UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4356
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FRANKLIN CALIFORNIA TAX-FREE TRUST
----------------------------------
(Exact name of registrant as specified in charter)
ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
(Address of principal executive offices) (Zip code)
MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
-----------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (650) 312-2000
--------------
Date of fiscal year end: 6/30
----
Date of reporting period: 6/30/03
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ITEM 1. REPORTS TO STOCKHOLDERS.
June 30, 2003
Franklin California Insured
Tax-Free Income Fund
Franklin California
Intermediate-Term
Tax-Free Income Fund
Franklin California
Tax-Exempt Money Fund
[GRAPHIC OMITTED]
ANNUAL REPORT AND SHAREHOLDER LETTER
TAX-FREE INCOME
FRANKLIN
California Tax-Free Trust
Want to receive this document FASTER via email?
Eligible shareholders can sign up for eDelivery at franklintempleton.com. See
inside for details
[LOGO OMITTED]
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS
FRANKLIN o TEMPLETON o MUTUAL SERIES
International
FRANKLIN TEMPLETON INVESTMENTS
Gain From Our Perspective
SPECIALIZED EXPERTISE
Franklin Templeton's distinct multi-manager structure combines the specialized
expertise of three world-class investment management groups--Franklin, Templeton
and Mutual Series.
Each of our portfolio management groups operates autonomously, relying on its
own research and staying true to the unique investment disciplines that underlie
its success.
FRANKLIN. Founded in 1947, Franklin is a leader in tax-free investing and a
driving force in fixed income investing around the globe. They also bring
expertise in growth- and value-style U.S. equity investing.
TEMPLETON. Founded in 1940, Templeton pioneered international investing and, in
1954, launched what has become the industry's oldest global fund. Today, with
research offices in over 25 countries, they offer investors the broadest global
reach in the industry.
MUTUAL SERIES. Established in 1949, Mutual Series is dedicated to a unique style
of value investing, searching aggressively for opportunity among undervalued
stocks, arbitrage situations and distressed companies.
TRUE DIVERSIFICATION
Because our management groups work independently and adhere to distinctly
different investment approaches, Franklin, Templeton and Mutual Series funds
typically have a low overlap of securities. That's why our funds can be used to
build truly diversified portfolios covering every major asset class.
RELIABILITY YOU CAN TRUST
At Franklin Templeton Investments, we seek to consistently provide investors
with exceptional risk-adjusted returns over the long term, as well as the
reliable account services that have helped us become one of the most trusted
names in financial services.
MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS |
SEPARATE ACCOUNTS
[GRAPHIC OMITTED]
Not part of the annual report
CONTENTS
SHAREHOLDER LETTER ......... 1
SPECIAL FEATURE:
Understanding Your
Tax-Free Income Fund ....... 5
ANNUAL REPORT
Franklin California Insured
Tax-Free Income Fund ....... 9
Franklin California
Intermediate-Term
Tax-Free Income Fund ....... 17
Franklin California
Tax-Exempt Money Fund ...... 23
Financial Highlights &
Statements of Investments .. 25
Financial Statements ....... 57
Notes to
Financial Statements ....... 62
Independent
Auditors' Report ........... 69
Tax Designation ............ 70
Board Members
and Officers ............... 71
ANNUAL REPORT
FRANKLIN CALIFORNIA INSURED
TAX-FREE INCOME FUND
YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin California Insured Tax-Free
Income Fund seeks to provide high, current income exempt from regular federal
and California state personal income taxes while seeking preservation of capital
through a portfolio consisting mainly of insured California municipal
securities. 1, 2
CALIFORNIA UPDATE
During the year ended June 30, 2003, anemic business spending and uneven
economic growth helped push U.S. unemployment to its highest level since 1994,
at 6.4% in June. 3 The Federal Reserve Board lowered the federal funds target
rate by 50 basis points (0.50%) to 1.25% on November 6, 2002, and 25 basis
points on June 25, 2003, its lowest level since 1958. Inflation remained tame,
global business confidence began to revive as major combat in the Iraq conflict
concluded, and consumer attitudes brightened with the Consumer Confidence Index
rising in consecutive months (April and May) for the first time since June 2001.
Budget pressure dominated California's credit landscape during the year under
review as the Golden State's economy continued its significant slowdown
resulting from weaker exports, the sluggish national economy and a
poor-performing technology sector. California's reliance on taxes, particularly
capital gains taxes, from a small percentage of wealthy taxpayers exacerbated
the budget challenge. In fiscal year 2002, the state experienced a dramatic
16.1% revenue collection decline, largely due to reduced stock market-related
tax collections. 4 The governor balanced California's fiscal year 2002 budget
through a variety of methods, including expenditure reductions, increased
federal funding, loans from other special funds, a power revenue bond, tobacco
settlement-backed bonds and a restructuring of outstanding GO debt.
1. For investors subject to alternative minimum tax, a small portion of this
income may be taxable. Distributions of capital gains are generally taxable.
2. The insurance relates only to the payment of principal and interest on the
portfolio's insured securities. No representation is made as to any insurer's
ability to meet its commitments.
3. Source: Bureau of Labor Statistics.
4. Source: Moody's Investors Service, New Issue: California (State of), 10/8/02.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND COMPLETE LEGAL
TITLES OF ALL PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF
INVESTMENTS (SOI). THE SOI BEGINS ON PAGE 28.
Annual Report| 9
PORTFOLIO BREAKDOWN
Franklin California Insured
Tax-Free Income Fund
6/30/03
% of Total
Long-Term Investments
- -------------------------------------------------
General Obligation ...................... 18.1%
Transportation .......................... 14.7%
Subject to Government Appropriations .... 14.5%
Tax-Supported ........................... 12.3%
Utilities ............................... 10.9%
Hospital & Health Care .................. 10.0%
Prerefunded ............................. 7.7%
Higher Education ........................ 6.7%
Other Revenue ........................... 3.9%
Housing ................................. 1.2%
State tax-supported debt levels are expected to remain moderate, despite
increasing issuance of GO bonds for local schools, higher education and other
purposes, as well as debt restructuring to partially defer debt payments in
fiscal year 2003. The state's GO and lease debt load was $952 per capita as of
April 2003, and even as sizable new bond authorizations materialize,
California's debt levels should remain at moderate levels. 5 In December 2002,
independent credit rating agency Standard & Poor's downgraded California's GO
debt to A from A+ with a stable outlook. Moody's Investors Service followed with
a similar downgrade to A2 from A1 in February 2003 and revised its outlook on
the state's long-term bonds to negative from stable in June. 6
In May 2003, Governor Davis submitted a revised budget proposal for fiscal year
2004 (begins July 1), which included reducing expenditures, increasing taxes and
drawing on one-time revenues. As of June 30, 2003, the California legislature
had failed to pass a new state spending plan, adding to the state's uncertainty.
In California's favor are its moderate debt burden and broad-based economy. The
Golden State's economy has slightly surpassed the nation's pace in terms of
employment and personal income, with positive employment growth expected by the
end of calendar year 2003. Reliance on the Bay Area's struggling technology
sector has been somewhat offset by federal defense and homeland security
spending measures as the state's aerospace and shipbuilding companies fulfill
rising defense contract orders.
PORTFOLIO NOTES
Typically, we seek opportunities when interest rates rise to sell high cost
(lower booked yield) bonds and report losses, which can be carried forward to
offset future gains, potentially lowering shareholders' future capital gains tax
liabilities. We use the proceeds to buy low cost (higher booked yield) bonds
with similar structures. We also strive to remain fully invested at all times.
During the year under review, although yields were at historical lows, the yield
curve was steep and accumulating cash would have hindered the Fund's income
production.
During this period of California's fiscal uncertainty, we sought to take
advantage of increased supply to purchase high credit quality, essential purpose
revenue and GO debt. Purchases during the period included Sacramento MUD, Los
Angeles USD GO, San Jose Financing Authority Lease Revenue, and Rancho Santiago
Community College District GO bonds.
5. Source: Standard & Poor's, RatingsDirect, 4/8/03.
6. These do not indicate ratings of the Fund.
10 |Annual Report
[GRAPHIC OMITTED]
COUPON BY MARKET VALUE PROFILE
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
HOLDINGS AS OF 6/30/03
<4.00 6.00%
5.00-5.25 43.99%
5.25-5.50 13.86%
5.50-5.75 9.21%
5.75-6.00 12.46%
6.00-6.25 7.06%
6.25-6.50 3.01%
6.50-6.75 2.30%
6.75-7.00 1.42%
7.00-7.25 0.27%
7.50-7.75 0.22%
7.75-8.00 0.20%
Because we employ a buy-and-hold approach, we hold a large number of high-coupon
bonds purchased in higher interest rate environments, as you can see in the bar
chart above. These high-coupon bonds are priced at a premium now that interest
rates have declined. Generally, premium bonds are less price sensitive to
fluctuations in interest rates and exhibit subdued price performance in a
declining interest rate environment. On the other hand, when interest rates
rise, premium bonds should outperform because their values do not drop as fast
as bonds priced at a discount. Thus, we believe our portfolio is defensive in
nature.
Annual Report| 11
DIVIDEND DISTRIBUTIONS*
Franklin California Insured Tax-Free Income Fund
7/1/02-6/30/03
- -------------------------------------------------------------------------------
Dividend per Share
------------------------------------------------
Month Class A Class B Class C
- -------------------------------------------------------------------------------
July 4.82 cents 4.27 cents 4.28 cents
August 4.82 cents 4.27 cents 4.28 cents
September 4.78 cents 4.20 cents 4.20 cents
October 4.78 cents 4.20 cents 4.20 cents
November 4.78 cents 4.20 cents 4.20 cents
December 4.73 cents 4.13 cents 4.14 cents
January 4.73 cents 4.13 cents 4.14 cents
February 4.73 cents 4.13 cents 4.14 cents
March 4.73 cents 4.16 cents 4.15 cents
April 4.73 cents 4.16 cents 4.15 cents
May 4.73 cents 4.16 cents 4.15 cents
June 4.68 cents 4.09 cents 4.07 cents
- -------------------------------------------------------------------------------
Total 57.04 cents 50.10 cents 50.10 cents
*Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the Fund during the reporting
period.
As interest rates generally declined over the past few years and issuers took
the opportunity to refinance higher yielding debt, Franklin California Insured
Tax-Free Income Fund had higher coupon bonds called, which affected the Fund's
income earnings and resulted in dividend reductions during the period.
Keep in mind that your Fund combines the advantages of high credit quality and
tax-free yields. 1 The Performance Summary beginning on page 13 shows that on
June 30, 2003, the Fund's Class A shares' distribution rate was 4.19% based on
an annualization of the current 4.68 cent ($0.0468) per share dividend and the
maximum offering price of $13.40 on June 30, 2003. This tax-free rate is
generally higher than the after-tax return on a comparable quality taxable
investment. An investor in the maximum combined federal and California state
personal income tax bracket of 41.05% would need to earn 7.11% from a taxable
investment to match the Fund's tax-free distribution rate. The Performance
Summary also shows distribution rates and their taxable equivalents for Class B
and C shares.
THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF
JUNE 30, 2003, THE END OF THE REPORTING PERIOD. OUR STRATEGIES AND THE FUND'S
PORTFOLIO COMPOSITION WILL CHANGE DEPENDING ON MARKET AND ECONOMIC CONDITIONS.
THESE OPINIONS MAY NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A
PARTICULAR SECURITY. THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT
OF ANY MARKET, STATE, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE
FROM SOURCES CONSIDERED RELIABLE, BUT THE ADVISOR MAKES NO REPRESENTATION OR
WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR
INVESTMENT MANAGEMENT PHILOSOPHY.
12 |Annual Report
PERFORMANCE SUMMARY AS OF 6/30/03
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table and graphs do not reflect any taxes
due on Fund dividends, capital gain distributions, if any, or any realized gains
on the sale of Fund shares. Total return reflects the Fund's dividend income,
capital gain distributions, if any, and any unrealized gains or losses.
PRICE AND DISTRIBUTION INFORMATION
- -------------------------------------------------------------------------------------------------
Class A Change 6/30/03 6/30/02
- -------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.51 $12.83 $12.32
- -------------------------------------------------------------------------------------------------
DISTRIBUTIONS (7/1/02-6/30/03)
- -------------------------------------------------------------------------------------------------
Dividend Income $0.5704
- -------------------------------------------------------------------------------------------------
Class B Change 6/30/03 6/30/02
- -------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.51 $12.88 $12.37
- -------------------------------------------------------------------------------------------------
DISTRIBUTIONS (7/1/02-6/30/03)
- -------------------------------------------------------------------------------------------------
Dividend Income $0.5010
- -------------------------------------------------------------------------------------------------
Class C Change 6/30/03 6/30/02
- -------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.52 $12.93 $12.41
- -------------------------------------------------------------------------------------------------
DISTRIBUTIONS (7/1/02-6/30/03)
- -------------------------------------------------------------------------------------------------
Dividend Income $0.5010
Annual Report | Past performance does not guarantee future results.| 13
PERFORMANCE SUMMARY (CONTINUED)
PERFORMANCE
- -----------------------------------------------------------------------------------------------------
Class A 1-Year 5-Year 10-Year
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +8.97% +32.12% +77.59%
- -----------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +4.31% +4.82% +5.45%
- -----------------------------------------------------------------------------------------------------
Distribution Rate 3 4.19%
- -----------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate 4 7.11%
- -----------------------------------------------------------------------------------------------------
30-Day Standardized Yield 5 3.02%
- -----------------------------------------------------------------------------------------------------
Taxable Equivalent Yield 4 5.12%
- -----------------------------------------------------------------------------------------------------
Class B 1-Year 3-Year Inception (2/1/00)
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +8.34% +23.91% +31.05%
- -----------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +4.34% +6.53% +7.51%
- -----------------------------------------------------------------------------------------------------
Distribution Rate 3 3.81%
- -----------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate 4 6.46%
- -----------------------------------------------------------------------------------------------------
30-Day Standardized Yield 5 2.61%
- -----------------------------------------------------------------------------------------------------
Taxable Equivalent Yield 4 4.43%
- -----------------------------------------------------------------------------------------------------
Class C 1-Year 5-Year Inception (5/1/95)
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +8.39% +28.46% +59.25%
- -----------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +6.28% +4.92% +5.73%
- -----------------------------------------------------------------------------------------------------
Distribution Rate 3 3.74%
- -----------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate 4 6.34%
- -----------------------------------------------------------------------------------------------------
30-Day Standardized Yield 5 2.58%
- -----------------------------------------------------------------------------------------------------
Taxable Equivalent Yield 4 4.38%
ONGOING MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE; MORE
RECENT RETURNS MAY DIFFER FROM THOSE SHOWN. SINCE MARKETS CAN GO DOWN AS WELL AS
UP, INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE WITH MARKET CONDITIONS,
AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES.
FOR MORE CURRENT PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.
14 |Past performance does not guarantee future results.|Annual Report
PERFORMANCE SUMMARY (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $10,000 INVESTMENT
Total return represents the change in value of an investment over the periods
shown. It includes the current, applicable, maximum sales charge(s), Fund
expenses, account fees and reinvested distributions. The unmanaged index
includes reinvested dividends. It differs from the Fund in composition and does
not pay management fees or expenses. The Consumer Price Index (CPI), calculated
by the U.S. Bureau of Labor Statistics, is a commonly used measure of the
inflation rate. One cannot invest directly in an index.
[GRAPHIC OMITTED]
CLASS A (7/1/93-6/30/03)
Franklin California Lehman Brothers
Insured Tax-free Municipal Bond
Income Fund Index 6 CPI
7/1/93 9572 10000 10000
7/31/93 9594 10013 10000
8/31/93 9772 10221 10028
9/30/93 9888 10338 10049
10/31/93 9948 10357 10090
11/30/93 9929 10266 10097
12/31/93 10093 10483 10097
1/31/94 10194 10602 10125
2/28/94 9990 10328 10159
3/31/94 9590 9907 10194
4/30/94 9628 9992 10208
5/31/94 9689 10079 10215
6/30/94 9653 10017 10250
7/31/94 9822 10200 10277
8/31/94 9861 10236 10318
9/30/94 9733 10086 10346
10/31/94 9553 9906 10354
11/30/94 9392 9727 10367
12/31/94 9557 9941 10367
1/31/95 9875 10225 10409
2/28/95 10153 10523 10450
3/31/95 10226 10644 10485
4/30/95 10257 10656 10519
5/31/95 10538 10996 10540
6/30/95 10405 10901 10561
7/31/95 10471 11004 10561
8/31/95 10564 11144 10589
9/30/95 10631 11214 10610
10/31/95 10786 11377 10645
11/30/95 10987 11566 10638
12/31/95 11117 11677 10630
1/31/96 11185 11766 10693
2/29/96 11128 11686 10727
3/31/96 10962 11536 10783
4/30/96 10922 11504 10825
5/31/96 10927 11499 10845
6/30/96 11052 11624 10852
7/31/96 11149 11729 10873
8/31/96 11190 11727 10893
9/30/96 11343 11891 10928
10/31/96 11451 12025 10963
11/30/96 11624 12245 10984
12/31/96 11582 12194 10984
1/31/97 11577 12217 11019
2/28/97 11677 12329 11053
3/31/97 11528 12165 11081
4/30/97 11629 12268 11094
5/31/97 11779 12453 11087
6/30/97 11870 12586 11101
7/31/97 12196 12935 11114
8/31/97 12093 12813 11135
9/30/97 12225 12966 11163
10/31/97 12298 13049 11191
11/30/97 12370 13126 11184
12/31/97 12537 13317 11171
1/31/98 12661 13454 11192
2/28/98 12674 13458 11213
3/31/98 12687 13471 11235
4/30/98 12629 13410 11255
5/31/98 12806 13622 11275
6/30/98 12871 13675 11289
7/31/98 12894 13709 11302
8/31/98 13074 13922 11316
9/30/98 13275 14096 11329
10/31/98 13289 14096 11356
11/30/98 13344 14145 11356
12/31/98 13354 14180 11350
1/31/99 13463 14349 11377
2/28/99 13454 14286 11391
3/31/99 13487 14306 11425
4/30/99 13488 14342 11508
5/31/99 13424 14258 11508
6/30/99 13218 14053 11508
7/31/99 13229 14104 11543
8/31/99 13055 13991 11570
9/30/99 13066 13997 11626
10/31/99 12868 13845 11647
11/30/99 12968 13992 11654
12/31/99 12870 13887 11654
1/31/00 12770 13826 11689
2/29/00 12995 13986 11758
3/31/00 13313 14291 11854
4/30/00 13199 14207 11861
5/31/00 13144 14133 11876
6/30/00 13511 14508 11937
7/31/00 13684 14709 11965
8/31/00 13950 14936 11965
9/30/00 13916 14858 12027
10/31/00 14022 15020 12047
11/30/00 14140 15134 12055
12/31/00 14481 15508 12047
1/31/01 14564 15662 12123
2/28/01 14600 15712 12172
3/31/01 14732 15853 12200
4/30/01 14506 15682 12249
5/31/01 14662 15851 12304
6/30/01 14699 15958 12325
7/31/01 14929 16194 12290
8/31/01 15269 16461 12290
9/30/01 15220 16405 12345
10/31/01 15378 16600 12303
11/30/01 15316 16461 12283
12/31/01 15154 16304 12235
1/31/02 15349 16586 12263
2/28/02 15484 16785 12312
3/31/02 15132 16456 12381
4/30/02 15368 16777 12450
5/31/02 15466 16880 12450
6/30/02 15603 17059 12458
7/31/02 15778 17279 12471
8/31/02 16018 17486 12512
9/30/02 16487 17869 12534
10/31/02 16075 17572 12555
11/30/02 16033 17499 12555
12/31/02 16340 17868 12527
1/31/03 16259 17823 12582
2/28/03 16516 18073 12679
3/31/03 16552 18083 12755
4/30/03 16706 18203 12727
5/31/03 17111 18629 12707
6/30/03 16999 18551 12721
[GRAPHIC OMITTED]
CLASS B (2/1/00-6/30/03)
CA Ins. TF Class B LB Muni Index CPI
2/1/00 10000 10000 10000
2/29/00 10166 10116 10059
3/31/00 10418 10337 10141
4/30/00 10317 10276 10148
5/31/00 10277 10222 10160
6/30/00 10559 10493 10213
7/31/00 10689 10639 10236
8/31/00 10892 10803 10236
9/30/00 10860 10747 10289
10/31/00 10946 10864 10307
11/30/00 11033 10946 10313
12/31/00 11294 11217 10307
1/31/01 11353 11328 10372
2/29/01 11377 11364 10413
3/31/01 11473 11466 10437
4/30/01 11301 11342 10479
5/31/01 11417 11465 10526
6/30/01 11440 11542 10544
7/31/01 11613 11712 10514
8/31/01 11872 11906 10514
9/30/01 11828 11865 10562
10/31/01 11946 12006 10526
11/30/01 11893 11906 10508
12/31/01 11771 11792 10467
1/31/02 11907 11996 10491
2/28/02 12014 12140 10533
3/31/02 11727 11902 10592
4/30/02 11913 12135 10651
5/31/02 11984 12209 10651
6/30/02 12084 12338 10658
7/31/02 12213 12497 10669
8/31/02 12393 12647 10705
9/30/02 12749 12924 10723
10/31/02 12426 12710 10741
11/30/02 12378 12656 10741
12/31/02 12618 12923 10717
1/31/03 12550 12891 10765
2/28/03 12742 13071 10847
3/31/03 12763 13079 10913
4/30/03 12876 13166 10889
5/31/03 13191 13474 10871
6/30/03 12805 13417 10883
Annual Report | Past performance does not guarantee future results.| 15
PERFORMANCE SUMMARY (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN
- -------------------------------------
Class C 6/30/03
- -------------------------------------
1-Year +6.28%
- -------------------------------------
5-Year +4.92%
- -------------------------------------
Since Inception (5/1/95) +5.73%
[GRAPHIC OMITTED]
CA Ins. TF Class C LB Muni Index CPI
5/1/95 9900 10000 10000
5/31/95 10197 10319 10020
6/30/95 10063 10229 10040
7/31/95 10122 10326 10040
8/31/95 10215 10458 10066
9/30/95 10265 10523 10086
10/31/95 10418 10676 10120
11/30/95 10606 10853 10112
12/31/95 10727 10957 10105
1/31/96 10787 11041 10165
2/29/96 10726 10966 10198
3/31/96 10571 10825 10251
4/30/96 10528 10795 10291
5/31/96 10527 10791 10310
6/30/96 10642 10908 10316
7/31/96 10737 11006 10336
8/31/96 10762 11004 10356
9/30/96 10904 11158 10389
10/31/96 11002 11284 10422
11/30/96 11172 11491 10442
12/31/96 11118 11443 10442
1/31/97 11108 11464 10475
2/28/97 11207 11570 10508
3/31/97 11060 11416 10534
4/30/97 11142 11512 10547
5/31/97 11287 11686 10540
6/30/97 11369 11811 10553
7/31/97 11674 12138 10565
8/31/97 11571 12024 10586
9/30/97 11692 12167 10612
10/31/97 11755 12245 10639
11/30/97 11827 12317 10632
12/31/97 11971 12497 10619
1/31/98 12092 12626 10640
2/28/98 12089 12629 10660
3/31/98 12096 12641 10680
4/30/98 12044 12584 10699
5/31/98 12206 12783 10719
6/30/98 12262 12832 10731
7/31/98 12268 12865 10744
8/31/98 12433 13064 10757
9/30/98 12627 13227 10770
10/31/98 12624 13227 10796
11/30/98 12681 13274 10796
12/31/98 12674 13307 10789
1/31/99 12781 13465 10815
2/28/99 12767 13406 10828
3/31/99 12792 13425 10861
4/30/99 12786 13458 10940
5/31/99 12720 13380 10940
6/30/99 12520 13187 10940
7/31/99 12525 13235 10973
8/31/99 12355 13129 10999
9/30/99 12360 13134 11052
10/31/99 12168 12992 11072
11/30/99 12256 13130 11079
12/31/99 12159 13032 11079
1/31/00 12048 12974 11112
2/29/00 12254 13125 11177
3/31/00 12557 13411 11269
4/30/00 12445 13332 11276
5/31/00 12388 13263 11289
6/30/00 12725 13614 11348
7/31/00 12882 13803 11374
8/31/00 13125 14016 11374
9/30/00 13087 13943 11433
10/31/00 13191 14095 11453
11/30/00 13284 14202 11460
12/31/00 13597 14553 11453
1/31/01 13680 14697 11525
2/29/01 13708 14744 11571
3/31/01 13823 14877 11598
4/30/01 13606 14716 11644
5/31/01 13745 14875 11696
6/30/01 13772 14974 11716
7/31/01 13979 15196 11683
8/31/01 14289 15447 11683
9/30/01 14237 15394 11736
10/31/01 14378 15578 11696
11/30/01 14314 15447 11676
12/31/01 14156 15300 11631
1/31/02 14330 15565 11657
2/28/02 14448 15751 11704
3/31/02 14115 15443 11770
4/30/02 14327 15744 11836
5/31/02 14423 15840 11836
6/30/02 14531 16008 11843
7/31/02 14687 16214 11856
8/31/02 14913 16409 11895
9/30/02 15352 16768 11915
10/31/02 14953 16490 11935
11/30/02 14895 16421 11935
12/31/02 15184 16767 11909
1/31/03 15102 16725 11961
2/28/03 15332 16959 12054
3/31/03 15358 16969 12126
4/30/03 15493 17081 12099
5/31/03 15870 17481 12080
6/30/03 15766 17408 12093
ENDNOTES
BOND PRICES, AND THUS THE FUND'S SHARE PRICE, GENERALLY MOVE IN THE OPPOSITE
DIRECTION FROM INTEREST RATES. MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO
INTEREST RATE MOVEMENTS; THEREFORE, THE FUND'S YIELD AND SHARE PRICE WILL
FLUCTUATE WITH MARKET CONDITIONS. SINCE THE FUND CONCENTRATES ITS INVESTMENTS IN
A SINGLE STATE, IT IS SUBJECT TO GREATER RISK OF ADVERSE ECONOMIC AND REGULATORY
CHANGES IN THAT STATE THAN A GEOGRAPHICALLY DIVERSIFIED FUND. THESE AND OTHER
RISKS ARE DESCRIBED MORE FULLY IN THE FUND'S PROSPECTUS.
CLASS A: Subject to the current, maximum 4.25% initial sales charge. Prior to
7/1/94, Fund shares were offered at a lower initial sales charge; thus
actual total returns may differ. Effective 5/1/94, the Fund implemented
a Rule 12b-1 plan, which affects subsequent performance.
CLASS B: Subject to no initial sales charge, but subject to a contingent
deferred sales charge (CDSC) declining from 4% to 0% over six years.
These shares have higher annual fees and expenses than Class A shares.
CLASS C: Subject to 1% initial sales charge and 1% CDSC for shares redeemed
within 18 months of investment. These shares have higher annual fees
and expenses than Class A shares.
1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes any current, applicable,
maximum sales charge(s).
3. Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price (NAV for Class B) per
share on 6/30/03.
4. Taxable equivalent distribution rate and yield assume the published rates as
of 6/18/03 for the maximum combined federal and California state personal income
tax bracket of 41.05%, based on the federal income tax rate of 35.00%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
Fund's portfolio for the 30 days ended 6/30/03.
6. Source: Standard & Poor's Micropal. The Lehman Brothers Municipal Bond Index
includes about 40,000 bonds from across the country. All bonds included have a
minimum credit rating of at least Baa and a maturity of at least two years, and
have been issued within the last five years as part of a deal of over $50
million. Bonds subject to alternative minimum tax or with floating or zero
coupons are excluded. Bonds will be added and the index will be updated monthly
with a one-month lag.
16 |Past performance does not guarantee future results.|Annual Report
FRANKLIN CALIFORNIA INTERMEDIATE-TERM
TAX-FREE INCOME FUND
YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin California Intermediate-Term
Tax-Free Income Fund seeks to provide high, current income exempt from regular
federal and California state personal income taxes while seeking preservation of
capital. The Fund's portfolio consists mainly of California municipal securities
with an average weighted maturity (the time at which the debt must be repaid)
between 3 and 10 years. 1
[GRAPHIC OMITTED]
CREDIT QUALITY BREAKDOWN*
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND
BASED ON TOTAL LONG-TERM INVESTMENTS AS OF 6/30/03
AAA .... 53.3%
AA ..... 3.8%
A ...... 23.6%
BBB .... 19.3%
*QUALITY BREAKDOWN MAY INCLUDE INTERNAL RATINGS FOR BONDS NOT RATED BY AN
INDEPENDENT RATING AGENCY.
CALIFORNIA UPDATE
During the year ended June 30, 2003, anemic business spending and uneven
economic growth helped push U.S. unemployment to its highest level since 1994,
at 6.4% in June. 2 The Federal Reserve Board lowered the federal funds target
rate by 50 basis points (0.50%) to 1.25% on November 6, 2002, and 25 basis
points on June 25, 2003. The short-term rate reached its lowest level since
1958. Inflation remained tame, global business confidence began to revive as
major combat in the
1. For investors subject to alternative minimum tax, a small portion of this
income may be taxable. Distributions of capital gains are generally taxable.
2. Source: Bureau of Labor Statistics.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND COMPLETE LEGAL
TITLES OF ALL PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF
INVESTMENTS (SOI). THE SOI BEGINS ON PAGE 42.
Annual Report| 17
PORTFOLIO BREAKDOWN
Franklin California Intermediate-Term
Tax-Free Income Fund
6/30/03
- -------------------------------------------------
% of Total
Long-Term Investments
- -------------------------------------------------
Tax-Supported 21.6%
General Obligation 21.0%
Utilities 15.7%
Hospital & Health Care 14.4%
Subject to Government Appropriations 12.7%
Other Revenue 4.9%
Housing 3.2%
Prerefunded 2.5%
Transportation 2.1%
Higher Education 1.9%
Iraq conflict concluded, and consumer attitudes brightened with the Consumer
Confidence Index rising consecutive months (April and May) for the first time
since June 2001.
Budget pressure dominated California's credit landscape during the year under
review as the Golden State's economy continued its significant slowdown
resulting from weaker exports, the sluggish national economy and a
poor-performing technology sector. California's reliance on taxes, particularly
capital gains taxes, from a small percentage of wealthy taxpayers exacerbated
the budget challenge. In fiscal year 2002, the state experienced a dramatic
16.1% revenue collection decline, largely due to reduced stock market-related
tax collections. 3 The governor balanced California's fiscal year 2002 budget
through a variety of methods, including expenditure reductions, increased
federal funding, loans from other special funds, a power revenue bond, tobacco
settlement-backed bonds and a restructuring of outstanding GO debt.
State tax-supported debt levels are expected to remain moderate, despite
increasing issuance of GO bonds for local schools, higher education and other
purposes, as well as debt restructuring to partially defer debt payments in
fiscal year 2003. The state's GO and lease debt load was $952 per capita as of
April 2003, and even as sizable new bond authorizations materialize,
California's debt levels should remain at moderate levels. 4 In December 2002,
independent credit rating agency Standard & Poor's downgraded California's GO
debt to A from A+ with a stable outlook. Moody's Investors Service followed with
a similar downgrade to A2 from A1 in February 2003 and revised its outlook on
the state's long-term bonds to negative from stable in June. 5
In May 2003, Governor Davis submitted a revised budget proposal for fiscal year
2004 (begins July 1), which included reducing expenditures, increasing taxes and
drawing on one-time revenues. As of June 30, 2003, the California legislature
had failed to pass a new state spending plan, adding to the state's uncertainty.
In California's favor are its moderate debt burden and broad-based economy. The
Golden State's economy has slightly surpassed the nation's pace in terms of
3. Source: Moody's Investors Service, NEW ISSUE: CALIFORNIA (STATE OF), 10/8/02.
4. Source: Standard & Poor's, RATINGSDIRECT, 4/8/03.
5. These do not indicate ratings of the Fund.
18 |Annual Report
employment and personal income, with positive employment growth expected by the
end of calendar year 2003. Reliance on the Bay Area's struggling technology
sector has been somewhat offset by federal defense and homeland security
spending measures as the state's aerospace and shipbuilding companies fulfill
rising defense contract orders.
PORTFOLIO NOTES
Typically, we seek opportunities when interest rates rise to sell high cost
(lower booked yield) bonds and report losses, which can be carried forward to
offset future gains, potentially lowering shareholders' future capital gains tax
liabilities. We use the proceeds to buy low cost (higher booked yield) bonds
with similar structures. We also strive to remain fully invested at all times.
During the year under review, although yields were at historical lows, the yield
curve was steep and accumulating cash would have hindered the Fund's income
production.
During this period of California's fiscal uncertainty, we sought to take
advantage of increased supply to purchase high credit quality, essential purpose
revenue and GO debt. Purchases during the period included Industry GO, Poway USD
GO, Clovis Public Financing Authority Water Revenue, Moulton-Niguel Water
District GO, and San Ramon Valley USD GO bonds. Notable sales included San Diego
Community College District and Sacramento City Financing Authority Revenue for
City Hall and Redevelopment Projects bonds.
Because we employ a buy-and-hold approach, we hold a large number of high-coupon
bonds purchased in higher interest rate environments, as you can see in the bar
chart on page 20. These high-coupon bonds are priced at a premium now that
interest rates have declined. Generally, premium bonds are less price sensitive
to fluctuations in interest rates and exhibit subdued price performance in a
declining interest rate environment. On the other hand, when interest rates
rise, premium bonds should outperform because their values do not drop as fast
as bonds priced at a discount. Thus, we believe our portfolio is defensive in
nature.
DIVIDEND DISTRIBUTIONS*
Franklin California Intermediate-Term
Tax-Free Income Fund - Class A
7/1/02-6/30/03
- ---------------------------------------
Month Dividend per Share
- ---------------------------------------
July 3.70 cents
August 3.70 cents
September 3.70 cents
October 3.70 cents
November 3.70 cents
December 3.70 cents
January 3.70 cents
February 3.70 cents
March 3.70 cents
April 3.70 cents
May 3.70 cents
June 3.70 cents
- ---------------------------------------
Total 44.40 cents
*Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the Fund during the reporting
period.
Annual Report| 19
[GRAPHIC OMITTED]
COUPON BY MARKET VALUE PROFILE
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
HOLDINGS AS OF 6/30/03
<2.00 8.34%
3.00-3.25 1.66%
3.25-3.50 0.82%
3.50-3.75 1.21%
3.75-4.00 1.25%
4.00-4.25 13.83%
4.25-4.50 6.06%
4.50-4.75 7.04%
4.75-5.00 4.78%
5.00-5.25 27.09%
5.25-5.50 16.40%
5.50-5.75 4.35%
5.75-6.00 3.38%
6.00-6.25 2.93%
6.25-6.50 0.86%
Keep in mind that your Fund combines the advantage of high credit quality with
tax-free yields. 1 The Performance Summary beginning on page 21 shows that at
the end of this reporting period, the Fund's Class A shares' distribution rate
was 3.70%. An investor in the maximum combined federal and California state
personal income tax bracket of 41.05% would need to earn 6.27% from a taxable
investment to match the Fund's tax-free distribution rate.
THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF
JUNE 30, 2003, THE END OF THE REPORTING PERIOD. OUR STRATEGIES AND THE FUND'S
PORTFOLIO COMPOSITION WILL CHANGE DEPENDING ON MARKET AND ECONOMIC CONDITIONS.
THESE OPINIONS MAY NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A
PARTICULAR SECURITY. THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT
OF ANY MARKET, STATE, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE
FROM SOURCES CONSIDERED RELIABLE, BUT THE ADVISOR MAKES NO REPRESENTATION OR
WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR
INVESTMENT MANAGEMENT PHILOSOPHY.
20 |Annual Report
PERFORMANCE SUMMARY AS OF 6/30/03
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses. Capital
gain distributions are net profits realized from the sale of portfolio
securities. The performance table and graph do not reflect any taxes due on Fund
dividends, capital gain distributions, if any, or any realized gains on the sale
of Fund shares. Total return reflects the Fund's dividend income, capital gain
distributions, if any, and any unrealized gains or losses.
PRICE AND DISTRIBUTION INFORMATION
- -------------------------------------------------------------------------------------------------
Class A Change 6/30/03 6/30/02
- -------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.33 $11.74 $11.41
DISTRIBUTIONS (7/1/02-6/30/03)
Dividend Income $0.4440
PERFORMANCE 1
- -------------------------------------------------------------------------------------------------
Class A 1-Year 5-Year 10-Year
- -------------------------------------------------------------------------------------------------
Cumulative Total Return 2 +6.92% +30.17% +77.48%
Average Annual Total Return 3 +4.54% +4.93% +5.67%
Distribution Rate 4 3.70%
Taxable Equivalent Distribution Rate 5 6.27%
30-Day Standardized Yield 6 2.60%
Taxable Equivalent Yield 5 4.41%
ONGOING MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE; MORE
RECENT RETURNS MAY DIFFER FROM THOSE SHOWN. SINCE MARKETS CAN GO DOWN AS WELL AS
UP, INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE WITH MARKET CONDITIONS,
AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES.
FOR MORE CURRENT PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.
Annual Report | Past performance does not guarantee future results.| 21
PERFORMANCE SUMMARY (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $10,000 INVESTMENT
Total return represents the change in value of an investment over the periods
shown. It includes the maximum sales charge, Fund expenses, account fees and
reinvested distributions. The unmanaged index includes reinvested dividends. It
differs from the Fund in composition and does not pay management fees or
expenses. The Consumer Price Index (CPI), calculated by the U.S. Bureau of Labor
Statistics, is a commonly used measure of the inflation rate. One cannot invest
directly in an index.
AVERAGE ANNUAL TOTAL RETURN
- -------------------------------------
Class A 6/30/03
- -------------------------------------
1-Year +4.54%
5-Year +4.93%
10-Year +5.67%
[GRAPHIC OMITTED]
CLASS A (7/1/93-6/30/03)
CA Int. TF LB 10 Yr. Muni Index CPI
7/1/93 9778 10000 10000
7/31/93 9802 10025 10000
8/31/93 9936 10233 10028
9/30/93 10145 10358 10049
10/31/93 10186 10375 10090
11/30/93 10077 10290 10097
12/31/93 10289 10509 10097
1/31/94 10398 10638 10125
2/28/94 10153 10347 10159
3/31/94 9830 9952 10194
4/30/94 9883 10061 10208
5/31/94 9944 10142 10215
6/30/94 9938 10098 10250
7/31/94 10088 10268 10277
8/31/94 10132 10308 10318
9/30/94 10037 10169 10346
10/31/94 9912 10021 10354
11/30/94 9768 9832 10367
12/31/94 9852 10009 10367
1/31/95 10066 10268 10409
2/28/95 10332 10558 10450
3/31/95 10447 10701 10485
4/30/95 10461 10714 10519
5/31/95 10760 11053 10540
6/30/95 10651 10985 10561
7/31/95 10789 11146 10561
8/31/95 10959 11298 10589
9/30/95 11046 11370 10610
10/31/95 11216 11501 10645
11/30/95 11377 11655 10638
12/31/95 11423 11726 10630
1/31/96 11522 11845 10693
2/29/96 11495 11796 10727
3/31/96 11414 11650 10783
4/30/96 11387 11609 10825
5/31/96 11391 11577 10845
6/30/96 11503 11686 10852
7/31/96 11593 11799 10873
8/31/96 11597 11799 10893
9/30/96 11710 11920 10928
10/31/96 11835 12070 10963
11/30/96 12037 12314 10984
12/31/96 11997 12259 10984
1/31/97 12035 12307 11019
2/28/97 12117 12422 11053
3/31/97 12009 12256 11081
4/30/97 12103 12347 11094
5/31/97 12265 12522 11087
6/30/97 12371 12660 11101
7/31/97 12670 13015 11114
8/31/97 12595 12889 11135
9/30/97 12713 13053 11163
10/31/97 12787 13122 11191
11/30/97 12849 13182 11184
12/31/97 12992 13391 11171
1/31/98 13124 13539 11192
2/28/98 13140 13538 11213
3/31/98 13145 13528 11235
4/30/98 13114 13454 11255
5/31/98 13296 13683 11275
6/30/98 13336 13733 11289
7/31/98 13388 13755 11302
8/31/98 13572 13995 11316
9/30/98 13755 14203 11329
10/31/98 13771 14209 11356
11/30/98 13811 14251 11356
12/31/98 13838 14296 11350
1/31/99 13988 14514 11377
2/28/99 13943 14384 11391
3/31/99 13970 14377 11425
4/30/99 13984 14415 11508
5/31/99 13888 14314 11508
6/30/99 13680 14048 11508
7/31/99 13769 14142 11543
8/31/99 13722 14090 11570
9/30/99 13776 14138 11626
10/31/99 13654 14038 11647
11/30/99 13771 14191 11654
12/31/99 13636 14117 11654
1/31/00 13653 14059 11689
2/29/00 13759 14170 11758
3/31/00 14007 14446 11854
4/30/00 13921 14374 11861
5/31/00 13914 14289 11876
6/30/00 14217 14678 11937
7/31/00 14391 14880 11965
8/31/00 14631 15111 11965
9/30/00 14609 15042 12027
10/31/00 14693 15195 12047
11/30/00 14751 15277 12055
12/31/00 14981 15636 12047
1/31/01 15159 15838 12123
2/28/01 15204 15865 12172
3/31/01 15262 16000 12200
4/30/01 15090 15803 12249
5/31/01 15271 15975 12304
6/30/01 15342 16071 12325
7/31/01 15524 16291 12290
8/31/01 15789 16570 12290
9/30/01 15765 16546 12345
10/31/01 15921 16752 12303
11/30/01 15800 16536 12283
12/31/01 15647 16360 12235
1/31/02 15898 16669 12263
2/28/02 16066 16908 12312
3/31/02 15697 16560 12381
4/30/02 16003 16944 12450
5/31/02 16126 17023 12450
6/30/02 16235 17234 12458
7/31/02 16416 17464 12471
8/31/02 16640 17691 12512
9/30/02 16980 18113 12534
10/31/02 16588 17784 12555
11/30/02 16540 17638 12555
12/31/02 16854 18024 12527
1/31/03 16733 17927 12582
2/28/03 16991 18237 12679
3/31/03 16987 18246 12755
4/30/03 17100 18383 12727
5/31/03 17478 18909 12707
6/30/03 17353 18818 12721
ENDNOTES
BOND PRICES, AND THUS THE FUND'S SHARE PRICE, GENERALLY MOVE IN THE OPPOSITE
DIRECTION FROM INTEREST RATES. MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO
INTEREST RATE MOVEMENTS; THEREFORE, THE FUND'S YIELD AND SHARE PRICE WILL
FLUCTUATE WITH MARKET CONDITIONS. SINCE THE FUND CONCENTRATES ITS INVESTMENTS IN
A SINGLE STATE, IT IS SUBJECT TO GREATER RISK OF ADVERSE ECONOMIC AND REGULATORY
CHANGES IN THAT STATE THAN A GEOGRAPHICALLY DIVERSIFIED FUND. THESE AND OTHER
RISKS ARE DESCRIBED MORE FULLY IN THE FUND'S PROSPECTUS.
CLASS A: Subject to the maximum 2.25% initial sales charge.
1. Past expense reductions by the Fund's manager increased the Fund's total
returns. Without these reductions, the Fund's total returns would have been
lower.
2. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include the sales charge.
3. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum sales charge.
4. Distribution rate is based on an annualization of the current 3.70 cent per
share monthly dividend and the maximum offering price of $12.01 per share on
6/30/03.
5. Taxable equivalent distribution rate and yield assume the published rates as
of 6/18/03 for the maximum combined federal and California state personal income
tax bracket of 41.05%, based on the federal income tax rate of 35.00%.
6. Yield, calculated as required by the SEC, is based on the earnings of the
Fund's portfolio for the 30 days ended 6/30/03.
7. Source: Standard & Poor's Micropal. The Lehman Brothers Municipal 10-Year
Bond Index includes bonds that have a minimum credit rating of at least Baa, a
maturity of at least 10 years, and have been issued within the last five years
as part of a deal of over $50 million. Bonds subject to alternative minimum tax
or with floating or zero coupons are excluded. Bonds will be added and the index
will be updated monthly with a one-month lag.
22 |Past performance does not guarantee future results.|Annual Report
FRANKLIN CALIFORNIA
TAX-EXEMPT MONEY FUND
YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin California Tax-Exempt Money
Fund seeks to provide high, current income exempt from regular federal and
California state personal income taxes while seeking preservation of capital and
liquidity through a portfolio consisting mainly of short-term municipal debt
securities issued in California. The Fund is managed to maintain a $1.00 share
price. 1
CALIFORNIA UPDATE
Budget pressure dominated California's credit landscape during the year ended
June 30, 2003, as the Golden State's economy continued its significant slowdown
resulting from weaker exports, the sluggish national economy and a
poor-performing technology sector. California's reliance on taxes, particularly
capital gains taxes, from a small percentage of wealthy taxpayers exacerbated
the budget challenge. In fiscal year 2002, the state experienced a dramatic
16.1% revenue collection decline, largely due to reduced stock market-related
tax collections. 2
State revenue anticipation notes and revenue anticipation warrants help provide
the state with liquidity to fund ongoing operations while a longer-term solution
to the budget shortfall is devised. In December, independent credit rating
agencies Standard & Poor's and Fitch downgraded California GO debt and revenue
anticipation notes. The downgrades were expected and already priced into the
market.
PORTFOLIO NOTES
The Federal Reserve Board (the Fed) lowered the federal funds target rate 50
basis points (0.50%) to 1.25% on November 6, 2002, and 25 basis points on June
25, 2003, its lowest level since 1958. The rate cuts impacted money market
portfolio yields. Largely as a result, Franklin California Tax-Exempt Money
Fund's seven-day effective yield fell from 0.87% at the beginning of the period
to 0.45% on June 30, 2003.
1. An investment in the Fund is not insured or guaranteed by the U.S. government
or any other entity or institution. Although the Fund seeks to preserve the
value of your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
2. Source: Moody's Investors Service, NEW ISSUE: CALIFORNIA (STATE OF), 10/8/02.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND COMPLETE LEGAL
TITLES OF ALL PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF
INVESTMENTS (SOI). THE SOI BEGINS ON PAGE 52.
Annual Report | 23
The Fund's investment strategy continues to emphasize high quality and
liquidity. We manage the Fund more conservatively than is required by SEC
guidelines, seeking to ensure safety and stability of the Fund's principal.
Although allowed by the SEC for money market funds, we do not buy any derivative
securities for our tax-exempt money funds. We believe the increased yield
offered by such securities does not justify the added risks to shareholders.
During the reporting period, the Fund participated in several attractive deals,
including California School Cash Reserve Program Revenue Notes, Los Angeles
Unified School District Tax Anticipation Notes, California State Department
Water Resources Power Supply variable rate demand notes, and California
Infrastructure and Economic Development Bank J. Paul Getty Trust mandatory puts.
PERFORMANCE SUMMARY
Franklin California
Tax-Exempt Money Fund
6/30/03
Seven-day effective yield 1 0.45%
Seven-day annualized yield 0.45%
Taxable equivalent yield 2 0.76%
1. The seven-day effective yield assumes the compounding of daily dividends.
2. Taxable equivalent yield assumes the published rates as of 6/18/03 for the
maximum combined federal and California state personal income tax bracket of
41.05%, based on the federal income tax rate of 35.00%. Annualized and effective
yields are for the seven-day period ended 6/30/03. The Fund's average weighted
maturity was 64 days. Yield reflects Fund expenses and fluctuations in interest
rates on portfolio investments.
Past performance does not guarantee future results.
THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF
JUNE 30, 2003, THE END OF THE REPORTING PERIOD. OUR STRATEGIES AND THE FUND'S
PORTFOLIO COMPOSITION WILL CHANGE DEPENDING ON MARKET AND ECONOMIC CONDITIONS.
THESE OPINIONS MAY NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A
PARTICULAR SECURITY. THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT
OF ANY MARKET, STATE, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE
FROM SOURCES CONSIDERED RELIABLE, BUT THE ADVISOR MAKES NO REPRESENTATION OR
WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR
INVESTMENT MANAGEMENT PHILOSOPHY.
24 |Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
-------------------------------------------------------------------
Year Ended June 30,
2003 2002 2001 2000 1999
-------------------------------------------------------------------
CLASS A
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ....................... $12.32 $12.17 $11.76 $12.12 $12.47
-------------------------------------------------------------------
Income from investment operations:
Net investment income a ................................. .57 .59 .61 .61 .61
Net realized and unrealized gains (losses) .............. .51 .15 .40 (.36) (.26)
-------------------------------------------------------------------
Total from investment operations ......................... 1.08 .74 1.01 .25 .35
-------------------------------------------------------------------
Less distributions from:
Net investment income ................................... (.57) (.59) (.60) (.61) (.63)
Net realized gains ...................................... -- -- -- -- c (.07)
-------------------------------------------------------------------
Total distributions ...................................... (.57) (.59) (.60) (.61) (.70)
-------------------------------------------------------------------
Net asset value, end of year ............................. $12.83 $12.32 $12.17 $11.76 $12.12
===================================================================
Total return b ........................................... 8.97% 6.15% 8.73% 2.24% 2.76%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .......................... $1,912,784 $1,789,914 $1,665,581 $1,558,857 $1,775,212
Ratios to average net assets:
Expenses ................................................ .61% .61% .61% .60% .60%
Net investment income ................................... 4.50% 4.74% 5.00% 5.24% 4.91%
Portfolio turnover rate .................................. 9.79% 16.99% 10.09% 29.40% 15.53%
aBased on average shares outstanding.
bTotal return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
cThe fund made a capital gain distribution of $.0016.
Annual Report|25
FRANKLIN CALIFORNIA TAX-FREE TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND (CONTINUED)
---------------------------------------------
Year Ended June 30,
2003 2002 2001 2000 C
CLASS B ---------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ...................................... $12.37 $12.21 $11.78 $11.36
---------------------------------------------
Income from investment operations:
Net investment income a ................................................ .50 .53 .54 .23
Net realized and unrealized gains (losses) ............................. .51 .15 .42 .42
---------------------------------------------
Total from investment operations ........................................ 1.01 .68 .96 .65
---------------------------------------------
Less distributions from net investment income ........................... (.50) (.52) (.53) (.23)
---------------------------------------------
Net asset value, end of year ............................................ $12.88 $12.37 $12.21 $11.78
=============================================
Total return b .......................................................... 8.34% 5.62% 8.29% 5.76%
Ratios/supplemental data
Net assets, end of year (000's) ......................................... $85,698 $56,303 $20,926 $1,884
Ratios to average net assets:
Expenses ............................................................... 1.16% 1.16% 1.16% 1.16% d
Net investment income .................................................. 3.95% 4.20% 4.42% 4.82% d
Portfolio turnover rate ................................................. 9.79% 16.99% 10.09% 29.40%
aBased on average shares outstanding.
bTotal return does not reflect contingent deferred sales charge, and is not
annualized for periods less than one year.
cFor the period February 1, 2000 (effective date) to June 30, 2000.
dAnnualized
26 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND (CONTINUED)
---------------------------------------------------------
Year Ended June 30,
2003 2002 2001 2000 1999
---------------------------------------------------------
CLASS C
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................................ $12.41 $12.26 $11.84 $12.20 $12.55
---------------------------------------------------------
Income from investment operations:
Net investment income a .......................................... .50 .53 .54 .55 .55
Net realized and unrealized gains (losses) ....................... .52 .14 .41 (.36) (.27)
---------------------------------------------------------
Total from investment operations .................................. 1.02 .67 .95 .19 .28
---------------------------------------------------------
Less distributions from:
Net investment income ............................................ (.50) (.52) (.53) (.55) (.56)
Net realized gains ............................................... -- -- -- -- c (.07)
---------------------------------------------------------
Total distributions ............................................... (.50) (.52) (.53) (.55) (.63)
---------------------------------------------------------
Net asset value, end of year ...................................... $12.93 $12.41 $12.26 $11.84 $12.20
=========================================================
Total return b .................................................... 8.39% 5.51% 8.17% 1.66% 2.16%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ................................... $136,674 $108,802 $79,803 $67,395 $80,336
Ratios to average net assets:
Expenses ......................................................... 1.16% 1.16% 1.16% 1.16% 1.16%
Net investment income ............................................ 3.95% 4.19% 4.45% 4.68% 4.35%
Portfolio turnover rate ........................................... 9.79% 16.99% 10.09% 29.40% 15.53%
aBased on average shares outstanding.
bTotal return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
cThe fund made a capital gain distribution of $.0016.
Annual Report | See notes to financial statements.| 27
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Insured Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS 97.0%
BONDS 92.4%
ABAG Finance Authority for Nonprofit Corps. COP,
Lincoln Child Center Inc., California Mortgage Insured, 6.125%, 11/01/24 ........... $ 2,055,000 $ 2,300,737
Lytton Gardens Inc., California Mortgage Insured, 6.00%, 2/15/30 ................... 3,500,000 3,766,175
Odd Fellows Home, California Mortgage Insured, 6.00%, 8/15/24 ...................... 5,000,000 5,458,100
ABAG Finance Authority for Nonprofit Corps. Revenue,
Poway RHF Housing Inc. Project, Series A, California Mortgage Insured,
5.375%, 11/15/25 .................................................................. 5,145,000 5,434,252
Sansum-Santa Barbara, Series A, California Mortgage Insured, 5.60%, 4/01/26 ........ 2,750,000 2,899,352
ABAG Revenue, Tax Allocation, RDA Pool, Series A2, FSA Insured, 6.60%, 12/15/24 ...... 10,775,000 11,748,090
Alameda County Water District Revenue COP, Water Systems Project, FGIC Insured,
Pre-Refunded, 6.00%, 6/01/20 ....................................................... 1,000,000 1,066,480
Alameda Power and Telecommunication Electric System Revenue COP, MBIA Insured,
5.75%, 7/01/30 ...................................................................... 3,305,000 3,709,995
Alhambra City Elementary School District GO, Series A, FSA Insured, 5.60%, 9/01/24 ... 2,065,000 2,289,734
Alhambra COP, Police Facilities AD No. 91-1, AMBAC Insured, 6.75%, 9/01/23 ........... 10,730,000 10,928,398
Anaheim PFAR, Local Agency, CFD, Refunding, Series A, MBIA Insured, 5.75%, 9/01/14 ... 3,790,000 4,050,979
Antelope Valley UHSD, GO, Series A, MBIA Insured, 5.00%, 2/01/27 ..................... 5,000,000 5,246,050
Arcata Joint Powers Financing Authority Wastewater Revenue, FSA Insured, 5.80%,
12/01/22 ............................................................................ 1,080,000 1,238,976
Baldwin Park California RDA, Tax Allocation, Refunding, FSA Insured, 5.70%, 9/01/25 .. 4,000,000 4,501,160
Barstow RDA, Tax Allocation, Central Redevelopment Project, Series A, MBIA Insured,
6.25%, 9/01/22 ...................................................................... 2,000,000 2,140,920
Beaumont USD, COP, Refunding, Series A, FSA Insured, 5.80%, 1/01/21 .................. 1,500,000 1,692,150
Brea Olinda USD, GO, Series A, FGIC Insured, 5.60%, 8/01/20 .......................... 1,000,000 1,132,600
Cabrillo Community College District GO, Series C, AMBAC Insured, 5.375%, 5/01/26 ..... 5,400,000 5,877,846
Calaveras County Water District Revenue COP, Water and Sewer System Improvement Project,
Refunding, AMBAC Insured, 6.00%, 5/01/16 ............................................ 3,950,000 4,165,156
Calexico CRDA Revenue, Tax Allocation, Merged Central Business and Residential,
Refunding, FSA Insured, 5.85%, 8/01/15 ............................................... 1,795,000 1,837,829
Calexico USD, CFD No. 1, Special Tax, Refunding, AMBAC Insured, 5.60%, 9/01/17 ....... 2,930,000 3,310,871
California Community College Financing Authority Lease Revenue, Grossmont,
Palomar, and Shasta, Series A, MBIA Insured, 5.125%, 4/01/31 ........................ 3,030,000 3,205,861
California Educational Facilities Authority Revenue,
Pomona College, Series B, 5.50%, 7/01/29 .......................................... 4,455,000 4,853,143
Stanford University, Refunding, Series O, 5.125%, 1/01/31 ......................... 24,705,000 26,128,255
Stanford University, Series N, 5.25%, 12/01/26 .................................... 6,450,000 6,886,342
Stanford University, Series N, 5.35%, 6/01/27 ..................................... 21,250,000 22,764,275
Stanford University, Series N, 5.20%, 12/01/27 .................................... 6,000,000 6,429,240
Student Loan Program, Series A, MBIA Insured, 6.00%, 3/01/16 ...................... 3,385,000 3,639,315
University of Southern California, Refunding, Series C, 5.125%, 10/01/28 .......... 2,000,000 2,115,860
California Health Facilities Financing Authority Revenue,
Catholic Healthcare West, Refunding, Series A, MBIA Insured, 6.00%, 7/01/17 ....... 5,000,000 5,641,350
Catholic Healthcare West, Series A, 5.00%, 7/01/28 ................................ 15,000,000 14,026,200
Catholic Healthcare, Refunding, 5.00%, 7/01/28 .................................... 10,000,000 9,587,000
Community Health Facilities, Series A, California Mortgage Insured, 5.80%, 8/01/25 1,245,000 1,336,383
Kaiser Permanente, Series A, 5.40%, 5/01/28 ....................................... 15,400,000 15,805,482
Kaiser Permanente, Series B, 5.00%, 10/01/18 ...................................... 5,000,000 5,164,350
Kaiser Permanente, Series B, 5.00%, 10/01/20 ...................................... 4,000,000 4,062,840
28 |Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Insured Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
California Health Facilities Financing Authority Revenue, (cont.)
Marshall Hospital, Series A, California Mortgage Insured, 5.30%, 11/01/28 ...... $ 3,325,000 $ 3,425,448
Northern California Presbyterian, 5.40%, 7/01/28 ............................... 5,000,000 5,080,800
Orange County Health Facility, Series A, California Mortgage Insured, 6.20%, 11/01/24 3,435,000 3,848,608
San Diego Hospital Association, Refunding, Series A, MBIA Insured, 6.20%, 8/01/20 4,850,000 4,914,893
San Diego Hospital Association, Series A, MBIA Insured, 6.20%, 8/01/12 ......... 2,425,000 2,457,446
Scripps Memorial Hospital, Series A, MBIA Insured, 6.40%, 10/01/12 ............. 3,500,000 3,576,790
Senior Living, Aldersly, Series A, California Mortgage Insured, 5.25%, 3/01/32 . 2,000,000 2,042,420
Sutter Health, Series A, MBIA Insured, 5.00%, 8/15/19 .......................... 1,700,000 1,815,005
Sutter Health, Series A, MBIA Insured, 5.00%, 8/15/38 .......................... 4,000,000 4,163,120
The Help Group, CHFCLP Insured, 5.40%, 8/01/22 ................................. 5,000,000 5,244,900
True to Life Children's Services, Series A, California Mortgage Insured, 5.625%,
9/01/25 ....................................................................... 1,250,000 1,340,500
UCSF-Stanford Health Care, Series A, FSA Insured, 5.00%, 11/15/28 .............. 9,530,000 9,945,317
California HFAR, Home Mortgage, Series D, MBIA Insured, 6.15%, 8/01/28 ........... 4,680,000 4,962,064
California PCFA, PCR, Southern California Edison Co., Series C, MBIA Insured,
5.55%, 9/01/31 .................................................................. 4,800,000 5,166,480
California Public School District Financing Authority Lease Revenue, Southern Kern USD,
Pre-Refunded, Series B, FSA Insured, ETM, 5.90%, 9/01/26 ........................ 1,615,000 1,951,727
California State Department of Water Resources Central Valley Project Revenue,
Water System, Refunding, Series Q, MBIA Insured, 5.375%, 12/01/27 ............... 1,000,000 1,068,410
California State Department Water Resources Water Revenue, Series W, FSA Insured,
5.125%, 12/01/29 ................................................................ 5,000,000 5,284,750
California State GO,
5.00%, 10/01/27 ............................................................... 30,790,000 30,803,855
AMBAC Insured, 6.30%, 9/01/06 ................................................. 9,000,000 10,262,700
FGIC Insured, Pre-Refunded, 6.00%, 5/01/20 .................................... 2,990,000 3,176,098
FSA Insured, 5.50%, 9/01/29 ................................................... 34,500,000 37,345,560
MBIA Insured, 6.00%, 8/01/16 .................................................. 210,000 224,267
MBIA Insured, 6.00%, 10/01/21 ................................................. 65,000 66,371
MBIA Insured, 5.00%, 8/01/29 .................................................. 20,250,000 21,027,600
Refunding, 5.125%, 6/01/31 .................................................... 25,000,000 25,249,750
Refunding, FGIC Insured, 5.375%, 6/01/26 ...................................... 5,000,000 5,305,200
California State HFAR, Home Mortgage, Series L, MBIA Insured, 6.40%, 8/01/27 ..... 3,015,000 3,164,484
California State Local Government Finance Authority Revenue, Marin Valley Mobile Country
Club Park Acquisition, Senior Series A, FSA Insured, 5.80%, 10/01/20 ............ 4,275,000 4,895,944
California State Public Works Board Lease Revenue, Department of Mental Health Hospital,
Series A, AMBAC Insured, 5.00%,
12/01/21 ....................................................................... 4,100,000 4,374,167
12/01/26 ....................................................................... 5,675,000 5,966,411
California State University Foundation Revenue, Monterey Bay, MBIA Insured, 5.35%,
6/01/31 ......................................................................... 2,000,000 2,164,580
California State University Los Angeles Auxiliary Services Inc. Revenue, MBIA Insured,
5.125%, 6/01/33 ................................................................. 3,200,000 3,370,944
California State University Revenue and Colleges, Systemwide, Series A, AMBAC Insured,
5.00%, 11/01/33 ................................................................. 22,000,000 22,965,360
California State University, Fresno, Auxiliary Residence Student Project Revenue,
MBIA Insured, Pre-Refunded, 6.25%, 2/01/17 ...................................... 1,500,000 1,632,990
Annual Report|29
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Insured Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
California Statewide CDA,
COP, California Mortgage Insured, 5.75%, 8/01/21 ................................... $ 9,585,000 $ 10,598,805
COP, Children's Hospital, Los Angeles, 5.25%, 8/15/29 .............................. 12,250,000 12,541,795
COP, FSA Insured, 5.50%, 8/15/31 ................................................... 7,000,000 7,651,210
COP, Kaiser Permanente, 5.30%, 12/01/15 ............................................ 9,700,000 10,192,760
COP, MBIA Insured, 5.00%, 4/01/18 .................................................. 3,000,000 3,189,270
MFR, Silver Ridge Apartments, Series H, FNMA Insured, 5.80%, 8/01/33 ............... 2,785,000 3,021,530
Water and Wastewater Revenue, Pooled Financing Program, Series A, FSA Insured,
5.00%, 10/01/32 ................................................................... 9,320,000 9,725,979
Water and Wastewater Revenue, Pooled Financing Program, Series B, FSA Insured,
5.65%, 10/01/26 ................................................................... 3,420,000 3,836,864
Water and Wastewater Revenue, Pooled Financing Program, Series B, FSA Insured,
5.75%, 10/01/29 ................................................................... 1,465,000 1,656,593
California Statewide CDA Revenue,
Brentwood School, Series A, FSA Insured, 5.25%, 10/01/29 ........................... 7,625,000 8,134,502
COP, John Muir/Mt. Diablo Health System, MBIA Insured, 5.125%, 8/15/22 ............. 5,000,000 5,312,000
Refunding, 5.00%, 8/01/21 .......................................................... 2,035,000 2,050,954
Cambria Community Services District Revenue COP, Wastewater Treatment System Upgrade,
MBIA Insured, Pre-Refunded, 6.90%, 11/01/24 ......................................... 1,000,000 1,099,470
Cambria Community Services District Water and Wastewater Revenue, Refunding, Series A,
MBIA Insured, 6.00%, 5/01/15 ........................................................ 1,330,000 1,452,905
Campbell USD, GO, FSA Insured, 5.00%, 8/01/27 ........................................ 7,150,000 7,518,153
Carpinteria Sanitary District Capital Facilities Revenue, FGIC Insured, Pre-Refunded,
6.25%, 7/01/14 ...................................................................... 2,485,000 2,519,169
Castaic Lake Water Agency Revenue COP, Series A, MBIA Insured, 5.00%, 8/01/29 ........ 8,000,000 8,333,760
Chaffey Community College District GO, Series A, FSA Insured, 5.00%, 7/01/27 ......... 5,750,000 6,031,290
Chico PFAR, Merged Redevelopment Project Area, MBIA Insured, 5.125%, 4/01/24 ......... 2,790,000 2,977,069
Chino Basin Regional Financing Authority Revenue, Municipal Water District,
Sewer System Project, Refunding, AMBAC Insured, 6.00%, 8/01/16 ....................... 2,000,000 2,129,580
Chino COP, RDA, Water System Improvement Project, Refunding, AMBAC Insured,
6.20%, 9/01/18 ...................................................................... 3,590,000 3,687,540
Chula Vista COP, MBIA Insured, 5.00%, 8/01/29 ........................................ 3,000,000 3,139,830
Chula Vista PFA, Local Agency Revenue, Series 1995-A, FSA Insured, 6.125%, 9/02/14 ... 3,785,000 4,229,700
Clovis PFAR, 2001 Corp. Yard Project, AMBAC Insured, 5.00%, 3/01/27 .................. 3,265,000 3,407,027
Coachella Valley Recreation and Park District 1915 Act, Reassessment District 94-1,
MBIA Insured, Pre-Refunded, 6.20%, 9/02/16 .......................................... 1,500,000 1,622,430
Contra Costa Mosquito Abatement District COP, Public Improvements Project, Refunding,
FSA Insured, 6.25%, 2/01/06 ......................................................... 815,000 818,048
Coronado CDA, Tax Allocation, Community Development Project, MBIA Insured, 5.375%,
9/01/26 ............................................................................. 2,700,000 2,952,801
Corona-Norco USD, COP, Refunding, FSA Insured, 5.125%,
4/15/25 ............................................................................ 5,355,000 5,637,958
4/15/29 ............................................................................ 3,870,000 4,065,164
Cucamonga County Water District COP, FGIC Insured, 5.00%, 9/01/29 .................... 5,070,000 5,293,131
Culver City USD, GO, MBIA Insured,
5.125%, 8/01/37 .................................................................... 650,000 681,226
5.20%, 8/01/38 ..................................................................... 3,285,000 3,490,411
30 |Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Insured Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Delano USD,
COP, Refinancing Project, MBIA Insured, 5.125%, 1/01/22 ............................ $ 1,620,000 $ 1,784,932
GO, Series A, FSA Insured, ETM, 6.10%, 5/01/17 ..................................... 1,065,000 1,101,029
East Bay MUD, Water System Revenue, Refunding, MBIA Insured, 5.00%, 6/01/26 .......... 14,000,000 14,603,120
East Side UHSD, Santa Clara County GO,
Series B, FGIC Insured, 5.00%, 8/01/24 ............................................. 3,460,000 3,641,788
Series D, FGIC Insured, 5.75%, 9/01/17 ............................................. 1,200,000 1,279,656
El Dorado County Public Agency Financing Authority Revenue, FGIC Insured, 5.50%,
2/15/16 ............................................................................ 2,250,000 2,469,307
2/15/21 ............................................................................ 3,500,000 3,811,115
El Monte Water Authority Revenue, Water System Project, AMBAC Insured, 5.60%,
9/01/34 ............................................................................. 1,800,000 2,002,410
Escondido Joint Powers Financing Authority Lease Revenue, AMBAC Insured, 5.125%,
9/01/30 ............................................................................. 3,770,000 3,969,244
Escondido USD, GO, Series A, FSA Insured, 5.00%, 8/01/26 ............................. 11,665,000 12,201,590
Eureka USD, GO, FSA Insured, 5.00%, 8/01/25 .......................................... 4,145,000 4,355,898
Fairfield Suisun USD, GO, MBIA Insured, 5.00%, 8/01/27 ............................... 12,000,000 12,590,520
Florin Resource Conservation District COP, Elk Grove Water Service, Refunding, Series A,
MBIA Insured, 5.00%, 3/01/33 ........................................................ 5,000,000 5,230,600
Folsom COP, Central Business District Fire Station, MBIA Insured, 5.125%, 10/01/26 ... 2,030,000 2,162,254
Foothill/Eastern Corridor Agency Toll Road Revenue, senior lien, Refunding, Series A,
MBIA Insured, 5.00%, 1/01/35 ........................................................ 66,735,000 68,307,277
Franklin-McKinley School District COP, Financing Project, Series A, AMBAC Insured,
5.125%, 9/01/27 ..................................................................... 2,765,000 2,953,379
Fremont UHSD, Santa Clara County GO, Series C, FSA Insured, 5.00%, 9/01/26 ........... 10,000,000 10,463,200
Fresno USD, GO,
Refunding, Series C, MBIA Insured, 5.90%, 2/01/20 .................................. 2,065,000 2,492,187
Refunding, Series C, MBIA Insured, 5.90%, 8/01/22 .................................. 3,000,000 3,633,600
Series B, FSA Insured, ETM, 5.875%, 8/01/20 ........................................ 1,190,000 1,254,926
Fullerton University Foundation Auxiliary Organization Revenue, Series A,
MBIA Insured, 5.75%,
7/01/25 ............................................................................ 1,250,000 1,410,550
7/01/30 ............................................................................ 1,000,000 1,122,540
Glendale RDA, Tax Allocation, Central Glendale Redevelopment Project, Refunding,
AMBAC Insured, 6.00%, 12/01/20 ...................................................... 4,775,000 4,952,487
Glendale USD, GO, Series C, FSA Insured, 5.50%, 9/01/24 .............................. 2,750,000 3,026,320
Grant Joint UHSD, GO, FSA Insured, 5.00%, 8/01/26 .................................... 5,235,000 5,497,012
Grossmont UHSD, COP, FSA Insured, 5.75%, 9/01/26 ..................................... 2,250,000 2,538,337
Hemet USD, COP, Nutrition Center Project, FSA Insured, 5.875%, 4/01/27 ............... 1,250,000 1,413,475
Hercules COP, Capital Improvement Projects, Refunding, AMBAC Insured, 6.00%, 6/01/15 . 1,000,000 1,037,640
Huntington Beach City School District COP, MBIA Insured, 5.25%, 7/01/29 .............. 1,795,000 1,935,854
Imperial Irrigation District COP, California Water Systems Project, AMBAC Insured,
Pre-Refunded, 5.75%, 7/01/16 ........................................................ 5,050,000 5,743,617
Jefferson San Mateo County UHSD, GO, Refunding, Series A, MBIA Insured, 6.45%,
8/01/25 ............................................................................ 3,045,000 3,936,119
8/01/29 ............................................................................ 3,075,000 4,041,257
Annual Report|31
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Insured Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Jurupa Community Services District Special Tax, CFD No. 2, Series A, AMBAC Insured,
5.00%, 9/01/32 ...................................................................... $ 7,000,000 $ 7,302,750
Jurupa USD, COP, FSA Insured, 5.625%, 9/01/24 ........................................ 1,600,000 1,793,744
Kern Community College District COP, Refunding, MBIA Insured, 5.00%, 1/01/25 ......... 7,800,000 8,095,542
Kern County High School District GO, FSA Insured, ETM, 6.625%,
8/01/14 ............................................................................ 1,535,000 2,003,651
8/01/15 ............................................................................ 1,400,000 1,832,712
Lake Elsinore USD, COP, School Facilities Project, MBIA Insured, 5.00%,
9/01/26 ............................................................................ 1,585,000 1,664,805
9/01/31 ............................................................................ 1,505,000 1,575,750
Lakewood PFA, Water Revenue, FGIC Insured, 5.70%, 4/01/16 ............................ 2,485,000 2,666,057
Lakewood RDA, Tax Allocation, Redevelopment Project No. 1, Refunding, Series A,
FSA Insured, 6.50%, 9/01/17 ......................................................... 1,265,000 1,286,783
Lancaster RDA, Tax Allocation, Lancaster Redevelopment Project No. 5, Refunding,
MBIA Insured, 6.85%, 2/01/19 ......................................................... 11,245,000 11,404,567
Lodi COP,
1996 Public Improvement Financing Project, MBIA Insured, Pre-Refunded, 5.90%,
10/01/16 .......................................................................... 3,605,000 4,181,584
Wastewater Treatment Project, Refunding, AMBAC Insured, 6.70%, 8/01/26 ............. 8,800,000 10,219,968
Lodi Electric System Revenue COP, Series A, MBIA Insured, Pre-Refunded, 5.50%, 1/15/32 4,000,000 4,696,680
Lodi USD, GO, MBIA Insured, 5.00%, 8/01/23 ........................................... 2,150,000 2,258,747
Lompoc USD, GO, Election of 2002, Series A, FGIC Insured, 5.00%, 8/01/27 ............. 4,065,000 4,265,039
Long Beach Bond Finance Authority Lease Revenue,
Aquarium of The South Pacific, Refunding, AMBAC Insured, 5.00%, 11/01/19 ........... 4,000,000 4,298,960
Aquarium of The South Pacific, Refunding, AMBAC Insured, 5.00%, 11/01/26 ........... 11,000,000 11,517,000
Aquarium of The South Pacific, Refunding, AMBAC Insured, 5.25%, 11/01/30 ........... 2,000,000 2,158,860
Public Safety Facilities Projects, AMBAC Insured, 5.00%, 11/01/26 .................. 6,780,000 7,098,660
Public Safety Facilities Projects, AMBAC Insured, 5.00%, 11/01/31 .................. 10,500,000 10,960,740
Long Beach Bond Finance Authority Tax Allocation Revenue, North Long Beach
Redevelopment Projects, Series A, AMBAC Insured, 5.00%,
8/01/25 ............................................................................ 13,550,000 14,131,972
8/01/31 ............................................................................ 12,000,000 12,515,400
Long Beach Harbor Revenue,
5.125%, 5/15/18 .................................................................... 3,625,000 3,691,773
MBIA Insured, 5.25%, 5/15/25 ....................................................... 25,000,000 25,964,750
Long Beach University School District GO, Election 1999, Series C,
MBIA Insured, 5.125%, 8/01/31 ....................................................... 13,870,000 14,630,631
Los Angeles Community College District GO, Series A, MBIA Insured, 5.00%, 6/01/26 .... 4,000,000 4,175,360
Los Angeles COP, Real Property Program, MBIA Insured, 5.00%, 2/01/27 ................. 9,890,000 10,281,150
Los Angeles County COP, Antelope Valley Courthouse, Series A, AMBAC Insured, 5.25%,
11/01/27 ........................................................................... 2,500,000 2,673,700
11/01/33 ........................................................................... 2,500,000 2,660,700
Los Angeles County MTA, Sales Tax Revenue,
Proposition A, First Tier, Refunding, Senior Series A, MBIA Insured, 5.25%, 7/01/27 27,870,000 29,551,676
Proposition C, Refunding, Second Series A, AMBAC Insured, 5.00%, 7/01/23 ........... 22,400,000 23,437,568
Los Angeles GO, Series A, MBIA Insured, 5.00%, 9/01/22 ............................... 11,110,000 11,718,939
32 |Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Insured Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Los Angeles Harbor Department Revenue, Series B, MBIA Insured, 6.20%, 8/01/25 ........ $ 2,500,000 $ 2,789,950
Los Angeles Mortgage Revenue, Refunding, Series I, MBIA Insured, 6.50%, 7/01/22 ...... 1,975,000 2,024,158
Los Angeles USD,
COP, Administration Building Project, Series B, AMBAC Insured, 5.00%, 10/01/31 ..... 16,525,000 17,180,051
GO, Series A, MBIA Insured, 5.00%, 1/01/28 ......................................... 10,000,000 10,481,000
Los Angeles Water and Power Revenue, Power System, Refunding, Series A,
MBIA Insured, 5.00%, 7/01/24 ........................................................ 12,000,000 12,504,120
Lynwood PFA,
Tax Allocation, Project Area A, Series A, FSA Insured, 5.85%, 9/01/18 .............. 1,765,000 2,062,826
Water Revenue, Water System Improvement Project, MBIA Insured, 5.85%, 6/01/22 ...... 665,000 760,082
Water Revenue, Water System Improvement Project, MBIA Insured, 5.90%, 6/01/29 ...... 3,105,000 3,523,212
Lynwood PFAR, Series A, AMBAC Insured, 5.75%, 9/01/18 ................................ 4,000,000 4,108,080
Mendocino County COP, Public Facilities Corp., MBIA Insured, 5.25%, 6/01/30 .......... 2,680,000 2,885,208
Menlo Park CDA, Tax Allocation, Las Pulgas Community Development Project, Refunding,
AMBAC Insured, 5.375%, 6/01/22 ...................................................... 10,000,000 10,747,200
Metropolitan Water District Southern California Waterworks Revenue,
Series A, MBIA Insured, 5.50%, 7/01/25 ............................................. 5,000,000 5,521,150
Series A, MBIA Insured, 5.00%, 7/01/30 ............................................. 6,525,000 6,788,153
Series C, MBIA Insured, 5.00%, 7/01/27 ............................................. 2,500,000 2,569,275
Millbrae COP, Police Department Expansion, AMBAC Insured, 5.875%, 3/01/24 ............ 1,025,000 1,171,524
Modesto Health Facilities Revenue, Memorial Hospital Association, Refunding, Series A,
MBIA Insured, 6.00%, 6/01/18 ........................................................ 5,565,000 5,700,953
Modesto Irrigation District COP, Capital Improvements, Series A, FSA Insured, 5.00%,
7/01/26 ............................................................................ 5,000,000 5,199,900
7/01/31 ............................................................................ 8,285,000 8,592,539
Modesto Wastewater Treatment Facility Revenue, MBIA Insured, 5.75%, 11/01/22 ......... 14,375,000 16,206,375
Montebello Community RDA, Tax Allocation,
Housing, Series A, FSA Insured, 5.45%, 9/01/19 ..................................... 1,100,000 1,215,852
Montebello Hills Redevelopment Project, Refunding, MBIA Insured, 5.60%, 3/01/19 .... 2,460,000 2,662,975
Montebello COP, Capital Improvement Project, Refunding, FSA Insured, 5.375%,
11/01/26 ............................................................................ 8,715,000 9,552,773
Morgan Hill USD, GO, FGIC Insured, 5.50%, 8/01/25 .................................... 3,840,000 4,215,898
Mount Diablo USD, CFD No. 1, Special Tax,
FSA Insured, 6.00%, 8/01/24 ........................................................ 1,000,000 1,091,770
Refunding, AMBAC Insured, 5.75%, 8/01/15 ........................................... 1,000,000 1,130,100
Refunding, AMBAC Insured, 5.75%, 8/01/16 ........................................... 2,270,000 2,545,623
Refunding, AMBAC Insured, 5.375%, 8/01/19 .......................................... 7,290,000 7,877,428
Murrieta Valley USD, COP, MBIA Insured, 5.00%, 8/01/27 ............................... 2,380,000 2,497,120
Natomas USD, GO, FSA Insured, 5.00%, 9/01/26 ......................................... 2,535,000 2,662,637
Nevada Irrigation District Revenue COP, Cascade Bench Flume Project, MBIA Insured,
5.50%, 1/01/17 ...................................................................... 4,600,000 5,122,008
Nevada Joint UHSD, Series A, FSA Insured, 5.00%, 8/01/26 ............................. 1,295,000 1,354,570
Norco RDA, Tax Allocation, Redevelopment Project Area No. 1, MBIA Insured, 5.625%,
3/01/30 ............................................................................. 1,000,000 1,111,990
Annual Report|33
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Insured Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
North City West School Facilities Financing Authority Special Tax, Refunding,
Series B, FSA Insured,
5.75%, 9/01/15 ..................................................................... $ 1,260,000 $ 1,433,527
6.00%, 9/01/19 ..................................................................... 2,500,000 2,818,675
Northern California Public Power Agency Revenue, AMBAC Insured, Pre-Refunded,
7.50%, 7/01/23 ...................................................................... 3,200,000 4,483,872
Oakland Revenue, 1800 Harrison Foundation, Refunding, Series A, AMBAC Insured,
6.00%, 1/01/29 ...................................................................... 10,000,000 11,347,900
Oceanside Community Development Commission COP, Public Parking Project, FSA Insured,
Pre-Refunded, 7.875%, 4/01/19 ....................................................... 3,940,000 4,223,207
Oceanside COP,
AMBAC Insured, 5.20%, 4/01/23 ...................................................... 2,500,000 2,693,925
Oceanside Civic Center Project, Refunding, MBIA Insured, 5.75%, 8/01/15 ............ 1,000,000 1,106,870
Waste Reuse Association Finance Project, Series A, AMBAC Insured, Pre-Refunded,
6.50%, 10/01/17 ................................................................... 2,180,000 2,228,897
Oroville PFA, Tax Allocation Revenue, Oroville Redevelopment Project No. 1, AMBAC Insured,
5.90%, 9/15/21 ..................................................................... 1,245,000 1,387,179
6.10%, 9/15/23 ..................................................................... 2,870,000 3,163,027
Oxnard Financing Authority Solid Waste Revenue, AMBAC Insured, 6.00%, 5/01/16 ........ 5,000,000 5,431,600
Oxnard UHSD, Series B, FSA Insured, ETM, 5.875%, 8/01/27 ............................. 3,615,000 3,985,284
Palm Springs Financing Authority Lease Revenue, Refunding, Convention Center Project,
Series A, MBIA Insured, 5.00%, 11/01/25 ............................................. 2,295,000 2,410,898
Paramount USD, COP, Master Lease Program, FSA Insured, Pre-Refunded, 6.30%,
9/01/26 ............................................................................. 4,750,000 5,353,345
Parlier USD, GO, Series B, AMBAC Insured, 6.00%, 6/01/16 ............................. 1,130,000 1,278,516
Pasadena USD, GO, Series B, FGIC Insured, 5.25%, 7/01/24 ............................. 1,000,000 1,073,930
Peralta Community College District GO, Election of 2000, Series B, MBIA Insured,
5.25%, 8/01/32 ...................................................................... 8,450,000 9,067,442
Perris CFD, Special Tax, No. 93-1, Series A, AMBAC Insured, 5.125%, 8/15/23 .......... 4,000,000 4,300,000
Petaluma COP, Refunding, Series A, AMBAC Insured, 5.625%, 8/01/13 .................... 1,000,000 1,023,310
Placer County COP,
Administrative and Emergency Services, MBIA Insured, 5.65%, 6/01/24 ................ 4,000,000 4,428,120
Jail Kitchen Project, MBIA Insured, Pre-Refunded, 6.90%, 10/01/21 .................. 3,745,000 4,098,940
Placer County Water Agency COP, FSA Insured, 5.90%, 7/01/25 .......................... 2,350,000 2,545,849
Plumas County COP, Capital Improvement Program, Series A, AMBAC Insured, 5.00%,
6/01/33 ............................................................................. 3,280,000 3,428,682
Porterville COP, Sewer System Refining Project, Refunding, AMBAC Insured, 5.25%,
10/01/23 ............................................................................ 3,000,000 3,223,680
Poway RDA, Tax Allocation,
Paguay Redevelopment Project, AMBAC Insured, 5.00%, 12/15/25 ....................... 9,195,000 9,639,302
Refunding, MBIA Insured, 5.75%, 6/15/33 ............................................ 11,475,000 13,031,928
Rancho Cucamonga RDA, Tax Allocation, Rancho Redevelopment Project,
Housing Set Aside, MBIA Insured, 5.25%, 9/01/26 .................................... 2,000,000 2,119,180
Refunding, FSA Insured, 5.25%, 9/01/20 ............................................. 2,500,000 2,730,125
34 |Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Insured Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Rancho Santiago Community College District GO, Series A, MBIA Insured, 5.00%,
9/01/27 ............................................................................. $ 5,000,000 $ 5,247,550
Redding Joint Powers Financing Authority Lease Revenue, Civic Center Project, Series A,
MBIA Insured,
5.75%, 3/01/19 ..................................................................... 3,090,000 3,463,890
5.25%, 3/01/26 ..................................................................... 75,000 79,255
Redding RDA, Tax Allocation, Hilltop Cypress Redevelopment Notes, Series C, FSA Insured,
6.00%, 9/01/22 ...................................................................... 2,120,000 2,177,176
Redlands USD, Series B, FSA Insured, 6.25%, 6/01/19 .................................. 2,115,000 2,239,404
Redwood City PFA, Local Agency Revenue, Series A, AMBAC Insured, 6.50%, 7/15/11 ...... 1,270,000 1,273,759
Redwood City School District GO, FGIC Insured, 5.00%, 7/15/27 ........................ 3,000,000 3,135,210
Ripon RDA, Tax Allocation, Community Redevelopment Project, MBIA Insured, 5.85%,
11/01/30 ............................................................................ 3,975,000 4,521,841
Riverside County COP, Historic Courthouse, MBIA Insured, 5.875%, 11/01/27 ............ 3,000,000 3,441,210
Riverside RDA, Lease Revenue, Series A, AMBAC Insured,
6.375%, 10/01/23 ................................................................... 12,540,000 13,486,018
6.50%, 10/01/24 .................................................................... 2,000,000 2,157,600
Rowland USD, GO, Series A, FSA Insured, 5.25%, 9/01/25 ............................... 5,685,000 6,085,395
Sacramento Area Flood Control Agency Special Assessment,
Capital AD No. 2, FGIC Insured, 5.80%, 11/01/16 .................................... 1,000,000 1,139,390
Operation and Maintenance, FGIC Insured, 5.80%, 11/01/16 ........................... 1,475,000 1,680,600
Operation and Maintenance, FGIC Insured, 5.90%, 11/01/25 ........................... 2,690,000 3,032,491
Sacramento City Financing Authority Revenue,
Capital Improvement, Series A, AMBAC Insured, 5.00%, 12/01/26 ...................... 8,395,000 8,739,531
Capital Improvement, Series A, AMBAC Insured, 5.00%, 12/01/32 ...................... 21,500,000 22,426,220
City Hall and Redevelopment Projects, Series A, FSA Insured, 5.00%, 12/01/28 ....... 10,000,000 10,457,900
Sacramento County Airport System Revenue, Series A, MBIA Insured, 6.00%, 7/01/17 ..... 5,920,000 6,531,477
Sacramento MUD, Electric Revenue,
Series J, AMBAC Insured, 5.50%, 8/15/21 ............................................ 8,485,000 9,386,956
Series N, MBIA Insured, 5.00%, 8/15/28 ............................................. 4,000,000 4,162,120
Salida Area Public Facilities Financing Agency, CFD, Special Tax No. 1988-1, FSA Insured,
5.75%, 9/01/30 ...................................................................... 3,435,000 3,863,757
Salida USD, COP, Financing Project, AMBAC Insured, 5.375%, 5/01/26 ................... 1,645,000 1,667,438
San Bernardino County COP, 1997 Public Improvement Financing Project, MBIA Insured,
5.25%, 10/01/25 ..................................................................... 7,000,000 7,507,570
San Buenaventura Public Facilities Financing Authority Lease Revenue, Refunding,
FSA Insured, 5.75%, 6/01/14 .......................................................... 2,250,000 2,477,273
San Carlos School District GO, MBIA Insured, 5.50%, 10/01/24 ......................... 2,110,000 2,340,961
San Diego Community College District COP, Series 1991, MBIA Insured, 6.50%,
12/01/12 ............................................................................ 2,000,000 2,046,260
San Diego IDR, San Diego Gas and Electric, Custodial Receipts, Series A, AMBAC Insured,
6.40%, 9/01/18 ...................................................................... 1,650,000 1,678,166
San Diego Public Facilities Financing Authority Sewer Revenue, Series B, FGIC Insured,
5.25%, 5/15/27 ...................................................................... 2,950,000 3,112,575
San Diego Public Facilities Financing Authority Water Revenue, Subordinated,
MBIA Insured, 5.00%, 8/01/32 ........................................................ 11,000,000 11,489,170
Annual Report|35
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
Franklin California Tax-Free Trust
Statement of Investments, June 30, 2003 (continued)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Insured Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
Long Term Investments (cont.)
Bonds (cont.)
San Francisco BART, District Sales Tax Revenue,
FGIC Insured, 5.50%, 7/01/26 ....................................................... $ 6,500,000 $ 7,164,950
FGIC Insured, 5.50%, 7/01/34 ....................................................... 12,000,000 13,231,080
Refunding, AMBAC Insured, 5.00%, 7/01/28 ........................................... 8,000,000 8,332,240
San Francisco City and County Airport Commission International Airport Revenue,
Issue 5, Second Series, FGIC Insured, 6.50%, 5/01/24 ............................... 6,900,000 7,266,114
Issue 8A, Second Series, FGIC Insured, 6.25%, 5/01/20 .............................. 3,500,000 3,650,780
Issue 9B, Second Series, FGIC Insured, Pre-Refunded, 6.00%, 5/01/25 ................ 6,400,000 7,017,472
Issue 11, Second Series, FGIC Insured, Pre-Refunded, 6.00%, 5/01/11 ................ 2,105,000 2,302,028
Refunding, Second Series-28A, MBIA Insured, 5.125%, 5/01/24 ........................ 9,745,000 10,184,110
Refunding, Second Series-28A, MBIA Insured, 5.125%, 5/01/27 ........................ 16,575,000 17,211,646
San Francisco City and County Public Utilities Commission Water Revenue, Refunding,
Series A, FSA Insured, 5.00%, 11/01/31 ............................................... 3,885,000 4,040,322
San Francisco Community College District GO, Series A, FGIC Insured, 5.00%, 6/15/26 .. 6,000,000 6,295,500
San Francisco State University Foundation Inc. Auxiliary Organization Revenue Housing,
MBIA Insured, 5.00%, 9/01/31 ......................................................... 13,415,000 13,995,199
San Gabriel USD, COP, Facilities Development Program, Series A, FSA Insured,
Pre-Refunded, 6.00%, 9/01/15 ......................................................... 1,000,000 1,120,650
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue,
Refunding, Series A, MBIA Insured, 5.375%, 1/15/29 ................................. 18,075,000 19,758,867
Refunding, Series A, MBIA Insured, 5.25%, 1/15/30 .................................. 11,860,000 12,811,646
senior lien, MBIA Insured, 5.00%, 1/01/33 .......................................... 10,035,000 10,501,527
San Jose Financing Authority Lease Revenue, Civic Center Project,
Refunding, Series B, AMBAC Insured, 5.00%, 6/01/32 ................................. 30,015,000 31,284,635
Series B, AMBAC Insured, 5.00%, 6/01/27 ............................................ 10,000,000 10,430,500
San Jose MFHR, Sixth and Martha Family Apartments, FNMA Insured, 5.875%, 3/01/33 ..... 3,500,000 3,724,210
San Leandro COP,
Library and Fire Stations Financing, AMBAC Insured, 5.75%, 11/01/29 ................ 5,000,000 5,679,950
Refunding, AMBAC Insured, 5.00%, 6/01/28 ........................................... 2,000,000 2,094,180
San Marcos Public Facilities Authority Revenue, Senior Tax Increment Project Area-3-A,
MBIA Insured,
5.75%, 10/01/29 .................................................................... 5,340,000 6,053,157
5.80%, 10/01/30 .................................................................... 7,800,000 8,839,584
San Ramon COP, Central Park Expansion Project, FSA Insured, Pre-Refunded, 7.20%,
2/01/25 .............................................................................. 5,110,000 5,558,607
Sanger PFAR, Utility System Financing, Series A, AMBAC Insured, Pre-Refunded, 5.70%,
1/01/22 .............................................................................. 5,935,000 6,676,222
Santa Ana Financing Authority Water Revenue, MBIA Insured, 6.125%, 9/01/24 ........... 1,000,000 1,027,130
Santa Clara COP, Refunding, AMBAC Insured, 5.00%, 2/01/27 ............................ 5,555,000 5,817,418
Santa Clara County Financing Authority Lease Revenue, Refunding, Series A,
AMBAC Insured, 5.00%, 11/15/22 ....................................................... 3,950,000 4,176,730
Santa Cruz County COP, Sub-Joint Wastewater Treatment Project, AMBAC Insured,
6.20%, 9/01/19 ....................................................................... 475,000 498,536
Santa Fe Springs PFA, Water Revenue, Series A, MBIA Insured, 5.90%,
5/01/21 ............................................................................ 900,000 1,019,718
5/01/26 ............................................................................ 1,190,000 1,322,626
36 |Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Insured Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Santa Margarita/Dana Point Authority Revenue, ID, 3, 3A, 4, and 4A,
Refunding, Series B,
MBIA Insured, 5.75%, 8/01/20 ........................................................$ 23,000,000 $ 24,452,220
Santa Monica Community College District GO, Series B, AMBAC Insured, 5.75%, 7/01/20 .. 1,495,000 1,641,839
Santa Rosa High School District GO,
FGIC Insured, 5.90%, 5/01/16 ....................................................... 1,000,000 1,052,530
Refunding, FSA Insured, 5.75%, 5/01/18 ............................................. 1,050,000 1,100,726
Santa Rosa Wastewater Revenue, Series B, FGIC Insured, 5.125%, 9/01/31 ............... 4,000,000 4,240,480
Santa Rosa Wastewater Service Facilities District Revenue, Refunding and Improvement,
AMBAC Insured, 6.00%, 7/02/15 ....................................................... 2,000,000 2,462,100
Sonoma CDA Tax Allocation, Redevelopment Project, MBIA Insured, 5.70%, 12/01/30 ...... 3,455,000 3,887,981
Sonoma Valley USD, GO, FSA Insured, 6.00%, 7/15/21 ................................... 2,400,000 2,669,880
South Gate COP, Series A, AMBAC Insured, 5.00%, 9/01/24 .............................. 3,155,000 3,320,354
South Gate PFAR, Tax Allocation, Redevelopment Project No. 1, AMBAC Insured, 5.875%,
9/01/24 ............................................................................. 2,500,000 2,564,200
South Orange County PFA, Special Tax Revenue, senior lien, Refunding, Series A,
MBIA Insured,
6.20%, 9/01/13 ..................................................................... 13,500,000 13,885,425
6.00%, 9/01/18 ..................................................................... 3,250,000 3,341,748
South San Francisco COP, 5.00%, 4/01/29 .............................................. 2,000,000 2,003,660
Southern Mono Health Care District GO, Series A, MBIA Insured, 5.00%, 8/01/24 ........ 3,005,000 3,127,213
Stanislaus County Board of Education COP, FSA Insured, 5.70%, 9/01/24 ................ 2,000,000 2,234,420
Stockton COP, Wastewater System Project, Refunding, AMBAC Insured, 5.75%, 9/01/23 .... 6,500,000 6,615,960
Stockton Port District Port Facilities Revenue, Refunding and Improvement, Series B,
FSA Insured, 5.90%, 7/01/12 ......................................................... 3,285,000 3,786,981
Stockton Revenue COP, Wastewater System Project, Refunding, Series A, MBIA Insured,
5.00%, 9/01/23 ...................................................................... 6,500,000 6,830,655
Suisun City RDA, Tax Allocation, Suisun City Redevelopment Project, Refunding,
MBIA Insured, 5.625%, 10/01/13 ...................................................... 4,260,000 4,389,504
Sunnyvale RDA, Tax Allocation, Central Core Project, Refunding, AMBAC Insured,
6.50%, 10/01/22 ..................................................................... 2,785,000 2,802,183
Susanville PFAR, MBIA Insured, 5.70%, 6/01/30 ........................................ 3,000,000 3,348,870
Tahoe-Truckee Joint USD, Series B, FGIC Insured, 5.95%, 9/01/20 ...................... 3,620,000 4,128,610
Tahoe-Truckee USD, GO, ID, No. 2, Series A, FGIC Insured, Pre-Refunded, 5.75%,
8/01/20 4,340,000 5,208,738
Tehachapi Water and Sewer Revenue, Refunding, MBIA Insured, 6.75%, 11/01/20 .......... 2,000,000 2,176,960
Thousand Oaks RDA, Tax Allocation, Thousand Oaks Boulevard Redevelopment, Refunding,
MBIA Insured, 5.375%, 12/01/25 ....................................................... 2,390,000 2,608,374
Tri-City Hospital District Revenue,
MBIA Insured, 6.00%, 2/01/22 ....................................................... 2,350,000 2,355,852
Refunding, Series A, MBIA Insured, 5.625%, 2/15/17 ................................. 2,750,000 3,034,130
Truckee PFA, Lease Revenue, Series A, AMBAC, 6.00%, 11/01/30 ......................... 1,990,000 2,282,809
Turlock Auxiliary Organization Revenue COP, California State University, Stanislaus
Foundation,
MBIA Insured, 5.875%, 6/01/22 ....................................................... 2,000,000 2,236,380
Turlock PFA, Sewer Revenue, FGIC Insured, 5.50%, 9/15/29 ............................. 6,855,000 7,523,294
Union City CRDA, Tax Allocation Revenue, Community Redevelopment Project,
AMBAC Insured, 5.75%,
10/01/22 ........................................................................... 6,200,000 6,397,656
10/01/32 ........................................................................... 14,100,000 16,131,951
Annual Report|37
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Insured Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
University of California Revenue, Multiple Purpose Projects, Series H, FGIC Insured,
5.50%, 9/01/28 ...................................................................... $ 2,500,000 $ 2,728,800
University Revenues, Multi Purpose,
Series K, 5.00%, 9/01/23 ........................................................... 3,160,000 3,291,077
Series M, FGIC Insured, 5.125%, 9/01/30 ............................................ 8,720,000 9,264,826
Vacaville PFA Tax Allocation Revenue, Vacaville Redevelopment Projects, FSA Insured,
5.00%, 9/01/31 ...................................................................... 5,095,000 5,295,335
Vallejo Revenue, Water Improvement Project, Refunding, Series A, FSA Insured,
5.875%, 5/01/26 ..................................................................... 12,500,000 13,866,500
Vista USD, GO, Series A, FSA Insured, 5.25%, 8/01/25 ................................. 5,000,000 5,384,850
Washington Township Hospital District Revenue, HealthCare District Revenue,
5.00%, 7/01/18 ..................................................................... 2,000,000 2,046,280
5.125%, 7/01/23 .................................................................... 450,000 459,612
Washington USD, GO, Yolo County Election of 1999, Series A, FGIC Insured,
5.375%,
8/01/25 ............................................................................. 2,045,000 2,234,469
Waugh School District Special Tax GO, Corona/Ely CFD No. 1, AMBAC Insured, 5.80%,
9/01/26 ............................................................................. 5,640,000 6,119,626
West Basin Municipal Water District Revenue COP, 1992 Project, Refunding, Series A,
AMBAC Insured, 5.50%, 8/01/17 ....................................................... 3,370,000 3,778,848
West Sacramento Financing Authority Revenue, MBIA Insured, Pre-Refunded, 6.25%,
9/01/16 ............................................................................. 4,185,000 4,528,379
Westlands Water District Revenue COP, MBIA Insured, 5.00%, 9/01/29 ................... 11,775,000 12,289,332
William S. Hart Joint School Financing Authority Special Tax Revenue, Community
Facilities, Refunding, FSA Insured, 6.60%, 9/01/18 ................................. 1,285,000 1,436,322
Windsor Joint Powers Financing Authority Wastewater Revenue, Refunding, Series A,
AMBAC Insured, 6.125%, 12/15/12 ..................................................... 750,000 813,900
Woodland Finance Authority Lease Revenue, Refunding and Capital Projects, XLCA Insured,
5.00%, 3/01/32 ...................................................................... 6,340,000 6,642,418
Yucaipa-Sweetwater School Facilities Financing Authority Special Tax Revenue,
Sweetwater, Series A, MBIA Insured, 5.70%, 9/01/19 .................................. 4,000,000 4,398,840
--------------
TOTAL BONDS (COST $1,805,988,575) 1,973,877,391
--------------
ZERO COUPON BONDS 4.6%
Acalanes UHSD, GO, Capital Appreciation, Election of 2002, Series A,
FGIC Insured, 8/01/25 ............................................................... 9,045,000 2,714,585
California HFAR, Home Mortgage, Series N, AMBAC Insured, 8/01/31 ..................... 3,665,000 2,450,419
Corona-Norco USD, GO,
Series B, FSA Insured, 9/01/23 ..................................................... 2,320,000 848,795
Series B, FSA Insured, 9/01/24 ..................................................... 2,620,000 902,564
Series B, FSA Insured, 3/01/25 ..................................................... 1,400,000 468,314
Series C, FGIC Insured, 9/01/25 .................................................... 4,655,000 1,517,297
Series C, FGIC Insured, 9/01/26 .................................................... 6,080,000 1,882,307
Foothill/Eastern Corridor Agency Toll Road Revenue, Capital Appreciation,
Refunding, MBIA Insured,
1/15/17 ............................................................................ 20,000,000 10,167,400
1/15/18 ............................................................................ 25,000,000 11,909,250
1/15/19 ............................................................................ 5,970,000 2,659,396
Fullerton School District GO, Capital Appreciation, Series A, FGIC Insured, 8/01/23 .. 3,030,000 1,113,192
38 |Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Insured Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
ZERO COUPON BONDS (CONT.)
Lancaster School District GO, Capital Appreciation, Election of 1999, MBIA Insured,
8/01/25 ............................................................................ $ 5,495,000 $ 1,799,777
7/01/26 ............................................................................ 5,965,000 1,859,410
Newark USD, GO, Capital Appreciation,
Series B, FGIC Insured, 8/01/24 .................................................... 9,905,000 2,963,378
Series C, FSA Insured, 8/01/22 ..................................................... 2,165,000 765,371
Series C, FSA Insured, 8/01/23 ..................................................... 2,465,000 813,795
Series C, FSA Insured, 8/01/24 ..................................................... 2,560,000 793,523
Series C, FSA Insured, 8/01/25 ..................................................... 2,705,000 789,103
Patterson Joint USD, GO, Series A, FGIC Insured,
8/01/22 ............................................................................ 1,900,000 740,582
8/01/23 ............................................................................ 1,985,000 729,269
8/01/24 ............................................................................ 2,075,000 717,825
8/01/25 ............................................................................ 2,170,000 710,740
8/01/26 ............................................................................ 2,265,000 703,713
San Bernardino County SFMR, Series A, GNMA Secured, ETM, 5/01/22 ..................... 28,405,000 11,629,007
San Gabriel USD GO, Capital Appreciation Bonds, Series A, FSA Insured,
8/01/26 ............................................................................ 3,530,000 1,096,736
2/01/27 ............................................................................ 1,850,000 559,107
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, Capital Appreciation,
Refunding, Series A, MBIA Insured, 1/15/26 .......................................... 13,155,000 4,201,444
San Marino USD, GO, Series A, MBIA Insured, 7/01/25 .................................. 6,080,000 1,999,834
Santa Ana USD, COP, Capital Appreciation Financing Project, FSA Insured, 4/01/24 ..... 14,245,000 5,011,391
Southern Kern USD, COP, Convertible Capital Appreciation Building Program, Series B,
FSA Insured, zero cpn. to 3/01/06, 5.625% thereafter, 9/01/26 ....................... 2,250,000 2,025,945
Southern Mono Health Care District Revenue, Capital Appreciation Bonds, Series A,
MBIA Insured,
8/01/28 ............................................................................ 2,340,000 645,817
8/01/29 ............................................................................ 2,440,000 638,109
8/01/30 ............................................................................ 2,550,000 631,762
8/01/31 ............................................................................ 2,660,000 624,222
Union Elementary School District GO, Capital Appreciation,
Series A, FGIC Insured, 9/01/24 .................................................... 2,000,000 688,980
Series B, FGIC Insured, 9/01/25 .................................................... 5,500,000 1,793,880
Series B, FGIC Insured, 9/01/26 .................................................... 5,850,000 1,809,873
Vista USD, GO, Capital Appreciation, Series A, FSA Insured,
8/01/26 ............................................................................ 7,150,000 2,221,434
2/01/27 ............................................................................ 4,795,000 1,449,145
Western Placer USD, Financing Corp. COP, Convertible Capital Appreciation,
zero cpn. to 11/01/05, 5.55% thereafter, 11/01/30 ................................... 11,890,000 10,665,330
--------------
TOTAL ZERO COUPON BONDS (COST $86,147,626) ........................................... 97,712,021
--------------
TOTAL LONG TERM INVESTMENTS (COST $1,892,136,201) .................................... 2,071,589,412
--------------
Annual Report|39
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Insured Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS 1.4%
a California State Department Water Resources Power Supply Revenue, Various, Series B-6,
Daily VRDN and Put, .85%, 5/01/22 .................................................... $12,700,000 $ 12,700,000
a Irvine 1915 Act, Special Assessment, AD No. 97-13, Daily VRDN and Put, .85%,
9/02/23 ............................................................................. 1,900,000 1,900,000
a Irvine Ranch Water District Revenue, Joint Powers Agency, Consolidated Bonds, DATES,
Series C, Daily VRDN and Put, .85%, 10/01/10 ......................................... 200,000 200,000
a Los Angeles Department of Water and Power Waterworks Revenue, Sub Series B-2,
Weekly VRDN and Put, .85%, 7/01/35 ................................................... 3,700,000 3,700,000
a Metropolitan Water District Southern California Waterworks Revenue, Refunding,
Series B-1, Daily VRDN and Put, .85%, 7/01/35 ........................................ 1,600,000 1,600,000
a Orange County Sanitation Districts COP, Refunding,
Series A, Daily VRDN and Put, .85%, 8/01/29 ........................................ 1,300,000 1,300,000
Series B, Daily VRDN and Put, .85%, 8/01/30 ........................................ 8,700,000 8,700,000
--------------
TOTAL SHORT TERM INVESTMENTS (COST $30,100,000) ...................................... 30,100,000
--------------
TOTAL INVESTMENTS (COST $1,922,236,201) 98.4% ........................................ 2,101,689,412
OTHER ASSETS, LESS LIABILITIES 1.6% .................................................. 33,466,527
--------------
NET ASSETS 100.0% .................................................................... $2,135,155,939
==============
See Glossary of Terms on page 56.
aVariable 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.
40 |See notes to financial statements.|Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND
---------------------------------------------------------
Year Ended June 30,
2003 2002 2001 2000 1999
---------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................................ $11.41 $11.25 $10.92 $11.02 $11.24
---------------------------------------------------------
Income from investment operations:
Net investment income a .......................................... .44 .47 .51 .52 .51
Net realized and unrealized gains (losses) ....................... .34 .17 .34 (.10) (.21)
---------------------------------------------------------
Total from investment operations .................................. .78 .64 .85 .42 .30
Less distributions from net investment income ..................... (.45) (.48) (.52) (.52) (.52)
---------------------------------------------------------
Net asset value, end of year ...................................... $11.74 $11.41 $11.25 $10.92 $11.02
=========================================================
Total return b .................................................... 6.92% 5.80% 7.86% 3.95% 2.63%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ................................... $414,558 $324,061 $224,156 $186,880 $192,547
Ratios to average net assets:
Expenses ......................................................... .68% .68% .60% .60% .60%
Expenses excluding waiver and payments by affiliate .............. .68% .70% .72% .74% .75%
Net investment income ............................................ 3.80% 4.13% 4.56% 4.79% 4.50%
Portfolio turnover rate ........................................... 9.56% 12.05% 8.02% 10.29% 5.48%
aBased on average shares outstanding.
bTotal return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
Annual Report|See notes to financial statements.|41
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Intermediate-Term Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS 97.6%
BONDS 92.6%
ABAG Finance Authority for Nonprofit Corps. COP,
5.75%, 8/01/03 ..................................................................... $ 155,000 $ 155,564
Partner North County Health Project, 5.50%, 3/01/06 ................................ 485,000 512,330
Rhoda Haas Goldman Plaza, California Mortgage Insured, 5.125%, 5/15/15 ............. 3,000,000 3,205,470
ABAG Finance Corp. COP, ABAG XXVI, Series B, 6.40%, 10/01/03 ......................... 100,000 101,260
ABAG Revenue, Refunding, Series A-E,
5.00%, 9/15/06 ..................................................................... 600,000 615,600
5.05%, 9/15/07 ..................................................................... 615,000 630,670
5.40%, 9/15/14 ..................................................................... 2,455,000 2,508,642
ABAG Water and Wastewater Revenue, Pooled Financing Program, Series A, FSA Insured,
5.00%, 10/01/10 ..................................................................... 3,035,000 3,450,886
Alameda County COP, Series 1994, 5.90%, 4/01/04 ...................................... 440,000 455,572
Alameda-Contra Costa Transportation District COP, Refunding, AMBAC Insured,
4.375%, 8/01/14 .................................................................... 1,330,000 1,409,893
4.50%, 8/01/16 ..................................................................... 1,705,000 1,783,686
Antelope Valley UHSD, GO, Series A, MBIA Insured,
4.50%, 8/01/13 ..................................................................... 1,230,000 1,345,964
4.625%, 8/01/14 .................................................................... 1,250,000 1,366,625
Antioch PFA, Reassessment Revenue, sub. lien, Series B,
5.00%, 9/02/03 ..................................................................... 1,800,000 1,807,290
5.20%, 9/02/05 ..................................................................... 1,985,000 2,079,585
5.40%, 9/02/07 ..................................................................... 1,105,000 1,178,571
Auburn COP, Civic Center Project, Refunding,
5.70%, 9/01/03 ..................................................................... 80,000 80,597
5.75%, 9/01/04 ..................................................................... 80,000 82,174
Brentwood Infrastructure Financing Authority Infrastructure Revenue, CIFP 94-1,
5.30%, 9/02/08 ..................................................................... 990,000 1,021,353
5.35%, 9/02/09 ..................................................................... 765,000 788,944
5.40%, 9/02/10 ..................................................................... 990,000 1,020,700
5.45%, 9/02/11 ..................................................................... 990,000 1,020,631
5.50%, 9/02/12 ..................................................................... 985,000 1,015,269
Burbank Electric Revenue, MBIA Insured, 4.00%, 6/01/12 ............................... 1,000,000 1,056,010
Burbank USD, GO, Election of 1997, Series C, FGIC Insured, 4.00%, 8/01/12 ............ 2,500,000 2,642,300
Burbank Water and Electric Revenue, MBIA Insured, 4.00%, 6/01/11 ..................... 1,000,000 1,063,410
Burbank Water and Power Electric Revenue, MBIA Insured, 4.00%, 6/01/11 ............... 5,045,000 5,066,946
California Educational Facilities Authority Revenue,
Pooled College and University Projects, Series B, 6.125%, 4/01/13 .................. 1,000,000 1,113,370
Stanford University, Refunding, Series R, 4.00%, 11/01/11 .......................... 1,000,000 1,066,330
California Health Facilities Authority Revenue, Kaiser Permanente Medical, 5.45%,
10/01/13 ............................................................................ 1,000,000 1,004,560
California Health Facilities Financing Authority Revenue,
Kaiser Permanente, Series B, 5.25%, 10/01/13 ....................................... 5,000,000 5,352,950
Kaiser Permanente, Series B, 5.25%, 10/01/14 ....................................... 2,000,000 2,127,480
Kaiser Permanente, Series B, 5.25%, 10/01/16 ....................................... 3,850,000 4,041,383
Paradise Valley Estates, 3.875%, 1/01/09 ........................................... 1,555,000 1,594,093
Paradise Valley Estates, 4.125%, 1/01/10 ........................................... 1,000,000 1,024,330
Paradise Valley Estates, 5.00%, 1/01/11 ............................................ 1,480,000 1,584,917
42 |Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Intermediate-Term Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
California Health Facilities Financing Authority Revenue, (cont.)
Paradise Valley Estates, 4.375%, 1/01/12 ........................................... $ 1,000,000 $ 1,028,230
Paradise Valley Estates, 5.00%, 1/01/13 ............................................ 1,815,000 1,948,312
Paradise Valley Estates, 5.00%, 1/01/14 ............................................ 1,635,000 1,741,815
San Diego Hospital Association, Series B, MBIA Insured, 5.60%, 8/01/03 ............. 100,000 100,290
Sutter Health, Refunding, Series A, MBIA Insured, 5.875%, 8/15/16 .................. 3,750,000 4,272,112
The Episcopal Home, 4.625%, 2/01/12 ................................................ 1,350,000 1,415,718
The Episcopal Home, 4.75%, 2/01/13 ................................................. 1,200,000 1,263,876
California HFAR, SFM Purchase, Class III, Series A-1, MBIA Insured, 5.70%, 8/01/11 ... 1,310,000 1,370,430
California State Department of Water Resources Central Valley Project Revenue,
Water System, Refunding, Series S, 5.00%, 12/01/19 .................................. 4,000,000 4,238,720
California State Department of Water Resources Power Supply Revenue, Series A,
5.50%, 5/01/12 ..................................................................... 2,000,000 2,256,060
5.125%, 5/01/18 .................................................................... 2,500,000 2,606,700
California State Department Water Resources Water Revenue, Central Valley Project,
Series Z, FGIC Insured,
3.50%, 12/01/12 .................................................................... 5,000,000 5,092,400
4.00%, 12/01/13 .................................................................... 5,000,000 5,239,750
California State GO,
5.25%, 2/01/14 ..................................................................... 4,000,000 4,414,720
5.25%, 6/01/16 ..................................................................... 2,000,000 2,121,520
Refunding, 5.00%, 12/01/05 ......................................................... 7,000,000 7,538,160
Refunding, 5.00%, 11/01/12 ......................................................... 2,000,000 2,180,300
Refunding, MBIA Insured, 5.00%, 2/01/18 ............................................ 1,175,000 1,254,829
Veterans, Series B, 5.00%, 12/01/12 ................................................ 2,000,000 2,070,980
Veterans, Series B, 5.25%, 12/01/15 ................................................ 2,310,000 2,440,746
Veterans, Series B, 5.375%, 12/01/16 ............................................... 605,000 625,437
California State Public Works Board Lease Revenue,
Department of Corrections, Coalinga State Prison, Series B, MBIA Insured,
5.50%, 12/01/08 ................................................................... 1,000,000 1,036,830
Department of Forestry and Fire Protection, Series A, 4.875%, 10/01/18 ............. 1,325,000 1,360,285
Various Community College Projects, Refunding, Series C, 5.50%, 9/01/09 ............ 1,555,000 1,723,624
California Statewide CDA, COP,
California Lutheran Homes, ETM, 5.375%, 11/15/06 ................................... 1,000,000 1,128,850
Kaiser Permanente, 5.30%, 12/01/15 ................................................. 2,000,000 2,101,600
St. Joseph Health System Obligation Group, 5.25%, 7/01/11 .......................... 1,005,000 1,099,199
St. Joseph Health System, Refunding, 5.00%, 7/01/12 ................................ 2,180,000 2,334,627
California Statewide CDA Revenue, Mission Community, California Mortgage Insured,
4.40%, 11/01/10 .................................................................... 1,100,000 1,167,111
4.50%, 11/01/11 .................................................................... 1,145,000 1,212,612
Central Joint Powers Health Financing Authority COP, Community Hospitals of
Central California,
5.125%, 2/01/13 .................................................................... 1,375,000 1,436,545
5.25%, 2/01/14 ..................................................................... 1,435,000 1,500,436
5.75%, 2/01/16 ..................................................................... 1,585,000 1,710,611
Central Valley Financing Authority Cogeneration Project Revenue, Carson Ice
General Project, Refunding, MBIA Insured, 5.00%, 7/01/17 ............................ 2,000,000 2,159,880
Cerritos Community College District, COP, AMBAC Insured, 4.00%, 9/01/13 .............. 1,000,000 1,042,410
Annual Report|43
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Intermediate-Term Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Cerritos PFAR, Tax Allocation, Redevelopment Project, Series A, AMBAC Insured, 3.00%,
11/01/11 ............................................................................ $ 2,585,000 $ 2,562,330
Chaffey Community College District COP, 5.10%, 9/01/13 ............................... 1,860,000 2,167,923
Clovis MFR, Refunding, FNMA Insured, 5.10%, 11/01/30 ................................. 4,105,000 4,509,384
Clovis PFA Water Revenue,
AMBAC Insured, 4.00%, 3/01/14 ...................................................... 1,575,000 1,631,180
Refunding, AMBAC Insured, 3.25%, 3/01/09 ........................................... 1,000,000 1,032,920
Coalinga COP, Custody Facility, Refunding, 4.25%, 4/01/10 ............................ 1,000,000 1,050,800
Coastside County Water District 1915 Act GO, Crystal Springs Project, Refunding,
5.10%, 9/02/03 ..................................................................... 515,000 517,106
5.20%, 9/02/04 ..................................................................... 895,000 911,316
5.40%, 9/02/06 ..................................................................... 525,000 534,250
Colma 1915 Act Special Assessment, Local ID No. 1, Refunding,
5.20%, 9/02/03 ..................................................................... 515,000 517,189
5.30%, 9/02/04 ..................................................................... 545,000 553,442
5.40%, 9/02/05 ..................................................................... 570,000 577,997
Colton PFAR, Electric Generation Facility Project, AMBAC Insured,
4.50%, 4/01/17 ..................................................................... 1,860,000 1,937,711
4.50%, 4/01/18 ..................................................................... 1,945,000 2,011,694
4.75%, 4/01/19 ..................................................................... 2,030,000 2,121,472
Commerce Joint Powers Financing Authority Water Facilities Lease Revenue, Refunding,
Series A,
5.625%, 10/01/03 ................................................................... 360,000 364,093
5.75%, 10/01/04 .................................................................... 470,000 497,833
Compton COP, Civic Center and Capital Improvement, Refunding, Series A,
5.00%, 9/01/08 ..................................................................... 4,340,000 4,789,711
5.50%, 9/01/15 ..................................................................... 1,180,000 1,280,937
Compton Sewer Revenue, ETM, 6.00%, 7/01/03 ........................................... 155,000 155,000
Concord RDA, Tax Allocation, Central Concord Redevelopment Project, Refunding,
Sub Series A, 5.625%, 7/01/03 ....................................................... 655,000 655,000
Contra Costa Community College District GO, Election 2002, FGIC Insured, 4.75%, 8/01/18 2,450,000 2,582,937
Contra Costa County MFHR, Byron Park Project, Series C, GNMA Secured, 6.00%, 7/20/03 . 60,000 60,102
Contra Costa County Public Financing Lease Revenue, Refunding, Series B, MBIA Insured,
4.00%, 6/01/13 ...................................................................... 1,065,000 1,113,745
Corona PFA, Lease Revenue, City Hall Project, Series B, MBIA Insured,
3.75%, 9/01/13 ..................................................................... 1,000,000 1,027,240
4.00%, 9/01/14 ..................................................................... 1,210,000 1,251,261
Danville Financing Authority Revenue, Sycamore Valley, Reassessment District No. 93-2,
5.70%, 9/02/03 ..................................................................... 190,000 191,389
5.80%, 9/02/04 ..................................................................... 805,000 835,002
Duarte RDA, Tax Allocation, Merged Redevelopment Project Area, Refunding, 5.125%,
10/01/16 ............................................................................ 4,930,000 5,348,113
Eden Township Hospital District Health Facilities Revenue COP, Eden Hospital Health
Services Corp., Refunding, 5.75%, 7/01/12 ........................................... 1,195,000 1,221,409
Fairfax School District GO, Election of 2000, Series A, FGIC Insured, 5.00%, 11/01/17 915,000 1,026,776
Fairfield PFAR, Fairfield Redevelopment Projects, Refunding, Series A, AMBAC Insured,
4.00%, 8/01/15 ...................................................................... 1,515,000 1,550,345
44 |Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Intermediate-Term Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Fairfield-Suisun Sewer District Sewer Revenue, Series A, Refunding, FGIC Insured,
5.00%, 5/01/12 ...................................................................... $ 600,000 $ 672,534
Folsom PFA Lease Revenue, City Hall and Community Center, Refunding, FSA Insured,
5.00%, 10/01/17 ..................................................................... 1,275,000 1,398,190
Foothill/Eastern Corridor Agency Toll Road Revenue, Refunding, MBIA Insured, 5.00%,
1/15/16 ............................................................................. 1,000,000 1,086,940
Fremont UHSD, Santa Clara County GO, Series C, FSA Insured, 4.25%, 9/01/13 ........... 1,310,000 1,399,093
Fresno Joint Powers Financing Authority Local Agency Revenue, Refunding, Series A,
6.20%, 9/02/03 ...................................................................... 500,000 504,120
Galt Capital Improvements Authority Lease Revenue, Culture and Recreation Improvement
Project, 5.00%, 4/01/12 ............................................................. 2,390,000 2,524,175
Galt Middle School Joint Powers Authority Special Tax, CFD No. 1, Refunding, 5.40%,
9/01/12 ............................................................................. 1,955,000 2,101,723
Garden Grove GO, CDA, Tax Allocation, Garden Grove Community Project, Refunding, 5.40%,
10/01/04 ............................................................................ 1,425,000 1,467,650
Goleta Water District Revenue COP, Goleta Reclamation Project, Refunding, FGIC Insured,
5.50%, 12/01/08 ..................................................................... 750,000 777,622
Hayward RDA, Tax Allocation, Downtown Hayward Redevelopment Project, Refunding,
5.70%, 3/01/14 ...................................................................... 1,500,000 1,558,605
Hesperia PFAR, Series A, 5.80%, 10/01/03 ............................................. 925,000 935,425
Hi Desert Memorial Health Care District Revenue, Refunding,
5.10%, 10/01/06 .................................................................... 615,000 618,235
5.125%, 10/01/07 ................................................................... 650,000 651,300
Hollister RDA, Tax Allocation, Community Development Project, Series 1994,
5.35%, 10/01/03 .................................................................... 525,000 529,221
5.45%, 10/01/04 .................................................................... 550,000 568,150
5.55%, 10/01/05 .................................................................... 585,000 604,381
Huntington Beach City School District GO, Series A, FGIC Insured, 5.00%, 8/01/18 ..... 1,245,000 1,336,395
Huntington Beach PFAR, Lease Capital Improvement Refinancing Project, Series B,
AMBAC Insured,
4.00%, 8/01/13 ..................................................................... 1,500,000 1,576,215
4.125%, 8/01/14 .................................................................... 2,140,000 2,241,586
4.25%, 8/01/15 ..................................................................... 2,080,000 2,182,606
Industry GO, Refunding, MBIA Insured, 4.00%, 7/01/13 ................................. 4,000,000 4,141,080
Inland Empire Solid Waste Financing Authority Revenue, Landfill Improvement Financing
Project, Series B, FSA Insured, ETM, 6.25%, 8/01/11 ................................. 1,000,000 1,194,600
Irvine 1915 Act Special Assessment, AD, No. 00-18, Group 2,
4.375%, 9/02/10 .................................................................... 885,000 897,186
4.70%, 9/02/12 ..................................................................... 1,475,000 1,489,145
4.80%, 9/02/13 ..................................................................... 1,175,000 1,189,711
5.125%, 9/02/17 .................................................................... 1,705,000 1,707,967
Kings River Conservation District Pine Flat Power Revenue, Refunding, Series E, 5.125%,
1/01/18 ............................................................................. 1,735,000 1,881,902
La Palma Community Development Commission Tax Allocation, La Palma Community
Development Project No. 1, Refunding,
5.70%, 6/01/04 ..................................................................... 150,000 154,692
5.80%, 6/01/05 ..................................................................... 160,000 165,090
Annual Report|45
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Intermediate-Term Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
La Quinta RDA, Tax Allocation, Redevelopment Project Areas No. 1 and 2, MBIA Insured,
5.40%, 9/01/07 ...................................................................... $ 560,000 $ 613,049
Lake Elsinore PFA, Tax Allocation Revenue,
Lake Elsinore Redevelopment Projects, Series A, FSA Insured, 5.40%, 9/01/08 ........ 1,500,000 1,539,510
Series A, 5.00%, 9/01/09 2,005,000 2,150,763
Lake Elsinore School Financing Authority Revenue, Refunding, 6.00%, 9/01/11 .......... 1,000,000 1,107,910
Lancaster COP, School District Project, Refunding, FSA Insured, 5.125%, 4/01/14 ...... 2,000,000 2,239,260
Lancaster RDA, Tax Allocation,
Central Business District Redevelopment, Refunding, 5.60%, 8/01/03 ................. 45,000 45,018
Central Business District Redevelopment, Refunding, 5.70%, 8/01/04 ................. 45,000 45,615
Central Business District Redevelopment, Refunding, 5.70%, 8/01/05 ................. 50,000 50,655
Fox Field Redevelopment Project Area, Refunding, 5.60%, 8/01/03 .................... 65,000 65,224
Fox Field Redevelopment Project Area, Refunding, 5.70%, 8/01/04 .................... 70,000 70,957
Fox Field Redevelopment Project Area, Refunding, 5.70%, 8/01/05 .................... 75,000 75,982
Las Virgenes USD, GO, Series D, FGIC Insured, 3.30%, 9/01/13 ......................... 1,415,000 1,400,482
Lemon Grove CDA, Tax Allocation, 1998 Refunding,
5.00%, 8/01/06 ..................................................................... 725,000 773,474
5.10%, 8/01/07 ..................................................................... 205,000 222,058
5.20%, 8/01/08 ..................................................................... 215,000 234,475
Los Angeles Convention and Exhibition Center Authority Lease Revenue, Series A, 3.00%,
8/15/12 ............................................................................. 4,525,000 4,394,409
Los Angeles County MTA Sales Tax Revenue, First Tier Proposition A, Refunding,
Series A, FSA Insured, 5.00%, 7/01/15 ............................................... 5,345,000 5,891,740
Los Angeles USD, GO, Refunding, MBIA Insured, 5.25%, 7/01/13 ......................... 3,500,000 4,051,180
Los Angeles Wastewater System Revenue,
Refunding, Sub Series B, MBIA Insured, 4.00%, 6/01/17 .............................. 1,470,000 1,459,886
Series A, FGIC Insured, 5.00%, 6/01/14 ............................................. 1,075,000 1,183,833
Lynwood PFAR, Water System Improvement Project, 6.15%, 6/01/08 ....................... 565,000 610,680
Merced Irrigation District COP, Water Facilities Project, ETM, 6.125%, 11/01/03 ...... 540,000 549,202
Metropolitan Water District Southern California GO, Waterworks, Refunding,
3.75%, 3/01/14 ..................................................................... 2,515,000 2,559,666
4.00%, 3/01/15 ..................................................................... 2,560,000 2,618,266
Series B, 4.125%, 3/01/13 .......................................................... 1,000,000 1,051,950
Series B, 4.25%, 3/01/14 ........................................................... 1,000,000 1,052,730
Series B, 4.30%, 3/01/15 ........................................................... 1,000,000 1,045,780
Mid-Peninsula Regional Open Space District COP, Special District Association
Finance Corp., Series 1993, 5.20%, 9/01/03 .......................................... 530,000 533,620
Morgan Hill USD, GO, FGIC Insured, 4.25%, 8/01/14 .................................... 1,585,000 1,675,472
Moulton-Niguel Water District GO, Refunding, AMBAC Insured, 4.00%, 9/01/12 ........... 3,930,000 4,136,600
Mount Diablo Hospital District Revenue, Series A, AMBAC Insured, ETM, 5.10%, 12/01/03 100,000 101,740
M-S-R Public Power Agency San Juan Project Revenue, Refunding, Series I, MBIA Insured,
4.25%, 7/01/11 ..................................................................... 5,055,000 5,456,418
5.00%, 7/01/18 ..................................................................... 1,000,000 1,072,800
Murrieta COP, Road Improvement Project, 6.00%,
4/01/07 ............................................................................ 235,000 261,264
4/01/08 ............................................................................ 245,000 273,219
Nevada County COP, Refunding, MBIA Insured, 4.125%, 10/01/12 ......................... 1,040,000 1,103,762
Newport Mesa USD, GO, MBIA Insured, 4.00%, 8/01/12 ................................... 1,000,000 1,056,760
46 |Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Intermediate-Term Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
North City West School Facilities Financing Authority Special Tax, Refunding, Series B,
FSA Insured, 5.625%, 9/01/08 ........................................................ $ 500,000 $ 566,285
Ontario Redevelopment Financing Authority Local Agency Revenue, Community Facility,
AD No. 1, senior lien, Series A, FSA Insured, 5.60%, 9/02/03 ........................ 850,000 856,588
Orange County CFD No. 86-2, Special Tax, Rancho Santa Margarita, Refunding, Series A,
5.375%, 8/15/12 ..................................................................... 1,500,000 1,545,165
Orange County Community Facilities District Special Tax, Series A,
4.60%, 8/15/14 ..................................................................... 1,000,000 987,110
4.75%, 8/15/15 ..................................................................... 1,000,000 981,890
4.90%, 8/15/16 ..................................................................... 1,285,000 1,260,572
Orange County Development Agency Tax Allocation, Santa Ana Heights Area Project,
Refunding, 5.90%, 9/01/04 ........................................................... 800,000 821,864
Orange County Local Transportation Authority Sales Tax Revenue, First Senior Measure M,
6.00%, 2/15/06 ...................................................................... 500,000 555,875
Orange County Recovery COP, Series A, MBIA Insured, 6.00%, 7/01/08 ................... 1,500,000 1,756,590
Oroville Hospital Revenue, Oroville Hospital, Series A, CHFCLP Insured, 5.125%,
12/01/12 ............................................................................ 1,435,000 1,528,619
Palm Desert Financing Authority Lease Revenue, Blythe County Administrative Project,
6.375%, 8/01/11 ..................................................................... 855,000 933,053
Palm Desert Financing Authority Tax Allocation Revenue, MBIA Insured, 4.75%, 8/01/18 . 1,050,000 1,116,980
Paramount RDA, Tax Allocation, Redevelopment Project Area No. 1, Refunding, 6.05%,
8/01/05 ............................................................................. 1,515,000 1,550,921
Pleasant Hill RDA, RMR, Refunding, 5.40%, 2/01/05 .................................... 105,000 108,382
Pomona RDA, Tax Allocation, Mountain Meadows Redevelopment Project, Refunding,
Series X, 5.35%, 12/01/16 ........................................................... 1,000,000 1,092,240
Poway USD GO, Election of 2002-School Facilities Improvement 1-A, MBIA Insured,
4.00%, 8/01/14 ...................................................................... 1,755,000 1,819,865
Puerto Rico Commonwealth GO, Public Improvement, FSA Insured, 5.25%, 7/01/16 ......... 2,500,000 2,919,450
Rialto RDA, Tax Allocation, Industrial Redevelopment, Sub Areas A and B, Series A,
ETM, 5.50%, 9/01/03 ................................................................. 280,000 282,041
Richmond Joint Powers Financing Authority Revenue, Multiple Redevelopment Projects,
Refunding, Series B, ETM, 5.35%, 5/15/13 ............................................. 2,000,000 2,350,180
Riverside California Redevelopment Agency, Tax Allocation, Merged Project Area,
Refunding, MBIA Insured, 4.00%,
8/01/13 ............................................................................ 1,215,000 1,270,088
8/01/14 ............................................................................ 1,615,000 1,668,860
8/01/15 ............................................................................ 1,680,000 1,711,954
Riverside County Housing Authority MFHR, Brandon Place Apartments, Series B,
FNMA Insured, 5.625%, 7/01/29 ........................................................ 995,000 1,074,600
Riverside USD, GO, Election, Series A, FGIC Insured,
4.00%, 2/01/13 ..................................................................... 1,000,000 1,047,010
4.50%, 2/01/18 ..................................................................... 1,500,000 1,555,515
San Bernardino County COP, Medical Center Financing Project, Refunding, 6.00%,
8/01/09 ............................................................................. 2,000,000 2,298,680
San Clemente 1915 Act, AD No. 8, Refunding,
5.10%, 9/02/03 ..................................................................... 435,000 436,962
5.20%, 9/02/04 ..................................................................... 460,000 471,896
San Diego Mortgage Revenue, Mariners Cove, Refunding, Series B-1, 5.125%, 9/01/03 .... 35,000 35,190
San Francisco City and County, Refunding, Series 1, FGIC Insured, 5.00%, 6/15/12 ..... 3,650,000 4,071,977
Annual Report|47
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Intermediate-Term Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
San Gorgonio Memorial Health Care District Health Facility Revenue, Pre-Refunded,
6.375%, 6/01/08 ..................................................................... $ 750,000 $ 787,523
San Joaquin County COP,
General Hospital Project, ETM, 5.90%, 9/01/03 ...................................... 400,000 403,204
General Hospital Project, Refunding, MBIA Insured, 5.00%, 9/01/17 .................. 1,000,000 1,085,880
MBIA Insured, 4.00%, 4/01/12 ....................................................... 2,925,000 3,073,619
San Jose MFHR, Countrybrook Project, Refunding, Series A, FNMA Insured, 4.95%,
4/01/12 ............................................................................. 4,870,000 5,192,199
San Marcos Public Facilities Authority Revenue,
Senior Tax Increment Project Area-3-A, MBIA Insured, 4.50%, 10/01/04 ............... 495,000 516,810
Senior Tax Increment Project Area-3-A, MBIA Insured, 5.30%, 10/01/11 ............... 350,000 407,194
Tax Increment Project Area-3-A, MBIA Insured, 4.40%, 10/01/03 ...................... 405,000 408,499
Tax Increment Project Area-3-A, MBIA Insured, 4.70%, 10/01/05 ...................... 595,000 639,595
Tax Increment Project Area-3-A, MBIA Insured, 5.10%, 10/01/09 ...................... 515,000 589,706
San Ramon Valley USD, GO, Election of 2002, FSA Insured,
4.00%, 8/01/15 ..................................................................... 1,000,000 1,023,330
4.50%, 8/01/16 ..................................................................... 1,525,000 1,603,202
Santa Ana COP, Refunding, Series A, AMBAC Insured, 4.25%, 6/01/13 .................... 1,405,000 1,509,630
Santa Clara 1915 Act, Reassessment District 187, Refunding, Series 1, 5.25%, 9/02/11 . 1,720,000 1,772,718
Santa Clara County Financing Authority Lease Revenue, Multiple Facilities Projects,
Refunding, Series A, AMBAC Insured, 4.50%, 5/15/12 .................................. 2,900,000 3,093,401
Santa Monica-Malibu USD, COP, Series C, MBIA Insured,
4.00%, 5/01/12 ..................................................................... 525,000 551,261
4.25%, 5/01/14 ..................................................................... 840,000 882,193
4.25%, 5/01/15 ..................................................................... 875,000 909,825
4.25%, 11/01/15 .................................................................... 670,000 696,666
Sebastopol COP,
5.70%, 6/01/05 ..................................................................... 240,000 253,253
Refunding, Series 1994, 5.60%, 6/01/04 ............................................. 215,000 223,164
Shafter Joint Powers Financing Authority Lease Revenue, Community Correctional
Facility Project, Series A, 5.50%, 1/01/06 .......................................... 950,000 1,021,611
South County Regional Wastewater Authority Revenue, Regional Wastewater
Facilities Project, Refunding, FSA Insured, 3.25%, 8/01/11 .......................... 1,000,000 1,009,200
South Gate PFA,
Tax Allocation Revenue, South Gate Redevelopment Project No. 1, XLCA Insured, 5.00%,
9/01/16 ........................................................................... 2,000,000 2,207,520
Water Revenue, Refunding, Series A, FGIC Insured, 5.35%, 10/01/07 .................. 995,000 1,133,444
Water Revenue, Refunding, Series A, FGIC Insured, 5.45%, 10/01/08 .................. 1,040,000 1,203,727
Tax Allocation, Redevelopment Project No. 1, Refunding, 6.10%, 9/01/03 ............. 925,000 928,700
South San Francisco Capital Improvements Financing Authority Revenue,
South San Francisco Conference Center, Refunding,
5.80%, 9/01/03 ..................................................................... 205,000 206,546
5.90%, 9/01/04 ..................................................................... 215,000 220,999
Stockton Health Facilities Revenue, Dameron Hospital Association, Refunding,
Series A, 5.35%, 12/01/09 ........................................................... 385,000 417,174
Stockton Port District Port Facilities Revenue, Refunding and Improvement, Series A,
FSA Insured, 5.75%, 7/01/11 ......................................................... 1,295,000 1,497,939
Stockton Revenue, O'Connor Woods Housing Corp., Series A, 5.375%, 11/01/11 ........... 1,675,000 1,726,439
48 |Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Intermediate-Term Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Sunline Transport Agency COP, Transport Finance Corp., Series B,
5.50%, 7/01/03 ..................................................................... $ 450,000 $450,000
5.75%, 7/01/06 ..................................................................... 445,000 462,956
Sweetwater UHSD, COP, FSA Insured, 4.15%, 9/01/12 .................................... 1,000,000 1,069,140
Tahoe City PUD, COP, Capital Facilities Project, Series B, 6.30%, 6/01/04 ............ 545,000 570,103
Temecula Valley USD, Series E, FSA Insured, 5.65%, 9/01/07 ........................... 370,000 407,422
Tobacco Securitization Authority Northern California Tobacco Settlement Revenue,
Asset Back Bonds, Series B,
4.25%, 6/01/09 ..................................................................... 880,000 850,951
4.375%, 6/01/10 .................................................................... 1,665,000 1,580,335
4.50%, 6/01/11 ..................................................................... 1,540,000 1,444,120
4.60%, 6/01/12 ..................................................................... 1,760,000 1,643,224
4.70%, 6/01/13 ..................................................................... 1,500,000 1,390,590
4.80%, 6/01/14 ..................................................................... 725,000 664,550
Torrance Hospital Revenue, Torrance Memorial Medical Center, Series A, 5.10%,
6/01/12 ............................................................................. 1,000,000 1,099,820
University of California Revenues,
Multiple Purpose Projects, Series N, FGIC Insured, 4.00%, 9/01/12 .................. 1,380,000 1,447,054
Research Facilities, Series E, AMBAC Insured, 5.00%, 9/01/15 ....................... 3,645,000 4,026,158
Upland Community Redevelopment Agency Tax Allocation, AMBAC Insured, 4.50%,
9/01/18 ............................................................................. 3,785,000 3,954,530
Virgin Islands PFAR, senior lien,
Fund Loan Notes, Refunding, Series A, 5.40%, 10/01/12 .............................. 4,150,000 4,447,721
Refunding, Series A, 5.30%, 10/01/11 ............................................... 1,000,000 1,070,980
Virgin Islands Water and Power Authority Water System Revenue, Refunding,
5.00%, 7/01/03 ..................................................................... 990,000 990,000
4.875%, 7/01/06 .................................................................... 2,000,000 2,130,260
5.00%, 7/01/09 ..................................................................... 2,000,000 2,156,460
Watsonville RDA, GO, Tax Allocation, Watsonville Redevelopment Project,
Series 1993, 6.10%, 8/01/03 ......................................................... 540,000 542,084
Whittier Health Facility Revenue, Presbyterian Intercommunity Hospital, 5.00%,
6/01/11 ............................................................................ 1,060,000 1,151,457
6/01/12 ............................................................................ 2,225,000 2,412,901
6/01/13 ............................................................................ 2,335,000 2,514,515
------------
TOTAL BONDS (COST $365,041,364) 383,879,539
------------
ZERO COUPON BONDS 5.0%
Burbank USD, GO, Capital Appreciation, Election of 1997, Series C, FGIC Insured,
8/01/15 ............................................................................ 4,600,000 2,764,738
8/01/16 ............................................................................ 4,670,000 2,633,039
Conejo Valley USD, GO, Election 1998, Series C, FSA Insured, 8/01/17 ................. 2,500,000 1,330,675
Montebello USD, GO, Capital Appreciation, FGIC Insured,
8/01/18 ............................................................................ 1,455,000 729,682
8/01/19 ............................................................................ 1,480,000 695,778
San Francisco City and County Redevelopment Financing Authority Tax Allocation,
Redevelopment Projects, Series A, 8/01/17 ............................................ 3,825,000 1,847,092
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, senior lien,
Refunding, Series A, 1/15/16 ........................................................ 3,000,000 2,473,290
Annual Report|49
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Intermediate-Term Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
ZERO COUPON BONDS (CONT.)
Santa Ana USD, GO, Election of 1999, Series B, FGIC Insured, 8/01/14 ................. $ 3,125,000 $ 2,002,063
Western Placer USD, Financing Corp. COP, Convertible Capital Appreciation,
zero cpn. to 11/01/05, 5.35% thereafter, 11/01/18 .................................... 6,655,000 6,063,171
------------
TOTAL ZERO COUPON BONDS (COST $19,499,994) ........................................... 20,539,528
------------
TOTAL LONG TERM INVESTMENTS (COST $384,541,358) ...................................... 404,419,067
------------
SHORT TERM INVESTMENTS 3.5%
a California State Department of Water Resources Power Supply Revenue, Series B-5,
Daily VRDN and Put, .95%, 5/01/22 .................................................... 500,000 500,000
a California State Department Water Resources Power Supply Revenue, Series B-2,
Daily VRDN and Put, 1.10%, 5/01/22 ................................................... 1,200,000 1,200,000
a Irvine 1915 Act, Special Assessment, AD,
No. 00-18, Series A, Daily VRDN and Put, .85%, 9/02/26 ............................. 1,800,000 1,800,000
No. 94-13, Daily VRDN and Put, .85%, 9/02/22 ....................................... 100,000 100,000
a Irvine Ranch Water District Revenue, Consolidated District Nos. 105, 250 and 290,
Daily VRDN and Put, .85%, 8/01/16 .................................................... 2,000,000 2,000,000
a Los Angeles Department of Water and Power Waterworks Revenue, Sub Series B-2,
Weekly VRDN and Put, .85%, 7/01/35 ................................................... 2,300,000 2,300,000
a Metropolitan Water District Southern California Waterworks Revenue, Refunding,
Series B-1, Daily VRDN and Put, .85%, 7/01/35 ........................................ 2,900,000 2,900,000
a Orange County Sanitation Districts COP, Refunding,
Series A, Daily VRDN and Put, .85%, 8/01/29 ........................................ 1,500,000 1,500,000
Series B, Daily VRDN and Put, .85%, 8/01/30 ........................................ 2,300,000 2,300,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $14,600,000) ...................................... 14,600,000
------------
TOTAL INVESTMENTS (COST $399,141,358) 101.1% ......................................... 419,019,067
OTHER ASSETS, LESS LIABILITIES (1.1)% ................................................ (4,461,100)
------------
NET ASSETS 100.0% .................................................................... $414,557,967
============
See Glossary of Terms on page 56.
aVariable 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.
50 |See notes to financial statements.|Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND
---------------------------------------------------------
Year Ended June 30,
2003 2002 2001 2000 1999
---------------------------------------------------------
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year .................................. $1.00 $1.00 $1.00 $1.00 $1.00
---------------------------------------------------------
Income from investment operations - net investment income ........... .01 .01 .03 .03 .02
Less distributions from net investment income ....................... (.01) (.01) (.03) (.03) (.02)
---------------------------------------------------------
Net asset value, end of year ........................................ $1.00 $1.00 $1.00 $1.00 $1.00
=========================================================
Total return a ...................................................... .71% 1.21% 2.76% 2.64% 2.39%
Ratios/supplemental data
Net assets, end of year (000's) ..................................... $671,392 $679,788 $711,789 $696,803 $706,877
Ratios to average net assets:
Expenses ........................................................... .56% .56% .56% .56% .59%
Net investment income .............................................. .71% 1.20% 2.72% 2.61% 2.36%
aTotal return is not annualized for periods less than one year.
Annual Report|See notes to financial statements.|51
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENTS 112.0%
a Alameda County IDAR, United Manufacturing Project, Series A, Weekly VRDN and Put,
1.05%, 6/01/30 ...................................................................... $ 1,000,000 $1,000,000
a Alvord USD, Financing Corp., COP, Refinancing Project, Weekly VRDN and Put, 1.00%,
9/01/19 ............................................................................. 2,400,000 2,400,000
a Anaheim COP, Police Facilities Refinancing Project, AMBAC Insured, Weekly VRDN and Put,
.85%, 8/01/08 ....................................................................... 3,550,000 3,550,000
a Big Bear Lake Industrial Revenue, Southwest Gas Corp. Project, Series A,
Weekly VRDN and Put, .95%, 12/01/28 ................................................. 2,700,000 2,700,000
a Butte County Housing Authority MFR, Pine Tree Apartment Project, Weekly VRDN and Put,
1.00%, 12/01/10 ..................................................................... 1,822,000 1,822,000
California Educational Facilities Revenue, TECP, .95%, 7/15/03 ....................... 3,000,000 3,000,000
a California Health Facilities Financing Authority Revenue,
Catholic Healthcare West, MBIA Insured, Weekly VRDN and Put, 1.00%, 7/01/16 ....... 5,000,000 5,000,000
Pooled Loan Program, Series B, FGIC Insured, Weekly VRDN and Put, 1.00%, 10/01/10 . 3,000,000 3,000,000
Scripps Health, Series A, MBIA Insured, Weekly VRDN and Put, .97%, 10/01/22 ....... 5,000,000 5,000,000
California Infrastructure and Economic Development Bank Revenue,
Refunding, Series D, 1.00%, 5/13/04 ............................................... 10,000,000 10,000,000
Series A, 1.00%, 5/13/04 .......................................................... 20,000,000 20,000,000
Series A, 1.00%, 5/13/04 .......................................................... 10,000,000 10,000,000
California School Cash Reserve Program Authority Revenue, Series A,
2.00%, 7/06/04 .................................................................... 25,000,000 25,275,250
AMBAC Insured, 3.00%, 7/03/03 ..................................................... 30,000,000 30,002,150
a California State Department Water Resources Power Supply Revenue, Series B-6,
Daily VRDN and Put, .85%, 5/01/22 ................................................... 39,600,000 39,600,000
a California State Economic Development Financing Authority Revenue,
Calco Project, Weekly VRDN and Put, 1.05%, 4/01/27 ................................ 1,600,000 1,600,000
KQED Inc. Project, Refunding, Weekly VRDN and Put, 1.00%, 4/01/20 ................. 1,170,000 1,170,000
a California Statewide CDA, MFHR, Ivy Hills Apartment Project, Series I,
Weekly VRDN and Put, 1.03%, 2/01/33 ................................................. 3,894,000 3,894,000
a Carlsbad USD, COP, Variable School Facility Bridge Funding Program, FSA Insured,
Weekly VRDN and Put, .90%
9/01/14 ........................................................................... 5,100,000 5,100,000
9/01/24 ........................................................................... 5,500,000 5,500,000
a Chico MFMR, Webb Homes Project, Weekly VRDN and Put, 1.10%, 1/01/10 .................. 1,670,000 1,670,000
a Chino Basin Regional Financing Authority Revenue, Inland Empire Utilities, Series A,
AMBAC Insured, Weekly VRDN and Put, .85%, 6/01/32 .................................... 5,585,000 5,585,000
a Commerce Joint Powers Financing Authority IDR, Weekly VRDN and Put, 1.05%, 11/01/14 .. 1,855,000 1,855,000
a Dublin Housing Authority MFHR, Park Sierra Housing, Series A, Weekly VRDN and Put,
.95%, 6/01/28 ........................................................................ 1,100,000 1,100,000
a Elsinore Valley Municipal Water District COP, Series A, FGIC Insured, Weekly
VRDN and Put, .95%, 7/01/29 .......................................................... 11,600,000 11,600,000
Fontana RDA, Tax Allocation, Southwest Industrial Park Project, FGIC Insured,
Pre-Refunded, 6.125%, 9/01/25 ........................................................ 3,255,000 3,347,761
a Fremont PFA, COP, Weekly VRDN and Put, 1.00%, 8/01/30 ................................ 6,300,000 6,300,000
a Grant Joint UHSD, COP, School Facilities Bridge Funding Program, FSA Insured,
Weekly VRDN and Put, .90%, 9/01/34 ................................................... 4,900,000 4,900,000
a Hillsborough COP, Water and Sewer System Project, Refunding, Series B, Weekly VRDN
and Put, 1.05%, 6/01/30 .............................................................. 4,400,000 4,400,000
52 |Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENTS (CONT.)
a Irvine 1915 Act, Special Assessment, AD,
No. 00-18, Series A, Daily VRDN and Put, .85%, 9/02/26 ............................ $ 4,355,000 $ 4,355,000
No. 93-14, Daily VRDN and Put, .90%, 9/02/25 ...................................... 4,700,000 4,700,000
No. 94-15, Daily VRDN and Put, .85%, 9/02/20 ...................................... 1,700,000 1,700,000
No. 97-13, Daily VRDN and Put, .85%, 9/02/23 ...................................... 10,900,000 10,900,000
No. 97-16, Daily VRDN and Put, .85%, 9/02/22 ...................................... 2,011,000 2,011,000
a Irvine Ranch Water District GO, Refunding, Series B, Daily VRDN and Put, 1.10%,
8/01/09 .............................................................................. 1,300,000 1,300,000
a Irvine Ranch Water District Revenue,
Consolidated Bonds, Refunding, Series B, Daily VRDN and Put, 1.10%, 10/01/09 ...... 2,300,000 2,300,000
Construction Bonds, Daily VRDN and Put, .85%, 10/01/05 ............................ 1,300,000 1,300,000
Joint Powers Agency, Consolidated Bonds, DATES, Series C,
Daily VRDN and Put, .85%, 10/01/10 ............................................... 4,900,000 4,900,000
Nos. 140, 105, and 250, Daily VRDN and Put, .85%, 4/01/33 ......................... 900,000 900,000
a Kern County COP, Kern Public Facilities Project, Series A, Weekly VRDN and Put, .95%,
8/01/06 .............................................................................. 1,100,000 1,100,000
Kern County TRAN, 2.00%, 6/30/04 ..................................................... 10,000,000 10,105,900
a Livermore Housing Authority MFR, Richards Manor, Refunding, Series A, Weekly
VRDN and Put, .90%, 12/01/22 ........................................................ 4,770,000 4,770,000
Los Angeles Convention and Exhibition Center Authority Lease Revenue, .97%, 6/15/04 .. 2,620,000 2,620,000
Los Angeles County GO, TRAN, Series A, 2.00%, 6/30/04 ................................ 20,000,000 20,217,400
a Los Angeles County MTA, Sales Tax Revenue, Proposition C, Refunding, Second Series A,
MBIA Insured, Weekly VRDN and Put, .85%, 7/01/20 .................................... 15,960,000 15,960,000
a Los Angeles County Pension Obligation Revenue, Refunding,
Series A, AMBAC Insured, Weekly VRDN and Put, .85%, 6/30/07 ....................... 1,800,000 1,800,000
Series B, Weekly VRDN and Put, .85%, 6/30/07 ...................................... 4,400,000 4,400,000
Los Angeles County Schools Pooled Financing Program COP, TRAN, Series A,
FSA Insured, 1.75%, 6/30/04 .......................................................... 6,000,000 6,049,200
a Los Angeles CRDA, COP, Baldwin Hill Park, Weekly VRDN and Put, .97%, 12/01/14 ........ 1,000,000 1,000,000
a Los Angeles Department of Water and Power Waterworks Revenue, Sub Series B-2,
Weekly VRDN and Put, .85%, 7/01/35 ................................................... 10,000,000 10,000,000
a Los Angeles MFR, Casden Project, Series K, Weekly VRDN and Put, 1.00%, 7/01/10 ....... 950,000 950,000
Los Angeles USD, TRAN, GO,
Series A, 2.00%, 7/01/04 .......................................................... 20,000,000 20,213,500
Series A, 2.50%, 7/01/03 .......................................................... 5,000,000 5,000,000
Series B, 3.00%, 7/01/03 .......................................................... 4,500,000 4,500,000
Series C, 3.25%, 7/01/03 .......................................................... 5,000,000 5,000,000
Los Angeles Wastewater System Revenue, TECP, .90%, 7/10/03 ........................... 10,000,000 10,000,000
a Los Angeles Water and Power Revenue, Power System, Sub Series A-2, Weekly
VRDN and Put, .85%, 7/01/35 ......................................................... 5,000,000 5,000,000
a Metropolitan Water District Southern California Waterworks Revenue,
Refunding, Series A, AMBAC Insured, Weekly VRDN and Put, .80%, 6/01/23 ............ 6,875,000 6,875,000
Refunding, Series B-1, Daily VRDN and Put, .85%, 7/01/35 .......................... 4,500,000 4,500,000
Series B-4, Weekly VRDN and Put, .85%, 7/01/35 .................................... 3,500,000 3,500,000
Series C, Weekly VRDN and Put, .90%, 7/01/28 ...................................... 13,200,000 13,200,000
Series C-1, Daily VRDN and Put, 1.00%, 7/01/36 .................................... 2,900,000 2,900,000
Series C-2, Daily VRDN and Put, .80%, 7/01/36 ..................................... 300,000 300,000
a Monterey County IDA, IDR, VPS Company Inc. Project, Series A, Weekly VRDN and
Put, .95%, 9/01/20 .................................................................. 3,915,000 3,915,000
Annual Report|53
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENTS (CONT.)
a Oakland COP, Capital Equipment Project, Weekly VRDN and Put, 1.00%, 12/01/15 ......... $ 6,700,000 $ 6,700,000
a Orange County Apartment Development Revenue, Wood Canyon Villas, Refunding,
Issue E, Weekly VRDN and Put, .85%, 8/15/31 ......................................... 5,000,000 5,000,000
a Orange County Sanitation Districts COP, Refunding,
Nos 1-3, 5-7 and 11, AMBAC Insured, Daily VRDN and Put, .85%, 8/01/16 ............. 2,000,000 2,000,000
Series A, Daily VRDN and Put, .85%, 8/01/29 ....................................... 11,900,000 11,900,000
Series B, Daily VRDN and Put, .85%, 8/01/30 ....................................... 10,140,000 10,140,000
a Pajaro Valley USD, COP, School Facility Bridge Funding Program, Weekly VRDN and Put,
.90%, 9/01/31 ....................................................................... 700,000 700,000
a Pico Rivera RDA, COP, Weekly VRDN and Put, .95%, 12/01/10 ............................ 1,500,000 1,500,000
a Pleasanton MFMR, Valley Plaza, Series A, Weekly VRDN and Put, .90%, 7/15/18 .......... 1,860,000 1,860,000
Puerto Rico Commonwealth Government Development Bank TECP, .90%, 9/10/03 ............. 10,000,000 10,000,000
a Rancho Mirage Joint Powers Financing Authority Revenue, Eisenhower Medical Center,
Series A, Daily VRDN and Put, .95%, 1/01/26 ......................................... 8,000,000 8,000,000
a Rancho Water District Financing Authority Revenue, Series B, FGIC Insured,
Weekly VRDN and Put, .90%, 8/01/31 .................................................. 3,880,000 3,880,000
a Redwood City COP, City Hall Project, Weekly VRDN and Put, 1.00%, 7/01/21 ............. 2,300,000 2,300,000
a Riverside County Asset Leasing Corp., Leasehold Revenue, Southwest Justice Center,
Series B, MBIA Insured, Weekly VRDN and Daily Put, .85%, 11/01/32 ................... 5,000,000 5,000,000
a Sacramento County COP, Administration Center and Courthouse Project, Weekly VRDN
and Put, 1.00%, 6/01/20 ............................................................. 12,000,000 12,000,000
a Sacramento County Sanitation District Financing Authority Revenue, Series C,
Weekly VRDN and Put, .95%, 12/01/30 .................................................. 13,600,000 13,600,000
San Bernardino County TRAN, 3.00%, 7/01/03 ........................................... 10,000,000 10,000,000
a San Diego Housing Authority MFHR,
La Cima Apartments, Series K, Weekly VRDN and Put, 1.00%, 12/01/22 ................ 23,000,000 23,000,000
Nobel Courts, Weekly VRDN and Put, .85%, 12/01/22 ................................. 31,000,000 31,000,000
a San Francisco City and County RDA, MFR,
Derek Silva Community, Series D, Weekly VRDN and Put, 1.00%, 12/01/19 ............. 4,650,000 4,650,000
Fillmore Center, Refunding, Series B-2, Weekly VRDN and Put, .97%, 12/01/17 ....... 1,000,000 1,000,000
San Joaquin County Transportation Authority, Sales Tax Revenue, TECP, .95%, 7/11/03 .. 31,200,000 31,200,000
a San Jose-Santa Clara Water Financing Authority Sewer Revenue, Series B, FGIC Insured,
Weekly VRDN and Put, .85%, 11/15/11 ................................................. 1,200,000 1,200,000
a San Mateo County MFHR, Pacific Oaks Apartment Project, Series A, Weekly VRDN and Put,
1.00%, 7/01/17 ...................................................................... 2,950,000 2,950,000
a Santa Ana Housing Authority MFHR, Vintage Apartments, Refunding, Series A,
Weekly VRDN and Put, 1.00%, 12/01/22 ................................................ 4,650,000 4,650,000
a Santa Clara County Housing Authority MFHR, Benton Park Central Apartments, Refunding,
Series A, Weekly VRDN and Put, .87%, 12/15/25 ....................................... 5,000,000 5,000,000
a South San Francisco MFHR, Magnolia Plaza Apartments, Series A, Weekly VRDN and Put,
1.00%, 5/01/17 ...................................................................... 500,000 500,000
a Southern California Public Power Authority Transmission Project Revenue, Southern
Transmission, Refunding,
AMBAC Insured, Weekly VRDN and Put, .85%, 7/01/19 ................................. 26,615,000 26,615,000
Series A, FSA Insured, Weekly VRDN and Put, .95%, 7/01/21 ......................... 8,400,000 8,400,000
Series B, FSA Insured, Weekly VRDN and Put, .90%, 7/01/23 ......................... 6,600,000 6,600,000
a Stanislaus Waste to Energy Financing Agency Revenue, Solid Waste Facility,
Ogden Martin Systems Project, Refunding, MBIA Insured, Weekly VRDN and Put,
1.00%, 1/01/10 ...................................................................... 4,400,000 4,400,000
54 |Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Franklin California Tax-Free Income Fund Principal Amount Value
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENTS (CONT.)
a Suisun City Housing Authority MFR, Village Green, Series A, Weekly VRDN and Put, .90%,
6/15/18 ......................................................................... $ 7,700,000 $ 7,700,000
a Sulphur Springs USD, COP, Bridge Funding Program, FSA Insured, Weekly VRDN and Put,
.85%, 3/01/27 ................................................................... 5,000,000 5,000,000
Transmission Authority of Northern California, TECP, .95%, 8/08/03 ............... 10,000,000 10,000,000
a Tustin 1915 Act, Special Assessment, Reassessment District, No. 95-2, Series A,
Daily VRDN and Put, .85%, 9/02/13 ............................................... 23,419,000 23,419,000
a Upland CRDA, MFHR, Weekly VRDN and Put, .95%, 2/15/30 ............................ 1,000,000 1,000,000
a Vallecitos Water District Revenue COP, Twin Oaks Reservoir Project, Weekly VRDN
and Put, .95%, 7/01/30 .......................................................... 2,500,000 2,500,000
a Vallejo Housing Authority MFR, FNMA Insured, Weekly VRDN and Put, .90%, 5/15/22 .. 1,985,000 1,985,000
a Watereuse Finance Authority Revenue, FSA Insured, Weekly VRDN and Put, 1.00%,
5/01/28 ......................................................................... 26,200,000 26,200,000
-------------
TOTAL INVESTMENTS (COST $752,162,161) 112.0% ..................................... 752,162,161
OTHER ASSETS, LESS LIABILITIES (12.0)% ........................................... (80,769,792)
-------------
NET ASSETS 100.0% ................................................................ $671,392,369
=============
See Glossary of Terms on page 56.
aVariable 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.
Annual Report|See notes to financial statements.|55
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2003 (CONTINUED)
GLOSSARY OF TERMS
1915 Act - Improvement Bond Act of 1915
ABAG - The Association of Bay Area Governments
AD - Assessment District
AMBAC - American Municipal Bond Assurance Corp.
BART - Bay Area Rapid Transit
CDA - Community Development Authority/Agency
CFD - Community Facilities District
CHFCLP - California Health Facilities Construction Loan Program
CIFP - Capital Improvement Financing Program
COP - Certificate of Participation
CRDA - Community Redevelopment Authority/Agency
DATES - Demand Adjustable Tax-Exempt Securities
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FNMA - Federal National Mortgage Association
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HFAR - Housing Finance Authority/Agency Revenue
ID - Improvement District
IDA - Industrial Development Authority/Agency
IDAR - Industrial Development Authority/Agency Revenue
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investor Assurance Corp.
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
MFR - Multi-Family Revenue
MTA - Metropolitan Transportation Authority
MUD - Municipal Utility District
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
PFA - Public Financing Authority
PFAR - Public Financing Authority Revenue
PUD - Public Utility District
RDA - Redevelopment Agency/Authority
RHF - Retirement Housing Foundation
RMR - Residential Mortgage Revenue
SFM - Single Family Mortgage
SFMR - Single Family Mortgage Revenue
TECP - Tax-Exempt Commercial Paper
TRAN - Tax and Revenue Anticipation Notes
UHSD - Unified/Union High School District
USD - Unified/Union School District
VRDN - Variable Rate Demand Notes
XLCA - XL Capital Assurance
56 |Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2003
Franklin Franklin California Franklin
California Intermediate-Term California
Insured Tax-Free Tax-Free Tax-Exempt
Income Fund Income Fund Money Fund
-----------------------------------------------------
Assets:
Investments in securities:
Cost ............................................................ $ 1,922,236,201 $ 399,141,358 $ 752,162,161
=====================================================
Value ........................................................... 2,101,689,412 419,019,067 752,162,161
Cash ............................................................. 963,019 279,515 54,510
Receivables:
Capital shares sold ............................................. 9,380,334 1,092,539 2,682,047
Interest ........................................................ 30,687,506 4,729,384 2,487,729
-----------------------------------------------------
Total assets ................................................ 2,142,720,271 425,120,505 757,386,447
-----------------------------------------------------
Liabilities:
Payables:
Investment securities purchased ................................. -- 7,675,932 81,861,250
Capital shares redeemed ......................................... 2,533,577 1,994,456 3,309,396
Affiliates ...................................................... 1,380,277 251,479 322,958
Shareholders .................................................... 589,748 103,006 422,337
Distributions to shareholders .................................... 2,898,308 496,190 38,684
Other liabilities ................................................ 162,422 41,475 39,453
-----------------------------------------------------
Total liabilities ........................................... 7,564,332 10,562,538 85,994,078
-----------------------------------------------------
Net assets, at value ....................................... $ 2,135,155,939 $ 414,557,967 $ 671,392,369
=====================================================
Net assets consist of:
Undistributed net investment income .............................. $ (1,213,326) $ (83,735) $ --
Net unrealized appreciation (depreciation) ....................... 179,453,211 19,877,709 --
Accumulated net realized gain (loss) ............................. (14,833,308) (669,447) --
Capital shares ................................................... 1,971,749,362 395,433,440 671,392,369
-----------------------------------------------------
Net assets, at value ....................................... $ 2,135,155,939 $ 414,557,967 $ 671,392,369
=====================================================
Annual Report|See notes to financial statements.|57
FRANKLIN CALIFORNIA TAX-FREE TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
June 30, 2003
Franklin Franklin California Franklin
California Intermediate-Term California
Insured Tax-Free Tax-Free Tax-Exempt
Income Fund Income Fund Money Fund
---------------------------------------------------
Class A:
Net assets, at value .............................................. $1,912,784,324 $414,557,967 $671,392,369
===================================================
Shares outstanding ................................................ 149,089,931 35,321,952 671,392,369
===================================================
Net asset value per share a ....................................... $12.83 $11.74 $1.00
===================================================
Maximum offering price per share (net asset value per
share (DIVIDE) 95.75%, 97.75% and 100%, respectively) ............. $13.40 $12.01 $1.00
===================================================
Class B:
Net assets, at value .............................................. $ 85,697,576
================
Shares outstanding ................................................ 6,651,898
================
Net asset value and maximum offering price per share a ............ $12.88
================
Class C:
Net assets, at value .............................................. $ 136,674,039
================
Shares outstanding ................................................ 10,566,986
================
Net asset value per share a ....................................... $12.93
================
Maximum offering price per share (net asset value per
share (DIVIDE) 99%) ............................................... $13.06
================
aRedemption price is equal to net asset value less any applicable contingent
deferred sales charge.
58 |See notes to financial statements.|Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF OPERATIONS
for the year ended June 30, 2003
Franklin Franklin California Franklin
California Intermediate-Term California
Insured Tax-Free Tax-Free Tax-Exempt
Income Fund Income Fund Money Fund
---------------------------------------------------
Investment income:
Interest ............................................................. $ 105,174,890 $ 16,892,556 $ 8,810,849
---------------------------------------------------
Expenses:
Management fees (Note 3) ............................................. 9,539,433 1,963,050 3,402,097
Distribution fees (Note 3)
Class A ............................................................. 1,810,508 376,948 --
Class B ............................................................. 466,238 -- --
Class C ............................................................. 818,624 -- --
Transfer agent fees (Note 3) ......................................... 583,896 109,416 345,444
Custodian fees ....................................................... 18,770 3,830 7,054
Reports to shareholders .............................................. 48,375 13,972 21,690
Registration and filing fees ......................................... 12,922 6,245 6,320
Professional fees .................................................... 63,722 19,228 15,832
Trustees' fees and expenses .......................................... 50,248 9,043 17,215
Other ................................................................ 180,577 66,194 52,277
---------------------------------------------------
Total expenses .................................................. 13,593,313 2,567,926 3,867,929
---------------------------------------------------
Net investment income .......................................... 91,581,577 14,324,630 4,942,920
---------------------------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments ............................ 2,154,831 281,135 (2,466)
Net unrealized appreciation (depreciation) on investments ............ 80,640,225 9,785,130 --
---------------------------------------------------
Net realized and unrealized gain (loss) ............................... 82,795,056 10,066,265 (2,466)
---------------------------------------------------
Net increase (decrease) in net assets resulting from operations ....... $ 174,376,633 $24,390,895 $4,940,454
===================================================
Annual Report|See notes to financial statements.|59
FRANKLIN CALIFORNIA TAX-FREE TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended June 30, 2003 and 2002
Franklin California Franklin California
Insured Tax-Free Intermediate-Term
Income Fund Tax-Free Income Fund
----------------------------------------------------------------------
2003 2002 2003 2002
----------------------------------------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ........................... $ 91,581,577 $ 88,328,927 $ 14,324,630 $ 11,532,805
Net realized gain (loss) from investments ....... 2,154,831 4,557,169 281,135 (373,054)
Net unrealized appreciation (depreciation)
on investments ................................. 80,640,225 16,651,500 9,785,130 3,604,782
----------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations .................. 174,376,633 109,537,596 24,390,895 14,764,533
Distributions to shareholders from:
Net investment income:
Class A ........................................ (84,464,602) (82,691,879) (14,471,962) (11,693,302)
Class B ........................................ (2,836,488) (1,670,341) -- --
Class C ........................................ (4,951,681) (3,988,763) -- --
----------------------------------------------------------------------
Total distributions to shareholders .............. (92,252,771) (88,350,983) (14,471,962) (11,693,302)
Capital share transactions: (Note 2)
Class A ........................................ 48,510,072 104,182,637 80,578,468 96,833,451
Class B ........................................ 26,565,574 35,228,355 -- --
Class C ........................................ 22,938,158 28,110,695 -- --
----------------------------------------------------------------------
Total capital share transactions ................. 98,013,804 167,521,687 80,578,468 96,833,451
Net increase (decrease) in net assets ....... 180,137,666 188,708,300 90,497,401 99,904,682
Net assets:
Beginning of year ................................ 1,955,018,273 1,766,309,973 324,060,566 224,155,884
----------------------------------------------------------------------
End of year ...................................... $2,135,155,939 $1,955,018,273 $414,557,967 $324,060,566
----------------------------------------------------------------------
Undistributed net investment income included in
net assets:
End of year ..................................... $ (1,213,326) $ (494,620) $ (83,735) $ 69,155
----------------------------------------------------------------------
60 |See notes to financial statements.|Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
for the years ended June 30, 2003 and 2002
Franklin California
Tax-Exempt
Money Fund
-------------------------------
2003 2002
-------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income .................................................................... $ 4,942,920 $ 8,189,903
Net realized gain (loss) from investments ................................................ (2,466) 10,451
-------------------------------
Net increase (decrease) in net assets resulting from operations ...................... 4,940,454 8,200,354
Distributions to shareholders from net investment income .................................. (4,940,454) a (8,200,354) a
Capital share transactions (Note 2) ....................................................... (8,395,879) (32,000,489)
-------------------------------
Net increase (decrease) in net assets ................................................ (8,395,879) (32,000,489)
Net assets (there is no undistributed net investment income at beginning or end of year):
Beginning of year ......................................................................... 679,788,248 711,788,737
-------------------------------
End of year ............................................................................... $671,392,369 $679,788,248
===============================
aDistributions were increased (decreased) by net realized gain (loss) from
security transactions of $(2,466) and $10,451 in 2003 and 2002, respectively.
Annual Report|See notes to financial statements.|61
FRANKLIN CALIFORNIA TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin California Tax-Free Trust (the Trust) is registered under the
Investment Company Act of 1940 as an open-end investment company, consisting of
three separate series (the Funds). All Funds are diversified except the Franklin
California Intermediate-Term Tax-Free Income Fund (Intermediate-Term Fund). The
Funds' investment objectives are to provide a high level of current income
exempt from federal and California personal income taxes, while seeking
preservation of capital. The Franklin California Tax-Exempt Money Fund (Money
Fund) also seeks liquidity in its investments.
On April 24, 2003, the Board of Trustees approved a new fund for the Trust,
Franklin California Limited Term Tax-Free Income Fund. The effective date of the
new fund is September 1, 2003.
The following summarizes the Funds' significant accounting policies.
A. SECURITY VALUATION
Tax-free bonds generally trade in the over-the-counter market and are valued
within the range of the latest quoted bid and asked prices. In the absence of a
sale or reported bid and asked prices, information with respect to bond and note
transactions, quotations from bond dealers, market transactions in comparable
securities, and various relationships between securities are used to determine
the value of the security. The Trust may utilize a pricing service, bank or
broker/dealer experienced in such matters to perform any of the pricing
functions under procedures approved by the Board of Trustees. Securities for
which market quotations are not readily available are valued at fair value as
determined by management in accordance with procedures established by the Board
of Trustees.
Securities in the Money Fund are valued at amortized cost which approximates
value.
B. SECURITIES PURCHASED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS
The Funds may purchase securities on a when-issued or delayed delivery basis,
with payment and delivery scheduled for a future date. These transactions are
subject to market fluctuations and are subject to the risk that the value at
delivery may be more or less than the trade date purchase price. Although the
Funds will generally purchase these securities with the intention of holding the
securities, they may sell the securities before the settlement date. Sufficient
assets have been segregated for these securities.
C. INCOME TAXES
No provision has been made for income taxes because each Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute substantially all of its income.
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
62 |Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
(CONTINUED)
daily. Discounts and premiums on securities purchased are amortized over the
lives of the respective securities. For the California Insured Tax-Free Income
Fund (Insured Fund) and the Intermediate-Term Fund, dividends from net
investment income are normally declared daily and distributed monthly to
shareholders. For the Money Fund, dividends from net investment income and
capital gains or losses are normally declared daily. Such distributions are
reinvested in additional shares of the Fund.
Common expenses incurred by the Trust are allocated among the Funds based on the
ratio of net assets of each Fund to the combined net assets. Other expenses are
charged to each Fund on a specific identification basis.
Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class for the Insured Fund.
E. INSURANCE
The scheduled payments of interest and principal for each insured municipal
security in the Insured Fund are insured by either a new issue insurance policy,
a portfolio insurance policy, or a secondary insurance policy. Some municipal
securities in the Insured Fund are secured by collateral guaranteed by an agency
of the U.S. government.
Depending on the type of coverage, premiums for insurance are either added to
the cost basis of the security, included as an expense of the fund, or paid by a
third party.
F. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
G. GUARANTEES AND INDEMNIFICATIONS
Under the Funds' organizational documents, its officers and trustees are
indemnified against certain liability arising out of the performance of their
duties to the Funds. Additionally, in the normal course of business, the Funds
enter into contracts with service providers that contain general indemnification
clauses. The Funds' maximum exposure under these arrangements is unknown as this
would involve future claims that may be made against the Funds that have not yet
occurred. However, based on experience, the Funds expect the risk of loss to be
remote.
Annual Report|63
FRANKLIN CALIFORNIA TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST
The classes of shares offered within each of the Funds are indicated below.
Effective July 1, 2003, the Intermediate-Term Fund began offering Class C
shares. Each class of shares differs by its initial sales load, contingent
deferred sales charges, distribution fees, voting rights on matters affecting a
single class and its exchange privilege.
Class A Class A, Class B & Class C
- -----------------------------------------------------
Intermediate-Term Fund Insured Fund
Money Fund
At June 30, 2003, there were an unlimited number of shares authorized (no par
value). Transactions in the Funds' shares were as follows:
-----------------------------------------------------------------
Insured Fund Intermediate-Term Fund
-----------------------------------------------------------------
Shares Amount Shares Amount
-----------------------------------------------------------------
Class A Shares:
Year ended June 30, 2003
Shares sold ...................... 20,344,406 $ 256,925,150 15,013,466 $ 174,239,975
Shares issued in reinvestment
of distributions ................. 3,412,993 43,027,957 719,268 8,349,349
Shares redeemed .................. (19,958,238) (251,443,035) (8,814,514) (102,010,856)
-----------------------------------------------------------------
Net increase (decrease) .......... 3,799,161 $ 48,510,072 6,918,220 $ 80,578,468
=================================================================
Year ended June 30, 2002
Shares sold ...................... 20,861,121 $ 257,504,812 13,014,422 $ 148,150,329
Shares issued in reinvestment
of distributions ................. 2,956,896 36,489,098 548,530 6,232,465
Shares redeemed .................. (15,396,083) (189,811,273) (5,078,021) (57,549,343)
-----------------------------------------------------------------
Net increase (decrease) .......... 8,421,934 $ 104,182,637 8,484,931 $ 96,833,451
=================================================================
Class B Shares:
Year ended June 30, 2003
Shares sold ...................... 2,487,468 $ 31,490,684
Shares issued in reinvestment
of distributions ................. 149,457 1,893,274
Shares redeemed .................. (537,929) (6,818,384)
-----------------------------
Net increase (decrease) .......... 2,098,996 $ 26,565,574
=============================
Year ended June 30, 2002
Shares sold ...................... 3,062,728 $ 37,987,344
Shares issued in reinvestment
of distributions ................. 86,693 1,072,308
Shares redeemed .................. (310,882) (3,831,297)
-----------------------------
Net increase (decrease) .......... 2,838,539 $ 35,228,355
=============================
64 |Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (continued)
-----------------------------
Insured Fund
Shares Amount
-----------------------------
CLASS C SHARES:
Year ended June 30, 2003
Shares sold ....................... 3,318,249 $ 42,185,455
Shares issued in reinvestment
of distributions .................. 230,685 2,931,577
Shares redeemed ................... (1,746,017) (22,178,874)
-----------------------------
Net increase (decrease) ........... 1,802,917 $ 22,938,158
=============================
Year ended June 30, 2002
Shares sold ....................... 3,632,626 $ 45,236,277
Shares issued in reinvestment
of distributions .................. 183,125 2,276,306
Shares redeemed ................... (1,562,394) (19,401,888)
-----------------------------
Net increase (decrease) ........... 2,253,357 $ 28,110,695
=============================
---------------
Money Fund
---------------
Amount
---------------
Class A Shares:
Year ended June 30, 2003
Shares sold .............................................. $ 738,232,187
Shares issued in reinvestment of distributions ........... 4,945,536
Shares redeemed .......................................... (751,573,602)
---------------
Net increase (decrease) .................................. $ (8,395,879)
===============
Year ended June 30, 2002
Shares sold .............................................. $ 799,787,990
Shares issued in reinvestment of distributions ........... 8,239,224
Shares redeemed .......................................... (840,027,703)
---------------
Net increase (decrease) .................................. $ (32,000,489)
===============
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Funds are also officers and/or trustees of
the following entities:
- ---------------------------------------------------------------------------------------
Entity Affiliation
- ---------------------------------------------------------------------------------------
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin Templeton Services, LLC (FT Services) Administration manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, LLC (Investor Services) Transfer agent
Annual Report|65
FRANKLIN CALIFORNIA TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (continued)
The Funds pay an investment management fee to Advisers based on the month-end
net assets of the Insured Fund and the Intermediate-Term Fund and on the average
daily net assets of the Money Fund as follows:
- ------------------------------------------------------------------------------
Annualized Fee Rate Net Assets
- ------------------------------------------------------------------------------
.625% First $100 million
.500% Over $100 million, up to and including $250 million
.450% In excess of $250 million
Under an agreement with Advisers, FT Services provides administrative services
to the Funds. The fee is paid by Advisers based on average daily net assets, and
is not an additional expense of the Funds.
The Funds reimburse Distributors for costs incurred in marketing the Funds'
shares up to a certain percentage per year of their average daily net assets of
each class as follows:
- ---------------------------------------------
Insured Insured Intermediate-
- ---------------------------------------------
Fund Term Fund
Class A .............. .10% .10%
Class B .............. .65% --
Class C .............. .65% --
Distributors paid net commissions on sales of the Funds' shares, and received
contingent deferred sales charges for the period as follows:
Insured Intermediate- Money
Fund Term Fund Fund
------------------------------------
Net commissions paid .................. $1,398,981 $121,782 --
Contingent deferred sales charges ..... $ 230,240 $ 1,211 $13,659
The Funds paid transfer agent fees as noted in the Statement of Operations of
which the following amounts were paid to Investor Services:
Insured Intermediate- Money
----------------------------------
Fund Term Fund Fund
Transfer agent fees ............ $190,037 $36,568 $72,282
66 |Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES
At June 30, 2003, the Funds had tax basis capital losses of which may be carried
over to offset future capital gains. Such losses expire as follows:
Insured Intermediate- Money
Fund Term Fund Fund
--------------------------------------
Capital loss carryovers expiring in:
2005 .................................. $ -- $ -- $ 1,444
2006 .................................. -- -- 9,957
2007 .................................. -- -- 4,593
2008 .................................. 7,009,033 90,667 9,293
2009 .................................. 7,452,092 321,166 21,840
2010 .................................. -- 112,465 --
2011 .................................. -- 145,149 --
--------------------------------------
$ 14,461,125 $ 669,447 $ 47,127
======================================
On June 30, 2003, the Money Fund has deferred capital losses occurring
subsequent to October 31, 2002 of $2,466. For tax purposes such losses will be
reflected in the year ending June 30, 2004.
The tax character of distributions paid during the years ended June 30, 2003 and
2002, was as follows:
Insured Fund Intermediate-Term Fund
2003 2002 2003 2002
-------------------------------------------------------------
Distributions paid from:
Ordinary tax-exempt income ........... $92,252,771 $ 83,350,983 $14,471,962 $ 11,693,302
Long-term capital gains .............. -- -- -- --
-------------------------------------------------------------
$92,252,771 $ 83,350,983 $14,471,962 $ 11,693,302
-------------------------------------------------------------
Money Fund
2003 2002
------------------------
Distributions paid from:
Ordinary tax-exempt income ....... $4,940,454 $8,200,354
Long-term capital gains .......... -- --
------------------------
$4,940,454 $8,200,354
------------------------
Annual Report|67
FRANKLIN CALIFORNIA TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES (continued)
At June 30, 2003, the cost of investments, net unrealized appreciation,
undistributed tax exempt income and undistributed long term capital gains for
income tax purposes were as follows:
Insured Intermediate- Money
Fund Term Fund Fund
------------------------------------------------
Cost of investments ............................. $ 1,921,883,012 $ 399,113,369 $ 752,162,161
================================================
Unrealized appreciation ......................... $ 180,260,050 $ 20,622,353 --
Unrealized depreciation ......................... (453,650) (716,655) --
------------------------------------------------
Net unrealized appreciation (depreciation) ...... $ 179,806,400 $ 19,905,698 --
================================================
Undistributed tax-exempt income ................. $ 959,609 $ 384,466 $ 29,628
Undistributed short term capital gains .......... -- -- --
Undistributed long term capital gains ........... -- -- --
------------------------------------------------
Distributable earnings .......................... $ 959,609 $ 384,466 $ 29,628
================================================
On June 30, 2003, the Intermediate-Term Fund had expired capital loss carryovers
of $102,640 which was reclassified to paid-in capital.
Net investment income differs for financial statement and tax purposes primarily
due to differing treatment of bond discounts.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatment of wash sales and bond discounts.
Distributions of income to shareholders may not equal net investment income due
to differing treatments of dividend distributions for book and tax purposes.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term securities) for the
year ended June 30, 2003 were as follows:
Insured Intermediate-
Fund Term Fund
----------------------------
Purchases .............. $270,833,504 $106,866,883
Sales .................. $196,952,949 $ 34,770,870
68 |Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF FRANKLIN CALIFORNIA TAX-FREE TRUST
In our opinion, the accompanying statements of assets and liabilities, including
the statements of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the funds included in this
report constituting the Franklin California Tax-Free Trust (hereafter referred
to as the "Funds") at June 30, 2003, the results of each of their operations for
the year then ended, the changes in each of their net assets for each of the two
years in the period then ended and each of their financial highlights for each
of the periods presented, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at June
30, 2003 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
August 5, 2003
Annual Report|69
FRANKLIN CALIFORNIA TAX-FREE TRUST
TAX DESIGNATION (UNAUDITED)
Under Section 852(b)(5)(A) of the Internal Revenue Code, the Trust hereby
designates 100% of the distributions paid from net investment income as
exempt-interest dividends for the fiscal year ended June 30, 2003.
70 |Annual Report
BOARD MEMBERS AND OFFICERS
The name, age and address of the officers and board members, as well as their
affiliations, positions held with the Trust, principal occupations during the
past five years and number of portfolios overseen in the Franklin Templeton
Investments fund complex are shown below. Each board member will serve until
that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
- -----------------------------------------------------------------------------------------------------------------------------------
Number of Portfolios in
Length of Fund Complex Overseen
Name, Age and Address Position Time Served by Board Member* Other Directorships Held
- -----------------------------------------------------------------------------------------------------------------------------------
FRANK H. ABBOTT, III (82) Trustee Since 1985 105 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Director, Abbott Corporation (an investment company); and
FORMERLY, Director, MotherLode Gold Mines Consolidated (gold mining) (until
1996) and Vacu-Dry Co. (food processing) (until 1996).
- -----------------------------------------------------------------------------------------------------------------------------------
HARRIS J. ASHTON (71) Trustee Since 1985 132 Director, Bar-S Foods (meat
One Franklin Parkway packing company).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank
holding company) (until 2002); and President, Chief Executive Officer and
Chairman of the Board, General Host Corporation (nursery and craft centers)
(until 1998).
- -----------------------------------------------------------------------------------------------------------------------------------
S. JOSEPH FORTUNATO (70) Trustee Since 1989 133 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Attorney; and FORMERLY, member of the law firm of Pitney, Hardin, Kipp & Szuch.
- -----------------------------------------------------------------------------------------------------------------------------------
FRANK W.T. LAHAYE (74) Trustee Since 1985 105 Director, The California Center for Land
One Franklin Parkway Recycling (redevelopment).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture capital).
- -----------------------------------------------------------------------------------------------------------------------------------
GORDON S. MACKLIN (75) Trustee Since 1992 132 Director, White Mountains Insurance
One Franklin Parkway Group, Ltd. (holding company); Martek
San Mateo, CA 94403-1906 Biosciences Corporation; MedImmune, Inc.
(biotechnology); Overstock.com (Internet
services); and Spacehab, Inc. (aerospace
services); and formerly, Director, MCI
Communication Corporation (subsequently
known as MCI WorldCom, Inc. and
WorldCom, Inc.) (communications
services) (1988-2002).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company); and
FORMERLY, Chairman, White River Corporation (financial services) (1993-1998)
and Hambrecht & Quist Group (investment banking) (1987-1992); and President,
National Association of Securities Dealers, Inc.
(1970-1987).
- -----------------------------------------------------------------------------------------------------------------------------------
Annual Report|71
INTERESTED BOARD MEMBERS AND OFFICERS
- -----------------------------------------------------------------------------------------------------------------------------------
Number of Portfolios in
Length of Fund Complex Overseen
Name, Age and Address Position Time Served by Board Member* Other Directorships Held
- -----------------------------------------------------------------------------------------------------------------------------------
**HARMON E. BURNS (58) Trustee and Trustee since 31 None
One Franklin Parkway Vice President 1993 and Vice
San Mateo, CA 94403-1906 President since
1986
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; Director, Franklin Investment Advisory Services,
Inc.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and
of 48 of the investment companies in Franklin Templeton Investments.
- -----------------------------------------------------------------------------------------------------------------------------------
**CHARLES B. JOHNSON (70) Trustee and Trustee since 132 None
One Franklin Parkway Chairman of 1985 and
San Mateo, CA 94403-1906 the Board Chairman of
the Board since
1993
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Chief Executive Officer, Member - Office of the Chairman
and Director, Franklin Resources, Inc.; Vice President, Franklin Templeton
Distributors, Inc.; Director, Fiduciary Trust Company International; and
officer and/or director or trustee, as the case may be, of some of the other
subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies
in Franklin Templeton Investments.
- -----------------------------------------------------------------------------------------------------------------------------------
**RUPERT H. JOHNSON, JR. (62) Trustee and Trustee since 115 None
One Franklin Parkway President and 1985, President
San Mateo, CA 94403-1906 Chief since 1993, and
Executive Chief Executive
Officer - Officer -
Investment Investment
Management Management
since 2002
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Director, Franklin Advisers, Inc. and Franklin Investment Advisory Services, Inc.; Senior Vice
President, Franklin Advisory Services, LLC; and
officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 48 of
the investment companies in Franklin Templeton Investments.
- -----------------------------------------------------------------------------------------------------------------------------------
SHEILA AMOROSO (43) Vice Since 1999 Not Applicable None
One Franklin Parkway President
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Advisers, Inc.; and officer of eight of the investment companies in Franklin Templeton
Investments.
- -----------------------------------------------------------------------------------------------------------------------------------
RAFAEL R. COSTAS, JR. (38) Vice Since 1999 Not Applicable None
One Franklin Parkway President
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Advisers, Inc.; and officer of eight of the investment companies in Franklin Templeton
Investments.
- -----------------------------------------------------------------------------------------------------------------------------------
72 |Annual Report
- -----------------------------------------------------------------------------------------------------------------------------------
Number of Portfolios in
Length of Fund Complex Overseen
Name, Age and Address Position Time Served by Board Member* Other Directorships Held
- -----------------------------------------------------------------------------------------------------------------------------------
MARTIN L. FLANAGAN (43) Vice Since 1995 Not Applicable None
One Franklin Parkway President
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Resources, Inc.; Senior Vice President and Chief Financial
Officer, Franklin Mutual Advisers, LLC; Executive Vice President, Chief
Financial Officer and Director, Templeton Worldwide, Inc.; Executive Vice
President and Chief Operating Officer, Templeton Investment Counsel, LLC;
President and Director, Franklin Advisers, Inc.; Executive Vice President,
Franklin Investment Advisory Services, Inc. and Franklin Templeton Investor
Services, LLC; Chief Financial Officer, Franklin Advisory Services, LLC;
Chairman, Franklin Templeton Services, LLC; and officer and/or director of some
of the other subsidiaries of Franklin Resources, Inc. and of 49 of the
investment companies in Franklin Templeton Investments.
- -----------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (55) Senior Vice Since 2002 Not Applicable None
500 East Broward Blvd. President and
Suite 2100 Chief
Fort Lauderdale, FL Executive
33394-3091 Officer-
Finance and
Administration
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 51 of the investment
companies in Franklin Templeton Investments.
- -----------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (56) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Resources, Inc.; officer and director of
one of the subsidiaries of Franklin Resources, Inc.; officer of 51 of the
investment companies in Franklin Templeton Investments; and FORMERLY,
President, Chief Executive Officer and Director, Property Resources Equity
Trust (until 1999) and Franklin Select Realty Trust (until 2000).
- -----------------------------------------------------------------------------------------------------------------------------------
BARBARA J. GREEN (55) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President and Deputy General Counsel, Franklin Resources, Inc.; Senior Vice President, Templeton Worldwide, Inc.; officer of
one of the other subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in Franklin Templeton Investments;
and FORMERLY, Deputy Director, Division of Investment Management, Executive Assistant and Senior Advisor to the Chairman, Counselor
to the Chairman, Special Counsel and Attorney Fellow, U.S. Securities and Exchange Commission (1986-1995); Attorney, Rogers & Wells
(until 1986); and Judicial Clerk, U.S. District Court (District of Massachusetts) (until 1979).
- -----------------------------------------------------------------------------------------------------------------------------------
MICHAEL O. MAGDOL (66) Vice President Since 2002 Not Applicable Director, FTI Banque, Arch
600 Fifth Avenue - AML Chemicals, Inc. and Lingnan
Rockefeller Center Compliance Foundation.
New York, NY 10048-0772
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Chief Banking Officer and Director, Fiduciary Trust Company
International; and officer and/or director, as the case may be, of some of the
other subsidiaries of Franklin Resources, Inc. and of 48 of the investment
companies in Franklin Templeton Investments.
- -----------------------------------------------------------------------------------------------------------------------------------
Annual Report|73
- -----------------------------------------------------------------------------------------------------------------------------------
Number of Portfolios in
Length of Fund Complex Overseen
Name, Age and Address Position Time Served by Board Member* Other Directorships Held
- -----------------------------------------------------------------------------------------------------------------------------------
KIMBERLEY H. MONASTERIO (39) Treasurer and Treasurer since Not Applicable None
One Franklin Parkway Chief 2000 and Chief
San Mateo, CA 94403-1906 Financial Financial Officer
Officer since 2002
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; and officer of 51 of
the investment companies in Franklin Templeton Investments.
- -----------------------------------------------------------------------------------------------------------------------------------
MURRAY L. SIMPSON (66) Vice President Since 2000 Not Applicable None
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and General Counsel, Franklin Resources, Inc.; officer and/or director, as the case may be, of some of the
subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in Franklin Templeton Investments; and formerly,
Chief Executive Officer and Managing Director, Templeton Franklin Investment Services (Asia) Limited (until 2000); and Director,
Templeton Asset Management Ltd. (until 1999).
- -----------------------------------------------------------------------------------------------------------------------------------
THOMAS WALSH (41) Vice President Since 1999 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Advisers, Inc.; and officer of eight of the investment companies in Franklin Templeton Investments.
- -----------------------------------------------------------------------------------------------------------------------------------
*We base the number of portfolios on each separate series of the U.S. registered
investment companies within the Franklin Templeton Investments fund complex.
These portfolios have a common investment adviser or affiliated investment
advisers.
**Charles B. Johnson and Rupert H. Johnson, Jr. are considered interested
persons of the Trust under the federal securities laws due to their positions as
officers and directors and major shareholders of Franklin Resources Inc.
(Resources), which is the parent company of the Trust's adviser and distributor.
Harmon E. Burns is considered an interested person of the Trust under the
federal securities laws due to his position as officer and director of
Resources.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.
THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION
ABOUT THE BOARD MEMBERS AND IS AVAILABLE, WITHOUT CHARGE, UPON REQUEST.
SHAREHOLDERS MAY CALL 1-800/DIAL BEN (1-800/342-5236) TO REQUEST THE SAI.
74 |Annual Report
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LITERATURE REQUEST
For a brochure and prospectus, which contains more complete information,
including charges and expenses, call Franklin Templeton Investments at
1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before
investing or sending money. To ensure the highest quality of service, telephone
calls to or from our service departments may be monitored, recorded and
accessed. These calls can be determined by the presence of a regular beeping
tone.
FRANKLIN TEMPLETON INVESTMENTS
INTERNATIONAL
Mutual European Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund
GLOBAL
Franklin Global Aggressive Growth Fund
Franklin Global Growth Fund
Mutual Discovery Fund
Templeton Capital Accumulator Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund 1
Franklin Small-Mid Cap Growth
Fund Franklin Small Cap Growth Fund II 2
VALUE
Franklin Balance Sheet Investment Fund 3
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 4
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Shares Fund
BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund 5
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Franklin Technology Fund
Mutual Financial Services Fund
ASSET ALLOCATION
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund 6
Franklin's AGE High Income Fund
Franklin Federal Money Fund 6, 7
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust 8
Franklin Income Fund
Franklin Money Fund 6, 7
Franklin Short-Intermediate U.S. Government Securities Fund 6
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund 6
Templeton Global Bond Fund
TAX-FREE INCOME 9
Double Tax-Free Income Fund
Federal Intermediate-Term Tax-Free
Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 10
Tax-Exempt Money Fund 6, 7
STATE-SPECIFIC TAX-FREE INCOME 9
Alabama
Arizona
California 11
Colorado
Connecticut
Florida 11
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 10
Michigan 10
Minnesota 10
Missouri
New Jersey
New York 11
North Carolina
Ohio 10
Oregon
Pennsylvania
Tennessee
VIRGINIA VARIABLE INSURANCE PRODUCTS FUNDS
Franklin Templeton Variable Insurance
Products Trust 12
1. Formerly Franklin California Growth Fund. Effective 9/1/02, the fund's name
changed and its investment criteria was modified. The fund's investment goal
remained the same.
2. The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.
3. The fund is only open to existing shareholders as well as select retirement
plans.
4. Effective June 30, 2003, the fund reopened to all new investors.
5. Upon reaching approximately $350 million in assets, the fund will close to
all investors.
6. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
7. No assurance exists that the fund's $1.00 per share price will be maintained.
It is possible to lose money by investing in the fund.
8. 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.
9. For investors subject to the alternative minimum tax, a small portion of
these dividends may be taxable. Distributions of capital gains are generally
taxable.
10. Portfolio of insured municipal securities.
11. These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA) and
intermediate-term and money market portfolios (CA and NY). 12. The funds of the
Franklin Templeton Variable Insurance Products Trust are generally available
only through insurance company variable contracts.
06/03 Not part of the annual report
[LOGO OMITTED]
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS
One Franklin Parkway
San Mateo, CA 94403-1906
Want to receive this document FASTER via email?
Eligible shareholders can sign up for eDelivery at franklintempleton.com. See
inside for details.
ANNUAL REPORT AND SHAREHOLDER LETTER
Franklin California
Tax-Free Trust
INVESTMENT MANAGER
Franklin Advisers, Inc.
DISTRIBUTOR
Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com
SHAREHOLDER SERVICES
1-800/632-2301
This report must be preceded or accompanied by the current Franklin California
Tax-Free Trust prospectus, which contains more complete information including
charges and expenses.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
CAT A2003 08/03
ITEM 2. CODE OF ETHICS. N/A
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. N/A
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. N/A
ITEM 9. CONTROLS AND PROCEDURES.
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
ITEM 10. EXHIBITS.
(A) N/A
(B)(1) CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
OF JIMMY D. GAMBILL, CHIEF EXECUTIVE OFFICER - FINANCE AND ADMINISTRATION, AND
KIMBERLEY H. MONASTERIO, CHIEF FINANCIAL OFFICER
(B(2) CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
OF JIMMY D. GAMBILL, CHIEF EXECUTIVE OFFICER - FINANCE AND ADMINISTRATION, AND
KIMBERLEY H. MONASTERIO, CHIEF FINANCIAL OFFICER
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN CALIFORNIA TAX-FREE TRUST
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date August 30, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date August 30, 2003
By /s/Kimberley H. Monasterio
Chief Financial Officer
Date August 30, 2003