franklin california tax-free trust semiannual report€¦ · december 31, 2011 semiannual report...

Franklin California Tax-Free Trust

DECEMBER 31, 2011

SEMIANNUAL REPORTAND SHAREHOLDER LETTER

Franklin California Insured Tax-Free Income Fund

Franklin California Intermediate-Term Tax-Free Income Fund

Franklin California Tax-Exempt Money Fund

Sign up for electronic deliveryon franklintempleton.com

TAX - FREE INCOME

Franklin Templeton InvestmentsGain From Our Perspective®

Franklin Templeton’s distinct multi-manager structure combines thespecialized expertise of three world-class investment management groups—Franklin, Templeton and Mutual Series.

Each of our portfolio management groups operates autonomously, relying on its own research and staying true to the unique investment disciplines that underlie its success.

Franklin. Founded in 1947, Franklin is a recognized leader in fixed income investingand 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, withoffices 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.

Because our management groups work independently and adhere to differentinvestment approaches, Franklin, Templeton and Mutual Series funds typicallyhave distinct portfolios. That’s why our funds can be used to build trulydiversified allocation plans covering every major asset class.

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 trustednames in financial services.

TRUE DIVERSIFICATION

RELIABILITY YOU CAN TRUST

SPECIALIZED EXPERTISE

MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS

Not part of the semiannual report

NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE

Shareholder LetterDear Shareholder:

During the six-month period ended December 31, 2011, the municipal bondmarket strengthened after a period of underperformance from late 2010 intoearly 2011. U.S. economic data seemed to indicate a modest recovery albeithindered by high unemployment and a still-struggling housing market. Grossdomestic product annualized growth rates for the third and fourth quarters of 2011 were 1.8% and an estimated 2.8%. During the reporting period, themild growth rate as well as other relatively weak data and declining businesssentiment led many economists to reduce their growth expectations for theremainder of the year. Toward the end of the year, however, various U.S.economic gauges began to show some improvement, leading some economiststo become more optimistic about the economy’s prospects.

On September 21, 2011, the Federal Reserve Board (Fed) announced a program(dubbed Operation Twist by commentators) in which it intends to buy hundredsof billions of dollars of long-term Treasuries in an attempt to lower the yield onlong-term debt. The Fed believed this action would help support conditions inmortgage markets and contribute to a stronger recovery. The Fed also antici-pated it would keep short-term rates near zero through mid-2013.

For the third consecutive summer, troubles in the eurozone helped undermineequity markets’ performance globally. As Greece appeared to be increasinglyat risk of defaulting on its debt, various European countries devised a bailoutpackage, but many observers thought it was insufficient for Greece to avoidrestructuring its debt. The crisis of confidence spread to the economies of Italyand Spain, which are each significantly larger than the Portuguese and Greekeconomies. Many analysts believe a default or restructuring by Italy or Spainwould have a more meaningful impact on the global economy. Equity marketsaround the world experienced significantly increased volatility in reaction to

ContentsSemiannual Report

State Update and Municipal Bond Market Overview . . . . . . 4

Franklin California Insured Tax-Free Income Fund . . . . . . 7

Franklin California Intermediate-Term Tax-Free Income Fund . . . . . . 15

Franklin California Tax-Exempt Money Fund . . . . . 23

Financial Highlights and Statements of Investments . . . 27

Financial Statements . . . . . . . 59

Notes to Financial Statements . . . . . . . . . . . . . . 64

Shareholder Information . . . . 75

Shareholder Letter . . . . . . . 1

Not part of the semiannual report | 1

2 | Not part of the semiannual report

reports regarding various European government proposals, as well as leader-ship changes in Greece, Italy and the European Central Bank, to address theeurozone financial crisis.

In the U.S., financial markets were further rattled by negotiations betweenDemocrats and Republicans over raising the U.S. debt ceiling, as well as reducingthe budget deficit and how to accomplish that. The ultimate agreement, whichnarrowly averted the possibility of the U.S. defaulting on some obligations (butnot on Treasury bond interest), called for expenditure reductions of approxi-mately $2 trillion over the next 10 years. On August 5, 2011, Standard & Poor’sdowngraded its rating on U.S. Treasury bonds to AA+ from AAA, citing notonly the size of the U.S. deficits but also its concerns about U.S. leaders’ abilityto make meaningful progress in reducing the federal deficits.

Throughout the six-month reporting period, the municipal bond market per-formed well as investors generally overcame fears of potentially widespreaddefaults prompted by extreme forecasts made toward the end of 2010. For thecalendar year, municipal defaults were far below forecasts for “hundreds ofbillions of dollars” and also below 2009 and 2010 levels.

In this recent environment, the municipal bond market’s performance for thesix-month period was solid. The Barclays Capital Municipal Bond Index,which tracks investment-grade municipal securities, posted a +6.02% totalreturn, placing the municipal bond market as one of the best-performing of all U.S. asset classes for the period.1

Franklin California Tax-Free Trust’s semiannual report goes into greater detailabout municipal bond market conditions during the period under review. Inaddition, you will find performance data, financial information and a discussionfrom the portfolio managers. We invite you to periodically check our website,franklintempleton.com, for updated commentary by our municipal bond experts.Please remember all securities markets fluctuate, as do mutual fund share prices.Municipal bonds can provide tax-free income and diversification from equities.Despite periods of volatility, municipal bonds historically have had a solidlong-term record of performance, driven mostly by their income component.

As always, we recommend investors seek the counsel and advice of qualifiedfinancial advisors to help them make the best decisions for the long term. In a constantly changing market environment, we remain committed to our

1. Source: © 2012 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstarand/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete ortimely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use ofthis information. Past performance is no guarantee of future results.

Not part of the semiannual report | 3

disciplined strategy as we manage the Funds, keeping in mind the trust youhave placed in us. We appreciate your confidence and encourage you to con-tact us when you have questions about your Franklin Templeton tax-freeinvestment.

Sincerely,

Charles B. JohnsonChairmanFranklin California Tax-Free Trust

Sheila Amoroso

Rafael R. Costas Jr.

Senior Vice Presidents and Co-DirectorsFranklin Municipal Bond Department

This letter reflects our analysis and opinions as of December 31, 2011. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sourcesconsidered reliable.

4 | Semiannual Report

California’s economy continued its post-recession recovery albeit at a slowerpace than the nation as a whole. Persistently weak real estate markets, highforeclosure rates and low homebuilding activity hindered the state’s economy,reducing its citizens’ household wealth levels. California’s 11.1% unemploymentrate in December was significantly higher than the 8.5% national rate.1 Thestate gained jobs in many sectors, representing a shift in trend from the pastfew years. The information, government, and professional and business servicessectors posted the strongest six-month growth rates, while the manufacturing,mining and logging, and other services sectors had declines. In the economicforecast included with the governor’s fiscal year 2012 budget proposal, the stateprojected slim job growth of 1.2% in 2011, a pace that would lag working-age population growth.2 However, the state projected job growth to acceleratein 2012 and 2013, with nonfarm jobs lost during the Great Recession to berecovered fully by the third quarter of 2016.

California enacted an on-time fiscal year 2012 budget that addressed a $17 billionbudget shortfall with $14 billion of deep spending cuts across state servicesand employment.3 The approach to the budget gap relied on a recent, above-par revenue trend but had built-in spending-cut triggers if the additionalrevenues did not materialize. Unlike recent years, the 2012 budget relied lesson one-time revenues and accounting gimmicks. However, it was not struc-turally balanced and depended on several billion dollars of cash deferrals andone-time revenues, some of which were derived from uncertain or contentioussources. Fortunately, a combination of cash management tools and higher-than-projected revenue growth into the summer of 2011 improved the state’scash position. Nevertheless, as state revenues during the first half of fiscal year2012 were below expectations, in mid-December the governor’s office imple-mented required mid-year spending cuts totaling almost $1 billion that includedhealth and education.4 Although these cuts may be subject to administrativeand legal challenges and would not cover the $2.2 billion projected shortfall in revenues for fiscal year 2012, we believe if carried out these cuts would represent an improvement from the legislative gridlock of recent years.5

1. Source: Bureau of Labor Statistics.

2. Source: Edmund G. Brown, Jr., Governor, State of California, “2011-12 Governor’s Budget Summary,” 1/10/11.

3. Source: Moody’s Investors Service, “Special Comment: California Enacts Timely Budget from Strengthened Position,”7/5/11.

4. Source: California Department of Finance (www.dof.ca.gov).

5. Source: Moody’s Investors Service, “California Spending Cuts Are Credit Positive for the State, but Negative for LocalGovernments and Higher Education,” 12/19/11.

Semiannual Report

State Update and Municipal Bond Market Overview

Semiannual Report | 5

The state’s net tax-supported debt was $2,542 per capita and 6.0% of personalincome, compared with the $1,066 and 2.8% national medians.6 AlthoughCalifornia’s debt levels ranked among the nation’s highest, they were relativelymoderate given the state’s large budget. However, Californians’ debt ratios arelikely to increase in the next few years, with sizable outstanding tax-supporteddebt and unused voter authorizations for the future issuance of general fund-backed general obligation (GO) bonds. Independent credit rating agencyStandard & Poor’s (S&P) in July 2011 affirmed California’s GO bond rating ofA- (the nation’s lowest) while upgrading its outlook to stable from negative.7

S&P’s rating and new outlook acknowledged the state’s economic depth anddiversity, prominent higher-education institutions, innovative businesses andsectors, as well as improved liquidity and budgeting flexibility that maintainsadequate cash for priority payments. These positives were counterbalanced byCalifornia’s large debt, retirement benefit and budgetary liabilities, as well aspotentially onerous governance rules that have contributed to delayed fiscaldecision making over the years.

For the six months ended December 31, 2011, the municipal bond marketposted solid gains as measured by the +6.02% return of the Barclays Capital(BC) Municipal Bond Index, which tracks investment-grade securities.8 However,over the reporting period municipal bonds generally underperformed Treasuries,which returned +7.43% according to the BC U.S. Treasury Index, which tracksvarious U.S. Treasury securities.8

During the reporting period, domestic and global events affected the municipalbond market. Domestically, the Federal Reserve Board’s (Fed’s) commitment tomaintain an accommodative monetary policy stance with historically low interestrates supported the municipal market. The market was further supported byan extended period of low supply, thus reducing the availability of bonds tomeet investor demand. In Europe, several countries struggled with financialchallenges that resulted in a flight to quality benefiting the U.S. Treasury market, as well as the municipal bond market.

From a credit perspective, on August 2, 2011, the U.S. raised its debt ceilingand avoided defaulting on its debt obligations. S&P lowered the country’slong-term rating to AA+ from AAA, citing political risks and a rising debt

6. Source: Moody’s Investors Service, “Special Comment: 2011 State Debt Medians Report,” 6/3/11.

7. This does not indicate a rating of the Funds.

8. Source: © 2012 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstarand/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete ortimely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use ofthis information. Past performance is no guarantee of future results.


burden.7 All municipal bonds backed by the U.S. government or government-sponsored enterprises (GSEs) were also downgraded along with the country’srating and those of GSEs. S&P’s downgrade of U.S. Treasury securities led to thereview of more than 11,000 municipal credits supported by federal programsand agency escrows. Primarily, prerefunded municipal bonds and housing bondstied to federal subsidy programs were affected by the downgrade, althoughthey generally still carried high-grade ratings. Furthermore, on July 19, 2011,independent credit rating agency Moody’s Investors Service placed five AAA-rated states on its watch list for potential rating cuts based on their dependencyon federal funding. After the debt ceiling was raised, Moody’s reconfirmed theAAA rating to states and public finance issuers previously identified as directlyor indirectly linked to the U.S. government.7 The same credits are currentlyassigned a negative outlook based on the identification of certain sharedcharacteristics.

Congress enacted the Budget Control Act of 2011 with the potential to reducethe federal deficit by approximately $2 trillion by 2021. While the plan of actionis unknown, one can expect reduced federal funding, which would impact stateand local programs dependent on federal subsidies. State and local officials mayneed to reevaluate current budget forecasts and the potential effects. Despitefacing fiscal restraints and broad budget cuts to achieve balance, many statescontinued to show mild growth in revenues, and the actual default rate formunicipal bonds was very low.

At period-end, we maintained our positive view of the municipal bond market.Municipal bond yields were well above those of comparable Treasury securitieson a nominal basis and an after-tax basis. Therefore, we believe municipalbonds continue to be an attractive asset class among fixed income securities,and we intend to follow our solid discipline of investing to maximize incomewhile seeking value in the municipal bond market.

The foregoing information reflects our analysis and opinions as of December 31, 2011, the end of the reportingperiod. The information is not a complete analysis of every aspect of any market, country, industry, security orfund. Statements of fact are from sources considered reliable.


*Standard & Poor’s (S&P) is used as the primary independent rating agency source. Moody’s is secondary, and Fitch, if available, is used for securities not rated by Moody’s or S&P. The ratings are an indication of an issuer’s creditworthi-ness, with long-term ratings typically ranging from AAA (highest) to Below Investment Grade (lowest; includes ratingsBB to D). This methodology differs from that used in Fund marketing materials.

**Does not include short-term investments and other net assets.


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 preservation of capital by investing at

least 80% of its net assets in insured municipal securities that pay interest free from such taxes.1, 2

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 andredemption 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.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’sStatement of Investments (SOI). The SOI begins on page 31.

We are pleased to bring you Franklin California Insured Tax-Free Income Fund’ssemiannual report for the period ended December 31, 2011.

AAA 1.7%

AA 61.9%

A 17.4%

BBB 16.0%

Not Rated 3.0%

Credit Quality Breakdown*Franklin California Insured Tax-Free Income FundBased on Total Long-Term Investments as of 12/31/11**


Performance Overview

The Fund’s Class A share price, as measured by net asset value, increased from$11.76 on June 30, 2011, to $12.36 on December 31, 2011. The Fund’s Class Ashares paid dividends totaling 27.66 cents per share for the same period.3

The Performance Summary beginning on page 10 shows that at the end ofthis reporting period the Fund’s Class A shares’ distribution rate was 4.28%,based on an annualization of the current 4.60 cent per share dividend and themaximum offering price of $12.91 on December 31, 2011. An investor in the2011 maximum combined effective federal and California personal income tax bracket of 41.05% would need to earn a distribution rate of 7.26% froma taxable investment to match the Fund’s Class A tax-free distribution rate.For the Fund’s Class B, C and Advisor shares’ performance, please see thePerformance Summary. Dividend distributions during the period under reviewwere affected by decreasing interest rates. Additionally, investor demand wasstrong for municipal bonds in an environment of limited tax-exempt supply.These factors resulted in reduced income for the portfolio and caused dividendsto decline.

3. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicativeof future trends.

Dividend Distributions*Franklin California Insured Tax-Free Income Fund

Dividend per ShareMonth Class A Class B Class C Advisor Class

July 4.67 cents 4.20 cents 4.16 cents 4.76 cents

August 4.67 cents 4.20 cents 4.16 cents 4.76 cents

September 4.60 cents 4.07 cents 4.04 cents 4.69 cents

October 4.60 cents 4.07 cents 4.04 cents 4.69 cents

November 4.60 cents 4.07 cents 4.04 cents 4.69 cents

December** 6.08 cents 5.33 cents 5.29 cents 6.22 cents

*Assumes shares were purchased and held for the entire accrual period, which differs from the calendar month. Sincedividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and anyaccount activity. All Fund distributions will vary depending upon current market conditions, and past distributions arenot indicative of future trends.

**The December per-share dividend distribution consisted of payments on 12/21/11 and 12/30/11 for each class asfollows: Class A, 4.60 cents and 1.48 cents; Class B, 4.03 cents and 1.30 cents; Class C, 4.00 cents and 1.29 cents;and Advisor Class, 4.71 cents and 1.51 cents.

Performance data represent past

performance, which does not

guarantee future results. Investment

return and principal value will

fluctuate, and you may have a gain

or loss when you sell your shares.

Current performance may differ

from figures shown. Please visit

franklintempleton.com or call

(800) 342-5236 for most recent

month-end performance.


Investment Strategy

We use a consistent, disciplined strategy in an effort to maximize tax-exemptincome for our shareholders by seeking to maintain exposure to higher couponsecurities while balancing risk and return within the Fund’s range of allowableinvestments. We generally employ a buy-and-hold approach and invest in secu-rities that we believe should provide the most relative value in the market.As we invest during different interest rate environments, the Fund’s portfolioremains diversified with a broad range of securities. This broad diversificationmay help mitigate interest rate risk. We do not use leverage or exotic derivatives,nor do we use hedging techniques that could add volatility and contribute tounderperformance in adverse markets. We generally stay fully invested to helpmaximize income distribution.

Manager’s Discussion

Consistent with our strategy, we sought to remain fully invested in bondsthat maintain an average weighted maturity of 15 to 30 years with good callfeatures. Based on the combination of our value-oriented philosophy of invest-ing primarily for income and a positively sloping municipal yield curve, wefavored the use of longer term bonds. We believe our conservative, buy-and-hold investment strategy can help us achieve high, current, tax-free income for shareholders.

Thank you for your continued participation in Franklin California InsuredTax-Free Income Fund. We look forward to serving your future investmentneeds.

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2011, the endof the reporting period. The way we implement our main investment strategies and the resulting portfolio holdingsmay change depending on factors such as market and economic conditions. These opinions may not be relied uponas investment advice or an offer for a particular security. The information is not a complete analysis of every aspectof any market, state, industry, security or the Fund. Statements of fact are from sources considered reliable, butthe investment manager makes no representation or warranty as to their completeness or accuracy. Althoughhistorical performance is no guarantee of future results, these insights may help you understand our investmentmanagement philosophy.

Portfolio BreakdownFranklin California InsuredTax-Free Income Fund12/31/11

% of TotalLong-Term Investments*

General Obligation 28.2%

Transportation 14.2%

Subject to Government Appropriations 14.0%

Hospital & Health Care 13.8%

Utilities 7.7%

Tax-Supported 7.6%

Refunded 6.8%

Other Revenue 4.0%

Higher Education 2.1%

Housing 1.6%

*Does not include short-term investments and othernet assets.


Performance Summary as of 12/31/11Franklin California Insured Tax-Free Income Fund

Price and Distribution Information

Class A (Symbol: FRCIX) Change 12/31/11 6/30/11

Net Asset Value (NAV) +$0.60 $12.36 $11.76

Distributions (7/1/11–12/31/11)

Dividend Income $0.2766

Class B (Symbol: FRCBX) Change 12/31/11 6/30/11




Class C (Symbol: FRCAX) Change 12/31/11 6/30/11




Advisor Class (Symbol: FZCAX) Change 12/31/11 6/30/11




Your dividend income will vary depending on dividends or interest paid by securities in the Fund’sportfolio, adjusted for operating expenses of each class. Capital gain distributions are net profitsrealized from the sale of portfolio securities. The performance table does not reflect any taxes thata shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gainson the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capitalgain distributions, if any, and any unrealized gains or losses.

Performance Summary (continued)


Performance

Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Class A: 4.25%maximum initial sales charge; Class B: contingent deferred sales charge (CDSC) declining from 4% to 1% over six years,and eliminated thereafter; Class C: 1% CDSC in first year only; Advisor Class: no sales charges.

Class A 6-Month 1-Year 5-Year 10-Year

Cumulative Total Return1 +7.52% +12.38% +21.97% +57.91%

Average Annual Total Return2 +2.97% +7.62% +3.16% +4.22%

Distribution Rate3 4.28%

Taxable Equivalent Distribution Rate4 7.26%

30-Day Standardized Yield5 3.77%

Taxable Equivalent Yield4 6.39%

Total Annual Operating Expenses6 0.61%

Class B 6-Month 1-Year 5-Year 10-Year








Class C 6-Month 1-Year 5-Year 10-Year








Advisor Class7 6-Month 1-Year 5-Year 10-Year








Performance data represent past performance, which does not guarantee future results. Investment return and principalvalue 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, go to franklintempleton.com or call (800) 342-5236.



Endnotes

All investments involve risks. Because municipal bonds are sensitive to interest rate movements, the Fund’s yield and share price will fluctuatewith market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a risein interest rates, the Fund’s share price may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect itsvalue. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. Sincethe Fund concentrates its investments in a single state, it is subject to greater risk of adverse economic and regulatory changes in that statethan 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 shareshave higher annual fees and expenses than Class A shares.

Advisor Class: Shares are available to certain eligible investors as described in the prospectus.

1. Cumulative total return represents the change in value of an investment over the periods indicated.

2. Average annual total return represents the average annual change in value of an investment over the periods indicated. Six-month return has notbeen annualized.

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, C and Advisor) per share on 12/31/11.

4. Taxable equivalent distribution rate and yield assume the published rates as of 12/28/11 for the maximum combined effective federal and Californiapersonal income tax rate of 41.05%, based on the federal income tax rate of 35.00%.

5. The 30-day standardized yield for the 30 days ended 12/31/11 reflects an estimated yield to maturity (assuming all portfolio securities are held tomaturity). It should be regarded as an estimate of the Fund’s rate of investment income, and it may not equal the Fund’s actual income distributionrate (which reflects the Fund’s past dividends paid to shareholders) or the income reported in the Fund’s financial statements.

6. Figures are as stated in the Fund’s prospectus current as of the date of this report. In periods of market volatility, assets may decline significantly,causing total annual Fund operating expenses to become higher than the figures shown.

7. Effective 10/31/08, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotationsfor this class reflect the following methods of calculation: (a) For periods prior to 10/31/08, a restated figure is used based upon the Fund’s Class Aperformance, excluding the effect of Class A’s maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periodsafter 10/31/08, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 10/31/08 (commencement ofsales), the cumulative and average annual total returns of Advisor Class shares were +26.87% and +7.80%.


As a Fund shareholder, you can incur two types of costs:

• Transaction costs, including sales charges (loads) on Fund purchases; and

• Ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and otherFund 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 understandthese costs and compare them with those of other mutual funds. The table assumes a $1,000investment 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 andexpenses. The “Ending Account Value” is derived from the Fund’s actual return, which includesthe 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 compareongoing costs of investing in the Fund with those of other mutual funds. This information maynot 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 andan assumed 5% annual rate of return before expenses, which does not represent the Fund’s actualreturn. The figure under the heading “Expenses Paid During Period” shows the hypothetical expensesyour 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.

Your Fund’s ExpensesFranklin California Insured Tax-Free Income Fund

Your Fund’s Expenses (continued)


Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflectany transaction costs, such as sales charges. Therefore, the second line for each class is useful incomparing 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 referto the Fund prospectus for additional information on operating expenses.

Beginning Account Ending Account Expenses Paid During Class A Value 7/1/11 Value 12/31/11 Period* 7/1/11–12/31/11

Actual $1,000 $1,075.20 $3.13

Hypothetical (5% return before expenses) $1,000 $1,022.12 $3.05

Class B

Actual $1,000 $1,072.10 $5.99


Class C

Actual $1,000 $1,073.10 $5.99


Advisor Class

Actual $1,000 $1,076.50 $2.61


*Expenses are calculated using the most recent six-month expense ratio, annualized for each class (A: 0.60%; B: 1.15%; C: 1.15%; and Advisor: 0.50%),multiplied by the average account value over the period, multiplied by 184/366 to reflect the one-half year period.



We are pleased to bring you Franklin California Intermediate-Term Tax-FreeIncome Fund’s semiannual report for the period ended December 31, 2011.

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 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 Fund12/31/11

% of Total Ratings Long-Term Investments**

AAA 0.6%

AA 33.1%

A 31.7%

BBB 29.4%

Below Investment Grade 0.3%

Not Rated 4.9%

*Standard & Poor’s (S&P) is used as the primary independent rating agency source. Moody’s is secondary, and Fitch, if available, is used for securities not rated by Moody’s or S&P. The ratings are an indication of an issuer’s creditworthi-ness, with long-term ratings typically ranging from AAA (highest) to Below Investment Grade (lowest; includes ratingsBB to D). This methodology differs from that used in Fund marketing materials.

**Does not include short-term investments and other net assets.

1. For investors subject to alternative minimum tax, a small portion of Fund dividends may be taxable. Distributions ofcapital gains are generally taxable. To avoid imposition of 28% backup withholding on all Fund distributions andredemption proceeds, U.S. investors must be properly certified on Form W-9 and non-U.S. investors on Form W-8BEN.



Dividend Distributions*Franklin California Intermediate-Term Tax-Free Income Fund

Dividend per ShareMonth Class A Class C Advisor Class

July 3.80 cents 3.30 cents 3.89 cents

August 3.80 cents 3.30 cents 3.89 cents

September 3.67 cents 3.14 cents 3.76 cents

October 3.67 cents 3.14 cents 3.76 cents

November 3.67 cents 3.14 cents 3.76 cents

December** 4.85 cents 4.12 cents 4.98 cents

*Assumes shares were purchased and held for the entire accrual period, which differs from the calendar month. Sincedividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and anyaccount activity. All Fund distributions will vary depending upon current market conditions, and past distributions arenot indicative of future trends.

**The December per-share dividend distribution consisted of payments on 12/21/11 and 12/30/11 for each class asfollows: Class A, 3.67 cents and 1.18 cents; Class C, 3.12 cents and 1.00 cent; and Advisor Class, 3.77 cents and 1.21 cents.


The Fund’s Class A share price, as measured by net asset value, increased from$11.30 on June 30, 2011, to $11.84 on December 31, 2011. The Fund’s Class Ashares paid dividends totaling 22.19 cents per share for the same period.2

The Performance Summary beginning on page 18 shows that at the end ofthis reporting period the Fund’s Class A shares’ distribution rate was 3.64%,based on an annualization of the current 3.67 cent per share dividend and themaximum offering price of $12.11 on December 31, 2011. An investor in the2011 maximum combined effective federal and California personal income tax bracket of 41.05% would need to earn a distribution rate of 6.17% from ataxable investment to match the Fund’s Class A tax-free distribution rate. Forthe Fund’s Class C and Advisor shares’ performance, please see the PerformanceSummary. Dividend distributions during the period under review were affectedby decreasing interest rates. Additionally, investor demand was strong formunicipal bonds in an environment of limited tax-exempt supply. These factorsresulted in reduced income for the portfolio and caused dividends to decline.




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




2. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicativeof future trends.


Investment Strategy

We use a consistent, disciplined strategy in an effort to maximize tax-exemptincome for our shareholders by seeking to maintain exposure to higher couponsecurities while balancing risk and return within the Fund’s range of allowableinvestments. We generally employ a buy-and-hold approach and invest insecurities we believe should provide the most relative value in the market. Aswe invest during different interest rate environments, our portfolio remainsdiversified with a broad range of securities. This broad diversification mayhelp mitigate interest rate risk. We do not use leverage or exotic derivatives,nor do we use hedging techniques that could add volatility and contribute tounderperformance in adverse markets. We generally stay fully invested to helpmaximize income distribution.


Consistent with our strategy, we sought to remain fully invested in bonds thatmaintain an average weighted maturity of 3 to 10 years. We believe our con-servative, buy-and-hold investment strategy can help us achieve high, current,tax-free income for shareholders.

Thank you for your continued participation in Franklin CaliforniaIntermediate-Term Tax-Free Income Fund. We look forward to serving yourfuture investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2011, the endof the reporting period. The way we implement our main investment strategies and the resulting portfolio holdingsmay change depending on factors such as market and economic conditions. These opinions may not be reliedupon as investment advice or an offer for a particular security. The information is not a complete analysis ofevery aspect of any market, state, industry, security or the Fund. Statements of fact are from sources consideredreliable, 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 ourinvestment management philosophy.

Portfolio BreakdownFranklin California Intermediate-TermTax-Free Income Fund12/31/11

% of TotalLong-Term Investments*

Subject to Government Appropriations 20.8%

Tax-Supported 17.0%

General Obligation 14.5%

Hospital & Health Care 13.9%

Utilities 12.2%

Transportation 6.6%

Other Revenue 5.8%

Higher Education 4.2%

Refunded 2.8%

Housing 2.2%

*Does not include short-term investments and othernet assets.


Performance Summary as of 12/31/11Franklin California Intermediate-Term Tax-Free Income Fund

Price and Distribution Information

Class A (Symbol: FKCIX) Change 12/31/11 6/30/11




Class C (Symbol: FCCIX) Change 12/31/11 6/30/11




Advisor Class (Symbol: FRCZX) Change 12/31/11 6/30/11




Your dividend income will vary depending on dividends or interest paid by securities in the Fund’sportfolio, adjusted for operating expenses of each class. Capital gain distributions are net profitsrealized from the sale of portfolio securities. The performance table does not reflect any taxes thata shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gainson the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capitalgain distributions, if any, and any unrealized gains or losses.



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; Advisor Class: no sales charges.

Class A 6-Month 1-Year 5-Year 10-Year








Class C 6-Month 1-Year 5-Year Inception (7/1/03)








Advisor Class7 6-Month 1-Year 5-Year 10-Year








Performance data represent past performance, which does not guarantee future results. Investment return and principalvalue 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, go to franklintempleton.com or call (800) 342-5236.



Endnotes

All investments involve risks. Because municipal bonds are sensitive to interest rate movements, the Fund’s yield and share price will fluctuatewith market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a risein interest rates, the Fund’s share price may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect itsvalue. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. Sincethe Fund concentrates its investments in a single state, it is subject to greater risk of adverse economic and regulatory changes in that statethan 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 shareshave higher annual fees and expenses than Class A shares.

Advisor Class: Shares are available to certain eligible investors as described in the prospectus.

1. Cumulative total return represents the change in value of an investment over the periods indicated.

2. Average annual total return represents the average annual change in value of an investment over the periods indicated. Six-month return has notbeen annualized.

3. Distribution rate is based on an annualization of the respective class’s current monthly dividend and the maximum offering price (NAV for Classes Cand Advisor) per share on 12/31/11.

4. Taxable equivalent distribution rate and yield assume the published rates as of 12/28/11 for the maximum combined effective federal andCalifornia personal income tax rate of 41.05%, based on the federal income tax rate of 35.00%.

5. The 30-day standardized yield for the 30 days ended 12/31/11 reflects an estimated yield to maturity (assuming all portfolio securities are held tomaturity). It should be regarded as an estimate of the Fund’s rate of investment income, and it may not equal the Fund’s actual income distributionrate (which reflects the Fund’s past dividends paid to shareholders) or the income reported in the Fund’s financial statements.

6. Figures are as stated in the Fund’s prospectus current as of the date of this report. In periods of market volatility, assets may decline significantly,causing total annual Fund operating expenses to become higher than the figures shown.

7. Effective 10/31/08, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotationsfor this class reflect the following methods of calculation: (a) For periods prior to 10/31/08, a restated figure is used based upon the Fund’s Class Aperformance, excluding the effect of Class A’s maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periodsafter 10/31/08, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 10/31/08 (commencement ofsales), the cumulative and average annual total returns of Advisor Class shares were +27.26% and +7.91%.







The first line (Actual) for each share class listed in the table provides actual account values andexpenses. The “Ending Account Value” is derived from the Fund’s actual return, which includesthe effect of Fund expenses.






Information in the second line (Hypothetical) for each class in the table can help you compareongoing costs of investing in the Fund with those of other mutual funds. This information maynot 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 andan assumed 5% annual rate of return before expenses, which does not represent the Fund’s actualreturn. The figure under the heading “Expenses Paid During Period” shows the hypothetical expensesyour 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.

Your Fund’s ExpensesFranklin California Intermediate-Term Tax-Free Income Fund



Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflectany transaction costs, such as sales charges. Therefore, the second line for each class is useful incomparing 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 referto the Fund prospectus for additional information on operating expenses.

Beginning Account Ending Account Expenses Paid During Class A Value 7/1/11 Value 12/31/11 Period* 7/1/11–12/31/11

Actual $1,000 $1,068.00 $3.33


Class C

Actual $1,000 $1,064.00 $6.17


Advisor Class

Actual $1,000 $1,068.40 $2.81


*Expenses are calculated using the most recent six-month expense ratio, annualized for each class (A: 0.64%; C: 1.19%; and Advisor: 0.54%), multiplied by the average account value over the period, multiplied by 184/366 to reflect the one-half year period.


This semiannual report for Franklin California Tax-Exempt Money Fund coversthe period ended December 31, 2011.


In an effort to promote continued economic recovery, the Federal Reserve Board(Fed) held short-term interest rates at a historically low level during the six-monthperiod under review, which affected money market portfolio yields. As a result,Franklin California Tax-Exempt Money Fund’s seven-day effective yield wasunchanged at 0.00% from June 30, 2011, through December 31, 2011.

Investment Strategy

Under normal market conditions, we invest at least 80% of the Fund’s totalassets in high-quality, short-term municipal securities whose interest is freefrom federal and California state personal income taxes. Although the Fundtries to invest all of its assets in tax-free securities, it is possible, although notanticipated, that up to 20% of its assets may be in securities that pay taxableinterest, including interest that may be subject to federal alternative minimumtax. We maintain a dollar-weighted average portfolio maturity of 60 days orless and a dollar-weighted average life of 120 days or less.


During the six months under review, short-term municipal bond yields remainedrelatively low as the Federal Open Market Committee kept the federal funds

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 andredemption proceeds, U.S. investors must be properly certified on Form W-9 and non-U.S. investors on Form W-8BEN.



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 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.




return will fluctuate. Current

performance may differ from

figures shown. Please visit




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.


target rate in a range of 0% to 0.25% and the discount rate at 0.75%. Inaddition, the Securities Industry and Financial Markets Association (SIFMA)Municipal Swap Index, a weekly index of variable rate securities, which makeup a large portion of Franklin California Tax-Exempt Money Fund, also stayedrelatively low. The SIFMA rate ranged during the reporting period from an all-time low of 0.07% in mid-July, to a high of 0.21% on August 24, 2011.2 TheSIFMA index ended the period at 0.10%.2

During the reporting period, variable rate demand note (VRDN) issuancewas extremely low compared to recent years, and demand for well-structuredVRDNs supported low rates. Franklin California Tax-Exempt Money Fundcontinued to be very selective in purchasing what we regarded as high-qualitysecurities. In this environment, the Fund’s yield remained at 0.00% for thereporting period.

During the review period, the Fund participated in several issues includingCalifornia Education Facilities Authority Revenue for Stanford University andMetropolitan Water District of Southern California Water revenue VRDNs,and Sonoma-Marin Rail Area Transit District Mandatory Put.

Thank you for your continued participation in Franklin California Tax-ExemptMoney Fund. We look forward to serving your future investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2011, the endof the reporting period. The way we implement our main investment strategies and the resulting portfolio holdingsmay change depending on factors such as market and economic conditions. These opinions may not be reliedupon as investment advice or an offer for a particular security. The information is not a complete analysis ofevery aspect of any market, state, industry, security or the Fund. Statements of fact are from sources consideredreliable, 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 ourinvestment management philosophy.

2. Source: SIFMA.

Portfolio BreakdownFranklin California Tax-Exempt Money Fund12/31/11

% of TotalInvestments

Variable Rate Notes 93.8%

Notes and Bonds 6.2%

Performance SummaryFranklin California Tax-Exempt Money FundSymbol: FCLXX12/31/11

Seven-day effective yield1 0.00%

Seven-day annualized yield 0.00%

Taxable equivalent yield2 0.00%

Total annual operating expenses3 0.54%

1. Seven-day effective yield assumes the compoundingof daily dividends, if any.

2. Taxable equivalent yield assumes the published ratesas of 12/28/11 for the maximum combined effective fed-eral and California personal income tax rate of 41.05%,based on the federal income tax rate of 35.00%.

3. The figure is as stated in the Fund’s prospectus cur-rent as of the date of this report. In periods of marketvolatility, assets may decline significantly, causingtotal annual Fund operating expenses to become higherthan the figure shown. In efforts to prevent a negativeyield, the investment manager and Fund administratorhave voluntarily agreed to waive or limit their respectivefees, assume as their own expense certain expensesotherwise payable by the Fund, and if necessary, make acapital infusion into the Fund. These waivers, expensereimbursements and capital infusions, which are notreflected in the table above, are voluntary and may bemodified or discontinued by the investment manager or Fund administrator at any time, and without furthernotice. There is no guarantee the Fund will be able toavoid a negative yield.

Annualized and effective yields are for the seven-dayperiod ended 12/31/11. The Fund’s average weightedlife and average weighted maturity were each 11 days.Yield reflects Fund expenses and fluctuations in interestrates on portfolio investments.

Performance data represent past perform-ance, which does not guarantee futureresults. Investment return will fluctuate.Current performance may differ from figuresshown. Please visit franklintempleton.comor call (800) 342-5236 for most recentmonth-end performance.







The first line (Actual) of the table provides actual account values and expenses. The “EndingAccount Value” is derived from the Fund’s actual return which includes the effect of Fund expenses.






Information in the second line (Hypothetical) of the table can help you compare ongoing costs ofinvesting in the Fund with those of other mutual funds. This information may not be used to esti-mate 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% annualrate of return before expenses, which does not represent the Fund’s actual return. The figure underthe heading “Expenses Paid During Period” shows the hypothetical expenses your account wouldhave incurred under this scenario. You can compare this figure with the 5% hypothetical examplesthat appear in shareholder reports of other funds.

Your Fund’s ExpensesFranklin California Tax-Exempt Money Fund



Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflectany transaction costs, such as sales charges. Therefore, the second line of the table is useful in com-paring ongoing costs only, and will not help you compare total costs of owning different funds. Inaddition, if transaction costs were included, your total costs would have been higher. Please referto the Fund prospectus for additional information on operating expenses.

Beginning Account Ending Account Expenses Paid During Value 7/1/11 Value 12/31/11 Period* 7/1/11–12/31/11

Actual $1,000 $1,000.00 $0.55


*Expenses are calculated using the most recent annualized six-month expense ratio, net of voluntary expense waivers, of 0.11%, multiplied by theaverage account value over the period, multiplied by 184/366 to reflect the one-half year period.

Semiannual Report | The accompanying notes are an integral part of these financial statements. | 27

Franklin California Tax-Free TrustFinancial Highlights


Six Months Ended December 31, 2011 Year Ended June 30,

Class A (unaudited) 2011 2010 2009 2008 2007

Per share operating performance(for a share outstanding throughout the

period)

Net asset value, beginning of period . . . $11.76 $12.07 $11.45 $12.19 $12.48 $12.43

Income from investment operationsa:

Net investment incomeb . . . . . . . . . 0.27 0.55 0.55 0.55 0.54 0.54

Net realized and unrealized gains (losses) . . . . . . . . . . . . . . . . . . . . 0.61 (0.31) 0.62 (0.75) (0.29) 0.05

Total from investment operations . . . . 0.88 0.24 1.17 (0.20) 0.25 0.59

Less distributions from net investment income . . . . . . . . . . . . . . . . . . . . (0.28) (0.55) (0.55) (0.54) (0.54) (0.54)

Redemption feesc . . . . . . . . . . . . . . . — — — —d —d —d

Net asset value, end of period . . . . . . $12.36 $11.76 $12.07 $11.45 $12.19 $12.48

Total returne . . . . . . . . . . . . . . . . . . . 7.52% 2.08% 10.33% (1.54)% 1.98% 4.79%

Ratios to average net assetsf

Expenses . . . . . . . . . . . . . . . . . . . . . 0.60% 0.61% 0.61% 0.61% 0.61% 0.61%

Net investment income . . . . . . . . . . . 4.52% 4.63% 4.60% 4.74% 4.33% 4.29%

Supplemental data

Net assets, end of period (000’s) . . . . $1,804,067 $1,715,495 $1,899,692 $1,780,448 $1,875,898 $1,810,358

Portfolio turnover rate . . . . . . . . . . . . 3.34% 12.49% 14.19% 13.04% 13.14% 6.77%

aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases ofthe Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.bBased on average daily shares outstanding.cEffective September 1, 2008, the redemption fee was eliminated.dAmount rounds to less than $0.01 per share.eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.fRatios are annualized for periods less than one year.

Franklin California Tax-Free TrustFinancial Highlights (continued)

28 | The accompanying notes are an integral part of these financial statements. | Semiannual Report



Class B (unaudited) 2011 2010 2009 2008 2007

Per share operating performance(for a share outstanding throughout the period)

Net asset value, beginning of period . . . . . . . . . . $11.82 $12.14 $11.51 $12.26 $12.54 $12.49


Net investment incomeb . . . . . . . . . . . . . . . . . 0.24 0.48 0.49 0.49 0.47 0.48

Net realized and unrealized gains (losses) . . . . . 0.61 (0.31) 0.62 (0.76) (0.28) 0.04

Total from investment operations . . . . . . . . . . . . 0.85 0.17 1.11 (0.27) 0.19 0.52

Less distributions from net investment income . . . (0.25) (0.49) (0.48) (0.48) (0.47) (0.47)

Redemption feesc . . . . . . . . . . . . . . . . . . . . . . . — — — —d —d —d

Net asset value, end of period . . . . . . . . . . . . . . $12.42 $11.82 $12.14 $11.51 $12.26 $12.54

Total returne . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.21% 1.44% 9.77% (2.14)% 1.49% 4.20%


Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.15% 1.15% 1.15% 1.15% 1.16% 1.16%

Net investment income . . . . . . . . . . . . . . . . . . . 3.97% 4.09% 4.06% 4.20% 3.78% 3.74%

Supplemental data

Net assets, end of period (000’s) . . . . . . . . . . . . $3,201 $6,234 $18,898 $31,963 $48,875 $59,127

Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . 3.34% 12.49% 14.19% 13.04% 13.14% 6.77%






Class C (unaudited) 2011 2010 2009 2008 2007










Total returne . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.31% 1.49% 9.79% (2.15)% 1.48% 4.17%


Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.15% 1.16% 1.16% 1.16% 1.16% 1.16%


Supplemental data






Advisor Class (unaudited) 2011 2010 2009a


Net asset value, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.77 $12.08 $11.45 $11.33

Income from investment operationsb:

Net investment incomec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.28 0.56 0.56 0.37

Net realized and unrealized gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . 0.61 (0.31) 0.63 0.12

Total from investment operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.89 0.25 1.19 0.49

Less distributions from net investment income . . . . . . . . . . . . . . . . . . . . . . (0.28) (0.56) (0.56) (0.37)

Net asset value, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12.38 $11.77 $12.08 $11.45

Total returnd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.65% 2.17% 10.52% 4.37%

Ratios to average net assetse

Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.50% 0.51% 0.51% 0.51%

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.62% 4.73% 4.70% 4.84%

Supplemental data

Net assets, end of period (000’s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $46,454 $41,213 $10,960 $2,100

Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.34% 12.49% 14.19% 13.04%

aFor the period October 31, 2008 (effective date) to June 30, 2009.bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases ofthe Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.cBased on average daily shares outstanding.dTotal return is not annualized for periods less than one year.eRatios are annualized for periods less than one year.




Franklin California Tax-Free TrustStatement of Investments, December 31, 2011 (unaudited)

Franklin California Insured Tax-Free Income Fund Principal Amount Value

Municipal Bonds 96.3%California 96.3%ABAG Finance Authority for Nonprofit Corps. California Health Facilities Revenue, Institute on

Aging, California Mortgage Insured, 5.65%, 8/15/38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,000,000 $ 9,243,810ABAG Finance Authority for Nonprofit Corps. COP, Odd Fellows Home, California Mortgage

Insured, 6.00%, 8/15/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,016,750ABAG Finance Authority for Nonprofit Corps. Revenue,

Casa De Las Campanas, California Mortgage Insured, 6.00%, 9/01/37 . . . . . . . . . . . . . . 11,000,000 11,551,430Channing House, California Mortgage Insured, 6.00%, 5/15/30 . . . . . . . . . . . . . . . . . . . 8,495,000 9,111,057Poway Retirement Housing Foundation Housing Inc. Project, Series A, California Mortgage Insured, 5.375%, 11/15/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,145,000 5,151,277

Sansum-Santa Barbara, Refunding, Series A, California Mortgage Insured, 5.60%, 4/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,750,000 2,763,943

Acalanes UHSD, GO, Capital Appreciation, Election of 2002, Series A, FGIC Insured, zero cpn., 8/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,045,000 4,521,324

Alameda Corridor Transportation Authority Revenue, Capital Appreciation, sub. lien, Refunding, Series A, AMBAC Insured, zero cpn. to 10/01/12,

5.25% thereafter, 10/01/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,660,000 64,123,9695.45% thereafter, 10/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000,000 24,135,500

Alhambra City Elementary School District GO, Capital Appreciation, Election of 1999, Series B, NATL RE, FGIC Insured, zero cpn., 9/01/27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,035,000 1,323,928

Alisal USD, GO, Capital Appreciation, Election of 2006, Series B, Assured Guaranty, zero cpn.,

8/01/32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,355,000 1,112,1158/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,610,000 1,117,5842/01/34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,345,000 992,729

Alvord USD, GO, Election of 2007, Series A, AGMC Insured, 5.00%, 8/01/32 . . . . . . . . . . . 9,070,000 9,419,376Anaheim City School District GO, AGMC Insured, 6.25%, 8/01/40 . . . . . . . . . . . . . . . . . . . . 7,500,000 8,669,325Anaheim PFAR, Distribution System, second lien, NATL Insured, 5.00%, 10/01/29 . . . . . . . . 5,000,000 5,104,750Antelope Valley UHSD, GO, Series A, NATL Insured, 5.00%, 2/01/27 . . . . . . . . . . . . . . . . . . 5,000,000 5,112,250Antioch USD, GO, Election of 2008, School Facilities Improvement No. 1-B, Assured Guaranty,

5.375%, 8/01/36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,130,000 3,322,558Atascadero CDA Tax Allocation, Redevelopment Project, XLCA Insured, 5.00%, 9/01/34 . . . . 4,315,000 3,877,459Atascadero USD, GO, Election of 2010, Series A, AGMC Inured, 5.00%, 8/01/40 . . . . . . . . . 6,235,000 6,465,259Atwater PFA Wastewater Revenue, AGMC Insured, 6.125%, 5/01/45 . . . . . . . . . . . . . . . . . . 4,620,000 4,925,105Auburn PFA Wastewater Revenue, Assured Guaranty, 5.50%, 6/01/39 . . . . . . . . . . . . . . . . . 1,880,000 2,020,474Auburn USD, COP, Refinancing Project, Assured Guaranty, 5.00%, 6/01/38 . . . . . . . . . . . . . 10,000,000 10,294,000Bakersfield Wastewater Revenue, Series A, AGMC Insured, 5.00%, 9/15/32 . . . . . . . . . . . . . 10,430,000 10,918,020Baldwin Park RDA Tax Allocation, Refunding, AGMC Insured, 5.70%, 9/01/25 . . . . . . . . . . . 4,000,000 4,045,520Baldwin Park USD, GO,

Capital Appreciation, Election of 2006, AGMC Insured, zero cpn., 8/01/28 . . . . . . . . . . . 5,810,000 2,274,731Election of 2006, AGMC Insured, 5.00%, 8/01/31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,440,000 5,681,536

Beaumont USD, GO, Election of 2008, Series C, AGMC Insured,5.75%, 8/01/36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,200,000 6,682,112zero cpn., 8/01/40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,000,000 1,916,640

Berkeley USD, GO, Election of 2010, Series B, AGMC Insured, 5.375%, 8/01/35 . . . . . . . . . 5,090,000 5,444,773Brentwood Infrastructure Financing Authority Infrastructure Revenue, Refunding, Series A,

AGMC Insured, 5.00%, 9/02/32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,790,000 4,000,345Buckeye USD, GO, Election of 2006, AGMC Insured, 5.00%, 8/01/32 . . . . . . . . . . . . . . . . . 10,705,000 11,224,835

Franklin California Tax-Free TrustStatement of Investments, December 31, 2011 (unaudited) (continued)



Municipal Bonds (continued)California (continued)California Community College Financing Authority Lease Revenue,

Grossmont Palomar and Shasta, Series A, NATL Insured, 5.125%, 4/01/31 . . . . . . . . . . . $ 3,030,000 $ 3,031,151Sequoias and Kern, AGMC Insured, 5.00%, 6/01/30 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,330,000 2,445,615Sequoias and Kern, AGMC Insured, 5.125%, 6/01/35 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,250,000 1,291,750

California Health Facilities Financing Authority Revenue,Children’s Hospital Los Angeles, Refunding, Series A, AGMC Insured, 5.25%, 7/01/38 . . . 7,000,000 7,090,790Community Development Program for Persons with Developmental Disabilities, Series A, California Mortgage Insured, 6.25%, 2/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,665,600

Community Health Facilities, Series A, California Mortgage Insured, 5.80%, 8/01/25 . . . . 940,000 941,419Kaiser Permanente, Series A, ETM, 5.40%, 5/01/28 . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,400,000 15,412,320Marshall Hospital, Refunding, Series A, California Mortgage Insured, 5.30%, 11/01/28 . . . 2,950,000 2,951,564Northern California Presbyterian, Refunding, 5.40%, 7/01/28 . . . . . . . . . . . . . . . . . . . . . 5,000,000 4,867,000Senior Living, Aldersly, Series A, California Mortgage Insured, 5.25%, 3/01/32 . . . . . . . . 2,000,000 2,010,100Sutter Health, Refunding, Series A, NATL Insured, 5.00%, 8/15/19 . . . . . . . . . . . . . . . . 325,000 325,826Sutter Health, Refunding, Series A, NATL Insured, 5.00%, 8/15/38 . . . . . . . . . . . . . . . . 3,735,000 3,735,187Sutter Health, Series A, BHAC Insured, 5.00%, 11/15/42 . . . . . . . . . . . . . . . . . . . . . . . 15,000,000 15,114,900

California HFAR, Home Mortgage, Series N, AMBAC Insured, 6.30%, 8/01/31 . . . . . . . . . . . 195,000 196,149California 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 10,845,720California Municipal Finance Authority Senior Living Revenue, Pilgrim Place in Claremont,

Series A, California Mortgage Insured,5.875%, 5/15/29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,895,000 3,121,2156.125%, 5/15/39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,830,000 6,199,855

California Public School District Financing Authority Lease Revenue, Southern Kern USD, Series B, AGMC Insured, ETM, 5.90%, 9/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,615,000 2,154,265

California School Facilities Financing Authority Revenue, Azusa USD, Series A, AGMC Insured, 5.00%, 8/01/32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000 10,474,400

California State Department of Water Resources Water System Revenue, Central Valley Project,Series AC, NATL Insured, Pre-Refunded, 5.00%, 12/01/26 . . . . . . . . . . . . . . . . . . . . . . 40,000 45,148Series AD, AGMC Insured, Pre-Refunded, 5.00%, 12/01/26 . . . . . . . . . . . . . . . . . . . . . . 25,000 28,648

California State GO,FGIC Insured, 5.375%, 6/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,350,000 1,362,326NATL Insured, 6.00%, 8/01/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,000 210,836NATL Insured, 6.00%, 10/01/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,000 65,793Refunding, 5.125%, 6/01/31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295,000 295,236Refunding, NATL Insured, 5.00%, 8/01/29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 730,000 730,621

California State Local Government Finance Authority Revenue, Marin Valley Mobile Country Club Park Acquisition Project, Senior, Series A, AGMC Insured, 5.80%, 10/01/20 . . . . . . . 3,770,000 3,782,743

California State Public Works Board Lease Revenue, Department of Mental Health Hospital, Series A, AMBAC Insured, 5.00%,

12/01/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,100,000 4,186,51012/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,675,000 5,792,813

California State University Revenue, Systemwide,Refunding, Series A, AMBAC Insured, 5.00%, 11/01/33 . . . . . . . . . . . . . . . . . . . . . . . . 22,000,000 22,344,740Series A, AGMC Insured, 5.00%, 11/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,219,800




Municipal Bonds (continued)California (continued)California Statewide CDA,

COP, Children’s Hospital Los Angeles, 5.25%, 8/15/29 . . . . . . . . . . . . . . . . . . . . . . . . . $12,250,000 $ 11,486,335COP, NATL Insured, 5.00%, 4/01/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 3,000,540COP, Refunding, AGMC Insured, 5.50%, 8/15/31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000,000 7,004,760COP, Refunding, California Mortgage Insured, 5.75%, 8/01/21 . . . . . . . . . . . . . . . . . . . . 4,405,000 4,411,960MFHR, 740 S. Olive Street, Series L, GNMA Secured, 4.90%, 7/20/39 . . . . . . . . . . . . . . 13,475,000 12,918,617MFHR, 740 S. Olive Street, Series L, GNMA Secured, 5.10%, 7/20/50 . . . . . . . . . . . . . . 10,000,000 9,501,500MFHR, Silver Ridge Apartments, Mandatory Put 8/01/21, Series H, FNMA Insured, 5.80%, 8/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,785,000 2,816,164

California Statewide CDA Revenue,Adventist, Series B, Assured Guaranty, 5.00%, 3/01/37 . . . . . . . . . . . . . . . . . . . . . . . . . 17,000,000 16,974,670California Endowment, 5.00%, 7/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,460,000 18,783,050Catholic Healthcare West, Series K, Assured Guaranty, 5.50%, 7/01/41 . . . . . . . . . . . . . . 17,000,000 17,576,470COP, John Muir/Mt. Diablo Health System, NATL Insured, 5.125%, 8/15/22 . . . . . . . . . . 5,000,000 5,011,050Enloe Medical Center, California Mortgage Insured, 6.25%, 8/15/28 . . . . . . . . . . . . . . . . 17,215,000 19,253,945Henry Mayo Newhall Memorial, Series B, AMBAC Insured, 5.05%, 10/01/28 . . . . . . . . . . 7,825,000 8,127,593Methodist Hospital of Southern California Project, FHA Insured, 6.75%, 2/01/38 . . . . . . . 20,000,000 23,391,000Refunding, California Mortgage Insured, 5.00%, 8/01/21 . . . . . . . . . . . . . . . . . . . . . . . . 2,035,000 2,085,326St. Joseph Health System, Series E, AGMC Insured, 5.25%, 7/01/47 . . . . . . . . . . . . . . . 20,000,000 20,530,200Sutter Health, Series C, AGMC Insured, 5.05%, 8/15/38 . . . . . . . . . . . . . . . . . . . . . . . . 15,000,000 15,243,450

California Statewide CDA Water and Wastewater Revenue, Pooled Financing Program, Refunding,

Series A, AGMC Insured, 5.00%, 10/01/32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,320,000 9,425,223Series B, AGMC Insured, 5.75%, 10/01/29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,465,000 1,466,919

Carlsbad USD, COP, Series A, Assured Guaranty, 5.00%,10/01/34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,000,000 14,903,84010/01/41 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,880,000 4,109,308

Castaic USD, COP, Refunding, AGMC Insured, 5.125%, 9/01/33 . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,053,130Castro Valley USD, COP, Solar Projects, AGMC Insured, 5.00%, 9/01/32 . . . . . . . . . . . . . . . 2,620,000 2,692,574Central USD, GO, Election of 2008, Series A, Assured Guaranty,

5.50%, 8/01/29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 3,309,9305.625%, 8/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,500,000 3,782,800

Chaffey Community College District GO, Refunding, Series A, AGMC Insured, 5.00%, 7/01/27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270,000 274,703

Chico PFAR, Merged Redevelopment Project Area, NATL Insured, 5.125%, 4/01/24 . . . . . . . 2,790,000 2,783,499Chula Vista Elementary School District GO, Election of 1998, Series F, NATL Insured, 5.00%,

8/01/28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,685,000 2,758,032Clovis PFAR, 2001 Corp. Yard Project, AMBAC Insured, 5.00%, 3/01/27 . . . . . . . . . . . . . . . 3,265,000 3,272,477Coachella Valley USD, GO, Capital Appreciation, Election of 2005, Series C, AGMC Insured,

zero cpn.,8/01/36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000,000 1,693,3608/01/37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000,000 1,585,6808/01/40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,500,000 1,222,7258/01/43 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000 1,339,400

College of the Sequoias Tulare Area ID No. 3 GO, Election of 2008, Series A, Assured Guaranty, 5.50%, 8/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,458,350




Municipal Bonds (continued)California (continued)College of the Sequoias Visalia Area ID No. 2 GO, Election of 2008,

Series A, Assured Guaranty, 5.50%, 8/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,750,000 $ 6,296,710Series B, AGMC Insured, 5.00%, 8/01/39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 3,084,120

Colton Joint USD, GO,Capital Appreciation Bonds, Election of 2008, Series B, AGMC Insured, zero cpn., 8/01/42 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,365,000 2,538,048

Election of 2008, Series A, Assured Guaranty, 5.375%, 8/01/34 . . . . . . . . . . . . . . . . . . 10,665,000 11,195,050Compton USD, GO, Election of 2002, Series B, NATL Insured, Pre-Refunded, 5.00%,

6/01/29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,211,880Corona-Norco USD, GO,

Capital Appreciation, Refunding, Series B, AGMC Insured, zero cpn., 3/01/25 . . . . . . . . . 1,400,000 718,998Capital Appreciation, Series B, AGMC Insured, zero cpn., 9/01/23 . . . . . . . . . . . . . . . . . 2,320,000 1,328,641Capital Appreciation, Series B, AGMC Insured, zero cpn., 9/01/24 . . . . . . . . . . . . . . . . . 2,620,000 1,402,381Capital Appreciation, Series C, NATL RE, FGIC Insured, zero cpn., 9/01/25 . . . . . . . . . . . 4,655,000 2,429,165Capital Appreciation, Series C, NATL RE, FGIC Insured, zero cpn., 9/01/26 . . . . . . . . . . . 6,080,000 2,977,984Election of 2006, Series B, Assured Guaranty, 5.375%, 2/01/34 . . . . . . . . . . . . . . . . . . 12,000,000 12,563,400Election of 2006, Series C, AGMC Insured, 5.50%, 8/01/39 . . . . . . . . . . . . . . . . . . . . . 7,500,000 8,001,300

Coronado CDA Tax Allocation, Community Development Project, NATL Insured, 5.375%, 9/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,700,000 2,710,800

Covina PFA Wastewater Revenue, Assured Guaranty, 5.375%, 10/01/29 . . . . . . . . . . . . . . . . 6,550,000 7,194,192Covina PFA Water Revenue, AGMC Insured, 5.50%, 10/01/40 . . . . . . . . . . . . . . . . . . . . . . . 3,500,000 3,771,285Delano USD, COP, Refinancing Project, NATL Insured, 5.125%, 1/01/22 . . . . . . . . . . . . . . . 1,620,000 1,675,679Desert Sands USD, COP, Financing Project, AGMC Insured, 5.75%, 3/01/24 . . . . . . . . . . . . 10,000,000 11,224,000El Monte UHSD, GO, Election of 2008, Series A, Assured Guaranty, 5.50%, 6/01/34 . . . . . . 11,355,000 12,278,161Elsinore Valley Municipal Water District COP, Refunding, Series A, BHAC Insured, 5.00%,

7/01/29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,245,000 7,892,848Escondido Joint Powers Financing Authority Lease Revenue, AMBAC Insured, 5.125%,

9/01/30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,770,000 3,770,189Escondido UHSD, COP, AGMC Insured, 5.00%,

6/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,500,000 3,569,6156/01/37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500,000 2,532,400

Eureka USD, GO, AGMC Insured, 5.00%, 8/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,145,000 4,243,319Fairfax Elementary School District GO, Election of 2010, AGMC Insured, 5.75%, 11/01/40 . . . 2,250,000 2,458,058Fairfield Suisun USD, GO, Election of 2002, NATL Insured,

5.00%, 8/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,185,000 4,395,924Pre-Refunded, 5.00%, 8/01/27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000,000 12,447,000

Florin Resource Conservation District COP, Elk Grove Water Service, Refunding, Series A, NATL Insured, 5.00%, 3/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 4,624,900

Folsom COP, Central Business District Fire Station, NATL Insured, 5.125%, 10/01/26 . . . . . . 2,030,000 2,067,535Fontana USD, GO,

Refunding, Series A, AGMC Insured, 5.25%, 8/01/28 . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000,000 7,483,770Series A, AGMC Insured, 5.25%, 8/01/27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,700,000 7,204,711

Foothill/Eastern Corridor Agency Toll Road Revenue,Capital Appreciation, Refunding, NATL Insured, zero cpn., 1/15/17 . . . . . . . . . . . . . . . . . 20,000,000 15,134,000Capital Appreciation, Refunding, NATL Insured, zero cpn., 1/15/18 . . . . . . . . . . . . . . . . . 25,000,000 17,872,500Capital Appreciation, Refunding, NATL Insured, zero cpn., 1/15/19 . . . . . . . . . . . . . . . . . 5,970,000 4,030,526senior lien, Refunding, Series A, NATL Insured, 5.00%, 1/01/35 . . . . . . . . . . . . . . . . . . 66,735,000 58,319,049

Fort Bragg USD, GO, Election of 2008, AGMC Insured, 5.125%, 8/01/41 . . . . . . . . . . . . . . 4,380,000 4,566,632




Municipal Bonds (continued)California (continued)Fowler USD, GO,

Capital Appreciation, Election of 2004, Series C, AGMC Insured, zero cpn., 8/01/41 . . . . $ 3,095,000 $ 504,361Capital Appreciation, Election of 2004, Series C, AGMC Insured, zero cpn., 8/01/42 . . . . 3,005,000 460,576Election of 2004, Series C, AGMC Insured, 5.25%, 8/01/39 . . . . . . . . . . . . . . . . . . . . . 3,555,000 3,871,999

Franklin-McKinley School District GO, Election of 2004, Series A, FGIC Insured, Pre-Refunded, 5.00%, 8/01/29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,280,000 6,077,544

Fresno USD, GO, Refunding, Series C, NATL Insured, 5.90%,2/01/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,065,000 2,527,9328/01/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 3,635,400

Fullerton School District GO, Capital Appreciation, Series A, NATL RE, FGIC Insured, zero cpn., 8/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,030,000 1,792,124

Glendora PFAR Tax Allocation, Project No. 1, Refunding, Series A, NATL Insured, 5.00%, 9/01/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 4,889,650

Grossmont UHSD, GO,AGMC Insured, 5.00%, 8/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,440,000 1,537,114AGMC Insured, 5.25%, 8/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,510,000 8,163,821Capital Appreciation, Election of 2004, AGMC Insured, zero cpn., 8/01/24 . . . . . . . . . . . 5,110,000 2,877,645

Hawthorne School District GO, Election of 2008, Series A, Assured Guaranty, 5.00%, 8/01/34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,044,140

Hayward USD, GO, Capital Appreciation, Election of 2008, Series A, AGMC Insured, zero cpn., 8/01/38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,875,000 1,578,321

Hercules PFA Wastewater Revenue, AGMC Insured, 5.00%, 8/01/40 . . . . . . . . . . . . . . . . . . 5,690,000 5,821,211Hollister RDA Tax Allocation, Community Development Project, Refunding, AMBAC Insured,

5.125%, 10/01/32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,815,000 18,597,765Huntington Beach UHSD, COP, Adult Education Project, AGMC Insured, 5.25%, 9/01/39 . . . 2,000,000 2,083,140Indian Wells Valley Water District COP,

Assured Guaranty, 5.25%, 10/01/39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,590,000 8,105,816Refunding, Assured Guaranty, 5.125%, 10/01/32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,690,000 1,815,212

Jefferson UHSD San Mateo County GO, Refunding, Series A, NATL Insured, 6.45%,8/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,045,000 3,631,4378/01/29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,075,000 3,637,571

Jurupa Community Services District Special Tax, CFD No. 2, Series A, NATL Insured, 5.00%, 9/01/32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000,000 6,703,900

Jurupa PFAR, superior lien, Refunding, Series A, AGMC Insured, 5.00%, 9/01/30 . . . . . . . . . 4,000,000 4,147,640Jurupa USD, COP, AGMC Insured, Pre-Refunded, 5.625%, 9/01/24 . . . . . . . . . . . . . . . . . . . 1,600,000 1,613,488Kern High School District GO, AGMC Insured, ETM, 6.625%,

8/01/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,535,000 1,772,4188/01/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,400,000 1,688,820

La Habra COP, Refunding, Series A, AGMC Insured, 5.25%, 9/01/40 . . . . . . . . . . . . . . . . . . 7,900,000 8,222,636La Mirada RDA Tax Allocation, Merged Project Area, Refunding, Series A, AGMC Insured,

5.00%, 8/15/28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,855,000 1,973,627Lake Elsinore USD, COP, School Facilities Project Funding Program, AGMC Insured, 5.00%,

6/01/42 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000 10,081,500Lake Tahoe USD, GO, Election of 2008, AGMC Insured, 5.375%, 8/01/29 . . . . . . . . . . . . . . 10,000,000 11,174,100Lakeside USD San Diego County GO, Capital Appreciation, Election of 2008, Series B, zero

cpn., 8/01/45 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,540,000 1,601,406




Municipal Bonds (continued)California (continued)Lancaster School District GO, Capital Appreciation, Election of 1999, NATL Insured, zero cpn.,

8/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,495,000 $ 2,723,2127/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,965,000 2,787,564

Lawndale RDA Tax Allocation, Economic Revitalization Project, Assured Guaranty, 5.50%, 8/01/44 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,085,000 6,407,748

Lemon Grove School District GO, Election of 2008, Series A, Assured Guaranty, 5.125%, 8/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,100,000 2,213,673

Live Oak School District COP, Assured Guaranty,5.50%, 8/01/29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,245,000 1,362,5285.875%, 8/01/34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,270,000 2,474,4145.875%, 8/01/39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,750,000 2,970,138

Lodi Electric System Revenue COP, Series A, Assured Guaranty, 5.00%, 7/01/32 . . . . . . . . . 18,960,000 19,769,971Lodi USD, GO, NATL Insured, Pre-Refunded, 5.00%, 8/01/23 . . . . . . . . . . . . . . . . . . . . . . . 2,150,000 2,178,939Lodi USD School Facilities ID No. 1 GO, Election of 2006, AGMC Insured, 5.00%,

8/01/32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,023,380Long Beach Bond Finance Authority Lease Revenue,

Aquarium of the Pacific Project, Refunding, AMBAC Insured, 5.00%, 11/01/19 . . . . . . . . 4,000,000 4,003,520Public Safety Facilities Projects, AMBAC Insured, 5.00%, 11/01/26 . . . . . . . . . . . . . . . . 6,780,000 6,661,214Public Safety Facilities Projects, AMBAC Insured, 5.00%, 11/01/31 . . . . . . . . . . . . . . . . 10,500,000 9,734,970

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 6,504,8698/01/31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,135,000 2,819,964

Long Beach USD, GO, Election of 1999, Series C, NATL Insured, 5.125%, 8/01/31 . . . . . . . 13,870,000 13,887,754Los Angeles Community College District GO, Series B, AGMC Insured, 5.00%, 8/01/27 . . . . . 4,000,000 4,125,600Los Angeles COP,

Municipal Improvement Corp. of Los Angeles, Program AW Certificates, AMBAC Insured, 5.00%, 6/01/27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,895,000 6,002,053

Real Property Program, NATL Insured, 5.00%, 2/01/27 . . . . . . . . . . . . . . . . . . . . . . . . . 9,890,000 9,897,516Los Angeles Department of Airports Airport Revenue, Los Angeles International Airport, senior

bond, Series D, 5.00%, 5/15/40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000,000 32,024,700Los Angeles Department of Water and Power Revenue, Power System, Series B, AGMC Insured,

5.00%, 7/01/35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,133,500Los Angeles Mortgage Revenue, Refunding, Series I, NATL Insured, 6.50%, 7/01/22 . . . . . . . 625,000 625,338Los Angeles USD, GO,

Election of 2004, Series H, AGMC Insured, 5.00%, 7/01/27 . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,366,400Election of 2004, Series H, AGMC Insured, 5.00%, 7/01/28 . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,353,550Election of 2005, Series E, AGMC Insured, 5.00%, 7/01/27 . . . . . . . . . . . . . . . . . . . . . 5,800,000 6,225,024

Los Angeles Wastewater System Revenue, Refunding, Series A, NATL Insured, 5.00%, 6/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000 10,489,200

Lynwood PFA Tax Allocation, Project Area A, Refunding, Series A, AGMC Insured, 5.85%, 9/01/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,765,000 1,774,972

Marin Municipal Water District COP, Financing Project, AMBAC Insured, 5.00%, 7/01/29 . . . 1,200,000 1,215,384McFarland PFAR, Water and Wastewater Financing Projects, Series A, Assured Guaranty,

5.00%, 10/01/40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,115,000 5,208,860Mendocino County COP, Public Facilities Corp., NATL Insured, 5.25%, 6/01/30 . . . . . . . . . . 2,680,000 2,528,902Mendocino-Lake Community College District GO, Election of 2006, Series B, AGMC Insured,

5.125%, 8/01/41 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,500,000 7,849,200




Municipal Bonds (continued)California (continued)Modesto Irrigation District COP, Capital Improvements, Series A, AGMC Insured,

5.00%, 7/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,000,000 $ 5,005,750Pre-Refunded, 5.00%, 7/01/31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,285,000 8,285,000

Montebello COP, Capital Improvement Project, Refunding, AGMC Insured, 5.375%, 11/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,715,000 8,763,368

Montebello CRDA Tax Allocation, Montebello Hills Redevelopment Project, Refunding, NATL Insured, 5.60%, 3/01/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,460,000 2,464,674

Montebello USD, GO, Election of 2004, AGMC Insured, 5.00%, 8/01/33 . . . . . . . . . . . . . . . 2,700,000 2,849,823Monterey Peninsula USD, GO, Election of 2010, Series A, AGMC Insured, 5.75%, 8/01/41 . . . 17,500,000 19,171,250Moorpark USD,

COP, Refunding, Assured Guaranty, 5.625%, 11/01/28 . . . . . . . . . . . . . . . . . . . . . . . . . 2,180,000 2,368,505GO, Election of 2008, Capital Appreciation Bonds, Series A, Assured Guaranty, zero cpn., 8/01/32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,870,000 1,722,375

Moreno Valley USD, GO, Election of 2004, Series A, AGMC Insured, Pre-Refunded, 5.00%, 8/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000,000 4,458,360

Mount Diablo USD, GO, Election of 2002, NATL RE, FGIC Insured, 5.00%, 7/01/25 . . . . . . . 6,025,000 6,236,598Murrieta Valley USD, COP, NATL Insured, 5.00%, 8/01/27 . . . . . . . . . . . . . . . . . . . . . . . . . 1,380,000 1,403,736Natomas USD, GO, AGMC Insured, 5.00%, 9/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,535,000 2,557,663Nevada Joint UHSD, GO, Series A, AGMC Insured, Pre-Refunded, 5.00%, 8/01/26 . . . . . . . . 1,295,000 1,330,302Northern California Public Power Agency Revenue, AMBAC Insured, Pre-Refunded, 7.50%,

7/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,200,000 4,526,080Oak View USD, GO, AGMC Insured, 5.00%, 8/01/49 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,895,000 1,961,704Oceanside COP, AMBAC Insured, 5.20%, 4/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500,000 2,557,075Oceanside USD, GO,

Capital Appreciation, Election of 2008, Series B, AGMC Insured, zero cpn., 8/01/38 . . . . 10,590,000 2,117,682Capital Appreciation, Election of 2008, Series B, AGMC Insured, zero cpn., 8/01/39 . . . . 7,860,000 1,475,479Refunding, Series A, Assured Guaranty, 5.25%, 8/01/33 . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,248,850

Orange County Sanitation Districts COP, NATL RE, FGIC Insured, 5.00%, 2/01/33 . . . . . . . . 8,000,000 8,148,640Pacifica COP, AMBAC Insured, 5.375%, 1/01/37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,600,000 6,740,382Palm Springs Financing Authority Lease Revenue, Convention Center Project, Refunding,

Series A, NATL Insured, 5.00%, 11/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,295,000 2,318,776Paramount USD, GO, Election of 2006, AGMC Insured, 5.00%, 8/01/46 . . . . . . . . . . . . . . . 11,270,000 11,432,288Patterson Joint USD, GO, Capital Appreciation, Series A, NATL RE, FGIC Insured, zero cpn.,

8/01/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,900,000 1,127,2138/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,985,000 1,097,1108/01/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,075,000 1,058,0228/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,170,000 1,021,3978/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,265,000 990,122

Peralta Community College District GO,Election of 2000, Series B, NATL Insured, 5.25%, 8/01/32 . . . . . . . . . . . . . . . . . . . . . . 8,450,000 8,503,657Election of 2006, Series B, AGMC Insured, 5.00%, 8/01/24 . . . . . . . . . . . . . . . . . . . . . 6,000,000 6,537,480

Perris CFD No. 93-1 Special Tax, Series A, AMBAC Insured, 5.125%, 8/15/23 . . . . . . . . . . . 3,885,000 3,913,555Perris School District COP, School Facility Bridge Funding, AGMC Insured, 5.50%,

9/01/34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000,000 4,088,000Pittsburg USD Financing Authority Revenue, Board Program, AGMC Insured, 5.50%,

9/01/46 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,980,000 10,482,593Pleasanton USD, COP, Refunding, AGMC Insured, 5.00%, 8/01/29 . . . . . . . . . . . . . . . . . . . 4,000,000 4,216,480




Municipal Bonds (continued)California (continued)Plumas County COP, Capital Improvement Program, Series A, AMBAC Insured, 5.00%,

6/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,280,000 $ 3,280,590Pomona USD, GO, Election of 2008,

Series A, Assured Guaranty, 5.25%, 8/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,675,000 5,956,537Series C, AGMC Insured, 5.25%, 8/01/40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,000,000 16,621,440

Poway RDA Tax Allocation,Paguay Redevelopment Project, AMBAC Insured, 5.00%, 12/15/25 . . . . . . . . . . . . . . . . 9,195,000 9,212,379Refunding, NATL Insured, 5.75%, 6/15/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,225,000 2,163,523

Rancho Cucamonga RDA Tax Allocation, Rancho Redevelopment Project, Refunding, AGMC Insured, 5.25%, 9/01/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500,000 2,505,750

Redwood City School District GO, NATL RE, FGIC Insured, 5.00%, 7/15/27 . . . . . . . . . . . . . 3,000,000 3,015,330Richmond Joint Powers Financing Authority Revenue, Lease, Civic Center Project, Refunding,

Assured Guaranty, 5.875%, 8/01/37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,000,000 25,683,600Rio Hondo Community College District GO, Capital Appreciation, Election of 2004, Series C,

zero cpn., 8/01/35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000 2,516,300Riverside Electric Revenue, Issue D, AGMC Insured, 5.00%, 10/01/38 . . . . . . . . . . . . . . . . 5,310,000 5,553,570Rohnert Park Community Development Commission Tax Allocation Revenue, Redevelopment

Project, Series R, NATL RE, FGIC Insured,5.00%, 8/01/37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,620,000 3,289,928Pre-Refunded, 5.00%, 8/01/37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,380,000 1,545,434

Roseville Financing Authority Revenue, senior lien, Series A, AMBAC Insured, 5.00%, 9/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,675,000 5,510,595

Sacramento Area Flood Control Agency Special Assessment,Consolidated, Capital AD, Refunding, Series A, Assured Guaranty, 5.00%, 10/01/32 . . . . 5,000,000 5,309,150Subordinated, Capital AD No. 2, FGIC Insured, 5.80%, 11/01/16 . . . . . . . . . . . . . . . . . . 675,000 677,079

Sacramento County Airport System Revenue, Senior Series B, Assured Guaranty, 5.50%, 7/01/34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,320,000 17,371,008

Salida Area Public Facilities Financing Agency No. 88 Special Tax, Refunding, AGMC Insured, 5.00%, 9/01/30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,435,000 5,555,820

San Bernardino County SFMR, Capital Appreciation, Series A, GNMA Secured, ETM, zero cpn., 5/01/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,405,000 17,902,819

San Francisco City and County Airports Commission International Airport Revenue,Refunding, Second Series 28A, NATL Insured, 5.125%, 5/01/27 . . . . . . . . . . . . . . . . . . 16,575,000 16,605,166Second Series 28A, NATL Insured, Pre-Refunded, 5.125%, 5/01/24 . . . . . . . . . . . . . . . . 9,745,000 9,886,595

San Francisco City and County Public Utilities Commission Water Revenue, Refunding, Series A, AGMC Insured, 5.00%, 11/01/31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,005,000 3,005,481

San Francisco Community College District GO, Series A, NATL RE, FGIC Insured, 5.00%, 6/15/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000,000 6,045,480

San Gabriel USD, GO, Capital Appreciation, Series A, AGMC Insured, zero cpn.,8/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,530,000 1,654,1582/01/27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,850,000 820,216

San Jacinto USD, COP, Refunding, AGMC Insured, 5.125%, 9/01/30 . . . . . . . . . . . . . . . . . . 4,375,000 4,521,431San Joaquin Delta Community College District GO, Election of 2004,

Capital Appreciation, Series B, AGMC Insured, zero cpn., 8/01/31 . . . . . . . . . . . . . . . . . 10,475,000 3,441,142Capital Appreciation, Series B, AGMC Insured, zero cpn., 8/01/32 . . . . . . . . . . . . . . . . . 15,185,000 4,680,624Series A, AGMC Insured, 5.00%, 8/01/29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 520,000 541,705Series A, AGMC Insured, Pre-Refunded, 5.00%, 8/01/29 . . . . . . . . . . . . . . . . . . . . . . . . 4,530,000 5,214,257




Municipal Bonds (continued)California (continued)San Joaquin Hills Transportation Corridor Agency Toll Road Revenue,

Capital Appreciation, Refunding, Series A, NATL Insured, zero cpn., 1/15/26 . . . . . . . . . . $13,155,000 $ 4,582,939Refunding, Series A, NATL Insured, 5.375%, 1/15/29 . . . . . . . . . . . . . . . . . . . . . . . . . . 18,075,000 15,274,098Refunding, Series A, NATL Insured, 5.25%, 1/15/30 . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,860,000 10,586,095senior lien, NATL Insured, 5.00%, 1/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,035,000 8,136,880

San Jose Financing Authority Lease Revenue, Civic Center Project, Series B, AMBAC Insured, 5.00%, 6/01/27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000 10,046,000

San Jose MFHR, Sixth and Martha Family Apartments, FNMA Insured, 5.875%, 3/01/33 . . . 3,500,000 3,500,245San Jose RDA Tax Allocation, Merged Area Redevelopment Project, Series B, XLCA Insured,

5.00%, 8/01/31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,470,000 13,225,148San Juan USD, GO,

Election of 1998, Series A, NATL Insured, 5.00%, 8/01/28 . . . . . . . . . . . . . . . . . . . . . . 5,115,000 5,200,625Election of 2002, BHAC Insured, 5.00%, 8/01/31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,181,600

San Marcos School Financing Authority Lease Revenue, AGMC Insured, 5.00%, 8/15/40 . . . . 15,635,000 16,164,714San Marino USD, GO, Election of 2000, Series A, NATL Insured, zero cpn., 7/01/25 . . . . . . . 6,080,000 3,131,443San Mateo GO, Library Improvement Project, Series A, AMBAC Insured, 5.25%, 8/01/30 . . . 5,790,000 6,141,048Santa Ana USD, COP, Capital Appreciation, Financing Project, AGMC Insured, zero cpn.,

4/01/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,245,000 7,599,707Santa Clara COP, Refunding, AMBAC Insured, 5.00%, 2/01/27 . . . . . . . . . . . . . . . . . . . . . . 5,555,000 5,663,545Santa Clara County Financing Authority Revenue, El Camino Hospital, Series B, AMBAC

Insured, 5.125%, 2/01/41 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,545,000 11,630,779Santa Monica PFA Lease Revenue, Civic Center Parking Project, XLCA Insured, 5.00%,

7/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,050,000 11,407,136Santa Rita USD, GO, Election of 2006, Series A, AGMC Insured, 5.00%, 8/01/32 . . . . . . . . 6,160,000 6,359,153Santa Rosa Wastewater Service Facilities District Revenue, Refunding and Improvement,

AMBAC Insured, 6.00%, 7/02/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,410,000 1,538,592Santee School District GO,

Election of 2006, Series B, Assured Guaranty, 5.00%, 8/01/33 . . . . . . . . . . . . . . . . . . . 1,260,000 1,318,804Election of 2006, Series B, Assured Guaranty, 5.00%, 8/01/38 . . . . . . . . . . . . . . . . . . . 1,000,000 1,033,890Election of 2006, Series B, Assured Guaranty, 5.00%, 8/01/48 . . . . . . . . . . . . . . . . . . . 5,250,000 5,385,712Series A, AGMC Insured, 5.00%, 8/01/31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,845,000 7,183,691

Saugus / Hart School Facilities Financing Authority Lease Revenue, Series A, AGMC Insured, 5.00%,

9/01/35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,045,0009/01/40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500,000 1,516,710

Snowline Joint USD, COP, Refinancing Project, Refunding, Assured Guaranty, 5.00%, 9/01/34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,390,000 13,818,748

Sonoma CDA Tax Allocation, Redevelopment Project, Refunding, Assured Guaranty, 5.00%, 12/01/30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,795,000 3,986,799

South Gate COP, Series A, AMBAC Insured, 5.00%, 9/01/24 . . . . . . . . . . . . . . . . . . . . . . . . 3,155,000 3,198,665South San Francisco COP, Conference Center Financing, 5.00%, 4/01/29 . . . . . . . . . . . . . . 2,000,000 2,001,400Southern California Pubic Power Authority Revenue, Series A, AMBAC Insured, Pre-Refunded,

5.00%, 7/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,000,000 20,325,630Southern California Water Replenishment District Revenue COP, 5.00%, 8/01/41 . . . . . . . . . 10,000,000 10,228,800Southern Kern USD, COP, Capital Appreciation, Building Program, Series B, AGMC Insured,

5.625%, 9/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,250,000 2,252,768




Municipal Bonds (continued)California (continued)Southern Mono Health Care District GO, Election of 2001, Series A, NATL Insured,

zero cpn., 8/01/28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,340,000 $ 858,920zero cpn., 8/01/29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,440,000 828,819zero cpn., 8/01/30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,550,000 801,465zero cpn., 8/01/31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,660,000 769,3255.00%, 8/01/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,005,000 3,028,199

Stanislaus USD, GO, Election of 2008,Series A, Assured Guaranty, 5.625%, 8/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,140,000 4,524,730Series B, Assured Guaranty, 5.125%, 8/01/41 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,400,000 3,585,334

Stanton RDA Tax Allocation, Consolidated Redevelopment Project, Series A, AGMC Insured, 5.00%, 12/01/40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,020,000 6,180,794

Stockton Revenue COP, Wastewater System Project, Refunding, Series A, NATL Insured, 5.00%, 9/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,500,000 6,505,590

Sulphur Springs USD, COP, Capital Appreciation, AGMC Insured, zero cpn. to 12/01/15, 6.50% thereafter, 12/01/37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000,000 13,491,900

Susanville PFAR, Utility Enterprises Project, Refunding, Series A, Assured Guaranty, 5.00%, 6/01/36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,230,000 3,292,016

Sweetwater UHSD, GO, Election of 2006, Series A, BHAC Insured, 5.00%, 8/01/38 . . . . . . . 14,980,000 15,522,276Truckee PFA Tax Allocation Revenue, Truckee Redevelopment Project Loan, Series A, AGMC

Insured,5.00%, 9/01/30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,255,000 1,321,5785.375%, 9/01/37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,237,400

Turlock PFA Sewer Revenue, NATL RE, FGIC Insured, 5.50%, 9/15/29 . . . . . . . . . . . . . . . . . 6,855,000 6,862,883Tustin CRDA Tax Allocation, Housing, AGMC Insured,

5.00%, 9/01/30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,125,000 2,231,4415.25%, 9/01/39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,250,000 3,378,050

Union Elementary School District GO, Capital Appreciation,Series A, NATL RE, FGIC Insured, zero cpn., 9/01/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 1,098,660Series B, NATL RE, FGIC Insured, zero cpn., 9/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . 5,500,000 2,790,920Series B, NATL RE, FGIC Insured, zero cpn., 9/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . 5,850,000 2,772,666

University of California Revenues, Limited Project, Series D, NATL RE, FGIC Insured, 5.00%, 5/15/37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,460,000 6,705,480

Vacaville PFA Tax Allocation Revenue, Vacaville Redevelopment Projects, AGMC Insured, 5.00%, 9/01/31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,095,000 5,095,866

Val Verde USD,COP, Refunding, Series A, Assured Guaranty, 5.125%, 3/01/36 . . . . . . . . . . . . . . . . . . . 7,020,000 7,071,737GO, Election of 2008, Refunding, Series B, AGMC Insured, zero cpn., 8/01/34 . . . . . . . . 1,000,000 596,620

Vista USD, GO,Capital Appreciation, Series A, AGMC Insured, zero cpn., 8/01/26 . . . . . . . . . . . . . . . . . . 7,150,000 3,355,209Capital Appreciation, Series A, AGMC Insured, zero cpn., 2/01/27 . . . . . . . . . . . . . . . . . . 4,795,000 2,160,483Series A, AGMC Insured, 5.25%, 8/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,070,100

Washington Township Health Care District Revenue, Refunding,5.00%, 7/01/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,005,8205.125%, 7/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450,000 450,383

Weaver USD, GO, Election of 2006, Series C, AMBAC Insured, zero cpn., 8/01/47 . . . . . . . . 18,685,000 1,953,330West Basin Municipal Water District COP, Series A, NATL Insured, Pre-Refunded, 5.00%,

8/01/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 955,000 1,025,3458/01/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,545,000 1,657,538




Municipal Bonds (continued)California (continued)West Contra Costa USD, GO,

Election of 2010, Series A, AGMC Insured, 5.25%, 8/01/41 . . . . . . . . . . . . . . . . . . . . . $12,500,000 $ 13,162,500Refunding, Assured Guaranty, 5.25%, 8/01/29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500,000 2,675,375Election of 2005, Series A, AGMC Insured, 5.00%, 8/01/35 . . . . . . . . . . . . . . . . . . . . . 20,000,000 20,306,200

West Hills Community College District School Facilities ID No. 3 GO, Election of 2008, Series B, AGMC Insured, 6.50%, 8/01/41 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000,000 4,579,600

West Kern Community College District COP, AMBAC Insured, 5.375%, 11/01/28 . . . . . . . . . 5,615,000 5,833,648Western Placer USD, COP, Refinancing Project, AGMC Insured, 5.20%, 11/01/41 . . . . . . . . . 1,000,000 986,490Western Riverside County Water and Wastewater Finance Authority Revenue, Western

Municipal Water District Improvement, Assured Guaranty,5.50%, 9/01/34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,750,000 1,871,5205.625%, 9/01/39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500,000 2,671,925

Westlands Water District Revenue COP,NATL Insured, 5.00%, 9/01/29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,775,000 11,932,903Series A, NATL Insured, 5.00%, 9/01/37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,340,000 4,391,820

Wiseburn School District GO, Election of 2010,Series A, AGMC Insured, 5.75%, 8/01/40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,215,000 10,046,930Series B, AGMC Insured, 5.625%, 5/01/41 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000 10,883,000

Woodland Finance Authority Lease Revenue, Capital Projects, Refunding, XLCA Insured, 5.00%, 3/01/32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,340,000 6,550,678

Woodland Finance Authority Wastewater Revenue, second senior lien, NATL Insured, 5.00%, 3/01/35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,590,000 2,622,997

Woodside Elementary School District GO, Election of 2005, NATL Insured, Pre-Refunded, 5.00%, 10/01/29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,435,000 5,200,082

Yosemite Community College District GO, Election of 2004, Series C, AGMC Insured, 5.00%, 8/01/32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,289,300

Total Municipal Bonds before Short Term Investments(Cost $1,942,808,312) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,029,113,550

Short Term Investments 2.1%Municipal Bonds 2.1%California 2.1%

aCalifornia Infrastructure and Economic Development Bank Revenue,Contemporary Jewish Museum, Daily VRDN and Put, 0.11%, 12/01/36 . . . . . . . . . . . . . . 5,770,000 5,770,000J. Paul Getty, Refunding, Series A-4, Daily VRDN and Put, 0.04%, 10/01/47 . . . . . . . . . . 1,000,000 1,000,000

aCalifornia PCFA, PCR, Pacific Gas and Electric Co., Refunding, Series F, Daily VRDN and Put, 0.04%, 11/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,000,000

aCalifornia State Economic Recovery GO,Series C-3, Daily VRDN and Put, 0.04%, 7/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 725,000 725,000Series C-4, Daily VRDN and Put, 0.04%, 7/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500,000 1,500,000

aCalifornia State GO,Kindergarten, Series A3, Daily VRDN and Put, 0.03%, 5/01/34 . . . . . . . . . . . . . . . . . . . 2,600,000 2,600,000Series A-2, Daily VRDN and Put, 0.05%, 5/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500,000 2,500,000

aCalifornia Statewide CDA Revenue, John Muir Health, Refunding, Series C, Daily VRDN and Put, 0.05%, 8/15/27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,900,000 4,900,000

a Irvine 1915 Act Special Assessment, Limited Obligation, AD No. 93-14, Daily VRDN and Put, 0.04%, 9/02/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,487,000 8,487,000




Short Term Investments (continued)Municipal Bonds (continued)California (continued)

aLos Angeles County MTA Sales Tax Revenue, Proposition C, second senior, Refunding, Series A2, Daily VRDN and Put, 0.07%, 7/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,000,000 $ 4,000,000

aLos Angeles Department of Water and Power Revenue, Refunding, Series B, Sub Series B-6, Daily VRDN and Put, 0.06%, 7/01/34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400,000 2,400,000

aSacramento County Sanitation District Financing Authority Revenue, sub. lien, Sanitation District, Refunding, Series A, Daily VRDN and Put, 0.05%, 12/01/36 . . . . . . . . . . . . . . . . 9,040,000 9,040,000

aTahoe Forest Hospital District Revenue, Health Facility, Daily VRDN and Put, 0.07%, 7/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,305,000 1,305,000

Total Short Term Investments (Cost $45,227,000) . . . . . . . . . . . . . . . . . . . . . . . 45,227,000

Total Investments (Cost $1,988,035,312) 98.4% . . . . . . . . . . . . . . . . . . . . . . . . 2,074,340,550

Other Assets, less Liabilities 1.6% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,046,925

Net Assets 100.0% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,107,387,475

See Abbreviations on page 74.

aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand toreceive payment of the principal balance plus accrued interest at specified dates. The coupon rate shown represents the rate at period end.











Total from investment operations . . . . . . . . . . . . 0.76 0.32 1.00 0.05 0.37 0.47




Total returne . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.80% 2.88% 9.36% 0.51% 3.29% 4.13%


Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.64% 0.64% 0.66% 0.66% 0.66% 0.67%


Supplemental data








Class C (unaudited) 2011 2010 2009 2008 2007










Total returne . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.40% 2.40% 8.83% (0.05)% 2.63% 3.68%


Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.19% 1.19% 1.21% 1.21% 1.21% 1.20%


Supplemental data








Advisor Class (unaudited) 2011 2010 2009a


Net asset value, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.32 $11.44 $10.87 $10.60

Income from investment operationsb:

Net investment incomec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.23 0.46 0.46 0.31

Net realized and unrealized gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . 0.54 (0.13) 0.58 0.27

Total from investment operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.77 0.33 1.04 0.58

Less distributions from net investment income . . . . . . . . . . . . . . . . . . . . . . (0.23) (0.45) (0.47) (0.31)

Net asset value, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.86 $11.32 $11.44 $10.87

Total returnd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.84% 2.98% 9.65% 5.49%

Ratios to average net assetse

Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.54% 0.54% 0.56% 0.56%

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.90% 4.03% 4.05% 4.27%

Supplemental data

Net assets, end of period (000’s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $127,978 $95,447 $36,322 $156

Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.12% 9.42% 12.40% 20.01%

aFor the period October 31, 2008 (commencement of operations) to June 30, 2009.bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases ofthe Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.cBased on average daily shares outstanding.dTotal return is not annualized for periods less than one year.eRatios are annualized for periods less than one year.



Franklin California Intermediate-Term Tax-Free Income Fund Principal Amount Value

Municipal Bonds 95.8%California 89.3%ABAG Finance Authority for Nonprofit Corps. COP, Rhoda Haas Goldman Plaza, California

Mortgage Insured, 5.125%, 5/15/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,815,000 $ 1,817,160ABAG Finance Authority for Nonprofit Corps. Revenue,

Channing House, California Mortgage Insured, 5.00%, 5/15/20 . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,202,040Episcopal Senior Communities, Refunding, 5.25%, 7/01/22 . . . . . . . . . . . . . . . . . . . . . . . 6,520,000 6,587,938San Diego Hospital Assn., Series C, 5.125%, 3/01/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,110,000 2,241,938San Diego Hospital Assn., Series C, 5.25%, 3/01/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,315,000 2,443,205

ABAG Revenue, Refunding, Series A-E, 5.40%, 9/15/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395,000 403,801Alameda Corridor Transportation Authority Revenue, Capital Appreciation, sub. lien, Refunding,

Series A, AMBAC Insured, zero cpn., 10/01/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000 7,711,500Alameda-Contra Costa Transit District COP, Refunding, AMBAC Insured, 4.375%, 8/01/14 . . . . 1,330,000 1,332,208Antelope Valley UHSD, GO, Series A, NATL Insured,

4.50%, 8/01/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,230,000 1,269,7544.625%, 8/01/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,250,000 1,287,325

Arcadia USD, GO, Capital Appreciation, Election of 2006, Series A, AGMC Insured, zero cpn., 8/01/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,065,000 2,525,706

Baldwin Park USD, GO, Capital Appreciation, Election of 2006, AGMC Insured, zero cpn., 8/01/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,265,000 2,735,115

Banning Utility Authority Water Enterprise Revenue, Refunding and Improvement Projects, NATL RE, FGIC Insured, 5.00%, 11/01/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,080,000 1,172,718

Bay Area Toll Authority Toll Bridge Revenue, San Francisco Bay Area, Refunding, Series F, 5.00%, 4/01/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 3,352,290

Burbank Electric Revenue, NATL Insured, 4.00%, 6/01/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,014,530Burbank USD, GO, Capital Appreciation, Election of 1997, Series C, NATL RE, FGIC Insured,

zero cpn.,8/01/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,600,000 4,200,4448/01/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,670,000 4,112,495

California Community College Financing Authority Lease Revenue, Coast Community College, Series A, 5.00%, 6/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,220,000 1,252,184

California Educational Facilities Authority Revenue, San Francisco University, 5.00%, 10/01/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 3,542,220

California Health Facilities Financing Authority Revenue,Catholic Healthcare West, Series K, 5.125%, 7/01/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,455,000 18,633,212Cedars-Sinai Medical Center, Refunding, 5.00%, 11/15/19 . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,189,060Community Development Program for Persons with Developmental Disabilities, Series A, California Mortgage Insured, 6.00%, 2/01/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,272,420

Paradise Valley Estates, Refunding, California Mortgage Insured, 4.375%, 1/01/12 . . . . . . . 1,000,000 1,000,000Paradise Valley Estates, Refunding, California Mortgage Insured, 5.00%, 1/01/13 . . . . . . . . 1,815,000 1,879,124Paradise Valley Estates, Refunding, California Mortgage Insured, 5.00%, 1/01/14 . . . . . . . . 1,635,000 1,686,699Providence Health and Services, Series C, 5.75%, 10/01/19 . . . . . . . . . . . . . . . . . . . . . . . 1,440,000 1,737,461Providence Health and Services, Series C, 6.00%, 10/01/20 . . . . . . . . . . . . . . . . . . . . . . . 1,500,000 1,815,390Scripps Health, Series A, 5.00%, 10/01/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,600,000 5,220,402The Episcopal Home, California Mortgage Insured, 4.625%, 2/01/12 . . . . . . . . . . . . . . . . . 1,350,000 1,352,687The Episcopal Home, California Mortgage Insured, 4.75%, 2/01/13 . . . . . . . . . . . . . . . . . . 1,200,000 1,202,880

California Infrastructure and Economic Developing Bank Revenue, Broad Museum Project, Series A, 5.00%, 6/01/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 6,221,950




Municipal Bonds (continued)California (continued)California Municipal Finance Authority COP, Community Hospitals of Central California,

5.00%, 2/01/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,390,000 $ 4,687,8615.00%, 2/01/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,860,000 4,078,5925.00%, 2/01/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,600,000 1,657,7445.00%, 2/01/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,600,000 1,643,072Refunding, 5.00%, 2/01/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,765,000 1,864,917Refunding, 5.00%, 2/01/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,025,000 4,264,850Refunding, 5.00%, 2/01/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,590,000 2,699,298

California Municipal Finance Authority Revenue,Kern Regional Center Project, Series A, 6.00%, 5/01/19 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500,000 1,673,580Kern Regional Center Project, Series A, 6.875%, 5/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . 1,500,000 1,635,990Loma Linda University, 5.00%, 4/01/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,180,000 1,245,478

California State Department of Water Resources Power Supply Revenue,Power Supply, Refunding, Series H, AGMC Insured, 5.00%, 5/01/22 . . . . . . . . . . . . . . . . . 5,000,000 5,796,350Power Supply, Series H, AGMC Insured, 5.00%, 5/01/17 . . . . . . . . . . . . . . . . . . . . . . . . . . 10,420,000 12,473,261Refunding, Series H, 5.00%, 5/01/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,400,000 8,578,598Refunding, Series L, 5.00%, 5/01/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000 12,050,900Series A, 5.50%, 5/01/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,034,260Series A, Pre-Refunded, 5.125%, 5/01/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500,000 2,564,625

California State Department of Water Resources Water System Revenue, Central Valley Project, Refunding, Series AE, 5.00%, 12/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,594,150

California State Economic Recovery GO, Series A,5.00%, 7/01/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,115,000 6,729,068Pre-Refunded, 5.00%, 7/01/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,555,000 5,060,149

California State Educational Facilities Authority Revenue, Chapman University, Refunding, 5.00%, 4/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,471,700

California State GO,5.25%, 6/01/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 515,000 525,599Refunding, 5.00%, 11/01/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 150,491Refunding, NATL Insured, 5.00%, 2/01/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 5,016

California State Public Works Board Lease Revenue,California State University Projects, Series B-1, 5.375%, 3/01/25 . . . . . . . . . . . . . . . . . . . 2,500,000 2,760,875Department of Corrections and Rehabilitation, Refunding, Series J, 5.00%, 1/01/21 . . . . . . 3,000,000 3,221,640Department of Forestry and Fire Protection, Series A, 4.875%, 10/01/18 . . . . . . . . . . . . . . 1,325,000 1,327,239Department of General Services, Buildings 8 and 9, Series A, 5.75%, 4/01/23 . . . . . . . . . . 4,000,000 4,606,760Department of General Services, Buildings 8 and 9, Series A, 6.00%, 4/01/24 . . . . . . . . . . 6,605,000 7,772,566Trustees of California State University, Series J, 5.50%, 11/01/25 . . . . . . . . . . . . . . . . . . . 4,725,000 5,436,254Trustees of California State University, Series J, 5.50%, 11/01/26 . . . . . . . . . . . . . . . . . . . 1,000,000 1,138,710Various Capital Projects, Series A, Sub Series A-1, 5.25%, 3/01/22 . . . . . . . . . . . . . . . . . . 7,475,000 8,498,028Various Capital Projects, Series G, Sub Series G-1, 5.25%, 10/01/18 . . . . . . . . . . . . . . . . . 5,605,000 6,468,787Various Capital Projects, Series G, Sub Series G-1, 5.00%, 10/01/20 . . . . . . . . . . . . . . . . . 6,405,000 7,110,639Various Capital Projects, Series G, Sub Series G-1, 5.125%, 10/01/22 . . . . . . . . . . . . . . . . 14,555,000 16,281,514

California State University Revenue, Systemwide, Refunding, Series A, 5.00%, 11/01/25 . . . . . 10,000,000 11,415,800California Statewide CDA, MFHR, 740 S. Olive Street Apartments, Series L, GNMA Secured,

4.25%, 7/20/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,540,000 3,446,544

California Statewide CDA Revenue,CHF-Irvine LLC, UCI East Campus Apartments, Phase II, 6.00%, 5/15/23 . . . . . . . . . . . . . $10,000,000 $ 11,083,300Daughters of Charity Health, Refunding, Series A, 5.25%, 7/01/24 . . . . . . . . . . . . . . . . . . 3,670,000 3,584,636Daughters of Charity Health, Refunding, Series G, 5.25%, 7/01/13 . . . . . . . . . . . . . . . . . . 1,000,000 1,036,820Enloe Medical Center, Series A, California Mortgage Insured, 5.50%, 8/15/23 . . . . . . . . . . . 3,000,000 3,314,010Health Facility, Los Angeles Jewish Home for the Aging, California Mortgage Insured, 5.00%, 11/15/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 3,109,920

Lodi Memorial Hospital, Series A, California Mortgage Insured, 5.00%, 12/01/22 . . . . . . . . 8,000,000 8,692,800Methodist Hospital of Southern California Project, FHA Insured, 5.50%, 8/01/18 . . . . . . . . 3,260,000 3,812,668Methodist Hospital of Southern California Project, FHA Insured, 5.50%, 2/01/19 . . . . . . . . 3,405,000 3,953,137Methodist Hospital of Southern California Project, FHA Insured, 5.50%, 8/01/19 . . . . . . . . 3,450,000 4,027,737Viewpoint School, Refunding, ACA Insured, 4.50%, 10/01/17 . . . . . . . . . . . . . . . . . . . . . . 460,000 471,288Viewpoint School, Refunding, ACA Insured, 4.75%, 10/01/18 . . . . . . . . . . . . . . . . . . . . . . 480,000 492,106

Carson RDA, Tax Allocation Housing, Series A, 5.00%,10/01/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,975,000 2,014,08510/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,135,000 2,158,95510/01/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,245,000 2,252,72310/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,700,000 1,691,517

Castaic Lake Water Agency Revenue COP, Water System Improvement Project, Capital Appreciation, AMBAC Insured, zero cpn., 8/01/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,445,000 6,592,884

Cathedral City 1915 Act Special Assessment, Limited Obligation, Cove ID No. 04-02, 5.00%, 9/02/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 975,000 955,247

Clovis USD, GO, Capital Appreciation, Election of 2004, Series A, NATL RE, FGIC Insured, zero cpn., 8/01/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,235,000 4,540,682

Compton CRDA Tax Allocation, Redevelopment Project, second lien, Series A, 5.00%, 8/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,275,000 7,913,051

Compton PFA Lease Revenue, Various Capital Projects, Refunding, AMBAC Insured, 5.00%, 9/01/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,055,000 15,053,946

Conejo Valley USD, GO, Election of 1998,Series C, AGMC Insured, zero cpn., 8/01/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500,000 2,161,275Series D, NATL RE, FGIC Insured, 4.50%, 8/01/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000,000 4,192,920

Contra Costa Community College District GO, Election of 2002, NATL RE, FGIC Insured, Pre-Refunded, 4.75%, 8/01/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,450,000 2,513,283

Corona-Norco USD,COP, Series A, AGMC Insured, 5.00%, 4/15/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,310,000 1,517,190COP, Series A, AGMC Insured, 5.00%, 4/15/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,465,000 1,653,091GO, Capital Appreciation Bonds, Election of 2006, Series E, zero cpn. to 7/31/21, 5.30% thereafter, 8/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,645,000 2,999,044

PFA Special Tax Revenue, Series A, 5.25%, 9/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,235,000 2,236,296Cupertino USD, GO, Refunding, 5.00%, 8/01/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,690,000 2,051,930Delano Financing Authority Revenue, Police Station and Capital Improvements, Series A, 5.00%,

12/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,865,000 4,039,969Desert Sands USD,

COP, Financing Project, AGMC Insured, 5.00%, 3/01/19 . . . . . . . . . . . . . . . . . . . . . . . . . . 2,090,000 2,341,970GO, Election of 2001, 5.25%, 8/01/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,015,000 2,354,205


Municipal Bonds (continued)California (continued)






Municipal Bonds (continued)California (continued)East Side UHSD Santa Clara County GO, Refunding, AGMC Insured, 5.00%,

8/01/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,800,000 $ 3,325,1688/01/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,140,000 2,507,2248/01/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,090,000 3,576,768

Eden Township Healthcare District COP, 5.00%, 6/01/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,505,000 1,590,996Fairfax School District GO, Election of 2000, Series A, NATL RE, FGIC Insured, 5.00%,

11/01/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 640,000 682,886Folsom PFA Lease Revenue, City Hall and Community Center, Refunding, AGMC Insured, 5.00%,

10/01/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,275,000 1,304,006Folsom PFA Special Tax Revenue,

CFD No. 7, Refunding, Series A, AGMC Insured, 5.00%, 9/01/23 . . . . . . . . . . . . . . . . . . . 1,005,000 1,072,335CFD No. 7, Refunding, Series A, AGMC Insured, 5.00%, 9/01/24 . . . . . . . . . . . . . . . . . . . 1,055,000 1,111,094Refunding, Series A, 5.00%, 9/01/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,055,880Refunding, Series A, 5.00%, 9/01/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,270,000 1,330,808Refunding, Series A, 5.00%, 9/01/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,335,000 1,386,224Refunding, Series A, 5.00%, 9/01/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,400,000 1,440,544

Foothill/Eastern Corridor Agency Toll Road Revenue,Capital Appreciation, Refunding, 5.875%, 1/15/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,765,000 1,779,085Capital Appreciation, Refunding, zero cpn., 1/15/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,345,000 16,595,074Refunding, NATL Insured, 5.00%, 1/15/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,000,690

Fresno Joint Powers Financing Authority Lease Revenue, Master Lease Projects, Series A,5.25%, 4/01/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,055,000 1,155,1515.50%, 4/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,070,000 1,178,4235.625%, 4/01/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,110,000 1,220,8565.75%, 4/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,125,000 1,234,271

Galt Capital Improvements Authority Lease Revenue, Culture and Recreation Improvement Project, 5.00%, 4/01/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525,000 526,591

Galt Middle School Joint Powers Authority Special Tax, CFD No. 1, Refunding, 5.40%, 9/01/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 435,000 436,984

Garden Grove Agency Community Development Tax Allocation, Garden Grove Community Project, Refunding, AMBAC Insured, 4.25%, 10/01/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,025,000 2,074,086

Golden State Tobacco Securitization Corp. Tobacco Settlement Revenue, Asset-Backed, ETM, 5.00%, 6/01/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500,000 1,527,735

Irvine 1915 Act Special Assessment, Limited Obligation,AD No. 00-18, Group 3, 4.75%, 9/02/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,022,230AD No. 00-18, Group 3, 5.00%, 9/02/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,017,740AD No. 03-19, Group 2, Refunding, 4.875%, 9/02/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . 940,000 965,277AD No. 03-19, Group 2, Refunding, 5.00%, 9/02/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 940,000 958,678AD No. 03-19, Group 2, Refunding, 5.125%, 9/02/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . 940,000 959,702Reassessment District No. 11-1, 5.00%, 9/02/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 514,640

Irvine USD Financing Authority Special Tax, Series A,4.70%, 9/01/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,040,000 1,072,9684.80%, 9/01/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,325,000 1,362,1804.875%, 9/01/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,490,000 1,523,8235.00%, 9/01/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,095,000 1,110,352

Lancaster RDA Tax Allocation, Combined Redevelopment Project Areas, 6.00%, 8/01/24 . . . . . 1,300,000 1,338,935




Municipal Bonds (continued)California (continued)Loma Linda Hospital Revenue, Loma Linda University Medical Center, Series A, 5.00%,

12/01/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,000,000 $ 5,038,550Long Beach Bond Finance Authority Natural Gas Purchase Revenue, Series A, 5.00%,

11/15/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,950,000 4,112,463Los Angeles Convention and Exhibition Center Authority Lease Revenue, Refunding, Series A,

5.00%, 8/15/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000,000 22,154,200AMBAC Insured, 3.00%, 8/15/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,525,000 4,577,173

Los Angeles County MTA Sales Tax Revenue, Proposition C, Senior, Refunding, Series A, 5.25%, 7/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000,000 17,759,550

Los Angeles County Sanitation Districts Financing Authority Revenue, Capital Projects, Refunding, Series A, 5.00%, 10/01/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,750,000 3,405,270

Los Angeles GO, Judgment Obligation, Series A, 5.00%, 6/01/18 . . . . . . . . . . . . . . . . . . . . . . 5,650,000 6,758,021Los Angeles USD,

COP, 5.00%, 12/01/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,830,000 4,369,992GO, Election of 2004, Series F, FGIC Insured, 5.00%, 7/01/21 . . . . . . . . . . . . . . . . . . . . . 5,975,000 6,699,947GO, Refunding, NATL Insured, 5.25%, 7/01/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,500,000 3,750,110GO, Refunding, Series A-1, FGIC Insured, 5.00%, 7/01/25 . . . . . . . . . . . . . . . . . . . . . . . . 6,265,000 6,737,381GO, Refunding, Series A-2, FGIC Insured, 5.00%, 7/01/22 . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,334,750GO, Series D, 5.00%, 7/01/27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,410,000 3,716,252GO, Series I, 5.00%, 7/01/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,921,900

Marina Joint Powers Financing Authority MFHR, Abrams B Apartments Financing, Mandatory Put 11/15/16, FNMA Insured,

3.90%, 11/15/36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,440,000 3,636,7683.95%, 11/15/36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,345,000 1,425,485

Martinez USD, GO, Election of 2010, Capital Appreciation, zero cpn. to 8/01/14, 5.375% thereafter, 8/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 4,805,150

Montebello USD, GO, Capital Appreciation, NATL RE, FGIC Insured, zero cpn.,8/01/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,455,000 1,113,6288/01/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,480,000 1,055,048

Moreno Valley USD, GO,Capital Appreciation, Refunding, NATL Insured, zero cpn., 8/01/24 . . . . . . . . . . . . . . . . . . 7,500,000 3,761,250Election of 2004, Series A, AGMC Insured, Pre-Refunded, 5.00%, 8/01/17 . . . . . . . . . . . . 2,000,000 2,229,180Election of 2004, Series A, AGMC Insured, Pre-Refunded, 5.00%, 8/01/18 . . . . . . . . . . . . 2,300,000 2,563,557

Northern California Power Agency Revenue, Geothermal Project No. 3, Series A,5.00%, 7/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,302,6805.25%, 7/01/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,324,560

Oakland USD Alameda County GO, 6.50%, 8/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,200,000 2,560,866Orange County CFD No. 2002-1 Special Tax, Ladera Ranch, Series A,

4.60%, 8/15/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,007,1004.75%, 8/15/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,007,2904.90%, 8/15/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,285,000 1,294,034

Orange County CFD No. 2003-1 Special Tax, Ladera Ranch, Series A,4.90%, 8/15/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,014,5405.10%, 8/15/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,014,210

Orange County CFD No. 2004-1 Special Tax, Ladera Ranch, Series A,4.70%, 8/15/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,765,000 1,797,6174.80%, 8/15/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,945,000 1,975,6534.85%, 8/15/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,020,900




Municipal Bonds (continued)California (continued)Orange County CFD No. 86-2 Special Tax, Rancho Santa Margarita, Refunding, Series A,

5.375%, 8/15/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 520,000 $ 521,045Oroville Hospital Revenue, Oroville Hospital, Series A, California Mortgage Insured, 5.125%,

12/01/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,435,000 1,438,932Oxnard Harbor District Revenue, Series A, 5.10%, 8/01/14 . . . . . . . . . . . . . . . . . . . . . . . . . . 590,000 603,682Pacifica COP, AMBAC Insured, 5.00%, 1/01/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,275,000 1,369,312Palm Desert Financing Authority Tax Allocation Revenue, Project Area No. 1, As Amended,

Series A, NATL Insured, 5.00%, 4/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,690,000 7,791,892Palo Verde Community College District COP, AMBAC Insured, 5.00%,

1/01/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,015,000 1,094,8201/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,065,000 1,141,2971/01/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,070,000 1,138,812

Perris UHSD Financing Authority Revenue,5.50%, 9/01/27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,270,000 1,285,0755.625%, 9/01/29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,375,000 1,383,539Special Tax, 5.25%, 9/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,005,000 1,013,261

Pomona RDA Tax Allocation, Mountain Meadows Redevelopment Project, Refunding, Series X, 5.35%, 12/01/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,073,830

Rancho Mirage Joint Powers Financing Authority Revenue, Eisenhower Medical Center, Series A, 5.00%,

7/01/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,420,000 1,520,5647/01/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,695,000 1,732,493

Redlands USD, GO, Election of 2002, AGMC Insured, 5.00%, 7/01/19 . . . . . . . . . . . . . . . . . . 1,000,000 1,050,730Richmond Joint Powers Financing Authority Revenue,

Lease, Civic Center Project, Refunding, Assured Guaranty, 5.00%, 8/01/19 . . . . . . . . . . . . . 2,010,000 2,330,615Lease, Civic Center Project, Refunding, Assured Guaranty, 5.00%, 8/01/20 . . . . . . . . . . . . . 2,315,000 2,643,336Lease, Civic Center Project, Refunding, Assured Guaranty, 5.00%, 8/01/21 . . . . . . . . . . . . . 2,050,000 2,311,047Multiple Redevelopment Projects, Series B, ETM, 5.35%, 5/15/13 . . . . . . . . . . . . . . . . . . . 740,000 767,498

Riverside County COP, Capital Improvement, Family Law, Refunding, Series A, NATL RE, FGIC Insured, 5.00%, 11/01/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,540,000 1,699,575

Riverside County RDA Tax Allocation,Desert Communities Redevelopment Project Area, second lien, Series D, 6.50%, 12/01/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,045,000 1,087,479

Desert Communities Redevelopment Project Area, second lien, Series D, 6.75%, 12/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,025,000 1,054,725

Jurupa Valley Redevelopment Project Area, Series B, 6.50%, 10/01/25 . . . . . . . . . . . . . . . 1,225,000 1,267,716Riverside USD, GO, Election of 2001, Series A, NATL RE, FGIC Insured, Pre-Refunded, 4.00%,

2/01/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,012,740Sacramento County COP, Refunding,

5.125%, 2/01/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,460,000 3,746,0385.375%, 2/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,400,000 3,687,9465.50%, 2/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,770,000 4,014,824

Sacramento County Special Tax, CFD No. 1, Improvement Area No. 1, Laguna Creek Ranch/Elliott Ranch, Refunding, 5.00%, 9/01/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,510,000 1,597,942

Sacramento MUD Revenue, Refunding, Series X, 5.00%, 8/15/25 . . . . . . . . . . . . . . . . . . . . . . 10,000,000 11,319,600San Bernardino County COP, Arrowhead Project, Refunding, Series A, 5.25%, 8/01/26 . . . . . . . 15,000,000 15,636,450




Municipal Bonds (continued)California (continued)San Diego Public Facilities Financing Authority Lease Revenue, Master Refunding Project,

Series A, 5.00%, 9/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,000,000 $ 8,353,680San Diego RDA Tax Allocation Revenue, Naval Training Center, Series A, 5.00%, 9/01/25 . . . . . 1,000,000 1,006,220San Francisco City and County Airports Commission International Airport Revenue,

Issue 34D, Refunding, Second Series, 5.25%, 5/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,425,000 5,917,210Mandatory Put 5/01/12, Second Series, Pre-Refunded, 6.50%, 5/01/19 . . . . . . . . . . . . . . . 2,000,000 2,036,640Refunding, Series G, 5.00%, 5/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,970,000 5,764,156

San Francisco City and County COP, Multiple Capital Improvement Projects, Series A, 5.00%, 4/01/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,400,000 9,109,632

San Francisco City and County GO, Clean and Safe Parks, Series B, 4.75%, 6/15/19 . . . . . . . . 2,610,000 3,138,133San Francisco City and County RDA Hotel Occupancy Revenue, Refunding, AGMC Insured,

5.00%, 6/01/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,275,000 11,148,991San Francisco City and County Redevelopment Financing Authority Tax Allocation,

Mission Bay North Redevelopment, Series C, 5.875%, 8/01/25 . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,056,490Mission Bay South Redevelopment, Series D, 5.50%, 8/01/19 . . . . . . . . . . . . . . . . . . . . . . 1,030,000 1,094,087Mission Bay South Redevelopment, Series D, 6.25%, 8/01/21 . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,087,140Mission Bay South Redevelopment, Series D, 6.25%, 8/01/23 . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,079,910Mission Bay South Redevelopment, Series D, 6.00%, 8/01/25 . . . . . . . . . . . . . . . . . . . . . . 1,465,000 1,539,393Mission Bay South Redevelopment, Series D, 6.125%, 8/01/26 . . . . . . . . . . . . . . . . . . . . . 1,550,000 1,630,801San Francisco Redevelopment Projects, Series B, 6.125%, 8/01/26 . . . . . . . . . . . . . . . . . . 1,000,000 1,111,250

San Joaquin County COP,General Hospital Project, Refunding, NATL Insured, 5.00%, 9/01/17 . . . . . . . . . . . . . . . . . 1,000,000 1,001,210Solid Waste System Facilities Projects, NATL Insured, 5.00%, 4/01/17 . . . . . . . . . . . . . . . . 1,340,000 1,378,244

San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, Capital Appreciation, Refunding, Series A,

5.60%, 1/15/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 3,047,400NATL Insured, zero cpn., 1/15/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,000,000 6,619,220

San Jose RDA Tax Allocation, Merged Area Redevelopment Project,Refunding, Series D, AMBAC Insured, 5.00%, 8/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,000,000 12,513,020Series B, XLCA Insured, 5.00%, 8/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000,000 7,316,960

Sanger USD, GO, Election of 2006, Series A, AGMC Insured, 5.00%,8/01/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,325,000 1,500,7888/01/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,510,000 1,700,471

Santa Ana Community RDA Tax Allocation, Merged Project Area, Refunding, Series A, 6.00%, 9/01/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,459,300

Santa Ana USD, GO,Election of 1999, Series B, NATL RE, FGIC Insured, zero cpn., 8/01/14 . . . . . . . . . . . . . . . 3,125,000 2,961,500Election of 2008, Series A, 5.25%, 8/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,203,840

Santa Margarita Water District Special Tax, CFD No. 99-1, Refunding, Series A,5.00%, 9/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,030,4905.00%, 9/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,030,3605.00%, 9/01/27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,026,9205.125%, 9/01/28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,060,000 1,090,4335.25%, 9/01/29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,030,260

South Bayside Waste Management Authority Solid Waste Enterprise Revenue, Shoreway Environmental Center, Series A, 5.25%, 9/01/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,500,000 3,717,070



South Gate PFA Tax Allocation Revenue, South Gate Redevelopment Project No. 1, XLCA Insured,5.00%, 9/01/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,095,000 $ 1,118,948

Southern California Public Power Authority Natural Gas Project Revenue, Project No. 1, Series A, 5.25%, 11/01/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500,000 2,556,100

Southern California Public Power Authority Revenue, Canyon Power Project, Refunding, Series A, 5.00%, 7/01/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500,000 1,821,990

Torrance Hospital Revenue, Torrance Memorial Medical Center, Series A, 5.10%, 6/01/12 . . . . . 1,000,000 1,013,000Tuolumne Wind Project Authority Revenue, Tuolumne Co. Project, Series A, 5.25%, 1/01/24 . . . 5,000,000 5,600,800Tustin CRDA Tax Allocation, Housing, AGMC Insured, 5.00%,

9/01/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,100,1509/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,087,760

University of California Revenues,General, Series U, 5.00%, 5/15/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,060,000 4,976,951Refunding, Series S, 5.00%, 5/15/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,145,000 9,793,792

Washington Township Health Care District Revenue, Series A, 5.00%, 7/01/25 . . . . . . . . . . . . 3,035,000 3,136,733West Kern Community College District COP, AMBAC Insured,

5.00%, 11/01/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,015,000 1,106,2495.00%, 11/01/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,065,000 1,137,0695.00%, 11/01/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,115,000 1,180,9415.125%, 11/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,170,000 1,234,2565.125%, 11/01/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,230,000 1,283,456

Whittier Health Facility Revenue, Presbyterian Intercommunity Hospital,ETM, 5.00%, 6/01/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,225,000 2,267,075Pre-Refunded, 5.00%, 6/01/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,335,000 2,402,458

Whittier UHSD, GO, Capital Appreciation Bonds, Refunding, zero cpn.,8/01/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,755,000 3,956,7568/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,045,000 4,427,736

Yorba Linda RDA Tax Allocation, sub. lien, Redevelopment Project, Series A, 6.00%, 9/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,435,000 1,520,052

Yucaipa Valley Water District Water System Revenue COP, Series A, NATL Insured,5.00%, 9/01/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,080,000 1,163,3655.25%, 9/01/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,325,000 1,406,077

826,733,673

U.S. Territories 6.5%Guam 0.3%Guam Government Limited Obligation Revenue, Section 30, Series A, 5.25%, 12/01/17 . . . . . . 2,305,000 2,506,918

Puerto Rico 6.2%Puerto Rico Commonwealth GO, Public Improvement, AGMC Insured, 5.25%, 7/01/16 . . . . . . . 2,500,000 2,801,500Puerto Rico Electric Power Authority Power Revenue,

Refunding, Series UU, AGMC Insured, 5.00%, 7/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,358,650Series RR, NATL RE, FGIC Insured, 5.00%, 7/01/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,305,050Series WW, 5.375%, 7/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,437,100

Puerto Rico Infrastructure Financing Authority Revenue, Ports Authority, Series B, 5.25%, 12/15/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,132,350


Municipal Bonds (continued)California (continued)




Municipal Bonds (continued)U.S. Territories (continued)Puerto Rico (continued)Puerto Rico PBA Guaranteed Revenue, Government Facilities, Refunding, Series M-3, NATL

Insured, 6.00%, 7/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,645,000 $ 13,726,311Puerto Rico Public Finance Corp. Revenue, Commonwealth Appropriation, Refunding, Series B,

6.00%, 8/01/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000,000 8,931,280Puerto Rico Sales Tax FICO Sales Tax Revenue, first sub., Series A, 5.00%, 8/01/24 . . . . . . . . 10,000,000 11,053,000

57,745,241

Total U.S. Territories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,252,159

Total Municipal Bonds before Short Term Investments(Cost $835,004,819) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 886,985,832

Short Term Investments 2.7%Municipal Bonds 2.7%California 2.7%

aCalifornia PCFA, PCR, Pacific Gas and Electric Co., Refunding, Series C, Daily VRDN and Put, 0.03%, 11/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 3,000,000

aCalifornia State Economic Recovery GO,Series C-3, Daily VRDN and Put, 0.04%, 7/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,100,000 3,100,000Series C-4, Daily VRDN and Put, 0.04%, 7/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000,000 4,000,000

aCalifornia State GO, Kindergarten, Series B3, Daily VRDN and Put, 0.03%, 5/01/34 . . . . . . . . . 4,875,000 4,875,000aLos Angeles Department of Water and Power Revenue, Refunding, Series B, Sub Series B-3,

Daily VRDN and Put, 0.06%, 7/01/34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,700,000 2,700,000aSouthern California Public Power Authority Revenue, Mead-Phoenix Project, Refunding, Series A,

Daily VRDN and Put, 0.05%, 7/01/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,260,000 7,260,000

Total Short Term Investments (Cost $24,935,000) . . . . . . . . . . . . . . . . . . . . . . . . . 24,935,000

Total Investments (Cost $859,939,819) 98.5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . 911,920,832

Other Assets, less Liabilities 1.5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,795,131

Net Assets 100.0% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $925,715,963










Income from investment operations – net investment income (loss) . . . . . . . . . . . . . . . . . — — —a 0.006 0.024 0.029

Less distributions from net investment income . . . — — — (0.006) (0.024) (0.029)


Total returnb . . . . . . . . . . . . . . . . . . . . . . . . . . . —% —% —% 0.57% 2.43% 2.97%

Ratios to average net assetsc

Expenses before waiver and payments by affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.55% 0.54% 0.54% 0.57% 0.54% 0.55%

Expenses net of waiver and payments by affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.11% 0.23% 0.24% 0.46% 0.54% 0.55%

Net investment income (loss) . . . . . . . . . . . . . . . —% —% (—)%d 0.61% 2.37% 2.94%

Supplemental data


aAmount rounds to less than $0.001 per share.bTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.cRatios are annualized for periods less than one year.dRounds to less than 0.01%.



Franklin California Tax-Exempt Money Fund Principal Amount Value

Investments 77.3%Municipal Bonds 77.3%California 77.3%

aCalifornia Educational Facilities Authority Revenue,California Institute of Technology, Series B, Weekly VRDN and Put, 0.03%, 10/01/36 . . . . . $20,850,000 $ 20,850,000Stanford University, Refunding, Series L, Weekly VRDN and Put, 0.05%, 10/01/22 . . . . . . . 3,300,000 3,300,000Stanford University, Refunding, Series L-2, Weekly VRDN and Put, 0.05%, 10/01/14 . . . . . 5,800,000 5,800,000Stanford University, Refunding, Series L-3, Weekly VRDN and Put, 0.05%, 10/01/15 . . . . . 7,240,000 7,240,000Stanford University, Refunding, Series L-5, Weekly VRDN and Put, 0.05%, 10/01/17 . . . . . 7,000,000 7,000,000Various, California Institute of Technology, Refunding, Series A, Weekly VRDN and Put, 0.05%, 10/01/36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,100,000 1,100,000

aCalifornia Health Facilities Financing Authority Revenue,Adventist Health System West, Series A, Weekly VRDN and Put, 0.04%, 8/01/21 . . . . . . . . 7,200,000 7,200,000Adventist Health System West, Series B, Daily VRDN and Put, 0.06%, 9/01/38 . . . . . . . . . . 6,305,000 6,305,000Health Facility, Catholic Healthcare West, Series B, Weekly VRDN and Put, 0.06%, 3/01/47 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,725,000 6,725,000

Health Facility, Catholic Healthcare West, Series C, Weekly VRDN and Put, 0.05%, 3/01/47 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000,000 8,000,000

aCalifornia HFAR,MF, Montecito Village, Series B, FHLMC Insured, Weekly VRDN and Put, 0.08%, 4/01/43 . . . 6,325,000 6,325,000MFH III, Refunding, Series F, Weekly VRDN and Put, 0.06%, 2/01/32 . . . . . . . . . . . . . . . . 6,255,000 6,255,000MFH III, Series D, Weekly VRDN and Put, 0.05%, 2/01/31 . . . . . . . . . . . . . . . . . . . . . . . . 8,700,000 8,700,000

aCalifornia Infrastructure and Economic Development Bank Revenue,American National Red Cross, Refunding, Weekly VRDN and Put, 0.07%, 9/01/34 . . . . . . . 5,000,000 5,000,000J. Paul Getty, Refunding, Series A-2, Daily VRDN and Put, 0.04%, 10/01/47 . . . . . . . . . . . 10,300,000 10,300,000J. Paul Getty, Refunding, Series A-4, Daily VRDN and Put, 0.04%, 10/01/47 . . . . . . . . . . . 10,200,000 10,200,000

aCalifornia Municipal Finance Authority Revenue, Westmont College, Series A, Weekly VRDN and Put, 0.07%, 1/01/40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,000,000

aCalifornia PCFA, PCR, Pacific Gas and Electric Co., Refunding, Series C, Daily VRDN and Put, 0.03%, 11/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,900,000 10,900,000

California State Department of Water Resources Water Revenue, Series 1, TECP, 0.12%, 2/02/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,647,000 5,646,887

aCalifornia State Economic Recovery GO,Refunding, Series C-1, Daily VRDN and Put, 0.04%, 7/01/23 . . . . . . . . . . . . . . . . . . . . . . 2,530,000 2,530,000Series C-2, Daily VRDN and Put, 0.04%, 7/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450,000 450,000

aCalifornia State GO,Kindergarten, Series A3, Daily VRDN and Put, 0.03%, 5/01/34 . . . . . . . . . . . . . . . . . . . . . 12,400,000 12,400,000Series A-2, Daily VRDN and Put, 0.05%, 5/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,900,000 20,900,000Series C-2, Weekly VRDN and Put, 0.07%, 5/01/33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,900,000 1,900,000Various Purpose, Refunding, Series A, Sub Series A1-2, Weekly VRDN and Put, 0.06%, 5/01/40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,800,000 9,800,000

aCalifornia Statewide CDA Revenue,John Muir Health, Refunding, Series A, Daily VRDN and Put, 0.02%, 8/15/36 . . . . . . . . . . 2,400,000 2,400,000John Muir Health, Refunding, Series C, Daily VRDN and Put, 0.05%, 8/15/27 . . . . . . . . . . 6,600,000 6,600,000Livermore Valley Performing Arts Center Project, Weekly VRDN and Put, 0.05%, 12/01/36 . . . 11,160,000 11,160,000

aCalleguas-Las Virgenes PFAR, Municipal Water District Project, Refunding, Series A, Weekly VRDN and Put, 0.04%, 7/01/37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,825,000 8,825,000

aEast Bay MUD Water System Revenue, Refunding, Sub Series A, Weekly VRDN and Put, 0.04%, 6/01/38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,910,000 20,910,000

aFremont PFA, COP, Weekly VRDN and Put, 0.07%, 8/01/30 . . . . . . . . . . . . . . . . . . . . . . . . . . 6,740,000 6,740,000




Investments (continued)Municipal Bonds (continued)California (continued)

aHillsborough COP, Refunding, Series A, Weekly VRDN and Put, 0.10%, 6/01/30 . . . . . . . . . . . $ 1,700,000 $ 1,700,000a Irvine 1915 Act Special Assessment,

AD No. 97-17, Daily VRDN and Put, 0.09%, 9/02/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000,000 8,000,000Limited Obligation, AD No. 94-13, Daily VRDN and Put, 0.06%, 9/02/22 . . . . . . . . . . . . . . 1,219,000 1,219,000Limited Obligation, AD No. 94-15, Refunding, Daily VRDN and Put, 0.06%, 9/02/20 . . . . . 1,274,000 1,274,000Limited Obligation, AD No. 97-16, Daily VRDN and Put, 0.06%, 9/02/22 . . . . . . . . . . . . . . 10,100,000 10,100,000

a Irvine Ranch Water District GO, ID, Consolidated, Series B, Daily VRDN and Put, 0.05%, 10/01/41 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,350,000 10,350,000

aLos Angeles County Housing Authority MFHR, Malibu Meadows Project, Refunding, Series B, FNMA Insured, Weekly VRDN and Put, 0.09%, 4/15/28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,425,000 9,425,000

aLos Angeles County MFMR,Housing, Valencia Housing Project, Series C, FHLMC Insured, Weekly VRDN and Put, 0.10%, 4/01/31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,875,000 11,875,000

Series A, FHLMC Insured, Weekly VRDN and Put, 0.09%, 7/01/14 . . . . . . . . . . . . . . . . . . . 4,500,000 4,500,000aLos Angeles County MTA Sales Tax Revenue, Proposition C, second senior, Refunding,

Series A1, Daily VRDN and Put, 0.07%, 7/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,060,000 13,060,000Series A2, Daily VRDN and Put, 0.07%, 7/01/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,600,000 2,600,000

aLos Angeles Department of Water and Power Revenue,Power System, Refunding, Series A, Sub Series A-3, Weekly VRDN and Put, 0.04%, 7/01/35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 750,000 750,000

Power System, Refunding, Series A, Sub Series A-6, Weekly VRDN and Put, 0.05%, 7/01/35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,100,000 6,100,000

Refunding, Series B, Sub Series B-8, Weekly VRDN and Put, 0.03%, 7/01/34 . . . . . . . . . . 10,700,000 10,700,000aLos Angeles Department of Water and Power Waterworks Revenue, Refunding, Series B, Sub

Series B-4, Weekly VRDN and Put, 0.05%, 7/01/35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,350,000 17,350,000Los Angeles GO, TRAN, 2.50%, 2/29/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000 10,037,500

aLos Angeles Wastewater System Revenue, Refunding, Series A, Weekly VRDN and Put, 0.04%, 6/01/28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000,000 12,000,000

aMetropolitan Water District of Southern California Water Revenue, Special, Refunding, Series A, Weekly VRDN and Put, 0.03%, 10/01/29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,900,000 16,900,000

aMetropolitan Water District of Southern California Waterworks Revenue, Refunding, Series B-3, Daily VRDN and Put, 0.03%, 7/01/35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,300,000 3,300,000

aOakland-Alameda County Coliseum Authority Lease Revenue, Coliseum Project, Refunding, Series C-1, Weekly VRDN and Put, 0.08%, 2/01/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,400,000 18,400,000

aOceanside MFHR, Shadow Way Apartments Project, Weekly VRDN and Put, 0.09%, 3/01/49 . . . 5,350,000 5,350,000aOrange County Apartment Development Revenue,

Harbor Pointe, Issue D, Refunding, FHLMC Insured, Weekly VRDN and Put, 0.07%, 12/01/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000,000 6,000,000

Park Ridge Villas, Issue 1, Refunding, FNMA Insured, Weekly VRDN and Put, 0.07%, 11/15/28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,100,000 5,100,000

Trabuco Woods, Refunding, Series J, FNMA Insured, Weekly VRDN and Put, 0.08%, 11/15/28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,670,000 2,670,000

aOrange County Housing Authority MF Apartment Development Revenue, Lantern Pines Project, Series CC, FNMA Insured, Weekly VRDN and Put, 0.09%, 12/01/27 . . . . . . . . . . . . . . . . . . . 2,595,000 2,595,000

Riverside County GO, TRAN, Series B, 2.00%, 6/29/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000 10,078,173aSacramento County Sanitation District Financing Authority Revenue, sub. lien, Sanitation

District, Refunding, Series C, Daily VRDN and Put, 0.05%, 12/01/38 . . . . . . . . . . . . . . . . . . 4,500,000 4,500,000aSan Diego County COP, San Diego Foundation, Weekly VRDN and Put, 0.05%, 8/01/36 . . . . . . 4,290,000 4,290,000




Investments (continued)Municipal Bonds (continued)California (continued)

aSan Jose Financing Authority Lease Revenue, Hayes Mansion, Refunding, Series C, Weekly VRDN and Put, 0.06%, 6/01/27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,915,000 $ 8,915,000

San Mateo UHSD, GO, BAN, Refunding, 2.00%, 2/15/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000 10,019,500aSanta Clara County Financing Authority Lease Revenue, Valley Medical Center Facilities

Replacement Project, Series B, Weekly VRDN and Put, 0.09%, 11/15/25 . . . . . . . . . . . . . . . 9,600,000 9,600,000aSanta Clara County Housing Authority MFHR, Benton Park Central Apartments, Refunding,

Series A, FNMA Insured, Weekly VRDN and Put, 0.06%, 12/15/25 . . . . . . . . . . . . . . . . . . . . 5,000,000 5,000,000aSanta Clara Valley Transportation Authority Sales Tax Revenue, Refunding, Series A, Weekly

VRDN and Put, 0.03%, 6/01/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,895,000 10,895,000Sonoma Marin Area Rail Transportation District Measure Q Sales Tax Revenue, Sales and Use

Tax, Mandatory Put 1/10/13, Series A, 1.00%, 3/01/29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,003,860aUnion City MFR, Housing Mission Sierra, Refunding, Series A, FNMA Insured, Weekly VRDN and

Put, 0.07%, 7/15/29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,400,000 9,400,000aWalnut Creek MFHR, Creekside Drive, FHLMC Insured, Weekly VRDN and Put, 0.08%,

4/01/27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,730,000 3,730,000aWhittier Health Facility Revenue, Presbyterian Intercommunity Hospital Inc., Refunding,

Series A, Weekly VRDN and Put, 0.05%, 6/01/36 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000,000 6,000,000

Total Investments (Cost $522,248,920) 77.3% . . . . . . . . . . . . . . . . . . . . . . . . . . . . 522,248,920

Other Assets, less Liabilities 22.7% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,722,305

Net Assets 100.0% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $675,971,225




Franklin California Tax-Free TrustFinancial Statements

Statements of Assets and LiabilitiesDecember 31, 2011 (unaudited)

Franklin Franklin California FranklinCalifornia Intermediate-Term California

Insured Tax-Free Tax-Free Tax-ExemptIncome Fund Income Fund Money Fund

Assets:Investments in securities:

Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,988,035,312 $859,939,819 $522,248,920

Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,074,340,550 $911,920,832 $522,248,920Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,690,404 25,711 5,594,378Receivables:

Investment securities sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 47,288 —Capital shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,013,353 5,032,712 153,124,385Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,314,700 11,797,611 322,245

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 20 —

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,112,359,061 928,824,174 681,289,928

Liabilities:Payables:

Capital shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,711,846 2,119,646 5,245,246Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,403,112 631,130 23,583Distributions to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679,227 264,043 —

Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 177,401 93,392 49,874

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,971,586 3,108,211 5,318,703

Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,107,387,475 $925,715,963 $675,971,225

Net assets consist of:Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,038,488,615 $885,779,666 $675,973,771Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . 404,952 353,961 —Net unrealized appreciation (depreciation) . . . . . . . . . . . . . . . . . . . . . . 86,305,238 51,981,013 —Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . (17,811,330) (12,398,677) (2,546)

Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,107,387,475 $925,715,963 $675,971,225

Franklin California Tax-Free TrustFinancial Statements (continued)


Statements of Assets and Liabilities (continued)December 31, 2011 (unaudited)



Class A:Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,804,067,187 $651,485,467 $675,971,225

Shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145,950,630 55,036,450 675,935,170

Net asset value per sharea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12.36 $11.84 $1.00

Maximum offering price per share (net asset value per share ÷ 95.75%, 97.75% and 100%, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . $12.91 $12.11 $1.00

Class B:Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,201,102

Shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257,660

Net asset value and maximum offering price per sharea . . . . . . . . . . . . . $12.42

Class C:Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 253,664,934 $146,252,082

Shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,268,644 12,317,477

Net asset value and maximum offering price per sharea . . . . . . . . . . . . . $12.52 $11.87

Advisor Class:Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 46,454,252 $127,978,414

Shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,752,441 10,791,810

Net asset value and maximum offering price per share . . . . . . . . . . . . . $12.38 $11.86

aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.



Statements of Operationsfor the six months ended December 31, 2011



Investment income:Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53,003,247 $19,283,070 $ 315,742

Expenses:Management fees (Note 3a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,759,935 2,086,158 1,429,751Distribution fees: (Note 3c)

Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 890,627 314,136 —Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,233 — —Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796,609 446,464 —

Transfer agent fees (Note 3e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286,069 152,110 85,922Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,444 5,986 4,193Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,389 16,043 10,612Registration and filing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,195 8,122 3,132Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,510 18,822 18,049Trustees’ fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,174 9,816 7,157Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,319 38,289 25,394

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,912,504 3,095,946 1,584,210Expenses waived/paid by affiliates (Note 3f) . . . . . . . . . . . . . . . . . . — — (1,268,468)

Net expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,912,504 3,095,946 315,742

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,090,743 16,187,124 —

Realized and unrealized gains (losses):Net realized gain (loss) from investments . . . . . . . . . . . . . . . . . . . . . . . . . 1,301,666 182,578 —Net change in unrealized appreciation (depreciation) on investments . . . . . 101,359,181 39,927,263 —

Net realized and unrealized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,660,847 40,109,841 —

Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . $148,751,590 $56,296,965 —


Statements of Changes in Net Assets

Franklin California Franklin CaliforniaInsured Intermediate-Term

Tax-Free Income Fund Tax-Free Income Fund

Six Months Ended Six Months EndedDecember 31, 2011 Year Ended December 31, 2011 Year Ended

(unaudited) June 30, 2011 (unaudited) June 30, 2011Increase (decrease) in net assets:

Operations:Net investment income . . . . . . . . . . . . . . . $ 46,090,743 $ 96,484,344 $ 16,187,124 $ 31,433,035Net realized gain (loss) from investments . . . 1,301,666 (14,780,544) 182,578 (1,491,871)Net change in unrealized appreciation

(depreciation) on investments . . . . . . . . . 101,359,181 (50,626,037) 39,927,263 (7,812,362)

Net increase (decrease) in net assets resulting from operations . . . . . . . . 148,751,590 31,077,763 56,296,965 22,128,802

Distributions to shareholders from:Net investment income:

Class A . . . . . . . . . . . . . . . . . . . . . . . . . (40,417,051) (84,851,770) (11,914,597) (24,166,750)Class B . . . . . . . . . . . . . . . . . . . . . . . . . (95,699) (503,038) — —Class C . . . . . . . . . . . . . . . . . . . . . . . . . (4,834,885) (10,117,147) (2,232,613) (4,141,917)Advisor Class . . . . . . . . . . . . . . . . . . . . . (980,063) (1,252,416) (2,064,795) (2,854,139)

Total distributions to shareholders . . . . . . . . (46,327,698) (96,724,371) (16,212,005) (31,162,806)

Capital share transactions: (Note 2)Class A . . . . . . . . . . . . . . . . . . . . . . . . . 661,065 (128,196,764) 32,857,069 (74,155,230)Class B . . . . . . . . . . . . . . . . . . . . . . . . . (3,270,116) (12,257,343) — —Class C . . . . . . . . . . . . . . . . . . . . . . . . . 6,981,483 (9,693,176) 11,353,246 18,605,802Advisor Class . . . . . . . . . . . . . . . . . . . . . 3,154,817 31,049,083 27,601,628 60,447,066

Total capital share transactions . . . . . . . . . . 7,527,249 (119,098,200) 71,811,943 4,897,638

Net increase (decrease) in net assets . . . . . . . . . . . . . . . . . . . . . . 109,951,141 (184,744,808) 111,896,903 (4,136,366)

Net assets:Beginning of period . . . . . . . . . . . . . . . . . . 1,997,436,334 2,182,181,142 813,819,060 817,955,426

End of period . . . . . . . . . . . . . . . . . . . . . . $2,107,387,475 $1,997,436,334 $925,715,963 $813,819,060

Undistributed net investment income includedin net assets:

End of period . . . . . . . . . . . . . . . . . . . . $ 404,952 $ 641,907 $ 353,961 $ 378,842




Statements of Changes in Net Assets (continued)

Franklin CaliforniaTax-Exempt Money Fund

Six Months EndedDecember 31, 2011 Year Ended

(unaudited) June 30, 2011Increase (decrease) in net assets:

Operations:Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ —

Capital share transactions: (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,497,414 (66,979,387)

Net increase (decrease) in net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,497,414 (66,979,387)Net assets (there is no undistributed net investment income at beginning or end of year):

Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 563,473,811 630,453,198

End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $675,971,225 $563,473,811

Franklin California Tax-Free TrustNotes to Financial Statements (unaudited)


1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin California Tax-Free Trust (Trust) is registered under the Investment Company Act of1940, as amended, (1940 Act) as an open-end investment company, consisting of three funds(Funds). The classes of shares offered within each of the Funds are indicated below. Each classof shares differs by its initial sales load, contingent deferred sales charges, distribution fees, vot-ing rights on matters affecting a single class and its exchange privilege.

Class A, Class B, Class CClass A Class A, Class C & Advisor Class & Advisor Class

Franklin California Tax-Exempt Franklin California Intermediate-Term Franklin California InsuredMoney Fund Tax-Free Income Fund Tax-Free Income Fund

The following summarizes the Funds’ significant accounting policies.

a. Financial Instrument Valuation

The Funds’ investments in securities and other financial instruments are carried at fair valuedaily. Fair value is the price that would be received to sell an asset or paid to transfer a liabilityin an orderly transaction between market participants on the measurement date. Under proce-dures approved by the Trust’s Board of Trustees, the Funds may utilize independent pricingservices, quotations from securities and financial instrument dealers, and other market sourcesto determine fair value.

Debt securities generally trade in the over-the-counter market rather than on a securities exchange.The Funds’ pricing services use multiple valuation techniques to determine fair value. In instanceswhere sufficient market activity exists, the pricing services may utilize a market-based approachthrough which quotes from market makers are used to determine fair value. In instances wheresufficient market activity may not exist or is limited, the pricing services also utilize proprietaryvaluation models which may consider market characteristics such as benchmark yield curves,option-adjusted spreads, credit spreads, estimated default rates, coupon rates, anticipated timing ofprincipal repayments, underlying collateral, and other unique security features in order to estimatethe relevant cash flows, which are then discounted to calculate the fair value.

Securities in the Franklin California Tax-Exempt Money Fund are valued at amortized cost,which approximates market value. Amortized cost is an income-based approach which involvesvaluing an instrument at its cost and thereafter assuming a constant amortization to maturity ofany discount or premium.

The Funds have procedures to determine the fair value of securities and other financial instru-ments for which market prices are not readily available or which may not be reliably priced.Under these procedures, the Funds primarily employ a market-based approach which may userelated or comparable assets or liabilities, recent transactions, market multiples, book values,and other relevant information for the investment to determine the fair value of the investment.

Franklin California Tax-Free TrustNotes to Financial Statements (unaudited) (continued)


1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

The Funds may also use an income-based valuation approach in which the anticipated futurecash flows of the investment are discounted to calculate fair value. Discounts may also beapplied due to the nature or duration of any restrictions on the disposition of the investments.Due to the inherent uncertainty of valuations of such investments, the fair values may differ sig-nificantly from the values that would have been used had an active market existed.

b. Income Taxes

It is each fund’s policy to qualify as a regulated investment company under the Internal RevenueCode. Each fund intends to distribute to shareholders substantially all of its income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision forU.S. federal income taxes is required.

Each fund recognizes the tax benefits of uncertain tax positions only when the position is “morelikely than not” to be sustained upon examination by the tax authorities based on the technicalmerits of the tax position. As of December 31, 2011, and for all open tax years, each fund hasdetermined that no liability for unrecognized tax benefits is required in each fund’s financialstatements related to uncertain tax positions taken on a tax return (or expected to be taken onfuture tax returns). Open tax years are those that remain subject to examination and are basedon each tax jurisdiction statute of limitation.

c. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transac-tions are determined on a specific identification basis. Interest income and estimated expenses areaccrued daily. Amortization of premium and accretion of discount on debt securities are included ininterest income. Dividends from net investment income are normally declared daily; these dividendsmay be reinvested or paid monthly to shareholders. Distributions to shareholders are determinedaccording to income tax regulations (tax basis). Distributable earnings determined on a tax basismay differ from earnings recorded in accordance with accounting principles generally accepted inthe United States of America. These differences may be permanent or temporary. Permanent differ-ences are reclassified among capital accounts to reflect their tax character. These reclassificationshave 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 ratioof net assets of each fund to the combined net assets of the Trust. Fund specific expenses arecharged directly to the fund that incurred the expense.



1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

c. Security Transactions, Investment Income, Expenses and Distributions (continued)

Realized and unrealized gains and losses and net investment income, not including class specificexpenses, are allocated daily to each class of shares based upon the relative proportion of netassets of each class. Differences in per share distributions, by class, are generally due to differ-ences in class specific expenses.

d. Insurance

The scheduled payments of interest and principal for each insured municipal security in the Trustare insured by either a new issue insurance policy or a secondary insurance policy. Some municipalsecurities in the Funds are secured by collateral guaranteed by an agency of the U.S. government.Depending on the type of coverage, premiums for insurance are either added to the cost basis ofthe security or paid by a third party.

Insurance companies typically insure municipal bonds that tend to be of very high quality, withthe majority of underlying municipal bonds rated A or better. However, an event involving aninsurer could have an adverse effect on the value of the securities insured by that insurance com-pany. There is no guarantee the insurer will be able to fulfill its obligations under the terms ofthe policy.

e. Accounting Estimates

The preparation of financial statements in accordance with accounting principles generallyaccepted in the United States of America requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities at the date of the financial statements andthe amounts of income and expenses during the reporting period. Actual results could differ fromthose estimates.

f. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trustagainst certain liabilities arising out of the performance of their duties to the Trust. Additionally, inthe normal course of business, the Trust, on behalf of the Funds, enters into contracts with serviceproviders that contain general indemnification clauses. The Trust’s maximum exposure under thesearrangements is unknown as this would involve future claims that may be made against the Trustthat have not yet occurred. Currently, the Trust expects the risk of loss to be remote.



2. SHARES OF BENEFICIAL INTEREST

At December 31, 2011, there were an unlimited number of shares authorized (without parvalue). Transactions in the Funds’ shares were as follows:


Tax-Free Income Fund Tax-Free Income FundShares Amount Shares Amount

Class A Shares:Six Months ended December 31, 2011Shares sold . . . . . . . . . . . . . . . . . . 8,138,783 $ 98,516,367 8,173,396 $ 94,648,532Shares issued in reinvestment ofdistributions . . . . . . . . . . . . . . . . 2,498,917 30,315,138 815,600 9,465,192

Shares redeemed . . . . . . . . . . . . . . (10,590,111) (128,170,440) (6,144,777) (71,256,655)

Net increase (decrease) . . . . . . . . . 47,589 $ 661,065 2,844,219 $ 32,857,069

Year ended June 30, 2011Shares sold . . . . . . . . . . . . . . . . . . 19,822,204 $ 236,025,819 16,468,835 $ 186,898,709Shares issued in reinvestment ofdistributions . . . . . . . . . . . . . . . . 4,521,436 53,308,670 1,439,910 16,325,241

Shares redeemed . . . . . . . . . . . . . . (35,789,578) (417,531,253) (24,372,255) (277,379,180)

Net increase (decrease) . . . . . . . . . (11,445,938) $(128,196,764) (6,463,510) $ (74,155,230)

Class B Shares:Six Months ended December 31, 2011Shares sold . . . . . . . . . . . . . . . . . . 693 $ 8,443Shares issued in reinvestment ofdistributions . . . . . . . . . . . . . . . . 5,738 69,788

Shares redeemed . . . . . . . . . . . . . . (276,220) (3,348,347)

Net increase (decrease) . . . . . . . . . (269,789) $ (3,270,116)

Year ended June 30, 2011Shares sold . . . . . . . . . . . . . . . . . . 2,457 $ 29,101Shares issued in reinvestment ofdistributions . . . . . . . . . . . . . . . . 29,517 351,837

Shares redeemed . . . . . . . . . . . . . . (1,061,557) (12,638,281)

Net increase (decrease) . . . . . . . . . (1,029,583) $ (12,257,343)

Class C Shares:Six Months ended December 31, 2011Shares sold . . . . . . . . . . . . . . . . . . 1,880,521 $ 23,065,488 1,834,835 $ 21,319,598Shares issued in reinvestment ofdistributions . . . . . . . . . . . . . . . . 312,871 3,842,255 136,991 1,594,835

Shares redeemed . . . . . . . . . . . . . . (1,626,871) (19,926,260) (995,664) (11,561,187)

Net increase (decrease) . . . . . . . . . 566,521 $ 6,981,483 976,162 $ 11,353,246

Year ended June 30, 2011Shares sold . . . . . . . . . . . . . . . . . . 5,089,211 $ 61,648,691 4,432,646 $ 50,738,041Shares issued in reinvestment ofdistributions . . . . . . . . . . . . . . . . 562,081 6,707,515 221,555 2,516,986

Shares redeemed . . . . . . . . . . . . . . (6,632,392) (78,049,382) (3,074,723) (34,649,225)

Net increase (decrease) . . . . . . . . . (981,100) $ (9,693,176) 1,579,478 $ 18,605,802



2. SHARES OF BENEFICIAL INTEREST (continued)



Shares Amount Shares AmountAdvisor Class Shares:Six Months ended December 31, 2011Shares sold . . . . . . . . . . . . . . . . . . 806,379 $ 9,837,702 3,456,235 $ 40,288,228Shares issued in reinvestment ofdistributions . . . . . . . . . . . . . . . . 61,527 747,551 80,284 933,943

Shares redeemed . . . . . . . . . . . . . . (615,561) (7,430,436) (1,176,266) (13,620,543)

Net increase (decrease) . . . . . . . . . 252,345 $ 3,154,817 2,360,253 $ 27,601,628

Year ended June 30, 2011Shares sold . . . . . . . . . . . . . . . . . . 3,391,230 $ 40,280,314 7,774,500 $ 88,658,354Shares issued in reinvestment ofdistributions . . . . . . . . . . . . . . . . 57,861 673,874 65,052 732,694

Shares redeemed . . . . . . . . . . . . . . (855,965) (9,905,105) (2,584,293) (28,943,982)

Net increase (decrease) . . . . . . . . . 2,593,126 $ 31,049,083 5,255,259 $ 60,447,066

Franklin CaliforniaTax-ExemptMoney Fund

AmountClass A Shares:Six Months ended December 31, 2011Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 388,054,090Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (275,556,676)

Net increase (decrease) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 112,497,414

Year ended June 30, 2011Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 375,200,886Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (442,180,273)

Net increase (decrease) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (66,979,387)

3. TRANSACTIONS WITH AFFILIATES

Franklin Resources, Inc. is the holding company for various subsidiaries that together arereferred to as Franklin Templeton Investments. Certain officers and trustees of the Funds arealso officers and/or directors of the following subsidiaries:

Subsidiary Affiliation

Franklin Advisers, Inc. (Advisers) Investment managerFranklin Templeton Services, LLC (FT Services) Administrative managerFranklin Templeton Distributors, Inc. (Distributors) Principal underwriterFranklin Templeton Investor Services, LLC (Investor Services) Transfer agent



3. TRANSACTIONS WITH AFFILIATES (continued)

a. Management Fees

The Franklin California Insured Tax-Free Income Fund and Franklin California Intermediate-Term Tax-Free Income Fund pay an investment management fee to Advisers based on themonth-end net assets of each of the funds and the Franklin California Tax-Exempt Money Fundpays an investment management fee to Advisers based on the average daily net assets of the fundas follows:

Annualized Fee Rate Net Assets

0.625% Up to and including $100 million0.500% Over $100 million, up to and including $250 million0.450% Over $250 million, up to and including $7.5 billion0.440% Over $7.5 billion, up to and including $10 billion0.430% Over $10 billion, up to and including $ 12.5 billion0.420% Over $12.5 billion, up to and including $15 billion0.400% Over $15 billion, up to and including $17.5 billion0.380% Over $17.5 billion, up to and including $20 billion0.360% In excess of $20 billion

b. Administrative Fees

Under an agreement with Advisers, FT Services provides administrative services to the Funds.The fee is paid by Advisers based on average daily net assets, and is not an additional expense ofthe Funds.

c. Distribution Fees

The Trust’s Board of Trustees has adopted distribution plans for each share class of the FranklinCalifornia Insured Tax-Free Income Fund and Franklin California Intermediate-Term Tax-FreeIncome Fund, with the exception of Advisor Class shares, pursuant to Rule 12b-1 under the1940 Act. Under the funds’ Class A reimbursement distribution plans, the funds reimburseDistributors for costs incurred in connection with the servicing, sale and distribution of eachfund’s shares up to the maximum annual plan rate. Under the Class A reimbursement distribu-tion plans, costs exceeding the maximum for the current plan year cannot be reimbursed insubsequent periods.

In addition, under the funds’ Class B and C compensation distribution plans, the funds payDistributors for costs incurred in connection with the servicing, sale and distribution of eachfund’s shares up to the maximum annual plan rate for each class.




c. Distribution Fees (continued)

The maximum annual plan rates, based on the average daily net assets, for each class, are asfollows:



Reimbursement Plans:Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.10% 0.10%

Compensation Plans:Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.65% —Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.65% 0.65%

d. Sales Charges/Underwriting Agreements

Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expensesof the Funds. These charges are deducted from the proceeds of sales of fund shares prior toinvestment or from redemption proceeds prior to remittance, as applicable. Distributors hasadvised the Funds of the following commission transactions related to the sales and redemptionsof the Funds’ shares for the period:

Franklin California Franklin California Franklin California Insured Tax-Free Intermediate-Term Tax-Exempt

Income Fund Tax-Free Income Fund Money Fund

Sales charges retained net of commissions paid to unaffiliated broker/dealers . . . . . . $190,436 $63,042 $ —

CDSC retained . . . . . . . . . . . . . . . . . . . . $ 22,379 $10,416 $ 7

e. Transfer Agent Fees

For the period ended December 31, 2011, the Funds paid transfer agent fees as noted in theStatements of Operations of which the following amounts were retained by Investor Services:

Franklin California Franklin California Franklin California Insured Tax-Free Intermediate-Term Tax-Exempt


Transfer agent fees . . . . . . . . . . . . . . . . . $132,113 $56,710 $53,701

f. Waiver and Expense Reimbursements

In efforts to prevent a negative yield for the Franklin California Tax-Exempt Money Fund,Advisers has voluntarily agreed to waive or limit its fees, assume as its own expense certainexpenses otherwise payable by the fund and if necessary, make a capital infusion into the fund.These waivers, expense reimbursements and capital infusions are voluntary and may be modi-fied or discontinued by Advisers at any time, and without further notice. There is no guaranteethat the fund will be able to avoid a negative yield.




g. Other Affiliated Transactions

At December 31, 2011, a director of Advisers owned 46.16% of the Franklin California Tax-Exempt Money Fund’s outstanding shares. Investment activities of this shareholder could have amaterial impact on the fund.

4. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains, if any. AtJune 30, 2011, the capital loss carryforwards were as follows:

Franklin California Franklin California Franklin CaliforniaInsured Tax-Free Intermediate-Term Tax-Exempt


Capital loss carryforwards expiring in:2012 . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 865,726 $ —2013 . . . . . . . . . . . . . . . . . . . . . . . . . . — 421,949 —2015 . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,083,972 —2016 . . . . . . . . . . . . . . . . . . . . . . . . . . — 154,257 2,5462017 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,446,203 5,166,158 —2018 . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,396,013 —2019 . . . . . . . . . . . . . . . . . . . . . . . . . . 7,062,310 2,006,118 —

$8,508,513 $11,094,193 $2,546

Under the Regulated Investment Company Modernization Act of 2010, the Funds will be per-mitted to carry forward capital losses incurred in taxable years beginning after December 22,2010 for an unlimited period. Post-enactment capital loss carryforwards will retain their charac-ter as either short-term or long-term capital losses rather than being considered short-term asunder previous law. Any post-enactment capital losses generated will be required to be utilizedprior to the losses incurred in pre-enactment tax years.

For tax purposes, realized capital losses occurring subsequent to October 31 may be deferred andtreated as occurring on the first day of the following fiscal year. At June 30, 2011, the FranklinCalifornia Insured Tax-Free Income Fund and Franklin California Intermediate-Term Tax-FreeIncome Fund deferred realized capital losses of $10,604,483 and $1,487,063, respectively.



4. INCOME TAXES (continued)

At December 31, 2011, the cost of investments and net unrealized appreciation (depreciation)for income tax purposes were as follows:

Franklin California Franklin California Franklin CaliforniaInsured Tax-Free Intermediate-Term Tax-Exempt


Cost of investments . . . . . . . . . . . . . . . . $1,987,129,571 $859,716,968 $522,248,920

Unrealized appreciation . . . . . . . . . . . . . $ 102,776,490 $ 55,933,977 $ —Unrealized depreciation . . . . . . . . . . . . . (15,565,511) (3,730,113) —

Net unrealized appreciation (depreciation) . . . . . . . . . . . . . . . . . . . $ 87,210,979 $ 52,203,864 $ —

Differences between income and/or capital gains as determined on a book basis and a tax basisare primarily due to differing treatments of bond discounts and wash sales.

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period endedDecember 31, 2011, were as follows:

Franklin California Franklin CaliforniaInsured Tax-Free Intermediate-Term

Income Fund Tax-Free Income Fund

Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $66,974,799 $85,835,708Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $95,782,305 $34,437,450

6. CONCENTRATION OF RISK

Each of the Funds invests a large percentage of its total assets in obligations of issuers withinCalifornia and U.S. territories. Such concentration may subject the Funds to risks associatedwith industrial or regional matters, and economic, political or legal developments occurringwithin California and U.S. territories. In addition, investments in these securities are sensitive tointerest rate changes and credit risk of the issuer and may subject the Funds to increased marketvolatility. The market for these investments may be limited, which may make them difficult tobuy or sell.



7. CREDIT FACILITY

The Franklin California Insured Tax-Free Income Fund and Franklin California IntermediateTerm Tax-Free Income Fund, together with other U.S. registered and foreign investment funds(collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a jointsyndicated senior unsecured credit facility totaling $750 million (Global Credit Facility) whichmatured on January 20, 2012. This Global Credit Facility provides a source of funds to theBorrowers for temporary and emergency purposes, including the ability to meet future unantici-pated or unusually large redemption requests. Effective January 20, 2012, the Borrowers renewedthe Global Credit Facility for a total of $1.5 billion, maturing January 18, 2013.

Under the terms of the Global Credit Facility, the funds shall, in addition to interest charged onany borrowings made by the funds and other costs incurred by the funds, pay their share of feesand expenses incurred in connection with the implementation and maintenance of the GlobalCredit Facility, based upon their relative share of the aggregate net assets of all of the Borrowers,including an annual commitment fee of 0.08% based upon the unused portion of the GlobalCredit Facility, which is reflected in other expenses on the Statements of Operations. During theperiod ended December 31, 2011, the funds did not use the Global Credit Facility.

8. FAIR VALUE MEASUREMENTS

The Funds follow a fair value hierarchy that distinguishes between market data obtained fromindependent sources (observable inputs) and the Funds’ own market assumptions (unobservableinputs). These inputs are used in determining the value of the Funds’ investments and are sum-marized in the following fair value hierarchy:

• Level 1 – quoted prices in active markets for identical securities

• Level 2 – other significant observable inputs (including quoted prices for similar securities,interest rates, prepayment speed, credit risk, etc.)

• Level 3 – significant unobservable inputs (including the Funds’ own assumptions in deter-mining the fair value of investments)

The inputs or methodology used for valuing securities are not an indication of the risk associatedwith investing in those securities. Money market securities may be valued using amortized cost, inaccordance with the 1940 Act. Generally, amortized cost reflects the current fair value of a security,but since the value is not obtained from a quoted price in an active market, such securities arereflected as Level 2 inputs.

For movements between the levels within the fair value hierarchy, the Funds have adopted a pol-icy of recognizing the transfers as of the date of the underlying event which caused the movement.

At December 31, 2011, all of the Funds’ investments in securities carried at fair value were valuedusing Level 2 inputs.



9. NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting StandardsUpdate (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to AchieveCommon Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. Theamendments in the ASU will improve the comparability of fair value measurements presentedand disclosed in financial statements prepared in accordance with U.S. GAAP (Generally AcceptedAccounting Principles) and IFRS (International Financial Reporting Standards) and include newguidance for certain fair value measurement principles and disclosure requirements. The ASU iseffective for interim and annual periods beginning after December 15, 2011. The Funds believethe adoption of this ASU will not have a material impact on their financial statements.

10. SUBSEQUENT EVENTS

The Funds have evaluated subsequent events through the issuance of the financial statementsand determined that no events have occurred that require disclosure other than those alreadydisclosed in the financial statements.

ABBREVIATIONS

1915 Act - Improvement Bond Act of 1915ABAG - The Association of Bay Area GovernmentsACA - American Capital Access Holdings Inc.AD - Assessment DistrictAGMC - Assured Guaranty Municipal Corp.AMBAC - American Municipal Bond Assurance

Corp.BAN - Bond Anticipation NoteBHAC - Berkshire Hathaway Assurance Corp.CDA - Community Development Authority/AgencyCFD - Community Facilities DistrictCOP - Certificate of ParticipationCRDA - Community Redevelopment

Authority/AgencyETM - Escrow to MaturityFGIC - Financial Guaranty Insurance Co.FHA - Federal Housing Authority/AgencyFHLMC - Federal Home Loan Mortgage Corp.FICO - Financing Corp.FNMA - Federal National Mortgage AssociationGNMA - Government National Mortgage

AssociationGO - General ObligationHFAR - Housing Finance Authority Revenue

ID - Improvement DistrictMF - Multi-FamilyMFH - Multi-Family HousingMFHR - Multi-Family Housing RevenueMFMR - Multi-Family Mortgage RevenueMFR - Multi-Family RevenueMTA - Metropolitan Transit AuthorityMUD - Municipal Utility DistrictNATL - National Public Financial Guarantee Corp.NATL RE - National Public Financial Guarantee Corp.

ReinsuredPBA - Public Building AuthorityPCFA - Pollution Control Financing AuthorityPCR - Pollution Control RevenuePFA - Public Financing AuthorityPFAR - Public Financing Authority RevenueRDA - Redevelopment Agency/AuthoritySFMR - Single Family Mortgage RevenueTECP - Tax-Exempt Commercial PaperTRAN - Tax and Revenue Anticipation NoteUHSD - Unified/Union High School DistrictUSD - Unified/Union School DistrictXLCA - XL Capital Assurance

Selected Portfolio


Franklin California Tax-Free TrustShareholder Information

Proxy Voting Policies and Procedures

The Trust’s investment manager has established Proxy Voting Policies and Procedures (Policies) thatthe Trust uses to determine how to vote proxies relating to portfolio securities. Shareholders mayview the Trust’s complete Policies online at franklintempleton.com. Alternatively, shareholders mayrequest copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, FortLauderdale, FL 33301, Attention: Proxy Group. Copies of the Trust’s proxy voting records are alsomade available online at franklintempleton.com and posted on the U.S. Securities and ExchangeCommission’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 ExchangeCommission for the first and third quarters for each fiscal year on Form N-Q. Shareholders mayview the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also beviewed and copied at the Commission’s Public Reference Room in Washington, DC. Informationregarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.


GOF P-1 01/12

SUPPLEMENT DATED JANUARY 3, 2012TO THE CURRENTLY EFFECTIVE PROSPECTUS

OF EACH OF THE LISTED FUNDS

Franklin California Tax-Free Income FundFranklin California Tax-Free TrustFranklin California Insured Tax-FreeIncome FundFranklin California Intermediate-TermTax-Free Income FundFranklin California Tax-Exempt Money FundFranklin Custodian FundsFranklin DynaTech FundFranklin Growth FundFranklin Income FundFranklin U.S. Government Securities FundFranklin Utilities FundFranklin Federal Tax-Free Income FundFranklin Global TrustFranklin Global Real Estate FundFranklin International Growth FundFranklin International Small CapGrowth FundFranklin Large Cap Equity FundFranklin Templeton Emerging Market DebtOpportunities FundFranklin Gold and Precious Metals FundFranklin High Income TrustFranklin High Income FundFranklin Investors Securities TrustFranklin Adjustable U.S. GovernmentSecurities FundFranklin Balanced FundFranklin Convertible Securities FundFranklin Equity Income FundFranklin Floating Rate Daily Access FundFranklin Limited Maturity U.S. GovernmentSecurities FundFranklin Low Duration Total Return FundFranklin Real Return FundFranklin Total Return FundFranklin Managed TrustFranklin Rising Dividends FundFranklin Money FundFranklin Municipal Securities TrustFranklin California High Yield Municipal FundFranklin Tennessee Municipal Bond FundFranklin Mutual Recovery FundFranklin Mutual Series FundsMutual Beacon FundMutual Discovery FundMutual European FundMutual Financial Services FundMutual International FundMutual Quest FundMutual Shares Fund

Franklin New York Tax-Free Income FundFranklin New York Tax-Free TrustFranklin New York Intermediate-TermTax-Free IncomeFranklin Real Estate Securities TrustFranklin Real Estate Securities FundFranklin Strategic Mortgage PortfolioFranklin Strategic SeriesFranklin Biotechnology Discovery FundFranklin Flex Cap Growth FundFranklin Focused Core Equity FundFranklin Growth Opportunities FundFranklin Natural Resources FundFranklin Small-Mid Cap Growth FundFranklin Small Cap Growth FundFranklin Strategic Income FundFranklin Tax-Exempt Money FundFranklin Tax-Free TrustFranklin Alabama Tax-Free Income FundFranklin Arizona Tax-Free Income FundFranklin Colorado Tax-Free Income FundFranklin Connecticut Tax-FreeIncome FundFranklin Double Tax-Free Income FundFranklin Federal Intermediate-TermTax-Free Income FundFranklin Federal Limited-Term Tax-FreeIncome FundFranklin Florida Tax-Free Income FundFranklin Georgia Tax-Free Income FundFranklin High Yield Tax-Free Income FundFranklin Insured Tax-Free Income FundFranklin Kentucky Tax-Free Income FundFranklin Louisiana Tax-Free Income FundFranklin Maryland Tax-Free Income FundFranklin Massachusetts Tax-FreeIncome FundFranklin Michigan Tax-Free Income FundFranklin Minnesota Tax-Free Income FundFranklin Missouri Tax-Free Income FundFranklin New Jersey Tax-Free Income FundFranklin North Carolina Tax-FreeIncome FundFranklin Ohio Tax-Free Income FundFranklin Oregon Tax-Free Income FundFranklin Pennsylvania Tax-FreeIncome FundFranklin Virginia Tax-Free Income Fund

Franklin Templeton Fund Allocator SeriesFranklin Templeton 2015 RetirementTarget FundFranklin Templeton 2025 RetirementTarget FundFranklin Templeton 2035 RetirementTarget FundFranklin Templeton 2045 RetirementTarget FundFranklin Templeton ConservativeAllocation FundFranklin Templeton CorefolioAllocation FundFranklin Templeton Founding FundsAllocation FundFranklin Templeton GrowthAllocation FundFranklin Templeton ModerateAllocation FundFranklin Templeton Global TrustFranklin Templeton Hard Currency FundFranklin Templeton International TrustFranklin India Growth FundFranklin Templeton Global Allocation FundFranklin World Perspectives FundTempleton Foreign Smaller Companies FundFranklin Value Investors TrustFranklin All Cap Value FundFranklin Balance Sheet Investment FundFranklin Large Cap Value FundFranklin MicroCap Value FundFranklin MidCap Value FundFranklin Small Cap Value FundInstitutional Fiduciary TrustMoney Market PortfolioTempleton Developing Markets TrustTempleton Global Investment TrustTempleton Asian Growth FundTempleton BRIC FundTempleton Emerging MarketsBalanced FundTempleton Emerging MarketsSmall Cap FundTempleton Frontier Markets FundTempleton Global Balanced FundTempleton Global Opportunities TrustTempleton Institutional FundsEmerging Markets SeriesForeign Equity SeriesForeign Smaller Companies SeriesGlobal Equity Series

The Prospectus is amended as follows:

I. The paragraph beginning “In considering an investor’s trading patterns…” in the “Exchanging Shares – FrequentTrading Policy” section of the Fund Details is revised as follows:

In considering an investor’s trading patterns, the Fund may consider, among other factors, the investor’s trading historyboth directly and, if known, through financial intermediaries, in the Fund, in other Franklin Templeton funds, in


non-Franklin Templeton mutual funds, or in accounts under common control or ownership (see, for example, “Investmentby asset allocators” in the SAI). The transfer agent may also reject any purchase or redemption request, whether or not itrepresents part of any ongoing trading pattern, if the Fund investment manager or transfer agent reasonably concludesthat the amount of the requested transaction may disrupt or otherwise interfere with the efficient management of theFund’s portfolio. In determining what actions should be taken, the Fund’s transfer agent may consider a variety offactors, including the potential impact of such remedial actions on the Fund and its shareholders. If the Fund is a “fundof funds,” the Fund’s transfer agent may take into account the impact of the trading activity and of any proposed remedialaction on both the Fund and the underlying funds in which the Fund invests.

II. The following replaces the second paragraph of the “Selling Shares – Selling Shares in Writing” section of the Fund Details:

We also may require a signature guarantee when we receive instructions from an agent, not the registered owners; whenyou want to send your proceeds to a bank account that was added or changed on your account within the last 15 days andthe bank and fund accounts have at least one common owner; or when we believe it would protect the Fund againstpotential claims based on the instructions received.

III. The following is added to the “SELLING SHARES” table of the “Selling Shares” section as a third paragraph under “ByElectronic Funds Transfer (ACH)” in the “Selling Shares” table of the Fund Details:

If the bank and Fund accounts have at least one common owner and the bank account was added or changed within thelast 15 days, you may be required to provide written instructions signed by all fund account owners, with a signatureguarantee for each fund account owner.

IV. The paragraph beginning “If you believe there are cumulative quantity discount…” in the “Choosing a Share Class –Sales Charge Reductions and Waivers” section of the Fund Details is replaced with the following:

If you believe there are cumulative quantity discount eligible shares that can be combined with your current purchase toachieve a sales charge breakpoint (for example, shares held in a different broker-dealer’s brokerage account or with a bank or an investment advisor), it is your responsibility to specifically identify those shares to your financial advisor atthe time of your purchase (including at the time of any future purchase). It may be necessary for you to provide yourfinancial advisor with information and records (including account statements) of all relevant accounts invested in theFranklin Templeton Funds. If you have not designated a financial advisor associated with your Franklin Templeton fundshares, it is your responsibility to specifically identify any cumulative quantity discount eligible shares to the Fund’stransfer agent at the time of any purchase.

Please keep this supplement for future reference.

This page intentionally left blank.

Franklin Templeton FundsLiterature Request. To receive a summary prospectus and/or prospectus, please call us at (800) DIAL BEN/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 a 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.

VALUEFranklin All Cap Value FundFranklin Balance Sheet Investment FundFranklin Large Cap Value FundFranklin MicroCap Value Fund1

Franklin MidCap Value FundFranklin Small Cap Value FundMutual Beacon FundMutual Quest FundMutual Recovery Fund2

Mutual Shares Fund

BLENDFranklin Focused Core Equity FundFranklin Large Cap Equity FundFranklin Rising Dividends Fund

GROWTHFranklin DynaTech FundFranklin Flex Cap Growth FundFranklin Growth FundFranklin Growth Opportunities FundFranklin Small Cap Growth FundFranklin Small-Mid Cap Growth Fund

SECTORFranklin Biotechnology Discovery FundFranklin Global Real Estate FundFranklin Gold & Precious Metals FundFranklin Natural Resources FundFranklin Real Estate Securities FundFranklin Utilities FundMutual Financial Services Fund

GLOBALFranklin World Perspectives FundMutual Global Discovery FundTempleton Global Opportunities TrustTempleton Global Smaller Companies FundTempleton Growth FundTempleton World Fund

1. The fund is closed to new investors. Existing shareholders and select retirement plans cancontinue adding to their accounts.2. The fund is a continuously offered, closed-end fund. Shares may be purchased daily; thereis no daily redemption. However, each quarter, pending board approval, the fund will authorizethe repurchase of 5%–25% of the outstanding number of shares. Investors may tender all ora portion of their shares during the tender period.3. Effective 7/1/11, Templeton Income Fund changed its name to Templeton Global BalancedFund. Additionally, the fund changed its goal and pricing structure. Under normalcircumstances, the fund will invest: at least 25% of its assets in fixed income senior securities

and at least 25% of its assets in equity securities; at least 40% of its assets in non-U.S.investments; and in issuers located in at least three different countries (including the U.S.).4. An investment in the fund is neither insured nor guaranteed by the U.S. government or byany other entity or institution.5. For investors subject to the alternative minimum tax, a small portion of fund dividends maybe taxable. Distributions of capital gains are generally taxable.6. The fund invests primarily in insured municipal securities.7. The funds of the Franklin Templeton Variable Insurance Products Trust are generally availableonly through insurance company variable contracts.

AlabamaArizonaCalifornia (4 funds)ColoradoConnecticutFloridaGeorgiaKentuckyLouisianaMarylandMassachusettsMichigan

MinnesotaMissouriNew JerseyNew York (2 funds)North CarolinaOhioOregonPennsylvaniaTennesseeVirginia

INSURANCE FUNDSFranklin Templeton Variable Insurance Products Trust7

12/11 Not part of the semiannual report

INTERNATIONALFranklin India Growth FundFranklin International Growth FundFranklin International Small Cap Growth FundMutual European FundMutual International FundTempleton Asian Growth FundTempleton BRIC FundTempleton China World FundTempleton Developing Markets TrustTempleton Emerging Markets Small Cap FundTempleton Foreign FundTempleton Foreign Smaller Companies FundTempleton Frontier Markets Fund

HYBRIDFranklin Balanced FundFranklin Convertible Securities FundFranklin Equity Income FundFranklin Income FundTempleton Emerging Markets Balanced FundTempleton Global Balanced Fund3

ASSET ALLOCATIONFranklin Templeton Corefolio® Allocation FundFranklin Templeton Founding Funds Allocation FundFranklin Templeton Conservative Allocation FundFranklin Templeton Growth Allocation FundFranklin Templeton Moderate Allocation FundFranklin Templeton 2015 Retirement Target FundFranklin Templeton 2025 Retirement Target FundFranklin Templeton 2035 Retirement Target FundFranklin Templeton 2045 Retirement Target FundFranklin Templeton Global Allocation FundFranklin Templeton Multi-Asset Real Return Fund

FIXED INCOMEFranklin Adjustable U.S. Government Securities Fund4

Franklin Floating Rate Daily Access FundFranklin High Income Fund

Franklin Limited Maturity U.S. GovernmentSecurities Fund4

Franklin Low Duration Total Return FundFranklin Real Return FundFranklin Strategic Income FundFranklin Strategic Mortgage PortfolioFranklin Templeton Hard Currency FundFranklin Total Return FundFranklin U.S. Government Securities Fund4

Templeton Global Bond FundTempleton Global Total Return FundTempleton International Bond Fund

TAX-FREE INCOME5

NationalDouble Tax-Free Income FundFederal Tax-Free Income FundHigh Yield Tax-Free Income FundInsured Tax-Free Income Fund6

Limited-/ Intermediate-TermCalifornia Intermediate-Term Tax-Free Income FundFederal Intermediate-Term Tax-Free Income FundFederal Limited-Term Tax-Free Income FundNew York Intermediate-Term Tax-Free Income Fund

State-Specific

< GAIN FROM OUR PERSPECTIVE® >

VALUE BLEND GROWTH SECTOR GLOBAL INTERNAT IONAL HYBRID ASSET ALLOCAT ION F IXED INCOME TAX-FREE INCOME

© 2012 Franklin Templeton Investments. All rights reserved. CAT S 02/12

Semiannual Report and Shareholder Letter

Franklin California Tax-Free Trust

Investment ManagerFranklin Advisers, Inc.

DistributorFranklin Templeton Distributors, Inc.(800) DIAL BEN®/342-5236franklintempleton.com

Shareholder Services(800) 632-2301

Authorized for distribution only when accompanied or preceded by a summary prospectus and/or prospectus.Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. A 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 andaccessed. These calls can be identified by the presence of a regular beeping tone.

franklin california tax-free trust semiannual report€¦ · december 31, 2011 semiannual report...

Documents