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 811-02790
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FRANKLIN CALIFORNIA TAX-FREE INCOME FUND, INC.
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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)
CRAIG S. TYLE, 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
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ITEM 1. REPORTS TO STOCKHOLDERS.
[GRAPHIC OMITTED]
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SEPTEMBER 30, 2005
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SEMIANNUAL REPORT AND SHAREHOLDER LETTER TAX-FREE INCOME
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WANT TO RECEIVE
THIS DOCUMENT
FASTER VIA EMAIL?
FRANKLIN CALIFORNIA
TAX-FREE INCOME FUND Eligible shareholders can
sign up for eDelivery at
franklintempleton.com.
See inside for details.
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[LOGO](R)
FRANKLIN TEMPLETON
INVESTMENTS
FRANKLIN o Templeton o Mutual Series
FRANKLIN TEMPLETON INVESTMENTS
GAIN FROM OUR PERSPECTIVE(R)
Franklin Templeton's distinct multi-manager
structure combines the specialized expertise
of three world-class investment management
groups--Franklin, Templeton and Mutual
Series.
SPECIALIZED EXPERTISE Each of our portfolio management groups
operates autonomously, relying on its own
research and staying true to the unique
investment disciplines that underlie its
success.
FRANKLIN. Founded in 1947, Franklin is a
recognized leader in fixed income investing
and also brings expertise in growth- and
value-style U.S. equity investing.
TEMPLETON. Founded in 1940, Templeton
pioneered international investing and, in
1954, launched what has become the industry's
oldest global fund. Today, with offices in
over 25 countries, Templeton offers investors
a truly global perspective.
MUTUAL SERIES. Founded in 1949, Mutual Series
is dedicated to a unique style of value
investing, searching aggressively for
opportunity among what it believes are
undervalued stocks, as well as arbitrage
situations and distressed securities.
TRUE DIVERSIFICATION Because our management groups work
independently and adhere to different
investment approaches, Franklin, Templeton
and Mutual Series funds typically have
distinct portfolios. That's why our funds can
be used to build truly diversified allocation
plans covering every major asset class.
RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with
exceptional risk-adjusted returns over the
long term, as well as the reliable, accurate
and personal service that has helped us
become one of the most trusted names in
financial services.
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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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[GRAPHIC OMITTED]
Not part of the semiannual report
CONTENTS
SHAREHOLDER LETTER ........................................................ 1
SPECIAL FEATURE:
Understanding Interest Rates .............................................. 4
SEMIANNUAL REPORT
Franklin California Tax-Free Income Fund .................................. 7
Performance Summary ...................................................... 13
Your Fund's Expenses ...................................................... 16
Financial Highlights and Statement of Investments ......................... 18
Financial Statements ...................................................... 50
Notes to Financial Statements ........................................... 54
Shareholder Information ................................................... 61
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SEMIANNUAL REPORT
FRANKLIN CALIFORNIA
TAX-FREE INCOME FUND
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin California Tax-Free Income Fund
seeks to provide as high a level of income exempt from federal and California
personal income taxes as is consistent with prudent investment management and
preservation of capital by investing at least 80% of its total assets in
securities that pay interest free from such taxes.(1)
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CREDIT QUALITY BREAKDOWN*
Franklin California Tax-Free Income Fund
Based on Total Long-Term Investments as of 9/30/05**
AAA ...................................... 49.4%
AA ....................................... 4.6%
[PIE CHART] A ........................................ 15.7%
BBB ...................................... 19.0%
Below Investment Grade ................... 6.7%
Not Rated by S&P ......................... 4.6%
* Standard & Poor's (S&P) is the primary independent rating agency; Moody's
and Fitch are the secondary and tertiary rating agencies. Securities not
rated by an independent rating agency are assigned comparable internal
ratings. Ratings for securities not rated by S&P are in the table below.
** Does not include short-term investments and other net assets.
RATINGS MOODY'S FITCH INTERNAL
AAA or Aaa 1.1% 0.1% 0.5%
AA or Aa 0.1% -- --
A 0.2% -- 0.2%
BBB or Baa 0.8% 0.1% 1.1%
Below Investment Grade -- -- 0.4%
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Total 2.2% 0.2% 2.2%
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We are pleased to bring you Franklin California Tax-Free Income Fund's
semiannual report for the period ended September 30, 2005.
(1) For investors subject to alternative minimum tax, a small portion of Fund
dividends may be taxable. Distributions of capital gains are generally
taxable.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 22.
Semiannual Report | 7
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PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
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PERFORMANCE OVERVIEW
Because bond yield and price move in opposite directions, as municipal bond
yields fell, bond prices rose for the six-month reporting period. The Fund's
Class A share price, as measured by net asset value, increased from $7.27 on
March 31, 2005, to $7.34 on September 30, 2005. The Fund's Class A shares paid
dividends totaling 16.77 cents per share for the same period.2 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 4.33%, based on an annualization of
September's 2.77 cent per share dividend and the maximum offering price of $7.67
on September 30, 2005. An investor in the 2005 maximum combined federal and
California income tax bracket of 41.05% would need to earn a distribution rate
of 7.34% 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
California's large and diverse economy showed healthy signs of sustained growth.
A wide variety of industries including professional services, education, health
services, trade and manufacturing powered the state's economy. Southern
California's economy gained momentum, helped by a new defense buildup. Some
signs indicated a high-technology turnaround, which could benefit northern
California. The state's employment picture improved, recording job gains every
month during the reporting period. As of September 2005, the unemployment rate
was 5.1%, the same as the national rate.(3)
(2) All Fund distributions will vary depending upon current market conditions,
and past distributions are not indicative of future trends.
(3) Source: Bureau of Labor Statistics.
8 | Semiannual Report
DIVIDEND DISTRIBUTIONS(2)
4/01/05-9/30/05
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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 2.80 cents 2.46 cents 2.45 cents 2.85 cents
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May 2.80 cents 2.46 cents 2.45 cents 2.85 cents
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June 2.80 cents 2.46 cents 2.45 cents 2.85 cents
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July 2.80 cents 2.46 cents 2.45 cents 2.86 cents
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August 2.80 cents 2.46 cents 2.45 cents 2.85 cents
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September 2.77 cents 2.42 cents 2.42 cents 2.83 cents
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TOTAL 16.77 CENTS 14.72 CENTS 14.67 CENTS 17.09 CENTS
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Despite economic improvement and healthy tax revenue increases, California
continued to face major structural deficit problems in fiscal year 2005. Deficit
financing bonds eased immediate liquidity pressures, but difficult taxation or
cost-cut decisions will likely be necessary in the long run to reconcile the
large mismatch between ongoing revenues and expenditures. The fiscal year 2005
budget was balanced with the help of a $3.8 billion amnesty tax windfall, of
which an estimated 90% is likely to be refunded through fiscal year 2007, from
corporations and other taxpayers prepaying contested taxes to avoid substantial
penalties.(4) The state's progressive income tax structure has contributed to
often volatile revenues, but it has the potential for strong revenue performance
if personal income picks up following positive trends in capital gains and stock
option taxes. A November special election has been called to consider several
state finance-related voter initiatives that would grant the governor special
budget-cutting powers and could reduce large projected deficits.
Based on the state's elimination of near-term liquidity pressures with bond
issuance and the amnesty tax windfall, independent credit rating agency Standard
& Poor's assigned California's general obligation bonds an A rating with a
stable outlook.(5) Overall debt levels went up but are expected to stay
manageable. The state's financial picture remained uncertain with continuing
fiscal structural issues.
(4) Source: Standard & Poor's, "State Review: California," RATINGSDIRECT,
9/12/05.
(5) This does not indicate Standard & Poor's rating of the Fund.
Semiannual Report | 9
MUNICIPAL BOND MARKET OVERVIEW
For the six-month period ended September 30, 2005, the fixed income markets
continued to deliver positive performance despite record high oil prices, fears
of inflation, concerns about the dollar, mixed economic releases, and the
aftermath of Hurricanes Katrina and Rita. The U.S. Treasury market continued
to experience strong support from foreign buyers seeking relatively higher
yields. Municipal bonds, which have domestic tax advantages, outperformed U.S.
Treasury bonds, as the Lehman Brothers Municipal Bond Index returned +2.80% for
the period, while the Lehman Brothers U.S. Treasury Index returned +2.47%.(6)
During the reporting period, short-term interest rates steadily increased while
long-term interest rates experienced some volatility. The Federal Reserve Board
remained on track and raised the federal funds target rate from 2.75% to 3.75%
in four successive moves during the period under review. The Treasury yield
curve, which illustrates rates for Treasuries with short to long maturities,
flattened somewhat as short-term rates went up and longer-maturity Treasury
rates declined. Over the six-month period, the 10-year Treasury bond yield
decreased 16 basis points (100 basis points equal one percentage point), while
the 30-year Treasury bond yield decreased 21 basis points. The 10-year Treasury
yielded 4.34% and the 30-year Treasury yielded 4.57% on September 30, 2005.
According to Municipal Market Data, 10-year municipal bond yields decreased 11
basis points while 30-year yields decreased 14 basis points.(7) Consequently,
long-maturity municipal bonds continued to outperform intermediates.
(6) Source: Standard & Poor's Micropal. The Lehman Brothers Municipal Bond
Index is a market value-weighted index engineered for the long-term
tax-exempt bond market. All bonds included have a minimum credit rating of
at least Baa. They must have an outstanding par value of at least $5
million and be issued as part of a transaction of at least $50 million.
The bonds must be dated after 12/31/90, and must be at least one year from
their maturity date. Remarketed issues, taxable municipal bonds, bonds
with floating rates and derivatives are excluded from the index. The index
has four main bond sectors: general obligation, revenue, insured and
prerefunded. The Lehman Brothers U.S. Treasury Index includes public
obligations of the U.S. Treasury with a remaining maturity of one year or
more. All issues must have at least one year to final maturity regardless
of call features, have at least $250 million par amount outstanding and
be rated investment grade (Baa3 or better). They must also be dollar
denominated, nonconvertible and publicly issued. The index excludes
Treasury bills (because of the maturity constraint), flower bonds,
targeted investor notes (TINs), and state and local government series
(SLGS) bonds, STRIPS and Treasury Inflation-Protected Securities (TIPS).
(7) Source: Thomson Financial.
10 | Semiannual Report
Motivated by the relatively low interest environment, municipalities sought to
refinance existing debt or borrow for capital improvement, which resulted in
rising issuance during the reporting period. Just as homebuyers seek the lowest
mortgage rates, municipalities borrow money when interest rates are low. Thus,
over the past two years, municipalities have issued more bonds to lock in lower
rates. Municipalities issued $310 billion in new debt year-to-date in 2005.(8)
Demand for municipal bonds remained strong as investors found municipal bonds
offered attractive taxable equivalent yields. Healthy demand came from a wide
range of traditional buyers including mutual funds, individuals and property
and casualty companies, as well as crossover buyers. Crossover buyers typically
invest in taxable securities, but they enter the tax-exempt market when
municipal valuations are attractive.
INVESTMENT STRATEGY
We use a consistent, disciplined strategy to maximize income for our
shareholders by seeking to maintain exposure to higher coupon securities. We
generally employ a buy-and-hold approach and invest in securities that we
believe should provide the most relative value in the market. As we invest
throughout different interest rate environments, our portfolio becomes well
diversified with a broad range of coupons, calls and maturities. This broad
diversification may help mitigate interest rate risk. We generally stay fully
invested to maximize income distribution.
MANAGER'S DISCUSSION
The mixture of our value-oriented philosophy of investing primarily for income
and a relatively steep municipal yield curve compared to Treasuries favored the
use of longer-term bonds. Consistent with our strategy, we sought to remain
fully invested in bonds that ranged from 15 to 30 years in maturity with good
call features. We intend to maintain our conservative, buy-and-hold investment
strategy as we attempt to provide shareholders with high, current, tax-free
income.
PORTFOLIO BREAKDOWN
9/30/05
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% OF TOTAL
LONG-TERM INVESTMENTS*
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Transportation 20.9%
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Prerefunded 20.4%
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Hospital & Health Care 13.4%
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General Obligation 12.7%
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Utilities 10.3%
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Subject to Government Appropriations 7.0%
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Tax-Supported 6.0%
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Other Revenue 4.4%
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Higher Education 3.1%
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Housing 1.8%
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* Does not include short-term investments and other net assets.
(8) Source: THE BOND BUYER.
Semiannual Report | 11
Thank you for your participation in Franklin California Tax-Free Income Fund. We
look forward to serving your future investment needs.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF SEPTEMBER 30, 2005, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT
OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, STATE,
INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE, BUT THE ADVISER 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 9/30/05
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 reinvestment of the Fund's dividends
and capital gain distributions, if any, and any unrealized gains or losses.
PRICE AND DISTRIBUTION INFORMATION
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CLASS A (SYMBOL: FKTFX) CHANGE 9/30/05 3/31/05
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Net Asset Value (NAV) +$0.07 $7.34 $7.27
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DISTRIBUTIONS (4/1/05-9/30/05)
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Dividend Income $0.1677
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Long-Term Capital Gain $0.0024
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TOTAL $0.1701
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CLASS B (SYMBOL: FCABX) CHANGE 9/30/05 3/31/05
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Net Asset Value (NAV) +$0.07 $7.33 $7.26
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DISTRIBUTIONS (4/1/05-9/30/05)
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Dividend Income $0.1472
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Long-Term Capital Gain $0.0024
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TOTAL $0.1496
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CLASS C (SYMBOL: FRCTX) CHANGE 9/30/05 3/31/05
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Net Asset Value (NAV) +$0.07 $7.33 $7.26
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DISTRIBUTIONS (4/1/05-9/30/05)
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Dividend Income $0.1467
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Long-Term Capital Gain $0.0024
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TOTAL $0.1491
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ADVISOR CLASS (SYMBOL: FCAVX) CHANGE 9/30/05 3/31/05
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Net Asset Value (NAV) +$0.07 $7.33 $7.26
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DISTRIBUTIONS (4/1/05-9/30/05)
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Dividend Income $0.1709
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Long-Term Capital Gain $0.0024
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TOTAL $0.1733
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Semiannual Report | 13
PERFORMANCE SUMMARY (CONTINUED)
PERFORMANCE
CLASS A: 4.25% MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES
CHARGE (CDSC) DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER;
CLASS C: 1% CDSC IN FIRST YEAR ONLY. CUMULATIVE TOTAL RETURN EXCLUDES SALES
CHARGES. AVERAGE ANNUAL TOTAL RETURN INCLUDES MAXIMUM SALES CHARGES.
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CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return(1) +3.32% +6.40% +34.47% +75.92%
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Average Annual Total Return(2) -1.03% +1.89% +5.19% +5.35%
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Distribution Rate(3) 4.33%
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Taxable Equivalent Distribution Rate(4) 7.34%
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30-Day Standardized Yield(5) 3.62%
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Taxable Equivalent Yield(4) 6.14%
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CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99)
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Cumulative Total Return(1) +3.04% +5.82% +30.59% +34.26%
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Average Annual Total Return(2) -0.96% +1.82% +5.16% +4.46%
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Distribution Rate(3) 3.96%
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Taxable Equivalent Distribution Rate(4) 6.72%
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30-Day Standardized Yield(5) 3.21%
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Taxable Equivalent Yield(4) 5.44%
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CLASS C 6-MONTH 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return(1) +3.03% +5.81% +30.78% +66.13%
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Average Annual Total Return(2) +2.03% +4.81% +5.51% +5.21%
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Distribution Rate(3) 3.96%
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Taxable Equivalent Distribution Rate(4) 6.72%
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30-Day Standardized Yield(5) 3.21%
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Taxable Equivalent Yield(4) 5.44%
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ADVISOR CLASS(6) 6-MONTH 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return(1) +3.37% +6.51% +34.76% +76.30%
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Average Annual Total Return(2) +3.37% +6.51% +6.15% +5.83%
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Distribution Rate(3) 4.63%
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Taxable Equivalent Distribution Rate(4) 7.85%
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30-Day Standardized Yield(5) 3.87%
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Taxable Equivalent Yield(4) 6.56%
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PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN.
FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.
14 | Semiannual Report
PERFORMANCE SUMMARY (CONTINUED)
ENDNOTES
MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO INTEREST RATE MOVEMENTS;
THEREFORE, THE FUND'S YIELD AND SHARE PRICE WILL FLUCTUATE WITH MARKET
CONDITIONS. BOND PRICES GENERALLY MOVE IN THE OPPOSITE DIRECTION FROM INTEREST
RATES. THUS, AS PRICES OF BONDS IN THE FUND ADJUST TO A RISE IN INTEREST RATES,
THE FUND'S SHARE PRICE MAY DECLINE. SINCE THE FUND CONCENTRATES ITS INVESTMENTS
IN A SINGLE STATE, IT IS SUBJECT TO GREATER RISK OF ADVERSE ECONOMIC AND
REGULATORY CHANGES IN THAT STATE THAN A GEOGRAPHICALLY DIVERSIFIED FUND. THE
FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS.
CLASS B: These shares have higher annual fees and expenses than Class A
shares.
CLASS C: Prior to 1/1/04, these shares were offered with an initial
sales charge; thus actual total returns would have differed.
These shares have higher annual fees and expenses than Class A
shares.
ADVISOR CLASS: Shares are available to certain eligible investors as
described in the prospectus.
(1) Cumulative total return represents the change in value of an investment
over the periods indicated and does not include a sales charge.
(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. Six-month return has not been
annualized.
(3) Distribution rate is based on an annualization of the respective class's
September dividend and the maximum offering price (NAV for Classes B, C
and Advisor) per share on 9/30/05.
(4) Taxable equivalent distribution rate and yield assume the published rates
as of 6/3/05 for the maximum combined federal and California 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 9/30/05.
(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 +22.54% and +5.22%.
Semiannual Report | 15
YOUR FUND'S EXPENSES
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table below provides
actual account values and expenses. The "Ending Account Value" is derived from
the Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period, by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. 1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
16 | Semiannual Report
YOUR FUND'S EXPENSES (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. In addition, if transaction costs were included, your
total costs would have been higher. Please refer to the Fund prospectus for
additional information on operating expenses.
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BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 3/31/05 VALUE 9/30/05 PERIOD* 3/31/05-9/30/05
- -----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,033.20 $2.91
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Hypothetical (5% return before expenses) $1,000 $1,022.21 $2.89
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CLASS B
- -----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,030.40 $5.80
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Hypothetical (5% return before expenses) $1,000 $1,019.35 $5.77
- -----------------------------------------------------------------------------------------------------------
CLASS C
- -----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,030.30 $5.80
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Hypothetical (5% return before expenses) $1,000 $1,019.35 $5.77
- -----------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- -----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,033.70 $2.50
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Hypothetical (5% return before expenses) $1,000 $1,022.61 $2.48
- -----------------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio for each class (A:
0.57%; B: 1.14%; C: 1.14%; and Advisor: 0.49%), multiplied by the average
account value over the period, multiplied by 183/365 to reflect the
one-half year period.
Semiannual Report | 17
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------------------------
SIX MONTHS ENDED
SEPTEMBER 30, 2005 YEAR ENDED MARCH 31,
CLASS A (UNAUDITED) 2005 2004 2003 2002 2001
----------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period .... $ 7.27 $ 7.32 $ 7.24 $ 7.07 $ 7.24 $ 6.88
----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) ............. 0.17 0.34 0.35 0.35 0.37 0.37
Net realized and unrealized
gains (losses) .................... 0.07 (0.04) 0.07 0.21 (0.16) 0.36
----------------------------------------------------------------------------------------
Total from investment operations ........ 0.24 0.30 0.42 0.56 0.21 0.73
----------------------------------------------------------------------------------------
Less distributions from:
Net investment income ................ (0.17) (0.34) (0.34) (0.36) (0.37) (0.37)
Net realized gains ................... --(c) (0.01) -- (0.03) (0.01) --
----------------------------------------------------------------------------------------
Total distributions ..................... (0.17) (0.35) (0.34) (0.39) (0.38) (0.37)
----------------------------------------------------------------------------------------
Redemption fees ......................... --(c) --(c) -- -- -- --
----------------------------------------------------------------------------------------
Net asset value, end of period .......... $ 7.34 $ 7.27 $ 7.32 $ 7.24 $ 7.07 $ 7.24
========================================================================================
Total return(b) ......................... 3.32% 4.16% 6.04% 8.05% 2.87% 10.98%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ....... $ 12,519,799 $12,270,603 $12,784,815 $13,376,339 $13,016,197 $13,279,037
Ratio to average net assets:
Expenses ............................. 0.57%(d) 0.57% 0.58% 0.57% 0.57% 0.57%
Net investment income ................ 4.54%(d) 4.76% 4.80% 4.90% 5.08% 5.31%
Portfolio turnover rate ................. 5.12% 8.46% 11.57% 11.92% 13.23% 5.83%
(a) Based on average daily shares outstanding.
(b) Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
(c) Amount is less than $0.01 per share.
(d) Annualized.
18 | See notes to financial statements. | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
------------------------------------------------------------------------------
SIX MONTHS ENDED
SEPTEMBER 30, 2005 YEAR ENDED MARCH 31,
CLASS B (UNAUDITED) 2005 2004 2003 2002 2001
------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period ..... $ 7.26 $ 7.31 $ 7.23 $ 7.07 $ 7.24 $ 6.87
------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) ............... 0.15 0.30 0.30 0.31 0.33 0.33
Net realized and unrealized gains
(losses) .............................. 0.07 (0.04) 0.08 0.20 (0.16) 0.37
------------------------------------------------------------------------------
Total from investment operations ......... 0.22 0.26 0.38 0.51 0.17 0.70
------------------------------------------------------------------------------
Less distributions from:
Net investment income .................. (0.15) (0.30) (0.30) (0.32) (0.33) (0.33)
Net realized gains ..................... --(c) (0.01) -- (0.03) (0.01) --
------------------------------------------------------------------------------
Total distributions ...................... (0.15) (0.31) (0.30) (0.35) (0.34) (0.33)
------------------------------------------------------------------------------
Redemption fees .......................... --(c) --(c) -- -- -- --
------------------------------------------------------------------------------
Net asset value, end of period ........... $ 7.33 $ 7.26 $ 7.31 $ 7.23 $ 7.07 $ 7.24
==============================================================================
Total return(b) .......................... 3.04% 3.57% 5.44% 7.46% 2.15% 10.51%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ........ $348,634 $ 358,856 $ 394,728 $ 402,085 $ 309,196 $ 193,428
Ratio to average net assets:
Expenses ............................... 1.14%(d) 1.14% 1.15% 1.14% 1.14% 1.14%
Net investment income .................. 3.97%(d) 4.19% 4.23% 4.33% 4.51% 4.73%
Portfolio turnover rate .................. 5.12% 8.46% 11.57% 11.92% 13.23% 5.83%
(a) Based on average daily shares outstanding.
(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.
(c) Amount is less than $0.01 per share.
(d) Annualized.
Semiannual Report | See notes to financial statements. | 19
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
------------------------------------------------------------------------------
SIX MONTHS ENDED
SEPTEMBER 30, 2005 YEAR ENDED MARCH 31,
CLASS C (UNAUDITED) 2005 2004 2003 2002 2001
------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period ..... $ 7.26 $ 7.31 $ 7.23 $ 7.06 $ 7.23 $ 6.87
------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) ............... 0.15 0.30 0.30 0.31 0.33 0.33
Net realized and unrealized gains
(losses) .............................. 0.07 (0.04) 0.08 0.21 (0.16) 0.36
------------------------------------------------------------------------------
Total from investment operations ......... 0.22 0.26 0.38 0.52 0.17 0.69
------------------------------------------------------------------------------
Less distributions from:
Net investment income .................. (0.15) (0.30) (0.30) (0.32) (0.33) (0.33)
Net realized gains ..................... --(c) (0.01) -- (0.03) (0.01) --
------------------------------------------------------------------------------
Total distributions ...................... (0.15) (0.31) (0.30) (0.35) (0.34) (0.33)
------------------------------------------------------------------------------
Redemption fees .......................... --(c) --(c) -- -- -- --
------------------------------------------------------------------------------
Net asset value, end of period ........... 7.33 $ 7.26 $ 7.31 $ 7.23 $ 7.06 $ 7.23
==============================================================================
Total return(b) .......................... 3.03% 3.57% 5.46% 7.46% 2.29% 10.38%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ........ $ 524,977 $494,254 $ 523,545 $538,460 $464,108 $393,652
Ratio to average net assets:
Expenses ............................... 1.14%(d) 1.14% 1.15% 1.13% 1.14% 1.14%
Net investment income .................. 3.97%(d) 4.19% 4.23% 4.34% 4.52% 4.74%
Portfolio turnover rate .................. 5.12% 8.46% 11.57% 11.92% 13.23% 5.83%
(a) Based on average daily shares outstanding.
(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.
(c) Amount is less than $0.01 per share.
(d) Annualized.
20 | See notes to financial statements. | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
----------------------------------------------------------------------
SIX MONTHS ENDED
SEPTEMBER 30, 2005 YEAR ENDED MARCH 31,
ADVISOR CLASS (UNAUDITED) 2005 2004 2003 2002(e)
----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period ..... $ 7.26 $ 7.31 $ 7.23 $ 7.07 $ 7.29
----------------------------------------------------------------------
Income from investment operations:
Net investment income(a) ............... 0.17 0.35 0.35 0.36 0.19
Net realized and unrealized gains
(losses) .............................. 0.07 (0.05) 0.08 0.19 (0.24)
----------------------------------------------------------------------
Total from investment operations ......... 0.24 0.30 0.43 0.55 (0.05)
----------------------------------------------------------------------
Less distributions from:
Net investment income .................. (0.17) (0.34) (0.35) (0.36) (0.16)
Net realized gains ..................... --(c) (0.01) -- (0.03) (0.01)
----------------------------------------------------------------------
Total distributions ...................... (0.17) (0.35) (0.35) (0.39) (0.17)
----------------------------------------------------------------------
Redemption fees .......................... --(c) --(c) -- -- --
----------------------------------------------------------------------
Net asset value, end of period ........... $ 7.33 $7.26 $ 7.31 $ 7.23 $ 7.07
======================================================================
Total return(b) .......................... 3.37% 4.26% 6.13% 8.00% (0.80)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ........ $51,218 $ 42,389 $ 14,096 $ 10,217 $ 2,134
Ratio to average net assets:
Expenses ............................... 0.49%(d) 0.49% 0.50% 0.49% 0.49%(d)
Net investment income .................. 4.62%(d) 4.84% 4.88% 4.98% 5.25%(d)
Portfolio turnover rate .................. 5.12% 8.46% 11.57% 11.92% 13.23%
(a) Based on average daily shares outstanding.
(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.
(c) Amount is less than $0.01 per share.
(d) Annualized.
(e) For the period October 1, 2001 (effective date) to March 31, 2002.
Semiannual Report | See notes to financial statements. | 21
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS 97.1%
BONDS 83.2%
CALIFORNIA 75.9%
ABAG Finance Authority for Nonprofit Corps. COP,
6.125%, 3/01/21 ........................................................................... $ 4,245,000 $ 4,387,377
Butte Valley-Tulelake Rural Health, California Mortgage Insured, 6.65%, 10/01/22 .......... 810,000 812,422
Episcopal Home Foundation, Refunding, 5.125%, 7/01/13 ..................................... 6,000,000 6,212,700
Episcopal Home Foundation, Refunding, 5.125%, 7/01/18 ..................................... 20,625,000 21,156,300
Home for Jewish Parents, California Mortgage Insured, 5.625%, 5/15/22 ..................... 5,000,000 5,254,550
Lytton Gardens Inc., California Mortgage Insured, 6.00%, 2/15/30 .......................... 5,000,000 5,311,500
Odd Fellows Home, California Mortgage Insured, 6.00%, 8/15/24 ............................. 5,525,000 5,817,162
Rhoda Haas Goldman Plaza, California Mortgage Insured, 5.125%, 5/15/23 .................... 5,000,000 5,147,850
ABAG Finance Authority for Nonprofit Corps. MFHR, Palo Alto Gardens Apartments,
Series A, 5.45%, 4/01/39 ................................................................... 5,500,000 5,535,475
ABAG Finance Authority for Nonprofit Corps. Revenue, San Diego Hospital Association,
Series A, 6.125%, 8/15/20 ................................................................. 23,525,000 25,735,174
Series C, 5.375%, 3/01/21 ................................................................. 5,000,000 5,231,900
ABAG Revenue,
Mello-Roos, Refunding and Improvement, Series A, FSA Insured, 5.125%, 9/01/21 ............. 4,760,000 4,831,210
Mello-Roos, Refunding and Improvement, Series A, FSA Insured, 5.20%, 9/01/27 .............. 4,140,000 4,202,141
Tax Allocation, RDA Pool, Series A4, FSA Insured, 5.875%, 12/15/25 ........................ 1,470,000 1,493,373
Tax Allocation, RDA Pool, Series A6, FSA Insured, 5.375%, 12/15/25 ........................ 3,670,000 3,869,942
ABAG Water and Wastewater Revenue, Pooled Financing Program,
Series A, FSA Insured, 5.30%, 10/01/21 ..................................................... 5,450,000 5,880,986
Alameda Corridor Transportation Authority Revenue, senior lien,
Series A, MBIA Insured, 5.00%, 10/01/29 .................................................... 24,490,000 25,300,619
Alameda County COP, Alameda County Medical Center Project, MBIA Insured,
5.00%, 6/01/23 ............................................................................ 19,195,000 19,998,887
5.30%, 6/01/26 ............................................................................ 7,000,000 7,021,210
5.00%, 6/01/28 ............................................................................ 8,925,000 9,179,809
Alvord USD, GO, Series A, FGIC Insured, 5.375%, 8/01/27 ..................................... 6,100,000 6,257,136
Anaheim PFA, Lease Revenue, Public Improvements Project, Series A, FSA Insured, 5.00%,
9/01/27 ................................................................................... 8,900,000 9,170,382
3/01/37 ................................................................................... 100,000,000 102,555,000
Anaheim PFAR, Distribution System, second lien, MBIA Insured, 5.00%,
10/01/29 .................................................................................. 4,325,000 4,525,723
10/01/34 .................................................................................. 5,500,000 5,742,770
Anaheim UHSD, GO, Series A, FSA Insured, 5.00%, 8/01/25 ..................................... 3,900,000 4,271,943
Antioch Area Public Facilities Financing Agency Special Tax, CFD No. 1989-1,
MBIA Insured, 5.50%, 8/01/22 ............................................................... 4,870,000 5,166,486
Antioch PFA, Reassessment Revenue, sub. lien,
Refunding, Series B, 5.50%, 9/02/08 ....................................................... 1,140,000 1,173,516
Refunding, Sub Series B, 5.60%, 9/02/09 ................................................... 1,205,000 1,246,428
Series B, 5.30%, 9/02/06 .................................................................. 2,050,000 2,076,384
Arcadia Hospital Revenue, Methodist Hospital of Southern California,
6.50%, 11/15/12 ........................................................................... 2,100,000 2,109,450
6.625%, 11/15/22 .......................................................................... 3,750,000 3,767,400
Baldwin Park PFAR, Tax Allocation, Series A, 7.75%, 8/01/19 ................................. 5,120,000 5,198,438
22 | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Belmont Redwood Shores School District, Series A, 5.50%, 9/01/22 ............................ $ 6,500,000 $ 6,944,015
Beverly Hills USD, GO, Election of 2002, Series B, 5.00%, 8/01/30 ........................... 8,590,000 9,010,910
Bonita USD, GO, Election of 2004, Series A, MBIA Insured, 5.00%, 8/01/27 .................... 5,100,000 5,363,313
Brentwood 1915 Act, Infrastructure Financing, Reassessment,
Series A, FSA Insured, 5.80%, 9/02/17 ...................................................... 5,110,000 5,400,759
Burbank Parking Authority, Special Tax, CFD No. 1, 8.375%, 10/01/06 ......................... 430,000 431,634
Calexico USD, GO, Refunding, MBIA Insured, 5.25%, 8/01/33 ................................... 4,285,000 4,597,248
California Counties Lease Financing Authority COP, CSAC Financing Corp.,
Amador County Project, ETM, 7.70%, 10/01/09 ................................................. 1,630,000 1,767,702
California County Tobacco Securitization Agency Revenue, Asset-Backed,
Alameda County, 5.875%, 6/01/35 ........................................................... 7,500,000 7,967,325
Gold Country Funding Corp., 6.00%, 6/01/38 ................................................ 10,000,000 10,664,300
Golden Gate Corp., Series A, 6.00%, 6/01/43 ............................................... 10,000,000 10,646,700
Kern County Corp., Series A, 6.125%, 6/01/43 .............................................. 28,135,000 30,152,561
Kern County Corp., Series B, 6.25%, 6/01/37 ............................................... 19,460,000 21,084,521
Merced Funding Corp., Series A, 5.875%, 6/01/43 ........................................... 10,235,000 10,824,945
Sonoma County Corp., Series A, 5.875%, 6/01/43 ............................................ 30,000,000 31,729,200
Stanislaus Fund, Series A, 5.875%, 6/01/43 ................................................ 8,690,000 9,190,892
California Educational Facilities Authority Revenue,
Chapman University, Refunding, Connie Lee Insured, 5.125%, 10/01/26 ....................... 10,000,000 10,371,700
Occidental College, Series A, MBIA Insured, 5.00%, 10/01/36 ............................... 7,275,000 7,624,709
Pooled College and University, Series B, 6.75%, 6/01/30 ................................... 11,495,000 12,597,141
Stanford University, Refunding, Series O, 5.125%, 1/01/31 ................................. 21,250,000 22,131,450
Student Loan Program, Series A, MBIA Insured, 6.00%, 3/01/16 .............................. 1,495,000 1,560,541
California Health Facilities Financing Authority Revenue,
California Autism Foundation Inc., Series A, CHFCLP Insured, 6.25%, 11/01/20 .............. 3,560,000 3,639,388
Casa Colina, 6.125%, 4/01/32 .............................................................. 10,300,000 11,047,265
Catholic Healthcare West, Refunding, Series A, 5.00%, 7/01/18 ............................. 28,095,000 28,838,956
Catholic Healthcare West, Refunding, Series A, MBIA Insured, 5.75%, 7/01/15 ............... 12,500,000 13,301,625
Catholic Healthcare West, Refunding, Series A, MBIA Insured, 6.00%, 7/01/17 ............... 7,300,000 7,593,022
Catholic Healthcare West, Series A, 5.00%, 7/01/28 ........................................ 140,630,000 141,680,506
Catholic Healthcare West, Series A, MBIA Insured, 5.00%, 7/01/17 .......................... 3,520,000 3,675,021
Catholic Healthcare West, Series A, MBIA Insured, 5.125%, 7/01/24 ......................... 8,375,000 8,693,166
Catholic Healthcare West, Series A, MBIA Insured, Pre-Refunded, 5.00%, 7/01/17 ............ 1,480,000 1,562,510
Catholic Healthcare West, Series A, MBIA Insured, Pre-Refunded, 5.125%, 7/01/24 ........... 3,125,000 3,305,781
Catholic Healthcare West, Series A, Prerefunded, 5.00%, 7/01/18 ........................... 11,905,000 12,651,920
Catholic Heathcare West, Series G, 5.25%, 7/01/23 ......................................... 3,000,000 3,141,000
Cedars-Sinai Medical Center, Series A, MBIA Insured, 5.125%, 8/01/17 ...................... 8,355,000 8,758,212
Cedars-Sinai Medical Center, Series B, MBIA Insured, 5.25%, 8/01/27 ....................... 52,500,000 54,910,275
County Program, Series B, 7.20%, 1/01/12 .................................................. 2,000,000 2,011,580
El Proyecto, Series A, CHFCLP Insured, 5.50%, 12/01/22 .................................... 3,350,000 3,489,025
Enloe Health System, Series A, FSA Insured, 5.00%, 11/15/18 ............................... 5,000,000 5,265,500
Enloe Health System, Series A, FSA Insured, 5.00%, 11/15/28 ............................... 25,390,000 26,116,154
Familiesfirst, Series A, California Mortgage Insured, 6.00%, 12/01/25 ..................... 11,365,000 12,296,021
Semiannual Report | 23
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
California Health Facilities Financing Authority Revenue, (cont.)
Feedback Foundation Inc., Series A, CHFCLP Insured, 6.50%, 12/01/22 ....................... $ 2,390,000 $ 2,405,057
Hospital of the Good Samaritan, Refunding, 7.00%, 9/01/21 ................................. 71,050,000 70,306,106
Insured Health Facility Help Group, Series A, California Mortgage Insured, 6.10%,
8/01/25 ................................................................................ 12,905,000 13,916,236
Insured Health Facility-Valleycare, Series A, California Mortgage Insured, 5.25%,
5/01/22 ................................................................................ 5,000,000 5,266,350
Kaiser Permanente, Series A, ETM, 5.40%, 5/01/28 .......................................... 46,000,000 47,439,800
Kaiser Permanente, Series A, FSA Insured, 5.00%, 6/01/20 .................................. 32,295,000 34,109,333
Kaiser Permanente, Series A, FSA Insured, 5.00%, 6/01/24 .................................. 136,775,000 143,388,071
Kaiser Permanente, Series B, 5.40%, 5/01/28 ............................................... 80,000,000 82,504,000
Kaiser Permanente, Series B, ETM, 5.25%, 10/01/16 ......................................... 7,515,000 8,036,917
Kaiser Permanente, Series B, ETM, 5.00%, 10/01/18 ......................................... 38,260,000 40,342,874
Kaiser Permanente, Series B, ETM, 5.00%, 10/01/20 ......................................... 38,020,000 39,978,790
Lucile Salter Packard Hospital, Series C, AMBAC Insured, 5.00%, 8/15/26 ................... 6,000,000 6,269,220
Marshall Hospital, Series A, California Mortgage Insured, 5.30%, 11/01/28 ................. 5,500,000 5,678,310
Northern California Presbyterian, 5.40%, 7/01/28 .......................................... 6,340,000 6,424,702
Paradise Valley Estates, 5.125%, 1/01/22 .................................................. 6,610,000 6,962,511
Paradise Valley Estates, 5.25%, 1/01/26 ................................................... 5,000,000 5,241,750
Pomona Valley Hospital, Refunding, Series A, MBIA Insured, 5.625%, 7/01/19 ................ 8,500,000 9,030,315
Scripps Memorial Hospital, Series A, MBIA Insured, Pre-Refunded, 6.375%, 10/01/22 ......... 9,725,000 9,725,000
Small Facilities Loan, Health Facilities, Refunding, Series B, California Mortgage Insured,
7.50%, 4/01/22 ......................................................................... 4,155,000 4,281,644
Small Facilities Loan, Health Facilities, Series A, CHFCLP Insured, 6.75%, 3/01/20 ........ 655,000 657,771
Small Facilities Program, Refunding, Series A, FGIC Insured, 5.00%, 4/01/25 ............... 10,915,000 11,461,732
Southern California, Series A, CHFCLP Insured, 5.50%, 12/01/22 ............................ 3,070,000 3,197,405
St. Francis Medical Center, Refunding, Series H, AMBAC Insured, 6.35%, 10/01/23 ........... 7,000,000 7,170,380
Sutter Health Project, Series A, MBIA Insured, 5.35%, 8/15/28 ............................. 6,650,000 7,040,355
Sutter Health, Refunding, Series A, MBIA Insured, 5.875%, 8/15/16 ......................... 5,750,000 6,004,898
Sutter Health, Series A, FSA Insured, 5.25%, 8/15/27 ...................................... 5,300,000 5,512,000
Sutter Health, Series A, FSA Insured, 5.00%, 8/15/37 ...................................... 61,000,000 62,592,100
Sutter Health, Series A, MBIA Insured, 5.375%, 8/15/30 .................................... 10,600,000 11,104,984
The Episcopal Home, 5.30%, 2/01/32 ........................................................ 28,150,000 29,375,369
The Help Group, California Mortgage Insured, 5.40%, 8/01/22 ............................... 7,420,000 7,737,131
UCSF-Stanford Health Care, Refunding, Series A, FSA Insured, 5.00%, 11/15/31 .............. 5,750,000 5,917,843
UCSF-Stanford Health Care, Refunding, Series B, 5.00%, 11/15/31 ........................... 26,920,000 27,705,795
UCSF-Stanford Health Care, Refunding, Series B, AMBAC Insured, 5.00%, 11/15/28 ............ 25,000,000 25,752,000
Valleycare Hospital Corp., Refunding, 5.50%, 5/01/20 ...................................... 11,640,000 12,141,917
California HFA, SFM Purchase, Refunding, Series A-2, FHA Insured, 6.45%, 8/01/25 ............ 455,000 458,972
California HFAR,
MFHR II, Series A, AMBAC Insured, 6.25%, 2/01/37 .......................................... 5,000,000 5,119,150
MFHR III, Series B, MBIA Insured, 5.50%, 8/01/39 .......................................... 12,055,000 12,361,438
Series B-1, Class 1, AMBAC Insured, 5.65%, 8/01/28 ........................................ 2,685,000 2,732,686
SFM, Series C-2, Class 1, FHA Insured, 5.65%, 2/01/25 ..................................... 315,000 316,950
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 5,224,650
Bay Area Toll Bridges, first lien, Series A, FGIC Insured, 5.00%, 7/01/29 ................. 50,985,000 53,412,396
Kaiser Hospital Assistance I LLC, Series B, 5.50%, 8/01/31 ................................ 10,000,000 10,591,700
24 | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
California Infrastructure and Economic Development Bank Revenue, (cont.)
Kaiser Hospital Assistance II LLC, Series A, 5.55%, 8/01/31 ............................... $ 34,000,000 $ 36,122,280
California PCFA, PCR,
Pacific Gas and Electric, Mandatory Put 6/01/07, Refunding, Series B, FGIC Insured,
3.50%, 12/01/23 ........................................................................... 5,000,000 5,016,650
San Diego Gas and Electric Co., Series A, 5.85%, 6/01/21 .................................. 32,535,000 32,707,435
California Pollution Control Financing Authority Pollution Control Revenue,
Pacific Gas and Electric, Refunding, Series A, MBIA Insured, 7.70%, 12/01/16 ............... 31,500,000 34,083,945
California Resources Efficiency Financing Authority COP, Capital Improvement Program,
Refunding, AMBAC Insured,
5.625%, 4/01/22 ........................................................................... 10,365,000 10,953,421
5.75%, 4/01/27 ............................................................................ 7,885,000 8,344,538
California State Department of Veteran Affairs Home Purchase Revenue,
Refunding, Series A, 5.40%, 12/01/28 ...................................................... 9,580,000 9,818,925
Refunding, Series B, 5.50%, 12/01/18 ...................................................... 2,500,000 2,578,350
Series A, 5.20%, 12/01/27 ................................................................. 31,000,000 31,026,350
Series B, 5.20%, 12/01/28 ................................................................. 5,975,000 5,980,079
California State Department of Water Resources Central Valley Project Revenue, Water System,
Refunding, Series S, 5.00%, 12/01/29 ...................................................... 24,595,000 25,228,075
Refunding, Series U, 5.00%, 12/01/29 ...................................................... 12,000,000 12,283,800
Refunding, Series Y, FGIC Insured, 5.00%, 12/01/25 ........................................ 20,000,000 21,037,200
Series Q, MBIA Insured, 5.375%, 12/01/27 .................................................. 20,055,000 20,886,480
Series Q, MBIA Insured, Pre-Refunded, 5.375%, 12/01/27 .................................... 37,945,000 39,624,825
California State Department of Water Resources Central Valley Project Water System Revenue,
Series O, 5.00%, 12/01/22 .................................................................. 5,500,000 5,574,855
California State Department of Water Resources Power Supply Revenue, Series A,
5.25%, 5/01/20 ............................................................................ 50,000,000 53,995,000
5.375%, 5/01/21 ........................................................................... 22,000,000 23,862,080
5.375%, 5/01/22 ........................................................................... 34,020,000 36,838,217
California State GO,
5.00%, 2/01/22 ............................................................................ 7,000,000 7,334,390
5.25%, 9/01/23 ............................................................................ 21,000,000 22,311,660
5.25%, 10/01/23 ........................................................................... 9,250,000 9,837,005
6.00%, 5/01/24 ............................................................................ 2,565,000 2,596,447
5.125%, 4/01/25 ........................................................................... 5,000,000 5,254,450
5.00%, 2/01/27 ............................................................................ 46,000,000 47,660,140
AMBAC Insured, 5.90%, 3/01/25 ............................................................. 210,000 213,566
FGIC Insured, 6.00%, 8/01/19 .............................................................. 905,000 923,046
FGIC Insured, 5.625%, 10/01/26 ............................................................ 8,645,000 8,958,727
FGIC Insured, Pre-Refunded, 5.625%, 10/01/26 .............................................. 32,855,000 34,093,305
FSA Insured, 5.50%, 4/01/19 ............................................................... 570,000 577,336
FSA Insured, 5.50%, 3/01/20 ............................................................... 850,000 858,874
FSA Insured, Pre-Refunded, 5.50%, 9/01/29 ................................................. 30,000,000 32,952,600
MBIA Insured, 5.00%, 10/01/23 ............................................................. 5,000,000 5,190,500
MBIA Insured, 6.00%, 8/01/24 .............................................................. 990,000 1,009,741
Refunding, 5.625%, 9/01/24 ................................................................ 10,650,000 10,972,162
Refunding, 5.00%, 2/01/29 ................................................................. 13,000,000 13,447,330
Refunding, 5.25%, 2/01/29 ................................................................. 54,000,000 57,250,140
Semiannual Report | 25
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
California State GO, (cont.)
Refunding, 5.25%, 2/01/30 ................................................................. $ 30,000,000 $ 31,680,300
Refunding, 5.25%, 4/01/32 ................................................................. 10,000,000 10,561,900
Refunding, AMBAC Insured, 5.00%, 4/01/23 .................................................. 6,250,000 6,535,000
Refunding, MBIA Insured, 5.00%, 10/01/32 .................................................. 5,000,000 5,194,050
Series BR, 5.30%, 12/01/29 ................................................................ 13,000,000 13,004,810
Various Purpose, 5.125%, 4/01/24 .......................................................... 10,000,000 10,537,900
Various Purpose, 5.20%, 4/01/26 ........................................................... 17,000,000 17,991,610
Various Purpose, 5.25%, 12/01/26 .......................................................... 12,915,000 13,726,062
Various Purpose, 5.25%, 4/01/27 ........................................................... 5,000,000 5,301,950
Various Purpose, 5.25%, 4/01/29 ........................................................... 5,580,000 5,904,812
Various Purpose, 5.00%, 6/01/31 ........................................................... 55,465,000 57,658,086
Various Purpose, 5.25%, 4/01/34 ........................................................... 20,000,000 21,193,400
Various Purpose, 5.00%, 8/01/35 ........................................................... 71,545,000 74,268,718
Various Purpose, AMBAC Insured, 5.00%, 4/01/31 ............................................ 30,000,000 31,285,200
Veterans Bonds, Series BH, 5.60%, 12/01/32 ................................................ 50,060,000 50,132,086
Veterans Bonds, Series BH, FSA Insured, 5.50%, 12/01/24 ................................... 16,440,000 16,471,565
California State Local Government Finance Authority Revenue, Marin Valley, Series A,
FSA Insured, 5.85%, 10/01/27 ............................................................... 6,735,000 7,224,432
California State Public Works Board Lease Revenue,
California Science Center, Series A, 5.25%, 10/01/22 ...................................... 8,645,000 9,041,633
Department of Corrections, Corcoran II Facility, Series A, AMBAC Insured, 5.25%,
1/01/21 ................................................................................. 17,405,000 17,497,072
Department of Corrections, Series C, 5.00%, 6/01/24 ....................................... 12,225,000 12,713,878
Department of Corrections, Series C, 5.00%, 6/01/25 ....................................... 4,810,000 4,989,028
Department of Corrections, Series C, 5.25%, 6/01/28 ....................................... 25,475,000 26,926,056
Department of Justice Building, Series A, FSA Insured, 5.625%, 5/01/20 .................... 5,000,000 5,061,400
Department of Mental Health, Coalinga, Series A, 5.00%, 6/01/25 ........................... 12,000,000 12,373,440
Department of Mental Health, Coalinga, Series A, 5.125%, 6/01/29 .......................... 56,500,000 58,717,625
Trustees California State University, Refunding, Series A, 5.00%, 10/01/19 ................ 7,500,000 7,799,550
University of California, Various Projects, Refunding, Series A, 5.50%, 6/01/21 ........... 14,000,000 14,066,780
University of California, Various Projects, Refunding, Series A, 5.00%, 6/01/23 ........... 23,175,000 23,267,700
University of California, Various Projects, Series B, 5.50%, 6/01/19 ...................... 13,000,000 13,062,010
Various California Community Colleges, Refunding, Series A, 5.90%, 4/01/17 ................ 8,320,000 8,797,734
Various University of California Projects, Series D, 5.00%, 5/01/30 ....................... 37,000,000 38,629,480
California State University at Channel Islands Financing Authority Revenue,
East Campus Community, Series A, MBIA Insured, 5.00%, 9/01/31 .............................. 11,000,000 11,374,220
California State University Revenue, Systemwide,
Series A, AMBAC Insured, 5.00%, 11/01/35 .................................................. 15,000,000 15,696,450
Series A, FSA Insured, 5.00%, 11/01/29 .................................................... 10,000,000 10,446,100
(a)Series C, MBIA Insured, 5.00%, 11/01/26 ................................................... 20,970,000 22,123,979
(a)Series C, MBIA Insured, 5.00%, 11/01/29 ................................................... 22,705,000 23,859,776
(a)Series C, MBIA Insured, 5.00%, 11/01/35 ................................................... 58,000,000 60,804,880
(b)California Statewide CDA Lease Revenue, Special Facilities, United Airlines,
Series A, 5.70%, 10/01/33 .................................................................. 61,325,000 30,476,685
California Statewide CDA Revenue,
5.50%, 1/01/28 ............................................................................ 3,615,000 3,868,231
5.50%, 10/01/33 ........................................................................... 45,465,000 48,061,961
26 | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
California Statewide CDA Revenue, (cont.)
COP, CHFCLP Insured Health Facilities, Unihealth, Series A, AMBAC Insured,
Pre-Refunded, ETM, 5.75%, 10/01/25 ...................................................... $ 24,545,000 $ 28,338,430
COP, CHFCLP Insured, ETM, 5.90%, 8/01/21 .................................................. 4,000,000 4,259,840
COP, Southern California Development Corp., 6.10%, 12/01/15 ............................... 2,255,000 2,310,969
COP, Sutter Health Obligated Group, MBIA Insured, 5.50%, 8/15/22 .......................... 25,520,000 26,309,589
COP, Triad Health Care, CHFCLP Insured, Refunding, ETM, 6.25%, 8/01/06 .................... 550,000 564,652
Daughters of Charity Health, Series A, 5.25%, 7/01/24 ..................................... 6,000,000 6,236,040
Daughters of Charity Health, Series A, 5.25%, 7/01/30 ..................................... 5,000,000 5,180,900
Daughters of Charity Health, Series A, 5.25%, 7/01/35 ..................................... 5,000,000 5,161,250
Daughters of Charity Health, Series A, 5.00%, 7/01/39 ..................................... 11,000,000 11,024,420
Daughters of Charity Health, Series H, 5.25%, 7/01/25 ..................................... 4,215,000 4,374,158
East Campus Apartments LLC, Series A, 5.50%, 8/01/22 ...................................... 11,000,000 11,547,030
(a)Health Facility Adventist Health, Series A, 5.00%, 3/01/30 ................................ 6,300,000 6,458,319
(a)Health Facility Adventist Health, Series A, 5.00%, 3/01/35 ................................ 14,000,000 14,229,600
Huntington Memorial Hospital, 5.00%, 7/01/27 .............................................. 22,000,000 22,770,440
Huntington Memorial Hospital, 5.00%, 7/01/35 .............................................. 50,000,000 51,394,000
Insured Health Facility, Jewish Home, 5.50%, 11/15/33 ..................................... 20,400,000 21,915,924
Kaiser Permanente, Series A, 5.50%, 11/01/32 .............................................. 27,000,000 28,468,530
Los Angeles Orthopedic Hospital Foundation, AMBAC Insured, 5.75%, 6/01/30 ................. 10,000,000 10,522,300
Mission Community, California Mortgage Insured, 5.375%, 11/01/21 .......................... 7,670,000 8,169,087
Mission Community, California Mortgage Insured, 5.375%, 11/01/26 .......................... 9,755,000 10,340,593
Series B, 5.625%, 8/15/42 ................................................................. 51,000,000 53,736,150
Stovehaven Apartments Project, Series A, 5.875%, 7/01/32 .................................. 4,945,000 5,292,337
California Statewide CDA Water and Wastewater Revenue,
Pooled Financing Program, Series B, FSA Insured, 5.65%, 10/01/26 .......................... 5,000,000 5,470,300
Pooled Financing Project, Series A, FSA Insured, 5.25%, 10/01/24 .......................... 5,000,000 5,420,950
Pooled Financing Project, Series A, FSA Insured, 5.00%, 10/01/29 .......................... 3,000,000 3,150,630
California Statewide CDA,
COP, California Lutheran Homes, ETM, 5.75%, 11/15/15 ...................................... 5,000,000 5,222,600
COP, Catholic Healthcare West, 6.50%, 7/01/20 ............................................. 7,990,000 8,943,207
COP, Children's Hospital, Los Angeles, 5.25%, 8/15/29 ..................................... 37,685,000 38,843,060
COP, FSA Insured, 5.50%, 8/15/31 .......................................................... 9,000,000 9,709,560
COP, Kaiser Permanente, ETM, 5.30%, 12/01/15 .............................................. 32,200,000 33,374,334
COP, MBIA Insured, 5.00%, 4/01/18 ......................................................... 7,000,000 7,297,010
COP, MBIA Insured, 5.125%, 4/01/23 ........................................................ 6,000,000 6,241,740
COP, St. Joseph Health System, Refunding, 5.125%, 7/01/17 ................................. 5,000,000 5,170,400
COP, St. Joseph Health System, Refunding, 5.25%, 7/01/21 .................................. 16,250,000 16,776,825
COP, The Internext Group, 5.375%, 4/01/17 ................................................. 10,770,000 11,061,436
COP, The Internext Group, 5.375%, 4/01/30 ................................................. 67,480,000 68,004,994
MFHR, Borregas Court Project, Series J, GNMA Secured, 6.30%, 3/20/39 ...................... 7,357,000 7,915,617
MFHR, Series E, FNMA Insured, 6.40%, 6/01/28 .............................................. 8,000,000 8,176,640
Revenue, East Campus Apartments LLC, Series A, 5.625%, 8/01/34 ............................ 25,000,000 26,186,000
California Valley HFAR, Home Mortgage, MBIA Insured, 5.65%, 2/01/27 ......................... 8,440,000 8,594,452
Camarillo Community Development Commission Tax Allocation, Camarillo Corridor Project,
Refunding, AMBAC Insured, 5.00%, 9/01/36 ................................................... 7,800,000 8,112,312
Camarillo COP, Capital Improvement Corp., ETM, 7.625%, 4/01/08 .............................. 1,550,000 1,640,877
Semiannual Report | 27
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Campbell Housing Facility Revenue, San Tomas Gardens Project, Series A, 6.625%, 10/20/34 .... $ 5,615,000 $ 5,640,829
Campbell RDA, Tax Allocation, Central Campbell Redevelopment Project, Series A, 6.00%,
10/01/33 ................................................................................... 5,000,000 5,354,600
Capistrano Bay Park and Recreation District COP, Special Lease Finance, Series Q, 6.35%,
8/01/12 .................................................................................... 2,800,000 2,831,724
Capistrano University School CFD Special Tax, Number 90-2 Talega,
5.875%, 9/01/33 ........................................................................... 5,820,000 5,984,357
6.00%, 9/01/33 ............................................................................ 7,100,000 7,356,878
Centinela Valley UHSD, GO, Refunding, Series A, MBIA Insured, 5.50%, 8/01/33 ................ 15,630,000 18,122,672
Central California Joint Powers Health Financing Authority COP,
Community Hospitals of Central California,
6.00%, 2/01/20 ............................................................................ 5,000,000 5,288,100
5.625%, 2/01/21 ........................................................................... 6,750,000 7,023,983
6.00%, 2/01/30 ............................................................................ 34,960,000 36,541,940
5.75%, 2/01/31 ............................................................................ 18,070,000 18,568,732
Cerritos PFAR, Tax Allocation Redevelopment Project, Series A, AMBAC Insured, 5.00%,
11/01/22 ................................................................................... 6,675,000 7,230,427
Chaffey UHSD, GO,
Series B, FGIC Insured, 5.00%, 8/01/25 .................................................... 6,510,000 6,810,371
Series C, FSA Insured, 5.00%, 5/01/27 ..................................................... 6,980,000 7,320,345
Chico RDAR, COP, Insured Health Facilities, Sierra Sunrise Lodge,
6.80%, 2/01/11 ............................................................................ 3,000,000 3,016,800
6.75%, 2/01/21 ............................................................................ 2,800,000 2,815,596
Chula Vista COP, Cops Phase I, MBIA Insured, 5.00%, 3/01/34 ................................. 10,360,000 10,864,221
Chula Vista IDR,
Adjustment, San Diego Gas and Electric Co., Series B, 5.50%, 12/01/21 ..................... 14,000,000 14,893,340
San Diego Gas and Electric Co., Series A, 5.30%, 7/01/21 .................................. 8,500,000 9,079,275
Claremont RDA, Tax Allocation, Consolidated Redevelopment Project, Refunding., 5.50%,
8/01/23 .................................................................................... 4,950,000 5,256,257
Colton Joint USD, GO, Election of 2001, Series B, FGIC Insured, 5.00%, 8/01/27 .............. 7,000,000 7,361,410
Colusa County COP, ABAG Finance Corp., Series B, 7.00%, 2/01/18 ............................. 1,555,000 1,575,526
Commerce Joint Powers Financing Authority Lease Revenue, Community Center,
Series A, 6.25%, 10/01/22 .................................................................. 4,000,000 4,209,040
Commerce Joint Powers Financing Authority Revenue, Redevelopment Projects,
Series B, 5.125%, 8/01/35 .................................................................. 8,310,000 8,593,371
Compton COP, Civic Center and Capital Improvement, Refunding, Series A, 5.50%, 9/01/15 ...... 5,000,000 5,227,900
Compton CRDA, Tax Allocation, Series 1, FSA Insured, 6.75%, 8/01/13 ......................... 4,650,000 4,774,899
Contra Costa Community College District GO, Election 2002, FGIC Insured, 5.00%, 8/01/26 ..... 11,700,000 12,270,726
Contra Costa County COP, Merrithew Memorial Hospital Project, Refunding,
MBIA Insured, 5.50%, 11/01/22 .............................................................. 11,000,000 11,718,300
Contra Costa Transportation Authority Revenue, Sales Tax, Series A,
ETM, 6.875%, 3/01/07 ...................................................................... 9,670,000 9,985,532
FGIC Insured, ETM, 6.50%, 3/01/09 ......................................................... 1,000,000 1,075,630
Corcoran Hospital District Revenue, Series A, 6.55%, 7/01/12 ................................ 800,000 804,864
Corona COP, Corona Community Hospital Project, Pre-Refunded, 9.425%, 9/01/20 ................ 15,000,000 18,877,800
28 | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Corona Department of Water and Power COP, MBIA Insured, 5.00%,
9/01/29 ................................................................................... $ 5,910,000 $ 6,206,564
9/01/35 ................................................................................... 9,280,000 9,684,886
Corona-Norco USD,
Lease Revenue, Land Acquisition, Series A, FSA Insured, 6.00%, 4/15/29 .................... 18,435,000 18,755,400
PFA Special Tax Revenue, Series A, 5.40%, 9/01/35 ......................................... 7,140,000 7,205,045
Coronado CDA, Tax Allocation, Coronado Community Development Project, Refunding,
MBIA Insured, 5.00%, 9/01/34 ............................................................... 6,115,000 6,378,251
CSAC Finance Corp. COP, Sutter County, Health Facilities Program, 7.80%, 1/01/21 ............ 2,100,000 2,112,621
Cudahy RDA Tax Allocation, Refunding, Series C, 6.00%, 10/01/27 ............................. 6,365,000 6,762,876
Culver City USD, GO, MBIA Insured, 5.75%, 8/01/36 ........................................... 5,000,000 5,287,350
Delano University High School District GO, Refunding, Series A, MBIA Insured, 5.15%,
2/01/32 .................................................................................... 8,520,000 9,530,642
Desert Hot Springs RDA, Tax Allocation, Redevelopment Project No. 2, Series A, 6.625%,
9/01/20 .................................................................................... 1,050,000 1,055,187
Desert Sands USD, GO, Election of 2001, FSA Insured, 5.00%, 6/01/29 ......................... 16,425,000 17,223,583
Downey USD, GO, Election of 2002, Series C, FSA Insured, 5.00%, 2/01/30 ..................... 4,860,000 5,107,277
Duarte COP,
Refunding, Series A, 5.25%, 4/01/24 ....................................................... 5,000,000 5,156,100
Series A, 5.25%, 4/01/19 .................................................................. 5,000,000 5,167,550
Series A, 5.25%, 4/01/31 .................................................................. 12,500,000 12,678,250
East Bay MUD Water System Revenue, Sub Series A, MBIA Insured, 5.00%,
6/01/29 ................................................................................... 15,000,000 15,797,550
6/01/30 ................................................................................... 15,000,000 15,785,400
Eastern Municipal Water District Water and Sewer Revenue COP, Series B,
FGIC Insured, 5.00%, 7/01/30 ............................................................... 31,370,000 32,506,535
El Cajon RDA, Tax Allocation, Redevelopment Project, Refunding, AMBAC Insured, 5.35%,
10/01/22() ................................................................................. 10,285,000 10,490,700
El Camino Hospital District Revenue, Refunding, Series A, ETM, 7.25%, 8/15/09 ............... 5,640,000 6,128,480
El Centro Financing Authority Hospital Revenue, El Centro Regional Medical Center Project,
5.25%, 3/01/26 ............................................................................. 8,500,000 8,860,485
El Dorado County Special Tax, CFD No. 1992-1,
5.875%, 9/01/24 ........................................................................... 4,475,000 4,634,668
6.25%, 9/01/29 ............................................................................ 19,780,000 20,566,848
6.00%, 9/01/31 ............................................................................ 8,850,000 9,164,087
El Rancho USD, GO, Election of 2003, Series A, FGIC Insured, 5.00%, 8/01/28 ................. 5,635,000 5,909,594
Emeryville PFA Revenue, Shellmound Park Redevelopment and Housing Project, Series B,
MBIA Insured, 5.00%, 9/01/28 ............................................................... 10,000,000 10,299,500
Emeryville PFAR, Housing Increment Loan, 6.20%, 9/01/25 ..................................... 3,115,000 3,194,775
Escondido COP, Wastewater Project, Refunding, AMBAC Insured,
5.70%, 9/01/26 ............................................................................ 13,465,000 14,081,428
5.80%, 9/01/26 ............................................................................ 400,000 418,668
Florin Resource Conservation District COP, Elk Grove Water Service, Refunding, Series A,
MBIA Insured, 5.00%, 3/01/33 ............................................................... 8,715,000 9,063,949
Fontana RDA, Tax Allocation, Jurupa Hills Redevelopment Project, Refunding, Series A,
5.50%, 10/01/27 ............................................................................ 12,500,000 12,956,375
Fontana USD, GO, Convertible Capital Appreciation, Series D, FGIC Insured, 5.80%, 5/01/17 ... 5,000,000 5,571,550
Semiannual Report | 29
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Foothill/Eastern Corridor Agency Toll Road Revenue,
Convertible Capital Appreciation,
Refunding, 5.75%, 1/15/40 ................................................................. $395,510,000 $ 403,542,808
senior lien, Series A, 5.00%, 1/01/35 ..................................................... 15,955,000 15,223,463
senior lien, Series A, ETM, 7.05%, 1/01/09 ................................................ 5,500,000 6,464,975
senior lien, Series A, Pre-Refunded, 7.10%, 1/01/12 ....................................... 8,000,000 9,387,840
senior lien, Series A, Pre-Refunded, 7.15%, 1/01/14 ....................................... 10,000,000 11,234,000
senior lien, Series A, Pre-Refunded, 6.50%, 1/01/32 ....................................... 95,675,000 99,974,634
senior lien, Series A, Pre-Refunded, 6.00%, 1/01/34 ....................................... 123,695,000 128,506,735
Fortuna and Susanville Cities COP, Series B, 7.375%, 9/01/17 ................................ 1,400,000 1,423,044
Fremont GO, Election of 2002, Fire Safety Project, Series B, FGIC Insured, 5.00%, 8/01/34 ... 7,235,000 7,576,058
Fremont USD Alameda County GO, Election of 2002, Series B, FSA Insured, 5.00%, 8/01/30 ...... 10,000,000 10,530,800
Glendale USD, GO, FSA Insured, 5.00%, 9/01/29 ............................................... 8,440,000 8,860,228
Golden State Tobacco Securitization Corp. Tobacco Settlement Revenue,
Asset-Backed, Series A-3, Pre-Refunded, 5.50%, 6/01/33 .................................... 15,000,000 16,795,650
Asset-Backed, Series A-3, Pre-Refunded, 5.50%, 6/01/43 .................................... 57,000,000 63,823,470
Asset-Backed, Series B, Pre-Refunded, 5.625%, 6/01/38 ..................................... 138,000,000 155,661,240
Enhanced, Asset-Backed, Series A, 5.00%, 6/01/45 .......................................... 15,000,000 15,228,750
Series 2003 A-1, 6.75%, 6/01/39 ........................................................... 5,290,000 6,082,759
Hartnell Community College District GO, Election of 2002, Series A, MBIA Insured,
Pre-Refunded, 5.00%, 8/01/27 ............................................................... 5,020,000 5,516,729
Hawaiian Gardens RDA, Tax Allocation, Project No. 1, Refunding, ETM, 8.00%, 12/01/10 ........ 4,240,000 4,745,705
Helix Water District COP, Installment Purchase, Series A, FSA Insured, 5.25%, 4/01/24 ....... 8,925,000 9,389,457
Huntington Beach UHSD, GO, Election of 2004, FSA Insured, 5.00%,
8/01/27 ................................................................................... 3,530,000 3,699,052
8/01/29 ................................................................................... 11,000,000 11,502,150
Industry COP, Refunding, 6.625%, 6/01/06 .................................................... 3,060,000 3,093,599
Inland Empire Solid Waste Financing Authority Revenue, Landfill Improvement Financing
Project, Series B, FSA Insured,
ETM, 6.25%, 8/01/11 ....................................................................... 5,000,000 5,446,400
Pre-Refunded, 6.00%, 8/01/16 .............................................................. 5,000,000 5,222,900
Intercommunity Hospital Financing Authority COP, Northbay Healthcare System, Refunding,
5.25%, 11/01/19 ............................................................................ 10,550,000 10,885,596
Irvine 1915 Act GO,
AD No. 00-18, Group Four, 5.375%, 9/02/26 ................................................. 2,500,000 2,513,050
AD No. 03-19, Group Two, 5.45%, 9/02/23 ................................................... 2,000,000 2,023,800
AD No. 03-19, Group Two, 5.50%, 9/02/29 ................................................... 4,295,000 4,346,025
Irwindale CRDA, Tax Allocation, senior lien, Refunding, FSA Insured, 5.75%, 8/01/26 ......... 10,220,000 10,701,464
John C. Fremont Hospital District Health Facilities Revenue, 6.75%, 6/01/23 ................. 1,760,000 1,787,544
Kaweah Delta Health Care District GO, Election of 2003, MBIA Insured, 5.00%, 8/01/34 ........ 16,500,000 17,155,215
Kern County Board of Education COP, Refunding, Series A, MBIA Insured,
5.20%, 5/01/28 ............................................................................. 8,685,000 9,203,842
Kern High School District GO, Election of 1990, Series E, FGIC Insured,
5.125%, 8/01/33 ............................................................................ 5,275,000 5,611,334
30 | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
La Mirada SFMR, MBS, Series A, 7.65%, 4/01/24 ................................................. $ 270,000 $ 279,893
La Palma Community Development Commission Tax Allocation, La Palma Community
Development Project No. 1, 6.10%, 6/01/22 .................................................... 2,355,000 2,377,373
La Quinta RDA Tax Allocation Revenue, Redevelopment Project Area No. 1,
AMBAC Insured, 5.125%, 9/01/32 ............................................................... 10,825,000 11,397,642
Laguna Beach USD, CFD Special Tax No. 98-1, 5.375%, 9/01/34 ................................... 5,375,000 5,391,663
Lake Elsinore PFA, Tax Allocation Revenue,
Lake Elsinore Redevelopment Projects, Series A, FSA Insured, 5.80%, 9/01/25 ................. 6,750,000 6,775,718
Series A, 5.50%, 9/01/30 .................................................................... 15,550,000 16,033,760
Lancaster RDA, RMR, Los Angeles County, Series A, ETM, 10.125%, 9/01/16 ....................... 5,000 7,662
Lemon Grove CDA, Tax Allocation, 1998 Refunding, 5.75%, 8/01/28 ............................... 8,115,000 8,543,553
Local Medical Facilities Financing Authority COP, Insured California Health Clinic Project,
California Mortgage Insured, 7.55%, 3/01/20 .................................................. 1,715,000 1,722,855
Local Medical Facilities Financing Authority II COP, Insured California Health Clinic Project,
7.55%, 11/01/20 .............................................................................. 1,950,000 1,957,157
Local Medical Facilities Financing Authority III COP, Insured California Health Clinic Project,
6.90%, 7/01/22 ............................................................................... 1,365,000 1,373,531
Loma Linda Hospital Revenue, Loma Linda University Medical Center, Refunding, Series A,
AMBAC Insured, 6.55%, 12/01/18 ............................................................... 10,640,000 10,697,243
Long Beach Bond Finance Authority Lease Revenue, Aquarium of The South Pacific,
Refunding, AMBAC Insured, 5.00%, 11/01/26 .................................................... 20,000,000 20,944,600
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 15,607,822
Los Angeles Community College District GO, Series A, MBIA Insured, Pre-Refunded, 5.00%,
6/01/26 ...................................................................................... 69,275,000 75,540,231
Los Angeles COP, Department of Public Social Services, Series A, AMBAC Insured, 5.50%,
8/01/24 ..................................................................................... 4,000,000 4,330,680
8/01/31 ..................................................................................... 5,000,000 5,404,000
Los Angeles County COP,
Antelope Valley Courthouse, Series A, AMBAC Insured, 5.25%, 11/01/33 ........................ 8,000,000 8,560,800
Insured Health Clinic Program, Refunding, Series F, California Mortgage Insured, 5.875%,
1/01/21 .................................................................................. 7,520,000 7,861,408
Series 1992, California Mortgage Insured, 6.625%, 7/01/22 ................................... 970,000 975,936
Los Angeles County Infrastructure and Economic Development Bank Revenue,
County Department Public Social Services, AMBAC Insured, 5.00%, 9/01/35 ...................... 7,765,000 8,163,345
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 13,543,920
First Tier, Refunding, Senior Series A, MBIA Insured, 5.25%, 7/01/27 ........................ 7,840,000 8,235,371
Second Tier, MBIA Insured, Pre-Refunded, 6.00%, 7/01/26 ..................................... 9,200,000 9,507,648
Senior Series A, FSA Insured, Pre-Refunded, 5.00%, 7/01/24 .................................. 5,000,000 5,487,800
Los Angeles County Public Works Financing Authority Revenue, Multiple Capital Facilities
Project, Series B, AMBAC Insured, 5.125%, 12/01/29 ........................................... 26,905,000 28,416,523
Los Angeles County Sanitation Districts Financing Authority Revenue, Capital Projects,
Series A, MBIA Insured, 5.00%, 10/01/34 ...................................................... 7,110,000 7,451,778
Los Angeles County Transportation Commission Lease Revenue, FSA Insured, 7.375%,
12/15/06 ..................................................................................... 3,891,000 3,928,198
Semiannual Report | 31
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Los Angeles CRDA, Financing Authority Revenue, Pooled Financing, Beacon Normandie,
MFHR, Angelus Plaza Project, Refunding, Series A, 6.40%, 7/01/23 ............................ $ 5,455,000 $ 5,486,366
Series B, 6.625%, 9/01/14 ................................................................... 845,000 848,532
Tax Allocation, Series G, ETM, 6.75%, 7/01/10 ............................................... 8,060,000 8,689,970
Los Angeles Department of Airports Revenue, Ontario International Airport, Series A,
FGIC Insured, 6.00%, 5/15/26 ................................................................. 10,000,000 10,246,700
Los Angeles Harbor Department Revenue,
Refunding, Series A, AMBAC Insured, 5.00%, 8/01/25 .......................................... 15,000,000 15,613,200
Series B, 6.125%, 8/01/18 ................................................................... 24,810,000 25,622,279
Series B, 6.20%, 8/01/22 .................................................................... 59,835,000 61,829,899
Series B, 5.375%, 11/01/23 .................................................................. 7,460,000 7,653,736
Series B, MBIA Insured, 6.20%, 8/01/25 ...................................................... 35,690,000 36,879,905
Los Angeles MFHR, Refunding, Senior Series G, FSA Insured, 5.75%, 1/01/24 ..................... 610,000 610,932
Los Angeles USD,
COP, Administration Building Project, Series B, AMBAC Insured, 5.00%, 10/01/31 .............. 28,210,000 29,182,681
GO, Series A, MBIA Insured, 5.00%, 1/01/28 .................................................. 170,250,000 178,471,372
GO, Series E, AMBAC Insured, 5.00%, 7/01/30 ................................................. 75,240,000 79,205,900
Series B, FGIC Insured, Pre-Refunded, 5.00%, 7/01/23 ........................................ 5,000,000 5,313,700
Los Angeles Wastewater System Revenue,
Refunding, Series A, FGIC Insured, 5.00%, 6/01/32 ........................................... 6,000,000 6,240,540
Refunding, Series A, FSA Insured, 5.00%, 6/01/32 ............................................ 17,500,000 18,291,000
Series A, FGIC Insured, 5.00%, 6/01/28 ...................................................... 8,245,000 8,501,420
Series A, FSA Insured, 4.875%, 6/01/29 ...................................................... 34,335,000 35,226,337
Los Angeles Water and Power Revenue, Power System,
Refunding, Series A, MBIA Insured, 5.00%, 7/01/24 ........................................... 2,000,000 2,095,600
Series A, 5.25%, 7/01/24 .................................................................... 5,000,000 5,079,150
Series B, FSA Insured, 5.00%, 7/01/28 ....................................................... 10,575,000 11,085,667
Los Angeles Water and Power Revenue,
Refunding, Series A, Sub Series A-2, 5.00%, 7/01/30 ......................................... 7,000,000 7,281,820
Series A Sub Series A-2, MBIA Insured, 5.00%, 7/01/23 ....................................... 6,550,000 6,919,355
Lynwood PFA, Tax Allocation, Project Area A, Refunding, Series A, FSA Insured, 5.90%,
9/01/28 ...................................................................................... 6,470,000 7,120,882
M-S-R Public Power Agency San Juan Project Revenue, Series E, MBIA Insured, 6.00%,
7/01/22 ...................................................................................... 6,330,000 6,366,904
Madera County COP, Valley Children's Hospital, MBIA Insured,
5.00%, 3/15/23 .............................................................................. 8,500,000 8,773,020
5.75%, 3/15/28 .............................................................................. 27,500,000 28,104,450
Madera USD, COP, 6.50%, 12/01/07 .............................................................. 795,000 799,237
Madera-Chowchilla Power Authority Hydroelectric Revenue, Refunding, 8.00%, 1/01/14 ............ 1,975,000 1,965,244
Manhattan Beach COP,
Metlox Public Improvements, 5.00%, 1/01/33 .................................................. 5,575,000 5,780,049
Police and Fire Facilities Project, AMBAC Insured, 5.00%, 1/01/36 ........................... 7,125,000 7,417,268
Manteca Financing Authority Sewer Revenue, Series A, MBIA Insured, 5.00%, 12/01/33 ............ 4,770,000 4,812,310
Marysville Hospital Revenue, Fremont Rideout Health, Refunding, Series A, AMBAC Insured,
5.00%, 1/01/22 ............................................................................... 5,000,000 5,274,850
32 | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Metropolitan Water District Southern California Waterworks Revenue,
Series A, 5.00%, 7/01/26 .................................................................... $ 10,720,000 $ 11,299,845
Series A, FSA Insured, 5.00%, 7/01/35 ....................................................... 17,500,000 18,422,425
Series A, Pre-Refunded, 5.00%, 7/01/26 ...................................................... 38,605,000 40,693,144
Series B1, FGIC Insured, 5.00%, 10/01/33 .................................................... 5,000,000 5,234,500
Series C, 5.00%, 7/01/37 .................................................................... 22,450,000 22,730,849
Metropolitan Water District Water Works Revenue, Series C, Pre-Refunded, 5.00%, 7/01/37 ....... 4,330,000 4,446,087
Milpitas RDA, Tax Allocation, Redevelopment Project Area No. 1, MBIA Insured,
5.40%, 1/15/17 .............................................................................. 12,155,000 13,546,140
5.50%, 1/15/24 .............................................................................. 11,790,000 13,420,911
Milpitas USD, FGIC Insured, 5.875%, 9/01/24 ................................................... 11,970,000 13,424,116
Modesto Irrigation District COP, Refunding and Capital Improvements, Series B, 5.30%,
7/01/22 ...................................................................................... 4,315,000 4,338,733
Modesto PFA Lease Revenue, Capital Improvements and Refinancing Project,
AMBAC Insured, 5.125%, 9/01/33 ............................................................... 5,535,000 5,815,625
Modesto Schools Infrastructure Financing Agency Special Tax, AMBAC Insured, 5.20%,
9/01/37 ...................................................................................... 4,315,000 4,550,642
Mojave Water Agency COP, Supplemental Water Entitlement, MBIA Insured, 5.55%,
9/01/22 ...................................................................................... 10,005,000 10,697,746
Montebello USD, GO, Election of 2004, MBIA Insured, 5.00%, 8/01/30 ............................ 7,150,000 7,500,350
Moreno Valley Special Tax, Towngate Community Facilities 87-1, Refunding, Series A,
FSA Insured, 5.875%, 12/01/15 ................................................................ 5,830,000 5,857,693
Murrieta COP, Road Improvement Project, 6.00%, 4/01/27 ........................................ 8,600,000 8,881,306
Murrieta Valley USD, PFA, Special Tax Revenue, Series A, FGIC Insured, 5.00%, 9/01/37 ......... 6,975,000 7,254,279
Napa Housing Facility Revenue, Napa Park Apartments, Series A, GNMA Secured, 6.35%,
6/20/35 ...................................................................................... 5,230,000 5,351,022
Napa Mortgage Revenue, Creekside II Apartments Project, Refunding, Series A, MBIA Insured,
6.625%, 7/01/25 .............................................................................. 1,960,000 1,962,960
Needles PFAR, Tax Allocation, Redevelopment Project, Series A, 7.50%, 8/15/22 ................. 1,535,000 1,543,504
Norco RDA, Tax Allocation, Area No. 1, Refunding, MBIA Insured, 5.125%, 3/01/30 ............... 8,515,000 8,939,643
North City West School Facilities Financing Authority Special Tax, CFD No. 1,
Series C, AMBAC Insured, Pre-Refunded, 5.30%,
9/01/22 ..................................................................................... 10,000,000 10,580,800
9/01/27 ..................................................................................... 9,900,000 10,454,202
Northern California Power Agency Multiple Capital Facilities Revenue, Refunding, Series A,
AMBAC Insured, 5.00%, 8/01/25 ................................................................ 19,250,000 20,213,462
Northern California Public Power Agency Revenue, Hydroelectric Project No. 1, Refunding,
Series A, MBIA Insured,
5.125%, 7/01/23 ............................................................................. 7,420,000 7,829,287
5.00%, 7/01/28 .............................................................................. 15,975,000 16,525,498
5.20%, 7/01/32 .............................................................................. 43,675,000 45,934,308
Oakland Joint Powers Financing Authority Lease Revenue, Oakland Administration Buildings,
AMBAC Insured, Pre-Refunded, 5.75%, 8/01/26 .................................................. 24,895,000 25,985,899
Oakland Revenue, 1800 Harrison Foundation,
Series A, AMBAC Insured, Pre-Refunded, 6.00%, 1/01/29 ....................................... 13,825,000 15,353,077
Series B, AMBAC Insured, Pre-Refunded, 6.00%, 1/01/29 ....................................... 13,470,000 14,958,839
Semiannual Report | 33
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Oceanside USD, GO, Election of 2000, Series D, FGIC Insured, 5.00%,
8/01/29 ..................................................................................... $ 5,755,000 $ 6,039,182
8/01/33 ..................................................................................... 5,590,000 5,874,419
Olivenhain Municipal Water District 1915 Act, AD No. 96-1, MBIA Insured, 5.45%,
9/02/27 ...................................................................................... 10,870,000 11,234,471
Orange County Airport Revenue, Refunding, MBIA Insured, 5.625%, 7/01/12 ....................... 5,000,000 5,274,200
Orange County CFD Special Tax,
No. 03-1, Ladera Ranch, Series A, 5.50%, 8/15/24 ............................................ 1,100,000 1,141,107
No. 03-1, Ladera Ranch, Series A, 5.60%, 8/15/28 ............................................ 3,250,000 3,370,965
No. 03-1, Ladera Ranch, Series A, 5.625%, 8/15/34 ........................................... 5,000,000 5,177,750
No. 04-1, Ladera Ranch, Series A, 5.15%, 8/15/29 ............................................ 6,405,000 6,416,913
No. 04-1, Ladera Ranch, Series A, 5.20%, 8/15/34 ............................................ 11,000,000 11,020,350
Orange County Recovery COP, Series A, MBIA Insured, Pre-Refunded, 5.80%, 7/01/16 .............. 10,380,000 10,813,676
Orange County Water District COP, Series B, MBIA Insured, 5.00%, 8/15/28 ...................... 12,950,000 13,495,972
Orange County Water District Revenue, COP, Series B, MBIA Insured, 5.00%, 8/15/34 ............. 23,575,000 24,505,269
Oxnard Harbor District Revenue, 5.60%, 8/01/19 ................................................ 10,820,000 11,294,673
Palm Desert Financing Authority Lease Revenue, Blythe County Administrative Project,
6.625%, 8/01/26 .............................................................................. 5,020,000 5,271,151
Palm Desert Financing Authority Tax Allocation Revenue, Project Area No. 1, Refunding,
MBIA Insured, 5.625%, 4/01/23 ................................................................ 13,000,000 13,728,260
Palm Springs COP, Multiple Capital Facilities Project, Refunding, AMBAC Insured, 5.75%,
4/01/27 ...................................................................................... 11,570,000 12,247,771
Palmdale CRDA, Tax Allocation,
Merged Project, sub. lien, AMBAC Insured, 5.50%, 12/01/29 ................................... 3,255,000 3,560,775
Merged Redevelopment Project, Refunding, MBIA Insured, 5.00%, 9/01/34 ....................... 6,980,000 7,240,633
Series A, MBIA Insured, 5.75%, 9/01/27 ...................................................... 10,435,000 11,141,345
Peralta Community College District GO, Election of 2000, Series C, MBIA Insured, 5.00%,
8/01/34 ...................................................................................... 6,920,000 7,272,090
Peralta Community College GO, Election of 2000, Series C, MBIA Insured, 5.00%, 8/01/31 ........ 4,105,000 4,316,941
Perris PFAR, Tax Allocation, Series A, 5.75%, 10/01/31 ........................................ 5,000,000 5,363,250
Perris Special Tax, CFD No. 91-1, 8.75%, 9/01/21 .............................................. 5,395,000 5,457,690
Pittsburg PFA, Water Revenue, MBIA Insured, 5.50%, 6/01/27 .................................... 2,980,000 3,149,055
Pomona PFAR, Refunding, Series P, 5.75%, 10/01/15 ............................................. 6,490,000 6,619,800
Pomona RDA, Tax Allocation, Southwest Pomona Redevelopment Project, ETM, 11.45%,
1/01/07 ...................................................................................... 3,915,000 4,135,845
Port Hueneme RDA, Tax Allocation, R-76 Project, Refunding, 6.50%, 5/01/23 ..................... 2,650,000 2,657,023
Port of Oakland Revenue,
Series J, MBIA Insured, 5.50%, 11/01/26 ..................................................... 7,000,000 7,448,280
Series L, FGIC Insured, 5.375%, 11/01/27 .................................................... 5,000,000 5,296,500
Porterville COP, Infrastructure Financing Project, AMBAC Insured, 5.00%, 7/01/28 .............. 10,430,000 10,863,471
Poway COP, Royal Mobile Home Park Project, Refunding, FSA Insured,
5.875%, 8/01/15 ............................................................................. 6,250,000 6,434,063
6.00%, 8/01/20 .............................................................................. 5,400,000 5,561,190
6.00%, 8/01/28 .............................................................................. 15,000,000 15,447,750
Poway USD, GO, MBIA Insured, 5.00%, 8/01/27 ................................................... 5,020,000 5,254,434
Rancho Cordova COP, City Hall Facility Acquistion Project, XLCA Insured, 5.00%,
2/01/30 ..................................................................................... 5,085,000 5,284,383
2/01/35 ..................................................................................... 5,525,000 5,733,127
34 | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Rancho Cucamonga RDA, Tax Allocation, Rancho Redevelopment Project, Set-Aside Housing,
MBIA Insured, 5.25%, 9/01/21 ................................................................. $ 8,330,000 $ 8,659,701
Rancho Mirage Joint Powers Financing Authority Revenue, Eisenhower Medical Center,
5.625%, 7/01/34 .............................................................................. 10,000,000 10,545,900
Redlands USD,
COP, Series A, FSA Insured, 6.15%, 9/01/11 .................................................. 320,000 321,270
COP, Series A, FSA Insured, 6.25%, 9/01/27 .................................................. 3,570,000 3,584,316
GO, Election of 2002, FSA Insured, 5.00%, 7/01/28 ........................................... 9,060,000 9,552,320
Redondo Beach PFAR, Wastewater System Financing Project, Series A, MBIA Insured, 5.00%,
5/01/34 ...................................................................................... 5,060,000 5,274,696
Rialto COP, FSA Insured, 5.75%, 2/01/22 ....................................................... 2,715,000 2,862,425
Richmond Joint Powers Financing Authority Revenue, Lease, Series A, MBIA Insured, 5.00%,
2/01/26 ..................................................................................... 6,500,000 6,760,130
2/01/31 ..................................................................................... 7,000,000 7,213,570
Riverside County Asset Leasing Corp. Leasehold Revenue, Riverside County Hospital Project,
Series A, 6.50%, 6/01/12 ..................................................................... 20,125,000 22,860,390
Riverside County COP,
Capital Improvement, Family Law, Refunding, Series A, FGIC Insured, 5.00%,
11/01/30 ................................................................................... 9,905,000 10,277,824
Capital Improvement, Family Law, Refunding, Series A, FGIC Insured, 5.00%,
11/01/36 ................................................................................... 6,345,000 6,573,420
Family Law Court Project, MBIA Insured, Pre-Refunded, 5.75%, 11/01/27 ....................... 5,295,000 5,704,939
Historic Courthouse, MBIA Insured, Pre-Refunded, 5.875%, 11/01/27 ........................... 6,000,000 6,445,380
Riverside County Flood Control and Water Conservation District Elsinore Valley AD,
Zone 3, 7.875%,
9/01/06 ..................................................................................... 205,000 214,116
9/01/07 ..................................................................................... 225,000 243,502
9/01/08 ..................................................................................... 240,000 270,173
9/01/09 ..................................................................................... 260,000 300,968
9/01/10 ..................................................................................... 280,000 332,405
9/01/11 ..................................................................................... 305,000 371,621
9/01/12 ..................................................................................... 325,000 402,087
9/01/13 ..................................................................................... 350,000 442,215
9/01/14 ..................................................................................... 380,000 489,060
9/01/15 ..................................................................................... 410,000 532,602
9/01/16 ..................................................................................... 440,000 578,024
9/01/17 ..................................................................................... 475,000 620,972
Riverside County PFA Tax Allocation Revenue, Redevelopment Projects,
Refunding, Series A, 5.625%, 10/01/33 ....................................................... 7,990,000 8,282,514
Series A, Pre-Refunded, 5.625%, 10/01/33 .................................................... 3,235,000 3,386,786
Riverside County PFA, COP,
5.75%, 5/15/19 .............................................................................. 3,500,000 3,683,610
5.80%, 5/15/29 .............................................................................. 14,230,000 14,801,334
Riverside County RDA, Tax Allocation, Jurupa Valley Project Area, AMBAC Insured,
5.00%, 10/01/28 ............................................................................. 14,035,000 14,635,417
5.125%, 10/01/35 ............................................................................ 17,035,000 17,917,924
Riverside County SFMR, Series B, GNMA Secured, 7.60%, 11/01/19 ................................ 10,000 10,349
Semiannual Report | 35
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Rohnert Park HFAR, Rancho Feliz Mobile Home Park, FSA Insured, Pre-Refunded, 5.375%,
12/01/26 ..................................................................................... $ 8,380,000 $ 8,582,293
Roseville 1915 Act, North Roseville Rocklin District No. 88-3, Refunding,
8.20%, 9/02/06 .............................................................................. 160,000 166,922
8.25%, 9/02/07 .............................................................................. 180,000 188,807
8.25%, 9/02/08 .............................................................................. 190,000 199,289
8.25%, 9/02/09 .............................................................................. 160,000 167,795
Roseville Electric System Revenue COP, FSA Insured, 5.00%,
2/01/29 ..................................................................................... 10,000,000 10,435,000
2/01/34 ..................................................................................... 17,000,000 17,703,290
Sacramento 1915 Act, Special Assessment, North Natomas AD No. 88-3,
8.20%, 9/02/10 .............................................................................. 760,000 801,458
8.20%, 9/02/11 .............................................................................. 1,685,000 1,777,136
8.25%, 9/02/12 .............................................................................. 2,180,000 2,299,442
8.25%, 9/02/13 .............................................................................. 2,360,000 2,489,304
8.25%, 9/02/14 .............................................................................. 2,545,000 2,684,237
Sacramento City Financing Authority Revenue,
Capital Improvement, AMBAC Insured, 5.00%, 12/01/33 ......................................... 7,520,000 7,852,158
Capital Improvement, Series A, AMBAC Insured, Pre-Refunded, 5.00%, 12/01/32 ................. 26,250,000 28,562,362
Capital Improvements, Pre-Refunded, 5.625%, 6/01/30 ......................................... 6,000,000 6,681,720
FGIC Insured, 5.00%, 12/01/29 ............................................................... 10,290,000 10,773,527
Series 1991, 6.60%, 11/01/05 ................................................................ 1,300,000 1,303,705
Series 1991, 6.70%, 11/01/11 ................................................................ 920,000 922,824
Sacramento City USD, GO,
Election of 1999, Series B, FGIC Insured, 5.00%, 7/01/30 .................................... 5,250,000 5,500,215
Election of 2002, MBIA Insured, 5.00%, 7/01/27 .............................................. 11,810,000 12,471,006
Election of 2002, MBIA Insured, 5.00%, 7/01/30 .............................................. 9,230,000 9,716,513
Sacramento County Airport System Revenue, Series A, MBIA Insured, 5.90%, 7/01/24 .............. 6,875,000 7,150,619
Sacramento County Sanitation District Financing Authority Revenue,
AMBAC Insured, Pre-Refunded, 5.625%, 12/01/30 ............................................... 5,000,000 5,611,750
Sacramento Regional County Sanitation, Series A, AMBAC Insured, 5.00%, 12/01/35 ............. 40,000,000 41,944,000
Sanitation District 1, MBIA Insured, 5.00%, 8/01/30 ......................................... 8,000,000 8,424,640
Sanitation District 1, MBIA Insured, 5.00%, 8/01/35 ......................................... 10,000,000 10,514,500
Sacramento MUD, Electric Revenue,
Refunding, Series T, FGIC Insured, 5.00%, 5/15/30 ........................................... 9,095,000 9,528,741
Series J, AMBAC Insured, 5.60%, 8/15/24 ..................................................... 10,215,000 10,661,089
Series N, MBIA Insured, 5.00%, 8/15/28 ...................................................... 63,500,000 66,078,100
Series R, MBIA Insured, 5.00%, 8/15/33 ...................................................... 4,500,000 4,692,735
sub. lien, Refunding, 8.00%, 11/15/10 ....................................................... 16,110,000 16,209,076
Sacramento USD, COP, Refunding, MBIA Insured, 5.00%, 3/01/31 .................................. 6,000,000 6,232,680
Saddleback Valley USD, GO, FSA Insured, 5.00%,
8/01/27 ..................................................................................... 4,680,000 4,921,628
8/01/29 ..................................................................................... 4,335,000 4,549,062
Salida Area Public Facilities Financing Agency CFD, Special Tax, No. 1988-1, Refunding,
FSA Insured, 5.25%, 9/01/28 .................................................................. 6,800,000 7,174,408
San Bernardino County COP, Medical Center Financing Project,
Refunding, 5.00%, 8/01/26 ................................................................... 13,045,000 13,090,005
Series A, MBIA Insured, 5.50%, 8/01/22 ...................................................... 40,830,000 41,885,864
36 | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
San Bernardino County Housing Authority MFMR,
Sequoia Plaza Mobil Home, GNMA Secured, 6.75%, 4/20/41 ...................................... $ 6,920,000 $ 7,695,524
Series A, GNMA Secured, 6.70%, 3/20/43 ...................................................... 3,345,000 3,768,109
San Bernardino Joint Powers Financing Authority Lease Revenue, City Hall Project,
Refunding, MBIA Insured, 5.70%, 1/01/23 ...................................................... 6,315,000 6,640,665
San Bernardino Joint Powers Financing Authority Revenue, Tax Allocation, Refunding,
Series A, FSA Insured, 5.75%, 10/01/25 ....................................................... 19,915,000 20,313,300
San Diego County COP, MBIA Insured, 5.00%, 8/15/28 ............................................ 24,000,000 24,829,680
San Diego County Water Authority Revenue COP, Series A, MBIA Insured, 5.00%, 5/01/25 .......... 12,440,000 12,997,312
San Diego County Water Authority Water Revenue COP, Series A, FSA Insured, 5.00%,
5/01/34 ...................................................................................... 106,705,000 111,573,949
San Diego Public Facilities Financing Authority Sewer Revenue,
Series A, FGIC Insured, 5.25%, 5/15/27 ...................................................... 21,750,000 22,643,707
Series B, FGIC Insured, 5.25%, 5/15/22 ...................................................... 5,200,000 5,422,872
San Diego Public Facilities Financing Authority Water Revenue,
MBIA Insured, 5.00%, 8/01/26 ................................................................ 12,210,000 12,731,977
Subordinated, MBIA Insured, 5.00%, 8/01/32 .................................................. 20,000,000 20,759,000
San Diego RDA, Tax Allocation, Horton Project, Refunding, Series A, FSA Insured, 6.00%,
11/01/15 ..................................................................................... 5,000,000 5,257,650
San Diego USD, GO,
Election of 1998, Series B, MBIA Insured, 5.00%, 7/01/25 .................................... 6,975,000 7,452,997
Election of 1998, Series D, FGIC Insured, 5.00%, 7/01/27 .................................... 16,000,000 17,289,120
Election of 1998, Series E, FSA Insured, 5.00%, 7/01/28 ..................................... 10,000,000 10,860,300
Series C, FSA Insured, 5.00%, 7/01/26 ....................................................... 6,490,000 7,091,104
San Francisco BART District Sales Tax Revenue, FGIC Insured, Pre-Refunded, 5.50%,
7/01/34 ...................................................................................... 11,790,000 12,908,046
San Francisco City and County Airport Commission International Airport Revenue,
Issue 12A, Second Series, 5.90%, 5/01/26 .................................................... 45,000,000 46,080,000
Issue 16A, Second Series, FSA Insured, 5.125%, 5/01/23 ...................................... 24,635,000 25,405,583
Refunding, Second Series-28A, MBIA Insured, 5.125%, 5/01/32 ................................. 26,290,000 27,290,860
Refunding, Series 28B, MBIA Insured, 5.00%, 5/01/27 ......................................... 5,050,000 5,253,313
Second Series, Issue 23B, FGIC Insured, 5.125%, 5/01/30 ..................................... 10,000,000 10,464,300
San Francisco City and County COP, 30 Van Ness Avenue Property, Series A, MBIA Insured,
5.00%, 9/01/31 ............................................................................... 5,805,000 6,043,237
San Francisco City and County RDA, Hotel Tax Revenue, FSA Insured, 6.75%, 7/01/25 ............. 315,000 320,094
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue,
Refunding, Series A, 5.50%, 1/15/28 ......................................................... 247,300,000 240,776,226
Refunding, Series A, MBIA Insured, 5.375%, 1/15/29 .......................................... 85,500,000 88,985,835
Refunding, Series A, MBIA Insured, 5.25%, 1/15/30 ........................................... 21,200,000 22,126,864
senior lien, 5.00%, 1/01/33 ................................................................. 82,040,000 77,714,851
senior lien, Pre-Refunded, 7.50%, 1/01/09 ................................................... 21,585,000 24,115,625
senior lien, Pre-Refunded, 7.55%, 1/01/10 ................................................... 10,745,000 12,016,348
senior lien, Pre-Refunded, 7.60%, 1/01/11 ................................................... 20,935,000 23,434,430
senior lien, Pre-Refunded, 7.65%, 1/01/12 ................................................... 25,215,000 28,252,651
senior lien, Pre-Refunded, 7.65%, 1/01/13 ................................................... 27,350,000 30,644,854
senior lien, Pre-Refunded, 7.70%, 1/01/14 ................................................... 7,470,000 8,377,904
senior lien, Pre-Refunded, 7.70%, 1/01/15 ................................................... 60,155,000 67,466,239
Semiannual Report | 37
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
San Jose Airport Revenue,
Refunding, Series A, FGIC Insured, 5.00%, 3/01/31 ........................................... $ 11,000,000 $ 11,319,330
Series D, MBIA Insured, 5.00%, 3/01/28 ...................................................... 10,000,000 10,446,000
San Jose Financing Authority Lease Revenue,
Civic Center Project, Series B, AMBAC Insured, 5.00%, 6/01/27 ............................... 46,400,000 48,151,136
MBIA Insured, 5.00%, 9/01/21 ................................................................ 14,045,000 14,641,632
MBIA Insured, 5.00%, 9/01/22 ................................................................ 14,730,000 15,332,310
San Jose Financing Authority Revenue, Fourth and San Fernando Parking Facility, Series A,
AMBAC Insured, 5.00%, 9/01/24 ................................................................ 5,000,000 5,204,450
San Jose GO, Library Parks and Public Safety Projects,
5.00%, 9/01/28, ............................................................................. 11,600,000 12,108,428
MBIA Insured, 5.00%, 9/01/34 ................................................................ 15,820,000 16,554,997
San Jose RDA,
MFHR, Miraido Village, Series A, GNMA Secured, 5.75%, 7/20/38 ............................... 7,110,000 7,276,730
Tax Allocation, Housing Set-Aside Merged Area, Series E, MBIA Insured, 5.85%,
8/01/27 .................................................................................... 7,325,000 7,784,937
Tax Allocation, Merged Area Redevelopment Project, 5.25%, 8/01/29 ........................... 9,860,000 10,189,718
Tax Allocation, Merged Area Redevelopment Project, AMBAC Insured, 5.00%,
8/01/31 .................................................................................... 2,000,000 2,056,560
Tax Allocation, Merged Area Redevelopment Project, MBIA Insured, 5.00%, 8/01/21 ............. 35,235,000 35,447,819
Tax Allocation, Merged Area Redevelopment Project, MBIA Insured, 5.625%, 8/01/28 ............ 24,135,000 25,652,850
San Jose USD Santa Clara County GO, Series A, FSA Insured, 5.00%,
8/01/24 ..................................................................................... 9,200,000 9,682,264
8/01/27 ..................................................................................... 9,150,000 9,585,266
San Juan Basin Authority Lease Revenue, AMBAC Insured, 5.00%, 12/01/34 ........................ 4,000,000 4,145,720
San Marcos PFA Tax Allocation Revenue, Project Areas No. 2 and 3 Financing Project,
Series C, AMBAC Insured, 5.00%,
8/01/35 ..................................................................................... 7,000,000 7,331,590
8/01/38 ..................................................................................... 6,110,000 6,415,989
San Marcos PFAR, Series A, ETM, 6.25%, 9/02/22 ................................................ 15,000,000 17,836,800
San Marcos Public Facilities Authority Revenue,
Refunding, 5.80%, 9/01/18 ................................................................... 4,745,000 5,021,871
Senior Tax Increment Project Area 3, Series A, MBIA Insured, 5.75%, 10/01/29 ................ 5,340,000 5,983,256
Senior Tax Increment Project Area 3, Series A, MBIA Insured, 5.80%, 10/01/30 ................ 8,035,000 9,001,530
San Marcos Public Facilities Authority Tax Allocation Revenue, Project Areas No. 1 and 3,
Refunding, Series A, AMBAC Insured, 5.00%, 8/01/34 ........................................... 8,000,000 8,400,640
San Marcos USD, School Facilities ID No. 1, AMBAC Insured, Pre-Refunded, 5.80%,
11/01/14 ..................................................................................... 5,000,000 5,257,600
San Mateo County Joint Powers Authority Lease Revenue, Capital Projects, Refunding,
Series A, FSA Insured, 5.00%, 7/15/29 ........................................................ 13,000,000 13,437,840
San Mateo Flood Control District COP, Colma Creek Flood Control Zone, AMBAC Insured,
5.00%, 8/01/39 ............................................................................... 6,555,000 6,815,299
San Mateo RDA, Tax Allocation, Merged Area, Series A, Pre-Refunded, 5.70%, 8/01/27 ............ 6,330,000 6,765,757
San Mateo RDA, Tax Allocation, 5.60%, 8/01/25 ................................................. 10,185,000 10,725,925
San Mateo UHSD, GO, Election of 2000, Series A, FGIC Insured, Pre-Refunded, 5.00%,
9/01/25 ...................................................................................... 13,865,000 15,135,450
38 | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
San Pablo RDA, Tax Allocation, Merged Project Area, FGIC Insured, 6.25%, 12/01/19 ............. $ 1,655,000 $ 1,681,281
San Ramon PFA, Tax Allocation Revenue, MBIA Insured, 5.30%, 2/01/28 ........................... 18,360,000 19,450,033
San Ramon Valley USD, GO, Election of 2002, FSA Insured,
5.00%, 8/01/26 ............................................................................ 12,800,000 13,480,192
5.40%, 3/01/28 ............................................................................ 27,410,000 29,944,877
5.00%, 8/01/29 ............................................................................ 16,505,000 17,320,017
Santa Barbara Housing Authority Revenue, Refunding and Acquisition, 6.25%, 11/15/20 ........... 5,160,000 5,051,124
Santa Clara Housing Authority MFHR,
Arastradero Park Apartments Project, Series A, GNMA Secured, 6.65%, 5/20/35 ............... 6,465,000 6,576,133
Elana Gardens Apartments Project, Series A, GNMA Secured, 6.40%, 6/20/35 .................. 5,625,000 5,697,675
Sierra Vista I Apartments Project, Series A, GNMA Secured, 6.65%, 6/20/35 ................. 3,860,000 3,922,957
Santa Clara USD, COP, 5.375%, 7/01/31 ......................................................... 7,575,000 8,048,059
Santa Clarita COP, Refunding, MBIA Insured, 5.00%, 10/01/21 ................................... 5,105,000 5,207,100
Santa Cruz City Elementary School District GO, MBIA Insured, 5.00%, 8/01/29 ................... 5,625,000 5,928,188
Santa Cruz City High School District GO, MBIA Insured, 5.00%, 8/01/29 ......................... 11,535,000 12,156,736
Santa Margarita Water District Special Tax, Community Facilities District No. 99-1, 6.00%,
9/01/30 ..................................................................................... 9,000,000 9,557,730
Santa Maria Bonita School District COP, MBIA Insured, 7.00%, 3/01/16 .......................... 480,000 482,083
Santa Maria Water and Wastewater Revenue, COP, Series A, AMBAC Insured, 5.55%,
8/01/27 ..................................................................................... 21,000,000 22,967,280
Santa Monica RDA, Tax Allocation, Earthquake Recovery Redevelopment Project,
AMBAC Insured, 6.00%, 7/01/29 ............................................................... 13,110,000 14,426,637
Saugus USD, GO, Series B, FSA Insured, 5.00%, 8/01/29 ......................................... 5,000,000 5,269,500
Shafter Joint Powers Financing Authority Lease Revenue, Community Correctional Facility
Project, Series A,
5.95%, 1/01/11 ............................................................................ 1,880,000 1,965,672
6.05%, 1/01/17 ............................................................................ 5,135,000 5,370,697
Simi Valley USD, GO, Election 2004, Series A, MBIA Insured, 5.00%, 8/01/26 .................... 6,000,000 6,318,840
Snowline Joint USD, CFD Special Tax, NO 2002-1, Series A,
5.30%, 9/01/29 ............................................................................ 1,615,000 1,638,159
5.40%, 9/01/34 ............................................................................ 2,000,000 2,029,540
Solano County COP, GO, MBIA Insured, 5.00%, 11/01/32 .......................................... 24,665,000 25,555,160
South Gate Utility Authority Revenue, Water and Sewer Systems Project, FGIC Insured,
5.00%, 10/01/32 ............................................................................. 6,475,000 6,734,259
Southern California Public Power Authority Power Project Revenue, 6.75%, 7/01/13 .............. 10,000,000 11,953,700
Southern California Public Power Authority Project Revenue, Magnolia Power Project,
Series A, AMBAC Insured, 5.00%, 7/01/36 ..................................................... 15,800,000 16,457,122
Southern California Public Power Authority Transmission Project Revenue, Southern
Transmission Project, 6.125%, 7/01/18 ....................................................... 1,135,000 1,141,674
Stockton COP, Essential Services Building Parking Facility,
5.875%, 8/01/23 ........................................................................... 2,295,000 2,461,479
6.00%, 8/01/31 ............................................................................ 6,585,000 7,081,838
Stockton Port District Port Facilities Revenue, Refunding and Improvement, Series A,
FSA Insured, 5.95%, 7/01/17 ................................................................. 5,095,000 5,440,696
Stockton Revenue COP, Wastewater System Project, Series A, MBIA Insured, 5.20%,
9/01/29 ..................................................................................... 19,160,000 20,370,720
Stockton Revenue, O'Connor Woods Housing Corp., Series A, 6.35%, 11/01/31 ..................... 9,110,000 9,620,980
Semiannual Report | 39
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Stockton USD, GO,
Election 2000, Series 2004, MBIA Insured, 5.00%, 1/01/27 .................................. $ 5,030,000 $ 5,265,806
MBIA Insured, 5.00%, 1/01/28 .............................................................. 5,335,000 5,578,383
Sweetwater UHSD, COP, FSA Insured, 5.00%, 9/01/27 ............................................. 7,840,000 8,189,037
Tahoe Forest Hospital District Revenue, Series A, 5.90%, 7/01/29 .............................. 7,990,000 8,323,982
Thousand Oaks RDA Tax Allocation, Thousand Oaks Boulevard Redevelopment, Refunding,
MBIA Insured, 5.375%, 12/01/25 .............................................................. 24,485,000 25,066,274
Thousand Oaks RDA, MFR, The Shadows Apartments, Refunding, Series A, FNMA Insured,
5.75%, 11/01/27 ............................................................................. 7,315,000 7,555,371
Tobacco Securitization Authority Northern California Tobacco Settlement Revenue,
Asset Backed Bonds, Series B, 5.00%, 6/01/28 ................................................ 17,390,000 17,714,497
Tobacco Securitization Authority Southern California Tobacco Settlement Revenue,
Asset Backed Bonds,
Senior, Series A, 5.50%, 6/01/36 .......................................................... 80,500,000 83,811,770
Senior, Series A, 5.625%, 6/01/43 ......................................................... 123,165,000 128,530,067
Subordinate, Series B, 6.00%, 6/01/43 ..................................................... 48,435,000 51,088,754
Tobacco Securitization Authority Tobacco Settlement Revenue,
Series A, 5.25%, 6/01/31 .................................................................. 6,800,000 6,915,872
Series A, 5.375%, 6/01/41 ................................................................. 30,250,000 30,860,445
Torrance Hospital Revenue, Torrance Memorial Medical Center, Series A, 5.50%, 6/01/31 ......... 4,385,000 4,588,289
Trabuco Canyon PFA, Special Tax Revenue, Refunding,
Series A, FSA Insured, 6.00%, 10/01/10 .................................................... 13,775,000 15,000,148
Series A, FSA Insured, 6.10%, 10/01/15 .................................................... 13,220,000 15,300,299
Series C, FSA Insured, 6.00%, 7/01/12 ..................................................... 3,040,000 3,339,866
Series C, FSA Insured, 6.10%, 7/01/19 ..................................................... 5,215,000 6,247,049
Tracy COP, I-205 Corridor Improvement and Refinancing Project, AMBAC Insured, 5.125%,
10/01/27 .................................................................................... 5,000,000 5,310,600
Tri-City Hospital District Revenue, Refunding, Series A, MBIA Insured, 5.625%, 2/15/17 ........ 5,000,000 5,146,700
Tulare Local Health Care District Health Facilities Revenue, 5.20%, 12/01/21 .................. 4,455,000 4,626,428
Tustin CFD Special Tax, No. 04-01, John Lang Homes,
5.375%, 9/01/29 ........................................................................... 1,000,000 1,005,920
5.50%, 9/01/34 ............................................................................ 1,500,000 1,515,690
Tustin USD, Special Tax, CFD No. 97-1, 6.375%, 9/01/35 ........................................ 8,645,000 9,622,231
Union City CRDA, Tax Allocation Revenue, Community Redevelopment Project,
AMBAC Insured, 5.75%, 10/01/33 . ............................................................ 5,055,000 5,588,656
University of California Hospital Revenue, UCLA Medical Center, Series A, AMBAC Insured,
5.00%, 5/15/34 .............................................................................. 10,000,000 10,416,900
University of California Revenues,
Multi-Purpose Projects, Series F, FGIC Insured, Pre-Refunded, 5.00%, 9/01/22 .............. 20,575,000 21,188,341
Multiple Purpose Projects, Series O, FGIC Insured, 5.00%, 9/01/23 ......................... 9,200,000 9,727,896
Multiple Purpose Projects, Series O, FGIC Insured, 5.00%, 9/01/26 ......................... 13,430,000 14,059,598
Research Facilities, Series E, AMBAC Insured, 5.00%, 9/01/31 .............................. 5,000,000 5,214,400
Series O, FGIC Insured, 5.25%, 9/01/34 .................................................... 61,235,000 65,615,752
Upland COP,
Refunding, Mortgage Insured, 5.50%, 1/01/07 ............................................... 2,745,000 2,745,000
San Antonio Community Hospital, Refunding, 5.70%, 1/01/11 ................................. 11,210,000 11,998,960
40 | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Vacaville PFAR, Local Agency, 8.65%, 9/02/18 .................................................. $ 4,835,000 $ 4,597,408
Vallejo PFA Local Agency Revenue, Hiddenbrooke Improvement District, Series A, 5.80%,
9/01/31 ..................................................................................... 4,900,000 4,945,619
Vallejo RDA, Tax Allocation, Waterfront Redevelopment Project, 7.90%, 5/01/19 ................. 2,255,000 2,263,840
Vista Community Development Commision Tax Allocation Revenue, Vista Redevelopment
Project Area, 5.875%, 9/01/37 ............................................................... 5,000,000 5,336,550
Vista USD, GO, Series B, FGIC Insured, 5.00%, 8/01/28 ......................................... 6,000,000 6,292,380
Washington Township Hospital District Revenue,
AMBAC Insured, 5.25%, 7/01/23 ............................................................. 5,000,000 5,027,400
Health Care District Revenue, 5.25%, 7/01/29 .............................................. 6,500,000 6,673,160
West Basin Municipal Water District Revenue COP, 1992 Project, Refunding, Series A,
AMBAC Insured, 5.50%, 8/01/22 ............................................................... 4,000,000 4,212,280
West Contra Costa USD, GO, Election of 2002, Series C, FGIC Insured, 5.00%, 8/01/34 ........... 11,605,000 12,195,462
West Hollywood COP, Refunding, MBIA Insured, 5.00%, 2/01/25 ................................... 6,250,000 6,515,188
Westlands Water District COP Revenue, MBIA Insured, 5.00%, 9/01/34 ............................ 13,500,000 14,035,410
Westlands Water District Revenue COP, 5.00%, 9/01/26 .......................................... 13,150,000 13,698,223
Whittier Health Facility Revenue, Presbyterian Intercommunity Hospital,
5.60%, 6/01/22 ............................................................................ 14,285,000 14,982,679
5.75%, 6/01/31 ............................................................................ 28,000,000 29,506,120
William S. Hart UHSD, GO, Series A, MBIA Insured, 5.00%, 9/01/27 .............................. 8,685,000 9,124,114
Yucaipa Valley Water District Water System Revenue COP, Series A, MBIA Insured, 5.00%,
9/01/29 ................................................................................... 10,100,000 10,564,803
9/01/34 ................................................................................... 12,765,000 13,371,720
---------------
TOTAL CALIFORNIA (COST $9,642,899,523) ........................................................ 10,202,426,260
---------------
U. S. TERRITORIES 7.3%
Children's Trust Fund Puerto Rico Tobacco Settlement Revenue, Asset Backed Bonds, Refunding,
5.50%, 5/15/39 ............................................................................ 7,210,000 7,471,939
5.625%, 5/15/43 ........................................................................... 25,500,000 26,531,730
Puerto Rico Commonwealth GO, Public Improvement, Series A,
5.125%, 7/01/31 ........................................................................... 95,185,000 98,303,261
Pre-Refunded, 5.00%, 7/01/27 .............................................................. 26,750,000 29,189,065
Pre-Refunded, 5.125%, 7/01/31 ............................................................. 47,740,000 52,180,298
Puerto Rico Commonwealth Highway and Transportation Authority Highway Revenue,
Series Y, 5.00%, 7/01/36 .................................................................... 63,000,000 65,220,120
(a) Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series K, 5.00%,
7/01/40 ................................................................................... 30,000,000 30,765,600
7/01/45 ................................................................................... 30,000,000 30,647,700
Puerto Rico Commonwealth Highway and Transportation Authority Transportation Revenue,
Series A, MBIA Insured, 5.00%, 7/01/38 .................................................... 116,975,000 120,347,389
Series B, MBIA Insured, 6.00%, 7/01/31 .................................................... 13,000,000 14,620,450
Series B, Pre-Refunded, 6.00%, 7/01/39 .................................................... 13,200,000 14,907,420
Series D, Pre-Refunded, 5.375%, 7/01/36 ................................................... 45,000,000 49,824,450
Series D, Pre-Refunded, 5.75%, 7/01/41 .................................................... 20,000,000 22,589,800
Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Revenue, Series A,
AMBAC Insured, Pre-Refunded, 5.00%, 7/01/28 ................................................. 10,000,000 10,529,700
Semiannual Report | 41
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
U.S. TERRITORIES (CONT.)
Puerto Rico Electric Power Authority Revenue,
Series DD, MBIA Insured, 5.00%, 7/01/28 ................................................... $ 23,250,000 $ 24,042,360
Series II, 5.25%, 7/01/31 ................................................................. 48,000,000 50,616,000
Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities
Revenue, Cogeneration Facility, AES Puerto Rico Project, 6.625%, 6/01/26 .................... 6,800,000 7,351,480
Puerto Rico PBA Revenue, Guaranteed, Government Facilities, Series D,
5.375%, 7/01/33 ........................................................................... 26,510,000 28,128,170
Pre-Refunded, 5.375%, 7/01/33 ............................................................. 73,490,000 81,137,370
Puerto Rico Public Finance Corp. Revenue, Commonwealth Appropriation, Series E,
5.50%, 8/01/29 ............................................................................ 35,760,000 38,541,770
Pre-Refunded, 5.50%, 8/01/29 .............................................................. 104,235,000 115,463,194
Pre-Refunded, 5.75%, 8/01/30 .............................................................. 50,000,000 51,747,000
Virgin Islands PFAR, senior lien,
Fund Loan Notes, Refunding, Series A, 5.50%, 10/01/22 ..................................... 7,000,000 7,322,910
Refunding, Series A, 5.50%, 10/01/14 ...................................................... 3,865,000 4,085,769
---------------
TOTAL U.S. TERRITORIES (COST $891,199,725) .................................................... 981,564,945
---------------
TOTAL BONDS (COST $10,534,099,248) ............................................................ 11,183,991,205
---------------
ZERO COUPON/STEP-UP BONDS 13.9%
CALIFORNIA 13.9%
Alameda Corridor Transportation Authority Revenue, AMBAC Insured,
10/01/29 .................................................................................. 20,000,000 6,247,000
10/01/30 .................................................................................. 22,000,000 6,498,580
zero cpn. to 10/01/12, 5.30% thereafter, 10/01/22 ......................................... 81,685,000 61,489,201
zero cpn. to 10/01/12, 5.30% thereafter, 10/01/23 ......................................... 70,015,000 52,469,241
zero cpn. to 10/01/12, 5.40% thereafter, 10/01/24 ......................................... 43,770,000 32,794,672
zero cpn. to 10/01/12, 5.45% thereafter, 10/01/25 ......................................... 32,960,000 24,500,486
Anaheim PFA, Lease Revenue, Capital Appreciation, Public Improvements Project, Series C,
FSA Insured,
9/01/24 ................................................................................... 26,855,000 11,178,662
9/01/26 ................................................................................... 29,430,000 11,007,409
9/01/27 ................................................................................... 22,860,000 8,087,639
9/01/28 ................................................................................... 8,425,000 2,817,320
9/01/29 ................................................................................... 4,320,000 1,364,342
9/01/32 ................................................................................... 13,665,000 3,656,891
9/01/33 ................................................................................... 37,070,000 9,420,228
3/01/37 ................................................................................... 16,080,000 3,441,120
Anaheim Public Financing Authority Lease Revenue, Capital Appreciation,
Public Improvement Projects, Series C, FSA Insured, 9/01/34 ................................. 24,970,000 6,041,242
Anaheim UHSD, GO, Capital Appreciation, Series A, FSA Insured, 8/01/26 ........................ 8,570,000 3,185,383
California Educational Facilities Authority Revenue,
Loyola Marymount University, MBIA Insured, 10/01/32 ....................................... 8,435,000 1,714,751
Loyola Marymount University, MBIA Insured, 10/01/33 ....................................... 8,435,000 1,607,795
Loyola Marymount University, MBIA Insured, 10/01/34 ....................................... 8,435,000 1,507,419
Loyola Marymount University, MBIA Insured, 10/01/35 ....................................... 8,435,000 1,413,284
Loyola Marymount University, MBIA Insured, 10/01/36 ....................................... 8,435,000 1,325,054
Loyola Marymount University, MBIA Insured, 10/01/37 ....................................... 8,435,000 1,242,391
42 | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
ZERO COUPON/STEP-UP BONDS (CONT.)
CALIFORNIA (CONT.)
California Educational Facilities Authority Revenue, (cont.)
Loyola Marymount University, MBIA Insured, 10/01/38 ....................................... $ 8,435,000 $ 1,164,789
Loyola Marymount University, MBIA Insured, 10/01/39 ....................................... 8,435,000 1,092,079
Loyola Marymount University, Refunding, MBIA Insured, 10/01/26 ............................ 7,620,000 2,809,951
Loyola Marymount University, Refunding, MBIA Insured, 10/01/27 ............................ 7,365,000 2,567,660
Loyola Marymount University, Refunding, MBIA Insured, 10/01/28 ............................ 4,120,000 1,356,922
Loyola Marymount University, Refunding, MBIA Insured, 10/01/30 ............................ 5,685,000 1,671,106
Loyola Marymount University, Refunding, MBIA Insured, 10/01/31 ............................ 7,615,000 2,120,625
Loyola Marymount University, Refunding, MBIA Insured, 10/01/32 ............................ 7,615,000 2,002,973
Santa Clara University, AMBAC Insured, 9/01/26 ............................................ 5,800,000 2,147,276
California Health Facilities Financing Authority Revenue, Kaiser Permanente, Series A,
ETM, 10/01/11 ............................................................................... 13,970,000 10,981,398
California HFAR, Home Mortgage,
Capital Appreciation, Series A, 8/01/16 ................................................... 575,000 200,209
Series N, AMBAC Insured, 8/01/31 .......................................................... 7,240,000 5,602,602
California State GO,
Principal Eagles II, Series 3, 3/01/09 .................................................... 7,500,000 6,648,525
Principal Eagles II, Series 4, 6/01/06 .................................................... 10,000,000 9,816,800
Principal Eagles II, Series 6, 3/01/09 .................................................... 5,000,000 4,432,350
Principal M-Raes, Series 8, 4/01/09 ....................................................... 9,000,000 7,954,740
California Statewide CDA Revenue, COP, Insured Hospital, Triad Health Care,
Refunding, ETM,
8/01/09 ................................................................................... 6,450,000 5,665,874
8/01/10 ................................................................................... 6,745,000 5,681,516
8/01/11 ................................................................................... 3,115,000 2,510,503
Campbell USD, Series B, FGIC Insured,
8/01/20 ................................................................................... 5,000,000 2,555,450
8/01/21 ................................................................................... 6,280,000 3,048,626
Contra Costa County COP, Merrithew Memorial Hospital Project, ETM, 11/01/15 ................... 6,810,000 4,538,388
Contra Costa Home Mortgage Finance Authority HMR,
Mandatory Sinking Fund 3/01/08, MBIA Insured, Pre-Refunded, 9/01/17 ....................... 9,635,000 3,084,260
Mandatory Sinking Fund 9/01/08, MBIA Insured, Pre-Refunded, 9/01/17 ....................... 8,095,000 2,694,583
Mandatory Sinking Fund 3/01/09, MBIA Insured, Pre-Refunded, 9/01/17 ....................... 8,615,000 2,972,089
Mandatory Sinking Fund 9/01/09, MBIA Insured, Pre-Refunded, 9/01/17 ....................... 7,135,000 2,556,970
Mandatory Sinking Fund 3/01/10, MBIA Insured, Pre-Refunded, 9/01/17 ....................... 7,700,000 2,852,003
Mandatory Sinking Fund 9/01/10, MBIA Insured, Pre-Refunded, 9/01/17 ....................... 6,275,000 2,410,416
MBIA Insured, Pre-Refunded, 9/01/17 ....................................................... 10,770,000 3,189,105
Contra Costa School Financing Authority Revenue, Capital Appreciation,
Antioch USD Community, Series B, 9/01/07 .................................................... 280,000 253,058
El Paso de Robles GO, Capital Appreciation, Series A, FGIC Insured,
8/01/16 ................................................................................... 2,050,000 1,205,892
8/01/22 ................................................................................... 11,485,000 4,720,680
8/01/27 ................................................................................... 11,495,000 3,522,068
Elk Grove USD, Special Tax, Capital Appreciation, CFD 1, MBIA Insured,
12/01/19 .................................................................................. 2,775,000 1,383,254
12/01/20 .................................................................................. 2,765,000 1,306,628
12/01/21 .................................................................................. 4,195,000 1,864,636
12/01/22 .................................................................................. 4,195,000 1,767,437
12/01/23 .................................................................................. 4,195,000 1,660,549
12/01/24 .................................................................................. 4,200,000 1,577,520
Semiannual Report | 43
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
ZERO COUPON/STEP-UP BONDS (CONT.)
CALIFORNIA (CONT.)
Foothill De Anza Community College District GO,
Capital Appreciation, MBIA Insured, 8/01/27 ............................................... $ 5,205,000 $ 1,848,764
MBIA Insured, 8/01/26 ..................................................................... 5,290,000 1,986,342
Foothill/Eastern Corridor Agency Toll Road Revenue,
Capital Appreciation, Refunding, 1/15/25 .................................................. 57,000,000 18,526,140
Capital Appreciation, Refunding, 1/15/30 .................................................. 98,460,000 24,082,331
Capital Appreciation, Refunding, 1/15/31 .................................................. 14,635,000 3,360,781
Capital Appreciation, Refunding, 1/15/34 .................................................. 100,000,000 19,082,000
Capital Appreciation, Refunding, 1/15/36 .................................................. 182,160,000 30,763,181
Capital Appreciation, Refunding, 1/15/38 .................................................. 160,560,000 24,034,226
Capital Appreciation, Refunding, MBIA Insured, 1/15/21 .................................... 51,180,000 21,252,495
Capital Appreciation, Refunding, MBIA Insured, 1/15/37 .................................... 170,615,000 27,136,316
Capital Appreciation, Refunding, zero cpn. to 7/15/09, 5.80% thereafter, 1/15/20 .......... 49,500,000 43,040,745
Capital Appreciation, Refunding, zero cpn. to 7/15/09, 5.875% thereafter, 1/15/27 ......... 80,835,000 69,159,193
Capital Appreciation, Refunding, zero cpn. to 7/15/09, 5.875% thereafter, 1/15/28 ......... 80,500,000 68,872,580
Capital Appreciation, Refunding, zero cpn. to 7/15/09, 5.875% thereafter, 1/15/29 ......... 112,230,000 96,019,499
Capital Appreciation, senior lien, Series A, ETM, 1/01/22 ................................. 30,835,000 15,136,593
Capital Appreciation, senior lien, Series A, ETM, 1/01/23 ................................. 5,765,000 2,685,914
Capital Appreciation, senior lien, Series A, ETM, 1/01/24 ................................. 72,045,000 31,769,684
Capital Appreciation, senior lien, Series A, ETM, 1/01/28 ................................. 2,000,000 716,440
Convertible Capital Appreciation, Refunding, 1/15/26 ...................................... 30,000,000 25,666,800
Convertible Capital Appreciation, Refunding, 1/15/32 ...................................... 100,000,000 21,565,000
Convertible Capital Appreciation, Refunding, 1/15/33 ...................................... 132,460,000 26,890,705
Convertible Capital Appreciation, Refunding, 1/15/35 ...................................... 20,000,000 3,594,400
Convertible Capital Appreciation, Refunding, zero cpn. to 7/15/09, 5.85% thereafter,
1/15/23 ................................................................................. 10,000,000 8,599,600
senior lien, Series A, ETM, 1/01/25 ....................................................... 20,660,000 8,661,498
senior lien, Series A, ETM, 1/01/26 ....................................................... 23,475,000 9,332,486
senior lien, Series A, ETM, 1/01/27 ....................................................... 15,000,000 5,662,200
senior lien, Series A, ETM, 1/01/29 ....................................................... 35,310,000 11,941,842
Glendale Community College District GO, FGIC Insured, 8/01/28 ................................. 15,000,000 4,795,200
Huntington Beach City and School District, Capital Appreciation, Election 2002, Series A,
FGIC Insured, 8/01/28 ....................................................................... 10,005,000 3,321,760
Lodi Electric Systems Revenue COP, Capital Appreciation Bond, Series B, MBIA Insured,
1/15/19 ..................................................................................... 6,360,000 3,135,671
Los Angeles Convention and Exhibition Center Authority COP, Series 1985, ETM,
12/01/05 .................................................................................... 26,750,000 26,632,032
Modesto High School District Stanislaus County GO, Capital Appreciation,
Series A, FGIC Insured,
8/01/21 ................................................................................... 9,660,000 4,689,447
8/01/23 ................................................................................... 10,815,000 4,725,506
5/01/27 ................................................................................... 12,770,000 4,541,778
Moreno Valley USD, GO, Election of 2004, Series A, FSA Insured,
8/01/27 ................................................................................... 6,315,000 2,195,789
8/01/28 ................................................................................... 6,625,000 2,175,253
New Haven USD, GO, Capital Appreciation, Series C, FGIC Insured, 8/01/23 14,700,000 5,892,054
44 | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
ZERO COUPON/STEP-UP BONDS (CONT.)
CALIFORNIA (CONT.)
Pasadena Special Tax CFD, No. 1 Civic Center West, Pre-Refunded, 12/01/17 ..................... $ 4,090,000 $ 1,831,257
Perris SFMR, Series A, GNMA Secured, ETM, 6/01/23 ............................................. 19,095,000 8,307,280
Rancho Water District Financing Authority Revenue, AMBAC Insured, ETM,
8/15/16 ................................................................................... 8,605,000 5,455,656
8/15/17 ................................................................................... 13,605,000 8,232,930
8/15/18 ................................................................................... 13,605,000 7,842,058
Rialto USD, GO, Series A, FGIC Insured, 6/01/19 ............................................... 13,985,000 7,585,884
Riverside County Asset Leasing Corp. Leasehold Revenue, Riverside County Hospital Project,
MBIA Insured,
6/01/23 ................................................................................... 14,160,000 6,023,806
6/01/24 ................................................................................... 13,005,000 5,232,822
Riverside County Board of Education COP, Capital Appreciation Financing Projects,
Series A, ETM, 11/01/05 ..................................................................... 280,000 279,446
Riverside County SFMR, Capital Appreciation Mortgage,
Series A, GNMA Secured, ETM, 9/01/14 ...................................................... 20,220,000 14,235,082
Series A, GNMA Secured, ETM, 11/01/20 . ................................................... 25,055,000 12,421,267
Series B, GNMA Secured, ETM, 6/01/23 ...................................................... 26,160,000 11,380,908
Rocklin USD, GO,
Capital Appreciation, Series A, FGIC Insured, 9/01/08 ..................................... 3,660,000 3,342,275
Capital Appreciation, Series A, FGIC Insured, 9/01/09 ..................................... 4,100,000 3,608,000
Capital Appreciation, Series A, FGIC Insured, 9/01/10 ..................................... 4,595,000 3,894,584
Capital Appreciation, Series A, FGIC Insured, 9/01/11 ..................................... 5,145,000 4,167,501
Capital Appreciation, Series A, FGIC Insured, 9/01/12 ..................................... 5,760,000 4,441,478
Capital Appreciation, Series A, FGIC Insured, 9/01/16 ..................................... 33,960,000 21,353,369
Election of 2002, FGIC Insured, 8/01/25 ................................................... 8,160,000 3,199,128
Election of 2002, FGIC Insured, 8/01/26 ................................................... 8,695,000 3,231,845
Election of 2002, FGIC Insured, 8/01/27 ................................................... 9,080,000 3,190,984
Election of 2002, FGIC Insured, 8/01/28 ................................................... 16,615,000 5,516,346
Roseville City School District GO, Capital Appreciation, Series A,
8/01/11 ................................................................................... 3,115,000 2,513,400
8/01/17 30,770,000 17,054,273
Roseville Joint UHSD, Capital Appreciation, Series A,
8/01/10 ................................................................................... 1,820,000 1,533,041
8/01/11 ................................................................................... 1,965,000 1,585,500
8/01/17 ................................................................................... 18,155,000 10,052,242
San Diego USD, GO, Capital Appreciation Bond, Series A, FGIC Insured,
7/01/21 ................................................................................... 12,160,000 5,925,568
7/01/22 ................................................................................... 8,440,000 3,903,584
7/01/23 ................................................................................... 11,120,000 4,877,677
San Francisco City and County RDA, Lease Revenue, George R. Moscone Center,
Capital Appreciation,
7/01/06 ................................................................................... 11,320,000 11,079,337
7/01/07 ................................................................................... 4,570,000 4,309,784
7/01/08 ................................................................................... 7,785,000 7,100,231
Semiannual Report | 45
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
ZERO COUPON/STEP-UP BONDS (CONT.)
CALIFORNIA (CONT.)
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue,
Capital Appreciation, Refunding, Series A, zero cpn. to 1/15/07,
5.60% thereafter, 1/15/16 ............................................................... $ 19,500,000 $ 17,782,440
Capital Appreciation, Refunding, Series A, zero cpn. to 1/15/07,
5.65% thereafter, 1/15/17 ............................................................... 17,000,000 15,474,250
Capital Appreciation, Refunding, Series A, zero cpn. to 1/15/07,
5.70% thereafter, 1/15/19 ............................................................... 57,000,000 51,762,840
senior lien, ETM, 1/01/25 ................................................................. 5,700,000 2,389,668
senior lien, ETM, 1/01/28 ................................................................. 33,545,000 12,016,490
senior lien, ETM, 1/01/29 ................................................................. 37,050,000 12,530,310
senior lien, Refunding, Series A, 1/15/18 ................................................. 60,000,000 54,415,800
senior lien, Refunding, Series A, 1/15/20 ................................................. 80,000,000 72,487,200
senior lien, Refunding, Series A, 1/15/23 ................................................. 80,000,000 71,388,000
senior lien, Refunding, Series A, 1/15/24 ................................................. 80,000,000 71,265,600
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, senior lien, Refunding,
Series A, 1/15/22 ........................................................................... 90,000,000 80,928,900
San Jose USD, COP, Refunding, FSA Insured,
1/01/27 ................................................................................... 7,105,000 2,567,676
1/01/29 ................................................................................... 7,105,000 2,291,078
San Juan USD, GO, Election of 1998, Series B, MBIA Insured,
8/01/26 ................................................................................... 15,825,000 5,613,919
8/01/27 ................................................................................... 18,605,000 6,538,355
8/01/28 ................................................................................... 19,470,000 6,464,235
San Mateo UHSD, GO, Capital Appreciation Election of 2000,
Series B, FGIC Insured, 9/01/22 ............................................................. 5,000,000 2,294,850
Southern California Public Power Authority Power Project Revenue, Refunding,
Series A, AMBAC Insured, ETM,
7/01/11 ................................................................................... 12,000,000 9,761,520
7/01/12 ................................................................................... 16,890,000 13,131,637
7/01/13 ................................................................................... 16,000,000 11,875,040
Stockton East Water District COP, 1990 Project, Series B, 4/01/16 ............................. 103,885,000 61,948,703
Suisun City PFA Tax Allocation Revenue, Capital Appreciation Redevelopment Project,
Series A, 10/01/28 .......................................................................... 17,855,000 5,440,954
Thousand Oaks SFHMR, Capital Appreciation, Series A, GNMA Secured, 9/01/23 . .................. 16,000 51,840
---------------
TOTAL ZERO COUPON/STEP-UP BONDS (COST $1,703,854,305) . ....................................... 1,867,223,713
---------------
TOTAL LONG TERM INVESTMENTS (COST $12,237,953,553) ............................................ 13,051,214,918
---------------
46 | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
(C) SHORT TERM INVESTMENTS 3.2%
BONDS 3.2%
CALIFORNIA 3.2%
California State Department of Water Resources Power Supply Revenue,
Series B-3, Daily VRDN and Put, 2.78%, 5/01/22 ............................................ $ 3,700,000 $ 3,700,000
Series B-4, Daily VRDN and Put, 2.78%, 5/01/22 ............................................ 11,410,000 11,410,000
Series B-5, Daily VRDN and Put, 2.77%, 5/01/22 ............................................ 26,850,000 26,850,000
Series B-6, Daily VRDN and Put, 2.77%, 5/01/22 ............................................ 5,950,000 5,950,000
Series C-7, FSA Insured, Weekly VRDN and Put, 2.70%, 5/01/22 .............................. 2,925,000 2,925,000
California State Economic Recovery GO, Series C-1, Daily VRDN and Put, 2.95%,
7/01/23 ..................................................................................... 3,855,000 3,855,000
California State Economic Recovery Revenue,
Series C-3, Daily VRDN and Put, 2.77%, 7/01/23 ............................................ 23,725,000 23,725,000
Series C-5, Daily VRDN and Put, 2.89%, 7/01/23 ............................................ 21,485,000 21,485,000
Series C-6, Weekly VRDN and Put, 2.78%, 7/01/23 ........................................... 71,850,000 71,850,000
Series C-9, Daily VRDN and Put, 2.78%, 7/01/23 ............................................ 2,500,000 2,500,000
California State GO,
Series A-2, Daily VRDN and Put, 2.78%, 5/01/33 ............................................ 29,200,000 29,200,000
Series A-3, Daily VRDN and Put, 2.77%, 5/01/33 ............................................ 20,750,000 20,750,000
Califonia State GO, Daily Kindergarten University, Refunding, Series A3,
Daily VRDN and Put, 2.95%, 5/01/34 .......................................................... 1,700,000 1,700,000
California Statewide CDA Revenue, COP, John Muir/Mt. Diablo Health System,
AMBAC Insured, Daily VRDN and Put, 2.85%, 8/15/27 ........................................... 3,600,000 3,600,000
Infrastructure and Economic Development Bank Insured Revenue, Rand Corp., Series B,
AMBAC Insured, Daily VRDN and Put, 2.75%, 4/01/42 ........................................... 14,000,000 14,000,000
Irvine 1915 Act Special Assessment,
AD No. 00-18, Series A, Daily VRDN and Put, 2.77%, 9/02/26 ................................ 1,540,000 1,540,000
AD No. 03-19, Series A, Daily VRDN and Put, 2.77%, 9/02/29 ................................ 3,914,000 3,914,000
AD No. 97-16, Daily VRDN and Put, 2.77%, 9/02/22 .......................................... 1,700,000 1,700,000
Irvine Ranch Water District COP, Capital Improvement Project, Daily VRDN and Put, 2.77%,
8/01/16 ..................................................................................... 3,800,000 3,800,000
Irvine USD Special Tax, CFD No. 01-1, Daily VRDN and Put, 2.77%, 9/01/38 ...................... 900,000 900,000
Los Angeles Department of Water and Power Waterworks Revenue, Sub Series B-2,
Daily VRDN and Put, 2.77%, 7/01/35 .......................................................... 18,375,000 18,375,000
Metropolitan Water District Southern California Waterworks Revenue,
Refunding, Series B-1, Daily VRDN and Put, 2.77%, 7/01/35 ................................. 42,050,000 42,050,000
Refunding, Series B-3, Daily VRDN and Put, 2.65%, 7/01/35 ................................. 21,200,000 21,200,000
Series C-1, Daily VRDN and Put, 2.95%, 7/01/36 ............................................ 7,050,000 7,050,000
Series C-2, Daily VRDN and Put, 2.78%, 7/01/36 ............................................ 47,000,000 47,000,000
Murrieta Valley USD, COP, School Facility Bridge Funding Program, FSA Insured,
Weekly VRDN and Put, 2.72%, 6/01/23 ......................................................... 9,600,000 9,600,000
Newport Beach Revenue, Hoag Memorial Presbyterian Hospital,
Series B, Weekly VRDN and Put, 2.75%, 10/01/26 ............................................ 2,000,000 2,000,000
Series C, Daily VRDN and Put, 2.75%, 10/01/26 ............................................. 2,600,000 2,600,000
Semiannual Report | 47
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Orange County Housing Authority Apartment Development Revenue, Oasis
Martinique, Refunding, Series I, FNMA Insured, Weekly VRDN and Put, 2.68%, 6/15/28 ........ $ 2,800,000 $ 2,800,000
Orange County Sanitation Districts COP,
Nos. 1-3 5-7 and 11, Refunding, AMBAC Insured, Daily VRDN and Put, 2.77%, 8/01/16 ....... 350,000 350,000
Refunding, Series A, Daily VRDN and Put, 2.77%, 8/01/29 ................................. 10,480,000 10,480,000
Refunding, Series B, Daily VRDN and Put, 2.77%, 8/01/30 ................................. 19,135,000 19,135,000
----------------
TOTAL SHORT TERM INVESTMENTS (COST $437,994,000) ............................................ 437,994,000
----------------
TOTAL INVESTMENTS (COST $12,675,947,553) 100.3% ............................................. 13,489,208,918
OTHER ASSETS, LESS LIABILITIES (0.3)% . ..................................................... (44,580,571)
----------------
NET ASSETS 100.0% ........................................................................... $13,444,628,347
================
See Selected Portfolio Abbreviations on next page.
(a) See Note 1 regarding securities purchased on a delayed delivery basis.
(b) See Note 7 regarding defaulted securities.
(c) Variable rate demand notes (VRDNs) are tax-exempt obligations which
contain a floating or variable interest rate adjustment formula and an
unconditional right of demand to receive payment of the principal balance
plus accrued interest at specified dates. The coupon rate shown represents
the rate at period end. VRDNs are valued at cost.
48 | See notes to financial statements. | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2005 (UNAUDITED) (CONTINUED)
SELECTED PORTFOLIO ABBREVIATIONS:
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
ETM Escrow to Maturity
FGIC Financial Guaranty Insurance Co.
FHA Federal Housing Authority/Agency
FNMA Federal National Mortgage Association
FSA Financial Security Assurance Inc.
GNMA Government National Mortgage Association
GO General Obligation
HFA Housing Finance Authority/Agency
HFAR Housing Finance Authority/Agency 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
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
RDA Redevelopment Agency/Authority
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/Union High School District
USD Unified/Union School District
XLCA XL Capital Assurance
Semiannual Report | See notes to financial statements. | 49
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2005 (unaudited)
Assets:
Investments in securities:
Cost ...................................................... $12,675,947,553
===============
Value ..................................................... 13,489,208,918
Cash ....................................................... 38,841
Receivables:
Capital shares sold ....................................... 16,626,497
Interest .................................................. 148,946,432
---------------
Total assets .......................................... 13,654,820,688
---------------
Liabilities:
Payables:
Investment securities purchased ........................... 189,200,211
Capital shares redeemed ................................... 12,426,976
Affiliates ................................................ 8,049,677
Accrued expenses and other liabilities ..................... 515,477
---------------
Total liabilities ..................................... 210,192,341
---------------
Net assets, at value ................................ $13,444,628,347
---------------
Net assets consist of:
Paid-in capital ............................................ $12,583,847,526
Undistributed net investment income ........................ 35,027,222
Net unrealized appreciation (depreciation) ................. 813,261,365
Accumulated net realized gain (loss) ....................... 12,492,234
---------------
Net assets, at value ................................ $13,444,628,347
===============
50 | See notes to financial statements. | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
September 30, 2005 (unaudited)
CLASS A:
Net assets, at value ........................................................... $12,519,799,376
===============
Shares outstanding ............................................................. 1,705,408,804
===============
Net asset value per share(a) ................................................... $ 7.34
===============
Maximum offering price per share (net asset value per share / 95.75%) .......... $ 7.67
===============
CLASS B:
Net assets, at value ........................................................... $ 348,633,853
===============
Shares outstanding ............................................................. 47,537,942
===============
Net asset value and maximum offering price per share(a) ........................ $ 7.33
===============
CLASS C:
Net assets, at value ........................................................... $ 524,977,189
===============
Shares outstanding ............................................................. 71,603,211
===============
Net asset value and maximum offering price per share(a) ........................ $ 7.33
===============
ADVISOR CLASS:
Net assets, at value ........................................................... $ 51,217,929
===============
Shares outstanding ............................................................. 6,983,760
===============
Net asset value and maximum offering price per share(a) ........................ $ 7.33
===============
(a) Redemption price is equal to net asset value less contingent deferred
sales charges, if applicable, and redemption fees retained by the Fund.
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, 2005 (unaudited)
Investment income:
Interest ....................................................................... $ 343,053,948
-------------
Expenses:
Management fees (Note 3a) ...................................................... 30,089,770
Distribution fees (Note 3c)
Class A ....................................................................... 5,292,317
Class B ....................................................................... 1,157,665
Class C ....................................................................... 1,665,114
Transfer agent fees (Note 3e) .................................................. 2,007,072
Custodian fees ................................................................. 100,234
Reports to shareholders ........................................................ 110,616
Registration and filing fees ................................................... 39,436
Professional fees .............................................................. 66,826
Directors' fees and expenses ................................................... 83,913
Other .......................................................................... 326,862
-------------
Total expenses ............................................................ 40,939,825
-------------
Net investment income ................................................... 302,114,123
-------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments ...................................... 12,730,844
Net change in unrealized appreciation (depreciation) on investments ............ 120,755,559
-------------
Net realized and unrealized gain (loss) ......................................... 133,486,403
-------------
Net increase (decrease) in net assets resulting from operations ................. $ 435,600,526
=============
52 | See notes to financial statements. | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------------
SIX MONTHS ENDED
SEPTEMBER 30, 2005 YEAR ENDED
(UNAUDITED) MARCH 31, 2005
------------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ............................................................ $ 302,114,123 $ 619,860,139
Net realized gain (loss) from investments ........................................ 12,730,844 13,464,279
Net change in unrealized appreciation (depreciation) on investments .............. 120,755,559 (118,608,545)
------------------------------------------
Net increase (decrease) in net assets resulting from operations .............. 435,600,526 514,715,873
------------------------------------------
Distributions to shareholders from:
Net investment income:
Class A ......................................................................... (283,791,624) (574,193,662)
Class B ......................................................................... (7,149,439) (15,193,859)
Class C ......................................................................... (10,146,707) (20,376,179)
Advisor Class ................................................................... (1,030,964) (1,469,553)
Net realized gains:
Class A ......................................................................... (4,050,693) (9,132,884)
Class B ......................................................................... (116,882) (271,805)
Class C ......................................................................... (164,516) (364,970)
Advisor Class ................................................................... (14,279) (30,663)
------------------------------------------
Total distributions to shareholders ............................................... (306,465,104) (621,033,575)
------------------------------------------
Capital share transactions: (Note 2)
Class A ......................................................................... 128,745,733 (415,250,515)
Class B ......................................................................... (13,764,834) (32,523,206)
Class C ......................................................................... 25,944,989 (24,790,905)
Advisor Class ................................................................... 8,449,892 27,782,649
------------------------------------------
Total capital share transactions .................................................. 149,375,780 (444,781,977)
------------------------------------------
Redemption fees ................................................................... 15,779 16,910
------------------------------------------
Net decrease in net assets ................................................... 278,526,981 (551,082,769)
Net assets:
Beginning of period ............................................................... 13,166,101,366 13,717,184,135
------------------------------------------
End of period ..................................................................... $ 13,444,628,347 $ 13,166,101,366
==========================================
Undistributed net investment income included in net assets:
End of period ..................................................................... $ 35,027,222 $ 35,031,833
==========================================
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, Inc. (the Fund) is registered under
the Investment Company Act of 1940 as a diversified, open-end investment
company.
The following summarizes the Fund's significant accounting policies.
A. SECURITY VALUATION
Municipal securities generally trade in the over-the-counter market rather than
on a securities exchange. The Fund may utilize independent pricing services,
quotations from bond dealers, and information with respect to bond and note
transactions, to assist in determining a current market value for each security.
The Fund's pricing services use valuation models or matrix pricing, which
considers information with respect to comparable bond and note transactions,
quotations from bond dealers or by reference to other securities that are
considered comparable in such characteristics as rating, interest rate and
maturity date, to determine current value.
The Fund has procedures to determine the fair value of individual securities and
other assets for which market prices are not readily available or which may not
be reliably priced. Methods for valuing these securities may include:
fundamental analysis, matrix pricing, discounts from market prices of similar
securities, or discounts applied due to the nature and duration of restrictions
on the disposition of the securities. Due to the inherent uncertainty of
valuations of such securities, the fair values may differ significantly from the
values that would have been used had a ready market for such investments
existed. Occasionally, events occur between the time at which trading in a
security is completed and the close of the NYSE that might call into question
the availability (including the reliability) of the value of a portfolio
security held by the Fund. If such an event occurs, the securities may be valued
using fair value procedures, which may include the use of independent pricing
services. All security valuation procedures are approved by the Fund's Board of
Directors.
B. SECURITIES PURCHASED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS
The Fund may purchase securities on a when-issued or delayed delivery basis,
with payment and delivery scheduled for a future date. These transactions are
subject to market fluctuations and are subject to the risk that the value at
delivery may be more or less than the trade date purchase price. Although the
Fund will generally purchase these securities with the intention of holding the
securities, it may sell the securities before the settlement date. Sufficient
assets have been segregated for these securities.
C. INCOME TAXES
No provision has been made for U.S. income taxes because the Fund's policy is to
continue to qualify as a regulated investment company under the Internal Revenue
Code and to distribute to shareholders substantially all of its income and net
realized gains.
54 | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Amortization of
premium and accretion of discount on debt securities are included in interest
income. Distributions to shareholders are recorded on the ex-dividend date and
are determined according to income tax regulations (tax basis). Distributable
earnings determined on a tax basis may differ from earnings recorded in
accordance with generally accepted accounting principles. These differences may
be permanent or temporary. Permanent differences are reclassified among capital
accounts to reflect their tax character. These reclassifications have no impact
on net assets or the results of operations. Temporary differences are not
reclassified, as they will reverse in subsequent periods.
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.
E. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
F. REDEMPTION FEES
A short-term trading redemption fee will be imposed, with some exceptions, on
any Fund shares that are redeemed or exchanged within seven calendar days
following their purchase date. The redemption fee is 2% of the amount redeemed.
Such fees are retained by the Fund and accounted for as an addition to paid-in
capital.
G. GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified by the Fund against certain liabilities arising out of the
performance of their duties to the Fund. Additionally, in the normal course of
business, the Fund enters 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.
Semiannual Report | 55
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. CAPITAL STOCK
The Fund offers four classes of shares: Class A, Class B, Class C, and Advisor
Class. Effective March 1, 2005, Class B shares are only offered to existing
Class B shareholders in the form of reinvested distributions and certain
exchanges from other Franklin Templeton Class B shares. 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, 2005, there were five billion shares authorized ($0.01 par
value). Transactions in the Fund's shares were as follows:
- ------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 2005 MARCH 31, 2005
- ------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
CLASS A SHARES:
Shares sold ................. 71,730,710 $ 527,873,407 106,655,270 $ 766,441,656
Shares issued in reinvestment
of distributions .......... 21,351,380 156,868,578 43,771,123 314,262,732
Shares redeemed ............. (75,587,540) (555,996,252) (209,026,835) (1,495,954,903)
-------------------------------------------------------------
Net increase (decrease) ..... 17,494,550 $ 128,745,733 (58,600,442) $ (415,250,515)
=============================================================
CLASS B SHARES:
Shares sold ................. 194,699 $ 1,429,973 2,207,301 $ 15,831,757
Shares issued in reinvestment
of distributions .......... 662,629 4,865,846 1,437,360 10,311,090
Shares redeemed ............. (2,730,118) (20,060,653) (8,209,774) (58,666,053)
-------------------------------------------------------------
Net increase (decrease) ..... (1,872,790) $ (13,764,834) (4,565,113) $ (32,523,206)
=============================================================
CLASS C SHARES:
Shares sold ................. 7,777,751 $ 57,187,831 10,795,707 $ 77,710,549
Shares issued in reinvestment
of distributions .......... 897,345 6,585,501 1,850,161 13,266,511
Shares redeemed ............. (5,148,006) (37,828,343) (16,181,993) (115,767,965)
-------------------------------------------------------------
Net increase (decrease) ..... 3,527,090 $ 25,944,989 (3,536,125) $ (24,790,905)
=============================================================
ADVISOR CLASS SHARES:
Shares sold ................. 1,434,853 $ 10,567,340 4,603,907 $ 32,788,641
Shares issued in reinvestment
of distributions .......... 31,597 231,991 62,106 445,412
Shares redeemed ............. (319,243) (2,349,439) (757,009) (5,451,404)
-------------------------------------------------------------
Net increase (decrease) ..... 1,147,207 $ 8,449,892 3,909,004 $ 27,782,649
=============================================================
56 | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
directors of the Fund are also officers and/or directors of the following
subsidiaries:
- --------------------------------------------------------------------------------
SUBSIDIARY AFFILIATION
- --------------------------------------------------------------------------------
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin Templeton Services, LLC (FT Services) Administrative manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Transfer agent
Services)
A. MANAGEMENT FEES
The Fund pays an investment management fee to Advisers based on the month-end
net assets of the Fund as follows:
- -------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- -------------------------------------------------------------------------
0.625% Up to and including $100 million
0.500% Over $100 million, up to and including $250 million
0.450% Over $250 million, up to and including $10 billion
0.440% Over $10 billion, up to and including $12.5 billion
0.420% Over $12.5 billion, up to and including $15 billion
0.400% Over $15 billion, up to and including $17.5 billion
0.380% Over $17.5 billion, up to and including $20 billion
0.360% In excess of $20 billion
B. ADMINISTRATIVE FEES
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.
C. DISTRIBUTION FEES
The Fund's Board of Directors has adopted distribution plans for each share
class, with the exception of Advisor class shares, pursuant to Rule 12b-1 under
the 1940 Act. Under the Fund's Class A reimbursement distribution plan, the Fund
reimburses Disributors up to 0.10% per year of Class A's average daily net
assets for costs incurred in connection with the sale and distribution of the
Fund's shares. Under the Class A reimbursement distribution plan, costs
exceeding the maximum for the current plan year cannot be reimbursed in
subsequent periods.
Under the Fund's compensation distribution plans, the Fund pays Distributors for
costs incurred in connection with the sale and distribution of the Fund's shares
up to a certain percentage per year of its average daily net assets of each
class as follows:
Class B ................................................................ 0.65%
Class C ................................................................ 0.65%
Semiannual Report | 57
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
D. SALES CHARGES/UNDERWRITING AGREEMENTS
Distributors has advised the Fund of the following commission transactions
related to the sales and redemptions of the Fund's shares for the period:
Net sales charges received(a) ..................................... $1,351,790
Contingent deferred sales charges retained ........................ $ 278,278
(a) Net of commissions paid to unaffiliated broker/dealers.
E. TRANSFER AGENT FEES
The Fund paid transfer agent fees of $2,007,072, of which $1,376,213 was
retained by Investor Services.
4. INCOME TAXES
Net investment income (loss) differs for financial statement and tax purposes
primarily due to differing treatments of defaulted securities and bond discounts
and premiums.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales and bond discounts and
premiums.
At September 30, 2005, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
Cost of investments $12,662,869,047
================
Unrealized appreciation ..................................... $ 875,595,709
Unrealized depreciation ..................................... (49,255,838)
----------------
Net unrealized appreciation (depreciation) .................. $ 826,339,871
================
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short term securities) for the
period ended September 30, 2005, aggregated $779,765,062 and $663,945,853,
respectively.
6. CONCENTRATION OF RISK
The Fund invests a large percentage of its total assets in obligations of
issuers within California. Such concentration may subject the Funds to risks
associated with industrial or regional matters, and economic, political or legal
developments occurring within California.
58 | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
7. DEFAULTED SECURITIES
The Fund held defaulted securities and/or other securities for which the income
has been deemed uncollectible. At September 30, 2005, the value of these
securities was $30,476,685, representing 0.23% of the Fund's net assets. The
Fund discontinues accruing income on securities for which income has been deemed
uncollectible and provides an estimate for losses on interest receivable. The
securities have been identified on the accompanying Statement of Investments.
8. REGULATORY MATTERS
As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, relating to certain practices in the
mutual fund industry, including late trading, market timing and marketing
support payments to securities dealers who sell fund shares, Franklin Resources,
Inc. and certain of its subsidiaries (collectively, the "Company"), entered into
settlements with certain of those regulators.
Specifically, the Company entered into settlements with the Securities and
Exchange Commission ("SEC") concerning market timing (the "August 2, 2004 SEC
Order") and marketing support payments to securities dealers who sell fund
shares (the "December 13, 2004 SEC Order") and with the California Attorney
General's Office ("CAGO") concerning marketing support payments to securities
dealers who sell fund shares (the "CAGO Settlement"). Under the terms of the
settlements with the SEC and the CAGO, the Company retained an Independent
Distribution Consultant ("IDC") to develop a plan for distribution of the
respective settlement monies. The CAGO approved the distribution plan under the
CAGO Settlement and, in accordance with the terms and conditions of that
settlement, the monies were disbursed to the relevant funds. The Fund did not
participate in the CAGO Settlement. The SEC has not yet approved the
distribution plan pertaining to the December 13, 2004 SEC Order. When approved,
disbursements of settlement monies will be made promptly to the relevant funds,
in accordance with the terms and conditions of that order. The IDC continues to
develop the plan of distribution under the August 2, 2004 SEC Order that
resolved the SEC's market timing investigation.
In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, directors, and/or
employees, have been named in private lawsuits (styled as shareholder class
actions, or as derivative actions on behalf of either the named funds or
Franklin Resources, Inc.) relating to the industry practices described above.
The lawsuits were filed in different courts throughout the country. Many of
those suits are now pending in a multi-district litigation in the United States
District Court for the District of Maryland.
Semiannual Report | 59
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
8. REGULATORY MATTERS (CONTINUED)
The Company and fund management strongly believe that the claims made in each of
the private lawsuits referenced above are without merit and intends to defend
against them vigorously. The Company cannot predict with certainty the eventual
outcome of these lawsuits, nor whether they will have a material negative impact
on the Company. If it is determined that the Company bears responsibility for
any unlawful or inappropriate conduct that caused losses to the Fund, it is
committed to making the Fund or its shareholders whole, as appropriate.
60 | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
SHAREHOLDER INFORMATION
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT
At a meeting held July 14, 2005, the Board of Directors ("Board"), including a
majority of non-interested or independent Directors, approved renewal of the
investment advisory contract for the Fund. In reaching this decision, the Board
took into account information furnished throughout the year at regular Board
meetings, as well as information prepared specifically in connection with the
annual renewal review process. Information furnished and discussed throughout
the year included investment performance reports and related financial
information for the Fund, as well as periodic reports on shareholder services,
legal, compliance, pricing, brokerage commissions and execution and other
services provided by the Investment Manager ("Manager") and its affiliates.
Information furnished specifically in connection with the renewal process
included a report for the Fund prepared by Lipper Financial Services ("Lipper"),
an independent organization, as well as a Fund profitability analysis report
prepared by management. The Lipper report compared the Fund's investment
performance and expenses with those of other mutual funds deemed comparable to
the Fund as selected by Lipper. The Fund profitability analysis report discussed
the profitability to Franklin Templeton Investments from its overall U.S. fund
operations, as well as on an individual fund-by-fund basis. Included with such
profitability analysis report was information on a fund-by-fund basis listing
portfolio managers and other accounts they manage, as well as information on
management fees charged by the Manager including management's explanation of
differences where relevant and a three-year expense analysis with an explanation
for any increase in expense ratios. Additional information accompanying such
report was a memorandum prepared by management describing enhancements to the
services provided to the Fund by the Franklin Templeton Investments
organization, as well as a memorandum relating to economies of scale.
In considering such materials, the independent Directors received assistance and
advice from and met separately with independent counsel. In approving
continuance of the investment advisory contract for the Fund, the Board,
including a majority of independent Directors, determined that the existing
management fee structure was fair and reasonable and that continuance of the
investment advisory contract was in the best interests of the Fund and its
shareholders. While attention was given to all information furnished, the
following discusses the primary factors relevant to the Board's decision.
NATURE, EXTENT AND QUALITY OF SERVICES. The Board was satisfied with the nature
and quality of the overall services provided by the Manager and its affiliates
to the Fund and its shareholders. In addition to investment performance and
expenses of the Fund discussed later, the Board's opinion was based, in part,
upon periodic reports furnished them showing that the investment policies and
restrictions for the Fund were consistently complied with as well as other
reports periodically furnished the Board covering matters such as the compliance
of portfolio managers and other management personnel with the code of ethics
adopted throughout the Franklin Templeton fund complex, the adherence to fair
value pricing procedures established by the Board, and the accuracy of net asset
value calculations. The Board also noted the extent of benefits provided Fund
shareholders from being part of the Franklin Templeton family of funds,
including the
Semiannual Report | 61
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
right to exchange investments between the same class of funds without a sales
charge, the ability to reinvest Fund dividends into other funds and the right to
combine holdings in other funds to obtain a reduced sales charge. Favorable
consideration was given to management's efforts and expenditures in establishing
back-up systems and recovery procedures to function in the event of a natural
disaster, it being noted by the Board that such systems and procedures had
functioned smoothly during the hurricanes and blackout experienced last year in
Florida. Other factors taken into account by the Board were the Manager's best
execution trading policies as well as the compliance procedures and
qualifications of the Chief Compliance Officer established in accordance with
recently adopted SEC requirements. Consideration was also given to the
experience of the Fund's portfolio management team, the number of accounts
managed and general method of compensation. In this latter respect, the Board
noted that a primary factor in management's determination of the amount of a
portfolio manager's bonus compensation was the relative investment performance
of the funds he or she managed so as to be aligned with the interests of Fund
shareholders. The Board also took into account the transfer agent and
shareholder services provided Fund shareholders by an affiliate of the Manager,
noting continuing expenditures by management to increase and improve the scope
of such services, periodic favorable reports on such service conducted by third
parties such as Dalbar, and the firsthand experience of the individual Directors
who deal with the shareholder services department in their capacities as
shareholders in one or more of the various Franklin Templeton funds.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment
performance of the Fund in view of its importance to shareholders. While
consideration was given to performance reports and discussions with portfolio
managers at Board meetings during the year, particular attention in assessing
such performance was given to the Lipper report furnished for the contract
renewal. The Lipper report prepared for the Fund showed the investment
performance of its Class A shares for the one year ended May 31, 2005, as well
as the previous ten years ended that date in comparison to a performance
universe consisting of the Fund and all retail and institutional California
municipal debt funds as selected by Lipper. The Lipper report showed the Fund's
income return for the one-year period, as well as for each of the previous
three-, five- and ten-year periods on an annualized basis, was in the highest
quintile of its performance universe. The Lipper report also showed the Fund's
total return for the one-year period was in the highest quintile of the
performance universe, and on an annualized basis was also in the highest
quintile for the previous three-year period, and was in the second highest
quintile of such universe for the previous five- and ten-year periods. The Board
expressed its satisfaction with such performance.
62 | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the
management fee and total expense ratios of the Fund compared with those of a
group of other funds selected by Lipper as its appropriate Lipper expense group
under the Lipper report. Prior to making such comparison, the Board relied upon
a survey showing that the scope of management advisory services covered under
the Fund's investment advisory contract was similar to those provided by fund
managers to other mutual fund groups that would be used as a basis of comparison
in the Lipper report. In reviewing comparative costs, emphasis was given to the
Fund's management fee in comparison with the effective management fee that would
have been charged by other funds within its Lipper expense group assuming they
were the same size as the Fund, as well as the actual total expenses of the Fund
in comparison with those of its Lipper expense group. The Lipper effective
management fee analysis includes administrative charges as being part of a
management fee and total expenses, for comparative consistency, are shown by
Lipper for Fund Class A shares. The results of such expense comparisons showed
the Fund's effective management fee rate to be below the median of its Lipper
expense group and its actual total expenses to be in the lowest quintile of such
expense group including 12b-1 fees, and in the second loweset quintile where
expenses were computed on a basis that excluded 12b-1 fees. The Board was
satisfied with the management fee and total expenses of the Fund in comparison
to those of its Lipper expense group as shown in the Lipper report.
MANAGEMENT PROFITABILITY. The Board also considered the level of profits
realized by the Manager and its affiliates in connection with the operation of
the Fund. In this respect, the Board reviewed the Fund profitability analysis
that addresses the overall profitability of Franklin Templeton's U.S. fund
business, as well as its profits in providing management and other services to
the Fund. The Board also considered the extent to which the Manager and its
affiliates might derive ancillary benefits from fund operations, including
potential benefits resulting from allocation of fund brokerage and the use of
"soft" commission dollars to pay for research. Specific attention was given to
the methodology followed in allocating costs to the Fund, it being recognized
that allocation methodologies are inherently subjective and various allocation
methodologies may each be reasonable while producing different results. In this
respect, the Board noted that the cost allocation methodology was consistent
with that followed in profitability report presentations for the Fund made in
prior years and that it had engaged on a biennial basis the Fund's independent
accountants to perform certain procedures specified by the Board solely for its
purpose and use. It was also noted that legal costs and payments incurred by
Franklin Templeton in resolving various legal proceedings arising from its U.S.
fund operations had not been allocated to the Fund for purposes of determining
profitability. Included in the analysis for the Fund were the revenue and
related costs broken down separately from the management, underwriting and
shareholder services functions provided by the Manager and its affiliates to the
Fund, as well as the relative contribution of the Fund to the profitability of
the Manager's parent. In reviewing and discussing such analysis, management
discussed with the Board its belief that costs incurred in establishing the
infrastructure necessary to the type of mutual fund operations conducted by the
Manager and
Semiannual Report | 63
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
its corporate affiliates may not be fully reflected in the expenses allocated to
the Fund in determining its profitability, as well as the fact that the level of
profits, to a certain extent, reflected operational cost savings and
efficiencies initiated by management. The Board also took into account
management's expenditures in improving shareholder services provided the Fund,
as well as the need to meet additional regulatory and compliance requirements
resulting from the Sarbanes-Oxley Act and recent SEC requirements. In addition,
the Board considered a third-party study comparing the profitability of the
Manager's parent on an overall basis as compared to other publicly held managers
broken down to show profitability from management operations exclusive of
distribution expenses, as well as profitability including distribution expenses.
Based upon their consideration of all these factors, the Board determined that
the level of profits realized by the Manager under its investment advisory
contract with the Fund was not excessive in view of the nature, quality and
extent of services provided.
ECONOMIES OF SCALE. The Board also considered whether economies of scale are
realized by the Manager as the Fund grows larger and the extent to which this is
reflected in the level of management fees charged. While recognizing that any
precise determination is inherently subjective, the Board noted that based upon
the Fund profitability analysis, it appears that as some funds get larger, at
some point economies of scale do result in the Manager realizing a larger profit
margin on management services provided such a fund. The Board also noted that
economies of scale are shared with a fund and its shareholders through
management fee breakpoints so that as a fund grows in size, its effective
management fee rate declines. The fee structure under the Fund's investment
advisory contract provides an initial fee of 0.625% on the first $100 million of
net assets; 0.50% on the next $150 million of net assets; 0.45% on the next
$9.75 billion of net assets; 0.44% on the next $2.5 billion of net assets; and
thereafter declines by 0.02% for each subsequent $2.5 billion of net assets
until it reaches a final breakpoint of 0.36% for assets in excess of $20
billion. The Fund's net assets were approximately $13.5 billion at June 30,
2005, and the Board believed that to the extent any economies of scale may be
realized by the Manager and its affiliates, the schedule of fees under the
investment advisory contract provides a sharing of benefits with the Fund and
its shareholders.
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. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the U.S. Securities and Exchange
Commission's website at sec.gov and reflect the most recent 12-month period
ended June 30.
64 | Semiannual Report
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
SHAREHOLDER INFORMATION (CONTINUED)
QUARTERLY STATEMENT OF INVESTMENTS
The Fund files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.
Semiannual Report | 65
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LITERATURE REQUEST
LITERATURE REQUEST. TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT
1-800/DIAL BEN(R) (1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS
SHOULD CAREFULLY CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES
BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE
CAREFULLY READ THE PROSPECTUS BEFORE INVESTING. To ensure the highest quality of
service, we may monitor, record and access telephone calls to or from our
service departments. These calls can be identified by the presence of a regular
beeping tone.
FRANKLIN TEMPLETON 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
Mutual Discovery 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(2)
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund(3)
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
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 Technology Fund
Franklin Utilities Fund
Mutual Financial Services Fund
ASSET ALLOCATION
Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
TARGET FUNDS
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund(4)
Franklin's AGE High Income Fund
Franklin Floating Rate Daily Access Fund
Franklin Income Fund
Franklin Limited Maturity U.S. Government Securities Fund(4)
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund(4)
Templeton Global Bond Fund
Templeton Income Fund
TAX-FREE INCOME(5)
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free IncomeFund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(6)
LIMITED-TERM FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund
INTERMEDIATE-TERM FUNDS
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund
STATE-SPECIFIC
Alabama
Arizona
California(7)
Colorado
Connecticut
Florida(7)
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(6)
Michigan(6)
Minnesota(6)
Missouri
New Jersey
New York(7)
North Carolina
Ohio(7)
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance Products Trust(8)
(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 and select retirement
plans.
(3) The fund is a continuously offered, closed-end fund. Shares may be
purchased daily; there is no daily redemption. However, each quarter,
pending board approval, the fund will authorize the repurchase of 5%-25%
of the outstanding number of shares. Investors may tender all or a portion
of their shares during the tender period.
(4) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
(5) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are
generally taxable.
(6) Portfolio of insured municipal securities.
(7) 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).
(8) The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
09/05 Not part of the semiannual report
[LOGO](R)
FRANKLIN(R) TEMPLETON(R) One Franklin Parkway
INVESTMENTS San Mateo, CA 94403-1906
|_| WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
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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
Authorized for distribution only when accompanied or preceded by a prospectus.
Investors should carefully consider a fund's investment goals, risks, charges
and expenses before investing. The prospectus contains this and other
information; please read it carefully before investing.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
112 S2005 11/05
ITEM 2. CODE OF ETHICS.
(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy
of its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The Registrant has an audit committee financial expert serving on its
audit committee.
(2) The audit committee financial 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 6. SCHEDULE OF INVESTMENTS. N/A
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES. N/A
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT
COMPANIES. N/A
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS. N/A
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have
been no changes to the procedures by which shareholders may recommend nominees
to the Registrant's Board of Directors that would require disclosure herein.
ITEM 11. CONTROLS AND PROCEDURES.
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
ITEM 12. EXHIBITS.
(a) (1) Code of Ethics
(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, 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, INC.
By /s/JIMMY D. GAMBILL
-------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date November 21, 2005
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
-------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date November 21, 2005
By /s/GALEN G. VETTER
------------------
Galen G. Vetter
Chief Financial Officer
Date November 21, 2005