Franklin Investors Securities Trust NCSR Certified annual shareholder report (management investment company)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file numbe 811-04986

Franklin Investors Securities Trust
(Exact name of registrant as specified in charter)

One Franklin Parkway, San Mateo, CA 94403-1906
(Address of principal executive offices) (Zip code)

Craig S. Tyle, One Franklin Parkway, San Mateo, CA 94403-1906
(Name and address of agent for service)

Registrant's telephone number, including area code: 650 312-2000

Date of fiscal year end: 10/31

Date of reporting period: 10/31/16

Item 1. Reports to Stockholders.


Contents

Annual Report
Economic and Market Overview	3
Franklin Balanced Fund	4
Franklin Convertible Securities Fund	12
Franklin Equity Income Fund	19
Franklin Real Return Fund	27
Financial Highlights and Statements of Investments	33
Financial Statements	71
Notes to Financial Statements	76
Report of Independent Registered
Public Accounting Firm	94
Tax Information	95
Board Members and Officers	96
Shareholder Information	101

Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.

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Economic and Market Overview

The U.S. economy expanded during the 12 months under review. The economy grew at a faster pace in 2016’s third quarter than in 2016’s second and first quarters and 2015’s fourth quarter, mainly due to personal consumption expenditures, exports, private inventory investment, federal government spending and nonresidential fixed investment. Manufacturing conditions generally contracted during the first half of the period but generally expanded in the second half. The services sector, although volatile, continued to grow throughout the period. The unemployment rate decreased slightly from 5.0% in October 2015 to 4.9% at period-end.¹Monthly retail sales grew for most of the review period, and rose to the highest level in April in more than a year, due to a broad-based increase across most retail categories. Inflation, as measured by the Consumer Price Index (CPI), rose slightly in October, led by an increase in gasoline and shelter prices.

After maintaining a near-zero interest rate for seven years to support the U.S. economy’s recovery, the U.S. Federal Reserve (Fed) raised its target range for the federal funds rate to 0.25%–0.50% at its December 2015 meeting and maintained the rate through period-end. The Fed noted at its September meeting that although the case for raising interest rates has strengthened, it will wait for further evidence of continued progress toward its objectives.

U.S. equity markets rose during the review period, benefiting from mostly upbeat economic data and better corporate earnings in the U.S., signs of improvement in the Chinese and European economies, and ongoing expansionary monetary policies from key central banks. A rally in crude oil prices and the Fed’s decision to keep interest rates unchanged at its September meeting further boosted investor confidence. However, the U.K.’s historic vote to leave the European Union (also known as "Brexit") and global growth concerns weighed on market sentiment. The broad U.S. stock market ended the 12-month period higher, as measured by the Standard & Poor’s^®500 Index.

The foregoing information reflects our analysis and opinions as of October 31, 2016. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.

1. Source: Bureau of Labor Statistics.

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Annual Report

Franklin Balanced Fund

We are pleased to bring you Franklin Balanced Fund’s annual report for the fiscal year ended October 31, 2016.

Your Fund’s Goal and Main Investments

The Fund seeks both income and capital appreciation by investing in a combination of stocks, convertible securities and debt securities. The Fund normally invests at least 25% of its total assets in equity securities (primarily common and preferred stock) and at least 25% of its total assets in debt securities, including bonds, notes, debentures and money market securities.


Portfolio Composition*
10/31/16
	% of Total
	Net Assets
Stocks	63.2	%
Common Stocks	49.3	%
Equity-Linked Securities	8.7	%
Convertible Preferred Stocks	4.4	%
Preferred Stocks	0.4	%
Options Purchased	0.4	%
Bonds	32.7	%
Corporate Bonds	32.2	%
Convertible Bonds	0.5	%
Short-Term Investments & Other Net Assets	4.1	%

*Percentages reflect certain derivatives held in the portfolio (or their underlying
reference assets) and may not total 100% or may be negative due to rounding, use
of derivatives, unsettled trades or other factors. The composition may not match the
SOI.

Performance Overview

For the 12 months under review, the Fund’s Class A shares delivered a cumulative total return of +5.54%. In comparison, the Fund’s equity benchmark, the Standard & Poor’s 500 Index (S&P 500^®), which is a broad measure of U.S. stock performance, posted a +4.51% total return.¹The Fund’s fixed income benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, which tracks the U.S. investment-grade, taxable bond market, posted a +4.37% return.¹You can find the Fund’s long-term performance data in the Performance Summary beginning on page 8.

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

Investment Strategy

We apply a bottom-up approach to investing in individual securities. We will assess the market price of a company’s securities relative to our evaluation of the company’s long-term earnings, asset value and cash flow potential. We also consider a company’s price/earnings ratio, profit margins and liquidation value. In determining an optimal mix of equity and fixed income investments for the Fund, we assess changing economic, market and industry conditions. We may sell securities for a number of possible reasons, including the achievement of certain stock prices or credit spreads, changes in the fundamental outlook or risk/reward profile of a security, less attractive values relative to market peers, or broad economic conditions affecting certain fixed income sectors. For purposes of pursuing the Fund’s investment goal, we may enter into various equity-related transactions involving derivative instruments. We may also invest in equity-linked notes, which are hybrid derivative-type instruments specially designed to combine the characteristics of one or more reference securities (usually a single stock, a stock index or a basket of stocks) and a related equity derivative, such as a put or call option.

What is an equity-linked note?

An equity-linked note is a derivative instrument whose return is determined by the performance of a single equity security, a basket of equity securities, or an equity index. The purchase of equity-linked notes may involve investment in related equity derivatives, such as put and call options.

Manager’s Discussion

During the 12 months under review, we continued to strategically shift the Fund’s asset mix, seeking to manage risks, and our equity and fixed income holdings increased. The Fund’s equity weighting rose to 63.2% from 60.9% of total net assets, and the Fund’s fixed income weighting rose to 32.7%

1. Source: Morningstar.
The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. One cannot invest directly in an
index, and an index is not representative of the Fund’s portfolio.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 38.

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What are put and call options?

A put option is a contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time. Put options are most commonly used to protect against the decline of a stock price below a certain price. Conversely, a call option gives the holder the right to buy shares at a specified price within a specified time, regardless of the price in the future before the expiration date. If the stock price rises, the holder of the call option has the right to buy at the agreed-upon price, which could be lower.


Dividend Distributions*
11/1/15–10/31/16
		Dividend per Share (cents)
					Advisor
Month	Class A	Class C	Class R	Class R6	Class
November	3.00	2.29	2.76	3.29	3.23
December	3.45	2.76	3.21	3.76	3.67
January	3.00	2.31	2.76	3.31	3.22
February	3.00	2.31	2.76	3.31	3.22
March	3.00	2.35	2.89	3.33	3.22
April	3.00	2.35	2.89	3.33	3.22
May	3.00	2.35	2.89	3.33	3.22
June	3.00	2.31	2.70	3.33	3.23
July	3.00	2.31	2.70	3.33	3.23
August	3.00	2.31	2.70	3.33	3.23
September	3.00	2.27	2.75	3.34	3.24
October	2.91	2.18	2.66	3.25	3.15
Total	36.36	28.10	33.67	40.24	39.08

*The distribution amount is the sum of the dividend payments to shareholders for
the period shown and includes only estimated tax-basis net investment income. All
Fund distributions will vary depending upon current market conditions, and past
distributions are not indicative of future trends.

from 27.6%. Our cash position fell during the period to 4.1% from 11.5% of total net assets.

Consistent with the Fund’s long-term strategy, performance was supported by healthy diversification across asset classes and positive overall contributions from the Fund’s equity and fixed income positions.

In equities, the information technology (IT) and energy sectors were strong contributors to performance. During the period, the IT sector surged ahead of all other equity sectors and helped lift the broader market to its fourth consecutive quarterly gain. After barely budging through the first half of 2016, technology-related companies have moved higher since June, dominating the equity-sector leaderboard and topping the S&P 500 Index by the widest margin since the bull market began more than seven years ago. Aided by reports of rising corporate profits among technology firms—in particular those focused on

mobile and cloud platforms—IT led all other sectors in terms of upside earnings surprises. Large-capitalization companies held by the Fund enjoyed strong returns, aided by their dividend component. We believe that part of the allure for investors was valuations, as IT-related companies appeared to be attractively priced, while still offering growth potential. The Fund’s semiconductor holdings performed well, benefiting from a stabilizing business environment and improved profitability, with key contributors including Texas Instruments and Analog Devices. Microsoft, a software and IT services company, was another strong contributor that benefited over the past year from investors gaining greater confidence in their ability to be relevant in the cloud-computing era with their key productivity and server software franchises. Specifically, its productivity suite moved rapidly to Office 365, while its server franchise found new growth opportunities with the company’s Azure platform. In addition, the company executed well on various cost containment and capital return initiatives, expanded share repurchases and had a solid dividend. Within energy, Chevron and Anadarko Petroleum were among the top contributors as oil prices rebounded and the companies took steps to lower their costs, while Anadarko also endeavored to strengthen its balance sheet.


Top Five Equity Holdings
10/31/16
Company	% of Total
*Sector/Industry*	Net Assets
Microsoft Corp.	1.8	%
Information Technology
Texas Instruments	1.8	%
Information Technology
JPMorgan Chase & Co.	1.8	%
Financials
General Electric Co.	1.8	%
Industrials
Wells Fargo & Co.	1.7	%
Financials

The industrials and financials sectors were also strong contributors to Fund performance. Within industrials, a position in defense contractor Raytheon posted strong returns as did our position in waste management company Republic Services. Within financials, financial services firm JPMorgan Chase also benefited performance. Individual equity positions that significantly contributed to Fund performance included health care company Johnson & Johnson, a convertible preferred stock position in clean energy utility NextEra Energy and a new position in German chemicals company BASF.

In contrast, the consumer discretionary sector detracted from equity Fund performance. Within the sector, shares in

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automobile manufacturer Ford Motor declined as global auto sales plateaued, while upscale fashion retailer Nordstrom and discount general merchandise retailer Target experienced weakness as foot traffic softened amid a continued shift to online shopping. Health care was another detractor from the Fund’s performance, particularly our new position in Teva Pharmaceutical Industries, as increased competition in the generics market led to pricing pressure, and election year rhetoric about drug prices raised investor concerns about future revenues. Additionally, our convertible preferred stock position in Allergan declined as Pfizer canceled its planned acquisition of Allergan after the U.S. government issued new rules to deter tax inversion mergers.

Individual equity positions that detracted from Fund performance included fertilizer company Mosaic, an equity-linked security in plastics, chemicals and refining company LyondellBasell Industries,²a new position in global hygiene company Kimberly-Clark, and financial services companies Wells Fargo and T. Rowe Price Group.

During the period, our fixed income positions exceeded the return of the benchmark Barclays U.S. Aggregate Bond Index.

Our fixed income holdings in the consumer non-cyclical, banking and communications sectors delivered positive performance during the period.³In consumer non-cyclical, our new positions in natural and organic foods retailer Whole Foods Market and beverage and brewing company Anheuser-Busch InBev Finance, which completed a large bond offering in January 2016, aided performance. In banking, nearly every position aided performance, with Morgan Stanley, Bank of America and Citigroup as notable contributors. Themes across the banking industry continued to focus on costs, strong credit quality and robust capital levels. The only detractor was a Deutsche Bank position that we have exited completely. In other financials, Nippon Life Insurance also added to performance. In communications, our new position in global satellite service provider Dish Network and positions in telecommunications providers Verizon Communications and Sprint boosted results.

Our energy sector fixed income holdings also aided performance, especially our pipeline industry positions in Energy Transfer Partners, Kinder Morgan Energy Partners and Williams Partners.⁴These companies benefited from cost cutting as well as strong cash flows and bounced back nicely with oil prices during the period. The only detractors were our positions in NGL Energy Partners and Linn Energy, which were sold by period-end. The consumer cyclical sector also delivered positive performance, and key contributors included fast food restaurants owner and franchiser Yum! Brands and discount retailer Dollar General.⁵

Individual fixed income holdings that contributed to Fund performance included positions in iron ore explorer and producer FMG Resources (Australia), data storage company Western Digital, a new position in defense contractor Lockheed Martin, industrial conglomerate General Electric and Diamond 1 and 2 Finance companies that issued notes for technology companies Dell and EMC. Individual fixed income positions that detracted from Fund performance included insurer MetLife²and hospital manager and operator Community Health Systems.


Top Five Fixed Income Holdings
10/31/16
Company	% of Total
*Sector/Industry*	Net Assets
Morgan Stanley	1.3	%
Financials
JPMorgan Chase & Co.	1.2	%
Financials
Weatherford International Ltd.	0.9	%
Energy
Bank of America Corp.	0.8	%
Financials
Citigroup Inc.	0.8	%
Financials

The Fund used derivative instruments during the period, such as equity options. The goal of these instruments is to enhance Fund returns, to lower volatility, or to more efficiently enter and exit stock positions at prices the Fund deems attractive. These positions did not have a material impact on performance. We were comfortable with the Fund’s declining cash position

2. Not held at period-end.
3. Consumer non-cyclical companies are in consumer staples and health care in the fixed income section of the SOI. Banking companies are in financials in the fixed Income
section of the SOI. Communications companies are in consumer discretionary and telecommunication services in the fixed income section of the SOI.
4. Energy companies are in energy and utilities in the fixed income section of the SOI.
5. Consumer cyclical companies are in consumer discretionary, consumer staples and health care in the fixed income section of the SOI.
See www.franklintempletondatasources.com for additional data provider information.

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during the period as we were able to invest opportunistically at times when the market retreated.

Thank you for your continued participation in Franklin Balanced Fund. We look forward to serving your future investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of October 31, 2016, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

CFA^®is a trademark owned by CFA Institute.

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Performance Summary as of October 31, 2016

The performance tables and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities.

Performance as of 10/31/16¹

Cumulative total return excludes sales charges. Average annual total returns include maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.75% and the minimum is 0%. Class A: 5.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.


	Cumulative		Average Annual		Average Annual
Share Class	Total Return²		Total Return³		Total Return (9/30/16)⁴
A
1-Year	+5.54	%	-0.56	%	+6.17	%
5-Year	+44.86	%	+6.43	%	+8.35	%
10-Year	+68.40	%	+4.73	%	+5.06	%
Advisor
1-Year	+5.79	%	+5.79	%	+12.92	%
5-Year	+46.85	%	+7.99	%	+9.97	%
10-Year	+73.45	%	+5.66	%	+5.99	%


	Distribution		30-Day Standardized Yield⁶
Share Class	Rate⁵		(with waiver) (without waiver)
A	2.91	%	2.25	%	2.24	%
Advisor	3.33	%	2.63	%	2.63	%

See page 10 for Performance Summary footnotes.

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PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.

See page 10 for Performance Summary footnotes.

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FRANKLIN BALANCED FUND
PERFORMANCE SUMMARY



Net Asset Value
Share Class (Symbol)		10/31/16			10/31/15			Change
A (FBLAX)	$	11.65		$	11.40		+$	0.25
C (FBMCX)	$	11.55		$	11.31		+$	0.24
R (N/A)	$	11.67		$	11.42		+$	0.25
R6 (FBFRX)	$	11.67		$	11.42		+$	0.25
Advisor (FBFZX)	$	11.67		$	11.42		+$	0.25


Distributions⁸(11/1/15–10/31/16)
		Dividend			Long-Term
Share Class		Income			Capital Gain			Total
A	$	0.3636		$	0.0009		$	0.3645
C	$	0.2810		$	0.0009		$	0.2819
R	$	0.3367		$	0.0009		$	0.3376
R6	$	0.4024		$	0.0009		$	0.4033
Advisor	$	0.3908		$	0.0009		$	0.3917


Total Annual Operating Expenses⁹
Share Class		With Waiver			Without Waiver
A		1.03	%		1.04	%
Advisor		0.78	%		0.79	%

Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.

All investments involve risks, including possible loss of principal. The Fund’s share price and yield will be affected by interest rate movements. Bond prices
generally move in the opposite direction of interest rates. As the prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline.
Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market
conditions. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s
prospectus also includes a description of the main investment risks.

1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton Fund, contractually guaranteed
through its current fiscal year-end. Fund investment results reflect the fee waiver; without this reduction, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, ifany,hasnotbeen
annualized.
4. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.
5. Distribution rate is based on an annualization of the respective class’s October dividend and the maximum offering price (NAV for Advisor Class) per share on 10/31/16.
6. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal
the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.
7. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The Bloomberg
Barclays U.S. Aggregate Bond Index is a market capitalization-weighted index representing the U.S. investment-grade, fixed-rate, taxable bond market with index components
for government and corporate, mortgage pass-through and asset-backed securities. All issues included are SEC registered, taxable, dollar denominated and nonconvertible,
must have at least one year to final maturity and must be rated investment grade (Baa3/BBB-/BBB- or higher) using the middle rating of Moody’s, S&P and Fitch, respectively.
8. The distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income and capital
gain.
9. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this
report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.

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Your Fund’s Expenses

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.


						Actual		Hypothetical
				(actual return after expenses)				(5% annual return before expenses)
						Expenses				Expenses	Net
		Beginning		Ending		Paid During		Ending		Paid During	Annualized
Share		Account		Account		Period		Account		Period	Expense
Class		Value 5/1/16		Value 10/31/16		5/1/16–10/31/16^1,2		Value 10/31/16		5/1/16–10/31/16^1,2	Ratio²
A	$	1,000	$	1,034.70	$	5.22	$	1,020.01	$	5.18	1.02	%
C	$	1,000	$	1,032.60	$	9.04	$	1,016.24	$	8.97	1.77	%
R	$	1,000	$	1,034.70	$	6.50	$	1,018.75	$	6.44	1.27	%
R6	$	1,000	$	1,038.70	$	3.38	$	1,021.82	$	3.35	0.66	%
Advisor	$	1,000	$	1,038.10	$	3.94	$	1,021.27	$	3.91	0.77	%

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above–in the far right column–multiplied by the simple average account value
over the period indicated, and then multiplied by 184/366 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.

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Annual Report

Franklin Convertible Securities Fund

We are pleased to bring you Franklin Convertible Securities Fund’s annual report for the fiscal year ended October 31, 2016.

Your Fund’s Goal and Main Investments

The Fund seeks to maximize total return, consistent with reasonable risk, by seeking to optimize capital appreciation and high current income under varying market conditions and investing at least 80% of its net assets in convertible securities.

Performance Overview

For the 12 months under review, the Fund’s Class A shares delivered a +6.41% cumulative total return. In comparison, the Fund’s benchmark, the BofA Merrill Lynch (BofAML) All Total Return Alternatives U.S. Convertibles Index, which tracks the domestic convertible securities market, posted a +2.35% total return.¹You can find the Fund’s long-term performance data in the Performance Summary beginning on page 15.

Investment Strategy

When choosing convertible securities for the Fund, we attempt to maintain a balance in the portfolio between the equity and debt characteristics of convertible securities with an emphasis on the equity features. We also consider the company’s long-term earnings, asset value and cash flow potential. Some of the convertible securities in which the Fund may invest have been structured to provide enhanced yield, increased equity exposure or enhanced downside protection. These securities typically provide a benefit to the issuer in exchange for the enhanced features, such as a conversion premium that is paid by the Fund. We may invest in convertible securities of companies of any capitalization size, but we generally seek to make the portfolio representative of the entire convertible securities market.

Manager’s Discussion

Most sectors the Fund invested in rose in value during the 12 months under review and supported performance. The information technology, consumer staples and utilities sectors contributed most to Fund returns during the period. Within information technology, Chinese online and mobile commerce company Alibaba Group Holding (shown as Mandatory Exchangeable Trust in the SOI),²semiconductor processing systems manufacturer LAM Research and semiconductor products manufacturer Microchip Technology appreciated significantly. During the period, Alibaba increased its transparency in terms of results for its core commerce, media and cloud-computing business segments. The improved transparency proved to be a positive catalyst for the stock, enabling analysts to better value the core businesses, and it led to a revaluation of Alibaba based on a sum-of-the-parts approach. LAM Research benefited from strong semiconductor capital expenditure trends in the NAND flash memory and semiconductor fabrication markets in 2016. The company’s etch and deposition tools are increasingly being used in the conversion of NAND memory chips to 3D architecture, as well as in advanced logic chips. Regarding Microchip Technology, in addition to strong execution in its core microcontroller and analog product segments, the company acquired Supertex, Micrel and Atmel. In our opinion, each of these transactions added solid value and expanded the company’s product lines, and the market reacted positively to the increased scale and breadth. We believe Microchip Technology remains one of the best managed, most profitable companies in the semiconductor industry.

1. Source: BofA Merrill Lynch.
The index is unmanaged and includes reinvested dividends. It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not
representative of the Fund’s portfolio.
2. New position during the period.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 49.

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Top 10 Holdings
10/31/16
Company	% of Total
*Sector/Industry*	Net Assets
Liberty Media Corp.	2.9	%
Consumer Discretionary
Novellus Systems Inc.	2.3	%
Information Technology
Microchip Technology Inc.	2.3	%
Information Technology
T-Mobile U.S. Inc.	2.3	%
Telecommunication Services
Proofpoint Inc.	2.2	%
Information Technology
Trulia Inc.	2.2	%
Information Technology
Dish Network Corp.	2.2	%
Consumer Discretionary
Mandatory Exchangeable Trust	2.2	%
Information Technology
ServiceNow Inc.	2.2	%
Information Technology
Post Holdings Inc.	2.2	%
Consumer Staples

Among consumer staples holdings, food products manufacturer Tyson Foods and cereal maker Post Holdings had significant gains during the reporting period. Tyson Foods continued to benefit from meat and protein, a category that has been expanding at a relatively high growth rate and that generally responds well to innovation. The company has successfully introduced value-added products to its portfolio to further distance itself from its commodity-protein past, creating a less volatile and higher margin business. We believe the company deserves a higher valuation than it has historically received as the more margin-stable prepared foods business becomes a larger percentage of its portfolio and as the company continues to reduce its commodity exposure to chicken. Post Holdings benefited from solid sales growth momentum across its businesses and the realization of synergies from recent acquisitions. Each of the company’s business segments are distinct platforms that we believe Post can continue to build. We believe the active nutrition segment has a particularly favorable growth profile and operates in a very fragmented category with many acquisition opportunities to drive incremental growth. Post generates strong free cash flow given its relatively high-margin profile and modest capital and working capital requirements.

In the utilities sector, our convertible preferred stock position in diversified energy company Black Hills helped the Fund’s results.²The company benefited from a lower interest-rate environment, which drove the value of regulated utilities higher. Black Hills also benefited from integration efforts around its SourceGas acquisition.

Elsewhere, Anacor Pharmaceuticals, a new position in the health care sector, boosted the Fund’s performance.³Anacor, which focuses on discovering, developing and commercializing novel small-molecule therapeutics derived from its boron chemistry platform, was acquired by Pfizer, another Fund holding, in June at a significant premium. In the telecommunication services sector, T-Mobile benefited results. The company is the only U.S. wireless carrier that has consistently gained market share, and new subscribers have been driving earnings growth. We believe the company continues to be a takeover target as more competitors look to enter the wireless industry. In the consumer discretionary sector, Jarden was a significant contributor to performance, largely due to stronger-than-expected operating results and its eventual sale to Newell in early 2016.

In contrast, the health care, energy and industrials sectors detracted from the Fund’s performance during the reporting period. In the health care sector, biotechnology company Novavax, which focuses on vaccines, hindered results.²The company’s shares experienced significant volatility during the reporting period. In September, the stock price fell after the company’s lead vaccine candidate for respiratory syncytial virus failed in a study on its effectiveness in older patients. Pharmaceutical company Allergan’s shares declined after the U.S. Treasury passed new tax rules that forced the company to terminate its planned merger with Pfizer. Allergan’s dramatic number of acquisitions and divestitures made investors cautious about its outlook as an independent company. Shares of generic drug manufacturer Teva Pharmaceutical Industries fell in value amid general pricing pressures in the pharmaceutical sector and price competition among its generic products.²Furthermore, its acquisition of Allergan’s Actavis generics division, which occurred in August, took longer than expected to close due to U.S. regulatory delays. In addition, the generics sector outlook has diminished since the acquisition due to price competition, and there is investor concern that the company may lose its patent exclusivity on Copaxone depending on a pending court decision.

3. Not held at period-end.
See www.franklintempletondatasources.com for additional data provider information.

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FRANKLIN CONVERTIBLE SECURITIES FUND

Energy sector detractors included Rex Energy³and Cobalt International Energy. Rex Energy’s shares continued to sink as lower natural gas prices and reduced natural gas liquid prices restricted cash flow and prevented growth. The company made several moves during the period to avert restructuring, including selling its non-core Illinois oil assets and signing a joint venture to continue natural gas drilling in Pennsylvania. The company’s relatively higher leverage metrics and debt holders selling converted equity for liquidity kept pressure on the shares. Shares of Cobalt fell as the government of Angola officially backed out of its agreement to purchase Cobalt’s interests in several offshore oil discoveries. The continued delays in closing the sale also led to a change in the company’s senior management, which is now focused on reselling the Angolan properties and reducing its interests in its Gulf of Mexico offshore U.S. discoveries. The company has significant cash and no near-term debt maturities, but we believe it needs to conserve cash for development of the offshore discoveries and will likely need to restructure its convertible bonds that mature in 2021.

In the industrials sector, medical waste manager Stericycle suffered from increased competition that reduced revenues and profitability of the company’s industrial and manufacturing waste business.

Thank you for your continued participation in Franklin Convertible Securities Fund. We look forward to serving your future investment needs.

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FRANKLIN CONVERTIBLE SECURITIES FUND

Performance Summary as of October 31, 2016

The performance table and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses.

Performance as of 10/31/16¹


	Cumulative		Average Annual		Average Annual
Share Class	Total Return²		Total Return³		Total Return(9/30/16)⁴
A
1-Year	+6.41	%	+0.28	%	+6.27	%
5-Year	+54.29	%	+7.77	%	+9.91	%
10-Year	+79.27	%	+5.38	%	+5.84	%
Advisor⁵
1-Year	+6.68	%	+6.68	%	+13.02	%
5-Year	+56.16	%	+9.32	%	+11.51	%
10-Year	+83.16	%	+6.24	%	+6.70	%


	Distribution		30-Day Standardized Yield⁷
Share Class	Rate⁶		(with waiver) (without waiver)
A	2.60	%	1.58	%	1.58	%
Advisor	3.00	%	1.93	%	1.92	%

See page 17 for Performance Summary footnotes.

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FRANKLIN CONVERTIBLE SECURITIES FUND
PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

See page 17 for Performance Summary footnotes.

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FRANKLIN CONVERTIBLE SECURITIES FUND
PERFORMANCE SUMMARY

Total Annual Operating Expenses⁹


Share Class
A	0.86	%
Advisor	0.61	%

Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.

All investments involve risks, including possible loss of principal. The Fund may invest in high yielding, fixed income securities. High yields reflect the higher
credit risk associated with these lower rated securities and, in some cases, the lower market prices for these instruments. Interest rate movements may affect the
Fund’s share price and yield. Bond prices generally move in the opposite direction of interest rates. As prices of bonds in the Fund adjust to a rise in interest
rates, the Fund’s share price may decline. The Fund may also invest in foreign securities, which involve special risks, including political uncertainty and currency
volatility. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus
also includes a description of the main investment risks.

1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed
through its current fiscal year-end. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, ifany,hasnotbeen
annualized.
4. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.
5. Effective 5/15/08, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the
following methods of calculation: (a) For periods prior to 5/15/08, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s
maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 5/15/08 actual Advisor Class performance is used reflecting all
charges and fees applicable to that class. Since 5/15/08 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were +71.92% and
+6.61%.
6. Distribution rate is based on the sum of the respective class’s past four quarterly dividends and the maximum offering price (NAV for Advisor Class) per share on 10/31/16.
7. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal
the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.
8. Source: BofA Merrill Lynch. The BofAMLAll Total Return Alternatives U.S. Convertibles Index comprises domestic securities of all quality grades that are convertible into U.S.
dollar-denominated common stock, ADRs or cash equivalents and have a delta (measure of equity sensitivity) that indicates the security likely has a balance between the debt
and equity characteristics of the security.
9. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this
report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.

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FRANKLIN CONVERTIBLE SECURITIES FUND

Your Fund’s Expenses

Actual Fund Expenses

Hypothetical Example for Comparison with Other Funds


						Actual		Hypothetical
				(actual return after expenses)				(5% annual return before expenses)
						Expenses				Expenses	Net
		Beginning		Ending		Paid During		Ending		Paid During	Annualized
Share		Account		Account		Period		Account		Period	Expense
Class		Value 5/1/16		Value 10/31/16		5/1/16–10/31/16^1,2		Value 10/31/16		5/1/16–10/31/16^1,2	Ratio²
A	$	1,000	$	1,063.40	$	4.36	$	1,020.91	$	4.27	0.84	%
C	$	1,000	$	1,059.10	$	8.23	$	1,017.14	$	8.06	1.59	%
R6	$	1,000	$	1,065.00	$	2.49	$	1,022.72	$	2.44	0.48	%
Advisor	$	1,000	$	1,064.70	$	3.06	$	1,022.17	$	3.00	0.59	%

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Franklin Equity Income Fund

This annual report for Franklin Equity Income Fund covers the fiscal year ended October 31, 2016.

Your Fund’s Goal and Main Investments

The Fund seeks to maximize total return, emphasizing high current income and long-term capital appreciation, consistent with reasonable risk, by investing at least 80% of its net assets in equity securities including securities convertible into common stocks.

Performance Overview

For the 12 months under review, the Fund’s Class A shares delivered a +3.31% cumulative total return. In comparison, the Fund’s benchmark, the Standard & Poor’s 500 Index (S&P 500), which tracks the broad U.S. stock market, generated a +4.51% total return.¹The Fund’s peers, as measured by the Lipper Equity Income Funds Classification Average, which consists of funds chosen by Lipper that seek relatively high current income and growth of income by investing at least 60% of their portfolios in stocks, posted a +4.70% total return.²You can find the Fund’s long-term performance data in the Performance Summary beginning on page 23.

Investment Strategy

We seek to invest in a broadly diversified portfolio of equity securities that we consider to be financially strong, with a focus on “blue chip” companies. We apply a bottom-up approach to investing in individual securities. We will assess the market price of a company’s securities relative to our evaluation of the company’s long-term earnings, asset value and cash flow potential. We also consider a company’s price/earnings ratio, profit margins, balance sheet and liquidations value. We consider dividend yield in selecting stocks for the Fund because we believe that, over time, dividend income can contribute significantly to total return and can be a more consistent source

of investment return than capital appreciation. We seek to take advantage of price dislocations that result from the market’s short-term focus and choose to invest in those companies that, in our opinion, offer the best trade-off between growth opportunity, business and financial risk, and valuation.

Manager’s Discussion

Most of the sectors the Fund invested in increased in value during the 12-month reporting period and supported performance. The industrials, information technology and energy sectors contributed most to Fund returns during the period. In the industrials sector, Illinois Tool Works, Republic

1. Source: Morningstar.
2. Source: Lipper, a Thomson Reuters Company. For the 12-month period ended 10/31/16, this category consisted of 508 funds. Lipper calculations do not include sales
charges, or expense subsidization by a fund’s manager. The Fund’s performance relative to the average may have differed if these and other factors had been considered.
The indexes are unmanaged and include reinvestment of any income or distributions. They do not include any fees, expenses or sales charges. One cannot invest directly in an
index, and an index is not representative of the Fund’s portfolio.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 58.

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FRANKLIN EQUITY INCOME FUND



Dividend Distributions*
11/1/15–10/31/16
		Dividend per Share (cents)
					Advisor
Month	Class A	Class C	Class R	Class R6	Class
November	3.90	2.48	3.40	4.60	4.38
December**	14.11	12.71	13.63	14.81	14.58
March	12.96	10.16	12.09	14.38	13.92
June	14.22	10.42	12.85	16.14	15.53
September	14.73	10.60	13.46	16.94	16.37
Total	59.92	46.37	55.43	66.87	64.78

Services and Raytheon helped performance. Industrial products and equipment manufacturer Illinois Tool Works posted strong earnings results for most of the period amid expanding operating margins, and it raised earnings guidance. A recent acquisition by the company’s original equipment manufacturing division also supported its stock. Shares of waste management company Republic Services rose in value as the company experienced strong trends in its commercial and industrial waste collection businesses. Pricing continued to improve, helped by industry consolidation, and recycling headwinds abated as renewable cardboard prices moved modestly higher over the summer. Defense contractor Raytheon’s shares increased during the period. The company experienced strong overseas demand for its missile protection systems and radios. Shares of Lockheed Martin, another defense contractor holding, benefited from similarly strong demand across its product offering. Finally, the uncertain geopolitical backdrop led defense stocks to trade at a premium to the market and historical levels.

Information technology holding Microsoft, a software and information technology services company and the Fund’s largest holding at period-end, benefited over the past year from investors gaining greater confidence in the company’s ability to be relevant in the cloud-computing era with its key productivity and server software franchises. Specifically, its productivity suite moved rapidly to Office 365, while its server franchise found new growth opportunities with the company’s Azure platform. In addition, the company executed well on various cost containment and capital return initiatives, with expanded share repurchases and a solid and growing dividend.

Semiconductor manufacturer Texas Instruments also helped the Fund’s results, as the company continued to improve its gross and operating profit margins, while its embedded processing division accelerated its revenue growth rate.³The company continued to surpass market expectations with its effective execution, and it has committed to returning 100% of its free cash flow to investors, which has attracted many to the stock, leading to its strong performance. Semiconductor company Avago Technologies (named Broadcom as of period-end) continued to execute well, delivering superior growth and profitability in its wireless, networking and enterprise storage business segments. In addition, the company announced and completed its acquisition of Broadcom during the reporting period. The market reacted positively to the transaction, and as Avago increased projections from its initial asset and earnings growth targets surrounding its expansion, the shares continued to benefit.

In the energy sector, major oil and gas company Chevron boosted results. The company’s shares recovered over the past year along with oil and natural gas fundamentals and amid progress in its project delivery and cost reduction initiatives. During the period, commodity prices stabilized at healthier levels, and Chevron made advances in delivering its Gorgon and Wheatstone liquid natural gas projects in Australia, while cost reductions helped move the company toward a better balance between cash flow and spending in a lower commodity price environment.

Elsewhere, in the consumer staples sector, The Kraft Heinz Company helped the Fund’s results during the reporting period. Kraft Heinz is a leading U.S. packaged food company, and is in the process of realigning the consolidated entity’s cost structure which has resulted in unprecedented margin expansion. Management has proven its ability to create more sustainable growth than many investors and competitors had expected despite structural category impediments and global economic challenges. We also believe there is a high probability of incremental upside potential from large merger-and-acquisition activity as the company leverages what its management describes as “an operating model that can be scaled.” In the utilities sector, NextEra Energy benefited Fund results as valuations of utilities generally moved higher with lower long-term interest rates. In addition, the company delivered on expanded renewable development opportunities following the passage of tax credit extensions in December 2015. Financial services company JPMorgan Chase, the Fund’s largest holding in the financials sector at period-end, also contributed to

3. New position during the period.

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FRANKLIN EQUITY INCOME FUND

relative performance. The company experienced improved fixed income trading results and strong earnings. Its shares were further supported by investors’ demand for higher quality banks.

In contrast, the health care and consumer discretionary sectors detracted from the Fund’s relative performance during the reporting period. In health care, shares of pharmaceutical company Allergan declined after the U.S. Department of the Treasury passed new tax rules that forced the company to terminate its planned merger with Pfizer. Allergan’s dramatic number of acquisitions and divestitures made investors cautious about its outlook as an independent company. France-based pharmaceutical firm Sanofi suffered amid pricing and competitive challenges to its dominant U.S. insulin franchise and the company’s difficulty in replacing these lost profits from its pipeline.⁴Shares of generic drug manufacturer Teva Pharmaceutical Industries fell in value amid general pricing pressures in the pharmaceutical sector and price competition among its generic products.³Furthermore, its acquisition of Allergan’s Actavis generics division, which occurred in August, took longer than expected to close due to U.S. regulatory delays. In addition, the generics sector outlook has diminished since the acquisition due to price competition, and there is investor concern that the company may lose its patent exclusivity on Copaxone depending on a pending court decision.

In the consumer discretionary sector, hotel operator Starwood Hotels & Resorts Worldwide declined in value as the lodging group experienced weakness in late 2015 and early 2016.⁴During that time, revenue-per-available-room expectations declined, corporate travel was slowing and investors began to digest the impact of competition from alternative accommodations (e.g., Airbnb⁵). During the period, the company received an initial takeover bid from Marriott⁵that was viewed as disappointing by investors though a takeover was ultimately completed at higher values. Automobile manufacturer Ford Motor also hindered results. The company suffered from negative sentiment toward the auto business cycle in North America, where investors seemed to believe demand had peaked and, as a result, declining earnings and profits would be experienced across the industry. Sportswear maker NIKE underperformed primarily because growth decelerated.⁴The company’s sales growth during the period were negatively impacted by one-time factors including sports retailer bankruptcies, tough comparisons from a robust 2015 and unfavorable weather causing excess inventory.

Elsewhere, Wells Fargo, in the financials sector, detracted from results. The company’s shares declined following an account-opening scandal, as well as the resignation of its chief executive officer in the scandal’s aftermath. Also in the financials sector, MetLife, like other insurance companies, suffered as the outlook for interest rates deteriorated at the start of the reporting period.⁴We have started to see this trend reverse as interest rates recently began to move higher, although they were still below where yields started the year. The company is in the process of separating into two standalone businesses, as first disclosed earlier in 2016. The process resulted in a pause in share repurchases and created above-average, near-term uncertainty, which recently has begun to be clarified by management but created what we view as a temporary overhang on the stock relative to its peers.

In the consumer staples sector, CVS Health hindered results. During the reporting period, scrutiny on pharmacy benefits managers intensified due to an increased focus on prescription drug pricing. We believe these headwinds are largely transient, and we expect CVS Health’s integrated delivery model will be successful over the long term.

4. Not held at period-end.
5. Not a Fund holding.
See www.franklintempletondatasources.com for additional data provider information.

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FRANKLIN EQUITY INCOME FUND

Thank you for your continued participation in Franklin Equity Income Fund. We look forward to serving your future investment needs.

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FRANKLIN EQUITY INCOME FUND

Performance Summary as of October 31, 2016

Performance as of 10/31/16¹


	Cumulative		Average Annual		Average Annual
Share Class	Total Return²		Total Return³		Total Return(9/30/16)⁴
A
1-Year	+3.31	%	-2.62	%	+6.39	%
5-Year	+67.06	%	+9.51	%	+12.08	%
10-Year	+58.11	%	+4.07	%	+4.51	%
Advisor⁵
1-Year	+3.53	%	+3.53	%	+13.13	%
5-Year	+69.18	%	+11.09	%	+13.70	%
10-Year	+61.57	%	+4.91	%	+5.36	%


	Distribution		30-Day Standardized Yield⁷
Share Class	Rate⁶		(with waiver) (without waiver)
A	2.47	%	1.85	%	1.84	%
Advisor	2.91	%	2.20	%	2.19	%

See page 25 for Performance Summary footnotes.

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FRANKLIN EQUITY INCOME FUND
PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

See page 25 for Performance Summary footnotes.

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					FRANKLIN EQUITY INCOME FUND
					PERFORMANCE SUMMARY

Total Annual Operating Expenses¹¹
Share Class	With Waiver		Without Waiver
A	0.86	%	0.86	%
Advisor	0.61	%	0.61	%

Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.

All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual
companies, particular industries or sectors, or general market conditions. Convertible securities are subject to the risks of stocks when the underlying stock price
is high relative to the conversion price and debt securities when the underlying stock price is low relative to the conversion price. The Fund’s investment in
foreign securities also involves special risks, including currency fluctuations and economic as well as political uncertainty. The Fund is actively managed but
there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main
investment risks.

1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton Fund, contractually guaranteed its
current fiscal year-end. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, ifany,hasnotbeen
annualized.
4. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.
5. Effective 5/15/08, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the
following methods of calculation: (a) For periods prior to 5/15/08, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s
maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 5/15/08, actual Advisor Class performance is used reflecting all
charges and fees applicable to that class. Since 5/15/08 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were +61.36% and
+5.82%.
6. Distribution rate is based on an annualization of the respective class’s current quarterly dividend and the maximum offering price (NAV for Advisor Class) per share on
10/31/16.
7. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal
the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.
8. Source: Morningstar: The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance.
9. Source: Lipper, a Thomson Reuters Company. The Lipper Equity Income Funds Classification Average is an equally weighted average calculation of performance figures for
all funds within the Lipper Equity Income Funds classification in the Lipper Open-End underlying funds universe. Lipper Equity Income Funds seek relatively high current
income and growth of income through investing 60% or more of their portfolios in equities. For the one-year period ended 10/31/16, there were 508 funds in this category.
Lipper calculations do not include sales charges or expense subsidization by a fund’s manager. The Fund’s performance relative to the average may have differed if these or
other factors had been considered.
10. Source: Bureau of Labor Statistics, bls.gov/cpi. The Consumer Price Index (CPI), is a commonly used measure of the inflation rate.
11. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in
this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.

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FRANKLIN EQUITY INCOME FUND

Your Fund’s Expenses

Actual Fund Expenses

Hypothetical Example for Comparison with Other Funds


						Actual		Hypothetical
				(actual return after expenses)				(5% annual return before expenses)
						Expenses				Expenses	Net
		Beginning		Ending		Paid During		Ending		Paid During	Annualized
Share		Account		Account		Period		Account		Period	Expense
Class		Value 5/1/16		Value 10/31/16		5/1/16–10/31/16^1,2		Value 10/31/16		5/1/16–10/31/16^1,2	Ratio²
A	$	1,000	$	1,033.70	$	4.40	$	1,020.81	$	4.37	0.86	%
C	$	1,000	$	1,029.30	$	8.21	$	1,017.04	$	8.16	1.61	%
R	$	1,000	$	1,032.50	$	5.57	$	1,019.66	$	5.53	1.09	%
R6	$	1,000	$	1,035.50	$	2.46	$	1,022.72	$	2.44	0.48	%
Advisor	$	1,000	$	1,034.50	$	3.12	$	1,022.07	$	3.10	0.61	%

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Franklin Real Return Fund

This annual report for Franklin Real Return Fund covers the fiscal year ended October 31, 2016.

Your Fund’s Goal and Main Investments

The Fund seeks to achieve total return that exceeds the rate of inflation over an economic cycle. The Fund will generally invest its assets in inflation-indexed securities structured to provide protection against inflation, as well as in investment-grade and high yield fixed income securities and short-term non-dollar-denominated debt securities to achieve the highest level of real return (total return less the rate of inflation) consistent with an acceptable level of risk.

Performance Overview

For the 12 months under review, the Fund’s Class A shares had a +2.77% cumulative total return. In comparison, the Barclays U.S. TIPS Index, which tracks the universe of inflation-protected notes issued by the U.S. Treasury that have at least one year to final maturity, posted a +5.89% total return.¹Also for comparison, the Consumer Price Index for All Urban Consumers - Non-Seasonally Adjusted (CPI-NSA), a measure of the average change in prices of all goods and services purchased for consumption by urban householders, rose 1.64% for the same period.²You can find more of the Fund’s performance data in the Performance Summary beginning on page 29.

Investment Strategy

Under normal market conditions, we will allocate the Fund’s assets among securities in various market sectors based on our assessment of changing economic, global market, industry and issuer conditions. When making our investment decisions, we use a “top-down” analysis of macroeconomic trends combined with a “bottom-up” fundamental analysis of market sectors, industries and issuers to try to take advantage of varying sector reactions to economic events. We will evaluate such criteria as country risk, business cycles, yield curves and values between and within markets.

What is the yield curve?

The yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality but differing maturity dates. The most frequently reported yield curve compares three-month, two-year and 30-year U.S. Treasury debt.

Manager’s Discussion

U.S. economic indicators were generally encouraging during the reporting period. Steady growth in the services sector created new jobs and slightly boosted employment levels. Retail sales grew for most of the period. Low energy prices pulled inflation lower. In this environment, home sales and prices grew.

At period-end, slightly more than half of total net assets were invested in Treasury Inflation Protected Securities (TIPS). For

1. Source: Morningstar.
The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. One cannot invest directly in an
index, and an index is not representative of the Fund’s portfolio.
2. Source: Bureau of Labor Statistics, bls.gov/cpi.
See www.franklintempletondatasources.com for additional data provider information.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 65.

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Annual Report

FRANKLIN REAL RETURN FUND

diversification, we also allocated the Fund’s assets to foreign government and agency securities, management investment companies, common stocks, corporate bonds, senior secured floating rate loans and short-term investments. We employed a non-U.S. dollar strategy to help hedge against potential U.S. dollar weakness versus certain currencies and concentrated our TIPS holdings in shorter maturities.


Dividend Distributions*
11/1/15–10/31/16
	Dividend per Share (cents)
				Advisor
Month	Class A	Class C	Class R6	Class
November**	—	—	—	—
December	8.60	4.27	13.19	11.21
January**	—	—	—	—
February**	—	—	—	—
March**	—	—	—	—
April**	—	—	—	—
May**	—	—	—	—
June**	—	—	—	—
July**	—	—	—	—
August**	—	—	—	—
September**	—	—	—	—
October**	—	—	—	—
Total	8.60	4.27	13.19	11.21

During the period, we increased the Fund’s allocations to TIPS, natural resources and loans. In contrast, we decreased the Fund’s allocation to foreign government debt securities and high yield corporate credit securities. The Fund’s heaviest allocations were in TIPS and foreign government debt securities.

The Fund’s investments in TIPS, foreign government bonds and high yield corporate bonds helped results. In contrast, the Fund’s foreign currency exposure hindered Fund performance.

Thank you for your continued participation in Franklin Real Return Fund. We look forward to serving your future investment needs.

28 Annual Report

franklintempleton.com

FRANKLIN REAL RETURN FUND

Performance Summary as of October 31, 2016

Performance as of 10/31/16¹

Cumulative total return excludes sales charges. Average annual total returns include maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 4.25% and the minimum is 0%. Class A: 4.25% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.


	Cumulative		Average Annual		Average Annual
Share Class	Total Return²		Total Return³		Total Return(9/30/16)⁴
A
1-Year	+2.77	%	-1.59	%	+0.64	%
5-Year	-0.05	%	-0.87	%	+0.08	%
10-Year	+27.14	%	+1.98	%	+2.09	%
Advisor
1-Year	+3.04	%	+3.04	%	+5.35	%
5-Year	+1.21	%	+0.24	%	+1.21	%
10-Year	+30.34	%	+2.69	%	+2.79	%


	Distribution		30-Day Standardized Yield⁶
Share Class	Rate⁵		(with waiver)		(without waiver)

A	0.00	%	1.81	%	1.61	%

Advisor	0.00	%	2.15	%	1.93	%

See page 31 for Performance Summary footnotes.

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Annual Report

FRANKLIN REAL RETURN FUND
PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

See page 31 for Performance Summary footnotes.

30 Annual Report

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					FRANKLIN REAL RETURN FUND
					PERFORMANCE SUMMARY

Total Annual Operating Expenses⁹
Share Class	With Waiver		Without Waiver
A	0.92	%	1.12	%
Advisor	0.67	%	0.87	%

Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.

All investments involve risks, including possible loss of principal. Interest rate movements will affect the Fund’s share price and yield. Bond prices generally
move in the opposite direction of interest rates. As prices of bonds in a Fund adjust to a rise in interest rates, the Fund’s share price may decline. Foreign
securities involve special risks, including currency fluctuations and economic and political uncertainties. Changes in the financial strength of a bond issuer or in
a bond’s credit rating may affect its value. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular
industries or sectors, or general market conditions. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce
the desired results. The Fund’s prospectus also includes a description of the main investment risks.

1. The Fund has an expense reduction contractually guaranteed through 2/28/17. Fund investment results reflect the expense reduction; without this reduction, the results
would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, ifany,hasnotbeen
annualized.
4. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.
5. Distribution rate is based on an annualization of the respective class’s October dividend and the maximum offering price (NAV for Advisor Class) per share on 10/31/16.
6. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal
the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.
7. Source: Morningstar. The Barclays U.S. TIPS Index comprises U.S. TIPS rated investment grade (Baa3/BBB- or better) with at least one year to final maturity and at least
$250 million par amount outstanding.
8. Source: Bureau of Labor Statistics, bls.gov/cpi. The Consumer Price Index (CPI), is a commonly used measure of the inflation rate.
9. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this
report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.

franklintempleton.com

Annual Report

FRANKLIN REAL RETURN FUND

Your Fund’s Expenses

Actual Fund Expenses

Hypothetical Example for Comparison with Other Funds


						Actual		Hypothetical
				(actual return after expenses)				(5% annual return before expenses)
						Expenses				Expenses	Net
		Beginning		Ending		Paid During		Ending		Paid During	Annualized
Share		Account		Account		Period		Account		Period	Expense
Class		Value 5/1/16		Value 10/31/16		5/1/16–10/31/16^1,2		Value 10/31/16		5/1/16–10/31/16^1,2	Ratio²
A	$	1,000	$	1,012.00	$	4.55	$	1,020.61	$	4.57	0.90	%
C	$	1,000	$	1,010.10	$	6.57	$	1,018.60	$	6.60	1.30	%
R6	$	1,000	$	1,015.00	$	2.63	$	1,022.52	$	2.64	0.52	%
Advisor	$	1,000	$	1,013.00	$	3.29	$	1,021.87	$	3.30	0.65	%

32 Annual Report

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		FRANKLIN INVESTORS SECURITIES TRUST



Financial Highlights
Franklin Balanced Fund
					Year Ended October 31,
		2016			2015			2014			2013			2012
Class A
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	11.40		$	11.86		$	11.43		$	10.64		$	9.87
Income from investment operations^a:
Net investment income^b		0.30			0.30			0.31	^c		0.27			0.30
Net realized and unrealized gains (losses)		0.31			(0.24	)		0.65			1.02			0.83
Total from investment operations		0.61			0.06			0.96			1.29			1.13
Less distributions from:
Net investment income		(0.36	)		(0.36	)		(0.36	)		(0.36	)		(0.36	)
Net realized gains		(—)^d			(0.16	)		(0.17	)		(0.14	)		(—)^d
Total distributions		(0.36	)		(0.52	)		(0.53	)		(0.50	)		(0.36	)
Net asset value, end of year.	$	11.65		$	11.40		$	11.86		$	11.43		$	10.64

Total return^e		5.54	%		0.51	%		8.66	%		12.51	%		11.70	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		1.02	%		1.06	%		1.09	%		1.12	%		1.15	%
Expenses net of waiver and payments by affiliates		1.01	%^f		1.06	%^f,g		1.09	%^f,g		1.10	%^f		1.01	%
Net investment income		2.62	%		2.56	%		2.64	%^c		2.51	%		2.95	%

Supplemental data
Net assets, end of year (000’s)	$	2,532,459		$	2,371,133		$	2,053,623		$	1,354,710		$	627,287
Portfolio turnover rate		46.03	%		69.23	%		40.54	%		58.52	%		58.59	%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^bBased on average daily shares outstanding.
^cNet investment income per share includes approximately $0.03 per share related to income received in the form of a special dividend in connection with certain Fund
holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 2.39%.
^dAmount rounds to less than $0.01 per share.
^eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
^fBenefit of expense reduction rounds to less than 0.01%.
^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

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FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS


Franklin Balanced Fund (continued)
					Year Ended October 31,
		2016			2015			2014			2013			2012
Class C
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	11.31		$	11.77		$	11.34		$	10.57		$	9.81
Income from investment operations^a:
Net investment income^b		0.21			0.21			0.23	^c		0.20			0.23
Net realized and unrealized gains (losses)		0.31			(0.23	)		0.65			0.99			0.82
Total from investment operations		0.52			(0.02	)		0.88			1.19			1.05
Less distributions from:
Net investment income		(0.28	)		(0.28	)		(0.28	)		(0.28	)		(0.29	)
Net realized gains		(—)^d			(0.16	)		(0.17	)		(0.14	)		(—)^d
Total distributions		(0.28	)		(0.44	)		(0.45	)		(0.42	)		(0.29	)
Net asset value, end of year.	$	11.55		$	11.31		$	11.77		$	11.34		$	10.57

Total return^e		4.73	%		(0.20	)%		7.97	%		11.62	%		10.91	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		1.77	%		1.77	%		1.79	%		1.82	%		1.85	%
Expenses net of waiver and payments by affiliates		1.76	%^f		1.77	%^f,g		1.79	%^f,g		1.80	%^f		1.71	%
Net investment income		1.87	%		1.85	%		1.94	%^c		1.81	%		2.25	%

Supplemental data
Net assets, end of year (000’s)	$	630,110		$	563,419		$	492,514		$	354,359		$	187,991
Portfolio turnover rate		46.03	%		69.23	%		40.54	%		58.52	%		58.59	%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^bBased on average daily shares outstanding.
^cNet investment income per share includes approximately $0.03 per share related to income received in the form of a special dividend in connection with certain Fund
holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.69%.
^dAmount rounds to less than $0.01 per share.
^eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
^fBenefit of expense reduction rounds to less than 0.01%.
^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

34 Annual Report | The accompanying notes are an integral part of these financial statements.

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		FRANKLIN INVESTORS SECURITIES TRUST
								FINANCIAL HIGHLIGHTS


Franklin Balanced Fund (continued)
					Year Ended October 31,
		2016			2015			2014			2013			2012
Class R
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	11.42		$	11.89		$	11.45		$	10.66		$	9.89
Income from investment operations^a:
Net investment income^b		0.27			0.27			0.29	^c		0.26			0.29
Net realized and unrealized gains (losses)		0.32			(0.24	)		0.66			1.01			0.82
Total from investment operations		0.59			0.03			0.95			1.27			1.11
Less distributions from:
Net investment income		(0.34	)		(0.34	)		(0.34	)		(0.34	)		(0.34	)
Net realized gains		(—)^d			(0.16	)		(0.17	)		(0.14	)		(—)^d
Total distributions		(0.34	)		(0.50	)		(0.51	)		(0.48	)		(0.34	)
Net asset value, end of year.	$	11.67		$	11.42		$	11.89		$	11.45		$	10.66

Total return		5.28	%		0.21	%		8.51	%		12.26	%		11.46	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		1.27	%		1.27	%		1.29	%		1.32	%		1.35	%
Expenses net of waiver and payments by affiliates		1.26	%^e		1.27	%^e,f		1.29	%^e,f		1.30	%^e		1.21	%
Net investment income		2.37	%		2.35	%		2.44	%^c		2.31	%		2.75	%

Supplemental data
Net assets, end of year (000’s)	$	4,482		$	4,699		$	3,598		$	3,253		$	2,378
Portfolio turnover rate		46.03	%		69.23	%		40.54	%		58.52	%		58.59	%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^bBased on average daily shares outstanding.
^cNet investment income per share includes approximately $0.03 per share related to income received in the form of a special dividend in connection with certain Fund
holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 2.19%.
^dAmount rounds to less than $0.01 per share.
^eBenefit of expense reduction rounds to less than 0.01%.
^fBenefit of waiver and payments by affiliates rounds to less than 0.01%.

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FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS


Franklin Balanced Fund (continued)
					Year Ended October 31,
		2016			2015			2014			2013	^a
Class R6
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	11.42		$	11.89		$	11.45		$	11.08
Income from investment operations^b:
Net investment income^c		0.34			0.35			0.37	^d		0.19
Net realized and unrealized gains (losses)		0.31			(0.25	)		0.65			0.38
Total from investment operations		0.65			0.10			1.02			0.57
Less distributions from:
Net investment income.		(0.40	)		(0.41	)		(0.41	)		(0.20	)
Net realized gains		(—)^e			(0.16	)		(0.17	)		—
Total distributions		(0.40	)		(0.57	)		(0.58	)		(0.20	)
Net asset value, end of year	$	11.67		$	11.42		$	11.89		$	11.45

Total return^f		5.90	%		0.81	%		9.29	%		5.15	%

Ratios to average net assets^g
Expenses before waiver and payments by affiliates		0.73	%		0.70	%		0.68	%		1.82	%
Expenses net of waiver and payments by affiliates^h		0.66	%		0.67	%		0.68	%ⁱ		0.70	%
Net investment income		2.97	%		2.95	%		3.05	%^d		2.91	%

Supplemental data
Net assets, end of year (000’s)	$	233		$	221		$	513		$	5
Portfolio turnover rate		46.03	%		69.23	%		40.54	%		58.52	%

^aFor the period May 1, 2013 (effective date) to October 31, 2013.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dNet investment income per share includes approximately $0.03 per share related to income received in the form of a special dividend in connection with certain Fund
holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 2.80%.
^eAmount rounds to less than $0.01 per share.
^fTotal return is not annualized for periods less than one year.
^gRatios are annualized for periods less than one year.
^hBenefit of expense reduction rounds to less than 0.01%.
ⁱBenefit of waiver and payments by affiliates rounds to less than 0.01%.

36 Annual Report | The accompanying notes are an integral part of these financial statements.

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		FRANKLIN INVESTORS SECURITIES TRUST
								FINANCIAL HIGHLIGHTS


Franklin Balanced Fund (continued)
					Year Ended October 31,
		2016			2015			2014			2013			2012
Advisor Class
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	11.42		$	11.88		$	11.45		$	10.66		$	9.89
Income from investment operations^a:
Net investment income^b		0.29			0.33			0.35	^c		0.30			0.34
Net realized and unrealized gains (losses)		0.35			(0.24	)		0.65			1.02			0.82
Total from investment operations		0.64			0.09			1.00			1.32			1.16
Less distributions from:
Net investment income		(0.39	)		(0.39	)		(0.40	)		(0.39	)		(0.39	)
Net realized gains		(—)^d			(0.16	)		(0.17	)		(0.14	)		(—)^d
Total distributions		(0.39	)		(0.55	)		(0.57	)		(0.53	)		(0.39	)
Net asset value, end of year.	$	11.67		$	11.42		$	11.88		$	11.45		$	10.66

Total return		5.79	%		0.81	%		8.97	%		12.82	%		12.01	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		0.77	%		0.77	%		0.79	%		0.82	%		0.85	%
Expenses net of waiver and payments by affiliates		0.76	%^e		0.77	%^e,f		0.79	%^e,f		0.80	%^e		0.71	%
Net investment income		2.87	%		2.85	%		2.94	%^c		2.81	%		3.25	%

Supplemental data
Net assets, end of year (000’s)	$	138,111		$	54,881		$	41,494		$	68,201		$	13,779
Portfolio turnover rate		46.03	%		69.23	%		40.54	%		58.52	%		58.59	%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^bBased on average daily shares outstanding.
^cNet investment income per share includes approximately $0.03 per share related to income received in the form of a special dividend in connection with certain Fund
holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 2.69%.
^dAmount rounds to less than $0.01 per share.
^eBenefit of expense reduction rounds to less than 0.01%.
^fBenefit of waiver and payments by affiliates rounds to less than 0.01%.

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The accompanying notes are an integral part of these financial statements. | Annual Report 37


FRANKLIN INVESTORS SECURITIES TRUST




Statement of Investments, October 31, 2016
Franklin Balanced Fund
	Country	Shares		Value

Common Stocks 49.3%
Consumer Discretionary 5.7%
Ford Motor Co	United States	3,500,000	$	41,090,000
General Motors Co	United States	1,000,000		31,600,000
Lowe’s Cos. Inc	United States	600,000		39,990,000
^aNordstrom Inc	United States	500,000		26,000,000
^aTarget Corp	United States	750,000		51,547,500
				190,227,500
Consumer Staples 6.7%
^aAnheuser-Busch InBev SA/NV, ADR	Belgium	200,000		23,098,000
The Coca-Cola Co	United States	1,200,000		50,880,000
^aDiageo PLC, ADR	United Kingdom	197,800		21,269,434
Kimberly-Clark Corp	United States	300,000		34,323,000
^aPhilip Morris International Inc	United States	300,000		28,932,000
Reynolds American Inc	United States	400,000		22,032,000
Walgreens Boots Alliance Inc	United States	500,000		41,365,000
				221,899,434
Energy 4.6%
Anadarko Petroleum Corp	United States	200,000		11,888,000
^aChevron Corp	United States	500,000		52,375,000
Occidental Petroleum Corp	United States	400,000		29,164,000
Royal Dutch Shell PLC, A, ADR	United Kingdom	719,264		35,826,540
Total SA, B, ADR	France	500,000		23,870,000
				153,123,540
Financials 8.8%
Bank of America Corp	United States	1,496,715		24,695,796
^aBlackRock Inc	United States	100,000		34,124,000
^aThe Charles Schwab Corp	United States	800,000		25,360,000
^aJPMorgan Chase & Co	United States	850,000		58,871,000
T. Rowe Price Group Inc	United States	400,000		25,604,000
The Toronto-Dominion Bank	Canada	750,000		34,035,000
U.S. Bancorp	United States	750,000		33,570,000
Wells Fargo & Co	United States	1,200,000		55,212,000
				291,471,796
Health Care 4.7%
Amgen Inc	United States	175,000		24,703,000
AstraZeneca PLC, ADR	United Kingdom	985,000		27,895,200
Johnson & Johnson.	United States	300,000		34,797,000
Pfizer Inc	United States	1,250,000		39,637,500
Teva Pharmaceutical Industries Ltd., ADR	Israel	687,400		29,379,476
				156,412,176
Industrials 5.7%
General Dynamics Corp	United States	100,000		15,074,000
General Electric Co	United States	2,000,000		58,200,000
Northrop Grumman Corp	United States	125,000		28,625,000
Raytheon Co	United States	360,000		49,179,600
Republic Services Inc	United States	700,000		36,841,000
				187,919,600

38 Annual Report

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FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Balanced Fund (continued)
	Country	Shares		Value

Common Stocks (continued)
Information Technology 6.5%
^aAnalog Devices Inc	United States	600,000	$	38,460,000
Apple Inc	United States	120,000		13,624,800
^aIntel Corp	United States	500,000		17,435,000
^aMicrosoft Corp	United States	1,000,000		59,920,000
Oracle Corp	United States	440,000		16,904,800
^aQUALCOMM Inc	United States	500,000		34,360,000
^aTexas Instruments Inc	United States	465,000		32,945,250
				213,649,850
Materials 3.3%
BASF SE	Germany	400,000		35,256,519
The Dow Chemical Co	United States	800,000		43,048,000
The Mosaic Co	United States	1,250,000		29,412,500
				107,717,019
Real Estate 0.7%
Host Hotels & Resorts Inc	United States	1,500,000		23,220,000
Telecommunication Services 2.0%
Rogers Communications Inc., B	Canada	790,000		31,781,700
Verizon Communications Inc	United States	700,000		33,670,000
				65,451,700
Utilities 0.6%
Dominion Resources Inc	United States	270,480		20,340,096
Total Common Stocks (Cost $1,526,468,732)				1,631,432,711

^bEquity-Linked Securities 8.7%
Energy 2.3%
^cCredit Suisse New York into Schlumberger Ltd., 7.50%, 144A	United States	320,000		24,822,784
^cRoyal Bank of Canada into Anadarko Petroleum Corp., 7.50%, 144A	United States	475,000		26,875,880
^cWells Fargo Bank National Assn. into Halliburton Co., 8.00%, 144A	United States	550,000		25,111,680
				76,810,344
Industrials 3.3%
^cMerrill Lynch International & Co. CV into Union Pacific Corp., 5.75%, 144A	United States	386,000		34,059,984
^cMerrill Lynch International & Co. CV into United Technologies Corp., 5.00%, 144A	United States	354,000		36,172,605
^cWells Fargo Bank National Assn. into The Boeing Co., 7.00%, 144A	United States	275,000		38,068,250
				108,300,839
Information Technology 3.1%
^cCitigroup Inc. into Cisco Systems Inc., 7.50%, 144A	United States	1,442,000		42,504,248
^cJPMorgan Chase & Co. into Oracle Corp., 6.00%, 144A	United States	865,000		33,573,158
^cRoyal Bank of Canada into Texas Instruments Inc., 6.00%, 144A	United States	400,000		26,589,640
				102,667,046
Total Equity-Linked Securities (Cost $276,081,600)				287,778,229

Convertible Preferred Stocks 4.4%
Energy 0.7%
Hess Corp., 8.00%, cvt. pfd	United States	400,000		23,660,000
Health Care 0.8%
Allergan PLC, 5.50%, cvt. pfd	United States	35,102		26,993,438
Real Estate 1.2%
American Tower Corp., 5.50%, cvt. pfd	United States	350,000		38,412,500

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Annual Report

FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Balanced Fund (continued)
	Country		Shares		Value

Convertible Preferred Stocks (continued)
Utilities 1.7%
Dominion Resources Inc., 6.375%, cvt. pfd., A	United States		438,900	$	22,045,947
Great Plains Energy Inc., 7.00%, cvt. pfd	United States		324,000		17,168,760
NextEra Energy Inc., 6.371%, cvt. pfd	United States		260,000		15,867,800
					55,082,507
Total Convertible Preferred Stocks (Cost $140,522,483)					144,148,445

Preferred Stocks 0.4%
Financials 0.4%
Morgan Stanley, 6.375%, pfd., I	United States		310,000		8,556,000
U.S. Bancorp, 6.00%, pfd., G	United States		180,000		4,609,800
Total Preferred Stocks (Cost $12,250,000)					13,165,800


			Principal
			Amount*

Convertible Bonds (Cost $15,000,000) 0.5%
Energy 0.5%
Weatherford International Ltd., cvt., senior note, 5.875%, 7/01/21	United States	$	15,000,000		15,946,875
Corporate Bonds 32.2%
Consumer Discretionary 3.4%
^cCharter Communications Operating LLC/Capital, senior secured note, first lien, 144A,
4.908%, 7/23/25	United States		20,000,000		21,616,660
DISH DBS Corp.,
7.75%, 7/01/26	United States		10,000,000		11,006,300
senior note, 5.875%, 7/15/22.	United States		12,000,000		12,480,000
Dollar General Corp., senior bond, 3.25%, 4/15/23	United States		15,000,000		15,363,165
Ford Motor Credit Co. LLC, senior note, 2.551%, 10/05/18	United States		5,000,000		5,062,465
^cSirius XM Radio Inc., senior bond, 144A, 5.375%, 4/15/25	United States		15,000,000		15,375,000
Tiffany & Co., senior bond, 4.90%, 10/01/44.	United States		7,000,000		6,867,644
Trinity Acquisition PLC, senior note, 4.625%, 8/15/23	United States		7,000,000		7,336,991
Yum! Brands Inc., senior bond, 3.875%, 11/01/23	United States		17,950,000		17,882,621
					112,990,846
Consumer Staples 4.0%
Anheuser-Busch InBev Finance Inc., senior bond, 4.90%, 2/01/46	Belgium		15,000,000		17,249,385
CVS Health Corp., senior note, 3.875%, 7/20/25.	United States		10,000,000		10,673,680
Kraft Foods Group Inc., senior bond, 3.50%, 6/06/22.	United States		10,000,000		10,573,540
Kraft Heinz Foods Co., senior bond, 3.00%, 6/01/26	United States		20,000,000		19,849,660
Mondelez International Inc., senior bond, 4.00%, 2/01/24	United States		15,000,000		16,669,260
Reynolds American Inc.,
senior note, 2.30%, 8/21/17	United States		6,100,000		6,147,275
senior note, 4.45%, 6/12/25	United States		15,000,000		16,500,585
Tyson Foods Inc., senior bond, 3.95%, 8/15/24.	United States		12,100,000		12,868,616
Whole Foods Market Inc., senior note, 5.20%, 12/03/25.	United States		20,000,000		21,579,820
					132,111,821
Energy 3.3%
Anadarko Petroleum Corp., senior note, 8.70%, 3/15/19	United States		7,215,000		8,274,220
Antero Resources Corp., senior note, 5.625%, 6/01/23	United States		10,000,000		10,250,000
Energy Transfer Partners LP, senior bond, 3.60%, 2/01/23	United States		15,000,000		14,981,385
EOG Resources Inc., senior bond, 2.625%, 3/15/23	United States		5,500,000		5,492,960
Ferrellgas LP/Ferrellgas Finance Corp., senior note, 6.75%, 6/15/23	United States		18,800,000		17,625,000

40 Annual Report

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FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Balanced Fund (continued)
			Principal
	Country		Amount*		Value

Corporate Bonds (continued)
Energy (continued)
Oceaneering International Inc., senior note, 4.65%, 11/15/24	United States	$	9,400,000	$	9,550,842
^cSabine Pass Liquefaction LLC, senior secured bond, 144A, 5.00%, 3/15/27	United States		8,200,000		8,364,000
Weatherford International Ltd.,
senior bond, 5.95%, 4/15/42	United States		4,000,000		3,040,000
senior note, 5.125%, 9/15/20.	United States		10,000,000		9,550,000
The Williams Cos. Inc., senior bond, 3.70%, 1/15/23	United States		5,000,000		4,862,500
Williams Partners LP, senior note, 3.60%, 3/15/22	United States		15,000,000		15,287,805
					107,278,712
Financials 8.5%
^dBank of America Corp.,
junior sub. bond, AA, 6.10% to 3/17/25, FRN thereafter, Perpetual	United States		15,000,000		15,690,150
junior sub. bond, M, 8.125% to 5/15/18, FRN thereafter, Perpetual	United States		10,000,000		10,300,000
Capital One Bank USA NA, senior note, 2.30%, 6/05/19	United States		10,000,000		10,108,790
^eCapital One NA, FRN, 1.617%, 9/13/19	United States		15,000,000		15,029,130
Citigroup Inc.,
^djunior sub. bond, P, 5.95% to 5/15/25, FRN thereafter, Perpetual	United States		15,000,000		15,356,250
sub. bond, 4.125%, 7/25/28	United States		10,000,000		10,277,380
Compass Bank, sub. note, 3.875%, 4/10/25	United States		15,000,000		14,631,540
JPMorgan Chase & Co.,
^djunior sub. bond, I, 7.90% to 4/30/19, FRN thereafter, Perpetual	United States		10,000,000		10,320,000
^djunior sub. bond, V, 5.00% to 7/30/19, FRN thereafter, Perpetual	United States		13,000,000		12,711,556
senior note, 2.295%, 8/15/21.	United States		15,000,000		15,021,525
^cLiberty Mutual Group Inc., senior note, 144A, 4.95%, 5/01/22	United States		7,100,000		7,969,345
^cMizuho Bank Ltd., senior note, 144A, 2.45%, 4/16/19	Japan		12,000,000		12,154,572
Morgan Stanley,
^djunior sub. bond, 5.55% to 7/15/20, FRN thereafter, Perpetual	United States		10,900,000		11,172,500
senior note, 2.50%, 4/21/21	United States		15,000,000		15,124,215
senior sub. bond, 4.35%, 9/08/26.	United States		15,000,000		15,964,290
Navient Corp., senior note, 6.125%, 3/25/24.	United States		15,000,000		13,800,000
^cNippon Life Insurance Co., sub. bond, 144A, 5.10% to 10/16/24, FRN thereafter,
10/16/44.	Japan		15,000,000		16,447,875
^dPNC Financial Services Group Inc., junior sub. note, 4.85% to 6/01/23, FRN
thereafter, Perpetual	United States		12,000,000		11,880,000
Prudential Financial Inc.,
3.50%, 5/15/24	United States		10,000,000		10,502,930
junior sub. note, 5.875%, 9/15/42	United States		5,000,000		5,481,250
Royal Bank of Scotland Group PLC,
sub. note, 6.125%, 12/15/22	United Kingdom		4,000,000		4,230,740
sub. note, 5.125%, 5/28/24	United Kingdom		10,400,000		10,312,432
^dWells Fargo & Co., junior sub. bond, 5.875% to 6/15/25, FRN thereafter, Perpetual	United States		15,000,000		16,110,930
					280,597,400
Health Care 3.2%
Actavis Funding SCS, senior bond, 4.75%, 3/15/45	United States		12,000,000		12,649,224
^cAMAG Pharmaceuticals Inc., senior note, 144A, 7.875%, 9/01/23	United States		16,000,000		15,080,000
Baxalta Inc., senior note, 4.00%, 6/23/25	United States		11,900,000		12,482,505
Biogen Inc., senior note, 3.625%, 9/15/22	United States		10,000,000		10,673,540
Celgene Corp., senior bond, 4.00%, 8/15/23	United States		10,000,000		10,667,850
CHS/Community Health Systems Inc., senior note, 8.00%, 11/15/19	United States		10,000,000		8,750,000
Edwards Lifesciences Corp., senior note, 2.875%, 10/15/18	United States		10,000,000		10,229,450
HCA Inc., senior secured note, first lien, 5.00%, 3/15/24	United States		12,000,000		12,570,000

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Annual Report

FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Balanced Fund (continued)
			Principal
	Country		Amount*		Value

Corporate Bonds (continued)
Health Care (continued)
^cValeant Pharmaceuticals International Inc.,
senior bond, 144A, 6.125%, 4/15/25	United States	$	6,300,000	$	4,866,750
senior note, 144A, 5.875%, 5/15/23	United States		8,300,000		6,432,500
					104,401,819
Industrials 1.1%
^cAir Canada 2013-1A Pass Through Trust, first lien, 144A, 4.125%, 11/15/26	Canada		6,165,349		6,527,563
^dGeneral Electric Co., junior sub. bond, 5.00% to 1/21/21, FRN thereafter, Perpetual	United States		9,876,000		10,474,980
Lockheed Martin Corp., senior bond, 3.55%, 1/15/26	United States		15,000,000		15,917,190
United Rentals North America Inc., senior bond, 5.875%, 9/15/26.	United States		4,300,000		4,401,480
					37,321,213
Information Technology 1.9%
^cDiamond 1 Finance Corp./Diamond 2 Finance Corp.,
senior note, 144A, 5.875%, 6/15/21	United States		2,700,000		2,833,852
senior note, 144A, 7.125%, 6/15/24	United States		2,700,000		2,960,596
senior secured note, first lien, 144A, 4.42%, 6/15/21	United States		18,000,000		18,839,592
^cMicrosemi Corp., senior note, 144A, 9.125%, 4/15/23	United States		5,500,000		6,366,250
Oracle Corp., senior note, 2.50%, 10/15/22	United States		10,000,000		10,175,480
^cWestern Digital Corp., senior secured note, 144A, 7.375%, 4/01/23	United States		20,000,000		21,950,000
					63,125,770
Materials 0.9%
Crown Americas LLC/Crown Americas Capital Corp. IV, senior bond, 4.50%, 1/15/23 .	United States		5,000,000		5,150,000
^cFMG Resources (August 2006) Pty. Ltd., senior secured note, 144A, 9.75%, 3/01/22 .	Australia		12,500,000		14,610,063
Freeport-McMoRan Inc., senior bond, 3.875%, 3/15/23	United States		7,000,000		6,405,000
Reliance Steel & Aluminum Co., senior note, 4.50%, 4/15/23	United States		4,000,000		4,108,064
					30,273,127
Real Estate 2.1%
HCP Inc., senior bond, 3.875%, 8/15/24	United States		21,700,000		22,318,493
Healthcare Trust of America Holdings LP, senior note, 3.375%, 7/15/21	United States		10,000,000		10,312,750
Prologis LP, senior note, 4.25%, 8/15/23	United States		12,000,000		13,184,352
Realty Income Corp., senior bond, 3.875%, 7/15/24	United States		15,000,000		15,886,755
Senior Housing Properties Trust, senior note, 6.75%, 12/15/21.	United States		7,000,000		7,994,714
					69,697,064
Telecommunication Services 1.4%
AT&T Inc., senior note, 3.95%, 1/15/25	United States		11,700,000		12,138,516
Sprint Corp., senior note, 7.625%, 2/15/25	United States		10,000,000		9,646,880
Telefonica Emisiones SAU, senior note, 4.57%, 4/27/23.	Spain		10,000,000		10,993,350
Verizon Communications Inc., senior bond, 6.55%, 9/15/43	United States		11,000,000		14,478,222
					47,256,968
Utilities 2.4%
Alabama Power Co., senior note, 2.80%, 4/01/25	United States		7,000,000		7,172,781
^c,fCalpine Corp., senior secured bond, 144A, 5.25%, 6/01/26	United States		15,000,000		15,262,500
^c,dEDF SA, sub. note, 144A, 5.25% to 1/29/23, FRN thereafter, Perpetual	France		10,000,000		9,944,250
^cEnogex LLC, senior note, 144A, 6.25%, 3/15/20	United States		5,000,000		5,402,790
^cInterGen NV, secured bond, 144A, 7.00%, 6/30/23	Netherlands		10,000,000		8,525,000
Kinder Morgan Energy Partners LP, senior note, 4.30%, 5/01/24	United States		12,900,000		13,360,040
PSEG Power LLC, senior note, 3.00%, 6/15/21.	United States		20,000,000		20,485,580
					80,152,941
Total Corporate Bonds (Cost $1,025,969,670)					1,065,207,681

42 Annual Report

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FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Balanced Fund (continued)
		Number of
		Contracts		Value
Options Purchased (Cost $12,854,000) 0.4%
Puts - Exchange-Traded
Financials 0.4%
S&P 500 Index, November Strike Price $2150, Expires 11/18/16		3,000	$	12,900,000
Total Investments before Short Term Investments
(Cost $3,009,146,485)				3,170,579,741


	Country	Shares
Short Term Investments (Cost $120,863,963) 3.7%
Money Market Funds 3.7%
^g,hInstitutional Fiduciary Trust Money Market Portfolio	United States	120,863,963		120,863,963
Total Investments (Cost $3,130,010,448) 99.6%.				3,291,443,704
Options Written (0.1)%				(3,151,230	)
Other Assets, less Liabilities 0.5%				17,102,444
Net Assets 100.0%			$	3,305,394,918


		Number of
		Contracts
ⁱOptions Written (0.1)%
Calls - Exchange-Traded
Consumer Discretionary (0.0)%^†
Nordstrom Inc., December Strike Price $60, Expires 12/16/16		5,000		(300,000	)
Target Corp., December Strike Price $72.50, Expires 12/16/16		4,000		(248,000	)
				(548,000	)
Consumer Staples (0.0)%^†
Anheuser-Busch InBev SA/NV, December Strike Price $130, Expires 12/16/16.		2,000		(48,000	)
Diageo PLC, December Strike Price $115, Expires 12/16/16		1,978		(69,230	)
Philip Morris International Inc., December Strike Price $100, Expires 12/16/16		3,000		(210,000	)
				(327,230	)
Energy (0.0)%^†
Chevron Corp., December Strike Price $105, Expires 12/16/16.		2,500		(575,000	)
Financials (0.0)%^†
BlackRock Inc., December Strike Price $360, Expires 12/16/16		1,000		(240,000	)
The Charles Schwab Corp., December Strike Price $33, Expires 12/16/16.		4,000		(312,000	)
JPMorgan Chase & Co., December Strike Price $72.50, Expires 12/16/16		4,000		(172,000	)
				(724,000	)
Information Technology (0.1)%
Analog Devices Inc., November Strike Price $65, Expires 11/18/16		3,000		(312,000	)
Intel Corp., December Strike Price $37, Expires 12/16/16		2,500		(40,000	)
Microsoft Corp., December Strike Price $62.50, Expires 12/16/16		5,000		(195,000	)
QUALCOMM Inc., December Strike price $72.50, Expires 12/16/16		2,500		(290,000	)
Texas Instruments Inc., December Strike Price $75, Expires 12/16/16		4,000		(140,000	)
				(977,000	)
Total Options Written (Premiums received $2,871,309)			$	(3,151,230	)

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Annual Report

FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS

Franklin Balanced Fund (continued)

See Abbreviations on page 93.

^†Rounds to less than 0.1% of net assets.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
^aA portion or all of the security is held in connection with written option contracts open at year end.
^bSee Note 1(g) regarding equity-linked securities.
^cSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers
or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At
October 31, 2016, the aggregate value of these securities was $509,307,387, representing 15.4% of net assets.
^dPerpetual security with no stated maturity date.
^eThe coupon rate shown represents the rate at period end.
^fAt October 31, 2016, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund is restricted from trading this security at year end.
^gNon-income producing.
^hSee Note 3(f) regarding investments in affiliated management investment companies.
ⁱSee Note 1(e) regarding written options.

44 Annual Report | The accompanying notes are an integral part of these financial statements.

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					FRANKLIN INVESTORS SECURITIES TRUST



Financial Highlights
Franklin Convertible Securities Fund
					Year Ended October 31,
		2016			2015			2014			2013			2012
Class A
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	18.00		$	18.97		$	17.82		$	14.93		$	14.37
Income from investment operations^a:
Net investment income^b		0.25			0.24			0.23			0.37			0.41
Net realized and unrealized gains (losses)		0.85			(0.14	)		1.32			2.99			0.67
Total from investment operations		1.10			0.10			1.55			3.36			1.08
Less distributions from:
Net investment income		(0.50	)		(0.39	)		(0.33	)		(0.47	)		(0.52	)
Net realized gains		(0.36	)		(0.68	)		(0.07	)		—			—
Total distributions		(0.86	)		(1.07	)		(0.40	)		(0.47	)		(0.52	)
Net asset value, end of year.	$	18.24		$	18.00		$	18.97		$	17.82		$	14.93

Total return^c		6.41	%		0.66	%		8.85	%		22.92	%		7.66	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		0.86	%		0.86	%		0.88	%		0.88	%		0.90	%
Expenses net of waiver and payments by affiliates		0.85	%^d		0.86	%^d,e		0.88	%^d,e		0.88	%^d		0.90	%
Net investment income		1.44	%		1.33	%		1.23	%		2.25	%		2.84	%

Supplemental data
Net assets, end of year (000’s)	$	768,553		$	818,082		$	921,134		$	844,498		$	602,804
Portfolio turnover rate		28.03	%		17.30	%		23.05	%		34.69	%		12.82	%

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The accompanying notes are an integral part of these financial statements. | Annual Report 45


FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS


Franklin Convertible Securities Fund (continued)
					Year Ended October 31,
		2016			2015			2014			2013			2012
Class C
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	17.75		$	18.73		$	17.60		$	14.75		$	14.21
Income from investment operations^a:
Net investment income^b		0.12			0.11			0.09			0.24			0.30
Net realized and unrealized gains (losses)		0.84			(0.16	)		1.31			2.97			0.65
Total from investment operations		0.96			(0.05	)		1.40			3.21			0.95
Less distributions from:
Net investment income		(0.37	)		(0.25	)		(0.20	)		(0.36	)		(0.41	)
Net realized gains		(0.36	)		(0.68	)		(0.07	)		—			—
Total distributions		(0.73	)		(0.93	)		(0.27	)		(0.36	)		(0.41	)
Net asset value, end of year.	$	17.98		$	17.75		$	18.73		$	17.60		$	14.75

Total return^c		5.65	%		(0.15	)%		8.01	%		22.11	%		6.79	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		1.61	%		1.61	%		1.63	%		1.63	%		1.65	%
Expenses net of waiver and payments by affiliates		1.60	%^d		1.61	%^d,e		1.63	%^d,e		1.63	%^d		1.65	%
Net investment income		0.69	%		0.58	%		0.48	%		1.50	%		2.09	%

Supplemental data
Net assets, end of year (000’s)	$	293,038		$	311,951		$	333,034		$	273,132		$	211,630
Portfolio turnover rate		28.03	%		17.30	%		23.05	%		34.69	%		12.82	%

46 Annual Report | The accompanying notes are an integral part of these financial statements.

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		FRANKLIN INVESTORS SECURITIES TRUST
		FINANCIAL HIGHLIGHTS


Franklin Convertible Securities Fund (continued)
		Year Ended October 31,
		2016			2015			2014	^a
Class R6
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	18.09		$	18.99		$	19.21
Income from investment operations^b:
Net investment income^c		0.33			0.30			0.19
Net realized and unrealized gains (losses)		0.84			(0.14	)		(0.17	)
Total from investment operations.		1.17			0.16			0.02
Less distributions from:
Net investment income		(0.57	)		(0.38	)		(0.24	)
Net realized gains		(0.36	)		(0.68	)		—
Total distributions		(0.93	)		(1.06	)		(0.24	)
Net asset value, end of year	$	18.33		$	18.09		$	18.99

Total return^d		6.78	%		0.99	%		0.11	%

Ratios to average net assets^e
Expenses before waiver and payments by affiliates		0.50	%		0.50	%		0.51	%
Expenses net of waiver and payments by affiliates^f		0.49	%		0.50	%^g		0.51	%^g
Net investment income.		1.80	%		1.69	%		1.60	%

Supplemental data
Net assets, end of year (000’s)	$	7,154		$	5		$	3,093
Portfolio turnover rate		28.03	%		17.30	%		23.05	%

^aFor the period March 4, 2014 (effective date) to October 31, 2014.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dTotal return is not annualized for periods less than one year.
^eRatios are annualized for periods less than one year.
^fBenefit of expense reduction rounds to less than 0.01%.
^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

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FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS


Franklin Convertible Securities Fund (continued)
					Year Ended October 31,
		2016			2015			2014			2013			2012
Advisor Class
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	18.00		$	18.98		$	17.83		$	14.94		$	14.38
Income from investment operations^a:
Net investment income^b		0.30			0.29			0.28			0.41			0.45
Net realized and unrealized gains (losses)		0.85			(0.15	)		1.32			2.99			0.66
Total from investment operations		1.15			0.14			1.60			3.40			1.11
Less distributions from:
Net investment income		(0.55	)		(0.44	)		(0.38	)		(0.51	)		(0.55	)
Net realized gains		(0.36	)		(0.68	)		(0.07	)		—			—
Total distributions		(0.91	)		(1.12	)		(0.45	)		(0.51	)		(0.55	)
Net asset value, end of year.	$	18.24		$	18.00		$	18.98		$	17.83		$	14.94

Total return		6.68	%		0.87	%		9.13	%		23.21	%		7.93	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		0.61	%		0.61	%		0.63	%		0.63	%		0.65	%
Expenses net of waiver and payments by affiliates		0.60	%^c		0.61	%^c,d		0.63	%^c,d		0.63	%^c		0.65	%
Net investment income		1.69	%		1.58	%		1.48	%		2.50	%		3.09	%

Supplemental data
Net assets, end of year (000’s)	$	1,080,346		$	899,441		$	877,190		$	387,528		$	196,765
Portfolio turnover rate		28.03	%		17.30	%		23.05	%		34.69	%		12.82	%

48 Annual Report | The accompanying notes are an integral part of these financial statements.

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FRANKLIN INVESTORS SECURITIES TRUST


Statement of Investments, October 31, 2016
Franklin Convertible Securities Fund
	Country	Shares		Value

Common Stocks 2.3%
Consumer Discretionary 0.9%
Newell Brands Inc	United States	403,856	$	19,393,165
Utilities 1.4%
Dominion Resources Inc	United States	410,049		30,835,685
Total Common Stocks (Cost $45,673,673)				50,228,850

Convertible Preferred Stocks 24.0%
Consumer Staples 4.3%
Post Holdings Inc., 2.50%, cvt. pfd	United States	231,200		33,596,250
Post Holdings Inc., 5.25%, cvt. pfd	United States	95,200		12,811,540
Tyson Foods Inc., 4.75%, cvt. pfd	United States	600,000		46,242,000
				92,649,790
Energy 1.2%
McDermott International Inc., 6.25%, cvt. pfd	United States	960,000		17,913,600
^aSanchez Energy Corp., 6.50%, cvt. pfd., B.	United States	236,000		6,787,100
				24,700,700
Financials 1.1%
Wintrust Financial Corp., 5.00%, cvt. pfd	United States	17,800		24,312,575
Health Care 3.1%
Allergan PLC, 5.50%, cvt. pfd	United States	45,500		34,989,500
Teva Pharmaceutical Industries Ltd., 7.00%, cvt. pfd	Israel	42,500		32,215,000
				67,204,500
Industrials 4.4%
Arconic Inc., 5.375%, cvt. pfd	United States	750,000		23,175,000
Stanley Black & Decker Inc., 6.25%, cvt. pfd	United States	389,900		45,649,492
Stericycle Inc., 5.25%, cvt. pfd	United States	380,000		25,638,600
				94,463,092
Information Technology 2.2%
^bMandatory Exchangeable Trust, 5.75%, cvt. pfd., 144A	China	375,000		46,895,625
Telecommunication Services 3.3%
Frontier Communications Corp., 11.125%, cvt. pfd	United States	267,060		22,302,181
T-Mobile U.S. Inc., 5.50%, cvt. pfd	United States	600,000		49,590,000
				71,892,181
Utilities 4.4%
Black Hills Corp., 7.75%, cvt. pfd	United States	606,000		41,486,760
Dominion Resources Inc., 6.375%, cvt. pfd., A	United States	185,200		9,302,596
Exelon Corp., 6.50%, cvt. pfd	United States	500,000		23,850,000
Great Plains Energy Inc., 7.00%, cvt. pfd	United States	370,000		19,606,300
				94,245,656
Total Convertible Preferred Stocks (Cost $499,158,223)				516,364,119

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Annual Report

FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Convertible Securities Fund (continued)
			Principal
	Country		Amount*		Value

Convertible Bonds 68.9%
Consumer Discretionary 12.9%
Ctrip.com International Ltd.,
cvt., senior note, 1.25%, 10/15/18	China	$	19,200,000	$	24,216,768
^bcvt., senior note, 144A, 1.25%, 9/15/22	China		20,000,000		19,750,000
^bDish Network Corp., cvt., senior bond, 144A, 3.375%, 8/15/26	United States		41,250,000		47,463,281
^bGNC Holdings Inc., cvt., senior note, 144A, 1.50%, 8/15/20	United States		5,000,000		3,911,375
^bLiberty Interactive LLC, cvt., senior bond, 144A, 1.75%, 9/30/46	United States		37,000,000		37,244,940
Liberty Media Corp.,
^bcvt., senior bond, 144A, 2.25%, 9/30/46	United States		39,000,000		40,291,875
cvt., senior note, 1.375%, 10/15/23	United States		21,200,000		21,796,250
The Priceline Group Inc., cvt., senior note, 0.35%, 6/15/20	United States		35,000,000		45,018,750
Shutterfly Inc., cvt., 0.25%, 5/15/18	United States		37,465,000		37,675,741
					277,368,980
Energy 0.3%
Cobalt International Energy Inc., cvt., senior bond, 3.125%, 5/15/24	United States		20,000,000		6,750,000
Health Care 11.7%
BioMarin Pharmaceutical Inc., cvt., senior sub. note, 1.50%, 10/15/20.	United States		28,200,000		32,994,000
Brookdale Senior Living Inc., cvt., senior note, 2.75%, 6/15/18	United States		26,200,000		25,594,125
Depomed Inc., cvt., senior note, 2.50%, 9/01/21	United States		16,000,000		21,270,000
Fluidigm Corp., cvt., senior bond, 2.75%, 2/01/34	United States		14,418,000		9,056,306
Illumina Inc., cvt., senior note, 0.50%, 6/15/21	United States		33,000,000		33,144,375
Impax Laboratories Inc., cvt., senior note, 2.00%, 6/15/22	United States		45,000,000		39,262,500
Jazz Investments I Ltd., cvt., senior note, 1.875%, 8/15/21.	United States		35,000,000		34,868,750
^bNovavax Inc., cvt., senior note, 144A, 3.75%, 2/01/23	United States		34,000,000		15,801,296
^bNuvasive Inc., cvt., senior note, 144A, 2.25%, 3/15/21.	United States		12,000,000		14,280,000
Pacira Pharmaceuticals Inc., cvt., senior note, 3.25%, 2/01/19	United States		5,880,000		8,371,650
Spectranetics Corp., cvt., senior note, 2.625%, 6/01/34	United States		17,000,000		16,723,750
					251,366,752
Industrials 0.9%
The KEYW Holding Corp., cvt., senior note, 2.50%, 7/15/19.	United States		20,000,000		19,162,500
Information Technology 39.4%
^bBlackhawk Network Holdings Inc., senior note, cvt., 144A, 1.50%, 1/15/22	United States		42,700,000		43,207,063
Bottomline Technologies (de) Inc., cvt., senior note, 1.50%, 12/01/17	United States		21,400,000		21,814,625
Electronics for Imaging Inc., cvt., senior note, 0.75%, 9/01/19	United States		22,000,000		23,320,000
^bInphi Corp., cvt., senior note, 144A, 0.75%, 9/01/21	United States		9,600,000		9,594,000
^bIntegrated Device Technology Inc., cvt., senior note, 144A, 0.875%, 11/15/22	United States		4,700,000		4,573,688
Intel Corp.,
cvt., junior sub. bond, 3.25%, 8/01/39.	United States		8,000,000		13,730,040
^bcvt., junior sub. bond, 144A, 2.95%, 12/15/35	United States		19,000,000		24,759,375
cvt., junior sub. deb., 2.95%, 12/15/35	United States		2,000,000		2,606,250
Mercadolibre Inc., cvt., 2.25%, 7/01/19	Argentina		5,000,000		7,265,625
Microchip Technology Inc., cvt., senior sub. bond, 1.625%, 2/15/25.	United States		40,000,000		49,850,000
Micron Technology Inc.,
cvt., senior bond, 2.125%, 2/15/33.	United States		11,800,000		20,244,375
cvt., senior bond, G, 3.00%, 11/15/43	United States		20,000,000		17,737,500
NetSuite Inc., cvt., senior note, 0.25%, 6/01/18.	United States		36,300,000		38,160,375
Novellus Systems Inc., cvt., senior note, 2.625%, 5/15/41	United States		17,600,000		50,193,000
NXP Semiconductors NV, senior note, cvt., 1.00%, 12/01/19	Netherlands		35,000,000		40,337,500
Palo Alto Networks Inc., cvt., zero cpn., 7/01/19	United States		28,750,000		42,675,781

50 Annual Report

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FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Convertible Securities Fund (continued)
			Principal
	Country		Amount*		Value

Convertible Bonds (continued)
Information Technology (continued)
Proofpoint Inc.,
cvt., 0.75%, 6/15/20	United States	$	12,500,000	$	15,046,875
cvt., senior note, 1.25%, 12/15/18	United States		16,375,000		33,138,906
Red Hat Inc., cvt., senior note, 0.25%, 10/01/19	United States		29,250,000		36,361,406
Salesforce.com Inc., cvt., senior note, 0.25%, 4/01/18	United States		35,200,000		43,406,000
ServiceNow Inc., cvt., zero cpn., 11/01/18	United States		35,500,000		46,482,812
Take-Two Interactive Software Inc., cvt., senior note, 1.00%, 7/01/18	United States		16,400,000		33,907,000
Trulia Inc., cvt., 2.75%, 12/15/20	United States		32,000,000		47,720,000
Twitter Inc., cvt., senior note, 1.00%, 9/15/21	United States		35,000,000		32,396,875
VeriSign Inc., cvt., junior sub. bond, 3.25%, 8/15/37	United States		11,000,000		27,094,375
Viavi Solutions Inc., cvt., senior bond, 0.625%, 8/15/33	United States		39,900,000		39,850,125
Workday Inc., cvt., senior note, 1.50%, 7/15/20	United States		9,166,500		11,509,687
Xilinx Inc., cvt., senior note, 2.625%, 6/15/17	United States		19,270,000		34,011,550
Yahoo! Inc., cvt., zero cpn., 12/01/18	United States		35,100,000		35,692,313
					846,687,121
Materials 2.0%
B2Gold Corp., cvt., senior sub. note, 3.25%, 10/01/18	Canada		13,900,000		14,873,000
Cemex SAB de CV, cvt., sub. note, 3.75%, 3/15/18	Mexico		24,000,000		28,035,000
					42,908,000
Real Estate 1.7%
Forest City Enterprises Inc.,
cvt., senior note, 4.25%, 8/15/18	United States		17,110,000		19,312,912
cvt., senior note, A, 3.625%, 8/15/20	United States		15,250,000		16,155,469
					35,468,381
Total Convertible Bonds (Cost $1,320,537,216)					1,479,711,734


			Shares

Escrows and Litigation Trusts (Cost $22,362) 0.0%
^c,dMotors Liquidation Co., Escrow Account	United States		376,200		—
Total Investments before Short Term Investments
(Cost $1,865,391,474)					2,046,304,703

Short Term Investments (Cost $98,515,365) 4.6%
Money Market Funds 4.6%
^c,eInstitutional Fiduciary Trust Money Market Portfolio.	United States		98,515,365		98,515,365
Total Investments (Cost $1,963,906,839) 99.8%					2,144,820,068
Other Assets, less Liabilities 0.2%					4,271,323
Net Assets 100.0%				$	2,149,091,391

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Annual Report

FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS

Franklin Convertible Securities Fund (continued)

See Abbreviations on page 93.

*The principal amount is stated in U.S. dollars unless otherwise indicated.
^aAt October 31, 2016, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund is restricted from trading this security at year end.
^bSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers
or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At
October 31, 2016, the aggregate value of these securities was $307,772,518, representing 14.3% of net assets.
^cNon-income producing.
^dSecurity has been deemed illiquid because it may not be able to be sold within seven days.
^eSee Note 3(f) regarding investments in affiliated management investment companies.

52 Annual Report | The accompanying notes are an integral part of these financial statements.

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		FRANKLIN INVESTORS SECURITIES TRUST



Financial Highlights
Franklin Equity Income Fund
					Year Ended October 31,
		2016			2015			2014			2013			2012
Class A
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	22.99		$	23.93		$	22.16		$	18.01		$	16.58
Income from investment operations^a:
Net investment income^b		0.47			0.55			0.66	^c		0.44			0.41
Net realized and unrealized gains (losses)		0.24			0.26			1.73			4.19			1.46
Total from investment operations		0.71			0.81			2.39			4.63			1.87
Less distributions from:
Net investment income		(0.60	)		(0.69	)		(0.50	)		(0.48	)		(0.44	)
Net realized gains		(0.60	)		(1.06	)		(0.12	)		—			—
Total distributions		(1.20	)		(1.75	)		(0.62	)		(0.48	)		(0.44	)
Net asset value, end of year.	$	22.50		$	22.99		$	23.93		$	22.16		$	18.01

Total return^d		3.31	%		3.72	%		10.99	%		26.07	%		11.43	%

Ratios to average net assets
Expenses		0.87	%^e,f		0.86	%^e,f		0.87	%^e,f		0.91	%^f		0.95	%
Net investment income		2.13	%		2.37	%		2.87	%^c		2.19	%		2.36	%

Supplemental data
Net assets, end of year (000’s)	$	1,700,712		$	1,790,392		$	1,762,318		$	1,637,089		$	1,305,791
Portfolio turnover rate		50.05	%		34.09	%		20.15	%		33.18	%		19.71	%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^bBased on average daily shares outstanding.
^cNet investment income per share includes approximately $0.17 per share related to income received in the form of a special dividend in connection with certain Fund
holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 2.15%.
^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
^eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
^fBenefit of expense reduction rounds to less than 0.01%.

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The accompanying notes are an integral part of these financial statements. | Annual Report 53


FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS


Franklin Equity Income Fund (continued)
					Year Ended October 31,
		2016			2015			2014			2013			2012
Class C
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	22.85		$	23.79		$	22.04		$	17.91		$	16.50
Income from investment operations^a:
Net investment income^b		0.30			0.37			0.49	^c		0.28			0.28
Net realized and unrealized gains (losses)		0.23			0.27			1.71			4.18			1.45
Total from investment operations		0.53			0.64			2.20			4.46			1.73
Less distributions from:
Net investment income		(0.46	)		(0.52	)		(0.33	)		(0.33	)		(0.32	)
Net realized gains		(0.60	)		(1.06	)		(0.12	)		—			—
Total distributions		(1.06	)		(1.58	)		(0.45	)		(0.33	)		(0.32	)
Net asset value, end of year.	$	22.32		$	22.85		$	23.79		$	22.04		$	17.91

Total return^d		2.51	%		2.96	%		10.14	%		25.18	%		10.56	%

Ratios to average net assets
Expenses		1.62	%^e,f		1.61	%^e,f		1.62	%^e,f		1.66	%^f		1.70	%
Net investment income		1.38	%		1.62	%		2.12	%^c		1.44	%		1.61	%

Supplemental data
Net assets, end of year (000’s)	$	257,156		$	250,347		$	241,566		$	208,325		$	134,746
Portfolio turnover rate		50.05	%		34.09	%		20.15	%		33.18	%		19.71	%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^bBased on average daily shares outstanding.
^cNet investment income per share includes approximately $0.17 per share related to income received in the form of a special dividend in connection with certain Fund
holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.40%.
^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
^eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
^fBenefit of expense reduction rounds to less than 0.01%.

54 Annual Report | The accompanying notes are an integral part of these financial statements.

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		FRANKLIN INVESTORS SECURITIES TRUST
								FINANCIAL HIGHLIGHTS


Franklin Equity Income Fund (continued)
					Year Ended October 31,
		2016			2015			2014			2013			2012
Class R
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	22.99		$	23.93		$	22.17		$	18.01		$	16.58
Income from investment operations^a:
Net investment income^b		0.41			0.50			0.61	^c		0.39			0.37
Net realized and unrealized gains (losses)		0.24			0.25			1.72			4.20			1.46
Total from investment operations		0.65			0.75			2.33			4.59			1.83
Less distributions from:
Net investment income		(0.55	)		(0.63	)		(0.45	)		(0.43	)		(0.40	)
Net realized gains		(0.60	)		(1.06	)		(0.12	)		—			—
Total distributions		(1.15	)		(1.69	)		(0.57	)		(0.43	)		(0.40	)
Net asset value, end of year.	$	22.49		$	22.99		$	23.93		$	22.17		$	18.01

Total return		3.05	%		3.45	%		10.67	%		25.81	%		11.16	%

Ratios to average net assets
Expenses		1.11	%^d,e		1.11	%^d,e		1.12	%^d,e		1.16	%^e		1.20	%
Net investment income		1.89	%		2.12	%		2.62	%^c		1.94	%		2.11	%

Supplemental data
Net assets, end of year (000’s)	$	6,395		$	6,265		$	7,305		$	5,844		$	4,940
Portfolio turnover rate		50.05	%		34.09	%		20.15	%		33.18	%		19.71	%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^bBased on average daily shares outstanding.
^cNet investment income per share includes approximately $0.17 per share related to income received in the form of a special dividend in connection with certain Fund
holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.90%.
^dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
^eBenefit of expense reduction rounds to less than 0.01%.

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The accompanying notes are an integral part of these financial statements. | Annual Report 55


FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS


Franklin Equity Income Fund (continued)
					Year Ended October 31,
		2016			2015			2014			2013	^a
Class R6
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	23.01		$	23.95		$	22.18		$	20.00
Income from investment operations^b:
Net investment income^c		0.43			0.63			0.75	^d		0.26
Net realized and unrealized gains (losses)		0.37			0.27			1.73			2.18
Total from investment operations		0.80			0.90			2.48			2.44
Less distributions from:
Net investment income.		(0.67	)		(0.78	)		(0.59	)		(0.26	)
Net realized gains		(0.60	)		(1.06	)		(0.12	)		—
Total distributions		(1.27	)		(1.84	)		(0.71	)		(0.26	)
Net asset value, end of year	$	22.54		$	23.01		$	23.95		$	22.18

Total return^e		3.72	%		4.10	%		11.38	%		12.30	%

Ratios to average net assets^f
Expenses before waiver and payments by affiliates		0.49	%		2.89	%		1.78	%		2.16	%
Expenses net of waiver and payments by affiliates^g		0.49	%^h		0.48	%		0.50	%		0.51	%
Net investment income		2.51	%		2.75	%		3.24	%^d		2.59	%

Supplemental data
Net assets, end of year (000’s)	$	10,537		$	6		$	6		$	6
Portfolio turnover rate		50.05	%		34.09	%		20.15	%		33.18	%

^aFor the period May 1, 2013 (effective date) to October 31, 2013.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dNet investment income per share includes approximately $0.17 per share related to income received in the form of a special dividend in connection with certain Fund
holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 2.51%.
^eTotal return is not annualized for periods less than one year.
^fRatios are annualized for periods less than one year.
^gBenefit of expense reduction rounds to less than 0.01%.
^hBenefit of waiver and payments by affiliates rounds to less than 0.01%.

56 Annual Report | The accompanying notes are an integral part of these financial statements.

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		FRANKLIN INVESTORS SECURITIES TRUST
								FINANCIAL HIGHLIGHTS


Franklin Equity Income Fund (continued)
					Year Ended October 31,
		2016			2015			2014			2013			2012
Advisor Class
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	23.02		$	23.96		$	22.19		$	18.02		$	16.59
Income from investment operations^a:
Net investment income^b		0.45			0.60			0.71	^c		0.48			0.45
Net realized and unrealized gains (losses)		0.31			0.27			1.74			4.22			1.46
Total from investment operations		0.76			0.87			2.45			4.70			1.91
Less distributions from:
Net investment income		(0.65	)		(0.75	)		(0.56	)		(0.53	)		(0.48	)
Net realized gains		(0.60	)		(1.06	)		(0.12	)		—			—
Total distributions		(1.25	)		(1.81	)		(0.68	)		(0.53	)		(0.48	)
Net asset value, end of year.	$	22.53		$	23.02		$	23.96		$	22.19		$	18.02

Total return		3.53	%		3.98	%		11.25	%		26.48	%		11.69	%

Ratios to average net assets
Expenses		0.62	%^d,e		0.61	%^d,e		0.62	%^d,e		0.66	%^e		0.70	%
Net investment income		2.38	%		2.62	%		3.12	%^c		2.44	%		2.61	%

Supplemental data
Net assets, end of year (000’s)	$	80,422		$	34,577		$	30,166		$	17,534		$	10,527
Portfolio turnover rate		50.05	%		34.09	%		20.15	%		33.18	%		19.71	%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^bBased on average daily shares outstanding.
^cNet investment income per share includes approximately $0.17 per share related to income received in the form of a special dividend in connection with certain Fund
holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 2.40%.
^dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
^eBenefit of expense reduction rounds to less than 0.01%.

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FRANKLIN INVESTORS SECURITIES TRUST




Statement of Investments, October 31, 2016
Franklin Equity Income Fund
	Country	Shares		Value

Common Stocks 85.3%
Consumer Discretionary 6.3%
Ford Motor Co	United States	1,456,700	$	17,101,658
Lowe’s Cos. Inc	United States	440,000		29,326,000
Mattel Inc	United States	675,000		21,282,750
Newell Brands Inc	United States	460,000		22,089,200
Target Corp	United States	582,900		40,062,717
				129,862,325
Consumer Staples 10.2%
Anheuser-Busch InBev SA/NV, ADR	Belgium	224,100		25,881,309
CVS Health Corp	United States	406,000		34,144,600
Kimberly-Clark Corp	United States	184,000		21,051,440
The Kraft Heinz Co	United States	491,100		43,683,345
PepsiCo Inc	United States	505,500		54,189,600
Reynolds American Inc	United States	561,500		30,927,420
				209,877,714
Energy 8.7%
Anadarko Petroleum Corp	United States	193,200		11,483,808
BP PLC, ADR.	United Kingdom	355,000		12,620,250
Chevron Corp	United States	502,800		52,668,300
ConocoPhillips	United States	310,000		13,469,500
Exxon Mobil Corp	United States	367,234		30,597,937
Royal Dutch Shell PLC, A, ADR	United Kingdom	243,900		12,148,659
Schlumberger Ltd	United States	283,000		22,139,090
Suncor Energy Inc	Canada	775,000		23,265,500
				178,393,044
Financials 15.8%
Arthur J. Gallagher & Co	United States	669,300		32,280,339
BB&T Corp	United States	620,000		24,304,000
BlackRock Inc	United States	118,000		40,266,320
JPMorgan Chase & Co	United States	1,030,300		71,358,578
Morgan Stanley	United States	956,000		32,092,920
T. Rowe Price Group Inc	United States	350,500		22,435,505
U.S. Bancorp	United States	1,076,800		48,197,568
Wells Fargo & Co	United States	1,145,000		52,681,450
				323,616,680
Health Care 7.2%
AstraZeneca PLC, ADR	United Kingdom	650,000		18,408,000
Eli Lilly & Co	United States	525,400		38,795,536
Johnson & Johnson	United States	144,000		16,702,560
Medtronic PLC	United States	493,000		40,435,860
Pfizer Inc	United States	1,044,300		33,114,753
				147,456,709
Industrials 14.7%
Deere & Co	United States	217,500		19,205,250
General Electric Co	United States	1,770,500		51,521,550
Illinois Tool Works Inc	United States	302,700		34,377,639
Lockheed Martin Corp	United States	166,100		40,923,718
Nielsen Holdings PLC	United States	449,600		20,240,992
Raytheon Co	United States	293,500		40,095,035
Republic Services Inc	United States	643,500		33,867,405
United Parcel Service Inc., B	United States	266,600		28,728,816

58 Annual Report

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FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Equity Income Fund (continued)
	Country	Shares		Value

Common Stocks (continued)
Industrials (continued)
United Technologies Corp	United States	329,700	$	33,695,340
				302,655,745
Information Technology 13.1%
Apple Inc	United States	340,500		38,660,370
Broadcom Ltd	Singapore	42,000		7,151,760
Cisco Systems Inc	United States	1,590,333		48,791,416
Intel Corp	United States	586,518		20,451,883
Microsoft Corp	United States	1,348,100		80,778,152
Oracle Corp	United States	838,000		32,195,960
Texas Instruments Inc	United States	583,000		41,305,550
				269,335,091
Materials 3.7%
BASF SE	Germany	336,500		29,659,546
The Dow Chemical Co	United States	305,400		16,433,574
International Paper Co	United States	682,600		30,737,478
				76,830,598
Real Estate 1.1%
Host Hotels & Resorts Inc	United States	1,483,000		22,956,840
Telecommunication Services 1.6%
Rogers Communications Inc., B	Canada	362,700		14,591,421
Verizon Communications Inc	United States	388,000		18,662,800
				33,254,221
Utilities 2.9%
Dominion Resources Inc	United States	421,100		31,666,720
Xcel Energy Inc	United States	673,500		27,983,925
				59,650,645
Total Common Stocks (Cost $1,398,427,171)				1,753,889,612

^aEquity-Linked Securities 6.8%
Energy 1.5%
^bJPMorgan Chase & Co. into Anadarko Petroleum Corp., 9.00%, 144A	United States	272,000		15,562,779
^bJPMorgan Chase & Co. into Schlumberger Ltd., 7.00%, 144A	United States	205,000		16,032,312
				31,595,091
Financials 1.5%
^bThe Goldman Sachs Group Inc. into The Charles Schwab Corp., 7.00%, 144A	United States	1,000,000		31,205,400
Health Care 1.0%
^bMerrill Lynch International & Co. CV into Gilead Sciences Inc., 7.25%, 144A	United States	284,000		21,140,250
Information Technology 2.8%
^bBarclays Bank PLC into Broadcom Ltd., 9.00%, 144A	Singapore	160,000		26,034,400
^bUBS AG into Intel Corp., 7.00%, 144A	United States	845,000		30,231,650
				56,266,050
Total Equity-Linked Securities (Cost $135,957,020)				140,206,791

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Annual Report

FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Equity Income Fund (continued)
	Country	Shares		Value
Convertible Preferred Stocks 5.1%
Health Care 1.8%
Allergan PLC, 5.50%, cvt. pfd	United States	41,700	$	32,067,300
Teva Pharmaceutical Industries Ltd., 7.00%, cvt. pfd	Israel	5,900		4,472,200
				36,539,500
Industrials 1.6%
Stanley Black & Decker Inc., 6.25%, cvt. pfd	United States	279,000		32,665,320
Utilities 1.7%
NextEra Energy Inc., 6.371%, cvt. pfd	United States	575,000		35,092,250
Total Convertible Preferred Stocks (Cost $105,915,193)				104,297,070
Total Investments before Short Term Investments
(Cost $1,640,299,384)				1,998,393,473

Short Term Investments (Cost $50,191,472) 2.5%
Money Market Funds 2.5%
^c,dInstitutional Fiduciary Trust Money Market Portfolio.	United States	50,191,472		50,191,472
Total Investments (Cost $1,690,490,856) 99.7%				2,048,584,945
Other Assets, less Liabilities 0.3%				6,636,216
Net Assets 100.0%			$	2,055,221,161

See Abbreviations on page 93.

^aSee Note 1(g) regarding equity-linked securities.
^bSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers
or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At
October 31, 2016, the aggregate value of these securities was $140,206,791, representing 6.8% of net assets.
^cNon-income producing.
^dSee Note 3(f) regarding investments in affiliated management investment companies.

60 Annual Report | The accompanying notes are an integral part of these financial statements.

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					FRANKLIN INVESTORS SECURITIES TRUST



Financial Highlights
Franklin Real Return Fund
					Year Ended October 31,
		2016			2015			2014			2013			2012
Class A
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	9.92		$	10.66		$	10.82		$	10.94		$	11.06
Income from investment operations^a:
Net investment income^b		0.12			0.05			0.14			0.15			0.17
Net realized and unrealized gains (losses)		0.15			(0.72	)		(0.06	)		(0.01	)		0.01
Total from investment operations		0.27			(0.67	)		0.08			0.14			0.18
Less distributions from:
Net investment income and net foreign currency gains		(0.09	)		(0.07	)		(0.24	)		(0.26	)		(0.30	)
Tax return of capital.		(0.01	)		—			—			—			—
Total distributions		(0.10	)		(0.07	)		(0.24	)		(0.26	)		(0.30	)
Net asset value, end of year.	$	10.09		$	9.92		$	10.66		$	10.82		$	10.94

Total return^c		2.77	%		(6.32	)%		0.75	%		1.34	%		1.67	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		1.12	%		1.10	%		1.10	%		1.08	%		1.06	%
Expenses net of waiver and payments by affiliates		0.90	%^d		0.90	%^d		0.90	%^d		0.90	%^d		0.90	%
Net investment income		1.18	%		0.43	%		1.34	%		1.35	%		1.58	%

Supplemental data
Net assets, end of year (000’s)	$	161,541		$	185,743		$	248,313		$	327,285		$	411,419
Portfolio turnover rate		31.82	%		26.57	%		33.02	%		27.91	%		18.64	%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned, adjustments to interest income for the inflation-indexed bonds, and/or fluctuating fair value of the investments
of the Fund.
^bBased on average daily shares outstanding.
^cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
^dBenefit of expense reduction rounds to less than 0.01%.

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The accompanying notes are an integral part of these financial statements. | Annual Report 61


FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS


Franklin Real Return Fund (continued)
					Year Ended October 31,
		2016			2015			2014			2013			2012
Class C
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	9.82		$	10.59		$	10.76		$	10.87		$	11.00
Income from investment operations^a:
Net investment income^b		0.08			—^c			0.10			0.10			0.13
Net realized and unrealized gains (losses)		0.16			(0.71	)		(0.07	)		0.01			—^c
Total from investment operations		0.24			(0.71	)		0.03			0.11			0.13
Less distributions from:
Net investment income and net foreign currency gains		(0.05	)		(0.06	)		(0.20	)		(0.22	)		(0.26	)
Tax return of capital.		(0.01	)		—			—			—			—
Total distributions		(0.06	)		(0.06	)		(0.20	)		(0.22	)		(0.26	)
Net asset value, end of year.	$	10.00		$	9.82		$	10.59		$	10.76		$	10.87

Total return^d		2.44	%		(6.70	)%		0.22	%		1.03	%		1.22	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		1.52	%		1.50	%		1.50	%		1.48	%		1.46	%
Expenses net of waiver and payments by affiliates		1.30	%^e		1.30	%^e		1.30	%^e		1.30	%^e		1.30	%
Net investment income		0.78	%		0.04	%		0.94	%		0.95	%		1.18	%

Supplemental data
Net assets, end of year (000’s)	$	39,568		$	48,084		$	68,188		$	83,666		$	104,682
Portfolio turnover rate		31.82	%		26.57	%		33.02	%		27.91	%		18.64	%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned, adjustments to interest income for the inflation-indexed bonds, and/or fluctuating fair value of the investments
of the Fund.
^bBased on average daily shares outstanding.
^cAmount rounds to less than $0.01 per share.
^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
^eBenefit of expense reduction rounds to less than 0.01%.

62 Annual Report | The accompanying notes are an integral part of these financial statements.

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		FRANKLIN INVESTORS SECURITIES TRUST
					FINANCIAL HIGHLIGHTS


Franklin Real Return Fund (continued)
					Year Ended October 31,
		2016			2015			2014			2013	^a
Class R6
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	9.98		$	10.68		$	10.85		$	11.01
Income from investment operations^b:
Net investment income^c		0.16			0.10			0.21			0.09
Net realized and unrealized gains (losses)		0.16			(0.72	)		(0.10	)		(0.10	)
Total from investment operations		0.32			(0.62	)		0.11			(0.01	)
Less distributions from:
Net investment income and net foreign currency gains		(0.14	)		(0.08	)		(0.28	)		(0.15	)
Tax return of capital		(0.01	)		—			—			—
Total distributions		(0.15	)		(0.08	)		(0.28	)		(0.15	)
Net asset value, end of year	$	10.15		$	9.98		$	10.68		$	10.85

Total return^d		3.25	%		(5.87	)%		1.04	%		(0.06	)%

Ratios to average net assets^e
Expenses before waiver and payments by affiliates		0.71	%		0.71	%		0.70	%		2.43	%
Expenses net of waiver and payments by affiliates^f		0.50	%		0.50	%		0.52	%		0.52	%
Net investment income		1.58	%		0.83	%		1.72	%		1.73	%

Supplemental data
Net assets, end of year (000’s)	$	5,326		$	1,730		$	2,034		$	5
Portfolio turnover rate		31.82	%		26.57	%		33.02	%		27.91	%

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FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS


Franklin Real Return Fund (continued)
					Year Ended October 31,
		2016			2015			2014			2013			2012
Advisor Class
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	9.96		$	10.68		$	10.85		$	10.97		$	11.08
Income from investment operations^a:
Net investment income^b		0.14			0.05			0.18			0.18			0.20
Net realized and unrealized gains (losses)		0.16			(0.70	)		(0.08	)		(0.01	)		0.01
Total from investment operations		0.30			(0.65	)		0.10			0.17			0.21
Less distributions from:
Net investment income and net foreign currency gains		(0.12	)		(0.07	)		(0.27	)		(0.29	)		(0.32	)
Tax return of capital.		(0.01	)		—			—			—			—
Total distributions		(0.13	)		(0.07	)		(0.27	)		(0.29	)		(0.32	)
Net asset value, end of year.	$	10.13		$	9.96		$	10.68		$	10.85		$	10.97

Total return		3.04	%		(6.08	)%		0.91	%		1.60	%		1.99	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		0.87	%		0.85	%		0.85	%		0.83	%		0.81	%
Expenses net of waiver and payments by affiliates		0.65	%^c		0.65	%^c		0.65	%^c		0.65	%^c		0.65	%
Net investment income		1.43	%		0.68	%		1.59	%		1.60	%		1.83	%

Supplemental data
Net assets, end of year (000’s)	$	35,215		$	37,758		$	65,958		$	28,042		$	35,362
Portfolio turnover rate		31.82	%		26.57	%		33.02	%		27.91	%		18.64	%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned, adjustments to interest income for the inflation-indexed bonds, and/or fluctuating fair value of the investments
of the Fund.
^bBased on average daily shares outstanding.
^cBenefit of expense reduction rounds to less than 0.01%.

64 Annual Report | The accompanying notes are an integral part of these financial statements.

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FRANKLIN INVESTORS SECURITIES TRUST


Statement of Investments, October 31, 2016
Franklin Real Return Fund
	Country	Shares		Value

Common Stocks 8.4%
Energy 5.4%
Anadarko Petroleum Corp	United States	23,700	$	1,408,728
Canadian Natural Resources Ltd	Canada	33,700		1,068,627
Chevron Corp	United States	13,700		1,435,075
Exxon Mobil Corp	United States	15,277		1,272,880
Halliburton Co	United States	33,300		1,531,800
Noble Energy Inc	United States	27,400		944,478
Occidental Petroleum Corp	United States	18,200		1,326,962
Pioneer Natural Resources Co	United States	4,700		841,394
Royal Dutch Shell PLC, A, ADR	United Kingdom	19,800		986,238
Schlumberger Ltd	United States	20,850		1,631,095
^aWeatherford International PLC	United States	119,400		575,508
				13,022,785
Materials 3.0%
Agrium Inc	Canada	8,800		808,016
BHP Billiton PLC, ADR	Australia	32,700		988,848
The Dow Chemical Co	United States	26,600		1,431,346
^aFreeport-McMoRan Inc., B	United States	53,046		593,054
Goldcorp Inc	Canada	101,600		1,544,320
Nucor Corp	United States	21,000		1,025,850
Rio Tinto PLC, ADR	United Kingdom	27,700		965,345
				7,356,779
Total Common Stocks (Cost $21,881,836)				20,379,564

Management Investment Companies 9.0%
Diversified Financials 1.7%
^bFranklin Lower Tier Floating Rate Fund	United States	280,073		2,909,964
^bFranklin Middle Tier Floating Rate Fund	United States	105,222		1,058,531
				3,968,495
Real Estate 7.3%
SPDR Dow Jones REIT ETF	United States	193,000		17,728,980
Total Management Investment Companies
(Cost $13,170,253)				21,697,475


		Principal
		Amount*

Corporate Bonds 4.0%
Consumer Services 0.1%
MGM Resorts International, senior note, 7.75%, 3/15/22.	United States	200,000		231,938
Energy 1.4%
^cChesapeake Energy Corp., secured note, second lien, 144A, 8.00%,
12/15/22	United States	425,000		433,500
CONSOL Energy Inc.,
senior note, 5.875%, 4/15/22	United States	300,000		277,620
senior note, 8.00%, 4/01/23	United States	600,000		597,000
Energy Transfer Equity LP, senior note, first lien, 7.50%, 10/15/20	United States	1,000,000		1,095,000
Sabine Pass Liquefaction LLC, first lien, 5.625%, 2/01/21	United States	1,000,000		1,060,000
				3,463,120

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Annual Report

FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Real Return Fund (continued)
		Principal
	Country	Amount*		Value

Corporate Bonds (continued)
Health Care Equipment & Services 0.4%
HCA Inc., senior secured bond, first lien, 5.875%, 3/15/22.	United States	1,000,000	$	1,102,500
Materials 0.3%
^cNovelis Corp., senior bond, 144A, 5.875%, 9/30/26	United States	700,000		710,500
Media 0.6%
^cAltice U.S. Finance I Corp., senior secured bond, 144A, 5.50%, 5/15/26	United States	300,000		306,750
CSC Holdings LLC, senior note, 6.75%, 11/15/21	United States	1,000,000		1,055,000
				1,361,750
Pharmaceuticals, Biotechnology & Life Sciences 0.4%
^cValeant Pharmaceuticals International Inc., senior note, 144A, 7.50%,
7/15/21	United States	1,000,000		883,750
Telecommunication Services 0.8%
Intelsat Jackson Holdings SA, senior note, 7.25%, 10/15/20	Luxembourg	1,000,000		755,000
^cSprint Communications Inc., senior note, 144A, 7.00%, 3/01/20	United States	1,000,000		1,090,000
				1,845,000
Total Corporate Bonds (Cost $9,830,853)				9,598,558

^d,eSenior Floating Rate Interests 2.5%
Automobiles & Components 0.1%
TI Group Automotive Systems LLC, Initial U.S. Term Loan, 4.50%, 6/25/22 .	United States	147,817		148,308
Capital Goods 0.0%^†
^fHarsco Corp., Initial Term Loan, 7.50%, 11/01/23	United States	29,373		29,740
Leidos (Abacus Innovations Corp.), B Term Loan, 3.284%, 8/16/23	United States	22,748		22,954
				52,694
Commercial & Professional Services 0.0%^†
KAR Auction Services Inc., Tranche B-3 Term Loan, 4.375%, 3/09/23	United States	91,718		92,903
Consumer Services 0.0%^†
Aristocrat Technologies Inc., Term B-1 Loans, 3.631%, 10/20/21	United States	17,873		17,978
Prime Security Services Borrower LLC, Term B-1 Loans, 4.75%, 5/02/22	United States	99,452		100,272
				118,250
Diversified Financials 0.0%^†
First Eagle Investment Management, Initial Term Loans, 4.838%, 12/01/22 .	United States	46,568		46,509
Russell Investments US Institutional Holdco Inc., Initial Term Loan, 6.75%,
6/01/23	United States	35,087		35,219
				81,728
Energy 0.2%
^gBowie Resource Holdings LLC, First Lien Initial Term Loan, 6.75%,
8/16/20	United States	209,136		173,583
Fieldwood Energy LLC, Loans, 3.875%, 10/01/18.	United States	364,913		336,632
McDermott Finance LLC, Term Loan, 8.25% - 8.484%, 4/16/19	United States	10,119		10,221
				520,436
Health Care Equipment & Services 0.1%
Carestream Health Inc., Term Loan, 5.00%, 6/07/19	United States	68,970		64,303
Community Health Systems Inc., 2018 Term F Loans, 4.083%, 12/31/18	United States	186,558		182,793
				247,096
Household & Personal Products 0.0%^†
^fSpectrum Brands Inc., Term Loans, 5.00%, 6/23/22	United States	3,724		3,765

66 Annual Report

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FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Real Return Fund (continued)
		Principal
	Country	Amount*		Value

^d,eSenior Floating Rate Interests (continued)
Materials 0.4%
The Chemours Co. LLC, Tranche B Term Loan, 3.75%, 5/12/22	United States	267,934	$	265,521
Cyanco Intermediate Corp., Initial Term Loan, 5.50%, 5/01/20	United States	58,859		59,006
FMG America Finance Inc. (Fortescue Metals Group), Loans, 3.75%,
6/30/19	Australia	385,639		385,820
^gOCI Beaumont LLC, Term B-3 Loan, 7.75%, 8/20/19	United States	231,794		228,027
				938,374
Media 0.6%
^fAltice U.S. Finance I Corp., 2016 Refinancing Term Loans, 5.50%, 1/01/25 .	United States	25,189		25,315
^fAMC Entertainment Holdings Inc.,
2016 Incremental Term Loan, 5.25%, 12/15/23	United States	9,791		9,760
Initial Term Loans, 5.25%, 12/15/22.	United States	15,317		15,317
Charter Communications Operating LLC (CCO Safari), Term A Loan,
2.54%, 5/18/21	United States	136,500		135,903
CSC Holdings Inc. (Cablevision), 2016 Extended Term Loans, 3.876%,
10/11/24	United States	121,389		121,971
^fLions Gate Entertainment Corp., Term Loan A, 5.00%, 10/12/21	United States	67,950		67,270
^fLive Nation Entertainment Inc., Term B-2 Loans, 5.00%, 10/31/23	United States	9,791		9,815
Radio One Inc., Term Loan B, 5.04%, 12/31/18	United States	938,494		940,841
UPC Financing Partnership, Facility AN, 4.08%, 8/31/24	Netherlands	30,895		31,092
				1,357,284
Pharmaceuticals, Biotechnology & Life Sciences 0.3%
Endo Luxembourg Finance Co. I S.A.R.L. and Endo LLC, 2015 Incremental
Term B Loans, 3.75%, 9/25/22	United States	244,519		244,481
Grifols Worldwide Operations USA Inc., U.S. Tranche B Term Loan, 3.46%,
2/27/21	United States	226,763		229,030
^fRPI Finance Trust, Term A-2 Term Loan A, 4.75%, 10/14/20	United States	38,312		38,114
Valeant Pharmaceuticals International Inc.,
Series C-2 Tranche B Term Loan, 5.25%, 12/11/19	United States	75,737		75,793
Series D-2 Tranche B Term Loan, 5.00%, 2/13/19	United States	155,168		155,155
				742,573
Retailing 0.1%
Ascena Retail Group Inc., Tranche B Term Loan, 5.25%, 8/21/22	United States	230,352		225,073
Dollar Tree Inc., Term A-1 Loans, 2.25%, 7/06/20	United States	71,383		71,271
PetSmart Inc., Tranche B-2 Loans, 4.00%, 3/11/22	United States	49,622		49,777
				346,121
Semiconductors & Semiconductor Equipment 0.3%
Avago Technologies Cayman Finance Ltd., Term B-3 Loans, 3.535%,
2/01/23	Singapore	149,154		150,879
MACOM Technology Solutions Holdings Inc., Initial Term Loan, 4.628%,
5/07/21	United States	121,311		122,675
MKS Instruments Inc., Tranche B-1 Term Loans, 4.25%, 5/01/23	United States	57,239		57,859
ON Semiconductor Corp., 2016 Replacement Term Loans, 3.777%,
3/31/23	United States	313,121		315,302
				646,715
Software & Services 0.1%
^fGlobal Payments Inc., Delayed Draw Term Loan (A-2), 4.75%, 10/31/21	United States	140,200		140,007
^fRackspace Hosting Inc., Term B Loan, 6.50%, 11/03/23	United States	48,955		49,300
				189,307

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Annual Report

FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Real Return Fund (continued)
		Principal
	Country	Amount*				Value

^d,eSenior Floating Rate Interests (continued)
Technology Hardware & Equipment 0.1%
Ciena Corp., Term Loan, 3.75%, 7/15/19	United States	32,432			$	32,594
Dell International LLC, Term A-3 Loan, 2.54%, 12/31/18	United States	104,097				104,146
Western Digital Corp., Term Loan B-1, 4.50%, 4/29/23	United States	67,328				68,191
Zebra Technologies Corp., Refinancing Term Loan, 4.089%, 10/27/21	United States	55,216				55,860
						260,791
Telecommunication Services 0.0%^†
Consolidated Communications Inc., Initial Term Loan, 4.00%, 10/05/23	United States	24,568				24,752
Global Tel*Link Corp., Term Loan, 5.00%, 5/23/20	United States	26,806				26,119
						50,871
Transportation 0.1%
Air Canada, Term Loan, 3.614%, 10/06/23	Canada	6,423				6,452
Navios Maritime Midstream Partners LP, Initial Term Loan, 5.50%, 6/18/20 .	Marshall Islands	85,921				84,418
Navios Maritime Partners LP, Initial Term Loan, 5.25%, 6/27/18	Marshall Islands	6,575				6,036
XPO Logistics Inc., Refinancing Term Loans, 4.25%, 10/30/21.	United States	123,302				124,273
						221,179
Utilities 0.1%
EFS Cogen Holdings I LLC (Linden), Term B Advance, 5.25%, 6/28/23.	United States	16,472				16,657
NRG Energy Inc., Term Loans, 3.50%, 6/30/23	United States	119,700				120,089
						136,746
Total Senior Floating Rate Interests (Cost $6,114,911)						6,155,141

Foreign Government and Agency Securities 13.2%
Government of Hungary,
^hsenior bond, Reg S, 3.875%, 2/24/20.	Hungary	180,000		EUR		221,810
senior note, 6.375%, 3/29/21	Hungary	620,000				717,433
^hsenior note, Reg S, 4.375%, 7/04/17	Hungary	150,000		EUR		169,710
^hsenior note, Reg S, 5.75%, 6/11/18	Hungary	435,000		EUR		521,334
Government of Indonesia, senior bond, FR53, 8.25%, 7/15/21	Indonesia	58,500,000,000		IDR		4,718,826
Government of Malaysia,
senior bond, 3.814%, 2/15/17	Malaysia	6,100,000		MYR		1,460,190
senior note, 3.58%, 9/28/18	Malaysia	18,000,000		MYR		4,349,135
Government of Mexico,
M, 4.75%, 6/14/18	Mexico	1,124,000	ⁱ	MXN		5,894,556
senior note, M, 5.00%, 6/15/17	Mexico	750,000	ⁱ	MXN		3,971,966
^dGovernment of Poland,
FRN, 1.79%, 1/25/17	Poland	4,515,000		PLN		1,151,829
FRN, 1.79%, 1/25/21	Poland	9,388,000		PLN		2,358,309
Nota Do Tesouro Nacional,
10.00%, 1/01/21	Brazil	17,200	^j	BRL		5,176,432
^kIndex Linked, 6.00%, 8/15/18	Brazil	1,270	^j	BRL		1,167,148
Total Foreign Government and Agency Securities
(Cost $32,587,349)						31,878,678

U.S. Government and Agency Securities 55.6%
^lU.S. Treasury Note,
Index Linked, 2.375%, 1/15/17	United States	3,582,810				3,607,467
Index Linked, 0.125%, 4/15/17	United States	39,233,569				39,326,788
Index Linked, 2.625%, 7/15/17	United States	15,106,624				15,538,960
Index Linked, 1.625%, 1/15/18	United States	33,339,058				34,313,358
Index Linked, 1.375%, 7/15/18	United States	971,677				1,011,556

68 Annual Report

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FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Real Return Fund (continued)
		Principal
	Country	Amount*		Value

U.S. Government and Agency Securities (continued)
^lU.S. Treasury Note, (continued)
Index Linked, 2.125%, 1/15/19	United States	38,139,891	$	40,545,832
Total U.S. Government and Agency Securities
(Cost $133,637,383)				134,343,961
Total Investments before Short Term Investments
(Cost $217,222,585)				224,053,377

Short Term Investments (Cost $15,773,046) 6.5%
Repurchase Agreements 6.5%
^mJoint Repurchase Agreement, 0.309%, 11/01/16
(Maturity Value $15,773,182)
BNP Paribas Securities Corp. (Maturity Value $6,219,208)
Deutsche Bank Securities Inc. (Maturity Value $2,401,782)
HSBC Securities (USA) Inc. (Maturity Value $6,219,208)
Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $932,984)
Collateralized by U.S. Government Agency Securities, 0.00% -
2.375%, 4/28/17 - 9/10/21; and U.S. Treasury Note, 0.00% - 2.375%,
1/15/17 - 6/30/21 (valued at $16,097,382)	United States	15,773,046		15,773,046
Total Investments (Cost $232,995,631) 99.2%				239,826,423
Other Assets, less Liabilities 0.8%				1,823,916
Net Assets 100.0%.			$	241,650,339

^†Rounds to less than 0.1% of net assets.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
^aNon-income producing.
^bSee Note 3(f) regarding investments in affiliated management investment companies.
^cSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers
or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At
October 31, 2016, the aggregate value of these securities was $3,424,500, representing 1.4% of net assets.
^dThe coupon rate shown represents the rate at period end.
^eSee Note 1(h) regarding senior floating rate interests.
^fSecurity purchased on a delayed delivery basis. See Note 1(d).
^gAt October 31, 2016, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund is restricted from trading these securities at year end.
^hSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States.
Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption
from registration. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At October 31, 2016, the aggregate value of these
securities was $912,854, representing 0.4% of net assets.
ⁱPrincipal amount is stated in 100 Mexican Peso Units.
^jPrincipal amount is stated in 1,000 Brazilian Real Units.
^kRedemption price at maturity is adjusted for inflation. See Note 1(j).
^lPrincipal amount of security is adjusted for inflation. See Note 1(j).
^mSee Note 1(c) regarding joint repurchase agreement.

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Annual Report

FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Real Return Fund (continued)

At October 31, 2016, the Fund had the following forward exchange contracts outstanding. See Note 1(e).
Forward Exchange Contracts
				Contract	Settlement		Unrealized		Unrealized
Currency	Counterparty^aType	Quantity		Amount	Date		Appreciation		Depreciation
OTC Forward Exchange Contracts
Chilean Peso	DBAB Buy	328,810,000	$	487,849	5/18/17	$	7,599	$	—
Euro	DBAB Sell	3,072,361		3,448,664	5/18/17		44,836		—
Euro	JPHQ Sell	1,150,100		1,276,369	5/18/17		2,189		—
Total Forward Exchange Contracts						$	54,624	$	—
Net unrealized appreciation (depreciation)						$	54,624

^aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.

See Abbreviations on page 93.

70 Annual Report | The accompanying notes are an integral part of these financial statements.

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					FRANKLIN INVESTORS SECURITIES TRUST




Financial Statements


Statements of Assets and Liabilities
October 31, 2016

					Franklin
		Franklin			Convertible			Franklin Equity		Franklin Real
		Balanced Fund			Securities Fund			Income Fund		Return Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	3,009,146,485		$	1,865,391,474		$	1,640,299,384	$	213,413,710
Cost - Non-controlled affiliates (Note 3f)		120,863,963			98,515,365			50,191,472		3,808,875
Cost - Repurchase agreements		—			—			—		15,773,046
Total cost of investments	$	3,130,010,448		$	1,963,906,839		$	1,690,490,856	$	232,995,631
Value - Unaffiliated issuers	$	3,170,579,741		$	2,046,304,703		$	1,998,393,473	$	220,084,882
Value - Non-controlled affiliates (Note 3f)		120,863,963			98,515,365			50,191,472		3,968,495
Value - Repurchase agreements		—			—			—		15,773,046
Total value of investments		3,291,443,704			2,144,820,068			2,048,584,945		239,826,423
Cash		261,414			—			—		260,449
Restricted Cash (Note 1f)		—			—			—		90,000
Foreign currency, at value (cost $—, $—, $— and
$1,368,541, respectively)		—			—			—		1,370,190
Receivables:
Investment securities sold		7,809,250			—			10,083,575		—
Capital shares sold		6,473,025			5,135,226			3,924,226		489,315
Dividends and interest		17,859,676			6,377,095			2,328,593		1,230,026
Unrealized appreciation on OTC forward exchange
contracts		—			—			—		54,624
Other assets		632			414			415		53
Total assets		3,323,847,701			2,156,332,803			2,064,921,754		243,321,080
Liabilities:
Payables:
Investment securities purchased		—			—			—		387,260
Capital shares redeemed		11,765,248			5,498,725			7,852,584		980,226
Management fees		1,767,959			806,740			779,969		96,349
Distribution fees		1,081,393			414,257			589,060		56,532
Transfer agent fees		532,477			415,876			370,373		11,736
Options written, at value (premiums received $2,871,309,
$—, $— and $—, respectively)		3,151,230			—			—		—
Due to brokers		—			—			—		90,000
Deferred tax		—			—			—		19,001
Accrued expenses and other liabilities		154,476			105,814			108,607		29,637
Total liabilities		18,452,783			7,241,412			9,700,593		1,670,741
Net assets, at value	$	3,305,394,918		$	2,149,091,391		$	2,055,221,161	$	241,650,339
Net assets consist of:
Paid-in capital	$	3,108,375,826		$	1,942,452,858		$	1,614,529,801	$	266,194,524
Undistributed net investment income		—			—			2,339,414		—
Distributions in excess of net investment income		(1,700,359	)		(14,288,410	)		—		(4,592,709	)
Net unrealized appreciation (depreciation)		161,143,940			180,913,229			358,075,277		6,868,214
Accumulated net realized gain (loss)		37,575,511			40,013,714			80,276,669		(26,819,690	)
Net assets, at value	$	3,305,394,918		$	2,149,091,391		$	2,055,221,161	$	241,650,339

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FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL STATEMENTS


Statements of Assets and Liabilities (continued)
October 31, 2016

						Franklin
			Franklin			Convertible			Franklin Equity			Franklin Real
			Balanced Fund			Securities Fund			Income Fund			Return Fund
Class A:
Net assets, at value	$		2,532,459,079	$		768,553,298	$		1,700,711,940	$		161,541,031
Shares outstanding			217,469,171			42,146,638			75,601,648			16,011,039
Net asset value per share^a		$	11.65		$	18.24		$	22.50		$	10.09
Maximum offering price per share (net asset value per
share ÷ 94.25%, 94.25%, 94.25% and 95.75%,
respectively)		$	12.36		$	19.35		$	23.87		$	10.54
Class C:
Net assets, at value	$		630,109,931	$		293,038,458	$		257,155,685	$		39,568,377
Shares outstanding			54,569,430			16,301,040			11,519,310			3,956,730
Net asset value and maximum offering price per share^a		$	11.55		$	17.98		$	22.32		$	10.00
Class R:
Net assets, at value	$		4,481,723				$		6,394,594
Shares outstanding			383,986						284,309
Net asset value and maximum offering price per share		$	11.67					$	22.49
Class R6:
Net assets, at value	$		233,391	$		7,154,043	$		10,536,879	$		5,325,717
Shares outstanding			20,004			390,187			467,537			524,934
Net asset value and maximum offering price per share		$	11.67		$	18.33		$	22.54		$	10.15
Advisor Class:
Net assets, at value	$		138,110,794	$		1,080,345,592	$		80,422,063	$		35,215,214
Shares outstanding			11,836,886			59,228,496			3,569,284			3,476,275
Net asset value and maximum offering price per share		$	11.67		$	18.24		$	22.53		$	10.13

^aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.

72 Annual Report | The accompanying notes are an integral part of these financial statements.

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					FRANKLIN INVESTORS SECURITIES TRUST
								FINANCIAL STATEMENTS


Statements of Operations
for the year ended October 31, 2016

					Franklin
		Franklin			Convertible			Franklin Equity		Franklin Real
		Balanced Fund			Securities Fund			Income Fund		Return Fund
Investment income:
Dividends:
Unaffiliated issuers	$	67,303,400		$	26,143,298		$	61,717,031		$	1,205,943
Non-controlled affiliates (Note 3f)		—			—			—			306,013
Interest		47,589,529			20,705,855			79			2,132,227
Inflation principal adjustments.		—			—			—			1,551,955
Total investment income.		114,892,929			46,849,153			61,717,110			5,196,138
Expenses:
Management fees (Note 3a)		20,051,202			9,513,458			9,562,563			1,559,115
Distribution fees: (Note 3c)
Class A		6,194,756			1,880,874			4,373,249			420,354
Class C		6,005,474			2,961,378			2,511,522			280,172
Class R		22,161			—			30,044			—
Transfer agent fees: (Note 3e)
Class A		2,834,405			936,871			2,257,578			280,060
Class C		689,986			368,784			324,107			71,797
Class R		5,071			—			7,903			—
Class R6		174			265			156			164
Advisor Class		93,802			1,240,566			65,569			57,511
Custodian fees (Note 4)		29,272			17,597			23,405			19,653
Reports to shareholders		381,324			204,170			315,741			47,641
Registration and filing fees		289,084			147,708			163,700			67,077
Professional fees		70,476			58,587			58,230			34,709
Trustees’ fees and expenses		33,361			22,312			22,347			2,850
Other.		69,164			48,576			42,439			21,522
Total expenses		36,769,712			17,401,146			19,758,553			2,862,625
Expense reductions (Note 4)		(270	)		(2,018	)		(215	)		(319	)
Expenses waived/paid by affiliates (Note 3f and
3g)		(395,756	)		(200,345	)		(151,586	)		(545,274	)
Net expenses		36,373,686			17,198,783			19,606,752			2,317,032
Net investment income		78,519,243			29,650,370			42,110,358			2,879,106
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		59,482,377			70,272,718			92,883,533			(17,964,281	)
Written options		10,717,079			—			1,315,173			—
Foreign currency transactions		30,048			—			(188,213	)		395,621
Net realized gain (loss)		70,229,504			70,272,718			94,010,493			(17,568,660	)
Net change in unrealized appreciation (depreciation) on:
Investments		23,605,648			35,403,730			(69,781,289	)		20,747,881
Translation of other assets and liabilities
denominated in foreign currencies		(9,395	)		—			(6,980	)		58,649
Written options		(922,509	)		—			—			—
Change in deferred taxes on unrealized appreciation.		—			—			—			(19,001	)
Net change in unrealized appreciation
(depreciation)		22,673,744			35,403,730			(69,788,269	)		20,787,529
Net realized and unrealized gain (loss)		92,903,248			105,676,448			24,222,224			3,218,869
Net increase (decrease) in net assets resulting from
operations	$	171,422,491		$	135,326,818		$	66,332,582		$	6,097,975

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FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL STATEMENTS


Statements of Changes in Net Assets

		Franklin						Franklin
		Balanced Fund						Convertible Securities Fund
		Year Ended October 31,						Year Ended October 31,
		2016			2015			2016			2015
Increase (decrease) in net assets:
Operations:
Net investment income	$	78,519,243		$	69,887,156		$	29,650,370		$	28,248,902
Net realized gain (loss)		70,229,504			5,876,467			70,272,718			89,937,146
Net change in unrealized appreciation (depreciation)		22,673,744			(70,359,679	)		35,403,730			(114,046,752	)
Net increase (decrease) in net assets resulting
from operations		171,422,491			5,403,944			135,326,818			4,139,296
Distributions to shareholders from:
Net investment income:
Class A		(79,181,917	)		(70,156,845	)		(21,449,948	)		(18,571,018	)
Class C		(15,011,956	)		(13,270,654	)		(6,322,161	)		(4,490,159	)
Class R		(131,468	)		(129,500	)		—			—
Class R6		(8,352	)		(11,849	)		(89,054	)		(50,746	)
Advisor Class		(2,775,337	)		(1,708,745	)		(28,889,795	)		(21,965,450	)
Net realized gains:
Class A		(196,452	)		(27,941,174	)		(15,784,677	)		(33,348,512	)
Class C		(49,077	)		(6,796,815	)		(6,225,597	)		(12,006,606	)
Class R		(340	)		(50,807	)		—			—
Class R6		(18	)		(6,909	)		(98	)		(110,660	)
Advisor Class		(10,279	)		(575,222	)		(15,633,159	)		(30,219,160	)
Total distributions to shareholders		(97,365,196	)		(120,648,520	)		(94,394,489	)		(120,762,311	)
Capital share transactions: (Note 2)
Class A		102,305,345			408,259,572			(54,566,518	)		(55,036,014	)
Class C		53,175,745			93,503,518			(21,791,985	)		(4,278,396	)
Class R		(287,996	)		1,269,988			—			—
Class R6		5,265			(284,447	)		6,867,487			(3,003,286	)
Advisor Class		81,786,363			15,106,961			148,171,070			73,969,258
Total capital share transactions		236,984,722			517,855,592			78,680,054			11,651,562
Net increase (decrease) in net assets		311,042,017			402,611,016			119,612,383			(104,971,453	)
Net assets:
Beginning of year		2,994,352,901			2,591,741,885			2,029,479,008			2,134,450,461
End of year	$	3,305,394,918		$	2,994,352,901		$	2,149,091,391		$	2,029,479,008
Distributions in excess of net investment income included
in net assets:
End of year	$	(1,700,359	)	$	(305,284	)	$	(14,288,410	)	$	(10,070,008	)

74 Annual Report | The accompanying notes are an integral part of these financial statements.

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					FRANKLIN INVESTORS SECURITIES TRUST
									FINANCIAL STATEMENTS


Statements of Changes in Net Assets (continued)

		Franklin								Franklin
		Equity Income Fund								Real Return Fund
		Year Ended October 31,								Year Ended October 31,
		2016				2015				2016				2015
Increase (decrease) in net assets:
Operations:
Net investment income.	$	42,110,358			$	47,416,333			$	2,879,106			$	1,310,527
Net realized gain (loss)		94,010,493				54,413,447				(17,568,660	)			4,458,658
Net change in unrealized appreciation (depreciation)		(69,788,269	)			(28,722,638	)			20,787,529				(27,267,123	)
Net increase (decrease) in net assets resulting from
operations		66,332,582				73,107,142				6,097,975				(21,497,938	)
Distributions to shareholders from:
Net investment income:
Class A		(47,097,269	)			(52,888,906	)			(1,562,108	)			(1,588,071	)
Class C		(5,251,049	)			(5,529,325	)			(215,455	)			(394,395	)
Class R		(152,076	)			(193,924	)			—				—
Class R6		(180,060	)			(195	)			(21,887	)			(13,635	)
Advisor Class		(1,422,902	)			(1,042,538	)			(429,016	)			(472,365	)
Net realized gains:
Class A		(46,499,582	)			(78,681,119	)			—				—
Class C		(6,537,589	)			(10,878,951	)			—				—
Class R		(161,343	)			(327,751	)			—				—
Class R6		(149	)			(266	)			—				—
Advisor Class		(889,611	)			(1,523,577	)			—				—
Tax return of capital:
Class A		—				—				(243,513	)			—
Class C		—				—				(62,428	)			—
Class R6		—				—				(3,525	)			—
Advisor Class		—				—				(50,006	)			—
Total distributions to shareholders.		(108,191,630	)			(151,066,552	)			(2,587,938	)			(2,468,466	)
Capital share transactions: (Note 2)
Class A		(53,673,051	)			95,079,558				(26,641,058	)			(46,641,225	)
Class C		12,513,162				18,093,330				(9,129,554	)			(15,672,201	)
Class R		252,727				(751,079	)			—				—
Class R6		9,967,087				—				3,570,373				(174,433	)
Advisor Class		46,433,315				5,763,786				(2,973,664	)			(24,725,271	)
Total capital share transactions		15,493,240				118,185,595				(35,173,903	)			(87,213,130	)
Net increase (decrease) in net assets		(26,365,808	)			40,226,185				(31,663,866	)		(111,179,534		)
Net assets:
Beginning of year		2,081,586,969				2,041,360,784				273,314,205			384,493,739
End of year	$	2,055,221,161		$	2,081,586,969			$	241,650,339			$	273,314,205
Undistributed net investment income included in net assets:
End of year	$	2,339,414			$	6,313,216			$	—			$	—
Distributions in excess of net investment income included in
net assets:
End of year	$	—			$	—			$	(4,592,709	)		$	(4,413,356	)

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The accompanying notes are an integral part of these financial statements. | Annual Report 75

FRANKLIN INVESTORS SECURITIES TRUST

Notes to Financial Statements

1. Organization and Significant Accounting Policies

Franklin Investors Securities Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of eight separate funds, four of which are included in this report (Funds) and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). The financial statements of the remaining funds in the Trust are presented separately. The classes of shares offered within each of the Funds are indicated below. Each class of shares differs by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees primarily due to differing arrangements for distribution and transfer agent fees.

Class A, Class C, Class R, Class R6 & Advisor Class

Franklin Balanced Fund Franklin Equity Income Fund

Class A, Class C, Class R6 & Advisor Class

Franklin Convertible Securities Fund Franklin Real Return Fund

The following summarizes the Funds’ significant accounting policies.

a. Financial Instrument Valuation

The Funds’ investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Funds calculate the net asset value (NAV) per share as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Funds’ administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Funds’ valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Funds to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities, exchange traded funds and derivative financial instruments listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of 4 p.m. Eastern time, whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

Debt and certain preferred securities generally trade in the OTC market rather than on a securities exchange. The Funds’ pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the date that the values of the foreign debt securities are determined.

Investments in open-end mutual funds are valued at the closing NAV. Investments in repurchase agreements are valued at cost, which approximates fair value.

Certain derivative financial instruments trade in the OTC market. The Funds’ pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Funds’ net benefit or obligation under the derivative contract, as measured by the fair value of the contract, is included in net assets.

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NOTES TO FINANCIAL STATEMENTS

The Funds have procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every NYSE business day. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Funds’ portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the VC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Funds. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Funds’ portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Funds for financial reporting purposes.

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Funds may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.

The Funds do not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statements of Operations.

Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.

c. Joint Repurchase Agreement

Certain or all Funds enter into a joint repurchase agreement whereby their uninvested cash balance is deposited into a joint cash account with other funds managed by the investment

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NOTES TO FINANCIAL STATEMENTS

1. Organization and Significant Accounting

Policies (continued)

c. Joint Repurchase Agreement (continued)

manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Funds’ custodian. The fair value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Funds, certain MRAs may permit the non-defaulting party to net and close-out all transactions, if any, traded under such agreements. The Funds may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Funds in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Funds at year end, as indicated in the Statements of Investments, had been entered into on October 31, 2016.

d. Securities Purchased on a Delayed Delivery Basis

Certain or all Funds purchase securities on a delayed delivery basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Funds will generally purchase these securities with the intention of holding the securities, they may sell the securities before the settlement date. Sufficient assets have been segregated for these securities.

e. Derivative Financial Instruments

Certain or all Funds invested in derivative financial instruments in order to manage risk or gain exposure to various other investments or markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives contain various risks including the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and/or the potential for market movements which expose the Fund to gains or losses in excess of the amounts shown in the Statements of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Statements of Operations.

Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counter-parties. Certain or all Funds attempt to reduce their exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination. Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Funds include failure of the Funds to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statements of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Funds of any net liability owed to that counterparty under the ISDA agreement. At October 31, 2016, Franklin Real Return Fund had no OTC derivatives in a net liability position for such contracts.

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NOTES TO FINANCIAL STATEMENTS

with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of Fund business each day and any additional collateral required due to changes in derivative values may be delivered by the Fund or the counterparty within a few business days. Collateral pledged and/or received by the Fund for OTC derivatives, if any, is held in segregated accounts with the Fund’s custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Funds’ investment objectives. To the extent that the amounts due to the Fund from its counterparties are not subject to collateralization or are not fully collateralized, the Fund bears the risk of loss from counterparty non-performance.

Certain or all Funds entered into OTC forward exchange contracts primarily to manage and/or gain exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.

Certain or all Funds purchased or wrote exchange traded option contracts primarily to manage and/or gain exposure to equity price risk. An option is a contract entitling the holder to purchase or sell a specific amount of shares or units of an asset or notional amount of a swap (swaption), at a specified price. When an option is purchased or written, an amount equal to the premium paid or received is recorded as an asset or liability, respectively. Upon exercise of an option, the acquisition cost or sales proceeds of the underlying investment is adjusted by any premium received or paid. Upon expiration of an option, any premium received or paid is recorded as a realized gain or loss. Upon closing an option other than through expiration or exercise, the difference between the premium received or paid and the cost to close the position is recorded as a realized gain or loss.

See Notes 6 and 8 regarding investment transactions and other derivative information, respectively.

f. Restricted Cash

At October 31, 2016, certain or all Funds held restricted cash in connection with investments in certain derivative securities. Restricted cash is held in a segregated account with the Fund’s custodian and is reflected in the Statements of Assets and Liabilities.

g. Equity-Linked Securities

Certain or all Funds invest in equity-linked securities. Equity-linked securities are hybrid financial instruments that generally combine both debt and equity characteristics into a single note form. Income received from equity-linked securities is recorded as realized gains in the Statements of Operations and may be based on the performance of an underlying equity security, an equity index, or an option position. The risks of investing in equity-linked securities include unfavorable price movements in the underlying security and the credit risk of the issuing financial institution. There may be no guarantee of a return of principal with equity-linked securities and the appreciation potential may be limited. Equity-linked securities may be more volatile and less liquid than other investments held by the Funds.

h. Senior Floating Rate Interests

Certain or all Funds invest in senior secured corporate loans that pay interest at rates which are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London InterBank Offered Rate (LIBOR). Senior secured corporate loans often require prepayment of principal from excess cash flows or at the discretion of the borrower. As a result, actual maturity may be substantially less than the stated maturity. Senior secured corporate loans in which the Funds invest are generally readily marketable, but may be subject to certain restrictions on resale.

i. Income and Deferred Taxes

It is each Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. Each Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.

The Funds may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which the Funds invest. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Funds invest. When a capital gain tax is determined to apply, the Funds record an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date. As a result of several

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FRANKLIN INVESTORS SECURITIES TRUST

NOTES TO FINANCIAL STATEMENTS

1. Organization and Significant Accounting

Policies (continued)

i. Income and Deferred Taxes (continued)

court cases, in certain countries across the European Union, certain or all Funds filed additional tax reclaims for previously withheld taxes on dividends earned in those countries (EU reclaims). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Income recognized, if any, for EU reclaims is reflected as other income in the Statements of Operations and any related receivable, if any, is reflected as European Union tax reclaims in the Statements of Assets and Liabilities. When uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts are reflected in the financial statements.

Each Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of October 31, 2016, each Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s statute of limitation.

j. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Facility fees are recognized as income over the expected term of the loan. Dividend income is recorded on the ex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Funds. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with

U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.

Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.

Inflation-indexed bonds are adjusted for inflation through periodic increases or decreases in the security’s interest accruals, face amount, or principal redemption value, by amounts corresponding to the rate of inflation as measured by an index. Any increase or decrease in the face amount or principal redemption value will be included as inflation principal adjustments in the Statements of Operations.

k. Accounting Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

l. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Funds, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

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NOTES TO FINANCIAL STATEMENTS

2. Shares of Beneficial Interest

At October 31, 2016, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:


	Franklin						Franklin
	Balanced Fund						Convertible Securities Fund
	Shares			Amount			Shares			Amount
Class A Shares:
Year ended October 31, 2016
Shares sold	59,288,525		$	669,112,660			9,476,768		$	168,154,565
Shares issued in reinvestment of distributions	6,894,113				77,791,246		2,018,714			35,174,653
Shares redeemed	(56,715,686	)		(644,598,561		)	(14,805,915	)		(257,895,736	)
Net increase (decrease)	9,466,952		$	102,305,345			(3,310,433	)	$	(54,566,518	)
Year ended October 31, 2015
Shares sold	58,341,044		$	678,734,826			15,996,161		$	295,084,541
Shares issued in reinvestment of distributions	8,328,938				96,129,984		2,736,597			48,590,091
Shares redeemed	(31,758,555	)		(366,605,238		)	(21,831,783	)		(398,710,646	)
Net increase (decrease)	34,911,427		$	408,259,572			(3,099,025	)	$	(55,036,014	)
Class C Shares:
Year ended October 31, 2016
Shares sold	17,111,710		$	191,037,224			1,949,088		$	33,909,433
Shares issued in reinvestment of distributions	1,240,417				13,880,631		589,732			10,122,973
Shares redeemed	(13,610,128	)		(151,742,110		)	(3,808,818	)		(65,824,391	)
Net increase (decrease)	4,741,999			$	53,175,745		(1,269,998	)	$	(21,791,985	)
Year ended October 31, 2015
Shares sold	16,412,206		$	189,653,141			2,203,232		$	39,873,587
Shares issued in reinvestment of distributions	1,614,671				18,479,927		751,799			13,156,989
Shares redeemed	(10,038,264	)		(114,629,550		)	(3,166,992	)		(57,308,972	)
Net increase (decrease)	7,988,613			$	93,503,518		(211,961	)	$	(4,278,396	)
Class R Shares:
Year ended October 31, 2016
Shares sold	132,632			$	1,496,201
Shares issued in reinvestment of distributions	11,661				131,808
Shares redeemed	(171,599	)			(1,916,005	)
Net increase (decrease)	(27,306	)		$	(287,996	)
Year ended October 31, 2015
Shares sold	163,363			$	1,900,373
Shares issued in reinvestment of distributions	15,593				180,307
Shares redeemed	(70,206	)			(810,692	)
Net increase (decrease)	108,750			$	1,269,988

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FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS




2. Shares of Beneficial Interest (continued)

	Franklin						Franklin
	Balanced Fund						Convertible Securities Fund
	Shares			Amount			Shares				Amount
Class R6 Shares:
Year ended October 31, 2016
Shares sold	3,047			$	34,245		788,664			$	13,994,019
Shares issued in reinvestment of distributions	740				8,369		4,845				88,899
Shares redeemed	(3,180	)			(37,349	)	(403,594	)			(7,215,431	)
Net increase (decrease)	607			$	5,265		389,915			$	6,867,487
Year ended October 31, 2015
Shares sold	4,434			$	51,485		272			$	5,000
Shares issued in reinvestment of distributions	1,610				18,640		9,077				161,165
Shares redeemed	(29,769	)			(354,572	)	(171,980	)			(3,169,451	)
Net increase (decrease)	(23,725	)		$	(284,447	)	(162,631	)		$	(3,003,286	)
Advisor Class Shares:
Year ended October 31, 2016
Shares sold	14,391,414		$	167,114,896			44,182,146		$	748,163,852
Shares issued in reinvestment of distributions	204,315				2,323,814		2,236,760				39,111,889
Shares redeemed	(7,564,701	)		(87,652,347		)	(37,152,701	)		(639,104,671		)
Net increase (decrease)	7,031,028			$	81,786,363		9,266,205		$	148,171,070
Year ended October 31, 2015
Shares sold	3,112,842			$	35,919,601		31,770,692		$	581,733,680
Shares issued in reinvestment of distributions	172,717				1,998,279		2,529,808				45,025,673
Shares redeemed	(1,971,010	)		(22,810,919		)	(30,555,895	)		(552,790,095		)
Net increase (decrease)	1,314,549			$	15,106,961		3,744,605			$	73,969,258


	Franklin						Franklin
	Equity Income Fund						Real Return Fund
	Shares				Amount		Shares				Amount
Class A Shares:
Year ended October 31, 2016
Shares sold	10,955,507		$	240,824,766			2,920,637		$	28,866,525
Shares issued in reinvestment of distributions	4,189,138				91,549,334		182,566				1,756,283
Shares redeemed	(17,422,052	)			(386,047,151	)	(5,823,642	)			(57,263,866	)
Net increase (decrease)	(2,277,407	)	$	(53,673,051		)	(2,720,439	)	$	(26,641,058		)
Year ended October 31, 2015
Shares sold	10,456,818		$	240,034,722			2,322,585		$	23,857,606
Shares issued in reinvestment of distributions	5,707,305				128,177,676		145,574				1,511,730
Shares redeemed	(11,940,634	)			(273,132,840	)	(7,038,513	)			(72,010,561	)
Net increase (decrease)	4,223,489		$	95,079,558			(4,570,354	)	$	(46,641,225		)

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NOTES TO FINANCIAL STATEMENTS


	Franklin					Franklin
	Equity Income Fund					Real Return Fund
	Shares		Amount			Shares				Amount
Class C Shares:
Year ended October 31, 2016
Shares sold	2,665,652		$	58,334,909		625,724			$	6,130,419
Shares issued in reinvestment of distributions	516,181			11,198,526		28,218				269,761
Shares redeemed	(2,617,595	)	(57,020,273		)	(1,591,824	)		(15,529,734		)
Net increase (decrease)	564,238		$	12,513,162		(937,882	)	$	(9,129,554		)
Year ended October 31, 2015
Shares sold	2,326,522		$	53,166,635		468,524			$	4,780,847
Shares issued in reinvestment of distributions	703,433			15,672,536		36,785				379,592
Shares redeemed	(2,227,554	)	(50,745,841		)	(2,047,828	)		(20,832,640		)
Net increase (decrease)	802,401		$	18,093,330		(1,542,519	)	$	(15,672,201		)
Class R Shares:
Year ended October 31, 2016
Shares sold	83,578		$	1,810,529
Shares issued in reinvestment of distributions	12,662			276,699
Shares redeemed	(84,438	)		(1,834,501	)
Net increase (decrease)	11,802		$	252,727
Year ended October 31, 2015
Shares sold	58,721		$	1,354,831
Shares issued in reinvestment of distributions	21,048			472,310
Shares redeemed	(112,528	)		(2,578,220	)
Net increase (decrease)	(32,759	)	$	(751,079	)
Class R6 Shares:
Year ended October 31, 2016
Shares sold	537,262		$	11,541,244		414,897			$	4,196,219
Shares issued in reinvestment of distributions	84			1,876		9				93
Shares redeemed	(70,059	)		(1,576,033	)	(63,409	)			(625,939	)
Net increase (decrease)	467,287		$	9,967,087		351,497			$	3,570,373
Year ended October 31, 2015
Shares sold	—		$	—		34,529			$	354,907
Shares issued in reinvestment of distributions	—			—		4				41
Shares redeemed	—			—		(51,465	)			(529,381	)
Net increase (decrease)	—		$	—		(16,932	)		$	(174,433	)
Advisor Class Shares:
Year ended October 31, 2016
Shares sold	4,153,049		$	93,471,028		1,852,276		$	18,341,311
Shares issued in reinvestment of distributions	95,903			2,107,308		47,451				457,432
Shares redeemed	(2,181,835	)	(49,145,021		)	(2,214,965	)		(21,772,407		)
Net increase (decrease)	2,067,117		$	46,433,315		(315,238	)	$	(2,973,664		)
Year ended October 31, 2015
Shares sold	762,782		$	17,712,527		3,343,973		$	34,412,614
Shares issued in reinvestment of distributions	96,069			2,160,788		43,881				456,992
Shares redeemed	(615,943	)	(14,109,529		)	(5,772,116	)		(59,594,877		)
Net increase (decrease)	242,908		$	5,763,786		(2,384,262	)	$	(24,725,271		)

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FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS

3. Transactions with Affiliates

Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Trust are also officers and/or directors of the following subsidiaries:


Subsidiary	Affiliation
Franklin Advisers, Inc. (Advisers)	Investment manager
Franklin Templeton Services, LLC (FT Services)	Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)	Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)	Transfer agent

a. Management Fees

Franklin Balanced Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.700	%	Up to and including $250 million
0.675	%	Over $250 million, up to and including $500 million
0.650	%	Over $500 million, up to and including $1 billion
0.625	%	Over $1 billion, up to and including $2.5 billion
0.600	%	Over $2.5 billion, up to and including $5 billion
0.575	%	Over $5 billion, up to and including $10 billion
0.550	%	Over $10 billion, up to and including $15 billion
0.525	%	Over $15 billion, up to and including $20 billion
0.500	%	In excess of $20 billion

Franklin Convertible Securities Fund and Franklin Equity Income Fund pay an investment management fee to Advisers based on the month-end net assets of each of the Funds as follows:


Annualized Fee Rate		Net Assets
0.625	%	Up to and including $100 million
0.500	%	Over $100 million, up to and including $250 million
0.450	%	Over $250 million, up to and including $7.5 billion
0.440	%	Over $7.5 billion, up to and including $10 billion
0.430	%	Over $10 billion, up to and including $12.5 billion
0.420	%	Over $12.5 billion, up to and including $15 billion
0.400	%	Over $15 billion, up to and including $17.5 billion
0.380	%	Over $17.5 billion, up to and including $20 billion
0.360	%	Over $20 billion, up to and including $35 billion
0.355	%	Over $35 billion, up to and including $50 billion
0.350	%	In excess of $50 billion

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NOTES TO FINANCIAL STATEMENTS

Franklin Real Return Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.625	%	Up to and including $500 million
0.525	%	Over $500 million, up to and including $1 billion
0.480	%	Over $1 billion, up to and including $1.5 billion
0.435	%	Over $1.5 billion, up to and including $6.5 billion
0.415	%	Over $6.5 billion, up to and including $11.5 billion
0.400	%	Over $11.5 billion, up to and including $16.5 billion
0.390	%	Over $16.5 billion, up to and including $19 billion
0.380	%	Over $19 billion, up to and including $21.5 billion
0.370	%	In excess of $21.5 billion

For the year ended October 31, 2016, each Fund’s effective investment management fee rate based on average daily net assets was as follows:


		Franklin
Franklin		Convertible		Franklin Equity		Franklin Real
Balanced Fund		Securities Fund		Income Fund		Return Fund

0.633	%	0.465	%	0.464	%	0.625	%

b. Administrative Fees

Under an agreement with Advisers, FT Services provides administrative services to the Funds. The fee is paid by Advisers based on each of the Funds’ average daily net assets, and is not an additional expense of the Funds.

c. Distribution Fees

The Board has adopted distribution plans for each share class, with the exception of Class R6 and Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Under the Funds’ Class A reimbursement distribution plans, the Funds reimburse Distributors for costs incurred in connection with the servicing, sale and distribution of each Fund’s shares up to the maximum annual plan rate for each class. Under the Class A reimbursement distribution plans, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Funds’ Class C and R compensation distribution plans, the Funds pay Distributors for costs incurred in connection with the servicing, sale and distribution of each Fund’s shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31 for each Fund.

The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:


			Franklin
	Franklin		Convertible		Franklin Equity		Franklin Real
	Balanced Fund		Securities Fund		Income Fund		Return Fund

Reimbursement Plans:
Class A	0.35	%	0.25	%	0.25	%	0.25	%
Compensation Plans:
Class C.	1.00	%	1.00	%	1.00	%	0.65	%
Class R.	0.50	%	—		0.50	%	—

For Franklin Balanced Fund, the Board has set the current rate at 0.25% per year for Class A shares until further notice and approval by the Board.

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FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS

3.	Transactions with Affiliates (continued)
d.	Sales Charges/Underwriting Agreements

Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Funds. These charges are deducted from the proceeds of sales of fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Funds of the following commission transactions related to the sales and redemptions of the Funds’ shares for the year:


				Franklin
		Franklin		Convertible		Franklin Equity		Franklin Real
		Balanced Fund		Securities Fund		Income Fund		Return Fund

Sales charges retained net of commissions paid to
unaffiliated brokers/dealers	$	1,481,042	$	155,984	$	591,142	$	30,136
CDSC retained	$	96,741	$	17,036	$	25,587	$	5,405

e. Transfer Agent Fees

Each class of shares, except for Class R6, pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations and reimburses Investor Services for out of pocket expenses incurred, including shareholder servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets. Class R6 pays Investor Services transfer agent fees specific to that class.

For the year ended October 31, 2016, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:


				Franklin
		Franklin		Convertible		Franklin Equity		Franklin Real
		Balanced Fund		Securities Fund		Income Fund		Return Fund

Transfer agent fees	$	1,208,879	$	793,228	$	991,467	$	196,708

f. Investments in Affiliated Management Investment Companies

Certain or all Funds invest in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Funds are waived on assets invested in the affiliated management investment companies, as noted in the Statements of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. Prior to November 1, 2013, the waiver was accounted for as a reduction to management fees. During the year ended October 31, 2016, certain or all Funds held investments in affiliated

management investment companies as follows:

% of

Affiliated

Number of

Fund Shares

Shares Held

Shares

Value

Outstanding

at Beginning

Gross

Held at End

at End

Investment

Realized

Held at End

of Year

Additions

Reductions

of Year

Income

Gain (Loss)

of Year

Franklin Balanced Fund

Non-Controlled Affiliates

Institutional Fiduciary Trust

Money Market Portfolio

229,883,180

1,244,451,556

(1,353,470,773

)

120,863,963

–

0.7

Franklin Convertible

Securities Fund

Non-Controlled Affiliates

Institutional Fiduciary Trust

Money Market Portfolio

65,178,257

475,797,447

(442,460,339

)

98,515,365

–

0.6

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NOTES TO FINANCIAL STATEMENTS

% of

Affiliated

Number of

Fund Shares

Shares Held

Shares

Value

Outstanding

at Beginning

Gross

Held at End

at End

Investment

Realized

Held at End

of Year

Additions

Reductions

of Year

Income

Gain (Loss)

of Year

Franklin Equity Income Fund

Non-Controlled Affiliates

Institutional Fiduciary Trust

Money Market Portfolio

45,153,270

598,291,457

(593,253,255

)

50,191,472

–

0.3

Franklin Real Return Fund

Non-Controlled Affiliates

Franklin Lower Tier Floating

RateFund

–

280,073

–

280,073

2,909,964

247,744

–

0.6

Franklin Middle Tier Floating

RateFund

–

105,222

–

105,222

1,058,531

58,269

–

0.3

Total

3,968,495

306,013

–

^aThe Fund purchased shares of the affiliate through an in-kind transfer of securities. The securities transferred had a market value of $2,519,518 and a cost basis of
$2,868,716 on the date of the transfer.
^bThe Fund purchased shares of the affiliate through an in-kind transfer of securities. The securities transferred had a market value of $983,344 and a cost basis of $1,046,227
on the date of the transfer.

g. Waiver and Expense Reimbursements

Advisers and Investor Services have contractually agreed in advance to waive or limit their respective fees and to assume as their own expense certain expenses otherwise payable by Franklin Real Return Fund so that the expenses (excluding distribution fees, and acquired fund fees and expenses) for Class A, Class C, and Advisor Class of the Fund do not exceed 0.65% and Class R6 does not exceed 0.50% based on the average net assets of each class (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until February 28, 2017. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end.

Additionally, Investor Services has contractually agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.01% until February 28, 2017. For Franklin Equity Income Fund there were no Class R6 transfer agent fees waived during the year ended October 31, 2016.

4. Expense Offset Arrangement

The Funds have entered into an arrangement with their custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Funds’ custodian expenses. During the year ended October 31, 2016, the custodian fees were reduced as noted in the Statements of Operations.

5. Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains. Capital loss carryforwards with no expiration, if any, must be fully utilized before those losses with expiration dates.

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FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS

5. Income Taxes (continued)

At October 31, 2016, the capital loss carryforwards were as follows:


		Franklin Real
		Return Fund
Capital loss carryforwards subject to expiration:
2017	$	1,207,907
2018		1,206,586
Capital loss carryforwards not subject to expiration:
Short term		842,781
Long term		23,558,304
Total capital loss carryforwards	$	26,815,578

During the year ended October 31, 2016, Franklin Balanced Fund utilized $10,087,871 of capital loss carryforwards.

On October 31, 2016, the Franklin Real Return Fund had expired capital loss carryforwards of $1,161,482, which were reclassified to paid-in capital.

The tax character of distributions paid during the years ended October 31, 2016 and 2015, was as follows:


		Franklin				Franklin
		Balanced Fund				Convertible Securities Fund
		2016		2015		2016			2015
Distributions paid from:
Ordinary income	$	97,109,030	$	85,303,669	$	56,750,958	$	62,644,614
Long term capital gain		256,166		35,344,851		37,643,531		58,117,697
	$	97,365,196	$	120,648,520	$	94,394,489	$	120,762,311

		Franklin				Franklin
		Equity Income Fund				Real Return Fund
		2016		2015		2016			2015
Distributions paid from:
Ordinary income	$	54,103,356	$	82,741,067	$	1,966,064		$	2,468,466
Long term capital gain		54,088,274		68,325,485		—			—
	$	108,191,630		151,066,552		1,966,064			2,468,466
Return of capital		—		—		359,472			—
	$	108,191,630	$	151,066,552	$	2,325,536		$	2,468,466

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NOTES TO FINANCIAL STATEMENTS

At October 31, 2016, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:


					Franklin
		Franklin			Convertible			Franklin Equity			Franklin Real
		Balanced Fund			Securities Fund			Income Fund			Return Fund
Cost of investments	$	3,142,044,156		$	1,991,191,167		$	1,690,664,910		$	237,510,096

Unrealized appreciation.	$	254,109,828		$	306,271,707		$	396,700,623		$	14,145,605
Unrealized depreciation.		(104,710,280	)		(152,642,806	)		(38,780,588	)		(11,829,278	)
Net unrealized appreciation (depreciation)	$	149,399,548		$	153,628,901		$	357,920,035		$	2,316,327

Undistributed ordinary income	$	—		$	49,872,471		$	3,874,637		$	—
Undistributed long term capital gains		48,132,615			4,025,727			80,276,666			—
Distributable earnings	$	48,132,615		$	53,898,198		$	84,151,303		$	—

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of foreign currency transactions, bond discounts and premiums and wash sales.

The Funds utilized a tax accounting practice to treat a portion of the proceeds from capital shares redeemed as a distribution from realized capital gains.

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the year ended October 31, 2016, were as follows:


				Franklin
		Franklin		Convertible		Franklin Equity			Franklin Real
		Balanced Fund		Securities Fund		Income Fund			Return Fund
Purchases	$	1,787,927,506	$	551,498,434	$	979,874,135		$	74,876,607
Sales	$	1,353,208,086	$	577,025,780	$	1,046,637,123		$	106,106,103

Transactions in options written during the year ended October 31, 2016, were as follows:

						Number of
						Contracts			Premiums
Franklin Balanced Fund
Options outstanding at October 31, 2015						10,000		$	1,094,838
Options written						155,165			15,926,096
Options expired						(68,337	)		(9,439,787	)
Options exercised						(49,860	)		(4,338,636	)
Options closed						(2,490	)		(371,202	)
Options outstanding at October 31, 2016						44,478		$	2,871,309

Franklin Equity Income Fund
Options outstanding at October 31, 2015						—		$	—
Options written						21,798			2,196,288
Options expired						(11,480	)		(564,541	)
Options exercised						(2,378	)		(368,724	)
Options closed						(7,940	)		(1,263,023	)
Options outstanding at October 31, 2016						—		$	—

See Notes 1(e) and 8 regarding derivative financial instruments and other derivative information, respectively.

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FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS

7. Credit Risk

At October 31, 2016, Franklin Balanced Fund, Franklin Convertible Securities Fund and Franklin Real Return Fund had 9.6%, 54.7% and 8.7%, respectively, of their portfolio invested in high yield securities, senior secured floating rate notes, or other securities rated below investment grade and unrated securities, if any. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

8. Other Derivative Information

At October 31, 2016, the Funds’ investments in derivative contracts are reflected in the Statements of Assets and Liabilities as follows:


	Asset Derivatives				Liability Derivatives
Derivative Contracts	Statement of				Statement of
Not Accounted for as	Assets and Liabilities				Assets and Liabilities
Hedging Instruments	Location		Fair Value		Location		Fair Value
Franklin Balanced Fund
Equity contracts	Investments in securities, at value	$	12,900,000	^a	Options written, at value	$	3,151,230

Franklin Real Return Fund
Foreign exchange contracts	Unrealized appreciation on OTC	$	54,624		Unrealized depreciation on OTC	$	—
	forward exchange contracts				forward exchange contracts
^aPurchased option contracts are included in investments in securities, at value in the Statement of Assets and Liabilities.

For the year ended October 31, 2016, the effect of derivative contracts in the Funds’ Statements of Operations was as follows:


							Net Change in
							Unrealized
Derivative Contracts			Net Realized				Appreciation
Not Accounted for as	Statement of		Gain (Loss) for		Statement of		(Depreciation)
Hedging Instruments	Operations Locations		the Year		Operations Locations		for the Year
	Net realized gain (loss) from:				Net change in unrealized
					appreciation (depreciation) on:
Franklin Balanced Fund
Equity contracts.	Investments	$	(8,276,205	)^a	Investments	$	46,000	^a
	Written options		10,717,079		Written options		(922,509	)
Franklin Equity Income Fund
Equity contracts.	Written options	$	1,315,173		Written options	$	—
Franklin Real Return Fund
Foreign exchange contracts	Foreign currency transactions	$	489,523	^b	Translation of other assets and	$	46,518	^b
					liabilities denominated in foreign
					currencies

^aPurchased option contracts are included in net realized gain (loss) from investments and net change in unrealized appreciation (depreciation) on investments in the
Statement of Operations.
^bForward exchange contracts are included in net realized gain (loss) from foreign currency transactions and net change in unrealized appreciation (depreciation) on
translation of other assets and liabilities denominated in foreign currencies in the Statements of Operations.

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FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS

For the year ended October 31, 2016, the average month end fair value of derivatives, as a percentage of average month end net assets, and the average month end number of open derivative contracts for the year were as follows:


	Franklin		Franklin Equity		Franklin Real
	Balanced Fund		Income Fund		Return Fund
Average month end fair value of derivatives	0.1	%	0.0	%^a	0.1	%
Average month end number of open derivatives	6		—^b		7

^aAmount rounds to less than 0.1%.
^bRounds to less than 1.

See Note 1(e) regarding derivative financial instruments.

9. Credit Facility

The Funds, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 10, 2017. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Funds shall, in addition to interest charged on any borrowings made by the Funds and other costs incurred by the Funds, pay their share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon their relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. Effective February 12, 2016, the annual commitment fee is 0.15%. These fees are reflected in other expenses in the Statements of Operations. During the year ended October 31, 2016, the Funds did not use the Global Credit Facility.

10. Fair Value Measurements

The Funds follow a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds’ own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds’ financial instruments and are summarized in the following fair value hierarchy:

Level 1 – quoted prices in active markets for identical financial instruments
Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
Level 3 – significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of financial instruments)

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

For movements between the levels within the fair value hierarchy, the Funds have adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

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NOTES TO FINANCIAL STATEMENTS

10. Fair Value Measurements (continued)

A summary of inputs used as of October 31, 2016, in valuing the Funds’ assets and liabilities carried at fair value, is as follows:


		Level 1		Level 2		Level 3		Total
Franklin Balanced Fund
Assets:
Investments in Securities:
Equity Investments^a,b	$	1,788,746,956	$	—	$	—	$	1,788,746,956
Equity-Linked Securities		—		287,778,229		—		287,778,229
Convertible Bonds		—		15,946,875		—		15,946,875
Corporate Bonds		—		1,065,207,681		—		1,065,207,681
Options Purchased		12,900,000		—		—		12,900,000
Short Term Investments		120,863,963		—		—		120,863,963
Total Investments in Securities	$	1,922,510,919	$	1,368,932,785	$	—	$	3,291,443,704

Liabilities:
Other Financial Instruments:
Options Written	$	3,151,230	$	—	$	—	$	3,151,230

Franklin Convertible Securities Fund
Assets:
Investments in Securities:
Equity Investments:^a
Consumer Staples	$	46,242,000	$	46,407,790	$	—	$	92,649,790
Energy.		—		24,700,700		—		24,700,700
Financials		—		24,312,575		—		24,312,575
Information Technology		—		46,895,625		—		46,895,625
All Other Equity Investments^b		378,034,279		—		—		378,034,279
Convertible Bonds		—		1,479,711,734		—		1,479,711,734
Escrows and Litigation Trusts		—		—		—^c		—
Short Term Investments		98,515,365		—		—		98,515,365
Total Investments in Securities	$	522,791,644	$	1,622,028,424	$	—	$	2,144,820,068

Franklin Equity Income Fund
Assets:
Investments in Securities:
Equity Investments^a,b	$	1,858,186,682	$	—	$	—	$	1,858,186,682
Equity-Linked Securities		—		140,206,791		—		140,206,791
Short Term Investments		50,191,472		—		—		50,191,472
Total Investments in Securities	$	1,908,378,154	$	140,206,791	$	—	$	2,048,584,945

Franklin Real Return Fund
Assets:
Investments in Securities:
Equity Investments^a,b	$	42,077,039	$	—	$	—	$	42,077,039
Corporate Bonds		—		9,598,558		—		9,598,558
Senior Floating Rate Interests		—		6,155,141		—		6,155,141
Foreign Government and Agency Securities		—		31,878,678		—		31,878,678
U.S. Government and Agency Securities		—		134,343,961		—		134,343,961
Short Term Investments		—		15,773,046		—		15,773,046
Total Investments in Securities	$	42,077,039	$	197,749,384	$	—	$	239,826,423

Other Financial Instruments:
Forward Exchange Contracts	$	—	$	54,624	$	—	$	54,624

^aIncludes common, preferred, convertible preferred stocks and management investment companies.
^bFor detailed categories, see the accompanying Statement of Investments.
^cIncludes securities determined to have no value at October 31, 2016.

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NOTES TO FINANCIAL STATEMENTS

11. Subsequent Events

The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.


Abbreviations

Counterparty		Currency		Selected Portfolio
DBAB	Deutsche Bank AG	BRL	Brazilian Real	ADR	American Depositary Receipt
JPHQ	JP Morgan Chase & Co.	EUR	Euro	ETF	Exchange Traded Fund
		IDR	Indonesian Rupiah	FRN	Floating Rate Note
		MXN	Mexican Peso	REIT	Real Estate Investment Trust
		MYR	Malaysian Ringgit	SPDR	S&P Depositary Receipt
		PLN	Polish Zloty

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Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of Franklin Investors Securities Trust

In our opinion, the accompanying statements of assets and liabilities, including the statements of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Franklin Balanced Fund, Franklin Convertible Securities Fund, Franklin Equity Income Fund and Franklin Real Return Fund, (hereafter referred to as the "Funds") as of October 31, 2016, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of October 31, 2016 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California
December 16, 2016

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Tax Information (unaudited)

Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Funds hereby report the maximum amount allowable but no less than the following amounts as long term capital gain dividends for the fiscal year ended October 31, 2016:


			Franklin		Franklin
	Franklin		Convertible		Equity
	Balanced Fund		Securities Fund		Income Fund

$	4,505,278	$	45,018,104	$	61,952,260

Under Section 871(k)(2)(C) of the Code, Franklin Equity Income Fund hereby reports the maximum amount allowable but no less than $61,040 as short term capital gain dividends for purposes of the tax imposed under Section 871(a)(1)(A) of the Code for the fiscal year ended October 31, 2016.

Under Section 854(b)(1)(A) of the Code, the Funds hereby report the following percentage amounts of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended October 31, 2016:


		Franklin		Franklin		Franklin
Franklin		Convertible		Equity		Real
Balanced Fund		Securities Fund		Income Fund		Return Fund

47.39	%	17.40	%	81.47	%	13.16	%

Under Section 854(b)(1)(B) of the Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended October 31, 2016:


			Franklin		Franklin		Franklin
	Franklin		Convertible		Equity		Real
	Balanced Fund		Securities Fund		Income Fund		Return Fund

$	61,504,456	$	14,676,827	$	58,165,126	$	529,616

Distributions, including qualified dividend income, paid during calendar year 2016 will be reported to shareholders on Form 1099-DIV by mid-February 2017. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.

Under Section 871(k)(1)(C) of the Code, Franklin Convertible Securites Fund hereby reports the maximum amount allowable but no less than $13,138,778 as interest related dividends for purposes of the tax imposed under Section 871(a)(1)(A) of the Code for the fiscal year ended October 31, 2016.

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Board Members and Officers

The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupations during at least the past five years and number of U.S. registered portfolios overseen in the Franklin Templeton Investments fund complex, are shown below. Generally, each board member serves until that person’s successor is elected and qualified.


Independent Board Members

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Harris J. Ashton (1932)	Trustee	Since 1986	143	Bar-S Foods (meat packing company)
One Franklin Parkway				(1981-2010).
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Director of various companies; and formerly, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief Executive
Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).

Mary C. Choksi (1950)	Trustee	Since 2014	137	Avis Budget Group Inc. (car rental)
One Franklin Parkway				(2007-present), Omnicom Group Inc.
San Mateo, CA 94403-1906				(advertising and marketing
				communications services)
				(2011-present) and H.J. Heinz
				Company (processed foods and allied
				products) (1998-2006).
Principal Occupation During at Least the Past 5 Years:
Senior Advisor, Strategic Investment Group (investment management group) (2015-present); director of various companies; and formerly,
Founding Partner and Senior Managing Director, Strategic Investment Group (1987–2015); Founding Partner and Managing Director, Emerging
Markets Management LLC (investment management firm) (1987-2011); and Loan Officer/Senior Loan Officer/Senior Pension Investment
Officer, World Bank Group (international financial institution) (1977-1987).

Edith E. Holiday (1952)	Trustee	Since 1998	143	Hess Corporation (exploration and
One Franklin Parkway				refining of oil and gas) (1993-present),
San Mateo, CA 94403-1906				Canadian National Railway (railroad)
				(2001-present), White Mountains
				Insurance Group, Ltd. (holding
				company) (2004-present), RTI
				International Metals, Inc. (manufacture
				and distribution of titanium)
				(1999-2015) and H.J. Heinz Company
				(processed foods and allied products)
				(1994-2013).
Principal Occupation During at Least the Past 5 Years:
Director or Trustee of various companies and trusts; and formerly, Assistant to the President of the United States and Secretary of the
Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and Assistant
Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).

J. Michael Luttig (1954)	Trustee	Since 2009	143	Boeing Capital Corporation (aircraft
One Franklin Parkway				financing) (2006-2013).
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Executive Vice President, General Counsel and member of the Executive Council, The Boeing Company (aerospace company) (2006-present);
and formerly, Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006).

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Independent Board Members (continued)



			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Larry D. Thompson (1945)	Trustee	Since 2007	143	The Southern Company (energy
One Franklin Parkway				company) (2014-present; previously
San Mateo, CA 94403-1906				2010-2012), Graham Holdings
				Company (education and media
				organization) (2011-present) and
				Cbeyond, Inc. (business
				communications provider)
				(2010-2012).
Principal Occupation During at Least the Past 5 Years:
Director of various companies; John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (2015-present;
previously 2011-2012); and formerly, Executive Vice President - Government Affairs, General Counsel and Corporate Secretary, PepsiCo, Inc.
(consumer products) (2012-2014); Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (2004-2011);
Senior Fellow of The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney
General, U.S. Department of Justice (2001-2003).

John B. Wilson (1959)	Lead	Trustee	117	None
One Franklin Parkway	Independent	since 2007
San Mateo, CA 94403-1906	Trustee	and Lead
		Independent
		Trustee
		since 2008
Principal Occupation During at Least the Past 5 Years:
President, Staples Europe (office supplies) (2012-present); President and Founder, Hyannis Port Capital, Inc. (real estate and private equity
investing); serves on private and non-profit boards; and formerly, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail)
(1996-2000); Chief Financial Officer and Executive Vice President – Finance and Strategy, Staples, Inc. (1992-1996); Senior Vice President –
Corporate Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (consulting firm)
(1986-1990).


Interested Board Members and Officers

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

**Gregory E. Johnson (1961)	Trustee	Since 2013	159	None
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Chairman of the Board, Member - Office of the Chairman, Director and Chief Executive Officer, Franklin Resources, Inc.; officer and/or director
or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin
Templeton Investments; Vice Chairman, Investment Company Institute; and formerly, President, Franklin Resources, Inc. (1994-2015).

**Rupert H. Johnson, Jr. (1940)	Chairman of	Chairman of the	143	None
One Franklin Parkway	the Board,	Board since 2013,
San Mateo, CA 94403-1906	Trustee and	Trustee since 1987
	Vice President	and Vice President
		since 1986
Principal Occupation During at Least the Past 5 Years:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc.; Senior Vice
President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of
Franklin Resources, Inc. and of 42 of the investment companies in Franklin Templeton Investments.

Alison E. Baur (1964)	Vice President	Since 2012	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Deputy General Counsel, Franklin Templeton Investments; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 45
of the investment companies in Franklin Templeton Investments.

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Interested Board Members and Officers (continued)



			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Mark Boyadjian (1964)	Vice President	Since 2003	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Advisers, Inc.; and officer of two of the investment companies in Franklin Templeton Investments.

Laura F. Fergerson (1962)	Chief Executive Since 2009		Not Applicable	Not Applicable
One Franklin Parkway	Officer –
San Mateo, CA 94403-1906	Finance and
	Administration
Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; Vice President, Franklin Advisers, Inc. and Franklin Templeton Institutional, LLC; and
officer of 45 of the investment companies in Franklin Templeton Investments.

Gaston Gardey (1967)	Treasurer,	Since 2009	Not Applicable	Not Applicable
One Franklin Parkway	Chief Financial
San Mateo, CA 94403-1906	Officer and
	Chief
	Accounting
	Officer
Principal Occupation During at Least the Past 5 Years:
Treasurer, U.S. Fund Administration & Reporting, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin
Templeton Investments.

Aliya S. Gordon (1973)	Vice President	Since 2009	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton
Investments.

Steven J. Gray (1955)	Vice President	Since 2009	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc. and Franklin
Alternative Strategies Advisers, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments.

Richard Hsu (1973)	Vice President	Since 2010	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Vice President, Franklin Advisers, Inc.; and officer of three of the investment companies in Franklin Templeton Investments.

Edward B. Jamieson (1948)	President and	President since	Not Applicable	Not Applicable
One Franklin Parkway	Chief Executive 1993 and Chief
San Mateo, CA 94403-1906	Officer –	Executive Officer
	Investment	– Investment
	Management	Management since
		2002
Principal Occupation During at Least the Past 5 Years:
President, Chief Investment Officer and Director, Franklin Advisers, Inc.; Executive Vice President, Franklin Templeton Institutional, LLC; and
officer and/or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 10 of the investment
companies in Franklin Templeton Investments.

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Interested Board Members and Officers (continued)



			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Madeline Lam (1969)	Vice President	Since 2010	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Vice President, Franklin Advisers, Inc.; and officer of two of the investment companies in Franklin Templeton Investments.

Robert Lim (1948)	Vice	Since May	Not Applicable	Not Applicable
One Franklin Parkway	President	2016
San Mateo, CA 94403-1906	– AML
	Compliance
Principal Occupation During at Least the Past 5 Years:
Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton
Investor Services, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments.

Kimberly H. Novotny (1972)	Vice President	Since 2013	Not Applicable	Not Applicable
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923
Principal Occupation During at Least the Past 5 Years:
Associate General Counsel, Franklin Templeton Investments; Vice President and Corporate Secretary, Fiduciary Trust International of the
South; Vice President, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 45 of the investment
companies in Franklin Templeton Investments.

Robert C. Rosselot (1960)	Chief	Since 2013	Not Applicable	Not Applicable
300 S.E. 2nd Street	Compliance
Fort Lauderdale, FL 33301-1923	Officer
Principal Occupation During at Least the Past 5 Years:
Director, Global Compliance, Franklin Templeton Investments; Vice President, Franklin Templeton Companies, LLC; officer of 45 of the
investment companies in Franklin Templeton Investments; and formerly, Senior Associate General Counsel, Franklin Templeton Investments
(2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013).

Karen L. Skidmore (1952)	Vice President	Since 2006	Not Applicable	Not Applicable
One Franklin Parkway	and Secretary
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton
Investments.

Navid J. Tofigh (1972)	Vice President	Since 2015	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments.

Craig S. Tyle (1960)	Vice President	Since 2005	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources,
Inc. and of 45 of the investment companies in Franklin Templeton Investments.

Lori A. Weber (1964)	Vice President	Since 2011	Not Applicable	Not Applicable
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and
Secretary, Templeton Investment Counsel, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments.

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Interested Board Members and Officers (continued)

*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton Investments fund complex. These
portfolios have a common investment manager or affiliated investment managers.
**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director ofFranklin
Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Rupert H. Johnson, Jr. is considered to be an interested person
of the Fund under the federal securities laws due to his position as officer and director and major shareholder of Resources.
Note 1: Rupert H. Johnson, Jr. is the uncle of Gregory E. Johnson.
Note 2: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.

The Sarbanes-Oxley Act of 2002 and Rules adopted by the U.S. Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit
Committee includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined
that there is at least one such financial expert on the Audit Committee and has designated each of Ann Torre Bates and David W. Niemiec as an audit committee
financial expert. The Board believes that Ms. Bates and Mr. Niemiec qualify as such an expert in view of their extensive business background and experience. Ms.
Bates has served as a member of the Fund Audit Committee since 2008. She currently serves as a director of Ares Capital Corporation (2010-present) and United
Natural Foods, Inc. (2013-present) and was formerly a director of Navient Corporation from 2014 to 2016, SLM Corporation from 1997 to 2014 and Allied Capital
Corporation from 2003 to 2010, Executive Vice President and Chief Financial Officer of NHP Incorporated from 1995 to 1997 and Vice President and Treasurer of
US Airways, Inc. until 1995. Mr. Niemiec has served as a member of the Fund Audit Committee since 2006, currently serves as an Advisor to Saratoga Partners
and was formerly its Managing Director from 1998 to 2001. Mr. Niemiec was formerly a director of Emeritus Corporation from 1999 to 2010 and OSI Pharmaceu-
ticals, Inc. from 2006 to 2010, Managing Director of SBC Warburg Dillon Read from 1997 to 1998, and was Vice Chairman from 1991 to 1997 and Chief Financial
Officer from 1982 to 1997 of Dillon, Read & Co. Inc. As a result of such background and experience, the Board believes that Ms. Bates and Mr. Niemiec have each
acquired an understanding of generally accepted accounting principles and financial statements, the general application of such principles in connection with
the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth and level of complexity of accounting
issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for financial reporting and an understanding
of audit committee functions. Ms. Bates and Mr. Niemiec are independent Board members as that term is defined under the applicable U.S. Securities and
Exchange Commission Rules and Releases.

The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request.
Shareholders may call (800) DIAL BEN/342-5236 to request the SAI.

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Shareholder Information

Proxy Voting Policies and Procedures

The Trust’s investment manager has established Proxy Voting
Policies and Procedures (Policies) that the Trust uses to
determine how to vote proxies relating to portfolio securities.
Shareholders may view the Trust’s complete Policies online at
franklintempleton.com. Alternatively, shareholders may request
copies of the Policies free of charge by calling the Proxy Group
collect at (954) 527-7678 or by sending a written request
to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street,
Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of
the Trust’s proxy voting records are also made available online
at franklintempleton.com and posted on the U.S. Securities and
Exchange Commission’s website at sec.gov and reflect the
most recent 12-month period ended June 30.

Quarterly Statement of Investments

The Trust files a complete statement of investments with the
U.S. Securities and Exchange Commission for the first and
third quarters for each fiscal year on Form N-Q. Shareholders
may view the filed Form N-Q by visiting the Commission’s
website at sec.gov. The filed form may also be viewed and
copied at the Commission’s Public Reference Room in
Washington, DC. Information regarding the operations of the
Public Reference Room may be obtained by calling (800)
SEC-0330.

Householding of Reports and Prospectuses

You will receive each Fund’s financial reports every six
months as well as an annual updated summary prospectus
(prospectus available upon request). To reduce Fund expenses,
we try to identify related shareholders in a household and send
only one copy of the financial reports and summary prospectus.
This process, called “householding,” will continue indefinitely
unless you instruct us otherwise. If you prefer not to have these
documents householded, please call us at (800) 632-2301. At
any time you may view current prospectuses/summary
prospectuses and financial reports on our website. If you
choose, you may receive these documents through electronic
delivery.

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Contents

Annual Report
Economic and Market Overview	3
Franklin Adjustable U.S. Government Securities Fund	4
Franklin Floating Rate Daily Access Fund	11
Franklin Low Duration Total Return Fund	19
Franklin Total Return Fund	26
Financial Highlights and Statements of Investments	33
Financial Statements	108
Notes to Financial Statements	114
Report of Independent Registered
Public Accounting Firm	141
Tax Information	142
Board Members and Officers	143
Shareholder Information	148

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2 Annual Report

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Annual Report

Economic and Market Overview

The 10-year Treasury yield, which moves inversely to price, shifted throughout the period. It rose from 2.16% on October 30, 2015, to a period high of 2.36% in November 2015. However, negative interest rates in Japan and Europe, and central banks’ purchases of government bonds, pushed down the Treasury yield. The U.K.’s historic referendum to leave the European Union in June 2016 (also known as the “Brexit”) also boosted safe haven buying by investors. The Treasury yield reached a period low of 1.37% in early July, and ended the period at 1.84%. The yields rose toward period-end, due to positive economic data and signals from the Fed on the possibility of an increase in interest rates in the near term.

1. Source: Bureau of Labor Statistics.

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Annual Report

Franklin Adjustable U.S. Government Securities Fund

This annual report for Franklin Adjustable U.S. Government Securities Fund covers the fiscal year ended October 31, 2016.

Your Fund’s Goal and Main Investments

The Fund seeks to provide a high level of current income while providing lower volatility of principal than a fund that invests in fixed-rate securities by investing at least 80% of its net assets in adjustable-rate U.S. government mortgage securities, which are issued or guaranteed by the U.S. government, its agencies or instrumentalities.¹The Fund’s investments may include securities issued by Ginnie Mae (GNMA) and government-sponsored entities, such as Fannie Mae (FNMA) and Freddie Mac (FHLMC).²

Performance Overview

The Fund’s Class A shares had a -0.32% cumulative total return for the 12 months under review. In comparison, the Fund’s benchmark, the Bloomberg Barclays U.S. Government Index: 1-2 Year Component, posted a +0.71% total return.³The index measures public obligations of the U.S. Treasury with one to two years to final maturity and publicly issued debt of U.S. government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by the U.S. government. You can find the Fund’s long-term performance data in the Performance Summary beginning on page 7.

Investment Strategy

We employ a conservative investment strategy as we strive to produce solid performance in a variety of interest rate climates. We choose securities using a value-oriented approach, emphasizing the bonds’ economic fundamentals in relation to comparable securities as well as their historical prepayment performance.

Manager’s Discussion

The Fund employed a conservative strategy that invested primarily in adjustable-rate mortgage securities (ARMs) that are either explicitly or implicitly backed by the U.S. government.¹During the period, the Fund invested predominantly in securities issued or guaranteed by FNMA and FHLMC. The Fund took a collateral-intensive research approach to analyze the prepayment behavior of individual ARMs to identify those with the most attractive prepayment profiles and focused on seasoned ARMs. Such securities have typically been through several interest-rate cycles and therefore tend to be less sensitive to changes in interest rates, compared to newer issued counterparts. We have found such securities historically to have experienced lower volatility than comparable maturity Treasuries and have provided more consistent income. We continued to focus on seasoned, post-reset FNMA and FHLMC ARM positions with average coupons below 3%.

Although mortgage rates remained low, mortgage credit has remained constrained, and actual prepayment levels have been

1. Securities owned by the Fund, but not shares of the Fund, are issued or guaranteed by the U.S. government, its agencies or instrumentalities, including government-
sponsored entities, as to timely payment of principal and interest.
2. Although U.S. government-sponsored entities may be chartered by acts of Congress, their securities are neither issued nor guaranteed by the U.S. Government. Please see
the Fund’s prospectus for a detailed discussion regarding various levels of credit support for government agency or instrumentality securities. The Fund’s yield and share price
are not guaranteed and will vary with market conditions.
3. Source: Morningstar.
The index is unmanaged and includes reinvested interest. It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not
representative of the Fund’s portfolio.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 38.

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FRANKLIN ADJUSTABLE U.S. GOVERNMENT SECURITIES FUND


Dividend Distributions*
11/1/15–10/31/16
		Dividend per Share (cents)
					Advisor
Month	Class A	Class A1	Class C	Class R6	Class
November	0.9537	1.0662	0.6656	1.2213	1.1371
December	0.8931	1.0056	0.6055	1.1725	1.0728
January	0.8438	0.9473	0.5740	1.1090	1.0132
February	1.0446	1.1549	0.7567	1.3027	1.2254
March	0.9869	1.0968	0.7002	1.2371	1.1669
April	0.9874	1.0928	0.7185	1.2242	1.1563
May	1.0561	1.1692	0.7606	1.3196	1.2414
June	1.0433	1.1493	0.7662	1.2933	1.2171
July	0.9923	1.0944	0.7269	1.2306	1.1597
August	1.1558	1.2721	0.8518	1.4227	1.3465
September	1.1178	1.2248	0.8437	1.3596	1.2905
October	1.1374	1.2450	0.8520	1.3719	1.3169
Total	12.2122	13.5184	8.8217	15.2645	14.3438

*The distribution amount is the sum of the dividend payments to shareholders for
the period shown and includes only estimated tax-basis net investment income.
Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the date you
purchased your shares and any account activity. All Fund distributions will vary
depending upon current market conditions, and past distributions are not indicative
of future trends.

relatively low. The Fund’s London Interbank Offered Rate (LIBOR) indexed ARMs detracted from value, while ARMs indexed to U.S. Treasuries were generally additive.⁴

Thank you for your continued participation in Franklin Adjustable U.S. Government Securities Fund. We look forward to serving your future investment needs.

CFA^®is a trademark owned by CFA Institute.

4. The London Interbank Offered Rate (LIBOR) is the interest rate banks charge each other for loans. LIBOR is a widely used benchmark for short-term interest rates.
See www.franklintempletondatasources.com for additional data provider information.

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FRANKLIN ADJUSTABLE U.S. GOVERNMENT SECURITIES FUND

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FRANKLIN ADJUSTABLE U.S. GOVERNMENT SECURITIES FUND

Performance Summary as of October 31, 2016

Performance as of 10/31/16¹

Cumulative total return excludes sales charges. Average annual total returns include maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 2.25% and the minimum is 0%. Class A: 2.25% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.


	Cumulative		Average Annual		Average Annual
Share Class	Total Return²		Total Return³		Total Return (9/30/16)⁴
A
1-Year	-0.32	%	-2.60	%	-2.75	%
5-Year	+1.64	%	-0.12	%	-0.14	%
10-Year	+19.51	%	+1.57	%	+1.59	%
Advisor⁵
1-Year	+0.05	%	+0.05	%	-0.11	%
5-Year	+2.93	%	+0.58	%	+0.56	%
10-Year	+22.21	%	+2.03	%	+2.04	%


	Distribution		30-Day Standardized Yield⁷
Share Class	Rate⁶		(with waiver)		(without waiver)

A	1.56	%	0.50	%	0.49	%

Advisor	1.84	%	0.76	%	0.75	%

See page 9 for Performance Summary footnotes.

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FRANKLIN ADJUSTABLE U.S. GOVERNMENT SECURITIES FUND

PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

See page 9 for Performance Summary footnotes.

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FRANKLIN ADJUSTABLE U.S. GOVERNMENT SECURITIES FUND

PERFORMANCE SUMMARY

Total Annual Operating Expenses⁹


Share Class
A	0.91	%
Advisor⁵	0.66	%

Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.

All investments involve risks, including possible loss of principal. Interest rate movements, unscheduled mortgage prepayments and other risk factors will affect
the Fund’s share price and yield. Bond prices generally move in the opposite direction of interest rates. As prices of bonds in the Fund adjust to a rise in interest
rates, the Fund’s share price may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The Fund is actively
managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description
of the main investment risks.

1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed
through its current fiscal year-end. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, ifany,hasnotbeen
annualized.
4. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.
5. Effective 5/15/08, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the
following methods of calculation: (a) For periods prior to 5/15/08, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s
maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 5/15/08 actual Advisor Class performance is used reflecting all
charges and fees applicable to that class. Since 5/15/08 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were +13.44% and
+1.50%.
6. Distribution rate is based on an annualization of the sum of the respective class’s past 30 days’ daily distributions and the maximum offering price (NAV for Advisor Class) per
share on 10/31/16.
7. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal
the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders
8. Source: Morningstar. The Bloomberg Barclays U.S. Government Index: 1-2 Year Component includes public obligations of the U.S. Treasury with at least one year up to, but
not including, two years to final maturity and publicly issued debt of U.S. government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by the U.S.
government.
9. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this
report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.

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FRANKLIN ADJUSTABLE U.S. GOVERNMENT SECURITIES FUND

Your Fund’s Expenses

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads), as applicable, on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

Hypothetical Example for Comparison with Other Funds


						Actual		Hypothetical
				(actual return after expenses)				(5% annual return before expenses)
						Expenses				Expenses	Net
		Beginning		Ending		Paid During		Ending		Paid During	Annualized
Share		Account		Account		Period		Account		Period	Expense
Class		Value 5/1/16		Value 10/31/16		5/1/16–10/31/16^1,2		Value 10/31/16		5/1/16–10/31/16^1,2	Ratio²
A	$	1,000	$	1,004.20	$	4.58	$	1,020.56	$	4.62	0.91	%
A1	$	1,000	$	1,004.90	$	3.83	$	1,021.32	$	3.86	0.76	%
C	$	1,000	$	1,003.30	$	6.65	$	1,018.50	$	6.70	1.32	%
R6	$	1,000	$	1,005.90	$	2.77	$	1,022.37	$	2.80	0.55	%
Advisor	$	1,000	$	1,005.40	$	3.33	$	1,021.82	$	3.35	0.66	%

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Franklin Floating Rate Daily Access Fund

We are pleased to bring you Franklin Floating Rate Daily Access Fund’s annual report for the fiscal year ended October 31, 2016.

Your Fund’s Goal and Main Investments

The Fund seeks to provide a high level of current income and, secondarily, preservation of capital by investing at least 80% of its net assets in income-producing floating interest rate corporate loans and corporate debt securities made to or issued by U.S. companies, non-U.S. entities and U.S. subsidiaries of non-U.S. entities.

What are corporate loans?

Corporate loans are typically floating rate loans to corporate borrowers made by a group, or syndicate, of banks and other financial institutions. These loans provide capital to companies for varied purposes, such as merger and acquisition activity, leveraged buyouts or refinancings. These loans are typically syndicated to a group of investors.

Performance Overview

The Fund’s Class A shares delivered a +7.60% cumulative total return for the 12 months under review. In comparison, the Credit Suisse Leveraged Loan Index (CS LLI), which is designed to mirror the investable universe of the U.S. dollar-denominated leveraged loan market, posted a +6.30% total return.¹You can find more of the Fund’s performance data in the Performance Summary beginning on page 15.

Corporate Loan Market Overview

Although weaker technical conditions and falling commodity prices initially contributed to significant volatility within the loan market during the period under review, oil prices eventually rebounded and continued accommodative policies from central banks eventually helped to improve investor sentiment across risk assets. Although flows from loan retail

*Figures reflect certain derivatives held in the portfolio (or their underlying reference
assets) and may not total 100% or may be negative due to rounding, use of any
derivatives, unsettled trades or other factors.
**Rounds to less than 0.1% of net assets.

vehicles remained mixed and collateralized-loan-obligation (CLO) formation was relatively slower, restrained new issuance and repayment activity helped to contribute to stronger bids, especially for loans trading at steeper discounts to par. The rally was largely driven by lower rated loans, while higher rated loans generally underperformed.

Within the primary market, the number of transactions was initially muted during bouts of volatility, but eventually stronger demand led to an increase in refinancing transactions. Among these refinancing deals were repricing transactions (refinancing deals that tighten spreads), which were largely absent from the market earlier in the period. However, issuers were increasingly able to launch these deals to lower interest costs as more loans traded above par. The robust technical environment also led to more deals and structures that are more common in periods of high demand, including deals to finance dividends.

Amid volatility in the credit markets, outflows from loan retail vehicles were elevated, but eventually moderated. Following the Federal Reserve’s (Fed’s) modest rate increase toward the end of 2015, U.S. central bank action remained on hold, but the three-month London Interbank Offered Rate (LIBOR) reached the highest level since 2009 due to regulatory changes for money market funds. For a large portion of the market with no or low LIBOR floors, the increase in the rate was sufficient to increase coupons and generate floating rate income. Moreover,

1. Source: Credit Suisse Group.
The index is unmanaged and includes reinvestment of any income or distributions. It does not reflect any fees, expenses or sales charges. One cannot invest directly in an
index, and an index is not representative of the Fund’s portfolio.
See www.franklintempletondatasources.com for additional data provider information.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 45.

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Annual Report

FRANKLIN FLOATING RATE DAILY ACCESS FUND

as more investors speculated that the Fed could increase rates later in 2016 and possibly lead to further increases in LIBOR, flows into retail vehicles improved.

Although CLO issuance was restrained at the beginning of the period, volume eventually increased as investor sentiment improved. Interest from banks and investors outside the U.S. contributed to meaningfully tighter liability spreads, especially for the highest rated tranches, which contributed to the arbitrage necessary for new vehicles. With tighter spreads, more CLOs also refinanced deals to further lower liability costs. However, the market for new CLO vehicles remained relatively low compared to last year’s pace, as investors faced a number of headwinds. As net new supply was relatively weak, managers faced difficulty in sourcing collateral, while repricing transactions among loans contributed to still challenging arbitrage conditions. Moreover, pending risk retention regulations expected to take effect at the end of 2016 helped to limit CLO formation from a broad number of managers.


Dividend Distributions*
11/1/15–10/31/16
	Dividend per Share (cents)
				Advisor
Month	Class A	Class C	Class R6	Class
November	3.5984	3.3100	3.8109	3.7837
December	3.4873	3.2060	3.7189	3.6649
January	3.2374	2.9759	3.4630	3.4029
February	3.4696	3.1942	3.7110	3.6437
March	3.4825	3.2031	3.7328	3.6589
April	3.2063	2.9396	3.4497	3.3746
May	3.5747	3.2777	3.7139	3.7598
June	3.2429	2.9634	3.4863	3.4195
July	3.0085	2.7375	3.2460	3.1795
August	3.5184	3.2064	3.7946	3.7163
September	2.9919	2.7060	3.2396	3.1724
October	3.1203	2.8225	3.3696	3.3083
Total	39.9382	36.5423	42.7363	42.0845

The default rate increased during the period following the defaults of issuers that were disproportionately concentrated in the energy sector and metals and mining industry. As a result, the default rate by principal amount reached the highest level in a year. Nonetheless, the default rate remained below its historical average, while loan issuers continued to report year-over-year earnings growth.

Investment Strategy

We use a detailed credit analysis process to select corporate loan and corporate debt securities that meet our criteria. We conduct ongoing credit monitoring of our investments. To help manage the credit risk associated with investing in securities rated below investment grade (or if unrated, of comparable quality), we seek to diversify the Fund by investing in a large number of loans of companies that we have identified as having attractive risk/reward profiles, favorable capital structures, strong asset coverage and dominant market shares. This diversification potentially reduces credit risk by spreading assets across many different industries.

In addition, we seek to exploit market inefficiencies by assigning forward-looking credit-risk tiers to issuers based upon our forward-looking analysis of the issuers’ prospects in the near term. This independent analysis enables us to express differences between backward-looking rating assignments of credit-risk tiers and our analysts’ forward-looking assessment of credit risk, thereby allowing us to potentially take advantage of credit risks the market may be overstating or avoid uncompensated credit risks the market may not have adequately identified.

Manager’s Discussion

During the 12-month period under review, the Fund outperformed its benchmark, the CS LLI. The Fund maintained an overweighting in the upper tier of the market throughout the period, which detracted from performance as upper tier loan in the index returned +5.30%, middle tier returned +6.21%, and lower tier returned +12.99%, according to the CS LLI. However, our selection across credit tiers contributed to outperformance compared to the index. This selection included an overweighted allocation to the metals and mining industry and investments in the energy sector that detracted from performance toward the end of 2015, but some of these issuers within these sectors rebounded significantly in 2016 and contributed to performance.

The top contributors included holdings across all credit tiers that had traded at what we considered significant discounts to par at the beginning of the period, but appreciated after benefiting from the technical environment. These issuers included companies within the metals and mining industry, which was a strong performing industry in the index. Peabody Energy, a coal producer, contributed to relative performance as the price of metallurgical coal improved and the company

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FRANKLIN FLOATING RATE DAILY ACCESS FUND


Top 10 Holdings
10/31/16
Company	% of Total
*Sector/Industry*	Net Assets
Valeant Pharmaceuticals International Inc.	2.8	%
Pharmaceuticals
Alinta Energy Finance Pty. Ltd. (Australia)	2.5	%
Electric Utilities
Caraustar Industries Inc.	2.3	%
Forest Products
Community Health Systems Inc.	2.1	%
Health Care Facilities
The Chemours Co. LLC	2.0	%
Diversified Chemicals
NRG Energy Inc.	2.0	%
Independent Power Producers & Energy Traders
Cyanco Intermediate Corp.	1.9	%
Commodity Chemicals
Fieldwood Energy LLC	1.8	%
Oil & Gas Exploration & Production
FMG America Finance Inc. (Australia)	1.6	%
Diversified Metals & Mining
Navistar Inc.	1.6	%
Industrial Machinery

worked toward reaching an agreement for its reorganization plan. Furthermore, the price of the term loan of FMG America (Fortescue), a producer of iron ore, rebounded after increases in the price of iron ore combined with previous efforts to reduce costs and allowed the company to continue to generate free cash flow and pay down debt.

Top detractors from Fund performance during the period reported weaker-than-expected results and all faced credit issues specific to each company. The term loan of radio broadcaster Cumulus Media declined after the company reported weak results due to weaker trends in digital and political advertising and license fees. Furthermore, coal producer Bowie Resource reported results that were lower than expected due to a decline in tons of coal sold. The term loan also declined after the company announced that its debt would not be refinanced due to the termination of an agreement to purchase assets from Peabody Energy.

Our purchases during the period primarily included upper tier loans, including non-institutional loans such as Term Loan A, which are typically held by banks and usually come with covenants and faster amortization schedules. Our purchases were focused on loans trading below par and targeted loans with relatively shorter years to maturity, which we believe would fare relatively better amid a period of increased credit risk as our loans would be closer to refinancing or repayment. Our sells included names in the middle and lower tiers, which we believed provided less attractive relative value given issuer-specific credit risks. During the period, while our weighting in the lower tier increased due to elevated downgrade activity by credit rating agencies, we continued to increase our overweighting in the upper tier and reduce our weighting in the middle tier.

During the period, we employed the use of BKLN, an ETF that seeks to track the loan market to gain liquid exposure to credit as well as to provide liquidity during elevated investor redemptions. We also bought protection in HYCDX to help offset heightened volatility in the credit markets but unwound the position prior to the period-end.

Thank you for your continued participation in Franklin Floating Rate Daily Access Fund. We look forward to serving your future investment needs.

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FRANKLIN FLOATING RATE DAILY ACCESS FUND

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FRANKLIN FLOATING RATE DAILY ACCESS FUND

Performance Summary as of October 31, 2016

Performance as of 10/31/16¹

Cumulative total return excludes sales charges. Average annual total returns include maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 2.25% and the minimum is 0%. Class A: 2.25% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.


	Cumulative		Average Annual		Average Annual
Share Class	Total Return²		Total Return³		Total Return (9/30/16)⁴
A
1-Year	+7.60	%	+5.16	%	+4.13	%
5-Year	+22.65	%	+3.71	%	+4.03	%
10-Year	+37.87	%	+3.03	%	+3.02	%
Advisor
1-Year	+8.00	%	+8.00	%	+6.80	%
5-Year	+24.33	%	+4.45	%	+4.77	%
10-Year	+41.24	%	+3.51	%	+3.50	%


	Distribution		30-Day Standardized Yield⁶
Share Class	Rate⁵		(with waiver) (without waiver)
A	4.07	%	4.75	%	4.66	%
Advisor	4.41	%	5.11	%	5.03	%

See page 17 for Performance Summary footnotes.

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FRANKLIN FLOATING RATE DAILY ACCESS FUND
PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

See page 17 for Performance Summary footnotes.

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			FRANKLIN FLOATING RATE DAILY ACCESS FUND
			PERFORMANCE SUMMARY

Total Annual Operating Expenses⁸
Share Class	With Waiver		Without Waiver
A	0.85	%	0.86	%
Advisor	0.60	%	0.61	%

Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus

All investments involve risks, including possible loss of principal. Investors should be aware that the Fund’s share price and yield will fluctuate with market
conditions. The Fund should not be considered an alternative to money market funds or certificates of deposit (CDs). The floating rate loans and debt securities in
which the Fund invests tend to be rated below investment grade. Investing in higher yielding, lower rated, floating rate loans and debt securities involves greater
risk of default, which could result in loss of principal—a risk that may be heightened in a slowing economy. Interest earned on floating rate loans varies with
changes in prevailing interest rates. Therefore, while floating rate loans offer higher interest income when interest rates rise, they will also generate less income
when interest rates decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The Fund is actively managed but
there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main
investment risks.

1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed
through its current fiscal year-end. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, ifany,hasnotbeen
annualized.
4. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.
5. Distribution rate is based on an annualization of the sum of the respective class’s past 30 days’ daily distributions and the maximum offering price (NAV for Advisor Class) per
share on 10/31/16.
6. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal
the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.
7. Source: Credit Suisse Group. The CS LLI is designed to mirror the investable universe of the U.S. dollar-denominated leveraged loan market. Loans must be below
investment grade and rated no higher than Baa/BB+ or Ba1/BBB+ by Moody’s or S&P.
8. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this
report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.

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FRANKLIN FLOATING RATE DAILY ACCESS FUND

Your Fund’s Expenses

Actual Fund Expenses

Hypothetical Example for Comparison with Other Funds


						Actual		Hypothetical
				(actual return after expenses)				(5% annual return before expenses)
						Expenses				Expenses	Net
		Beginning		Ending		Paid During		Ending		Paid During	Annualized
Share		Account		Account		Period		Account		Period	Expense
Class		Value 5/1/16		Value 10/31/16		5/1/16–10/31/16^1,2		Value 10/31/16		5/1/16–10/31/16^1,2	Ratio²
A	$	1,000	$	1,063.50	$	4.37	$	1,020.81	$	4.46	0.86	%
C	$	1,000	$	1,061.40	$	6.39	$	1,018.80	$	6.53	1.26	%
R6	$	1,000	$	1,065.20	$	2.59	$	1,022.57	$	2.65	0.51	%
Advisor	$	1,000	$	1,066.10	$	3.10	$	1,022.07	$	3.17	0.61	%

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Franklin Low Duration Total Return Fund

We are pleased to bring you Franklin Low Duration Total Return Fund’s annual report for the fiscal year ended October 31, 2016.

Your Fund’s Goal and Main Investments

The Fund seeks a high level of current income as is consistent with prudent investing, while seeking capital preservation. The Fund invests primarily in investment-grade debt securities and investments, including government and corporate debt securities and mortgage- and asset-backed securities, targeting an estimated average portfolio duration of three years or less.

What is duration?

Duration is a measure of a bond’s price sensitivity to interest rate changes. In general, a portfolio of securities with a lower duration can be expected to be less sensitive to interest rate changes than a portfolio with a higher duration.

Performance Overview

The Fund’s Class A shares delivered a +1.88% cumulative total return for the 12 months under review. In comparison, the Fund’s benchmark, the Bloomberg Barclays U.S. Government/Credit Index: 1-3 Year Component, posted a +0.70% total return.¹The index measures public obligations of the U.S. Treasury with one to three years to final maturity and publicly issued debt of U.S. government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by the U.S. government. You can find more of the Fund’s performance data in the Performance Summary beginning on page 22.

Investment Strategy

We seek to invest in a combination of fixed income securities, primarily from across the investment-grade debt universe. We analyze securities using proprietary and nonproprietary research to help us identify attractive investment opportunities across the entire fixed income opportunity set, on a relative basis. When making investment decisions, we evaluate

Portfolio Composition*

Based on Total Net Assets as of 10/31/16

*Figures reflect certain derivatives held in the portfolio (or their underlying reference
assets) and may not total 100% or may be negative due to rounding, use of
derivatives, unsettled trades or other factors.
**Rounds to less than 0.1% of total net assets.

business cycles, yield curves, and values between and within markets. Through a low duration portfolio, we seek to position the Fund to be less affected by interest rate changes than a fund with a higher duration. In addition, we may use derivative transactions, such as forwards, futures contracts and swap

1. Source: Morningstar.
The index is unmanaged and includes reinvested interest. It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not
representative of the Fund’s portfolio.
See www.franklintempletondatasources.com for additional data provider information.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 56.

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FRANKLIN LOW DURATION TOTAL RETURN FUND

agreements to obtain net long or short exposures to select currencies, interest rates, countries, duration or credit risks.

What is the yield curve?

What is a currency forward contract?

A currency forward contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency in exchange for another currency at a specific exchange rate on a future date.

What is a futures contract?

A futures contract is an agreement between the Fund and a counterparty made through a U.S. or foreign futures exchange to buy or sell an underlying instrument or asset at a specific priceonafuturedate.

What are swap agreements?

Swap agreements, such as interest rate, fixed income total return, currency, inflation index and credit default swaps, are contracts between the Fund and another party (the swap counterparty). In a basic swap transaction, the Fund agrees with the swap counterparty to exchange the returns (or differentials in rates of return) earned or realized on a particular “notional amount” of underlying instruments. The notional amount is the set amount selected by the parties as the basis on which to calculate the obligations that they have agreed to exchange. The parties typically do not actually exchange the notional amount. Instead, they agree to exchange the returns that would be earned or realized if the notional amount were invested in given instruments or at given interest rates.

Manager’s Discussion

From a perspective of excess returns over Treasuries, high yield corporate credit performed well. Other major fixed income sectors that delivered positive excess returns, as measured by Bloomberg Barclays indexes, included emerging markets, corporate loans and U.S. investment-grade corporate bonds.

During the period, the Fund’s senior secured floating rate loans and high yield corporate credit exposure benefited performance. Our exposure to non-agency residential mortgage-backed securities and commercial mortgage-backed securities (CMBS) also contributed to results. In contrast, the Fund’s exposure to foreign currency and investment-grade corporate bonds detracted from results. Our exposure to non-U.S. yield curves also hurt Fund performance.


Dividend Distributions*
11/1/15–10/31/16
	Dividend per Share (cents)
				Advisor
Month	Class A	Class C	Class R6	Class
November	2.1509	1.8126	2.4784	2.3689
December**	8.5987	8.2618	8.9311	8.8224
January	1.1178	0.9466	1.2845	1.2292
February	0.9289	0.7290	1.1237	1.0577
March	1.2919	1.0006	1.5989	1.4766
April	0.6957	0.5351	0.8688	0.7998
May	1.0150	0.7992	1.2467	1.1533
June	0.4961	0.3982	0.6001	0.5587
July	0.6996	0.5908	0.8389	0.7833
August	0.4161	0.3397	0.4977	0.4652
September	0.9898	0.8009	1.2224	1.1228
October	1.8268	1.4891	1.9105	2.0440
Total	20.2273	17.7036	22.6017	21.8819

At period-end, we were overweighted compared to the benchmark in many of the credit sectors, including corporate credit and securitized products, based on our belief that valuations remained relatively attractive on a longer term basis. Over the period, we increased our exposure to Treasury inflation protected securities, certain Treasury positions and floating rate loans. We decreased our exposures to CMBS, asset-backed securities and select international bonds.

During the period, the portfolio utilized derivatives, including credit default and currency swaps, currency forwards, Treasury futures, interest rate swaps and currency and credit default swap options, principally as a tool for efficient portfolio management and to manage overall portfolio risk. These derivative transactions may provide the same, or similar, net long or short exposure to select currencies, interest rates,

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FRANKLIN LOW DURATION TOTAL RETURN FUND

countries, duration or credit risks in a less expensive way than by directly purchasing securities. In those markets where portfolio securities are readily available, the cost difference in normal market conditions may be small.

Thank you for your continued participation in Franklin Low Duration Total Return Fund. We look forward to serving your future investment needs.

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Annual Report

FRANKLIN LOW DURATION TOTAL RETURN FUND

Performance Summary as of October 31, 2016

Performance as of 10/31/16¹

Cumulative total return excludes sales charges. Average annual total returns include maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 2.25% and the minimum is 0%. Class A: 2.25% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.


	Cumulative		Average Annual		Average Annual
Share Class	Total Return²		Total Return³		Total Return (9/30/16)⁴
A
1-Year	+1.88	%	-0.43	%	-0.28	%
5-Year	+7.98	%	+1.08	%	+1.27	%
10-Year	+35.02	%	+2.81	%	+2.86	%
Advisor⁵
1-Year	+2.14	%	+2.14	%	+2.31	%
5-Year	+9.37	%	+1.81	%	+1.99	%
10-Year	+38.13	%	+3.28	%	+3.32	%


	Distribution		30-Day Standardized Yield⁷
Share Class	Rate⁶		(with waiver)		(without waiver)

A	2.17	%	1.25	%	1.09	%

Advisor	2.47	%	1.52	%	1.37	%

See page 24 for Performance Summary footnotes.

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FRANKLIN LOW DURATION TOTAL RETURN FUND
PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

See page 24 for Performance Summary footnotes.

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FRANKLIN LOW DURATION TOTAL RETURN FUND
PERFORMANCE SUMMARY

Total Annual Operating Expenses¹⁰
Share Class	With Waiver		Without Waiver
A	0.82	%	0.97	%
Advisor⁵	0.57	%	0.72	%

Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus

All investments involve risks, including possible loss of principal. Investors should be aware that the Fund’s share price and yield will fluctuate with market
conditions. The Fund should not be considered an alternative to money market funds or certificates of deposit (CDs). The floating rate loans and debt securities in
which the Fund invests tend to be rated below investment grade. Investing in higher yielding, lower rated, floating rate loans and debt securities involves greater
risk of default, which could result in loss of principal—a risk that may be heightened in a slowing economy. Interest earned on floating rate loans varies with
changes in prevailing interest rates. Therefore, while floating rate loans offer higher interest income when interest rates rise, they will also generate less income
when interest rates decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The Fund is actively managed but
there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main
investment risks.

1. The Fund has an expense reduction contractually guaranteed through 2/28/17. The Fund also has a fee waiver associated with any investments it makes in a Franklin
Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through its current fiscal year-end. Fund investment results reflect the expense reduction
and fee waiver; without these reductions, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, ifany,hasnotbeen
annualized.
4. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.
5. Effective 5/15/08, the Fund began offering Advisor class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the
following methods of calculation: (a) For periods prior to 5/15/08, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s
maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 5/15/08 actual Advisor Class performance is used reflecting all
charges and fees applicable to that class. Since 5/15/08 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were +27.19% and
+2.88%.
6. Distribution rate is based on an annualization of the sum of the respective class’s past 30 days’ daily distributions and the maximum offering price (NAV for Advisor Class) per
share on 10/31/16.
7. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal
the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.
8. Source: Morningstar. The Bloomberg Barclays U.S. Government/Credit Index: 1-3 Year Component includes dollar-denominated investment grade corporate debt and
non-native currency agency and local authority debt, sovereign, supranational, and taxable municipal debt, public obligations of the U.S. Treasury with at least one year up to,
but not including, three years to final maturity, and publicly issued debt of U.S. government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by
the U.S. government.
9. Source: Bureau of Labor Statistics, bls.gov/cpi. The Consumer Price Index (CPI) is a commonly used measure of the inflation rate.
10. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in
this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.

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FRANKLIN LOW DURATION TOTAL RETURN FUND

Your Fund’s Expenses

Actual Fund Expenses

Hypothetical Example for Comparison with Other Funds


						Actual		Hypothetical
				(actual return after expenses)				(5% annual return before expenses)
						Expenses				Expenses	Net
		Beginning		Ending		Paid During		Ending		Paid During	Annualized
Share		Account		Account		Period		Account		Period	Expense
Class		Value 5/1/16		Value 10/31/16		5/1/16–10/31/16^1,2		Value 10/31/16		5/1/16–10/31/16^1,2	Ratio²
A	$	1,000	$	1,014.80	$	4.05	$	1,021.11	$	4.06	0.80	%
C	$	1,000	$	1,012.70	$	6.07	$	1,019.10	$	6.09	1.20	%
R6	$	1,000	$	1,016.60	$	2.13	$	1,023.03	$	2.14	0.42	%
Advisor	$	1,000	$	1,016.40	$	2.79	$	1,022.77	$	2.80	0.55	%

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Annual Report

Franklin Total Return Fund

This annual report for Franklin Total Return Fund covers the fiscal year ended October 31, 2016.

Your Fund’s Goal and Main Investments

The Fund seeks to provide high current income, consistent with preservation of capital. Capital appreciation over the long term is a secondary goal. The Fund invests at least 80% of its assets in investment-grade debt securities and investments. The Fund currently focuses on government and corporate debt securities and mortgage- and asset-backed securities.

Performance Overview

The Fund’s Class A shares produced a +3.53% cumulative total return for the 12 months under review. In comparison, the Fund’s benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index posted a +4.14% total return.¹The index measures the U.S. investment-grade, fixed-rate, taxable bond market with index components for government and corporate, mortgage pass-through and asset-backed securities. You can find the Fund’s long-term performance data in the Performance Summary beginning on page 29.

Investment Strategy

We seek to invest in a combination of fixed income securities, predominantly from across the investment-grade debt universe. We analyze securities using proprietary and nonproprietary research to help us identify attractive investment opportunities, across the entire fixed income opportunity set, on a relative basis. The Fund may also invest up to 20% of its total assets in noninvestment-grade debt securities. In addition, we may use derivative transactions, such as currency and cross-currency forwards, futures contracts and swap agreements, to obtain net long or short exposures to select currencies, interest rates, countries, duration or credit risks.

What is a currency forward contract?

A currency forward contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency in exchange for another currency at a specific exchange rate on a future date.

1. Source: Morningstar.
The index is unmanaged and includes reinvested interest. It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not
representative of the Fund’s portfolio.
See www.franklintempletondatasources.com for additional data provider information.

The dollar value, number of shares or principal amounts, and names of all portfolio holdings are listed in the Fund’s Consolidated Statement of
Investments (SOI). The Consolidated SOI begins on page 84.

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FRANKLIN TOTAL RETURN FUND

What is a futures contract?

What are swap agreements?

Manager’s Discussion

During the period, the Fund’s exposure to non-U.S. yield curves contributed to performance. The Fund’s exposure to senior secured floating rate loans, below investment-grade corporate bonds and residential mortgage-backed securities also aided results. In contrast, the Fund’s defensive U.S. yield curve positioning was a detractor as yield curve movements had a negative impact on the Fund relative to its benchmark. The Fund’s exposure to foreign currencies and investment-grade corporate bonds also detracted from performance.

At period-end, we were overweighted compared to the benchmark in many of the credit sectors, including corporate credit and most securitized products, based on our belief that valuations remained relatively attractive on a longer term basis. Over the period, we increased our exposure to certain Treasury positions, Treasury inflation protected securities and corporate


Dividend Distributions*
11/1/15–10/31/16
		Dividend per Share (cents)
					Advisor
Month	Class A	Class C	Class R	Class R6	Class
November	3.2070	2.8646	2.9920	3.5813	3.4054
December**	17.0009	16.6524	16.7844	17.3772	17.2315
January	0.8366	0.7061	0.7543	0.9691	0.9200
February	1.1923	1.0145	1.0814	1.3752	1.3066
March	1.2066	0.9925	1.0730	1.4147	1.3433
April	0.4785	0.4025	0.4303	0.5533	0.5282
May	0.8027	0.6610	0.7144	0.9401	0.8931
June	0.4234	0.3573	0.3822	0.4871	0.4657
July	0.5174	0.3967	0.4423	0.6347	0.5951
August	0.4150	0.3371	0.3664	0.4860	0.4647
September	0.6227	0.5322	0.5666	0.7085	0.6801
October	1.1194	0.9745	1.0341	1.2494	1.2106
Total	27.8225	25.8914	26.6214	29.7766	29.0443

What is the yield curve?

loans. We decreased our exposure to international bonds, commercial mortgage-backed securities and municipal bonds as we found better relative opportunities.

During the period, the portfolio utilized derivatives, including credit default and currency swaps, currency forwards, Treasury futures, interest rate swaps, inflation index swaps, and currency and credit default swap options, principally as a tool for efficient portfolio management and to manage overall portfolio risk. These derivative transactions may provide the same, or similar, net long or short exposure to select currencies, interest rates, countries, duration or credit risks in a less expensive way than by directly purchasing securities. In those markets where portfolio securities are readily available, the cost difference in normal market conditions may be small.

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FRANKLIN TOTAL RETURN FUND

What is an option?

An option is a contract to buy or sell a specific financial product known as the option’s underlying instrument at a specific price. The buyer of an option has the right, but not the obligation, to buy or sell the underlying instrument at or until a specified expiration date. Conversely, the seller (“writer”) of an option who opens a transaction is obligated to buy or sell the underlying instrument should the option holder exercise that right.

Thank you for your continued participation in Franklin Total Return Fund. We look forward to serving your future investment needs.

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FRANKLIN TOTAL RETURN FUND

Performance Summary as of October 31, 2016

Performance as of 10/31/16¹

Cumulative total return excludes sales charges. Average annual total returns include maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 4.25% and the minimum is 0%. Class A: 4.25% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.


	Cumulative		Average Annual		Average Annual
Share Class	Total Return²		Total Return³		Total Return (9/30/16)⁴
A
1-Year	+3.53	%	-0.88	%	+0.50	%
5-Year	+17.19	%	+2.33	%	+2.75	%
10-Year	+56.76	%	+4.15	%	+4.29	%
Advisor
1-Year	+3.75	%	+3.75	%	+5.24	%
5-Year	+18.70	%	+3.49	%	+3.88	%
10-Year	+60.85	%	+4.87	%	+5.01	%


	Distribution		30-Day Standardized Yield⁶
Share Class	Rate⁵		(with waiver) (without waiver)
A	1.30	%	2.15	%	2.13	%
Advisor	1.46	%	2.50	%	2.48	%

See page 31 for Performance Summary footnotes.

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Annual Report

FRANKLIN TOTAL RETURN FUND
PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

See page 31 for Performance Summary footnotes.

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					FRANKLIN TOTAL RETURN FUND
					PERFORMANCE SUMMARY

Total Annual Operating Expenses⁹
Share Class	With Waiver		Without Waiver
A	0.91	%	0.94	%
Advisor	0.66	%	0.69	%

Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.

All investments involve risks, including possible loss of principal. Interest rate movements and mortgage prepayments will affect the Fund’s share price and yield.
Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price
may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The risks associated with higher yielding, lower
rated securities include higher risk of default and loss of principal. Investment in foreign securities also involves special risks, including currency fluctuations,
and political and economic uncertainty. Derivatives, including currency management strategies, involve costs and can create economic leverage in the portfolio
which may result in significant volatility and cause the Fund to participate in losses (as well as gains) on an amount that exceeds the Fund’s initial investment. The
Fund may not achieve the anticipated benefits and may realize losses when a counterparty fails to perform as promised. The Fund is actively managed but there is
no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment
risks.

1. The Fund has an expense reduction contractually guaranteed through 2/28/17. The Fund also has a fee waiver associated with any investments it makes in a Franklin
Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through its current fiscal year-end. Fund investment results reflect the expense reduction
and fee waiver; without these reductions, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, ifany,hasnotbeen
annualized.
4. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.
5. Distribution rate is based on an annualization of the sum of the respective class’s past 30 days’ daily distributions and the maximum offering price (NAV for Advisor Class) per
share on 10/31/16.
6. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal
the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.
7. Source: Morningstar. The Bloomberg Barclays U.S. Aggregate Bond Index is a market capitalization-weighted index representing the U.S. investment-grade, fixed-rate,
taxable bond market with index components for government and corporate, mortgage pass-through and asset-backed securities. All issues included are SEC registered,
taxable, dollar denominated and nonconvertible, must have at least one year to final maturity and must be rated investment grade (Baa3/BBB-/BBB- or higher) using the middle
rating of Moody’s, Standard & Poor’s and Fitch, respectively.
8. Source: Bureau of Labor Statistics, bls.gov/cpi. The Consumer Price Index (CPI), is a commonly used measure of the inflation rate.
9. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this
report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.

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FRANKLIN TOTAL RETURN FUND

Your Fund’s Expenses

Actual Fund Expenses

Hypothetical Example for Comparison with Other Funds


						Actual		Hypothetical
				(actual return after expenses)				(5% annual return before expenses)
						Expenses				Expenses	Net
		Beginning		Ending		Paid During		Ending		Paid During	Annualized
Share		Account		Account		Period		Account		Period	Expense
Class		Value 5/1/16		Value 10/31/16		5/1/16–10/31/16^1,2		Value 10/31/16		5/1/16–10/31/16^1,2	Ratio²
A	$	1,000	$	1,022.50	$	4.27	$	1,020.91	$	4.27	0.84	%
C	$	1,000	$	1,020.90	$	6.30	$	1,018.90	$	6.29	1.24	%
R	$	1,000	$	1,021.10	$	5.54	$	1,019.66	$	5.53	1.09	%
R6	$	1,000	$	1,025.00	$	2.34	$	1,022.82	$	2.34	0.46	%
Advisor	$	1,000	$	1,023.80	$	3.00	$	1,022.17	$	3.00	0.59	%

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					FRANKLIN INVESTORS SECURITIES TRUST



Financial Highlights
Franklin Adjustable U.S. Government Securities Fund
					Year Ended October 31,
		2016			2015				2014				2013				2012
Class A
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	8.55		$	8.67			$	8.72			$	8.90			$	8.84
Income from investment operations^a:
Net investment income		0.025			0.019				0.043				0.048				0.078
Net realized and unrealized gains (losses)		(0.053	)		(0.040	)			0.006				(0.098	)			0.117
Total from investment operations		(0.028	)		(0.021	)			0.049				(0.050	)			0.195
Less distributions from net investment income		(0.122	)		(0.099	)			(0.099	)			(0.130	)			(0.135	)
Net asset value, end of year.	$	8.40		$	8.55			$	8.67			$	8.72			$	8.90

Total return^b		(0.32	)%		(0.24	)%			0.56	%		(0.56		)%			2.22	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		0.92	%		0.91	%			0.93	%			0.87	%			0.87	%
Expenses net of waiver and payments by affiliates		0.91	%^c		0.91	%^c,d			0.93	%^c,d			0.87	%			0.87	%
Net investment income		0.43	%		0.39	%			0.48	%			0.63	%			0.91	%

Supplemental data
Net assets, end of year (000’s)	$	667,671		$	848,918		$	1,058,838			$	1,105,674			$	1,308,971
Portfolio turnover rate		11.49	%		9.98	%		14.18		%			8.66	%			9.69	%

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FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS


Franklin Adjustable U.S. Government Securities Fund (continued)
		Year Ended October 31,
		2016				2015				2014	^a
Class A1
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	8.54			$	8.67			$	8.68
Income from investment operations^b:
Net investment income		0.049				0.046				0.018
Net realized and unrealized gains (losses)		(0.054	)			(0.062	)			0.010
Total from investment operations.		(0.005	)			(0.016	)			0.028
Less distributions from net investment income		(0.135	)			(0.114	)			(0.038	)
Net asset value, end of year	$	8.40			$	8.54			$	8.67

Total return^c		(0.05	)%		(0.19		)%			0.32	%

Ratios to average net assets^d
Expenses before waiver and payments by affiliates		0.77	%			0.75	%			0.78	%
Expenses net of waiver and payments by affiliates		0.76	%^e			0.75	%^e,f			0.78	%^e,f
Net investment income.		0.58	%			0.55	%			0.63	%

Supplemental data
Net assets, end of year (000’s)	$	160,469		$	198,670			$	253,021
Portfolio turnover rate		11.49	%			9.98	%		14.18		%

^aFor the period June 18, 2014 (effective date) to October 31, 2014.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
^dRatios are annualized for periods less than one year.
^eBenefit of expense reduction rounds to less than 0.01%.
^fBenefit of waiver and payments by affiliates rounds to less than 0.01%.

34 Annual Report | The accompanying notes are an integral part of these financial statements.

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						FRANKLIN INVESTORS SECURITIES TRUST
										FINANCIAL HIGHLIGHTS


Franklin Adjustable U.S. Government Securities Fund (continued)
						Year Ended October 31,
			2016			2015				2014				2013				2012
Class C
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year		$	8.54		$	8.66			$	8.71			$	8.90			$	8.83
Income from investment operations^a:
Net investment income (loss)			(0.011	)		(0.013	)			(0.004	)			0.006				0.042
Net realized and unrealized gains (losses)			(0.041	)		(0.043	)			0.018				(0.101	)			0.128
Total from investment operations			(0.052	)		(0.056	)			0.014				(0.095	)			0.170
Less distributions from net investment income			(0.088	)		(0.064	)			(0.064	)			(0.095	)			(0.100	)
Net asset value, end of year.		$	8.40		$	8.54			$	8.66			$	8.71			$	8.90

Total return^b		(0.61		)%		(0.65	)%			0.16	%		(1.07		)%			1.93	%

Ratios to average net assets
Expenses before waiver and payments by affiliates			1.32	%		1.31	%			1.33	%			1.27	%			1.27	%
Expenses net of waiver and payments by affiliates			1.31	%^c		1.31	%^c,d			1.33	%^c,d			1.27	%			1.27	%
Net investment income (loss)			0.03	%		(0.01	)%			0.08	%			0.23	%			0.51	%

Supplemental data
Net assets, end of year (000’s)	$	266,186			$	336,254		$	428,031			$	603,067			$	794,201
Portfolio turnover rate		11.49		%		9.98	%		14.18		%			8.66	%			9.69	%

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The accompanying notes are an integral part of these financial statements. | Annual Report 35


FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS


Franklin Adjustable U.S. Government Securities Fund (continued)
					Year Ended October 31,
		2016			2015			2014			2013	^a
Class R6
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	8.55		$	8.68		$	8.73		$	8.72
Income from investment operations^b:
Net investment income.		0.066			0.013			0.088	^c		0.008
Net realized and unrealized gains (losses)		(0.053	)		(0.010	)		(0.009	)		0.018
Total from investment operations		0.013			0.003			0.079			0.026
Less distributions from net investment income		(0.153	)		(0.133	)		(0.129	)		(0.016	)
Net asset value, end of year	$	8.41		$	8.55		$	8.68		$	8.73

Total return^d		0.15	%		0.03	%		0.92	%		0.30	%

Ratios to average net assets^e
Expenses before waiver and payments by affiliates		0.56	%		0.53	%		0.56	%		0.53	%
Expenses net of waiver and payments by affiliates		0.55	%^f		0.53	%^f,g		0.56	%^f,g		0.53	%
Net investment income		0.79	%		0.77	%		0.85	%		0.97	%

Supplemental data
Net assets, end of year (000’s)	$	2,374		$	2,176		$	7,193		$	335
Portfolio turnover rate		11.49	%		9.98	%		14.18	%		8.66	%

^aFor the period September 20, 2013 (effective date) to October 31, 2013.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dTotal return is not annualized for periods less than one year.
^eRatios are annualized for periods less than one year.
^fBenefit of expense reduction rounds to less than 0.01%.
^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

36 Annual Report | The accompanying notes are an integral part of these financial statements.

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						FRANKLIN INVESTORS SECURITIES TRUST
										FINANCIAL HIGHLIGHTS


Franklin Adjustable U.S. Government Securities Fund (continued)
						Year Ended October 31,
			2016			2015				2014				2013				2012
Advisor Class
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year		$	8.55		$	8.68			$	8.73			$	8.91			$	8.85
Income from investment operations^a:
Net investment income			0.046			0.040				0.068				0.073				0.107
Net realized and unrealized gains (losses)			(0.043	)		(0.049	)			0.003				(0.101	)			0.111
Total from investment operations			0.003			(0.009	)			0.071				(0.028	)			0.218
Less distributions from net investment income			(0.143	)		(0.121	)			(0.121	)			(0.152	)			(0.158	)
Net asset value, end of year.		$	8.41		$	8.55			$	8.68			$	8.73			$	8.91

Total return			0.05	%		(0.11	)%			0.82	%		(0.31		)%			2.48	%

Ratios to average net assets
Expenses before waiver and payments by affiliates			0.67	%		0.66	%			0.68	%			0.62	%			0.62	%
Expenses net of waiver and payments by affiliates			0.66	%^b		0.66	%^b,c			0.68	%^b,c			0.62	%			0.62	%
Net investment income			0.68	%		0.64	%			0.73	%			0.88	%			1.16	%

Supplemental data
Net assets, end of year (000’s)	$	227,599			$	308,683		$	416,854			$	411,228			$	437,540
Portfolio turnover rate		11.49		%		9.98	%		14.18		%			8.66	%			9.69	%

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The accompanying notes are an integral part of these financial statements. | Annual Report 37


FRANKLIN INVESTORS SECURITIES TRUST




Statement of Investments, October 31, 2016
Franklin Adjustable U.S. Government Securities Fund
		Principal
		Amount		Value

Mortgage-Backed Securities 97.5%
^aFederal Home Loan Mortgage Corp. (FHLMC) Adjustable Rate 24.4%
FHLMC, 2.361%, 1/01/36	$	6,809,008	$	7,232,498
FHLMC, 2.594%, 9/01/35		11,193,783		11,745,011
FHLMC, 1.94% - 2.657%, 2/01/18 - 5/01/37		11,461,137		12,103,866
FHLMC, 2.67% - 2.689%, 2/01/36 - 4/01/37		12,179,120		12,902,187
FHLMC, 2.708%, 12/01/35.		6,040,446		6,356,706
FHLMC, 2.739%, 4/01/38		6,809,650		7,177,336
FHLMC, 2.754%, 4/01/34		11,645,091		12,352,108
FHLMC, 2.696% - 2.764%, 8/01/33 - 8/01/37		11,615,880		12,304,989
FHLMC, 2.767%, 12/01/35.		6,291,831		6,674,498
FHLMC, 2.801%, 9/01/37		38,396,231		40,850,721
FHLMC, 2.775% - 2.809%, 12/01/34 - 11/01/37		12,098,610		12,824,944
FHLMC, 2.821%, 12/01/35.		6,998,125		7,434,849
FHLMC, 2.824%, 3/01/37		6,293,799		6,661,089
FHLMC, 2.814% - 2.83%, 11/01/35 - 12/01/37		10,254,584		10,859,211
FHLMC, 2.845%, 11/01/35.		5,625,302		5,951,038
FHLMC, 2.83% - 2.847%, 11/01/36 - 10/01/38		11,331,640		11,979,955
FHLMC, 2.847% - 2.877%, 4/01/34 - 4/01/40		11,272,073		11,940,249
FHLMC, 2.91%, 11/01/37		7,839,275		8,264,881
FHLMC, 2.92%, 9/01/36		6,865,053		7,315,344
FHLMC, 2.933%, 7/01/35		15,800,723		16,866,234
FHLMC, 2.881% - 2.949%, 6/01/35 - 5/01/40		12,189,998		12,915,406
FHLMC, 2.952% - 2.977%, 8/01/34 - 9/01/37		9,209,933		9,784,734
FHLMC, 2.982%, 9/01/38		7,348,092		7,803,172
FHLMC, 3.007%, 10/01/41.		7,744,304		8,155,117
FHLMC, 2.994% - 3.03%, 6/01/35 - 11/01/41		12,251,482		12,953,242
FHLMC, 3.046%, 11/01/40.		8,758,658		9,298,031
FHLMC, 3.086%, 6/01/37		14,224,395		15,105,917
FHLMC, 3.126%, 1/01/37		6,867,076		7,300,720
FHLMC, 3.058% - 4.018%, 8/01/34 - 9/01/37		9,365,595		9,964,961
				323,079,014
^aFederal National Mortgage Association (FNMA) Adjustable Rate 73.0%
FNMA, 1.24% - 1.943%, 7/01/17 - 11/01/44		11,552,581		11,878,891
FNMA, 1.943% - 2.18%, 2/01/17 - 3/01/43		12,015,526		12,497,572
FNMA, 2.281%, 1/01/36		6,964,297		7,297,575
FNMA, 2.18% - 2.325%, 7/01/17 - 11/01/42		11,601,496		12,073,459
FNMA, 2.327% - 2.40%, 11/01/17 - 2/01/43		12,482,674		12,987,691
FNMA, 2.40% - 2.45%, 10/01/17 - 2/01/37		12,059,992		12,594,488
FNMA, 2.455%, 12/01/34		10,668,008		11,201,308
FNMA, 2.451% - 2.474%, 5/01/19 - 12/01/39		12,397,770		12,916,383
FNMA, 2.475% - 2.495%, 9/01/19 - 4/01/37		12,097,443		12,676,822
FNMA, 2.495% - 2.511%, 5/01/17 - 9/01/38		12,516,816		13,112,083
FNMA, 2.537%, 3/01/35		5,586,742		5,883,090
FNMA, 2.511% - 2.543%, 2/01/17 - 12/01/39		12,460,318		13,093,300
FNMA, 2.543% - 2.58%, 5/01/18 - 1/01/42		12,459,701		13,087,482
FNMA, 2.58% - 2.597%, 9/01/19 - 1/01/38		11,012,183		11,587,781
FNMA, 2.601%, 2/01/36		13,216,324		13,879,098
FNMA, 2.607%, 3/01/38		7,400,697		7,831,602
FNMA, 2.598% - 2.612%, 2/01/18 - 12/01/37		11,552,984		12,156,041
FNMA, 2.612% - 2.624%, 3/01/18 - 11/01/37		12,393,755		13,066,427
FNMA, 2.624% - 2.638%, 6/01/19 - 1/01/39		12,424,674		13,074,551
FNMA, 2.638% - 2.65%, 12/01/18 - 7/01/38		12,625,433		13,223,926

38 Annual Report

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FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Adjustable U.S. Government Securities Fund (continued)
		Principal
		Amount		Value

Mortgage-Backed Securities (continued)
^aFederal National Mortgage Association (FNMA) Adjustable Rate (continued)
FNMA, 2.651%, 5/01/39	$	11,072,921	$	11,676,237
FNMA, 2.66%, 1/01/38		9,034,442		9,494,322
FNMA, 2.65% - 2.664%, 5/01/22 - 4/01/38		7,944,270		8,331,660
FNMA, 2.664% - 2.669%, 2/01/19 - 4/01/36		12,650,607		13,210,059
FNMA, 2.67% - 2.672%, 9/01/25 - 1/01/38		9,405,351		9,911,861
FNMA, 2.672% - 2.675%, 9/01/22 - 10/01/37		9,135,746		9,630,180
FNMA, 2.675% - 2.682%, 10/01/18 - 7/01/40		12,028,424		12,736,228
FNMA, 2.682% - 2.696%, 9/01/20 - 1/01/41		12,473,057		13,116,992
FNMA, 2.696% - 2.702%, 10/01/22 - 9/01/39		10,148,972		10,720,549
FNMA, 2.702% - 2.722%, 12/01/19 - 5/01/38		12,550,377		13,208,684
FNMA, 2.722% - 2.731%, 3/01/18 - 2/01/41		12,135,488		12,773,736
FNMA, 2.739%, 2/01/36		8,103,507		8,547,551
FNMA, 2.731% - 2.74%, 12/01/20 - 9/01/39		11,362,116		11,947,603
FNMA, 2.749%, 10/01/35		5,763,395		6,098,829
FNMA, 2.74% - 2.754%, 6/01/17 - 3/01/41		11,564,846		12,188,647
FNMA, 2.755% - 2.768%, 12/01/17 - 3/01/38		8,809,080		9,313,285
FNMA, 2.768% - 2.773%, 6/01/19 - 8/01/37		10,121,076		10,693,208
FNMA, 2.774%, 5/01/36		29,595,373		31,378,249
FNMA, 2.773% - 2.782%, 10/01/18 - 3/01/40		9,430,570		9,951,657
FNMA, 2.794%, 1/01/39		8,145,455		8,575,072
FNMA, 2.782% - 2.795%, 1/01/18 - 4/01/40		10,822,274		11,427,107
FNMA, 2.796%, 1/01/36		7,877,532		8,318,614
FNMA, 2.795% - 2.80%, 12/01/17 - 8/01/37		10,363,831		10,923,165
FNMA, 2.80%, 11/01/34		8,321,258		8,766,198
FNMA, 2.80% - 2.808%, 1/01/19 - 5/01/38		11,182,856		11,762,925
FNMA, 2.813%, 3/01/35		11,945,730		12,638,389
FNMA, 2.808% - 2.824%, 1/01/18 - 9/01/39		9,569,386		10,089,259
FNMA, 2.824% - 2.829%, 3/01/19 - 4/01/40		11,514,686		12,202,374
FNMA, 2.831%, 2/01/36		7,627,716		8,052,567
FNMA, 2.829% - 2.837%, 3/01/24 - 7/01/42		12,358,383		13,068,785
FNMA, 2.838% - 2.845%, 9/01/23 - 5/01/39		11,584,190		12,276,176
FNMA, 2.852%, 3/01/37		8,546,643		9,023,771
FNMA, 2.845% - 2.859%, 3/01/19 - 9/01/37		12,112,178		12,807,670
FNMA, 2.86% - 2.867%, 8/01/28 - 1/01/42		12,397,081		13,069,762
FNMA, 2.871%, 9/01/37		5,683,323		6,022,763
FNMA, 2.875%, 8/01/35		5,598,425		5,938,457
FNMA, 2.88%, 9/01/39		5,671,105		6,001,399
FNMA, 2.867% - 2.881%, 8/01/19 - 10/01/38		11,321,704		11,921,824
FNMA, 2.881% - 2.901%, 2/01/24 - 5/01/38		11,323,988		11,927,401
FNMA, 2.906%, 3/01/41		9,934,197		10,523,747
FNMA, 2.902% - 2.916%, 4/01/18 - 7/01/42		12,530,921		13,212,155
FNMA, 2.917%, 9/01/36		6,601,270		6,920,619
FNMA, 2.923%, 12/01/36		10,237,567		10,846,240
FNMA, 2.929%, 7/01/40		7,912,348		8,387,172
FNMA, 2.917% - 2.937%, 6/01/19 - 11/01/39		10,906,994		11,498,014
FNMA, 2.937% - 2.942%, 8/01/33 - 8/01/39		11,238,313		11,908,729
FNMA, 2.947%, 2/01/43		7,073,140		7,485,476
FNMA, 2.942% - 2.95%, 11/01/24 - 9/01/36		11,845,730		12,531,759
FNMA, 2.955%, 5/01/40		7,538,725		8,003,171
FNMA, 2.95% - 2.97%, 1/01/19 - 4/01/41.		12,408,001		13,084,071
FNMA, 2.972%, 11/01/35		5,453,059		5,751,956

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Annual Report

FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Adjustable U.S. Government Securities Fund (continued)
		Principal
		Amount		Value

Mortgage-Backed Securities (continued)
^aFederal National Mortgage Association (FNMA) Adjustable Rate (continued)
FNMA, 2.972% - 2.98%, 8/01/22 - 5/01/48	$	11,922,182	$	12,642,595
FNMA, 2.987%, 6/01/35		6,239,596		6,598,132
FNMA, 2.98% - 2.997%, 11/01/25 - 4/01/44		12,195,545		12,883,531
FNMA, 2.998% - 3.014%, 12/01/16 - 10/01/41		12,512,629		13,217,257
FNMA, 3.014% - 3.027%, 8/01/26 - 8/01/37		12,470,483		13,166,898
FNMA, 3.038%, 1/01/37		8,598,442		9,120,843
FNMA, 3.028% - 3.05%, 5/01/18 - 11/01/37		12,058,988		12,750,959
FNMA, 3.059%, 11/01/34		7,352,879		7,789,208
FNMA, 3.05% - 3.066%, 7/01/17 - 5/01/48		11,465,845		12,102,427
FNMA, 3.067%, 1/01/36		7,252,290		7,708,716
FNMA, 3.067% - 3.106%, 9/01/17 - 3/01/47		10,677,028		11,243,472
FNMA, 3.107% - 3.193%, 6/01/17 - 10/01/40		12,097,981		12,785,823
FNMA, 3.334%, 4/01/34		29,280,214		31,116,247
FNMA, 3.199% - 3.633%, 7/01/17 - 11/01/46		12,451,095		13,155,505
FNMA, 3.634% - 7.67%, 7/01/17 - 3/01/38		4,333,534		4,461,055
				966,758,562
^aGovernment National Mortgage Association (GNMA) Adjustable Rate 0.1%
GNMA, 1.875% - 2.125%, 9/20/33 - 5/20/36.		1,515,940		1,559,734
Total Mortgage-Backed Securities (Cost $1,282,882,940)				1,291,397,310


		Shares

Short Term Investments (Cost $26,812,763) 2.0%
Money Market Funds 2.0%
^b,cInstitutional Fiduciary Trust Money Market Portfolio.		26,812,763		26,812,763
Total Investments (Cost $1,309,695,703) 99.5%				1,318,210,073
Other Assets, less Liabilities 0.5%				6,087,946
Net Assets 100.0%			$	1,324,298,019

See Abbreviations on page 140.

^aThe coupon rate shown represents the rate at period end.
^bNon-income producing.
^cSee Note 3(f) regarding investments in affiliated management investment companies.

40 Annual Report | The accompanying notes are an integral part of these financial statements.

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					FRANKLIN INVESTORS SECURITIES TRUST



Financial Highlights
Franklin Floating Rate Daily Access Fund
					Year Ended October 31,
		2016			2015				2014				2013				2012
Class A
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	8.61		$	9.04			$	9.20			$	9.11			$	8.89
Income from investment operations^a:
Net investment income		0.401			0.406				0.335				0.333				0.403
Net realized and unrealized gains (losses)		0.228			(0.434	)			(0.160	)			0.088				0.225
Total from investment operations		0.629			(0.028	)			0.175				0.421				0.628
Less distributions from net investment income		(0.399	)		(0.402	)			(0.335	)			(0.331	)			(0.408	)
Net asset value, end of year.	$	8.84		$	8.61			$	9.04			$	9.20			$	9.11

Total return^b		7.60	%		(0.37	)%			1.91	%			4.69	%			7.22	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		0.88	%		0.85	%			0.84	%			0.83	%			0.90	%
Expenses net of waiver and payments by affiliates		0.86	%^c		0.84	%^c			0.82	%^c			0.83	%^c,d			0.90	%
Net investment income		4.72	%		4.55	%			3.64	%			3.60	%			4.52	%

Supplemental data
Net assets, end of year (000’s)	$	1,359,862		$	1,553,100		$	1,874,867			$	1,991,138			$	1,295,166
Portfolio turnover rate		34.10	%		46.72	%		83.93		%		42.72		%		80.88		%

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The accompanying notes are an integral part of these financial statements. | Annual Report 41


FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS


Franklin Floating Rate Daily Access Fund (continued)
					Year Ended October 31,
		2016			2015				2014				2013			2012
Class C
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	8.61		$	9.05			$	9.20			$	9.11		$	8.89
Income from investment operations^a:
Net investment income		0.366			0.369				0.298				0.296			0.368
Net realized and unrealized gains (losses)		0.229			(0.443	)			(0.150	)			0.088			0.224
Total from investment operations		0.595			(0.074	)			0.148				0.384			0.592
Less distributions from net investment income		(0.365	)		(0.366	)			(0.298	)			(0.294	)		(0.372	)
Net asset value, end of year.	$	8.84		$	8.61			$	9.05			$	9.20		$	9.11

Total return^b		7.18	%		(0.87	)%			1.62	%			4.28	%		6.79	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		1.28	%		1.25	%			1.24	%			1.23	%		1.30	%
Expenses net of waiver and payments by affiliates		1.26	%^c		1.24	%^c			1.22	%^c			1.23	%^c,d		1.30	%
Net investment income		4.32	%		4.15	%			3.24	%			3.20	%		4.12	%

Supplemental data
Net assets, end of year (000’s)	$	551,726		$	627,805		$	742,602			$	765,839			$	431,818
Portfolio turnover rate		34.10	%		46.72	%		83.93		%		42.72		%		80.88	%

42 Annual Report | The accompanying notes are an integral part of these financial statements.

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		FRANKLIN INVESTORS SECURITIES TRUST
						FINANCIAL HIGHLIGHTS


Franklin Floating Rate Daily Access Fund (continued)
				Year Ended October 31,
		2016				2015			2014			2013	^a
Class R6
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	8.60		$		9.05		$	9.21		$	9.21
Income from investment operations^b:
Net investment income.		0.422				0.437			0.364			0.175
Net realized and unrealized gains (losses)		0.245				(0.457	)		(0.159	)		(0.001	)
Total from investment operations		0.667				(0.020	)		0.205			0.174
Less distributions from net investment income		(0.427	)			(0.430	)		(0.365	)		(0.174	)
Net asset value, end of year	$	8.84		$		8.60		$	9.05		$	9.21

Total return^c		7.96	%	(0.16			)%		2.36	%		1.80	%

Ratios to average net assets^d
Expenses before waiver and payments by affiliates		0.53	%			0.72	%		0.52	%		0.51	%
Expenses net of waiver and payments by affiliates		0.51	%^e			0.51	%^e		0.50	%^e		0.51	%^e,f
Net investment income		5.07	%			4.88	%		3.96	%		3.92	%

Supplemental data
Net assets, end of year (000’s)	$	12,333			$	7		$	465		$	1,339
Portfolio turnover rate		34.10	%	46.72			%		83.93	%		42.72	%

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The accompanying notes are an integral part of these financial statements. | Annual Report 43


FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS


Franklin Floating Rate Daily Access Fund (continued)
		��			Year Ended October 31,
		2016			2015				2014				2013			2012
Advisor Class
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	8.61		$	9.05			$	9.20			$	9.11		$	8.89
Income from investment operations^a:
Net investment income		0.422			0.427				0.358				0.355			0.426
Net realized and unrealized gains (losses)		0.239			(0.443	)			(0.150	)			0.089			0.225
Total from investment operations		0.661			(0.016	)			0.208				0.444			0.651
Less distributions from net investment income		(0.421	)		(0.424	)			(0.358	)			(0.354	)		(0.431	)
Net asset value, end of year.	$	8.85		$	8.61			$	9.05			$	9.20		$	9.11

Total return		8.00	%		(0.23	)%			2.28	%			4.95	%		7.49	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		0.63	%		0.60	%			0.59	%			0.58	%		0.65	%
Expenses net of waiver and payments by affiliates		0.61	%^b		0.59	%^b			0.57	%^b			0.58	%^b,c		0.65	%
Net investment income		4.97	%		4.80	%			3.89	%			3.85	%		4.77	%

Supplemental data
Net assets, end of year (000’s)	$	1,108,692		$	1,405,281		$	2,019,477			$	2,374,914			$	739,974
Portfolio turnover rate		34.10	%		46.72	%		83.93		%		42.72		%		80.88	%

44 Annual Report | The accompanying notes are an integral part of these financial statements.

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FRANKLIN INVESTORS SECURITIES TRUST


Statement of Investments, October 31, 2016
Franklin Floating Rate Daily Access Fund
	Country		Shares		Value

Common Stocks (Cost $13,170,468) 0.0%^†
Coal & Consumable Fuels 0.0%^†
^a,bWarrior Met Coal LLC, A.	United States		6,893	$	1,550,925


			Principal
			Amount*

Corporate Bonds (Cost $532,432) 0.0%^†
Aerospace & Defense 0.0%^†
^c,dErickson Air-Crane Inc., Purchase Price Notes, 6.00%, 11/02/20.	United States	$	532,431		55,695
^e,fSenior Floating Rate Interests 85.9%
Aerospace & Defense 1.7%
Delos Finance S.A.R.L. (ILFC), Loans, 3.588%, 3/06/21.	United States		23,200,000		23,391,400
Doncasters U.S. Finance LLC,
Second Lien Term Loan, 9.50%, 10/09/20	United States		6,608,226		6,244,773
Term B Loans, 4.50%, 4/09/20	United States		18,580,788		18,470,474
Leidos (Abacus Innovations Corp.), B Term Loan, 3.284%, 8/16/23	United States		3,327,433		3,357,590
					51,464,237
Agricultural Products 0.1%
Allflex Holdings III Inc., Second Lien Initial Term Loan, 8.00%, 7/19/21.	United States		2,287,774		2,284,915
Air Freight & Logistics 0.5%
XPO Logistics Inc., Refinancing Term Loans, 4.25%, 10/30/21	United States		15,014,771		15,133,012
Airlines 2.1%
^gAir Canada, Term Loan, 3.614%, 10/06/23	Canada		17,986,185		18,064,874
American Airlines Inc.,
2015 Term Loans, 3.25%, 6/27/20	United States		4,285,738		4,296,787
Class B Term Loans, 3.50%, 4/28/23	United States		14,768,712		14,804,482
Flying Fortress Inc. (ILFC), New Loan, 3.588%, 4/30/20	United States		11,584,329		11,680,259
U.S. Airways Inc., Tranche B1 Term Loan, 3.50%, 5/23/19	United States		14,489,807		14,528,292
					63,374,694
Aluminum 0.5%
Novelis Inc., Initial Term Loan, 4.00% - 4.088%, 6/02/22.	Canada		15,168,825		15,233,292
Apparel Retail 1.7%
^gAscena Retail Group Inc., Tranche B Term Loan, 5.25%, 8/21/22	United States		45,831,722		44,781,396
The Men’s Wearhouse Inc., Tranche B Term Loan, 4.50%, 6/18/21	United States		8,069,109		7,974,903
					52,756,299
Auto Parts & Equipment 1.7%
FRAM Group Holdings Inc. (Autoparts Holdings), Term Loan, 7.00%, 7/29/17.	United States		15,736,445		15,260,418
TI Group Automotive Systems LLC, Initial U.S. Term Loan, 4.50%, 6/25/22	United States		36,523,701		36,645,142
					51,905,560
Broadcasting 4.5%
Cumulus Media Holdings Inc., Term Loans, 4.25%, 12/23/20	United States		23,059,275		16,026,196
Gray Television Inc., Term Loan B, 3.938%, 6/13/21.	United States		26,898,307		27,089,958
Media General Inc., Term B Loan, 4.00%, 7/31/20	United States		35,678,497		35,732,657
^gNexstar Broadcasting Group Inc., Term Loan B, 5.75%, 9/30/23	United States		14,052,229		14,125,005
Radio One Inc., Term Loan B, 5.04%, 12/31/18	United States		40,487,500		40,588,719
Sinclair Television Group Inc., Incremental Term Loan B-1, 3.50%, 7/31/21	United States		2,958,312		2,974,952
					136,537,487

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Annual Report

FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Floating Rate Daily Access Fund (continued)
			Principal
	Country		Amount*		Value

^e,fSenior Floating Rate Interests (continued)
Cable & Satellite 2.9%
Charter Communications Operating LLC (CCO Safari), Term A Loan, 2.54%,
5/18/21	United States	$	29,221,330	$	29,093,487
CSC Holdings Inc. (Cablevision), 2016 Extended Term Loans, 3.876%, 10/11/24 .	United States		26,938,469		27,067,558
^gUPC Financing Partnership, Facility AN, 4.08%, 8/31/24	Netherlands		8,649,087		8,704,225
Virgin Media Bristol LLC, F Facility, 3.50%, 6/30/23	United States		24,326,626		24,445,729
					89,310,999
Casinos & Gaming 2.2%
Aristocrat Technologies Inc., Term B-1 Loans, 3.631%, 10/20/21	United States		7,559,055		7,603,465
Boyd Gaming Corp., Term A Loan, 3.034%, 9/15/21	United States		5,065,198		5,042,506
^hCannery Casino Resorts LLC, Second Lien Term Loan, PIK (all cash), 12.50% ,
10/02/19	United States		6,616,106		6,654,698
Jack Ohio Finance LLC, Funded Term B Loans, 6.25%, 6/20/19	United States		39,485,200		39,518,091
Penn National Gaming Inc., Term A Facility Loans, 2.54%, 10/30/18	United States		6,494,485		6,482,307
					65,301,067
Coal & Consumable Fuels 2.5%
ⁱBowie Resource Holdings LLC,
First Lien Initial Term Loan, 6.75%, 8/16/20	United States		28,787,853		23,893,918
Second Lien Initial Term Loan, 11.75%, 2/16/21.	United States		4,464,778		3,683,442
Foresight Energy LLC, Term Loans, 6.50%, 8/23/20.	United States		39,247,004		37,284,654
Peabody Energy Corp., Commitment (DIP Facility), 10.00%, 4/18/17	United States		4,436,015		4,637,485
Westmoreland Coal Co., Term Loan, 7.50%, 12/16/20	United States		7,980,370		6,404,247
					75,903,746
Commodity Chemicals 2.0%
Cyanco Intermediate Corp., Initial Term Loan, 5.50%, 5/01/20	United States		58,961,412		59,108,815
Communications Equipment 1.3%
Ciena Corp.,
2016 Term Loans, 4.25%, 4/25/21	United States		6,565,231		6,598,057
Term Loan, 3.75%, 7/15/19	United States		13,626,427		13,694,559
^gCommScope Inc., Tranche 5 Term Loan, 5.00%, 12/29/22	United States		19,363,995		19,493,252
					39,785,868
Construction & Engineering 0.1%
Ventia Pty. Ltd., Refinancing Term B Loans, 5.00%, 5/21/22	Australia		3,862,974		3,906,433
Data Processing & Outsourced Services 2.0%
^gGlobal Payments Inc., Delayed Draw Term Loan (A-2), 4.75%, 10/31/21	United States		29,647,089		29,606,176
MoneyGram International Inc., Term Loan, 4.25%, 3/27/20	United States		30,991,566		30,255,516
					59,861,692
Diversified Chemicals 3.9%
The Chemours Co. LLC, Tranche B Term Loan, 3.75%, 5/12/22	United States		62,632,794		62,012,782
Ineos U.S. Finance LLC, 2018 Dollar Term Loans, 3.75%, 5/04/18	United States		24,164,535		24,234,395
ⁱOCI Beaumont LLC, Term B-3 Loan, 7.75%, 8/20/19	United States		31,032,685		30,528,404
					116,775,581
Diversified Metals & Mining 1.6%
FMG America Finance Inc. (Fortescue Metals Group), Loans, 3.75%, 6/30/19	Australia		49,640,303		49,663,585
Diversified Real Estate Activities 0.1%
^gRealogy Group LLC, Term Loan A, 2.526%, 10/23/20	United States		4,044,625		4,047,052

46 Annual Report

franklintempleton.com

FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Floating Rate Daily Access Fund (continued)
			Principal
	Country		Amount*		Value

^e,fSenior Floating Rate Interests (continued)
Electric Utilities 2.6%
Alinta Energy Finance Pty. Ltd.,
Delayed Draw Term Commitments, 6.375%, 8/13/18	Australia	$	4,723,809	$	4,735,619
Term B Loans, 6.375%, 8/13/19	Australia		71,105,627		71,283,391
EFS Cogen Holdings I LLC (Linden), Term B Advance, 5.25%, 6/28/23	United States		3,231,473		3,267,827
					79,286,837
Electronic Equipment & Instruments 0.0%^†
Zebra Technologies Corp., Refinancing Term Loan, 4.089%, 10/27/21	United States		568,101		574,729
Forest Products 2.9%
Appvion Inc., Term Loan, 6.25%, 6/28/19	United States		19,632,956		18,945,803
Caraustar Industries Inc.,
Term Loan B, 8.00%, 5/01/19.	United States		30,815,550		31,154,521
Term Loan C, 8.00%, 5/01/19	United States		36,992,922		37,399,844
					87,500,168
General Merchandise Stores 0.4%
Dollar Tree Inc.,
Term A-1 Loans, 2.25%, 7/06/20	United States		10,482,777		10,466,319
Term B-3 Loans, 3.00%, 7/06/22	United States		2,392,014		2,418,924
					12,885,243
Health Care Distributors 0.5%
Team Health Inc., New Tranche B Term Loan, 3.838%, 11/23/22	United States		14,987,047		15,068,921
Health Care Equipment 1.3%
Carestream Health Inc.,
Second Lien Loan, 9.50%, 12/07/19	United States		16,900,077		15,041,068
Term Loan, 5.00%, 6/07/19	United States		6,704,803		6,251,028
Mallinckrodt International Finance SA, Initial Term B Loan, 3.338%, 3/19/21.	Luxembourg		17,602,019		17,596,528
					38,888,624
Health Care Facilities 3.0%
Amsurg Corp., Initial Term Loan, 3.50%, 7/16/21	United States		28,969,347		29,010,078
Community Health Systems Inc., 2018 Term F Loans, 4.083%, 12/31/18	United States		64,540,508		63,238,145
					92,248,223
Health Care Services 0.2%
DaVita Healthcare Partners Inc., Tranche A Term Loan, 2.284%, 6/24/19	United States		7,343,750		7,355,684
Household Products 0.3%
Spectrum Brands Inc.,
Initial Term Loans, 3.50% - 5.25%, 6/23/22	United States		8,363,331		8,422,402
^gTerm Loans, 5.00%, 6/23/22	United States		711,861		719,572
					9,141,974
Independent Power Producers & Energy Traders 3.9%
Calpine Construction Finance Co. LP, Term B-1 Loan, 3.09%, 5/03/20	United States		29,692,983		29,572,370
ⁱCalpine Corp.,
Term Loan (B5), 3.59%, 5/27/22.	United States		19,412,307		19,480,561
Term Loan (B6), 4.00%, 1/15/23.	United States		8,932,500		8,990,561
NRG Energy Inc., Term Loans, 3.50%, 6/30/23	United States		59,458,523		59,651,763
					117,695,255

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Annual Report

FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Floating Rate Daily Access Fund (continued)
			Principal
	Country		Amount*		Value

^e,fSenior Floating Rate Interests (continued)
Industrial Machinery 4.1%
Alfred Fueling Systems Inc. (Wayne Fueling),
First Lien Initial Term Loan, 4.50%, 6/18/21	United States	$	14,810,671	$	14,829,184
Second Lien Initial Term Loan, 8.50%, 6/20/22.	United States		23,842,353		24,021,171
^gHarsco Corp., Initial Term Loan, 7.50%, 11/01/23	United States		3,196,453		3,236,408
Navistar Inc., Tranche B Term Loans, 6.50%, 8/07/20	United States		47,730,838		48,088,820
Onsite Rental Group Operations Pty. Ltd., Term B Loan, 5.50%, 7/30/21	Australia		40,866,351		32,897,412
					123,072,995
Integrated Telecommunication Services 1.0%
Global Tel*Link Corp.,
^gSecond Lien Term Loan, 9.00%, 11/20/20	United States		3,209,595		3,099,265
Term Loan, 5.00%, 5/23/20	United States		7,453,634		7,262,635
Intelsat Jackson Holdings SA, Tranche B-2 Term Loan, 3.75%, 6/30/19	Luxembourg		3,467,350		3,322,155
Zayo Group LLC, 2021 Term Loans, 3.75%, 5/06/21	United States		15,074,368		15,074,368
					28,758,423
Internet Software & Services 1.4%
BMC Software Finance Inc., Initial U.S. Term Loans, 5.00%, 9/10/20	United States		35,874,942		35,452,657
^gRackspace Hosting Inc., Term B Loan, 6.50%, 11/03/23.	United States		5,327,421		5,365,001
					40,817,658
IT Consulting & Other Services 0.9%
Sungard Availability Services Capital Inc., Tranche B Term Loan, 6.00%, 3/29/19 .	United States		30,116,931		28,661,289
Leisure Facilities 2.4%
24 Hour Fitness Worldwide Inc., Term Loan, 4.75%, 5/28/21.	United States		28,234,148		27,740,050
Fitness International LLC, Term B Loan, 6.00%, 7/01/20	United States		45,745,851		45,831,625
					73,571,675
Leisure Products 0.8%
Scientific Games International Inc., Term B-1 Loan, 6.00%, 10/18/20.	United States		24,827,455		24,991,490
Marine 1.3%
Navios Maritime Partners LP, Initial Term Loan, 5.25%, 6/27/18.	Marshall Islands		41,154,391		37,784,875
Metal & Glass Containers 0.7%
CD&R Millennium U.S. Acquico LLC, Second Lien Initial Term Loan, 8.75%,
7/31/22	United States		22,149,800		21,872,928
Movies & Entertainment 1.1%
^gAMC Entertainment Holdings Inc., 2016 Incremental Term Loan, 5.25%,
12/15/23	United States		1,066,907		1,063,525
^gLions Gate Entertainment Corp., Term Loan A, 5.00%, 10/12/21	United States		15,000,000		14,850,000
^gLive Nation Entertainment Inc., Term B-2 Loans, 5.00%, 10/31/23	United States		6,854,958		6,872,095
Regal Cinemas Corp., Term Loan, 3.50%, 4/01/22.	United States		11,500,111		11,576,783
					34,362,403
Oil & Gas Equipment & Services 0.4%
^gMcDermott Finance LLC, Term Loan, 8.25% - 8.484%, 4/16/19	United States		10,472,292		10,577,015
Oil & Gas Exploration & Production 3.2%
Fieldwood Energy LLC, Loans, 3.875%, 10/01/18	United States		59,783,683		55,150,447
^d,iSamson Investment Co., Second Lien Tranche I Term Loan, 5.00%, 9/25/18	United States		27,720,000		6,722,100
UTEX Industries Inc., First Lien Initial Term Loan, 5.00%, 5/21/21	United States		42,452,829		36,297,169
					98,169,716

48 Annual Report

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FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Floating Rate Daily Access Fund (continued)
			Principal
	Country		Amount*		Value

^e,fSenior Floating Rate Interests (continued)
Oil & Gas Storage & Transportation 1.2%
OSG Bulk Ships Inc., Initial Term Loan, 5.25%, 8/05/19	United States	$	22,164,896	$	21,998,659
OSG International Inc., Initial Term Loan, 5.75%, 8/05/19	United States		13,358,947		13,350,598
					35,349,257
Packaged Foods & Meats 1.0%
CSM Bakery Supplies LLC,
Second Lien Term Loan, 8.75%, 7/03/21	United States		11,591,497		10,475,815
^gTerm Loans, 5.00%, 7/03/20	United States		5,663,804		5,523,982
JBS USA LLC,
Incremental Term Loan, 3.75%, 9/18/20	United States		7,120,900		7,120,900
Initial Term Loan, 3.75%, 5/25/18	United States		7,654,383		7,663,951
					30,784,648
Personal Products 1.4%
FGI Operating Co. LLC (Freedom Group), Term B Loans, 5.50%, 4/19/19	United States		46,282,918		43,621,650
Pharmaceuticals 5.9%
Endo Luxembourg Finance Co. I S.A.R.L. and Endo, 2014 Term A Loans,
3.063%, 2/28/19	United States		12,139,860		12,200,559
Endo Luxembourg Finance Co. I S.A.R.L. and Endo LLC, 2015 Incremental Term
B Loans, 3.75%, 9/25/22.	United States		37,529,574		37,523,719
Grifols Worldwide Operations USA Inc., U.S. Tranche B Term Loan, 3.46%,
2/27/21	United States		33,346,085		33,679,546
^gHorizon Pharma Inc., Incremental Term B-1 Loan, 7.00%, 5/07/21	United States		1,065,484		1,071,478
^gRPI Finance Trust, Term A-2 Term Loan A, 4.75%, 10/14/20.	United States		9,411,460		9,362,803
Valeant Pharmaceuticals International Inc.,
^gSeries A-3 Tranche A Term Loan, 4.29%, 10/20/18.	United States		21,300,633		21,269,576
Series C-2 Tranche B Term Loan, 5.25%, 12/11/19	United States		39,421,014		39,450,580
^gSeries D-2 Tranche B Term Loan, 5.00%, 2/13/19	United States		19,126,268		19,124,566
Series F-1 Tranche B Term Loan, 5.50%, 4/01/22.	United States		3,724,808		3,731,095
					177,413,922
Restaurants 0.3%
KFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of America LLC (Yum
Brands), Term B Loans, 3.286%, 6/16/23	United States		9,134,640		9,237,404
Semiconductor Equipment 0.1%
MKS Instruments Inc., Tranche B-1 Term Loans, 4.25%, 5/01/23.	United States		3,544,489		3,582,887
Semiconductors 3.0%
Avago Technologies Cayman Finance Ltd., Term B-3 Loans, 3.535%, 2/01/23	Singapore		26,235,875		26,539,241
MACOM Technology Solutions Holdings Inc., Initial Term Loan, 4.628%, 5/07/21 .	United States		20,222,645		20,450,150
NXP BV/NXP Funding LLC, Tranche F Loan, 3.405%, 12/07/20	United States		18,570,157		18,655,746
^gON Semiconductor Corp., 2016 Replacement Term Loans, 3.777%, 3/31/23	United States		25,591,427		25,769,645
					91,414,782
Specialized Consumer Services 1.1%
Avis Budget Car Rental LLC, Extended Tranche B Term Loan, 3.34%, 3/15/22	United States		7,020,237		7,082,542
Sabre GLBL Inc., Incremental Term A Loan, 3.338%, 7/18/21	United States		27,606,250		27,545,240
					34,627,782

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Annual Report

FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Floating Rate Daily Access Fund (continued)
			Principal
	Country		Amount*		Value

^e,fSenior Floating Rate Interests (continued)
Specialty Chemicals 1.3%
Axalta Coating Systems U.S. Holdings Inc., 2014 Specified Refinancing Term,
3.75%, 2/01/20	United States	$	12,704,080	$	12,812,599
Oxbow Carbon LLC,
Second Lien Initial Term Loan, 8.00%, 1/17/20.	United States		16,364,314		16,037,027
Tranche B Term Loan, 4.25%, 7/19/19	United States		3,949,562		3,966,841
Solenis International LP and Solenis Holdings 3 LLC, Second Lien Term Loan,
7.75%, 7/31/22	United States		7,800,000		7,658,625
					40,475,092
Specialty Stores 4.1%
99 Cents Only Stores, Tranche B-2 Loan, 4.50%, 1/11/19.	United States		26,618,117		20,861,950
BJ’s Wholesale Club Inc., Second Lien 2013 (Nov) Replacement Loans, 8.50%,
3/26/20	United States		26,670,289		26,830,311
Evergreen AcqCo. 1 LP (Savers), Term Loan, 5.00%, 7/09/19.	United States		46,062,867		42,723,309
PetSmart Inc., Tranche B-2 Loans, 4.00%, 3/11/22	United States		32,218,078		32,318,760
					122,734,330
Technology Distributors 1.3%
Dell International LLC, Term A-3 Loan, 2.54%, 12/31/18.	United States		37,924,006		37,941,792
Technology Hardware, Storage & Peripherals 0.3%
Western Digital Corp., Term Loan B-1, 4.50%, 4/29/23	United States		8,273,374		8,379,380
Tires & Rubber 0.3%
The Goodyear Tire & Rubber Co., Second Lien Loans, 3.86%, 4/30/19	United States		9,160,418		9,230,761
Trucking 0.8%
The Hertz Corp., Tranche B-1 Term Loan, 3.50%, 6/30/23	United States		23,304,567		23,481,426
Total Senior Floating Rate Interests
(Cost $2,648,826,612)					2,603,915,572

Asset-Backed Securities 4.8%
Other Diversified Financial Services 4.8%
^jApidos CDO, 2013-14A, C2, 144A, 4.85%, 4/15/25	United States		3,540,000		3,568,001
^e,jAtrium IX, 9A, C, 144A, FRN, 4.079%, 2/28/24	United States		2,500,000		2,503,575
^e,jBallyrock CLO LLC, 2014-1A, B, 144A, FRN, 4.081%, 10/20/26	United States		5,200,000		5,228,184
^e,jCarlyle Global Market Strategies CLO Ltd.,
2014-2A, A, 144A, FRN, 2.287%,5/15/25	United States		5,000,000		5,018,500
2014-4A, C, 144A, FRN, 4.03%,10/15/26	United States		6,500,000		6,519,435
^e,jCatamaran CLO Ltd.,
2013-1A, C, 144A, FRN, 3.486%,1/27/25	United States		3,500,000		3,457,895
2014-2A, B, 144A, FRN, 3.882%,10/18/26.	United States		13,240,000		13,248,209
^e,jCent CLO LP,
2013-17A, B, 144A, FRN, 3.887%,1/30/25.	United States		3,850,000		3,887,153
2014-22A, B, 144A, FRN, 3.988%,11/07/26	United States		7,400,000		7,470,522
^e,jCumberland Park CLO Ltd., 2015-2A, C, 144A, FRN, 3.731%, 7/20/26	United States		3,850,000		3,842,300
^e,jEaton Vance CDO Ltd.,
2014-1A, A, 144A, FRN, 2.33%,7/15/26	United States		6,510,000		6,510,391
2014-1A, B, 144A, FRN, 2.93%,7/15/26	United States		6,510,000		6,518,007
2014-1A, C, 144A, FRN, 3.88%,7/15/26	United States		5,630,000		5,626,903
^jEmerson Park CLO Ltd., 2013-1A, C2, 144A, 5.64%, 7/15/25	United States		3,600,000		3,639,816
^jFlatiron CLO Ltd., 2014-1A, A1, 144A, 2.26%, 7/17/26	United States		16,400,000		16,401,312
^jHighbridge Loan Management Ltd., 2013-2A, B2, 144A, 5.80%, 10/20/24	United States		3,500,000		3,559,045
^e,jLimerock CLO III LLC, 2014-3A, B, 144A, FRN, 4.081%, 10/20/26	United States		6,700,000		6,703,953
^e,jMadison Park Funding Ltd., 2016-21A, A1, 144A, FRN, 2.21%, 7/25/29	United States		17,200,000		17,193,636

50 Annual Report

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FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Floating Rate Daily Access Fund (continued)
			Principal
	Country		Amount*		Value

Asset-Backed Securities (continued)
Other Diversified Financial Services (continued)
^e,jMagnetite XIV Ltd., 2015-14A, A, 144A, FRN, 2.272%, 7/18/28.	United States	$	3,140,000	$	3,143,203
^e,jOctagon Investment Partners 24 Ltd., 2015-1A, A1, 144A, FRN, 2.261%, 5/21/27 .	United States		3,300,000		3,297,525
^e,jOctagon Investment Partners XVII Ltd., 2013-1A, A1, 144A, FRN, 2.212%,
10/25/25	United States		2,820,000		2,819,295
^e,jVoya CLO Ltd.,
2013-1A, B, 144A, FRN, 3.78%,4/15/24	United States		3,850,000		3,842,377
2013-2A, B, 144A, FRN, 3.562%,4/25/25	United States		3,850,000		3,791,480
2015-1A, A1, 144A, FRN, 2.362%,4/18/27	United States		6,900,000		6,899,724
^e,jZiggurat CLO I Ltd., 2014-1A, C, 144A, FRN, 3.98%, 10/17/26	United States		1,340,000		1,341,246
Total Asset-Backed Securities (Cost $145,308,501)					146,031,687
Total Investments before Short Term Investments
(Cost $2,807,838,013)					2,751,553,879
			Shares

Short Term Investments (Cost $301,294,963) 10.0%
Money Market Funds 10.0%
^a,kInstitutional Fiduciary Trust Money Market Portfolio	United States		301,294,963		301,294,963
Total Investments (Cost $3,109,132,976) 100.7%					3,052,848,842
Other Assets, less Liabilities (0.7)%					(20,235,019	)
Net Assets 100.0%				$	3,032,613,823

See Abbreviations on page 140.

†Rounds to less than 0.1% of net assets.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
^aNon-income producing.
^bSee Note 8 regarding restricted securities.
^cSecurity has been deemed illiquid because it may not be able to be sold within seven days.
^dSee Note 7 regarding defaulted securities.
^eThe coupon rate shown represents the rate at period end.
^fSee Note 1(i) regarding senior floating rate interests.
^gA portion or all of the security purchased on a delayed delivery basis. See Note 1(c).
^hIncome may be received in additional securities and/or cash.
ⁱAt October 31, 2016, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund is restricted from trading these securities at year end.
^jSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers
or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At
October 31, 2016, the aggregate value of these securities was $146,031,687 representing 4.8% of net assets.
^kSee Note 3(f) regarding investments in affiliated management investment companies.

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FRANKLIN INVESTORS SECURITIES TRUST



Financial Highlights
Franklin Low Duration Total Return Fund
					Year Ended October 31,
		2016			2015			2014			2013			2012
Class A
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	9.91		$	10.11		$	10.16		$	10.29		$	10.27
Income from investment operations^a:
Net investment income		0.151			0.134			0.144			0.166			0.169
Net realized and unrealized gains (losses)		0.031			(0.135	)		(0.011	)		(0.032	)		0.158
Total from investment operations		0.182			(0.001	)		0.133			0.134			0.327
Less distributions from net investment income and net foreign
currency gains		(0.202	)		(0.199	)		(0.183	)		(0.264	)		(0.307	)
Net asset value, end of year.	$	9.89		$	9.91		$	10.11		$	10.16		$	10.29

Total return^b		1.88	%		(0.02	)%		1.32	%		1.32	%		3.26	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		0.95	%		0.96	%		0.93	%		0.98	%		1.01	%
Expenses net of waiver and payments by affiliates		0.80	%^c		0.80	%^c		0.80	%^c		0.80	%^c		0.89	%
Net investment income		1.57	%		1.27	%		1.24	%		1.25	%		1.47	%

Supplemental data
Net assets, end of year (000’s)	$	1,524,437		$	1,656,001		$	1,589,854		$	1,296,612		$	904,878
Portfolio turnover rate		44.76	%		41.28	%		78.63	%		64.86	%		51.42	%

52 Annual Report | The accompanying notes are an integral part of these financial statements.

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					FRANKLIN INVESTORS SECURITIES TRUST
								FINANCIAL HIGHLIGHTS


Franklin Low Duration Total Return Fund (continued)
					Year Ended October 31,
		2016			2015			2014			2013			2012	^a
Class C
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	9.90		$	10.11		$	10.16		$	10.29		$	10.29
Income from investment operations^b:
Net investment income		0.113			0.104			0.098			0.189			0.013
Net realized and unrealized gains (losses)		0.024			(0.145	)		(0.001	)		(0.090	)		0.005
Total from investment operations		0.137			(0.041	)		0.097			0.099			0.018
Less distributions from net investment income and net foreign
currency gains		(0.177	)		(0.169	)		(0.147	)		(0.229	)		(0.018	)
Net asset value, end of year.	$	9.86		$	9.90		$	10.11		$	10.16		$	10.29

Total return^c		1.41	%		(0.41	)%		0.96	%		0.97	%		0.17	%

Ratios to average net assets^d
Expenses before waiver and payments by affiliates		1.35	%		1.36	%		1.33	%		1.38	%		1.41	%
Expenses net of waiver and payments by affiliates		1.20	%^e		1.20	%^e		1.20	%^e		1.20	%^e		1.29	%
Net investment income		1.17	%		0.87	%		0.84	%		0.84	%		1.07	%

Supplemental data
Net assets, end of year (000’s)	$	218,066		$	211,354		$	165,952		$	114,200		$	1,034
Portfolio turnover rate		44.76	%		41.28	%		78.63	%		64.86	%		51.42	%

^aFor the period October 1, 2012 (effective date) to October 31, 2012.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
^dRatios are annualized for periods less than one year.
^eBenefit of expense reduction rounds to less than 0.01%.

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The accompanying notes are an integral part of these financial statements. | Annual Report 53


FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS


Franklin Low Duration Total Return Fund (continued)
					Year Ended October 31,
		2016			2015			2014			2013	^a
Class R6
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	9.95		$	10.14		$	10.19		$	10.27
Income from investment operations^b:
Net investment income.		0.195			0.165			0.164	^c		0.089
Net realized and unrealized gains (losses)		0.021			(0.130	)		0.003			(0.046	)
Total from investment operations		0.216			0.035			0.167			0.043
Less distributions from net investment income and net foreign currency gains		(0.226	)		(0.228	)		(0.217	)		(0.123	)
Net asset value, end of year	$	9.94		$	9.95		$	10.14		$	10.19

Total return^d		2.22	%		0.37	%		1.66	%		0.43	%

Ratios to average net assets^e
Expenses before waiver and payments by affiliates		0.53	%		0.54	%		0.55	%		0.62	%
Expenses net of waiver and payments by affiliates^f		0.42	%		0.42	%		0.42	%		0.43	%
Net investment income		1.95	%		1.65	%		1.62	%		1.61	%

Supplemental data
Net assets, end of year (000’s)	$	553,233		$	508,675		$	418,539		$	943
Portfolio turnover rate		44.76	%		41.28	%		78.63	%		64.86	%

54 Annual Report | The accompanying notes are an integral part of these financial statements.

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					FRANKLIN INVESTORS SECURITIES TRUST
								FINANCIAL HIGHLIGHTS


Franklin Low Duration Total Return Fund (continued)
					Year Ended October 31,
		2016			2015			2014			2013			2012
Advisor Class
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	9.95		$	10.14		$	10.19		$	10.31		$	10.29
Income from investment operations^a:
Net investment income		0.184			0.134			0.166			0.231			0.202
Net realized and unrealized gains (losses)		0.025			(0.106	)		(0.010	)		(0.064	)		0.146
Total from investment operations		0.209			0.028			0.156			0.167			0.348
Less distributions from net investment income and net foreign
currency gains		(0.219	)		(0.218	)		(0.206	)		(0.287	)		(0.328	)
Net asset value, end of year.	$	9.94		$	9.95		$	10.14		$	10.19		$	10.31

Total return		2.14	%		0.27	%		1.54	%		1.64	%		3.46	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		0.70	%		0.71	%		0.68	%		0.73	%		0.76	%
Expenses net of waiver and payments by affiliates		0.55	%^b		0.55	%^b		0.55	%^b		0.55	%^b		0.64	%
Net investment income		1.82	%		1.52	%		1.49	%		1.50	%		1.72	%

Supplemental data
Net assets, end of year (000’s)	$	224,887		$	150,464		$	198,694		$	156,129		$	70,442
Portfolio turnover rate		44.76	%		41.28	%		78.63	%		64.86	%		51.42	%

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FRANKLIN INVESTORS SECURITIES TRUST




Statement of Investments, October 31, 2016
Franklin Low Duration Total Return Fund
		Shares/
	Country	Warrants			Value

Common Stocks and Other Equity Interests 0.0%^†
Energy 0.0%^†
^a,bHalcon Resources Corp	United States	98,168		$	786,358
^aHalcon Resources Corp., wts., 9/09/20	United States	8,753			22,145
					808,503
Materials 0.0%^†
^aVerso Corp., A	United States	1,387			8,516
^aVerso Corp., wts., 7/25/23	United States	146			—
					8,516
Total Common Stocks and Other Equity Interests
(Cost $1,895,611)					817,019

^cManagement Investment Companies 1.8%
Diversified Financials 1.8%
Franklin Lower Tier Floating Rate Fund	United States	1,893,663			19,675,161
Franklin Middle Tier Floating Rate Fund	United States	2,389,308			24,036,434
Total Management Investment Companies
(Cost $41,451,172)					43,711,595


		Principal
		Amount*

Corporate Bonds 40.4%
Automobiles & Components 1.2%
Delphi Automotive PLC, senior note, 3.15%, 11/19/20	United Kingdom	10,500,000			10,837,732
Fiat Chrysler Automobiles NV, senior note, 4.50%, 4/15/20	United Kingdom	4,000,000			4,100,000
Ford Motor Credit Co. LLC,
senior note, 2.597%, 11/04/19	United States	4,000,000			4,049,076
senior note, 3.157%, 8/04/20	United States	11,300,000			11,609,880
					30,596,688
Banks 11.5%
^dANZ New Zealand International Ltd. of London, senior note, 144A,
2.85%, 8/06/20	New Zealand	7,500,000			7,706,475
^eBanca Monte dei Paschi di Siena SpA, secured note, Reg S, 2.875%,
4/16/21	Italy	6,300,000	EUR		7,580,644
Banco Comercial Portugues SA, 4.75%, 6/22/17	Portugal	4,500,000	EUR		5,086,620
Bank of America Corp.,
senior note, 2.65%, 4/01/19	United States	9,300,000			9,478,430
^fsenior note, FRN, 1.92%, 1/15/19	United States	12,671,000			12,762,548
^eBankinter SA, senior note, Reg S, 1.75%, 6/10/19	Spain	6,400,000	EUR		7,322,362
Barclays PLC, senior note, 3.25%, 1/12/21	United Kingdom	7,000,000			7,099,995
BB&T Corp.,
senior note, 2.05%, 6/19/18	United States	1,000,000			1,010,572
^fsenior note, FRN, 1.417%, 2/01/19	United States	2,000,000			2,007,268
CIT Group Inc.,
senior note, 5.25%, 3/15/18	United States	500,000			519,080
senior note, 3.875%, 2/19/19	United States	3,100,000			3,155,211
Citigroup Inc.,
senior note, 2.40%, 2/18/20	United States	11,300,000			11,422,639
^fsenior note, FRN, 1.763%, 6/07/19	United States	5,000,000			5,024,845

56 Annual Report

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FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Low Duration Total Return Fund (continued)
		Principal
	Country	Amount*			Value

Corporate Bonds (continued)
Banks (continued)
Depfa ACS Bank,
secured bond, 1.65%, 12/20/16	Ireland	550,000,000	JPY	$	5,254,198
secured bond, 2.125%, 10/13/17	Ireland	5,000,000	CHF		5,166,768
^fDeutsche Bank AG, senior note, FRN, 2.121%, 8/20/20	Germany	7,500,000			7,219,537
^dThe Export-Import Bank of China, senior note, 144A, 2.50%, 7/31/19	China	8,000,000			8,174,360
^fThe Goldman Sachs Group Inc., senior note, FRN, 2.05%, 9/15/20	United States	20,000,000			20,156,700
HSBC Holdings PLC, senior note, 3.40%, 3/08/21	United Kingdom	3,300,000			3,407,151
HSBC USA Inc., senior note, 2.00%, 8/07/18	United States	7,500,000			7,535,040
Industrial and Commercial Bank of China Ltd./New York, 3.231%,
11/13/19	China	5,400,000			5,594,076
^d,fING Bank NV, senior note, 144A, FRN, 1.536%, 10/01/19	Netherlands	5,000,000			5,007,200
Intesa Sanpaolo SpA,
senior note, 2.375%, 1/13/17	Italy	1,500,000			1,502,228
senior note, 3.875%, 1/16/18	Italy	5,900,000			6,011,068
senior note, 3.875%, 1/15/19	Italy	10,100,000			10,404,212
^e,fsenior note, Reg S, FRN, 0.00%, 5/18/17	Italy	2,150,000	EUR		2,360,042
JPMorgan Chase & Co.,
senior note, 2.20%, 10/22/19	United States	17,400,000			17,645,949
senior note, 2.40%, 6/07/21	United States	2,600,000			2,623,959
^fsenior note, FRN, 1.782%, 1/25/18	United States	8,000,000			8,041,704
National Australia Bank of New York, senior note, 1.875%, 7/23/18	Australia	7,600,000			7,645,524
^dNorddeutsche Landesbank Girozentrale, secured note, 144A, 2.00%,
2/05/19	Germany	6,500,000			6,583,785
Regions Financial Corp., senior note, 2.00%, 5/15/18	United States	4,500,000			4,519,755
Royal Bank of Canada, secured note, 2.10%, 10/14/20	Canada	6,300,000			6,392,440
The Royal Bank of Scotland PLC, sub. note, 6.934%, 4/09/18	United Kingdom	2,500,000	EUR		2,972,217
^dThe Toronto-Dominion Bank, secured note, 144A, 2.25%, 3/15/21	Canada	12,700,000			12,905,848
^e,fUniCredit SpA, senior note, Reg S, FRN, 0.646%, 4/10/17	Italy	3,400,000	EUR		3,742,105
^eUnione di Banche Italiane SpA, senior note, Reg S, 2.875%, 2/18/19	Italy	5,800,000	EUR		6,751,567
Wells Fargo & Co.,
senior note, 2.50%, 3/04/21	United States	2,600,000			2,634,715
^fsenior note, FRN, 1.762%, 7/22/20	United States	17,600,000			17,662,410
^dWestpac Banking Corp.,
secured note, 144A, 2.10%, 2/25/22	Australia	9,700,000			9,796,466
senior secured note, 144A, 2.25%, 11/09/20	Australia	6,300,000			6,401,713
^dWoori Bank, sub. note, 144A, 4.75%, 4/30/24	South Korea	5,300,000			5,624,201
					289,913,627
Capital Goods 0.8%
CNH Industrial Capital LLC, senior note, 3.875%, 10/15/21	United States	2,800,000			2,786,000
John Deere Capital Corp.,
senior note, 1.30%, 3/12/18	United States	1,700,000			1,700,471
senior note, 1.95%, 3/04/19	United States	3,750,000			3,792,473
Lockheed Martin Corp., senior note, 1.85%, 11/23/18.	United States	4,200,000			4,242,260
United Technologies Corp., senior note, 4.50%, 4/15/20	United States	7,500,000			8,217,367
					20,738,571
Commercial & Professional Services 0.0%^†
Republic Services Inc., senior note, 3.80%, 5/15/18	United States	1,035,000			1,072,421

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Annual Report

FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Low Duration Total Return Fund (continued)
		Principal
	Country	Amount*		Value

Corporate Bonds (continued)
Consumer Durables & Apparel 0.4%
Beazer Homes USA Inc., senior note, 5.75%, 6/15/19	United States	4,500,000	$	4,668,750
KB Home, senior note, 4.75%, 5/15/19	United States	4,200,000		4,315,500
				8,984,250
Consumer Services 0.6%
^dInternational Game Technology PLC, senior note, 144A, 5.625%,
2/15/20	United States	3,800,000		4,042,250
Marriott International Inc., senior note, 2.875%, 3/01/21	United States	10,000,000		10,301,000
				14,343,250
Diversified Financials 3.4%
AerCap Ireland Capital Ltd./AerCap Global Aviation Trust, senior note,
4.25%, 7/01/20	Netherlands	3,700,000		3,849,554
American Express Credit Corp., senior note, 1.55%, 9/22/17	United States	4,600,000		4,607,185
^fBank of New York Mellon Corp., senior note, FRN, 1.674%, 8/17/20	United States	6,400,000		6,488,173
Capital One Bank USA NA, senior note, 2.30%, 6/05/19	United States	11,900,000		12,029,460
^fCredit Suisse New York, senior note, FRN, 1.315%, 5/26/17	Switzerland	5,400,000		5,401,134
^dHutchison Whampoa International 14 Ltd., 144A, 1.625%, 10/31/17	Hong Kong	4,700,000		4,705,852
International Lease Finance Corp., senior note, 8.75%, 3/15/17.	United States	8,000,000		8,206,272
^dLincoln Finance Ltd., senior secured note, 144A, 7.375%, 4/15/21	Netherlands	400,000		431,500
^fMorgan Stanley, senior note, FRN, 2.026%, 1/27/20.	United States	22,400,000		22,633,722
Navient Corp., senior note, 5.50%, 1/15/19	United States	3,400,000		3,477,520
PHH Corp., senior note, 7.375%, 9/01/19	United States	1,800,000		1,885,500
^dPricoa Global Funding I, secured note, 144A, 2.55%, 11/24/20	United States	5,600,000		5,727,288
^dProtective Life Global Funding, senior secured note, 144A, 1.722%,
4/15/19	United States	4,300,000		4,304,635
^d,fSeven and Seven Ltd., senior note, 144A, FRN, 2.235%, 9/11/19	South Korea	1,200,000		1,200,000
				84,947,795
Energy 2.7%
^dCalifornia Resources Corp., secured note, second lien, 144A, 8.00%,
12/15/22	United States	1,656,000		1,130,220
CNOOC Nexen Finance 2014 ULC, senior note, 1.625%, 4/30/17	China	6,800,000		6,803,148
^dCNPC General Capital Ltd.,
senior note, 144A, 1.95%, 4/16/18	China	1,500,000		1,502,678
^fsenior note, 144A, FRN, 1.717%, 5/14/17	China	7,500,000		7,507,425
Enable Midstream Partners LP, senior note, 2.40%, 5/15/19	United States	3,700,000		3,652,248
Energy Transfer Partners LP, senior note, 4.15%, 10/01/20	United States	2,600,000		2,715,684
^d,gEnergy XXI Gulf Coast Inc., senior secured note, second lien, 144A,
11.00%, 3/15/20.	United States	3,000,000		1,365,000
EnLink Midstream Partners LP, senior note, 2.70%, 4/01/19	United States	800,000		800,015
Ensco PLC, senior note, 4.70%, 3/15/21	United States	2,000,000		1,855,000
^dKinder Morgan Finance Co. LLC, senior secured note, 144A, 6.00%,
1/15/18	United States	2,500,000		2,616,787
Kinder Morgan Inc., senior note, 3.05%, 12/01/19	United States	500,000		512,681
^d,gLinn Energy LLC/Finance Corp., senior secured note, second lien, 144A,
12.00%, 12/15/20	United States	225,000		158,625
^dLUKOIL International Finance BV, senior note, 144A, 3.416%, 4/24/18	Russia	2,300,000		2,328,233
^fPetrobras Global Finance BV, senior note, FRN, 3.737%, 3/17/20	Brazil	5,100,000		5,042,625
^dPetrofac Ltd., senior note, 144A, 3.40%, 10/10/18	United Kingdom	1,300,000		1,311,894
^hSanchez Energy Corp., senior note, 7.75%, 6/15/21.	United States	1,900,000		1,776,500
^dSinopec Group Overseas Development 2015 Ltd., senior note, 144A,
2.50%, 4/28/20	China	7,400,000		7,519,991

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STATEMENT OF INVESTMENTS


Franklin Low Duration Total Return Fund (continued)
		Principal
	Country	Amount*		Value

Corporate Bonds (continued)
Energy (continued)
^fStatoil ASA, senior note, FRN, 1.248%, 11/08/18.	Norway	6,900,000	$	6,909,384
Transocean Inc., senior bond, 7.375%, 4/15/18	United States	7,000,000		7,122,500
Weatherford International Ltd., senior note, 7.75%, 6/15/21	United States	3,600,000		3,649,500
Williams Partners LP, senior note, 4.125%, 11/15/20	United States	1,700,000		1,775,575
				68,055,713
Food & Staples Retailing 0.5%
The Kroger Co., senior note, 2.60%, 2/01/21	United States	7,500,000		7,652,820
Walgreens Boots Alliance Inc., senior note, 1.75%, 11/17/17.	United States	5,900,000		5,927,459
				13,580,279
Food, Beverage & Tobacco 1.9%
Anheuser-Busch InBev Finance Inc., senior note, 2.65%, 2/01/21	Belgium	6,500,000		6,656,390
Coca-Cola Femsa SAB de CV, senior note, 2.375%, 11/26/18	Mexico	5,500,000		5,545,023
Constellation Brands Inc., senior note, 7.25%, 5/15/17	United States	6,600,000		6,822,750
^dImperial Brands Finance PLC, senior note, 144A, 2.95%, 7/21/20	United Kingdom	6,000,000		6,180,000
^dJBS USA LLC/Finance Inc., senior note, 144A, 7.25%, 6/01/21	United States	2,500,000		2,581,250
Kraft Heinz Foods Co.,
senior note, 2.25%, 6/05/17	United States	7,000,000		7,038,017
senior note, 2.00%, 7/02/18	United States	6,400,000		6,448,538
^fMondelez International Inc., senior note, FRN, 1.277%, 2/01/19	United States	500,000		500,137
Reynolds American Inc., senior note, 2.30%, 6/12/18	United States	6,200,000		6,284,270
				48,056,375
Health Care Equipment & Services 2.0%
Aetna Inc., senior note, 1.50%, 11/15/17.	United States	1,000,000		1,002,653
Becton, Dickinson and Co., senior note, 2.675%, 12/15/19	United States	5,900,000		6,084,847
CHS/Community Health Systems Inc., senior note, 7.125%, 7/15/20	United States	3,800,000		3,097,000
Edwards Lifesciences Corp., senior note, 2.875%, 10/15/18	United States	1,600,000		1,636,712
Express Scripts Holding Co., senior note, 3.30%, 2/25/21	United States	4,300,000		4,506,860
HCA Inc., senior secured note, first lien, 4.25%, 10/15/19	United States	4,000,000		4,160,000
Stryker Corp., senior note, 2.00%, 3/08/19	United States	10,100,000		10,198,748
Tenet Healthcare Corp.,
senior note, 5.00%, 3/01/19	United States	10,600,000		10,308,500
senior note, 5.50%, 3/01/19	United States	3,000,000		2,947,500
Zimmer Holdings Inc., senior note, 2.70%, 4/01/20.	United States	7,500,000		7,632,757
				51,575,577
Household & Personal Products 0.6%
Avon Products Inc., senior note, 6.60%, 3/15/20	United States	10,000,000		10,306,250
Colgate-Palmolive Co., senior note, 0.90%, 5/01/18	United States	2,200,000		2,194,493
Procter & Gamble Co., senior note, 1.70%, 11/03/21	United States	3,200,000		3,193,440
				15,694,183
Insurance 2.0%
^dJackson National Life Global Funding, secured note, 144A, 2.25%,
4/29/21	United States	7,600,000		7,654,963
^dMetropolitan Life Global Funding I,
secured note, 144A, 1.30%, 4/10/17	United States	10,000,000		10,014,380
senior secured bond, 144A, 3.875%, 4/11/22	United States	5,900,000		6,387,493
^dNew York Life Global Funding,
secured note, 144A, 2.10%, 1/02/19	United States	10,000,000		10,145,070
secured note, 144A, 2.15%, 6/18/19	United States	6,400,000		6,514,567

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STATEMENT OF INVESTMENTS


Franklin Low Duration Total Return Fund (continued)
		Principal
	Country	Amount*			Value

Corporate Bonds (continued)
Insurance (continued)
^fPrudential Financial Inc., senior note, FRN, 1.597%, 8/15/18	United States	5,700,000		$	5,691,114
^dTIAA Asset Management Finance LLC, senior note, 144A, 2.95%,
11/01/19	United States	4,200,000			4,322,896
					50,730,483
Materials 0.8%
^eArkema SA, senior note, Reg S, 1.50%, 1/20/25	France	2,000,000	EUR		2,309,697
^dBlueScope Steel Ltd./BlueScope Steel Finance, senior note, 144A,
6.50%, 5/15/21	Australia	4,000,000			4,240,000
Freeport-McMoRan Copper & Gold Inc., senior note, 2.30%, 11/14/17	United States	3,500,000			3,482,500
Owens-Illinois Inc., senior note, 7.80%, 5/15/18	United States	7,400,000			8,010,500
Reynolds Group Holdings Inc., senior note, 8.125%, 6/15/17.	United States	2,100,000			2,176,125
					20,218,822
Media 1.3%
CBS Corp., senior note, 2.30%, 8/15/19	United States	11,437,000			11,590,496
CSC Holdings LLC,
senior bond, 7.625%, 7/15/18.	United States	3,500,000			3,762,500
senior note, 8.625%, 2/15/19	United States	3,000,000			3,354,360
^d,fNBCUniversal Enterprise Inc., 144A, FRN, 1.565%, 4/15/18	United States	7,500,000			7,553,557
The New York Times Co., senior note, 6.625%, 12/15/16	United States	2,000,000			2,012,600
Time Warner Inc., senior note, 2.10%, 6/01/19	United States	4,500,000			4,537,233
					32,810,746
Pharmaceuticals, Biotechnology & Life Sciences 1.9%
AbbVie Inc., senior note, 1.80%, 5/14/18	United States	8,600,000			8,632,663
Actavis Funding SCS, senior note, 2.35%, 3/12/18.	United States	6,200,000			6,263,265
Amgen Inc.,
senior note, 2.125%, 5/15/17	United States	2,500,000			2,514,468
^fsenior note, FRN, 1.411%, 5/22/19	United States	6,200,000			6,209,567
Baxalta Inc., senior note, 2.00%, 6/22/18	United States	10,200,000			10,253,927
Biogen Inc., senior note, 2.90%, 9/15/20	United States	7,500,000			7,742,587
Celgene Corp., senior note, 2.30%, 8/15/18	United States	3,000,000			3,038,706
^dValeant Pharmaceuticals International Inc., senior note, 144A, 5.375%,
3/15/20	United States	3,800,000			3,249,000
					47,904,183
Real Estate 0.6%
American Tower Corp., senior note, 3.40%, 2/15/19	United States	3,600,000			3,733,060
Boston Properties LP, senior note, 3.70%, 11/15/18	United States	4,900,000			5,086,964
HCP Inc., senior note, 3.75%, 2/01/19	United States	5,500,000			5,690,152
					14,510,176
Retailing 0.7%
Dollar General Corp., senior note, 1.875%, 4/15/18	United States	8,200,000			8,237,662
^d,gEdcon Ltd., secured note, 144A, 9.50%, 3/01/18	South Africa	1,500,000	EUR		411,619
^dExperian Finance PLC, 144A, 2.375%, 6/15/17	United Kingdom	1,000,000			1,004,820
Toys R Us Inc., senior bond, 7.375%, 10/15/18	United States	8,250,000			7,940,625
					17,594,726
Semiconductors & Semiconductor Equipment 0.2%
Maxim Integrated Products Inc., senior note, 2.50%, 11/15/18.	United States	5,200,000			5,277,636

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STATEMENT OF INVESTMENTS


Franklin Low Duration Total Return Fund (continued)
		Principal
	Country	Amount*			Value

Corporate Bonds (continued)
Software & Services 1.4%
Alibaba Group Holding Ltd., senior note, 2.50%, 11/28/19.	China	11,900,000		$	12,088,318
Fiserv Inc., senior note, 2.70%, 6/01/20	United States	11,300,000			11,575,607
^fOracle Corp., senior note, FRN, 1.46%, 1/15/19	United States	12,000,000			12,103,068
					35,766,993
Technology Hardware & Equipment 1.5%
^fApple Inc., FRN, 1.009%, 5/03/18	United States	7,300,000			7,318,308
^dDiamond 1 Finance Corp./Diamond 2 Finance Corp., senior secured
note, first lien, 144A, 3.48%, 6/01/19	United States	6,400,000			6,571,098
^d,fHewlett Packard Enterprise Co., senior note, 144A, FRN, 3.038%,
10/05/18	United States	8,100,000			8,293,493
Juniper Networks Inc.,
senior note, 3.125%, 2/26/19	United States	7,500,000			7,718,880
senior note, 3.30%, 6/15/20	United States	500,000			519,343
^dSanmina Corp., senior note, first lien, 144A, 4.375%, 6/01/19	United States	6,500,000			6,792,500
					37,213,622
Telecommunication Services 1.4%
AT&T Inc., senior note, 2.45%, 6/30/20	United States	7,400,000			7,450,771
CenturyLink Inc., senior note, 5.625%, 4/01/20	United States	3,800,000			4,080,250
Intelsat Jackson Holdings SA, senior note, 7.25%, 10/15/20	Luxembourg	2,500,000			1,887,500
^dSprint Communications Inc., senior note, 144A, 9.00%, 11/15/18.	United States	1,000,000			1,102,500
^dSprint Spectrum Co. LLC/Sprint Spectrum Co. II LLC, 144A, 3.36%,
9/20/21	United States	2,500,000			2,528,125
Telefonica Emisiones S.A.U., senior note, 3.192%, 4/27/18	Spain	2,300,000			2,349,611
T-Mobile USA Inc., senior note, 6.633%, 4/28/21	United States	1,800,000			1,884,375
Verizon Communications Inc.,
senior note, 2.625%, 2/21/20	United States	8,824,000			9,007,407
^fsenior note, FRN, 2.606%, 9/14/18	United States	4,800,000			4,929,989
					35,220,528
Transportation 0.5%
FedEx Corp., senior note, 0.50%, 4/09/20	United States	7,100,000	EUR		7,862,052
XPO CNW Inc., senior bond, 7.25%, 1/15/18	United States	3,275,000			3,406,000
					11,268,052
Utilities 2.5%
Dominion Resources Inc., senior note, 2.50%, 12/01/19	United States	9,500,000			9,743,561
Duke Energy Corp., senior note, 2.10%, 6/15/18	United States	5,100,000			5,151,571
^dEngie SA, senior note, 144A, 1.625%, 10/10/17.	France	1,000,000			1,002,155
Kinder Morgan Energy Partners LP, senior note, 5.95%, 2/15/18	United States	3,400,000			3,575,756
^dKorea Western Power Co. Ltd., senior note, 144A, 3.125%, 5/10/17	South Korea	5,200,000			5,242,068
PSEG Power LLC, senior note, 3.00%, 6/15/21	United States	7,700,000			7,886,948
Sempra Energy, senior note, 2.85%, 11/15/20	United States	9,600,000			9,891,014
The Southern Co.,
senior note, 2.45%, 9/01/18	United States	7,000,000			7,120,428
senior note, 2.35%, 7/01/21	United States	6,500,000			6,572,735

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FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Low Duration Total Return Fund (continued)
		Principal
	Country	Amount*			Value

Corporate Bonds (continued)
Utilities (continued)
^dState Grid Overseas Investment 2013 Ltd., senior note, 144A, 1.75%,
5/22/18	China	2,000,000		$	2,001,920
^dState Grid Overseas Investment 2014 Ltd., senior note, 144A, 2.75%,
5/07/19	China	2,200,000			2,255,350
^eVeolia Environnement SA, senior bond, Reg S, 4.625%, 3/30/27	France	1,000,000	EUR		1,508,989
Virginia Electric & Power Co., senior note, 1.20%, 1/15/18	United States	900,000			899,006
					62,851,501
Total Corporate Bonds (Cost $1,013,907,613)					1,018,926,197

^f,iSenior Floating Rate Interests 2.9%
Automobiles & Components 0.1%
TI Group Automotive Systems LLC, Initial U.S. Term Loan, 4.50%,
6/25/22	United States	1,605,201			1,610,539
Capital Goods 0.0%^†
^jHarsco Corp., Initial Term Loan, 7.50%, 11/01/23	United States	135,558			137,252
Leidos (Abacus Innovations Corp.), B Term Loan, 3.284%, 8/16/23	United States	212,319			214,244
					351,496
Commercial & Professional Services 0.0%^†
KAR Auction Services Inc., Tranche B-3 Term Loan, 4.375%, 3/09/23	United States	908,841			920,580
Consumer Services 0.2%
Aristocrat Technologies Inc., Term B-1 Loans, 3.631%, 10/20/21	United States	165,520			166,492
Fitness International LLC, Term B Loan, 6.00%, 7/01/20	United States	4,309,037			4,317,117
Prime Security Services Borrower LLC, Term B-1 Loans, 4.75%, 5/02/22 .	United States	870,078			877,256
					5,360,865
Diversified Financials 0.1%
First Eagle Investment Management, Initial Term Loans, 4.838%,
12/01/22	United States	894,750			893,632
Russell Investments US Institutional Holdco Inc., Initial Term Loan,
6.75%, 6/01/23	United States	605,256			607,525
					1,501,157
Energy 0.4%
^hBowie Resource Holdings LLC, First Lien Initial Term Loan, 6.75%,
8/16/20	United States	2,184,980			1,813,533
Fieldwood Energy LLC, Loans, 3.875%, 10/01/18	United States	4,636,382			4,277,063
McDermott Finance LLC, Term Loan, 8.25% - 8.484%, 4/16/19	United States	139,141			140,532
OSG Bulk Ships Inc., Initial Term Loan, 5.25%, 8/05/19	United States	1,081,968			1,073,853
OSG International Inc., Initial Term Loan, 5.75%, 8/05/19	United States	1,788,577			1,787,460
					9,092,441
Health Care Equipment & Services 0.1%
Carestream Health Inc., Term Loan, 5.00%, 6/07/19	United States	650,294			606,283
Community Health Systems Inc., 2018 Term F Loans, 4.083%, 12/31/18 .	United States	1,887,968			1,849,870
					2,456,153
Household & Personal Products 0.0%^†
^jSpectrum Brands Inc., Term Loans, 5.00%, 6/23/22	United States	34,447			34,820

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STATEMENT OF INVESTMENTS


Franklin Low Duration Total Return Fund (continued)
		Principal
	Country	Amount*		Value

^f,iSenior Floating Rate Interests (continued)
Materials 0.4%
The Chemours Co. LLC, Tranche B Term Loan, 3.75%, 5/12/22.	United States	3,691,368	$	3,658,127
Cyanco Intermediate Corp., Initial Term Loan, 5.50%, 5/01/20	United States	578,776		580,222
FMG America Finance Inc. (Fortescue Metals Group), Loans, 3.75%,
6/30/19	Australia	2,867,728		2,869,073
Novelis Inc., Initial Term Loan, 4.00% - 4.088%, 6/02/22	Canada	1,740,007		1,747,402
^hOCI Beaumont LLC, Term B-3 Loan, 7.75%, 8/20/19	United States	1,534,123		1,509,194
				10,364,018
Media 0.4%
^jAltice U.S. Finance I Corp., 2016 Refinancing Term Loans, 5.50%,
1/01/25	United States	116,386		116,968
^jAMC Entertainment Holdings Inc.,
2016 Incremental Term Loan, 5.25%, 12/15/23	United States	45,186		45,043
Initial Term Loans, 5.25%, 12/15/22	United States	70,690		70,689
Charter Communications Operating LLC (CCO Safari), Term A Loan,
2.54%, 5/18/21	United States	1,306,500		1,300,784
CSC Holdings Inc. (Cablevision), 2016 Extended Term Loans, 3.876%,
10/11/24	United States	1,249,724		1,255,712
^jLions Gate Entertainment Corp., Term Loan A, 5.00%, 10/12/21	United States	314,357		311,214
^jLive Nation Entertainment Inc., Term B-2 Loans, 5.00%, 10/31/23	United States	45,186		45,299
Radio One Inc., Term Loan B, 5.04%, 12/31/18	United States	6,842,717		6,859,823
UPC Financing Partnership, Facility AN, 4.08%, 8/31/24.	Netherlands	286,447		288,273
				10,293,805
Pharmaceuticals, Biotechnology & Life Sciences 0.4%
Endo Luxembourg Finance Co. I S.A.R.L. and Endo LLC, 2015
Incremental Term B Loans, 3.75%, 9/25/22	United States	3,306,929		3,306,413
Grifols Worldwide Operations USA Inc., U.S. Tranche B Term Loan,
3.46%, 2/27/21	United States	1,689,161		1,706,052
^jRPI Finance Trust, Term A-2 Term Loan A, 4.75%, 10/14/20	United States	354,354		352,522
Valeant Pharmaceuticals International Inc.,
^jSeries A-3 Tranche A Term Loan, 4.29%, 10/20/18	United States	2,767,575		2,763,540
Series C-2 Tranche B Term Loan, 5.25%, 12/11/19	United States	714,240		714,775
Series D-2 Tranche B Term Loan, 5.00%, 2/13/19.	United States	1,231,650		1,231,541
Series F-1 Tranche B Term Loan, 5.50%, 4/01/22	United States	377,828		378,466
				10,453,309
Retailing 0.2%
Ascena Retail Group Inc., Tranche B Term Loan, 5.25%, 8/21/22	United States	3,261,781		3,187,031
Dollar Tree Inc., Term A-1 Loans, 2.25%, 7/06/20	United States	520,077		519,260
PetSmart Inc., Tranche B-2 Loans, 4.00%, 3/11/22	United States	704,011		706,211
				4,412,502
Semiconductors & Semiconductor Equipment 0.2%
Avago Technologies Cayman Finance Ltd., Term B-3 Loans, 3.535%,
2/01/23	Singapore	1,430,820		1,447,365
MACOM Technology Solutions Holdings Inc., Initial Term Loan, 4.628%,
5/07/21	United States	847,939		857,477
MKS Instruments Inc., Tranche B-1 Term Loans, 4.25%, 5/01/23	United States	215,591		217,927
ON Semiconductor Corp., 2016 Replacement Term Loans, 3.777%,
3/31/23	United States	2,914,264		2,934,559
				5,457,328

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FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Low Duration Total Return Fund (continued)
		Principal
	Country	Amount*				Value

^f,iSenior Floating Rate Interests (continued)
Software & Services 0.2%
^jGlobal Payments Inc., Delayed Draw Term Loan (A-2), 4.75%, 10/31/21 .	United States	647,481			$	646,587
MoneyGram International Inc., Term Loan, 4.25%, 3/27/20	United States	4,984,047				4,865,677
^jRackspace Hosting Inc., Term B Loan, 6.50%, 11/03/23	United States	225,930				227,524
						5,739,788
Technology Hardware & Equipment 0.1%
Ciena Corp., Term Loan, 3.75%, 7/15/19	United States	234,231				235,403
Dell International LLC, Term A-3 Loan, 2.54%, 12/31/18	United States	923,168				923,601
Western Digital Corp., Term Loan B-1, 4.50%, 4/29/23	United States	640,092				648,293
Zebra Technologies Corp., Refinancing Term Loan, 4.089%, 10/27/21	United States	478,537				484,120
						2,291,417
Telecommunication Services 0.0%^†
Consolidated Communications Inc., Initial Term Loan, 4.00%, 10/05/23	United States	227,279				228,984
Global Tel*Link Corp., Term Loan, 5.00%, 5/23/20	United States	268,059				261,190
						490,174
Transportation 0.1%
Air Canada, Term Loan, 3.614%, 10/06/23	Canada	46,797				47,002
Navios Maritime Midstream Partners LP, Initial Term Loan, 5.50%,
6/18/20	Marshall Islands	1,221,994				1,200,609
Navios Maritime Partners LP, Initial Term Loan, 5.25%, 6/27/18	Marshall Islands	63,867				58,638
XPO Logistics Inc., Refinancing Term Loans, 4.25%, 10/30/21	United States	121,362				122,318
						1,428,567
Utilities 0.0%^†
EFS Cogen Holdings I LLC (Linden), Term B Advance, 5.25%, 6/28/23	United States	164,717				166,570
NRG Energy Inc., Term Loans, 3.50%, 6/30/23	United States	1,147,125				1,150,853
						1,317,423
Total Senior Floating Rate Interests
(Cost $73,317,364)						73,576,382

Foreign Government and Agency Securities 2.1%
The Export-Import Bank of Korea, senior note, 2.25%, 1/21/20	South Korea	11,200,000				11,326,504
Government of Hungary,
5.50%, 12/22/16	Hungary	750,880,000		HUF		2,686,659
A, 6.75%, 11/24/17	Hungary	3,910,000		HUF		14,830
A, 5.50%, 12/20/18	Hungary	428,710,000		HUF		1,674,713
Government of Malaysia,
senior bond, 4.24%, 2/07/18	Malaysia	4,000,000		MYR		972,863
senior bond, 3.26%, 3/01/18	Malaysia	2,400,000		MYR		576,830
senior note, 4.012%, 9/15/17	Malaysia	29,800,000		MYR		7,197,180
senior note, 3.58%, 9/28/18	Malaysia	5,200,000		MYR		1,256,417
Government of Mexico,
7.25%, 12/15/16	Mexico	894,000	^k	MXN		4,749,955
7.75%, 12/14/17	Mexico	930,000	^k	MXN		5,071,518
M, 4.75%, 6/14/18	Mexico	720,000	^k	MXN		3,775,872
senior note, 8.50%, 12/13/18	Mexico	1,060,000	^k	MXN		5,946,940

64 Annual Report

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STATEMENT OF INVESTMENTS


Franklin Low Duration Total Return Fund (continued)
		Principal
	Country	Amount*			Value

Foreign Government and Agency Securities (continued)
^dGovernment of Serbia, senior note, 144A, 5.25%, 11/21/17	Serbia	1,800,000		$	1,855,125
Korea Monetary Stabilization Bond, senior note, 1.96%, 2/02/17	South Korea	2,800,000,000	KRW		2,451,794
Korea Treasury Bond, senior note, 3.00%, 12/10/16	South Korea	1,590,000,000	KRW		1,392,723
^lNota Do Tesouro Nacional,
Index Linked, 6.00%, 5/15/17	Brazil	150^mBRL			137,740
Index Linked, 6.00%, 8/15/18	Brazil	1,810^mBRL			1,663,416
Total Foreign Government and Agency Securities
(Cost $57,922,017)					52,751,079

U.S. Government and Agency Securities 19.4%
ⁿU.S. Treasury Bond, Index Linked, 0.125%, 7/15/22	United States	14,243,372			14,580,171
U.S. Treasury Note,
1.50%, 12/31/18	United States	50,000,000			50,630,850
1.375%, 2/28/19	United States	40,000,000			40,414,840
1.50%, 2/28/19	United States	76,000,000			77,006,392
1.625%, 3/31/19	United States	80,000,000			81,317,200
3.125%, 5/15/19	United States	42,000,000			44,291,142
3.375%, 11/15/19	United States	25,000,000			26,762,700
ⁿIndex Linked, 1.875%, 7/15/19	United States	23,958,059			25,695,018
ⁿIndex Linked, 1.375%, 1/15/20	United States	24,346,350			25,830,966
ⁿIndex Linked, 0.125%, 1/15/22	United States	38,307,452			39,094,288
ⁿIndex Linked, 0.125%, 1/15/23	United States	52,170,469			52,965,859
ⁿIndex Linked, 0.125%, 7/15/24	United States	10,143,019			10,255,880
Total U.S. Government and Agency Securities
(Cost $486,705,601)					488,845,306

Asset-Backed Securities and Commercial Mortgage-
Backed Securities 27.4%
Automobiles & Components 0.0%^†
^fCountrywide Asset-Backed Certificates,
2001-BC3, A, FRN, 0.774%, 12/25/31	United States	1,471			1,132
2002-3, 1A1, FRN, 1.274%, 5/25/32	United States	1,659			1,596
					2,728
Banks 2.5%
Banc of America Commercial Mortgage Trust,
2006-1, AJ, 5.46%, 9/10/45	United States	261,687			261,551
^f2006-1, D, FRN, 5.785%, 9/10/45	United States	1,776,000			1,773,119
^o2006-4, AJ, 5.695%, 7/10/46	United States	2,434,420			2,418,422
Bear Stearns Commercial Mortgage Securities Trust,
^f2005-T20, E, FRN, 5.291%, 10/12/42	United States	2,000,000			1,984,830
^f2006-PW11, AJ, FRN, 5.569%, 3/11/39.	United States	5,382,000			5,175,039
2006-PW13, AJ, 5.611%, 9/11/41	United States	954,117			958,288
^f2007-PW16, A4, FRN, 5.90%, 6/11/40	United States	1,146,794			1,161,913
^f2007-PW16, AM, FRN, 5.90%, 6/11/40	United States	2,100,000			2,143,259
^fCD Commercial Mortgage Trust, 2005-CD1, E, FRN, 5.45%, 7/15/44.	United States	3,495,000			3,490,756
^fCitibank Credit Card Issuance Trust,
2006-A8, A8, FRN, 0.92%, 12/17/18	United States	6,230,000			6,230,064
2013-A12, A12, FRN, 1.018%, 11/07/18	United States	6,200,000			6,200,190
Citigroup Commercial Mortgage Trust,
2006-C5, AJ, 5.482%, 10/15/49	United States	1,219,000			1,144,399
^f2007-C6, AM, FRN, 5.90%, 12/10/49	United States	5,200,000			5,276,465

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FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Low Duration Total Return Fund (continued)
		Principal
	Country	Amount*		Value

Asset-Backed Securities and Commercial Mortgage-
Backed Securities (continued)
Banks (continued)
^fCommercial Mortgage Trust, 2006-GG7, AJ, FRN, 5.951%, 7/10/38	United States	4,448,000	$	4,105,775
Credit Suisse First Boston Mortgage Securities Corp., 2004-6, 3A1,
5.00%, 9/25/19	United States	881,845		906,292
^fCWABS Asset-Backed Certificates Trust, 2004-7, MV3, FRN, 1.584%,
12/25/34	United States	451,790		450,916
^fCWABS Inc. Asset-Backed Certificates, 2004-1, M1, FRN, 1.284%,
3/25/34	United States	330,582		320,839
^f,oGreenwich Capital Commercial Funding Corp., 2006-GG7, AM, FRN,
5.951%, 7/10/38.	United States	287,239		286,907
^fImpac Secured Assets CMN Owner Trust, 2004-4, M1, FRN, 1.299%,
2/25/35	United States	1,120,000		1,105,627
^fLB-UBS Commercial Mortgage Trust,
2006-C1, AJ, FRN, 5.276%, 2/15/41	United States	1,892,198		1,891,642
2006-C4, AJ, FRN, 6.078%, 6/15/38	United States	138,240		138,549
^fMerrill Lynch Mortgage Investors Trust,
2003-A, 1A, FRN, 1.274%, 3/25/28	United States	521,358		497,213
2005-1, 2A2, FRN, 2.681%, 4/25/35	United States	553,371		538,408
2006-3, 2A1, FRN, 2.893%, 10/25/36	United States	2,910,101		2,856,372
^fMorgan Stanley ABS Capital I Inc. Trust, 2005-WMC, M2, FRN, 1.269%,
1/25/35	United States	354,617		350,260
Morgan Stanley Capital I Trust,
^d2005-RR6, B, 144A, 5.306%, 5/24/43	United States	2,684,273		2,625,031
^f2006-HQ8, AJ, FRN, 5.589%, 3/12/44	United States	2,434,148		2,445,922
2007-IQ13, A1A, 5.312%, 3/15/44	United States	2,163,192		2,174,741
^fWachovia Bank Commercial Mortgage Trust,
^d2003-C7, F, 144A, FRN, 6.116%, 10/15/35.	United States	540,327		542,370
2006-C27, AM, FRN, 5.795%, 7/15/45	United States	651,159		650,547
2006-C28, AM, FRN, 5.603%, 10/15/48.	United States	1,122,901		1,121,598
^fWells Fargo Mortgage Backed Securities Trust,
2005-AR, 1A1, FRN, 2.766%, 2/25/35	United States	1,893,969		1,922,002
2005-AR9, 2A2, FRN, 3.072%, 10/25/33	United States	198,106		195,663
				63,344,969
Diversified Financials 24.7%
^fAmerican Express Credit Account Master Trust,
2008-2, A, FRN, 1.795%, 9/15/20	United States	2,900,000		2,941,548
2012-1, A, FRN, 0.805%, 1/15/20	United States	11,890,000		11,903,621
^fAmerican Home Mortgage Investment Trust,
2004-3, 4A, FRN, 2.745%, 10/25/34	United States	3,311,524		3,239,410
2005-1, 6A, FRN, 3.248%, 6/25/45	United States	1,611,009		1,602,092
^f,oAmeriquest Mortgage Securities Inc. Asset-Backed Pass-Through
Certificates, 2004-R4, M1, FRN, 1.359%, 6/25/34	United States	1,116,857		1,099,761
^dApidos CDO, 2013-14A, C2, 144A, 4.85%, 4/15/25	United States	1,900,000		1,915,029
^d,fARCap REIT Inc., 2004-RR3, A2, 144A, FRN, 4.76%, 9/21/45	United States	3,397,075		3,439,640
^d,fAres IIIR/IVR CLO Ltd.,
2007-3RA, A2, 144A, FRN, 1.10%, 4/16/21	United States	1,102,314		1,095,094
2007-3RA, B, 144A, FRN, 1.25%, 4/16/21	United States	3,700,000		3,624,298

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STATEMENT OF INVESTMENTS


Franklin Low Duration Total Return Fund (continued)
		Principal
	Country	Amount*		Value

Asset-Backed Securities and Commercial Mortgage-
Backed Securities (continued)
Diversified Financials (continued)
^fArgent Securities Inc. Asset-Backed Pass-Through Certificates,
2005-W2, A2C, FRN, 0.894%, 10/25/35	United States	796,279	$	768,921
^d,fAtrium IX, 9A, A, 144A, FRN, 2.129%, 2/28/24	United States	3,370,000		3,374,954
^d,fAtrium X, 10A, A, 144A, FRN, 2.00%, 7/16/25	United States	1,390,000		1,386,317
^d,fAtrium XI, 11A, C, 144A, FRN, 4.082%, 10/23/25	Cayman Islands	6,750,000		6,756,075
^dBAMLL Commercial Mortgage Securities Trust, 2012-PARK, A, 144A,
2.959%, 12/10/30	United States	3,200,000		3,320,481
^fBank of America Credit Card Trust, 2014-A2, A, FRN, 0.805%, 9/16/19	United States	9,620,000		9,626,534
^fBear Stearns ALT-A Trust,
2004-10, 1A3, FRN, 1.534%, 9/25/34	United States	1,362,491		1,353,319
2004-13, A2, FRN, 1.414%, 11/25/34	United States	108,461		104,230
^d,fBlueMountain CLO Ltd.,
2011-1A, B, 144A, FRN, 2.818%, 8/16/22	Cayman Islands	1,200,000		1,203,948
2011-1A, C, 144A, FRN, 3.818%, 8/16/22	Cayman Islands	700,000		703,360
2013-3A, A, 144A, FRN, 2.287%, 10/29/25	United States	1,448,215		1,448,258
^d,fBurnham Park CLO Ltd., 2016-1A, A, 144A, FRN, 2.318%, 10/20/29	Cayman Islands	2,240,000		2,240,224
^fCapital One Multi-Asset Execution Trust,
2007-A2, A2, FRN, 0.615%, 12/16/19	United States	11,390,000		11,390,437
2007-A5, A5, FRN, 0.575%, 7/15/20	United States	10,200,000		10,200,900
^d,fCarlyle Global Market Strategies CLO Ltd., 2012-4A, AR, 144A, FRN,
2.33%, 1/20/29	United States	2,800,000		2,804,060
^d,fCatamaran CLO Ltd., 2014-2A, B, 144A, FRN, 3.882%, 10/18/26	United States	3,011,300		3,013,167
^d,fCent CLO, 2013-17A, A1, 144A, FRN, 2.187%, 1/30/25	United States	8,916,000		8,900,843
^d,fCent CLO 20 Ltd., 2013-20A, A, 144A, FRN, 2.362%, 1/25/26.	United States	1,000,000		1,002,210
^d,fCent CLO 21 Ltd.,
2014-21A, A2A, 144A, FRN, 2.886%, 7/27/26	Cayman Islands	3,260,000		3,270,725
2014-21A, B, 144A, FRN, 3.686%, 7/27/26	United States	780,000		773,175
^d,fCent CLO LP, 2014-22A, B, 144A, FRN, 3.988%, 11/07/26	United States	4,050,000		4,088,596
^dCenterline REIT Inc., 2004-RR3, B, 144A, 5.04%, 9/21/45	United States	2,227,000		2,041,046
^fChase Funding Trust, 2004-2, 2A2, FRN, 1.034%, 2/26/35	United States	12,256		11,256
Chase Issuance Trust,
^f2007-A2, A2, FRN, 0.585%, 4/15/19	United States	6,468,000		6,466,864
^f2007-B1, B1, FRN, 0.785%, 4/15/19	United States	9,400,000		9,396,401
^f2007-C1, C1, FRN, 0.995%, 4/15/19	United States	3,800,000		3,799,221
^f2013-A3, A3, FRN, 0.815%, 4/15/20	United States	6,147,000		6,155,238
^f2014-A5, A5, FRN, 0.905%, 4/15/21	United States	7,310,000		7,335,244
2015-A2, A2, 1.59%, 2/18/20	United States	8,200,000		8,246,268
2015-A7, A7, 1.62%, 7/15/20	United States	5,005,000		5,040,134
^d,fCIFC Funding Ltd., 2007-3A, A1J, 144A, FRN, 1.284%, 7/26/21	United States	4,673,974		4,646,631
^d,fColony American Homes,
2014-1A, A, 144A, FRN, 1.685%, 5/17/31	United States	4,549,119		4,561,277
2014-1A, C, 144A, FRN, 2.385%, 5/17/31	United States	700,000		700,540
^dColony MFM Trust, 2014-1, A, 144A, 2.543%, 4/20/50	United States	5,771,040		5,753,807
^dCOMM Mortgage Trust, 2012-9W57, A, 144A, 2.365%, 2/10/29	United States	7,805,000		7,809,128
^fCommercial Mortgage Trust,
2007-C9, A1A, FRN, 6.007%, 12/10/49	United States	7,625,710		7,778,158
^d2014-BBG, A, 144A, FRN, 1.335%, 3/15/29	United States	6,600,000		6,546,674

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FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Low Duration Total Return Fund (continued)
		Principal
	Country	Amount*		Value

Asset-Backed Securities and Commercial Mortgage-
Backed Securities (continued)
Diversified Financials (continued)
^fConseco Finance Securitizations Corp., 2002-2, M1, FRN, 7.424%,
3/01/33	United States	985,000	$	1,100,376
Conseco Financial Corp.,
^f1997-3, A7, FRN, 7.64%, 3/15/28	United States	1,514,337		1,574,715
1998-6, A8, 6.66%, 6/01/30	United States	8,003,387		8,585,318
^dCore Industrial Trust, 2015-CALW, A, 144A, 3.04%, 2/10/34	United States	5,290,000		5,533,498
^d,fCornerstone CLO Ltd., 2007-1A, B, 144A, FRN, 1.83%, 7/15/21	United States	995,000		985,538
^dCountryPlace Manufactured Housing Contract Trust,
2005-1, A3, 144A, 4.80%, 12/15/35	United States	742		741
2007-1, A3, 144A, 5.593%, 7/15/37	United States	28,601		28,662
^fCountrywide Home Loans,
2004-11, 2A1, FRN, 2.634%, 7/25/34	United States	2,510,332		2,509,199
2004-6, 1A1, FRN, 3.019%, 5/25/34	United States	2,335,370		2,318,071
^d,fCSMC Trust, 2014-IVR3, A1, 144A, FRN, 3.50%, 7/25/44.	United States	3,452,236		3,541,729
Discover Card Execution Note Trust,
^f2012-A4, A4, FRN, 0.905%, 11/15/19	United States	10,500,000		10,517,636
^f2013-A6, A6, FRN, 0.985%, 4/15/21	United States	5,520,000		5,544,153
^f2014-A1, A1, FRN, 0.965%, 7/15/21	United States	7,690,000		7,722,819
2014-A5, A, 1.39%, 4/15/20	United States	2,060,000		2,065,349
^d,fDryden 33 Senior Loan Fund, 2014-33A, A, 144A, FRN, 2.36%, 7/15/26 .	United States	6,535,000		6,532,909
^d,fDryden Senior Loan Fund, 2015-38A, A, 144A, FRN, 2.31%, 7/15/27	Cayman Islands	9,642,857		9,646,136
^d,fEaton Vance CDO Ltd.,
2014-1A, A, 144A, FRN, 2.33%, 7/15/26	United States	5,266,000		5,266,316
2014-1A, B, 144A, FRN, 2.93%, 7/15/26	United States	858,000		859,055
2014-1A, C, 144A, FRN, 3.88%, 7/15/26	United States	739,600		739,193
^dEmerson Park CLO Ltd., 2013-1A, C2, 144A, 5.64%, 7/15/25	United States	630,000		636,968
^fFannie Mae Connecticut Avenue Securities,
2013-C01, M1, FRN, 2.534%, 10/25/23	United States	4,519,747		4,560,701
2014-C02, 2M1, FRN, 1.484%, 5/25/24	United States	589,064		589,129
2015-C02, 2M1, FRN, 1.734%, 5/25/25	United States	822,428		823,290
^fFHLMC Structured Agency Credit Risk Debt Notes,
2014-DN3, M2, FRN, 2.934%, 8/25/24	United States	1,183,054		1,186,784
2014-DN4, M2, FRN, 2.934%, 10/25/24	United States	3,579,486		3,587,755
2014-HQ1, M2, FRN, 3.034%, 8/25/24	United States	6,833,031		6,898,798
2014-HQ3, M2, FRN, 3.184%, 10/25/24	United States	7,719,583		7,780,900
2015-DN1, M2, FRN, 2.934%, 1/25/25	United States	7,185,724		7,218,368
2015-DN1, M3, FRN, 4.684%, 1/25/25	United States	9,400,000		9,824,938
2015-DNA1, M2, FRN, 2.384%, 10/25/27	United States	10,530,000		10,680,726
2015-DNA2, M2, FRN, 3.134%, 12/25/27	United States	10,445,000		10,588,353
2015-HQ1, M1, FRN, 1.584%, 3/25/25	United States	83,737		83,741
2015-HQ1, M2, FRN, 2.734%, 3/25/25	United States	11,000,000		11,129,870
2015-HQA1, M2, FRN, 3.184%, 3/25/28	United States	12,750,000		12,977,317
2015-HQA2, M2, FRN, 3.334%, 5/25/28	United States	12,520,000		12,843,306
2016-HQ1, M1, FRN, 2.284%, 9/25/28	United States	4,265,942		4,280,132
^fFirst Horizon Alternative Mortgage Securities Trust, 2004-AA5, 2A1,
FRN, 2.485%, 12/25/34.	United States	1,836,476		1,784,587
^d,fFlagship CLO VIII Ltd., 2014-8A, A, 144A, FRN, 2.44%, 1/16/26	Cayman Islands	5,545,000		5,563,631
^d,fGalaxy CLO Ltd., 2014-17A, AR, 144A, FRN, 2.28%, 7/15/26	Cayman Islands	1,710,000		1,711,847
^d,fGalaxy XV CLO Ltd., 2013-15A, A, 144A, FRN, 2.13%, 4/15/25	United States	10,063,000		10,054,950
^dG-Force LLC, 2005-RRA, B, 144A, 5.09%, 8/22/36	United States	1,102,733		1,099,673

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STATEMENT OF INVESTMENTS


Franklin Low Duration Total Return Fund (continued)
		Principal
	Country	Amount*		Value

Asset-Backed Securities and Commercial Mortgage-
Backed Securities (continued)
Diversified Financials (continued)
^oGMAC Commercial Mortgage Securities Inc. Trust, 2005-C1, B, 4.936%,
5/10/43	United States	1,431,075	$	241,180
^fGreenpoint Manufactured Housing, 1999-5, M1A, FRN, 8.30%, 10/15/26 .	United States	975,703		1,077,942
^fGSAA Home Equity Trust,
^o2005-5, M3, FRN, 1.479%, 2/25/35.	United States	5,950,000		5,717,795
2005-6, A3, FRN, 0.904%, 6/25/35	United States	426,820		424,229
^fGSAMP Trust, 2005-HE3, M2, FRN, 1.539%, 6/25/35	United States	1,059,792		1,048,291
^fGSR Mortgage Loan Trust, 2005-AR1, 1A1, FRN, 3.334%, 1/25/35	United States	547,125		523,993
^dHighbridge Loan Management Ltd., 2013-2A, B2, 144A, 5.80%,
10/20/24	United States	570,000		579,616
^d,fInvitation Homes Trust,
2014-SFR1, B, 144A, FRN, 2.035%, 6/17/31	United States	1,130,000		1,130,796
2014-SFR2, A, 144A, FRN, 1.645%, 9/17/31	United States	4,412,920		4,409,676
2014-SFR2, B, 144A, FRN, 2.145%, 9/17/31	United States	8,500,000		8,507,012
2015-SFR1, A, 144A, FRN, 1.985%, 3/17/32	United States	2,387,374		2,403,653
2015-SFR2, A, 144A, FRN, 1.881%, 6/17/32	United States	7,957,982		7,999,170
2015-SFR3, A, 144A, FRN, 1.835%, 8/17/32	United States	4,293,105		4,314,726
^fIXIS Real Estate Capital Trust, 2005-HE4, A3, FRN, 1.214%, 2/25/36	United States	502,262		500,718
^d,fJay Park CLO Ltd., 2016-1A, A2, 144A, FRN, 2.611%, 10/20/27	United States	17,290,000		17,286,369
^d,fJefferies & Co., 2009-R2, 4A, 144A, FRN, 2.881%, 5/26/37	United States	1,216,771		1,222,794
JP Morgan Chase Commercial Mortgage Securities Trust,
2004-LN2, A2, 5.115%, 7/15/41	United States	36,572		36,555
^f2005-LDP5, E, FRN, 5.717%, 12/15/44	United States	1,150,000		1,146,576
^f2005-LPD5, F, FRN, 5.717%, 12/15/44	United States	7,850,000		7,805,412
2006-CB17, AM, 5.464%, 12/12/43.	United States	2,350,000		2,348,115
^fJP Morgan Mortgage Trust, 2004-A1, 5A1, FRN, 2.797%, 2/25/34	United States	109,194		107,892
^d,f,oLB-UBS Commercial Mortgage Trust, 2001-C3, E, 144A, FRN, 6.95%,
6/15/36	United States	700,000		699,528
^fLehman XS Trust, 2005-4, 1A4, FRN, 1.094%, 10/25/35	United States	971,357		881,565
^dLNR CDO Ltd.,
^f2002-1A, DFL, 144A, FRN, 1.924%, 7/24/37	United States	671,286		673,112
2002-1A, DFX, 144A, 6.727%, 7/24/37	United States	886,097		887,621
^d,fMach One ULC,
2004-1A, K, 144A, FRN, 5.45%, 5/28/40	United States	4,293,400		4,332,651
2004-1A, L, 144A, FRN, 5.45%, 5/28/40	United States	3,470,500		3,448,150
2004-1A, M, 144A, FRN, 5.45%, 5/28/40	United States	640,000		629,590
^fMadison Avenue Manufactured Housing Contract Trust, 2-A, B1, FRN,
200, 3.784%, 3/25/32	United States	1,816,871		1,843,083
^fManufactured Housing Contract Trust Pass Through Certificates, 2001-1,
IIM2, FRN, 1.976%, 4/20/32	United States	7,707,993		7,272,046
MASTR Alternative Loan Trust,
2003-1, 3A1, 5.00%, 2/25/18	United States	232,966		235,922
2003-6, 2A1, 5.00%, 8/25/18	United States	652,871		661,083
2003-9, 1A1, 5.50%, 12/25/18	United States	271,062		272,626
^f2004-11, 2A1, FRN, 5.553%, 11/25/19	United States	983,173		1,006,702
2004-4, 5A1, 5.50%, 4/25/19	United States	802,157		818,016
^fMASTR ARM Trust, 2007-3, 12A2, FRN, 0.734%, 5/25/47	United States	250,738		250,573
^fMerrill Lynch Mortgage Investors Trust,
2003-G, A2, FRN, 1.638%, 1/25/29.	United States	977,966		933,158
2005-A10, A, FRN, 0.744%, 2/25/36	United States	3,751,922		3,457,857

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FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Low Duration Total Return Fund (continued)
		Principal
	Country	Amount*		Value

Asset-Backed Securities and Commercial Mortgage-
Backed Securities (continued)
Diversified Financials (continued)
^fMerrill Lynch Mortgage Investors Trust Inc., 2003-E, A1, FRN, 1.154%,
10/25/28	United States	996,879	$	956,818
^fMerrill Lynch Mortgage Trust, 2005-CKI1, D, FRN, 5.525%, 11/12/37	United States	2,676,411		2,617,580
^fNew York Mortgage Trust, 2005-3, M1, FRN, 1.209%, 2/25/36	United States	495,008		440,975
^fNovastar Home Equity Loan, 2004-4, M4, FRN, 2.184%, 3/25/35	United States	1,294,368		1,288,304
^d,fNZCG Funding Ltd., 2015-2A, A1, 144A, FRN, 2.436%, 4/27/27	United States	8,101,875		8,115,891
^dOBP Depositor LLC Trust, 2010-OBP, A, 144A, 4.646%, 7/15/45	United States	1,700,000		1,852,161
^d,fOctagon Investment Partners XVII Ltd., 2013-1A, A1, 144A, FRN,
2.212%, 10/25/25	United States	7,510,000		7,508,122
^d,fOctagon Investment Partners XXIII Ltd.,
2015-1A, A1, 144A, FRN, 2.30%, 7/15/27	United States	4,160,328		4,158,997
2015-1A, A2, 144A, FRN, 2.30%, 7/15/27	United States	3,949,678		3,946,755
^fOwnit Mortgage Loan Asset-Backed Certificates, 2005-2, M4, FRN,
1.464%, 3/25/36.	United States	1,234,548		1,229,507
^fPark Place Securities Inc. Asset-Backed Pass-Through Certificates,
2004-WHQ2, M2, FRN, 1.479%, 2/25/35.	United States	1,209,616		1,215,226
^d,fProgress Residential Trust, 2015-SFR1, A, 144A, FRN, 1.928%, 2/17/32 .	United States	10,016,059		10,063,391
^fRAAC, 2004-SP1, AII, FRN, 1.234%, 3/25/34	United States	634,779		605,391
^fResidential Funding Mortgage Securities II, 2004-HI3, A5, FRN, 5.48%,
6/25/34	United States	349,990		363,057
^d,fResource Capital Corp. Ltd.,
2014-CRE2, A, 144A, FRN, 1.585%, 4/15/32	United States	1,631,176		1,625,012
2015-CRE4, A, 144A, FRN, 1.935%, 8/15/32	United States	1,395,789		1,393,033
^d,fSilver Bay Realty Trust,
2014-1, A, 144A, FRN, 1.525%, 9/17/31	United States	1,176,517		1,170,697
2014-1, B, 144A, FRN, 1.975%, 9/17/31	United States	540,000		535,417
^fStructured ARM Loan Trust, 2004-12, 3A1, FRN, 3.15%, 9/25/34	United States	3,771,132		3,753,912
^fStructured Asset Investment Loan Trust, 2004-BNC2, A2, FRN, 1.574%,
12/25/34	United States	1,203,926		1,201,706
^fStructured Asset Mortgage Investments II Trust, 2004-AR6, A1A, FRN,
1.228%, 2/19/35.	United States	2,082,344		1,952,284
^fStructured Asset Mortgage Investments Trust,
2003-AR1, A1, FRN, 1.268%, 10/19/33	United States	415,641		389,563
2003-AR2, A1, FRN, 1.268%, 12/19/33	United States	869,921		838,587
^d,fSWAY Residential 2014-1 Trust, 2014-1, A, 144A, FRN, 1.835%, 1/17/32.	United States	6,213,273		6,224,272
^fThornburg Mortgage Securities Trust,
2003-4, A1, FRN, 1.174%, 9/25/43	United States	2,499,008		2,419,121
2004-3, A, FRN, 1.274%, 9/25/44	United States	1,352,451		1,244,521
2005-1, A3, FRN, 2.373%, 4/25/45	United States	409,637		411,320
^dTowd Point Mortgage Trust, 2016-1, A1, 144A, 3.50%, 2/25/55	United States	12,002,209		12,438,532
^d,fTrade MAPS Ltd., 2013-1A, A, 144A, FRN, 1.23%, 12/10/18	Ireland	8,500,000		8,491,755
^d,fTreman Park CLO Ltd., 2015-1A, A, 144A, FRN, 2.381%, 4/20/27	Cayman Islands	3,300,000		3,314,619
^d,fTricon American Homes Trust, 2015-SFR1, A, 144A, FRN, 1.785%,
5/17/32	United States	7,830,031		7,837,088
Vanderbilt Acquisition Loan Trust, 2002-1, M1, 7.33%, 5/07/32	United States	235,446		249,756
^d,fVoya CLO Ltd.,
2012-4A, A2R, 144A, FRN, 2.41%, 10/15/28	Cayman Islands	7,660,000		7,665,592
2014-4A, A1, 144A, FRN, 2.381%, 10/14/26	Cayman Islands	6,450,000		6,454,837
2015-1A, A1, 144A, FRN, 2.362%, 4/18/27	United States	5,280,000		5,279,789

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STATEMENT OF INVESTMENTS


Franklin Low Duration Total Return Fund (continued)
		Principal
	Country	Amount*		Value

Asset-Backed Securities and Commercial Mortgage-
Backed Securities (continued)
Diversified Financials (continued)
^fWaMu Mortgage Pass-Through Certificates,
2005-AR19, A1A1, FRN, 0.804%, 12/25/45	United States	3,881,268	$	3,748,393
2005-AR8, 1A1A, FRN, 0.824%, 7/25/45	United States	1,480,591		1,416,836
^fWells Fargo Mortgage Backed Securities Trust,
2004-W, A9, FRN, 2.99%, 11/25/34	United States	151,471		153,679
2005-AR10, 2A3, FRN, 2.981%, 6/25/35	United States	818,973		817,202
^d,fWest CLO Ltd.,
2014-1A, A2, 144A, FRN, 2.982%, 7/18/26	United States	1,360,000		1,360,150
2014-1A, B, 144A, FRN, 3.732%, 7/18/26	United States	3,590,000		3,555,823
				623,297,755
Real Estate 0.2%
^d,fAmerican Homes 4 Rent,
2014-SFR1, A, 144A, FRN, 1.535%, 6/17/31	United States	2,911,638		2,904,658
2014-SFR1, C, 144A, FRN, 2.285%, 6/17/31	United States	492,000		489,841
				3,394,499
Total Asset-Backed Securities and Commercial
Mortgage-Backed Securities (Cost $689,792,977)				690,039,951

Mortgage-Backed Securities 1.7%
^fFederal Home Loan Mortgage Corp. (FHLMC) Adjustable Rate 0.2%
FHLMC, 2.81% - 3.086%, 10/01/36 - 6/01/37	United States	3,526,261		3,739,206
Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate 0.0%^†
FHLMC Gold 15 Year, 5.00%, 10/01/23	United States	167,115		177,664
FHLMC Gold 15 Year, 6.00%, 6/01/23	United States	53,294		57,785
FHLMC Gold 30 Year, 5.00%, 1/01/39	United States	199,303		220,470
				455,919
^fFederal National Mortgage Association (FNMA) Adjustable Rate
1.3%
FNMA, 1.60% - 2.942%, 3/01/17 - 10/01/44	United States	22,549,940		23,665,143
FNMA, 2.947% - 5.927%, 3/01/17 - 10/01/38	United States	9,111,974		9,626,617
				33,291,760
Federal National Mortgage Association (FNMA) Fixed Rate 0.2%
FNMA 15 Year, 4.00%, 12/01/25	United States	2,286,941		2,432,335
FNMA 15 Year, 4.50%, 5/01/23 - 6/01/25	United States	1,704,650		1,822,890
FNMA 30 Year, 3.50%, 10/01/25	United States	1,476,181		1,555,937
FNMA 30 Year, 5.00%, 3/01/38	United States	48,815		54,013
				5,865,175
^fGovernment National Mortgage Association (GNMA) Adjustable
Rate 0.0%^†
GNMA, 1.875% - 2.125%, 4/20/26 - 9/20/26	United States	28,786		29,775
Total Mortgage-Backed Securities (Cost $43,041,110)				43,381,835

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STATEMENT OF INVESTMENTS


Franklin Low Duration Total Return Fund (continued)
		Principal
	Country	Amount*		Value

Municipal Bonds 0.4%
Industry Public Facilities Authority Tax Allocation Revenue,
Transportation District, Industrial Redevelopment Project No. 2,
Refunding, Series B, AGMC Insured, 3.389%, 1/01/20	United States	5,900,000	$	6,261,611
^pTexas State GO, Transportation Commission-Highway Improvement,
Series A, 5.00%, 4/01/21.	United States	2,685,000		3,122,064
^fUniversity of California Revenue, Series Y-2, Monthly FRN, 1.027%,
7/01/41	United States	390,000		390,039
Total Municipal Bonds (Cost $9,411,044)				9,773,714


		Shares

Escrows and Litigation Trusts (Cost $—) 0.0%
^a,qNewPage Corp., Litigation Trust.	United States	500,000		—


		Notional
	Counterparty	Amount*

Options Purchased 0.0%^†

Puts - Over-the-Counter
Credit Default Swaptions 0.0%^†
Buy protection on CDX.NA.HY.26, Premium Rate 5.00%, Strike Price
$103.50, Expires 11/16/16.	CITI	17,400,000		30,519
Buy protection on CDX.NA.IG.27, Premium Rate 1.00%, Strike Price $85,
Expires 11/16/16	JPHQ	8,700,000		2,245
Buy protection on CDX.NA.IG.27, Premium Rate 1.00%, Strike Price $90,
Expires 11/16/16	CITI	17,400,000		3,028
Total Options Purchased (Cost $184,614)				35,792
Total Investments before Short Term Investments
(Cost $2,417,629,123)				2,421,858,870


		Principal
	Country	Amount*

Short Term Investments 3.7%
Corporate Bonds (Cost $2,914,127) 0.1%
AT&T Inc., senior note, 2.40%, 3/15/17	United States	2,900,000		2,915,040
Total Investments before Money Market Funds
(Cost $2,420,543,250)				2,424,773,910


		Shares
Money Market Funds (Cost $89,753,463) 3.6%
^a,cInstitutional Fiduciary Trust Money Market Portfolio	United States	89,753,463		89,753,463
Total Investments (Cost $2,510,296,713) 99.8%				2,514,527,373
Other Assets, less Liabilities 0.2%				6,094,688
Net Assets 100.0%			$	2,520,622,061

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Franklin Low Duration Total Return Fund (continued)

^†Rounds to less than 0.1% of net assets.
*The principal/notional amount is stated in U.S. dollars unless otherwise indicated.
^aNon-income producing.
^bSee Note 8 regarding restricted securities.
^cSee Note 3(f) regarding investments in affiliated management investment companies.
^dSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers
or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At
October 31, 2016, the aggregate value of these securities was $522,655,075, representing 20.7% of net assets.
^eSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States.
Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption
from registration. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At October 31, 2016, the aggregate value of these
securities was $31,575,406, representing 1.3% of net assets.
^fThe coupon rate shown represents the rate at period end.
^gSee Note 7 regarding defaulted securities.
^hAt October 31, 2016, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund is restricted from trading these securities at year end.
ⁱSee Note 1(i) regarding senior floating rate interests.
^jA portion or all of the security purchased on a delayed delivery basis. See Note 1(c).
^kPrincipal amount is stated in 100 Mexican Peso Units.
^lRedemption price at maturity is adjusted for inflation. See Note 1(k).
^mPrincipal amount is stated in 1,000 Brazilian Real Units.
ⁿPrincipal amount of security is adjusted for inflation. See Note 1(k).
^oThe bond pays interest and/or principal based upon the issuer’s ability to pay, which may be less than the stated interest rate or principal paydown.
^pSecurity purchased on a when-issued basis. See Note 1(c).
^qSecurity has been deemed illiquid because it may not be able to be sold within seven days.

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FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS

Franklin Low Duration Total Return Fund (continued)

At October 31, 2016, the Fund had the following financial futures contracts outstanding. See Note 1(d).

Financial Futures Contracts


			Number of			Notional	Expiration		Unrealized				Unrealized
Description		Type	Contracts			Value	Date		Appreciation				Depreciation
Interest Rate Contracts
Canadian 10 Yr. Bond		Long	49	$		5,281,446	12/19/16		$		—	$	(60,736	)
CME Ultra Long Term U.S. Treasury Bond		Short	15			2,639,063	12/20/16				174,334		—
U.S. Treasury 2 Yr. Note		Long	1,296			282,710,250	12/30/16				—		(60,256	)
U.S. Treasury 5 Yr. Note		Short	1,815			219,246,328	12/30/16				737,801		—
U.S. Treasury 10 Yr. Note		Short	111			14,388,375	12/20/16				152,331		—
U.S. Treasury 30 Yr. Bond		Short	3			488,156	12/20/16				23,617		—
Total Financial Futures Contracts								$	1,088,083			$	(120,992	)
Net unrealized appreciation (depreciation)										$	967,091


At October 31, 2016, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts
						Contract	Settlement		Unrealized				Unrealized
Currency	Counterparty^aType		Quantity			Amount	Date		Appreciation				Depreciation
OTC Forward Exchange Contracts
Euro	DBAB	Buy	2,082,500		$	2,764,519	11/03/16		$		—	$	(478,390	)
Euro	DBAB	Sell	2,082,500			2,795,756	11/03/16				509,627		—
Australian Dollar	DBAB	Sell	3,410,144			2,502,705	12/15/16				—		(89,224	)
Euro	DBAB	Buy	2,250,000			2,534,850	12/15/16				—		(60,035	)
Euro	DBAB	Sell	18,899,102			21,234,818	12/15/16				447,357		—
Euro	JPHQ	Sell	2,600,000			2,934,100	12/15/16				74,313		—
Euro	MSCO	Sell	977,590			1,111,080	12/15/16				35,811		—
Japanese Yen	DBAB	Sell	1,072,725,000			10,197,684	12/15/16				—		(50,014	)
Japanese Yen	JPHQ	Sell	227,754,944			2,162,771	12/15/16				—		(12,963	)
Japanese Yen	JPHQ	Sell	545,000,000			5,362,247	12/15/16				155,884		—
Malaysian Ringgit	DBAB	Buy	227,680			55,397	12/15/16				—		(1,201	)
Malaysian Ringgit	HSBK	Buy	48,000			11,650	12/15/16				—		(225	)
Mexican Peso	JPHQ	Sell	70,500,000			3,541,556	12/15/16				—		(174,901	)
South Korean Won.	JPHQ	Sell	4,500,000,000			3,842,705	12/15/16				—		(90,904	)
Japanese Yen	DBAB	Sell	177,500,000			1,773,191	4/27/17				67,472		—
Japanese Yen	JPHQ	Sell	177,500,000			1,772,634	4/27/17				66,914		—
Australian Dollar	DBAB	Sell	3,360,000			2,532,432	5/18/17				—		(12,588	)
Australian Dollar	JPHQ	Sell	11,750,000			8,908,850	5/18/17				8,854		—
Brazilian Real	JPHQ	Buy	7,500,000			2,202,643	5/18/17				16,326		—
Canadian Dollar	JPHQ	Sell	1,350,000			1,028,611	5/18/17				20,720		—
Euro	BZWS	Sell	194,860			218,055	5/18/17				2,172		—
Euro	CITI	Sell	391,262			439,112	5/18/17				5,638		—
Euro	DBAB	Buy	558,065			613,425	5/18/17				4,848		—
Euro	DBAB	Sell	46,977,626			52,731,446	5/18/17				685,562		—
Euro	GSCO	Sell	420,000			471,912	5/18/17				6,600		—
Euro	HSBK	Sell	6,000			6,659	5/18/17				12		—
Euro	JPHQ	Sell	6,167,765			6,862,323	5/18/17				29,138		—
Hungarian Forint	DBAB	Sell	900,000,000			3,220,266	5/18/17				8,102		—
Hungarian Forint	JPHQ	Sell	430,000,000			1,547,375	5/18/17				12,674		—
Indian Rupee	DBAB	Buy	135,900,000			1,955,396	5/18/17				26,107		—

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STATEMENT OF INVESTMENTS


Franklin Low Duration Total Return Fund (continued)

Forward Exchange Contracts (continued)

					Contract	Settlement		Unrealized		Unrealized
Currency	Counterparty^aType		Quantity		Amount	Date		Appreciation		Depreciation
OTC Forward Exchange Contracts (continued)
Indian Rupee	JPHQ	Buy	78,000,000	$	1,130,435	5/18/17	$	6,851	$	—
Indonesian Rupiah.	JPHQ	Buy	41,430,000,000		3,058,693	5/18/17		23,386		—
Japanese Yen	JPHQ	Sell	863,000,000		8,605,354	5/18/17		303,824		—
Philippine Peso	JPHQ	Buy	94,860,000		1,925,309	5/18/17		10,937		—
Total Forward Exchange Contracts							$	2,529,129	$	(970,445	)
Net unrealized appreciation (depreciation)							$	1,558,684


^aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.


At October 31, 2016, the Fund had the following credit default swap contracts outstanding. See Note 1(d).

Credit Default Swap Contracts
								Unamortized
	Periodic		Counter-						Upfront
	Payment		party/	Notional		Expiration			Payments			Unrealized		Unrealized
Description	Rate		Exchange	Amount^a		Date			(Receipts)		Appreciation			Depreciation				Value		Rating^b
Centrally Cleared Swap Contracts
Contracts to Sell Protection^c
Traded Index
CDX.NA.IG.26	1.00	%	ICE	31,500,000		6/20/21		$	336,764		$	98,003		$	–		$	434,767		Investment
																				Grade
ITRX.EUR.25	1.00	%	ICE	11,100,000	EUR	6/20/21			113,951			86,502			–			200,453		Investment
																				Grade
ITRX.EUR.SN-
RFIN.26	1.00	%	ICE	16,350,000	EUR	12/20/21			(14,625	)		61,531			–			46,906		Investment
																				Grade
TotalCentrallyClearedSwapContracts								$	436,090		$	246,036		$	–		$	682,126
OTC Swap Contracts
Contracts to Buy Protection
Single Name
TheAESCorp	5.00	%	JPHQ	9,950,000		6/20/21	$	(1,068,068		)	$	–	$	(284,089		)	$	(1,352,157	)
Avon Products Inc	5.00	%	GSCO	10,000,000		3/20/20			1,019,549			–		(1,792,564		)		(773,015	)
Bank of America
Corp	1.00	%	FBCO	2,000,000		9/20/17			851			–		(16,183		)		(15,332	)
Beazer Homes
USAInc	5.00	%	CITI	1,500,000		6/20/19			(48,355	)		–		(60,991		)		(109,346	)
Beazer Homes
USAInc	5.00	%	GSCO	3,000,000		6/20/19			(93,153	)		–		(125,540		)		(218,693	)
Constellation
BrandsInc	5.00	%	DBAB	6,600,000		6/20/17			(151,966	)		–		(92,246		)		(244,212	)
CSC Holdings LLC	5.00	%	GSCO	3,500,000		9/20/18			(135,981	)		–		(141,290		)		(277,271	)
CSC Holdings LLC	5.00	%	GSCO	3,000,000		3/20/19			(85,197	)		–		(179,318		)		(264,515	)
DPLInc	5.00	%	JPHQ	471,000		12/20/16			(2,455	)		–		(3,165		)		(5,620	)
Hospitality Properties
Trust	5.00	%	BOFA	3,000,000		3/20/17			(44,436	)		–		(27,329		)		(71,765	)

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FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Low Duration Total Return Fund (continued)

Credit Default Swap Contracts (continued)

								Unamortized
	Periodic		Counter-					Upfront
	Payment		party/	Notional		Expiration		Payments			Unrealized		Unrealized
Description	Rate		Exchange	Amount^a		Date		(Receipts)			Appreciation		Depreciation			Value		Rating^b
OTC Swap Contracts (continued)
Contracts to Buy Protection (continued)
Single Name (continued)
International Lease
Finance Corp	5.00	%	GSCO	8,000,000		3/20/17	$	(113,578	)	$	–	$	(74,447	)	$	(188,025	)
Kinder Morgan Energy
Partners LP	5.00	%	CITI	3,400,000		3/20/18		(175,934	)		–		(66,343	)		(242,277	)
LennarCorp	5.00	%	CITI	2,700,000		12/20/19		(213,905	)		–		(109,758	)		(323,663	)
LennarCorp	5.00	%	GSCO	3,200,000		12/20/20		(268,181	)		–		(167,798	)		(435,979	)
The New York Times
Co	5.00	%	GSCO	2,000,000		12/20/16		(4,734	)		–		(18,770	)		(23,504	)
OlinCorp	1.00	%	CITI	1,430,000		6/20/21		103,607			–		(19,734	)		83,873
OlinCorp	1.00	%	GSCO	3,570,000		6/20/21		265,958			–		(56,087	)		209,871
Owens-Illinois Inc	5.00	%	CITI	7,400,000		6/20/18		(469,688	)		–		(154,000	)		(623,688	)
PactivLLC	5.00	%	BZWS	2,100,000		6/20/17		(31,765	)		–		(42,925	)		(74,690	)
PHHCorp	5.00	%	GSCO	1,800,000		9/20/19		13,394			–		(80,076	)		(66,682	)
RiteAidCorp	5.00	%	JPHQ	6,300,000		12/20/20		(938,916	)		15,484		–			(923,432	)
SanminaCorp	5.00	%	GSCO	6,500,000		6/20/19		(753,355	)		–		(36,817	)		(790,172	)
Tenet Healthcare
Corp	5.00	%	BZWS	4,000,000		12/20/16		(16,568	)		–		(29,509	)		(46,077	)
Tenet Healthcare
Corp	5.00	%	DBAB	3,000,000		3/20/19		(187,366	)		36,588		–			(150,778	)
Tenet Healthcare
Corp	5.00	%	GSCO	9,100,000		3/20/19		(620,097	)		162,736		–			(457,361	)
Toys R Us Inc	5.00	%	CITI	2,000,000		12/20/18		287,585			–		(228,974	)		58,611
Toys R Us Inc	5.00	%	DBAB	2,250,000		12/20/18		354,503			–		(288,565	)		65,938
Toys R Us Inc	5.00	%	GSCO	4,000,000		12/20/18		866,280			–		(749,058	)		117,222
Transocean Inc	5.00	%	MSCO	7,000,000		6/20/18		(139,094	)		–		(156,382	)		(295,476	)
XPOCNWInc	5.00	%	JPHQ	3,275,000		3/20/18		(109,457	)		–		(13,578	)		(123,035	)
Contracts to Sell Protection^c
Single Name
American Tower
Corp	1.00	%	GSCO	6,500,000		3/20/21		(106,732	)		3,460		–			(103,272	)	BBB-
Bank of America
Corp	1.00	%	FBCO	2,000,000		9/20/17		(851	)		16,183		–			15,332		BBB+
Beazer Homes
USAInc	5.00	%	CITI	2,700,000		12/20/19		48,267			131,150		–			179,417		B-
Beazer Homes
USAInc	5.00	%	GSCO	3,200,000		12/20/20		(308,402	)		429,480		–			121,078		B-
^dCalpineCorp	5.00	%	JPHQ	9,950,000		6/20/21		543,716			149,763		–			693,479		B
Electricite de France
SA	1.00	%	BZWS	5,300,000	EUR	9/20/20		105,937			–		(3,530	)		102,407		A-
EngieSA	1.00	%	BZWS	4,300,000	EUR	9/20/20		106,149			20,705		–			126,854		A-
Enterprise Products
Operating LLC	1.00	%	MSCO	3,500,000		12/20/19		(15,880	)		33,385		–			17,505		BBB+

76 Annual Report

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FRANKLIN INVESTORS SECURITIES TRUST

STATEMENT OF INVESTMENTS


Franklin Low Duration Total Return Fund (continued)

Credit Default Swap Contracts (continued)

								Unamortized
	Periodic		Counter-					Upfront
	Payment		party/	Notional		Expiration		Payments			Unrealized		Unrealized
Description	Rate		Exchange	Amount^a		Date		(Receipts)			Appreciation		Depreciation			Value		Rating^b
OTC Swap Contracts (continued)
Contracts to Sell Protection^c(continued)
Single Name (continued)
Government of
Mexico	1.00	%	CITI	2,500,000		6/20/20	$	(21,752	)	$	13,011		$ –		$	(8,741	)	BBB+
iHeartCommunica-
tionsInc	5.00	%	BZWS	2,400,000		6/20/18		(278,153	)		–		(499,358	)		(777,511	)	CC
OrangeSA	1.00	%	CITI	5,300,000	EUR	9/20/20		85,741			52,111		–			137,852		BBB+
Tenet Healthcare
Corp	5.00	%	BZWS	4,000,000		12/20/18		114,608			106,632		–			221,240		CCC+
Traded Index
MCDX.NA.27	1.00	%	CITI	6,500,000		12/20/21		66,703			–		(19,939	)		46,764		Investment
																		Grade
TotalOTCSwapContracts							$	(2,421,171	)	$	1,170,688	$	(5,538,363	)	$	(6,788,846	)
TotalCreditDefaultSwapContracts							$	(1,985,081	)	$	1,416,724	$	(5,538,363	)	$	(6,106,720	)
Netunrealizedappreciation(depreciation)												$	(4,121,639	)

^aIn U.S. dollars unless otherwise indicated. For contracts to sell protection, the notional amount is equal to the maximum potential amount of the future payments and no
recourse provisions have been entered into in association with the contracts.
^bBased on Standard and Poor’s (S&P) Rating for single name swaps and internal ratings for index swaps. Internal ratings based on mapping into equivalent ratings from
external vendors.
^cThe Fund enters contracts to sell protection to create a long credit position. Performance triggers include default, bankruptcy or restructuring for single name swaps, and
failure to pay or bankruptcy of the underlying securities for traded index swaps.
^dAt October 31, 2016, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund is restricted from trading these contracts at year end.


At October 31, 2016, the Fund had the following cross-currency swap contracts outstanding. See Note 1(d).

Cross Currency Swap Contracts
		Notional		Expiration		Unrealized		Unrealized
Description	Counterparty	Amount		Date		Appreciation		Depreciation
OTC Swap Contracts
Receive Floating Quarterly 3-month USD BBA LIBOR + 2.18%	CITI	3,922,448	USD	10/13/17	$	353,537	$	—
Pay Fixed Annual 2.125%		3,500,000	CHF
Receive Floating Quarterly 3-month USD BBA LIBOR + 3.29%	JPHQ	1,562,500	USD	10/13/17		53,247		—
Pay Fixed Annual 2.125%		1,500,000	CHF
Receive Fixed Semi-Annual 2.393%	JPHQ	7,916,500	USD	4/09/20		122,532		—
Pay Fixed Annual 0.50%.		7,100,000	EUR
Net unrealized appreciation (depreciation)					$	529,316

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Annual Report

FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS


Franklin Low Duration Total Return Fund (continued)

At October 31, 2016, the Fund had the following interest rate swap contracts outstanding. See Note 1(d).

Interest Rate Swap Contracts
						Unamortized
						Upfront
			Notional	Expiration		Payments/ Unrealized	Unrealized
Description	Exchange		Amount	Date		(Receipts) Appreciation	Depreciation		Value

Centrally Cleared Swap Contract
Receive Floating rate 3-month USD BBA
LIBOR + 0.661%
Pay Fixed Semi-Annual 1.75%.	LCH	$	38,280,000	3/15/24	$	(847,227) $347,110	$—	$	(500,117	)

See Notes 6 and 10 regarding investment transactions and other derivative information, respectively.

See Abbreviations on page 140.

78 Annual Report | The accompanying notes are an integral part of these financial statements.

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					FRANKLIN INVESTORS SECURITIES TRUST



Consolidated Financial Highlights
Franklin Total Return Fund
					Year Ended October 31,
		2016			2015			2014			2013			2012
Class A
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	9.87		$	10.18		$	10.05		$	10.53		$	10.32
Income from investment operations^a:
Net investment income		0.231			0.217			0.257			0.236			0.297
Net realized and unrealized gains (losses)		0.107			(0.220	)		0.214			(0.205	)		0.472
Total from investment operations		0.338			(0.003	)		0.471			0.031			0.769
Less distributions from:
Net investment income and net foreign currency gains		(0.278	)		(0.307	)		(0.341	)		(0.351	)		(0.447	)
Net realized gains		—			—			—			(0.160	)		(0.112	)
Total distributions		(0.278	)		(0.307	)		(0.341	)		(0.511	)		(0.559	)
Net asset value, end of year.	$	9.93		$	9.87		$	10.18		$	10.05		$	10.53

Total return^b		3.53	%		(0.05	)%		4.80	%		0.30	%		7.74	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		0.90	%		0.91	%		0.93	%		0.91	%		0.92	%
Expenses net of waiver and payments by affiliates		0.85	%^c		0.87	%^c		0.88	%^c		0.88	%^c		0.88	%
Net investment income		2.32	%		2.08	%		2.46	%		2.36	%		2.69	%

Supplemental data
Net assets, end of year (000’s)	$	3,623,035		$	3,527,479		$	3,213,446		$	3,019,228		$	3,134,211
Portfolio turnover rate		287.38	%		294.80	%		273.96	%		371.54	%		314.62	%
Portfolio turnover rate excluding mortgage dollar rolls^d		146.15	%		95.06	%		85.03	%		156.49	%		122.04	%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated Statement of Operations for the period due to the timing of sales
and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^bTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
^cBenefit of expense reduction rounds to less than 0.01%.
^dSee Note 1(h) regarding mortgage dollar rolls.

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FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED FINANCIAL HIGHLIGHTS


Franklin Total Return Fund (continued)
					Year Ended October 31,
		2016			2015			2014			2013			2012
Class C
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	9.84		$	10.16		$	10.03		$	10.51		$	10.31
Income from investment operations^a:
Net investment income		0.189			0.172			0.201			0.174			0.253
Net realized and unrealized gains (losses)		0.100			(0.214	)		0.232			(0.182	)		0.467
Total from investment operations		0.289			(0.042	)		0.433			(0.008	)		0.720
Less distributions from:
Net investment income and net foreign currency gains		(0.259	)		(0.278	)		(0.303	)		(0.312	)		(0.408	)
Net realized gains		—			—			—			(0.160	)		(0.112	)
Total distributions		(0.259	)		(0.278	)		(0.303	)		(0.472	)		(0.520	)
Net asset value, end of year.	$	9.87		$	9.84		$	10.16		$	10.03		$	10.51

Total return^b		3.13	%		(0.43	)%		4.42	%		(0.08	)%		7.25	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		1.30	%		1.31	%		1.33	%		1.31	%		1.32	%
Expenses net of waiver and payments by affiliates		1.25	%^c		1.27	%^c		1.28	%^c		1.28	%^c		1.28	%
Net investment income		1.92	%		1.68	%		2.06	%		1.96	%		2.29	%

Supplemental data
Net assets, end of year (000’s)	$	449,274		$	444,253		$	432,767		$	455,720		$	571,206
Portfolio turnover rate		287.38	%		294.80	%		273.96	%		371.54	%		314.62	%
Portfolio turnover rate excluding mortgage dollar rolls^d		146.15	%		95.06	%		85.03	%		156.49	%		122.04	%

80 Annual Report | The accompanying notes are an integral part of these financial statements.

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					FRANKLIN INVESTORS SECURITIES TRUST
					CONSOLIDATED FINANCIAL HIGHLIGHTS


Franklin Total Return Fund (continued)
					Year Ended October 31,
		2016			2015			2014			2013			2012
Class R
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	9.85		$	10.17		$	10.04		$	10.52		$	10.32
Income from investment operations^a:
Net investment income		0.199			0.198			0.209			0.204			0.255
Net realized and unrealized gains (losses)		0.117			(0.229	)		0.238			(0.197	)		0.480
Total from investment operations		0.316			(0.031	)		0.447			0.007			0.735
Less distributions from:
Net investment income and net foreign currency gains		(0.266	)		(0.289	)		(0.317	)		(0.327	)		(0.423	)
Net realized gains		—			—			—			(0.160	)		(0.112	)
Total distributions		(0.266	)		(0.289	)		(0.317	)		(0.487	)		(0.535	)
Net asset value, end of year.	$	9.90		$	9.85		$	10.17		$	10.04		$	10.52

Total return		3.31	%		(0.32	)%		4.56	%		0.06	%		7.39	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		1.15	%		1.16	%		1.18	%		1.16	%		1.17	%
Expenses net of waiver and payments by affiliates		1.10	%^b		1.12	%^b		1.13	%^b		1.13	%^b		1.13	%
Net investment income		2.07	%		1.83	%		2.21	%		2.11	%		2.44	%

Supplemental data
Net assets, end of year (000’s)	$	58,715		$	70,506		$	59,307		$	65,601		$	87,235
Portfolio turnover rate		287.38	%		294.80	%		273.96	%		371.54	%		314.62	%
Portfolio turnover rate excluding mortgage dollar rolls^c		146.15	%		95.06	%		85.03	%		156.49	%		122.04	%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated Statement of Operations for the period due to the timing of sales
and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^bBenefit of expense reduction rounds to less than 0.01%.
^cSee Note 1(h) regarding mortgage dollar rolls.

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FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED FINANCIAL HIGHLIGHTS


Franklin Total Return Fund (continued)
					Year Ended October 31,
		2016			2015			2014			2013	^a
Class R6
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	9.91		$	10.20		$	10.07		$	10.44
Income from investment operations^b:
Net investment income.		0.195			0.255	^c		0.317	^c		0.145
Net realized and unrealized gains (losses)		0.173			(0.209	)		0.191			(0.348	)
Total from investment operations		0.368			0.046			0.508			(0.203	)
Less distributions from net investment income and net foreign currency gains		(0.298	)		(0.336	)		(0.378	)		(0.167	)
Net asset value, end of year	$	9.98		$	9.91		$	10.20		$	10.07

Total return^d		3.94	%		0.44	%		5.18	%		(1.92	)%

Ratios to average net assets^e
Expenses before waiver and payments by affiliates		0.51	%		0.50	%		0.50	%		0.50	%
Expenses net of waiver and payments by affiliates^f		0.46	%		0.46	%		0.48	%		0.49	%
Net investment income		2.71	%		2.49	%		2.86	%		2.75	%

Supplemental data
Net assets, end of year (000’s)	$	93,892		$	68,848		$	26,123		$	329,806
Portfolio turnover rate		287.38	%		294.80	%		273.96	%		371.54	%
Portfolio turnover rate excluding mortgage dollar rolls^g		146.15	%		95.06	%		85.03	%		156.49	%

^aFor the period May 1, 2013 (effective date) to October 31, 2013.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated Statement of Operations for the period due to the timing of sales
and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dTotal return is not annualized for periods less than one year.
^eRatios are annualized for periods less than one year.
^fBenefit of expense reduction rounds to less than 0.01%.
^gSee Note 1(h) regarding mortgage dollar rolls.

82 Annual Report | The accompanying notes are an integral part of these financial statements.

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					FRANKLIN INVESTORS SECURITIES TRUST
					CONSOLIDATED FINANCIAL HIGHLIGHTS


Franklin Total Return Fund (continued)
					Year Ended October 31,
		2016			2015			2014			2013			2012
Advisor Class
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	9.91		$	10.20		$	10.07		$	10.55		$	10.34
Income from investment operations^a:
Net investment income		0.218			0.127			0.288			0.242			0.319
Net realized and unrealized gains (losses)		0.142			(0.092	)		0.206			(0.186	)		0.474
Total from investment operations		0.360			0.035			0.494			0.056			0.793
Less distributions from:
Net investment income and net foreign currency gains		(0.290	)		(0.325	)		(0.364	)		(0.376	)		(0.471	)
Net realized gains		—			—			—			(0.160	)		(0.112	)
Total distributions		(0.290	)		(0.325	)		(0.364	)		(0.536	)		(0.583	)
Net asset value, end of year.	$	9.98		$	9.91		$	10.20		$	10.07		$	10.55

Total return		3.75	%		0.33	%		5.03	%		0.54	%		7.98	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		0.65	%		0.66	%		0.68	%		0.66	%		0.67	%
Expenses net of waiver and payments by affiliates		0.60	%^b		0.62	%^b		0.63	%^b		0.63	%^b		0.63	%
Net investment income		2.57	%		2.33	%		2.71	%		2.61	%		2.94	%

Supplemental data
Net assets, end of year (000’s)	$	740,046		$	526,749		$	1,281,151		$	1,148,451		$	1,482,994
Portfolio turnover rate		287.38	%		294.80	%		273.96	%		371.54	%		314.62	%
Portfolio turnover rate excluding mortgage dollar rolls^c		146.15	%		95.06	%		85.03	%		156.49	%		122.04	%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated Statement of Operations for the period due to the timing of sales
and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^bBenefit of expense reduction rounds to less than 0.01%.
^cSee Note 1(h) regarding mortgage dollar rolls.

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FRANKLIN INVESTORS SECURITIES TRUST


Consolidated Statement of Investments, October 31, 2016
Franklin Total Return Fund
		Shares/
	Country	Warrants			Value

Common Stocks and Other Equity Interests 0.2%
Consumer Services 0.1%
^a,b,cTurtle Bay Resort	United States	1,550,568		$	5,378,919
Energy 0.1%
^a,dHalcon Resources Corp	United States	229,059			1,834,837
^aHalcon Resources Corp., wts., 9/09/20	United States	20,425			51,675
					1,886,512
Materials 0.0%^†
^aVerso Corp., A	United States	6,954			42,697
^aVerso Corp., wts., 7/25/23	United States	732			—
					42,697
Total Common Stocks and Other Equity Interests
(Cost $6,177,308)					7,308,128

^eManagement Investment Companies 1.8%
Diversified Financials 1.8%
Franklin Liberty Investment Grade Corporate ETF.	United States	400,000			9,888,000
Franklin Liberty Short Duration U.S. Government ETF	United States	500,000			48,780,000
Franklin Lower Tier Floating Rate Fund	United States	997,589			10,364,951
Franklin Middle Tier Floating Rate Fund.	United States	1,889,310			19,006,460
Total Management Investment Companies
(Cost $87,329,310)					88,039,411

Preferred Stocks 0.4%
Banks 0.3%
U.S. Bancorp, 6.00%, pfd., G	United States	640,000			16,390,400
Diversified Financials 0.1%
^fCitigroup Capital XIII, 7.149%, pfd	United States	93,000			2,418,930
Total Preferred Stocks (Cost $18,325,000)					18,809,330


		Principal
		Amount*

Corporate Bonds 37.5%
Automobiles & Components 0.6%
Delphi Corp., senior bond, 4.15%, 3/15/24	United Kingdom	5,100,000			5,471,300
Fiat Chrysler Automobiles NV, senior note, 4.50%, 4/15/20	United Kingdom	6,000,000			6,150,000
Ford Motor Credit Co. LLC, senior note, 3.096%, 5/04/23	United States	18,200,000			18,236,127
					29,857,427
Banks 8.2%
Banco Comercial Portugues SA, 4.75%, 6/22/17	Portugal	5,400,000	EUR		6,103,944
Bank of America Corp.,
senior bond, 3.875%, 8/01/25	United States	6,000,000			6,329,064
senior note, 3.50%, 4/19/26	United States	20,400,000			20,967,344
^gBankinter SA, senior note, Reg S, 1.75%, 6/10/19.	Spain	12,500,000	EUR		14,301,488
^gBarclays Bank PLC, senior sub. note, Reg S, 6.00%, 1/14/21	United Kingdom	8,000,000	EUR		10,181,319
Barclays PLC, sub. note, 4.375%, 9/11/24	United Kingdom	500,000			503,183
Capital One Financial Corp., senior note, 3.20%, 2/05/25.	United States	9,700,000			9,841,290
CIT Group Inc., senior note, 5.00%, 8/15/22	United States	7,000,000			7,509,460

84 Annual Report

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FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS


Franklin Total Return Fund (continued)
		Principal
	Country	Amount*			Value

Corporate Bonds (continued)
Banks (continued)
Citigroup Inc.,
senior note, 3.40%, 5/01/26	United States	20,000,000		$	20,384,380
senior note, 8.125%, 7/15/39.	United States	4,400,000			6,736,695
Depfa ACS Bank,
secured bond, 1.65%, 12/20/16	Ireland	720,000,000	JPY		6,878,223
secured bond, 2.125%, 10/13/17	Ireland	12,250,000	CHF		12,658,581
HSBC Holdings PLC,
senior note, 3.60%, 5/25/23	United Kingdom	12,700,000			13,125,640
senior note, 4.30%, 3/08/26	United Kingdom	14,800,000			15,785,532
Intesa Sanpaolo SpA,
senior note, 2.375%, 1/13/17.	Italy	24,500,000			24,536,382
senior note, 3.875%, 1/16/18.	Italy	4,300,000			4,380,948
^hsub. note, 144A, 5.71%, 1/15/26	Italy	17,500,000			16,753,887
JPMorgan Chase & Co.,
ⁱjunior sub. bond, X, 6.10% to 10/01/24, FRN thereafter,
Perpetual	United States	10,400,000			10,942,360
senior bond, 3.30%, 4/01/26	United States	22,000,000			22,450,318
senior bond, 3.20%, 6/15/26	United States	10,800,000			10,929,319
senior note, 2.40%, 6/07/21	United States	10,000,000			10,092,150
senior note, 3.25%, 9/23/22	United States	11,400,000			11,864,185
^hNorddeutsche Landesbank Girozentrale, secured note, 144A,
2.00%, 2/05/19	Germany	7,000,000			7,090,230
Royal Bank of Canada, secured note, 2.10%, 10/14/20	Canada	11,500,000			11,668,739
Royal Bank of Scotland Group PLC, sub. note, 6.125%, 12/15/22	United Kingdom	3,100,000			3,278,824
The Royal Bank of Scotland PLC, sub. note, 6.934%, 4/09/18	United Kingdom	4,000,000	EUR		4,755,547
^hShinhan Bank, senior note, 144A, 1.875%, 7/30/18	South Korea	10,000,000			10,020,700
SVB Financial Group, senior note, 3.50%, 1/29/25	United States	6,000,000			5,998,044
^jUniCredit SpA, senior note, FRN, 1.688%, 10/31/17	Italy	9,500,000	EUR		10,559,637
^gUnione di Banche Italiane SpA, senior note, Reg S, 2.875%,
2/18/19	Italy	12,000,000	EUR		13,968,760
Wells Fargo & Co.,
ⁱjunior sub. bond, S, 5.90% to 6/15/24, FRN thereafter,
Perpetual	United States	5,500,000			5,761,250
senior note, 2.50%, 3/04/21	United States	10,000,000			10,133,520
senior note, 3.00%, 4/22/26	United States	31,200,000			31,082,002
sub. bond, 4.65%, 11/04/44	United States	10,000,000			10,371,060
^hWestpac Banking Corp., senior secured note, 144A, 2.25%,
11/09/20.	Australia	10,800,000			10,974,366
^hWoori Bank, sub. note, 144A, 4.75%, 4/30/24	South Korea	9,750,000			10,346,408
					409,264,779
Capital Goods 1.2%
^hAmcor Finance USA Inc., senior note, 144A, 3.625%, 4/28/26	Australia	11,800,000			12,048,626
CNH Industrial Capital LLC, senior note, 3.875%, 10/15/21	United States	3,400,000			3,383,000
^hCortes NP Acquisition Corp., senior note, 144A, 9.25%, 10/15/24	United States	4,100,000			4,315,250
^k,lErickson Air-Crane Inc., Purchase Price Notes, 6.00%, 11/02/20	United States	10,305			1,078
General Electric Co., senior note, A, 8.50%, 4/06/18	United States	135,000,000	MXN		7,382,589
Lockheed Martin Corp., senior bond, 4.70%, 5/15/46	United States	13,900,000			15,859,886
^hSydney Airport Finance Co. Pty. Ltd., 144A, 3.90%, 3/22/23	Australia	5,800,000			6,142,374
United Technologies Corp., senior note, 1.125%, 12/15/21	United States	10,500,000	EUR		11,981,037
					61,113,840

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FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS


Franklin Total Return Fund (continued)
			Principal
		Country	Amount*		Value

Corporate Bonds (continued)
Commercial & Professional Services 0.1%
Republic Services Inc., senior note, 2.90%, 7/01/26		United States	4,500,000	$	4,505,512
Consumer Durables & Apparel 0.4%
Beazer Homes USA Inc., senior note, 5.75%, 6/15/19		United States	13,500,000		14,006,250
PulteGroup Inc., senior bond, 5.00%, 1/15/27.		United States	4,900,000		4,881,625
					18,887,875
Consumer Services 0.6%
^hKFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of
America LLC,
senior note, 144A, 5.00%, 6/01/24		United States	2,300,000		2,369,000
senior note, 144A, 5.25%, 6/01/26		United States	2,300,000		2,403,500
Marriott International Inc., senior bond, 3.75%, 10/01/25		United States	18,400,000		19,343,276
Yum! Brands Inc., senior note, 5.30%, 9/15/19		United States	3,000,000		3,243,750
					27,359,526
Diversified Financials 3.4%
AerCap Ireland Capital Ltd./AerCap Global Aviation Trust, senior
note, 4.25%, 7/01/20		Netherlands	6,000,000		6,242,520
American Airlines Pass Through Trust, first lien, 2016-2, AA,
3.20%, 6/15/28		United States	6,600,000		6,723,750
American Express Centurion Bank, senior note, 5.95%, 6/12/17		United States	800,000		822,331
Capital One Bank USA NA, sub. bond, 3.375%, 2/15/23		United States	6,000,000		6,139,158
Discover Financial Services, senior note, 3.85%, 11/21/22		United States	3,052,000		3,154,276
GE Capital International Funding Co., senior bond, 3.373%,
11/15/25	.	United States	17,000,000		18,110,270
The Goldman Sachs Group Inc.,
senior note, 3.75%, 5/22/25		United States	7,700,000		8,027,496
senior note, 3.75%, 2/25/26		United States	21,300,000		22,228,978
^hHutchison Whampoa International 11 Ltd., senior note, 144A,
3.50%, 1/13/17		Hong Kong	9,500,000		9,539,900
International Lease Finance Corp., senior note, 8.75%, 3/15/17		United States	12,000,000		12,309,408
Morgan Stanley,
senior bond, 4.30%, 1/27/45		United States	10,000,000		10,526,400
senior note, 3.875%, 1/27/26.		United States	20,500,000		21,651,465
^hMSCI Inc., senior note, 144A, 4.75%, 8/01/26		United States	1,100,000		1,111,000
Navient Corp.,
senior note, 6.625%, 7/26/21.		United States	2,200,000		2,222,000
senior note, 7.25%, 9/25/23		United States	4,000,000		3,995,000
PHH Corp., senior note, 7.375%, 9/01/19.		United States	5,400,000		5,656,500
Springleaf Finance Corp.,
senior note, 6.00%, 6/01/20		United States	1,200,000		1,215,000
senior note, 7.75%, 10/01/21.		United States	1,000,000		1,041,650
^hThree Gorges Finance I Cayman Islands Ltd., senior note, 144A,
3.70%, 6/10/25		China	12,800,000		13,503,872
^hTransurban Finance Co. Pty. Ltd., senior secured bond, 144A,
4.125%, 2/02/26		Australia	8,200,000		8,707,957
United Airlines Pass Through Trust, first lien, 2016-1, AA, 3.10%,
1/07/30		United States	6,300,000		6,468,651
					169,397,582

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CONSOLIDATED STATEMENT OF INVESTMENTS


Franklin Total Return Fund (continued)
		Principal
	Country	Amount*		Value

Corporate Bonds (continued)
Energy 4.3%
Anadarko Petroleum Corp., senior note, 6.45%, 9/15/36	United States	2,260,000	$	2,691,911
^hCalifornia Resources Corp., secured note, second lien, 144A,
8.00%, 12/15/22	United States	4,000,000		2,730,000
^hCalumet Specialty Products Partners LP/Calumet Finance Corp.,
senior note, 144A, 11.50%, 1/15/21	United States	2,100,000		2,378,250
Canadian Natural Resources Ltd., senior note, 5.70%, 5/15/17	Canada	5,400,000		5,517,261
CGG SA, senior note, 6.50%, 6/01/21	France	2,100,000		1,071,000
^hCheniere Corpus Christi Holdings LLC, senior secured note, 144A,
7.00%, 6/30/24	United States	2,300,000		2,449,500
CNOOC Finance 2013 Ltd., senior note, 3.00%, 5/09/23	China	14,000,000		14,016,520
Enable Midstream Partners LP,
senior bond, 5.00%, 5/15/44	United States	1,200,000		1,031,076
senior note, 3.90%, 5/15/24	United States	3,600,000		3,394,098
Energy Transfer Equity LP, senior note, first lien, 7.50%, 10/15/20	United States	6,000,000		6,570,000
Energy Transfer Partners LP, senior bond, 5.15%, 2/01/43	United States	6,000,000		5,585,520
^h,lEnergy XXI Gulf Coast Inc., senior secured note, second lien,
144A, 11.00%, 3/15/20	United States	6,000,000		2,730,000
EnLink Midstream Partners LP, senior bond, 5.05%, 4/01/45	United States	6,200,000		5,550,823
Ensco PLC, senior bond, 5.75%, 10/01/44	United States	3,700,000		2,488,250
Enterprise Products Operating LLC, senior bond, 4.45%, 2/15/43	United States	6,000,000		5,786,484
Exxon Mobil Corp., senior note, 2.709%, 3/06/25	United States	21,500,000		21,889,773
^h,mGaz Capital SA (OJSC Gazprom), loan participation, senior note,
144A, 3.85%, 2/06/20	Russia	10,000,000		10,040,550
^h,lLinn Energy LLC/Finance Corp., senior secured note, second lien,
144A, 12.00%, 12/15/20.	United States	1,000,000		705,000
^hLUKOIL International Finance BV, senior note, 144A, 4.563%,
4/24/23	Russia	6,000,000		6,110,460
MPLX LP, 4.00%, 2/15/25.	United States	4,600,000		4,556,889
Oceaneering International Inc., senior note, 4.65%, 11/15/24	United States	7,900,000		8,026,771
^jPetrobras Global Finance BV, senior note, FRN, 3.737%, 3/17/20	Brazil	14,400,000		14,238,000
^hPetrofac Ltd., senior note, 144A, 3.40%, 10/10/18	United Kingdom	7,600,000		7,669,532
^hSabine Pass Liquefaction LLC, senior secured bond, 144A, 5.00%,
3/15/27	United States	3,700,000		3,774,000
^cSanchez Energy Corp., senior note, 6.125%, 1/15/23	United States	3,000,000		2,580,000
^hSinopec Group Overseas Development 2014 Ltd., senior note,
144A, 4.375%, 4/10/24	China	9,300,000		10,161,459
^hSinopec Group Overseas Development 2015 Ltd., senior note,
144A, 3.25%, 4/28/25	China	16,400,000		16,536,202
Sunoco Logistics Partners Operations LP, senior note, 4.25%,
4/01/24	United States	9,300,000		9,747,107
Transcontinental Gas Pipe Line Corp., senior note, 6.05%, 6/15/18 .	United States	550,000		583,100
Transocean Inc., senior bond, 7.375%, 4/15/18	United States	13,000,000		13,227,500
Valero Energy Corp., senior bond, 4.90%, 3/15/45	United States	6,700,000		6,595,004
Weatherford International Ltd.,
senior bond, 5.95%, 4/15/42	United States	2,400,000		1,824,000
senior note, 7.75%, 6/15/21	United States	1,600,000		1,622,000
senior note, 8.25%, 6/15/23	United States	2,000,000		2,075,000
^hWoodside Finance Ltd., senior note, 144A, 3.70%, 9/15/26	Australia	9,500,000		9,518,193
				215,471,233

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FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS


Franklin Total Return Fund (continued)
		Principal
	Country	Amount*			Value

Corporate Bonds (continued)
Food & Staples Retailing 0.6%
^hCencosud SA, senior note, 144A, 4.875%, 1/20/23	Chile	10,200,000		$	10,780,533
The Kroger Co., senior note, 4.00%, 2/01/24	United States	15,400,000			16,598,875
					27,379,408
Food, Beverage & Tobacco 1.4%
Anheuser-Busch InBev Finance Inc., senior bond, 3.65%, 2/01/26 .	Belgium	17,000,000			17,928,353
Bunge Ltd. Finance Corp., senior note, 3.25%, 8/15/26	United States	12,000,000			12,040,764
Constellation Brands Inc., senior note, 7.25%, 5/15/17	United States	5,000,000			5,168,750
Kraft Heinz Foods Co., senior note, 3.50%, 7/15/22.	United States	21,400,000			22,580,403
Reynolds American Inc., senior bond, 5.70%, 8/15/35	United States	9,300,000			11,286,917
					69,005,187
Health Care Equipment & Services 0.9%
Express Scripts Holding Co., senior bond, 3.50%, 6/15/24	United States	14,500,000			14,998,336
HCA Inc., senior bond, 5.875%, 5/01/23	United States	8,000,000			8,500,000
Medco Health Solutions Inc., senior note, 4.125%, 9/15/20	United States	3,500,000			3,753,246
^hMPH Acquisition Holdings LLC, senior note, 144A, 7.125%,
6/01/24	United States	1,000,000			1,072,400
Stryker Corp., senior bond, 3.50%, 3/15/26	United States	3,000,000			3,131,052
Tenet Healthcare Corp., senior note, 5.50%, 3/01/19	United States	15,835,000			15,557,887
					47,012,921
Household & Personal Products 0.6%
Avon Products Inc., senior note, 6.60%, 3/15/20	United States	18,500,000			19,066,562
The Procter & Gamble Co., senior note, 2.45%, 11/03/26	United States	12,500,000			12,482,375
					31,548,937
Insurance 1.6%
Aflac Inc., senior bond, 3.625%, 6/15/23	United States	17,500,000			18,697,158
^hLiberty Mutual Group Inc., senior note, 144A, 4.95%, 5/01/22	United States	12,000,000			13,469,316
MetLife Inc.,
senior note, 3.60%, 4/10/24	United States	9,600,000			10,182,950
senior note, 3.00%, 3/01/25	United States	1,500,000			1,524,162
Prudential Financial Inc., junior sub. note, 5.875%, 9/15/42	United States	7,000,000			7,673,750
^hTeachers Insurance & Annuity Assn. of America, sub. bond, 144A,
4.90%, 9/15/44	United States	20,400,000			22,764,258
^hTIAA Asset Management Finance LLC, senior note, 144A, 2.95%,
11/01/19.	United States	5,800,000			5,969,714
					80,281,308
Materials 1.6%
^gArkema SA, senior note, Reg S, 1.50%, 1/20/25	France	12,000,000	EUR		13,858,183
^hCemex SAB de CV, first lien, 144A, 5.70%, 1/11/25.	Mexico	8,000,000			8,170,520
^hFMG Resources (August 2006) Pty. Ltd., senior secured note,
144A, 9.75%, 3/01/22	Australia	300,000			350,641
^hGlencore Finance Canada Ltd., senior bond, 144A, 4.95%,
11/15/21.	Switzerland	4,700,000			5,011,084
LYB International Finance BV, senior note, 4.00%, 7/15/23.	United States	18,400,000			19,728,940
Owens-Illinois Inc., senior note, 7.80%, 5/15/18	United States	9,200,000			9,959,000
Reliance Steel & Aluminum Co., senior note, 4.50%, 4/15/23	United States	5,600,000			5,751,289
Reynolds Group Holdings Inc., senior note, 8.125%, 6/15/17	United States	12,000,000			12,435,000

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CONSOLIDATED STATEMENT OF INVESTMENTS


Franklin Total Return Fund (continued)
		Principal
	Country	Amount*		Value

Corporate Bonds (continued)
Materials (continued)
^hReynolds Group Issuer Inc./Reynolds Group Issuer LLC/Reynolds
Group Issuer Luxembourg SA,
first lien, 144A, 5.125%, 7/15/23	United States	1,600,000	$	1,641,000
senior note, 144A, 7.00%, 7/15/24	United States	800,000		856,500
				77,762,157
Media 1.5%
21st Century Fox America Inc.,
senior bond, 6.90%, 8/15/39	United States	1,800,000		2,377,361
senior bond, 7.90%, 12/01/95	United States	500,000		650,809
senior note, 3.00%, 9/15/22	United States	5,100,000		5,271,783
senior note, 3.70%, 10/15/25.	United States	2,300,000		2,450,275
^hAltice U.S. Finance I Corp., senior secured bond, 144A, 5.50%,
5/15/26	United States	6,500,000		6,646,250
^hCCO Holdings LLC/CCO Holdings Capital Corp., senior bond,
144A, 5.375%, 5/01/25	United States	7,000,000		7,210,000
CSC Holdings LLC,
senior bond, 7.625%, 7/15/18	United States	3,000,000		3,225,000
senior note, 8.625%, 2/15/19.	United States	9,000,000		10,063,080
NBCUniversal Media LLC, senior bond, 4.45%, 1/15/43.	United States	8,100,000		8,788,411
The New York Times Co., senior note, 6.625%, 12/15/16	United States	11,700,000		11,773,710
^hNextstar Escrow Corp., senior note, 144A, 5.625%, 8/01/24	United States	1,600,000		1,592,000
Time Warner Inc.,
7.70%, 5/01/32	United States	550,000		762,211
6.10%, 7/15/40	United States	8,600,000		10,378,540
^hVirgin Media Secured Finance PLC, senior secured bond, first lien,
144A, 5.50%, 8/15/26	United Kingdom	4,300,000		4,359,125
				75,548,555
Pharmaceuticals, Biotechnology & Life Sciences 1.2%
Actavis Funding SCS, senior bond, 4.55%, 3/15/35.	United States	13,400,000		13,888,872
Baxalta Inc., senior note, 3.60%, 6/23/22	United States	8,300,000		8,656,643
Biogen Inc., senior bond, 5.20%, 9/15/45	United States	9,200,000		10,425,155
Gilead Sciences Inc., senior bond, 4.50%, 2/01/45	United States	6,000,000		6,268,524
PerkinElmer Inc., senior note, 5.00%, 11/15/21.	United States	13,200,000		14,442,714
^hValeant Pharmaceuticals International Inc., senior bond, 144A,
6.125%, 4/15/25	United States	6,800,000		5,253,000
Zoetis Inc., senior bond, 4.70%, 2/01/43	United States	3,000,000		3,086,715
				62,021,623
Real Estate 1.5%
American Tower Corp.,
senior bond, 3.50%, 1/31/23	United States	12,700,000		13,149,885
senior bond, 4.40%, 2/15/26	United States	9,400,000		10,142,431
ERP Operating LP, 5.75%, 6/15/17	United States	881,000		905,509
HCP Inc., senior bond, 3.875%, 8/15/24	United States	17,000,000		17,484,534
MPT Operating Partnership LP/MPT Finance Corp., senior bond,
5.25%, 8/01/26	United States	1,100,000		1,124,750
Realty Income Corp., senior bond, 4.125%, 10/15/26	United States	12,500,000		13,514,375
Senior Housing Properties Trust, senior note, 6.75%, 12/15/21.	United States	14,500,000		16,560,479
				72,881,963

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FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS


Franklin Total Return Fund (continued)
		Principal
	Country	Amount*			Value

Corporate Bonds (continued)
Retailing 1.4%
Dollar General Corp., senior bond, 4.15%, 11/01/25	United States	12,700,000		$	13,630,376
^h,lEdcon Ltd., secured note, 144A, 9.50%, 3/01/18.	South Africa	3,500,000	EUR		960,444
Home Depot Inc., senior note, 2.125%, 9/15/26	United States	16,800,000			16,229,253
Tiffany & Co., senior bond, 4.90%, 10/01/44.	United States	10,300,000			10,105,248
Toys R Us Inc., senior bond, 7.375%, 10/15/18.	United States	28,800,000			27,720,000
					68,645,321
Semiconductors & Semiconductor Equipment 0.5%
Maxim Integrated Products Inc., senior note, 3.375%, 3/15/23	United States	22,000,000			22,327,756
Software & Services 0.5%
Alibaba Group Holding Ltd., senior bond, 4.50%, 11/28/34.	China	10,000,000			10,652,500
^hFirst Data Corp., secured note, first lien, 144A, 5.00%, 1/15/24	United States	6,000,000			6,097,500
Fiserv Inc., senior bond, 3.85%, 6/01/25	United States	9,300,000			9,908,620
					26,658,620
Technology Hardware & Equipment 1.2%
Cisco Systems Inc., senior note, 2.60%, 2/28/23.	United States	12,000,000			12,303,756
^hDiamond 1 Finance Corp./Diamond 2 Finance Corp., senior
secured note, first lien, 144A, 3.48%, 6/01/19	United States	12,000,000			12,320,808
Juniper Networks Inc.,
senior bond, 4.50%, 3/15/24	United States	4,500,000			4,794,629
senior bond, 4.35%, 6/15/25	United States	9,300,000			9,660,942
^hSanmina Corp., senior note, first lien, 144A, 4.375%, 6/01/19.	United States	7,500,000			7,837,500
^hWestern Digital Corp., senior secured note, 144A, 7.375%,
4/01/23	United States	9,800,000			10,755,500
					57,673,135
Telecommunication Services 1.6%
AT&T Inc.,
senior bond, 4.50%, 5/15/35	United States	16,200,000			16,144,499
senior note, 3.95%, 1/15/25	United States	7,400,000			7,677,352
^hHughes Satellite Systems Corp., senior bond, 144A, 6.625%,
8/01/26	United States	5,400,000			5,359,500
Sprint Communications Inc., senior note, 6.00%, 11/15/22	United States	7,000,000			6,527,500
Sprint Corp., senior note, 7.625%, 2/15/25	United States	2,000,000			1,929,376
Telefonica Emisiones SAU, senior note, 4.57%, 4/27/23.	Spain	9,000,000			9,894,015
Verizon Communications Inc.,
senior bond, 6.40%, 9/15/33	United States	10,255,000			12,836,214
senior bond, 4.522%, 9/15/48	United States	10,700,000			10,780,378
^hWind Acquisition Finance SA, secured note, second lien, 144A,
7.375%, 4/23/21	Italy	7,000,000			7,260,155
					78,408,989
Transportation 0.3%
^hAviation Capital Group Corp., 144A, 7.125%, 10/15/20	United States	6,000,000			7,100,520
Burlington Northern and Santa Fe 99-2 Trust, secured bond,
7.57%, 1/02/21	United States	102,185			111,009
^hDP World Ltd., senior bond, 144A, 6.85%, 7/02/37	United Arab Emirates	3,700,000			4,241,125
Union Pacific Railroad Co. 2005 Pass Trust, 2005-1, 5.082%,
1/02/29	United States	196,496			216,449
XPO CNW Inc., senior bond, 7.25%, 1/15/18	United States	4,300,000			4,472,000
					16,141,103

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CONSOLIDATED STATEMENT OF INVESTMENTS


Franklin Total Return Fund (continued)
		Principal
	Country	Amount*			Value

Corporate Bonds (continued)
Utilities 2.3%
Commonwealth Edison Co., secured bond, 6.45%, 1/15/38	United States	700,000		$	974,791
Dominion Resources Inc., senior bond, 3.90%, 10/01/25	United States	12,200,000			13,035,834
^hDynegy Inc., senior note, 144A, 8.00%, 1/15/25	United States	4,400,000			4,257,000
^h,iEDF SA, sub. note, 144A, 5.25% to 1/29/23, FRN thereafter,
Perpetual	France	24,000,000			23,866,200
^hEnogex LLC, senior note, 144A, 6.25%, 3/15/20	United States	5,000,000			5,402,790
Georgia Power Co., senior note, 4.30%, 3/15/42	United States	9,000,000			9,569,664
Kinder Morgan Energy Partners LP,
senior note, 5.95%, 2/15/18	United States	5,200,000			5,468,804
senior note, 6.85%, 2/15/20	United States	1,000,000			1,127,971
MidAmerican Energy Co., senior note, 5.95%, 7/15/17	United States	2,200,000			2,275,414
Sempra Energy, senior note, 3.75%, 11/15/25	United States	8,200,000			8,697,543
The Southern Co., senior bond, 3.25%, 7/01/26	United States	14,350,000			14,780,457
^hState Grid Overseas Investment 2013 Ltd., senior note, 144A,
3.125%, 5/22/23	China	10,400,000			10,762,440
^gVeolia Environnement SA, senior bond, Reg S, 4.625%, 3/30/27	France	7,800,000	EUR		11,770,113
					111,989,021
Total Corporate Bonds (Cost $1,820,964,575)					1,861,143,778

^j,nSenior Floating Rate Interests 1.5%
Automobiles & Components 0.0%^†
TI Group Automotive Systems LLC, Initial U.S. Term Loan, 4.50%,
6/25/22	United States	1,488,040			1,492,988
Capital Goods 0.0%^†
^oHarsco Corp., Initial Term Loan, 7.50%, 11/01/23	United States	274,602			278,035
Leidos (Abacus Innovations Corp.), B Term Loan, 3.284%, 8/16/23.	United States	194,626			196,390
					474,425
Consumer Services 0.1%
Aristocrat Technologies Inc., Term B-1 Loans, 3.631%, 10/20/21	United States	166,321			167,298
Fitness International LLC, Term B Loan, 6.00%, 7/01/20	United States	2,495,938			2,500,619
Prime Security Services Borrower LLC, Term B-1 Loans, 4.75%,
5/02/22	United States	795,514			802,077
^c,pTurtle Bay Holdings LLC, Term Loan B, PIK, 3.375%, 6/30/17.	United States	697,827			690,848
					4,160,842
Diversified Financials 0.0%^†
First Eagle Investment Management, Initial Term Loans, 4.838%,
12/01/22.	United States	475,649			475,054
Russell Investments US Institutional Holdco Inc., Initial Term Loan,
6.75%, 6/01/23	United States	324,557			325,774
					800,828
Energy 0.2%
^cBowie Resource Holdings LLC,
First Lien Initial Term Loan, 6.75%, 8/16/20	United States	3,229,920			2,680,834
Second Lien Initial Term Loan, 11.75%, 2/16/21	United States	592,359			488,696
Fieldwood Energy LLC, Loans, 3.875%, 10/01/18	United States	4,647,342			4,287,173
Foresight Energy LLC, Term Loans, 6.50%, 8/23/20	United States	500,000			475,000
McDermott Finance LLC, Term Loan, 8.25% - 8.484%, 4/16/19	United States	141,671			143,087
					8,074,790

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CONSOLIDATED STATEMENT OF INVESTMENTS


Franklin Total Return Fund (continued)
		Principal
	Country	Amount*		Value

^j,nSenior Floating Rate Interests (continued)
Health Care Equipment & Services 0.1%
Carestream Health Inc., Term Loan, 5.00%, 6/07/19	United States	601,029	$	560,352
Community Health Systems Inc., 2018 Term F Loans, 4.083%,
12/31/18.	United States	3,061,012		2,999,244
				3,559,596
Household & Personal Products 0.0%^†
^oSpectrum Brands Inc., Term Loans, 5.00%, 6/23/22	United States	34,752		35,128
Materials 0.3%
The Chemours Co. LLC, Tranche B Term Loan, 3.75%, 5/12/22	United States	4,103,476		4,066,524
Cyanco Intermediate Corp., Initial Term Loan, 5.50%, 5/01/20	United States	588,585		590,057
FMG America Finance Inc. (Fortescue Metals Group), Loans,
3.75%, 6/30/19	Australia	3,777,887		3,779,659
Huntsman International LLC, 2015 Extended Term B Dollar Loan,
3.534% - 3.644%, 4/19/19	United States	1,293,080		1,301,162
Novelis Inc., Initial Term Loan, 4.00% - 4.088%, 6/02/22	Canada	2,055,020		2,063,754
^cOCI Beaumont LLC, Term B-3 Loan, 7.75%, 8/20/19	United States	1,924,716		1,893,439
				13,694,595
Media 0.2%
^oAltice U.S. Finance I Corp., 2016 Refinancing Term Loans, 5.50%,
1/01/25	United States	235,499		236,677
^oAMC Entertainment Holdings Inc.,
2016 Incremental Term Loan, 5.25%, 12/15/23	United States	91,534		91,244
Initial Term Loans, 5.25%, 12/15/22	United States	143,198		143,195
CSC Holdings Inc. (Cablevision), 2016 Extended Term Loans,
3.876%, 10/11/24	United States	1,102,071		1,107,352
^oLions Gate Entertainment Corp., Term Loan A, 5.00%, 10/12/21	United States	1,650,000		1,633,500
^oLive Nation Entertainment Inc., Term B-2 Loans, 5.00%, 10/31/23 .	United States	91,534		91,763
Radio One Inc., Term Loan B, 5.04%, 12/31/18	United States	6,965,941		6,983,356
UPC Financing Partnership, Facility AN, 4.08%, 8/31/24	Netherlands	287,841		289,675
				10,576,762
Pharmaceuticals, Biotechnology & Life Sciences 0.2%
Endo Luxembourg Finance Co. I S.A.R.L. and Endo LLC, 2015
Incremental Term B Loans, 3.75%, 9/25/22	United States	3,738,813		3,738,229
Grifols Worldwide Operations USA Inc., U.S. Tranche B Term Loan,
3.46%, 2/27/21	United States	2,823,658		2,851,895
^oRPI Finance Trust, Term A-2 Term Loan A, 4.75%, 10/14/20	United States	357,494		355,645
Valeant Pharmaceuticals International Inc.,
Series C-2 Tranche B Term Loan, 5.25%, 12/11/19	United States	640,488		640,969
Series D-2 Tranche B Term Loan, 5.00%, 2/13/19	United States	1,745,646		1,745,491
				9,332,229
Retailing 0.1%
Ascena Retail Group Inc., Tranche B Term Loan, 5.25%, 8/21/22	United States	3,307,851		3,232,045
Dollar Tree Inc., Term A-1 Loans, 2.25%, 7/06/20	United States	611,855		610,895
PetSmart Inc., Tranche B-2 Loans, 4.00%, 3/11/22	United States	2,631,808		2,640,032
				6,482,972

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CONSOLIDATED STATEMENT OF INVESTMENTS


Franklin Total Return Fund (continued)
			Principal
		Country	Amount*			Value

^j,nSenior Floating Rate Interests (continued)
Semiconductors & Semiconductor Equipment 0.1%
Avago Technologies Cayman Finance Ltd., Term B-3 Loans,
3.535%, 2/01/23		Singapore	1,288,413		$	1,303,311
MACOM Technology Solutions Holdings Inc., Initial Term Loan,
4.628%, 5/07/21		United States	242,052			244,775
MKS Instruments Inc., Tranche B-1 Term Loans, 4.25%, 5/01/23		United States	196,428			198,556
ON Semiconductor Corp., 2016 Replacement Term Loans,
3.777%, 3/31/23		United States	2,691,999			2,710,746
						4,457,388
Software & Services 0.1%
^oGlobal Payments Inc., Delayed Draw Term Loan (A-2), 4.75%,
10/31/21	.	United States	1,310,631			1,308,823
MoneyGram International Inc., Term Loan, 4.25%, 3/27/20		United States	3,788,490			3,698,513
^oRackspace Hosting Inc., Term B Loan, 6.50%, 11/03/23		United States	457,670			460,898
						5,468,234
Technology Hardware & Equipment 0.0%^†
Dell International LLC, Term A-3 Loan, 2.54%, 12/31/18		United States	927,880			928,315
Western Digital Corp., Term Loan B-1, 4.50%, 4/29/23		United States	581,061			588,506
Zebra Technologies Corp., Refinancing Term Loan, 4.089%,
10/27/21	.	United States	432,524			437,570
						1,954,391
Telecommunication Services 0.0%^†
Consolidated Communications Inc., Initial Term Loan, 4.00%,
10/05/23	.	United States	229,278			230,997
Global Tel*Link Corp., Term Loan, 5.00%, 5/23/20		United States	268,059			261,190
						492,187
Transportation 0.1%
Air Canada, Term Loan, 3.614%, 10/06/23.		Canada	55,056			55,297
Navios Maritime Midstream Partners LP, Initial Term Loan, 5.50%,
6/18/20		Marshall Islands	1,718,429			1,688,356
Navios Maritime Partners LP, Initial Term Loan, 5.25%, 6/27/18		Marshall Islands	59,170			54,326
XPO Logistics Inc., Refinancing Term Loans, 4.25%, 10/30/21		United States	1,148,068			1,157,109
						2,955,088
Utilities 0.0%^†
EFS Cogen Holdings I LLC (Linden), Term B Advance, 5.25%,
6/28/23		United States	164,717			166,570
NRG Energy Inc., Term Loans, 3.50%, 6/30/23.		United States	1,047,375			1,050,779
						1,217,349
Total Senior Floating Rate Interests
(Cost $75,239,805)						75,229,792

Foreign Government and Agency Securities 4.1%
The Export-Import Bank of Korea, senior note, 2.25%, 1/21/20		South Korea	18,800,000			19,012,346
Government of Hungary,
5.50%, 12/22/16		Hungary	3,092,050,000	HUF		11,063,399
6.00%, 1/11/19		Hungary	1,820,000	EUR		2,252,283
A, 6.75%, 11/24/17		Hungary	1,457,960,000	HUF		5,529,964
A, 5.50%, 12/20/18		Hungary	205,390,000	HUF		802,336
^gsenior bond, Reg S, 3.875%, 2/24/20		Hungary	285,000	EUR		351,199
^gsenior note, Reg S, 4.375%, 7/04/17		Hungary	215,000	EUR		243,251

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Annual Report

FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS


Franklin Total Return Fund (continued)
		Principal
	Country	Amount*				Value

Foreign Government and Agency
Securities (continued)
Government of Hungary, (continued)
^gsenior note, Reg S, 5.75%, 6/11/18	Hungary	695,000		EUR	$	832,936
^hGovernment of Lithuania, 144A, 7.375%, 2/11/20	Lithuania	4,670,000				5,490,029
Government of Malaysia,
3.80%, 8/17/23	Malaysia	35,300,000		MYR		8,560,355
senior bond, 4.24%, 2/07/18	Malaysia	41,200,000		MYR		10,020,488
senior bond, 3.26%, 3/01/18	Malaysia	18,700,000		MYR		4,494,464
senior note, 4.012%, 9/15/17.	Malaysia	76,500,000		MYR		18,475,981
Government of Mexico,
7.25%, 12/15/16	Mexico	3,414,390	^q	MXN		18,141,163
7.75%, 12/14/17	Mexico	2,600,000	^q	MXN		14,178,437
M, 4.75%, 6/14/18	Mexico	2,940,000	^q	MXN		15,418,145
senior note, 8.50%, 12/13/18.	Mexico	2,000,000	^q	MXN		11,220,642
^hGovernment of Serbia, senior note, 144A, 4.875%, 2/25/20	Serbia	6,000,000				6,219,240
^hGovernment of Spain, senior bond, 144A, 2.75%, 10/31/24	Spain	5,700,000		EUR		7,159,433
^hGovernment of Ukraine,
144A, 7.75%, 9/01/20.	Ukraine	292,000				289,839
144A, 7.75%, 9/01/21.	Ukraine	229,000				226,469
144A, 7.75%, 9/01/22.	Ukraine	229,000				224,552
144A, 7.75%, 9/01/23.	Ukraine	229,000				223,281
144A, 7.75%, 9/01/24.	Ukraine	229,000				221,306
144A, 7.75%, 9/01/25.	Ukraine	229,000				220,075
144A, 7.75%, 9/01/26.	Ukraine	229,000				219,273
144A, 7.75%, 9/01/27.	Ukraine	229,000				218,409
^a,r144A, VRI, GDP Linked Securities, 5/31/40.	Ukraine	474,000				152,291
^hGovernment of Vietnam, 144A, 6.75%, 1/29/20	Vietnam	5,120,000				5,708,800
Italy Treasury Bond, 2.50%, 12/01/24	Italy	6,000,000		EUR		7,171,551
Korea Treasury Bond, senior note, 3.00%, 12/10/16	South Korea	21,100,000,000		KRW		18,482,051
^sNota Do Tesouro Nacional, Index Linked, 6.00%, 8/15/18	Brazil	13,695	^t	BRL		12,585,900
^hPeru Enhanced Pass-Through Finance Ltd., senior secured bond,
A-1, 144A, zero cpn., 5/31/18	Peru	290,479				282,701
Total Foreign Government and Agency Securities
(Cost $229,396,449)						205,692,589

U.S. Government and Agency Securities 17.9%
U.S. Treasury Bond,
6.25%, 8/15/23	United States	60,000,000				78,155,880
4.75%, 2/15/37	United States	8,000,000				11,223,280
3.875%, 8/15/40	United States	52,000,000				65,132,028
4.75%, 2/15/41	United States	34,000,000				48,204,962
3.75%, 8/15/41	United States	25,000,000				30,796,375
3.125%, 2/15/43	United States	17,000,000				18,928,769
2.875%, 5/15/43	United States	82,000,000				87,179,448
2.875%, 8/15/45	United States	5,000,000				5,306,835
2.50%, 2/15/46	United States	35,000,000				34,397,055
^uIndex Linked, 2.375%, 1/15/25	United States	21,082,018				24,979,894
U.S. Treasury Note,
1.375%, 12/31/18	United States	50,000,000				50,500,000
3.625%, 2/15/21	United States	25,000,000				27,475,100
3.125%, 5/15/21	United States	90,000,000				97,245,720
2.125%, 6/30/21	United States	75,000,000				77,770,050
2.00%, 8/31/21	United States	30,000,000				30,923,430

94 Annual Report

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FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS


Franklin Total Return Fund (continued)
			Principal
		Country	Amount*		Value

U.S. Government and Agency Securities (continued)
U.S. Treasury Note, (continued)
2.125%, 12/31/21		United States	23,000,000	$	23,852,610
2.00%, 11/30/22		United States	36,900,000		37,929,879
2.125%, 12/31/22		United States	60,500,000		62,617,500
^uIndex Linked, 0.125%, 7/15/24		United States	75,565,492		76,406,309
Total U.S. Government and Agency Securities
(Cost $876,803,353)					889,025,124

Asset-Backed Securities and Commercial
Mortgage-Backed Securities 13.7%
Banks 2.7%
Banc of America Commercial Mortgage Trust,
^v2006-4, AJ, 5.695%, 7/10/46		United States	4,527,711		4,497,957
^j2007-3, AM, FRN, 5.732%, 6/10/49		United States	17,730,000		18,042,640
Bear Stearns Commercial Mortgage Securities Trust,
^j2006-PW11, AJ, FRN, 5.569%, 3/11/39		United States	17,194,000		16,532,818
2006-PW13, AJ, 5.611%, 9/11/41		United States	1,771,959		1,779,704
^j2007-PW16, AM, FRN, 5.90%, 6/11/40		United States	11,110,000		11,338,862
^jCitibank Credit Card Issuance Trust,
2013-A7, A7, FRN, 0.959%, 9/10/20		United States	11,130,000		11,187,035
2013-A12, A12, FRN, 1.018%, 11/07/18		United States	7,050,000		7,050,216
Citigroup Commercial Mortgage Trust, 2006-C5, AJ, 5.482%,
10/15/49	.	United States	10,492,000		9,849,908
^j,vCommercial Mortgage Trust, 2006-GG7, AJ, FRN, 5.951%,
7/10/38		United States	8,491,000		7,837,711
Credit Suisse First Boston Mortgage Securities Corp., 2004-6,
3A1, 5.00%, 9/25/19		United States	640,660		658,421
^h,jCSMC, 2009-15R, 3A1, 144A, FRN, 2.965%, 3/26/36		United States	3,402,208		3,376,371
^jCWABS Inc. Asset-Backed Certificates, 2004-1, M1, FRN,
1.284%, 3/25/34		United States	1,784,304		1,731,717
^jFNMA, 2005-122, FN, FRN, 0.884%, 1/25/36.		United States	514,480		511,374
^jGreenwich Capital Commercial Funding Corp., 2006-GG7, AM,
FRN, 5.951%, 7/10/38		United States	2,038,959		2,036,603
^j,vJP Morgan Chase Commercial Mortgage Securities Trust,
2006-CB16, B, FRN, 5.672%, 5/12/45		United States	6,745,000		2,747,309
^jLB-UBS Commercial Mortgage Trust, 2006-C4, AJ, FRN, 6.078%,
6/15/38		United States	272,235		272,842
^jMerrill Lynch Mortgage Investors Trust, 2003-A, 1A, FRN, 1.274%,
3/25/28		United States	1,516,963		1,446,711
^jMorgan Stanley ABS Capital I Inc. Trust, 2005-WMC, M2, FRN,
1.269%, 1/25/35		United States	2,127,703		2,101,560
^jMorgan Stanley Capital I Trust,
2006-HQ8, AJ, FRN, 5.589%, 3/12/44		United States	5,200,730		5,225,887
2007-IQ16, AM, FRN, 6.053%, 12/12/49		United States	16,470,000		17,079,186
^jWachovia Bank Commercial Mortgage Trust, 2006-C25, C, FRN,
5.812%, 5/15/43		United States	6,683,000		6,668,238
^kWeyerhaeuser Mortgage Co., 1984-A, 7.43%, 1/01/24		United States	15,780		15,780
					131,988,850
Diversified Financials 11.0%
^jAmerican Express Credit Account Master Trust,
2008-2, A, FRN, 1.795%, 9/15/20		United States	15,550,000		15,772,782
2012-1, A, FRN, 0.805%, 1/15/20		United States	8,160,000		8,169,348

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Annual Report

FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS


Franklin Total Return Fund (continued)
		Principal
	Country	Amount*		Value

Asset-Backed Securities and Commercial
Mortgage-Backed Securities (continued)
Diversified Financials (continued)
^jAmerican Express Credit Account Secured Note Trust, 2012-4, A,
FRN, 0.775%, 5/15/20	United States	11,193,000	$	11,204,589
^jAmerican Home Mortgage Investment Trust, 2004-3, 4A, FRN,
2.745%, 10/25/34	United States	1,947,492		1,905,081
^j,vAmeriquest Mortgage Securities Inc. Asset-Backed Pass-Through
Certificates, 2004-R4, M1, FRN, 1.359%, 6/25/34	United States	6,014,310		5,922,248
^hApidos CDO, 2013-14A, C2, 144A, 4.85%, 4/15/25	United States	8,740,000		8,809,133
^h,jARCap REIT Inc., 2004-RR3, A2, 144A, FRN, 4.76%, 9/21/45	United States	7,041,473		7,129,703
^h,jAres Enhanced Loan Investment Strategy Ltd., 2013-IRAR, BR,
144A, FRN, 3.932%, 7/23/25	United States	900,000		895,824
^h,jAres IIIR/IVR CLO Ltd.,
2007-3RA, A2, 144A, FRN, 1.10%, 4/16/21	United States	2,480,207		2,463,962
2007-3RA, B, 144A, FRN, 1.25%, 4/16/21	United States	9,780,000		9,579,901
^jArgent Securities Inc. Asset-Backed Pass-Through Certificates,
2005-W2, A2C, FRN, 0.894%, 10/25/35	United States	4,291,634		4,144,182
^h,jAtrium IX,
9A, A, 144A, FRN, 2.129%, 2/28/24	United States	3,360,000		3,364,939
9A, C, 144A, FRN, 4.079%, 2/28/24	United States	3,500,000		3,505,005
^h,jAtrium X,
10A, A, 144A, FRN, 2.00%, 7/16/25	United States	3,890,000		3,879,692
10A, C, 144A, FRN, 3.48%, 7/16/25	United States	4,650,000		4,622,519
^h,jBallyrock CLO LLC, 2014-1A, B, 144A, FRN, 4.081%, 10/20/26	United States	10,000,000		10,054,200
^jBear Stearns ALT-A Trust, 2004-13, A2, FRN, 1.414%, 11/25/34	United States	996,834		957,949
^h,jBlueMountain CLO Ltd.,
2011-1A, B, 144A, FRN, 2.818%, 8/16/22	Cayman Islands	2,500,000		2,508,225
2011-1A, C, 144A, FRN, 3.818%, 8/16/22.	Cayman Islands	1,800,000		1,808,640
2013-3A, A, 144A, FRN, 2.287%, 10/29/25	United States	2,638,970		2,639,049
^h,jBridgeport CLO Ltd., 2006-1A, B, 144A, FRN, 1.531%, 7/21/20	United States	2,000,000		1,997,160
^jCapital One Multi-Asset Execution Trust,
2007-A1, A1, FRN, 0.585%, 11/15/19	United States	4,400,000		4,399,323
2007-A2, A2, FRN, 0.615%, 12/16/19	United States	26,136,000		26,137,004
^h,jCarlyle Global Market Strategies CLO Ltd., 2012-4A, AR, 144A,
FRN, 2.33%, 1/20/29	United States	6,280,000		6,289,106
^h,jCarlyle Global Market Strategies Ltd., 2014-2A, B2, 144A, FRN,
2.867%, 5/15/25	United States	3,400,000		3,425,024
^h,jCatamaran CLO Ltd., 2014-2A, B, 144A, FRN, 3.882%, 10/18/26	United States	6,401,000		6,404,969
^h,jCent CDO Ltd.,
2007-15A, A2B, 144A, FRN, 1.185%, 3/11/21	United States	5,686,824		5,450,593
2007-15A, B, 144A, FRN, 1.565%, 3/11/21	United States	8,500,000		7,989,065
^h,jCent CLO, 2013-17A, A1, 144A, FRN, 2.187%, 1/30/25	United States	16,246,000		16,218,382
^h,jCent CLO 20 Ltd.,
2013-20A, A, 144A, FRN, 2.362%, 1/25/26	United States	8,000,000		8,017,680
2013-20A, C, 144A, FRN, 3.882%, 1/25/26	United States	3,500,000		3,504,445
^h,jCent CLO 21 Ltd., 2014-21A, B, 144A, FRN, 3.686%, 7/27/26	United States	1,760,000		1,744,600
^h,jCent CLO LP, 2013-17A, B, 144A, FRN, 3.887%, 1/30/25	United States	3,500,000		3,533,775
^jChase Funding Trust, 2004-2, 2A2, FRN, 1.034%, 2/26/35	United States	625,033		574,038
^jChase Issuance Trust, 2013-A6, A6, FRN, 0.955%, 7/15/20.	United States	17,443,000		17,523,498
^h,jCIFC Funding Ltd., 2007-3A, A1J, 144A, FRN, 1.284%, 7/26/21	United States	11,507,045		11,439,729
^h,jCitigroup Mortgage Loan Trust, 2013-A, A, 144A, FRN, 3.00%,
5/25/42	United States	2,959,408		2,950,243

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CONSOLIDATED STATEMENT OF INVESTMENTS


Franklin Total Return Fund (continued)
		Principal
	Country	Amount*		Value

Asset-Backed Securities and Commercial
Mortgage-Backed Securities (continued)
Diversified Financials (continued)
^h,jColony American Homes,
2014-1A, A, 144A, FRN, 1.685%, 5/17/31.	United States	9,527,928	$	9,553,394
2014-2A, C, 144A, FRN, 2.435%, 7/17/31.	United States	10,105,000		10,097,558
^hColony MFM Trust, 2014-1, A, 144A, 2.543%, 4/20/50.	United States	9,642,446		9,613,652
^h,jCornerstone CLO Ltd., 2007-1A, B, 144A, FRN, 1.83%, 7/15/21	United States	8,986,000		8,900,543
^hCountryPlace Manufactured Housing Contract Trust, 2005-1, A3,
144A, 4.80%, 12/15/35	United States	4,020		4,015
^h,jDryden 33 Senior Loan Fund, 2014-33A, A, 144A, FRN, 2.36%,
7/15/26	United States	9,130,000		9,127,078
^h,jDryden Senior Loan Fund, 2015-38A, A, 144A, FRN, 2.31%,
7/15/27	Cayman Islands	21,757,143		21,764,540
^h,jEaton Vance CDO Ltd.,
2014-1A, A, 144A, FRN, 2.33%, 7/15/26	United States	10,096,000		10,096,606
2014-1A, B, 144A, FRN, 2.93%, 7/15/26.	United States	1,813,400		1,815,630
2014-1A, C, 144A, FRN, 3.88%, 7/15/26	United States	1,558,600		1,557,743
^h,jEleven Madison Trust Mortgage Trust, 2015-11MD, A, 144A, FRN,
3.555%, 9/10/35	United States	3,255,000		3,490,150
^hEmerson Park CLO Ltd., 2013-1A, C2, 144A, 5.64%, 7/15/25.	United States	2,920,000		2,952,295
^jFHLMC Structured Agency Credit Risk Debt Notes,
2014-DN3, M3, FRN, 4.534%, 8/25/24	United States	3,028,000		3,165,518
2014-DN4, M3, FRN, 5.084%, 10/25/24	United States	9,500,000		10,056,837
2015-DN1, M3, FRN, 4.684%, 1/25/25	United States	9,310,000		9,730,870
2015-HQ1, M3, FRN, 4.334%, 3/25/25	United States	2,000,000		2,089,158
^h,jGalaxy XV CLO Ltd., 2013-15A, A, 144A, FRN, 2.13%, 4/15/25	United States	15,465,000		15,452,628
^hG-Force LLC, 2005-RRA, C, 144A, 5.20%, 8/22/36	United States	9,275,000		8,942,630
^vGMAC Commercial Mortgage Securities Inc. Trust, 2005-C1, B,
4.936%, 5/10/43	United States	9,113,687		1,535,939
Green Tree Financial Corp., 1996-9, M1, 7.63%, 8/15/27	United States	2,799,771		3,050,438
^j,vGSAA Home Equity Trust, 2005-5, M3, FRN, 1.479%, 2/25/35	United States	3,550,000		3,411,457
^hHighbridge Loan Management Ltd., 2013-2A, B2, 144A, 5.80%,
10/20/24.	United States	2,620,000		2,664,199
^jHome Equity Mortgage Trust, 2004-4, M3, FRN, 1.509%, 12/25/34.	United States	3,170,745		3,029,532
^h,jInvitation Homes Trust,
2014-SFR3, C, 144A, FRN, 3.035%, 12/17/31.	United States	1,250,000		1,259,018
2015-SFR1, B, 144A, FRN, 2.385%, 3/17/32.	United States	7,400,000		7,443,299
2015-SFR2, C, 144A, FRN, 2.531%, 6/17/32	United States	2,340,000		2,342,425
2015-SFR3, C, 144A, FRN, 2.528%, 8/17/32	United States	10,402,000		10,394,874
JP Morgan Chase Commercial Mortgage Securities Trust,
2006-CB17, AM, 5.464%, 12/12/43	United States	13,790,000		13,778,939
^h,jKatonah Ltd., 2007-IA, A2L, 144A, FRN, 2.382%, 4/23/22	United States	5,416,684		5,389,763
^h,jLCM XI LP, 11A, B, 144A, FRN, 3.028%, 4/19/22	United States	10,000,000		10,025,800
^jMerrill Lynch Mortgage Investors Trust, 2004-A1, M1, FRN, 2.90%,
2/25/34	United States	1,560,917		1,249,904
^h,jMountain View CLO II Ltd., 2006-2A, C, 144A, FRN, 1.574%,
1/12/21	United States	4,000,000		3,894,680
^h,jNZCG Funding Ltd., 2015-2A, A1, 144A, FRN, 2.436%, 4/27/27	United States	18,215,625		18,247,138
^h,jOctagon Investment Partners XXIII Ltd.,
2015-1A, A1, 144A, FRN, 2.30%, 7/15/27.	United States	7,581,042		7,578,616
2015-1A, A2, 144A, FRN, 2.30%, 7/15/27.	United States	7,197,192		7,191,866

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CONSOLIDATED STATEMENT OF INVESTMENTS


Franklin Total Return Fund (continued)
			Principal
		Country	Amount*		Value

Asset-Backed Securities and Commercial
Mortgage-Backed Securities (continued)
Diversified Financials (continued)
^h,jProgress Residential Trust, 2015-SFR1, A, 144A, FRN, 1.928%,
2/17/32		United States	5,674,533	$	5,701,348
Residential Asset Securities Corp., 2001-KS2, AI5, 7.514%,
6/25/31		United States	7,307		7,488
^h,jSilverado CLO 2006-II Ltd., 2006-2A, B, 144A, FRN, 1.57%,
10/16/20	.	United States	9,000,000		8,748,450
^jStructured Asset Securities Corp., 2002-1A, 2A1, FRN, 2.243%,
2/25/32		United States	21,124		19,276
^h,jTreman Park CLO Ltd., 2015-1A, A, 144A, FRN, 2.381%, 4/20/27 .		Cayman Islands	6,500,000		6,528,795
^h,jTricon American Homes Trust, 2015-SFR1, C, 144A, FRN,
2.435%, 5/17/32		United States	8,170,000		8,123,344
^h,jTrimaran CLO VII Ltd., 2007-1A, A2L, 144A, FRN, 1.22%, 6/15/21 .		United States	2,000,000		1,990,520
^h,jVoya CLO Ltd.,
2013-3A, A2, 144A, FRN, 2.682%, 1/18/26		United States	900,000		897,408
2014-4A, A1, 144A, FRN, 2.381%, 10/14/26		Cayman Islands	7,620,000		7,625,715
2015-1A, A1, 144A, FRN, 2.362%, 4/18/27		United States	7,745,000		7,744,690
^h,jVoya CLO II Ltd., 2006-2A, C, 144A, FRN, 1.459%, 8/01/20		United States	3,500,000		3,499,895
Wells Fargo Mortgage Backed Securities Trust,
^j2004-W, A9, FRN, 2.99%, 11/25/34		United States	1,594,004		1,617,239
^v2007-3, 3A1, 5.50%, 4/25/22.		United States	258,877		265,395
^h,jWest CLO Ltd.,
2014-1A, A2, 144A, FRN, 2.982%, 7/18/26		United States	2,860,000		2,860,315
2014-1A, B, 144A, FRN, 3.732%, 7/18/26		United States	7,540,000		7,468,219
^h,jWestchester CLO Ltd., 2007-1A, A1A, 144A, FRN, 0.982%,
8/01/22		United States	980,387		974,034
^h,jZiggurat CLO I Ltd., 2014-1A, C, 144A, FRN, 3.98%, 10/17/26		United States	2,000,000		2,001,860
					543,908,328
Insurance 0.0%^†
^h,jVoya CLO III Ltd., 2006-3A, B, 144A, FRN, 1.56%, 12/13/20		United States	2,000,000		1,999,000
Real Estate 0.0%^†
^h,jAmerican Homes 4 Rent, 2014-SFR1, A, 144A, FRN, 1.535%,
6/17/31		United States	2,227,084		2,221,745
Total Asset-Backed Securities and Commercial
Mortgage-Backed Securities (Cost $679,003,081).					680,117,923

Mortgage-Backed Securities 20.9%
^jFederal Home Loan Mortgage Corp. (FHLMC) Adjustable Rate
0.1%
FHLMC, 1.943%, 11/01/27		United States	1,794,626		1,847,614
Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate
10.6%
FHLMC 30 Year, 6.00%, 6/01/37		United States	59,482		68,399
FHLMC 30 Year, 6.50%, 8/01/25 - 11/01/31		United States	94,367		108,159
FHLMC 30 Year, 7.00%, 7/01/31		United States	6,742		7,148
FHLMC 30 Year, 8.00%, 2/01/30		United States	29,379		36,826
FHLMC 30 Year, 8.50%, 10/01/24		United States	5,549		6,310
FHLMC Gold 15 Year, 5.00%, 10/01/17 - 9/01/18		United States	25,335		26,049
FHLMC Gold 15 Year, 5.50%, 11/01/22		United States	130,578		137,665
FHLMC Gold 15 Year, 6.00%, 2/01/17 - 9/01/22		United States	431,332		463,090
FHLMC Gold 30 Year, 3.00%, 9/01/46		United States	134,010,198		138,124,368

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CONSOLIDATED STATEMENT OF INVESTMENTS


Franklin Total Return Fund (continued)
		Principal
	Country	Amount*		Value

Mortgage-Backed Securities (continued)
Federal Home Loan Mortgage Corp. (FHLMC) Fixed
Rate (continued)
^wFHLMC Gold 30 Year, 3.00%, 11/01/46	United States	16,000,000	$	16,473,125
FHLMC Gold 30 Year, 3.50%, 8/01/46	United States	83,918,248		88,200,962
FHLMC Gold 30 Year, 4.00%, 6/01/46	United States	141,052,088		151,249,302
FHLMC Gold 30 Year, 4.00%, 8/01/46	United States	98,971,643		106,063,706
FHLMC Gold 30 Year, 4.50%, 3/01/39	United States	2,522,109		2,763,636
FHLMC Gold 30 Year, 5.00%, 8/01/33 - 2/01/39	United States	16,086,488		17,811,087
FHLMC Gold 30 Year, 5.50%, 1/01/35 - 12/01/37	United States	1,421,234		1,611,297
FHLMC Gold 30 Year, 6.00%, 5/01/33 - 4/01/38	United States	1,811,745		2,078,010
FHLMC Gold 30 Year, 6.50%, 4/01/28 - 3/01/39	United States	1,283,971		1,490,721
FHLMC Gold 30 Year, 7.00%, 1/01/28 - 7/01/32	United States	94,508		109,366
FHLMC Gold 30 Year, 7.50%, 3/01/32	United States	21,918		26,458
FHLMC Gold 30 Year, 8.50%, 8/01/30	United States	3,909		4,956
FHLMC Gold 30 Year, 9.00%, 1/01/22	United States	1,332		1,347
FHLMC Gold 30 Year, 10.00%, 10/01/30	United States	13,565		13,789
				526,875,776
^jFederal National Mortgage Association (FNMA) Adjustable
Rate 0.1%
FNMA, 1.943% - 4.103%, 12/01/24 - 3/01/37	United States	6,427,265		6,787,337
Federal National Mortgage Association (FNMA) Fixed Rate
6.3%
FNMA 15 Year, 4.50%, 3/01/19 - 6/01/19	United States	87,999		90,564
FNMA 15 Year, 5.00%, 6/01/18 - 7/01/18	United States	60,260		61,860
FNMA 15 Year, 5.50%, 12/01/16 - 12/01/23	United States	241,690		258,769
FNMA 15 Year, 6.00%, 6/01/17 - 9/01/22	United States	69,357		72,396
FNMA 30 Year, 3.00%, 8/01/46	United States	133,292,034		137,398,576
^wFNMA 30 Year, 3.00%, 11/01/46	United States	21,000,000		21,623,438
FNMA 30 Year, 3.50%, 7/01/46	United States	120,251,887		126,317,448
FNMA 30 Year, 5.00%, 6/01/36 - 5/01/39	United States	2,405,065		2,663,464
FNMA 30 Year, 5.50%, 6/01/33 - 8/01/37	United States	8,439,796		9,619,065
FNMA 30 Year, 6.00%, 9/01/32 - 9/01/38	United States	11,600,529		13,304,524
FNMA 30 Year, 6.50%, 5/01/28 - 5/01/37	United States	326,185		375,389
FNMA 30 Year, 7.00%, 11/01/25	United States	3,949		4,002
FNMA 30 Year, 7.50%, 1/01/30	United States	15,607		19,228
FNMA 30 Year, 8.50%, 4/01/30 - 5/01/32	United States	89,142		111,695
FNMA 30 Year, 9.00%, 11/01/26 - 5/01/27	United States	109,380		118,946
				312,039,364
^jGovernment National Mortgage Association (GNMA)
Adjustable Rate 0.0%^†
GNMA, 2.00%, 1/20/23 - 10/20/26	United States	51,773		53,411
Government National Mortgage Association (GNMA) Fixed
Rate 3.8%
GNMA I SF 30 Year, 6.00%, 1/15/39	United States	244,296		279,975
GNMA I SF 30 Year, 6.50%, 10/15/31 - 7/15/38	United States	50,114		59,650
GNMA I SF 30 Year, 7.00%, 10/15/27 - 6/15/31	United States	41,268		48,613
GNMA I SF 30 Year, 7.50%, 2/15/17 - 5/15/26	United States	106,319		110,287
GNMA I SF 30 Year, 9.00%, 9/15/25 - 1/15/31	United States	1,670		1,733
GNMA II SF 30 Year, 3.00%, 8/20/46.	United States	79,482,435		82,917,966
^wGNMA II SF 30 Year, 3.00%, 11/01/46	United States	9,000,000		9,374,766
GNMA II SF 30 Year, 3.50%, 8/20/46.	United States	90,292,404		95,753,168

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FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS


Franklin Total Return Fund (continued)
		Principal
	Country	Amount*		Value

Mortgage-Backed Securities (continued)
Government National Mortgage Association (GNMA) Fixed
Rate (continued)
GNMA II SF 30 Year, 6.00%, 5/20/31.	United States	5,869	$	6,807
GNMA II SF 30 Year, 6.50%, 3/20/28 - 7/20/38	United States	595,548		697,242
GNMA II SF 30 Year, 7.50%, 8/20/30 - 1/20/33	United States	58,368		69,600
				189,319,807
Total Mortgage-Backed Securities
(Cost $1,036,887,556)				1,036,923,309

Municipal Bonds 1.7%
California State GO, Various Purpose, 6.00%, 11/01/39.	United States	2,385,000		2,729,084
Chicago Transit Authority Sales and Transfer Tax Receipts
Revenue, Pension Funding, Series A, 6.899%, 12/01/40	United States	800,000		1,036,968
Connecticut State GO, Series B, 5.00%, 4/15/18.	United States	650,000		687,141
Industry Public Facilities Authority Tax Allocation Revenue,
Transportation District, Industrial Redevelopment Project No. 2,
Refunding, Series B, AGMC Insured, 4.294%, 1/01/23	United States	10,000,000		10,328,100
Minnesota State GO, Various Purpose, Refunding, Series F,
4.00%, 10/01/24	United States	5,760,000		6,656,889
New Jersey EDA Revenue, School Facilities Construction,
Refunding, Series NN, 5.00%, 3/01/30	United States	3,300,000		3,608,022
Port Authority of New York and New Jersey Revenue,
Consolidated, One Hundred Ninety-First Series, 4.823%,
6/01/45	United States	4,570,000		4,990,577
Consolidated, Series 192, 4.81%, 10/15/65.	United States	15,000,000		17,350,800
Providence St. Joseph Health Obligated Group, 2.746%, 10/01/26 .	United States	8,875,000		8,805,509
Puerto Rico Electric Power Authority Power Revenue, Series A,
6.75%, 7/01/36	United States	12,000,000		8,232,000
^xTexas State GO, Transportation Commission-Highway
Improvement, Series A, 5.00%, 4/01/26	United States	8,215,000		10,448,741
University of California Revenue, Limited Project, Refunding,
Series J, 4.131%, 5/15/45	United States	10,750,000		11,296,745
Total Municipal Bonds (Cost $84,591,950)				86,170,576


		Shares

Escrows and Litigation Trusts 0.0%
^a,kMotors Liquidation Co., Escrow Account, cvt. pfd., C	United States	43,500		—
^a,kNewPage Corp., Litigation Trust	United States	2,500,000		—
Total Escrows and Litigation Trusts (Cost $2,307) .				—

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CONSOLIDATED STATEMENT OF INVESTMENTS


Franklin Total Return Fund (continued)
		Notional
	Counterparty	Amount*		Value
Options Purchased 0.0%^†
Puts - Over-the-Counter
Credit Default Swaptions 0.0%^†
Buy protection on CDX.NA.HY.26, Premium Rate 5.00%, Strike
Price $103.50, Expires 11/16/16	CITI	50,000,000	$	87,700
Buy protection on CDX.NA.IG.27, Premium Rate 1.00%, Strike
Price $85, Expires 11/16/16	JPHQ	25,000,000		6,450
Buy protection on CDX.NA.IG.27, Premium Rate 1.00%, Strike
Price $90, Expires 11/16/16	CITI	50,000,000		8,700
Total Options Purchased (Cost $530,500)				102,850
Total Investments before Short Term Investments
(Cost $4,915,251,194)				4,948,562,810


	Country	Shares
Short Term Investments (Cost $104,199,665) 2.1%
Money Market Funds 2.1%
^a,eInstitutional Fiduciary Trust Money Market Portfolio	United States	104,199,665		104,199,665
Total Investments (Cost $5,019,450,859) 101.8%				5,052,762,475
Other Assets, less Liabilities (1.8)%				(87,799,421	)
Net Assets 100.0%			$	4,964,963,054

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CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Total Return Fund (continued)

^†Rounds to less than 0.1% of net assets.
*The principal/notional amount is stated in U.S. dollars unless otherwise indicated.
^aNon-income producing.
^bThe security is owned by FT Holdings Corporation I, a wholly-owned subsidiary of the Fund. See Note 1(g).
^cAt October 31, 2016, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund is restricted from trading these securities at year end.
^dSee Note 8 regarding restricted securities.
^eSee Note 3(f) regarding investments in affiliated management investment companies.
^fVariable rate security. The rate shown represents the yield at period end.
^gSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States.
Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption
from registration. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At October 31, 2016, the aggregate value of these
securities was $65,507,249, representing 1.3% of net assets.
^hSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers
or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At
October 31, 2016, the aggregate value of these securities was $820,141,149, representing 16.5% of net assets.
ⁱPerpetual security with no stated maturity date.
^jThe coupon rate shown represents the rate at period end.
^kSecurity has been deemed illiquid because it may not be able to be sold within seven days. At October 31, 2016, the aggregate value of these securities was $16,858,
representing less than 0.1% of net assets.
^lSee Note 7 regarding defaulted securities.
^mSee Note 1(f) regarding loan participation notes.
ⁿSee Note 1(i) regarding senior floating rate interests.
^oSecurity purchased on a delayed delivery basis. See Note 1(c).
^pIncome may be received in additional securities and/or cash.
^qPrincipal amount is stated in 100 Mexican Peso Units.
^rThe principal represents the notional amount. See Note 1(d) regarding value recovery instruments.
^sRedemption price at maturity is adjusted for inflation. See Note 1(k).
^tPrincipal amount is stated in 1,000 Brazilian Real Units.
^uPrincipal amount of security is adjusted for inflation. See Note 1(k).
^vThe bond pays interest and/or principal based upon the issuer’s ability to pay, which may be less than the stated interest rate or principal paydown.
^wSecurity purchased on a to-be-announced (TBA) basis. See Note 1(c).
^xSecurity purchased on a when-issued basis. See Note 1(c).

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CONSOLIDATED STATEMENT OF INVESTMENTS


Franklin Total Return Fund (continued)

At October 31, 2016, the Fund had the following financial futures contracts outstanding. See Note 1(d).

			Number of		Notional	Expiration		Unrealized			Unrealized
Description		Type	Contracts		Value	Date		Appreciation			Depreciation
Interest Rate Contracts
Australian 10 Yr. Bond		Long	650	$	65,597,364	12/15/16		$	—	$	(1,196,056	)
Canadian 10 Yr. Bond		Long	207		22,311,414	12/19/16			—		(256,580	)
CME Ultra Long Term U.S. Treasury Bond		Long	150		26,390,625	12/20/16			—		(1,575,412	)
Euro BOBL		Short	250		35,978,224	12/08/16			135,321		—
Euro-Bund		Short	120		21,360,708	12/08/16			169,697		—
Long Gilt		Long	380		58,305,282	12/28/16			—		(989,511	)
U.S. 10 Yr. Ultra		Short	98		13,868,531	12/20/16			278,090		—
U.S. Treasury 2 Yr. Note.		Long	129		28,140,141	12/30/16			—		(323	)
U.S. Treasury 5 Yr. Note.		Long	570		68,854,219	12/30/16			—		(491,297	)
U.S. Treasury 10 Yr. Note		Short	50		6,481,250	12/20/16			68,618		—
Total Financial Futures Contracts							$	651,726		$	(4,509,179	)
Net unrealized appreciation (depreciation)										$	(3,857,453	)


At October 31, 2016, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts
					Contract	Settlement		Unrealized			Unrealized
Currency	Counterparty^aType		Quantity		Amount	Date		Appreciation			Depreciation
OTC Forward Exchange Contracts
Australian Dollar.	DBAB	Sell	9,789,527	$	7,184,534	12/15/16		$	—	$	(256,137	)
Euro	DBAB	Buy	8,800,000		9,914,080	12/15/16			—		(234,802	)
Euro	DBAB	Sell	98,223,576		110,538,963	12/15/16		2,501,091			—
Euro	JPHQ	Sell	966,580		1,098,325	12/15/16			35,166		—
Euro	MSCO	Sell	5,621,360		6,388,957	12/15/16			205,922		—
Japanese Yen	JPHQ	Sell	3,094,000,360		29,380,766	12/15/16			—		(176,094	)
Japanese Yen	JPHQ	Sell	500,000,000		4,919,492	12/15/16			143,013		—
Malaysian Ringgit	DBAB	Buy	3,367,980		819,460	12/15/16			—		(17,760	)
Malaysian Ringgit	HSBK	Buy	790,000		191,747	12/15/16			—		(3,699	)
Mexican Peso	JPHQ	Sell	245,000,000		12,307,538	12/15/16			—		(607,813	)
South Korean Won	JPHQ	Sell	21,600,000,000		18,444,985	12/15/16			—		(436,340	)
Japanese Yen	DBAB	Sell	4,455,000,000		44,504,605	4/27/17		1,693,445			—
Japanese Yen	JPHQ	Sell	4,455,000,000		44,490,605	4/27/17		1,679,445			—
Australian Dollar.	DBAB	Sell	33,150,000		24,985,155	5/18/17			—		(124,195	)
Australian Dollar.	JPHQ	Sell	36,198,000		27,445,324	5/18/17			27,278		—
Canadian Dollar	JPHQ	Sell	4,900,000		3,733,476	5/18/17			75,206		—
Euro	BZWS	Sell	4,446,931		4,967,208	5/18/17			40,512		—
Euro	CITI	Sell	3,200,070		3,587,448	5/18/17			42,134		—
Euro	DBAB	Buy	3,683,229		4,048,606	5/18/17			31,995		—
Euro	DBAB	Sell	108,263,979		121,524,151	5/18/17		1,579,935			—
Euro	GSCO	Sell	1,024,000		1,150,566	5/18/17			16,090		—
Euro	HSBK	Sell	267,000		296,343	5/18/17			537		—
Euro	JPHQ	Sell	30,245,583		33,837,258	5/18/17			328,580		—
Hungarian Forint	DBAB	Sell	4,332,000,000		15,500,215	5/18/17			38,998		—
Hungarian Forint	JPHQ	Sell	935,000,000		3,364,641	5/18/17			27,559		—
Indian Rupee	DBAB	Buy	631,935,000		9,092,590	5/18/17			121,396		—
Indian Rupee	JPHQ	Buy	260,000,000		3,768,116	5/18/17			22,838		—
Indonesian Rupiah	DBAB	Buy 139,844,100,000			10,237,489	5/18/17			165,857		—

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CONSOLIDATED STATEMENT OF INVESTMENTS


Franklin Total Return Fund (continued)

Forward Exchange Contracts (continued)

					Contract	Settlement		Unrealized		Unrealized
Currency	Counterparty^a	Type	Quantity		Amount	Date		Appreciation		Depreciation
OTC Forward Exchange Contracts (continued)
Japanese Yen	JPHQ	Sell	852,000,000	$	8,570,356	5/18/17	$	374,641	$	—
Philippine Peso	JPHQ	Buy	177,480,000		3,602,192	5/18/17		20,462		—
Total Forward Exchange Contracts							$	9,172,100	$	(1,856,840	)
Net unrealized appreciation (depreciation)							$	7,315,260


^aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.


At October 31, 2016, the Fund had the following credit default swap contracts outstanding. See Note 1(d).

Credit Default Swap Contracts
									Unamortized
	Periodic		Counter-						Upfront
	Payment		party/		Notional		Expiration		Payments			Unrealized		Unrealized
Description	Rate		Exchange		Amount^a		Date		(Receipts)		Appreciation		Depreciation				Value		Rating^b
Centrally Cleared Swap Contracts
Contracts to Buy Protection
Traded Index
CDX.NA.HY.27	5.00	%	ICE	$	25,000,000		12/20/21	$	(811,868	)	$	–	$	(178,220	)	$	(990,088	)

Contracts to Sell Protection^c
Traded Index
CDX.NA.IG.24	1.00	%	ICE		25,000,000		6/20/25		(50,578	)		–		(310,647	)		(361,225	)	Investment
																			Grade
CDX.NA.IG.26	1.00	%	ICE		32,400,000		6/20/21		346,386			100,803		–			447,189		Investment
																			Grade
ITRX.EUR.25	1.00	%	ICE		20,650,000	EUR	6/20/21		211,987			160,927		–			372,914		Investment
																			Grade
ITRX.EUR.SN-
RFIN.26	1.00	%	ICE		31,550,000	EUR	12/20/21		(28,222	)		118,734		–			90,512		Investment
																			Grade
TotalCentrallyClearedSwapContracts								$	(332,295	)	$	380,464	$	(488,867	)	$	(440,698	)
OTC Swap Contracts
Contracts to Buy Protection
Single Name
The AES Corp	5.00	%	JPHQ		19,600,000		6/20/21	$	(2,112,272	)	$	–	$	(551,272	)	$	(2,663,544	)
Avon Products Inc	5.00	%	GSCO		18,500,000		3/20/20		2,055,392			–		(3,485,471	)		(1,430,079	)
Bank of America
Corp	1.00	%	FBCO		20,000,000		9/20/17		53,366			–		(206,686	)		(153,320	)
Beazer Homes
USA Inc	5.00	%	CITI		4,000,000		6/20/19		(124,084	)		–		(167,506	)		(291,590	)
Beazer Homes
USA Inc	5.00	%	GSCO		5,000,000		6/20/19		(163,686	)		–		(200,802	)		(364,488	)
Canadian Natural
Resources Ltd	5.00	%	GSCO		5,400,000		6/20/17		(124,820	)		–		(54,098	)		(178,918	)

104 Annual Report

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CONSOLIDATED STATEMENT OF INVESTMENTS


Franklin Total Return Fund (continued)

Credit Default Swap Contracts (continued)

								Unamortized
	Periodic		Counter-					Upfront
	Payment		party/	Notional		Expiration		Payments			Unrealized		Unrealized
Description	Rate		Exchange	Amount^a		Date		(Receipts)			Appreciation		Depreciation			Value		Rating^b
OTC Swap Contracts (continued)
Contracts to Buy Protection (continued)
Single Name (continued)
Constellation
Brands Inc	5.00	%	BZWS	3,000,000		6/20/17	$	(58,299	)	$	–	$	(52,706	)	$	(111,005	)
Constellation
Brands Inc	5.00	%	DBAB	2,000,000		6/20/17		(39,134	)		–		(34,870	)		(74,004	)
CSC Holdings LLC .	5.00	%	GSCO	3,000,000		9/20/18		(116,555	)		–		(121,106	)		(237,661	)
CSC Holdings LLC .	5.00	%	GSCO	9,000,000		3/20/19		(284,107	)		–		(509,438	)		(793,545	)
DPL Inc	5.00	%	MSCO	337,000		12/20/16		(1,511	)		–		(2,510	)		(4,021	)
El Paso Corp	5.00	%	GSCO	1,100,000		6/20/17		(26,375	)		��		(14,137	)		(40,512	)
International Lease
Finance Corp	5.00	%	GSCO	12,000,000		3/20/17		(169,666	)		–		(112,370	)		(282,036	)
Intesa Sanpaolo
SPA	1.00	%	JPHQ	6,450,000	EUR	6/20/21		772,366			–		(186,624	)		585,742
Kinder Morgan
Energy
Partners LP	5.00	%	CITI	5,200,000		3/20/18		(268,796	)		–		(101,745	)		(370,541	)
Kinder Morgan
Energy
Partners LP	5.00	%	CITI	1,000,000		3/20/20		(147,089	)		2,062		–			(145,027	)
Lennar Corp	5.00	%	CITI	6,200,000		12/20/19		(491,189	)		–		(252,037	)		(743,226	)
Lennar Corp	5.00	%	FBCO	4,500,000		9/20/19		(380,136	)		–		(131,082	)		(511,218	)
Lennar Corp	5.00	%	GSCO	3,900,000		12/20/20		(326,846	)		–		(204,504	)		(531,350	)
The New York
TimesCo	5.00	%	GSCO	11,700,000		12/20/16		(28,817	)		–		(108,684	)		(137,501	)
Olin Corp	1.00	%	FBCO	5,000,000		6/20/21		364,179			–		(70,292	)		293,887
Olin Corp	1.00	%	GSCO	5,000,000		6/20/21		360,761			–		(66,332	)		294,429
Owens-Illinois Inc	5.00	%	CITI	9,200,000		6/20/18		(574,962	)		–		(200,434	)		(775,396	)
Pactiv LLC	5.00	%	UBSW	12,000,000		6/20/17		111,358			–		(538,158	)		(426,800	)
PHH Corp	5.00	%	GSCO	5,400,000		9/20/19		27,069			–		(227,116	)		(200,047	)
Rite Aid Corp	5.00	%	CITI	5,000,000		6/20/21		(712,096	)		–		(34,979	)		(747,075	)
Rite Aid Corp	5.00	%	JPHQ	7,000,000		12/20/20		(1,043,241	)		17,205		–			(1,026,036	)
The Royal Bank of
Scotland PLC	1.00	%	JPHQ	1,200,000	EUR	6/20/21		138,481			–		(44,575	)		93,906
Sanmina Corp	5.00	%	GSCO	7,500,000		6/20/19		(869,256	)		–		(42,481	)		(911,737	)
Springleaf Finance
Corp	5.00	%	BZWS	1,000,000		12/20/21		(9,325	)		–		(3,720	)		(13,045	)
Springleaf Finance
Corp	5.00	%	GSCO	1,200,000		6/20/20		(52,675	)		44		–			(52,631	)
Tenet Healthcare
Corp	5.00	%	BZWS	9,400,000		12/20/16		(38,934	)		–		(69,347	)		(108,281	)
Tenet Healthcare
Corp	5.00	%	BZWS	3,000,000		3/20/19		(173,137	)		22,359		–			(150,778	)
Tenet Healthcare
Corp	5.00	%	BZWS	1,500,000		3/20/19		(66,520	)		–		(8,869	)		(75,389	)

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CONSOLIDATED STATEMENT OF INVESTMENTS


Franklin Total Return Fund (continued)

Credit Default Swap Contracts (continued)

								Unamortized
	Periodic		Counter-					Upfront
	Payment		party/	Notional		Expiration		Payments			Unrealized		Unrealized
Description	Rate		Exchange	Amount^a		Date		(Receipts)			Appreciation		Depreciation			Value		Rating^b
OTC Swap Contracts (continued)
Contracts to Buy Protection (continued)
Single Name (continued)
Tenet Healthcare
Corp	5.00	%	DBAB	4,000,000		3/20/19	$	(249,821	)	$	48,783	$	–		$	(201,038	)
Tenet Healthcare
Corp	5.00	%	GSCO	4,635,000		3/20/19		(244,550	)		11,597		–			(232,953	)
Tenet Healthcare
Corp	5.00	%	GSCO	2,700,000		3/20/19		(115,226	)		–		(20,474	)		(135,700	)
Toys R Us Inc	5.00	%	DBAB	14,000,000		12/20/18		2,207,428			–		(1,797,150	)		410,278
Toys R Us Inc	5.00	%	GSCO	14,800,000		12/20/18		2,842,344			–		(2,408,622	)		433,722
Transocean Inc	5.00	%	MSCO	13,000,000		6/20/18		(258,317	)		–		(290,423	)		(548,740	)
XPO CNW Inc	5.00	%	JPHQ	4,300,000		3/20/18		(143,725	)		–		(17,817	)		(161,542	)
Contracts to Sell Protection^c
Single Name
Arcelormittal	5.00	%	CITI	5,000,000	EUR	3/20/21		381,796			49,927		–			431,723		BB
Bank of America
Corp	1.00	%	FBCO	20,000,000		9/20/17		(53,366	)		206,686		–			153,320		BBB+
Beazer Homes
USA Inc	5.00	%	CITI	6,200,000		12/20/19		110,836			301,159		–			411,995		B-
Beazer Homes
USA Inc	5.00	%	GSCO	3,900,000		12/20/20		(375,864	)		523,428		–			147,564		B-
^dCalpine Corp	5.00	%	JPHQ	19,600,000		6/20/21		1,072,526			293,512		–			1,366,038		B
Electricite de
France SA	1.00	%	BZWS	10,500,000	EUR	9/20/20		209,873			–		(6,990	)		202,883		A-
Engie SA	1.00	%	BZWS	10,500,000	EUR	9/20/20		259,197			50,564		–			309,761		A-
Freeport-
McMoRan Inc	1.00	%	DBAB	6,500,000		3/20/23		(299,551	)		–		(1,120,329	)		(1,419,880	)	BB-
Government of
Mexico	1.00	%	CITI	8,400,000		6/20/20		(73,087	)		43,716		–			(29,371	)	BBB+
iHeartCommunica-
tionsInc	5.00	%	BZWS	5,000,000		6/20/18		(579,486	)		–		(1,040,329	)		(1,619,815	)	CC
OrangeSA	1.00	%	CITI	10,500,000	EUR	9/20/20		169,862			103,241		–			273,103		BBB+
Prudential
Financial Inc	1.00	%	BOFA	8,800,000		12/20/21		(133,707	)		152,451		–			18,744		A
Tenet Healthcare
Corp	5.00	%	BZWS	9,400,000		12/20/18		269,328			250,586		–			519,914		CCC+
Traded Index
MCDX.NA.27	1.00	%	CITI	12,400,000		12/20/21		127,249			–		(38,037	)		89,212		Investment
																		Grade
TotalOTCSwapContracts							$	603,183		$	2,077,320	$	(14,544,122	)	$	(11,863,619	)
TotalCreditDefaultSwapContracts							$	270,888		$	2,457,784	$	(15,032,989	)	$	(12,304,317	)
Netunrealizedappreciation(depreciation)												$	(12,575,205	)

106 Annual Report

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CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Total Return Fund (continued)

Credit Default Swap Contracts (continued)

^aIn U.S. dollars unless otherwise indicated. For contracts to sell protection, the notional amount is equal to the maximum potential amount of the future payments and no
recourse provisions have been entered into in association with the contracts.
^bBased on Standard and Poor’s (S&P) Rating for single name swaps and internal ratings for index swaps. Internal ratings based on mapping into equivalent ratings from
external vendors.
^cThe Fund enters contracts to sell protection to create a long credit position. Performance triggers include default, bankruptcy or restructuring for single name swaps, and
failure to pay or bankruptcy of the underlying securities for traded index swaps.
^dAt October 31, 2016, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund is restricted from trading these contracts at year end.


At October 31, 2016, the Fund had the following cross-currency swap contracts outstanding. See Note 1(d).

Cross Currency Swap Contracts
				Notional		Expiration		Unrealized		Unrealized
Description	Counterparty			Amount		Date		Appreciation		Depreciation
OTC Swap Contracts
Receive Floating Quarterly 3-month USD BBA LIBOR + 3.29%	JPHQ	12,760,417			USD	10/13/17	$	434,850	$	—
Pay Fixed Annual 2.125%		12,250,000			CHF
Receive Fixed Semi-Annual 3.045%.	CITI	11,760,000			USD	12/15/21		294,761		—
Pay Fixed Annual 1.125%		10,500,000			EUR
Net unrealized appreciation (depreciation)							$	729,611

At October 31, 2016, the Fund had the following inflation index swap contracts outstanding. See Note 1(d).

Inflation Index Swap Contracts
	Coumter-			Notional		Expiration		Unrealized		Unrealized
Description	party			Amount		Date		Appreciation		Depreciation
OTC Swap Contracts
Receiving variable change in USA-CPI-U
Pay Fixed Rate at Maturity 1.782%	JPHQ		$	95,700,000		5/27/24	$	1,614,905	$	—

See Notes 6 and 10 regarding investment transactions and other derivative information, respectively.

See Abbreviations on page 140.

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FRANKLIN INVESTORS SECURITIES TRUST

Financial Statements

Statements of Assets and Liabilities
October 31, 2016


		Franklin		Franklin		Franklin
		Adjustable		Floating Rate		Low Duration		Franklin
		U.S. Government		Daily Access		Total Return		Total Return
		Securities Fund		Fund		Fund		Fund^a
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	1,282,882,940	$	2,807,838,013	$	2,379,092,078	$	4,827,921,884
Cost - Controlled affiliates (Note 3f)		—		—		—		59,340,350
Cost - Non-controlled affiliates (Note 3f)		26,812,763		301,294,963		131,204,635		132,188,625
Total cost of investments	$	1,309,695,703	$	3,109,132,976	$	2,510,296,713	$	5,019,450,859
Value - Unaffiliated issuers	$	1,291,397,310	$	2,751,553,879	$	2,381,062,315	$	4,860,523,399
Value - Controlled affiliates (Note 3f)		—		—		—		58,668,000
Value - Non-controlled affiliates (Note 3f)		26,812,763		301,294,963		133,465,058		133,571,076
Total value of investments		1,318,210,073		3,052,848,842		2,514,527,373		5,052,762,475
Cash.		—		9,322,258		2,688,965		2,248,228
Restricted Cash (Note 1e)		—		—		1,150,000		6,050,000
Foreign currency, at value (cost $—, $—, $1,224,609
and $808,669, respectively)		—		—		1,226,327		808,264
Receivables:
Investment securities sold		6,748,438		89,066,217		208,298		10,621,518
Capital shares sold		1,882,318		7,883,806		5,585,479		13,955,173
Dividends and interest		3,496,193		8,935,800		11,635,473		34,442,450
Affiliates		—		—		94,226		—
Due from brokers		—		—		9,830,863		16,389,554
Variation margin		—		—		—		138,860
OTC swap contracts (upfront payments $—, $—,
$5,501,544 and $17,177,855)		—		—		3,982,848		11,533,411
Unrealized appreciation on OTC forward exchange
contracts		—		—		2,529,129		9,172,100
Unrealized appreciation on OTC swap contracts		—		—		1,700,004		4,421,836
Unrealized appreciation on unfunded loan
commitments (Note 9)		—		11,867		—		—
Other assets		339		631		597		114
Total assets		1,330,337,361		3,168,069,421		2,555,159,582		5,162,543,983
Liabilities:
Payables:
Investment securities purchased		—		122,228,510		9,038,083		135,783,668
Capital shares redeemed		4,647,178		7,387,795		8,531,700		23,270,764
Management fees		559,043		1,212,101		1,028,791		1,949,840
Distribution fees		304,825		585,698		446,128		1,054,479
Transfer agent fees		266,724		491,625		—		981,912
Distributions to shareholders		116,243		2,704,182		502,192		352,960
Variation margin		—		—		129,626		—
OTC swap contracts (upfront receipts $—, $—,
$10,736,125 and $17,916,203)		—		—		6,404,019		10,930,228
Due to brokers		—		—		1,150,000		6,050,000
Unrealized depreciation on OTC forward exchange
contracts		—		—		970,445		1,856,840
Unrealized depreciation on OTC swap contracts		—		—		5,538,363		14,544,122
Unrealized depreciation on unfunded loan
commitments (Note 9)		—		—		54,736		120,803

108 Annual Report | The accompanying notes are an integral part of these financial statements.

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						FRANKLIN INVESTORS SECURITIES TRUST
									FINANCIAL STATEMENTS


Statements of Assets and Liabilities (continued)
October 31, 2016

			Franklin			Franklin			Franklin
			Adjustable			Floating Rate			Low Duration			Franklin
			U.S. Government			Daily Access			Total Return			Total Return
			Securities Fund			Fund			Fund			Fund^a
Accrued expenses and other liabilities.	$		145,329		$	845,687		$	743,438		$	685,313
Total liabilities			6,039,342			135,455,598			34,537,521			197,580,929
Net assets, at value	$		1,324,298,019		$	3,032,613,823		$	2,520,622,061		$	4,964,963,054
Net assets consist of:
Paid-in capital	$		1,473,750,028		$	3,337,037,164		$	2,592,158,224		$	4,997,957,349
Undistributed net investment income			36,132			2,223,849			1,657,052			3,637,002
Net unrealized appreciation (depreciation)			8,514,370			(56,272,267	)		2,993,561			25,453,015
Accumulated net realized gain (loss)			(158,002,511	)		(250,374,923	)		(76,186,776	)		(62,084,312	)
Net assets, at value	$		1,324,298,019		$	3,032,613,823		$	2,520,622,061		$	4,964,963,054
Class A:
Net assets, at value	$		667,670,669		$	1,359,862,215		$	1,524,436,661		$	3,623,034,930
Shares outstanding.			79,451,673			153,804,451			154,118,160			364,927,154
Net asset value per share^b		$	8.40		$	8.84		$	9.89		$	9.93
Maximum offering price per share (net asset value per
share ÷ 97.75%, 97.75%, 97.75% and 95.75%,
respectively)		$	8.59		$	9.04		$	10.12		$	10.37
Class A1:
Net assets, at value	$		160,469,055
Shares outstanding.			19,101,500
Net asset value per share^b		$	8.40
Maximum offering price per share (net asset value per
share ÷ 97.75%)		$	8.59
Class C:
Net assets, at value	$		266,185,518		$	551,726,450		$	218,065,504		$	449,274,299
Shares outstanding.			31,697,127			62,387,792			22,116,416			45,502,673
Net asset value and maximum offering price per
share^b		$	8.40		$	8.84		$	9.86		$	9.87
Class R:
Net assets, at value											$	58,715,369
Shares outstanding.												5,931,895
Net asset value and maximum offering price per share .											$	9.90
Class R6:
Net assets, at value	$		2,373,810		$	12,332,804		$	553,233,246		$	93,892,394
Shares outstanding.			282,193			1,394,780			55,647,586			9,404,728
Net asset value and maximum offering price per share .		$	8.41		$	8.84		$	9.94		$	9.98
Advisor Class:
Net assets, at value	$		227,598,967		$	1,108,692,354		$	224,886,650		$	740,046,062
Shares outstanding.			27,058,824			125,345,616			22,634,415			74,172,248
Net asset value and maximum offering price per share .		$	8.41		$	8.85		$	9.94		$	9.98

^aConsolidated financial statement. See Note 1(g).
^bRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.

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FINANCIAL STATEMENTS


Statements of Operations
for the year ended October 31, 2016

		Franklin			Franklin			Franklin
		Adjustable			Floating Rate			Low Duration			Franklin
		U.S. Government			Daily Access			Total Return			Total Return
		Securities Fund			Fund			Fund			Fund^a
Investment income:
Dividends:
Unaffiliated issuers	$	—		$	192,383		$	—		$	1,118,832
Controlled affiliates (Note 3f)		—			—			—			878,940
Non-controlled affiliates (Note 3f)		—			—			3,104,759			1,994,178
Interest		34,986,782			168,211,616			62,141,387			146,508,263
Paydown gain (loss)		(14,878,089	)		—			(5,250,251	)		1,282,807
Total investment income.		20,108,693			168,403,999			59,995,895			151,783,020
Expenses:
Management fees (Note 3a)		7,488,149			15,324,977			12,652,821			22,456,814
Distribution fees: (Note 3c)
Class A		1,909,577			3,416,194			3,999,603			9,169,167
Class A1		170,658			—			—			—
Class C		1,962,976			3,581,712			1,446,770			2,923,749
Class R		—			—			—			329,197
Transfer agent fees: (Note 3e)
Class A		918,966			1,411,446			2,685,395			5,181,943
Class A1		215,754			—			—			—
Class C		363,222			569,215			376,264			635,743
Class R		—			—			—			93,037
Class R6		301			229			387			1,278
Advisor Class		300,423			1,129,202			278,350			754,804
Custodian fees (Note 4)		13,898			24,239			48,928			148,113
Reports to shareholders		194,591			290,327			285,709			655,617
Registration and filing fees		120,898			117,416			190,618			413,127
Professional fees		55,816			116,131			97,356			171,740
Trustees’ fees and expenses		18,093			35,705			24,096			51,605
Other.		284,534			77,343			257,617			352,130
Total expenses		14,017,856			26,094,136			22,343,914			43,338,064
Expense reductions (Note 4)		(450	)		(8,185	)		(16,755	)		(48,639	)
Expenses waived/paid by affiliates (Note 3f and 3g)		(86,638	)		(544,650	)		(3,649,073	)		(2,347,785	)
Net expenses		13,930,768			25,541,301			18,678,086			40,941,640
Net investment income		6,177,925			142,862,698			41,317,809			110,841,380
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		617,606			(60,832,757	)		(12,093,115	)		(33,131,810	)
Written options		—			—			307,231			655,836
Foreign currency transactions		—			18,878			(2,569,755	)		(23,758,842	)
Futures contracts		—			—			(2,018,476	)		7,162,540
Swap contracts		—			217,311			(5,578,730	)		(10,191,077	)
Net realized gain (loss)		617,606			(60,596,568	)		(21,952,845	)		(59,263,353	)
Net change in unrealized appreciation (depreciation) on:
Investments		(11,522,082	)		119,165,880			35,084,133			128,959,232
Translation of other assets and liabilities
denominated in foreign currencies		—			—			(2,539,649	)		341,975
Written options		—			—			(308,273	)		(659,146	)
Futures contracts		—			—			1,255,315			(3,721,434	)
Swap contracts		—			47,565			(4,109,710	)		(10,585,565	)

110 Annual Report | The accompanying notes are an integral part of these financial statements.

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							FINANCIAL STATEMENTS


Statements of Operations (continued)
for the year ended October 31, 2016

		Franklin			Franklin		Franklin
		Adjustable			Floating Rate		Low Duration		Franklin
		U.S. Government			Daily Access		Total Return		Total Return
		Securities Fund			Fund		Fund		Fund^a
Net change in unrealized appreciation
(depreciation)	$	(11,522,082	)	$	119,213,445	$	29,381,816	$	114,335,062
Net realized and unrealized gain (loss)		(10,904,476	)		58,616,877		7,428,971		55,071,709
Net increase (decrease) in net assets resulting from
operations	$	(4,726,551	)	$	201,479,575	$	48,746,780	$	165,913,089

^aConsolidated financial statement. See Note 1(g).

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FINANCIAL STATEMENTS


Statements of Changes in Net Assets

		Franklin Adjustable U.S.							Franklin Floating Rate
		Government Securities Fund							Daily Access Fund
		Year Ended October 31,							Year Ended October 31,
		2016			2015				2016				2015
Increase (decrease) in net assets:
Operations:
Net investment income	$	6,177,925			$	7,386,710		$	142,862,698			$	181,670,130
Net realized gain (loss)		617,606				3,977,176			(60,596,568	)			(57,017,412	)
Net change in unrealized appreciation (depreciation)		(11,522,082	)		(16,455,279		)		119,213,445				(139,672,972	)
Net increase (decrease) in net assets resulting
from operations		(4,726,551	)		(5,091,393		)		201,479,575				(15,020,254	)
Distributions to shareholders from:
Net investment income:
Class A		(10,995,661	)		(11,496,470		)		(64,460,934	)			(75,905,826	)
Class A1		(2,862,431	)		(2,962,707		)		—				—
Class C		(3,137,657	)		(2,804,429		)		(23,786,613	)			(27,606,089	)
Class R6		(41,661	)			(71,457	)		(285,466	)			(4,174	)
Advisor Class.		(4,223,137	)		(5,038,156		)		(54,321,011	)			(76,936,149	)
Total distributions to shareholders		(21,260,547	)		(22,373,219		)		(142,854,024	)			(180,452,238	)
Capital share transactions: (Note 2)
Class A		(167,984,621	)		(195,883,210		)		(222,175,112	)			(239,383,605	)
Class A1		(35,100,623	)		(51,188,248		)		—				—
Class C		(64,817,272	)		(86,549,659		)		(87,707,899	)			(81,761,761	)
Class R6		236,438			(4,959,369		)		11,857,272				(451,181	)
Advisor Class.		(76,748,790	)		(103,191,545		)		(314,178,543	)			(534,150,566	)
Total capital share transactions		(344,414,868	)		(441,772,031		)		(612,204,282	)			(855,747,113	)
Net increase (decrease) in net assets		(370,401,966	)		(469,236,643		)		(553,578,731	)		(1,051,219,605		)
Net assets:
Beginning of year		1,694,699,985			2,163,936,628				3,586,192,554				4,637,412,159
End of year	$	1,324,298,019		$	1,694,699,985			$	3,032,613,823		$	3,586,192,554
Undistributed net investment income included in net
assets:
End of year	$	36,132			$	—		$	2,223,849			$	2,331,451
Distributions in excess of net investment income included
in net assets:
End of year	$	—			$	(430,553	)	$	—			$	—

112 Annual Report | The accompanying notes are an integral part of these financial statements.

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					FRANKLIN INVESTORS SECURITIES TRUST
								FINANCIAL STATEMENTS


Statements of Changes in Net Assets (continued)

		Franklin Low Duration						Franklin Total
		Total Return Fund						Return Fund^a
		Year Ended October 31,						Year Ended October 31,
		2016			2015			2016			2015
Increase (decrease) in net assets:
Operations:
Net investment income	$	41,317,809		$	33,091,804		$	110,841,380		$	108,016,847
Net realized gain (loss)		(21,952,845	)		10,086,678			(59,263,353	)		105,081,761
Net change in unrealized appreciation (depreciation)		29,381,816			(41,785,644	)		114,335,062			(215,394,420	)
Net increase (decrease) in net assets resulting
from operations		48,746,780			1,392,838			165,913,089			(2,295,812	)
Distributions to shareholders from:
Net investment income and net foreign currency gains:
Class A		(33,131,709	)		(31,970,213	)		(101,527,245	)		(102,580,350	)
Class C		(4,013,836	)		(3,021,768	)		(11,788,656	)		(12,390,512	)
Class R		—			—			(1,861,369	)		(1,874,785	)
Class R6		(12,099,518	)		(11,544,553	)		(2,201,117	)		(1,493,816	)
Advisor Class		(3,563,139	)		(3,636,737	)		(15,522,886	)		(38,204,478	)
Total distributions to shareholders		(52,808,202	)		(50,173,271	)		(132,901,273	)		(156,543,941	)
Capital share transactions: (Note 2)
Class A		(127,311,300	)		98,528,651			66,617,965			417,940,997
Class C		7,361,242			49,157,590			2,877,723			25,914,042
Class R		—			—			(12,019,056	)		13,325,622
Class R6		43,783,151			99,586,210			24,451,715			44,485,978
Advisor Class		74,356,194			(45,036,986	)		212,187,480			(717,785,422	)
Total capital share transactions		(1,810,713	)		202,235,465			294,115,827			(216,118,783	)
Net increase (decrease) in net assets		(5,872,135	)		153,455,032			327,127,643			(374,958,536	)
Net assets:
Beginning of year		2,526,494,196			2,373,039,164			4,637,835,411			5,012,793,947
End of year	$	2,520,622,061		$	2,526,494,196		$	4,964,963,054		$	4,637,835,411
Undistributed net investment income included in net assets:
End of year	$	1,657,052		$	7,129,079		$	3,637,002		$	49,185,692

^aConsolidated financial statement. See Note 1(g).

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FRANKLIN INVESTORS SECURITIES TRUST

Notes to Financial Statements

1. Organization and Significant Accounting Policies

Class A, Class A1, Class C, Class R6 & Advisor Class

Franklin Adjustable U.S. Government Securities Fund

Class A, Class C, Class R6 & Advisor Class

Franklin Floating Rate Daily Access Fund Franklin Low Duration Total Return Fund

Class A, Class C, Class R, Class R6 & Advisor Class

Franklin Total Return Fund

The following summarizes the Funds’ significant accounting policies.

a. Financial Instrument Valuation

Equity securities, exchange traded funds, and derivative financial instruments listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of 4 p.m. Eastern time, whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

Debt securities generally trade in the OTC market rather than on a securities exchange. The Funds’ pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the date that the values of the foreign debt securities are determined.

Investments in open-end mutual funds are valued at the closing NAV.

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b. Foreign Currency Translation

c. Securities Purchased on a When-Issued, Delayed Delivery, and TBA Basis

Certain or all Funds purchase securities on a when-issued or delayed delivery and to-be-announced (TBA) basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Funds will generally purchase these securities with the intention of holding the securities, they may sell the securities before the settlement date. Sufficient assets have been segregated for these securities and collateral has been pledged and/or received for open TBA trades.

d. Derivative Financial Instruments

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1. Organization and Significant Accounting

Policies (continued)

d. Derivative Financial Instruments (continued)

by entering into International Swaps and Derivatives Association (ISDA) master agreements with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination. Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Funds include failure of the Funds to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statements of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Funds of any net liability owed to that counterparty under the ISDA agreement.

Collateral requirements differ by type of derivative. Collateral or initial margin requirements are set by the broker or exchange clearing house for exchange traded and centrally cleared derivatives. Initial margin deposited is held at the exchange and can be in the form of cash and/or securities. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the Fund or the applicable counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of Fund business each day and any additional collateral required due to changes in derivative values may be delivered by the Fund or the counterparty within a few business days. Collateral pledged and/or received by the Fund for OTC derivatives, if any, is held in segregated accounts with the Fund’s custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Funds’ investment objectives. To the extent that the amounts due to the Fund from its counterparties are not subject to collateralization or are not fully collateralized, the Fund bears the risk of loss from counterparty non-performance.

Certain or all Funds entered into exchange traded financial futures contracts primarily to manage and/or gain exposure to interest rate risk. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset at a specified price on a future date. Required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statements of Assets and Liabilities.

Certain or all Funds entered into credit default swap contracts primarily to manage and/or gain exposure to credit risk. A credit default swap is an agreement between the Fund and a counterparty whereby the buyer of the contract receives credit protection and the seller of the contract guarantees the credit worthiness of a referenced debt obligation. These agreements may be privately negotiated in the over-the-counter market (OTC credit default swaps) or may be executed in a multilateral trade facility platform, such as a registered exchange (centrally cleared credit default swaps). The underlying referenced debt obligation may be a single issuer of corporate or sovereign debt, a credit index, a basket of issuers or indices, or a tranche of a credit index or basket of issuers or indices. In the event of a default of the underlying referenced debt obligation, the buyer is entitled to receive the notional amount of the credit default swap contract from the seller in exchange for the referenced debt obligation, a net settlement amount equal to the notional amount of the credit default swap less the recovery value of the referenced debt obligation, or other agreed upon amount. For centrally cleared credit default swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statements of Assets and Liabilities. Over the term of the contract, the buyer pays the seller a periodic stream of payments, provided that no event of default has occurred. Such periodic payments are accrued daily as an unrealized appreciation or depreciation until the payments are made, at which time they are realized. Upfront payments and receipts are reflected in the Statements of Assets and Liabilities and represent compensating factors between stated terms of the credit default swap agreement and prevailing market conditions (credit spreads and other relevant factors). These upfront

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payments and receipts are amortized over the term of the contract as a realized gain or loss in the Statements of Operations.

Certain or all Funds entered into OTC cross currency swap contracts primarily to manage and/or gain exposure to interest rate risk and certain foreign currencies. A cross currency swap is an agreement between the Fund and a counterparty to exchange cash flows (determined using either a fixed or floating rate) based on the notional amounts of two different currencies. The notional amounts are typically determined based on the spot exchange rates at the opening of the contract. Cross currency swaps may require the exchange of notional amounts at the opening and/or closing of the contract. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized. Upfront payments and receipts are reflected in the Statements of Assets and Liabilities and represent compensating factors between stated terms of the cross currency swap contract and prevailing market conditions (interest rate spreads and other relevant factors). These upfront payments and receipts are amortized over the term of the contract as a realized gain or loss in the Statements of Operations.

Certain or all Funds entered into interest rate swap contracts primarily to manage interest rate risk. An interest rate swap is an agreement between the Fund and a counterparty to exchange cash flows based on the difference between two interest rates, applied to a notional amount. These agreements may be privately negotiated in the over-the-counter market (OTC interest rate swaps) or may be executed on a registered exchange (centrally cleared interest rate swaps). For centrally cleared interest rate swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statements of Assets and Liabilities. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized.

Certain or all Funds purchased or wrote exchange traded and/or OTC option contracts primarily to manage and/or gain exposure to interest rate, foreign exchange rate and credit risk. An option is a contract entitling the holder to purchase or sell a specific amount of shares or units of an asset or notional amount of a swap (swaption), at a specified price. When an option is purchased or written, an amount equal to the premium paid or received is recorded as an asset or liability, respectively. Upon exercise of an option, the acquisition cost or sales proceeds of the underlying investment is adjusted by any premium received or paid. Upon expiration of an option, any premium received or paid is recorded as a realized gain or loss. Upon closing an option other than through expiration or exercise, the difference between the premium received or paid and the cost to close the position is recorded as a realized gain or loss.

Certain or all Funds entered into inflation index swap contracts primarily to manage inflation risk. An inflation index swap is an agreement between the Fund and a counterparty to exchange cash flows whereby one party makes payments based on the percentage change in an index that serves as a measure of inflation and the other party makes a regular payment based on a compounded fixed rate, applied to a notional amount. These agreements may be privately negotiated in the over-the-counter market (OTC inflation index swap) or may be executed on a registered exchange (centrally cleared inflation index swap). For centrally cleared inflation index swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized. Typically, an inflation index swap has payment obligations netted and exchanged upon maturity.

Certain or all Funds invest in value recovery instruments (VRI) primarily to gain exposure to growth risk. Periodic payments from VRI are dependent on established benchmarks for underlying variables. VRI has a notional amount, which is used to calculate amounts of payments to holders. Payments are recorded upon receipt as realized gains in the Statements of Operations. The risks of investing in VRI include growth risk, liquidity, and the potential loss of investment.

See Notes 6 and 10 regarding investment transactions and other derivative information, respectively.

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1. Organization and Significant Accounting

Policies (continued)

e. Restricted Cash

f. Loan Participation Notes

Certain or all Funds invest in loan participation notes (Participations). Participations are loans originally issued to a borrower by one or more financial institutions (the Lender) and subsequently sold to other investors, such as the Funds. Participations typically result in the Fund having a contractual relationship only with the Lender and not with the borrower. The Funds have the right to receive from the Lender any payments of principal, interest and fees which the Lender received from the borrower. The Funds generally have no rights to either enforce compliance by the borrower with the terms of the loan agreement or to any collateral relating to the original loan. As a result, the Funds assume the credit risk of both the borrower and the Lender that is selling the Participation. The Participations may also involve interest rate risk and liquidity risk, including the potential default or insolvency of the borrower and/or the Lender.

g. Investments in FT Holdings Corporation I (FT Subsidiary)

Franklin Total Return Fund invests in certain financial instruments through its investment in the FT Subsidiary. The FT Subsidiary is a Delaware Corporation, is a wholly-owned Subsidiary of the Fund, and is able to invest in certain financial instruments consistent with the investment objective of the Fund. At October 31, 2016, the FT Subsidiary’s investment, Turtle Bay Resort, as well as any other assets and liabilities of the FT Subsidiary are reflected in the Fund’s Consolidated Statement of Investments and Consolidated Statement of Assets and Liabilities. The financial statements have been consolidated and include the accounts of the Fund and the FT Subsidiary. All intercompany transactions and balances have been eliminated. At October 31, 2016, the net assets of the FT Subsidiary were $5,382,878, representing 0.1% of the Fund’s consolidated net assets. The Fund’s investment in the FT Subsidiary is limited to 25% of consolidated assets.

h. Mortgage Dollar Rolls

Certain or all Funds enter into mortgage dollar rolls, typically on a TBA basis. Mortgage dollar rolls are agreements between the Fund and a financial institution where the Fund sells (or buys) mortgage-backed securities for delivery on a specified date and simultaneously contracts to repurchase (or sell) substantially similar (same type, coupon, and maturity) securities at a future date and at a predetermined price. Gains or losses are realized on the initial sale, and the difference between the repurchase price and the sale price is recorded as an unrealized gain or loss to the Fund upon entering into the mortgage dollar roll. In addition, the Fund may invest the cash proceeds that are received from the initial sale. During the period between the sale and repurchase, the Fund is not entitled to principal and interest paid on the mortgage backed securities. Transactions in mortgage dollar rolls are accounted for as purchases and sales and may result in an increase to the Fund’s portfolio turnover rate. The risks of mortgage dollar roll transactions include the potential inability of the counterparty to fulfill its obligations.

i. Senior Floating Rate Interests

j. Income and Deferred Taxes

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based on the tax regulations and rates that exist in the foreign markets in which the Funds invest. When a capital gain tax is determined to apply, certain or all Funds record an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.

k. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Paydown gains and losses are recorded separately on the Statements of Operations. Facility fees are recognized as income over the expected term of the loan. Dividends from net investment income are normally declared daily; these dividends may be reinvested or paid monthly to shareholders. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

Net investment income, not including class specific expenses, is allocated daily to each class of shares based upon the relative value of the settled shares of each class. Realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.

l. Accounting Estimates

m. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Funds, enter into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

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2. Shares of Beneficial Interest

At October 31, 2016, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:


	Franklin Adjustable U.S.					Franklin Floating Rate
	Government Securities Fund					Daily Access Fund
	Shares			Amount		Shares			Amount
Class A Shares:
Year ended October 31, 2016
Shares sold	21,965,175		$	185,996,265	��	24,811,623		$	212,007,459
Shares issued in reinvestment of distributions	1,239,949			10,469,739		7,064,574			59,950,762
Shares redeemed	(43,095,113	)		(364,450,625	)	(58,463,296	)		(494,133,333	)
Net increase (decrease)	(19,889,989	)	$	(167,984,621	)	(26,587,099	)	$	(222,175,112	)
Year ended October 31, 2015
Shares sold	29,600,803		$	255,228,822		35,259,302		$	314,270,932
Shares issued in reinvestment of distributions	1,093,408			9,421,052		7,762,505			69,039,598
Shares redeemed	(53,496,340	)		(460,533,084	)	(69,916,661	)		(622,694,135	)
Net increase (decrease)	(22,802,129	)	$	(195,883,210	)	(26,894,854	)	$	(239,383,605	)
Class A1 Shares:
Year ended October 31, 2016
Shares sold	782,382		$	6,611,320
Shares issued in reinvestment of distributions	321,531			2,714,543
Shares redeemed	(5,258,218	)		(44,426,486	)
Net increase (decrease)	(4,154,305	)	$	(35,100,623	)
Year ended October 31, 2015
Shares sold	1,222,138		$	10,538,383
Shares issued in reinvestment of distributions	322,924			2,781,758
Shares redeemed	(7,479,327	)		(64,508,389	)
Net increase (decrease)	(5,934,265	)	$	(51,188,248	)
Class C Shares:
Year ended October 31, 2016
Shares sold	4,522,226		$	38,281,353		9,537,412		$	81,449,034
Shares issued in reinvestment of distributions	342,782			2,892,128		2,536,642			21,527,906
Shares redeemed	(12,545,368	)		(105,990,753	)	(22,589,768	)		(190,684,839	)
Net increase (decrease)	(7,680,360	)	$	(64,817,272	)	(10,515,714	)	$	(87,707,899	)
Year ended October 31, 2015
Shares sold	5,349,068		$	46,082,804		14,110,236		$	125,708,580
Shares issued in reinvestment of distributions	298,946			2,574,236		2,777,065			24,699,170
Shares redeemed	(15,680,366	)		(135,206,699	)	(26,067,686	)		(232,169,511	)
Net increase (decrease)	(10,032,352	)	$	(86,549,659	)	(9,180,385	)	$	(81,761,761	)

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	Franklin Adjustable U.S.						Franklin Floating Rate
	Government Securities Fund						Daily Access Fund
	Shares				Amount		Shares				Amount
Class R6 Shares:
Year ended October 31, 2016
Shares sold	59,418			$	503,303		1,447,506			$	12,322,386
Shares issued in reinvestment of distributions	4,930				41,660		32,856				285,282
Shares redeemed	(36,505	)			(308,525	)	(86,396	)			(750,396	)
Net increase (decrease)	27,843			$	236,438		1,393,966			$	11,857,272
Year ended October 31, 2015
Shares sold	398,482			$	3,455,605		702			$	6,249
Shares issued in reinvestment of distributions	8,176				70,673		444				3,983
Shares redeemed	(980,650	)			(8,485,647	)	(51,765	)			(461,413	)
Net increase (decrease)	(573,992	)		$	(4,959,369	)	(50,619	)		$	(451,181	)
Advisor Class Shares:
Year ended October 31, 2016
Shares sold	13,280,439		$	112,298,847			43,401,930			$	369,260,775
Shares issued in reinvestment of distributions	441,098				3,728,635		2,892,071				24,565,655
Shares redeemed	(22,751,797	)		(192,776,272		)	(84,100,921	)			(708,004,973	)
Net increase (decrease)	(9,030,260	)	$	(76,748,790		)	(37,806,920	)		$	(314,178,543	)
Year ended October 31, 2015
Shares sold	16,262,514		$	140,248,227			50,519,163			$	450,379,688
Shares issued in reinvestment of distributions	492,842				4,251,127		3,269,592				29,068,251
Shares redeemed	(28,703,734	)		(247,690,899		)	(113,811,749	)		(1,013,598,505		)
Net increase (decrease)	(11,948,378	)	$	(103,191,545		)	(60,022,994	)		$	(534,150,566	)

	Franklin Low Duration						Franklin Total
	Total Return Fund						Return Fund
	Shares				Amount		Shares				Amount
Class A Shares:
Year ended October 31, 2016
Shares sold	47,047,322		$	461,234,268			93,822,994			$	916,738,346
Shares issued in reinvestment of distributions	2,977,746				29,135,231		10,292,781				99,324,788
Shares redeemed	(62,936,182	)		(617,680,799		)	(96,558,711	)			(949,445,169	)
Net increase (decrease)	(12,911,114	)	$	(127,311,300		)	7,557,064			$	66,617,965
Year ended October 31, 2015
Shares sold	62,045,618		$	620,756,628			106,013,942		$	1,065,164,455
Shares issued in reinvestment of distributions	2,798,272				27,971,757		9,933,392				99,512,096
Shares redeemed	(55,015,732	)		(550,199,734		)	(74,337,731	)			(746,735,554	)
Net increase (decrease)	9,828,158			$	98,528,651		41,609,603			$	417,940,997

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2. Shares of Beneficial Interest (continued)

	Franklin Low Duration					Franklin Total
	Total Return Fund					Return Fund
	Shares			Amount		Shares			Amount
Class C Shares:
Year ended October 31, 2016
Shares sold	10,992,306		$	107,389,119		11,518,037		$	111,836,091
Shares issued in reinvestment of distributions	344,793			3,366,635		1,118,125			10,736,413
Shares redeemed	(10,576,146	)		(103,394,512	)	(12,292,706	)		(119,694,781	)
Net increase (decrease)	760,953		$	7,361,242		343,456		$	2,877,723
Year ended October 31, 2015
Shares sold	11,804,941		$	117,806,725		13,450,866		$	134,822,571
Shares issued in reinvestment of distributions	267,721			2,673,011		1,125,209			11,241,167
Shares redeemed	(7,138,718	)		(71,322,146	)	(12,032,841	)		(120,149,696	)
Net increase (decrease)	4,933,944		$	49,157,590		2,543,234		$	25,914,042
Class R Shares:
Year ended October 31, 2016
Shares sold						1,331,922		$	12,937,501
Shares issued in reinvestment of distributions						186,048			1,789,731
Shares redeemed						(2,741,401	)		(26,746,288	)
Net increase (decrease)						(1,223,431	)	$	(12,019,056	)
Year ended October 31, 2015
Shares sold						2,816,817		$	28,284,445
Shares issued in reinvestment of distributions						178,317			1,783,880
Shares redeemed						(1,673,042	)		(16,742,703	)
Net increase (decrease)						1,322,092		$	13,325,622
Class R6 Shares:
Year ended October 31, 2016
Shares sold	13,012,102		$	127,680,026		5,007,346		$	49,666,379
Shares issued in reinvestment of distributions	1,225,030			12,041,881		8,309			80,954
Shares redeemed	(9,709,503	)		(95,938,756	)	(2,560,569	)		(25,295,618	)
Net increase (decrease)	4,527,629		$	43,783,151		2,455,086		$	24,451,715
Year ended October 31, 2015
Shares sold	14,096,020		$	142,249,562		5,543,739		$	56,013,679
Shares issued in reinvestment of distributions	1,147,359			11,505,176		4,715			47,383
Shares redeemed	(5,397,823	)		(54,168,528	)	(1,159,308	)		(11,575,084	)
Net increase (decrease)	9,845,556		$	99,586,210		4,389,146		$	44,485,978

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	Franklin Low Duration						Franklin Total
	Total Return Fund						Return Fund
	Shares				Amount		Shares			Amount
Advisor Class Shares:
Year ended October 31, 2016
Shares sold	18,882,422		$	186,687,617			48,174,526		$	480,064,749
Shares issued in reinvestment of distributions	280,629				2,760,337		1,297,441			12,575,671
Shares redeemed	(11,651,331	)		(115,091,760		)	(28,473,005	)		(280,452,940	)
Net increase (decrease)	7,511,720			$	74,356,194		20,998,962		$	212,187,480
Year ended October 31, 2015
Shares sold	7,865,807			$	78,985,437		26,269,640		$	265,286,213
Shares issued in reinvestment of distributions	252,897				2,536,877		3,401,485			34,224,878
Shares redeemed	(12,585,151	)		(126,559,300		)	(102,089,675	)		(1,017,296,513	)
Net increase (decrease)	(4,466,447	)	$	(45,036,986		)	(72,418,550	)	$	(717,785,422	)

3. Transactions with Affiliates


Subsidiary	Affiliation
Franklin Advisers, Inc. (Advisers)	Investment manager
Franklin Templeton Institutional, LLC (FT Institutional)	Investment manager
Franklin Templeton Services, LLC (FT Services)	Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)	Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)	Transfer agent

a. Management Fees

Franklin Adjustable U.S. Government Securities Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.500	%	Up to and including $5 billion
0.440	%	Over $5 billion, up to and including $10 billion
0.410	%	Over $10 billion, up to and including $15 billion
0.380	%	In excess of $15 billion

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3. Transactions with Affiliates (continued)

a. Management Fees (continued)

Franklin Floating Rate Daily Access Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.650	%	Up to and including $500 million
0.550	%	Over $500 million, up to and including $1 billion
0.500	%	Over $1 billion, up to and including $1.5 billion
0.450	%	Over $1.5 billion, up to and including $6.5 billion
0.425	%	Over $6.5 billion, up to and including $11.5 billion
0.400	%	Over $11.5 billion, up to and including $16.5 billion
0.390	%	Over $16.5 billion, up to and including $19 billion
0.380	%	Over $19 billion, up to and including $21.5 billion
0.370	%	In excess of $21.5 billion

Franklin Low Duration Total Return Fund and Franklin Total Return Fund pay an investment management fee to Advisers based on the average daily net assets of each of the Funds as follows:


Annualized Fee Rate		Net Assets
0.625	%	Up to and including $500 million
0.525	%	Over $500 million, up to and including $1 billion
0.480	%	Over $1 billion, up to and including $1.5 billion
0.435	%	Over $1.5 billion, up to and including $6.5 billion
0.415	%	Over $6.5 billion, up to and including $11.5 billion
0.400	%	Over $11.5 billion, up to and including $16.5 billion
0.390	%	Over $16.5 billion, up to and including $19 billion
0.380	%	Over $19 billion, up to and including $21.5 billion
0.370	%	In excess of $21.5 billion

Under a subadvisory agreement, FT Institutional, an affiliate of Advisers, provides subadvisory services to Franklin Total Return Fund. The subadvisory fee is paid by Advisers based on the Fund’s average daily net assets, and is not an additional expense of the Fund.

For the year ended October 31, 2016, each Fund’s effective investment management fee rate based on average daily net assets were as follows:


Franklin		Franklin		Franklin
Adjustable		Floating Rate		Low Duration		Franklin
U.S. Government		Daily Access		Total Return		Total Return
Securities Fund		Fund		Fund		Fund

0.500	%	0.508	%	0.499	%	0.469	%

b. Administrative Fees

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c. Distribution Fees

The Board has adopted distribution plans for each share class, with the exception of Class R6 and Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Under the Funds’ Class A and A1 reimbursement distribution plans, the Funds reimburse Distributors for costs incurred in connection with the servicing, sale and distribution of each Fund’s shares up to the maximum annual plan rate for each class. Under the Class A and A1 reimbursement distribution plans, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Funds’ Class C and R compensation distribution plans, the Funds pay Distributors for costs incurred in connection with the servicing, sale and distribution of each Fund’s shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31 for each Fund.

The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:


	Franklin		Franklin		Franklin
	Adjustable		Floating Rate		Low Duration		Franklin
	U.S. Government		Daily Access		Total Return		Total Return
	Securities Fund		Fund		Fund		Fund

Reimbursement Plans:
Class A	0.25	%	0.25	%	0.25	%	0.25	%
Class A1	0.10	%	—		—		—
Compensation Plans:
Class C	0.65	%	0.65	%	0.65	%	0.65	%
Class R	—		—		—		0.50	%

d. Sales Charges/Underwriting Agreements


		Franklin		Franklin		Franklin
		Adjustable		Floating Rate		Low Duration		Franklin
		U.S. Government		Daily Access		Total Return		Total Return
		Securities Fund		Fund		Fund		Fund

Sales charges retained net of commissions paid to
unaffiliated brokers/dealers	$	101,446	$	107,323	$	294,814	$	1,878,970
CDSC retained	$	31,367	$	51,596	$	92,140	$	83,278

e. Transfer Agent Fees

For the year ended October 31, 2016, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:


		Franklin		Franklin		Franklin
		Adjustable		Floating Rate		Low Duration		Franklin
		U.S. Government		Daily Access		Total Return		Total Return
		Securities Fund		Fund		Fund		Fund

Transfer agent fees	$	727,892	$	1,093,101	$	1,256,419	$	2,501,774

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3. Transactions with Affiliates (continued)

f. Investments in Affiliated Management Investment Companies


													% of
													Affiliated
	Number of					Number of							Fund Shares
	Shares Held					Shares		Value					Outstanding
	at Beginning	Gross		Gross		Held at End		at End		Investment		Realized	Held at End
	of Year	Additions		Reductions		of Year		of Year		Income		Gain (Loss)	of Year
Franklin Adjustable U.S. Government Securities Fund
Non-Controlled Affiliates
Institutional Fiduciary Trust
Money Market Portfolio	35,774,086	517,115,385		(526,076,708	)	26,812,763	$	26,812,763	$	–	$	–	0.2	%
Franklin Floating Rate Daily Access Fund
Non-Controlled Affiliates
Institutional Fiduciary Trust
Money Market Portfolio	152,604,455	1,018,125,473		(869,434,965	)	301,294,963	$	301,294,963	$	–	$	–	1.8	%
Franklin Low Duration Total Return Fund
Non-Controlled Affiliates
Franklin Lower Tier Floating
RateFund	–	1,893,663	^a	–		1,893,663	$	19,675,161	$	1,746,156	$	–	4.3	%
Franklin Middle Tier Floating
RateFund	–	2,389,308	^b	–		2,389,308		24,036,434		1,358,603		–	6.7	%
Institutional Fiduciary Trust
Money Market Portfolio	253,268,073	878,808,467		(1,042,323,077	)	89,753,463		89,753,463		–		–	0.5	%
Total							$	133,465,058	$	3,104,759	$	–
Franklin Total Return Fund
Controlled Affiliates
Franklin Liberty Investment
Grade Corporate ETF	–	400,000		–		400,000	$	9,888,000	$	–	$	–	57.1	%
Franklin Liberty Short Duration
U.S. Government ETF^c	500,000	–		–		500,000		48,780,000		878,940		–	28.6	%
Non-Controlled Affiliates
Franklin Lower Tier Floating
RateFund	–	997,589	^a	–		997,589		10,364,951		919,882		–	2.3	%
Franklin Middle Tier Floating
RateFund	–	1,889,310	^b	–		1,889,310		19,006,460		1,074,296		–	5.3	%
Institutional Fiduciary Trust
Money Market Portfolio	591,212,333	1,847,777,400		(2,334,790,068	)	104,199,665		104,199,665		–		–	0.6	%
Total							$	192,239,076	$	2,873,118	$	–

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^aThe Funds purchased shares of the affiliate through an in-kind transfer of securities. Market value and cost basis of the securities transferred on the date of the transfer were
as follows:


		Franklin
		Low Duration		Franklin
		Total Return		Total Return
		Fund		Fund

Market value	$	17,742,918	$	9,347,037
Cost basis	$	20,821,357	$	11,616,851

^bThe Funds purchased shares of the affiliate through an in-kind transfer of securities. Market value and cost basis of the securities transferred on the date of the transfer were
as follows:


		Franklin
		Low Duration		Franklin
		Total Return		Total Return
		Fund		Fund

Market value	$	22,984,002	$	18,174,265
Cost basis	$	24,872,750	$	21,006,435

^cEffective June 1, 2016, Franklin Short Duration U.S.Government ETF was renamed Franklin Liberty Short Duration U.S.Government ETF.

g. Waiver and Expense Reimbursements

Advisers and Investor Services have contractually agreed in advance to waive or limit their respective fees and to assume as their own expense certain expenses otherwise payable by Franklin Low Duration Total Return and Franklin Total Return Fund so that the expenses (excluding distribution fees, and acquired fund fees and expenses) for Class A, Class C, Class R and Advisor Class of the Funds do not exceed 0.55% and 0.63%, respectively, and Class R6 does not exceed 0.42% and 0.47%, respectively, based on the average net assets of each class (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until February 28, 2017. Total expenses waived or paid are not subject to recapture subsequent to the Funds’ fiscal year end.

Additionally, Investor Services has contractually agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.01% until February 28, 2017. For Franklin Low Duration Total Return Fund and Franklin Total Return Fund, there were no Class R6 transfer agent fees waived during the year ended October 31, 2016.

h. Other Affiliated Transactions

At October 31, 2016, one or more of the funds in Franklin Fund Allocator Series owned a percentage of the following Funds’ outstanding shares:


Franklin		Franklin
Floating Rate		Low Duration
Daily Access		Total Return
Fund		Fund

0.4	%	21.0	%

4. Expense Offset Arrangement

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5. Income Taxes


At October 31, 2016, the capital loss carryforwards were as follows:

		Franklin		Franklin		Franklin
		Adjustable		Floating		Low Duration		Franklin
		U.S. Government		Rate Daily		Total Return		Total Return
		Securities Fund		Access Fund		Fund		Fund
Capital loss carryforwards subject to expiration:
2017	$	4,398,245	$	113,325,538	$	—	$	—
2018		39,689,305		—		—		—
2019		21,934,756		10,282,409		5,327,487		—
Capital loss carryforwards not subject to
expiration:
Short term		19,905,561		21,809,899		23,452,757		21,117,357
Long term		72,074,646		104,483,893		44,282,224		34,070,782
Total capital loss carryforwards.	$	158,002,513	$	249,901,739	$	73,062,468	$	55,188,139

On October 31, 2016, the following Funds had expired capital loss carryforwards, which were reclassified to paid-in capital.


	Franklin		Franklin
	Adjustable		Floating		Franklin
	U.S. Government		Rate Daily		Total Return
	Securities Fund		Access Fund		Fund

$	1,492,445	$	91,562,953	$	1,260,827

The tax character of distributions paid during the years ended October 31, 2016 and 2015, was as follows:


		Franklin Adjustable U.S.				Franklin Floating Rate
		Government Securities Fund				Daily Access Fund
		2016		2015		2016		2015
Distributions paid from ordinary income	$	21,260,547	$	22,373,219	$	142,854,024	$	180,452,238

		Franklin Low Duration				Franklin Total
		Total Return Fund				Return Fund
		2016		2015		2016		2015
Distributions paid from ordinary income	$	52,808,202	$	50,173,271	$	132,901,273	$	156,543,941

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At October 31, 2016, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income tax purposes were as follows:


		Franklin			Franklin			Franklin
		Adjustable			Floating Rate			Low Duration			Franklin
		U.S. Government			Daily Access			Total Return			Total Return
		Securities Fund			Fund			Fund			Fund

Cost of investments	$	1,309,695,703		$	3,108,429,560		$	2,517,086,207		$	5,037,132,850

Unrealized appreciation	$	12,045,543		$	27,787,236		$	27,903,759		$	122,722,343
Unrealized depreciation		(3,531,173	)		(83,367,954	)		(30,462,593	)		(107,092,718	)
Net unrealized appreciation (depreciation)	$	8,514,370		$	(55,580,718	)	$	(2,558,834	)	$	15,629,625
Distributable earnings - undistributed ordinary
income	$	152,380		$	4,175,222		$	10,846,509		$	23,461,625

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of foreign currency transactions, paydown losses, bond discounts and premiums, swaps and wash sales.


6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the year ended October 31, 2016, were as follows:

		Franklin		Franklin						Franklin
		Adjustable		Floating Rate				Low Duration								Franklin
		U.S. Government		Daily Access						Total Return					Total Return
		Securities Fund				Fund				Fund						Fund
Purchases	$	167,013,172	$	973,210,589			$	1,408,666,376			$	13,909,873,568
Sales	$	496,674,286	$	1,697,404,535			$	1,087,525,686			$	13,652,417,019

Transactions in options and swaptions written during the year ended October 31, 2016, were as follows:

				Options								Swaptions
				Notional						Notional
				Amount*		Premiums				Amount*					Premiums
Franklin Low Duration Total Return Fund
Options outstanding at October 31, 2015				2,500,000		$		15,425		55,400,000				$	327,600
Options written				7,500,000				52,404				—				—
Options expired				(2,500,000	)			(22,839	)	(46,200,000			)			(229,689	)
Options exercised				(5,000,000	)			(29,565	)			—				—
Options closed				(2,500,000	)			(15,425	)	(9,200,000			)			(97,911	)
Options outstanding at October 31, 2016				—		$		—				—			$	—

Franklin Total Return Fund
Options outstanding at October 31, 2015				3,800,000		$		23,446		120,000,000				$	711,000
Options written				16,530,000				115,498				—				—
Options expired				(5,510,000	)			(50,337	)	(100,000,000			)			(498,150	)
Options exercised				—				—				—				—
Options closed				(14,820,000	)			(88,607	)	(20,000,000			)			(212,850	)
Options outstanding at October 31, 2016				—		$		—				—			$	—

*The notional amount is stated in U.S. dollars unless otherwise indicated.

See Notes 1(d) and 10 regarding derivative financial instruments and other derivative information, respectively.

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7. Credit Risk and Defaulted Securities

At October 31, 2016, Franklin Floating Rate Daily Access Fund, Franklin Low Duration Total Return Fund and Franklin Total Return Fund had 81.2%, 15.6% and 13.9%, respectively, of their portfolio invested in high yield securities, senior secured floating rate notes, or other securities rated below investment grade and unrated securities, if any. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

Certain or all Funds held a defaulted securities and/or other securities for which the income has been deemed uncollectible. At October 31, 2016, the aggregate value of these securities for Franklin Floating Rate Daily Access Fund, Franklin Low Duration Total Return Fund, and Franklin Total Return Fund was $6,777,795, $1,935,244 and $4,396,522, representing 0.2%, 0.1%, and 0.1%, respectively, of each Fund’s net assets. The Funds discontinue accruing income on securities for which income has been deemed uncollectible and provide an estimate for losses on interest receivable. The securities have been identified in the accompanying Statements of Investments.

8. Restricted Securities

Certain or all Funds invest in securities that are restricted under the Securities Act of 1933 (1933 Act) or which are subject to legal, contractual, or other agreed upon restrictions on resale. Restricted securities are often purchased in private placement transactions, and cannot be sold without prior registration unless the sale is pursuant to an exemption under the 1933 Act. Disposal of these securities may require greater effort and expense, and prompt sale at an acceptable price may be difficult. The Funds may have registration rights for restricted securities. The issuer generally incurs all registration costs.

At October 31, 2016, certain or all Funds held investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, as follows:


		Acquisition
Shares	Issuer	Date		Cost		Value
Franklin Floating Rate Daily Access Fund
6,893	Warrior Met Coal LLC, A (Value is 0.0%^†of Net Assets)	7/31/14 - 9/23/14	$	13,170,468	$	1,550,925
Franklin Low Duration Total Return Fund
98,168	^aHalcon Resources Corp. (Value is 0.0%^†of Net Assets)	3/17/15 - 7/07/15	$	1,880,354	$	786,358
Franklin Total Return Fund
229,059	^bHalcon Resources Corp. (Value is 0.0%^†of Net Assets)	3/17/15 - 7/07/15	$	4,383,140	$	1,834,837

^†Rounds to less than 0.1% of net assets.

^aThe Fund also invests in unrestricted securities or other investments in the issuer, valued at $22,145 as of October 31, 2016.
^bThe Fund also invests in unrestricted securities or other investments in the issuer, valued at $51,675 as of October 31, 2016.

9. Unfunded Loan Commitments

Certain or all Funds enter into certain credit agreements, all or a portion of which may be unfunded. The Funds are obligated to fund these loan commitments at the borrowers’ discretion. Unfunded loan commitments and funded portions of credit agreements are marked to market daily and any unrealized appreciation or depreciation is included in the Statements of Assets and Liabilities and the Statements of Operations. Funded portions of credit agreements are presented in the Statements of Investments.

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At October 31, 2016, unfunded commitments were as follows:

		Unfunded
Borrower		Commitment
Franklin Floating Rate Daily Access Fund
BMC Software Finance, Inc., Initial U.S. Revolving Commitment	$	20,723,252
Franklin Low Duration Total Return Fund
BMC Software Finance, Inc., Initial US Revolving Commitment	$	3,492,917
Franklin Total Return Fund
BMC Software Finance, Inc., Initial US Revolving Commitment	$	7,629,911
Global Tel*Link Corp., Revolving Commitment		211,174
	$	7,841,085

10. Other Derivative Information

At October 31, 2016, the Funds’ investments in derivative contracts are reflected in the Statements of Assets and Liabilities as follows:


	Asset Derivatives				Liability Derivatives
Derivative Contracts	Statements of				Statements of
Not Accounted for as	Assets and Liabilities				Assets and Liabilities
Hedging Instruments	Location		Fair Value		Location		Fair Value
Franklin Low Duration Total
Return Fund
Interest rate contracts	Variation margin	$	1,435,193	^a	Variation margin	$	120,992	^a

	Unrealized appreciation on OTC		529,316		Unrealized depreciation on OTC		—
	swap contracts				swap contracts

Foreign exchange contracts.	Unrealized appreciation on OTC		2,529,129		Unrealized depreciation on OTC		970,445
	forward exchange				forward exchange
	contracts				contracts

Credit contracts	Investments in securities, at value		35,792	^b	Options written, at value		—

	Variation margin		246,036	^a	Variation margin		—

	OTC swap contracts (Upfront		3,982,848		OTC swap contracts (Upfront		6,404,019
	payments)				receipts)

	Unrealized appreciation on OTC		1,170,688		Unrealized depreciation on OTC		5,538,363
	swap contracts				swap contracts
Totals		$	9,929,002			$	13,033,819

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10. Other Derivative Information (continued)

	Asset Derivatives				Liability Derivatives
Derivative Contracts	Statements of				Statements of
Not Accounted for as	Assets and Liabilities				Assets and Liabilities
Hedging Instruments	Location		Fair Value		Location		Fair Value
Franklin Total Return Fund
Interest rate contracts	Variation margin	$	651,726	^a	Variation margin	$	4,509,179	^a
	Unrealized appreciation on OTC		729,611		Unrealized depreciation on OTC		—
	swap contracts				swap contracts
Foreign exchange contracts.	Unrealized appreciation on OTC		9,172,100		Unrealized depreciation on OTC		1,856,840
	forward exchange				forward exchange
	contracts				contracts
Credit contracts	Investments in securities, at value		102,850	^b	Options written, at value		—
	Variation margin		380,464	^a	Variation margin		488,867	^a
	OTC swap contracts (Upfront		11,533,411		OTC swap contracts (Upfront		10,930,228
	payments)				receipts)
	Unrealized appreciation on OTC		2,077,320		Unrealized depreciation on OTC		14,544,122
	swap contracts				swap contracts
Inflation contracts.	Unrealized appreciation on OTC		1,614,905		Unrealized depreciation on OTC		—
	swap contracts				swap contracts
Value recovery instruments	Investments in securities, at value		152,291		Investments in securities, at value		—
Totals		$	26,414,678			$	32,329,236

^aThis amount reflects the cumulative appreciation (depreciation) of futures contracts and/or centrally cleared swap contracts as reported in the Statement of Investments.
Only the variation margin receivable/payable at year end is separately reported within the Statements of Assets and Liabilities. Prior variation margin movements were
recorded to cash upon receipt or payment.
^bPurchased option contracts are included in investments in securities, at value in the Statements of Assets and Liabilities.

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For the year ended October 31, 2016, the effect of derivative contracts in the Funds’ Statements of Operations was as follows:


							Net Change
							in Unrealized
Derivative Contracts			Net Realized				Appreciation
Not Accounted for as	Statements of		Gain (Loss) for		Statements		(Depreciation)
Hedging Instruments	Operations Locations		the Year		of Operations Locations		for the Year
	Net realized gain (loss) from:				Net change in unrealized
					appreciation (depreciation) on:
Franklin Floating Rate Daily
Access Fund
Credit contracts	Swap contracts	$	217,311		Swap contracts	$	47,565
Franklin Low Duration
Total Return Fund
Interest rate contracts.	Futures contracts	$	(2,018,476	)	Futures contracts	$	1,255,315
	Swap contracts		(1,729,370	)	Swap contracts		(298,189	)
Foreign exchange contracts	Investments		(55,795	)^a	Investments		29,215	^a
	Written options		(16,726	)	Written options		(15,295	)
	Foreign currency transactions		(2,529,777	)^b	Translation of other assets		(2,514,662	)^b
					and liabilities denominated
					in foreign currencies
Credit contracts	Investments		(562,290	)^a	Investments		341,632	^a
	Written options		323,957		Written options		(292,978	)
	Swap contracts		(3,849,360	)	Swap contracts		(3,811,521	)
Totals		$	(10,437,837	)		$	(5,306,483	)
Franklin Total Return Fund
Interest rate contracts.	Investments	$	(650,018	)^a	Investments	$	26,544	^a
	Futures contracts		7,162,540		Futures contracts		(3,721,434	)
	Swap contracts		298,949		Swap contracts		(4,200,848	)
Foreign exchange contracts	Investments		(213,464	)^a	Investments		44,407	^a
	Written options		(47,244	)	Written options		(23,249	)
	Foreign currency transactions		(23,123,401	)^b	Translation of other assets		324,184	^b
					and liabilities denominated
					in foreign currencies
Credit contracts	Investments		(1,258,500	)^a	Investments		636,681	^a
	Written options		703,080		Written options		(635,897	)
	Swap contracts		(10,490,026	)	Swap contracts		(7,999,622	)
Inflation contracts.	Swap contracts		—		Swap contracts		1,614,905
Value recovery instruments	Investments		—		Investments		(34,939	)
Totals		$	(27,618,084	)		$	(13,969,268	)

^aPurchased option contracts are included in net realized gain (loss) from investments and net change in unrealized appreciation (depreciation) on investments in the
Statements of Operations.
^bForward exchange contracts are included in net realized gain (loss) from foreign currency transactions and net change in unrealized appreciation (depreciation) on
translation of other assets and liabilities denominated in foreign currencies in the Statements of Operations.

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10. Other Derivative Information (continued)


			Franklin
	Franklin		Low Duration		Franklin
	Floating Rate		Total Return		Total Return
	Daily Access Fund		Fund		Fund

Average month end fair value of derivatives	0.0	%^a	0.6	%	1.0	%
Average month end number of open derivative contracts	—^b		155		166

^aRounds to less than 0.1%.
^bRounds to less than 1 contract.

At October 31, 2016, the Funds’ OTC derivative assets and liabilities are as follows:


		Gross Amounts of
		Assets and Liabilities Presented
		in the Statements of Assets and Liabilities
		Assets^a		Liabilities^a
Derivatives
Franklin Low Duration
Total Return Fund
Forward exchange contracts	$	2,529,129	$	970,445
Options purchased		35,792		—
Swap contracts		5,682,852		11,942,382
Total	$	8,247,773	$	12,912,827

Franklin Total
Return Fund
Forward exchange contracts	$	9,172,100	$	1,856,840
Options purchased		102,850		—
Swap contracts		15,955,247		25,474,350
Total	$	25,230,197	$	27,331,190

^aAbsent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statements of Assets and Liabilities.

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At October 31, 2016, the Funds’ OTC derivative assets, which may be offset against the Funds’ OTC derivative liabilities and collateral received from the counterparty, are as follows:


				Amounts Not Offset in the
				Statements of Assets and Liabilities
		Gross
		Amounts of		Financial					Financial
		Assets Presented in		Instruments			Instruments						Cash			Net Amount
		the Statements of		Available for					Collateral			Collateral				(Not less
		Assets and Liabilities		Offset					Received			Received^a				than zero)
Franklin Low Duration Total Return Fund
Counterparty
BOFA	$	—	$	—				$	—			$	—		$	—
BZWS		456,203		(456,203	)				—				—			—
CITI		1,180,897		(1,180,897	)				—				—			—
DBAB.		2,140,166		(1,411,595	)				—				(728,571	)		—
FBCO		17,034		(17,034	)				—				—			—
GSCO		2,767,457		(2,767,457	)				—				—			—
HSBK		12		(12	)				—				—			—
JPHQ.		1,616,808		(1,616,808	)				—				—			—
MSCO		69,196		(69,196	)				—				—			—
Total	$	8,247,773	$	(7,519,202	)			$	—		$	(728,571		)	$	—

				Amounts Not Offset in the
				Statements of Assets and Liabilities
		Gross
		Amounts of		Financial					Financial
		Assets Presented in		Instruments			Instruments						Cash			Net Amount
		the Statements of		Available for					Collateral			Collateral				(Not less
		Assets and Liabilities		Offset			Received^a,b					Received^a				than zero)
Franklin Total Return Fund
Counterparty
BOFA	$	152,451	$	(133,707	)		$		—			$	—		$	18,744
BZWS		1,102,419		(1,102,419	)				—				—			—
CITI		1,723,143		(1,723,143	)				—				—			—
DBAB		8,388,928		(4,173,749	)				—			(4,215,179		)		—
FBCO.		624,231		(624,231	)				—				—			—
GSCO		5,836,725		(5,836,725	)				—				—			—
HSBK.		537		(537	)				—				—			—
JPHQ		7,084,483		(5,319,773	)				(1,764,710	)			—			—
MSCO		205,922		(205,922	)				—				—			—
UBSW		111,358		(111,358	)				—				—			—
Total	$	25,230,197	$	(19,231,564	)	$	(1,764,710			)	$	(4,215,179		)	$	18,744

^aIn some instances, the collateral amounts disclosed in the table above were adjusted due to the requirement to limit collateral amounts to avoid the effect of overcollateral-
ization. Actual collateral received and/or pledged may be more than the amounts disclosed herein.
^bAt October 31, 2016, the Fund received U.S. Government and Agency securities as collateral for derivatives.

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10. Other Derivative Information (continued)

At October 31, 2016, the Funds’ OTC derivative liabilities, which may be offset against the Funds’ OTC derivative assets and collateral pledged to the counterparty, are as follows:


				Amounts Not Offset in the
				Statements of Assets and Liabilities
		Gross
		Amounts of		Financial			Financial
		Liabilities Presented in		Instruments			Instruments		Cash				Net Amount
		the Statements of		Available for			Collateral		Collateral				(Not less
		Assets and Liabilities		Offset			Pledged		Pledged^a				than zero)
Franklin Low Duration Total Return Fund
Counterparty
BOFA	$	71,765	$	—		$	—	$	(71,765	)	$		—
BZWS		901,808		(456,203	)		—		(445,605	)			—
CITI		1,589,373		(1,180,897	)		—		(320,000	)			88,476
DBAB.		1,411,595		(1,411,595	)		—		—				—
FBCO		17,034		(17,034	)		—		—				—
GSCO		5,911,175		(2,767,457	)		—		(3,143,718	)			—
HSBK.		225		(12	)		—		—				213
JPHQ.		2,698,496		(1,616,808	)		—		(850,000	)			231,688
MSCO		311,356		(69,196	)		—		(170,000	)			72,160
Total	$	12,912,827	$	(7,519,202	)	$	—	$	(5,001,088	)	$		392,537

				Amounts Not Offset in the
				Statements of Assets and Liabilities
		Gross
		Amounts of		Financial			Financial
		Liabilities Presented in		Instruments			Instruments		Cash				Net Amount
		the Statements of		Available for			Collateral		Collateral				(Not less
		Assets and Liabilities		Offset			Pledged		Pledged^a				than zero)
Franklin Total Return Fund
Counterparty
BOFA		133,707		(133,707	)		—		—				—
BZWS		2,107,662		(1,102,419	)		—		(1,005,243	)			—
CITI		3,186,041		(1,723,143	)		—		(1,370,000	)			92,898
DBAB.		4,173,749		(4,173,749	)		—		—				—
FBCO		841,562		(624,231	)		—		(217,331	)			—
GSCO		10,474,078		(5,836,725	)		—		(4,637,353	)			—
HSBK.		3,699		(537	)		—		—				3,162
JPHQ.		5,319,773		(5,319,773	)		—		—				—
MSCO		552,761		(205,922	)		—		(346,839	)			—
UBSW		538,158		(111,358	)		—		(426,800	)			—
Total	$	27,331,190	$	(19,231,564	)	$	—	$	(8,003,566	)		$	96,060

^aIn some instances, the collateral amounts disclosed in the table above were adjusted due to the requirement to limit collateral amounts to avoid the effect of overcollateral-
ization. Actual collateral received and/or pledged may be more than the amounts disclosed herein.

See Note 1(d) and 6 regarding derivative financial instruments and investment transactions, respectively.

See Abbreviations on page 140.

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11. Credit Facility

Certain or all Funds, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 10, 2017. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

12. Fair Value Measurements

Level 1 – quoted prices in active markets for identical financial instruments
Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
Level 3 – significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of financial instruments)

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

For movements between the levels within the fair value hierarchy, the Funds have adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of October 31, 2016, in valuing the Funds’ assets and liabilities carried at fair value, is as follows:


		Level 1		Level 2		Level 3		Total
Franklin Adjustable U.S. Government Securities
Fund
Assets:
Investments in Securities:
Mortgage-Backed Securities	$	—	$	1,291,397,310	$	—	$	1,291,397,310
Short Term Investments		26,812,763		—		—		26,812,763
Total Investments in Securities	$	26,812,763	$	1,291,397,310	$	—	$	1,318,210,073

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12. Fair Value Measurements (continued)


		Level 1		Level 2		Level 3		Total
Franklin Floating Rate Daily Access Fund
Assets:
Investments in Securities:
Equity Investments:^a
Coal & Consumable Fuels	$	—	$	—	$	1,550,925	$	1,550,925
Corporate Bonds		—		—		55,695		55,695
Senior Floating Rate Interests		—		2,603,915,572		—		2,603,915,572
Asset-Backed Securities.		—		146,031,687		—		146,031,687
Short Term Investments		301,294,963		—		—		301,294,963
Total Investments in Securities	$	301,294,963	$	2,749,947,259	$	1,606,620	$	3,052,848,842

Other Financial Instruments:
Unfunded Loan Commitments.	$	—	$	11,867	$	—	$	11,867

Franklin Low Duration Total Return Fund
Assets:
Investments in Securities:
Equity Investments:^a
Energy.	$	22,145	$	—	$	786,358	$	808,503
All Other Equity Investments^b		43,720,111		—		—		43,720,111
Corporate Bonds		—		1,018,926,197		—		1,018,926,197
Senior Floating Rate Interests		—		73,576,382		—		73,576,382
Foreign Government and Agency Securities		—		52,751,079		—		52,751,079
U.S. Government and Agency Securities		—		488,845,306		—		488,845,306
Asset-Backed Securities and Commercial
Mortgage-Backed Securities.		—		690,039,951		—		690,039,951
Mortgage-Backed Securities		—		43,381,835		—		43,381,835
Municipal Bonds		—		9,773,714		—		9,773,714
Escrows and Litigation Trusts		—		—		—^c		—
Options Purchased		—		35,792		—		35,792
Short Term Investments		89,753,463		2,915,040		—		92,668,503
Total Investments in Securities	$	133,495,719	$	2,380,245,296	$	786,358	$	2,514,527,373

Other Financial Instruments:
Futures Contracts	$	1,088,083	$	—	$	—	$	1,088,083
Forward Exchange Contracts		—		2,529,129		—		2,529,129
Swap Contracts.		—		2,293,150		—		2,293,150
Total Other Financial Instruments	$	1,088,083	$	4,822,279	$	—	$	5,910,362

Liabilities:
Other Financial Instruments:
Futures Contracts	$	120,992	$	—	$	—	$	120,992
Forward Exchange Contracts		—		970,445		—		970,445
Swap Contracts.		—		5,538,363		—		5,538,363
Unfunded Loan Commitments.		—		54,736		—		54,736
Total Other Financial Instruments	$	120,992	$	6,563,544	$	—	$	6,684,536

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				NOTES TO FINANCIAL STATEMENTS




		Level 1		Level 2		Level 3		Total
Franklin Total Return Fund
Assets:
Investments in Securities:
Equity Investments:^a
Consumer Services	$	—	$	5,378,919	$	—	$	5,378,919
Energy.		51,675		—		1,834,837		1,886,512
All Other Equity Investments^b		106,891,438		—		—		106,891,438
Corporate Bonds		—		1,861,142,700		1,078		1,861,143,778
Senior Floating Rate Interests		—		75,229,792		—		75,229,792
Foreign Government and Agency Securities		—		205,692,589		—		205,692,589
U.S. Government and Agency Securities		—		889,025,124		—		889,025,124
Asset-Backed Securities and Commercial
Mortgage-Backed Securities.		—		680,102,143		15,780		680,117,923
Mortgage-Backed Securities		—		1,036,923,309		—		1,036,923,309
Municipal Bonds		—		86,170,576		—		86,170,576
Escrows and Litigation Trusts		—		—		—^c		—
Options Purchased		—		102,850		—		102,850
Short Term Investments		104,199,665		—		—		104,199,665
Total Investments in Securities	$	211,142,778	$	4,839,768,002	$	1,851,695	$	5,052,762,475

Other Financial Instruments:
Futures Contracts	$	651,726	$	—	$	—	$	651,726
Forward Exchange Contracts		—		9,172,100		—		9,172,100
Swap Contracts.		—		4,802,300		—		4,802,300
Total Other Financial Instruments	$	651,726	$	13,974,400	$	—	$	14,626,126

Liabilities:
Other Financial Instruments:
Futures Contracts	$	4,509,179	$	—	$	—	$	4,509,179
Forward Exchange Contracts		—		1,856,840		—		1,856,840
Swap Contracts.		—		15,032,989		—		15,032,989
Unfunded Loan Commitments.		—		120,803		—		120,803
Total Other Financial Instruments	$	4,509,179	$	17,010,632	$	—	$	21,519,811

^aIncludes common and preferred stocks, and management investment companies as well as other equity investments.
^bFor detailed categories, see the accompanying Statement of Investments.
^cIncludes securities determined to have no value at October 31, 2016.

A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the end of the year.

13. Subsequent Events

The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.

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NOTES TO FINANCIAL STATEMENTS




Abbreviations

Counterparty/Exchange			Currency		Selected Portfolio
BOFA	Bank of America, N.A.		BRL	Brazilian Real	AGMC	Assured Guaranty Municipal Corp.
BZWS	Barclays Bank PLC		CHF	Swiss Franc	ARM	Adjustable Rate Mortgage
CITI	Citigroup, Inc.		EUR	Euro	BBA	British Bankers Association
DBAB	Deutsche Bank AG		HUF	Hungarian Forint	CDO	Collateralized Debt Obligation
FBCO	Credit Suisse Group AG		JPY	Japanese Yen	CLO	Collateralized Loan Obligation
GSCO	The Goldman Sachs Group, Inc.		KRW	South Korean Won	DIP	Debtor-In-Possession
HSBK	HSBC Bank PLC		MXN	Mexican Peso	EDA	Economic Development Authority
ICE	Intercontinental Exchange		MYR	Malaysian Ringgit	ETF	Exchange Traded Fund
JPHQ	JP Morgan Chase & Co.		USD	United States Dollar	FRN	Floating Rate Note
LCH	LCH.Clearnet LLC				GDP	Gross Domestic Product
MSCO	Morgan Stanley				GO	General Obligation
UBSW	UBS AG				LIBOR	London InterBank Offered Rate
					MFM	Multi-Family Mortgage
					PIK	Payment-In-Kind
					REIT	Real Estate Investment Trust
					SF	Single Family
					VRI	Value Recovery Instruments



Index
CDX.NA.HY.Series number		CDX North America High Yield Index
CDX.NA.IG.Series number		CDX North America Investment Grade Index
ITRX.EUR.Series number		iTraxx Europe Index
ITRX.EUR.SNRFIN.Series number		iTraxx Europe Senior Financials Index
MCDX.NA.Series number		MCDX North America Index

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Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of Franklin Investors Securities Trust

In our opinion, the accompanying statements of assets and liabilities, including the statements of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Franklin Adjustable U.S. Government Securities Fund, Franklin Floating Rate Daily Access Fund, Franklin Low Duration Total Return Fund, and Franklin Total Return Fund (hereafter referred to as the "Funds") as of October 31, 2016, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (consolidated financial statements and consolidated financial highlights for Franklin Total Return Fund) (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of October 31, 2016 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California
December 16, 2016

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Tax Information (unaudited)

Under Section 871(k)(1)(C) of the Internal Revenue Code (Code), the Funds hereby report the maximum amount allowable but no less than the following amounts as interest related dividends for purposes of the tax imposed under Section 871(a)(1)(A) of the Code for the fiscal year ended October 31, 2016:


	Franklin
	Adjustable		Franklin		Franklin
	U.S. Government		Floating Rate		Low Duration		Franklin Total
	Securities Fund		Daily Access Fund		Total Return Fund		Return Fund

$	21,142,072	$	123,734,906	$	40,337,054	$	81,111,368

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Board Members and Officers

The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Fund, principal occupations during at least the past five years and number of U.S. registered portfolios overseen in the Franklin Templeton Investments fund complex are shown below. Generally, each board member serves a three-year term that continues until that person’s successor is elected and qualified.


Independent Board Members

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Harris J. Ashton (1932)	Trustee	Since 1986	142	Bar-S Foods (meat packing company)
One Franklin Parkway				(1981-2010).
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Director of various companies; and formerly, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief Executive
Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).

Mary C. Choksi (1950)	Trustee	Since 2014	136	Avis Budget Group Inc. (car rental)
One Franklin Parkway				(2007-present), Omnicom Group Inc.
San Mateo, CA 94403-1906				(advertising and marketing
				communications services)
				(2011-present) and H.J. Heinz
				Company (processed foods and allied
				products) (1998-2006).
Principal Occupation During at Least the Past 5 Years:
Senior Advisor, Strategic Investment Group (investment management group) (2015-present); director of various companies; and formerly,
Founding Partner and Senior Managing Director, Strategic Investment Group (1987–2015); Founding Partner and Managing Director, Emerging
Markets Management LLC (investment management firm) (1987-2011); and Loan Officer/Senior Loan Officer/Senior Pension Investment
Officer, World Bank Group (international financial institution) (1977-1987).

Edith E. Holiday (1952)	Trustee	Since 1998	142	Hess Corporation (exploration and
One Franklin Parkway				refining of oil and gas) (1993-present),
San Mateo, CA 94403-1906				Canadian National Railway (railroad)
				(2001-present), Santander Consumer
				USA Holdings, Inc. (consumer finance)
				(November 2015), White Mountains
				Insurance Group, Ltd. (holding
				company) (2004-present), RTI
				International Metals, Inc. (manufacture
				and distribution of titanium)
				(1999-2015) and H.J. Heinz Company
				(processed foods and allied products)
				(1994-2013).
Principal Occupation During at Least the Past 5 Years:
Director or Trustee of various companies and trusts; and formerly, Assistant to the President of the United States and Secretary of the
Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and Assistant
Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).

J. Michael Luttig (1954)	Trustee	Since 2009	142	Boeing Capital Corporation (aircraft
One Franklin Parkway				financing) (2006-2013).
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Executive Vice President, General Counsel and member of the Executive Council, The Boeing Company (aerospace company) (2006-present);
and formerly, Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006).

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Independent Board Members (continued)



			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Larry D. Thompson (1945)	Trustee	Since 2007	142	The Southern Company (energy
One Franklin Parkway				company) (2014-present; previously
San Mateo, CA 94403-1906				2010-2012), Graham Holdings
				Company (education and media
				organization) (2011-present) and
				Cbeyond, Inc. (business
				communications provider)
				(2010-2012).
Principal Occupation During at Least the Past 5 Years:
Director of various companies; John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (2015-present;
previously 2011-2012); and formerly, Executive Vice President - Government Affairs, General Counsel and Corporate Secretary, PepsiCo, Inc.
(consumer products) (2012-2014); Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (2004-2011);
Senior Fellow of The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney
General, U.S. Department of Justice (2001-2003).

John B. Wilson (1959)	Lead	Trustee	116	None
One Franklin Parkway	Independent	since 2007
San Mateo, CA 94403-1906	Trustee	and Lead
		Independent
		Trustee
		since 2008
Principal Occupation During at Least the Past 5 Years:
President, Staples Europe (office supplies) (2012-present); President and Founder, Hyannis Port Capital, Inc. (real estate and private equity
investing); serves on private and non-profit boards; and formerly, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail)
(1996-2000); Chief Financial Officer and Executive Vice President – Finance and Strategy, Staples, Inc. (1992-1996); Senior Vice President –
Corporate Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (consulting firm)
(1986-1990).


Interested Board Members and Officers

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

**Gregory E. Johnson (1961)	Trustee	Since 2013	158	None
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Chairman of the Board, Member - Office of the Chairman, Director and Chief Executive Officer, Franklin Resources, Inc.; officer and/or director
or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin
Templeton Investments; Vice Chairman, Investment Company Institute; and formerly, President, Franklin Resources, Inc. (1994-2015).

**Rupert H. Johnson, Jr. (1940)	Chairman of	Chairman of the	142	None
One Franklin Parkway	the Board,	Board since 2013,
San Mateo, CA 94403-1906	Trustee and	Trustee since 1987
	Vice President	and Vice President
		since 1986
Principal Occupation During at Least the Past 5 Years:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc.; Senior Vice
President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of
Franklin Resources, Inc. and of 42 of the investment companies in Franklin Templeton Investments.

Alison E. Baur (1964)	Vice President	Since 2012	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Deputy General Counsel, Franklin Templeton Investments; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 45
of the investment companies in Franklin Templeton Investments.

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Interested Board Members and Officers (continued)



			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Mark Boyadjian (1964)	Vice President	Since 2003	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Advisers, Inc.; and officer of two of the investment companies in Franklin Templeton Investments.

Laura F. Fergerson (1962)	Chief Executive Since 2009		Not Applicable	Not Applicable
One Franklin Parkway	Officer –
San Mateo, CA 94403-1906	Finance and
	Administration
Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; Vice President, Franklin Advisers, Inc. and Franklin Templeton Institutional, LLC; and
officer of 45 of the investment companies in Franklin Templeton Investments.

Gaston Gardey (1967)	Treasurer,	Since 2009	Not Applicable	Not Applicable
One Franklin Parkway	Chief Financial
San Mateo, CA 94403-1906	Officer and
	Chief
	Accounting
	Officer
Principal Occupation During at Least the Past 5 Years:
Treasurer, U.S. Fund Administration & Reporting, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin
Templeton Investments.

Aliya S. Gordon (1973)	Vice President	Since 2009	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton
Investments.

Steven J. Gray (1955)	Vice President	Since 2009	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc. and Franklin
Alternative Strategies Advisers, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments.

Richard Hsu (1973)	Vice President	Since 2010	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Vice President, Franklin Advisers, Inc.; and officer of three of the investment companies in Franklin Templeton Investments.

Edward B. Jamieson (1948)	President and	President since	Not Applicable	Not Applicable
One Franklin Parkway	Chief Executive 1993 and Chief
San Mateo, CA 94403-1906	Officer –	Executive Officer
	Investment	– Investment
	Management	Management since
		2002
Principal Occupation During at Least the Past 5 Years:
President, Chief Investment Officer and Director, Franklin Advisers, Inc.; Executive Vice President, Franklin Templeton Institutional, LLC; and
officer and/or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 10 of the investment
companies in Franklin Templeton Investments.

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Interested Board Members and Officers (continued)



			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Madeline Lam (1969)	Vice President	Since 2010	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Vice President, Franklin Advisers, Inc.; and officer of two of the investment companies in Franklin Templeton Investments.

Robert Lim (1948)	Vice	Since May	Not Applicable	Not Applicable
One Franklin Parkway	President	2016
San Mateo, CA 94403-1906	– AML
	Compliance
Principal Occupation During at Least the Past 5 Years:
Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton
Investor Services, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments.

Kimberly H. Novotny (1972)	Vice President	Since 2013	Not Applicable	Not Applicable
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923
Principal Occupation During at Least the Past 5 Years:
Associate General Counsel, Franklin Templeton Investments; Vice President and Corporate Secretary, Fiduciary Trust International of the
South; Vice President, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 45 of the investment
companies in Franklin Templeton Investments.

Robert C. Rosselot (1960)	Chief	Since 2013	Not Applicable	Not Applicable
300 S.E. 2nd Street	Compliance
Fort Lauderdale, FL 33301-1923	Officer
Principal Occupation During at Least the Past 5 Years:
Director, Global Compliance, Franklin Templeton Investments; Vice President, Franklin Templeton Companies, LLC; officer of 45 of the
investment companies in Franklin Templeton Investments; and formerly, Senior Associate General Counsel, Franklin Templeton Investments
(2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013).

Karen L. Skidmore (1952)	Vice President	Since 2006	Not Applicable	Not Applicable
One Franklin Parkway	and Secretary
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton
Investments.

Navid J. Tofigh (1972)	Vice President	Since 2015	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments.

Craig S. Tyle (1960)	Vice President	Since 2005	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources,
Inc. and of 45 of the investment companies in Franklin Templeton Investments.

Lori A. Weber (1964)	Vice President	Since 2011	Not Applicable	Not Applicable
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and
Secretary, Templeton Investment Counsel, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments.

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Interested Board Members and Officers (continued)

*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton Investments fund complex. These
portfolios have a common investment manager or affiliated investment managers.
**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director ofFranklin
Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Rupert H. Johnson, Jr. is considered to be an interested person
of the Fund under the federal securities laws due to his position as officer and director and major shareholder of Resources.
Note 1: Rupert H. Johnson, Jr. is the uncle of Gregory E. Johnson.
Note 2: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.
Note 3: Effective November 1, 2016, Frank Olson ceased to be a trustee of the Trust.

The Sarbanes-Oxley Act of 2002 and Rules adopted by the Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit
Committee includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined
that there is at least one such financial expert on the Audit Committee and has designated John B. Wilson as its audit committee financial expert. The Board
believes that Mr. Wilson qualifies as such an expert in view of his extensive business background and experience, including service as chief financial officer of
Staples, Inc. from 1992 to 1996. Mr. Wilson has been a Member and Chairman of the Fund’s Audit Committee since 2006. As a result of such background and
experience, the Board believes that Mr. Wilson has acquired an understanding of generally accepted accounting principles and financial statements, the general
application of such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that
present a breadth and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and
procedures for financial reporting and an understanding of audit committee functions. Mr. Wilson is an independent Board member as that term is defined under
the relevant Securities and Exchange Commission Rules and Releases.

The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request.
Shareholders may call (800) DIAL BEN/342-5236 to request the SAI.

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Shareholder Information

Proxy Voting Policies and Procedures

The Trust’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Trust uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Trust’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Trust’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.

Quarterly Statement of Investments

The Trust files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.

Householding of Reports and Prospectuses

You will receive each Fund’s financial reports every six months as well as an annual updated summary prospectus (prospectus available upon request). To reduce Fund expenses, we try to identify related shareholders in a household and send only one copy of the financial reports and summary prospectus. This process, called “householding,” will continue indefinitely unless you instruct us otherwise. If you prefer not to have these documents householded, please call us at (800) 632-2301. At any time you may view current prospectuses/summary prospectuses and financial reports on our website. If you choose, you may receive these documents through electronic delivery.

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Item 2. Code of Ethics.

(a) The Registrant has adopted a code of ethics that applies to its principal executive officers and principal financial and accounting officer.

(d) N/A

(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers and principal financial and accounting officer.

Item 3. Audit Committee Financial Expert.

(a)(1) The Registrant has an audit committee financial expert serving on its audit committee.

(2) The audit committee financial expert is John B. Wilson and he is "independent" as defined under the relevant Securities and Exchange Commission Rules and Releases.

Item 4. Principal Accountant Fees and Services.

(a) Audit Fees

The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or for services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements were $431,607 for the fiscal year ended October 31, 2016 and $450,822 for the fiscal year ended October 31, 2015.

(b) Audit-Related Fees

The aggregate fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of Item 4 were $4,682 for the fiscal year ended October 31, 2016 and $4,590 for the fiscal year ended October 31, 2015. The services for which these fees were paid included attestation services.

There were no fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant's investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant that are reasonably related to the performance of the audit of their financial statements.

There were no fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant for tax compliance, tax advice and tax planning.

There were no fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant for tax compliance, tax advice and tax planning.

(d) All Other Fees

The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant not reported in paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended October 31, 2016 and $6,850 for the fiscal year ended October 31, 2015. The services for which these fees were paid include review of materials provided to the fund Board in connection with the investment management contract renewal process.

The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant not reported in paragraphs (a)-(c) of Item 4 were $439,897 for the fiscal year ended October 31, 2016 and $495,203 for the fiscal year ended October 31, 2015. The services for which these fees were paid include preparation and review of materials provided to the fund Board in connection with the investment management contract renewal process and derivatives assessment. Other services include compliance examination for Investment Advisor Act rule 204-2 and 206-4(2), and review of system processes related to fixed income securities.

(e) (1) The registrant’s audit committee is directly responsible for approving the services to be provided by the auditors, including:

(i) pre-approval of all audit and audit related services;

(ii) pre-approval of all non-audit related services to be provided to the Fund by the auditors;

(iii) pre-approval of all non-audit related services to be provided to the registrant by the auditors to the registrant’s investment adviser or to any entity that controls, is controlled by or is under common control with the registrant’s investment adviser and that provides ongoing services to the registrant where the non-audit services relate directly to the operations or financial reporting of the registrant; and

(iv) establishment by the audit committee, if deemed necessary or appropriate, as an alternative to committee pre-approval of services to be provided by the auditors, as required by paragraphs (ii) and (iii) above, of policies and procedures to permit such services to be pre-approved by other means, such as through establishment of guidelines or by action of a designated member or members of the committee; provided the policies and procedures are detailed as to the particular service and the committee is informed of each service and such policies and procedures do not include delegation of audit committee responsibilities, as contemplated under the Securities Exchange Act of 1934, to management; subject, in the case of (ii) through (iv), to any waivers, exceptions or exemptions that may be available under applicable law or rules.

(e) (2) None of the services provided to the registrant described in paragraphs (b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of regulation S-X.

(f) No disclosures are required by this Item 4(f).

(g) The aggregate non-audit fees paid to the principal accountant for services rendered by the principal accountant to the registrant and the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant were $444,579 for the fiscal year ended October 31, 2016 and $506,644 for the fiscal year ended October 31, 2015.

(h) The registrant’s audit committee of the board has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.

Item 5. Audit Committee of Listed Registrants. N/A

Item 6. Schedule of Investments. N/A

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. N/A

Item 8. Portfolio Managers of Closed-End Management Investment Companies. N/A

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. N/A

Item 10. Submission of Matters to a Vote of Security Holders.

There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant's Board of Trustees that would require disclosure herein.

Item 11. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934 and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management, including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures are effective.

(b) Changes in Internal Controls. There have been no changes in the Registrant’s internal controls or in other factors that could materially affect the internal controls over financial reporting subsequent to the date of their evaluation in connection with the preparation of this Shareholder Report on Form N-CSR.

Item 12. Exhibits.

(a) (1) Code of Ethics

(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FRANKLIN INVESTORS SECURITIES TRUST

By /s/Laura F. Fergerson

Laura F. Fergerson

Chief Executive Officer - Finance and Administration

Date December 27, 2016

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By /s/Laura F. Fergerson

Laura F. Fergerson

Chief Executive Officer - Finance and Administration

Date December 27, 2016

By /s/Gaston Gardey _

Gaston Gardey

Chief Financial Officer and Chief Accounting Officer

Date December 27, 2016

Franklin Investors Securities Trust N-CSRCertified annual shareholder report (management investment company)