Fund Description

The fund seeks to provide a high current yield exempt from federal income taxes. Its secondary goal is capital appreciation to the extent possible and consistent with the fund’s principal investment goal.

Strategy Statement

"In the Franklin Muni Department, we are committed to a conservative, disciplined investment strategy. For over 30 years, we have worked to provide shareholders with a high level of tax-free income."

Management

John Wiley

John Wiley

  • Joined Franklin Templeton in 1989
  • Managed Fund Since 1991
Francisco Rivera

Francisco Rivera

  • Joined Franklin Templeton in 1994
  • Managed Fund Since 2004
Daniel Workman, CFA

Daniel Workman, CFA®

  • Joined Franklin Templeton in 2003
  • Managed Fund Since 2009

INVESTMENT PHILOSOPHY, STRATEGY AND APPROACH

Focus on Income

Franklin municipal managers aim to maximize monthly tax-free income for shareholders. Historically, the income return from municipal bonds has contributed much more to municipal bond returns than changes in municipal bond prices. Additionally, Franklin managers generally limit fund exposure to bonds with income that is subject to the Alternative Minimum Tax.

No Leverage, No Derivatives, No Options

Franklin managers avoid investment practices that may expose shareholder capital to unnecessary risk. For example, we don’t use leverage or invest in derivatives or futures, because they can increase portfolio volatility.

Strict Internal Analysis

Our analysts are responsible for conducting research on credit-driven securities in the municipal market. They are responsible for evaluating an issuer’s credit strengths and weaknesses and working with the portfolio managers on select fund purchase and sale decisions.

Buy and Hold for the Long Term

Franklin managers are focused on seeking to maximize income; we don’t actively trade bonds to try to capture capital gains. We typically sell holdings only if we see an opportunity to enhance a fund’s portfolio structure or its income earning potential.

Market Analysis

On a daily basis, we analyze current market conditions, including:
  • Trading activity
  • Yield spreads
  • Call option spreads
  • New offerings
  • Secondary market offerings
  • Credit ratings
  • Event risk

Research

We search for high-quality, undervalued bonds that we believe should provide a high level of income until maturity.

We often make site visits to identify potential problems and opportunities that may not be readily visible on paper.

Analysts focus on credit-driven bond issues where we believe they can add the most value to the security selection process.

Portfolio Construction

We build portfolios with diversification in mind, taking into consideration allocations to sectors, regions, coupons, calls, maturities and quality, as appropriated.

We don't make significant allocation shifts based on expected market conditions. Rather, we look for the best value in the marketplace from an income-oriented perspective.

Rating

Overall Morningstar Rating As of 10/31/2019

Rating Category: High Yield Muni

Morningstar
The fund's overall Morningstar Rating measures risk-adjusted returns and is derived from a weighted average of the performance figures associated with its 3-, 5- and 10-year (if applicable) rating metrics.

Historical Morningstar Rating As of 10/31/2019

Years Ratings Funds
in category
3
1 Stars
155
5
2 Stars
136
10
1 Stars
87

Morningstar Style Box

We do not publish a style box for this fund.

Strategy, Benefits, Results

Strategy

  • We seek to provide a high current yield.
  • We don't use leverage or invest in derivatives, which can increase portfolio volatility.
  • Our analysts search for attractively valued, higher-yielding bonds.
  • We buy and hold for the long term.

Benefits

  • Monthly income exempt from federal income taxesi
  • Portfolio diversification
  • Tenured investment team with expertise across market cycles

Selling The Fund

  1. Call attention to Franklin's history of leadership in municipal bond asset management.
  2. Highlight the fund's:
    • Plain vanilla approach—no leverage, no derivatives
    • Attractive taxable-equivalent yield
    • Historically lower volatility record
    • Relatively low expense ratio
    • Experienced portfolio management team
    • Large, in-house research team