Effective 3/1/19, the maximum initial sales charge for purchases of less than $100,000 of Franklin Templeton’s long-term fixed income funds (Class A and A1 shares) was lowered to 3.75%. Please see the prospectus supplement for more information. If you have any questions, please contact your financial professional or call Shareholder Services.
Beginning on 10/19/18, Class C shares held for 10 years or more will automatically convert to Class A shares. Thereafter, Class C shares held for 10 years or more will automatically convert to Class A shares on a monthly basis. This conversion allows shareholders to take advantage of the lower expenses offered by Class A shares. Please see the prospectus supplement for more information. If you have any questions, please contact your financial professional or call Franklin Templeton.
Class A shares (NASDAQ: FHAIX) were renamed Class A1 and closed to new investors. Existing Class A1 shareholders may continue to add money to their accounts. A new Class A share (NASDAQ: FHQRX) launched with a different expense structure, in which new shareholders can invest. The fund also changed certain sales charges and commissions paid to dealers on Class A and A1 shares. Please see the prospectus supplement for more information. If you have additional questions, please contact your financial professional or call Franklin Templeton.
New investors must invest in new Class A shares. This A1 share class is available only for existing investors as of 9/7/18.
The fund seeks a high level of current income, with a secondary focus on capital appreciation, by investing predominantly in higher-yielding, lower-rated corporate bonds.
Franklin Templeton Fixed Income believes that integrating top-down macroeconomic views, bottom up fundamental research, and quantitative science provides us with a competitive edge to navigate challenging investment environments, pursue consistent alpha, and better serve our clients.
Our corporate credit strategies apply a research-driven approach to investing, relying primarily on bottom-up, fundamental analysis to identify corporate fixed income securities with the potential to offer high yield without excessive risk.
Credit research is conducted by a team of global corporate credit analysts who conduct in-depth fundamental and technical research on individual corporate issuers, as well as make macro-based industry evaluations. Organized regionally, analysts specialize by industry sector, covering investment grade and high yield issuers. This joint credit quality structure affords a more comprehensive industry view that facilitates a deeper understanding of the relevant risk factors in each broad sector and permits analysts to conduct more accurate relative value analysis when comparing credit spreads.
The team may also leverage macroeconomic views from the Fixed Income Research and Strategy Team (FIRST). FIRST includes all Franklin Templeton Fixed Income investment professionals and representatives from other Franklin Templeton investment teams. The Quarterly Research and Strategy Forum allows FIRST to present and debate independently derived macro, fundamental, and quantitative research.
The research process begins with an investment universe of approximately 1,000 issuers that analysts screen to remove smaller, less liquid issuers, resulting in a focus group of 50-75 companies per industry. These companies are further screened with a fundamental focus on financial strength to compile a select list of companies within each industry. Analysts perform rigorous company and industry research on this focus list, producing and maintaining detailed financial models and analysis of each company’s financial structure, earnings and cash flow projections, business and financial risk factors, and any other pertinent company information. This research relies on a combination of financial statement analysis and direct contact with company management. Analysts develop industry-specific buy/hold/sell ratings for the companies on the focus list, which is updated regularly.
Issuers with favorable fundamental characteristics are compiled into an industry-specific Buy List based on a number of factors, including, but not limited to:
Buy List recommendations reflect our analysts’ views of fundamental trends and relative valuations versus the broad high yield market, as well as industry recommendations, and are updated on an ongoing basis. Analysts discuss their recommendations and the underlying rationale with portfolio managers who make the security selection and positioning decisions for the portfolio. Corporate credit portfolios are well-diversified, typically with exposure to issuers across all major industries; industry, issuer and issue level diversification naturally reduces the potential negative impact that any one company or industry may have on the portfolio’s overall performance. The fundamental research process that results in our Buy List is illustrated in the below charts. Given their understanding of the fundamental drivers for assigned industries, analysts also make recommendations on the expected performance of an industry versus the broad credit market (over-, under-, or market-weight).
Footnote: Diversification does not assure a profit or protect against loss.
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Performance data represents past performance, which does not guarantee future results. Current performance may differ from figures shown. Investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your shares.