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 811-2790
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Franklin California Tax-Free Income Fund
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(Exact name of registrant as specified in charter)
One Franklin Parkway, San Mateo, CA 94403-1906
(Address of principal executive offices) (Zip code)
Murray L. Simpson, One Franklin Parkway, San Mateo, CA 94403-1906
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(Name and address of agent for service)
Registrant's telephone number, including area code: (650) 312-2000
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Date of fiscal year end: 3/31
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Date of reporting period: 9/30/03
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Item 1. Reports to Stockholders.
SEPTEMBER 30, 2003
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SEMIANNUAL REPORT AND SHAREHOLDER LETTER | TAX-FREE INCOME
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FRANKLIN CALIFORNIA
TAX-FREE INCOME FUND
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WANT TO RECEIVE
THIS DOCUMENT
FASTER VIA EMAIL?
Eligible shareholders can
sign up for eDelivery at
franklintempleton.com.
See inside for details.
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[LOGO OMITTED]
FRANKLIN[R] TEMPLETON[R]
INVESTMENTS
FRANKLIN o Templeton o Mutual Series
Franklin Templeton Investments
GAIN FROM OUR PERSPECTIVE
Franklin Templeton's distinct multi-manager structure combines the specialized
expertise of three world-class investment management groups--Franklin, Templeton
and Mutual Series.
SPECIALIZED EXPERTISE
Each of our portfolio management groups operates autonomously, relying on its
own research and staying true to the unique investment disciplines that underlie
its success.
FRANKLIN. Founded in 1947, Franklin is a leader in tax-free investing and a
driving force in fixed income investing around the globe. They also bring
expertise in growth- and value-style U.S. equity investing.
TEMPLETON. Founded in 1940, Templeton pioneered international investing and, in
1954, launched what has become the industry's oldest global fund. Today, with
research offices in over 25 countries, they offer investors the broadest global
reach in the industry.
MUTUAL SERIES. Established in 1949, Mutual Series is dedicated to a unique style
of value investing, searching aggressively for opportunity among undervalued
stocks, arbitrage situations and distressed companies.
TRUE DIVERSIFICATION
Because our management groups work independently and adhere to distinctly
different investment approaches, Franklin, Templeton and Mutual Series funds
typically have a low overlap of securities. That's why our funds can be used to
build truly diversified portfolios covering every major asset class.
RELIABILITY YOU CAN TRUST
At Franklin Templeton Investments, we seek to consistently provide investors
with exceptional risk-adjusted returns over the long term, as well as the
reliable account services that have helped us become one of the most trusted
names in financial services.
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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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Not part of the semiannual report
Contents
SHAREHOLDER LETTER ............... 1
SPECIAL FEATURE:
Understanding Your
Tax-Free Income Fund ............. 4
SEMIANNUAL REPORT
Franklin California Tax-Free
Income Fund ...................... 8
Performance Summary .............. 13
Financial Highlights and
Statement of Investments ......... 16
Financial Statements ............. 50
Notes to Financial Statements .... 54
Proxy Voting Policies and
Procedures ....................... 58
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Semiannual Report
Franklin California
Tax-Free Income Fund
YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin California Tax-Free Income
Fund seeks to provide high, current income exempt from regular federal and
California state personal income taxes through a portfolio consisting mainly of
California municipal bonds. 1
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CREDIT QUALITY BREAKDOWN*
Franklin California Tax-Free Income Fund
Based on Total Long-term Investments as of 9/30/03
[PIE CHART]
AAA ..................... 51.0%
AA ...................... 4.8%
A ....................... 18.9%
BBB ..................... 24.3%
Below Investment Grade .. 1.0%
*Quality breakdown may include internal ratings for bonds not rated by an
independent rating agency.
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This semiannual report for Franklin California Tax-Free Income Fund covers the
period ended September 30, 2003.
PERFORMANCE OVERVIEW
Because bond yield and price move in opposite directions, as yields rose bond
prices fell for the six-month reporting period. The Fund's Class A share price,
as measured by net asset value, declined from $7.24 on March 31, 2003, to $7.17
on September 30, 2003. The Fund's Class A shares paid dividends totaling 17.20
1. For investors subject to alternative minimum tax, a small portion of this
income may be taxable. Distributions of capital gains are generally taxable.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND COMPLETE LEGAL
TITLES OF ALL PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF
INVESTMENTS (SOI). THE SOI BEGINS ON PAGE 20.
8 | Semiannual Report
DIVIDEND DISTRIBUTIONS
Franklin California Tax-Free Income Fund
4/1/03-9/30/03
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DIVIDEND PER SHARE
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MONTH CLASS A CLASS B CLASS C ADVISOR CLASS
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April 2.90 cents 2.55 cents 2.56 cents 2.95 cents
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May 2.90 cents 2.55 cents 2.56 cents 2.95 cents
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June 2.85 cents 2.51 cents 2.50 cents 2.90 cents
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July 2.85 cents 2.51 cents 2.50 cents 2.90 cents
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August 2.85 cents 2.52 cents 2.51 cents 2.90 cents
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September 2.85 cents 2.52 cents 2.51 cents 2.90 cents
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TOTAL 17.20 CENTS 15.16 CENTS 15.14 CENTS 17.50 CENTS
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cents per share for the same period. The Performance Summary beginning on page
13 shows that at the end of this reporting period the Fund's Class A shares'
distribution rate was 4.57%. An investor in the 2003 maximum combined federal
and California state personal income tax bracket of 41.05% would need to earn a
distribution rate of 7.75% 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.
The Fund was subject to bond calls during the six months under review as many
municipal bond issuers sought to take advantage of lower interest rates and
exercised call options on their outstanding higher-coupon bonds issued several
years ago. In general, we were limited to reinvesting the proceeds from these
bond calls as well as from cash inflows at current, lower interest rates, which
tended to reduce the Fund's income and cause dividend distributions to decline
slightly, as shown in the dividend distributions table.
STATE UPDATE
During the six months under review, California's economy continued to experience
a significant downturn resulting from weaker exports and a sluggish national
economy. The state's personal income growth slightly outpaced the nation even
though revenue from sales taxes and corporate taxes remained low. Revenue
declines were due in part to the high-tech sector slowdown; however, on a more
positive note, the San Francisco District of the Federal Reserve reported demand
for semiconductors improved as of September 3, 2003, particularly for
leading-edge products. In addition, semiconductor prices rose slightly, though
competition held down prices for most IT products.
Semiannual Report | 9
[SIDEBAR]
PORTFOLIO BREAKDOWN
Franklin California Tax-Free Income Fund
9/30/03
- --------------------------------------
% OF TOTAL
LONG-TERM INVESTMENTS
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Transportation 18.8%
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Hospital & Health Care 15.5%
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General Obligation 14.1%
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Subject to Government
Appropriations 12.5%
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Utilities 11.5%
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Prerefunded 9.7%
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Tax-supported 9.5%
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Other Revenue 3.4%
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Housing 2.9%
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Higher Education 2.1%
According to California's Legislative Analyst's Office, the state reported a
cumulative $12.5 billion shortfall for fiscal year 2003. The governor balanced
California's 2003 budget through a variety of methods including reliance on
sizable short-term borrowings, and use of spending deferral and other
non-recurring resources such as deficit bonds; this pattern of borrowing and
deferring payments to meet budget shortfalls is expected to continue through
2005.2
California's recently concluded budget for the coming 2004 fiscal year added a
number of recurring structural improvements, including a $4 billion increase in
the motor vehicle license fee and cuts in spending programs.2 While Moody's
Investors Service confirmed the state's general obligation (GO) debt rating of
A3 in September 2003, California's credit rating outlook is negative, reflecting
a view that the state will have substantial difficulty closing the anticipated
budget gap in the 2005 budget cycle.3 Still, according to Moody's, California's
economy is expected to slightly outpace the nation's.
INVESTMENT STRATEGY
We use a consistent, disciplined strategy to maximize income for our
shareholders by seeking to maintain our exposure to higher coupon securities. We
generally employ a buy-and-hold approach and invest in securities that we
believe should provide the most relative value in the market. As we invest
throughout different interest rate environments, our portfolios become well
diversified with a broad range of coupons, calls and maturities. This broad
diversification helps stabilize Fund share price. We generally stay fully
invested to support income distribution.
ECONOMIC AND MARKET OVERVIEW
The municipal bond market, like other bond markets, was volatile over the
six-month period ended September 30, 2003. The market struggled with
geopolitical events, an accommodative Federal Reserve Board (Fed), mixed
economic releases, a strong equity market, and a record level of new bond
issuance. From April 1 through mid-June, the municipal bond market generally
performed well as yields decreased to historically low levels; the Municipal
Market Data AAA 10-year yield fell from 3.63% at the beginning of the period to
2.85% on June 13, and the 30-year yield declined from 4.73% to 4.20% over the
same period.4 Market strength was driven by perceptions that inflation would
stay low and the Fed would remain accommodative as economic indicators seemed to
show little growth. At its May
2. Source: Moody's Investors Service, "Rating Update: California (State of),"
9/18/03 and "Rating Update: California (State of)," 8/4/03.
3. This does not indicate Moody's rating of the Fund.
4. Source: Thomson Financial.
10 | Semiannual Report
meeting the Fed in fact warned the economy risked further weakening. First
quarter 2003 gross domestic product was lower than expected, the employment
outlook was declining, and consumer confidence remained low.
The Municipal Market Data AAA 10-year yield increased from 2.85% on June 13 to
3.47% on September 30, and the 30-year yield rose from 4.20% to 4.73% for the
same period.4 The yield increase was attributed to rising consumer confidence
driven by several factors that were perceived to put the economy in a stronger
posture toward growth. The Fed reduced the federal funds target rate by 25 basis
points (0.25%) rather than the widely expected 50 basis points (0.50%) at its
June meeting, bringing the yield to 1.00%. Furthermore, the Fed left the federal
funds target rate unchanged at its August meeting citing indications of a
strengthening economy as second quarter gross domestic product was higher than
expected. With signs of economic growth, historically low interest rates,
passage of the president's tax plan, and diminishing concerns around pending
geopolitical risks, the market drove yields higher through the last month of the
reporting period.
MANAGER'S DISCUSSION
Early in the reporting period, we followed our value-oriented strategy,
investing primarily for income. We looked to remain fully invested in bonds
ranging from 15 to 30 years in maturity with good call options. We changed our
general investment focus in July, however, when municipal bond market yields
began to increase significantly. As a result, we concentrated more on executing
tax loss swaps that entailed selling bonds purchased in a lower interest rate
environment, and purchasing similarly structured bonds. This strategy enabled
the Fund to book losses that may be used to offset future capital gains, and
allowed it to increase the portfolio's book yield or distributable yield.
Consistent with our income-oriented investment philosophy, we generally invest
in bonds that we believe should provide the most relative value from an income
perspective, and we are comfortable holding them unless we find an opportunity
to enhance the portfolio's structure or increase its future income-earning
potential. As a result of our strategy, the Fund is generally more weighted in
higher coupon bonds purchased in a more favorable yield environment. Such bonds
are susceptible to being called when interest rates decline. On the other hand,
many of the higher coupon bonds that we continue to hold have recently traded at
a premium, which generally makes them less price sensitive to interest rate
fluctuations and
Semiannual Report | 11
thus behave defensively through an increasing interest rate cycle. Furthermore,
our higher coupon bonds allowed us to distribute an attractive tax-free
distribution yield, which we expect ultimately to drive our intermediate- and
long-term performance.
Thank you for your participation in Franklin California Tax-Free Income Fund. We
look forward to serving your future investment needs.
THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF
SEPTEMBER 30, 2003, THE END OF THE REPORTING PERIOD. OUR STRATEGIES AND THE
FUND'S PORTFOLIO COMPOSITION WILL CHANGE DEPENDING ON MARKET AND ECONOMIC
CONDITIONS. THESE OPINIONS MAY NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN
OFFER FOR A PARTICULAR SECURITY. THE INFORMATION IS NOT A COMPLETE ANALYSIS OF
EVERY ASPECT OF ANY MARKET, STATE, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF
FACT ARE FROM SOURCES CONSIDERED RELIABLE, BUT THE ADVISOR MAKES NO
REPRESENTATION OR WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH
HISTORICAL PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY
HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT PHILOSOPHY.
12 | Semiannual Report
Performance Summary as of 9/30/03
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table does not reflect any taxes due on
Fund dividends, capital gain distributions, if any, or any realized gains on the
sale of Fund shares. Total return reflects the Fund's dividend income, capital
gain distributions, if any, and any unrealized gains or losses.
PRICE AND DISTRIBUTION INFORMATION
- -----------------------------------------------------------------------------------------------------
CLASS A CHANGE 9/30/03 3/31/03
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Net Asset Value (NAV) -$0.07 $7.17 $7.24
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DISTRIBUTIONS (4/1/03-9/30/03)
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Dividend Income $0.1720
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CLASS B CHANGE 9/30/03 3/31/03
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Net Asset Value (NAV) -$0.07 $7.16 $7.23
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DISTRIBUTIONS (4/1/03-9/30/03)
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Dividend Income $0.1516
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CLASS C CHANGE 9/30/03 3/31/03
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Net Asset Value (NAV) -$0.07 $7.16 $7.23
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DISTRIBUTIONS (4/1/03-9/30/03)
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Dividend Income $0.1514
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ADVISOR CLASS CHANGE 9/30/03 3/31/03
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Net Asset Value (NAV) -$0.07 $7.16 $7.23
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DISTRIBUTIONS (4/1/03-9/30/03)
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Dividend Income $0.1750
Semiannual Report | Past performance does not guarantee future results. | 13
Performance Summary (CONTINUED)
PERFORMANCE
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CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +1.43% +1.69% +24.74% +69.00%
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Average Annual Total Return 2 -2.86% -2.65% +3.62% +4.92%
- -----------------------------------------------------------------------------------------------------
Distribution Rate 3 4.57%
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Taxable Equivalent Distribution Rate 4 7.75%
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30-Day Standardized Yield 5 4.16%
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Taxable Equivalent Yield 4 7.06%
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CLASS B 6-MONTH 1-YEAR 3-YEAR INCEPTION (1/1/99)
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +1.14% +1.11% +17.38% +20.68%
- -----------------------------------------------------------------------------------------------------
Average Annual Total Return 2 -2.82% -2.76% +4.58% +3.69%
- -----------------------------------------------------------------------------------------------------
Distribution Rate 3 4.22%
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Taxable Equivalent Distribution Rate 4 7.16%
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30-Day Standardized Yield 5 3.79%
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Taxable Equivalent Yield 4 6.43%
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CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (5/1/95)
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +1.14% +1.11% +21.12% +55.03%
- -----------------------------------------------------------------------------------------------------
Average Annual Total Return 2 -0.81% -0.80% +3.69% +5.22%
- -----------------------------------------------------------------------------------------------------
Distribution Rate 3 4.17%
- -----------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate 4 7.07%
- -----------------------------------------------------------------------------------------------------
30-Day Standardized Yield 5 3.75%
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Taxable Equivalent Yield 4 6.36%
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ADVISOR CLASS6 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +1.47% +1.77% +24.77% +69.05%
- -----------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +1.47% +1.77% +4.53% +5.39%
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Distribution Rate 3 4.86%
- -----------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate 4 8.24%
- -----------------------------------------------------------------------------------------------------
30-Day Standardized Yield 5 4.45%
- -----------------------------------------------------------------------------------------------------
Taxable Equivalent Yield 4 7.55%
ONGOING MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE; MORE
RECENT RETURNS MAY DIFFER FROM THOSE SHOWN. SINCE MARKETS CAN GO DOWN AS WELL AS
UP, INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE WITH MARKET CONDITIONS,
AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES.
FOR MORE CURRENT PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.
14 | Past performance does not guarantee future results. | Semiannual Report
Performance Summary (CONTINUED)
ENDNOTES
BOND PRICES, AND THUS THE FUND'S SHARE PRICE, GENERALLY MOVE IN THE OPPOSITE
DIRECTION FROM INTEREST RATES. MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO
INTEREST RATE MOVEMENTS; THEREFORE, THE FUND'S YIELD AND SHARE PRICE WILL
FLUCTUATE WITH MARKET CONDITIONS. SINCE THE FUND CONCENTRATES ITS INVESTMENTS IN
A SINGLE STATE, IT IS SUBJECT TO GREATER RISK OF ADVERSE ECONOMIC AND REGULATORY
CHANGES IN THAT STATE THAN A GEOGRAPHICALLY DIVERSIFIED FUND. THE FUND'S
PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS.
CLASS A: Subject to the current, maximum 4.25% initial sales charge. Prior to
7/1/94, Fund shares were offered at a lower initial sales charge; thus
actual total returns may differ. Effective 5/1/94, the Fund implemented
a Rule 12b-1 plan, which affects subsequent performance.
CLASS B: Subject to no initial sales charge, but subject to a contingent
deferred sales charge (CDSC) declining from 4% to 0% over six years.
These shares have higher annual fees and expenses than Class A shares.
CLASS C: Subject to 1% initial sales charge and 1% CDSC for shares redeemed
within 18 months of investment. These shares have higher annual fees
and expenses than Class A shares.
ADVISOR CLASS: No initial sales charge or Rule 12b-1 fees; are available to a
limited class of investors.
1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes any current, applicable,
maximum sales charge(s). Six-month return has not been annualized.
3. Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price (NAV for Classes B and
Advisor) per share on 9/30/03.
4. Taxable equivalent distribution rate and yield assume the published rates as
of 6/18/03 for the maximum combined federal and California state personal income
tax bracket of 41.05%, based on the federal income tax rate of 35.00%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
Fund's portfolio for the 30 days ended 9/30/03.
6. Effective 10/1/01, 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 10/1/01,
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 9/30/01, actual
Advisor Class performance is used reflecting all charges and fees applicable to
that class. Since 10/1/01 (commencement of sales), the cumulative and average
annual total returns of Advisor Class shares were +8.71% and +4.27%.
Semiannual Report | Past performance does not guarantee future results. | 15
Franklin California Tax-Free Income Fund
FINANCIAL HIGHLIGHTS
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SIX MONTHS ENDED
SEPTEMBER 30, 2003 YEAR ENDED MARCH 31,
CLASS A (UNAUDITED) 2003 2002 2001 2000 1999
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PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period ..... $7.24 $7.07 $7.24 $6.88 $7.40 $7.35
----------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) a .......... .17 .35 .37 .37 .38 .39
Net realized and unrealized
gains (losses) ......................... (.07) .21 (.16) .36 (.53) .07
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Total from investment operations ......... .10 .56 .21 .73 (.15) .46
----------------------------------------------------------------------------------
Less distributions from:
Net investment income ................... (.17) (.36) (.37) (.37) (.36) (.39)
Net realized gains ...................... -- (.03) (.01) -- (.01) (.02)
----------------------------------------------------------------------------------
Total distributions ...................... (.17) (.39) (.38) (.37) (.37) (.41)
----------------------------------------------------------------------------------
Net asset value, end of period ........... $7.17 $7.24 $7.07 $7.24 $6.88 $7.40
----------------------------------------------------------------------------------
Total return b ........................... 1.43% 8.05% 2.87% 10.98% (1.97)% 6.43%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ........ $12,791,485 $13,376,339 $13,016,197 $13,279,037 $12,859,577 $15,473,713
Ratio to average net assets:
Expenses ................................ .56%c .57% .57% .57% .57% .57%
Net investment income ................... 4.84%c 4.90% 5.08% 5.31% 5.40% 5.21%
Portfolio turnover rate .................. 8.21% 11.92% 13.23% 5.83% 12.10% 18.66%
<FN>
a Based on average shares outstanding effective March 31, 2000.
b Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
c Annualized.
</FN>
16 | Semiannual Report
Franklin California Tax-Free Income Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
------------------------------------------------------------------------
SIX MONTHS ENDED
SEPTEMBER 30, 2003 YEAR ENDED MARCH 31,
CLASS B (UNAUDITED) 2003 2002 2001 2000 1999 C
------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............. $7.23 $7.07 $7.24 $6.87 $7.39 $7.41
------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) a .................. .15 .31 .33 .33 .34 .10
Net realized and unrealized gains (losses) ...... (.07) .20 (.16) .37 (.52) (.03)
------------------------------------------------------------------------
Total from investment operations ................. .08 .51 .17 .70 (.18) .07
------------------------------------------------------------------------
Less distributions from:
Net investment income ........................... (.15) (.32) (.33) (.33) (.33) (.09)
Net realized gains .............................. -- (.03) (.01) -- (.01) --
------------------------------------------------------------------------
Total distributions .............................. (.15) (.35) (.34) (.33) (.34) (.09)
------------------------------------------------------------------------
Net asset value, end of period ................... $7.16 $7.23 $7.07 $7.24 $6.87 $7.39
------------------------------------------------------------------------
Total return b ................................... 1.14% 7.46% 2.15% 10.51% (2.51)% .88%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................ $391,347 $402,085 $309,196 $193,428 $110,933 $43,674
Ratio to average net assets:
Expenses ........................................ 1.13%d 1.14% 1.14% 1.14% 1.14% 1.14%d
Net investment income ........................... 4.27%d 4.33% 4.51% 4.73% 4.87% 4.59%d
Portfolio turnover rate .......................... 8.21% 11.92% 13.23% 5.83% 12.10% 18.66%
<FN>
a Based on average shares outstanding effective March 31, 2000.
b Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
c For the period January 1, 1999 (effective date) to March 31, 1999.
d Annualized
</FN>
Semiannual Report | 17
Franklin California Tax-Free Income Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
-----------------------------------------------------------------------
SIX MONTHS ENDED
SEPTEMBER 30, 2003 YEAR ENDED MARCH 31,
CLASS C (UNAUDITED) 2003 2002 2001 2000 1999
-----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ................ $7.23 $7.06 $7.23 $6.87 $7.39 $7.35
-----------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) a ..................... .15 .31 .33 .33 .34 .35
Net realized and unrealized gains (losses) ......... (.07) .21 (.16) .36 (.53) .06
-----------------------------------------------------------------------
Total from investment operations .................... .08 .52 .17 .69 (.19) .41
-----------------------------------------------------------------------
Less distributions from:
Net investment income .............................. (.15) (.32) (.33) (.33) (.32) (.35)
Net realized gain .................................. -- (.03) (.01) -- (.01) (.02)
-----------------------------------------------------------------------
Total distributions ................................. (.15) (.35) (.34) (.33) (.33) (.37)
-----------------------------------------------------------------------
Net asset value, end of period ...................... $7.16 $7.23 $7.06 $7.23 $6.87 $7.39
-----------------------------------------------------------------------
Total return b ...................................... 1.14% 7.46% 2.29% 10.38% (2.54)% 5.70%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................... $517,499 $538,460 $464,108 $393,652 $367,874 $464,535
Ratio to average net assets:
Expenses ........................................... 1.13%c 1.13% 1.14% 1.14% 1.14% 1.14%
Net investment income .............................. 4.27%c 4.34% 4.52% 4.74% 4.82% 4.61%
Portfolio turnover rate ............................. 8.21% 11.92% 13.23% 5.83% 12.10% 18.66%
<FN>
a Based on average shares outstanding effective March 31, 2000.
b Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
c Annualized.
</FN>
18 | Semiannual Report
Franklin California Tax-Free Income Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
---------------------------------------
SIX MONTHS ENDED PERIOD ENDED
SEPTEMBER 30, 2003 MARCH 31,
ADVISOR CLASS (UNAUDITED) 2003 2002C
---------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ....................... $7.23 $7.07 $7.29
---------------------------------------
Income from investment operations:
Net investment income a ................................... .18 .36 .19
Net realized and unrealized gains (losses) ................ (.07) .19 (.24)
---------------------------------------
Total from investment operations ........................... .11 .55 (.05)
---------------------------------------
Less distributions from:
Net investment income ..................................... (.18) (.36) (.16)
Net realized gain ......................................... -- (.03) (.01)
---------------------------------------
Total distributions ........................................ (.18) (.39) (.17)
---------------------------------------
Net asset value, end of period ............................. $7.16 $7.23 $7.07
---------------------------------------
Total return b ............................................. 1.47% 8.00% (.80)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .......................... $13,831 $10,217 $2,134
Ratio to average net assets:
Expenses .................................................. .48%d .49% .49%d
Net investment income ..................................... 4.92%d 4.98% 5.25%d
Portfolio turnover rate .................................... 8.21% 11.92% 13.23%
<FN>
a Based on average shares outstanding.
b Total return is not annualized for periods less than one year.
c For the period October 1, 2001 (effective date) to March 31, 2002.
d Annualized
</FN>
Semiannual Report | See notes to financial statements. | 19
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS 97.9%
BONDS 85.8%
ABAG Finance Authority for Nonprofit Corps. COP,
6.75%, 8/01/20 ................................................................. $ 3,955,000 $ 4,288,604
6.125%, 3/01/21 ................................................................ 4,245,000 4,649,039
Butte Valley-Tulelake Rural Health, 6.65%, 10/01/22 ............................ 855,000 866,508
Episcopal Home Foundation, Refunding, 5.125%, 7/01/13 .......................... 6,000,000 6,100,380
Episcopal Home Foundation, Refunding, 5.125%, 7/01/18 .......................... 18,625,000 18,088,786
Home for Jewish Parents, California Mortgage Insured, 5.625%, 5/15/22 .......... 5,000,000 5,245,800
Lytton Gardens Inc., California Mortgage Insured, 6.00%, 2/15/30 ............... 5,000,000 5,172,300
Milestones Human Services Inc., California Mortgage Insured, 5.65%, 7/01/22 .... 2,000,000 2,110,740
Miramonte Mental Health Services, California Mortgage Insured, 6.60%, 7/01/22 .. 1,250,000 1,265,850
Odd Fellows Home, California Mortgage Insured, 6.00%, 8/15/24 .................. 5,525,000 5,832,080
Rehabilitation Mental Health Services Inc. Project, California Mortgage Insured,
6.50%, 6/01/12 ................................................................ 1,855,000 1,878,614
Rehabilitation Mental Health Services Inc. Project, California Mortgage Insured,
6.55%, 6/01/22 ................................................................ 2,370,000 2,400,218
Rhoda Haas Goldman Plaza, California Mortgage Insured, 5.125%, 5/15/23 ......... 5,000,000 4,941,800
ABAG Finance Authority for Nonprofit Corps. MFHR, Palo Alto Gardens Apartments,
Series A, 5.45%, 4/01/39 ......................................................... 5,500,000 5,532,615
ABAG Finance Authority for Nonprofit Corps. Revenue, San Diego Hospital Association,
Series A, 6.125%, 8/15/20 ...................................................... 23,525,000 24,772,531
Series C, 5.375%, 3/01/21 ...................................................... 5,000,000 4,941,300
ABAG Finance Corp. COP, ABAG XXV, 6.80%, 8/01/12 .................................. 3,040,000 3,083,229
ABAG Revenue,
Mello-Roos, Refunding and Improvement, Series A, FSA Insured, 5.125%, 9/01/21 .. 4,760,000 4,902,562
Mello-Roos, Refunding and Improvement, Series A, FSA Insured, 5.20%, 9/01/27 ... 4,140,000 4,198,912
Tax Allocation, RDA Pool, Series A4, FSA Insured, 5.875%, 12/15/25 ............. 5,000,000 5,308,700
Tax Allocation, RDA Pool, Series A6, FSA Insured, 5.375%, 12/15/25 ............. 3,670,000 3,866,162
ABAG Water and Wastewater Revenue, Pooled Financing Program, Series A, FSA Insured,
5.30%, 10/01/21 .................................................................. 5,450,000 5,865,018
Alameda Corridor Transportation Authority Revenue, senior lien, Series A, MBIA Insured,
5.00%, 10/01/29 .................................................................. 24,490,000 24,747,145
Alameda County COP, Alameda County Medical Center Project, MBIA Insured,
5.00%, 6/01/23 ................................................................. 19,195,000 19,946,292
5.30%, 6/01/26 ................................................................. 7,000,000 7,078,680
5.00%, 6/01/28 ................................................................. 8,925,000 9,142,681
Alhambra RDA, Tax Allocation, Industrial Redevelopment Project, Refunding, 6.375%,
5/01/23 .......................................................................... 2,560,000 2,596,429
Alvord USD, GO, Series A, FGIC Insured, 5.375%, 8/01/27 ........................... 6,100,000 6,492,718
Anaheim PFA, Lease Revenue, Public Improvements Project, Series A, FSA Insured,
5.00%, 9/01/27 ................................................................. 8,900,000 8,981,168
5.00%, 3/01/37 ................................................................. 100,000,000 100,605,000
Anaheim PFAR, Electric Systems Distribution Facilities, MBIA Insured,
5.00%, 10/01/28 ................................................................ 10,765,000 10,872,542
5.00%, 10/01/31 ................................................................ 15,000,000 15,151,500
Antioch Area Public Facilities Financing Agency Special Tax, CFD No. 1989-1, MBIA
Insured, 5.50%, 8/01/22 .......................................................... 4,870,000 5,260,915
20 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Antioch PFA, Reassessment Revenue, sub. lien,
Refunding, 5.60%, 9/02/09 ...................................................... $ 1,225,000 $ 1,301,416
Refunding, Series B, 5.50%, 9/02/08 ............................................ 1,165,000 1,229,984
Series B, 5.30%, 9/02/06 ....................................................... 2,095,000 2,220,009
Arcadia Hospital Revenue, Methodist Hospital of Southern California,
6.50%, 11/15/12 ................................................................ 2,295,000 2,324,950
6.625%, 11/15/22 ............................................................... 3,750,000 3,793,875
Auburn USD, COP, Land Acquisition Program, Series A, FSA Insured, 7.00%, 9/01/28 .. 2,770,000 2,977,889
Baldwin Park PFAR, Tax Allocation,
Series A, 7.75%, 8/01/19 ....................................................... 5,265,000 5,357,453
Series A, Pre-Refunded, 7.10%, 9/01/24 ......................................... 2,000,000 2,149,980
Series B, 7.75%, 8/01/21 ....................................................... 5,795,000 5,890,965
Belmont - Redwood Shores School District, Series A, 5.50%, 9/01/22 ................ 6,500,000 6,955,975
Belmont RDA, Tax Allocation, Los Costanos Community Development, Series A, Pre-Refunded,
6.70%, 8/01/14 ................................................................. 1,235,000 1,317,893
6.80%, 8/01/23 ................................................................. 2,310,000 2,466,965
Berkeley COP, Building Acquisition and Improvement Projects, AMBAC Insured, 5.00%,
2/01/33 .......................................................................... 8,170,000 8,248,350
Brentwood 1915 Act, Infrastructure Financing, Reassessment, Series A, FSA Insured,
5.80%, 9/02/17 ................................................................... 5,110,000 5,705,724
Burbank Parking Authority, Special Tax, CFD No. 1, 8.375%, 10/01/06 ............... 795,000 798,474
Burbank RDA, Tax Allocation,
City Center Redevelopment Project, Refunding, Series A, FSA Insured, 5.50%,
12/01/23 ...................................................................... 5,000,000 5,116,850
Refunding, Series A, 6.00%, 12/01/23 ........................................... 6,500,000 6,682,390
Burton Elementary School District COP, Loan Acquisition, Capital Appreciation,
Series A, FSA Insured, 6.60%, 9/01/27 .......................................... 770,000 780,472
Series B, FSA Insured, 6.60%, 9/01/27 .......................................... 285,000 288,876
California Counties Lease Financing Authority COP, CSAC Financing Corp., Amador County
Project, ETM, 7.70%, 10/01/09 .................................................... 2,130,000 2,543,071
California County California Tobacco Securitization Agency Tobacco Revenue, Asset-Backed,
Alameda County, 5.875%, 6/01/35 .................................................. 7,500,000 6,065,250
California County Tobacco Securitization Agency Revenue, Asset-Backed,
Gold Country Funding Corp., 6.00%, 6/01/38 ..................................... 10,000,000 8,154,600
Golden Gate, Series A, 6.00%, 6/01/43 .......................................... 10,000,000 7,951,700
Kern County Corp., Series A, 6.125%, 6/01/43 ................................... 28,135,000 22,808,482
Kern County Corp., Series B, 6.25%, 6/01/37 .................................... 19,460,000 16,695,512
Sonoma County Corp., Series A, 5.875%, 6/01/43 ................................. 30,000,000 23,540,700
California County Tobacco, Securitization Agency Tobacco Revenue, Asset Backed,
Merced Funding Corp., Series, 5.875%, 6/01/43 .................................. 10,235,000 8,031,302
Stanislaus Fund, Series A, 5.875%, 6/01/43 ..................................... 8,690,000 6,818,956
California Educational Facilities Authority Revenue,
Chapman University, Refunding, Connie Lee Insured, 5.125%, 10/01/26 ............ 10,000,000 10,138,400
Pooled College and University, Series B, 6.75%, 6/01/30 ........................ 11,495,000 12,162,170
Stanford University, Refunding, Series O, 5.125%, 1/01/31 ...................... 21,250,000 21,604,663
Student Loan Program, Series A, MBIA Insured, 6.00%, 3/01/16 ................... 4,965,000 5,284,796
Semiannual Report | 21
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
California Health Facilities Financing Authority Revenue,
AIDS Health Care Foundation, Refunding, Series C, California Mortgage Insured,
6.25%, 9/01/17 ................................................................ $ 1,750,000 $ 1,773,503
California Autism Foundation Inc., Series A, CHFCLP Insured, 6.25%, 11/01/20 ... 3,560,000 3,800,620
Casa Colina, 6.125%, 4/01/32 ................................................... 10,300,000 10,626,407
Catholic Healthcare West, Refunding, Series A, MBIA Insured, 5.75%, 7/01/15 .... 12,500,000 14,175,625
Catholic Healthcare West, Refunding, Series A, MBIA Insured, 6.00%, 7/01/17 .... 7,300,000 8,115,848
Catholic Healthcare West, Series A, 5.00%, 7/01/18 ............................. 40,000,000 38,660,400
Catholic Healthcare West, Series A, 5.00%, 7/01/28 ............................. 140,630,000 127,499,377
Catholic Healthcare West, Series A, MBIA Insured, 5.00%, 7/01/17 ............... 5,000,000 5,274,350
Catholic Healthcare West, Series A, MBIA Insured, 5.125%, 7/01/24 .............. 11,500,000 11,684,805
Cedars-Sinai Medical Center, Series A, MBIA Insured, 5.125%, 8/01/17 ........... 8,355,000 8,949,041
Cedars-Sinai Medical Center, Series A, MBIA Insured, 5.125%, 8/01/27 ........... 15,600,000 15,798,588
Cedars-Sinai Medical Center, Series B, MBIA Insured, 5.25%, 8/01/27 ............ 52,500,000 53,631,375
Clinicas Del Camino, Series A, CHFCLP Insured, 6.55%, 5/01/25 .................. 4,500,000 4,752,450
County Program, Series B, 7.20%, 1/01/12 ....................................... 2,115,000 2,120,330
El Proyecto, Series A, CHFCLP Insured, 5.50%, 12/01/22 ......................... 3,350,000 3,429,697
Enloe Health System, Series A, FSA Insured, 5.00%, 11/15/18 .................... 5,000,000 5,253,300
Enloe Health System, Series A, FSA Insured, 5.00%, 11/15/28 .................... 25,390,000 25,570,015
Familiesfirst, Series A, California Mortgage Insured, 6.00%, 12/01/25 .......... 11,365,000 12,099,861
Feedback Foundation Inc., Series A, CHFCLP Insured, 6.50%, 12/01/22 ............ 4,240,000 4,320,051
Hospital of the Good Samaritan, Refunding, 7.00%, 9/01/21 ...................... 71,050,000 71,077,710
Insured Health Facility Help Group, Series A, California Mortgage Insured, 6.10%,
8/01/25 ....................................................................... 12,905,000 14,170,722
Insured Health Facility-Valleycare, Series A, California Mortgage Insured, 5.25%,
5/01/22 ....................................................................... 5,000,000 4,988,000
Kaiser Permanente, Series A, 5.40%, 5/01/28 .................................... 46,000,000 46,723,120
Kaiser Permanente, Series A, FSA Insured, 5.00%, 6/01/20 ....................... 32,295,000 33,647,515
Kaiser Permanente, Series A, FSA Insured, 5.00%, 6/01/24 ....................... 136,775,000 137,922,542
Kaiser Permanente, Series B, 5.25%, 10/01/16 ................................... 7,515,000 7,814,473
Kaiser Permanente, Series B, 5.00%, 10/01/18 ................................... 38,260,000 39,074,555
Kaiser Permanente, Series B, 5.00%, 10/01/20 ................................... 38,020,000 38,175,882
Kaiser Permanente, Series B, 5.40%, 5/01/28 .................................... 80,000,000 81,257,600
Lucile Salter Packard Hospital, Series C, AMBAC Insured, 5.00%, 8/15/26 ........ 6,000,000 6,088,380
Marshall Hospital, Series A, California Mortgage Insured, 5.30%, 11/01/28 ...... 5,500,000 5,402,430
Mills-Peninsula Health, Refunding, Series A, Connie Lee Insured, 5.75%, 1/15/15 11,500,000 12,269,005
Mills-Peninsula Health, Series B, Connie Lee Insured, 5.75%, 1/15/15 ........... 5,665,000 6,043,819
Northern California Presbyterian, 5.40%, 7/01/28 ............................... 6,340,000 6,392,178
On Lok Senior Health Services, Series A, CHFCLP Insured, 6.40%, 12/01/12 ....... 2,000,000 2,037,440
On Lok Senior Health Services, Series A, CHFCLP Insured, 6.50%, 12/01/22 ....... 7,525,000 7,667,072
Paradise Valley Estates, 5.125%, 1/01/22 ....................................... 6,610,000 6,460,151
Paradise Valley Estates, 5.25%, 1/01/26 ........................................ 5,000,000 4,928,600
Pomona Valley Hospital, Refunding, Series A, MBIA Insured, 5.625%, 7/01/19 ..... 8,500,000 9,381,960
Scripps Memorial Hospital, Series A, MBIA Insured, 6.375%, 10/01/22 ............ 9,725,000 10,052,246
Small Facilities Loan, Health Facilities, Refunding, Series B, California Mortgage
Insured, 7.50%, 4/01/22 ....................................................... 5,000,000 5,443,750
Small Facilities Loan, Health Facilities, Series A, CHFCLP Insured, 6.75%, 3/01/20 3,715,000 3,765,821
Southern California, Series A, CHFCLP Insured, 5.50%, 12/01/22 ................. 3,070,000 3,143,035
St. Francis Medical Center, Refunding, Series H, AMBAC Insured, 6.35%, 10/01/23 7,000,000 7,687,680
22 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
California Health Facilities Financing Authority Revenue, (cont.)
St. Paul's Episcopal Home, CHFCLP Insured, 6.50%, 9/01/14 ...................... $ 2,595,000 $ 2,741,514
Stanford Hospital and Clinics, Series A, 5.00%, 11/15/23 ....................... 5,000,000 4,987,150
Sutter Health Project, Series A, MBIA Insured, 5.35%, 8/15/28 .................. 6,650,000 6,872,642
Sutter Health, Refunding, Series A, MBIA Insured, 5.875%, 8/15/16 .............. 5,750,000 6,484,850
Sutter Health, Series A, FSA Insured, 5.25%, 8/15/27 ........................... 5,300,000 5,401,389
Sutter Health, Series A, FSA Insured, 5.00%, 8/15/37 ........................... 61,000,000 61,066,490
Sutter Health, Series A, MBIA Insured, 5.375%, 8/15/30 ......................... 10,600,000 10,921,074
The Episcopal Home, 5.30%, 2/01/32 ............................................. 28,150,000 27,462,577
The Help Group, CHFCLP Insured, 5.40%, 8/01/22 ................................. 7,420,000 7,504,365
UCSF-Stanford Health Care, Refunding, Series A, FSA Insured, 5.00%, 11/15/31 ... 5,750,000 5,780,475
UCSF-Stanford Health Care, Refunding, Series B, 5.00%, 11/15/31 ................ 26,920,000 27,062,676
UCSF-Stanford Health Care, Refunding, Series B, AMBAC Insured, 5.00%, 11/15/28 . 25,000,000 25,252,000
Valleycare Hospital Corp., Refunding, 5.50%, 5/01/20 ........................... 11,640,000 12,051,358
Walden House, State Guaranteed, 6.85%, 3/01/22 ................................. 3,225,000 3,269,279
California HFA, SFM Purchase,
Class I, Series A-1, 6.05%, 8/01/26 ............................................ 11,240,000 11,631,152
Refunding, Series A-2, FHA Insured, 6.45%, 8/01/25 ............................. 2,545,000 2,610,152
California HFAR,
Home Mortgage, Series A, FHA Insured, 6.55%, 8/01/26 ........................... 2,495,000 2,569,750
Home Mortgage, Series E, AMBAC Insured, 6.10%, 8/01/29 ......................... 320,000 332,662
Home Mortgage, Series I, MBIA Insured, 5.75%, 2/01/29 .......................... 2,085,000 2,157,725
Home Mortgage, Series J, MBIA Insured, 5.55%, 8/01/28 .......................... 9,405,000 9,545,511
Home Mortgage, Series M, MBIA Insured, 5.60%, 8/01/29 .......................... 10,135,000 10,377,835
Housing Revenue, Series E, MBIA Insured, 6.625%, 8/01/14 ....................... 4,365,000 4,558,239
Housing Revenue, Series E, MBIA Insured, 6.75%, 8/01/26 ........................ 11,855,000 12,387,764
Housing Revenue, Series F, MBIA Insured, 6.90%, 8/01/26 ........................ 11,345,000 11,770,438
MFHR II, Series A, AMBAC Insured, 6.25%, 2/01/37 ............................... 5,000,000 5,223,350
MFHR III, Series B, MBIA Insured, 5.50%, 8/01/39 ............................... 12,085,000 12,325,008
Multi-Unit Rental Housing, Series A, 6.875%, 2/01/22 ........................... 1,130,000 1,133,232
Series B-1, Class 1, AMBAC Insured, 5.65%, 8/01/28 ............................. 8,170,000 8,381,031
SFM, Series C-2, Class 1, FHA Insured, 5.65%, 2/01/25 .......................... 3,850,000 3,972,892
California Infrastructure and Economic Development Bank Revenue,
Bay Area Toll Bridges, First Lien, Series A, AMBAC Insured, 5.00%, 7/01/33 ..... 5,000,000 5,048,800
Bay Area Toll Bridges, First Lien, Series A, AMBAC Insured, 5.00%, 7/01/36 ..... 29,300,000 29,567,802
Bay Area Toll Bridges, First Lien, Series A, FGIC Insured, 5.00%, 7/01/29 ...... 38,785,000 39,259,728
Kaiser Hospital Assistance I LLC, Series B, 5.50%, 8/01/31 ..................... 10,000,000 10,289,800
Kaiser Hospital Assistance II LLC, Series A, 5.55%, 8/01/31 .................... 34,000,000 34,877,540
California Mobilehome Park Financing Authority Revenue, Series A, FSA Insured,
5.15%, 10/01/04 ................................................................ 5,000 5,138
5.25%, 10/01/05 ................................................................ 5,000 5,306
6.25%, 10/01/25 ................................................................ 450,000 465,534
California PCFA,
PCR, Pacific Gas and Electric Co., Series A, 6.625%, 6/01/09 ................... 1,750,000 1,758,260
PCR, San Diego Gas and Electric Co., Series A, 5.85%, 6/01/21 .................. 32,535,000 32,880,196
PCR, Southern California Edison Co., Refunding, 6.90%, 12/01/17 ................ 2,510,000 2,511,004
PCR, Southern California Edison Co., Series B, 6.40%, 12/01/24 ................. 29,000,000 29,025,520
PCR, Southern California Edison Co., Series B, MBIA Insured, 6.40%, 12/01/24 ... 12,120,000 12,346,886
Solid Waste Disposal Revenue, Keller Canyon Landfill Co. Project, 6.875%, 11/01/27 17,205,000 17,216,871
Semiannual Report | 23
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
California PCFA Revenue, Refunding, Pacific Gas and Electric,
Series A, MBIA Insured, 5.35%, 12/01/16 .......................................... $ 31,500,000 $ 33,928,650
California Public School District Financing Authority Lease Revenue, Los Banos School,
Series B, FSA Insured, Pre-Refunded, 5.85%, 6/01/21 .............................. 4,345,000 4,431,900
California Resources Efficiency Financing Authority COP, Capital Improvement Program,
Refunding, AMBAC Insured,
5.625%, 4/01/22 ................................................................ 10,365,000 11,313,916
5.75%, 4/01/27 ................................................................. 7,885,000 8,611,682
California Special Districts Lease Financing Program COP, Series E,
7.70%, 12/01/09 ................................................................ 205,000 206,894
7.75%, 12/01/19 ................................................................ 305,000 307,376
California State Department of Veteran Affairs Home Purchase Revenue,
Refunding, Series A, 5.40%, 12/01/28 ........................................... 9,580,000 9,908,594
Refunding, Series B, 5.50%, 12/01/18 ........................................... 2,500,000 2,603,025
Series A, Chase Revenue, Series A, 5.20%, 12/01/27 ............................. 31,000,000 31,252,650
Series B, 5.20%, 12/01/28 ...................................................... 63,875,000 64,334,900
California State Department of Water Resources Central Valley Project Revenue, Water System,
Refunding, Series Q, MBIA Insured, 5.375%, 12/01/27 ............................ 58,000,000 60,183,120
Series S, 5.00%, 12/01/29 ...................................................... 24,595,000 24,715,516
Series U, 5.00%, 12/01/29 ...................................................... 12,000,000 12,068,760
Series Y, FGIC Insured, 5.00%, 12/01/25 ........................................ 20,000,000 20,336,000
California State Department of Water Resources Central Valley Project Water System Revenue,
Series O, 5.00%, 12/01/22 ........................................................ 5,500,000 5,609,065
California State Department of Water Resources Power Supply Revenue, Series A,
5.25%, 5/01/20 ................................................................. 50,000,000 51,904,000
5.375%, 5/01/21 ................................................................ 22,000,000 22,875,600
5.375%, 5/01/22 ................................................................ 34,020,000 35,110,681
California State GO,
5.25%, 10/01/20 ................................................................ 10,000,000 10,252,300
5.25%, 9/01/23 ................................................................. 22,000,000 22,317,020
5.25%, 10/01/23 ................................................................ 9,250,000 9,385,050
6.00%, 5/01/24 ................................................................. 2,565,000 2,671,268
5.125%, 6/01/24 ................................................................ 8,250,000 8,272,770
5.00%, 11/01/24 ................................................................ 11,350,000 11,189,511
5.00%, 11/01/25 ................................................................ 20,000,000 19,632,000
5.25%, 9/01/26 ................................................................. 25,000,000 25,157,000
5.00%, 2/01/27 ................................................................. 46,000,000 44,883,120
5.00%, 10/01/27 ................................................................ 12,100,000 11,802,703
5.125%, 10/01/27 ............................................................... 39,835,000 39,698,764
5.00%, 2/01/29 ................................................................. 15,000,000 14,579,250
5.00%, 11/01/30 ................................................................ 17,500,000 16,969,050
5.125%, 3/01/31 ................................................................ 35,000,000 34,667,500
AMBAC Insured, 5.90%, 3/01/25 .................................................. 210,000 223,438
AMBAC Insured, 5.125%, 10/01/27 ................................................ 31,420,000 31,771,276
FGIC Insured, 6.00%, 8/01/19 ................................................... 905,000 955,843
FGIC Insured, 5.625%, 10/01/26 ................................................. 41,500,000 44,348,145
FSA Insured, 5.50%, 3/01/20 .................................................... 5,500,000 5,693,930
FSA Insured, 5.50%, 9/01/29 .................................................... 30,000,000 31,149,900
24 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
California State GO, (cont.)
MBIA Insured, 5.00%, 10/01/23 .................................................. $ 5,000,000 $ 5,057,200
MBIA Insured, 6.00%, 8/01/24 ................................................... 990,000 1,043,915
Refunding, 5.625%, 9/01/24 ..................................................... 10,650,000 11,028,288
Refunding, 5.125%, 6/01/27 ..................................................... 56,150,000 55,955,160
Refunding, 5.25%, 2/01/29 ...................................................... 44,000,000 44,254,760
Refunding, 5.25%, 2/01/29 ...................................................... 10,000,000 10,052,800
Refunding, 5.25%, 2/01/30 ...................................................... 50,000,000 50,230,500
Refunding, 5.125%, 6/01/31 ..................................................... 76,220,000 75,491,337
Refunding, 5.25%, 4/01/32 ...................................................... 10,000,000 10,032,600
Refunding, AMBAC Insured, 5.00%, 4/01/23 ....................................... 6,250,000 6,362,500
Refunding, MBIA Insured, 5.00%, 2/01/32 ........................................ 5,000,000 5,026,700
Refunding, MBIA Insured, 5.00%, 10/01/32 ....................................... 5,000,000 5,028,800
Series BR, 5.25%, 12/01/26 ..................................................... 5,000,000 5,008,300
Series BR, 5.30%, 12/01/29 ..................................................... 13,000,000 13,027,690
Various Purposes, FSA Insured, 5.50%, 4/01/19 .................................. 5,000,000 5,148,550
Veterans Bonds, Series BH, 5.50%, 12/01/18 ..................................... 44,250,000 44,958,000
Veterans Bonds, Series BH, 5.60%, 12/01/32 ..................................... 50,060,000 50,572,614
Veterans Bonds, Series BH, FSA Insured, 5.50%, 12/01/24 ........................ 16,440,000 16,595,194
Veterans Bonds, Series BM, 5.45%, 12/01/25 ..................................... 36,635,000 36,836,493
Veterans Bonds, Series BN, 5.375%, 12/01/21 .................................... 24,870,000 25,039,116
Veterans Bonds, Series BN, 5.45%, 12/01/28 ..................................... 21,575,000 21,691,289
California State HFAR, Home Mortgage, Series L, MBIA Insured, 6.40%, 8/01/27 ...... 3,255,000 3,395,616
California State Local Government Finance Authority Revenue, Marin Valley, Series A, FSA
Insured, 5.85%, 10/01/27 ......................................................... 6,735,000 7,418,872
California State Public Works Board Lease Revenue,
California Science Center, Series A, 5.25%, 10/01/22 ........................... 8,645,000 8,823,001
California State University, Various Projects, Series A, 6.30%, 10/01/04 ....... 5,250,000 5,319,720
Department General Services-Capital East End, Series A, AMBAC Insured,
5.00%, 12/01/27 ............................................................... 17,250,000 17,349,705
Department of Corrections, California State Prison at Coalinga, Series B, MBIA Insured,
5.375%, 12/01/19 .............................................................. 15,250,000 15,645,433
Department of Corrections, Corcoran II Facility, Series A, AMBAC Insured, 5.25%,
1/01/21 ....................................................................... 17,405,000 18,170,994
Department of Justice Building, Series A, FSA Insured, 5.625%, 5/01/20 ......... 5,000,000 5,359,350
Trustees California State University, Refunding, Series A, 5.00%, 10/01/19 ..... 7,500,000 7,655,175
University of California, Various Projects, Refunding, Series A, 5.50%, 6/01/21 14,000,000 14,313,600
University of California, Various Projects, Refunding, Series A, 5.00%, 6/01/23 23,175,000 23,180,099
University of California, Various Projects, Series B, 5.50%, 6/01/19 ........... 13,000,000 13,297,960
University of California, Various Projects, Series B, Pre-Refunded, 6.625%, 12/01/14 7,415,000 8,046,313
Various California Community Colleges, Refunding, Series A, 5.90%, 4/01/17 ..... 8,320,000 9,078,451
California State University at Channel Islands Financing Authority Revenue, East Campus
Community, Series A, MBIA Insured, 5.00%, 9/01/31 ................................ 11,000,000 11,215,490
California State University Revenue, Series A, FGIC Insured, 5.00%,
11/01/32 ....................................................................... 10,000,000 10,098,200
11/01/35 ....................................................................... 6,650,000 6,710,183
California Statewide CDA Revenue,
5.50%, 1/01/28 ................................................................. 3,615,000 3,632,858
5.50%, 10/01/33 ................................................................ 45,465,000 46,306,103
Semiannual Report | 25
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
California Statewide CDA Revenue, (cont.)
COP, Catholic Healthcare West, Obligated, MBIA Insured, 5.50%, 7/01/23 ......... $ 11,240,000 $ 11,535,275
COP, CHFCLP Insured Health Facilities, Unihealth, Series A, AMBAC Insured,
Pre-Refunded, ETM, 5.75%, 10/01/25 ............................................ 36,000,000 42,044,400
COP, CHFCLP Insured, ETM, 5.90%, 8/01/21 ....................................... 4,000,000 4,665,560
COP, Familiesfirst Inc., CHFCLP Insured, Pre-Refunded, 7.25%, 12/01/22 ......... 5,120,000 5,586,432
COP, Gemological Institute, Connie Lee Insured, 6.00%, 5/01/15 ................. 5,365,000 5,749,456
COP, Gemological Institute, Connie Lee Insured, 6.00%, 5/01/20 ................. 3,775,000 4,061,485
COP, Salk Institute, Connie Lee Insured, 6.20%, 7/01/24 ........................ 7,065,000 7,415,636
COP, Sisters Charity Leavenworth, 5.00%, 12/01/23 .............................. 11,375,000 11,434,378
COP, Southern California Development Corp., 6.10%, 12/01/15 .................... 2,255,000 2,462,888
COP, St. Joseph Health System Group, Pre-Refunded, 6.625%, 7/01/21 ............. 12,500,000 13,277,875
COP, Sutter Health Obligated Group, MBIA Insured, 5.50%, 8/15/22 ............... 25,520,000 27,117,807
COP, Sutter Health Obligated Group, Refunding, MBIA Insured, 5.50%, 8/15/23 .... 14,000,000 14,385,980
COP, Triad Health Care, CHFCLP Insured, Refunding, ETM, 6.25%, 8/01/06 ......... 1,540,000 1,668,174
East Campus Apartments LLC, Series A, 5.50%, 8/01/22 ........................... 11,000,000 11,372,020
East Campus Apartments LLC, Series A, 5.625%, 8/01/34 .......................... 25,000,000 25,618,000
Kaiser Permanente, Series A, 5.50%, 11/01/32 ................................... 27,000,000 27,461,700
Los Angeles Orthopedic Hospital Foundation, AMBAC Insured, 5.75%, 6/01/30 ...... 10,000,000 10,606,200
Mission Community, California Mortgage Insured, 5.375%, 11/01/21 ............... 7,670,000 7,747,160
Mission Community, California Mortgage Insured, 5.375%, 11/01/26 ............... 9,755,000 9,764,072
Series B, 5.625%, 8/15/42 ...................................................... 51,000,000 52,374,960
Stovehaven Apartments Project, Series A, 5.875%, 7/01/32 ....................... 4,945,000 5,158,772
California Statewide CDA,
COP, California Lutheran Homes, ETM, 5.75%, 11/15/15 ........................... 5,000,000 5,625,100
COP, Catholic Healthcare West, 6.50%, 7/01/20 .................................. 7,990,000 8,545,625
COP, Children's Hospital, Los Angeles, 5.25%, 8/15/29 .......................... 37,685,000 38,020,773
COP, FSA Insured, 5.50%, 8/15/31 ............................................... 9,000,000 9,520,650
COP, Kaiser Permanente, 5.30%, 12/01/15 ........................................ 32,200,000 33,601,022
COP, MBIA Insured, 5.00%, 4/01/18 .............................................. 7,000,000 7,338,030
COP, MBIA Insured, 5.125%, 4/01/23 ............................................. 6,000,000 6,151,380
COP, St. Joseph Health System, Refunding, 5.125%, 7/01/17 ...................... 5,000,000 5,118,150
COP, St. Joseph Health System, Refunding, 5.25%, 7/01/21 ....................... 16,250,000 16,628,463
COP, The Internext Group, 5.375%, 4/01/17 ...................................... 10,255,000 10,295,712
COP, The Internext Group, 5.375%, 4/01/30 ...................................... 67,480,000 63,535,119
aLease Revenue, Special Facilities, United Airlines, Series A, 5.70%, 10/01/33 .. 61,325,000 24,550,851
MFHR, Borregas Court Project, Series J, GNMA Secured, 6.30%, 3/20/39 ........... 7,453,000 8,122,428
MFHR, Series E, FNMA Insured, 6.40%, 6/01/28 ................................... 8,000,000 8,368,160
Water and Wastewater Revenue, Pooled Financing Program, Series B, FSA Insured, 5.65%,
10/01/26 ...................................................................... 5,000,000 5,428,050
Water Revenue, Refunding, Series A, 6.10%, 7/01/21 ............................. 730,000 753,594
California Valley HFAR, Home Mortgage, MBIA Insured, 5.65%, 2/01/27 ............... 18,190,000 18,694,227
Camarillo COP, Capital Improvement Corp., ETM, 7.625%, 4/01/08 .................... 2,530,000 2,892,726
Campbell Housing Facility Revenue, San Tomas Gardens Project,
Series A, 6.625%, 10/20/34 ....................................................... 5,615,000 5,769,076
Campbell RDA, Tax Allocation, Central Campbell Redevelopment Project,
Series A, 6.00%, 10/01/33 ........................................................ 5,000,000 5,101,600
Camrosa Water District COP, Water System Improvement Projects, MBIA
Insured, 6.00%, 1/15/20 .......................................................... 5,120,000 5,550,080
26 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Capistrano Bay Park and Recreation District COP, Special Lease Finance, Series Q,
6.35%, 8/01/12 ................................................................. $ 2,800,000 $ 2,840,880
Castaic Lake Water Agency COP, Water System Improvement Project, Refunding, Series A,
MBIA Insured,
6.125%, 8/01/15 ................................................................ 11,540,000 12,185,201
6.00%, 8/01/18 ................................................................. 5,345,000 5,633,790
Cathedral City PFAR, Tax Allocation, Redevelopment Projects, Refunding, Series A, MBIA
Insured, 5.70%, 8/01/24 .......................................................... 11,210,000 12,113,526
Central California Joint Powers Health Financing Authority COP, Community Hospitals of
Central California, 6.00%,
2/01/20 ........................................................................ 5,000,000 5,221,550
2/01/30 ........................................................................ 32,960,000 33,957,370
Central California Joint Powers Health Financing Authority, COP, Community Hospitals of
Central California,
5.625%, 2/01/21 ................................................................ 6,750,000 6,809,670
5.75%, 2/01/31 ................................................................. 18,070,000 18,187,094
Cerritos PFAR, Tax Allocation Redevelopment Project, Series A, AMBAC Insured,
5.00%, 11/01/22 .................................................................. 6,675,000 6,999,071
Chaffey Community College District COP, Pre-Refunded, 7.40%, 11/01/14 ............. 5,000,000 5,441,050
Chaffey UHSD, GO,
Series B, FGIC Insured, 5.00%, 8/01/25 ......................................... 6,510,000 6,602,182
Series C, FSA Insured, 5.00%, 5/01/27 .......................................... 6,980,000 7,075,207
Chico RDAR, COP, Insured Health Facilities, Sierra Sunrise Lodge,
6.80%, 2/01/11 ................................................................. 3,765,000 3,773,810
6.75%, 2/01/21 ................................................................. 2,800,000 2,806,496
Childrens Trust Fund Tobacco Settlement Revenue, Asset Backed Bonds, Refunding,
5.50%, 5/15/39 ................................................................. 12,500,000 10,849,875
5.625%, 5/15/43 ................................................................ 25,500,000 22,018,485
Chino USD, COP, Land Acquisition, Series A, FSA Insured,
6.60%, 9/01/14 ................................................................. 385,000 404,862
6.70%, 9/01/29 ................................................................. 2,880,000 3,031,200
Claremont RDA, Tax Allocation, Consolidated Redevelopment Project, Refunding, 5.50%,
8/01/23 .......................................................................... 4,950,000 5,074,245
Clayton 1915 Act, Limited Obligation, Contra Costa County, Oakhurst Country Club,
8.30%, 9/02/04 ................................................................. 70,000 72,255
8.30%, 9/02/05 ................................................................. 80,000 83,598
8.35%, 9/02/06 ................................................................. 80,000 83,546
8.35%, 9/02/07 ................................................................. 95,000 98,895
8.375%, 9/02/08 ................................................................ 100,000 104,034
8.375%, 9/02/09 ................................................................ 115,000 119,541
8.40%, 9/02/10 ................................................................. 15,000 15,586
8.40%, 9/02/11 ................................................................. 120,000 124,639
8.40%, 9/02/12 ................................................................. 130,000 134,983
8.40%, 9/02/13 ................................................................. 150,000 155,769
Colusa County COP, ABAG Finance Corp., Series B, 7.00%, 2/01/18 ................... 1,555,000 1,579,833
Commerce Joint Powers Financing Authority Lease Revenue, Community Center, Series A,
6.25%, 10/01/22 .................................................................. 4,000,000 4,252,480
Commerce Refuse to Energy Authority Revenue, Refunding, Series 1994,
8.75%, 7/01/10 ................................................................... 23,950,000 25,540,280
Semiannual Report | 27
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Compton COP, Civic Center and Capital Improvement, Refunding, Series A,
5.50%, 9/01/15 ................................................................... $ 5,000,000 $ 5,337,600
Compton CRDA, Tax Allocation, Series 1, FSA Insured, 6.75%, 8/01/13 ............... 5,475,000 5,982,204
Concord RDA, Tax Allocation, Central Concord Redevelopment Project, Refunding, Sub
Series A, 6.00%, 7/01/19 ......................................................... 8,395,000 8,573,394
Contra Costa Community College District GO, Election 2002, FGIC Insured, 5.00%, 8/01/26 11,700,000 11,857,599
Contra Costa County COP, Merrithew Memorial Hospital Project, Refunding, MBIA Insured,
5.50%, 11/01/22 .................................................................. 11,000,000 11,686,290
Contra Costa County MFHR, Byron Park Project, Refunding, Series C, GNMA Secured,
6.40%, 1/20/31 ................................................................... 5,930,000 6,190,801
Contra Costa Transportation Authority Revenue, Sales Tax, Series A,
ETM, 6.875%, 3/01/07 ........................................................... 13,900,000 15,508,647
FGIC Insured, ETM, 6.50%, 3/01/09 .............................................. 1,000,000 1,181,200
Corcoran Hospital District Revenue, Series A, 6.55%, 7/01/12 ...................... 965,000 983,866
Corona 1915 Act, AD No. 79-2, Northeast Area, Series B, 7.85%, 9/02/04 ............ 510,000 532,348
Corona COP,
Clearwater Co-Generation Project, MBIA Insured, 5.00%, 9/01/28 ................. 17,760,000 17,994,787
Clearwater Co-Generation Project, MBIA Insured, 5.00%, 9/01/31 ................. 7,930,000 7,985,114
Corona Community Hospital Project, Pre-Refunded, 9.425%, 9/01/20 ............... 15,000,000 20,877,750
aVista Hospital System, Refunding, Series C, 9.50%, 7/01/20 ..................... 22,325,000 8,930,000
Corona RDA, Tax Allocation, Redevelopment Project Area A, Refunding, Series A, FGIC
Insured, 6.25%, 9/01/16 .......................................................... 3,000,000 3,183,630
Corona-Norco USD, Lease Revenue, Land Acquisition, Series A, FSA Insured, 6.00%,
4/15/29 .......................................................................... 18,435,000 20,646,278
Coronado CDA, Tax Allocation, Coronado Community Development Project, Refunding, MBIA
Insured, 5.00%, 9/01/34 .......................................................... 6,115,000 6,152,730
CSAC Finance Corp. COP, Sutter County, Health Facilities Program, 7.80%, 1/01/21 .. 2,100,000 2,117,808
Cudahy RDA Tax Allocation, Refunding, Series C, 6.00%, 10/01/27 ................... 6,365,000 6,573,963
Culver City USD, GO, MBIA Insured, 5.75%, 8/01/36 ................................. 5,000,000 5,391,000
Desert Hot Springs RDA, Tax Allocation, Redevelopment Project No. 2, Series A, 6.625%,
9/01/20 .......................................................................... 1,190,000 1,170,103
Desert Sands USD, COP, Capital Projects, FSA Insured, 6.45%, 3/01/20 .............. 6,420,000 6,982,713
Duarte COP,
Refunding, Series A, 5.25%, 4/01/24 ............................................ 5,000,000 4,913,750
Series A, 5.25%, 4/01/19 ....................................................... 5,000,000 5,006,100
Series A, 5.25%, 4/01/31 ....................................................... 12,500,000 12,076,750
East Side UHSD, GO, Santa Clara County,
Series B, FGIC Insured, 5.00%, 8/01/27 ......................................... 5,810,000 5,888,900
Series D, FGIC Insured, 5.80%, 9/01/21 ......................................... 7,100,000 7,485,317
Eastern Municipal Water District Water and Sewer Revenue COP, Series B, FGIC Insured,
5.00%, 7/01/30 ................................................................... 31,370,000 31,668,329
El Cajon RDA, Tax Allocation, Redevelopment Project, Refunding, AMBAC Insured, 5.35%,
10/01/22 ......................................................................... 10,285,000 10,795,547
El Camino Hospital District Revenue, Refunding, Series A, ETM, 7.25%, 8/15/09 ..... 7,920,000 9,263,786
El Centro Financing Authority Hospital Revenue, El Centro Regional Medical Center Project,
5.25%, 3/01/26 ................................................................... 8,500,000 8,433,190
El Dorado County Special Tax, CFD No. 1992-1, 6.25%, 9/01/29 ...................... 19,825,000 20,383,272
Emeryville PFAR, Housing Increment Loan, 6.20%, 9/01/25 ........................... 3,115,000 3,280,407
28 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Emeryville PFAR, Shellmound Park Redevelopment and Housing Project, Series B,
MBIA Insured, 5.00%, 9/01/28 ................................................... $ 20,000,000 $ 20,172,200
Escondido COP, Wastewater Project, Refunding, AMBAC Insured,
5.70%, 9/01/26 ................................................................. 13,465,000 14,536,679
5.80%, 9/01/26 ................................................................. 400,000 441,164
Fillmore COP, Water System Improvement Project, AMBAC Insured, 7.70%, 5/01/19 ..... 2,590,000 2,742,758
Florin Resource Conservation District COP, Elk Grove Water Service, Refunding, Series A,
MBIA Insured, 5.00%, 3/01/33 ..................................................... 8,715,000 8,772,955
Folsom PFAR, Local Agency, 8.00%, 10/01/18 ........................................ 7,480,000 7,511,192
Fontana RDA, Tax Allocation, Jurupa Hills Redevelopment Project, Refunding, Series A,
5.50%, 10/01/27 .................................................................. 12,500,000 12,384,875
Fontana USD, GO, Convertible Capital Appreciation, Series D, FGIC Insured, 5.80%,
5/01/17 .......................................................................... 5,000,000 5,685,000
Foothill/Eastern Corridor Agency Toll Road Revenue,
Refunding, MBIA Insured, 5.75%, 1/15/40 ........................................ 395,510,000 404,887,542
Senior lien, Series A, 5.00%, 1/01/35 .......................................... 15,955,000 14,247,655
Senior lien, Series A, Pre-Refunded, 6.50%, 1/01/32 ............................ 95,675,000 110,370,680
Senior lien, Series A, Pre-Refunded, 6.00%, 1/01/34 ............................ 123,695,000 140,747,593
Fort Bragg RDAR, Tax Allocation, Fort Bragg Redevelopment Project, Series A, 6.875%,
5/01/18 .......................................................................... 1,775,000 1,815,896
Fortuna and Susanville Cities COP, Series B, 7.375%, 9/01/17 ...................... 1,535,000 1,573,344
Fresno Health Facilities Revenue, Holy Cross Health Systems Corp., MBIA Insured, 5.625%,
12/01/15 ......................................................................... 5,000,000 5,131,900
Glendale USD, COP, Series A, AMBAC Insured, 6.00%, 3/01/19 ........................ 7,250,000 7,517,018
Golden State Tobacco Securitization Corp., Tobacco Settlement Revenue ............. 100,000,000 98,684,300
5.50%, 6/01/33 ................................................................. 30,000,000 29,694,300
5.50%, 6/01/43 ................................................................. 80,000,000 77,244,800
Hawaiian Gardens RDA, Tax Allocation, Project No. 1, Refunding,
6.35%, 12/01/33 ................................................................ 13,000,000 13,313,560
ETM, 8.00%, 12/01/10 ........................................................... 5,270,000 6,366,002
Helix Water District COP, Installment Purchase, Series A, FSA Insured, 5.25%, 4/01/24 8,925,000 9,247,460
Hesperia PFAR, Highway and Street Improvement, Series A, 6.10%, 10/01/10 .......... 1,600,000 1,703,376
Hollister RDA, Tax Allocation, Community Development Project, Series B, FSA Insured,
6.625%, 10/01/07 ............................................................... 1,905,000 1,924,050
6.75%, 10/01/13 ................................................................ 1,495,000 1,509,950
Huntington Park PFA, Local Agency Revenue, Refunding, Series A, MBIA Insured, 6.45%,
9/01/22 .......................................................................... 10,000,000 10,605,400
Industry COP, Refunding, 6.625%, 6/01/06 .......................................... 8,650,000 9,371,929
Inland Empire Solid Waste Financing Authority Revenue, Landfill Improvement Financing
Project, Series B, FSA Insured, ETM, 6.25%, 8/01/11 ............................ 5,000,000 5,900,250
Pre-Refunded, 6.00%, 8/01/16 ................................................... 5,000,000 5,742,150
Intercommunity Hospital Financing Authority COP, Northbay Healthcare System, Refunding,
5.25%, 11/01/19 .................................................................. 10,550,000 10,882,747
Irwindale CRDA, Tax Allocation,
Individual Development Project, Pre-Refunded, 6.60%, 8/01/18 ................... 1,630,000 1,819,308
Individual Development Project, Pre-Refunded, 6.625%, 8/01/26 .................. 9,100,000 10,250,240
Senior lien, Refunding, FSA Insured, 5.75%, 8/01/26 ............................ 10,220,000 11,178,636
John C. Fremont Hospital District Health Facilities Revenue, 6.75%, 6/01/23 ....... 1,760,000 1,845,818
Semiannual Report | 29
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Kern County Board of Education COP, Refunding, Series A, MBIA Insured,
5.20%, 5/01/28 ................................................................... $ 8,685,000 $ 8,863,911
Kern County Housing Authority SFMR, Series A, GNMA Secured,
7.55%, 12/01/07 ................................................................ 65,000 66,497
7.65%, 12/01/12 ................................................................ 100,000 102,562
7.70%, 12/01/23 ................................................................ 455,000 464,314
7.50%, 10/01/24 ................................................................ 40,000 40,000
La Mirada RDA, Tax Allocation, Housing, Refunding, Series A, FSA Insured, 5.875%,
8/15/25 .......................................................................... 7,100,000 7,591,107
La Mirada SFMR, MBS, Series A, 7.65%, 4/01/24 ..................................... 730,000 750,966
La Palma Community Development Commission Tax Allocation, La Palma Community
Development Project No. 1, 6.10%, 6/01/22 ........................................ 2,355,000 2,398,379
La Quinta RDA Tax Allocation Revenue, Redevelopment Project Area No. 1, AMBAC Insured,
5.125%, 9/01/32 .................................................................. 10,825,000 11,056,005
Lake Elsinore PFA, Tax Allocation Revenue,
Lake Elsinore Redevelopment Projects, Series A, FSA Insured, 5.80%, 9/01/25 .... 6,750,000 6,935,422
Series A, 5.50%, 9/01/30 ....................................................... 15,550,000 15,228,426
Lakewood RDA, Tax Allocation, Redevelopment Project No.1, Refunding, Series A, FSA
Insured, 6.50%, 9/01/17 .......................................................... 2,850,000 2,888,646
Lancaster RDA,
RMR, Los Angeles County, Series A, ETM, 10.125%, 9/01/16 ....................... 5,000 8,085
Tax Allocation, Combined Redevelopment Project Areas, Sheriff's Program, MBIA
Insured, 5.70%, 8/01/23 ....................................................... 13,140,000 13,571,123
Lemon Grove CDA, Tax Allocation, 1998 Refunding, 5.75%, 8/01/28 ................... 8,115,000 8,256,201
Lemoore Financing Authority Lease Revenue, Water and Wastewater System Improvement
Project, AMBAC Insured, 6.20%, 12/01/20 .......................................... 4,400,000 4,753,100
Liberty UHSD, Series A, FSA Insured, 6.20%, 8/01/19 ............................... 2,745,000 2,919,170
Livermore-Amador Valley Water Management Agency Sewer Revenue, Series A, AMBAC
Insured, 5.00%, 8/01/31 .......................................................... 18,350,000 18,514,416
Local Medical Facilities Financing Authority COP, Insured California Health Clinic Project,
7.55%, 3/01/20 ................................................................... 4,100,000 4,116,728
Local Medical Facilities Financing Authority II COP, Insured California Health Clinic Project,
7.55%, 11/01/20 .................................................................. 2,065,000 2,075,552
Local Medical Facilities Financing Authority III COP, Insured California Health Clinic Project,
6.90%, 7/01/22 ................................................................... 2,665,000 2,719,233
Loma Linda Hospital Revenue, Loma Linda University Medical Center, Refunding, Series A,
AMBAC Insured, 6.55%, 12/01/18 ................................................... 11,525,000 11,730,376
Long Beach Bond Finance Authority Lease Revenue, Aquarium of The South Pacific,
Refunding, AMBAC Insured, 5.00%, 11/01/26 ........................................ 20,000,000 20,276,000
Long Beach California Board Finance Authority Lease Revenue, Temple and Willow Facility,
Refunding, Series B, MBIA Insured, 5.00%, 10/01/27 ............................... 14,935,000 15,093,012
Long Beach Harbor Revenue, MBIA Insured,
5.375%, 5/15/20 ................................................................ 12,000,000 12,466,920
5.25%, 5/15/25 ................................................................. 10,500,000 10,574,865
Long Beach HMR, Series A, 9.60%, 11/01/14 ......................................... 245,000 247,455
Los Angeles Community College District GO, Series A, MBIA Insured, 5.00%, 6/01/26 . 69,275,000 70,210,905
Los Angeles COP, Department of Public Social Services, Series A, AMBAC Insured, 5.50%,
8/01/24 ........................................................................ 4,000,000 4,286,760
8/01/31 ........................................................................ 5,000,000 5,315,850
30 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Los Angeles County COP,
Antelope Valley Courthouse, Series A, AMBAC Insured, 5.25%, 11/01/33 ........... $ 8,000,000 $ 8,228,080
Insured Health Clinic Program, Refunding, Series F, California Mortgage Insured,
5.875%, 1/01/21 ............................................................... 7,520,000 7,907,130
Insured Health Clinic Program, Series A, California Mortgage Insured, 7.30%, 1/01/21 965,000 967,943
Marina del Rey, Series A, 6.50%, 7/01/08 ....................................... 21,615,000 22,095,718
Series 1992, 6.625%, 7/01/22 ................................................... 1,000,000 1,012,690
Los Angeles County MTA, Sales Tax Revenue, Proposition A,
First Tier, Refunding, Senior Series A, AMBAC Insured, 5.00%, 7/01/26 .......... 13,000,000 13,139,880
First Tier, Refunding, Senior Series A, MBIA Insured, 5.25%, 7/01/27 ........... 7,840,000 8,047,682
Refunding, Senior Series A, FSA Insured, 5.00%, 7/01/24 ........................ 5,000,000 5,088,250
Second Tier, MBIA Insured, Pre-Refunded, 6.00%, 7/01/26 ........................ 9,200,000 10,482,940
Los Angeles County Public Works Financing Authority Revenue, Multiple Capital Facilities
Project, Series B, AMBAC Insured, 5.125%, 12/01/29 ............................... 26,905,000 27,307,499
Los Angeles County Transportation Commission Lease Revenue, FSA Insured, 7.375%,
12/15/06 ......................................................................... 7,166,000 7,183,843
Los Angeles CRDA,
Financing Authority Revenue, Pooled Financing, Beacon Normandie, Series B, 6.625%,
9/01/14 ....................................................................... 1,000,000 1,015,600
MFHR, Angelus Plaza Project, Refunding, Series A, 6.40%, 7/01/23 ............... 5,780,000 5,886,121
Tax Allocation, Bunker Hill, Refunding, Series H, FSA Insured, 5.625%, 12/01/18 20,000,000 20,535,000
Tax Allocation, Bunker Hill, Refunding, Series H, FSA Insured, 5.625%, 12/01/23 50,090,000 51,329,227
Tax Allocation, Bunker Hill, Refunding, Series H, FSA Insured, 5.60%, 12/01/28 . 27,900,000 28,588,572
Tax Allocation, Series G, ETM, 6.75%, 7/01/10 .................................. 8,060,000 8,160,750
Los Angeles Department of Airports Revenue, Ontario International Airport, Series A, FGIC
Insured, 6.00%, 5/15/26 .......................................................... 10,000,000 10,770,800
Los Angeles Harbor Department Revenue,
Refunding, Series A, AMBAC Insured, 5.00%, 8/01/25 ............................. 15,000,000 15,212,400
Series B, 6.125%, 8/01/18 ...................................................... 24,810,000 27,308,863
Series B, 6.20%, 8/01/22 ....................................................... 59,835,000 65,810,721
Series B, 5.375%, 11/01/23 ..................................................... 7,460,000 7,641,203
Series B, MBIA Insured, 6.20%, 8/01/25 ......................................... 35,690,000 39,254,360
Los Angeles MFHR, Refunding, Senior Series G, FSA Insured, 5.75%, 1/01/24 ......... 6,815,000 6,936,103
Los Angeles USD,
COP, Administration Building Project, Series B, AMBAC Insured, 5.00%, 10/01/31 . 28,210,000 28,468,968
COP, Land Acquisition Program I, Series A, FSA Insured, 5.25%, 4/01/21 ......... 8,180,000 8,266,790
GO, Series A, MBIA Insured, 5.00%, 1/01/28 ..................................... 170,250,000 172,730,543
Series B, FGIC Insured, 5.00%, 7/01/23 ......................................... 5,000,000 5,094,150
Los Angeles Wastewater System Revenue,
Refunding, Series A, FGIC Insured, 5.00%, 6/01/32 .............................. 6,000,000 6,054,180
Refunding, Series A, FSA Insured, 5.00%, 6/01/32 ............................... 17,500,000 17,672,550
Refunding, Series D, FGIC Insured, 6.00%, 11/01/14 ............................. 8,000,000 8,191,440
Series A, FGIC Insured, 5.00%, 6/01/28 ......................................... 8,245,000 8,323,492
Series A, FSA Insured, 4.875%, 6/01/29 ......................................... 57,010,000 57,158,796
Los Angeles Water and Power Electric Plant Revenue, Refunding, Second Issue, 5.40%,
11/15/31 ......................................................................... 14,500,000 14,669,360
Semiannual Report | 31
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Los Angeles Water and Power Revenue,
Power System, Refunding, Series A, MBIA Insured, 5.00%, 7/01/24 ................ $ 2,000,000 $ 2,029,760
Power System, Series A, 5.25%, 7/01/24 ......................................... 5,000,000 5,082,550
Power System, Series A, Sub Series A-2, MBIA Insured, 5.00%, 7/01/27 ........... 12,500,000 12,672,375
Power System, Series B, FSA Insured, 5.00%, 7/01/28 ............................ 10,575,000 10,710,995
Refunding, Series A, Sub Series A-2, 5.00%, 7/01/30 ............................ 7,000,000 7,026,250
Series A Sub Series A-2, MBIA Insured, 5.00%, 7/01/23 .......................... 13,550,000 13,895,931
Series A, FGIC Insured, 5.00%, 7/01/43 ......................................... 19,720,000 19,829,446
Lynwood PFA, Tax Allocation, Project Area A, Refunding, Series A, FSA Insured, 5.90%,
9/01/28 .......................................................................... 6,470,000 7,187,652
M-S-R Public Power Agency San Juan Project Revenue, Series E, MBIA Insured, 6.00%,
7/01/22 .......................................................................... 6,330,000 6,345,002
Madera County COP, Valley Children's Hospital, MBIA Insured,
5.00%, 3/15/23 ................................................................. 8,500,000 8,607,270
5.75%, 3/15/28 ................................................................. 27,500,000 29,282,825
Madera USD, COP, 6.50%, 12/01/07 .................................................. 1,250,000 1,273,175
Madera-Chowchilla Power Authority Hydroelectric Revenue, Refunding, 8.00%, 1/01/14 2,060,000 2,045,436
Manhattan Beach COP, Metlox Public Improvements, 5.00%, 1/01/33 ................... 6,575,000 6,613,201
Marysville Hospital Revenue, Fremont Rideout Health, Refunding, Series A, AMBAC Insured,
5.00%, 1/01/22 ................................................................... 5,000,000 5,122,150
Merced Irrigation District COP, Water Facilities Project, 6.40%, 11/01/10 ......... 3,580,000 3,666,636
Metropolitan Water District Southern California Waterworks Revenue,
Series A, 5.00%, 7/01/26 ....................................................... 49,325,000 49,689,512
Series B1, FGIC Insured, 5.00%, 10/01/33 ....................................... 5,000,000 5,050,150
Series C, 5.00%, 7/01/37 ....................................................... 26,780,000 26,833,560
Mid-Peninsula Regional Open Space District COP, Special District Association Finance Corp.,
5.75%, 9/01/20 ................................................................... 5,200,000 5,355,688
Milpitas RDA, Tax Allocation, Redevelopment Project Area No. 1, MBIA Insured,
5.40%, 1/15/17 ................................................................. 12,155,000 13,176,749
5.50%, 1/15/24 ................................................................. 11,790,000 12,573,092
Milpitas USD, FGIC Insured, 5.875%, 9/01/24 ....................................... 11,970,000 13,048,976
Modesto Irrigation District COP,
Capital Improvements, Series A, FSA Insured, 5.00%, 7/01/31 .................... 7,790,000 7,862,759
Refunding and Capital Improvements, Series B, 5.30%, 7/01/22 ................... 4,645,000 4,649,459
Modesto PFA Lease Revenue, Capital Improvements and Refinancing Project, AMBAC Insured,
5.125%, 9/01/33 .................................................................. 5,535,000 5,606,512
Mojave Water Agency COP, Supplemental Water Entitlement, MBIA Insured, 5.55%, 9/01/22 10,005,000 10,953,874
Montclair RDA, Tax Allocation, Redevelopment Project No. IV, 6.90%, 10/01/22 ...... 1,645,000 1,675,581
Monterey County COP, Natividad Medical Center Improvement Project, Series C, MBIA
Insured, Pre-Refunded,
6.50%, 8/01/15 ................................................................. 3,500,000 3,919,895
6.60%, 8/01/23 ................................................................. 13,250,000 14,863,585
Moreno Valley Special Tax, Towngate Community Facilities 87-1, Refunding, Series A, FSA
Insured, 5.875%, 12/01/15 ........................................................ 5,830,000 5,929,460
Moreno Valley USD, COP, Refunding, FSA Insured,
5.60%, 3/01/17 ................................................................. 5,000,000 5,367,600
5.70%, 3/01/27 ................................................................. 15,000,000 16,000,800
32 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Mountain View Shoreline Regional Park, Community Tax Allocation, Series A, MBIA
Insured, 5.75%, 8/01/18 .......................................................... $ 9,605,000 $ 9,719,011
Murrieta COP, Road Improvement Project, 6.00%, 4/01/27 ............................ 8,600,000 9,040,492
Napa Housing Facility Revenue, Napa Park Apartments, Series A, GNMA Secured, 6.35%,
6/20/35 .......................................................................... 6,125,000 6,368,101
Napa Mortgage Revenue, Creekside II Apartments Project, Refunding, Series A, MBIA Insured,
6.625%, 7/01/25 .................................................................. 2,000,000 2,042,240
Needles PFAR, Tax Allocation, Redevelopment Project, Series A, 7.50%, 8/15/22 ..... 1,580,000 1,592,561
Nevada Power Authority Revenue, Bowman Hydroelectric Project, Refunding, 7.50%,
5/01/13 .......................................................................... 5,675,000 5,840,767
Norco RDA, Tax Allocation, Area No. 1, Refunding, MBIA Insured, 5.125%, 3/01/30 ... 13,515,000 13,792,598
North City West School Facilities Financing Authority Special Tax, CFD No. 1, Series C,
AMBAC Insured, 5.30%, 9/01/22 .................................................. 10,000,000 10,648,600
9/01/27 ........................................................................ 9,900,000 10,348,470
Northern California Power Agency Multiple Capital Facilities Revenue, Refunding, Series A,
AMBAC Insured, 5.00%, 8/01/25 .................................................... 19,250,000 19,507,950
Northern California Public Power Agency Revenue, Hydroelectric Project No. 1, Refunding,
Series A, MBIA Insured,
5.125%, 7/01/23 ................................................................ 7,420,000 7,612,846
5.00%, 7/01/28 ................................................................. 15,975,000 16,128,520
5.20%, 7/01/32 ................................................................. 43,675,000 44,491,722
Oakland HFR,
Issue D-1, 7.10%, 1/01/10 ...................................................... 1,150,000 1,160,937
Issue D-2, 7.15%, 1/01/24 ...................................................... 1,620,000 1,635,860
Oakland Joint Powers Financing Authority Lease Revenue, Oakland Administration Buildings,
AMBAC Insured, 5.75%, 8/01/26 .................................................... 24,895,000 27,116,132
Oakland Revenue, 1800 Harrison Foundation,
Refunding, Series A, AMBAC Insured, 6.00%, 1/01/29 ............................. 13,825,000 15,370,773
Series B, AMBAC Insured, 6.00%, 1/01/29 ........................................ 13,470,000 15,070,909
Oceanside Building Authority Revenue, Refunding, 7.75%, 11/01/04 .................. 1,600,000 1,649,824
Oceanside COP, Oceanside Civic Center Project, Refunding, MBIA Insured, 5.75%, 8/01/15 5,000,000 5,470,250
Olivenhain Municipal Water District 1915 Act, AD No. 96-1, MBIA Insured, 5.45%, 9/02/27 10,975,000 11,283,507
Orange Community Facilities District Special Tax, No. 91-2,
6.15%, 10/01/23 ................................................................ 6,225,000 6,415,547
6.25%, 10/01/30 ................................................................ 7,910,000 8,117,717
Orange County Airport Revenue, Refunding, MBIA Insured, 5.625%, 7/01/12 ........... 5,000,000 5,579,200
Orange County Development Agency Tax Allocation, Santa Ana Heights Area Project,
Refunding, 6.125%, 9/01/23 ....................................................... 6,500,000 6,686,745
Orange County Recovery COP, Series A, MBIA Insured, 5.80%, 7/01/16 ................ 10,380,000 11,550,241
Orange County Recovery, Refunding, Series A, MBIA Insured, 5.75%, 6/01/15 ......... 79,010,000 85,983,423
Orange County Water District COP, Series B, MBIA Insured, 5.00%, 8/15/28 .......... 6,950,000 7,041,462
Orange County Water District Revenue, COP, Series B, MBIA Insured, 5.00%, 8/15/34 . 6,000,000 6,060,180
Orange RDA, Tax Allocation Revenue, Northwest Redevelopment Project, Refunding,
Series B, 5.70%, 10/01/23 ........................................................ 8,530,000 8,700,600
Oroville Wyandotte Irrigation District Revenue, Hydroelectric Sly Creek Power, Refunding,
6.20%, 1/01/09 ................................................................... 6,085,000 6,136,357
Oxnard Harbor District Revenue, ACA Insured, 5.60%, 8/01/19 ....................... 10,820,000 11,271,410
Semiannual Report | 33
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Palm Desert Financing Authority Lease Revenue, Blythe County Administrative Project,
6.625%, 8/01/26 .................................................................. $ 5,020,000 $ 5,303,128
Palm Desert Financing Authority Tax Allocation Revenue, Project Area No. 1,
Refunding, MBIA Insured, 5.625%, 4/01/23 ....................................... 13,000,000 14,055,340
Series A, MBIA Insured, 5.95%, 4/01/24 ......................................... 15,075,000 16,263,513
Palm Springs COP, Multiple Capital Facilities Project, Refunding, AMBAC Insured, 5.75%,
4/01/27 .......................................................................... 11,570,000 12,636,291
Palmdale Civic Authority Revenue, Merged Redevelopment Project Areas, Refunding,
Series A, MBIA Insured, 6.15%, 9/01/24 ........................................... 4,730,000 4,991,569
Palmdale CRDA, Tax Allocation,
Merged Redevelopment Project, Refunding, MBIA Insured, 5.00%, 9/01/28 .......... 17,500,000 17,672,375
Merged Redevelopment Project, Refunding, MBIA Insured, 5.00%, 9/01/34 .......... 6,980,000 7,032,420
Series A, MBIA Insured, 5.75%, 9/01/27 ......................................... 10,435,000 11,480,170
Palomar Community College District COP, Building Acquisition Project, Connie Lee Insured,
Pre-Refunded, 6.75%, 10/01/19 .................................................... 4,210,000 4,536,738
Pasadena COP, Art Center College of Design, Connie Lee Insured, 6.50%, 12/01/19 ... 8,250,000 8,940,525
Perris PFAR,
Special Tax, Series A, ETM, 7.60%, 9/01/04 ..................................... 120,000 122,880
Special Tax, Series A, ETM, 7.60%, 9/01/05 ..................................... 125,000 127,989
Special Tax, Series A, ETM, 7.80%, 9/01/19 ..................................... 1,090,000 1,107,342
Tax Allocation, Series A, 5.75%, 10/01/31 ...................................... 5,000,000 5,145,450
Perris Special Tax,
CFD No. 8, Series A, Pre-Refunded, 8.30%, 9/01/18 .............................. 5,920,000 6,313,739
CFD No. 91-1, 8.75%, 9/01/21 ................................................... 5,395,000 5,479,162
Petaluma Community Development Commission MFR, Park Lane Apartments, Series A,
6.875%, 11/20/34 ................................................................. 4,800,000 4,945,728
Pittsburg PFA, Water Revenue, MBIA Insured, 5.50%, 6/01/27 ........................ 2,980,000 3,169,588
Placentia COP, RDA, Refunding, Series A, 6.90%, 1/01/14 ........................... 1,770,000 1,823,560
Placer Hills Union Elementary School District COP, Convertible Capital Appreciation,
Series B, 7.125%, 3/01/19 ........................................................ 510,000 530,706
Placer Union High School District COP, Capital Appreciation, Series A, 7.125%, 3/01/19 2,095,000 2,189,212
Pomona PFAR, Refunding, Series P, 5.75%, 10/01/15 ................................. 6,490,000 6,956,631
Pomona RDA, Tax Allocation, Southwest Pomona Redevelopment Project, ETM, 11.45%,
1/01/07 .......................................................................... 7,405,000 8,914,065
Port Hueneme RDA, Tax Allocation, R-76 Project, Refunding, 6.50%, 5/01/23 ......... 2,795,000 2,856,769
Port of Oakland Revenue,
AMT, Series L, FGIC Insured, 5.375%, 11/01/27 .................................. 25,000,000 25,639,750
Series J, MBIA Insured, 5.50%, 11/01/26 ........................................ 7,000,000 7,466,620
Port of Oakland Special Facilities Revenue, Mitsui O.S.K. Lines Ltd., Series A,
6.70%, 1/01/07 ................................................................. 6,100,000 6,208,885
6.75%, 1/01/12 ................................................................. 4,890,000 4,970,392
6.80%, 1/01/19 ................................................................. 5,030,000 5,108,015
Porterville COP, Infrastructure Financing Project, AMBAC Insured, 5.00%, 7/01/28 .. 10,430,000 10,530,232
Poway COP, Royal Mobile Home Park Project, Refunding, FSA Insured,
5.875%, 8/01/15 ................................................................ 6,250,000 6,816,000
6.00%, 8/01/20 ................................................................. 5,400,000 5,854,896
6.00%, 8/01/28 ................................................................. 15,000,000 16,204,200
34 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Poway RDA, Tax Allocation, Parguay Redevelopment Project, sub. notes, Refunding,
FGIC Insured,
5.50%, 12/15/23 ................................................................ $ 23,000,000 $ 23,669,760
5.75%, 12/15/26 ................................................................ 8,000,000 8,236,960
Puerto Rico Commonwealth GO, Public Improvement, Series A,
5.00%, 7/01/27 ................................................................. 26,750,000 26,974,165
5.125%, 7/01/31 ................................................................ 142,925,000 144,874,497
Puerto Rico Commonwealth Highway and Transportation Authority Transportation Revenue,
Series A, MBIA Insured, 5.00%, 7/01/38 ......................................... 116,975,000 119,518,036
Series B, MBIA Insured, 6.00%, 7/01/31 ......................................... 13,000,000 15,647,710
Series B, Pre-Refunded, 6.00%, 7/01/39 ......................................... 13,200,000 15,933,588
Series D, 5.375%, 7/01/36 ...................................................... 45,000,000 46,437,300
Series D, 5.75%, 7/01/41 ....................................................... 20,000,000 21,609,200
Series Y, 5.00%, 7/01/36 ....................................................... 63,000,000 63,171,990
Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Revenue,
Series A, AMBAC Insured, 5.00%, 7/01/28 .......................................... 10,000,000 10,203,400
Puerto Rico Electric Power Authority Revenue,
Series DD, MBIA Insured, 5.00%, 7/01/28 ........................................ 23,250,000 23,755,455
Series II, 5.25%, 7/01/31 ...................................................... 48,000,000 49,248,000
Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities
Revenue, Cogen Facilities, AES, Puerto Rico Project, 6.625%, 6/01/26 ............. 6,800,000 7,189,708
Puerto Rico PBA Revenue, Government Facilities, Series D, 5.375%, 7/01/33 ......... 100,000,000 103,553,000
Puerto Rico Public Finance Corp. Revenue, Commonwealth Appropriation, Series E,
5.50%, 8/01/29 ................................................................. 139,995,000 147,630,327
5.75%, 8/01/30 ................................................................. 50,000,000 52,459,500
Rancho Cucamonga RDA, Tax Allocation, Rancho Redevelopment Project,
MBIA Insured, 5.125%, 9/01/30 .................................................. 12,000,000 12,214,200
Set-Aside Housing, MBIA Insured, 5.25%, 9/01/21 ................................ 8,330,000 8,839,796
Rancho Cucamonga, Palmdale, Potterville and Colton HFA, SFMR, Series 1986, GNMA
Secured, 7.55%, 8/01/18 .......................................................... 825,000 856,276
Rancho Murieta Community Services District 1915 Act, ID No. 1, 8.40%,
9/02/04 ........................................................................ 750,000 785,167
9/02/05 ........................................................................ 735,000 773,102
9/02/06 ........................................................................ 750,000 783,390
Redlands USD, COP, Series A, FSA Insured,
6.15%, 9/01/11 ................................................................. 465,000 466,576
6.25%, 9/01/27 ................................................................. 4,160,000 4,174,310
Rialto COP, FSA Insured, 5.75%, 2/01/22 ........................................... 2,715,000 2,987,885
Rialto RDA, Tax Allocation, Agua Mansa Redevelopment Project, Pre-Refunded, 6.75%,
3/01/24 .......................................................................... 3,500,000 3,652,040
Richmond Joint Powers Financing Authority Revenue, Lease, Series A, MBIA Insured, 5.00%,
2/01/26 ........................................................................ 6,500,000 6,583,460
2/01/31 ........................................................................ 7,000,000 7,066,010
Riverside County Asset Leasing Corp. Leasehold Revenue, Riverside County Hospital Project,
Series A, 6.50%, 6/01/12 ......................................................... 20,125,000 23,840,880
Riverside County Board of Education COP, Capital Appreciation Financing Projects,
Series A, 6.65%, 11/01/17 ........................................................ 7,945,000 7,975,986
Semiannual Report | 35
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Riverside County COP,
Family Law Court Project, MBIA Insured, 5.75%, 11/01/27 ........................ $ 5,295,000 $ 5,842,238
Historic Courthouse, MBIA Insured, 5.875%, 11/01/27 ............................ 6,000,000 6,684,900
Riverside County Flood Control and Water Conservation District Elsinore Valley AD,
Zone 3, 7.875%,
9/01/04 ........................................................................ 180,000 190,460
9/01/05 ........................................................................ 190,000 213,001
9/01/06 ........................................................................ 205,000 241,377
9/01/07 ........................................................................ 225,000 274,201
9/01/08 ........................................................................ 240,000 301,157
9/01/09 ........................................................................ 260,000 331,414
9/01/10 ........................................................................ 280,000 359,971
9/01/11 ........................................................................ 305,000 396,500
9/01/12 ........................................................................ 325,000 422,295
9/01/13 ........................................................................ 350,000 460,058
9/01/14 ........................................................................ 380,000 504,762
9/01/15 ........................................................................ 410,000 550,519
9/01/16 ........................................................................ 440,000 594,581
9/01/17 ........................................................................ 475,000 641,768
Riverside County Housing Authority Revenue, Breezewood Apartment Project, Refunding,
Series C, 6.40%, 6/01/28 ......................................................... 4,740,000 4,597,326
Riverside County PFA,
COP, 5.75%, 5/15/19 ............................................................ 3,500,000 3,538,430
COP, 5.80%, 5/15/29 ............................................................ 14,230,000 14,342,132
Tax Allocation Revenue, Redevelopment Projects, Series A, 5.625%, 10/01/33 ..... 11,225,000 11,295,268
Riverside County RDA, Tax Allocation, Jurupa Valley Project Area, AMBAC Insured,
5.00%, 10/01/28 ................................................................ 15,535,000 15,681,029
5.125%, 10/01/35 ............................................................... 17,035,000 17,294,613
Riverside County SFMR,
Series A, GNMA Secured, 7.20%, 10/01/24 ........................................ 285,000 295,374
Series B, GNMA Secured, 7.60%, 11/01/19 ........................................ 155,000 159,493
Rohnert Park HFAR, Rancho Feliz Mobile Home Park, FSA Insured, 5.375%, 12/01/26 ... 8,380,000 9,316,130
Roseville 1915 Act,
North Roseville Rocklin District No. 88-3, Refunding, 8.20%, 9/02/04 ........... 140,000 143,881
North Roseville Rocklin District No. 88-3, Refunding, 8.20%, 9/02/05 ........... 150,000 156,462
North Roseville Rocklin District No. 88-3, Refunding, 8.20%, 9/02/06 ........... 160,000 166,995
North Roseville Rocklin District No. 88-3, Refunding, 8.25%, 9/02/07 ........... 180,000 187,232
North Roseville Rocklin District No. 88-3, Refunding, 8.25%, 9/02/08 ........... 190,000 197,570
North Roseville Rocklin District No. 88-3, Refunding, 8.25%, 9/02/09 ........... 160,000 166,238
Rocky Ridge Harding District No. 88-4, Refunding, 8.20%, 9/02/04 ............... 300,000 308,316
Rocky Ridge Harding District No. 88-4, Refunding, 8.20%, 9/02/05 ............... 320,000 333,786
Sacramento 1915 Act, Special Assessment, North Natomas AD No. 88-3,
8.20%, 9/02/10 ................................................................. 760,000 787,330
8.20%, 9/02/11 ................................................................. 1,685,000 1,744,531
8.25%, 9/02/12 ................................................................. 2,180,000 2,256,278
8.25%, 9/02/13 ................................................................. 2,360,000 2,442,081
8.25%, 9/02/14 ................................................................. 2,545,000 2,632,344
36 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Sacramento City Financing Authority Revenue,
Capital Improvement, AMBAC Insured, 5.00%, 12/01/33 ............................ $ 7,520,000 $ 7,595,952
Capital Improvement, Series A, AMBAC Insured, 5.00%, 12/01/32 .................. 26,250,000 26,464,200
Capital Improvements, 5.625%, 6/01/30 .......................................... 6,000,000 6,329,520
Series 1991, 6.60%, 11/01/05 ................................................... 1,300,000 1,305,681
Series 1991, 6.70%, 11/01/11 ................................................... 920,000 924,094
Sacramento City USD, GO, Election of 1999, Series B, FGIC Insured, 5.00%, 7/01/30 . 5,250,000 5,305,177
Sacramento County Airport System Revenue, Series A, MBIA Insured, 5.90%, 7/01/24 .. 6,875,000 7,484,606
Sacramento County COP, Public Facilities Project, Coroner/Crime Laboratory, AMBAC
Insured, 6.40%,
10/01/19 ....................................................................... 11,000,000 11,755,920
10/01/24 ....................................................................... 29,500,000 31,527,240
Sacramento County Sanitation District Financing Authority Revenue, AMBAC Insured,
5.625%, 12/01/30 ................................................................. 5,000,000 5,393,050
Sacramento MUD Revenue, Refunding, Series P, FSA Insured, 5.00%, 8/15/23 .......... 7,000,000 7,150,220
Sacramento MUD, Electric Revenue,
Refunding, Series D, MBIA Insured, 5.25%, 11/15/20 ............................. 10,000,000 10,250,300
Series J, AMBAC Insured, 5.60%, 8/15/24 ........................................ 10,215,000 11,681,363
Series N, MBIA Insured, 5.00%, 8/15/28 ......................................... 63,500,000 64,195,960
Series R, MBIA Insured, 5.00%, 8/15/33 ......................................... 7,000,000 7,070,210
Sub. lien, Refunding, 8.00%, 11/15/10 .......................................... 16,110,000 16,207,143
Sacramento Regional Transit District COP, Series A, 6.375%,
3/01/04 ........................................................................ 1,000,000 1,021,180
3/01/05 ........................................................................ 1,100,000 1,123,122
Sacramento USD, COP, Refunding, MBIA Insured, 5.00%, 3/01/31 ...................... 6,000,000 6,051,480
Salida Area Public Facilities Financing Agency CFD, Special Tax, No. 1988-1, Refunding,
FSA Insured, 5.25%, 9/01/28 ...................................................... 6,800,000 6,997,880
San Bernardino 1915 Act, Special Assessment, AD No. 961, Refunding,
7.70%, 9/02/04 ................................................................. 845,000 865,229
7.75%, 9/02/05 ................................................................. 915,000 945,707
San Bernardino County COP,
Medical Center Financing Project, Refunding, 5.00%, 8/01/26 .................... 15,045,000 14,902,524
Medical Center Financing Project, Refunding, MBIA Insured, 5.00%, 8/01/28 ...... 55,065,000 55,460,367
Medical Center Financing Project, Series A, MBIA Insured, 5.50%, 8/01/22 ....... 40,830,000 43,730,563
West Valley Detention Center Project, MBIA Insured, 6.20%, 11/01/25 ............ 9,275,000 9,874,907
San Bernardino County Housing Authority MFMR,
Rancho Meridian, GNMA Secured, 6.75%, 4/20/41 .................................. 6,920,000 7,771,990
Series A, GNMA Secured, 6.70%, 3/20/43 ......................................... 3,345,000 3,789,149
San Bernardino County SFMR,
GNMA Secured, 7.50%, 12/01/07 .................................................. 70,000 72,046
GNMA Secured, 7.65%, 6/01/23 ................................................... 430,000 443,240
Series A, GNMA Secured, 6.20%, 5/01/21 ......................................... 70,000 73,536
Series B, 5.40%, 5/01/25 ....................................................... 160,000 163,328
San Bernardino Joint Powers Financing Authority Lease Revenue, City Hall Project,
Refunding, MBIA Insured, 5.70%, 1/01/23 .......................................... 6,315,000 6,835,861
San Bernardino Joint Powers Financing Authority Revenue COP, Police Station Financing
Project, Pre-Refunded, 6.60%, 4/01/20 ............................................ 4,715,000 5,245,060
Semiannual Report | 37
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
San Bernardino Joint Powers Financing Authority Revenue, Tax Allocation, Refunding,
Series A, FSA Insured, 5.75%, 10/01/25 ........................................... $ 19,915,000 $ 21,512,980
San Carlos Mortgage Revenue, Elms Project, FHA Insured, 6.875%, 8/01/37 ........... 8,465,000 8,723,775
San Diego County COP, MBIA Insured, 5.00%, 8/15/28 ................................ 24,000,000 24,164,880
San Diego County Water Authority Revenue COP, Series A,
5.00%, 5/01/32 ................................................................. 20,000,000 20,196,400
MBIA Insured, 5.00%, 5/01/23 ................................................... 10,000,000 10,252,100
MBIA Insured, 5.00%, 5/01/25 ................................................... 12,440,000 12,647,872
San Diego IDR, San Diego Gas and Electric Co. Project, Series A, 6.40%, 9/01/18 ... 19,800,000 20,067,498
San Diego Public Facilities Financing Authority Sewer Revenue,
Series A, FGIC Insured, 5.25%, 5/15/27 ......................................... 21,750,000 22,384,882
Series B, FGIC Insured, 5.25%, 5/15/22 ......................................... 5,200,000 5,440,188
San Diego Public Facilities Financing Authority Water Revenue,
MBIA Insured, 5.00%, 8/01/26 ................................................... 12,210,000 12,374,469
Subordinated, MBIA Insured, 5.00%, 8/01/32 ..................................... 20,000,000 20,183,400
San Diego RDA, Tax Allocation, Horton Project, Refunding, Series A, FSA Insured, 6.00%,
11/01/15 ......................................................................... 5,000,000 5,641,350
San Diego USD, GO,
Election 1998, Series D, FGIC Insured, 5.00%, 7/01/27 .......................... 16,000,000 16,225,120
Election 1998, Series E, FSA Insured, 5.00%, 7/01/28 ........................... 10,000,000 10,140,500
Election of 1998, Series B, MBIA Insured, 5.00%, 7/01/25 ....................... 6,975,000 7,062,048
Series C, FSA Insured, 5.00%, 7/01/26 .......................................... 6,490,000 6,584,559
San Francisco BART, District Sales Tax Revenue, FGIC Insured, 5.50%, 7/01/34 ...... 11,790,000 12,579,340
San Francisco City and County Airport Commission International Airport Revenue,
Issue 12A, Second Series, 5.90%, 5/01/26 ....................................... 45,000,000 47,118,150
Issue 16A, Second Series, FSA Insured, 5.125%, 5/01/23 ......................... 24,635,000 24,984,078
Issue 6, AMBAC Insured, 6.50%, 5/01/18 ......................................... 2,500,000 2,611,000
Issue 6, AMBAC Insured, 6.60%, 5/01/24 ......................................... 13,250,000 13,822,930
Issue 9A, FGIC Insured, 5.90%, 5/01/25 ......................................... 46,415,000 49,264,417
San Francisco City and County Airports Commission Airport Revenue, Refunding, Series 28B,
MBIA Insured, 5.00%, 5/01/27 ..................................................... 5,050,000 5,113,074
San Francisco City and County Airports Commission International Airport Revenue,
Refunding, Second Series-28A, MBIA Insured, 5.125%, 5/01/32 .................... 28,790,000 28,897,962
Second Series 27A, Refunding,MBIA Insured, 5.25%, 5/01/31 ...................... 10,000,000 10,149,400
Second Series-Issue 23B, FGIC Insured, 5.125%, 5/01/30 ......................... 10,000,000 10,172,300
Second Series-Issue 26B, FGIC Insured, 5.00%, 5/01/30 .......................... 6,500,000 6,567,470
San Francisco City and County COP,
30 Van Ness Avenue Property, Series A, MBIA Insured, 5.00%, 9/01/31 ............ 5,805,000 5,857,593
San Francisco Courthouse Project, FSA Insured, 5.875%, 4/01/21 ................. 2,810,000 3,036,317
San Francisco City and County Public Utilities Commission Water Revenue, Refunding,
Series A, MBIA Insured, 5.00%, 11/01/25 .......................................... 14,155,000 14,381,622
San Francisco City and County RDA,
Hotel Tax Revenue, FSA Insured, 6.75%, 7/01/25 ................................. 315,000 332,927
Hotel Tax Revenue, FSA Insured, Pre-Refunded, 6.75%, 7/01/25 ................... 9,100,000 9,674,756
Lease Revenue, George R. Moscone Center, Capital Appreciation, 8.50%, 7/01/14 .. 46,000,000 49,312,000
Mortgage Revenue, Refunding, Series A, MBIA Insured, 6.65%, 7/01/24 ............ 5,580,000 5,534,021
San Gabriel Valley Schools Financing Authority Revenue, Pomona USD Financing, 5.80%,
2/01/26 .......................................................................... 5,150,000 5,275,454
38 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue,
Refunding, Series A, 5.50%, 1/15/28 ............................................ $ 247,300,000 $ 233,379,483
Refunding, Series A, MBIA Insured, 5.375%, 1/15/29 ............................. 85,500,000 88,206,075
Refunding, Series A, MBIA Insured, 5.25%, 1/15/30 .............................. 21,200,000 21,738,268
Senior lien, 5.00%, 1/01/33 .................................................... 82,040,000 73,477,485
Senior lien, Pre-Refunded, 7.50%, 1/01/09 ...................................... 21,585,000 26,808,786
Senior lien, Pre-Refunded, 7.55%, 1/01/10 ...................................... 10,745,000 13,367,102
Senior lien, Pre-Refunded, 7.60%, 1/01/11 ...................................... 20,935,000 26,086,266
Senior lien, Pre-Refunded, 7.65%, 1/01/12 ...................................... 25,215,000 31,470,589
Senior lien, Pre-Refunded, 7.65%, 1/01/13 ...................................... 27,350,000 34,135,261
Senior lien, Pre-Refunded, 7.70%, 1/01/14 ...................................... 7,470,000 9,338,322
Senior lien, Pre-Refunded, 7.70%, 1/01/15 ...................................... 60,155,000 75,200,367
San Jose Airport Revenue, Refunding, Series A, FGIC Insured, 5.00%, 3/01/31 ....... 11,000,000 11,094,380
San Jose Financing Authority Lease Revenue,
Civic Center Project, Refunding, Series B, AMBAC Insured, 5.00%, 6/01/32 ....... 18,500,000 18,667,055
Civic Center Project, Series B, AMBAC Insured, 5.00%, 6/01/27 .................. 46,400,000 46,982,784
MBIA Insured, 5.00%, 9/01/21 ................................................... 14,045,000 14,488,682
MBIA Insured, 5.00%, 9/01/22 ................................................... 14,730,000 15,087,055
San Jose Financing Authority Revenue, Fourth and San Fernando Parking Facility, Series A,
AMBAC Insured, 5.00%, 9/01/24 .................................................... 5,000,000 5,081,400
San Jose GO, Library Parks and Public Safety Projects, 5.00%, 9/01/28 ............. 11,600,000 11,740,940
San Jose RDA,
MFHR, Miraido Village, Series A, GNMA Secured, 5.75%, 7/20/38 .................. 7,110,000 7,306,520
Tax Allocation, Housing Set-Aside Merged Area, Series E, MBIA Insured, 5.85%, 8/01/27 7,325,000 7,746,993
Tax Allocation, Merged Area Redevelopment Project, 5.25%, 8/01/29 .............. 10,860,000 10,865,321
Tax Allocation, Merged Area Redevelopment Project, AMBAC Insured, 5.00%, 8/01/26 15,000,000 15,163,200
Tax Allocation, Merged Area Redevelopment Project, AMBAC Insured, 5.00%, 8/01/31 2,000,000 2,013,920
Tax Allocation, Merged Area Redevelopment Project, MBIA Insured, 5.00%, 8/01/21 35,235,000 36,061,965
Tax Allocation, Merged Area Redevelopment Project, MBIA Insured, 5.625%, 8/01/28 24,135,000 25,278,516
Tax Allocation, Merged Area Redevelopment Project, Refunding, MBIA Insured, 5.00%,
8/01/20 ....................................................................... 35,665,000 36,507,764
San Jose USD Santa Clara County GO, Series A, FSA Insured, 5.00%,
8/01/24 ........................................................................ 9,200,000 9,363,668
8/01/27 ........................................................................ 9,150,000 9,266,662
San Juan Basin Authority Lease Revenue, AMBAC Insured, 5.00%, 12/01/34 ............ 5,000,000 5,047,250
San Leandro RDA, RMR, Pre-Refunded, 11.25%, 4/01/13 ............................... 55,000 60,332
San Marcos PFAR, Series A, 6.25%, 9/02/22 ......................................... 15,000,000 17,734,800
San Marcos Public Facilities Authority Revenue,
Refunding, 5.80%, 9/01/18 ...................................................... 4,750,000 4,978,190
Senior Tax Increment Project Area-3-A, MBIA Insured, 5.75%, 10/01/29 ........... 5,340,000 5,852,159
Senior Tax Increment Project Area-3-A, MBIA Insured, 5.80%, 10/01/30 ........... 8,035,000 8,798,968
San Marcos USD, School Facilities ID No. 1, AMBAC Insured, 5.80%, 11/01/14 ........ 5,000,000 5,702,150
San Mateo County Joint Powers Authority Lease Revenue, Capital Projects, Refunding,
Series A, FSA Insured, 5.00%, 7/15/29 ............................................ 17,500,000 17,678,500
San Mateo RDA, Tax Allocation,
5.60%, 8/01/25 ................................................................. 10,185,000 10,417,116
Merged Area, Series A, 5.70%, 8/01/27 .......................................... 6,330,000 6,606,368
Semiannual Report | 39
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
San Mateo Unified High School District GO, Election of 2000, Series A, FGIC Insured, 5.00%,
9/01/25 .......................................................................... $ 13,865,000 $ 14,063,408
San Pablo RDA, Tax Allocation, Merged Project Area, FGIC Insured, 6.25%, 12/01/19 . 3,500,000 3,751,720
San Ramon PFA, Tax Allocation Revenue,
MBIA Insured, 5.30%, 2/01/28 ................................................... 18,360,000 19,129,100
Pre-Refunded, 6.90%, 2/01/24 ................................................... 6,140,000 6,562,248
Refunding, 6.90%, 2/01/24 ...................................................... 6,910,000 7,210,585
San Ramon Valley USD,
COP, Refunding, 7.55%, 2/01/04 ................................................. 1,495,000 1,526,679
GO, Election of 2002, FSA Insured, 5.40%, 3/01/28 .............................. 27,410,000 28,948,523
Santa Ana Financing Authority Water Revenue, MBIA Insured, 6.125%, 9/01/24 ........ 5,000,000 5,124,950
Santa Barbara Housing Authority Revenue, Refunding and Acquisition, 6.25%, 11/15/20 5,470,000 5,373,783
Santa Clara County Financing Authority Lease Revenue, Valley Medical Center Facilities
Replacement Project, Series A, AMBAC Insured, Pre-Refunded, 6.75%, 11/15/20 ...... 13,000,000 14,092,650
Santa Clara Housing Authority MFHR,
Arastradero Park Apartments Project, Series A, GNMA Secured, 6.65%, 5/20/35 .... 6,465,000 6,757,153
Elana Gardens Apartments Project, Series A, GNMA Secured, 6.40%, 6/20/35 ....... 5,625,000 5,824,069
Sierra Vista I Apartments Project, Series A, GNMA Secured, 6.65%, 6/20/35 ...... 3,860,000 4,039,143
Santa Clara USD, COP, 5.375%, 7/01/31 ............................................. 7,575,000 7,762,784
Santa Clara Valley Transportation Authority Sales Tax Revenue, Series A, MBIA Insured,
5.00%, 6/01/23 ................................................................... 7,325,000 7,478,752
Santa Clarita COP, Refunding, MBIA Insured, 5.00%, 10/01/21 ....................... 5,105,000 5,259,426
Santa Cruz City School District COP, Education Center Financing Project, Pre-Refunded,
7.00%, 5/01/24 ................................................................... 3,150,000 3,322,179
Santa Cruz County Housing Authority MFHR, Series B, FNMA Insured, 7.75%, 7/01/23 .. 1,445,000 1,447,254
Santa Margarita Water District Special Tax, Community Facilities District No. 99-1, 6.00%,
9/01/30 .......................................................................... 9,000,000 8,985,060
Santa Maria Bonita School District COP, MBIA Insured, 7.00%, 3/01/16 .............. 480,000 481,829
Santa Monica RDA, Tax Allocation, Earthquake Recovery Redevelopment Project, AMBAC
Insured, 6.00%, 7/01/29 .......................................................... 13,110,000 14,748,488
Shafter Joint Powers Financing Authority Lease Revenue, Community Correctional Facility
Project, Series A,
5.95%, 1/01/11 ................................................................. 1,880,000 2,058,017
6.05%, 1/01/17 ................................................................. 5,135,000 5,585,494
Solano County COP, GO, MBIA Insured, 5.00%, 11/01/32 .............................. 25,665,000 25,906,508
South Gate PFAR, Tax Allocation, Redevelopment Project No. 1, AMBAC Insured, 5.875%,
9/01/24 .......................................................................... 8,505,000 8,787,961
South Gate Utility Authority Revenue, Water and Sewer Systems Project, FGIC Insured,
5.00%, 10/01/32 .................................................................. 6,475,000 6,538,390
South Napa Waste Management Authority Revenue, Solid Waste Transfer Facilities Project,
6.50%, 2/15/14 ................................................................... 4,500,000 4,651,155
South Orange County PFA Special Tax Revenue, Foothill Area, Series C, FGIC Insured,
5.75%, 8/15/18 ................................................................... 5,000,000 5,244,150
Southern California HFA, SFMR,
GNMA Secured, 7.625%, 10/01/22 ................................................. 595,000 595,547
Series A, GNMA Secured, 6.75%, 9/01/22 ......................................... 55,000 55,108
Southern California Public Power Authority Power Project Revenue,
6.75%, 7/01/13 ................................................................. 10,000,000 12,245,700
Multi-Purpose Projects, 6.00%, 7/01/18 ......................................... 29,645,000 29,728,006
40 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Southern California Public Power Authority Project Revenue, Magnolia Power Project, Series A,
AMBAC Insured, 5.00%, 7/01/36 .................................................... $ 15,800,000 $ 15,944,412
Southern California Public Power Authority Transmission Project Revenue, Southern
Transmission Project, 6.125%, 7/01/18 ............................................ 1,135,000 1,149,755
Southern Public Power Authority Power Projects Revenue,Series A, AMBAC Insured, 5.00%,
7/01/33 .......................................................................... 15,620,000 15,774,950
Stockton COP, Essential Services Building Parking Facility,
5.875%, 8/01/23 ................................................................ 2,295,000 2,413,835
6.00%, 8/01/31 ................................................................. 6,585,000 6,934,203
Stockton Health Facilities Revenue, St. Joseph Medical Center, Series A, MBIA Insured,
5.50%, 6/01/23 ................................................................... 5,000,000 5,121,450
Stockton Port District Port Facilities Revenue, Refunding and Improvement, Series A, FSA
Insured, 5.95%, 7/01/17 .......................................................... 5,095,000 5,761,120
Stockton Revenue COP, Wastewater System Project, Series A, MBIA Insured, 5.20%, 9/01/29 19,160,000 19,616,774
Stockton Revenue, O'Connor Woods Housing Corp., Series A, 6.35%, 11/01/31 ......... 9,110,000 9,354,877
Stockton USD, GO, MBIA Insured, 5.00%, 1/01/28 .................................... 5,335,000 5,401,581
Suisun City COP, Civic Center Project, Refunding, 6.45%, 11/01/15 ................. 2,105,000 2,153,036
Suisun City RDA, Tax Allocation, Suisun City Redevelopment Project, Refunding,
MBIA Insured,
6.00%, 10/01/18 ................................................................ 3,285,000 3,350,700
5.90%, 10/01/23 ................................................................ 3,180,000 3,243,600
Sweetwater UHSD, COP, FSA Insured, 5.00%, 9/01/27 ................................. 7,840,000 7,958,306
Tahoe Forest Hospital District Revenue, Series A, 5.90%, 7/01/29 .................. 7,990,000 8,138,135
Temecula Valley USD, GO,
Series D, FGIC Insured, 6.00%, 9/01/14 ......................................... 1,250,000 1,286,450
Series D, FGIC Insured, 6.125%, 9/01/19 ........................................ 3,110,000 3,202,149
Series E, FSA Insured, 6.35%, 9/01/19 .......................................... 5,460,000 5,999,448
Thousand Oaks RDA,
MFR, The Shadows Apartments, Refunding, Series A, FNMA Insured, 5.75%, 11/01/27 7,530,000 7,818,550
Tax Allocation, Thousand Oaks Boulevard Redevelopment, Refunding, MBIA Insured,
5.375%, 12/01/25 .............................................................. 24,485,000 25,607,882
Tobacco Securitization Authority Northern California Tobacco Settlement Revenue, Asset
Backed Bonds, Series B, 5.00%, 6/01/28 ........................................... 17,390,000 13,933,216
Tobacco Securitization Authority Southern California Tobacco Settlement Revenue, Asset
Backed Bonds,
Senior Series A, 5.50%, 6/01/36 ................................................ 80,500,000 61,748,330
Senior Series A, 5.625%, 6/01/43 ............................................... 123,165,000 92,804,827
Subordinate, Series B, 6.00%, 6/01/43 .......................................... 63,635,000 50,600,643
Tobacco Securitization Authority Tobacco Settlement Revenue, Series A,
5.25%, 6/01/31 ................................................................. 6,800,000 5,351,736
5.375%, 6/01/41 ................................................................ 30,250,000 21,924,292
Torrance Hospital Revenue, Torrance Memorial Medical Center, Series A, 5.50%, 6/01/31 4,385,000 4,472,393
Trabuco Canyon PFA, Special Tax Revenue, Refunding,
Series A, FSA Insured, 6.00%, 10/01/10 ......................................... 13,775,000 16,336,186
Series A, FSA Insured, 6.10%, 10/01/15 ......................................... 13,220,000 16,141,488
Series C, FSA Insured, 6.00%, 7/01/12 .......................................... 3,040,000 3,620,701
Series C, FSA Insured, 6.10%, 7/01/19 .......................................... 5,215,000 6,334,087
Semiannual Report | 41
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Tracy CFD Special Tax, No. 98-1 Plan C Properties,
5.875%, 8/01/23 ................................................................ $ 6,375,000 $ 6,451,946
6.00%, 8/01/26 ................................................................. 8,265,000 8,340,542
Tracy COP, I-205 Corridor Improvement and Refinancing Project, AMBAC Insured, 5.125%,
10/01/27 ......................................................................... 5,000,000 5,089,600
Tri-City Hospital District Revenue, Refunding, Series A, MBIA Insured, 5.625%, 2/15/17 5,000,000 5,461,950
Tri-Dam Power Authority Revenue, Hydroelectric Sand Bar Project, Refunding, 7.50%,
1/01/17 .......................................................................... 41,245,000 42,268,288
Tulare Local Health Care District Health Facilities Revenue, 5.20%, 12/01/21 ...... 4,455,000 4,508,505
Tustin USD, Special Tax, CFD No. 97-1, 6.375%, 9/01/35 ............................ 8,645,000 10,525,979
Union City CRDA, Tax Allocation Revenue, Community Redevelopment Project, AMBAC
Insured, 5.75%, 10/01/33 ......................................................... 5,190,000 5,734,120
University of California Revenues, Multiple Purpose Projects, Series 0, FGIC Insured,
5.00%, 9/01/23 ................................................................... 9,200,000 9,418,868
University of California COP, UCLA Center Chiller/Cogeneration Project, Refunding,
5.50%, 11/01/17 ................................................................ 13,940,000 14,268,287
5.60%, 11/01/20 ................................................................ 14,880,000 15,231,466
University of California Revenues,
Multi-Purpose Projects, Refunding, Series C, AMBAC Insured, 5.00%, 9/01/23 ..... 12,090,000 12,194,578
Multi-Purpose Projects, Series F, FGIC Insured, 5.00%, 9/01/22 ................. 20,575,000 21,191,838
Multiple Purpose Projects, Series O, FGIC Insured, 5.00%, 9/01/26 .............. 13,430,000 13,612,648
Research Facilities, Series E, AMBAC Insured, 5.00%, 9/01/31 ................... 5,000,000 5,045,300
Series O, FGIC Insured, 5.25%, 9/01/34 ......................................... 61,235,000 63,121,650
Upland COP,
Refunding, Mortgage Insured, 5.50%, 1/01/07 .................................... 4,935,000 5,319,831
San Antonio Community Hospital, Refunding, 5.70%, 1/01/11 ...................... 11,210,000 12,577,284
Vacaville PFAR, Local Agency, 8.65%, 9/02/18 ...................................... 5,220,000 4,241,198
Vallejo RDA, Tax Allocation, Waterfront Redevelopment Project, 7.90%, 5/01/19 ..... 2,355,000 2,365,338
Virgin Islands PFAR, senior lien,
Fund Loan Notes, Refunding, Series A, 5.50%, 10/01/22 .......................... 7,000,000 7,150,570
Refunding, Series A, 5.50%, 10/01/14 ........................................... 3,865,000 4,122,448
Vista Community Development Commission Tax Allocation Revenue, Vista Redevelopment
Project Area, 5.875%, 9/01/37 .................................................. 5,000,000 5,126,500
MBIA Insured, 5.50%, 9/01/23 ................................................... 11,810,000 12,481,753
Vista Joint Powers Financing Authority Revenue, Series A, 7.625%, 2/01/20 ......... 3,675,000 3,738,063
Washington Township Hospital District Revenue,
AMBAC Insured, 5.25%, 7/01/23 .................................................. 5,000,000 5,089,600
Health Care District Revenue, 5.25%, 7/01/29 ................................... 6,500,000 6,503,575
Watsonville Insured Hospital Revenue, Watsonville Community Hospital, Series A,
Pre-Refunded, 6.30%, 7/01/15 ................................................... 3,990,000 4,433,129
6.35%, 7/01/24 ................................................................. 5,435,000 6,043,340
Watsonville RDA, Tax Allocation, Watsonville Redevelopment Project, 6.30%, 8/01/06 1,745,000 1,772,641
West Basin Municipal Water District Revenue COP, 1992 Project, Refunding, Series A,
AMBAC Insured, 5.50%, 8/01/22 .................................................... 4,000,000 4,308,640
West Hollywood COP, Refunding, MBIA Insured, 5.00%, 2/01/25 ....................... 6,250,000 6,323,937
Westlands Water District Revenue COP,
5.00%, 9/01/26 ................................................................. 13,150,000 13,344,620
MBIA Insured, 5.00%, 9/01/34 ................................................... 13,500,000 13,636,080
42 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Whittier Health Facility Revenue, Presbyterian Intercommunity Hospital,
5.60%, 6/01/22 ................................................................. $ 14,285,000 $ 14,571,129
5.75%, 6/01/31 ................................................................. 28,000,000 28,579,320
William S. Hart Joint School Financing Authority Special Tax Revenue, Community Facilities,
Refunding, FSA Insured, 6.50%, 9/01/14 ........................................... 4,000,000 4,421,600
William S. Hart UHSD, GO, Series A, MBIA Insured, 5.00%, 9/01/27 .................. 8,685,000 8,806,677
------------------
TOTAL BONDS (COST $11,321,692,696) ................................................ 11,773,295,400
------------------
ZERO COUPON BONDS/STEP-UP BONDS 12.1%
Alameda Corridor Transportation Authority Revenue, Series 1999 A-Capital Appreciation Bonds,
10/01/31 ......................................................................... 15,500,000 3,366,135
Anaheim PFA, Lease Revenue, Capital Appreciation, Public Improvements Project,
Series C, FSA Insured,
9/01/24 ........................................................................ 26,855,000 8,866,984
9/01/26 ........................................................................ 29,430,000 8,623,873
9/01/27 ........................................................................ 22,860,000 6,334,506
9/01/28 ........................................................................ 8,425,000 2,207,182
9/01/29 ........................................................................ 4,320,000 1,069,805
9/01/32 ........................................................................ 13,665,000 2,854,892
9/01/33 ........................................................................ 37,070,000 7,315,023
Anaheim Public Financing Authority Lease Revenue, Capital Appreciation, Public
Improvement Projects, Series C, FSA Insured, 9/01/34 ............................. 12,485,000 2,333,571
Anaheim UHSD, GO, Capital Appreciation, Series A, FSA Insured, 8/01/26 ............ 8,570,000 2,522,494
Baldwin Park RDA, Tax Allocation, San Gabriel, Refunding, Series A, ETM,
2/01/04 ........................................................................ 575,000 572,838
2/01/05 ........................................................................ 585,000 575,400
Beaumont USD, COP, Series A, FSA Insured, 1/01/29 ................................. 6,835,000 7,109,767
California Community College Financing Authority Lease Revenue, AMBAC Insured,
6/01/33 .......................................................................... 5,500,000 1,084,380
California Educational Facilities Authority Revenue,
Loyola Marymount University, MBIA Insured, 10/01/32 ............................ 8,435,000 1,650,983
Loyola Marymount University, MBIA Insured, 10/01/33 ............................ 8,435,000 1,547,991
Loyola Marymount University, MBIA Insured, 10/01/34 ............................ 8,435,000 1,451,326
Loyola Marymount University, MBIA Insured, 10/01/35 ............................ 8,435,000 1,360,734
Loyola Marymount University, MBIA Insured, 10/01/36 ............................ 8,435,000 1,275,794
Loyola Marymount University, MBIA Insured, 10/01/37 ............................ 8,435,000 1,196,167
Loyola Marymount University, MBIA Insured, 10/01/38 ............................ 8,435,000 1,121,518
Loyola Marymount University, MBIA Insured, 10/01/39 ............................ 8,435,000 1,051,507
Loyola Marymount University, Refunding, MBIA Insured, 10/01/26 ................. 7,620,000 2,222,906
Loyola Marymount University, Refunding, MBIA Insured, 10/01/27 ................. 7,365,000 2,031,709
Loyola Marymount University, Refunding, MBIA Insured, 10/01/28 ................. 4,120,000 1,074,537
Loyola Marymount University, Refunding, MBIA Insured, 10/01/30 ................. 5,685,000 1,324,548
Loyola Marymount University, Refunding, MBIA Insured, 10/01/31 ................. 7,615,000 1,676,442
Loyola Marymount University, Refunding, MBIA Insured, 10/01/32 ................. 7,615,000 1,583,692
Santa Clara University, AMBAC Insured, 9/01/26 ................................. 5,800,000 1,699,574
California Health Facilities Financing Authority Revenue, Kaiser Permanente, Series A,
ETM, 10/01/11 .................................................................... 13,970,000 9,864,776
Semiannual Report | 43
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
ZERO COUPON BONDS/STEP-UP BONDS (CONT.)
California HFAR,
AMT, Home Mortgage, Series K, MBIA Insured, 2/01/33 ............................ $ 28,950,000 $ 5,019,351
Capital Appreciation, Home Mortgage, Series T, MBIA Insured, 8/01/32 ........... 12,040,000 2,393,070
Home Mortgage, Capital Appreciation, Series A, 8/01/16 ......................... 575,000 164,456
Home Mortgage, Series N, AMBAC Insured, 8/01/31 ................................ 47,580,000 32,304,441
Home Mortgage, Series Q, AMBAC Insured, 2/01/33 ................................ 37,010,000 7,056,697
Series B, FSA Insured, 8/01/31 ................................................. 11,500,000 2,459,850
Series E, MBIA Insured, 2/01/21 ................................................ 9,500,000 3,717,920
Series E, MBIA Insured, 2/01/32 ................................................ 29,535,000 5,677,513
Series G, 8/01/22 .............................................................. 52,350,000 17,654,514
Series G, 2/01/33 .............................................................. 16,375,000 2,820,430
California State GO,
Principal Eagles II, Series 3, 3/01/09 ......................................... 7,500,000 6,333,075
Principal Eagles II, Series 4, 6/01/06 ......................................... 10,000,000 9,519,300
Principal Eagles II, Series 6, 3/01/09 ......................................... 5,000,000 4,222,050
Principal M-Raes, Series 8, 4/01/09 ............................................ 9,000,000 7,600,410
California Statewide CDA Revenue, COP, Insured Hospital, Triad Health Care, Refunding, ETM,
8/01/09 ........................................................................ 6,450,000 5,428,643
8/01/10 ........................................................................ 6,745,000 5,376,102
8/01/11 ........................................................................ 3,115,000 2,363,195
Campbell USD, Series B, FGIC Insured,
8/01/20 ........................................................................ 5,000,000 2,188,750
8/01/21 ........................................................................ 6,280,000 2,572,225
Contra Costa County COP, Merrithew Memorial Hospital Project, ETM, 11/01/15 ....... 6,810,000 4,083,344
Contra Costa Home Mortgage Finance Authority HMR,
Mandatory Sinking Fund 3/01/08, MBIA Insured, Pre-Refunded, 9/01/17 ............ 9,635,000 2,961,606
Mandatory Sinking Fund 3/01/09, MBIA Insured, Pre-Refunded, 9/01/17 ............ 8,615,000 2,815,124
Mandatory Sinking Fund 3/01/10, MBIA Insured, Pre-Refunded, 9/01/17 ............ 7,700,000 2,685,144
Mandatory Sinking Fund 9/01/08, MBIA Insured, Pre-Refunded, 9/01/17 ............ 8,095,000 2,596,552
Mandatory Sinking Fund 9/01/09, MBIA Insured, Pre-Refunded, 9/01/17 ............ 7,135,000 2,427,612
Mandatory Sinking Fund 9/01/10, MBIA Insured, Pre-Refunded, 9/01/17 ............ 6,275,000 2,275,566
MBIA Insured, Pre-Refunded, 9/01/17 ............................................ 10,770,000 3,069,989
Contra Costa School Financing Authority Revenue, Capital Appreciation, Antioch USD
Community, Series B, 9/01/07 ..................................................... 640,000 548,582
Covina-Valley USD, GO, Capital Appreciation, Election of 2001, Series B, FGIC Insured,
6/01/25 ........................................................................ 3,130,000 986,920
6/01/26 ........................................................................ 3,265,000 969,640
6/01/27 ........................................................................ 5,265,000 1,478,623
6/01/28 ........................................................................ 5,505,000 1,461,743
El Paso de Robles GO, Capital Appreciation, Series A, FGIC Insured,
8/01/16 ........................................................................ 2,050,000 1,084,348
8/01/22 ........................................................................ 11,485,000 4,158,604
8/01/27 ........................................................................ 11,495,000 3,090,086
Elk Grove USD, Special Tax, Capital Appreciation, CFD 1, MBIA Insured,
12/01/19 ....................................................................... 2,775,000 1,239,260
12/01/20 ....................................................................... 2,765,000 1,151,512
12/01/21 ....................................................................... 4,195,000 1,631,016
12/01/22 ....................................................................... 4,195,000 1,519,681
44 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
ZERO COUPON BONDS/STEP-UP BONDS (CONT.)
Elk Grove USD, Special Tax, Capital Appreciation, CFD 1, MBIA Insured, (cont.)
12/01/23 ....................................................................... $ 4,195,000 $ 1,407,716
12/01/24 ....................................................................... 4,200,000 1,313,256
12/01/25 ....................................................................... 6,355,000 1,868,751
12/01/26 ....................................................................... 6,355,000 1,756,458
12/01/27 ....................................................................... 6,355,000 1,657,702
12/01/28 ....................................................................... 6,355,000 1,564,156
Foothill-De Anza Community College District GO,
Capital Appreciation, MBIA Insured, 8/01/27 .................................... 5,205,000 1,448,760
MBIA Insured, 8/01/26 .......................................................... 5,290,000 1,557,059
Foothill/Eastern Corridor Agency Toll Road Revenue,
Capital Appreciation, Refunding, 1/15/25 ....................................... 57,000,000 15,637,950
Capital Appreciation, Refunding, 1/15/30 ....................................... 98,460,000 19,682,154
Capital Appreciation, Refunding, 1/15/31 ....................................... 14,635,000 2,715,671
Capital Appreciation, Refunding, 1/15/34 ....................................... 100,000,000 15,418,000
Capital Appreciation, Refunding, 1/15/36 ....................................... 182,160,000 24,822,943
Capital Appreciation, Refunding, 1/15/38 ....................................... 160,560,000 19,339,452
Capital Appreciation, Refunding, MBIA Insured, 1/15/21 ......................... 51,180,000 18,055,792
Capital Appreciation, Refunding, MBIA Insured, 1/15/37 ......................... 170,615,000 21,859,194
Capital Appreciation, Refunding, zero cpn. to 7/15/09, 5.80% thereafter, 1/15/20 49,500,000 34,301,520
Capital Appreciation, Refunding, zero cpn. to 7/15/09, 5.875% thereafter, 1/15/27 80,835,000 54,951,633
Capital Appreciation, Refunding, zero cpn. to 7/15/09, 5.875% thereafter, 1/15/28 80,500,000 54,665,940
Capital Appreciation, Refunding, zero cpn. to 7/15/09, 5.875% thereafter, 1/15/29 112,230,000 76,137,954
Capital Appreciation, senior lien, Series A, ETM, 1/01/22 ...................... 30,835,000 12,391,045
Capital Appreciation, senior lien, Series A, ETM, 1/01/23 ...................... 5,765,000 2,183,148
Capital Appreciation, senior lien, Series A, ETM, 1/01/24 ...................... 72,045,000 25,584,620
Capital Appreciation, senior lien, Series A, ETM, 1/01/28 ...................... 2,000,000 562,660
Convertible Capital Appreciation, Refunding, 1/15/23 ........................... 10,000,000 6,883,200
Convertible Capital Appreciation, Refunding, 1/15/26 ........................... 30,000,000 20,580,600
Convertible Capital Appreciation, Refunding, 1/15/32 ........................... 100,000,000 17,445,000
Convertible Capital Appreciation, Refunding, 1/15/33 ........................... 132,460,000 21,723,440
Convertible Capital Appreciation, Refunding, 1/15/35 ........................... 20,000,000 2,899,000
Convertible Capital Appreciation, senior lien, Series A, ETM, zero cpn. to 1/01/05,
7.05% thereafter, 1/01/09 ..................................................... 10,000,000 11,219,300
Convertible Capital Appreciation, senior lien, Series A, Pre-Refunded, zero cpn. to
1/01/05, 7.15% thereafter, 1/14-Jan ........................................... 5,500,000 6,370,155
Senior lien, Series A, ETM, 1/01/25 ............................................ 20,660,000 6,842,179
Senior lien, Series A, ETM, 1/01/26 ............................................ 23,475,000 7,348,614
Senior lien, Series A, ETM, 1/01/27 ............................................ 15,000,000 4,466,700
Senior lien, Series A, ETM, 1/01/29 ............................................ 35,310,000 9,381,161
Senior lien, Series A, Pre-Refunded, 1/01/12 ................................... 8,000,000 9,247,920
Glendale Community College District GO, FGIC Insured, 8/01/28 ..................... 15,000,000 3,947,400
Huntington Beach City and School District, Capital Appeciation, Election 2002, Series A,
FGIC Insured, 8/01/28 ............................................................ 10,005,000 2,632,916
Lodi Electric Systems Revenue COP, Capital Appreciation Bond, Series B, MBIA Insured,
1/15/19 .......................................................................... 6,360,000 3,021,890
Los Angeles Convention and Exhibition Center Authority COP, Series 1985, ETM,
12/01/05 ......................................................................... 26,750,000 25,983,345
Semiannual Report | 45
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
ZERO COUPON BONDS/STEP-UP BONDS (CONT.)
Modesto High School District Stanislaus County GO, Capital Appreciation, Series A,
FGIC Insured,
8/01/21 ........................................................................ $ 9,660,000 $ 3,956,639
8/01/23 ........................................................................ 10,815,000 3,840,731
5/01/27 ........................................................................ 12,770,000 3,602,417
New Haven USD, GO, Capital Appreciation, Series C, FGIC Insured, 8/01/23 .......... 14,700,000 5,022,696
Palmdale CRDA, Tax Allocation, Merged Project, sub. lien, AMBAC Insured, zero cpn. to
12/01/04, 5.50% thereafter, 12/01/29 ............................................. 3,255,000 3,176,196
Pasadena Special Tax CFD, No. 1 Civic Center West, Pre-Refunded, 12/01/17 ......... 4,090,000 1,795,101
Perris SFMR, Series A, GNMA Secured, ETM, 6/01/23 ................................. 19,095,000 7,080,617
Pittsburg RDA Tax Allocation, Los Medanos Community Development Project, AMBAC
Insured, 8/01/29 ................................................................. 9,145,000 2,274,819
Rancho Water District Financing Authority Revenue, AMBAC Insured,
8/15/16 ........................................................................ 8,605,000 4,853,822
8/15/17 ........................................................................ 13,605,000 7,231,466
8/15/18 ........................................................................ 13,605,000 6,799,779
Rialto USD, GO, Series A, FGIC Insured, 6/01/19 ................................... 13,985,000 6,633,085
Riverside County Asset Leasing Corp. Leasehold Revenue, Riverside County Hospital Project,
MBIA Insured,
6/01/23 ........................................................................ 14,160,000 5,024,251
6/01/24 ........................................................................ 13,005,000 4,264,600
Riverside County Board of Education COP, Capital Appreciation Financing Projects,
Series A, 11/01/05 ............................................................... 905,000 854,374
Riverside County SFMR, Capital Appreciation Mortgage,
Series A, GNMA Secured, ETM, 9/01/14 ........................................... 20,220,000 13,138,956
Series A, GNMA Secured, ETM, 11/01/20 .......................................... 25,055,000 10,708,256
Series B, GNMA Secured, ETM, 6/01/23 ........................................... 26,160,000 9,516,223
Rocklin USD, GO,
Capital Appreciation, Series A, FGIC Insured, 9/01/08 .......................... 3,660,000 3,242,723
Capital Appreciation, Series A, FGIC Insured, 9/01/09 .......................... 4,100,000 3,448,305
Capital Appreciation, Series A, FGIC Insured, 9/01/10 .......................... 4,595,000 3,644,892
Capital Appreciation, Series A, FGIC Insured, 9/01/11 .......................... 5,145,000 3,864,667
Capital Appreciation, Series A, FGIC Insured, 9/01/12 .......................... 5,760,000 4,064,832
Capital Appreciation, Series A, FGIC Insured, 9/01/16 .......................... 33,960,000 19,117,782
Election of 2002, FGIC Insured, 8/01/25 ........................................ 8,160,000 2,550,245
Election of 2002, FGIC Insured, 8/01/26 ........................................ 8,695,000 2,559,286
Election of 2002, FGIC Insured, 8/01/27 ........................................ 9,080,000 2,527,327
Election of 2002, FGIC Insured, 8/01/28 ........................................ 16,615,000 4,372,403
Roseville City School District GO, Capital Appreciation, Series A,
8/01/11 ........................................................................ 3,115,000 2,311,112
8/01/17 ........................................................................ 30,770,000 15,291,152
Roseville Joint UHSD, Capital Appreciation, Series A,
8/01/10 ........................................................................ 1,820,000 1,433,214
8/01/11 ........................................................................ 1,965,000 1,463,493
8/01/17 ........................................................................ 18,155,000 9,013,776
46 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
ZERO COUPON BONDS/STEP-UP BONDS (CONT.)
San Diego USD, GO, Capital Appreciation Bond, Series A, FGIC Insured,
7/01/21 ........................................................................ $ 12,160,000 $ 5,001,408
7/01/22 ........................................................................ 8,440,000 3,242,057
7/01/23 ........................................................................ 11,120,000 3,966,282
San Francisco City and County RDA, Lease Revenue, George R. Moscone Center,
Capital Appreciation,
7/01/05 ........................................................................ 12,820,000 12,449,117
7/01/06 ........................................................................ 11,320,000 10,730,002
7/01/07 ........................................................................ 4,570,000 4,174,832
7/01/08 ........................................................................ 7,785,000 6,829,236
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, senior lien,
ETM, 1/01/25 ................................................................... 5,700,000 1,907,391
ETM, 1/01/28 ................................................................... 33,545,000 9,549,255
ETM, 1/01/29 ................................................................... 37,050,000 9,965,339
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, senior lien, (cont.)
Refunding, Series A, 1/15/16 ................................................... 19,500,000 15,242,955
Refunding, Series A, 1/15/17 ................................................... 17,000,000 13,080,310
Refunding, Series A, 1/15/18 ................................................... 60,000,000 45,879,600
Refunding, Series A, 1/15/19 ................................................... 57,000,000 43,609,560
Refunding, Series A, 1/15/20 ................................................... 80,000,000 60,778,400
Refunding, Series A, 1/15/22 ................................................... 90,000,000 66,976,200
Refunding, Series A, 1/15/23 ................................................... 80,000,000 59,339,200
Refunding, Series A, 1/15/24 ................................................... 80,000,000 59,155,200
San Jose USD, COP, Refunding, FSA Insured,
1/01/27 ........................................................................ 7,105,000 2,040,485
1/01/29 ........................................................................ 7,105,000 1,823,782
San Juan USD, GO, Election of 1998, Series B, MBIA Insured,
8/01/26 ........................................................................ 15,825,000 4,657,930
8/01/27 ........................................................................ 18,605,000 5,178,516
8/01/28 ........................................................................ 19,470,000 5,123,725
San Mateo UHSD, GO, Capital Appreciation Election of 2000, Series B, FGIC Insured,
9/01/22 ........................................................................ 5,000,000 1,904,400
Santa Maria Water and Wastewater Revenue, COP, Series A, AMBAC Insured, 8/01/27 ... 21,000,000 20,724,900
Southern California Public Power Authority Power Project Revenue, Refunding, Series A,
AMBAC Insured, 7/01/11 ......................................................... 12,000,000 9,068,280
7/01/12 ........................................................................ 16,890,000 11,997,305
7/01/13 ........................................................................ 16,000,000 10,722,400
Stockton East Water District COP,
1990 Project, Series B, ETM, 4/01/05 ........................................... 28,575,000 83,453,288
Refunding, Series B, 4/01/16 ................................................... 103,885,000 55,370,705
Suisun City PFA Tax Allocation Revenue, Capital Appreciation Redevelopment Project,
Series A, 10/01/28 ............................................................... 17,855,000 4,382,153
Thousand Oaks SFHMR, Capital Appreciation, Series A, GNMA Secured, 9/01/23 ........ 16,000 44,192
------------------
TOTAL ZERO COUPON BONDS/STEP-UP BONDS (COST $1,582,874,086) ....................... 1,652,001,994
------------------
TOTAL LONG TERM INVESTMENTS (COST $12,904,566,782) ................................ 13,425,297,394
------------------
Semiannual Report | 47
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS 1.1%
b California State Department of Water Resources Power Supply Revenue,
Series B-5, Daily VRDN and Put, 1.15%, 5/01/22 ................................. $ 3,000,000 $ 3,000,000
Series B-6, Daily VRDN and Put, 1.20%, 5/01/22 ................................. 5,500,000 5,500,000
b Irvine 1915 Act, Special Assessment,
AD No. 00-18, Series A, Daily VRDN and Put, 1.20%, 9/02/26 ..................... 7,700,000 7,700,000
AD No. 94-13, Daily VRDN and Put, 1.20%, 9/02/22 ............................... 3,416,000 3,416,000
AD No. 97-13, Daily VRDN and Put, 1.20%, 9/02/23 ............................... 1,400,000 1,400,000
b Irvine Ranch Water District GO, No. 105, 140, 240 and 250, Daily VRDN and Put, 1.15%,
1/01/21 .......................................................................... 13,300,000 13,300,000
b Irvine Ranch Water District Revenue,
Consolidated Bonds, Refunding, Series B, Daily VRDN and Put, 1.23%, 10/01/09 ... 5,250,000 5,250,000
Consolidated District No. 105, 250 and 290, Daily VRDN and Put, 1.20%, 8/01/16 . 1,000,000 1,000,000
Joint Powers Agency, Consolidated Bonds, DATES, Series C, Daily VRDN and Put,
1.20%, 10/01/10 ............................................................... 3,500,000 3,500,000
b Los Angeles Water and Power Revenue, Sub Series B-2, Weekly VRDN and Put,
1.20%, 7/01/35 ................................................................... 12,250,000 12,250,000
b Metropolitan Water District Southern California Waterworks Revenue,
Refunding, Series B-1, Daily VRDN and Put, 1.20%, 7/01/35 ...................... 26,150,000 26,150,000
Series C-1, Daily VRDN and Put, 1.19%, 7/01/36 ................................. 21,725,000 21,725,000
Series C-2, Daily VRDN and Put, 1.10%, 7/01/36 ................................. 21,860,000 21,860,000
b Newport Beach Revenue, Hoag Memorial Presbyterian Hospital, Series C, Daily VRDN and
Put, 1.23%, 10/01/26 ............................................................. 2,700,000 2,700,000
b Orange County Sanitation Districts COP, Refunding,
Series A, Daily VRDN and Put, 1.20%, 8/01/29 ................................... 9,090,000 9,090,000
Series B, Daily VRDN and Put, 1.20%, 8/01/30 ................................... 9,800,000 9,800,000
------------------
TOTAL SHORT TERM INVESTMENTS (COST $147,641,000) .................................. 147,641,000
------------------
TOTAL INVESTMENTS (COST $13,052,207,782) 99.0% .................................... 13,572,938,394
OTHER ASSETS, LESS LIABILITIES 1.0% ............................................... 141,223,974
------------------
NET ASSETS 100.0% ................................................................. $ 13,714,162,368
------------------
<FN>
a See Note 6 regarding defaulted securities.
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.
</FN>
48 | See notes to financial statements. | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2003 (UNAUDITED) (CONTINUED)
GLOSSARY OF TERMS
1915 ACT - Improvement Bond Act of 1915
ABAG - The Association of Bay Area Governments
AD - Assessment District
AMBAC - American Municipal Bond Assurance Corp.
BART - Bay Area Rapid Transit
CDA - Community Development Authority/Agency
CFD - Community Facilities District
CHFCLP - California Health Facilities Construction Loan Program
COP - Certificate of Participation
CRDA - Community Redevelopment Authority/Agency
CSAC - County Supervisors Association of California
DATES - Demand Adjustable Tax-Exempt Securities
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FNMA - Federal National Mortgage Association
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Authority/Agency
HFAR - Housing Finance Authority/Agency Revenue
HFR - Home Financial Revenue
HMR - Home Mortgage Revenue
ID - Improvement District
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investors Assurance Corp.
MBS - Mortgage-Backed Securities
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
MFR - Multi-Family Revenue
MTA - Metropolitan Transit Authority
MUD - Municipal Utility District
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
PFA - Public Financing Authority
PFAR - Public Financing Authority Revenue
PUD - Public Utility District
RDA - Redevelopment Authority/Agency
RDAR - Redevelopment Agency Revenue
RMR - Residential Mortgage Revenue
SFHMR - Single Family Home Mortgage Revenue
SFM - Single Family Mortgage
SFMR - Single Family Mortgage Revenue
UHSD - Unified High School District
USD - Unified School District
Semiannual Report | 49
Franklin California Tax-Free Income Fund
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2003 (unaudited)
Assets:
Investments in securities:
Cost ............................................................................. $13,052,207,782
---------------
Value ............................................................................ 13,572,938,394
Cash ............................................................................. 2,904,233
Receivables:
Capital shares sold .............................................................. 5,571,488
Interest ......................................................................... 171,169,123
---------------
Total assets ................................................................. 13,752,583,238
---------------
Liabilities:
Payables:
Investment securities purchased .................................................. 9,843,263
Capital shares redeemed .......................................................... 17,882,567
Affiliates ....................................................................... 7,526,582
Shareholders ..................................................................... 3,095,522
Other liabilities ................................................................. 72,936
---------------
Total liabilities ............................................................ 38,420,870
---------------
Net assets, at value ....................................................... $13,714,162,368
---------------
Net assets consist of:
Undistributed net investment income ............................................... $ 28,148,459
Net unrealized appreciation (depreciation) ........................................ 520,730,612
Accumulated net realized gain (loss) .............................................. 303,083
Capital shares .................................................................... 13,164,980,214
---------------
Net assets, at value ............................................................... $13,714,162,368
---------------
50 | Semiannual Report
Franklin California Tax-Free Income Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
September 30, 2003 (unaudited)
CLASS A:
Net assets, at value ............................................................. $12,791,485,476
---------------
Shares outstanding ............................................................... 1,784,582,855
---------------
Net asset value per sharea ....................................................... $7.17
---------------
Maximum offering price per share (Net asset value per share / 95.75%) ............ $7.49
---------------
CLASS B:
Net assets, at value ............................................................. $ 391,346,621
---------------
Shares outstanding ............................................................... 54,652,698
---------------
Net asset value and maximum offering price per sharea ............................ $7.16
---------------
CLASS C:
Net assets, at value ............................................................. $ 517,499,013
---------------
Shares outstanding ............................................................... 72,290,088
---------------
Net asset value per sharea ....................................................... $7.16
---------------
Maximum offering price per share (Net asset value per share / 99%) ............... $7.23
---------------
ADVISOR CLASS:
Net assets, at value ............................................................. $ 13,831,258
---------------
Shares outstanding ............................................................... 1,931,535
---------------
Net asset value and maximum offering price per share ............................. $7.16
---------------
<FN>
a Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
</FN>
Semiannual Report | See notes to financial statements. | 51
Franklin California Tax-Free Income Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the six months ended September 30, 2003 (unaudited)
Investment income:
Interest ...................................................................... $ 382,260,531
--------------
Expenses:
Management fees (Note 3) ...................................................... 31,389,690
Distribution fees (Note 3)
Class A ...................................................................... 5,532,889
Class B ...................................................................... 1,313,695
Class C ...................................................................... 1,752,779
Transfer agent fees (Note 3) .................................................. 1,883,048
Custodian fees ................................................................ 57,986
Reports to shareholders ....................................................... 246,827
Registration and filing fees .................................................. 47,697
Professional fees ............................................................. 74,949
Directors' fees and expenses .................................................. 66,871
Other ......................................................................... 433,755
--------------
Total expenses ........................................................... 42,800,186
--------------
Net investment income .................................................. 339,460,345
--------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments ..................................... 25,926,042
Net unrealized appreciation (depreciation) on investments ..................... (179,098,597)
--------------
Net realized and unrealized gain (loss) ........................................ (153,172,555)
--------------
Net increase (decrease) in net assets resulting from operations ................ $ 186,287,790
--------------
52 | See notes to financial statements. | Semiannual Report
Franklin California Tax-Free Income Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
for the six months ended September 30, 2003(unaudited)
and the year ended March 31, 2003
-----------------------------------
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 2003 MARCH 31, 2003
-----------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ............................................................ $ 339,460,345 $ 692,320,881
Net realized gain (loss) from investments ........................................ 25,926,042 (6,502,457)
Net unrealized appreciation (depreciation) on investments ........................ (179,098,597) 405,596,258
-----------------------------------
Net increase (decrease) in net assets resulting from operations .............. 186,287,790 1,091,414,682
Distributions to shareholders from:
Net investment income:
Class A ......................................................................... (314,597,966) (661,377,957)
Class B ......................................................................... (8,510,840) (15,911,485)
Class C ......................................................................... (11,328,775) (22,257,958)
Advisor Class ................................................................... (296,104) (418,817)
Net realized gains:
Class A ......................................................................... -- (54,587,523)
Class B ......................................................................... -- (1,463,744)
Class C ......................................................................... -- (2,055,421)
Advisor Class ................................................................... -- (29,533)
-----------------------------------
Total distributions to shareholders ............................................... (334,733,685) (758,102,438)
Capital share transactions: (Note 2)
Class A ......................................................................... (447,092,425) 45,990,498
Class B ......................................................................... (6,212,228) 85,056,403
Class C ......................................................................... (14,968,137) 63,053,201
Advisor Class ................................................................... 3,779,654 8,054,186
-----------------------------------
Total capital share transactions .................................................. (464,493,136) 202,154,288
Net increase (decrease) in net assets ........................................ (612,939,031) 535,466,532
Net assets:
Beginning of period ............................................................... 14,327,101,399 13,791,634,867
-----------------------------------
End of period ..................................................................... $13,714,162,368 $14,327,101,399
-----------------------------------
Undistributed net investment income included in net assets:
End of period ..................................................................... $ 28,148,459 $ 23,421,799
-----------------------------------
Semiannual Report | See notes to financial statements. | 53
Franklin California Tax-Free Income Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin California Tax-Free Income Fund (the Fund) is registered under the
Investment Company Act of 1940 as a diversified, open-end investment company.
The Fund seeks to provide tax-free income. The following summarizes the Fund's
significant accounting policies.
A. SECURITY VALUATION
Tax-free bonds generally trade in the over-the-counter market and are valued
within the range of the latest quoted bid and asked prices. In the absence of a
sale or reported bid and asked prices, information with respect to bond and note
transactions, quotations from bond dealers, market transactions in comparable
securities, and various relationships between securities are used to determine
the value of the security. The Fund may utilize a pricing service, bank or
broker/dealer experienced in such matters to perform any of the pricing
functions under procedures approved by the Board of Directors. Securities for
which market quotations are not readily available are valued at fair value as
determined by management in accordance with procedures established by the Board
of Directors.
B. INCOME TAXES
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute substantially all of its taxable income.
C. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Bond discount and
premium are amortized on a yield to maturity basis. Distributions to
shareholders are recorded on the ex-dividend date.
Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
D. 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.
E. GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liability arising out of the performance of their
duties to the Fund. Additionally, in the normal course of business, the Fund
enter into contracts with service providers that contain general indemnification
clauses. The Fund's maximum exposure under these arrangements is unknown as this
would involve future claims that may be made against the Fund that have not yet
occurred. However, based on experience the Fund expects the risk of loss to be
remote.
54 | Semiannual Report
Franklin California Tax-Free Income Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST
The Fund offers four classes of shares: Class A, Class B, Class C, and Advisor
Class. 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.
At September 30, 2003, there were five billion shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:
---------------------------------------------------------------------
SIX MONTH ENDED YEAR ENDED
SEPTEMBER 30, 2003 MARCH 31, 2003
---------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------
CLASS A SHARES:
Shares sold ................... 65,287,388 $ 470,363,271 167,312,490 $1,205,385,749
Shares issued in reinvestment
of distributions ............. 21,418,423 153,793,552 47,730,322 342,821,510
Shares redeemed ............... (149,320,839) (1,071,249,248) (208,368,553) (1,502,216,761)
---------------------------------------------------------------------
Net increase (decrease) ....... (62,615,028) $ (447,092,425) 6,674,259 $ 45,990,498
---------------------------------------------------------------------
CLASS B SHARES:
Shares sold ................... 3,907,263 $ 28,243,725 14,731,939 $ 106,052,670
Shares issued in reinvestment
of distributions ............. 793,850 5,695,714 1,562,114 11,211,294
Shares redeemed ............... (5,629,463) (40,151,667) (4,472,770) (32,207,561)
---------------------------------------------------------------------
Net increase (decrease) ....... (928,350) $ (6,212,228) 11,821,283 $ 85,056,403
---------------------------------------------------------------------
CLASS C SHARES:
Shares sold ................... 6,333,593 $ 45,728,271 17,491,215 $ 126,020,261
Shares issued in reinvestment
of distributions ............. 1,005,971 7,217,331 2,218,614 15,920,546
Shares redeemed ............... (9,502,786) (67,913,739) (10,960,455) (78,887,606)
---------------------------------------------------------------------
Net increase (decrease) ....... (2,163,222) $ (14,968,137) 8,749,374 $ 63,053,201
---------------------------------------------------------------------
ADVISOR CLASS SHARES:
Shares sold ................... 849,523 $ 6,103,179 2,561,501 $ 18,470,939
Shares issued in reinvestment
of distributions ............. 28,109 201,573 47,443 341,548
Shares redeemed ............... (358,611) (2,525,098) (1,498,419) (10,758,301)
---------------------------------------------------------------------
Net increase (decrease) ....... 519,021 $ 3,779,654 1,110,525 $ 8,054,186
---------------------------------------------------------------------
3. TRANSACTIONS WITH AFFILIATES
Certain officers and directors of the Fund are also officers and/or directors of
Franklin Advisers, Inc. (Advisers), Franklin/Templeton Distributors, Inc.
(Distributors), Franklin/Templeton Investor Services, Inc. (Investor Services),
and Franklin Templeton Services, Inc. (FT Services), the Fund's investment
manager, principal underwriter, transfer agent, and administrative manager,
respectively.
Semiannual Report | 55
Franklin California Tax-Free Income Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
The Fund pays an investment management fee to Advisers based on the net assets
of the Fund as follows:
- ---------------------------------------------------------------------------
ANNUALIZED FEE RATE MONTH-END NET ASSETS
- ---------------------------------------------------------------------------
.625% First $100 million
.500% Over $100 million, up to and including $250 million
.450% Over $250 million, up to and including $10 billion
.440% Over $10 billion, up to and including $12.5 billion
.420% Over $12.5 billion, up to and including $15 billion
.400% Over $15 billion, up to and including $17.5 billion
Fees are further reduced on net assets over $17.5 billion.
Under an agreement with Advisers, FT Services provides administrative services
to the Fund. The fee is paid by Advisers based on average daily net assets, and
is not an additional expense of the Fund.
The Fund reimburses Distributors up to .10%, .65%, and .65% per year of the
average daily net assets of Class A, Class B, and Class C, respectively, for
costs incurred in marketing the Fund's shares.
Distributors paid net commissions on sales of the Fund's shares, and received
contingent deferred sales charges for the period of $748,406 and $519,629,
respectively.
The Fund paid transfer agent fees of $1,883,048, of which $1,608,714 was paid to
Investor Services.
4. INCOME TAXES
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of defaulted securities and bond discounts.
Net realized gains differ for financial statement and tax purposes primarily due
to differing treatments of wash sales, bond workout expenditures, bond
discounts, and losses realized subsequent to October 31 on sale of securities.
At March 31, 2003, the Fund had deferred capital losses occurring subsequent to
October 31, 2002 of $25,301,110. For tax purposes, such losses will be reflected
in the year ending March 31, 2004.
56 | Semiannual Report
Franklin California Tax-Free Income Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
4. INCOME TAXES (CONTINUED)
At September 30, 2003, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
Investments at cost ................................... $13,041,526,196
---------------
Unrealized appreciation ............................... 748,550,703
Unrealized depreciation ............................... (217,138,505)
---------------
Net unrealized appreciation (depreciation) ............ $ 531,412,198
---------------
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended September 30, 2003 aggregated $1,143,668,576 and $1,831,495,843,
respectively.
6. CREDIT RISK, DEFAULTED SECURITIES
The Fund held defaulted securities for which the income has been deemed
uncollectible. The Fund discontinues accruing income on these securities and
provides an estimate for losses on interest receivable. At September 30, 2003,
the value of these securities was $33,480,851 representing .24% of the Fund's
net assets. For information as to specific securities, see the accompanying
Statement of Investments.
Semiannual Report | 57
Franklin California Tax-Free Income Fund
PROXY VOTING POLICIES AND PROCEDURES
The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group.
58 | Semiannual Report
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This page intentionally left blank.
Literature Request
For a brochure and prospectus, which contains more complete information,
including charges and expenses, call Franklin Templeton Investments at
1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before
investing or sending money. To ensure the highest quality of service, telephone
calls to or from our service departments may be monitored, recorded and
accessed. These calls can be identified by the presence of a regular beeping
tone.
FRANKLIN TEMPLETON INVESTMENTS
INTERNATIONAL
Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund
GLOBAL
Franklin Global Aggressive Growth Fund
Franklin Global Growth Fund
Mutual Discovery Fund
Templeton Capital Accumulator Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II 1
VALUE
Franklin Balance Sheet Investment Fund 2
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 3
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Shares Fund
BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund 4
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Franklin Technology Fund
Mutual Financial Services Fund
ASSET ALLOCATION
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund 5
Franklin's AGE High Income Fund
Franklin Federal Money Fund 5, 6
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust 7
Franklin Income Fund
Franklin Money Fund 5, 6
Franklin Short-Intermediate
U.S. Government Securities Fund 5
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
TAX-FREE INCOME8
Double Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 9
Tax-Exempt Money Fund 5, 6
STATE-SPECIFIC TAX-FREE INCOME8
Alabama
Arizona
California 10
Colorado
Connecticut
Florida 10
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 9
Michigan 9
Minnesota 9
Missouri
New Jersey
New York 10
North Carolina
Ohio 9
Oregon
Pennsylvania
Tennessee
Virginia
VARIABLE INSURANCE PRODUCTS FUNDS
Franklin Templeton Variable Insurance
Products Trust 11
1. The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.
2. The fund is only open to existing shareholders as well as select retirement
plans.
3. Effective June 30, 2003, the fund reopened to all new investors.
4. Upon reaching approximately $350 million in assets, the fund will close to
all investors.
5. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
6. No assurance exists that the fund's $1.00 per share price will be maintained.
It is possible to lose money by investing in the fund.
7. 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.
8. For investors subject to the alternative minimum tax, a small portion of
these dividends may be taxable. Distributions of capital gains are generally
taxable.
9. Portfolio of insured municipal securities.
10. These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA) and
limited-term, intermediate-term and money market portfolios (CA and NY).
11. The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
09/03 Not part of the semiannual report
[LOGO]
FRANKLIN[R] TEMPLETON[R] One Franklin Parkway
INVESTMENTS San Mateo, CA 94403-1906
WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
Eligible shareholders can sign up for eDelivery at
franklintempleton.com. See inside for details.
SEMIANNUAL REPORT AND SHAREHOLDER LETTER
FRANKLIN CALIFORNIA
TAX-FREE INCOME FUND
INVESTMENT MANAGER
Franklin Advisers, Inc.
DISTRIBUTOR
Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com
SHAREHOLDER SERVICES
1-800/632-2301
This report must be preceded or accompanied by the current Franklin California
Tax-Free Income Fund prospectus, which contains more complete information
including charges, expenses and risks.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
112 S2003 11/03
Item 2. Code of Ethics.
(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 10(a), the Registrant is attaching as an exhibit a copy of
its code of ethics that applies to its principal executive officers financial
and accounting officer.
Item 3. Audit Committee Financial Expert.
(a)(1) The registrant has an audit committee financial expert serving on its
audit committee.
(2) The audit committee financial experts are Edith E. Holiday and Harris J.
Ashton and they are "independent" as defined under the relevant Securities and
Exchange Commission Rules and Releases.
Item 4. Principal Accountant Fees and Services. N/A
Item 5. Audit Committee of Listed Registrants. N/A
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. N/A
Item 9. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(b) Changes in Internal Controls. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
Item 10. Exhibits.
(A) Code of Ethics for Principal Executive and Senior Financial Officers.
(B)(1) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Kimberley H. Monasterio, Chief Financial Officer
(B(2) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Kimberley H. Monasterio, Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date November 28, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date November 28, 2003
By /s/Kimberley H. Monasterio
Chief Financial Officer
Date November 28, 2003