Franklin California Tax Free Income Fund

Scorecard
4 / 5 Stars
Lipper
4 4 2 4 3
Zacks Investment Research
1 (Strong Buy)
Standard & Poor's
3 / 5 Stars
TheStreet.com
A- (Buy)

#10 in Muni California Long

U.S. News evaluated 34 Muni California Long Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.

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Performance

The fund has returned 7.42 percent over the past year, 7.05 percent over the past three years, 7.14 percent over the past five years, and 5.22 percent over the past decade.

Trailing Returns Updated 06.30.2014
Year to date 8.6%
1 Year 7.4%
3 Years (Annualized) 7.1%
5 Years (Annualized) 7.1%
10 Years (Annualized) 5.2%

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Summary

Despite California’s struggling economy, the Franklin California Tax-Free Income Fund has held up through California's ongoing budget saga and an unusually volatile muni bond market. The fund invests in municipal bonds, which generally provide tax-free income and have been a historically stable investment with low volatility.

As of July 03, 2014, the fund has assets totaling $13.17 billion. Its portfolio consists primarily of investment-grade municipal bonds in California.

California has been mired in economic problems due to the credit and subprime mortgage crises. However, management at the fund has found attractive opportunities in the state including investing in some hospital bonds, according to Morningstar. The fund invests broadly across sectors and issuers. Management generally holds more than 800 bonds, including those of local governments, school districts, public utilities, hospitals, toll roads, and colleges. The fund has returned 7.42 percent over the past year and 7.05 percent over the past three years.

Over the years, the fund’s management has continued to seek out cheap bonds with attractive yields to hold for the long term. This strategy has helped the fund retain one of the lowest standard deviation of returns in its category over time, according to Morningstar. Although it ran into credit problems in 2002, the fund has managed to regain its footing in recent years. The fund has returned 7.14 percent over the past five years and 5.22 percent over the past decade.

Investment Strategy

The fund’s management seeks to provide a high level of income exempt from California and federal income taxes by investing at least 80 percent of its assets in investment-grade municipal securities whose interest is free from federal income taxes and from California personal income taxes. The fund may invest up to 35 percent of its assets in other U.S. territories. The management can hold a slightly higher BBB-rated bond stake than its peers, but it does not invest in below-investment grade securities, according to Morningstar.

Role in Portfolio

Morningstar says the fund is a core holding in an investment portfolio.

Management

John Wiley and Christopher Sperry manage this fund. Wiley has been an analyst or portfolio manager of the fund since 1991, joining Franklin Templeton Investments in 1989. Sperry has been an analyst or portfolio manager of the fund since 2000, joining Franklin Templeton in 1996. They are supported by Franklin’s research team of 26 analysts, who give the fund an edge over its competitors, according to Morningstar.

Fees

Franklin California Tax Free Income Fund has an expense ratio of 0.57 percent.

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Risk

Since the fund avoids leverage and doesn’t use risky derivative strategies, it maintains a low volatility relative to its category. There are interest rate risks, as bonds are sensitive to changing interest rates. Also, because the fund focuses its investments in California, it is susceptible to adverse economic and regulatory changes.

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Fund Opinions

The fund's Value Line Overall Rank, a measure of risk-adjusted performance and relative growth in fund returns, is 2 on a scale of 1 to 5, with 1 being the best and 5 the worst.

Value Line 2014-06-11

The fund's Value Line Growth Persistence rank, which awards funds that consistently outperform their broad universes, is 2 for one year, 2 for five years, and 1 for 10 years. Scores are on a 1 to 5 scale, with 1 being the best and 5 the worst.

Value Line 2014-06-11

The fund's Value Line Risk Rank, a measure of volatility, is 3 on a scale of 1 to 5, with 1 being the least volatile and 5 the most.

Value Line 2014-06-11

In the annual Lipper/Barron's Fund Families Survey for 2009, Franklin Templeton Investments ranks 17th out of 61 fund families.

Morningstar gives this fund a stewardship rating of C on a scale of A to F, saying, “This fund is supported by an above-average corporate culture, benefiting from the firm’s extensive analyst staff and overall philosophy of prudence and patience. Although the firm gets solid marks in most places, we wish it were governed by a board of directors with an independent chairman.”

Morningstar

In the annual Lipper/Barron's Fund Families Survey for 2009, Franklin Templeton Investments ranks 17th out of 61 fund families.

Morningstar gives this fund a stewardship rating of C on a scale of A to F, saying, “This fund is supported by an above-average corporate culture, benefiting from the firm’s extensive analyst staff and overall philosophy of prudence and patience. Although the firm gets solid marks in most places, we wish it were governed by a board of directors with an independent chairman.”

Morningstar

See Also:

Top Franklin Templeton Investments Funds