Risk Table - FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND
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Risk [Text Block] |
| Principal Risks |
Principal Risks You could lose money by investing in the Fund. Mutual fund
shares are not deposits or obligations of, or guaranteed or endorsed by, any bank, and are not insured
by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency of the U.S.
government.
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| Risk Lose Money [Member] |
You could lose money by investing in the Fund.
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| Risk Not Insured [Member] |
Mutual fund
shares are not deposits or obligations of, or guaranteed or endorsed by, any bank, and are not insured
by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency of the U.S.
government.
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| Interest Rate |
Interest
Rate:
When interest rates rise, debt security prices generally fall. The opposite is also generally true:
debt security prices rise when interest rates fall. Interest rate changes are influenced by a number
of factors, including government policy, monetary policy, inflation expectations, perceptions of risk,
and supply of and
demand for bonds. In general, securities with longer maturities or durations are more sensitive to interest
rate changes.
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| Credit |
Credit: An issuer of debt securities may fail
to make interest payments or repay principal when due, in whole or in part. Changes in an issuer's financial
strength or in a security's or government's credit rating may affect a security's value. A change in
the credit rating of a municipal bond insurer that insures securities in the Fund’s portfolio may
affect the value of the securities it insures, the Fund’s share price and Fund performance. The
Fund might also be adversely impacted by the inability of an insurer to meet its insurance obligations.
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| Liquidity |
Liquidity:
The trading market for a particular security or type of security or other investments in which the Fund
invests may become less liquid or even illiquid. Reduced liquidity will have an adverse impact on the
Fund’s ability to sell such securities or other investments when necessary to meet the Fund’s
liquidity needs, which may arise or increase in response to a specific economic event or because the
investment manager wishes to purchase particular investments or believes that a higher level of liquidity
would be advantageous. Reduced liquidity will also generally lower the value of such securities or other
investments. Market prices for such securities or other investments may be relatively volatile.
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| Tax Legislative and Political Changes |
Tax
Legislative and Political Changes: The municipal securities market could be significantly affected
by adverse political and legislative changes or litigation at the federal or state level. The value of
municipal bonds is closely tied to the benefits of tax-exempt income to investors. Significant revisions
of federal income tax laws or regulations revising income tax rates or the tax-exempt character of municipal
bonds, or even proposed changes and deliberations on this topic by the federal government, could cause
municipal bond prices to fall. For example, lower federal income tax rates would reduce certain relative
advantages of owning municipal bonds, and lower state income tax rates could have similar effects. In
addition, the application of corporate minimum tax rates to financial statement income may have the effect
of reducing demand for municipal bonds among corporate investors, which may in turn impact municipal
bond prices.
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| Tax-Exempt Securities |
Tax-Exempt Securities: Failure of a municipal security issuer
to comply with applicable tax requirements may make income paid thereon taxable, resulting in a decline
in the security’s value. In addition, there could be changes in applicable tax laws or tax treatments
that reduce or eliminate the current federal income tax exemption on municipal securities or otherwise
adversely affect the current federal or state tax status of municipal securities.
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| Market |
Market:
The
market values of securities or other investments owned by the Fund will go up or down, sometimes rapidly
or unpredictably. The market value of a security or other investment may be reduced by market activity
or other results of supply and demand unrelated to the issuer. This is a basic risk associated with all
investments.
When there are more sellers than buyers, prices tend to fall. Likewise, when there are more buyers than
sellers, prices tend to rise. In addition, the value of the Fund’s investments may go up or down
due to general market or other conditions that are not specifically related to a particular issuer, such
as: real or perceived adverse economic changes, including widespread liquidity issues and defaults in
one or more industries; changes in interest, inflation or exchange rates; unexpected natural and man-made
world events, such as diseases or disasters; financial, political or social disruptions, including terrorism
and war; and U.S. trade disputes or other disputes with specific countries that could result in additional
tariffs, trade barriers and/or investment restrictions in certain securities in those countries. Any
of these conditions can adversely affect the economic prospects of many companies, sectors, nations,
regions and the market in general, in ways that cannot necessarily be foreseen. Ongoing or threatened
armed conflicts throughout the world have caused and could continue to cause significant market disruptions
and volatility. The hostilities and sanctions resulting from those hostilities could have a significant
impact on certain investments of the Fund as well as the Fund’s performance and liquidity.
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| High-Yield Debt Instruments |
High-Yield
Debt Instruments: Issuers of lower-rated or “high-yield” debt instruments (also known
as “junk bonds”) are not as strong financially as those issuing higher credit quality debt
instruments. High-yield debt instruments are generally considered predominantly speculative by the applicable
rating agencies as their issuers are more likely to encounter financial difficulties because they may
be more highly leveraged, or because of other considerations. In addition, high yield debt instruments
generally are more vulnerable to changes in the relevant economy, such as a recession or a sustained
period of rising interest rates, that could affect their ability to make interest and principal payments
when due. The prices of high-yield debt instruments generally fluctuate more than those of higher credit
quality. High-yield debt instruments are generally more illiquid (harder to sell) and harder to value.
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| California |
California:
The Fund invests predominantly in California municipal securities. Therefore, events in California are
likely to affect the Fund’s investments and its performance. These events may include economic
or political policy changes, tax base erosion, unfunded pension and healthcare liabilities, constitutional
limits on tax increases, budget deficits and other financial difficulties, and changes in the credit
ratings assigned to municipal issuers of California. The same is true of events in other states or U.S.
territories, to the extent that the Fund has exposure to any other state or territory at any given time.
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| Focus |
Focus:
The Fund may invest more than 25% of its assets in municipal securities that finance similar types of
projects, such as utilities, hospitals, higher education and transportation. A change that affects one
project, such as proposed legislation on the financing of the project, a shortage of the materials needed
for the project, or
a declining need for the project, would likely affect all similar projects, thereby increasing market
risk.
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| Income |
Income:
The Fund's distributions to shareholders may decline when prevailing interest rates fall, when the Fund
experiences defaults on debt securities it holds or when the Fund realizes a loss upon the sale of a
debt security.
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| Prepayment |
Prepayment: Prepayment risk occurs when a debt security
can be repaid in whole or in part prior to the security's maturity and the Fund must reinvest the proceeds
it receives, during periods of declining interest rates, in securities that pay a lower rate of interest.
Also, if a security has been purchased at a premium, the value of the premium would be lost in the event
of prepayment. Prepayments generally increase when interest rates fall.
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| Inflation |
Inflation:
The
market price of debt securities generally falls as inflation increases because the purchasing power of
the future income and repaid principal is expected to be worth less when received by the Fund. Debt securities
that pay a fixed rather than variable interest rate are especially vulnerable to inflation risk because
variable-rate debt securities may be able to participate, over the long term, in rising interest rates
which have historically corresponded with long-term inflationary trends.
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| Bond Insurers |
Bond Insurers:
Market conditions or changes to ratings criteria could adversely impact the ratings of municipal bond
insurance companies. Downgrades and withdrawal of ratings from municipal bond insurers have substantially
limited the availability of insurance sought by municipal bond issuers thereby reducing the supply of
insured municipal securities. Because of the consolidation among municipal bond insurers
the Fund is subject to additional risks including the risk that credit risk may be concentrated among
fewer insurers and the risk that events involving one or more municipal bond insurers could have a significant
adverse effect on the value of the securities insured by an insurer and on the municipal markets as a
whole.
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| Unrated Debt Securities |
Unrated
Debt Securities: Certain unrated debt securities determined by the investment manager to be of
comparable credit quality to rated securities which the Fund may purchase may pay a higher interest rate
than such rated debt securities and be subject to a greater risk of illiquidity or price changes. Less
public information and independent credit analysis are typically available about unrated securities or
issuers, and therefore they may be subject to greater risk of default.
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| Management |
Management:
The Fund is subject to management risk because it is an actively managed investment portfolio. The Fund's
investment manager applies investment techniques and risk analyses in making investment decisions for
the Fund, but there can be no guarantee that these decisions will produce the desired results.
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| Cybersecurity |
Cybersecurity:
Cybersecurity incidents, both intentional and unintentional, may allow an unauthorized party to gain
access to Fund assets, Fund or customer data (including private shareholder information), or proprietary
information, cause the Fund, the investment manager, and/or their service providers (including, but not
limited to, Fund accountants, custodians, sub-custodians, transfer agents and financial intermediaries)
to suffer data breaches, data corruption or loss of operational functionality or prevent Fund investors
from purchasing, redeeming or exchanging shares or receiving distributions. The investment manager has
limited ability to prevent or mitigate cybersecurity incidents affecting third party service providers,
and such third party service providers may have limited indemnification obligations to the Fund or the
investment manager. Cybersecurity incidents may result in financial losses to the Fund and its shareholders,
and substantial costs may be incurred in an effort to prevent or mitigate future cybersecurity incidents.
Issuers of securities in which the Fund invests are also subject to cybersecurity risks, and the value
of these securities could decline if the issuers experience cybersecurity incidents. Because technology is
frequently changing, new ways to carry out cyber attacks are always developing. Therefore, there is a
chance that some risks have not been identified or prepared for, or that an attack may not be detected,
which puts limitations on the Fund's ability to plan for or respond to a cyber attack. Like other funds
and business enterprises, the Fund, the investment manager, and their service providers are subject to
the risk of cyber incidents occurring from time to time.
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