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 811-04356
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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
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(Name and address of agent for service)
Registrant's telephone number, including area code: 650 312-2000
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Date of fiscal year end: 6/30
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Date of reporting period: 6/30/05
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Item 1. Reports to Stockholders.
[GRAPHIC OMITTED]
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JUNE 30, 2005
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Franklin California Insured
Tax-Free Income Fund
Franklin California
Intermediate-Term
Tax-Free Income Fund
Franklin California
Limited-Term
Tax-Free Income Fund
Franklin California
Tax-Exempt Money Fund
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ANNUAL REPORT AND SHAREHOLDER LETTER TAX-FREE INCOME
- --------------------------------------------------------------------------------
WANT TO RECEIVE
THIS DOCUMENT
FASTER VIA EMAIL?
FRANKLIN
CALIFORNIA TAX-FREE TRUST Eligible shareholders can
sign up for eDelivery at
franklintempleton.com.
See inside for details.
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[LOGO](R)
FRANKLIN TEMPLETON
INVESTMENTS
FRANKLIN o Templeton o Mutual Series
FRANKLIN TEMPLETON INVESTMENTS
GAIN FROM OUR PERSPECTIVE(R)
Franklin Templeton's distinct multi-manager
structure combines the specialized expertise of
three world-class investment management
groups--Franklin, Templeton and Mutual Series.
SPECIALIZED EXPERTISE Each of our portfolio management groups operates
autonomously, relying on its own research and
staying true to the unique investment disciplines
that underlie its success.
FRANKLIN. Founded in 1947, Franklin is a recognized
leader in fixed income investing and also brings
expertise in growth- and value-style U.S. equity
investing.
TEMPLETON. Founded in 1940, Templeton pioneered
international investing and, in 1954, launched what
has become the industry's oldest global fund. Today,
with offices in over 25 countries, Templeton offers
investors a truly global perspective.
MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what it
believes are undervalued stocks, as well as
arbitrage situations and distressed securities.
TRUE DIVERSIFICATION Because our management groups work independently and
adhere to different investment approaches, Franklin,
Templeton and Mutual Series funds typically have
distinct portfolios. That's why our funds can be
used to build truly diversified allocation plans
covering every major asset class.
RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with exceptional
risk-adjusted returns over the long term, as well as
the reliable, accurate and personal service that
has helped us become one of the most trusted
names in financial services.
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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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[GRAPHIC OMITTED]
Not part of the annual report
CONTENTS
SHAREHOLDER LETTER ..................................................... 1
SPECIAL FEATURE:
Understanding Interest Rates ........................................... 4
ANNUAL REPORT
State Update and Municipal Bond Market Overview ........................ 7
Franklin California Insured Tax-Free Income Fund ....................... 10
Franklin California Intermediate-Term Tax-Free Income Fund ............. 19
Franklin California Limited-Term Tax-Free Income Fund .................. 27
Franklin California Tax-Exempt Money Fund .............................. 33
Financial Highlights and Statements of Investments ..................... 37
Financial Statements ................................................... 71
Notes to Financial Statements........................................... 76
Report of Independent Registered Public Accounting Firm ................ 87
Tax Designation ........................................................ 88
Board Members and Officers ............................................. 89
Shareholder Information ................................................ 94
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ANNUAL REPORT
STATE UPDATE AND MUNICIPAL
BOND MARKET OVERVIEW
California's large and diverse economy showed signs of sustained growth. Foreign
trade, services and the entertainment industry powered the state's economy. Some
reports indicated that high technology might be poised for a turnaround, which
could benefit northern California. Southern California's economy began to
strengthen and may receive an additional boost from a defense buildup. The state
experienced employment performance similar to the nation's, but state personal
income growth lagged. California's unemployment rate was 5.4% in June 2005,
while the national average was 5.0%.(1) A downturn in capital gains and stock
option income, partially due to weakness in Silicon Valley, resulted in personal
income volatility.
California retained a large mismatch between ongoing revenues and expenditures.
Financial operations were volatile due to wide tax revenue swings, persistent
expenditure pressures arising from population growth and education spending
policies, and a limited willingness to maintain reserves. The state relied on
borrowing to fund accumulated operating deficits rather than on permanent
adjustments to bring the budget into balance. A portion of the $15 billion
deficit-financing bonds authorized by voters in March 2004 still remained for
California's use, and Governor Arnold Schwarzenegger proposed issuing $1.7
billion in bonds for fiscal year 2006.(2)
The recent increase in California's long-term debt resulted in an above-average
level of indebtedness relative to other states. Overall net tax-supported debt
stood at $1,387 per capita.(2) Furthermore, debt per capita nearly doubled over
the past four years. However, debt levels remained relatively moderate and
manageable.
At period-end independent credit rating agency Standard & Poor's (S&P) held a
stable outlook for California's general obligation bonds based on the state's
elimination of near-term liquidity pressures. However, projections of continued
large structural operating deficits kept S&P from raising the state's A
rating.(3) Moody's Investors Service, another independent credit rating agency,
held a positive outlook for California, reflecting the current trend of economic
recovery and the availability of unused deficit financing capacity. Moody's
affirmed the
(1) Source: Bureau of Labor Statistics.
(2) Source: Standard & Poor's, "Research: California; Tax Secured, General
Obligation," RATINGSDIRECT, 4/5/05.
(3) This does not indicate S&P's rating of the Fund.
Annual Report | 7
state's A3 general obligation bond rating and believes it unlikely that any
serious new strains on liquidity would occur over the next 18 months.(4)
For the one-year period ended June 30, 2005, the fixed income markets had
positive performance despite record high oil prices, fears of inflation,
concerns about the dollar, and mixed economic releases. Municipal bonds
outperformed U.S. Treasury bonds, as the Lehman Brothers Municipal Bond Index
returned 8.24% for the period, while the Lehman Brothers U.S. Treasury Index
returned 7.06%.(5)
While long-term interest rates experienced some volatility, short-term interest
rates had greater changes over the year. The Federal Reserve Board raised the
federal funds target rate from 1.25% to 3.25% in eight successive moves during
the year under review. The Treasury yield curve, which illustrates rates for
Treasuries with short to long maturities, flattened somewhat as short-term rates
went up and longer-maturity Treasuries declined. Over the one-year period, the
10-year Treasury bond yield decreased 68 basis points (100 basis points equal
one percentage point), while the 30-year Treasury bond yield decreased 101 basis
points. The 10-year Treasury yielded 3.94% and the 30-year yielded 4.19% on June
30, 2005. According to Municipal Market Data, 10- and 30-year municipal bond
yields decreased 50 and 76 basis points.(6) Consequently, long-maturity
municipal bonds outperformed intermediates.
(4) This does not indicate Moody's rating of the Fund.
(5) Source: Lehman Brothers Inc. The Lehman Brothers Municipal Bond Index is a
market value-weighted index engineered for the long-term tax-exempt bond
market. All bonds included have a minimum credit rating of at least Baa.
They must have an outstanding par value of at least $5 million and be
issued as part of a transaction of at least $50 million. The bonds must be
dated after 12/31/90, and must be at least one year from their maturity
date. Remarketed issues, taxable municipal bonds, bonds with floating
rates and derivatives are excluded from the index. The index has four main
bond sectors: general obligation, revenue, insured and prerefunded. The
Lehman Brothers U.S. Treasury Index includes public obligations of the
U.S. Treasury with a remaining maturity of one year or more. All issues
must have at least one year to final maturity regardless of call features,
have at least $250 million par amount outstanding and be rated investment
grade (Baa3 or better). They must also be dollar denominated,
nonconvertible and publicly issued. The index excludes Treasury bills
(because of the maturity constraint), flower bonds, targeted investor
notes (TINs), and state and local government series (SLGS) bonds, STRIPS
and Treasury Inflation-Protected Securities (TIPS).
(6) Source: Thomson Financial.
8 | Annual Report
Although short-term interest rates rose during the year, overall interest rates
remained relatively low. This environment led to another high-volume year for
new-issue municipal bonds. Just as homebuyers seek the lowest mortgage rates,
municipalities borrow money when interest rates are low. Thus, over the past two
years, municipalities have issued more bonds to lock in lower rates.
Municipalities issued more than $358 billion in new debt during 2004.(7)
Although this was a decrease of more than 6% from 2003 (a record year), 2004 was
the third successive year of more than $300 billion in new issuance.(7)
Continuing this trend, year-to-date through June 2005, issuance was
approximately $206 billion.(7) Demand for municipal bonds remained strong as
investors sought to reinvest proceeds from a combination of coupon payments,
maturities and bond calls. Healthy demand came from a wide range of traditional
buyers including mutual funds, individuals and property and casualty companies,
as well as crossover buyers. Crossover buyers, such as hedge funds, typically
invest in taxable securities, but they enter the tax-exempt market when
municipal valuations are attractive.
(7). Source: THE BOND BUYER.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS AND OPINIONS AS OF JUNE 30,
2005, THE END OF THE REPORTING PERIOD. THE INFORMATION IS NOT A COMPLETE
ANALYSIS OF EVERY ASPECT OF ANY MARKET, STATE, INDUSTRY, SECURITY OR FUND.
STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED RELIABLE.
Annual Report | 9
FRANKLIN CALIFORNIA INSURED
TAX-FREE INCOME FUND
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin California Tax-Free Income Fund
seeks to provide high, current income exempt from federal and California
personal income taxes consistent with prudent investment management and the
preservation of capital by investing at least 80% of its total assets in insured
securities that pay interest free from such taxes.(1),(2)
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PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
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We are pleased to bring you Franklin California Insured Tax-Free Income Fund's
annual report for the fiscal year ended June 30, 2005.
PERFORMANCE OVERVIEW
Because bond yield and price move in opposite directions, as municipal bond
yields fell, bond prices rose for the 12-month reporting period. The Fund's
Class A share price, as measured by net asset value, increased from $12.24 on
June 30, 2004, to $12.85 on June 30, 2005. The Fund's Class A shares paid
dividends totaling 55.74 cents per share for the same period.(3) The Performance
Summary beginning on page 13 shows that at the end of this reporting period the
Fund's Class A shares' distribution rate was 4.13%, based on an annualization of
the current 4.62 cent per share dividend and the maximum offering price of
$13.42 on June 30, 2005. An investor in the 2005 maximum combined federal and
California state personal income tax bracket of 41.05% would need to earn a
distribution rate of 7.01% from a taxable investment to match the Fund's Class A
tax-free distribution rate. For the Fund's Class B and C shares' performance,
please see the Performance Summary.
The Fund was subject to bond calls during the 12 months under review as many
municipal bond issuers sought to take advantage of lower interest rates and
exercised call options on their outstanding higher-coupon bonds issued several
years ago. In general, we were limited to reinvesting the proceeds from these
bond calls as well as from cash inflows at current, lower interest rates, which
tended to reduce the Fund's income and cause dividend distributions to decline
slightly, as shown in the dividend distributions table.
(1) For investors subject to alternative minimum tax, a small portion of Fund
dividends 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) 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.
All Fund distributions will vary depending upon current market conditions,
and past distributions are not indicative of future trends.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 40.
10 | Annual Report
DIVIDEND DISTRIBUTIONS(3)
Franklin California Insured Tax-Free Income Fund
7/1/04-6/30/05
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DIVIDEND PER SHARE
----------------------------------------------
MONTH CLASS A CLASS B CLASS C
- ----------------------------------------------------------------
July 4.68 cents 4.11 cents 4.09 cents
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August 4.68 cents 4.11 cents 4.09 cents
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September 4.68 cents 4.11 cents 4.11 cents
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October 4.68 cents 4.11 cents 4.11 cents
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November 4.68 cents 4.11 cents 4.11 cents
- ----------------------------------------------------------------
December 4.62 cents 4.02 cents 4.03 cents
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January 4.62 cents 4.02 cents 4.03 cents
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February 4.62 cents 4.02 cents 4.03 cents
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March 4.62 cents 4.02 cents 4.02 cents
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April 4.62 cents 4.02 cents 4.02 cents
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May 4.62 cents 4.02 cents 4.02 cents
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June 4.62 cents 4.06 cents 4.03 cents
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TOTAL 55.74 CENTS 48.73 CENTS 48.69 CENTS
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INVESTMENT STRATEGY
We use a consistent, disciplined strategy to maximize income for our
shareholders by seeking to maintain our exposure to higher coupon securities. We
generally employ a buy-and-hold approach and invest in securities that we
believe should provide the most relative value in the market. As we invest
throughout different interest rate environments, the Fund's portfolio becomes
well diversified with a broad range of coupons, calls and maturities. This broad
diversification may help mitigate interest rate risk. We generally stay fully
invested to maximize income distribution.
MANAGER'S DISCUSSION
The combination of higher short-term interest rates and lower long-term interest
rates resulted in a flatter yield curve, which benefited the Fund.
Consistent with our strategy, we sought to remain fully invested in bonds that
maintain an average weighted maturity of 15 to 30 years with good call features.
We also maintained our conservative, buy-and-hold investment strategy as we
attempted to provide shareholders with high, current, tax-free income.
PORTFOLIO BREAKDOWN
Franklin California Insured
Tax-Free Income Fund
6/30/05
- -------------------------------------------------
% OF TOTAL
LONG-TERM INVESTMENTS*
- -------------------------------------------------
General Obligation 17.0%
- -------------------------------------------------
Transportation 16.5%
- -------------------------------------------------
Prerefunded 11.7%
- -------------------------------------------------
Tax-Supported 11.6%
- -------------------------------------------------
Subject to Government Appropriations 11.4%
- -------------------------------------------------
Utilities 11.4%
- -------------------------------------------------
Hospital & Health Care 8.4%
- -------------------------------------------------
Higher Education 6.7%
- -------------------------------------------------
Other Revenue 4.6%
- -------------------------------------------------
Housing 0.7%
- -------------------------------------------------
* Does not include short-term investments and other net assets.
Annual Report | 11
Thank you for your participation in Franklin California Insured Tax-Free Income
Fund. We look forward to serving your future investment needs.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JUNE 30, 2005, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR
MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, STATE,
INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE, BUT THE ADVISER MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR
COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT
PHILOSOPHY.
12 | Annual Report
PERFORMANCE SUMMARY AS OF 6/30/05
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 reinvestment of the Fund's
dividends and capital gain distributions, if any, and any unrealized gains or
losses.
PRICE AND DISTRIBUTION INFORMATION
- --------------------------------------------------------------------------------
CLASS A (SYMBOL: FRCIX) CHANGE 6/30/05 6/30/04
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.61 $12.85 $12.24
- --------------------------------------------------------------------------------
DISTRIBUTIONS (7/1/04-6/30/05)
- --------------------------------------------------------------------------------
Dividend Income $ 0.5574
- --------------------------------------------------------------------------------
CLASS B (SYMBOL: FRCBX) CHANGE 6/30/05 6/30/04
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.62 $12.91 $12.29
- --------------------------------------------------------------------------------
DISTRIBUTIONS (7/1/04-6/30/05)
- --------------------------------------------------------------------------------
Dividend Income $ 0.4873
- --------------------------------------------------------------------------------
CLASS C (SYMBOL: FRCAX) CHANGE 6/30/05 6/30/04
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.63 $12.97 $12.34
- --------------------------------------------------------------------------------
DISTRIBUTIONS (7/1/04-6/30/05)
- --------------------------------------------------------------------------------
Dividend Income $ 0.4869
- --------------------------------------------------------------------------------
Annual Report | 13
PERFORMANCE SUMMARY (CONTINUED)
PERFORMANCE
CLASS A: 4.25% MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES
CHARGE (CDSC) DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER;
CLASS C: 1% CDSC IN FIRST YEAR ONLY. CUMULATIVE TOTAL RETURN EXCLUDES SALES
CHARGES. AVERAGE ANNUAL TOTAL RETURN INCLUDES MAXIMUM SALES CHARGES.
- ------------------------------------------------------------------------------------------------
CLASS A 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------------------------------------------------------------------
Cumulative Total Return(1) +9.70% +37.66% +78.81%
- ------------------------------------------------------------------------------------------------
Average Annual Total Return(2) +5.07% +5.68% +5.52%
- ------------------------------------------------------------------------------------------------
Distribution Rate(3) 4.13%
- ------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate(4) 7.01%
- ------------------------------------------------------------------------------------------------
30-Day Standardized Yield(5) 3.16%
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Taxable Equivalent Yield(4) 5.36%
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CLASS B 1-YEAR 5-YEAR INCEPTION (2/1/00)
- ------------------------------------------------------------------------------------------------
Cumulative Total Return(1) +9.15% +34.21% +41.94%
- ------------------------------------------------------------------------------------------------
Average Annual Total Return(2) +5.15% +5.74% +6.54%
- ------------------------------------------------------------------------------------------------
Distribution Rate(3) 3.77%
- ------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate(4) 6.39%
- ------------------------------------------------------------------------------------------------
30-Day Standardized Yield(5) 2.75%
- ------------------------------------------------------------------------------------------------
Taxable Equivalent Yield(4) 4.66%
- ------------------------------------------------------------------------------------------------
CLASS C 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------------------------------------------------------------------
Cumulative Total Return(1) +9.19% +34.01% +69.50%
- ------------------------------------------------------------------------------------------------
Average Annual Total Return(2) +8.19% +6.03% +5.42%
- ------------------------------------------------------------------------------------------------
Distribution Rate(3) 3.73%
- ------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate(4) 6.33%
- ------------------------------------------------------------------------------------------------
30-Day Standardized Yield(5) 2.76%
- ------------------------------------------------------------------------------------------------
Taxable Equivalent Yield(4) 4.68%
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PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN.
FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.
14 | 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 any current, applicable, maximum sales charge, Fund expenses,
account fees and reinvested distributions. The unmanaged index includes
reinvestment of any income or distributions. It differs from the Fund in
composition and does not pay management fees or expenses. One cannot invest
directly in an index. The Consumer Price Index (CPI), calculated by the U.S.
Bureau of Labor Statistics, is a commonly used measure of the inflation rate.
AVERAGE ANNUAL TOTAL RETURN
- -------------------------------------------------
CLASS A 6/30/05
- -------------------------------------------------
1-Year +5.07%
- -------------------------------------------------
5-Year +5.68%
- -------------------------------------------------
10-Year +5.52%
- -------------------------------------------------
CLASS A (7/1/95-6/30/05)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Franklin
California Insured Lehman Brothers
Date Tax-Free Income Fund Municipal Bond Index(6) CPI(6)
---------- --------------------- ------------------------- ------
07/95 9575 10000 10000
9636 10094.6 10000
9722 10222.7 10026.2
9783 10287.3 10045.9
9926 10436.8 10078.7
10111 10610.2 10072.1
10231 10712.1 10065.6
10294 10793 10124.6
10241 10720.1 10157.4
10088 10583.2 10209.8
10051 10553.2 10249.2
10056 10549.1 10268.9
10171 10664.1 10275.4
10260 10760.6 10295.1
10298 10758.2 10314.8
10439 10908.5 10347.5
10538 11032.1 10380.3
10698 11233.9 10400
10659 11186.5 10400
10655 11207.6 10432.8
10746 11310.5 10465.6
10610 11159.6 10491.8
10703 11253.2 10504.9
10840 11422.6 10498.4
06/97 10924 11544.2 10511.5
11224 11864 10524.6
11129 11752.7 10544.3
11251 11892.1 10570.5
11317 11968.8 10596.7
11384 12039.2 10590.2
11538 12214.8 10577
11652 12340.7 10596.7
11664 12344.5 10616.4
11676 12355.5 10636.1
11622 12299.7 10655.7
11785 12494.3 10675.4
11845 12543.6 10688.5
11867 12575 10701.6
12032 12769.3 10714.8
12217 12928.5 10727.9
12230 12928.2 10754.1
12281 12973.5 10754.1
12289 13006.2 10747.5
12390 13160.8 10773.8
12382 13103.5 10786.9
12412 13121.4 10819.7
12413 13154.1 10898.4
12354 13078 10898.4
06/99 12165 12889.9 10898.4
12175 12936.8 10931.1
12014 12833.1 10957.4
12025 12838.4 11009.8
11842 12699.3 11029.5
11934 12834.4 11036.1
11844 12738.7 11036.1
11752 12683.2 11068.9
11960 12830.6 11134.4
12252 13111 11226.2
12147 13033.5 11232.8
12096 12965.7 11245.9
12434 13309.3 11304.9
12593 13494.5 11331.1
12839 13702.5 11331.1
12807 13631.2 11390.2
12904 13779.9 11409.8
13013 13884.2 11416.4
13327 14227.2 11409.8
13403 14368.2 11482
13437 14413.7 11527.9
13558 14542.9 11554.1
13350 14385.3 11600
13494 14540.2 11652.5
06/01 13527 14637.5 11672.1
13739 14854.3 11639.3
14052 15099 11639.3
14007 15048.4 11691.8
14153 15227.7 11652.5
14095 15099.3 11632.8
13946 14956.5 11586.9
14126 15215.9 11613.1
14250 15399.2 11659
13926 15097.4 11724.6
14143 15392.5 11790.2
14234 15486 11790.2
14359 15649.8 11796.7
14520 15851 11809.8
14741 16041.6 11849.2
15173 16393 11868.9
14794 16121.2 11888.5
14755 16054.2 11888.5
15038 16393 11862.3
14963 16351.4 11914.8
15200 16580 12006.6
15233 16589.9 12078.7
15375 16699.5 12052.5
15747 17090.6 12032.8
06/03 15645 17017.9 12045.9
15018 16422.4 12059
15075 16544.9 12104.9
15440 17031.3 12144.3
15424 16945.6 12131.1
15656 17122.2 12098.4
15776 17264 12085.2
15883 17362.8 12144.3
16168 17624.2 12209.8
16087 17562.8 12288.5
15642 17146.8 12327.9
15562 17084.7 12400
15609 17146.8 12439.3
15822 17372.5 12419.7
16164 17720.6 12426.2
16250 17814.7 12452.5
16426 17968 12518
16279 17819.8 12524.6
16521 18037.4 12478.7
16777 18206 12504.9
16733 18145.4 12577
16609 18031 12675.4
16895 18315.3 12760.7
17009 18444.8 12747.5
06/05 17121 18559.2 12754.1
AVERAGE ANNUAL TOTAL RETURN
- -------------------------------------------------
CLASS B 6/30/05
- -------------------------------------------------
1-Year +5.15%
- -------------------------------------------------
5-Year +5.74%
- -------------------------------------------------
Since Inception (2/1/00) +6.54%
- -------------------------------------------------
CLASS B (2/1/00-6/30/05)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Franklin
California Insured Lehman Brothers
Date Tax-Free Income Fund Municipal Bond Index(6) CPI(6)
- --------- --------------------- ------------------------- ------
02/00 10000 10000 10000
10166 10116.2 10059.2
10418 10337.2 10142.2
10317 10276.2 10148.1
10277 10222.7 10160
10559 10493.6 10213.3
10689 10639.6 10237
10892 10803.6 10237
10860 10747.4 10290.3
10946 10864.7 10308.1
11033 10946.9 10314
11294 11217.3 10308.1
11353 11328.5 10373.2
11377 11364.4 10414.7
11473 11466.2 10438.4
11301 11342 10479.9
06/01 11417 11464.1 10527.2
11440 11540.8 10545
11613 11711.8 10515.4
11872 11904.7 10515.4
11828 11864.8 10562.8
11946 12006.1 10527.2
11893 11904.9 10509.5
11771 11792.3 10468
11907 11996.8 10491.7
12014 12141.4 10533.2
11727 11903.4 10592.4
11913 12136.1 10651.7
11984 12209.8 10651.7
06/02 12084 12338.9 10657.6
12213 12497.6 10669.4
12393 12647.9 10705
12749 12924.9 10722.8
12426 12710.6 10740.5
12378 12657.8 10740.5
12618 12924.9 10716.8
12550 12892.1 10764.2
12742 13072.4 10847.2
12763 13080.2 10912.3
12876 13166.6 10888.6
13191 13474.9 10870.9
06/03 13090 13417.6 10882.7
12561 12948.1 10894.5
12603 13044.7 10936
12901 13428.2 10971.6
12881 13360.6 10959.7
13067 13499.8 10930.1
13172 13611.6 10918.2
13246 13689.6 10971.6
13486 13895.6 11030.8
13414 13847.2 11101.9
13028 13519.3 11137.4
12956 13470.3 11202.6
06/04 12989 13519.3 11238.1
13159 13697.2 11220.4
13447 13971.7 11226.3
13512 14045.9 11250
13641 14166.7 11309.2
13524 14049.9 11315.2
13718 14221.5 11273.7
13923 14354.4 11297.4
13880 14306.6 11362.6
13771 14216.4 11451.4
14000 14440.6 11528.4
14088 14542.6 11516.6
06/05 14094 14632.9 11522.5
Annual Report | 15
PERFORMANCE SUMMARY (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN
- -------------------------------------------------
CLASS C 6/30/05
- -------------------------------------------------
1-Year +8.19%
- -------------------------------------------------
5-Year +6.03%
- -------------------------------------------------
10-Year +5.42%
- -------------------------------------------------
CLASS C (7/1/95-6/30/05)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Franklin
California Insured Lehman Brothers
Date Tax-Free Income Fund Municipal Bond Index(6) CPI(6)
- --------- --------------------- ------------------------- -------
07/95 10000 10000 10000
10058 10094.6 10000
10151 10222.7 10026.2
10201 10287.3 10045.9
10353 10436.8 10078.7
10540 10610.2 10072.1
10660 10712.1 10065.6
10720 10793 10124.6
10659 10720.1 10157.4
10505 10583.2 10209.8
10462 10553.2 10249.2
10462 10549.1 10268.9
10576 10664.1 10275.4
10670 10760.6 10295.1
10695 10758.2 10314.8
10836 10908.5 10347.5
10933 11032.1 10380.3
11102 11233.9 10400
11049 11186.5 10400
11039 11207.6 10432.8
11137 11310.5 10465.6
10991 11159.6 10491.8
11072 11253.2 10504.9
06/97 11217 11422.6 10498.4
11298 11544.2 10511.5
11601 11864 10524.6
11499 11752.7 10544.3
11618 11892.1 10570.5
11681 11968.8 10596.7
11753 12039.2 10590.2
11896 12214.8 10577
12017 12340.7 10596.7
12013 12344.5 10616.4
12020 12355.5 10636.1
11969 12299.7 10655.7
12130 12494.3 10675.4
06/98 12185 12543.6 10688.5
12192 12575 10701.6
12355 12769.3 10714.8
12548 12928.5 10727.9
12545 12928.2 10754.1
12602 12973.5 10754.1
12595 13006.2 10747.5
12701 13160.8 10773.8
12687 13103.5 10786.9
12712 13121.4 10819.7
12706 13154.1 10898.4
12640 13078 10898.4
06/99 12442 12889.9 10898.4
12446 12936.8 10931.1
12277 12833.1 10957.4
12282 12838.4 11009.8
12092 12699.3 11029.5
12180 12834.4 11036.1
12083 12738.7 11036.1
11973 12683.2 11068.9
12178 12830.6 11134.4
12478 13111 11226.2
12368 13033.5 11232.8
12310 12965.7 11245.9
12646 13309.3 11304.9
12801 13494.5 11331.1
13043 13702.5 11331.1
13005 13631.2 11390.2
13108 13779.9 11409.8
13201 13884.2 11416.4
13512 14227.2 11409.8
13594 14368.2 11482
13622 14413.7 11527.9
13737 14542.9 11554.1
13521 14385.3 11600
13659 14540.2 11652.5
06/01 13686 14637.5 11672.1
13892 14854.3 11639.3
14200 15099 11639.3
14148 15048.4 11691.8
14288 15227.7 11652.5
14224 15099.3 11632.8
14068 14956.5 11586.9
14241 15215.9 11613.1
14357 15399.2 11659
14027 15097.4 11724.6
14237 15392.5 11790.2
14333 15486 11790.2
14440 15649.8 11796.7
14595 15851 11809.8
14820 16041.6 11849.2
15256 16393 11868.9
14859 16121.2 11888.5
14802 16054.2 11888.5
15089 16393 11862.3
15007 16351.4 11914.8
15236 16580 12006.6
15262 16589.9 12078.7
15396 16699.5 12052.5
15770 17090.6 12032.8
06/03 15650 17017.9 12045.9
15020 16422.4 12059
15070 16544.9 12104.9
15424 17031.3 12144.3
15401 16945.6 12131.1
15623 17122.2 12098.4
15747 17264 12085.2
15835 17362.8 12144.3
16121 17624.2 12209.8
16035 17562.8 12288.5
15574 17146.8 12327.9
15489 17084.7 12400
15528 17146.8 12439.3
15743 17372.5 12419.7
16072 17720.6 12426.2
16149 17814.7 12452.5
16316 17968 12518
16164 17819.8 12524.6
16395 18037.4 12478.7
16652 18206 12504.9
16588 18145.4 12577
16459 18031 12675.4
16744 18315.3 12760.7
16849 18444.8 12747.5
06/05 16950 18559.2 12754.1
ENDNOTES
MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO INTEREST RATE MOVEMENTS;
THEREFORE, THE FUND'S YIELD AND SHARE PRICE WILL FLUCTUATE WITH MARKET
CONDITIONS. BOND PRICES GENERALLY MOVE IN THE OPPOSITE DIRECTION FROM INTEREST
RATES. THUS, AS PRICES OF BONDS IN THE FUND ADJUST TO A RISE IN INTEREST RATES,
THE FUND'S SHARE PRICE MAY DECLINE. SINCE THE FUND CONCENTRATES ITS INVESTMENTS
IN A SINGLE STATE, IT IS SUBJECT TO GREATER RISK OF ADVERSE ECONOMIC AND
REGULATORY CHANGES IN THAT STATE THAN A GEOGRAPHICALLY DIVERSIFIED FUND. THE
FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS.
CLASS B: These shares have higher annual fees and expenses than Class
A shares.
CLASS C: Prior to 1/1/04, these shares were offered with an initial
sales charge; thus actual total returns would have differed.
These shares have higher annual fees and expenses than Class
A shares.
(1) Cumulative total return represents the change in value of an investment
over the periods indicated and does not include a sales charge.
(2) Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes any current,
applicable, maximum sales charge.
(3) Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price (NAV for Classes B
and C) per share on 6/30/05.
(4) Taxable equivalent distribution rate and yield assume the published rates
as of 6/3/05 for the maximum combined federal and California 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 6/30/05.
(6) Sources: Lehman Brothers Inc.; Standard & Poor's Micropal. The Lehman
Brothers Municipal Bond Index is a market value-weighted index engineered
for the long-term tax-exempt bond market. All bonds included have a
minimum credit rating of at least Baa. They must have an outstanding par
value of at least $5 million and be issued as part of a transaction of at
least $50 million. The bonds must be dated after 12/31/90, and must be at
least one year from their maturity date. Remarketed issues, taxable
municipal bonds, bonds with floating rates and derivatives are excluded
from the index. The index has four main bond sectors: general obligation,
revenue, insured and prerefunded.
16 | Annual Report
YOUR FUND'S EXPENSES
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table below provides
actual account values and expenses. The "Ending Account Value" is derived from
the Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period, by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
Annual Report | 17
YOUR FUND'S EXPENSES (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. In addition, if transaction costs were included, your
total costs would have been higher. Please refer to the Fund prospectus for
additional information on operating expenses.
- ---------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 12/31/04 VALUE 6/30/05 PERIOD* 12/31/04-6/30/05
- ---------------------------------------------------------------------------------------------------------
Actual $1,000 $1,036.50 $3.08
- ---------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,021.77 $3.06
- ---------------------------------------------------------------------------------------------------------
CLASS B
- ---------------------------------------------------------------------------------------------------------
Actual $1,000 $1,033.50 $5.85
- ---------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.04 $5.81
- ---------------------------------------------------------------------------------------------------------
CLASS C
- ---------------------------------------------------------------------------------------------------------
Actual $1,000 $1,034.10 $5.85
- ---------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.04 $5.81
- ---------------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio for each class (A: 0.61%;
B: 1.16%; and C: 1.16%), multiplied by the average account value over the
period, multiplied by 181/365 to reflect the one-half year period.
18 | Annual Report
FRANKLIN CALIFORNIA INTERMEDIATE-TERM
TAX-FREE INCOME FUND
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin California Intermediate-Term
Tax-Free Income Fund seeks to provide high, current income exempt from federal
and California personal income taxes consistent with prudent investment
management and the preservation of capital by investing at least 80% of its
total assets in securities that pay interest free from such taxes. The Fund
maintains a dollar-weighted average portfolio maturity (the time at which the
debt must be repaid) of 3 to 10 years.(1)
- --------------------------------------------------------------------------------
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CREDIT QUALITY BREAKDOWN*
Franklin California Intermediate-Term Tax-Free Income Fund
6/30/05
- -----------------------------------------------------------
% OF TOTAL
RATINGS LONG-TERM INVESTMENTS**
- -----------------------------------------------------------
AAA 50.7%
- -----------------------------------------------------------
AA 5.2%
- -----------------------------------------------------------
A 18.8%
- -----------------------------------------------------------
BBB 10.0%
- -----------------------------------------------------------
Below Investment Grade 0.6%
- -----------------------------------------------------------
Not Rated by S&P 14.7%
- -----------------------------------------------------------
* Standard & Poor's (S&P) is the primary independent rating agency; Moody's and
Fitch are the secondary and tertiary rating agencies. Securities not rated by an
independent rating agency are assigned comparable internal ratings. Ratings for
securities not rated by S&P are in the table below.
** Does not include short-term investments and other net assets.
RATINGS MOODY'S FITCH INTERNAL
AAA or Aaa 3.3% -- 0.9%
A 0.5% -- 0.4%
BBB or Baa 1.1% 0.3% 8.2%
- -------------------------------------------------------
Total 4.9% 0.3% 9.5%
- --------------------------------------------------------------------------------
We are pleased to bring you Franklin California Intermediate-Term Tax-Free
Income Fund's annual report for the fiscal year ended June 30, 2005.
PERFORMANCE OVERVIEW
Because bond yield and price move in opposite directions, as municipal bond
yields fell, bond prices rose for the 12-month reporting period. The Fund's
(1) For investors subject to alternative minimum tax, a small portion of Fund
dividends may be taxable. Distributions of capital gains are generally
taxable.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 53.
Annual Report | 19
PORTFOLIO BREAKDOWN
Franklin California Intermediate-Term
Tax-Free Income Fund
6/30/05
- -------------------------------------------------
% OF TOTAL
LONG-TERM INVESTMENTS*
- -------------------------------------------------
General Obligation 24.4%
- -------------------------------------------------
Tax-Supported 18.9%
- -------------------------------------------------
Hospital & Health Care 15.5%
- -------------------------------------------------
Utilities 11.5%
- -------------------------------------------------
Subject to Government Appropriations 10.9%
- -------------------------------------------------
Prerefunded 6.9%
- -------------------------------------------------
Other Revenue 4.8%
- -------------------------------------------------
Transportation 3.4%
- -------------------------------------------------
Housing 2.3%
- -------------------------------------------------
Higher Education 1.4%
- -------------------------------------------------
* Does not include short-term investments and other net assets.
Class A share price, as measured by net asset value, increased from $11.36 on
June 30, 2004, to $11.68 on June 30, 2005. The Fund's Class A shares paid
dividends totaling 42.71 cents per share for the same period.(2) The Performance
Summary beginning on page 22 shows that at the end of this reporting period the
Fund's Class A shares' distribution rate was 3.54%, based on an annualization of
the current 3.53 cent per share dividend and the maximum offering price of
$11.95 on June 30, 2005. An investor in the 2005 maximum combined federal and
California state personal income tax bracket of 41.05% would need to earn a
distribution rate of 6.00% from a taxable investment to match the Fund's Class A
tax-free distribution rate. For the Fund's Class C shares' performance, please
see the Performance Summary.
The Fund was subject to bond calls during the 12 months under review as many
municipal bond issuers sought to take advantage of lower interest rates and
exercised call options on their outstanding higher-coupon bonds issued several
years ago. In general, we were limited to reinvesting the proceeds from these
bond calls as well as from cash inflows at current, lower interest rates, which
tended to reduce the Fund's income and cause dividend distributions to decline
slightly, as shown in the dividend distribution's table.
INVESTMENT STRATEGY
We use a consistent, disciplined strategy to maximize income for our
shareholders by seeking to maintain our exposure to higher coupon securities. We
generally employ a buy-and-hold approach and invest in securities that we
believe should provide the most relative value in the market. As we invest
throughout different interest rate environments, the Fund's portfolio becomes
well diversified with a broad range of coupons, calls and maturities. This broad
diversification may help mitigate interest rate risk. We generally stay fully
invested to maximize income distributions.
(2). 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.
All Fund distributions will vary depending upon current market conditions,
and past distributions are not indicative of future trends.
20 | Annual Report
DIVIDEND DISTRIBUTIONS(2)
Franklin California Intermediate-Term Tax-Free Income Fund
7/1/04-6/30/05
- -------------------------------------------------------------
DIVIDEND PER SHARE
-----------------------------
MONTH CLASS A CLASS C
- -------------------------------------------------------------
July 3.60 cents 3.05 cents
- -------------------------------------------------------------
August 3.60 cents 3.05 cents
- -------------------------------------------------------------
September 3.60 cents 3.07 cents
- -------------------------------------------------------------
October 3.60 cents 3.07 cents
- -------------------------------------------------------------
November 3.60 cents 3.07 cents
- -------------------------------------------------------------
December 3.53 cents 2.99 cents
- -------------------------------------------------------------
January 3.53 cents 2.99 cents
- -------------------------------------------------------------
February 3.53 cents 2.99 cents
- -------------------------------------------------------------
March 3.53 cents 2.98 cents
- -------------------------------------------------------------
April 3.53 cents 2.98 cents
- -------------------------------------------------------------
May 3.53 cents 2.98 cents
- -------------------------------------------------------------
June 3.53 cents 2.99 cents
- -------------------------------------------------------------
TOTAL 42.71 CENTS 36.21 CENTS
- -------------------------------------------------------------
MANAGER'S DISCUSSION
Consistent with our strategy, we typically look to remain fully invested in a
portfolio of bonds that maintain an average weighted maturity of 3 to 10 years.
We also maintained our conservative, buy-and-hold investment strategy as we
attempted to provide shareholders with high, current, tax-free income.
Thank you for your participation in Franklin California Intermediate-Term
Tax-Free Income Fund. We look forward to serving your future investment needs.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JUNE 30, 2005, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR
MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, STATE,
INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE, BUT THE ADVISER MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR
COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT
PHILOSOPHY.
Annual Report | 21
PERFORMANCE SUMMARY AS OF 6/30/05
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table 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 reinvestment of the Fund's
dividends and capital gain distributions, if any, and any unrealized gains or
losses.
PRICE AND DISTRIBUTION INFORMATION
- --------------------------------------------------------------------------------------------
CLASS A (SYMBOL: FKCIX) CHANGE 6/30/05 6/30/04
- --------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.32 $11.68 $11.36
- --------------------------------------------------------------------------------------------
DISTRIBUTIONS (7/1/04-6/30/05)
- --------------------------------------------------------------------------------------------
Dividend Income $0.4271
- --------------------------------------------------------------------------------------------
CLASS C (SYMBOL: FCCIX) CHANGE 6/30/05 6/30/04
- --------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.33 $11.70 $11.37
- --------------------------------------------------------------------------------------------
DISTRIBUTIONS (7/1/04-6/30/05)
- --------------------------------------------------------------------------------------------
Dividend Income $0.3621
- --------------------------------------------------------------------------------------------
PERFORMANCE
CLASS A: 2.25% MAXIMUM INITIAL SALES CHARGE; CLASS C: 1% CONTINGENT DEFERRED
SALES CHARGE IN FIRST YEAR ONLY. CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES.
AVERAGE ANNUAL TOTAL RETURN INCLUDES MAXIMUM SALES CHARGES.
- ------------------------------------------------------------------------------------------------
CLASS A(1) 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------------------------------------------------------------------
Cumulative Total Return(2) +6.67% +30.80% +74.62%
- ------------------------------------------------------------------------------------------------
Average Annual Total Return(3) +4.28% +5.04% +5.49%
- ------------------------------------------------------------------------------------------------
Distribution Rate(4) 3.54%
- ------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate(5) 6.00%
- ------------------------------------------------------------------------------------------------
30-Day Standardized Yield(6) 3.03%
- ------------------------------------------------------------------------------------------------
Taxable Equivalent Yield(5) 5.14%
- ------------------------------------------------------------------------------------------------
CLASS C 1-YEAR INCEPTION (7/1/03)
- ------------------------------------------------------------------------------------------------
Cumulative Total Return(2) +6.15% +6.27%
- ------------------------------------------------------------------------------------------------
Average Annual Total Return(3) +5.15% +3.09%
- ------------------------------------------------------------------------------------------------
Distribution Rate(4) 3.07%
- ------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate(5) 5.21%
- ------------------------------------------------------------------------------------------------
30-Day Standardized Yield(6) 2.57%
- ------------------------------------------------------------------------------------------------
Taxable Equivalent Yield(5) 4.36%
- ------------------------------------------------------------------------------------------------
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN.
FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.
22 | 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 any current, applicable, maximum sales charge, Fund expenses,
account fees and reinvested distributions. The unmanaged index includes
reinvestment of any income or distributions. It differs from the Fund in
composition and does not pay management fees or expenses. One cannot invest
directly in an index. The Consumer Price Index (CPI), calculated by the U.S.
Bureau of Labor Statistics, is a commonly used measure of the inflation rate.
AVERAGE ANNUAL TOTAL RETURN
- -------------------------------------------------
CLASS A(1) 6/30/05
- -------------------------------------------------
1-Year +4.28%
- -------------------------------------------------
5-Year +5.04%
- -------------------------------------------------
10-Year +5.49%
- -------------------------------------------------
CLASS A (7/1/95-6/30/05)(1)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Franklin California
Intermediate - Term Lehman Brothers Municipal
Date Tax-Free Income Fund 10-Year Bond Index(7) CPI(7)
- --------- --------------------- --------------------------- -------
07/95 9774 10000 10000
9900 10146.8 10000
10056 10284.5 10026.2
10136 10350.3 10045.9
10292 10469.7 10078.7
10440 10610.3 10072.1
10482 10675.2 10065.6
10573 10783.4 10124.6
10548 10739 10157.4
10474 10605.5 10209.8
10449 10568 10249.2
10452 10538.3 10268.8
10555 10638.5 10275.4
10638 10740.5 10295.1
10642 10740.7 10314.8
10746 10851.1 10347.5
10860 10988.3 10380.3
11045 11210.8 10400
11009 11160.2 10400
11043 11204.3 10432.8
11118 11309.8 10465.6
11020 11158.2 10491.8
11106 11240.4 10504.9
11255 11399.6 10498.4
06/97 11352 11525.5 10511.5
11626 11849.3 10524.6
11557 11734.4 10544.3
11666 11883.2 10570.5
11734 11946.1 10596.7
11791 12001.5 10590.2
11922 12190.9 10577
12043 12326.1 10596.7
12058 12325.3 10616.4
12062 12316.8 10636.1
12034 12249 10655.7
12201 12457.4 10675.4
12237 12503.1 10688.5
12285 12523.2 10701.6
12454 12740.8 10714.8
12622 12930.2 10727.9
12636 12935.9 10754.1
12673 12974.5 10754.1
12698 13014.9 10747.5
12836 13214.2 10773.8
12794 13095.6 10786.9
12819 13088.9 10819.7
12832 13123.9 10898.4
12744 13031.8 10898.4
06/99 12553 12789.6 10898.4
12635 12875.5 10931.2
12592 12828 10957.4
12641 12871.2 11009.8
12529 12780.3 11029.5
12637 12920 11036.1
12512 12852.9 11036.1
12528 12800.4 11068.8
12626 12900.9 11134.4
12853 13151.8 11226.2
12775 13085.8 11232.8
12767 13008.1 11245.9
06/00 13045 13361.6 11304.9
13205 13546.5 11331.2
13426 13756.8 11331.2
13406 13693 11390.2
13483 13833.3 11409.8
13536 13908.6 11416.4
13747 14235.8 11409.8
13910 14419.3 11482
13952 14443.9 11527.9
14005 14566.4 11554.1
13847 14386.6 11600
14013 14543 11652.5
14079 14629.9 11672.1
14245 14830.3 11639.3
14488 15083.6 11639.3
14466 15062.4 11691.8
14609 15248.7 11652.5
14499 15052.2 11632.8
14358 14893 11586.9
14588 15174.2 11613.1
14743 15390.7 11659
14403 15074 11724.6
14684 15423.4 11790.2
14797 15496.6 11790.2
06/02 14898 15689.1 11796.7
15064 15897.7 11809.8
15269 16104.9 11849.2
15581 16489.1 11868.8
15221 16189.6 11888.5
15177 16056.9 11888.5
15465 16408.1 11862.3
15355 16320.3 11914.8
15592 16602 12006.6
15588 16610.5 12078.7
15691 16734.4 12052.5
16038 17213.5 12032.8
06/03 15925 17131 12045.9
15350 16412 12059
15482 16552.6 12104.9
15901 17109.9 12144.3
15814 16979.2 12131.2
15946 17162.1 12098.4
16079 17343.1 12085.2
16157 17416.4 12144.3
16443 17722.4 12209.8
16368 17621.7 12288.5
15986 17135 12327.9
15912 17145.4 12400
16005 17202.5 12439.3
16182 17437.9 12419.7
16488 17819.8 12426.2
16567 17914.7 12452.5
16689 18057.2 12518
16541 17852.9 12524.6
16720 18062.6 12478.7
16857 18215.6 12504.9
16764 18100.7 12577
16627 17942.4 12675.4
16910 18289.9 12760.7
16975 18412.9 12747.5
06/05 17068 18519.1 12754.1
AVERAGE ANNUAL TOTAL RETURN
- -------------------------------------------------
CLASS C 6/30/05
- -------------------------------------------------
1-Year +5.15%
- -------------------------------------------------
Since Inception (7/1/03) +3.09%
- -------------------------------------------------
CLASS C (7/1/03-6/30/05)
Franklin California
Intermediate-Term Lehman Brothers Municipal
Date Tax-Free Income Fund 10-Year Bond Index(7) CPI(7)
- --------- --------------------- --------------------------- -------
07/03 10000 10000 10000
9641 9580.29 10010.9
9719 9662.35 10049
9977 9987.64 10081.6
9918 9911.35 10070.8
10005 10018.1 10043.5
10084 10123.8 10032.7
10128 10166.6 10081.6
10302 10345.2 10136.1
10242 10286.4 10201.4
9998 10002.3 10234.1
9956 10008.4 10294
06/04 10000 10041.7 10326.6
10106 10179.1 10310.3
10300 10402.1 10315.7
10345 10457.4 10337.5
10417 10540.7 10391.9
10320 10421.4 10397.4
10426 10543.8 10359.3
10507 10633.1 10381.1
10444 10566 10440.9
10354 10473.6 10522.6
10525 10676.5 10593.4
10561 10748.3 10582.5
06/05 10627 10810.2 10587.9
Annual Report | 23
PERFORMANCE SUMMARY (CONTINUED)
ENDNOTES
MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO INTEREST RATE MOVEMENTS;
THEREFORE, THE FUND'S YIELD AND SHARE PRICE WILL FLUCTUATE WITH MARKET
CONDITIONS. BOND PRICES GENERALLY MOVE IN THE OPPOSITE DIRECTION FROM INTEREST
RATES. THUS, AS THE PRICES OF BONDS IN THE FUND ADJUST TO A RISE IN INTEREST
RATES, THE FUND'S SHARE PRICE MAY DECLINE. SINCE THE FUND CONCENTRATES ITS
INVESTMENTS IN A SINGLE STATE, IT IS SUBJECT TO GREATER RISK OF ADVERSE ECONOMIC
AND REGULATORY CHANGES IN THAT STATE THAN A GEOGRAPHICALLY DIVERSIFIED FUND. THE
FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS.
CLASS C: Prior to 1/1/04, these shares were offered with an initial
sales charge; thus actual total returns would have differed.
These shares have higher annual fees and expenses than Class
A shares.
(1) Past expense reductions by the Fund's manager increased the Fund's total
returns. If the manager had not taken this action, the Fund's total
returns would have been lower.
(2) Cumulative total return represents the change in value of an investment
over the periods indicated and does not include a sales charge.
(3) 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.
(4) Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price (NAV for Class C)
per share on 6/30/05.
(5) Taxable equivalent distribution rate and yield assume the published rates
as of 6/3/05 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 6/30/05.
(7) Sources: Lehman Brothers Inc.; Standard & Poor's Micropal. The Lehman
Brothers Municipal 10-Year Bond Index is the 10-year (8-12) component of
the Municipal Bond Index, which is a market value-weighted index
engineered for the long-term tax-exempt bond market. All bonds included
have a minimum credit rating of at least Baa. They must have an
outstanding par value of at least $5 million and be issued as part of a
transaction of at least $50 million. The bonds must be dated after
12/31/90, and must be at least one year from their maturity date.
Remarketed issues, taxable municipal bonds, bonds with floating rates and
derivatives are excluded from the index. The index has four main bond
sectors: general obligation, revenue, insured and prerefunded.
24 | Annual Report
YOUR FUND'S EXPENSES
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table below provides
actual account values and expenses. The "Ending Account Value" is derived from
the Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period, by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
Annual Report | 25
YOUR FUND'S EXPENSES (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. In addition, if transaction costs were included, your
total costs would have been higher. Please refer to the Fund prospectus for
additional information on operating expenses.
- ---------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 12/31/04 VALUE 6/30/05 PERIOD* 12/31/04-6/30/05
- ---------------------------------------------------------------------------------------------------------
Actual $1,000 $1,021.00 $3.36
- ---------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,021.47 $3.36
- ---------------------------------------------------------------------------------------------------------
CLASS C
- ---------------------------------------------------------------------------------------------------------
Actual $1,000 $1,018.10 $6.10
- ---------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,018.74 $6.11
- ---------------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio for each class (A: 0.67%
and C: 1.22%), multiplied by the average account value over the period,
multiplied by 181/365 to reflect the one-half year period.
26 | Annual Report
FRANKLIN CALIFORNIA LIMITED-TERM
TAX-FREE INCOME FUND
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin California Limited-Term Tax-Free
Income Fund seeks to provide high, current income exempt from federal and
California personal income taxes consistent with prudent investment management
and the preservation of capital, by investing at least 80% of its total assets
in securities that pay interest free from such taxes. The Fund maintains a
dollar-weighted average portfolio maturity (the time at which the debt must be
repaid) of five years or less.(1)
- --------------------------------------------------------------------------------
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CREDIT QUALITY BREAKDOWN*
Franklin California Limited-Term Tax-Free Income Fund
Based on Total Long-Term Investments as of 6/30/05**
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
AAA .................................... 74.3%
AA ..................................... 7.8%
A ...................................... 5.0%
Not Rated by S&P ....................... 12.9%
* Standard & Poor's (S&P) is the primary independent rating agency; Moody's
is the secondary rating agency. Ratings for securities not rated by S&P
are in the table below.
** Does not include short-term investments and other net assets.
RATINGS MOODY'S
AAA or Aaa 7.7%
AA or Aa 5.2%
- ------------------------------------------------
Total 12.9%
- --------------------------------------------------------------------------------
We are pleased to bring you Franklin California Limited-Term Tax-Free Income
Fund's annual report for the fiscal year ended June 30, 2005.
PERFORMANCE OVERVIEW
Because bond yield and price move in opposite directions, as municipal bond
yields fell, bond prices rose for the 12-month reporting period. The Fund's
(1) For investors subject to alternative minimum tax, a small portion of Fund
dividends may be taxable. Distributions of capital gains are generally
taxable.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 62.
Annual Report | 27
PORTFOLIO BREAKDOWN
Franklin California Limited-Term
Tax-Free Income Fund
6/30/05
- --------------------------------------------------------
% OF TOTAL
LONG-TERM INVESTMENTS*
- --------------------------------------------------------
General Obligation 28.5%
- --------------------------------------------------------
Utilities 21.1%
- --------------------------------------------------------
Tax-Supported 17.1%
- --------------------------------------------------------
Subject to Government Appropriations 8.0%
- --------------------------------------------------------
Transportation 8.0%
- --------------------------------------------------------
Higher Education 5.9%
- --------------------------------------------------------
Hospital & Health Care 5.7%
- --------------------------------------------------------
Other Revenue 5.7%
- --------------------------------------------------------
* Does not include short-term investments and other net assets.
DIVIDEND DISTRIBUTIONS(2)
Franklin California Limited-Term
Tax-Free Income Fund - Class A
7/1/04-6/30/05
- ---------------------------------------------------------
MONTH DIVIDEND PER SHARE
- ---------------------------------------------------------
July 1.17 cents
- ---------------------------------------------------------
August 1.17 cents
- ---------------------------------------------------------
September 1.17 cents
- ---------------------------------------------------------
October 1.17 cents
- ---------------------------------------------------------
November 1.17 cents
- ---------------------------------------------------------
December 1.22 cents
- ---------------------------------------------------------
January 1.22 cents
- ---------------------------------------------------------
February 1.22 cents
- ---------------------------------------------------------
March 1.25 cents
- ---------------------------------------------------------
April 1.25 cents
- ---------------------------------------------------------
May 1.30 cents
- ---------------------------------------------------------
June 1.30 cents
- ---------------------------------------------------------
TOTAL 14.61 CENTS
- ---------------------------------------------------------
Class A share price, as measured by net asset value, increased from $9.91 on
June 30, 2004, to $9.94 on June 30, 2005. The Fund's Class A shares paid
dividends totaling 14.61 cents per share for the same period.(2) The Performance
Summary beginning on page 29 shows that at the end of this reporting period the
Fund's Class A shares' distribution rate was 1.57%. An investor in the 2005
maximum combined federal and California state personal income tax bracket of
41.05% would need to earn a distribution rate of 2.66% from a taxable investment
to match the Fund's Class A tax-free distribution rate.
INVESTMENT STRATEGY
We use a consistent, disciplined strategy to maximize income for our
shareholders by seeking to maintain our exposure to higher coupon securities. We
generally employ a buy-and-hold approach and invest in securities that we
believe should provide the most relative value in the market. As we invest
throughout different interest rate environments, the Fund's portfolio becomes
well diversified with a broad range of coupons, calls and maturities. This broad
diversification may help mitigate interest rate risk. We generally stay fully
invested to maximize income distribution.
MANAGER'S DISCUSSION
Consistent with our investment philosophy, we invested in bonds we believed
could provide the most relative value from an income perspective. Seeking a
dollar-weighted average portfolio maturity of five years or less, we
concentrated on the one- to two-year range in an effort to take advantage of
rising yields. As a result of our strategy, the Fund was positioned to capture
changes in short-term interest rates, preserve capital and produce tax-free
income.
Thank you for your participation in Franklin California Limited-Term Tax-Free
Income Fund. We look forward to serving your future investment needs.
(2). 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.
All Fund distributions will vary depending upon current market conditions,
and past distributions are not indicative of future trends.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JUNE 30, 2005, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR
MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, STATE,
INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE, BUT THE ADVISER MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR
COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT
PHILOSOPHY.
28 | ANNUAL REPORT
PERFORMANCE SUMMARY AS OF 6/30/05
FRANKLIN CALIFORNIA LIMITED-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 reinvestment of the Fund's dividends and
capital gain distributions, if any, and any unrealized gains or losses.
PRICE AND DISTRIBUTION INFORMATION
- ---------------------------------------------------------------------------------------------------------------
CLASS A (SYMBOL: FCALX) CHANGE 6/30/05 6/30/04
- ---------------------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.03 $ 9.94 $ 9.91
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (7/1/04-6/30/05)
- ---------------------------------------------------------------------------------------------------------------
Dividend Income $0.1461
- ---------------------------------------------------------------------------------------------------------------
PERFORMANCE(1)
- ---------------------------------------------------------------------------------------------------------------
CLASS A 1-YEAR INCEPTION (9/2/03)
- ---------------------------------------------------------------------------------------------------------------
Cumulative Total Return(2) +1.81% +1.92%
- ---------------------------------------------------------------------------------------------------------------
Average Annual Total Return(3) +1.81% +1.05%
- ---------------------------------------------------------------------------------------------------------------
Distribution Rate(4) 1.57%
- ---------------------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate(5) 2.66%
- ---------------------------------------------------------------------------------------------------------------
30-Day Standardized Yield(6) 2.11%
- ---------------------------------------------------------------------------------------------------------------
Taxable Equivalent Yield(5) 3.58%
- ---------------------------------------------------------------------------------------------------------------
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN.
FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.
Annual Report | 29
PERFORMANCE SUMMARY (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $10,000 INVESTMENT(1)
Total return represents the change in value of an investment over the periods
shown. It includes Fund expenses, account fees and reinvested distributions. The
unmanaged index includes reinvestment of any income or distributions. It differs
from the Fund in composition and does not pay management fees or expenses. One
cannot invest directly in an index. The Consumer Price Index (CPI), calculated
by the U.S. Bureau of Labor Statistics, is a commonly used measure of the
inflation rate.
AVERAGE ANNUAL TOTAL RETURN
- -----------------------------------------------
CLASS A 6/30/05
- -----------------------------------------------
1-Year +1.81%
- -----------------------------------------------
Since Inception (9/2/03) +1.05%
- -----------------------------------------------
CLASS A (9/2/03-6/30/05)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Franklin California
Limited-Term Lehman Brothers Municipal
Date Tax-Free Income Fund 5-Years Bond Index(7) CPI(7)
---------- -------------------- ------------------------- -------
3-Sep 10000 10000 10000
10100 10253.4 10032.5
10040 10186.2 10021.7
10050 10227.4 9994.58
10070 10267.2 9983.75
10100 10315.8 10032.5
10170 10441.8 10086.7
10142 10398.3 10151.7
10033 10189.9 10184.2
9974 10137.5 10243.8
4-Jun 10006 10175 10276.3
10068 10269 10260
10141 10449.2 10265.4
10133 10463 10287.1
10154 10520.9 10341.3
10116 10451.8 10346.7
10148 10546.6 10308.8
10151 10544.4 10330.4
10122 10492 10390
10104 10425.4 10471.3
10137 10546.2 10541.7
10151 10576.3 10530.9
5-Jun 10192 10625 10536.3
ENDNOTES
MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO INTEREST RATE MOVEMENTS;
THEREFORE, THE FUND'S YIELD AND SHARE PRICE WILL FLUCTUATE WITH MARKET
CONDITIONS. BOND PRICES GENERALLY MOVE IN THE OPPOSITE DIRECTION FROM INTEREST
RATES. THUS, AS THE PRICES OF BONDS IN THE FUND ADJUST TO A RISE IN INTEREST
RATES, THE FUND'S SHARE PRICE MAY DECLINE. SINCE THE FUND CONCENTRATES ITS
INVESTMENTS IN A SINGLE STATE, IT IS SUBJECT TO GREATER RISK OF ADVERSE ECONOMIC
AND REGULATORY CHANGES IN THAT STATE THAN A GEOGRAPHICALLY DIVERSIFIED FUND. THE
FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS.
(1) The Fund's manager has agreed in advance to waive a portion of its
management fees. If the manager had not taken this action, the Fund's
distribution rate and total return would have been lower, and yield for
the period would have been 1.56%. The fee waiver may be discontinued at
any time upon notice to the Fund's Board of Trustees.
(2) Cumulative total return represents the change in value of an investment
over the periods indicated.
(3) Average annual total return represents the average annual change in value
of an investment over the periods indicated.
(4) Distribution rate is based on an annualization of the current 1.30 cent
per share monthly dividend and the maximum offering price of $9.94 per
share on 6/30/05.
(5) Taxable equivalent distribution rate and yield assume the published rates
as of 6/3/05 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 6/30/05.
(7) Sources: Lehman Brothers Inc.; Standard & Poor's Micropal. The Lehman
Brothers Municipal 5-Year Bond Index is the 5-year (4-6) component of the
Municipal Bond Index, which is a market value-weighted index engineered
for the long-term tax-exempt bond market. All bonds included have a
minimum credit rating of at least Baa. They must have an outstanding par
value of at least $5 million and be issued as part of a transaction of at
least $50 million. The bonds must be dated after 12/31/90, and must be at
least one year from their maturity date. Remarketed issues, taxable
municipal bonds, bonds with floating rates and derivatives are excluded
from the index. The index has four main bond sectors: general obligation,
revenue, insured and prerefunded.
30 | Annual Report
YOUR FUND'S EXPENSES
FRANKLIN CALIFORNIA LIMITED-TERM TAX-FREE INCOME FUND
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table below provides
actual account values and expenses. The "Ending Account Value" is derived from
the Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period, by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
Annual Report | 31
YOUR FUND'S EXPENSES (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. In addition, if transaction costs were included, your
total costs would have been higher. Please refer to the Fund prospectus for
additional information on operating expenses.
- ------------------------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 12/31/04 VALUE 6/30/05 PERIOD* 12/31/04-6/30/05
- ------------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,003.80 $2.48
- ------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,022.32 $2.51
- ------------------------------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio, net of expense
waivers, of 0.50%, multiplied by the average account value over the
period, multiplied by 181/365 to reflect the one-half year period.
32 | Annual Report
FRANKLIN CALIFORNIA
TAX-EXEMPT MONEY FUND
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin California Tax-Exempt Money Fund
seeks to provide high, current income exempt from federal and California
personal income taxes consistent with prudent investment management and the
preservation of capital and liquidity.(1) The Fund's portfolio invests at least
80% of its total assets in short-term municipal debt securities issued in
California. The Fund tries to maintain a stable $1.00 share price.
- --------------------------------------------------------------------------------
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE. CURRENT
PERFORMANCE MAY DIFFER FROM FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR
CALL 1-800/342-5236 FOR MOST RECENT MONTH-END PERFORMANCE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AN INVESTMENT IN THE FUND IS NOT GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY 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.
- --------------------------------------------------------------------------------
We are pleased to bring you Franklin California Tax-Exempt Money Fund's annual
report for the fiscal year ended June 30, 2005.
PERFORMANCE OVERVIEW
With rising short-term interest rates, money market portfolio yields climbed
during the period. Largely as a result, Franklin California Tax-Exempt Money
Fund's seven-day effective yield rose from 0.47% at the beginning of the period
to 1.79% on June 30, 2005.
INVESTMENT STRATEGY
We invest predominantly in high quality, short-term municipal securities whose
interest is free from federal income tax and California state personal income
tax. Although the Fund tries to invest all of its assets in tax-free securities,
it is possible, although not anticipated, that a portion of its assets may be in
securities that pay taxable interest, including interest that may be subject to
federal alternative minimum tax. We maintain a dollar-weighted average portfolio
maturity of 90 days or less.
(1) For investors subject to alternative minimum tax, a small portion of Fund
dividends may be taxable. Distributions of capital gains are generally
taxable.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 66.
Annual Report | 33
PORTFOLIO BREAKDOWN
Franklin California Tax-Exempt Money Fund
6/30/05
- -------------------------------------------------
% OF TOTAL
INVESTMENTS
- -------------------------------------------------
Variable Rate Notes 80.03%
- -------------------------------------------------
Notes and Bonds 14.47%
- -------------------------------------------------
Tax Exempt Commercial Paper 4.83%
- -------------------------------------------------
Put or Option Tender Bonds 0.67%
- -------------------------------------------------
PERFORMANCE SUMMARY
Franklin California Tax-Exempt Money Fund
Symbol: FCLXX
6/30/05
- -------------------------------------------------
Seven-day effective yield(1) 1.79%
- -------------------------------------------------
Seven-day annualized yield 1.78%
- -------------------------------------------------
Taxable equivalent yield(2) 3.02%
- -------------------------------------------------
(1) Seven-day effective yield assumes the compounding of daily dividends.
(2) Taxable equivalent yield assumes the published rates as of 6/3/05 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 6/30/05. The
Fund's average weighted maturity was 42 days. Yield reflects Fund expenses and
fluctuations in interest rates on portfolio investments.
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE. CURRENT
PERFORMANCE MAY DIFFER FROM FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR
CALL 1-800/342-5236 FOR MOST RECENT MONTH-END PERFORMANCE.
MANAGER'S DISCUSSION
Short-term municipal bond yields increased during the reporting period,
reflecting the Federal Reserve Board's eight consecutive increases to the
federal funds target rate. The Bond Market Association Municipal Swap Index, a
benchmark for variable rate securities, which make up a large portion of
Franklin California Tax-Exempt Money Fund, averaged a rate of 1.86% for the
period under review.(2)
The Fund participated in several deals during the period under review including
California School Cash Reserve Program notes, Sacramento County tax and revenue
anticipation notes, Los Angeles County Metropolitan Transportation Authority
commercial paper, and East Bay Municipal Utility District commercial paper.
Thank you for your continued participation in Franklin California Tax-Exempt
Money Fund. We look forward to serving your future investment needs.
(2). Source: Thomson Financial. The Bond Market Association Municipal Swap
Index is a weekly high-grade market index composed of seven-day tax-exempt
variable rate demand notes produced by the Municipal Market Data Group.
Actual issues are selected from Municipal Market Data's database of more
than 10,000 active issues based on several specific criteria.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JUNE 30, 2005, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR
MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, STATE,
INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE, BUT THE ADVISER MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR
COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT
PHILOSOPHY.
34 | Annual Report
YOUR FUND'S EXPENSES
FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table below provides
actual account values and expenses. The "Ending Account Value" is derived from
the Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period, by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
Annual Report | 35
YOUR FUND'S EXPENSES (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. In addition, if transaction costs were included, your
total costs would have been higher. Please refer to the Fund prospectus for
additional information on operating expenses.
- ------------------------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
VALUE 12/31/04 VALUE 6/30/05 PERIOD* 12/31/04-6/30/05
- ------------------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,007.70 $2.84
- ------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,021.97 $2.86
- ------------------------------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of 0.57%, multiplied by
the average account value over the period, multiplied by 181/365 to
reflect the one-half year period.
36 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
---------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
CLASS A 2005 2004 2003 2002 2001
---------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ........... $ 12.24 $ 12.83 $ 12.32 $ 12.17 $ 11.76
---------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) .................... 0.55 0.56 0.57 0.59 0.61
Net realized and unrealized gains (losses) .. 0.62 (0.59) 0.51 0.15 0.40
---------------------------------------------------------------------------------
Total from investment operations ............. 1.17 (0.03) 1.08 0.74 1.01
---------------------------------------------------------------------------------
Less distributions from net investment income (0.56) (0.56) (0.57) (0.59) (0.60)
---------------------------------------------------------------------------------
Redemption fees .............................. --(c) -- -- -- --
---------------------------------------------------------------------------------
Net asset value, end of year ................. $ 12.85 $ 12.24 $ 12.83 $ 12.32 $ 12.17
=================================================================================
Total return(b) .............................. 9.70% (0.22)% 8.97% 6.15% 8.73%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .............. $ 1,780,642 $ 1,698,669 $ 1,912,784 $ 1,789,914 $ 1,665,581
Ratios to average net assets:
Expenses .................................... 0.61% 0.61% 0.61% 0.61% 0.61%
Net investment income ....................... 4.38% 4.51% 4.50% 4.74% 5.00%
Portfolio turnover rate ...................... 3.87% 12.21% 9.79% 16.99% 10.09%
(a) Based on average daily shares outstanding.
(b) Total return does not reflect sales commissions or the contingent deferred
sales charge.
(c) Amount is less than $0.01 per share.
Annual Report | See notes to financial statements. | 37
FRANKLIN CALIFORNIA TAX-FREE TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND (CONTINUED)
---------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
CLASS B 2005 2004 2003 2002 2001
---------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ........... $ 12.29 $ 12.88 $ 12.37 $ 12.21 $ 11.78
---------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) .................... 0.49 0.50 0.50 0.53 0.54
Net realized and unrealized gains (losses) .. 0.62 (0.60) 0.51 0.15 0.42
---------------------------------------------------------------------------------
Total from investment operations ............. 1.11 (0.10) 1.01 0.68 0.96
---------------------------------------------------------------------------------
Less distributions from net investment income (0.49) (0.49) (0.50) (0.52) (0.53)
---------------------------------------------------------------------------------
Redemption fees .............................. --(c) -- -- -- --
---------------------------------------------------------------------------------
Net asset value, end of year ................. $ 12.91 $ 12.29 $ 12.88 $ 12.37 $ 12.21
=================================================================================
Total return(b) .............................. 9.15% (0.77)% 8.34% 5.62% 8.29%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .............. $ 78,038 $ 77,169 $ 85,698 $ 56,303 $ 20,926
Ratios to average net assets:
Expenses .................................... 1.16% 1.16% 1.16% 1.16% 1.16%
Net investment income ....................... 3.83% 3.96% 3.95% 4.20% 4.42%
Portfolio turnover rate ...................... 3.87% 12.21% 9.79% 16.99% 10.09%
(a) Based on average daily shares outstanding.
(b) Total return does not reflect the contingent deferred sales charge.
(c) Amount is less than $0.01 per share.
38 | See notes to financial statements. | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND (CONTINUED)
---------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
CLASS C 2005 2004 2003 2002 2001
---------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ........... $ 12.34 $ 12.93 $ 12.41 $ 12.26 $ 11.84
---------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) .................... 0.49 0.50 0.50 0.53 0.54
Net realized and unrealized gains (losses) .. 0.63 (0.60) 0.52 0.14 0.41
---------------------------------------------------------------------------------
Total from investment operations ............. 1.12 (0.10) 1.02 0.67 0.95
---------------------------------------------------------------------------------
Less distributions from net investment income (0.49) (0.49) (0.50) (0.52) (0.53)
---------------------------------------------------------------------------------
Redemption fees .............................. --(c) -- -- -- --
---------------------------------------------------------------------------------
Net asset value, end of year ................. $ 12.97 $ 12.34 $ 12.93 $ 12.41 $ 12.26
=================================================================================
Total return(b) .............................. 9.19% (0.78)% 8.39% 5.51% 8.17%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .............. $ 129,156 $ 120,610 $ 136,674 $ 108,802 $ 79,803
Ratios to average net assets:
Expenses .................................... 1.16% 1.16% 1.16% 1.16% 1.16%
Net investment income ....................... 3.83% 3.96% 3.95% 4.19% 4.45%
Portfolio turnover rate ...................... 3.87% 12.21% 9.79% 16.99% 10.09%
(a) Based on average daily shares outstanding.
(b) Total return does not reflect the contingent deferred sales charge.
(c) Amount is less than $0.01 per share.
Annual Report | See notes to financial statements. | 39
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS 96.5%
BONDS 87.7%
CALIFORNIA 87.7%
ABAG Finance Authority for Nonprofit Corps. COP,
Lincoln Child Center Inc., California Mortgage Insured, 6.125%, 11/01/24 ............... $ 2,055,000 $ 2,240,977
Lytton Gardens Inc., California Mortgage Insured, 6.00%, 2/15/30 ....................... 3,500,000 3,741,780
Odd Fellows Home, California Mortgage Insured, 6.00%, 8/15/24 .......................... 5,000,000 5,303,450
ABAG Finance Authority for Nonprofit Corps. Revenue,
Poway Retirement Housing Foundation Housing Inc. Project, Series A,
California Mortgage Insured, 5.375%, 11/15/25 ........................................ 5,145,000 5,470,164
Sansum-Santa Barbara, Series A, California Mortgage Insured, 5.60%, 4/01/26 ............ 2,750,000 2,928,832
Alameda Power and Telecommunication Electric System Revenue COP, MBIA Insured,
5.75%, 7/01/30 ........................................................................... 3,305,000 3,684,778
Alhambra City Elementary School District GO, Series A, FSA Insured, Pre-Refunded,
5.60%, 9/01/24 ........................................................................... 2,065,000 2,305,924
Alhambra COP, Police Facilities AD No. 91-1, AMBAC Insured, 6.75%, 9/01/23 ................. 10,730,000 10,795,131
Antelope Valley UHSD, GO, Series A, MBIA Insured, 5.00%, 2/01/27 ........................... 5,000,000 5,331,150
Arcata Joint Powers Financing Authority Wastewater Revenue, FSA Insured, 5.80%, 12/01/22 ... 1,080,000 1,175,483
Atascadero CDA Tax Allocation, Redevelopment Project, XLCA Insured, 5.00%, 9/01/34 ......... 4,315,000 4,586,716
Baldwin Park RDA, Tax Allocation, Refunding, FSA Insured, 5.70%, 9/01/25 ................... 4,000,000 4,476,320
Beaumont USD, COP, Refunding, Series A, FSA Insured, 5.80%, 1/01/21 ........................ 1,500,000 1,594,290
Brea Olinda USD, GO, Series A, FGIC Insured, 5.60%, 8/01/20 ................................ 1,000,000 1,108,450
Brentwood Infrastructure Financing Authority Infrastructure Revenue, Refunding, Series A,
FSA Insured, 5.00%, 9/02/32 .............................................................. 3,800,000 4,053,118
Cabrillo Community College District GO, Series C, AMBAC Insured, Pre-Refunded,
5.375%, 5/01/26 .......................................................................... 5,400,000 6,088,284
Calexico USD, CFD No. 1 Special Tax, AMBAC Insured, Pre-Refunded, 5.60%, 9/01/17 ........... 2,930,000 3,168,209
California Community College Financing Authority Lease Revenue, Grossmont, Palomar and
Shasta, Series A, MBIA Insured, 5.125%, 4/01/31 .......................................... 3,030,000 3,236,676
California Educational Facilities Authority Revenue,
Pomona College, Series B, Pre-Refunded, 5.50%, 7/01/29 ................................. 4,455,000 4,945,540
Stanford University, Refunding, Series O, 5.125%, 1/01/31 .............................. 24,705,000 25,915,545
Stanford University, Series N, 5.25%, 12/01/26 ......................................... 6,450,000 6,802,299
Stanford University, Series N, 5.35%, 6/01/27 .......................................... 21,250,000 22,378,375
Stanford University, Series N, 5.20%, 12/01/27 ......................................... 6,000,000 6,298,020
Student Loan Program, Series A, MBIA Insured, 6.00%, 3/01/16 ........................... 900,000 946,062
University of Southern California, Refunding, Series C, 5.125%, 10/01/28 ............... 3,845,000 3,997,608
California Health Facilities Financing Authority Revenue,
Catholic Healthcare West, Refunding, ACA Insured, 5.00%, 7/01/28 ....................... 10,000,000 10,163,000
Catholic Healthcare West, Refunding, Series A, MBIA Insured, 6.00%, 7/01/17 ............ 5,000,000 5,249,800
Catholic Healthcare West, Series A, 5.00%, 7/01/28 ..................................... 15,000,000 15,197,850
Community Health Facilities, Series A, California Mortgage Insured, 5.80%, 8/01/25 ..... 1,190,000 1,277,346
Kaiser Permanente, Series A, ETM, 5.40%, 5/01/28 ....................................... 15,400,000 15,965,334
Kaiser Permanente, Series B, ETM, 5.00%, 10/01/18 ...................................... 5,000,000 5,333,800
Kaiser Permanente, Series B, ETM, 5.00%, 10/01/20 ...................................... 4,000,000 4,254,320
Marshall Hospital, Series A, California Mortgage Insured, 5.30%, 11/01/28 .............. 3,325,000 3,456,071
Northern California Presbyterian, 5.40%, 7/01/28 ....................................... 5,000,000 5,089,450
Orange County Health Facility, Series A, California Mortgage Insured, 6.20%, 11/01/24 .. 3,435,000 3,731,269
Scripps Memorial Hospital, Series A, MBIA Insured, 6.40%, 10/01/12 ..................... 3,500,000 3,532,200
Senior Living, Aldersly, Series A, California Mortgage Insured, 5.25%, 3/01/32 ......... 2,000,000 2,105,340
Sutter Health, Series A, MBIA Insured, 5.00%, 8/15/19 .................................. 1,700,000 1,794,639
40 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
California Health Facilities Financing Authority Revenue, (cont.)
Sutter Health, Series A, MBIA Insured, 5.00%, 8/15/38 .................................. $ 4,000,000 $ 4,146,640
The Help Group, California Mortgage Insured, 5.40%, 8/01/22 ............................ 5,000,000 5,241,950
True to Life Children's Services, Series A, California Mortgage Insured, 5.625%, 9/01/25 1,250,000 1,337,000
UCSF-Stanford Health Care, Series A, FSA Insured, 5.00%, 11/15/28 ...................... 9,530,000 9,882,229
California Infrastructure and Economic Development Bank Revenue, Bay Area Toll Bridges,
first lien, Series A, AMBAC Insured, 5.00%, 7/01/33 ...................................... 8,460,000 8,985,874
California PCFA, PCR, Southern California Edison Co., Series C, MBIA Insured,
5.55%, 9/01/31 ........................................................................... 4,800,000 5,109,264
California Public School District Financing Authority Lease Revenue, Southern Kern USD,
Series B, FSA Insured, ETM, 5.90%, 9/01/26 ............................................... 1,615,000 1,969,008
California State Department of Water Resources Central Valley Project Revenue, Water System,
Series Q, MBIA Insured,
5.375%, 12/01/27 ....................................................................... 365,000 382,991
Pre-Refunded, 5.375%, 12/01/27 ......................................................... 635,000 669,011
California State Department of Water Resources Water Revenue, Series W, FSA Insured,
5.125%, 12/01/29 ......................................................................... 5,000,000 5,306,100
California State GO,
5.00%, 10/01/27 ........................................................................ 30,790,000 32,070,864
AMBAC Insured, 6.30%, 9/01/06 .......................................................... 9,000,000 9,379,620
FGIC Insured, 5.375%, 6/01/26 .......................................................... 3,645,000 3,746,331
FGIC Insured, Pre-Refunded, 5.375%, 6/01/26 ............................................ 1,355,000 1,403,021
FSA Insured, Pre-Refunded, 5.50%, 9/01/29 .............................................. 34,500,000 38,390,910
MBIA Insured, 6.00%, 8/01/16 ........................................................... 210,000 212,575
MBIA Insured, 6.00%, 10/01/21 .......................................................... 65,000 65,497
MBIA Insured, 5.00%, 8/01/29 ........................................................... 20,250,000 21,170,362
Refunding, 5.125%, 6/01/31 ............................................................. 25,000,000 26,478,250
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 4,642,992
California State Public Works Board Lease Revenue, Department of Mental Health Hospital,
Series A, AMBAC Insured, 5.00%,
12/01/21 ............................................................................... 4,100,000 4,380,932
12/01/26 ............................................................................... 5,675,000 5,985,195
California State University Foundation Revenue, Monterey Bay, MBIA Insured, 5.35%, 6/01/31 . 2,000,000 2,160,260
California State University of Los Angeles Auxiliary Services Inc. Revenue, MBIA Insured,
Pre-Refunded, 5.125%, 6/01/33 ............................................................ 3,200,000 3,365,152
California State University Revenue and Colleges Revenue, Systemwide, Series A,
AMBAC Insured, 5.00%, 11/01/33 ........................................................... 22,000,000 23,197,240
California Statewide CDA Revenue,
Brentwood School, Series A, FSA Insured, 5.25%, 10/01/29 ............................... 7,625,000 8,121,921
Hospital Monterey Peninsula, Series B, FSA Insured, 5.25%, 6/01/23 ..................... 2,000,000 2,183,460
Refunding, California Mortgage Insured, 5.00%, 8/01/21 ................................. 2,035,000 2,155,391
California Statewide CDA Revenue COP, John Muir/Mt. Diablo Health System, MBIA Insured,
5.125%, 8/15/22 .......................................................................... 5,000,000 5,248,150
California Statewide CDA Water and Wastewater Revenue, Pooled Financing Program,
Series A, FSA Insured, 5.00%, 10/01/32 ................................................. 9,320,000 9,822,162
Series B, FSA Insured, 5.65%, 10/01/26 ................................................. 3,420,000 3,777,424
Series B, FSA Insured, 5.75%, 10/01/29 ................................................. 1,465,000 1,610,108
Annual Report | 41
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
California Statewide CDA,
COP, California Mortgage Insured, 5.75%, 8/01/21 ....................................... $ 9,585,000 $ 10,414,773
COP, Children's Hospital, Los Angeles, 5.25%, 8/15/29 .................................. 12,250,000 12,697,247
COP, FSA Insured, 5.50%, 8/15/31 ....................................................... 7,000,000 7,628,320
COP, Kaiser Permanente, ETM, 5.30%, 12/01/15 ........................................... 9,700,000 10,122,435
COP, MBIA Insured, 5.00%, 4/01/18 ...................................................... 3,000,000 3,149,190
MFR, Silver Ridge Apartments, Mandatory Put 8/01/21, Series H, FNMA Insured,
5.80%, 8/01/33 ....................................................................... 2,785,000 3,001,088
Cambria Community Services District Water and Wastewater Revenue, Refunding, Series A,
MBIA Insured, 6.00%, 5/01/15 ............................................................. 1,330,000 1,364,726
Campbell USD, GO, FSA Insured, 5.00%, 8/01/27 .............................................. 7,150,000 7,556,978
Castaic Lake Water Agency Revenue COP, Series A, MBIA Insured, 5.00%, 8/01/29 .............. 8,000,000 8,410,720
Chaffey Community College District GO, Series A, FSA Insured, 5.00%, 7/01/27 ............... 5,750,000 6,399,290
Chico PFAR, Merged Redevelopment Project Area, MBIA Insured, 5.125%, 4/01/24 ............... 2,790,000 3,024,555
Chino Basin Regional Financing Authority Revenue, Municipal Water District,
Sewer System Project, Refunding, AMBAC Insured, 6.00%, 8/01/16 ........................... 2,000,000 2,024,940
Chula Vista Elementary School District GO, Election of 1998, Series F, MBIA Insured,
5.00%, 8/01/28 ........................................................................... 2,685,000 2,879,045
Chula Vista PFA Local Agency Revenue, Series 1995-A, FSA Insured, 6.125%, 9/02/14 .......... 3,785,000 3,917,513
Clovis PFAR, 2001 Corp. Yard Project, AMBAC Insured, 5.00%, 3/01/27 ........................ 3,265,000 3,448,036
Compton USD, GO, Election of 2002, Series B, MBIA Insured, 5.00%, 6/01/29 .................. 2,000,000 2,140,760
Contra Costa Mosquito Abatement District COP, Public Improvements Project, Refunding,
FSA Insured, 6.25%, 2/01/06 .............................................................. 290,000 290,731
Corona-Norco USD, COP, Refunding, FSA Insured, 5.125%,
4/15/25 ................................................................................ 5,355,000 5,623,660
4/15/29 ................................................................................ 2,540,000 2,662,936
Coronado CDA, Tax Allocation, Community Development Project, MBIA Insured,
5.375%, 9/01/26 .......................................................................... 2,700,000 2,958,984
Cucamonga County Water District COP, FGIC Insured, 5.00%, 9/01/29 .......................... 5,070,000 5,350,117
Culver City USD, GO, MBIA Insured,
5.125%, 8/01/37 ........................................................................ 650,000 679,926
5.20%, 8/01/38 ......................................................................... 3,285,000 3,462,094
Delano USD, COP, Refinancing Project, MBIA Insured, 5.125%, 1/01/22 ........................ 1,620,000 1,844,775
East Bay MUD Water System Revenue, Refunding, MBIA Insured, 5.00%, 6/01/26 ................. 14,000,000 14,751,660
El Dorado County Public Agency Financing Authority Revenue, FGIC Insured, 5.50%,
2/15/16 ................................................................................ 2,250,000 2,335,050
2/15/21 ................................................................................ 3,500,000 3,632,300
El Monte Water Authority Revenue, Water System Project, AMBAC Insured, 5.60%, 9/01/34 ...... 1,800,000 2,009,538
Escondido Joint Powers Financing Authority Lease Revenue, AMBAC Insured,
5.125%, 9/01/30 .......................................................................... 3,770,000 3,963,740
Escondido USD, GO, Series A, FSA Insured, 5.00%, 8/01/26 ................................... 11,665,000 12,362,100
Eureka USD, GO, FSA Insured, 5.00%, 8/01/25 ................................................ 4,145,000 4,425,409
Fairfield Suisun USD, GO,
Election of 2002, MBIA Insured, 5.00%, 8/01/25 ......................................... 4,185,000 4,497,285
MBIA Insured, 5.00%, 8/01/27 ........................................................... 12,000,000 12,794,760
Florin Resource Conservation District COP, Elk Grove Water Service, Refunding, Series A,
MBIA Insured, 5.00%, 3/01/33 ............................................................. 5,000,000 5,289,400
Folsom COP, Central Business District Fire Station, MBIA Insured, 5.125%, 10/01/26 ......... 2,030,000 2,184,199
42 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Foothill/Eastern Corridor Agency Toll Road Revenue, senior lien, Refunding, Series A,
MBIA Insured, 5.00%, 1/01/35 ............................................................. $ 66,735,000 $ 68,951,937
Fremont UHSD, Santa Clara County GO, Series C, FSA Insured, Pre-Refunded, 5.00%,
9/01/26 .................................................................................. 10,000,000 11,162,600
Fresno USD, GO, Refunding,
Series B, MBIA Insured, 5.00%, 2/01/21 ................................................. 2,860,000 3,203,114
Series C, MBIA Insured, 5.90%, 2/01/20 ................................................. 2,065,000 2,520,663
Series C, MBIA Insured, 5.90%, 8/01/22 ................................................. 3,000,000 3,691,680
Fullerton University Foundation Auxiliary Organization Revenue, Series A, MBIA Insured, 5.75%,
7/01/25 ................................................................................ 1,250,000 1,402,800
7/01/30 ................................................................................ 1,000,000 1,117,350
Glendale USD, GO, Series C, FSA Insured, 5.50%, 9/01/24 .................................... 2,750,000 3,018,125
Glendora PFAR, Tax Allocation, Project No. 1, Series A, MBIA Insured, 5.00%, 9/01/24 ....... 5,000,000 5,344,650
Grant Joint UHSD, GO, FSA Insured, Pre-Refunded, 5.00%, 8/01/26 ............................ 5,235,000 5,879,271
Grossmont UHSD, COP, FSA Insured, Pre-Refunded, 5.75%, 9/01/26 ............................. 2,250,000 2,496,600
Hemet USD, COP, Nutrition Center Project, FSA Insured, 5.875%, 4/01/27 ..................... 1,250,000 1,337,787
Hercules COP, Capital Improvement Projects, Refunding, AMBAC Insured, 6.00%, 6/01/15 ....... 125,000 126,121
Hollister RDA, Tax Allocation, Community Development Project, Refunding, AMBAC Insured,
5.125%, 10/01/32 ......................................................................... 19,815,000 21,350,464
Huntington Beach City School District COP, MBIA Insured, 5.25%, 7/01/29 .................... 1,795,000 1,945,690
Jefferson San Mateo County UHSD, GO, Refunding, Series A, MBIA Insured, 6.45%,
8/01/25 ................................................................................ 3,045,000 3,996,958
8/01/29 ................................................................................ 3,075,000 4,097,653
Jurupa Community Services District Special Tax, CFD No. 2, Series A, AMBAC Insured,
5.00%, 9/01/32 ........................................................................... 7,000,000 7,351,330
Jurupa USD, COP, FSA Insured, 5.625%, 9/01/24 .............................................. 1,600,000 1,784,384
Kern Community College District COP, Refunding, MBIA Insured, 5.00%, 1/01/25 ............... 7,800,000 8,180,172
Kern County High School District GO, FSA Insured, ETM, 6.625%,
8/01/14 ................................................................................ 1,535,000 1,923,969
8/01/15 ................................................................................ 1,400,000 1,776,740
Lancaster Financing Authority Tax Allocation Revenue, Subordinated, Redevelopment
Projects No. 5 and 6, Series B, FGIC Insured, 5.00%, 2/01/35 ............................. 5,775,000 6,134,320
Lodi COP, Wastewater Treatment Project, Refunding, AMBAC Insured, 6.70%, 8/01/26 ........... 8,800,000 9,342,344
Lodi Electric System Revenue COP, Series A, MBIA Insured, Pre-Refunded, 5.50%, 1/15/32 ..... 4,000,000 4,396,360
Lodi USD, GO, MBIA Insured, 5.00%, 8/01/23 ................................................. 2,150,000 2,290,072
Long Beach Bond Finance Authority Lease Revenue,
Aquarium of The South Pacific, Refunding, AMBAC Insured, 5.00%, 11/01/19 ............... 4,000,000 4,303,400
Aquarium of The South Pacific, Refunding, AMBAC Insured, 5.00%, 11/01/26 ............... 11,000,000 11,677,050
Aquarium of The South Pacific, Refunding, AMBAC Insured, 5.25%, 11/01/30 ............... 2,000,000 2,158,500
Public Safety Facilities Projects, AMBAC Insured, 5.00%, 11/01/26 ...................... 6,780,000 7,153,307
Public Safety Facilities Projects, AMBAC Insured, 5.00%, 11/01/31 ...................... 10,500,000 11,044,320
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 14,282,919
8/01/31 ................................................................................ 12,000,000 12,604,080
Long Beach University School District GO, Election of 1999, Series C, MBIA Insured,
5.125%, 8/01/31 .......................................................................... 13,870,000 14,838,126
Annual Report | 43
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
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FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE
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LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Los Angeles Community College District GO,
Series A, MBIA Insured, Pre-Refunded, 5.00%, 6/01/26 ................................... $ 4,000,000 $ 4,415,120
Series B, FSA Insured, 5.00%, 8/01/27 .................................................. 4,000,000 4,264,920
Los Angeles COP,
Municipal Improvement Corp. of Los Angeles AW, AMBAC Insured, 5.00%, 6/01/27 ........... 5,895,000 6,258,014
Real Property Program, MBIA Insured, 5.00%, 2/01/27 .................................... 9,890,000 10,409,423
Los Angeles County COP, Antelope Valley Courthouse, Series A, AMBAC Insured, 5.25%,
11/01/27 ............................................................................... 2,500,000 2,669,250
11/01/33 ............................................................................... 2,500,000 2,695,450
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 29,014,342
Los Angeles Harbor Department Revenue, Series B, MBIA Insured, 6.20%, 8/01/25 .............. 2,500,000 2,608,000
Los Angeles Mortgage Revenue, Refunding, Series I, MBIA Insured, 6.50%, 7/01/22 ............ 810,000 817,614
Los Angeles Wastewater System Revenue, Refunding, MBIA Insured, 5.00%, 6/01/26 ............. 10,000,000 10,657,500
Los Angeles Water and Power Revenue, Power System, Refunding, Series A, MBIA Insured,
5.00%, 7/01/24 ........................................................................... 12,000,000 12,682,560
Lynwood PFA Tax Allocation, Project Area A, Series A, FSA Insured, 5.85%, 9/01/18 .......... 1,765,000 1,995,509
Lynwood PFA Water Revenue, Water System Improvement Project, MBIA Insured,
5.85%, 6/01/22 ......................................................................... 665,000 735,025
5.90%, 6/01/29 ......................................................................... 3,105,000 3,423,169
Marin Municipal Water District COP, Financing Project, AMBAC Insured, 5.00%, 7/01/29 ....... 1,200,000 1,280,496
Mendocino County COP, Public Facilities Corp., MBIA Insured, 5.25%, 6/01/30 ................ 2,680,000 2,919,485
Menlo Park CDA, Tax Allocation, Las Pulgas Community Development Project, Refunding,
AMBAC Insured, 5.375%, 6/01/22 ........................................................... 10,000,000 10,416,300
Metropolitan Water District Southern California Waterworks Revenue,
Series A, MBIA Insured, Pre-Refunded, 5.00%, 7/01/30 ................................... 6,525,000 6,951,017
Series C, MBIA Insured, Pre-Refunded, 5.00%, 7/01/27 ................................... 2,500,000 2,588,025
Millbrae COP, Police Department Expansion, AMBAC Insured, 5.875%, 3/01/24 .................. 1,025,000 1,140,794
Modesto Irrigation District COP, Capital Improvements, Series A, FSA Insured, 5.00%,
7/01/26 ................................................................................ 5,000,000 5,262,700
7/01/31 ................................................................................ 8,285,000 8,672,241
Modesto Wastewater Treatment Facility Revenue, MBIA Insured, Pre-Refunded,
5.75%, 11/01/22 .......................................................................... 14,375,000 15,522,700
Montebello Community RDA, Tax Allocation,
Montebello Hills Redevelopment Project, Refunding, MBIA Insured, 5.60%, 3/01/19 ........ 2,460,000 2,519,458
Housing, Series A, FSA Insured, 5.45%, 9/01/19 ......................................... 1,100,000 1,182,852
Montebello COP, Capital Improvement Project, Refunding, FSA Insured, 5.375%, 11/01/26 ...... 8,715,000 9,548,067
Moreno Valley USD, GO, Election of 2004, Series A, FSA Insured, 5.00%, 8/01/26 ............. 4,000,000 4,295,360
Morgan Hill USD, GO, FGIC Insured, 5.50%, 8/01/25 .......................................... 3,840,000 4,224,154
Mount Diablo USD,
CFD No. 1 Special Tax, FSA Insured, 6.00%, 8/01/24 ..................................... 1,000,000 1,022,200
CFD No. 1 Special Tax, Refunding, AMBAC Insured, 5.75%, 8/01/15 ........................ 1,000,000 1,041,420
CFD No. 1 Special Tax, Refunding, AMBAC Insured, 5.75%, 8/01/16 ........................ 2,270,000 2,364,023
CFD No. 1 Special Tax, Refunding, AMBAC Insured, 5.375%, 8/01/19 ....................... 7,290,000 7,559,366
GO, Election of 2002, FGIC Insured, 5.00%, 7/01/25 ..................................... 6,025,000 6,429,157
Murrieta Valley USD, COP, MBIA Insured, 5.00%, 8/01/27 ..................................... 2,380,000 2,537,627
Natomas USD, GO, FSA Insured, 5.00%, 9/01/26 ............................................... 2,535,000 2,715,213
44 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
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FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Nevada Irrigation District Revenue COP, Cascade Bench Flume Project, MBIA Insured,
5.50%, 1/01/17 ........................................................................... $ 4,600,000 $ 4,865,742
Nevada Joint UHSD, GO, Series A, FSA Insured, 5.00%, 8/01/26 ............................... 1,295,000 1,372,389
Norco RDA, Tax Allocation, Redevelopment Project Area No. 1, MBIA Insured,
5.625%, 3/01/30 .......................................................................... 1,000,000 1,106,570
North City West School Facilities Financing Authority Special Tax, Refunding, Series B,
FSA Insured,
5.75%, 9/01/15 ......................................................................... 1,260,000 1,327,410
6.00%, 9/01/19 ......................................................................... 2,500,000 2,640,800
Northern California Public Power Agency Revenue, AMBAC Insured, Pre-Refunded,
7.50%, 7/01/23 ........................................................................... 3,200,000 4,471,296
(a) Oak Valley Hospital District GO, Election of 2004, FGIC Insured, 5.00%,
7/01/29 ................................................................................ 2,065,000 2,216,034
7/01/30 ................................................................................ 2,230,000 2,391,207
7/01/31 ................................................................................ 2,405,000 2,574,793
7/01/32 ................................................................................ 2,590,000 2,772,854
7/01/33 ................................................................................ 2,785,000 2,981,621
7/01/35 ................................................................................ 6,210,000 6,648,426
Oakland Revenue, 1800 Harrison Foundation, Series A, AMBAC Insured, Pre-Refunded,
6.00%, 1/01/29 ........................................................................... 10,000,000 11,268,300
Oceanside COP,
AMBAC Insured, 5.20%, 4/01/23 .......................................................... 2,500,000 2,696,050
Oceanside Civic Center Project, Refunding, MBIA Insured, Pre-Refunded, 5.75%, 8/01/15 .. 1,000,000 1,022,280
Orange County Sanitation Districts COP, FGIC Insured, 5.00%, 2/01/33 ....................... 8,000,000 8,473,280
Oroville PFA, Tax Allocation Revenue, Oroville Redevelopment Project No. 1, AMBAC Insured,
Pre-Refunded,
5.90%, 9/15/21 ......................................................................... 1,245,000 1,278,117
6.10%, 9/15/23 ......................................................................... 2,860,000 2,937,163
Oxnard UHSD, GO, Series B, FSA Insured, ETM, 5.875%, 8/01/27 ............................... 3,615,000 3,694,169
Palm Springs Financing Authority Lease Revenue, Convention Center Project, Refunding,
Series A, MBIA Insured, 5.00%, 11/01/25 .................................................. 2,295,000 2,431,851
Paramount USD, COP, Master Lease Program, FSA Insured, Pre-Refunded, 6.30%, 9/01/26 ........ 4,750,000 4,872,835
Parlier USD, GO, Series B, AMBAC Insured, 6.00%, 6/01/16 ................................... 1,130,000 1,186,421
Pasadena Area Community College District GO, Election of 2002, Series A, FGIC Insured,
5.00%, 6/01/28 ........................................................................... 4,000,000 4,257,440
Pasadena USD, GO, Series B, FGIC Insured, Pre-Refunded, 5.25%, 7/01/24 ..................... 1,000,000 1,100,750
Peralta Community College District GO, Election of 2000, Series B, MBIA Insured,
5.25%, 8/01/32 ........................................................................... 8,450,000 9,116,959
Perris CFD, Special Tax, No. 93-1, Series A, AMBAC Insured, 5.125%, 8/15/23 ................ 4,000,000 4,325,880
Placer County COP, Administrative and Emergency Services, MBIA Insured, 5.65%, 6/01/24 ..... 4,000,000 4,279,360
Placer County Water Agency Water Revenue COP, FSA Insured, 5.90%, 7/01/25 .................. 2,350,000 2,397,000
Plumas County COP, Capital Improvement Program, Series A, AMBAC Insured, 5.00%, 6/01/33 .... 3,280,000 3,490,642
Porterville COP, Sewer System Refining Project, Refunding, AMBAC Insured, 5.25%, 10/01/23 .. 3,000,000 3,174,690
Poway RDA, Tax Allocation,
Paguay Redevelopment Project, AMBAC Insured, 5.00%, 12/15/25 ........................... 9,195,000 9,714,885
Refunding, MBIA Insured, 5.75%, 6/15/33 ................................................ 11,475,000 12,891,359
Annual Report | 45
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
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FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE
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LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Rancho Cucamonga RDA, Tax Allocation, Rancho Redevelopment Project,
Refunding, FSA Insured, 5.25%, 9/01/20 ................................................. $ 2,500,000 $ 2,698,325
Housing Set Aside, MBIA Insured, 5.25%, 9/01/26 ........................................ 2,000,000 2,091,060
Redding Joint Powers Financing Authority Lease Revenue, Civic Center Project, Series A,
MBIA Insured,
5.75%, 3/01/19 ......................................................................... 3,090,000 3,277,501
5.25%, 3/01/26 ......................................................................... 75,000 78,949
Redwood City School District GO, FGIC Insured, 5.00%, 7/15/27 .............................. 3,000,000 3,176,460
Ripon RDA, Tax Allocation, Community Redevelopment Project, MBIA Insured,
5.85%, 11/01/30 .......................................................................... 3,975,000 4,498,985
Riverside County COP, Historic Courthouse, MBIA Insured, Pre-Refunded, 5.875%, 11/01/27 .... 3,000,000 3,266,880
Rowland USD, GO, Series A, FSA Insured, Pre-Refunded, 5.25%, 9/01/25 ....................... 5,685,000 6,357,365
Sacramento Area Flood Control Agency Special Assessment,
Capital AD No. 2, FGIC Insured, Pre-Refunded, 5.80%, 11/01/16 .......................... 1,000,000 1,061,610
Operation and Maintenance, FGIC Insured, 5.80%, 11/01/16 ............................... 1,475,000 1,561,892
Operation and Maintenance, FGIC Insured, 5.90%, 11/01/25 ............................... 2,690,000 2,850,109
Sacramento City Financing Authority Revenue,
Capital Improvement, Series A, AMBAC Insured, 5.00%, 12/01/26 .......................... 8,395,000 8,823,145
Capital Improvement, Series A, AMBAC Insured, 5.00%, 12/01/32 .......................... 21,500,000 22,527,485
City Hall and Redevelopment Projects, Series A, FSA Insured, 5.00%, 12/01/28 ........... 10,000,000 10,608,600
Sacramento County Airport System Revenue, Series A, MBIA Insured, 6.00%, 7/01/17 ........... 5,920,000 6,174,856
Sacramento County Sanitation District Financing Authority Revenue, Sacramento Regional
County Sanitation, Series A, AMBAC Insured, 5.00%, 12/01/35 .............................. 10,000,000 10,720,200
Salida Area Public Facilities Financing Agency, CFD, No. 1988-1 Special Tax, FSA Insured,
5.75%, 9/01/30 ........................................................................... 3,435,000 3,849,227
Salida USD, COP, Financing Project, AMBAC Insured, 5.375%, 5/01/26 ......................... 1,645,000 1,658,802
San Bernardino County COP, 1997 Public Improvement Financing Project, MBIA Insured,
5.25%, 10/01/25 .......................................................................... 7,000,000 7,464,100
San Buenaventura Public Facilities Financing Authority Lease Revenue, Refunding,
FSA Insured, 5.75%, 6/01/14 .............................................................. 2,250,000 2,322,180
San Carlos School District GO, MBIA Insured, Pre-Refunded, 5.50%, 10/01/24 ................. 2,110,000 2,366,260
San Diego Public Facilities Financing Authority Sewer Revenue, Series B, FGIC Insured,
5.25%, 5/15/27 ........................................................................... 2,950,000 3,095,258
San Francisco BART, District Sales Tax Revenue, FGIC Insured, 5.50%,
7/01/26 ................................................................................ 6,500,000 7,125,365
7/01/34 ................................................................................ 12,000,000 13,154,520
Refunding, AMBAC Insured, 5.00%, 7/01/28 ............................................... 8,000,000 8,307,840
San Francisco City and County Airport Commission International Airport Revenue, Refunding,
Second Series 28A, MBIA Insured, 5.125%,
5/01/24 ................................................................................ 9,745,000 10,274,154
5/01/27 ................................................................................ 16,575,000 17,344,909
San Francisco City and County Public Utilities Commission Water Revenue, Refunding,
Series A, FSA Insured, 5.00%, 11/01/31 ................................................... 3,885,000 4,073,306
San Francisco Community College District GO, Series A, FGIC Insured, 5.00%, 6/15/26 ........ 6,000,000 6,371,640
San Francisco State University Foundation Inc. Auxiliary Organization Housing Revenue,
MBIA Insured, 5.00%, 9/01/31 ............................................................. 13,415,000 14,139,276
San Gabriel USD, COP, Facilities Development Program, Series A, FSA Insured, Pre-Refunded,
6.00%, 9/01/15 ........................................................................... 1,000,000 1,025,410
46 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
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FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue,
Refunding, Series A, MBIA Insured, 5.375%, 1/15/29 ..................................... $ 18,075,000 $ 18,930,490
Refunding, Series A, MBIA Insured, 5.25%, 1/15/30 ...................................... 11,860,000 12,476,008
senior lien, MBIA Insured, 5.00%, 1/01/33 .............................................. 10,035,000 10,173,985
San Jose Financing Authority Lease Revenue, Civic Center Project, Series B, AMBAC Insured,
5.00%, 6/01/27 ........................................................................... 10,000,000 10,517,500
San Jose MFHR, Sixth and Martha Family Apartments, FNMA Insured, 5.875%, 3/01/33 ........... 3,500,000 3,690,225
San Juan USD, GO, Election of 1998, Series A, MBIA Insured, 5.00%, 8/01/28 ................. 5,115,000 5,450,135
San Leandro COP, Library and Fire Stations Financing, AMBAC Insured, 5.75%, 11/01/29 ....... 5,000,000 5,554,500
San Marcos Public Facilities Authority Revenue, Senior Tax Increment Project Area 3,
Series A, MBIA Insured,
5.75%, 10/01/29 ........................................................................ 5,340,000 6,054,065
5.80%, 10/01/30 ........................................................................ 7,800,000 8,773,128
San Mateo GO, Library Improvement Project, Series A, AMBAC Insured, 5.25%, 8/01/30 ......... 5,790,000 6,354,293
Santa Clara COP, Refunding, AMBAC Insured, 5.00%, 2/01/27 .................................. 5,555,000 5,884,800
Santa Clara County Financing Authority Lease Revenue, Refunding, Series A, AMBAC Insured,
5.00%, 11/15/22 .......................................................................... 3,950,000 4,152,872
Santa Fe Springs PFA Water Revenue, Series A, MBIA Insured, Pre-Refunded, 5.90%,
5/01/21 ................................................................................ 900,000 942,417
5/01/26 ................................................................................ 1,190,000 1,246,085
Santa Monica Community College District GO, Series B, AMBAC Insured, 5.75%, 7/01/20 ........ 1,495,000 1,546,234
Santa Monica PFA Lease Revenue, Civic Center Parking Project, XLCA Insured, 5.00%, 7/01/33 . 11,050,000 11,722,945
Santa Rosa Wastewater Revenue, Series B, FGIC Insured, 5.125%, 9/01/31 ..................... 4,000,000 4,271,840
Santa Rosa Wastewater Service Facilities District Revenue, Refunding and Improvement,
AMBAC Insured, 6.00%, 7/02/15 ............................................................ 2,000,000 2,403,460
Sonoma CDA, Tax Allocation, Redevelopment Project, MBIA Insured, 5.70%, 12/01/30 ........... 3,455,000 3,829,349
Sonoma Valley USD, GO, FSA Insured, 6.00%, 7/15/21 ......................................... 2,400,000 2,503,608
South Gate COP, Series A, AMBAC Insured, 5.00%, 9/01/24 .................................... 3,155,000 3,357,330
South San Francisco COP, 5.00%, 4/01/29 .................................................... 2,000,000 2,063,380
Southern Mono Health Care District GO, Series A, MBIA Insured, 5.00%, 8/01/24 .............. 3,005,000 3,178,899
Southern Public Power Authority Power Projects Revenue, Series A, AMBAC Insured,
5.00%, 7/01/33 ........................................................................... 29,000,000 30,802,640
Stanislaus County Board of Education COP, FSA Insured, 5.70%, 9/01/24 ...................... 2,000,000 2,218,680
Stockton Port District Port Facilities Revenue, Refunding and Improvement, Series B,
FSA Insured, 5.90%, 7/01/12 .............................................................. 2,770,000 2,968,166
Stockton Revenue COP, Wastewater System Project, Refunding, Series A, MBIA Insured,
5.00%, 9/01/23 ........................................................................... 6,500,000 6,939,205
Susanville PFAR, MBIA Insured, 5.70%, 6/01/30 .............................................. 3,000,000 3,344,040
Tahoe-Truckee Joint USD, GO,
Series B, FGIC Insured, Pre-Refunded, 5.95%, 9/01/20 ................................... 3,620,000 3,830,394
ID No. 2, Series A, FGIC Insured, Pre-Refunded, 5.75%, 8/01/20 ......................... 4,340,000 4,862,493
Thousand Oaks RDA, Tax Allocation, Thousand Oaks Boulevard Redevelopment, Refunding,
MBIA Insured, 5.375%, 12/01/25 ........................................................... 2,390,000 2,461,150
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 2,850,183
Truckee PFA, Lease Revenue, Series A, AMBAC Insured, 6.00%, 11/01/30 ....................... 1,990,000 2,183,289
Annual Report | 47
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
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FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Turlock Auxiliary Organization Revenue COP, California State University, Stanislaus
Foundation, MBIA Insured, 5.875%, 6/01/22 ................................................ $ 2,000,000 $ 2,094,880
Turlock PFA, Sewer Revenue, FGIC Insured, 5.50%, 9/15/29 ................................... 6,855,000 7,528,572
Union City CRDA Tax Allocation Revenue, Community Redevelopment Project, AMBAC Insured,
5.75%, 10/01/32 .......................................................................... 14,100,000 15,797,217
University of California Revenues, Multi Purpose Projects,
Series H, FGIC Insured, 5.50%, 9/01/28 ................................................. 2,500,000 2,656,475
Series K, 5.00%, 9/01/23 ............................................................... 3,160,000 3,286,179
Series M, FGIC Insured, 5.125%, 9/01/30 ................................................ 8,720,000 9,247,996
Vacaville PFA, Tax Allocation Revenue, Vacaville Redevelopment Projects, FSA Insured,
5.00%, 9/01/31 ........................................................................... 5,095,000 5,322,135
Vallejo Revenue, Water Improvement Project, Refunding, Series A, FSA Insured,
5.875%, 5/01/26 .......................................................................... 12,500,000 13,061,375
Vista USD, GO, Series A, FSA Insured, 5.25%, 8/01/25 ....................................... 5,000,000 5,426,250
Washington Township Health Care District Revenue,
5.00%, 7/01/18 ......................................................................... 2,000,000 2,078,080
5.125%, 7/01/23 ........................................................................ 450,000 465,588
Washington USD, GO, Yolo County Election of 1999, Series A, FGIC Insured, 5.375%,
8/01/25 .................................................................................. 2,045,000 2,238,989
Waugh School District Special Tax GO, Corona/Ely CFD No.1, AMBAC Insured, 5.80%,
9/01/26 .................................................................................. 5,640,000 5,778,462
West Basin Municipal Water District Revenue COP,
1992 Project, Refunding, Series A, AMBAC Insured, 5.50%, 8/01/17 ....................... 3,370,000 3,581,333
Refunding, Series A, MBIA Insured, 5.00%, 8/01/24 ...................................... 2,500,000 2,670,900
Refunding, Series A, MBIA Insured, 5.00%, 8/01/30 ...................................... 5,745,000 6,092,975
Westlands Water District Revenue COP,
MBIA Insured, 5.00%, 9/01/29 ........................................................... 11,775,000 12,460,658
Series A, MBIA Insured, 5.00%, 9/01/35 ................................................. 1,460,000 1,554,214
William S. Hart Joint School Financing Authority Special Tax Revenue, Community Facilities,
FSA Insured, Pre-Refunded, 6.60%, 9/01/18 ................................................ 1,285,000 1,318,821
Woodland Finance Authority Lease Revenue, Capital Projects, Refunding, XLCA Insured,
5.00%, 3/01/32 ........................................................................... 6,340,000 6,749,120
Yucaipa-Sweetwater School Facilities Financing Authority Special Tax Revenue, Sweetwater,
Series A, MBIA Insured, 5.70%, 9/01/19 ................................................... 4,000,000 4,097,280
--------------
TOTAL BONDS (COST $1,595,429,820) .......................................................... 1,743,068,552
--------------
ZERO COUPON/STEP-UP BONDS 8.8%
CALIFORNIA 8.8%
Acalanes UHSD, GO, Capital Appreciation, Election of 2002, Series A, FGIC Insured,
8/01/25 .................................................................................. 9,045,000 3,115,369
Alameda Corridor Transportation Authority Revenue, AMBAC Insured, zero cpn. to 10/01/12,
5.25% thereafter, 10/01/21 ............................................................. 64,660,000 48,305,546
5.45% thereafter, 10/01/25 ............................................................. 25,000,000 18,327,500
Alhambra City Elementary School District GO, Capital Appreciation, Election of 1999,
Series B, FGIC Insured, 9/01/27 .......................................................... 3,035,000 1,075,118
California HFAR, Home Mortgage, Series N, AMBAC Insured, 8/01/31 ........................... 860,000 657,986
48 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
ZERO COUPON/STEP-UP BONDS (CONT.)
CALIFORNIA (CONT.)
Corona-Norco USD, GO,
Series B, FSA Insured, 9/01/23 ......................................................... $ 2,320,000 $ 1,019,733
Series B, FSA Insured, 9/01/24 ......................................................... 2,620,000 1,092,409
Series B, FSA Insured, 3/01/25 ......................................................... 1,400,000 566,188
Series C, FGIC Insured, 9/01/25 ........................................................ 4,655,000 1,839,703
Series C, FGIC Insured, 9/01/26 ........................................................ 6,080,000 2,275,805
Foothill/Eastern Corridor Agency Toll Road Revenue, Capital Appreciation, Refunding,
MBIA Insured,
1/15/17 ................................................................................ 20,000,000 11,508,400
1/15/18 ................................................................................ 25,000,000 13,532,000
1/15/19 ................................................................................ 5,970,000 3,030,790
Fullerton School District GO, Capital Appreciation, Series A, FGIC Insured, 8/01/23 ........ 3,030,000 1,336,836
Grossmont UHSD, GO, Capital Appreciation, Election of 2004, FSA Insured, 8/01/24 ........... 5,110,000 2,138,739
Lancaster School District GO, Capital Appreciation, Election of 1999, MBIA Insured,
8/01/25 ................................................................................ 5,495,000 2,180,031
7/01/26 ................................................................................ 5,965,000 2,250,117
Newark USD, GO, Capital Appreciation,
Series B, FGIC Insured, 8/01/24 ........................................................ 9,905,000 3,596,109
Series C, FSA Insured, 8/01/22 ......................................................... 2,165,000 943,702
Series C, FSA Insured, 8/01/23 ......................................................... 2,465,000 1,007,372
Series C, FSA Insured, 8/01/24 ......................................................... 2,560,000 986,163
Series C, FSA Insured, 8/01/25 ......................................................... 2,705,000 982,185
Patterson Joint USD, GO, Series A, FGIC Insured,
8/01/22 ................................................................................ 1,900,000 885,951
8/01/23 ................................................................................ 1,985,000 875,782
8/01/24 ................................................................................ 2,075,000 868,471
8/01/25 ................................................................................ 2,170,000 860,904
8/01/26 ................................................................................ 2,265,000 851,096
San Bernardino County SFMR, Series A, GNMA Secured, ETM, 5/01/22 ........................... 28,405,000 12,043,152
San Gabriel USD, GO, Capital Appreciation Bonds, Series A, FSA Insured,
8/01/26 ................................................................................ 3,530,000 1,326,433
2/01/27 ................................................................................ 1,850,000 673,493
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, Capital Appreciation,
Refunding, Series A, MBIA Insured, 1/15/26 ............................................... 13,155,000 5,069,674
San Marino USD, GO, Series A, MBIA Insured, 7/01/25 ........................................ 6,080,000 2,421,360
Santa Ana USD, COP, Capital Appreciation Financing Project, FSA Insured, 4/01/24 ........... 14,245,000 6,053,555
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 2,262,668
Southern Mono Health Care District Revenue, Capital Appreciation Bonds, Series A,
MBIA Insured,
8/01/28 ................................................................................ 2,340,000 769,415
8/01/29 ................................................................................ 2,440,000 759,157
8/01/30 ................................................................................ 2,550,000 752,123
8/01/31 ................................................................................ 2,660,000 745,385
Union Elementary School District GO, Capital Appreciation,
Series A, FGIC Insured, 9/01/24 ........................................................ 2,000,000 833,900
Series B, FGIC Insured, 9/01/25 ........................................................ 5,500,000 2,173,655
Series B, FGIC Insured, 9/01/26 ........................................................ 5,850,000 2,189,714
Annual Report | 49
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
ZERO COUPON/STEP-UP BONDS (CONT.)
CALIFORNIA (CONT.)
Vista USD, GO, Capital Appreciation, Series A, FSA Insured,
8/01/26 ................................................................................ $ 7,150,000 $ 2,686,684
2/01/27 ................................................................................ 4,795,000 1,745,620
Western Placer USD Financing Corp. COP, Convertible Capital Appreciation, zero cpn. to
11/01/05, 5.55% thereafter, 11/01/30 ..................................................... 6,930,000 6,914,685
--------------
TOTAL ZERO COUPON/STEP-UP BONDS (COST $153,685,174) ........................................ 175,530,678
--------------
TOTAL LONG TERM INVESTMENTS (COST $1,749,114,994) .......................................... 1,918,599,230
--------------
SHORT TERM INVESTMENTS 3.2%
BONDS 3.2%
CALIFORNIA 3.2%
(b) California State Department of Water Resources Power Supply Revenue,
Series B-5, Daily VRDN and Put, 2.30%, 5/01/22 ......................................... 5,000,000 5,000,000
Series B-6, Daily VRDN and Put, 2.20%, 5/01/22 ......................................... 7,400,000 7,400,000
Series C-7, FSA Insured, Weekly VRDN and Put, 2.22%, 5/01/22 ........................... 2,300,000 2,300,000
(b) California State Economic Recovery GO, Series C-6, Daily VRDN and Put, 2.15%, 7/01/23 ...... 5,600,000 5,600,000
(b) California State Economic Recovery Revenue, Series C-3, Daily VRDN and Put,
2.30%, 7/01/23 ........................................................................... 2,800,000 2,800,000
(b) California State GO,
Kindergarten University, Series B-3, Daily VRDN and Put, 2.20%, 5/01/34 ................ 11,500,000 11,500,000
Series A-2, Daily VRDN and Put, 2.15%, 5/01/33 ......................................... 2,800,000 2,800,000
(b) Infrastructure and Economic Development Bank Insured Revenue, Rand Corp., Series B,
AMBAC Insured, Daily VRDN and Put, 2.15%, 4/01/42 ........................................ 6,850,000 6,850,000
(b) Irvine Ranch Water District Revenue, Nos. 140 240 105 and 250, Daily VRDN and Put,
2.20%, 4/01/33 ........................................................................... 1,200,000 1,200,000
(b) Los Angeles Department of Water and Power Waterworks Revenue, Sub Series B-2,
Daily VRDN and Put, 2.20%, 7/01/35 ....................................................... 1,800,000 1,800,000
(b) Metropolitan Water District Southern California Waterworks Revenue, Refunding,
Series B-1, Daily VRDN and Put, 2.20%, 7/01/35 ......................................... 1,900,000 1,900,000
Series B-3, Daily VRDN and Put, 1.70%, 7/01/35 ......................................... 11,400,000 11,400,000
(b) Newport Beach Revenue, Hoag Memorial Presbyterian Hospital,
Series B, Weekly VRDN and Put, 2.23%, 10/01/26 ......................................... 1,300,000 1,300,000
Series C, Daily VRDN and Put, 2.23%, 10/01/26 .......................................... 1,300,000 1,300,000
--------------
TOTAL SHORT TERM INVESTMENTS (COST $63,150,000) ............................................ 63,150,000
--------------
TOTAL INVESTMENTS (COST $1,812,264,994) 99.7% .............................................. 1,981,749,230
OTHER ASSETS, LESS LIABILITIES 0.3% ........................................................ 6,086,469
--------------
NET ASSETS 100.0% .......................................................................... $1,987,835,699
==============
See Selected Portfolio Abbreviations on page 70.
(a) See Note 1(b) regarding securities purchased on a when-issued or delayed
delivery basis.
(b) Variable rate demand notes (VRDNs) are tax-exempt obligations which
contain a floating or variable interest rate adjustment formula and an
unconditional right of demand to receive payment of the principal balance
plus accrued interest at specified dates. The coupon rate shown represents
the rate at period end. VRDNs are valued at cost.
50 | 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,
CLASS A 2005 2004 2003 2002 2001
----------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ............... $ 11.36 $ 11.74 $ 11.41 $ 11.25 $ 10.92
----------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) ....................... 0.43 0.44 0.44 0.47 0.51
Net realized and unrealized gains (losses) ..... 0.32 (0.38) 0.34 0.17 0.34
----------------------------------------------------------------------------
Total from investment operations ................. 0.75 0.06 0.78 0.64 0.85
----------------------------------------------------------------------------
Less distributions from net investment income .... (0.43) (0.44) (0.45) (0.48) (0.52)
----------------------------------------------------------------------------
Redemption fees .................................. --(c) -- -- -- --
----------------------------------------------------------------------------
Net asset value, end of year ..................... $ 11.68 $ 11.36 $ 11.74 $ 11.41 $ 11.25
============================================================================
Total return(b) .................................. 6.67% 0.50% 6.92% 5.80% 7.86%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .................. $ 453,335 $ 384,196 $ 414,558 $ 324,061 $ 224,156
Ratios to average net assets:
Expenses ....................................... 0.67% 0.67% 0.68% 0.70% 0.72%
Expenses net of waiver and payments by affiliate 0.67% 0.67% 0.68% 0.68% 0.60%
Net investment income .......................... 3.67% 3.76% 3.80% 4.13% 4.56%
Portfolio turnover rate .......................... 4.17% 17.36% 9.56% 12.05% 8.02%
(a) Based on average daily shares outstanding.
(b) Total return does not reflect sales commissions or the contingent deferred
sales charge.
(c) Amount is less than $0.01 per share.
Annual Report | See notes to financial statements. | 51
FRANKLIN CALIFORNIA TAX-FREE TRUST
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND (CONTINUED)
--------------------------------
YEAR ENDED JUNE 30,
CLASS C 2005 2004
--------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......... $ 11.37 $ 11.73
--------------------------------
Income from investment operations:
Net investment income(a) .................. 0.36 0.37
Net realized and unrealized gains (losses) 0.33 (0.36)
--------------------------------
Total from investment operations ............ 0.69 0.01
--------------------------------
Less distributions from net investment income (0.36) (0.37)
--------------------------------
Redemption fees ............................. --(c) --
--------------------------------
Net asset value, end of year ................ $ 11.70 $ 11.37
================================
Total return(b) ............................. 6.15% 0.11%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............. $ 19,082 $ 9,142
Ratios to average net assets:
Expenses .................................. 1.22% 1.22%
Net investment income ..................... 3.12% 3.21%
Portfolio turnover rate ..................... 4.17% 17.36%
(a) Based on average daily shares outstanding.
(b) Total return does not reflect the contingent deferred sales charge.
(c) Amount is less than $0.01 per share.
52 | See notes to financial statements. | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS 98.4%
BONDS 93.0%
CALIFORNIA 90.4%
ABAG Finance Authority for Nonprofit Corps. COP,
Partner North County Health Project, 5.50%, 3/01/06 .................................... $ 170,000 $ 172,521
Rhoda Haas Goldman Plaza, California Mortgage Insured, 5.125%, 5/15/15 ................. 3,000,000 3,177,060
ABAG Finance Authority for Nonprofit Corps. Revenue, San Diego Hospital Assn., Series C,
5.125%, 3/01/18 ........................................................................ 2,695,000 2,830,235
5.25%, 3/01/19 ......................................................................... 2,315,000 2,443,251
ABAG Revenue, Refunding, Series A-E,
5.00%, 9/15/06 ......................................................................... 595,000 606,769
5.05%, 9/15/07 ......................................................................... 610,000 624,231
5.40%, 9/15/14 ......................................................................... 2,455,000 2,507,586
ABAG Water and Wastewater Revenue, Pooled Financing Program, Series A, FSA Insured,
5.00%, 10/01/10 .......................................................................... 3,035,000 3,278,802
Alameda-Contra Costa Transportation District COP, Refunding, AMBAC Insured, 4.375%,
8/01/14 .................................................................................. 1,330,000 1,393,853
Anaheim UHSD, GO, Refunding, FSA Insured, 5.00%, 8/01/18 ................................... 4,740,000 5,241,350
Antelope Valley UHSD, GO, Series A, MBIA Insured,
4.50%, 8/01/13 ......................................................................... 1,230,000 1,328,080
4.625%, 8/01/14 ........................................................................ 1,250,000 1,352,050
Antioch PFA Reassessment Revenue, sub. lien, Series B,
5.20%, 9/02/05 ......................................................................... 1,965,000 1,969,264
5.40%, 9/02/07 ......................................................................... 1,100,000 1,132,131
Brentwood Infrastructure Financing Authority Revenue, Refunding, Series A, FSA Insured,
4.00%, 9/02/17 ........................................................................... 1,485,000 1,507,720
Burbank Electric Revenue, MBIA Insured, 4.00%,
6/01/11 ................................................................................ 1,000,000 1,048,180
6/01/12 ................................................................................ 1,000,000 1,046,650
Burbank USD, GO, Election of 1997, Series C, FGIC Insured, 4.00%, 8/01/12 .................. 2,500,000 2,611,100
Burbank Water and Power Electric Revenue, MBIA Insured, 4.00%, 6/01/11 ..................... 5,045,000 5,067,904
California Educational Facilities Authority Revenue,
Pooled College and University Projects, Series B, Pre-Refunded, 6.125%, 4/01/13 ........ 1,000,000 1,077,280
Stanford University, Refunding, Series R, 4.00%, 11/01/11 .............................. 1,000,000 1,051,260
California Health Facilities Financing Authority Revenue,
The Episcopal Home, California Mortgage Insured, 4.625%, 2/01/12 ....................... 1,350,000 1,410,979
The Episcopal Home, California Mortgage Insured, 4.75%, 2/01/13 ........................ 1,200,000 1,272,852
Kaiser Permanente, Series B, ETM, 5.25%, 10/01/13 ...................................... 5,000,000 5,420,350
Kaiser Permanente, Series B, ETM, 5.25%, 10/01/14 ...................................... 2,000,000 2,164,900
Kaiser Permanente, Series B, ETM, 5.25%, 10/01/16 ...................................... 3,850,000 4,156,229
Paradise Valley Estates, California Mortgage Insured, 3.875%, 1/01/09 .................. 1,555,000 1,563,817
Paradise Valley Estates, California Mortgage Insured, 4.125%, 1/01/10 .................. 1,000,000 1,033,290
Paradise Valley Estates, California Mortgage Insured, 5.00%, 1/01/11 ................... 1,480,000 1,578,524
Paradise Valley Estates, California Mortgage Insured, 4.375%, 1/01/12 .................. 1,000,000 1,039,190
Paradise Valley Estates, California Mortgage Insured, 5.00%, 1/01/13 ................... 1,815,000 1,968,041
Paradise Valley Estates, California Mortgage Insured, 5.00%, 1/01/14 ................... 1,635,000 1,762,890
Sutter Health, Refunding, Series A, MBIA Insured, 5.875%, 8/15/16 ...................... 3,750,000 3,948,862
California HFAR, SFM Purchase, Class III, Series A-1, MBIA Insured, 5.70%, 8/01/11 ......... 735,000 755,756
California State Department of Water Resources Central Valley Project Revenue, Water System,
Refunding, Series S, 5.00%, 12/01/19 ..................................................... 4,000,000 4,208,840
Annual Report | 53
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
California State Department of Water Resources Power Supply Revenue, Series A,
5.50%, 5/01/12 ......................................................................... $ 2,000,000 $ 2,241,980
5.125%, 5/01/18 ........................................................................ 2,500,000 2,718,125
California State Department of Water Resources Water Revenue, Central Valley Project,
(a) Series AD, FSA Insured, 5.00%, 12/01/20 ................................................ 5,000,000 5,456,650
Series Z, FGIC Insured, 3.50%, 12/01/12 ................................................ 5,000,000 5,068,400
California State Economic Recovery Revenue, Series A, 5.00%, 7/01/15 ....................... 10,670,000 11,782,241
California State GO,
5.00%, 11/01/12 ........................................................................ 665,000 723,440
5.25%, 2/01/14 ......................................................................... 4,000,000 4,458,560
5.25%, 6/01/16 ......................................................................... 630,000 650,884
Pre-Refunded, 5.00%, 11/01/12 .......................................................... 1,335,000 1,479,500
Pre-Refunded, 5.25%, 6/01/16 ........................................................... 1,370,000 1,416,416
Refunding, 5.00%, 12/01/05 ............................................................. 7,000,000 7,066,640
Refunding, 4.00%, 2/01/10 .............................................................. 6,900,000 7,132,806
Refunding, MBIA Insured, 5.00%, 2/01/18 ................................................ 1,175,000 1,242,656
Veterans, Series B, 5.00%, 12/01/12 .................................................... 2,000,000 2,036,060
Veterans, Series B, 5.25%, 12/01/15 .................................................... 2,310,000 2,407,343
Veterans, Series B, 5.375%, 12/01/16 ................................................... 605,000 616,737
California State Public Works Board Lease Revenue,
Department of Forestry and Fire Protection, Series A, 4.875%, 10/01/18 ................. 1,325,000 1,371,441
Various Community College Projects, Refunding, Series C, 5.50%, 9/01/09 ................ 1,555,000 1,630,900
California Statewide CDA, COP,
California Lutheran Homes, ETM, 5.375%, 11/15/06 ....................................... 1,000,000 1,036,490
Kaiser Permanente, ETM, 5.30%, 12/01/15 ................................................ 2,000,000 2,087,100
St. Joseph Health System, Refunding, 5.00%, 7/01/12 .................................... 2,180,000 2,288,935
St. Joseph Health System Obligation Group, 5.25%, 7/01/11 .............................. 1,005,000 1,077,722
California Statewide CDA Revenue,
Daughters of Charity Health, Series G, 5.25%, 7/01/13 .................................. 1,000,000 1,088,290
Daughters of Charity Health, Series G, 5.00%, 7/01/22 .................................. 5,000,000 5,215,650
Insured Health Facilities, Jewish Home, California Mortgage Insured, 5.00%, 11/15/18 ... 3,000,000 3,204,630
Kaiser Permanente, Mandatory Put 5/01/11, Series I, 3.45%, 4/01/35 ..................... 5,000,000 4,953,000
Kaiser Permanente, Mandatory Put 6/01/12, Series C, 3.85%, 11/01/29 .................... 10,000,000 10,066,100
Mission Community, California Mortgage Insured, 4.40%, 11/01/10 ........................ 1,100,000 1,149,258
Mission Community, California Mortgage Insured, 4.50%, 11/01/11 ........................ 1,145,000 1,202,731
Viewpoint School, ACA Insured, 4.50%, 10/01/17 ......................................... 460,000 468,680
Viewpoint School, ACA Insured, 4.75%, 10/01/18 ......................................... 480,000 495,922
Central Joint Powers Health Financing Authority COP, Community Hospitals of Central California,
5.125%, 2/01/13 ........................................................................ 1,375,000 1,444,094
5.25%, 2/01/14 ......................................................................... 1,435,000 1,508,902
5.75%, 2/01/16 ......................................................................... 1,585,000 1,693,145
Central Valley Financing Authority Cogeneration Project Revenue, Carson Ice General Project,
Refunding, MBIA Insured, 5.00%, 7/01/17 .................................................. 2,000,000 2,117,000
Cerritos PFAR Tax Allocation, Redevelopment Project, Series A, AMBAC Insured, 3.00%,
11/01/11 ................................................................................. 2,585,000 2,562,872
Chaffey Community College District COP, Pre-Refunded, 5.10%, 9/01/13 ....................... 1,860,000 2,027,567
Clovis MFR, Mandatory Put 11/01/10, Refunding, FNMA Insured, 5.10%, 11/01/30 ............... 4,105,000 4,279,257
54 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Coalinga COP, Custody Facility, Refunding, 4.25%, 4/01/10 .................................. $ 1,000,000 $ 1,027,150
Colma 1915 Act Special Assessment, Local ID No. 1, Refunding, 5.40%, 9/02/05 ............... 570,000 571,111
Compton Community College District GO, Series 2004-A, MBIA Insured, 4.25%, 7/01/16 ......... 1,025,000 1,074,958
Compton COP, Civic Center and Capital Improvement, Refunding, Series A,
5.00%, 9/01/08 ......................................................................... 4,340,000 4,521,976
5.50%, 9/01/15 ......................................................................... 1,180,000 1,240,782
Conejo Valley USD, GO, Election of 1998, Series D, FGIC Insured, 4.50%,
8/01/18 ................................................................................ 3,850,000 4,055,012
8/01/19 ................................................................................ 4,000,000 4,188,000
Contra Costa Community College District GO, Election of 2002, FGIC Insured, 4.75%,
8/01/18 .................................................................................. 2,450,000 2,593,056
Contra Costa County Public Financing Lease Revenue, Refunding, Series B, MBIA Insured,
4.00%, 6/01/13 ........................................................................... 1,065,000 1,107,323
Corona PFA Lease Revenue, City Hall Project, Series B, MBIA Insured,
3.75%, 9/01/13 ......................................................................... 1,000,000 1,022,020
4.00%, 9/01/14 ......................................................................... 1,210,000 1,251,818
Corona-Norco USD, PFA Special Tax Revenue, Series A, 5.25%, 9/01/25 ........................ 2,235,000 2,289,646
Duarte RDA Tax Allocation, Merged Redevelopment Project Area, Refunding, 5.125%,
10/01/16 ................................................................................. 4,200,000 4,324,488
Fairfax School District GO, Election of 2000, Series A, FGIC Insured, 5.00%, 11/01/17 ...... 895,000 984,178
Fairfield-Suisun Sewer District Sewer Revenue, Series A, Refunding, FGIC Insured, 5.00%,
5/01/12 .................................................................................. 600,000 651,882
Folsom PFA Lease Revenue, City Hall and Community Center, Refunding, FSA Insured, 5.00%,
10/01/17 ................................................................................. 1,275,000 1,388,258
Foothill/Eastern Corridor Agency Toll Road Revenue, Refunding, MBIA Insured, 5.00%,
1/15/16 .................................................................................. 1,000,000 1,068,210
Fremont UHSD Santa Clara County GO, Series C, FSA Insured, Pre-Refunded, 4.25%,
9/01/13 .................................................................................. 1,310,000 1,399,866
Galt Capital Improvements Authority Lease Revenue, Culture and Recreation Improvement
Project, 5.00%, 4/01/12 .................................................................. 2,390,000 2,497,741
Galt Middle School Joint Powers Authority Special Tax, CFD No. 1, Refunding, 5.40%,
9/01/12 .................................................................................. 1,955,000 2,068,312
Garden Grove Agency Community Development Tax Allocation, Garden Grove Community
Project, Refunding, AMBAC Insured, 4.25%, 10/01/13 ....................................... 2,025,000 2,147,654
Golden State Tobacco Securitization Corp. Tobacco Settlement Revenue, 5.00%, 6/01/12 ....... 1,500,000 1,615,890
Hi-Desert Memorial Health Care District Revenue, Refunding,
5.10%, 10/01/06 ........................................................................ 615,000 618,758
5.125%, 10/01/07 ....................................................................... 650,000 656,715
Hollister RDA Tax Allocation, Community Development Project, Series 1994, 5.55%,
10/01/05 ................................................................................. 585,000 589,025
Huntington Beach City School District GO, Series A, FGIC Insured, 5.00%, 8/01/18 ........... 1,245,000 1,340,641
Huntington Beach PFAR, Lease Capital Improvement Refinancing Project, Series B,
AMBAC Insured,
4.00%, 8/01/13 ......................................................................... 1,500,000 1,563,015
4.125%, 8/01/14 ........................................................................ 2,140,000 2,240,944
4.25%, 8/01/15 ......................................................................... 2,080,000 2,181,338
Inland Empire Solid Waste Financing Authority Revenue, Landfill Improvement Financing
Project, Series B, FSA Insured, ETM, 6.25%, 8/01/11 ...................................... 1,000,000 1,104,160
Annual Report | 55
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Irvine 1915 Act GO, AD No. 03-19, Group 2,
4.875%, 9/02/16 ........................................................................ $ 1,000,000 $ 1,013,580
5.00%, 9/02/18 ......................................................................... 1,000,000 1,013,130
5.125%, 9/02/19 ........................................................................ 1,000,000 1,014,900
Irvine 1915 Act Special Assessment, AD No. 00-18,
Group 2, 4.375%, 9/02/10 ............................................................... 885,000 906,497
Group 2, 4.70%, 9/02/12 ................................................................ 1,475,000 1,519,973
Group 2, 4.80%, 9/02/13 ................................................................ 1,175,000 1,210,873
Group 2, 5.125%, 9/02/17 ............................................................... 1,705,000 1,752,672
Group 3, 4.75%, 9/02/15 ................................................................ 1,000,000 1,017,540
Group 3, 5.00%, 9/02/17 ................................................................ 1,000,000 1,022,790
Kings River Conservation District Pine Flat Power Revenue, Refunding, Series E, 5.125%,
1/01/18 .................................................................................. 1,735,000 1,849,198
La Quinta RDA Tax Allocation, Redevelopment Project Areas No. 1 and 2, MBIA Insured,
Pre-Refunded, 5.40%, 9/01/07 ............................................................. 560,000 573,681
Lake Elsinore PFA Tax Allocation Revenue,
Lake Elsinore Redevelopment Projects, Series A, FSA Insured, 5.40%, 9/01/08 ............ 1,230,000 1,235,633
Series A, 5.00%, 9/01/09 ............................................................... 1,500,000 1,559,700
Lake Elsinore School Financing Authority Revenue, Refunding, 6.00%, 9/01/11 ................ 1,000,000 1,069,260
Lancaster COP, School District Project, Refunding, FSA Insured, 5.125%, 4/01/14 ............ 2,000,000 2,144,320
Lancaster RDA Tax Allocation,
Central Business District Redevelopment, Refunding, 5.70%, 8/01/05 ..................... 50,000 50,066
Fox Field Redevelopment Project Area, Refunding, 5.70%, 8/01/05 ........................ 75,000 75,117
Las Virgenes USD, GO, Series D, FGIC Insured, 3.30%, 9/01/13 ............................... 1,415,000 1,409,948
Lemon Grove CDA Tax Allocation, 1998, Refunding,
5.00%, 8/01/06 ......................................................................... 380,000 385,643
5.10%, 8/01/07 ......................................................................... 205,000 211,240
5.20%, 8/01/08 ......................................................................... 215,000 224,079
Los Angeles Convention and Exhibition Center Authority Lease Revenue, Refunding, Series A,
AMBAC Insured, 3.00%, 8/15/12 ............................................................ 4,525,000 4,456,446
Los Angeles County MTA Sales Tax Revenue, Proposition A, First Tier, Refunding, Series A,
FSA Insured, 5.00%, 7/01/15 .............................................................. 5,345,000 5,732,833
Los Angeles County Sanitation Districts Financing Authority Revenue, Capital Project, Series A,
FSA Insured, 5.00%, 10/01/17 ............................................................. 1,000,000 1,093,000
Los Angeles USD,
COP, Refunding, Series A, AMBAC Insured, 4.00%, 10/01/13 ............................... 4,415,000 4,583,476
GO, Election of 2004, Series C, FGIC Insured, 5.00%, 7/01/19 ........................... 2,035,000 2,222,668
GO, Refunding, MBIA Insured, 5.25%, 7/01/13 ............................................ 3,500,000 3,962,595
Los Angeles Wastewater System Revenue, Series A, FGIC Insured, 5.00%, 6/01/14 .............. 1,075,000 1,144,488
Lynwood PFAR, Water System Improvement Project, 6.15%, 6/01/08 ............................. 435,000 445,997
M-S-R Public Power Agency San Juan Project Revenue, Refunding, Series I, MBIA Insured,
4.25%, 7/01/11 ......................................................................... 5,055,000 5,370,381
5.00%, 7/01/18 ......................................................................... 1,000,000 1,070,340
Metropolitan Water District Southern California GO, Waterworks, Series B, Pre-Refunded,
4.125%, 3/01/13 ........................................................................ 1,000,000 1,056,460
4.25%, 3/01/14 ......................................................................... 1,000,000 1,062,910
4.30%, 3/01/15 ......................................................................... 1,000,000 1,065,490
56 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Moreno Valley USD, GO, Election of 2004, Series A, FSA Insured, 5.00%,
8/01/17 ................................................................................ $ 2,000,000 $ 2,201,960
8/01/18 ................................................................................ 2,300,000 2,522,962
Morgan Hill USD, GO, FGIC Insured, 4.25%, 8/01/14 .......................................... 1,585,000 1,666,960
Moulton-Niguel Water District GO,
Consolidated, Refunding, AMBAC Insured, 5.00%, 9/01/16 ................................. 3,520,000 3,889,037
Refunding, AMBAC Insured, 4.00%, 9/01/12 ............................................... 2,930,000 3,071,050
Murrieta COP, Road Improvement Project, 6.00%,
4/01/07 ................................................................................ 235,000 245,194
4/01/08 ................................................................................ 245,000 255,221
Nevada County COP, Refunding, MBIA Insured, 4.125%, 10/01/12 ............................... 1,040,000 1,085,573
Newport Mesa USD, GO, MBIA Insured, 4.00%, 8/01/12 ......................................... 1,000,000 1,047,660
North City West School Facilities Financing Authority Special Tax, Refunding, Series B,
FSA Insured, 5.625%, 9/01/08 ............................................................. 500,000 526,050
Orange County CFD No. 86-2 Special Tax, Rancho Santa Margarita, Refunding, Series A,
5.375%, 8/15/12 .......................................................................... 1,500,000 1,598,730
Orange County CFD Special Tax,
No. 02-1, Ladera Ranch, Series A, 4.60%, 8/15/14 ....................................... 1,000,000 1,031,140
No. 02-1, Ladera Ranch, Series A, 4.75%, 8/15/15 ....................................... 1,000,000 1,034,700
No. 02-1, Ladera Ranch, Series A, 4.90%, 8/15/16 ....................................... 1,285,000 1,330,939
No. 03-1, Ladera Ranch, Series A, 4.90%, 8/15/17 ....................................... 1,000,000 1,034,430
No. 03-1, Ladera Ranch, Series A, 5.10%, 8/15/18 ....................................... 1,000,000 1,041,030
No. 04-1, Ladera Ranch, Series A, 4.70%, 8/15/18 ....................................... 1,765,000 1,789,887
No. 04-1, Ladera Ranch, Series A, 4.80%, 8/15/19 ....................................... 1,945,000 1,972,308
No. 04-1, Ladera Ranch, Series A, 4.85%, 8/15/20 ....................................... 2,000,000 2,026,680
Orange County Local Transportation Authority Sales Tax Revenue, First Senior Measure M,
6.00%, 2/15/06 ........................................................................... 500,000 510,425
Orange County Recovery COP, Series A, MBIA Insured, 6.00%, 7/01/08 ......................... 1,500,000 1,635,225
Oroville Hospital Revenue, Oroville Hospital, Series A, California Mortgage Insured, 5.125%,
12/01/12 ................................................................................. 1,435,000 1,478,423
Oxnard Harbor District Revenue, Series A, 5.10%, 8/01/14 ................................... 1,000,000 1,041,220
Pajaro Valley USD, GO, Election of 2002, Series A, FSA Insured, Pre-Refunded, 5.00%,
8/01/16 .................................................................................. 1,500,000 1,682,715
Palm Desert Financing Authority Lease Revenue, Blythe County Administrative Project,
Pre-Refunded, 6.375%, 8/01/11 ............................................................ 855,000 905,248
Palm Desert Financing Authority Tax Allocation Revenue, MBIA Insured, 4.75%, 8/01/18 ....... 1,050,000 1,130,073
Pleasanton USD, GO, Refunding, Series C, MBIA Insured, 5.00%, 8/01/14 ...................... 3,535,000 3,961,427
Pomona RDA Tax Allocation, Mountain Meadows Redevelopment Project, Refunding, Series X,
5.35%, 12/01/16 .......................................................................... 1,000,000 1,111,940
Poway RDA Tax Allocation, Paguay Redevelopment Project, Series A, MBIA Insured, 4.50%,
6/15/14 .................................................................................. 4,595,000 4,914,398
Redlands USD, GO, Election of 2002, FSA Insured, 5.00%, 7/01/19 ............................ 1,000,000 1,083,420
Richmond Joint Powers Financing Authority Revenue, Multiple Redevelopment Projects,
Series B, ETM, 5.35%, 5/15/13 ............................................................ 2,000,000 2,178,360
Riverside County COP, Capital Improvement, Family Law, Refunding, Series A, FGIC Insured,
5.00%,
11/01/18 ............................................................................... 1,540,000 1,678,600
11/01/19 ............................................................................... 1,615,000 1,753,212
Annual Report | 57
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Riverside County Housing Authority MFHR, Brandon Place Apartments, Mandatory Put 7/01/09,
Series B, FNMA Insured, 5.625%, 7/01/29 .................................................. $ 995,000 $ 1,044,700
Riverside USD, GO, Election, Series A, FGIC Insured, 4.00%, 2/01/13 ........................ 1,000,000 1,043,120
Sacramento City USD, GO, Election of 1999, Series D, FSA Insured, 5.00%, 7/01/19 ........... 1,465,000 1,587,210
San Bernardino City USD, GO, Refunding,
FSA Insured, 5.00%, 8/01/17 ............................................................ 2,615,000 2,879,063
FSA Insured, 5.00%, 8/01/18 ............................................................ 1,140,000 1,250,512
Series A, FSA Insured, 5.00%, 8/01/19 .................................................. 1,680,000 1,836,089
San Bernardino County COP, Medical Center Financing Project, Refunding, 6.00%, 8/01/09 ..... 2,000,000 2,197,600
San Francisco City and County Airports Commission International Airport Revenue, Issue 30,
Refunding, Second Series, XLCA Insured, 4.00%, 5/01/14 ................................... 2,500,000 2,584,450
San Francisco City and County GO, Refunding, Series 1, FGIC Insured, 5.00%, 6/15/12 ........ 3,650,000 3,866,956
San Joaquin County COP,
General Hospital Project, Refunding, MBIA Insured, 5.00%, 9/01/17 ...................... 1,000,000 1,060,940
Solid Waste System Facilities Projects, MBIA Insured, 4.00%, 4/01/12 ................... 2,925,000 3,058,439
Solid Waste System Facilities Projects, MBIA Insured, 5.00%, 4/01/17 ................... 1,340,000 1,453,377
San Jose MFHR, Countrybrook Project, Refunding, Series A, FNMA Insured, 4.95%, 4/01/12 ..... 4,595,000 4,774,343
San Marcos Public Facilities Authority Revenue, Senior Tax Increment Project Area 3,
Series A, MBIA Insured,
4.70%, 10/01/05 ........................................................................ 595,000 598,100
5.10%, 10/01/09 ........................................................................ 515,000 559,836
5.30%, 10/01/11 ........................................................................ 350,000 392,893
Santa Ana COP, Refunding, Series A, AMBAC Insured, 4.25%, 6/01/13 .......................... 1,405,000 1,492,124
Santa Clara 1915 Act, Reassessment District 187, Refunding, Series 1, 5.25%, 9/02/11 ....... 1,720,000 1,774,025
Santa Clara County Financing Authority Lease Revenue, Multiple Facilities Projects, Refunding,
Series A, AMBAC Insured, 4.50%, 5/15/12 .................................................. 2,900,000 3,017,247
Santa Monica-Malibu USD, COP, Series C, MBIA Insured,
4.00%, 5/01/12 ......................................................................... 525,000 543,170
4.25%, 5/01/14 ......................................................................... 840,000 874,675
4.25%, 5/01/15 ......................................................................... 875,000 906,911
4.25%, 11/01/15 ........................................................................ 670,000 694,435
Shafter Joint Powers Financing Authority Lease Revenue, Community Correctional Facility
Project, Series A, 5.50%, 1/01/06 ........................................................ 330,000 334,062
South County Regional Wastewater Authority Revenue, Regional Wastewater Facilities Project,
Refunding, FSA Insured, 3.25%, 8/01/11 ................................................... 1,000,000 1,008,230
South Gate PFA Tax Allocation Revenue, South Gate Redevelopment Project No. 1, XLCA
Insured, 5.00%, 9/01/16 .................................................................. 2,000,000 2,184,820
South Gate PFA Water Revenue, Refunding, Series A, FGIC Insured,
5.35%, 10/01/07 ........................................................................ 995,000 1,054,471
5.45%, 10/01/08 ........................................................................ 1,040,000 1,126,996
Southwestern Community College District GO, Refunding, MBIA Insured, 5.00%, 8/01/18 ........ 2,295,000 2,559,109
Stockton Health Facilities Revenue, Dameron Hospital Assn., Refunding, Series A, 5.35%,
12/01/09 ................................................................................. 385,000 410,102
Stockton Port District Port Facilities Revenue, Refunding and Improvement, Series A, FSA
Insured, 5.75%, 7/01/11 .................................................................. 1,295,000 1,388,875
Stockton Revenue, O'Connor Woods Housing Corp., Series A, 5.375%, 11/01/11 ................. 1,365,000 1,420,829
Sunline Transport Agency COP, Transport Finance Corp., Series B, 5.75%, 7/01/06 ............ 445,000 451,399
Sweetwater Authority Water Revenue, AMBAC Insured, 5.00%, 4/01/18 .......................... 2,860,000 3,115,083
58 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Sweetwater UHSD, COP, FSA Insured, 4.15%, 9/01/12 .......................................... $ 1,000,000 $ 1,051,120
Temecula Valley USD, GO, Series E, FSA Insured, Pre-Refunded, 5.65%, 9/01/07 ............... 370,000 379,206
Tobacco Securitization Authority Northern California Tobacco Settlement Revenue,
Asset Backed Bonds, Series B,
4.25%, 6/01/09 ......................................................................... 880,000 904,508
4.375%, 6/01/10 ........................................................................ 1,665,000 1,726,272
4.50%, 6/01/11 ......................................................................... 1,540,000 1,600,599
4.60%, 6/01/12 ......................................................................... 1,760,000 1,819,646
4.70%, 6/01/13 ......................................................................... 1,500,000 1,542,750
4.80%, 6/01/14 ......................................................................... 725,000 743,691
Torrance Hospital Revenue, Torrance Memorial Medical Center, Series A, 5.10%, 6/01/12 ...... 1,000,000 1,087,190
University of California Revenues,
Multiple Purpose Projects, Series N, FGIC Insured, 4.00%, 9/01/12 ...................... 1,380,000 1,427,017
Research Facilities, Series E, AMBAC Insured, 5.00%, 9/01/15 ........................... 3,645,000 3,925,629
West Contra Costa USD, GO, Series B, FSA Insured, 4.00%, 8/01/12 ........................... 1,875,000 1,964,363
Whittier Health Facility Revenue, Presbyterian Intercommunity Hospital, 5.00%,
6/01/11 ................................................................................ 1,060,000 1,131,857
6/01/12 ................................................................................ 2,225,000 2,391,297
6/01/13 ................................................................................ 2,335,000 2,509,868
Yucaipa Valley Water District Water System Revenue COP, Series A, MBIA Insured,
5.00%, 9/01/15 ......................................................................... 1,080,000 1,203,206
5.25%, 9/01/20 ......................................................................... 1,325,000 1,479,893
--------------
426,999,272
--------------
U.S. TERRITORIES 2.6%
Puerto Rico Commonwealth GO, Public Improvement, FSA Insured, 5.25%, 7/01/16 ............... 2,500,000 2,893,700
Virgin Islands PFAR, senior lien,
Fund Loan Notes, Refunding, Series A, 5.40%, 10/01/12 .................................. 4,150,000 4,444,567
Refunding, Series A, 5.30%, 10/01/11 ................................................... 1,000,000 1,067,620
Virgin Islands Water and Power Authority Water System Revenue, Refunding,
4.875%, 7/01/06 ........................................................................ 1,500,000 1,517,775
5.00%, 7/01/09 ......................................................................... 2,000,000 2,084,980
--------------
12,008,642
--------------
TOTAL BONDS (COST $421,719,529) ............................................................ 439,007,914
--------------
ZERO COUPON/STEP-UP BONDS 5.4%
CALIFORNIA 5.4%
Alameda Corridor Transportation Authority Revenue, Capital Appreciation, sub. lien, Refunding,
Series A, AMBAC Insured, 10/01/17 ........................................................ 10,000,000 6,042,300
Burbank USD, GO, Capital Appreciation, Election of 1997, Series C, FGIC Insured,
8/01/15 ................................................................................ 4,600,000 3,071,972
8/01/16 ................................................................................ 4,670,000 2,970,260
Clovis USD, GO, Capital Appreciation, Election of 2004, Series A, FGIC Insured, 8/01/17 .... 5,235,000 3,166,128
Conejo Valley USD, GO, Election of 1998, Series C, FSA Insured, 8/01/17 .................... 2,500,000 1,512,000
Montebello USD, GO, Capital Appreciation, FGIC Insured,
8/01/18 ................................................................................ 1,455,000 836,552
8/01/19 ................................................................................ 1,480,000 808,939
Annual Report | 59
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
ZERO COUPON/STEP-UP BONDS (CONT.)
CALIFORNIA (CONT.)
San Francisco City and County Redevelopment Financing Authority Tax Allocation,
Redevelopment Projects, Series A, 8/01/17 ................................................ $ 3,825,000 $ 2,080,685
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, Capital Appreciation,
Refunding, Series A, zero cpn. to 1/15/07, 5.60% thereafter, 1/15/16 ..................... 3,000,000 2,783,520
Santa Ana USD, GO, Election of 1999, Series B, FGIC Insured, 8/01/14 ....................... 3,125,000 2,199,531
--------------
TOTAL ZERO COUPON/STEP-UP BONDS (COST $23,539,441) ......................................... 25,471,887
--------------
TOTAL LONG TERM INVESTMENTS (COST $445,258,970) ............................................ 464,479,801
--------------
SHORT TERM INVESTMENTS 1.7%
BONDS 1.7%
CALIFORNIA 1.7%
(b) California State Department of Water Resources Power Supply Revenue, Series B-6, Daily
VRDN and Put, 2.20%, 5/01/22 ............................................................. 1,000,000 1,000,000
(b) California State Economic Recovery Revenue, Series C-3, Daily VRDN and Put, 2.30%,
7/01/23 .................................................................................. 1,500,000 1,500,000
(b) California State GO, Kindergarten University, Series B-3, Daily VRDN and Put, 2.20%,
5/01/34 .................................................................................. 700,000 700,000
(b) Irvine 1915 Act Special Assessment, AD No. 94-13, Daily VRDN and Put, 2.20%, 9/02/22 ....... 900,000 900,000
(b) Newport Beach Revenue, Hoag Memorial Presbyterian Hospital,
Series B, Weekly VRDN and Put, 2.23%, 10/01/26 ......................................... 1,700,000 1,700,000
Series C, Daily VRDN and Put, 2.23%, 10/01/26 .......................................... 1,300,000 1,300,000
(b) Orange County Sanitation Districts COP, Refunding,
Series A, Daily VRDN and Put, 2.20%, 8/01/29 ........................................... 1,000,000 1,000,000
Series B, Daily VRDN and Put, 2.20%, 8/01/30 ........................................... 100,000 100,000
--------------
TOTAL SHORT TERM INVESTMENTS (COST $8,200,000) ............................................. 8,200,000
--------------
TOTAL INVESTMENTS (COST $453,458,970) 100.1% ............................................... 472,679,801
OTHER ASSETS, LESS LIABILITIES (0.1)% ...................................................... (262,772)
--------------
NET ASSETS 100.0% .......................................................................... $ 472,417,029
==============
See Selected Portfolio Abbreviations on page 70.
(a) See Note 1(b) regarding securities purchased on a when-issued or delayed
delivery basis.
(b) Variable rate demand notes (VRDNs) are tax-exempt obligations which
contain a floating or variable interest rate adjustment formula and an
unconditional right of demand to receive payment of the principal balance
plus accrued interest at specified dates. The coupon rate shown represents
the rate at period end. VRDNs are valued at cost.
60 | See notes to financial statements. | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
FRANKLIN CALIFORNIA LIMITED-TERM TAX-FREE INCOME FUND
------------------------------
YEAR ENDED JUNE 30,
CLASS A 2005 2004(d)
------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ........................... $ 9.91 $ 10.00
------------------------------
Income from investment operations:
Net investment income(a) ................................... 0.15 0.11
Net realized and unrealized gains (losses) ................. 0.03 (0.10)
------------------------------
Total from investment operations ............................. 0.18 0.01
------------------------------
Less distributions from net investment income ................ (0.15) (0.10)
------------------------------
Redemption fees .............................................. --(c) --
------------------------------
Net asset value, end of year ................................. $ 9.94 $ 9.91
==============================
Total return(b) .............................................. 1.81% 0.06%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .............................. $ 16,318 $ 16,244
Ratios to average net assets:
Expenses ................................................... 1.05% 1.20%(e)
Expenses net of waiver and payments by affiliate ........... 0.50% 0.50%(e)
Net investment income ...................................... 1.48% 1.30%(e)
Portfolio turnover rate ...................................... 5.43% 7.42%
(a) Based on average daily shares outstanding.
(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.
(c) Amount is less than $0.01 per share.
(d) For the period September 2, 2003 (commencement of operations) to June 30,
2004.
(e) Annualized.
Annual Report | See notes to financial statements. | 61
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA LIMITED-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS 95.4%
BONDS 95.4%
CALIFORNIA 90.8%
Azusa Redevelopment Agency Tax Allocation, West End Redevelopment Project Area A,
Refunding, AMBAC Insured, 2.00%, 8/01/06 ................................................. $ 375,000 $ 371,662
Brea Olinda USD, GO, Election of 1999, Series A, FGIC Insured, 2.60%, 8/01/09 .............. 120,000 119,310
Cajon Valley Unified Elementary School District COP, MBIA Insured, 2.50%, 5/01/08 .......... 250,000 247,700
California Educational Facilities Authority Revenue, Santa Clara University, Series A,
FSA Insured, 2.625%, 9/01/09 ............................................................. 100,000 99,123
California Health Facilities Financing Authority Revenue, AMBAC Insured, 3.75%, 7/01/05 .... 300,000 300,000
California State Department of Water Resources Central Valley Project Revenue, Water System,
Refunding, Series Y, FGIC Insured, 5.00%, 12/01/08 ....................................... 200,000 214,652
California State Department of Water Resources Power Supply Revenue, Series A, MBIA Insured,
3.50%, 5/01/07 ........................................................................... 555,000 563,408
California State Economic Recovery Revenue, Series A, 5.00%, 7/01/06 ....................... 500,000 511,460
California State University at Channel Islands Financing Authority Revenue, Rental Housing
and Town Center, Mandatory Put 8/01/07, Series A, 2.50%, 8/01/44 ......................... 750,000 745,200
California Statewide CDA Revenue,
Kaiser Permanente, Mandatory Put 5/01/07, Series G, 2.30%, 4/01/34 ..................... 400,000 395,628
Viewpoint School, ACA Insured, 3.50%, 10/01/08 ......................................... 320,000 319,891
California Statewide CDA Water and Wastewater Revenue,
Pooled Financing Program, Series B, FSA Insured, 2.00%, 10/01/05 ....................... 270,000 269,552
Pooled Financing Program 2004, Series C, FSA Insured, 2.00%, 10/01/05 .................. 460,000 459,117
Chaffey Joint UHSD, COP, Refunding, 3.00%, 5/01/08 ......................................... 250,000 252,152
Costa Mesa RDA Tax Allocation Revenue, Downtown Redevelopment Project, FSA Insured,
2.50%, 10/01/08 .......................................................................... 265,000 263,527
Evergreen School District GO, Refunding, Series D, FGIC Insured, 2.75%, 9/01/08 ............ 150,000 150,087
Fontana USD, COP, Facility Bridge Funding Program, Mandatory Put 9/01/05, FSA Insured,
3.00%, 9/01/15 ........................................................................... 500,000 500,270
Foothill-De Anza Community College District GO, Election of 1999, Series B, 2.60%, 8/01/08 . 100,000 99,473
Glendale USD, GO, Series F, MBIA Insured, 2.50%, 9/01/08 ................................... 200,000 198,616
Glendora PFAR Tax Allocation, Project No. 1, Refunding, Series A, MBIA Insured,
2.00%, 9/01/07 ......................................................................... 100,000 98,193
2.125%, 9/01/08 ........................................................................ 105,000 102,226
Goleta Water District Revenue COP, 1991 Project and 2003 Project, Refunding, MBIA Insured,
2.00%, 12/01/05 .......................................................................... 300,000 299,133
Inglewood USD, GO, Election of 1998, Series C, FSA Insured, 2.50%, 10/01/08 ................ 265,000 263,118
Lodi USD, COP, Capital Projects, Refunding, FSA Insured, 3.00%, 2/01/08 .................... 110,000 110,730
Lompoc USD, GO, Election of 2002, Series B, MBIA Insured, 3.50%, 6/01/07 ................... 335,000 340,430
Los Angeles Convention and Exhibition Center Authority Lease Revenue, Series A,
AMBAC Insured, 3.25%, 8/15/09 ............................................................ 250,000 253,845
Los Angeles County MTA Sales Tax Revenue, Proposition A, First Tier, Refunding, Senior
Series A, FSA Insured, 2.50%, 7/01/07 .................................................... 100,000 99,846
Los Angeles County TRAN, 4.00%, 6/30/06 .................................................... 800,000 811,664
Los Angeles USD, GO, Election of 1997, Series F, FSA Insured, 3.00%, 7/01/06 ............... 150,000 150,652
Los Angeles Water and Power Revenue, Power System, Series A, Sub Series A-1, 4.00%,
7/01/06 .................................................................................. 500,000 506,625
Lynwood USD, GO, Election of 2002, Series A, FSA Insured, 4.00%, 8/01/10 ................... 100,000 104,813
Manteca USD Special Tax, CFD No. 89-1, AMBAC Insured, 2.50%, 9/01/08 ....................... 250,000 249,995
62 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA LIMITED-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
Modesto High School District Stanislaus County GO, Refunding, FSA Insured, 2.50%,
8/01/05 .................................................................................. $ 100,000 $ 100,002
North Orange County Community College District GO, Election of 2002, Series B, FGIC Insured,
2.125%, 8/01/08 .......................................................................... 500,000 487,480
Placer County Water Agency Water Revenue COP, Refunding, MBIA Insured, 2.375%, 7/01/07 ..... 105,000 104,405
Pleasanton GO, FSA Insured, 3.25%, 8/01/08 ................................................. 725,000 736,020
Poway RDA Tax Allocation, Paguay Redevelopment Project, Series A, MBIA Insured, 3.00%,
6/15/09 .................................................................................. 100,000 100,369
Rio Linda Unified Elementary School District, Election of 2002, Series A, FSA Insured, 4.00%,
8/01/10 .................................................................................. 100,000 104,813
Riverside County Asset Leasing Corp. Leasehold Revenue, Hospital Project, Refunding, Series
A, MBIA Insured, 3.00%, 6/01/08 .......................................................... 115,000 115,380
Sacramento Power Authority Cogeneration Project Revenue, Refunding, AMBAC Insured, 4.00%,
7/01/08 .................................................................................. 1,000,000 1,031,820
San Diego Community College District GO, Election of 2002, Refunding, Series A, FSA Insured,
2.50%, 5/01/07 ........................................................................... 300,000 299,625
San Diego Regional Building Authority Lease Revenue, San Miguel Conservation Fire District,
Refunding, AMBAC Insured, 3.00%, 1/01/08 ................................................. 240,000 241,546
San Francisco City and County Airports Commission International Airport Revenue, Issue 29B,
Refunding, Second Series, FGIC Insured, 3.00%, 5/01/07 ................................... 500,000 502,900
San Francisco City and County Public Utility Commission Warrant Revenue, Refunding, Series
A, MBIA Insured, 3.00%, 10/01/08 ......................................................... 100,000 100,828
San Jose Financing Authority Lease Revenue, Central Service Yard Project, Refunding,
AMBAC Insured, 3.00%, 10/15/06 ........................................................... 245,000 246,338
San Mateo Foster City School District GO, Refunding, FSA Insured, 2.50%, 9/01/08 ........... 200,000 198,616
Santa Clara Electric Revenue, Sub Series A, MBIA Insured, 3.00%, 7/01/09 ................... 225,000 226,262
Santa Clara Valley Transportation Authority Sales Tax Revenue, Measure A, Mandatory Put
10/02/06, AMBAC Insured, 3.00%, 4/01/36 .................................................. 500,000 501,620
Sonoma County COP, Series A, Refunding, MBIA Insured, 3.00%, 11/15/08 ...................... 250,000 252,148
--------------
14,822,270
--------------
U.S. TERRITORIES 4.6%
Guam International Airport Authority Revenue, Series A, MBIA Insured, 2.375%, 10/01/08 ..... 250,000 242,598
Puerto Rico Commonwealth GO, Public Improvement, Mandatory Put 7/01/08, Refunding,
Series C, MBIA Insured, 5.00%, 7/01/28 ................................................... 200,000 211,930
Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series AA,
FGIC Insured, 2.625%, 7/01/08 ............................................................ 300,000 298,335
--------------
752,863
--------------
TOTAL LONG TERM INVESTMENTS (COST $15,717,260) ............................................. 15,575,133
--------------
SHORT TERM INVESTMENTS 7.7%
BONDS 7.7%
CALIFORNIA 7.7%
(a) California State GO, Series A-3, Daily VRDN and Put, 2.30%, 5/01/33 ........................ 200,000 200,000
(a) Los Angeles Department of Water and Power Waterworks Revenue, Sub Series B-2, Daily VRDN
and Put, 2.20%, 7/01/35 .................................................................. 800,000 800,000
Annual Report | 63
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA LIMITED-TERM TAX-FREE INCOME FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS (CONT.)
BONDS (CONT.)
CALIFORNIA (CONT.)
(a) Metropolitan Water District Southern California Waterworks Revenue, Refunding, Series B-1,
Daily VRDN and Put, 2.20%, 7/01/35 ....................................................... $ 100,000 $ 100,000
(a) Newport Beach Revenue, Hoag Memorial Presbyterian Hospital, Series B, Weekly VRDN and
Put, 2.23%, 10/01/26 ..................................................................... 150,000 150,000
--------------
TOTAL SHORT TERM INVESTMENTS (COST $1,250,000) ............................................. 1,250,000
--------------
TOTAL INVESTMENTS (COST $16,967,260) 103.1% ................................................ 16,825,133
OTHER ASSETS, LESS LIABILITIES (3.1)% ...................................................... (507,156)
--------------
NET ASSETS 100.0% .......................................................................... $ 16,317,977
==============
See Selected Portfolio Abbreviations on page 70.
(a) Variable rate demand notes (VRDNs) are tax-exempt obligations which
contain a floating or variable interest rate adjustment formula and an
unconditional right of demand to receive payment of the principal balance
plus accrued interest at specified dates. The coupon rate shown represents
the rate at period end. VRDNs are valued at cost.
64 | See notes to financial statements. | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND
--------------------------------------------------------------------
YEAR ENDED JUNE 30,
CLASS A 2005 2004 2003 2002 2001
--------------------------------------------------------------------
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.... 0.012 0.004 0.007 0.012 0.027
Less distributions from net investment income ............... (0.012) (0.004) (0.007) (0.012) (0.027)
--------------------------------------------------------------------
Net asset value, end of year ................................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====================================================================
Total return(a) ............................................. 1.20% 0.38% 0.71% 1.21% 2.76%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............................. $ 688,121 $ 631,895 $ 671,392 $ 679,788 $ 711,789
Ratios to average net assets:
Expenses .................................................. 0.56% 0.56% 0.56% 0.56% 0.56%
Net investment income ..................................... 1.22% 0.38% 0.71% 1.20% 2.72%
(a) Total return does not reflect the contingent deferred sales charge.
Annual Report | See notes to financial statements. | 65
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
BONDS 109.1%
CALIFORNIA 109.1%
(a) Alameda County IDAR, United Manufacturing Project, Series A, Weekly VRDN and
Put, 2.31%, 6/01/30 ...................................................................... $ 1,000,000 $ 1,000,000
(a) Bay Area Toll Authority Toll Bridge Revenue, San Francisco Bay Area,
Series A, AMBAC Insured, Weekly VRDN and Put, 2.19%, 4/01/36 ........................... 12,500,000 12,500,000
Series B, AMBAC Insured, Weekly VRDN and Put, 2.21%, 4/01/39 ........................... 15,800,000 15,800,000
(a) Butte County Housing Authority MFR, Pine Tree Apartment Project, Weekly VRDN and Put,
2.29%, 12/01/10 .......................................................................... 1,432,000 1,432,000
(a) California Health Facilities Financing Authority Revenue,
Catholic Healthcare West, MBIA Insured, Weekly VRDN and Put, 2.23%, 7/01/16 ............ 3,955,000 3,955,000
Pooled Loan Program, Series B, FGIC Insured, Weekly VRDN and Put, 2.35%, 10/01/10 ...... 2,500,000 2,500,000
Scripps Health, Series A, MBIA Insured, Weekly VRDN and Put, 2.10%, 10/01/22 ........... 3,300,000 3,300,000
California Infrastructure and Economic Development Bank Revenue,
(a) Independent System Operating Corp. Project, Refunding, Series B, MBIA
Insured, Weekly VRDN and Put, 2.29%, 4/01/08 ....................................... 4,900,000 4,900,000
(a) Independent System Operating Corp. Project, Series C, MBIA Insured, Weekly VRDN and
Put, 2.24%, 4/01/09 ................................................................ 11,000,000 11,000,000
(a) J. Paul Getty Trust, Series B, Annual VRDN and Put, 2.25%, 4/01/33 ................... 6,000,000 6,000,000
(a) J. Paul Getty Trust, Series C, Annual VRDN and Put, 2.25%, 4/01/33 ................... 3,000,000 3,000,000
TECP, 2.35%, 8/04/05 ................................................................. 5,000,000 5,000,000
California School Cash Reserve Program Authority Revenue, Pool, Series A, AMBAC Insured,
3.00%, 7/06/05 ....................................................................... 24,870,000 24,874,464
4.00%, 7/06/06 ....................................................................... 7,500,000 7,602,300
(a) California State Department of Water Resources Power Supply Revenue,
Series B-5, Daily VRDN and Put, 2.30%, 5/01/22 ....................................... 24,100,000 24,100,000
Series B-6, Daily VRDN and Put, 2.20%, 5/01/22 ....................................... 900,000 900,000
Series C-7, FSA Insured, Weekly VRDN and Put, 2.22%, 5/01/22 ......................... 5,300,000 5,300,000
Series C-8, Weekly VRDN and Put, 2.16%, 5/01/22 ...................................... 6,000,000 6,000,000
Series C-9, Weekly VRDN and Put, 2.20%, 5/01/22 ...................................... 20,000,000 20,000,000
Series C-12, Weekly VRDN and Put, 2.19%, 5/01/22 ..................................... 6,700,000 6,700,000
(a) California State Economic Development Financing Authority Revenue,
Calco Project, Weekly VRDN and Put, 2.31%, 4/01/27 ................................... 1,440,000 1,440,000
KQED Inc. Project, Refunding, Weekly VRDN and Put, 2.28%, 4/01/20 .................... 990,000 990,000
(a) California State Economic Recovery Revenue,
Series C-2, Weekly VRDN and Put, 2.30%, 7/01/23 ...................................... 4,000,000 4,000,000
Series C-3, Daily VRDN and Put, 2.30%, 7/01/23 ....................................... 8,925,000 8,925,000
Series C-4, Daily VRDN and Put, 2.22%, 7/01/23 ....................................... 4,900,000 4,900,000
Series C-6, Daily VRDN and Put, 2.15%, 7/01/23 ....................................... 24,000,000 24,000,000
Series C-11, Weekly VRDN and Put, 2.15%, 7/01/23 ..................................... 4,800,000 4,800,000
Series C-15, FSA Insured, Weekly VRDN and Put, 2.29%, 7/01/23 ........................ 3,000,000 3,000,000
(a) California State GO,
Kindergarten University, Series B-3, Daily VRDN and Put, 2.20%, 5/01/34 .............. 12,000,000 12,000,000
Series A-3, Daily VRDN and Put, 2.30%, 5/01/33 ....................................... 1,100,000 1,100,000
California Statewide CDA Revenue, Series A-5, 4.00%, 6/30/06 .............................. 25,000,000 25,335,250
(a) Carlsbad USD, COP, School Facility Bridge Funding Program, FSA Insured, Weekly VRDN and
Put, 2.20%, 9/01/14 ...................................................................... 500,000 500,000
66 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
BONDS (CONT.)
CALIFORNIA (CONT.)
(a) Chico MFMR, Webb Homes Project, Weekly VRDN and Put, 2.65%, 1/01/10 ........................ $ 1,220,000 $ 1,220,000
(a) Chino Basin Regional Financing Authority Revenue, Inland Empire Utilities, Series A,
AMBAC Insured, Weekly VRDN and Put, 2.21%, 6/01/32 ....................................... 5,380,000 5,380,000
(a) Commerce Joint Powers Financing Authority IDR, Weekly VRDN and Put, 2.31%, 11/01/14 ........ 1,620,000 1,620,000
(a) Elsinore Valley Municipal Water District COP, Series A, FGIC Insured, Weekly VRDN and Put,
2.20%, 7/01/29 ........................................................................... 15,000,000 15,000,000
(a) Fremont PFA, COP, Weekly VRDN and Put, 2.35%, 8/01/30 ...................................... 5,900,000 5,900,000
(a) Glendale COP, Police Building Project, Weekly VRDN and Put, 2.25%, 6/01/30 ................. 27,650,000 27,650,000
(a) Grant Joint UHSD, COP,
School Facilities Bridge Funding Program, FSA Insured, Weekly VRDN and Put, 2.20%,
9/01/34 ................................................................................ 4,900,000 4,900,000
Various Bridge Funding Program, FSA Insured, Weekly VRDN and Put, 2.20%, 7/01/37 ......... 10,000,000 10,000,000
(a) Hillsborough COP, Water and Sewer System Project, Refunding, Series B,
Weekly VRDN and Put, 2.27%, 6/01/30 ...................................................... 4,200,000 4,200,000
(a) Irvine 1915 Act Revenue, AD No. 94-15, Daily VRDN and Put, 2.20%, 9/02/20 .................. 3,800,000 3,800,000
(a) Irvine 1915 Act Special Assessment,
AD No. 00-18, Series A, Daily VRDN and Put, 2.20%, 9/02/26 ............................. 6,495,000 6,495,000
AD No. 03-19, Series A, Daily VRDN and Put, 2.20%, 9/02/29 ............................. 6,374,000 6,374,000
AD No. 93-14, Daily VRDN and Put, 2.30%, 9/02/25 ....................................... 2,216,000 2,216,000
AD No. 97-13, Daily VRDN and Put, 2.20%, 9/02/23 ....................................... 5,795,000 5,795,000
AD No. 97-16, Daily VRDN and Put, 2.20%, 9/02/22 ....................................... 6,795,000 6,795,000
(a) Irvine Ranch Water District GO,
Consolidated ID, Daily VRDN and Put, 2.20%, 6/01/15 .................................... 2,750,000 2,750,000
Nos. 105 140 240 and 250, Daily VRDN and Put, 2.30%, 1/01/21 ........................... 7,500,000 7,500,000
(a) Irvine Ranch Water District Revenue,
Consolidated Bonds, Daily VRDN and Put, 2.20%, 10/01/10 ................................ 2,500,000 2,500,000
Consolidated Bonds, Refunding, Series B, Daily VRDN and Put, 2.48%, 10/01/09 ........... 2,300,000 2,300,000
Consolidated, Daily VRDN and Put, 2.20%, 8/01/16 ....................................... 400,000 400,000
Construction Bonds, Daily VRDN and Put, 2.20%, 10/01/05 ................................ 1,500,000 1,500,000
(a) Irvine USD Special Tax,
CFD No. 01-1, Daily VRDN and Put, 2.20%, 9/01/38 ....................................... 20,850,000 20,850,000
CFD No. 03-1, Daily VRDN and Put, 2.20%, 9/01/39 ....................................... 3,400,000 3,400,000
(a) Kern County COP, Kern Public Facilities Project, Series A, Weekly VRDN and
Put, 2.20%, 8/01/06 ...................................................................... 200,000 200,000
Los Angeles County MTA Sales Tax Revenue, TECP, 2.43%, 7/12/05 ............................. 2,000,000 2,000,000
(a) Los Angeles County Pension Obligation Revenue, Refunding,
Series A, AMBAC Insured, Weekly VRDN and Put, 2.21%, 6/30/07 ........................... 1,100,000 1,100,000
Series B, AMBAC Insured, Weekly VRDN and Put, 2.21%, 6/30/07 ........................... 2,300,000 2,300,000
Los Angeles County TRAN, 4.00%, 6/30/06 .................................................... 5,950,000 6,034,430
(a) Los Angeles Department of Water and Power Waterworks Revenue, Sub Series B-2, Daily
VRDN and Put, 2.20%, 7/01/35 ............................................................. 10,875,000 10,875,000
(a) Los Angeles MFR, Casden Project, Series K, Weekly VRDN and Put, 2.32%, 7/01/10 ............. 145,507 145,507
(a) Los Angeles Wastewater System Revenue, Refunding, Sub Series A, FGIC Insured, Annual
VRDN and Put, 2.15%, 12/01/31 ............................................................ 5,000,000 5,000,000
(a) Los Angeles Water and Power Revenue, Sub Series B-5, Refunding, Weekly VRDN and Put,
2.25%, 7/01/34 ........................................................................... 3,700,000 3,700,000
Annual Report | 67
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
BONDS (CONT.)
CALIFORNIA (CONT.)
(a) Metropolitan Water District Southern California Waterworks Revenue,
Refunding, Series A, AMBAC Insured, Weekly VRDN and Put, 2.20%, 6/01/23 ................ $ 6,575,000 $ 6,575,000
Refunding, Series B-1, Daily VRDN and Put, 2.20%, 7/01/35 .............................. 3,300,000 3,300,000
Refunding, Series B-3, Daily VRDN and Put, 1.70%, 7/01/35 .............................. 3,600,000 3,600,000
Refunding, Series B-4, Weekly VRDN and Put, 2.21%, 7/01/35 ............................. 5,000,000 5,000,000
Refunding, Series C-1, Weekly VRDN and Put, 2.17%, 7/01/30 ............................. 3,000,000 3,000,000
Series C, Weekly VRDN and Put, 2.25%, 7/01/28 .......................................... 13,200,000 13,200,000
(a) Northern California Public Power Agency Revenue, Hydroelectric No. 1, Refunding, Series A,
MBIA Insured, Weekly VRDN and Put, 2.21%, 7/01/23 ........................................ 8,700,000 8,700,000
(a) Oakland COP, Capital Equipment Project, Weekly VRDN and Put, 2.30%, 12/01/15 ............... 6,100,000 6,100,000
(a) Orange County Sanitation Districts COP, Refunding, Series A, Daily VRDN and Put, 2.20%,
8/01/29 .................................................................................. 2,200,000 2,200,000
(a) Pajaro Valley USD, COP, School Facility Bridge Funding Program, FSA Insured, Weekly VRDN
and Put, 2.20%, 9/01/31 .................................................................. 700,000 700,000
(a) Rancho Water District Financing Authority Revenue,
Refunding, Series A, FGIC Insured, Weekly VRDN and Put, 2.17%, 8/01/29 ................. 6,000,000 6,000,000
Series B, FGIC Insured, Weekly VRDN and Put, 2.17%, 8/01/31 ............................ 3,880,000 3,880,000
(a) Riverside County Asset Leasing Corp. Leasehold Revenue, Southwest Justice
Center, Series B,
MBIA Insured, Weekly VRDN and Daily Put, 2.21%, 11/01/32 ................................. 5,000,000 5,000,000
(a) Riverside County COP, Riverside County Public Facilities, ACES, Series B, Weekly VRDN and
Put, 2.25%, 12/01/15 ..................................................................... 1,800,000 1,800,000
(a) Sacramento County COP, Administration Center and Courthouse Project, Weekly VRDN and
Put, 2.35%, 6/01/20 ...................................................................... 10,890,000 10,890,000
(a) Sacramento County Sanitation District Financing Authority Revenue, Series C, Weekly VRDN
and Put, 2.25%, 12/01/30 ................................................................. 28,600,000 28,600,000
Sacramento County TRAN, Series A,
3.00%, 7/11/05 ......................................................................... 10,000,000 10,003,637
4.00%, 7/10/06 ......................................................................... 25,000,000 25,364,500
(a) San Francisco City and County RDA, MFR,
Derek Silva Community, Series D, Weekly VRDN and Put, 2.34%, 12/01/19 .................... 4,550,000 4,550,000
Fillmore Center, Refunding, Series B-2, Weekly VRDN and Put, 2.31%, 12/01/17 ............. 1,000,000 1,000,000
San Joaquin County Transportation Authority Sales Tax Revenue, TECP, 2.48%, 9/06/05 ........ 29,200,000 29,200,000
(a) San Jose MFHR, Pollard Plaza Apartments, Series D, Weekly VRDN and Put, 2.25%,
8/01/35 .................................................................................. 1,800,000 1,800,000
(a) San Jose RDAR, Merged Area Redevelopment Project, Series A, Weekly VRDN and Put, 2.21%,
7/01/26 .................................................................................. 3,300,000 3,300,000
(a) San Jose-Santa Clara Water Financing Authority Sewer Revenue, Series B, FGIC Insured,
Weekly VRDN and Put, 2.21%, 11/15/11 ..................................................... 1,200,000 1,200,000
(a) San Mateo County MFHR, Pacific Oaks Apartment Project, Series A, Weekly VRDN and Put,
2.31%, 7/01/17 ........................................................................... 2,950,000 2,950,000
(a) Santa Ana Housing Authority MFHR, Vintage Apartments, Refunding, Series A, Weekly VRDN
and Put, 2.28%, 12/15/22 ................................................................. 4,650,000 4,650,000
(a) Santa Clara County Housing Authority MFHR, Benton Park Central Apartments, Refunding,
Series A, FNMA Insured, Weekly VRDN and Put, 2.20%, 12/15/25 ............................. 5,000,000 5,000,000
(a) South Placer Wastewater Authority Wastewater Revenue, Series B, FGIC Insured, Weekly VRDN
and Put, 2.16%, 11/01/35 ................................................................. 15,400,000 15,400,000
(a) South San Francisco MFHR, Magnolia Plaza Apartments, Series A, Weekly VRDN and Put,
2.31%, 5/01/17 ........................................................................... 500,000 500,000
68 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
BONDS (CONT.)
CALIFORNIA (CONT.)
(a) Southern California Public Power Authority Transmission Project Revenue,
Southern Transmission, Refunding,
AMBAC Insured, Weekly VRDN and Put, 2.21%, 7/01/19 ..................................... $ 27,715,000 $ 27,715,000
Series A, FSA Insured, Weekly VRDN and Put, 2.20%, 7/01/23 ............................. 1,000,000 1,000,000
Series B, FSA Insured, Weekly VRDN and Put, 2.22%, 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, 2.35%, 1/01/10 ............ 3,600,000 3,600,000
(a) Suisun City Housing Authority MFR, Village Green, Series A, FNMA Insured, Weekly VRDN and
Put, 2.20%, 6/15/18 ...................................................................... 7,100,000 7,100,000
(a) Turlock Irrigation District COP, Capital Improvement and Refunding Project, Daily VRDN and
Put, 2.22%, 1/01/31 ...................................................................... 1,900,000 1,900,000
(a) Tustin 1915 Act Special Assessment, Reassessment District, No. 95-2, Series A, Daily VRDN
and Put, 2.20%, 9/02/13 .................................................................. 16,169,000 16,169,000
(a) Union City MFR, Housing Mission Sierra, Refunding, Series A, FNMA Insured, Weekly VRDN
and Put, 2.20%, 7/15/29 .................................................................. 2,000,000 2,000,000
(a) Upland CRDA, MFHR, FNMA Insured, Weekly VRDN and Put, 2.28%, 2/15/30 ....................... 1,000,000 1,000,000
(a) Val Verde USD, COP, Land Bank Program, Series A, Weekly VRDN and Put, 2.25%, 9/01/24 ....... 2,600,000 2,600,000
(a) Vallecitos Water District Revenue COP, Twin Oaks Reservoir Project, Weekly VRDN and Put,
2.20%, 7/01/30 ........................................................................... 2,400,000 2,400,000
(a) Vallejo Housing Authority MFR, FNMA Insured, Weekly VRDN and Put, 2.20%, 5/15/22 ........... 1,985,000 1,985,000
(a) Watereuse Finance Authority Revenue, FSA Insured, Weekly VRDN and Put, 2.35%, 5/01/28 ...... 20,200,000 20,200,000
(a) Western Placer Union School COP, Facilities Project B, Weekly VRDN and Put, 2.25%,
8/01/23 .................................................................................. 5,000,000 5,000,000
(a) Western Riverside County Regional Wastewater Authority Revenue, Regional Wastewater
Treatment, Daily VRDN and Put, 2.20%, 4/01/28 ............................................ 1,350,000 1,350,000
--------------
TOTAL BONDS (COST $750,836,088) 109.1% ..................................................... 750,836,088
OTHER ASSETS, LESS LIABILITIES (9.1)% ...................................................... (62,714,772)
--------------
NET ASSETS 100.0% .......................................................................... $ 688,121,316
==============
See Selected Portfolio Abbreviations on page 70.
(a) Variable rate demand notes (VRDNs) are tax-exempt obligations which
contain a floating or variable interest rate adjustment formula and an
unconditional right of demand to receive payment of the principal balance
plus accrued interest at specified dates. The coupon rate shown represents
the rate at period end. VRDNs are valued at cost.
Annual Report | See notes to financial statements. | 69
FRANKLIN CALIFORNIA TAX-FREE TRUST
STATEMENT OF INVESTMENTS, JUNE 30, 2005 (CONTINUED)
SELECTED PORTFOLIO ABBREVIATIONS
1915 ACT - Improvement Bond Act of 1915 MBIA - Municipal Bond Investors Assurance Corp.
ABAG - The Association of Bay Area Governments MFHR - Multi-Family Housing Revenue
ACA - American Capital Access Holdings Inc. MFMR - Multi-Family Mortgage Revenue
ACES - Adjustable Convertible Exempt Securities MFR - Multi-Family Revenue
AD - Assessment District MTA - Metropolitan Transit Authority
AMBAC - American Municipal Bond Assurance Corp. MUD - Municipal Utility District
BART - Bay Area Rapid Transit PCFA - Pollution Control Financing Authority
CDA - Community Development Authority/Agency PCR - Pollution Control Revenue
CFD - Community Facilities District PFA - Public Financing Authority
COP - Certificate of Participation PFAR - Public Financing Authority Revenue
CRDA - Community Redevelopment Authority/Agency RDA - Redevelopment Agency/Authority
ETM - Escrow to Maturity RDAR - Redevelopment Agency/Authority
FGIC - Financial Guaranty Insurance Co. SFM - Single Family Mortgage
FNMA - Federal National Mortgage Association SFMR - Single Family Mortgage Revenue
FSA - Financial Security Assurance Inc. TECP - Tax-Exempt Commercial Paper
GNMA - Government National Mortgage Association TRAN - Tax and Revenue Anticipation Notes
GO - General Obligation UHSD - Unified/Union High School District
HFAR - Housing Finance Authority/Agency Revenue USD - Unified/Union School District
ID - Improvement District XLCA - XL Capital Assurance
IDAR - Industrial Development Authority/Agency Revenue
IDR - Industrial Development Revenue or International
Depository Receipt
70 | See notes to financial statements. | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2005
----------------------------------------------------------------------------
FRANKLIN FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA FRANKLIN
CALIFORNIA INTERMEDIATE-TERM LIMITED-TERM CALIFORNIA
INSURED TAX-FREE TAX-FREE TAX-FREE TAX-EXEMPT
INCOME FUND INCOME FUND INCOME FUND MONEY FUND
----------------------------------------------------------------------------
Assets:
Investments in securities:
Cost ............................................ $ 1,812,264,994 $ 453,458,970 $ 16,967,260 $ 750,836,088
============================================================================
Value ........................................... $ 1,981,749,230 $ 472,679,801 $ 16,825,133 $ 750,836,088
Cash ............................................. 56,771 209,682 177,025 745,221
Receivables:
Capital shares sold ............................. 5,548,241 1,026,008 34,091 667,349
Interest ........................................ 27,141,615 5,844,377 130,636 2,620,771
----------------------------------------------------------------------------
Total assets ................................ 2,014,495,857 479,759,868 17,166,885 754,869,429
----------------------------------------------------------------------------
Liabilities:
Payables:
Investment securities purchased ................. 19,522,844 5,418,000 811,352 64,336,481
Capital shares redeemed ......................... 2,781,623 992,286 801 1,957,549
Affiliates ...................................... 1,284,924 291,790 9,321 302,314
Distributions to shareholders ................... 2,944,296 592,232 11,447 74,320
Other liabilities ................................ 126,471 48,531 15,987 77,449
----------------------------------------------------------------------------
Total liabilities ........................... 26,660,158 7,342,839 848,908 66,748,113
----------------------------------------------------------------------------
Net assets, at value ....................... $ 1,987,835,699 $ 472,417,029 $ 16,317,977 $ 688,121,316
============================================================================
Net assets consist of:
Undistributed net investment income (distributions
in excess of net investment income) ............. $ (1,550,375) $ (253,901) $ 14,747 $ --
Net unrealized appreciation (depreciation) ....... 169,484,236 19,220,831 (142,127) --
Accumulated net realized gain (loss) ............. (7,127,655) (1,957,122) -- --
Paid-in capital .................................. 1,827,029,493 455,407,221 16,445,357 688,121,316
----------------------------------------------------------------------------
Net assets, at value ....................... $ 1,987,835,699 $ 472,417,029 $ 16,317,977 $ 688,121,316
============================================================================
Annual Report | See notes to financial statements. | 71
FRANKLIN CALIFORNIA TAX-FREE TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
June 30, 2005
---------------------------------------------------------------------------
FRANKLIN FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA FRANKLIN
CALIFORNIA INTERMEDIATE-TERM LIMITED-TERM CALIFORNIA
INSURED TAX-FREE TAX-FREE TAX-FREE TAX-EXEMPT
INCOME FUND INCOME FUND INCOME FUND MONEY FUND
---------------------------------------------------------------------------
CLASS A:
Net assets, at value ............................... $ 1,780,642,019 $ 453,335,013 $ 16,317,977 $ 688,121,316
===========================================================================
Shares outstanding ................................. 138,545,967 38,805,846 1,641,043 688,121,316
===========================================================================
Net asset value per share(a) ....................... $ 12.85 $ 11.68 $ 9.94 $ 1.00
===========================================================================
Maximum offering price per share (net asset value
per share / 95.75%, 97.75%, 100% and 100%,
respectively) ..................................... $ 13.42 $ 11.95 $ 9.94 $ 1.00
===========================================================================
CLASS B:
Net assets, at value ............................... $ 78,037,818 -- -- --
===========================================================================
Shares outstanding ................................. 6,043,224 -- -- --
===========================================================================
Net asset value and maximum offering price per
share(a) .......................................... $ 12.91 -- -- --
===========================================================================
CLASS C:
Net assets, at value ............................... $ 129,155,862 $ 19,082,016 -- --
===========================================================================
Shares outstanding ................................. 9,958,493 1,630,554 -- --
===========================================================================
Net asset value and maximum offering price per
share(a) .......................................... $ 12.97 $ 11.70 -- --
===========================================================================
(a) Redemption price is equal to net asset value less contingent deferred
sales charges, if applicable, and redemption fees retained by the Fund.
72 | See notes to financial statements. | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF OPERATIONS
for the year ended June 30, 2005
---------------------------------------------------------------------------
FRANKLIN FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA FRANKLIN
CALIFORNIA INTERMEDIATE-TERM LIMITED-TERM CALIFORNIA
INSURED TAX-FREE TAX-FREE TAX-FREE TAX-EXEMPT
INCOME FUND INCOME FUND INCOME FUND MONEY FUND
---------------------------------------------------------------------------
Investment income:
Interest ........................................... $ 97,661,877 $ 19,016,445 $ 371,652 $ 11,297,114
---------------------------------------------------------------------------
Expenses:
Management fees (Note 3a) .......................... 9,067,184 2,234,058 93,475 3,102,573
Administrative fees (Note 3b) ...................... -- -- 37,514 --
Distribution fees: (Note 3c)
Class A ........................................... 1,749,518 424,418 28,084 --
Class B ........................................... 509,812 -- -- --
Class C ........................................... 809,769 83,397 -- --
Transfer agent fees (Note 3e) ...................... 551,937 148,233 5,024 326,451
Custodian fees ..................................... 30,099 6,500 295 9,590
Reports to shareholders ............................ 60,411 25,186 399 50,854
Registration and filing fees ....................... 6,633 6,600 2,491 3,737
Professional fees .................................. 48,005 18,565 14,561 17,581
Trustees' fees and expenses ........................ 39,943 8,842 397 13,316
Amortization of offering costs ..................... -- -- 1,790 --
Other .............................................. 141,358 58,924 13,388 46,650
---------------------------------------------------------------------------
Total expenses ................................ 13,014,669 3,014,723 197,418 3,570,752
Expenses waived/paid by affiliate (Note 3f) ... -- -- (103,654) --
---------------------------------------------------------------------------
Net expenses ................................. 13,014,669 3,014,723 93,764 3,570,752
---------------------------------------------------------------------------
Net investment income ....................... 84,647,208 16,001,722 277,888 7,726,362
---------------------------------------------------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments .......... 2,988,793 143,177 -- (1,565)
Net change in unrealized appreciation
(depreciation) on investments ..................... 92,867,197 11,730,841 40,741 --
---------------------------------------------------------------------------
Net realized and unrealized gain (loss) ............. 95,855,990 11,874,018 40,741 (1,565)
---------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations .................................... $ 180,503,198 $ 27,875,740 $ 318,629 $ 7,724,797
===========================================================================
Annual Report | See notes to financial statements. | 73
FRANKLIN CALIFORNIA TAX-FREE TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
---------------------------------------------------------------------------
FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA
INSURED TAX-FREE INTERMEDIATE-TERM
INCOME FUND TAX-FREE INCOME FUND
---------------------------------------------------------------------------
YEAR ENDED JUNE 30, YEAR ENDED JUNE 30,
2005 2004 2005 2004
---------------------------------------------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ........................... $ 84,647,208 $ 90,533,901 $ 16,001,722 $ 15,072,195
Net realized gain (loss) from investments ....... 2,988,793 4,549,719 143,177 (1,444,960)
Net change in unrealized appreciation
(depreciation) on investments .................. 92,867,197 (102,836,172) 11,730,841 (12,387,719)
---------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations .................. 180,503,198 (7,752,552) 27,875,740 1,239,516
---------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income:
Class A ........................................ (77,406,348) (81,912,569) (15,662,738) (14,985,040)
Class B ........................................ (3,033,725) (3,208,586) -- --
Class C ........................................ (4,771,542) (5,018,247) (398,883) (183,314)
---------------------------------------------------------------------------
Total distributions to shareholders .............. (85,211,615) (90,139,402) (16,061,621) (15,168,354)
---------------------------------------------------------------------------
Capital share transactions: (Note 2)
Class A ........................................ (3,352,260) (126,577,971) 57,643,754 (16,567,037)
Class B ........................................ (2,989,995) (4,527,274) -- --
Class C ........................................ 2,437,233 (9,710,641) 9,619,939 9,275,690
---------------------------------------------------------------------------
Total capital share transactions ................. (3,905,022) (140,815,886) 67,263,693 (7,291,347)
---------------------------------------------------------------------------
Redemption fees .................................. 1,039 -- 1,435 --
---------------------------------------------------------------------------
Net increase (decrease) in net assets ....... 91,387,600 (238,707,840) 79,079,247 (21,220,185)
Net assets:
Beginning of year ................................ 1,896,448,099 2,135,155,939 393,337,782 414,557,967
---------------------------------------------------------------------------
End of year ...................................... $ 1,987,835,699 $ 1,896,448,099 $ 472,417,029 $ 393,337,782
===========================================================================
Undistributed net investment income
(distributions in excess of net investment
income) included in net assets:
End of year ...................................... $ (1,550,375) $ (966,264) $ (253,901) $ (192,702)
===========================================================================
74 | See notes to financial statements. | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
---------------------------------------------------------------------------
FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA
LIMITED-TERM TAX-EXEMPT
TAX-FREE INCOME FUND MONEY FUND
---------------------------------------------------------------------------
YEAR ENDED JUNE 30, YEAR ENDED JUNE 30,
2005 2004(a) 2005 2004
---------------------------------------------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ........................... $ 277,888 $ 130,707 $ 7,726,362 $ 2,490,464
Net realized gain (loss) from investments ....... -- -- (1,565) --
Net change in unrealized appreciation
(depreciation) on investments .................. 40,741 (182,868) -- --
---------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations .................. 318,629 (52,161) 7,724,797 2,490,464
Distributions to shareholders from net
investment income ............................... (278,610) (128,991) (7,724,797)(b) (2,490,464)
Capital share transactions (Note 2) .............. 26,500 16,425,560 56,226,162 (39,497,215)
Redemption fees .................................. 7,050 -- -- --
---------------------------------------------------------------------------
Net increase (decrease) in net assets ....... 73,569 16,244,408 56,226,162 (39,497,215)
---------------------------------------------------------------------------
Net assets:
Beginning of year ................................ 16,244,408 -- 631,895,154 671,392,369
---------------------------------------------------------------------------
End of year ...................................... $ 16,317,977 $ 16,244,408 $ 688,121,316 $ 631,895,154
===========================================================================
Undistributed net investment income included
in net assets:
End of year ...................................... $ 14,747 $ 13,679 $ -- $ --
===========================================================================
(a) For the period September 2, 2003 (commencement of operations) to June 30,
2004.
(b) Distributions were decreased by net realized losses from security
transactions of $1,565.
Annual Report | See notes to financial statements. | 75
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
four series (the Funds). All Funds are diversified except the Franklin
California Intermediate-Term Tax-Free Income Fund (Intermediate-Term Fund).
The following summarizes the Funds' significant accounting policies.
A. SECURITY VALUATION
Municipal securities generally trade in the over-the-counter market rather than
on a securities exchange. The Funds may utilize independent pricing services,
quotations from bond dealers, and information with respect to bond and note
transactions, to assist in determining a current market value for each security.
The Trust's pricing services use valuation models or matrix pricing, which
considers information with respect to comparable bond and note transactions,
quotations from bond dealers or by reference to other securities that are
considered comparable in such characteristics as rating, interest rate and
maturity date, to determine current value. For the Franklin California
Tax-Exempt Money Fund (Money Fund), short term securities are valued at
amortized cost unless otherwise noted.
The Trust has procedures to determine the fair value of individual securities
and other assets for which market prices are not readily available or which may
not be reliably priced. Some methods for valuing these securities may include:
fundamental analysis, matrix pricing, discounts from market prices of similar
securities, or discounts applied due to the nature and duration of restrictions
on the disposition of the securities. Due to the inherent uncertainty of
valuations of such securities, the fair values may differ significantly from the
values that would have been used had a ready market for such investments
existed. Occasionally, events occur between the time at which trading in a
security is completed and the close of the NYSE that might call into question
the availability (including the reliability) of the value of a portfolio
security held by the Fund. If such an event occurs, the securities may be valued
using fair value procedures, which may include the use of independent pricing
services. All security valuation procedures are approved by the Trust's Board of
Trustees.
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.
76 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. INCOME TAXES
No provision has been made for U.S. income taxes because each Fund's policy is
to continue to qualify as a regulated investment company under Subchapter M of
the Internal Revenue Code and to distribute substantially all of its income.
Fund distributions to shareholders are determined on an income tax basis and may
differ from net investment income and realized gains for financial reporting
purposes.
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Discounts and premiums
on securities purchased are amortized over the lives of the respective
securities. For the Franklin California Insured Tax-Free Income Fund (Insured
Fund), the Intermediate-Term Fund, and the Franklin California Limited-Term
Tax-Free Income Fund (Limited-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 or distributed monthly.
Common expenses incurred by the Trust are allocated among the Funds based on the
ratio of net assets of each fund to the combined net assets of the Trust. Fund
specific expenses are charged directly to the fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, 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 and the
Intermediate-Term Fund.
E. INSURANCE
The scheduled payments of interest and principal for each insured municipal
security in the Insured Fund are generally insured by a new issue insurance
policy which is purchased by the issuer. Some municipal securities in the fund
are secured by collateral guaranteed by an agency of the U.S. government.
F. OFFERING COSTS
Offering costs are amortized on a straight line basis over twelve months.
Annual Report | 77
FRANKLIN CALIFORNIA TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
G. 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.
H. REDEMPTION FEES
Effective June 1, 2004, redemptions and exchanges of the Funds' shares, except
for the Money Fund, held five trading days or less may be subject to the Funds'
redemption fee, which is 2% of the amount redeemed. Such fees are retained by
the Funds and accounted for as additional paid-in capital.
I. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified by the Trust against certain liabilities arising out of the
performance of their duties to the Trust. Additionally, in the normal course of
business, the Trust enters into contracts with service providers that contain
general indemnification clauses. The Trust's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Trust that have not yet occurred. However, based on experience, the
Trust expects the risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
The classes of shares offered within each of the Funds are indicated below.
Effective March 1, 2005, Class B shares are only offered to existing Class B
shareholders in the form of reinvested distributions and certain exchanges from
other Franklin Templeton Class B shares. Each class of shares differs by its
initial sales load, contingent deferred sales charges, distribution fees, voting
rights on matters affecting a single class and its exchange privilege.
- --------------------------------------------------------------------------------
CLASS A CLASS A & CLASS C CLASS A, CLASS B & CLASS C
- --------------------------------------------------------------------------------
Limited-Term Fund Intermediate-Term Fund Insured Fund
Money Fund
78 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
At June 30, 2005, there were an unlimited number of shares authorized (no par
value). Transactions in the Money Fund's shares were at $1.00 per share.
Transactions in the Funds' shares were as follows:
---------------------------------------------------------------------------
INSURED FUND INTERMEDIATE-TERM FUND
---------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------
CLASS A SHARES:
Year ended June 30, 2005
Shares sold ..................................... 12,779,215 $ 161,809,515 10,523,751 $ 122,071,290
Shares issued in reinvestment
of distributions ............................... 3,351,406 42,435,806 787,405 9,150,895
Shares redeemed ................................. (16,403,984) (207,597,581) (6,338,303) (73,578,431)
---------------------------------------------------------------------------
Net increase (decrease) ......................... (273,363) $ (3,352,260) 4,972,853 $ 57,643,754
===========================================================================
Year ended June 30, 2004
Shares sold ..................................... 18,980,728 $ 237,925,528 11,527,778 $ 133,026,492
Shares issued in reinvestment
of distributions ............................... 3,553,147 44,490,385 771,318 8,903,549
Shares redeemed ................................. (32,804,476) (408,993,884) (13,788,055) (158,497,078)
---------------------------------------------------------------------------
Net increase (decrease) ......................... (10,270,601) $ (126,577,971) (1,488,959) $ (16,567,037)
===========================================================================
CLASS B SHARES:
Year ended June 30, 2005
Shares sold ..................................... 428,268 $ 5,428,652
Shares issued in reinvestment
of distributions ............................... 158,196 2,012,009
Shares redeemed ................................. (821,528) (10,430,656)
----------------------------------
Net increase (decrease) ......................... (235,064) $ (2,989,995)
==================================
Year ended June 30, 2004
Shares sold ..................................... 1,108,542 $ 13,945,723
Shares issued in reinvestment
of distributions ............................... 172,057 2,162,656
Shares redeemed ................................. (1,654,209) (20,635,653)
----------------------------------
Net increase (decrease) ......................... (373,610) $ (4,527,274)
==================================
CLASS C SHARES:
Year ended June 30, 2005
Shares sold ..................................... 1,531,059 $ 19,551,797 1,029,411 $ 11,972,499
Shares issued in reinvestment
of distributions ............................... 213,416 2,726,173 20,848 242,687
Shares redeemed ................................. (1,558,025) (19,840,737) (223,547) (2,595,247)
---------------------------------------------------------------------------
Net increase (decrease) ......................... 186,450 $ 2,437,233 826,712 $ 9,619,939
===========================================================================
Year ended June 30, 2004
Shares sold ..................................... 2,003,569 $ 25,356,286 1,046,200 $ 12,057,807
Shares issued in reinvestment
of distributions ............................... 230,947 2,914,870 9,085 105,009
Shares redeemed ................................. (3,029,459) (37,981,797) (251,443) (2,887,126)
---------------------------------------------------------------------------
Net increase (decrease) ......................... (794,943) $ (9,710,641) 803,842 $ 9,275,690
===========================================================================
Annual Report | 79
FRANKLIN CALIFORNIA TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
------------------------------------------------------
LIMITED-TERM FUND MONEY FUND
------------------------------------------------------
SHARES AMOUNT AMOUNT
------------------------------------------------------
CLASS A SHARES:
Year ended June 30, 2005
Shares sold ..................................... 1,515,855 $ 15,099,320 $ 616,660,955
Shares issued in reinvestment
of distributions ............................... 17,344 172,814 7,696,793
Shares redeemed ................................. (1,531,173) (15,245,634) (568,131,586)
------------------------------------------------------
Net increase (decrease) ......................... 2,026 $ 26,500 $ 56,226,162
======================================================
Year ended June 30, 2004(a)
Shares sold ..................................... 2,319,006 $ 23,220,874 $ 672,833,442
Shares issued in reinvestment
of distributions ............................... 7,263 72,724 2,482,205
Shares redeemed ................................. (687,252) (6,868,038) (714,812,862)
------------------------------------------------------
Net increase (decrease) ......................... 1,639,017 $ 16,425,560 $ (39,497,215)
======================================================
(a) For the period September 2, 2003 (commencement of operations) to June 30,
2004 for the Limited-Term Fund.
3. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Funds are also officers and/or directors of the following
subsidiaries:
- -------------------------------------------------------------------------------------------
SUBSIDIARY AFFILIATION
- -------------------------------------------------------------------------------------------
Franklin Advisers Inc. (Advisers) Investment manager
Franklin Templeton Services LLC (FT Services) Administrative manager
Franklin Templeton Distributors Inc. (Distributors) Principal underwriter
Franklin Templeton Investor Services LLC (Investor Services) Transfer agent
A. MANAGEMENT FEES
The Insured Fund and the Intermediate-Term Fund pay an investment management fee
to Advisers based on the month-end net assets and the Money Fund pays an
investment management fee to Advisers based on the average daily net assets as
follows:
- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
0.625% Up to and including $100 million
0.500% Over $100 million, up to and including $250 million
0.450% Over $250 million, up to and including $10 billion
0.440% Over $10 billion, up to and including $12.5 billion
0.420% Over $12.5 billion, up to and including $15 billion
0.400% Over $15 billion, up to and including $17.5 billion
0.380% Over $17.5 billion, up to and including $20 billion
0.360% In excess of $20 billion
80 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
A. MANAGEMENT FEES (CONTINUED)
Prior to May 1, 2005, the Insured Fund and the Intermediate-Term Fund paid an
investment management fee to Advisers based on the month-end net assets and the
Money Fund paid an investment management fee to Advisers based on the average
daily net assets as follows:
- -----------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- -----------------------------------------------------------------------------
0.625% Up to and including $100 million
0.500% Over $100 million, up to and including $250 million
0.450% In excess of $250 million
The Limited-Term Fund pays an investment management fee to Advisers based on the
average daily net assets of the Fund as follows:
- -----------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- -----------------------------------------------------------------------------
0.500% Up to and including $100 million
0.450% Over $100 million, up to and including $250 million
0.425% Over $250 million, up to and including $500 million
0.400% In excess of $500 million
B. ADMINISTRATIVE FEES
The Limited-Term Fund pays an administrative fee to FT Services of 0.20% per
year of the fund's average daily net assets.
Under an agreement with Advisers, FT Services provides administrative services
to all Funds except the Limited-Term Fund. The fee is paid by Advisers based on
average daily net assets, and is not an additional expense of the funds.
C. DISTRIBUTION FEES
The Funds, except the Money Fund, reimburse Distributors for costs incurred in
marketing the funds' shares under a Rule 12b-1 plan up to a certain percentage
per year of their average daily net assets of each class as follows:
-----------------------------------
INSURED INTERMEDIATE- LIMITED-
FUND TERM FUND TERM FUND
-----------------------------------
Class A .................................. 0.10% 0.10% 0.15%
Class B .................................. 0.65% -- --
Class C .................................. 0.65% 0.65% --
Under the Class A distribution plan, costs exceeding the maximum for the current
plan year cannot be reimbursed in subsequent periods.
Annual Report | 81
FRANKLIN CALIFORNIA TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
D. SALES CHARGES/UNDERWRITING AGREEMENTS
Distributors has advised the Funds of the following commission transactions
related to the sales and redemptions of the Funds' shares for the year:
----------------------------------
INSURED INTERMEDIATE- MONEY
FUND TERM FUND FUND
----------------------------------
Net sales charges received .................. $430,791 $ 59,928 $ --
Contingent deferred sales charges retained .. $161,000 $ 17,867 $ 16,824
E. TRANSFER AGENT FEES
The Funds paid transfer agent fees as noted in the Statement of Operations of
which the following amounts were retained by Investor Services:
----------------------------------------------------
INSURED INTERMEDIATE- LIMITED- MONEY
FUND TERM FUND TERM FUND FUND
----------------------------------------------------
Transfer agent fees ..... $ 371,253 $ 94,223 $ 3,444 $233,055
F. VOLUNTARY WAIVER AND EXPENSE REIMBURSEMENTS
FT Services agreed in advance to voluntarily waive administrative fees, for the
Limited-Term Fund. Additionally, Advisers agreed in advance to voluntarily waive
a portion of management fees for the Limited-Term Fund, as noted in the
Statement of Operations. Total expenses waived by FT Services and Advisers are
not subject to reimbursement by the fund subsequent to the fund's fiscal year
end.
4. INCOME TAXES
At June 30, 2005, the Funds had tax basis capital losses 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:
2006 ..................................... $ -- $ -- $ 9,957
2007 ..................................... -- -- 4,593
2008 ..................................... -- 90,667 9,293
2009 ..................................... 6,856,819 321,166 21,840
2010 ..................................... -- 112,465 --
2011 ..................................... -- 145,149 --
2012 ..................................... -- 865,726 2,466
2013 ..................................... -- 421,949 1,565
-------------------------------------
$ 6,856,819 $ 1,957,122 $ 49,714
=====================================
82 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES (CONTINUED)
On June 30, 2005, the Money Fund had expired capital loss carryovers of $1,444.
The tax character of distributions paid during the years ended June 30, 2005 and
2004, was as follows:
---------------------------------------------------------------------
INSURED FUND INTERMEDIATE-TERM FUND
---------------------------------------------------------------------
2005 2004 2005 2004
---------------------------------------------------------------------
Distributions paid from -
tax exempt income ............... $ 85,211,615 $ 90,139,402 $ 16,061,621 $ 15,168,354
=====================================================================
---------------------------------------------------------------------
LIMITED-TERM FUND MONEY FUND
---------------------------------------------------------------------
2005 2004(a) 2005 2004
---------------------------------------------------------------------
Distributions paid from -
tax exempt income ............... $ 278,610 $ 128,991 $ 7,724,797 $ 2,490,464
=====================================================================
(a) For the period September 2, 2003 (commencement of operations) to June 30,
2004.
At June 30, 2005, the cost of investments, net unrealized appreciation
(depreciation) and undistributed tax exempt income for income tax purposes were
as follows:
----------------------------------
INSURED INTERMEDIATE-
FUND TERM FUND
----------------------------------
Cost of investments ............................................. $1,811,617,973 $ 453,433,472
==================================
Unrealized appreciation ......................................... $ 170,131,257 $ 19,380,664
Unrealized depreciation ......................................... -- (134,335)
----------------------------------
Net unrealized appreciation (depreciation) ...................... $ 170,131,257 $ 19,246,329
==================================
Distributable earnings - undistributed tax exempt income ........ $ 476,063 $ 312,833
==================================
----------------------------------
LIMITED- MONEY
TERM FUND FUND
----------------------------------
Cost of investments ............................................. $ 16,967,260 $ 750,836,088
==================================
Unrealized appreciation ......................................... $ 5,242 $ --
Unrealized depreciation ......................................... (147,369) --
----------------------------------
Net unrealized appreciation (depreciation) ...................... $ (142,127) $ --
==================================
Distributable earnings - undistributed tax exempt income ........ $ 26,194 $ 60,830
==================================
Annual Report | 83
FRANKLIN CALIFORNIA TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES (CONTINUED)
Net investment income (loss) differs for financial statement and tax purposes
primarily due to differing treatments of bond discounts and premiums and
offering costs.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatment of wash sales and bond discounts and
premiums.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term securities) for the
year ended June 30, 2005, were as follows:
---------------------------------------------
INSURED INTERMEDIATE- LIMITED-
FUND TERM FUND TERM FUND
---------------------------------------------
Purchases ............................................. $ 73,566,880 $ 91,891,879 $ 4,347,484
Sales ................................................. $ 146,132,110 $ 17,717,327 $ 770,000
6. CREDIT RISK
Each of the Funds invests a large percentage of its total assets in obligations
of issuers within California. Such concentration may subject the Funds to risks
associated with industrial or regional matters, and economic, political or legal
developments occurring within California.
7. REGULATORY MATTERS
INVESTIGATIONS AND SETTLEMENTS
As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission ("SEC"), the California Attorney General's Office ("CAGO"), and the
National Association of Securities Dealers, Inc. ("NASD"), relating to certain
practices in the mutual fund industry, including late trading, market timing and
marketing support payments to securities dealers who sell fund shares, Franklin
Resources, Inc. and certain of its subsidiaries (as used in this section,
together, the "Company"), as well as certain current or former executives and
employees of the Company, provided documents and information in response to
subpoenas and/or requests for documents, information and/or testimony. Beginning
in August 2004, the Company entered into settlements with certain of the
regulators and a governmental entity investigating the mutual fund industry
practices noted above. The Company believes that settlement of each of the
matters is in the best interest of the Company and shareholders of the Franklin,
Templeton, and Mutual Series mutual funds (the "funds").
84 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. REGULATORY MATTERS (CONTINUED)
INVESTIGATIONS AND SETTLEMENTS (CONTINUED)
Two of the settlement agreements, those with the SEC and the CAGO concerning
marketing support payments, provide that the distribution of settlement monies
are to be made to the relevant funds, not to individual shareholders. The CAGO
has approved the distribution plan pertaining to the distribution of the monies
owed under the CAGO settlement agreement and, in accordance with the terms and
conditions of that settlement, the monies were disbursed to the participating
funds. The Trust did not participate in the CAGO settlement. The SEC has not yet
approved the distribution plan pertaining to the SEC settlement. When approved,
disbursements of settlement monies under the SEC's settlement will be made
promptly in accordance with the terms and conditions of that order.
OTHER LEGAL PROCEEDINGS
On April 12, 2005, the Attorney General of West Virginia filed a complaint in
the Circuit Court of Marshall County, West Virginia against a number of
companies engaged in the mutual fund industry, including Franklin Resources,
Inc. and its subsidiary, Franklin Advisers, Inc., and certain other parties
alleging violations of the West Virginia Consumer Credit and Protection Act and
seeking, among other things, civil penalties and attorneys' fees and costs.
Defendants have since removed the matter to the United States District Court for
the Northern District of West Virginia. To the extent applicable to the Company,
the complaint arises from activity that occurred in 2001 and duplicates, in
whole or in part, the allegations asserted in the February 4, 2004 Massachusetts
Administrative Complaint concerning one instance of market timing (the
"Administrative Complaint") and the SEC's findings regarding market timing in
its August 2, 2004 Order (the "SEC Order"), both of which matters were
previously reported.
The Company, in addition to certain Franklin, Templeton, and Mutual Series
mutual funds, and certain current and former officers, employees, and directors
have been named in multiple lawsuits in different courts alleging violations of
various federal securities and state laws and seeking, among other relief,
monetary damages, restitution, removal of fund trustees, directors, advisers,
administrators, and distributors, rescission of management contracts and 12b-1
plans, and/or attorneys' fees and costs. Specifically, the lawsuits claim breach
of duty with respect to alleged arrangements to permit market timing and/or late
trading activity, or breach of duty with respect to the valuation of the
portfolio securities of certain Templeton funds managed by Franklin Resources,
Inc. subsidiaries, resulting in alleged market timing activity. The majority of
these lawsuits duplicate, in whole or in part, the allegations asserted in the
Administrative Complaint and the SEC's findings regarding market timing in the
SEC Order. The lawsuits are styled as class actions, or derivative actions on
behalf of either the named funds or Franklin Resources, Inc.
Annual Report | 85
FRANKLIN CALIFORNIA TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. REGULATORY MATTERS (CONTINUED)
OTHER LEGAL PROCEEDINGS (CONTINUED)
The Company, in addition to certain Franklin, Templeton, and Mutual Series
mutual funds, and certain current and former officers, employees, and directors
have been named in multiple lawsuits alleging violations of various securities
laws and pendent state law claims relating to the disclosure of marketing
support payments and/or payment of allegedly excessive commissions and/or
advisory or distribution fees, and seeking, among other relief, monetary
damages, restitution, rescission of advisory contracts, including recovery of
all fees paid pursuant to those contracts, an accounting of all monies paid to
the named advisers, declaratory relief, injunctive relief, and/or attorneys'
fees and costs. These lawsuits are styled as class actions or derivative actions
brought on behalf of the named funds.
The Company and fund management strongly believe that the claims made in each of
the lawsuits described above are without merit and intends to defend against
them vigorously. The Company cannot predict with certainty the eventual outcome
of these lawsuits, nor whether they will have a material negative impact on the
Company. Public trust and confidence are critical to the Company's business and
any material loss of investor and/or client confidence could result in a
significant decline in assets under management by the Company, which would have
an adverse effect on future financial results. If it is determined that the
Company bears responsibility for any unlawful or inappropriate conduct that
caused losses to the Trust, it is committed to making the Trust or their
shareholders whole, as appropriate. The Company is committed to taking all
appropriate actions to protect the interests of its funds' shareholders.
86 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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 Franklin California Insured
Tax-Free Income Fund, Franklin California Intermediate-Term Tax-Free Income
Fund, Franklin California Limited-Term Tax-Free Income Fund and Franklin
California Tax-Exempt Money Fund (each separate portfolios of Franklin
California Tax-Free Trust, hereafter referred to as the "Funds") at June 30,
2005, the results of each of their operations for the year then ended, the
changes in each of their net assets and the 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 Funds' 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 the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits 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, 2005 by correspondence with the custodian
and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
August 10, 2005
Annual Report | 87
FRANKLIN CALIFORNIA TAX-FREE TRUST
TAX DESIGNATION (UNAUDITED)
Under Section 852(b)(5)(A) of the Internal Revenue Code, the Funds designate
100% of the distributions paid from net investment income as exempt-interest
dividends for the fiscal year ended June 30, 2005. A portion of the Funds'
exempt-interest dividends may be subject to the federal alternative minimum tax.
In January 2006, shareholders will be notified of amounts for use in preparing
their 2005 income tax returns.
88 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
BOARD MEMBERS AND OFFICERS
The name, year of birth 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
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- -----------------------------------------------------------------------------------------------------------------------------------
HARRIS J. ASHTON (1932) Trustee Since 1985 142 Director, Bar-S Foods (meat packing
One Franklin Parkway 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 (1932) Trustee Since 1989 143 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 (until 2002) (Consultant (2003)).
- -----------------------------------------------------------------------------------------------------------------------------------
FRANK W.T. LAHAYE (1929) Trustee Since 1985 116 Director, The California Center for
One Franklin Parkway Land 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 (1928) Trustee Since 1992 142 Director, Martek Biosciences
One Franklin Parkway Corporation, MedImmune, Inc.
San Mateo, CA 94403-1906 (biotechnology), and Overstock.com
(Internet services); and FORMERLY,
Director, MCI Communication
Corporation (subsequently known as
MCI WorldCom, Inc. and WorldCom,
Inc.) (communications services)
(1988-2002), White Mountains
Insurance Group, Ltd. (holding com-
pany) (1987-2004) and Spacehab,
Inc. (aerospace services) (1994-2003).
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company) (2001-2004);
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 | 89
INTERESTED BOARD MEMBERS AND OFFICERS
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- -----------------------------------------------------------------------------------------------------------------------------------
**HARMON E. BURNS (1945) Trustee and Trustee since 22 None
One Franklin Parkway Vice 1993 and Vice
San Mateo, CA 94403-1906 President 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.; and officer and/or director or trustee, as the
case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 47 of the investment companies in
Franklin Templeton Investments.
- -----------------------------------------------------------------------------------------------------------------------------------
**CHARLES B. JOHNSON (1933) Trustee and Trustee since 142 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, 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 44 of the investment companies in
Franklin Templeton Investments.
- -----------------------------------------------------------------------------------------------------------------------------------
**RUPERT H. JOHNSON, JR. (1940) Trustee and Trustee since 126 None
One Franklin Parkway President 1985, President
San Mateo, CA 94403-1906 and 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.; 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 47
of the investment companies in Franklin Templeton Investments.
- -----------------------------------------------------------------------------------------------------------------------------------
SHEILA AMOROSO (1959) Vice President Since 1999 Not Applicable Not Applicable
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.
- -----------------------------------------------------------------------------------------------------------------------------------
RAFAEL R. COSTAS, JR. (1965) Vice President Since 1999 Not Applicable Not Applicable
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.
- -----------------------------------------------------------------------------------------------------------------------------------
90 | Annual Report
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- -----------------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (1952) Chief Since 2004 Not Applicable Not Applicable
One Franklin Parkway Compliance
San Mateo, CA 94403-1906 Officer
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of 49 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Director of Compliance, Franklin Resources, Inc. (1994-2001).
- -----------------------------------------------------------------------------------------------------------------------------------
LAURA FERGERSON (1962) Treasurer Since 2004 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 33 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director and member of Audit and
Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant Treasurer of most of the investment companies in
Franklin Templeton Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC (1997-2003).
- -----------------------------------------------------------------------------------------------------------------------------------
MARTIN L. FLANAGAN (1960) Vice Since 1995 Not Applicable Not Applicable
One Franklin Parkway President
San Mateo, CA 94403-1906
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Co-President and Chief Executive Officer, 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 Templeton Investor Services, LLC; Chief Financial Officer, Franklin Advisory Services, LLC;
Chairman, Franklin Templeton 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 47 of the investment companies in Franklin Templeton Investments.
- -----------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (1947) Senior Vice Since 2002 Not Applicable Not Applicable
500 East Broward Blvd. President and
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Executive
Officer -
Finance and
Administration
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 49 of the
investment companies in Franklin Templeton Investments.
- -----------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Resources, Inc.; officer and director of one of the subsidiaries of Franklin Resources,
Inc.; officer of 49 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).
- -----------------------------------------------------------------------------------------------------------------------------------
Annual Report | 91
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- -----------------------------------------------------------------------------------------------------------------------------------
BARBARA J. GREEN (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Deputy General Counsel and Secretary, Franklin Resources, Inc.; Secretary and Senior Vice President, Templeton
Worldwide, Inc.; Secretary, Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Investment Advisory Services, LLC,
Franklin Mutual Advisers, LLC, Franklin Templeton Alternative Strategies, Inc., Franklin Templeton Investor Services, LLC,
Franklin Templeton Services, LLC, Franklin Templeton Distributors, Inc., Templeton Investment Counsel, LLC, and Templeton/Franklin
Investment Services, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 49 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 (1937) Vice Since 2002 Not Applicable Not Applicable
600 Fifth Avenue President
Rockefeller Center - AML
New York, NY 10020-2302 Compliance
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Chief Banking Officer and Director, Fiduciary Trust Company International; Director, FTI Banque, Arch Chemicals, Inc.
and Lingnan Foundation; and officer and/or director, as the case may be, of some of the other subsidiaries of Franklin
Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments.
- -----------------------------------------------------------------------------------------------------------------------------------
MURRAY L. SIMPSON (1937) Vice President Since 2000 Not Applicable Not Applicable
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 49 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).
- -----------------------------------------------------------------------------------------------------------------------------------
92| Annual Report
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- -----------------------------------------------------------------------------------------------------------------------------------
GALEN G. VETTER (1951) Chief Since 2004 Not Applicable Not Applicable
500 East Broward Blvd. Financial
Suite 2100 Officer and
Fort Lauderdale, FL 33394-3091 Chief
Accounting
Officer
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; officer of 49 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Managing Director, RSM McGladrey, Inc.; and Partner, McGladrey & Pullen, LLP.
- -----------------------------------------------------------------------------------------------------------------------------------
THOMAS WALSH (1961) Vice Since 1999 Not Applicable Not Applicable
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.
- -----------------------------------------------------------------------------------------------------------------------------------
* 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 to be
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 to be 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 SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE FUND'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE FUND'S BOARD OF TRUSTEES HAS DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED FRANK W.T. LAHAYE AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. LAHAYE QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE
BUSINESS BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS PRESIDENT AND DIRECTOR
OF MCCORMICK SELPH ASSOCIATES FROM 1954 THROUGH 1965; DIRECTOR AND CHAIRMAN OF
TELEDYNE CANADA LTD. FROM 1966 THROUGH 1971; DIRECTOR AND CHAIRMAN OF
QUARTERDECK CORPORATION FROM 1982 THROUGH 1998; AND SERVICES AS A DIRECTOR OF
VARIOUS OTHER PUBLIC COMPANIES INCLUDING U.S. TELEPHONE INC. (1981-1984), FISHER
IMAGING INC. (1991-1998) AND DIGITAL TRANSMISSIONS SYSTEMS (1995-1999). IN
ADDITION, MR. LAHAYE SERVED FROM 1981 TO 2000 AS A DIRECTOR AND CHAIRMAN OF
PEREGRINE VENTURE MANAGEMENT CO., A VENTURE CAPITAL FIRM, AND HAS BEEN A MEMBER
AND CHAIRMAN OF THE FUND'S AUDIT COMMITTEE SINCE ITS INCEPTION. AS A RESULT OF
SUCH BACKGROUND AND EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT MR. LAHAYE
HAS ACQUIRED AN UNDERSTANDING OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND
FINANCIAL STATEMENTS, THE GENERAL APPLICATION OF SUCH PRINCIPLES IN CONNECTION
WITH THE ACCOUNTING ESTIMATES, ACCRUALS AND RESERVES, AND ANALYZING AND
EVALUATING FINANCIAL STATEMENTS THAT PRESENT A BREADTH AND LEVEL OF COMPLEXITY
OF ACCOUNTING ISSUES GENERALLY COMPARABLE TO THOSE OF THE FUND, AS WELL AS AN
UNDERSTANDING OF INTERNAL CONTROLS AND PROCEDURES FOR FINANCIAL REPORTING AND AN
UNDERSTANDING OF AUDIT COMMITTEE FUNCTIONS. MR. LAHAYE IS AN INDEPENDENT TRUSTEE
AS THAT TERM IS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION
RULES AND RELEASES.
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.
Annual Report | 93
FRANKLIN CALIFORNIA TAX-FREE TRUST
SHAREHOLDER INFORMATION
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT
At a meeting held February 28, 2005, the Board of Trustees ("Board"), including
a majority of non-interested or independent Trustees, approved renewal of the
investment advisory contract for each of the four separate tax-exempt funds
within the Trust ("Fund(s)"). In reaching this decision, the Board took into
account information furnished throughout the year at regular Board meetings, as
well as information prepared specifically in connection with the annual renewal
review process. Information furnished and discussed throughout the year included
investment performance reports and related financial information for each Fund,
as well as periodic reports on shareholder services, legal compliance, pricing,
brokerage commissions and execution and other services provided by the
Investment Manager ("Manager") and its affiliates. Information furnished
specifically in connection with the renewal process included a report for each
Fund prepared by Lipper Financial Services ("Lipper"), an independent
organization, as well as a Fund profitability analysis report prepared by
management. The Lipper reports compared each Fund's investment performance and
expenses with those of other mutual funds deemed comparable to the Fund as
selected by Lipper. The Fund profitability analysis report discussed the
profitability to Franklin Templeton Investments from its overall U.S. fund
operations, as well as on an individual fund-by-fund basis. Included with such
profitability analysis report was information on a fund-by-fund basis listing
portfolio managers and other accounts they manage, as well as information on
management fees charged by the Manager including management's explanation of
differences where relevant, and a three-year expense analysis with an
explanation for any increase in expense ratios. Additional information
accompanying such report was a memorandum prepared by management describing
enhancements to the services provided to the Funds by the Franklin Templeton
Investments organization, as well as a memorandum relating to economies of
scale.
In considering such materials, the independent Trustees received assistance and
advice from and met separately with independent counsel. While the investment
advisory contracts for all the Funds were considered at the same Board meeting,
the Board dealt with each Fund separately. In approving continuance of the
investment advisory contract for each Fund, the Board, including a majority of
independent Trustees, determined that the existing management fee structure was
fair and reasonable and that continuance of the investment advisory contract was
in the best interests of each Fund and its shareholders. While attention was
given to all information furnished, the following discusses the primary factors
relevant to the Board's decision.
NATURE, EXTENT AND QUALITY OF SERVICE. The Board was satisfied with the nature
and quality of the overall services provided by the Manager and its affiliates
to the Funds and their shareholders. In addition to investment performance and
expenses discussed later, the Board's opinion was based, in part, upon periodic
reports furnished them showing that the investment policies and restrictions for
each Fund were consistently complied with as well as other reports periodically
furnished the Board covering matters such as the compliance of portfolio
managers and other management personnel with the code of ethics adopted
throughout the Franklin Templeton fund complex, the
94 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
adherence to fair value pricing procedures established by the Board, and the
accuracy of net asset value calculations. The Board also noted the extent of
benefits provided Fund shareholders from being part of the Franklin Templeton
family of funds, including the right to exchange investments between the same
class of funds without a sales charge, the ability to reinvest Fund dividends
into other funds and the right to combine holdings in other funds to obtain a
reduced sales charge. Favorable consideration was given to management's efforts
and expenditures in establishing back-up systems and recovery procedures to
function in the event of a natural disaster, it being noted by the Board that
such systems and procedures had functioned smoothly during the hurricanes and
blackout experienced last year in Florida. Other factors taken into account by
the Board were the Manager's best execution trading policies, as well as the
compliance procedures and qualifications of the Chief Compliance Officer
established in accordance with recently adopted SEC requirements. Consideration
was also given to the experience of each Fund's portfolio management team, the
number of accounts managed and general method of compensation. In this latter
respect, the Board noted that a primary factor in management's determination of
the amount of a portfolio manager's bonus compensation was the relative
investment performance of the funds he or she managed so as to be aligned with
the interests of Fund shareholders. The Board also took into account the
transfer agent and shareholder services provided Fund shareholders by an
affiliate of the Manager, noting continuing expenditures by management to
increase and improve the scope of such services, periodic favorable reports on
such service conducted by third parties such as Dalbar, and the firsthand
experience of the individual Trustees who deal with the shareholder services
department in their capacities as shareholders in one or more of the various
Franklin Templeton funds.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment
performance of each Fund in view of its importance to shareholders. While
consideration was given to performance reports and discussions with portfolio
managers at Board meetings during the year, particular attention in assessing
performance was given to the Lipper reports furnished for the contract renewals.
The Lipper report prepared for each individual Fund showed their investment
performance in comparison with a performance universe selected by Lipper. The
following summarizes the performance results for each of the Funds.
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND - The Lipper report for this
Fund showed the investment performance of its Class A shares during 2004 and the
previous ten years ended December 31, 2004, in comparison with a performance
universe consisting of all retail and institutional California insured municipal
debt funds as selected by Lipper. Such comparison showed that the Fund's income
return during 2004, as shown in the Lipper report, and for the previous three-,
five- and ten-year periods on an annualized basis was in the highest quintile of
its performance universe. The Lipper report also showed that the Fund's total
return during 2004 was in the first quintile and for the previous three-, five-
and ten-year periods on an annualized basis was in the first or second quintile
of its performance universe. The Board expressed its satisfaction with such
performance.
Annual Report | 95
FRANKLIN CALIFORNIA TAX-FREE TRUST
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND - The Lipper report
for this Fund showed the investment performance of its Class A shares during
2004 and the previous ten years ended December 31, 2004, in comparison with a
performance universe consisting of all retail and institutional California
intermediate municipal debt funds as selected by Lipper. Such Lipper report
comparison showed that the Fund's income return in 2004 was in the highest
quintile and during each of the previous three-, five- and ten-year periods on
an annualized basis was in either the first or second quintile of its
performance universe. The Lipper report also showed that the Fund's total return
during 2004 and for each of the previous three-, five- and ten-year periods on
an annualized basis was in the highest quintile of its performance universe. The
Board expressed its satisfaction with such performance.
FRANKLIN CALIFORNIA LIMITED TERM TAX-FREE INCOME FUND - Lipper compared this
Fund's performance to a group of retail and institutional California
short-intermediate municipal debt funds as selected by Lipper, and the Fund's
income and total return during 2004, as shown in the Lipper report, placed it in
the lowest quintile of such universe. The Board was satisfied with management's
explanation for such performance, which was that this Fund had not been in
existence for more than a year and is of a relatively small size. The Board also
noted that the Fund's management fees and other expenses have been partially
waived or absorbed by management.
FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND - Lipper compared this Fund's
performance to a performance universe consisting of all retail and institutional
California tax-exempt money market funds as selected by Lipper. This Fund's
performance was in the middle quintile of its performance universe during 2004
and in each of the previous three- and five-year periods on an annualized basis
and was in the fourth quintile for the ten-year annualized period. In discussing
this performance, management pointed out that it followed a conservative
approach investing only in securities that present minimal credit risks and
which were rated in the top two ratings by nationally recognized rating services
or comparable unrated securities. The Board found such performance acceptable in
view of management's explanation, noting that the Fund's annualized return for
the ten-year period was within nine basis points of the performance universe
median as set forth in the Lipper report.
COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the
management fees and total expense ratios of each Fund compared with those of a
group of other funds selected by Lipper as constituting its appropriate Lipper
expense group. Prior to making such comparison, the Board relied upon a survey
showing that the scope of management advisory services covered under the Fund's
investment advisory contract was similar to those provided by fund managers to
other mutual fund groups that would be used as a basis of comparison in the
Lipper reports. In reviewing comparative costs, emphasis was given to each
Fund's management fee in comparison with the effective management fee that would
have been charged by other funds within its Lipper expense group assuming they
were the same size as the Fund, as well as the actual total expenses of the Fund
in comparison with those of such group which, for comparative consistency, was
shown by Lipper for Fund Class A shares in the case of Franklin California
Insured Tax-Free Income
96 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
Fund and Franklin California Intermediate-Term Tax-Free Income Fund. The results
of such expense comparisons showed that the effective management fee rate of
Franklin California Insured Tax-Free Income Fund was in the lowest quintile of
its Lipper expense group and its actual total expenses were also in the lowest
quintile of such group. The effective management fee rate of Franklin California
Intermediate-Term Tax-Free Income Fund was in the middle quintile of its Lipper
expense group while its total expenses were in the lowest quintile of such
expense group and the second lowest quintile if 12b-1 fees were excluded from
actual total expenses. While realizing that other factors such as the Manager's
profitability and economies of scale bear on the reasonableness of fees, the
Board was satisfied with the management fee and total expenses of these Funds in
comparison to their Lipper expense groups. The Lipper expense comparison for
Franklin California Limited-Term Tax-Free Income Fund was not considered to be
particularly meaningful in view of this Fund's small size and management's
partial waiver or absorption of expenses. The Lipper expense comparison for
Franklin California Tax-Exempt Money Fund showed its effective management fee to
be in the second most expensive quintile of its Lipper group, while its actual
total expenses were in the least expensive quintile of such group and were in
the middle quintile of such group if 12b-1 fees were excluded from actual total
expenses. In discussing these expense comparisons, management pointed out that
this Fund is not actively marketed and largely serves as an alternative, and
frequently temporary, investment vehicle for shareholders of various other funds
within the Franklin Templeton family of funds and provides a number of services
for shareholders, including check writing. It was also noted that the Fund's
effective management fee rate was within five basis points of the median of its
expense group as shown on the Lipper report. The Board found the Fund's
comparative expenses to be acceptable noting such facts.
MANAGEMENT PROFITABILITY. The Board also considered the level of profits
realized by the Manager and its affiliates in connection with the operation of
each Fund. In this respect, the Board reviewed the Fund profitability analysis
that addresses the overall profitability of Franklin Templeton's U.S. fund
business, as well as its profits in providing management and other services to
each of the funds. The Board also considered the extent to which the Manager and
its affiliates might derive ancillary benefits from fund operations, including
its interest in a joint venture entity which finances up-front commissions paid
to brokers/dealers who sold fund Class B shares, as well as potential benefits
resulting from allocation of fund brokerage and the use of "soft" commission
dollars to pay for research. Specific attention was given to the methodology
followed in allocating costs to each Fund, it being recognized that allocation
methodologies are inherently subjective and various allocation methodologies may
each be reasonable while producing different results. In this respect, the Board
noted that the cost allocation methodology was consistent with that followed in
profitability report presentations for the Funds made in prior years and that it
had engaged on a biennial basis the Fund's independent accountants to perform
certain procedures specified by the Board solely for its purpose and use. It was
also noted that legal costs and payments incurred by Franklin Templeton in
resolving various legal proceedings arising from its U.S. fund operations had
not been allocated to the Funds for purposes of determining profitability.
Included in the analysis for each Fund were
Annual Report | 97
FRANKLIN CALIFORNIA TAX-FREE TRUST
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
the revenue and related costs broken down separately from the management,
underwriting and shareholder services functions provided by the Manager and its
affiliates to each Fund, as well as the relative contribution of each Fund to
the profitability of the Manager's parent. In reviewing and discussing such
analysis, management discussed with the Board its belief that costs incurred in
establishing the infrastructure necessary to the type of mutual fund operations
conducted by the Manager and its corporate affiliates may not be fully reflected
in the expenses allocated to each Fund in determining its profitability, as well
as the fact that the level of profits, to a certain extent, reflected
operational cost savings and efficiencies initiated by management. The Board
also took into account management's expenditures in improving shareholder
services provided the Funds, as well as the need to meet additional regulatory
and compliance requirements resulting from the Sarbanes-Oxley Act and recent SEC
requirements. In addition, the Board considered a third-party study comparing
the profitability of the Manager's parent on an overall basis as compared to
other publicly held managers broken down to show profitability from management
operations exclusive of distribution expenses, as well as profitability
including distribution expenses. Based upon their consideration of all these
factors, the Board determined that the level of profits realized by the Manager
under its investment advisory contract with each Fund was not excessive in view
of the nature, quality and extent of services provided.
ECONOMIES OF SCALE. The Board also considered whether economies of scale are
realized by the Manager as the Funds grow larger and the extent to which this is
reflected in the level of management fees charged. While recognizing any precise
determination is inherently subjective, the Board noted that based upon the Fund
profitability analysis, it appeared that as some funds get larger, at some point
economies of scale do result in the Manager realizing a larger profit margin on
management services provided such fund. The Board also noted that any economies
of scale are shared with each of these Funds and their shareholders through
management fee breakpoints existing in each of the Fund's investment advisory
contracts so that as a Fund grows in size, its effective management fee rate
declines. The net assets of Franklin California Limited Term Tax-Free Income
Fund were approximately $20 million at December 31, 2004, and with its expenses
being partially waived or subsidized by management, the Board did not consider
economies of scale to be relevant. The management fee structure, including
administrative expenses for the other three Funds provides for a fee of 0.625%
on the first $100 million of net assets; 0.50% on the next $150 million of net
assets; and 0.45% on net assets in excess of $250 million. The net assets of
Franklin California Insured Tax-Free Income Fund stood at approximately $2
billion at December 31, 2004, and the independent Trustees requested that
management consider adding additional fee breakpoints for this Fund.
Management's position in discussing this issue was that the existing fee rate
reaches a relatively low rate quickly and that such low rate, in effect,
reflects anticipated economies of scale as assets increase beyond such level. In
support of this position, management pointed out the favorable effective
management fee rate and total actual expense comparisons for this Fund within
its Lipper
98 | Annual Report
FRANKLIN CALIFORNIA TAX-FREE TRUST
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT ADVISORY CONTRACT (CONTINUED)
expense group as previously discussed under "Comparative Expenses." The net
assets at December 31, 2004, for Franklin California Intermediate-Term Tax-Free
Income Fund and Franklin California Tax-Exempt Money Fund were approximately
$435 million and $607 million, respectively, and the independent Trustees raised
the prospect of adding further fee breakpoints for these two Funds as well.
Management's position in discussing this was basically the same as set forth in
respect to Franklin California Insured Tax-Free Income Fund. Management further
observed, and the Board acknowledged, that the fact these Funds had assets
beyond the last breakpoint level does not mean they no longer benefit from
economies of scale since the continuous growth of amount of assets being charged
at the lowest 0.45% fee level results in a lower overall effective management
fee rate. While intending to monitor future growth and continue discussions with
management on this topic, the Board believed that to the extent economies of
scale may be realized by the Manager and its affiliates, the schedule of fees
under the investment advisory contracts for these three Funds provides a sharing
of benefits with each Fund and its shareholders. At a Board meeting held April
19, 2005, management agreed to an additional series of management fee
breakpoints for each of these three Funds beginning at the $10 billion asset
level.
PROXY VOTING POLICIES AND PROCEDURES
The Trust has established Proxy Voting Policies and Procedures ("Policies") that
the Trust uses to determine how to vote proxies relating to portfolio
securities. Shareholders may view the Trust's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Trust's proxy voting records are also made available online
at franklintempleton.com and posted on the U.S. Securities and Exchange
Commission's website at sec.gov and reflect the most recent 12-month period
ended June 30.
QUARTERLY STATEMENT OF INVESTMENTS
The Trust files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.
Annual Report | 99
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LITERATURE REQUEST
LITERATURE REQUEST. TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT
1-800/DIAL BEN(R) (1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS
SHOULD CAREFULLY CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES
BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE
CAREFULLY READ THE PROSPECTUS BEFORE INVESTING. To ensure the highest quality of
service, we may monitor, record and access telephone calls to or from our
service departments. These calls can be identified by the presence of a regular
beeping tone.
FRANKLIN TEMPLETON INVESTMENTS
INTERNATIONAL
Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund
GLOBAL
Mutual Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II(1)
VALUE
Franklin Balance Sheet Investment Fund(2)
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund(2)
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund(3)
Mutual Shares Fund
BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Technology Fund
Franklin Utilities Fund
Mutual Financial Services Fund
ASSET ALLOCATION
Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
TARGET FUNDS
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund(4)
Franklin's AGE High Income Fund
Franklin Floating Rate Daily Access Fund
Franklin Income Fund
Franklin Limited Maturity U.S. Government Securities Fund(4)
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund(4)
Templeton Global Bond Fund
Templeton Income Fund
TAX-FREE INCOME(5)
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(6)
LIMITED-TERM FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund
INTERMEDIATE-TERM FUNDS
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund
STATE-SPECIFIC
Alabama
Arizona
California(7)
Colorado
Connecticut
Florida(7)
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(6)
Michigan(6)
Minnesota(6)
Missouri
New Jersey
New York(7)
North Carolina
Ohio(7)
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance Products Trust(8)
(1) The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.
(2) The fund is only open to existing shareholders and select retirement
plans.
(3) The fund is a continuously offered, closed-end fund. Shares may be
purchased daily; there is no daily redemption. However, each quarter,
pending board approval, the fund will authorize the repurchase of 5%-25%
of the outstanding number of shares. Investors may tender all or a portion
of their shares during the tender period.
(4) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
(5) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are
generally taxable.
(6) Portfolio of insured municipal securities.
(7) These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA)
and limited-term, intermediate-term and money market portfolios (CA and
NY).
(8) The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
06/05 Not part of the annual report
[LOGO](R)
FRANKLIN TEMPLETON One Franklin Parkway
INVESTMENTS San Mateo, CA 94403-1906
o 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
Authorized for distribution only when accompanied or preceded by a prospectus.
Investors should carefully consider a fund's investment goals, risks, charges
and expenses before investing. The prospectus contains this and other
information; please read it carefully before investing.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
CAT A2005 08/05
Item 2. Code of Ethics.
(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy
of its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.
Item 3. Audit Committee Financial Expert.
(a)(1) The Registrant has an audit committee financial expert serving on its
audit committee.
(2) The audit committee financial expert is Frank W. T. LaHaye and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements or for services that are normally provided by the principal
accountant in connection with statutory and regulatory filings or engagements
were $7,311 for the fiscal year ended June 30, 2005 and $122,019 for the fiscal
year ended June 30, 2004.
(b) Audit-Related Fees
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant that are
reasonably related to the performance of the audit of the registrant's financial
statements and are not reported under paragraph (a) of Item 4.
The aggregate fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant's investment
adviser and any entity controlling, controlled by or under common control with
the investment adviser that provides ongoing services to the registrant that are
reasonably related to the performance of the audit of their financial statements
were $0 for the fiscal year ended June 30, 2005 and $52,158 for the fiscal year
ended June 30, 2004. The services for which these fees were paid included
attestation services.
(c) Tax Fees
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant for tax compliance, tax
advice and tax planning.
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant for tax
compliance, tax advice and tax planning were $19,591 for the fiscal year ended
June 30, 2005 and $0 for the fiscal year ended June 30, 2004. The services for
which these fees were paid included tax compliance and advise.
(d) All Other Fees
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant not reported in
paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended June 30, 2005 and
$1,555 for the fiscal year ended June 30, 2004. The services for which these
fees were paid included review of materials provided to the fund Board in
connection with the investment management contract renewal process.
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant not reported
in paragraphs (a)-(c) of Item 4 were $4,500 for the fiscal year ended June 30,
2005 and $98,445 for the fiscal year ended June 30, 2004. The services for which
these fees were paid included review of materials provided to the fund Board in
connection with the investment management contract renewal process and the
review of the ICI transfer agent survey.
(e) (1) The registrant's audit committee is directly responsible for approving
the services to be provided by the auditors, including:
(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to the
Fund by the auditors;
(iii)pre-approval of all non-audit related services to be provided to the
registrant by the auditors to the registrant's investment adviser or to any
entity that controls, is controlled by or is under common control with the
registrant's investment adviser and that provides ongoing services to the
registrant where the non-audit services relate directly to the operations or
financial reporting of the registrant; and
(iv) establishment by the audit committee, if deemed necessary or
appropriate, as an alternative to committee pre-approval of services to be
provided by the auditors, as required by paragraphs (ii) and (iii) above, of
policies and procedures to permit such services to be pre-approved by other
means, such as through establishment of guidelines or by action of a designated
member or members of the committee; provided the policies and procedures are
detailed as to the particular service and the committee is informed of each
service and such policies and procedures do not include delegation of audit
committee responsibilities, as contemplated under the Securities Exchange Act of
1934, to management; subject, in the case of (ii) through (iv), to any waivers,
exceptions or exemptions that may be available under applicable law or rules.
(e) (2) None of the services provided to the registrant described in paragraphs
(b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) The aggregate non-audit fees paid to the principal accountant for services
rendered by the principal accountant to the registrant and the registrant's
investment adviser and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant were $24,091 for the fiscal year ended June 30, 2005 and $152,158 for
the fiscal year ended June 30, 2004.
(h) The registrant's audit committee of the board of trustees has considered
whether the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal accountant's
independence.
Item 5. Audit Committee of Listed Registrants. N/A
Item 6. Schedule of Investments. N/A
Item 7. Disclosure of Proxy Voting Policies and Procedures for
Closed-End Management Investment Companies. N/A
Item 8. Portfolio Managers of Closed-End Management Investment
Companies. N/A
Item 9. Purchases of Equity Securities by Closed-End Management
Investment Company and Affiliated Purchasers. N/A
Item 10. Submission of Matters to a Vote of Security Holders. There have
been no changes to the procedures by which shareholders may recommend nominees
to the Registrant's Board of Trustees that would require disclosure herein.
Item 11. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(b) Changes in Internal Controls. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
Item 12. Exhibits.
(a) (1) Code of Ethics
(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN CALIFORNIA TAX-FREE TRUST
By JIMMY D. GAMBILL
----------------
/s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date August 19, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By JIMMY D. GAMBILL
----------------
/s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date August 19, 2005
By GALEN G. VETTER
----------------
/s/Galen G. Vetter
Chief Financial Officer
Date August 19, 2005