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
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
---------------------------------------------------
(Exact name of registrant as specified in charter)
ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Address of principal executive offices) (Zip code)
CRAIG S. TYLE, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
--------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 650 312-2000
------------
Date of fiscal year end: 3/31
----
Date of reporting period: 9/30/09
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ITEM 1. REPORTS TO STOCKHOLDERS.
SEPTEMBER 30, 2009
SEMIANNUAL REPORT
AND SHAREHOLDER LETTER
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TAX-FREE INCOME
FRANKLIN
CALIFORNIA TAX-FREE INCOME FUND
[FRANKLIN TEMPLETON INVESTMENTS LOGO]
FRANKLIN - Templeton - Mutual Series
Franklin Templeton Investments
GAIN FROM OUR PERSPECTIVE(R)
Franklin Templeton's distinct multi-manager
structure combines the specialized expertise of
three world-class investment management groups --
Franklin, Templeton and Mutual Series.
SPECIALIZED EXPERTISE Each of our portfolio management groups operates
autonomously, relying on its own research and
staying true to the unique investment disciplines
that underlie its success.
FRANKLIN. Founded in 1947, Franklin is a recognized
leader in fixed income investing and also brings
expertise in growth- and value-style U.S. equity
investing.
TEMPLETON. Founded in 1940, Templeton pioneered
international investing and, in 1954, launched what
has become the industry's oldest global fund.
Today, with offices in over 25 countries, Templeton
offers investors a truly global perspective.
MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what
it believes are undervalued stocks, as well as
arbitrage situations and distressed securities.
TRUE DIVERSIFICATION Because our management groups work
independently and adhere to different investment
approaches, Franklin, Templeton and Mutual Series
funds typically have distinct portfolios. That's
why our funds can be used to build truly
diversified allocation plans covering every major
asset class.
RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we
seek to consistently provide investors with
exceptional risk-adjusted returns over the long
term, as well as the reliable, accurate and
personal service that has helped us become one of
the most trusted names in financial services.
MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
[GRAPHIC]
Not part of the semiannual report
Contents
SHAREHOLDER LETTER ........................................................ 1
SEMIANNUAL REPORT
Franklin California Tax-Free Income Fund .................................. 4
Performance Summary ....................................................... 10
Your Fund's Expenses ...................................................... 13
Financial Highlights and Statement of Investments ......................... 15
Financial Statements ...................................................... 44
Notes to Financial Statements ............................................. 48
Shareholder Information ................................................... 56
Shareholder Letter
Dear Shareholder:
In the third quarter of 2009, U.S. economic activity showed improvement
over that of the previous quarters. Recent economic releases pointed to an
easing of the global recession. Although most economists predicted
positive U.S growth for the second half of 2009, many expected growth
would be sluggish as consumers and the financial system continued to climb
out of debt.
The municipal bond market experienced a healthy rebound in the six-month
period under review. Most major financial markets showed signs of recovery
as well, and equity markets staged a strong rally since March.
The federal funds target rate remained unchanged over the period; however,
the Federal Reserve Board (Fed) was very active. In response to the
financial crisis in 2008, the Fed not only cut the federal funds target
rate to a 0% to 0.25% range, it also employed other strategies to help
stem the crisis, resulting in a substantial increase in its balance sheet.
The Fed established various lending and liquidity facilities and through
quantitative easing purchased mortgage securities and Treasuries, all in
an effort to encourage long interest rates to move lower. However,
Treasury yields increased over the period as 2008's flight to quality
started to reverse.
Treasury and Fed policies implemented in the fourth quarter of 2008 and in
2009 helped the markets recover somewhat from the panic that gripped them
in the fourth quarter of 2008. With improved confidence in the banking
system, financial markets started a process of repair. Treasury bond
yields hit their low for the year in December 2008 and U.S. equity markets
bottomed in the first quarter of 2009. As financial markets moved off
their lows, commodity prices rebounded. Overall inflation, however,
remained tame. The Fed chairman began
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Not part of the semiannual report | 1
to prepare markets for the unwinding of the Fed's accommodative monetary
policy and the exit strategy for its lending and liquidity facilities. At
this point, the timing of these actions is uncertain.
The municipal bond market also started to bounce back in the first quarter
of 2009. For the six months under review, the Barclays Capital (BC)
Municipal Bond Index returned +9.38%, and securities with maturities 22
years and longer, which make up a good portion of our long-term fund,
returned +17.86%.(1)
Although it looked as if the banking and financial crisis may have turned
the corner and economic recovery was under way, we think a note of caution
is warranted. We believe such areas of the economy as employment, housing,
state and local government budgets, and the finance and banking sector
will continue to face challenges and show signs of pressure for an
indefinite period.
We believe it is especially important during uncertain times to keep a
clear head and long-term outlook and to consult with your financial
advisor. Your financial advisor can review your portfolio and help you
reassess your needs, goals and risk tolerance. Investors with discipline
and a sound investment plan may find favorable long-term opportunities
when markets decline.
In the enclosed semiannual report for Franklin California Tax-Free Income
Fund, the portfolio managers discuss municipal bond market conditions,
investment decisions and Fund performance during the period. You can also
find other performance data and financial information. Please remember
that all securities markets fluctuate, as do mutual fund share prices.
Municipal bonds provide tax-free income and diversification from equities.
Despite periods of volatility, municipal bonds have a solid long-term
record of performance, driven mostly by their income component.
1. Source: (C) 2009 Morningstar. All Rights Reserved. The information contained
herein: (1) is proprietary to Morningstar and/or its content providers; (2) may
not be copied or distributed; and (3) is not warranted to be accurate, complete
or timely. Neither Morningstar nor its content providers are responsible for any
damages or losses arising from any use of this information. Past performance is
no guarantee of future results. The BC Municipal Bond Index is a market
value-weighted index engineered for the long-term tax-exempt bond market. To be
included in the index, bonds must be fixed rate, have at least one year to final
maturity and be rated investment grade (Baa3/BBB- or higher) by at least two of
the following agencies: Moody's, Standard & Poor's or Fitch. The BC Municipal
Long Bond Index is the long (22+ years) component of the BC Municipal Bond
Index.
Not part of the semiannual report | 2
Please check our website at FRANKLINTEMPLETON.COM for special portfolio manager
commentary. Although market conditions are constantly changing, we remain
committed to our disciplined strategy as we manage the Fund, keeping in mind the
trust you have placed in us. We appreciate your confidence and encourage you to
contact us when you have questions about your Franklin Templeton tax-free
investment.
Sincerely,
/s/ Charles B. Johnson
- ----------------------------
Charles B. Johnson
Chairman
Franklin California Tax-Free Income Fund
/s/ Sheila Amoroso
- ----------------------------
Sheila Amoroso
/s/ Rafael R. Costas Jr.
- ----------------------------
Rafael R. Costas Jr.
Senior Vice Presidents and Co-Directors
Franklin Municipal Bond Department
THIS LETTER REFLECTS OUR ANALYSIS AND OPINIONS AS OF SEPTEMBER 30, 2009. THE
INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, COUNTRY,
INDUSTRY, SECURITY OR FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE.
Not part of the semiannual report | 3
Semiannual Report
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 (for California residents) 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)
CREDIT QUALITY BREAKDOWN*
Based on Total Long-Term Investments as of 9/30/09**
[PIE CHART]
AAA ..................... 23.2%
AA ...................... 14.9%
A ....................... 32.5%
BBB ..................... 17.4%
Below Investment Grade... 6.1%
Not Rated by S&P ........ 5.9%
* Standard & Poor's (S&P) is the primary independent rating agency; Moody's is
the secondary rating agency. Securities not rated by an independent rating
agency are assigned comparable internal ratings. Ratings for securities not
rated by S&P are in the table below. The letter ratings are provided to
indicate creditworthiness of the Fund's bond holdings and generally can range
from AAA or Aaa (highest) to Below Investment Grade (lowest).
** Does not include short-term investments and other net assets.
RATINGS MOODY'S INTERNAL
- ---------------------- ------- --------
AAA or Aaa 0.2% 1.2%
AA or Aa 0.3% --
A 1.3% 0.6%
BBB or Baa 1.2% 1.0%
Below Investment Grade -- 0.1%
------- --------
Total 3.0% 2.9%
======= ========
We are pleased to bring you Franklin California Tax-Free Income Fund's
semiannual report for the period ended September 30, 2009.
1. For investors subject to alternative minimum tax, a small portion of Fund
dividends may be taxable. Distributions of capital gains are generally
taxable. To avoid imposition of 28% backup withholding on all Fund
distributions and redemption proceeds, U.S. investors must be properly
certified on Form W-9 and non-U.S. investors on Form W-8BEN.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 19.
4 | Semiannual Report
DIVIDEND DISTRIBUTIONS*
DIVIDEND PER SHARE
----------------------------------------------------
MONTH CLASS A CLASS B CLASS C ADVISOR CLASS
- ----- ---------- ---------- ---------- -------------
April 2.80 cents 2.51 cents 2.52 cents 2.85 cents
May 2.80 cents 2.51 cents 2.52 cents 2.85 cents
June 2.80 cents 2.49 cents 2.49 cents 2.84 cents
July 2.80 cents 2.49 cents 2.49 cents 2.84 cents
August 2.80 cents 2.49 cents 2.49 cents 2.84 cents
September 2.80 cents 2.48 cents 2.50 cents 2.86 cents
* Assumes shares were purchased and held for the entire accrual period, which
differs from the calendar month. Since dividends accrue daily, your actual
distributions will vary depending on the date you purchased your shares and
any account activity. All Fund distributions will vary depending upon current
market conditions, and past distributions are not indicative of future trends.
PERFORMANCE OVERVIEW
The Fund's Class A share price, as measured by net asset value, increased from
$6.42 on March 31, 2009, to $7.19 on September 30, 2009. The Fund's Class A
shares paid dividends totaling 16.80 cents per share for the reporting
period.(2) The Performance Summary beginning on page 10 shows that at the end of
this reporting period the Fund's Class A shares' distribution rate was 4.47%
based on an annualization of the 2.80 cent per share September dividend and the
maximum offering price of $7.51 on September 30, 2009. An investor in the 2009
maximum combined effective federal and California personal income tax bracket of
41.05% would need to earn a distribution rate of 7.58% 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.
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL (800) 342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
STATE UPDATE
During the six months under review, California's large and diverse economy
remained mired in recession amid a series of budgetary crises. With a gross
state product of $1.8 trillion, the state is responsible for 13% of U.S. gross
domestic product.(3) If California were a country, it would have the tenth
largest economy in the world. Yet, like nearly all U.S. states impacted by the
deepest recession in 70 years, California's economy remained very weak through
the first nine months
2. All Fund distributions will vary depending upon current market conditions,
and past distributions are not indicative of future trends.
3. Source: Moody's Investors Service, "Rating Update: Moody's Confirms Baa1
Rating on State of California and Removes Credit from Watchlist; Outlook is
Stable," 8/21/09.
Semiannual Report | 5
PORTFOLIO BREAKDOWN
9/30/09
% OF TOTAL
LONG-TERM INVESTMENTS*
----------------------
Prerefunded 22.2%
Transportation 18.1%
Hospital & Health Care 17.6%
General Obligation 13.6%
Utilities 12.3%
Subject to Government Appropriations 5.9%
Tax-Supported 4.6%
Higher Education 2.3%
Other Revenue 1.9%
Housing 1.5%
* Does not include short-term investments and other net assets.
of 2009 and its unemployment rate rose sharply to 12.2% by September, higher
than the 9.8% national rate and a significant jump from the state's prerecession
low of 4.8% reached in late 2006.(4) Construction employment led the declines as
the state's depressed housing market improved only marginally from historically
low levels, while commercial real estate had not rebounded at all by period-end.
Weak revenue collections, limited financial flexibility and a difficult
political environment were among several elements making the state financially
vulnerable. Projections for the fiscal year 2010 budget gap grew through the
spring and summer of 2009, after voters in a special statewide election did not
approve a proposal to issue deficit bonds backed by lottery revenues, and as tax
revenue collections underperformed.
In late July, budget amendments were finally passed to solve the current 2010
fiscal year's estimated $24 billion budget gap, but this was done largely with
one-time solutions that will likely result in further budget gaps in upcoming
years.(5) The budget amendments provide more than $23 billion through a
combination of cuts, raids on local funds, accounting maneuvers, and one-time
revenues.(5) Of the $14 billion in cuts, most went to schools; social services
were also curtailed under the plan.(5) An additional $4 billion came from local
governments, with another $4 billion from accounting shifts, other borrowing and
the assumed sale of the State Compensation Insurance Fund.(5) In response, most
local governments will cut services, implement additional layoffs and make fewer
capital improvements to their communities. It also brought general fund spending
for the state in fiscal year 2010 down to about $80 billion, a 20% decline from
the $100 billion budgeted for fiscal year 2009.(5) After the passage of the
budget amendments, the state controller in September announced he would stop
making payments with IOUs; the inherent volatility signified and created by the
emergency stopgap of an IOU program had been a major credit rating concern among
independent credit rating agencies. This year's solutions will come at the cost
of projected budget gaps in future years of up to $15 billion as the state
anticipates significant structural imbalances in fiscal year 2011 and beyond as
it seeks to maintain operations while repaying local governments and schools,
with interest, for this year's cuts and borrowing.(5)
With California's finances under extreme duress, the state's credit rating was
downgraded three notches since February 2009. The most recent credit rating
setback -- a two-notch downgrade to Baa1 from A2 by independent credit rating
agency Moody's Investors Service -- reflected the increased risk to legally
4. Source: Bureau of Labor Statistics.
5. Source: Moody's Investors Service, "Special Comment: California Adopts Budget
Solutions," July 2009.
6 | Semiannual Report
required payments as the budget deadlock continued and the controller began
issuing IOUs for non-priority payments.(6) By late August, Moody's reviewed and
confirmed the current rating. It also removed the rating from its watch list for
possible further downgrade and said the state's credit outlook was stable.
Nonetheless, the current rating reflected the state's extraordinary fiscal
pressures when compared with most other U.S. states, and more specifically the
likelihood for increased short-term borrowing.
MUNICIPAL BOND MARKET OVERVIEW
During the six-month period ended September 30, 2009, the municipal bond market
posted an impressive +9.38% total return, as measured by the Barclays Capital
(BC) Municipal Bond Index.(7) The last time the same index posted an April
through September return of this magnitude was 1982; such returns are atypical
for the usually docile municipal bond market.(7) In comparison, over the past 10
years, the average six-month total return for the BC Municipal Bond Index was
+2.59%.(7) The municipal bond market posted not only strong absolute performance
but also strong relative performance when compared to the Treasury market, as
the BC U.S. Treasury Index had a +0.98% total return for the reporting
period.(8)
Among the many factors that affected municipal bond prices during the
six-month period, confidence over issuers' abilities to repay funds, the
purchasing power of those repaid dollars, and the supply of tax-free municipal
bonds had a major impact on municipal bond prices. Due to a changing economic
landscape, rating downgrades of bond insurers, and reconciliation between
corporate and municipal rating scales, many municipal bonds were re-rated during
the period. In the second and third quarters of 2009, Moody's elevated the
ratings of 185 state and local government sector issues while downgrading 120.
Recent positive rating actions coupled with a long-term default rate for
investment-grade municipal bonds of less than 1% helped remind investors of the
asset class's historical underlying credit strength.(9) Investor interest also
increased for lower
6. This does not indicate Moody's rating of the Fund.
7. Source: (C) 2009 Morningstar. All Rights Reserved. The information contained
herein: (1) is proprietary to Morningstar and/or its content providers; (2)
may not be copied or distributed; and (3) is not warranted to be accurate,
complete or timely. Neither Morningstar nor its content providers are
responsible for any damages or losses arising from any use of this
information. Past performance is no guarantee of future results. The BC
Municipal Bond Index is a market value-weighted index engineered for the
long-term tax-exempt bond market. To be included in the index, bonds must be
fixed rate, have at least one year to final maturity and be rated investment
grade (Baa3/BBB- or higher) by at least two of the following agencies:
Moody's, Standard & Poor's or Fitch.
8. Source: (C) 2009 Morningstar. The BC U.S. Treasury Index is the U.S. Treasury
component of the U.S. Government Index and covers public obligations of the
U.S. Treasury with a remaining maturity of one year or more.
9. Source: Standard & Poor's, "U.S. Municipal Ratings Transitions and Defaults,
1986-2009," RATINGSDIRECT, 3/11/09.
Semiannual Report | 7
investment-grade and speculative-grade issues during the reporting period, which
drove the BC Baa Municipal Bond Index up 20.55%, compared with the BC Aaa
Municipal Bond Index's +5.71% total return.(10)
From March through September 2009, each month's annualized inflation rate as
measured by the Consumer Price Index (CPI) was negative, marking the first
12-month declines since 1955.(4) Historically, a low inflation outlook has
provided confidence for fixed income investors that future cash flow from their
bond investments will retain purchasing power. However, a Congressional Budget
Office estimate for temperate inflation did not cause the yield curve to level
off, and the yield difference between short- and long-term municipal bonds
averaged a spread of 435 basis points (100 basis points equal one percentage
point) for the six-month period, as measured by the Securities Industry and
Financial Market Association (SIFMA) 7-Day Index and the Bloomberg Fair Value
30-Year AAA Index.(11) The 10-year average using the same indexes was 246 basis
points.(11)
Tax-free bond supply also affected municipal bond market performance over the
past six months. Thus far in 2009, tax-exempt bond issuance contracted 10.1%
compared with the same period in 2008.(12) The lack of tax-free offerings left
investors with fewer bonds to construct their portfolios and helped drive
municipal bond prices higher. Details of the supply picture during the period
are noteworthy because the way municipalities accessed capital markets underwent
a structural change. In February 2009 the American Recovery and Reinvestment Act
was signed into law, allowing municipalities to issue taxable bonds and receive
a 35% federal government subsidy for all coupon payments distributed to
investors for the life of the bonds. This rebate allowed municipalities to
borrow significantly below their after-tax cost in the traditional tax-exempt
municipal bond market. These new municipal bonds, known as Build America Bonds,
are likely to suppress future supply of tax-exempt municipal bonds as long as
the government permits their use.
Given various ratings changes, a relatively steep yield curve, and the reduced
supply during the reporting period, we looked for opportunities to keep
portfolios fully invested in longer term maturity bonds, which supported our
Funds'
10. Source: (C) 2009 Morningstar. The BC Baa Municipal Bond Index is the Baa
credit quality component of the BC Municipal Bond Index. The BC Aaa
Municipal Bond Index is the Aaa credit quality component of the BC Municipal
Bond Index.
11. Sources: Thomson Financial; Bloomberg LP. The SIFMA 7-Day Index is produced
by Municipal Market Data and is composed of actual auction rate securities
issues provided by broker dealers and auction agents. The Bloomberg Fair
Value 30-Year AAA Index is an index derived from data points on Bloomberg's
option-free Fair Market Curve consisting of municipal general obligation
bonds.
12. Source: THE BOND BUYER (www.bondbuyer.com), 10/1/09.
8 | Semiannual Report
dividend distributions. At period-end, we continued to be active in the market
and felt that municipal bonds at current yields represented an attractive
long-term opportunity. As of September 30, 2009, yields for 10- and 30-year
high-grade municipal bonds continued to exceed comparable Treasury yields, which
is highly unusual.
INVESTMENT STRATEGY
We use a consistent, disciplined strategy seeking to maximize income for our
shareholders by trying to maintain exposure to higher coupon securities to the
extent we believe is prudent. 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 can become well diversified with a broad range of securities. Broad
diversification may help mitigate interest rate risk. We do not use leverage or
exotic derivatives, nor do we use techniques that we believe could add
volatility and contribute to underperformance in adverse markets. We seek to
stay fully invested to maximize income distribution.
MANAGER'S DISCUSSION
The mixture of our value-oriented philosophy of investing primarily for income
and a positively sloping municipal yield curve favored the use of longer-term
bonds. Consequently, 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.
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, 2009, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT
OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, STATE,
INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE, BUT THE INVESTMENT MANAGER MAKES NO REPRESENTATION OR WARRANTY AS TO
THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT
MANAGEMENT PHILOSOPHY.
Semiannual Report | 9
Performance Summary as of 9/30/09
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table does not reflect any taxes that a
shareholder would pay on Fund dividends, capital gain distributions, if any, or
any realized gains on the sale of Fund shares. Total return reflects
reinvestment of the Fund's dividends and capital gain distributions, if any, and
any unrealized gains or losses.
PRICE AND DISTRIBUTION INFORMATION
CLASS A (SYMBOL: FKTFX) CHANGE 9/30/09 3/31/09
- ----------------------- ------ ------- -------
Net Asset Value (NAV) +$0.77 $ 7.19 $ 6.42
DISTRIBUTIONS (4/1/09 - 9/30/09)
Dividend Income $0.1680
CLASS B (SYMBOL: FCABX) CHANGE 9/30/09 3/31/09
- ----------------------- ------ ------- -------
Net Asset Value (NAV) +$0.77 $ 7.18 $ 6.41
DISTRIBUTIONS (4/1/09 - 9/30/09)
Dividend Income $0.1497
CLASS C (SYMBOL: FRCTX) CHANGE 9/30/09 3/31/09
- ----------------------- ------ ------- -------
Net Asset Value (NAV) +$0.77 $ 7.18 $ 6.41
DISTRIBUTIONS (4/1/09 - 9/30/09)
Dividend Income $0.1501
ADVISOR CLASS (SYMBOL: FCAVX) CHANGE 9/30/09 3/31/09
- ----------------------------- ------ ------- -------
Net Asset Value (NAV) +$0.77 $ 7.18 $ 6.41
DISTRIBUTIONS (4/1/09 - 9/30/09)
Dividend Income $0.1708
10 | Semiannual Report
Performance Summary (CONTINUED)
PERFORMANCE
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURN
INCLUDES MAXIMUM SALES CHARGES. CLASS A: 4.25% MAXIMUM INITIAL SALES CHARGE;
CLASS B: CONTINGENT DEFERRED SALES CHARGE (CDSC) DECLINING FROM 4% TO 1% OVER
SIX YEARS, AND ELIMINATED THEREAFTER; CLASS C: 1% CDSC IN FIRST YEAR ONLY;
ADVISOR CLASS: NO SALES CHARGES.
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------------ ------------- ------ ------ -------
Cumulative Total Return(1) +14.89% +14.49% +25.91% +68.98%
Average Annual Total Return(2) +6.30% +9.68% +3.81% +4.93%
Distribution Rate(3) 4.47%
Taxable Equivalent Distribution Rate(4) 7.58%
30-Day Standardized Yield(5) 3.77%
Taxable Equivalent Yield(4) 6.39%
Total Annual Operating Expenses(6) 0.57%
CLASS B 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------------ ------------- ------ ------ -------
Cumulative Total Return(1) +14.60% +13.85% +22.42% +61.38%
Average Annual Total Return(2) +6.69% +9.85% +3.79% +4.90%
Distribution Rate(3) 4.14%
Taxable Equivalent Distribution Rate(4) 7.02%
30-Day Standardized Yield(5) 3.40%
Taxable Equivalent Yield(4) 5.77%
Total Annual Operating Expenses(6) 1.13%
CLASS C 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------------ ------------ ------ ------- -------
Cumulative Total Return(1) +14.60% +13.87% +22.45% +59.64%
Average Annual Total Return(2) +9.87% +12.87% +4.13% +4.79%
Distribution Rate(3) 4.18%
Taxable Equivalent Distribution Rate(4) 7.09%
30-Day Standardized Yield(5) 3.40%
Taxable Equivalent Yield(4) 5.77%
Total Annual Operating Expenses(6) 1.13%
ADVISOR CLASS(7) 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------------ ------------ ------ ------- -------
Cumulative Total Return(1) +14.97% +14.61% +26.48% +69.96%
Average Annual Total Return(2) +14.97% +14.61% +4.81% +5.45%
Distribution Rate(3) 4.78%
Taxable Equivalent Distribution Rate(4) 8.11%
30-Day Standardized Yield(5) 4.02%
Taxable Equivalent Yield(4) 6.82%
Total Annual Operating Expenses(6) 0.48%
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 (800) 342-5236.
Semiannual Report | 11
Performance Summary (CONTINUED)
ENDNOTES
BECAUSE MUNICIPAL BONDS ARE SENSITIVE TO INTEREST RATE MOVEMENTS, THE FUND'S
YIELD AND SHARE PRICE WILL FLUCTUATE WITH MARKET CONDITIONS. BOND PRICES
GENERALLY MOVE IN THE OPPOSITE DIRECTION OF INTEREST RATES. THUS, AS PRICES OF
BONDS IN THE FUND ADJUST TO A RISE IN INTEREST RATES, THE FUND'S SHARE PRICE MAY
DECLINE. SINCE THE FUND CONCENTRATES ITS INVESTMENTS IN A SINGLE STATE, IT IS
SUBJECT TO GREATER RISK OF ADVERSE ECONOMIC AND REGULATORY CHANGES IN THAT STATE
THAN A GEOGRAPHICALLY DIVERSIFIED FUND. THE FUND'S PROSPECTUS ALSO INCLUDES A
DESCRIPTION OF THE MAIN INVESTMENT RISKS.
CLASS B: These shares have higher annual fees and expenses than Class A
shares.
CLASS C: Prior to 1/1/04, these shares were offered with an initial sales
charge; thus actual total returns would have differed. These
shares have higher annual fees and expenses than Class A shares.
ADVISOR CLASS: Shares are available to certain eligible investors as
described in the prospectus.
1. Cumulative total return represents the change in value of an investment over
the periods indicated.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated. Six-month return has not been
annualized.
3. Distribution rate is based on an annualization of the respective class's
September dividend and the maximum offering price (NAV for Classes B, C and
Advisor) per share on 9/30/09.
4. Taxable equivalent distribution rate and yield assume the published rates as
of 6/29/09 for the maximum combined effective federal and California personal
income tax rate of 41.05%, based on the federal income tax rate of 35.00%.
5. The 30-day standardized yield for the 30 days ended 9/30/09 reflects an
estimated yield to maturity (assuming all portfolio securities are held to
maturity). It should be regarded as an estimate of the Fund's rate of investment
income, and it may not equal the Fund's actual income distribution rate (which
reflects the Fund's past dividends paid to shareholders) or the income reported
in the Fund's financial statements.
6. Figures are as stated in the Funds prospectus current as of the date of this
report. In periods of market volatility, assets may decline significantly,
causing total annual Fund operating expenses to become higher than the figures
shown.
7. Effective 10/1/01, 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 +45.53% and +4.80%.
12 | Semiannual Report
Your Fund's Expenses
As a Fund shareholder, you can incur two types of costs:
- - Transaction costs, including sales charges (loads) on Fund purchases; and
- - Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
Semiannual Report | 13
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES.
Therefore, the second line for each class is useful in comparing ongoing costs
only, and will not help you compare total costs of owning different funds. In
addition, if transaction costs were included, your total costs would have been
higher. Please refer to the Fund prospectus for additional information on
operating expenses.
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 4/1/09 VALUE 9/30/09 PERIOD* 4/1/09-9/30/09
- ---------------------------------------- ----------------- -------------- -----------------------
Actual $ 1,000 $ 1,148.90 $ 3.12
Hypothetical (5% return before expenses) $ 1,000 $ 1,022.16 $ 2.94
CLASS B
Actual $ 1,000 $ 1,146.00 $ 6.08
Hypothetical (5% return before expenses) $ 1,000 $ 1,019.40 $ 5.72
CLASS C
Actual $ 1,000 $ 1,146.00 $ 6.08
Hypothetical (5% return before expenses) $ 1,000 $ 1,019.40 $ 5.72
ADVISOR CLASS
Actual $ 1,000 $ 1,149.70 $ 2.59
Hypothetical (5% return before expenses) $ 1,000 $ 1,022.66 $ 2.43
* Expenses are calculated using the most recent six-month expense ratio,
annualized for each class (A: 0.58%; B: 1.13%; C: 1.13%; and Advisor:
0.48%), multiplied by the average account value over the period,
multiplied by 183/365 to reflect the one-half year period.
14 | Semiannual Report
Franklin California Tax-Free Income Fund
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED
SEPTEMBER 30, 2009 YEAR ENDED MARCH 31,
CLASS A (UNAUDITED) 2009 2008 2007 2006 2005
--------------------------------------------------------------------------------------------------
PER SHARE OPERATING
PERFORMANCE
(for a share outstanding
throughout the period)
Net asset value, beginning
of period ................. $ 6.42 $ 6.99 $ 7.35 $ 7.26 $ 7.27 $ 7.32
--------------------------------------------------------------------------------------------------
Income from investment
operations(a):
Net investment
income(b) ................ 0.17 0.33 0.33 0.33 0.33 0.34
Net realized and
unrealized
gains (losses) .......... 0.77 (0.57) (0.37) 0.10 --(c) (0.04)
--------------------------------------------------------------------------------------------------
Total from investment
operations ................ 0.94 (0.24) (0.04) 0.43 0.33 0.30
--------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income ..... (0.17) (0.33) (0.32) (0.33) (0.33) (0.34)
Net realized gains ........ -- -- -- (0.01) (0.01) (0.01)
--------------------------------------------------------------------------------------------------
Total distributions .......... (0.17) (0.33) (0.32) (0.34) (0.34) (0.35)
--------------------------------------------------------------------------------------------------
Redemption fees(d) ........... -- --(c) --(c) --(c) --(c) --(c)
--------------------------------------------------------------------------------------------------
Net asset value, end of
period ..................... $ 7.19 $ 6.42 $ 6.99 $ 7.35 $ 7.26 $ 7.27
==================================================================================================
Total return(e) .............. 14.89% (3.56)% (0.53)% 6.01% 4.64% 4.16%
RATIOS TO AVERAGE NET ASSETS(f)
Expenses ..................... 0.58% 0.57% 0.57% 0.58% 0.58% 0.57%
Net investment income ........ 4.96% 4.92% 4.53% 4.52% 4.55% 4.76%
SUPPLEMENTAL DATA
Net assets, end of period
(000's) ................... $ 13,156,108 $ 11,631,656 $ 12,803,225 $ 12,949,083 $ 12,418,764 $12,270,603
Portfolio turnover rate ...... 2.94% 11.01% 14.13% 8.02% 8.82% 8.46%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the
timing of sales and repurchases of the Fund shares in relation to income
earned and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Amount rounds to less than $0.01 per share.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
(f) Ratios are annualized for periods less than one year.
Semiannual Report | The accompanying notes are an integral part
of these financial statements. | 15
Franklin California Tax-Free Income Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
SIX MONTHS ENDED
SEPTEMBER 30, 2009 YEAR ENDED MARCH 31,
CLASS B (UNAUDITED) 2009 2008 2007 2006 2005
-------------------------------------------------------------------------------------------
PER SHARE OPERATING
PERFORMANCE
(for a share outstanding
throughout the period)
Net asset value, beginning
of period ............... $ 6.41 $ 6.98 $ 7.34 $ 7.26 $ 7.26 $ 7.31
-------------------------------------------------------------------------------------------
Income from investment
operations(a):
Net investment income(b) 0.15 0.29 0.29 0.29 0.29 0.30
Net realized and
unrealized gains
(losses) .............. 0.77 (0.57) (0.37) 0.09 0.01 (0.04)
-------------------------------------------------------------------------------------------
Total from investment
operations ................. 0.92 (0.28) (0.08) 0.38 0.30 0.26
-------------------------------------------------------------------------------------------
Less distributions from:
Net investment income ... (0.15) (0.29) (0.28) (0.29) (0.29) (0.30)
Net realized gains ...... -- -- -- (0.01) (0.01) (0.01)
-------------------------------------------------------------------------------------------
Total distributions ........ (0.15) (0.29) (0.28) (0.30) (0.30) (0.31)
-------------------------------------------------------------------------------------------
Redemption fees(c) ......... -- --(d) --(d) --(d) --(d) --(d)
-------------------------------------------------------------------------------------------
Net asset value, end of
period .................. $ 7.18 $ 6.41 $ 6.98 $ 7.34 $ 7.26 $ 7.26
===========================================================================================
Total return(e) ............ 14.60% (4.12)% (1.10)% 5.28% 4.20% 3.57%
RATIOS TO AVERAGE NET
ASSETS(f)
Expenses ................... 1.13% 1.13% 1.13% 1.14% 1.14% 1.14%
Net investment income ...... 4.41% 4.36% 3.97% 3.96% 3.99% 4.19%
SUPPLEMENTAL DATA
Net assets, end of period
(000's) .................. $ 110,090 $ 135,450 $ 205,192 $ 289,147 $ 331,385 $ 358,856
Portfolio turnover rate .... 2.94% 11.01% 14.13% 8.02% 8.82% 8.46%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the
timing of sales and repurchases of the Fund shares in relation to income
earned and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Effective September 1, 2008, the redemption fee was eliminated.
(d) Amount rounds to less than $0.01 per share.
(e) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
(f) Ratios are annualized for periods less than one year.
16 | The accompanying notes are an integral part of these
financial statements. | Semiannual Report
Franklin California Tax-Free Income Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
SIX MONTHS ENDED
SEPTEMBER 30, 2009 YEAR ENDED MARCH 31,
CLASS C (UNAUDITED) 2009 2008 2007 2006 2005
-----------------------------------------------------------------------------------------
PER SHARE OPERATING
PERFORMANCE
(for a share outstanding
throughout the period)
Net asset value, beginning
of period ................... $ 6.41 $ 6.98 $ 7.34 $ 7.25 $ 7.26 $ 7.31
-----------------------------------------------------------------------------------------
Income from investment
operations(a):
Net investment income(b) .... 0.15 0.29 0.29 0.29 0.29 0.30
Net realized and
unrealized gains
(losses) .................. 0.77 (0.57) (0.37) 0.10 --(c) (0.04)
-----------------------------------------------------------------------------------------
Total from investment
operations .................. 0.92 (0.28) (0.08) 0.39 0.29 0.26
-----------------------------------------------------------------------------------------
Less distributions from:
Net investment income ....... (0.15) (0.29) (0.28) (0.29) (0.29) (0.30)
Net realized gains .......... -- -- -- (0.01) (0.01) (0.01)
-----------------------------------------------------------------------------------------
Total distributions ............ (0.15) (0.29) (0.28) (0.30) (0.30) (0.31)
-----------------------------------------------------------------------------------------
Redemption fees(d) ............. -- --(c) --(c) --(c) --(c) --(c)
-----------------------------------------------------------------------------------------
Net asset value, end of
period ...................... $ 7.18 $ 6.41 $ 6.98 $ 7.34 $ 7.25 $ 7.26
=========================================================================================
Total return(e) ................ 14.60% (4.11)% (1.09)% 5.43% 4.06% 3.57%
RATIOS TO AVERAGE NET
ASSETS(f)
Expenses ....................... 1.13% 1.13% 1.13% 1.14% 1.14% 1.14%
Net investment income .......... 4.41% 4.36% 3.97% 3.96% 3.99% 4.19%
SUPPLEMENTAL DATA
Net assets, end of period
(000's) ..................... $ 1,034,331 $ 819,803 $ 750,678 $ 631,184 $ 546,815 $ 494,254
Portfolio turnover rate ........ 2.94% 11.01% 14.13% 8.02% 8.82% 8.46%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the
timing of sales and repurchases of the Fund shares in relation to income
earned and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Amount rounds to less than $0.01 per share.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
(f) Ratios are annualized for periods less than one year.
Semiannual Report | The accompanying notes are an integral part of
these financial statements. | 17
Franklin California Tax-Free Income Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
SIX MONTHS ENDED
SEPTEMBER 30, 2009 YEAR ENDED MARCH 31,
ADVISOR CLASS (UNAUDITED) 2009 2008 2007 2006 2005
------------------------------------------------------------------------------------------
PER SHARE OPERATING
PERFORMANCE
(for a share outstanding
throughout the period)
Net asset value, beginning
of period ................... $ 6.41 $ 6.98 $ 7.34 $ 7.25 $ 7.26 $ 7.31
-------------------------------------------------------------------------------------------
Income from investment
operations(a):
Net investment income(b) .... 0.17 0.34 0.33 0.34 0.34 0.35
Net realized and
unrealized gains
(losses) .................. 0.77 (0.58) (0.36) 0.10 --(c) (0.05)
-------------------------------------------------------------------------------------------
Total from investment
operations .................. 0.94 (0.24) (0.03) 0.44 0.34 0.30
-------------------------------------------------------------------------------------------
Less distributions from:
Net investment income ....... (0.17) (0.33) (0.33) (0.34) (0.34) (0.34)
Net realized gains .......... -- -- -- (0.01) (0.01) (0.01)
-------------------------------------------------------------------------------------------
Total distributions ............ (0.17) (0.33) (0.33) (0.35) (0.35) (0.35)
-------------------------------------------------------------------------------------------
Redemption fees(d) ............. -- --(c) --(c) --(c) --(c) --(c)
-------------------------------------------------------------------------------------------
Net asset value, end of
period ...................... $ 7.18 $ 6.41 $ 6.98 $ 7.34 $ 7.25 $ 7.26
===========================================================================================
Total return(e) . .............. 14.97% (3.49)% (0.44)% 6.11% 4.73% 4.26%
RATIOS TO AVERAGE NET
ASSETS(f)
Expenses ....................... 0.48% 0.48% 0.48% 0.49% 0.49% 0.49%
Net investment income .......... 5.06% 5.01% 4.62% 4.61% 4.64% 4.84%
SUPPLEMENTAL DATA
Net assets, end of period
(000's) ..................... $ 362,746 $ 223,502 $ 178,796 $ 122,456 $ 65,655 $ 42,389
Portfolio turnover rate ........ 2.94% 11.01% 14.13% 8.02% 8.82% 8.46%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the
timing of sales and repurchases of the Fund shares in relation to income
earned and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Amount rounds to less than $0.01 per share.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Total return is not annualized for periods less than one year.
(f) Ratios are annualized for periods less than one year.
18 | The accompanying notes are an integral part of these financial
statements. | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED)
PRINCIPAL AMOUNT VALUE
---------------- -----------------
MUNICIPAL BONDS 96.1%
CALIFORNIA 87.8%
ABAG Finance Authority for Nonprofit Corps. COP,
Butte Valley-Tulelake Rural Health, California Mortgage
Insured, 6.65%, 10/01/22 ........................................................ $ 700,000 $ 700,259
California Mortgage Insured, 6.125%, 3/01/21 ..................................... 3,670,000 3,670,184
Episcopal Home Foundation, Refunding, 5.125%, 7/01/13 ............................ 6,000,000 6,048,540
Episcopal Home Foundation, Refunding, 5.125%, 7/01/18 ............................ 20,625,000 20,690,794
Home for Jewish Parents, California Mortgage Insured, 5.625%, 5/15/22 ............ 4,930,000 4,929,951
Lytton Gardens Inc., Refunding, California Mortgage Insured, 6.00%, 2/15/30 ..... 5,000,000 5,014,300
Odd Fellows Home, California Mortgage Insured, 6.00%, 8/15/24 .................... 5,525,000 5,550,525
Rhoda Haas Goldman Plaza, California Mortgage Insured, 5.125%, 5/15/23 ........... 5,000,000 5,019,000
ABAG Finance Authority for Nonprofit Corps. MFHR, Palo Alto
Gardens Apartments, Series A, 5.45%, 4/01/39 ........................................ 5,500,000 5,049,330
ABAG Finance Authority for Nonprofit Corps. Revenue,
San Diego Hospital Assn., Series A, 6.125%, 8/15/20 .............................. 23,525,000 24,011,262
San Diego Hospital Assn., Series C, 5.375%, 3/01/21 .............................. 5,000,000 5,024,050
San Diego Hospital Assn., Sharp Healthcare, 6.25%, 8/01/39 ....................... 17,500,000 18,511,325
St. Rose Hospital, Series A, California Mortgage Insured,
6.00%, 5/15/29 .................................................................. 8,620,000 9,155,992
ABAG Revenue Tax Allocation, RDA Pool, Series A6, FSA Insured, 5.375%,
12/15/25 ......................................................................... 1,250,000 1,250,850
ABAG Water and Wastewater Revenue, Pooled Financing Program,
Refunding, Series A, FSA Insured, 5.30%, 10/01/21 .......... ........................ 5,450,000 5,451,853
Alameda Corridor Transportation Authority Revenue,
AMBAC Insured, zero cpn. to 10/01/12, 5.30% thereafter, 10/01/22 ................. 81,685,000 66,614,117
AMBAC Insured, zero cpn. to 10/01/12, 5.30% thereafter,
10/01/23 ........................................................................ 70,015,000 56,463,597
AMBAC Insured, zero cpn. to 10/01/12, 5.40% thereafter,
10/01/24 ........................................................................ 43,770,000 35,135,492
AMBAC Insured, zero cpn. to 10/01/12, 5.45% thereafter,
10/01/25 ........................................................................ 32,960,000 26,282,963
Refunding, AMBAC Insured, zero cpn., 10/01/29 .................................... 20,000,000 6,052,400
Refunding, AMBAC Insured, zero cpn., 10/01/30 .................................... 41,665,000 11,684,949
senior lien, Series A, NATL Insured, 5.00%, 10/01/29 ............................. 24,490,000 24,664,859
Alameda County COP, Alameda County Medical Center Project, NATL
Insured, ETM,
5.00%, 6/01/23 ................................................................... 19,195,000 19,344,913
5.30%, 6/01/26 ................................................................... 7,000,000 7,021,420
5.00%, 6/01/28 ................................................................... 8,925,000 8,994,704
Alhambra USD, GO, Election of 2004, Series A, FGIC Insured,
5.00%, 8/01/29 ....................................................................... 13,025,000 13,374,591
Alvord USD, GO, Election of 2007, Series A, FSA Insured, 5.00%,
8/01/32 .............................................................................. 11,625,000 12,268,909
Anaheim PFA Lease Revenue, Capital Appreciation, Public
Improvements Project, Series C,
FSA Insured, zero cpn.,
9/01/24 .......................................................................... 26,855,000 11,619,890
9/01/26 .......................................................................... 29,430,000 11,012,412
9/01/27 .......................................................................... 22,860,000 7,931,506
9/01/28 .......................................................................... 14,425,000 4,597,969
9/01/29 .......................................................................... 24,810,000 7,273,796
9/01/32 .......................................................................... 13,665,000 3,213,598
9/01/33 .......................................................................... 37,070,000 8,033,810
9/01/34 .......................................................................... 24,970,000 5,027,460
3/01/37 .......................................................................... 16,080,000 2,741,801
Anaheim PFAR, Distribution System, second lien, NATL Insured, 5.00%,
10/01/29 ......................................................................... 4,325,000 4,485,155
10/01/34 ......................................................................... 5,500,000 5,633,980
Anaheim UHSD, GO, Capital Appreciation, Series A, FSA Insured,
zero cpn., 8/01/26 ................................................................... 8,570,000 3,445,911
Semiannual Report | 19
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- -----------------
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Antelope Valley Community College District GO, Election of 2004,
Series B, NATL Insured, 5.25%, 8/01/39 ............................. $ 14,900,000 $ 15,810,539
Azusa RDA Tax Allocation, Series B, 7.00%, 8/01/38 .................. 8,420,000 9,225,794
Bakersfield City School District GO, Series A, FSA Insured,
5.00%, 11/01/31 .................................................... 8,390,000 8,916,305
Baldwin Park PFAR Tax Allocation, Refunding, Series A, 7.75%,
8/01/19 ............................................................ 4,325,000 4,327,682
Baldwin Park USD, GO, Capital Appreciation, Election of 2006, FSA
Insured, zero cpn., 8/01/36 ........................................ 11,410,000 2,255,072
Bay Area Toll Authority Toll Bridge Revenue, San Francisco Bay
Area, Refunding,
Series F, 5.00%, 4/01/31 ....................................... 11,255,000 11,905,764
Series F1, 5.00%, 4/01/39 ...................................... 81,800,000 87,214,342
Series F1, 5.50%, 4/01/43 ...................................... 18,000,000 19,859,040
Series F1, 5.125%, 4/01/47 ..................................... 53,585,000 57,211,633
Bell GO, Election of 2003, NATL Insured, 5.00%, 8/01/34 ............. 5,195,000 5,216,715
Belmont-Redwood Shores School District GO, Election of 2005,
Series A, FSA Insured, 5.00%, 8/01/32 .............................. 10,000,000 10,446,700
Beverly Hills USD, GO, Election of 2002, Series B, 5.00%, 8/01/30 ... 8,590,000 9,123,439
Bonita USD, GO, Election of 2004, Series A, NATL Insured, 5.00%,
8/01/27 ............................................................ 5,100,000 5,376,267
Brentwood 1915 Act Revenue, Infrastructure Financing,
Reassessment, Refunding, Series A, FSA Insured, 5.80%, 9/02/17 ..... 5,085,000 5,086,729
Byron USD, GO, Series A, FGIC Insured, 5.00%, 8/01/31 ............... 5,145,000 5,331,043
Calexico USD, GO, NATL Insured, Pre-Refunded, 5.25%, 8/01/33 ........ 4,285,000 5,027,548
California Counties Lease Financing Authority COP, CSAC Financing ...
Corp., Amador County Project, ETM, 7.70%, 10/01/09 ................. 375,000 375,000
California County Tobacco Securitization Agency Tobacco Revenue,
Asset-Backed, Alameda County, 5.875%, 6/01/35 .................. 7,500,000 7,006,200
Asset-Backed, Golden Gate Corp., Series A, Pre-Refunded,
6.00%, 6/01/43 ................................................ 10,000,000 11,284,400
Asset-Backed, Kern County Corp., Series A, 6.125%, 6/01/43 ..... 28,135,000 25,293,928
Asset-Backed, Kern County Corp., Series B, 6.25%, 6/01/37 ..... 19,460,000 18,837,085
Asset-Backed, Merced Funding Corp., Series A, Pre-Refunded,
5.875%, 6/01/43 ............................................... 10,235,000 11,544,978
Asset-Backed, Sonoma County Corp., Series A, Pre-Refunded,
5.875%, 6/01/43 ............................................... 30,000,000 33,839,700
Asset-Backed, Stanislaus Funding, Series A, 5.875%, 6/01/43 .... 8,690,000 7,529,798
Tobacco Settlement Asset-Backed, Gold Country Settlement
Funding Corp., Pre-Refunded, 6.00%, 6/01/38 .................... 10,000,000 11,326,700
California Educational Facilities Authority Revenue,
Loyola Marymount University, NATL Insured, Pre-Refunded,
zero cpn., 10/01/32 ........................................... 8,435,000 1,953,883
Loyola Marymount University, NATL Insured, Pre-Refunded,
zero cpn., 10/01/33 ........................................... 8,435,000 1,831,998
Loyola Marymount University, NATL Insured, Pre-Refunded,
zero cpn., 10/01/34 ............................................ 8,435,000 1,717,619
Loyola Marymount University, NATL Insured, Pre-Refunded,
zero cpn., 10/01/35 ........................................... 8,435,000 1,610,410
Loyola Marymount University, NATL Insured, Pre-Refunded,
zero cpn., 10/01/36 ............................................ 8,435,000 1,509,865
Loyola Marymount University, NATL Insured, Pre-Refunded,
zero cpn., 10/01/37 ........................................... 8,435,000 1,244,416
Loyola Marymount University, NATL Insured, Pre-Refunded,
zero cpn., 10/01/37 ........................................... 8,435,000 1,415,646
Loyola Marymount University, NATL Insured, Pre-Refunded,
zero cpn., 10/01/38 ........................................... 8,435,000 1,327,247
Loyola Marymount University, Refunding, NATL Insured, zero
cpn., 10/01/26 ................................................ 7,620,000 3,041,371
Loyola Marymount University, Refunding, NATL Insured, zero
cpn., 10/01/27 ................................................ 7,365,000 2,746,188
Loyola Marymount University, Refunding, NATL Insured, zero
cpn., 10/01/28 ................................................ 4,120,000 1,432,895
Loyola Marymount University, Refunding, NATL Insured, zero
cpn., 10/01/30 ................................................ 5,685,000 1,712,208
Loyola Marymount University, Refunding, NATL Insured, zero
cpn., 10/01/31 ................................................ 7,615,000 2,129,382
Loyola Marymount University, Refunding, NATL Insured, zero
cpn., 10/01/32 ................................................ 7,615,000 1,982,718
20 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- -----------------
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
California Educational Facilities Authority Revenue, (continued)
Occidental College, Refunding, Series A, NATL Insured, 5.00%,
10/01/36 ........................................................ $ 7,275,000 $ 7,448,727
Pepperdine University, Refunding, Series A, AMBAC Insured,
5.00%, 12/01/35 ................................................. 7,720,000 7,912,537
Pooled College and University, Series B, Pre-Refunded, 6.75%,
6/01/30 ......................................................... 11,495,000 12,079,061
Santa Clara University, Refunding, AMBAC Insured, zero cpn.,
9/01/26 ......................................................... 5,800,000 2,657,676
Stanford University, Refunding, Series O, 5.125%, 1/01/31 ........ 15,750,000 15,752,205
California Health Facilities Financing Authority Revenue,
Adventist Health System West, Series A, 5.75%, 9/01/39 .......... 18,000,000 18,687,240
Casa Colina, 6.125%, 4/01/32 ..................................... 10,300,000 10,256,328
Catholic Healthcare West, Refunding, Series A, 5.00%, 7/01/18 .... 24,900,000 25,009,311
Catholic Healthcare West, Refunding, Series A, 5.00%, 7/01/28 .... 117,175,000 117,170,313
Catholic Healthcare West, Refunding, Series A, 6.00%, 7/01/34 .... 10,000,000 10,373,700
Catholic Healthcare West, Refunding, Series A, NATL Insured,
5.75%, 7/01/15 ................................................. 12,500,000 12,519,375
Catholic Healthcare West, Refunding, Series A, NATL Insured,
5.00%, 7/01/17 ................................................. 3,390,000 3,390,102
Catholic Healthcare West, Refunding, Series A, NATL Insured,
5.125%, 7/01/24 ................................................. 7,825,000 7,830,164
Catholic Healthcare West, Series G, 5.25%, 7/01/23 ............... 3,000,000 3,066,600
Cedars-Sinai Medical Center, Series A, NATL Insured, 5.125%,
8/01/17 ......................................................... 8,355,000 8,379,397
Cedars-Sinai Medical Center, Series B, NATL Insured, 5.25%,
8/01/27 ........................................................ 52,500,000 52,528,875
Children's Hospital of Orange County, Series A, 6.50%, 11/01/24 .. 10,500,000 11,672,430
Children's Hospital of Orange County, Series A, 6.25%, 11/01/29 .. 13,870,000 14,809,415
County Program, Series B, 7.20%, 1/01/12 ......................... 1,715,000 1,715,103
Families First, Refunding, Series A, California Mortgage
Insured, 6.00%, 12/01/25 ........................................ 9,500,000 9,611,055
Feedback Foundation Inc., Series A, California Mortgage
Insured, 6.50%, 12/01/22 ........................................ 1,340,000 1,343,846
Health Facility, Valleycare, Series A, California Mortgage
Insured, Pre-Refunded, 5.25%, 5/01/22 ........................... 5,000,000 5,520,750
Hospital of the Good Samaritan, Refunding, 7.00%, 9/01/21 ........ 64,530,000 51,905,351
Insured Health Facility, Help Group, Series A, California
Mortgage Insured, 6.10%, 8/01/25 ................................ 12,905,000 13,041,793
Kaiser Permanente, Series A, ETM, 5.40%, 5/01/28 ................. 46,000,000 46,164,680
Kaiser Permanente, Series A, FSA Insured, ETM, 5.00%, 6/01/20 .... 32,295,000 32,708,376
Kaiser Permanente, Series A, FSA Insured, ETM, 5.00%, 6/01/24 .... 136,775,000 138,045,640
Kaiser Permanente, Series A, zero cpn., 10/01/11 ................. 13,970,000 13,110,007
Kaiser Permanente, Series B, ETM, 5.25%, 10/01/16 ................ 7,515,000 7,619,834
Kaiser Permanente, Series B, ETM, 5.00%, 10/01/18 ................ 38,260,000 38,516,342
Kaiser Permanente, Series B, ETM, 5.00%, 10/01/20 ................ 38,020,000 38,274,734
Kaiser Permanente, Series B, ETM, 5.40%, 5/01/28 ................. 80,000,000 80,286,400
Lucile Salter Packard Hospital, Series C, AMBAC Insured,
5.00%, 8/15/26 .................................................. 6,000,000 6,173,460
Marshall Hospital, Refunding, Series A, California Mortgage
Insured, 5.30%, 11/01/28 ........................................ 4,920,000 4,920,492
Northern California Presbyterian, Refunding, 5.40%, 7/01/28 ...... 6,340,000 5,914,776
Paradise Valley Estates, Refunding, California Mortgage
Insured, 5.125%, 1/01/22 ........................................ 6,610,000 6,772,804
Paradise Valley Estates, Refunding, California Mortgage
Insured, 5.25%, 1/01/26 ......................................... 5,000,000 5,114,500
Pomona Valley Hospital, Refunding, Series A, NATL Insured,
5.625%, 7/01/19 ................................................. 8,500,000 8,499,490
Providence Health and Services, Series C, 6.25%, 10/01/28 ........ 4,000,000 4,509,680
Providence Health and Services, Series C, 6.50%, 10/01/38 ........ 6,500,000 7,380,360
Small Facilities Program, Refunding, Series A, California
Mortgage Insured, 5.00%, 4/01/25 ................................ 10,915,000 11,151,201
Southern California, Series A, California Mortgage Insured,
5.50%, 12/01/22 ................................................. 2,940,000 2,940,000
Semiannual Report | 21
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- -----------------
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
California Health Facilities Financing Authority Revenue, (continued)
Sutter Health, Refunding, Series A, FSA Insured, 5.25%,
8/15/27 ........................................................ $ 1,815,000 $ 1,815,109
Sutter Health, Refunding, Series A, NATL Insured, 5.35%,
8/15/28 ........................................................ 6,170,000 6,221,705
Sutter Health, Series A, 5.00%, 8/15/38 ........................... 35,300,000 35,350,479
Sutter Health, Series A, 5.00%, 11/15/42 ......................... 40,000,000 39,871,200
Sutter Health, Series A, 5.25%, 11/15/46 ......................... 75,390,000 76,367,054
Sutter Health, Series A, FSA Insured, 5.00%, 8/15/37 .............. 61,000,000 64,138,450
Sutter Health, Series A, NATL Insured, 5.375%, 8/15/30 ............ 10,600,000 10,641,234
The Episcopal Home, California Mortgage Insured, 5.30%,
2/01/32 ........................................................ 28,150,000 28,367,599
The Help Group, Refunding, California Mortgage Insured,
5.40%, 8/01/22 ................................................. 7,035,000 7,053,221
University of California San Francisco-Stanford Health
Care, Refunding, Series B, AMBAC Insured, 5.00%, 11/15/28 ...... 25,000,000 25,157,500
University of California San Francisco-Stanford Health
Care, Refunding, Series B, FSA Insured, 5.00%, 11/15/31 ........ 26,920,000 27,164,164
California HFAR,
Class 1, Series B-1, AMBAC Insured, 5.65%, 8/01/28 ................ 1,580,000 1,547,610
Home Mortgage, Capital Appreciation, Series A, zero cpn.,
8/01/16 ........................................................ 470,000 241,491
Home Mortgage, Series K, 4.75%, 8/01/36 ........................... 5,000,000 4,136,700
Home Mortgage, Series N, AMBAC Insured, zero cpn. to
2/01/10, 6.30% thereafter, 8/01/31 ............................. 2,605,000 2,566,290
MFHR II, Series A, AMBAC Insured, 6.25%, 2/01/37 .................. 1,235,000 1,238,841
MFHR III, Series B, NATL Insured, 5.50%, 8/01/39 .................. 11,950,000 11,056,976
California Infrastructure and Economic Development Bank Revenue,
Bay Area Toll Bridges, first lien, Series A, AMBAC
Insured, Pre-Refunded, 5.00%, 7/01/33 .......................... 5,000,000 6,012,500
Bay Area Toll Bridges, first lien, Series A, FGIC
Insured, Pre-Refunded, 5.00%, 7/01/29 ............................. 50,985,000 61,373,194
Kaiser Hospital Assistance I LLC, Series B, 5.50%,
8/01/31 ....................................................... 10,000,000 10,095,100
Kaiser Hospital Assistance II LLC, Series A, 5.55%,
8/01/31 ....................................................... 34,000,000 34,676,260
California Municipal Finance Authority COP,
(a)5.375%, 2/01/29 .................................................. 10,000,000 9,935,000
(a)5.50%, 2/01/39 ................................................... 13,250,000 13,268,020
Community Hospitals of Central California, 5.25%, 2/01/37 ......... 37,100,000 35,641,599
Community Hospitals of Central California, 5.25%, 2/01/46 ......... 90,650,000 84,154,021
California PCFA, PCR,
Pacific Gas and Electric Co., Refunding, Series A, NATL
Insured, 5.35%, 12/01/16 .......................................... 31,500,000 32,572,575
San Diego Gas and Electric Co., Series A, 5.85%, 6/01/21 .......... 32,535,000 32,589,008
California Resource Efficiency Financing Authority COP, Capital
Improvements Program, AMBAC Insured,
5.625%, 4/01/22 ................................................... 325,000 325,143
5.75%, 4/01/27 .................................................... 475,000 475,138
California State Department of Veteran Affairs Home Purchase
Revenue,
Series A, 5.20%, 12/01/27 ......................................... 17,110,000 17,118,213
Series B, 5.20%, 12/01/28 ......................................... 3,620,000 3,619,819
California State Department of Water Resources Central Valley
Project Revenue, Water System,
Refunding, Series S, 5.00%, 12/01/29 .............................. 24,085,000 24,103,064
Refunding, Series Y, FGIC Insured, 5.00%, 12/01/25 ................ 19,725,000 21,293,532
Series Y, FGIC Insured, Pre-Refunded, 5.00%, 12/01/25 ............. 275,000 312,683
22| Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- -----------------
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
California State Department of Water Resources Power Supply
Revenue, Series A,
Pre-Refunded,
5.25%, 5/01/20 ................................................. $ 40,000,000 $ 44,772,400
5.375%, 5/01/21 ................................................ 22,000,000 24,694,560
5.375%, 5/01/22 ................................................ 34,020,000 38,186,770
California State GO,
6.00%, 5/01/24 ................................................. 2,565,000 2,571,413
5.125%, 4/01/25 ................................................ 3,500,000 3,642,800
5.20%, 4/01/26 ................................................. 13,500,000 14,035,815
5.25%, 4/01/27 ................................................. 5,000 5,190
5.25%, 4/01/34 ................................................. 20,000 20,424
5.00%, 8/01/34 ................................................. 48,000,000 48,268,800
AMBAC Insured, 5.90%, 3/01/25 .................................. 210,000 210,057
AMBAC Insured, 5.00%, 4/01/31 .................................. 20,000 20,176
AMBAC Insured, Pre-Refunded, 5.00%, 4/01/31 .................... 29,980,000 34,744,721
FGIC Insured, 6.00%, 8/01/19 ................................... 905,000 908,276
FGIC Insured, 5.625%, 10/01/26 ................................. 6,345,000 6,348,680
FSA Insured, 5.50%, 4/01/19 .................................... 540,000 549,256
FSA Insured, 5.50%, 3/01/20 .................................... 415,000 415,465
NATL Insured, 6.00%, 8/01/24 ................................... 990,000 993,584
Pre-Refunded, 5.25%, 10/01/23 .................................. 7,720,000 8,075,738
Pre-Refunded, 5.25%, 10/01/23 .................................. 1,530,000 1,604,419
Pre-Refunded, 5.25%, 4/01/27 ................................... 4,995,000 5,843,101
Pre-Refunded, 5.00%, 2/01/29 ................................... 13,000,000 14,259,960
Pre-Refunded, 5.25%, 2/01/29 ................................... 310,000 341,825
Pre-Refunded, 5.25%, 4/01/29 ................................... 5,580,000 6,527,428
Pre-Refunded, 5.25%, 2/01/30 ................................... 140,000 154,372
Pre-Refunded, 5.25%, 4/01/32 ................................... 9,835,000 10,916,555
Pre-Refunded, 5.25%, 4/01/34 ................................... 19,980,000 23,372,404
Refunding, 5.625%, 9/01/24 ..................................... 255,000 257,438
Refunding, 5.25%, 2/01/29 ...................................... 24,000,000 24,607,680
Refunding, 5.25%, 2/01/29 ...................................... 9,690,000 9,865,001
Refunding, 5.25%, 2/01/30 ...................................... 29,860,000 30,313,573
Refunding, 5.25%, 4/01/32 ...................................... 165,000 167,185
Refunding, Series BR, 5.30%, 12/01/29........................... 13,000,000 12,455,690
Various Purpose, 5.125%, 4/01/24 ............................... 7,500,000 7,837,275
Various Purpose, 5.25%, 12/01/26 ............................... 145,000 151,245
Various Purpose, 6.00%, 4/01/38, 6.00%, 4/01/38 ................ 10,000,000 10,977,900
Various Purpose, Pre-Refunded, 5.25%, 12/01/26 ................. 12,770,000 14,940,389
Various Purpose, Refunding, 5.00%, 6/01/32 ..................... 26,000,000 26,195,780
Various Purpose, Refunding, 5.25%, 3/01/38, 5.25%, 3/01/38 ..... 60,045,000 61,227,286
Various Purpose, Refunding, FSA Insured, 5.00%, 6/01/32 ........ 20,000,000 20,278,000
Various Purpose, Refunding, NATL Insured, 5.00%, 6/01/37 ....... 17,000,000 17,052,530
California State Local Government Finance Authority Revenue,
Marin Valley Mobile, Series A, FSA Insured, 5.85%, 10/01/27 ...... 5,955,000 5,959,943
California State Public Works Board Lease Revenue,
California Science Center, Series A, 5.25%, 10/01/22 ........... 8,645,000 8,595,723
Department of Corrections, Series C, 5.00%, 6/01/24 ............ 12,225,000 12,375,001
Semiannual Report | 23
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- -----------------
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
California State Public Works Board Lease Revenue, (continued)
Department of Corrections, Series C, 5.00%, 6/01/25 ................ $ 4,810,000 $ 4,841,938
Department of Corrections, Series C, 5.25%, 6/01/28 ................ 25,475,000 25,671,667
Department of Mental Health, Coalinga, Series A, 5.00%, 6/01/25 .... 12,000,000 12,088,320
Department of Mental Health, Coalinga, Series A, 5.125%,
6/01/29 .......................................................... 56,500,000 56,184,730
Trustees of California State University, Refunding, Series A,
5.00%, 10/01/19 .................................................. 7,500,000 7,511,250
Various California Community Colleges Projects, Refunding,
Series A, 5.90%, 4/01/17 ......................................... 8,320,000 8,333,645
California State University Revenue, Systemwide,
Refunding, Series A, FSA Insured, 5.00%, 11/01/34 .................. 5,000,000 5,154,200
Refunding, Series C, NATL Insured, 5.00%, 11/01/30 ................. 15,490,000 16,189,838
Series A, AMBAC Insured, 5.00%, 11/01/35 ........................... 15,925,000 16,408,005
Series A, FSA Insured, 5.00%, 11/01/29 ............................. 10,000,000 10,447,800
California Statewide CDA,
Assisted Living Facilities Revenue, Hollenbeck Palms/Magnolia
Court, Series A, Radian Insured, 4.60%, 2/01/37 .................. 5,010,000 4,214,512
COP, Catholic Healthcare West, Pre-Refunded, 6.50%, 7/01/20 ........ 7,990,000 8,425,775
COP, Children's Hospital, Los Angeles, 5.25%, 8/15/29 .............. 37,685,000 34,632,138
COP, NATL Insured, 5.00%, 4/01/18 .................................. 7,000,000 6,792,730
COP, NATL Insured, 5.125%, 4/01/23 ................................. 6,000,000 5,561,340
COP, Refunding, FSA Insured, 5.50%, 8/15/31 ........................ 9,000,000 9,169,380
COP, The Internext Group, 5.375%, 4/01/17 .......................... 7,900,000 7,937,446
COP, The Internext Group, 5.375%, 4/01/30 .......................... 67,480,000 62,244,902
MFHR, Borregas Court Project, Series J, GNMA Secured, 6.30%,
3/20/39 .......................................................... 7,055,000 7,367,819
California Statewide CDA Revenue, 5.50%, 10/01/33 ..................... 45,465,000 45,894,644
Catholic Healthcare West, Refunding, Series L, Assured
Guaranty, 5.25%, 7/01/41 .......................................... 13,000,000 13,433,550
Catholic Healthcare West, Series A, 5.50%, 7/01/30 ................. 10,000,000 10,414,500
Catholic Healthcare West, Series E, 5.50%, 7/01/31 ................. 15,000,000 15,621,750
CHF-Irvine LLC, UCI East Campus Apartments, Phase II, 5.50%,
5/15/26 .......................................................... 9,500,000 9,570,680
CHF-Irvine LLC, UCI East Campus Apartments, Phase II, 6.00%,
5/15/40 .......................................................... 59,000,000 59,034,810
Daughters of Charity Health, Refunding, Series A, 5.25%,
7/01/24 .......................................................... 6,000,000 5,778,960
Daughters of Charity Health, Refunding, Series A, 5.25%,
7/01/30 .......................................................... 5,000,000 4,535,900
Daughters of Charity Health, Refunding, Series A, 5.25%,
7/01/35 .......................................................... 13,900,000 12,390,738
Daughters of Charity Health, Refunding, Series A, 5.00%,
7/01/39 .......................................................... 29,980,000 25,368,177
Daughters of Charity Health, Refunding, Series H, 5.25%,
7/01/25 .......................................................... 3,715,000 3,517,585
East Campus Apartments LLC, Series A, ACA Insured, 5.50%,
8/01/22 .......................................................... 11,000,000 10,069,730
East Campus Apartments LLC, Series A, ACA Insured, 5.625%,
8/01/34 .......................................................... 25,000,000 20,798,250
Enloe Medical Center, California Mortgage Insured, 6.25%,
8/15/33 .......................................................... 20,000,000 22,071,800
Enloe Medical Center, California Mortgage Insured, 5.75%,
8/15/38 .......................................................... 36,500,000 38,411,140
Health Facility, Adventist Health, Series A, 5.00%, 3/01/30 ........ 6,300,000 6,220,368
Health Facility, Los Angeles Jewish Home for the Aging,
California Mortgage Insured, 5.50%, 11/15/33 ..................... 19,400,000 19,929,232
Henry Mayo Newhall Memorial Hospital, California Mortgage
Insured, 5.00%, 10/01/37 ......................................... 5,000,000 4,889,400
Huntington Memorial Hospital, Refunding, 5.00%, 7/01/27 ............ 22,000,000 21,819,600
Huntington Memorial Hospital, Refunding, 5.00%, 7/01/35 ............ 50,000,000 48,037,500
Kaiser Permanente, Refunding, Series A, 4.75%, 4/01/33 ............. 24,590,000 23,679,924
Kaiser Permanente, Refunding, Series A, BHAC Insured, 5.00%,
4/01/31 .......................................................... 10,000,000 10,688,300
24| Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- -----------------
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
California Statewide CDA Revenue, (continued)
Kaiser Permanente, Series A, 5.50%, 11/01/32 ................... $ 27,000,000 $ 27,203,310
Kaiser Permanente, Series B, 5.00%, 3/01/41 .................... 39,980,000 39,979,600
Kaiser Permanente, Series B, 5.25%, 3/01/45 .................... 177,235,000 179,767,688
Lodi Memorial Hospital, Series A, California Mortgage
Insured, 5.00%, 12/01/37 .................................... 20,000,000 19,555,200
Los Angeles Orthopedic Hospital Foundation, AMBAC Insured,
5.75%, 6/01/30 .............................................. 10,000,000 9,751,500
Methodist Hospital of Southern California Project, FHA
Insured, 6.25%, 8/01/24 ..................................... 14,270,000 16,197,449
Methodist Hospital of Southern California Project, FHA
Insured, 6.625%, 8/01/29 .................................... 22,500,000 25,798,050
Methodist Hospital of Southern California Project, FHA
Insured, 6.75%, 2/01/38 ..................................... 22,000,000 25,122,680
Mission Community, California Mortgage Insured, 5.375%,
11/01/21 .................................................... 7,670,000 7,829,152
Mission Community, California Mortgage Insured, 5.375%,
11/01/26 .................................................... 9,755,000 9,925,615
Refunding, California Mortgage Insured, 5.50%, 1/01/28 ......... 3,615,000 3,718,172
Series B, 5.625%, 8/15/42 ...................................... 51,000,000 51,809,370
St. Joseph Health System, Series B, FGIC Insured, 5.75%,
7/01/47 ..................................................... 30,275,000 31,776,640
St. Joseph Health System, Series E, FSA Insured, 5.25%,
7/01/47 .................................................... 15,300,000 16,041,591
Stovehaven Apartments Project, Series A, ACA Insured,
5.875%, 7/01/32 ............................................. 4,945,000 3,702,668
Sutter Health, Refunding, Series A, 5.00%, 11/15/43 ............ 103,300,000 102,800,028
Sutter Health, Series B, 5.25%, 11/15/48 ....................... 15,000,000 15,196,050
Sutter Health, Series C, 5.00%, 11/15/38 ....................... 23,925,000 23,958,495
California Statewide CDA Revenue COP,
Capital Appreciation, Hospital, Triad Health Care,
California Mortgage Insured, ETM,
zero cpn., 8/01/10 ........................................... 6,745,000 6,692,659
Capital Appreciation, Hospital, Triad Health Care,
California Mortgage Insured, ETM, zero cpn., 8/01/11 .......... 3,115,000 3,048,370
CHFCLP Insured Health Facilities, Unihealth, Series A, AMBAC
Insured, Pre-Refunded, 5.75%, 10/01/25 ........................ 24,545,000 29,515,853
Southern California Development Corp., California Mortgage
Insured, 6.10%, 12/01/15 ...................................... 1,700,000 1,700,306
California Statewide CDA Water and Wastewater Revenue, Pooled
Financing Program,
Series A, FSA Insured, 5.25%, 10/01/24 ......................... 3,925,000 4,264,787
Series A, FSA Insured, 5.00%, 10/01/29 ......................... 1,095,000 1,153,878
Series A, FSA Insured, Pre-Refunded, 5.25%, 10/01/24 ........... 1,075,000 1,256,170
Series A, FSA Insured, Pre-Refunded, 5.00%, 10/01/29 ........... 1,905,000 2,207,533
Series B, FSA Insured, Pre-Refunded, 5.65%, 10/01/26 ........... 1,515,000 1,545,300
California Valley HFAR, Home Mortgage, NATL Insured, 5.65%,
2/01/27 ........................................................... 4,795,000 4,800,562
Camarillo Community Development Commission Tax Allocation,
Camarillo Corridor Project,
Refunding, AMBAC Insured, 5.00%, 9/01/36 ......................... 7,800,000 5,966,922
Campbell RDA Tax Allocation, Central Campbell Redevelopment
Project, Series A, 6.00%, 10/01/33 ................................ 5,000,000 4,733,000
Campbell USD,
GO, Series A, FGIC Insured, 5.00%, 8/01/28 ..................... 5,205,000 5,644,406
GO, Series E, FSA Insured, 5.00%, 8/01/29 ...................... 6,260,000 6,708,404
Series B, FGIC Insured, zero cpn., 8/01/20 ..................... 5,000,000 3,030,700
Series B, FGIC Insured, zero cpn., 8/01/21 ..................... 6,280,000 3,584,436
Capistrano University School CFD Special Tax, Number 90-2 Talega,
5.875%, 9/01/33 ................................................ 5,765,000 5,767,594
6.00%, 9/01/33 ................................................. 7,100,000 7,133,796
Carlsbad USD, GO, zero cpn. to 5/01/19, 6.00% thereafter, 5/01/34 ... 14,000,000 8,743,280
Semiannual Report | 25
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- -----------------
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Centinela Valley UHSD, GO, Refunding, Series A, NATL Insured,
5.50%, 8/01/33 ................................................... $ 15,630,000 $ 16,597,028
Central California Joint Powers Health Financing Authority COP,
Community Hospitals of Central California, Pre-Refunded,
6.00%, 2/01/20 ................................................. 3,950,000 4,061,904
5.625%, 2/01/21 ................................................ 6,750,000 7,268,602
6.00%, 2/01/30 ................................................. 19,960,000 20,525,467
5.75%, 2/01/31 ................................................. 18,070,000 19,487,953
Cerritos Community College District GO, Election of 2004, Series
B, NATL Insured, 5.00%, 8/01/31 .................................. 16,580,000 17,429,062
Cerritos PFAR Tax Allocation, Redevelopment Project, Refunding,
Series A, AMBAC Insured, 5.00%, 11/01/22 ......................... 6,675,000 6,549,243
Chabot-Las Positas Community College District GO,
Capital Appreciation Bonds, Series C, AMBAC Insured, zero
cpn., 8/01/38 ............................................... 52,010,000 8,343,444
Capital Appreciation Bonds, Series C, AMBAC Insured, zero
cpn., 8/01/39 ............................................... 54,045,000 8,092,158
Capital Appreciation Bonds, Series C, AMBAC Insured, zero
cpn., 8/01/40 ............................................... 56,165,000 7,985,540
Capital Appreciation Bonds, Series C, AMBAC Insured, zero
cpn., 8/01/41 ............................................... 58,365,000 7,693,674
Election of 2004, Series B, AMBAC Insured, 5.00%, 8/01/31 ...... 11,500,000 12,158,950
Series B, AMBAC Insured, 5.00%, 8/01/30 ..................... 17,330,000 18,301,866
Chaffey UHSD, GO,
Series B, 5.00%, 8/01/25 ....................................... 6,510,000 6,656,735
Series C, FSA Insured, 5.00%, 5/01/27 .......................... 6,980,000 7,306,106
Chico RDA Tax Allocation, Chico Amended and Merged Redevelopment
Project, AMBAC Insured, 5.00%, 4/01/32 ........................... 5,000,000 4,649,400
Chino Valley USD, GO, Election of 2002, Series D, FGIC Insured,
5.00%, 8/01/31 ................................................... 23,825,000 24,829,224
Chula Vista COP, Cops Phase I, NATL Insured, 5.00%, 3/01/34 ......... 10,360,000 10,670,593
Chula Vista IDR,
San Diego Gas and Electric Co., Refunding, Series A, 5.875%,
2/15/34 ........................................................ 17,500,000 18,618,775
San Diego Gas and Electric Co., Series A, 5.30%, 7/01/21 ....... 8,500,000 9,235,250
San Diego Gas and Electric Co., Series B, 5.50%, 12/01/21 ...... 14,000,000 14,665,700
Claremont RDA Tax Allocation, Consolidated Redevelopment Project,
Refunding, 5.50%, 8/01/23 ........................................ 4,950,000 4,916,488
Colton Joint USD, GO, Election of 2001, Series B, FGIC Insured,
5.00%, 8/01/27 ................................................... 7,000,000 7,116,410
Colusa County COP, ABAG Finance Corp., Series B, 7.00%, 2/01/18 ..... 1,210,000 1,210,605
Commerce Joint Powers Financing Authority Revenue, Redevelopment
Projects, Series B, Radian Insured, 5.125%, 8/01/35 .............. 7,870,000 6,472,839
Compton Sewer Revenue, 6.00%, 9/01/39 ............................... 11,775,000 12,524,479
Compton USD, GO, AMBAC Insured, 5.00%, 6/01/29 ..................... 5,660,000 5,797,991
Contra Costa Community College District GO, Election of 2002,
FGIC Insured, 5.00%, 8/01/26 ..................................... 11,700,000 12,302,316
Contra Costa County COP, Merrithew Memorial Hospital Project,
ETM, zero cpn., 11/01/15 ...................................... 6,810,000 5,962,768
Contra Costa Home Mortgage Finance Authority HMR, Pre-Refunded,
zero cpn., 9/01/17 ............................................... 7,700,000 3,317,314
Contra Costa Home Mortgage Finance Authority HMR, Pre-Refunded,
zero cpn., 9/01/17 ............................................... 6,275,000 2,846,779
Corcoran Hospital District Revenue, Series A, California Mortgage
Insured, 6.55%, 7/01/12 .......................................... 385,000 385,073
Corona COP, Corona Community Hospital Project, Pre-Refunded,
9.425%, 9/01/20 .................................................. 13,300,000 14,067,144
Corona-Norco USD, PFA Special Tax Revenue, Series A, 5.40%,
9/01/35 .......................................................... 7,140,000 6,005,383
26 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- -----------------
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Coronado CDA Tax Allocation, Coronado Community Development
Project, Refunding, NATL Insured, 5.00%, 9/01/34 ................. $ 6,115,000 $ 5,661,634
Cudahy RDA Tax Allocation, Refunding, Series C, 6.00%, 10/01/27 ..... 6,365,000 6,713,675
Daly City Housing Development Finance Agency Mobile Home Park
Revenue, Senior Franciscan Mobile Park, Refunding, Series A, 5.00%,
12/15/47 ......................................................... 20,645,000 17,269,130
Delano UHSD, GO,
Election of 2005, Series A, XLCA Insured, 5.00%, 8/01/31 ....... 5,160,000 5,225,068
Refunding, Series A, NATL Insured, 5.15%, 2/01/32 .............. 8,520,000 8,428,410
Desert Community College District GO, Capital Appreciation Bonds,
Series C, FSA Insured, zero cpn., 8/01/46 ........................ 396,230,000 41,984,531
Desert Sands USD, GO, Election of 2001, FSA Insured,
Pre-Refunded, 5.00%, 6/01/29 ..................................... 16,425,000 19,032,469
Downey USD, GO, Election of 2002, Series C, FSA Insured,
Pre-Refunded, 5.00%, 2/01/30 ..................................... 4,860,000 5,575,489
Duarte COP, Refunding, Series A, 5.25%,
4/01/19 ........................................................ 5,000,000 5,040,650
4/01/24 ........................................................ 5,000,000 5,009,900
4/01/31 ........................................................ 12,500,000 11,982,000
East Bay MUD Water System Revenue,
Refunding, Series A, FGIC Insured, 5.00%, 6/01/37 .............. 99,545,000 106,727,172
Series A, NATL Insured, 5.00%, 6/01/28 ......................... 7,000,000 7,519,330
Series A, NATL Insured, 5.00%, 6/01/29 ......................... 27,495,000 29,418,550
Series A, NATL Insured, 5.00%, 6/01/30 ......................... 15,000,000 16,025,700
Series A, NATL Insured, 5.00%, 6/01/35 ......................... 27,505,000 29,054,357
East Side UHSD Santa Clara County GO, Series F, FSA Insured,
5.00%, 8/01/35 ................................................... 19,000,000 19,630,420
Eastern Municipal Water District Water and Sewer Revenue COP,
Series B, FGIC Insured, Pre-Refunded, 5.00%, 7/01/30 ............. 21,370,000 23,017,200
El Centro Financing Authority Hospital Revenue, El Centro
Regional Medical Center Project, California Mortgage Insured,
5.25%, 3/01/26 ................................................... 8,500,000 8,530,345
El Dorado County Special Tax, CFD No. 1992-1,
5.875%, 9/01/24 ................................................ 4,475,000 4,063,345
6.00%, 9/01/31 ................................................. 8,850,000 7,731,360
Refunding, 6.25%, 9/01/29 ...................................... 19,750,000 17,589,350
El Rancho USD, GO, Election of 2003, Series A, FGIC Insured,
5.00%, 8/01/28 ................................................... 5,635,000 5,774,354
Elk Grove USD, Special Tax, Capital Appreciation,
CFD 1, NATL Insured, zero cpn.,
12/01/19 ....................................................... 2,775,000 1,655,759
12/01/20 ....................................................... 2,765,000 1,552,741
12/01/21 ....................................................... 4,195,000 2,158,957
12/01/22 ....................................................... 4,195,000 2,036,337
12/01/23 ....................................................... 4,195,000 1,916,863
12/01/24 ....................................................... 4,200,000 1,802,514
Emeryville PFAR,
Housing Increment Loan, 6.20%, 9/01/25 ......................... 3,115,000 3,116,277
Shellmound Park Redevelopment and Housing Project,
Refunding, Series B, NATL Insured, 5.00%, 9/01/28 ........... 10,000,000 10,039,600
Fairfield COP, Fairfield Water Financing, Series A, XLCA Insured,
5.00%, 4/01/42 ................................................... 10,000,000 10,062,000
Florin Resource Conservation District COP, Elk Grove Water
Service, Refunding, Series A, NATL Insured, 5.00%, 3/01/33 ....... 8,715,000 8,537,911
Fontana RDA Tax Allocation, Jurupa Hills Redevelopment Project,
Refunding, Series A, 5.50%, 10/01/27 ............................. 12,500,000 12,503,375
Semiannual Report | 27
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- --------------
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Foothill-De Anza Community College District GO,
Capital Appreciation, zero cpn., 8/01/27 ............................................... $ 5,205,000 $ 2,231,175
NATL Insured, zero cpn., 8/01/26 ....................................................... 5,290,000 2,409,436
Foothill/Eastern Corridor Agency Toll Road Revenue,
Capital Appreciation, Refunding, 5.80%, 1/15/20 ........................................ 49,500,000 51,249,825
Capital Appreciation, Refunding, 5.85%, 1/15/23 ........................................ 10,000,000 10,290,900
Capital Appreciation, Refunding, 5.875%, 1/15/26 ....................................... 30,000,000 30,587,400
Capital Appreciation, Refunding, 5.875%, 1/15/27 ....................................... 80,835,000 82,117,851
Capital Appreciation, Refunding, 5.875%, 1/15/28 ....................................... 80,500,000 81,480,490
Capital Appreciation, Refunding, 5.875%, 1/15/29 ....................................... 112,230,000 113,183,955
Capital Appreciation, Refunding, zero cpn., 1/15/21 .................................... 51,180,000 23,814,566
Capital Appreciation, Refunding, zero cpn., 1/15/25 .................................... 57,000,000 20,219,610
Capital Appreciation, Refunding, zero cpn., 1/15/30 .................................... 98,460,000 24,879,857
Capital Appreciation, Refunding, zero cpn., 1/15/31 .................................... 14,635,000 3,455,616
Capital Appreciation, Refunding, zero cpn., 1/15/32 .................................... 100,000,000 22,064,000
Capital Appreciation, Refunding, zero cpn., 1/15/33 .................................... 132,460,000 27,307,954
Capital Appreciation, Refunding, zero cpn., 1/15/34 .................................... 100,000,000 19,264,000
Capital Appreciation, Refunding, zero cpn., 1/15/35 .................................... 20,000,000 3,600,200
Capital Appreciation, Refunding, zero cpn., 1/15/36 .................................... 182,160,000 30,639,312
Capital Appreciation, Refunding, zero cpn., 1/15/37 .................................... 170,615,000 26,815,560
Capital Appreciation, Refunding, zero cpn., 1/15/38 .................................... 160,560,000 23,579,842
Capital Appreciation, senior lien, Series A, ETM, zero cpn., 1/01/22 ................... 30,835,000 19,900,909
Capital Appreciation, senior lien, Series A, ETM, zero cpn., 1/01/23 ................... 5,765,000 3,548,185
Capital Appreciation, senior lien, Series A, ETM, zero cpn., 1/01/24 ................... 72,045,000 42,152,089
Capital Appreciation, senior lien, Series A, ETM, zero cpn., 1/01/28 ................... 2,000,000 940,460
Capital Appreciation, senior lien, Series A, Pre-Refunded, 7.15%, 1/01/14 .............. 5,500,000 5,699,760
Refunding, 5.75%, 1/15/40 .............................................................. 395,510,000 388,236,571
senior lien, Series A, 5.00%, 1/01/35 .................................................. 15,955,000 14,214,788
senior lien, Series A, ETM, zero cpn., 1/01/25 ......................................... 20,660,000 11,468,573
senior lien, Series A, ETM, zero cpn., 1/01/26 ......................................... 23,475,000 12,378,602
senior lien, Series A, ETM, zero cpn., 1/01/27 ......................................... 15,000,000 7,476,600
senior lien, Series A, ETM, zero cpn., 1/01/29 ......................................... 35,310,000 15,633,856
senior lien, Series A, Pre-Refunded, 7.10%, 1/01/12 .................................... 8,000,000 8,289,680
Fremont GO, Election of 2002, Fire Safety Project, Series B, FGIC Insured, 5.00%, 8/01/34 ..... 7,235,000 7,539,376
Fremont USD Alameda County GO, Election 2002, Series B, FSA Insured, 5.00%, 8/01/28 ........... 10,000,000 10,599,500
Fresno Joint Powers Financing Authority Lease Revenue, Master Lease Projects, Series A,
6.375%, 4/01/39 ........................................................................... 25,415,000 27,392,287
Glendale Community College District GO, FGIC Insured, zero cpn., 8/01/28 ...................... 15,000,000 5,573,100
Golden State Tobacco Securitization Corp. Tobacco Settlement Revenue,
Asset-Backed, Refunding, Series A, FGIC Insured, 5.00%, 6/01/45 ........................ 20,000,000 18,738,800
Asset-Backed, Senior Series A-1, 5.125%, 6/01/47 ....................................... 5,000,000 3,760,650
Asset-Backed, Senior Series A-1, 5.75%, 6/01/47 ........................................ 77,500,000 64,690,025
Enhanced, Asset-Backed, Refunding, Series A, 5.00%, 6/01/45 ............................ 64,000,000 59,964,160
Enhanced, Asset-Backed, Refunding, Series A, Radian Insured, 5.00%, 6/01/45 ............ 30,000,000 28,108,200
Enhanced, Asset-Backed, Series B, Pre-Refunded, 5.50%, 6/01/33 ......................... 15,000,000 17,109,000
Enhanced, Asset-Backed, Series B, Pre-Refunded, 5.625%, 6/01/38 ........................ 138,000,000 158,012,760
28 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- --------------
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Golden State Tobacco Securitization Corp. Tobacco Settlement Revenue, (continued)
Enhanced, Asset-Backed, Series B, Pre-Refunded, 5.50%, 6/01/43 ......................... $ 57,000,000 $ 65,014,200
Enhanced, Series A, AMBAC Insured, 5.00%, 6/01/45 ...................................... 14,085,000 13,196,800
Series A-1, Pre-Refunded, 6.75%, 6/01/39 ............................................... 5,290,000 6,267,962
Hartnell Community College District GO,
Capital Appreciation, Election of 2002, zero cpn. to 8/01/22, 6.125% thereafter,
8/01/33 ............................................................................. 20,000,000 10,800,600
Election of 2002, Series A, NATL Insured, Pre-Refunded, 5.00%, 8/01/27 ................. 5,020,000 5,728,473
Hawaiian Gardens RDA Tax Allocation, Project No. 1, ETM, 8.00%, 12/01/10 ...................... 1,630,000 1,650,929
Hawthorne School District GO, Capital Appreciation, Election of 2004, Series C,
Assured Guaranty, zero cpn., 8/01/48 ...................................................... 37,665,000 4,076,860
Helix Water District COP, Installment Purchase, Series A, FSA Insured, 5.25%, 4/01/24 ......... 8,925,000 8,927,499
Huntington Beach City and School District, Capital Appreciation, Election of 2002, Series A,
FGIC Insured, zero cpn., 8/01/28 .......................................................... 10,005,000 3,676,637
Huntington Beach UHSD, GO, Election of 2004, FSA Insured, 5.00%, 8/01/29 ...................... 11,000,000 11,541,420
Imperial Irrigation District Electric Revenue, System, Refunding, BHAC Insured, 5.125%,
11/01/38 .................................................................................. 4,800,000 5,146,896
Indio Water Authority Water Revenue, AMBAC Insured, 5.00%, 4/01/36 ............................ 18,020,000 18,178,756
Inland Empire Solid Waste Financing Authority Revenue, Landfill Improvement Financing
Project, Series B, FSA Insured, ETM, 6.25%, 8/01/11 ....................................... 2,200,000 2,302,124
Inland Empire Tobacco Securitization Authority Tobacco Settlement Revenue, Capital
Appreciation, Series B, zero cpn. to 12/01/11, 5.75% thereafter, 6/01/26 .................. 35,000,000 27,397,300
Intercommunity Hospital Financing Authority COP, Northbay Healthcare System, Refunding,
ACA Insured, 5.25%, 11/01/19 .............................................................. 10,550,000 10,134,857
Irvine 1915 Act Special Assessment, Limited Obligation,
AD No. 00-18, Group 4, 5.375%, 9/02/26 ................................................. 2,500,000 2,417,700
AD No. 03-19, Group 2, Refunding, 5.45%, 9/02/23 ....................................... 2,000,000 1,956,060
AD No. 03-19, Group 2, Refunding, 5.50%, 9/02/29 ....................................... 4,295,000 4,080,594
Irvine USD Financing Authority Special Tax, Series A,
5.00%, 9/01/26 ......................................................................... 2,865,000 2,654,910
5.125%, 9/01/36 ........................................................................ 10,585,000 9,153,485
Kaweah Delta Health Care District GO, Election of 2003, NATL Insured, 5.00%, 8/01/34 .......... 16,500,000 16,533,825
Kern Community College District COP, AMBAC Insured, 5.00%, 3/01/34 ............................ 15,000,000 15,733,500
Kern County Board of Education COP, Refunding, Series A, NATL Insured, 5.20%, 5/01/28 ......... 3,150,000 3,167,703
Kern High School District GO, Election of 1990, Series E, FGIC Insured, 5.125%, 8/01/33 ....... 5,275,000 5,462,368
La Mirada SFMR, MBS, Series A, 7.65%, 4/01/24 ................................................. 80,000 83,527
La Palma Community Development Commission Tax Allocation, La Palma Community
Development Project No. 1, Refunding, 6.10%, 6/01/22 ...................................... 2,065,000 2,066,487
La Quinta RDA Tax Allocation, Redevelopment Project Area No. 1, AMBAC Insured, 5.125%,
9/01/32 ................................................................................... 10,825,000 10,532,833
Laguna Beach USD, CFD Special Tax No. 98-1, 5.375%, 9/01/34 ................................... 5,375,000 4,506,239
Lake Elsinore PFA Tax Allocation Revenue,
Lake Elsinore Redevelopment Projects, Series A, FSA Insured, 5.80%, 9/01/25 ............ 6,750,000 6,750,337
Series A, 5.50%, 9/01/30 ............................................................... 15,550,000 15,061,263
Lancaster RDA, RMR, Los Angeles County, Series A, ETM, 10.125%, 9/01/16 ....................... 5,000 7,554
Lemon Grove CDA Tax Allocation, Refunding, 5.75%, 8/01/28 ..................................... 7,890,000 7,514,830
</Table>
Semiannual Report | 29
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- --------------
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Local Medical Facilities Financing Authority COP, California Mortgage Insured, 7.55%,
3/01/20 ................................................................................... $ 785,000 $ 785,141
Loma Linda Hospital Revenue, Loma Linda University Medical Center, Series A,
5.00%, 12/01/23 ........................................................................ 9,200,000 8,248,904
8.25%, 12/01/38 ........................................................................ 35,000,000 38,739,050
Long Beach Bond Finance Authority Lease Revenue, Aquarium of the Pacific Project,
Refunding, AMBAC Insured, 5.00%, 11/01/26 ................................................. 20,000,000 19,484,000
Long Beach Bond Finance Authority Natural Gas Purchase Revenue, Series A,
5.50%, 11/15/28 ........................................................................ 8,000,000 7,952,720
5.00%, 11/15/29 ........................................................................ 17,465,000 16,227,081
5.50%, 11/15/30 ........................................................................ 5,000,000 4,932,100
5.00%, 11/15/35 ........................................................................ 69,800,000 63,147,362
5.50%, 11/15/37 ........................................................................ 35,000,000 33,785,150
Long Beach California Board Finance Authority Lease Revenue, Temple and Willow Facility,
Refunding, Series B, NATL Insured, 5.00%, 10/01/27 ........................................ 14,935,000 14,976,221
Los Angeles Community College District GO,
Election of 2001, Series A, FGIC Insured, 5.00%, 8/01/32 ............................... 21,500,000 22,797,310
Series A, NATL Insured, Pre-Refunded, 5.00%, 6/01/26 ................................... 59,275,000 64,062,049
Los Angeles COP, Department of Public Social Services, Series A, AMBAC Insured, 5.50%,
8/01/24 ................................................................................ 4,000,000 4,059,920
8/01/31 ................................................................................ 5,000,000 5,059,900
Los Angeles County COP, Series 1992, California Mortgage Insured, 6.625%, 7/01/22 ............. 835,000 835,159
Los Angeles County Infrastructure and Economic Development Bank Revenue, County
Department of Public Social Services, AMBAC Insured, 5.00%, 9/01/35 ....................... 7,765,000 6,754,696
Los Angeles County MTA Sales Tax Revenue,
Proposition A, Senior Series A, FSA Insured, Pre-Refunded, 5.00%, 7/01/24 .............. 5,000,000 5,439,500
Proposition C, Refunding, Series C, AMBAC Insured, 5.00%, 7/01/26 ...................... 12,965,000 13,149,622
Los Angeles County Sanitation Districts Financing Authority Revenue, Capital Projects,
District No. 14, Series B, FGIC Insured, 5.00%, 10/01/30 ............................... 7,000,000 7,237,580
District No. 14, Series B, FGIC Insured, 5.00%, 10/01/34 ............................... 25,820,000 26,491,062
Series A, NATL Insured, 5.00%, 10/01/34 ................................................ 7,110,000 7,294,789
Los Angeles CRDA, Financing Authority Revenue, Pooled Financing, Beacon Normandie,
Series B, 6.625%, 9/01/14 ................................................................. 470,000 470,019
Los Angeles CRDA Tax Allocation, Series G, ETM, 6.75%, 7/01/10 ................................ 2,175,000 2,206,059
Los Angeles Department of Airports Revenue, Los Angeles International Airport, Series C,
5.125%, 5/15/33 ........................................................................... 16,000,000 16,476,160
Los Angeles Department of Water and Power Revenue,
Power System, Series A, Sub Series A-1, 5.25%, 7/01/38 ................................. 10,000,000 10,905,900
Power System, Series A, Sub Series A-1, AMBAC Insured, 5.00%, 7/01/37 .................. 12,345,000 13,074,589
Power System, Series A, Sub Series A-1, FSA Insured, 5.00%, 7/01/31 .................... 10,000,000 10,623,600
Power System, Series A, Sub Series A-1, FSA Insured, 5.00%, 7/01/35 .................... 63,435,000 66,556,002
Power System, Series B, FSA Insured, 5.00%, 7/01/28 .................................... 10,575,000 11,129,659
Refunding, Series A, Sub Series A-2, 5.00%, 7/01/30 .................................... 7,000,000 7,314,650
Series A, Sub Series A-2, NATL Insured, 5.00%, 7/01/23 ................................. 6,550,000 7,014,591
Los Angeles Department of Water and Power Waterworks Revenue, System, Series A,
Sub Series A-1, AMBAC Insured, 5.00%, 7/01/36 .......................................... 14,385,000 14,976,367
Sub Series A-1, AMBAC Insured, 5.00%, 7/01/38 .......................................... 18,000,000 18,869,220
Sub Series A-1, AMBAC Insured, 5.00%, 7/01/40 .......................................... 17,000,000 17,658,410
Sub Series A-2, AMBAC Insured, 5.00%, 7/01/44 .......................................... 60,000,000 63,099,000
30 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- --------------
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Los Angeles Harbor Department Revenue, Refunding, Series A, AMBAC Insured, 5.00%,
8/01/25 ................................................................................... $ 15,000,000 $ 15,446,700
Los Angeles USD,
COP, Administration Building Project, Series B, AMBAC Insured, 5.00%, 10/01/31 ......... 28,210,000 28,299,708
GO, Election of 2004, Series F, FGIC Insured, 5.00%, 7/01/30 ........................... 100,000 105,246
GO, Election of 2004, Series G, AMBAC Insured, 5.00%, 7/01/30 .......................... 13,815,000 14,539,735
GO, Election of 2004, Series G, AMBAC Insured, 5.00%, 7/01/31 .......................... 6,000,000 6,303,960
GO, Series A, NATL Insured, Pre-Refunded, 5.00%, 1/01/28 ............................... 170,250,000 194,100,322
GO, Series F, 5.00%, 7/01/29 ........................................................... 2,250,000 2,407,388
GO, Series I, 5.00%, 7/01/29 ........................................................... 10,000,000 10,699,500
GO, Series I, 5.00%, 1/01/34 ........................................................... 26,000,000 27,223,040
Los Angeles Wastewater System Revenue, Refunding, Series A,
5.00%, 6/01/39 ......................................................................... 25,000,000 26,736,750
FGIC Insured, 5.00%, 6/01/32 ........................................................... 6,000,000 6,173,820
FSA Insured, 4.875%, 6/01/29 ........................................................... 34,335,000 35,322,131
FSA Insured, 5.00%, 6/01/32 ............................................................ 17,500,000 18,124,925
Lynwood PFA Tax Allocation, Project Area A, Refunding, Series A, FSA Insured, 5.90%,
9/01/28 ................................................................................... 6,470,000 6,606,258
M-S-R Energy Authority Gas Revenue, Series B, 6.50%, 11/01/39 ................................. 25,000,000 28,574,000
M-S-R Public Power Agency San Juan Project Revenue, Series E, NATL Insured, 6.00%, 7/01/22 .... 6,330,000 6,346,268
Madera County COP, Valley Children's Hospital, NATL Insured,
5.00%, 3/15/23 ......................................................................... 8,500,000 8,210,575
5.75%, 3/15/28 ......................................................................... 27,500,000 27,674,350
(b) Madera-Chowchilla Power Authority Hydroelectric Revenue, Refunding, 8.00%, 1/01/14 ...... 1,315,000 1,319,313
Manhattan Beach COP, Metlox Public Improvements, 5.00%, 1/01/33 ............................... 5,575,000 5,802,627
Manteca Financing Authority Sewer Revenue, Series A, NATL Insured, 5.00%, 12/01/33 ............ 2,870,000 2,873,014
Marysville Hospital Revenue, Fremont Rideout Health, Refunding, Series A, AMBAC Insured,
5.00%, 1/01/22 ............................................................................ 5,000,000 5,032,700
Metropolitan Water District of Southern California Waterworks Revenue, Series B1,
FGIC Insured, 5.00%, 10/01/33 ............................................................. 5,000,000 5,248,450
Milpitas RDA Tax Allocation, Redevelopment Project Area No. 1, NATL Insured, ETM,
5.40%, 1/15/17 ......................................................................... 12,155,000 13,749,858
5.50%, 1/15/24 ......................................................................... 11,790,000 14,178,300
Modesto High School District Stanislaus County GO, Capital Appreciation, Series A,
FGIC Insured, zero cpn.,
8/01/21 ................................................................................ 9,660,000 5,204,808
8/01/23 ................................................................................ 10,815,000 5,129,554
5/01/27 ................................................................................ 12,770,000 4,667,818
Modesto Irrigation District COP, Refunding and Capital Improvements, Series B, 5.30%,
7/01/22 ................................................................................... 3,635,000 3,635,509
Modesto Schools Infrastructure Financing Agency Special Tax, AMBAC Insured, 5.20%,
9/01/37 ................................................................................... 4,295,000 3,884,226
Monterey Peninsula Community College District GO, Series C, FSA Insured, 5.00%, 8/01/34 ....... 10,000,000 10,556,400
Moreno Valley USD, GO, Election of 2004, Series A, FSA Insured, zero cpn.,
8/01/27 ................................................................................ 6,315,000 3,194,885
8/01/28 ................................................................................ 6,625,000 3,178,675
Semiannual Report | 31
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- --------------
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Murrieta Valley USD,
GO, FSA Insured, 4.50%, 9/01/28 ........................................................ $ 5,300,000 $ 5,409,392
PFA, Special Tax Revenue, Series A, FGIC Insured, 5.00%, 9/01/37 ....................... 6,975,000 7,019,849
Natomas USD, GO, Election of 2006, BHAC Insured, 5.00%, 8/01/32 ............................... 16,450,000 17,107,342
Needles PFAR Tax Allocation, Redevelopment Project, Series A, 7.50%, 8/15/22 .................. 1,325,000 1,325,053
New Haven USD, GO, Capital Appreciation, Series C, FGIC Insured, zero cpn., 8/01/23 ........... 14,700,000 7,230,195
Norco RDA Tax Allocation, Area No. 1, Refunding, NATL Insured, 5.125%, 3/01/30 ................ 8,515,000 8,055,956
Northern California Power Agency Multiple Capital Facilities Revenue, Refunding, Series A,
AMBAC Insured, 5.00%, 8/01/25 ............................................................. 19,250,000 19,394,760
Northern California Power Agency Public Power Revenue, Hydroelectric Project No. 1,
Refunding, Series A, NATL Insured,
5.125%, 7/01/23 ........................................................................ 6,270,000 6,321,038
5.00%, 7/01/28 ......................................................................... 12,510,000 12,577,679
5.20%, 7/01/32 ......................................................................... 12,930,000 12,990,383
Oakland GO, Series B, 6.25%, 1/15/39 .......................................................... 10,045,000 11,068,987
Oakland USD Alameda County GO, 6.125%, 8/01/29 ................................................ 7,225,000 7,750,546
Oceanside USD, GO, Election of 2000, Series D, FGIC Insured, 5.00%,
8/01/29 ................................................................................ 5,755,000 5,986,869
8/01/33 ................................................................................ 5,590,000 5,685,365
Orange County CFD No. 2003-1 Special Tax, Ladera Ranch, Series A,
5.50%, 8/15/24 ......................................................................... 1,100,000 1,085,645
5.60%, 8/15/28 ......................................................................... 3,250,000 3,164,883
5.625%, 8/15/34 ........................................................................ 5,000,000 4,752,750
Orange County CFD No. 2004-1 Special Tax, Ladera Ranch, Series A,
5.15%, 8/15/29 ......................................................................... 6,405,000 5,695,902
5.20%, 8/15/34 ......................................................................... 11,000,000 9,676,810
Orange County Water District Revenue COP, Series B, NATL Insured,
5.00%, 8/15/28 ......................................................................... 22,950,000 24,190,677
5.00%, 8/15/34 ......................................................................... 19,435,000 20,193,548
ETM, 5.00%, 8/15/34 .................................................................... 4,140,000 4,802,524
Oxnard Harbor District Revenue, ACA Insured, 5.60%, 8/01/19 ................................... 10,820,000 10,603,275
Palmdale CRDA Tax Allocation, Merged Redevelopment Project Areas,
Refunding, NATL Insured, 5.00%, 9/01/34 ................................................ 6,980,000 6,317,319
sub. lien, AMBAC Insured, 5.50%, 12/01/29 .............................................. 2,980,000 2,958,246
Palo Verde Community College District COP, AMBAC Insured, 5.50%, 1/01/37 ...................... 21,000,000 22,208,550
Palomar Pomerado Health GO, Convertible Capital Appreciation, Election of 2004, Series A,
Assured Guaranty, zero cpn. to 8/01/19, 7.00% thereafter, 8/01/38 ......................... 36,000,000 23,740,200
Peralta Community College District GO, Election of 2000, Series C, NATL Insured, 5.00%,
8/01/31 ................................................................................ 4,105,000 4,277,697
8/01/34 ................................................................................ 6,920,000 7,159,017
Perris PFAR Tax Allocation, Series A, 5.75%, 10/01/31 ......................................... 5,000,000 5,056,650
Perris SFMR, Series A, GNMA Secured, ETM, zero cpn., 6/01/23 .................................. 19,095,000 11,103,361
Perris Special Tax, CFD No. 91-1, 8.75%, 9/01/21 .............................................. 4,785,000 4,822,132
Port Hueneme RDA Tax Allocation, R-76 Project, Refunding, 6.50%, 5/01/23 ...................... 2,290,000 2,289,702
Port of Oakland Revenue, Series L, FGIC Insured, 5.375%, 11/01/27 ............................. 5,000,000 5,029,950
Porterville COP, Infrastructure Financing Project, AMBAC Insured, 5.00%,
7/01/30 ................................................................................ 7,420,000 7,232,422
7/01/36 ................................................................................ 6,535,000 6,048,208
32 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- --------------
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Poway COP, Royal Mobile Home Park Project, Refunding, FSA Insured,
5.875%, 8/01/15 ........................................................................ $ 5,505,000 $ 5,515,735
6.00%, 8/01/20 ......................................................................... 5,400,000 5,402,700
6.00%, 8/01/28 ......................................................................... 15,000,000 15,007,650
Poway USD, GO, NATL Insured, 5.00%, 8/01/27 ................................................... 5,020,000 5,264,574
Ramona USD, COP, Convertible Capital Appreciation Bonds, Refunding, FGIC Insured,
zero cpn. to 5/01/12, 5.00% thereafter, 5/01/32 ........................................... 5,500,000 4,897,585
Rancho Mirage Joint Powers Financing Authority Revenue, Eisenhower Medical Center,
Pre-Refunded, 5.625%, 7/01/34 .......................................................... 10,000,000 11,824,600
Refunding, Series A, 5.00%, 7/01/38 .................................................... 14,000,000 13,466,600
Series A, 5.00%, 7/01/47 ............................................................... 60,000,000 56,902,200
Rancho Water District Financing Authority Revenue, AMBAC Insured, ETM, zero cpn.,
8/15/16 ................................................................................ 8,605,000 7,168,395
8/15/17 ................................................................................ 13,605,000 10,849,307
8/15/18 ................................................................................ 13,605,000 10,386,057
Redding California Electricity System Revenue COP, Series A, FGIC Insured, 5.00%,
6/01/35 ................................................................................... 12,725,000 12,861,539
Redondo Beach PFAR, Wastewater System Financing Project, Series A, NATL Insured,
5.00%, 5/01/34 ............................................................................ 5,060,000 5,301,666
Rialto RDA Tax Allocation, Series A, 6.25%, 9/01/37 ........................................... 13,525,000 13,726,793
Rialto USD, GO, Series A, FGIC Insured, zero cpn., 6/01/19 .................................... 13,985,000 8,551,268
Richmond Joint Powers Financing Authority Revenue, Lease, Series A, NATL Insured,
Pre-Refunded, 5.00%,
2/01/26 ................................................................................ 6,500,000 6,950,450
2/01/31 ................................................................................ 7,000,000 7,485,100
Riverside Community College District GO, Election of 2004, Series C, NATL Insured,
5.00%, 8/01/32 ............................................................................ 6,930,000 7,230,208
Riverside County Asset Leasing Corp. Leasehold Revenue, Riverside County Hospital Project,
NATL Insured, zero cpn., 6/01/23 ....................................................... 14,160,000 7,015,147
NATL Insured, zero cpn., 6/01/24 ....................................................... 13,005,000 6,033,150
Series A, 6.50%, 6/01/12 ............................................................... 20,125,000 21,320,224
Riverside County COP, Capital Improvement, Family Law, Refunding, Series A, FGIC Insured,
5.00%,
11/01/30 ............................................................................... 9,905,000 9,956,110
11/01/36 ............................................................................... 6,345,000 6,348,046
Riverside County Flood Control and Water Conservation District Elsinore Valley AD, Zone 3,
7.875%,
9/01/10 ................................................................................ 280,000 293,485
9/01/11 ................................................................................ 305,000 337,483
9/01/12 ................................................................................ 325,000 371,391
9/01/13 ................................................................................ 350,000 411,579
9/01/14 ................................................................................ 380,000 457,744
9/01/15 ................................................................................ 410,000 501,992
9/01/16 ................................................................................ 440,000 544,966
9/01/17 ................................................................................ 475,000 594,277
Riverside County PFA, COP,
5.75%, 5/15/19 ......................................................................... 3,500,000 3,281,005
5.80%, 5/15/29 ......................................................................... 14,230,000 12,246,196
Semiannual Report | 33
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- --------------
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Riverside County PFA Tax Allocation Revenue, Redevelopment Projects, Refunding, Series A,
XLCA Insured, 5.00%, 10/01/35 ............................................................. $ 17,500,000 $ 14,211,050
Riverside County RDA Tax Allocation, Jurupa Valley Project Area, AMBAC Insured,
Pre-Refunded, 5.125%, 10/01/35 ............................................................ 17,035,000 18,896,925
Riverside County SFMR, Capital Appreciation Mortgage,
Series A, ETM, zero cpn., 9/01/14 ...................................................... 20,220,000 18,374,925
Series A, ETM, zero cpn., 11/01/20 ..................................................... 25,055,000 16,407,768
Series B, ETM, zero cpn., 6/01/23 ...................................................... 26,160,000 14,829,842
Riverside Electric Revenue, Issue D, FSA Insured, 5.00%, 10/01/33 ............................. 10,000,000 10,593,800
RNR School Financing Authority Special Tax, CFD No. 92-1, Series A, AMBAC Insured,
5.00%, 9/01/36 ............................................................................ 10,090,000 8,724,318
Road 17 Levee Area PFA Assessment Revenue, Road 17 Levee Improvement Project,
7.00%, 9/01/39 ............................................................................ 8,865,000 9,390,163
Rocklin USD, GO,
Capital Appreciation, Series A, FGIC Insured, zero cpn., 9/01/10 ....................... 4,595,000 4,538,527
Capital Appreciation, Series A, FGIC Insured, zero cpn., 9/01/11 ....................... 5,145,000 4,877,666
Capital Appreciation, Series A, FGIC Insured, zero cpn., 9/01/12 ....................... 5,760,000 5,261,472
Capital Appreciation, Series A, FGIC Insured, zero cpn., 9/01/16 ....................... 33,960,000 25,144,324
Election of 2002, FGIC Insured, zero cpn., 8/01/25 ..................................... 8,160,000 3,389,746
Election of 2002, FGIC Insured, zero cpn., 8/01/26 ..................................... 8,695,000 3,405,745
Election of 2002, FGIC Insured, zero cpn., 8/01/27 ..................................... 9,080,000 3,311,748
Election of 2002, FGIC Insured, zero cpn., 8/01/28 ..................................... 16,615,000 5,612,547
Roseville City School District GO, Capital Appreciation, Series A, zero cpn.,
8/01/11 ................................................................................ 3,115,000 2,986,787
8/01/17 ................................................................................ 30,770,000 21,991,319
Roseville Electric System Revenue COP, FSA Insured, 5.00%,
2/01/29 ................................................................................ 10,000,000 10,485,800
2/01/34 ................................................................................ 17,000,000 17,633,590
Roseville Joint UHSD,
Capital Appreciation, Series A, zero cpn., 8/01/10 ..................................... 1,820,000 1,801,454
Capital Appreciation, Series A, zero cpn., 8/01/11 ..................................... 1,965,000 1,887,520
Capital Appreciation, Series A, zero cpn., 8/01/17 ..................................... 18,155,000 12,953,592
GO, Election of 2004, Series B, FGIC Insured, 5.00%, 8/01/30 ........................... 8,375,000 8,761,422
Roseville Natural Gas Financing Authority Gas Revenue, 5.00%, 2/15/26 ......................... 5,000,000 4,759,300
Rowland USD, GO, Series A, FSA Insured, 5.00%, 8/01/31 ........................................ 17,715,000 18,355,574
Sacramento Area Flood Control Agency Revenue, Consolidated, Capital Assessment District,
Series A, FGIC Insured, 5.00%, 10/01/37 ................................................... 8,715,000 8,887,383
Sacramento City Financing Authority Revenue, Capital Improvement,
AMBAC Insured, 5.00%, 12/01/33 ......................................................... 485,000 486,770
AMBAC Insured, Pre-Refunded, 5.00%, 12/01/33 ........................................... 7,035,000 8,112,270
Community Reinsurance Capital Program, Series A, AMBAC Insured, 5.00%, 12/01/31 ........ 16,915,000 17,137,263
Community Reinsurance Capital Program, Series A, AMBAC Insured, 5.00%, 12/01/36 ........ 10,000,000 10,035,100
Pre-Refunded, 5.625%, 6/01/30 .......................................................... 6,000,000 6,268,920
Series A, AMBAC Insured, Pre-Refunded, 5.00%, 12/01/32 ................................. 16,250,000 17,442,750
Sacramento City USD, GO, Election of 1999, Series B, FGIC Insured, 5.00%, 7/01/30 ............. 5,250,000 5,377,732
34 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- --------------
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Sacramento County Airport System Revenue,
PFC/Grant, Series C, Assured Guaranty, 5.75%, 7/01/39 .................................. $ 5,000,000 $ 5,496,400
Senior Series A, FSA Insured, 5.00%, 7/01/41 ........................................... 10,000,000 10,438,100
Senior Series B, FSA Insured, 5.25%, 7/01/39 ........................................... 20,000,000 19,498,800
Sacramento County Sanitation District Financing Authority Revenue,
AMBAC Insured, Pre-Refunded, 5.625%, 12/01/30 .......................................... 5,000,000 5,349,400
County Sanitation District No. 1, NATL Insured, 5.00%, 8/01/30 ......................... 11,900,000 12,543,552
Sacramento Regional County Sanitation District, FGIC Insured, 5.00%, 12/01/30 .......... 10,000,000 10,608,800
Sacramento Regional County Sanitation District, FGIC Insured, 5.00%, 12/01/36 .......... 61,095,000 63,759,964
Sacramento Regional County Sanitation District, Series A, AMBAC Insured, Pre-Refunded,
5.00%, 12/01/35 .................................................................... 40,000,000 46,898,400
Sacramento MUD Electric Revenue,
Refunding, Series T, FGIC Insured, 5.00%, 5/15/30 ...................................... 9,095,000 9,377,491
Series N, NATL Insured, 5.00%, 8/15/28 ................................................. 63,500,000 64,693,165
sub. lien, Refunding, 8.00%, 11/15/10 .................................................. 6,355,000 6,371,841
Sacramento USD, COP, Refunding, NATL Insured, 5.00%, 3/01/31 .................................. 6,000,000 6,013,440
Saddleback Valley USD, GO,
Election of 2004, Series A, NATL Insured, 4.50%, 8/01/30 ............................... 5,250,000 5,336,310
FSA Insured, 5.00%, 8/01/27 ............................................................ 4,680,000 4,944,092
FSA Insured, 5.00%, 8/01/29 ............................................................ 4,335,000 4,548,369
Salida Area Public Facilities Financing Agency CFD, Special Tax, No. 1988-1, Refunding,
FSA Insured, 5.25%, 9/01/28 ............................................................... 6,800,000 6,800,408
San Bernardino County COP, Medical Center Financing Project,
Refunding, 5.00%, 8/01/26 .............................................................. 13,045,000 12,293,217
Series A, NATL Insured, 5.50%, 8/01/22 ................................................. 40,830,000 40,836,124
San Bernardino County Housing Authority MFMR,
Sequoia Plaza Mobil Home, GNMA Secured, 6.75%, 4/20/41 ................................. 6,920,000 7,418,655
Series A, GNMA Secured, 6.70%, 3/20/43 ................................................. 3,345,000 3,638,758
San Bernardino Joint Powers Financing Authority Lease Revenue, City Hall Project,
Refunding, NATL Insured, 5.70%, 1/01/23 ................................................... 6,315,000 6,326,872
San Carlos School District GO, Election of 2005, Series A, NATL Insured, 5.00%,
10/01/26 ............................................................................... 5,070,000 5,446,752
10/01/30 ............................................................................... 9,820,000 10,352,342
San Diego Community College District GO, Election of 2002, Capital Appreciation,
zero cpn. to 8/01/19, 6.00% thereafter, 8/01/33 ........................................... 26,880,000 17,628,979
San Diego County COP, NATL Insured, 5.00%, 8/15/28 ............................................ 24,000,000 24,101,040
San Diego County Water Authority Water Revenue COP, Series A,
FSA Insured, 5.00%, 5/01/34 ............................................................ 106,705,000 110,903,842
NATL Insured, 5.00%, 5/01/25 ........................................................... 12,440,000 13,039,981
San Diego Public Facilities Financing Authority Sewer Revenue, Series A, FGIC Insured,
5.25%, 5/15/27 ............................................................................ 9,395,000 9,394,436
San Diego Public Facilities Financing Authority Water Revenue,
NATL Insured, 5.00%, 8/01/26 ........................................................... 12,210,000 12,720,866
Subordinated, Refunding, NATL Insured, 5.00%, 8/01/32 .................................. 20,000,000 20,506,200
San Diego RDA Tax Allocation, Horton Project, Refunding, Series A, FSA Insured, 6.00%,
11/01/15 .................................................................................. 5,000,000 5,000,300
Semiannual Report | 35
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- --------------
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
San Diego USD, GO,
Capital Appreciation, Election of 2008, Series A, zero cpn. to 7/01/19, 6.00%
thereafter, 7/01/33 ................................................................ $ 104,505,000 $ 65,145,282
Capital Appreciation Bond, Series A, FGIC Insured, zero cpn., 7/01/21 .................. 12,160,000 7,212,096
Capital Appreciation Bond, Series A, FGIC Insured, zero cpn., 7/01/22 .................. 8,440,000 4,734,502
Capital Appreciation Bond, Series A, FGIC Insured, zero cpn., 7/01/23 .................. 11,120,000 5,897,381
Election of 1998, Series B, NATL Insured, 5.00%, 7/01/25 ............................... 6,975,000 7,165,069
Election of 1998, Series D, FGIC Insured, 5.00%, 7/01/27 ............................... 16,000,000 17,451,680
Election of 1998, Series E, FSA Insured, 5.00%, 7/01/28 ................................ 10,000,000 11,121,100
Series C, FSA Insured, 5.00%, 7/01/26 .................................................. 6,490,000 7,030,682
San Francisco BART District GO, Election of 2004, Series B, 5.00%, 8/01/32 .................... 28,000,000 30,273,600
San Francisco BART District Sales Tax Revenue, FSA Insured, 5.00%,
7/01/31 ................................................................................ 10,000,000 10,370,400
7/01/36 ................................................................................ 6,760,000 6,978,010
San Francisco City and County Airports Commission International Airport Revenue,
Issue 32G, Refunding, Second Series, FGIC Insured, 4.50%, 5/01/28 ...................... 7,500,000 7,525,200
Issue 32G, Refunding, Second Series, FGIC Insured, 4.50%, 5/01/32 ...................... 5,260,000 5,085,999
Refunding, Second Series 28A, NATL Insured, 5.125%, 5/01/32 ............................ 26,290,000 24,732,055
Refunding, Series 28B, NATL Insured, 5.00%, 5/01/27 .................................... 5,050,000 5,158,474
San Francisco City and County COP, 30 Van Ness Avenue Property, Series A, NATL Insured,
5.00%, 9/01/31 ............................................................................ 5,805,000 5,859,277
San Francisco City and County RDA, Hotel Tax Revenue, FSA Insured, 6.75%, 7/01/25 ............. 315,000 315,047
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue,
Capital Appreciation, Refunding, Series A, 5.60%, 1/15/16 .............................. 19,500,000 19,974,435
Capital Appreciation, Refunding, Series A, 5.65%, 1/15/17 .............................. 17,000,000 17,367,200
Capital Appreciation, Refunding, Series A, 5.70%, 1/15/19 .............................. 57,000,000 57,774,060
Capital Appreciation, Refunding, Series A, 5.75%, 1/15/23 .............................. 80,000,000 79,992,000
Capital Appreciation, Refunding, Series A, 5.75%, 1/15/24 .............................. 80,000,000 79,453,600
Refunding, Series A, 5.50%, 1/15/28 .................................................... 247,300,000 231,062,282
Refunding, Series A, NATL Insured, 5.375%, 1/15/29 ..................................... 85,500,000 77,888,790
Refunding, Series A, NATL Insured, 5.25%, 1/15/30 ...................................... 21,200,000 18,801,856
senior lien, 5.00%, 1/01/33 ............................................................ 82,040,000 75,678,618
senior lien, ETM, zero cpn., 1/01/25 ................................................... 5,700,000 3,164,127
senior lien, ETM, zero cpn., 1/01/28 ................................................... 33,545,000 15,773,865
senior lien, ETM, zero cpn., 1/01/29 ................................................... 37,050,000 16,404,258
senior lien, Refunding, Series A, 5.65%, 1/15/18 ....................................... 60,000,000 60,975,600
senior lien, Refunding, Series A, 5.70%, 1/15/20 ....................................... 80,000,000 80,663,200
senior lien, Refunding, Series A, 5.75%, 1/15/22 ....................................... 90,000,000 90,319,500
San Jose Airport Revenue,
Refunding, Series A, FGIC Insured, 5.00%, 3/01/31 ...................................... 11,000,000 11,069,190
Refunding, Series B, AMBAC Insured, 5.00%, 3/01/37 ..................................... 65,000,000 65,597,350
Series D, NATL Insured, 5.00%, 3/01/28 ................................................. 10,000,000 10,302,100
San Jose Financing Authority Lease Revenue,
Civic Center Project, Refunding, Series A, AMBAC Insured, 5.00%, 6/01/39 ............... 20,885,000 21,820,648
Civic Center Project, Series B, AMBAC Insured, 5.00%, 6/01/27 .......................... 46,400,000 48,256,000
Refunding, Series F, NATL Insured, 5.00%, 9/01/21 ...................................... 14,045,000 14,624,778
Refunding, Series F, NATL Insured, 5.00%, 9/01/22 ...................................... 14,730,000 15,299,020
36 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- --------------
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
San Jose Financing Authority Revenue, Fourth and San Fernando Parking Facility, Series A,
AMBAC Insured, 5.00%, 9/01/24 ............................................................. $ 5,000,000 $ 5,212,100
San Jose GO,
Libraries, Parks and Public Safety Projects, 5.00%, 9/01/28 ............................ 11,600,000 12,194,384
Libraries, Parks and Public Safety Projects, NATL Insured, 5.00%, 9/01/34 .............. 15,820,000 16,502,475
Libraries and Parks Projects, NATL Insured, 5.00%, 9/01/36 ............................. 35,150,000 37,382,376
San Jose RDA, MFHR, Miraido Village, Series A, GNMA Secured, 5.75%, 7/20/38 ................... 7,110,000 7,825,906
San Jose RDA Tax Allocation,
Housing Set-Aside Merged Area, Series E, NATL Insured, 5.85%, 8/01/27 .................. 7,325,000 7,341,628
Merged Area Redevelopment Project, Refunding, NATL Insured, 5.625%, 8/01/28 ............ 2,030,000 2,036,699
Merged Area Redevelopment Project, Series B, XLCA Insured, 5.00%, 8/01/32 .............. 13,395,000 12,729,536
Series A, 6.50%, 8/01/18 ............................................................... 10,000,000 11,568,500
Series B, 7.00%, 8/01/35 ............................................................... 28,565,000 32,098,776
San Jose USD, COP, Refunding, FSA Insured, zero cpn.,
1/01/27 ................................................................................ 7,105,000 2,952,199
1/01/29 ................................................................................ 7,105,000 2,587,428
San Jose USD Santa Clara County GO, Series A, FSA Insured, 5.00%,
8/01/24 ................................................................................ 9,200,000 9,534,144
8/01/27 ................................................................................ 9,150,000 9,441,244
San Juan Basin Authority Lease Revenue, AMBAC Insured, 5.00%, 12/01/34 ........................ 4,000,000 3,702,360
San Juan Bautista Water and Wastewater Revenue COP, Refunding, 6.25%, 10/01/43 ................ 7,330,000 7,849,844
San Juan USD, GO, Election of 1998, Series B, NATL Insured, zero cpn.,
8/01/26 ................................................................................ 15,825,000 6,535,725
8/01/27 ................................................................................ 18,605,000 7,025,248
8/01/28 ................................................................................ 19,470,000 6,822,093
San Luis Obispo County Financing Authority Revenue, Nacimiento Water Project, Series A,
NATL Insured, 5.00%, 9/01/32 .............................................................. 12,500,000 12,711,625
San Marcos PFAR, Series A, ETM, 6.25%, 9/02/22 ................................................ 15,000,000 20,103,750
San Marcos Public Facilities Authority Revenue,
Refunding, 5.80%, 9/01/18 .............................................................. 4,745,000 4,795,487
Senior Tax Increment Project Area 3, Series A, NATL Insured, Pre-Refunded, 5.80%,
10/01/30 ........................................................................... 8,035,000 8,633,527
San Mateo County Joint Powers Authority Lease Revenue, Capital Projects, Refunding,
Series A, FSA Insured, 5.00%, 7/15/29 ..................................................... 13,000,000 13,156,520
San Mateo Flood Control District COP, Colma Creek Flood Control Zone, AMBAC Insured,
5.00%, 8/01/39 ............................................................................ 6,555,000 6,021,947
San Mateo RDA Tax Allocation, Pre-Refunded, 5.60%, 8/01/25 .................................... 10,185,000 11,118,150
San Mateo UHSD,
COP, Phase I Projects, Capital Appreciation, Series B, zero cpn. to 12/14/19, 5.00%
thereafter, 12/15/43 ............................................................... 11,535,000 4,942,517
GO, Capital Appreciation, Election of 2000, Series B, FGIC Insured, zero cpn.,
9/01/22 ............................................................................ 5,000,000 2,935,300
GO, Election of 2000, Series A, FGIC Insured, Pre-Refunded, 5.00%, 9/01/25 ............. 13,865,000 15,049,487
San Ramon PFA Tax Allocation Revenue, NATL Insured, 5.30%, 2/01/28 ............................ 18,360,000 17,855,284
San Ramon Valley Fire Protection District COP, XLCA Insured, 5.00%, 8/01/36 ................... 5,655,000 5,805,819
San Ramon Valley USD, GO, Election of 2002,
FSA Insured, 5.40%, 3/01/28 ............................................................ 27,410,000 29,674,888
NATL Insured, 5.00%, 8/01/25 ........................................................... 9,215,000 9,988,784
NATL Insured, 5.00%, 8/01/28 ........................................................... 14,770,000 15,840,530
Semiannual Report | 37
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- --------------
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Sanger USD, GO, Election of 2006, Series A, FSA Insured, 5.00%, 8/01/27 ....................... $ 6,000,000 $ 6,368,640
(b) Santa Barbara Housing Authority Revenue, Refunding and Acquisition, 6.25%, 11/15/20 ...... 4,390,000 3,878,082
Santa Clara County Financing Authority Revenue, El Camino, Series B, AMBAC Insured,
5.125%, 2/01/41 ........................................................................... 20,000,000 20,274,400
Santa Clara Housing Authority MFHR, Elena Gardens Apartments Project, Series A, GNMA
Secured, 6.40%, 6/20/35 ................................................................... 5,345,000 5,361,409
Santa Clara USD, COP, 5.375%, 7/01/31 ......................................................... 7,575,000 7,918,829
Santa Clarita Community College District GO, Election of 2006, NATL Insured, 5.00%,
8/01/32 ................................................................................... 9,765,000 10,037,932
Santa Cruz City High School District GO, NATL Insured, 5.00%, 8/01/29 ......................... 11,535,000 11,609,401
Santa Cruz County RDA Tax Allocation, 7.00%, 9/01/36 .......................................... 5,000,000 5,595,000
Santa Margarita Water District Special Tax, Community Facilities District No. 99-1,
Pre-Refunded, 6.00%, 9/01/30 .............................................................. 9,000,000 10,583,010
Santa Maria Bonita School District COP, NATL Insured, 7.00%, 3/01/16 .......................... 370,000 370,133
Santa Maria Water and Wastewater Revenue, COP, Series A, AMBAC Insured, 5.55%, 8/01/27 ........ 21,000,000 22,243,410
Santee School District COP, Capital Improvement Project, Assured Guaranty, 5.50%,
10/01/48 .................................................................................. 15,460,000 16,557,196
Saugus USD, GO, Series B, FSA Insured, Pre-Refunded, 5.00%, 8/01/29 ........................... 5,000,000 5,910,850
School Facilities Financing Authority Revenue, Capital Appreciation, Grant Joint UHSD,
Series A, FSA Insured, zero cpn., 8/01/42 ................................................. 49,000,000 6,522,880
Shafter Joint Powers Financing Authority Lease Revenue, Community Correctional Facility
Project, Series A,
5.95%, 1/01/11 ......................................................................... 820,000 820,262
6.05%, 1/01/17 ......................................................................... 5,135,000 5,135,770
Simi Valley USD, GO, Election 2004, Series A, NATL Insured, Pre-Refunded, 5.00%, 8/01/26 ...... 6,000,000 6,970,200
Snowline Joint USD, CFD Special Tax, No. 2002-1, Series A,
5.30%, 9/01/29 ......................................................................... 1,615,000 1,345,069
5.40%, 9/01/34 ......................................................................... 2,000,000 1,668,060
Solano County COP, GO, NATL Insured, Pre-Refunded, 5.00%, 11/01/32 ............................ 14,665,000 16,397,376
South Gate Utility Authority Revenue, Water and Sewer Systems Project, FGIC Insured,
5.00%, 10/01/32 ........................................................................... 6,475,000 5,721,375
Southern California Public Power Authority Natural Gas Project Revenue, Project No. 1,
Series A, 5.00%, 11/01/33 ................................................................. 17,500,000 17,548,125
Southern California Public Power Authority Power Project Revenue,
6.75%, 7/01/13 ......................................................................... 10,000,000 11,777,800
Series A, AMBAC Insured, ETM, zero cpn., 7/01/11 ....................................... 12,000,000 11,785,440
Series A, AMBAC Insured, ETM, zero cpn., 7/01/12 ....................................... 16,890,000 16,243,451
Series A, AMBAC Insured, ETM, zero cpn., 7/01/13 ....................................... 16,000,000 15,013,120
Southern California Public Power Authority Project Revenue, Magnolia Power Project,
Series A, AMBAC Insured, Pre-Refunded, 5.00%, 7/01/36 ..................................... 15,800,000 17,982,296
Southern California Public Power Authority Transmission Project Revenue, Southern
Transmission Project, 6.125%, 7/01/18 ..................................................... 1,135,000 1,135,306
Standard Elementary School District GO, Election of 2006, Series A, AMBAC Insured,
5.00%, 11/01/30 ........................................................................... 5,000,000 5,180,450
Stockton East Water District COP, Capital Appreciation, 1990 Project, Series B, zero cpn.,
4/01/16 ................................................................................... 103,885,000 80,137,928
38 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- --------------
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Stockton Revenue, O'Connor Woods Housing Corp., Series A, 6.35%, 11/01/31 ..................... $ 9,110,000 $ 7,873,773
Stockton Revenue COP, Wastewater System Project, Refunding, Series A, NATL Insured,
5.20%, 9/01/29 ............................................................................. 19,160,000 19,315,771
Stockton USD, GO,
Election of 2000, NATL Insured, 5.00%, 1/01/27 ......................................... 5,030,000 5,110,731
NATL Insured, 5.00%, 1/01/28 ........................................................... 5,335,000 5,407,769
Suisun City PFA Tax Allocation Revenue, Capital Appreciation Redevelopment Project,
Series A, zero cpn., 10/01/28 .............................................................. 17,855,000 6,539,572
Sweetwater UHSD, GO, Election of 2006, Series A, FSA Insured, 5.625%, 8/01/47 ................. 10,000,000 10,795,900
Tahoe Forest Hospital District Revenue, Series A, 5.90%, 7/01/29 .............................. 1,635,000 1,565,071
Thousand Oaks SFHMR, Capital Appreciation, Mortgage-Backed Securities Program,
Refunding, Series A, GNMA Secured, zero cpn., 9/01/23 ...................................... 16,000 70,849
Tobacco Securitization Authority Northern California Tobacco Settlement Revenue,
Asset-Backed Bonds, Series B, Pre-Refunded, 5.00%, 6/01/28 ................................. 17,390,000 18,651,471
Tobacco Securitization Authority Southern California Tobacco Settlement Revenue,
Asset-Backed Bonds,
Senior Series A, Pre-Refunded, 5.50%, 6/01/36 .......................................... 80,500,000 89,900,790
Senior Series A, Pre-Refunded, 5.625%, 6/01/43 ......................................... 123,165,000 137,950,958
Sub Series B, Pre-Refunded, 6.00%, 6/01/43 ............................................. 48,435,000 54,724,285
Tobacco Securitization Authority Tobacco Settlement Revenue, Series A, Pre-Refunded,
5.375%, 6/01/41 ............................................................................ 30,250,000 32,630,977
Torrance Hospital Revenue, Torrance Memorial Medical Center, Series A, 5.50%, 6/01/31 ......... 4,385,000 4,437,488
Trabuco Canyon PFA, Special Tax Revenue, Refunding,
Series A, FSA Insured, 6.00%, 10/01/10 ................................................. 7,465,000 7,478,810
Series A, FSA Insured, 6.10%, 10/01/15 ................................................. 13,220,000 15,008,930
Series C, FSA Insured, 6.00%, 7/01/12 .................................................. 1,650,000 1,744,265
Series C, FSA Insured, 6.10%, 7/01/19 .................................................. 5,215,000 6,335,756
Tustin CFD No. 04-01 Special Tax, John Laing Homes,
5.375%, 9/01/29 ........................................................................ 1,000,000 924,610
5.50%, 9/01/34 ......................................................................... 1,500,000 1,357,020
Twin Cities Police Authority CFD Special Tax, No. 2008-1, Public Safety Police, 6.00%,
8/01/44 .................................................................................... 12,850,000 14,089,768
University of California Regents Medical Center Pooled Revenue, Series A, NATL Insured,
4.50%, 5/15/47 ............................................................................. 66,335,000 62,301,169
University of California Regents Revenue, Series A, NATL Insured, 4.50%, 5/15/37 .............. 36,715,000 35,528,371
University of California Revenues,
Limited Project, Series B, FSA Insured, 5.00%, 5/15/29 ................................. 17,300,000 18,222,609
Limited Project, Series B, FSA Insured, 5.00%, 5/15/33 ................................. 15,000,000 15,680,700
Limited Project, Series D, FGIC Insured, 5.00%, 5/15/37 ................................ 10,000,000 10,482,900
Limited Project, Series D, FGIC Insured, 5.00%, 5/15/41 ................................ 22,500,000 23,526,900
Multiple Purpose Projects, Series O, FGIC Insured, Pre-Refunded, 5.00%, 9/01/23 ........ 9,200,000 9,682,448
Multiple Purpose Projects, Series O, FGIC Insured, Pre-Refunded, 5.00%, 9/01/26 ........ 13,430,000 14,134,269
Series O, FGIC Insured, Pre-Refunded, 5.25%, 9/01/34 ................................... 21,235,000 22,396,554
UCLA Medical Center, Series A, AMBAC Insured, 5.00%, 5/15/34 ........................... 3,710,000 3,723,171
Upland COP, San Antonio Community Hospital, Refunding, 5.70%, 1/01/11 ......................... 5,915,000 5,915,000
(b) Vacaville PFAR, Local Agency, 8.65%, 9/02/18 ............................................. 3,855,000 3,078,834
Vacaville USD, GO, Election of 2001, AMBAC Insured, 5.00%, 8/01/32 ............................ 12,790,000 13,147,480
Semiannual Report | 39
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- ---------------
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Vallejo PFA Local Agency Revenue, Hiddenbrooke Improvement District, Series A, 5.80%,
9/01/31 ................................................................................... $ 4,485,000 $ 3,968,283
Vallejo RDA Tax Allocation, Waterfront Redevelopment Project, 7.90%, 5/01/19 .................. 1,935,000 1,936,103
Vista Community Development Commission Tax Allocation Revenue, Vista Redevelopment
Project Area, 5.875%, 9/01/37 ............................................................. 5,000,000 4,928,850
Vista USD, GO,
Election of 2002, Series C, FSA Insured, 5.00%, 8/01/28 ................................ 4,370,000 4,694,210
Series B, FGIC Insured, 5.00%, 8/01/28 ................................................. 6,000,000 6,223,320
Washington Township Health Care District Revenue, Refunding,
5.25%, 7/01/29 ......................................................................... 6,500,000 6,358,820
Series A, 5.00%, 7/01/37 ............................................................... 7,000,000 6,340,250
West Contra Costa USD, GO,
Election of 2002, Series C, FGIC Insured, 5.00%, 8/01/34 ............................... 11,605,000 11,555,098
Series A, FSA Insured, 5.00%, 8/01/35 .................................................. 32,000,000 32,925,120
West Covina PFA Lease Revenue, Big League Dreams Project, Series A, 5.00%,
6/01/30 ................................................................................ 4,200,000 4,295,130
6/01/36 ................................................................................ 5,045,000 5,104,430
West Kern Community College District COP, AMBAC Insured, 5.625%, 11/01/34 ..................... 11,035,000 11,773,021
West Sacramento Financing Authority Special Tax Revenue, Series A, XLCA Insured, 5.00%,
9/01/34 ................................................................................... 5,000,000 4,357,550
Western Placer Unified School COP, Refinancing Project, Series B, Assured Guaranty,
5.125%, 8/01/47 ........................................................................... 10,275,000 10,534,444
Westlands Water District Revenue COP,
NATL Insured, 5.00%, 9/01/26 ........................................................... 13,150,000 13,534,374
NATL Insured, 5.00%, 9/01/34 ........................................................... 13,500,000 13,666,455
Series A, NATL Insured, 5.00%, 9/01/30 ................................................. 6,250,000 6,398,187
Series A, NATL Insured, 5.00%, 9/01/31 ................................................. 7,490,000 7,692,005
Series A, NATL Insured, 5.00%, 9/01/35 ................................................. 6,910,000 6,997,757
Whittier Health Facility Revenue, Presbyterian Intercommunity Hospital, Pre-Refunded,
5.60%, 6/01/22 ......................................................................... 14,285,000 16,089,195
5.75%, 6/01/31 ......................................................................... 28,000,000 31,646,160
William S. Hart UHSD, GO, Series A, NATL Insured, 5.00%, 9/01/27 .............................. 8,685,000 9,093,195
Yuba Community College District GO,
Capital Appreciation, Election of 2006, Series B, AMBAC Insured, zero cpn., 8/01/39 .... 7,075,000 1,319,912
Election of 2006, Series A, AMBAC Insured, 5.00%, 8/01/46 .............................. 24,080,000 24,625,894
Yucaipa Valley Water District Water System Revenue COP, Series A, NATL Insured, 5.00%,
9/01/29 ................................................................................ 10,100,000 10,355,429
9/01/34 ................................................................................ 12,765,000 12,986,345
---------------
12,871,188,129
---------------
U.S. TERRITORIES 8.3%
PUERTO RICO 8.1%
Children's Trust Fund Puerto Rico Tobacco Settlement Revenue, Asset-Backed Bonds,
Refunding,
5.50%, 5/15/39 ......................................................................... 7,210,000 6,352,515
5.625%, 5/15/43 ........................................................................ 25,500,000 22,155,675
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, senior lien, Series A,
6.00%, 7/01/44 ............................................................................ 10,500,000 10,911,075
40 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- --------------
U.S. TERRITORIES (CONTINUED)
PUERTO RICO (CONTINUED)
Puerto Rico Commonwealth GO,
Public Improvement, Refunding, Series A, 5.50%, 7/01/32 ................................ $ 30,000,000 $ 29,652,000
Public Improvement, Refunding, Series A, NATL Insured, 5.50%, 7/01/20 .................. 10,000,000 10,816,900
Public Improvement, Refunding, Series B, 5.25%, 7/01/32 ................................ 7,505,000 7,178,157
Public Improvement, Series A, 5.125%, 7/01/28 .......................................... 10,000,000 9,769,700
Public Improvement, Series A, 5.125%, 7/01/31 .......................................... 95,185,000 95,216,411
Public Improvement, Series A, 6.00%, 7/01/38 ........................................... 10,000,000 10,155,100
Public Improvement, Series A, Pre-Refunded, 5.00%, 7/01/27 ............................. 14,525,000 16,119,845
Public Improvement, Series A, Pre-Refunded, 5.125%, 7/01/31 ............................ 37,740,000 40,730,518
Public Improvement, Series B, Pre-Refunded, 5.25%, 7/01/32 ............................. 12,495,000 15,060,348
Public Improvement, Series B, Pre-Refunded, 5.00%, 7/01/35 ............................. 21,200,000 25,219,732
Refunding, Series C, Sub Series C-7, NATL Insured, 6.00%, 7/01/27 ...................... 21,000,000 22,120,560
Series A, 5.25%, 7/01/32 ............................................................... 10,000,000 9,946,600
Series A, 5.25%, 7/01/33 ............................................................... 26,050,000 25,699,888
Puerto Rico Commonwealth Highway and Transportation Authority Highway Revenue, Series Y,
Pre-Refunded, 5.00%, 7/01/36 .............................................................. 63,000,000 74,945,430
Puerto Rico Commonwealth Highway and Transportation Authority Transportation Revenue,
Refunding, Series A, NATL Insured, 5.00%, 7/01/38 ...................................... 5,800,000 5,406,818
Refunding, Series N, FGIC Insured, 5.25%, 7/01/39 ...................................... 7,000,000 6,522,250
Series B, Pre-Refunded, 6.00%, 7/01/31 ................................................. 13,000,000 13,641,030
Series B, Pre-Refunded, 6.00%, 7/01/39 ................................................. 13,200,000 13,850,892
Series D, Pre-Refunded, 5.375%, 7/01/36 ................................................ 45,000,000 50,136,750
Series D, Pre-Refunded, 5.75%, 7/01/41 ................................................. 20,000,000 22,484,600
Series K, Pre-Refunded, 5.00%, 7/01/40 ................................................. 30,000,000 35,300,700
Series K, Pre-Refunded, 5.00%, 7/01/45 ................................................. 30,000,000 35,300,700
Puerto Rico Commonwealth Infrastructure Financing Authority Special Tax Revenue, 5.00%,
7/01/46 ................................................................................... 20,000,000 18,674,600
Puerto Rico Convention Center District Authority Hotel Occupancy Tax Revenue, Series A,
AMBAC Insured, 5.00%, 7/01/31 .......................................................... 8,000,000 7,298,400
FGIC Insured, 5.00%, 7/01/24 ........................................................... 6,505,000 6,404,563
Puerto Rico Electric Power Authority Power Revenue,
Series II, Pre-Refunded, 5.25%, 7/01/31 ................................................ 48,000,000 53,992,320
Series WW, 5.00%, 7/01/28 .............................................................. 12,030,000 12,354,810
Series WW, 5.25%, 7/01/33 .............................................................. 32,250,000 33,157,515
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 6,902,272
Puerto Rico PBA Guaranteed Revenue, Government Facilities,
Refunding, Series D, 5.375%, 7/01/33 ................................................... 26,510,000 26,244,635
Refunding, Series M-3, NATL Insured, 6.00%, 7/01/24 .................................... 21,535,000 23,042,665
Refunding, Series M-3, NATL Insured, 6.00%, 7/01/27 .................................... 15,000,000 15,800,400
Refunding, Series M-3, NATL Insured, 6.00%, 7/01/28 .................................... 10,000,000 10,469,400
Refunding, Series N, 5.00%, 7/01/37 .................................................... 50,000,000 44,764,000
Series D, Pre-Refunded, 5.375%, 7/01/33 ................................................ 73,490,000 81,248,339
Puerto Rico Public Finance Corp. Revenue, Commonwealth Appropriation, Series E,
Pre-Refunded, 5.50%, 8/01/29 .............................................................. 129,995,000 142,977,601
Semiannual Report | 41
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- ---------------
U.S. TERRITORIES (CONTINUED)
PUERTO RICO (CONTINUED)
Puerto Rico Sales Tax Financing Corp. Sales Tax Revenue,
Convertible Capital Appreciation, First Subordinate, Series A, zero cpn. to 8/01/16,
6.75% thereafter, 8/01/32 ................................................................ $ 80,000,000 $ 61,019,200
first subordinate, Series A, 5.75%, 8/01/37 ................................................. 10,000,000 10,801,400
first subordinate, Series A, 6.00%, 8/01/42 ................................................. 8,000,000 8,796,880
Series A, 5.25%, 8/01/57 .................................................................... 10,000,000 10,355,800
---------------
1,188,998,994
---------------
VIRGIN ISLANDS 0.2%
Virgin Islands PFAR,
Virgin Islands Matching Fund Loan Note, Diageo Project, Series A, 6.75%, 10/01/37 ........... 10,000,000 10,580,400
Virgin Islands Matching Fund Loan Notes, senior lien, Refunding, Series A, 5.50%,
10/01/14 ................................................................................. 3,865,000 3,891,514
Virgin Islands Matching Fund Loan Notes, senior lien, Refunding, Series A, 5.50%,
10/01/22 ................................................................................. 7,000,000 7,062,580
---------------
21,534,494
---------------
TOTAL U.S. TERRITORIES .......................................................................... 1,210,533,488
---------------
TOTAL MUNICIPAL BONDS BEFORE SHORT TERM INVESTMENTS
(COST $13,557,268,686) ....................................................................... 14,081,721,617
---------------
SHORT TERM INVESTMENTS 2.9%
MUNICIPAL BONDS 2.9%
CALIFORNIA 2.9%
(c) California Educational Facilities Authority Revenue, Chapman University, Refunding, Series A,
Daily VRDN and Put, 0.28%, 10/01/36 ......................................................... 2,350,000 2,350,000
(c) California Infrastructure and Economic Development Bank Revenue,
California Academy of Sciences, Refunding, Series F, Daily VRDN and Put, 0.27%,
9/01/38 .................................................................................. 2,700,000 2,700,000
Contemporary Jewish Museum, Daily VRDN and Put, 0.28%, 12/01/36 ............................. 9,000,000 9,000,000
(c) California PCFA, PCR, Pacific Gas and Electric Co., Refunding, Series C,
Daily VRDN and Put, 0.30%, 11/01/26 ......................................................... 17,190,000 17,190,000
(c) California State Department of Water Resources Power Supply Revenue,
Refunding, Series J, Daily VRDN and Put, 0.27%, 5/01/18 .................................. 30,120,000 30,120,000
Series B, Sub Series B-3, Daily VRDN and Put, 0.27%, 5/01/22.............................. 18,045,000 18,045,000
(c) California State GO, Kindergarten-University Public Education Facilities,
Refunding, Series A8, Weekly VRDN and Put, 0.25%, 5/01/34 ................................ 2,800,000 2,800,000
Series A4, Daily VRDN and Put, 0.33%, 5/01/34 ............................................ 4,600,000 4,600,000
California State RAN, Sub Series A-1, 3.00%, 5/25/10 ............................................ 240,000,000 242,973,600
(c) California Statewide CDA Revenue, John Muir Health, Refunding, Series C, Daily VRDN
and Put, 0.24%, 8/15/27 ..................................................................... 10,800,000 10,800,000
(c) Irvine 1915 Act Special Assessment, Limited Obligation, AD No. 93-14, Daily VRDN and Put,
0.28%, 9/02/25 .............................................................................. 5,600,000 5,600,000
(c) Irvine Ranch Water District Revenue,
District Nos. 140 240 105 and 250, Daily VRDN and Put, 0.28%, 4/01/33 .................... 1,900,000 1,900,000
Improvement Districts, Consolidated, Series B, Daily VRDN and Put, 0.27%, 10/01/41 ....... 15,800,000 15,800,000
(c) Los Angeles Department of Water and Power Waterworks Revenue, Refunding, Series B,
Sub Series B-6, Daily VRDN and Put, 0.25%, 7/01/34 .......................................... 16,500,000 16,500,000
42 | Semiannual Report
Franklin California Tax-Free Income Fund
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2009 (UNAUDITED) (CONTINUED)
PRINCIPAL AMOUNT VALUE
---------------- ---------------
SHORT TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
(c) Metropolitan Water District of Southern California Waterworks Revenue,
Refunding, Series B-3, Daily VRDN and Put, 0.25%, 7/01/35 ..................... $ 28,700,000 $ 28,700,000
Series C-2, Daily VRDN and Put, 0.21%, 7/01/36 ................................ 5,700,000 5,700,000
(c) Sacramento County Sanitation District Financing Authority Revenue, sub. lien,
Sanitation District, Refunding,
Series A, Daily VRDN and Put, 0.28%, 12/01/36 ................................. 9,000,000 9,000,000
Series C, Daily VRDN and Put, 0.28%, 12/01/38 ................................. 8,450,000 8,450,000
---------------
TOTAL SHORT TERM INVESTMENTS (COST $431,957,995) ..................................... 432,228,600
---------------
TOTAL INVESTMENTS (COST $13,989,226,681) 99.0% ....................................... 14,513,950,217
OTHER ASSETS, LESS LIABILITIES 1.0% .................................................. 149,324,574
---------------
NET ASSETS 100.0% .................................................................... $14,663,274,791
===============
See Abbreviations on page 55.
(a) Security purchased on a when-issued basis. See Note 1(b).
(b) Security has been deemed illiquid because it may not be able to be sold
within seven days. At September 30, 2009, the aggregate value of these
securities was $8,276,229, representing 0.06% of net assets.
(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.
Semiannual Report | The accompanying notes are an integral part of these
financial statements. | 43
Franklin California Tax-Free Income Fund
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2009 (unaudited)
Assets:
Investments in securities:
Cost .................................................... $ 13,989,226,681
----------------
Value ................................................... $ 14,513,950,217
Cash ..................................................... 8,125
Receivables:
Capital shares sold ..................................... 26,799,031
Interest ................................................ 171,906,674
Other assets ............................................. 9,695
----------------
Total assets ........................................... 14,712,673,742
----------------
Liabilities:
Payables:
Investment securities purchased ......................... 22,630,033
Capital shares redeemed ................................. 17,677,429
Affiliates .............................................. 8,215,641
Accrued expenses and other liabilities ................... 875,848
----------------
Total liabilities ...................................... 49,398,951
----------------
Net assets, at value .................................. $ 14,663,274,791
================
Net assets consist of:
Paid-in capital .......................................... $ 14,142,384,853
Undistributed net investment income ...................... 41,390,797
Net unrealized appreciation (depreciation) ............... 524,723,536
Accumulated net realized gain (loss) ..................... (45,224,395)
================
Net assets, at value .................................. $ 14,663,274,791
================
44 | The accompanying notes are an integral part of these financial
statements. | Semiannual Report
Franklin California Tax-Free Income Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
September 30, 2009 (unaudited)
CLASS A:
Net assets, at value ...................................................... $ 13,156,107,833
----------------
Shares outstanding ........................................................ 1,829,804,235
----------------
Net asset value per share(a) .............................................. $ 7.19
----------------
Maximum offering price per share (net asset value per share / 95.75%) ..... $ 7.51
----------------
CLASS B:
Net assets, at value ...................................................... $ 110,090,031
----------------
Shares outstanding ........................................................ 15,323,832
----------------
Net asset value and maximum offering price per share(a) ................... $ 7.18
----------------
CLASS C:
Net assets, at value ...................................................... $ 1,034,330,519
----------------
Shares outstanding ........................................................ 144,087,542
----------------
Net asset value and maximum offering price per share(a) ................... $ 7.18
----------------
ADVISOR CLASS:
Net assets, at value ...................................................... $ 362,746,408
----------------
Shares outstanding ........................................................ 50,522,282
----------------
Net asset value and maximum offering price per share ...................... $ 7.18
----------------
(a) Redemption price is equal to net asset value less contingent deferred
sales charges, if applicable.
Semiannual Report | The accompanying notes are an integral part of these
financial statements. | 45
Franklin California Tax-Free Income Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the six months ended September 30, 2009 (unaudited)
Investment income:
Interest .................................................................. $ 372,029,022
---------------
Expenses:
Management fees (Note 3a) ................................................. 29,720,565
Distribution fees: (Note 3c)
Class A .................................................................. 5,911,963
Class B .................................................................. 388,980
Class C .................................................................. 2,929,063
Transfer agent fees (Note 3e) ............................................. 1,789,800
Custodian fees ............................................................ 93,398
Reports to shareholders ................................................... 163,721
Registration and filing fees .............................................. 62,395
Professional fees ......................................................... 98,793
Trustees' fees and expenses ............................................... 74,558
Other ..................................................................... 353,410
---------------
Total expenses .......................................................... 41,586,646
---------------
Net investment income ................................................. 330,442,376
---------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments ................................. (17,756,746)
Net change in unrealized appreciation (depreciation) on investments ....... 1,591,907,239
---------------
Net realized and unrealized gain (loss) .................................... 1,574,150,493
---------------
Net increase (decrease) in net assets resulting from operations ............ $ 1,904,592,869
===============
46 | The accompanying notes are an integral part of these financial
statements. | Semiannual Report
Franklin California Tax-Free Income Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
SEPTEMBER 30, 2009 YEAR ENDED
(UNAUDITED) MARCH 31, 2009
--------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ................................................... $ 330,442,376 $ 663,311,892
Net realized gain (loss) from investments ............................... (17,756,746) 7,854,900
Net change in unrealized appreciation (depreciation) on investments ..... 1,591,907,239 (1,232,211,195)
---------------------------------------
Net increase (decrease) in net assets resulting from operations ......... 1,904,592,869 (561,044,403)
---------------------------------------
Distributions to shareholders from:
Net investment income:
Class A ................................................................ (305,658,733) (604,283,773)
Class B ................................................................ (2,777,458) (7,475,118)
Class C ................................................................ (20,153,638) (35,326,363)
Advisor Class .......................................................... (6,868,844) (10,093,660)
---------------------------------------
Total distributions to shareholders ....................................... (335,458,673) (657,178,914)
---------------------------------------
Capital share transactions: (Note 2)
Class A ................................................................ 111,171,946 (64,204,271)
Class B ................................................................ (38,535,274) (54,338,724)
Class C ................................................................ 107,519,199 145,406,870
Advisor Class .......................................................... 103,573,380 63,869,955
---------------------------------------
Total capital share transactions .......................................... 283,729,251 90,733,830
---------------------------------------
Redemption fees ........................................................... -- 9,671
---------------------------------------
Net increase (decrease) in net assets ................................. 1,852,863,447 (1,127,479,816)
Net assets:
Beginning of period ....................................................... 12,810,411,344 13,937,891,160
---------------------------------------
End of period ............................................................. $ 14,663,274,791 $ 12,810,411,344
=======================================
Undistributed net investment income included in net assets:
End of period ............................................................. $ 41,390,797 $ 46,407,094
=======================================
Semiannual Report | The accompanying notes are an integral part of
these financial statements. | 47
Franklin California Tax-Free Income Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin California Tax-Free Income Fund (Trust) is registered under the
Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment
company, consisting of one fund, the Franklin California Tax-Free Income Fund
(Fund). The Fund offers four classes of shares: Class A, Class B, Class C, and
Advisor Class. Each class of shares differs by its initial sales load,
contingent deferred sales charges, distribution fees, voting rights on matters
affecting a single class and its exchange privilege.
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
Trustees.
B. SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
The Fund may purchase securities on a when-issued basis, with payment and
delivery scheduled for a future date. These transactions are subject to market
fluctuations and are subject to the risk that the value at delivery may be more
or less than the trade date purchase price. Although the 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.
48 | Semiannual Report
Franklin California Tax-Free Income Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. INCOME TAXES
No provision has been made for U.S. income taxes because it is the Fund's policy
to qualify as a regulated investment company under the Internal Revenue Code and
to distribute to shareholders substantially all of its income and net realized
gains.
The Fund has reviewed the tax positions, taken on federal income tax returns,
for each of the three open tax years and as of September 30, 2009, and has
determined that no provision for income tax is required in the Fund's financial
statements.
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Amortization of
premium and accretion of discount on debt securities are included in interest
income. 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 accounting principles generally accepted in the United States of
America. These differences may be permanent or temporary. Permanent differences
are reclassified among capital accounts to reflect their tax character. These
reclassifications have no impact on net assets or the results of operations.
Temporary differences are not reclassified, as they may reverse in subsequent
periods.
Realized and unrealized gains and losses and net investment income, not
including class specific expenses, are allocated daily to each class of shares
based upon the relative proportion of net assets of each class. Differences in
per share distributions, by class, are generally due to differences in class
specific expenses.
E. INSURANCE
The scheduled payments of interest and principal for each insured municipal
security in the Trust are insured by either a new issue insurance policy or a
secondary insurance policy. Some municipal securities in the Fund are secured by
collateral guaranteed by an agency of the U.S. government. Insurance companies
typically insure municipal bonds that tend to be of very high quality, with the
majority of underlying municipal bonds rated A or better. However, there is a
risk that in the event of an issuer default, the insurer may not be able to
fulfill its obligations under the terms of the policy.
Depending on the type of coverage, premiums for insurance are either added to
the cost basis of the security or paid by a third party.
Semiannual Report | 49
Franklin California Tax-Free Income Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
F. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
G. REDEMPTION FEES
A short term trading redemption fee was imposed, with some exceptions, on any
Fund shares that were redeemed or exchanged within seven calendar days following
their purchase date. The redemption fee was 2% of the amount redeemed. Such fees
were retained by the fund and accounted for as an addition to paid-in capital.
Effective September 1, 2008, the redemption fee was eliminated.
H. GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and trustees 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. Currently, the Fund expects the
risk of loss to be remote.
2. CAPITAL STOCK
At September 30, 2009, there were an unlimited number of shares authorized
(without par value). Transactions in the Fund's shares were as follows:
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 2009 MARCH 31, 2009
-------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------
CLASS A SHARES:
Shares sold ................................................. 105,592,940 $ 702,856,689 257,050,733 $ 1,731,370,342
Shares issued in reinvestment of distributions .............. 28,047,570 183,914,909 52,492,448 350,584,615
Shares redeemed ............................................. (116,935,050) (775,599,652) (328,221,841) (2,146,159,228)
-------------------------------------------------------------------
Net increase (decrease) ..................................... 16,705,460 $ 111,171,946 (18,678,660) $ (64,204,271)
===================================================================
CLASS B SHARES:
Shares sold ................................................. 137,428 $ 918,794 435,292 $ 2,940,919
Shares issued in reinvestment of distributions .............. 288,501 1,888,449 755,266 5,058,277
Shares redeemed ............................................. (6,233,333) (41,342,517) (9,443,463) (62,337,920)
-------------------------------------------------------------------
Net increase (decrease) ..................................... (5,807,404) $ (38,535,274) (8,252,905) $ (54,338,724)
===================================================================
50 | Semiannual Report
Franklin California Tax-Free Income Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. CAPITAL STOCK (CONTINUED)
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 2009 MARCH 31, 2009
------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------
CLASS C SHARES:
Shares sold ................................................. 25,653,768 $ 170,971,402 46,596,514 $ 316,013,313
Shares issued in reinvestment of distributions .............. 2,103,160 13,777,920 3,535,047 23,542,562
Shares redeemed ............................................. (11,651,970) (77,230,123) (29,711,732) (194,149,005)
------------------------------------------------------------------
Net increase (decrease) ..................................... 16,104,958 $ 107,519,199 20,419,829 $ 145,406,870
==================================================================
ADVISOR CLASS SHARES:
Shares sold ................................................. 18,675,331 $ 123,756,421 21,403,549 $ 142,560,071
Shares issued in reinvestment of distributions .............. 638,973 4,187,320 930,489 6,169,704
Shares redeemed ............................................. (3,676,792) (24,370,361) (13,064,166) (84,859,820)
------------------------------------------------------------------
Net increase (decrease) ..................................... 15,637,512 $ 103,573,380 9,269,872 $ 63,869,955
==================================================================
3. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Trust are also officers and/or directors of the following
subsidiaries:
SUBSIDIARY AFFILIATION
- -------------------------------------------------------------- ----------------------
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin Templeton Services, LLC (FT Services) Administrative manager
Franklin Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services) Transfer agent
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 $7.5 billion
0.440% Over $7.5 billion, up to and including $10 billion
0.430% Over $10 billion, up to and including $12.5 billion
0.420% Over $12.5 billion, up to and including $15 billion
0.400% Over $15 billion, up to and including $17.5 billion
0.380% Over $17.5 billion, up to and including $20 billion
0.360% In excess of $20 billion
Semiannual Report | 51
Franklin California Tax-Free Income Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
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 Trust's Board of Trustees 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 Distributors for costs incurred in connection with the servicing,
sale and distribution of the Fund's shares up to the maximum annual plan rate.
Under the Class A reimbursement distribution plan, costs exceeding the maximum
for the current plan year cannot be reimbursed in subsequent periods.
In addition, under the Fund's Class B and C compensation distribution plans, the
Fund pays Distributors for costs incurred in connection with the servicing, sale
and distribution of the Fund's shares up to the maximum annual plan rate for
each class.
The maximum annual plan rates, based on the average daily net assets, for each
class, are as follows:
Class A ................................................... 0.10%
Class B ................................................... 0.65%
Class C ................................................... 0.65%
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:
Sales charges retained net of commissions paid to unaffiliated
broker/dealers ............................................ $ 1,551,221
Contingent deferred sales charges retained ................... $ 109,728
E. TRANSFER AGENT FEES
For the period ended September 30, 2009, the Fund paid transfer agent fees of
$1,789,800, of which $1,147,827 was retained by Investor Services.
52 | Semiannual Report
Franklin California Tax-Free Income Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
4. INCOME TAXES
For tax purposes, capital losses may be carried over to offset future capital
gains, if any. At March 31, 2009, the capital loss carryforwards were as
follows:
Capital loss carryforwards expiring in:
2016 ...................................................... $ 18,263,066
2017 ...................................................... 5,213,307
------------
$ 23,476,373
============
At September 30, 2009, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
Cost of investments .......................................... $ 13,982,256,256
================
Unrealized appreciation ...................................... $ 772,085,046
Unrealized depreciation ...................................... (240,391,085)
----------------
Net unrealized appreciation (depreciation) ................... $ 531,693,961
================
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of bond discounts and non-deductible taxes.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales and bond discounts.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short term securities) for the
period ended September 30, 2009, aggregated $391,636,803 and $384,401,161,
respectively.
6. CREDIT RISK
At September 30, 2009, the Fund had 6.2% of its portfolio invested in high yield
or other securities rated below investment grade. These securities may be more
sensitive to economic conditions causing greater price volatility and are
potentially subject to a greater risk of loss due to default than higher rated
securities.
7. 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.
Semiannual Report | 53
Franklin California Tax-Free Income Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
8. CREDIT FACILITY
Effective January 23, 2009, the Fund, together with other U.S. registered and
foreign investment funds managed by Franklin Templeton Investments
(individually, "Borrower"; collectively "Borrowers"), entered into a joint
syndicated senior unsecured credit facility totaling $725 million (Global Credit
Facility) to provide a source of funds to the Borrowers for temporary and
emergency purposes, including the ability to meet future unanticipated or
unusually large redemption requests.
Under the terms of the Global Credit Facility, the Fund shall, in addition to
interest charged on any borrowings made by the Fund and other costs incurred by
the Fund, pay its share of fees and expenses incurred in connection with the
implementation and maintenance of the Global Credit Facility, based upon its
relative share of the aggregate net assets of all of the Borrowers, including an
annual commitment fee based upon the unused portion of the Global Credit
Facility. During the period, the Fund incurred commitment fees of $15,864 of its
pro rata portion of the Global Credit Facility, which is reflected in other
expenses on the Statement of Operations. During the period ended September 30,
2009, the Fund did not utilize the Global Credit Facility.
9. FAIR VALUE MEASUREMENTS
The Trust follows a fair value hierarchy that distinguishes between market data
obtained from independent sources (observable inputs) and the Trust's own market
assumptions (unobservable inputs). These inputs are used in determining the
value of the Fund's investments and are summarized in the following fair value
hierarchy:
- Level 1 - quoted prices in active markets for identical securities
- Level 2 - other significant observable inputs (including quoted
prices for similar securities, interest rates, prepayment speed,
credit risk, etc.)
- Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities.
At September 30, 2009, all of the Fund's investments in securities carried at
fair value were in Level 2 inputs.
10. SUBSEQUENT EVENTS
The Fund has evaluated subsequent events through November 16, 2009, the issuance
date of the financial statements and determined that no events have occurred
that require disclosure.
54 | Semiannual Report
Franklin California Tax-Free Income Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
ABBREVIATIONS
SELECTED PORTFOLIO
1915 ACT - Improvement Bond Act of 1915
ABAG - The Association of Bay Area Governments
ACA - American Capital Access Holdings Inc.
AD - Assessment District
AMBAC - American Municipal Bond Assurance Corp.
BART - Bay Area Rapid Transit
BHAC - Berkshire Hathaway Assurance Corp.
CDA - Community Development Authority/Agency
CFD - Community Facilities District
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
FSA - Financial Security Assurance Inc.
GNMA - Government National Mortgage Association
GO - General Obligation
HFAR - Housing Finance Authority Revenue
HMR - Home Mortgage Revenue
IDR - Industrial Development Revenue
MBS - Mortgage-Backed Security
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
MTA - Metropolitan Transit Authority
MUD - Municipal Utility District
NATL - National Public Financial Guarantee Corp.
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
PFA - Public Financing Authority
PFAR - Public Financing Authority Revenue
RAN - Revenue Anticipation Note
RDA - Redevelopment Agency/Authority
RMR - Residential Mortgage Revenue
SFHMR - Single Family Home Mortgage Revenue
SFMR - Single Family Mortgage Revenue
UHSD - Unified/Union High School District
USD - Unified/Union School District
XLCA - XL Capital Assurance
Semiannual Report | 55
Franklin California Tax-Free Income Fund
SHAREHOLDER INFORMATION
PROXY VOTING POLICIES AND PROCEDURES
The Fund's investment manager 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 (954) 527-7678 or by sending a written request to: Franklin Templeton
Companies, LLC, 500 East Broward Boulevard, Suite 1500, Fort Lauderdale, FL
33394, Attention: Proxy Group. Copies of the 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.
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 (800)
SEC-0330.
56 | Semiannual Report
Franklin Templeton Funds
LITERATURE REQUEST. TO RECEIVE A PROSPECTUS, PLEASE CALL US AT (800) DIAL
BEN/(800) 342-5236 OR VISIT FRANKLINTEMPLETON.COM. INVESTORS SHOULD CAREFULLY
CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES BEFORE
INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE CAREFULLY
READ THE PROSPECTUS BEFORE INVESTING. TO ENSURE THE HIGHEST QUALITY OF SERVICE,
WE MAY MONITOR, RECORD AND ACCESS TELEPHONE CALLS TO OR FROM OUR SERVICE
DEPARTMENTS. THESE CALLS CAN BE IDENTIFIED BY THE PRESENCE OF A REGULAR BEEPING
TONE.
VALUE
Franklin All Cap Value Fund
Franklin Balance Sheet Investment Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund(1)
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Quest Fund
Mutual Recovery Fund(2)
Mutual Shares Fund
BLEND
Franklin Focused Core Equity Fund
Franklin Large Cap Equity Fund
Franklin Rising Dividends Fund
GROWTH
Franklin Flex Cap Growth Fund
Franklin Growth Fund
Franklin Growth Opportunities Fund
Franklin Small Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Real Estate Fund
Franklin Gold & Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Mutual Financial Services Fund
GLOBAL
Mutual Global Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
INTERNATIONAL
Franklin India Growth Fund
Franklin International Growth Fund
Franklin International Small Cap Growth Fund
Mutual European Fund
Mutual International Fund
Templeton BRIC Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Emerging Markets Small Cap Fund
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton Frontier Markets Fund
HYBRID
Franklin Balanced Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Templeton Income Fund
ASSET ALLOCATION
Franklin Templeton Corefolio(R) Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund
FIXED INCOME
Franklin Adjustable U.S. Government Securities Fund(3)
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund
Franklin Limited Maturity U.S. Government Securities Fund(3)
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(3)
Templeton Global Bond Fund
Templeton Global Total Return Fund
Templeton International Bond Fund
TAX-FREE INCOME(4)
NATIONAL
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(5)
LIMITED-/INTERMEDIATE-TERM
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund
STATE-SPECIFIC
Alabama
Arizona
California(6)
Colorado
Connecticut
Florida
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(7)
Michigan(7)
Minnesota(7)
Missouri
New Jersey
New York(6)
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 and select
retirement plans can continue adding to their accounts.
(2.) 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.
(3.) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
(4.) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are generally
taxable.
(5.) The fund invests primarily in insured municipal securities.
(6.) These funds are available in four or more variations, including long-term
portfolios, intermediate-term portfolios, portfolios of insured securities,
a high-yield portfolio (CA only) and money market portfolios.
(7.) The Board of Trustees approved the elimination of the non-fundamental
policy requiring the fund to invest at least 80% of net assets in insured
municipal securities and the removal of the word "Insured" from the fund
name. The changes became effective 2/17/09.
(8.) The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
04/09 Not part of the semiannual report
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FRANKLIN TEMPLETON One Franklin Parkway
INVESTMENTS San Mateo, CA 94403-1906
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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.
(800) DIAL BEN(R)
franklintempleton.com
SHAREHOLDER SERVICES
(800) 632-2301
Authorized for distribution only when accompanied or preceded by a prospectus.
Investors should carefully consider a fund's investment goals, risks, charges
and expenses before investing. The prospectus contains this and other
information; please read it carefully before investing.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
112 S2009 11/09
ITEM 2. CODE OF ETHICS.
(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy
of its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The Registrant has an audit committee financial expert serving on its
audit committee.
(2) The audit committee financial expert is John B. Wilson and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A
ITEM 6. SCHEDULE OF INVESTMENTS. N/A
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. N/A
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. N/A
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS. N/A
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no changes to the procedures by which shareholders may recommend
nominees to the Registrant's Board of Trustees that would require disclosure
herein.
ITEM 11. CONTROLS AND PROCEDURES.
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
ITEM 12. EXHIBITS.
(a) (1) Code of Ethics
(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and
Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and
Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN CALIFORNIA TAX-FREE INCOME FUND
By /s/LAURA F. FERGERSON
--------------------------
Laura F. Fergerson
Chief Executive Officer - Finance and Administration
Date November 25, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/LAURA F. FERGERSON
--------------------------
Laura F. Fergerson
Chief Executive Officer - Finance and Administration
Date November 25, 2009
By /s/GASTON GARDEY
--------------------------
Gaston Gardey
Chief Financial Officer and Chief Accounting Officer
Date November 25, 2009