Franklin Dynamic Municipal Bond ETF

FLMI is Franklin Templeton's actively managed municipal bond ETF. It holds bonds from US states, cities and public agencies, and their interest is generally free from federal income tax. It follows no index, so its managers can buy bonds of any credit quality, including junk bonds, while keeping duration between two and eight years. Its 6.2% annualized three-year return ranked first of eight similar funds as of October 27, 2026, at a 0.30% expense ratio.

• Over the year to Oct 27, 2026, FLMI returned +0.1%, 3rd of 8 among similar funds.
• Its 5-year annualized return was +1.7%.
• In the 2020 COVID crash it fell 13.6% and regained its old high 8 months after the low.
• Its worst full calendar year was 2022 (-10.2%); its best was 2023 (+7.9%).
• The deepest fall in its price history was 14.6% (Aug 4, 2021 to Oct 25, 2022), recovered by Jul 29, 2024.

As of Jun 30, 2026, the fund held 1,337 securities; the ten largest made up 14.31% of assets.

The bonds mature in 16.5 years on average (weighted by size), with an average coupon of 4.75%.

• Over the three months to Jun 30, 2026, investors added a net $405.2M (creations minus redemptions, per the N-PORT report).
• Monthly total returns reported for that quarter: +1.21%, +0.72%, +0.77%.

FLMI does not track an index. Franklin Templeton's managers pick the bonds. Under normal conditions, at least 80% of net assets go into municipal bonds whose interest is free from federal income tax, including the alternative minimum tax (AMT), a parallel tax system that catches some higher earners. Up to 20% may go into bonds whose interest is subject to the AMT or to other taxes. The managers look for bonds they think balance risk and return well. They usually hold for income, but they may sell based on credit, pricing, duration or tax-loss harvesting.

The fund can own bonds of any maturity. It keeps average effective duration between two and eight years. Duration estimates how much a bond's price moves when interest rates change. For example, with a five-year duration, a one-point rise in rates would cut the price by roughly 5%. The fund can buy bonds of any rating, including junk and defaulted bonds. It can also buy insured bonds, variable rate demand notes and zero-coupon bonds.

As of June 30, 2026, the fund held 1,337 positions, and the top 10 made up 14.31% of assets. The largest were energy and gas authority bonds from Alabama, Kentucky, California and Tennessee, led by Southeast Energy Authority (AL) at about 1.8%. The fund may put more than 25% of assets into bonds that finance similar types of projects. It held no derivatives, and portfolio turnover was 34%.

• FLMI charges 0.3% a year, versus an average of 0.29% for the similar funds below (5th of 8, cheapest first).
• Using the prospectus's standard example, $10,000 invested would cost about $31 in the first year and $380 over 10 years (assuming a 5% annual return).

FLMI pays monthly income that is generally free of federal income tax, with price swings much smaller than stocks but not trivial.

FLMI pays every month. Its trailing 12-month yield was 4.12% as of October 27, 2026. Because the income is mostly exempt from federal tax, it does the most good in a taxable account. Its prices move less than stocks, but they still fall at times. In March 2020 it dropped 13.6% and was back at its peak about eight months later. Rising interest rates did more damage: it lost 10.22% in calendar 2022. Its deepest drop was 14.6%, from August 2021 to October 2022, and it took about 21 months to recover, by July 2024. A retiree who sold shares in 2022 would have locked in losses. The fund launched in 2017, so it has no 2008 record. In the SEC's standard example, $10,000 invested would cost $31 in the first year and $380 over 10 years. Past results don't predict the future, and a plan should look at the whole portfolio, not one fund.

Matched by bond funds with the closest average maturity and issuer mix (N-PORT).