Franklin Federal Tax-Free Income Fund Advisor Class (FAFTX)

Overview

The fund is dedicated to investing primarily in investment grade municipal securities that are not subject to federal income taxes, including the avoidance of the federal alternative minimum tax. This focus underscores the fund's strategy to maximize tax-free income for its investors by investing at least 80% of its total assets in such securities. However, it is important for investors to note that while the fund aims to invest all its assets in tax-free securities, circumstances may lead to up to 20% of the fund's total assets being allocated to securities that either are subject to the federal alternative minimum tax or generate taxable interest. This strategic allocation allows the fund to potentially enhance its returns while still prioritizing tax-efficient income.

Products and Services

• Investment Grade Municipal Securities

  The flagship product of the fund involves investing in municipal securities that are rated investment grade. These securities are chosen based on their creditworthiness and potential to offer tax-free interest income to investors. The primary appeal of these securities is their ability to provide returns that are exempt from federal income taxes, including the federal alternative minimum tax, aligning with the fund's strategy to maximize tax-efficient returns.

• Taxable Interest Securities

  Up to 20% of the fund's portfolio may include securities that produce interest income subject to federal taxes or the alternative minimum tax. This portion of the fund's investment strategy is designed to allow for flexibility in its investments and the potential to capture higher returns that may come from taxable interest securities. While these investments diverge from the fund's primary focus on tax-free income, they offer an adjustment lever to optimize overall fund performance under varying market conditions.