N-CSRS 1 fctftsrpt0310.txt FCTFT SEMIANNUAL REPORT DTD 12/31/09 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: 12/31/09 -------- Item 1. Reports to Stockholders. DECEMBER 31, 2009 SEMIANNUAL REPORT AND SHAREHOLDER LETTER Franklin California Insured Tax-Free Fund Franklin California Intermediate-Term Tax-Free Income Fund Franklin California Tax-Exempt Money Fund SIGN UP FOR ELECTRONIC DELIVERY on franklintempleton.com (GRAPHIC) TAX-FREE INCOME FRANKLIN CALIFORNIA TAX-FREE TRUST (FRANKLIN TEMPLETON INVESTMENTS(R) LOGO) FRANKLIN - TEMPLETON - 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) Not part of the semiannual report Contents SHAREHOLDER LETTER ....................................................... 1 SEMIANNUAL REPORT State Update and Municipal Bond Market Overview .......................... 4 Franklin California Insured Tax-Free Income Fund ......................... 7 Franklin California Intermediate-Term Tax-Free Income Fund ............... 15 Franklin California Tax-Exempt Money Fund ................................ 23 Financial Highlights and Statements of Investments ....................... 27 Financial Statements ..................................................... 58 Notes to Financial Statements ............................................................... 63 Shareholder Information .................................................. 74
Shareholder Letter Dear Shareholder: In the third and fourth quarters of 2009, U.S. economic activity improved compared with the second quarter, while recent economic releases pointed to an easing of the global recession. Many observers think the recession is already over and the recovery has started. Although most economists predicted positive U.S. growth for the second half of 2009, many expected growth would be sluggish as consumers and the financial system continued to climb out of debt. The federal funds target rate remained unchanged over the period; however, the Federal Reserve Board (Fed) was very active. In response to the financial crisis in 2008, the Fed not only cut the federal funds target rate to a 0% to 0.25% range, it also employed other strategies to help stem the crisis, resulting in a substantial increase in its balance sheet. The Fed established various lending and liquidity facilities and through quantitative easing purchased mortgage securities and Treasuries, all in an effort to encourage long-term interest rates to move lower. Most major financial markets showed signs of recovery, and equity markets staged a strong rally since March. As financial markets moved off their lows, commodity prices rebounded. Overall inflation, however, remained tame. Fed Chairman Bernanke began to prepare markets for the unwinding of the Fed's accommodative policy and the exit strategy for its lending and liquidity facilities. At this point, the timing of these actions is uncertain. NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE Not part of the semiannual report | 1 The municipal bond market experienced a healthy rebound in the six-month period under review; the Barclays Capital (BC) Municipal Bond Index returned +6.10% and securities with maturities 22 years and longer, which make up a significant portion of our insured portfolio, returned +10.06%.(1) Although it looked as if the banking and financial crisis may have turned the corner and economic recovery was under way, we think a note of caution is warranted. We believe such areas of the economy as employment, housing, state and local government budgets, and the finance and banking sector will continue to face challenges and show signs of pressure for an indefinite period. We believe it is especially important during uncertain times to keep a clear head and long-term outlook and to consult with your financial advisor. Your financial advisor can review your portfolio and help you reassess your needs, goals and risk tolerance. Investors with discipline and a sound investment plan may find favorable long-term opportunities when markets decline. Franklin California Tax-Free Trust's semiannual report goes into greater detail about municipal bond market conditions during the period. In addition, you will find performance data, financial information and discussions from the portfolio managers. Please remember that all securities markets fluctuate, as do mutual fund share prices. Municipal bonds provide tax-free income and diversification from equities. Despite periods of volatility, municipal bonds have a solid long-term record of performance, driven mostly by their income component. (1.) Source: (C) 2009 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. The BC Municipal Bond Index is a market value-weighted index engineered for the long-term tax-exempt bond market. To be included in the index, bonds must be fixed rate, have at least one year to final maturity and be rated investment grade (Baa3/BBB- or higher) by at least two of the following agencies: Moody's, Standard & Poor's or Fitch. The BC Municipal Long Bond Index is the long (22+ years) component of the BC Municipal Bond Index. 2 | Not part of the semiannual report Please check our website at franklintempleton.com for special portfolio manager commentary. Although market conditions are constantly changing, we remain committed to our disciplined strategy as we manage the Funds, keeping in mind the trust you have placed in us. We appreciate your confidence and encourage you to contact us when you have questions about your Franklin Templeton tax-free investment. Sincerely, /s/ Charles B. Johnson Charles B. Johnson Chairman Franklin California Tax-Free Trust /s/ Sheila Amoroso Sheila Amoroso /s/ Rafael R. Costas Jr. Rafael R. Costas Jr. Senior Vice Presidents and Co-Directors Franklin Municipal Bond Department THIS LETTER REFLECTS OUR ANALYSIS AND OPINIONS AS OF DECEMBER 31, 2009. THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, COUNTRY, INDUSTRY, SECURITY OR FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED RELIABLE. Not part of the semiannual report | 3 Semiannual Report State Update and Municipal Bond Market Overview California's large, diverse and wealthy economy has a gross state product of $1.8 trillion and is responsible for 13% of U.S. gross domestic product.(1) If California were a country, it would have the 10th largest economy in the world.(1) However, during the six months under review, the state's economy remained weak and is not expected to experience an economic rebound sooner than the nation as a whole. Its unemployment rate rose sharply to 12.4% by December 2009, higher than the 10.0% national rate.(2) Some positive trends that may bode well for California's growth prospects are its well-educated workforce, capacity to attract venture capital, prominence in the growing biotechnology and alternative energy industries, and stabilizing real estate market. Limited fiscal flexibility, a difficult political environment and weak revenue collections made the state financially vulnerable during the current downturn. Approval by two-thirds of the legislature is required to pass a budget and the governor needs legislative consent to raise revenues or order spending cuts. Additionally, voter approval is required to issue general obligation or deficit bonds. On July 28, 2009, Governor Schwarzenegger signed an amended budget passed by the California Senate and General Assembly. The budget closed a gap of more than $24 billion through cuts, raids on local funds, accounting maneuvers and one-time revenues.(1) Revenue declines and litigation since the state passed its budget amendments contributed to a current-year shortfall. The State Department of Finance reported in September that revenues were $800 million below forecast.(1) Furthermore, the state lost litigation regarding almost $1 billion of transportation-related spending.1 The state's tax-supported debt was moderate at $1,990 per capita or 4.8% of personal income.(3) However, with California implementing a long-term strategic plan with voter-authorized projects necessary to support ongoing economic growth, its debt burden is likely to increase in the next few years. During the period, independent credit rating agency Moody's Investors Service confirmed its Baa1 rating for California's general obligation bonds.(4) The rating reflected budget amendments, which relied on one-time solutions to solve the (1.) Source: Moody's Investors Service, "New Issue: Moody's Assigns Baa1 to Approximately $1.5 B State of California General Obligation Bonds; Outlook is Stable," 10/28/09. (2.) Source: Bureau of Labor Statistics. (3.) Source: Standard & Poor's, "Summary: California; General Obligation; Note," RATINGSDIRECT, 11/2/09. (4.) This does not indicate Moody's rating of the Fund. 4 | Semiannual Report current fiscal problems but that will likely result in future budget gaps in upcoming years. Nonetheless, the outlook is stable based on Moody's expectation that the state will deal with any further challenges to its budgetary balance and liquidity without another major cash crisis. During the six-month period ended December 31, 2009, the municipal bond market posted a +6.10% total return, as measured by the Barclays Capital (BC) Municipal Bond Index.(5) The municipal bond market posted not only solid absolute performance but also strong relative performance when compared to the Treasury market, as the BC U.S. Treasury Index had a +0.77% total return for the reporting period.(6) Among the many factors that affected municipal bond prices during the six-month period, confidence over issuers' abilities to repay funds, the purchasing power of those repaid dollars, and the supply of tax-free municipal bonds had a major impact on municipal bond prices. Due to a changing economic landscape, rating downgrades of bond insurers, and reconciliation between corporate and municipal rating scales, many municipal bonds were re-rated during the period. In the second and third quarters of 2009, Moody's elevated the rating of 185 state and local government issues while downgrading 120. Recent positive rating actions coupled with a long-term default rate for investment-grade municipal bonds of less than 1% helped remind investors of the asset class's underlying credit strength.(7) Investor interest also increased for lower investment-grade and speculative-grade issues during the reporting period, which drove the BC Baa Municipal Bond Index up +9.56%, compared with the BC Aaa Municipal Bond Index's +4.19% total return.(8) Further aiding positive municipal bond performance during the reporting period was a benign inflationary environment. The Consumer Price Index (CPI) and Producer Price Index (PPI) reported negative year-over-year changes in four of the six months under review. Historically, a low inflation outlook has provided (5.) Source: (C) 2009 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. The BC Municipal Bond Index is a market value-weighted index engineered for the long-term tax-exempt bond market. To be included in the index, bonds must be fixed rate, have at least one year to final maturity and be rated investment grade (Baa3/BBB- or higher) by at least two of the following agencies: Moody's, Standard & Poor's or Fitch. (6.) Source: (C) 2009 Morningstar. The BC U.S. Treasury Index is the U.S. Treasury component of the U.S. Government Index and covers public obligations of the U.S. Treasury with a remaining maturity of one year or more. (7.) Source: Standard & Poor's, "U.S. Municipal Ratings Transitions and Defaults, 1986-2009," RATINGSDIRECT, 3/11/09. (8.) Source: (C) 2009 Morningstar. The BC Baa Municipal Bond Index is the Baa credit quality component of the BC Municipal Bond Index. The BC Aaa Municipal Bond Index is the Aaa credit quality component of the BC Municipal Bond Index. Semiannual Report | 5 confidence for fixed income investors that future cash flow from their bond investments will retain purchasing power. However, the Congressional Budget Office's estimate for temperate inflation did not cause the yield curve to level off, and the yield difference between short- and long-term municipal bonds averaged a spread of 430 basis points (100 basis points equal one percentage point) for the six-month period, as measured by the Securities Industry and Financial Market Association (SIFMA) Municipal Swap Index and the Bloomberg Fair Value 30-Year AAA Index.(9) The 10-year average using the same indexes was 251 basis points.(9) Tax-free bond supply also affected municipal bond market performance over the past six months. In 2009, tax-exempt bond issuance contracted slightly compared with 2008. The decline of tax-free offerings left investors with fewer bonds to construct their portfolios and helped drive municipal bond prices higher. Details of the supply of tax-exempt offerings during 2009 are noteworthy because the way municipalities accessed capital markets underwent a structural change. In February 2009 the American Recovery and Reinvestment Act was signed into law, allowing municipalities to issue taxable bonds and receive a 35% federal government subsidy for all coupon payments distributed to investors for the life of the bonds. This rebate allowed municipalities to borrow significantly below their after-tax cost in the traditional tax-exempt municipal bond market. We think these new, subsidized, taxable municipal bonds, known as Build America Bonds, are likely to suppress future supply of tax-exempt municipal bonds as long as the government permits their use. Given the various ratings changes, the relatively steep yield curve, and the reduced supply during the reporting period, we looked for opportunities to keep our portfolios fully invested, which helped support the insured and intermediate-term Funds' dividend distributions. At period-end, we continued to be active in the market and felt that municipal bonds at current yields represented an attractive long-term opportunity. THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS AND OPINIONS AS OF DECEMBER 31, 2009. 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. (9.) Sources: Thomson Financial; Bloomberg LP. 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 Bloomberg Fair Value 30-Year AAA Index is an index derived from data points on Bloomberg's option-free Fair Market Curve consisting of municipal general obligation bonds. 6 | Semiannual Report 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 municipal securities that pay interest free from such taxes.(1, 2) CREDIT QUALITY BREAKDOWN* Franklin California Insured Tax-Free Income Fund Based on Total Long-Term Investments as of 12/31/09** (PIE CHART) AAA .................... 44.9% AA ..................... 10.7% A ...................... 34.8% BBB .................... 2.9% Not Rated by S&P ....... 6.7%
* Standard & Poor's (S&P) is the primary independent rating agency; Moody's is the secondary rating agency. 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. Not Rated by S&P ** Does not include short-term investments and other net assets.
RATINGS MOODY'S INTERNAL ------- ------- -------- AAA or Aaa 0.1% 0.8% AA or Aa 1.5% 0.1% A 1.3% 2.3% BBB or Baa -- 0.6% --- --- Total 2.9% 3.8% === ===
We are pleased to bring you Franklin California Insured Tax-Free Income Fund's semiannual report for the six months ended December 31, 2009. (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. 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 31. Semiannual Report | 7 DIVIDEND DISTRIBUTIONS* Franklin California Insured Tax-Free Income Fund
DIVIDEND PER SHARE ---------------------------------------------------- MONTH CLASS A CLASS B CLASS C ADVISOR CLASS ----- ---------- ---------- ---------- ------------- July 4.60 cents 4.08 cents 4.06 cents 4.69 cents August 4.60 cents 4.08 cents 4.06 cents 4.69 cents September 4.60 cents 4.07 cents 4.06 cents 4.69 cents October 4.60 cents 4.07 cents 4.06 cents 4.69 cents November 4.60 cents 4.07 cents 4.06 cents 4.69 cents December 4.50 cents 3.94 cents 3.93 cents 4.60 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 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 (800) 342-5236 FOR MOST RECENT MONTH-END PERFORMANCE. PERFORMANCE OVERVIEW The Fund's Class A share price, as measured by net asset value, increased from $11.45 on June 30, 2009, to $11.88 on December 31, 2009. The Fund's Class A shares paid dividends totaling 27.37 cents per share for the same period.(3) The Performance Summary beginning on page 10 shows that at the end of this reporting period the Fund's Class A shares' distribution rate was 4.35%, based on an annualization of the current 4.50 cent per share dividend and the maximum offering price of $12.41 on December 31, 2009. An investor in the 2010 maximum combined effective federal and California personal income tax bracket of 41.21% would need to earn a distribution rate of 7.38% from a taxable investment to match the Fund's Class A tax-free distribution rate. For the Fund's Class B, C and Advisor shares' performance, please see the Performance Summary. During the period under review, renewed investor interest in municipal bonds and limited new-issue supply led to higher municipal bond prices, which reduced the Fund's income and caused dividends to decline. (3.) All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends. 8 | Semiannual Report INVESTMENT STRATEGY We use a consistent, disciplined strategy in an effort to maximize tax-exempt income for our shareholders by seeking to maintain 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 during different interest rate environments, our portfolio becomes progressively more 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 help 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 positively sloping municipal yield curve 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. 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, 2009, 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. PORTFOLIO BREAKDOWN Franklin California Insured Tax-Free Income Fund 12/31/09
% OF TOTAL LONG-TERM INVESTMENTS* ------------ General Obligation 23.4% Prerefunded 14.9% Hospital & Health Care 14.3% Subject to Government Appropriations 12.3% Transportation 11.9% Utilities 9.1% Tax-Supported 6.3% Higher Education 3.5% Other Revenue 2.7% Housing 1.6%
* Does not include short-term investments and other net assets. Semiannual Report | 9 Performance Summary as of 12/31/09 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 12/31/09 6/30/09 ----------------------- ------ -------- ------- Net Asset Value (NAV) +$0.43 $11.88 $11.45 DISTRIBUTIONS (7/1/09-12/31/09) Dividend Income $0.2737
CLASS B (SYMBOL: FRCBX) CHANGE 12/31/09 6/30/09 ----------------------- ------ -------- ------- Net Asset Value (NAV) +$0.43 $11.94 $11.51 DISTRIBUTIONS (7/1/09-12/31/09) Dividend Income $0.2418
CLASS C (SYMBOL: FRCAX) CHANGE 12/31/09 6/30/09 ----------------------- ------ -------- ------- Net Asset Value (NAV) +$0.44 $12.01 $11.57 DISTRIBUTIONS (7/1/09-12/31/09) Dividend Income $0.2410
ADVISOR CLASS (SYMBOL: N/A) CHANGE 12/31/09 6/30/09 --------------------------- ------ -------- ------- Net Asset Value (NAV) +$0.44 $11.89 $11.45 DISTRIBUTIONS (7/1/09-12/31/09) Dividend Income $0.2792
10 | Semiannual Report 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; ADVISOR CLASS: NO SALES CHARGES.
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR ------- ------- ------ ------ ------- Cumulative Total Return(1) +6.17% +11.62% +16.90% +62.97% Average Annual Total Return(2) +1.64% +6.92% +2.28% +4.55% Distribution Rate(3) 4.35% Taxable Equivalent Distribution Rate(4) 7.38% 30-Day Standardized Yield(5) 3.93% Taxable Equivalent Yield(4) 6.68% Total Annual Operating Expenses(6) 0.61%
INCEPTION CLASS B 6-MONTH 1-YEAR 5-YEAR (2/1/00) ------- ------- ------ ------ --------- Cumulative Total Return(1) +5.86% +10.97% +13.68% +57.79% Average Annual Total Return(2) +1.86% +6.97% +2.26% +4.71% Distribution Rate(3) 3.96% Taxable Equivalent Distribution Rate(4) 6.72% 30-Day Standardized Yield(5) 3.52% Taxable Equivalent Yield(4) 5.99% Total Annual Operating Expenses(6) 1.16%
CLASS C 6-MONTH 1-YEAR 5-YEAR 10-YEAR ------- ------- ------ ------ ------- Cumulative Total Return(1) +5.90% +10.98% +13.74% +54.25% Average Annual Total Return(2) +4.90% +9.98% +2.61% +4.43% Distribution Rate(3) 3.93% Taxable Equivalent Distribution Rate(4) 6.67% 30-Day Standardized Yield(5) 3.55% Taxable Equivalent Yield(4) 6.04% Total Annual Operating Expenses(6) 1.16%
ADVISOR CLASS(7) 6-MONTH 1-YEAR 5-YEAR 10-YEAR ---------------- ------- ------ ------ ------- Cumulative Total Return(1) +6.31% +11.81% +17.12% +63.28% Average Annual Total Return(2) +6.31% +11.81% +3.21% +5.03% Distribution Rate(3) 4.64% Taxable Equivalent Distribution Rate(4) 7.87% 30-Day Standardized Yield(5) 4.24% Taxable Equivalent Yield(4) 7.21% Total Annual Operating Expenses(6) 0.51%
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, GO TO franklintempleton.com OR CALL (800) 342-5236. Semiannual Report | 11 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. ADVISOR CLASS: Shares are available to certain eligible investors as described in the prospectus. (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, C and Advisor) per share on 12/31/09. (4.) Taxable equivalent distribution rate and yield assume the published rates as of 12/24/09 for the maximum combined effective federal and California personal income tax rate of 41.21%, based on the federal income tax rate of 35.00%. (5.) The 30-day standardized yield for the 30 days ended 12/31/09 reflects an estimated yield to maturity (assuming all portfolio securities are held to maturity). It should be regarded as an estimate of the Fund's rate of investment income, and it may not equal the Fund's actual income distribution rate (which reflects the Fund's past dividends paid to shareholders) or the income reported in the Fund's financial statements. (6.) Figures are as stated in the Fund's prospectus current as of the date of this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown. (7.) Effective 10/31/08, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the following methods of calculation: (a) For periods prior to 10/31/08, a restated figure is used based upon the Fund's Class A performance, excluding the effect of Class A's maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 10/30/08, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 10/31/08 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were +10.95% and +9.31%. 12 | Semiannual Report Your Fund's Expenses FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND As a Fund shareholder, you can incur two types of costs: - Transaction costs, including sales charges (loads) on Fund purchases; and - 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 | 13 Your Fund's Expenses (CONTINUED) PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES. 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 VALUE 7/1/09 VALUE 12/31/09 PERIOD* 7/1/09-12/31/09 ----------------- -------------- ----------------------- CLASS A Actual $1,000 $1,061.70 $3.12 Hypothetical (5% return before expenses) $1,000 $1,022.18 $3.06 CLASS B Actual $1,000 $1,058.60 $5.92 Hypothetical (5% return before expenses) $1,000 $1,019.46 $5.80 CLASS C Actual $1,000 $1,059.00 $5.97 Hypothetical (5% return before expenses) $1,000 $1,019.41 $5.85 ADVISOR CLASS Actual $1,000 $1,063.10 $2.60 Hypothetical (5% return before expenses) $1,000 $1,022.68 $2.55
* Expenses are calculated using the most recent six-month expense ratio, annualized for each class (A: 0.60%; B: 1.14%; C: 1.15%; and Advisor: 0.50%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period. 14 | Semiannual Report 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 12/31/09
% OF TOTAL LONG-TERM RATINGS INVESTMENTS** ------- ------------- AAA 12.8% AA 20.3% A 46.7% BBB 7.9% Below Investment Grade 0.5% Not Rated by S&P 11.8%
* Standard & Poor's (S&P) is the primary independent rating agency; Moody's is the secondary rating agency. 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 INTERNAL ------- ------- -------- AAA or Aaa -- 1.2% A 1.2% 2.7% BBB or Baa 2.2% 4.0% Below Investment Grade 0.5% -- --- --- Total 3.9% 7.9% === ===
We are pleased to bring you Franklin California Intermediate-Term Tax-Free Income Fund's semiannual report for the six months ended December 31, 2009. (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 46. Semiannual Report | 15 DIVIDEND DISTRIBUTIONS* Franklin California Intermediate-Term Tax-Free Income Fund
DIVIDEND PER SHARE --------------------------------------- MONTH CLASS A CLASS C ADVISOR CLASS ----- ---------- ---------- ------------- July 3.77 cents 3.26 cents 3.86 cents August 3.77 cents 3.26 cents 3.86 cents September 3.82 cents 3.31 cents 3.91 cents October 3.82 cents 3.31 cents 3.91 cents November 3.82 cents 3.31 cents 3.91 cents December 3.82 cents 3.28 cents 3.91 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 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 (800) 342-5236 FOR MOST RECENT MONTH-END PERFORMANCE. PERFORMANCE OVERVIEW The Fund's Class A share price, as measured by net asset value, increased from $10.87 on June 30, 2009, to $11.24 on December 31, 2009. The Fund's Class A shares paid dividends totaling 22.76 cents per share for the same period.(2) The Performance Summary beginning on page 18 shows that at the end of this reporting period the Fund's Class A shares' distribution rate was 3.99%, based on an annualization of the current 3.82 cent per share dividend and the maximum offering price of $11.50 on December 31, 2009. An investor in the 2010 maximum combined effective federal and California personal income tax bracket of 41.21% would need to earn a distribution rate of 6.77% from a taxable investment to match the Fund's Class A tax-free distribution rate. For the Fund's Class C and Advisor shares' performance, please see the Performance Summary. (2.) All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends. 16 | Semiannual Report INVESTMENT STRATEGY We use a consistent, disciplined strategy in an effort to maximize tax-exempt income for our shareholders by seeking to maintain 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 during different interest rate environments, our portfolio becomes progressively more 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 help 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 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, 2009, 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. PORTFOLIO BREAKDOWN Franklin California Intermediate-Term Tax-Free Income Fund 12/31/09
% OF TOTAL LONG-TERM INVESTMENTS* ------------ Hospital & Health Care 19.5% Subject to Government Appropriations 19.1% General Obligation 17.1% Tax-Supported 11.3% Utilities 10.2% Other Revenue 6.5% Prerefunded 6.5% Housing 4.8% Transportation 4.3% Higher Education 0.7%
* Does not include short-term investments and other net assets. Semiannual Report | 17 Performance Summary as of 12/31/09 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 12/31/09 6/30/09 ----------------------- ------ -------- ------- Net Asset Value (NAV) +$0.37 $11.24 $10.87 DISTRIBUTIONS (7/1/09-12/31/09) Dividend Income $0.2276
CLASS C (SYMBOL: FCCIX) CHANGE 12/31/09 6/30/09 ----------------------- ------ -------- ------- Net Asset Value (NAV) +$0.38 $11.27 $10.89 DISTRIBUTIONS (7/1/09-12/31/09) Dividend Income $0.1967
ADVISOR CLASS (SYMBOL: FRCZX) CHANGE 12/31/09 6/30/09 ----------------------------- ------ -------- ------- Net Asset Value (NAV) +$0.38 $11.25 $10.87 DISTRIBUTIONS (7/1/09-12/31/09) Dividend Income $0.2329
18 | Semiannual Report Performance Summary (CONTINUED) 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; ADVISOR CLASS: NO SALES CHARGES.
CLASS A(1) 6-MONTH 1-YEAR 5-YEAR 10-YEAR ---------- ------- ------ ------ ------- Cumulative Total Return(2) +5.52% +12.36% +16.90% +56.13% Average Annual Total Return(3) +3.15% +9.83% +2.70% +4.32% Distribution Rate(4) 3.99% Taxable Equivalent Distribution Rate(5) 6.77% 30-Day Standardized Yield(6) 3.35% Taxable Equivalent Yield(5) 5.70% Total Annual Operating Expenses(7) 0.66%
INCEPTION CLASS C 6-MONTH 1-YEAR 5-YEAR (7/1/03) ------- ------- ------ ------ --------- Cumulative Total Return(2) +5.31% +11.83% +13.82% +18.81% Average Annual Total Return(3) +4.31% +10.83% +2.62% +2.69% Distribution Rate(4) 3.49% Taxable Equivalent Distribution Rate(5) 5.92% 30-Day Standardized Yield(6) 2.87% Taxable Equivalent Yield(5) 4.88% Total Annual Operating Expenses(7) 1.21%
ADVISOR CLASS(8) 6-MONTH 1-YEAR 5-YEAR 10-YEAR ---------------- ------- ------ ------ ------- Cumulative Total Return(2) +5.66% +12.57% +17.13% +56.43% Average Annual Total Return(3) +5.66% +12.57% +3.21% +4.58% Distribution Rate(4) 4.17% Taxable Equivalent Distribution Rate(5) 7.07% 30-Day Standardized Yield(6) 3.54% Taxable Equivalent Yield(5) 6.02% Total Annual Operating Expenses(7) 0.56%
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, GO TO franklintempleton.com OR CALL (800) 342-5236. Semiannual Report | 19 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 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. ADVISOR CLASS: Shares are available to certain eligible investors as described in the prospectus. (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 Classes C and Advisor) per share on 12/31/09. (5.) Taxable equivalent distribution rate and yield assume the published rates as of 12/24/09 for the maximum combined effective federal and California personal income tax rate of 41.21%, based on the federal income tax rate of 35.00%. (6.) The 30-day standardized yield for the 30 days ended 12/31/09 reflects an estimated yield to maturity (assuming all portfolio securities are held to maturity). It should be regarded as an estimate of the Fund's rate of investment income, and it may not equal the Fund's actual income distribution rate (which reflects the Fund's past dividends paid to shareholders) or the income reported in the Fund's financial statements. (7.) Figures are as stated in the Fund's prospectus current as of the date of this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown. (8.) Effective 10/31/08, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the following methods of calculation: (a) For periods prior to 10/31/08, a restated figure is used based upon the Fund's Class A performance, excluding the effect of Class A's maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 10/30/08, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 10/31/08 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were +11.46% and +9.75%. 20 | 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: - Transaction costs, including sales charges (loads) on Fund purchases; and - 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 | 21 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. 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 VALUE 7/1/09 VALUE 12/31/09 PERIOD* 7/1/09-12/31/09 ----------------- -------------- ----------------------- CLASS A Actual $1,000 $1,055.20 $3.37 Hypothetical (5% return before expenses) $1,000 $1,021.93 $3.31 CLASS C Actual $1,000 $1,053.10 $6.21 Hypothetical (5% return before expenses) $1,000 $1,019.16 $6.11 ADVISOR CLASS Actual $1,000 $1,056.60 $2.85 Hypothetical (5% return before expenses) $1,000 $1,022.43 $2.80
* Expenses are calculated using the most recent six-month expense ratio, annualized for each class (A: 0.65%; C: 1.20%; and Advisor: 0.55%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period. 22 | 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. This semiannual report for Franklin California Tax-Exempt Money Fund covers the six months ended December 31, 2009. 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 (800) 342-5236 FOR MOST RECENT MONTH-END PERFORMANCE. PERFORMANCE OVERVIEW With short-term interest rates in the 0% to 0.25% range, money market portfolio yields remained very low during the period. Largely as a result, Franklin California Tax-Exempt Money Fund's seven-day effective yield stayed at 0.00% from the beginning of the period to December 31, 2009. 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. 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 taxes. 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 55. Semiannual Report | 23 PORTFOLIO BREAKDOWN Franklin California Tax-Exempt Money Fund 12/31/09
% OF TOTAL INVESTMENTS ----------- Variable Rate Notes 91.1% Notes and Bonds 8.9%
PERFORMANCE SUMMARY Franklin California Tax-Exempt Money Fund SYMBOL: FCLXX 12/31/09 Seven-day effective yield(1) 0.00% Seven-day annualized yield 0.00% Taxable equivalent yield(2) 0.00% Total annual operating expenses(3) 0.57%
(1.) Seven-day effective yield assumes the compounding of daily dividends, if any. (2.) Taxable equivalent yield assumes the published rates as of 12/24/09 for the maximum combined effective federal and California personal income tax rate of 41.21%, 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. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown. To avoid a negative yield, the Fund administrator, investment manager and/or transfer agent have voluntarily agreed to waive or limit their respective fees, assume as their own expense certain expenses otherwise payable by the Fund, and if necessary, make a capital infusion into the Fund. These waivers, expense reimbursements and capital infusions, which are not reflected in the table above, are voluntary and may be modified or discontinued by the Fund administrator, investment manager and/or transfer agent at any time. There is no guarantee the Fund will be able to avoid a negative yield. Annualized and effective yields are for the seven-day period ended 12/31/09. The Fund's average weighted maturity was 20 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 (800) 342-5236 FOR MOST RECENT MONTH-END PERFORMANCE. MANAGER'S DISCUSSION During the period under review, short-term municipal bond yields remained historically low, as the Federal Open Market Committee (FOMC) kept the federal funds target rate in a 0% to 0.25% range and the discount rate at 0.50%. In addition, variable rate demand note issuance was down approximately 72% in 2009 compared with last year.(2) During the reporting period, 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, had a rate that ranged from a high of 0.43% in the middle of August to a low of 0.22% in the beginning of December.(3) Franklin California Tax-Exempt Money Fund continued to be very selective in purchasing high-quality securities. This resulted in a 0.00% yield throughout the reporting period. Thank you for your continued participation in Franklin California Tax-Exempt Money Fund. We look forward to serving your future investment needs. THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF DECEMBER 31, 2009, 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. (2.) Source: THE BOND BUYER, 12/31/09. (3.) 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. 24 | Semiannual Report Your Fund's Expenses FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND As a Fund shareholder, you can incur two types of costs: - Transaction costs, including sales charges (loads) on Fund purchases; and - 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 | 25 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. Therefore, the second line of the table 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 7/1/09 VALUE 12/31/09 PERIOD* 7/1/09-12/31/09 ----------------- -------------- ----------------------- Actual $1,000 $1,000.00 $1.26 Hypothetical (5% return before expenses) $1,000 $1,023.95 $1.28
* Expenses are calculated using the most recent annualized six-month expense ratio 0.25%, net of voluntary expense waivers, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period. 26 | Semiannual Report Franklin California Tax-Free Trust FINANCIAL HIGHLIGHTS FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
SIX MONTHS ENDED DECEMBER 31, YEAR ENDED JUNE 30, 2009 ------------------------------------------------------------------ CLASS A (UNAUDITED) 2009 2008 2007 2006 2005 ------- ------------ ---------- ---------- ---------- ---------- ---------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ........... $ 11.45 $ 12.19 $ 12.48 $ 12.43 $ 12.85 $ 12.24 ---------- ---------- ---------- ---------- ---------- ---------- Income from investment operations(a): Net investment income(b) .................... 0.27 0.55 0.54 0.54 0.55 0.55 Net realized and unrealized gains (losses) .. 0.43 (0.75) (0.29) 0.05 (0.43) 0.62 ---------- ---------- ---------- ---------- ---------- ---------- Total from investment operations ............... 0.70 (0.20) 0.25 0.59 0.12 1.17 ---------- ---------- ---------- ---------- ---------- ---------- Less distributions from net investment income .. (0.27) (0.54) (0.54) (0.54) (0.54) (0.56) ---------- ---------- ---------- ---------- ---------- ---------- Redemption fees(c) ............................. -- --(d) --(d) --(d) --(d) --(d) ---------- ---------- ---------- ---------- ---------- ---------- Net asset value, end of period ................. $ 11.88 $ 11.45 $ 12.19 $ 12.48 $ 12.43 $ 12.85 ========== ========== ========== ========== ========== ========== Total return(e) ................................ 6.17% (1.54)% 1.98% 4.79% 0.96% 9.70% RATIOS TO AVERAGE NET ASSETS(f) Expenses ....................................... 0.60% 0.61% 0.61% 0.61% 0.61% 0.61% Net investment income .......................... 4.58% 4.74% 4.33% 4.29% 4.34% 4.38% SUPPLEMENTAL DATA Net assets, end of period (000's) .............. $1,866,004 $1,780,448 $1,875,898 $1,810,358 $1,751,279 $1,780,642 Portfolio turnover rate ........................ 10.73% 13.04% 13.14% 6.77% 5.75% 3.87%
(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) Effective September 1, 2008, the redemption fee was eliminated. (d) Amount rounds to less than $0.01 per share. (e) Total return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year. (f) Ratios are annualized for periods less than one year. The accompanying notes are an integral part of these financial statements. Semiannual Report | 27 Franklin California Tax-Free Trust FINANCIAL HIGHLIGHTS (CONTINUED) FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
SIX MONTHS ENDED DECEMBER 31, YEAR ENDED JUNE 30, 2009 ---------------------------------------------------- CLASS B (UNAUDITED) 2009 2008 2007 2006 2005 ------- ------------ -------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ........... $ 11.51 $ 12.26 $ 12.54 $ 12.49 $ 12.91 $ 12.29 ------- ------- ------- ------- ------- ------- Income from investment operations(a): Net investment income(b) .................... 0.24 0.49 0.47 0.48 0.48 0.49 Net realized and unrealized gains (losses) .. 0.43 (0.76) (0.28) 0.04 (0.43) 0.62 ------- ------- ------- ------- ------- ------- Total from investment operations ............... 0.67 (0.27) 0.19 0.52 0.05 1.11 ------- ------- ------- ------- ------- ------- Less distributions from net investment income .. (0.24) (0.48) (0.47) (0.47) (0.47) (0.49) ------- ------- ------- ------- ------- ------- Redemption fees(c) ............................. -- --(d) --(d) --(d) --(d) --(d) ------- ------- ------- ------- ------- ------- Net asset value, end of period ................. $ 11.94 $ 11.51 $ 12.26 $ 12.54 $ 12.49 $ 12.91 ======= ======= ======= ======= ======= ======= Total return(e) ................................ 5.86% (2.14)% 1.49% 4.20% 0.41% 9.15% RATIOS TO AVERAGE NET ASSETS(f) Expenses ....................................... 1.14% 1.15% 1.16% 1.16% 1.16% 1.16% Net investment income .......................... 4.04% 4.20% 3.78% 3.74% 3.79% 3.83% SUPPLEMENTAL DATA Net assets, end of period (000's) .............. $25,321 $31,963 $48,875 $59,127 $68,922 $78,038 Portfolio turnover rate ........................ 10.73% 13.04% 13.14% 6.77% 5.75% 3.87%
(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) Effective September 1, 2008, the redemption fee was eliminated. (d) Amount rounds to less than $0.01 per share. (e) Total return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year. (f) Ratios are annualized for periods less than one year. The accompanying notes are an integral part of these financial statements. 28 | Semiannual Report Franklin California Tax-Free Trust FINANCIAL HIGHLIGHTS (CONTINUED) FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
SIX MONTHS ENDED DECEMBER 31, YEAR ENDED JUNE 30, 2009 -------------------------------------------------------- CLASS C (UNAUDITED) 2009 2008 2007 2006 2005 ------- ------------ -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ........... $ 11.57 $ 12.32 $ 12.60 $ 12.55 $ 12.97 $ 12.34 -------- -------- -------- -------- -------- -------- Income from investment operations(a): Net investment income(b) .................... 0.24 0.49 0.47 0.48 0.48 0.49 Net realized and unrealized gains (losses) .. 0.44 (0.76) (0.28) 0.04 (0.43) 0.63 -------- -------- -------- -------- -------- -------- Total from investment operations ............... 0.68 (0.27) 0.19 0.52 0.05 1.12 -------- -------- -------- -------- -------- -------- Less distributions from net investment income .. (0.24) (0.48) (0.47) (0.47) (0.47) (0.49) -------- -------- -------- -------- -------- -------- Redemption fees(c) ............................. -- --(d) --(d) --(d) --(d) --(d) -------- -------- -------- -------- -------- -------- Net asset value, end of period ................. $ 12.01 $ 11.57 $ 12.32 $ 12.60 $ 12.55 $ 12.97 ======== ======== ======== ======== ======== ======== Total return(e) ................................ 5.90% (2.15)% 1.48% 4.17% 0.40% 9.19% RATIOS TO AVERAGE NET ASSETS(f) Expenses ....................................... 1.15% 1.16% 1.16% 1.16% 1.16% 1.16% Net investment income .......................... 4.03% 4.19% 3.78% 3.74% 3.79% 3.83% SUPPLEMENTAL DATA Net assets, end of period (000's) .............. $224,761 $186,238 $163,407 $139,476 $133,560 $129,156 Portfolio turnover rate ........................ 10.73% 13.04% 13.14% 6.77% 5.75% 3.87%
(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) Effective September 1, 2008, the redemption fee was eliminated. (d) Amount rounds to less than $0.01 per share. (e) Total return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year. (f) Ratios are annualized for periods less than one year. The accompanying notes are an integral part of these financial statements. Semiannual Report | 29 Franklin California Tax-Free Trust FINANCIAL HIGHLIGHTS (CONTINUED) FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
SIX MONTHS ENDED PERIOD ENDED DECEMBER 31, 2009 JUNE 30, ADVISOR CLASS (UNAUDITED) 2009(a) ------------- ----------------- ------------ PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ............. $11.45 $11.33 ------ ------ Income from investment operations(b): Net investment income(c) ...................... 0.28 0.37 Net realized and unrealized gains (losses) .... 0.44 0.12 ------ ------ Total from investment operations ................. 0.72 0.49 ------ ------ Less distributions from net investment income .... (0.28) (0.37) ------ ------ Net asset value, end of period ................... $11.89 $11.45 ------ ------ Total return(d) .................................. 6.31% 4.37% RATIOS TO AVERAGE NET ASSETS(e) Expenses ......................................... 0.50% 0.51% Net investment income ............................ 4.68% 4.84% SUPPLEMENTAL DATA Net assets, end of period (000's) ................ $7,797 $2,100 Portfolio turnover rate .......................... 10.73% 13.04%
(a) For the period October 31, 2008 (effective date) to June 30, 2009. (b) 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. (c) Based on average daily shares outstanding. (d) Total return is not annualized for periods less than one year. (e) Ratios are annualized for periods less than one year. The accompanying notes are an integral part of these financial statements. 30 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE ------------------------------------------------ ----------- -------------- MUNICIPAL BONDS 98.9% CALIFORNIA 98.9% ABAG Finance Authority for Nonprofit Corps. California Health Facilities Revenue, Institute on Aging, California Mortgage Insured, 5.65%, 8/15/38 .......................................................... $ 9,000,000 $ 8,477,550 ABAG Finance Authority for Nonprofit Corps. COP, Lincoln Child Center Inc., California Mortgage Insured, 6.125%, 11/01/24 1,950,000 1,950,156 Lytton Gardens Inc., Refunding, California Mortgage Insured, 6.00%, 2/15/30 ....................................................... 3,500,000 3,500,210 Odd Fellows Home, California Mortgage Insured, 6.00%, 8/15/24 ........... 5,000,000 5,003,500 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 5,149,528 Sansum-Santa Barbara, Refunding, Series A, California Mortgage Insured, 5.60%, 4/01/26 ....................................................... 2,750,000 2,756,600 Acalanes UHSD, GO, Capital Appreciation, Election of 2002, Series A, FGIC Insured, zero cpn., 8/01/25 ............................................. 9,045,000 4,212,347 Alameda Corridor Transportation Authority Revenue, AMBAC Insured, zero cpn. to 10/01/12, ............................................................ 5.25% thereafter, 10/01/21 .............................................. 64,660,000 52,238,814 5.45% thereafter, 10/01/25 .............................................. 25,000,000 19,621,750 Alameda Power and Telecommunication Electric System Revenue COP, Refunding, Series A, NATL Insured, 5.75%, 7/01/30................................... 3,305,000 3,354,377 Alhambra City Elementary School District GO, Capital Appreciation, Election of 1999, Series B, FGIC Insured, zero cpn., 9/01/27...................... 3,035,000 1,009,046 Alisal USD, GO, Capital Appreciation, Election of 2006, Series B, Assured Guaranty, zero cpn., 8/01/32 ................................................................. 3,355,000 724,143 8/01/33 ................................................................. 3,610,000 716,513 2/01/34 ................................................................. 3,345,000 631,168 Alum Rock Union Elementary School District GO, Election of 2008, Series A, Assured Guaranty, 5.00%, 8/01/33 ........................................ 12,595,000 12,708,103 Alvord USD, GO, Election of 2007, Series A, FSA Insured, 5.00%, 8/01/32 .... 9,070,000 9,132,492 Anaheim PFAR, Distribution System, second lien, NATL Insured, 5.00%, 10/01/29 ......................................................... 5,000,000 5,012,150 Antelope Valley UHSD, GO, Series A, NATL Insured, 5.00%, 2/01/27 ........... 5,000,000 5,040,400 Antioch USD, GO, Election of 2008, School Facilities Improvement No. 1-B, Assured Guaranty, 5.375%, 8/01/36 ....................................... 3,130,000 3,192,037 Arcadia USD, GO, Capital Appreciation, Election of 2006, Series A, FSA Insured, zero cpn., 8/01/29 ................................................................. 5,110,000 1,465,088 8/01/33 ................................................................. 11,690,000 2,443,678 8/01/39 ................................................................. 9,620,000 1,303,606 8/01/46 ................................................................. 27,665,000 2,356,228 Atascadero CDA Tax Allocation, Redevelopment Project, XLCA Insured, 5.00%, 9/01/34 .......................................................... 4,315,000 3,661,407 Auburn Public Financing Authority Wastewater Revenue, Assured Guaranty, 5.50%, 6/01/39 .......................................................... 1,880,000 1,936,926 Auburn USD, COP, Refinancing Project, Assured Guaranty, 5.00%, 6/01/38 ..... 10,000,000 9,806,200 Bakersfield City School District GO, Series A, FSA Insured, 5.00%, 11/01/27 ................................................................ 2,415,000 2,527,781 11/01/28 ................................................................ 2,535,000 2,642,028 Bakersfield Wastewater Revenue, Series A, FSA Insured, 5.00%, 9/15/32 ...... 10,430,000 10,595,628 Baldwin Park RDA Tax Allocation, Refunding, FSA Insured, 5.70%, 9/01/25 .... 4,000,000 4,106,680 Baldwin Park USD, GO, Capital Appreciation, Election of 2006, FSA Insured, zero cpn., 8/01/28.................................................................. 5,810,000 1,869,658 Election of 2006, FSA Insured, 5.00%, 8/01/31 ........................... 5,440,000 5,497,882 Brea and Olinda USD, GO, Series A, FGIC Insured, 5.60%, 8/01/20 ............ 1,000,000 1,021,570
Semiannual Report | 31 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE ------------------------------------------------ ----------- -------------- MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) Brentwood Infrastructure Financing Authority Infrastructure Revenue, Refunding, Series A, FSA Insured, 5.00%, 9/02/32 ........................ $ 3,790,000 $ 3,910,674 Buckeye USD, GO, Election of 2006, FSA Insured, 5.00%, 8/01/32 ............. 10,705,000 10,912,891 Cabrillo Community College District GO, Capital Appreciation, Election of 2004, Series B, NATL Insured, zero cpn., 8/01/39 ........................................................ 12,570,000 1,927,610 Series C, AMBAC Insured, Pre-Refunded, 5.375%, 5/01/26 .................. 5,400,000 5,596,938 California Community College Financing Authority Lease Revenue, Grossmont Palomar and Shasta, Series A, NATL Insured, 5.125%, 4/01/31 ............. 3,030,000 3,008,426 California Educational Facilities Authority Revenue, Stanford University, Refunding, Series O, 5.125%, 1/01/31 .................................... 24,705,000 24,708,953 California Health Facilities Financing Authority Revenue, Asian Community Center, Series A, California Mortgage Insured, 5.00%, 4/01/37 ....................................................... 10,550,000 9,639,957 Catholic Healthcare West, Refunding, ACA Insured, 5.00%, 7/01/28 ........ 8,765,000 8,637,820 Catholic Healthcare West, Refunding, Series A, 5.00%, 7/01/28 ........... 12,995,000 12,808,392 Community Health Facilities, Series A, California Mortgage Insured, 5.80%, 8/01/25 ....................................................... 1,020,000 1,022,213 Kaiser Permanente, Series A, ETM, 5.40%, 5/01/28 ........................ 15,400,000 15,444,352 Kaiser Permanente, Series B, ETM, 5.00%, 10/01/18 ....................... 5,000,000 5,034,300 Kaiser Permanente, Series B, ETM, 5.00%, 10/01/20 ....................... 4,000,000 4,027,440 Marshall Hospital, Refunding, Series A, California Mortgage Insured, 5.30%, 11/01/28 ...................................................... 3,005,000 3,005,421 Northern California Presbyterian, Refunding, 5.40%, 7/01/28 ............. 5,000,000 4,537,900 Orange County Health Facility, Series A, California Mortgage Insured, 6.20%, 11/01/24 ...................................................... 3,435,000 3,435,275 Senior Living, Aldersly, Series A, California Mortgage Insured, 5.25%, 3/01/32 ....................................................... 2,000,000 1,800,940 Sutter Health, Refunding, Series A, NATL Insured, 5.00%, 8/15/19 ........ 1,585,000 1,602,340 Sutter Health, Refunding, Series A, NATL Insured, 5.00%, 8/15/38 ........ 3,735,000 3,461,000 Sutter Health, Series A, BHAC Insured, 5.00%, 11/15/42 .................. 15,000,000 14,831,850 The Help Group, Refunding, California Mortgage Insured, 5.40%, 8/01/22 .. 4,755,000 4,755,285 True to Life Children's Services, Series A, California Mortgage Insured, 5.625%, 9/01/25 ...................................................... 1,250,000 1,251,675 California HFAR, Home Mortgage, Series N, AMBAC Insured, zero cpn. to 2/01/10, 6.30% thereafter, 8/01/31 ................................... 240,000 239,220 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 9,907,337 California Municipal Finance Authority Senior Living Revenue, Pilgrim Place Claremont, California Mortgage Insured, Series A, 5.875%, 5/15/29 ..................... 2,895,000 2,901,977 6.125%, 5/15/39 ......................................................... 5,830,000 5,889,408 California PCFA, PCR, Southern California Edison Co., Refunding, Series C, NATL Insured, 5.55%, 9/01/31 ............................................ 4,800,000 4,493,424 California Public School District Financing Authority Lease Revenue, Southern Kern USD, Series B, FSA Insured, ETM, 5.90%, 9/01/26 ........... 1,615,000 1,985,223 (a) California School Facilities Financing Authority Revenue, Azusa USD, Series A, FSA Insured, 5.00%, 8/01/32 ................................... 10,000,000 9,866,500 California State Department of Water Resources Water Revenue, Central Valley Project, Series AC, NATL Insured, Pre-Refunded, 5.00%, 12/01/26 ......................................................... 40,000 46,593 Central Valley Project, Series AD, FSA Insured, Pre-Refunded, 5.00%, 12/01/26 ......................................................... 25,000 29,129 FSA Insured, Pre-Refunded, 5.125%, 12/01/29 ............................. 115,000 125,036 Refunding, FSA Insured, 5.125%, 12/01/29 ................................ 4,885,000 5,067,210 California State GO, FGIC Insured, 5.375%, 6/01/26 ........................................... 1,350,000 1,351,809 NATL Insured, 6.00%, 8/01/16 ............................................ 210,000 210,678
32 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE ------------------------------------------------ ----------- -------------- MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) California State GO, (continued) NATL Insured, 6.00%, 10/01/21 ........................................... $ 65,000 $ 65,141 Pre-Refunded, 5.125%, 6/01/31 ........................................... 24,705,000 26,336,271 Refunding, 5.125%, 6/01/31 .............................................. 295,000 280,457 Refunding, NATL Insured, 5.00%, 8/01/29 ................................. 730,000 688,113 Various Purpose, 5.00%, 11/01/32 ........................................ 20,000,000 18,413,400 California State Local Government Finance Authority Revenue, Marin Valley Mobile, Senior Series A, FSA Insured, 5.80%, 10/01/20 ................... 3,770,000 3,777,540 California State Public Works Board Lease Revenue, Department of Mental Health Hospital, Series A, AMBAC Insured, 5.00%, 12/01/21 ................................................................ 4,100,000 3,999,304 12/01/26 ................................................................ 5,675,000 5,144,047 California State University Foundation Revenue, Monterey Bay, NATL Insured, Pre-Refunded, 5.35%, 6/01/31 ............................................ 2,000,000 2,138,340 California State University of Los Angeles Auxiliary Services Inc. Revenue, NATL Insured, Pre-Refunded, 5.125%, 6/01/33 ............................. 3,200,000 3,408,960 California State University Revenue, Systemwide, Refunding, Series A, AMBAC Insured, 5.00%, 11/01/33 ..................... 22,000,000 21,786,820 Series A, FSA Insured, 5.00%, 11/01/33 .................................. 10,000,000 10,053,400 California Statewide CDA, COP, Children's Hospital, Los Angeles, 5.25%, 8/15/29 ................... 12,250,000 11,304,422 COP, NATL Insured, 5.00%, 4/01/18 ....................................... 3,000,000 2,824,920 COP, Refunding, California Mortgage Insured, 5.75%, 8/01/21 ............. 5,895,000 5,902,899 COP, Refunding, FSA Insured, 5.50%, 8/15/31 ............................. 7,000,000 7,012,810 MFHR, 740 Olive Street, Series L, GNMA Secured, 4.90%, 7/20/39 .......... 13,475,000 13,206,713 MFHR, 740 Olive Street, Series L, GNMA Secured, 5.10%, 7/20/50 .......... 10,000,000 10,008,400 MFHR, Silver Ridge Apartments, Mandatory Put 8/01/21, Series H, FNMA Insured, 5.80%, 8/01/33 .............................................. 2,785,000 2,855,182 California Statewide CDA Revenue, Adventist, Series B, Assured Guaranty, 5.00%, 3/01/37 ................... 17,000,000 16,340,060 Catholic Healthcare West, Series K, Assured Guaranty, 5.50%, 7/01/41 .... 17,000,000 17,197,200 COP, John Muir/Mt. Diablo Health System, NATL Insured, 5.125%, 8/15/22 .. 5,000,000 5,000,500 Enloe Medical Center, California Mortgage Insured, 6.25%, 8/15/28 ....... 17,215,000 18,065,765 Henry Mayo Newhall Memorial, Series B, AMBAC Insured, 5.05%, 10/01/28 ... 7,825,000 7,239,064 Hospital Monterey Peninsula, Series B, FSA Insured, 5.25%, 6/01/23 ...... 2,000,000 2,081,300 Lodi Memorial Hospital, Series A, California Mortgage Insured, 5.00%, 12/01/27 ...................................................... 15,000,000 13,930,050 Methodist Hospital of Southern California Project, FHA Insured, 6.75%, 2/01/38 ....................................................... 20,000,000 22,473,400 Refunding, California Mortgage Insured, 5.00%, 8/01/21 .................. 2,035,000 2,012,045 St. Ignatius College Preparatory, AMBAC Insured, 5.00%, 6/01/37 ......... 7,215,000 6,114,929 St. Joseph Health System, Series E, FSA Insured, 5.25%, 7/01/47 ......... 20,000,000 20,204,400 Sutter Health, Series C, FSA Insured, 5.05%, 8/15/38 .................... 15,000,000 14,820,150 California Statewide CDA Water and Wastewater Revenue, Pooled Financing Program, Refunding, Series A, FSA Insured, 5.00%, 10/01/32 .................................. 9,320,000 9,534,453 Series B, FSA Insured, 5.75%, 10/01/29 .................................. 1,465,000 1,468,956 Carlsbad USD, COP, Series A, Assured Guaranty, 5.00%, 10/01/34 ................................................................ 14,000,000 13,630,680 10/01/41 ................................................................ 3,880,000 3,724,800 Castaic Lake Water Agency Revenue COP, Series A, NATL Insured, 5.00%, 8/01/29 .......................................................... 8,000,000 8,095,280
Semiannual Report | 33 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE ------------------------------------------------ ----------- -------------- MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) Central USD, GO, Election of 2008, Series A, Assured Guaranty, 5.50%, 8/01/29 .......................................................... $ 3,000,000 $ 3,197,430 5.625%, 8/01/33 ......................................................... 3,500,000 3,672,760 Chabot-Las Positas Community College District GO, Capital Appreciation Bonds, Series C, AMBAC Insured, zero cpn., 8/01/35 ................................................................. 10,000,000 1,733,300 8/01/36 ................................................................. 10,000,000 1,596,300 8/01/37 ................................................................. 15,045,000 2,240,953 Chaffey Community College District GO, Refunding, Series A, FSA Insured, 5.00%, 7/01/27 ........................ 270,000 278,259 Series A, FSA Insured, Pre-Refunded, 5.00%, 7/01/27 ..................... 5,480,000 6,112,173 Chico PFAR, Merged Redevelopment Project Area, NATL Insured, 5.125%, 4/01/24 ......................................................... 2,790,000 2,698,097 Chino Basin Regional Financing Authority Revenue, Municipal Water District, Sewer System Project, Refunding, AMBAC Insured, 6.00%, 8/01/16 .......... 2,000,000 2,006,460 Chula Vista Elementary School District GO, Election of 1998, Series F, NATL Insured, 5.00%, 8/01/28 ................................................. 2,685,000 2,754,300 Clovis PFAR, 2001 Corp. Yard Project, AMBAC Insured, 5.00%, 3/01/27 ........ 3,265,000 3,284,623 College of the Sequoias Tulare Area ID No. 3 GO, Election of 2008, Series A, Assured Guaranty, 5.50%, 8/01/33 ........................................ 5,000,000 5,246,300 College of the Sequoias Visalia Area ID No. 2 GO, Election of 2008, Series A, Assured Guaranty, 5.50%, 8/01/33 .............................. 5,750,000 6,033,245 Colton Joint USD, GO, Election of 2008, Series A, Assured Guaranty, 5.375%, 8/01/34 ................................................................. 10,665,000 10,771,863 Compton USD, GO, Election of 2002, Series B, NATL Insured, Pre-Refunded, 5.00%, 6/01/29 .......................................................... 2,000,000 2,313,780 Corona-Norco USD, COP, Refunding, FSA Insured, 5.125%, 4/15/25 ............................ 5,355,000 5,382,578 COP, Refunding, FSA Insured, 5.125%, 4/15/29 ............................ 2,540,000 2,550,693 GO, Capital Appreciation, Refunding, Series B, FSA Insured, zero cpn., 3/01/25 .............................................................. 1,400,000 546,126 GO, Capital Appreciation, Series B, FSA Insured, zero cpn., 9/01/23 ..... 2,320,000 1,020,081 GO, Capital Appreciation, Series B, FSA Insured, zero cpn., 9/01/24 ..... 2,620,000 1,072,418 GO, Capital Appreciation, Series C, FGIC Insured, zero cpn., 9/01/25 .... 4,655,000 1,718,952 GO, Capital Appreciation, Series C, FGIC Insured, zero cpn., 9/01/26 .... 6,080,000 2,078,934 GO, Election of 2006, Series B, Assured Guaranty, 5.375%, 2/01/34 ....... 12,000,000 12,192,960 GO, Election of 2006, Series C, Assured Guaranty, 5.50%, 8/01/39 ........ 7,500,000 7,532,925 Coronado CDA Tax Allocation, Community Development Project, NATL Insured, 5.375%, 9/01/26 ......................................................... 2,700,000 2,698,326 Covina Public Financing Authority Wastewater Revenue, Assured Guaranty, 5.375%, 10/01/29 ........................................................ 6,550,000 6,844,881 Cucamonga County Water District COP, FGIC Insured, 5.00%, 9/01/29 .......... 5,070,000 5,083,385 Delano USD, COP, Refinancing Project, NATL Insured, 5.125%, 1/01/22 ........ 1,620,000 1,699,202 Desert Sands USD, COP, Financing Project, FSA Insured, 5.75%, 3/01/24 ...... 10,000,000 10,787,900 East Bay MUD Water System Revenue, Refunding, NATL Insured, Pre-Refunded, 5.00%, 6/01/26 .......................................................... 14,000,000 14,889,700 East Side UHSD Santa Clara County GO, Election of 2008, Series A, Assured Guaranty, 5.00%, 8/01/38 ............ 4,255,000 4,172,368 Series F, FSA Insured, 5.00%, 8/01/35 ................................... 19,000,000 18,756,230 El Centro Financing Authority Wastewater Revenue, Series A, FSA Insured, 5.25%, 10/01/35 ......................................................... 6,200,000 6,220,398
34 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE ------------------------------------------------ ----------- -------------- MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) El Monte UHSD, GO, Election of 2008, Series A, Assured Guaranty, 5.50%, 6/01/34 .......................................................... $11,355,000 $ 11,571,313 El Monte Water Authority Revenue, Water System Project, AMBAC Insured, Pre-Refunded, 5.60%, 9/01/34 ............................................ 1,800,000 1,896,732 Elsinore Valley Municipal Water District COP, Refunding, Series A, BHAC Insured, 5.00%, 7/01/29 ................................................. 7,245,000 7,607,612 Escondido Joint Powers Financing Authority Lease Revenue, AMBAC Insured, 5.125%, 9/01/30 ......................................................... 3,770,000 3,659,878 Eureka USD, GO, FSA Insured, 5.00%, 8/01/25 ................................ 4,145,000 4,322,862 Fairfield Suisun USD, GO, Election of 2002, NATL Insured, 5.00%, 8/01/25 .......................... 4,185,000 4,331,559 NATL Insured, 5.00%, 8/01/27 ............................................ 12,000,000 12,314,760 Florin Resource Conservation District COP, Elk Grove Water Service, Refunding, Series A, NATL Insured, 5.00%, 3/01/33 ....................... 5,000,000 4,662,150 Folsom COP, Central Business District Fire Station, NATL Insured, 5.125%, 10/01/26 ........................................................ 2,030,000 2,017,434 Foothill/Eastern Corridor Agency Toll Road Revenue, Capital Appreciation, Refunding, NATL Insured, zero cpn., 1/15/17 ....... 20,000,000 13,140,000 Capital Appreciation, Refunding, NATL Insured, zero cpn., 1/15/18 ....... 25,000,000 15,303,750 Capital Appreciation, Refunding, NATL Insured, zero cpn., 1/15/19 ....... 5,970,000 3,404,810 senior lien, Refunding, Series A, NATL Insured, 5.00%, 1/01/35 .......... 66,735,000 55,449,444 Franklin-McKinley School District GO, Election of 2004, Series A, FGIC Insured, Pre-Refunded, 5.00%, 8/01/29 ................................... 5,280,000 6,177,600 Fresno USD, GO, Refunding, Series C, NATL Insured, 5.90%, 2/01/20 ................................................................. 2,065,000 2,249,776 8/01/22 ................................................................. 3,000,000 3,295,650 Fullerton School District GO, Capital Appreciation, Series A, FGIC Insured, zero cpn., 8/01/23 ...................................................... 3,030,000 1,456,854 Fullerton University Foundation Auxiliary Organization Revenue, Series A, NATL Insured, 5.75%, 7/01/25 ................................................................. 1,250,000 1,277,550 7/01/30 ................................................................. 1,000,000 1,019,650 Glendale USD, GO, Series C, FSA Insured, Pre-Refunded, 5.50%, 9/01/24 ...... 2,750,000 2,799,913 Glendora PFAR Tax Allocation, Project No. 1, Refunding, Series A, NATL Insured, 5.00%, 9/01/24 ................................................. 5,000,000 4,680,900 Grossmont UHSD, GO, Capital Appreciation, Election of 2004, FSA Insured, zero cpn., 8/01/24 .............................................................. 5,110,000 2,224,690 FSA Insured, 5.00%, 8/01/33 ............................................. 1,440,000 1,470,715 FSA Insured, 5.25%, 8/01/33 ............................................. 5,510,000 5,732,604 Hawthorne School District GO, Capital Appreciation, Election of 2004, Series C, Assured Guaranty, zero cpn., 8/01/38 ........................................................... 10,000,000 1,667,100 Hawthorne School District, Assured Guaranty, 5.00%, 8/01/34 ............. 1,000,000 953,730 Hollister RDA Tax Allocation, Community Development Project, Refunding, AMBAC Insured, 5.125%, 10/01/32 ......................................... 19,815,000 16,651,337 Indian Wells Valley Water District COP, Assured Guaranty, 5.25%, 10/01/39 ....................................... 7,590,000 7,769,503 Refunding, Assured Guaranty, 5.125%, 10/01/32 ........................... 1,690,000 1,732,199 Jefferson San Mateo County UHSD, GO, Refunding, Series A, NATL Insured, 6.45%, 8/01/25 ................................................................. 3,045,000 3,485,551 8/01/29 ................................................................. 3,075,000 3,512,849
Semiannual Report | 35 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE ------------------------------------------------ ----------- -------------- MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) Jurupa Community Services District Special Tax, CFD No. 2, Series A, NATL Insured, 5.00%, 9/01/32 ................................................. $ 7,000,000 $ 6,018,040 Jurupa USD, COP, FSA Insured, 5.625%, 9/01/24 .............................. 1,600,000 1,637,776 Kern High School District GO, FSA Insured, ETM, 6.625%, 8/01/14 ................................................................. 1,535,000 1,887,267 8/01/15 ................................................................. 1,400,000 1,749,678 Lake Tahoe USD, GO, Election of 2008, FSA Insured, 5.375%, 8/01/29 ......... 10,000,000 10,522,900 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 4,847,535 Lancaster School District GO, Capital Appreciation, Election of 1999, NATL Insured, zero cpn., 8/01/25 ................................................................. 5,495,000 2,001,169 7/01/26 ................................................................. 5,965,000 2,020,644 Lawndale RDA Tax Allocation, Economic Revitalization Project, Assured Guaranty, 5.50%, 8/01/44 ................................................ 6,085,000 6,019,708 Lemon Grove School District GO, Election of 2008, Series A, Assured Guaranty, 5.125%, 8/01/33 ............................................... 2,100,000 2,092,797 Live Oak School District COP, Assured Guaranty, 5.50%, 8/01/29 .......................................................... 1,245,000 1,297,614 5.875%, 8/01/34 ......................................................... 2,270,000 2,368,609 5.875%, 8/01/39 ......................................................... 2,750,000 2,848,588 Lodi Electric System Revenue COP, Series A, Assured Guaranty, 5.00%, 7/01/32 .......................................................... 18,960,000 19,024,843 Lodi USD, GO, NATL Insured, 5.00%, 8/01/23 ................................. 2,150,000 2,193,516 Lodi USD School Facilities ID No. 1 GO, Election of 2006, FSA Insured, 5.00%, 8/01/30 ................................................................. 6,450,000 6,671,493 8/01/32 ................................................................. 8,220,000 8,427,884 Long Beach Bond Finance Authority Lease Revenue, Aquarium of the Pacific Project, Refunding, AMBAC Insured, 5.00%, 11/01/19 ................................................................ 4,000,000 3,743,600 Aquarium of the Pacific Project, Refunding, AMBAC Insured, 5.00%, 11/01/26 ................................................................ 11,000,000 9,759,420 Aquarium of the Pacific Project, Refunding, AMBAC Insured, 5.25%, 11/01/30 ................................................................ 2,000,000 1,779,680 Public Safety Facilities Projects, AMBAC Insured, 5.00%, 11/01/26 .......... 6,780,000 6,214,277 Public Safety Facilities Projects, AMBAC Insured, 5.00%, 11/01/31 .......... 10,500,000 9,198,735 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 6,124,516 5.00%, 8/01/31 .......................................................... 3,135,000 2,531,387 Pre-Refunded, 5.00%, 8/01/25 ............................................ 6,535,000 7,212,222 Pre-Refunded, 5.00%, 8/01/31 ............................................ 8,865,000 9,783,680 Long Beach University School District GO, Election of 1999, Series C, NATL Insured, 5.125%, 8/01/31 ........................................... 13,870,000 13,911,471 Los Angeles Community College District GO, Series A, NATL Insured, Pre-Refunded, 5.00%, 6/01/26 .................... 4,000,000 4,284,320 Series B, FSA Insured, 5.00%, 8/01/27 ................................... 4,000,000 4,091,600 Los Angeles COP, Municipal Improvement Corp. of Los Angeles, Program AW Certificates, AMBAC Insured, 5.00%, 6/01/27 ........................................ 5,895,000 5,912,980 Real Property Program, NATL Insured, 5.00%, 2/01/27 ..................... 9,890,000 9,918,483
36 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE ------------------------------------------------ ----------- -------------- MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) Los Angeles County COP, Antelope Valley Courthouse, Series A, AMBAC Insured, Pre-Refunded, 5.25%, 11/01/27 ................................................................ $ 2,500,000 $ 2,600,550 11/01/33 ................................................................ 2,500,000 2,600,550 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 6,934,620 Los Angeles Department of Water and Power Revenue, Power System, Series A, Sub Series A-1, FSA Insured, 5.00%, 7/01/35 ................... 5,000,000 5,062,100 Series B, FSA Insured, 5.00%, 7/01/35 ................................... 5,000,000 5,097,550 Los Angeles Department of Water and Power Waterworks Revenue, System, Series A, Sub Series A-2, AMBAC Insured, 5.00%, 7/01/44 ................. 10,000,000 10,018,500 Los Angeles Mortgage Revenue, Refunding, Series I, NATL Insured, 6.50%, 7/01/22 .......................................................... 695,000 696,689 Los Angeles USD, GO, Election of 2004, Series H, FSA Insured, 5.00%, 7/01/27 ................. 5,000,000 5,205,750 Election of 2004, Series H, FSA Insured, 5.00%, 7/01/28 ................. 5,000,000 5,183,100 Election of 2005, Series E, FSA Insured, 5.00%, 7/01/27 ................. 5,800,000 6,038,670 Los Angeles Wastewater System Revenue, Refunding, NATL Insured, 5.00%, 6/01/26 .......................................................... 10,000,000 10,193,600 Lynwood PFA Tax Allocation, Project Area A, Refunding, Series A, FSA Insured, 5.85%, 9/01/18 ................................................. 1,765,000 1,787,063 Marin Municipal Water District COP, Financing Project, AMBAC Insured, 5.00%, 7/01/29 .......................................................... 1,200,000 1,106,064 Mendocino County COP, Public Facilities Corp., NATL Insured, 5.25%, 6/01/30 .......................................................... 2,680,000 2,676,516 Merced Irrigation District Electricity System Revenue, Refunding, XLCA Insured, 5.00%, 9/01/26 ................................................. 10,000,000 8,874,700 Millbrae COP, Police Department Expansion, AMBAC Insured, 5.875%, 3/01/24 ......................................................... 1,025,000 1,036,449 Modesto Irrigation District COP, Capital Improvements, Series A, FSA Insured, 5.00%, 7/01/26 ................................................................. 5,000,000 5,053,600 7/01/31 ................................................................. 8,285,000 8,326,839 Montebello COP, Capital Improvement Project, Refunding, FSA Insured, 5.375%, 11/01/26 ........................................................ 8,715,000 8,962,419 Montebello CRDA Tax Allocation, Montebello Hills Redevelopment Project, Refunding, NATL Insured, 5.60%, 3/01/19 ................................. 2,460,000 2,460,025 Montebello USD, GO, Election of 2004, FSA Insured, 5.00%, 8/01/33 .......... 2,700,000 2,714,850 Moorpark USD, COP, Refunding, Assured Guaranty, 5.625%, 11/01/28 ...................... 2,180,000 2,255,450 GO, Election of 2008, Capital Appreciation Bonds, Series A, Assured Guaranty, zero cpn., 8/01/32 ......................................... 5,870,000 1,309,127 Moreno Valley USD, GO, Election of 2004, Series A, FSA Insured, Pre-Refunded, 5.00%, 8/01/26 ............................................ 4,000,000 4,650,600 Morgan Hill USD, GO, FGIC Insured, Pre-Refunded, 5.50%, 8/01/25 ............ 3,840,000 3,993,907 Mount Diablo USD, GO, Election of 2002, FGIC Insured, 5.00%, 7/01/25 ....... 6,025,000 6,121,159 Murrieta Valley USD, COP, NATL Insured, 5.00%, 8/01/27 ..................... 2,380,000 2,418,770 Natomas USD, GO, FSA Insured, 5.00%, 9/01/26 ............................... 2,535,000 2,566,028 Nevada Joint UHSD, GO, Series A, FSA Insured, 5.00%, 8/01/26 ............... 1,295,000 1,328,515 Newark USD, GO, Capital Appreciation, Series C, FSA Insured, zero cpn., 8/01/22 ................................................................. 2,165,000 1,141,561 8/01/23 ................................................................. 2,465,000 1,218,597 8/01/24 ................................................................. 2,560,000 1,192,934 8/01/25 ................................................................. 2,705,000 1,188,144 Norco RDA Tax Allocation, Redevelopment Project Area No. 1, NATL Insured, 5.625%, 3/01/30 ......................................................... 1,000,000 981,600
Semiannual Report | 37 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE ------------------------------------------------ ----------- -------------- MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) Northern California Public Power Agency Revenue, AMBAC Insured, Pre-Refunded, 7.50%, 7/01/23 ............................................ $ 3,200,000 $ 4,339,680 Oakland Revenue, 1800 Harrison Foundation, Series A, AMBAC Insured, Pre-Refunded, 6.00%, 1/01/29 ............................................ 10,000,000 10,000,000 Oceanside COP, AMBAC Insured, 5.20%, 4/01/23 ............................... 2,500,000 2,513,825 Oceanside USD, GO, Refunding, Series A, Assured Guaranty, 5.25%, 8/01/33 ... 5,000,000 5,079,100 Orange County Sanitation Districts COP, FGIC Insured, 5.00%, 2/01/33 ....... 8,000,000 8,111,840 Pacifica COP, AMBAC Insured, 5.375%, 1/01/37 ............................... 6,600,000 6,730,812 Palm Springs Financing Authority Lease Revenue, Convention Center Project, Refunding, Series A, NATL Insured, 5.00%, 11/01/25 ...................... 2,295,000 2,209,810 Pasadena Area Community College District GO, Election of 2002, Series A, FGIC Insured, Pre-Refunded, 5.00%, 6/01/28 .............................. 4,000,000 4,529,640 Patterson Joint USD, GO, Capital Appreciation, Series A, FGIC Insured, zero cpn., 8/01/22 .............................. 1,900,000 950,152 Series A, FGIC Insured, zero cpn., 8/01/24 .............................. 2,075,000 911,070 Series A, FGIC Insured, zero cpn., 8/01/25 .............................. 2,170,000 881,584 Series A, FGIC Insured, zero cpn., 8/01/26 .............................. 2,265,000 864,256 Series C, FGIC Insured, zero cpn., 8/01/23 .............................. 1,985,000 934,459 Peralta Community College District GO, Election of 2000, Series B, NATL Insured, 5.25%, 8/01/32 ................ 8,450,000 8,520,304 Peralta Community College, FSA Insured, 5.00%, 8/01/24 .................. 6,000,000 6,356,220 Perris CFD No. 93-1 Special Tax, Series A, AMBAC Insured, 5.125%, 8/15/23 ................................................................. 3,885,000 3,529,212 Plumas County COP, Capital Improvement Program, Series A, AMBAC Insured, 5.00%, 6/01/33 .......................................................... 3,280,000 3,119,214 Pomona USD, GO, Election of 2008, Series A, Assured Guaranty, 5.25%, 8/01/33 .......................................................... 5,675,000 5,708,709 Porterville COP, Sewer System Refining Project, Refunding, AMBAC Insured, 5.25%, 10/01/23 ......................................................... 3,000,000 3,000,060 Poway RDA Tax Allocation, NATL Insured, Pre-Refunded, 5.75%, 6/15/33 .............................. 9,250,000 9,886,955 Paguay Redevelopment Project, AMBAC Insured, 5.00%, 12/15/25 ............ 9,195,000 8,519,995 Refunding, NATL Insured, 5.75%, 6/15/33 ................................. 2,225,000 2,149,951 Rancho Cucamonga RDA Tax Allocation, Rancho Redevelopment Project, Refunding, FSA Insured, 5.25%, 9/01/20 .................................. 2,500,000 2,526,750 Redwood City School District GO, FGIC Insured, 5.00%, 7/15/27 .............. 3,000,000 3,006,990 Richmond Joint Powers Financing Authority Revenue, Lease, Civic Center Project, Refunding, Assured Guaranty, 5.875%, 8/01/37 ................... 24,000,000 24,094,560 Ripon RDA Tax Allocation, Community Redevelopment Project, NATL Insured, Pre-Refunded, 5.85%, 11/01/30 ........................................... 3,975,000 4,237,112 Riverside Electric Revenue, Issue D, FSA Insured, 5.00%, 10/01/38 .......... 5,310,000 5,392,252 Rohnert Park Community Development Commission Tax Allocation, Redevelopment Project, Series R, FGIC Insured, 5.00%, 8/01/37 ......................... 5,000,000 4,206,000 Roseville Financing Authority Revenue, senior lien, Series A, AMBAC Insured, 5.00%, 9/01/25 .......................................................... 5,675,000 5,165,782 Rowland USD, GO, Series A, FSA Insured, Pre-Refunded, 5.25%, 9/01/25 ....... 5,685,000 5,930,478 Sacramento Area Flood Control Agency Special Assessment, Consolidated, Capital AD, Refunding, Series A, Assured Guaranty, 5.00%, 10/01/32 ............................................................. 5,000,000 5,031,500 Subordinated, Capital AD No. 2, FGIC Insured, 5.80%, 11/01/16 ........... 900,000 901,044
38 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE ------------------------------------------------ ----------- -------------- MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) Sacramento City Financing Authority Revenue, Capital Improvement, Series A, AMBAC Insured, Pre-Refunded, 5.00%, 12/01/26 ...................................................... $ 8,395,000 $ 8,916,246 Capital Improvement, Series A, AMBAC Insured, Pre-Refunded, 5.00%, 12/01/32 ...................................................... 21,500,000 22,834,935 City Hall and Redevelopment Projects, Series A, FSA Insured, Pre-Refunded, 5.00%, 12/01/28 ....................................... 10,000,000 11,193,500 Sacramento County Airport System Revenue, Senior Series B, Assured Guaranty, 5.50%, 7/01/34 .......................................................... 16,320,000 17,178,269 Salida Area Public Facilities Financing Agency CFD, Special Tax, No. 1988-1, FSA Insured, 5.75%, 9/01/30 ............................................. 3,435,000 3,450,251 Salida USD, COP, Financing Project, AMBAC Insured, 5.375%, 5/01/26 ......... 1,645,000 1,645,132 San Bernardino City USD, GO, Election of 2004, Series B, FSA Insured, 5.00%, 8/01/28 .......................................................... 10,000,000 10,135,400 San Bernardino County COP, 1997 Public Improvement Financing Project, NATL Insured, 5.25%, 10/01/25 ........................................... 5,450,000 5,307,264 San Bernardino County SFMR, Capital Appreciation, Series A, GNMA Secured, ETM, zero cpn., 5/01/22 ................................................. 28,405,000 15,165,714 San Diego Public Facilities Financing Authority Sewer Revenue, Series B, FGIC Insured, 5.25%, 5/15/27 ............................................ 1,270,000 1,270,178 San Francisco BART District Sales Tax Revenue, AMBAC Insured, 5.00%, 7/01/28 .......................................................... 2,795,000 2,811,351 San Francisco City and County Airports Commission International Airport Revenue, Refunding, Second Series 28A, NATL Insured, 5.125%, 5/01/24 ................................................................. 9,745,000 9,174,625 5/01/27 ................................................................. 16,575,000 15,179,882 San Francisco City and County Public Utilities Commission Water Revenue, Refunding, Series A, FSA Insured, 5.00%, 11/01/31 ....................... 3,885,000 3,909,553 San Francisco Community College District GO, Series A, FGIC Insured, 5.00%, 6/15/26 ................................................................. 6,000,000 6,126,900 San Gabriel USD, GO, Capital Appreciation, Election of 2002, Series C, FSA Insured, zero cpn., 8/01/30 ............. 5,635,000 1,578,589 Election of 2002, Series C, FSA Insured, zero cpn., 8/01/31 ............. 5,870,000 1,541,932 Election of 2002, Series C, FSA Insured, zero cpn., 7/01/32 ............. 6,115,000 1,502,517 Series A, FSA Insured, zero cpn., 8/01/26 ............................... 3,530,000 1,382,101 Series A, FSA Insured, zero cpn., 2/01/27 ............................... 1,850,000 686,813 San Joaquin Delta Community College District GO, Election of 2004, Capital Appreciation, Series B, FSA Insured, zero cpn., 8/01/31 ......... 10,475,000 2,686,104 Capital Appreciation, Series B, FSA Insured, zero cpn., 8/01/32 ......... 15,185,000 3,623,900 Series A, FSA Insured, 5.00%, 8/01/29 ................................... 520,000 538,101 Series A, FSA Insured, Pre-Refunded, 5.00%, 8/01/29 ..................... 4,530,000 5,300,100 San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, Capital Appreciation, Refunding, Series A, NATL Insured, zero cpn., 1/15/26 .............................................................. 13,155,000 3,568,162 Refunding, Series A, NATL Insured, 5.375%, 1/15/29 ...................... 18,075,000 14,637,858 Refunding, Series A, NATL Insured, 5.25%, 1/15/30 ....................... 12,860,000 10,118,891 senior lien, NATL Insured, 5.00%, 1/01/33 ............................... 10,035,000 8,376,716 San Jose Airport Revenue, Refunding, Series B, AMBAC Insured, 5.00%, 3/01/33 .......................................................... 12,135,000 11,543,176 San Jose Financing Authority Lease Revenue, Civic Center Project, Series B, AMBAC Insured, 5.00%, 6/01/27 ........................................... 10,000,000 10,215,000 San Jose MFHR, Sixth and Martha Family Apartments, FNMA Insured, 5.875%, 3/01/33 ......................................................... 3,500,000 3,537,415 San Jose RDA Tax Allocation, Merged Area Redevelopment Project, Series B, XLCA Insured, 5.00%, 8/01/31 ............................................ 15,470,000 13,614,373
Semiannual Report | 39 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE ------------------------------------------------ ----------- -------------- MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) San Juan USD, GO, Election of 1998, Series A, NATL Insured, 5.00%, 8/01/28.. $ 5,115,000 $ 5,102,571 San Marcos Public Facilities Authority Revenue, Senior Tax Increment Project Area 3, Series A, NATL Insured, Pre-Refunded, 5.75%, 10/01/29.......................................................... 5,340,000 5,652,924 5.80%, 10/01/30.......................................................... 7,800,000 8,280,168 San Marino USD, GO, Series A, NATL Insured, zero cpn., 7/01/25.............. 6,080,000 2,448,598 San Mateo GO, Library Improvement Project, Series A, AMBAC Insured, 5.25%, 8/01/30........................................................... 5,790,000 6,086,853 Santa Ana USD, COP, Capital Appreciation Financing Project, FSA Insured, zero cpn., 4/01/24....................................................... 14,245,000 5,769,937 Santa Clara COP, Refunding, AMBAC Insured, 5.00%, 2/01/27................... 5,555,000 5,778,922 Santa Clara County Financing Authority Revenue, El Camino, Series B, AMBAC Insured, 5.125%, 2/01/41................................................. 11,545,000 11,418,929 Santa Monica PFA Lease Revenue, Civic Center Parking Project, XLCA Insured, 5.00%, 7/01/33........................................................... 11,050,000 11,240,723 Santa Rita USD, GO, Election of 2006, Series A, FSA Insured, 5.00%, 8/01/32........................................................... 6,160,000 6,198,315 Santa Rosa Wastewater Revenue, Series B, FGIC Insured, Pre-Refunded, 5.125%, 9/01/31.......................................................... 4,000,000 4,188,080 Santa Rosa Wastewater Service Facilities District Revenue, Refunding and Improvement, AMBAC Insured, 6.00%, 7/02/15........................... 2,000,000 2,233,640 Santee School District GO, Election of 2006, Series B, Assured Guaranty, 5.00%, 8/01/33............. 1,260,000 1,209,411 Election of 2006, Series B, Assured Guaranty, 5.00%, 8/01/38............. 1,000,000 937,910 Election of 2006, Series B, Assured Guaranty, 5.00%, 8/01/48............. 5,250,000 4,983,878 Series A, FSA Insured, 5.00%, 8/01/31.................................... 6,845,000 6,729,456 Snowline Joint USD, COP, Refinancing Project, Refunding, Assured Guaranty, 5.00%, 9/01/34........................................................... 13,390,000 13,399,239 Sonoma CDA Tax Allocation, Redevelopment Project, NATL Insured, 5.70%, 12/01/30.......................................................... 3,455,000 2,964,528 South Gate COP, Series A, AMBAC Insured, 5.00%, 9/01/24..................... 3,155,000 3,112,912 South San Francisco COP, Conference Center Financing, 5.00%, 4/01/29........ 2,000,000 2,021,240 Southern California Public Power Authority Power Project Revenue, Series A, AMBAC Insured, Pre-Refunded, 5.00%, 7/01/33.............................. 29,000,000 32,932,400 Southern Kern USD, COP, Capital Appreciation, Building Program, Series B, FSA Insured, 5.625%, 9/01/26............................................. 2,250,000 2,250,945 Southern Mono Health Care District GO, Series A, NATL Insured, 5.00%, 8/01/24........................................................... 3,005,000 2,965,154 Southern Mono Health Care District Revenue, Capital Appreciation, Series A, NATL Insured, zero cpn., 8/01/28.................................................................. 2,340,000 653,445 8/01/29.................................................................. 2,440,000 625,396 8/01/30.................................................................. 2,550,000 605,472 8/01/31.................................................................. 2,660,000 587,301 Stanislaus County Board of Education COP, FSA Insured, 5.70%, 9/01/24....... 2,000,000 2,022,580 Stanislaus USD, GO, Election of 2008, Series A, Assured Guaranty, 5.625%, 8/01/33.................................................................. 4,140,000 4,334,746 Stockton Revenue COP, Wastewater System Project, Refunding, Series A, NATL Insured, 5.00%, 9/01/23............................................. 6,500,000 6,524,050 Susanville PFAR, NATL Insured, 5.70%, 6/01/30............................... 3,000,000 3,015,840 Sweetwater UHSD, GO, Election of 2006, Series A, BHAC Insured, 5.00%, 8/01/38........................................................... 14,980,000 15,261,774 Turlock PFA Sewer Revenue, FGIC Insured, 5.50%, 9/15/29..................... 6,855,000 6,896,473
40 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE ------------------------------------------------ ----------- -------------- MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) Union Elementary School District GO, Capital Appreciation, Series A, FGIC Insured, zero cpn., 9/01/24............................... $ 2,000,000 $ 905,720 Series B, FGIC Insured, zero cpn., 9/01/25............................... 5,500,000 2,302,850 Series B, FGIC Insured, zero cpn., 9/01/26............................... 5,850,000 2,298,231 University of California Revenues, Limited Project, Series D, FGIC Insured, 5.00%, 5/15/37........................................................... 6,460,000 6,393,074 Vacaville PFA Tax Allocation Revenue, Vacaville Redevelopment Projects, FSA Insured, 5.00%, 9/01/31.............................................. 5,095,000 5,008,640 Val Verde USD, COP, Refunding, Series A, Assured Guaranty, 5.00%, 3/01/29........................................................... 10,000,000 10,006,600 5.125%, 3/01/36.......................................................... 7,020,000 6,741,236 Vista USD, GO, Capital Appreciation, Series A, FSA Insured, zero cpn., 8/01/26.......... 7,150,000 2,693,334 Capital Appreciation, Series A, FSA Insured, zero cpn., 2/01/27.......... 4,795,000 1,713,589 Series A, FSA Insured, 5.25%, 8/01/25.................................... 5,000,000 5,199,350 Washington Township Health Care District Revenue, Refunding, 5.00%, 7/01/18........................................................... 2,000,000 1,976,860 5.125%, 7/01/23.......................................................... 450,000 429,539 Washington USD, GO, Yolo County, Election of 1999, Series A, FGIC Insured, 5.375%, 8/01/25.......................................................... 2,045,000 2,114,428 Weaver USD, GO, Election of 2006, Series C, AMBAC Insured, zero cpn., 8/01/47.................................................................. 18,685,000 1,300,850 West Basin Municipal Water District Revenue COP, Refunding, Series A, NATL Insured, 5.00%, 8/01/24............................................. 2,500,000 2,588,200 West Contra Costa USD, GO, Refunding, Assured Guaranty, 5.25%, 8/01/29.............................. 2,500,000 2,558,450 Series A, FSA Insured, 5.00%, 8/01/35.................................... 20,000,000 19,191,400 West Kern Community College District COP, AMBAC Insured, 5.375%, 11/01/28... 5,615,000 5,918,828 Western Placer USD Financing Corp. COP, Pre-Refunded, 5.55%, 11/01/30....... 6,930,000 7,699,022 Western Riverside County Water and Wastewater Finance Authority Revenue, Western Municipal Water District Improvement, Assured Guaranty, 5.50%, 9/01/34........................................................... 1,750,000 1,817,585 5.625%, 9/01/39.......................................................... 2,500,000 2,600,825 Westlands Water District Revenue COP, NATL Insured, 5.00%, 9/01/29............................................. 11,775,000 11,934,904 Series A, NATL Insured, 5.00%, 9/01/35................................... 1,460,000 1,441,195 Series A, NATL Insured, 5.00%, 9/01/37................................... 4,340,000 4,263,139 Woodland Finance Authority Lease Revenue, Capital Projects, Refunding, XLCA Insured, 5.00%, 3/01/32............................................. 6,340,000 6,425,780 Woodland Finance Authority Wastewater Revenue, second senior lien, NATL Insured, 5.00%, 3/01/33.................................................................. 3,870,000 3,892,446 3/01/35.................................................................. 2,590,000 2,590,984 Woodside Elementary School District GO, Election of 2005, NATL Insured, Pre-Refunded, 5.00%, 10/01/29............................................ 4,435,000 5,178,129 Yosemite Community College District GO, Election of 2004, Series C, FSA Insured, 5.00%, 8/01/32.................................................. 5,000,000 5,122,350 -------------- TOTAL MUNICIPAL BONDS BEFORE SHORT TERM INVESTMENTS (COST $2,099,966,433).................................................... 2,099,233,626 --------------
Semiannual Report | 41 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE ------------------------------------------------ ----------- -------------- SHORT TERM INVESTMENTS 0.3% MUNICIPAL BONDS 0.3% CALIFORNIA 0.3% (b) California PCFA, PCR, Pacific Gas and Electric Co., Refunding, Series C, Daily VRDN and Put, 0.20%, 11/01/26...................................... $ 1,300,000 $ 1,300,000 (b) California State Department of Water Resources Power Supply Revenue, Refunding, Series F, Sub Series F-4, Daily VRDN and Put, 0.20%, 5/01/22........................................................... 2,500,000 2,500,000 (b) Los Angeles Department of Water and Power Revenue, Refunding, Series B, Sub Series B-3, Daily VRDN and Put, 0.20%, 7/01/34....................... 1,000,000 1,000,000 (b) Metropolitan Water District of Southern California Waterworks Revenue, Refunding, Series B-3, Daily VRDN and Put, 0.20%, 7/01/35................ 700,000 700,000 (b) Southern California Public Power Authority Power Project Revenue, Mead-Phoenix Project,Refunding, Series A, Daily VRDN and Put, 0.20%, 7/01/20........................................................... 1,500,000 1,500,000 -------------- TOTAL SHORT TERM INVESTMENTS (COST $7,000,000).............................. 7,000,000 -------------- TOTAL INVESTMENTS (COST $2,106,966,433) 99.2%............................... 2,106,233,626 OTHER ASSETS, LESS LIABILITIES 0.8%......................................... 17,649,542 -------------- NET ASSETS 100.0%........................................................... $2,123,883,168 ==============
See Abbreviations on page 73. (a) Security purchased on a when-issued 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. The accompanying notes are an integral part of these financial statements. 42 | Semiannual Report Franklin California Tax-Free Trust FINANCIAL HIGHLIGHTS FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND
SIX MONTHS ENDED DECEMBER 31, YEAR ENDED JUNE 30, 2009 -------------------------------------------------------- CLASS A (UNAUDITED) 2009 2008 2007 2006 2005 ------- ------------ -------- -------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .................. $ 10.87 $ 11.27 $ 11.33 $ 11.30 $ 11.68 $ 11.36 -------- -------- -------- -------- -------- -------- Income from investment operations(a): Net investment income(b) ........................... 0.23 0.45 0.44 0.43 0.43 0.43 Net realized and unrealized gains (losses) ......... 0.37 (0.40) (0.07) 0.04 (0.39) 0.32 -------- -------- -------- -------- -------- -------- Total from investment operations ...................... 0.60 0.05 0.37 0.47 0.04 0.75 -------- -------- -------- -------- -------- -------- Less distributions from net investment income ......... (0.23) (0.45) (0.43) (0.44) (0.42) (0.43) -------- -------- -------- -------- -------- -------- Redemption fees(c) .................................... -- --(d) --(d) --(d) --(d) --(d) ======== ======== ======== ======== ======== ======== Net asset value, end of period ........................ $ 11.24 $ 10.87 $ 11.27 $ 11.33 $ 11.30 $ 11.68 Total return(e) ....................................... 5.52% 0.51% 3.29% 4.13% 0.37% 6.67% RATIOS TO AVERAGE NET ASSETS(f) Expenses .............................................. 0.65% 0.66% 0.66% 0.67% 0.66% 0.67% Net investment income ................................. 4.01% 4.17% 3.85% 3.76% 3.74% 3.67% SUPPLEMENTAL DATA Net assets, end of period (000's) ..................... $577,634 $517,829 $517,443 $458,146 $463,545 $453,335 Portfolio turnover rate ............................... 6.12% 20.01% 22.97% 11.25% 13.28% 4.17%
(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) Effective September 1, 2008, the redemption fee was eliminated. (d) Amount rounds to less than $0.01 per share. (e) Total return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year. (f) Ratios are annualized for periods less than one year. The accompanying notes are an integral part of these financial statements. Semiannual Report | 43 Franklin California Tax-Free Trust FINANCIAL HIGHLIGHTS (CONTINUED) FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND
SIX MONTHS ENDED DECEMBER 31, YEAR ENDED JUNE 30, 2009 --------------------------------------------------- CLASS C (UNAUDITED) 2009 2008 2007 2006 2005 ------- ------------ ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .................. $ 10.89 $ 11.29 $ 11.36 $ 11.32 $ 11.70 $ 11.37 ------- ------- ------- ------- ------- ------- Income from investment operations(a): Net investment income(b) ........................... 0.20 0.40 0.38 0.37 0.37 0.36 Net realized and unrealized gains (losses) ......... 0.38 (0.41) (0.08) 0.05 (0.39) 0.33 ------- ------- ------- ------- ------- ------- Total from investment operations ...................... 0.58 (0.01) 0.30 0.42 (0.02) 0.69 ------- ------- ------- ------- ------- ------- Less distributions from net investment income ......... (0.20) (0.39) (0.37) (0.38) (0.36) (0.36) ------- ------- ------- ------- ------- ------- Redemption fees(c) .................................... -- --(d) --(d) --(d) --(d) --(d) ------- ------- ------- ------- ------- ------- Net asset value, end of period ........................ $ 11.27 $ 10.89 $ 11.29 $ 11.36 $ 11.32 $ 11.70 ======= ======= ======= ======= ======= ======= Total return(e) ....................................... 5.31% (0.05)% 2.63% 3.68% (0.18)% 6.15% RATIOS TO AVERAGE NET ASSETS(f) Expenses .............................................. 1.20% 1.21% 1.21% 1.20% 1.20% 1.22% Net investment income ................................. 3.46% 3.62% 3.30% 3.23% 3.20% 3.12% SUPPLEMENTAL DATA Net assets, end of period (000's) ..................... $85,638 $59,205 $36,842 $27,025 $25,173 $19,082 Portfolio turnover rate ............................... 6.12% 20.01% 22.97% 11.25% 13.28% 4.17%
(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) Effective September 1, 2008, the redemption fee was eliminated. (d) Amount rounds to less than $0.01 per share. (e) Total return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year. (f) Ratios are annualized for periods less than one year. The accompanying notes are an integral part of these financial statements. 44 | Semiannual Report Franklin California Tax-Free Trust FINANCIAL HIGHLIGHTS (CONTINUED) FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND
SIX MONTHS ENDED PERIOD ENDED DECEMBER 31, 2009 JUNE 30, ADVISOR CLASS (UNAUDITED) 2009(a) ------------- ----------------- ------------ PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period .................. $ 10.87 $10.60 ------- ------ Income from investment operations(b): Net investment income(c) ........................... 0.23 0.31 Net realized and unrealized gains (losses) ......... 0.38 0.27 ------- ------ Total from investment operations ...................... 0.61 0.58 ------- ------ Less distributions from net investment income ......... (0.23) (0.31) ------- ------ Net asset value, end of period ........................ $ 11.25 $10.87 ======= ====== Total return(d) ....................................... 5.66% 5.49% RATIOS TO AVERAGE NET ASSETS(e) Expenses .............................................. 0.55% 0.56% Net investment income ................................. 4.11% 4.27% SUPPLEMENTAL DATA Net assets, end of period (000's) ..................... $18,618 $ 156 Portfolio turnover rate ............................... 6.12% 20.01%
(a) For the period October 31, 2008 (effective date) to June 30, 2009. (b) 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. (c) Based on average daily shares outstanding. (d) Total return is not annualized for periods less than one year. (e) Ratios are annualized for periods less than one year. The accompanying notes are an integral part of these financial statements. Semiannual Report | 45 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED)
PRINCIPAL FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE ---------------------------------------------------------- ----------- -------------- MUNICIPAL BONDS 94.1% CALIFORNIA 89.3% ABAG Finance Authority for Nonprofit Corps. COP, Rhoda Haas Goldman Plaza, California Mortgage Insured, 5.125%, 5/15/15 ............................ $ 2,655,000 $ 2,656,779 ABAG Finance Authority for Nonprofit Corps. Revenue, San Diego Hospital Assn., Series C, 5.125%, 3/01/18 ......................................................... 2,515,000 2,527,827 5.25%, 3/01/19 .......................................................... 2,315,000 2,324,260 ABAG Revenue, Refunding, Series A-E, 5.40%, 9/15/14 ........................ 1,320,000 1,347,958 ABAG Water and Wastewater Revenue, Pooled Financing Program, Refunding, Series A, FSA Insured, 5.00%, 10/01/10 .................................. 670,000 677,913 Alameda Corridor Transportation Authority Revenue, Capital Appreciation, sub. lien, Refunding, Series A, AMBAC Insured, zero cpn., 10/01/17 ...... 10,000,000 6,418,100 Alameda-Contra Costa Transportation District COP, Refunding, AMBAC Insured, 4.375%, 8/01/14 ......................................................... 1,330,000 1,365,844 Antelope Valley UHSD, GO, Series A, NATL Insured, 4.50%, 8/01/13 .......................................................... 1,230,000 1,321,856 4.625%, 8/01/14 ......................................................... 1,250,000 1,333,550 Arcadia USD, GO, Capital Appreciation, Election of 2006, Series A, FSA Insured, zero cpn., 8/01/22 ............................................. 4,065,000 1,985,183 Bakersfield Hospital Revenue, Adventist Health System, Refunding, NATL Insured, 5.50%, 3/01/19 ................................................. 11,210,000 11,443,392 Baldwin Park USD, GO, Capital Appreciation, Election of 2006, FSA Insured, zero cpn., 8/01/24 ...................................................... 5,265,000 2,282,430 Banning Utility Authority Water Enterprise Revenue, Refunding and Improvement Projects, FGIC Insured, 5.00%, 11/01/21 ..................... 1,080,000 1,103,069 Bay Area Toll Authority Toll Bridge Revenue, San Francisco Bay Area, Refunding, Series F, 5.00%, 4/01/24 ..................................... 3,000,000 3,167,340 Burbank Electric Revenue, NATL Insured, 4.00%, 6/01/11 ................................................................. 1,000,000 1,043,110 6/01/12 ................................................................. 1,000,000 1,066,110 Burbank USD, GO, Capital Appreciation, Election of 1997, Series C, FGIC Insured, 4.00%, 8/01/12 .......................................................... 2,500,000 2,607,425 zero cpn., 8/01/15 ...................................................... 4,600,000 3,643,430 zero cpn., 8/01/16 ...................................................... 4,670,000 3,441,697 Burbank Water and Power Electric Revenue, NATL Insured, 4.00%, 6/01/11 ..... 5,045,000 5,051,508 California Educational Facilities Authority Revenue, Stanford University, Refunding, Series R, 4.00%, 11/01/11 .................................... 1,000,000 1,058,430 California Health Facilities Financing Authority Revenue, Catholic Healthcare West, Series K, 5.125%, 7/01/22 ..................... 20,000,000 20,242,800 Cedars-Sinai Medical Center, Refunding, 5.00%, 11/15/19 ................. 2,000,000 2,051,920 Kaiser Permanente, Series B, ETM, 5.25%, 10/01/13 ....................... 5,000,000 5,158,000 Kaiser Permanente, Series B, ETM, 5.25%, 10/01/14 ....................... 2,000,000 2,022,440 Kaiser Permanente, Series B, ETM, 5.25%, 10/01/16 ....................... 3,850,000 3,886,536 Paradise Valley Estates, Refunding, California Mortgage Insured, 4.125%, 1/01/10 .............................................................. 1,000,000 1,000,000 Paradise Valley Estates, Refunding, California Mortgage Insured, 5.00%, 1/01/11 .............................................................. 1,480,000 1,515,668 Paradise Valley Estates, Refunding, California Mortgage Insured, 4.375%, 1/01/12 .............................................................. 1,000,000 1,029,440 Paradise Valley Estates, Refunding, California Mortgage Insured, 5.00%, 1/01/13 .............................................................. 1,815,000 1,910,505 Paradise Valley Estates, Refunding, California Mortgage Insured, 5.00%, 1/01/14 .............................................................. 1,635,000 1,710,570 Providence Health and Services, Series C, 5.75%, 10/01/19 ............... 1,440,000 1,611,763 Providence Health and Services, Series C, 6.00%, 10/01/20 ............... 1,500,000 1,688,625
46 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE ---------------------------------------------------------- ----------- -------------- MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) California Health Facilities Financing Authority Revenue, (continued) Scripps Health, Series A, 5.00%, 10/01/22 .................................. $ 4,600,000 $ 4,694,300 The Episcopal Home, California Mortgage Insured, 4.625%, 2/01/12 ........... 1,350,000 1,398,074 The Episcopal Home, California Mortgage Insured, 4.75%, 2/01/13 ............ 1,200,000 1,238,388 California HFA, SFM Purchase Revenue, Class III, Series A-1, NATL Insured, 5.70%, 8/01/11 .......................................................... 110,000 110,149 California Municipal Finance Authority COP, Community Hospitals of Central California, 5.00%, 2/01/18 .......................................................... 4,390,000 4,231,697 5.00%, 2/01/19 .......................................................... 3,860,000 3,681,050 5.00%, 2/01/20 .......................................................... 1,600,000 1,508,000 5.00%, 2/01/21 .......................................................... 1,600,000 1,489,008 Refunding, 5.00%, 2/01/14 ............................................... 1,765,000 1,800,053 Refunding, 5.00%, 2/01/17 ............................................... 4,025,000 3,940,515 Refunding, 5.00%, 2/01/18 ............................................... 2,185,000 2,106,209 Refunding, 5.00%, 2/01/19 ............................................... 2,590,000 2,469,928 California Municipal Finance Authority Revenue, Kern Regional Center Project, Series A, 6.00%, 5/01/19 .................. 1,500,000 1,605,915 Kern Regional Center Project, Series A, 6.875%, 5/01/25 ................. 1,500,000 1,595,790 Loma Linda University, 5.00%, 4/01/24 ................................... 1,180,000 1,210,149 California State Department of Water Resources Power Supply Revenue, Series A, 5.50%, 5/01/12 ................................................ 2,000,000 2,199,000 Pre-Refunded, 5.125%, 5/01/18 ........................................... 2,500,000 2,778,025 California State Department of Water Resources Water Revenue, Central Valley Project, Refunding, Series AE, 5.00%, 12/01/26 .......................... 5,000,000 5,379,550 California State Economic Recovery GO, Series A, 5.00%, 7/01/15 .......................................................... 6,115,000 6,691,950 Pre-Refunded, 5.00%, 7/01/15 ............................................ 4,555,000 5,272,048 California State GO, 5.25%, 6/01/16 .......................................................... 515,000 520,181 Pre-Refunded, 5.00%, 11/01/12 ........................................... 1,320,000 1,425,930 Refunding, 4.00%, 2/01/10 ............................................... 6,900,000 6,914,421 Refunding, 5.00%, 11/01/12 .............................................. 590,000 625,376 Refunding, NATL Insured, 5.00%, 2/01/18 ................................. 5,000 5,013 Veterans, Refunding, Series B, 5.25%, 12/01/15 .......................... 2,310,000 2,310,000 California State Public Works Board Lease Revenue, Department of Corrections and Rehabilitation, Refunding, Series J, 5.00%, 1/01/21 .............................................................. 3,000,000 2,942,850 Department of Forestry and Fire Protection, Series A, 4.875%, 10/01/18 .. 1,325,000 1,325,384 Department of General Services, Buildings 8 and 9, Series A, 5.75%, 4/01/23 .............................................................. 4,000,000 4,065,480 Department of General Services, Buildings 8 and 9, Series A, 6.00%, 4/01/24 .............................................................. 6,605,000 6,812,067 Trustees of California State University, Series J, 5.50%, 11/01/25 ...... 2,375,000 2,414,449 Various Capital Projects, Series G, Sub Series G-1, 5.25%, 10/01/18 ..... 5,605,000 5,730,608 Various Capital Projects, Series G, Sub Series G-1, 5.00%, 10/01/20 ..... 6,405,000 6,305,274 Various Capital Projects, Series G, Sub Series G-1, 5.125%, 10/01/22 .... 14,555,000 14,201,605 California Statewide CDA, COP, St. Joseph Health System Obligation Group, 5.25%, 7/01/11 .......... 1,005,000 1,018,367 MFHR, 740 Olive Street, Series L, GNMA Secured, 4.25%, 7/20/24 .......... 3,540,000 3,479,608 MFHR, 740 Olive Street, Series L, GNMA Secured, 4.55%, 7/20/29 .......... 4,110,000 4,012,675
Semiannual Report | 47 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE ---------------------------------------------------------- ----------- -------------- MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) California Statewide CDA Revenue, CHF-Irvine LLC, UCI East Campus Apartments, Phase II, 6.00%, 5/15/23 .... $10,000,000 $ 10,473,900 Daughters of Charity Health, Refunding, Series A, 5.25%, 7/01/24 ........ 3,670,000 3,473,949 Daughters of Charity Health, Refunding, Series G, 5.25%, 7/01/13 ........ 1,000,000 1,045,920 Enloe Medical Center, Series A, California Mortgage Insured, 5.50%, 8/15/23 .............................................................. 3,000,000 3,049,140 Health Facility, Los Angeles Jewish Home for the Aging, California Mortgage Insured, 5.00%, 11/15/18 .................................... 3,000,000 3,022,830 Lodi Memorial Hospital, Series A, California Mortgage Insured, 5.00%, 12/01/22 ............................................................. 8,000,000 7,857,920 Methodist Hospital of Southern California Project, FHA Insured, 5.50%, 8/01/18 .............................................................. 3,260,000 3,672,194 Methodist Hospital of Southern California Project, FHA Insured, 5.50%, 2/01/19 .............................................................. 3,405,000 3,803,930 Methodist Hospital of Southern California Project, FHA Insured, 5.50%, 8/01/19 .............................................................. 3,450,000 3,872,590 Mission Community, California Mortgage Insured, 4.40%, 11/01/10 ......... 1,100,000 1,117,622 Mission Community, California Mortgage Insured, 4.50%, 11/01/11 ......... 1,145,000 1,169,549 Viewpoint School, Refunding, ACA Insured, 4.50%, 10/01/17 ............... 460,000 409,349 Viewpoint School, Refunding, ACA Insured, 4.75%, 10/01/18 ............... 480,000 429,658 Castaic Lake Water Agency Revenue COP, Water System Improvement Project, Capital Appreciation, AMBAC Insured, zero cpn., 8/01/22 ................. 10,445,000 5,191,478 Cathedral City 1915 Act Special Assessment, Limited Obligation, Cove ID No. 04-02, 5.00%, 9/02/24 ................................................... 975,000 848,874 Cerritos PFAR Tax Allocation, Redevelopment Project, Refunding, Series A, AMBAC Insured, 3.00%, 11/01/11 .......................................... 2,585,000 2,590,842 Clovis MFR, Mandatory Put 11/01/10, Refunding, FNMA Insured, 5.10%, 11/01/30 4,105,000 4,182,256 Clovis USD, GO, Capital Appreciation, Election of 2004, Series A, FGIC Insured, zero cpn., 8/01/17 ............................................. 5,235,000 3,688,424 Coalinga COP, Custody Facility, Refunding, 4.25%, 4/01/10 .................. 1,000,000 1,006,600 Compton Public Finance Authority Lease Revenue, Various Capital Projects, Refunding, AMBAC Insured, 5.00%, 9/01/22 ................................ 15,190,000 15,359,217 Conejo Valley USD, GO, Election of 1998, Series C, FSA Insured, zero cpn., 8/01/17 ............................... 2,500,000 1,761,425 Series D, FGIC Insured, 4.50%, 8/01/19 .................................. 4,000,000 4,092,720 Contra Costa Community College District GO, Election of 2002, FGIC Insured, 4.75%, 8/01/18 .......................................................... 2,450,000 2,513,651 Corona-Norco USD, PFA Special Tax Revenue, Series A, 5.25%, 9/01/25 ........ 2,235,000 2,042,857 Desert Sands USD, COP, Financing Project, FSA Insured, 5.00%, 3/01/19 ..................... 2,090,000 2,183,757 GO, Election of 2001, 5.25%, 8/01/21 .................................... 2,015,000 2,214,566 Fairfax School District GO, Election of 2000, Series A, FGIC Insured, 5.00%, 11/01/17 ................................................................ 760,000 834,556 Fairfield-Suisun Sewer District Sewer Revenue, Refunding, Series A, FGIC Insured, 5.00%, 5/01/12 ................................................. 600,000 612,546 Folsom PFA Lease Revenue, City Hall and Community Center, Refunding, FSA Insured, 5.00%, 10/01/17 ................................................ 1,275,000 1,347,356 Foothill/Eastern Corridor Agency Toll Road Revenue, Refunding, NATL Insured, 5.00%, 1/15/16 .......................................................... 1,000,000 986,200 Fresno Joint Powers Financing Authority Lease Revenue, Master Lease Projects, Series A, 5.25%, 4/01/22 .......................................................... 1,055,000 1,082,873 5.50%, 4/01/23 .......................................................... 1,070,000 1,112,308 5.625%, 4/01/24 ......................................................... 1,110,000 1,158,218 5.75%, 4/01/25 .......................................................... 1,125,000 1,178,235
48 Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE ---------------------------------------------------------- ----------- -------------- MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) Galt Capital Improvements Authority Lease Revenue, Culture and Recreation Improvement Project, 5.00%, 4/01/12 ..................................... $ 1,500,000 $ 1,517,475 Galt Middle School Joint Powers Authority Special Tax, CFD No. 1, Refunding, 5.40%, 9/01/12 .......................................................... 1,235,000 1,251,796 Garden Grove Agency Community Development Tax Allocation, Garden Grove Community Project, Refunding, AMBAC Insured, 4.25%, 10/01/13 ............ 2,025,000 2,074,815 Golden State Tobacco Securitization Corp. Tobacco Settlement Revenue, Asset-Backed, ETM, 5.00%, 6/01/12 ....................................... 1,500,000 1,634,955 Hayward USD, GO, Election of 2008, 5.00%, 8/01/26 .......................... 4,770,000 4,896,023 Huntington Beach PFAR, Lease Capital Improvement Refinancing Project, Refunding, Series B, AMBAC Insured, 4.125%, 8/01/14 ......................................................... 2,140,000 2,251,023 4.25%, 8/01/15 .......................................................... 2,080,000 2,172,352 Inland Empire Solid Waste Financing Authority Revenue, Landfill Improvement Financing Project, Series B, FSA Insured, ETM, 6.25%, 8/01/11 ..................... 375,000 388,710 Inland Empire Tobacco Asset Securitization Corp. Revenue, Series A, 5.00%, 6/01/21 ................................................................. 11,395,000 10,074,661 Irvine 1915 Act Special Assessment, Limited Obligation, AD No. 00-18, Group 2, 4.375%, 9/02/10 .................................. 885,000 892,753 AD No. 00-18, Group 2, 4.70%, 9/02/12 ................................... 1,475,000 1,519,073 AD No. 00-18, Group 2, 4.80%, 9/02/13 ................................... 1,175,000 1,211,860 AD No. 00-18, Group 2, 5.125%, 9/02/17 .................................. 1,705,000 1,689,467 AD No. 00-18, Group 3, 4.75%, 9/02/15 ................................... 1,000,000 1,006,270 AD No. 00-18, Group 3, 5.00%, 9/02/17 ................................... 1,000,000 983,100 AD No. 03-19, Group 2, Refunding, 4.875%, 9/02/16 ....................... 1,000,000 991,820 AD No. 03-19, Group 2, Refunding, 5.00%, 9/02/18 ........................ 1,000,000 971,220 AD No. 03-19, Group 2, Refunding, 5.125%, 9/02/19 ....................... 1,000,000 964,870 Irvine USD Financing Authority Special Tax, Series A, 4.70%, 9/01/15 .......................................................... 1,040,000 1,046,094 4.80%, 9/01/17 .......................................................... 1,325,000 1,290,166 4.875%, 9/01/18 ......................................................... 1,490,000 1,434,393 5.00%, 9/01/20 .......................................................... 1,095,000 1,029,344 Kings River Conservation District Pine Flat Power Revenue, Refunding, Series E, 5.125%, 1/01/18 ...................................................... 1,735,000 1,746,295 Lake Elsinore School Financing Authority Revenue, Refunding, 6.00%, 9/01/11 ................................................................. 530,000 530,604 Lancaster RDA Tax Allocation, Combine Redevelopment Project Areas, 6.00%, 8/01/24 ................................................................. 1,300,000 1,340,976 Loma Linda Hospital Revenue, Loma Linda University Medical Center, Series A, 5.00%, 12/01/19 ......................................................... 5,000,000 4,641,000 Long Beach Bond Finance Authority Natural Gas Purchase Revenue, Series A, 5.00%, 11/15/17 ......................................................... 3,950,000 4,026,867 Los Angeles Convention and Exhibition Center Authority Lease Revenue, Refunding, Series A, 5.00%, 8/15/20 ..................................... 20,000,000 20,605,400 AMBAC Insured, 3.00%, 8/15/12 ........................................... 4,525,000 4,728,761 Los Angeles USD, GO, Election of 2004, Series F, FGIC Insured, 5.00%, 7/01/21 ................ 5,975,000 6,302,908 Refunding, NATL Insured, 5.25%, 7/01/13 ................................. 3,500,000 3,926,405 Refunding, Series A-1, FGIC Insured, 5.00%, 7/01/25 ..................... 6,265,000 6,477,258 Refunding, Series A-2, FGIC Insured, 5.00%, 7/01/22 ..................... 5,000,000 5,236,900
Semiannual Report | 49 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE ---------------------------------------------------------- ----------- -------------- MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) M-S-R Public Power Agency San Juan Project Revenue, Refunding, Series I, NATL Insured, 4.25%, 7/01/11 .......................................................... $ 5,055,000 $ 5,294,455 5.00%, 7/01/18 .......................................................... 1,000,000 1,023,280 Marina Joint Powers Financing Authority MFHR, Abrams B Apartments Financing, Mandatory Put 11/15/16, FNMA Insured, 3.90%, 11/15/36 ......................................................... 3,440,000 3,531,607 3.95%, 11/15/36 ......................................................... 1,405,000 1,432,201 Montebello USD, GO, Capital Appreciation, FGIC Insured, zero cpn., 8/01/18 ................................................................. 1,455,000 910,175 8/01/19 ................................................................. 1,480,000 839,426 Moreno Valley USD, GO, Capital Appreciation, Refunding, NATL Insured, zero cpn., 8/01/24 ....... 7,500,000 3,151,200 Election of 2004, Series A, FSA Insured, Pre-Refunded, 5.00%, 8/01/17 ... 2,000,000 2,325,300 Election of 2004, Series A, FSA Insured, Pre-Refunded, 5.00%, 8/01/18 ... 2,300,000 2,674,095 Nevada County COP, Refunding, NATL Insured, 4.125%, 10/01/12 ............... 1,040,000 1,051,866 Northern California Power Agency Revenue, Geothermal Project No. 3, Series A, 5.00%, 7/01/23 .......................................................... 2,000,000 2,114,500 5.25%, 7/01/24 .......................................................... 2,000,000 2,141,880 Oakland USD Alameda County GO, 6.50%, 8/01/23 .............................. 2,200,000 2,402,950 Orange County CFD No. 2002-1 Special Tax, Ladera Ranch, Series A, 4.60%, 8/15/14 .......................................................... 1,000,000 1,007,530 4.75%, 8/15/15 .......................................................... 1,000,000 995,580 4.90%, 8/15/16 .......................................................... 1,285,000 1,258,683 Orange County CFD No. 2003-1 Special Tax, Ladera Ranch, Series A, 4.90%, 8/15/17 .......................................................... 1,000,000 980,060 5.10%, 8/15/18 .......................................................... 1,000,000 987,620 Orange County CFD No. 2004-1 Special Tax, Ladera Ranch, Series A, 4.70%, 8/15/18 .......................................................... 1,765,000 1,632,519 4.80%, 8/15/19 .......................................................... 1,945,000 1,780,297 4.85%, 8/15/20 .......................................................... 2,000,000 1,818,360 Orange County CFD No. 86-2 Special Tax, Rancho Santa Margarita, Refunding, Series A, 5.375%, 8/15/12 ............................................... 1,500,000 1,502,460 Oroville Hospital Revenue, Oroville Hospital, Series A, California Mortgage Insured, 5.125%, 12/01/12 ............................................... 1,435,000 1,435,373 Oxnard Harbor District Revenue, Series A, 5.10%, 8/01/14 ................... 1,000,000 993,540 Pacifica COP, AMBAC Insured, 5.00%, 1/01/22 ................................ 1,275,000 1,340,063 Palm Desert Financing Authority Tax Allocation Revenue, Project Area No. 1, As Amended, Series A, NATL Insured, 5.00%, 4/01/23 .. 7,690,000 7,374,479 Refunding, NATL Insured, 4.75%, 8/01/18 ................................. 1,050,000 1,020,012 Palo Verde Community College District COP, AMBAC Insured, 5.00%, 1/01/22 ................................................................. 1,015,000 1,063,294 1/01/23 ................................................................. 1,065,000 1,110,550 1/01/24 ................................................................. 1,070,000 1,110,639 Pomona RDA Tax Allocation, Mountain Meadows Redevelopment Project, Refunding, Series X, 5.35%, 12/01/16 .................................... 1,000,000 1,052,940 Rancho Mirage Joint Powers Financing Authority Revenue, Eisenhower Medical Center, Series A, 5.00%, 7/01/16 ................................................................. 1,420,000 1,470,850 7/01/21 ................................................................. 1,695,000 1,663,066
50 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE ---------------------------------------------------------- ----------- -------------- MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) Redlands USD, GO, Election of 2002, FSA Insured, 5.00%, 7/01/19 ............ $ 1,000,000 $ 1,054,200 Richmond Joint Powers Financing Authority Revenue, Lease, Civic Center Project, Refunding, Assured Guaranty, 5.00%, 8/01/19 .............................................................. 2,010,000 2,003,890 Lease, Civic Center Project, Refunding, Assured Guaranty, 5.00%, 8/01/20 .............................................................. 2,315,000 2,301,781 Lease, Civic Center Project, Refunding, Assured Guaranty, 5.00%, 8/01/21 .............................................................. 2,050,000 2,037,475 Multiple Redevelopment Projects, Series B, ETM, 5.35%, 5/15/13 ............. 1,410,000 1,490,864 Riverside County COP, Capital Improvement, Family Law, Refunding, Series A, FGIC Insured, 5.00%, 11/01/18 ........................................... 1,540,000 1,624,885 Riverside USD, GO, Election of 2001, Series A, FGIC Insured, 4.00%, 2/01/13 ................................................................. 1,000,000 1,052,230 San Bernardino County COP, Arrowhead Project, Refunding, Series A, 5.25%, 8/01/26 ................................................................. 15,000,000 14,547,450 San Francisco City and County Airports Commission International Airport Revenue, Issue 34D, Refunding, Second Series, 5.25%, 5/01/26 ............ 5,425,000 5,635,707 Mandatory Put 5/01/19, Refunding, Second Series, 6.50%, 5/01/19 ......... 2,000,000 2,158,400 San Francisco City and County COP, Multiple Capital Improvement Project, Series A, 5.00%, 4/01/24 ................................................ 8,400,000 8,694,672 San Francisco City and County Redevelopment Financing Authority Tax Allocation Revenue, Mission Bay North Redevelopment, Series C, 5.875%, 8/01/25 .............. 1,000,000 1,033,580 Mission Bay South Redevelopment, Series D, 5.50%, 8/01/19 ............... 1,030,000 1,058,490 Mission Bay South Redevelopment, Series D, 6.25%, 8/01/21 ............... 1,000,000 1,052,140 Mission Bay South Redevelopment, Series D, 6.25%, 8/01/23 ............... 1,000,000 1,059,760 Mission Bay South Redevelopment, Series D, 6.00%, 8/01/25 ............... 1,465,000 1,523,292 Mission Bay South Redevelopment, Series D, 6.125%, 8/01/26 .............. 1,550,000 1,604,932 San Joaquin County COP, General Hospital Project, Refunding, NATL Insured, 5.00%, 9/01/17 ....... 1,000,000 1,010,950 Solid Waste System Facilities Projects, NATL Insured, 5.00%, 4/01/17 .... 1,340,000 1,367,564 San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, Capital Appreciation, Refunding, Series A, 5.60%, 1/15/16 ..................................... 3,000,000 2,907,660 NATL Insured, zero cpn., 1/15/26 ........................................ 19,000,000 5,153,560 San Jose MFHR, Countrybrook Project, Refunding, Series A, FNMA Insured, 4.95%, 4/01/12 .......................................................... 3,785,000 3,793,668 San Jose RDA Tax Allocation, Merged Area Redevelopment Project, Series B, XLCA Insured, 5.00%, 8/01/26 ............................................ 8,000,000 7,453,840 San Marcos Public Facilities Authority Revenue, Senior Tax Increment Project Area 3, Series A, NATL Insured, Pre-Refunded, 5.30%, 10/01/11 ................... 350,000 369,355 Sanger USD, GO, Election of 2006, Series A, FSA Insured, 5.00%, 8/01/19 ................................................................. 1,325,000 1,391,820 8/01/20 ................................................................. 1,510,000 1,582,842 Santa Ana USD, GO, Election of 1999, Series B, FGIC Insured, zero cpn., 8/01/14 ............ 3,125,000 2,675,219 Election of 2008, Series A, 5.25%, 8/01/25 .............................. 2,000,000 2,105,620 Santa Clara 1915 Act, Reassessment District 187, Refunding, Series 1, 5.25%, 9/02/11 ................................................................. 740,000 747,126 Santa Monica-Malibu USD, COP, Series C, NATL Insured, 4.00%, 5/01/12 .......................................................... 525,000 543,197 4.25%, 5/01/14 .......................................................... 840,000 865,469 4.25%, 5/01/15 .......................................................... 875,000 894,723 4.25%, 11/01/15 ......................................................... 670,000 684,666 South Bayside Waste Management Authority Solid Waste Enterprise Revenue, Shoreway Environmental, Series A, 5.25%, 9/01/24 ........................ 3,500,000 3,571,505
Semiannual Report | 51 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE ---------------------------------------------------------- ----------- -------------- MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) South County Regional Wastewater Authority Revenue, Regional Wastewater Facilities Project, Refunding, FSA Insured, 3.25%, 8/01/11 .............. $ 1,000,000 $ 1,032,410 South Gate PFA Tax Allocation Revenue, South Gate Redevelopment Project No. 1, XLCA Insured, 5.00%, 9/01/16 ..................................... 1,490,000 1,491,132 Southern California Public Power Authority Natural Gas Project Revenue, Project No. 1, Series A, 5.25%, 11/01/19 ................................ 1,500,000 1,548,690 Stockton Revenue, O'Connor Woods Housing Corp., Series A, 5.375%, 11/01/11 ................................................................ 440,000 442,499 Tobacco Securitization Authority Northern California Tobacco Settlement Revenue, Asset-Backed Bonds, Series B, ETM, 4.50%, 6/01/11 ..................................................... 1,540,000 1,625,994 Pre-Refunded, 4.60%, 6/01/12 ............................................ 1,760,000 1,860,742 Pre-Refunded, 4.70%, 6/01/13 ............................................ 1,500,000 1,587,945 Pre-Refunded, 4.80%, 6/01/14 ............................................ 725,000 768,522 Torrance Hospital Revenue, Torrance Memorial Medical Center, Series A, 5.10%, 6/01/12 .......................................................... 1,000,000 1,035,950 Tuolumne Wind Project Authority Revenue, Tuolumne Co. Project, Series A, 5.25%, 1/01/24 .......................................................... 5,000,000 5,244,500 West Contra Costa USD, GO, Series B, FSA Insured, 4.00%, 8/01/12 ........... 1,875,000 1,963,031 West Kern Community College District COP, AMBAC Insured, 5.00%, 11/01/20 ......................................................... 1,015,000 1,058,300 5.00%, 11/01/21 ......................................................... 1,065,000 1,118,378 5.00%, 11/01/22 ......................................................... 1,115,000 1,168,386 5.125%, 11/01/23 ........................................................ 1,170,000 1,222,673 5.125%, 11/01/24 ........................................................ 1,230,000 1,298,204 Whittier Health Facility Revenue, Presbyterian Intercommunity Hospital, ETM, 5.00%, 6/01/11 ..................................................... 1,060,000 1,124,278 ETM, 5.00%, 6/01/12 ..................................................... 2,225,000 2,437,977 Pre-Refunded, 5.00%, 6/01/13 ............................................ 2,335,000 2,581,342 Whittier UHSD, GO, Capital Appreciation Bonds, Refunding, zero cpn., 8/01/24 ................................................................. 7,755,000 3,286,647 8/01/26 ................................................................. 10,045,000 3,687,720 Yucaipa Valley Water District Water System Revenue COP, Series A, NATL Insured, 5.00%, 9/01/15 .......................................................... 1,080,000 1,160,957 5.25%, 9/01/20 .......................................................... 1,325,000 1,376,357 -------------- 609,113,704 -------------- U.S. TERRITORIES 4.8% GUAM 0.3% Guam Government Limited Obligation Revenue, Section 30, Series A, 5.25%, 12/01/17 ................................................................ 2,305,000 2,389,317 -------------- PUERTO RICO 4.5% Puerto Rico Commonwealth GO, Public Improvement, FSA Insured, 5.25%, 7/01/16 .......................................................... 2,500,000 2,733,675 Puerto Rico Electric Power Authority Power Revenue, Refunding, Series UU, FSA Insured, 5.00%, 7/01/23 ....................... 5,000,000 5,271,050 Series RR, FGIC Insured, 5.00%, 7/01/21 ................................. 5,000,000 5,079,000 Series WW, 5.375%, 7/01/23 .............................................. 5,000,000 5,156,250 Puerto Rico PBA Guaranteed Revenue, Government Facilities, Refunding, Series M-3, NATL Insured, 6.00%, 7/01/23 ................................ 11,645,000 12,228,181 -------------- 30,468,156 -------------- TOTAL U.S. TERRITORIES ..................................................... 32,857,473 -------------- TOTAL MUNICIPAL BONDS BEFORE SHORT TERM INVESTMENTS (COST $636,256,993) .... 641,971,177 --------------
52 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE ---------------------------------------------------------- ----------- -------------- SHORT TERM INVESTMENTS 4.3% MUNICIPAL BONDS 4.3% CALIFORNIA 4.3% (a) California PCFA, PCR, Pacific Gas and Electric Co., Refunding, Series C, Daily VRDN and Put, 0.20%, 11/01/26 ........................... $ 8,100,000 $ 8,100,000 Series F, Daily VRDN and Put, 0.20%, 11/01/26 ........................... 4,300,000 4,300,000 (a) California State Department of Water Resources Power Supply Revenue, Refunding, Series F, Sub Series F-4, Daily VRDN and Put, 0.20%, 5/01/22 ............ 4,400,000 4,400,000 Sub Series I-2, Daily VRDN and Put, 0.20%, 5/01/22 ...................... 5,200,000 5,200,000 (a) Irvine 1915 Act Special Assessment, Limited Obligation, AD No. 93-14, Daily VRDN and Put, 0.23%, 9/02/25 ...................................... 6,250,000 6,250,000 (a) Sacramento County Sanitation District Financing Authority Revenue, sub. lien, Sanitation District, Refunding, Series C, Daily VRDN and Put, 0.21%, 12/01/38 ......................................................... 800,000 800,000 -------------- TOTAL SHORT TERM INVESTMENTS (COST $29,050,000) ............................ 29,050,000 -------------- TOTAL INVESTMENTS (COST $665,306,993) 98.4% ................................ 671,021,177 OTHER ASSETS, LESS LIABILITIES 1.6% ........................................ 10,868,746 -------------- NET ASSETS 100.0% .......................................................... $ 681,889,923 ==============
See Abbreviations on page 73. (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. The accompanying notes are an integral part of these financial statements. Semiannual Report | 53 Franklin California Tax-Free Trust FINANCIAL HIGHLIGHTS FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND
SIX MONTHS ENDED DECEMBER 31, YEAR ENDED JUNE 30, 2009 ----------------------------------------------------- CLASS A (UNAUDITED) 2009 2008 2007 2006 2005 ------- ------------ --------- -------- -------- -------- -------- 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 .............................. -- 0.006 0.024 0.029 0.023 0.012 Less distributions from net investment income ......... -- (0.006) (0.024) (0.029) (0.023) (0.012) -------- --------- -------- -------- -------- -------- Net asset value, end of period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ========= ======== ======== ======== ======== Total return(a) ....................................... --% 0.57% 2.43% 2.97% 2.33% 1.20% RATIOS TO AVERAGE NET ASSETS(b) Expenses before waiver and payments by affiliates ......................................... 0.56% 0.57% 0.54% 0.55% 0.55% 0.56% Expenses net of waiver and payments by affiliates ......................................... 0.25% 0.46% 0.54% 0.55% 0.55% 0.56% Net investment income ................................. --% 0.61% 2.37% 2.94% 2.30% 1.22% SUPPLEMENTAL DATA Net assets, end of period (000's) ..................... $765,225 $570,026 $709,264 $658,903 $610,593 $688,121
(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) Ratio are annualized for periods less than one year. The accompanying notes are an integral part of these financial statements. 54 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED)
PRINCIPAL FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND AMOUNT VALUE ----------------------------------------- ----------- -------------- INVESTMENTS 72.7% MUNICIPAL BONDS 72.7% CALIFORNIA 72.7% (a) Berkeley Revenue, Berkeley-Albany YMCA, Refunding, Weekly VRDN and Put, 0.17%, 7/01/38 .......................................................... $ 2,000,000 $ 2,000,000 (a) California Educational Facilities Authority Revenue, Chapman University, Refunding, Series A, Daily VRDN and Put, 0.21%, 10/01/36 ............................................................. 17,800,000 17,800,000 Stanford University, Refunding, Series L, Weekly VRDN and Put, 0.23%, 10/01/22 ............................................................. 500,000 500,000 Stanford University, Refunding, Series L-2, Weekly VRDN and Put, 0.23%, 10/01/14 ............................................................. 1,800,000 1,800,000 Stanford University, Refunding, Series L-3, Weekly VRDN and Put, 0.23%, 10/01/15 ............................................................. 4,640,000 4,640,000 Stanford University, Refunding, Series L-4, Weekly VRDN and Put, 0.23%, 10/01/16 ............................................................. 1,000,000 1,000,000 Stanford University, Refunding, Series L-5, Weekly VRDN and Put, 0.23%, 10/01/17 ............................................................. 8,500,000 8,500,000 (a) California Health Facilities Financing Authority Revenue, Adventist Health System, Series A, Weekly VRDN and Put, 0.17%, 8/01/21 .. 7,200,000 7,200,000 Adventist Health System West, Series B, Daily VRDN and Put, 0.20%, 9/01/38 .............................................................. 2,400,000 2,400,000 (a) California HFAR, MFH III, Series D, Daily VRDN and Put, 0.42%, 2/01/31 ...................................... 10,045,000 10,045,000 Weekly VRDN and Put, 0.20%, 8/01/22 ..................................... 920,000 920,000 (a) California Infrastructure and Economic Development Bank Revenue, American National Red Cross, Refunding, Weekly VRDN and Put, 0.21%, 9/01/34 .............................................................. 5,000,000 5,000,000 California Academy of Sciences, Refunding, Series A, Daily VRDN and Put, 0.20%, 9/01/38 ....................................................... 5,500,000 5,500,000 California Academy of Sciences, Refunding, Series F, Daily VRDN and Put, 0.20%, 9/01/38 ....................................................... 200,000 200,000 J. Paul Getty Trust, Refunding, Series B, Daily VRDN and Put, 0.20%, 10/01/23 ............................................................. 3,245,000 3,245,000 J. Paul Getty Trust, Refunding, Series D, Daily VRDN and Put, 0.20%, 4/01/33 .............................................................. 14,325,000 14,325,000 Orange County Performing Arts Center, Series B, Weekly VRDN and Put, 0.17%, 7/01/34 ....................................................... 9,700,000 9,700,000 (a) California Municipal Finance Authority Revenue, Gideon Hausner Jewish Day, Weekly VRDN and Put, 0.21%, 7/01/38 ..................................... 2,000,000 2,000,000 California School Cash Reserve Program Authority COP, Series A, 2.50%, 7/01/10 ................................................................. 10,000,000 10,093,617 (a) California State Department of Water Resources Power Supply Revenue, Refunding, Series F, Sub Series F-1, Daily VRDN and Put, 0.26%, 5/01/19 . 10,900,000 10,900,000 Refunding, Series F, Sub Series F-4, Daily VRDN and Put, 0.20%, 5/01/22 . 4,065,000 4,065,000 Refunding, Series G, Sub Series G-3, FSA Insured, Weekly VRDN and Put, 0.21%, 5/01/16 ....................................................... 6,255,000 6,255,000 Series B, Sub Series B-3, Daily VRDN and Put, 0.20%, 5/01/22 ............ 500,000 500,000 Series B-2, Daily VRDN and Put, 0.26%, 5/01/22 .......................... 800,000 800,000 Series C, Sub Series C-12, Weekly VRDN and Put, 0.22%, 5/01/22 .......... 11,400,000 11,400,000 Series C, Sub Series C-15, Weekly VRDN and Put, 0.17%, 5/01/22 .......... 6,600,000 6,600,000 (a) California State Educational Facilities Authority Revenue, California Institute of Technology, Series B, Weekly VRDN and Put, 0.23%, 10/01/36 .......................... 18,400,000 18,400,000 (a) California State GO, Kindergarten, Series B3, Daily VRDN and Put, 0.20%, 5/01/34 ............. 5,700,000 5,700,000 Series A-1, Daily VRDN and Put, 0.27%, 5/01/33 .......................... 10,000,000 10,000,000 Series B-3, Weekly VRDN and Put, 0.20%, 5/01/33 ......................... 20,000,000 20,000,000 Series C, Weekly VRDN and Put, 0.21%, 5/01/33 ........................... 6,000,000 6,000,000 (a) California Statewide CDA Revenue, Children's Hospital, Refunding, Series C, Daily VRDN and Put, 0.21%, 8/15/34 .............................................................. 1,600,000 1,600,000 Goodwill of Santa Cruz, Weekly VRDN and Daily Put, 0.22%, 2/01/38 ....... 1,000,000 1,000,000 John Muir Health, Refunding, Series C, Daily VRDN and Put, 0.21%, 8/15/27 .............................................................. 300,000 300,000
Semiannual Report | 55 Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND AMOUNT VALUE ----------------------------------------- ----------- -------------- INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) (a) California Statewide CDA Revenue, (continued) Los Angeles County Museum Art Project, Refunding, Series B, Weekly VRDN and Put, 0.20%, 12/01/37 ............................................. $ 5,000,000 $ 5,000,000 Los Angeles County Museum Art Project, Refunding, Series C, Weekly VRDN and Put, 0.19%, 12/01/34 ............................................. 5,000,000 5,000,000 Los Angeles County Museum Art Project, Refunding, Series D, Daily VRDN and Put, 0.20%, 12/01/34 ............................................. 600,000 600,000 Motion Picture and Television Fund, Series A, Weekly VRDN and Put, 0.22%, 3/01/31 .............................................................. 2,300,000 2,300,000 Sweep Loan Program, Refunding, Series A, Weekly VRDN and Put, 0.20%, 8/01/35 .............................................................. 6,000,000 6,000,000 Touro University Project, Refunding, Weekly VRDN and Put, 0.17%, 9/01/29 .............................................................. 4,570,000 4,570,000 (a) Calleguas-Las Virgines PFAR, Municipal Water District Project, Refunding, Series A, Weekly VRDN and Put, 0.17%, 7/01/37 ........................... 8,825,000 8,825,000 (a) East Bay MUD Wastewater System Revenue, Refunding, Series A, Weekly VRDN and Put, 0.17%, 6/01/33 ..................................................... 3,000,000 3,000,000 Foothill/Eastern Corridor Agency Toll Road Revenue, Capital Appreciation, senior lien, Series A, ETM, 7.05%, 1/01/10 .............................. 2,000,000 2,000,000 (a) Fremont PFA, COP, Weekly VRDN and Put, 0.28%, 8/01/30 ...................... 7,600,000 7,600,000 (a) Hillsborough COP, Refunding, Series A, Weekly VRDN and Put, 0.15%, 6/01/30 . 1,900,000 1,900,000 (a) Irvine 1915 Act Special Assessment, Limited Obligation, AD No. 03-19, Series B, Daily VRDN and Put, 0.20%, 9/02/29 .............. 6,197,000 6,197,000 AD No. 05-21, Series A, Daily VRDN and Put, 0.24%, 9/02/31 .............. 7,100,000 7,100,000 AD No. 93-14, Daily VRDN and Put, 0.23%, 9/02/25 ........................ 4,300,000 4,300,000 AD No. 94-13, Daily VRDN and Put, 0.20%, 9/02/22 ........................ 1,550,000 1,550,000 AD No. 94-15, Refunding, Daily VRDN and Put, 0.20%, 9/02/20 ............. 2,173,000 2,173,000 AD No. 97-13, Daily VRDN and Put, 0.20%, 9/02/23 ........................ 8,350,000 8,350,000 AD No. 97-16, Daily VRDN and Put, 0.20%, 9/02/22 ........................ 9,875,000 9,875,000 (a) Irvine Ranch Water District GO, District Nos. 105 140 240 and 250, Daily VRDN and Put, 0.20%, 1/01/21 ... 10,000,000 10,000,000 Improvement Districts, Consolidated, Series A, Weekly VRDN and Put, 0.18%, 10/01/41 ...................................................... 5,000,000 5,000,000 (a) Los Angeles County Housing Authority MFHR, Malibu Meadows Project, Refunding, Series B, Weekly VRDN and Put, 0.18%, 4/15/28 ................ 3,125,000 3,125,000 (a) Los Angeles County MFMR, Series A, Weekly VRDN and Put, 0.24%, 7/01/14 ..... 4,500,000 4,500,000 (a) Los Angeles County MTA Sales Tax Revenue, Proposition C, second senior, Refunding, Series A1, Daily VRDN and Put, 0.20%, 7/01/23 ................ 16,700,000 16,700,000 (a) Los Angeles Department of Water and Power Revenue, Refunding, Series B, Sub Series B-1, Weekly VRDN and Put, 0.20%, 7/01/34 ..................... 4,050,000 4,050,000 Sub Series B-3, Daily VRDN and Put, 0.20%, 7/01/34 ...................... 6,900,000 6,900,000 Sub Series B-7, Weekly VRDN and Put, 0.15%, 7/01/34 ..................... 8,100,000 8,100,000 (a) Los Angeles Department of Water and Power Waterworks Revenue, Refunding, Series B, Sub Series B-4, Weekly VRDN and Put, 0.20%, 7/01/35 ........... 8,750,000 8,750,000 Los Angeles GO, TRAN, 2.50%, 2/26/10 ....................................... 8,000,000 8,025,367 Los Angeles USD, GO, TRAN, 2.00%, 8/12/10 .................................. 10,000,000 10,083,747 (a) Los Angeles Wastewater System Revenue, Refunding, Sub Series A, Weekly VRDN and Put, 0.15%, 6/01/28 ................................................. 6,100,000 6,100,000 (a) Metropolitan Water District of Southern California Waterworks Revenue, Refunding, Series B-3, Daily VRDN and Put, 0.20%, 7/01/35 ............... 8,200,000 8,200,000 Series C, Weekly VRDN and Put, 0.24%, 7/01/28 ........................... 11,200,000 11,200,000 Series C-2, Daily VRDN and Put, 0.22%, 7/01/36 .......................... 2,400,000 2,400,000
56 | Semiannual Report Franklin California Tax-Free Trust STATEMENT OF INVESTMENTS, DECEMBER 31, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND AMOUNT VALUE ----------------------------------------- ----------- -------------- INVESTMENTS (CONTINUED) MUNICIPAL BONDS (CONTINUED) CALIFORNIA (CONTINUED) (a) Oceanside MFHR, Shadow Way Apartments Project, Weekly VRDN and Put, 0.25%, 3/01/49 ................................................................. $ 4,750,000 $ 4,750,000 (a) Orange County Apartment Development Revenue, Harbor Pointe, Refunding, Issue D, Weekly VRDN and Put, 0.20%, 12/01/22 ............................................................. 3,500,000 3,500,000 Park Ridge Villas, Refunding, Issue I, Weekly VRDN and Put, 0.20%, 11/15/28 ............................................................. 5,100,000 5,100,000 (a) Orange County Housing Authority MF Apartment Development Revenue, Lantern Pines Project, Series CC, FNMA Insured, Weekly VRDN and Put, 0.28%, 12/01/27 ................................................................ 2,595,000 2,595,000 Orange County Revenue, TRAN, Series A, 2.00%, 6/30/10 ...................... 9,000,000 9,070,719 Roseville Joint Union High School District GO, TRAN, 3.00%, 9/08/10 ........ 10,000,000 10,101,168 (a) Sacramento County Housing Authority MFHR, Stonebridge Apartments, Refunding, Series D, Weekly VRDN and Put, 0.23%, 5/15/31 ........................... 2,900,000 2,900,000 (a) Sacramento County Sanitation District Financing Authority Revenue, sub ..... lien, Sanitation District, Refunding, Series A, Daily VRDN and Put, 0.21%, 12/01/36 ........................... 1,600,000 1,600,000 Series C, Daily VRDN and Put, 0.21%, 12/01/38 ........................... 11,400,000 11,400,000 Series E, Weekly VRDN and Put, 0.20%, 12/01/40 .......................... 3,000,000 3,000,000 (a) San Bernardino County MFHR, Housing Mortgage, Parkview, Refunding, Series A, Weekly VRDN and Put, 0.21%, 2/15/27 ..................................... 1,200,000 1,200,000 (a) San Diego County COP, San Diego Foundation, Weekly VRDN and Put, 0.08%, 8/01/36 ................................................................. 4,535,000 4,535,000 (a) San Jose Financing Authority Lease Revenue, Civic Center Project, Refunding, Series A, Weekly VRDN and Put, 0.18%, 6/01/39 .............................................................. 3,000,000 3,000,000 Hayes Mansion, Refunding, Series C, Weekly VRDN and Put, 0.17%, 6/01/27 .............................................................. 5,900,000 5,900,000 (a) San Jose RDAR, Merged Area Redevelopment Project, Series B, Weekly VRDN and Put, 0.20%, 7/01/26 ..................................................... 19,320,000 19,320,000 (a) Santa Ana Housing Authority MFHR, Harbor Pointe Apartments, Refunding, Series A, Weekly VRDN and Put, 0.15%, 12/01/15 .......................... 1,200,000 1,200,000 (a) Santa Clara County Financing Authority Lease Revenue, Valley Medical Center Facilities Replacement Project, Series B, Weekly VRDN and Put, 0.27%, 11/15/25 ................................................................ 4,900,000 4,900,000 (a) Santa Clara County Housing Authority MFHR, Benton Park Central Apartments, Refunding, Series A, Weekly VRDN and Put, 0.20%, 12/15/25 ............... 5,000,000 5,000,000 (a) Santa Clara Electric Revenue, sub. bond, Refunding, Series A, Daily VRDN and Put, 0.21%, 7/01/34 ..................................................... 3,600,000 3,600,000 (a) Southern California Public Power Authority Power Project Revenue, Mead-Adelanto Project, Refunding, Series A, Daily VRDN and Put, 0.20%, 7/01/20 .............................................................. 10,005,000 10,005,000 Mead-Phoenix Project, Refunding, Series A, Daily VRDN and Put, 0.20%, 7/01/20 .............................................................. 11,060,000 11,060,000 (a) Tahoe Forest Hospital District Revenue, Health Facility, Daily VRDN and Put, 0.25%, 7/01/33 .......................................................... 2,000,000 2,000,000 (a) Union City MFR, Housing Mission Sierra, Refunding, Series A, Weekly VRDN and Put, 0.21%, 7/15/29 ..................................................... 6,100,000 6,100,000 (a) University of California Regents Medical Center Pooled Revenue, Refunding, Series B-1, Daily VRDN and Put, 0.20%, 5/15/32 .......................... 15,000,000 15,000,000 -------------- TOTAL INVESTMENTS (COST $556,699,618) ...................................... 556,699,618 OTHER ASSETS, LESS LIABILITIES 27.3% ....................................... 208,525,785 -------------- NET ASSETS 100.0% .......................................................... $ 765,225,403 ==============
See Abbreviations on page 73. (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. The accompanying notes are an integral part of these financial statements. Semiannual Report | 57 Franklin California Tax-Free Trust FINANCIAL STATEMENTS STATEMENTS OF ASSETS AND LIABILITIES December 31, 2009 (unaudited)
FRANKLIN FRANKLIN CALIFORNIA CALIFORNIA INTERMEDIATE FRANKLIN INSURED -TERM CALIFORNIA TAX-FREE TAX-FREE TAX-EXEMPT INCOME FUND INCOME FUND MONEY FUND -------------- ------------ ------------ Assets: Investments in securities: Cost ....................................... $2,106,966,433 $665,306,993 $556,699,618 -------------- ------------ ------------ Value ...................................... $2,106,233,626 $671,021,177 $556,699,618 Cash .......................................... 346,968 63,241 88,348 Receivables: Capital shares sold ........................ 4,036,186 5,120,516 211,696,828 Interest ................................... 32,444,103 8,915,175 636,940 -------------- ------------ ------------ Total assets ............................ 2,143,060,883 685,120,109 769,121,734 -------------- ------------ ------------ Liabilities: Payables: Investment securities purchased ............ 9,853,300 -- -- Capital shares redeemed .................... 5,130,320 1,950,779 3,718,009 Affiliates ................................. 1,418,921 457,995 99,094 Distributions to shareholders .............. 2,634,499 752,489 -- Accrued expenses and other liabilities ........ 140,675 68,923 79,228 -------------- ------------ ------------ Total liabilities ....................... 19,177,715 3,230,186 3,896,331 -------------- ------------ ------------ Net assets, at value ................. $2,123,883,168 $681,889,923 $765,225,403 ============== ============ ============ Net assets consist of: Paid-in capital ............................... $2,126,593,332 $684,959,315 $765,227,949 Undistributed net investment income ........... 290,082 554,638 -- Net unrealized appreciation (depreciation) .... (732,807) 5,714,184 -- Accumulated net realized gain (loss) .......... (2,267,439) (9,338,214) (2,546) -------------- ------------ ------------ Net assets, at value ................. $2,123,883,168 $681,889,923 $765,225,403 ============== ============ ============
The accompanying notes are an integral part of these financial statements. 58 | Semiannual Report Franklin California Tax-Free Trust FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) December 31, 2009 (unaudited)
FRANKLIN FRANKLIN CALIFORNIA CALIFORNIA INTERMEDIATE FRANKLIN INSURED -TERM CALIFORNIA TAX-FREE TAX-FREE TAX-EXEMPT INCOME FUND INCOME FUND MONEY FUND -------------- ------------ ------------ CLASS A: Net assets, at value .......................... $1,866,004,128 $577,633,753 $765,225,403 -------------- ------------ ------------ Shares outstanding ............................ 157,071,666 51,391,880 765,188,591 -------------- ------------ ------------ Net asset value per share(a) .................. $ 11.88 $ 11.24 $ 1.00 -------------- ------------ ------------ Maximum offering price per share (net asset value per share / 95.75%, 97.75% and 100%, respectively) .............................. $ 12.41 $ 11.50 $ 1.00 -------------- ------------ ------------ CLASS B: Net assets, at value .......................... $ 25,321,194 -------------- Shares outstanding ............................ 2,120,359 -------------- Net asset value and maximum offering price per share(a) ................................... $ 11.94 -------------- CLASS C: Net assets, at value .......................... $ 224,760,774 $ 85,638,365 -------------- ------------ Shares outstanding ............................ 18,708,068 7,599,008 -------------- ------------ Net asset value and maximum offering price per share(a) ................................... $ 12.01 $ 11.27 -------------- ------------ ADVISOR CLASS: Net assets, at value .......................... $ 7,797,072 $ 18,617,805 -------------- ------------ Shares outstanding ............................ 655,754 1,654,427 -------------- ------------ Net asset value and maximum offering price per share ...................................... $ 11.89 $ 11.25 -------------- ------------
(a) Redemption price is equal to net asset value less contingent deferred sales charges, if applicable. The accompanying notes are an integral part of these financial statements. Semiannual Report | 59 Franklin California Tax-Free Trust FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF OPERATIONS for the six months ended December 31, 2009 (unaudited)
FRANKLIN FRANKLIN CALIFORNIA CALIFORNIA INTERMEDIATE FRANKLIN INSURED -TERM CALIFORNIA TAX-FREE TAX-FREE TAX-EXEMPT INCOME FUND INCOME FUND MONEY FUND ------------ ------------ ------------ Investment income: Interest ............................................................. $ 54,534,048 $14,690,965 $ 703,096 ------------ ----------- ---------- Expenses: Management fees (Note 3a) ............................................ 4,841,188 1,551,050 1,389,550 Distribution fees: (Note 3c) Class A ........................................................... 929,072 269,434 -- Class B ........................................................... 94,706 -- -- Class C ........................................................... 685,294 235,389 -- Transfer agent fees (Note 3e) ........................................ 261,543 105,793 108,166 Custodian fees ....................................................... 14,561 4,258 3,981 Reports to shareholders .............................................. 40,870 15,947 14,252 Registration and filing fees ......................................... 10,297 6,833 4,413 Professional fees .................................................... 27,216 17,760 16,176 Trustees' fees and expenses .......................................... 32,927 10,045 11,915 Other ................................................................ 71,855 35,433 24,191 ------------ ----------- ---------- Total expenses ................................................. 7,009,529 2,251,942 1,572,644 Expenses waived/paid by affiliates (Note 3f) ................... -- -- (869,548) ------------ ----------- ---------- Net expenses ................................................ 7,009,529 2,251,942 703,096 ------------ ----------- ---------- Net investment income .................................... 47,524,519 12,439,023 -- ------------ ----------- ---------- Realized and unrealized gains (losses): Net realized gain (loss) from investments ......................... 628,947 (467,906) -- Net change in unrealized appreciation (depreciation) on investments .................................................... 74,850,389 20,051,037 -- ------------ ----------- ---------- Net realized and unrealized gain (loss) .............................. 75,479,336 19,583,131 -- ------------ ----------- ---------- Net increase (decrease) in net assets resulting from operations ...... $123,003,855 $32,022,154 $ -- ============ =========== ==========
The accompanying notes are an integral part of these financial statements. 60 | 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 SIX MONTHS ENDED ENDED DECEMBER 31, DECEMBER 31, 2009 YEAR ENDED 2009 YEAR ENDED (UNAUDITED) JUNE 30, 2009 (UNAUDITED) JUNE 30, 2009 -------------- -------------- ------------ ------------- Increase (decrease) in net assets: Operations: Net investment income ...................... $ 47,524,519 $ 94,527,407 $ 12,439,023 $ 23,261,745 Net realized gain (loss) from investments .. 628,947 (2,844,035) (467,906) (5,684,875) Net change in unrealized appreciation (depreciation) on investments ........... 74,850,389 (130,270,547) 20,051,037 (16,143,756) -------------- -------------- ------------ ------------ Net increase (decrease) in net assets resulting from operations ......... 123,003,855 (38,587,175) 32,022,154 1,433,114 -------------- -------------- ------------ ------------ Distributions to shareholders from: Net investment income: Class A ................................. (42,571,082) (85,101,308) (10,935,838) (21,317,414) Class B ................................. (595,440) (1,662,730) -- -- Class C ................................. (4,191,444) (6,927,938) (1,249,106) (1,642,458) Advisor Class ........................... (156,316) (50,507) (282,204) (2,135) -------------- -------------- ------------ ------------ Total distributions to shareholders ........... (47,514,282) (93,742,483) (12,467,148) (22,962,007) -------------- -------------- ------------ ------------ Capital share transactions: (Note 2) Class A ................................. 18,696,467 23,467,087 42,645,257 20,503,056 Class B ................................. (7,827,611) (13,987,116) -- -- Class C ................................. 31,335,902 33,302,435 24,359,593 23,776,300 Advisor Class ........................... 5,439,900 2,115,249 18,140,763 153,009 -------------- -------------- ------------ ------------ Total capital share transactions .............. 47,644,658 44,897,655 85,145,613 44,432,365 -------------- -------------- ------------ ------------ Redemption fees ............................... -- 624 -- 990 -------------- -------------- ------------ ------------ Net increase (decrease) in net assets ............................ 123,134,231 (87,431,379) 104,700,619 22,904,462 Net assets: Beginning of period ........................... 2,000,748,937 2,088,180,316 577,189,304 554,284,842 -------------- -------------- ------------ ------------ End of period ................................. $2,123,883,168 $2,000,748,937 $681,889,923 $577,189,304 ============== ============== ============ ============ Undistributed net investment income included in net assets: End of period .............................. $ 290,082 $ 279,845 $ 554,638 $ 582,763 ============== ============== ============ ============
The accompanying notes are an integral part of these financial statements. Semiannual Report | 61 Franklin California Tax-Free Trust FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND ---------------------------- SIX MONTHS ENDED DECEMBER 31, YEAR ENDED 2009 JUNE 30, (UNAUDITED) 2009 ------------ ------------- Increase (decrease) in net assets: Operations: Net investment income .................................... $ -- $ 4,088,586 Net realized gain (loss) from investments ................ -- 28,688 ------------ ------------- Net increase (decrease) in net assets resulting from operations .................................... -- 4,117,274 ------------ ------------- Distributions to shareholders from net investment income .... -- (4,088,586) ------------ ------------- Capital share transactions: (Note 2) ........................ 195,199,747 (139,267,200) ------------ ------------- Net increase (decrease) in net assets ................. 195,199,747 (139,239,512) Net assets (there is no undistributed net investment income at beginning or end of period): Beginning of period ......................................... 570,025,656 709,264,168 ------------ ------------- End of period ............................................... $765,225,403 $ 570,025,656 ============ =============
The accompanying notes are an integral part of these financial statements. 62 | 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 an open-end investment company, consisting of three 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 B, CLASS C CLASS A CLASS A, CLASS C & ADVISOR CLASS & ADVISOR CLASS ------- ------------------------------------- ---------------------------- Franklin California Tax-Exempt Franklin California Intermediate-Term Franklin California Insured Money Fund Tax-Free Income Fund Tax-Free Income 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 Funds 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 Funds' 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 Funds have 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 Funds' Board of Trustees. Semiannual Report | 63 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 BASIS The Funds may purchase securities on a when-issued 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. The Funds have reviewed the tax positions, taken on federal income tax returns, for each of the three open tax years and as of December 31, 2009, and have determined that no provision for income tax is required in the Funds' financial statements. 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; these dividends are reinvested and paid 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, not including 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. 64 | 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. Insurance companies typically insure municipal bonds that tend to be of very high quality, with the majority of underlying municipal bonds rated A or better. However, there is a risk that in the event of an issuer default, the insurer may not be able to fulfill its obligations under the terms of the policy. 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 was imposed, with some exceptions, on any fund shares that were redeemed or exchanged within seven calendar days following their purchase date. The redemption fee was 2% of the amount redeemed. Such fees were retained by the funds and accounted for as an addition to paid-in capital. Effective September 1, 2008, the redemption fee was eliminated. 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 | 65 Franklin California Tax-Free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 2. SHARES OF BENEFICIAL INTEREST At December 31, 2009, 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, 2009 Shares sold ......................... 11,465,100 $ 136,320,335 9,726,596 $ 109,214,551 Shares issued in reinvestment of distributions .................... 2,242,642 26,579,429 672,431 7,542,554 Shares redeemed ..................... (12,188,759) (144,203,297) (6,665,967) (74,111,848) ----------- ------------- ----------- ------------- Net increase (decrease) ............. 1,518,983 $ 18,696,467 3,733,060 $ 42,645,257 =========== ============= =========== ============= Year ended June 30, 2009 Shares sold ......................... 29,167,937 $ 337,405,080 19,328,396 $ 210,337,015 Shares issued in reinvestment of distributions .................... 4,296,933 49,692,892 1,236,042 13,446,918 Shares redeemed ..................... (31,748,010) (363,630,885) (18,836,592) (203,280,877) ----------- ------------- ----------- ------------- Net increase (decrease) ............. 1,716,860 $ 23,467,087 1,727,846 $ 20,503,056 =========== ============= =========== ============= CLASS B SHARES: Six Months ended December 31, 2009 Shares sold ......................... 12,649 $ 151,091 Shares issued in reinvestment of distributions .................... 34,531 411,056 Shares redeemed ..................... (704,638) (8,389,758) ----------- ------------- Net increase (decrease) ............. (657,458) $ (7,827,611) =========== ============= Year ended June 30, 2009 Shares sold ......................... 73,578 $ 832,721 Shares issued in reinvestment of distributions .................... 90,842 1,056,458 Shares redeemed ..................... (1,374,300) (15,876,295) ----------- ------------- Net increase (decrease) ............. (1,209,880) $ (13,987,116) =========== ============= CLASS C SHARES: Six Months ended December 31, 2009 Shares sold ......................... 3,778,717 $ 45,328,649 2,517,604 $ 28,329,269 Shares issued in reinvestment of distributions .................... 229,833 2,756,002 67,432 758,772 Shares redeemed ..................... (1,394,479) (16,748,749) (421,197) (4,728,448) ----------- ------------- ----------- ------------- Net increase (decrease) ............. 2,614,071 $ 31,335,902 2,163,839 $ 24,359,593 =========== ============= =========== ============= Year ended June 30, 2009 Shares sold ......................... 6,066,207 $ 70,773,138 3,372,119 $ 36,707,062 Shares issued in reinvestment of distributions .................... 366,507 4,283,092 85,595 932,866 Shares redeemed ..................... (3,601,441) (41,753,795) (1,285,439) (13,863,628) ----------- ------------- ----------- ------------- Net increase (decrease) ............. 2,831,273 $ 33,302,435 2,172,275 $ 23,776,300 =========== ============= =========== =============
66 | Semiannual Report Franklin California Tax-Free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA INSURED INTERMEDIATE-TERM TAX-FREE INCOME FUND TAX-FREE INCOME FUND ---------------------------------- ---------------------------------- SHARES AMOUNT SHARES AMOUNT ----------- -------------------- ----------- -------------------- ADVISOR CLASS SHARES: Six Months ended December 31, 2009 Shares sold ......................... 592,602 $ 6,879,091 1,775,688 $ 19,671,755 Shares issued in reinvestment of distributions .................... 4,143 49,184 674 7,589 Shares redeemed ..................... (124,429) (1,488,375) (136,286) (1,538,581) ----------- ------------- ----------- ------------- Net increase (decrease) ............. 472,316 $ 5,439,900 1,640,076 $ 18,140,763 =========== ============= =========== ============= Period ended June 30, 2009(a) Shares sold ......................... 252,413 $ 2,901,997 16,051 $ 171,296 Shares issued in reinvestment of distributions .................... 3,639 42,024 157 1,713 Shares redeemed ..................... (72,614) (828,772) (1,857) (20,000) ----------- ------------- ----------- ------------- Net increase (decrease) ............. 183,438 $ 2,115,249 14,351 $ 153,009 =========== ============= =========== =============
(a) For the period October 31, 2008 (effective date) to June 30, 2009.
FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND AMOUNT ------------------- CLASS A SHARES: Six Months ended December 31, 2009 Shares sold ........................................ $ 401,430,380 Shares redeemed .................................... (206,230,633) ------------- Net increase (decrease) ............................ $ 195,199,747 ============= Year ended June 30, 2009 Shares sold ........................................ $ 567,744,452 Shares issued in reinvestment of distributions ..... 3,885,276 Shares redeemed .................................... (710,896,928) ------------- Net increase (decrease) ............................ $(139,267,200) =============
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 Services) Transfer agent
Semiannual Report | 67 Franklin California Tax-Free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 3. TRANSACTIONS WITH AFFILIATES (CONTINUED) A. MANAGEMENT FEES The Franklin California Insured Tax-Free Income Fund and 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 of the fund 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
B. ADMINISTRATIVE FEES Under an agreement with Advisers, FT Services provides administrative services to the Funds. The fee is paid by Advisers based on average daily net assets, and is not an additional expense of the Funds. C. DISTRIBUTION FEES The Funds' Board of Trustees has adopted distribution plans for each share class of the Franklin California Insured Tax-Free Income Fund and Franklin California Intermediate-Term Tax-Free Income Fund, with the exception of Advisor Class shares, 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. 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. 68 | Semiannual Report Franklin California Tax-Free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 3. TRANSACTIONS WITH AFFILIATES (CONTINUED) C. DISTRIBUTION FEES (CONTINUED) The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:
FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA INSURED INTERMEDIATE-TERM TAX-FREE INCOME FUND TAX-FREE INCOME FUND -------------------- -------------------- Reimbursement Plans: Class A ......... 0.10% 0.10% Compensation Plans: 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 FRANKLIN CALIFORNIA INSURED TAX-FREE INTERMEDIATE-TERM TAX-EXEMPT INCOME FUND TAX-FREE INCOME FUND MONEY FUND ------------------- -------------------- ------------------- Sales charges retained net of commissions paid to unaffiliated broker/dealers ... $304,973 $62,859 $ -- Contingent deferred sales charges retained............................... $ 30,521 $10,625 $13,898
E. TRANSFER AGENT FEES For the period ended December 31, 2009, 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 TAX-FREE INTERMEDIATE-TERM TAX-EXEMPT INCOME FUND TAX-FREE INCOME FUND MONEY FUND ------------------- -------------------- ------------------- Transfer agent fees .. $154,270 $55,535 $73,383
F. WAIVER AND EXPENSE REIMBURSEMENTS In efforts to prevent a negative yield for the Franklin California Tax-Exempt Money Fund, Advisers has voluntarily agreed to waive or limit its fees, assume as its own expense certain expenses otherwise payable by the fund and if necessary, make a capital infusion into the fund. These waivers, expense reimbursements and capital infusions are voluntary and may be modified or discontinued by Advisers at any time, and without further notice. There is no guarantee that the fund will be able to avoid a negative yield. Semiannual Report | 69 Franklin California Tax-Free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 4. INCOME TAXES For tax purposes, capital losses may be carried over to offset future capital gains, if any. At June 30, 2009, the capital loss carryforwards were as follows:
FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA INSURED TAX-FREE INTERMEDIATE-TERM TAX-EXEMPT INCOME FUND TAX-FREE INCOME FUND MONEY FUND ------------------- -------------------- ------------------- Capital loss carryforwards expiring in: 2010 .................................. $ -- $ 112,465 $ -- 2011 .................................. -- 145,149 -- 2012 .................................. -- 865,726 -- 2013 .................................. -- 421,949 -- 2015 .................................. -- 1,083,972 -- 2016 .................................. -- 154,257 2,546 2017 .................................. 1,517,317 5,166,158 -- ---------- ---------- ------ $1,517,317 $7,949,676 $2,546 ========== ========== ======
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, 2009, the Franklin California Insured Tax-Free Income Fund and the Franklin California Intermediate-Term Tax-Free Income Fund deferred realized capital losses of $1,326,127 and $920,632, respectively. At December 31, 2009, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA INSURED TAX-FREE INTERMEDIATE-TERM TAX-EXEMPT INCOME FUND TAX-FREE INCOME FUND MONEY FUND ------------------- -------------------- ------------------- Cost of investments ................... $2,106,358,641 $665,195,786 $556,699,618 -------------- ------------ ------------ Unrealized appreciation ............... $ 64,463,510 $ 16,308,617 $ -- Unrealized depreciation ............... (64,588,525) (10,483,226) -- -------------- ------------ ------------ Net unrealized appreciation (depreciation) ..................... $ (125,015) $ 5,825,391 $ -- ============== ============ ============
Net investment income differs for financial statement and tax purposes primarily due to differing treatment of bond discounts. Net realized gains (losses) differ for financial statement and tax purposes primarily due to differing treatments of wash sales and bond discounts. 70 | Semiannual Report Franklin California Tax-Free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 5. INVESTMENT TRANSACTIONS Purchases and sales (excluding short term securities) for the period ended December 31, 2009, were as follows:
FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA INSURED TAX-FREE INTERMEDIATE-TERM INCOME FUND TAX-FREE INCOME FUND ------------------- -------------------- Purchases ..... $259,489,491 $94,953,964 Sales ......... $220,737,702 $37,069,077
6. CONCENTRATION OF RISK Each of the Funds invests a large percentage of its total assets in obligations of issuers within California and U.S. territories. 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. 7. CREDIT FACILITY The Franklin California Insured Tax-Free Income Fund and the Franklin California Intermediate-Term Tax-Free Income Fund, together with other U.S. registered and foreign investment funds (collectively "Borrowers"), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $725 million (Global Credit Facility) to provide a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective January 22, 2010, the funds renewed the Global Credit Facility, for a total of $750 million, maturing January 21, 2011. Under the terms of the Global Credit Facility, the funds shall, in addition to interest charged on any borrowings made by the funds and other costs incurred by the funds, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.10% based upon the unused portion of the Global Credit Facility, which is reflected in other expenses on the Statements of Operations. During the period ended December 31, 2009, the funds did not utilize the Global Credit Facility. Semiannual Report | 71 Franklin California Tax-Free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 8. FAIR VALUE MEASUREMENTS The Funds follow a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds' own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds' investments and are summarized in the following fair value hierarchy: - Level 1 - quoted prices in active markets for identical securities - Level 2 - other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speed, credit risk, etc.) - Level 3 - significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities. Money market securities may be valued using amortized cost, in accordance with the 1940 Act. Generally, amortized cost reflects the current fair value of a security, but since the value is not obtained from a quoted price in an active market, such securities are reflected as a Level 2. At December 31, 2009, all of the Funds' investments in securities carried at fair value were in Level 2 inputs. 9. NEW ACCOUNTING PRONOUNCEMENTS In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2010-6, FAIR VALUE MEASUREMENTS AND DISCLOSURES (TOPIC 820): IMPROVING DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS. ASU No. 2010-6 enhances and clarifies existing fair value measurement disclosure requirements and is effective for interim and annual periods beginning after December 15, 2009. The Funds are currently evaluating the impact, if any, of applying the provisions of ASU No. 2010-6. 10. SUBSEQUENT EVENTS The Funds have evaluated subsequent events through February 16, 2010, the issuance date of the financial statements and determined that no events have occurred that require disclosure. 72 | Semiannual Report Franklin California Tax-Free Trust NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) ABBREVIATIONS SELECTED PORTFOLIO 1915 ACT - Improvement Bond Act of 1915 ABAG - The Association of Bay Area Governments ACA - American Capital Access Holdings Inc. AD - Assessment District AMBAC - American Municipal Bond Assurance Corp. BART - Bay Area Rapid Transit BHAC - Berkshire Hathaway Assurance Corp. 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. FHA - Federal Housing Authority/Agency 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 MF - Multi-Family 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 NATL - National Public Financial Guarantee Corp. PBA - Public Building Authority PCFA - Pollution Control Financing Authority PCR - Pollution Control Revenue PFA - Public Financing Authority PFAR - Public Financing Authority Revenue RDA - Redevelopment Agency/Authority RDAR - Redevelopment Agency Revenue SFM - Single Family Mortgage SFMR - Single Family Mortgage Revenue TRAN - Tax and Revenue Anticipation Note UHSD - Unified/Union High School District USD - Unified/Union School District XLCA - XL Capital Assurance Semiannual Report | 73 Franklin California Tax-Free Trust SHAREHOLDER INFORMATION PROXY VOTING POLICIES AND PROCEDURES The Trust's investment manager 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 (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 (800) SEC-0330. 74 | Semiannual Report This page intentionally left blank. This page intentionally left blank. Franklin Templeton Funds LITERATURE REQUEST. TO RECEIVE A PROSPECTUS, PLEASE CALL US AT (800) DIAL BEN/(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. VALUE Franklin All Cap Value Fund Franklin Balance Sheet Investment Fund Franklin Large Cap Value Fund Franklin MicroCap Value Fund(1) Franklin MidCap Value Fund Franklin Small Cap Value Fund Mutual Beacon Fund Mutual Quest Fund(2) Mutual Recovery Fund(3) Mutual Shares Fund BLEND Franklin Focused Core Equity Fund Franklin Large Cap Equity Fund Franklin Rising Dividends Fund GROWTH Franklin DynaTech Fund Franklin Flex Cap Growth Fund Franklin Growth Fund Franklin Growth Opportunities Fund Franklin Small Cap Growth Fund Franklin Small-Mid Cap Growth Fund SECTOR Franklin Biotechnology Discovery Fund Franklin Global Real Estate Fund Franklin Gold & Precious Metals Fund Franklin Natural Resources Fund Franklin Real Estate Securities Fund Franklin Utilities Fund Mutual Financial Services Fund GLOBAL Mutual Global Discovery Fund(4) Templeton Global Long-Short Fund Templeton Global Opportunities Trust Templeton Global Smaller Companies Fund Templeton Growth Fund Templeton World Fund INTERNATIONAL Franklin India Growth Fund Franklin International Growth Fund Franklin International Small Cap Growth Fund Mutual European Fund Mutual International 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 Templeton Frontier Markets Fund HYBRID Franklin Balanced Fund Franklin Convertible Securities Fund Franklin Equity Income Fund Franklin Income Fund Templeton Income 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 FIXED INCOME Franklin Adjustable U.S. Government Securities Fund(5) Franklin Floating Rate Daily Access Fund Franklin High 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 Global Total Return Fund Templeton International Bond Fund TAX-FREE INCOME(6) NATIONAL Double Tax-Free Income Fund Federal Tax-Free Income Fund High Yield Tax-Free Income Fund Insured Tax-Free Income Fund(7) LIMITED-/INTERMEDIATE-TERM California Intermediate-Term Tax-Free Income Fund Federal Intermediate-Term Tax-Free Income Fund Federal Limited-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(9) Michigan(9) Minnesota(9) Missouri New Jersey New York(8) North Carolina Ohio(9) Oregon Pennsylvania Tennessee Virginia INSURANCE FUNDS Franklin Templeton Variable Insurance Products Trust(10) (1.) The fund is closed to new investors. Existing shareholders and select retirement plans can continue adding to their accounts. (2.) Effective 5/1/09, Mutual Qualified Fund changed its name to Mutual Quest Fund. The fund's investment goal and strategy remained unchanged. (3.) The fund is a continuously offered, closed-end fund. Shares may be purchased daily; there is no daily redemption. However, each quarter, pending board approval, the fund will authorize the repurchase of 5%-25% of the outstanding number of shares. Investors may tender all or a portion of their shares during the tender period. (4.) Effective 5/1/09, Mutual Discovery Fund changed its name to Mutual Global Discovery Fund. The fund's investment goal and strategy remained unchanged. (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 three or more variations, including long-term portfolios, intermediate-term portfolios, portfolios of insured securities, a high-yield portfolio (CA only) and a money market portfolio (CA only). (9.) The Board of Trustees approved the elimination of the non-fundamental policy requiring the fund to invest at least 80% of net assets in insured municipal securities and the removal of the word "Insured" from the fund name. The changes became effective 2/15/09. (10.) The funds of the Franklin Templeton Variable Insurance Products Trust are generally available only through insurance company variable contracts. 01/10 Not part of the semiannual report (FRANKLIN TEMPLETON INVESTMENTS(R) LOGO) One Franklin Parkway San Mateo, CA 94403-1906 SIGN UP FOR ELECTRONIC DELIVERY on franklintempleton.com SEMIANNUAL REPORT AND SHAREHOLDER LETTER FRANKLIN CALIFORNIA TAX-FREE TRUST INVESTMENT MANAGER Franklin Advisers, Inc. DISTRIBUTOR Franklin Templeton Distributors, Inc. (800) DIAL BEN(R) franklintempleton.com SHAREHOLDER SERVICES (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 departmentsmay be monitored, recorded and accessed. These calls can be identified by the presence of a regular beeping tone. CAT S2009 02/10 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 Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer (b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, 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/LAURA F. FERGERSON ---------------------- Laura F. Fergerson Chief Executive Officer - Finance and Administration Date February 25, 2010 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/LAURA F. FERGERSON ---------------------- Laura F. Fergerson Chief Executive Officer - Finance and Administration Date February 25, 2010 By /s/GASTON GARDEY --------------------- Gaston Gardey Chief Financial Officer and Chief Accounting Officer Date February 25, 2010