UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 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: 4/30/18
Item 1. | Reports to Stockholders. |
Semiannual Report and Shareholder Letter April 30, 2018 Franklin Balanced Fund Franklin Convertible Securities Fund Franklin Equity Income Fund Franklin Real Return Fund Sign up for electronic delivery at franklintempleton.com/edelivery
Franklin Templeton Investments
Why choose Franklin Templeton Investments?
Successful investing begins with ambition. And achievement only comes when you reach for it. That’s why we continually strive to deliver better outcomes for investors. No matter what your goals are, our deep, global investment expertise allows us to offer solutions that can help.
During our more than 70 years of experience, we’ve managed through all kinds of markets—up, down and those in between. We’re always preparing for what may come next. It’s because of this, combined with our strength as one of the world’s largest asset managers that we’ve earned the trust of millions of investors around the world.
Dear Fellow Shareholder:
During the six months ended April 30, 2018, upbeat economic data, generally supportive monetary policies and better corporate earnings, combined with the passage of the US Tax Reform bill, aided markets. However, investor sentiment was dampened by concerns about rising US inflation, trade tensions between the US and China, and consumer data privacy.
The US Federal Reserve (Fed) began reducing its balance sheet in October 2017 and raised its range for the federal funds rate from 1.00% to 1.25% to a range of 1.25% to 1.50% in December. After the Fed left its range unchanged at its January 2018 meeting, in March the Fed raised it from 1.25% to 1.50% to a range of 1.50% to 1.75% and maintained its forecast of three rate increases in 2018, while upgrading its economic forecasts for 2018 and 2019. The 10-year US Treasury yield began the period at 2.38% and ended the period at 2.95%. Within this environment, US stocks, as measured by the Standard & Poor’s 500® Index, generated a +3.82% total return for the six-month period.1 Investment-grade bonds, as measured by the Bloomberg Barclays US Aggregate Bond Index, had a -1.87% total return.1
We are committed to our long-term perspective and disciplined investment approach as we conduct a rigorous, fundamental analysis of securities with a regular emphasis on investment risk management.
We believe active, professional investment management serves investors well. We also recognize the important role of financial advisors in today’s markets and encourage investors to continue to seek their advice. Amid changing markets and
economic conditions, we are confident investors with a well-diversified portfolio and a patient, long-term outlook should be well positioned for the years ahead.
Franklin Investors Securities Trust’s semiannual report, covering Franklin Balanced Fund, Franklin Convertible Securities Fund, Franklin Equity Income Fund and Franklin Real Return Fund, includes more detail about prevailing conditions and a discussion about investment decisions during the period. Please remember all securities markets fluctuate, as do mutual fund share prices.
We thank you for investing with Franklin Templeton, welcome your questions and comments, and look forward to serving your future investment needs.
Sincerely,
Rupert H. Johnson, Jr.
Chairman
Franklin Investors Securities Trust
This letter reflects our analysis and opinions as of April 30, 2018, unless otherwise indicated. 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: Morningstar.
See www.franklintempletondatasources.com for additional data provider information.
|
Not FDIC Insured | May Lose Value | No Bank Guarantee
|
|
franklintempleton.com | Not part of the semiannual report | 1 |
Semiannual Report | ||||
3 | ||||
4 | ||||
11 | ||||
17 | ||||
23 | ||||
28 | ||||
60 | ||||
66 | ||||
83 | ||||
|
| 86
|
|
Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.
2 | Semiannual Report | franklintempleton.com |
Semiannual Report
The US economy continued to grow during the six months under review. The economy expanded in 2017’s fourth quarter, though at a slower pace compared to the third quarter. Growth continued to moderate in 2018’s first quarter due to a slowdown in consumer spending, residential fixed investment, exports, and sate and local government spending. The manufacturing and services sectors expanded during the period. The unemployment rate declined from 4.1% in October 2017 to 3.9% at period-end.1 Annual inflation, as measured by the Consumer Price Index, increased from 2.0% in October 2017 to 2.5% at period-end.1
The US Federal Reserve (Fed) raised its target range for the federal funds rate 0.25% to 1.25%–1.50% in December 2017 and continued reducing its balance sheet during the period as part of its ongoing effort to normalize monetary policy. In February 2018, new Fed Chair Jerome Powell spoke before Congress for the first time and indicated the Fed saw signs of a continued strong labor market and economic growth. He reiterated the Fed’s intention to gradually raise interest rates in an effort to keep the economy from overheating and as inflation increases toward the Fed’s target. However, he noted there was no evidence of the economy overheating and he had yet to see a clear upward move in wages. At its March meeting, the Fed raised its target range for the federal funds rate 0.25% to 1.50%–1.75% and maintained its forecast of three rate increases in 2018. Additionally, the Fed upgraded its economic forecasts for 2018 and 2019, and its rate projections indicated the number of rate hikes would increase in 2019 and 2020.
US equity markets rose overall during the period, benefiting from mostly upbeat economic data and better US corporate earnings. Markets were also supported earlier in the period by the Fed’s indication of gradual rate hikes and the passage of the US tax reform bill in December 2017. However, concerns about the progress of the US tax reform bill and political uncertainties in the US curbed market sentiment at times. After reaching new all-time highs in January 2018, US stocks declined in February amid concerns that strong economic growth and rising inflation would lead the Fed to increase its target rate faster than expected. In March, markets were pressured further by a broad sell-off in information technology stocks due to a potential for tighter regulation in the sector arising from concerns about consumer data privacy. The Trump
administration’s protectionist policies and escalating trade tensions between the US and China also dampened investor sentiment. However, stocks rebounded amid the prospects for trade negotiations between the US and China, easing tensions in the Korean peninsula and strong first-quarter 2018 earnings results from many companies. In this environment, the broad US stock market, as measured by the Standard & Poor’s 500 Index, generated a +3.82% total return for the period.2
The foregoing information reflects our analysis and opinions as of April 30, 2018. 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: US Bureau of Labor Statistics.
2. Source: Morningstar.
See www.franklintempletondatasources.com for additional data provider information.
franklintempleton.com | Semiannual Report | 3 |
This semiannual report for Franklin Balanced Fund covers the period ended April 30, 2018.
Your Fund’s Goal and Main Investments
The Fund seeks both income and capital appreciation by investing in a diversified portfolio of stocks (substantially dividend paying), convertible securities and debt securities. The Fund normally invests at least 25% of its total assets in debt securities, including bonds, notes, debentures and money market securities, and at least 25% of its total assets in equity securities, primarily common and preferred stock.
Portfolio Composition*
4/30/18
% of Total
| ||||
Stocks | 63.8% | |||
Common Stocks | 50.6% | |||
Equity-Linked Securities | 9.0% | |||
Management Investment Companies | 2.6% | |||
Index-Linked Notes | 1.0% | |||
Convertible Preferred Stocks
|
| 0.6%
|
| |
Bonds | 32.7% | |||
Corporate Bonds | 32.3% | |||
Convertible Bonds
|
| 0.4%
|
| |
Short-Term Investments & Other Net Assets
|
| 3.5%
|
|
*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. The composition may not match the SOI.
Performance Overview
For the six months under review, the Fund’s Class A shares posted a cumulative total return of +0.16%. In comparison, the Fund’s equity benchmark, the Standard & Poor’s 500 Index (S&P 500®), which is a broad measure of US stock performance, generated a +3.82% total return.1 The Fund’s fixed income benchmark, the Bloomberg Barclays US Aggregate Bond Index, which tracks the US investment-grade, taxable bond market, had a -1.87% total return.1 You 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. The Fund seeks income by investing in a combination of corporate, agency and government bonds issued in the US and other countries, as well as common stocks and convertible securities. The Fund seeks capital appreciation by investing in equity securities and convertible securities of companies from a variety of industries. For purposes of pursuing the Fund’s investment goal, we may from time to time enter into various equity-related transactions involving derivative instruments, including put and call options on equity securities and equity indexes. We may also enter into equity-related derivatives transactions to hedge against market risk, to earn income, to gain or increase exposure to certain equity securities or segments of the equity markets or to otherwise enhance Fund returns.
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.
|
Manager’s Discussion
Consistent with the Fund’s long-term strategy of investing across asset classes to seek to generate attractive income, while
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 33.
4 | Semiannual Report | franklintempleton.com |
FRANKLIN BALANCED FUND
seeking opportunities for capital appreciation, performance was supported by healthy diversification and a positive overall contribution from the Fund’s equity holdings, while our fixed income position detracted from results. During the six months under review, our actions and movements in equity and fixed income markets resulted in a modest increase in equity holdings from 61.2% to 62.8% of total net assets, and a slight rise in fixed income holdings from 33.0% to 33.7%. Our cash position decreased from 5.8% to 3.5% of total net assets. The flexibility to use market volatility to invest in different asset classes remains a core strategy of the Fund.
Dividend Distributions*
11/1/17–4/30/18
Dividend per Share (cents) | ||||||||||||||||||||
Month | Class A | Class C | Class R | Class R6 | Advisor Class | |||||||||||||||
November
|
| 3.00
|
|
| 2.25
|
|
| 2.74
|
|
| 3.34
|
|
| 3.25
|
| |||||
December**
|
| 5.36
|
|
| 4.59
|
|
| 5.10
|
|
| 5.71
|
|
| 5.61
|
| |||||
January
|
| 3.00
|
|
| 2.23
|
|
| 2.74
|
|
| 3.35
|
|
| 3.25
|
| |||||
February
|
| 3.00
|
|
| 2.23
|
|
| 2.74
|
|
| 3.35
|
|
| 3.25
|
| |||||
March
|
| 3.00
|
|
| 2.22
|
|
| 2.73
|
|
| 3.36
|
|
| 3.26
|
| |||||
April
|
| 3.00
|
|
| 2.22
|
|
| 2.73
|
|
| 3.36
|
|
| 3.26
|
| |||||
Total
|
| 20.36
|
|
| 15.74
|
|
| 18.78
|
|
| 22.47
|
|
| 21.88
|
|
*The distribution amount is the sum of all estimated tax-basis net investment income distributions for the period shown. A portion or all of the distribution may be reclassified as return of capital or short-term or long-term capital gains once final tax designations are known. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
**Includes an additional 2.36 cent per share distribution to meet excise tax requirements.
The Fund experienced modestly positive returns from equities for the six-month period. Strong equity market returns in the first half of the period turned volatile in February as rising interest rates in the US and a deterioration in economic indicators globally weighed on equity returns as the period came to a close. Energy, information technology (IT) and consumer discretionary were the top performing sectors.
In energy, Anadarko Petroleum and Royal Dutch Shell were the largest contributors to return. Anadarko Petroleum reported strong results in the improved commodity environment amid a shifting focus from production growth to delivering free cash flow back to shareholders.2 Royal Dutch Shell benefited from continued cost reductions, modest production growth and progress on asset sales as they integrate BG Group.
In IT, our holdings benefited from global growth, a continued preference by investors for growth stocks, and solid financial
Top Five Equity Holdings | ||||
4/30/18 | ||||
Company Sector/Industry | % of Total Net Assets | |||
Microsoft Corp. Information Technology
|
|
3.1% |
| |
Analog Devices Inc. Information Technology
|
|
2.4% |
| |
General Electric Co. Industrials
|
|
1.8% |
| |
Wells Fargo & Co. Financials
|
|
1.8% |
| |
JPMorgan Chase & Co. Financials
|
|
1.7% |
|
results from many of our bellwether companies, including Microsoft and Intel. Microsoft shares were buoyed by strong results in its cloud computing platform Azure, which saw a global shift to its architectures. Intel’s strong performance was driven by its data centers group, which sells processors and related components into server, storage and network applications.
In other sectors, aerospace and defense contractor Raytheon and rail transportation company Union Pacific were among the Fund’s top contributors.
Detractors from Fund performance included defensive sectors like consumer staples and utilities. Industrials also detracted from Fund performance.
In consumer staples, shares of Phillip Morris were impacted by disappointing shipment volumes and less-than-expected growth in its reduced-risk tobacco device IQOS. Shares of Procter & Gamble and Anheuser Busch INBEV also detracted from returns.
In industrials, General Electric detracted from results. GE struggled with lower-than-expected cash flow generation, resulting in a reduction in its dividend distribution, and took a charge related to its legacy life insurance business. We believe the company is taking steps to improve profitability, reduce costs, implement more accountability and sell non-core assets.
Other detractors included Comcast as investor concern about a proposed acquisition of certain media content assets overshadowed strong financial results from its cable and NBC Universal businesses. Wells Fargo also detracted from returns after the Federal Reserve placed a cap on the company’s total
2. Not held at period-end.
franklintempleton.com | Semiannual Report | 5 |
FRANKLIN BALANCED FUND
assets, effectively limiting its growth as it takes steps to convince regulators that prior scandals are behind it.
The Fund’s fixed income holdings, the bulk of which is allocated to corporate credit, hurt returns. During the period, a flattening in the Treasury curve led to negative returns across sectors and maturities. During the period, the Bloomberg Barclays US Aggregate Bond Index had a negative return, with all of the subcategories—Treasuries, government agencies, securitized/MBS, corporates—having negative returns as well.
Although companies continued to deliver earnings and strong cash flow post-tax reform, the duration of the corporate sector was a significant negative factor, and corporates were the weakest performers from a total return perspective of the four subcategories in the index.
Within corporates, our securities underperformed the index during the period. Consumer non-cyclical, banking and consumer cyclical were the largest detractors from Fund performance.3
Within consumer non-cyclical and consumer cyclical, longer duration securities such as Anheuser-Busch InBev, Kraft Heinz and Dollar General underperformed.
Top Five Fixed Income Holdings | ||||
4/30/18 | ||||
Company Sector/Industry
| % of Total
| |||
JPMorgan Chase & Co. Financials
|
|
1.1% |
| |
Morgan Stanley Financials
|
|
1.0% |
| |
Amazon.com Inc. Consumer Discretionary
|
|
1.0% |
| |
Costco Wholesale Corp. Consumer Staples
|
|
0.9% |
| |
Kraft Heinz Foods Co. Consumer Staples
|
|
0.9% |
|
Banks reported strong earnings, continued asset quality and benefited from the tax policy changes, but subordinated positions lower in the capital structure with longer duration, such as Morgan Stanley and Citigroup, hurt performance.
Wells Fargo also continued to deal with issues related to regulatory violations and agreed to significant fines levied by the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency. From the credit side, we continue to see value in the breadth of Wells Fargo’s franchise and its robust capital levels. We believe the company is in the process of addressing governance and compliance issues, but this could take some time to be reflected in credit spreads.
Conversely, the energy, basic industry and technology-related sectors performed better than the index.4 There were also specific securities that outperformed. Valeant Pharmaceuticals was one of the top contributors during the period.
Management’s renewed focus on near-term maturities and efforts to get the core business back on track drove a recovery in its bonds. Oil service companies Nabors Industries and Weatherford International also outperformed, as crude oil prices recovered and drilling activity started to pick up. On the commodity side, Freeport-McMoRan and Fortescue contributed as metals rebounded during the period, leading us to exit these positions to lock in gains.2
Thank you for your continued participation in Franklin Balanced Fund. We look forward to serving your future investment needs.
![]() |
Edward D. Perks, CFA
Alan E. Muschott, CFA Shawn Lyons, CFA Todd Brighton, CFA
Portfolio Management Team |
CFA® is a trademark owned by CFA Institute.
3. Consumer non-cyclical companies are in the consumer discretionary, consumer staples and health care sectors in the fixed income section of the SOI. Banking companies are in financials in the fixed income section of the SOI. Consumer cyclical companies are in the consumer discretionary, consumer staples and health care sectors in the fixed income section of the SOI.
4. Technology-related companies are in the information technology sector in the fixed income section of the SOI.
6 | Semiannual Report | franklintempleton.com |
FRANKLIN BALANCED FUND
The foregoing information reflects our analysis, opinions and portfolio holdings as of April 30, 2018, 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.
franklintempleton.com | Semiannual Report | 7 |
FRANKLIN BALANCED FUND
Performance Summary as of April 30, 2018
The performance tables 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 4/30/181
Cumulative total return excludes sales charges. Average annual total return includes 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.
Share Class | Cumulative Total Return2 | Average Annual Total Return3 | ||
A 6-Month | +0.16%
| -5.57%
| ||
1-Year
| +4.53%
| -1.46%
| ||
5-Year
| +33.60%
| +4.72%
| ||
10-Year
| +77.01%
| +5.25%
| ||
Advisor 6-Month
| +0.20%
| +0.20%
| ||
1-Year
| +4.69%
| +4.69%
| ||
5-Year
| +35.46%
| +6.26%
| ||
10-Year
| +81.92%
| +6.17%
|
Distribution | 30-Day Standardized Yield5 | |||||||
Share Class | Rate4 | (with waiver) | (without waiver) | |||||
A | 2.83% | 2.20% | 2.20% | |||||
Advisor | 3.26% | 2.59% | 2.59% |
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.
See page 9 for Performance Summary footnotes.
8 | Semiannual Report | franklintempleton.com |
FRANKLIN BALANCED FUND
PERFORMANCE SUMMARY
Net Asset Value
Share Class (Symbol) | 4/30/18 | 10/31/17 | Change | |||||||||||||
A (FBLAX)
|
| $11.98
|
|
| $12.36
|
|
| -$0.38
|
| |||||||
C (FBMCX)
|
| $11.87
|
|
| $12.25
|
|
| -$0.38
|
| |||||||
R (N/A)
|
| $12.01
|
|
| $12.39
|
|
| -$0.38
|
| |||||||
R6 (FBFRX)
|
| $12.01
|
|
| $12.39
|
|
| -$0.38
|
| |||||||
Advisor (FBFZX)
|
| $12.00
|
|
| $12.39
|
|
| -$0.39
|
| |||||||
Distributions (11/1/17–4/30/18)
| ||||||||||||||||
Share Class | Net Investment Income | Short-Term Capital Gain | Long-Term Capital Gain | Total | ||||||||||||
A
|
| $0.2036
|
|
| $0.0474
|
|
| $0.1535
|
|
| $0.4045
|
| ||||
C
|
| $0.1574
|
|
| $0.0474
|
|
| $0.1535
|
|
| $0.3583
|
| ||||
R
|
| $0.1878
|
|
| $0.0474
|
|
| $0.1535
|
|
| $0.3887
|
| ||||
R6
|
| $0.2247
|
|
| $0.0474
|
|
| $0.1535
|
|
| $0.4256
|
| ||||
Advisor
|
| $0.2188
|
|
| $0.0474
|
|
| $0.1535
|
|
| $0.4197
|
| ||||
Total Annual Operating Expenses6
| ||||||||||||||||
Share Class | With Waiver | Without Waiver | ||||||||||||||
A
|
|
1.01
|
%
|
|
1.03%
|
| ||||||||||
Advisor
|
| 0.76
| %
|
| 0.78%
|
|
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 2/28/19. 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, if any, has not been annualized.
4. Distribution rate is based on an annualization of the respective class’s April dividend and the maximum offering price (NAV for Advisor Class) per share on 4/30/18.
5. 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.
6. 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.
franklintempleton.com | Semiannual Report | 9 |
FRANKLIN BALANCED FUND
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 (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||||||||
|
| |||||||||||||||||
Share Class | Beginning Account Value 11/1/17 | Ending Account Value 4/30/18 | Expenses Paid During Period | Ending Account Value 4/30/18 | Expenses Paid During Period 11/1/17–4/30/181,2 | Net Annualized Expense Ratio2 | ||||||||||||
|
|
|
| |||||||||||||||
A | $1,000 | $1,001.60 | $4.96 | $1,019.84 | $5.01 | 1.00% | ||||||||||||
C | $1,000 | $ 997.80 | $8.62 | $1,016.17 | $8.70 | 1.74% | ||||||||||||
R | $1,000 | $1,000.30 | $6.20 | $1,018.60 | $6.26 | 1.25% | ||||||||||||
R6 | $1,000 | $1,003.30 | $3.28 | $1,021.52 | $3.31 | 0.66% | ||||||||||||
Advisor | $1,000 | $1,002.00 | $3.72 | $1,021.08 | $3.76 | 0.75% |
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 181/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
10 | Semiannual Report | franklintempleton.com |
Franklin Convertible Securities Fund
We are pleased to bring you Franklin Convertible Securities Fund’s semiannual report for the period ended April 30, 2018.
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. The Fund normally invests at least 80% of its net assets in convertible securities and common stock received upon conversion of convertible securities.
Portfolio Composition
Based on Total Net Assets as of 4/30/18
Performance Overview
For the six months under review, the Fund’s Class A shares delivered a +4.59% cumulative total return. In comparison, the Fund’s benchmark, the BofA Merrill Lynch (BofAML) All Alternatives US Convertibles Index, which tracks the domestic convertible securities market, generated a +3.29% total return.1 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 14.
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
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
Top 10 Holdings | ||||
4/30/18 | ||||
Company Sector/Industry | % of Total Net Assets | |||
Liberty Media Corp. Consumer Discretionary
|
|
2.3% |
| |
Red Hat Inc. Information Technology
|
|
2.3% |
| |
Square Inc Information Technology
|
|
2.2% |
| |
ServiceNow Inc. Information Technology
|
|
2.2% |
| |
Rexnord Corp. Industrials
|
|
2.1% |
| |
Proofpoint Inc. Information Technology
|
|
2.1% |
| |
The Priceline Group Inc. Consumer Discretionary
|
|
2.1% |
| |
Neurocrine Biosciences Inc. Health Care
|
|
2.1% |
| |
Realpage Inc. Information Technology
|
|
2.0% |
| |
Workday Inc. Information Technology
|
|
2.0% |
|
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
The information technology (IT), health care and industrials sectors contributed most to Fund performance during the period. Within IT, the Fund’s holdings of convertible bonds issued by business applications technology provider Salesforce.com,2 enterprise IT management software provider ServiceNow and mobile payment solutions provider Square contributed to performance. Salesforce benefited from modest improvements in revenue due to increased subscription growth for its variety of cloud-based products. Significant growth in
1. Source: BofA Merrill Lynch.
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.
2. Not held at period-end.
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 43.
franklintempleton.com | Semiannual Report | 11 |
FRANKLIN CONVERTIBLE SECURITIES FUND
deferred revenue and unbilled future contract revenue represented a positive end to the company’s fiscal year that far surpassed any booking activity in its history. Shares of ServiceNow rose amid better-than-expected earnings, revenue, operating margin, cash flow and billings, and higher revenue guidance. We believe ServiceNow is a high quality Software-as-a-Service company proving itself as a key partner in enterprise initiatives to drive productivity through digital transformation, while also delivering excellent unit economics. Square’s quarterly results and earnings guidance were higher than anticipated. On top of solid performance in the company’s core payments business, the company appears to be gaining traction in its platform-like subscription and services-based products that could underpin an attractive long-term outlook for the company.
In health care, our holdings of convertible bonds issued by Novavax, a clinical stage biotechnology company, and Neurocrine Biosciences, which develops therapies for neurologic, psychiatric and endocrine related disorders, contributed to performance. In the industrials sector, our holdings of convertible preferred stock issued by Rexnord, a manufacturer specializing in process and motion control and water management operations, helped results. Elsewhere, the Fund’s position in convertible bonds issued by digital image and photo products and services provider Shutterfly, contributed to performance.
In contrast, the utilities, real estate and energy sectors detracted from performance. In utilities, our holdings in convertible preferred stock issued by diversified energy company Black Hills, and in common stock of utilities services holding company Exelon,2 hampered results. Shares of Black Hills suffered from lower earnings guidance announced in late 2017 and from earnings and cash flow pressure resulting from tax reform and regulatory uncertainty. Some positive developments included the company’s exit from oil and gas, regulatory approval of a wind project for Colorado Electric,3 and some progress in the company’s pursuit of rate increases. In real estate, our holdings in convertible bonds issued by real estate investment trust Forest City Enterprises hindered performance. In energy, our holdings in convertible bonds issued by offshore oil and exploration company Cobalt International Energy2 also hurt performance.
In other sectors, our holdings in convertible bonds issued by dermatology therapeutics company Dermira, satellite TV
3. Not a Fund holding.
See www.franklintempletondatasources.com for additional data provider information.
provider Dish Network and microcontroller and analog semiconductor provider Microchip Technology negatively affected performance. Shares of Dermira fell significantly after the failure of two phase III clinical trials using its topical gel olumacostat to treat acne, but another clinical trial is pending to determine if the gel could be used to treat hyperhidrosis. The company has one more potential product in development that targets atopic dermatitis, with results expected by the first half of 2019. Shares of Dish Network were hindered by weaker earnings results, and although subscriber metrics improved due to net additions to their Sling live TV streaming service, the lower operating margin dollars from Sling customers reduced cash flow. The company’s co-founder and CEO stepped aside from his CEO role beginning in December 2017 to focus on building a narrowband wireless network to utilize the company’s significant wireless spectrum assets.
Thank you for your continued participation in Franklin Convertible Securities Fund. We look forward to serving your future investment needs.
![]() |
Alan E. Muschott, CFA | |
![]() |
Matthew D. Quinlan | |
Eric Webster, CFA | ||
Portfolio Management Team |
12 | Semiannual Report | franklintempleton.com |
FRANKLIN CONVERTIBLE SECURITIES FUND
The foregoing information reflects our analysis, opinions and portfolio holdings as of April 30, 2018, 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.
franklintempleton.com | Semiannual Report | 13 |
FRANKLIN CONVERTIBLE SECURITIES FUND
Performance Summary as of April 30, 2018
The performance tables 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 4/30/181
Cumulative total return excludes sales charges. Average annual total return includes 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.
Share Class | Cumulative Total Return2 | Average Annual Total Return3 | ||
A | ||||
6-Month
| +4.59%
| -1.42%
| ||
1-Year
| +13.89%
| +7.35%
| ||
5-Year
| +60.07%
| +8.57%
| ||
10-Year
| +113.82%
| +7.26%
| ||
Advisor4 | ||||
6-Month
| +4.76%
| +4.76%
| ||
1-Year
| +14.23%
| +14.23%
| ||
5-Year
| +62.20%
| +10.16%
| ||
10-Year
| +119.39%
| +8.17%
|
Distribution | 30-Day Standardized Yield6 | |||||||
Share Class | Rate5 | (with waiver) | (without waiver) | |||||
A
| 2.14%
| 0.99%
| 0.97%
| |||||
Advisor
| 2.52%
| 1.29%
| 1.28%
|
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.
See page 15 for Performance Summary footnotes.
14 |
Semiannual Report |
franklintempleton.com |
FRANKLIN CONVERTIBLE SECURITIES FUND
PERFORMANCE SUMMARY
Distributions (11/1/17–4/30/18)
Share Class | Net Investment Income | Short-Term Capital Gain | Long-Term Capital Gain | Total | ||||||||||||
A
|
| $0.2527
|
|
| $0.2120
|
|
| $0.8333
|
|
| $1.2980
|
| ||||
C
|
| $0.1780
|
|
| $0.2120
|
|
| $0.8333
|
|
| $1.2233
|
| ||||
R6
|
| $0.2885
|
|
| $0.2120
|
|
| $0.8333
|
|
| $1.3338
|
| ||||
Advisor
|
| $0.2779
|
|
| $0.2120
|
|
| $0.8333
|
|
| $1.3232
|
| ||||
Total Annual Operating Expenses7
| ||||||||||||||||
Share Class | With Waiver | Without Waiver | ||||||||||||||
A
|
|
0.84%
|
|
|
0.85%
|
| ||||||||||
Advisor
|
|
0.59%
|
|
|
0.60%
|
|
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. Convertible securities are subject to the risks of stocks when the underlying stock price is high relative to the conversion price (because more of the security’s value resides in the conversion feature) and debt securities when the underlying stock price is low relative to the conversion price (because the conversion feature is less valuable). A convertible security is not as sensitive to interest rate changes as a similar non-convertible debt security, and generally has less potential for gain or loss than the underlying stock. 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 2/28/19. 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, if any, has not been annualized.
4. 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 +113.78% and +7.93%.
5. 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 4/31/18.
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. 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.
franklintempleton.com | Semiannual Report | 15 |
FRANKLIN CONVERTIBLE SECURITIES FUND
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 (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||||||||
|
| |||||||||||||||||
Share Class | Beginning Account Value 11/1/17 | Ending Account Value 4/30/18 | Expenses Paid During 11/1/17–4/30/181,2 | Ending Account Value 4/30/18 | Expenses Paid During 11/1/17–4/30/181,2 | Net Annualized Expense Ratio2 | ||||||||||||
|
|
|
| |||||||||||||||
A | $1,000 | $1,045.90 | $4.26 | $1,020.63 | $4.21 | 0.84% | ||||||||||||
C | $1,000 | $1,042.20 | $8.05 | $1,016.91 | $7.95 | 1.59% | ||||||||||||
R6 | $1,000 | $1,047.90 | $2.54 | $1,022.32 | $2.51 | 0.50% | ||||||||||||
Advisor | $1,000 | $1,047.60 | $3.00 | $1,021.87 | $2.96 | 0.59% |
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 181/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
16 | Semiannual Report | franklintempleton.com |
This semiannual report for Franklin Equity Income Fund covers the period ended April 30, 2018.
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 normally investing at least 80% of its net assets in equity securities, including securities convertible into common stocks. The Fund may also invest in debt securities and foreign securities, including emerging markets.
Performance Overview
For the six months under review, the Fund’s Class A shares delivered a +1.72% cumulative total return. In comparison, the Fund’s benchmark, the Standard & Poor’s 500 Index (S&P 500), which tracks the broad US stock market, generated a +3.82% total return.1 The 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 +2.15% total return.2 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 20.
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 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 liquidation value. We consider dividend yield and the opportunity for dividend growth in selecting stocks for the Fund because we believe that,
Portfolio Composition
Based on Total Net Assets as of 4/30/18
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
The energy, information technology (IT) and financials sectors contributed most to Fund returns during the period. Within energy, large integrated energy company Chevron and
1. Source: Morningstar.
2. Source: Lipper, a Thomson Reuters Company. For the six-month period ended 4/30/18, this category consisted of 552 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 51.
franklintempleton.com | Semiannual Report | 17 |
FRANKLIN EQUITY INCOME FUND
independent oil and gas exploration and production company Anadarko Petroleum helped results as rising crude prices and tight cost controls lifted cash flow generation. In IT, networking hardware and telecommunications equipment maker Cisco Systems and software and IT services company Microsoft were notable contributors. Shares of Cisco Systems rose during the period, driven by better-than-expected second quarter revenue and earnings helped in part by good results across its products and services. Cisco is also benefiting from a refresh of its campus-networking portfolio. Microsoft aided performance due to demand for its suite of office and cloud-based products. Both companies are beneficiaries of healthy levels of corporate spending for the IT services industry.
In the financials sector, the Fund’s largest sector weighting, strong performances from global bank JPMorgan Chase and investment manager firm BlackRock boosted returns. Shares of JPMorgan Chase gained as quarterly results have been strong and rising interest rates are helping the company’s net interest margins. BlackRock continues to see strong flows into its funds. In other sectors, results from defense and security solutions producer Raytheon and managed care giant UnitedHealth Group aided performance.
In contrast, the consumer staples, materials and industrials sectors detracted most from Fund performance. In consumer staples, packaged food company Kraft Heinz, consumer household products manufacturer Procter & Gamble and beer producer Anheuser-Busch InBev hurt results. Kraft Heinz, like many packaged food and household companies, has suffered from a tough retail environment, shifts in consumer preferences and supply chain inflation. In materials, agriculture and specialty chemicals producer DowDuPont hindered performance. General Electric (GE), an industrials conglomerate, was the Fund’s largest detractor. GE struggled with lower-than-expected cash flow generation, ultimately resulting in a reduction in its dividend distribution, and its oil and gas and power segments remained challenged. We believe the company is taking steps to improve profitability, reduce costs, implement more accountability and sell non-core assets.
In other sectors, consumer and commercial products manufacturer Newell Brands3 and diversified financial services company Wells Fargo also detracted from performance. Newell Brands reported weak quarterly results and declining earnings guidance due in part to rising costs, unfavorable pricing and
3. Not held at period-end.
See www.franklintempletondatasources.com for additional data provider information.
Top 10 Holdings | ||||
4/30/18 | ||||
Company Sector/Industry | % of Total Net Assets | |||
JPMorgan Chase & Co. Financials | 4.4% | |||
Microsoft Corp. Information Technology | 3.8% | |||
Deutsche Bank AG Financials | 3.2% | |||
UBS AG London Financials | 3.0% | |||
Wells Fargo & Co. Financials | 2.8% | |||
Chevron Corp. Energy | 2.7% | |||
Morgan Stanley Financials | 2.3% | |||
BlackRock Inc. Financials | 2.2% | |||
PepsiCo Inc. Consumer Staples | 2.2% | |||
Pfizer Inc. Health Care | 2.1% |
worse-than-expected margins. Revenue was also affected due to destocking by retailers and store closures of some important customers.
18 | Semiannual Report | franklintempleton.com |
FRANKLIN EQUITY INCOME FUND
Thank you for your continued participation in Franklin Equity Income Fund. We look forward to serving your future investment needs.
![]() |
Matthew D. Quinlan | |
![]() |
Alan E. Muschott, CFA | |
Todd Brighton, CFA | ||
Portfolio Management Team |
The foregoing information reflects our analysis, opinions and portfolio holdings as of April 30, 2018, 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.
franklintempleton.com | Semiannual Report | 19 |
FRANKLIN EQUITY INCOME FUND
Performance Summary as of April 30, 2018
The performance tables 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 4/30/181
Cumulative total return excludes sales charges. Average annual total return includes 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.
Share Class | Cumulative Total Return2 | | Average Annual Total Return | 3 | ||
| ||||||
A | ||||||
6-Month | +1.72% | -4.14% | ||||
| ||||||
1-Year | +9.63% | +3.31% | ||||
| ||||||
5-Year | +59.31% | +8.47% | ||||
| ||||||
10-Year | +96.06% | +6.33% | ||||
| ||||||
Advisor4 | ||||||
6-Month | +1.87% | +1.87% | ||||
| ||||||
1-Year | +9.93% | +9.93% | ||||
| ||||||
5-Year | +61.45% | +10.05% | ||||
| ||||||
10-Year | +101.21% | +7.24% | ||||
|
Distribution | 30-Day Standardized Yield6 | |||||||
Share Class | Rate5 | (with waiver) | (without waiver) | |||||
A | 1.76% | 1.56% | 1.55% | |||||
Advisor | 2.04% | 1.90% | 1.89% |
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.
See page 21 for Performance Summary footnotes.
20 |
Semiannual Report |
franklintempleton.com |
FRANKLIN EQUITY INCOME FUND
PERFORMANCE SUMMARY
Distributions (11/1/17–4/30/18)
Share Class | Net Investment Income | Short-Term Capital Gain | Long-Term Capital Gain | Total | ||||||||||||
A | $0.2751 | $0.0013 | $0.6248 | $0.9012 | ||||||||||||
C | $0.1820 | $0.0013 | $0.6248 | $0.8081 | ||||||||||||
R | $0.2464 | $0.0013 | $0.6248 | $0.8725 | ||||||||||||
R6 | $0.3227 | $0.0013 | $0.6248 | $0.9488 | ||||||||||||
Advisor | $0.3027 | $0.0013 | $0.6248 | $0.9288 | ||||||||||||
Total Annual Operating Expenses7
| ||||||||||||||||
Share Class | ||||||||||||||||
A | 0.85% | |||||||||||||||
Advisor | 0.60% |
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 through 2/28/19. 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, if any, has not been annualized.
4. 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 +95.42% and +6.96%.
5. 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 4/30/18.
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. 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.
franklintempleton.com | Semiannual Report | 21 |
FRANKLIN EQUITY INCOME FUND
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 (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||||||||
|
| |||||||||||||||||
Share Class | Beginning Account Value 11/1/17 | Ending Account Value 4/30/18 | Expenses Paid During 11/1/17–4/30/181,2 | Ending Account Value 4/30/18 | Expenses Paid During Period 11/1/17–4/30/181,2 | Net Annualized Expense Ratio2 | ||||||||||||
|
|
|
| |||||||||||||||
A | $1,000 | $1,017.20 | $4.20 | $1,020.63 | $4.21 | 0.84% | ||||||||||||
C | $1,000 | $1,013.50 | $7.94 | $1,016.91 | $7.95 | 1.59% | ||||||||||||
R | $1,000 | $1,016.40 | $5.30 | $1,019.54 | $5.31 | 1.06% | ||||||||||||
R6 | $1,000 | $1,019.00 | $2.50 | $1,022.32 | $2.51 | 0.50% | ||||||||||||
Advisor | $1,000 | $1,018.70 | $2.95 | $1,021.87 | $2.96 | 0.59% |
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 181/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
22 |
Semiannual Report |
franklintempleton.com |
This semiannual report for Franklin Real Return Fund covers the period ended April 30, 2018.
Your Fund’s Goal and Main Investments
The Fund seeks total return that exceeds the rate of inflation over an economic cycle. Under normal market conditions, the Fund seeks to allocate assets among investments to achieve the highest level of real return (total return less the rate of inflation) consistent with an acceptable level of risk. The Fund shifts its investments among the following general asset classes and at any given time may have a substantial amount of its asset in any one class: inflation-indexed securities and investment-grade fixed income securities issued by governments, corporations and municipal issuers; equity securities with high correlation to broad measures of inflation; and non-dollar denominated inflation-indexed securities.
Portfolio Composition*
Based on Total Net Assets as of 4/30/18
*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.
**In the SOI, the natural resources sector comprises energy and materials.
Performance Overview
For the six months under review, the Fund’s Class A shares had a +1.13% cumulative total return. In comparison, the Bloomberg Barclays US TIPS Index, which tracks the universe of inflation-protected notes issued by the US Treasury that have at least one year to final maturity, posted a +0.19% total return.1 Also 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 1.57% for the same period.2 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 25.
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
The Fund uses an active asset allocation strategy to try to achieve its goal of total return that exceeds the rate of inflation over an economic cycle by allocating its 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? A yield curve is a line that plots the yield to maturity of bonds having equal credit quality against their maturity dates.
|
Manager’s Discussion
At period-end, nearly three quarters of total net assets were invested in Treasury Inflation-Protected Securities (TIPS). For diversification, we also allocated the Fund’s assets to natural resources common stocks, management investment companies, foreign government and agency securities, repurchase agreements and other short-term investments. We employed a non-US dollar strategy to help hedge against potential US dollar weakness versus certain currencies and concentrated our TIPS holdings in shorter maturities.
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 58.
franklintempleton.com | Semiannual Report | 23 |
FRANKLIN REAL RETURN FUND
Dividend Distributions*
11/1/17–4/30/18
Dividend per Share (cents) | ||||||||||||||||
Month | Class A | Class C | Class R6 | Advisor Class | ||||||||||||
November | 4.32 | 3.98 | 4.66 | 4.48 | ||||||||||||
December | 10.37 | 10.02 | 10.73 | 10.60 | ||||||||||||
January | 0.56 | 0.24 | 0.88 | 0.77 | ||||||||||||
February** | — | — | — | — | ||||||||||||
March | 4.21 | 3.58 | 4.90 | 4.60 | ||||||||||||
April | 2.90 | 2.58 | 3.22 | 3.10 | ||||||||||||
Total | 22.36 | 20.40 | 24.39 | 23.55 |
*The distribution amount is the sum of all estimated tax-basis net investment income distributions for the period shown. A portion or all of the distribution may be reclassified as return of capital or short-term or long-term capital gains once final tax designations are known. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
**The Fund paid no dividends due to negative inflation adjustments for TIPS, which are the Fund’s primary investments.
During the period, we increased the Fund’s allocations to TIPS and natural resources equities. In contrast, we decreased the Fund’s allocation to foreign government debt securities and eliminated our exposure to senior secured floating rate loans and corporate bonds. The Fund’s heaviest allocations were in TIPS and natural resources equities.
The Fund’s investments in natural resources stocks and TIPS helped results. In contrast, the Fund’s investments in real estate investment trusts hindered Fund performance.
Thank you for your continued participation in Franklin Real Return Fund. We look forward to serving your future investment needs.
![]() |
T. Anthony Coffey, CFA | |
![]() |
Kent Burns, CFA | |
Portfolio Management Team |
The foregoing information reflects our analysis, opinions and portfolio holdings as of April 30, 2018, 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.
24 | Semiannual Report | franklintempleton.com |
FRANKLIN REAL RETURN FUND
Performance Summary as of April 30, 2018
The performance tables 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 4/30/181
Cumulative total return excludes sales charges. Average annual total return includes 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.
Share Class | | Cumulative Total Return2 | | | Average Annual Total Return3 | | ||
| ||||||||
A | ||||||||
6-Month | +1.13% | -3.17% | ||||||
| ||||||||
1-Year | +1.93% | -2.39% | ||||||
| ||||||||
5-Year | -0.65% | -1.00% | ||||||
| ||||||||
10-Year | +13.75% | +0.85% | ||||||
| ||||||||
Advisor | ||||||||
6-Month | +1.34% | +1.34% | ||||||
| ||||||||
1-Year | +2.27% | +2.27% | ||||||
| ||||||||
5-Year | +0.69% | +0.14% | ||||||
| ||||||||
10-Year | +16.76% | +1.56% | ||||||
|
Distribution | 30-Day Standardized Yield5 | |||||||||||||||
Share Class | Rate4 | (with waiver) | (without waiver) | |||||||||||||
A | 3.32% | 1.37% | 1.13% | |||||||||||||
Advisor | 3.69% | 1.67% | 1.43% |
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.
See page 26 for Performance Summary footnotes.
franklintempleton.com | Semiannual Report | 25 |
FRANKLIN REAL RETURN FUND
PERFORMANCE SUMMARY
Distributions (11/1/17–4/30/18)
Share Class | Net Investment Income | |||
A | $0.2236 | |||
C | $0.2040 | |||
R6 | $0.2439 | |||
Advisor | $0.2355 |
Total Annual Operating Expenses6
Share Class | With Waiver | Without Waiver | ||||||
A | 0.93% | 1.17% | ||||||
Advisor | 0.68% | 0.92% |
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 and a fee waiver associated with any investments it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 2/28/19. 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, if any, has not been annualized.
4. Distribution rate is based on an annualization of the respective class’s April dividend and the maximum offering price (NAV for Advisor Class) per share on 4/30/18.
5. 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.
6. 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.
26 | Semiannual Report | franklintempleton.com |
FRANKLIN REAL RETURN FUND
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 (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||||||||
Share Class | Beginning Account Value 11/1/17 | Ending Account Value 4/30/18 | Expenses Paid During | Ending Account Value 4/30/18 | Expenses Paid During Period 11/1/17–4/30/181,2 | Net Annualized Expense Ratio2 | ||||||||||||
|
|
|
|
| ||||||||||||||
A | $1,000 | $1,011.30 | $4.49 | $1,020.33 | $4.51 | 0.90% | ||||||||||||
C | $1,000 | $1,010.40 | $6.48 | $1,018.35 | $6.51 | 1.30% | ||||||||||||
R6 | $1,000 | $1,014.20 | $2.45 | $1,022.36 | $2.46 | 0.49% | ||||||||||||
Advisor | $1,000 | $1,013.40 | $3.24 | $1,021.57 | $3.26 | 0.65% |
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 181/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
franklintempleton.com | Semiannual Report | 27 |
FRANKLIN INVESTORS SECURITIES TRUST
Franklin Balanced Fund
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
Class A | ||||||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.36 | $11.65 | $11.40 | $11.86 | $11.43 | $10.64 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment incomeb | 0.13 | 0.33 | 0.30 | 0.30 | 0.31c | 0.27 | ||||||||||||||||||
Net realized and unrealized gains (losses) | (0.11 | ) | 0.91 | 0.31 | (0.24 | ) | 0.65 | 1.02 | ||||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.02 | 1.24 | 0.61 | 0.06 | 0.96 | 1.29 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.20 | ) | (0.36 | ) | (0.36) | (0.36 | ) | (0.36 | ) | (0.36) | ||||||||||||||
Net realized gains | (0.20 | ) | (0.17 | ) | (—) | d | (0.16 | ) | (0.17 | ) | (0.14) | |||||||||||||
|
| |||||||||||||||||||||||
Total distributions | (0.40 | ) | (0.53 | ) | (0.36) | (0.52 | ) | (0.53 | ) | (0.50) | ||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $11.98 | $12.36 | $11.65 | $11.40 | $11.86 | $11.43 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total returne | 0.16% | 10.88% | 5.54% | 0.51% | 8.66% | 12.51% | ||||||||||||||||||
Ratios to average net assetsf | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 1.01% | 1.02% | 1.02% | 1.06% | 1.09% | 1.12% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatesg | 1.00% | 1.00% | 1.01% | 1.06% | h | 1.09% | h | 1.10% | ||||||||||||||||
Net investment income | 2.13% | 2.72% | 2.62% | 2.56% | 2.64%c | 2.51% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $2,566,488 | $2,646,599 | $2,532,459 | $2,371,133 | $2,053,623 | $1,354,710 | ||||||||||||||||||
Portfolio turnover rate | 25.34% | 34.99% | 46.03% | 69.23% | 40.54% | 58.52% |
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, and 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%.
28 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Balanced Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
Class C | ||||||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.25 | $11.55 | $11.31 | $11.77 | $11.34 | $10.57 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment incomeb | 0.08 | 0.24 | 0.21 | 0.21 | 0.23 | c | 0.20 | |||||||||||||||||
Net realized and unrealized gains (losses) | (0.10 | ) | 0.90 | 0.31 | (0.23 | ) | 0.65 | 0.99 | ||||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | (0.02 | ) | 1.14 | 0.52 | (0.02 | ) | 0.88 | 1.19 | ||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.16 | ) | (0.27 | ) | (0.28 | ) | (0.28 | ) | (0.28 | ) | (0.28) | |||||||||||||
Net realized gains | (0.20 | ) | (0.17 | ) | (— | )d | (0.16 | ) | (0.17 | ) | (0.14) | |||||||||||||
|
| |||||||||||||||||||||||
Total distributions | (0.36 | ) | (0.44 | ) | (0.28 | ) | (0.44 | ) | (0.45 | ) | (0.42) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $11.87 | $12.25 | $11.55 | $11.31 | $11.77 | $11.34 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total returne | (0.22)% | 10.06% | 4.73% | (0.20)% | 7.97% | 11.62% | ||||||||||||||||||
Ratios to average net assetsf | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 1.75% | 1.77% | 1.77% | 1.77% | 1.79% | 1.82% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatesg | 1.74% | 1.75% | 1.76% | 1.77% | h | 1.79% | h | 1.80% | ||||||||||||||||
Net investment income | 1.39% | 1.97% | 1.87% | 1.85% | 1.94% | c | 1.81% | |||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $595,278 | $633,108 | $630,110 | $563,419 | $492,514 | $354,359 | ||||||||||||||||||
Portfolio turnover rate | 25.34% | 34.99% | 46.03% | 69.23% | 40.54% | 58.52% |
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, and 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%.
franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 29 |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Balanced Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
Class R | ||||||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.39 | $11.67 | $11.42 | $11.89 | $11.45 | $10.66 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment incomeb | 0.11 | 0.30 | 0.27 | 0.27 | 0.29 | c | 0.26 | |||||||||||||||||
Net realized and unrealized gains (losses) | (0.10 | ) | 0.92 | 0.32 | (0.24 | ) | 0.66 | 1.01 | ||||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.01 | 1.22 | 0.59 | 0.03 | 0.95 | 1.27 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.19 | ) | (0.33 | ) | (0.34 | ) | (0.34 | ) | (0.34 | ) | (0.34) | |||||||||||||
Net realized gains | (0.20 | ) | (0.17 | ) | (— | )d | (0.16 | ) | (0.17 | ) | (0.14) | |||||||||||||
|
| |||||||||||||||||||||||
Total distributions | (0.39 | ) | (0.50 | ) | (0.34 | ) | (0.50 | ) | (0.51 | ) | (0.48) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $12.01 | $12.39 | $11.67 | $11.42 | $11.89 | $11.45 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total returne | 0.03% | 10.66% | 5.28% | 0.21% | 8.51% | 12.26% | ||||||||||||||||||
Ratios to average net assetsf | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 1.26% | 1.27% | 1.27% | 1.27% | 1.29% | 1.32% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatesg | 1.25% | 1.25% | 1.26% | 1.27%h | 1.29%h | 1.30% | ||||||||||||||||||
Net investment income | 1.88% | 2.47% | 2.37% | 2.35% | 2.44%c | 2.31% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $4,958 | $4,763 | $4,482 | $4,699 | $3,598 | $3,253 | ||||||||||||||||||
Portfolio turnover rate | 25.34% | 34.99% | 46.03% | 69.23% | 40.54% | 58.52% |
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.
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%.
30 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Balanced Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013a | |||||||||||||||||||
Class R6 | ||||||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.39 | $11.67 | $11.42 | $11.89 | $11.45 | $11.08 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsb: | ||||||||||||||||||||||||
Net investment incomec | 0.15 | 0.41 | 0.34 | 0.35 | 0.37 | d | 0.19 | |||||||||||||||||
Net realized and unrealized gains (losses) | (0.11 | ) | 0.88 | 0.31 | (0.25 | ) | 0.65 | 0.38 | ||||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.04 | 1.29 | 0.65 | 0.10 | 1.02 | 0.57 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.22 | ) | (0.40 | ) | (0.40 | ) | (0.41 | ) | (0.41 | ) | (0.20) | |||||||||||||
Net realized gains | (0.20 | ) | (0.17 | ) | (— | )e | (0.16 | ) | (0.17 | ) | — | |||||||||||||
|
| |||||||||||||||||||||||
Total distributions | (0.42 | ) | (0.57 | ) | (0.40 | ) | (0.57 | ) | (0.58 | ) | (0.20) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $12.01 | $12.39 | $11.67 | $11.42 | $11.89 | $11.45 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total returnf | 0.33% | 11.33% | 5.90% | 0.81% | 9.29% | 5.15% | ||||||||||||||||||
Ratios to average net assetsg | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.67% | 0.71% | 0.73% | 0.70% | 0.68% | 1.82% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatesh | 0.66% | 0.64% | 0.66% | 0.67% | 0.68%i | 0.70% | ||||||||||||||||||
Net investment income | 2.47% | 3.08% | 2.97% | 2.95% | 3.05%d | 2.91% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $139,485 | $342 | $233 | $221 | $513 | $5 | ||||||||||||||||||
Portfolio turnover rate | 25.34% | 34.99% | 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%.
franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 31 |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Balanced Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
Advisor Class | ||||||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.39 | $11.67 | $11.42 | $11.88 | $11.45 | $10.66 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment incomeb | 0.14 | 0.35 | 0.29 | 0.33 | 0.35 | c | 0.30 | |||||||||||||||||
Net realized and unrealized gains (losses) | (0.11) | 0.93 | 0.35 | (0.24) | 0.65 | 1.02 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.03 | 1.28 | 0.64 | 0.09 | 1.00 | 1.32 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.22) | (0.39) | (0.39) | (0.39) | (0.40) | (0.39) | ||||||||||||||||||
Net realized gains | (0.20) | (0.17) | (—) | d | (0.16) | (0.17) | (0.14) | |||||||||||||||||
|
| |||||||||||||||||||||||
Total distributions | (0.42) | (0.56) | (0.39) | (0.55) | (0.57) | (0.53) | ||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $12.00 | $12.39 | $11.67 | $11.42 | $11.88 | $11.45 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total returne | 0.20% | 11.21% | 5.79% | 0.81% | 8.97% | 12.82% | ||||||||||||||||||
Ratios to average net assetsf | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.76% | 0.77% | 0.77% | 0.77% | 0.79% | 0.82% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatesg | 0.75% | 0.75% | 0.76% | 0.77%h | 0.79%h | 0.80% | ||||||||||||||||||
Net investment income | 2.38% | 2.97% | 2.87% | 2.85% | 2.94%c | 2.81% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $121,155 | $243,674 | $138,111 | $54,881 | $41,494 | $68,201 | ||||||||||||||||||
Portfolio turnover rate | 25.34% | 34.99% | 46.03% | 69.23% | 40.54% | 58.52% |
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.
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%.
32 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
Statement of Investments, April 30, 2018 (unaudited)
Franklin Balanced Fund
Country | Shares | Value | ||||||||||||
Common Stocks 50.6% | ||||||||||||||
Consumer Discretionary 0.9% | ||||||||||||||
Comcast Corp., A | United States | 1,000,000 | $ | 31,390,000 | ||||||||||
|
| |||||||||||||
Consumer Staples 6.4% | ||||||||||||||
Anheuser-Busch InBev SA/NV, ADR | Belgium | 370,000 | 37,029,600 | |||||||||||
The Coca-Cola Co. | United States | 900,200 | 38,897,642 | |||||||||||
Nestle SA | Switzerland | 500,000 | 38,740,000 | |||||||||||
PepsiCo Inc. | United States | 337,200 | 34,036,968 | |||||||||||
Philip Morris International Inc. | United States | 425,000 | 34,850,000 | |||||||||||
The Procter & Gamble Co. | United States | 500,000 | 36,170,000 | |||||||||||
|
| |||||||||||||
219,724,210 | ||||||||||||||
|
| |||||||||||||
Energy 5.4% | ||||||||||||||
Baker Hughes a GE Co., A | United States | 700,000 | 25,277,000 | |||||||||||
Chevron Corp. | United States | 375,000 | 46,916,250 | |||||||||||
Exxon Mobil Corp. | United States | 535,000 | 41,596,250 | |||||||||||
Royal Dutch Shell PLC, A, ADR | United Kingdom | 719,264 | 50,276,554 | |||||||||||
Schlumberger Ltd. | United States | 320,000 | 21,939,200 | |||||||||||
|
| |||||||||||||
186,005,254 | ||||||||||||||
|
| |||||||||||||
Financials 8.1% | ||||||||||||||
AXA SA | France | 1,000,000 | 28,650,201 | |||||||||||
Bank of America Corp. | United States | 1,496,715 | 44,781,713 | |||||||||||
The Charles Schwab Corp. | United States | 505,000 | 28,118,400 | |||||||||||
JPMorgan Chase & Co. | United States | 543,380 | 59,108,876 | |||||||||||
The Toronto-Dominion Bank | Canada | 415,000 | 23,302,250 | |||||||||||
U.S. Bancorp | United States | 650,000 | 32,792,500 | |||||||||||
Wells Fargo & Co. | United States | 1,200,000 | 62,352,000 | |||||||||||
|
| |||||||||||||
279,105,940 | ||||||||||||||
|
| |||||||||||||
Health Care 5.9% | ||||||||||||||
Allergan PLC | United States | 124,015 | 19,054,905 | |||||||||||
AstraZeneca PLC, ADR | United Kingdom | 1,100,000 | 39,083,000 | |||||||||||
Eli Lilly & Co. | United States | 320,000 | 25,942,400 | |||||||||||
Johnson & Johnson | United States | 267,000 | 33,772,830 | |||||||||||
Medtronic PLC | United States | 300,000 | 24,039,000 | |||||||||||
a | Pfizer Inc. | United States | 1,610,000 | 58,942,100 | ||||||||||
|
| |||||||||||||
200,834,235 | ||||||||||||||
|
| |||||||||||||
Industrials 7.4% | ||||||||||||||
a | General Dynamics Corp. | United States | 100,000 | 20,131,000 | ||||||||||
General Electric Co. | United States | 4,500,000 | 63,315,000 | |||||||||||
Honeywell International Inc. | United States | 200,000 | 28,936,000 | |||||||||||
a | Northrop Grumman Corp. | United States | 105,000 | 33,814,200 | ||||||||||
a | Raytheon Co. | United States | 260,000 | 53,284,400 | ||||||||||
Republic Services Inc. | United States | 460,000 | 29,752,800 | |||||||||||
United Technologies Corp. | United States | 203,592 | 24,461,579 | |||||||||||
|
| |||||||||||||
253,694,979 | ||||||||||||||
|
| |||||||||||||
Information Technology 7.3% | ||||||||||||||
Analog Devices Inc. | United States | 485,000 | 42,364,750 | |||||||||||
Apple Inc. | United States | 100,000 | 16,526,000 | |||||||||||
Broadcom Inc. | United States | 100,000 | 22,942,000 | |||||||||||
a | Cisco Systems Inc. | United States | 500,000 | 22,145,000 | ||||||||||
Intel Corp. | United States | 446,000 | 23,022,520 | |||||||||||
a | Microsoft Corp. | United States | 604,000 | 56,486,080 |
franklintempleton.com | Semiannual Report | 33 |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Balanced Fund (continued)
Country | Shares | Value | ||||||||||||
Common Stocks (continued) | ||||||||||||||
Information Technology (continued) | ||||||||||||||
Oracle Corp. | United States | 570,000 | $ | 26,031,900 | ||||||||||
Texas Instruments Inc. | United States | 400,000 | 40,572,000 | |||||||||||
|
| |||||||||||||
250,090,250 | ||||||||||||||
|
| |||||||||||||
Materials 2.3% | ||||||||||||||
BASF SE | Germany | 500,000 | 52,130,804 | |||||||||||
DowDuPont Inc. | United States | 400,000 | 25,296,000 | |||||||||||
|
| |||||||||||||
77,426,804 | ||||||||||||||
|
| |||||||||||||
Real Estate 2.1% | ||||||||||||||
American Tower Corp. | United States | 305,970 | 41,722,069 | |||||||||||
Host Hotels & Resorts Inc. | United States | 1,500,000 | 29,340,000 | |||||||||||
|
| |||||||||||||
71,062,069 | ||||||||||||||
|
| |||||||||||||
Telecommunication Services 1.0% | ||||||||||||||
Verizon Communications Inc. | United States | 700,000 | 34,545,000 | |||||||||||
|
| |||||||||||||
Utilities 3.8% | ||||||||||||||
American Electric Power Co. Inc. | United States | 400,000 | 27,992,000 | |||||||||||
Dominion Energy Inc. | United States | 350,000 | 23,296,000 | |||||||||||
Entergy Corp. | United States | 350,000 | 28,556,500 | |||||||||||
Sempra Energy | United States | 170,000 | 19,006,000 | |||||||||||
The Southern Co. | United States | 700,000 | 32,284,000 | |||||||||||
|
| |||||||||||||
131,134,500 | ||||||||||||||
|
| |||||||||||||
Total Common Stocks (Cost $1,532,230,178) | 1,735,013,241 | |||||||||||||
|
| |||||||||||||
Management Investment Companies 2.6% | ||||||||||||||
Financials 2.6% | ||||||||||||||
b | Franklin FTSE Europe Hedged ETF | United States | 1,350,000 | 33,894,045 | ||||||||||
b | Franklin FTSE Japan Hedged ETF | United States | 1,250,000 | 32,575,000 | ||||||||||
b | Franklin Liberty Investment Grade Corporate ETF | United States | 900,000 | 21,316,320 | ||||||||||
|
| |||||||||||||
Total Management Investment Companies | 87,785,365 | |||||||||||||
|
| |||||||||||||
c | Equity-Linked Securities 9.0% | |||||||||||||
Consumer Discretionary 2.8% | ||||||||||||||
d | Deutsche Bank AG/London into Target Corp., 8.00%, 144A | United States | 780,000 | 50,206,876 | ||||||||||
d | Wells Fargo Bank National Assn. into Ford Motor Co., 9.00%, 144A | United States | 3,900,000 | 45,283,567 | ||||||||||
|
| |||||||||||||
95,490,443 | ||||||||||||||
|
| |||||||||||||
Industrials 0.8% | ||||||||||||||
d | Goldman Sachs International intoUnion Pacific Corp., 7.50%, 144A | United States | 200,000 | 27,131,326 | ||||||||||
|
| |||||||||||||
Information Technology 5.4% | ||||||||||||||
d | Credit Suisse AG/London into Analog Devices Inc., 7.00%, 144A | United States | 430,000 | 39,075,696 | ||||||||||
d | Deutsche Bank AG/London into Apple Inc., 6.50%, 144A | United States | 200,000 | 33,600,436 | ||||||||||
d | JPMorgan Chase Financial Co. LLC into Intel Corp., 9.00%, 144A | United States | 685,000 | 35,508,672 | ||||||||||
d | Merrill Lynch International & Co. CV into Microsoft Corp., 6.00%, 144A | United States | 600,000 | 49,094,137 | ||||||||||
d | UBS AG London into Alphabet Inc., 6.00%, 144A | United States | 29,000 | 29,615,036 | ||||||||||
|
| |||||||||||||
186,893,977 | ||||||||||||||
|
| |||||||||||||
Total Equity-Linked Securities (Cost $300,834,100) | 309,515,746 | |||||||||||||
|
| |||||||||||||
Convertible Preferred Stocks (Cost $12,870,000) 0.6% | ||||||||||||||
Utilities 0.6% | ||||||||||||||
NextEra Energy Inc., 6.371%, cvt. pfd. | United States | 260,000 | 19,071,000 | |||||||||||
|
|
34 |
Semiannual Report |
franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Balanced Fund (continued)
Country | Units | Value | ||||||||||||
e | Index-Linked Notes (Cost $33,147,500) 1.0% | |||||||||||||
Financials 1.0% | ||||||||||||||
d,f | Morgan Stanley Finance LLC, senior note, 144A, 6.53%, 10/03/19 | United States | 250,000 | $ | 33,302,500 | |||||||||
|
| |||||||||||||
| Principal Amount | * | ||||||||||||
|
| |||||||||||||
Convertible Bonds (Cost $15,000,000) 0.4% | ||||||||||||||
Energy 0.4% | ||||||||||||||
Weatherford International Ltd., cvt., senior note, 5.875%, 7/01/21 | United States | $ | 15,000,000 | 14,291,130 | ||||||||||
|
| |||||||||||||
Corporate Bonds 32.3% | ||||||||||||||
Consumer Discretionary 5.0% | ||||||||||||||
Amazon.com Inc., | ||||||||||||||
senior note, 5.20%, 12/03/25 | United States | 20,000,000 | 22,140,024 | |||||||||||
d senior note, 144A, 2.40%, 2/22/23 | United States | 10,000,000 | 9,581,865 | |||||||||||
d | CCO Holdings LLC/CCO Holdings Capital Corp., senior bond, 144A, 5.125%, 5/01/27 | United States | 15,000,000 | 14,092,050 | ||||||||||
Charter Communications Operating LLC/Charter Communications Operating Capital | ||||||||||||||
Corp., senior secured note, first lien, 4.908%, 7/23/25 | United States | 20,000,000 | 20,370,940 | |||||||||||
DISH DBS Corp., senior bond, 5.875%, 7/15/22 | United States | 12,000,000 | 11,055,000 | |||||||||||
Dollar General Corp., | ||||||||||||||
senior bond, 3.25%, 4/15/23 | United States | 15,000,000 | 14,736,098 | |||||||||||
senior bond, 3.875%, 4/15/27 | United States | 10,000,000 | 9,786,049 | |||||||||||
NIKE Inc., senior bond, 2.375%, 11/01/26 | United States | 25,000,000 | 22,843,022 | |||||||||||
d | Sirius XM Radio Inc., senior bond, 144A, 5.375%, 4/15/25 | United States | 15,000,000 | 14,962,500 | ||||||||||
d | Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., senior bond, 144A, 5.50%, 3/01/25 | United States | 6,000,000 | 5,987,400 | ||||||||||
d | Wynn Macau Ltd., senior bond, 144A, 5.50%, 10/01/27 | Macau | 25,000,000 | 24,562,500 | ||||||||||
|
| |||||||||||||
170,117,448 | ||||||||||||||
|
| |||||||||||||
Consumer Staples 3.8% | ||||||||||||||
Anheuser-Busch InBev Finance Inc., senior bond, 4.90%, 2/01/46 | Belgium | 15,000,000 | 15,501,033 | |||||||||||
The Clorox Co., senior bond, 3.10%, 10/01/27 | United States | 17,500,000 | 16,627,550 | |||||||||||
Costco Wholesale Corp., senior note, 2.75%, 5/18/24 | United States | 30,000,000 | 29,030,522 | |||||||||||
Kraft Heinz Foods Co., | ||||||||||||||
senior bond, 3.50%, 6/06/22 | United States | 10,000,000 | 9,956,884 | |||||||||||
senior bond, 3.00%, 6/01/26 | United States | 20,000,000 | 18,170,039 | |||||||||||
Mondelez International Inc., senior bond, 4.00%, 2/01/24 | United States | 15,000,000 | 15,232,232 | |||||||||||
Reynolds American Inc., senior note, 4.45%, 6/12/25 | United Kingdom | 15,000,000 | 15,203,486 | |||||||||||
Tyson Foods Inc., senior bond, 3.95%, 8/15/24 | United States | 12,100,000 | 12,086,388 | |||||||||||
|
| |||||||||||||
131,808,134 | ||||||||||||||
|
| |||||||||||||
Energy 3.8% | ||||||||||||||
Energy Transfer Partners LP, senior bond, 3.60%, 2/01/23 | United States | 15,000,000 | 14,593,534 | |||||||||||
Ferrellgas LP/Ferrellgas Finance Corp., senior note, 6.75%, 6/15/23 | United States | 18,800,000 | 17,084,500 | |||||||||||
Kinder Morgan Energy Partners LP, senior note, 4.30%, 5/01/24 | United States | 12,900,000 | 12,891,190 | |||||||||||
Nabors Industries Inc., senior note, 5.50%, 1/15/23 | United States | 15,000,000 | 14,767,050 | |||||||||||
Oceaneering International Inc., | ||||||||||||||
senior note, 4.65%, 11/15/24 | United States | 9,400,000 | 9,019,908 | |||||||||||
senior note, 6.00%, 2/01/28 | United States | 20,000,000 | 19,936,327 | |||||||||||
Sabine Pass Liquefaction LLC, senior secured bond, first lien, 5.00%, 3/15/27 | United States | 8,200,000 | 8,442,300 | |||||||||||
Weatherford International Ltd., senior note, 5.125%, 9/15/20 | United States | 10,000,000 | 9,850,000 | |||||||||||
The Williams Cos. Inc., senior note, 4.55%, 6/24/24 | United States | 10,000,000 | 10,012,500 | |||||||||||
Williams Partners LP, senior note, 3.60%, 3/15/22 | United States | 15,000,000 | 14,872,907 | |||||||||||
|
| |||||||||||||
131,470,216 | ||||||||||||||
|
|
franklintempleton.com | Semiannual Report | 35 |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Balanced Fund (continued)
Country | | Principal Amount | * | Value | ||||||||||
Corporate Bonds (continued) | ||||||||||||||
Financials 7.1% | ||||||||||||||
Capital One Financial Corp., | ||||||||||||||
senior bond, 3.80%, 1/31/28 | United States | $ | 20,000,000 | $ | 19,000,668 | |||||||||
senior note, 3.75%, 3/09/27 | United States | 10,000,000 | 9,500,000 | |||||||||||
g | Capital One NA, FRN, 2.854%, (3-month USD LIBOR + 0.765%), 9/13/19 | United States | 10,000,000 | 10,060,013 | ||||||||||
Citigroup Inc., | ||||||||||||||
h junior sub. bond, P, 5.95% to 5/15/25, FRN thereafter, Perpetual | United States | 15,000,000 | 15,206,250 | |||||||||||
sub. bond, 4.125%, 7/25/28 | United States | 15,000,000 | 14,450,803 | |||||||||||
Compass Bank, sub. note, 3.875%, 4/10/25 | United States | 15,000,000 | 14,555,332 | |||||||||||
JPMorgan Chase & Co., | ||||||||||||||
g,h junior sub. bond, I, FRN, 5.829%, (3-month USD LIBOR + 3.47%), Perpetual | United States | 10,000,000 | 10,087,500 | |||||||||||
h junior sub. bond, V, 5.00% to 7/30/19, FRN thereafter, Perpetual | United States | 13,000,000 | 13,165,100 | |||||||||||
senior note, 2.295%, 8/15/21 | United States | 15,000,000 | 14,581,002 | |||||||||||
d | Liberty Mutual Group Inc., senior note, 144A, 4.95%, 5/01/22 | United States | 7,100,000 | 7,429,518 | ||||||||||
d | Mizuho Bank Ltd., senior note, 144A, 2.45%, 4/16/19 | Japan | 12,000,000 | 11,957,994 | ||||||||||
Morgan Stanley, | ||||||||||||||
senior note, 3.125%, 1/23/23 | United States | 20,000,000 | 19,560,763 | |||||||||||
senior sub. bond, 4.35%, 9/08/26 | United States | 15,000,000 | 14,915,539 | |||||||||||
Navient Corp., senior note, 6.125%, 3/25/24 | United States | 15,000,000 | 15,093,750 | |||||||||||
d | Nippon Life Insurance Co., sub. bond, 144A, 5.10% to 10/16/24, FRN thereafter, 10/16/44 | Japan | 15,000,000 | 15,604,650 | ||||||||||
h | PNC Financial Services Group Inc., junior sub. note, 4.85% to 6/01/23, FRN thereafter, Perpetual | United States | 12,000,000 | 11,958,000 | ||||||||||
Prudential Financial Inc., senior note, 3.50%, 5/15/24 | United States | 10,000,000 | 9,976,362 | |||||||||||
h | Wells Fargo & Co., junior sub. bond, 5.875% to 6/15/25, FRN thereafter, Perpetual | United States | 15,000,000 | 15,543,750 | ||||||||||
|
| |||||||||||||
242,646,994 | ||||||||||||||
|
| |||||||||||||
Health Care 4.7% | ||||||||||||||
d | AMAG Pharmaceuticals Inc., senior note, 144A, 7.875%, 9/01/23 | United States | 11,000,000 | 11,000,000 | ||||||||||
Anthem Inc., senior bond, 3.65%, 12/01/27 | United States | 10,000,000 | 9,527,828 | |||||||||||
Biogen Inc., senior note, 3.625%, 9/15/22 | United States | 10,000,000 | 10,009,944 | |||||||||||
Celgene Corp., senior bond, 4.00%, 8/15/23 | United States | 10,000,000 | 10,078,895 | |||||||||||
CHS/Community Health Systems Inc., | ||||||||||||||
senior note, 8.00%, 11/15/19 | United States | 10,000,000 | 9,150,000 | |||||||||||
senior secured note, first lien, 6.25%, 3/31/23 | United States | 21,400,000 | 19,567,625 | |||||||||||
CVS Health Corp., | ||||||||||||||
senior bond, 5.05%, 3/25/48 | United States | 12,300,000 | 12,585,573 | |||||||||||
senior note, 3.875%, 7/20/25 | United States | 15,000,000 | 14,771,992 | |||||||||||
Edwards Lifesciences Corp., senior note, 2.875%, 10/15/18 | United States | 10,000,000 | 10,014,553 | |||||||||||
d | Endo Finance LLC/Endo Finco Inc., senior note, 144A, 5.375%, 1/15/23 | United States | 15,000,000 | 10,912,500 | ||||||||||
d | Mylan Inc., senior bond, 144A, 4.55%, 4/15/28 | United States | 19,000,000 | 18,638,301 | ||||||||||
d | Tenet Healthcare Corp., senior secured note, second lien, 144A, 7.50%, 1/01/22 | United States | 9,200,000 | 9,729,000 | ||||||||||
d | Valeant Pharmaceuticals International Inc., | |||||||||||||
senior bond, 144A, 6.125%, 4/15/25 | United States | 6,300,000 | 5,706,036 | |||||||||||
senior note, 144A, 5.875%, 5/15/23 | United States | 8,300,000 | 7,620,437 | |||||||||||
|
| |||||||||||||
159,312,684 | ||||||||||||||
|
| |||||||||||||
Industrials 1.3% | ||||||||||||||
d | Air Canada 2013-1A Pass Through Trust, first lien, 144A, 4.125%, 11/15/26 | Canada | 5,664,559 | 5,718,202 | ||||||||||
CNH Industrial NV, senior bond, 3.85%, 11/15/27 | United Kingdom | 15,000,000 | 14,360,625 | |||||||||||
h | General Electric Co., junior sub. bond, 5.00% to 1/21/21, FRN thereafter, Perpetual | United States | 9,876,000 | 9,789,585 | ||||||||||
Lockheed Martin Corp., senior bond, 3.55%, 1/15/26 | United States | 15,000,000 | 14,793,475 | |||||||||||
|
| |||||||||||||
44,661,887 | ||||||||||||||
|
|
36 |
Semiannual Report |
franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Balanced Fund (continued)
Country | | Principal Amount | * | Value | ||||||||||
Corporate Bonds (continued) | ||||||||||||||
Information Technology 1.1% | ||||||||||||||
d | CommScope Technologies LLC, senior bond, 144A, 5.00%, 3/15/27 | United States | $ | 10,000,000 | $ | 9,600,000 | ||||||||
d | Dell International LLC/EMC Corp., senior secured note, first lien, 144A, 4.42%, 6/15/21 | United States | 18,000,000 | 18,345,926 | ||||||||||
Xilinx Inc., senior note, 2.95%, 6/01/24 | United States | 11,000,000 | 10,455,712 | |||||||||||
|
| |||||||||||||
38,401,638 | ||||||||||||||
|
| |||||||||||||
Real Estate 1.7% | ||||||||||||||
HCP Inc., senior bond, 3.875%, 8/15/24 | United States | 21,700,000 | 21,220,174 | |||||||||||
Healthcare Trust of America Holdings LP, senior note, 3.375%, 7/15/21 | United States | 10,000,000 | 9,948,911 | |||||||||||
Prologis LP, senior note, 4.25%, 8/15/23 | United States | 12,000,000 | 12,368,243 | |||||||||||
Realty Income Corp., senior bond, 3.875%, 7/15/24 | United States | 15,000,000 | 14,868,307 | |||||||||||
|
| |||||||||||||
58,405,635 | ||||||||||||||
|
| |||||||||||||
Telecommunication Services 1.7% | ||||||||||||||
AT&T Inc., senior note, 3.95%, 1/15/25 | United States | 11,700,000 | 11,600,472 | |||||||||||
Sprint Corp., senior note, 7.625%, 2/15/25 | United States | 10,000,000 | 10,550,000 | |||||||||||
d | Sprint Spectrum Co. LLC/Sprint Spectrum Co. II LLC, first lien, senior secured note, | United States | 25,000,000 | 25,187,500 | ||||||||||
Telefonica Emisiones S.A.U., senior note, 4.57%, 4/27/23 | Spain | 10,000,000 | 10,437,350 | |||||||||||
|
| |||||||||||||
57,775,322 | ||||||||||||||
|
| |||||||||||||
Utilities 2.1% | ||||||||||||||
d | Calpine Corp., senior secured bond, 144A, 5.25%, 6/01/26 | United States | 15,000,000 | 14,409,375 | ||||||||||
Duke Energy Corp., senior bond, 3.15%, 8/15/27 | United States | 20,000,000 | 18,625,567 | |||||||||||
d,h | EDF SA, junior sub. note, 144A, 5.25% to 1/29/23, FRN thereafter, Perpetual | France | 10,000,000 | 9,993,000 | ||||||||||
d | InterGen NV, secured bond, 144A, 7.00%, 6/30/23 | Netherlands | 10,000,000 | 9,976,500 | ||||||||||
PSEG Power LLC, senior note, 3.00%, 6/15/21 | United States | 20,000,000 | 19,839,122 | |||||||||||
|
| |||||||||||||
72,843,564 | ||||||||||||||
|
| |||||||||||||
Total Corporate Bonds (Cost $1,121,516,536) | 1,107,443,522 | |||||||||||||
|
| |||||||||||||
Total Investments before Short Term Investments | 3,306,422,504 | |||||||||||||
|
| |||||||||||||
Shares | ||||||||||||||
Short Term Investments (Cost $72,301,728) 2.1% | ||||||||||||||
Money Market Funds 2.1% | ||||||||||||||
b,i | Institutional Fiduciary Trust Money Market Portfolio, 1.30% | United States | 72,301,728 | 72,301,728 | ||||||||||
|
| |||||||||||||
Total Investments (Cost $3,176,176,292) 98.6% | 3,378,724,232 | |||||||||||||
Options Written (0.0)%† | (1,460,200 | ) | ||||||||||||
Other Assets, less Liabilities 1.4% | 50,101,018 | |||||||||||||
|
| |||||||||||||
Net Assets 100.0% | $ | 3,427,365,050 | ||||||||||||
|
|
franklintempleton.com | Semiannual Report | 37 |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Balanced Fund (continued)
| Number of Contracts | | | Notional Amount | * | Value | ||||||||
j | Options Written (0.0)%† | |||||||||||||
Calls - Exchange-Traded | ||||||||||||||
Cisco Systems Inc., Call Option, Strike Price $45, Expires 5/18/18 | 5,000 | 500,000 | $ | (495,000 | ) | |||||||||
General Dynamics Corp., Call option, Strike Price $230, Expires 5/18/18 | 1,000 | 100,000 | (5,000 | ) | ||||||||||
Microsoft Corp., Call Option, Strike Price $100, Expires 5/18/18 | 3,000 | 300,000 | (51,000 | ) | ||||||||||
Northrop Grumman Corp., Call Option, Strike Price $370, Expires 5/18/18 | 1,050 | 105,000 | (8,400 | ) | ||||||||||
Pfizer Inc., Call Option, Strike Price $37, Expires 5/18/18 | 10,000 | 1,000,000 | (340,000 | ) | ||||||||||
Raytheon Co., Call Option, Strike Price $230, Expires 5/18/18 | 1,200 | 120,000 | (10,800 | ) | ||||||||||
|
| |||||||||||||
(910,200 | ) | |||||||||||||
|
| |||||||||||||
Puts - Exchange-Traded | ||||||||||||||
General Dynamics Corp., Put Option, Strike Price $205, Expires 5/18/18 | 1,000 | 100,000 | (490,000 | ) | ||||||||||
Microsoft Corp., Put Option, Strike Price $85, Expires 5/18/18 | 3,000 | 300,000 | (60,000 | ) | ||||||||||
|
| |||||||||||||
(550,000 | ) | |||||||||||||
|
| |||||||||||||
Total Options Written (Premiums received $2,413,479) | $ | (1,460,200 | ) | |||||||||||
|
|
See Abbreviations on page 82.
†Rounds to less than 0.1% of net assets.
*The principal/notional 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 period end.
bSee Note 3(f) regarding investments in affiliated management investment companies.
cSee Note 1(f) regarding equity-linked securities.
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 April 30, 2018, the aggregate value of these securities was $603,833,500, representing 17.6% of net assets.
eSee Note 1(e) regarding index-linked notes.
fSecurity pays a fixed 2.00% coupon rate and a variable coupon based on the distribution of the Morgan Stanley Custom Enhanced SPX B DT Index 20 Delta. The coupon rate shown represents the combined rate at period end. Cash payment at maturity or upon early redemption is based on the performance of the Morgan Stanley Custom Enhanced SPX B Index 20 Delta.
gThe coupon rate shown represents the rate at period end.
hPerpetual security with no stated maturity date.
iThe rate shown is the annualized seven-day effective yield at period end.
jSee Note 1(d) regarding written options.
38 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
Financial Highlights
Franklin Convertible Securities Fund
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
Class A | ||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $20.68 | $18.24 | $18.00 | $18.97 | $17.82 | $14.93 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment incomeb | 0.07 | 0.27 | 0.25 | 0.24 | 0.23 | 0.37 | ||||||||||||||||||
Net realized and unrealized gains (losses) | 0.83 | 2.98 | 0.85 | (0.14 | ) | 1.32 | 2.99 | |||||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.90 | 3.25 | 1.10 | 0.10 | 1.55 | 3.36 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.25 | ) | (0.47 | ) | (0.50 | ) | (0.39 | ) | (0.33 | ) | (0.47) | |||||||||||||
Net realized gains | (1.05 | ) | (0.34 | ) | (0.36 | ) | (0.68 | ) | (0.07 | ) | — | |||||||||||||
|
| |||||||||||||||||||||||
Total distributions | (1.30 | ) | (0.81 | ) | (0.86 | ) | (1.07 | ) | (0.40 | ) | (0.47) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $20.28 | $20.68 | $18.24 | $18.00 | $18.97 | $17.82 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total returnc | 4.59% | 18.39% | 6.41% | 0.66% | 8.85% | 22.92% | ||||||||||||||||||
Ratios to average net assetsd | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.85% | 0.85% | 0.86% | 0.86% | 0.88% | 0.88% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatese | 0.84% | 0.84% | 0.85% | 0.86%f | 0.88%f | 0.88% | ||||||||||||||||||
Net investment income | 0.65% | 1.39% | 1.44% | 1.33% | 1.23% | 2.25% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $907,155 | $815,491 | $768,553 | $818,082 | $921,134 | $844,498 | ||||||||||||||||||
Portfolio turnover rate | 24.47% | 27.24% | 28.03% | 17.30% | 23.05% | 34.69% |
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.
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%.
franklintempleton.com |
The accompanying notes are an integral part of these financial statements. | Semiannual Report | 39 |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Convertible Securities Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
Class C | ||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $20.37 | $17.98 | $17.75 | $18.73 | $17.60 | $14.75 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment income (loss)b | (0.01 | ) | 0.12 | 0.12 | 0.11 | 0.09 | 0.24 | |||||||||||||||||
Net realized and unrealized gains (losses) | 0.83 | 2.93 | 0.84 | (0.16 | ) | 1.31 | 2.97 | |||||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.82 | 3.05 | 0.96 | (0.05 | ) | 1.40 | 3.21 | |||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.18 | ) | (0.32 | ) | (0.37 | ) | (0.25 | ) | (0.20 | ) | (0.36) | |||||||||||||
Net realized gains | (1.05 | ) | (0.34 | ) | (0.36 | ) | (0.68 | ) | (0.07 | ) | — | |||||||||||||
|
| |||||||||||||||||||||||
Total distributions | (1.23 | ) | (0.66 | ) | (0.73 | ) | (0.93 | ) | (0.27 | ) | (0.36) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $19.96 | $20.37 | $17.98 | $17.75 | $18.73 | $17.60 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total returnc | 4.22% | 17.49% | 5.65% | (0.15 | )% | 8.01% | 22.11% | |||||||||||||||||
Ratios to average net assetsd | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 1.60% | 1.60% | 1.61% | 1.61% | 1.63% | 1.63% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatese | 1.59% | 1.59% | 1.60% | 1.61%f | 1.63%f | 1.63% | ||||||||||||||||||
Net investment income (loss) | (0.10)% | 0.64% | 0.69% | 0.58% | 0.48% | 1.50% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $325,131 | $303,243 | $293,038 | $311,951 | $333,034 | $273,132 | ||||||||||||||||||
Portfolio turnover rate | 24.47% | 27.24% | 28.03% | 17.30% | 23.05% | 34.69% |
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.
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%.
40 |
Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Convertible Securities Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014a | ||||||||||||||||
Class R6 | ||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||
Net asset value, beginning of period | $20.79 | $18.33 | $18.09 | $18.99 | $19.21 | |||||||||||||||
|
| |||||||||||||||||||
Income from investment operationsb: | ||||||||||||||||||||
Net investment incomec | 0.10 | 0.34 | 0.33 | 0.30 | 0.19 | |||||||||||||||
Net realized and unrealized gains (losses) | 0.85 | 3.00 | 0.84 | (0.14 | ) | (0.17) | ||||||||||||||
|
| |||||||||||||||||||
Total from investment operations | 0.95 | 3.34 | 1.17 | 0.16 | 0.02 | |||||||||||||||
|
| |||||||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (0.29 | ) | (0.54 | ) | (0.57 | ) | (0.38 | ) | (0.24) | |||||||||||
Net realized gains | (1.05 | ) | (0.34 | ) | (0.36 | ) | (0.68 | ) | — | |||||||||||
|
| |||||||||||||||||||
Total distributions | (1.34 | ) | (0.88 | ) | (0.93 | ) | (1.06 | ) | (0.24) | |||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $20.40 | $20.79 | $18.33 | $18.09 | $18.99 | |||||||||||||||
|
| |||||||||||||||||||
Total returnd | 4.79% | 18.84% | 6.78% | 0.99% | 0.11% | |||||||||||||||
Ratios to average net assetse | ||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.54% | 0.49% | 0.50% | 0.50% | 0.51% | |||||||||||||||
Expenses net of waiver and payments by affiliatesf | 0.50% | 0.48% | 0.49% | 0.50% | g | 0.51% | g | |||||||||||||
Net investment income | 0.99% | 1.75% | 1.80% | 1.69% | 1.60% | |||||||||||||||
Supplemental data | ||||||||||||||||||||
Net assets, end of period (000’s) | $30,191 | $22,950 | $7,154 | $5 | $3,093 | |||||||||||||||
Portfolio turnover rate | 24.47% | 27.24% | 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%.
franklintempleton.com |
The accompanying notes are an integral part of these financial statements. | Semiannual Report | 41 |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Convertible Securities Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
Advisor Class | ||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $20.68 | $18.24 | $18.00 | $18.98 | $17.83 | $14.94 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment incomeb | 0.09 | 0.32 | 0.30 | 0.29 | 0.28 | 0.41 | ||||||||||||||||||
Net realized and unrealized gains (losses) | 0.85 | 2.98 | 0.85 | (0.15 | ) | 1.32 | 2.99 | |||||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.94 | 3.30 | 1.15 | 0.14 | 1.60 | 3.40 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.28 | ) | (0.52 | ) | (0.55 | ) | (0.44 | ) | (0.38 | ) | (0.51) | |||||||||||||
Net realized gains | (1.05 | ) | (0.34 | ) | (0.36 | ) | (0.68 | ) | (0.07 | ) | — | |||||||||||||
|
| |||||||||||||||||||||||
Total distributions | (1.33 | ) | (0.86 | ) | (0.91 | ) | (1.12 | ) | (0.45 | ) | (0.51) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $20.29 | $20.68 | $18.24 | $18.00 | $18.98 | $17.83 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total returnc | 4.76% | 18.69% | 6.68% | 0.87% | 9.13% | 23.21% | ||||||||||||||||||
Ratios to average net assetsd | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.60% | 0.60% | 0.61% | 0.61% | 0.63% | 0.63% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatese | 0.59% | 0.59% | 0.60% | 0.61%f | 0.63%f | 0.63% | ||||||||||||||||||
Net investment income | 0.90% | 1.64% | 1.69% | 1.58% | 1.48% | 2.50% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $1,550,864 | $1,542,254 | $1,080,346 | $899,441 | $877,190 | $387,528 | ||||||||||||||||||
Portfolio turnover rate | 24.47% | 27.24% | 28.03% | 17.30% | 23.05% | 34.69% |
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.
cTotal return 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%.
42 |
Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
Statement of Investments, April 30, 2018 (unaudited)
Franklin Convertible Securities Fund
Country | Shares | Value | ||||||||||
Convertible Preferred Stocks 15.0% | ||||||||||||
Consumer Staples 2.9% | ||||||||||||
Bunge Ltd., 4.875%, cvt. pfd. | United States | 315,000 | $ | 34,177,500 | ||||||||
Post Holdings Inc., 2.50%, cvt. pfd. | United States | 321,200 | 48,528,887 | |||||||||
|
| |||||||||||
82,706,387 | ||||||||||||
|
| |||||||||||
Health Care 2.4% | ||||||||||||
Becton Dickinson and Co., 6.125%, cvt. pfd., A | United States | 875,000 | 52,806,250 | |||||||||
Teva Pharmaceutical Industries Ltd., 7.00%, cvt. pfd. | Israel | 42,500 | 14,917,500 | |||||||||
|
| |||||||||||
67,723,750 | ||||||||||||
|
| |||||||||||
Industrials 4.5% | ||||||||||||
Rexnord Corp., 5.75%, cvt. pfd. | United States | 967,500 | 60,313,950 | |||||||||
Stanley Black & Decker Inc., 5.375%, cvt. pfd. | United States | 445,000 | 47,837,500 | |||||||||
Stericycle Inc., 5.25%, cvt. pfd. | United States | 380,000 | 17,259,600 | |||||||||
|
| |||||||||||
125,411,050 | ||||||||||||
|
| |||||||||||
Information Technology 1.8% | ||||||||||||
a | Mandatory Exchangeable Trust, 5.75%, cvt. pfd., 144A | China | 251,500 | 50,752,776 | ||||||||
|
| |||||||||||
Utilities 3.4% | ||||||||||||
Black Hills Corp., 7.75%, cvt. pfd. | United States | 606,000 | 37,044,780 | |||||||||
Sempra Energy, 6.00%, cvt. pfd., A. | United States | 477,500 | 49,101,325 | |||||||||
South Jersey Industries Inc, 7.25%, cvt. pfd. | United States | 180,000 | 9,360,000 | |||||||||
|
| |||||||||||
95,506,105 | ||||||||||||
|
| |||||||||||
Total Convertible Preferred Stocks (Cost $406,468,205) | 422,100,068 | |||||||||||
|
| |||||||||||
| Principal Amount | * | ||||||||||
|
| |||||||||||
Convertible Bonds 81.2% | ||||||||||||
Consumer Discretionary 14.2% | ||||||||||||
Ctrip.com International Ltd., | ||||||||||||
cvt., senior note, 1.25%, 10/15/18 | China | $ | 19,200,000 | 21,181,440 | ||||||||
cvt., senior note, 1.25%, 9/15/22 | China | 25,000,000 | 25,278,750 | |||||||||
Dish Network Corp., cvt., senior bond, 3.375%, 8/15/26 | United States | 45,900,000 | 41,769,964 | |||||||||
GNC Holdings Inc., cvt., senior note, 1.50%, 8/15/20 | United States | 5,000,000 | 3,625,000 | |||||||||
a | Liberty Expedia Holdings, cvt., 144A, 1.00%, 6/30/47 | United States | 52,450,000 | 51,433,781 | ||||||||
a | Liberty Interactive LLC, cvt., senior bond, 144A, 1.75%, 9/30/46 | United States | 37,000,000 | 38,810,040 | ||||||||
Liberty Media Corp., | ||||||||||||
cvt., senior bond, 2.25%, 9/30/46 | United States | 39,000,000 | 41,064,933 | |||||||||
cvt., senior note, 1.375%, 10/15/23 | United States | 21,200,000 | 24,424,520 | |||||||||
The Priceline Group Inc., cvt., senior note, 0.35%, 6/15/20 | United States | 35,000,000 | 58,605,400 | |||||||||
Shutterfly Inc., cvt., 0.25%, 5/18/18 | United States | 37,465,000 | 47,242,466 | |||||||||
a | Wayfair Inc., cvt., senior note, 144A, 0.375%, 9/01/22 | United States | 50,000,000 | 46,557,300 | ||||||||
|
| |||||||||||
399,993,594 | ||||||||||||
|
| |||||||||||
Energy 0.6% | ||||||||||||
a | Oil States International Inc., cvt., senior note, 144A, 1.50%, 2/15/23 | United States | 14,000,000 | 15,575,000 | ||||||||
|
| |||||||||||
Health Care 15.9% | ||||||||||||
BioMarin Pharmaceutical Inc., cvt., senior sub. note, 1.50%, 10/15/20 | United States | 28,200,000 | 31,793,893 | |||||||||
Brookdale Senior Living Inc., cvt., senior note, 2.75%, 6/15/18 | United States | 12,100,000 | 12,104,961 | |||||||||
Clovis Oncology Inc., cvt., senior note, 1.25%, 5/01/25 | United States | 30,000,000 | 27,173,040 | |||||||||
a | Corium International Inc., cvt., senior note, 144A, 5.00%, 3/15/25 | United States | 14,500,000 | 13,368,217 | ||||||||
Depomed Inc., cvt., senior note, 2.50%, 9/01/21 | United States | 16,000,000 | 12,965,264 | |||||||||
a | Dermira Inc., cvt., senior note, 144A, 3.00%, 5/15/22 | United States | 41,120,000 | 33,276,360 |
franklintempleton.com | Semiannual Report | 43 |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Convertible Securities Fund (continued)
Country | | Principal Amount | * | Value | ||||||||
Convertible Bonds (continued) | ||||||||||||
Health Care (continued) | ||||||||||||
a | DexCom Inc., cvt., senior note, 144A, 0.75%, 5/15/22 | United States | $ | 21,600,000 | $ | 22,205,016 | ||||||
Fluidigm Corp., cvt., senior bond, 2.75%, 2/01/34 | United States | 11,918,000 | 11,019,442 | |||||||||
Illumina Inc., cvt., senior note, 0.50%, 6/15/21 | United States | 41,000,000 | 51,396,739 | |||||||||
a | Insulet Corp., cvt., senior note, 144A, 1.375%, 11/15/24 | United States | 42,000,000 | 47,617,500 | ||||||||
Jazz Investments I Ltd., | ||||||||||||
cvt., senior note, 1.875%, 8/15/21 | United States | 35,000,000 | 36,642,550 | |||||||||
a cvt., senior note, 144A, 1.50%, 8/15/24 | United States | 17,750,000 | 17,575,518 | |||||||||
a | Neurocrine Biosciences Inc., cvt., senior note, 144A, 2.25%, 5/15/24 | United States | 44,750,000 | 57,973,356 | ||||||||
Novavax Inc., cvt., senior note, 3.75%, 2/01/23 | United States | 29,000,000 | 18,815,200 | |||||||||
NuVasive Inc., cvt., senior note, 2.25%, 3/15/21 | United States | 12,000,000 | 13,267,500 | |||||||||
a | Sarepta Therapeutics Inc., cvt., senior note, 144A, 1.50%, 11/15/24 | United States | 30,250,000 | 38,827,085 | ||||||||
|
| |||||||||||
446,021,641 | ||||||||||||
|
| |||||||||||
Industrials 0.7% | ||||||||||||
The KeyW Holding Corp., cvt., senior note, 2.50%, 7/15/19 | United States | 20,000,000 | 19,800,000 | |||||||||
|
| |||||||||||
Information Technology 46.6% | ||||||||||||
Altaba Inc., cvt., zero cpn., 12/01/18 | United States | 35,100,000 | 46,383,457 | |||||||||
a | Atlassian Inc., cvt., senior note, 144A, 0.625%, 5/01/23 | United States | 32,000,000 | 32,128,000 | ||||||||
Blackhawk Network Holdings Inc., cvt., senior note, 1.50%, 1/15/22 | United States | 42,700,000 | 47,379,621 | |||||||||
Electronics for Imaging Inc., cvt., senior note, 0.75%, 9/01/19 | United States | 22,000,000 | 21,264,672 | |||||||||
a | Etsy Inc., cvt., senior note, 144A, zero cpn., 3/01/23 | United States | 40,000,000 | 43,575,000 | ||||||||
Guidewire Software Inc., cvt., senior note, 1.25%, 3/15/25 | United States | 29,000,000 | 29,486,591 | |||||||||
a | HubSpot Inc., cvt., 144A, 0.25%, 6/01/22 | United States | 43,875,000 | 55,995,469 | ||||||||
Inphi Corp., cvt., senior note, 0.75%, 9/01/21 | United States | 9,600,000 | 8,855,405 | |||||||||
Integrated Device Technology Inc., cvt., senior note, 0.875%, 11/15/22 | United States | 4,700,000 | 5,084,469 | |||||||||
Intel Corp., cvt., junior sub. bond, 3.25%, 8/01/39 | United States | 8,000,000 | 19,888,200 | |||||||||
Mercadolibre Inc., cvt., 2.25%, 7/01/19 | Argentina | 5,000,000 | 13,581,350 | |||||||||
Microchip Technology Inc., cvt., 1.625%, 2/15/27 | United States | 45,750,000 | 51,711,225 | |||||||||
Micron Technology Inc., cvt., senior bond, G, 3.00%, 11/15/43 | United States | 35,050,000 | 55,661,748 | |||||||||
Novellus Systems Inc., cvt., senior note, 2.625%, 5/15/41 | United States | 8,600,000 | 47,534,737 | |||||||||
NXP Semiconductors NV, cvt., senior note, 1.00%, 12/01/19 | Netherlands | 35,000,000 | 41,523,125 | |||||||||
a | Okta Inc., cvt., senior note, 144A, 0.25%, 2/15/23 | United States | 44,500,000 | 51,131,657 | ||||||||
Palo Alto Networks Inc., cvt., zero cpn., 7/01/19 | United States | 28,750,000 | 50,480,774 | |||||||||
Proofpoint Inc., cvt., 0.75%, 6/15/20 | United States | 39,100,000 | 59,189,033 | |||||||||
a | Q2 Holdings Inc., cvt., 144A, 0.75%, 2/15/23 | United States | 27,000,000 | 28,809,000 | ||||||||
a | Realpage Inc., cvt., 144A, 1.50%, 11/15/22 | United States | 40,850,000 | 57,241,062 | ||||||||
Red Hat Inc., cvt., senior note, 0.25%, 10/01/19 | United States | 29,250,000 | 64,916,894 | |||||||||
a | ServiceNow Inc., cvt., senior note, 144A, zero cpn., 6/01/22 | United States | 45,000,000 | 60,489,000 | ||||||||
Silicon Laboratories Inc., cvt., senior note, 1.375%, 3/01/22 | United States | 38,700,000 | 45,956,250 | |||||||||
Square Inc, cvt., 0.375%, 3/01/22 | United States | 29,200,000 | 61,936,120 | |||||||||
Take-Two Interactive Software Inc., cvt., senior note, 1.00%, 7/01/18 | United States | 7,000,000 | 32,417,000 | |||||||||
VeriSign Inc., cvt., junior sub. bond, 3.25%, 8/15/37 | United States | 11,000,000 | 37,637,006 | |||||||||
Viavi Solutions Inc., cvt., senior bond, 0.625%, 8/15/33 | United States | 39,900,000 | 40,373,892 | |||||||||
a | Weibo Corp., cvt., senior note, 144A, 1.25%, 11/15/22 | China | 43,000,000 | 49,041,715 | ||||||||
a | Workday Inc., cvt., senior note, 144A, 0.25%, 10/01/22 | United States | 52,500,000 | 56,778,750 | ||||||||
a | Zendesk Inc., cvt., senior note, 144A, 0.25%, 3/15/23 | United States | 43,500,000 | 45,148,650 | ||||||||
Zillow Group Inc., cvt., senior note, 2.00%, 12/01/21 | United States | 43,500,000 | 50,453,040 | |||||||||
|
| |||||||||||
1,312,052,912 | ||||||||||||
|
|
44 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Convertible Securities Fund (continued)
Country | Principal Amount* | Value | ||||||||||
Convertible Bonds (continued) | ||||||||||||
Materials 1.8% | ||||||||||||
B2Gold Corp., cvt., senior sub. note, 3.25%, 10/01/18 | Canada | $ | 13,900,000 | $ | 14,011,200 | |||||||
Cemex SAB de CV, cvt., sub. note, 3.72%, 3/15/20 | Mexico | 34,750,000 | 35,835,938 | |||||||||
|
| |||||||||||
49,847,138 | ||||||||||||
|
| |||||||||||
Real Estate 1.4% | ||||||||||||
Forest City Enterprises Inc., | ||||||||||||
cvt., senior note, 4.25%, 8/15/18 | United States | 17,110,000 | 17,404,514 | |||||||||
cvt., senior note, A, 3.625%, 8/15/20 | United States | 22,000,000 | 22,797,390 | |||||||||
|
| |||||||||||
40,201,904 | ||||||||||||
|
| |||||||||||
Total Convertible Bonds (Cost $1,953,213,472) | 2,283,492,189 | |||||||||||
|
| |||||||||||
Shares | ||||||||||||
Escrows and Litigation Trusts 0.0% | ||||||||||||
b,c | Impax Laboratories Inc., Escrow Account | United States | 45,000,000 | — | ||||||||
b,c | Motors Liquidation Co., Escrow Account | United States | 376,200 | — | ||||||||
|
| |||||||||||
Total Escrows and Litigation Trusts | — | |||||||||||
|
| |||||||||||
Total Investments before Short Term Investments | 2,705,592,257 | |||||||||||
|
| |||||||||||
Short Term Investments (Cost $89,575,377) 3.2% | ||||||||||||
Money Market Funds 3.2% | ||||||||||||
d,e | Institutional Fiduciary Trust Money Market Portfolio, 1.30% | United States | 89,575,377 | 89,575,377 | ||||||||
|
| |||||||||||
Total Investments (Cost $2,449,279,416) 99.4% | 2,795,167,634 | |||||||||||
Other Assets, less Liabilities 0.6% | 18,173,393 | |||||||||||
|
| |||||||||||
Net Assets 100.0% | $ | 2,813,341,027 | ||||||||||
|
|
*The principal amount is stated in U.S. dollars unless otherwise indicated.
aSecurity 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 April 30, 2018, the aggregate value of these securities was $914,310,252, representing 32.5% of net assets.
bNon-income producing.
cFair valued using significant unobservable inputs. See Note 10 regarding fair value measurements.
dSee Note 3(f) regarding investments in affiliated management investment companies.
eThe rate shown is the annualized seven-day effective yield at period end.
franklintempleton.com |
The accompanying notes are an integral part of these financial statements. | Semiannual Report | 45 |
FRANKLIN INVESTORS SECURITIES TRUST
Financial Highlights
Franklin Equity Income Fund
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
Class A | ||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $25.06 | $22.50 | $22.99 | $23.93 | $22.16 | $18.01 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment incomeb | 0.20 | 0.48 | 0.47 | 0.55 | 0.66 | c | 0.44 | |||||||||||||||||
Net realized and unrealized gains (losses) | 0.25 | 3.55 | 0.24 | 0.26 | 1.73 | 4.19 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.45 | 4.03 | 0.71 | 0.81 | 2.39 | 4.63 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.28 | ) | (0.58 | ) | (0.60 | ) | (0.69 | ) | (0.50 | ) | (0.48) | |||||||||||||
Net realized gains | (0.63 | ) | (0.89 | ) | (0.60 | ) | (1.06 | ) | (0.12 | ) | — | |||||||||||||
|
| |||||||||||||||||||||||
Total distributions | (0.91 | ) | (1.47 | ) | (1.20 | ) | (1.75 | ) | (0.62 | ) | (0.48) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $24.60 | $25.06 | $22.50 | $22.99 | $23.93 | $22.16 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total returnd | 1.72% | 18.55% | 3.31% | 3.72% | 10.99% | 26.07% | ||||||||||||||||||
Ratios to average net assetse | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.85% | 0.86% | 0.87% | 0.86% | 0.87% | 0.91% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatesf | 0.84% | 0.86% | g | 0.87% | g | 0.86% | g | 0.87% | g | 0.91% | ||||||||||||||
Net investment income | 1.59% | 2.02% | 2.13% | 2.37% | 2.87% | c | 2.19% | |||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $1,699,186 | $1,753,135 | $1,700,712 | $1,790,392 | $1,762,318 | $1,637,089 | ||||||||||||||||||
Portfolio turnover rate | 15.74% | 27.18% | 50.05% | 34.09% | 20.15% | 33.18% |
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, and 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%.
46 |
Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Equity Income Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
Class C | ||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $24.86 | $22.32 | $22.85 | $23.79 | $22.04 | $17.91 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment incomeb | 0.10 | 0.30 | 0.30 | 0.37 | 0.49 | c | 0.28 | |||||||||||||||||
Net realized and unrealized gains (losses) | 0.25 | 3.54 | 0.23 | 0.27 | 1.71 | 4.18 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.35 | 3.84 | 0.53 | 0.64 | 2.20 | 4.46 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.18 | ) | (0.41 | ) | (0.46 | ) | (0.52 | ) | (0.33 | ) | (0.33) | |||||||||||||
Net realized gains | (0.63 | ) | (0.89 | ) | (0.60 | ) | (1.06 | ) | (0.12 | ) | — | |||||||||||||
|
| |||||||||||||||||||||||
Total distributions | (0.81 | ) | (1.30 | ) | (1.06 | ) | (1.58 | ) | (0.45 | ) | (0.33) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $24.40 | $24.86 | $22.32 | $22.85 | $23.79 | $22.04 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total returnd | 1.35% | 17.73% | 2.51% | 2.96% | 10.14% | 25.18% | ||||||||||||||||||
Ratios to average net assetse | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 1.60% | 1.61% | 1.62% | 1.61% | 1.62% | 1.66% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatesf | 1.59% | 1.61% | g | 1.62% | g | 1.61% | g | 1.62% | g | 1.66% | ||||||||||||||
Net investment income | 0.84% | 1.27% | 1.38% | 1.62% | 2.12% | c | 1.44% | |||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $265,810 | $267,450 | $257,156 | $250,347 | $241,566 | $208,325 | ||||||||||||||||||
Portfolio turnover rate | 15.74% | 27.18% | 50.05% | 34.09% | 20.15% | 33.18% |
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, and 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%.
franklintempleton.com |
The accompanying notes are an integral part of these financial statements. | Semiannual Report | 47 |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Equity Income Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
Class R | ||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $25.05 | $22.49 | $22.99 | $23.93 | $22.17 | $18.01 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment incomeb | 0.17 | 0.42 | 0.41 | 0.50 | 0.61 | c | 0.39 | |||||||||||||||||
Net realized and unrealized gains (losses) | 0.26 | 3.56 | 0.24 | 0.25 | 1.72 | 4.20 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.43 | 3.98 | 0.65 | 0.75 | 2.33 | 4.59 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.25 | ) | (0.53 | ) | (0.55 | ) | (0.63 | ) | (0.45 | ) | (0.43) | |||||||||||||
Net realized gains | (0.63 | ) | (0.89 | ) | (0.60 | ) | (1.06 | ) | (0.12 | ) | — | |||||||||||||
|
| |||||||||||||||||||||||
Total distributions | (0.88 | ) | (1.42 | ) | (1.15 | ) | (1.69 | ) | (0.57 | ) | (0.43) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $24.60 | $25.05 | $22.49 | $22.99 | $23.93 | $22.17 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total returnd | 1.64% | 18.29% | 3.05% | 3.45% | 10.67% | 25.81% | ||||||||||||||||||
Ratios to average net assetse | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 1.07% | 1.09% | 1.11% | 1.11% | 1.12% | 1.16% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatesf | 1.06% | 1.09% | g | 1.11% | g | 1.11% | g | 1.12% | g | 1.16% | ||||||||||||||
Net investment income | 1.37% | 1.79% | 1.89% | 2.12% | 2.62% | c | 1.94% | |||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $6,558 | $7,074 | $6,395 | $6,265 | $7,305 | $5,844 | ||||||||||||||||||
Portfolio turnover rate | 15.74% | 27.18% | 50.05% | 34.09% | 20.15% | 33.18% |
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%.
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%.
48 |
Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Equity Income Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013a | |||||||||||||||||||
Class R6 | ||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $25.11 | $22.54 | $23.01 | $23.95 | $22.18 | $20.00 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsb: | ||||||||||||||||||||||||
Net investment incomec | 0.23 | 0.56 | 0.43 | 0.63 | 0.75 | d | 0.26 | |||||||||||||||||
Net realized and unrealized gains (losses) | 0.26 | 3.57 | 0.37 | 0.27 | 1.73 | 2.18 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.49 | 4.13 | 0.80 | 0.90 | 2.48 | 2.44 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.32 | ) | (0.67 | ) | (0.67 | ) | (0.78 | ) | (0.59 | ) | (0.26) | |||||||||||||
Net realized gains | (0.63 | ) | (0.89 | ) | (0.60 | ) | (1.06 | ) | (0.12 | ) | — | |||||||||||||
|
| |||||||||||||||||||||||
Total distributions | (0.95 | ) | (1.56 | ) | (1.27 | ) | (1.84 | ) | (0.71 | ) | (0.26) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $24.65 | $25.11 | $22.54 | $23.01 | $23.95 | $22.18 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total returne | 1.90% | 19.00% | 3.72% | 4.10% | 11.38% | 12.30% | ||||||||||||||||||
Ratios to average net assetsf | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.53% | 0.49% | 0.49% | 2.89% | 1.78% | 2.16% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatesg | 0.50% | 0.49% | h | 0.49% | h | 0.48% | 0.50% | 0.51% | ||||||||||||||||
Net investment income | 1.93% | 2.39% | 2.51% | 2.75% | 3.24% | d | 2.59% | |||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $79,991 | $12,728 | $10,537 | $6 | $6 | $6 | ||||||||||||||||||
Portfolio turnover rate | 15.74% | 27.18% | 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%.
franklintempleton.com |
The accompanying notes are an integral part of these financial statements. | Semiannual Report | 49 |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Equity Income Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
Advisor Class | ||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $25.10 | $22.53 | $23.02 | $23.96 | $22.19 | $18.02 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment incomeb | 0.23 | 0.50 | 0.45 | 0.60 | 0.71c | 0.48 | ||||||||||||||||||
Net realized and unrealized gains (losses) | 0.25 | 3.60 | 0.31 | 0.27 | 1.74 | 4.22 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.48 | 4.10 | 0.76 | 0.87 | 2.45 | 4.70 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.30 | ) | (0.64 | ) | (0.65 | ) | (0.75 | ) | (0.56 | ) | (0.53) | |||||||||||||
Net realized gains | (0.63 | ) | (0.89 | ) | (0.60 | ) | (1.06 | ) | (0.12 | ) | — | |||||||||||||
|
| |||||||||||||||||||||||
Total distributions | (0.93 | ) | (1.53 | ) | (1.25 | ) | (1.81 | ) | (0.68 | ) | (0.53) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $24.65 | $25.10 | $22.53 | $23.02 | $23.96 | $22.19 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total returnd | 1.87% | 18.88% | 3.53% | 3.98% | 11.25% | 26.48% | ||||||||||||||||||
Ratios to average net assetse | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.60% | 0.61% | 0.62% | 0.61% | 0.62% | 0.66% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatesf | 0.59% | 0.61% | g | 0.62% | g | 0.61% | g | 0.62% | g | 0.66% | ||||||||||||||
Net investment income | 1.84% | 2.27% | 2.38% | 2.62% | 3.12% | c | 2.44% | |||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $93,799 | �� | $147,681 | $80,422 | $34,577 | $30,166 | $17,534 | |||||||||||||||||
Portfolio turnover rate | 15.74% | 27.18% | 50.05% | 34.09% | 20.15% | 33.18% |
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%.
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%.
50 |
Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
Statement of Investments, April 30, 2018 (unaudited)
Franklin Equity Income Fund
Country | Shares | Value | ||||||||||||
Common Stocks 84.6% | ||||||||||||||
Consumer Discretionary 4.3% | ||||||||||||||
Comcast Corp., A | United States | 600,000 | $ | 18,834,000 | ||||||||||
Las Vegas Sands Corp. | United States | 295,500 | 21,669,015 | |||||||||||
Lowe’s Cos. Inc. | United States | 165,200 | 13,617,436 | |||||||||||
McDonald’s Corp. | United States | 114,000 | 19,088,160 | |||||||||||
Target Corp. | United States | 258,900 | 18,796,140 | |||||||||||
|
| |||||||||||||
92,004,751 | ||||||||||||||
|
| |||||||||||||
Consumer Staples 7.3% | ||||||||||||||
Anheuser-Busch InBev SA/NV, ADR | Belgium | 201,100 | 20,126,088 | |||||||||||
The Kraft Heinz Co. | United States | 306,600 | 17,286,108 | |||||||||||
PepsiCo Inc. | United States | 460,500 | 46,482,870 | |||||||||||
The Procter & Gamble Co. | United States | 567,500 | 41,052,950 | |||||||||||
Walmart Inc. | United States | 370,000 | 32,730,200 | |||||||||||
|
| |||||||||||||
157,678,216 | ||||||||||||||
|
| |||||||||||||
Energy 8.7% | ||||||||||||||
Anadarko Petroleum Corp. | United States | 93,200 | 6,274,224 | |||||||||||
Chevron Corp. | United States | 467,400 | 58,476,414 | |||||||||||
Exxon Mobil Corp. | United States | 436,434 | 33,932,743 | |||||||||||
Occidental Petroleum Corp. | United States | 320,500 | 24,761,830 | |||||||||||
ONEOK Inc. | United States | 262,000 | 15,777,640 | |||||||||||
Royal Dutch Shell PLC, A, ADR | United Kingdom | 415,000 | 29,008,500 | |||||||||||
Suncor Energy Inc. | Canada | 515,000 | 19,688,450 | |||||||||||
|
| |||||||||||||
187,919,801 | ||||||||||||||
|
| |||||||||||||
Financials 19.8% | ||||||||||||||
Arthur J. Gallagher & Co. | United States | 297,800 | 20,843,022 | |||||||||||
Bank of America Corp. | United States | 1,300,900 | 38,922,928 | |||||||||||
BB&T Corp. | United States | 720,000 | 38,016,000 | |||||||||||
BlackRock Inc. | United States | 92,500 | 48,238,750 | |||||||||||
JPMorgan Chase & Co. | United States | 866,000 | 94,203,480 | |||||||||||
MetLife Inc. | United States | 645,000 | 30,747,150 | |||||||||||
Morgan Stanley | United States | 956,000 | 49,348,720 | |||||||||||
U.S. Bancorp. | United States | 879,300 | 44,360,685 | |||||||||||
Wells Fargo & Co. | United States | 1,145,000 | 59,494,200 | |||||||||||
|
| |||||||||||||
424,174,935 | ||||||||||||||
|
| |||||||||||||
Health Care 11.0% | ||||||||||||||
Baxter International Inc. | United States | 170,000 | 11,815,000 | |||||||||||
Eli Lilly & Co. | United States | 330,400 | 26,785,528 | |||||||||||
Johnson & Johnson | United States | 262,000 | 33,140,380 | |||||||||||
Medtronic PLC | United States | 523,000 | 41,907,990 | |||||||||||
Merck & Co. Inc. | United States | 670,000 | 39,442,900 | |||||||||||
Pfizer Inc. | United States | 1,239,300 | 45,370,773 | |||||||||||
UnitedHealth Group Inc. | United States | 161,500 | 38,178,600 | |||||||||||
|
| |||||||||||||
236,641,171 | ||||||||||||||
|
| |||||||||||||
Industrials 11.7% | ||||||||||||||
Cummins Inc. | United States | 219,500 | 35,089,270 | |||||||||||
General Electric Co. | United States | 1,575,300 | 22,164,471 | |||||||||||
Illinois Tool Works Inc. | United States | 114,900 | 16,318,098 | |||||||||||
Lockheed Martin Corp. | United States | 100,600 | 32,276,504 | |||||||||||
Norfolk Southern Corp. | United States | 181,000 | 25,968,070 | |||||||||||
Raytheon Co. | United States | 215,000 | 44,062,100 | |||||||||||
Republic Services Inc. | United States | 553,500 | 35,800,380 |
franklintempleton.com | Semiannual Report | 51 |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Equity Income Fund (continued)
Country | Shares | Value | ||||||||||||
Common Stocks (continued) | ||||||||||||||
Industrials (continued) | ||||||||||||||
Stanley Black & Decker Inc. | United States | 140,380 | $ | 19,876,404 | ||||||||||
United Technologies Corp. | United States | 161,600 | 19,416,240 | |||||||||||
|
| |||||||||||||
250,971,537 | ||||||||||||||
|
| |||||||||||||
Information Technology 11.8% | ||||||||||||||
Apple Inc. | United States | 222,000 | 36,687,720 | |||||||||||
Broadcom Inc. | United States | 36,000 | 8,259,120 | |||||||||||
Cisco Systems Inc. | United States | 901,733 | 39,937,755 | |||||||||||
Intel Corp. | United States | 393,402 | 20,307,411 | |||||||||||
Microsoft Corp. | United States | 871,000 | 81,455,920 | |||||||||||
Oracle Corp. | United States | 676,000 | 30,872,920 | |||||||||||
Texas Instruments Inc. | United States | 348,000 | 35,297,640 | |||||||||||
|
| |||||||||||||
252,818,486 | ||||||||||||||
|
| |||||||||||||
Materials 4.7% | ||||||||||||||
BASF SE | Germany | 262,500 | 27,368,672 | |||||||||||
DowDuPont Inc. | United States | 522,000 | 33,011,280 | |||||||||||
International Paper Co. | United States | 454,800 | 23,449,488 | |||||||||||
Praxair Inc. | United States | 108,500 | 16,548,420 | |||||||||||
|
| |||||||||||||
100,377,860 | ||||||||||||||
|
| |||||||||||||
Real Estate 1.6% | ||||||||||||||
Equity Residential | United States | 125,000 | 7,713,750 | |||||||||||
Host Hotels & Resorts Inc. | United States | 1,333,000 | 26,073,480 | |||||||||||
|
| |||||||||||||
33,787,230 | ||||||||||||||
|
| |||||||||||||
Telecommunication Services 2.1% | ||||||||||||||
Rogers Communications Inc., B | Canada | 115,300 | 5,443,313 | |||||||||||
TELUS Corp. | Canada | 470,000 | 16,828,879 | |||||||||||
Verizon Communications Inc. | United States | 473,000 | 23,342,550 | |||||||||||
|
| |||||||||||||
45,614,742 | ||||||||||||||
|
| |||||||||||||
Utilities 1.6% | ||||||||||||||
Xcel Energy Inc. | United States | 723,500 | 33,888,740 | |||||||||||
|
| |||||||||||||
Total Common Stocks (Cost $1,291,629,625) | 1,815,877,469 | |||||||||||||
|
| |||||||||||||
a | Equity-Linked Securities 9.9% | |||||||||||||
Consumer Discretionary 1.5% | ||||||||||||||
b | Deutsche Bank AG/London into Amazon.com Inc., 5.00%, 144A | United States | 23,900 | 31,955,219 | ||||||||||
|
| |||||||||||||
Energy 1.6% | ||||||||||||||
b | Citigroup Global Markets Holdings Inc. into Anadarko Petroleum Corp., 6.00%, 144A | United States | 330,000 | 18,918,472 | ||||||||||
b | Credit Suisse AG/London into Schlumberger Ltd., 6.50%, 144A | United States | 210,000 | 14,742,452 | ||||||||||
|
| |||||||||||||
33,660,924 | ||||||||||||||
|
| |||||||||||||
Financials 2.5% | ||||||||||||||
b | Deutsche Bank AG/London into Bank of America Corp., 6.50%, 144A | United States | 880,000 | 24,195,058 | ||||||||||
b | UBS AG London into The Charles Schwab Corp., 6.50%, 144A | United States | 545,000 | 29,421,193 | ||||||||||
|
| |||||||||||||
53,616,251 | ||||||||||||||
|
| |||||||||||||
Health Care 0.5% | ||||||||||||||
b | Deutsche Bank AG/London into Baxter International Inc., 4.50%, 144A | United States | 170,000 | 11,697,803 | ||||||||||
|
|
52 |
Semiannual Report |
franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Equity Income Fund (continued)
Country | Shares | Value | ||||||||||||
a | Equity-Linked Securities (continued) | |||||||||||||
Information Technology 3.8% | ||||||||||||||
b | Barclays Bank PLC into Broadcom Ltd., 7.50%, 144A | United States | 99,300 | $ | 23,199,881 | |||||||||
b | Goldman Sachs International into Apple Inc., 6.00%, 144A | United States | 140,000 | 23,025,452 | ||||||||||
b | UBS AG London into Intel Corp., 7.00%, 144A | United States | 825,000 | 35,494,877 | ||||||||||
|
| |||||||||||||
81,720,210 | ||||||||||||||
|
| |||||||||||||
Total Equity-Linked Securities (Cost $198,012,576) | 212,650,407 | |||||||||||||
|
| |||||||||||||
Convertible Preferred Stocks 3.7% | ||||||||||||||
Health Care 1.7% | ||||||||||||||
Becton Dickinson and Co., 6.125%, cvt. pfd., A | United States | 613,000 | 36,994,550 | |||||||||||
|
| |||||||||||||
Utilities 2.0% | ||||||||||||||
NextEra Energy Inc., 6.371%, cvt. pfd. | United States | 575,000 | 42,176,250 | |||||||||||
|
| |||||||||||||
Total Convertible Preferred Stocks (Cost $61,985,383) | 79,170,800 | |||||||||||||
|
| |||||||||||||
Total Investments before Short Term Investments | 2,107,698,676 | |||||||||||||
|
| |||||||||||||
Short Term Investments (Cost $32,110,673) 1.5% | ||||||||||||||
Money Market Funds 1.5% | ||||||||||||||
c,d | Institutional Fiduciary Trust Money Market Portfolio, 1.30% | United States | 32,110,673 | 32,110,673 | ||||||||||
|
| |||||||||||||
Total Investments (Cost $1,583,738,257) 99.7% | 2,139,809,349 | |||||||||||||
Other Assets, less Liabilities 0.3% | 5,534,343 | |||||||||||||
|
| |||||||||||||
Net Assets 100.0% | $ | 2,145,343,692 | ||||||||||||
|
|
See Abbreviations on page 82.
aSee Note 1(f) 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 April 30, 2018, the aggregate value of these securities was $212,650,407, representing 9.9% of net assets.
cSee Note 3(f) regarding investments in affiliated management investment companies.
dThe rate shown is the annualized seven-day effective yield at period end.
franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 53 |
FRANKLIN INVESTORS SECURITIES TRUST
Financial Highlights
Franklin Real Return Fund
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
Class A | ||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $10.14 | $10.09 | $9.92 | $10.66 | $10.82 | $10.94 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment incomeb | 0.11 | 0.17 | 0.12 | 0.05 | 0.14 | 0.15 | ||||||||||||||||||
Net realized and unrealized gains (losses) | — | c | 0.01 | 0.15 | (0.72 | ) | (0.06 | ) | (0.01) | |||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.11 | 0.18 | 0.27 | (0.67 | ) | 0.08 | 0.14 | |||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.22 | ) | (0.13 | ) | (0.09 | ) | (0.07 | ) | (0.24 | ) | (0.26) | |||||||||||||
Tax return of capital | — | — | (0.01 | ) | — | — | — | |||||||||||||||||
|
| |||||||||||||||||||||||
Total distributions | (0.22 | ) | (0.13 | ) | (0.10 | ) | (0.07 | ) | (0.24 | ) | (0.26) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $10.03 | $10.14 | $10.09 | $9.92 | $10.66 | $10.82 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total returnd | 1.13% | 1.77% | 2.77% | (6.32 | )% | 0.75% | 1.34% | |||||||||||||||||
Ratios to average net assetse | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 1.14% | 1.17% | 1.12% | 1.10% | 1.10% | 1.08% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatesf | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | ||||||||||||||||||
Net investment income | 2.16% | 1.69% | 1.18% | 0.43% | 1.34% | 1.35% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $137,597 | $146,866 | $161,541 | $185,743 | $248,313 | $327,285 | ||||||||||||||||||
Portfolio turnover rate | 27.06% | 32.44% | 31.82% | 26.57% | 33.02% | 27.91% |
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, and 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%.
54 |
Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Real Return Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
Class C | ||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $10.03 | $10.00 | $9.82 | $10.59 | $10.76 | $10.87 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment incomeb | 0.09 | 0.13 | 0.08 | — | c | 0.10 | 0.10 | |||||||||||||||||
Net realized and unrealized gains (losses) | 0.01 | — | c | 0.16 | (0.71 | ) | (0.07 | ) | 0.01 | |||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.10 | 0.13 | 0.24 | (0.71 | ) | 0.03 | 0.11 | |||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.20 | ) | (0.10 | ) | (0.05 | ) | (0.06 | ) | (0.20 | ) | (0.22) | |||||||||||||
Tax return of capital | — | — | �� | (0.01 | ) | — | — | — | ||||||||||||||||
|
| |||||||||||||||||||||||
Total distributions | (0.20 | ) | (0.10 | ) | (0.06 | ) | (0.06 | ) | (0.20 | ) | (0.22) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $9.93 | $10.03 | $10.00 | $9.82 | $10.59 | $10.76 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total returnd | 1.04% | 1.30% | 2.44% | (6.70 | )% | 0.22% | 1.03% | |||||||||||||||||
Ratios to average net assetse | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 1.54% | 1.57% | 1.52% | 1.50% | 1.50% | 1.48% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatesf | 1.30% | 1.30% | 1.30% | 1.30% | 1.30% | 1.30% | ||||||||||||||||||
Net investment income | 1.76% | 1.29% | 0.78% | 0.04% | 0.94% | 0.95% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $30,343 | $33,844 | $39,568 | $48,084 | $68,188 | $83,666 | ||||||||||||||||||
Portfolio turnover rate | 27.06% | 32.44% | 31.82% | 26.57% | 33.02% | 27.91% |
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, and 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%.
franklintempleton.com |
The accompanying notes are an integral part of these financial statements. | Semiannual Report | 55 |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Real Return Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013a | |||||||||||||||||||
Class R6 | ||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $10.19 | $10.15 | $9.98 | $10.68 | $10.85 | $11.01 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsb: | ||||||||||||||||||||||||
Net investment incomec | 0.13 | 0.22 | 0.16 | 0.10 | 0.21 | 0.09 | ||||||||||||||||||
Net realized and unrealized gains (losses) | 0.01 | (0.01 | ) | 0.16 | (0.72 | ) | (0.10 | ) | (0.10) | |||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.14 | 0.21 | 0.32 | (0.62 | ) | 0.11 | (0.01) | |||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.24 | ) | (0.17 | ) | (0.14 | ) | (0.08 | ) | (0.28 | ) | (0.15) | |||||||||||||
Tax return of capital | — | — | (0.01 | ) | — | — | — | |||||||||||||||||
|
| |||||||||||||||||||||||
Total distributions | (0.24 | ) | (0.17 | ) | (0.15 | ) | (0.08 | ) | (0.28 | ) | (0.15) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $10.09 | $10.19 | $10.15 | $9.98 | $10.68 | $10.85 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total returnd | 1.42% | 2.09% | 3.25% | (5.87 | )% | 1.04% | (0.06)% | |||||||||||||||||
Ratios to average net assetse | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.80% | 0.72% | 0.71% | 0.71% | 0.70% | 2.43% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatesf | 0.49% | 0.49% | 0.50% | 0.50% | 0.52% | 0.52% | ||||||||||||||||||
Net investment income | 2.57% | 2.11% | 1.58% | 0.83% | 1.72% | 1.73% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $10,442 | $5,727 | $5,326 | $1,730 | $2,034 | $5 | ||||||||||||||||||
Portfolio turnover rate | 27.06% | 32.44% | 31.82% | 26.57% | 33.02% | 27.91% |
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, adjustments to interest income for the inflation-indexed bonds, 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%.
56 |
Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Real Return Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
Advisor Class | ||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $10.18 | $10.13 | $9.96 | $10.68 | $10.85 | $10.97 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment incomeb | 0.13 | 0.20 | 0.14 | 0.05 | 0.18 | 0.18 | ||||||||||||||||||
Net realized and unrealized gains (losses) | 0.01 | — | c | 0.16 | (0.70 | ) | (0.08 | ) | (0.01) | |||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.14 | 0.20 | 0.30 | (0.65 | ) | 0.10 | 0.17 | |||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.24 | ) | (0.15 | ) | (0.12 | ) | (0.07 | ) | (0.27 | ) | (0.29) | |||||||||||||
Tax return of capital | — | — | (0.01 | ) | — | — | — | |||||||||||||||||
|
| |||||||||||||||||||||||
Total distributions | (0.24 | ) | (0.15 | ) | (0.13 | ) | (0.07 | ) | (0.27 | ) | (0.29) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $10.08 | $10.18 | $10.13 | $9.96 | $10.68 | $10.85 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total returnd | 1.34% | 2.03% | 3.04% | (6.08)% | 0.91% | 1.60% | ||||||||||||||||||
Ratios to average net assetse | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.89% | 0.92% | 0.87% | 0.85% | 0.85% | 0.83% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatesf | 0.65% | 0.65% | 0.65% | 0.65% | 0.65% | 0.65% | ||||||||||||||||||
Net investment income | 2.41% | 1.94% | 1.43% | 0.68% | 1.59% | 1.60% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $27,962 | $40,077 | $35,215 | $37,758 | $65,958 | $28,042 | ||||||||||||||||||
Portfolio turnover rate | 27.06% | 32.44% | 31.82% | 26.57% | 33.02% | 27.91% |
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 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%.
franklintempleton.com |
The accompanying notes are an integral part of these financial statements. | Semiannual Report | 57 |
FRANKLIN INVESTORS SECURITIES TRUST
Statement of Investments, April 30, 2018 (unaudited)
Franklin Real Return Fund
Country | Shares | Value | ||||||||||||
Common Stocks 11.1% | ||||||||||||||
Energy 6.8% | ||||||||||||||
Anadarko Petroleum Corp. | United States | 23,700 | $ | 1,595,484 | ||||||||||
Canadian Natural Resources Ltd. | Canada | 33,700 | 1,215,896 | |||||||||||
Chevron Corp. | United States | 13,700 | 1,714,007 | |||||||||||
Exxon Mobil Corp. | United States | 15,277 | 1,187,787 | |||||||||||
Halliburton Co. | United States | 33,300 | 1,764,567 | |||||||||||
Noble Energy Inc. | United States | 27,400 | 926,942 | |||||||||||
Occidental Petroleum Corp. | United States | 18,200 | 1,406,132 | |||||||||||
Pioneer Natural Resources Co. | United States | 4,700 | 947,285 | |||||||||||
Royal Dutch Shell PLC, A, ADR | United Kingdom | 19,800 | 1,384,020 | |||||||||||
Schlumberger Ltd. | United States | 20,850 | 1,429,476 | |||||||||||
a Weatherford International PLC | United States | 119,400 | 352,230 | |||||||||||
|
| |||||||||||||
| 13,923,826 | |||||||||||||
|
| |||||||||||||
Materials 4.3% | ||||||||||||||
BHP Billiton PLC, ADR | United Kingdom | 32,700 | 1,384,518 | |||||||||||
DowDuPont Inc. | United States | 26,600 | 1,682,184 | |||||||||||
Freeport-McMoRan Inc. | United States | 53,046 | 806,830 | |||||||||||
Goldcorp Inc. | Canada | 101,600 | 1,350,264 | |||||||||||
Nucor Corp. | United States | 21,000 | 1,294,020 | |||||||||||
Nutrien Ltd. | Canada | 19,624 | 893,481 | |||||||||||
Rio Tinto PLC, ADR | United Kingdom | 27,700 | 1,522,115 | |||||||||||
|
| |||||||||||||
| 8,933,412 | |||||||||||||
|
| |||||||||||||
Total Common Stocks (Cost $21,881,052) |
| 22,857,238 | ||||||||||||
|
| |||||||||||||
Management Investment Companies 9.6% | ||||||||||||||
Diversified Financials 5.0% | ||||||||||||||
b Franklin Pelagos Commodities Strategy Fund, Class R6 | United States | 897,760 | 6,167,612 | |||||||||||
iShares Global Infrastructure ETF | United States | 95,000 | 4,152,450 | |||||||||||
|
| |||||||||||||
| 10,320,062 | |||||||||||||
|
| |||||||||||||
Real Estate 4.6% | ||||||||||||||
SPDR Dow Jones REIT ETF | United States | 109,700 | 9,586,683 | |||||||||||
|
| |||||||||||||
Total Management Investment Companies (Cost $15,329,164) | 19,906,745 | |||||||||||||
|
| |||||||||||||
Principal Amount* | ||||||||||||||
Foreign Government and Agency Securities (Cost $1,947,130) 0.5% | ||||||||||||||
c Nota Do Tesouro Nacional, Index Linked, 6.00%, 8/15/18 | Brazil | 1,270 | d | BRL | 1,123,814 | |||||||||
|
| |||||||||||||
U.S. Government and Agency Securities 73.6% | ||||||||||||||
e U.S. Treasury Bond, Index Linked, 0.625%, 1/15/24 | United States | 8,002,172 | 7,981,162 | |||||||||||
e U.S. Treasury Note, | ||||||||||||||
Index Linked, 2.125%, 1/15/19 | United States | 39,424,460 | 39,956,792 | |||||||||||
Index Linked, 0.125%, 4/15/19 | United States | 19,442,882 | 19,358,199 | |||||||||||
Index Linked, 1.875%, 7/15/19 | United States | 24,485,147 | 25,027,437 | |||||||||||
Index Linked, 1.375%, 1/15/20 | United States | 12,203,260 | 12,405,628 | |||||||||||
Index Linked, 0.125%, 4/15/20 | United States | 10,099,290 | 10,016,033 | |||||||||||
Index Linked, 0.125%, 4/15/21 | United States | 12,184,708 | 12,016,573 | |||||||||||
Index Linked, 0.625%, 7/15/21 | United States | 6,958,828 | 6,999,139 | |||||||||||
Index Linked, 0.125%, 7/15/24 | United States | 8,387,712 | 8,127,784 |
58 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Real Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||
| ||||||||||||||
U.S. Government and Agency Securities (continued) | ||||||||||||||
e U.S. Treasury Note, (continued) | ||||||||||||||
Index Linked, 0.25%, 1/15/25 | United States | 10,195,517 | $ | 9,885,979 | ||||||||||
|
| |||||||||||||
Total U.S. Government and Agency Securities | 151,774,726 | |||||||||||||
|
| |||||||||||||
Total Investments before Short Term Investments | 195,662,523 | |||||||||||||
|
| |||||||||||||
Short Term Investments (Cost $10,478,250) 5.1% | ||||||||||||||
Repurchase Agreements 5.1% | ||||||||||||||
f Joint Repurchase Agreement, 1.710%, 5/01/18 (Maturity Value $10,478,748) | ||||||||||||||
BNP Paribas Securities Corp. (Maturity Value $4,566,534) | ||||||||||||||
Deutsche Bank Securities Inc. (Maturity Value $752,060) | ||||||||||||||
HSBC Securities (USA) Inc. (Maturity Value $5,137,310) | ||||||||||||||
Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $22,844) | ||||||||||||||
Collateralized by U.S. Government Agency Securities, 0.00% - 1.875%, 9/18/18 - 4/05/22; g U.S. Treasury Bill, 6/14/18 - 1/31/19; and U.S. Treasury Note, 0.875% - 3.50%, 1/31/19 -11/30/21 (valued at $10,693,826) | United States | 10,478,250 | 10,478,250 | |||||||||||
|
| |||||||||||||
Total Investments (Cost $202,622,200) 99.9% | 206,140,773 | |||||||||||||
Other Assets, less Liabilities 0.1% | 202,026 | |||||||||||||
|
| |||||||||||||
Net Assets 100.0% | $ | 206,342,799 | ||||||||||||
|
|
See Abbreviations on page 82.
*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.
cRedemption price at maturity and coupon payment is adjusted for inflation. See Note 1(h).
dPrincipal amount is stated in 1,000 Brazilian Real Units.
ePrincipal amount of security is adjusted for inflation. See Note 1(h).
fSee Note 1(c) regarding joint repurchase agreement.
gThe security was issued on a discount basis with no stated coupon rate.
franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report |
|
59 |
|
FRANKLIN INVESTORS SECURITIES TRUST
Statements of Assets and Liabilities
April 30, 2018 (unaudited)
Franklin Balanced Fund | Franklin Convertible Securities Fund | Franklin Equity Income Fund | Franklin Real Return Fund | |||||||||||||
| ||||||||||||||||
Assets: | ||||||||||||||||
Investments in securities: | ||||||||||||||||
Cost - Unaffiliated issuers | $3,015,598,314 | $2,359,704,039 | $1,551,627,584 | $186,143,950 | ||||||||||||
Cost - Controlled affiliates (Note 3f) | 88,276,250 | — | — | — | ||||||||||||
Cost - Non-controlled affiliates (Note 3f) | 72,301,728 | 89,575,377 | 32,110,673 | 6,000,000 | ||||||||||||
Cost - Unaffiliated repurchase agreements | — | — | — | 10,478,250 | ||||||||||||
|
| |||||||||||||||
Value - Unaffiliated issuers | $3,218,637,139 | $2,705,592,257 | $2,107,698,676 | $189,494,911 | ||||||||||||
Value - Controlled affiliates (Note 3f) | 87,785,365 | — | — | — | ||||||||||||
Value - Non-controlled affiliates (Note 3f) | 72,301,728 | 89,575,377 | 32,110,673 | 6,167,612 | ||||||||||||
Value - Unaffiliated repurchase agreements | — | — | — | 10,478,250 | ||||||||||||
Cash | 183,925 | — | 283,604 | — | ||||||||||||
Foreign currency, at value (cost $—, $—, $— and $114,139, respectively) | — | — | — | 113,801 | ||||||||||||
Receivables: | ||||||||||||||||
Investment securities sold | 5,041,718 | — | 8,409,703 | — | ||||||||||||
Capital shares sold | 3,108,091 | 13,956,977 | 1,823,511 | 119,376 | ||||||||||||
Dividends and interest | 16,325,894 | 9,250,036 | 2,332,390 | 504,793 | ||||||||||||
European Union tax reclaims | 98,126 | — | 70,525 | — | ||||||||||||
Deposits with brokers for: | ||||||||||||||||
Exchange traded options written | 46,000,000 | — | — | — | ||||||||||||
Other assets | 3,364 | 2,058 | 1,891 | 173 | ||||||||||||
|
| |||||||||||||||
Total assets | 3,449,485,350 | 2,818,376,705 | 2,152,730,973 | 206,878,916 | ||||||||||||
|
| |||||||||||||||
Liabilities: | ||||||||||||||||
Payables: | ||||||||||||||||
Investment securities purchased | 12,992,911 | — | 3,161,630 | — | ||||||||||||
Capital shares redeemed | 4,221,556 | 3,179,520 | 2,353,241 | 296,174 | ||||||||||||
Management fees | 1,767,869 | 1,038,617 | 811,744 | 64,274 | ||||||||||||
Distribution fees | 1,026,494 | 450,341 | 572,692 | 44,523 | ||||||||||||
Transfer agent fees | 462,118 | 275,638 | 357,449 | 61,501 | ||||||||||||
Distributions to shareholders | — | — | — | 19,781 | ||||||||||||
Options written, at value (premiums received $2,413,479, | 1,460,200 | — | — | — | ||||||||||||
Accrued expenses and other liabilities | 189,152 | 91,562 | 130,525 | 49,864 | ||||||||||||
|
| |||||||||||||||
Total liabilities | 22,120,300 | 5,035,678 | 7,387,281 | 536,117 | ||||||||||||
|
| |||||||||||||||
Net assets, at value | $3,427,365,050 | $2,813,341,027 | $2,145,343,692 | $206,342,799 | ||||||||||||
|
| |||||||||||||||
Net assets consist of: | ||||||||||||||||
Paid-in capital | $3,137,811,663 | $2,371,443,654 | $1,518,179,479 | $230,675,107 | ||||||||||||
Distributions in excess of net investment income | (15,106,808 | ) | (50,489,430 | ) | (2,965,782 | ) | (4,384,789 | ) | ||||||||
Net unrealized appreciation (depreciation) | 203,495,310 | 345,888,218 | 556,060,441 | 3,519,711 | ||||||||||||
Accumulated net realized gain (loss) | 101,164,885 | 146,498,585 | 74,069,554 | (23,467,230 | ) | |||||||||||
|
| |||||||||||||||
Net assets, at value | $3,427,365,050 | $2,813,341,027 | $2,145,343,692 | $206,342,799 | ||||||||||||
|
|
60 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL STATEMENTS
Statements of Assets and Liabilities (continued)
April 30, 2018 (unaudited)
Franklin Balanced Fund | Franklin Convertible Securities Fund | Franklin Equity Income Fund | Franklin Real Return Fund | |||||||||||||
Class A: | ||||||||||||||||
Net assets, at value | $ | 2,566,487,991 | $ | 907,155,474 | $ | 1,699,185,713 | $ | 137,596,537 | ||||||||
|
| |||||||||||||||
Shares outstanding | 214,308,316 | 44,728,582 | 69,060,461 | 13,712,272 | ||||||||||||
|
| |||||||||||||||
Net asset value per sharea | $11.98 | $20.28 | $24.60 | $10.03 | ||||||||||||
|
| |||||||||||||||
Maximum offering price per share (net asset value per share ÷ 94.25%, 94.25%, 94.25% and 95.75%, respectively) | $12.71 | $21.52 | $26.10 | $10.48 | ||||||||||||
|
| |||||||||||||||
Class C: | ||||||||||||||||
Net assets, at value | $ | 595,278,350 | $ | 325,130,806 | $ | 265,809,659 | $ | 30,342,811 | ||||||||
|
| |||||||||||||||
Shares outstanding | 50,161,351 | 16,286,514 | 10,895,038 | 3,055,395 | ||||||||||||
|
| |||||||||||||||
Net asset value and maximum offering price per sharea | $11.87 | $19.96 | $24.40 | $9.93 | ||||||||||||
|
| |||||||||||||||
Class R: | ||||||||||||||||
Net assets, at value | $ | 4,958,431 | $ | 6,558,360 | ||||||||||||
|
|
|
| |||||||||||||
Shares outstanding | 412,932 | 266,617 | ||||||||||||||
|
|
|
| |||||||||||||
Net asset value and maximum offering price per share | $12.01 | $24.60 | ||||||||||||||
|
|
|
| |||||||||||||
Class R6: | ||||||||||||||||
Net assets, at value | $ | 139,484,996 | $ | 30,190,880 | $ | 79,990,700 | $ | 10,441,778 | ||||||||
|
| |||||||||||||||
Shares outstanding | 11,613,666 | 1,479,718 | 3,244,758 | 1,034,529 | ||||||||||||
|
| |||||||||||||||
Net asset value and maximum offering price per share | $12.01 | $20.40 | $24.65 | $10.09 | ||||||||||||
|
| |||||||||||||||
Advisor Class: | ||||||||||||||||
Net assets, at value | $ | 121,155,282 | $ | 1,550,863,867 | $ | 93,799,260 | $ | 27,961,673 | ||||||||
|
| |||||||||||||||
Shares outstanding | 10,093,783 | 76,449,555 | 3,805,634 | 2,774,839 | ||||||||||||
|
| |||||||||||||||
Net asset value and maximum offering price per share | $12.00 | $20.29 | $24.65 | $10.08 | ||||||||||||
|
|
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report |
|
61 |
|
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL STATEMENTS
Statements of Operations
for the six months ended April 30, 2018 (unaudited)
Franklin Balanced Fund | Franklin Convertible Securities Fund | Franklin Equity Income Fund | Franklin Real Return Fund | |||||||||||||
| ||||||||||||||||
Investment income: | ||||||||||||||||
Dividends: (net of foreign taxes)* | ||||||||||||||||
Unaffiliated issuers | $ | 26,840,098 | $ | 6,977,904 | $ | 26,276,462 | $ | 505,299 | ||||||||
Controlled affiliates (Note 3f) | 392,516 | — | — | — | ||||||||||||
Non-controlled affiliates (Note 3f) | 456,695 | 565,322 | 285,158 | 95,470 | ||||||||||||
Interest: (net of foreign taxes)~ | ||||||||||||||||
Unaffiliated issuers: | ||||||||||||||||
Inflation principal adjustments | — | — | — | 2,089,732 | ||||||||||||
Paid in cash | 26,895,936 | 12,043,719 | 2,086 | 515,867 | ||||||||||||
Other income (Note 1g) | 103,005 | — | 74,031 | — | ||||||||||||
|
| |||||||||||||||
Total investment income | 54,688,250 | 19,586,945 | 26,637,737 | 3,206,368 | ||||||||||||
|
| |||||||||||||||
Expenses: | ||||||||||||||||
Management fees (Note 3a) | 11,014,024 | 6,104,116 | 5,094,965 | 655,508 | ||||||||||||
Distribution fees: (Note 3c) | ||||||||||||||||
Class A | 3,271,933 | 1,053,440 | 2,179,364 | 174,853 | ||||||||||||
Class C | 3,071,448 | 1,551,967 | 1,354,805 | 102,799 | ||||||||||||
Class R | 12,301 | — | 16,130 | — | ||||||||||||
Transfer agent fees: (Note 3e) | ||||||||||||||||
Class A | 1,418,809 | 510,734 | 967,443 | 126,445 | ||||||||||||
Class C | 335,518 | 188,077 | 150,342 | 28,594 | ||||||||||||
Class R | 2,675 | — | 3,807 | — | ||||||||||||
Class R6 | 14,108 | 7,180 | 13,165 | 4,058 | ||||||||||||
Advisor Class | 67,527 | 879,531 | 52,375 | 25,867 | ||||||||||||
Custodian fees (Note 4) | 16,405 | 10,803 | 11,125 | 5,653 | ||||||||||||
Reports to shareholders | 137,977 | 86,461 | 101,539 | 20,281 | ||||||||||||
Registration and filing fees | 87,479 | 62,111 | 62,422 | 34,841 | ||||||||||||
Professional fees | 38,330 | 34,238 | 34,815 | 22,782 | ||||||||||||
Trustees’ fees and expenses | 16,986 | 11,446 | 10,512 | 1,181 | ||||||||||||
Other | 39,427 | 22,634 | 23,987 | 7,747 | ||||||||||||
|
| |||||||||||||||
Total expenses | 19,544,947 | 10,522,738 | 10,076,796 | 1,210,609 | ||||||||||||
Expense reductions (Note 4) | (3,867 | ) | (1,677 | ) | (652 | ) | (50 | ) | ||||||||
Expenses waived/paid by affiliates (Note 3f and 3g) | (169,815 | ) | (203,792 | ) | (109,518 | ) | (259,197 | ) | ||||||||
|
| |||||||||||||||
Net expenses | 19,371,265 | 10,317,269 | 9,966,626 | 951,362 | ||||||||||||
|
| |||||||||||||||
Net investment income | 35,316,985 | 9,269,676 | 16,671,111 | 2,255,006 | ||||||||||||
|
| |||||||||||||||
Realized and unrealized gains (losses): | ||||||||||||||||
Net realized gain (loss) from: | ||||||||||||||||
Investments:# | ||||||||||||||||
Unaffiliated issuers | 99,220,328 | 146,508,143 | 74,436,176 | 5,097,486 | ||||||||||||
Controlled affiliates (Note 3f) | (92,555 | ) | — | — | — | |||||||||||
Non-controlled affiliates (Note 3f) | — | — | — | 36,927 | ||||||||||||
Written options | 3,020,462 | — | — | — | ||||||||||||
Foreign currency transactions | 161,183 | — | 202,740 | 65,574 | ||||||||||||
Capital gain distributions from management investment companies: | ||||||||||||||||
Non-controlled affiliates (Note 3f) | — | — | — | 85,233 | ||||||||||||
|
| |||||||||||||||
Net realized gain (loss) | 102,309,418 | 146,508,143 | 74,638,916 | 5,285,220 | ||||||||||||
|
|
62 | Semiannual Report | ��The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL STATEMENTS
Statements of Operations (continued)
for the six months ended April 30, 2018 (unaudited)
Franklin Balanced Fund | Franklin Convertible Securities Fund | Franklin Equity Income Fund | Franklin Real Return Fund | |||||||||||||
| ||||||||||||||||
Net change in unrealized appreciation (depreciation) on: | ||||||||||||||||
Investments: | ||||||||||||||||
Unaffiliated issuers | $ | (134,194,639 | ) | $ | (39,388,991 | ) | $ | (53,176,163 | ) | $ | (5,086,335 | ) | ||||
Controlled affiliates (Note 3f) | (1,077,760 | ) | — | — | — | |||||||||||
Non-controlled affiliates (Note 3f) | — | — | — | 27,502 | ||||||||||||
Translation of other assets and liabilities denominated in foreign currencies | (15,839 | ) | — | (10,154 | ) | 15,272 | ||||||||||
Written options | 953,279 | — | — | — | ||||||||||||
Change in deferred taxes on unrealized appreciation | — | — | — | 20,403 | ||||||||||||
|
| |||||||||||||||
Net change in unrealized appreciation (depreciation) | (134,334,959 | ) | (39,388,991 | ) | (53,186,317 | ) | (5,023,158 | ) | ||||||||
|
| |||||||||||||||
Net realized and unrealized gain (loss) | (32,025,541 | ) | 107,119,152 | 21,452,599 | 262,062 | |||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from operations | $ | 3,291,444 | $ | 116,388,828 | $ | 38,123,710 | $ | 2,517,068 | ||||||||
|
| |||||||||||||||
*Foreign taxes withheld on dividends | $ | 648,041 | $ | 111,563 | $ | 300,567 | $ | 10,944 | ||||||||
~Foreign taxes withheld on interest | $ | — | $ | — | $ | — | $ | 8,723 | ||||||||
#Net of foreign taxes | $ | — | $ | — | $ | — | $ | 27,801 |
franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report |
|
63 |
|
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
Franklin Balanced Fund | Franklin Convertible Securities Fund | |||||||||||||||
Six Months Ended April 30, 2018 (unaudited) | Year Ended October 31, 2017 | Six Months Ended April 30, 2018 (unaudited) | Year Ended October 31, 2017 | |||||||||||||
Increase (decrease) in net assets: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income | $ | 35,316,985 | $ | 90,261,237 | $ | 9,269,676 | $ | 34,041,219 | ||||||||
Net realized gain (loss) | 102,309,418 | 85,304,619 | 146,508,143 | 164,567,291 | ||||||||||||
Net change in unrealized appreciation (depreciation) | (134,334,959 | ) | 176,686,329 | (39,388,991 | ) | 204,363,980 | ||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from operations | 3,291,444 | 352,252,185 | 116,388,828 | 402,972,490 | ||||||||||||
|
| |||||||||||||||
Distributions to shareholders from: | ||||||||||||||||
Net investment income: | ||||||||||||||||
Class A | (43,690,249 | ) | (78,196,064 | ) | (10,232,060 | ) | (18,543,170 | ) | ||||||||
Class C | (8,065,317 | ) | (14,807,257 | ) | (2,704,566 | ) | (5,076,900 | ) | ||||||||
Class R | (75,411 | ) | (133,912 | ) | — | — | ||||||||||
Class R6 | (2,462,079 | ) | (24,051 | ) | (340,423 | ) | (292,682 | ) | ||||||||
Advisor Class | (2,158,887 | ) | (6,366,506 | ) | (20,191,709 | ) | (34,146,214 | ) | ||||||||
Net realized gains: | ||||||||||||||||
Class A | (42,758,290 | ) | (36,628,258 | ) | (41,245,442 | ) | (13,915,081 | ) | ||||||||
Class C | (10,271,476 | ) | (9,315,539 | ) | (15,522,997 | ) | (5,462,741 | ) | ||||||||
Class R | (77,735 | ) | (65,313 | ) | — | — | ||||||||||
Class R6 | (2,107,509 | ) | (3,394 | ) | (1,202,002 | ) | (160,359 | ) | ||||||||
Advisor Class | (1,952,807 | ) | (2,130,727 | ) | (78,200,404 | ) | (20,367,621 | ) | ||||||||
|
| |||||||||||||||
Total distributions to shareholders | (113,619,760 | ) | (147,671,021 | ) | (169,639,603 | ) | (97,964,768 | ) | ||||||||
|
| |||||||||||||||
Capital share transactions: (Note 2) | ||||||||||||||||
Class A | 2,461,248 | (40,657,348 | ) | 106,668,836 | (49,842,077 | ) | ||||||||||
Class C | (18,357,518 | ) | (35,085,152 | ) | 27,442,967 | (27,199,180 | ) | |||||||||
Class R | 350,164 | (4,205 | ) | — | — | |||||||||||
Class R6 | 144,045,149 | 54,098 | 7,324,482 | 14,196,058 | ||||||||||||
Advisor Class | (119,292,533 | ) | 94,203,381 | 41,217,549 | 292,684,054 | |||||||||||
|
| |||||||||||||||
Total capital share transactions | 9,206,510 | 18,510,774 | 182,653,834 | 229,838,855 | ||||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets | (101,121,806 | ) | 223,091,938 | 129,403,059 | 534,846,577 | |||||||||||
Net assets: | ||||||||||||||||
Beginning of period | 3,528,486,856 | 3,305,394,918 | 2,683,937,968 | 2,149,091,391 | ||||||||||||
|
| |||||||||||||||
End of period | $ | 3,427,365,050 | $ | 3,528,486,856 | $ | 2,813,341,027 | $ | 2,683,937,968 | ||||||||
|
| |||||||||||||||
Undistributed net investment income included in net assets: | ||||||||||||||||
End of period | $ | — | $ | 6,028,150 | $ | — | $ | — | ||||||||
|
| |||||||||||||||
Distributions in excess of net investment income included in net assets: | ||||||||||||||||
End of period | $ | (15,106,808 | ) | $ | — | $ | (50,489,430 | ) | $ | (26,290,348 | ) | |||||
|
|
64 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets (continued)
Franklin Equity Income Fund | Franklin Real Return Fund | |||||||||||||||
|
| |||||||||||||||
Six Months Ended April 30, 2018 (unaudited) | Year Ended October 31, 2017 | Six Months Ended April 30, 2018 (unaudited) | Year Ended October 31, 2017 | |||||||||||||
| ||||||||||||||||
Increase (decrease) in net assets: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income | $ | 16,671,111 | $ | 41,589,804 | $ | 2,255,006 | $ | 4,047,623 | ||||||||
Net realized gain (loss) | 74,638,916 | 69,697,927 | 5,285,220 | (1,617,385 | ) | |||||||||||
Net change in unrealized appreciation (depreciation) | (53,186,317 | ) | 251,171,481 | (5,023,158 | ) | 1,674,655 | ||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from operations | 38,123,710 | 362,459,212 | 2,517,068 | 4,104,893 | ||||||||||||
|
| |||||||||||||||
Distributions to shareholders from: | ||||||||||||||||
Net investment income: | ||||||||||||||||
Class A | (19,034,805 | ) | (42,489,638 | ) | (3,118,464 | ) | (1,941,335 | ) | ||||||||
Class C | (1,973,984 | ) | (4,618,552 | ) | (649,008 | ) | (353,587 | ) | ||||||||
Class R | (67,780 | ) | (158,369 | ) | — | — | ||||||||||
Class R6 | (975,497 | ) | (321,585 | ) | (233,357 | ) | (94,114 | ) | ||||||||
Advisor Class | (1,115,964 | ) | (3,122,071 | ) | (616,961 | ) | (611,165 | ) | ||||||||
Net realized gains: | ||||||||||||||||
Class A | (43,197,004 | ) | (66,068,336 | ) | — | — | ||||||||||
Class C | (6,695,600 | ) | (10,179,480 | ) | — | — | ||||||||||
Class R | (176,218 | ) | (270,558 | ) | — | — | ||||||||||
Class R6 | (1,827,696 | ) | (407,606 | ) | — | — | ||||||||||
Advisor Class | (2,269,104 | ) | (3,358,229 | ) | — | — | ||||||||||
|
| |||||||||||||||
Total distributions to shareholders | (77,333,652 | ) | (130,994,424 | ) | (4,617,790 | ) | (3,000,201 | ) | ||||||||
|
| |||||||||||||||
Capital share transactions: (Note 2) | ||||||||||||||||
Class A | (23,038,173 | ) | (135,418,963 | ) | (7,853,993 | ) | (15,477,267 | ) | ||||||||
Class C | 3,453,662 | (18,455,576 | ) | (3,170,099 | ) | (5,864,126 | ) | |||||||||
Class R | (396,764 | ) | (80,399 | ) | — | — | ||||||||||
Class R6 | 68,924,153 | 936,862 | 4,829,330 | 374,554 | ||||||||||||
Advisor Class | (52,457,917 | ) | 54,400,800 | (11,875,790 | ) | 4,725,881 | ||||||||||
|
| |||||||||||||||
Total capital share transactions | (3,515,039 | ) | (98,617,276 | ) | (18,070,552 | ) | (16,240,958 | ) | ||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets | (42,724,981 | ) | 132,847,512 | (20,171,274 | ) | (15,136,266 | ) | |||||||||
Net assets: | ||||||||||||||||
Beginning of period | 2,188,068,673 | 2,055,221,161 | 226,514,073 | 241,650,339 | ||||||||||||
|
| |||||||||||||||
End of period | $ | 2,145,343,692 | $ | 2,188,068,673 | $ | 206,342,799 | $ | 226,514,073 | ||||||||
|
| |||||||||||||||
Undistributed net investment income included in net assets: | ||||||||||||||||
End of period | $ | — | $ | 3,531,137 | $ | — | $ | — | ||||||||
|
| |||||||||||||||
Distributions in excess of net investment income included in net assets: | ||||||||||||||||
End of period | $ | (2,965,782 | ) | $ | — | $ | (4,384,789 | ) | $ | (2,022,005 | ) | |||||
|
|
franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report |
|
65 |
|
FRANKLIN INVESTORS SECURITIES TRUST
Notes to Financial Statements (unaudited)
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 classes of shares offered within each of the Funds are indicated below. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees 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. 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.
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
66 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 Funds’ business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time 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 4 p.m. Eastern time. 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 Funds’ NAV is not calculated, 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 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
franklintempleton.com | Semiannual Report | 67 |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Organization and Significant Accounting
Policies (continued)
c. Joint Repurchase Agreement (continued)
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 period end, as indicated in the Statements of Investments, had been entered into on April 30, 2018.
d. 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.
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.
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 Note 8 regarding other derivative information.
e. Index-Linked Notes
Certain or all Funds invest in index-linked notes. Index-linked notes are senior, unsecured, subordinated debt securities issued by a financial institution, and the value is based on the price movements of the underlying index. Index-linked notes are designed to provide investors access to the returns of various market benchmarks and intended to replicate the economic effects that would apply had the Fund directly purchased the underlying referenced asset or basket of assets. The risks of investing in index-linked notes include unfavorable price movements in the underlying index and the credit risk of the issuing financial institution. There may be no guarantee of a return of principal with index-linked notes and the appreciation potential may be limited. Index-linked notes may be more volatile and less liquid than other investments held by the Funds.
f. 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
68 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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.
g. 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, 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.
As a result of several 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. For U.S. income tax purposes, EU reclaims received by the Funds, if any, reduce the amounts of foreign taxes Fund shareholders can use as tax credits in their individual income tax returns.
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 April 30, 2018, 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 the statute of limitations in each jurisdiction in which the Fund invests.
h. 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. Distributable earnings are determined according to income tax regulations (tax basis) and 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, excluding 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
franklintempleton.com | Semiannual Report | 69 |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Organization and Significant Accounting Policies (continued)
h. Security Transactions, Investment Income, Expenses and Distributions (continued)
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.
i. 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.
j. 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.
2. Shares of Beneficial Interest
At April 30, 2018, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:
Franklin Balanced Fund | Franklin Convertible Securities Fund | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares: | ||||||||||||||||
Six Months ended April 30, 2018 | ||||||||||||||||
Shares sold | 14,553,667 | $ | 178,442,986 | 8,720,500 | $ | 177,998,405 | ||||||||||
Shares issued in reinvestment of distributions | 6,890,155 | 84,392,740 | 2,496,441 | 48,933,099 | ||||||||||||
Shares redeemed | (21,262,586 | ) | (260,374,478 | ) | (5,930,634 | ) | (120,262,668) | |||||||||
|
| |||||||||||||||
Net increase (decrease) | 181,236 | $ | 2,461,248 | 5,286,307 | $ | 106,668,836 | ||||||||||
|
| |||||||||||||||
Year ended October 31, 2017 | ||||||||||||||||
Shares sold | 41,122,848 | $ | 493,473,430 | 10,813,117 | $ | 208,458,475 | ||||||||||
Shares issued in reinvestment of distributions | 9,374,533 | 112,108,534 | 1,667,207 | 30,768,242 | ||||||||||||
Shares redeemed | (53,839,472 | ) | (646,239,312 | ) | (15,184,687 | ) | (289,068,794) | |||||||||
|
| |||||||||||||||
Net increase (decrease) | (3,342,091 | ) | $ | (40,657,348 | ) | (2,704,363 | ) | $ | (49,842,077) | |||||||
|
| |||||||||||||||
Class C Shares: | ||||||||||||||||
Six Months ended April 30, 2018 | ||||||||||||||||
Shares sold | 2,913,124 | $ | 35,440,770 | 2,051,225 | $ | 41,072,245 | ||||||||||
Shares issued in reinvestment of distributions | 1,446,860 | 17,575,438 | 842,233 | 16,259,258 | ||||||||||||
Shares redeemed | (5,880,453 | ) | (71,373,726 | ) | (1,493,217 | ) | (29,888,536) | |||||||||
|
| |||||||||||||||
Net increase (decrease) | (1,520,469 | ) | $ | (18,357,518 | ) | 1,400,241 | $ | 27,442,967 | ||||||||
|
| |||||||||||||||
Year ended October 31, 2017 | ||||||||||||||||
Shares sold | 9,430,439 | $ | 111,985,968 | 2,390,323 | $ | 45,128,905 | ||||||||||
Shares issued in reinvestment of distributions | 1,901,983 | 22,527,563 | 481,988 | 8,729,846 | ||||||||||||
Shares redeemed | (14,220,032 | ) | (169,598,683 | ) | (4,287,078 | ) | (81,057,931) | |||||||||
|
| |||||||||||||||
Net increase (decrease) | (2,887,610 | ) | $ | (35,085,152 | ) | (1,414,767 | ) | $ | (27,199,180) | |||||||
|
|
70 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin Balanced Fund | Franklin Convertible Securities Fund | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class R Shares: | ||||||||||||||||
Six Months ended April 30, 2018 | ||||||||||||||||
Shares sold | 36,229 | $ | 445,273 | |||||||||||||
Shares issued in reinvestment of distributions | 12,466 | 153,146 | ||||||||||||||
Shares redeemed | (20,139 | ) | (248,255) | |||||||||||||
|
| |||||||||||||||
Net increase (decrease) | 28,556 | $ | 350,164 | |||||||||||||
|
| |||||||||||||||
Year ended October 31, 2017 | ||||||||||||||||
Shares sold | 96,705 | $ | 1,160,206 | |||||||||||||
Shares issued in reinvestment of distributions | 16,618 | 199,225 | ||||||||||||||
Shares redeemed | (112,933 | ) | (1,363,636) | |||||||||||||
|
| |||||||||||||||
Net increase (decrease) | 390 | $ | (4,205) | |||||||||||||
|
| |||||||||||||||
Class R6 Shares: | ||||||||||||||||
Six Months ended April 30, 2018 | ||||||||||||||||
Shares sold | 12,861,841 | $ | 159,721,465 | 1,280,617 | $ | 26,000,241 | ||||||||||
Shares issued in reinvestment of distributions | 372,059 | 4,569,581 | 78,137 | 1,541,023 | ||||||||||||
Shares redeemed | (1,647,845 | ) | (20,245,897) | (982,807 | ) | (20,216,782) | ||||||||||
|
| |||||||||||||||
Net increase (decrease) | 11,586,055 | $ | 144,045,149 | 375,947 | $ | 7,324,482 | ||||||||||
|
| |||||||||||||||
Year ended October 31, 2017 | ||||||||||||||||
Shares sold | 101,768 | $ | 1,216,479 | 825,661 | $ | 16,405,823 | ||||||||||
Shares issued in reinvestment of distributions | 2,272 | 27,446 | 24,212 | 452,646 | ||||||||||||
Shares redeemed | (96,433 | ) | (1,189,827) | (136,289 | ) | (2,662,411) | ||||||||||
|
| |||||||||||||||
Net increase (decrease) | 7,607 | $ | 54,098 | 713,584 | $ | 14,196,058 | ||||||||||
|
| |||||||||||||||
Advisor Class Shares: | ||||||||||||||||
Six Months ended April 30, 2018 | ||||||||||||||||
Shares sold | 2,003,546 | $ | 24,597,623 | 25,095,533 | $ | 512,279,517 | ||||||||||
Shares issued in reinvestment of distributions | 275,509 | 3,381,353 | 4,462,474 | 87,418,147 | ||||||||||||
Shares redeemed | (11,858,676 | ) | (147,271,509) | (27,683,539 | ) | (558,480,115) | ||||||||||
|
| |||||||||||||||
Net increase (decrease) | (9,579,621 | ) | $ | (119,292,533) | 1,874,468 | $ | 41,217,549 | |||||||||
|
| |||||||||||||||
Year ended October 31, 2017 | ||||||||||||||||
Shares sold | 15,399,254 | $ | 184,926,370 | 28,693,593 | $ | 549,908,666 | ||||||||||
Shares issued in reinvestment of distributions | 634,330 | 7,621,151 | 2,642,306 | 49,040,409 | ||||||||||||
Shares redeemed | (8,197,066 | ) | (98,344,140) | (15,989,308 | ) | (306,265,021) | ||||||||||
|
| |||||||||||||||
Net increase (decrease) | 7,836,518 | $ | 94,203,381 | 15,346,591 | $ | 292,684,054 | ||||||||||
|
|
franklintempleton.com | Semiannual Report | 71 |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
2. Shares of Beneficial Interest (continued)
Franklin Equity Income Fund | Franklin Real Return Fund | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares: | ||||||||||||||||
Six Months ended April 30, 2018 | ||||||||||||||||
Shares sold | 3,064,629 | $ | 77,135,090 | 1,035,031 | $ | 10,446,130 | ||||||||||
Shares issued in reinvestment of distributions | 2,435,421 | 60,889,151 | 302,938 | 3,050,299 | ||||||||||||
Shares redeemed | (6,392,586 | ) | (161,062,414) | (2,115,465 | ) | (21,350,422 | ) | |||||||||
|
| |||||||||||||||
Net increase (decrease) | (892,536 | ) | $ | (23,038,173) | (777,496 | ) | $ | (7,853,993) | ||||||||
|
| |||||||||||||||
Year ended October 31, 2017 | ||||||||||||||||
Shares sold | 7,935,217 | $ | 186,557,733 | 3,149,721 | $ | 31,981,942 | ||||||||||
Shares issued in reinvestment of distributions | 4,586,199 | 106,137,449 | 186,888 | 1,895,555 | ||||||||||||
Shares redeemed | (18,170,067 | ) | (428,114,145) | (4,857,880 | ) | (49,354,764) | ||||||||||
|
| |||||||||||||||
Net increase (decrease) | (5,648,651 | ) | $ | (135,418,963) | (1,521,271 | ) | $ | (15,477,267) | ||||||||
|
| |||||||||||||||
Class C Shares: | ||||||||||||||||
Six Months ended April 30, 2018 | ||||||||||||||||
Shares sold | 879,917 | $ | 22,050,767 | 200,627 | $ | 2,002,915 | ||||||||||
Shares issued in reinvestment of distributions | 339,035 | 8,417,385 | 63,515 | 632,944 | ||||||||||||
Shares redeemed | (1,083,178 | ) | (27,014,490) | (581,761 | ) | (5,805,958) | ||||||||||
|
| |||||||||||||||
Net increase (decrease) | 135,774 | $ | 3,453,662 | (317,619 | ) | $ | (3,170,099) | |||||||||
|
| |||||||||||||||
Year ended October 31, 2017 | ||||||||||||||||
Shares sold | 1,668,212 | $ | 38,941,261 | 630,519 | $ | 6,345,139 | ||||||||||
Shares issued in reinvestment of distributions | 613,812 | 14,082,715 | 34,431 | 345,545 | ||||||||||||
Shares redeemed | (3,042,070 | ) | (71,479,552) | (1,248,666 | ) | (12,554,810) | ||||||||||
|
| |||||||||||||||
Net increase (decrease) | (760,046 | ) | $ | (18,455,576) | (583,716 | ) | $ | (5,864,126) | ||||||||
|
| |||||||||||||||
Class R Shares: | ||||||||||||||||
Six Months ended April 30, 2018 | ||||||||||||||||
Shares sold | 14,244 | $ | 357,015 | |||||||||||||
Shares issued in reinvestment of distributions | 8,738 | 218,519 | ||||||||||||||
Shares redeemed | (38,714 | ) | (972,298) | |||||||||||||
|
| |||||||||||||||
Net increase (decrease) | (15,732 | ) | $ | (396,764) | ||||||||||||
|
| |||||||||||||||
Year ended October 31, 2017 | ||||||||||||||||
Shares sold | 64,993 | $ | 1,525,028 | |||||||||||||
Shares issued in reinvestment of distributions | 16,175 | 374,199 | ||||||||||||||
Shares redeemed | (83,128 | ) | (1,979,626) | |||||||||||||
|
| |||||||||||||||
Net increase (decrease) | (1,960 | ) | $ | (80,399) | ||||||||||||
|
| |||||||||||||||
Class R6 Shares: | ||||||||||||||||
Six Months ended April 30, 2018 | ||||||||||||||||
Shares sold | 3,069,743 | $ | 77,330,390 | 597,260 | $ | 6,092,528 | ||||||||||
Shares issued in reinvestment of distributions | 92,215 | 2,309,203 | 16,953 | 171,575 | ||||||||||||
Shares redeemed | (424,045 | ) | (10,715,440) | (141,604 | ) | (1,434,773) | ||||||||||
|
| |||||||||||||||
Net increase (decrease) | 2,737,913 | $ | 68,924,153 | 472,609 | $ | 4,829,330 | ||||||||||
|
| |||||||||||||||
Year ended October 31, 2017 | ||||||||||||||||
Shares sold | 228,564 | $ | 5,407,737 | 299,229 | $ | 3,051,514 | ||||||||||
Shares issued in reinvestment of distributions | 479 | 11,161 | 5,063 | 51,659 | ||||||||||||
Shares redeemed | (189,735 | ) | (4,482,036) | (267,306 | ) | (2,728,619) | ||||||||||
|
| |||||||||||||||
Net increase (decrease) | 39,308 | $ | 936,862 | 36,986 | $ | 374,554 | ||||||||||
|
|
72 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin Equity Income Fund | Franklin Real Return Fund | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Advisor Class Shares: | ||||||||||||||||
Six Months ended April 30, 2018 | ||||||||||||||||
Shares sold | 668,229 | $ | 16,839,393 | 681,960 | $ | 6,919,465 | ||||||||||
Shares issued in reinvestment of distributions | 120,220 | 3,010,442 | 59,071 | 597,026 | ||||||||||||
Shares redeemed | (2,866,104 | ) | (72,307,752) | (1,904,193 | ) | (19,392,281) | ||||||||||
|
| |||||||||||||||
Net increase (decrease) | (2,077,655 | ) | $ | (52,457,917) | (1,163,162 | ) | $ | (11,875,790) | ||||||||
|
| |||||||||||||||
Year ended October 31, 2017 | ||||||||||||||||
Shares sold | 4,431,818 | $ | 104,388,733 | 1,805,023 | $ | 18,433,312 | ||||||||||
Shares issued in reinvestment of distributions | 260,564 | 6,067,460 | 58,212 | 592,952 | ||||||||||||
Shares redeemed | (2,378,377 | ) | (56,055,393) | (1,401,509 | ) | (14,300,383) | ||||||||||
|
| |||||||||||||||
Net increase (decrease) | 2,314,005 | $ | 54,400,800 | 461,726 | $ | 4,725,881 | ||||||||||
|
|
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
|
franklintempleton.com | Semiannual Report | 73 |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
3. Transactions with Affiliates (continued)
a. Management Fees (continued)
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
|
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 period ended April 30, 2018, each Fund’s annualized gross effective investment management fee rate based on average daily net assets was as follows:
Franklin Balanced Fund | Franklin Convertible | Franklin Equity Income Fund | Franklin Real Return Fund | |||
0.630% | 0.464% | 0.465% | 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.
74 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 Balanced Fund | Franklin Convertible Securities Fund | Franklin Equity Income Fund | Franklin Real 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.
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 period:
Franklin Balanced Fund | Franklin Convertible Securities Fund | Franklin Equity Income Fund | Franklin Real Return Fund | |||||||||||||
Sales charges retained net of commissions paid to unaffiliated brokers/dealers | $427,671 | $221,229 | $198,839 | $7,750 | ||||||||||||
CDSC retained | $ 25,870 | $ 7,652 | $ 9,069 | $2,851 |
e. Transfer Agent Fees
Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. Effective November 1, 2017, the fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. Prior to November 1, 2017, the fees were account based fees that varied based on fund or account type. In addition, each class reimburses Investor Services for out of pocket expenses incurred and, except for Class R6, reimburses 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.
franklintempleton.com | Semiannual Report |
|
75 |
|
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
3. Transactions with Affiliates (continued)
e. Transfer Agent Fees (continued)
For the period ended April 30, 2018, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:
Franklin Balanced Fund | Franklin Convertible Securities Fund | Franklin Equity Income Fund | Franklin Real Return Fund | |||||||||||||
Transfer agent fees | $804,375 | $527,905 | $534,511 | $100,701 |
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 period ended April 30, 2018, investments in affiliated management investment companies were as follows:
Number of at Beginning | Gross Additions | Gross Reductions | Number of Held at End | Value at End of Period | Dividend Income | Realized (Loss) | Net Change in Unrealized Appreciation (Depreciation) | |||||||||||||||||||||||||
Franklin Balanced Fund | ||||||||||||||||||||||||||||||||
Controlled Affiliates | ||||||||||||||||||||||||||||||||
Franklin FTSE Europe Hedged ETF | — | 1,350,000 | — | 1,350,000 | $ | 33,894,045 | $ | 16,090 | $ | — | $ | 181,420 | ||||||||||||||||||||
Franklin FTSE Japan Hedged ETF | — | 1,250,000 | — | 1,250,000 | 32,575,000 | 12,810 | — | (297,875) | ||||||||||||||||||||||||
Franklin Liberty Investment Grade Corporate ETF | 750,000 | 250,000 | (100,000) | 900,000 | 21,316,320 | 363,616 | (92,555) | (961,305) | ||||||||||||||||||||||||
Total Controlled Affiliates | $ | 87,785,365 | $ | 392,516 | $ | (92,555) | $ | (1,077,760) | ||||||||||||||||||||||||
Non-Controlled Affiliates | ||||||||||||||||||||||||||||||||
Institutional Fiduciary Trust Money Market Portfolio, 1.30% | 101,275,128 | 794,481,151 | (823,454,551) | 72,301,728 | $ | 72,301,728 | $ | 456,695 | $ | — | $ | — | ||||||||||||||||||||
Total Affiliated Securities | $ | 160,087,093 | $ | 849,211 | $ | (92,555) | $ | (1,077,760) | ||||||||||||||||||||||||
Franklin Convertible Securities Fund | ||||||||||||||||||||||||||||||||
Non-Controlled Affiliates | ||||||||||||||||||||||||||||||||
Institutional Fiduciary Trust Money Market Portfolio, 1.30% | 69,852,661 | 333,134,168 | (313,411,452) | 89,575,377 | $ | 89,575,377 | $ | 565,322 | $ | — | $ | — | ||||||||||||||||||||
Franklin Equity Income Fund | ||||||||||||||||||||||||||||||||
Non-Controlled Affiliates | ||||||||||||||||||||||||||||||||
Institutional Fiduciary Trust Money Market Portfolio, 1.30% | 36,691,548 | 232,597,506 | (237,178,381) | 32,110,673 | $ | 32,110,673 | $ | 285,158 | $ | — | $ | — | ||||||||||||||||||||
Franklin Real Return Fund | ||||||||||||||||||||||||||||||||
Non-Controlled Affiliates | ||||||||||||||||||||||||||||||||
Franklin Lower Tier Floating Rate Fund | 305,899 | 15,703 | (321,602) | — | $ | — | $ | 74,590 | $ | 140,938a | $ | (149,933) | ||||||||||||||||||||
Franklin Middle Tier Floating Rate Fund . | 112,671 | 2,104 | (114,775) | — | — | 20,880 | (18,778) | 9,823 | ||||||||||||||||||||||||
Franklin Pelagos Commodities Strategy Fund, Class R6 | — | 897,760 | — | 897,760 | 6,167,612 | — | — | 167,612 | ||||||||||||||||||||||||
Total Affiliated Securities | $ | 6,167,612 | $ | 95,470 | $ | 122,160 | $ | 27,502 |
a | Includes realized gain distributions received. |
76 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 0.49% 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, 2019. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end.
For Franklin Balanced Fund, Franklin Convertible Securities Fund and Franklin Equity Income Fund, Investor Services has voluntarily agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.03%, 0.02% and 0.02% based on the average net assets of the class, respectively. Investor Services may discontinue this waiver in the future.
h. Interfund Transactions
Franklin Real Return Fund engaged in purchases and sales of investments with funds or other accounts that have common investment managers (or affiliated investment managers), directors, trustees or officers. During the period ended April 30, 2018, these purchase and sale transactions aggregated $0 and $1,241,087, respectively.
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 period ended April 30, 2018, 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.
At October 31, 2017, the capital loss carryforwards were as follows:
Franklin Real Return Fund | ||||
Capital loss carryforwards subject to expiration: | ||||
2018 | 1,206,585 | |||
Capital loss carryforwards not subject to expiration: | ||||
Short term | 875,948 | |||
Long term | 26,665,810 | |||
Total capital loss carryforwards | 28,748,343 |
On October 31, 2017, the Franklin Real Return Fund had expired capital loss carryforwards of $1,207,907, which were reclassified to paid-in capital.
franklintempleton.com | Semiannual Report |
|
77 |
|
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
5. Income Taxes (continued)
At April 30, 2018, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
Franklin Balanced Fund | Franklin Convertible Securities Fund | Franklin Equity Income Fund | Franklin Real Return Fund | |||||||||||||
Cost of investments | $ | 3,176,196,821 | $ | 2,491,162,642 | $ | 1,584,443,250 | $ | 205,336,372 | ||||||||
|
| |||||||||||||||
Unrealized appreciation | $ | 358,358,566 | $ | 439,424,333 | $ | 590,687,822 | $ | 9,000,426 | ||||||||
Unrealized depreciation | (157,291,355 | ) | (135,419,341 | ) | (35,321,723 | ) | (8,196,025) | |||||||||
|
| |||||||||||||||
Net unrealized appreciation (depreciation) | $ | 201,067,211 | $ | 304,004,992 | $ | 555,366,099 | $ | 804,401 | ||||||||
|
|
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.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the period ended April 30, 2018, were as follows:
Franklin Balanced Fund | Franklin Convertible Securities Fund | Franklin Equity Income Fund | Franklin Real Return Fund | |||||||||||||
Purchases | $880,901,607 | $622,300,003 | $338,673,312 | $53,348,319 | ||||||||||||
Sales | $851,837,226 | $630,243,961 | $399,133,190 | $77,347,719 |
7. Credit Risk
At April 30, 2018, Franklin Balanced Fund and Franklin Convertible Securities Fund had 10.3% and 85.8%, respectively, of their portfolio invested in high yield securities 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 April 30, 2018, Franklin Balanced Fund’s investments in derivative contracts are reflected in the Statements of Assets and Liabilities as follows:
Asset Derivatives | Liability Derivatives | |||||||||||
Derivative Contracts Not Hedging Instruments | Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | ||||||||
Equity contracts | Investments in securities, at value | $ | — | Options written, at value | $ | 1,460,200 | ||||||
|
|
|
|
78 | Semiannual Report |
franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
For the period ended April 30, 2018, the effect of derivative contracts in the Franklin Balanced Fund’s Statements of Operations was as follows:
Derivative Contracts Not Accounted for as | Statement of Operations Location | Net Realized Gain (Loss) for the Period | Statement of Operations Location | Net Change in for the Period | ||||||
Equity contracts | Net realized gain (loss) from Written options | $3,020,462 | Net change in unrealized appreciation (depreciation) on Written options | $953,279 | ||||||
|
|
|
For the period ended April 30, 2018, the average month end notional amount of options represented $1,453,857.
See Note 1(d) 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 8, 2019. 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 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statements of Operations. During the period ended April 30, 2018, 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.
franklintempleton.com |
Semiannual Report | 79 |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
10. Fair Value Measurements (continued)
A summary of inputs used as of April 30, 2018, 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:a | ||||||||||||||||
Equity Investmentsb | $ | 1,841,869,606 | $ | — | $ | — | $ | 1,841,869,606 | ||||||||
Equity-Linked Securities | — | 309,515,746 | — | 309,515,746 | ||||||||||||
Index-Linked Notes | — | 33,302,500 | — | 33,302,500 | ||||||||||||
Convertible Bonds | — | 14,291,130 | — | 14,291,130 | ||||||||||||
Corporate Bonds | — | 1,107,443,522 | — | 1,107,443,522 | ||||||||||||
Short Term Investments | 72,301,728 | — | — | 72,301,728 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | 1,914,171,334 | $ | 1,464,552,898 | $ | — | $ | 3,378,724,232 | ||||||||
|
| |||||||||||||||
Liabilities: | ||||||||||||||||
Other Financial Instruments: | ||||||||||||||||
Options Written | $ | 1,460,200 | $ | — | $ | — | $ | 1,460,200 | ||||||||
|
| |||||||||||||||
Franklin Convertible Securities Fund | ||||||||||||||||
Assets: | ||||||||||||||||
Investments in Securities:a | ||||||||||||||||
Equity Investments:b | ||||||||||||||||
Consumer Staples | $ | 34,177,500 | $ | 48,528,887 | $ | — | $ | 82,706,387 | ||||||||
Information Technology | — | 50,752,776 | — | 50,752,776 | ||||||||||||
All Other Equity Investments | 288,640,905 | — | — | 288,640,905 | ||||||||||||
Convertible Bonds | — | 2,283,492,189 | — | 2,283,492,189 | ||||||||||||
Escrows and Litigation Trusts | — | — | —c | — | ||||||||||||
Short Term Investments | 89,575,377 | — | — | 89,575,377 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | 412,393,782 | $ | 2,382,773,852 | $ | — | $ | 2,795,167,634 | ||||||||
|
| |||||||||||||||
Franklin Equity Income Fund | ||||||||||||||||
Assets: | ||||||||||||||||
Investments in Securities:a | ||||||||||||||||
Equity Investmentsb | $ | 1,895,048,269 | $ | — | $ | — | $ | 1,895,048,269 | ||||||||
Equity-Linked Securities | — | 212,650,407 | — | 212,650,407 | ||||||||||||
Short Term Investments | 32,110,673 | — | — | 32,110,673 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | 1,927,158,942 | $ | 212,650,407 | $ | — | $ | 2,139,809,349 | ||||||||
|
| |||||||||||||||
Franklin Real Return Fund | ||||||||||||||||
Assets: | ||||||||||||||||
Investments in Securities:a | ||||||||||||||||
Equity Investmentsb | $ | 42,763,983 | $ | — | $ | — | $ | 42,763,983 | ||||||||
Foreign Government and Agency Securities | — | 1,123,814 | — | 1,123,814 | ||||||||||||
U.S. Government and Agency Securities | — | 151,774,726 | — | 151,774,726 | ||||||||||||
Short Term Investments | — | 10,478,250 | — | 10,478,250 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | 42,763,983 | $ | 163,376,790 | $ | — | $ | 206,140,773 | ||||||||
|
|
aFor detailed categories, see the accompanying Statement of Investments.
bIncludes common, preferred, convertible preferred stocks and management investment companies.
cIncludes securities determined to have no value at April 30, 2018.
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 beginning and/or end of the period.
80 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
11. New Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities acquired at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities acquired at a discount, which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.
12. 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.
franklintempleton.com | Semiannual Report | 81 |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Abbreviations
Currency | Selected Portfolio | |||||
BRL | Brazilian Real | ADR | American Depositary Receipt | |||
USD | United States Dollar | ETF | Exchange Traded Fund | |||
FRN | Floating Rate Note | |||||
LIBOR | London InterBank Offered Rate | |||||
REIT | Real Estate Investment Trust | |||||
SPDR | S&P Depositary Receipt |
82 |
Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
Special Meeting of Shareholders
MEETING OF SHAREHOLDERS: OCTOBER 30, 2017 AND RECONVENED ON DECEMBER 15, 2017 AND DECEMBER 29, 2017
(UNAUDITED)
A Special Meeting of Shareholders of Franklin Investors Securities Trust was held at the offices of Franklin Templeton Investments, One Franklin Parkway, San Mateo, California on October 30, 2017 and reconvened on December 15, 2017 and December 29, 2017. The purpose of the meeting was to elect Trustees of Franklin Investors Securities Trust and to vote on the following proposals for each Fund: to approve the use of a “manager of managers” structure whereby the Fund’s investment manager would be able to hire and replace subadvisers without shareholder approval and to approve an amended fundamental investment restriction regarding investments in commodities. At the meeting, (i) the following persons were elected by the shareholders to serve as Trustees of Franklin Investors Securities Trust: Harris J. Ashton, Terrence J. Checki, Mary C. Choksi, Edith E. Holiday, Gregory E. Johnson, Rupert H. Johnson, Jr., J. Michael Luttig, Larry D. Thompson, and John B. Wilson; and (ii) the proposals to use a “manager of managers” structure and to approve an amended fundamental investment restriction regarding investments in commodities were approved by shareholders of each Fund, except for Franklin Real Return Fund. No other business was transacted at the meeting.
In connection with the meeting, management is aware that some shareholders received from the proxy solicitor numerous calls and mailings that may have been distracting. Management is taking steps to ensure that, in the future, for any new shareholder meeting solicitations that occur, such activity is not repeated. Management apologizes for any inconvenience that may have been caused as a result of such calls and mailings.
The results of the voting at the meeting are as follows:
Proposal 1. To elect a Board of Trustees:
Name | For | Withheld | ||||||
Harris J. Ashton | 1,140,629,120 | 32,081,576 | ||||||
Terrence J. Checki | 1,140,321,742 | 32,388,956 | ||||||
Mary C. Choksi | 1,140,407,572 | 32,303,126 | ||||||
Edith E. Holiday | 1,108,315,463 | 64,395,237 | ||||||
Gregory E. Johnson | 1,141,429,086 | 31,281,610 | ||||||
Rupert H. Johnson, Jr. | 1,140,181,429 | 32,529,268 | ||||||
J. Michael Luttig | 1,140,612,578 | 32,098,122 | ||||||
Larry D. Thompson | 1,140,871,851 | 31,838,848 | ||||||
John B. Wilson | 1,141,487,184 | 31,223,513 |
Total Trust Shares Outstanding*: 1,818,967,134
* As of the record date.
franklintempleton.com | Semiannual Report | 83 |
FRANKLIN INVESTORS SECURITIES TRUST
SPECIAL MEETING OF SHAREHOLDERS
Proposal 2. | To approve the use of a “manager of managers” structure whereby the Fund’s investment manager would be able to hire and replace subadvisers without shareholder approval: |
Franklin Balanced Fund
Shares | ||||
For | 104,246,566 | |||
Against | 8,903,975 | |||
Abstain | 6,730,540 | |||
Broker Non-Votes | 24,731,949 | |||
Total Fund Shares Voted | 144,613,028 | |||
Total Fund Shares Outstanding* | 288,495,988 |
Franklin Convertible Securities Fund
Shares | ||||
For | 59,793,433 | |||
Against | 2,620,815 | |||
Abstain | 1,644,437 | |||
Broker Non-Votes | 22,720,089 | |||
Total Fund Shares Voted | 86,778,774 | |||
Total Fund Shares Outstanding* | 128,499,691 |
Franklin Equity Income Fund
Shares | ||||
For | 32,618,200 | |||
Against | 2,669,239 | |||
Abstain | 1,831,559 | |||
Broker Non-Votes | 8,279,951 | |||
Total Fund Shares Voted | 45,398,950 | |||
Total Fund Shares Outstanding* | 88,573,120 |
Franklin Real Return Fund
Shares | ||||
For | 9,226,088 | |||
Against | 824,151 | |||
Abstain | 584,830 | |||
Broker Non-Votes | 3,920,546 | |||
Total Fund Shares Voted | 14,555,622 | |||
Total Fund Shares Outstanding* | 23,154,340 |
Proposal 3. | To approve an amended fundamental investment restriction regarding investments in commodities: |
Franklin Balanced Fund
Shares | ||||
For | 106,101,197 | |||
Against | 5,525,418 | |||
Abstain | 8,254,464 | |||
Broker Non-Votes | 24,731,949 | |||
Total Fund Shares Voted | 144,613,028 | |||
Total Fund Shares Outstanding* | 288,495,988 |
84 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
SPECIAL MEETING OF SHAREHOLDERS
Franklin Convertible Securities Fund
Shares | ||||
For | 59,902,307 | |||
Against | 2,006,159 | |||
Abstain | 2,150,219 | |||
Broker Non-Votes | 22,720,089 | |||
Total Fund Shares Voted | 86,778,774 | |||
Total Fund Shares Outstanding* | 128,499,691 |
Franklin Equity Income Fund
Shares | ||||
For | 32,960,417 | |||
Against | 1,888,508 | |||
Abstain | 2,270,074 | |||
Broker Non-Votes | 8,279,951 | |||
Total Fund Shares Voted | 45,398,950 | |||
Total Fund Shares Outstanding* | 88,573,120 |
Franklin Real Return Fund
Shares | ||||
For | 9,314,179 | |||
Against | 637,451 | |||
Abstain | 683,446 | |||
Broker Non-Votes | 3,920,546 | |||
Total Fund Shares Voted | 14,555,622 | |||
Total Fund Shares Outstanding* | 23,154,340 |
franklintempleton.com | Semiannual Report | 85 |
FRANKLIN INVESTORS SECURITIES TRUST
Board Approval of Investment Management Agreements
FRANKLIN INVESTORS SECURITIES TRUST
Franklin Balanced Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Real Return Fund
(each a Fund)
At an in-person meeting held on February 27, 2018 (Meeting), the Board of Trustees (Board) of Franklin Investors Securities Trust (Trust), including a majority of the trustees who are not “interested persons” as defined in the Investment Company Act of 1940 (Independent Trustees), reviewed and approved the continuance of the investment management agreement between Franklin Advisers, Inc. (Manager) and the Trust, on behalf of each Fund (each a Management Agreement) for an additional one-year period. The Independent Trustees received advice from and met separately with Independent Trustee counsel in considering whether to approve the continuation of each Management Agreement. Although the Management Agreements for the Funds were considered at the same Board meeting, the Board considered the information provided to it about the Funds together and with respect to each Fund separately as the Board deemed appropriate.
In considering the continuation of each Management Agreement, the Board reviewed and considered information provided by the Manager at the Meeting and throughout the year at meetings of the Board and its committees. The Board also reviewed and considered information provided in response to a detailed set of requests for information submitted to the Manager by Independent Trustee counsel on behalf of the Independent Trustees in connection with the annual contract renewal process. In addition, prior to the Meeting, the Independent Trustees held a telephonic contract renewal meeting at which the Independent Trustees conferred amongst themselves and Independent Trustee counsel about contract renewal matters. The Board reviewed and considered all of the factors it deemed relevant in approving the continuance of each Management Agreement, including, but not limited to: (i) the nature, extent and quality of the services provided by the Manager; (ii) the investment performance of each Fund; (iii) the costs of the services provided and profits realized by the Manager and its affiliates from the relationship with each Fund; (iv) the extent to which economies of scale are realized as each Fund grows; and (v) whether fee levels reflect these economies of scale for the benefit of Fund investors.
In approving the continuance of each Management Agreement, the Board, including a majority of the Independent Trustees, determined that the terms of the Management Agreement are fair and reasonable and that the continuance of such Management Agreement is in the interests of the applicable Fund and its shareholders. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s determination.
Nature, Extent and Quality of Services
The Board reviewed and considered information regarding the nature, extent and quality of investment management services provided by the Manager and its affiliates to the Funds and their shareholders. This information included, among other things, the qualifications, background and experience of the senior management and investment personnel of the Manager; the structure of investment personnel compensation; oversight of third-party service providers; investment performance reports and related financial information for each Fund; reports on expenses, shareholder services, marketing support payments made to financial intermediaries and third party servicing arrangements; legal and compliance matters; risk controls; pricing and other services provided by the Manager and its affiliates; and management fees charged by the Manager and its affiliates to U.S. funds and other accounts, including management’s explanation of differences among accounts where relevant. The Board also reviewed and considered an annual report on payments made by Franklin Templeton Investments (FTI) or the Funds to financial intermediaries, as well as a memorandum relating to third-party servicing arrangements in response to a guidance update in 2016 from the U.S. Securities and Exchange Commission (SEC) relating to mutual fund distribution and sub-accounting fees. The Board noted management’s continuing efforts and expenditures in establishing effective business continuity plans and developing strategies to address areas of heightened concern in the mutual fund industry, such as cybersecurity and liquidity risk management. The Board also recognized management’s commitment to facilitating Board oversight of particular areas, including derivatives and payments to intermediaries, by enhanced reporting.
The Board also reviewed and considered the benefits provided to Fund shareholders of investing in a fund that is part of the Franklin Templeton family of funds. The Board noted the financial position of Franklin Resources, Inc. (FRI), the Manager’s parent, and its commitment to the mutual fund business as evidenced by its continued introduction of new funds, reassessment of the fund offerings in response to the
86 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
SHAREHOLDER INFORMATION
market environment and project initiatives and capital investments relating to the services provided to the Funds by the FTI organization.
Following consideration of such information, the Board was satisfied with the nature, extent and quality of services provided by the Manager and its affiliates to the Funds and their shareholders.
Fund Performance
The Board reviewed and considered the performance results of each Fund over various time periods ended December 31, 2017. The Board considered the performance returns for each Fund in comparison to the performance returns of mutual funds deemed comparable to the Fund included in a universe (Performance Universe) selected by Broadridge Financial Solutions, Inc. (Broadridge), an independent provider of investment company data. The Board received a description of the methodology used by Broadridge to select the mutual funds included in a Performance Universe. The Board also reviewed and considered Fund performance reports provided and discussions that occurred with portfolio managers at Board meetings throughout the year. A summary of each Fund’s performance results is below.
Franklin Balanced Fund – The Performance Universe for this Fund included the Fund and all retail and institutional mixed-asset target allocation moderate funds. The Board noted that the Fund’s annualized income return for the one-, three-, five- and 10-year periods was above the median of its Performance Universe. The Board also noted that the Fund’s annualized total return for the one-year period was below the median of its Performance Universe, but for the three-, five-and 10-year periods was above the median of its Performance Universe. The Board concluded that the Fund’s performance was satisfactory. In doing so, the Board noted that the Fund’s annualized total return for the one-year period, while below the median, exceeded 9.5%.
Franklin Convertible Securities Fund – The Performance Universe for this Fund included the Fund and all retail and institutional convertible securities funds. The Board noted that the Fund’s annualized income return for the one-, three- and 10-year periods was above the median of its Performance Universe, but for the five-year period was below the median of its Performance Universe. The Board also noted that the Fund’s annualized total return for the one-, three-, five- and 10-year periods was in the first quintile (the best) and above the median of its Performance Universe. The Board concluded that the Fund’s performance was satisfactory.
Franklin Equity Income Fund – The Performance Universe for this Fund included the Fund and all retail and institutional equity income funds. The Board noted that the Fund’s annualized income return for the one-, three-, five- and 10-year periods was above the median of its Performance Universe. The Board also noted that the Fund’s annualized total return for the one- and 10-year periods was below the median of its Performance Universe, but for the three- and five-year periods was equal to the median of its Performance Universe. Given the Fund’s income-oriented investment objective and consistently good comparative annualized income returns, the Board concluded that the Fund’s performance was satisfactory. In doing so, the Board noted that the Fund’s annualized total return for the one-year period, while below the median, exceeded 15.9%.
Franklin Real Return Fund – The Performance Universe for this Fund included the Fund and all retail and institutional inflation-protected bond funds. The Board noted that the Fund’s annualized income return for the one-, three-, five- and 10-year periods was above the median of its Performance Universe. The Board also noted that the Fund’s annualized total return for the one-, three- and 10-year periods was below the median of its Performance Universe, but for the five-year period was above the median of its Performance Universe. In discussing such performance, management explained that the Performance Universe contained many funds that, unlike the Fund, invested primarily in treasury inflation protected securities (TIPS) and held longer term TIPS that performed better during such periods than the Fund’s portfolio, in contrast with the Fund’s broader approach and generally lower duration stance. Management further explained that, while it intends to retain a multi-asset approach, it will focus on non-TIPS sectors that have a more direct inflation relationship. Management also explained that this would be expected to reduce foreign exchange and corporate credit-related positioning, and should reduce large deviations in relative performance in the future. Noting the Fund’s income-oriented investment objective, the Board concluded that the Fund’s performance was satisfactory.
Comparative Fees and Expenses
The Board reviewed and considered information regarding each Fund’s actual total expense ratio and its various components, including, as applicable, management fees; transfer agent expenses; underlying fund expenses; Rule 12b-1 and non-Rule 12b-1 service fees; and other non-management fees. The Board also noted the quarterly and annual reports it receives on all marketing support payments made by FTI to financial intermediaries. The Board considered the actual total
franklintempleton.com | Semiannual Report | 87 |
FRANKLIN INVESTORS SECURITIES TRUST
SHAREHOLDER INFORMATION
expense ratio and, separately, the contractual management fee rate, without the effect of fee waivers (Management Rate), if any, of each Fund in comparison to the median expense ratio and median Management Rate, respectively, of other mutual funds deemed comparable to and with a similar expense structure as the Fund selected by Broadridge (Expense Group). Broadridge fee and expense data is based upon information taken from each fund’s most recent annual report, which reflects historical asset levels that may be quite different from those currently existing, particularly in a period of market volatility. While recognizing such inherent limitation and the fact that expense ratios and Management Rates generally increase as assets decline and decrease as assets grow, the Board believed the independent analysis conducted by Broadridge to be an appropriate measure of comparative fees and expenses. The Broadridge Management Rate includes administrative charges, and the actual total expense ratio, for comparative consistency, was shown for Class A shares for funds with multiple classes of shares. The Board received a description of the methodology used by Broadridge to select the mutual funds included in an Expense Group.
Franklin Balanced Fund – The Expense Group for the Fund included the Fund and five other mixed-asset target allocation moderate funds. The Board noted that the Management Rate and actual total expense ratio for the Fund were slightly above the medians of its Expense Group. The Board concluded that the Management Rate charged to the Fund is reasonable. In doing so, the Board noted the Fund’s above median annualized income and total return for each of the one , three-, five- and 10-year periods ended December 31, 2017, with the exception of the one year annualized total return.
Franklin Real Return Fund – The Expense Group for the Fund included the Fund and ten other inflation-protected bond funds. The Board noted that the Management Rate and actual total expense ratio for the Fund were slightly above the medians of its Expense Group. The Board concluded that the Management Rate charged to the Fund is reasonable. In doing so, the Board noted management’s explanation that the Expense Group for the Fund consists of funds that predominantly invest in Treasury inflation protected securities as compared to the Fund, which has a broader asset allocation and employs individual security selection among a variety of sectors. The Board further noted that the Fund’s actual total expense ratio reflected a fee waiver from management.
Franklin Convertible Securities Fund and Franklin Equity Income Fund – The Expense Group for the Franklin
Convertible Securities Fund included the Fund and six other convertible securities funds. The Expense Group for the Franklin Equity Income Fund included the Fund and 11 other equity income funds. The Board noted that the Management Rates and actual total expense ratios for these Funds were below the medians of their Expense Groups. The Board concluded that the Management Rates charged to these Funds are reasonable.
Profitability
The Board reviewed and considered information regarding the profits realized by the Manager and its affiliates in connection with the operation of each Fund. In this respect, the Board considered the Fund profitability analysis provided by the Manager that addresses the overall profitability of FTI’s U.S. fund business, as well as its profits in providing investment management and other services to each of the individual funds during the 12-month period ended September 30, 2017, being the most recent fiscal year-end for FRI. The Board noted that although management continually makes refinements to its methodologies used in calculating profitability in response to organizational and product-related changes, the overall methodology has remained consistent with that used in the Funds’ profitability report presentations from prior years. Additionally, PricewaterhouseCoopers LLP, auditor to Franklin Resources, Inc. and certain Franklin Templeton funds, has been engaged by the Manager to periodically review and assess the allocation methodologies to be used solely by the Funds’ Board with respect to the profitability analysis.
The Board noted management’s belief that costs incurred in establishing the infrastructure necessary for the type of mutual fund operations conducted by the Manager and its affiliates may not be fully reflected in the expenses allocated to each Fund in determining its profitability, as well as the fact that the level of profits, to a certain extent, reflected operational cost savings and efficiencies initiated by management. The Board also noted management’s expenditures in improving shareholder services provided to the Funds, as well as the need to implement systems and meet additional regulatory and compliance requirements resulting from recent SEC and other regulatory requirements.
The Board also considered the extent to which the Manager and its affiliates might derive ancillary benefits from fund operations, including revenues generated from transfer agent services, potential benefits resulting from personnel and systems enhancements necessitated by fund growth, as well as increased leverage with service providers and counterparties.
88 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
SHAREHOLDER INFORMATION
Based upon its consideration of all these factors, the Board concluded that the level of profits realized by the Manager and its affiliates from providing services to each Fund was not excessive in view of the nature, extent, and quality of services provided to each Fund.
Economies of Scale
The Board reviewed and considered the extent to which the Manager may realize economies of scale, if any, as each Fund grows larger and whether the Fund’s management fee structure reflects any economies of scale for the benefit of shareholders. With respect to possible economies of scale, the Board noted the existence of management fee breakpoints, which operate generally to share any economies of scale with a Fund’s shareholders by reducing the Fund’s effective management fees as the Fund grows in size. The Board considered the Manager’s view that any analyses of potential economies of scale in managing a particular fund are inherently limited in light of the joint and common costs and investments the Manager incurs across the Franklin Templeton family of funds as a whole. The Board noted that the Franklin Real Return Fund does not have an asset size that would likely enable the Fund to achieve economies of scale, but concluded that to the extent economies of scale may be realized by the Manager and its affiliates, each Fund’s management fee structure provided a sharing of benefits with the Fund and its shareholders as the Fund grows.
Conclusion
Based on its review, consideration and evaluation of all factors it believed relevant, including the above-described factors and conclusions, the Board unanimously approved the continuation of each Management Agreement for an additional one-year period.
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 US 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 US 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.
franklintempleton.com | Semiannual Report | 89 |
This page intentionally left blank.
This page intentionally left blank.
This page intentionally left blank.
|
Semiannual Report and Shareholder Letter | |
Franklin Investors Securities Trust | ||
Investment Manager | ||
Franklin Advisers, Inc. | ||
Distributor | ||
Franklin Templeton Distributors, Inc. | ||
(800) DIAL BEN® / 342-5236 | ||
franklintempleton.com | ||
Shareholder Services | ||
(800) 632-2301 |
Authorized for distribution only when accompanied or preceded by a summary prospectus and/or prospectus. Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. A prospectus contains this and other information; please read it carefully before investing.
To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.
© 2018 Franklin Templeton Investments. All rights reserved. | FIST1 S 06/18 |
Semiannual Report and Shareholder Letter April 30, 2018 Franklin Investors Securities Trust Franklin Adjustable U.S. Government Securities Fund Franklin Floating Rate Daily Access Fund Franklin Low Duration Total Return Fund Franklin Total Return Fund Sign up for electronic delivery at franklintempleton.com/edelivery
Franklin Templeton Investments
Why choose Franklin Templeton Investments?
Successful investing begins with ambition. And achievement only comes when you reach for it. That’s why we continually strive to deliver better outcomes for investors. No matter what your goals are, our deep, global investment expertise allows us to offer solutions that can help.
During our more than 70 years of experience, we’ve managed through all kinds of markets—up, down and those in between. We’re always preparing for what may come next. It’s because of this, combined with our strength as one of the world’s largest asset managers that we’ve earned the trust of millions of investors around the world.
Dear Fellow Shareholder:
During the six months ended April 30, 2018, upbeat economic data, generally supportive monetary policies and better corporate earnings, combined with the passage of the US Tax Reform bill, aided markets. However, investor sentiment was dampened by concerns about rising US inflation, trade tensions between the US and China, and consumer data privacy.
The US Federal Reserve (Fed) began reducing its balance sheet in October 2017 and raised its range for the federal funds rate from 1.00% to 1.25% to a range of 1.25% to 1.50% in December. After the Fed left its range unchanged at its January 2018 meeting, in March the Fed raised it from 1.25% to 1.50% to a range of 1.50% to 1.75% and maintained its forecast of three rate increases in 2018, while upgrading its economic forecasts for 2018 and 2019. The 10-year US Treasury yield began the period at 2.38% and ended the period at 2.95%. Investment-grade bonds, as measured by the Bloomberg Barclays Aggregate Bond Index, had a -1.87% total return.1
We are committed to our long-term perspective and disciplined investment approach as we conduct a rigorous, fundamental analysis of securities with a regular emphasis on investment risk management.
We believe active, professional investment management serves investors well. We also recognize the important role of financial advisors in today’s markets and encourage investors to continue to seek their advice. Amid changing markets and economic conditions, we are confident investors with a well-diversified portfolio and a patient, long-term outlook should be well positioned for the years ahead.
Franklin Investors Securities Trust’s semiannual report, covering Franklin Adjustable U.S. Government Securities Fund, Franklin Floating Rate Daily Access Fund, Franklin Low Duration Total Return Fund and Franklin Total Return Fund, includes more detail about prevailing conditions and a discussion about investment decisions during the period. Please remember all securities markets fluctuate, as do mutual fund share prices.
We thank you for investing with Franklin Templeton, welcome your questions and comments, and look forward to serving your future investment needs.
Sincerely,
Rupert H. Johnson, Jr.
Chairman
Franklin Investors Securities Trust
This letter reflects our analysis and opinions as of April 30, 2018, unless otherwise indicated. 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: Morningstar.
See www.franklintempletondatasources.com for additional data provider information.
Not FDIC Insured
|
|
|
May Lose Value
|
|
|
No Bank Guarantee
|
franklintempleton.com | Not part of the semiannual report | 1 |
Semiannual Report | ||||
3 | ||||
4 | ||||
9 | ||||
16 | ||||
22 | ||||
28 | ||||
118 | ||||
124 | ||||
150 | ||||
153 | ||||
Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.
2 | Semiannual Report | franklintempleton.com |
Semiannual Report
The US economy continued to grow during the six months under review. The economy expanded in 2017’s fourth quarter, though at a slower pace compared to the third quarter. Growth continued to moderate in 2018’s first quarter due to a slowdown in consumer spending, residential fixed investment, exports, and state and local government spending. The manufacturing and services sectors expanded during the period. The unemployment rate declined from 4.1% in October 2017 to 3.9% at period-end.1 Annual inflation, as measured by the Consumer Price Index, increased from 2.0% in October 2017 to 2.5% at period-end.1
The US Federal Reserve (Fed) raised its target range for the federal funds rate 0.25% to 1.25%–1.50% in December 2017 and continued reducing its balance sheet during the period as part of its ongoing effort to normalize monetary policy. In February 2018, new Fed Chair Jerome Powell spoke before Congress for the first time and indicated the Fed saw signs of a continued strong labor market and economic growth. He reiterated the Fed’s intention to gradually raise interest rates in an effort to keep the economy from overheating and as inflation increases toward the Fed’s target. However, he noted there was no evidence of the economy overheating and he had yet to see a clear upward move in wages. At its March meeting, the Fed raised its target range for the federal funds rate 0.25% to 1.50%–1.75% and maintained its forecast of three rate increases in 2018. Additionally, the Fed upgraded its economic forecasts for 2018 and 2019, and its rate projections indicated the number of rate hikes would increase in 2019 and 2020.
The 10-year Treasury yield, which moves inversely to its price, increased during the period. The yield rose amid the passage of the tax reform bill in December and indications of higher inflation in the first two months of 2018, which pushed the yield to a four-year high in February. However, some factors weighed on the Treasury yield at certain points during the period, including concerns about political uncertainties in the US, tensions between the US and North Korea, the Trump administration’s protectionist trade policies and escalating trade tensions between the US and China. In April, higher inflation expectations led the 10-year yield to reach 3.03%, the highest level since January 2014. Overall, the 10-year Treasury yield rose from 2.38% at the beginning of the period to 2.95% at period-end.
The foregoing information reflects our analysis and opinions as of April 30, 2018. 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.
franklintempleton.com | Semiannual Report | 3 |
Franklin Adjustable U.S. Government Securities Fund
We are pleased to bring you Franklin Adjustable U.S. Government Securities Fund’s semiannual report for the period ended April 30, 2018.
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 US government mortgage securities, which are issued or guaranteed by the US government, its agencies or instrumentalities.1 The 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 +0.12% cumulative total return for the six months under review. In comparison, the Fund’s benchmark, the Bloomberg Barclays US Government Index: 1-2 Year Component, had a -0.17% total return.3 The index measures public obligations of the US Treasury with one to two years to final maturity and publicly issued debt of US government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by the US government. You can find the Fund’s long-term performance data in the Performance Summary beginning on page 6.
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 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
Portfolio Composition
Based on Total Net Assets as of 4/30/18
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 US government.1 During 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 focused on seasoned, post-reset FNMA and FHLMC ARM positions with average coupons above 3%.
Prepayment levels have risen incrementally across the ARM universe due to gradual yield curve flattening. We expect more volatility in the ARMs indexed to the Constant Maturity Treasury Rate (CMT) versus ARMs indexed to the London Interbank Offered Rate (LIBOR) because of the larger refinancing incentive from rate movements. Our focus on diverse, well-seasoned pools helped mitigate some of the
1. Securities owned by the Fund, but not shares of the Fund, are issued or guaranteed by the US government, its agencies or instrumentalities, including government-sponsored entities, as to timely payment of principal and interest.
2. Although US government-sponsored entities may be chartered by acts of Congress, their securities are neither issued nor guaranteed by the US 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 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.
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 33.
4 | Semiannual Report | franklintempleton.com |
FRANKLIN ADJUSTABLE U.S. GOVERNMENT SECURITIES FUND
Dividend Distributions*
11/1/17–4/30/18
Dividend per Share (cents) | ||||||||||||||||||||
Month | Class A | Class A1 | Class C | Class R6 | Advisor Class | |||||||||||||||
November | 1.4899 | 1.5998 | 1.2256 | 1.7092 | 1.6640 | |||||||||||||||
December | 1.3591 | 1.4585 | 1.0946 | 1.5904 | 1.5222 | |||||||||||||||
January | 1.6155 | 1.7311 | 1.3181 | 1.8465 | 1.8035 | |||||||||||||||
February | 1.5280 | 1.6247 | 1.2747 | 1.7639 | 1.6862 | |||||||||||||||
March | 1.3929 | 1.4950 | 1.1332 | 1.6403 | 1.5561 | |||||||||||||||
April | 1.6415 | 1.7528 | 1.3542 | 1.9156 | 1.8227 | |||||||||||||||
Total | 9.0269 | 9.6619 | 7.4004 | 10.4659 | 10.0547 |
*The distribution amount is the sum of all estimated tax-basis net investment income distributions for the period shown. A portion or all of the distribution may be reclassified as return of capital or short-term or long-term capital gains once final tax designations are known. 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.
prepayment risk, but we remain cautious on the prepayment environment overall.4
Thank you for your continued participation in Franklin Adjustable U.S. Government Securities Fund. We look forward to serving your future investment needs.
![]() |
Paul Varunok | |
![]() |
Roger A. Bayston, CFA | |
Portfolio Management Team |
The foregoing information reflects our analysis, opinions and portfolio holdings as of April 30, 2018, 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.
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.
franklintempleton.com |
Semiannual Report | 5 |
FRANKLIN ADJUSTABLE U.S. GOVERNMENT SECURITIES FUND
Performance Summary as of April 30, 2018
The performance tables 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 4/30/181
Cumulative total return excludes sales charges. Average annual total return includes 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.
Share Class | Cumulative Total Return2 | Average Annual Total Return3 | ||
A
6-Month | +0.12% | -2.13% | ||
1-Year | +0.03% | -2.20% | ||
5-Year | -0.48% | -0.54% | ||
10-Year | +11.06% | +0.83% | ||
Advisor4
6-Month | +0.25% | +0.25% | ||
1-Year | +0.28% | +0.28% | ||
5-Year | +0.78% | +0.15% | ||
10-Year | +14.00% | +1.32% |
Distribution | 30-Day Standardized Yield6 | |||||||||||
|
| |||||||||||
Share Class | Rate5 | (with waiver) | (without waiver) | |||||||||
| ||||||||||||
A | 2.25% | 0.91% | 0.90% | |||||||||
| ||||||||||||
Advisor | 2.55% | 1.19% | 1.16% | |||||||||
|
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.
See page 7 for Performance Summary footnotes.
6 | Semiannual Report | franklintempleton.com |
FRANKLIN ADJUSTABLE U.S. GOVERNMENT SECURITIES FUND
PERFORMANCE SUMMARY
Distributions (11/1/17–4/30/18)
Share Class | Net Investment Income | |
A | $0.090269 | |
A1 | $0.096619 | |
C | $0.074004 | |
R6 | $0.104659 | |
Advisor | $0.100547 |
Total Annual Operating Expenses7
Share Class | With Waiver | Without Waiver | ||||||
A | 0.93% | 0.94% | ||||||
Advisor | 0.68% | 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, 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 2/28/19. 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, if any, has not been annualized.
4. 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 +13.95% and +1.32%.
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 4/30/18.
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. 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.
franklintempleton.com |
Semiannual Report | 7 |
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) 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 (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||||||||
Share Class | Beginning Account Value 11/1/17 | Ending Account Value 4/30/18 | Expenses Paid During | Ending Account Value 4/30/18 | Expenses Paid During |
| Net Annualized Ratio2 | |||||||||||
A | $1,000 | $1,001.20 | $4.61 | $1,020.18 | $4.66 | 0.93% | ||||||||||||
A1 | $1,000 | $1,002.00 | $3.82 | $1,020.98 | $3.86 | 0.77% | ||||||||||||
C | $1,000 | $ 999.30 | $6.59 | $1,018.20 | $6.66 | 1.33% | ||||||||||||
R6 | $1,000 | $1,004.20 | $2.88 | $1,021.92 | $2.91 | 0.58% | ||||||||||||
Advisor | $1,000 | $1,002.50 | $3.38 | $1,021.42 | $3.41 | 0.68% |
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 181/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
8 | Semiannual Report |
franklintempleton.com |
Franklin Floating Rate Daily Access Fund
This semiannual report for Franklin Floating Rate Daily Access Fund covers the period ended April 30, 2018.
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 US companies, non-US entities and US subsidiaries of non-US 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 +1.48% cumulative total return for the six months under review. In comparison, the Credit Suisse Leveraged Loan Index (CS LLI), which is designed to mirror the investable universe of the US dollar-denominated leveraged loan market, posted a +2.59% total return.1 You can find more of the Fund’s performance data in the Performance Summary beginning on page 13.
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.
Corporate Loan Market Overview
Technical conditions for the corporate loan market remained supportive for much of the six-month period, despite bouts of volatility in the equity and high yield bond markets. Strong issuance of new collateralized loan obligations (CLOs) and modest inflows into loan retail vehicles helped to provide a base of support for loans, but higher new issue activity and refinancing transactions helped to limit principal returns.
Portfolio Composition*
Based on Total Net Assets as of 4/30/18
*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.
London Interbank Offered Rate (LIBOR) also increased to the highest level since 2009, which managed to attract investors back to the market, but the increase also prompted further repricing transactions that constrained increases in income.
Continued tight conditions and further repricing transactions helped to dampen retail investor interest in the asset class at the beginning of the period, but higher US Treasury yields and rising LIBOR helped flows to eventually turn positive as more investors looked for lower duration assets. Moreover, after the Fed hiked rates twice during the period and expectations for further hikes later in 2018 improved, interest from retail investors improved.
CLO issuance continued at a strong pace as liability spreads tightened further, with the highest rated tranches reaching tightest levels for vehicles launched after the crisis. While spreads widened slightly toward the end of the period due to heavy issuance, tighter liability spreads allowed CLO managers to maintain the necessary arbitrage that was challenged due to tighter spreads in the loan market. During the period, a US court also ruled that CLO managers were not subject to risk retention rules under the Dodd-Frank Act and market participants expected the potential removal of the rules to take
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 40.
franklintempleton.com | Semiannual Report | 9 |
FRANKLIN FLOATING RATE DAILY ACCESS FUND
out a potential obstacle to additional issuance. Relatively low new issuance, however, remained a hurdle to managers looking for collateral for new vehicles.
From low levels in previous periods, primary issuance increased due to more deals to finance mergers and acquisitions. Refinancing activity declined as a portion of new activity, but repricing transactions remained prevalent as LIBOR increased and increasingly tight spreads over the benchmark rate became more acceptable to investors. Moreover, outside of repricing transactions, issuers also took advantage of relatively lower rates by switching to a one-month LIBOR benchmark, rather than three-month LIBOR, limiting increases in coupon.
Dividend Distributions*
11/1/17–4/30/18
Dividend per Share (cents) | ||||||||||||||||
Advisor | ||||||||||||||||
Month | Class A | Class C | Class R6 | Class | ||||||||||||
November
|
|
2.8700
|
|
|
2.5832
|
|
|
3.1035
|
|
|
3.0503
|
| ||||
December
|
|
3.3147
|
|
|
3.0358
|
|
|
3.5330
|
|
|
3.4910
|
| ||||
January
|
|
3.5520
|
|
|
3.2346
|
|
|
3.8085
|
|
|
3.7534
|
| ||||
February
|
|
3.0628
|
|
|
2.8043
|
|
|
3.2795
|
|
|
3.2297
|
| ||||
March
|
|
3.2845
|
|
|
3.0036
|
|
|
3.5110
|
|
|
3.4574
|
| ||||
April
|
|
3.8443
|
|
|
3.5375
|
|
|
4.1029
|
|
|
4.0387
|
| ||||
Total
|
|
19.9283
|
|
|
18.1990
|
|
|
21.3384
|
|
|
21.0205
|
|
*The distribution amount is the sum of all estimated tax-basis net investment income distributions for the period shown. A portion or all of the distribution may be reclassified as return of capital or short-term or long-term capital gains once final tax designations are known. 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.
The default rate increased to the highest level since 2015, following the widely expected default of a large broadcasting issuer and defaults of issuers in the energy, retail and consumer durable industries. While average total leverage of large corporate leveraged buyouts remained lower than the high of 2007, average first-lien debt leverage was at a record high, resulting in a diminished debt cushion.
We believe the increasingly tight pricing has increased the vulnerability of the market toward external macroeconomic events following multiple waves of repricing transactions in the loan market. In response, as the market gets further along in the credit cycle, we have maintained our overweighting in loans rated in the upper tier, which we would expect to outperform during periods of future volatility. Additionally, we have invested in a handful of issuers with relatively shorter maturities that we believe would be closer to a near-term
catalyst such as repayment or refinancing. Although the Fund’s intentional investment in these select loans contributed to recent volatility as the issuers looked to address their upcoming maturities, we believe these investments are best viewed over a longer time horizon. We have actively engaged management teams, sponsors, and other lenders of these issuers in order to generate favorable transactions and achieve improved performance for the entire portfolio.
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 six-month period under review, the Fund underperformed its benchmark, the CSLLI. The Fund maintained an overweighting in the upper tier of the market throughout the period, which detracted from performance as upper tier loans in the index returned +2.09%, middle tier returned +2.57%, and lower tier returned +5.38%, according to the CS LLI.1 Although the Fund’s overweighting in the upper tier detracted from relative performance, returns were also hurt by loan selection, loans with relatively shorter maturities and loans in the retail sector.
The top contributors to performance included issuers where we had built relatively large positions, and through proactive engagement, were able to execute transactions that contributed to returns. The first lien term loan of Fieldwood (a provider of oil and gas) traded higher after the company completed a
10 |
Semiannual Report |
franklintempleton.com |
FRANKLIN FLOATING RATE DAILY ACCESS FUND
Top 10 Holdings
4/30/18
Company Sector/Industry | % of Total Net Assets | |||
Fieldwood Energy LLC Oil & Gas Exploration & Production | 3.9% | |||
Ascena Retail Group Inc. Apparel Retail | 2.3% | |||
General Nutrition Centers Inc. Specialty Stores | 2.2% | |||
Appvion Inc. Forest Products | 2.2%* | |||
PetSmart Inc. Specialty Stores | 2.1% | |||
NRG Energy Inc. Independent Power Producers & Energy Traders | 1.9% | |||
Navistar Inc. Industrial Machinery | 1.8% | |||
Delos Finance S.A.R.L. (AerCap) (Luxembourg) Aerospace & Defense | 1.7% | |||
FGI Operating Co. LLC (Freedom Group) Personal Products | 1.7% | |||
Hertz Corp. Trucking | 1.6% |
* Does not include unfunded commitments.
restructuring plan and the exit term loan also increased its spread. General Nutrition Centers, the largest specialty retailer of nutritional supplements, contributed to performance after the company successfully extended the maturity on its term loan by two years after announcing a strategic investment and the new term loans significantly increased income compensation. Savers, a for-profit thrift retailer, contributed to performance after reporting improved results and investors increasingly expected a refinancing that could pay down the existing term loan.
The top detractors from performance included loans that declined amid uncertainty surrounding their near-term maturities, while others reported weaker financial results. FGI Operating Company, a manufacturer of firearms and ammunition, detracted from performance after the company filed for bankruptcy and worked on a restructuring agreement with lenders. The term loan of the company had traded lower amid weaker firearm sales and as the company needed to address its 2019 term loan maturity. Furthermore, the term loan of Petsmart (a leading retailer in the specialty pet market) declined as the company acquired an online competitor, which increased leverage and increased uncertainty surrounding the companies’ integration.
Although the Fund maintained a significant overweighting in higher rated loans, its weighting in the upper tier declined due to credit rating downgrades and sales of higher rated loans. The Fund experienced relatively higher outflows toward the end of 2017 and focused on sales of loans with relatively tighter spreads, which were primarily in the upper tier. We also maintained the Fund’s investment in AAA- to A-rated collateralized loan obligation tranches as well as two open-end funds, Franklin Middle Tier Floating Rate Fund and Franklin Lower Tier Floating Rate Fund. These investments allowed the Fund to have further exposure to credit, while providing additional liquidity. The Fund also held protection in HYCDX, an index of high yield bond credit default swaps providing synthetic exposure to the high yield bond market, to protect against volatility in the credit markets.
Thank you for your continued participation in Franklin Floating Rate Daily Access Fund. We look forward to serving your future investment needs.
Mark Boyadjian, CFA | ||
Madeline Lam | ||
Justin Ma, CFA | ||
Portfolio Management Team | ||
franklintempleton.com |
Semiannual Report | 11 |
FRANKLIN FLOATING RATE DAILY ACCESS FUND
The foregoing information reflects our analysis, opinions and portfolio holdings as of April 30, 2018, 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.
12 |
Semiannual Report | franklintempleton.com |
FRANKLIN FLOATING RATE DAILY ACCESS FUND
Performance Summary as of April 30, 2018
The performance tables 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 4/30/181
Cumulative total return excludes sales charges. Average annual total return includes 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.
Share Class | Cumulative Total Return2 | Average Annual Total Return3 | ||
A | ||||
6-Month | +1.48% | -0.77% | ||
1-Year | +2.82% | +0.56% | ||
5-Year | +16.66% | +2.67% | ||
10-Year | +41.51% | +3.29% | ||
Advisor | ||||
6-Month | +1.72% | +1.72% | ||
1-Year | +3.19% | +3.19% | ||
5-Year | +18.25% | +3.41% | ||
10-Year | +45.24% | +3.80% |
| Distribution Rate4 | | 30-Day Standardized Yield5 | |||||||||||||
Share Class | (with waiver) | (without waiver) | ||||||||||||||
| ||||||||||||||||
A | 4.96% | 4.44% | 4.37% | |||||||||||||
| ||||||||||||||||
Advisor | 5.32% | 4.79% | 4.72% | |||||||||||||
|
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.
See page 14 for Performance Summary footnotes.
franklintempleton.com | Semiannual Report | 13 |
FRANKLIN FLOATING RATE DAILY ACCESS FUND
PERFORMANCE SUMMARY
Distributions (11/1/17–4/30/18)
Share Class | Net Investment Income | |
A | $0.199283 | |
C | $0.181990 | |
R6 | $0.213384 | |
Advisor | $0.210205 |
Total Annual Operating Expenses6
Share Class | With Waiver | Without Waiver | ||||||
A | 0.86% | 0.91% | ||||||
Advisor | 0.61% | 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. 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 2/28/19. 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, if any, has not been annualized.
4. 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 4/30/18.
5. 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.
6. 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.
14 | Semiannual Report | franklintempleton.com |
FRANKLIN FLOATING RATE DAILY ACCESS FUND
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 (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||||||||
Share Class | Beginning Value 11/1/17 | Ending Account Value 4/30/18 | Expenses Paid During 11/1/17–4/30/181,2 | Ending Account Value 4/30/18 | Expenses Paid During 11/1/17–4/30/181,2 | Net Annualized Expense Ratio2 | ||||||||||||
A | $1,000 | $1,014.80 | $4.00 | $1,020.83 | $4.01 | 0.80% | ||||||||||||
C | $1,000 | $1,012.80 | $5.99 | $1,018.84 | $6.01 | 1.20% | ||||||||||||
R6 | $1,000 | $1,016.40 | $2.35 | $1,022.46 | $2.36 | 0.47% | ||||||||||||
Advisor | $1,000 | $1,017.20 | $2.75 | $1,022.07 | $2.76 | 0.55% |
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 181/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
franklintempleton.com |
Semiannual Report | 15 |
Franklin Low Duration Total Return Fund
This semiannual report for Franklin Low Duration Total Return Fund covers the period ended April 30, 2018.
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 had a -0.34% cumulative total return for the six months under review. In comparison, the Fund’s benchmark, the Bloomberg Barclays US Government/ Credit Index: 1-3 Year Component, had a -0.52% total return.1 The index measures public obligations of the US Treasury with one to three years to final maturity and publicly issued debt of US government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by the US government. You can find more of the Fund’s performance data in the Performance Summary beginning on page 19.
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 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
Portfolio Composition*
Based on Total Net Assets as of 4/30/18
* 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.
across the entire fixed income opportunity set, on a relative basis. When making investment decisions, we evaluate
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 agreements to obtain net long or short exposures to select currencies, interest rates, countries, duration or credit risks.
1. Source: Morningstar.
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 54.
16 |
Semiannual Report | franklintempleton.com |
FRANKLIN LOW DURATION TOTAL RETURN FUND
What is the yield curve?
A yield curve is a line that plots the yield to maturity of bonds having equal credit quality against their maturity dates.
|
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. Currency forward contracts are privately traded in the interbank market, not on a centralized exchange.
|
What is a futures contract?
A futures contract is an agreement between the Fund and a counterparty made through a US or foreign futures exchange to buy or sell an underlying instrument or asset at a specific price on a future date. |
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 of similar duration, Treasury inflation-protected securities performed well. Other major fixed income sectors that delivered notable positive excess returns, as measured by Bloomberg Barclays indexes, included senior secured floating rate loans, US dollar-denominated high yield corporate credit and municipal bonds. In contrast, US investment-grade corporate bonds underperformed Treasuries.
During the period, the Fund’s exposure to non-agency residential mortgage-backed securities and high yield corporate credit were significant contributors to the Fund’s performance relative to its benchmark. Treasury inflation-protected securities also benefited performance as did the Fund’s defensive US yield curve positioning as yield curve movements
Dividend Distributions*
11/1/17–4/30/18
Dividend per Share (cents) | ||||||||||||||||
Advisor | ||||||||||||||||
Month | Class A | Class C | Class R6 | Class | ||||||||||||
November | 2.1123 | 1.7980 | 2.4584 | 2.3264 | ||||||||||||
December | 3.5363 | 3.2116 | 3.8780 | 3.7499 | ||||||||||||
January | 2.2047 | 1.8450 | 2.5907 | 2.4388 | ||||||||||||
February | 1.9354 | 1.6306 | 2.2571 | 2.1330 | ||||||||||||
March | 2.2882 | 1.9825 | 2.6254 | 2.4924 | ||||||||||||
April | 2.6070 | 2.2595 | 2.9608 | 2.8338 | ||||||||||||
Total | 14.6839 | 12.7272 | 16.7704 | 15.9743 |
*The distribution amount is the sum of all estimated tax-basis net investment income distributions for the period shown. A portion or all of the distribution may be reclassified as return of capital or short-term or long-term capital gains once final tax designations are known. 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.
had a positive impact relative to the benchmark. In contrast, the Fund’s currency forward exposure detracted from relative returns.
At period-end, we were overweighted relative to the benchmark in many spread 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 high yield corporate credit, investment-grade corporate credit and collateralized loan obligations. We pared our exposure to certain Treasury positions, Treasury Inflation-Protected Securities and senior secured floating rate loans as we found better relative opportunities.
During the period, the portfolio utilized derivatives, including credit default and currency swaps, inflation linked swaps, currency forwards, Treasury futures, interest rate swaps 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 non-derivative securities are readily available, the cost difference in normal market conditions may be small.
franklintempleton.com |
Semiannual Report | 17 |
FRANKLIN LOW DURATION TOTAL RETURN FUND
Thank you for your continued participation in Franklin Low Duration Total Return Fund. We look forward to serving your future investment needs.
![]() |
Roger A. Bayston, CFA | |
![]() |
Kent Burns, CFA | |
Christopher J. Molumphy, CFA David Yuen, CFA, FRM
Portfolio Management Team |
The foregoing information reflects our analysis, opinions and portfolio holdings as of April 30, 2018, 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.
18 |
Semiannual Report | franklintempleton.com |
FRANKLIN LOW DURATION TOTAL RETURN FUND
Performance Summary as of April 30, 2018
The performance tables 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 4/30/181
Cumulative total return excludes sales charges. Average annual total return includes 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.
Share Class | Cumulative Total Return2 | Average Annual Total Return3 | ||
A | ||||
6-Month | -0.34% | -2.61% | ||
1-Year
|
+0.13%
|
-2.15%
| ||
5-Year
|
+4.59%
|
+0.44%
| ||
10-Year
|
+25.82%
|
+2.09%
| ||
Advisor4 | ||||
6-Month
| -0.21%
| -0.21%
| ||
1-Year
|
+0.35%
|
+0.35%
| ||
5-Year
|
+5.97%
|
+1.17%
| ||
10-Year
|
+29.15%
|
+2.59%
|
Share Class | Distribution Rate5 | 30-Day Standardized Yield6 | ||||||||||||||
(with waiver) | (without waiver) | |||||||||||||||
A |
|
3.17% |
|
|
2.65% |
|
|
2.41% |
| |||||||
Advisor | 3.50% | 2.97% | 2.71% |
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.
See page 20 for Performance Summary footnotes.
franklintempleton.com |
Semiannual Report | 19 |
FRANKLIN LOW DURATION TOTAL RETURN FUND
PERFORMANCE SUMMARY
Distributions (11/1/17–4/30/18)
Share Class | Net Investment Income | |
A |
$0.146839 | |
C |
$0.127272 | |
R6 |
$0.167704 | |
Advisor
|
$0.159743
|
Total Annual Operating Expenses7
Share Class | With Waiver | Without Waiver | ||||
A |
|
0.71% |
|
0.97% | ||
Advisor |
|
0.46% |
|
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. 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 the 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. 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 and a fee waiver associated with any investments it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 2/28/19. 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, if any, has not been annualized.
4. 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 +29.08% and +2.60%.
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 4/30/18.
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. 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.
20 | Semiannual Report | franklintempleton.com |
FRANKLIN LOW DURATION TOTAL RETURN FUND
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 (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||||||||
|
| |||||||||||||||||
Share Class | Beginning Account Value 11/1/17 | Ending Account Value 4/30/18 | Expenses Paid During 11/1/17–4/30/181,2 | Ending Account Value 4/30/18 | Expenses Paid During 11/1/17–4/30/181,2 | Net Annualized Expense Ratio2 | ||||||||||||
|
|
|
| |||||||||||||||
A | $1,000 | $996.60 | $3.71 | $1,021.08 | $3.76 | 0.75% | ||||||||||||
C | $1,000 | $994.60 | $5.69 | $1,019.09 | $5.76 | 1.15% | ||||||||||||
R6 | $1,000 | $998.80 | $1.64 | $1,023.16 | $1.66 | 0.33% | ||||||||||||
Advisor | $1,000 | $997.90 | $2.48 | $1,022.32 | $2.51 | 0.50% |
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 181/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
franklintempleton.com | Semiannual Report | 21 |
This semiannual report for Franklin Total Return Fund covers the period ended April 30, 2018.
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 had a -2.11% cumulative total return for the six months under review. In comparison, the Fund’s benchmark, the Bloomberg Barclays US Aggregate Bond Index had a -1.87% total return.1 The index measures the US 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 25.
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 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.
Portfolio Composition*
Based on Total Net Assets as of 4/30/18
*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.
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. Currency forward contracts are privately traded in the interbank market, not on a centralized exchange.
|
1. Source: Morningstar.
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 Consolidated Statement of Investments (SOI). The Consolidated SOI begins on page 87.
22 | Semiannual Report | franklintempleton.com |
FRANKLIN TOTAL RETURN FUND
What is a futures contract?
A futures contract is an agreement between the Fund and a counterparty made through a US or foreign futures exchange to buy or sell an underlying instrument or asset at a specific price on a future date. |
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 counter party 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 of similar duration, Treasury inflation-protected securities performed well. Other major fixed income sectors that delivered notable positive excess returns, as measured by Bloomberg Barclays indexes, included senior secured floating rate loans, US dollar-denominated high yield corporate credit and municipal bonds. In contrast, US investment-grade corporate bonds underperformed Treasuries.
During the period, the Fund’s exposure to non-agency residential mortgage-backed securities (RMBS) and Treasury inflation-protected securities were significant contributors to the Fund’s performance relative to its benchmark. High yield corporate credit and senior secured floating rate loans also benefited relative performance. In contrast, the Fund’s exposure to currency forwards, fixed-rate agency mortgage-backed securities and sovereign emerging markets securities detracted from relative returns.
What is the yield curve?
A yield curve is a line that plots the yield to maturity of bonds having equal credit quality against their maturity dates.
|
At period-end, we were overweighted relative to the benchmark in many spread 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 collateralized loan
Dividend Distributions*
11/1/17–4/30/18
Dividend per Share (cents) | ||||||||||||||||||||
|
| |||||||||||||||||||
Month | Class A | Class C | Class R | Class R6 | | Advisor Class | | |||||||||||||
| ||||||||||||||||||||
November | 2.4928 | 2.1570 | 2.2888 | 2.8250 | 2.7092 | |||||||||||||||
| ||||||||||||||||||||
December | 4.4369 | 4.1086 | 4.2331 | 4.7588 | 4.6496 | |||||||||||||||
| ||||||||||||||||||||
January | 2.4671 | 2.1009 | 2.2392 | 2.8279 | 2.7023 | |||||||||||||||
| ||||||||||||||||||||
February | 2.2908 | 1.9826 | 2.0994 | 2.5928 | 2.4877 | |||||||||||||||
| ||||||||||||||||||||
March | 2.3005 | 1.9875 | 2.1157 | 2.6108 | 2.5026 | |||||||||||||||
| ||||||||||||||||||||
April | 1.1642 | 0.9809 | 1.0499 | 1.3448 | 1.2814 | |||||||||||||||
| ||||||||||||||||||||
Total | 15.1523 | 13.3175 | 14.0261 | 16.9601 | 16.3328 | |||||||||||||||
|
*The distribution amount is the sum of all estimated tax-basis net investment income distributions for the period shown. A portion or all of the distribution may be reclassified as return of capital or short-term or long-term capital gains once final tax designations are known. 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.
obligations, high yield corporate credit and sovereign emerging market securities. We pared our exposure to Treasury Inflation-Protected Securities, investment-grade corporate credit and emerging market bonds as we found better relative opportunities.
During the period, the portfolio utilized derivatives, including credit default and currency swaps, currency forwards, Treasury futures, inflation index swaps 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 non-derivative securities are readily available, the cost difference in normal market conditions may be small.
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.
|
franklintempleton.com | Semiannual Report | 23 |
FRANKLIN TOTAL RETURN FUND
Thank you for your continued participation in Franklin Total Return Fund. We look forward to serving your future investment needs.
Roger A. Bayston, CFA | ||
Kent Burns, CFA | ||
Christopher J. Molumphy, CFA David Yuen, CFA, FRM Michael J. Materasso
Portfolio Management Team |
The foregoing information reflects our analysis, opinions and portfolio holdings as of April 30, 2018, 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.
24 |
Semiannual Report | franklintempleton.com |
FRANKLIN TOTAL RETURN FUND
Performance Summary as of April 30, 2018
The performance tables 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 4/30/181
Cumulative total return excludes sales charges. Average annual total return includes 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.
Share Class | Cumulative Total Return2 | Average Annual Total Return3 | ||
A | ||||
6-Month | -2.35% | -6.53% | ||
1-Year | -0.85% | -5.03% | ||
5-Year | +5.41% | +0.19% | ||
10-Year | +45.42% | +3.36% | ||
Advisor | ||||
6-Month | -2.11% | -2.11% | ||
1-Year | -0.55% | -0.55% | ||
5-Year | +6.75% | +1.31% | ||
10-Year | +49.11% | +4.08% |
Share Class | Distribution Rate4 | 30-Day Standardized Yield5 | ||||||||||||||
(with waiver) | (without waiver) | |||||||||||||||
A | 1.41% | 2.93% | 2.92% | |||||||||||||
Advisor | 1.62% | 3.32% | 3.29% |
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.
See page 26 for Performance Summary footnotes.
franklintempleton.com |
Semiannual Report | 25 |
FRANKLIN TOTAL RETURN FUND
PERFORMANCE SUMMARY
Distributions (11/1/17–4/30/18)
Share Class | Net Investment Income | |
A
| $0.151523 | |
C
| $0.133175 | |
R
| $0.140261 | |
R6
| $0.169601 | |
Advisor
| $0.163328 |
Total Annual Operating Expenses6
Share Class | With Waiver | Without Waiver | ||||
A | 0.90% | 0.93% | ||||
Advisor
| 0.65% | 0.68% |
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 and a fee waiver associated with any investments it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 2/28/19. 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, if any, has not been annualized.
4. 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 4/30/18.
5. 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.
6. 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.
26 |
Semiannual Report |
franklintempleton.com |
FRANKLIN TOTAL RETURN FUND
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 (actual return after expenses) | Hypothetical (5% annual return before expenses) | |||||||||||||||||
Share Class | Beginning Account Value 11/1/17 | Ending Account Value 4/30/18 |
Expenses Paid During 11/1/17–4/30/181,2 | Ending Account Value 4/30/18 | Expenses Paid During 11/1/17–4/30/181,2 | Net Annualized | ||||||||||||
A | $1,000 | $976.50 | $4.31 | $1,020.43 | $4.41 | 0.88% | ||||||||||||
C | $1,000 | $975.50 | $6.27 | $1,018.45 | $6.41 | 1.28% | ||||||||||||
R | $1,000 | $975.30 | $5.53 | $1,019.19 | $5.66 | 1.13% | ||||||||||||
R6 | $1,000 | $978.50 | $2.40 | $1,022.36 | $2.46 | 0.49% | ||||||||||||
Advisor | $1,000 | $978.90 | $3.09 | $1,021.67 | $3.16 | 0.63% |
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 181/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
franklintempleton.com | Semiannual Report | 27 |
FRANKLIN INVESTORS SECURITIES TRUST
Franklin Adjustable U.S. Government Securities Fund
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
Class A | ||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ 8.24 | $ 8.40 | $ 8.55 | $ 8.67 | $ 8.72 | $ 8.90 | ||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment income | 0.038 | 0.026 | 0.025 | 0.019 | 0.043 | 0.048 | ||||||||||||||||||
Net realized and unrealized gains (losses) | (0.028 | ) | (0.031 | ) | (0.053 | ) | (0.040 | ) | 0.006 | (0.098 | ) | |||||||||||||
Total from investment operations | 0.010 | (0.005 | ) | (0.028 | ) | (0.021 | ) | 0.049 | (0.050 | ) | ||||||||||||||
Less distributions from net investment income | (0.090 | ) | (0.155 | ) | (0.122 | ) | (0.099 | ) | (0.099 | ) | (0.130 | ) | ||||||||||||
Net asset value, end of period | $ 8.16 | $ 8.24 | $ 8.40 | $ 8.55 | $ 8.67 | $ 8.72 | ||||||||||||||||||
Total returnb | 0.12% | (0.06)% | (0.32)% | (0.24)% | 0.56% | (0.56)% | ||||||||||||||||||
Ratios to average net assetsc | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.94% | 0.95% | 0.92% | 0.91% | 0.93% | 0.87% | ||||||||||||||||||
Expenses net of waiver and payments by affiliates | 0.93% | d | 0.94% | d | 0.91% | d | 0.91% | d,e | 0.93% | d,e | 0.87% | |||||||||||||
Net investment income | 1.01% | 0.54% | 0.43% | 0.39% | 0.48% | 0.63% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $441,680 | $ | 492,319 | $ | 667,671 | $ | 848,918 | $ | 1,058,838 | $ | 1,105,674 | |||||||||||||
Portfolio turnover rate | 4.42% | 2.81% | 11.49% | 9.98% | 14.18% | 8.66% |
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.
bTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year. cRatios are annualized for periods less than one year.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
28 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Adjustable U.S. Government Securities Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||
|
| |||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014a | ||||||||||||||||
| ||||||||||||||||||||
Class A1 | ||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||
Net asset value, beginning of period | $ 8.24 | $ 8.40 | $ 8.54 | $ 8.67 | $ 8.68 | |||||||||||||||
|
| |||||||||||||||||||
Income from investment operationsb: | ||||||||||||||||||||
Net investment income | 0.054 | 0.059 | 0.049 | 0.046 | 0.018 | |||||||||||||||
Net realized and unrealized gains (losses) | (0.037 | ) | (0.051 | ) | (0.054 | ) | (0.062 | ) | 0.010 | |||||||||||
|
| |||||||||||||||||||
Total from investment operations. | 0.017 | 0.008 | (0.005 | ) | (0.016 | ) | 0.028 | |||||||||||||
|
| |||||||||||||||||||
Less distributions from net investment income | (0.097 | ) | (0.168 | ) | (0.135 | ) | (0.114 | ) | (0.038) | |||||||||||
|
| |||||||||||||||||||
Net asset value, end of period. | $ 8.16 | $ 8.24 | $ 8.40 | $ 8.54 | $ 8.67 | |||||||||||||||
|
| |||||||||||||||||||
Total returnc | 0.20% | 0.10% | (0.05)% | (0.19)% | 0.32% | |||||||||||||||
Ratios to average net assetsd | ||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.78% | 0.79% | 0.77% | 0.75% | 0.78% | |||||||||||||||
Expenses net of waiver and payments by affiliates | 0.77% | e | 0.78% | e | 0.76% | e | 0.75% | e,f | 0.78% | e,f | ||||||||||
Net investment income | 1.17% | 0.70% | 0.58% | 0.55% | 0.63% | |||||||||||||||
Supplemental data | ||||||||||||||||||||
Net assets, end of period (000’s) | $104,092 | $ | 121,012 | $ | 160,469 | $ | 198,670 | $ | 253,021 | |||||||||||
Portfolio turnover rate | 4.42% | 2.81% | 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%.
franklintempleton.com |
The accompanying notes are an integral part of these financial statements. | Semiannual Report |
|
29 |
|
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Adjustable U.S. Government Securities Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
Class C | ||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ 8.24 | $ 8.40 | $ 8.54 | $ 8.66 | $ 8.71 | $ 8.90 | ||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment income (loss) | 0.017 | (0.014 | ) | (0.011 | ) | (0.013 | ) | (0.004 | ) | 0.006 | ||||||||||||||
Net realized and unrealized gains (losses) | (0.023 | ) | (0.024 | ) | (0.041 | ) | (0.043 | ) | 0.018 | (0.101 | ) | |||||||||||||
Total from investment operations | (0.006 | ) | (0.038 | ) | (0.052 | ) | (0.056 | ) | 0.014 | (0.095 | ) | |||||||||||||
Less distributions from net investment income . | (0.074 | ) | (0.122 | ) | (0.088 | ) | (0.064 | ) | (0.064 | ) | (0.095 | ) | ||||||||||||
Net asset value, end of period | $ 8.16 | $ 8.24 | $ 8.40 | $ 8.54 | $ 8.66 | $ 8.71 | ||||||||||||||||||
Total returnb | (0.07)% | (0.45)% | (0.61)% | (0.65)% | 0.16% | (1.07)% | ||||||||||||||||||
Ratios to average net assetsc | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 1.34% | 1.35% | 1.32% | 1.31% | 1.33% | 1.27% | ||||||||||||||||||
Expenses net of waiver and payments by affiliates | 1.33% | d | 1.34% | d | 1.31% | d | 1.31% | d,e | 1.33% | d,e | 1.27% | |||||||||||||
Net investment income (loss) | 0.61% | 0.14% | 0.03% | (0.01)% | 0.08% | 0.23% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $162,011 | $ | 189,634 | $ | 266,186 | $ | 336,254 | $ | 428,031 | $ | 603,067 | |||||||||||||
Portfolio turnover rate | 4.42% | 2.81% | 11.49% | 9.98% | 14.18% | 8.66% |
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.
bTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year. cRatios are annualized for periods less than one year.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
30 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Adjustable U.S. Government Securities Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013a | |||||||||||||||||||
Class R6 | ||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ 8.25 | $ 8.41 | $ 8.55 | $ 8.68 | $ 8.73 | $ 8.72 | ||||||||||||||||||
Income from investment operationsb: | ||||||||||||||||||||||||
Net investment income | 0.055 | c | 0.074 | 0.066 | 0.013 | 0.088 | c | 0.008 | ||||||||||||||||
Net realized and unrealized gains (losses) | (0.020 | ) | (0.046 | ) | (0.053 | ) | (0.010 | ) | (0.009 | ) | 0.018 | |||||||||||||
Total from investment operations | 0.035 | 0.028 | 0.013 | 0.003 | 0.079 | 0.026 | ||||||||||||||||||
Less distributions from net investment income . | (0.105 | ) | (0.188 | ) | (0.153 | ) | (0.133 | ) | (0.129 | ) | (0.016 | ) | ||||||||||||
Net asset value, end of period | $ 8.18 | $ 8.25 | $ 8.41 | $ 8.55 | $ 8.68 | $ 8.73 | ||||||||||||||||||
Total returnd | 0.42% | 0.34% | 0.15% | 0.03% | 0.92% | 0.30% | ||||||||||||||||||
Ratios to average net assetse | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.61% | 0.58% | 0.56% | 0.53% | 0.56% | 0.53% | ||||||||||||||||||
Expenses net of waiver and payments by affiliates | 0.58% | f | 0.55% | f | 0.55% | f | 0.53% | f,g | 0.56% | f,g | 0.53% | |||||||||||||
Net investment income | 1.36% | 0.93% | 0.79% | 0.77% | 0.85% | 0.97% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $25,543 | $2,196 | $2,374 | $2,176 | $7,193 | $335 | ||||||||||||||||||
Portfolio turnover rate | 4.42% | 2.81% | 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%.
franklintempleton.com |
The accompanying notes are an integral part of these financial statements. | Semiannual Report |
|
31 |
|
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Adjustable U.S. Government Securities Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
Advisor Class | ||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ 8.25 | $ 8.41 | $ 8.55 | $ 8.68 | $ 8.73 | $ 8.91 | ||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment income | 0.046 | 0.052 | 0.046 | 0.040 | 0.068 | 0.073 | ||||||||||||||||||
Net realized and unrealized gains (losses) | (0.025 | ) | (0.036 | ) | (0.043 | ) | (0.049 | ) | 0.003 | (0.101 | ) | |||||||||||||
Total from investment operations | 0.021 | 0.016 | 0.003 | (0.009 | ) | 0.071 | (0.028 | ) | ||||||||||||||||
Less distributions from net investment income . | (0.101 | ) | (0.176 | ) | (0.143 | ) | (0.121 | ) | (0.121 | ) | (0.152 | ) | ||||||||||||
Net asset value, end of period | $ 8.17 | $ 8.25 | $ 8.41 | $ 8.55 | $ 8.68 | $ 8.73 | ||||||||||||||||||
Total returnb | 0.25% | 0.20% | 0.05% | (0.11)% | 0.82% | (0.31)% | ||||||||||||||||||
Ratios to average net assetsc | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.69% | 0.70% | 0.67% | 0.66% | 0.68% | 0.62% | ||||||||||||||||||
Expenses net of waiver and payments by affiliates | 0.68% | d | 0.69% | d | 0.66% | d | 0.66% | d,e | 0.68% | d,e | 0.62% | |||||||||||||
Net investment income | 1.26% | 0.79% | 0.68% | 0.64% | 0.73% | 0.88% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $140,507 | $ | 184,299 | $ | 227,599 | $ | 308,683 | $ | 416,854 | $ | 411,228 | |||||||||||||
Portfolio turnover rate | 4.42% | 2.81% | 11.49% | 9.98% | 14.18% | 8.66% |
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.
bTotal return is not annualized for periods less than one year.
cRatios are annualized for periods less than one year.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
32 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
Statement of Investments, April 30, 2018 (unaudited)
Franklin Adjustable U.S. Government Securities Fund
Principal Amount | Value | |||||||
Mortgage-Backed Securities 95.9% | ||||||||
a Federal Home Loan Mortgage Corp. (FHLMC) Adjustable Rate 20.9% | ||||||||
FHLMC, 2.003%, (11th District COF +/- MBS Margin), 7/01/18 - 8/01/18 | $ | 7,878 | $ | 7,849 | ||||
FHLMC, 3.099%, (12-month USD LIBOR +/- MBS Margin), 9/01/35 | 7,154,625 | 7,398,412 | ||||||
FHLMC, 3.331%, (12-month USD LIBOR +/- MBS Margin), 1/01/36 | 4,116,225 | 4,263,107 | ||||||
FHLMC, 3.395%, (US 1 Year CMT T-Note +/- MBS Margin), 3/01/35 | 4,494,712 | 4,741,283 | ||||||
FHLMC, 3.458%, (US 1 Year CMT T-Note +/- MBS Margin), 6/01/37 | 3,835,606 | 4,030,909 | ||||||
FHLMC, 3.317% - 3.468%, (US 1 Year CMT T-Note +/- MBS Margin), 8/01/33 - 4/01/37 | 6,583,554 | 6,925,612 | ||||||
FHLMC, 3.489% - 3.492%, (US 1 Year CMT T-Note +/- MBS Margin), 9/01/35 - 11/01/36 | 6,937,445 | 7,292,977 | ||||||
FHLMC, 3.089% - 3.50%, (12-month USD LIBOR +/- MBS Margin), 1/01/36 - 5/01/38 | 7,150,134 | 7,448,730 | ||||||
FHLMC, 3.549%, (12-month USD LIBOR +/- MBS Margin), 12/01/35 | 3,746,379 | 3,918,771 | ||||||
FHLMC, 3.087% - 3.55%, (6-month USD LIBOR +/- MBS Margin), 4/01/36 - 1/01/37 | 1,885,732 | 1,953,805 | ||||||
FHLMC, 3.53% - 3.552%, (12-month USD LIBOR +/- MBS Margin), 4/01/36 - 10/01/38 | 7,808,470 | 8,163,292 | ||||||
FHLMC, 3.558%, (12-month USD LIBOR +/- MBS Margin), 11/01/37 | 4,395,874 | 4,618,765 | ||||||
FHLMC, 3.565%, (12-month USD LIBOR +/- MBS Margin), 2/01/36 | 3,564,146 | 3,733,359 | ||||||
FHLMC, 3.588%, (12-month USD LIBOR +/- MBS Margin), 9/01/37 | 24,188,542 | 25,395,669 | ||||||
FHLMC, 3.556% - 3.592%, (12-month USD LIBOR +/- MBS Margin), 11/01/35 - 10/01/37 | 7,325,062 | 7,681,369 | ||||||
FHLMC, 3.53% - 3.601%, (US 1 Year CMT T-Note +/- MBS Margin), 1/01/36 - 11/01/36 | 7,602,950 | 7,995,265 | ||||||
FHLMC, 3.601% - 3.634%, (12-month USD LIBOR +/- MBS Margin), 6/01/35 - 11/01/41 | 7,194,670 | 7,548,264 | ||||||
FHLMC, 3.654%, (12-month USD LIBOR +/- MBS Margin), 11/01/35 | 3,499,637 | 3,676,481 | ||||||
FHLMC, 3.673%, (12-month USD LIBOR +/- MBS Margin), 7/01/35 | 9,303,927 | 9,792,009 | ||||||
FHLMC, 3.641% - 3.681%, (12-month USD LIBOR +/- MBS Margin), 12/01/34 - 3/01/38 | 7,937,186 | 8,333,022 | ||||||
FHLMC, 3.695%, (12-month USD LIBOR +/- MBS Margin), 12/01/35 | 4,057,721 | 4,245,891 | ||||||
FHLMC, 3.682% - 3.718%, (12-month USD LIBOR +/- MBS Margin), 8/01/34 - 5/01/40 | 6,669,937 | 7,024,187 | ||||||
FHLMC, 3.724%, (12-month USD LIBOR +/- MBS Margin), 10/01/41 | 4,737,368 | 4,948,342 | ||||||
FHLMC, 3.775%, (12-month USD LIBOR +/- MBS Margin), 11/01/40 | 4,825,783 | 5,081,259 | ||||||
FHLMC, 3.855%, (12-month USD LIBOR +/- MBS Margin), 6/01/37 | 9,074,367 | 9,587,137 | ||||||
FHLMC, 3.786% - 3.869%, (12-month USD LIBOR +/- MBS Margin), 3/01/37 - 4/01/40 | 8,083,574 | 8,463,494 | ||||||
FHLMC, 3.997%, (12-month USD LIBOR +/- MBS Margin), 1/01/37 | 3,863,673 | 4,123,998 | ||||||
FHLMC, 3.604% - 4.814%, (US 1 Year CMT T-Note +/- MBS Margin), 4/01/34 - 7/01/35 | 3,978,946 | 4,303,467 | ||||||
|
| |||||||
|
182,696,725 |
| ||||||
|
| |||||||
a Federal National Mortgage Association (FNMA) Adjustable Rate 74.8% | ||||||||
FNMA, 1.619% - 2.622%, (11th District COF +/- MBS Margin), 6/01/18 - 11/01/40 | 6,550,401 | 6,644,083 | ||||||
FNMA, 2.875%, (US 2 Year CMT T-Note +/- MBS Margin), 8/01/19 | 218 | 218 | ||||||
FNMA, 3.085%, (12-month USD LIBOR +/- MBS Margin), 1/01/36 | 3,588,116 | 3,701,722 | ||||||
FNMA, 2.683% - 3.137%, (12-month USD LIBOR +/- MBS Margin), 6/01/33 - 10/01/37 | 7,983,879 | 8,268,930 | ||||||
FNMA, 2.348% - 3.145%, (6-month USD LIBOR +/- MBS Margin), 6/01/21 - 3/01/38 | 8,319,494 | 8,556,962 | ||||||
FNMA, 3.137% - 3.157%, (12-month USD LIBOR +/- MBS Margin), 5/01/34 - 2/01/39 | 8,399,566 | 8,702,259 | ||||||
FNMA, 3.199%, (6-month USD LIBOR +/- MBS Margin), 12/01/34 | 6,105,414 | 6,321,897 | ||||||
FNMA, 3.159% - 3.238%, (12-month USD LIBOR +/- MBS Margin), 6/01/33 - 9/01/37 | 8,050,552 | 8,361,843 | ||||||
FNMA, 2.026% - 3.252%, (US 1 Year CMT T-Note +/- MBS Margin), 7/01/18 - 5/01/38 | 8,036,299 | 8,381,880 | ||||||
FNMA, 3.263%, (12-month USD LIBOR +/- MBS Margin), 2/01/36 | 8,574,482 | 8,904,125 | ||||||
FNMA, 3.15% - 3.27%, (6-month USD LIBOR +/- MBS Margin), 12/01/24 - 8/01/37 | 7,192,561 | 7,465,342 | ||||||
FNMA, 3.24% - 3.30%, (12-month USD LIBOR +/- MBS Margin), 12/01/32 - 12/01/43 | 7,699,814 | 8,005,607 | ||||||
FNMA, 3.325%, (11th District COF +/- MBS Margin), 4/01/34 | 21,739,748 | 22,695,857 | ||||||
FNMA, 3.30% - 3.335%, (12-month USD LIBOR +/- MBS Margin), 5/01/33 - 9/01/38 | 7,604,340 | 7,929,263 | ||||||
FNMA, 3.252% - 3.345%, (US 1 Year CMT T-Note +/- MBS Margin), 3/01/20 - 9/01/37 | 8,287,401 | 8,693,799 | ||||||
FNMA, 3.335% - 3.35%, (12-month USD LIBOR +/- MBS Margin), 6/01/33 - 12/01/39 | 7,366,859 | 7,679,750 | ||||||
FNMA, 3.35% - 3.368%, (12-month USD LIBOR +/- MBS Margin), 9/01/32 - 11/01/37 | 6,476,675 | 6,751,723 | ||||||
FNMA, 3.37%, (12-month USD LIBOR +/- MBS Margin), 8/01/37 | 3,464,626 | 3,619,139 | ||||||
FNMA, 3.368% - 3.379%, (12-month USD LIBOR +/- MBS Margin), 12/01/32 - 7/01/38 | 7,256,642 | 7,593,796 | ||||||
FNMA, 3.379%, (12-month USD LIBOR +/- MBS Margin), 11/01/34 | 4,938,715 | 5,177,578 | ||||||
FNMA, 3.382%, (12-month USD LIBOR +/- MBS Margin), 3/01/37 | 5,506,944 | 5,754,164 |
franklintempleton.com | Semiannual Report | 33 |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Adjustable U.S. Government Securities Fund (continued)
Principal Amount | Value | |||||||
Mortgage-Backed Securities (continued) | ||||||||
a Federal National Mortgage Association (FNMA) Adjustable Rate (continued) | ||||||||
FNMA, 3.38% - 3.402%, (12-month USD LIBOR +/- MBS Margin), 9/01/32 - 11/01/42 | $ | 8,176,090 | $ | 8,548,909 | ||||
FNMA, 2.577% - 3.403%, (1 Year CMT +/- MBS Margin), 12/01/26 - 11/01/44 | 8,240,330 | 8,444,198 | ||||||
FNMA, 3.274% - 3.408%, (6-month USD LIBOR +/- MBS Margin), 9/01/21 - 8/01/37 | 8,390,765 | 8,676,066 | ||||||
FNMA, 3.414%, (12-month USD LIBOR +/- MBS Margin), 2/01/36 | 5,543,705 | 5,801,820 | ||||||
FNMA, 3.403% - 3.42%, (12-month USD LIBOR +/- MBS Margin), 11/01/32 - 7/01/42 | 6,699,008 | 6,995,137 | ||||||
FNMA, 3.42% - 3.434%, (12-month USD LIBOR +/- MBS Margin), 11/01/32 - 4/01/38 | 8,303,033 | 8,678,385 | ||||||
FNMA, 3.438%, (12-month USD LIBOR +/- MBS Margin), 5/01/39 | 7,257,883 | 7,560,608 | ||||||
FNMA, 3.348% - 3.448%, (US 1 Year CMT T-Note +/- MBS Margin), 3/01/19 - 9/01/39 | 8,337,909 | 8,717,630 | ||||||
FNMA, 3.448%, (12-month USD LIBOR +/- MBS Margin), 11/01/34 | 5,761,116 | 6,053,855 | ||||||
FNMA, 3.46%, (12-month USD LIBOR +/- MBS Margin), 2/01/36 | 4,959,698 | 5,196,672 | ||||||
FNMA, 3.435% - 3.461%, (12-month USD LIBOR +/- MBS Margin), 12/01/32 - 8/01/39 | 7,778,830 | 8,135,311 | ||||||
FNMA, 3.41% - 3.472%, (6-month USD LIBOR +/- MBS Margin), 10/01/22 - 5/01/36 | 8,307,320 | 8,614,888 | ||||||
FNMA, 3.464% - 3.474%, (12-month USD LIBOR +/- MBS Margin), 1/01/33 - 1/01/37 | 8,268,426 | 8,657,456 | ||||||
FNMA, 3.475% - 3.489%, (12-month USD LIBOR +/- MBS Margin), 11/01/32 - 3/01/39 | 7,932,311 | 8,313,699 | ||||||
FNMA, 3.495%, (US 1 Year CMT T-Note +/- MBS Margin), 6/01/36 | 5,255,870 | 5,539,177 | ||||||
FNMA, 3.25% - 3.50%, (Federal COF +/- MBS Margin), 7/01/18 - 2/01/29 | 11,410 | 11,432 | ||||||
FNMA, 3.50%, (12-month USD LIBOR +/- MBS Margin), 8/01/40 | 3,539,935 | 3,700,633 | ||||||
FNMA, 3.489% - 3.504%, (12-month USD LIBOR +/- MBS Margin), 10/01/33 - 11/01/41 | 8,348,181 | 8,733,418 | ||||||
FNMA, 3.505% - 3.512%, (12-month USD LIBOR +/- MBS Margin), 1/01/33 - 3/01/42 | 8,186,203 | 8,565,169 | ||||||
FNMA, 3.512%, (US 1 Year CMT T-Note +/- MBS Margin), 5/01/36 | 20,299,870 | 21,425,497 | ||||||
FNMA, 3.516%, (12-month USD LIBOR +/- MBS Margin), 11/01/35 | 3,485,627 | 3,659,893 | ||||||
FNMA, 3.514% - 3.52%, (12-month USD LIBOR +/- MBS Margin), 8/01/34 - 7/01/38 | 7,434,936 | 7,774,872 | ||||||
FNMA, 3.521% - 3.522%, (12-month USD LIBOR +/- MBS Margin), 4/01/35 - 1/01/42 | 5,437,510 | 5,687,340 | ||||||
FNMA, 3.529%, (12-month USD LIBOR +/- MBS Margin), 1/01/36 | 5,161,545 | 5,404,399 | ||||||
FNMA, 3.526% - 3.539%, (12-month USD LIBOR +/- MBS Margin), 1/01/33 - 7/01/38 | 7,752,328 | 8,146,130 | ||||||
FNMA, 3.474% - 3.547%, (6-month USD LIBOR +/- MBS Margin), 5/01/24 - 4/01/37 | 6,311,975 | 6,564,639 | ||||||
FNMA, 2.49% - 3.555%, (1-month USD LIBOR +/- MBS Margin), 10/01/26 - 10/01/34 | 588,710 | 599,064 | ||||||
FNMA, 3.54% - 3.557%, (12-month USD LIBOR +/- MBS Margin), 10/01/18 - 8/01/40 | 7,741,696 | 8,124,188 | ||||||
FNMA, 3.448% - 3.559%, (US 1 Year CMT T-Note +/- MBS Margin), 12/01/18 - 7/01/40 | 7,701,610 | 8,072,519 | ||||||
FNMA, 3.56%, (12-month USD LIBOR +/- MBS Margin), 9/01/37 | 3,491,584 | 3,665,797 | ||||||
FNMA, 3.558% - 3.568%, (12-month USD LIBOR +/- MBS Margin), 1/01/33 - 7/01/42 | 7,998,051 | 8,377,384 | ||||||
FNMA, 3.568% - 3.582%, (12-month USD LIBOR +/- MBS Margin), 1/01/33 - 1/01/41 | 8,011,588 | 8,393,597 | ||||||
FNMA, 3.584%, (12-month USD LIBOR +/- MBS Margin), 7/01/40 | 4,865,032 | 5,111,328 | ||||||
FNMA, 3.603%, (12-month USD LIBOR +/- MBS Margin), 9/01/36 | 3,573,285 | 3,750,063 | ||||||
FNMA, 3.584% - 3.605%, (12-month USD LIBOR +/- MBS Margin), 2/01/33 - 4/01/38 | 7,792,062 | 8,171,784 | ||||||
FNMA, 3.605% - 3.608%, (12-month USD LIBOR +/- MBS Margin), 6/01/35 - 6/01/36 | 7,478,325 | 7,878,308 | ||||||
FNMA, 3.618%, (12-month USD LIBOR +/- MBS Margin), 5/01/38 | 4,453,927 | 4,689,358 | ||||||
FNMA, 3.618%, (12-month USD LIBOR +/- MBS Margin), 9/01/39 | 3,837,109 | 4,030,641 | ||||||
FNMA, 3.619%, (12-month USD LIBOR +/- MBS Margin), 1/01/36 | 5,231,550 | 5,521,223 | ||||||
FNMA, 3.625%, (12-month USD LIBOR +/- MBS Margin), 9/01/40 | 3,646,876 | 3,823,148 | ||||||
FNMA, 3.608% - 3.632%, (12-month USD LIBOR +/- MBS Margin), 1/01/33 - 3/01/40 | 7,710,147 | 8,078,221 | ||||||
FNMA, 3.635% - 3.64%, (12-month USD LIBOR +/- MBS Margin), 10/01/33 - 8/01/37 | 7,629,559 | 8,023,248 | ||||||
FNMA, 3.641%, (US 1 Year CMT T-Note +/- MBS Margin), 1/01/38 | 5,943,385 | 6,249,678 | ||||||
FNMA, 3.648%, (12-month USD LIBOR +/- MBS Margin), 2/01/43 | 3,765,912 | 3,952,768 | ||||||
FNMA, 3.561% - 3.651%, (US 1 Year CMT T-Note +/- MBS Margin), 3/01/20 - 1/01/40 | 8,291,879 | 8,673,213 | ||||||
FNMA, 3.654%, (12-month USD LIBOR +/- MBS Margin), 3/01/41 | 6,823,478 | 7,148,468 | ||||||
b FNMA, 3.658%, (12-month USD LIBOR +/- MBS Margin), 10/01/38 | 10,588,934 | 11,174,827 | ||||||
FNMA, 3.659%, (12-month USD LIBOR +/- MBS Margin), 6/01/35 | 4,298,522 | 4,541,730 | ||||||
FNMA, 3.641% - 3.671%, (12-month USD LIBOR +/- MBS Margin), 4/01/34 - 2/01/41 | 8,304,856 | 8,713,562 | ||||||
FNMA, 3.676%, (12-month USD LIBOR +/- MBS Margin), 1/01/37 | 5,802,893 | 6,127,293 | ||||||
FNMA, 3.674% - 3.696%, (12-month USD LIBOR +/- MBS Margin), 2/01/32 - 5/01/48 | 8,190,520 | 8,588,369 |
34 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Adjustable U.S. Government Securities Fund (continued)
Principal Amount | Value | |||||||
Mortgage-Backed Securities (continued) | ||||||||
a Federal National Mortgage Association (FNMA) Adjustable Rate (continued) | ||||||||
FNMA, 3.696% - 3.71%, (12-month USD LIBOR +/- MBS Margin), 10/01/33 - 11/01/42 | $ | 7,979,789 | $ | 8,357,091 | ||||
FNMA, 3.549% - 3.711%, (6-month USD LIBOR +/- MBS Margin), 11/01/23 - 2/01/37 | 6,944,158 | 7,190,715 | ||||||
FNMA, 3.71% - 3.721%, (12-month USD LIBOR +/- MBS Margin), 2/01/33 - 8/01/39 | 7,027,355 | 7,381,241 | ||||||
FNMA, 3.726%, (12-month USD LIBOR +/- MBS Margin), 3/01/35 | 8,357,990 | 8,769,274 | ||||||
FNMA, 3.772%, (12-month USD LIBOR +/- MBS Margin), 1/01/39 | 6,302,387 | 6,594,848 | ||||||
FNMA, 3.722% - 3.789%, (12-month USD LIBOR +/- MBS Margin), 2/01/33 - 5/01/48 | 8,148,038 | 8,563,027 | ||||||
FNMA, 3.801%, (12-month USD LIBOR +/- MBS Margin), 1/01/36 | 4,287,494 | 4,511,718 | ||||||
FNMA, 3.802%, (12-month USD LIBOR +/- MBS Margin), 8/01/35 | 3,708,661 | 3,899,331 | ||||||
FNMA, 3.789% - 3.82%, (12-month USD LIBOR +/- MBS Margin), 4/01/33 - 2/01/37 | 8,182,474 | 8,592,825 | ||||||
FNMA, 3.657% - 3.875%, (US 1 Year CMT T-Note +/- MBS Margin), 2/01/19 - 5/01/38 | 8,279,409 | 8,627,946 | ||||||
FNMA, 3.821% - 3.881%, (12-month USD LIBOR +/- MBS Margin), 3/01/33 - 4/01/37 | 7,465,287 | 7,821,994 | ||||||
FNMA, 2.65% - 3.95%, (US 3 Year CMT T-Note +/- MBS Margin), 12/01/19 - 1/01/35 | 1,020,731 | 1,057,844 | ||||||
FNMA, 3.883% - 3.963%, (12-month USD LIBOR +/- MBS Margin), 3/01/33 - 4/01/41 | 7,391,834 | 7,733,871 | ||||||
FNMA, 3.975%, (12-month USD LIBOR +/- MBS Margin), 5/01/40 | 4,621,312 | 4,825,743 | ||||||
FNMA, 3.965% - 4.026%, (12-month USD LIBOR +/- MBS Margin), 3/01/32 - 4/01/38 | 7,172,911 | 7,506,575 | ||||||
FNMA, 3.472% - 4.042%, (US 5 Year CMT T-Note +/- MBS Margin), 6/01/25 - 2/01/30 | 136,362 | 141,102 | ||||||
FNMA, 4.031% - 4.193%, (12-month USD LIBOR +/- MBS Margin), 4/01/32 - 3/01/47 | 8,283,871 | 8,714,599 | ||||||
FNMA, 3.41% - 4.275%, (1 Year CMT +/- MBS Margin), 1/01/27 - 10/01/36 | 3,655,774 | 3,830,026 | ||||||
FNMA, 3.886% - 4.39%, (US 1 Year CMT T-Note +/- MBS Margin), 3/01/19 - 4/01/38 | 8,261,202 | 8,622,627 | ||||||
FNMA, 4.195% - 4.47%, (12-month USD LIBOR +/- MBS Margin), 4/01/33 - 4/01/44 | 2,509,722 | 2,652,029 | ||||||
FNMA, 3.713% - 5.724%, (6-month USD LIBOR +/- MBS Margin), 12/01/23 - 11/01/46 | 7,243,550 | 7,538,077 | ||||||
FNMA, 4.404% - 6.192%, (US 1 Year CMT T-Note +/- MBS Margin), 10/01/22 - 9/01/32 | 992,502 | 1,031,110 | ||||||
FNMA, 2.651% - 6.989%, (11th District COF +/- MBS Margin), 9/01/18 - 8/01/37 | 5,227,279 | 5,371,164 | ||||||
FNMA, 3.00% - 7.67%, (6-month US T-Bill +/- MBS Margin), 7/01/18 - 11/01/34 | 253,945 | 259,794 | ||||||
|
| |||||||
|
653,891,520 |
| ||||||
|
| |||||||
a Government National Mortgage Association (GNMA) Adjustable Rate 0.2% | ||||||||
GNMA, 2.375% - 3.125%, (US 1 Year CMT T-Note +/- MBS Margin), 9/20/33 - 5/20/36 | 1,184,464 | 1,212,316 | ||||||
|
| |||||||
Total Mortgage-Backed Securities (Cost $839,491,952) | 837,800,561 | |||||||
|
| |||||||
Shares | ||||||||
|
| |||||||
Short Term Investments (Cost $43,056,833) 4.9% | ||||||||
Money Market Funds 4.9% | ||||||||
c,d Institutional Fiduciary Trust Money Market Portfolio, 1.30% | 43,056,833 | 43,056,833 | ||||||
|
| |||||||
Total Investments (Cost $882,548,785) 100.8% | 880,857,394 | |||||||
Other Assets, less Liabilities (0.8)% | (7,025,879 | ) | ||||||
|
| |||||||
Net Assets 100.0% | $ | 873,831,515 | ||||||
|
|
See Abbreviations on page 149.
aAdjustable Rate Mortgage-Backed Security (ARM); the rate shown is the effective rate at period end. ARM rates are not based on a published reference rate and spread, but instead pass-through weighted average interest income inclusive of any caps or floors, if applicable, from the underlying mortgage loans in which the majority of mortgages pay interest based on the index shown at their designated reset dates plus a spread, less the applicable servicing and guaranty fee (MBS margin).
bSecurity purchased on a delayed delivery basis. See Note 1(c).
cSee Note 3(f) regarding investments in affiliated management investment companies.
dThe rate shown is the annualized seven-day effective yield at period end.
franklintempleton.com |
The accompanying notes are an integral part of these financial statements. | Semiannual Report | 35 |
FRANKLIN INVESTORS SECURITIES TRUST
Financial Highlights
Franklin Floating Rate Daily Access Fund
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||
Class A | ||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||
Net asset value, beginning of period | $ 8.83 | $ 8.84 | $ 8.61 | $ 9.04 | $ 9.20 | $ 9.11 | ||||||||||||||||
|
| |||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||
Net investment income | 0.196 | 0.307 | 0.401 | 0.406 | 0.335 | 0.333 | ||||||||||||||||
Net realized and unrealized gains (losses) | (0.057 | ) | (0.011 | ) | 0.228 | (0.434 | ) | (0.160 | ) | 0.088 | ||||||||||||
|
| |||||||||||||||||||||
Total from investment operations | 0.139 | 0.296 | 0.629 | (0.028 | ) | 0.175 | 0.421 | |||||||||||||||
|
| |||||||||||||||||||||
Less distributions from net investment income | (0.199 | ) | (0.306 | ) | (0.399 | ) | (0.402 | ) | (0.335 | ) | (0.331) | |||||||||||
|
| |||||||||||||||||||||
Net asset value, end of period | $ 8.77 | $ 8.83 | $ 8.84 | $ 8.61 | $ 9.04 | $ 9.20 | ||||||||||||||||
|
| |||||||||||||||||||||
Total returnb | 1.48% | 3.51% | 7.60% | (0.37)% | 1.91% | 4.69% | ||||||||||||||||
Ratios to average net assetsc | ||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.87% | 0.87% | 0.88% | 0.85% | 0.84% | 0.83% | ||||||||||||||||
Expenses net of waiver and payments by affiliatesd | 0.80% | 0.82% | 0.86% | 0.84% | 0.82% | 0.83%e | ||||||||||||||||
Net investment income | 4.50% | 3.45% | 4.72% | 4.55% | 3.64% | 3.60% | ||||||||||||||||
Supplemental data | ||||||||||||||||||||||
Net assets, end of period (000’s) | $1,249,004 | $1,362,220 | $1,359,862 | $1,553,100 | $1,874,867 | $1,991,138 | ||||||||||||||||
Portfolio turnover rate | 24.12% | 64.21% | 34.10% | 46.72% | 83.93% | 42.72% |
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.
bTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
cRatios are annualized for periods less than one year.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
36 |
Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Floating Rate Daily Access Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||
Class C | ||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||
Net asset value, beginning of period | $ 8.83 | $ 8.84 | $ 8.61 | $ 9.05 | $ 9.20 | $ 9.11 | ||||||||||||||||
|
| |||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||
Net investment income | 0.179 | 0.271 | 0.366 | 0.369 | 0.298 | 0.296 | ||||||||||||||||
Net realized and unrealized gains (losses) | (0.057 | ) | (0.010 | ) | 0.229 | (0.443 | ) | (0.150 | ) | 0.088 | ||||||||||||
|
| |||||||||||||||||||||
Total from investment operations | 0.122 | 0.261 | 0.595 | (0.074 | ) | 0.148 | 0.384 | |||||||||||||||
|
| |||||||||||||||||||||
Less distributions from net investment income | (0.182 | ) | (0.271 | ) | (0.365 | ) | (0.366 | ) | (0.298 | ) | (0.294) | |||||||||||
|
| |||||||||||||||||||||
Net asset value, end of period | $ 8.77 | $ 8.83 | $ 8.84 | $ 8.61 | $ 9.05 | $ 9.20 | ||||||||||||||||
|
| |||||||||||||||||||||
Total returnb | 1.28% | 3.11% | 7.18% | (0.87 | )% | 1.62% | 4.28% | |||||||||||||||
Ratios to average net assetsc | ||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 1.27% | 1.27% | 1.28% | 1.25% | 1.24% | 1.23% | ||||||||||||||||
Expenses net of waiver and payments by affiliatesd | 1.20% | 1.22% | 1.26% | 1.24% | 1.22% | 1.23%e | ||||||||||||||||
Net investment income | 4.10% | 3.05% | 4.32% | 4.15% | 3.24% | 3.20% | ||||||||||||||||
Supplemental data | ||||||||||||||||||||||
Net assets, end of period (000’s) | $518,444 | $550,797 | $551,726 | $627,805 | $742,602 | $765,839 | ||||||||||||||||
Portfolio turnover rate | 24.12% | 64.21% | 34.10% | 46.72% | 83.93% | 42.72% |
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.
bTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
cRatios are annualized for periods less than one year.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
franklintempleton.com |
The accompanying notes are an integral part of these financial statements. | Semiannual Report | 37 |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Floating Rate Daily Access Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013a | |||||||||||||||||
Class R6 | ||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||
Net asset value, beginning of period | $ 8.84 | $ 8.84 | $ 8.60 | $ 9.05 | $ 9.21 | $ 9.21 | ||||||||||||||||
|
| |||||||||||||||||||||
Income from investment operationsb: | ||||||||||||||||||||||
Net investment income | 0.210 | 0.338 | 0.422 | 0.437 | 0.364 | 0.175 | ||||||||||||||||
Net realized and unrealized gains (losses) | (0.067 | ) | (0.002 | ) | 0.245 | (0.457 | ) | (0.159 | ) | (0.001) | ||||||||||||
|
| |||||||||||||||||||||
Total from investment operations | 0.143 | 0.336 | 0.667 | (0.020 | ) | 0.205 | 0.174 | |||||||||||||||
|
| |||||||||||||||||||||
Less distributions from net investment income | (0.213 | ) | (0.336 | ) | (0.427 | ) | (0.430 | ) | (0.365 | ) | (0.174) | |||||||||||
|
| |||||||||||||||||||||
Net asset value, end of period | $ 8.77 | $ 8.84 | $ 8.84 | $ 8.60 | $ 9.05 | $ 9.21 | ||||||||||||||||
|
| |||||||||||||||||||||
Total returnc | 1.64% | 3.85% | 7.96% | (0.16 | )% | 2.36% | 1.80% | |||||||||||||||
Ratios to average net assetsd | ||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.54% | 0.52% | 0.53% | 0.72% | 0.52% | 0.51% | ||||||||||||||||
Expenses net of waiver and payments by affiliatese | 0.47% | 0.47% | 0.51% | 0.51% | 0.50% | 0.51%f | ||||||||||||||||
Net investment income | 4.83% | 3.80% | 5.07% | 4.88% | 3.96% | 3.92% | ||||||||||||||||
Supplemental data | ||||||||||||||||||||||
Net assets, end of period (000’s) | $136,403 | $130,180 | $12,333 | $7 | $465 | $1,339 | ||||||||||||||||
Portfolio turnover rate | 24.12% | 64.21% | 34.10% | 46.72% | 83.93% | 42.72% |
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.
cTotal return 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%.
38 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Floating Rate Daily Access Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||
Advisor Class | ||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||
Net asset value, beginning of period | $ 8.84 | $ 8.85 | $ 8.61 | $ 9.05 | $ 9.20 | $ 9.11 | ||||||||||||||||
|
| |||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||
Net investment income | 0.207 | 0.327 | 0.422 | 0.427 | 0.358 | 0.355 | ||||||||||||||||
Net realized and unrealized gains (losses) | (0.057 | ) | (0.010 | ) | 0.239 | (0.443 | ) | (0.150 | ) | 0.089 | ||||||||||||
|
| |||||||||||||||||||||
Total from investment operations | 0.150 | 0.317 | 0.661 | (0.016 | ) | 0.208 | 0.444 | |||||||||||||||
|
| |||||||||||||||||||||
Less distributions from net investment income | (0.210 | ) | (0.327 | ) | (0.421 | ) | (0.424 | ) | (0.358 | ) | (0.354) | |||||||||||
|
| |||||||||||||||||||||
Net asset value, end of period | $ 8.78 | $ 8.84 | $ 8.85 | $ 8.61 | $ 9.05 | $ 9.20 | ||||||||||||||||
|
| |||||||||||||||||||||
Total returnb | 1.72% | 3.64% | 8.00% | (0.23)% | 2.28% | 4.95% | ||||||||||||||||
Ratios to average net assetsc | ||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.62% | 0.62% | 0.63% | 0.60% | 0.59% | 0.58% | ||||||||||||||||
Expenses net of waiver and payments by affiliatesd | 0.55% | 0.57% | 0.61% | 0.59% | 0.57% | 0.58%e | ||||||||||||||||
Net investment income | 4.75% | 3.70% | 4.97% | 4.80% | 3.89% | 3.85% | ||||||||||||||||
Supplemental data | ||||||||||||||||||||||
Net assets, end of period (000’s) | $1,648,137 | $1,672,724 | $1,108,692 | $1,405,281 | $2,019,477 | $2,374,914 | ||||||||||||||||
Portfolio turnover rate | 24.12% | 64.21% | 34.10% | 46.72% | 83.93% | 42.72% |
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.
bTotal return is not annualized for periods less than one year.
cRatios are annualized for periods less than one year.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 39 |
FRANKLIN INVESTORS SECURITIES TRUST
Statement of Investments, April 30, 2018 (unaudited)
Franklin Floating Rate Daily Access Fund
Country | Shares | Value | ||||||||||||
| ||||||||||||||
Common Stocks (Cost $1,947,501) 0.3% | ||||||||||||||
Oil & Gas Exploration & Production 0.3% | ||||||||||||||
Samson Resources II LLC | United States | 432,778 | $ | 10,170,283 | ||||||||||
|
| |||||||||||||
Management Investment Companies 3.7% | ||||||||||||||
Other Diversified Financial Services 3.7% | ||||||||||||||
a | Franklin Lower Tier Floating Rate Fund | United States | 6,729,194 | 66,484,441 | ||||||||||
a | Franklin Middle Tier Floating Rate Fund | United States | 6,837,495 | 64,682,700 | ||||||||||
|
| |||||||||||||
Total Management Investment Companies | 131,167,141 | |||||||||||||
|
| |||||||||||||
Principal | ||||||||||||||
Corporate Bonds (Cost $16,910,497) 0.4% | ||||||||||||||
Industrial Machinery 0.4% | ||||||||||||||
b | Onsite Rental Group Operations Pty. Ltd., secured note, PIK, 6.10%, 10/26/23 | Australia | $ | 19,861,081 | 15,392,338 | |||||||||
|
| |||||||||||||
c,d | Senior Floating Rate Interests 71.0% | |||||||||||||
Aerospace & Defense 3.6% | ||||||||||||||
Delos Finance S.A.R.L. (AerCap), New Loans, 4.052%, (3-month USD LIBOR + 1.75%), 10/06/23 | Luxembourg | 59,610,818 | 60,088,957 | |||||||||||
Doncasters U.S. Finance LLC, | ||||||||||||||
Second Lien Term Loan, 10.552%, (3-month USD LIBOR + 8.25%), 10/09/20 | United States | 6,608,226 | 6,513,232 | |||||||||||
Term B Loans, 5.837%, (3-month USD LIBOR + 3.50%), 4/09/20 | United States | 27,426,332 | 26,989,211 | |||||||||||
Flying Fortress Holdings LLC (ILFC), New Loan, 4.052%, (3-month USD LIBOR + 1.75%), 10/30/22 | United States | 30,062,918 | 30,274,982 | |||||||||||
Leidos Innovations Corp., Term Loan B, 3.688%, (1-month USD LIBOR + 1.75%), 8/16/23 | United States | 3,269,288 | 3,298,915 | |||||||||||
|
| |||||||||||||
|
127,165,297 |
| ||||||||||||
|
| |||||||||||||
Agricultural Products 0.1% | ||||||||||||||
Allflex Holdings III Inc., Second Lien Initial Term Loan, 9.362%, (3-month USD LIBOR + 7.00%), 7/19/21 | United States | 2,141,011 | 2,153,500 | |||||||||||
|
| |||||||||||||
Airlines 1.2% | ||||||||||||||
Air Canada, Term Loan, 3.984%, (3-month USD LIBOR + 2.00%), 10/06/23 | Canada | 33,160,822 | 33,402,631 | |||||||||||
American Airlines Inc., 2017 Replacement Term Loans, 3.90%, (1-month USD LIBOR + 2.00%), 6/27/20 | United States | 9,884,616 | 9,911,799 | |||||||||||
|
| |||||||||||||
|
43,314,430 |
| ||||||||||||
|
| |||||||||||||
Apparel Retail 2.3% | ||||||||||||||
Ascena Retail Group Inc., Tranche B Term Loan, 6.438%, (1-month USD LIBOR + 4.50%), 8/21/22 | United States | 95,089,172 | 83,361,540 | |||||||||||
|
| |||||||||||||
Auto Parts & Equipment 1.7% | ||||||||||||||
Allison Transmission Inc., New Term Loans, 3.65%, (1-month USD LIBOR + 1.75%), 9/23/22 | United States | 26,537,390 | 26,784,665 | |||||||||||
American Axle and Manufacturing Inc., Tranche B Term Loan, 4.15%, (1-month USD LIBOR + 2.25%), 4/06/24 | United States | 3,899,364 | 3,922,519 | |||||||||||
TI Group Automotive Systems LLC, Initial US Term Loan, 4.401%, (1-month USD LIBOR + 2.50%), 6/30/22 | United States | 29,434,428 | 29,696,306 | |||||||||||
|
| |||||||||||||
|
60,403,490 |
| ||||||||||||
|
|
40 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Floating Rate Daily Access Fund (continued)
Country | Principal Amount* | Value | ||||||||||||
c,d | Senior Floating Rate Interests (continued) | |||||||||||||
Broadcasting 2.3% | ||||||||||||||
Gray Television Inc., Term B-2 Loan, 4.137%, (1-month USD LIBOR + 2.25%), 2/07/24 | United States | $ | 22,418,924 | $ | 22,540,367 | |||||||||
Mission Broadcasting Inc., Term Loan B-2, 4.387%, (1-month USD LIBOR + 2.50%), 1/17/24 | United States | 1,173,344 | 1,179,504 | |||||||||||
Nexstar Broadcasting Inc., | ||||||||||||||
Term A-2 Loan, 3.887%, (1-month USD LIBOR + 2.00%), 7/19/22 | United States | 3,245,873 | 3,251,960 | |||||||||||
Term Loan B-2, 4.387%, (1-month USD LIBOR + 2.50%), 1/17/24 | United States | 9,136,973 | 9,184,942 | |||||||||||
e | Sinclair Television Group Inc., | |||||||||||||
Tranche B Term Loans, 4.16%, (1-month USD LIBOR + 2.25%), 1/03/24 | United States | 32,760,526 | 32,930,324 | |||||||||||
f Tranche B-1 Term Loans, TBD, 1/31/25 | United States | 11,800,000 | 11,867,602 | |||||||||||
WXXA-TV LLC and WLAJ-TV LLC, Term Loan A-2, 3.887%, (1-month USD LIBOR + 2.00%), 7/19/22 | United States | 109,666 | 109,871 | |||||||||||
|
| |||||||||||||
|
81,064,570 |
| ||||||||||||
|
| |||||||||||||
Cable & Satellite 2.6% | ||||||||||||||
Charter Communications Operating LLC, | ||||||||||||||
Term A-2 Loan, 3.41%, (1-month USD LIBOR + 1.50%), 3/31/23 | United States | 34,097,436 | 34,177,360 | |||||||||||
e,f Term Loan B, TBD, 3/13/25 | United States | 6,000,000 | 6,033,750 | |||||||||||
CSC Holdings LLC, March 2017 Incremental Term Loans, 4.147%, (1-month USD LIBOR + 2.25%), 7/17/25 | United States | 42,154,887 | 42,202,311 | |||||||||||
Mediacom Illinois LLC, Tranche N Term Loan, 3.50%, (1-week USD LIBOR + 1.75%), 2/15/24 | United States | 10,034,291 | 10,087,594 | |||||||||||
|
| |||||||||||||
|
92,501,015 |
| ||||||||||||
|
| |||||||||||||
Casinos & Gaming 1.5% | ||||||||||||||
Boyd Gaming Corp., | ||||||||||||||
Refinancing Term B Loans, 4.244%, (1-week USD LIBOR + 2.50%), 9/15/23 | United States | 14,606,094 | 14,702,450 | |||||||||||
Term A Loan, 3.994%, (1-week USD LIBOR + 2.25%), 9/15/21 | United States | 4,603,153 | 4,626,168 | |||||||||||
CEOC LLC, Term B Loans, 4.377%, (1-month USD LIBOR + 2.50%), 10/06/24 | United States | 2,875,746 | 2,884,733 | |||||||||||
Eldorado Resorts Inc., | ||||||||||||||
Initial Term Loan, 4.188%, (1-month USD LIBOR + 2.25%), 4/17/24 | United States | 5,368,698 | 8,935,451 | |||||||||||
Initial Term Loan, 4.125% - 4.188%, (2-month USD LIBOR + 2.25%), 4/17/24 | United States | 7,504,740 | 4,014,430 | |||||||||||
Greektown Holdings LLC, Initial Term Loan, 4.901%, (1-month USD LIBOR + 3.00%), 4/25/24 | United States | 15,388,103 | 15,428,974 | |||||||||||
Kingpin Intermediate Holdings LLC, Initial Term Loans, 6.15%, (1-month USD LIBOR + 4.25%), 7/03/24 | United States | 2,779,000 | 2,827,910 | |||||||||||
|
| |||||||||||||
|
53,420,116 |
| ||||||||||||
|
| |||||||||||||
Coal & Consumable Fuels 2.4% | ||||||||||||||
Bowie Resource Holdings LLC, | ||||||||||||||
e First Lien Initial Term Loan, 7.651%, (1-month USD LIBOR + 5.75%), 8/14/20 | United States | 26,824,794 | 26,439,188 | |||||||||||
Second Lien Initial Term Loan, 12.651%, (1-month USD LIBOR + 10.75%), 2/16/21 | United States | 4,464,778 | 4,277,815 | |||||||||||
Foresight Energy LLC, Term Loans, 8.109%, (3-month USD LIBOR + 5.75%), 3/28/22 | United States | 54,491,422 | 53,442,462 | |||||||||||
Westmoreland Coal Co., Term Loan, 8.802%, (3-month USD LIBOR + 6.50%), 12/16/20 | United States | 7,859,150 | 2,757,265 | |||||||||||
|
| |||||||||||||
|
86,916,730 |
| ||||||||||||
|
| |||||||||||||
Commodity Chemicals 0.6% | ||||||||||||||
Ineos U.S. Finance LLC, 2024 Dollar Term Loan, 3.901%, (1-month USD LIBOR + 2.00%), 3/31/24 | United States | 21,745,197 | 21,848,834 | |||||||||||
|
|
franklintempleton.com |
Semiannual Report |
|
41 |
|
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Floating Rate Daily Access Fund (continued)
Country | Principal Amount* | Value | ||||||||||||
| ||||||||||||||
c,d | Senior Floating Rate Interests (continued) | |||||||||||||
Communications Equipment 1.0% | ||||||||||||||
Ciena Corp., Refinancing Term Loan, 4.397%, (1-month USD LIBOR + 2.50%), 1/28/22 | United States | $ | 16,173,799 | $ | 16,274,886 | |||||||||
CommScope Inc., Tranche 5 Term Loans, 3.901%, (1-month USD LIBOR + 2.00%), 12/29/22 | United States | 17,579,422 | 17,705,782 | |||||||||||
|
| |||||||||||||
|
33,980,668 |
| ||||||||||||
|
| |||||||||||||
Construction & Engineering 0.5% | ||||||||||||||
AECOM, Term B Loans, 3.651%, (1-month USD LIBOR + 1.75%), 3/13/25 | United States | 17,476,235 | 17,541,771 | |||||||||||
|
| |||||||||||||
Data Processing & Outsourced Services 1.6% | ||||||||||||||
e,f | First Data Corp., Term A Loan, TBD, 6/02/20 | United States | 12,648,959 | 12,677,621 | ||||||||||
Global Payments Inc., Term A-2 Loan, 3.498%, (1-week USD LIBOR + 1.75%), 5/02/22 | United States | 20,240,578 | 20,295,389 | |||||||||||
e | Iron Mountain Information Management LLC, Term B Loan, 3.898%, (1-month USD LIBOR + 1.75%), 1/26/26 | United States | 9,292,212 | 9,267,541 | ||||||||||
Wex Inc., Term B-2 Loan, 4.151%, (1-month USD LIBOR + 2.25%), 7/01/23 | United States | 16,086,313 | 16,211,980 | |||||||||||
|
| |||||||||||||
58,452,531 | ||||||||||||||
|
| |||||||||||||
Diversified Chemicals 0.5% | ||||||||||||||
Chemours Co., Tranche B-2 US$ Term Loan, 3.66%, (1-month USD LIBOR + 1.75%), 4/03/25 | United States | 18,410,525 | 18,450,807 | |||||||||||
|
| |||||||||||||
Diversified Support Services 0.2% | ||||||||||||||
Ventia Pty. Ltd., Term B Loans (USD), 5.802%, (3-month USD LIBOR + 3.50%), 5/21/22 | Australia | 7,236,609 | 7,345,158 | |||||||||||
|
| |||||||||||||
Electric Utilities 0.3% | ||||||||||||||
EFS Cogen Holdings I LLC (Linden), Term B Advance, 5.56%, (3-month USD LIBOR + 3.25%), 6/28/23 | United States | 10,583,836 | 10,649,985 | |||||||||||
|
| |||||||||||||
Fertilizers & Agricultural Chemicals 0.1% | ||||||||||||||
Mosaic Co., Term Loan A, 3.401%, (1-month USD LIBOR + 1.50%), 11/18/21 | United States | 2,890,029 | 2,882,804 | |||||||||||
|
| |||||||||||||
Food Distributors 0.5% | ||||||||||||||
Aramark Corp., U.S. Term B-1 Loan, 3.901%, (1-month USD LIBOR + 2.00%), 3/11/25. | United States | 14,012,534 | 14,122,000 | |||||||||||
Nutraceutical International Corp., Term Loan B, 5.151%, (1-month USD LIBOR + 3.25%), 8/22/23 | United States | 5,095,140 | 5,107,877 | |||||||||||
|
| |||||||||||||
|
19,229,877 |
| ||||||||||||
|
| |||||||||||||
Food Retail 0.1% | ||||||||||||||
Smart & Final Stores LLC, First Lien Term Loan, 5.401%, (1-month USD LIBOR + 3.50%), 11/15/22 | United States | 2,880,905 | 2,830,489 | |||||||||||
|
| |||||||||||||
Forest Products 0.8% | ||||||||||||||
b | Appvion Inc., Roll-Up Loans, PIK, 8.401%, (1-month USD LIBOR + 6.50%), 7/01/18 | United States | 30,211,103 | 30,211,103 | ||||||||||
|
| |||||||||||||
General Merchandise Stores 2.6% | ||||||||||||||
b | 99 Cents Only Stores, First Lien Term Loan, PIK, 8.484% - 8.802%, (3-month USD LIBOR + 6.50%), 1/13/22 | United States | 41,430,510 | 40,576,005 | ||||||||||
Evergreen AcqCo. 1 LP (Savers), | ||||||||||||||
Term Loan, 5.806%, (2-month USD LIBOR + 3.75%), 7/09/19 | United States | 143,128 | 52,475,369 | |||||||||||
Term Loan, 6.112%, (3-month USD LIBOR + 3.75%), 7/09/19 | United States | 53,959,249 | 139,193 | |||||||||||
|
| |||||||||||||
|
93,190,567 |
| ||||||||||||
|
| |||||||||||||
Health Care Distributors 0.5% | ||||||||||||||
Mallinckrodt International Finance SA/CB LLC, Extended Term Loan B, 5.203%, (6-month USD LIBOR + 2.75%), 9/24/24 | Luxembourg | 17,280,290 | 17,195,427 | |||||||||||
|
|
42 |
Semiannual Report |
franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Floating Rate Daily Access Fund (continued)
Country | Principal Amount* | Value | ||||||||||||
c,d | Senior Floating Rate Interests (continued) | |||||||||||||
Health Care Services 1.6% | ||||||||||||||
e | Air Medical Group Holdings Inc., 2018 New Term Loans, 6.147%, (1-month USD LIBOR + 4.25%), 3/14/25 | United States | $ | 9,480,000 | $ | 9,595,116 | ||||||||
DaVita Healthcare Partners Inc., | ||||||||||||||
Tranche A Term Loan, 3.901%, (1-month USD LIBOR + 2.00%), 6/24/19 | United States | 13,367,484 | 13,400,823 | |||||||||||
e Tranche B Term Loan, 4.651%, (1-month USD LIBOR + 2.75%), 6/24/21 | United States | 7,736,323 | 7,817,833 | |||||||||||
Envision Healthcare Corp., Initial Term Loans, 4.91%, (1-month USD LIBOR + 3.00%), 12/01/23 | United States | 9,222,945 | 9,281,455 | |||||||||||
U.S. Renal Care Inc., Initial Term Loan, 6.552%, (3-month USD LIBOR + 4.25%), 12/31/22 | United States | 18,290,495 | 18,233,337 | |||||||||||
|
| |||||||||||||
|
58,328,564 |
| ||||||||||||
|
| |||||||||||||
Health Care Technology 0.5% | ||||||||||||||
Quintiles IMS Inc., Term B-1 Dollar Loans, 4.302%, (3-month USD LIBOR + 2.00%), 3/07/24 | United States | 18,762,500 | 18,887,590 | |||||||||||
|
| |||||||||||||
Hotels, Resorts & Cruise Lines 0.5% | ||||||||||||||
Hilton Worldwide Finance LLC, Series B-2 Term Loans, 3.647%, (1-month USD LIBOR + 1.75%), 10/25/23 | United States | 17,083,972 | 17,243,109 | |||||||||||
|
| |||||||||||||
Household Products 0.7% | ||||||||||||||
Spectrum Brands Inc., | ||||||||||||||
USD Term Loans, 3.994% - 4.056%, (2-month USD LIBOR + 2.00%), 6/23/22 | United States | 7,155,167 | 13,795,436 | |||||||||||
USD Term Loans, 3.791%, (3-month USD LIBOR + 2.00%), 6/23/22 | United States | 16,466,981 | 9,868,901 | |||||||||||
|
| |||||||||||||
|
23,664,337 |
| ||||||||||||
|
| |||||||||||||
Independent Power Producers & Energy Traders 2.9% | ||||||||||||||
Helix Gen Funding LLC, Term Loan, 5.651%, (1-month USD LIBOR + 3.75%), 6/02/24 | United States | 34,465,494 | 34,816,594 | |||||||||||
e | NRG Energy Inc., Term loan B, 4.052%, (3-month USD LIBOR + 1.75%), 6/30/23 | United States | 66,289,982 | 66,535,255 | ||||||||||
|
| |||||||||||||
|
101,351,849 |
| ||||||||||||
|
| |||||||||||||
Industrial Machinery 2.9% | ||||||||||||||
Harsco Corp., Term B-1 Loan, 4.938%, (1-month USD LIBOR + 3.00%), 12/10/24 | United States | 14,903,291 | 15,122,191 | |||||||||||
Mueller Water Products Inc., | ||||||||||||||
Loans, 4.401%, (1-month USD LIBOR + 2.50%), 11/26/21 | United States | 6,248,515 | 9,021,603 | |||||||||||
Loans, 4.802%, (3-month USD LIBOR + 2.50%), 11/26/21 | United States | 2,807,270 | 121,914 | |||||||||||
Navistar Inc., Tranche B Term Loan, 5.40%, (1-month USD LIBOR + 3.50%), 11/06/24 | United States | 62,209,880 | 62,715,335 | |||||||||||
Onsite Rental Group Operations Pty. Ltd., Term Loan, 6.398%, (1-month USD LIBOR + 4.50%), 10/25/22 | Australia | 14,526,645 | 14,381,378 | |||||||||||
|
| |||||||||||||
|
101,362,421 |
| ||||||||||||
|
| |||||||||||||
Integrated Telecommunication Services 2.2% | ||||||||||||||
Consolidated Communications Inc., Initial Term Loan, 4.91%, (1-month USD LIBOR + 3.00%), 10/05/23 | United States | 4,252,052 | 4,219,278 | |||||||||||
Global Tel*Link Corp., | ||||||||||||||
Second Lien Term Loan, 10.552%, (3-month USD LIBOR + 8.25%), 5/23/20 | United States | 6,033,937 | 6,047,139 | |||||||||||
Term Loan, 6.302%, (3-month USD LIBOR + 4.00%), 5/23/20 | United States | 9,767,836 | 9,838,047 | |||||||||||
Securus Technologies Holdings Inc., Second Lien Initial Loan, 10.151%, (1-month USD LIBOR + 8.25%), 11/01/25 | United States | 1,042,786 | 1,055,821 | |||||||||||
Zayo Group LLC, 2017 Incremental Refinancing B-1 Term Loan, 3.901%, (1-month USD LIBOR + 2.00%), 1/19/21 | United States | 55,600,222 | 55,930,376 | |||||||||||
|
| |||||||||||||
|
77,090,661 |
| ||||||||||||
|
|
franklintempleton.com |
Semiannual Report |
|
43 |
|
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Floating Rate Daily Access Fund (continued)
Country | Principal Amount* | Value | ||||||||||||
c,d | Senior Floating Rate Interests (continued) | |||||||||||||
Internet Software & Services 0.2% | ||||||||||||||
Legalzoom.com Inc., Initial Term Loan, 6.397%, (1-month USD LIBOR + 4.50%), 11/21/24 | United States | $ | 1,723,366 | $ | 1,742,754 | |||||||||
Rackspace Hosting Inc., Term B Loans, 4.787%, (3-month USD LIBOR + 3.00%), 11/03/23 | United States | 5,274,247 | 5,268,023 | |||||||||||
|
| |||||||||||||
|
7,010,777 |
| ||||||||||||
|
| |||||||||||||
Investment Banking & Brokerage 0.9% | ||||||||||||||
FinCo I LLC, Initial Term Loans, 4.651%, (1-month USD LIBOR + 2.75%), 12/27/22 | United States | 30,907,769 | 31,255,481 | |||||||||||
|
| |||||||||||||
IT Consulting & Other Services 1.4% | ||||||||||||||
Gartner Inc., Tranche A Term Loans, 3.901%, (1-month USD LIBOR + 2.00%), 3/21/22 | United States | 2,983,575 | 3,013,411 | |||||||||||
Sungard Availability Services Capital Inc., 2022 Tranche B Term Loans, 11.901%, (1-month USD LIBOR + 10.00%), 10/01/22 | United States | 45,360,525 | 45,162,073 | |||||||||||
|
| |||||||||||||
|
48,175,484 |
| ||||||||||||
|
| |||||||||||||
Leisure Facilities 1.0% | ||||||||||||||
24 Hour Fitness Worldwide Inc., Term Loan, 6.052%, (3-month USD LIBOR + 3.75%), 5/28/21 | United States | 35,388,505 | 35,528,572 | |||||||||||
|
| |||||||||||||
Life Sciences Tools & Services 0.3% | ||||||||||||||
Syneos Health Inc., Initial Term B Loans, 4.151%, (1-month USD LIBOR + 2.25%), 8/01/24 | United States | 11,638,129 | 11,687,230 | |||||||||||
|
| |||||||||||||
Marine 0.6% | ||||||||||||||
International Seaways Operating Corp., Initial Term Loans, 7.41%, (1-month USD | ||||||||||||||
LIBOR + 5.50%), 6/22/22 | United States | 7,195,769 | 7,150,796 | |||||||||||
Navios Maritime Partners LP, Initial Term Loan, 7.08%, (3-month USD LIBOR + 5.00%), 9/14/20 | Greece | 15,775,803 | 15,874,401 | |||||||||||
|
| |||||||||||||
|
23,025,197 |
| ||||||||||||
|
| |||||||||||||
Metal & Glass Containers 0.9% | ||||||||||||||
e | Crown Americas LLC, Term B Loans, 4.312%, (3-month USD LIBOR + 2.00%), 4/03/25 | United States | 11,128,465 | 11,244,101 | ||||||||||
Owens-Brockway Glass Container Inc., Term A Loan, 3.29% - 3.387%, (1-month USD LIBOR + 1.50%), 4/22/20 | United States | 20,770,874 | 20,894,212 | |||||||||||
|
| |||||||||||||
|
32,138,313 |
| ||||||||||||
|
| |||||||||||||
Movies & Entertainment 1.3% | ||||||||||||||
AMC Entertainment Holdings Inc., | ||||||||||||||
2016 Incremental Term Loans, 4.147%, (1-month USD LIBOR + 2.25%), 12/15/23 | United States | 3,324,821 | 3,336,597 | |||||||||||
Initial Term Loans, 4.147%, (1-month USD LIBOR + 2.25%), 12/15/22 | United States | 5,281,430 | 5,312,792 | |||||||||||
Lions Gate Capital Holdings LLC, Term A Loan, 3.648%, (1-month USD LIBOR + 1.75%), 3/22/23 | Canada | 27,168,403 | 27,270,284 | |||||||||||
Live Nation Entertainment Inc., Term B-3 Loans, 3.688%, (1-month USD LIBOR + 1.75%), 10/31/23 | United States | 12,029,433 | 12,114,638 | |||||||||||
|
| |||||||||||||
|
48,034,311 |
| ||||||||||||
|
| |||||||||||||
Office Services & Supplies 0.2% | ||||||||||||||
Conduent Business Services LLC, Delayed Draw Term A Loan, 4.151%, (1-month USD LIBOR + 2.25%), 12/07/21 | United States | 7,850,000 | 7,869,625 | |||||||||||
|
|
44 |
Semiannual Report |
franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Floating Rate Daily Access Fund (continued)
Country | Principal Amount* | Value | ||||||||||||
c,d | Senior Floating Rate Interests (continued) | |||||||||||||
Oil & Gas Exploration & Production 5.4% | ||||||||||||||
Cantium LLC, Commitment, 8.31%, (3-month USD LIBOR + 6.00%), 6/13/20 | United States | $ | 22,045,289 | $ | 22,210,629 | |||||||||
Fieldwood Energy LLC, Closing Date Loans, 7.151%, (1-month USD LIBOR + 5.25%), 4/11/22 | United States | 138,632,416 | 139,585,514 | |||||||||||
UTEX Industries Inc., First Lien Initial Term Loan, 5.901%, (1-month USD LIBOR + 4.00%), 5/21/21 | United States | 30,591,593 | 30,170,958 | |||||||||||
|
| |||||||||||||
|
191,967,101 |
| ||||||||||||
|
| |||||||||||||
Oil & Gas Storage & Transportation 0.7% | ||||||||||||||
OSG Bulk Ships Inc., Initial Term Loan, 6.04%, (3-month USD LIBOR + 4.25%), 8/05/19 | United States | 19,016,612 | 18,517,426 | |||||||||||
Strike LLC, | ||||||||||||||
Term Loan, 10.302%, (3-month USD LIBOR + 8.00%), 11/30/22 | United States | 77,500 | 15,665 | |||||||||||
Term Loan, 10.453%, (6-month USD LIBOR + 8.00%), 11/30/22 | United States | 5,735,000 | 5,905,819 | |||||||||||
|
| |||||||||||||
|
24,438,910 |
| ||||||||||||
|
| |||||||||||||
Packaged Foods & Meats 2.9% | ||||||||||||||
CSM Bakery Supplies LLC, | ||||||||||||||
Second Lien Term Loan, 10.06%, (3-month USD LIBOR + 7.75%), 7/03/21 | United States | 15,590,519 | 14,986,387 | |||||||||||
Term Loans, 6.31%, (3-month USD LIBOR + 4.00%), 7/03/20 | United States | 4,787,154 | 4,736,889 | |||||||||||
JBS USA LUX SA, New Initial Term Loans, 4.678%, (3-month USD LIBOR + 2.50%), 10/30/22 | United States | 45,525,666 | 45,542,737 | |||||||||||
e | Pinnacle Foods Finance LLC, Initial B Term Loan, 3.637%, (1-month USD LIBOR + 1.75%), 2/03/24 | United States | 7,318,041 | 7,382,074 | ||||||||||
Post Holdings Inc., Series A Incremental Term Loans, 3.90%, (1-month USD LIBOR + 2.00%), 5/24/24 | United States | 28,895,789 | 29,055,756 | |||||||||||
|
| |||||||||||||
|
101,703,843 |
| ||||||||||||
|
| |||||||||||||
Paper Packaging 0.7% | ||||||||||||||
Caraustar Industries Inc., Refinancing Term Loans, 7.802%, (3-month USD LIBOR + 5.50%), 3/14/22 | United States | 23,783,738 | 23,872,927 | |||||||||||
|
| |||||||||||||
Personal Products 0.5% | ||||||||||||||
g | FGI Operating Co. LLC, Term B Loans, 5.823%, (LIBOR + 4.25%), 4/19/19 | United States | 73,300,493 | 19,149,754 | ||||||||||
|
| |||||||||||||
Pharmaceuticals 3.4% | ||||||||||||||
Endo Luxembourg Finance Co. I S.A.R.L. and Endo LLC, Initial Term Loans, 6.188%, (1-month USD LIBOR + 4.25%), 4/29/24 | United States | 39,696,916 | 39,564,607 | |||||||||||
Grifols Worldwide Operations USA Inc., Tranche B Term Loan, 4.00%, (1-week USD LIBOR + 2.25%), 1/31/25 | United States | 30,815,739 | 31,015,733 | |||||||||||
e | Horizon Pharma Inc., Third Amendment Refinancing Term Loan, 5.188%, (1-month USD LIBOR + 3.25%), 3/29/24 | United States | 16,300,297 | 16,429,346 | ||||||||||
Innoviva Inc., Initial Term Loan, 6.373%, (3-month USD LIBOR + 4.50%), 8/18/22 | United States | 1,556,727 | 1,574,240 | |||||||||||
RPI Finance Trust, Term A-3 Loan, 4.052%, (3-month USD LIBOR + 1.75%), 10/14/21. | United States | 8,732,749 | 8,754,581 | |||||||||||
Valeant Pharmaceuticals International Inc., Series F-4 Tranche B Term Loans, 5.394%, (1-month USD LIBOR + 3.50%), 4/01/22 | United States | 23,683,248 | 23,975,263 | |||||||||||
|
| |||||||||||||
|
121,313,770 |
| ||||||||||||
|
| |||||||||||||
Restaurants 0.7% | ||||||||||||||
e | KFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of America LLC (Yum Brands), Term Loan B, 3.644%, (1-month USD LIBOR + 1.75%), 4/03/25 | United States | 16,285,346 | 16,427,842 | ||||||||||
NPC International Inc., Second Lien Initial Term Loan, 9.401%, (1-month USD LIBOR + 7.50%), 4/20/25 | United States | 8,228,426 | 8,434,137 | |||||||||||
|
| |||||||||||||
|
24,861,979 |
| ||||||||||||
|
|
franklintempleton.com |
Semiannual Report |
|
45 |
|
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Floating Rate Daily Access Fund (continued)
Country | Principal Amount* | Value | ||||||||||||
c,d | Senior Floating Rate Interests (continued) | |||||||||||||
Semiconductor Equipment 0.1% | ||||||||||||||
MKS Instruments Inc., Tranche B-4 Term Loan, 3.651%, (1-month USD LIBOR + 1.75%), 4/29/23 | United States | $ | 1,848,507 | $ | 1,862,084 | |||||||||
|
| |||||||||||||
Semiconductors 0.7% | ||||||||||||||
ON Semiconductor Corp., 2017 Replacement Term B-2 Loans, 3.901%, (1-month USD LIBOR + 2.00%), 3/31/23 | United States | 26,219,251 | 26,412,618 | |||||||||||
|
| |||||||||||||
Specialized Consumer Services 1.6% | ||||||||||||||
Avis Budget Car Rental LLC, Tranche B Term Loans, 4.31%, (3-month USD LIBOR + 2.00%), 2/13/25 | United States | 30,764,475 | 31,033,664 | |||||||||||
NVA Holdings Inc., Term B-3 Loan, 5.052%, (3-month USD LIBOR + 2.75%), 2/02/25 . | United States | 11,378,444 | 11,437,111 | |||||||||||
Sabre GLBL Inc., | ||||||||||||||
2017 Other Term A Loans, 3.901%, (1-month USD LIBOR + 2.00%), 7/01/22 | United States | 13,145,542 | 13,178,406 | |||||||||||
Term Loan B, 3.901%, (1-month USD LIBOR + 2.00%), 2/22/24 | United States | 1,877,694 | 1,886,348 | |||||||||||
|
| |||||||||||||
|
57,535,529 |
| ||||||||||||
|
| |||||||||||||
Specialty Chemicals 3.1% | ||||||||||||||
e | Ashland LLC, Term B Loan, 3.897% - 3.901%, (1-month USD LIBOR + 2.00%), 5/17/24 | United States | 17,005,025 | 17,166,572 | ||||||||||
e | Axalta Coating Systems U.S. Holdings Inc., Term B-3 Dollar Loan, 4.052%, (3-month USD LIBOR + 1.75%), 6/01/24 | United States | 32,109,656 | 32,275,663 | ||||||||||
KMG Chemicals Inc., Initial Term Loan, 4.651%, (1-month USD LIBOR + 2.75%), 6/15/24 | United States | 2,790,316 | 2,814,731 | |||||||||||
Oxbow Carbon LLC, | ||||||||||||||
Second Lien Term Loan, 9.401%, (1-month USD LIBOR + 7.50%), 1/04/24 | United States | 14,095,184 | 14,377,088 | |||||||||||
Tranche A Term Loan, 4.401%, (1-month USD LIBOR + 2.50%), 1/04/22 | United States | 13,650,000 | 13,667,062 | |||||||||||
Tranche B Term Loan, 5.651%, (1-month USD LIBOR + 3.75%), 1/04/23 | United States | 10,951,375 | 11,101,956 | |||||||||||
Solenis International LP and Solenis Holdings 3 LLC, Second Lien Term Loan, 8.734%, (3-month USD LIBOR + 6.75%), 7/31/22 | United States | 7,550,000 | 7,314,063 | |||||||||||
e | WR Grace & Co., | |||||||||||||
Term B-1 Loans, 4.058%, (3-month USD LIBOR + 1.75%), 4/03/25 | United States | 3,896,405 | 3,916,293 | |||||||||||
Term B-2 Loans, 4.058%, (3-month USD LIBOR + 1.75%), 4/03/25 | United States | 6,679,552 | 6,714,620 | |||||||||||
|
| |||||||||||||
|
109,348,048 |
| ||||||||||||
|
| |||||||||||||
Specialty Stores 4.3% | ||||||||||||||
General Nutrition Centers Inc., | ||||||||||||||
FILO Term Loan (ABL), 8.91%, (1-month USD LIBOR + 7.00%), 12/31/22 | United States | 21,881,580 | 22,647,435 | |||||||||||
e Tranche B-2 Term Loans, 10.66%, (1-month USD LIBOR + 8.75%), 3/04/21 | United States | 57,174,686 | 54,971,059 | |||||||||||
PetSmart Inc., Tranche B-2 Loans, 4.89%, (1-month USD LIBOR + 3.00%), 3/11/22 | United States | 94,386,569 | 74,172,081 | |||||||||||
|
| |||||||||||||
|
151,790,575 |
| ||||||||||||
|
| |||||||||||||
Technology Hardware, Storage & Peripherals 0.2% | ||||||||||||||
Western Digital Corp., U.S. Term B-3 Loan, 3.90%, (1-month USD LIBOR + 2.00%), 4/29/23 | United States | 5,636,395 | 5,679,169 | |||||||||||
|
| |||||||||||||
Trucking 1.6% | ||||||||||||||
Hertz Corp., Tranche B-1 Term Loan, 4.651%, (1-month USD LIBOR + 2.75%), 6/30/23 | United States | 56,960,707 | 57,147,595 | |||||||||||
|
| |||||||||||||
Total Senior Floating Rate Interests | 2,523,848,132 | |||||||||||||
|
|
46 |
Semiannual Report |
franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Floating Rate Daily Access Fund (continued)
Country | Principal Amount* | Value | ||||||||||||
Asset-Backed Securities 9.2% | ||||||||||||||
Other Diversified Financial Services 9.2% | ||||||||||||||
h,i | AMMC CLO XII Ltd., 2013-12A, CR, 144A, FRN, 3.711%, (3-month USD LIBOR + 1.90%), 11/10/30 | United States | $ | 1,493,000 | $ | 1,498,405 | ||||||||
h,i | Ares XXXVII CLO Ltd., 2015-4A, BR, 144A, FRN, 4.148%, (3-month USD LIBOR + 1.80%), 10/15/30 | United States | 4,908,000 | 4,903,681 | ||||||||||
h,i | Atrium XI, | |||||||||||||
11A, CR, 144A, FRN, 4.512%,(3-month USD LIBOR + 2.15%), 10/23/25 | United States | 574,513 | 576,104 | |||||||||||
2011A, A2R, 144A, FRN, 3.502%,(3-month USD LIBOR + 1.14%), 10/23/25 | United States | 1,149,026 | 1,150,520 | |||||||||||
h,i | Birchwood Park CLO Ltd., 2014-1A, AR, 144A, FRN, 3.528%, (3-month USD LIBOR + 1.18%), 7/15/26 | United States | 8,625,000 | 8,634,142 | ||||||||||
h,i | BlueMountain CLO Ltd., | |||||||||||||
2012-2A, AR, 144A, FRN, 3.305%,(3-month USD LIBOR + 1.42%), 11/20/28 | United States | 23,309,026 | 23,369,163 | |||||||||||
2014, CL 3A, 144A, FRN, 3.488%,(3-month USD LIBOR + 1.14%), 10/15/26 | United States | 2,940,000 | 2,942,058 | |||||||||||
h,i | Bristol Park CLO Ltd., 2016-1A, A, 144A, FRN, 3.768%, (3-month USD LIBOR + 1.42%), 4/15/29 | United States | 40,000,000 | 40,347,600 | ||||||||||
h | Carlyle Global Market Strategies CLO Ltd., | |||||||||||||
i 2014-1A, A1R2, 144A, FRN, 3.31%,(3-month USD LIBOR + 0.97%), 4/17/31 | United States | 2,880,000 | 2,880,048 | |||||||||||
i 2014-2A, AR, 144A, FRN, 3.089%,(3-month USD LIBOR + 1.25%), 5/15/25 | United States | 5,000,000 | 4,999,000 | |||||||||||
2014-4A, AR2, 144A, 2.97%, 10/15/26 | United States | 1,149,026 | 1,148,716 | |||||||||||
i 2015-2A, A1, 144A, FRN, 3.836%,(3-month USD LIBOR + 1.47%), 4/27/27 | United States | 16,535,000 | 16,614,864 | |||||||||||
h,i | Carlyle U.S. CLO Ltd., | |||||||||||||
2017-1A, A1A, 144A, FRN, 3.659%,(3-month USD LIBOR + 1.30%), 4/20/31 | United States | 24,000,000 | 24,097,200 | |||||||||||
2017-4A, B, 144A, FRN, 4.198%,(3-month USD LIBOR + 1.85%), 1/15/30 | United States | 1,493,000 | 1,492,030 | |||||||||||
h,i | Cent CLO Ltd., 2013-17A, B, 144A, FRN, 4.767%, (3-month USD LIBOR + 3.00%), 1/30/25 | United States | 3,850,000 | 3,864,361 | ||||||||||
h,i | Cent CLO 21 Ltd., 2014-21A, A1AR, 144A, FRN, 3.576%, (3-month USD LIBOR + 1.21%), 7/27/26 | United States | 1,020,000 | 1,021,081 | ||||||||||
h,i | Cent CLO LP, | |||||||||||||
2014-22A, A1R, 144A, FRN, 3.203%,(3-month USD LIBOR + 1.41%), 11/07/26 | United States | 5,000,000 | 5,003,050 | |||||||||||
2014-22A, BR, 144A, FRN, 4.743%,(3-month USD LIBOR + 2.95%), 11/07/26 | United States | 9,123,539 | 9,146,348 | |||||||||||
h,i | Eaton Vance CDO Ltd., 2014-1A, AR, 144A, FRN, 3.548%, (3-month USD LIBOR + 1.20%), 7/15/26 | United States | 6,510,000 | 6,499,844 | ||||||||||
h | Emerson Park CLO Ltd., 2013-1A, C2R, 144A, 4.055%, 7/15/25 | United States | 3,600,000 | 3,604,500 | ||||||||||
h,i | Gilbert Park CLO Ltd., 2017-1A, C, 144A, FRN, 4.298%, (3-month USD LIBOR + 1.95%), 10/15/30 | United States | 350,000 | 350,067 | ||||||||||
h,i | LCM XXIV Ltd., 24A, A, 144A, FRN, 3.669%, (3-month USD LIBOR + 1.31%), 3/20/30 | United States | 52,000,000 | 52,835,120 | ||||||||||
h,i | LCM XXV Ltd., 25A, A, 144A, FRN, 3.569%, (3-month USD LIBOR + 1.21%), 7/22/30 | United States | 2,580,000 | 2,595,351 | ||||||||||
h,i | Madison Park Funding Ltd., 2016-21A, A1, 144A, FRN, 3.89%, (3-month USD LIBOR + 1.53%), 7/25/29 | United States | 17,200,000 | 17,492,228 | ||||||||||
h,i | Magnetite XIV Ltd., 2015-14A, A, 144A, FRN, 3.745%, (3-month USD LIBOR + 1.39%), 7/18/28 | United States | 3,140,000 | 3,145,683 | ||||||||||
h,i | Magnetite XVIII Ltd., 2016-18A, C, 144A, FRN, 4.189%, (3-month USD LIBOR + 2.35%), 11/15/28 | United States | 5,133,000 | 5,154,867 | ||||||||||
h,i | Neuberger Berman CLO Ltd., 2017-26A, C, 144A, FRN, 4.105%, (3-month USD LIBOR + 1.75%), 10/18/30 | United States | 746,000 | 742,113 | ||||||||||
h,i | Octagon Investment Partners 30 Ltd., 144A, FRN, 3.679%, (3-month USD LIBOR + 1.32%), 3/17/30 | United States | 23,071,429 | 23,221,855 | ||||||||||
h,i | Octagon Investment Partners 31 LLC, 2017-1A, C, 144A, FRN, 4.759%, (3-month USD LIBOR + 2.40%), 7/20/30 | United States | 4,208,540 | 4,232,024 | ||||||||||
h,i | Octagon Investment Partners XX Ltd., 2014-1A, AR, 144A, FRN, 2.941%, (3-month USD LIBOR + 1.13%), 8/12/26 | United States | 1,063,164 | 1,064,333 | ||||||||||
h,i | TCI-Cent CLO Income Note Issuer Ltd., 2017-1A, B, 144A, FRN, 4.71%, (3-month USD LIBOR + 2.35%), 7/25/30 | United States | 9,671,118 | 9,746,359 |
franklintempleton.com |
Semiannual Report |
|
47 |
|
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Floating Rate Daily Access Fund (continued)
Country | Principal Amount* | Value | ||||||||||||
Asset-Backed Securities (continued) | ||||||||||||||
Other Diversified Financial Services (continued) | ||||||||||||||
h,i | Venture XXIV CLO Ltd., 2016-24A, A1D, 144A, FRN, 3.779%, (3-month USD LIBOR + 1.42%), 10/20/28 | United States | $ | 34,000,000 | $ | 34,086,700 | ||||||||
h,i | Voya CLO Ltd., 2017-3A, B, 144A, FRN, 4.709%, (3-month USD LIBOR + 2.35%), 7/20/30 | United States | 8,362,537 | 8,439,723 | ||||||||||
|
| |||||||||||||
Total Asset-Backed Securities (Cost $324,946,077) | 326,899,138 | |||||||||||||
|
| |||||||||||||
Total Investments before Short Term Investments | 3,007,477,032 | |||||||||||||
|
| |||||||||||||
Short Term Investments 18.2% | ||||||||||||||
Senior Floating Rate Interests 2.5% | ||||||||||||||
Broadcasting 0.0%† | ||||||||||||||
Marshall Broadcasting Group Inc., Term Loan A-2, 3.887%, (1-month USD LIBOR + 2.00%), 6/28/18 | United States | 226,849 | 227,275 | |||||||||||
|
| |||||||||||||
Forest Products 1.3% | ||||||||||||||
j | Appvion Inc., New Money Term Loan (DIP II), 11.145% - 11.151%, (1-month USD LIBOR + 9.25%), 7/01/18 | United States | 47,153,301 | 47,251,521 | ||||||||||
|
| |||||||||||||
Personal Products 1.2% | ||||||||||||||
FGI Operating Co. LLC (Freedom Group), DIP Term Loan B, 8.646% - 8.651%, (1-month USD LIBOR + 6.75%), 6/26/18 | United States | 40,931,140 | 40,931,140 | |||||||||||
|
| |||||||||||||
Total Senior Floating Rate Interests | 88,409,936 | |||||||||||||
|
| |||||||||||||
U.S. Government and Agency Securities (Cost $69,154,155) 2.0% | ||||||||||||||
k | U.S. Treasury Bill, 3/28/19 | United States | 70,500,000 | 69,112,024 | ||||||||||
|
| |||||||||||||
Shares | ||||||||||||||
Money Market Funds (Cost $487,984,189) 13.7% | ||||||||||||||
a,l | Institutional Fiduciary Trust Money Market Portfolio, 1.30% | United States | 487,984,189 | 487,984,189 | ||||||||||
|
| |||||||||||||
Total Investments (Cost $3,712,203,777) 102.8% | 3,652,983,181 | |||||||||||||
Other Assets, less Liabilities (2.8)% | (100,995,141 | ) | ||||||||||||
|
| |||||||||||||
Net Assets 100.0% | $ | 3,551,988,040 | ||||||||||||
|
|
48 |
Semiannual Report |
franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Floating Rate Daily Access Fund (continued)
†Rounds to less than 0.1% of net assets.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
aSee Note 3(f) regarding investments in affiliated management investment companies.
bIncome may be received in additional securities and/or cash.
cThe coupon rate shown represents the rate at period end.
dSee Note 1(h) regarding senior floating rate interests.
eA portion or all of the security purchased on a delayed delivery basis. See Note 1(c).
fA portion or all of the security represents an unsettled loan commitment. The coupon rate is to-be determined (TBD) at the time of settlement and will be based upon a reference index/floor plus a spread.
gSee Note 7 regarding defaulted securities.
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 April 30, 2018, the aggregate value of these securities was $326,899,138, representing 9.2% of net assets.
iThe coupon rate shown represents the rate inclusive of any caps or floors, if applicable, in effect at period end.
jSee Note 9 regarding unfunded loan commitments.
kThe security was issued on a discount basis with no stated coupon rate.
lThe rate shown is the annualized seven-day effective yield at period end.
At April 30, 2018, the Fund had the following credit default swap contracts outstanding. See Note 1(d).
Credit Default Swap Contracts
Description | | Periodic Payment Rate Received (Paid) | | | Payment Frequency | | | Maturity Date | | | Notional Amount | | Value | | Unamortized Upfront Payments (Receipts) | | | Unrealized Appreciation (Depreciation) | | Rating | ||||||||||||
Centrally Cleared Swap Contracts | ||||||||||||||||||||||||||||||||
Contracts to Buy Protectiona | ||||||||||||||||||||||||||||||||
Traded Index | ||||||||||||||||||||||||||||||||
CDX.NA.HY.26 | (5.00)% | Quarterly | 6/20/21 | $50,176,000 | $(3,856,104 | ) | $(2,966,887 | ) | $(889,217 | ) | ||||||||||||||||||||||
|
|
aPerformance triggers for settlement of contract include failure to pay or bankruptcy of the underlying securities for traded index swaps.
See Note 10 regarding other derivative information
See Abbreviations on page 149.
franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 49 |
FRANKLIN INVESTORS SECURITIES TRUST
Financial Highlights
Franklin Low Duration Total Return Fund
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
| ||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $9.84 | $9.89 | $9.91 | $10.11 | $10.16 | $10.29 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment income | 0.104 | 0.170 | 0.151 | 0.134 | 0.144 | 0.166 | ||||||||||||||||||
Net realized and unrealized gains (losses) | (0.137) | (0.023) | 0.031 | (0.135) | (0.011) | (0.032) | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | (0.033) | 0.147 | 0.182 | (0.001) | 0.133 | 0.134 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from net investment income and net foreign currency gains | (0.147) | (0.197) | (0.202) | (0.199) | (0.183) | (0.264) | ||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $9.66 | $9.84 | $9.89 | $9.91 | $10.11 | $10.16 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total returnb | (0.34)% | 1.50% | 1.88% | (0.02)% | 1.32% | 1.32% | ||||||||||||||||||
Ratios to average net assetsc | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.94% | 0.96% | 0.95% | 0.96% | 0.93% | 0.98% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatesd | 0.75% | 0.80% | 0.80% | 0.80% | 0.80% | 0.80% | ||||||||||||||||||
Net investment income | 2.19% | 1.73% | 1.57% | 1.27% | 1.24% | 1.25% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $1,446,265 | $1,519,902 | $1,524,437 | $1,656,001 | $1,589,854 | $1,296,612 | ||||||||||||||||||
Portfolio turnover rate | 38.64% | 50.40% | 44.76% | 41.28% | 78.63% | 64.86% | ||||||||||||||||||
Portfolio turnover rate excluding mortgage dollar rollse | 26.33% | 45.29% | 44.76% | 41.28% | 78.63% | 64.86% |
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.
bTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
cRatios are annualized for periods less than one year.
dBenefit of expense reduction rounds to less than 0.01%.
eSee Note 1(g) regarding mortgage dollar rolls.
50 |
Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Low Duration Total Return Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||
| ||||||||||||||||||||||
Class C | ||||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||||
Net asset value, beginning of period | $ 9.80 | $ 9.86 | $ 9.90 | $ 10.11 | $ 10.16 | $ 10.29 | ||||||||||||||||
|
| |||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||
Net investment income | 0.078 | 0.121 | 0.113 | 0.104 | 0.098 | 0.189 | ||||||||||||||||
Net realized and unrealized gains (losses) | (0.131 | ) | (0.015 | ) | 0.024 | (0.145 | ) | (0.001 | ) | (0.090) | ||||||||||||
|
| |||||||||||||||||||||
Total from investment operations | (0.053 | ) | 0.106 | 0.137 | (0.041 | ) | 0.097 | 0.099 | ||||||||||||||
|
| |||||||||||||||||||||
Less distributions from net investment income and net foreign currency gains | (0.127 | ) | (0.166 | ) | (0.177 | ) | (0.169 | ) | (0.147 | ) | (0.229) | |||||||||||
|
| |||||||||||||||||||||
Net asset value, end of period | $ 9.62 | $ 9.80 | $ 9.86 | $ 9.90 | $ 10.11 | $ 10.16 | ||||||||||||||||
|
| |||||||||||||||||||||
Total returnb | (0.54)% | 1.08% | 1.41% | (0.41)% | 0.96% | 0.97% | ||||||||||||||||
Ratios to average net assetsc | ||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 1.34% | 1.36% | 1.35% | 1.36% | 1.33% | 1.38% | ||||||||||||||||
Expenses net of waiver and payments by affiliatesd | 1.15% | 1.20% | 1.20% | 1.20% | 1.20% | 1.20% | ||||||||||||||||
Net investment income | 1.79% | 1.33% | 1.17% | 0.87% | 0.84% | 0.84% | ||||||||||||||||
Supplemental data | ||||||||||||||||||||||
Net assets, end of period (000’s) | $155,564 | $174,754 | $218,066 | $211,354 | $165,952 | $114,200 | ||||||||||||||||
Portfolio turnover rate | 38.64% | 50.40% | 44.76% | 41.28% | 78.63% | 64.86% | ||||||||||||||||
Portfolio turnover rate excluding mortgage dollar rollse | 26.33% | 45.29% | 44.76% | 41.28% | 78.63% | 64.86% |
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.
bTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
cRatios are annualized for periods less than one year.
dBenefit of expense reduction rounds to less than 0.01%.
eSee Note 1(g) regarding mortgage dollar rolls.
franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 51 |
FRANKLIN INVESTORS SECURITIES TRUST
Franklin Low Duration Total Return Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013a | |||||||||||||||||
| ||||||||||||||||||||||
Class R6 | ||||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||||
Net asset value, beginning of period | $ 9.90 | $ 9.94 | $ 9.95 | $ 10.14 | $ 10.19 | $ 10.27 | ||||||||||||||||
|
| |||||||||||||||||||||
Income from investment operationsb: | ||||||||||||||||||||||
Net investment income | 0.119 | 0.214 | 0.195 | 0.165 | 0.164 | c | 0.089 | |||||||||||||||
Net realized and unrealized gains (losses) | (0.131 | ) | (0.025 | ) | 0.021 | (0.130 | ) | 0.003 | (0.046) | |||||||||||||
|
| |||||||||||||||||||||
Total from investment operations | (0.012 | ) | 0.189 | 0.216 | 0.035 | 0.167 | 0.043 | |||||||||||||||
|
| |||||||||||||||||||||
Less distributions from net investment income and net foreign currency gains | (0.168 | ) | (0.229 | ) | (0.226 | ) | (0.228 | ) | (0.217 | ) | (0.123) | |||||||||||
|
| |||||||||||||||||||||
Net asset value, end of period | $ 9.72 | $ 9.90 | $ 9.94 | $ 9.95 | $ 10.14 | $ 10.19 | ||||||||||||||||
|
| |||||||||||||||||||||
Total returnd | (0.12)% | 1.92% | 2.22% | 0.37% | 1.66% | 0.43% | ||||||||||||||||
Ratios to average net assetse | ||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.54% | 0.53% | 0.53% | 0.54% | 0.55% | 0.62% | ||||||||||||||||
Expenses net of waiver and payments by affiliatesf | 0.33% | 0.39% | 0.42% | 0.42% | 0.42% | 0.43% | ||||||||||||||||
Net investment income | 2.61% | 2.14% | 1.95% | 1.65% | 1.62% | 1.61% | ||||||||||||||||
Supplemental data | ||||||||||||||||||||||
Net assets, end of period (000’s) | $869,182 | $591,622 | $553,233 | $508,675 | $418,539 | $943 | ||||||||||||||||
Portfolio turnover rate | 38.64% | 50.40% | 44.76% | 41.28% | 78.63% | 64.86% | ||||||||||||||||
Portfolio turnover rate excluding mortgage dollar rollsg | 26.33% | 45.29% | 44.76% | 41.28% | 78.63% | 64.86% |
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.
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(g) regarding mortgage dollar rolls.
52 |
Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Franklin Low Duration Total Return Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||
| ||||||||||||||||||||
Advisor Class | ||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||
Net asset value, beginning of period | $ 9.89 | $ 9.94 | $ 9.95 | $ 10.14 | $ 10.19 | $ 10.31 | ||||||||||||||
| ||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||
Net investment income | 0.118 | 0.209 | 0.184 | 0.134 | 0.166 | 0.231 | ||||||||||||||
Net realized and unrealized gains (losses) | (0.138) | (0.042 | ) | 0.025 | (0.106 | ) | (0.010 | ) | (0.064) | |||||||||||
| ||||||||||||||||||||
Total from investment operations | (0.020) | 0.167 | 0.209 | 0.028 | 0.156 | 0.167 | ||||||||||||||
| ||||||||||||||||||||
Less distributions from net investment income and net foreign currency gains | (0.160) | (0.217 | ) | (0.219 | ) | (0.218 | ) | (0.206 | ) | (0.287) | ||||||||||
| ||||||||||||||||||||
Net asset value, end of period | $ 9.71 | $ 9.89 | $ 9.94 | $ 9.95 | $ 10.14 | $ 10.19 | ||||||||||||||
| ||||||||||||||||||||
Total returnb | (0.21)% | 1.70% | 2.14% | 0.27% | 1.54% | 1.64% | ||||||||||||||
Ratios to average net assetsc | ||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.69% | 0.71% | 0.70% | 0.71% | 0.68% | 0.73% | ||||||||||||||
Expenses net of waiver and payments by affiliatesd | 0.50% | 0.55% | 0.55% | 0.55% | 0.55% | 0.55% | ||||||||||||||
Net investment income | 2.44% | 1.98% | 1.82% | 1.52% | 1.49% | 1.50% | ||||||||||||||
Supplemental data | ||||||||||||||||||||
Net assets, end of period (000’s) | $195,097 | $428,838 | $224,887 | $150,464 | $198,694 | $156,129 | ||||||||||||||
Portfolio turnover rate | 38.64% | 50.40% | 44.76% | 41.28% | 78.63% | 64.86% | ||||||||||||||
Portfolio turnover rate excluding mortgage dollar rollse | 26.33% | 45.29% | 44.76% | 41.28% | 78.63% | 64.86% |
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.
bTotal return is not annualized for periods less than one year.
cRatios are annualized for periods less than one year.
dBenefit of expense reduction rounds to less than 0.01%.
eSee Note 1(g) regarding mortgage dollar rolls.
franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 53 |
FRANKLIN INVESTORS SECURITIES TRUST
Statement of Investments, April 30, 2018 (unaudited)
Franklin Low Duration Total Return Fund
Country | | Shares/ Warrants | | Value | ||||||||||
Common Stocks and Other Equity Interests 0.0%† | ||||||||||||||
Energy 0.0%† | ||||||||||||||
a | Halcon Resources Corp. | United States | 98,168 | $ | 527,162 | |||||||||
a | Halcon Resources Corp., wts., 9/09/20 | United States | 8,753 | 5,471 | ||||||||||
a | Linn Energy Inc. | United States | 3,385 | 132,692 | ||||||||||
|
| |||||||||||||
|
665,325 |
| ||||||||||||
|
| |||||||||||||
Materials 0.0%† | ||||||||||||||
a | Verso Corp., A | United States | 1,387 | 25,049 | ||||||||||
a | Verso Corp., wts., 7/25/23 | United States | 146 | 226 | ||||||||||
|
| |||||||||||||
�� |
|
25,275 |
| |||||||||||
|
| |||||||||||||
Retailing 0.0%† | ||||||||||||||
a,b,c | K2016470219 South Africa Ltd., A | South Africa | 12,326,925 | 9,892 | ||||||||||
a,b,c | K2016470219 South Africa Ltd., B | South Africa | 1,226,701 | 984 | ||||||||||
|
| |||||||||||||
|
10,876 |
| ||||||||||||
|
| |||||||||||||
Total Common Stocks and Other Equity Interests | 701,476 | |||||||||||||
|
| |||||||||||||
Management Investment Companies 2.4% | ||||||||||||||
Diversified Financials 2.4% | ||||||||||||||
d | Franklin Lower Tier Floating Rate Fund | United States | 1,893,663 | 18,709,393 | ||||||||||
d | Franklin Middle Tier Floating Rate Fund | United States | 2,389,308 | 22,602,850 | ||||||||||
PowerShares Senior Loan Portfolio ETF | United States | 950,000 | 21,954,500 | |||||||||||
|
| |||||||||||||
Total Management Investment Companies | 63,266,743 | |||||||||||||
|
| |||||||||||||
Principal | ||||||||||||||
Amount* | ||||||||||||||
|
| |||||||||||||
Corporate Bonds 37.2% | ||||||||||||||
Automobiles & Components 0.4% | ||||||||||||||
Aptiv PLC, senior note, 3.15%, 11/19/20 | United States | 10,500,000 | 10,447,756 | |||||||||||
|
| |||||||||||||
Banks 9.0% | ||||||||||||||
e | ANZ New Zealand International Ltd. of London, senior note, 144A, 2.85%, 8/06/20 | New Zealand | 7,500,000 | 7,428,112 | ||||||||||
f | Banca Monte dei Paschi di Siena SpA, secured note, Reg S, 2.875%, 4/16/59 | Italy | 6,300,000 | EUR | 8,205,998 | |||||||||
f | Banco Popular Espanol SA, secured note, Reg S, 1.00%, 3/03/22 | Spain | 2,800,000 | EUR | 3,486,331 | |||||||||
Bank of America Corp., | ||||||||||||||
senior note, 2.65%, 4/01/19 | United States | 9,300,000 | 9,303,325 | |||||||||||
senior note, 2.151%, 11/09/20 | United States | 6,600,000 | 6,445,511 | |||||||||||
senior note, 3.55% to 3/05/23, FRN thereafter, 3/05/24 | United States | 8,950,000 | 8,887,139 | |||||||||||
g | senior note, FRN, 3.388%, (3-month USD LIBOR + 1.04%), 1/15/19 | United States | 16,671,000 | 16,788,463 | ||||||||||
Barclays PLC, senior note, 3.25%, 1/12/21 | United Kingdom | 7,000,000 | 6,944,910 | |||||||||||
BB&T Corp., | ||||||||||||||
senior note, 2.05%, 6/19/18 | United States | 1,000,000 | 999,675 | |||||||||||
g | senior note, FRN, 2.433%, (3-month USD LIBOR + 0.66%), 2/01/19 | United States | 2,000,000 | 2,007,645 | ||||||||||
Citigroup Inc., | ||||||||||||||
senior note, 2.40%, 2/18/20 | United States | 11,300,000 | 11,181,988 | |||||||||||
senior note, 2.65%, 10/26/20 | United States | 5,000,000 | 4,933,762 | |||||||||||
g | senior note, FRN, 2.965%, (3-month USD LIBOR + 0.93%), 6/07/19 | United States | 5,000,000 | 5,035,877 | ||||||||||
HSBC Holdings PLC, senior note, 3.40%, 3/08/21 | United Kingdom | 3,300,000 | 3,308,085 |
54 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
Principal | ||||||||||||||||
Country | Amount* | Value | ||||||||||||||
| ||||||||||||||||
Corporate Bonds (continued) | ||||||||||||||||
Banks (continued) | ||||||||||||||||
HSBC USA Inc., senior note, 2.00%, 8/07/18 | United States | 7,500,000 | $ | 7,494,616 | ||||||||||||
Industrial & Commercial Bank of China Ltd., | ||||||||||||||||
senior note, 3.231%, 11/13/19 | China | 5,400,000 | 5,389,605 | |||||||||||||
senior note, 2.957%, 11/08/22 | China | 9,400,000 | 9,086,745 | |||||||||||||
e,g | ING Bank NV, senior note, 144A, FRN, 2.998%, (3-month USD LIBOR + 0.69%), 10/01/19 | Netherlands | 5,000,000 | 5,028,650 | ||||||||||||
Intesa Sanpaolo SpA, senior note, 3.875%, 1/15/19 | Italy | 10,100,000 | 10,160,600 | |||||||||||||
JPMorgan Chase & Co., | ||||||||||||||||
senior note, 1.85%, 3/22/19 | United States | 8,000,000 | 7,945,930 | |||||||||||||
senior note, 2.20%, 10/22/19 | United States | 21,400,000 | 21,211,355 | |||||||||||||
senior note, 2.40%, 6/07/21 | United States | 2,600,000 | 2,533,232 | |||||||||||||
e | Norddeutsche Landesbank Girozentrale, secured note, 144A, 2.00%, 2/05/19 | Germany | 6,500,000 | 6,470,620 | ||||||||||||
PHH Corp., senior note, 7.375%, 9/01/19. | United States | 1,800,000 | 1,867,500 | |||||||||||||
Regions Financial Corp., senior note, 2.00%, 5/15/18 | United States | 4,500,000 | 4,498,804 | |||||||||||||
Royal Bank of Canada, secured note, 2.10%, 10/14/20 | Canada | 6,300,000 | 6,164,006 | |||||||||||||
e | Standard Chartered PLC, senior note, 144A, 3.885% to 3/15/23, FRN thereafter, 3/15/24 | United Kingdom | 7,800,000 | 7,705,581 | ||||||||||||
e | The Toronto-Dominion Bank, secured note, 144A, 2.25%, 3/15/21 | Canada | 12,700,000 | 12,400,200 | ||||||||||||
Wells Fargo & Co., | ||||||||||||||||
senior note, 2.50%, 3/04/21 | United States | 2,600,000 | 2,547,625 | |||||||||||||
g senior note, FRN, 3.242%, (3-month USD LIBOR + 0.88%), 7/22/20 | United States | 13,700,000 | 13,866,180 | |||||||||||||
e | Westpac Banking Corp., | |||||||||||||||
secured note, 144A, 2.10%, 2/25/21 | Australia | 9,700,000 | 9,435,287 | |||||||||||||
senior secured note, 144A, 2.25%, 11/09/20 | Australia | 6,300,000 | 6,181,371 | |||||||||||||
e | Woori Bank, sub. note, 144A, 4.75%, 4/30/24 | South Korea | 5,300,000 | 5,368,953 | ||||||||||||
|
| |||||||||||||||
|
240,313,681 |
| ||||||||||||||
|
| |||||||||||||||
Capital Goods 0.8% | ||||||||||||||||
CNH Industrial Capital LLC, senior note, 3.875%, 10/15/21 | United States | 5,100,000 | 5,125,908 | |||||||||||||
John Deere Capital Corp., senior note, 1.95%, 3/04/19 | United States | 3,750,000 | 3,730,433 | |||||||||||||
Lockheed Martin Corp., senior note, 1.85%, 11/23/18 | United States | 4,200,000 | 4,185,327 | |||||||||||||
United Technologies Corp., senior note, 4.50%, 4/15/20 | United States | 7,500,000 | 7,721,385 | |||||||||||||
|
| |||||||||||||||
|
20,763,053 |
| ||||||||||||||
|
| |||||||||||||||
Commercial & Professional Services 0.0%† | ||||||||||||||||
Republic Services Inc., senior note, 3.80%, 5/15/18 | United States | 1,035,000 | 1,035,527 | |||||||||||||
|
| |||||||||||||||
Consumer Durables & Apparel 0.3% | ||||||||||||||||
Beazer Homes USA Inc., senior note, 5.75%, 6/15/19 | United States | 3,651,000 | 3,752,315 | |||||||||||||
KB Home, senior note, 4.75%, 5/15/19 | United States | 4,500,000 | 4,545,000 | |||||||||||||
|
| |||||||||||||||
|
8,297,315 |
| ||||||||||||||
|
| |||||||||||||||
Consumer Services 0.4% | ||||||||||||||||
Marriott International Inc., senior note, 2.875%, 3/01/21 | United States | 10,000,000 | 9,905,892 | |||||||||||||
|
| |||||||||||||||
Diversified Financials 5.4% | ||||||||||||||||
g | Bank of New York Mellon Corp., senior note, FRN, 2.755%, (3-month USD LIBOR + 0.87%), 8/17/20 | United States | 6,400,000 | 6,501,668 | ||||||||||||
Capital One Bank USA NA, senior note, 2.30%, 6/05/19 | United States | 11,900,000 | 11,811,775 | |||||||||||||
Capital One Financial Corp., | ||||||||||||||||
senior note, 2.50%, 5/12/20 | United States | 3,900,000 | 3,844,833 | |||||||||||||
senior note, 3.05%, 3/09/22 | United States | 13,600,000 | 13,310,272 |
franklintempleton.com | Semiannual Report | 55 |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||
Corporate Bonds (continued) | ||||||||||||||
Diversified Financials (continued) | ||||||||||||||
g | Deutsche Bank AG, senior note, FRN, 3.195%, (3-month USD LIBOR + 1.31%), 8/20/20 | Germany | 7,500,000 | $ | 7,566,413 | |||||||||
e | Dexia Credit Local SA, senior note, 144A, 2.375%, 9/20/22 | France | 4,550,000 | 4,402,853 | ||||||||||
GE Capital International Funding Co., senior note, 2.342%, 11/15/20 | United States | 2,000,000 | 1,955,679 | |||||||||||
The Goldman Sachs Group Inc., | ||||||||||||||
senior note, 2.625%, 4/25/21 | United States | 5,200,000 | 5,092,865 | |||||||||||
senior note, 2.35%, 11/15/21 | United States | 4,000,000 | 3,862,680 | |||||||||||
g senior note, FRN, 3.325%, (3-month USD LIBOR + 1.20%), 9/15/20 | United States | 23,000,000 | 23,433,187 | |||||||||||
e | Lincoln Finance Ltd., senior secured note, 144A, 7.375%, 4/15/21 | Netherlands | 3,400,000 | 3,527,500 | ||||||||||
Morgan Stanley, | ||||||||||||||
senior note, 2.65%, 1/27/20 | United States | 4,000,000 | 3,977,203 | |||||||||||
senior note, 2.80%, 6/16/20 | United States | 6,600,000 | 6,556,945 | |||||||||||
g senior note, FRN, 3.506%, (3-month USD LIBOR + 1.14%), 1/27/20 | United States | 22,400,000 | 22,714,955 | |||||||||||
Navient Corp., | ||||||||||||||
senior bond, 8.00%, 3/25/20 | United States | 1,150,000 | 1,227,625 | |||||||||||
senior note, 5.50%, 1/15/19 | United States | 5,750,000 | 5,844,875 | |||||||||||
senior note, 5.00%, 10/26/20 | United States | 2,000,000 | 2,015,000 | |||||||||||
e | Pricoa Global Funding I, secured note, 144A, 2.55%, 11/24/20 | United States | 5,600,000 | 5,523,529 | ||||||||||
e | Protective Life Global Funding, | |||||||||||||
secured note, 144A, 2.262%, 4/08/20 | United States | 7,000,000 | 6,891,818 | |||||||||||
senior secured note, 144A, 1.722%, 4/15/19 | United States | 4,300,000 | 4,262,267 | |||||||||||
e,g | Seven and Seven Ltd., senior note, 144A, FRN, 3.259%, (6-month USD LIBOR + 1.00%), 9/11/19 | South Korea | 600,000 | 594,927 | ||||||||||
|
| |||||||||||||
144,918,869 | ||||||||||||||
|
| |||||||||||||
�� | Energy 2.4% | |||||||||||||
Anadarko Petroleum Corp., senior note, 4.85%, 3/15/21 | United States | 6,100,000 | 6,321,846 | |||||||||||
e | California Resources Corp., secured note, second lien, 144A, 8.00%, 12/15/22 | United States | 1,656,000 | 1,428,300 | ||||||||||
Devon Energy Corp., senior bond, 3.25%, 5/15/22 | United States | 5,300,000 | 5,229,447 | |||||||||||
Enable Midstream Partners LP, senior note, 2.40%, 5/15/19 | United States | 3,700,000 | 3,657,543 | |||||||||||
Energy Transfer Equity LP, senior secured note, first lien, 4.25%, 3/15/23 | United States | 3,600,000 | 3,483,000 | |||||||||||
Enterprise Products Operating LLC, senior note, 2.55%, 10/15/19 | United States | 7,500,000 | 7,453,384 | |||||||||||
Kinder Morgan Inc., senior note, 3.05%, 12/01/19 | United States | 4,500,000 | 4,487,136 | |||||||||||
e | Petrofac Ltd., senior note, 144A, 3.40%, 10/10/18 | United Kingdom | 1,300,000 | 1,290,250 | ||||||||||
Sabine Pass Liquefaction LLC, senior secured note, first lien, 5.625%, 2/01/21 | United States | 5,000,000 | 5,250,504 | |||||||||||
Sanchez Energy Corp., senior note, 7.75%, 6/15/21 | United States | 1,900,000 | 1,771,750 | |||||||||||
e | Sinopec Group Overseas Development 2015 Ltd., senior note, 144A, 2.50%, 4/28/20 | China | 7,400,000 | 7,279,972 | ||||||||||
e | Sinopec Group Overseas Development 2017 Ltd., senior note, 144A, 2.375%, 4/12/20 | China | 5,100,000 | 5,007,609 | ||||||||||
g | Statoil ASA, senior note, FRN, 2.251%, (3-month USD LIBOR + 0.46%), 11/08/18 | Norway | 6,900,000 | 6,912,006 | ||||||||||
e | Sunoco LP/Sunoco Finance Corp., senior note, 144A, 4.875%, 1/15/23 | United States | 2,500,000 | 2,467,425 | ||||||||||
Williams Partners LP, senior note, 4.125%, 11/15/20 | United States | 1,700,000 | 1,722,566 | |||||||||||
|
| |||||||||||||
63,762,738 | ||||||||||||||
|
| |||||||||||||
Food & Staples Retailing 0.3% | ||||||||||||||
The Kroger Co., senior note, 2.60%, 2/01/21 | United States | 7,500,000 | 7,353,885 | |||||||||||
|
|
56 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||
Corporate Bonds (continued) | ||||||||||||||||
Food, Beverage & Tobacco 1.8% | �� | |||||||||||||||
Anheuser-Busch InBev Finance Inc., senior note, 2.65%, 2/01/21 | Belgium | 8,500,000 | $ | 8,403,185 | ||||||||||||
Coca-Cola Femsa SAB de CV, senior note, 2.375%, 11/26/18 | Mexico | 2,500,000 | 2,496,651 | |||||||||||||
e Imperial Brands Finance PLC, senior note, 144A, 2.95%, 7/21/20 | United Kingdom | 6,000,000 | 5,950,668 | |||||||||||||
Kraft Heinz Foods Co., | ||||||||||||||||
senior bond, 3.50%, 6/06/22 | United States | 10,000,000 | 9,956,884 | |||||||||||||
senior note, 2.00%, 7/02/18 | United States | 6,400,000 | 6,394,472 | |||||||||||||
senior note, 3.50%, 7/15/22 | United States | 5,700,000 | 5,658,304 | |||||||||||||
g Mondelez International Inc., senior note, FRN, 2.293%, (3-month USD LIBOR + 0.52%), 2/01/19 | United States | 500,000 | 501,137 | |||||||||||||
Reynolds American Inc., senior note, 2.30%, 6/12/18 | United Kingdom | 8,800,000 | 8,798,441 | |||||||||||||
|
| |||||||||||||||
48,159,742 | ||||||||||||||||
|
| |||||||||||||||
Health Care Equipment & Services 1.7% | ||||||||||||||||
Anthem Inc., senior note, 2.50%, 11/21/20 | United States | 7,800,000 | 7,673,481 | |||||||||||||
CHS/Community Health Systems Inc., senior note, 7.125%, 7/15/20 | United States | 3,500,000 | 2,800,000 | |||||||||||||
CVS Health Corp., | ||||||||||||||||
senior note, 2.80%, 7/20/20 | United States | 2,800,000 | 2,784,220 | |||||||||||||
senior note, 3.70%, 3/09/23 | United States | 7,000,000 | 6,980,779 | |||||||||||||
Edwards Lifesciences Corp., senior note, 2.875%, 10/15/18 | United States | 1,600,000 | 1,602,328 | |||||||||||||
HCA Inc., senior secured note, first lien, 4.25%, 10/15/19 | United States | 3,500,000 | 3,535,000 | |||||||||||||
Stryker Corp., senior note, 2.00%, 3/08/19 | United States | 10,100,000 | 10,048,126 | |||||||||||||
Tenet Healthcare Corp., senior note, 5.50%, 3/01/19 | United States | 1,825,000 | 1,859,219 | |||||||||||||
Zimmer Holdings Inc., senior note, 2.70%, 4/01/20 | United States | 7,500,000 | 7,431,794 | |||||||||||||
|
| |||||||||||||||
44,714,947 | ||||||||||||||||
|
| |||||||||||||||
Household & Personal Products 0.1% | ||||||||||||||||
The Procter & Gamble Co., senior note, 1.70%, 11/03/21 | United States | 3,200,000 | 3,069,117 | |||||||||||||
|
| |||||||||||||||
Insurance 1.5% | ||||||||||||||||
e Jackson National Life Global Funding, secured note, 144A, 2.25%, 4/29/21 | United States | 7,600,000 | 7,397,889 | |||||||||||||
e Metropolitan Life Global Funding I, senior secured bond, 144A, 3.875%, 4/11/22 | United States | 5,900,000 | 5,991,594 | |||||||||||||
e New York Life Global Funding, | ||||||||||||||||
secured note, 144A, 2.10%, 1/02/19 | United States | 10,000,000 | 9,970,012 | |||||||||||||
secured note, 144A, 2.15%, 6/18/19 | United States | 6,400,000 | 6,358,588 | |||||||||||||
e Nuveen Finance LLC, senior note, 144A, 2.95%, 11/01/19 | United States | 4,200,000 | 4,186,689 | |||||||||||||
g Prudential Financial Inc., senior note, FRN, 2.619%, (3-month USD LIBOR + 0.78%), 8/15/18 | United States | 5,700,000 | 5,710,286 | |||||||||||||
|
| |||||||||||||||
39,615,058 | ||||||||||||||||
|
| |||||||||||||||
Materials 0.8% | ||||||||||||||||
e BlueScope Steel Ltd./BlueScope Steel Finance, senior note, 144A, 6.50%, 5/15/21 | Australia | 4,500,000 | 4,657,500 | |||||||||||||
e FMG Resources (August 2006) Pty. Ltd., senior note, 144A, 4.75%, 5/15/22 | Australia | 5,000,000 | 4,968,675 | |||||||||||||
e Glencore Funding LLC, senior note, 144A, 3.00%, 10/27/22 | Switzerland | 2,200,000 | 2,105,836 | |||||||||||||
LyondellBasell Industries NV, senior note, 6.00%, 11/15/21 | United States | 4,900,000 | 5,270,551 | |||||||||||||
e OCI NV, senior note, 144A, 6.625%, 4/15/23 | Netherlands | 700,000 | 717,500 | |||||||||||||
e Owens-Brockway Glass Container Inc., senior note, 144A, 5.00%, 1/15/22 | United States | 3,500,000 | 3,565,625 | |||||||||||||
|
| |||||||||||||||
21,285,687 | ||||||||||||||||
|
|
franklintempleton.com |
Semiannual Report | 57 |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
Principal | ||||||||||||||
Country | Amount* | Value | ||||||||||||
| ||||||||||||||
Corporate Bonds (continued) | ||||||||||||||
Media 1.5% | ||||||||||||||
e | Altice Financing SA, secured bond, 144A, 7.50%, 5/15/26 | Luxembourg | 2,000,000 | $ | 1,970,000 | |||||||||
CBS Corp., senior note, 2.30%, 8/15/19 | United States | 8,437,000 | 8,357,060 | |||||||||||
CSC Holdings LLC, | ||||||||||||||
senior bond, 7.625%, 7/15/18 | United States | 3,500,000 | 3,539,375 | |||||||||||
senior bond, 8.625%, 2/15/19 | United States | 3,000,000 | 3,129,510 | |||||||||||
DISH DBS Corp., senior bond, 5.875%, 7/15/22 | United States | 5,000,000 | 4,606,250 | |||||||||||
e | NBCUniversal Enterprise Inc., senior note, 144A, 1.974%, 4/15/19 | United States | 10,000,000 | 9,929,394 | ||||||||||
Time Warner Inc., senior note, 2.10%, 6/01/19 | United States | 8,500,000 | 8,425,453 | |||||||||||
|
| |||||||||||||
39,957,042 | ||||||||||||||
|
| |||||||||||||
Pharmaceuticals, Biotechnology & Life Sciences 2.3% | ||||||||||||||
Allergan Funding SCS, senior note, 3.45%, 3/15/22 | United States | 10,500,000 | 10,331,032 | |||||||||||
Amgen Inc., | ||||||||||||||
senior note, 1.85%, 8/19/21 | United States | 1,000,000 | 956,576 | |||||||||||
g senior note, FRN, 2.504%, (3-month USD LIBOR + 0.60%), 5/22/19 | United States | 6,200,000 | 6,228,496 | |||||||||||
Baxalta Inc., | ||||||||||||||
senior note, 2.00%, 6/22/18 | United States | 10,200,000 | 10,192,589 | |||||||||||
senior note, 2.875%, 6/23/20 | United States | 7,900,000 | 7,822,028 | |||||||||||
Biogen Inc., senior note, 2.90%, 9/15/20 | United States | 11,500,000 | 11,451,343 | |||||||||||
Celgene Corp., | ||||||||||||||
senior note, 2.25%, 8/15/21 | United States | 7,900,000 | 7,616,105 | |||||||||||
senior note, 2.75%, 2/15/23 | United States | 3,700,000 | 3,535,647 | |||||||||||
e | Valeant Pharmaceuticals International Inc., senior note, 144A, 5.375%, 3/15/20 | United States | 3,800,000 | 3,842,750 | ||||||||||
|
| |||||||||||||
61,976,566 | ||||||||||||||
|
| |||||||||||||
Real Estate 0.5% | ||||||||||||||
American Tower Corp., senior note, 3.40%, 2/15/19 | United States | 6,200,000 | 6,226,825 | |||||||||||
Crown Castle International Corp., senior note, 3.15%, 7/15/23 | United States | 6,000,000 | 5,781,909 | |||||||||||
|
| |||||||||||||
12,008,734 | ||||||||||||||
|
| |||||||||||||
Retailing 1.0% | ||||||||||||||
e | Amazon.com Inc., senior note, 144A, 2.40%, 2/22/23 | United States | 4,150,000 | 3,976,474 | ||||||||||
Dollar Tree Inc., senior note, 3.70%, 5/15/23 | United States | 8,800,000 | 8,725,301 | |||||||||||
JD.com Inc., senior note, 3.125%, 4/29/21 | China | 5,300,000 | 5,175,397 | |||||||||||
c,h | K2016470219 South Africa Ltd., senior secured note, 144A, PIK, 3.00%, | |||||||||||||
12/31/22. | South Africa | 934,308 | 4,625 | |||||||||||
b,c,h | K2016470260 South Africa Ltd., senior secured note, 144A, PIK, 25.00%, 12/31/22 | South Africa | 163,027 | 22,558 | ||||||||||
Penske Automotive Group Inc., senior sub. note, 3.75%, 8/15/20 | United States | 4,000,000 | 3,980,000 | |||||||||||
e | PetSmart Inc., senior note, 144A, 7.125%, 3/15/23 | United States | 8,500,000 | 4,993,750 | ||||||||||
|
| |||||||||||||
26,878,105 | ||||||||||||||
|
| |||||||||||||
Semiconductors & Semiconductor Equipment 0.5% | ||||||||||||||
Broadcom Corp./Broadcom Cayman Finance Ltd., senior note, 2.375%, 1/15/20 | United States | 8,700,000 | 8,579,365 | |||||||||||
Maxim Integrated Products Inc., senior note, 2.50%, 11/15/18 | United States | 5,200,000 | 5,192,965 | |||||||||||
|
| |||||||||||||
13,772,330 | ||||||||||||||
|
| |||||||||||||
Software & Services 1.2% | ||||||||||||||
Alibaba Group Holding Ltd., senior note, 2.50%, 11/28/19 | China | 11,900,000 | 11,798,136 | |||||||||||
Fiserv Inc., senior note, 2.70%, 6/01/20 | United States | 11,300,000 | 11,209,128 | |||||||||||
e | Tencent Holdings Ltd., senior note, 144A, 2.985%, 1/19/23 | China | 8,000,000 | 7,743,280 | ||||||||||
|
| |||||||||||||
30,750,544 | ||||||||||||||
|
|
58 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
Principal | ||||||||||||||
Country | Amount* | Value | ||||||||||||
| ||||||||||||||
Corporate Bonds (continued) | ||||||||||||||
Technology Hardware & Equipment 1.1% | ||||||||||||||
e | Dell International LLC/EMC Corp., senior secured note, first lien, 144A, 3.48%, 6/01/19 | United States | 6,400,000 | $ | 6,415,902 | |||||||||
g | Hewlett Packard Enterprise Co., senior note, FRN, 4.251%, (3-month USD LIBOR + 1.93%), 10/05/18 | United States | 8,100,000 | 8,159,597 | ||||||||||
Juniper Networks Inc., | ||||||||||||||
senior note, 3.125%, 2/26/19 | United States | 7,500,000 | 7,513,113 | |||||||||||
senior note, 3.30%, 6/15/20 | United States | 500,000 | 498,873 | |||||||||||
e | Sanmina Corp., senior note, first lien, 144A, 4.375%, 6/01/19 | United States | 6,500,000 | 6,581,250 | ||||||||||
Tech Data Corp., senior note, 3.70%, 2/15/22 | United States | 800,000 | 788,089 | |||||||||||
|
| |||||||||||||
29,956,824 | ||||||||||||||
|
| |||||||||||||
Telecommunication Services 1.1% | ||||||||||||||
Intelsat Jackson Holdings SA, senior bond, 7.25%, 10/15/20 | Luxembourg | 2,000,000 | 1,962,500 | |||||||||||
e | Sprint Communications Inc., senior note, 144A, 9.00%, 11/15/18 | United States | 371,000 | 381,898 | ||||||||||
e | Sprint Spectrum Co. LLC/Sprint Spectrum Co. II LLC, | |||||||||||||
first lien, 144A, 3.36%, 3/20/23 | United States | 2,187,500 | 2,185,028 | |||||||||||
first lien, senior secured note, 144A, 4.738%, 9/20/29 | United States | 6,600,000 | 6,649,500 | |||||||||||
Telefonica Emisiones S.A.U., senior bond, 5.134%, 4/27/20 | Spain | 5,400,000 | 5,608,953 | |||||||||||
T-Mobile USA Inc., senior note, 4.00%, 4/15/22 | United States | 1,800,000 | 1,803,375 | |||||||||||
Verizon Communications Inc., | ||||||||||||||
senior note, 2.625%, 2/21/20 | United States | 5,180,000 | 5,155,837 | |||||||||||
g senior note, FRN, 3.857%, (3-month USD LIBOR + 1.75%), 9/14/18 | United States | 4,800,000 | 4,829,300 | |||||||||||
|
| |||||||||||||
28,576,391 | ||||||||||||||
|
| |||||||||||||
Transportation 0.7% | ||||||||||||||
e | American Airlines Group Inc., senior note, 144A, 5.50%, 10/01/19 | United States | 1,780,000 | 1,820,050 | ||||||||||
e | DAE Funding LLC, senior note, 144A, 4.00%, 8/01/20 | United Arab Emirates | 4,400,000 | 4,389,000 | ||||||||||
FedEx Corp., senior note, 0.50%, 4/09/20 | United States | 7,100,000 | EUR | 8,658,062 | ||||||||||
e | Park Aerospace Holdings Ltd., senior note, 144A, 5.25%, 8/15/22 | Ireland | 3,900,000 | 3,879,720 | ||||||||||
|
| |||||||||||||
18,746,832 | ||||||||||||||
|
| |||||||||||||
Utilities 2.4% | ||||||||||||||
Calpine Corp., senior note, 5.375%, 1/15/23 | United States | 7,600,000 | 7,315,000 | |||||||||||
Dominion Energy Inc., | ||||||||||||||
junior sub. note, 2.579%, 7/01/20 | United States | 5,200,000 | 5,122,174 | |||||||||||
senior note, 2.50%, 12/01/19 | United States | 9,500,000 | 9,389,530 | |||||||||||
Duke Energy Corp., senior note, 2.10%, 6/15/18 | United States | 5,100,000 | 5,097,297 | |||||||||||
PSEG Power LLC, senior note, 3.00%, 6/15/21 | United States | 7,700,000 | 7,638,062 | |||||||||||
The Southern Co., | ||||||||||||||
senior note, 2.45%, 9/01/18 | United States | 7,000,000 | 6,994,937 | |||||||||||
senior note, 2.35%, 7/01/21 | United States | 6,500,000 | 6,315,863 | |||||||||||
e | State Grid Overseas Investment 2013 Ltd., senior note, 144A, 1.75%, 5/22/18 | China | 2,000,000 | 1,999,010 | ||||||||||
e | State Grid Overseas Investment 2014 Ltd., senior note, 144A, 2.75%, 5/07/19 | China | 2,200,000 | 2,192,938 | ||||||||||
e | State Grid Overseas Investment 2016 Ltd., senior note, 144A, 2.75%, 5/04/22 | China | 9,400,000 | 9,096,944 | ||||||||||
e | Talen Energy Supply LLC, senior note, 144A, 9.50%, 7/15/22 | United States | 3,400,000 | 3,240,676 | ||||||||||
|
| |||||||||||||
64,402,431 | ||||||||||||||
|
| |||||||||||||
Total Corporate Bonds (Cost $1,002,402,233) | 990,669,066 | |||||||||||||
|
|
franklintempleton.com | Semiannual Report | 59 |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
Country
| Principal
| Value
| ||||||||||||
g,i | Senior Floating Rate Interests 4.1% | |||||||||||||
Automobiles & Components 0.1% | ||||||||||||||
Allison Transmission Inc., New Term Loans, 3.65%, | United States | 866,019 | $ | 874,089 | ||||||||||
TI Group Automotive Systems LLC, Initial US Term Loan, 4.401%, (1-month USD LIBOR + 2.50%), 6/30/22 | United States | 1,293,631 | 1,305,140 | |||||||||||
|
| |||||||||||||
|
2,179,229 |
| ||||||||||||
|
| |||||||||||||
Capital Goods 0.0%† | ||||||||||||||
Harsco Corp., Term B-1 Loan, 4.938%, (1-month USD LIBOR + 3.00%), 12/10/24 | United States | 134,205 | 136,176 | |||||||||||
Leidos Innovations Corp., Term Loan B, 3.688%, (1-month USD LIBOR + 1.75%), 8/16/23 | United States | 208,609 | 210,500 | |||||||||||
|
| |||||||||||||
|
346,676 |
| ||||||||||||
|
| |||||||||||||
Commercial & Professional Services 0.0%† | ||||||||||||||
KAR Auction Services Inc., Tranche B-5 Term Loans, 4.813%, (3-month USD LIBOR + 2.50%), 3/09/23 | United States | 704,747 | 708,565 | |||||||||||
|
| |||||||||||||
Consumer Services 0.4% | ||||||||||||||
Aristocrat Technologies Inc., | ||||||||||||||
New 2017 Term Loans, 4.357% - 4.359%, (3-month USD LIBOR + 2.00%), 10/19/24 | United States | 1,104,232 | 1,111,726 | |||||||||||
Term B-2 Loans, 4.359%, (3-month USD LIBOR + 2.00%), 10/20/21 | United States | 2,557,244 | 2,574,298 | |||||||||||
Avis Budget Car Rental LLC, Tranche B Term Loans, 4.31%, (3-month USD LIBOR + 2.00%), 2/13/25 | United States | 1,543,977 | 1,557,486 | |||||||||||
Eldorado Resorts Inc., | ||||||||||||||
Initial Term Loan, 4.188%, (1-month USD LIBOR + 2.25%), 4/17/24 | United States | 662,069 | 1,113,255 | |||||||||||
Initial Term Loan, 4.125% - 4.188%, (2-month USD LIBOR + 2.25%), 4/17/24 | United States | 925,486 | 483,727 | |||||||||||
Greektown Holdings LLC, Initial Term Loan, 4.901%, (1-month USD LIBOR + 3.00%), 4/25/24 | United States | 3,317,275 | 3,326,086 | |||||||||||
|
| |||||||||||||
|
10,166,578 |
| ||||||||||||
|
| |||||||||||||
Diversified Financials 0.2% | ||||||||||||||
FinCo I LLC, Initial Term Loans, 4.651%, (1-month USD LIBOR + 2.75%), 12/27/22. | United States | 3,464,432 | 3,503,407 | |||||||||||
First Eagle Holdings Inc., Initial Term Loans, 5.302%, (3-month USD LIBOR + 3.00%), 12/01/22 | United States | 883,566 | 892,125 | |||||||||||
|
| |||||||||||||
|
4,395,532 |
| ||||||||||||
|
| |||||||||||||
Energy 0.3% | ||||||||||||||
Bowie Resource Holdings LLC, First Lien Initial Term Loan, 7.651%, (1-month USD LIBOR + 5.75%), 8/14/20 | United States | 1,775,296 | 1,749,776 | |||||||||||
Fieldwood Energy LLC, Closing Date Loans, 7.151%, (1-month USD LIBOR + 5.25%), 4/11/22 | United States | 5,036,382 | 5,071,007 | |||||||||||
Foresight Energy LLC, Term Loans, 8.109%, (3-month USD LIBOR + 5.75%), 3/28/22 | United States | 1,207,845 | 1,184,594 | |||||||||||
OSG Bulk Ships Inc., Initial Term Loan, 6.04%, (3-month USD LIBOR + 4.25%), 8/05/19 | United States | 867,153 | 844,390 | |||||||||||
|
| |||||||||||||
|
8,849,767 |
| ||||||||||||
|
|
60 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
Principal | ||||||||||||||
Country | Amount* | Value | ||||||||||||
| ||||||||||||||
g,i | Senior Floating Rate Interests (continued) | |||||||||||||
Food & Staples Retailing 0.1% | ||||||||||||||
Aramark Corp., U.S. Term B-1 Loan, 3.901%, (1-month USD LIBOR + 2.00%), 3/11/25 | United States | 102,572 | $ | 103,374 | ||||||||||
Smart & Final Stores LLC, First Lien Term Loan, 5.401%, (1-month USD LIBOR + 3.50%), 11/15/22 | United States | 1,217,455 | 1,196,149 | |||||||||||
|
| |||||||||||||
|
1,299,523 |
| ||||||||||||
|
| |||||||||||||
Food, Beverage & Tobacco 0.3% | ||||||||||||||
JBS USA LUX SA, New Initial Term Loans, 4.678%, (3-month USD LIBOR + 2.50%), 10/30/22 | United States | 6,633,000 | 6,635,487 | |||||||||||
Post Holdings Inc., Series A Incremental Term Loans, 3.90%, (1-month USD LIBOR + 2.00%), 5/24/24 | United States | 2,378,020 | 2,391,185 | |||||||||||
|
| |||||||||||||
|
9,026,672 |
| ||||||||||||
|
| |||||||||||||
Health Care Equipment & Services 0.3% | ||||||||||||||
DaVita Healthcare Partners Inc., Tranche B Term Loan, 4.651%, (1-month USD LIBOR + 2.75%), 6/24/21 | United States | 2,360,535 | 2,385,406 | |||||||||||
Quintiles IMS Inc., Term B-2 Dollar Loans, 4.302%, (3-month USD LIBOR + 2.00%), 1/20/25 | United States | 3,586,259 | 3,608,673 | |||||||||||
U.S. Renal Care Inc., Initial Term Loan, 6.552%, (3-month USD LIBOR + 4.25%), 12/31/22 | United States | 1,918,639 | 1,912,643 | |||||||||||
|
| |||||||||||||
|
7,906,722 |
| ||||||||||||
|
| |||||||||||||
Household & Personal Products 0.1% | ||||||||||||||
j | FGI Operating Co. LLC, Term B Loans, 5.823%, (LIBOR + 4.25%), 4/19/19 | United States | 3,621,839 | 946,205 | ||||||||||
Spectrum Brands Inc., | ||||||||||||||
USD Term Loans, 3.994% - 4.056%, (2-month USD LIBOR + 2.00%), 6/23/22 | United States | 556,344 | 1,072,652 | |||||||||||
USD Term Loans, 3.791%, (3-month USD LIBOR + 2.00%), 6/23/22 | United States | 1,280,376 | 767,348 | |||||||||||
|
| |||||||||||||
|
2,786,205 |
| ||||||||||||
|
| |||||||||||||
Materials 0.4% | ||||||||||||||
Ashland LLC, Term B Loan, 3.897% - 3.901%, (1-month USD LIBOR + 2.00%), 5/17/24 | United States | 4,237,676 | 4,277,934 | |||||||||||
Chemours Co., Tranche B-2 US$ Term Loan, 3.66%, (1-month USD LIBOR + 1.75%), 4/03/25 | United States | 1,775,291 | 1,779,175 | |||||||||||
k | Crown Americas LLC, Term B Loans, 4.312%, (3-month USD LIBOR + 2.00%), 4/03/25 | United States | 1,962,190 | 1,982,579 | ||||||||||
Oxbow Carbon LLC, | ||||||||||||||
Tranche A Term Loan, 4.401%, (1-month USD LIBOR + 2.50%), 1/04/22 | United States | 1,345,500 | 1,347,182 | |||||||||||
Tranche B Term Loan, 5.651%, (1-month USD LIBOR + 3.75%), 1/04/23 | United States | 592,500 | 600,647 | |||||||||||
|
| |||||||||||||
|
9,987,517 |
| ||||||||||||
|
| |||||||||||||
Media 0.4% | ||||||||||||||
Altice U.S. Finance I Corp., March 2017 Refinancing Term Loan Commitments, 4.151%, (1-month USD LIBOR + 2.25%), 7/28/25 | United States | 115,225 | 115,224 | |||||||||||
AMC Entertainment Holdings Inc., | ||||||||||||||
2016 Incremental Term Loans, 4.147%, (1-month USD LIBOR + 2.25%), 12/15/23 | United States | 506,760 | 508,555 | |||||||||||
Initial Term Loans, 4.147%, (1-month USD LIBOR + 2.25%), 12/15/22 | United States | 4,092,424 | 4,116,725 |
franklintempleton.com | Semiannual Report | 61 |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
Principal | ||||||||||||||
Country | Amount* | Value | ||||||||||||
| ||||||||||||||
g,i | Senior Floating Rate Interests (continued) | |||||||||||||
Media (continued) | ||||||||||||||
Charter Communications Operating LLC, Term A-2 Loan, 3.41%, (1-month USD LIBOR + 1.50%), 3/31/23 | United States | 1,223,746 | $ | 1,226,615 | ||||||||||
CSC Holdings LLC, March 2017 Incremental Term Loans, 4.147%, (1-month USD LIBOR + 2.25%), 7/17/25 | United States | 2,226,614 | 2,229,119 | |||||||||||
Lions Gate Capital Holdings LLC, Term A Loan, 3.648%, (1-month USD | ||||||||||||||
LIBOR + 1.75%), 3/22/23 | Canada | 148,475 | 149,032 | |||||||||||
k,l | Sinclair Television Group Inc., Tranche B-1 Term Loans, TBD, 1/31/25 | United States | 2,611,667 | 2,626,629 | ||||||||||
|
| |||||||||||||
|
10,971,899 |
| ||||||||||||
|
| |||||||||||||
Pharmaceuticals, Biotechnology & Life Sciences 0.4% | ||||||||||||||
Endo Luxembourg Finance Co. I S.A.R.L. and Endo LLC, Initial Term Loans, 6.188%, (1-month USD LIBOR + 4.25%), 4/29/24 | United States | 3,428,921 | 3,417,492 | |||||||||||
Grifols Worldwide Operations USA Inc., Tranche B Term Loan, 4.00%, (1-week USD LIBOR + 2.25%), 1/31/25 | United States | 1,442,358 | 1,451,719 | |||||||||||
RPI Finance Trust, Term A-3 Loan, 4.052%, (3-month USD LIBOR + 1.75%), 10/14/21 | United States | 328,800 | 329,622 | |||||||||||
Syneos Health Inc., | ||||||||||||||
Initial Term B Loans, 4.151%, (1-month USD LIBOR + 2.25%), 8/01/24 | United States | 157,747 | 158,413 | |||||||||||
k,l Replacement Term B Loans, TBD, 8/01/24 | United States | 4,440,000 | 4,461,507 | |||||||||||
Valeant Pharmaceuticals International Inc., Series F-4 Tranche B Term | ||||||||||||||
Loans, 5.394%, (1-month USD LIBOR + 3.50%), 4/01/22 | United States | 1,123,784 | 1,137,641 | |||||||||||
|
| |||||||||||||
|
10,956,394 |
| ||||||||||||
|
| |||||||||||||
Retailing 0.4% | ||||||||||||||
Ascena Retail Group Inc., Tranche B Term Loan, 6.438%, (1-month USD LIBOR + 4.50%), 8/21/22 | United States | 3,215,812 | 2,819,196 | |||||||||||
Harbor Freight Tools USA Inc., Refinancing Loans, 4.401%, (1-month USD LIBOR + 2.50%), 8/19/23 | United States | 2,750,963 | 2,765,100 | |||||||||||
Jo-Ann Stores Inc., Initial Loans, 7.509%, (6-month USD LIBOR + 5.00%), 10/23/23 | United States | 2,020,919 | 2,013,972 | |||||||||||
PetSmart Inc., Tranche B-2 Loans, 4.89%, (1-month USD LIBOR + 3.00%), 3/11/22 | United States | 4,622,960 | 3,632,875 | |||||||||||
|
| |||||||||||||
|
11,231,143 |
| ||||||||||||
|
| |||||||||||||
Semiconductors & Semiconductor Equipment 0.1% | ||||||||||||||
MKS Instruments Inc., Tranche B-4 Term Loan, 3.651%, (1-month USD LIBOR + 1.75%), 4/29/23 | United States | 112,434 | 113,260 | |||||||||||
ON Semiconductor Corp., 2017 Replacement Term B-2 Loans, 3.901%, (1-month USD LIBOR + 2.00%), 3/31/23 | United States | 3,433,936 | 3,459,261 | |||||||||||
|
| |||||||||||||
|
3,572,521 |
| ||||||||||||
|
| |||||||||||||
Software & Services 0.1% | ||||||||||||||
Global Payments Inc., Term A-2 Loan, 3.498%, (1-week USD LIBOR + 1.75%), 5/02/22 | United States | 362,622 | 363,604 | |||||||||||
Rackspace Hosting Inc., Term B Loans, 4.787%, (3-month USD LIBOR + 3.00%), 11/03/23 | United States | 1,712,425 | 1,710,404 | |||||||||||
Wex Inc., Term B-2 Loan, 4.151%, (1-month USD LIBOR + 2.25%), 7/01/23 | United States | 386,110 | 389,127 | |||||||||||
|
| |||||||||||||
|
2,463,135 |
| ||||||||||||
|
|
62 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
Country
| Principal
| Value | ||||||||||||
g,i | Senior Floating Rate Interests (continued) | |||||||||||||
Technology Hardware & Equipment 0.1% | ||||||||||||||
Ciena Corp., Refinancing Term Loan, 4.397%, (1-month USD LIBOR + 2.50%), 1/28/22 | United States | 187,623 | $ | 188,795 | ||||||||||
CommScope Inc., Tranche 5 Term Loans, 3.901%, (1-month USD LIBOR + 2.00%), 12/29/22 | United States | 2,141,090 | 2,156,480 | |||||||||||
Western Digital Corp., U.S. Term B-3 Loan, 3.90%, (1-month USD LIBOR + 2.00%), 4/29/23 | United States | 1,312,458 | 1,322,419 | |||||||||||
|
| |||||||||||||
|
3,667,694 |
| ||||||||||||
|
| |||||||||||||
Telecommunication Services 0.1% | ||||||||||||||
Consolidated Communications Inc., Initial Term Loan, 4.91%, (1-month USD LIBOR + 3.00%), 10/05/23 | United States | 3,205,418 | 3,180,710 | |||||||||||
Global Tel*Link Corp., Term Loan, 6.302%, (3-month USD LIBOR + 4.00%), 5/23/20 | United States | 261,667 | 263,549 | |||||||||||
|
| |||||||||||||
|
3,444,259 |
| ||||||||||||
|
| |||||||||||||
Transportation 0.2% | ||||||||||||||
Air Canada, Term Loan, 3.984%, (3-month USD LIBOR + 2.00%), 10/06/23 | Canada | 46,563 | 46,903 | |||||||||||
International Seaways Operating Corp., Initial Term Loans, 7.41%, (1-month USD LIBOR + 5.50%), 6/22/22 | United States | 858,594 | 853,227 | |||||||||||
Navios Maritime Midstream Partners LP, Initial Term Loan, 6.71%, (3-month USD LIBOR + 4.50%), 6/18/20 | Marshall Islands | 1,203,432 | 1,198,167 | |||||||||||
Navios Maritime Partners LP, Initial Term Loan, 7.08%, (3-month USD LIBOR + 5.00%), 9/14/20 | Greece | 2,137,502 | 2,150,861 | |||||||||||
|
| |||||||||||||
|
4,249,158 |
| ||||||||||||
|
| |||||||||||||
Utilities 0.1% | ||||||||||||||
EFS Cogen Holdings I LLC (Linden), Term B Advance, 5.56%, (3-month USD LIBOR + 3.25%), 6/28/23 | United States | 149,932 | 150,869 | |||||||||||
NRG Energy Inc., Term loan B, 4.052%, (3-month USD LIBOR + 1.75%), 6/30/23 | United States | 2,122,299 | 2,130,152 | |||||||||||
|
| |||||||||||||
|
2,281,021 |
| ||||||||||||
|
| |||||||||||||
Total Senior Floating Rate Interests (Cost $113,613,669) | 110,490,210 | |||||||||||||
|
| |||||||||||||
Foreign Government and Agency Securities 1.5% | ||||||||||||||
e | The Export-Import Bank of China, senior note, 144A, 2.50%, 7/31/19 | China | 8,000,000 | 7,948,360 | ||||||||||
The Export-Import Bank of Korea, senior note, 2.25%, 1/21/20 | South Korea | 11,200,000 | 11,019,848 | |||||||||||
Government of Mexico, | ||||||||||||||
senior note, M, 4.75%, 6/14/18 | Mexico | 720,000m | MXN | 3,837,670 | ||||||||||
senior note, M 10, 8.50%, 12/13/18 | Mexico | 1,060,000m | MXN | 5,701,935 | ||||||||||
e,n | Harvest Operations Corp., senior note, 144A, 4.20%, 6/01/23 | South Korea | 1,900,000 | 1,919,819 | ||||||||||
The Korea Development Bank, senior note, 3.375%, 3/12/23 | South Korea | 6,500,000 | 6,396,033 | |||||||||||
Nota Do Tesouro Nacional, | ||||||||||||||
10.00%, 1/01/21 | Brazil | 2,350o | BRL | 703,477 | ||||||||||
p Index Linked, 6.00%, 8/15/18 | Brazil | 1,810o | BRL | 1,601,657 | ||||||||||
|
| |||||||||||||
Total Foreign Government and Agency Securities (Cost $40,680,182) | 39,128,799 | |||||||||||||
|
|
franklintempleton.com | Semiannual Report | 63 |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
Principal | ||||||||||||||
Country | Amount* | Value | ||||||||||||
| ||||||||||||||
U.S. Government and Agency Securities 16.3% | ||||||||||||||
U.S. Treasury Note, 3.625%, 8/15/19 | United States | 50,000,000 | $ | 50,788,086 | ||||||||||
3.375%, 11/15/19 | United States | 60,000,000 | 60,860,156 | |||||||||||
2.125%, 1/31/21 | United States | 38,000,000 | 37,507,930 | |||||||||||
2.25%, 4/30/21 | United States | 17,000,000 | 16,808,086 | |||||||||||
2.25%, 7/31/21 | United States | 39,000,000 | 38,482,031 | |||||||||||
2.00%, 8/31/21 | United States | 18,800,000 | 18,387,281 | |||||||||||
2.125%, 9/30/21 | United States | 20,000,000 | 19,628,125 | |||||||||||
1.75%, 3/31/22 | United States | 54,000,000 | 52,046,719 | |||||||||||
1.875%, 3/31/22 | United States | 50,000,000 | 48,426,758 | |||||||||||
q Index Linked, 1.875%, 7/15/19 | United States | 9,607,505 | 9,820,290 | |||||||||||
q Index Linked, 1.375%, 1/15/20 | United States | 25,166,346 | 25,583,681 | |||||||||||
q Index Linked, 0.125%, 4/15/21 | United States | 18,907,305 | 18,646,406 | |||||||||||
q Index Linked, 0.125%, 1/15/22 | United States | 39,597,665 | 38,939,103 | |||||||||||
|
| |||||||||||||
Total U.S. Government and Agency Securities (Cost $443,711,936) | 435,924,652 | |||||||||||||
|
| |||||||||||||
Asset-Backed Securities and Commercial Mortgage-Backed Securities 33.8% | ||||||||||||||
Automobiles & Components 0.0%† | ||||||||||||||
r | Countrywide Asset-Backed Certificates, | |||||||||||||
2001-BC3, A, FRN, 2.377%, (1-month USD LIBOR + 0.48%), 12/25/31 | United States | 1,276 | 1,180 | |||||||||||
2002-3, 1A1, FRN, 2.637%, (1-month USD LIBOR + 0.74%), 5/25/32 | United States | 1,544 | 1,499 | |||||||||||
|
| |||||||||||||
2,679 | ||||||||||||||
|
| |||||||||||||
Banks 1.4% | ||||||||||||||
s | Bear Stearns Commercial Mortgage Securities Trust, 2005-T20, E, FRN, 5.268%, 10/12/42 | United States | 2,000,000 | 1,668,095 | ||||||||||
s | CD Commercial Mortgage Trust, 2005-CD1, E, FRN, 5.432%, 7/15/44 | United States | 619,620 | 618,912 | ||||||||||
Citibank Credit Card Issuance Trust, | ||||||||||||||
2017-A3, A3, 1.92%, 4/07/22 | United States | 11,000,000 | 10,815,523 | |||||||||||
2018-A1, A1, 2.49%, 1/20/23 | United States | 13,700,000 | 13,541,992 | |||||||||||
Citigroup Commercial Mortgage Trust, 2006-C5, AJ, 5.482%, 10/15/49 | United States | 640,165 | 607,108 | |||||||||||
s | Commercial Mortgage Trust, 2006-GG7, AJ, FRN, 5.945%, 7/10/38 | United States | 3,818,000 | 3,519,704 | ||||||||||
r | CWABS Asset-Backed Certificates Trust, 2004-7, MV3, FRN, 2.947%, | |||||||||||||
(1-month USD LIBOR + 1.05%), 12/25/34 | United States | 93,474 | 93,761 | |||||||||||
r | CWABS Inc. Asset-Backed Certificates, 2004-1, M1, FRN, 2.647%, | |||||||||||||
(1-month USD LIBOR + 0.75%), 3/25/34 | United States | 228,013 | 229,707 | |||||||||||
s,t | GE Capital Commercial Mortgage Corp. Trust, 2007-C1, AM, FRN, 5.606%, 12/10/49 | United States | 2,127,753 | 2,107,110 | ||||||||||
s | Greenwich Capital Commercial Funding Corp., 2006-GG7, AM, FRN, 5.945%, 7/10/38 | United States | 226,447 | 226,734 | ||||||||||
r | Impac Secured Assets Corp., 2004-4, M1, FRN, 2.662%, (1-month USD LIBOR + 0.765%), 2/25/35 | United States | 849,073 | 851,356 | ||||||||||
Merrill Lynch Mortgage Investors Trust, | ||||||||||||||
r 2003-A, 1A, FRN, 2.637%, (1-month USD LIBOR + 0.74%), 3/25/28 | United States | 392,976 | 379,282 | |||||||||||
s 2005-1, 2A2, FRN, 3.414%, 4/25/35 | United States | 297,444 | 290,681 |
64 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued) | ||||||||||||||||
Banks (continued) | ||||||||||||||||
r | Morgan Stanley ABS Capital I Inc. Trust, 2005-WMC, M2, FRN, 2.632%, (1-month USD LIBOR + 0.735%), 1/25/35 | United States | 138,963 | $ | 139,146 | |||||||||||
e,s | Wachovia Bank Commercial Mortgage Trust, 2003-C7, F, 144A, FRN, 6.157%, 10/15/35 | United States | 222,202 | 222,683 | ||||||||||||
s | Wells Fargo Mortgage Backed Securities Trust, | |||||||||||||||
2005-AR, 1A1, FRN, 3.84%, 2/25/35 | United States | 1,124,250 | 1,151,952 | |||||||||||||
2005-AR9, 2A2, FRN, 3.629%, 10/25/33 | United States | 141,276 | 141,374 | |||||||||||||
|
| |||||||||||||||
36,605,120 | ||||||||||||||||
|
| |||||||||||||||
Diversified Financials 31.8% | ||||||||||||||||
American Express Credit Account Master Trust, | ||||||||||||||||
r 2013-1, B, FRN, 2.597%, (1-month USD LIBOR + 0.70%), 2/16/21 | United States | 2,520,000 | 2,522,742 | |||||||||||||
2017-1, B, 2.10%, 9/15/22 | United States | 11,060,000 | 10,904,481 | |||||||||||||
2017-6, A, 2.04%, 5/15/23 | United States | 16,300,000 | 15,980,947 | |||||||||||||
2018-1, A, 2.67%, 10/17/22 | United States | 12,000,000 | 11,976,365 | |||||||||||||
r | American Home Mortgage Investment Trust, | |||||||||||||||
2004-3, 4A, FRN, 3.711%, (6-month USD LIBOR + 1.50%), 10/25/34 | United States | 2,251,040 | 2,232,915 | |||||||||||||
2005-1, 6A, FRN, 4.447%, (6-month USD LIBOR + 2.00%), 6/25/45 | United States | 1,113,131 | 1,151,744 | |||||||||||||
r | Ameriquest Mortgage Securities Inc. Asset-Backed Pass-Through Certificates, 2004-R4, M1, FRN, 2.722%, (1-month USD LIBOR + 0.825%), 6/25/34 | United States | 630,490 | 634,845 | ||||||||||||
e,r | AMMC CLO XI Ltd., | |||||||||||||||
2012-11A, BR2, 144A, FRN, 3.959%, (3-month USD LIBOR + 1.60%), 4/30/31 | United States | 1,700,000 | 1,700,000 | |||||||||||||
2012-11A, CR2, 144A, FRN, 4.259%, (3-month USD LIBOR + 1.90%), 4/30/31 | United States | 450,000 | 450,000 | |||||||||||||
2012-11A, DR2, 144A, FRN, 5.209%, (3-month USD LIBOR + 2.85%), 4/30/31 | United States | 400,000 | 400,000 | |||||||||||||
e,n,u | Antares CLO Ltd., 2018-1A, B, 144A, FRN, (3-month USD LIBOR + 1.65%), 4/20/31 | United States | 5,400,000 | 5,400,000 | ||||||||||||
r | Argent Securities Inc. Asset-Backed Pass-Through Certificates, 2005-W2, A2C, FRN, 2.257%, (1-month USD LIBOR + 0.36%), 10/25/35. | United States | 499,028 | 500,900 | ||||||||||||
e,r | Atrium IX, 9A, AR, 144A, FRN, 3.224%, (3-month USD LIBOR + 1.24%), 5/28/30 | United States | 2,000,000 | 2,009,000 | ||||||||||||
e,r | Atrium X, 10A, CR, 144A, FRN, 4.298%, (3-month USD LIBOR + 1.95%), 7/16/25 | United States | 2,230,000 | 2,233,167 | ||||||||||||
e,r | Atrium XI, 11A, CR, 144A, FRN, 4.512%, (3-month USD LIBOR + 2.15%), 10/23/25 | United States | 6,750,000 | 6,768,698 | ||||||||||||
e,r | Atrium XIII, | |||||||||||||||
2013A, B, 144A, FRN, 3.862%, (3-month USD LIBOR + 1.50%), 11/21/30 | United States | 1,000,000 | 1,003,320 | |||||||||||||
2013A, C, 144A, FRN, 4.162%, (3-month USD LIBOR + 1.80%), 11/21/30 | United States | 1,000,000 | 999,980 |
franklintempleton.com | Semiannual Report | 65 |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued) | ||||||||||||||||
Diversified Financials (continued) | ||||||||||||||||
e,r | Bain Capital Credit CLO, 2018-1A, A1, 144A, FRN, 3.322%, (3-month USD LIBOR + 0.96%), 4/23/31 | United States | 2,000,000 | $ | 1,995,920 | |||||||||||
e | BAMLL Commercial Mortgage Securities Trust, 2012-PARK, A, 144A, 2.959%, 12/10/30 | United States | 3,200,000 | 3,150,559 | ||||||||||||
r | Bear Stearns ALT-A Trust, 2004-13, A2, FRN, 2.777%, (1-month USD LIBOR + 0.88%), 11/25/34 | United States | 35,728 | 35,619 | ||||||||||||
e,r | Bellemeade Re 2018-1 Ltd., 2018-1A, M1B, 144A, FRN, 3.477%, (1-month USD LIBOR + 1.60%), 4/25/28 | Bermuda | 5,870,000 | 5,870,000 | ||||||||||||
e,r | Birchwood Park CLO Ltd., 2014-1A, AR, 144A, FRN, 3.528%, (3-month USD LIBOR + 1.18%), 7/15/26 | United States | 1,000,000 | 1,001,060 | ||||||||||||
e,r | BlueMountain Fuji U.S. CLO I Ltd., 2017-1A, C, 144A, FRN, 4.709%, (3-month USD LIBOR + 2.35%), 7/20/29 | United States | 1,361,000 | 1,369,248 | ||||||||||||
e,r | BlueMountain Fuji U.S. CLO II Ltd., | |||||||||||||||
2017-2A, A1A, 144A, FRN, 3.559%, (3-month USD LIBOR + 1.20%), 10/20/30 | United States | 3,500,000 | 3,521,000 | |||||||||||||
2017-2A, B, 144A, FRN, 4.509%, (3-month USD LIBOR + 2.15%), 10/20/30 | United States | 1,000,000 | 1,004,010 | |||||||||||||
e,r | BlueMountain Fuji U.S. CLO III Ltd., 2017-3A, C, 144A, FRN, 3.427%, (3-month USD LIBOR + 1.70%), 1/15/30 | United States | 500,000 | 497,570 | ||||||||||||
e,r | Burnham Park CLO Ltd., 2016-1A, A, 144A, FRN, 3.789%, (3-month USD LIBOR + 1.43%), 10/20/29 | United States | 2,240,000 | 2,253,037 | ||||||||||||
Capital One Multi-Asset Execution Trust, | ||||||||||||||||
r2004-B3, B3, FRN, 2.627%, (1-month USD LIBOR + 0.73%), 1/18/22 | United States | 2,220,000 | 2,228,760 | |||||||||||||
2017-A4, A4, 1.99%, 7/17/23 | United States | 14,230,000 | 13,944,270 | |||||||||||||
e,r | Carlyle Global Market Strategies CLO Ltd., | |||||||||||||||
2012-4A, AR, 144A, FRN, 3.809%, (3-month USD LIBOR + 1.45%), 1/20/29 | United States | 2,800,000 | 2,815,008 | |||||||||||||
2014-1A, A2R2, 144A, FRN, 3.47%, (3-month USD LIBOR + 1.13%), 4/17/31 | United States | 1,200,000 | 1,202,145 | |||||||||||||
e,r | Carlyle U.S. CLO Ltd., | |||||||||||||||
2017-1A, A1A, 144A, FRN, 3.659%, (3-month USD LIBOR + 1.30%), 4/20/31 | United States | 1,000,000 | 1,004,050 | |||||||||||||
2017-2A, B, 144A, FRN, 4.759%, (3-month USD LIBOR + 2.40%), 7/20/31 | United States | 2,110,000 | 2,124,306 | |||||||||||||
2017-3A, B, 144A, FRN, 4.709%, (3-month USD LIBOR + 2.35%), 7/20/29 | United States | 1,250,000 | 1,256,788 | |||||||||||||
2017-5A, B, 144A, FRN, 3.53%, (3-month USD LIBOR + 1.80%), 1/20/30 | United States | 2,200,000 | 2,200,066 | |||||||||||||
e,r | Catamaran CLO Ltd., 2014-2A, BR, 144A, FRN, 5.305%, (3-month USD LIBOR + 2.95%), 10/18/26 | United States | 3,011,300 | 3,037,890 | ||||||||||||
e,r | Cent CLO Ltd., | |||||||||||||||
2013-17A, A1, 144A, FRN, 3.067%, (3-month USD LIBOR + 1.30%), 1/30/25 | United States | 4,031,467 | 4,037,111 | |||||||||||||
e,r | Cent CLO LP, | |||||||||||||||
2014-22A, A1R, 144A, FRN, 3.203%, (3-month USD LIBOR + 1.41%), 11/07/26 | United States | 2,800,000 | 2,801,708 | |||||||||||||
2014-22A, BR, 144A, FRN, 4.743%, (3-month USD LIBOR + 2.95%), 11/07/26 | United States | 4,050,000 | 4,060,125 | |||||||||||||
2013-20A, AR, 144A, FRN, 3.46%, (3-month USD LIBOR + 1.10%), 1/25/26 | United States | 3,854,083 | 3,859,016 |
66 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued) | ||||||||||||||||
Diversified Financials (continued) | ||||||||||||||||
e | Centerline REIT Inc., | |||||||||||||||
2004-RR3, A2, 144A, 4.76%, 9/21/45 | United States | 843,722 | $ | 848,110 | ||||||||||||
2004-RR3, B, 144A, 5.04%, 9/21/45 | United States | 2,227,000 | 2,173,307 | |||||||||||||
r | Chase Funding Trust, 2004-2, 2A2, FRN, 2.397%, (1-month USD LIBOR + 0.50%), 2/26/35 | United States | 12,256 | 11,953 | ||||||||||||
Chase Issuance Trust, | ||||||||||||||||
r2014-A5, A5, FRN, 2.267%, (1-month USD LIBOR + 0.37%), 4/15/21 | United States | 7,310,000 | 7,329,407 | |||||||||||||
2015-A7, A7, 1.62%, 7/15/20 | United States | 5,005,000 | 4,997,095 | |||||||||||||
e,s | COMM 2014-277P Mortgage Trust, 2014-277P, A, 144A, FRN, 3.732%, 8/10/49 | United States | 2,980,000 | 2,997,174 | ||||||||||||
s | Conseco Finance Securitizations Corp., 2002-2, M1, FRN, 7.424%, 3/01/33 | United States | 801,160 | 878,538 | ||||||||||||
Conseco Financial Corp., 1998-6, A8, 6.66%, 6/01/30 | United States | 5,115,940 | 5,407,748 | |||||||||||||
e,s | Consumer Loan Underlying Bond (CLUB) Certificate Issuer Trust I, 2018-8, 144A, FRN, 10.53%, 6/17/41 | United States | 4,920,070 | 4,952,638 | ||||||||||||
e,r | Cook Park CLO Ltd., 2018-1A, A2, 144A, FRN, 3.468%, (3-month USD LIBOR + 1.12%), 4/17/30 | United States | 1,000,000 | 999,900 | ||||||||||||
e | Core Industrial Trust, 2015-CALW, A, 144A, 3.04%, 2/10/34 | United States | 13,365,000 | 13,274,262 | ||||||||||||
s | Countrywide Home Loans, 2004-11, 2A1, FRN, 3.12%, 7/25/34 | United States | 1,633,335 | 1,636,431 | ||||||||||||
Credit Suisse First Boston Mortgage Securities Corp., 2004-6, 3A1, 5.00%, 9/25/19 | United States | 320,141 | 331,159 | |||||||||||||
e,s | CSMC Trust, 2014-IVR3, A1, 144A, FRN, 3.50%, 7/25/44 | United States | 2,231,409 | 2,209,183 | ||||||||||||
r | Discover Card Execution Note Trust, | |||||||||||||||
2013-A6, A6, FRN, 2.347%, (1-month USD LIBOR + 0.45%), 4/15/21 | United States | 5,520,000 | 5,529,526 | |||||||||||||
2014-A1, A1, FRN, 2.327%, (1-month USD LIBOR + 0.43%), 7/15/21 | United States | 7,690,000 | 7,709,682 | |||||||||||||
e,r | Dryden 33 Senior Loan Fund, 2014-33A, AR, 144A, FRN, 3.778%, (3-month USD LIBOR + 1.43%), 10/15/28 | United States | 12,415,000 | 12,449,886 | ||||||||||||
e,r | Dryden 34 Senior Loan Fund, 2014-34A, AR, 144A, FRN, 3.508%, (3-month USD LIBOR + 1.16%), 10/15/26 | United States | 2,627,318 | 2,627,318 | ||||||||||||
e,r | Dryden 38 Senior Loan Fund, 2015-38A, A, 144A, FRN, 3.778%, (3-month USD LIBOR + 1.43%), 7/15/27 | United States | 9,642,857 | 9,660,021 | ||||||||||||
e,r | Dryden 41 Senior Loan Fund, 2015-41A, AR, 144A, FRN, 3.318%, (3-month USD LIBOR + 0.97%), 4/15/31 | United States | 1,875,000 | 1,873,125 | ||||||||||||
e,r | Dryden 49 Senior Loan Fund, 2017-49A, C, 144A, FRN, 4.705%, (3-month USD LIBOR + 2.35%), 7/18/30 | United States | 870,000 | 874,689 | ||||||||||||
e,r | Dryden 50 Senior Loan Fund, | |||||||||||||||
2017-50A, A1, 144A, FRN, 3.568%, (3-month USD LIBOR + 1.22%), 7/15/30 | United States | 2,640,000 | 2,645,834 | |||||||||||||
2017-50A, C, 144A, FRN, 4.598%, (3-month USD LIBOR + 2.25%), 7/15/30 | United States | 2,150,000 | 2,160,793 | |||||||||||||
e,r | Dryden 53 CLO Ltd., | |||||||||||||||
2017-53A, B, 144A, FRN, 3.748%, (3-month USD LIBOR + 1.40%), 1/15/31 | United States | 700,000 | 694,449 | |||||||||||||
2017-53A, C, 144A, FRN, 4.048%, (3-month USD LIBOR + 1.70%), 1/15/31 | United States | 1,000,000 | 996,610 | |||||||||||||
e,n,u | Dryden 64 CLO Ltd., | |||||||||||||||
2018-64A, A, 144A, FRN, (3-month USD LIBOR + 0.97%), 4/18/31 | United States | 1,500,000 | 1,500,000 | |||||||||||||
2018-64A, D, 144A, FRN, (3-month USD LIBOR + 2.65%), 4/18/31 | United States | 500,000 | 500,000 |
franklintempleton.com | Semiannual Report | 67 |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||
Asset-Backed Securities and Commercial | ||||||||||||||||
Mortgage-Backed Securities (continued) | ||||||||||||||||
Diversified Financials (continued) | ||||||||||||||||
e,r | Eaton Vance CDO Ltd., 2014-1A, AR, 144A, FRN, 3.548%, (3-month USD LIBOR + 1.20%), 7/15/26 | United States | 5,266,000 | $ | 5,257,785 | |||||||||||
r | FHLMC Structured Agency Credit Risk Debt Notes, | |||||||||||||||
2014-DN1, M2, FRN, 4.097%, (1-month USD LIBOR + 2.20%), 2/25/24 | United States | 1,428,012 | 1,469,606 | |||||||||||||
2014-DN3, M3, FRN, 5.897%, (1-month USD LIBOR + 4.00%), 8/25/24 | United States | 2,433,367 | 2,667,697 | |||||||||||||
2014-DN4, M3, FRN, 6.447%, (1-month USD LIBOR + 4.55%), 10/25/24 | United States | 9,690,861 | 10,810,272 | |||||||||||||
2014-HQ1, M2, FRN, 4.397%, (1-month USD LIBOR + 2.50%), 8/25/24 | United States | 1,501,619 | 1,511,129 | |||||||||||||
2014-HQ1, M3, FRN, 5.997%, (1-month USD LIBOR + 4.10%), 8/25/24 | United States | 5,200,000 | 5,785,858 | |||||||||||||
2014-HQ2, M3, FRN, 5.647%, (1-month USD LIBOR + 3.75%), 9/25/24 | United States | 12,060,000 | 13,901,909 | |||||||||||||
2014-HQ3, M3, FRN, 6.647%, (1-month USD LIBOR + 4.75%), 10/25/24 | United States | 3,707,880 | 4,137,308 | |||||||||||||
2015-DN1, M3, FRN, 6.047%, (1-month USD LIBOR + 4.15%), 1/25/25 | United States | 19,225,458 | 20,730,755 | |||||||||||||
2015-DNA1, M2, FRN, 3.747%, (1-month USD LIBOR + 1.85%), 10/25/27 | United States | 10,530,000 | 10,746,703 | |||||||||||||
2015-DNA1, M3, FRN, 5.197%, (1-month USD LIBOR + 3.30%), 10/25/27 | United States | 4,500,000 | 5,016,635 | |||||||||||||
2015-DNA2, M2, FRN, 4.497%, (1-month USD LIBOR + 2.60%), 12/25/27 | United States | 7,178,008 | 7,338,852 | |||||||||||||
2015-DNA2, M3, FRN, 5.797%, (1-month USD LIBOR + 3.90%), 12/25/27 | United States | 18,171,000 | 20,200,861 | |||||||||||||
2015-DNA3, M2, FRN, 4.747%, (1-month USD LIBOR + 2.85%), 4/25/28 | United States | 6,366,359 | 6,605,500 | |||||||||||||
2015-HQ1, M2, FRN, 4.097%, (1-month USD LIBOR + 2.20%), 3/25/25 | United States | 2,613,163 | 2,631,147 | |||||||||||||
2015-HQ1, M3, FRN, 5.697%, (1-month USD LIBOR + 3.80%), 3/25/25 | United States | 13,295,000 | 14,319,866 | |||||||||||||
2015-HQ2, M3, FRN, 5.147%, (1-month USD LIBOR + 3.25%), 5/25/25 | United States | 6,860,000 | 7,778,672 | |||||||||||||
2015-HQA1, M2, FRN, 4.547%, (1-month USD LIBOR + 2.65%), 3/25/28 | United States | 7,213,903 | 7,355,365 | |||||||||||||
2015-HQA2, M2, FRN, 4.697%, (1-month USD LIBOR + 2.80%), 5/25/28 | United States | 8,425,417 | 8,667,996 | |||||||||||||
2016-DNA1, M2, FRN, 4.772%, (1-month USD LIBOR + 2.90%), 7/25/28 | United States | 323,209 | 331,861 | |||||||||||||
2016-DNA1, M3, FRN, 7.422%, (1-month USD LIBOR + 5.55%), 7/25/28 | United States | 2,130,000 | 2,576,365 | |||||||||||||
2016-DNA2, M2, FRN, 4.097%, (1-month USD LIBOR + 2.20%), 10/25/28 | United States | 1,806,273 | 1,829,461 | |||||||||||||
2016-HQA1, M2, FRN, 4.647%, (1-month USD LIBOR + 2.75%), 9/25/28 | United States | 1,082,194 | 1,107,421 | |||||||||||||
2016-HQA2, M2, FRN, 4.147%, (1-month USD LIBOR + 2.25%), 11/25/28 | United States | 1,119,849 | 1,146,826 | |||||||||||||
2016-HQA3, M2, FRN, 3.247%, (1-month USD LIBOR + 1.35%), 3/25/29 | United States | 250,000 | 253,633 |
68 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||
Asset-Backed Securities and Commercial | ||||||||||||||||
Mortgage-Backed Securities (continued) | ||||||||||||||||
Diversified Financials (continued) | ||||||||||||||||
r | FHLMC Structured Agency Credit Risk Debt Notes, (continued) | |||||||||||||||
2018-HQA1, M1, FRN, 2.597%, (1-month USD LIBOR + 0.70%), 9/25/30 | United States | 8,085,348 | $ | 8,092,215 | ||||||||||||
e,r | Flagship CLO VIII Ltd., 2014-8A, AR, 144A, FRN, 3.598%, (3-month USD LIBOR + 1.25%), 1/16/26 | United States | 5,545,000 | 5,554,260 | ||||||||||||
r | FNMA Connecticut Avenue Securities, | |||||||||||||||
2013-C01, M1, FRN, 3.897%, (1-month USD LIBOR + 2.00%), 10/25/23 | United States | 1,083,703 | 1,089,892 | |||||||||||||
2014-C01, M1, FRN, 3.497%, (1-month USD LIBOR + 1.60%), 1/25/24 | United States | 6,520,718 | 6,570,818 | |||||||||||||
2014-C02, 1M2, FRN, 4.497%, (1-month USD LIBOR + 2.60%), 5/25/24 | United States | 13,645,000 | 14,513,693 | |||||||||||||
2014-C03, 1M2, FRN, 4.897%, (1-month USD LIBOR + 3.00%), 7/25/24 | United States | 16,578,457 | 17,737,208 | |||||||||||||
2014-C03, 2M2, FRN, 4.797%, (1-month USD LIBOR + 2.90%), 7/25/24 | United States | 4,241,344 | 4,520,651 | |||||||||||||
2014-C04, 1M1, FRN, 6.797%, (1-month USD LIBOR + 4.90%), 11/25/24 | United States | 13,774,251 | 15,793,243 | |||||||||||||
2014-C04, 2M2, FRN, 6.897%, (1-month USD LIBOR + 5.00%), 11/25/24 | United States | 6,927,194 | 7,782,282 | |||||||||||||
2015-C01, 1M2, FRN, 6.197%, (1-month USD LIBOR + 4.30%), 2/25/25 | United States | 8,319,426 | 9,201,493 | |||||||||||||
2015-C01, 2M2, FRN, 6.447%, (1-month USD LIBOR + 4.55%), 2/25/25 | United States | 8,495,400 | 9,237,927 | |||||||||||||
2015-C02, 1M2, FRN, 5.897%, (1-month USD LIBOR + 4.00%), 5/25/25 | United States | 2,390,893 | 2,626,520 | |||||||||||||
2015-C02, 2M2, FRN, 5.897%, (1-month USD LIBOR + 4.00%), 5/25/25 | United States | 9,987,518 | 10,781,270 | |||||||||||||
2015-C03, 1M2, FRN, 6.897%, (1-month USD LIBOR + 5.00%), 7/25/25 | United States | 13,920,805 | 15,892,598 | |||||||||||||
2015-C03, 2M2, FRN, 6.897%, (1-month USD LIBOR + 5.00%), 7/25/25 | United States | 9,492,002 | 10,585,108 | |||||||||||||
2017-C01, 1M2, FRN, 5.447%, (1-month USD LIBOR + 3.55%), 7/25/29 | United States | 6,805,000 | 7,447,095 | |||||||||||||
2018-C02, 2M1, FRN, 2.547%, (1-month USD LIBOR + 0.65%), 8/25/30 | United States | 9,974,544 | 9,976,775 | |||||||||||||
e,r | Galaxy CLO Ltd., 2014-17A, AR, 144A, FRN, 3.748%, (3-month USD LIBOR + 1.40%), 7/15/26 | United States | 1,710,000 | 1,713,574 | ||||||||||||
e,r | Galaxy XXVII CLO Ltd., | |||||||||||||||
2018-27A, A, 144A, FRN, 3.383%, (3-month USD LIBOR + 1.02%), 5/16/31 | United States | 1,500,000 | 1,500,842 | |||||||||||||
2018-27A, C, 144A, FRN, 5.113%, (3-month USD LIBOR + 2.75%), 5/16/31 | United States | 250,000 | 245,994 | |||||||||||||
s | Greenpoint Manufactured Housing, 1999-5, M1A, FRN, 8.30%, 10/15/26 | United States | 657,965 | 709,843 | ||||||||||||
s,v | GS Mortgage Securities Corp. II, 2015-GC30, XA, IO, FRN, 1.011%, 5/10/50 | United States | 7,902,664 | 321,905 | ||||||||||||
r | GSAA Home Equity Trust, | |||||||||||||||
2005-5, M3, FRN, 2.842%, (1-month USD LIBOR + 0.945%), 2/25/35 | United States | 3,827,149 | 3,809,646 | |||||||||||||
2005-6, A3, FRN, 2.267%, (1-month USD LIBOR + 0.37%), 6/25/35 | United States | 210,228 | 212,336 |
franklintempleton.com | Semiannual Report | 69 |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued) | ||||||||||||||||
Diversified Financials (continued) | ||||||||||||||||
r | GSAMP Trust, 2005-HE3, M2, FRN, 2.902%, (1-month USD LIBOR + 1.005%), 6/25/35 | United States | 470,122 | $ | 473,309 | |||||||||||
s | GSR Mortgage Loan Trust, 2005-AR1, 1A1, FRN, 3.775%, 1/25/35 | United States | 397,789 | 393,718 | ||||||||||||
e,r | HayFin Kingsland IX Ltd., 2013-6A, BR, 144A, FRN, 4.159%, (3-month USD LIBOR + 1.80%), 4/28/31 | United States | 5,200,000 | 5,200,000 | ||||||||||||
e,r | Invitation Homes Trust, | |||||||||||||||
2015-SFR1, A, 144A, FRN, 3.346%, (1-month USD LIBOR + 1.45%), 3/17/32 | United States | 2,338,162 | 2,346,360 | |||||||||||||
2015-SFR2, A, 144A, FRN, 3.246%, (1-month USD LIBOR + 1.35%), 6/17/32 | United States | 7,854,075 | 7,876,584 | |||||||||||||
2015-SFR3, A, 144A, FRN, 3.196%, (1-month USD LIBOR + 1.30%), 8/17/32 | United States | 8,601,595 | 8,627,666 | |||||||||||||
2017-SFR2, A, 144A, FRN, 2.746%, (1-month USD LIBOR + 0.85%), 12/17/36 | United States | 14,095,309 | 14,143,938 | |||||||||||||
e,r | Jay Park CLO Ltd., 2016-1A, A2, 144A, FRN, 4.159%, (3-month USD LIBOR + 1.80%), 10/20/27 | United States | 17,290,000 | 17,333,398 | ||||||||||||
e,s | Jefferies & Co., 2009-R2, 4A, 144A, FRN, 3.649%, 5/26/37 | United States | 261,952 | 263,336 | ||||||||||||
s | JP Morgan Chase Commercial Mortgage Securities Trust, 2005-LPD5, F, FRN, 5.894%, 12/15/44 | United States | 2,515,264 | 2,509,107 | ||||||||||||
s | JP Morgan Mortgage Trust, 2004-A1, 5A1, FRN, 3.685%, 2/25/34 | United States | 75,219 | 75,957 | ||||||||||||
e,r | LCM 26 Ltd., | |||||||||||||||
26A, B, 144A, FRN, 3.326%, (3-month USD LIBOR + 1.40%), 1/20/31 | United States | 4,500,000 | 4,489,650 | |||||||||||||
26A, C, 144A, FRN, 3.726%, (3-month USD LIBOR + 1.80%), 1/20/31 | United States | 2,000,000 | 1,987,300 | |||||||||||||
e,r | LCM XXIII Ltd., 23A, A2, 144A, FRN, 4.209%, (3-month USD LIBOR + 1.85%), 10/20/29 | United States | 1,000,000 | 1,006,940 | ||||||||||||
r | Lehman XS Trust, 2005-4, 1A4, FRN, 2.457%, (1-month USD LIBOR + 0.56%), 10/25/35 | United States | 581,126 | 572,188 | ||||||||||||
e,r | Long Point Park CLO Ltd., | |||||||||||||||
2017-1A, A2, 144A, FRN, 3.061%, (3-month USD LIBOR + 1.375%), 1/17/30 | United States | 2,400,000 | 2,397,432 | |||||||||||||
2017-1A, B, 144A, FRN, 3.386%, (3-month USD LIBOR + 1.70%), 1/17/30 | United States | 1,000,000 | 1,000,920 | |||||||||||||
e,s | Mach One ULC, | |||||||||||||||
2004-1A, K, 144A, FRN, 5.45%, 5/28/40 | United States | 186,058 | 185,362 | |||||||||||||
2004-1A, L, 144A, FRN, 5.45%, 5/28/40 | United States | 3,470,500 | 3,457,192 | |||||||||||||
2004-1A, M, 144A, FRN, 5.45%, 5/28/40 | United States | 640,000 | 631,622 | |||||||||||||
r | Madison Avenue Manufactured Housing Contract Trust, 2002-A, B1, FRN, 5.147%, (1-month USD LIBOR + 3.25%), 3/25/32 | United States | 693,016 | 704,821 | ||||||||||||
e,r | Madison Park Funding XXIII Ltd., | |||||||||||||||
2017-23A, B, 144A, FRN, 4.066%, (3-month USD LIBOR + 1.70%), 7/27/30 | United States | 4,000,000 | 4,043,720 | |||||||||||||
2017-23A, C, 144A, FRN, 4.716%, (3-month USD LIBOR + 2.35%), 7/27/30 | United States | 1,300,000 | 1,307,371 |
70 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued) | ||||||||||||||||
Diversified Financials (continued) | ||||||||||||||||
e,r | Madison Park Funding XXVII Ltd., 2018-27A, A1B, 144A, FRN, 3.177%, (3-month USD LIBOR + 1.13%), 4/20/30 | United States | 3,061,000 | $ | 3,058,827 | |||||||||||
e,r | Magnetite XVIII Ltd., 2016-18A, B, 144A, FRN, 3.589%, (3-month USD LIBOR + 1.75%), 11/15/28 | United States | 3,000,000 | 3,007,200 | ||||||||||||
r | Manufactured Housing Contract Trust Pass Through Certificates, 2001-1, IIM2, FRN, 3.347%, (1-month USD LIBOR + 1.45%), 4/20/32 | United States | 5,331,756 | 5,282,630 | ||||||||||||
MASTR Alternative Loan Trust, | ||||||||||||||||
2003-1, 3A1, 5.00%, 5/25/18 | United States | 13,558 | 14,108 | |||||||||||||
2003-6, 2A1, 5.00%, 8/25/18 | United States | 43,345 | 43,386 | |||||||||||||
2003-9, 1A1, 5.50%, 12/25/18 | United States | 28,770 | 28,828 | |||||||||||||
s 2004-11, 2A1, FRN, 5.511%, 11/25/19 | United States | 303,801 | 307,160 | |||||||||||||
2004-4, 5A1, 5.50%, 4/25/19 | United States | 198,083 | 199,855 | |||||||||||||
r | Merrill Lynch Mortgage Investors Trust, 2005-A10, A, FRN, 2.107%, (1-month USD LIBOR + 0.21%), 2/25/36 | United States | 2,748,852 | 2,655,401 | ||||||||||||
r | Merrill Lynch Mortgage Investors Trust Inc., 2003-E, A1, FRN, 2.517%, (1-month USD LIBOR + 0.62%), 10/25/28 | United States | 688,507 | 685,660 | ||||||||||||
s | Merrill Lynch Mortgage Trust, 2005-CKI1, D, FRN, 5.54%, 11/12/37 | United States | 640,382 | 639,465 | ||||||||||||
e,s | Mill City Mortgage Loan Trust, | |||||||||||||||
2017-3, A1, 144A, FRN, 2.75%, 1/25/61 | United States | 9,568,641 | 9,438,804 | |||||||||||||
2018-1, A1, 144A, FRN, 3.25%, 5/25/62 | United States | 6,700,000 | 6,716,750 | |||||||||||||
e,s | Multi Security Asset Trust LP Commercial Mortgage, 2005-RR4A, K, 144A, FRN, 5.88%, 11/28/35 | United States | 2,131,329 | 2,130,657 | ||||||||||||
e,r | Neuberger Berman CLO Ltd., 2017-26A, B, 144A, FRN, 3.855%, (3-month USD LIBOR + 1.50%), 10/18/30 | United States | 1,078,945 | 1,082,322 | ||||||||||||
e,r | Neuberger Berman CLO XVI-S Ltd., | |||||||||||||||
2017-16SA, B, 144A, FRN, 3.598%, (3-month USD LIBOR + 1.25%), 1/15/28 | United States | 400,000 | 397,512 | |||||||||||||
2017-16SA, C, 144A, FRN, 3.948%, (3-month USD LIBOR + 1.60%), 1/15/28 | United States | 400,000 | 398,308 | |||||||||||||
e,r | Neuberger Berman Loan Advisers CLO Ltd., 2018-27A, C, 144A, FRN, 3.717%, (3-month USD LIBOR + 1.70%), 1/15/30 | United States | 500,000 | 499,880 | ||||||||||||
r | New York Mortgage Trust, 2005-3, M1, FRN, 2.572%, (1-month USD LIBOR + 0.675%), 2/25/36 | United States | 327,226 | 296,952 | ||||||||||||
e,r | NZCG Funding Ltd., 2015-1A, A2R, 144A, FRN, 3.494%, (3-month USD LIBOR + 1.55%), 2/26/31 | United States | 6,600,000 | 6,601,518 | ||||||||||||
e | OBP Depositor LLC Trust, 2010-OBP, A, 144A, 4.646%, 7/15/45 | United States | 5,834,000 | 5,999,390 | ||||||||||||
e,r | OBX Trust, 2018-1, A2, 144A, FRN, 2.527%, (1-month USD LIBOR + 0.65%), 6/25/57 | United States | 5,493,251 | 5,517,853 | ||||||||||||
e,r | Octagon Investment Partners 18-R Ltd., 2018-18A, C, 144A, FRN, 5.055%, (3-month USD LIBOR + 2.70%), 4/16/31 | United States | 1,000,000 | 1,000,020 | ||||||||||||
e,r | Octagon Investment Partners 31 LLC, 2017-1A, C, 144A, FRN, 4.759%, (3-month USD LIBOR + 2.40%), 7/20/30 | United States | 280,761 | 282,328 | ||||||||||||
e,r | Octagon Investment Partners 35 Ltd., 2018-1A, A1B, 144A, FRN, 2.848%, (3-month USD LIBOR + 1.10%), 1/20/31 | United States | 2,000,000 | 1,999,800 | ||||||||||||
e,r | Octagon Investment Partners XX Ltd., 2014-1A, AR, 144A, FRN, 2.941%, (3-month USD LIBOR + 1.13%), 8/12/26 | United States | 3,500,000 | 3,503,850 | ||||||||||||
e,r | Octagon Investment Partners XXIII Ltd., | |||||||||||||||
2015-1A, CR, 144A, FRN, 4.111%, (3-month USD LIBOR + 1.85%), 7/15/27 | United States | 250,000 | 250,028 | |||||||||||||
2015-1A, DR, 144A, FRN, 4.811%, (3-month USD LIBOR + 2.55%), 7/15/27 | United States | 300,000 | 300,039 |
franklintempleton.com | Semiannual Report | 71 |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued) | ||||||||||||||||
Diversified Financials (continued) | ||||||||||||||||
r | Ownit Mortgage Loan Asset-Backed Certificates, 2005-2, M4, FRN, 2.827%, (1-month USD LIBOR + 0.93%), 3/25/36 | United States | 4,362 | $ | 4,375 | |||||||||||
e | Progress Residential Trust, | |||||||||||||||
2015-SFR2, A, 144A, 2.74%, 6/12/32 | United States | 863,616 | 851,980 | |||||||||||||
2017-SFR1, A, 144A, 2.768%, 8/17/34 | United States | 409,035 | 396,709 | |||||||||||||
r | RAAC, 2004-SP1, AII, FRN, 2.597%, (1-month USD LIBOR + 0.70%), 3/25/34 | United States | 405,942 | 397,897 | ||||||||||||
e,r | Radnor RE Ltd., 2018-1, M1, 144A, FRN, 3.297%, (1-month USD LIBOR + 1.40%), 3/25/28 | United States | 5,790,000 | 5,804,275 | ||||||||||||
s | Structured ARM Loan Trust, 2004-12, 3A1, FRN, 3.693%, 9/25/34 | United States | 2,328,641 | 2,330,397 | ||||||||||||
r | Structured Asset Investment Loan Trust, 2004-BNC2, A2, FRN, 2.937%, (1-month USD LIBOR + 1.04%), 12/25/34 | United States | 39,552 | 39,669 | ||||||||||||
r | Structured Asset Mortgage Investments II Trust, 2004-AR6, A1A, FRN, 2.596%, (1-month USD LIBOR + 0.70%), 2/19/35 | United States | 1,516,653 | 1,506,256 | ||||||||||||
e,r | TCI-Cent CLO Income Note Issuer Ltd., 2017-1A, B, 144A, FRN, 4.71%, (3-month USD LIBOR + 2.35%), 7/25/30 | United States | 583,989 | 588,532 | ||||||||||||
e,r | TCI-Flatiron CLO Ltd., 2017-1A, C, 144A, FRN, 3.477%, (3-month USD LIBOR + 1.85%), 11/17/30 | United States | 500,000 | 502,215 | ||||||||||||
Thornburg Mortgage Securities Trust, | ||||||||||||||||
r 2004-3, A, FRN, 2.637%, (1-month USD LIBOR + 0.74%), 9/25/44 | United States | 949,853 | 907,649 | |||||||||||||
s 2005-1, A3, FRN, 3.366%, 4/25/45 | United States | 295,786 | 297,990 | |||||||||||||
e | Towd Point Mortgage Trust, | |||||||||||||||
s 2015-2, 2A1, 144A, FRN, 3.75%, 11/25/57 | United States | 1,126,392 | 1,136,606 | |||||||||||||
s 2015-3, A1B, 144A, FRN, 3.00%, 3/25/54 | United States | 1,730,203 | 1,726,857 | |||||||||||||
s 2016-1, A1, 144A, FRN, 3.50%, 2/25/55 | United States | 7,083,584 | 7,119,412 | |||||||||||||
s 2016-3, A1, 144A, FRN, 2.25%, 4/25/56 | United States | 12,701,006 | 12,498,145 | |||||||||||||
s 2016-4, A1, 144A, FRN, 2.25%, 7/25/56 | United States | 17,393,439 | 17,052,489 | |||||||||||||
s 2016-5, A1, 144A, FRN, 2.50%, 10/25/56 | United States | 5,506,721 | 5,415,127 | |||||||||||||
s 2017-1, A1, 144A, FRN, 2.75%, 10/25/56 | United States | 15,829,638 | 15,638,462 | |||||||||||||
s 2017-2, A1, 144A, FRN, 2.75%, 4/25/57 | United States | 16,892,497 | 16,665,908 | |||||||||||||
s 2017-4, A1, 144A, FRN, 2.75%, 6/25/57 | United States | 13,115,334 | 12,919,240 | |||||||||||||
r 2017-5, A1, 144A, FRN, 2.497%, (1-month USD LIBOR + 0.60%), 2/25/57 | United States | 4,686,450 | 4,718,386 | |||||||||||||
s 2018-1, A1, 144A, FRN, 3.00%, 1/25/58 | United States | 3,357,621 | 3,328,175 | |||||||||||||
s 2018-3, A1A, 144A, FRN, 3.50%, 3/25/54 | United States | 3,746,769 | 3,761,879 | |||||||||||||
e,r | Voya CLO Ltd., | |||||||||||||||
2012-4A, A2R, 144A, FRN, 4.198%, (3-month USD LIBOR + 1.85%), 10/15/28 | United States | 7,660,000 | 7,676,622 | |||||||||||||
2013-2A, CR, 144A, FRN, 5.094%, (3-month USD LIBOR + 2.75%), 4/25/31 | United States | 375,000 | 374,505 | |||||||||||||
2014-1A, CR2, 144A, FRN, 5.155%, (3-month USD LIBOR + 2.80%), 4/18/31 | United States | 600,000 | 600,000 | |||||||||||||
2017-3A, B, 144A, FRN, 4.709%, (3-month USD LIBOR + 2.35%), 7/20/30 | United States | 507,690 | 512,376 | |||||||||||||
r | WaMu Mortgage Pass-Through Certificates, | |||||||||||||||
2005-AR19, A1A1, FRN, 2.167%, (1-month USD LIBOR + 0.27%), 12/25/45 | United States | 2,881,678 | 2,833,281 | |||||||||||||
2005-AR8, 1A1A, FRN, 2.477%, (1-month USD LIBOR + 0.58%), 7/25/45 | United States | 1,094,854 | 1,081,991 |
72 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued) | ||||||||||||||
Diversified Financials (continued) | ||||||||||||||
Wells Fargo Commercial Mortgage Trust, | ||||||||||||||
2016-NXS6, A2, 2.399%, 11/15/49 | United States | 6,534,000 | $ | 6,363,376 | ||||||||||
s,v 2016-NXS6, XA, IO, FRN, 1.794%, 11/15/49 | United States | 53,840,649 | 4,926,075 | |||||||||||
s | Wells Fargo Mortgage Backed Securities Trust, | |||||||||||||
2004-W, A9, FRN, 3.707%, 11/25/34 | United States | 91,706 | 94,183 | |||||||||||
2005-AR10, 2A3, FRN, 3.713%, 6/25/35 | United States | 539,505 | 544,967 | |||||||||||
e,r | West CLO Ltd., | |||||||||||||
2014-1A, A2R, 144A, FRN, 3.705%, (3-month USD LIBOR + 1.35%), 7/18/26 | United States | 1,360,000 | 1,360,952 | |||||||||||
2014-1A, BR, 144A, FRN, 4.205%, (3-month USD LIBOR + 1.85%), 7/18/26 | United States | 2,410,000 | 2,414,434 | |||||||||||
|
| |||||||||||||
|
847,261,693 |
| ||||||||||||
|
| |||||||||||||
Real Estate 0.6% | ||||||||||||||
e | American Homes 4 Rent, 2015-SFR1, A, 144A, 3.467%, 4/17/52 | United States | 5,802,472 | 5,749,720 | ||||||||||
e,r | Colony American Homes, 2015-1A, A, 144A, FRN, 3.097%, (1-month USD LIBOR + 1.20%), 7/17/32 | United States | 9,460,165 | 9,467,573 | ||||||||||
e,t | Colony MFM Trust, 2014-1, A, 144A, 2.543%, 4/20/50 | United States | 793,791 | 788,388 | ||||||||||
|
| |||||||||||||
16,005,681 | ||||||||||||||
|
| |||||||||||||
Total Asset-Backed Securities and Commercial | ||||||||||||||
Mortgage-Backed Securities (Cost $897,987,951) | 899,875,173 | |||||||||||||
|
| |||||||||||||
Mortgage-Backed Securities 1.0% | ||||||||||||||
w | Federal Home Loan Mortgage Corp. (FHLMC) Adjustable Rate 0.1% | |||||||||||||
FHLMC, 3.637% - 3.855%, (12-month USD LIBOR +/- MBS Margin), 10/01/36 - 6/01/37 | United States | 2,175,432 | 2,293,724 | |||||||||||
|
| |||||||||||||
Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate 0.0%† | ||||||||||||||
FHLMC Gold 15 Year, 5.00%, 10/01/23 | United States | 117,110 | 118,886 | |||||||||||
FHLMC Gold 15 Year, 6.00%, 6/01/23 | United States | 22,943 | 23,616 | |||||||||||
FHLMC Gold 30 Year, 5.00%, 1/01/39 | United States | 136,575 | 146,308 | |||||||||||
|
| |||||||||||||
288,810 | ||||||||||||||
|
| |||||||||||||
w | Federal National Mortgage Association (FNMA) Adjustable Rate 0.8% | |||||||||||||
FNMA, 2.793% - 2.85%, (1-month USD LIBOR +/- MBS Margin), 4/01/28 - 7/01/34 | United States | 292,905 | 301,886 | |||||||||||
FNMA, 2.873% - 3.458%, (US 3 Year CMT T-Note +/- MBS Margin), 3/01/21 - 6/01/34 | United States | 102,726 | 105,318 | |||||||||||
FNMA, 2.865% - 3.48%, (Federal COF +/- MBS Margin), 1/01/29 - 10/01/29 | United States | 16,669 | 17,102 | |||||||||||
FNMA, 3.544%, (US 5 Year CMT T-Note +/- MBS Margin), 2/01/30 | United States | 70,390 | 73,721 | |||||||||||
FNMA, 2.577% - 3.843%, (1 Year CMT +/- MBS Margin), 11/01/30 - 10/01/44 | United States | 489,368 | 500,898 | |||||||||||
FNMA, 2.52% - 4.184%, (US 1 Year CMT T-Note +/- MBS Margin), 2/01/21 - 10/01/43 | United States | 3,340,697 | 3,462,144 | |||||||||||
FNMA, 3.084% - 4.277%, (12-month USD LIBOR +/- MBS Margin), 11/01/32 - 2/01/44 | United States | 14,449,885 | 15,147,910 | |||||||||||
FNMA, 4.375%, (6-month US T-Bill +/- MBS Margin), 8/01/32 | United States | 107,191 | 109,091 | |||||||||||
FNMA, 2.741% - 4.765%, (6-month USD LIBOR +/- MBS Margin), 9/01/22 - 8/01/37 | United States | 1,549,130 | 1,590,568 |
franklintempleton.com | Semiannual Report | 73 |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||
Mortgage-Backed Securities (continued) | ||||||||||||||||
w | Federal National Mortgage Association (FNMA) Adjustable Rate | |||||||||||||||
(continued) | ||||||||||||||||
FNMA, 2.00% - 5.75%, (11th District COF +/- MBS Margin), 8/01/18 -12/01/36 | United States | 151,829 | $ | 157,125 | ||||||||||||
|
| |||||||||||||||
21,465,763 | ||||||||||||||||
|
| |||||||||||||||
Federal National Mortgage Association (FNMA) Fixed Rate 0.1% | ||||||||||||||||
FNMA 15 Year, 3.50%, 10/01/25 | United States | 997,542 | 1,010,212 | |||||||||||||
FNMA 15 Year, 4.00%, 12/01/25 | United States | 1,508,075 | 1,548,064 | |||||||||||||
FNMA 15 Year, 4.50%, 5/01/23 - 6/01/25 | United States | 1,088,773 | 1,129,351 | |||||||||||||
FNMA 30 Year, 5.00%, 3/01/38 | United States | 26,307 | 27,982 | |||||||||||||
|
| |||||||||||||||
3,715,609 | ||||||||||||||||
|
| |||||||||||||||
w | Government National Mortgage Association (GNMA) Adjustable Rate 0.0%† | |||||||||||||||
GNMA, 2.625% - 2.75%, (US 1 Year CMT T-Note +/- MBS Margin), 4/20/26 - 9/20/26 | United States | 22,381 | 22,909 | |||||||||||||
|
| |||||||||||||||
Total Mortgage-Backed Securities (Cost $27,880,747) | 27,786,815 | |||||||||||||||
|
| |||||||||||||||
Municipal Bonds 0.8% | ||||||||||||||||
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 | 5,946,787 | |||||||||||||
Pennsylvania State GO, Refunding, Second Series, 5.00%, 1/15/20 | United States | 6,500,000 | 6,825,780 | |||||||||||||
San Jose RDA Successor Agency Tax Allocation, | ||||||||||||||||
Senior, Refunding, Series A-T, 2.48%, 8/01/21 | United States | 1,595,000 | 1,574,711 | |||||||||||||
Senior, Refunding, Series A-T, 2.63%, 8/01/22 | United States | 5,320,000 | 5,231,369 | |||||||||||||
Texas State GO, Transportation Commission-Highway Improvement, Series A, 5.00%, 4/01/21 | United States | 2,685,000 | 2,909,466 | |||||||||||||
|
| |||||||||||||||
Total Municipal Bonds (Cost $22,620,484) | 22,488,113 | |||||||||||||||
|
| |||||||||||||||
Shares | ||||||||||||||||
Escrows and Litigation Trusts (Cost $—) 0.0% | ||||||||||||||||
a,b | NewPage Corp., Litigation Trust | United States | 500,000 | — | ||||||||||||
|
| |||||||||||||||
Total Investments before Short Term Investments | 2,590,331,047 | |||||||||||||||
|
| |||||||||||||||
Short Term Investments (Cost $92,365,460) 3.5% | ||||||||||||||||
Money Market Funds 3.5% | ||||||||||||||||
d,x | Institutional Fiduciary Trust Money Market Portfolio, 1.30% | United States | 92,365,460 | 92,365,460 | ||||||||||||
|
| |||||||||||||||
Total Investments (Cost $2,706,748,885) 100.6% | 2,682,696,507 | |||||||||||||||
Other Assets, less Liabilities (0.6)% | (16,588,241 | ) | ||||||||||||||
|
| |||||||||||||||
Net Assets 100.0% | $ | 2,666,108,266 | ||||||||||||||
|
|
74 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
†Rounds to less than 0.1% of net assets.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
aNon-income producing.
bFair valued using significant unobservable inputs. See Note 12 regarding fair value measurements.
cSee Note 8 regarding restricted securities.
dSee Note 3(f) regarding investments in affiliated management investment companies.
eSecurity 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 April 30, 2018, the aggregate value of these securities was $665,231,606, representing 24.9% of net assets.
fSecurity 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 April 30, 2018, the aggregate value of these securities was $11,692,329, representing 0.4% of net assets.
gThe coupon rate shown represents the rate at period end.
hIncome may be received in additional securities and/or cash.
iSee Note 1(h) regarding senior floating rate interests.
jSee Note 7 regarding defaulted securities.
kSecurity purchased on a delayed delivery basis. See Note 1(c).
lA portion or all of the security represents an unsettled loan commitment. The coupon rate is to-be determined (TBD) at the time of settlement and will be based upon a reference index/floor plus a spread.
mPrincipal amount is stated in 100 Mexican Peso Units.
nSecurity purchased on a when-issued basis. See Note 1(c).
oPrincipal amount is stated in 1,000 Brazilian Real Units.
pRedemption price at maturity and coupon payment are adjusted for inflation. See Note 1(j).
qPrincipal amount of security is adjusted for inflation. See Note 1(j).
rThe coupon rate shown represents the rate inclusive of any caps or floors, if applicable, in effect at period end.
sAdjustable rate security with an interest rate that is not based on a published reference index and spread. The rate is based on the structure of the agreement and current market conditions. The coupon rate shown represents the rate at period end.
tThe 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.
uThe coupon rate will be determined at time of issue.
vInvestment in an interest-only security entitles holders to receive only the interest payment on the underlying instruments. The principal amount shown is the notional amount of the underlying instruments.
wAdjustable Rate Mortgage-Backed Security (ARM); the rate shown is the effective rate at period end. ARM rates are not based on a published reference rate and spread, but instead pass-through weighted average interest income inclusive of any caps or floors, if applicable, from the underlying mortgage loans in which the majority of mortgages pay interest based on the index shown at their designated reset dates plus a spread, less the applicable servicing and guaranty fee (MBS margin).
xThe rate shown is the annualized seven-day effective yield at period end.
franklintempleton.com | Semiannual Report | 75 |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
At April 30, 2018, the Fund had the following futures contracts outstanding. See Note 1(d).
Futures Contracts
Description | Type | | Number of Contracts | | | Notional Amount | * | | Expiration Date | | | Value/ Unrealized Appreciation (Depreciation | ) | |||||||
Interest Rate Contracts | ||||||||||||||||||||
Canada 10 Yr. Bond | Long | 49 | $ | 5,019,130 | 6/20/18 | $ 14,390 | ||||||||||||||
CME Ultra Long Term U.S. Treasury Bond | Short | 5 | 785,625 | 6/20/18 | (12,358 | ) | ||||||||||||||
U.S. Treasury 2 Yr. Note | Long | 1,885 | 399,708,360 | 6/29/18 | (1,123,931 | ) | ||||||||||||||
U.S. Treasury 5 Yr. Note | Short | 276 | 31,328,156 | 6/29/18 | 93,237 | |||||||||||||||
U.S. Treasury 10 Yr. Note | Short | 84 | 10,048,500 | 6/20/18 | 19,465 | |||||||||||||||
|
| |||||||||||||||||||
Total Futures Contracts | $(1,009,197 | ) | ||||||||||||||||||
|
|
*As of period end.
At April 30, 2018, the Fund had the following forward exchange contracts outstanding. See Note 1(d).
Forward Exchange Contracts
Currency | Counterpartya | Type | Quantity | | Contract Amount | * | | Settlement Date | | | Unrealized Appreciation | | | Unrealized Depreciation | | |||||||||||||
OTC Forward Exchange Contracts | ||||||||||||||||||||||||||||
Euro | BZWS | Sell | 194,860 | 243,495 | 9/19/18 | $ 5,400 | $ — | |||||||||||||||||||||
Euro | CITI | Sell | 391,262 | 489,113 | 9/19/18 | 11,037 | — | |||||||||||||||||||||
Euro | GSCO | Sell | 420,000 | 525,084 | 9/19/18 | 11,894 | — | |||||||||||||||||||||
Euro | JPHQ | Sell | 6,165,355 | 7,703,734 | 9/19/18 | 170,401 | — | |||||||||||||||||||||
Polish Zloty | JPHQ | Buy | 7,680,000 | 2,270,275 | 9/19/18 | — | (75,163 | ) | ||||||||||||||||||||
Swedish Krona | JPHQ | Buy | 32,420,000 | 3,945,479 | 9/19/18 | — | (193,812 | ) | ||||||||||||||||||||
United States Dollar | DBAB | Buy | 15,680,265 | 12,550,136 | EUR | 9/19/18 | 345,486 | — | ||||||||||||||||||||
Australian Dollar | JPHQ | Sell | 5,130,000 | 3,984,445 | 10/09/18 | 118,093 | — | |||||||||||||||||||||
Brazilian Real | JPHQ | Buy | 7,500,000 | 2,160,250 | 10/09/18 | — | (49,833 | ) | ||||||||||||||||||||
Canadian Dollar | JPHQ | Sell | 3,300,000 | 2,626,030 | 10/09/18 | 45,438 | — | |||||||||||||||||||||
Indian Rupee | DBAB | Buy | 135,900,000 | 2,059,091 | 10/09/18 | — | (53,749 | ) | ||||||||||||||||||||
Indian Rupee | JPHQ | Buy | 295,000,000 | 4,458,760 | 10/09/18 | — | (105,737 | ) | ||||||||||||||||||||
Indonesian Rupiah | JPHQ | Buy | 67,630,000,000 | 4,838,875 | 10/09/18 | — | (69,517 | ) | ||||||||||||||||||||
Mexican Peso | JPHQ | Buy | 73,650,000 | 3,918,950 | 10/09/18 | — | (80,073 | ) | ||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Forward Exchange Contracts | $ 707,749 | $ (627,884 | ) | |||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) | $ 79,865 | |||||||||||||||||||||||||||
|
|
*In U.S. dollars unless otherwise indicated.
aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.
76 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
At April 30, 2018, the Fund had the following credit default swap contracts outstanding. See Note 1(d).
Credit Default Swap Contracts
Description | | Periodic Payment Rate | | | Payment Frequency | | Counter- party | | Maturity Date | | | Notional Amount | a | Value | | Unamortized Upfront Payments (Receipts) | | | Unrealized Appreciation (Depreciation) | | Rating | b | ||||||||||||
| ||||||||||||||||||||||||||||||||||
Centrally Cleared Swap Contracts | ||||||||||||||||||||||||||||||||||
Contracts to Buy Protectionc | ||||||||||||||||||||||||||||||||||
Single Name | ||||||||||||||||||||||||||||||||||
Government of | (1.00)% | Quarterly | 6/20/23 | 952,000 | $ | 40,763 | $ | 43,100 | $ | (2,337 | ) | |||||||||||||||||||||||
Navient Corp. | (5.00)% | Quarterly | 3/20/19 | 2,350,000 | (109,403 | ) | (86,030 | ) | (23,373 | ) | ||||||||||||||||||||||||
Traded Index | ||||||||||||||||||||||||||||||||||
ITRX.EUR.28 | (1.00)% | Quarterly | 12/20/22 | 71,000,000 | EUR | (2,241,296 | ) | (1,757,214 | ) | (484,082 | ) | |||||||||||||||||||||||
Contracts to Sell Protectionc,d | ||||||||||||||||||||||||||||||||||
Single Name | ||||||||||||||||||||||||||||||||||
Government of | 1.00% | Quarterly | 6/20/23 | 2,700,000 | (2,050 | ) | 4,395 | (6,445 | ) | BBB- | ||||||||||||||||||||||||
Traded Index | ||||||||||||||||||||||||||||||||||
CDX.EM.29 | 1.00% | Quarterly | 6/20/23 | 6,800,000 | (124,000 | ) | (134,347 | ) | 10,347 | Non- | ||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||
Grade | ||||||||||||||||||||||||||||||||||
CDX.NA.HY.30 | 5.00% | Quarterly | 6/20/23 | 43,600,000 | 3,261,045 | 2,617,290 | 643,755 | Non- | ||||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||
Grade | ||||||||||||||||||||||||||||||||||
CDX.NA.IG.29 | 1.00% | Quarterly | 12/20/22 | 81,350,000 | 1,742,123 | 1,485,115 | 257,008 | Investment | ||||||||||||||||||||||||||
Grade | ||||||||||||||||||||||||||||||||||
Total Centrally Cleared Swap Contracts |
| $ | 2,567,182 | $ | 2,172,309 | $ | 394,873 | |||||||||||||||||||||||||||
OTC Swap Contracts | ||||||||||||||||||||||||||||||||||
Contracts to Buy Protectionc | ||||||||||||||||||||||||||||||||||
Single Name | ||||||||||||||||||||||||||||||||||
The AES Corp. | (5.00)% | Quarterly | JPHQ | 6/20/22 | 7,600,000 | $ | (1,304,505 | ) | $ | (851,978 | ) | $ | (452,527 | ) | ||||||||||||||||||||
Ally Financial Inc. | (5.00)% | Quarterly | CITI | 12/20/22 | 1,500,000 | (258,833 | ) | (254,110 | ) | (4,723 | ) | |||||||||||||||||||||||
Ally Financial Inc. | (5.00)% | Quarterly | JPHQ | 12/20/22 | 2,700,000 | (465,900 | ) | (460,595 | ) | (5,305 | ) | |||||||||||||||||||||||
American Airlines | ||||||||||||||||||||||||||||||||||
Group Inc. | (5.00)% | Quarterly | CITI | 12/20/19 | 1,780,000 | (132,673 | ) | (120,210 | ) | (12,463 | ) | |||||||||||||||||||||||
Best Buy Co. Inc. | (5.00)% | Quarterly | BZWS | 6/20/22 | 950,000 | (167,706 | ) | (134,874 | ) | (32,832 | ) | |||||||||||||||||||||||
Best Buy Co. Inc. | (5.00)% | Quarterly | CITI | 6/20/22 | 2,800,000 | (494,292 | ) | (381,553 | ) | (112,739 | ) | |||||||||||||||||||||||
Best Buy Co. Inc. | (5.00)% | Quarterly | JPHQ | 6/20/22 | 1,500,000 | (264,799 | ) | (219,748 | ) | (45,051 | ) | |||||||||||||||||||||||
CSC Holdings LLC | (5.00)% | Quarterly | GSCO | 9/20/18 | 3,500,000 | (84,941 | ) | (28,223 | ) | (56,718 | ) | |||||||||||||||||||||||
CSC Holdings LLC | (5.00)% | Quarterly | GSCO | 3/20/19 | 3,000,000 | (140,616 | ) | (31,728 | ) | (108,888 | ) | |||||||||||||||||||||||
DISH DBS Corp. | (5.00)% | Quarterly | JPHQ | 6/20/21 | 4,400,000 | (225,447 | ) | (228,443 | ) | 2,996 | ||||||||||||||||||||||||
Nabors | ||||||||||||||||||||||||||||||||||
Industries Inc. | (1.00)% | Quarterly | JPHQ | 6/20/20 | 1,950,000 | (10,546 | ) | 37,802 | (48,348 | ) | ||||||||||||||||||||||||
Navient Corp. | (5.00)% | Quarterly | JPHQ | 3/20/20 | 1,150,000 | (97,148 | ) | (79,128 | ) | (18,020 | ) | |||||||||||||||||||||||
PHH Corp. | (5.00)% | Quarterly | GSCO | 9/20/19 | 1,800,000 | (121,799 | ) | 6,455 | (128,254 | ) | ||||||||||||||||||||||||
Sanmina Corp. | (5.00)% | Quarterly | GSCO | 6/20/19 | 6,500,000 | (399,921 | ) | (325,775 | ) | (74,146 | ) | |||||||||||||||||||||||
Tenet Healthcare | ||||||||||||||||||||||||||||||||||
Corp. | (5.00)% | Quarterly | DBAB | 3/20/19 | 1,825,000 | (82,785 | ) | (42,448 | ) | (40,337 | ) |
franklintempleton.com | Semiannual Report | 77 |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
Credit Default Swap Contracts (continued)
Description | | Periodic Payment Rate Received (Paid) | | | Payment Frequency | | | Counter- party | | | Maturity Date | | | Notional Amount | a | Value | | Unamortized Upfront Payments (Receipts) | | | Unrealized Appreciation (Depreciation) | | Rating | b | ||||||||||||
| ||||||||||||||||||||||||||||||||||||
OTC Swap Contracts (continued) | ||||||||||||||||||||||||||||||||||||
Contracts to Sell Protectionc,d | ||||||||||||||||||||||||||||||||||||
Single Name | ||||||||||||||||||||||||||||||||||||
American Tower | ||||||||||||||||||||||||||||||||||||
Corp. | 1.00% | Quarterly | GSCO | 3/20/21 | 6,500,000 | $ | (22,664 | ) | $ | (70,333 | ) | $ | 47,669 | BBB- | ||||||||||||||||||||||
Dish DBS Corp. | 5.00% | Quarterly | JPHQ | 6/20/23 | 4,400,000 | (166,700 | ) | (37,898 | ) | (128,802 | ) | B | ||||||||||||||||||||||||
Enterprise Products | ||||||||||||||||||||||||||||||||||||
Operating LLC | 1.00% | Quarterly | MSCO | 12/20/19 | 3,500,000 | 49,410 | (8,308 | ) | 57,718 | BBB+ | ||||||||||||||||||||||||||
General Electric | ||||||||||||||||||||||||||||||||||||
Co. | 1.00% | Quarterly | CITI | 12/20/22 | 6,660,000 | 78,587 | 62,657 | 15,930 | A | |||||||||||||||||||||||||||
Government of | ||||||||||||||||||||||||||||||||||||
Colombia | 1.00% | Quarterly | CITI | 6/20/23 | 2,700,000 | (5,673 | ) | (7,260 | ) | 1,587 | BBB- | |||||||||||||||||||||||||
Government of | ||||||||||||||||||||||||||||||||||||
Mexico | 1.00% | Quarterly | CITI | 6/20/23 | 2,500,000 | (13,144 | ) | (18,350 | ) | 5,206 | BBB+ | |||||||||||||||||||||||||
Government of | ||||||||||||||||||||||||||||||||||||
Mexico | 1.00% | Quarterly | JPHQ | 6/20/23 | 2,700,000 | (14,196 | ) | (20,256 | ) | 6,060 | BBB+ | |||||||||||||||||||||||||
Nabors | ||||||||||||||||||||||||||||||||||||
Industries Inc. | 1.00% | Quarterly | JPHQ | 6/20/22 | 1,950,000 | (107,605 | ) | (211,372 | ) | 103,767 | BB | |||||||||||||||||||||||||
Simon Property | ||||||||||||||||||||||||||||||||||||
Group LP | 1.00% | Quarterly | CITI | 6/20/22 | 4,500,000 | 93,093 | 10,398 | 82,695 | A | |||||||||||||||||||||||||||
Simon Property | ||||||||||||||||||||||||||||||||||||
Group LP | 1.00% | Quarterly | JPHQ | 6/20/22 | 5,475,000 | 113,264 | 44,715 | 68,549 | A | |||||||||||||||||||||||||||
Traded Index | ||||||||||||||||||||||||||||||||||||
eCitibank Bespoke Cambridge Index, Equity Tranche 0-3% | 0.00% | Quarterly | CITI | 12/20/19 | 2,700,000 | (492,648 | ) | (362,695 | ) | (129,953 | ) | Non- | ||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||||
Grade | ||||||||||||||||||||||||||||||||||||
eCitibank Bespoke Hong Kong Index, Mezzanine Tranche 3-5% | 1.00% | Quarterly | CITI | 12/20/18 | 7,000,000 | 28,847 | (96,053 | ) | 124,900 | Non- | ||||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||||
Grade | ||||||||||||||||||||||||||||||||||||
eCitibank Bespoke Index, Mezzanine Tranche 5-8% | 0.50% | Quarterly | CITI | 6/20/18 | 8,000,000 | 339 | — | 339 | Non- | |||||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||||
Grade | ||||||||||||||||||||||||||||||||||||
eCitibank Bespoke Index, Mezzanine Tranche 6-10% | 0.63% | Quarterly | CITI | 12/20/18 | 10,000,000 | 18,998 | — | 18,998 | Non- | |||||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||||
Grade |
78 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
Credit Default Swap Contracts (continued)
Description | | Periodic Payment Rate Received (Paid) | | Payment Frequency | Counter- party | | Maturity Date | | | Notional Amount | a | Value | | Unamortized Upfront Payments (Receipts) | | | Unrealized Appreciation (Depreciation) | | Rating | b | ||||||||||||
| ||||||||||||||||||||||||||||||||
OTC Swap Contracts (continued) | ||||||||||||||||||||||||||||||||
Contracts to Sell Protectionc,d (continued) |
| |||||||||||||||||||||||||||||||
Traded Index (continued) eCitibank Bespoke | 0.00% | Quarterly | CITI | 6/20/19 | 1,300,000 | $ | (108,152 | ) | $ | (175,289 | ) | $ | 67,137 | Non- | ||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||
Grade | ||||||||||||||||||||||||||||||||
eCitibank Bespoke | 0.79% | Quarterly | CITI | 6/20/19 | 4,000,000 | (14,511 | ) | — | (14,511 | ) | Non- | |||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||
Grade | ||||||||||||||||||||||||||||||||
eCitibank Bespoke | 0.00% | Quarterly | CITI | 12/20/19 | 2,100,000 | (356,725 | ) | (346,276 | ) | (10,449 | ) | Non- | ||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||
Grade | ||||||||||||||||||||||||||||||||
eCitibank Bespoke | 0.40% | Quarterly | CITI | 12/20/19 | 4,000,000 | 8,785 | — | 8,785 | Non- | |||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||
Grade | ||||||||||||||||||||||||||||||||
Total OTC Swap Contracts |
| $ | (5,162,606 | ) | $ | (4,350,876 | ) | $ | (811,730 | ) | ||||||||||||||||||||||
Total Credit Default Swap Contracts | $ | (2,595,424 | ) | $ | (2,178,567 | ) | $ | (416,857 | ) |
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.
cPerformance triggers for settlement of contract include default, bankruptcy or restructuring for single name swaps, and failure to pay or bankruptcy of the underlying securities for traded index swaps.
dThe fund enters contracts to sell protection to create a long credit position.
eRepresents a custom index comprised of a basket of underlying issuers.
franklintempleton.com |
Semiannual Report | 79 |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
At April 30, 2018, the Fund had the following cross-currency swap contracts outstanding. See Note 1(d).
Cross-Currency Swap Contracts
Description | Payment Frequency | Counter- party | Maturity Date | Notional Amount | Value/ (Depreciation) | |||||||||||||||
OTC Swap Contracts | ||||||||||||||||||||
Receive Fixed 2.393% | Semi-Annual | 7,916,500 USD | ||||||||||||||||||
Pay Fixed 0.50% | Annual | JPHQ | 4/09/20 | 7,100,000 EUR | $(864,632 | ) | ||||||||||||||
|
|
At April 30, 2018, the Fund had the following interest rate swap contracts outstanding. See Note 1(d).
Interest Rate Swap Contracts
Description | Payment Frequency | Maturity Date | Notional Amount | Value | Unamortized (Receipts) | Unrealized Appreciation (Depreciation) | ||||||||||||||||||
Centrally Cleared Swap Contracts | ||||||||||||||||||||||||
Receive Fixed 2.25% | Semi-Annual | |||||||||||||||||||||||
Pay Floating 3-month USD LIBOR | Quarterly | 9/19/20 | $ | 105,300,000 | $ | (1,256,022 | ) | $ | (808,395 | ) | $ | (447,627 | ) | |||||||||||
Receive Fixed 2.25% | Semi-Annual | |||||||||||||||||||||||
Pay Floating 3-month USD LIBOR | Quarterly | 9/19/20 | 80,000,000 | (954,242 | ) | (711,191 | ) | (243,051 | ) | |||||||||||||||
|
| |||||||||||||||||||||||
Total Interest Rate Swap Contracts | $ | (2,210,264 | ) | $ | (1,519,586 | ) | $ | (690,678 | ) | |||||||||||||||
|
|
At April 30, 2018, the Fund had the following inflation index swap contracts outstanding. See Note 1(d).
Inflation Index Swap Contracts
Description | Payment Frequency | Maturity Date | Notional Amount | Value/ Unrealized Appreciaton (Depreciation) | ||||||||||||
Centrally Cleared Swap Contracts | ||||||||||||||||
Receive variable change in USA-CPI-U | At maturity | |||||||||||||||
Pay Fixed 1.96% | At maturity | 8/31/24 | $ | 25,200,000 | $734,586 | |||||||||||
|
|
80 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund (continued)
At April 30, 2018, the Fund had the following total return swap contracts outstanding. See Note 1(d).
Total Return Swap Contracts
Underlying Instruments | Financing Rate | Payment Frequency | Counterparty | Maturity Date | Notional Value | Value/ Unrealized Appreciation (Depreciation) | ||||||||||||||||||
OTC Swap Contracts | ||||||||||||||||||||||||
Longa | ||||||||||||||||||||||||
iBoxx USD Liquid High Yield Index | 3-month USD LIBOR | Quarterly | CITI | 9/20/18 | $ | 9,400,000 | $(33,037 | ) | ||||||||||||||||
|
|
aThe Fund receives the total return on the underlying instrument and pays a variable financing rate.
See Note 10 regarding other derivative information.
See Abbreviations on page 149.
franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 81 |
FRANKLIN INVESTORS SECURITIES TRUST
Consolidated Financial Highlights
Franklin Total Return Fund
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
Class A | ||||||||||||||||||||||||
Per share operating performance | ||||||||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ 9.84 | $ 9.93 | $ 9.87 | $ 10.18 | $ 10.05 | $ 10.53 | ||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment income | 0.131 | 0.251 | b | 0.231 | 0.217 | 0.257 | 0.236 | |||||||||||||||||
Net realized and unrealized gains (losses) | (0.359) | (0.110 | ) | 0.107 | (0.220 | ) | 0.214 | (0.205) | ||||||||||||||||
Total from investment operations | (0.228) | 0.141 | 0.338 | (0.003 | ) | 0.471 | 0.031 | |||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income and net foreign currency gains. | (0.152) | (0.231) | (0.278) | (0.307) | (0.341) | (0.351) | ||||||||||||||||||
Net realized gains | — | — | — | — | — | (0.160) | ||||||||||||||||||
Total distributions | (0.152) | (0.231) | (0.278) | (0.307) | (0.341) | (0.511) | ||||||||||||||||||
Net asset value, end of period | $ 9.46 | $ 9.84 | $ 9.93 | $ 9.87 | $ 10.18 | $ 10.05 | ||||||||||||||||||
Total returnc | (2.35)% | 1.47% | 3.53% | (0.05)% | 4.80% | 0.30% | ||||||||||||||||||
Ratios to average net assetsd | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.91% | 0.91% | 0.90% | 0.91% | 0.93% | 0.91% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatese | 0.88% | 0.87% | 0.85% | 0.87% | 0.88% | 0.88% | ||||||||||||||||||
Net investment income | 2.75% | 2.58% | 2.32% | 2.08% | 2.46% | 2.36% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $2,902,912 | $3,153,751 | $3,623,035 | $3,527,479 | $3,213,446 | $3,019,228 | ||||||||||||||||||
Portfolio turnover rate | 80.20% | 101.07% | 287.38% | 294.80% | 273.96% | 371.54% | ||||||||||||||||||
Portfolio turnover rate excluding mortgage dollar rollsf | 48.31% | 78.46% | 146.15% | 95.06% | 85.03% | 156.49% |
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.
bBased on average daily shares outstanding.
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%.
fSee Note 1(g) regarding mortgage dollar rolls.
82 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED FINANCIAL HIGHLIGHTS
Franklin Total Return Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
Class C | ||||||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ 9.77 | $ 9.87 | $ 9.84 | $ 10.16 | $ 10.03 | $ 10.51 | ||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment income | 0.100 | 0.212 | b | 0.189 | 0.172 | 0.201 | 0.174 | |||||||||||||||||
Net realized and unrealized gains (losses) | (0.337) | (0.109 | ) | 0.100 | (0.214 | ) | 0.232 | (0.182) | ||||||||||||||||
Total from investment operations | (0.237) | 0.103 | 0.289 | (0.042 | ) | 0.433 | (0.008) | |||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income and net foreign currency gains | (0.133 | ) | (0.203) | (0.259) | (0.278) | (0.303) | (0.312) | |||||||||||||||||
Net realized gains | — | — | — | — | — | (0.160) | ||||||||||||||||||
Total distributions | (0.133) | (0.203) | (0.259) | (0.278) | (0.303) | (0.472) | ||||||||||||||||||
Net asset value, end of period | $ 9.40 | $ 9.77 | $ 9.87 | $ 9.84 | $ 10.16 | $ 10.03 | ||||||||||||||||||
Total returnc | (2.45)% | 0.98% | 3.13% | (0.43)% | 4.42% | (0.08)% | ||||||||||||||||||
Ratios to average net assetsd | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 1.31% | 1.31% | 1.30% | 1.31% | 1.33% | 1.31% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatese | 1.28% | 1.27% | 1.25% | 1.27% | 1.28% | 1.28% | ||||||||||||||||||
Net investment income | 2.35% | 2.18% | 1.92% | 1.68% | 2.06% | 1.96% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $314,318 | $354,269 | $449,274 | $444,253 | $432,767 | $455,720 | ||||||||||||||||||
Portfolio turnover rate | 80.20% | 101.07% | 287.38% | 294.80% | 273.96% | 371.54% | ||||||||||||||||||
Portfolio turnover rate excluding mortgage dollar rollsf | 48.31% | 78.46% | 146.15% | 95.06% | 85.03% | 156.49% |
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.
bBased on average daily shares outstanding.
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%.
fSee Note 1(g) regarding mortgage dollar rolls.
franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 83 |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED FINANCIAL HIGHLIGHTS
Franklin Total Return Fund (continued)
Six Months Ended April 30, 2018 (unaudited) | Year Ended October 31, | |||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Class R | ||||||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ 9.80 | $ 9.90 | $ 9.85 | $ 10.17 | $ 10.04 | $ 10.52 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment income | 0.108 | 0.228b | 0.199 | 0.198 | 0.209 | 0.204 | ||||||||||||||||||
Net realized and unrealized gains (losses) | (0.348 | ) | (0.115 | ) | 0.117 | (0.229 | ) | 0.238 | (0.197) | |||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | (0.240 | ) | 0.113 | 0.316 | (0.031 | ) | 0.447 | 0.007 | ||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income and net foreign currency gains | (0.140 | ) | (0.213 | ) | (0.266 | ) | (0.289 | ) | (0.317 | ) | (0.327) | |||||||||||||
Net realized gains | — | — | — | — | — | (0.160) | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total distributions | (0.140 | ) | (0.213 | ) | (0.266 | ) | (0.289 | ) | (0.317 | ) | (0.487) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ 9.42 | $ 9.80 | $ 9.90 | $ 9.85 | $ 10.17 | $ 10.04 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total returnc | (2.47 | )% | 1.19% | 3.31% | (0.32)% | 4.56% | 0.06% | |||||||||||||||||
Ratios to average net assetsd | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 1.16% | 1.16% | 1.15% | 1.16% | 1.18% | 1.16% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatese | 1.13% | 1.12% | 1.10% | 1.12% | 1.13% | 1.13% | ||||||||||||||||||
Net investment income | 2.50% | 2.33% | 2.07% | 1.83% | 2.21% | 2.11% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $32,407 | $36,337 | $58,715 | $70,506 | $59,307 | $65,601 | ||||||||||||||||||
Portfolio turnover rate | 80.20% | 101.07% | 287.38% | 294.80% | 273.96% | 371.54% | ||||||||||||||||||
Portfolio turnover rate excluding mortgage dollar rollsf | 48.31% | 78.46% | 146.15% | 95.06% | 85.03% | 156.49% |
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.
bBased on average daily shares outstanding.
cTotal return 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%.
fSee Note 1(g) regarding mortgage dollar rolls.
84 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED FINANCIAL HIGHLIGHTS
Franklin Total Return Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013a | |||||||||||||||||||
| ||||||||||||||||||||||||
Class R6 | ||||||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ 9.90 | $ 9.98 | $ 9.91 | $ 10.20 | $ 10.07 | $ 10.44 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsb: | ||||||||||||||||||||||||
Net investment income | 0.149 | 0.296c | 0.195 | 0.255 | c | 0.317c | 0.145 | |||||||||||||||||
Net realized and unrealized gains (losses) | (0.359) | (0.117) | 0.173 | (0.209) | 0.191 | (0.348) | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | (0.210) | 0.179 | 0.368 | 0.046 | 0.508 | (0.203) | ||||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from net investment income and net foreign currency gains | (0.170) | (0.259) | (0.298) | (0.336) | (0.378) | (0.167) | ||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ 9.52 | $ 9.90 | $ 9.98 | $ 9.91 | $ 10.20 | $ 10.07 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total returnd | (2.15)% | 1.75% | 3.94% | 0.44% | 5.18% | (1.92)% | ||||||||||||||||||
Ratios to average net assetse | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.53% | 0.50% | 0.51% | 0.50% | 0.50% | 0.50% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatesf | 0.49% | 0.48% | 0.46% | 0.46% | 0.48% | 0.49% | ||||||||||||||||||
Net investment income | 3.14% | 2.97% | 2.71% | 2.49% | 2.86% | 2.75% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $436,270 | $398,732 | $93,892 | $68,848 | $26,123 | $329,806 | ||||||||||||||||||
Portfolio turnover rate | 80.20% | 101.07% | 287.38% | 294.80% | 273.96% | 371.54% | ||||||||||||||||||
Portfolio turnover rate excluding mortgage dollar rollsg | 48.31% | 78.46% | 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(g) regarding mortgage dollar rolls.
franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 85 |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED FINANCIAL HIGHLIGHTS
Franklin Total Return Fund (continued)
Six Months Ended April 30, 2018 | Year Ended October 31, | |||||||||||||||||||||||
(unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||
| ||||||||||||||||||||||||
Advisor Class | ||||||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ 9.89 | $ 9.98 | $ 9.91 | $ 10.20 | $ 10.07 | $ 10.55 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment income | 0.138 | 0.275b | 0.218 | 0.127 | 0.288 | 0.242 | ||||||||||||||||||
Net realized and unrealized gains (losses) | (0.355) | (0.116) | 0.142 | (0.092) | 0.206 | (0.186) | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | (0.217) | 0.159 | 0.360 | 0.035 | 0.494 | 0.056 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income and net foreign currency gains | (0.163) | (0.249) | (0.290) | (0.325) | (0.364) | (0.376) | ||||||||||||||||||
Net realized gains | — | — | — | — | — | (0.160) | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total distributions | (0.163) | (0.249) | (0.290) | (0.325) | (0.364) | (0.536) | ||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ 9.51 | $ 9.89 | $ 9.98 | $ 9.91 | $ 10.20 | $ 10.07 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total returnc | (2.11)% | 1.65% | 3.75% | 0.33% | 5.03% | 0.54% | ||||||||||||||||||
Ratios to average net assetsd | ||||||||||||||||||||||||
Expenses before waiver and payments by affiliates | 0.66% | 0.66% | 0.65% | 0.66% | 0.68% | 0.66% | ||||||||||||||||||
Expenses net of waiver and payments by affiliatese | 0.63% | 0.62% | 0.60% | 0.62% | 0.63% | 0.63% | ||||||||||||||||||
Net investment income | 3.00% | 2.83% | 2.57% | 2.33% | 2.71% | 2.61% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $629,139 | $595,239 | $740,046 | $526,749 | $1,281,151 | $1,148,451 | ||||||||||||||||||
Portfolio turnover rate | 80.20% | 101.07% | 287.38% | 294.80% | 273.96% | 371.54% | ||||||||||||||||||
Portfolio turnover rate excluding mortgage dollar rollsf | 48.31% | 78.46% | 146.15% | 95.06% | 85.03% | 156.49% |
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.
bBased on average daily shares outstanding.
cTotal return 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%.
fSee Note 1(g) regarding mortgage dollar rolls.
86 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
Consolidated Statement of Investments, April 30, 2018 (unaudited)
Franklin Total Return Fund
Country | Shares/ Warrants | Value | ||||||||||||||
Common Stocks and Other Equity Interests 0.0%† | ||||||||||||||||
Consumer Services 0.0%† | ||||||||||||||||
a,aa,ab | Turtle Bay Resort | United States | 1,550,568 | $ | 280,415 | |||||||||||
|
| |||||||||||||||
Energy 0.0%† | ||||||||||||||||
a | Halcon Resources Corp. | United States | 229,059 | 1,230,047 | ||||||||||||
a | Halcon Resources Corp., wts., 9/09/20 | United States | 20,425 | 12,765 | ||||||||||||
a | Linn Energy Inc. | United States | 15,440 | 605,248 | ||||||||||||
|
| |||||||||||||||
1,848,060 | ||||||||||||||||
|
| |||||||||||||||
Materials 0.0%† | ||||||||||||||||
a | Verso Corp., A | United States | 6,954 | 125,589 | ||||||||||||
a | Verso Corp., wts., 7/25/23 | United States | 732 | 1,135 | ||||||||||||
|
| |||||||||||||||
126,724 | ||||||||||||||||
|
| |||||||||||||||
Retailing 0.0%† | ||||||||||||||||
a,ab,ac | K2016470219 South Africa Ltd., A | South Africa | 28,762,824 | 23,081 | ||||||||||||
a,ab,ac | K2016470219 South Africa Ltd., B | South Africa | 2,862,311 | 2,297 | ||||||||||||
|
| |||||||||||||||
25,378 | ||||||||||||||||
|
| |||||||||||||||
Total Common Stocks and Other Equity Interests (Cost $6,910,450) | 2,280,577 | |||||||||||||||
|
| |||||||||||||||
Management Investment Companies 3.7% | ||||||||||||||||
Diversified Financials 3.7% | ||||||||||||||||
b | Franklin Flexible Alpha Bond Fund, Class R6 | United States | 10,172,940 | 99,593,083 | ||||||||||||
b | Franklin Liberty Investment Grade Corporate ETF | United States | 400,000 | 9,473,920 | ||||||||||||
b | Franklin Lower Tier Floating Rate Fund | United States | 997,589 | 9,856,180 | ||||||||||||
b | Franklin Middle Tier Floating Rate Fund | United States | 1,889,310 | 17,872,874 | ||||||||||||
PowerShares Senior Loan Portfolio ETF | United States | 1,000,000 | 23,110,000 | |||||||||||||
|
| |||||||||||||||
Total Management Investment Companies (Cost $160,816,460) | 159,906,057 | |||||||||||||||
|
| |||||||||||||||
Preferred Stocks (Cost $2,325,000) 0.1% | ||||||||||||||||
Diversified Financials 0.1% | ||||||||||||||||
c | Citigroup Capital XIII, 8.137%, pfd. | United States | 93,000 | 2,491,470 | ||||||||||||
|
| |||||||||||||||
Principal Amount* | ||||||||||||||||
Corporate Bonds 35.9% | ||||||||||||||||
Automobiles & Components 0.2% | ||||||||||||||||
Delphi Corp., senior bond, 4.15%, 3/15/24 | United States | 5,100,000 | 5,174,666 | |||||||||||||
Fiat Chrysler Automobiles NV, senior note, 4.50%, 4/15/20 | United Kingdom | 3,000,000 | 3,045,000 | |||||||||||||
|
| |||||||||||||||
8,219,666 | ||||||||||||||||
|
| |||||||||||||||
Banks 6.4% | ||||||||||||||||
d | Banca Monte dei Paschi di Siena SpA, secured note, Reg S, 2.125%, 11/26/63 | Italy | 20,000,000 | EUR | 25,646,882 | |||||||||||
Bank of America Corp., | ||||||||||||||||
senior bond, 3.875%, 8/01/25 | United States | 6,000,000 | 5,947,882 | |||||||||||||
senior note, 3.50%, 4/19/26 | United States | 20,400,000 | 19,700,414 |
franklintempleton.com | Semiannual Report | 87 |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Principal | ||||||||||||||||
Country | Amount* | Value | ||||||||||||||
| ||||||||||||||||
Corporate Bonds (continued) | ||||||||||||||||
Banks (continued) | ||||||||||||||||
d | Barclays Bank PLC, senior sub. bond, Reg S, 6.00%, 1/14/21 | United Kingdom | 8,000,000 | EUR | $ | 10,983,560 | ||||||||||
Barclays PLC, sub. note, 4.375%, 9/11/24 | United Kingdom | 500,000 | 488,120 | |||||||||||||
CIT Group Inc., senior bond, 5.00%, 8/15/22 | United States | 1,647,000 | 1,688,175 | |||||||||||||
Citigroup Inc., | ||||||||||||||||
senior bond, 8.125%, 7/15/39 | United States | 4,400,000 | 6,354,709 | |||||||||||||
senior note, 3.40%, 5/01/26 | United States | 20,000,000 | 18,938,574 | |||||||||||||
HSBC Holdings PLC, | ||||||||||||||||
senior note, 3.60%, 5/25/23 | United Kingdom | 12,700,000 | 12,661,392 | |||||||||||||
senior note, 4.30%, 3/08/26 | United Kingdom | 14,800,000 | 15,019,780 | |||||||||||||
e | ICICI Bank Ltd./Dubai, senior note, 144A, 3.80%, 12/14/27 | India | 11,200,000 | 10,402,952 | ||||||||||||
Industrial & Commercial Bank of China Ltd., senior note, 2.957%, 11/08/22 | China | 11,300,000 | 10,923,428 | |||||||||||||
JPMorgan Chase & Co., | ||||||||||||||||
f junior sub. bond, X, 6.10% to 10/01/24, FRN thereafter, Perpetual | United States | 10,400,000 | 10,790,000 | |||||||||||||
senior bond, 3.30%, 4/01/26 | United States | 22,000,000 | 20,929,235 | |||||||||||||
senior bond, 3.20%, 6/15/26 | United States | 10,800,000 | 10,224,822 | |||||||||||||
senior note, 2.40%, 6/07/21 | United States | 10,000,000 | 9,743,200 | |||||||||||||
senior note, 3.25%, 9/23/22 | United States | 11,400,000 | 11,289,052 | |||||||||||||
e | Norddeutsche Landesbank Girozentrale, secured note, 144A, 2.00%, 2/05/19 | Germany | 7,000,000 | 6,968,360 | ||||||||||||
PHH Corp., senior note, 7.375%, 9/01/19 | United States | 5,400,000 | 5,602,500 | |||||||||||||
Royal Bank of Canada, secured note, 2.10%, 10/14/20 | Canada | 11,500,000 | 11,251,757 | |||||||||||||
e | Shinhan Bank, senior note, 144A, 1.875%, 7/30/18 | South Korea | 10,000,000 | 9,972,250 | ||||||||||||
SVB Financial Group, senior note, 3.50%, 1/29/25 | United States | 6,000,000 | 5,811,964 | |||||||||||||
Wells Fargo & Co., | ||||||||||||||||
f junior sub. bond, S, 5.90% to 6/15/24, FRN thereafter, Perpetual | United States | 5,500,000 | 5,603,125 | |||||||||||||
sub. bond, 4.65%, 11/04/44 | United States | 10,000,000 | 9,630,862 | |||||||||||||
e | Westpac Banking Corp., senior secured note, 144A, 2.25%, 11/09/20 | Australia | 10,800,000 | 10,596,636 | ||||||||||||
e | Woori Bank, sub. note, 144A, 4.75%, 4/30/24 | South Korea | 9,750,000 | 9,876,848 | ||||||||||||
|
| |||||||||||||||
277,046,479 | ||||||||||||||||
|
| |||||||||||||||
Capital Goods 1.4% | ||||||||||||||||
Aircastle Ltd., senior note, 4.125%, 5/01/24 | United States | 6,000,000 | 5,895,000 | |||||||||||||
e | Amcor Finance USA Inc., senior note, 144A, 3.625%, 4/28/26 | Australia | 11,800,000 | 11,205,575 | ||||||||||||
e | BBA US Holdings Inc., senior note, 144A, 5.375%, 5/01/26 | United States | 2,000,000 | 2,016,160 | ||||||||||||
e | Beacon Roofing Supply Inc., senior note, 144A, 4.875%, 11/01/25 | United States | 6,600,000 | 6,270,000 | ||||||||||||
CNH Industrial Capital LLC, senior note, 3.875%, 10/15/21 | United States | 3,400,000 | 3,417,272 | |||||||||||||
CNH Industrial NV, senior bond, 3.85%, 11/15/27 | United Kingdom | 4,600,000 | 4,403,925 | |||||||||||||
General Electric Co., senior bond, 4.50%, 3/11/44 | United States | 1,900,000 | 1,833,537 | |||||||||||||
H&E Equipment Services Inc., senior note, 5.625%, 9/01/25 | United States | 3,100,000 | 3,123,250 | |||||||||||||
Lockheed Martin Corp., senior bond, 4.70%, 5/15/46 | United States | 13,900,000 | 14,809,394 | |||||||||||||
Tennant Co., senior note, 5.625%, 5/01/25 | United States | 2,600,000 | 2,662,218 | |||||||||||||
e | Terex Corp., senior note, 144A, 5.625%, 2/01/25 | United States | 1,100,000 | 1,095,875 | ||||||||||||
e | Vertiv Group Corp., senior note, 144A, 9.25%, 10/15/24 | United States | 4,100,000 | 4,161,500 | ||||||||||||
|
| |||||||||||||||
60,893,706 | ||||||||||||||||
|
| |||||||||||||||
Commercial & Professional Services 0.5% | ||||||||||||||||
e | IHS Markit Ltd., senior note, 144A, 4.00%, 3/01/26 | United States | 4,100,000 | 3,925,750 | ||||||||||||
e | Multi-Color Corp., senior note, 144A, 4.875%, 11/01/25 | United States | 6,000,000 | 5,610,000 | ||||||||||||
Republic Services Inc., senior note, 2.90%, 7/01/26 | United States | 4,500,000 | 4,186,344 |
88 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||
Corporate Bonds (continued) | ||||||||||||||
Commercial & Professional Services (continued) | ||||||||||||||
e | West Corp., senior note, 144A, 8.50%, 10/15/25 | United States | 8,100,000 | $ | 7,857,000 | |||||||||
|
| |||||||||||||
21,579,094 | ||||||||||||||
|
| |||||||||||||
Consumer Durables & Apparel 0.1% | ||||||||||||||
PulteGroup Inc., senior bond, 5.00%, 1/15/27 | United States | 4,900,000 | 4,790,975 | |||||||||||
|
| |||||||||||||
Consumer Services 0.9% | ||||||||||||||
e | 1011778 BC ULC/New Red Finance Inc., secured note, second lien, 144A, 5.00%, 10/15/25 | Canada | 5,500,000 | 5,319,545 | ||||||||||
e | Ascend Learning LLC, senior note, 144A, 6.875%, 8/01/25 | United States | 6,000,000 | 6,120,000 | ||||||||||
Marriott International Inc., senior bond, 3.75%, 10/01/25 | United States | 18,400,000 | 18,058,793 | |||||||||||
e | Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., senior bond, 144A, 5.25%, 5/15/27 | United States | 5,500,000 | 5,329,775 | ||||||||||
Yum! Brands Inc., senior note, 5.30%, 9/15/19 | United States | 3,000,000 | 3,086,250 | |||||||||||
|
| |||||||||||||
37,914,363 | ||||||||||||||
|
| |||||||||||||
Diversified Financials 2.7% | ||||||||||||||
American Airlines Pass Through Trust, first lien, 2016-2, AA, 3.20%, 6/15/28 | United States | 6,256,800 | 5,977,184 | |||||||||||
Capital One Bank USA NA, sub. bond, 3.375%, 2/15/23 | United States | 6,000,000 | 5,827,548 | |||||||||||
Capital One Financial Corp., senior note, 3.20%, 2/05/25 | United States | 9,700,000 | 9,165,393 | |||||||||||
e | FirstCash Inc., senior note, 144A, 5.375%, 6/01/24 | United States | 2,800,000 | 2,856,000 | ||||||||||
GE Capital International Funding Co., senior bond, 3.373%, 11/15/25 | United States | 17,000,000 | 16,233,660 | |||||||||||
The Goldman Sachs Group Inc., | ||||||||||||||
senior note, 3.75%, 5/22/25 | United States | 7,700,000 | 7,527,699 | |||||||||||
senior note, 3.75%, 2/25/26 | United States | 21,300,000 | 20,654,973 | |||||||||||
Morgan Stanley, | ||||||||||||||
senior bond, 4.30%, 1/27/45 | United States | 10,000,000 | 9,614,089 | |||||||||||
senior note, 3.875%, 1/27/26 | United States | 20,500,000 | 20,205,343 | |||||||||||
Navient Corp., | ||||||||||||||
senior bond, 8.00%, 3/25/20 | United States | 5,000,000 | 5,337,500 | |||||||||||
senior note, 7.25%, 9/25/23 | United States | 5,500,000 | 5,775,000 | |||||||||||
Springleaf Finance Corp., senior note, 6.00%, 6/01/20 | United States | 700,000 | 729,750 | |||||||||||
United Airlines Pass Through Trust, first lien, 2016-1, AA, 3.10%, 1/07/30 | United States | 6,133,769 | 5,881,775 | |||||||||||
|
| |||||||||||||
115,785,914 | ||||||||||||||
|
| |||||||||||||
Energy 3.9% | ||||||||||||||
Anadarko Petroleum Corp.,senior note, 6.45%, 9/15/36 | United States | 2,260,000 | 2,683,274 | |||||||||||
e | BG Energy Capital PLC,senior bound, 144A,5.125%,10/15/41 | United Kingdom | 500,000 | 557,221 | ||||||||||
e | California Resources Corp., secured note, second lien, 144A, 8.00%, 12/15/22 | United States | 4,000,000 | 3,450,000 | ||||||||||
Cheniere Corpus Christi Holdings LLC, | ||||||||||||||
senior secured note, first lien, 7.00%, 6/30/24 | United States | 2,300,000 | 2,521,375 | |||||||||||
senior secured note, first lien, 5.875%, 3/31/25 | United States | 1,600,000 | 1,655,536 | |||||||||||
e | Cheniere Energy Partners LP, senior secured note, first lien, 144A, 5.25%, 10/01/25 | United States | 4,000,000 | 3,920,000 | ||||||||||
CNOOC Finance 2013 Ltd., senior note, 3.00%, 5/09/23 | China | 14,000,000 | 13,403,670 | |||||||||||
CNOOC Finance 2015 USA LLC, senior note, 3.50%, 5/05/25 | China | 11,000,000 | 10,554,170 | |||||||||||
Enable Midstream Partners LP, | ||||||||||||||
senior bond, 5.00%, 5/15/44 | United States | 1,200,000 | 1,133,238 | |||||||||||
senior note, 3.90%, 5/15/24 | United States | 3,600,000 | 3,486,627 | |||||||||||
Energy Transfer Partners LP, senior bond, 5.15%, 2/01/43 | United States | 6,000,000 | 5,420,998 |
franklintempleton.com | Semiannual Report | 89 |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||
Corporate Bonds (continued) | ||||||||||||||||
Energy (continued) | ||||||||||||||||
EnLink Midstream Partners LP, senior bond, 5.05%, 4/01/45 | United States | 6,200,000 | $ | 5,623,949 | ||||||||||||
Ensco PLC, senior bond, 5.75%, 10/01/44 | United States | 3,700,000 | 2,585,375 | |||||||||||||
Enterprise Products Operating LLC, senior bond, 4.45%, 2/15/43 | United States | 6,000,000 | 5,822,652 | |||||||||||||
e,g Gaz Capital SA (OJSC Gazprom), loan participation, senior note, 144A, 3.85%, 2/06/20 | Russia | 10,000,000 | 9,973,350 | |||||||||||||
Kinder Morgan Energy Partners LP, senior bond, 6.50%, 9/01/39 | United States | 1,700,000 | 1,897,259 | |||||||||||||
MPLX LP, senior bond, 4.00%, 2/15/25 | United States | 4,600,000 | 4,552,960 | |||||||||||||
Oceaneering International Inc., senior note, 4.65%, 11/15/24 | United States | 7,900,000 | 7,580,561 | |||||||||||||
e Petrofac Ltd., senior note, 144A, 3.40%, 10/10/18 | United Kingdom | 7,600,000 | 7,543,000 | |||||||||||||
Sabine Pass Liquefaction LLC, senior secured bond, first lien, 5.00%, 3/15/27 | United States | 3,700,000 | 3,809,331 | |||||||||||||
Sanchez Energy Corp., senior note, 6.125%, 1/15/23 | United States | 3,000,000 | 2,181,600 | |||||||||||||
e Sinopec Group Overseas Development 2014 Ltd., senior note, 144A, 4.375%, 4/10/24 | China | 9,300,000 | 9,459,309 | |||||||||||||
e Sinopec Group Overseas Development 2015 Ltd., senior note, 144A, 3.25%, 4/28/25 | China | 16,400,000 | 15,498,902 | |||||||||||||
e Sinopec Group Overseas Development 2016 Ltd., senior note, 144A, 2.75%, 9/29/26 | China | 11,000,000 | 9,874,645 | |||||||||||||
Sunoco Logistics Partners Operations LP, senior note, 4.25%, 4/01/24 | United States | 9,300,000 | 9,159,523 | |||||||||||||
e Sunoco LP/Sunoco Finance Corp., senior note, 144A, 4.875%, 1/15/23 | United States | 2,000,000 | 1,973,940 | |||||||||||||
Transcontinental Gas Pipe Line Corp., senior note, 6.05%, 6/15/18 | United States | 550,000 | 552,067 | |||||||||||||
Valero Energy Corp., senior bond, 4.90%, 3/15/45 | United States | 6,700,000 | 7,015,712 | |||||||||||||
Weatherford International Ltd., | ||||||||||||||||
senior note, 7.75%, 6/15/21 | United States | 1,600,000 | 1,582,000 | |||||||||||||
senior note, 8.25%, 6/15/23 | United States | 2,000,000 | 1,885,000 | |||||||||||||
e Woodside Finance Ltd., | ||||||||||||||||
senior bond, 144A, 3.70%, 3/15/28 | Australia | 5,500,000 | 5,279,890 | |||||||||||||
senior note, 144A, 3.70%, 9/15/26 | Australia | 4,000,000 | 3,867,492 | |||||||||||||
|
| |||||||||||||||
166,504,626 | ||||||||||||||||
|
| |||||||||||||||
Food & Staples Retailing 0.4% | ||||||||||||||||
e Aramark Services Inc., senior bond, 144A, 5.00%, 2/01/28 | United States | 2,700,000 | 2,633,607 | |||||||||||||
The Kroger Co., senior note, 4.00%, 2/01/24 | United States | 15,400,000 | 15,470,286 | |||||||||||||
|
| |||||||||||||||
18,103,893 | ||||||||||||||||
|
| |||||||||||||||
Food, Beverage & Tobacco 1.5% | ||||||||||||||||
Anheuser-Busch Inbev Finance Inc., senior bond, 3.65%, 2/01/26 | Belgium | 17,000,000 | 16,625,087 | |||||||||||||
Bunge Ltd. Finance Corp., senior note, 3.25%, 8/15/26 | United States | 12,000,000 | 11,014,951 | |||||||||||||
Coca-Cola Femsa SAB de CV, senior bond, 5.25%, 11/26/43 | Mexico | 1,700,000 | 1,917,333 | |||||||||||||
Kraft Heinz Foods Co., senior note, 3.50%, 7/15/22 | United States | 21,400,000 | 21,243,457 | |||||||||||||
e Lamb Weston Holdings Inc., | ||||||||||||||||
senior note, 144A, 4.625%, 11/01/24 | United States | 1,500,000 | 1,494,375 | |||||||||||||
senior note, 144A, 4.875%, 11/01/26 | United States | 1,600,000 | 1,590,000 | |||||||||||||
Reynolds American Inc., senior bond, 5.70%, 8/15/35 | United Kingdom | 9,300,000 | 10,271,339 | |||||||||||||
|
| |||||||||||||||
64,156,542 | ||||||||||||||||
|
|
90 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||
Corporate Bonds (continued) | ||||||||||||||
Health Care Equipment & Services 1.1% | ||||||||||||||
e Avantor Inc., senior secured note, first lien, 144A, 6.00%, 10/01/24 | United States | 2,400,000 | $ | 2,418,000 | ||||||||||
e Catalent Pharma Solutions Inc., senior note, 144A, 4.875%, 1/15/26 | United States | 5,700,000 | 5,564,625 | |||||||||||
CHS/Community Health Systems Inc., senior secured note, first lien, 6.25%, 3/31/23 | United States | 5,000,000 | 4,571,875 | |||||||||||
CVS Health Corp., senior bond, 4.30%, 3/25/28 | United States | 7,000,000 | 6,912,958 | |||||||||||
HCA Inc., | ||||||||||||||
senior bond, 5.875%, 5/01/23 | United States | 4,000,000 | 4,180,000 | |||||||||||
senior secured bond, first lien, 5.50%, 6/15/47 | United States | 9,000,000 | 8,527,500 | |||||||||||
e MPH Acquisition Holdings LLC, senior note, 144A, 7.125%, 6/01/24 | United States | 1,000,000 | 1,020,410 | |||||||||||
Stryker Corp., senior bond, 3.50%, 3/15/26 | United States | 3,000,000 | 2,953,293 | |||||||||||
Tenet Healthcare Corp., senior note, 5.50%, 3/01/19 | United States | 9,660,000 | 9,841,125 | |||||||||||
|
| |||||||||||||
45,989,786 | ||||||||||||||
|
| |||||||||||||
Insurance 1.1% | ||||||||||||||
Aflac Inc., senior note, 0.932%, 1/25/27 | United States | 1,400,000,000 | JPY | 12,978,917 | ||||||||||
e Liberty Mutual Group Inc., senior note, 144A, 4.95%, 5/01/22 | United States | 12,000,000 | 12,556,931 | |||||||||||
e Teachers Insurance & Annuity Assn. of America, sub. bond, 144A, 4.90%, 9/15/44 | United States | 20,400,000 | 21,878,256 | |||||||||||
|
| |||||||||||||
47,414,104 | ||||||||||||||
|
| |||||||||||||
Materials 2.3% | ||||||||||||||
ArcelorMittal, senior note, 5.75%, 3/01/21 | France | 5,000,000 | 5,269,700 | |||||||||||
e Ardagh Packaging Finance PLC/Ardagh MP Holdings USA Inc., senior note, 144A, 6.00%, 2/15/25 | Luxembourg | 6,000,000 | 6,105,000 | |||||||||||
e BWAY Holding Co., senior note, 144A, 7.25%, 4/15/25 | United States | 7,000,000 | 7,207,900 | |||||||||||
e Cemex SAB de CV, senior secured bond, first lien, 144A, 5.70%, 1/11/25 | Mexico | 6,000,000 | 6,078,900 | |||||||||||
The Chemours Co., senior note, 5.375%, 5/15/27 | United States | 5,000,000 | 4,962,500 | |||||||||||
e Crown Americas LLC/Crown Americas Capital Corp., senior note, 144A, 4.75%, 2/01/26 | United States | 2,600,000 | 2,515,500 | |||||||||||
e First Quantum Minerals Ltd., senior note, 144A, 7.25%, 4/01/23 | Zambia | 6,100,000 | 6,098,780 | |||||||||||
e FMG Resources (August 2006) Pty. Ltd., | ||||||||||||||
senior note, 144A, 5.125%, 3/15/23 | Australia | 2,900,000 | 2,892,750 | |||||||||||
senior note, 144A, 5.125%, 5/15/24 | Australia | 1,900,000 | 1,887,450 | |||||||||||
Freeport-McMoRan Inc., senior bond, 3.875%, 3/15/23 | United States | 6,500,000 | 6,248,125 | |||||||||||
e Glencore Finance Canada Ltd., senior bond, 144A, 4.95%, 11/15/21 | Switzerland | 4,700,000 | 4,872,241 | |||||||||||
LYB International Finance BV, senior note, 4.00%, 7/15/23 | United States | 18,400,000 | 18,552,536 | |||||||||||
e New Gold Inc., senior note, 144A, 6.375%, 5/15/25 | Canada | 1,800,000 | 1,838,250 | |||||||||||
e Northwest Acquisitions ULC/Dominion Finco Inc., secured note, second lien, 144A, 7.125%, 11/01/22 | Canada | 1,300,000 | 1,327,040 | |||||||||||
e OCI NV, senior note, 144A, 6.625%, 4/15/23 | Netherlands | 1,000,000 | 1,025,000 | |||||||||||
e OI European Group BV, senior note, 144A, 4.00%, 3/15/23 | United States | 5,000,000 | 4,762,500 | |||||||||||
e Plastipak Holdings Inc., senior note, 144A, 6.25%, 10/15/25 | United States | 2,300,000 | 2,242,500 | |||||||||||
Reliance Steel & Aluminum Co., senior note, 4.50%, 4/15/23 | United States | 5,600,000 | 5,755,572 | |||||||||||
e Reynolds Group Issuer Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Luxembourg SA, | ||||||||||||||
senior note, 144A, 7.00%, 7/15/24 | United States | 800,000 | 834,500 | |||||||||||
senior secured note, first lien, 144A, 5.125%, 7/15/23 | United States | 1,600,000 | 1,609,008 |
franklintempleton.com | Semiannual Report | 91 |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||
Corporate Bonds (continued) | ||||||||||||||
Materials (continued) | ||||||||||||||
e SunCoke Energy Partners LP/SunCoke Energy Partners Finance Corp., senior note, 144A, 7.50%, 6/15/25 | United States | 5,200,000 | $ | 5,369,000 | ||||||||||
|
| |||||||||||||
97,454,752 | ||||||||||||||
|
| |||||||||||||
Media 1.2% | ||||||||||||||
21st Century Fox America Inc., senior note, 3.70%, 10/15/25 | United States | 2,300,000 | 2,289,646 | |||||||||||
e Altice U.S. Finance I Corp., senior secured bond, 144A, 5.50%, 5/15/26 | United States | 7,000,000 | 6,803,125 | |||||||||||
e CCO Holdings LLC/CCO Holdings Capital Corp., | ||||||||||||||
senior bond, 144A, 5.375%, 5/01/25 | United States | 4,000,000 | 3,942,500 | |||||||||||
senior bond, 144A, 5.00%, 2/01/28 | United States | 1,500,000 | 1,392,570 | |||||||||||
Comcast Corp., senior bond, 3.15%, 2/15/28 | United States | 8,100,000 | 7,566,329 | |||||||||||
CSC Holdings LLC, | ||||||||||||||
senior bond, 7.625%, 7/15/18 | United States | 3,000,000 | 3,033,750 | |||||||||||
senior bond, 8.625%, 2/15/19 | United States | 9,000,000 | 9,388,530 | |||||||||||
e senior bond, 144A, 5.375%, 2/01/28 | United States | 3,000,000 | 2,812,500 | |||||||||||
e Nexstar Broadcasting Inc., senior note, 144A, 5.625%, 8/01/24 | United States | 1,600,000 | 1,580,000 | |||||||||||
Time Warner Inc., senior bond, 2.95%, 7/15/26 | United States | 16,200,000 | 14,897,345 | |||||||||||
|
| |||||||||||||
53,706,295 | ||||||||||||||
|
| |||||||||||||
Pharmaceuticals, Biotechnology & Life Sciences 1.5% | ||||||||||||||
Actavis Funding SCS, senior bond, 4.55%, 3/15/35 | United States | 13,400,000 | 12,626,581 | |||||||||||
Baxalta Inc., senior note, 3.60%, 6/23/22 | United States | 8,300,000 | 8,214,247 | |||||||||||
Biogen Inc., senior bond, 5.20%, 9/15/45 | United States | 18,200,000 | 19,066,788 | |||||||||||
Celgene Corp., senior bond, 3.45%, 11/15/27 | United States | 6,500,000 | 6,090,000 | |||||||||||
PerkinElmer Inc., senior note, 5.00%, 11/15/21 | United States | 13,200,000 | 13,869,851 | |||||||||||
e Valeant Pharmaceuticals International Inc., | ||||||||||||||
senior bond, 144A, 6.125%, 4/15/25 | United States | 4,800,000 | 4,347,456 | |||||||||||
senior note, first lien, 144A, 7.00%, 3/15/24 | United States | 400,000 | 423,379 | |||||||||||
|
| |||||||||||||
64,638,302 | ||||||||||||||
|
| |||||||||||||
Real Estate 1.8% | ||||||||||||||
American Homes 4 Rent LP, senior bond, 4.25%, 2/15/28 | United States | 5,900,000 | 5,677,000 | |||||||||||
American Tower Corp., | ||||||||||||||
senior bond, 3.50%, 1/31/23 | United States | 12,700,000 | 12,537,286 | |||||||||||
senior bond, 4.40%, 2/15/26 | United States | 9,400,000 | 9,383,206 | |||||||||||
Crown Castle International Corp., senior bond, 3.80%, 2/15/28 | United States | 10,700,000 | 10,172,149 | |||||||||||
MPT Operating Partnership LP/MPT Finance Corp., | ||||||||||||||
senior bond, 5.25%, 8/01/26 | United States | 1,100,000 | 1,075,250 | |||||||||||
senior bond, 5.00%, 10/15/27 | United States | 3,000,000 | 2,850,000 | |||||||||||
Prologis LP, senior bond, 3.75%, 11/01/25 | United States | 9,400,000 | 9,374,948 | |||||||||||
Realty Income Corp., senior bond, 4.125%, 10/15/26 | United States | 12,500,000 | 12,367,065 | |||||||||||
Senior Housing Properties Trust, senior note, 6.75%, 12/15/21 | United States | 14,500,000 | 15,527,101 | |||||||||||
|
| |||||||||||||
78,964,005 | ||||||||||||||
|
| |||||||||||||
Retailing 1.2% | ||||||||||||||
e Amazon.com Inc., senior note, 144A, 2.80%, 8/22/24 | United States | 6,400,000 | 6,155,133 | |||||||||||
Dollar General Corp., senior bond, 4.15%, 11/01/25 | United States | 3,100,000 | 3,134,146 | |||||||||||
Dollar Tree Inc., senior note, 4.00%, 5/15/25 | United States | 13,100,000 | 12,985,125 | |||||||||||
Home Depot Inc., senior note, 2.125%, 9/15/26 | United States | 16,800,000 | 14,987,593 | |||||||||||
JD.com Inc., senior note, 3.125%, 4/29/21 | China | 1,900,000 | 1,855,331 | |||||||||||
ac,h K2016470219 South Africa Ltd., senior secured note, 144A, PIK, 3.00%, 12/31/22 | South Africa | 2,180,053 | 10,791 |
92 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||
Corporate Bonds (continued) | ||||||||||||||
Retailing (continued) | ||||||||||||||
ab,ac,h K2016470260 South Africa Ltd., senior secured note, 144A, PIK, 25.00%, 12/31/22 | South Africa | 380,400 | $ | 52,637 | ||||||||||
e Netflix Inc., senior bond, 144A, 5.875%, 11/15/28 | United States | 2,000,000 | 2,005,000 | |||||||||||
e PetSmart Inc., senior note, 144A, 7.125%, 3/15/23 | United States | 16,500,000 | 9,693,750 | |||||||||||
Tiffany & Co., senior bond, 4.90%, 10/01/44 | United States | 3,300,000 | 3,181,672 | |||||||||||
|
| |||||||||||||
54,061,178 | ||||||||||||||
|
| |||||||||||||
Semiconductors & Semiconductor Equipment 0.5% | ||||||||||||||
Maxim Integrated Products Inc., senior note, 3.375%, 3/15/23 | United States | 22,000,000 | 21,671,973 | |||||||||||
Xilinx Inc., senior note, 2.125%, 3/15/19 | United States | 1,200,000 | 1,195,575 | |||||||||||
|
| |||||||||||||
22,867,548 | ||||||||||||||
|
| |||||||||||||
Software & Services 0.8% | ||||||||||||||
Alibaba Group Holding Ltd., senior bond, 4.50%, 11/28/34 | China | 10,000,000 | 10,132,300 | |||||||||||
e First Data Corp., secured note, first lien, 144A, 5.00%, 1/15/24 | United States | 4,000,000 | 4,045,000 | |||||||||||
Fiserv Inc., senior bond, 3.85%, 6/01/25 | United States | 9,300,000 | 9,288,034 | |||||||||||
e Symantec Corp., senior note, 144A, 5.00%, 4/15/25 | United States | 1,200,000 | 1,207,881 | |||||||||||
e Tencent Holdings Ltd., senior note, 144A, 3.595%, 1/19/28 | China | 11,400,000 | 10,831,026 | |||||||||||
|
| |||||||||||||
35,504,241 | ||||||||||||||
|
| |||||||||||||
Technology Hardware & Equipment 1.0% | ||||||||||||||
e Dell International LLC/EMC Corp., senior secured note, first lien, 144A, 3.48%, 6/01/19 | United States | 12,000,000 | 12,029,815 | |||||||||||
Juniper Networks Inc., | ||||||||||||||
senior bond, 4.50%, 3/15/24 | United States | 4,500,000 | 4,578,435 | |||||||||||
senior bond, 4.35%, 6/15/25 | United States | 9,300,000 | 9,265,700 | |||||||||||
e Sanmina Corp., senior note, first lien, 144A, 4.375%, 6/01/19 | United States | 11,100,000 | 11,238,750 | |||||||||||
Tech Data Corp., senior bond, 4.95%, 2/15/27 | United States | 1,800,000 | 1,760,147 | |||||||||||
e Tempo Acquisition LLC/Tempo Acquisition Finance Corp., senior note, 144A, 6.75%, 6/01/25 | United States | 5,500,000 | 5,458,750 | |||||||||||
|
| |||||||||||||
44,331,597 | ||||||||||||||
|
| |||||||||||||
Telecommunication Services 1.1% | ||||||||||||||
Hughes Satellite Systems Corp., senior bond, 6.625%, 8/01/26 | United States | 4,500,000 | 4,477,500 | |||||||||||
Sprint Communications Inc., senior note, 6.00%, 11/15/22 | United States | 3,000,000 | 3,071,250 | |||||||||||
e Sprint Spectrum Co. LLC, first lien, senior secured note, 144A, | United States | 15,600,000 | 15,834,000 | |||||||||||
Telefonica Emisiones S.A.U., senior note, 4.57%, 4/27/23 | Spain | 3,000,000 | 3,131,205 | |||||||||||
Verizon Communications Inc., | ||||||||||||||
senior bond, 2.625%, 8/15/26 | United States | 10,700,000 | 9,616,116 | |||||||||||
senior bond, 4.812%, 3/15/39 | United States | 11,065,000 | 10,961,395 | |||||||||||
|
| |||||||||||||
47,091,466 | ||||||||||||||
|
| |||||||||||||
Transportation 0.8% | ||||||||||||||
e Aviation Capital Group Corp., senior bond, 144A, 7.125%, 10/15/20 | United States | 6,000,000 | 6,513,976 | |||||||||||
Burlington Northern and Santa Fe 99-2 Trust, secured bond, 7.57%, 1/02/21 | United States | 38,231 | 39,808 | |||||||||||
e DAE Funding LLC, | ||||||||||||||
senior note, 144A, 4.50%, 8/01/22 | United Arab Emirates | 1,500,000 | 1,455,000 | |||||||||||
senior note, 144A, 5.00%, 8/01/24 | United Arab Emirates | 3,900,000 | 3,763,403 | |||||||||||
e DP World Ltd., senior bond, 144A, 6.85%, 7/02/37 | United Arab Emirates | 3,700,000 | 4,415,062 | |||||||||||
e Park Aerospace Holdings Ltd., | ||||||||||||||
senior note, 144A, 5.25%, 8/15/22 | Ireland | 1,200,000 | 1,193,760 | |||||||||||
senior note, 144A, 5.50%, 2/15/24 | Ireland | 1,800,000 | 1,760,040 |
franklintempleton.com | Semiannual Report | 93 |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||
Corporate Bonds (continued) | ||||||||||||||
Transportation (continued) | ||||||||||||||
e Sydney Airport Finance Co. Pty. Ltd., senior secured bond, first lien, 144A, 3.90%, 3/22/23 | Australia | 5,800,000 | $ | 5,799,710 | ||||||||||
e Transurban Finance Co. Pty. Ltd., senior secured bond, 144A, 4.125%, 2/02/26 | Australia | 8,200,000 | 8,136,122 | |||||||||||
Union Pacific Railroad Co. 2005 Pass Through Trust, 2005-1, 5.082%, 1/02/29 | United States | 137,046 | 143,966 | |||||||||||
|
| |||||||||||||
33,220,847 | ||||||||||||||
|
| |||||||||||||
Utilities 3.5% | ||||||||||||||
Calpine Corp., senior note, 5.375%, 1/15/23 | United States | 13,275,000 | 12,777,188 | |||||||||||
e Colbun SA, senior note, 144A, 3.95%, 10/11/27 | Chile | 4,300,000 | 4,097,255 | |||||||||||
Commonwealth Edison Co., secured bond, 6.45%, 1/15/38 | United States | 700,000 | 912,692 | |||||||||||
Dominion Energy Inc., senior bond, 3.90%, 10/01/25 | United States | 12,200,000 | 12,077,069 | |||||||||||
Duke Energy Corp., senior bond, 3.15%, 8/15/27 | United States | 18,400,000 | 17,135,522 | |||||||||||
e,f EDF SA, junior sub. note, 144A, 5.25% to 1/29/23, FRN thereafter, Perpetual | France | 24,000,000 | 23,983,200 | |||||||||||
e Enogex LLC, senior bond, 144A, 6.25%, 3/15/20 | United States | 5,000,000 | 5,197,197 | |||||||||||
Georgia Power Co., senior bond, 4.30%, 3/15/42 | United States | 9,000,000 | 9,003,323 | |||||||||||
e Israel Electric Corp. Ltd., secured bond, 144A, 4.25%, 8/14/28 | Israel | 6,700,000 | 6,423,960 | |||||||||||
The Southern Co., senior bond, 3.25%, 7/01/26 | United States | 14,350,000 | 13,493,262 | |||||||||||
e State Grid Overseas Investments 2016 Ltd., | ||||||||||||||
senior note, 144A, 3.50%, 5/04/27 | China | 10,700,000 | 10,185,170 | |||||||||||
i senior note, 144A, 4.25%, 5/02/28 | China | 6,700,000 | 6,715,276 | |||||||||||
e Talen Energy Supply LLC, | ||||||||||||||
senior note, 144A, 9.50%, 7/15/22 | United States | 6,100,000 | 5,814,154 | |||||||||||
senior note, 144A, 10.50%, 1/15/26 | United States | 2,000,000 | 1,732,500 | |||||||||||
e Three Gorges Finance I Cayman Islands Ltd., senior note, 144A, 3.70%, 6/10/25 | China | 12,800,000 | 12,571,200 | |||||||||||
e Vistra Energy Corp., senior note, 144A, 8.00%, 1/15/25 | United States | 6,400,000 | 6,968,000 | |||||||||||
|
| |||||||||||||
149,086,968 | ||||||||||||||
|
| |||||||||||||
Total Corporate Bonds (Cost $1,580,263,517) | 1,549,326,347 | |||||||||||||
|
| |||||||||||||
j,k Senior Floating Rate Interests 2.9% | ||||||||||||||
Automobiles & Components 0.0%† | ||||||||||||||
TI Group Automotive Systems LLC, Initial US Term Loan, 4.401%, (1-month USD LIBOR + 2.50%), 6/30/22 | United States | 1,199,210 | 1,209,880 | |||||||||||
|
| |||||||||||||
Capital Goods 0.2% | ||||||||||||||
Allison Transmission Inc., New Term Loans, 3.65%, (1-month USD LIBOR + 1.75%), 9/23/22 | United States | 6,185,855 | 6,243,494 | |||||||||||
Harsco Corp., Term B-1 Loan, 4.938%, (1-month USD LIBOR + 3.00%), 12/10/24 | United States | 271,861 | 275,854 | |||||||||||
Leidos Innovations Corp., Term Loan B, 3.688%, (1-month USD LIBOR + 1.75%), 8/16/23 | United States | 191,225 | 192,958 | |||||||||||
|
| |||||||||||||
6,712,306 | ||||||||||||||
|
| |||||||||||||
Consumer Services 0.2% | ||||||||||||||
Aristocrat Technologies Inc., | ||||||||||||||
New 2017 Term Loans, 4.357% - 4.359%, (3-month USD | United States | 628,425 | 632,689 | |||||||||||
Term B-2 Loans, 4.359%, (3-month USD LIBOR + 2.00%), | United States | 158,005 | 159,059 |
94 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||
j,k Senior Floating Rate Interests (continued) | ||||||||||||||
Consumer Services (continued) | ||||||||||||||
Avis Budget Car Rental LLC, Tranche B Term Loans, 4.31%, (3-month USD LIBOR + 2.00%), 2/13/25 | United States | 5,051,282 | $ | 5,095,481 | ||||||||||
Eldorado Resorts Inc., | ||||||||||||||
Initial Term Loan, 4.188%, (1-month USD LIBOR + 2.25%), 4/17/24 | United States | 1,383,825 | 1,392,042 | |||||||||||
Initial Term Loan, 4.125% - 4.188%, (2-month USD LIBOR + 2.25%), 4/17/24 | United States | 1,934,407 | 1,945,893 | |||||||||||
Greektown Holdings LLC, Initial Term Loan, 4.901%, (1-month USD LIBOR + 3.00%), 4/25/24 | United States | 378,386 | 379,391 | |||||||||||
|
| |||||||||||||
9,604,555 | ||||||||||||||
|
| |||||||||||||
Energy 0.3% | ||||||||||||||
Bowie Resource Holdings LLC, | ||||||||||||||
First Lien Initial Term Loan, 7.651%, (1-month USD LIBOR + 5.75%), 8/14/20 | United States | 2,632,682 | 2,594,837 | |||||||||||
Second Lien Initial Term Loan, 12.651%, (1-month USD LIBOR + 10.75%), 2/16/21 | United States | 592,358 | 567,554 | |||||||||||
Fieldwood Energy LLC, Closing Date Loans, 7.151%, (1-month USD LIBOR + 5.25%), 4/11/22 | United States | 6,287,342 | 6,330,567 | |||||||||||
Foresight Energy LLC, Term Loans, 8.109%, (3-month USD LIBOR + 5.75%), 3/28/22 | United States | 1,529,357 | 1,499,917 | |||||||||||
|
| |||||||||||||
10,992,875 | ||||||||||||||
|
| |||||||||||||
Food & Staples Retailing 0.1% | ||||||||||||||
Aramark Corp., U.S. Term B-1 Loan, 3.901%, (1-month USD LIBOR + 2.00%), 3/11/25 | United States | 1,961,695 | 1,977,020 | |||||||||||
Smart & Final Stores LLC, First Lien Term Loan, 5.401%, (1-month USD LIBOR + 3.50%), 11/15/22 | United States | 1,556,745 | 1,529,502 | |||||||||||
|
| |||||||||||||
3,506,522 | ||||||||||||||
|
| |||||||||||||
Food, Beverage & Tobacco 0.3% | ||||||||||||||
B&G Foods Inc., Tranche B-3 Term Loan, 3.901%, (1-month USD LIBOR + 2.00%), 11/02/22 | United States | 2,955,965 | 2,976,902 | |||||||||||
JBS USA LUX SA, New Initial Term Loans, 4.678%, (3-month USD LIBOR + 2.50%), 10/30/22 | United States | 7,138,760 | 7,141,437 | |||||||||||
Post Holdings Inc., Series A Incremental Term Loans, 3.90%, (1-month USD LIBOR + 2.00%), 5/24/24 | United States | 2,954,342 | 2,970,697 | |||||||||||
|
| |||||||||||||
13,089,036 | ||||||||||||||
|
| |||||||||||||
Health Care Equipment & Services 0.1% | ||||||||||||||
DaVita Healthcare Partners Inc., Tranche B Term Loan, 4.651%, (1-month USD LIBOR + 2.75%), 6/24/21 | United States | 2,074,611 | 2,096,470 | |||||||||||
Quintiles IMS Inc., Term B-2 Dollar Loans, 4.302%, (3-month USD LIBOR + 2.00%), 1/20/25 | United States | 1,023,813 | 1,030,211 | |||||||||||
U.S. Renal Care Inc., Initial Term Loan, 6.552%, (3-month USD LIBOR + 4.25%), 12/31/22 | United States | 2,165,715 | 2,158,947 | |||||||||||
|
| |||||||||||||
5,285,628 | ||||||||||||||
|
|
franklintempleton.com | Semiannual Report | 95 |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||
j,k Senior Floating Rate Interests (continued) | ||||||||||||||
Household & Personal Products 0.1% | ||||||||||||||
Spectrum Brands Inc., | ||||||||||||||
USD Term Loans, 3.994% - 4.056%, (2-month USD LIBOR + 2.00%), 6/23/22 | United States | 816,723 | $ | 818,182 | ||||||||||
USD Term Loans, 3.791%, (3-month USD LIBOR + 2.00%), 6/23/22 | United States | 1,879,617 | 1,882,974 | |||||||||||
|
| |||||||||||||
2,701,156 | ||||||||||||||
|
| |||||||||||||
Materials 0.4% | ||||||||||||||
Ashland LLC, Term B Loan, 3.897% - 3.901%, (1-month USD LIBOR + 2.00%), 5/17/24 | United States | 6,144,523 | 6,202,896 | |||||||||||
Axalta Coating Systems U.S. Holdings Inc., Term B-3 Dollar Loan, 4.052%, (3-month USD LIBOR + 1.75%), 6/01/24 | United States | 958,638 | 963,594 | |||||||||||
Chemours Co., Tranche B-2 US$ Term Loan, 3.66%, (1-month USD LIBOR + 1.75%), 4/03/25 | United States | 1,548,895 | 1,552,284 | |||||||||||
l Crown Americas LLC, Term B Loans, 4.312%, (3-month USD LIBOR + 2.00%), 4/03/25 | United States | 1,990,699 | 2,011,384 | |||||||||||
Oxbow Carbon LLC, | ||||||||||||||
Second Lien Term Loan, 9.401%, (1-month USD LIBOR + 7.50%), 1/04/24 | United States | 36,943 | 37,682 | |||||||||||
Tranche A Term Loan, 4.401%, (1-month USD LIBOR + 2.50%), 1/04/22 | United States | 2,145,000 | 2,147,681 | |||||||||||
Tranche B Term Loan, 5.651%, (1-month USD LIBOR + 3.75%), 1/04/23 | United States | 3,545,125 | 3,593,871 | |||||||||||
|
| |||||||||||||
16,509,392 | ||||||||||||||
|
| |||||||||||||
Media 0.3% | ||||||||||||||
Altice U.S. Finance I Corp., March 2017 Refinancing Term Loan Commitments, 4.151%, (1-month USD LIBOR + 2.25%), 7/28/25 | United States | 233,148 | 233,149 | |||||||||||
AMC Entertainment Holdings Inc., | United States | 90,390 | 90,710 | |||||||||||
2016 Incremental Term Loans, 4.147%, (1-month USD LIBOR + 2.25%), 12/15/23 | ||||||||||||||
Initial Term Loans, 4.147%, (1-month USD LIBOR + 2.25%), 12/15/22 | United States | 1,542,746 | 1,551,907 | |||||||||||
CSC Holdings LLC, March 2017 Incremental Term Loans, 4.147%, (1-month USD LIBOR + 2.25%), 7/17/25 | United States | 1,088,323 | 1,089,547 | |||||||||||
Lions Gate Capital Holdings LLC, Term A Loan, 3.648%, (1-month USD LIBOR + 1.75%), 3/22/23 | Canada | 1,669,963 | 1,676,225 | |||||||||||
Live Nation Entertainment Inc., Term B-3 Loans, 3.688%, (1-month USD LIBOR + 1.75%), 10/31/23 | United States | 4,608,363 | 4,641,004 | |||||||||||
l,m Sinclair Television Group Inc., Tranche B-1 Term Loans, TBD, 1/31/25 | United States | 3,120,000 | 3,137,874 | |||||||||||
|
| |||||||||||||
12,420,416 | ||||||||||||||
|
| |||||||||||||
Pharmaceuticals, Biotechnology & Life Sciences 0.3% | ||||||||||||||
Endo Luxembourg Finance Co. I S.A.R.L. and Endo LLC, Initial Term Loans, 6.188%, (1-month USD LIBOR + 4.25%), 4/29/24 | United States | 3,016,163 | 3,006,110 | |||||||||||
Grifols Worldwide Operations USA Inc., Tranche B Term Loan, 4.00%, (1-week USD LIBOR + 2.25%), 1/31/25 | United States | 2,422,374 | 2,438,095 | |||||||||||
RPI Finance Trust, Term A-3 Loan, 4.052%, (3-month USD LIBOR + 1.75%), 10/14/21 | United States | 331,713 | 332,542 |
96 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||
j,k Senior Floating Rate Interests (continued) | ||||||||||||||
Pharmaceuticals, Biotechnology & Life Sciences (continued) | ||||||||||||||
Syneos Health Inc., | ||||||||||||||
Initial Term B Loans, 4.151%, (1-month USD LIBOR + 2.25%), 8/01/24 | United States | 971,723 | $ | 975,822 | ||||||||||
l,m Replacement Term B Loans, TBD, 8/01/24 | United States | 3,650,000 | 3,667,681 | |||||||||||
Valeant Pharmaceuticals International Inc., Series F-4 Tranche B | ||||||||||||||
Term Loans, 5.394%, (1-month USD LIBOR + 3.50%), 4/01/22 | United States | 727,843 | 736,818 | |||||||||||
|
| |||||||||||||
11,157,068 | ||||||||||||||
|
| |||||||||||||
Retailing 0.2% | ||||||||||||||
Ascena Retail Group Inc., Tranche B Term Loan, 6.438%, (1-month USD LIBOR + 4.50%), 8/21/22 | United States | 3,261,233 | 2,859,015 | |||||||||||
Jo-Ann Stores Inc., Initial Loans, 7.509%, (6-month USD LIBOR + 5.00%), 10/23/23 | United States | 1,068,690 | 1,065,017 | |||||||||||
PetSmart Inc., Tranche B-2 Loans, 4.89%, (1-month USD LIBOR + 3.00%), 3/11/22 | United States | 7,961,531 | 6,256,434 | |||||||||||
|
| |||||||||||||
10,180,466 | ||||||||||||||
|
| |||||||||||||
Semiconductors & Semiconductor Equipment 0.0%† | ||||||||||||||
MKS Instruments Inc., Tranche B-4 Term Loan, 3.651%, (1-month USD LIBOR + 1.75%), 4/29/23 | United States | 102,440 | 103,192 | |||||||||||
ON Semiconductor Corp., 2017 Replacement Term B-2 Loans, 3.901%, (1-month USD LIBOR + 2.00%), 3/31/23 | United States | 1,322,244 | 1,331,996 | |||||||||||
|
| |||||||||||||
1,435,188 | ||||||||||||||
|
| |||||||||||||
Software & Services 0.0%† | ||||||||||||||
Global Payments Inc., Term A-2 Loan, 3.498%, (1-week USD LIBOR + 1.75%), 5/02/22 | United States | 734,019 | 736,007 | |||||||||||
Rackspace Hosting Inc., Term B Loans, 4.787%, (3-month USD LIBOR + 3.00%), 11/03/23 | United States | 453,102 | 452,567 | |||||||||||
|
| |||||||||||||
1,188,574 | ||||||||||||||
|
| |||||||||||||
Technology Hardware & Equipment 0.1% | ||||||||||||||
CommScope Inc., Tranche 5 Term Loans, 3.901%, (1-month USD LIBOR + 2.00%), 12/29/22 | United States | 2,069,584 | 2,084,460 | |||||||||||
Western Digital Corp., U.S. Term B-3 Loan, 3.90%, (1-month USD LIBOR + 2.00%), 4/29/23 | United States | 476,733 | 480,351 | |||||||||||
|
| |||||||||||||
2,564,811 | ||||||||||||||
|
| |||||||||||||
Telecommunication Services 0.0%† | ||||||||||||||
Consolidated Communications Inc., Initial Term Loan, 4.91%, (1-month USD LIBOR + 3.00%), 10/05/23 | United States | 226,136 | 224,393 | |||||||||||
Global Tel*Link Corp., Term Loan, 6.302%, (3-month USD LIBOR + 4.00%), 5/23/20 | United States | 261,668 | 263,548 | |||||||||||
|
| |||||||||||||
487,941 | ||||||||||||||
|
| |||||||||||||
Transportation 0.2% | ||||||||||||||
Air Canada, Term Loan, 3.984%, (3-month USD LIBOR + 2.00%), 10/06/23 | Canada | 54,781 | 55,180 | |||||||||||
Hertz Corp., Tranche B-1 Term Loan, 4.651%, (1-month USD LIBOR + 2.75%), 6/30/23 | United States | 3,929,648 | 3,942,541 | |||||||||||
Navios Maritime Midstream Partners LP, Initial Term Loan, 6.71%, (3-month USD LIBOR + 4.50%), 6/18/20 | Marshall Islands | 1,692,326 | 1,684,922 |
franklintempleton.com | Semiannual Report | 97 |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||
j,k Senior Floating Rate Interests (continued) | ||||||||||||||
Transportation (continued) | ||||||||||||||
Navios Maritime Partners LP, Initial Term Loan, 7.08%, (3-month USD LIBOR + 5.00%), 9/14/20 | Greece | 2,850,002 | $ | 2,867,815 | ||||||||||
|
| |||||||||||||
8,550,458 | ||||||||||||||
|
| |||||||||||||
Utilities 0.1% | ||||||||||||||
EFS Cogen Holdings I LLC (Linden), Term B Advance, 5.56%, (3-month USD LIBOR + 3.25%), 6/28/23 | United States | 4,970,040 | 5,001,103 | |||||||||||
NRG Energy Inc., Term loan B, 4.052%, (3-month USD LIBOR + 1.75%), 6/30/23 | United States | 1,031,625 | 1,035,442 | |||||||||||
|
| |||||||||||||
6,036,545 | ||||||||||||||
|
| |||||||||||||
Total Senior Floating Rate Interests | 123,632,817 | |||||||||||||
|
| |||||||||||||
Foreign Government and Agency Securities 2.0% | ||||||||||||||
e The Export-Import Bank of China, senior note, 144A, 3.625%, 7/31/24 | China | 11,300,000 | 11,126,036 | |||||||||||
e The Export-Import Bank of India, senior note, 144A, 3.875%, 2/01/28 | India | 11,400,000 | 10,860,267 | |||||||||||
The Export-Import Bank of Korea, senior note, 2.25%, 1/21/20 | South Korea | 18,800,000 | 18,497,602 | |||||||||||
Government of Mexico, | ||||||||||||||
senior note, M, 4.75%, 6/14/18 | Mexico | 2,940,000n | MXN | 15,670,487 | ||||||||||
senior note, M 10, 8.50%, 12/13/18 | Mexico | 2,000,000n | MXN | 10,758,369 | ||||||||||
e Government of Ukraine, | ||||||||||||||
144A, 7.75%, 9/01/20 | Ukraine | 292,000 | 303,797 | |||||||||||
144A, 7.75%, 9/01/21 | Ukraine | 229,000 | 236,986 | |||||||||||
144A, 7.75%, 9/01/22 | Ukraine | 229,000 | 234,112 | |||||||||||
144A, 7.75%, 9/01/23 | Ukraine | 229,000 | 231,387 | |||||||||||
144A, 7.75%, 9/01/24 | Ukraine | 229,000 | 228,666 | |||||||||||
144A, 7.75%, 9/01/25 | Ukraine | 229,000 | 227,323 | |||||||||||
144A, 7.75%, 9/01/26 | Ukraine | 229,000 | 226,029 | |||||||||||
144A, 7.75%, 9/01/27 | Ukraine | 229,000 | 224,741 | |||||||||||
a,o 144A, VRI, GDP Linked Security, 5/31/40 | Ukraine | 474,000 | 321,424 | |||||||||||
e,i Harvest Operations Corp., senior note, 144A, 4.20%, 6/01/23 | South Korea | 3,800,000 | 3,839,638 | |||||||||||
p Nota Do Tesouro Nacional, Index Linked, 6.00%, 8/15/18 | Brazil | 13,695q | BRL | 12,118,612 | ||||||||||
e Peru Enhanced Pass-Through Finance Ltd., senior secured bond, A-1, 144A, zero cpn., 5/31/18 | Peru | 72,620 | 72,345 | |||||||||||
|
| |||||||||||||
Total Foreign Government and Agency Securities | 85,177,821 | |||||||||||||
|
| |||||||||||||
U.S. Government and Agency Securities 12.0% | ||||||||||||||
U.S. Treasury Bond, | ||||||||||||||
6.25%, 8/15/23 | United States | 41,000,000 | 47,927,559 | |||||||||||
4.50%, 2/15/36 | United States | 15,000,000 | 18,119,824 | |||||||||||
2.875%, 5/15/43 | United States | 46,100,000 | 44,312,725 | |||||||||||
3.00%, 11/15/44 | United States | 13,000,000 | 12,749,649 | |||||||||||
2.875%, 8/15/45 | United States | 5,000,000 | 4,782,031 | |||||||||||
2.50%, 2/15/46 | United States | 50,000,000 | 44,287,110 | |||||||||||
2.50%, 5/15/46 | United States | 60,000,000 | 53,088,307 | |||||||||||
2.25%, 8/15/46 | United States | 57,500,000 | 48,163,013 | |||||||||||
2.75%, 11/15/47 | United States | 7,500,000 | 6,972,070 |
98 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||
U.S. Government and Agency Securities (continued) | ||||||||||||||||
U.S. Treasury Note, | ||||||||||||||||
3.125%, 5/15/21 | United States | 40,000,000 | $ | 40,549,219 | ||||||||||||
2.125%, 6/30/21 | United States | 50,000,000 | 49,181,641 | |||||||||||||
2.00%, 8/31/21 | United States | 30,000,000 | 29,341,406 | |||||||||||||
2.00%, 10/31/22 | United States | 20,000,000 | 19,350,781 | |||||||||||||
2.00%, 11/30/22 | United States | 36,900,000 | 35,686,336 | |||||||||||||
r Index Linked, 0.125%, 7/15/24 | United States | 63,432,075 | 61,466,368 | |||||||||||||
|
| |||||||||||||||
Total U.S. Government and Agency Securities | 515,978,039 | |||||||||||||||
|
| |||||||||||||||
Asset-Backed Securities and Commercial | ||||||||||||||||
Banks 0.6% | ||||||||||||||||
Citigroup Commercial Mortgage Trust, 2006-C5, AJ, 5.482%, 10/15/49 | United States | 5,509,938 | 5,225,408 | |||||||||||||
s Commercial Mortgage Trust, 2006-GG7, AJ, FRN, 5.945%, 7/10/38 | United States | 7,281,000 | 6,712,144 | |||||||||||||
e,s CSMC, 2009-15R, 3A1, 144A, FRN, 3.966%, 3/26/36 | United States | 1,774,411 | 1,782,444 | |||||||||||||
t CWABS Inc. Asset-Backed Certificates, 2004-1, M1, FRN, 2.647%, (1-month USD LIBOR + 0.75%), 3/25/34 | United States | 1,230,692 | 1,239,832 | |||||||||||||
t FNMA, 2005-122, FN, FRN, 2.247%, (1-month USD LIBOR + 0.35%), 1/25/36 | United States | 422,158 | 422,960 | |||||||||||||
s,u GE Capital Commercial Mortgage Corp. Trust, 2007-C1, AM, FRN, 5.606%, 12/10/49 | United States | 4,182,970 | 4,142,388 | |||||||||||||
s Greenwich Capital Commercial Funding Corp., 2006-GG7, AM, FRN, 5.945%, 7/10/38 | United States | 1,607,430 | 1,609,469 | |||||||||||||
t Merrill Lynch Mortgage Investors Trust, 2003-A, 1A, FRN, 2.637%, (1-month USD LIBOR + 0.74%), 3/25/28 | United States | 1,143,419 | 1,103,573 | |||||||||||||
t Morgan Stanley ABS Capital I Inc. Trust, 2005-WMC, M2, FRN, 2.632%, (1-month USD LIBOR + 0.735%), 1/25/35 | United States | 833,776 | 834,877 | |||||||||||||
ab Weyerhaeuser Mortgage Co., 1984-A, 7.43%, 1/01/24 | United States | 13,057 | 13,057 | |||||||||||||
|
| |||||||||||||||
23,086,152 | ||||||||||||||||
|
| |||||||||||||||
Diversified Financials 22.0% | ||||||||||||||||
t American Home Mortgage Investment Trust, 2004-3, 4A, FRN, 3.711%, (6-month USD LIBOR + 1.50%), 10/25/34 | United States | 1,323,826 | 1,313,167 | |||||||||||||
t Ameriquest Mortgage Securities Inc. Asset-Backed Pass-Through Certificates, 2004-R4, M1, FRN, 2.722%, (1-month USD LIBOR + 0.825%), 6/25/34. | United States | 3,395,210 | 3,418,658 | |||||||||||||
e,t AMMC CLO 21 Ltd., 2017-21A, C, 144A, FRN, 3.878%, (3-month USD LIBOR + 2.10%), 11/02/30 | United States | 1,000,000 | 1,001,140 | |||||||||||||
e,t AMMC CLO XI Ltd., | ||||||||||||||||
2012-11A, BR2, 144A, FRN, 3.959%, (3-month USD LIBOR + 1.60%), 4/30/31 | United States | 5,050,000 | 5,050,000 | |||||||||||||
2012-11A, CR2, 144A, FRN, 4.259%, (3-month USD LIBOR + 1.90%), 4/30/31 | United States | 3,750,000 | 3,750,000 | |||||||||||||
2012-11A, DR2, 144A, FRN, 5.209%, (3-month USD LIBOR + 2.85%), 4/30/31 | United States | 1,750,000 | 1,750,000 |
franklintempleton.com | Semiannual Report | 99 |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||
Asset-Backed Securities and Commercial | ||||||||||||||||
Diversified Financials (continued) | ||||||||||||||||
e,i,v | Antares CLO Ltd., 2018-1A, B, 144A, FRN, (3-month USD LIBOR + 1.65%), 4/20/31 | United States | 12,900,000 | $ | 12,900,000 | |||||||||||
t | Argent Securities Inc. Asset-Backed Pass-Through Certificates, 2005-W2, A2C, FRN, 2.257%, (1-month USD LIBOR + 0.36%), 10/25/35 | United States | 2,689,567 | 2,699,655 | ||||||||||||
e,t | Atrium IX, 9A, AR, 144A, FRN, 3.224%, (3-month USD LIBOR + 1.24%), 5/28/30 | United States | 4,500,000 | 4,520,250 | ||||||||||||
e,t | Atrium X, 10A, CR, 144A, FRN, 4.298%, (3-month USD LIBOR + 1.95%), 7/16/25 | United States | 13,680,000 | 13,699,426 | ||||||||||||
e,t | Atrium XIII, | |||||||||||||||
2013A, B, 144A, FRN, 3.862%, (3-month USD LIBOR + 1.50%), 11/21/30 | United States | 2,700,000 | 2,708,964 | |||||||||||||
2013A, C, 144A, FRN, 4.162%, (3-month USD LIBOR + 1.80%), 11/21/30 | United States | 3,753,500 | 3,753,425 | |||||||||||||
2013A, D, 144A, FRN, 5.062%, (3-month USD LIBOR + 2.70%), 11/21/30 | United States | 5,500,000 | 5,562,480 | |||||||||||||
e,t | Bain Capital Credit CLO, | |||||||||||||||
2018-1A, A1, 144A, FRN, 3.322%, (3-month USD LIBOR + 0.96%), 4/23/31 | United States | 12,000,000 | 11,975,520 | |||||||||||||
2018-1A, A2, 144A, FRN, 3.512%, (3-month USD LIBOR + 1.15%), 4/23/31 | United States | 5,100,000 | 5,097,297 | |||||||||||||
t | Bear Stearns ALT-A Trust, 2004-13, A2, FRN, 2.777%, (1-month USD LIBOR + 0.88%), 11/25/34 | United States | 328,364 | 327,364 | ||||||||||||
e,t | Bellemeade Re 2018-1 Ltd., 2018-1A, M1B, 144A, FRN, 3.477%, (1-month USD LIBOR + 1.60%), 4/25/28 | Bermuda | 9,850,000 | 9,850,000 | ||||||||||||
e,t | Birchwood Park CLO Ltd., | |||||||||||||||
2014-1A, AR, 144A, FRN, 3.528%, (3-month USD LIBOR + 1.18%), 7/15/26 | United States | 3,250,000 | 3,253,445 | |||||||||||||
2014-1A, D2R, 144A, FRN, 5.748%, (3-month USD LIBOR + 3.40%), 7/15/26 | United States | 1,500,000 | 1,502,475 | |||||||||||||
e,t | BlueMountain CLO Ltd., 2014, CL 3A, 144A, FRN, 3.488%, (3-month USD LIBOR + 1.14%), 10/15/26 | United States | 8,100,000 | 8,105,670 | ||||||||||||
e,t | BlueMountain Fuji U.S. CLO II Ltd., 2017-2A, B, 144A, FRN, 4.509%, (3-month USD LIBOR + 2.15%), 10/20/30 | United States | 4,010,000 | 4,026,080 | ||||||||||||
e,t | BlueMountain Fuji U.S. CLO III Ltd., | |||||||||||||||
2017-3A, C, 144A, FRN, 3.427%, (3-month USD LIBOR + 1.70%), 1/15/30 | United States | 1,500,000 | 1,492,710 | |||||||||||||
2017-3A, D, 144A, FRN, 4.127%, (3-month USD LIBOR + 2.40%), 1/15/30 | United States | 1,600,000 | 1,578,224 | |||||||||||||
e,t | Carlyle Global Market Strategies CLO Ltd., | |||||||||||||||
2012-4A, AR, 144A, FRN, 3.809%, (3-month USD LIBOR + 1.45%), 1/20/29 | United States | 6,280,000 | 6,313,661 | |||||||||||||
2014-1A, A1R2, 144A, FRN, 3.31%, (3-month USD LIBOR + 0.97%), 4/17/31 | United States | 725,000 | 725,012 | |||||||||||||
2014-1A, A2R2, 144A, FRN, 3.47%, (3-month USD LIBOR + 1.13%), 4/17/31 | United States | 6,300,000 | 6,311,263 | |||||||||||||
2014-3A, A1AR, 144A, FRN, 3.516%, (3-month USD LIBOR + 1.15%), 7/27/26 | United States | 1,250,000 | 1,251,150 |
100 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||
Asset-Backed Securities and Commercial | ||||||||||||||||
Diversified Financials (continued) | ||||||||||||||||
e,t | Carlyle U.S. CLO Ltd., | |||||||||||||||
2017-1A, A1A, 144A, FRN, 3.659%, (3-month USD LIBOR + 1.30%), 4/20/31 | United States | 18,800,000 | $ | 18,876,140 | ||||||||||||
2017-2A, A1B, 144A, FRN, 3.579%, (3-month USD LIBOR + 1.22%), 7/20/31 | United States | 10,650,000 | 10,682,056 | |||||||||||||
2017-2A, B, 144A, FRN, 4.759%, (3-month USD LIBOR + 2.40%), 7/20/31 | United States | 8,829,000 | 8,888,861 | |||||||||||||
2017-3A, B, 144A, FRN, 4.709%, (3-month USD LIBOR + 2.35%), 7/20/29 | United States | 1,000,000 | 1,005,430 | |||||||||||||
2017-4A, C, 144A, FRN, 5.148%, (3-month USD LIBOR + 2.80%), 1/15/30 | United States | 545,000 | 545,038 | |||||||||||||
2017-5A, A2, 144A, FRN, 3.13%, (3-month USD LIBOR + 1.40%), 1/20/30 | United States | 2,000,000 | 2,000,040 | |||||||||||||
2017-5A, B, 144A, FRN, 3.53%, (3-month USD LIBOR + 1.80%), 1/20/30 | United States | 7,000,000 | 7,000,210 | |||||||||||||
e,t | Catamaran CLO Ltd., | |||||||||||||||
2014-2A, BR, 144A, FRN, 5.305%, (3-month USD LIBOR + 2.95%), 10/18/26 | United States | 6,401,000 | 6,457,521 | |||||||||||||
2015-1A, C2R, 144A, FRN, 4.312%, (3-month USD LIBOR + 1.95%), 4/22/27 | United States | 7,600,000 | 7,619,000 | |||||||||||||
e,t | Cent CLO LP, | |||||||||||||||
2014-22A, A1R, 144A, FRN, 3.203%, (3-month USD LIBOR + 1.41%), 11/07/26 | United States | 6,280,000 | 6,283,831 | |||||||||||||
2014-22A, C, 144A, FRN, 5.543%, (3-month USD LIBOR + 3.75%), 11/07/26 | United States | 2,500,000 | 2,506,225 | |||||||||||||
e,t | Cent CLO Ltd., | |||||||||||||||
2013-17A, A1, 144A, FRN, 3.067%, (3-month USD LIBOR + 1.30%), 1/30/25 | United States | 7,345,807 | 7,356,091 | |||||||||||||
2013-17A, B, 144A, FRN, 4.767%, (3-month USD LIBOR + 3.00%), 1/30/25 | United States | 3,500,000 | 3,513,055 | |||||||||||||
2013-20A, AR, 144A, FRN, 3.46%, (3-month USD LIBOR + 1.10%), 1/25/26 | United States | 7,708,166 | 7,718,033 | |||||||||||||
2013-20A, CR, 144A, FRN, 4.71%, (3-month USD LIBOR + 2.35%), 1/25/26 | United States | 3,500,000 | 3,509,135 | |||||||||||||
e,t | Centerline REIT Inc., 2004-RR3, A2, 144A, 4.76%, 9/21/45 | United States | 1,748,871 | 1,757,966 | ||||||||||||
t | Chase Funding Trust, 2004-2, 2A2, FRN, 2.397%, (1-month USD LIBOR + 0.50%), 2/26/35 | United States | 625,033 | 609,621 | ||||||||||||
e,s | Citigroup Mortgage Loan Trust, 2013-A, A, 144A, FRN, 3.00%, 5/25/42 | United States | 1,550,885 | 1,527,671 | ||||||||||||
Conseco Financial Corp., 1996-9, M1, 7.63%, 8/15/27 | United States | 2,160,678 | 2,326,761 | |||||||||||||
e,t | Cook Park CLO Ltd., 2018-1A, A2, 144A, FRN, 3.468%, (3-month USD LIBOR + 1.12%), 4/17/30 | United States | 6,000,000 | 5,999,400 | ||||||||||||
Credit Suisse First Boston Mortgage Securities Corp., 2004-6, 3A1, 5.00%, 9/25/19 | United States | 232,582 | 240,587 | |||||||||||||
e,t | Dryden 33 Senior Loan Fund, 2014-33A, AR, 144A, FRN, 3.778%, (3-month USD LIBOR + 1.43%), 10/15/28 | United States | 12,185,000 | 12,219,240 | ||||||||||||
e,t | Dryden 34 Senior Loan Fund, 2014-34A, AR, 144A, FRN, 3.508%, (3-month USD LIBOR + 1.16%), 10/15/26 | United States | 16,911,173 | 16,911,173 | ||||||||||||
e,t | Dryden 38 Senior Loan Fund, 2015-38A, A, 144A, FRN, 3.778%, (3-month USD LIBOR + 1.43%), 7/15/27 | United States | 21,757,143 | 21,795,871 |
franklintempleton.com | Semiannual Report | 101 |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||
Asset-Backed Securities and Commercial | ||||||||||||||||
Mortgage-Backed Securities (continued) | ||||||||||||||||
Diversified Financials (continued) | ||||||||||||||||
e,t | Dryden 41 Senior Loan Fund, 2015-41A, AR, 144A, FRN, 3.318%, (3-month USD LIBOR + 0.97%), 4/15/31 | United States | 18,000,000 | $ | 17,982,000 | |||||||||||
e,t | Dryden 49 Senior Loan Fund, | |||||||||||||||
2017-49A, A, 144A, FRN, 3.565%, (3-month USD LIBOR + 1.21%), 7/18/30 | United States | 7,030,000 | 7,047,013 | |||||||||||||
2017-49A, C, 144A, FRN, 4.705%, (3-month USD LIBOR + 2.35%), 7/18/30 | United States | 5,320,000 | 5,348,675 | |||||||||||||
e,t | Dryden 50 Senior Loan Fund, | |||||||||||||||
2017-50A, A1, 144A, FRN, 3.568%, (3-month USD LIBOR + 1.22%), 7/15/30 | United States | 5,660,000 | 5,672,509 | |||||||||||||
2017-50A, C, 144A, FRN, 4.598%, (3-month USD LIBOR + 2.25%), 7/15/30 | United States | 2,600,000 | 2,613,052 | |||||||||||||
e,t | Dryden 53 CLO Ltd., | |||||||||||||||
2017-53A, B, 144A, FRN, 3.748%, (3-month USD LIBOR + 1.40%), 1/15/31 | United States | 2,200,000 | 2,182,554 | |||||||||||||
2017-53A, C, 144A, FRN, 4.048%, (3-month USD LIBOR + 1.70%), 1/15/31 | United States | 7,200,000 | 7,175,592 | |||||||||||||
2017-53A, D, 144A, FRN, 4.748%, (3-month USD LIBOR + 2.40%), 1/15/31 | United States | 5,400,000 | 5,339,736 | |||||||||||||
e,i,v | Dryden 64 CLO Ltd., | |||||||||||||||
2018-64A, A, 144A, FRN, (3-month USD LIBOR + 0.97%), 4/18/31 | United States | 1,200,000 | 1,200,000 | |||||||||||||
2018-64A, D, 144A, FRN, (3-month USD LIBOR + 2.65%), 4/18/31 | United States | 4,000,000 | 4,000,000 | |||||||||||||
e,t | Eaton Vance CDO Ltd., 2014-1A, AR, 144A, FRN, 3.548%, (3-month USD LIBOR + 1.20%), 7/15/26 | United States | 10,096,000 | 10,080,250 | ||||||||||||
e,s | Eleven Madison Trust Mortgage Trust, 2015-11MD, A, 144A, FRN, 3.673%, 9/10/35 | United States | 3,255,000 | 3,248,303 | ||||||||||||
t | FHLMC Structured Agency Credit Risk Debt Notes, | |||||||||||||||
2014-DN1, M2, FRN, 4.097%, (1-month USD LIBOR + 2.20%), 2/25/24 | United States | 2,633,377 | 2,710,080 | |||||||||||||
2014-DN3, M3, FRN, 5.897%, (1-month USD LIBOR + 4.00%), 8/25/24 | United States | 16,293,897 | 17,862,973 | |||||||||||||
2014-DN4, M3, FRN, 6.447%, (1-month USD LIBOR + 4.55%), 10/25/24 | United States | 10,871,051 | 12,126,788 | |||||||||||||
2015-DN1, M3, FRN, 6.047%, (1-month USD LIBOR + 4.15%), 1/25/25 | United States | 14,724,832 | 15,877,744 | |||||||||||||
2015-DNA2, M3, FRN, 5.797%, (1-month USD LIBOR + 3.90%), 12/25/27 | United States | 25,057,000 | 27,856,087 | |||||||||||||
2015-DNA3, M2, FRN, 4.747%, (1-month USD LIBOR + 2.85%), 4/25/28 | United States | 17,489,231 | 18,146,183 | |||||||||||||
2015-DNA3, M3, FRN, 6.597%, (1-month USD LIBOR + 4.70%), 4/25/28 | United States | 3,330,000 | 3,999,911 | |||||||||||||
2015-HQ1, M3, FRN, 5.697%, (1-month USD LIBOR + 3.80%), 3/25/25 | United States | 28,711,666 | 30,924,951 | |||||||||||||
2015-HQ2, M3, FRN, 5.147%, (1-month USD LIBOR + 3.25%), 5/25/25 | United States | 780,000 | 884,455 | |||||||||||||
2015-HQA1, M2, FRN, 4.547%, (1-month USD LIBOR + 2.65%), 3/25/28 | United States | 17,164,818 | 17,501,415 | |||||||||||||
2015-HQA2, M2, FRN, 4.697%, (1-month USD LIBOR + 2.80%), 5/25/28 | United States | 2,371,708 | 2,439,993 |
102 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||
Asset-Backed Securities and Commercial | ||||||||||||||||
Diversified Financials (continued) | ||||||||||||||||
t | FHLMC Structured Agency Credit Risk Debt Notes, (continued) | |||||||||||||||
2016-DNA1, M2, FRN, 4.772%, (1-month USD LIBOR + 2.90%), 7/25/28 | United States | 6,660,063 | $ | 6,838,358 | ||||||||||||
2016-DNA2, M2, FRN, 4.097%, (1-month USD LIBOR + 2.20%), 10/25/28 | United States | 28,064,864 | 28,425,155 | |||||||||||||
2016-HQA1, M2, FRN, 4.647%, (1-month USD LIBOR + 2.75%), 9/25/28 | United States | 13,637,806 | 13,955,718 | |||||||||||||
2016-HQA2, M2, FRN, 4.147%, (1-month USD LIBOR + 2.25%), 11/25/28 | United States | 21,255,888 | 21,767,946 | |||||||||||||
2016-HQA3, M2, FRN, 3.247%, (1-month USD LIBOR + 1.35%), 3/25/29 | United States | 2,250,000 | 2,282,699 | |||||||||||||
e,t | Flagship CLO VIII Ltd., | |||||||||||||||
2014-8A, AR, 144A, FRN, 3.598%, (3-month USD LIBOR + 1.25%), 1/16/26 | United States | 5,900,000 | 5,909,853 | |||||||||||||
2014-8A, D, 144A, FRN, 6.048%, (3-month USD LIBOR + 3.70%), 1/16/26 | United States | 3,900,000 | 3,913,572 | |||||||||||||
t | FNMA Connecticut Avenue Securities, | |||||||||||||||
2014-C02, 1M2, FRN, 4.497%, (1-month USD LIBOR + 2.60%), 5/25/24 | United States | 3,690,000 | 3,924,919 | |||||||||||||
2014-C02, 2M2, FRN, 4.497%, (1-month USD LIBOR + 2.60%), 5/25/24 | United States | 3,583,619 | 3,785,586 | |||||||||||||
2014-C03, 1M2, FRN, 4.897%, (1-month USD LIBOR + 3.00%), 7/25/24 | United States | 18,699,366 | 20,006,358 | |||||||||||||
2014-C04, 1M1, FRN, 6.797%, (1-month USD LIBOR + 4.90%), 11/25/24 | United States | 9,898,203 | 11,349,053 | |||||||||||||
2014-C04, 2M2, FRN, 6.897%, (1-month USD LIBOR + 5.00%), 11/25/24 | United States | 4,948,292 | 5,559,105 | |||||||||||||
2015-C01, 1M2, FRN, 6.197%, (1-month USD LIBOR + 4.30%), 2/25/25 | United States | 3,945,265 | 4,363,561 | |||||||||||||
2015-C01, 2M2, FRN, 6.447%, (1-month USD LIBOR + 4.55%), 2/25/25 | United States | 17,981,012 | 19,552,614 | |||||||||||||
2015-C02, 1M2, FRN, 5.897%, (1-month USD LIBOR + 4.00%), 5/25/25 | United States | 7,450,585 | 8,184,855 | |||||||||||||
2015-C02, 2M2, FRN, 5.897%, (1-month USD LIBOR + 4.00%), 5/25/25 | United States | 5,684,708 | 6,136,497 | |||||||||||||
2015-C03, 1M2, FRN, 6.897%, (1-month USD LIBOR + 5.00%), 7/25/25 | United States | 13,092,628 | 14,947,115 | |||||||||||||
2015-C03, 2M2, FRN, 6.897%, (1-month USD LIBOR + 5.00%), 7/25/25 | United States | 5,861,579 | 6,536,603 | |||||||||||||
2017-C01, 1B1, FRN, 7.647%, (1-month USD LIBOR + 5.75%), 7/25/29 | United States | 5,375,000 | 6,326,145 | |||||||||||||
e | FREMF Mortgage Trust, 2018-K72, B, 144A, 3.992%, 12/25/50 | United States | 17,900,000 | 17,360,526 | ||||||||||||
e,t | Galaxy XXVII CLO Ltd., | |||||||||||||||
2018-27A, A, 144A, FRN, 3.383%, (3-month USD LIBOR + 1.02%), 5/16/31 | United States | 1,000,000 | 1,000,561 | |||||||||||||
2018-27A, C, 144A, FRN, 5.113%, (3-month USD LIBOR + 2.75%), 5/16/31 | United States | 750,000 | 737,983 |
franklintempleton.com |
Semiannual Report | 103 |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||
Asset-Backed Securities and Commercial | ||||||||||||||||
Diversified Financials (continued) | ||||||||||||||||
e | G-Force LLC, 2005-RRA, C, 144A, 5.20%, 8/22/36 | United States | 2,603,474 | $ | 2,577,669 | |||||||||||
e,t | Gilbert Park CLO Ltd., | |||||||||||||||
2017-1A, B, 144A, FRN, 3.948%, (3-month USD LIBOR + 1.60%), 10/15/30 | United States | 1,000,000 | 1,005,000 | |||||||||||||
2017-1A, D, 144A, FRN, 5.298%, (3-month USD LIBOR + 2.95%), 10/15/30 | United States | 2,600,000 | 2,615,626 | |||||||||||||
t | GSAA Home Equity Trust, 2005-5, M3, FRN, 2.842%, (1-month USD LIBOR + 0.945%), 2/25/35 | United States | 2,283,425 | 2,272,982 | ||||||||||||
e,t | HayFin Kingsland IX Ltd., 2013-6A, BR, 144A, FRN, 4.159%, (3-month USD LIBOR + 1.80%), 4/28/31 | United States | 14,500,000 | 14,500,000 | ||||||||||||
t | Home Equity Mortgage Trust, 2004-4, M3, FRN, 2.872%, (1-month USD LIBOR + 0.975%), 12/25/34 | United States | 1,717,944 | 1,717,888 | ||||||||||||
e,t | Invitation Homes Trust, | |||||||||||||||
2015-SFR1, B, 144A, FRN, 3.746%, (1-month USD LIBOR + 1.85%), 3/17/32 | United States | 7,400,000 | 7,407,634 | |||||||||||||
2015-SFR2, C, 144A, FRN, 3.896%, (1-month USD LIBOR + 2.00%), 6/17/32 | United States | 2,340,000 | 2,342,029 | |||||||||||||
2015-SFR3, C, 144A, FRN, 3.896%, (1-month USD LIBOR + 2.00%), 8/17/32 | United States | 10,402,000 | 10,411,453 | |||||||||||||
e,t | LCM 26 Ltd., | |||||||||||||||
26A, B, 144A, FRN, 3.326%, (3-month USD LIBOR + 1.40%), 1/20/31 | United States | 2,000,000 | 1,995,400 | |||||||||||||
26A, C, 144A, FRN, 3.726%, (3-month USD LIBOR + 1.80%), 1/20/31 | United States | 9,600,000 | 9,539,040 | |||||||||||||
26A, D, 144A, FRN, 4.426%, (3-month USD LIBOR + 2.50%), 1/20/31 | United States | 600,000 | 596,844 | |||||||||||||
e,t | LCM XVI LP, 16A, DR, 144A, FRN, 5.348%, (3-month USD LIBOR + 3.00%), 7/15/26 | United States | 2,750,000 | 2,755,610 | ||||||||||||
e,i,v | LCM XVIII LP, 2018A, CR, 144A, FRN, (3-month USD LIBOR + 1.85%), 4/20/31 | United States | 2,000,000 | 2,000,000 | ||||||||||||
e,t | LCM XXIII Ltd., 23A, A2, 144A, FRN, 4.209%, (3-month USD LIBOR + 1.85%), 10/20/29 | United States | 2,000,000 | 2,013,880 | ||||||||||||
e,t | LCM XXV Ltd., 25A, C2, 144A, FRN, 4.659%, (3-month USD LIBOR + 2.30%), 7/20/30 | United States | 443,666 | 446,363 | ||||||||||||
e,t | Long Point Park CLO Ltd., | |||||||||||||||
2017-1A, A2, 144A, FRN, 3.061%, (3-month USD LIBOR + 1.375%), 1/17/30 | United States | 5,800,000 | 5,793,794 | |||||||||||||
2017-1A, B, 144A, FRN, 3.386%, (3-month USD LIBOR + 1.70%), 1/17/30 | United States | 2,700,000 | 2,702,484 | |||||||||||||
2017-1A, C, 144A, FRN, 4.086%, (3-month USD LIBOR + 2.40%), 1/17/30 | United States | 3,100,000 | 3,099,690 | |||||||||||||
e,t | Madison Park Funding XXIII Ltd., | |||||||||||||||
2017-23A, B, 144A, FRN, 4.066%, (3-month USD LIBOR + 1.70%), 7/27/30 | United States | 3,840,000 | 3,881,971 | |||||||||||||
2017-23A, C, 144A, FRN, 4.716%, (3-month USD LIBOR + 2.35%), 7/27/30 | United States | 1,000,000 | 1,005,670 |
104 | Semiannual Report |
|
franklintempleton.com |
|
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||
Asset-Backed Securities and Commercial | ||||||||||||||||
Diversified Financials (continued) | ||||||||||||||||
e,t | Madison Park Funding XXVII Ltd., 2018-27A, A1B, 144A, FRN, 3.177%, (3-month USD LIBOR + 1.13%), 4/20/30 | United States | 6,837,000 | $ | 6,832,146 | |||||||||||
e,t | Magnetite IX Ltd., 2014-9A, BR, 144A, FRN, 4.36%, (3-month USD LIBOR + 2.00%), 7/25/26 | United States | 1,010,000 | 1,011,192 | ||||||||||||
e,t | Magnetite XVIII Ltd., 2016-18A, B, 144A, FRN, 3.589%, (3-month USD LIBOR + 1.75%), 11/15/28 | United States | 6,000,000 | 6,014,400 | ||||||||||||
s | Merrill Lynch Mortgage Investors Trust, 2004-A1, M1, FRN, 3.711%, 2/25/34 | United States | 1,318,768 | 1,108,105 | ||||||||||||
e,t | Neuberger Berman CLO Ltd., 2017-26A, B, 144A, FRN, 3.855%, (3-month USD LIBOR + 1.50%), 10/18/30 | United States | 5,772,370 | 5,790,438 | ||||||||||||
e,t | Neuberger Berman CLO XVI-S Ltd., | |||||||||||||||
2017-16SA, C, 144A, FRN, 3.948%, (3-month USD LIBOR + 1.60%), 1/15/28 | United States | 2,350,000 | 2,340,060 | |||||||||||||
2017-16SA, D, 144A, FRN, 4.848%, (3-month USD LIBOR + 2.50%), 1/15/28 | United States | 650,000 | 643,396 | |||||||||||||
e,t | Neuberger Berman Loan Advisers CLO Ltd., 2018-27A, C, 144A, FRN, 3.717%, (3-month USD LIBOR + 1.70%), 1/15/30 | United States | 4,900,000 | 4,898,824 | ||||||||||||
e,t | NZCG Funding Ltd., 2015-1A, A2R, 144A, FRN, 3.494%, (3-month USD LIBOR + 1.55%), 2/26/31 | United States | 11,200,000 | 11,202,576 | ||||||||||||
e,t | Octagon Investment Partners 18-R Ltd., 2018-18A, C, 144A, FRN, 5.055%, (3-month USD LIBOR + 2.70%), 4/16/31 | United States | 9,050,000 | 9,050,181 | ||||||||||||
e,t | Octagon Investment Partners 31 LLC, 2017-1A, C, 144A, FRN, 4.759%, (3-month USD LIBOR + 2.40%), 7/20/30 | United States | 1,707,068 | 1,716,593 | ||||||||||||
e,t | Octagon Investment Partners 33 Ltd., | |||||||||||||||
2017-1A, A2, 144A, FRN, 3.859%, (3-month USD LIBOR + 1.50%), 1/20/31 | United States | 400,000 | 401,544 | |||||||||||||
2017-1A, C, 144A, FRN, 5.109%, (3-month USD LIBOR + 2.75%), 1/20/31 | United States | 2,800,000 | 2,792,160 | |||||||||||||
e,t | Octagon Investment Partners 35 Ltd., | |||||||||||||||
2018-1A, A1B, 144A, FRN, 2.848%, (3-month USD LIBOR + 1.10%), 1/20/31 | United States | 3,325,000 | 3,324,668 | |||||||||||||
2018-1A, B, 144A, FRN, 3.448%, (3-month USD LIBOR + 1.70%), 1/20/31 | United States | 450,000 | 442,656 | |||||||||||||
e,t | Octagon Investment Partners 36 Ltd., | |||||||||||||||
2018-1A, A1, 144A, FRN, 2.726%, (3-month USD LIBOR + 0.97%), 4/15/31 | United States | 9,000,000 | 9,000,090 | |||||||||||||
2018-1A, A2, 144A, FRN, 2.956%, (3-month USD LIBOR + 1.20%), 4/15/31 | United States | 8,500,000 | 8,505,588 | |||||||||||||
e,t | Octagon Investment Partners XX Ltd., 2014-1A, AR, 144A, FRN, 2.941%, (3-month USD LIBOR + 1.13%), 8/12/26 | United States | 6,500,000 | 6,507,150 | ||||||||||||
e,t | Octagon Investment Partners XXIII Ltd., | |||||||||||||||
2015-1A, BR, 144A, FRN, 3.461%, (3-month USD LIBOR + 1.20%), 7/15/27 | United States | 1,170,000 | 1,170,117 | |||||||||||||
2015-1A, CR, 144A, FRN, 4.111%, (3-month USD LIBOR + 1.85%), 7/15/27 | United States | 2,700,000 | 2,700,297 | |||||||||||||
2015-1A, DR, 144A, FRN, 4.811%, (3-month USD LIBOR + 2.55%), 7/15/27 | United States | 1,000,000 | 1,000,130 |
franklintempleton.com | Semiannual Report | 105 |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||
Asset-Backed Securities and Commercial | ||||||||||||||||
Diversified Financials (continued) | ||||||||||||||||
e,t | Radnor RE Ltd., 2018-1, M1, 144A, FRN, 3.297%, (1-month USD LIBOR + 1.40%), 3/25/28 | United States | 6,557,000 | $ | 6,573,166 | |||||||||||
e,t | TCI-Cent CLO Income Note Issuer Ltd., | |||||||||||||||
2017-1A, B, 144A, FRN, 4.71%, (3-month USD LIBOR + 2.35%), 7/25/30 | United States | 3,069,687 | 3,093,569 | |||||||||||||
2017-1A, C, 144A, FRN, 6.01%, (3-month USD LIBOR + 3.65%), 7/25/30 | United States | 1,000,000 | 1,012,680 | |||||||||||||
e,t | TCI-Flatiron CLO Ltd., | |||||||||||||||
2017-1A, B, 144A, FRN, 3.187%, (3-month USD LIBOR + 1.56%), 11/17/30 | United States | 3,500,000 | 3,500,175 | |||||||||||||
2017-1A, C, 144A, FRN, 3.477%, (3-month USD LIBOR + 1.85%), 11/17/30 | United States | 2,800,000 | 2,812,404 | |||||||||||||
2017-1A, D, 144A, FRN, 4.377%, (3-month USD LIBOR + 2.75%), 11/17/30 | United States | 11,800,000 | 11,840,120 | |||||||||||||
e,s | Towd Point Mortgage Trust, | |||||||||||||||
2017-1, A2, 144A, FRN, 3.50%, 10/25/56 | United States | 8,862,000 | 8,819,336 | |||||||||||||
2017-2, A1, 144A, FRN, 2.75%, 4/25/57 | United States | 5,369,096 | 5,297,077 | |||||||||||||
e,t | Voya CLO Ltd., | |||||||||||||||
2013-2A, CR, 144A, FRN, 5.094%, (3-month USD LIBOR + 2.75%), 4/25/31 | United States | 1,650,000 | 1,647,822 | |||||||||||||
2014-1A, BR2, 144A, FRN, 4.255%, (3-month USD LIBOR + 1.90%), 4/18/31 | United States | 1,000,000 | 1,000,000 | |||||||||||||
2014-1A, CR2, 144A, FRN, 5.155%, (3-month USD LIBOR + 2.80%), 4/18/31 | United States | 4,000,000 | 4,000,000 | |||||||||||||
2015-2A, A, 144A, FRN, 3.762%, (3-month USD LIBOR + 1.40%), 7/23/27 | United States | 4,840,000 | 4,852,052 | |||||||||||||
2017-3A, B, 144A, FRN, 4.709%, (3-month USD LIBOR + 2.35%), 7/20/30 | United States | 3,091,704 | 3,120,240 | |||||||||||||
Wells Fargo Mortgage Backed Securities Trust, | ||||||||||||||||
s 2004-W, A9, FRN, 3.707%, 11/25/34 | United States | 965,072 | 991,135 | |||||||||||||
2007-3, 3A1, 5.50%, 4/25/22 | United States | 131,505 | 134,204 | |||||||||||||
e,t | West CLO Ltd., | |||||||||||||||
2014-1A, A2R, 144A, FRN, 3.705%, (3-month USD LIBOR + 1.35%), 7/18/26 | United States | 2,860,000 | 2,862,002 | |||||||||||||
2014-1A, BR, 144A, FRN, 4.205%, (3-month USD LIBOR + 1.85%), 7/18/26 | United States | 5,060,000 | 5,069,310 | |||||||||||||
|
| |||||||||||||||
950,129,668 | ||||||||||||||||
|
| |||||||||||||||
Real Estate 0.0%† | ||||||||||||||||
e,u | Colony MFM Trust, 2014-1, A, 144A, 2.543%, 4/20/50 | United States | 1,326,292 | 1,317,265 | ||||||||||||
|
| |||||||||||||||
Utilities 0.0%† | ||||||||||||||||
e,t | Race Point IX CLO Ltd., 2015-9A, A1AR, 144A, FRN, 3.558%, (3-month USD LIBOR + 1.21%), 10/15/30 | United States | 1,175,000 | 1,181,991 | ||||||||||||
|
| |||||||||||||||
Total Asset-Backed Securities and Commercial Mortgage-Backed Securities (Cost $968,304,580) | 975,715,076 | |||||||||||||||
|
| |||||||||||||||
Mortgage-Backed Securities 23.4% | ||||||||||||||||
w | Federal Home Loan Mortgage Corp. (FHLMC) Adjustable Rate 0.0%† | |||||||||||||||
FHLMC, 2.027%, (11th District COF +/- MBS Margin), 11/01/27 | United States | 1,457,040 | 1,468,990 | |||||||||||||
|
|
106 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||
Mortgage-Backed Securities (continued) | ||||||||||||||||
Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate 12.8% | ||||||||||||||||
FHLMC 30 Year, 6.00%, 6/01/37 | United States | 38,108 | $ | 42,404 | ||||||||||||
FHLMC 30 Year, 6.50%, 8/01/25 - 11/01/31 | United States | 87,572 | 98,707 | |||||||||||||
FHLMC 30 Year, 7.00%, 7/01/31 | United States | 6,208 | 6,443 | |||||||||||||
FHLMC 30 Year, 8.00%, 2/01/30 | United States | 23,565 | 27,284 | |||||||||||||
FHLMC 30 Year, 8.50%, 10/01/24 | United States | 4,443 | 4,856 | |||||||||||||
FHLMC Gold 15 Year, 5.00%, 9/01/18 | United States | 2,549 | 2,564 | |||||||||||||
FHLMC Gold 15 Year, 5.50%, 11/01/22 | United States | 101,944 | 104,387 | |||||||||||||
FHLMC Gold 15 Year, 6.00%, 10/01/21 - 9/01/22 | United States | 281,331 | 289,965 | |||||||||||||
FHLMC Gold 30 Year, 3.50%, 12/01/47 | United States | 92,623,953 | 92,022,903 | |||||||||||||
FHLMC Gold 30 Year, 3.50%, 4/01/48 | United States | 123,486,041 | 122,691,422 | |||||||||||||
FHLMC Gold 30 Year, 4.00%, 5/01/48 | United States | 126,520,000 | 129,068,482 | |||||||||||||
x | FHLMC Gold 30 Year, 4.00%, 5/01/48 | United States | 188,630,000 | 192,093,120 | ||||||||||||
FHLMC Gold 30 Year, 4.50%, 3/01/39 | United States | 1,861,475 | 1,950,127 | |||||||||||||
FHLMC Gold 30 Year, 5.00%, 8/01/33 - 2/01/39 | United States | 10,727,274 | 11,475,085 | |||||||||||||
FHLMC Gold 30 Year, 5.50%, 1/01/35 - 12/01/37 | United States | 881,060 | 962,601 | |||||||||||||
FHLMC Gold 30 Year, 6.00%, 5/01/33 - 4/01/38 | United States | 1,186,002 | 1,317,336 | |||||||||||||
FHLMC Gold 30 Year, 6.50%, 4/01/28 - 3/01/39 | United States | 913,228 | 1,029,390 | |||||||||||||
FHLMC Gold 30 Year, 7.00%, 1/01/28 - 7/01/32 | United States | 67,051 | 74,703 | |||||||||||||
FHLMC Gold 30 Year, 7.50%, 3/01/32 | United States | 16,396 | 18,877 | |||||||||||||
FHLMC Gold 30 Year, 8.50%, 8/01/30 | United States | 2,073 | 2,363 | |||||||||||||
FHLMC Gold 30 Year, 9.00%, 1/01/22 | United States | 471 | 475 | |||||||||||||
FHLMC Gold 30 Year, 10.00%, 10/01/30 | United States | 5,697 | 5,718 | |||||||||||||
|
| |||||||||||||||
553,289,212 | ||||||||||||||||
|
| |||||||||||||||
w | Federal National Mortgage Association (FNMA) Adjustable Rate 0.1% | |||||||||||||||
FNMA, 3.301%, (6-month USD LIBOR +/- MBS Margin), 10/01/32 | United States | 173,108 | 175,788 | |||||||||||||
FNMA, 3.219% - 3.573%, (12-month USD LIBOR +/- MBS Margin), 2/01/34 - 3/01/37 | United States | 1,143,886 | 1,187,317 | |||||||||||||
FNMA, 3.818%, (US 3 Year CMT T-Note +/- MBS Margin), 12/01/24 | United States | 10,424 | 10,651 | |||||||||||||
FNMA, 2.027% - 4.107%, (11th District COF +/- MBS Margin), 12/01/27 - 9/01/34 | United States | 3,122,813 | 3,232,456 | |||||||||||||
FNMA, 3.418% - 4.214%, (US 1 Year CMT T-Note +/- MBS Margin), 5/01/25 - 10/01/36 | United States | 337,132 | 354,176 | |||||||||||||
|
| |||||||||||||||
4,960,388 | ||||||||||||||||
|
| |||||||||||||||
Federal National Mortgage Association (FNMA) Fixed Rate 9.3% | ||||||||||||||||
FNMA 15 Year, 3.00%, 4/01/33 | United States | 103,063,515 | 102,314,910 | |||||||||||||
FNMA 15 Year, 4.50%, 3/01/19 - 6/01/19 | United States | 17,952 | 18,089 | |||||||||||||
FNMA 15 Year, 5.00%, 6/01/18 - 7/01/18 | United States | 1,655 | 1,681 | |||||||||||||
FNMA 15 Year, 5.50%, 12/01/22 - 12/01/23 | United States | 112,293 | 116,096 | |||||||||||||
FNMA 15 Year, 6.00%, 9/01/22 | United States | 52,036 | 53,042 | |||||||||||||
FNMA 30 Year, 3.50%, 11/01/47 | United States | 124,112,483 | 123,341,096 | |||||||||||||
FNMA 30 Year, 3.50%, 3/01/48 | United States | 53,147,928 | 52,799,464 | |||||||||||||
FNMA 30 Year, 4.00%, 4/01/48 | United States | 17,449,044 | 17,797,700 | |||||||||||||
x | FNMA 30 Year, 4.00%, 5/01/48 | United States | 40,500,000 | 41,230,900 | ||||||||||||
x | FNMA 30 Year, 4.50%, 5/01/48 | United States | 41,500,000 | 43,205,391 | ||||||||||||
FNMA 30 Year, 5.00%, 6/01/36 - 5/01/39 | United States | 1,749,423 | 1,874,773 | |||||||||||||
FNMA 30 Year, 5.50%, 6/01/33 - 8/01/37 | United States | 6,284,134 | 6,885,117 | |||||||||||||
FNMA 30 Year, 6.00%, 9/01/32 - 9/01/38 | United States | 8,066,082 | 8,992,280 | |||||||||||||
FNMA 30 Year, 6.50%, 8/01/28 - 5/01/37 | United States | 214,376 | 238,978 | |||||||||||||
FNMA 30 Year, 7.00%, 11/01/25 | United States | 3,410 | 3,429 | |||||||||||||
FNMA 30 Year, 7.50%, 1/01/30 | United States | 12,683 | 14,547 |
franklintempleton.com | Semiannual Report | 107 |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||
Mortgage-Backed Securities (continued) | ||||||||||||||||
Federal National Mortgage Association (FNMA) Fixed Rate (continued) | ||||||||||||||||
FNMA 30 Year, 8.50%, 4/01/30 - 5/01/32 | United States | 71,181 | $ | 83,949 | ||||||||||||
FNMA 30 Year, 9.00%, 11/01/26 - 5/01/27 | United States | 69,280 | 71,230 | |||||||||||||
|
| |||||||||||||||
399,042,672 | ||||||||||||||||
|
| |||||||||||||||
w | Government National Mortgage Association (GNMA) Adjustable Rate 0.0%† | |||||||||||||||
GNMA, 2.375% - 3.125%, (US 1 Year CMT T-Note +/- MBS Margin), 1/20/23 - 10/20/26 | United States | 36,550 | 37,531 | |||||||||||||
|
| |||||||||||||||
Government National Mortgage Association (GNMA) Fixed Rate 1.2% | ||||||||||||||||
GNMA I SF 30 Year, 3.50%, 4/20/48 | United States | 16,000,000 | 16,032,561 | |||||||||||||
GNMA I SF 30 Year, 6.00%, 1/15/39 | United States | 185,973 | 207,431 | |||||||||||||
GNMA I SF 30 Year, 6.50%, 10/15/31 - 7/15/38 | United States | 28,661 | 32,083 | |||||||||||||
GNMA I SF 30 Year, 7.00%, 10/15/27 - 6/15/31 | United States | 32,912 | 36,657 | |||||||||||||
GNMA I SF 30 Year, 7.50%, 1/15/22 - 5/15/26 | United States | 59,384 | 60,531 | |||||||||||||
GNMA I SF 30 Year, 9.00%, 9/15/25 - 1/15/31 | United States | 1,467 | 1,504 | |||||||||||||
GNMA II SF 30 Year, 3.50%, 9/20/47 | United States | 35,587,066 | 35,659,078 | |||||||||||||
GNMA II SF 30 Year, 6.00%, 5/20/31 | United States | 4,351 | 4,866 | |||||||||||||
GNMA II SF 30 Year, 6.50%, 3/20/28 - 7/20/38 | United States | 408,080 | 458,644 | |||||||||||||
GNMA II SF 30 Year, 7.50%, 8/20/30 - 1/20/33 | United States | 48,911 | 54,660 | |||||||||||||
|
| |||||||||||||||
52,548,015 | ||||||||||||||||
|
| |||||||||||||||
Total Mortgage-Backed Securities | ||||||||||||||||
(Cost $1,021,775,697) | 1,011,346,808 | |||||||||||||||
|
| |||||||||||||||
Municipal Bonds 1.8% | ||||||||||||||||
California State GO, Various Purpose, 6.00%, 11/01/39 | United States | 2,385,000 | 2,530,127 | |||||||||||||
Chicago Transit Authority Sales and Transfer Tax Receipts Revenue, | ||||||||||||||||
Pension Funding, Series A, 6.899%, 12/01/40 | United States | 800,000 | 1,048,032 | |||||||||||||
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 | 10,228,800 | |||||||||||||
Minnesota State GO, Various Purpose, Refunding, Series F, 4.00%, | ||||||||||||||||
10/01/24 | United States | 5,760,000 | 6,243,437 | |||||||||||||
New Jersey EDA Revenue, School Facilities Construction, | ||||||||||||||||
Refunding, Series NN, 5.00%, 3/01/30 | United States | 3,300,000 | 3,473,085 | |||||||||||||
Orlando Health Obligated Group, 3.777%, 10/01/28 | United States | 2,810,000 | 2,777,962 | |||||||||||||
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 | 4,840,773 | |||||||||||||
Consolidated, Refunding, One Hundred Ninety-Second Series, 4.81%, 10/15/65 | United States | 15,000,000 | 17,073,150 | |||||||||||||
Providence St. Joseph Health Obligated Group, 2.746%, 10/01/26 | United States | 8,875,000 | 8,256,281 | |||||||||||||
y | Puerto Rico Electric Power Authority Power Revenue, Series A, 6.75%, 7/01/36 | United States | 12,000,000 | 4,890,000 | ||||||||||||
San Jose RDA Successor Agency Tax Allocation, Senior, Refunding, Series A-T, 3.226%, 8/01/27 | United States | 6,150,000 | 5,980,199 | |||||||||||||
University of California Revenue, Limited Project, Refunding, Series J, 4.131%, 5/15/45 | United States | 10,750,000 | 10,993,057 | |||||||||||||
|
| |||||||||||||||
Total Municipal Bonds (Cost $82,396,398) | 78,334,903 | |||||||||||||||
|
|
108 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Country | Shares | Value | ||||||||||||||||
Escrows and Litigation Trusts 0.0% | ||||||||||||||||||
a,ab | Motors Liquidation Co., Escrow Account, cvt. pfd., C | United States | 43,500 | $ | — | |||||||||||||
a,ab | NewPage Corp., Litigation Trust | United States | 2,500,000 | — | ||||||||||||||
|
| |||||||||||||||||
Total Escrows and Litigation Trusts (Cost $2,307) | — | |||||||||||||||||
|
| |||||||||||||||||
Total Investments before Short Term Investments | ||||||||||||||||||
(Cost $4,580,151,361) | 4,504,189,915 | |||||||||||||||||
|
| |||||||||||||||||
Short Term Investments (Cost $68,893,179) 1.6% | ||||||||||||||||||
Money Market Funds 1.6% | ||||||||||||||||||
b,z | Institutional Fiduciary Trust Money Market Portfolio, 1.30% | United States | 68,893,179 | 68,893,179 | ||||||||||||||
|
| |||||||||||||||||
Total Investments (Cost $4,649,044,540) 106.0% | 4,573,083,094 | |||||||||||||||||
Other Assets, less Liabilities (6.0)% | (258,036,215 | ) | ||||||||||||||||
|
| |||||||||||||||||
Net Assets 100.0% | $ | 4,315,046,879 | ||||||||||||||||
|
|
franklintempleton.com | Semiannual Report | 109 |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
†Rounds to less than 0.1% of net assets.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
aNon-income producing.
aaThe security is owned by FT Holdings Corporation I, a wholly-owned subsidiary of the Fund. See Note 1(f).
abFair valued using significant unobservable inputs. See Note 12 regarding fair value measurements.
acSee Note 8 regarding restricted securities.
bSee Note 3(f) regarding investments in affiliated management investment companies.
cVariable rate security. The rate shown represents the yield at period end.
dSecurity 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 April 30, 2018, the aggregate value of these securities was $36,630,442, representing 0.8% of net assets.
eSecurity 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 April 30, 2018, the aggregate value of these securities was $1,134,441,243, representing 26.3% of net assets.
fPerpetual security with no stated maturity date.
gSee Note 1(e) regarding loan participation notes.
hIncome may be received in additional securities and/or cash.
iSecurity purchased on a when-issued basis. See Note 1(c).
jThe coupon rate shown represents the rate at period end.
kSee Note 1(h) regarding senior floating rate interests.
lA portion or all of the security purchased on a delayed delivery basis. See Note 1(c).
mA portion or all of the security represents an unsettled loan commitment. The coupon rate is to-be determined (TBD) at the time of settlement and will be based upon a reference index/floor plus a spread.
nPrincipal amount is stated in 100 Mexican Peso Units.
oThe principal represents the notional amount. See Note 1(d) regarding value recovery instruments.
pRedemption price at maturity and coupon payment are adjusted for inflation. See Note 1(j).
qPrincipal amount is stated in 1,000 Brazilian Real Units.
rPrincipal amount of security is adjusted for inflation. See Note 1(j).
sAdjustable rate security with an interest rate that is not based on a published reference index and spread. The rate is based on the structure of the agreement and current market conditions. The coupon rate shown represents the rate at period end.
tThe coupon rate shown represents the rate inclusive of any caps or floors, if applicable, in effect at period end.
uThe 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.
vThe coupon rate will be determined at time of issue.
wAdjustable Rate Mortgage-Backed Security (ARM); the rate shown is the effective rate at period end. ARM rates are not based on a published reference rate and spread, but instead pass-through weighted average interest income inclusive of any caps or floors, if applicable, from the underlying mortgage loans in which the majority of mortgages pay interest based on the index shown at their designated reset dates plus a spread, less the applicable servicing and guaranty fee (MBS margin).
xSecurity purchased on a to-be-announced (TBA) basis. See Note 1(c).
ySee Note 7 regarding defaulted securities.
zThe rate shown is the annualized seven-day effective yield at period end.
110 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
At April 30, 2018, the Fund had the following futures contracts outstanding. See Note 1(d).
Futures Contracts
Description | Type | | Number of Contracts | | | Notional Amount | * | | Expiration Date | | | Value/ Unrealized Appreciation (Depreciation) | | |||||||
Interest Rate Contracts | ||||||||||||||||||||
Australian 10 Yr. Bond | Long | 280 | $ | 26,959,651 | 6/15/18 | $ | (74,876) | |||||||||||||
Canada 10 Yr. Bond | Long | 377 | 38,616,574 | 6/20/18 | 110,713 | |||||||||||||||
Euro-Bund | Short | 50 | 9,586,705 | 6/07/18 | (110,038) | |||||||||||||||
U.S. Treasury 2 Yr. Note | Long | 61 | 12,934,859 | 6/29/18 | (36,371) | |||||||||||||||
U.S. Treasury 5 Yr. Note | Long | 2,642 | 299,887,641 | 6/29/18 | (1,678,628) | |||||||||||||||
U.S. Treasury 10 Yr. Note Ultra | Short | 333 | 42,587,578 | 6/20/18 | 315,152 | |||||||||||||||
U.S. Treasury 30 Yr. Bond | Long | 1,200 | 172,612,500 | 6/20/18 | 971,760 | |||||||||||||||
|
| |||||||||||||||||||
Total Futures Contracts | $ | (502,288) | ||||||||||||||||||
|
|
*As of period end.
At April 30, 2018, the Fund had the following forward exchange contracts outstanding. See Note 1(d).
Forward Exchange Contracts
Currency | Counterpartya | Type | Quantity | | Contract Amount | * | | Settlement Date | | | Unrealized Appreciation | | | Unrealized Depreciation | | |||||||||||||||||
OTC Forward Exchange Contracts | ||||||||||||||||||||||||||||||||
Euro | JPHQ | Sell | 6,009,460 | 7,508,941 | 9/19/18 | $ | 166,092 | $ | — | |||||||||||||||||||||||
Polish Zloty | JPHQ | Buy | 31,600,000 | 9,341,236 | 9/19/18 | — | (309,263) | |||||||||||||||||||||||||
Swedish Krona | JPHQ | Buy | 131,600,000 | 16,015,577 | 9/19/18 | — | (786,727) | |||||||||||||||||||||||||
United States Dollar | DBAB | Buy | 25,564,614 | 20,461,349 | EUR | 9/19/18 | 563,270 | — | ||||||||||||||||||||||||
Australian Dollar | JPHQ | Sell | 19,098,000 | 14,833,321 | 10/09/18 | 439,637 | — | |||||||||||||||||||||||||
Canadian Dollar | JPHQ | Sell | 15,760,000 | 12,541,280 | 10/09/18 | 217,001 | — | |||||||||||||||||||||||||
Indian Rupee | DBAB | Buy | 631,935,000 | 9,574,773 | 10/09/18 | — | (249,934) | |||||||||||||||||||||||||
Indian Rupee | JPHQ | Buy | 980,000,000 | 14,812,143 | 10/09/18 | — | (351,254) | |||||||||||||||||||||||||
Indonesian Rupiah | DBAB | Buy | 139,844,100,000 | 10,016,768 | 10/09/18 | — | (154,771) | |||||||||||||||||||||||||
Indonesian Rupiah | JPHQ | Buy | 90,600,000,000 | 6,482,078 | 10/09/18 | — | (92,842) | |||||||||||||||||||||||||
Mexican Peso | JPHQ | Buy | 201,250,000 | 10,708,603 | 10/09/18 | — | (218,801) | |||||||||||||||||||||||||
Philippine Peso | JPHQ | Sell | 230,000,000 | 4,356,886 | 10/09/18 | — | (44,860) | |||||||||||||||||||||||||
South Korean Won | JPHQ | Buy | 11,300,000,000 | 10,610,030 | 10/10/18 | 6,657 | — | |||||||||||||||||||||||||
South Korean Won | JPHQ | Sell | 11,300,000,000 | 10,675,989 | 10/10/18 | 59,302 | — | |||||||||||||||||||||||||
Japanese Yen | JPHQ | Sell | 1,400,000,000 | 12,917,274 | 1/23/19 | — | (166,897) | |||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Total Forward Exchange Contracts |
| $ | 1,451,959 | $ | (2,375,349) | |||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) |
| $ | (923,390) | |||||||||||||||||||||||||||||
|
|
*In U.S. dollars unless otherwise indicated.
aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.
franklintempleton.com | Semiannual Report | 111 |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
At April 30, 2018, the Fund had the following credit default swap contracts outstanding. See Note 1(d).
Credit Default Swap Contracts
Description | | Periodic Payment Rate Received (Paid) | | | Payment Frequency | | | Counter- party | | | Maturity Date | | | Notional Amount | a | Value | | Unamortized Upfront Payments (Receipts) | | | Unrealized Appreciation (Depreciation) | | Rating | b | ||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||
Centrally Cleared Swap Contracts | ||||||||||||||||||||||||||||||||||||||||
Contracts to Buy Protectionc | ||||||||||||||||||||||||||||||||||||||||
Single Name | ||||||||||||||||||||||||||||||||||||||||
Government of Turkey | (1.00 | )% | Quarterly | 6/20/23 | 6,384,000 | $ | 273,350 | $ | 289,024 | $ | (15,674 | ) | ||||||||||||||||||||||||||||
Traded Index | ||||||||||||||||||||||||||||||||||||||||
ITRX.EUR.28 | (1.00 | )% | Quarterly | 12/20/22 | 161,000,000 | EUR | (5,082,394 | ) | (3,941,681 | ) | (1,140,713 | ) | ||||||||||||||||||||||||||||
Contracts to Sell Protectionc,d | ||||||||||||||||||||||||||||||||||||||||
Single Name | ||||||||||||||||||||||||||||||||||||||||
Government of Indonesia | 1.00 | % | Quarterly | 6/20/23 | 11,400,000 | (8,654 | ) | 18,557 | (27,211 | ) | BBB- | |||||||||||||||||||||||||||||
Traded Index | ||||||||||||||||||||||||||||||||||||||||
CDX.EM.29 | 1.00 | % | Quarterly | 6/20/23 | 45,600,000 | (831,531 | ) | (901,453 | ) | 69,922 | Non- | |||||||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||||||||
Grade | ||||||||||||||||||||||||||||||||||||||||
CDX.NA.HY.30 | 5.00 | % | Quarterly | 6/20/23 | 34,050,000 | 2,546,756 | 2,044,008 | 502,748 | Non- | |||||||||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||||||||
Grade | ||||||||||||||||||||||||||||||||||||||||
CDX.NA.IG.24 | 1.00 | % | Quarterly | 6/20/25 | 25,000,000 | 141,543 | (41,823 | ) | 183,366 | Investment | ||||||||||||||||||||||||||||||
Grade | ||||||||||||||||||||||||||||||||||||||||
CDX.NA.IG.29 | 1.00 | % | Quarterly | 12/20/22 | 183,300,000 | 3,925,399 | 3,358,335 | 567,064 | Investment | |||||||||||||||||||||||||||||||
Grade | ||||||||||||||||||||||||||||||||||||||||
Total Centrally Cleared Swap Contracts |
| $ | 964,469 | $ | 824,967 | $ | 139,502 | |||||||||||||||||||||||||||||||||
OTC Swap Contracts | ||||||||||||||||||||||||||||||||||||||||
Contracts to Buy Protectionc | ||||||||||||||||||||||||||||||||||||||||
Single Name | ||||||||||||||||||||||||||||||||||||||||
The AES Corp. | (5.00 | )% | Quarterly | JPHQ | 6/20/22 | 13,275,000 | $ | (2,278,593 | ) | $ | (1,486,383 | ) | $ | (792,210 | ) | |||||||||||||||||||||||||
Ally Financial Inc. | (5.00 | )% | Quarterly | CITI | 12/20/22 | 5,200,000 | (897,289 | ) | (880,914 | ) | (16,375 | ) | ||||||||||||||||||||||||||||
Ally Financial Inc. | (5.00 | )% | Quarterly | JPHQ | 12/20/22 | 8,800,000 | (1,518,488 | ) | (1,501,191 | ) | (17,297 | ) | ||||||||||||||||||||||||||||
Best Buy Co. Inc. | (5.00 | )% | Quarterly | BZWS | 6/20/22 | 3,800,000 | (670,824 | ) | (539,495 | ) | (131,329 | ) | ||||||||||||||||||||||||||||
Best Buy Co. Inc. | (5.00 | )% | Quarterly | CITI | 6/20/22 | 9,900,000 | (1,747,675 | ) | (1,358,166 | ) | (389,509 | ) | ||||||||||||||||||||||||||||
Best Buy Co. Inc. | (5.00 | )% | Quarterly | JPHQ | 6/20/22 | 4,600,000 | (812,051 | ) | (673,896 | ) | (138,155 | ) | ||||||||||||||||||||||||||||
CSC Holdings LLC. | (5.00 | )% | Quarterly | GSCO | 9/20/18 | 3,000,000 | (72,806 | ) | (24,190 | ) | (48,616 | ) | ||||||||||||||||||||||||||||
CSC Holdings LLC. | (5.00 | )% | Quarterly | GSCO | 3/20/19 | 9,000,000 | (421,850 | ) | (105,805 | ) | (316,045 | ) | ||||||||||||||||||||||||||||
Dish DBS Corp. | (5.00 | )% | Quarterly | JPHQ | 6/20/21 | 6,520,000 | (334,072 | ) | (299,938 | ) | (34,134 | ) | ||||||||||||||||||||||||||||
Nabors Industries Inc. | (1.00 | )% | Quarterly | JPHQ | 6/20/20 | 3,350,000 | (18,117 | ) | 64,898 | (83,015 | ) |
112 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Credit Default Swap Contracts (continued)
Description | | Periodic Payment Rate Received (Paid) | | | Payment Frequency | | | Counter- party | | | Maturity Date | | | Notional Amount | a | Value | | Unamortized Upfront Payments (Receipts) | | | Unrealized Appreciation (Depreciation) | | Rating | b | ||||||||||||
| ||||||||||||||||||||||||||||||||||||
OTC Swap Contracts (continued) | ||||||||||||||||||||||||||||||||||||
Contracts to Buy Protectionc (continued) | ||||||||||||||||||||||||||||||||||||
Single Name (continued) | ||||||||||||||||||||||||||||||||||||
Navient Corp. | (5.00 | )% | Quarterly | JPHQ | 3/20/20 | 5,000,000 | $ | (422,383) | $ (344,812 | ) | $ | (77,571 | ) | |||||||||||||||||||||||
PHH Corp. | (5.00 | )% | Quarterly | GSCO | 9/20/19 | 5,400,000 | (365,396) | 13,047 | (378,443 | ) | ||||||||||||||||||||||||||
Sanmina Corp. | (5.00 | )% | Quarterly | BZWS | 6/20/19 | 3,600,000 | (221,495) | (182,705 | ) | (38,790 | ) | |||||||||||||||||||||||||
Sanmina Corp. | (5.00 | )% | Quarterly | GSCO | 6/20/19 | 7,500,000 | (461,447) | (375,894 | ) | (85,553 | ) | |||||||||||||||||||||||||
Springleaf Finance Corp. | (5.00 | )% | Quarterly | GSCO | 6/20/20 | 700,000 | (67,337) | (18,095 | ) | (49,242 | ) | |||||||||||||||||||||||||
Tenet Healthcare Corp. | (5.00 | )% | Quarterly | BZWS | 3/20/19 | 2,325,000 | (105,465) | (49,971 | ) | (55,494 | ) | |||||||||||||||||||||||||
Tenet Healthcare Corp. | (5.00 | )% | Quarterly | GSCO | 3/20/19 | 7,335,000 | (332,726) | (133,985 | ) | (198,741 | ) | |||||||||||||||||||||||||
Contracts to Sell Protectionc,d | ||||||||||||||||||||||||||||||||||||
Single Name | ||||||||||||||||||||||||||||||||||||
Capital One Financial Corp. | 1.00 | % | Quarterly | JPHQ | 12/20/22 | 5,200,000 | 105,557 | 83,742 | 21,815 | BBB | ||||||||||||||||||||||||||
DISH DBS Corp. | 5.00 | % | Quarterly | JPHQ | 6/20/23 | 6,520,000 | (247,020) | (88,694 | ) | (158,326 | ) | B | ||||||||||||||||||||||||
General Electric Co. | 1.00 | % | Quarterly | CITI | 12/20/22 | 11,000,000 | 129,798 | 103,487 | 26,311 | A | ||||||||||||||||||||||||||
Goldman Sachs Group Inc. | 1.00 | % | Quarterly | BZWS | 12/20/22 | 7,850,000 | 153,244 | 137,946 | 15,298 | BBB+ | ||||||||||||||||||||||||||
Goldman Sachs Group Inc. | 1.00 | % | Quarterly | JPHQ | 12/20/22 | 6,150,000 | 120,058 | 106,587 | 13,471 | BBB+ | ||||||||||||||||||||||||||
Government of Colombia | 1.00 | % | Quarterly | CITI | 6/20/23 | 11,400,000 | (23,952) | (30,653 | ) | 6,701 | BBB- | |||||||||||||||||||||||||
Government of Mexico | 1.00 | % | Quarterly | CITI | 6/20/23 | 8,400,000 | (44,164) | (61,656 | ) | 17,492 | BBB+ | |||||||||||||||||||||||||
Government of Mexico | 1.00 | % | Quarterly | JPHQ | 6/20/23 | 11,400,000 | (59,937) | (85,526 | ) | 25,589 | BBB+ | |||||||||||||||||||||||||
Morgan Stanley | 1.00 | % | Quarterly | BZWS | 12/20/22 | 8,800,000 | 175,627 | 172,820 | 2,807 | BBB+ | ||||||||||||||||||||||||||
Nabors Industries Inc. | 1.00 | % | Quarterly | JPHQ | 6/20/22 | 3,350,000 | (184,860) | (363,059 | ) | 178,199 | BB | |||||||||||||||||||||||||
Prudential Financial Inc. | 1.00 | % | Quarterly | BOFA | 12/20/21 | 8,800,000 | 187,534 | (94,791 | ) | 282,325 | A | |||||||||||||||||||||||||
Simon Property Group LP | 1.00 | % | Quarterly | CITI | 6/20/22 | 13,800,000 | 285,486 | 31,887 | 253,599 | A | ||||||||||||||||||||||||||
Simon Property Group LP | 1.00 | % | Quarterly | JPHQ | 6/20/22 | 20,950,000 | 433,401 | 171,099 | 262,302 | A |
franklintempleton.com | Semiannual Report | 113 |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Credit Default Swap Contracts (continued)
Description | | Periodic Payment Rate Received (Paid) | | | Payment Frequency | | | Counter- party | | | Maturity Date | | | Notional Amount | a | Value | | Unamortized Upfront Payments (Receipts) | | | Unrealized Appreciation (Depreciation) | | Rating | b | ||||||||||||
| ||||||||||||||||||||||||||||||||||||
OTC Swap Contracts (continued) | ||||||||||||||||||||||||||||||||||||
Contracts to Sell Protectionc,d (continued) | ||||||||||||||||||||||||||||||||||||
Traded Index | ||||||||||||||||||||||||||||||||||||
eCitibank Bespoke Cambridge Index, Equity Tranche 0-3% | 0.00% | Quarterly | CITI | 12/20/19 | 10,400,000 | $ | (1,897,608) | $ | (1,397,047) | $ | (500,561) | Non- | ||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||||
Grade | ||||||||||||||||||||||||||||||||||||
eCitibank Bespoke Hong Kong Index, Mezzanine Tranche 3-5% | 1.00% | Quarterly | CITI | 12/20/18 | 13,100,000 | 53,986 | (179,755 | ) | 233,741 | Non- | ||||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||||
Grade | ||||||||||||||||||||||||||||||||||||
eCitibank Bespoke Index, Mezzanine Tranche 5-8% | 0.50% | Quarterly | CITI | 6/20/18 | 20,600,000 | 872 | — | 872 | Non- | |||||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||||
Grade | ||||||||||||||||||||||||||||||||||||
eCitibank Bespoke Lisbon Index, Equity Tranche 0-3% | 0.00% | Quarterly | CITI | 6/20/19 | 3,600,000 | (299,499 | ) | (485,417 | ) | 185,918 | Non- | |||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||||
Grade | ||||||||||||||||||||||||||||||||||||
eCitibank Bespoke Verona Index, Equity Tranche 0-3% | 0.00% | Quarterly | CITI | 12/20/19 | 7,500,000 | (1,274,018 | ) | (1,236,700 | ) | (37,318 | ) | Non- | ||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||||
Grade | ||||||||||||||||||||||||||||||||||||
eCitibank Bespoke Verona Index, Mezzanine Tranche 7-15% | 0.40% | Quarterly | CITI | 12/20/19 | 21,000,000 | 46,121 | — | 46,121 | Non- | |||||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||||
Grade |
114 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Credit Default Swap Contracts (continued)
Description | | Periodic Payment Rate Received (Paid) | | | Payment Frequency | | | Counter- party | | | Maturity Date | | | Notional Amounta | | Value | | Unamortized Upfront Payments (Receipts) | | | Unrealized Appreciation (Depreciation) | | Rating | b | ||||||||||||
| ||||||||||||||||||||||||||||||||||||
OTC Swap Contracts (continued) | ||||||||||||||||||||||||||||||||||||
Contracts to Sell Protectionc,d (continued) | ||||||||||||||||||||||||||||||||||||
Traded Index (continued) | ||||||||||||||||||||||||||||||||||||
MCDX.NA.30 | 1.00% | Quarterly | CITI | 6/20/23 | 2,325,000 | $ | 55,730 | $ | 55,938 | $ | (208) | Investment | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Grade | ||||||||||||||||||||||||||||||||||||
Total OTC Swap Contracts |
| $ | (13,031,658 | ) | $ | (11,057,287 | ) | $ | (1,974,371) | |||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Total Credit Default Swap Contracts |
| $ | (12,067,189 | ) | $ | (10,232,320 | ) | $ | (1,834,869) | |||||||||||||||||||||||||||
|
|
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.
cPerformance triggers for settlement of contract include default, bankruptcy or restructuring for single name swaps,and failure to pay or bankruptcy of the underlying securities for traded index swaps.
dThe fund enters contracts to sell protection to create a long credit position.
eRepresents a custom index comprised of a basket of underlying issuers.
At April 30, 2018, the Fund had the following cross-currency swap contracts outstanding. See Note 1(d).
Cross-Currency Swap Contracts
Description | Payment Frequency | Counter- party | Maturity Date | Notional Amount | Value/ Unrealized Appreciation (Depreciation) | |||||||||||||||||||
OTC Swap Contracts | ||||||||||||||||||||||||
Receive Floating 3-month USD LIBOR + 1.44% Pay Fixed 1.50% | | Quarterly Annual | | HSBK | 11/26/25 | | 1,428,000 1,200,000 | | | USD EUR | | $ (3,563 | ) | |||||||||||
Receive Floating 3-month USD LIBOR + 1.395% Pay Fixed 1.50% | | Quarterly Annual | | HSBK | 11/26/25 | | 10,277,000 8,600,000 | | | USD EUR | | (11,548 | ) | |||||||||||
Receive Floating 3-month USD LIBOR + 1.415% Pay Fixed 1.50% | | Quarterly Annual | | HSBK | 11/26/25 | | 12,209,400 10,200,000 | | | USD EUR | | 9,096 | ||||||||||||
|
| |||||||||||||||||||||||
Total Cross Currency Swap Contracts | $ (6,015 | ) | ||||||||||||||||||||||
|
|
At April 30, 2018, the Fund had the following inflation index swap contracts outstanding. See Note 1(d).
Inflation Index Swap Contracts
Description | Payment Fequency | Counterparty | Maturity Date | Notional Amount | Value | Unamortized Upfront Payments (Receipts) | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||
Centrally Cleared Swap Contracts | ||||||||||||||||||||||||||||
Receive variable change in USA-CPI-U | At maturity | |||||||||||||||||||||||||||
Pay Fixed 1.96% | At maturity | 8/31/24 | $ | 24,600,000 | $ 717,096 | $ — | $ | 717,096 | ||||||||||||||||||||
|
|
franklintempleton.com | Semiannual Report | 115 |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Inflation Index Swap Contracts (continued)
Description | Payment Fequency | Counterparty | Maturity Date | Notional Amount | Value | Unamortized Upfront Payments (Receipts) | Unrealized Appreciation (Depreciation) | |||||||||||||||||||||
OTC Swap Contracts | ||||||||||||||||||||||||||||
Receive variable change in USA-CPI-U | At maturity | |||||||||||||||||||||||||||
Pay Fixed 1.782% | At maturity | JPHQ | 5/27/24 | $ | 35,700,000 | $ | 1,600,456 | $ — | $ | 1,600,456 | ||||||||||||||||||
Total Inflation Index Swap Contracts | $ | 2,317,552 | $ — | $ | 2,317,552 |
At April 30, 2018, the Fund had the following total return swap contracts outstanding. See Note 1(d).
Total Return Swap Contracts
Underlying Instruments | Financing Rate | Payment Frequency | Counterparty | Maturity Date | Notional Value | Value/ Unrealized Appreciation (Depreciation) | ||||||||||||||||||
OTC Swap Contracts | ||||||||||||||||||||||||
Longa | ||||||||||||||||||||||||
Bloomberg Barclays US Aggregate Bond Indexb | 1-month USD LIBOR + 0.22% | Monthly | BZWS | 9/28/18 | $ | 100,000,000 | $ (996,895 | ) | ||||||||||||||||
iBoxx USD Liquid High Yield Index | 3-month USD LIBOR | Quarterly | CITI | 6/20/18 | 68,000,000 | 883,862 | ||||||||||||||||||
iBoxx USD Liquid High Yield Index | 3-month USD LIBOR | Quarterly | CITI | 9/20/18 | 36,200,000 | (202,902 | ) | |||||||||||||||||
Total Total Return Swap Contracts | $ (315,935 | ) |
aThe Fund receives the total return on the underlying instrument and pays a variable financing rate.
bRepresents a custom index comprised of a basket of underlying instruments. Additional information regarding the custom basket’s underlying instruments and their respective values and fees are as follows:
Underlying Instruments | Notional Valuec | Value/ (Depreciation) | Percentage of Net Assets (%)d | |||||||||
FHLMC Gold 30 Year, 3.00%, 12/15/41 | $ 304,815 | $ (11,745 | ) | (— | ) | |||||||
FHLMC Gold 30 Year, 3.00%, 6/15/42 | 303,387 | (12,368 | ) | (— | ) | |||||||
FHLMC Gold 30 Year, 3.00%, 4/15/46 | 814,971 | (34,914 | ) | (— | ) | |||||||
FHLMC Gold 30 Year, 3.50%, 7/15/41 | 258,177 | (8,267 | ) | (— | ) | |||||||
FHLMC Gold 30 Year, 3.50%, 2/15/45 | 499,757 | (18,693 | ) | (— | ) | |||||||
FHLMC Gold 30 Year, 3.50%, 4/15/46 | 359,549 | (13,797 | ) | (— | ) | |||||||
FHLMC Gold 30 Year, 3.50%, 6/15/47 | 647,622 | (25,678 | ) | (— | ) | |||||||
FHLMC Gold 30 Year, 4.00%, 5/15/47 | 430,164 | (14,719 | ) | (— | ) | |||||||
FNMA 30 Year, 3.00%, 12/25/41 | 576,807 | (22,089 | ) | (— | ) | |||||||
FNMA 30 Year, 3.00%, 7/25/42 | 514,009 | (20,831 | ) | (— | ) | |||||||
FNMA 30 Year, 3.00%, 4/25/46 | 1,071,682 | (45,654 | ) | (— | ) | |||||||
FNMA 30 Year, 3.50%, 7/25/41 | 518,730 | (18,909 | ) | (— | ) | |||||||
FNMA 30 Year, 3.50%, 9/25/42 | 307,188 | (11,171 | ) | (— | ) | |||||||
FNMA 30 Year, 3.50%, 3/25/44 | 263,656 | (10,623 | ) | (— | ) | |||||||
FNMA 30 Year, 3.50%, 2/25/45 | 744,854 | (27,971 | ) | (— | ) | |||||||
FNMA 30 Year, 3.50%, 4/25/46 | 521,123 | (20,078 | ) | (— | ) | |||||||
FNMA 30 Year, 3.50%, 6/25/47 | 855,262 | (34,026 | ) | (— | ) | |||||||
FNMA 30 Year, 4.00%, 1/25/44 | 330,567 | (10,923 | ) | (— | ) | |||||||
FNMA 30 Year, 4.00%, 5/25/44 | 683,640 | (23,706 | ) | (— | ) |
116 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Total Return Fund (continued)
Total Return Swap Contracts (continued)
Underlying Instruments | Notional Valuec | Value/ Unrealized Appreciation (Depreciation) | Percentage of Net Assets (%)d | |||||||||
GNMA II SF 30 Year, 3.00%, 4/20/42 | $ 256,862 | $ (8,096 | ) | (— | ) | |||||||
GNMA II SF 30 Year, 3.00%, 10/20/42 | 266,891 | (8,648 | ) | (— | ) | |||||||
GNMA II SF 30 Year, 3.00%, 3/20/45 | 285,792 | (15,378 | ) | (— | ) | |||||||
GNMA II SF 30 Year, 3.00%, 4/20/46 | 1,038,206 | (42,105 | ) | (— | ) | |||||||
GNMA II SF 30 Year, 3.50%, 11/20/41 | 323,023 | (12,541 | ) | (— | ) | |||||||
GNMA II SF 30 Year, 3.50%, 4/20/44 | 255,429 | (7,332 | ) | (— | ) | |||||||
GNMA II SF 30 Year, 3.50%, 5/20/44 | 1,036,162 | (40,062 | ) | (— | ) | |||||||
GNMA II SF 30 Year, 3.50%, 4/20/45 | 678,335 | (25,045 | ) | (— | ) | |||||||
GNMA II SF 30 Year, 3.50%, 4/20/46 | 660,283 | (25,150 | ) | (— | ) | |||||||
GNMA II SF 30 Year, 4.00%, 5/20/47 | 466,196 | (13,513 | ) | (— | ) | |||||||
U.S. Treasury Note, 1.50%, 10/31/19 | 305,098 | (4,905 | ) | (— | ) | |||||||
U.S. Treasury Note, 1.50%, 8/15/26 | 284,737 | (15,340 | ) | (— | ) | |||||||
U.S. Treasury Note, 1.625%, 2/15/26 | 289,726 | (15,221 | ) | (— | ) | |||||||
U.S. Treasury Note, 1.625%, 5/15/26 | 289,929 | (15,522 | ) | (— | ) | |||||||
U.S. Treasury Note, 2.00%, 11/30/22 | 309,169 | (12,746 | ) | (— | ) | |||||||
U.S. Treasury Note, 2.00%, 2/25/25 | 315,125 | (16,167 | ) | (— | ) | |||||||
U.S. Treasury Note, 2.00%, 8/15/25 | 313,667 | (16,526 | ) | (— | ) | |||||||
U.S. Treasury Note, 2.00%, 11/15/26 | 297,667 | (16,707 | ) | (— | ) | |||||||
U.S. Treasury Note, 2.125%, 12/31/22 | 310,254 | (13,166 | ) | (— | ) | |||||||
U.S. Treasury Note, 2.125%, 5/15/25 | 318,748 | (16,813 | ) | (— | ) | |||||||
U.S. Treasury Note, 2.25%, 11/15/24 | 322,964 | (16,789 | ) | (— | ) | |||||||
U.S. Treasury Note, 2.25%, 11/15/25 | 320,570 | (17,473 | ) | (— | ) | |||||||
U.S. Treasury Note, 2.25%, 2/15/27 | 301,721 | (17,416 | ) | (— | ) | |||||||
U.S. Treasury Note, 2.25%, 8/15/27 | 300,851 | (18,104 | ) | (— | ) | |||||||
U.S. Treasury Note, 2.25%, 11/15/27 | 302,208 | (15,245 | ) | (— | ) | |||||||
U.S. Treasury Note, 2.375%, 8/15/24 | 324,184 | (16,600 | ) | (— | ) | |||||||
U.S. Treasury Note, 2.375%, 5/15/27 | 306,449 | (18,035 | ) | (— | ) | |||||||
U.S. Treasury Note, 2.50%, 5/15/24 | 320,643 | (16,158 | ) | (— | ) | |||||||
U.S. Treasury Note, 2.625%, 11/15/20 | 279,725 | (8,886 | ) | (— | ) | |||||||
U.S. Treasury Note, 2.75%, 11/15/23 | 291,750 | (14,589 | ) | (— | ) | |||||||
U.S. Treasury Note, 2.75%, 2/15/24 | 250,787 | (12,603 | ) | (— | ) | |||||||
All Other Underlying Instruments | 78,370,889 | (97,852 | ) | (— | ) | |||||||
Total | $ | 100,000,000 | $(996,895 | ) | (— | ) |
cNotional value represents the fair value at period end of each underlying instrument (including the financing rate fee which is calculated based on the swap contract’s original notional value of $100,000,000, allocated to each underlying instrument on a pro-rata basis).
dRepresents the weighting of the component in the custom index.
See Note 10 regarding other derivative information.
See Abbreviations on page 149.
franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 117 |
FRANKLIN INVESTORS SECURITIES TRUST
Statements of Assets and Liabilities
April 30, 2018 (unaudited)
Franklin U.S. Government | Franklin Floating Rate | Franklin Low Duration Fund | Franklin Total Return Funda | |||||||||||||
Assets: | ||||||||||||||||
Investments in securities: | ||||||||||||||||
Cost - Unaffiliated issuers | $839,491,952 | $3,086,935,978 | $2,572,932,255 | $4,442,527,402 | ||||||||||||
Cost - Controlled affiliates (Note 3f) | — | — | — | 100,000,000 | ||||||||||||
Cost - Non-controlled affiliates (Note 3f) | 43,056,833 | 625,267,799 | 133,816,630 | 106,517,138 | ||||||||||||
|
| |||||||||||||||
Value - Unaffiliated issuers | $837,800,561 | $3,033,831,851 | $2,549,018,804 | $4,367,393,858 | ||||||||||||
Value - Controlled affiliates (Note 3f) | — | — | — | 99,593,083 | ||||||||||||
Value - Non-controlled affiliates (Note 3f) | 43,056,833 | 619,151,330 | 133,677,703 | 106,096,153 | ||||||||||||
Cash | — | 6,955,998 | 938,061 | 8,425,834 | ||||||||||||
Foreign currency, at value (cost $—, $—, $125,072 and $8,012,422, respectively) | — | — | 124,346 | 7,979,964 | ||||||||||||
Receivables: | ||||||||||||||||
Investment securities sold | 4,914,011 | 5,466,280 | 127,203 | 221,720 | ||||||||||||
Capital shares sold | 871,511 | 11,574,258 | 4,330,619 | 3,358,285 | ||||||||||||
Dividends and interest | 2,795,263 | 6,696,853 | 11,905,490 | 29,310,164 | ||||||||||||
Deposits with brokers for: | ||||||||||||||||
OTC derivative contracts | — | — | 6,090,000 | 13,560,000 | ||||||||||||
Futures contracts | — | — | 664,064 | 5,083,957 | ||||||||||||
Centrally cleared swap contracts | — | 1,045,774 | 7,874,294 | 16,881,157 | ||||||||||||
Variation margin on futures contracts | — | — | — | 975,370 | ||||||||||||
OTC swap contracts (upfront payments $—, $—, $195,577 and $1,079,080) | — | — | 162,027 | 941,451 | ||||||||||||
Unrealized appreciation on OTC forward exchange contracts | — | — | 707,749 | 1,451,959 | ||||||||||||
Unrealized appreciation on OTC swap contracts | — | — | 612,336 | 4,065,975 | ||||||||||||
Unrealized appreciation on unfunded loan commitments (Note 9) | — | 254,801 | 32,044 | 69,996 | ||||||||||||
FT Subsidiary deferred tax benefit (Note 1f) | — | — | — | 376,087 | ||||||||||||
Other assets | 743 | 2,875 | 2,150 | 3,702 | ||||||||||||
|
| |||||||||||||||
Total assets | 889,438,922 | 3,684,980,020 | 2,716,266,890 | 4,665,788,715 | ||||||||||||
|
| |||||||||||||||
Liabilities: | ||||||||||||||||
Payables: | ||||||||||||||||
Investment securities purchased | 11,188,378 | 118,881,545 | 35,302,752 | 319,397,829 | ||||||||||||
Capital shares redeemed | 3,340,440 | 8,359,258 | 4,766,187 | 5,986,754 | ||||||||||||
Management fees | 351,092 | 1,229,933 | 510,382 | 1,622,701 | ||||||||||||
Distribution fees | 187,605 | 531,807 | 381,749 | 787,352 | ||||||||||||
Transfer agent fees | 238,520 | 641,390 | 320,788 | 736,333 | ||||||||||||
Distributions to shareholders | 116,118 | 2,961,558 | 1,095,617 | 243,265 | ||||||||||||
Variation margin on futures contracts | — | — | 53,195 | — | ||||||||||||
Variation margin on centrally cleared swap contracts | — | 2,214 | 62,263 | 117,227 | ||||||||||||
OTC swap contracts (upfront receipts $—, $—, $6,579,001 and $16,773,910) | — | — | 4,512,903 | 11,998,738 | ||||||||||||
Unrealized depreciation on OTC forward exchange contracts | — | — | 627,884 | 2,375,349 | ||||||||||||
Unrealized depreciation on OTC swap contracts | — | — | 2,321,735 | 4,761,840 | ||||||||||||
Accrued expenses and other liabilities | 185,254 | 384,275 | 203,169 | 2,714,448 | ||||||||||||
|
| |||||||||||||||
Total liabilities | 15,607,407 | 132,991,980 | 50,158,624 | 350,741,836 | ||||||||||||
|
|
118 |
Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL STATEMENTS
Statements of Assets and Liabilities (continued)
April 30, 2018 (unaudited)
Franklin Adjustable U.S. Government Securities Fund | Franklin Floating Rate Daily Access Fund | Franklin Low Duration Total Return Fund | Franklin Total Return | |||||||||||||
| ||||||||||||||||
Net assets, at value | $ 873,831,515 | $3,551,988,040 | $2,666,108,266 | $4,315,046,879 | ||||||||||||
|
| |||||||||||||||
Net assets consist of: | ||||||||||||||||
Paid-in capital | $1,049,804,586 | $3,775,629,829 | $2,800,045,889 | $4,572,197,536 | ||||||||||||
Undistributed net investment income | — | 1,492,022 | — | — | ||||||||||||
Distributions in excess of net investment income | (5,484,857 | ) | — | (15,162,209 | ) | (14,893,004 | ) | |||||||||
Net unrealized appreciation (depreciation) | (1,691,391 | ) | (60,140,737 | ) | (26,135,372 | ) | (77,204,485 | ) | ||||||||
Accumulated net realized gain (loss) | (168,796,823 | ) | (164,993,074 | ) | (92,640,042 | ) | (165,053,168 | ) | ||||||||
|
| |||||||||||||||
Net assets, at value | $ 873,831,515 | $3,551,988,040 | $2,666,108,266 | $4,315,046,879 | ||||||||||||
|
| |||||||||||||||
Class A: | ||||||||||||||||
Net assets, at value | $ 441,679,560 | $1,249,003,927 | $1,446,265,020 | $2,902,912,420 | ||||||||||||
|
| |||||||||||||||
Shares outstanding | 54,104,237 | 142,390,996 | 149,747,452 | 306,845,273 | ||||||||||||
|
| |||||||||||||||
Net asset value per shareb | $8.16 | $8.77 | $9.66 | $9.46 | ||||||||||||
|
| |||||||||||||||
Maximum offering price per share (net asset value per share ÷ 97.75%, 97.75%, 97.75% and 95.75%, respectively) | $8.35 | $8.97 | $9.88 | $9.88 | ||||||||||||
|
| |||||||||||||||
Class A1: | ||||||||||||||||
Net assets, at value | $104,091,834 | |||||||||||||||
|
| |||||||||||||||
Shares outstanding | 12,754,868 | |||||||||||||||
|
| |||||||||||||||
Net asset value per shareb | $8.16 | |||||||||||||||
|
| |||||||||||||||
Maximum offering price per share (net asset value per share ÷ 97.75%) | $8.35 | |||||||||||||||
|
| |||||||||||||||
Class C: | ||||||||||||||||
Net assets, at value | $ 162,010,660 | $ 518,444,466 | $ 155,564,378 | $ 314,318,428 | ||||||||||||
|
| |||||||||||||||
Shares outstanding | 19,858,674 | 59,099,719 | 16,172,977 | 33,454,576 | ||||||||||||
|
| |||||||||||||||
Net asset value and maximum offering price per shareb | $8.16 | $8.77 | $9.62 | $9.40 | ||||||||||||
|
| |||||||||||||||
Class R: | ||||||||||||||||
Net assets, at value | $ 32,407,395 | |||||||||||||||
|
| |||||||||||||||
Shares outstanding | 3,438,971 | |||||||||||||||
|
| |||||||||||||||
Net asset value and maximum offering price per share | $9.42 | |||||||||||||||
|
| |||||||||||||||
Class R6: | ||||||||||||||||
Net assets, at value | $ 25,542,664 | $ 136,402,862 | $ 869,182,018 | $ 436,269,999 | ||||||||||||
|
| |||||||||||||||
Shares outstanding | 3,123,869 | 15,545,831 | 89,445,010 | 45,819,678 | ||||||||||||
|
| |||||||||||||||
Net asset value and maximum offering price per share | $8.18 | $8.77 | $9.72 | $9.52 | ||||||||||||
|
| |||||||||||||||
Advisor Class: | ||||||||||||||||
Net assets, at value | $ 140,506,797 | $ 1,648,136,785 | $ 195,096,850 | $ 629,138,637 | ||||||||||||
|
| |||||||||||||||
Shares outstanding | 17,192,826 | 187,809,840 | 20,095,987 | 66,125,657 | ||||||||||||
|
| |||||||||||||||
Net asset value and maximum offering price per share | $8.17 | $8.78 | $9.71 | $9.51 | ||||||||||||
|
|
aConsolidated financial statement. See Note 1(f).
bRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
franklintempleton.com |
The accompanying notes are an integral part of these financial statements. | Semiannual Report | 119 |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL STATEMENTS
Statements of Operations
for the six months ended April 30, 2018 (unaudited)
Franklin Adjustable U.S. Government Securities Fund | Franklin Floating Rate Daily Access Fund | Franklin Low Duration Total Return Fund | Franklin Total Return Funda | |||||||||||||
| ||||||||||||||||
Investment income: | ||||||||||||||||
Dividends: | ||||||||||||||||
Unaffiliated issuers | $ — | $ 238,891 | $ 784,271 | $ 333,314 | ||||||||||||
Controlled affiliates (Note 3f) | — | — | — | 1,093,143 | ||||||||||||
Non-controlled affiliates (Note 3f) | 110,260 | 7,180,417 | 2,070,932 | 1,655,280 | ||||||||||||
Interest: (net of foreign taxes)~ | ||||||||||||||||
Unaffiliated issuers: | ||||||||||||||||
Paydown gain (loss) | (5,501,572 | ) | — | (1,371,924 | ) | (2,112,411 | ) | |||||||||
Paid in cash | 14,241,580 | 86,050,002 | 37,194,948 | 79,321,694 | ||||||||||||
Other income (net of taxes of $112,444) (Note 1f and 1i) | — | — | — | 33,599 | ||||||||||||
|
| |||||||||||||||
Total investment income | 8,850,268 | 93,469,310 | 38,678,227 | 80,324,619 | ||||||||||||
|
| |||||||||||||||
Expenses: | ||||||||||||||||
Management fees (Note 3a) | 2,283,499 | 8,795,157 | 6,545,584 | 10,421,523 | ||||||||||||
Distribution fees: (Note 3c) | ||||||||||||||||
Class A | 573,248 | 1,585,429 | 1,826,517 | 3,749,372 | ||||||||||||
Class A1 | 51,776 | — | — | — | ||||||||||||
Class C | 563,633 | 1,706,075 | 527,984 | 1,084,067 | ||||||||||||
Class R | — | — | — | 83,490 | ||||||||||||
Transfer agent fees: (Note 3e) | ||||||||||||||||
Class A | 307,866 | 608,040 | 1,243,097 | 2,315,243 | ||||||||||||
Class A1 | 74,592 | — | — | — | ||||||||||||
Class C | 116,426 | 251,651 | 139,276 | 257,491 | ||||||||||||
Class R | — | — | — | 25,965 | ||||||||||||
Class R6 | 5,903 | 17,060 | 88,009 | 58,156 | ||||||||||||
Advisor Class | 98,513 | 765,631 | 190,819 | 489,949 | ||||||||||||
Custodian fees (Note 4) | 3,877 | 13,549 | 15,633 | 58,845 | ||||||||||||
Reports to shareholders | 74,624 | 105,896 | 112,818 | 305,145 | ||||||||||||
Registration and filing fees | 56,352 | 95,883 | 82,756 | 101,313 | ||||||||||||
Professional fees | 30,074 | 60,744 | 51,776 | 58,055 | ||||||||||||
Trustees’ fees and expenses | 5,768 | 17,978 | 12,866 | 24,731 | ||||||||||||
Other | 102,858 | 41,527 | 97,240 | 154,154 | ||||||||||||
|
| |||||||||||||||
Total expenses | 4,349,009 | 14,064,620 | 10,934,375 | 19,187,499 | ||||||||||||
Expense reductions (Note 4) | (14 | ) | (9,969 | ) | (9,908 | ) | (21,774 | ) | ||||||||
Expenses waived/paid by affiliates (Note 3f and 3g) | (40,074 | ) | (1,093,289 | ) | (2,679,738 | ) | (600,125 | ) | ||||||||
|
| |||||||||||||||
Net expenses | 4,308,921 | 12,961,362 | 8,244,729 | 18,565,600 | ||||||||||||
|
| |||||||||||||||
Net investment income | 4,541,347 | 80,507,948 | 30,433,498 | 61,759,019 | ||||||||||||
|
| |||||||||||||||
Realized and unrealized gains (losses): | ||||||||||||||||
Net realized gain (loss) from: | ||||||||||||||||
Investments: | ||||||||||||||||
Unaffiliated issuers | (7,313 | ) | (859,263 | ) | (8,581,361 | ) | (46,831,842 | ) | ||||||||
Foreign currency transactions | — | 79 | 145,749 | (727,531 | ) | |||||||||||
Forward exchange contracts | — | — | (1,028,249 | ) | (1,940,320 | ) | ||||||||||
Futures contracts | — | — | (4,354,057 | ) | (23,735,641 | ) | ||||||||||
TBA sale commitments | — | — | (365,381 | ) | 256,598 | |||||||||||
Swap contracts | — | (793,185 | ) | (1,581,162 | ) | (4,213,297 | ) | |||||||||
Capital gain distributions from management investment companies: | ||||||||||||||||
Controlled affiliates (Note 3f) | — | — | — | 98,678 | ||||||||||||
Non-controlled affiliates (Note 3f) | — | 1,510,184 | 523,977 | 276,033 |
120 |
Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL STATEMENTS
Statements of Operations (continued)
for the six months ended April 30, 2018 (unaudited)
Franklin U.S. Government | Franklin Floating Rate Daily Access Fund | Franklin Low Duration | Franklin Total Return | |||||||||||||
| ||||||||||||||||
Capital gain distribution received in FT Subsidiary (net of taxes of $1,980,057) (Note 1f) | $ — | $ — | $ — | $ 4,678,986 | ||||||||||||
|
| |||||||||||||||
Net realized gain (loss) | (7,313 | ) | (142,185 | ) | (15,240,484) | (72,138,336 | ) | |||||||||
|
| |||||||||||||||
Net change in unrealized appreciation (depreciation) on: | ||||||||||||||||
Investments: | ||||||||||||||||
Unaffiliated issuers | (3,099,466 | ) | (19,194,559 | ) | (21,779,584) | (91,779,120 | ) | |||||||||
Controlled affiliates (Note 3f) | — | — | — | (610,376 | ) | |||||||||||
Non-controlled affiliates (Note 3f) | — | (5,516,944 | ) | (1,882,728) | (1,656,930 | ) | ||||||||||
Translation of other assets and liabilities denominated in foreign currencies | — | — | 24,982 | 35,348 | ||||||||||||
Forward exchange contracts | — | — | (658,753) | (4,336,737 | ) | |||||||||||
Futures contracts | — | — | 340,561 | 5,530,071 | ||||||||||||
Swap contracts | — | 289,803 | 961,659 | 14,316 | ||||||||||||
Change in FT Subsidiary deferred tax benefit (Note 1f) | — | — | — | 376,087 | ||||||||||||
|
| |||||||||||||||
Net change in unrealized appreciation (depreciation) | (3,099,466 | ) | (24,421,700 | ) | (22,993,863) | (92,427,341 | ) | |||||||||
|
| |||||||||||||||
Net realized and unrealized gain (loss) | (3,106,779 | ) | (24,563,885 | ) | (38,234,347) | (164,565,677 | ) | |||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from operations | $ 1,434,568 | $ 55,944,063 | $ (7,800,849) | $(102,806,658 | ) | |||||||||||
|
| |||||||||||||||
~Foreign taxes withheld on interest | $ — | $ — | $ 1,789 | $ 1,342 |
aConsolidated financial statement. See Note 1(f).
franklintempleton.com |
The accompanying notes are an integral part of these financial statements. | Semiannual Report | 121 |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
Franklin Adjustable U.S. Government Securities Fund | Franklin Floating Rate Daily Access Fund | |||||||||||||||
|
| |||||||||||||||
Six Months Ended April 30, 2018 (unaudited) | Year Ended October 31, 2017 | Six Months Ended April 30, 2018 (unaudited) | Year Ended October 31, 2017 | |||||||||||||
| ||||||||||||||||
Increase (decrease) in net assets: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income | $ 4,541,347 | $ 6,086,122 | $ 80,507,948 | $ 128,801,212 | ||||||||||||
Net realized gain (loss) | (7,313) | 96,773 | (142,185 | ) | (27,985,552 | ) | ||||||||||
Net change in unrealized appreciation (depreciation) | (3,099,466) | (7,106,295 | ) | (24,421,700 | ) | 20,553,230 | ||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from operations | 1,434,568 | (923,400 | ) | 55,944,063 | 121,368,890 | |||||||||||
|
| |||||||||||||||
Distributions to shareholders from: | ||||||||||||||||
Net investment income: | ||||||||||||||||
Class A | (5,091,582) | (10,816,412 | ) | (28,961,321 | ) | (49,009,035 | ) | |||||||||
Class A1 | (1,320,781) | (2,796,558 | ) | — | — | |||||||||||
Class C | (1,579,214) | (3,300,858 | ) | (10,947,931 | ) | (17,722,222 | ) | |||||||||
Class R6 | (290,144) | (52,994 | ) | (3,220,539 | ) | (2,953,451 | ) | |||||||||
Advisor Class | (1,811,604) | (4,370,331 | ) | (38,484,908 | ) | (58,557,532 | ) | |||||||||
|
| |||||||||||||||
Total distributions to shareholders | (10,093,325) | (21,337,153 | ) | (81,614,699 | ) | (128,242,240 | ) | |||||||||
|
| |||||||||||||||
Capital share transactions: (Note 2) | ||||||||||||||||
Class A | (46,286,937) | (164,170,469 | ) | (104,153,742 | ) | 3,631,210 | ||||||||||
Class A1 | (15,867,543) | (36,788,901 | ) | — | — | |||||||||||
Class C | (25,977,442) | (72,203,722 | ) | (28,559,245 | ) | (257,800 | ) | |||||||||
Class R6 | 23,583,063 | (132,241 | ) | 7,165,682 | 118,459,347 | |||||||||||
Advisor Class | (42,420,153) | (39,282,849 | ) | (12,714,348 | ) | 568,347,099 | ||||||||||
Total capital share transactions | (106,969,012) | (312,578,182 | ) | (138,261,653 | ) | 690,179,856 | ||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets | (115,627,769) | (334,838,735 | ) | (163,932,289 | ) | 683,306,506 | ||||||||||
|
| |||||||||||||||
Net assets: | ||||||||||||||||
Beginning of period | 989,459,284 | 1,324,298,019 | 3,715,920,329 | 3,032,613,823 | ||||||||||||
|
| |||||||||||||||
End of period | $ 873,831,515 | $ 989,459,284 | $3,551,988,040 | $3,715,920,329 | ||||||||||||
|
| |||||||||||||||
Undistributed net investment income included in net assets: | ||||||||||||||||
End of period | $ — | $ 67,121 | $ 1,492,022 | $ 2,598,773 | ||||||||||||
|
| |||||||||||||||
Distributions in excess of net investment income included in net assets: | ||||||||||||||||
End of period | $ (5,484,857) | $ — | $ — | $ — | ||||||||||||
|
|
122 |
Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets (continued)
Franklin Low Duration Total Return Fund | Franklin Total Return Funda | |||||||||||||||
|
| |||||||||||||||
Six Months Ended April 30, 2018 (unaudited) | Year Ended October 31, 2017 | Six Months Ended April 30, 2018 (unaudited) | Year Ended October 31, 2017 | |||||||||||||
| ||||||||||||||||
Increase (decrease) in net assets: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income | $ | 30,433,498 | $ | 46,895,267 | $ | 61,759,019 | $ | 120,030,375 | ||||||||
Net realized gain (loss) | (15,240,484) | (1,156,974) | (72,138,336) | (48,258,255 | ) | |||||||||||
Net change in unrealized appreciation (depreciation) | (22,993,863) | (6,135,070) | (92,427,341) | (10,230,159 | ) | |||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets resulting from operations | (7,800,849) | 39,603,223 | (102,806,658) | 61,541,961 | ||||||||||||
|
| |||||||||||||||
Distributions to shareholders from: | ||||||||||||||||
Net investment income: | ||||||||||||||||
Class A | (22,221,995) | (29,407,853) | (47,579,697) | (79,166,327 | ) | |||||||||||
Class C | (2,169,902) | (3,436,954) | (4,699,902) | (8,606,867 | ) | |||||||||||
Class R | — | — | (497,691) | (1,159,298 | ) | |||||||||||
Class R6 | (13,612,573) | (12,604,268) | (7,302,064) | (2,523,966 | ) | |||||||||||
Advisor Class | (3,701,809) | (7,048,480) | (10,762,103) | (20,532,154 | ) | |||||||||||
|
| |||||||||||||||
Total distributions to shareholders | (41,706,279) | (52,497,555) | (70,841,457) | (111,988,612 | ) | |||||||||||
|
| |||||||||||||||
Capital share transactions: (Note 2) | ||||||||||||||||
Class A | (46,247,594) | 3,455,292 | (132,960,987) | (430,205,619 | ) | |||||||||||
Class C | (16,109,634) | (42,037,863) | (26,808,413) | (89,548,811 | ) | |||||||||||
Class R | — | — | (2,620,386) | (21,629,393 | ) | |||||||||||
Class R6 | 292,484,414 | 40,905,255 | 54,002,109 | 304,494,859 | ||||||||||||
Advisor Class | (229,628,416) | 205,066,211 | 58,755,731 | (139,300,499 | ) | |||||||||||
|
| |||||||||||||||
Total capital share transactions | 498,770 | 207,388,895 | (49,631,946) | (376,189,463 | ) | |||||||||||
|
| |||||||||||||||
Net increase (decrease) in net assets | (49,008,358) | 194,494,563 | (223,280,061) | (426,636,114 | ) | |||||||||||
Net assets: | ||||||||||||||||
Beginning of period | 2,715,116,624 | 2,520,622,061 | 4,538,326,940 | 4,964,963,054 | ||||||||||||
|
| |||||||||||||||
End of period | $ | 2,666,108,266 | $ | 2,715,116,624 | $ | 4,315,046,879 | $ | 4,538,326,940 | ||||||||
|
| |||||||||||||||
Distributions in excess of net investment income included in net assets: | ||||||||||||||||
End of period | $ | (15,162,209) | $ | (3,889,428) | $ | (14,893,004) | $ | (5,810,566 | ) | |||||||
|
|
aConsolidated financial statement. See Note 1(f).
franklintempleton.com |
The accompanying notes are an integral part of these financial statements. | Semiannual Report | 123 |
FRANKLIN INVESTORS SECURITIES TRUST
Notes to Financial Statements (unaudited)
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 classes of shares offered within each of the Funds are indicated below. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees due to differing arrangements for distribution and transfer agent fees.
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
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. 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.
Certain derivative financial instruments are centrally cleared or 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.
124 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 Funds’ business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time 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 4 p.m. Eastern time. 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 Funds’ NAV is not calculated, 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.
franklintempleton.com | Semiannual Report | 125 |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Organization and Significant Accounting
Policies (continued)
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
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.
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 the next business day, or 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 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.
126 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 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 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 inflation index swap contracts primarily to manage and/or gain exposure to 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 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
franklintempleton.com | Semiannual Report | 127 |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Organization and Significant Accounting
Policies (continued)
d. Derivative Financial Instruments (continued)
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 entered into OTC total return swap contracts primarily to manage and/or gain exposure to interest rate risk of an underlying instrument such as a stock, bond, index or basket of securities or indices. A total return swap is an agreement between the Fund and a counterparty to exchange a return linked to an underlying instrument for a floating or fixed rate payment, both based upon a notional amount. Over the term of the contract, contractually required payments to be paid or received are accrued daily and recorded as unrealized appreciation or depreciation until the payments are made, at which time they are recognized as realized gain or loss.
Certain or all Funds invest in value recovery instruments (VRI) primarily to gain exposure to economic growth. 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 Note 10 regarding other derivative information.
e. 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.
f. FT Holdings Corporation I (FT Subsidiary)
Franklin Total Return Fund invests in certain financial instruments through its investment in the FT Subsidiary. 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 April 30, 2018, FT Subsidiary’s investment, Turtle Bay Resort, as well as any other assets and liabilities of FT Subsidiary are reflected in the Fund’s Consolidated Statement of Investments and Consolidated Statement of Assets and Liabilities.
During the period ended April 30, 2018, Turtle Bay Resort paid a distribution to FT Subsidiary upon the sale of a majority of its assets to a third party. The distribution received is reflected net of taxes as other income and capital gain distribution received in FT Subsidiary in the Consolidated Statement of Operations. For U.S. income tax purposes, this distribution is taxable to FT Subsidiary, and as such an estimated tax liability was recorded in FT Subsidiary. The estimated tax liability was calculated using FT Subsidiary’s prior year effective federal rate of 34%, and a blended Hawaii state rate of 4% of the 2017 estimated capital gain and 6.4% of the 2017 estimated ordinary income. The tax liability is reflected as FT Subsidiary income taxes in the Consolidated Statement of Assets and Liabilities. In addition, a deferred tax benefit was recorded on the unrealized depreciation of the security. When the Fund disposes of the security, the deferred asset is relieved and the Fund should incur a realized tax benefit. The estimated deferred tax benefit was calculated using a federal rate of 21% and a Hawaii state rate (net of federal tax benefit) of 3%. This is reflected as FT Subsidiary deferred tax benefit in the Consolidated Statement of Assets and Liabilities.
The financial statements have been consolidated and include the accounts of the Fund and FT Subsidiary. All intercompany transactions and balances have been eliminated. At April 30, 2018, the net assets of FT Subsidiary were $5,435,831, representing 0.1% of the Fund’s consolidated net assets. The Fund’s investment in FT Subsidiary is limited to 25% of consolidated assets.
128 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
g. 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.
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, 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.
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 April 30, 2018, 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 the statute of limitations in each jurisdiction in which the Fund invests.
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. 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. 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. 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. Distributable earnings are determined according to income tax regulations (tax basis) and 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.
franklintempleton.com | Semiannual Report | 129 |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Organization and Significant Accounting
Policies (continued)
j. Security Transactions, Investment Income, Expenses and Distributions (continued)
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.
Net investment income, excluding 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.
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 interest income 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, 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.
2. Shares of Beneficial Interest
At April 30, 2018, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:
Franklin Adjustable U.S. Government Securities Fund | Franklin Floating Rate Daily Access Fund | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares: | ||||||||||||||||
Six Months ended April 30, 2018 | ||||||||||||||||
Shares sold | 5,826,941 | $ | 47,819,823 | 13,780,479 | $ | 121,164,498 | ||||||||||
Shares issued in reinvestment of distributions | 590,069 | 4,836,489 | 3,066,982 | 26,969,364 | ||||||||||||
Shares redeemed | (12,051,736 | ) | (98,943,249 | ) | (28,664,705 | ) | (252,287,604) | |||||||||
|
| |||||||||||||||
Net increase (decrease) | (5,634,726 | ) | $ | (46,286,937 | ) | (11,817,244 | ) | $ | (104,153,742) | |||||||
|
| |||||||||||||||
Year ended October 31, 2017 | ||||||||||||||||
Shares sold | 15,064,447 | $ | 125,693,039 | 44,354,738 | $ | 393,140,477 | ||||||||||
Shares issued in reinvestment of distributions | 1,228,691 | 10,224,922 | 5,153,232 | 45,658,928 | ||||||||||||
Shares redeemed | (36,005,848 | ) | (300,088,430 | ) | (49,104,181 | ) | (435,168,195) | |||||||||
|
| |||||||||||||||
Net increase (decrease) | (19,712,710 | ) | $ | (164,170,469 | ) | 403,789 | $ | 3,631,210 | ||||||||
|
|
130 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin Adjustable U.S. Government Securities Fund | Franklin Floating Rate Daily Access Fund | |||||||||||||||
|
| |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A1 Shares: | ||||||||||||||||
Six Months ended April 30, 2018 | ||||||||||||||||
Shares sold | 154,993 | $ | 1,270,135 | |||||||||||||
Shares issued in reinvestment of distributions | 151,849 | 1,244,452 | ||||||||||||||
Shares redeemed | (2,240,657 | ) | (18,382,130) | |||||||||||||
|
| |||||||||||||||
Net increase (decrease) | (1,933,815 | ) | $ | (15,867,543) | ||||||||||||
|
| |||||||||||||||
Year ended October 31, 2017 | ||||||||||||||||
Shares sold | 460,357 | $ | 3,832,460 | |||||||||||||
Shares issued in reinvestment of distributions | 318,104 | 2,645,959 | ||||||||||||||
Shares redeemed | (5,191,278 | ) | (43,267,320) | |||||||||||||
|
| |||||||||||||||
Net increase (decrease) | (4,412,817 | ) | $ | (36,788,901) | ||||||||||||
|
| |||||||||||||||
Class C Shares: | ||||||||||||||||
Six Months ended April 30, 2018 | ||||||||||||||||
Shares sold | 893,895 | $ | 7,329,087 | 4,430,033 | $ | 38,974,957 | ||||||||||
Shares issued in reinvestment of distributions | 179,853 | 1,473,656 | 1,159,979 | 10,199,821 | ||||||||||||
Shares redeemed | (4,240,915 | ) | (34,780,185 | ) | (8,835,458 | ) | (77,734,023) | |||||||||
|
| |||||||||||||||
Net increase (decrease) | (3,167,167 | ) | $ | (25,977,442 | ) | (3,245,446 | ) | $ | (28,559,245) | |||||||
|
| |||||||||||||||
Year ended October 31, 2017 | ||||||||||||||||
Shares sold | 1,689,775 | $ | 14,082,487 | 15,908,252 | $ | 141,059,930 | ||||||||||
Shares issued in reinvestment of distributions | 368,575 | 3,064,421 | 1,836,285 | 16,269,098 | ||||||||||||
Shares redeemed | (10,729,636 | ) | (89,350,630 | ) | (17,787,164 | ) | (157,586,828) | |||||||||
|
| |||||||||||||||
Net increase (decrease) | (8,671,286 | ) | $ | (72,203,722 | ) | (42,627 | ) | $ | (257,800) | |||||||
|
| |||||||||||||||
Class R6 Shares: | ||||||||||||||||
Six Months ended April 30, 2018 | ||||||||||||||||
Shares sold | 3,230,410 | $ | 26,647,231 | 2,067,164 | $ | 18,212,680 | ||||||||||
Shares issued in reinvestment of distributions | 35,345 | 290,143 | 360,545 | 3,170,798 | ||||||||||||
Shares redeemed | (408,023 | ) | (3,354,311 | ) | (1,614,332 | ) | (14,217,796) | |||||||||
|
| |||||||||||||||
Net increase (decrease) | 2,857,732 | $ | 23,583,063 | 813,377 | $ | 7,165,682 | ||||||||||
|
| |||||||||||||||
Year ended October 31, 2017 | ||||||||||||||||
Shares sold | 51,545 | $ | 430,037 | 15,034,860 | $ | 133,480,154 | ||||||||||
Shares issued in reinvestment of distributions | 6,366 | 52,994 | 326,520 | 2,890,725 | ||||||||||||
Shares redeemed | (73,967 | ) | (615,272 | ) | (2,023,706 | ) | (17,911,532) | |||||||||
|
| |||||||||||||||
Net increase (decrease) | (16,056 | ) | $ | (132,241 | ) | 13,337,674 | $ | 118,459,347 | ||||||||
|
| |||||||||||||||
Advisor Class Shares: | ||||||||||||||||
Six Months ended April 30, 2018 | ||||||||||||||||
Shares sold | 5,051,482 | $ | 41,460,716 | 36,308,483 | $ | 319,707,020 | ||||||||||
Shares issued in reinvestment of distributions | 193,171 | 1,585,455 | 2,402,759 | 21,138,265 | ||||||||||||
Shares redeemed | (10,392,992 | ) | (85,466,324 | ) | (40,169,783 | ) | (353,559,633) | |||||||||
|
| |||||||||||||||
Net increase (decrease) | (5,148,339 | ) | $ | (42,420,153 | ) | (1,458,541 | ) | $ | (12,714,348) | |||||||
|
| |||||||||||||||
Year ended October 31, 2017 | ||||||||||||||||
Shares sold | 11,485,012 | $ | 95,774,135 | 125,873,007 | $ | 1,117,140,394 | ||||||||||
Shares issued in reinvestment of distributions | 473,291 | 3,940,955 | 3,348,529 | 29,668,881 | ||||||||||||
Shares redeemed | (16,675,962 | ) | (138,997,939 | ) | (65,298,771 | ) | (578,462,176) | |||||||||
|
| |||||||||||||||
Net increase (decrease) | (4,717,659 | ) | $ | (39,282,849 | ) | 63,922,765 | $ | 568,347,099 | ||||||||
|
|
franklintempleton.com | Semiannual Report | 131 |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
2. Shares of Beneficial Interest (continued)
Franklin Low Duration Total Return Fund | Franklin Total Return Fund | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class A Shares: | ||||||||||||||||
Six Months ended April 30, 2018 | ||||||||||||||||
Shares sold | 20,482,088 | $ | 199,614,815 | 26,293,546 | $ | 254,641,848 | ||||||||||
Shares issued in reinvestment of distributions | 1,865,693 | 18,153,482 | 4,836,132 | 46,758,673 | ||||||||||||
Shares redeemed | (27,075,170 | ) | (264,015,891 | ) | (44,906,850 | ) | (434,361,508) | |||||||||
|
| |||||||||||||||
Net increase (decrease) | (4,727,389 | ) | $ | (46,247,594 | ) | (13,777,172 | ) | $ | (132,960,987) | |||||||
|
| |||||||||||||||
Year ended October 31, 2017 | ||||||||||||||||
Shares sold | 67,556,193 | $ | 665,223,690 | 60,861,062 | $ | 593,317,133 | ||||||||||
Shares issued in reinvestment of distributions | 2,577,144 | 25,374,436 | 7,998,920 | 77,657,172 | ||||||||||||
Shares redeemed | (69,776,656 | ) | (687,142,834 | ) | (113,164,691 | ) | (1,101,179,924) | |||||||||
|
| |||||||||||||||
Net increase (decrease) | 356,681 | $ | 3,455,292 | (44,304,709 | ) | $ | (430,205,619) | |||||||||
|
| |||||||||||||||
Class C Shares: | ||||||||||||||||
Six Months ended April 30, 2018 | ||||||||||||||||
Shares sold | 1,674,926 | $ | 16,256,877 | 2,414,579 | $ | 23,260,723 | ||||||||||
Shares issued in reinvestment of distributions | 187,657 | 1,818,638 | 459,835 | 4,418,092 | ||||||||||||
Shares redeemed | (3,522,981 | ) | (34,185,149 | ) | (5,678,989 | ) | (54,487,228) | |||||||||
|
| |||||||||||||||
Net increase (decrease) | (1,660,398 | ) | $ | (16,109,634 | ) | (2,804,575 | ) | $ | (26,808,413) | |||||||
|
| |||||||||||||||
Year ended October 31, 2017 | ||||||||||||||||
Shares sold | 4,898,935 | $ | 48,093,413 | 5,424,433 | $ | 52,538,301 | ||||||||||
Shares issued in reinvestment of distributions | 284,264 | 2,789,104 | 820,431 | 7,915,305 | ||||||||||||
Shares redeemed | (9,466,240 | ) | (92,920,380 | ) | (15,488,386 | ) | (150,002,417) | |||||||||
|
| |||||||||||||||
Net increase (decrease) | (4,283,041 | ) | $ | (42,037,863 | ) | (9,243,522 | ) | $ | (89,548,811) | |||||||
|
| |||||||||||||||
Class R Shares: | ||||||||||||||||
Six Months ended April 30, 2018 | ||||||||||||||||
Shares sold | 290,979 | $ | 2,794,262 | |||||||||||||
Shares issued in reinvestment of distributions | 48,623 | 468,487 | ||||||||||||||
Shares redeemed | (608,860 | ) | (5,883,135) | |||||||||||||
|
| |||||||||||||||
Net increase (decrease) | (269,258 | ) | $ | (2,620,386) | ||||||||||||
|
| |||||||||||||||
Year ended October 31, 2017 | ||||||||||||||||
Shares sold | 902,022 | $ | 8,746,669 | |||||||||||||
Shares issued in reinvestment of distributions | 114,619 | 1,108,621 | ||||||||||||||
Shares redeemed | (3,240,307 | ) | (31,484,683) | |||||||||||||
|
| |||||||||||||||
Net increase (decrease) | (2,223,666 | ) | $ | (21,629,393) | ||||||||||||
|
| |||||||||||||||
Class R6 Shares: | ||||||||||||||||
Six Months ended April 30, 2018 | ||||||||||||||||
Shares sold | 45,339,393 | $ | 445,228,812 | 10,036,729 | $ | 97,673,422 | ||||||||||
Shares issued in reinvestment of distributions | 1,355,191 | 13,261,250 | 680,027 | 6,610,558 | ||||||||||||
Shares redeemed | (17,011,967 | ) | (166,005,648 | ) | (5,180,860 | ) | (50,281,871) | |||||||||
|
| |||||||||||||||
Net increase (decrease) | 29,682,617 | $ | 292,484,414 | 5,535,896 | $ | 54,002,109 | ||||||||||
|
| |||||||||||||||
Year ended October 31, 2017 | ||||||||||||||||
Shares sold | 14,784,998 | $ | 146,559,335 | 38,903,238 | $ | 383,335,522 | ||||||||||
Shares issued in reinvestment of distributions | 1,264,112 | 12,513,346 | 18,879 | 184,469 | ||||||||||||
Shares redeemed | (11,934,303 | ) | (118,167,426 | ) | (8,043,063 | ) | (79,025,132) | |||||||||
|
| |||||||||||||||
Net increase (decrease) | 4,114,807 | $ | 40,905,255 | 30,879,054 | $ | 304,494,859 | ||||||||||
|
|
132 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin Low Duration Total Return Fund | Franklin Total Return Fund | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Advisor Class Shares: | ||||||||||||||||
Six Months ended April 30, 2018 | ||||||||||||||||
Shares sold | 5,394,064 | $ | 52,909,713 | 14,109,048 | $ | 137,971,262 | ||||||||||
Shares issued in reinvestment of distributions | 332,221 | 3,251,246 | 950,999 | 9,243,799 | ||||||||||||
Shares redeemed | (28,993,216 | ) | (285,789,375 | ) | (9,114,989 | ) | (88,459,330) | |||||||||
|
| |||||||||||||||
Net increase (decrease) | (23,266,931 | ) | $ | (229,628,416 | ) | 5,945,058 | $ | 58,755,731 | ||||||||
|
| |||||||||||||||
Year ended October 31, 2017 | ||||||||||||||||
Shares sold | 37,677,301 | $ | 372,780,265 | 48,423,990 | $ | 474,423,563 | ||||||||||
Shares issued in reinvestment of distributions | 639,191 | 6,323,130 | 1,856,741 | 18,132,064 | ||||||||||||
Shares redeemed | (17,587,989 | ) | (174,037,184 | ) | (64,272,380 | ) | (631,856,126) | |||||||||
|
| |||||||||||||||
Net increase (decrease) | 20,728,503 | $ | 205,066,211 | (13,991,649 | ) | $ | (139,300,499) | |||||||||
|
|
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 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 |
franklintempleton.com | Semiannual Report | 133 |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 period ended April 30, 2018, each Fund’s annualized gross effective investment management fee rate based on average daily net assets was as follows:
Franklin Adjustable U.S. Government Securities Fund | Franklin Floating Rate Daily Access Fund | Franklin Low Duration Total Return Fund | Franklin Total Return Fund | |||
0.500% | 0.499% | 0.496% | 0.472% |
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 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
134 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 Adjustable U.S. Government Securities Fund | Franklin Floating Rate Daily Access Fund | Franklin Low Duration Total Return Fund | Franklin Total Return 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
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 period:
Franklin Adjustable U.S. Government Securities Fund | Franklin Floating Rate Daily Access Fund | Franklin Low Duration Total Return Fund | Franklin Total Return Fund | |||||||||||||
Sales charges retained net of commissions paid to unaffiliated brokers/dealers | $25,969 | $68,038 | $84,146 | $293,989 | ||||||||||||
CDSC retained | $18,298 | $23,164 | $22,255 | $ 18,596 |
e. Transfer Agent Fees
Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. Effective November 1, 2017, the fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. Prior to November 1, 2017, the fees were account based fees that varied based on fund or account type. In addition, each class reimburses Investor Services for out of pocket expenses incurred and, except for Class R6, reimburses 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 period ended April 30, 2018, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:
Franklin Adjustable U.S. Government Securities Fund | Franklin Floating Rate Daily Access Fund | Franklin Low Duration Total Return Fund | Franklin Total Return Fund | |||||||||||||
Transfer agent fees | $320,659 | $761,922 | $490,752 | $1,055,619 |
franklintempleton.com | Semiannual Report | 135 |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
3. Transactions with Affiliates (continued)
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 period ended April 30, 2018, investments in affiliated management investment companies were as follows:
Number of Shares Held at Beginning of Period | Gross Additions | Gross Reductions | Number of Shares Held at End of Period | Value at End of Period | Dividend Income | Realized Gain (Loss) | Net Change in Unrealized Appreciation (Depreciation) | |||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Franklin Adjustable U.S. Government Securities Fund | ||||||||||||||||||||||||||||||||
Non-Controlled Affiliates | ||||||||||||||||||||||||||||||||
Institutional Fiduciary Trust Money Market Portfolio, 1.30% | 33,319,558 | 146,909,524 | (137,172,249 | ) | 43,056,833 | $ | 43,056,833 | $ | 110,260 | $ | — | $ | — | |||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Franklin Floating Rate Daily Access Fund | ||||||||||||||||||||||||||||||||
Non-Controlled Affiliates | ||||||||||||||||||||||||||||||||
Franklin Lower Tier Floating Rate Fund | 5,419,982 | 1,309,212 | — | 6,729,194 | $ | 66,484,441 | $ | 2,880,572 | $1,510,184 | a | $(3,182,528 | ) | ||||||||||||||||||||
Franklin Middle Tier Floating Rate Fund | 5,706,221 | 1,131,274 | — | 6,837,495 | 64,682,700 | 2,182,028 | — | (2,334,416 | ) | |||||||||||||||||||||||
Institutional Fiduciary Trust Money Market Portfolio, 1.30% | 368,263,476 | 813,888,257 | (694,167,544 | ) | 487,984,189 | 487,984,189 | 2,117,817 | — | — | |||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Total Affiliated Securities | $ | 619,151,330 | $ | 7,180,417 | $ | 1,510,184 | $ | (5,516,944 | ) | |||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Franklin Low Duration Total Return Fund | ||||||||||||||||||||||||||||||||
Non-Controlled Affiliates | ||||||||||||||||||||||||||||||||
Franklin Lower Tier Floating Rate Fund | 1,893,663 | — | — | 1,893,663 | $ | 18,709,393 | $ | 899,011 | $ | 523,977 | a | $ | (1,022,578 | ) | ||||||||||||||||||
Franklin Middle Tier Floating Rate Fund | 2,389,308 | — | — | 2,389,308 | 22,602,850 | 837,608 | — | (860,150 | ) | |||||||||||||||||||||||
Institutional Fiduciary Trust Money Market Portfolio, 1.30% | 79,803,015 | 593,221,199 | (580,658,754 | ) | 92,365,460 | 92,365,460 | 334,313 | — | — | |||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Total Affiliated Securities | $ | 133,677,703 | $ | 2,070,932 | $ | 523,977 | $ | (1,882,728 | ) | |||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Franklin Total Return Fund | ||||||||||||||||||||||||||||||||
Controlled Affiliates | ||||||||||||||||||||||||||||||||
Franklin Flexible Alpha Bond Fund, Class R6 | 10,172,940 | — | — | 10,172,940 | $ | 99,593,083 | $ | 1,093,143 | $ | 98,678 | a | $ | (610,376 | ) | ||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Non-Controlled Affiliates | ||||||||||||||||||||||||||||||||
Franklin Liberty Investment Grade Corporate ETF | 400,000 | — | — | 400,000 | $ | 9,473,920 | $ | 161,891 | $ | — | $ | (438,080 | ) | |||||||||||||||||||
Franklin Lower Tier Floating Rate Fund | 997,589 | — | — | 997,589 | 9,856,180 | 473,602 | 276,033 | a | (538,698 | ) | ||||||||||||||||||||||
Franklin Middle Tier Floating Rate Fund | 1,889,310 | — | — | 1,889,310 | 17,872,874 | 662,326 | — | (680,152 | ) | |||||||||||||||||||||||
Institutional Fiduciary Trust Money Market Portfolio, 1.30% | 122,271,638 | 869,483,763 | (922,862,222 | ) | 68,893,179 | 68,893,179 | 357,461 | — | — | |||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Total Non-Controlled Affiliates | $ | 106,096,153 | $ | 1,655,280 | $ | 276,033 | $ | (1,656,930 | ) | |||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Total Affiliated Securities | $ | 205,689,236 | $ | 2,748,423 | $ | 374,711 | $ | (2,267,306 | ) | |||||||||||||||||||||||
|
|
136 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
aIncludes realized gain distributions received.
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 Fund 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 0.44% and 0.63%, respectively, and Class R6 does not exceed 0.33% and 0.49%, 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, 2019. Total expenses waived or paid are not subject to recapture subsequent to the Funds’ fiscal year end. Prior to February 1, 2018, expenses for Franklin Low Duration Total Return Fund for Class A, Class C and Advisor Class were limited to 0.55%, and Class R6 was limited to 0.38%.
Additionally, Investor Services has voluntarily agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.03% for Franklin Adjustable U.S. Government Securities Fund and 0.02% for Franklin Floating Rate Daily Access Fund. Investor Services may discontinue this waiver in the future.
h. Other Affiliated Transactions
At April 30, 2018, one or more of the funds in Franklin Fund Allocator Series owned a percentage of the following Funds’ outstanding shares:
Franklin Floating Rate Daily Access Fund | Franklin Low Duration Total Return Fund | |||||||
3.3% | 18.3% |
i. Interfund Transactions
Certain or all Funds engaged in purchases and sales of investments with funds or other accounts that have common investment managers (or affiliated investment managers), directors, trustees or officers. These purchases and sales for the period ended April 30, 2018, were as follows:
Franklin Floating Rate Daily Access Fund | ||||
| ||||
Purchases | $ | 29,551,449 | ||
Sales | $ | — |
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 period ended April 30, 2018, 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.
franklintempleton.com | Semiannual Report | 137 |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
5. Income Taxes (continued)
At October 31, 2017, the capital loss carryforwards were as follows:
Franklin Adjustable U.S. Government Securities Fund | Franklin Floating Rate Daily Access Fund | Franklin Low Duration Total Return Fund | Franklin Total Return Fund | |||||||||||||
Capital loss carryforwards subject to expiration: | ||||||||||||||||
2018 | $ 39,689,305 | $ — | $ — | $ — | ||||||||||||
2019 | 21,934,756 | 10,282,409 | 5,327,487 | — | ||||||||||||
Capital loss carryforwards not subject to expiration: | ||||||||||||||||
Short term | 21,349,453 | 19,104,268 | 23,578,932 | 42,643,785 | ||||||||||||
Long term | 85,815,996 | 135,097,489 | 48,789,244 | 52,328,720 | ||||||||||||
|
| |||||||||||||||
Total capital loss carryforwards | $168,789,510 | $164,484,166 | $77,695,663 | $94,972,505 | ||||||||||||
|
|
At April 30, 2018, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
Franklin Adjustable U.S. Government Securities Fund | Franklin Floating Rate Daily Access Fund | Franklin Low Duration Total Return Fund | Franklin Total Return Fund | |||||||||||||
| ||||||||||||||||
Cost of investments | $882,548,785 | $ | 3,708,894,468 | $ | 2,709,788,111 | $ | 4,650,742,901 | |||||||||
|
| |||||||||||||||
Unrealized appreciation | $ 4,380,043 | $ | 38,733,733 | $ | 16,904,284 | $ | 52,444,801 | |||||||||
Unrealized depreciation | (6,071,434 | ) | (98,786,848 | ) | (49,562,294 | ) | (140,552,412) | |||||||||
|
| |||||||||||||||
Net unrealized appreciation (depreciation) | $ (1,691,391) | $ | (60,053,115 | ) | $ | (32,658,010 | ) | $ | (88,107,611) | |||||||
|
|
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of defaulted securities, foreign currency transactions, paydown losses, bond discounts and premiums, swaps and financial futures transactions.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the period ended April 30, 2018, were as follows:
Franklin Adjustable U.S. Government Securities Fund | Franklin Floating Rate Daily Access Fund | Franklin Low Duration Total Return Fund | Franklin Total Return Fund | |||||||||||||
Purchases | $ 39,280,809 | $ 770,583,199 | $1,010,270,453 | $3,702,658,765 | ||||||||||||
Sales | $143,498,414 | $1,010,906,604 | $1,013,867,060 | $3,729,557,572 |
7. Credit Risk and Defaulted Securities
At April 30, 2018, Franklin Floating Rate Daily Access Fund, Franklin Low Duration Total Return Fund and Franklin Total Return Fund had 69.7%, 21.9% and 17.8%, 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.
138 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Certain or all Funds held defaulted securities and/or other securities for which the income has been deemed uncollectible. 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. At April 30, 2018, the aggregate value of these securities was as follows:
Value | Percentage of Net Assets | |||||||
| ||||||||
Franklin Floating Rate Daily Access Fund | $ | 19,149,754 | 0.5% | |||||
Franklin Low Duration Total Return Fund | $ | 946,205 | 0.0% | a | ||||
Franklin Total Return Fund | $ | 4,890,000 | 0.1% | |||||
aRounds to less than 0.1% of net assets. |
8. Restricted Securities
Certain or all Funds invest in securities that are restricted under the Securities Act of 1933 (1933 Act). 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 April 30, 2018, investments in restricted securities, excluding securities exempt from registration under the 1933 Act deemed to be liquid, were as follows:
Principal Amount/ Shares | Issuer | Acquisition Date | Cost | Value | ||||||||
Franklin Low Duration Total Return Fund | ||||||||||||
12,326,925 | K2016470219 South Africa Ltd., A | 4/15/13 - 2/01/17 | $ | 92,078 | $ | 9,892 | ||||||
1,226,701 | K2016470219 South Africa Ltd., B | 2/01/17 | 911 | 984 | ||||||||
934,308 | K2016470219 South Africa Ltd., senior secured note, 144A, PIK, 3.00%, 12/31/22 | 4/15/13 - 12/29/17 | 1,555,488 | 4,625 | ||||||||
163,027 | K2016470260 South Africa Ltd., senior secured note, 144A, PIK, 25.00%, 12/31/22 | 2/01/17 - 12/29/17 | 158,489 | 22,558 | ||||||||
|
| |||||||||||
Total Restricted Securities (Value is 0.0%† of Net Assets) | $ | 1,806,966 | $ | 38,059 | ||||||||
|
| |||||||||||
Franklin Total Return Fund | ||||||||||||
28,762,824 | K2016470219 South Africa Ltd., A | 4/15/13 - 2/01/17 | $ | 221,469 | $ | 23,081 | ||||||
2,862,311 | K2016470219 South Africa Ltd., B | 2/01/17 | 2,125 | 2,297 | ||||||||
2,180,053 | K2016470219 South Africa Ltd., senior secured note, 144A, PIK, 3.00%, 12/31/22 | 4/15/13 - 12/29/17 | 3,717,690 | 10,791 | ||||||||
380,400 | K2016470260 South Africa Ltd., senior secured note, 144A, PIK, 25.00%, 12/31/22 | 2/01/17 - 12/29/17 | 369,808 | 52,637 | ||||||||
|
| |||||||||||
Total Restricted Securities (Value is 0.0%† of Net Assets) | $ | 4,311,092 | $ | 88,806 | ||||||||
|
|
†Rounds to less than 0.1% of net assets.
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.
franklintempleton.com | Semiannual Report | 139 |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
9. Unfunded Loan Commitments (continued)
At April 30, 2018, unfunded commitments were as follows:
Borrower | Unfunded Commitment | |||
| ||||
Franklin Floating Rate Daily Access Fund | ||||
BMC Software Finance, Inc., Non-Extended US Revolving Commitment | $13,901,796 | |||
Appvion, Inc., New Money Term Loan (DIP II) | 2,202,875 | |||
|
| |||
$16,104,671 | ||||
|
| |||
Franklin Low Duration Total Return Fund | ||||
BMC Software Finance, Inc., Non-Extended US Revolving Commitment | $ 2,343,156 | |||
|
| |||
Franklin Total Return Fund | ||||
BMC Software Finance, Inc., Non-Extended US Revolving Commitment | $ 5,118,379 | |||
|
|
10. Other Derivative Information
At April 30, 2018, the Funds’ investments in derivative contracts are reflected in the Statements of Assets and Liabilities as follows:
Asset Derivatives | Liability Derivatives | |||||||||||
Derivative Contracts Not Accounted for as Hedging Instruments | Statements of Assets and Liabilities Location | Fair Value | Statements of Assets and Liabilities Location | Fair Value | ||||||||
Franklin Floating Rate Daily Access Fund | ||||||||||||
Credit contracts | Variation margin on centrally cleared swap contracts | $ | — | Variation margin on centrally cleared swap contracts | $ | 889,217 | a | |||||
|
|
|
| |||||||||
Franklin Low Duration Total Return Fund | ||||||||||||
Interest rate contracts | Variation margin on futures contracts | $ | 127,092 | a | Variation margin on futures contracts | $ | 1,136,289 | a | ||||
Variation margin on centrally cleared swap contracts | — | Variation margin on centrally cleared swap contracts | 690,678 | a | ||||||||
Unrealized appreciation on OTC swap contracts | — | Unrealized depreciation on OTC swap contracts | 897,669 | |||||||||
Foreign exchange contracts | Unrealized appreciation on OTC forward exchange contracts | 707,749 | Unrealized depreciation on OTC forward exchange contracts | 627,884 | ||||||||
Credit contracts | Variation margin on centrally cleared swap contracts | 911,110 | a | Variation margin on centrally cleared swap contracts | 516,237 | a | ||||||
OTC swap contracts (Upfront payments) | 162,027 | OTC swap contracts (Upfront receipts) | 4,512,903 | |||||||||
Unrealized appreciation on OTC swap contracts | 612,336 | Unrealized depreciation on OTC swap contracts | 1,424,066 | |||||||||
Inflation contracts | Variation margin on centrally cleared swap contracts | 734,586 | a | Variation margin on centrally cleared swap contracts | — | |||||||
|
|
|
| |||||||||
Totals | $ | 3,254,900 | $ | 9,805,726 | ||||||||
|
|
|
|
140 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Asset Derivatives | Liability Derivatives | |||||||||||
Derivative Contracts Not Accounted for as Hedging Instruments | Statements of Assets and Liabilities Location | Fair Value | Statements of Assets and Liabilities Location | Fair Value | ||||||||
Franklin Total Return Fund | ||||||||||||
Interest rate contracts | Variation margin on futures contracts | $ | 1,397,625 | a | Variation margin on futures contracts | $ | 1,899,913 | a | ||||
Unrealized appreciation on OTC swap contracts | 892,958 | Unrealized depreciation on OTC swap contracts | 1,214,908 | |||||||||
Foreign exchange contracts | Unrealized appreciation on OTC forward exchange contracts | 1,451,959 | Unrealized depreciation on OTC forward exchange contracts | 2,375,349 | ||||||||
Credit contracts | Variation margin on centrally cleared swap contracts | 1,323,100 | a | Variation margin on centrally cleared swap contracts | 1,183,598 | a | ||||||
OTC swap contracts (Upfront payments) | 941,451 | OTC swap contracts (Upfront receipts) | 11,998,738 | |||||||||
Unrealized appreciation on OTC swap contracts | 1,572,561 | Unrealized depreciation on OTC swap contracts | 3,546,932 | |||||||||
Inflation contracts | Variation margin on centrally cleared swap contracts | 717,096 | a | Variation margin on centrally cleared swap contracts | — | |||||||
Unrealized appreciation on OTC swap contracts | 1,600,456 | Unrealized depreciation on OTC swap contracts | — | |||||||||
Value recovery instruments | Investments in securities, at value | 321,424 | b | |||||||||
|
|
|
| |||||||||
Totals | $ | 10,218,630 | $ | 22,219,438 | ||||||||
|
|
|
|
aThis amount reflects the cumulative appreciation (depreciation) of futures contracts and centrally cleared swap contracts as reported in the Statement of Investments. Only the variation margin receivable/payable at period end is separately reported within the Statements of Assets and Liabilities. Prior variation margin movements were recorded to cash upon receipt or payment.
bVRI are included in investments in securities, at value in the Statement of Assets and Liabilities.
franklintempleton.com | Semiannual Report | 141 |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
10. Other Derivative Information (continued)
For the period ended April 30, 2018, the effect of derivative contracts in the Funds’ Statements of Operations was as follows:
Derivative Contracts Not Accounted for as Hedging Instruments | Statements of Operations Location | Net Realized Gain (Loss) for the Period | Statements of Operations Location | Net Change in Unrealized Appreciation (Depreciation) for the Period | ||||||||
Net realized gain (loss) from: | Net change in unrealized appreciation (depreciation) on: | |||||||||||
Franklin Floating Rate Daily Access Fund | ||||||||||||
Credit contracts | Swap contracts | $ | (793,185) | Swap contracts | $ | 289,803 | ||||||
|
|
|
| |||||||||
Franklin Low Duration Total Return Fund | ||||||||||||
Interest rate contracts | Futures contracts | $ | (4,354,057) | Futures contracts | $ | 340,561 | ||||||
Swap contracts | (901,926) | Swap contracts | (1,188,076 | ) | ||||||||
Foreign exchange contracts | Forward exchange contracts | (1,028,249) | Forward exchange contracts | (658,753 | ) | |||||||
Credit contracts | Swap contracts | (1,295,376) | Swap contracts | 1,872,443 | ||||||||
Inflation contracts | Swap contracts | 616,140 | Swap contracts | 277,292 | ||||||||
|
|
|
| |||||||||
Totals | $ | (6,963,468) | $ | 643,467 | ||||||||
|
|
|
| |||||||||
Franklin Total Return Fund | ||||||||||||
Interest rate contracts | Futures contracts | $ | (23,735,641) | Futures contracts | $ | 5,530,071 | ||||||
Swap contracts | (2,511,233) | Swap contracts | (2,615,098 | ) | ||||||||
Foreign exchange contracts | Forward exchange contracts | (1,940,320) | Forward exchange contracts | (4,336,737 | ) | |||||||
Credit contracts | Swap contracts | (3,948,510) | Swap contracts | 3,015,993 | ||||||||
Inflation contracts | Swap contracts | 2,246,446 | Swap contracts | (386,579 | ) | |||||||
Value recovery instruments | Investments | — | Investments | 49,158 | a | |||||||
|
|
|
| |||||||||
Totals | $ | (29,889,258) | $ | 1,256,808 | ||||||||
|
|
|
|
aVRI are included in net change in unrealized appreciation (depreciation) on investments in the Statement of Operations.
For the period ended April 30, 2018, the average month end notional amount of futures contracts and swap contracts and the average month end contract value for forward exchange contracts, and average month end fair value of VRI were as follows:
Franklin Floating Rate Daily Access Fund | Franklin Low Duration Total Return Fund | Franklin Total Return Fund | ||||||||||||
Futures contracts | $ | — | $491,715,909 | $ | 632,559,893 | |||||||||
Swap contracts | 50,176,000 | 498,705,769 | 1,089,342,189 | |||||||||||
Forward exchange contracts | — | 115,656,239 | 445,841,852 | |||||||||||
VRI | — | — | 299,667 |
See Note 1(d) regarding derivative financial instruments.
142 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
At April 30, 2018, the Funds’ OTC derivative assets and liabilities are as follows:
Gross Amounts of Assets and Liabilities Presented in the Statements of Assets and Liabilities | ||||||||
Assetsa | Liabilitiesa | |||||||
Derivatives | ||||||||
Franklin Low Duration | ||||||||
Total Return Fund | ||||||||
Forward exchange contracts | $ 707,749 | $ 627,884 | ||||||
Swap contracts | 774,363 | 6,834,638 | ||||||
|
| |||||||
Total | $ 1,482,112 | $ 7,462,522 | ||||||
|
| |||||||
Franklin Total | ||||||||
Return Fund | ||||||||
Forward exchange contracts | $ 1,451,959 | $ 2,375,349 | ||||||
Swap contracts | 5,007,426 | 16,760,578 | ||||||
|
| |||||||
Total | $ 6,459,385 | $ 19,135,927 | ||||||
|
|
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.
At April 30, 2018, 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 Assets Presented in the Statements of Assets and Liabilities | Financial Instruments Available for Offset | Financial Instruments Collateral Receiveda | Cash Collateral Receivedb | Net Amount (Not less than zero) | ||||||||||||||||
Franklin Low Duration Total Return Fund | ||||||||||||||||||||
Counterparty | ||||||||||||||||||||
BZWS | $ 5,400 | $ (5,400) | $ — | $ — | $ — | |||||||||||||||
CITI | 409,669 | (409,669) | — | — | — | |||||||||||||||
DBAB | 345,486 | (136,534) | (180,493 | ) | — | 28,459 | ||||||||||||||
GSCO | 66,018 | (66,018) | — | — | — | |||||||||||||||
JPHQ | 597,821 | (597,821) | — | — | — | |||||||||||||||
MSCO | 57,718 | (8,308) | — | (49,410 | ) | — | ||||||||||||||
|
| |||||||||||||||||||
Total | $1,482,112 | $(1,223,750) | $(180,493) | $(49,410 | ) | $28,459 | ||||||||||||||
|
|
franklintempleton.com | Semiannual Report | 143 |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
10. Other Derivative Information (continued)
Amounts Not Offset in the Statements of Assets and Liabilities | ||||||||||||||||||||
Gross Amounts of Assets Presented in the Statements of Assets and Liabilities | Financial Instruments Available for Offset | Financial Instruments Collateral Received | Cash Collateral Receivedb | Net Amount (Not less than zero) | ||||||||||||||||
Franklin Total Return Fund | ||||||||||||||||||||
Counterparty | ||||||||||||||||||||
BOFA | $ 282,325 | $ (94,791) | $ — | $(187,534 | ) | $ — | ||||||||||||||
BZWS | 328,871 | (328,871) | — | — | — | |||||||||||||||
CITI | 1,845,929 | (1,845,929) | — | — | — | |||||||||||||||
DBAB | 563,270 | (404,705) | — | — | 158,565 | |||||||||||||||
GSCO | 13,047 | (13,047) | — | — | — | |||||||||||||||
HSBK | 9,096 | (9,096) | — | — | — | |||||||||||||||
JPHQ | 3,416,847 | (3,416,847) | — | — | — | |||||||||||||||
|
| |||||||||||||||||||
Total | $6,459,385 | $(6,113,286) | $ — | $(187,534 | ) | $158,565 | ||||||||||||||
|
|
At April 30, 2018, 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 Liabilities Presented in the Statements of Assets and Liabilities | Financial Instruments Available for Offset | Financial Instruments Collateral Pledged | Cash Collateral Pledgedb | Net Amount (Not less than zero) | ||||||||||||||||
Franklin Low Duration Total Return Fund | ||||||||||||||||||||
Counterparty | ||||||||||||||||||||
BZWS | $ 167,706 | $ (5,400) | $ — | $ — | $162,306 | |||||||||||||||
CITI | 2,079,671 | (409,669) | — | (1,660,000 | ) | 10,002 | ||||||||||||||
DBAB | 136,534 | (136,534) | — | — | — | |||||||||||||||
GSCO | 824,065 | (66,018) | — | (758,047 | ) | — | ||||||||||||||
JPHQ | 4,246,238 | (597,821) | — | — | — | |||||||||||||||
MSCO | 8,308 | (8,308) | — | (3,630,000 | ) | 18,417 | ||||||||||||||
|
| |||||||||||||||||||
$7,462,522 | $(1,223,750) | $ — | $(6,048,047 | ) | $190,725 | |||||||||||||||
|
|
144 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Amounts Not Offset in the Statements of Assets and Liabilities | ||||||||||||||||||||
Gross Amounts of | Financial Instruments Available for Offset | Financial Instruments Collateral Pledged | Cash Collateral Pledgedb | Net Amount (Not less than zero) | ||||||||||||||||
Franklin Total Return Fund | ||||||||||||||||||||
Counterparty | ||||||||||||||||||||
BOFA | $ | 94,791 | $ (94,791 | ) | $ — | $ | — | $ — | ||||||||||||
BZWS | 1,994,679 | (328,871 | ) | — | (1,665,808 | ) | — | |||||||||||||
CITI | 6,777,181 | (1,845,929 | ) | — | (4,931,252 | ) | — | |||||||||||||
DBAB | 404,705 | (404,705 | ) | — | — | — | ||||||||||||||
GSCO | 1,734,609 | (13,047 | ) | — | (1,721,562 | ) | — | |||||||||||||
HSBK | 15,111 | (9,096 | ) | — | (6,015 | ) | — | |||||||||||||
JPHQ | 8,114,851 | (3,416,847 | ) | — | (4,550,000 | ) | 148,004 | |||||||||||||
|
| |||||||||||||||||||
Total |
$ |
19,135,927 |
|
|
$(6,113,286 |
) |
|
$ — |
|
$ |
(12,874,637 |
) |
|
$148,004 |
| |||||
|
|
aAt April 30, 2018, the Fund received U.S. Treasury Notes as collateral for derivatives.
bIn 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 overcollateralization. Actual collateral received and/or pledged may be more than the amounts disclosed herein.
See Abbreviations on page 149.
11. 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 8, 2019. 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 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statements of Operations. During the period ended April 30, 2018, the Funds did not use the Global Credit Facility.
12. 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.
franklintempleton.com | Semiannual Report | 145 |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
12. Fair Value Measurements (continued)
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 April 30, 2018, 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:a | ||||||||||||||||
Mortgage-Backed Securities | $ | — | $ | 837,800,561 | $ | — | $ | 837,800,561 | ||||||||
Short Term Investments | 43,056,833 | — | — | 43,056,833 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | 43,056,833 | $ | 837,800,561 | $ | — | $ | 880,857,394 | ||||||||
|
| |||||||||||||||
Franklin Floating Rate Daily Access Fund | ||||||||||||||||
Assets: | ||||||||||||||||
Investments in Securities:a | ||||||||||||||||
Equity Investments:b | ||||||||||||||||
Oil & Gas Exploration & Production | $ | — | $ | 10,170,283 | $ | — | $ | 10,170,283 | ||||||||
All Other Equity Investments | 131,167,141 | — | — | 131,167,141 | ||||||||||||
Corporate Bonds | — | 15,392,338 | — | 15,392,338 | ||||||||||||
Senior Floating Rate Interests | — | 2,523,848,132 | — | 2,523,848,132 | ||||||||||||
Asset-Backed Securities | — | 326,899,138 | — | 326,899,138 | ||||||||||||
Short Term Investments | 557,096,213 | 88,409,936 | — | 645,506,149 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | 688,263,354 | $ | 2,964,719,827 | $ | — | $ | 3,652,983,181 | ||||||||
|
| |||||||||||||||
Other Financial Instruments: | ||||||||||||||||
Unfunded Loan Commitments | $ | — | $ | 254,801 | $ | — | $ | 254,801 | ||||||||
|
| |||||||||||||||
Liabilities: | ||||||||||||||||
Other Financial Instruments: | ||||||||||||||||
Swap Contracts. | $ | — | $ | 889,217 | $ | — | $ | 889,217 | ||||||||
|
|
146 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Franklin Low Duration Total Return Fund | ||||||||||||||||
Assets: | ||||||||||||||||
Investments in Securities:a | ||||||||||||||||
Equity Investments:b | ||||||||||||||||
Materials | $ | 25,049 | $ | 226 | $ | — | $ | 25,275 | ||||||||
Retailing | — | — | 10,876 | 10,876 | ||||||||||||
All Other Equity Investments | 63,932,068 | — | — | 63,932,068 | ||||||||||||
Corporate Bonds: | ||||||||||||||||
Retailing | — | 26,855,547 | 22,558 | 26,878,105 | ||||||||||||
All Other Corporate Bonds | — | 963,790,961 | — | 963,790,961 | ||||||||||||
Senior Floating Rate Interests | — | 110,490,210 | — | 110,490,210 | ||||||||||||
Foreign Government and Agency Securities | — | 39,128,799 | — | 39,128,799 | ||||||||||||
U.S. Government and Agency Securities | — | 435,924,652 | — | 435,924,652 | ||||||||||||
Asset-Backed Securities and Commercial | ||||||||||||||||
Mortgage-Backed Securities | — | 899,875,173 | — | 899,875,173 | ||||||||||||
Mortgage-Backed Securities | — | 27,786,815 | — | 27,786,815 | ||||||||||||
Municipal Bonds | — | 22,488,113 | — | 22,488,113 | ||||||||||||
Escrows and Litigation Trusts | — | — | —c | — | ||||||||||||
Short Term Investments | 92,365,460 | — | — | 92,365,460 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | 156,322,577 | $ | 2,526,340,496 | $ | 33,434 | $ | 2,682,696,507 | ||||||||
|
| |||||||||||||||
Other Financial Instruments: | ||||||||||||||||
Futures Contracts | $ | 127,092 | $ | — | $ | — | $ | 127,092 | ||||||||
Forward Exchange Contracts | — | 707,749 | — | 707,749 | ||||||||||||
Swap Contracts | — | 2,258,032 | — | 2,258,032 | ||||||||||||
Unfunded Loan Commitments | — | 32,044 | — | 32,044 | ||||||||||||
|
| |||||||||||||||
Total Other Financial Instruments | $ | 127,092 | $ | 2,997,825 | $ | — | $ | 3,124,917 | ||||||||
|
| |||||||||||||||
Liabilities: | ||||||||||||||||
Other Financial Instruments: | ||||||||||||||||
Futures Contracts | $ | 1,136,289 | $ | — | $ | — | $ | 1,136,289 | ||||||||
Forward Exchange Contracts | — | 627,884 | — | 627,884 | ||||||||||||
Swap Contracts | — | 3,528,650 | — | 3,528,650 | ||||||||||||
|
| |||||||||||||||
Total Other Financial Instruments | $ | 1,136,289 | $ | 4,156,534 | $ | — | $ | 5,292,823 | ||||||||
|
|
franklintempleton.com | Semiannual Report | 147 |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
12. Fair Value Measurements (continued)
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Franklin Total Return Fund | ||||||||||||||||
Assets: | ||||||||||||||||
Investments in Securities:a | ||||||||||||||||
Equity Investments:b | ||||||||||||||||
Consumer Services | $ | — | $ | — | $ | 280,415 | $ | 280,415 | ||||||||
Materials | 125,589 | 1,135 | — | 126,724 | ||||||||||||
Retailing | — | — | 25,378 | 25,378 | ||||||||||||
All Other Equity Investments | 164,245,587 | — | — | 164,245,587 | ||||||||||||
Corporate Bonds: | ||||||||||||||||
Retailing | — | 54,008,541 | 52,637 | 54,061,178 | ||||||||||||
All Other Corporate Bonds | — | 1,495,265,169 | — | 1,495,265,169 | ||||||||||||
Senior Floating Rate Interests | — | 123,632,817 | — | 123,632,817 | ||||||||||||
Foreign Government and Agency Securities | — | 85,177,821 | — | 85,177,821 | ||||||||||||
U.S. Government and Agency Securities | — | 515,978,039 | — | 515,978,039 | ||||||||||||
Asset-Backed Securities and Commercial | ||||||||||||||||
Mortgage-Backed Securities | — | 975,702,019 | 13,057 | 975,715,076 | ||||||||||||
Mortgage-Backed Securities | — | 1,011,346,808 | — | 1,011,346,808 | ||||||||||||
Municipal Bonds | — | 78,334,903 | — | 78,334,903 | ||||||||||||
Escrows and Litigation Trusts | — | — | —c | — | ||||||||||||
Short Term Investments | 68,893,179 | — | — | 68,893,179 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | 233,264,355 | $ | 4,339,447,252 | $ | 371,487 | $ | 4,573,083,094 | ||||||||
|
| |||||||||||||||
Other Financial Instruments: | ||||||||||||||||
Futures Contracts | $ | 1,397,625 | $ | — | $ | — | $ | 1,397,625 | ||||||||
Forward Exchange Contracts | — | 1,451,959 | — | 1,451,959 | ||||||||||||
Swap Contracts | — | 6,106,171 | — | 6,106,171 | ||||||||||||
Unfunded Loan Commitments | — | 69,996 | — | 69,996 | ||||||||||||
|
| |||||||||||||||
Total Other Financial Instruments | $ | 1,397,625 | $ | 7,628,126 | $ | — | $ | 9,025,751 | ||||||||
|
| |||||||||||||||
Liabilities: | ||||||||||||||||
Other Financial Instruments: | ||||||||||||||||
Futures Contracts | $ | 1,899,913 | $ | — | $ | — | $ | 1,899,913 | ||||||||
Forward Exchange Contracts | — | 2,375,349 | — | 2,375,349 | ||||||||||||
Swap Contracts | — | 5,945,438 | — | 5,945,438 | ||||||||||||
|
| |||||||||||||||
Total Other Financial Instruments | $ | 1,899,913 | $ | 8,320,787 | $ | — | $ | 10,220,700 | ||||||||
|
|
aFor detailed categories, see the accompanying Statement of Investments.
bIncludes common and preferred stocks, and management investment companies as well as other equity investments.
cIncludes securities determined to have no value at April 30, 2018.
A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial insutruments at the end of the period.
13. New Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities acquired at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities acquired at a discount, which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.
148 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
14. 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/Exchange | Currency | Selected Portfolio | ||||||||
BOFA | Bank of America Corp. | BRL | Brazilian Real | AGMC | Assured Guaranty Municipal Corp. | |||||
BZWS | Barclays Bank PLC | EUR | Euro | ARM | Adjustable Rate Mortgage | |||||
CITI | Citigroup, Inc. | JPY | Japanese Yen | CDO | Collateralized Debt Obligation | |||||
CME | Chicago Mercantile Exchange | MXN | Mexican Peso | CLO | Collateralized Loan Obligation | |||||
DBAB | Deutsche Bank AG | USD | United States Dollar | CMT | Constant Maturity Treasury Index | |||||
GSCO | The Goldman Sachs Group, Inc. | COF | Cost of Funds | |||||||
HSBK | HSBC Bank PLC | EDA | Economic Development Authority | |||||||
JPHQ | JP Morgan Chase & Co. | ETF | Exchange Traded Fund | |||||||
MSCO | Morgan Stanley | FRN | Floating Rate Note | |||||||
GDP | Gross Domestic Product | |||||||||
GO | General Obligation | |||||||||
IO | Interest Only | |||||||||
LIBOR | London InterBank Offered Rate | |||||||||
MBS | Mortgage-Backed Security | |||||||||
MFM | Multi-Family Mortgage | |||||||||
PIK | Payment-In-Kind | |||||||||
REIT | Real Estate Investment Trust | |||||||||
SF | Single Family | |||||||||
TBD | To be determined | |||||||||
T-Bill | Treasury Bill | |||||||||
T-Note | Treasury Note | |||||||||
VRI | Value Recovery Instruments |
Index | ||||
CDX.EM.Series number | CDX Emerging Markets 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 | |||
MCDX.NA.Series number | MCDX North America Index |
franklintempleton.com | Semiannual Report | 149 |
FRANKLIN INVESTORS SECURITIES TRUST
Special Meeting of Shareholders
MEETING OF SHAREHOLDERS: OCTOBER 30, 2017 AND RECONVENED ON DECEMBER 15, 2017 AND DECEMBER 29, 2017
(UNAUDITED)
A Special Meeting of Shareholders of Franklin Investors Securities Trust was held at the offices of Franklin Templeton Investments, One Franklin Parkway, San Mateo, California on October 30, 2017 and reconvened on December 15, 2017 and December 29, 2017. The purpose of the meeting was to elect Trustees of Franklin Investors Securities Trust and to vote on the following proposals for each Fund: to approve the use of a “manager of managers” structure whereby the Fund’s investment manager would be able to hire and replace subadvisers without shareholder approval and to approve an amended fundamental investment restriction regarding investments in commodities. At the meeting, (i) the following persons were elected by the shareholders to serve as Trustees of Franklin Investors Securities Trust: Harris J. Ashton, Terrence J. Checki, Mary C. Choksi, Edith E. Holiday, Gregory E. Johnson, Rupert H. Johnson, Jr., J. Michael Luttig, Larry D. Thompson, and John B. Wilson; and (ii) the proposals to use a “manager of managers” structure and to approve an amended fundamental investment restriction regarding investments in commodities were approved by shareholders of each Fund, except for Franklin Adjustable U.S. Government Securities Fund. No other business was transacted at the meeting.
In connection with the meeting, management is aware that some shareholders received from the proxy solicitor numerous calls and mailings that may have been distracting. Management is taking steps to ensure that, in the future, for any new shareholder meeting solicitations that occur, such activity is not repeated. Management apologizes for any inconvenience that may have been caused as a result of such calls and mailings.
The results of the voting at the meeting are as follows:
Proposal 1. | To elect a Board of Trustees: |
Name | For | Withheld | ||||||
Harris J. Ashton | 1,140,629,120 | 32,081,576 | ||||||
Terrence J. Checki | 1,140,321,742 | 32,388,956 | ||||||
Mary C. Choksi | 1,140,407,572 | 32,303,126 | ||||||
Edith E. Holiday | 1,108,315,463 | 64,395,237 | ||||||
Gregory E. Johnson | 1,141,429,086 | 31,281,610 | ||||||
Rupert H. Johnson, Jr. | 1,140,181,429 | 32,529,268 | ||||||
J. Michael Luttig | 1,140,612,578 | 32,098,122 | ||||||
Larry D. Thompson | 1,140,871,851 | 31,838,848 | ||||||
John B. Wilson | 1,141,487,184 | 31,223,513 |
Total Trust Shares Outstanding*: 1,818,967,134
* As of the record date.
150 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
SPECIAL MEETING OF SHAREHOLDERS
Proposal 2. | To approve the use of a “manager of managers” structure whereby the Fund’s investment manager would be able to hire and replace subadvisers without shareholder approval: |
Franklin Adjustable U.S. Government Securities Fund
Shares | ||||
For | 39,826,044 | |||
Against | 3,205,365 | |||
Abstain | 2,311,308 | |||
Broker Non-Votes | 30,028,215 | |||
Total Fund Shares Voted | 75,370,934 | |||
Total Fund Shares Outstanding* | 125,633,216 |
Franklin Floating Rate Daily Access Fund
Shares | ||||
For | 243,290,272 | |||
Against | 7,257,391 | |||
Abstain | 5,415,717 | |||
Broker Non-Votes | 144,713,604 | |||
Total Fund Shares Voted | 400,676,982 | |||
Total Fund Shares Outstanding* | 436,512,931 |
Franklin Low Duration Total Return Fund
Shares | ||||
For | 132,279,760 | |||
Against | 5,197,232 | |||
Abstain | 6,859,902 | |||
Broker Non-Votes | 21,783,108 | |||
Total Fund Shares Voted | 166,120,009 | |||
Total Fund Shares Outstanding* | 266,594,979 |
Franklin Total Return Fund
Shares | ||||
For | 168,186,368 | |||
Against | 11,905,018 | |||
Abstain | 9,209,163 | |||
Broker Non-Votes | 49,895,855 | |||
Total Fund Shares Voted | 239,196,399 | |||
Total Fund Shares Outstanding* | 461,502,868 |
Proposal 3. | To approve an amended fundamental investment restriction regarding investments in commodities: |
Franklin Adjustable U.S. Government Securities Fund
Shares | ||||
For | 40,233,929 | |||
Against | 2,302,824 | |||
Abstain | 2,805,966 | |||
Broker Non-Votes | 30,028,215 | |||
Total Fund Shares Voted | 75,370,934 | |||
Total Fund Shares Outstanding* | 125,633,216 |
franklintempleton.com | Semiannual Report | 151 |
FRANKLIN INVESTORS SECURITIES TRUST
SPECIAL MEETING OF SHAREHOLDERS
Franklin Floating Rate Daily Access Fund
Shares | ||||
For | 244,030,871 | |||
Against | 5,014,609 | |||
Abstain | 6,917,899 | |||
Broker Non-Votes | 144,713,604 | |||
Total Fund Shares Voted | 400,676,982 | |||
Total Fund Shares Outstanding* | 436,512,931 |
Franklin Low Duration Total Return Fund
Shares | ||||
For | 133,181,434 | |||
Against | 3,615,575 | |||
Abstain | 7,539,891 | |||
Broker Non-Votes | 21,783,108 | |||
Total Fund Shares Voted | 166,120,009 | |||
Total Fund Shares Outstanding* | 266,594,979 |
Franklin Total Return Fund
Shares | ||||
For | 170,238,568 | |||
Against | 7,831,326 | |||
Abstain | 11,230,650 | |||
Broker Non-Votes | 49,895,855 | |||
Total Fund Shares Voted | 239,196,399 | |||
Total Fund Shares Outstanding* | 461,502,868 |
152 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
Board Approval of Investment Management Agreements
FRANKLIN INVESTORS SECURITIES TRUST
Franklin Adjustable U.S. Government Securities Fund
Franklin Floating Rate Daily Access Fund
Franklin Low Duration Total Return Fund
Franklin Total Return Fund
(each a Fund)
At an in-person meeting held on February 27, 2018 (Meeting), the Board of Trustees (Board) of Franklin Investors Securities Trust (Trust), including a majority of the trustees who are not “interested persons” as defined in the Investment Company Act of 1940 (Independent Trustees), reviewed and approved the continuance of the investment management agreement between Franklin Advisers, Inc. (FAI) and the Trust, on behalf of each Fund and the investment sub-advisory agreement between FAI and Franklin Templeton Institutional, LLC (Sub-Adviser), an affiliate of FAI, on behalf of the Franklin Total Return Fund (each a Management Agreement) for an additional one-year period. The Independent Trustees received advice from and met separately with Independent Trustee counsel in considering whether to approve the continuation of each Management Agreement. Although the Management Agreements for the Funds were considered at the same Board meeting, the Board considered the information provided to it about the Funds together and with respect to each Fund separately as the Board deemed appropriate. FAI and the Sub-Adviser are each referred to herein as a Manager.
In considering the continuation of each Management Agreement, the Board reviewed and considered information provided by each Manager at the Meeting and throughout the year at meetings of the Board and its committees. The Board also reviewed and considered information provided in response to a detailed set of requests for information submitted to each Manager by Independent Trustee counsel on behalf of the Independent Trustees in connection with the annual contract renewal process. In addition, prior to the Meeting, the Independent Trustees held a telephonic contract renewal meeting at which the Independent Trustees conferred amongst themselves and Independent Trustee counsel about contract renewal matters. The Board reviewed and considered all of the factors it deemed relevant in approving the continuance of each Management Agreement, including, but not limited to: (i) the nature, extent and quality of the services provided by each Manager; (ii) the investment performance of each Fund; (iii) the costs of the services provided and profits realized by each
Manager and its affiliates from the relationship with each Fund; (iv) the extent to which economies of scale are realized as each Fund grows; and (v) whether fee levels reflect these economies of scale for the benefit of Fund investors.
In approving the continuance of each Management Agreement, the Board, including a majority of the Independent Trustees, determined that the terms of the Management Agreement are fair and reasonable and that the continuance of such Management Agreement is in the interests of the applicable Fund and its shareholders. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s determination.
Nature, Extent and Quality of Services
The Board reviewed and considered information regarding the nature, extent and quality of investment management services provided by each Manager and its affiliates to the Funds and their shareholders. This information included, among other things, the qualifications, background and experience of the senior management and investment personnel of each Manager; the structure of investment personnel compensation; oversight of third-party service providers; investment performance reports and related financial information for each Fund; reports on expenses, shareholder services, marketing support payments made to financial intermediaries and third party servicing arrangements; legal and compliance matters; risk controls; pricing and other services provided by each Manager and its affiliates; and management fees charged by each Manager and its affiliates to U.S. funds and other accounts, including management’s explanation of differences among accounts where relevant. The Board also reviewed and considered an annual report on payments made by Franklin Templeton Investments (FTI) or the Funds to financial intermediaries, as well as a memorandum relating to third-party servicing arrangements in response to a guidance update in 2016 from the U.S. Securities and Exchange Commission (SEC) relating to mutual fund distribution and sub-accounting fees. The Board noted management’s continuing efforts and expenditures in establishing effective business continuity plans and developing strategies to address areas of heightened concern in the mutual fund industry, such as cybersecurity and liquidity risk management. The Board also recognized management’s commitment to facilitating Board oversight of particular areas, including derivatives and payments to intermediaries, by enhanced reporting.
The Board also reviewed and considered the benefits provided to Fund shareholders of investing in a fund that is part of the
franklintempleton.com | Semiannual Report | 153 |
FRANKLIN INVESTORS SECURITIES TRUST
SHAREHOLDER INFORMATION
Franklin Templeton family of funds. The Board noted the financial position of Franklin Resources, Inc. (FRI), the Managers’ parent, and its commitment to the mutual fund business as evidenced by its continued introduction of new funds, reassessment of the fund offerings in response to the market environment and project initiatives and capital investments relating to the services provided to the Funds by the FTI organization.
Following consideration of such information, the Board was satisfied with the nature, extent and quality of services provided by each Manager and its affiliates to the Funds and their shareholders.
Fund Performance
The Board reviewed and considered the performance results of each Fund over various time periods ended December 31, 2017. The Board considered the performance returns for each Fund in comparison to the performance returns of mutual funds deemed comparable to the Fund included in a universe (Performance Universe) selected by Broadridge Financial Solutions, Inc. (Broadridge), an independent provider of investment company data. The Board received a description of the methodology used by Broadridge to select the mutual funds included in a Performance Universe. The Board also reviewed and considered Fund performance reports provided and discussions that occurred with portfolio managers at Board meetings throughout the year. A summary of each Fund’s performance results is below.
Franklin Adjustable U.S. Government Securities Fund - The Performance Universe for this Fund included the Fund and all retail and institutional ultra-short obligation funds. The Board noted that the Fund’s annualized income return for the one-, three-, five- and 10-year periods was above the median and in the first quintile (the best) of its Performance Universe. The Board also noted that the Fund’s annualized total return for the one-, three- and five-year periods was below the median and in the fifth quintile (the worst) of its Performance Universe, but for the 10-year period was above the median of its Performance Universe. The Board further noted management’s explanation that the Fund invests only in plain vanilla ARM securities issued or guaranteed by the U.S. government or its related agencies (such as Fannie Mae or Freddie Mac), so it tends to underperform its Broadridge peers, many of which invest in a broader range of asset types, during periods of decreasing risk premiums. Given the Fund’s income-oriented investment objective and management’s explanation, the Board concluded that the Fund’s performance was satisfactory.
Franklin Floating Rate Daily Access Fund - The Performance Universe for this Fund included the Fund and all retail and institutional loan participation funds. The Board noted that the Fund’s annualized income return for the one-year and 10-year periods was below the median of its Performance Universe, but for the three- and five-year periods was above the median of its Performance Universe. The Board also noted that the Fund’s annualized total return for the one-, three-, five- and 10-year periods was below the median of its Performance Universe. The Board further noted management’s explanation that the Fund’s overweight in loans rated in the upper tier and in the retail industry, as well as the Fund’s investments in loans with relatively shorter durations, contributed to the Fund’s underperformance. The Board also noted that management expects these investments to contribute to more favorable relative performance in the future. Given the Fund’s income-oriented investment objective and management’s explanation, the Board concluded that the Fund’s performance was acceptable. In doing so, the Board noted that the Fund’s annualized income return for the one- and 10-year periods, while below the median, exceeded 3.5% and 4.2%, respectively.
Franklin Low Duration Total Return Fund - The Performance Universe for this Fund included the Fund and all retail and institutional short investment-grade debt funds. The Board noted that the Fund’s annualized income return for the one-, three-, five- and 10-year periods was above the median of its Performance Universe. The Board also noted that the Fund’s annualized total return for the one- and three-year periods was below the median of its Performance Universe, but for the five-and 10-year periods was above the median of its Performance Universe. Given the Fund’s income-oriented investment objective, the Board concluded that the Fund’s performance was satisfactory. In doing so, the Board noted that Fund’s annualized total return for each of the one- and three-year periods, while below the median, outperformed the Fund’s benchmark and exceeded 1.0%.
Franklin Total Return Fund - The Performance Universe for this Fund included the Fund and all retail and institutional core plus bond funds. The Board noted that the Fund’s annualized income return for the one- and three-year periods was below the median of its Performance Universe, but for the five- and 10-year periods was above the median of its Performance Universe. The Board also noted that the Fund’s annualized total return for the one-, three-, five- and 10-year periods was below the median of its Performance Universe. The Board further noted management’s explanation that the Fund’s exposure to
154 | Semiannual Report | franklintempleton.com |
FRANKLIN INVESTORS SECURITIES TRUST
SHAREHOLDER INFORMATION
non-U.S. dollar currencies detracted from the Fund’s relative returns. The Board also noted management’s belief that the Fund’s peers may have greater exposure to high yield bonds and emerging market bonds, and less exposure to non-U.S. dollar currencies than the Fund. Given the Fund’s income-oriented investment objective and management’s explanation of its diversified strategy and actions underway to continue strengthening the investment process, the Board concluded that the Fund’s performance was acceptable. In doing so, the Board noted that the Fund’s annualized income return for each of the one- and three-year periods, while below the median, exceeded 2.3%. The Board further noted that the Fund’s annualized total return for the one-year period, while below the median, outperformed the Fund’s benchmark and exceeded 3.6%.
Comparative Fees and Expenses
The Board reviewed and considered information regarding each Fund’s actual total expense ratio and its various components, including, as applicable, management fees; transfer agent expenses; underlying fund expenses; Rule 12b-1 and non-Rule 12b-1 service fees; and other non-management fees. The Board also noted the quarterly and annual reports it receives on all marketing support payments made by FTI to financial intermediaries. The Board considered the actual total expense ratio and, separately, the contractual management fee rate, without the effect of fee waivers (Management Rate), if any, of each Fund in comparison to the median expense ratio and median Management Rate, respectively, of other mutual funds deemed comparable to and with a similar expense structure as the Fund selected by Broadridge (Expense Group). Broadridge fee and expense data is based upon information taken from each fund’s most recent annual report, which reflects historical asset levels that may be quite different from those currently existing, particularly in a period of market volatility. While recognizing such inherent limitation and the fact that expense ratios and Management Rates generally increase as assets decline and decrease as assets grow, the Board believed the independent analysis conducted by Broadridge to be an appropriate measure of comparative fees and expenses. The Broadridge Management Rate includes administrative charges, and the actual total expense ratio, for comparative consistency, was shown for Class A shares for funds with multiple classes of shares. The Board received a description of the methodology used by Broadridge to select the mutual funds included in an Expense Group.
Franklin Adjustable U.S. Government Securities Fund – The Expense Group for the Fund included the Fund and one other
ultra-short obligation fund, one short U.S. government fund, one short-intermediate investment-grade debt fund, and one short investment-grade debt fund. The Board noted the small size of the Expense Group and that the Management Rate for the Fund was equal to the median of its Expense Group, but its actual total expense ratio was slightly above the median of its Expense Group. The Board concluded that the Management Rate charged to the Fund is reasonable.
Franklin Floating Rate Daily Access Fund – The Expense Group for the Fund included the Fund and 13 other loan participation funds. The Board noted that the Management Rate and actual total expense ratio for the Fund were below the medians of its Expense Group. The Board concluded that the Management Rate charged to the Fund is reasonable.
Franklin Low Duration Total Return Fund – The Expense Group for the Fund included the Fund and nine other short investment-grade debt funds. The Board noted that the Management Rate and actual total expense ratio for the Fund were slightly above the medians of its Expense Group. The Board concluded that the Management Rate charged to the Fund is reasonable. In doing so, the Board noted that the actual total expense ratio for the Fund reflected a fee waiver from management.
Franklin Total Return Fund – The Expense Group for the Fund included the Fund and nine other core plus bond funds. The Board noted that the Management Rate and actual total expense ratio for the Fund were slightly above the medians of its Expense Group. The Board concluded that the Management Rate charged to the Fund is reasonable. In doing so, the Board noted that the Fund’s actual total expense ratio reflected a fee waiver from management and that the Sub-Adviser was paid by FAI out of the management fee FAI received from the Fund.
Profitability
The Board reviewed and considered information regarding the profits realized by each Manager and its affiliates in connection with the operation of each Fund. In this respect, the Board considered the Fund profitability analysis that addresses the overall profitability of FTI’s U.S. fund business, as well as its profits in providing investment management and other services to each of the individual funds during the 12-month period ended September 30, 2017, being the most recent fiscal year-end for FRI. The Board noted that although management continually makes refinements to its methodologies used in calculating profitability in response to organizational and product-related changes, the overall methodology has remained consistent with that used in the Funds’ profitability report
franklintempleton.com | Semiannual Report | 155 |
FRANKLIN INVESTORS SECURITIES TRUST
SHAREHOLDER INFORMATION
presentations from prior years. Additionally, Pricewaterhouse-Coopers LLP, auditor to Franklin Resources, Inc. and certain Franklin Templeton funds, has been engaged to periodically review and assess the allocation methodologies to be used solely by the Funds’ Board with respect to the profitability analysis.
The Board noted management’s belief that costs incurred in establishing the infrastructure necessary for the type of mutual fund operations conducted by each Manager and its affiliates may not be fully reflected in the expenses allocated to each Fund in determining its profitability, as well as the fact that the level of profits, to a certain extent, reflected operational cost savings and efficiencies initiated by management. The Board also noted management’s expenditures in improving shareholder services provided to the Funds, as well as the need to implement systems and meet additional regulatory and compliance requirements resulting from recent SEC and other regulatory requirements.
The Board also considered the extent to which each Manager and its affiliates might derive ancillary benefits from fund operations, including revenues generated from transfer agent services, potential benefits resulting from personnel and systems enhancements necessitated by fund growth, as well as increased leverage with service providers and counterparties. Based upon its consideration of all these factors, the Board concluded that the level of profits realized by each Manager and its affiliates from providing services to each Fund was not excessive in view of the nature, extent and quality of services provided to each Fund.
Economies of Scale
The Board reviewed and considered the extent to which each Manager may realize economies of scale, if any, as each Fund grows larger and whether the Fund’s management fee structure reflects any economies of scale for the benefit of shareholders. With respect to possible economies of scale, the Board noted the existence of management fee breakpoints, which operate generally to share any economies of scale with a Fund’s shareholders by reducing the Fund’s effective management fees as the Fund grows in size. The Board considered each Manager’s view that any analyses of potential economies of scale in managing a particular fund are inherently limited in light of the joint and common costs and investments each Manager incurs across the Franklin Templeton family of funds as a whole. The Board noted that the Franklin Adjustable U.S. Government Securities Fund had experienced a decrease in assets and would not be expected to demonstrate additional
economies of scale in the near term, but concluded that to the extent economies of scale may be realized by the Manager and its affiliates, each Fund’s management fee structure provided a sharing of benefits with the Fund and its shareholders as the Fund grows.
Conclusion
Based on its review, consideration and evaluation of all factors it believed relevant, including the above-described factors and conclusions, the Board unanimously approved the continuation of each Management Agreement for an additional one-year period.
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 US 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 US 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.
156 | Semiannual Report | franklintempleton.com |
|
Semiannual Report and Shareholder Letter | |
Franklin Investors Securities Trust | ||
Investment Manager | ||
Franklin Advisers, Inc. | ||
Subadvisor | ||
Franklin Templeton Institutional, LLC | ||
Distributor | ||
Franklin Templeton Distributors, Inc. | ||
(800) DIAL BEN® / 342-5236 | ||
franklintempleton.com | ||
Shareholder Services | ||
(800) 632-2301 |
Authorized for distribution only when accompanied or preceded by a summary prospectus and/or prospectus. Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. A prospectus contains this and other information; please read it carefully before investing.
To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.
© 2018 Franklin Templeton Investments. All rights reserved. | FIST2 S 06/18 |
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.
(c) N/A
(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. N/A | ||
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 Matthew T. Hinkle, 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 Matthew T. Hinkle, 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/MATTHEW T. HINKLE | |
Matthew T. Hinkle | ||
Chief Executive Officer – | ||
Finance and Administration | ||
Date | June 26, 2018 |
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/MATTHEW T. HINKLE | |
Matthew T. Hinkle | ||
Chief Executive Officer – | ||
Finance and Administration | ||
Date | June 26, 2018 |
By | /s/GASTON GARDEY | |
Gaston Gardey | ||
Chief Financial Officer and | ||
Chief Accounting Officer | ||
Date | June 26, 2018 |