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
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(Exact name of registrant as specified in charter)
ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Address of principal executive offices) (Zip code)
CRAIG S. TYLE, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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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: 6/30/07
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ITEM 1. REPORTS TO STOCKHOLDERS.
[GRAPHIC OMITTED]
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JUNE 30, 2007
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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
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WANT TO RECEIVE
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FRANKLIN
CALIFORNIA TAX-FREE TRUST Eligible shareholders can
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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
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 ................................. 34
Financial Highlights and Statements of Investments ........................ 38
Financial Statements ...................................................... 72
Notes to Financial Statements ............................................. 77
Report of Independent Registered Public Accounting Firm ................... 88
Tax Designation ........................................................... 89
Meeting of Shareholders ................................................... 90
Board Members and Officers ................................................ 101
Shareholder Information ................................................... 106
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Annual Report
State Update and Municipal
Bond Market Overview
During the year ended June 30, 2007, California's large and diverse economy
experienced strong growth and healthy tax revenue increases. In recent years,
most of the state's economic sectors performed close to or better than the
nation's, and the state had a sustained trend of moderate private sector
employment and personal income growth. As of June 2007, the state's unemployment
rate was 5.2%, which was above the 4.5% national rate. 1
The state has a history of uneven financial operations, with a large operating
deficit projected for fiscal year 2007 and a smaller one proposed for fiscal
year 2008. Tax revenue for fiscal year 2006 was up 9% over the prior year, while
revenue for the first nine months of fiscal year 2007 was 2.4% above the same
period in the previous fiscal year. 2 Overall tax-supported debt levels rose but
were still moderate. Debt per capita has nearly doubled over the past four years
and could rise further if remaining authorized debt is sold.
Moody's Investors Service assigned California's general obligation bonds a
rating of A1, reflecting strong economic and tax revenue trends, financial
performance in 2006 that exceeded expectations, and a moderately improved
financial outlook for fiscal year 2007 and beyond. 3 The rating also takes into
account the large, but still manageable, increase in long-term state debt in
recent years. The state's credit outlook is stable, with economic and revenue
trends expected to moderate.
For the 12 months under review, the municipal bond market continued to deliver
positive performance despite inflation concerns, volatile oil prices, mixed
market expectations and uncertainty regarding future economic growth.
Intermediate- and longer-term municipal yields tracked declining Treasury yields
over the period. Global equity market volatility and uncertainty regarding the
impact of subprime mortgage defaults on the housing market, economy, and
1. Source: Bureau of Labor Statistics.
2. Source: Moody's Investors Service, "California (State of)," 6/11/07.
3. This does not indicate Moody's rating of the Fund.
Annual Report | 7
Federal Reserve Board (Fed) policy, resulted in a flight to quality as many
investors moved from equities to bonds. Largely as a result, intermediate- and
long-term yields fell. The Lehman Brothers Municipal Bond Index returned +4.69%
for the period, while the Lehman Brothers U.S. Treasury Index returned
+5.48%. 4
During the reporting period the Fed maintained the federal funds target rate at
5.25% with an inflation risk bias, stating it is more concerned with a potential
for increased inflation than a slowing economy. Many market participants
reassessed expectations of an easing in the federal funds target rate as growth
and inflation risks seemed balanced at period-end. On June 30, 2007, the
two-year Treasury yielded 4.87%, the 10-year 5.03% and the 30-year 5.13%. Yields
decreased 29, 12 and seven basis points, respectively, for the one-year period
(100 basis points equal one percentage point).
During the period nominal yields remained low and credit spreads (the difference
in yield between higher-grade and lower-grade securities) continued to narrow.
In this environment, the interest rate premium decreased for assuming additional
risk in the taxable fixed income market. As a result, non-traditional municipal
buyers seemed to focus on the municipal bond market. Non-traditional or
crossover buyers typically invest in taxable securities; however, they will
enter the municipal bond market when municipal valuations are attractive. With
historically favorable intermediate- and longer-term municipal yields versus
Treasury yields, and a positive sloping yield curve (though flatter than usual),
municipal bonds offered favorable relative value for traditional and cross-over
fixed income investors. As a result, demand was consistently strong for
intermediate- to longer-term municipal bonds over the period, which drove
performance and contributed to further flattening of the municipal yield curve.
According to Municipal Market Data, the two-year yield rose three basis points,
while 10-year and 30-year yields fell seven and 19 basis points. 5
4. Source: Standard & Poor's Micropal. The Lehman Brothers Municipal Bond Index
is a market value-weighted index engineered for the long-term tax-exempt bond
market. All bonds included have a minimum credit rating of at least Baa3/BBB-.
They must have an outstanding par value of at least $7 million and be issued as
part of a transaction of at least $75 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.
5. Source: Thomson Financial.
8 | Annual Report
Generally low interest rates continued to motivate municipal issuers to access
the debt market to finance their capital needs. In 2006, new issuance was
approximately $388 billion, which was the second-highest volume after the $408
billion issued in 2005.6 So far in 2007, supply has been unusually large with
new municipal issuance up 27%. 6 Refunding deals, in which issuers take
advantage of lower rates to finance higher yielding outstanding debt, were 58%
higher than during the first six months of 2006. 6 Strong demand from
traditional buyers such as mutual funds, individuals and insurance companies
combined with large participation of cross-over buyers enabled the municipal
bond market to absorb the comparatively large amount of new issuance throughout
the reporting period.
6. Source: THE BOND BUYER.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS AND OPINIONS AS OF JUNE 30,
2007, THE END OF THE REPORTING PERIOD. THE INFORMATION IS NOT A COMPLETE
ANALYSIS OF EVERY ASPECT OF ANY MARKET, COUNTRY, INDUSTRY, SECURITY OR FUND.
STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED RELIABLE.
Annual Report | 9
Franklin California Insured
Tax-Free Income Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin California Insured Tax-Free
Income Fund seeks to provide as high a level of income exempt from federal and
California personal income taxes as is consistent with prudent investment
management and the preservation of capital by investing at least 80% of its net
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, 2007.
PERFORMANCE OVERVIEW
The Fund's Class A share price, as measured by net asset value, increased from
$12.43 on June 30, 2006, to $12.48 on June 30, 2007. The Fund's Class A shares
paid dividends totaling 54.18 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 4.14%, based on an
annualization of the current 4.50 cent per share dividend and the maximum
offering price of $13.03 on June 30, 2007. An investor in the 2007 maximum
combined effective federal and California personal income tax bracket of 41.05%
would need to earn a distribution rate of 7.02% 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.
To avoid imposition of 28% backup withholding on all Fund distributions and
redemption proceeds, U.S. investors must be properly certified on Form W-9 and
non-U.S. investors on Form W-8BEN.
2. Fund shares are not insured by any U.S. or other government agency. They are
subject to market risks and will fluctuate in value.
3. Assumes shares were purchased and held for the entire accrual period, which
differs from the calendar month. Since dividends accrue daily, your actual
distributions will vary depending on the date you purchased your shares and any
account activity. All Fund distributions will vary depending upon current market
conditions, and past distributions are not indicative of future trends.
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 41.
10 | Annual Report
DIVIDEND DISTRIBUTIONS 3
Franklin California Insured Tax-Free Income Fund
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DIVIDEND PER SHARE
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MONTH CLASS A CLASS B CLASS C
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July 2006 4.56 cents 4.00 cents 3.99 cents
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August 2006 4.56 cents 4.00 cents 3.99 cents
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September 2006 4.56 cents 3.99 cents 3.98 cents
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October 2006 4.56 cents 3.99 cents 3.98 cents
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November 2006 4.56 cents 3.99 cents 3.98 cents
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December 2006 4.50 cents 3.91 cents 3.91 cents
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January 2007 4.50 cents 3.91 cents 3.91 cents
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February 2007 4.50 cents 3.91 cents 3.91 cents
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March 2007 4.50 cents 3.91 cents 3.90 cents
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April 2007 4.50 cents 3.91 cents 3.90 cents
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May 2007 4.50 cents 3.91 cents 3.90 cents
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June 2007 4.50 cents 3.94 cents 3.92 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
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.
The combination of our value oriented philosophy of investing primarily for
income and a relatively steep municipal yield curve compared to Treasuries
favored the use of longer term bonds. 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
6/30/07
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% OF TOTAL
LONG-TERM INVESTMENTS*
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Prerefunded 27.0%
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General Obligation 16.9%
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Transportation 12.3%
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Utilities 11.1%
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Subject to Government Appropriations 8.7%
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Hospital & Health Care 6.9%
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Tax-Supported 6.6%
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Higher Education 6.4%
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Other Revenue 3.5%
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Housing 0.6%
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* 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, 2007, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR
MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, STATE,
INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE, BUT THE INVESTMENT MANAGER MAKES NO REPRESENTATION OR WARRANTY AS TO
THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT
MANAGEMENT PHILOSOPHY.
12 | Annual Report
Performance Summary as of 6/30/07
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
that a shareholder would pay on Fund dividends, capital gain distributions, if
any, or any realized gains on the sale of Fund shares. Total return reflects
reinvestment of the Fund's dividends and capital gain distributions, if any, and
any unrealized gains or losses.
PRICE AND DISTRIBUTION INFORMATION
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CLASS A (SYMBOL: FRCIX) CHANGE 6/30/07 6/30/06
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Net Asset Value (NAV) +$0.05 $ 12.48 $ 12.43
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DISTRIBUTIONS (7/1/06-6/30/07)
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Dividend Income $0.5418
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CLASS B (SYMBOL: FRCBX) CHANGE 6/30/07 6/30/06
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Net Asset Value (NAV) +$0.05 $ 12.54 $ 12.49
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DISTRIBUTIONS (7/1/06-6/30/07)
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Dividend Income $0.4726
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CLASS C (SYMBOL: FRCAX) CHANGE 6/30/07 6/30/06
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Net Asset Value (NAV) +$0.05 $ 12.60 $ 12.55
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DISTRIBUTIONS (7/1/06-6/30/07)
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Dividend Income $0.4716
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Annual Report | 13
Performance Summary (CONTINUED)
PERFORMANCE
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURN
INCLUDES MAXIMUM SALES CHARGES. CLASS A: 4.25% MAXIMUM INITIAL SALES CHARGE;
CLASS B: CONTINGENT DEFERRED SALES CHARGE (CDSC) DECLINING FROM 4% TO 1% OVER
SIX YEARS, AND ELIMINATED THEREAFTER; CLASS C: 1% CDSC IN FIRST YEAR ONLY. THE
FUND MAY CHARGE A 2% FEE ON REDEMPTIONS MADE WITHIN SEVEN DAYS OF PURCHASE.
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CLASS A 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 1 +4.79% +26.19% +65.82%
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Average Annual Total Return 2 +0.35% +3.85% +4.73%
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Distribution Rate 3 4.14%
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Taxable Equivalent Distribution Rate 4 7.02%
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30-Day Standardized Yield 5 3.48%
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Taxable Equivalent Yield 4 5.90%
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Total Annual Operating Expenses 6 0.61%
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CLASS B 1-YEAR 5-YEAR INCEPTION (2/1/00)
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Cumulative Total Return 1 +4.20% +22.77% +48.51%
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Average Annual Total Return 2 +0.20% +3.85% +5.48%
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Distribution Rate 3 3.77%
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Taxable Equivalent Distribution Rate 4 6.39%
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30-Day Standardized Yield 5 3.07%
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Taxable Equivalent Yield 4 5.21%
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Total Annual Operating Expenses 6 1.16%
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CLASS C 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 1 +4.17% +22.82% +56.92%
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Average Annual Total Return 2 +3.17% +4.20% +4.61%
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Distribution Rate 3 3.73%
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Taxable Equivalent Distribution Rate 4 6.33%
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30-Day Standardized Yield 5 3.09%
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Taxable Equivalent Yield 4 5.24%
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Total Annual Operating Expenses 6 1.16%
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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.
CLASS A (7/1/97-6/30/07)
[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 7 CPI 7
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7/1/1997 $ 9,577 $ 10,000 $ 10,000
7/31/1997 $ 9,839 $ 10,277 $ 10,012
8/31/1997 $ 9,757 $ 10,181 $ 10,031
9/30/1997 $ 9,863 $ 10,301 $ 10,056
10/31/1997 $ 9,922 $ 10,368 $ 10,081
11/30/1997 $ 9,980 $ 10,429 $ 10,075
12/31/1997 $ 10,115 $ 10,581 $ 10,062
1/31/1998 $ 10,215 $ 10,690 $ 10,081
2/28/1998 $ 10,225 $ 10,693 $ 10,100
3/31/1998 $ 10,236 $ 10,703 $ 10,119
4/30/1998 $ 10,189 $ 10,654 $ 10,137
5/31/1998 $ 10,332 $ 10,823 $ 10,156
6/30/1998 $ 10,384 $ 10,866 $ 10,168
7/31/1998 $ 10,403 $ 10,893 $ 10,181
8/31/1998 $ 10,548 $ 11,061 $ 10,193
9/30/1998 $ 10,710 $ 11,199 $ 10,206
10/31/1998 $ 10,721 $ 11,199 $ 10,231
11/30/1998 $ 10,766 $ 11,238 $ 10,231
12/31/1998 $ 10,774 $ 11,266 $ 10,225
1/31/1999 $ 10,862 $ 11,400 $ 10,250
2/28/1999 $ 10,855 $ 11,351 $ 10,262
3/31/1999 $ 10,881 $ 11,366 $ 10,293
4/30/1999 $ 10,882 $ 11,395 $ 10,368
5/31/1999 $ 10,831 $ 11,329 $ 10,368
6/30/1999 $ 10,664 $ 11,166 $ 10,368
7/31/1999 $ 10,673 $ 11,206 $ 10,399
8/31/1999 $ 10,532 $ 11,116 $ 10,424
9/30/1999 $ 10,542 $ 11,121 $ 10,474
10/31/1999 $ 10,382 $ 11,001 $ 10,493
11/30/1999 $ 10,463 $ 11,118 $ 10,499
12/31/1999 $ 10,383 $ 11,035 $ 10,499
1/31/2000 $ 10,302 $ 10,987 $ 10,530
2/29/2000 $ 10,485 $ 11,114 $ 10,593
3/31/2000 $ 10,741 $ 11,357 $ 10,680
4/30/2000 $ 10,649 $ 11,290 $ 10,686
5/31/2000 $ 10,604 $ 11,231 $ 10,699
6/30/2000 $ 10,900 $ 11,529 $ 10,755
7/31/2000 $ 11,040 $ 11,689 $ 10,780
8/31/2000 $ 11,255 $ 11,870 $ 10,780
9/30/2000 $ 11,228 $ 11,808 $ 10,836
10/31/2000 $ 11,313 $ 11,937 $ 10,855
11/30/2000 $ 11,408 $ 12,027 $ 10,861
12/31/2000 $ 11,683 $ 12,324 $ 10,855
1/31/2001 $ 11,750 $ 12,446 $ 10,923
2/28/2001 $ 11,780 $ 12,486 $ 10,967
3/31/2001 $ 11,886 $ 12,598 $ 10,992
4/30/2001 $ 11,703 $ 12,461 $ 11,036
5/31/2001 $ 11,830 $ 12,595 $ 11,085
6/30/2001 $ 11,859 $ 12,680 $ 11,104
7/31/2001 $ 12,044 $ 12,867 $ 11,073
8/31/2001 $ 12,319 $ 13,079 $ 11,073
9/30/2001 $ 12,279 $ 13,035 $ 11,123
10/31/2001 $ 12,407 $ 13,191 $ 11,085
11/30/2001 $ 12,357 $ 13,080 $ 11,067
12/31/2001 $ 12,226 $ 12,956 $ 11,023
1/31/2002 $ 12,384 $ 13,180 $ 11,048
2/28/2002 $ 12,492 $ 13,339 $ 11,092
3/31/2002 $ 12,208 $ 13,078 $ 11,154
4/30/2002 $ 12,399 $ 13,333 $ 11,216
5/31/2002 $ 12,478 $ 13,415 $ 11,216
6/30/2002 $ 12,588 $ 13,556 $ 11,223
7/31/2002 $ 12,730 $ 13,731 $ 11,235
8/31/2002 $ 12,923 $ 13,896 $ 11,273
9/30/2002 $ 13,302 $ 14,200 $ 11,291
10/31/2002 $ 12,969 $ 13,965 $ 11,310
11/30/2002 $ 12,935 $ 13,907 $ 11,310
12/31/2002 $ 13,183 $ 14,200 $ 11,285
1/31/2003 $ 13,118 $ 14,164 $ 11,335
2/28/2003 $ 13,325 $ 14,362 $ 11,422
3/31/2003 $ 13,354 $ 14,371 $ 11,491
4/30/2003 $ 13,479 $ 14,466 $ 11,466
5/31/2003 $ 13,805 $ 14,804 $ 11,447
6/30/2003 $ 13,716 $ 14,741 $ 11,460
7/31/2003 $ 13,166 $ 14,226 $ 11,472
8/31/2003 $ 13,216 $ 14,332 $ 11,516
9/30/2003 $ 13,536 $ 14,753 $ 11,553
10/31/2003 $ 13,522 $ 14,679 $ 11,541
11/30/2003 $ 13,725 $ 14,832 $ 11,510
12/31/2003 $ 13,830 $ 14,955 $ 11,497
1/31/2004 $ 13,925 $ 15,040 $ 11,553
2/29/2004 $ 14,174 $ 15,267 $ 11,616
3/31/2004 $ 14,103 $ 15,213 $ 11,691
4/30/2004 $ 13,712 $ 14,853 $ 11,728
5/31/2004 $ 13,643 $ 14,799 $ 11,797
6/30/2004 $ 13,684 $ 14,853 $ 11,834
7/31/2004 $ 13,871 $ 15,049 $ 11,815
8/31/2004 $ 14,170 $ 15,350 $ 11,822
9/30/2004 $ 14,245 $ 15,432 $ 11,847
10/31/2004 $ 14,400 $ 15,564 $ 11,909
11/30/2004 $ 14,272 $ 15,436 $ 11,915
12/31/2004 $ 14,484 $ 15,625 $ 11,871
1/31/2005 $ 14,708 $ 15,771 $ 11,896
2/28/2005 $ 14,669 $ 15,718 $ 11,965
3/31/2005 $ 14,561 $ 15,619 $ 12,059
4/30/2005 $ 14,811 $ 15,865 $ 12,140
5/31/2005 $ 14,911 $ 15,977 $ 12,127
6/30/2005 $ 15,012 $ 16,077 $ 12,133
7/31/2005 $ 14,960 $ 16,004 $ 12,190
8/31/2005 $ 15,132 $ 16,166 $ 12,252
9/30/2005 $ 15,032 $ 16,057 $ 12,402
10/31/2005 $ 14,932 $ 15,959 $ 12,427
11/30/2005 $ 14,997 $ 16,036 $ 12,327
12/31/2005 $ 15,134 $ 16,174 $ 12,277
1/31/2006 $ 15,176 $ 16,217 $ 12,371
2/28/2006 $ 15,290 $ 16,326 $ 12,396
3/31/2006 $ 15,188 $ 16,214 $ 12,464
4/30/2006 $ 15,146 $ 16,208 $ 12,570
5/31/2006 $ 15,201 $ 16,280 $ 12,633
6/30/2006 $ 15,159 $ 16,219 $ 12,658
7/31/2006 $ 15,324 $ 16,412 $ 12,695
8/31/2006 $ 15,539 $ 16,655 $ 12,720
9/30/2006 $ 15,632 $ 16,771 $ 12,658
10/31/2006 $ 15,738 $ 16,876 $ 12,589
11/30/2006 $ 15,894 $ 17,017 $ 12,570
12/31/2006 $ 15,838 $ 16,957 $ 12,589
1/31/2007 $ 15,807 $ 16,914 $ 12,627
2/28/2007 $ 16,013 $ 17,136 $ 12,695
3/31/2007 $ 15,944 $ 17,094 $ 12,810
4/30/2007 $ 16,001 $ 17,145 $ 12,894
5/31/2007 $ 15,943 $ 17,069 $ 12,972
6/30/2007 $ 15,880 $ 16,980 $ 12,998
AVERAGE ANNUAL TOTAL RETURN
- ------------------------------------
CLASS A 6/30/07
- ------------------------------------
1-Year +0.35%
- ------------------------------------
5-Year +3.85%
- ------------------------------------
10-Year +4.73%
- ------------------------------------
CLASS B (2/1/00-6/30/07)
[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 7 CPI 7
- --------------------------------------------------------------------------------
2/1/2000 $ 10,000 $ 10,000 $ 10,000
2/29/2000 $ 10,166 $ 10,116 $ 10,059
3/31/2000 $ 10,418 $ 10,337 $ 10,142
4/30/2000 $ 10,317 $ 10,276 $ 10,148
5/31/2000 $ 10,277 $ 10,223 $ 10,160
6/30/2000 $ 10,559 $ 10,494 $ 10,213
7/31/2000 $ 10,689 $ 10,640 $ 10,237
8/31/2000 $ 10,892 $ 10,804 $ 10,237
9/30/2000 $ 10,860 $ 10,747 $ 10,290
10/31/2000 $ 10,946 $ 10,865 $ 10,308
11/30/2000 $ 11,033 $ 10,947 $ 10,314
12/31/2000 $ 11,294 $ 11,217 $ 10,308
1/31/2001 $ 11,353 $ 11,328 $ 10,373
2/28/2001 $ 11,377 $ 11,364 $ 10,415
3/31/2001 $ 11,473 $ 11,466 $ 10,438
4/30/2001 $ 11,301 $ 11,342 $ 10,480
5/31/2001 $ 11,417 $ 11,464 $ 10,527
6/30/2001 $ 11,440 $ 11,541 $ 10,545
7/31/2001 $ 11,613 $ 11,712 $ 10,515
8/31/2001 $ 11,872 $ 11,905 $ 10,515
9/30/2001 $ 11,828 $ 11,865 $ 10,563
10/31/2001 $ 11,946 $ 12,006 $ 10,527
11/30/2001 $ 11,893 $ 11,905 $ 10,509
12/31/2001 $ 11,771 $ 11,792 $ 10,468
1/31/2002 $ 11,907 $ 11,997 $ 10,492
2/28/2002 $ 12,014 $ 12,141 $ 10,533
3/31/2002 $ 11,727 $ 11,903 $ 10,592
4/30/2002 $ 11,913 $ 12,136 $ 10,652
5/31/2002 $ 11,984 $ 12,210 $ 10,652
6/30/2002 $ 12,084 $ 12,339 $ 10,658
7/31/2002 $ 12,213 $ 12,498 $ 10,669
8/31/2002 $ 12,393 $ 12,648 $ 10,705
9/30/2002 $ 12,749 $ 12,925 $ 10,723
10/31/2002 $ 12,426 $ 12,711 $ 10,741
11/30/2002 $ 12,378 $ 12,658 $ 10,741
12/31/2002 $ 12,618 $ 12,925 $ 10,717
1/31/2003 $ 12,550 $ 12,892 $ 10,764
2/28/2003 $ 12,742 $ 13,072 $ 10,847
3/31/2003 $ 12,763 $ 13,080 $ 10,912
4/30/2003 $ 12,876 $ 13,167 $ 10,889
5/31/2003 $ 13,191 $ 13,475 $ 10,871
6/30/2003 $ 13,090 $ 13,418 $ 10,883
7/31/2003 $ 12,561 $ 12,948 $ 10,895
8/31/2003 $ 12,603 $ 13,045 $ 10,936
9/30/2003 $ 12,901 $ 13,428 $ 10,972
10/31/2003 $ 12,881 $ 13,361 $ 10,960
11/30/2003 $ 13,067 $ 13,500 $ 10,930
12/31/2003 $ 13,172 $ 13,612 $ 10,918
1/31/2004 $ 13,246 $ 13,690 $ 10,972
2/29/2004 $ 13,486 $ 13,896 $ 11,031
3/31/2004 $ 13,414 $ 13,847 $ 11,102
4/30/2004 $ 13,028 $ 13,519 $ 11,137
5/31/2004 $ 12,956 $ 13,470 $ 11,203
6/30/2004 $ 12,989 $ 13,519 $ 11,238
7/31/2004 $ 13,159 $ 13,697 $ 11,220
8/31/2004 $ 13,447 $ 13,972 $ 11,226
9/30/2004 $ 13,512 $ 14,046 $ 11,250
10/31/2004 $ 13,641 $ 14,167 $ 11,309
11/30/2004 $ 13,524 $ 14,050 $ 11,315
12/31/2004 $ 13,718 $ 14,221 $ 11,274
1/31/2005 $ 13,923 $ 14,354 $ 11,297
2/28/2005 $ 13,880 $ 14,307 $ 11,363
3/31/2005 $ 13,771 $ 14,216 $ 11,451
4/30/2005 $ 14,000 $ 14,441 $ 11,528
5/31/2005 $ 14,088 $ 14,543 $ 11,517
6/30/2005 $ 14,176 $ 14,633 $ 11,523
7/31/2005 $ 14,122 $ 14,567 $ 11,576
8/31/2005 $ 14,277 $ 14,714 $ 11,635
9/30/2005 $ 14,177 $ 14,615 $ 11,777
10/31/2005 $ 14,076 $ 14,526 $ 11,801
11/30/2005 $ 14,131 $ 14,596 $ 11,706
12/31/2005 $ 14,253 $ 14,721 $ 11,659
1/31/2006 $ 14,286 $ 14,761 $ 11,748
2/28/2006 $ 14,386 $ 14,860 $ 11,771
3/31/2006 $ 14,284 $ 14,758 $ 11,836
4/30/2006 $ 14,238 $ 14,752 $ 11,937
5/31/2006 $ 14,282 $ 14,818 $ 11,996
6/30/2006 $ 14,237 $ 14,762 $ 12,020
7/31/2006 $ 14,385 $ 14,938 $ 12,056
8/31/2006 $ 14,580 $ 15,160 $ 12,079
9/30/2006 $ 14,671 $ 15,265 $ 12,020
10/31/2006 $ 14,752 $ 15,361 $ 11,955
11/30/2006 $ 14,891 $ 15,489 $ 11,937
12/31/2006 $ 14,832 $ 15,434 $ 11,955
1/31/2007 $ 14,796 $ 15,395 $ 11,991
2/28/2007 $ 14,981 $ 15,597 $ 12,056
3/31/2007 $ 14,922 $ 15,559 $ 12,165
4/30/2007 $ 14,956 $ 15,605 $ 12,244
5/31/2007 $ 14,896 $ 15,536 $ 12,319
6/30/2007 $ 14,851 $ 15,455 $ 12,343
AVERAGE ANNUAL TOTAL RETURN
- ------------------------------------
CLASS B 6/30/07
- ------------------------------------
1-Year +0.20%
- ------------------------------------
5-Year +3.85%
- ------------------------------------
Since Inception (2/1/00) +5.48%
- ------------------------------------
Annual Report | 15
Performance Summary (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN
- ------------------------------------
CLASS C 6/30/07
- ------------------------------------
1-Year +3.17%
- ------------------------------------
5-Year +4.20%
- ------------------------------------
10-Year +4.61%
- ------------------------------------
CLASS C (7/1/97-6/30/07)
[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 7 CPI 7
- --------------------------------------------------------------------------------
7/1/1997 $ 10,000 $ 10,000 $ 10,000
7/31/1997 $ 10,269 $ 10,277 $ 10,012
8/31/1997 $ 10,178 $ 10,181 $ 10,031
9/30/1997 $ 10,284 $ 10,301 $ 10,056
10/31/1997 $ 10,339 $ 10,368 $ 10,081
11/30/1997 $ 10,403 $ 10,429 $ 10,075
12/31/1997 $ 10,530 $ 10,581 $ 10,062
1/31/1998 $ 10,636 $ 10,690 $ 10,081
2/28/1998 $ 10,633 $ 10,693 $ 10,100
3/31/1998 $ 10,639 $ 10,703 $ 10,119
4/30/1998 $ 10,594 $ 10,654 $ 10,137
5/31/1998 $ 10,737 $ 10,823 $ 10,156
6/30/1998 $ 10,786 $ 10,866 $ 10,168
7/31/1998 $ 10,791 $ 10,893 $ 10,181
8/31/1998 $ 10,936 $ 11,061 $ 10,193
9/30/1998 $ 11,107 $ 11,199 $ 10,206
10/31/1998 $ 11,104 $ 11,199 $ 10,231
11/30/1998 $ 11,154 $ 11,238 $ 10,231
12/31/1998 $ 11,148 $ 11,266 $ 10,225
1/31/1999 $ 11,242 $ 11,400 $ 10,250
2/28/1999 $ 11,230 $ 11,351 $ 10,262
3/31/1999 $ 11,252 $ 11,366 $ 10,293
4/30/1999 $ 11,247 $ 11,395 $ 10,368
5/31/1999 $ 11,188 $ 11,329 $ 10,368
6/30/1999 $ 11,013 $ 11,166 $ 10,368
7/31/1999 $ 11,017 $ 11,206 $ 10,399
8/31/1999 $ 10,867 $ 11,116 $ 10,424
9/30/1999 $ 10,872 $ 11,121 $ 10,474
10/31/1999 $ 10,703 $ 11,001 $ 10,493
11/30/1999 $ 10,781 $ 11,118 $ 10,499
12/31/1999 $ 10,695 $ 11,035 $ 10,499
1/31/2000 $ 10,598 $ 10,987 $ 10,530
2/29/2000 $ 10,779 $ 11,114 $ 10,593
3/31/2000 $ 11,045 $ 11,357 $ 10,680
4/30/2000 $ 10,947 $ 11,290 $ 10,686
5/31/2000 $ 10,896 $ 11,231 $ 10,699
6/30/2000 $ 11,193 $ 11,529 $ 10,755
7/31/2000 $ 11,331 $ 11,689 $ 10,780
8/31/2000 $ 11,545 $ 11,870 $ 10,780
9/30/2000 $ 11,511 $ 11,808 $ 10,836
10/31/2000 $ 11,603 $ 11,937 $ 10,855
11/30/2000 $ 11,684 $ 12,027 $ 10,861
12/31/2000 $ 11,960 $ 12,324 $ 10,855
1/31/2001 $ 12,032 $ 12,446 $ 10,923
2/28/2001 $ 12,057 $ 12,486 $ 10,967
3/31/2001 $ 12,159 $ 12,598 $ 10,992
4/30/2001 $ 11,968 $ 12,461 $ 11,036
5/31/2001 $ 12,090 $ 12,595 $ 11,085
6/30/2001 $ 12,114 $ 12,680 $ 11,104
7/31/2001 $ 12,296 $ 12,867 $ 11,073
8/31/2001 $ 12,569 $ 13,079 $ 11,073
9/30/2001 $ 12,523 $ 13,035 $ 11,123
10/31/2001 $ 12,647 $ 13,191 $ 11,085
11/30/2001 $ 12,590 $ 13,080 $ 11,067
12/31/2001 $ 12,452 $ 12,956 $ 11,023
1/31/2002 $ 12,605 $ 13,180 $ 11,048
2/28/2002 $ 12,708 $ 13,339 $ 11,092
3/31/2002 $ 12,416 $ 13,078 $ 11,154
4/30/2002 $ 12,602 $ 13,333 $ 11,216
5/31/2002 $ 12,686 $ 13,415 $ 11,216
6/30/2002 $ 12,782 $ 13,556 $ 11,223
7/31/2002 $ 12,918 $ 13,731 $ 11,235
8/31/2002 $ 13,118 $ 13,896 $ 11,273
9/30/2002 $ 13,504 $ 14,200 $ 11,291
10/31/2002 $ 13,152 $ 13,965 $ 11,310
11/30/2002 $ 13,102 $ 13,907 $ 11,310
12/31/2002 $ 13,356 $ 14,200 $ 11,285
1/31/2003 $ 13,283 $ 14,164 $ 11,335
2/28/2003 $ 13,486 $ 14,362 $ 11,422
3/31/2003 $ 13,509 $ 14,371 $ 11,491
4/30/2003 $ 13,627 $ 14,466 $ 11,466
5/31/2003 $ 13,959 $ 14,804 $ 11,447
6/30/2003 $ 13,852 $ 14,741 $ 11,460
7/31/2003 $ 13,295 $ 14,226 $ 11,472
8/31/2003 $ 13,339 $ 14,332 $ 11,516
9/30/2003 $ 13,652 $ 14,753 $ 11,553
10/31/2003 $ 13,632 $ 14,679 $ 11,541
11/30/2003 $ 13,828 $ 14,832 $ 11,510
12/31/2003 $ 13,938 $ 14,955 $ 11,497
1/31/2004 $ 14,016 $ 15,040 $ 11,553
2/29/2004 $ 14,269 $ 15,267 $ 11,616
3/31/2004 $ 14,193 $ 15,213 $ 11,691
4/30/2004 $ 13,785 $ 14,853 $ 11,728
5/31/2004 $ 13,710 $ 14,799 $ 11,797
6/30/2004 $ 13,744 $ 14,853 $ 11,834
7/31/2004 $ 13,934 $ 15,049 $ 11,815
8/31/2004 $ 14,226 $ 15,350 $ 11,822
9/30/2004 $ 14,294 $ 15,432 $ 11,847
10/31/2004 $ 14,442 $ 15,564 $ 11,909
11/30/2004 $ 14,308 $ 15,436 $ 11,915
12/31/2004 $ 14,512 $ 15,625 $ 11,871
1/31/2005 $ 14,739 $ 15,771 $ 11,896
2/28/2005 $ 14,683 $ 15,718 $ 11,965
3/31/2005 $ 14,568 $ 15,619 $ 12,059
4/30/2005 $ 14,821 $ 15,865 $ 12,140
5/31/2005 $ 14,913 $ 15,977 $ 12,127
6/30/2005 $ 15,006 $ 16,077 $ 12,133
7/31/2005 $ 14,948 $ 16,004 $ 12,190
8/31/2005 $ 15,111 $ 16,166 $ 12,252
9/30/2005 $ 15,006 $ 16,057 $ 12,402
10/31/2005 $ 14,900 $ 15,959 $ 12,427
11/30/2005 $ 14,958 $ 16,036 $ 12,327
12/31/2005 $ 15,086 $ 16,174 $ 12,277
1/31/2006 $ 15,109 $ 16,217 $ 12,371
2/28/2006 $ 15,226 $ 16,326 $ 12,396
3/31/2006 $ 15,107 $ 16,214 $ 12,464
4/30/2006 $ 15,070 $ 16,208 $ 12,570
5/31/2006 $ 15,105 $ 16,280 $ 12,633
6/30/2006 $ 15,069 $ 16,219 $ 12,658
7/31/2006 $ 15,225 $ 16,412 $ 12,695
8/31/2006 $ 15,430 $ 16,655 $ 12,720
9/30/2006 $ 15,526 $ 16,771 $ 12,658
10/31/2006 $ 15,611 $ 16,876 $ 12,589
11/30/2006 $ 15,757 $ 17,017 $ 12,570
12/31/2006 $ 15,695 $ 16,957 $ 12,589
1/31/2007 $ 15,657 $ 16,914 $ 12,627
2/28/2007 $ 15,852 $ 17,136 $ 12,695
3/31/2007 $ 15,789 $ 17,094 $ 12,810
4/30/2007 $ 15,825 $ 17,145 $ 12,894
5/31/2007 $ 15,774 $ 17,069 $ 12,972
6/30/2007 $ 15,692 $ 16,980 $ 12,998
ENDNOTES
BECAUSE MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO INTEREST RATE MOVEMENTS,
THE FUND'S YIELD AND SHARE PRICE WILL FLUCTUATE WITH MARKET CONDITIONS. BOND
PRICES GENERALLY MOVE IN THE OPPOSITE DIRECTION OF INTEREST RATES. THUS, AS
PRICES OF BONDS IN THE FUND ADJUST TO A RISE IN INTEREST RATES, THE FUND'S SHARE
PRICE MAY DECLINE. SINCE THE FUND CONCENTRATES ITS INVESTMENTS IN A SINGLE
STATE, IT IS SUBJECT TO GREATER RISK OF ADVERSE ECONOMIC AND REGULATORY CHANGES
IN THAT STATE THAN A GEOGRAPHICALLY DIVERSIFIED FUND. THE FUND'S PROSPECTUS ALSO
INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS.
CLASS B: These shares have higher annual fees and expenses than Class A
shares.
CLASS C: Prior to 1/1/04, these shares were offered with an initial
sales charge; thus actual total returns would have differed.
These shares have higher annual fees and expenses than Class A
shares.
1. Cumulative total return represents the change in value of an investment over
the periods indicated.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated.
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 6/30/07.
4. Taxable equivalent distribution rate and yield assume the published rates as
of 6/27/07 for the maximum combined effective federal and California personal
income tax rate of 41.05%, based on the federal income tax rate of 35.00%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
Fund's portfolio for the 30 days ended 6/30/07.
6. Figures are as stated in the Fund's prospectus current as of the date of this
report.
7. Source: Standard & Poor's Micropal. The Lehman Brothers Municipal Bond Index
is a market value-weighted index engineered for the long-term tax-exempt bond
market. All bonds included have a minimum credit rating of at least Baa3/BBB-.
They must have an outstanding par value of at least $7 million and be issued as
part of a transaction of at least $75 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 Consumer Price Index (CPI),
calculated by the U.S. Bureau of Labor Statistics, is a commonly used measure of
the inflation rate.
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 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 1/1/07 VALUE 6/30/07 PERIOD* 1/1/07-6/30/07
- ---------------------------------------------------------------------------------------------------------------------------
Actual $ 1,000 $ 1,003.30 $ 3.08
- ---------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $ 1,000 $ 1,021.72 $ 3.11
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B
- ---------------------------------------------------------------------------------------------------------------------------
Actual $ 1,000 $ 1,000.50 $ 5.80
- ---------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $ 1,000 $ 1,018.99 $ 5.86
- ---------------------------------------------------------------------------------------------------------------------------
CLASS C
- ---------------------------------------------------------------------------------------------------------------------------
Actual $ 1,000 $ 1,000.40 $ 5.80
- ---------------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $ 1,000 $ 1,018.99 $ 5.86
- ---------------------------------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio for each class (A: 0.62%;
B: 1.17%; and C: 1.17%), 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 as high a level of income exempt from
federal and California personal income taxes as is 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. 1 The
Fund maintains a dollar-weighted average portfolio maturity (the time at which
the debt must be repaid) of 3 to 10 years.
- --------------------------------------------------------------------------------
CREDIT QUALITY BREAKDOWN*
Franklin California Intermediate-Term Tax-Free Income Fund
6/30/07
- --------------------------------------------------------------------------------
% OF TOTAL
RATINGS LONG-TERM INVESTMENTS**
- --------------------------------------------------------------------------------
AAA 57.1%
- --------------------------------------------------------------------------------
AA 7.7%
- --------------------------------------------------------------------------------
A 15.2%
- --------------------------------------------------------------------------------
BBB 7.0%
- --------------------------------------------------------------------------------
Below Investment Grade 0.7%
- --------------------------------------------------------------------------------
Not Rated by S&P 12.3%
- --------------------------------------------------------------------------------
* Standard & Poor's (S&P) is the primary independent rating agency; Moody's and
Fitch are the secondary and tertiary rating agencies. Securities not rated by an
independent rating agency are assigned comparable internal ratings. Ratings for
securities not rated by S&P are in the table below.
** Does not include short-term investments and other net assets.
RATINGS MOODY'S FITCH INTERNAL
AAA or Aaa 1.6% -- 0.4%
AA or Aa 0.4% -- --
A -- -- 3.4%
BBB or Baa 1.3% 0.2% 5.0%
- -------------------------------------------------
Total 3.3% 0.2% 8.8%
- --------------------------------------------------------------------------------
We are pleased to bring you Franklin California Intermediate-Term Tax-Free
Income Fund's annual report for the fiscal year ended June 30, 2007.
1. For investors subject to alternative minimum tax, a small portion of Fund
dividends may be taxable. Distributions of capital gains are generally taxable.
To avoid imposition of 28% backup withholding on all Fund distributions and
redemption proceeds, U.S. investors must be properly certified on Form W-9 and
non-U.S. investors on Form W-8BEN.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 55.
Annual Report | 19
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
PORTFOLIO BREAKDOWN
Franklin California Intermediate-Term
Tax-Free Income Fund
6/30/07
- --------------------------------------------------------------------------------
% OF TOTAL
LONG-TERM INVESTMENTS*
- --------------------------------------------------------------------------------
General Obligation 22.8%
- --------------------------------------------------------------------------------
Tax-Supported 17.5%
- --------------------------------------------------------------------------------
Prerefunded 16.6%
- --------------------------------------------------------------------------------
Hospital & Health Care 12.9%
- --------------------------------------------------------------------------------
Utilities 9.8%
- --------------------------------------------------------------------------------
Subject to Government Appropriations 7.6%
- --------------------------------------------------------------------------------
Transportation 5.2%
- --------------------------------------------------------------------------------
Housing 3.0%
- --------------------------------------------------------------------------------
Other Revenue 2.4%
- --------------------------------------------------------------------------------
Higher Education 2.2%
- --------------------------------------------------------------------------------
* Does not include short-term investments and other net assets.
PERFORMANCE OVERVIEW
The Fund's Class A share price, as measured by net asset value, increased from
$11.30 on June 30, 2006, to $11.33 on June 30, 2007. The Fund's Class A shares
paid dividends totaling 43.51 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 3.70%, based on an
annualization of the current 3.57 cent per share dividend and the maximum
offering price of $11.59 on June 30, 2007. An investor in the 2007 maximum
combined effective federal and California personal income tax bracket of 41.05%
would need to earn a distribution rate of 6.28% 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.
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, which
differs from the calendar month. Since dividends accrue daily, your actual
distributions will vary depending on the date you purchased your shares and any
account activity. All Fund distributions will vary depending upon current market
conditions, and past distributions are not indicative of future trends.
20 | Annual Report
DIVIDEND DISTRIBUTIONS 2
Franklin California Intermediate-Term Tax-Free Income Fund
- --------------------------------------------------------------------------------
DIVIDEND PER SHARE
------------------------
MONTH CLASS A CLASS C
- --------------------------------------------------------------------------------
July 2006 3.57 cents 3.04 cents
- --------------------------------------------------------------------------------
August 2006 3.57 cents 3.04 cents
- --------------------------------------------------------------------------------
September 2006 3.67 cents 3.20 cents
- --------------------------------------------------------------------------------
October 2006 3.67 cents 3.20 cents
- --------------------------------------------------------------------------------
November 2006 3.67 cents 3.20 cents
- --------------------------------------------------------------------------------
December 2006 3.67 cents 3.19 cents
- --------------------------------------------------------------------------------
January 2007 3.67 cents 3.19 cents
- --------------------------------------------------------------------------------
February 2007 3.67 cents 3.19 cents
- --------------------------------------------------------------------------------
March 2007 3.62 cents 3.10 cents
- --------------------------------------------------------------------------------
April 2007 3.62 cents 3.10 cents
- --------------------------------------------------------------------------------
May 2007 3.62 cents 3.10 cents
- --------------------------------------------------------------------------------
June 2007 3.57 cents 3.05 cents
- --------------------------------------------------------------------------------
MANAGER'S DISCUSSION
Consistent with our strategy, we sought to remain fully invested in a portfolio
of bonds that maintains 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, 2007, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR
MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, STATE,
INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE, BUT THE INVESTMENT MANAGER MAKES NO REPRESENTATION OR WARRANTY AS TO
THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT
MANAGEMENT PHILOSOPHY.
Annual Report | 21
Performance Summary as of 6/30/07
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
that a shareholder would pay on Fund dividends, capital gain distributions, if
any, or any realized gains on the sale of Fund shares. Total return reflects
reinvestment of the Fund's dividends and capital gain distributions, if any, and
any unrealized gains or losses.
PRICE AND DISTRIBUTION INFORMATION
- --------------------------------------------------------------------------------
CLASS A (SYMBOL: FKCIX) CHANGE 6/30/07 6/30/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.03 $11.33 $11.30
- --------------------------------------------------------------------------------
DISTRIBUTIONS (7/1/06-6/30/07)
- --------------------------------------------------------------------------------
Dividend Income $0.4351
- --------------------------------------------------------------------------------
CLASS C (SYMBOL: FCCIX) CHANGE 6/30/07 6/30/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.04 $11.36 $11.32
- --------------------------------------------------------------------------------
DISTRIBUTIONS (7/1/06-6/30/07)
- --------------------------------------------------------------------------------
Dividend Income $0.3754
- --------------------------------------------------------------------------------
PERFORMANCE
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURN
INCLUDES MAXIMUM SALES CHARGES. CLASS A: 2.25% MAXIMUM INITIAL SALES CHARGE;
CLASS C: 1% CONTINGENT DEFERRED SALES CHARGE IN FIRST YEAR ONLY. THE FUND MAY
CHARGE A 2% FEE ON REDEMPTIONS MADE WITHIN SEVEN DAYS OF PURCHASE.
- --------------------------------------------------------------------------------------------------
CLASS A 1 1-YEAR 5-YEAR 10-YEAR
- --------------------------------------------------------------------------------------------------
Cumulative Total Return 2 +4.13% +19.80% +57.16%
- --------------------------------------------------------------------------------------------------
Average Annual Total Return 3 +1.79% +3.21% +4.39%
- --------------------------------------------------------------------------------------------------
Distribution Rate 4 3.70%
- --------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate 5 6.28%
- --------------------------------------------------------------------------------------------------
30-Day Standardized Yield 6 3.42%
- --------------------------------------------------------------------------------------------------
Taxable Equivalent Yield 5 5.80%
- --------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 7 0.66%
- --------------------------------------------------------------------------------------------------
CLASS C 1-YEAR 3-YEAR INCEPTION (7/1/03)
- --------------------------------------------------------------------------------------------------
Cumulative Total Return 2 +3.68% +9.86% +9.99%
- --------------------------------------------------------------------------------------------------
Average Annual Total Return 3 +2.68% +3.18% +2.41%
- --------------------------------------------------------------------------------------------------
Distribution Rate 4 3.22%
- --------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate 5 5.46%
- --------------------------------------------------------------------------------------------------
30-Day Standardized Yield 6 2.94%
- --------------------------------------------------------------------------------------------------
Taxable Equivalent Yield 5 4.99%
- --------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 7 1.20%
- --------------------------------------------------------------------------------------------------
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.
CLASS A (7/1/97-6/30/07) 1
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Franklin California Lehman Brothers
Intermediate-Term Municipal Bond Index:
Date Tax-Free Income Fund 10-Year Component 8 CPI 8
- --------------------------------------------------------------------------------
7/1/1997 $ 9,776 $ 10,000 $ 10,000
7/31/1997 $ 10,013 $ 10,281 $ 10,012
8/31/1997 $ 9,953 $ 10,181 $ 10,031
9/30/1997 $ 10,047 $ 10,310 $ 10,056
10/31/1997 $ 10,105 $ 10,365 $ 10,081
11/30/1997 $ 10,154 $ 10,413 $ 10,075
12/31/1997 $ 10,267 $ 10,577 $ 10,062
1/31/1998 $ 10,372 $ 10,695 $ 10,081
2/28/1998 $ 10,384 $ 10,694 $ 10,100
3/31/1998 $ 10,388 $ 10,687 $ 10,119
4/30/1998 $ 10,364 $ 10,628 $ 10,137
5/31/1998 $ 10,507 $ 10,809 $ 10,156
6/30/1998 $ 10,539 $ 10,848 $ 10,168
7/31/1998 $ 10,580 $ 10,866 $ 10,181
8/31/1998 $ 10,726 $ 11,054 $ 10,193
9/30/1998 $ 10,870 $ 11,219 $ 10,206
10/31/1998 $ 10,882 $ 11,224 $ 10,231
11/30/1998 $ 10,914 $ 11,257 $ 10,231
12/31/1998 $ 10,936 $ 11,292 $ 10,225
1/31/1999 $ 11,054 $ 11,465 $ 10,250
2/28/1999 $ 11,018 $ 11,362 $ 10,262
3/31/1999 $ 11,040 $ 11,356 $ 10,293
4/30/1999 $ 11,051 $ 11,387 $ 10,368
5/31/1999 $ 10,975 $ 11,307 $ 10,368
6/30/1999 $ 10,811 $ 11,097 $ 10,368
7/31/1999 $ 10,881 $ 11,171 $ 10,399
8/31/1999 $ 10,844 $ 11,130 $ 10,424
9/30/1999 $ 10,886 $ 11,168 $ 10,474
10/31/1999 $ 10,790 $ 11,089 $ 10,493
11/30/1999 $ 10,883 $ 11,210 $ 10,499
12/31/1999 $ 10,776 $ 11,152 $ 10,499
1/31/2000 $ 10,789 $ 11,106 $ 10,530
2/29/2000 $ 10,873 $ 11,193 $ 10,593
3/31/2000 $ 11,069 $ 11,411 $ 10,680
4/30/2000 $ 11,002 $ 11,354 $ 10,686
5/31/2000 $ 10,995 $ 11,286 $ 10,699
6/30/2000 $ 11,235 $ 11,593 $ 10,755
7/31/2000 $ 11,372 $ 11,753 $ 10,780
8/31/2000 $ 11,562 $ 11,936 $ 10,780
9/30/2000 $ 11,545 $ 11,881 $ 10,836
10/31/2000 $ 11,611 $ 12,002 $ 10,855
11/30/2000 $ 11,657 $ 12,068 $ 10,861
12/31/2000 $ 11,839 $ 12,352 $ 10,855
1/31/2001 $ 11,980 $ 12,511 $ 10,923
2/28/2001 $ 12,015 $ 12,532 $ 10,967
3/31/2001 $ 12,061 $ 12,638 $ 10,992
4/30/2001 $ 11,925 $ 12,482 $ 11,036
5/31/2001 $ 12,068 $ 12,618 $ 11,085
6/30/2001 $ 12,125 $ 12,693 $ 11,104
7/31/2001 $ 12,268 $ 12,867 $ 11,073
8/31/2001 $ 12,477 $ 13,087 $ 11,073
9/30/2001 $ 12,459 $ 13,069 $ 11,123
10/31/2001 $ 12,582 $ 13,230 $ 11,085
11/30/2001 $ 12,486 $ 13,060 $ 11,067
12/31/2001 $ 12,366 $ 12,922 $ 11,023
1/31/2002 $ 12,564 $ 13,166 $ 11,048
2/28/2002 $ 12,697 $ 13,354 $ 11,092
3/31/2002 $ 12,404 $ 13,079 $ 11,154
4/30/2002 $ 12,646 $ 13,382 $ 11,216
5/31/2002 $ 12,744 $ 13,445 $ 11,216
6/30/2002 $ 12,830 $ 13,612 $ 11,223
7/31/2002 $ 12,973 $ 13,793 $ 11,235
8/31/2002 $ 13,150 $ 13,973 $ 11,273
9/30/2002 $ 13,418 $ 14,307 $ 11,291
10/31/2002 $ 13,109 $ 14,047 $ 11,310
11/30/2002 $ 13,071 $ 13,932 $ 11,310
12/31/2002 $ 13,319 $ 14,236 $ 11,285
1/31/2003 $ 13,224 $ 14,160 $ 11,335
2/28/2003 $ 13,428 $ 14,405 $ 11,422
3/31/2003 $ 13,424 $ 14,412 $ 11,491
4/30/2003 $ 13,514 $ 14,519 $ 11,466
5/31/2003 $ 13,812 $ 14,935 $ 11,447
6/30/2003 $ 13,715 $ 14,864 $ 11,460
7/31/2003 $ 13,220 $ 14,240 $ 11,472
8/31/2003 $ 13,333 $ 14,362 $ 11,516
9/30/2003 $ 13,694 $ 14,845 $ 11,553
10/31/2003 $ 13,619 $ 14,732 $ 11,541
11/30/2003 $ 13,733 $ 14,891 $ 11,510
12/31/2003 $ 13,848 $ 15,048 $ 11,497
1/31/2004 $ 13,914 $ 15,111 $ 11,553
2/29/2004 $ 14,161 $ 15,377 $ 11,616
3/31/2004 $ 14,097 $ 15,289 $ 11,691
4/30/2004 $ 13,767 $ 14,867 $ 11,728
5/31/2004 $ 13,704 $ 14,876 $ 11,797
6/30/2004 $ 13,784 $ 14,926 $ 11,834
7/31/2004 $ 13,936 $ 15,130 $ 11,815
8/31/2004 $ 14,199 $ 15,461 $ 11,822
9/30/2004 $ 14,268 $ 15,544 $ 11,847
10/31/2004 $ 14,373 $ 15,667 $ 11,909
11/30/2004 $ 14,245 $ 15,490 $ 11,915
12/31/2004 $ 14,399 $ 15,672 $ 11,871
1/31/2005 $ 14,517 $ 15,805 $ 11,896
2/28/2005 $ 14,437 $ 15,705 $ 11,965
3/31/2005 $ 14,319 $ 15,568 $ 12,059
4/30/2005 $ 14,563 $ 15,869 $ 12,140
5/31/2005 $ 14,619 $ 15,976 $ 12,127
6/30/2005 $ 14,701 $ 16,068 $ 12,133
7/31/2005 $ 14,620 $ 15,931 $ 12,190
8/31/2005 $ 14,753 $ 16,125 $ 12,252
9/30/2005 $ 14,671 $ 15,979 $ 12,402
10/31/2005 $ 14,576 $ 15,857 $ 12,427
11/30/2005 $ 14,646 $ 15,955 $ 12,327
12/31/2005 $ 14,756 $ 16,101 $ 12,277
1/31/2006 $ 14,801 $ 16,154 $ 12,371
2/28/2006 $ 14,872 $ 16,250 $ 12,396
3/31/2006 $ 14,763 $ 16,083 $ 12,464
4/30/2006 $ 14,744 $ 16,054 $ 12,570
5/31/2006 $ 14,804 $ 16,164 $ 12,633
6/30/2006 $ 14,759 $ 16,092 $ 12,658
7/31/2006 $ 14,923 $ 16,306 $ 12,695
8/31/2006 $ 15,127 $ 16,585 $ 12,720
9/30/2006 $ 15,215 $ 16,706 $ 12,658
10/31/2006 $ 15,303 $ 16,806 $ 12,589
11/30/2006 $ 15,405 $ 16,939 $ 12,570
12/31/2006 $ 15,334 $ 16,860 $ 12,589
1/31/2007 $ 15,303 $ 16,785 $ 12,627
2/28/2007 $ 15,472 $ 17,021 $ 12,695
3/31/2007 $ 15,467 $ 16,986 $ 12,810
4/30/2007 $ 15,489 $ 17,040 $ 12,894
5/31/2007 $ 15,429 $ 16,951 $ 12,972
6/30/2007 $ 15,364 $ 16,860 $ 12,998
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------
CLASS A 1 6/30/07
- --------------------------------
1-Year +1.79%
- --------------------------------
5-Year +3.21%
- --------------------------------
10-Year +4.39%
- --------------------------------
CLASS C (7/1/03-6/30/07)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Franklin California Lehman Brothers
Intermediate-Term Municipal Bond Index:
Date Tax-Free Income Fund 10-Year Component 8 CPI 8
- --------------------------------------------------------------------------------
7/1/2003 $ 10,000 $ 10,000 $ 10,000
7/31/2003 $ 9,641 $ 9,580 $ 10,011
8/31/2003 $ 9,719 $ 9,662 $ 10,049
9/30/2003 $ 9,977 $ 9,988 $ 10,082
10/31/2003 $ 9,918 $ 9,911 $ 10,071
11/30/2003 $ 10,005 $ 10,018 $ 10,044
12/31/2003 $ 10,084 $ 10,124 $ 10,033
1/31/2004 $ 10,128 $ 10,167 $ 10,082
2/29/2004 $ 10,302 $ 10,345 $ 10,136
3/31/2004 $ 10,242 $ 10,286 $ 10,201
4/30/2004 $ 9,998 $ 10,002 $ 10,234
5/31/2004 $ 9,956 $ 10,008 $ 10,294
6/30/2004 $ 10,000 $ 10,042 $ 10,327
7/31/2004 $ 10,106 $ 10,179 $ 10,310
8/31/2004 $ 10,300 $ 10,402 $ 10,316
9/30/2004 $ 10,345 $ 10,457 $ 10,338
10/31/2004 $ 10,417 $ 10,541 $ 10,392
11/30/2004 $ 10,320 $ 10,421 $ 10,397
12/31/2004 $ 10,426 $ 10,544 $ 10,359
1/31/2005 $ 10,507 $ 10,633 $ 10,381
2/28/2005 $ 10,444 $ 10,566 $ 10,441
3/31/2005 $ 10,354 $ 10,474 $ 10,523
4/30/2005 $ 10,525 $ 10,676 $ 10,593
5/31/2005 $ 10,561 $ 10,748 $ 10,582
6/30/2005 $ 10,615 $ 10,810 $ 10,588
7/31/2005 $ 10,551 $ 10,718 $ 10,637
8/31/2005 $ 10,642 $ 10,848 $ 10,691
9/30/2005 $ 10,578 $ 10,750 $ 10,822
10/31/2005 $ 10,505 $ 10,669 $ 10,844
11/30/2005 $ 10,551 $ 10,735 $ 10,757
12/31/2005 $ 10,624 $ 10,833 $ 10,713
1/31/2006 $ 10,652 $ 10,868 $ 10,795
2/28/2006 $ 10,698 $ 10,933 $ 10,817
3/31/2006 $ 10,615 $ 10,820 $ 10,876
4/30/2006 $ 10,597 $ 10,801 $ 10,969
5/31/2006 $ 10,644 $ 10,875 $ 11,023
6/30/2006 $ 10,598 $ 10,826 $ 11,045
7/31/2006 $ 10,720 $ 10,971 $ 11,078
8/31/2006 $ 10,861 $ 11,158 $ 11,100
9/30/2006 $ 10,919 $ 11,240 $ 11,045
10/31/2006 $ 10,969 $ 11,307 $ 10,985
11/30/2006 $ 11,037 $ 11,397 $ 10,969
12/31/2006 $ 10,991 $ 11,343 $ 10,985
1/31/2007 $ 10,964 $ 11,292 $ 11,019
2/28/2007 $ 11,081 $ 11,451 $ 11,078
3/31/2007 $ 11,063 $ 11,428 $ 11,179
4/30/2007 $ 11,083 $ 11,464 $ 11,251
5/31/2007 $ 11,036 $ 11,405 $ 11,320
6/30/2007 $ 10,999 $ 11,343 $ 11,342
AVERAGE ANNUAL TOTAL RETURN
- ----------------------------------------
CLASS C 6/30/07
- ----------------------------------------
1-Year +2.68%
- ----------------------------------------
3-Year +3.18%
- ----------------------------------------
Since Inception (7/1/03) +2.41%
- ----------------------------------------
Annual Report | 23
Performance Summary (CONTINUED)
ENDNOTES
BECAUSE MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO INTEREST RATE MOVEMENTS,
THE FUND'S YIELD AND SHARE PRICE WILL FLUCTUATE WITH MARKET CONDITIONS. BOND
PRICES GENERALLY MOVE IN THE OPPOSITE DIRECTION OF INTEREST RATES. THUS, AS
PRICES OF BONDS IN THE FUND ADJUST TO A RISE IN INTEREST RATES, THE FUND'S SHARE
PRICE MAY DECLINE. THE FUND IS CLASSIFIED AS A NONDIVERSIFIED FUND, BECAUSE IT
MAY INVEST A GREATER PORTION OF ITS ASSETS IN ONE ISSUER THAN A DIVERSIFIED
FUND. 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.
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 respective class's
current monthly dividend and the maximum offering price (NAV for Class C) per
share on 6/30/07.
5. Taxable equivalent distribution rate and yield assume the published rates as
of 6/27/07 for the maximum combined effective federal and California personal
income tax rate of 41.05%, based on the federal income tax rate of 35.00%.
6. Yield, calculated as required by the SEC, is based on the earnings of the
Fund's portfolio for the 30 days ended 6/30/07.
7. Figures are as stated in the Fund's prospectus current as of the date of this
report.
8. Source: Standard & Poor's Micropal. The Lehman Brothers Municipal Bond Index:
10-Year Component 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
Baa3/BBB-. They must have an outstanding par value of at least $7 million and be
issued as part of a transaction of at least $75 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 Consumer Price Index
(CPI), calculated by the U.S. Bureau of Labor Statistics, is a commonly used
measure of the inflation rate.
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 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 1/1/07 VALUE 6/30/07 PERIOD* 1/1/07-6/30/07
- ------------------------------------------------------------------------------------------------------
Actual $ 1,000 $ 1,002.50 $ 3.43
- ------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $ 1,000 $ 1,021.37 $ 3.46
- ------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------
Actual $ 1,000 $ 999.80 $ 6.10
- ------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $ 1,000 $ 1,018.70 $ 6.16
- ------------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio for each class (A: 0.69%
and C: 1.23%), 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 as high a level of income exempt from federal and
California personal income taxes as is consistent with prudent investment
management and the preservation of capital, by investing at least 80% of its net
assets in securities that pay interest free from such taxes. 1 The Fund
maintains a dollar-weighted average portfolio maturity (the time at which the
debt must be repaid) of five years or less.
PORTFOLIO BREAKDOWN
Franklin California Limited-Term
Tax-Free Income Fund
6/30/07
- --------------------------------------------------------------------------------
% OF TOTAL
LONG-TERM INVESTMENTS*
- --------------------------------------------------------------------------------
General Obligation 26.7%
- --------------------------------------------------------------------------------
Utilities 24.8%
- --------------------------------------------------------------------------------
Hospital & Health Care 15.6%
- --------------------------------------------------------------------------------
Tax-Supported 14.9%
- --------------------------------------------------------------------------------
Other Revenue 11.1%
- --------------------------------------------------------------------------------
Transportation 3.7%
- --------------------------------------------------------------------------------
Subject to Government Appropriations 1.7%
- --------------------------------------------------------------------------------
Higher Education 1.5%
- --------------------------------------------------------------------------------
* Does not include short-term investments and other net assets.
- --------------------------------------------------------------------------------
CREDIT QUALITY BREAKDOWN**
Franklin California Limited-Term Tax-Free Income Fund
Based on Total Long-Term Investments as of 6/30/07***
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
AAA ............................... 63.8%
AA ................................ 8.0%
A ................................. 16.6%
BBB ............................... 10.1%
Not Rated by S&P .................. 1.5%
** 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 1.5%
- --------------------------------------------------------------------------------
We are pleased to bring you Franklin California Limited-Term Tax-Free Income
Fund's annual report for the fiscal year ended June 30, 2007.
1. For investors subject to alternative minimum tax, a small portion of Fund
dividends may be taxable. Distributions of capital gains are generally taxable.
To avoid imposition of 28% backup withholding on all Fund distributions and
redemption proceeds, U.S. investors must be properly certified on Form W-9 and
non-U.S. investors on Form W-8BEN.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 64.
Annual Report | 27
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
DIVIDEND DISTRIBUTIONS 2
Franklin California Limited-Term
Tax-Free Income Fund - Class A
- --------------------------------------------------------------------------------
MONTH DIVIDEND PER SHARE
- --------------------------------------------------------------------------------
July 2006 2.18 cents
- --------------------------------------------------------------------------------
August 2006 2.30 cents
- --------------------------------------------------------------------------------
September 2006 2.30 cents
- --------------------------------------------------------------------------------
October 2006 2.30 cents
- --------------------------------------------------------------------------------
November 2006 2.30 cents
- --------------------------------------------------------------------------------
December 2006 2.30 cents
- --------------------------------------------------------------------------------
January 2007 2.30 cents
- --------------------------------------------------------------------------------
February 2007 2.30 cents
- --------------------------------------------------------------------------------
March 2007 2.30 cents
- --------------------------------------------------------------------------------
April 2007 2.30 cents
- --------------------------------------------------------------------------------
May 2007 2.30 cents
- --------------------------------------------------------------------------------
June 2007 2.30 cents
- --------------------------------------------------------------------------------
PERFORMANCE OVERVIEW
The Fund's Class A share price, as measured by net asset value, increased from
$9.80 on June 30, 2006, to $9.86 on June 30, 2007. The Fund's Class A shares
paid dividends totaling 27.47 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 2.74%. An investor in
the 2007 maximum combined effective federal and California personal income tax
bracket of 41.05% would need to earn a distribution rate of 4.65% from a taxable
investment to match the Fund's Class A tax-free distribution rate.
INVESTMENT STRATEGY
We generally employ a buy-and-hold approach and invest in securities that we
believe should provide the most relative value in the market. We generally stay
fully invested to maximize income distribution.
MANAGER'S DISCUSSION
Consistent with our investment strategy, 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 in 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, which
differs from the calendar month. Since dividends accrue daily, your actual
distributions will vary depending on the date you purchased your shares and any
account activity. All Fund distributions will vary depending upon current market
conditions, and past distributions are not indicative of future trends.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JUNE 30, 2007, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR
MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, STATE,
INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE, BUT THE INVESTMENT MANAGER MAKES NO REPRESENTATION OR WARRANTY AS TO
THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT
MANAGEMENT PHILOSOPHY.
28 | Annual Report
Performance Summary as of 6/30/07
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 that a
shareholder would pay on Fund dividends, capital gain distributions, if any, or
any realized gains on the sale of Fund shares. Total return reflects
reinvestment of the Fund's dividends and capital gain distributions, if any, and
any unrealized gains or losses.
PRICE AND DISTRIBUTION INFORMATION
- --------------------------------------------------------------------------------
CLASS A (SYMBOL: FCALX) CHANGE 6/30/07 6/30/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.06 $9.86 $9.80
- --------------------------------------------------------------------------------
DISTRIBUTIONS (7/1/06-6/30/07)
- --------------------------------------------------------------------------------
Dividend Income $0.2747
- --------------------------------------------------------------------------------
PERFORMANCE 1
CUMULATIVE TOTAL RETURN EXCLUDES THE SALES CHARGE. AVERAGE ANNUAL TOTAL RETURN
INCLUDES THE MAXIMUM SALES CHARGE. CLASS A: 2.25% MAXIMUM INITIAL SALES CHARGE.
THE FUND MAY CHARGE A 2% FEE ON REDEMPTIONS MADE WITHIN SEVEN DAYS OF PURCHASE.
- -----------------------------------------------------------------------------------
CLASS A 1-YEAR INCEPTION (9/2/03)
- -----------------------------------------------------------------------------------
Cumulative Total Return 2 +3.45% +6.22%
- -----------------------------------------------------------------------------------
Average Annual Total Return 3 +1.08% +0.99%
- -----------------------------------------------------------------------------------
Distribution Rate 4 2.74%
- -----------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate 5 4.65%
- -----------------------------------------------------------------------------------
30-Day Standardized Yield 6 2.61%
- -----------------------------------------------------------------------------------
Taxable Equivalent Yield 5 4.43%
- -----------------------------------------------------------------------------------
Total Annual Operating Expenses 7
- -----------------------------------------------------------------------------------
Without Waiver 1.10%
- -----------------------------------------------------------------------------------
With Waiver 0.50%
- -----------------------------------------------------------------------------------
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.
THE MANAGER AND ADMINISTRATOR HAVE CONTRACTUALLY AGREED TO LIMIT FUND EXPENSES
SO THAT TOTAL ANNUAL FUND OPERATING EXPENSES DO NOT EXCEED THE AMOUNT SHOWN WITH
WAIVER (OTHER THAN CERTAIN NON-ROUTINE EXPENSES) UNTIL 8/31/08.
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.
AVERAGE ANNUAL TOTAL RETURN
- ---------------------------------------
CLASS A 6/30/07
- ---------------------------------------
1-Year +1.08%
- ---------------------------------------
Since Inception (9/2/03) +0.99%
- ---------------------------------------
CLASS A (9/2/03-6/30/07)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Franklin California Lehman Brothers
Limited-Term Municipal Bond Index:
Date Tax-Free Income Fund 5-Year Component 8 CPI 8
- --------------------------------------------------------------------------------
9/2/2003 $ 9,775 $ 10,000 $ 10,000
9/30/2003 $ 9,873 $ 10,253 $ 10,033
10/31/2003 $ 9,814 $ 10,186 $ 10,022
11/30/2003 $ 9,824 $ 10,227 $ 9,995
12/31/2003 $ 9,844 $ 10,267 $ 9,984
1/31/2004 $ 9,873 $ 10,316 $ 10,033
2/29/2004 $ 9,942 $ 10,442 $ 10,087
3/31/2004 $ 9,914 $ 10,398 $ 10,152
4/30/2004 $ 9,807 $ 10,190 $ 10,184
5/31/2004 $ 9,750 $ 10,137 $ 10,244
6/30/2004 $ 9,781 $ 10,175 $ 10,276
7/31/2004 $ 9,842 $ 10,269 $ 10,260
8/31/2004 $ 9,913 $ 10,449 $ 10,265
9/30/2004 $ 9,905 $ 10,463 $ 10,287
10/31/2004 $ 9,926 $ 10,521 $ 10,341
11/30/2004 $ 9,888 $ 10,452 $ 10,347
12/31/2004 $ 9,920 $ 10,547 $ 10,309
1/31/2005 $ 9,922 $ 10,544 $ 10,330
2/28/2005 $ 9,895 $ 10,492 $ 10,390
3/31/2005 $ 9,877 $ 10,425 $ 10,471
4/30/2005 $ 9,909 $ 10,546 $ 10,542
5/31/2005 $ 9,922 $ 10,576 $ 10,531
6/30/2005 $ 9,955 $ 10,625 $ 10,536
7/31/2005 $ 9,942 $ 10,567 $ 10,585
8/31/2005 $ 9,959 $ 10,634 $ 10,639
9/30/2005 $ 9,976 $ 10,615 $ 10,769
10/31/2005 $ 9,962 $ 10,570 $ 10,791
11/30/2005 $ 9,949 $ 10,595 $ 10,704
12/31/2005 $ 9,976 $ 10,647 $ 10,661
1/31/2006 $ 9,993 $ 10,671 $ 10,742
2/28/2006 $ 10,000 $ 10,691 $ 10,764
3/31/2006 $ 9,988 $ 10,649 $ 10,823
4/30/2006 $ 10,007 $ 10,672 $ 10,915
5/31/2006 $ 10,028 $ 10,709 $ 10,970
6/30/2006 $ 10,028 $ 10,659 $ 10,991
7/31/2006 $ 10,071 $ 10,759 $ 11,024
8/31/2006 $ 10,126 $ 10,875 $ 11,046
9/30/2006 $ 10,170 $ 10,934 $ 10,991
10/31/2006 $ 10,183 $ 10,980 $ 10,932
11/30/2006 $ 10,217 $ 11,025 $ 10,915
12/31/2006 $ 10,231 $ 11,002 $ 10,932
1/31/2007 $ 10,244 $ 10,979 $ 10,965
2/28/2007 $ 10,289 $ 11,079 $ 11,024
3/31/2007 $ 10,313 $ 11,105 $ 11,124
4/30/2007 $ 10,327 $ 11,122 $ 11,196
5/31/2007 $ 10,351 $ 11,089 $ 11,265
6/30/2007 $ 10,383 $ 11,069 $ 11,287
30 | Annual Report
Performance Summary (CONTINUED)
ENDNOTES
BECAUSE MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO INTEREST RATE MOVEMENTS,
THE FUND'S YIELD AND SHARE PRICE WILL FLUCTUATE WITH MARKET CONDITIONS. BOND
PRICES GENERALLY MOVE IN THE OPPOSITE DIRECTION OF INTEREST RATES. THUS, AS
PRICES OF BONDS IN THE FUND ADJUST TO A RISE IN INTEREST RATES, THE FUND'S SHARE
PRICE MAY DECLINE. SINCE THE FUND CONCENTRATES ITS INVESTMENTS IN A SINGLE
STATE, IT IS SUBJECT TO GREATER RISK OF ADVERSE ECONOMIC AND REGULATORY CHANGES
IN THAT STATE THAN A GEOGRAPHICALLY DIVERSIFIED FUND. THE FUND'S PROSPECTUS ALSO
INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS.
1. The manager and administrator have contractually agreed to limit Fund
expenses so that total annual Fund operating expenses do not exceed the amount
shown with waiver (other than certain non-routine expenses) until 8/31/08. If
the manager and administrator had not taken this action, the Fund's total return
and distribution rate would have been lower and yield for the period would have
been 1.89%.
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 2.3 cent per share
current monthly dividend and the maximum offering price of $10.09 per share on
6/30/07.
5. Taxable equivalent distribution rate and yield assume the published rates as
of 6/27/07 for the maximum combined effective federal and California personal
income tax rate of 41.05%, based on the federal income tax rate of 35.00%.
6. Yield, calculated as required by the SEC, is based on the earnings of the
Fund's portfolio for the 30 days ended 6/30/07.
7. Figures are as stated in the Fund's prospectus current as of the date of this
report.
8. Source: Standard & Poor's Micropal. The Lehman Brothers Municipal Bond Index:
5-Year Component 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
Baa3/BBB-. They must have an outstanding par value of at least $7 million and be
issued as part of a transaction of at least $75 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 Consumer Price Index
(CPI), calculated by the U.S. Bureau of Labor Statistics, is a commonly used
measure of the inflation rate.
Annual Report | 31
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 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.
32 | Annual Report
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. In addition, if transaction costs were included, your
total costs would have been higher. Please refer to the Fund prospectus for
additional information on operating expenses.
- ----------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 1/1/07 VALUE 6/30/07 PERIOD* 1/1/07-6/30/07
- ----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,014.20 $2.50
- ----------------------------------------------------------------------------------------------------------
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.
Annual Report | 33
Franklin California
Tax-Exempt Money Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin California Tax-Exempt Money Fund
seeks to provide as high a level of income exempt from federal and California
personal income taxes as is consistent with prudent investment management and
the preservation of capital and liquidity. 1 The Fund's portfolio invests at
least 80% of its total assets in securities that pay interest free from such
taxes. The Fund tries to maintain a stable $1.00 share price.
- --------------------------------------------------------------------------------
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN 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 (FDIC) OR ANY OTHER GOVERNMENT AGENCY. 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.
- --------------------------------------------------------------------------------
This annual report for Franklin California Tax-Exempt Money Fund covers the
fiscal year ended June 30, 2007.
PERFORMANCE OVERVIEW
With relatively stable short-term interest rates, money market portfolio yields
moved little during the period. Largely as a result, Franklin California
Tax-Exempt Money Fund's seven-day effective yield fell from 3.20% at the
beginning of the period to 3.15% on June 30, 2007.
INVESTMENT STRATEGY
We invest at least 80% of the Fund's total assets in high quality, short-term
municipal securities whose interest is free from federal and California personal
income taxes. Although the Fund tries to invest all of its assets in tax-free
securities, it is possible, although not anticipated, that up to 20% 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.
To avoid imposition of 28% backup withholding on all Fund distributions and
redemption proceeds, U.S. investors must be properly certified on Form W-9 and
non-U.S. investors on Form W-8BEN.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 67.
34 | Annual Report
MANAGER'S DISCUSSION
During the reporting period, the Federal Reserve Board (Fed) left the federal
funds target rate unchanged. As a result, the short-term municipal bond market
experienced healthy demand for short-term fixed rate securities. The Fed's
decision helped give investors confidence that the value of their fixed coupon
payments would not be eroded by rising inflation in the near term.
The Bond Market Association Municipal Swap Index, a benchmark for variable rate
securities, which comprised a large portion of Franklin California Tax-Exempt
Money Fund, averaged a yield of 3.62% for the period under review. 2
The Fund participated and reinvested in several issues during the period under
review including Los Angeles County tax and revenue anticipation notes,
University of California Regents commercial paper program, and California School
Cash Reserves Program notes.
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 index is unmanaged and does not reflect
management fees and expenses that affect Fund performance.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JUNE 30, 2007, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR
MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, STATE,
INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE, BUT THE INVESTMENT MANAGER MAKES NO REPRESENTATION OR WARRANTY AS TO
THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT
MANAGEMENT PHILOSOPHY.
PERFORMANCE SUMMARY
Franklin California Tax-Exempt Money Fund
SYMBOL: FCLXX
6/30/07
- --------------------------------------------------------------------------------
Seven-day effective yield 1 3.15%
- --------------------------------------------------------------------------------
Seven-day annualized yield 3.10%
- --------------------------------------------------------------------------------
Taxable equivalent yield 2 5.25%
- --------------------------------------------------------------------------------
Total annual operating expenses 0.55%
- --------------------------------------------------------------------------------
1. Seven-day effective yield assumes the compounding of daily dividends.
2. Taxable equivalent yield assumes the published rates as of 6/27/07 for the
maximum combined effective federal and California personal income tax rate of
41.05%, based on the federal income tax rate of 35.00%.
3. Figures are as stated in the Fund's prospectus current as of the date of this
report.
Annualized and effective yields are for the seven-day period ended 6/30/07. The
Fund's average weighted maturity was 37 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 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.
PORTFOLIO BREAKDOWN
Franklin California Tax-Exempt Money Fund
6/30/07
- --------------------------------------------------------------------------------
% OF TOTAL
INVESTMENTS
- --------------------------------------------------------------------------------
Variable Rate Notes 80.7%
- --------------------------------------------------------------------------------
Notes and Bonds 16.2%
- --------------------------------------------------------------------------------
Tax-Exempt Commercial Paper 3.1%
- --------------------------------------------------------------------------------
Annual Report | 35
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) of the table provides actual account values and
expenses. The "Ending Account Value" is derived from the Fund's actual return,
which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) of 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 Fund's actual expense ratio 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.
36 | Annual Report
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line of the table 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 1/1/07 VALUE 6/30/07 PERIOD* 1/1/07-6/30/07
- ----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,015.00 $2.75
- ----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,022.07 $2.76
- ----------------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of 0.55%, multiplied by the
average account value over the period, multiplied by 181/365 to reflect the
one-half year period.
Annual Report | 37
Franklin California Tax-Free Trust
FINANCIAL HIGHLIGHTS
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
----------------------------------------------------------------------
YEAR ENDED JUNE 30,
CLASS A 2007 2006 2005 2004 2003
----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .............. $ 12.43 $ 12.85 $ 12.24 $ 12.83 $ 12.32
----------------------------------------------------------------------
Income from investment operations a:
Net investment income b ...................... 0.54 0.55 0.55 0.56 0.57
Net realized and unrealized gains (losses) ... 0.05 (0.43) 0.62 (0.59) 0.51
----------------------------------------------------------------------
Total from investment operations ................ 0.59 0.12 1.17 (0.03) 1.08
----------------------------------------------------------------------
Less distributions from net investment income ... (0.54) (0.54) (0.56) (0.56) (0.57)
----------------------------------------------------------------------
Redemption fees ................................. -- d -- d -- d -- --
----------------------------------------------------------------------
Net asset value, end of year .................... $ 12.48 $ 12.43 $ 12.85 $ 12.24 $ 12.83
======================================================================
Total return c .................................. 4.79% 0.96% 9.70% (0.22)% 8.97%
RATIOS TO AVERAGE NET ASSETS
Expenses ........................................ 0.61% 0.61% 0.61% 0.61% 0.61%
Net investment income ........................... 4.29% 4.34% 4.38% 4.51% 4.50%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ................. $1,810,358 $1,751,279 $1,780,642 $1,698,669 $1,912,784
Portfolio turnover rate ......................... 6.77% 5.75% 3.87% 12.21% 9.79%
a The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing of
sales and repurchase of the Fund shares in relation to income earned and/or
fluctuating market value of the investments of the Fund.
b Based on average daily shares outstanding.
c Total return does not reflect sales commissions or contingent deferred sales
charges, if applicable.
d Amount rounds to less than $0.01 per share.
38 | The accompanying notes are an integral part of these financial statements.
| Annual Report
Franklin California Tax-Free Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
------------------------------------------------------------
YEAR ENDED JUNE 30,
CLASS B 2007 2006 2005 2004 2003
------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .............. $ 12.49 $ 12.91 $ 12.29 $ 12.88 $ 12.37
------------------------------------------------------------
Income from investment operations a:
Net investment income b ...................... 0.48 0.48 0.49 0.50 0.50
Net realized and unrealized gains (losses) ... 0.04 (0.43) 0.62 (0.60) 0.51
------------------------------------------------------------
Total from investment operations ................ 0.52 0.05 1.11 (0.10) 1.01
------------------------------------------------------------
Less distributions from net investment income ... (0.47) (0.47) (0.49) (0.49) (0.50)
------------------------------------------------------------
Redemption fees ................................. -- d -- d -- d -- --
------------------------------------------------------------
Net asset value, end of year .................... $ 12.54 $ 12.49 $ 12.91 $ 12.29 $ 12.88
============================================================
Total return c .................................. 4.20% 0.41% 9.15% (0.77)% 8.34%
RATIOS TO AVERAGE NET ASSETS
Expenses ........................................ 1.16% 1.16% 1.16% 1.16% 1.16%
Net investment income ........................... 3.74% 3.79% 3.83% 3.96% 3.95%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ................. $ 59,127 $ 68,922 $ 78,038 $ 77,169 $ 85,698
Portfolio turnover rate ......................... 6.77% 5.75% 3.87% 12.21% 9.79%
a The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing of
sales and repurchase of the Fund shares in relation to income earned and/or
fluctuating market value of the investments of the Fund.
b Based on average daily shares outstanding.
c Total return does not reflect sales commissions or contingent deferred sales
charges, if applicable.
d Amount rounds to less than $0.01 per share.
Annual Report |
The accompanying notes are an integral part of these financial statements. | 39
Franklin California Tax-Free Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND
----------------------------------------------------------
YEAR ENDED JUNE 30,
CLASS C 2007 2006 2005 2004 2003
----------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................................... $ 12.55 $ 12.97 $ 12.34 $ 12.93 $ 12.41
----------------------------------------------------------
Income from investment operations a:
Net investment income b ........................................... 0.48 0.48 0.49 0.50 0.50
Net realized and unrealized gains (losses) ........................ 0.04 (0.43) 0.63 (0.60) 0.52
----------------------------------------------------------
Total from investment operations ..................................... 0.52 0.05 1.12 (0.10) 1.02
----------------------------------------------------------
Less distributions from net investment income ........................ (0.47) (0.47) (0.49) (0.49) (0.50)
----------------------------------------------------------
Redemption fees ...................................................... -- d -- d -- d -- --
----------------------------------------------------------
Net asset value, end of year ......................................... $ 12.60 $ 12.55 $ 12.97 $ 12.34 $ 12.93
==========================================================
Total return c ....................................................... 4.17% 0.40% 9.19% (0.78)% 8.39%
RATIOS TO AVERAGE NET ASSETS
Expenses ............................................................. 1.16% 1.16% 1.16% 1.16% 1.16%
Net investment income ................................................ 3.74% 3.79% 3.83% 3.96% 3.95%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ...................................... $ 139,476 $ 133,560 $ 129,156 $ 120,610 $ 136,674
Portfolio turnover rate .............................................. 6.77% 5.75% 3.87% 12.21% 9.79%
a The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing of
sales and repurchase of the Fund shares in relation to income earned and/or
fluctuating market value of the investments of the Fund.
b Based on average daily shares outstanding.
c Total return does not reflect sales commissions or contingent deferred sales
charges, if applicable.
d Amount rounds to less than $0.01 per share.
40 | The accompanying notes are an integral part of these financial statements.
| Annual Report
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS 99.6%
MUNICIPAL BONDS 99.6%
CALIFORNIA 99.6%
ABAG Finance Authority for Nonprofit Corps. COP,
Lincoln Child Center Inc., California Mortgage Insured, 6.125%, 11/01/24 ..................... $ 2,055,000 $ 2,110,547
Lytton Gardens Inc., Refunding, California Mortgage Insured, 6.00%, 2/15/30 .................. 3,500,000 3,580,535
Odd Fellows Home, California Mortgage Insured, 6.00%, 8/15/24 ................................ 5,000,000 5,061,450
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 5,316,946
Sansum-Santa Barbara, Refunding, Series A, California Mortgage Insured, 5.60%,
4/01/26 .................................................................................... 2,750,000 2,845,562
Acalanes UHSD, GO, Capital Appreciation, Election of 2002, Series A, FGIC Insured,
zero cpn., 8/01/25 ............................................................................ 9,045,000 3,552,514
Alameda Corridor Transportation Authority Revenue, AMBAC Insured, zero cpn. to 10/01/12,
5.25% thereafter, 10/01/21 ................................................................... 64,660,000 52,516,205
5.45% thereafter, 10/01/25 ................................................................... 25,000,000 20,152,000
Alameda Power and Telecommunication Electric System Revenue COP, Refunding, Series A,
MBIA Insured, 5.75%, 7/01/30 .................................................................. 3,305,000 3,491,931
Alhambra City Elementary School District GO,
Capital Appreciation, Election of 1999, Series B, FGIC Insured, zero cpn., 9/01/27 ........... 3,035,000 1,139,460
Series A, FSA Insured, Pre-Refunded, 5.60%, 9/01/24 .......................................... 2,065,000 2,163,666
Antelope Valley UHSD, GO, Series A, MBIA Insured, 5.00%, 2/01/27 ................................ 5,000,000 5,150,100
Arcadia USD, GO, Capital Appreciation, Election of 2006, Series A, FSA Insured, zero cpn.,
8/01/29 ...................................................................................... 5,110,000 1,695,958
8/01/33 ...................................................................................... 11,690,000 3,136,778
8/01/39 ...................................................................................... 9,620,000 1,877,439
8/01/46 ...................................................................................... 27,665,000 3,736,712
Arcata Joint Powers Financing Authority Wastewater Revenue, FSA Insured, 5.80%,
12/01/22 ...................................................................................... 1,080,000 1,110,704
Atascadero CDA Tax Allocation, Redevelopment Project, XLCA Insured, 5.00%, 9/01/34 .............. 4,315,000 4,416,273
Bakersfield City School District GO, Series A, FSA Insured, 5.00%,
11/01/27 ..................................................................................... 2,415,000 2,513,749
11/01/28 ..................................................................................... 2,535,000 2,645,222
Baldwin Park RDA Tax Allocation, Refunding, FSA Insured, 5.70%, 9/01/25 ......................... 4,000,000 4,275,000
Beaumont USD, COP, Refunding, Series A, FSA Insured, 5.80%, 1/01/21 ............................. 1,500,000 1,530,135
Brea and Olinda USD, GO, Series A, FGIC Insured, 5.60%, 8/01/20 ................................. 1,000,000 1,052,980
Brentwood Infrastructure Financing Authority Infrastructure Revenue, Refunding, Series A,
FSA Insured, 5.00%, 9/02/32 ................................................................... 3,800,000 3,887,932
Cabrillo Community College District GO,
Capital Appreciation, Election of 2004, Series B, MBIA Insured, zero cpn., 8/01/39 ........... 12,570,000 2,385,157
Series C, AMBAC Insured, Pre-Refunded, 5.375%, 5/01/26 ....................................... 5,400,000 5,723,892
Calexico USD, CFD No. 1 Special Tax, AMBAC Insured, Pre-Refunded, 5.60%, 9/01/17 ................ 2,930,000 2,997,009
California Community College Financing Authority Lease Revenue, Grossmont Palomar and
Shasta, Series A, MBIA Insured, 5.125%, 4/01/31 ............................................... 3,030,000 3,157,048
California Educational Facilities Authority Revenue,
Pomona College, Series B, Pre-Refunded, 5.50%, 7/01/29 ....................................... 4,455,000 4,647,055
Stanford University, Refunding, Series M, 5.25%, 12/01/26 .................................... 6,450,000 6,555,651
Stanford University, Refunding, Series O, 5.125%, 1/01/31 .................................... 24,705,000 25,059,764
Annual Report | 41
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
California Educational Facilities Authority Revenue, (continued)
Stanford University, Series N, 5.35%, 6/01/27 ................................................ $ 21,250,000 $ 21,564,925
Stanford University, Series N, 5.20%, 12/01/27 ............................................... 6,000,000 6,085,380
University of Southern California, Series C, Pre-Refunded, 5.125%, 10/01/28 .................. 3,845,000 3,896,369
California Health Facilities Financing Authority Revenue,
Catholic Healthcare West, Refunding, ACA Insured, 5.00%, 7/01/28 ............................. 10,000,000 10,021,900
Catholic Healthcare West, Refunding, Series A, 5.00%, 7/01/28 ................................ 12,995,000 13,189,015
Catholic Healthcare West, Refunding, Series A, MBIA Insured,, 6.00%, 7/01/17 ................. 3,970,000 4,009,700
Catholic Healthcare West, Series A, Pre-Refunded, 5.00%, 7/01/28 ............................. 2,005,000 2,050,393
Community Health Facilities, Series A, California Mortgage Insured, 5.80%, 8/01/25 ........... 1,130,000 1,174,217
The Help Group, Refunding, California Mortgage Insured, 5.40%, 8/01/22 ....................... 5,000,000 5,104,100
Kaiser Permanente, Series A, ETM, 5.40%, 5/01/28 ............................................. 15,400,000 15,769,908
Kaiser Permanente, Series B, ETM, 5.00%, 10/01/18 ............................................ 5,000,000 5,113,250
Kaiser Permanente, Series B, ETM, 5.00%, 10/01/20 ............................................ 4,000,000 4,089,120
Marshall Hospital, Refunding, Series A, California Mortgage Insured, 5.30%, 11/01/28 ......... 3,325,000 3,377,202
Northern California Presbyterian, Refunding, 5.40%, 7/01/28 .................................. 5,000,000 5,020,450
Orange County Health Facility, Series A, California Mortgage Insured, 6.20%, 11/01/24 ........ 3,435,000 3,529,222
Senior Living, Aldersly, Series A, California Mortgage Insured, 5.25%, 3/01/32 ............... 2,000,000 2,060,960
Sutter Health, Refunding, Series A, MBIA Insured, 5.00%, 8/15/19 ............................. 1,585,000 1,625,196
Sutter Health, Refunding, Series A, MBIA Insured, 5.00%, 8/15/38 ............................. 3,735,000 3,801,408
Sutter Health, Series A, MBIA Insured, Pre-Refunded, 5.00%, 8/15/19 .......................... 115,000 118,916
Sutter Health, Series A, MBIA Insured, Pre-Refunded, 5.00%, 8/15/38 .......................... 265,000 274,023
True to Life Children's Services, Series A, California Mortgage Insured, 5.625%,
9/01/25 .................................................................................... 1,250,000 1,298,263
UCSF-Stanford Health Care, Series A, FSA Insured, Pre-Refunded, 5.00%, 11/15/28 .............. 9,530,000 9,792,170
California HFAR, Home Mortgage, Series N, AMBAC Insured, zero cpn. to 2/01/10,
6.30% thereafter, 8/01/31 ..................................................................... 240,000 205,778
California Infrastructure and Economic Development Bank Revenue, Bay Area Toll Bridges,
first lien, Series A, AMBAC Insured, Pre-Refunded, 5.00%, 7/01/33 ............................. 8,460,000 9,104,906
California PCFA, PCR, Southern California Edison Co., Refunding, Series C, MBIA Insured,
5.55%, 9/01/31 ................................................................................ 4,800,000 4,975,824
California Public School District Financing Authority Lease Revenue, Southern Kern USD,
Series B, FSA Insured, ETM, 5.90%, 9/01/26 .................................................... 1,615,000 1,869,589
California State Department of Water Resources Central Valley Project Revenue, Water System,
Refunding, Series Q, MBIA Insured, 5.375%, 12/01/27 ........................................... 365,000 369,125
California State Department of Water Resources Water Revenue,
Central Valley Project, Refunding, Series AD, FSA Insured, 5.00%, 12/01/26 ................... 2,170,000 2,253,111
Refunding, Series W, FSA Insured, 5.125%, 12/01/29 ........................................... 5,000,000 5,163,750
System, Central Valley Project, Refunding, Series AC, MBIA Insured, 5.00%, 12/01/26 .......... 3,575,000 3,704,594
California State GO,
FGIC Insured, 5.375%, 6/01/26 ................................................................ 1,350,000 1,364,877
FSA Insured, Pre-Refunded, 5.50%, 9/01/29 .................................................... 34,500,000 36,077,685
MBIA Insured, 6.00%, 8/01/16 ................................................................. 210,000 210,342
MBIA Insured, 6.00%, 10/01/21 ................................................................ 65,000 65,353
MBIA Insured, Pre-Refunded, 5.00%, 8/01/29 ................................................... 19,520,000 20,194,221
Pre-Refunded, 5.00%, 10/01/27 ................................................................ 30,790,000 31,581,611
42 | Annual Report
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
California State GO, (continued)
Pre-Refunded, 5.125%, 6/01/31 ................................................................ $ 24,705,000 $ 25,836,242
Refunding, 5.125%, 6/01/31 ................................................................... 295,000 302,478
Refunding, MBIA Insured, 5.00%, 8/01/29 ...................................................... 730,000 749,608
California State Local Government Finance Authority Revenue, Marin Valley Mobile, Senior
Series A, FSA Insured, 5.80%, 10/01/20 ........................................................ 4,275,000 4,380,977
California State Public Works Board Lease Revenue, Department of Mental Health Hospital,
Series A, AMBAC Insured, 5.00%,
12/01/21 ..................................................................................... 4,100,000 4,224,312
12/01/26 ..................................................................................... 5,675,000 5,793,153
California State University Foundation Revenue, Monterey Bay, MBIA Insured, Pre-Refunded,
5.35%, 6/01/31 ................................................................................ 2,000,000 2,109,240
California State University of Los Angeles Auxiliary Services Inc. Revenue, MBIA Insured,
Pre-Refunded, 5.125%, 6/01/33 ................................................................. 3,200,000 3,348,896
California State University Revenue, Systemwide, Refunding, Series C, MBIA Insured, 5.00%,
11/01/28 ...................................................................................... 23,215,000 24,028,221
California State University Revenue and Colleges Revenue, Systemwide, Refunding, Series A,
AMBAC Insured, 5.00%, 11/01/33 ................................................................ 22,000,000 22,472,340
California Statewide CDA,
COP, Children's Hospital, Los Angeles, 5.25%, 8/15/29 ........................................ 12,250,000 12,420,887
COP, Kaiser Permanente, ETM, 5.30%, 12/01/15 ................................................. 9,700,000 10,079,367
COP, MBIA Insured, 5.00%, 4/01/18 ............................................................ 3,000,000 3,051,450
COP, Refunding, California Mortgage Insured, 5.75%, 8/01/21 .................................. 9,585,000 9,967,537
COP, Refunding, FSA Insured, 5.50%, 8/15/31 .................................................. 7,000,000 7,274,610
MFHR, Silver Ridge Apartments, Mandatory Put 8/01/21, Series H, FNMA Insured, 5.80%,
8/01/33 .................................................................................... 2,785,000 2,920,880
California Statewide CDA Revenue,
Brentwood School, Series A, FSA Insured, Pre-Refunded, 5.25%, 10/01/29 ....................... 7,625,000 7,805,102
COP, John Muir/Mt. Diablo Health System, MBIA Insured, 5.125%, 8/15/22 ....................... 5,000,000 5,105,750
Hospital Monterey Peninsula, Series B, FSA Insured, 5.25%, 6/01/23 ........................... 2,000,000 2,105,540
Refunding, California Mortgage Insured, 5.00%, 8/01/21 ....................................... 2,035,000 2,088,480
a St. Ignatius College Preparatory, AMBAC Insured, 5.00%, 6/01/37 .............................. 7,215,000 7,442,200
California Statewide CDA Water and Wastewater Revenue, Pooled Financing Program,
Refunding, Series A, FSA Insured, 5.00%, 10/01/32 ............................................ 9,320,000 9,521,592
Refunding, Series B, FSA Insured, 5.75%, 10/01/29 ............................................ 1,465,000 1,526,574
Series B, FSA Insured, Pre-Refunded, 5.65%, 10/01/26 ......................................... 2,400,000 2,542,680
Series B, FSA Insured, Pre-Refunded, 5.65%, 10/01/26 ......................................... 1,020,000 1,075,427
Campbell USD, GO, FSA Insured, 5.00%, 8/01/27 ................................................... 7,150,000 7,340,261
Castaic Lake Water Agency Revenue COP,
1999 Project, Refunding, AMBAC Insured, 4.50%, 8/01/26 ....................................... 7,700,000 7,450,674
Series A, MBIA Insured, 5.00%, 8/01/29 ....................................................... 8,000,000 8,146,800
Chabot-Las Positas Community College District GO, Capital Appreciation Bonds, Series C,
AMBAC Insured, zero cpn.,
8/01/35 ...................................................................................... 10,000,000 2,461,100
8/01/36 ...................................................................................... 10,000,000 2,336,700
8/01/37 ...................................................................................... 15,045,000 3,337,131
Annual Report | 43
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Chaffey Community College District GO,
Refunding, Series A, FSA Insured, 5.00%, 7/01/27 ............................................. $ 270,000 $ 278,735
Series A, FSA Insured, Pre-Refunded, 5.00%, 7/01/27 .......................................... 5,480,000 5,798,607
Charter Oak USD, GO, Election of 2000, Series D, FGIC Insured, 5.00%, 8/01/30 ................... 3,115,000 3,239,288
Chico PFAR, Merged Redevelopment Project Area, MBIA Insured, 5.125%, 4/01/24 .................... 2,790,000 2,912,955
Chino Basin Regional Financing Authority Revenue, Municipal Water District, Sewer System
Project, Refunding, AMBAC Insured, 6.00%, 8/01/16 ............................................. 2,000,000 2,003,180
Chula Vista Elementary School District GO, Election of 1998, Series F, MBIA Insured, 5.00%,
8/01/28 ....................................................................................... 2,685,000 2,775,323
Clovis PFAR, 2001 Corp. Yard Project, AMBAC Insured, 5.00%, 3/01/27 ............................. 3,265,000 3,356,159
Compton USD, GO, Election of 2002, Series B, MBIA Insured, Pre-Refunded, 5.00%,
6/01/29 ....................................................................................... 2,000,000 2,124,520
Corona-Norco USD,
COP, Refunding, FSA Insured, 5.125%, 4/15/25 ................................................. 5,355,000 5,498,782
COP, Refunding, FSA Insured, 5.125%, 4/15/29 ................................................. 2,540,000 2,606,192
GO, Capital Appreciation, Refunding, Series B, FSA Insured, zero cpn., 3/01/25 ............... 1,400,000 605,934
GO, Capital Appreciation, Series B, FSA Insured, zero cpn., 9/01/23 .......................... 2,320,000 1,090,145
GO, Capital Appreciation, Series B, FSA Insured, zero cpn., 9/01/24 .......................... 2,620,000 1,165,062
GO, Capital Appreciation, Series C, FGIC Insured, zero cpn., 9/01/25 ......................... 4,655,000 1,967,529
GO, Capital Appreciation, Series C, FGIC Insured, zero cpn., 9/01/26 ......................... 6,080,000 2,446,166
GO, Election of 2006, Series A, FSA Insured, 5.00%, 8/01/25 .................................. 2,000,000 2,093,580
GO, Election of 2006, Series A, FSA Insured, 5.00%, 8/01/26 .................................. 1,605,000 1,678,766
GO, Election of 2006, Series A, FSA Insured, 5.00%, 8/01/27 .................................. 2,000,000 2,090,260
Coronado CDA Tax Allocation, Community Development Project, MBIA Insured, 5.375%,
9/01/26 ....................................................................................... 2,700,000 2,851,443
Cucamonga County Water District COP, FGIC Insured, 5.00%, 9/01/29 ............................... 5,070,000 5,185,190
Culver City USD, GO, MBIA Insured, Pre-Refunded,
5.125%, 8/01/37 .............................................................................. 650,000 666,367
5.20%, 8/01/38 ............................................................................... 3,285,000 3,411,440
Delano USD, COP, Refinancing Project, MBIA Insured, 5.125%, 1/01/22 ............................. 1,620,000 1,750,264
East Bay MUD Water System Revenue, Refunding, MBIA Insured, 5.00%, 6/01/26 ...................... 14,000,000 14,588,420
El Centro Financing Authority Wastewater Revenue, Series A, FSA Insured, 5.25%,
10/01/35 ...................................................................................... 6,200,000 6,571,938
El Monte City School District GO, Election of 2004, Series A, FGIC Insured, 5.00%,
5/01/30 ....................................................................................... 4,500,000 4,658,715
El Monte Water Authority Revenue, Water System Project, AMBAC Insured, Pre-Refunded,
5.60%, 9/01/34 ................................................................................ 1,800,000 1,927,926
Escondido Joint Powers Financing Authority Lease Revenue, AMBAC Insured, 5.125%,
9/01/30 ....................................................................................... 3,770,000 3,853,958
Escondido USD, GO, Series A, FSA Insured, Pre-Refunded, 5.00%, 8/01/26 .......................... 11,665,000 12,255,482
Eureka USD, GO, FSA Insured, 5.00%, 8/01/25 ..................................................... 4,145,000 4,285,060
Fairfield Suisun USD, GO,
Election of 2002, MBIA Insured, 5.00%, 8/01/25 ............................................... 4,185,000 4,333,484
MBIA Insured, 5.00%, 8/01/27 ................................................................. 12,000,000 12,392,520
Florin Resource Conservation District COP, Elk Grove Water Service, Refunding, Series A,
MBIA Insured, 5.00%, 3/01/33 .................................................................. 5,000,000 5,108,250
44 | Annual Report
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Folsom COP, Central Business District Fire Station, MBIA Insured, 5.125%, 10/01/26 .............. $ 2,030,000 $ 2,107,160
Foothill/Eastern Corridor Agency Toll Road Revenue,
Capital Appreciation, Refunding, MBIA Insured, zero cpn., 1/15/17 ............................ 20,000,000 12,397,800
Capital Appreciation, Refunding, MBIA Insured, zero cpn., 1/15/18 ............................ 25,000,000 14,610,750
Capital Appreciation, Refunding, MBIA Insured, zero cpn., 1/15/19 ............................ 5,970,000 3,288,157
senior lien, Refunding, Series A, MBIA Insured, 5.00%, 1/01/35 ............................... 66,735,000 67,668,623
Fortuna PFA Wastewater Revenue, FSA Insured, 5.00%, 10/01/36 .................................... 4,125,000 4,260,300
Franklin-McKinley School District GO, Election of 2004, Series A, FGIC Insured, 5.00%,
8/01/29 ....................................................................................... 5,280,000 5,474,938
Fresno USD, GO, Refunding,
Series B, MBIA Insured, 5.00%, 2/01/21 ....................................................... 2,860,000 3,036,891
Series C, MBIA Insured, 5.90%, 2/01/20 ....................................................... 2,065,000 2,370,207
Series C, MBIA Insured, 5.90%, 8/01/22 ....................................................... 3,000,000 3,440,730
Fullerton School District GO, Capital Appreciation, Series A, FGIC Insured, zero cpn.,
8/01/23 ....................................................................................... 3,030,000 1,429,312
Fullerton University Foundation Auxiliary Organization Revenue, Series A, MBIA Insured,
5.75%,
7/01/25 ...................................................................................... 1,250,000 1,323,238
7/01/30 ...................................................................................... 1,000,000 1,058,010
Gilroy USD, GO, Election of 2002, FGIC Insured, 5.00%, 8/01/30 .................................. 8,650,000 8,963,476
Glendale USD, GO, Series C, FSA Insured, 5.50%, 9/01/24 ......................................... 2,750,000 2,862,942
Glendora PFAR Tax Allocation, Project No. 1, Refunding, Series A, MBIA Insured, 5.00%,
9/01/24 ....................................................................................... 5,000,000 5,162,650
Grossmont UHSD,
COP, FSA Insured, Pre-Refunded, 5.75%, 9/01/26 ............................................... 2,250,000 2,346,548
GO, Capital Appreciation, Election of 2004, FSA Insured, zero cpn., 8/01/24 .................. 5,110,000 2,281,308
Hartnell Community College District GO, Election of 2002, Series B, FSA Insured, 5.00%,
6/01/31 ....................................................................................... 5,000,000 5,192,700
Hollister RDA Tax Allocation, Community Development Project, Refunding, AMBAC Insured,
5.125%, 10/01/32 .............................................................................. 19,815,000 20,579,066
Huntington Beach City and School District COP, MBIA Insured, Pre-Refunded, 5.25%,
7/01/29 ....................................................................................... 1,795,000 1,880,532
a Huntington Beach UHSD, GO, Election of 2004, FGIC Insured, 5.00%, 8/01/35 ....................... 3,000,000 3,108,000
Jefferson San Mateo County UHSD, GO, Refunding, Series A, MBIA Insured, 6.45%,
8/01/25 ...................................................................................... 3,045,000 3,738,042
8/01/29 ...................................................................................... 3,075,000 3,877,513
Jurupa Community Services District Special Tax, CFD No. 2, Series A, AMBAC Insured,
5.00%, 9/01/32 ................................................................................ 7,000,000 7,133,210
Jurupa USD, COP, FSA Insured, 5.625%, 9/01/24 ................................................... 1,600,000 1,687,936
Kern Community College District COP, Refunding, MBIA Insured, 5.00%, 1/01/25 .................... 7,800,000 7,908,264
Kern County High School District GO,
a Election of 2004, Series C, FGIC Insured, 5.00%, 8/01/33 ..................................... 7,535,000 7,789,984
FSA Insured, ETM, 6.625%, 8/01/14 ............................................................ 1,535,000 1,785,128
FSA Insured, ETM, 6.625%, 8/01/15 ............................................................ 1,400,000 1,652,406
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 5,920,992
Annual Report | 45
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Lancaster School District GO, Capital Appreciation, Election of 1999, MBIA Insured, zero cpn.,
8/01/25 ...................................................................................... $ 5,495,000 $ 2,331,748
7/01/26 ...................................................................................... 5,965,000 2,418,986
Las Virgenes USD, GO, Series A, FSA Insured, 5.00%, 8/01/28 ..................................... 5,245,000 5,442,369
Lodi COP, Wastewater Treatment Project, Refunding, AMBAC Insured, 6.70%, 8/01/26 ................ 8,800,000 8,949,952
Lodi Electric Systems Revenue COP, Series A, MBIA Insured, Pre-Refunded, 5.50%,
1/15/32 ....................................................................................... 4,000,000 4,142,560
Lodi USD, GO, MBIA Insured, 5.00%, 8/01/23 ...................................................... 2,150,000 2,210,953
Lompoc USD, GO, Election of 2002, Series C, FSA Insured, 5.00%,
6/01/27 ...................................................................................... 3,020,000 3,154,481
6/01/32 ...................................................................................... 3,000,000 3,121,380
Long Beach Bond Finance Authority Lease Revenue,
Aquarium of The South Pacific, Refunding, AMBAC Insured, 5.00%, 11/01/19 ..................... 4,000,000 4,149,040
Aquarium of The South Pacific, Refunding, AMBAC Insured, 5.00%, 11/01/26 ..................... 11,000,000 11,298,980
Aquarium of The South Pacific, Refunding, AMBAC Insured, 5.25%, 11/01/30 ..................... 2,000,000 2,083,600
Public Safety Facilities Projects, AMBAC Insured, 5.00%, 11/01/26 ............................ 6,780,000 6,932,008
Public Safety Facilities Projects, AMBAC Insured, 5.00%, 11/01/31 ............................ 10,500,000 10,710,525
Long Beach Bond Finance Authority Tax Allocation Revenue, North Long Beach
Redevelopment Projects, Series A, AMBAC Insured,
5.00%, 8/01/25 ............................................................................... 7,015,000 7,185,044
5.00%, 8/01/31 ............................................................................... 3,135,000 3,202,434
Pre-Refunded, 5.00%, 8/01/25 ................................................................. 6,535,000 6,865,802
Pre-Refunded, 5.00%, 8/01/31 ................................................................. 8,865,000 9,313,746
Long Beach University School District GO, Election of 1999, Series C, MBIA Insured,
5.125%, 8/01/31 ............................................................................... 13,870,000 14,207,596
Los Angeles Community College District GO,
Series A, MBIA Insured, Pre-Refunded, 5.00%, 6/01/26 ......................................... 4,000,000 4,174,800
Series B, FSA Insured, 5.00%, 8/01/27 ........................................................ 4,000,000 4,124,400
Los Angeles COP,
Municipal Improvement Corp., Municipal Improvement Corp. of Los Angeles, Series AW,
AMBAC Insured, 5.00%, 6/01/27 .............................................................. 5,895,000 6,052,279
Real Property Program, MBIA Insured, 5.00%, 2/01/27 .......................................... 9,890,000 10,120,734
Los Angeles County COP, Antelope Valley Courthouse, Series A, AMBAC Insured,
Pre-Refunded, 5.25%,
11/01/27 ..................................................................................... 2,500,000 2,611,200
11/01/33 ..................................................................................... 2,500,000 2,611,200
Los Angeles County MTA Sales Tax Revenue, Proposition A, first tier, Senior Series A,
MBIA Insured, Pre-Refunded,, 5.25%, 7/01/27 ................................................... 27,870,000 28,148,700
Los Angeles County Public Works Financing Authority Lease Revenue, Master Refunding
Project, Refunding, Series B, FGIC Insured, 5.00%, 9/01/31 .................................... 7,600,000 7,841,832
Los Angeles County Sanitation Districts Financing Authority Revenue, Capital Projects,
District No. 14, Sub Series B, FGIC Insured, 5.00%, 10/01/29 .................................. 6,460,000 6,702,379
Los Angeles Department of Water and Power Waterworks Revenue, System, Sub Series A-2,
AMBAC Insured, 5.00%, 7/01/44 ................................................................. 25,000,000 25,672,500
Los Angeles Mortgage Revenue, Refunding, Series I, MBIA Insured, 6.50%, 7/01/22 ................. 765,000 765,260
Los Angeles Wastewater System Revenue, Refunding, MBIA Insured, 5.00%, 6/01/26 .................. 10,000,000 10,303,400
46 | Annual Report
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Los Angeles Water and Power Revenue, Power System, Refunding, Series A, MBIA Insured,
5.00%, 7/01/24 ................................................................................ $ 12,000,000 $ 12,229,440
Lynwood PFA Tax Allocation, Project Area A, Refunding, Series A, FSA Insured, 5.85%,
9/01/18 ....................................................................................... 1,765,000 1,853,497
Lynwood PFA Water Revenue, Water System Improvement Project, MBIA Insured,
5.85%, 6/01/22 ............................................................................... 665,000 695,371
5.90%, 6/01/29 ............................................................................... 3,105,000 3,252,550
Madera PFA Water and Wastewater Revenue, Refunding, MBIA Insured, 5.00%, 3/01/36 ................ 2,000,000 2,062,240
Marin Municipal Water District COP, Financing Project, AMBAC Insured, 5.00%, 7/01/29 ............ 1,200,000 1,235,628
Mendocino County COP, Public Facilities Corp., MBIA Insured, 5.25%, 6/01/30 ..................... 2,680,000 2,817,940
Merced Irrigation District Electricity System Revenue, Refunding, XLCA Insured, 5.00%,
9/01/26 ....................................................................................... 10,000,000 10,329,200
Millbrae COP, Police Department Expansion, AMBAC Insured, 5.875%, 3/01/24 ....................... 1,025,000 1,078,864
Modesto Irrigation District COP, Capital Improvements, Series A, FSA Insured, 5.00%,
7/01/26 ...................................................................................... 5,000,000 5,106,700
7/01/31 ...................................................................................... 8,285,000 8,444,900
Modesto Wastewater Treatment Facility Revenue, MBIA Insured, Pre-Refunded, 5.75%,
11/01/22 ...................................................................................... 14,375,000 14,613,912
Monrovia USD, GO, Election of 2006, Series A, FSA Insured, 5.00%, 8/01/31 ....................... 4,915,000 5,107,373
Montebello Community RDA Tax Allocation,
Housing, Series A, FSA Insured, Pre-Refunded, 5.45%, 9/01/19 ................................. 1,100,000 1,124,915
Montebello Hills Redevelopment Project, Refunding, MBIA Insured, 5.60%, 3/01/19 .............. 2,460,000 2,466,765
Montebello COP, Capital Improvement Project, Refunding, FSA Insured, 5.375%,
11/01/26 ...................................................................................... 8,715,000 9,225,438
Moreno Valley USD, GO, Election of 2004, Series A, FSA Insured, 5.00%, 8/01/26 .................. 4,000,000 4,254,320
Morgan Hill USD, GO, FGIC Insured, Pre-Refunded, 5.50%, 8/01/25 ................................. 3,840,000 4,062,835
Mount Diablo USD, GO, Election of 2002,
FGIC Insured, 5.00%, 7/01/25 ................................................................. 6,025,000 6,226,295
MBIA Insured, 5.00%, 6/01/28 ................................................................. 1,465,000 1,519,132
MBIA Insured, 5.00%, 6/01/29 ................................................................. 1,590,000 1,646,827
Murrieta Valley USD, COP, MBIA Insured, 5.00%, 8/01/27 .......................................... 2,380,000 2,451,448
Natomas USD, GO, FSA Insured, 5.00%, 9/01/26 .................................................... 2,535,000 2,613,331
Nevada Joint UHSD, GO,
Election of 2002, Series B, FSA Insured, 5.00%, 8/01/30 ...................................... 5,125,000 5,310,730
Series A, FSA Insured, 5.00%, 8/01/26 ........................................................ 1,295,000 1,331,713
Newark USD, GO, Capital Appreciation,
Series B, FGIC Insured, zero cpn., 8/01/24 ................................................... 9,905,000 3,765,287
Series C, FSA Insured, zero cpn., 8/01/22 .................................................... 2,165,000 986,872
Series C, FSA Insured, zero cpn., 8/01/23 .................................................... 2,465,000 1,053,467
Series C, FSA Insured, zero cpn., 8/01/24 .................................................... 2,560,000 1,031,270
Series C, FSA Insured, zero cpn., 8/01/25 .................................................... 2,705,000 1,027,143
Norco RDA Tax Allocation, Redevelopment Project Area No. 1, MBIA Insured, 5.625%,
3/01/30 ....................................................................................... 1,000,000 1,057,460
Northern California Public Power Agency Revenue, AMBAC Insured, Pre-Refunded, 7.50%,
7/01/23 ....................................................................................... 3,200,000 4,179,520
Annual Report | 47
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Oakland Revenue, 1800 Harrison Foundation, Series A, AMBAC Insured, Pre-Refunded,
6.00%, 1/01/29 ................................................................................ $ 10,000,000 $ 10,515,300
Oceanside COP, AMBAC Insured, 5.20%, 4/01/23 .................................................... 2,500,000 2,600,300
Orange County Sanitation Districts COP, FGIC Insured, 5.00%, 2/01/33 ............................ 8,000,000 8,193,120
Orinda COP, City Offices, AMBAC Insured, 5.00%, 7/01/30 ......................................... 2,155,000 2,217,883
Palm Springs Financing Authority Lease Revenue, Convention Center Project, Refunding,
Series A, MBIA Insured, 5.00%, 11/01/25 ....................................................... 2,295,000 2,362,060
Parlier USD, GO, Series B, AMBAC Insured, 6.00%, 6/01/16 ........................................ 1,130,000 1,152,114
Pasadena Area Community College District GO, Election of 2002, Series A, FGIC Insured,
5.00%, 6/01/28 ................................................................................ 4,000,000 4,223,480
Pasadena USD, GO, Series B, FGIC Insured, Pre-Refunded, 5.25%, 7/01/24 .......................... 1,000,000 1,038,360
Patterson Joint USD, GO, Capital Appreciation,
Series A, FGIC Insured, zero cpn., 8/01/22 ................................................... 1,900,000 946,105
Series A, FGIC Insured, zero cpn., 8/01/24 ................................................... 2,075,000 926,363
Series A, FGIC Insured, zero cpn., 8/01/25 ................................................... 2,170,000 920,818
Series A, FGIC Insured, zero cpn., 8/01/26 ................................................... 2,265,000 914,901
Series C, FGIC Insured, zero cpn., 8/01/23 ................................................... 1,985,000 936,364
Peralta Community College District GO, Election of 2000, Series B, MBIA Insured, 5.25%,
8/01/32 ....................................................................................... 8,450,000 8,856,698
Perris CFD Special Tax, CFD No. 93-1, Series A, AMBAC Insured, 5.125%, 8/15/23 .................. 4,000,000 4,170,280
Plumas County COP, Capital Improvement Program, Series A, AMBAC Insured, 5.00%,
6/01/33 ....................................................................................... 3,280,000 3,368,462
Pomona PFA Lease Revenue, Series AN, AMBAC Insured, 5.00%,
10/01/30 ..................................................................................... 5,190,000 5,363,035
10/01/35 ..................................................................................... 6,635,000 6,837,766
Porterville COP, Sewer System Refining Project, Refunding, AMBAC Insured, 5.25%,
10/01/23 ...................................................................................... 3,000,000 3,069,030
Poway RDA Tax Allocation,
MBIA Insured, Pre-Refunded, 5.75%, 6/15/33 ................................................... 9,250,000 9,992,590
Paguay Redevelopment Project, AMBAC Insured, 5.00%, 12/15/25 ................................. 9,195,000 9,410,163
Refunding, MBIA Insured, 5.75%, 6/15/33 ...................................................... 2,225,000 2,384,911
Rancho Cucamonga RDA Tax Allocation, Rancho Redevelopment Project,
Housing Set Aside, MBIA Insured, 5.25%, 9/01/26 .............................................. 2,000,000 2,024,480
Refunding, FSA Insured, 5.25%, 9/01/20 ....................................................... 2,500,000 2,590,425
Redwood City School District GO, FGIC Insured, 5.00%, 7/15/27 ................................... 3,000,000 3,083,070
Rescue USD, GO, Election of 1998, MBIA Insured, 5.00%, 9/01/30 .................................. 7,015,000 7,271,188
Ripon RDA Tax Allocation, Community Redevelopment Project, MBIA Insured, Pre-Refunded,
5.85%, 11/01/30 ............................................................................... 3,975,000 4,298,287
Riverside County COP, Historic Courthouse, MBIA Insured, Pre-Refunded, 5.875%,
11/01/27 ...................................................................................... 3,000,000 3,080,700
Roseville Financing Authority Revenue, senior lien, Series A, AMBAC Insured, 5.00%,
9/01/25 ....................................................................................... 5,675,000 5,838,440
Rowland USD, GO, Series A, FSA Insured, Pre-Refunded, 5.25%, 9/01/25 ............................ 5,685,000 5,979,881
Sacramento Area Flood Control Agency Revenue, Consolidated, Capital AD, Refunding,
Series A, FGIC Insured, 5.00%, 10/01/32 ....................................................... 5,000,000 5,169,750
Sacramento Area Flood Control Agency Special Assessment, Subordinated, Capital AD No. 2,
FGIC Insured, 5.80%, 11/01/16 ................................................................. 1,000,000 1,021,620
48 | Annual Report
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Sacramento City Financing Authority Revenue,
Capital Improvement, Series A, AMBAC Insured, Pre-Refunded, 5.00%, 12/01/26 .................. $ 8,395,000 $ 8,747,842
Capital Improvement, Series A, AMBAC Insured, Pre-Refunded, 5.00%, 12/01/32 .................. 21,500,000 22,403,645
City Hall and Redevelopment Projects, Series A, FSA Insured, Pre-Refunded, 5.00%,
12/01/28 ................................................................................... 10,000,000 10,536,100
Sacramento County Sanitation District Financing Authority Revenue, Sacramento Regional
County of Sanitation, Series A, AMBAC Insured, Pre-Refunded, 5.00%, 12/01/35 .................. 10,000,000 10,661,500
Salida Area Public Facilities Financing Agency CFD, Special Tax, No. 1988-1, FSA Insured,
5.75%, 9/01/30 ................................................................................ 3,435,000 3,653,226
Salida USD, COP, Financing Project, AMBAC Insured, 5.375%, 5/01/26 .............................. 1,645,000 1,647,204
Salinas UHSD, GO, Election of 2002, Series B, MBIA Insured, 5.00%, 6/01/31 ...................... 5,000,000 5,174,150
San Bernardino City USD, GO, Election of 2004, Series B, FSA Insured, 5.00%, 8/01/28 ............ 14,170,000 14,702,934
San Bernardino County COP, 1997 Public Improvement Financing Project, MBIA Insured,
5.25%, 10/01/25 ............................................................................... 7,000,000 7,160,370
San Bernardino County SFMR, Capital Appreciation, Series A, GNMA Insured, ETM, zero cpn.,
5/01/22 ....................................................................................... 28,405,000 12,508,710
San Buenaventura Public Facilities Financing Authority Lease Revenue, Refunding,
FSA Insured, 5.75%, 6/01/14 ................................................................... 2,250,000 2,269,170
San Carlos School District GO, MBIA Insured, Pre-Refunded, 5.50%, 10/01/24 ...................... 2,110,000 2,228,688
San Diego Public Facilities Financing Authority Sewer Revenue, Series B, FGIC Insured,
5.25%, 5/15/27 ................................................................................ 2,950,000 2,983,099
San Francisco BART District Sales Tax Revenue,
5.00%, 7/01/28 ............................................................................... 2,795,000 2,844,891
FGIC Insured, Pre-Refunded, 5.50%, 7/01/26 ................................................... 6,500,000 6,780,215
FGIC Insured, Pre-Refunded, 5.50%, 7/01/34 ................................................... 12,000,000 12,517,320
San Francisco City and County Airports Commission International Airport Revenue, Refunding,
Second Series 28A, MBIA Insured, 5.125%,
5/01/24 ...................................................................................... 9,745,000 10,009,967
5/01/27 ...................................................................................... 16,575,000 16,960,866
San Francisco City and County Public Utilities Commission Water Revenue, Refunding,
Series A, FSA Insured, 5.00%, 11/01/31 ........................................................ 3,885,000 3,987,914
San Francisco Community College District GO, Series A, FGIC Insured, 5.00%, 6/15/26 ............. 6,000,000 6,179,760
San Francisco State University Foundation Inc. Auxiliary Organization Housing Revenue,
MBIA Insured, 5.00%, 9/01/31 .................................................................. 13,415,000 14,126,666
San Gabriel USD, GO, Capital Appreciation,
a Election of 2002, Series C, FSA Insured, zero cpn., 8/01/30 .................................. 5,635,000 1,860,959
a Election of 2002, Series C, FSA Insured, zero cpn., 8/01/31 .................................. 5,870,000 1,843,356
a Election of 2002, Series C, FSA Insured, zero cpn., 7/01/32 .................................. 6,115,000 1,828,507
Series A, FSA Insured, zero cpn., 8/01/26 .................................................... 3,530,000 1,425,873
Series A, FSA Insured, zero cpn., 2/01/27 .................................................... 1,850,000 728,327
San Joaquin Delta Community College District GO, Election of 2004, Series A, FSA Insured,
5.00%, 8/01/29 ............................................................................... 520,000 539,198
Pre-Refunded, 5.00%, 8/01/29 ................................................................. 4,530,000 4,842,978
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue,
Capital Appreciation, Refunding, Series A, MBIA Insured, zero cpn., 1/15/26 .................. 13,155,000 5,403,942
Refunding, Series A, MBIA Insured, 5.375%, 1/15/29 ........................................... 18,075,000 18,408,845
Refunding, Series A, MBIA Insured, 5.25%, 1/15/30 ............................................ 11,860,000 12,071,345
senior lien, MBIA Insured, 5.00%, 1/01/33 .................................................... 10,035,000 10,045,236
Annual Report | 49
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
San Jose Financing Authority Lease Revenue, Civic Center Project, Series B, AMBAC Insured,
5.00%, 6/01/27 ................................................................................ $ 10,000,000 $ 10,204,200
San Jose MFHR, Sixth and Martha Family Apartments, FNMA Insured, 5.875%, 3/01/33 ................ 3,500,000 3,615,220
San Juan USD, GO, Election of 1998, Series A, MBIA Insured, 5.00%, 8/01/28 ...................... 5,115,000 5,265,841
San Leandro COP, Library and Fire Stations Financing, AMBAC Insured, Pre-Refunded,
5.75%, 11/01/29 ............................................................................... 5,000,000 5,315,300
San Marcos Public Facilities Authority Revenue, Senior Tax Increment Project Area 3,
Series A, MBIA Insured, Pre-Refunded,
5.75%, 10/01/29 .............................................................................. 5,340,000 5,750,432
5.80%, 10/01/30 .............................................................................. 7,800,000 8,361,678
San Marino USD, GO, Series A, MBIA Insured, zero cpn., 7/01/25 .................................. 6,080,000 2,590,202
San Mateo County Community College District GO, Election of 2001, Series C, 5.00%,
3/01/31 ....................................................................................... 3,760,000 3,887,878
San Mateo GO, Library Improvement Project, Series A, AMBAC Insured, 5.25%, 8/01/30 .............. 5,790,000 6,118,582
San Ramon PFA Tax Allocation, Series A, AMBAC Insured, 5.00%, 2/01/38 ........................... 5,000,000 5,133,050
Santa Ana USD, COP, Capital Appreciation Financing Project, FSA Insured, zero cpn.,
4/01/24 ....................................................................................... 14,245,000 6,407,828
Santa Clara COP, Refunding, AMBAC Insured, 5.00%, 2/01/27 ....................................... 5,555,000 5,695,875
Santa Clara County Financing Authority Lease Revenue, Refunding, Series A, AMBAC Insured,
5.00%, 11/15/22 ............................................................................... 3,950,000 4,042,864
Santa Monica PFA Lease Revenue, Civic Center Parking Project, XLCA Insured, 5.00%,
7/01/33 ....................................................................................... 11,050,000 11,318,183
Santa Rosa Wastewater Revenue, Series B, FGIC Insured, Pre-Refunded, 5.125%,
9/01/31 ....................................................................................... 4,000,000 4,210,520
Santa Rosa Wastewater Service Facilities District Revenue, Refunding and Improvement,
AMBAC Insured, 6.00%, 7/02/15 ................................................................. 2,000,000 2,175,300
Sequoia UHSD, GO, Refunding, FSA Insured, 5.00%, 7/01/28 ........................................ 3,060,000 3,185,858
Shasta Tehama Trinity Joint Community College District GO, Election of 2002, Series B,
FSA Insured, 5.00%, 8/01/30 ................................................................... 9,070,000 9,431,893
Sonoma CDA Tax Allocation, Redevelopment Project, MBIA Insured, 5.70%, 12/01/30 ................. 3,455,000 3,655,217
Sonoma Valley USD, GO, FSA Insured, Pre-Refunded, 6.00%, 7/15/21 ................................ 2,400,000 2,401,536
South Gate COP, Series A, AMBAC Insured, 5.00%, 9/01/24 ......................................... 3,155,000 3,242,646
South San Francisco COP, 5.00%, 4/01/29 ......................................................... 2,000,000 2,030,480
Southern California Public Power Authority Power Project Revenue, Series A, AMBAC Insured,
Pre-Refunded, 5.00%, 7/01/33 .................................................................. 29,000,000 30,641,400
Southern Kern USD, COP, Capital Appreciation, Building Program, Series B, FSA Insured,
5.625%, 9/01/26 ............................................................................... 2,250,000 2,316,645
Southern Mono Health Care District GO, Series A, MBIA Insured, 5.00%, 8/01/24 ................... 3,005,000 3,080,576
Southern Mono Health Care District Revenue, Capital Appreciation, Series A, MBIA Insured,
zero cpn.,
8/01/28 ...................................................................................... 2,340,000 838,516
8/01/29 ...................................................................................... 2,440,000 829,210
8/01/30 ...................................................................................... 2,550,000 823,395
8/01/31 ...................................................................................... 2,660,000 815,928
Stanislaus County Board of Education COP, FSA Insured, 5.70%, 9/01/24 ........................... 2,000,000 2,090,340
50 | Annual Report
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Stockton Port District Port Facilities Revenue, Refunding and Improvement, Series B,
FSA Insured, 5.90%, 7/01/12 ................................................................... $ 2,195,000 $ 2,238,900
Stockton Revenue COP, Wastewater System Project, Refunding, Series A, MBIA Insured,
5.00%, 9/01/23 ................................................................................ 6,500,000 6,694,480
Susanville PFAR, MBIA Insured, 5.70%, 6/01/30 ................................................... 3,000,000 3,192,810
Tahoe-Truckee USD, GO, ID No. 2, Series A, FGIC Insured, Pre-Refunded, 5.75%,
8/01/20 ....................................................................................... 4,340,000 4,554,222
Travis USD, COP, FGIC Insured, 5.00%, 9/01/36 ................................................... 8,230,000 8,466,448
Tri-City Hospital District Revenue,
MBIA Insured, 6.00%, 2/01/22 ................................................................. 2,350,000 2,353,736
Refunding, Series A, MBIA Insured, 5.625%, 2/15/17 ........................................... 2,750,000 2,781,185
Truckee PFA Lease Revenue, Series A, AMBAC Insured, Pre-Refunded, 6.00%, 11/01/30 ............... 1,990,000 2,088,187
Turlock Auxiliary Organization Revenue COP, California State University, Stanislaus
Foundation, MBIA Insured, 5.875%, 6/01/22 ..................................................... 1,850,000 1,871,645
Turlock PFA Sewer Revenue, FGIC Insured, 5.50%, 9/15/29 ......................................... 6,855,000 7,138,728
Union City CRDA Tax Allocation Revenue, Community Redevelopment Project,
AMBAC Insured, 5.75%, 10/01/32 ................................................................ 14,100,000 14,766,930
Union Elementary School District GO, Capital Appreciation,
Series A, FGIC Insured, zero cpn., 9/01/24 ................................................... 2,000,000 889,360
Series B, FGIC Insured, zero cpn., 9/01/25 ................................................... 5,500,000 2,324,685
Series B, FGIC Insured, zero cpn., 9/01/26 ................................................... 5,850,000 2,353,630
University of California Revenues, Multiple Purpose Projects,
Series H, FGIC Insured, Pre-Refunded, 5.50%, 9/01/28 ......................................... 2,500,000 2,531,950
Series K, Pre-Refunded, 5.00%, 9/01/23 ....................................................... 3,160,000 3,237,989
Series M, FGIC Insured, Pre-Refunded, 5.125%, 9/01/30 ........................................ 8,720,000 9,051,622
Vacaville PFA Tax Allocation Revenue, Vacaville Redevelopment Projects, FSA Insured,
5.00%, 9/01/31 ................................................................................ 5,095,000 5,176,775
Vacaville USD, GO, Election of 2001, MBIA Insured, 5.00%, 8/01/30 ............................... 7,425,000 7,689,998
Vista USD, GO,
Capital Appreciation, Series A, FSA Insured, zero cpn., 8/01/26 .............................. 7,150,000 2,888,099
Capital Appreciation, Series A, FSA Insured, zero cpn., 2/01/27 .............................. 4,795,000 1,887,744
Series A, FSA Insured, 5.25%, 8/01/25 ........................................................ 5,000,000 5,246,750
Washington Township Health Care District Revenue,
5.00%, 7/01/18 ............................................................................... 2,000,000 2,029,560
5.125%, 7/01/23 .............................................................................. 450,000 456,881
Washington USD, GO, Yolo County, Election of 1999, Series A, FGIC Insured, 5.375%,
8/01/25 ....................................................................................... 2,045,000 2,158,354
West Basin Municipal Water District Revenue COP,
1992 Project, Refunding, Series A, AMBAC Insured, 5.50%, 8/01/17 ............................. 3,370,000 3,407,778
Refunding, Series A, MBIA Insured, 5.00%, 8/01/24 ............................................ 2,500,000 2,580,425
Refunding, Series A, MBIA Insured, 5.00%, 8/01/30 ............................................ 5,745,000 5,908,273
Western Placer USD Financing Corp. COP, Pre-Refunded, 5.55%, 11/01/30 ........................... 6,930,000 7,517,872
Westlands Water District Revenue COP,
MBIA Insured, 5.00%, 9/01/29 ................................................................. 11,775,000 12,055,951
Series A, MBIA Insured, 5.00%, 9/01/35 ....................................................... 1,460,000 1,491,565
Annual Report | 51
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA INSURED TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Woodland Finance Authority Lease Revenue, Capital Projects, Refunding, XLCA Insured,
5.00%, 3/01/32 ................................................................................ $ 6,340,000 $ 6,509,912
Woodland Finance Authority Wastewater Revenue, second senior lien, MBIA Insured, 5.00%,
3/01/33 ...................................................................................... 3,870,000 3,971,239
3/01/35 ...................................................................................... 2,590,000 2,656,071
Woodside Elementary School District GO, Election of 2005, MBIA Insured, Pre-Refunded,
5.00%, 10/01/29 ............................................................................... 4,435,000 4,760,307
---------------
TOTAL LONG TERM INVESTMENTS (COST $1,896,367,356) ............................................... 2,002,006,561
---------------
SHORT TERM INVESTMENTS 0.2%
MUNICIPAL BONDS 0.2%
CALIFORNIA 0.2%
b California State Department of Water Resources Power Supply Revenue, Series B-4,
Daily VRDN and Put, 3.82%, 5/01/22 ............................................................ 1,400,000 1,400,000
b California State Economic Recovery Revenue, Series C-16, FSA Insured, Weekly VRDN and
Put, 3.71%, 7/01/23 ........................................................................... 1,500,000 1,500,000
b Orange County Sanitation District COP, Refunding, Series B, Daily VRDN and Put, 3.71%,
8/01/30 ....................................................................................... 400,000 400,000
---------------
TOTAL SHORT TERM INVESTMENTS (COST $3,300,000) .................................................. 3,300,000
---------------
TOTAL INVESTMENTS (COST $1,899,667,356) 99.8% ................................................... 2,005,306,561
OTHER ASSETS, LESS LIABILITIES 0.2% ............................................................. 3,654,631
---------------
NET ASSETS 100.0% ............................................................................... $2,008,961,192
===============
See Selected Portfolio Abbreviations on page 71.
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.
52 | The accompanying notes are an integral part of these 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 2007 2006 2005 2004 2003
------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......................... $ 11.30 $ 11.68 $ 11.36 $ 11.74 $ 11.41
------------------------------------------------------------
Income from investment operations a:
Net investment income b .................................. 0.43 0.43 0.43 0.44 0.44
Net realized and unrealized gains (losses) ............... 0.04 (0.39) 0.32 (0.38) 0.34
------------------------------------------------------------
Total from investment operations ............................ 0.47 0.04 0.75 0.06 0.78
------------------------------------------------------------
Less distributions from net investment income ............... (0.44) (0.42) (0.43) (0.44) (0.45)
------------------------------------------------------------
Redemption fees ............................................. -- d -- d -- d -- --
------------------------------------------------------------
Net asset value, end of year ................................ $ 11.33 $ 11.30 $ 11.68 $ 11.36 $ 11.74
============================================================
Total return c .............................................. 4.13% 0.37% 6.67% 0.50% 6.92%
RATIOS TO AVERAGE NET ASSETS
Expenses .................................................... 0.67% 0.66% 0.67% 0.67% 0.68%
Net investment income ....................................... 3.76% 3.74% 3.67% 3.76% 3.80%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ............................. $458,146 $463,545 $453,335 $384,196 $414,558
Portfolio turnover rate ..................................... 11.25% 13.28% 4.17% 17.36% 9.56%
a The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing of
sales and repurchase of the Fund shares in relation to income earned and/or
fluctuating market value of the investments of the Fund.
b Based on average daily shares outstanding.
c Total return does not reflect sales commissions or contingent deferred sales
charges, if applicable.
d Amount rounds to less than $0.01 per share.
Annual Report |
The accompanying notes are an integral part of these financial statements. | 53
Franklin California Tax-Free Trust
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND
----------------------------------------------
YEAR ENDED JUNE 30,
CLASS C 2007 2006 2005 2004 e
----------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......................... $ 11.32 $ 11.70 $ 11.37 $ 11.73
----------------------------------------------
Income from investment operations a:
Net investment income b .................................. 0.37 0.37 0.36 0.37
Net realized and unrealized gains (losses) ............... 0.05 (0.39) 0.33 (0.36)
----------------------------------------------
Total from investment operations ............................ 0.42 (0.02) 0.69 0.01
----------------------------------------------
Less distributions from net investment income ............... (0.38) (0.36) (0.36) (0.37)
----------------------------------------------
Redemption fees ............................................. -- d -- d -- d --
----------------------------------------------
Net asset value, end of year ................................ $ 11.36 $ 11.32 $ 11.70 $ 11.37
==============================================
Total return c .............................................. 3.68% (0.18)% 6.15% 0.11%
RATIOS TO AVERAGE NET ASSETS
Expenses .................................................... 1.20% 1.20% 1.22% 1.22%
Net investment income ....................................... 3.23% 3.20% 3.12% 3.21%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ............................. $27,025 $25,173 $19,082 $ 9,142
Portfolio turnover rate ..................................... 11.25% 13.28% 4.17% 17.36%
a The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing of
sales and repurchase of the Fund shares in relation to income earned and/or
fluctuating market value of the investments of the Fund.
b Based on average daily shares outstanding.
c Total return does not reflect sales commissions or contingent deferred sales
charges, if applicable.
d Amount rounds to less than $0.01 per share.
e For the period July 1, 2003 (effective date) to June 30, 2004.
54 | The accompanying notes are an integral part of these financial statements.
| Annual Report
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS 96.9%
MUNICIPAL BONDS 96.9%
CALIFORNIA 94.8%
ABAG Finance Authority for Nonprofit Corps. COP, Rhoda Haas Goldman Plaza,
California Mortgage Insured, 5.125%, 5/15/15 ................................................... $ 3,000,000 $ 3,058,170
ABAG Finance Authority for Nonprofit Corps. Revenue, San Diego Hospital Assn., Series C,
5.125%, 3/01/18 ............................................................................... 2,695,000 2,738,093
5.25%, 3/01/19 ................................................................................ 2,315,000 2,368,314
ABAG Revenue, Refunding, Series A-E,
5.05%, 9/15/07 ................................................................................ 610,000 610,921
5.40%, 9/15/14 ................................................................................ 2,455,000 2,506,211
ABAG Water and Wastewater Revenue, Pooled Financing Program, Refunding, Series A,
FSA Insured, 5.00%, 10/01/10 ................................................................... 2,485,000 2,570,186
Alameda Corridor Transportation Authority Revenue, Capital Appreciation, sub. lien, Refunding,
Series A, AMBAC Insured, zero cpn., 10/01/17 ................................................... 10,000,000 6,385,000
Alameda-Contra Costa Transportation District COP, Refunding, AMBAC Insured, 4.375%,
8/01/14 ........................................................................................ 1,330,000 1,348,035
Antelope Valley UHSD, GO, Series A, MBIA Insured,
4.50%, 8/01/13 ................................................................................ 1,230,000 1,265,510
4.625%, 8/01/14 ............................................................................... 1,250,000 1,291,038
Antioch PFA, Reassessment Revenue, sub. lien, Refunding, Sub Series B, 5.40%, 9/02/07 ............ 1,080,000 1,080,594
Arcadia USD, GO, Capital Appreciation, Election of 2006, Series A, FSA Insured, zero cpn.,
8/01/22 ........................................................................................ 4,065,000 1,965,428
Banning Utility Authority Water Enterprise Revenue, Refunding and Improvement Projects,
FGIC Insured, 5.00%, 11/01/21 .................................................................. 1,080,000 1,129,054
Bay Area Toll Authority Toll Bridge Revenue, San Francisco Bay Area, Refunding, Series F,
5.00%, 4/01/21 ................................................................................. 10,000,000 10,467,700
Brentwood Infrastructure Financing Authority Infrastructure Revenue, Refunding, Series A,
FSA Insured, 4.00%, 9/02/17 .................................................................... 1,485,000 1,461,789
Burbank Electric Revenue, MBIA Insured, 4.00%,
6/01/11 ....................................................................................... 1,000,000 1,007,170
6/01/12 ....................................................................................... 1,000,000 1,006,170
Burbank USD, GO,
Capital Appreciation, Election of 1997, Series C, FGIC Insured, zero cpn., 8/01/15 ............ 4,600,000 3,278,466
Capital Appreciation, Election of 1997, Series C, FGIC Insured, zero cpn., 8/01/16 ............ 4,670,000 3,166,167
Election of 1997, Series C, FGIC Insured, 4.00%, 8/01/12 ...................................... 2,500,000 2,515,925
Burbank Water and Power Electric Revenue, MBIA Insured, 4.00%, 6/01/11 ........................... 5,045,000 5,048,733
California Educational Facilities Authority Revenue, Stanford University, Refunding, Series R,
4.00%, 11/01/11 ................................................................................ 1,000,000 1,007,860
California Health Facilities Financing Authority Revenue,
The Episcopal Home, California Mortgage Insured, 4.625%, 2/01/12 .............................. 1,350,000 1,375,853
The Episcopal Home, California Mortgage Insured, 4.75%, 2/01/13 ............................... 1,200,000 1,229,172
Kaiser Permanente, Series B, ETM, 5.25%, 10/01/13 ............................................. 5,000,000 5,136,200
Kaiser Permanente, Series B, ETM, 5.25%, 10/01/14 ............................................. 2,000,000 2,053,740
Kaiser Permanente, Series B, ETM, 5.25%, 10/01/16 ............................................. 3,850,000 3,950,600
Paradise Valley Estates, Refunding, California Mortgage Insured, 3.875%, 1/01/09 .............. 1,555,000 1,537,071
Paradise Valley Estates, Refunding, California Mortgage Insured, 4.125%, 1/01/10 .............. 1,000,000 1,000,580
Paradise Valley Estates, Refunding, California Mortgage Insured, 5.00%, 1/01/11 ............... 1,480,000 1,520,463
Annual Report | 55
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
California Health Facilities Financing Authority Revenue, (continued)
Paradise Valley Estates, Refunding, California Mortgage Insured, 4.375%, 1/01/12 .............. $ 1,000,000 $ 1,008,720
Paradise Valley Estates, Refunding, California Mortgage Insured, 5.00%, 1/01/13 ............... 1,815,000 1,889,125
Paradise Valley Estates, Refunding, California Mortgage Insured, 5.00%, 1/01/14 ............... 1,635,000 1,697,702
Sutter Health, Refunding, Series A, MBIA Insured, 5.875%, 8/15/16 ............................. 3,750,000 3,829,837
California HFA, SFM Purchase Revenue, Class III, Series A-1, MBIA Insured, 5.70%,
8/01/11 ........................................................................................ 275,000 275,974
California Municipal Finance Authority COP, Community Hospitals of Central California, 5.00%,
2/01/18 ....................................................................................... 2,185,000 2,218,146
2/01/19 ....................................................................................... 2,000,000 2,025,740
2/01/20 ....................................................................................... 2,325,000 2,346,041
2/01/21 ....................................................................................... 2,000,000 2,007,480
California State Department of Water Resources Central Valley Project Revenue, Water System,
Refunding, Series S, 5.00%, 12/01/19 .......................................................... 1,915,000 1,941,657
Series S, Pre-Refunded, 5.00%, 12/01/19 ....................................................... 2,085,000 2,116,484
California State Department of Water Resources Power Supply Revenue, Series A,
5.50%, 5/01/12 ................................................................................ 2,000,000 2,123,960
Pre-Refunded, 5.125%, 5/01/18 ................................................................. 2,500,000 2,655,200
California State Economic Recovery Revenue, Series A, 5.00%, 7/01/15 ............................. 10,670,000 11,241,805
California State GO,
5.25%, 6/01/16 ................................................................................ 515,000 520,104
Pre-Refunded, 5.00%, 11/01/12 ................................................................. 1,335,000 1,396,610
Refunding, 4.00%, 2/01/10 ..................................................................... 6,900,000 6,924,978
Refunding, 5.00%, 11/01/12 .................................................................... 665,000 691,919
Refunding, 5.25%, 2/01/14 ..................................................................... 4,000,000 4,249,360
Refunding, MBIA Insured, 5.00%, 2/01/18 ....................................................... 1,175,000 1,194,305
Veterans, Refunding, Series B, 5.25%, 12/01/15 ................................................ 2,310,000 2,353,982
California State Public Works Board Lease Revenue,
Department of Forestry and Fire Protection, Series A, 4.875%, 10/01/18 ........................ 1,325,000 1,345,935
University of California Research Project, Series E, 5.00%, 10/01/24 .......................... 2,310,000 2,384,012
Various California Community College Projects, Refunding, Series C, 5.50%, 9/01/09 ............ 1,555,000 1,574,624
California Statewide CDA, COP,
Kaiser Permanente, ETM, 5.30%, 12/01/15 ....................................................... 2,000,000 2,078,220
St. Joseph Health System, Pre-Refunded, 5.00%, 7/01/12 ........................................ 2,180,000 2,223,600
St. Joseph Health System Obligation Group, 5.25%, 7/01/11 ..................................... 1,005,000 1,027,412
California Statewide CDA Revenue,
Daughters of Charity Health, Refunding, Series G, 5.25%, 7/01/13 .............................. 1,000,000 1,043,790
Insured Health Facility, Jewish Home, California Mortgage Insured, 5.00%, 11/15/18 ............ 3,000,000 3,105,510
Kaiser Permanente, Mandatory Put 6/01/12, Series C, 3.85%, 11/01/29 ........................... 10,000,000 9,832,900
Mission Community, California Mortgage Insured, 4.40%, 11/01/10 ............................... 1,100,000 1,111,803
Mission Community, California Mortgage Insured, 4.50%, 11/01/11 ............................... 1,145,000 1,162,908
Viewpoint School, Refunding, ACA Insured, 4.50%, 10/01/17 ..................................... 460,000 452,562
Viewpoint School, Refunding, ACA Insured, 4.75%, 10/01/18 ..................................... 480,000 479,966
Cathedral City 1915 Act Special Assessment, Limited Obligation, Cove ID 04-02, 5.00%,
9/02/24 ........................................................................................ 1,000,000 988,590
56 | Annual Report
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Central California Joint Powers Health Financing Authority COP, Community Hospitals of
Central California, Pre-Refunded,
5.125%, 2/01/13 ............................................................................... $ 1,375,000 $ 1,445,895
5.25%, 2/01/14 ................................................................................ 1,435,000 1,514,915
5.75%, 2/01/16 ................................................................................ 1,585,000 1,699,485
Central Valley Financing Authority Cogeneration Project Revenue, Carson Ice General Project,
Refunding, MBIA Insured, 5.00%, 7/01/17 ........................................................ 2,000,000 2,041,740
Cerritos PFAR Tax Allocation, Redevelopment Project, Refunding, Series A, AMBAC Insured,
3.00%, 11/01/11 ................................................................................ 2,585,000 2,454,638
Chaffey Community College District COP, Pre-Refunded, 5.10%, 9/01/13 ............................. 1,860,000 1,926,272
Clovis MFR, Mandatory Put 11/01/10, Refunding, FNMA Insured, 5.10%, 11/01/30 ..................... 4,105,000 4,145,886
Clovis USD, GO, Capital Appreciation, Election of 2004, Series A, FGIC Insured, zero cpn.,
8/01/17 ........................................................................................ 5,235,000 3,383,695
Coalinga COP, Custody Facility, Refunding, 4.25%, 4/01/10 ........................................ 1,000,000 997,640
Compton COP, Civic Center and Capital Improvement, Refunding, Series A,
5.00%, 9/01/08 ................................................................................ 2,965,000 2,993,642
5.50%, 9/01/15 ................................................................................ 1,180,000 1,206,031
Conejo Valley USD, GO, Election of 1998,
Series C, FSA Insured, zero cpn., 8/01/17 ..................................................... 2,500,000 1,615,900
Series D, FGIC Insured, 4.50%, 8/01/19 ........................................................ 4,000,000 4,055,520
Contra Costa Community College District GO, Election of 2002, FGIC Insured, 4.75%,
8/01/18 ........................................................................................ 2,450,000 2,509,780
Corona-Norco USD, PFA Special Tax Revenue, Series A, 5.25%, 9/01/25 .............................. 2,235,000 2,240,722
Duarte RDA Tax Allocation, Merged Redevelopment Project Area, Pre-Refunded, 5.125%,
10/01/16 ....................................................................................... 2,630,000 2,667,846
Fairfax School District GO, Election of 2000, Series A, FGIC Insured, 5.00%, 11/01/17 ............ 855,000 891,517
Fairfield Suisun Sewer District Sewer Revenue, Series A, Refunding, FGIC Insured, 5.00%,
5/01/12 ........................................................................................ 600,000 624,294
Folsom PFA Lease Revenue, City Hall and Community Center, Refunding, FSA Insured, 5.00%,
10/01/17 ....................................................................................... 1,275,000 1,336,812
Foothill/Eastern Corridor Agency Toll Road Revenue, Refunding, MBIA Insured, 5.00%,
1/15/16 ........................................................................................ 1,000,000 1,035,050
Fremont UHSD Santa Clara County GO, Series C, FSA Insured, Pre-Refunded, 4.25%,
9/01/13 ........................................................................................ 1,310,000 1,331,785
Fresno USD, GO, Election of 2001, Series D, MBIA Insured, 5.00%, 8/01/21 ......................... 1,355,000 1,419,064
Galt Capital Improvements Authority Lease Revenue, Culture and Recreation Improvement
Project, 5.00%, 4/01/12 ........................................................................ 2,390,000 2,425,611
Galt Middle School Joint Powers Authority Special Tax, CFD No. 1, Refunding, 5.40%,
9/01/12 ........................................................................................ 1,955,000 1,999,906
Garden Grove Agency Community Development Tax Allocation, Garden Grove Community Project,
Refunding, AMBAC Insured, 4.25%, 10/01/13 ...................................................... 2,025,000 2,057,076
Golden State Tobacco Securitization Corp. Tobacco Settlement Revenue, Asset-Backed, ETM,
5.00%, 6/01/12 ................................................................................. 1,500,000 1,568,880
Hi-Desert Memorial Health Care District Revenue, Refunding, 5.125%, 10/01/07 ..................... 650,000 651,118
Annual Report | 57
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Huntington Beach PFAR, Lease Capital Improvement Refinancing Project, Refunding, Series B,
AMBAC Insured,
4.125%, 8/01/14 ............................................................................... $ 2,140,000 $ 2,153,097
4.25%, 8/01/15 ................................................................................ 2,080,000 2,101,029
Inland Empire Solid Waste Financing Authority Revenue, Landfill Improvement Financing
Project, Series B, FSA Insured, ETM, 6.25%, 8/01/11 ............................................ 890,000 925,600
Irvine 1915 Act GO, AD No. 03-19, Group 2, Refunding,
4.875%, 9/02/16 ............................................................................... 1,000,000 1,000,240
5.00%, 9/02/18 ................................................................................ 1,000,000 1,001,720
5.125%, 9/02/19 ............................................................................... 1,000,000 1,005,580
Irvine 1915 Act Special Assessment, AD No. 00-18,
Group 2, 4.375%, 9/02/10 ...................................................................... 885,000 888,195
Group 2, 4.70%, 9/02/12 ....................................................................... 1,475,000 1,485,664
Group 2, 4.80%, 9/02/13 ....................................................................... 1,175,000 1,186,691
Group 2, 5.125%, 9/02/17 ...................................................................... 1,705,000 1,722,186
Group 3, 4.75%, 9/02/15 ....................................................................... 1,000,000 998,600
Group 3, 5.00%, 9/02/17 ....................................................................... 1,000,000 1,005,200
Irvine USD Financing Authority Special Tax, Series A,
4.70%, 9/01/15 ................................................................................ 1,095,000 1,092,733
4.80%, 9/01/17 ................................................................................ 1,400,000 1,398,796
4.875%, 9/01/18 ............................................................................... 1,570,000 1,570,471
5.00%, 9/01/20 ................................................................................ 1,150,000 1,156,647
Kings River Conservation District Pine Flat Power Revenue, Refunding, Series E, 5.125%,
1/01/18 ........................................................................................ 1,735,000 1,779,034
Lake Elsinore PFA Tax Allocation Revenue,
Lake Elsinore Redevelopment Projects, Series A, FSA Insured, 5.40%, 9/01/08 ................... 645,000 645,903
Series A, 5.00%, 9/01/09 ...................................................................... 945,000 950,689
Lake Elsinore School Financing Authority Revenue, Refunding, 6.00%, 9/01/11 ...................... 1,000,000 1,013,060
Lancaster COP, School District Project, Refunding, FSA Insured, 5.125%, 4/01/14 .................. 2,000,000 2,058,960
Lemon Grove CDA Tax Allocation, 1998, Refunding,
5.10%, 8/01/07 ................................................................................ 205,000 205,055
5.20%, 8/01/08 ................................................................................ 215,000 216,260
Loma Linda Hospital Revenue, Loma Linda University Medical Center, Series A, 5.00%,
12/01/19 ....................................................................................... 5,000,000 5,071,750
Lompoc USD, GO, Election of 2002, Series C, FSA Insured, 5.00%, 6/01/22 .......................... 1,340,000 1,409,653
Long Beach Community College District GO, Election of 2002, Series B, FGIC Insured, 5.00%,
5/01/17 ........................................................................................ 1,000,000 1,058,970
Los Altos School District GO, Refunding, AMBAC Insured, 5.00%, 8/01/22 ........................... 5,000,000 5,245,150
Los Angeles Convention and Exhibition Center Authority Lease Revenue, Refunding, Series A,
AMBAC Insured, 3.00%, 8/15/12 .................................................................. 4,525,000 4,281,419
Los Angeles County MTA Sales Tax Revenue, Proposition A, first tier senior, Refunding, Series A,
AMBAC Insured, 5.00%, 7/01/19 ................................................................. 7,410,000 7,793,319
FSA Insured, 5.00%, 7/01/15 ................................................................... 5,345,000 5,507,007
Los Angeles County Sanitation Districts Financing Authority Revenue, Capital Project,
Refunding, Series A, FSA Insured, 5.00%, 10/01/17 .............................................. 1,000,000 1,048,480
58 | Annual Report
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Los Angeles USD, GO,
Election of 2004, Series C, FGIC Insured, 5.00%, 7/01/19 ...................................... $ 2,035,000 $ 2,128,956
Refunding, MBIA Insured, 5.25%, 7/01/13 ....................................................... 3,500,000 3,744,405
Refunding, Series A-1, FGIC Insured, 5.00%, 7/01/21 ........................................... 10,895,000 11,391,049
Lynwood PFAR, Water System Improvement Project, 6.15%, 6/01/08 ................................... 155,000 155,301
M-S-R Public Power Agency San Juan Project Revenue, Refunding, Series I, MBIA Insured,
4.25%, 7/01/11 ................................................................................ 5,055,000 5,138,458
5.00%, 7/01/18 ................................................................................ 1,000,000 1,032,430
Marina Joint Powers Financing Authority MFHR, Abrams B Apartments Financing, Mandatory
Put 11/15/16, FNMA Insured,
3.90%, 11/15/36 ............................................................................... 3,540,000 3,466,403
3.95%, 11/15/36 ............................................................................... 1,460,000 1,429,720
Metropolitan Water District Southern California GO, Waterworks, Series B, Pre-Refunded,
4.125%, 3/01/13 ............................................................................... 1,000,000 1,009,930
4.25%, 3/01/14 ................................................................................ 1,000,000 1,014,160
4.30%, 3/01/15 ................................................................................ 1,000,000 1,015,850
Metropolitan Water District Southern California Waterworks Revenue, Series A, 5.00%,
7/01/26 ........................................................................................ 7,790,000 8,151,612
Montebello USD, GO, Capital Appreciation, FGIC Insured, zero cpn.,
8/01/18 ....................................................................................... 1,455,000 890,867
8/01/19 ....................................................................................... 1,480,000 861,804
Moreno Valley USD, GO,
Capital Appreciation, Refunding, MBIA Insured, zero cpn., 8/01/24 ............................. 7,500,000 3,292,950
Election of 2004, Series A, FSA Insured, 5.00%, 8/01/17 ....................................... 2,000,000 2,127,160
Election of 2004, Series A, FSA Insured, 5.00%, 8/01/18 ....................................... 2,300,000 2,446,234
Morgan Hill USD, GO, FGIC Insured, Pre-Refunded, 4.25%, 8/01/14 .................................. 1,585,000 1,623,420
Moulton-Niguel Water District GO, Consolidated, Refunding, AMBAC Insured, 5.00%,
9/01/16 ........................................................................................ 3,520,000 3,712,333
Murrieta COP, Road Improvement Project, 6.00%, 4/01/08 ........................................... 245,000 248,945
Nevada County COP, Refunding, MBIA Insured, 4.125%, 10/01/12 ..................................... 1,040,000 1,048,601
Orange County CFD No. 86-2 Special Tax, Rancho Santa Margarita, Refunding, Series A,
5.375%, 8/15/12 ................................................................................ 1,500,000 1,521,855
Orange County CFD Special Tax,
No. 02-1, Ladera Ranch, Series A, 4.60%, 8/15/14 .............................................. 1,000,000 1,009,930
No. 02-1, Ladera Ranch, Series A, 4.75%, 8/15/15 .............................................. 1,000,000 1,013,540
No. 02-1, Ladera Ranch, Series A, 4.90%, 8/15/16 .............................................. 1,285,000 1,304,661
No. 03-1, Ladera Ranch, Series A, 4.90%, 8/15/17 .............................................. 1,000,000 1,013,650
No. 03-1, Ladera Ranch, Series A, 5.10%, 8/15/18 .............................................. 1,000,000 1,018,860
No. 04-1, Ladera Ranch, Series A, 4.70%, 8/15/18 .............................................. 1,765,000 1,755,857
No. 04-1, Ladera Ranch, Series A, 4.80%, 8/15/19 .............................................. 1,945,000 1,934,322
No. 04-1, Ladera Ranch, Series A, 4.85%, 8/15/20 .............................................. 2,000,000 1,986,480
Orange County Recovery COP, Series A, MBIA Insured, ETM, 6.00%, 7/01/08 .......................... 1,500,000 1,534,215
Oroville Hospital Revenue, Oroville Hospital, Series A, California Mortgage Insured, 5.125%,
12/01/12 ....................................................................................... 1,435,000 1,443,065
Oxnard Harbor District Revenue, Series A, 5.10%, 8/01/14 ......................................... 1,000,000 1,017,710
Pajaro Valley USD, GO, Election of 2002, Series A, FSA Insured, Pre-Refunded, 5.00%,
8/01/16 ........................................................................................ 1,500,000 1,585,905
Annual Report | 59
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Palm Desert Financing Authority Tax Allocation Revenue,
Project Area No. 1, As Amended, Series A, MBIA Insured, 5.00%, 4/01/23 ....................... $ 7,690,000 $ 7,981,682
Refunding, MBIA Insured, 4.75%, 8/01/18 ...................................................... 1,050,000 1,077,878
Pomona RDA Tax Allocation, Mountain Meadows Redevelopment Project, Refunding, Series X,
5.35%, 12/01/16 ............................................................................... 1,000,000 1,055,920
Redlands USD, GO, Election of 2002, FSA Insured, 5.00%, 7/01/19 ................................. 1,000,000 1,041,430
Richmond Joint Powers Financing Authority Revenue, Multiple Redevelopment Projects,
Series B, ETM, 5.35%, 5/15/13 ................................................................. 2,000,000 2,057,740
Riverside County COP, Capital Improvement, Family Law, Refunding, Series A, FGIC Insured,
5.00%,
11/01/18 ..................................................................................... 1,540,000 1,608,083
11/01/19 ..................................................................................... 1,615,000 1,680,682
Riverside USD, GO, Election of 2001, Series A, FGIC Insured, 4.00%, 2/01/13 ..................... 1,000,000 1,001,960
Sacramento City USD, GO, Election of 1999, Series D, FSA Insured, 5.00%, 7/01/19 ................ 1,465,000 1,529,636
Sacramento County Sanitation District Financing Authority Revenue, Sacramento Regional
County Sanitation, Series A, AMBAC Insured, Pre-Refunded, 5.00%, 12/01/18 ..................... 9,155,000 9,760,603
Sacramento County Water Financing Authority Revenue, Water Agency Zones 40 and 41,
Series A, FGIC Insured, 5.00%, 6/01/22 ........................................................ 2,040,000 2,147,386
Sacramento MUD Financing Authority Revenue, Cosumnes Project, MBIA Insured, 5.00%,
7/01/21 ....................................................................................... 3,305,000 3,463,409
San Bernardino County COP, Medical Center Financing Project, Refunding, 6.00%, 8/01/09 .......... 2,000,000 2,069,860
San Carlos School District GO, Election of 2005, Series A, MBIA Insured, 5.00%, 10/01/22 ........ 3,215,000 3,374,882
San Francisco City and County Airports Commission International Airport Revenue, Issue 32F,
Refunding, Second Series, FGIC Insured, 5.00%, 5/01/22 ........................................ 1,750,000 1,827,280
San Francisco City and County GO, Refunding, Series 1, FGIC Insured, 5.00%, 6/15/12 ............. 3,650,000 3,726,467
San Francisco City and County Redevelopment Financing Authority Tax Allocation,
Redevelopment Projects, Series A, Pre-Refunded, zero cpn., 8/01/17 ............................ 3,825,000 2,283,869
San Joaquin County COP,
General Hospital Project, Refunding, MBIA Insured, 5.00%, 9/01/17 ............................ 1,000,000 1,029,380
Solid Waste System Facilities Projects, MBIA Insured, 5.00%, 4/01/17 ......................... 1,340,000 1,396,856
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, Capital Appreciation,
Refunding, Series A, 5.60%, 1/15/16 ........................................................... 3,000,000 3,159,870
San Jose MFHR, Countrybrook Project, Refunding, Series A, FNMA Insured, 4.95%,
4/01/12 ....................................................................................... 4,275,000 4,331,601
San Marcos Public Facilities Authority Revenue, Senior Tax Increment Project Area 3, Series A,
MBIA Insured,
ETM, 5.10%, 10/01/09 ......................................................................... 515,000 530,105
Pre-Refunded, 5.30%, 10/01/11 ................................................................ 350,000 372,145
Sanger USD, GO, Election of 2006, Series A, FSA Insured, 5.00%,
8/01/19 ...................................................................................... 1,325,000 1,404,792
8/01/20 ...................................................................................... 1,510,000 1,594,107
Santa Ana COP, Refunding, Series A, AMBAC Insured, 4.25%, 6/01/13 ............................... 1,405,000 1,426,230
Santa Ana USD, GO, Election of 1999, Series B, FGIC Insured, zero cpn., 8/01/14 ................. 3,125,000 2,330,688
Santa Clara 1915 Act, Reassessment District 187, Refunding, Series 1, 5.25%, 9/02/11 ............ 1,720,000 1,773,509
60 | Annual Report
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Santa Clara County Financing Authority Lease Revenue, Multiple Facilities Projects, Refunding,
Series A, AMBAC Insured, 4.50%, 5/15/12 ....................................................... $ 2,900,000 $ 2,937,932
Santa Monica-Malibu USD, COP, Series C, MBIA Insured,
4.00%, 5/01/12 ............................................................................... 525,000 524,748
4.25%, 5/01/14 ............................................................................... 840,000 847,039
4.25%, 5/01/15 ............................................................................... 875,000 880,793
4.25%, 11/01/15 .............................................................................. 670,000 674,435
South County Regional Wastewater Authority Revenue, Regional Wastewater Facilities Project,
Refunding, FSA Insured, 3.25%, 8/01/11 ........................................................ 1,000,000 970,600
South Gate PFA Tax Allocation Revenue, South Gate Redevelopment Project No. 1,
XLCA Insured, 5.00%, 9/01/16 .................................................................. 2,000,000 2,096,640
South Gate PFA Water Revenue, Refunding, Series A, FGIC Insured,
5.35%, 10/01/07 .............................................................................. 995,000 998,910
5.45%, 10/01/08 .............................................................................. 1,040,000 1,062,162
Stockton Health Facilities Revenue, Dameron Hospital Assn., Refunding, Series A, 5.35%,
12/01/09 ...................................................................................... 385,000 394,290
Stockton Port District Port Facilities Revenue, Refunding and Improvement, Series A,
FSA Insured, 5.75%, 7/01/11 ................................................................... 1,295,000 1,320,900
Stockton Revenue, O'Connor Woods Housing Corp., Series A, 5.375%, 11/01/11 ...................... 1,025,000 1,040,098
Sweetwater UHSD, COP, FSA Insured, 4.15%, 9/01/12 ............................................... 1,000,000 1,006,420
Tobacco Securitization Authority Northern California Tobacco Settlement Revenue, Asset-Backed
Bonds, Series B,
ETM, 4.25%, 6/01/09 .......................................................................... 880,000 888,158
ETM, 4.375%, 6/01/10 ......................................................................... 1,665,000 1,690,591
ETM, 4.50%, 6/01/11 .......................................................................... 1,540,000 1,575,928
Pre-Refunded, 4.60%, 6/01/12 ................................................................. 1,760,000 1,807,379
Pre-Refunded, 4.70%, 6/01/13 ................................................................. 1,500,000 1,545,780
Pre-Refunded, 4.80%, 6/01/14 ................................................................. 725,000 749,730
Torrance Hospital Revenue, Torrance Memorial Medical Center, Series A, 5.10%, 6/01/12 ........... 1,000,000 1,040,840
University of California Revenues,
Limited Project, Series B, FSA Insured, 5.00%, 5/15/21 ....................................... 5,000,000 5,220,900
Multiple Purpose Projects, Series N, FGIC Insured, 4.00%, 9/01/12 ............................ 1,380,000 1,387,300
Research Facilities, Series E, AMBAC Insured, Pre-Refunded, 5.00%, 9/01/15 ................... 3,645,000 3,774,288
Victor Valley UHSD, COP, Refunding, AMBAC Insured, 5.00%, 11/15/21 .............................. 1,140,000 1,191,414
a Vista USD, GO, Election of 2002, Series C, FSA Insured, 5.00%,
8/01/22 ...................................................................................... 1,755,000 1,841,328
8/01/25 ...................................................................................... 1,395,000 1,455,543
West Contra Costa USD, GO, Series B, FSA Insured, 4.00%, 8/01/12 ................................ 1,875,000 1,886,944
Whittier Health Facility Revenue, Presbyterian Intercommunity Hospital,
ETM, 5.00%, 6/01/11 .......................................................................... 1,060,000 1,103,778
ETM, 5.00%, 6/01/12 .......................................................................... 2,225,000 2,332,223
Pre-Refunded, 5.00%, 6/01/13 ................................................................. 2,335,000 2,466,834
Yucaipa Valley Water District Water System Revenue COP, Series A, MBIA Insured,
5.00%, 9/01/15 ............................................................................... 1,080,000 1,145,880
5.25%, 9/01/20 ............................................................................... 1,325,000 1,409,297
---------------
460,196,842
---------------
Annual Report | 61
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA INTERMEDIATE-TERM TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
U.S. TERRITORIES 2.1%
PUERTO RICO 0.6%
Puerto Rico Commonwealth GO, Public Improvement, FSA Insured, 5.25%, 7/01/16 .................... $ 2,500,000 $ 2,716,300
---------------
VIRGIN ISLANDS 1.5%
Virgin Islands PFAR, senior lien,
Fund Loan Notes, Refunding, Series A, 5.40%, 10/01/12 ........................................ 4,150,000 4,251,675
Refunding, Series A, 5.30%, 10/01/11 ......................................................... 1,000,000 1,023,800
Virgin Islands Water and Power Authority Water System Revenue, Refunding, 5.00%,
7/01/09 ....................................................................................... 2,000,000 2,034,800
---------------
7,310,275
---------------
TOTAL U.S. TERRITORIES .......................................................................... 10,026,575
---------------
TOTAL LONG TERM INVESTMENTS (COST $464,427,141) ................................................. 470,223,417
---------------
SHORT TERM INVESTMENTS 4.0%
MUNICIPAL BONDS 4.0%
CALIFORNIA 4.0%
b California Infrastructure and Economic Development Bank Insured Revenue, Rand Corp.,
Series B, AMBAC Insured, Daily VRDN and Put, 3.83%, 4/01/42 ................................... 1,500,000 1,500,000
b California Infrastructure and Economic Development Bank Revenue, J. Paul Getty Trust,
Series B, Daily VRDN and Put, 3.82%, 4/01/33 .................................................. 4,900,000 4,900,000
b California State Department of Water Resources Power Supply Revenue,
Series B-4, Daily VRDN and Put, 3.82%, 5/01/22 ............................................... 7,550,000 7,550,000
Series C-7, FSA Insured, Weekly VRDN and Put, 3.65%, 5/01/22 ................................. 1,400,000 1,400,000
b California State Economic Recovery Revenue, Series C-16, FSA Insured, Weekly VRDN and Put,
3.71%, 7/01/23 ................................................................................ 300,000 300,000
b California State GO, Series A-3, Daily VRDN and Put, 3.81%, 5/01/33 ............................. 1,200,000 1,200,000
b Los Angeles Water and Power Revenue, Refunding, Sub Series B-1, Weekly VRDN and Put,
3.71%, 7/01/34 ................................................................................ 600,000 600,000
b Metropolitan Water District Southern California Waterworks Revenue,
Refunding, Series B-3, Daily VRDN and Put, 3.82%, 7/01/35 .................................... 700,000 700,000
Series C-2, Daily VRDN and Put, 3.83%, 7/01/36 ............................................... 800,000 800,000
b Orange County Housing Authority Apartment Development Revenue, Oasis Martinique,
Refunding, Series I, FNMA Insured, Weekly VRDN and Put, 3.68%, 6/15/28 ........................ 500,000 500,000
---------------
TOTAL SHORT TERM INVESTMENTS (COST $19,450,000) ................................................. 19,450,000
---------------
TOTAL INVESTMENTS (COST $483,877,141) 100.9% .................................................... 489,673,417
OTHER ASSETS, LESS LIABILITIES (0.9)% ........................................................... (4,501,770)
---------------
NET ASSETS 100.0% ............................................................................... $ 485,171,647
===============
See Selected Portfolio Abbreviations on page 71.
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.
62 | The accompanying notes are an integral part of these 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 2007 2006 2005 2004 f
---------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ......................... $ 9.80 $ 9.94 $ 9.91 $ 10.00
---------------------------------------
Income from investment operations a:
Net investment income b ................................. 0.27 0.21 0.15 0.11
Net realized and unrealized gains (losses) .............. 0.06 (0.14) 0.03 (0.10)
---------------------------------------
Total from investment operations ........................... 0.33 0.07 0.18 0.01
---------------------------------------
Less distributions from net investment income .............. (0.27) (0.21) (0.15) (0.10)
---------------------------------------
Redemption fees ............................................ -- -- -- e --
---------------------------------------
Net asset value, end of year ............................... $ 9.86 $ 9.80 $ 9.94 $ 9.91
=======================================
Total return c ............................................. 3.45% 0.74% 1.81% 0.06%
RATIOS TO AVERAGE NET ASSETS d
Expenses before waiver and payments by affiliates .......... 1.26% 1.10% 1.05% 1.20%
Expenses net of waiver and payments by affiliates .......... 0.50% 0.50% 0.50% 0.50%
Net investment income ...................................... 2.74% 2.10% 1.48% 1.30%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ............................ $12,044 $11,149 $16,318 $16,244
Portfolio turnover rate .................................... 17.44% 24.19% 5.43% 7.42%
a The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing of
sales and repurchase of the Fund shares in relation to income earned and/or
fluctuating market value of the investments of the Fund.
b Based on average daily shares outstanding.
c Total return does not reflect sales commissions or contingent deferred sales
charges, if applicable, and is not annualized for periods less than one year.
d Ratios are annualized for periods less than one year.
e Amount rounds to less than $0.01 per share.
f For the period September 2, 2003 (commencement of operations) to June 30,
2004.
Annual Report |
The accompanying notes are an integral part of these financial statements. | 63
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA LIMITED-TERM TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS 51.9%
MUNICIPAL BONDS 51.9%
CALIFORNIA 43.4%
Brea and Olinda USD, GO, Election of 1999, Series A, FGIC Insured, 2.60%, 8/01/09 ............... $ 120,000 $ 116,310
California Educational Facilities Authority Revenue, Santa Clara University, Refunding, Series A,
FSA Insured, 2.625%, 9/01/09 .................................................................. 100,000 96,881
California Health Facilities Financing Authority Revenue, Catholic Healthcare West, Series G,
5.00%, 7/01/09 ................................................................................ 750,000 763,912
California State Economic Recovery GO, Series A, 5.00%, 1/01/09 ................................. 415,000 422,744
California State GO, Refunding, FSA Insured, 5.25%, 2/01/10 ..................................... 445,000 460,655
California Statewide CDA Revenue, Viewpoint School, Refunding, ACA Insured, 3.50%,
10/01/08 ...................................................................................... 320,000 314,781
Foothill-De Anza Community College District GO, Election of 1999, Series B, 2.60%, 8/01/08 ...... 100,000 98,286
Glendora PFAR Tax Allocation, Project No. 1, Refunding, Series A, MBIA Insured,
2.00%, 9/01/07 ............................................................................... 100,000 99,606
2.125%, 9/01/08 .............................................................................. 105,000 102,368
Lodi USD, COP, Capital Projects, Refunding, FSA Insured, 3.00%, 2/01/08 ......................... 110,000 109,387
Los Angeles County Sanitation Districts Financing Authority Revenue, Capital Project, Refunding,
Series A, FSA Insured, 4.00%, 10/01/08 ........................................................ 500,000 501,960
Lynwood USD, GO, Election of 2002, Series A, FSA Insured, 4.00%, 8/01/10 ........................ 100,000 100,717
Manteca USD Special Tax, CFD No. 89-1, AMBAC Insured, 2.50%, 9/01/08 ............................ 250,000 245,063
North Orange County Community College District GO, Election of 2002, Series B, FGIC Insured,
2.125%, 8/01/08 ............................................................................... 500,000 487,920
Placer County Water Agency Water Revenue COP, Refunding, MBIA Insured, 2.375%,
7/01/07 ....................................................................................... 105,000 105,000
Poway RDA Tax Allocation, Paguay Redevelopment Project, Series A, MBIA Insured, 3.00%,
6/15/09 ....................................................................................... 100,000 98,069
Rio Linda Unified Elementary School District, Election of 2002, Series A, FSA Insured, 4.00%,
8/01/10 ....................................................................................... 100,000 100,717
Sacramento Power Authority Cogeneration Project Revenue, Refunding, AMBAC Insured, 4.00%,
7/01/08 ....................................................................................... 1,000,000 1,002,690
---------------
5,227,066
---------------
U.S. TERRITORIES 8.5%
GUAM 2.0%
Guam International Airport Authority Revenue, Series A, MBIA Insured, 2.375%, 10/01/08 .......... 250,000 243,475
---------------
PUERTO RICO 6.5%
Puerto Rico Commonwealth GO, Public Improvement, Mandatory Put 7/01/08, Refunding,
Series C, MBIA Insured, 5.00%, 7/01/28 ........................................................ 370,000 374,447
Puerto Rico Commonwealth Government Development Bank Revenue, senior notes, Series B,
5.00%, 12/01/08 ............................................................................... 400,000 405,016
---------------
779,463
---------------
TOTAL U.S. TERRITORIES .......................................................................... 1,022,938
---------------
TOTAL LONG TERM INVESTMENTS (COST $6,324,566) ................................................... 6,250,004
---------------
64 | Annual Report
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA LIMITED-TERM TAX-FREE INCOME FUND AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS 46.2%
MUNICIPAL BONDS 46.2%
CALIFORNIA 46.2%
a California Health Facilities Financing Authority Revenue, Sutter Health, Refunding, Series B,
AMBAC Insured, Daily VRDN and Put, 3.83%, 7/01/12 ............................................. $ 200,000 $ 200,000
a California HFAR, MFH, Series D, Daily VRDN and Put, 3.80%, 2/01/31 .............................. 500,000 500,000
a California Infrastructure and Economic Development Bank Insured Revenue, Rand Corp., Series B,
AMBAC Insured, Daily VRDN and Put, 3.83%, 4/01/42 ............................................. 300,000 300,000
California Municipal Finance Authority COP, Community Hospitals of Central California, 5.00%,
2/01/08 ....................................................................................... 250,000 250,985
a California State Department of Water Resources Power Supply Revenue,
Refunding, Sub Series F-5, Weekly VRDN and Put, 3.83%, 5/01/22 ............................... 200,000 200,000
Series B-5, Daily VRDN and Put, 3.81%, 5/01/22 ............................................... 500,000 500,000
Series C-7, FSA Insured, Weekly VRDN and Put, 3.65%, 5/01/22 ................................. 400,000 400,000
a California State Economic Recovery Revenue, Series C-8, Daily VRDN and Put, 3.85%,
7/01/23 ....................................................................................... 100,000 100,000
a Irvine 1915 Act Special Assessment,
AD No. 03-19, Series A, Daily VRDN and Put, 3.70%, 9/02/29 ................................... 200,000 200,000
AD No. 93-14, Daily VRDN and Put, 3.80%, 9/02/25 ............................................. 400,000 400,000
AD No. 97-13, Daily VRDN and Put, 3.70%, 9/02/23 ............................................. 100,000 100,000
AD No. 97-16, Daily VRDN and Put, 3.70%, 9/02/22 ............................................. 500,000 500,000
a Los Angeles Convention and Exhibition Center Authority Lease Revenue, Refunding, Series D,
AMBAC Insured, Weekly VRDN and Put, 3.65%, 8/15/21 ............................................ 300,000 300,000
a Metropolitan Water District Southern California Waterworks Revenue, Refunding,
Series B-1, Daily VRDN and Put, 3.70%, 7/01/35 ............................................... 200,000 200,000
Series B-3, Daily VRDN and Put, 3.82%, 7/01/35 ............................................... 200,000 200,000
a Newport Beach Revenue, Hoag Memorial Presbyterian Hospital,
Series A, Weekly VRDN and Put, Pre-Refunded, 3.80%, 10/01/26 ................................. 485,000 485,000
Series B, Weekly VRDN and Put, Pre-Refunded, 3.80%, 10/01/26 ................................. 225,000 225,000
a Orange County Sanitation District COP, Refunding,
Series A, Daily VRDN and Put, 3.71%, 8/01/29 ................................................. 200,000 200,000
Series B, Daily VRDN and Put, 3.71%, 8/01/30 ................................................. 300,000 300,000
---------------
TOTAL SHORT TERM INVESTMENTS (COST $5,561,248) .................................................. 5,560,985
---------------
TOTAL INVESTMENTS (COST $11,885,814) 98.1% ...................................................... 11,810,989
OTHER ASSETS, LESS LIABILITIES 1.9% ............................................................. 233,332
---------------
NET ASSETS 100.0% ............................................................................... $ 12,044,321
===============
See Selected Portfolio Abbreviations on page 71.
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.
Annual Report |
The accompanying notes are an integral part of these financial statements. | 65
Franklin California Tax-Free Trust
FINANCIAL HIGHLIGHTS
FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND
-----------------------------------------------------
YEAR ENDED JUNE 30,
CLASS A 2007 2006 2005 2004 2003
-----------------------------------------------------
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 .. 0.029 0.023 0.012 0.004 0.007
Less distributions from net investment income .............. (0.029) (0.023) (0.012) (0.004) (0.007)
-----------------------------------------------------
Net asset value, end of year ............................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=====================================================
Total return a ............................................. 2.97% 2.33% 1.20% 0.38% 0.71%
RATIOS TO AVERAGE NET ASSETS
Expenses ................................................... 0.55% 0.55% 0.56% 0.56% 0.56%
Net investment income ...................................... 2.94% 2.30% 1.22% 0.38% 0.71%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ............................ $658,903 $610,593 $688,121 $631,895 $671,392
a Total return does not reflect sales commissions or contingent deferred sales
charges, if applicable.
66 | The accompanying notes are an integral part of these financial statements.
| Annual Report
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS 107.7%
MUNICIPAL BONDS 107.7%
CALIFORNIA 106.8%
a Bay Area Toll Authority Toll Bridge Revenue, San Francisco Bay Area,
Series A, AMBAC Insured, Weekly VRDN and Put, 3.55%, 4/01/36 ................................. $ 12,500,000 $ 12,500,000
Series B, AMBAC Insured, Weekly VRDN and Put, 3.61%, 4/01/39 ................................. 17,200,000 17,200,000
a Butte County Housing Authority MFR, Pine Tree Apartment Project, Weekly VRDN and Put,
3.70%, 12/01/10 ............................................................................... 982,000 982,000
b California Communities Note Program Note Participation Revenue, Series A-3, TRAN, 4.50%,
6/30/08 ....................................................................................... 15,000,000 15,126,600
a California Health Facilities Financing Authority Revenue,
Catholic Healthcare West, Refunding, MBIA Insured, Weekly VRDN and Put, 3.68%,
7/01/16 .................................................................................... 3,955,000 3,955,000
Pooled Loan Program, Series B, FGIC Insured, Weekly VRDN and Put, 3.63%, 10/01/10 ............ 1,800,000 1,800,000
Scripps Health, Refunding, Series A, MBIA Insured, Weekly VRDN and Put, 3.51%,
10/01/22 ................................................................................... 3,200,000 3,200,000
a California Infrastructure and Economic Development Bank Revenue,
Goodwill Industries Orange County, Weekly VRDN and Put, 3.58%, 3/01/31 ....................... 2,000,000 2,000,000
Independent System Operating Corp. Project, Refunding, Series B, MBIA Insured,
Weekly VRDN and Put, 3.60%, 4/01/08 ........................................................ 1,600,000 1,600,000
Independent System Operating Corp. Project, Refunding, Series C, MBIA Insured,
Weekly VRDN and Put, 3.70%, 4/01/09 ........................................................ 4,500,000 4,500,000
San Francisco Ballet Assn., FGIC Insured, Daily VRDN and Put, 3.81%, 7/01/36 ................. 2,100,000 2,100,000
a California PCFA, PCR, Pacific Gas and Electric Co., Refunding, Series C, Daily VRDN and Put,
3.88%, 11/01/26 ............................................................................... 8,000,000 8,000,000
California School Cash Reserve Program Authority COP,
2006-2007 TRAN, Series A, 4.50%, 7/06/07 ..................................................... 20,000,000 20,002,647
b 2007-2008 TRAN, Series A, 4.25%, 7/01/08 ..................................................... 12,000,000 12,071,880
a California State Department of Water Resources Power Supply Revenue,
Refunding, Sub Series F-1, Daily VRDN and Put, 3.70%, 5/01/19 ................................ 3,400,000 3,400,000
Series B-4, Daily VRDN and Put, 3.82%, 5/01/22 ............................................... 3,235,000 3,235,000
Series B-5, Daily VRDN and Put, 3.81%, 5/01/22 ............................................... 1,600,000 1,600,000
Series B-6, Daily VRDN and Put, 3.70%, 5/01/22 ............................................... 2,115,000 2,115,000
Series C-12, Weekly VRDN and Put, 3.65%, 5/01/22 ............................................. 6,700,000 6,700,000
Series C-5, Weekly VRDN and Put, 3.63%, 5/01/22 .............................................. 5,000,000 5,000,000
Series C-8, Weekly VRDN and Put, 3.70%, 5/01/22 .............................................. 7,600,000 7,600,000
Series C-9, Weekly VRDN and Put, 3.70%, 5/01/22 .............................................. 300,000 300,000
a California State Economic Development Financing Authority Revenue, KQED Inc. Project,
Refunding, Weekly VRDN and Put, 3.65%, 4/01/20 ................................................ 810,000 810,000
a California State Economic Recovery Revenue,
Series C-14, XLCA Insured, Weekly VRDN and Put, 3.65%, 7/01/23 ............................... 30,300,000 30,300,000
Series C-3, Daily VRDN and Put, 3.81%, 7/01/23 ............................................... 800,000 800,000
Series C-8, Daily VRDN and Put, 3.85%, 7/01/23 ............................................... 2,700,000 2,700,000
Series C-9, Daily VRDN and Put, 3.85%, 7/01/23 ............................................... 800,000 800,000
a California State GO,
Kindergarten-University, Refunding, Series A-3, Daily VRDN and Put, 3.80%, 5/01/34 ........... 4,200,000 4,200,000
Kindergarten-University, Refunding, Series B-2, Daily VRDN and Put, 3.85%, 5/01/34 ........... 6,025,000 6,025,000
Kindergarten-University, Series B-3, Daily VRDN and Put, 3.70%, 5/01/34 ...................... 2,700,000 2,700,000
Refunding, Series B, Sub Series B-7, Daily VRDN and Put, 3.89%, 5/01/40 ...................... 2,600,000 2,600,000
Annual Report | 67
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
a California State GO, (continued)
Series A-3, Daily VRDN and Put, 3.81%, 5/01/33 ............................................... $ 3,200,000 $ 3,200,000
Series B-1, Weekly VRDN and Put, 3.70%, 5/01/33 .............................................. 5,000,000 5,000,000
Series C-2, Weekly VRDN and Put, 3.65%, 5/01/33 .............................................. 6,700,000 6,700,000
a California Statewide CDA Revenue,
Museum of Art Project, Series C, FGIC Insured, Weekly VRDN and Put, 3.67%, 12/01/34 .......... 5,075,000 5,075,000
North Peninsula Jewish, Daily VRDN and Put, 3.81%, 7/01/34 ................................... 3,000,000 3,000,000
a Carlsbad USD, COP, School Facility Bridge Funding Program, FSA Insured, Weekly VRDN and
Put, 3.65%, 9/01/14 ........................................................................... 400,000 400,000
a Chico MFMR, Webb Homes Project, Monthly VRDN and Put, 3.90%, 1/01/10 ............................ 770,000 770,000
a East Bay MUD Wastewater System Revenue, Refunding, Sub Series 2, XLCA Insured,
Weekly VRDN and Put, 3.63%, 6/01/38 ........................................................... 4,650,000 4,650,000
a Eastern Municipal Water District Water and Sewer Revenue COP, Refunding, Series B,
MBIA Insured, Weekly VRDN and Put, 3.65%, 7/01/33 ............................................. 2,360,000 2,360,000
a Elsinore Valley Municipal Water District COP, Series A, FGIC Insured, Weekly VRDN and Put,
3.65%, 7/01/29 ................................................................................ 15,000,000 15,000,000
a Fremont PFA, COP, Weekly VRDN and Put, 3.63%, 8/01/30 ........................................... 5,400,000 5,400,000
a Grant Joint UHSD, COP,
School Facilities Bridge Funding Program, FSA Insured, Weekly VRDN and Put, 3.65%,
9/01/34 ..................................................................................... 4,900,000 4,900,000
Various Bridge Funding Program, FSA Insured, Weekly VRDN and Put, 3.65%, 7/01/37 ............. 10,000,000 10,000,000
a Hillsborough COP, Water and Sewer System Project, Refunding, Series B, Weekly VRDN and Put,
3.80%, 6/01/30 ................................................................................ 4,000,000 4,000,000
Imperial Irrigation District Revenue, TECP, Series A, 3.68%, 10/11/07 ........................... 5,000,000 5,000,000
a Irvine 1915 Act Special Assessment,
AD No. 00-18, Series A, Daily VRDN and Put, 3.70%, 9/02/26 ................................... 3,027,000 3,027,000
AD No. 03-19, Series A, Daily VRDN and Put, 3.70%, 9/02/29 ................................... 274,000 274,000
AD No. 03-19, Series B, Daily VRDN and Put, 3.80%, 9/02/29 ................................... 904,000 904,000
AD No. 05-21, Series A, Daily VRDN and Put, 3.80%, 9/02/31 ................................... 5,900,000 5,900,000
AD No. 93-14, Daily VRDN and Put, 3.80%, 9/02/25 ............................................. 1,456,000 1,456,000
AD No. 94-13, Daily VRDN and Put, 3.70%, 9/02/22 ............................................. 5,600,000 5,600,000
AD No. 97-13, Daily VRDN and Put, 3.70%, 9/02/23 ............................................. 4,554,000 4,554,000
AD No. 97-16, Daily VRDN and Put, 3.70%, 9/02/22 ............................................. 6,000,000 6,000,000
a Irvine Improvement Bond Act 1915 Revenue, AD No. 94-15, Refunding, Daily VRDN and Put,
3.70%, 9/02/20 ................................................................................ 2,867,000 2,867,000
a Irvine Ranch Water District GO,
Consolidated ID, Daily VRDN and Put, 3.83%, 6/01/15 .......................................... 2,275,000 2,275,000
District Nos. 105 140 240 and 250, Daily VRDN and Put, 3.80%, 1/01/21 ........................ 4,500,000 4,500,000
a Irvine Ranch Water District Revenue, District Nos. 140 240 105 and 250, Daily VRDN and Put,
3.70%, 4/01/33 ................................................................................ 900,000 900,000
a Los Angeles COP, Kadima Hebrew Academy, Series A, Weekly VRDN and Put, 3.65%,
8/01/35 ....................................................................................... 1,300,000 1,300,000
b Los Angeles County GO, TRAN, 4.50%, 6/30/08 ..................................................... 20,000,000 20,168,800
a Los Angeles Department of Water and Power Waterworks Revenue,
Sub Series B-2, Daily VRDN and Put, 3.70%, 7/01/35 ........................................... 21,300,000 21,300,000
Sub Series B-4, Weekly VRDN and Put, 3.70%, 7/01/35 .......................................... 6,650,000 6,650,000
a Los Angeles MFR, Casden Project, Series K, Weekly VRDN and Put, 3.62%, 7/01/10 .................. 145,507 145,507
68 | Annual Report
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
a Los Angeles Wastewater System Revenue, Refunding,
Sub Series A, FGIC Insured, Weekly VRDN and Put, 3.65%, 12/01/31 ............................. $ 4,895,000 $ 4,895,000
Sub Series B-1, XLCA Insured, Weekly VRDN and Put, 3.61%, 6/01/28 ............................ 4,550,000 4,550,000
a M-S-R Public Power Agency San Juan Project Revenue, sub. lien, Refunding, Series F,
MBIA Insured, Daily VRDN and Put, 3.81%, 7/01/22 .............................................. 7,135,000 7,135,000
a Metropolitan Water District Southern California Waterworks Revenue,
Refunding, Series A, AMBAC Insured, Weekly VRDN and Put, 3.62%, 6/01/23 ...................... 5,865,000 5,865,000
Refunding, Series B-3, Daily VRDN and Put, 3.82%, 7/01/35 .................................... 700,000 700,000
Refunding, Series B-4, Weekly VRDN and Put, 3.67%, 7/01/35 ................................... 7,000,000 7,000,000
Refunding, Series C-1, Weekly VRDN and Put, 3.62%, 7/01/30 ................................... 3,000,000 3,000,000
Series C, Weekly VRDN and Put, 3.67%, 7/01/28 ................................................ 13,200,000 13,200,000
a Northern California Public Power Agency Revenue, Hydroelectric Project No. 1, Refunding,
Series A, MBIA Insured, Weekly VRDN and Put, 3.68%, 7/01/23 ................................... 8,700,000 8,700,000
a Oakland COP, Capital Equipment Project, Weekly VRDN and Put, 3.75%, 12/01/15 .................... 5,300,000 5,300,000
a Orange County Apartment Development Revenue, Aliso Creek Project, Refunding, Series B,
Weekly VRDN and Put, 3.62%, 11/01/22 .......................................................... 7,000,000 7,000,000
a Orange County Sanitation District COP,
Daily VRDN and Put, 3.85%, 2/01/36 ........................................................... 20,100,000 20,100,000
Refunding, Series A, Daily VRDN and Put, 3.71%, 8/01/29 ...................................... 200,000 200,000
Refunding, Series B, Daily VRDN and Put, 3.71%, 8/01/30 ...................................... 3,000,000 3,000,000
a Pajaro Valley USD, COP, School Facility Bridge Funding Program, FSA Insured, Weekly VRDN
and Put, 3.65%, 9/01/31 ....................................................................... 700,000 700,000
a Rancho Water District Financing Authority Revenue, Refunding, Series A, FGIC Insured,
Weekly VRDN and Put, 3.65%, 8/01/29 ........................................................... 5,200,000 5,200,000
Ravenswood City School District Revenue, TRAN, 4.50%, 7/05/07 ................................... 2,555,000 2,555,216
a Riverside County Asset Leasing Corp. Leasehold Revenue, Southwest Justice Center, Series B,
MBIA Insured, Weekly VRDN and Put, 3.68%, 11/01/32 ............................................ 5,000,000 5,000,000
a Riverside County COP, Riverside County Public Facilities, ACES, Series B, Weekly VRDN and
Put, 3.64%, 12/01/15 .......................................................................... 1,500,000 1,500,000
Riverside County Teeter Obligation Revenue, TECP, 3.68%, 9/13/07 ................................ 10,000,000 10,000,000
a Sacramento County COP, Administration Center and Courthouse Project, Weekly VRDN and Put,
3.63%, 6/01/20 ................................................................................ 14,470,000 14,470,000
Sacramento County GO, TRAN, 4.50%,
7/17/07 ...................................................................................... 28,500,000 28,508,866
b 7/09/08 ...................................................................................... 10,000,000 10,083,300
a Sacramento County Sanitation District Financing Authority Revenue, Series C, Weekly VRDN
and Put, 3.65%, 12/01/30 ...................................................................... 28,600,000 28,600,000
a San Jose RDAR, Merged Area Redevelopment Project, Series A, Weekly VRDN and Put, 3.65%,
7/01/26 ....................................................................................... 5,000,000 5,000,000
a Santa Clara County Housing Authority MFHR, Benton Park Central Apartments, Refunding,
Series A, FNMA Insured, Weekly VRDN and Put, 3.69%, 12/15/25 .................................. 5,000,000 5,000,000
a South Placer Wastewater Authority Wastewater Revenue, Series B, FGIC Insured, Weekly VRDN
and Put, 3.77%, 11/01/35 ...................................................................... 15,400,000 15,400,000
a Southern California Public Power Authority Power Project Revenue, Palo Verde Project,
Refunding, Series C, AMBAC Insured, Weekly VRDN and Put, 3.68%, 7/01/17 ....................... 700,000 700,000
Annual Report | 69
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
a Southern California Public Power Authority Transmission Project Revenue, Southern
Transmission, Refunding,
AMBAC Insured, Weekly VRDN and Put, 3.68%, 7/01/19 ........................................... $ 13,315,000 $ 13,315,000
Series A, FSA Insured, Weekly VRDN and Put, 3.65%, 7/01/23 ................................... 4,000,000 4,000,000
Series B, FSA Insured, Weekly VRDN and Put, 3.72%, 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, 3.63%, 1/01/10 ................. 2,400,000 2,400,000
a Turlock Irrigation District COP, Capital Improvement and Refunding Project, Daily VRDN and Put,
3.81%, 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, 3.70%, 9/02/13 ....................................................................... 16,569,000 16,569,000
a Union City MFR, Housing Mission Sierra, Refunding, Series A, FNMA Insured, Weekly VRDN
and Put, 3.69%, 7/15/29 ....................................................................... 2,000,000 2,000,000
a University of California Regents Medical Center Pooled Revenue, Refunding, Series B-1,
Daily VRDN and Put, 3.80%, 5/15/32 ............................................................ 18,500,000 18,500,000
University of California Regents Revenue, TECP, 3.70%, 9/12/07 .................................. 6,900,000 6,900,000
a Vallejo Housing Authority MFR, FNMA Insured, Weekly VRDN and Put, 3.65%, 5/15/22 ................ 1,985,000 1,985,000
a Vernon Natural Gas Financing Authority Revenue, Vernon Gas Project, Series C, MBIA Insured,
Weekly VRDN and Put, 3.68%, 8/01/21 ........................................................... 35,000,000 35,000,000
a WateReuse Finance Authority Revenue, FSA Insured, Weekly VRDN and Put, 3.63%,
5/01/28 ....................................................................................... 17,075,000 17,075,000
a Western Placer Union School COP, Facilities Project B, Weekly VRDN and Put, 3.62%,
8/01/23 ....................................................................................... 4,800,000 4,800,000
---------------
703,605,816
---------------
U.S. TERRITORIES 0.9%
PUERTO RICO 0.9%
Puerto Rico Commonwealth Revenue, TRAN, 4.50%, 7/30/07 .......................................... 6,000,000 6,004,068
---------------
TOTAL SHORT TERM INVESTMENTS (COST $709,609,884) ................................................ 709,609,884
OTHER ASSETS, LESS LIABILITIES (7.7)% ........................................................... (50,706,537)
---------------
NET ASSETS 100.0% ............................................................................... $ 658,903,347
===============
See Selected Portfolio Abbreviations on page 71.
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.
b See Note 1(b) regarding securities purchased on a when-issued or delayed
delivery basis.
70 | The accompanying notes are an integral part of these financial statements.
| Annual Report
Franklin California Tax-Free Trust
STATEMENT OF INVESTMENTS, JUNE 30, 2007
SELECTED PORTFOLIO ABBREVIATIONS
1915 ACT - Improvement Bond Act of 1915
ABAG - The Association of Bay Area Governments
ACA - American Capital Access Holdings Inc.
ACES - Adjustable Convertible Exempt Security
AD - Assessment District
AMBAC - American Municipal Bond Assurance Corp.
BART - Bay Area Rapid Transit
CDA - Community Development Authority/Agency
CFD - Community Facilities District
COP - Certificate of Participation
CRDA - Community Redevelopment Authority/Agency
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FNMA - Federal National Mortgage Association
FSA - Financial Security Assurance Inc.
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Authority/Agency
HFAR - Housing Finance Authority Revenue
ID - Improvement District
MBIA - Municipal Bond Investors Assurance Corp.
MFH - Multi-Family Housing
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
MFR - Multi-Family Revenue
MTA - Metropolitan Transit Authority
MUD - Municipal Utility District
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
PFA - Public Financing Authority
PFAR - Public Financing Authority Revenue
RDA - Redevelopment Agency/Authority
RDAR - Redevelopment Agency Revenue
SFM - Single Family Mortgage
SFMR - Single Family Mortgage Revenue
TECP - Tax-Exempt Commercial Paper
TRAN - Tax and Revenue Anticipation Note
UHSD - Unified/Union High School District
USD - Unified/Union School District
XLCA - XL Capital Assurance
Annual Report |
The accompanying notes are an integral part of these financial statements. | 71
Franklin California Tax-Free Trust
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2007
------------------------------------------------------------------------------
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 ........................................ $ 1,899,667,356 $ 483,877,141 $ 11,885,814 $ 709,609,884
==============================================================================
Value ....................................... $ 2,005,306,561 $ 489,673,417 $ 11,810,989 $ 709,609,884
Cash ........................................... 13,081 18,324 86,062 1,204,524
Receivables:
Investment securities sold .................. 1,315,553 8,831,392 -- 2,000,000
Capital shares sold ......................... 4,265,078 1,615,995 63,500 1,550,202
Interest .................................... 27,428,830 6,198,239 115,560 4,610,037
Affiliates .................................. -- -- 8,426 --
------------------------------------------------------------------------------
Total assets ............................. 2,038,329,103 506,337,367 12,084,537 718,974,647
------------------------------------------------------------------------------
Liabilities:
Payables:
Investment securities purchased ............. 23,582,165 19,256,089 -- 57,450,580
Capital shares redeemed ..................... 1,860,003 1,000,625 8,396 2,051,152
Affiliates .................................. 1,293,224 309,386 -- 284,285
Distributions to shareholders ............... 2,377,393 503,992 9,407 183,687
Professional fees ........................... 51,116 21,085 16,036 18,978
Accrued expenses and other liabilities ......... 204,010 74,543 6,377 82,618
------------------------------------------------------------------------------
Total liabilities ........................ 29,367,911 21,165,720 40,216 60,071,300
------------------------------------------------------------------------------
Net assets, at value .................. $ 2,008,961,192 $ 485,171,647 $ 12,044,321 $ 658,903,347
==============================================================================
Net assets consist of:
Paid-in capital ................................ $ 1,906,939,218 $ 482,868,378 $ 12,319,039 $ 658,938,511
Undistributed net investment income
(distributions in excess of net
investment income) ............................ (243,504) (84,882) 4,696 --
Net unrealized appreciation (depreciation) ..... 105,639,205 5,796,276 (74,825) --
Accumulated net realized gain (loss) ........... (3,373,727) (3,408,125) (204,589) (35,164)
------------------------------------------------------------------------------
Net assets, at value .................. $ 2,008,961,192 $ 485,171,647 $ 12,044,321 $ 658,903,347
==============================================================================
72 | The accompanying notes are an integral part of these financial statements.
| Annual Report
Franklin California Tax-Free Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
June 30, 2007
-----------------------------------------------------------------------------
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 ........................... $ 1,810,358,379 $ 458,146,325 $ 12,044,321 $ 658,903,347
=============================================================================
Shares outstanding ............................. 145,057,709 40,425,497 1,221,459 658,928,541
=============================================================================
Net asset value per share a .................... $ 12.48 $ 11.33 $ 9.86 $ 1.00
=============================================================================
Maximum offering price per share (net asset
value per share / 95.75%, 97.75%, 97.75% and
100%, respectively) ........................... $ 13.03 $ 11.59 $ 10.09 $ 1.00
=============================================================================
CLASS B:
Net assets, at value ........................... $ 59,127,274
================
Shares outstanding ............................. 4,714,258
================
Net asset value and maximum offering price
per share a ................................... $ 12.54
================
CLASS C:
Net assets, at value ........................... $ 139,475,539 $ 27,025,322
====================================
Shares outstanding ............................. 11,065,826 2,379,688
====================================
Net asset value and maximum offering price
per share a ................................... $ 12.60 $ 11.36
====================================
a Redemption price is equal to net asset value less contingent deferred sales
charges, if applicable, and redemption fees retained by the Funds.
Annual Report |
The accompanying notes are an integral part of these financial statements. | 73
Franklin California Tax-Free Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF OPERATIONS
for the year ended June 30, 2007
---------------------------------------------------------------------------
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 ....................................... $ 98,194,154 $ 21,497,359 $ 356,067 $ 22,890,108
---------------------------------------------------------------------------
Expenses:
Management fees (Note 3a) ...................... 9,278,779 2,432,919 54,932 3,196,864
Administrative fees (Note 3b) .................. -- -- 21,973 --
Distribution fees: (Note 3c)
Class A ..................................... 1,799,679 457,204 16,458 --
Class B ..................................... 422,314 -- -- --
Class C ..................................... 893,789 171,828 -- --
Transfer agent fees (Note 3e) .................. 600,054 194,572 7,820 296,327
Custodian fees ................................. 29,780 7,209 153 9,620
Reports to shareholders ........................ 96,708 27,372 840 32,238
Registration and filing fees ................... 7,492 5,456 2,848 4,558
Professional fees .............................. 68,348 30,044 20,647 26,708
Trustees' fees and expenses .................... 48,523 11,853 322 15,762
Other .......................................... 134,662 66,847 12,499 41,020
---------------------------------------------------------------------------
Total expenses ........................... 13,380,128 3,405,304 138,492 3,623,097
Expenses waived/paid by affiliates
(Note 3f) ............................... -- -- (83,547) --
---------------------------------------------------------------------------
Net expenses .......................... 13,380,128 3,405,304 54,945 3,623,097
---------------------------------------------------------------------------
Net investment income .............. 84,814,026 18,092,055 301,122 19,267,011
---------------------------------------------------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments ..... 479,220 (824,806) (8,600) --
Net change in unrealized appreciation
(depreciation) on investments ................. 6,157,833 2,493,355 80,065 --
---------------------------------------------------------------------------
Net realized and unrealized gain (loss) ........... 6,637,053 1,668,549 71,465 --
---------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations ........................ $ 91,451,079 $ 19,760,604 $ 372,587 $ 19,267,011
===========================================================================
74 | The accompanying notes are an integral part of these financial statements.
| Annual Report
Franklin California Tax-Free Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
----------------------------------------------------------------------
FRANKLIN CALIFORNIA
FRANKLIN CALIFORNIA INSURED INTERMEDIATE-TERM
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
----------------------------------------------------------------------
YEAR ENDED JUNE 30, YEAR ENDED JUNE 30,
2007 2006 2007 2006
----------------------------------------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income .............................. $ 84,814,026 $ 84,802,971 $ 18,092,055 $ 18,016,771
Net realized gain (loss) from investments ......... 479,220 3,176,524 (824,806) (628,704)
Net change in unrealized appreciation
(depreciation) on investments ..................... 6,157,833 (70,002,864) 2,493,355 (15,917,910)
----------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations ................... 91,451,079 17,976,631 19,760,604 1,470,157
----------------------------------------------------------------------
Distributions to shareholders from:
Net investment income:
Class A ......................................... (77,084,097) (75,973,378) (17,341,633) (16,979,691)
Class B ......................................... (2,440,278) (2,755,237) -- --
Class C ......................................... (5,080,702) (4,878,248) (884,836) (731,140)
----------------------------------------------------------------------
Total distributions to shareholders ................... (84,605,077) (83,606,863) (18,226,469) (17,710,831)
----------------------------------------------------------------------
Capital share transactions: (Note 2)
Class A ......................................... 53,086,761 29,461,839 (6,879,252) 25,665,201
Class B ......................................... (10,190,789) (6,675,179) -- --
Class C ......................................... 5,455,724 8,767,960 1,795,959 6,873,745
----------------------------------------------------------------------
Total capital share transactions ...................... 48,351,696 31,554,620 (5,083,293) 32,538,946
----------------------------------------------------------------------
Redemption fees ....................................... 2,737 670 2,856 2,648
----------------------------------------------------------------------
Net increase (decrease) in net assets ........ 55,200,435 (34,074,942) (3,546,302) 16,300,920
Net assets:
Beginning of year ..................................... 1,953,760,757 1,987,835,699 488,717,949 472,417,029
----------------------------------------------------------------------
End of year ........................................... $ 2,008,961,192 $ 1,953,760,757 $ 485,171,647 $ 488,717,949
======================================================================
Undistributed net investment income (distributions
in excess of net investment income) included in
net assets:
End of year ........................................... $ (243,504) $ (411,175) $ (84,882) $ 51,700
======================================================================
Annual Report |
The accompanying notes are an integral part of these financial statements. | 75
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,
2007 2006 2007 2006
--------------------------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ...................................... $ 301,122 $ 304,253 $ 19,267,011 $ 15,417,985
Net realized gain (loss) from investments .................. (8,600) (195,989) -- --
Net change in unrealized appreciation (depreciation) on
investments .............................................. 80,065 (12,763) -- --
--------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations ............................................... 372,587 95,501 19,267,011 15,417,985
--------------------------------------------------------
Distributions to shareholders from net investment
income ...................................................... (305,975) (309,451) (19,267,011) (15,443,179)
Capital share transactions (Note 2) ........................... 828,517 (4,954,835) 48,310,312 (77,503,087)
--------------------------------------------------------
Net increase (decrease) in net assets ................... 895,129 (5,168,785) 48,310,312 (77,528,281)
Net assets:
Beginning of year ............................................. 11,149,192 16,317,977 610,593,035 688,121,316
--------------------------------------------------------
End of year ................................................... $12,044,321 $11,149,192 $658,903,347 $610,593,035
========================================================
Undistributed net investment income included in net assets:
End of year ................................................... $ 4,696 $ 9,549 $ -- $ --
========================================================
76 | The accompanying notes are an integral part of these financial statements.
| Annual Report
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 amended, (the 1940 Act) as a diversified,
open-end investment company, consisting of four funds (the Funds). The classes
of shares offered within each of the Funds are indicated below. 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
- ----------------------------------------------------------------------------------------------------------------
Franklin California Limited-Term Franklin California Intermediate-Term Franklin California Insured Tax-Free
Tax-Free Income Fund Tax-Free Income Fund Income Fund
Franklin California Tax-Exempt
Money 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 Trust 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.
Securities in the Franklin California Tax-Exempt Money Fund are valued at
amortized cost which approximates market value. This method involves valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium.
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. 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.
Annual Report | 77
Franklin California Tax-Free Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. SECURITIES PURCHASED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS
The Funds may purchase securities on a when-issued or delayed delivery basis,
with payment and delivery scheduled for a future date. These transactions are
subject to market fluctuations and are subject to the risk that the value at
delivery may be more or less than the trade date purchase price. Although the
Funds will generally purchase these securities with the intention of holding the
securities, they may sell the securities before the settlement date. Sufficient
assets have been segregated for these securities.
C. INCOME TAXES
No provision has been made for U.S. income taxes because it is each fund's
policy to qualify as a regulated investment company under the Internal Revenue
Code and to distribute to shareholders substantially all of its income and net
realized gains.
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Amortization of
premium and accretion of discount on debt securities are included in interest
income. Dividends from net investment income are normally declared daily and
distributed monthly to shareholders. Distributions to shareholders are
determined according to income tax regulations (tax basis). Distributable
earnings determined on a tax basis may differ from earnings recorded in
accordance with accounting principles generally accepted in the United States of
America. These differences may be permanent or temporary. Permanent differences
are reclassified among capital accounts to reflect their tax character. These
reclassifications have no impact on net assets or the results of operations.
Temporary differences are not reclassified, as they may reverse in subsequent
periods.
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. Differences in per share
distributions, by class, are generally due to differences in class specific
expenses.
E. INSURANCE
The scheduled payments of interest and principal for each insured municipal
security in the Trust are insured by either a new issue insurance policy or a
secondary insurance policy. Some municipal securities in the Funds are secured
by collateral guaranteed by an agency of the U.S. government.
78 | Annual Report
Franklin California Tax-Free Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. INSURANCE (CONTINUED)
Depending on the type of coverage, premiums for insurance are either added to
the cost basis of the security or paid by a third party.
F. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
G. REDEMPTION FEES
A short term trading redemption fee will be imposed, with some exceptions, on
any fund shares that are redeemed or exchanged within seven calendar days
following their purchase date. The redemption fee is 2% of the amount redeemed.
Such fees are retained by the funds and accounted for as an addition to paid-in
capital.
H. 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. Currently, the Trust expects the
risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At June 30, 2007, there were an unlimited number of shares authorized (no par
value). Transactions in the Franklin California Tax-Exempt Money Fund's shares
were at $1.00 per share. Transactions in the Funds' shares were as follows:
----------------------------------------------------------
FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA
INSURED INTERMEDIATE-TERM
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
----------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------
CLASS A SHARES:
Year ended June 30, 2007
Shares sold .................................................... 17,455,918 $ 220,629,858 7,640,775 $ 87,751,826
Shares issued in reinvestment of distributions ................. 3,462,745 43,770,823 934,758 10,732,062
Shares redeemed ................................................ (16,721,698) (211,313,920) (9,185,930) (105,363,140)
----------------------------------------------------------
Net increase (decrease) ........................................ 4,196,965 $ 53,086,761 (610,397) $ (6,879,252)
==========================================================
Annual Report | 79
Franklin California Tax-Free Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
----------------------------------------------------------
FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA
INSURED INTERMEDIATE-TERM
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
----------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------
CLASS A SHARES: (CONTINUED)
Year ended June 30, 2006
Shares sold .................................................... 16,458,137 $ 208,133,962 8,873,205 $ 101,823,002
Shares issued in reinvestment of distributions ................. 3,356,852 42,468,834 894,985 10,276,725
Shares redeemed ................................................ (17,500,212) (221,140,957) (7,538,142) (86,434,526)
----------------------------------------------------------
Net increase (decrease) ........................................ 2,314,777 $ 29,461,839 2,230,048 $ 25,665,201
==========================================================
CLASS B SHARES:
Year ended June 30, 2007
Shares sold .................................................... 7,839 $ 99,798
Shares issued in reinvestment of distributions ................. 125,167 1,589,956
Shares redeemed ................................................ (935,605) (11,880,543)
----------------------------
Net increase (decrease) ........................................ (802,599) $ (10,190,789)
============================
Year ended June 30, 2006
Shares sold .................................................... 84,583 $ 1,079,492
Shares issued in reinvestment of distributions ................. 142,305 1,809,598
Shares redeemed ................................................ (753,255) (9,564,269)
----------------------------
Net increase (decrease) ........................................ (526,367) $ (6,675,179)
============================
CLASS C SHARES:
Year ended June 30, 2007
Shares sold .................................................... 2,114,348 $ 27,009,041 687,478 $ 7,915,490
Shares issued in reinvestment of distributions ................. 232,714 2,969,972 43,530 500,866
Shares redeemed ................................................ (1,922,826) (24,523,289) (575,151) (6,620,397)
----------------------------------------------------------
Net increase (decrease) ........................................ 424,236 $ 5,455,724 155,857 $ 1,795,959
==========================================================
Year ended June 30, 2006
Shares sold .................................................... 1,977,989 $ 25,260,241 1,143,292 $ 13,189,043
Shares issued in reinvestment of distributions ................. 225,829 2,883,383 39,533 454,684
Shares redeemed ................................................ (1,520,721) (19,375,664) (589,548) (6,769,982)
----------------------------------------------------------
Net increase (decrease) ........................................ 683,097 $ 8,767,960 593,277 $ 6,873,745
==========================================================
------------------------------------------------
FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA
LIMITED-TERM TAX-EXEMPT
TAX-FREE INCOME FUND MONEY FUND
------------------------------------------------
SHARES AMOUNT AMOUNT
------------------------------------------------
CLASS A SHARES:
Year ended June 30, 2007
Shares sold ....................................................... 446,382 $ 4,398,181 $ 541,175,032
Shares issued in reinvestment of distributions .................... 20,692 203,904 19,212,287
Shares redeemed ................................................... (383,029) (3,773,568) (512,077,007)
------------------------------------------------
Net increase (decrease) ........................................... 84,045 $ 828,517 $ 48,310,312
================================================
80 | Annual Report
Franklin California Tax-Free Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
------------------------------------------------
FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA
LIMITED-TERM TAX-EXEMPT
TAX-FREE INCOME FUND MONEY FUND
------------------------------------------------
SHARES AMOUNT AMOUNT
------------------------------------------------
CLASS A SHARES: (CONTINUED)
Year ended June 30, 2006
Shares sold ....................................................... 528,548 $ 5,215,928 $ 469,737,284
Shares issued in reinvestment of distributions ................... 19,857 195,828 15,429,953
Shares redeemed ................................................... (1,052,034) (10,366,591) (562,670,324)
------------------------------------------------
Net increase (decrease) ........................................... (503,629) $ (4,954,835) $ (77,503,087)
================================================
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 Franklin California Insured Tax-Free Income Fund and the Franklin California
Intermediate-Term Tax-Free Income Fund pay an investment management fee to
Advisers based on the month-end net assets of each of the funds and the Franklin
California Tax-Exempt 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
Annual Report | 81
Franklin California Tax-Free Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
A. MANAGEMENT FEES (CONTINUED)
The Franklin California Limited-Term Tax-Free Income 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 Franklin California Limited-Term Tax-Free Income Fund pays an administrative
fee to FT Services of 0.20% per year of the average daily net assets of the
fund.
Under an agreement with Advisers, FT Services provides administrative services
to the Funds, except the Franklin California Limited-Term Tax-Free Income 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' Board of Trustees has adopted distribution plans for each share class
pursuant to Rule 12b-1 under the 1940 Act. Under the funds' Class A
reimbursement distribution plans, the funds reimburse Distributors for costs
incurred in connection with the servicing, sale and distribution of each fund's
shares up to the maximum annual plan rate for each class. Under the Class A
reimbursement distribution plans, costs exceeding the maximum for the current
plan year cannot be reimbursed in subsequent periods.
In addition, under the funds' compensation distribution plans, the funds pay
Distributors for costs incurred in connection with the servicing, sale and
distribution of each fund's shares up to the maximum annual plan rate for each
class.
The maximum annual plan rates, based on the average daily net assets, for each
class, are as follows:
---------------------------------------------------------------------
FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA
INSURED INTERMEDIATE-TERM LIMITED-TERM
TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND
---------------------------------------------------------------------
Reimbursement Plans:
Class A ....................... 0.10% 0.10% --
Compensation Plans:
Class A ....................... -- -- 0.15%
Class B ....................... 0.65% -- --
Class C ....................... 0.65% 0.65% --
82 | Annual Report
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:
---------------------------------------------
FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA
INSURED INTERMEDIATE-TERM
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
---------------------------------------------
Sales charges retained net of commissions paid to
unaffiliated broker/dealers .................................... $414,372 $31,395
Contingent deferred sales charges retained ....................... $152,993 $28,998
---------------------------------------------
FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA
LIMITED-TERM TAX-EXEMPT
TAX-FREE INCOME FUND MONEY FUND
---------------------------------------------
Sales charges retained net of commissions paid to
unaffiliated broker/dealers .................................... $1,575 $ --
Contingent deferred sales charges retained ....................... $ -- $2,083
E. TRANSFER AGENT FEES
For the year ended June 30, 2007, the Funds paid transfer agent fees as noted in
the Statements of Operations of which the following amounts were retained by
Investor Services:
---------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA
INSURED INTERMEDIATE-TERM LIMITED-TERM FRANKLIN CALIFORNIA
TAX-FREE TAX-FREE TAX-FREE TAX-EXEMPT
INCOME FUND INCOME FUND INCOME FUND MONEY FUND
---------------------------------------------------------------------------------------
Transfer agent fees .... $334,590 $102,221 $3,304 $192,802
F. WAIVER AND EXPENSE REIMBURSEMENTS
FT Services and Advisers have agreed in advance to waive their respective fees
and assume payment of other expenses through October 31, 2008 for the Franklin
California Limited-Term Tax-Free Income Fund. Total expenses waived are not
subject to reimbursement by the fund subsequent to the fund's fiscal year end.
After October 31, 2008, FT Services and Advisers may discontinue this waiver at
any time upon notice to the Fund's Board of Trustees.
Annual Report | 83
Franklin California Tax-Free Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES
For tax purposes, capital losses may be carried over to offset future capital
gains, if any. At June 30, 2007, the capital loss carryforwards were as follows:
---------------------------------------------
FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA
INSURED INTERMEDIATE-TERM
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
---------------------------------------------
Capital loss carryforwards expiring in:
2008 ................................. $ -- $ 69,184
2009 ................................. 2,249,572 321,166
2010 ................................. -- 112,465
2011 ................................. -- 145,149
2012 ................................. -- 865,726
2013 ................................. -- 421,949
2015 ................................. -- 1,083,972
------------------------------------
$ 2,249,572 $ 3,019,611
====================================
---------------------------------------------
FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA
LIMITED-TERM TAX-EXEMPT
TAX-FREE INCOME FUND MONEY FUND
---------------------------------------------
Capital loss carryforwards expiring in:
2008 ................................. $ -- $ 9,293
2009 ................................. -- 21,840
2012 ................................. -- 2,466
2013 ................................. -- 1,565
2015 ................................. 204,589 --
------------------------------------
$ 204,589 $ 35,164
====================================
During the year ended June 30, 2007, the Franklin California Insured Tax-Free
Income Fund utilized $1,591,710 of capital loss carryforwards.
For tax purposes, realized capital losses occurring subsequent to October 31,
may be deferred and treated as occurring on the first day of the following
fiscal year. At June 30, 2007, the Franklin California Insured Tax-Free Income
Fund and the Franklin California Intermediate-Term Tax-Free Income Fund deferred
realized capital losses of $1,071,213 and $388,514, respectively.
On June 30, 2007, the Franklin California Tax-Exempt Money Fund had expired
capital loss carryforwards of $4,593, which were reclassified to paid-in
capital.
84 | Annual Report
Franklin California Tax-Free Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES (CONTINUED)
The tax character of distributions paid during the years ended June 30, 2007 and
2006, was as follows:
--------------------------------------------------------------
FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA
INSURED INTERMEDIATE-TERM
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
--------------------------------------------------------------
2007 2006 2007 2006
--------------------------------------------------------------
Distributions paid from -
tax exempt income ................... $84,605,077 $83,606,863 $18,226,469 $17,710,831
==============================================================
--------------------------------------------------------------
FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA
LIMITED-TERM TAX-EXEMPT
TAX-FREE INCOME FUND MONEY FUND
--------------------------------------------------------------
2007 2006 2007 2006
--------------------------------------------------------------
Distributions paid from -
tax exempt income ................... $ 305,975 $ 309,451 $19,267,011 $15,443,179
==============================================================
At June 30, 2007, the cost of investments, net unrealized appreciation
(depreciation) and undistributed tax exempt income for income tax purposes were
as follows:
--------------------------------------------
FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA
INSURED INTERMEDIATE-TERM
TAX-FREE INCOME FUND TAX-FREE INCOME FUND
--------------------------------------------
Cost of investments ........................................ $ 1,898,517,138 $ 483,837,565
=======================================
Unrealized appreciation .................................... $ 109,441,400 $ 7,460,840
Unrealized depreciation .................................... (2,651,977) (1,624,988)
---------------------------------------
Net unrealized appreciation (depreciation) ................. $ 106,789,423 $ 5,835,852
=======================================
Distributable earnings - undistributed tax exempt income ... $ 930,729 $ 379,533
=======================================
--------------------------------------------
FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA
LIMITED-TERM TAX-EXEMPT
TAX-FREE INCOME FUND MONEY FUND
--------------------------------------------
Cost of investments ........................................ $ 11,885,814 $ 709,609,884
=======================================
Unrealized appreciation .................................... $ -- $ --
Unrealized depreciation .................................... (74,825) --
---------------------------------------
Net unrealized appreciation (depreciation) ................. $ (74,825) $ --
=======================================
Distributable earnings - undistributed tax exempt income ... $ 14,102 $ 183,687
=======================================
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of bond discounts and premiums.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales and bond discounts and
premiums.
Annual Report | 85
Franklin California Tax-Free Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short term securities) for the
year ended June 30, 2007, were as follows:
------------------------------------------------------------------
FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA FRANKLIN CALIFORNIA
INSURED INTERMEDIATE-TERM LIMITED-TERM
TAX-FREE INCOME FUND TAX-FREE INCOME FUND TAX-FREE INCOME FUND
------------------------------------------------------------------
Purchases .................... $190,117,418 $53,523,515 $ 1,256,568
Sales ........................ $133,334,179 $70,190,464 $ 2,065,090
6. CONCENTRATION OF 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 and U.S. Territories.
7. REGULATORY AND LITIGATION MATTERS
As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission ("SEC"), 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 ("marketing support"), Franklin
Resources, Inc. and certain of its subsidiaries (collectively, the "Company"),
entered into settlements with certain of those regulators and governmental
entities. Specifically, the Company entered into settlements with the SEC, among
others, concerning market timing and marketing support.
On June 23, 2006, the SEC approved the proposed plan of distribution for the
marketing support settlement, and disbursement of the settlement monies to the
designated funds, in accordance with the terms and conditions of that settlement
and plan, was completed in September 2006. The Trust did not participate in that
settlement.
On June 6, 2007, the SEC posted for public comment the proposed plan of
distribution for the market timing settlement. Following the public comment
period, and once the SEC approves the final plan of distribution, disbursements
of settlement monies will be made promptly to individuals who were shareholders
of the designated funds during the relevant period, in accordance with the terms
and conditions of the settlement and plan.
In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, Company directors,
fund directors, and employees, have been named in private lawsuits (styled as
shareholder class actions, or as derivative actions on behalf of either the
named funds or Franklin Resources, Inc.). The lawsuits relate to the industry
practices referenced above, as well as to allegedly excessive commissions and
advisory and distribution fees.
86 | Annual Report
Franklin California Tax-Free Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. REGULATORY AND LITIGATION MATTERS (CONTINUED)
The Company and fund management believe that the claims made in each of the
private lawsuits referenced above are without merit and intend to defend against
them vigorously. The Company cannot predict with certainty the eventual outcome
of these lawsuits, nor whether they will have a material negative impact on the
Company. If it is determined that the Company bears responsibility for any
unlawful or inappropriate conduct that caused losses to the Trust, it is
committed to making the Trust or its shareholders whole, as appropriate.
8. NEW ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement No. 109" ("FIN 48"), which clarifies the
accounting for uncertainty in tax positions taken or expected to be taken in a
tax return. FIN 48 provides guidance on the measurement, recognition,
classification and disclosure of tax positions, along with accounting for the
related interest and penalties. FIN 48 is effective for fiscal years beginning
after December 15, 2006, and is to be applied to all open tax years as of the
date of effectiveness. On December 22, 2006, the Securities and Exchange
Commission extended the implementation date to no later than the last net asset
value calculation in the first semi-annual reporting period in 2007. The Trust
believes the adoption of FIN 48 will have no material impact on its financial
statements.
In September 2006, FASB issued FASB Statement No. 157, "Fair Value Measurement"
("SFAS 157"), which defines fair value, establishes a framework for measuring
fair value, and expands disclosures about fair value measurements. SFAS 157 is
effective for fiscal years beginning after November 15, 2007, and interim
periods within those fiscal years. The Trust believes the adoption of SFAS 157
will have no material impact on its financial statements.
Annual Report | 87
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 (separate portfolios of Franklin California
Tax-Free Trust, hereafter referred to as the "Funds") at June 30, 2007, the
results of each of their operations for the year then ended, the changes in each
of their net assets for each of the two years in the period then ended and 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at June 30, 2007 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
August 17, 2007
88 | Annual Report
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, 2007. A portion of the Funds'
exempt-interest dividends may be subject to the federal alternative minimum tax.
In January 2008, shareholders will be notified of amounts for use in preparing
their 2007 income tax returns.
Annual Report | 89
Franklin California Tax-Free Trust
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
MEETING OF SHAREHOLDERS, MARCH 21, 2007 AND RECONVENED ON APRIL 11, 2007, MAY
11, 2007 AND MAY 18, 2007 (UNAUDITED)
A Special Meeting of Shareholders of the Trust was held at the Trust's offices,
One Franklin Parkway, San Mateo, California on March 21, 2007 and reconvened on
April 11, 2007, May 11, 2007 and May 18, 2007. The purpose of the meeting was to
elect Trustees of the Trust and to vote on the following Proposals and
Sub-Proposals: to approve an Agreement and Plan of Reorganization that provides
for the reorganization of the Trust from a Massachusetts business trust to a
Delaware statutory trust; to approve amendments to certain of the Franklin
California Insured Tax-Free Income Fund's, Franklin California Intermediate-Term
Tax-Free Income Fund's, Franklin California Limited-Term Tax-Free Income Fund's
and Franklin California Tax-Exempt Money Fund's (each, a "Fund") fundamental
investment restrictions (including several Sub-Proposals); and to approve the
elimination of certain of the Funds' fundamental investment restrictions. At the
meeting, the following persons were elected by the shareholders to serve as
Independent Trustees of the Trust: Harris J. Ashton, Robert F. Carlson, Sam
Ginn, Edith E. Holiday, Frank W. T. LaHaye, Frank A. Olson, Larry D. Thompson
and John B. Wilson. Charles B. Johnson and Gregory E. Johnson were elected by
the shareholders to serve as Interested Trustees. Shareholders also approved the
Agreement and Plan of Reorganization providing for the reorganization of the
Trust from a Massachusetts business trust to a Delaware statutory trust,
amendments to certain of the Funds' fundamental investment restrictions
(including several Sub-Proposals), and the elimination of certain of the Funds'
fundamental investment restrictions. No other business was transacted at the
meeting.
Proposal 1. The Election of Trustees:
- --------------------------------------------------------------------------------------------------------------------
% OF % OF % OF % OF
OUTSTANDING VOTED OUTSTANDING VOTED
NAME FOR SHARES SHARES WITHHELD SHARES SHARES
- --------------------------------------------------------------------------------------------------------------------
Harris J. Ashton ................. 491,067,133.293 57.156% 97.705% 11,536,621.886 1.343% 2.295%
Robert F. Carlson ................ 489,736,413.471 57.001% 97.440% 12,867,341.708 1.498% 2.560%
Sam Ginn ......................... 490,481,783.640 57.088% 97.588% 12,121,971.539 1.411% 2.412%
Edith E. Holiday ................. 491,034,878.744 57.152% 97.698% 11,568,876.435 1.347% 2.302%
Frank W. T. LaHaye ............... 489,924,165.478 57.023% 97.477% 12,679,589.701 1.476% 2.523%
Frank A. Olson ................... 491,057,828.376 57.155% 97.703% 11,545,926.803 1.344% 2.297%
Larry D. Thompson ................ 491,204,159.439 57.172% 97.732% 11,399,595.740 1.327% 2.268%
John B. Wilson ................... 491,221,948.901 57.174% 97.735% 11,381,806.278 1.325% 2.265%
Charles B. Johnson ............... 489,357,055.844 56.957% 97.364% 13,246,699.335 1.542% 2.636%
Gregory E. Johnson ............... 490,713,884.439 57.115% 97.634% 11,889,870.740 1.384% 2.366%
90 | Annual Report
Franklin California Tax-Free Trust
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
MEETING OF SHAREHOLDERS, MARCH 21, 2007 AND RECONVENED ON APRIL 11, 2007,
MAY 11, 2007 AND MAY 18, 2007 (UNAUDITED) (CONTINUED)
Proposal 2. To approve an Agreement and Plan of Reorganization that provides for
the reorganization of the Trust from a Massachusetts business trust to a
Delaware statutory trust:
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
INSURED TAX-FREE OUTSTANDING VOTED
INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 81,696,067.621 51.790% 76.644%
Against ............................. 2,686,928.621 1.703% 2.521%
Abstain ............................. 8,213,300.540 5.207% 7.705%
Broker Non-Votes .................... 13,996,111.000 8.873% 13.130%
- --------------------------------------------------------------------------------
TOTAL ............................... 106,592,407.782 67.573% 100.000%
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
INTERMEDIATE-TERM OUTSTANDING VOTED
TAX-FREE INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 22,553,533.626 54.005% 70.715%
Against ............................. 576,448.936 1.381% 1.808%
Abstain ............................. 1,578,432.970 3.779% 4.948%
Broker Non-Votes .................... 7,185,462.000 17.206% 22.529%
- --------------------------------------------------------------------------------
TOTAL ............................... 31,893,877.532 76.371% 100.000%
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
LIMITED-TERM OUTSTANDING VOTED
TAX-FREE INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 638,027.496 60.210% 86.216%
Against ............................. 8,706.539 0.822% 1.177%
Abstain ............................. 47,668.812 4.498% 6.441%
Broker Non-Votes .................... 45,630.000 4.306% 6.166%
- --------------------------------------------------------------------------------
TOTAL ............................... 740,032.847 69.836% 100.000%
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
TAX-EXEMPT OUTSTANDING VOTED
MONEY FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 351,873,927.872 53.427% 90.659%
Against ............................. 10,170,471.896 1.544% 2.620%
Abstain ............................. 12,776,777.940 1.940% 3.292%
Broker Non-Votes .................... 13,309,497.000 2.021% 3.429%
- --------------------------------------------------------------------------------
TOTAL ............................... 388,130,674.708 58.932% 100.000%
Annual Report | 91
Franklin California Tax-Free Trust
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
MEETING OF SHAREHOLDERS, MARCH 21, 2007 AND RECONVENED ON APRIL 11, 2007,
MAY 11, 2007 AND MAY 18, 2007 (UNAUDITED) (CONTINUED)
Proposal 3. To approve amendments to certain of the Funds' fundamental
investment restrictions (includes several Sub-Proposals):
(a) To amend the Fund's fundamental investment restriction regarding borrowing:
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
INSURED TAX-FREE OUTSTANDING VOTED
INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 63,193,389.358 40.060% 69.176%
Against ............................. 3,427,268.685 2.173% 3.752%
Abstain ............................. 5,344,010.220 3.388% 5.850%
Broker Non-Votes .................... 19,387,064.000 12.290% 21.222%
- --------------------------------------------------------------------------------
TOTAL ............................... 91,351,732.263 57.911% 100.000%
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
INTERMEDIATE-TERM OUTSTANDING VOTED
TAX-FREE INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 22,027,330.271 52.745% 69.065%
Against ............................. 1,189,325.435 2.848% 3.729%
Abstain ............................. 1,491,759.826 3.572% 4.677%
Broker Non-Votes .................... 7,185,462.000 17.206% 22.529%
- --------------------------------------------------------------------------------
TOTAL ............................... 31,893,877.532 76.371% 100.000%
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
TAX-EXEMPT OUTSTANDING VOTED
MONEY FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 343,175,028.936 52.106% 89.506%
Against ............................. 13,021,155.352 1.977% 3.397%
Abstain ............................. 13,840,951.942 2.102% 3.609%
Broker Non-Votes .................... 13,375,092.000 2.031% 3.488%
- --------------------------------------------------------------------------------
TOTAL ............................... 383,412,228.230 58.216% 100.000%
(b) To amend the Fund's fundamental investment restriction regarding
underwriting:
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
INSURED TAX-FREE OUTSTANDING VOTED
INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 63,676,765.426 40.367% 69.705%
Against ............................. 2,916,407.715 1.849% 3.193%
Abstain ............................. 5,371,495.122 3.405% 5.880%
Broker Non-Votes .................... 19,387,064.000 12.290% 21.222%
- --------------------------------------------------------------------------------
TOTAL ............................... 91,351,732.263 57.911% 100.000%
92 | Annual Report
Franklin California Tax-Free Trust
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
MEETING OF SHAREHOLDERS, MARCH 21, 2007 AND RECONVENED ON APRIL 11, 2007,
MAY 11, 2007 AND MAY 18, 2007 (UNAUDITED) (CONTINUED)
Proposal 3. To approve amendments to certain of the Funds' fundamental
investment restrictions (includes several Sub-Proposals): (CONTINUED)
(b) To amend the Fund's fundamental investment restriction regarding
underwriting: (CONTINUED)
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
INTERMEDIATE-TERM OUTSTANDING VOTED
TAX-FREE INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 22,048,653.099 52.796% 69.132%
Against ............................. 1,012,677.975 2.425% 3.175%
Abstain ............................. 1,647,084.458 3.944% 5.164%
Broker Non-Votes .................... 7,185,462.000 17.206% 22.529%
- --------------------------------------------------------------------------------
TOTAL ............................... 31,893,877.532 76.371% 100.000%
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
TAX-EXEMPT OUTSTANDING VOTED
MONEY FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 346,220,536.771 52.569% 90.300%
Against ............................. 9,595,892.169 1.457% 2.503%
Abstain ............................. 14,220,707.290 2.159% 3.709%
Broker Non-Votes .................... 13,375,092.000 2.031% 3.488%
- --------------------------------------------------------------------------------
TOTAL ............................... 383,412,228.230 58.216% 100.000%
(c) To amend the Fund's fundamental investment restriction regarding lending:
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
INSURED TAX-FREE OUTSTANDING VOTED
INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 63,405,881.337 40.195% 69.409%
Against ............................. 3,466,335.238 2.198% 3.794%
Abstain ............................. 5,092,451.688 3.228% 5.575%
Broker Non-Votes .................... 19,387,064.000 12.290% 21.222%
- --------------------------------------------------------------------------------
TOTAL ............................... 91,351,732.263 57.911% 100.000%
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
INTERMEDIATE-TERM OUTSTANDING VOTED
TAX-FREE INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 21,878,542.417 52.389% 68.598%
Against ............................. 1,261,169.952 3.020% 3.954%
Abstain ............................. 1,568,703.163 3.756% 4.919%
Broker Non-Votes .................... 7,185,462.000 17.206% 22.529%
- --------------------------------------------------------------------------------
TOTAL ............................... 31,893,877.532 76.371% 100.000%
Annual Report | 93
Franklin California Tax-Free Trust
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
MEETING OF SHAREHOLDERS, MARCH 21, 2007 AND RECONVENED ON APRIL 11, 2007,
MAY 11, 2007 AND MAY 18, 2007 (UNAUDITED) (CONTINUED)
Proposal 3. To approve amendments to certain of the Funds' fundamental
investment restrictions (includes several Sub-Proposals): (CONTINUED)
(c) To amend the Fund's fundamental investment restriction regarding lending:
(CONTINUED)
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
LIMITED-TERM OUTSTANDING VOTED
TAX-FREE INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 586,090.547 55.309% 79.198%
Against ............................. 49,944.461 4.713% 6.749%
Abstain ............................. 58,367.839 5.508% 7.887%
Broker Non-Votes .................... 45,630.000 4.306% 6.166%
- --------------------------------------------------------------------------------
TOTAL ............................... 740,032.847 69.836% 100.000%
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
TAX-EXEMPT OUTSTANDING VOTED
MONEY FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 345,165,133.284 52.409% 90.025%
Against ............................. 11,176,933.514 1.697% 2.915%
Abstain ............................. 13,695,069.432 2.079% 3.572%
Broker Non-Votes .................... 13,375,092.000 2.031% 3.488%
- --------------------------------------------------------------------------------
TOTAL ............................... 383,412,228.230 58.216% 100.000%
(d) To amend the Fund's fundamental investment restriction regarding investments
in real estate:
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
INSURED TAX-FREE OUTSTANDING VOTED
INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 64,006,825.885 40.576% 70.067%
Against ............................. 2,894,821.420 1.835% 3.169%
Abstain ............................. 5,063,020.958 3.210% 5.542%
Broker Non-Votes .................... 19,387,064.000 12.290% 21.222%
- --------------------------------------------------------------------------------
TOTAL ............................... 91,351,732.263 57.911% 100.000%
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
INTERMEDIATE-TERM OUTSTANDING VOTED
TAX-FREE INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 21,816,410.421 52.240% 68.403%
Against ............................. 1,054,714.230 2.526% 3.307%
Abstain ............................. 1,837,290.881 4.399% 5.761%
Broker Non-Votes .................... 7,185,462.000 17.206% 22.529%
- --------------------------------------------------------------------------------
TOTAL ............................... 31,893,877.532 76.371% 100.000%
94 | Annual Report
Franklin California Tax-Free Trust
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
MEETING OF SHAREHOLDERS, MARCH 21, 2007 AND RECONVENED ON APRIL 11, 2007,
MAY 11, 2007 AND MAY 18, 2007 (UNAUDITED) (CONTINUED)
Proposal 3. To approve amendments to certain of the Funds' fundamental
investment restrictions (includes several Sub-Proposals): (CONTINUED)
(d) To amend the Fund's fundamental investment restriction regarding investments
in real estate: (CONTINUED)
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
LIMITED-TERM OUTSTANDING VOTED
TAX-FREE INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 586,090.548 55.309% 79.198%
Against ............................. 50,157.839 4.733% 6.778%
Abstain ............................. 58,154.460 5.488% 7.858%
Broker Non-Votes .................... 45,630.000 4.306% 6.166%
- --------------------------------------------------------------------------------
TOTAL ............................... 740,032.847 69.836% 100.000%
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
TAX-EXEMPT OUTSTANDING VOTED
MONEY FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 345,551,979.062 52.467% 90.126%
Against ............................. 9,598,099.519 1.458% 2.504%
Abstain ............................. 14,887,057.649 2.260% 3.882%
Broker Non-Votes .................... 13,375,092.000 2.031% 3.488%
- --------------------------------------------------------------------------------
TOTAL ............................... 383,412,228.230 58.216% 100.000%
(e) To amend the Fund's fundamental investment restriction regarding investments
in commodities:
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
INSURED TAX-FREE OUTSTANDING VOTED
INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 62,859,556.318 39.849% 68.811%
Against ............................. 3,755,766.152 2.381% 4.112%
Abstain ............................. 5,349,345.793 3.391% 5.855%
Broker Non-Votes .................... 19,387,064.000 12.290% 21.222%
- --------------------------------------------------------------------------------
TOTAL ............................... 91,351,732.263 57.911% 100.000%
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
INTERMEDIATE-TERM OUTSTANDING VOTED
TAX-FREE INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 21,653,331.633 51.850% 67.892%
Against ............................. 1,245,371.517 2.982% 3.905%
Abstain ............................. 1,809,712.382 4.333% 5.674%
Broker Non-Votes .................... 7,185,462.000 17.206% 22.529%
- --------------------------------------------------------------------------------
TOTAL ............................... 31,893,877.532 76.371% 100.000%
Annual Report | 95
Franklin California Tax-Free Trust
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
MEETING OF SHAREHOLDERS, MARCH 21, 2007 AND RECONVENED ON APRIL 11, 2007,
MAY 11, 2007 AND MAY 18, 2007 (UNAUDITED) (CONTINUED)
Proposal 3. To approve amendments to certain of the Funds' fundamental
investment restrictions (includes several Sub-Proposals): (CONTINUED)
(e) To amend the Fund's fundamental investment restriction regarding investments
in commodities: (CONTINUED)
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
LIMITED-TERM OUTSTANDING VOTED
TAX-FREE INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 586,090.547 55.309% 79.198%
Against ............................. 49,944.461 4.713% 6.749%
Abstain ............................. 58,367.839 5.508% 7.887%
Broker Non-Votes .................... 45,630.000 4.306% 6.166%
- --------------------------------------------------------------------------------
TOTAL ............................... 740,032.847 69.836% 100.000%
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
TAX-EXEMPT OUTSTANDING VOTED
MONEY FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 337,234,497.667 51.204% 87.957%
Against ............................. 18,905,280.002 2.871% 4.931%
Abstain ............................. 13,897,358.561 2.110% 3.624%
Broker Non-Votes .................... 13,375,092.000 2.031% 3.488%
- --------------------------------------------------------------------------------
TOTAL ............................... 383,412,228.230 58.216% 100.000%
(f) To amend the Fund's fundamental investment restriction regarding issuing
senior securities:
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
INSURED TAX-FREE OUTSTANDING VOTED
INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 63,298,160.881 40.127% 69.291%
Against ............................. 2,972,684.844 1.884% 3.254%
Abstain ............................. 5,693,822.538 3.610% 6.233%
Broker Non-Votes .................... 19,387,064.000 12.290% 21.222%
- --------------------------------------------------------------------------------
TOTAL ............................... 91,351,732.263 57.911% 100.000%
96 | Annual Report
Franklin California Tax-Free Trust
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
MEETING OF SHAREHOLDERS, MARCH 21, 2007 AND RECONVENED ON APRIL 11, 2007,
MAY 11, 2007 AND MAY 18, 2007 (UNAUDITED) (CONTINUED)
Proposal 3. To approve amendments to certain of the Funds' fundamental
investment restrictions (includes several Sub-Proposals): (CONTINUED)
(f) To amend the Fund's fundamental investment restriction regarding issuing
senior securities: (CONTINUED)
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
INTERMEDIATE-TERM OUTSTANDING VOTED
TAX-FREE INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 22,112,452.064 52.949% 69.332%
Against ............................. 1,013,865.157 2.428% 3.179%
Abstain ............................. 1,582,068.311 3.788% 4.960%
Broker Non-Votes .................... 7,185,462.000 17.206% 22.529%
- --------------------------------------------------------------------------------
TOTAL ............................... 31,893,847.532 76.371% 100.000%
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
TAX-EXEMPT OUTSTANDING VOTED
MONEY FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 345,573,863.825 52.471% 90.132%
Against ............................. 9,359,326.692 1.421% 2.441%
Abstain ............................. 15,103,945.713 2.293% 3.939%
Broker Non-Votes .................... 13,375,092.000 2.031% 3.488%
- --------------------------------------------------------------------------------
TOTAL ............................... 383,412,228.230 58.216% 100.000%
(g) To amend the Fund's fundamental investment restriction regarding industry
concentration:
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
INSURED TAX-FREE OUTSTANDING VOTED
INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 63,161,463.717 40.040% 69.141%
Against ............................. 3,006,141.170 1.906% 3.291%
Abstain ............................. 5,797,063.376 3.675% 6.346%
Broker Non-Votes .................... 19,387,064.000 12.290% 21.222%
- --------------------------------------------------------------------------------
TOTAL ............................... 91,351,732.263 57.911% 100.000%
Annual Report | 97
Franklin California Tax-Free Trust
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
MEETING OF SHAREHOLDERS, MARCH 21, 2007 AND RECONVENED ON APRIL 11, 2007,
MAY 11, 2007 AND MAY 18, 2007 (UNAUDITED) (CONTINUED)
Proposal 3. To approve amendments to certain of the Funds' fundamental
investment restrictions (includes several Sub-Proposals): (CONTINUED)
(g) To amend the Fund's fundamental investment restriction regarding industry
concentration: (CONTINUED)
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
INTERMEDIATE-TERM OUTSTANDING VOTED
TAX-FREE INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 22,106,406.603 52.935% 69.313%
Against ............................. 996,171.720 2.385% 3.124%
Abstain ............................. 1,605,837.209 3.845% 5.034%
Broker Non-Votes .................... 7,185,462.000 17.206% 22.529%
- --------------------------------------------------------------------------------
TOTAL ............................... 31,893,877.532 76.371% 100.000%
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
LIMITED-TERM OUTSTANDING VOTED
TAX-FREE INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 586,090.547 55.309% 79.198%
Against ............................. 49,944.461 4.713% 6.749%
Abstain ............................. 58,367.839 5.508% 7.887%
Broker Non-Votes .................... 45,630.000 4.306% 6.166%
- --------------------------------------------------------------------------------
TOTAL ............................... 740,032.847 69.836% 100.000%
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
TAX-EXEMPT OUTSTANDING VOTED
MONEY FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 346,363,657.155 52.590% 90.338%
Against ............................. 9,829,730.896 1.493% 2.564%
Abstain ............................. 13,843,748.179 2.102% 3.610%
Broker Non-Votes .................... 13,375,092.000 2.031% 3.488%
- --------------------------------------------------------------------------------
TOTAL ............................... 383,412,228.230 58.216% 100.000%
98 | Annual Report
Franklin California Tax-Free Trust
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
MEETING OF SHAREHOLDERS, MARCH 21, 2007 AND RECONVENED ON APRIL 11, 2007,
MAY 11, 2007 AND MAY 18, 2007 (UNAUDITED) (CONTINUED)
Proposal 3. To approve amendments to certain of the Funds' fundamental
investment restrictions (includes several Sub-Proposals): (CONTINUED)
(h) To amend the Fund's fundamental investment restriction regarding
diversification of investments:
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
INSURED TAX-FREE OUTSTANDING VOTED
INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 64,506,977.091 40.893% 70.614%
Against ............................. 2,720,557.972 1.725% 2.978%
Abstain ............................. 4,737,133.200 3.003% 5.186%
Broker Non-Votes .................... 19,387,064.000 12.290% 21.222%
- --------------------------------------------------------------------------------
TOTAL ............................... 91,351,732.263 57.911% 100.000%
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
INTERMEDIATE-TERM OUTSTANDING VOTED
TAX-FREE INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 22,242,275.026 53.260% 69.739%
Against ............................. 742,676.615 1.778% 2.329%
Abstain ............................. 1,723,463.891 4.127% 5.403%
Broker Non-Votes .................... 7,185,462.000 17.206% 22.529%
- --------------------------------------------------------------------------------
TOTAL ............................... 31,893,877.532 76.371% 100.000%
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
LIMITED-TERM OUTSTANDING VOTED
TAX-FREE INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 582,214.976 54.943% 78.674%
Against ............................. 49,944.461 4.713% 6.749%
Abstain ............................. 62,243.410 5.874% 8.411%
Broker Non-Votes .................... 45,630.000 4.306% 6.166%
- --------------------------------------------------------------------------------
TOTAL ............................... 740,032.847 69.836% 100.000%
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
TAX-EXEMPT OUTSTANDING VOTED
MONEY FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 348,666,804.565 52.940% 90.938%
Against ............................. 8,083,810.448 1.228% 2.108%
Abstain ............................. 13,286,521.217 2.017% 3.466%
Broker Non-Votes .................... 13,375,092.000 2.031% 3.488%
- --------------------------------------------------------------------------------
TOTAL ............................... 383,412,228.230 58.216% 100.000%
Annual Report | 99
Franklin California Tax-Free Trust
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
MEETING OF SHAREHOLDERS, MARCH 21, 2007 AND RECONVENED ON APRIL 11, 2007,
MAY 11, 2007 AND MAY 18, 2007 (UNAUDITED) (CONTINUED)
Proposal 4. To approve the elimination of certain of the Funds' fundamental
investment restrictions:
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
INSURED TAX-FREE OUTSTANDING VOTED
INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 62,830,504.690 39.830% 68.779%
Against ............................. 3,672,545.039 2.329% 4.020%
Abstain ............................. 5,461,618.534 3.462% 5.979%
Broker Non-Votes .................... 19,387,064.000 12.290% 21.222%
- --------------------------------------------------------------------------------
TOTAL ............................... 91,351,732.263 57.911% 100.000%
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
INTERMEDIATE-TERM OUTSTANDING VOTED
TAX-FREE INCOME FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 21,807,401.871 52.219% 68.375%
Against ............................. 1,283,952.152 3.074% 4.026%
Abstain ............................. 1,617,061.509 3.872% 5.070%
Broker Non-Votes .................... 7,185,462.000 17.206% 22.529%
- --------------------------------------------------------------------------------
TOTAL ............................... 31,893,877.532 76.371% 100.000%
- --------------------------------------------------------------------------------
FRANKLIN CALIFORNIA % OF % OF
TAX-EXEMPT OUTSTANDING VOTED
MONEY FUND SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------------
For ................................. 338,957,678.299 51.466% 88.406%
Against ............................. 16,747,018.561 2.543% 4.367%
Abstain ............................. 14,332,439.370 2.176% 3.739%
Broker Non-Votes .................... 13,375,092.000 2.031% 3.488%
- --------------------------------------------------------------------------------
TOTAL ............................... 383,412,228.230 58.216% 100.000%
100 | 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. Generally, each board member
serves 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 140 Director, Bar-S Foods (meat
One Franklin Parkway packing company).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief
Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT F. CARLSON (1928) Trustee Since April 2007 121 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, senior member and past President, Board of Administration, California Public Employees Retirement Systems
(CALPERS); and FORMERLY, member and Chairman of the Board, Sutter Community Hospitals; member, Corporate Board, Blue Shield of
California; and Chief Counsel, California Department of Transportation.
- ------------------------------------------------------------------------------------------------------------------------------------
SAM GINN (1937) Trustee Since April 2007 121 Director, Chevron Corporation
One Franklin Parkway (global energy company) and ICO
San Mateo, CA 94403-1906 Global Communications (Holdings)
Limited (satellite company).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Private investor; and FORMERLY, Chairman of the Board, Vodafone AirTouch, PLC; Chairman of the Board and Chief Executive Officer,
AirTouch Communications (1993-1998) and Pacific Telesis Groups (1988-1994).
- ------------------------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (1952) Trustee Since September 140 Director, Hess Corporation
One Franklin Parkway 2006 (formerly, Amerada Hess
San Mateo, CA 94403-1906 Corporation) (exploration and
refining of oil and gas), H.J.
Heinz Company (processed foods and
allied products), RTI
International Metals, Inc.
(manufacture and distribution of
titanium), Canadian National
Railway (railroad) and White
Mountains Insurance Group, Ltd.
(holding company).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; and FORMERLY, Assistant to the President of the United States and Secretary of
the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and
Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 101
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK W.T. LAHAYE (1929) Trustee Since 1985 121 Director, Center for Creative Land
One Franklin Parkway Recycling (redevelopment).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture capital).
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK A. OLSON (1932) Trustee Since April 2007 140 Director, Hess Corporation
One Franklin Parkway San (formerly, Amerada Hess
Mateo, CA 94403-1906 Corporation) (exploration and
refining of oil and gas) and
Sentient Jet (private jet
service); and FORMERLY, Director,
Becton Dickinson and Company
(medical technology), Cooper
Industries, Inc. (electrical
products and tools and hardware),
Health Net, Inc. (formerly,
Foundation Health) (integrated
managed care), The Hertz
Corporation (car rental), Pacific
Southwest Airlines, The RCA
Corporation, Unicom (formerly,
Commonwealth Edison), UAL
Corporation (airlines) and White
Mountains Insurance Group, Ltd.
(holding company).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer (1977-1999));
and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL Corporation.
- ------------------------------------------------------------------------------------------------------------------------------------
LARRY D. THOMPSON (1945) Trustee Since April 2007 140 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (consumer products); and FORMERLY,
Director, Delta Airlines (aviation) (2003-2005) and Providian Financial Corp. (1997-2001); Senior Fellow of The Brookings
Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General, U.S.
Department of Justice (2001-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
JOHN B. WILSON (1959) Trustee Since September 121 None
One Franklin Parkway 2006
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Founder, Hyannis Port Capital, Inc. (real estate and private equity investing); serves on private and non-profit
boards; and FORMERLY, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail) (1996-2000); Chief Financial Officer
and Executive Vice President - Finance and Strategy, Staples, Inc. (office supplies) (1992-1996); Executive Vice President -
Corporate Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (1986-1990).
- ------------------------------------------------------------------------------------------------------------------------------------
102 | Annual Report
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
- ------------------------------------------------------------------------------------------------------------------------------------
**CHARLES B. JOHNSON (1933) Trustee and Trustee since 140 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.; Director, Templeton Worldwide, 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 42
of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
**GREGORY E. JOHNSON (1961) Trustee Since April 2007 91 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, President and Chief Executive Officer, Franklin Resources, Inc.; President, Templeton Worldwide, Inc.; Director,
Templeton Asset Management Ltd.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of
Franklin Resources, Inc. and of 33 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.
- ------------------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (1952) Chief Chief Compliance Not Applicable Not Applicable
One Franklin Parkway Compliance Officer since 2004
San Mateo, CA 94403-1906 Officer and and Vice
Vice President President - AML
- AML Compliance since
Compliance 2006
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin Resources, Inc. and of
46 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director of Compliance, Franklin Resources, Inc.
(1994-2001).
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 103
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
LAURA FERGERSON (1962) Treasurer Since 2004 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Franklin Templeton Services, LLC; officer of 30 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).
- ------------------------------------------------------------------------------------------------------------------------------------
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 some of the other
subsidiaries of Franklin Resources, Inc. and of 46 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 Templeton Investments; officer and director of one of the subsidiaries of Franklin
Resources, Inc.; and officer of 46 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
RUPERT H. JOHNSON, JR. (1940) President and President since Not Applicable Not Applicable
One Franklin Parkway Chief 1993 and Chief
San Mateo, CA 94403-1906 Executive 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.; Director, Franklin Advisers, Inc. and
Templeton Worldwide, 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 44 of the investment companies in Franklin
Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
KAREN L. SKIDMORE (1952) Vice President Since 2006 Not Applicable Not Applicable
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 30 of the investment companies in Franklin
Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
104 | 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
- ------------------------------------------------------------------------------------------------------------------------------------
CRAIG S. TYLE (1960) Vice President Since 2005 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Counsel and Executive Vice President, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin
Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments; and FORMERLY, Partner, Shearman &
Sterling, LLP (2004-2005); and General Counsel, Investment Company Institute (ICI) (1997-2004).
- ------------------------------------------------------------------------------------------------------------------------------------
GALEN G. VETTER (1951) Chief Financial Since 2004 Not Applicable Not Applicable
500 East Broward Blvd. Officer and
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Accounting
Officer
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; officer of 46 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Managing Director, RSM McGladrey, Inc. (1999-2004); and Partner, McGladrey & Pullen, LLP (1979-1987 and
1991-2004).
- ------------------------------------------------------------------------------------------------------------------------------------
THOMAS WALSH (1961) 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.
- ------------------------------------------------------------------------------------------------------------------------------------
* 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 manager or affiliated
investment managers.
** Charles B. Johnson is considered to be an interested person of the Trust
under the federal securities laws due to his position as officer and director
and major shareholder of Franklin Resources, Inc. (Resources), which is the
parent company of the Fund's investment manager and distributor. Gregory E.
Johnson is considered to be an interested person of the Trust under the federal
securities laws due to his position as an officer and director of Resources.
Note 1: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, of Gregory E. Johnson.
Note 2: Officer information is current as of the date of this report. It is
possible that after this date, information about officers may change.
Note 3: Prior to June 30, 2007, Harmon E. Burns, S. Joseph Fortunato, Rupert H.
Johnson, Jr. and Gordon S. Macklin ceased to be trustees of the Trust.
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 JOHN B. WILSON AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. WILSON QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE
BUSINESS BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS CHIEF FINANCIAL OFFICER
OF STAPLES, INC. FROM 1992 TO 1996. MR. WILSON HAS BEEN A MEMBER AND CHAIRMAN OF
THE FUND'S AUDIT COMMITTEE SINCE 2006. AS A RESULT OF SUCH BACKGROUND AND
EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT MR. WILSON 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. WILSON 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 | 105
Franklin California Tax-Free Trust
SHAREHOLDER INFORMATION
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT
At a meeting held February 27, 2007, the Board of Trustees (Board), including a
majority of non-interested or independent Trustees, approved renewal of the
investment management agreement 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
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, Inc. (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 and its affiliates including management's
explanation of differences where relevant and a three-year expense analysis with
an explanation for any increase in expense ratios. Additional material
accompanying such report was a memorandum prepared by management describing
project initiatives and capital investments relating to the services provided to
the Funds by the Franklin Templeton Investments organization, as well as a
memorandum relating to economies of scale and a comparative analysis concerning
transfer agent fees charged each Fund.
In considering such materials, the independent Trustees received assistance and
advice from and met separately with independent counsel. While the investment
management agreements for all Funds were considered at the same Board meeting,
the Board dealt with each Fund separately. In approving continuance of the
investment management agreement 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 management
agreement was in the best interests of each Fund and its shareholders. While
attention was given to all information furnished, the following discusses some
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 adherence to fair value
pricing procedures established by the Board, and the accuracy
106 | Annual Report
Franklin California Tax-Free Trust
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
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 continuous efforts and
expenditures in establishing back-up systems and recovery procedures to function
in the event of a natural disaster, it being noted that such systems and
procedures had functioned smoothly during the Florida hurricanes and blackouts
experienced in recent years. 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 a portfolio manager's bonus
compensation was the relative investment performance of the funds he or she
managed and that a portion of such bonus was required to be invested in a
predesignated list of funds within such person's fund management area so as to
be aligned with the interests of Fund shareholders. The Board also took into
account the quality of 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, the high industry
ranking given to the Franklin Templeton website, and the firsthand experience of
the individual Board members 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 agreement
renewals. The Lipper reports prepared for each individual Fund showed its
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 2006 and the
previous 10 years ended December 31, 2006, in comparison with a performance
universe consisting of all retail and institutional California insured municipal
debt funds as selected by Lipper. The Lipper report showed that the Fund's
income return during 2006 for the previous three-, five- and 10-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 2006, and for the
previous three-, five- and 10-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 INTERMEDIATE-TERM TAX-FREE INCOME FUND - The Lipper report
for this Fund showed the investment performance of its Class A shares during
2006 and the previous 10 years ended December 31, 2006, in comparison with a
performance universe consisting of all retail and
Annual Report | 107
Franklin California Tax-Free Trust
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
institutional California intermediate municipal debt funds as selected by
Lipper. Such Lipper report comparison showed that the Fund's income return in
2006 was in the highest quintile and during each of the previous three-, five-
and 10-year periods on an annualized basis was in either the highest or
second-highest quintile of its performance universe. The Lipper report also
showed that the Fund's total return during 2006 was in the middle quintile of
its performance universe, and for each of the previous three-, five- and 10-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 universe of retail and institutional California
short-intermediate municipal debt funds as selected by Lipper during the three
years ended December 31, 2006, being the first three full years of operations
for this Fund. The Lipper report showed that both the Fund's income and total
return during this period was in the lowest quintile of such universe. In
explaining such performance, management pointed out the Fund's objective of
investing in higher quality, shorter maturing securities as well as its small
size. The Board found such performance to be acceptable in view of management's
explanation and also noted that the Fund's expenses had been partially waived or
absorbed by management.
FRANKLIN CALIFORNIA TAX-EXEMPT MONEY FUND - The Lipper report for this Fund
showed its investment performance during 2006 and the 10-year period ended
December 31, 2006, in comparison to a performance universe consisting of all
retail and institutional California tax-exempt money market funds as selected by
Lipper. The Lipper report showed the Fund's total return to be in the middle
quintile of its performance universe during 2006, as well as in each of the
previous three- and five-year periods on an annualized basis and to be in the
second-lowest quintile for the 10-year annualized period. The Board found such
performance acceptable in view of the Fund's conservative investment approach,
noting that the Fund's annualized return for the 10-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 management agreement was similar to those provided by fund managers
to other mutual fund groups. In reviewing comparative costs, emphasis was given
to each Fund's contractual investment management fee in comparison with the
contractual investment management fee that would have been charged by other
funds within its Lipper expense group assuming they were similar in size to the
Fund, as well as the actual total expenses of the Fund in comparison with those
of such group. The Lipper contractual investment management fee analysis
includes administrative fees as being part of management fees, and total
expenses for comparative consistency were shown by Lipper for Fund Class A
shares in the case of Franklin California Insured Tax-Free Income Fund and
California Intermediate-Term Tax-Free Income Fund. The results of such expense
comparisons showed that the contractual investment management fee rate of
Franklin
108 | Annual Report
Franklin California Tax-Free Trust
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
California Insured Tax-Free Income Fund was below the median of its Lipper
expense group and its actual total expenses were in the least expensive quintile
of such group. The contractual investment management fee rate of Franklin
California Intermediate-Term Tax-Free Income Fund was at the median of its
Lipper expense group and its actual total expenses were in the least expensive
quintile of such group. 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 that caused
actual total expenses to be the lowest in its Lipper expense group. The Lipper
expense comparison for Franklin California Tax-Exempt Money Fund showed its
contractual investment management fee to be in the second most expensive
quintile of its Lipper expense group, while its actual total expenses were in
the second least expensive quintile of such group. 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 family of funds and
provides a number of services for shareholders, including check writing. It was
also noted that the Fund's contractual investment management fee rate was within
two basis points of the median of its expense group as shown in 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 individual funds. 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, while being continuously refined and reflecting changes in the
Manager's own cost accounting, the allocation methodology was consistent with
that followed in profitability report presentations for the Funds made in prior
years and that the Funds' independent registered public accounting firm had been
engaged by the Manager to perform certain procedures on a biennial basis,
specified and approved by the Manager and the Funds' Board solely for their
purposes and use in reference to the profitability analysis. In reviewing and
discussing such analysis, management discussed with the Board its belief that
costs incurred in establishing the infrastructure necessary for the type of
mutual fund operations conducted by the Manager and its 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
Annual Report | 109
Franklin California Tax-Free Trust
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
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. 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 that financed up-front commissions paid to brokers/dealers who
sold fund Class B shares prior to February 2005, when the offering of such
shares was discontinued. Based upon its consideration of all these factors, the
Board determined that the level of profits realized by the Manager and its
affiliates from providing services to 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 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 management
agreements 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 $10 million at December 31, 2006, 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; 0.45% on net assets in excess of $250 million; with additional
breakpoints thereafter beginning at the $10 billion net asset level. At December
31, 2006, the net assets of Franklin California Insured Tax-Free Income Fund
stood at approximately $2 billion, and those of Franklin California
Intermediate-Term Tax-Free Income Fund and Franklin California Tax-Exempt Money
Fund were approximately $482 million and $658 million, respectively. In
discussing these fee levels, management's position was that the existing fee
rate reaches a low level quickly, which anticipates economies of scale as assets
grow, and in support of such position pointed out the generally favorable
effective management fee rate and low total actual expense comparisons for these
Funds within their Lipper expense groups as previously discussed under
"Comparative Expenses." 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 management agreement for these three Funds provides a sharing of
benefits with each Fund and its shareholders.
110 | Annual Report
Franklin California Tax-Free Trust
SHAREHOLDER INFORMATION (CONTINUED)
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 1-954/527-7678 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the 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 | 111
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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 FUNDS
INTERNATIONAL
Mutual European Fund
Templeton BRIC Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Emerging Markets Small Cap Fund
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund 1
GLOBAL
Mutual Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund 1
Templeton Growth Fund
Templeton World Fund
GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small Cap Growth Fund II 2
Franklin Small-Mid Cap Growth Fund
VALUE
Franklin Balance Sheet Investment Fund 1
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 1
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund 3
Mutual Shares Fund
BLEND
Franklin Balanced Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Global Real Estate 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 (R) Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund 4
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund 5
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 6
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 7
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 8
Colorado
Connecticut
Florida 8
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 7
Michigan 7
Minnesota 7
Missouri
New Jersey
New York 8
North Carolina
Ohio 7
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance Products Trust 9
1. The fund is open only to existing shareholders and select retirement plans.
2. The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.
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. Effective 10/1/06, Franklin's AGE High Income Fund changed its name to
Franklin High Income Fund. The fund's investment goal and strategy remained the
same.
6. For investors subject to the alternative minimum tax, a small portion of fund
dividends may be taxable. Distributions of capital gains are generally taxable.
7. The fund invests primarily in insured municipal securities.
8. 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).
9. The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
05/07 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 A2007 08/07
ITEM 2. CODE OF ETHICS.
(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy
of its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The Registrant has an audit committee financial expert serving on its
audit committee.
(2) The audit committee financial expert is John B. Wilson and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(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 $101,232 for the fiscal year ended June 30, 2007 and
$104,146 for the fiscal year ended June 30, 2006.
(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.
There were no 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.
(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 $46,000 for the fiscal year
ended June 30, 2007 and $0 for the fiscal year ended June 30, 2006. The
services for which these fees were paid included tax compliance and advice.
(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, 2007
and $1,778 for the fiscal year ended June 30, 2006. 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 $0 for the fiscal year ended
June 30, 2007 and $174,083 for the fiscal year ended June 30, 2006. 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.
(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 $46,000 for the fiscal year ended June 30,
2007 and $175,861 for the fiscal year ended June 30, 2006.
(h) The registrant's audit committee of the board 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 /S/JIMMY D. GAMBILL
-------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date August 27, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /S/JIMMY D. GAMBILL
-------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date August 27, 2007
By /S/GALEN G. VETTER
------------------
Galen G. Vetter
Chief Financial Officer
Date August 27, 2007