UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-08034
Franklin Real Estate 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: _4/30
Date of reporting period: _10/31/2020
Item 1. Reports to Stockholders.
Semiannual
Report
and
Shareholder
Letter
Franklin
Real
Estate
Securities
Fund
A
Series
of
Franklin
Real
Estate
Securities
Trust
October
31,
2020
Sign
up
for
electronic
delivery
at
franklintempleton.com/edelivery
Internet
Delivery
of
Fund
Reports
Unless
You
Request
Paper
Copies
:
Effective
January
1,
2021,
as
permitted
by
the
SEC,
paper
copies
of
the
Fund’s
shareholder
reports
will
no
longer
be
sent
by
mail,
unless
you
specifically
request
them
from
the
Fund
or
your
financial
intermediary.
Instead,
the
reports
will
be
made
available
on
a
website,
and
you
will
be
notified
by
mail
each
time
a
report
is
posted
and
provided
with
a
website
link
to
access
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report.
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you
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elected
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reports
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will
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by
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encourage
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semiannual
report
1
Shareholder
Letter
Dear
Shareholder:
During
the
six
months
ended
October
31,
2020,
first-
and
second-quarter
2020
data
reported
during
the
period
indicated
that
the
U.S.
economy
contracted
in
response
to
the
novel
coronavirus
(COVID-19)
pandemic.
In
the
third
quarter,
the
economy
recovered
substantially
based
on
increased
business
and
residential
investment
and
consumer
spending.
Before
the
reporting
period,
the
U.S.
Federal
Reserve
(Fed),
in
its
efforts
to
support
U.S.
economic
activity,
lowered
the
federal
funds
rate
twice
in
March
2020
and
implemented
broad
quantitative
easing
measures
to
support
credit
markets.
During
the
reporting
period,
the
Fed
held
its
key
rate
unchanged
at
0.25%,
but
continued
quantitative
easing
and
adjusted
its
policy
in
August
2020
to
allow
more
flexibility
to
keep
interest
rates
low,
while
maintaining
a
2%
average
inflation
target.
U.S.
equity
prices
rose
considerably
during
the
period,
helped
by
monetary
and
fiscal
actions
and
optimism
about
the
economy,
which
propelled
valuations
to
all-time
highs
in
September
before
stocks
trended
lower
amid
renewed
investor
concerns.
In
this
environment,
U.S.
stocks,
as
measured
by
the
Standard
&
Poor’s
®
500
Index,
posted
a
strong
positive
total
return
for
the
six-month
period.
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.
In
addition,
Franklin
Real
Estate
Securities
Fund’s
semiannual
report
includes
more
detail
about
prevailing
conditions
and
a
discussion
about
investment
decisions
during
the
period.
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,
Edward
Perks,
CFA
President
and
Chief
Executive
Officer
–
Investment
Management
Franklin
Real
Estate
Securities
Trust
This
letter
reflects
our
analysis
and
opinions
as
of
October
31,
2020
,
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
CFA
®
is
a
trademark
owned
by
CFA
Institute.
franklintempleton.com
Semiannual
Report
2
Contents
Semiannual
Report
Franklin
Real
Estate
Securities
Fund
3
Performance
Summary
6
Your
Fund’s
Expenses
8
Financial
Highlights
and
Statement
of
Investments
9
Financial
Statements
15
Notes
to
Financial
Statements
18
Shareholder
Information
25
Visit
franklintempleton.com
for
fund
updates,
to
access
your
account,
or
to
find
helpful
financial
planning
tools.
3
franklintempleton.com
Semiannual
Report
SEMIANNUAL
REPORT
Franklin
Real
Estate
Securities
Fund
This
semiannual
report
for
Franklin
Real
Estate
Securities
Fund
covers
the
period
ended
October
31,
2020
.
Your
Fund’s
Goal
and
Main
Investments
The
Fund
seeks
to
maximize
total
return.
Under
normal
market
conditions,
the
Fund
invests
at
least
80%
of
its
net
assets
in
equity
securities
of
companies
operating
in
the
real
estate
industry
predominantly
in
the
U.S.,
including
real
estate
investment
trusts
(REITs)
and
companies
that
derive
at
least
half
of
their
assets
or
revenues
from
the
ownership,
construction,
management,
operation,
development
or
sale
of
commercial
or
residential
real
estate.
1
Performance
Overview
The
Fund’s
Class
A
shares
posted
a
+3.15%
cumulative
total
return
for
the
six
months
under
review.
In
comparison,
the
Fund’s
benchmark,
the
MSCI
U.S.
IMI
Real
Estate
25/50
Index,
which
tracks
the
large,
mid-
and
small-cap
segments
of
the
U.S.
REIT
universe,
posted
a
total
return
of
+2.42%.
2
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
.
Economic
and
Market
Overview
U.S.
equities,
as
measured
by
the
Standard
&
Poor’s
500
Index
(S&P
500
®
),
advanced
significantly
during
the
six
months
ended
October
31,
2020,
as
markets
continued
to
recover
from
the
disruption
caused
by
the
novel
coronavirus
(COVID-19)
pandemic.
The
nascent
equity
market
recovery
that
began
in
late
March
gained
momentum
during
the
period,
supported
by
monetary
and
fiscal
measures,
which
drove
stocks,
as
measured
by
the
S&P
500,
to
all-time
price
highs
in
early
September,
before
retreating
in
the
period’s
final
months.
The
U.S.
Federal
Reserve
(Fed)
continued
its
efforts
to
support
the
U.S.
economy
by
maintaining
the
federal
funds
target
rate
at
a
range
of
0.00%–0.25%,
expanding
quantitative
easing
measures
aimed
at
ensuring
credit
flows
to
borrowers
and
supporting
credit
markets
with
unlimited
amounts
of
bond
purchasing.
Furthermore,
the
Fed
signaled
that
interest
rates
would
potentially
remain
low,
even
if
inflation
persistently
exceeded
the
Fed’s
2%
target.
Pandemic-related
restrictions
implemented
prior
to
the
period
caused
stiff
economic
headwinds.
The
longest
U.S.
economic
expansion
in
history
ended
in
February
2020,
according
to
the
National
Bureau
of
Economic
Research,
and
the
country
slipped
into
a
deep
recession
with
second-
quarter
2020
gross
domestic
product
(GDP)
posting
a
record
annualized
decline.
Optimism
about
an
economic
rebound
amid
the
government’s
fiscal
and
monetary
stimulus,
along
with
rising
retail
sales
and
resilient
consumer
spending,
drove
a
sharp
equity
rally
throughout
much
of
the
summer.
Improving
economic
activity
led
third-quarter
GDP
to
Portfolio
Composition
10/31/20
%
of
Total
Net
Assets
Specialized
REITs
38.2%
Residential
REITs
15.7%
Industrial
REITs
14.4%
Retail
REITs
8.6%
Office
REITs
8.5%
Health
Care
REITs
6.8%
Hotel
&
Resort
REITs
3.0%
Diversified
REITs
2.5%
Real
Estate
Services
1.1%
Other
0.5%
Short-Term
Investments
&
Other
Net
Assets
0.7%
1.
A
REIT
is
a
type
of
real
estate
company
that
is
dedicated
to
owning
and
usually
operating
income-producing
real
estate
properties
such
as
apartments,
hotels,
industrial
properties,
office
buildings
or
shopping
centers.
Equity
REITs
generally
receive
income
from
rents
received,
are
generally
operated
by
experienced
property
management
teams
and
typically
concentrate
on
a
specific
geographic
region
or
property
type.
2.
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
13
.
Franklin
Real
Estate
Securities
Fund
4
franklintempleton.com
Semiannual
Report
expand
at
a
record
annualized
pace,
while
declining
jobless
claims
drove
the
unemployment
rate
from
a
pandemic
high
of
14.7%
in
April
to
6.9%
in
October.
3
Optimism
about
treatments
and
potential
vaccines
for
COVID-19
also
supported
stock
prices.
However,
stocks
declined
in
the
period’s
last
two
months
amid
investor
concerns
that
the
economic
recovery
was
stalling,
as
new
job
growth
slowed
and
unemployment
claims
remained
high.
Concerns
that
possible
new
restrictions
due
to
rising
COVID-19
cases
could
disrupt
the
economic
recovery,
the
government’s
lack
of
consensus
about
additional
stimulus
and
uncertainties
surrounding
the
upcoming
presidential
election
also
tempered
investor
enthusiasm.
Investment
Strategy
We
are
research-driven,
fundamental
investors.
Our
investment
strategy
is
centered
on
the
belief
that
unsynchronized
economic
activity
within
real
estate
sectors
provides
consistent,
attractive
return
opportunities
in
real
estate
markets.
When
selecting
investments
for
the
Fund’s
portfolio,
we
use
a
bottom-up
security
selection
process
that
incorporates
macro-level
views
in
the
evaluation
process.
In
our
portfolio
construction
process,
we
analyze
individual
stock
and
real
estate
market
fundamentals
and
provide
regional,
property
type
and
company-size
perspectives
in
identifying
local
cyclical
and
thematic
trends
that
highlight
investment
opportunities.
Manager’s
Discussion
During
the
six
months
under
review,
stock
selection
in
the
residential
sector
contributed
to
relative
performance,
led
by
American
Homes
4
Rent.
The
company
owns,
operates
and
develops
single-family
rental
housing
across
the
U.S.,
maintaining
a
portfolio
of
more
than
50,000
homes,
mostly
in
the
southeast
and
southwest
regions
of
the
country.
American
Homes
4
Rent
has
continued
to
benefit
from
demographic
shifts
driving
increased
demand
for
single
family
rentals
versus
a
backdrop
of
sustained
under-
production
of
detached
houses
dating
back
to
the
global
financial
crisis
more
than
a
decade
ago.
Under
COVID-19,
such
demand
trends
have
only
been
amplified,
namely
migration
from
urban
and
apartment
living.
The
result
has
been
the
company
experiencing
record
strength
in
operating
metrics
with
occupancy
approaching
historic
highs
and
strong
new
lease
spreads
during
the
third
quarter
of
2020.
Stock
selection
in
the
office
space
sector
also
enhanced
relative
results,
as
did
an
overweighting
in
the
industrial
property
sector.
Notable
contributors
from
industrial
property
included
Rexford
Industrial
Properties,
an
industrial
landlord
focused
exclusively
on
premier,
in-fill
properties
in
Southern
California.
Industrial
has
been
one
of
the
only
real
estate
subsectors
to
benefit
from
the
COVID-19
pandemic,
as
initial
lockdowns
forced
nearly
all
shopping
online,
generating
a
new
wave
of
demand
for
industrial
space
as
online
retailers
like
Amazon.com
(not
a
Fund
holding)
raced
to
lease
additional
needed
space
for
their
business.
As
a
result,
leasing
volumes
have
been
strong,
occupancy
has
been
resilient
and
asking
rents
have
continued
to
trend
upward.
The
Southern
California
submarket
in
which
Rexford
operates
especially
benefits
from
these
fundamentals,
given
land-supply
constraints
and
a
very
dense
population.
As
such,
Rexford
has
increased
its
occupancy
throughout
the
pandemic
to
near
record
levels,
is
back
to
collecting
nearly
all
rents,
and
is
achieving
impressive
double-digit
cash
spreads
on
leases.
Relative
contributions
in
the
data
centers
sector
were
led
by
Equinix.
The
company
owns,
develops
and
manages
more
than
200
data
centers
in
approximately
50
markets
worldwide,
providing
interconnection,
colocation,
and
managed
information
technology
(IT)
services
to
enterprises,
internet
service
companies
and
cloud
providers.
The
company
has
continued
to
benefit
from
the
immense
Top
10
Holdings
10/31/20
Company
Sub-Industry
%
of
Total
Net
Assets
a
a
Equinix
,
Inc.
8.6%
Specialized
REITs
Prologis,
Inc.
8.4%
Industrial
REITs
American
Tower
Corp.
7.4%
Specialized
REITs
Crown
Castle
International
Corp.
6.1%
Specialized
REITs
SBA
Communications
Corp.
5.7%
Specialized
REITs
Alexandria
Real
Estate
Equities,
Inc.
4.3%
Office
REITs
Extra
Space
Storage,
Inc.
4.1%
Specialized
REITs
Healthpeak
Properties,
Inc.
3.4%
Health
Care
REITs
Equity
LifeStyle
Properties,
Inc.
3.3%
Residential
REITs
American
Homes
4
Rent
3.3%
Residential
REITs
3.
Source:
Bureau
of
Labor
Statistics.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
Franklin
Real
Estate
Securities
Fund
5
franklintempleton.com
Semiannual
Report
tailwinds
with
respect
to
the
growth
in
cloud
computing,
enterprise
outsourcing
and
digital
content,
which
continue
to
drive
significant
demand
growth
for
Equinix’s
services
and
facilities.
Equinix
shares
rose
considerably
over
the
period
due
to
financial
results
outperforming
expectations.
Adjusted-
funds-from-operations
per-share
growth
guidance
for
2020
was
significantly
increased,
fueled
by
top-line
acceleration
across
both
interconnection
and
colocation.
In
contrast,
an
underweighting
and
stock
selection
in
the
real
estate
services
sector
detracted
from
relative
performance,
with
a
large
portion
of
the
negative
effects
coming
from
underweighted
allocations
or
lack
of
positions
in
stocks
that
performed
especially
well
during
the
volatile
period.
In
early
2020
we
established
a
relative
underweighting
to
CBRE,
the
largest
commercial
real
estate
services
company
in
the
world,
due
to
concerns
over
the
impact
of
COVID-19
and
economic
slowdown
on
transaction
volumes
and
leasing
activity.
Shares
of
the
company,
which
specializes
in
property
sales,
leasing,
and
management
for
a
wide
range
of
asset
types
and
values,
ended
up
rising
during
the
period
and
outperformed
the
broader
market
despite
the
pandemic-
related
national
lockdown,
which
brought
transaction
activity
essentially
to
a
halt.
An
underweighting
in
the
healthcare
property
sector
also
hampered
relative
results,
as
did
stock
selection
in
the
triple-net
leasing
and
shopping
centers
sectors.
Relative
performance
in
the
shopping
centers
sector
was
led
lower
by
our
investment
in
Regency
Centers.
Regency
is
an
owner
of
mostly
grocery
anchored
shopping
centers
located
in
affluent
and
densely
populated
trade
areas
across
the
U.S.
While
weak
fundamental
trends
have
persisted
for
retail
landlords
for
some
time
amid
the
increasing
percentage
of
online
consumer
spending,
the
company
had
fared
relatively
well,
owing
to
the
internet-resistant
nature
and
superior
quality
of
its
assets
relative
to
peers.
However,
the
advent
of
COVID-19
impacted
even
Regency,
as
the
ability
to
collect
rent
was
meaningly
affected
due
to
the
extended
closure
of
a
substantial
number
of
stores.
As
a
consequence,
financial
results
for
2020
have
been
significantly
impaired
and
future
tenant
fallout
remains
an
ongoing
concern.
Elsewhere,
other
relative
detractors
included
Kilroy
Realty.
Kilroy
is
a
West
Coast-focused
office
developer
and
landlord,
leasing
high-end
office
space
to
primarily
market
leading,
well-capitalized
technology
tenants.
Weak
U.S.
office
fundamentals
have
weighed
on
the
business,
with
the
pandemic
and
resulting
work-from-home
trends
causing
companies
to
reevaluate
their
long-term
needs
for
office
space.
Leasing
volumes
have
been
subdued
as
companies
find
themselves
in
a
“wait-and-see”
mode
for
more
clarity
post-pandemic.
Kilroy
operates
in
submarkets
that
have
been
hit
especially
hard,
generating
a
majority
of
its
net-
operating-income
from
San
Francisco
where
office
vacancy
has
reached
double-digits
and
asking
rents
have
slipped.
However,
seeing
that
many
IT
businesses
have
actually
performed
quite
well
through
this
period,
we
believe
Kilroy
is
poised
to
emerge
with
a
healthy
tenant
roster
and
attractive
real
estate
on
the
other
side
of
the
pandemic,
which
would
bode
favorably
for
rents
and
occupancy.
Thank
you
for
your
continued
participation
in
Franklin
Real
Estate
Securities
Fund.
We
look
forward
to
serving
your
future
investment
needs.
J.
Blair
Schmicker,
CFA
Co-Lead
Portfolio
Manager
Daniel
Scher
Co-Lead
Portfolio
Manager
The
foregoing
information
reflects
our
analysis,
opinions
and
portfolio
holdings
as
of
October
31,
2020
,
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.
Performance
Summary
as
of
October
31,
2020
Franklin
Real
Estate
Securities
Fund
6
franklintempleton.com
Semiannual
Report
The
performance
table
does
not
reflect
any
taxes
that
a
shareholder
would
pay
on
Fund
dividends,
capital
gain
distributions,
if
any,
or
any
realized
gains
on
the
sale
of
Fund
shares.
Total
return
reflects
reinvestment
of
the
Fund’s
dividends
and
capital
gain
distributions,
if
any,
and
any
unrealized
gains
or
losses.
Your
dividend
income
will
vary
depending
on
dividends
or
interest
paid
by
securities
in
the
Fund’s
portfolio,
adjusted
for
operating
expenses
of
each
class.
Capital
gain
distributions
are
net
profits
realized
from
the
sale
of
portfolio
securities.
Performance
as
of
10/31/20
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
5.50%
and
the
minimum
is
0%.
Class
A
:
5.50%
maximum
initial
sales
charge;
Advisor
Class:
no
sales
charges.
For
other
share
classes,
visit
franklintempleton.com.
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
.
Share
Class
Cumulative
Total
Return
1
Average
Annual
Total
Return
2
–
A
3
6-Month
+3.15%
-2.54%
1-Year
-13.07%
-17.85%
5-Year
+16.03%
+1.86%
10-Year
+104.76%
+6.82%
Advisor
6-Month
+3.27%
+3.27%
1-Year
-12.86%
-12.86%
5-Year
+17.52%
+3.28%
10-Year
+110.05%
+7.70%
See
page
7
for
Performance
Summary
footnotes.
Franklin
Real
Estate
Securities
Fund
Performance
Summary
7
franklintempleton.com
Semiannual
Report
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
concentration
in
real
estate
securities
involves
special
risks,
such
as
declines
in
the
value
of
real
estate
and
increased
susceptibility
to
adverse
economic
or
regulatory
developments
affecting
the
sector.
The
Fund’s
investments
in
REITs
involve
additional
risks;
since
REITs
typically
are
invested
in
a
limited
number
of
projects
or
in
a
particular
market
segment,
they
are
more
susceptible
to
adverse
developments
affecting
a
single
project
or
market
segment
than
more
broadly
diversified
investments.
Unexpected
events
and
their
aftermaths,
such
as
the
spread
of
deadly
diseases;
natural,
environmental
or
man-made
disasters;
financial,
political
or
social
disruptions;
terrorism
and
war;
and
other
tragedies
or
catastrophes,
can
cause
investor
fear
and
panic,
which
can
adversely
affect
the
economies
of
many
companies,
sectors,
nations,
regions
and
the
market
in
general,
in
ways
that
cannot
necessarily
be
foreseen.
The
Fund’s
prospectus
also
includes
a
description
of
the
main
investment
risks.
1.
Cumulative
total
return
represents
the
change
in
value
of
an
investment
over
the
periods
indicated.
2.
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.
3.
Prior
to
9/10/18,
these
shares
were
offered
at
a
higher
initial
sales
charge
of
5.75%,
thus
actual
returns
(with
sales
charges)
would
have
differed.
Average
annual
total
returns
(with
sales
charges)
have
been
restated
to
reflect
the
current
maximum
initial
sales
charge
of
5.50%.
4.
Figures
are
as
stated
in
the
Fund’s
current
prospectus
and
may
differ
from
the
expense
ratios
disclosed
in
the
Your
Fund’s
Expenses
and
Financial
Highlights
sections
in
this
report.
In
periods
of
market
volatility,
assets
may
decline
significantly,
causing
total
annual
Fund
operating
expenses
to
become
higher
than
the
figures
shown.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
Distributions
(5/1/20–10/31/20)
Share
Class
Net
Investment
Income
A
$0.1263
C
$0.0335
R6
$0.1780
Advisor
$0.1563
Total
Annual
Operating
Expenses
4
Share
Class
A
1.00%
Advisor
0.75%
Your
Fund’s
Expenses
Franklin
Real
Estate
Securities
Fund
8
franklintempleton.com
Semiannual
Report
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.
1.
Expenses
are
equal
to
the
annualized
expense
ratio
for
the
six-month
period
as
indicated
above—in
the
far
right
column—multiplied
by
the
simple
average
account
value
over
the
period
indicated,
and
then
multiplied
by
184/365
to
reflect
the
one-half
year
period.
2.
Reflects
expenses
after
fee
waivers
and
expense
reimbursements.
Does
not
include
acquired
fund
fees
and
expenses.
Actual
(actual
return
after
expenses)
Hypothetical
(5%
annual
return
before
expenses)
Share
Class
Beginning
Account
Value
5/1/20
Ending
Account
Value
10/31/20
Expenses
Paid
During
Period
5/1/20–10/31/20
1,2
Ending
Account
Value
10/31/20
Expenses
Paid
During
Period
5/1/20–10/31/20
1,2
a
Net
Annualized
Expense
Ratio
2
A
$1,000
$1,031.53
$5.06
$1,020.22
$5.03
0.99%
C
$1,000
$1,027.36
$8.89
$1,016.43
$8.84
1.74%
R6
$1,000
$1,033.87
$3.16
$1,022.10
$3.14
0.62%
Advisor
$1,000
$1,032.74
$3.79
$1,021.48
$3.77
0.74%
Franklin
Real
Estate
Securities
Trust
Financial
Highlights
Franklin
Real
Estate
Securities
Fund
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
9
a
Six
Months
Ended
October
31,
2020
(unaudited)
Year
Ended
April
30,
2020
2019
2018
2017
2016
Class
A
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
period)
Net
asset
value,
beginning
of
period
.....
$17.11
$21.69
$19.64
$22.40
$22.65
$21.49
Income
from
investment
operations
a
:
Net
investment
income
b
.............
0.17
0.33
0.39
0.37
0.24
0.48
c
Net
realized
and
unrealized
gains
(losses)
0.38
(1.41)
2.69
(0.79)
0.40
1.05
Total
from
investment
operations
........
0.55
(1.08)
3.08
(0.42)
0.64
1.53
Less
distributions
from:
Net
investment
income
..............
(0.13)
(0.28)
(0.37)
(0.38)
(0.45)
(0.37)
Net
realized
gains
.................
—
(3.22)
(0.66)
(1.96)
(0.44)
—
Total
distributions
...................
(0.13)
(3.50)
(1.03)
(2.34)
(0.89)
(0.37)
Net
asset
value,
end
of
period
..........
$17.53
$17.11
$21.69
$19.64
$22.40
$22.65
Total
return
d
.......................
3.15%
(6.96)%
16.32%
(2.66)%
2.92%
7.17%
Ratios
to
average
net
assets
e
Expenses
f
.........................
0.99%
g
1.00%
g
1.01%
g
1.11%
g
1.00%
g
1.00%
Net
investment
income
...............
1.84%
1.53%
1.89%
1.72%
1.04%
2.21%
c
Supplemental
data
Net
assets,
end
of
period
(000’s)
........
$270,402
$281,341
$338,260
$327,085
$333,601
$364,981
Portfolio
turnover
rate
................
8.45%
53.37%
21.85%
19.84%
39.66%
24.21%
a
The
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.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.11
per
share
related
to
income
received
in
the
form
of
special
dividends
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.71%.
d
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable,
and
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year.
f
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
g
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
Franklin
Real
Estate
Securities
Trust
Financial
Highlights
Franklin
Real
Estate
Securities
Fund
(continued)
franklintempleton.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
10
a
Six
Months
Ended
October
31,
2020
(unaudited)
Year
Ended
April
30,
2020
2019
2018
2017
2016
Class
C
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
period)
Net
asset
value,
beginning
of
period
.....
$16.12
$20.66
$18.77
$21.56
$21.86
$20.75
Income
from
investment
operations
a
:
Net
investment
income
b
.............
0.09
0.16
0.25
0.20
0.07
0.30
c
Net
realized
and
unrealized
gains
(losses)
0.35
(1.31)
2.54
(0.77)
0.38
1.02
Total
from
investment
operations
........
0.44
(1.15)
2.79
(0.57)
0.45
1.32
Less
distributions
from:
Net
investment
income
..............
(0.03)
(0.17)
(0.24)
(0.26)
(0.31)
(0.21)
Net
realized
gains
.................
—
(3.22)
(0.66)
(1.96)
(0.44)
—
Total
distributions
...................
(0.03)
(3.39)
(0.90)
(2.22)
(0.75)
(0.21)
Net
asset
value,
end
of
period
..........
$16.53
$16.12
$20.66
$18.77
$21.56
$21.86
Total
return
d
.......................
2.74%
(7.62)%
15.49%
(3.43)%
2.14%
6.40%
Ratios
to
average
net
assets
e
Expenses
f
.........................
1.74%
g
1.75%
g
1.76%
g
1.86%
g
1.75%
g
1.75%
Net
investment
income
...............
1.09%
0.78%
1.14%
0.97%
0.29%
1.46%
c
Supplemental
data
Net
assets,
end
of
period
(000’s)
........
$23,389
$28,634
$39,619
$61,867
$72,637
$82,147
Portfolio
turnover
rate
................
8.45%
53.37%
21.85%
19.84%
39.66%
24.21%
a
The
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.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.11
per
share
related
to
income
received
in
the
form
of
special
dividends
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
0.96%.
d
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable,
and
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year.
f
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
g
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
Franklin
Real
Estate
Securities
Trust
Financial
Highlights
Franklin
Real
Estate
Securities
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
11
a
Six
Months
Ended
October
31,
2020
(unaudited)
Year
Ended
April
30,
2020
2019
2018
2017
2016
Class
R6
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
period)
Net
asset
value,
beginning
of
period
.....
$17.39
$21.97
$19.87
$22.61
$22.83
$21.67
Income
from
investment
operations
a
:
Net
investment
income
b
.............
0.21
0.41
0.49
0.43
0.35
0.58
c
Net
realized
and
unrealized
gains
(losses)
0.39
(1.43)
2.72
(0.75)
0.41
1.05
Total
from
investment
operations
........
0.60
(1.02)
3.21
(0.32)
0.76
1.63
Less
distributions
from:
Net
investment
income
..............
(0.18)
(0.34)
(0.45)
(0.46)
(0.54)
(0.47)
Net
realized
gains
.................
—
(3.22)
(0.66)
(1.96)
(0.44)
—
Total
distributions
...................
(0.18)
(3.56)
(1.11)
(2.42)
(0.98)
(0.47)
Net
asset
value,
end
of
period
..........
$17.81
$17.39
$21.97
$19.87
$22.61
$22.83
Total
return
d
.......................
3.39%
(6.61)%
16.86%
(2.19)%
3.42%
7.66%
Ratios
to
average
net
assets
e
Expenses
before
waiver
and
payments
by
affiliates
..........................
0.70%
0.81%
0.80%
0.76%
0.55%
0.54%
Expenses
net
of
waiver
and
payments
by
affiliates
..........................
0.62%
f
0.60%
f
0.58%
f
0.60%
f
0.55%
f,g
0.54%
g
Net
investment
income
...............
2.30%
1.93%
2.32%
2.23%
1.49%
2.67%
c
Supplemental
data
Net
assets,
end
of
period
(000’s)
........
$12,402
$3,589
$3,699
$3,794
$2,422
$104,392
Portfolio
turnover
rate
................
8.45%
53.37%
21.85%
19.84%
39.66%
24.21%
a
The
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.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.11
per
share
related
to
income
received
in
the
form
of
special
dividends
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
2.17%.
d
Total
return
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year.
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
g
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Real
Estate
Securities
Trust
Financial
Highlights
Franklin
Real
Estate
Securities
Fund
(continued)
franklintempleton.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
12
a
Six
Months
Ended
October
31,
2020
(unaudited)
Year
Ended
April
30,
2020
2019
2018
2017
2016
Advisor
Class
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
period)
Net
asset
value,
beginning
of
period
.....
$17.35
$21.93
$19.85
$22.59
$22.83
$21.67
Income
from
investment
operations
a
:
Net
investment
income
b
.............
0.19
0.38
0.45
0.44
0.30
0.54
c
Net
realized
and
unrealized
gains
(losses)
0.39
(1.42)
2.71
(0.81)
0.41
1.04
Total
from
investment
operations
........
0.58
(1.04)
3.16
(0.37)
0.71
1.58
Less
distributions
from:
Net
investment
income
..............
(0.16)
(0.32)
(0.42)
(0.41)
(0.51)
(0.42)
Net
realized
gains
.................
—
(3.22)
(0.66)
(1.96)
(0.44)
—
Total
distributions
...................
(0.16)
(3.54)
(1.08)
(2.37)
(0.95)
(0.42)
Net
asset
value,
end
of
period
..........
$17.77
$17.35
$21.93
$19.85
$22.59
$22.83
Total
return
d
.......................
3.27%
(6.71)%
16.62%
(2.42)%
3.18%
7.44%
Ratios
to
average
net
assets
e
Expenses
f
.........................
0.74%
g
0.75%
g
0.76%
g
0.86%
g
0.75%
g
0.75%
Net
investment
income
...............
2.08%
1.78%
2.14%
1.97%
1.29%
2.46%
c
Supplemental
data
Net
assets,
end
of
period
(000’s)
........
$53,624
$65,889
$75,240
$71,000
$50,521
$22,346
Portfolio
turnover
rate
................
8.45%
53.37%
21.85%
19.84%
39.66%
24.21%
a
The
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.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.11
per
share
related
to
income
received
in
the
form
of
special
dividends
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.96%.
d
Total
return
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year.
f
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
g
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
Franklin
Real
Estate
Securities
Trust
Statement
of
Investments
(unaudited),
October
31,
2020
Franklin
Real
Estate
Securities
Fund
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
13
a
a
Country
Shares
a
Value
a
Common
Stocks
99.3%
Diversified
REITs
2.5%
Broadstone
Net
Lease,
Inc.,
A
............................
United
States
157,500
$
2,598,750
VEREIT,
Inc.
.........................................
United
States
1,053,898
6,534,168
9,132,918
Health
Care
REITs
6.8%
Healthcare
Realty
Trust,
Inc.
.............................
United
States
181,000
5,031,800
Healthpeak
Properties,
Inc.
..............................
United
States
448,855
12,105,619
Welltower
,
Inc.
.......................................
United
States
136,832
7,357,457
24,494,876
Hotel
&
Resort
REITs
3.0%
Host
Hotels
&
Resorts,
Inc.
..............................
United
States
260,644
2,731,549
MGM
Growth
Properties
LLC,
A
...........................
United
States
212,420
5,618,509
Summit
Hotel
Properties,
Inc.
............................
United
States
459,013
2,423,589
10,773,647
Hotels,
Resorts
&
Cruise
Lines
0.5%
Extended
Stay
America,
Inc.
.............................
United
States
160,223
1,818,531
Industrial
REITs
14.4%
Americold
Realty
Trust
.................................
United
States
174,448
6,320,251
Prologis,
Inc.
.........................................
United
States
304,179
30,174,557
Rexford
Industrial
Realty,
Inc.
............................
United
States
208,231
9,674,412
Terreno
Realty
Corp.
...................................
United
States
102,858
5,788,848
51,958,068
Office
REITs
8.5%
Alexandria
Real
Estate
Equities,
Inc.
.......................
United
States
101,027
15,307,611
Boston
Properties,
Inc.
.................................
United
States
55,207
3,997,539
Cousins
Properties,
Inc.
................................
United
States
250,111
6,372,828
Kilroy
Realty
Corp.
....................................
United
States
106,622
5,019,764
30,697,742
Real
Estate
Services
1.1%
a
CBRE
Group,
Inc.,
A
...................................
United
States
75,736
3,817,094
a
Residential
REITs
15.7%
American
Campus
Communities,
Inc.
......................
United
States
111,511
4,177,202
American
Homes
4
Rent,
A
..............................
United
States
419,052
11,846,600
AvalonBay
Communities,
Inc.
............................
United
States
75,885
10,557,880
Camden
Property
Trust
.................................
United
States
103,783
9,572,944
Equity
LifeStyle
Properties,
Inc.
...........................
United
States
202,533
11,987,928
UDR,
Inc.
...........................................
United
States
263,293
8,225,274
56,367,828
Retail
REITs
8.6%
Realty
Income
Corp.
...................................
United
States
200,429
11,596,822
Regency
Centers
Corp.
.................................
United
States
158,082
5,626,138
Retail
Properties
of
America,
Inc.,
A
........................
United
States
348,409
1,825,663
Simon
Property
Group,
Inc.
..............................
United
States
73,355
4,607,428
Spirit
Realty
Capital,
Inc.
................................
United
States
193,699
5,820,655
Weingarten
Realty
Investors
.............................
United
States
81,657
1,295,080
30,771,786
Specialized
REITs
38.2%
American
Tower
Corp.
..................................
United
States
115,138
26,441,442
Crown
Castle
International
Corp.
..........................
United
States
141,499
22,102,144
Equinix
,
Inc.
.........................................
United
States
42,368
30,981,176
Franklin
Real
Estate
Securities
Trust
Statement
of
Investments
(unaudited)
Franklin
Real
Estate
Securities
Fund
(continued)
franklintempleton.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
14
See
Abbreviations
on
page
24
.
a
a
Country
Shares
a
Value
a
Common
Stocks
(continued)
Specialized
REITs
(continued)
Extra
Space
Storage,
Inc.
...............................
United
States
128,361
$
14,883,458
Life
Storage,
Inc.
......................................
United
States
35,567
4,059,973
QTS
Realty
Trust,
Inc.,
A
................................
United
States
112,236
6,903,636
SBA
Communications
Corp.
.............................
United
States
71,137
20,656,051
Weyerhaeuser
Co.
....................................
United
States
420,388
11,472,388
137,500,268
Total
Common
Stocks
(Cost
$279,387,796)
.....................................
357,332,758
Short
Term
Investments
0.3%
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Money
Market
Funds
0.3%
b,c
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
........
United
States
1,043,865
1,043,865
Total
Money
Market
Funds
(Cost
$1,043,865)
...................................
1,043,865
Total
Short
Term
Investments
(Cost
$1,043,865
)
.................................
1,043,865
a
Total
Investments
(Cost
$280,431,661)
99.6%
...................................
$358,376,623
Other
Assets,
less
Liabilities
0.4%
.............................................
1,440,432
Net
Assets
100.0%
...........................................................
$359,817,055
a
Non-income
producing.
b
See
Note
3(f)
regarding
investments
in
affiliated
management
investment
companies.
c
The
rate
shown
is
the
annualized
seven-day
effective
yield
at
period
end.
Franklin
Real
Estate
Securities
Trust
Financial
Statements
Statement
of
Assets
and
Liabilities
October
31,
2020
(unaudited)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
15
Franklin
Real
Estate
Securities
Fund
Assets:
Investments
in
securities:
Cost
-
Unaffiliated
issuers
...................................................................
$279,387,796
Cost
-
Non-controlled
affiliates
(Note
3
f
)
........................................................
1,043,865
Value
-
Unaffiliated
issuers
..................................................................
$357,332,758
Value
-
Non-controlled
affiliates
(Note
3
f
)
........................................................
1,043,865
Receivables:
Investment
securities
sold
...................................................................
2,094,989
Capital
shares
sold
........................................................................
151,699
Dividends
...............................................................................
155,447
European
Union
tax
reclaims
................................................................
44,379
Other
assets
..............................................................................
166
Total
assets
..........................................................................
360,823,303
Liabilities:
Payables:
Capital
shares
redeemed
...................................................................
692,684
Management
fees
.........................................................................
168,203
Distribution
fees
..........................................................................
82,098
Transfer
agent
fees
........................................................................
58,426
Trustees'
fees
and
expenses
.................................................................
1,557
Accrued
expenses
and
other
liabilities
...........................................................
3,280
Total
liabilities
.........................................................................
1,006,248
Net
assets,
at
value
.................................................................
$359,817,055
Net
assets
consist
of:
Paid-in
capital
.............................................................................
$267,898,080
Total
distributable
earnings
(losses)
.............................................................
91,918,975
Net
assets,
at
value
.................................................................
$359,817,055
Franklin
Real
Estate
Securities
Fund
Class
A:
Net
assets,
at
value
.......................................................................
$270,402,259
Shares
outstanding
........................................................................
15,424,285
Net
asset
value
per
share
a
..................................................................
$17.53
Maximum
offering
price
per
share
(net
asset
value
per
share
÷
94.50%)
................................
$18.55
Class
C:
Net
assets,
at
value
.......................................................................
$23,388,574
Shares
outstanding
........................................................................
1,415,007
Net
asset
value
and
maximum
offering
price
per
share
a
.............................................
$16.53
Class
R6:
Net
assets,
at
value
.......................................................................
$12,401,737
Shares
outstanding
........................................................................
696,521
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$17.81
Advisor
Class:
Net
assets,
at
value
.......................................................................
$53,624,485
Shares
outstanding
........................................................................
3,017,646
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$17.77
a
Redemption
price
is
equal
to
net
asset
value
less
contingent
deferred
sales
charges,
if
applicable.
Franklin
Real
Estate
Securities
Trust
Financial
Statements
Statement
of
Operations
for
the
six
months
ended
October
31,
2020
(unaudited)
franklintempleton.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
16
Franklin
Real
Estate
Securities
Fund
Investment
income:
Dividends:
Unaffiliated
issuers
........................................................................
$5,549,299
Expenses:
Management
fees
(Note
3
a
)
...................................................................
1,007,547
Distribution
fees:
(Note
3c
)
Class
A
................................................................................
361,828
Class
C
................................................................................
136,888
Transfer
agent
fees:
(Note
3e
)
Class
A
................................................................................
218,949
Class
C
................................................................................
20,681
Class
R6
...............................................................................
6,307
Advisor
Class
............................................................................
47,937
Custodian
fees
(Note
4
)
......................................................................
1,878
Reports
to
shareholders
......................................................................
36,785
Registration
and
filing
fees
....................................................................
43,939
Professional
fees
...........................................................................
40,785
Trustees'
fees
and
expenses
..................................................................
13,677
Other
....................................................................................
8,883
Total
expenses
.........................................................................
1,946,084
Expense
reductions
(Note
4
)
...............................................................
(6)
Expenses
waived/paid
by
affiliates
(Note
3
f
and
3
g
)
..............................................
(6,719)
Net
expenses
.........................................................................
1,939,359
Net
investment
income
................................................................
3,609,940
Realized
and
unrealized
gains
(losses):
Net
realized
gain
(loss)
from:
Investments:
Unaffiliated
issuers
......................................................................
4,162,948
Net
change
in
unrealized
appreciation
(depreciation)
on:
Investments:
Unaffiliated
issuers
......................................................................
5,777,782
Translation
of
other
assets
and
liabilities
denominated
in
foreign
currencies
..............................
4,362
Net
change
in
unrealized
appreciation
(depreciation)
............................................
5,782,144
Net
realized
and
unrealized
gain
(loss)
............................................................
9,945,092
Net
increase
(decrease)
in
net
assets
resulting
from
operations
..........................................
$13,555,032
Franklin
Real
Estate
Securities
Trust
Financial
Statements
Statement
of
Changes
in
Net
Assets
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
17
Franklin
Real
Estate
Securities
Fund
Six
Months
Ended
October
31,
2020
(unaudited)
Year
Ended
April
30,
2020
Increase
(decrease)
in
net
assets:
Operations:
Net
investment
income
.................................................
$3,609,940
$6,987,939
Net
realized
gain
(loss)
.................................................
4,162,948
88,113,924
Net
change
in
unrealized
appreciation
(depreciation)
...........................
5,782,144
(124,359,796)
Net
increase
(decrease)
in
net
assets
resulting
from
operations
................
13,555,032
(29,257,933)
Distributions
to
shareholders:
Class
A
.............................................................
(2,013,143)
(53,087,663)
Class
C
.............................................................
(50,191)
(5,689,513)
Class
R6
............................................................
(114,817)
(613,270)
Advisor
Class
........................................................
(532,865)
(12,742,475)
Total
distributions
to
shareholders
..........................................
(2,711,016)
(72,132,921)
Capital
share
transactions:
(Note
2
)
Class
A
.............................................................
(18,083,443)
17,883,273
Class
C
.............................................................
(6,128,673)
(2,965,210)
Class
R6
............................................................
8,445,959
833,944
Advisor
Class
........................................................
(14,713,463)
8,273,000
Total
capital
share
transactions
............................................
(30,479,620)
24,025,007
Net
increase
(decrease)
in
net
assets
...................................
(19,635,604)
(77,365,847)
Net
assets:
Beginning
of
period
.....................................................
379,452,659
456,818,506
End
of
period
..........................................................
$359,817,055
$379,452,659
Franklin
Real
Estate
Securities
Trust
Notes
to
Financial
Statements
(unaudited)
Franklin
Real
Estate
Securities
Fund
18
franklintempleton.com
Semiannual
Report
1.
Organization
and
Significant
Accounting
Policies
Franklin
Real
Estate
Securities
Trust (Trust)
is
registered
under
the
Investment
Company
Act
of
1940
(1940
Act)
as
an
open-end
management
investment
company,
consisting
of
one
fund, Franklin
Real
Estate
Securities
Fund
(Fund)
and
applies
the
specialized
accounting
and
reporting
guidance
in
U.S.
Generally
Accepted
Accounting
Principles
(U.S.
GAAP).
The
Fund
offers
four
classes
of
shares:
Class A,
Class C,
Class
R6
and
Advisor
Class.
Class
C
shares
automatically
convert
to
Class
A
shares
after
they
have
been
held
for
10
years.
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.
The
following
summarizes
the Fund's
significant
accounting
policies.
a.
Financial
Instrument
Valuation
The
Fund's
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
Fund
calculates
the
net
asset
value
(NAV)
per
share
each business
day as
of
4
p.m.
Eastern
time
or
the
regularly
scheduled
close
of
the
New
York
Stock
Exchange
(NYSE),
whichever
is
earlier.
Under
compliance
policies
and
procedures
approved
by
the
Fund's
Board
of
Trustees
(the
Board),
the Fund's
administrator
has
responsibility
for
oversight
of
valuation,
including
leading
the
cross-functional
Valuation
Committee
(VC).
The
Fund
may
utilize
independent
pricing
services,
quotations
from
securities
and
financial
instrument
dealers,
and
other
market
sources
to
determine
fair
value.
Equity
securities
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.
Over-the-counter
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.
Investments
in open-end mutual
funds
are
valued
at
the
closing
NAV.
The
Fund
has
procedures
to
determine
the
fair
value
of
financial
instruments
for
which
market
prices
are
not
reliable
or
readily
available.
Under
these
procedures,
the Fund
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.
b.
Income
and
Deferred
Taxes
It
is the Fund's
policy
to
qualify
as
a
regulated
investment
company
under
the
Internal
Revenue
Code. The 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
Fund
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 it
invests.
Foreign
taxes,
if
any,
are
recorded
based
on
the
tax
regulations
and
rates
that
exist
in
the
foreign
markets
in
which
the
Fund
invests.
When
a
capital
gain
tax
is
determined
to
apply,
the
Fund
records
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, the
Fund
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
Statement
of
Operations
and
any
related
receivable,
if
any,
is
reflected
as
European
Union
Franklin
Real
Estate
Securities
Trust
Notes
to
Financial
Statements
(unaudited)
19
franklintempleton.com
Semiannual
Report
Franklin
Real
Estate
Securities
Fund
(continued)
tax
reclaims
in
the
Statement
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
Fund,
if
any,
reduce
the
amounts
of
foreign
taxes
Fund
shareholders
can
use
as
tax
credits
in
their
individual
income
tax
returns.
The
Fund
may
recognize
an
income
tax
liability
related
to
its
uncertain
tax
positions
under
U.S.
GAAP
when
the
uncertain
tax
position
has
a
less
than
50%
probability
that
it
will
be
sustained
upon
examination
by
the
tax
authorities
based
on
its
technical
merits.
As
of
October
31,
2020,
the
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.
c.
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.
Estimated
expenses
are
accrued
daily.
Dividend
income
is
recorded
on
the
ex-dividend
date.
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.
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.
Distributions
received
by
the
Fund
from
certain
securities
may
be
a
return
of
capital
(ROC).
Such
distributions
reduce
the
cost
basis
of
the
securities,
and
any
distributions
in
excess
of
the
cost
basis
are
recognized
as
capital
gains.
For
U.S.
Real
Estate
Investment
Trust
(REIT)
securities,
the
Fund
records
ROC
estimates,
if
any,
on
the
ex-dividend
date
and
are
adjusted
once
actual
tax
designations
are
known.
d.
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.
e.
Guarantees
and
Indemnifications
Under
the
Fund's
organizational
documents,
its
officers
and
trustees
are
indemnified
by
the
Fund
against
certain
liabilities
arising
out
of
the
performance
of
their
duties
to
the
Fund.
Additionally,
in
the
normal
course
of
business,
the
Fund,
enters
into
contracts
with
service
providers
that
contain
general
indemnification
clauses.
The
Fund's
maximum
exposure
under
these
arrangements
is
unknown
as
this
would
involve
future
claims
that
may
be
made
against
the
Fund
that
have
not
yet
occurred.
Currently,
the
Fund
expects
the
risk
of
loss
to
be
remote.
1.
Organization
and
Significant
Accounting
Policies
(continued)
b.
Income
and
Deferred
Taxes
(continued)
Franklin
Real
Estate
Securities
Trust
Notes
to
Financial
Statements
(unaudited)
20
franklintempleton.com
Semiannual
Report
Franklin
Real
Estate
Securities
Fund
(continued)
2.
Shares
of
Beneficial
Interest
At
October
31,
2020,
there
were
an
unlimited
number
of
shares
authorized
(without
par
value).
Transactions
in
the
Fund’s
shares
were
as
follows:
3.
Transactions
with
Affiliates
Franklin
Resources,
Inc.
is
the
holding
company
for
various
subsidiaries
that
together
are
referred
to
as
Franklin
Templeton.
Certain
officers
and
trustees
of
the
Trust
are
also
officers
and/or
directors
of
the
following
subsidiaries:
Six
Months
Ended
October
31,
2020
Year
Ended
April
30,
2020
Shares
Amount
Shares
Amount
Class
A
Shares:
Shares
sold
a
...................................
948,338
$17,275,466
1,734,243
$36,930,245
Shares
issued
in
reinvestment
of
distributions
..........
104,454
1,939,666
2,619,911
51,380,135
Shares
redeemed
...............................
(2,070,234)
(37,298,575)
(3,505,277)
(70,427,107)
Net
increase
(decrease)
..........................
(1,017,442)
$(18,083,443)
848,877
$17,883,273
Class
C
Shares:
Shares
sold
...................................
67,763
$1,161,498
284,507
$5,733,640
Shares
issued
in
reinvestment
of
distributions
..........
2,775
49,408
301,810
5,576,622
Shares
redeemed
a
..............................
(432,353)
(7,339,579)
(726,988)
(14,275,472)
Net
increase
(decrease)
..........................
(361,815)
$(6,128,673)
(140,671)
$(2,965,210)
Class
R6
Shares:
Shares
sold
...................................
573,128
$9,973,597
89,781
$1,958,989
Shares
issued
in
reinvestment
of
distributions
..........
2,630
49,517
30,792
613,270
Shares
redeemed
...............................
(85,585)
(1,577,155)
(82,617)
(1,738,315)
Net
increase
(decrease)
..........................
490,173
$8,445,959
37,956
$833,944
Advisor
Class
Shares:
Shares
sold
...................................
456,914
$8,343,665
873,661
$18,960,081
Shares
issued
in
reinvestment
of
distributions
..........
18,244
341,925
423,994
8,426,467
Shares
redeemed
...............................
(1,255,208)
(23,399,053)
(930,221)
(19,113,548)
Net
increase
(decrease)
..........................
(780,050)
$(14,713,463)
367,434
$8,273,000
a
May
include
a
portion
of
Class
C
shares
that
were
automatically
converted
to
Class
A.
Subsidiary
Affiliation
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
Franklin
Real
Estate
Securities
Trust
Notes
to
Financial
Statements
(unaudited)
21
franklintempleton.com
Semiannual
Report
Franklin
Real
Estate
Securities
Fund
(continued)
a.
Management
Fees
The
Fund
pays
an
investment
management
fee
to
FT
Institutional
based
on
the
average
daily
net
assets
of
the
Fund
as
follows:
For
the
period
ended
October
31,
2020,
the
annualized
gross
effective
investment
management
fee
rate
was
0.514%
of
the
Fund’s
average
daily
net
assets.
b.
Administrative
Fees
Under
an
agreement
with
FT
Institutional,
FT
Services
provides
administrative
services
to
the
Fund.
The
fee
is
paid
by
FT
Institutional
based
on
the
Fund’s
average
daily
net
assets,
and
is
not
an
additional
expense
of
the
Fund.
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
Fund’s
Class A reimbursement
distribution
plan,
the
Fund
reimburses
Distributors
for
costs
incurred
in
connection
with
the
servicing,
sale
and
distribution
of
the
Fund's
shares
up
to
the
maximum
annual
plan
rate.
Under
the
Class
A
reimbursement
distribution
plan,
costs
exceeding
the
maximum
for
the
current
plan
year
cannot
be
reimbursed
in
subsequent
periods.
In
addition,
under
the
Fund’s
Class C
compensation
distribution
plan,
the
Fund
pays
Distributors
for
costs
incurred
in
connection
with
the
servicing,
sale
and
distribution
of
the
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
rate,
is
February
1
through
January
31.
The
maximum
annual
plan
rates,
based
on
the
average
daily
net
assets,
for
each
class,
are
as
follows:
d.
Sales
Charges/Underwriting
Agreements
Front-end
sales
charges
and
contingent
deferred
sales
charges
(CDSC)
do
not
represent
expenses
of
the
Fund.
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
Fund
of
the
following
commission
transactions
related
to
the
sales
and
redemptions
of
the
Fund's
shares
for
the
period:
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%
In
excess
of
$15
billion
Class
A
....................................................................................
0.25%
Class
C
....................................................................................
1.00%
Sales
charges
retained
net
of
commissions
paid
to
unaffiliated
brokers/dealers
..............................
$9,951
CDSC
retained
..............................................................................
$4,233
3.
Transactions
with
Affiliates
(continued)
Franklin
Real
Estate
Securities
Trust
Notes
to
Financial
Statements
(unaudited)
22
franklintempleton.com
Semiannual
Report
Franklin
Real
Estate
Securities
Fund
(continued)
e.
Transfer
Agent
Fees
Each
class
of
shares pays
transfer
agent
fees
to
Investor
Services
for
its
performance
of
shareholder
servicing
obligations.
The
fees
are
based
on
an
annualized
asset
based
fee
of
0.02%
plus
a
transaction
based
fee.
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
October
31,
2020,
the
Fund
paid
transfer
agent
fees
of
$293,874,
of
which $155,796
was
retained
by
Investor
Services.
f.
Investments
in
Affiliated
Management
Investment
Companies
The
Fund
invests
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
Fund
are
waived
on
assets
invested
in
the
affiliated
management
investment
companies,
as
noted
in
the
Statement
of
Operations,
in
an
amount
not
to
exceed
the
management
and
administrative
fees
paid
directly
or
indirectly
by
each
affiliate.
During
the
period
ended
October
31,
2020,
the
Fund
held
investments
in
affiliated
management
investment
companies
as
follows:
g.
Waiver
and
Expense
Reimbursements
Investor
Services
has
contractually
agreed
in
advance
to
waive
or
limit
its
fees
so
that
the
Class
R6
transfer
agent
fees
do
not
exceed
0.03%
based
on
the
average
net
assets
of
the
class
until
August
31,
2021.
4.
Expense
Offset
Arrangement
The Fund has
entered
into
an
arrangement
with
its
custodian
whereby
credits
realized
as
a
result
of
uninvested
cash
balances
are
used
to
reduce
a
portion
of
the
Fund's
custodian
expenses.
During
the
period
ended
October
31,
2020,
the
custodian
fees
were
reduced
as
noted
in
the
Statement
of
Operations.
a
Value
at
Beginning
of
Period
Purchases
Sales
Realized
Gain
(Loss)
Net
Change
in
Unrealized
Appreciation
(Depreciation)
Value
at
End
of
Period
Number
of
Shares
Held
at
End
of
Period
Investment
Income
a
a
a
a
a
a
a
a
a
Franklin
Real
Estate
Securities
Fund
Non-Controlled
Affiliates
Dividends
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
.........
$3,139,130
$46,337,371
$(48,432,636)
$
—
$
—
$
1,043,865
1,043,865
$
—
Total
Affiliated
Securities
....
$3,139,130
$46,337,371
$(48,432,636)
$—
$—
$1,043,865
$—
3.
Transactions
with
Affiliates
(continued)
Franklin
Real
Estate
Securities
Trust
Notes
to
Financial
Statements
(unaudited)
23
franklintempleton.com
Semiannual
Report
Franklin
Real
Estate
Securities
Fund
(continued)
5.
Income
Taxes
At
October
31,
2020,
the
cost
of
investments,
net
unrealized
appreciation
(depreciation)
for
income
tax
purposes
were
as
follows:
Differences
between
income
and/or
capital
gains
as
determined
on
a
book
basis
and
a
tax
basis
are
primarily
due
to
differing
treatment
wash
sales.
6.
Investment
Transactions
Purchases
and
sales
of
investments
(excluding
short
term
securities)
for
the
period
ended
October
31,
2020,
aggregated
$32,401,098
and
$61,682,729,
respectively.
7.
Concentration
of
Risk
The
Fund
invests
a
large
percentage
of
its
total
assets
in
REIT
securities.
Such
concentration
may
subject
the
Fund
to
special
risks
associated
with
real
estate
securities.
These
securities
may
be
more
sensitive
to
economic
or
regulatory
developments
due
to
a
variety
of
factors
such
as
local,
regional,
national
and
global
economic
conditions,
interest
rates
and
tax
considerations.
8.
Novel
Coronavirus
Pandemic
The
global
outbreak
of
the
novel
coronavirus
disease,
known
as
COVID-19, has
caused
adverse
effects
on
many
companies,
sectors,
nations,
regions
and
the
markets
in
general, and
may
continue for
an unpredictable duration.
The
effects
of
this
pandemic
may
materially
impact
the
value
and
performance
of
the Fund, its ability
to
buy
and
sell
fund
investments
at
appropriate
valuations
and its ability
to
achieve its investment
objectives.
9.
Credit
Facility
The
Fund,
together
with
other
U.S.
registered
and
foreign
investment
funds
(collectively,
Borrowers),
managed
by
Franklin
Templeton,
are
borrowers
in
a
joint
syndicated
senior
unsecured
credit
facility
totaling
$2
billion
(Global
Credit
Facility)
which
matures
on
February
5,
2021.
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
Fund
shall,
in
addition
to
interest
charged
on
any
borrowings
made
by
the
Fund
and
other
costs
incurred
by
the Fund,
pay
its
share
of
fees
and
expenses
incurred
in
connection
with
the
implementation
and
maintenance
of
the
Global
Credit
Facility,
based
upon
its
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
Statement
of
Operations.
During
the
period
ended
October
31,
2020,
the Fund
did
not
use
the
Global
Credit
Facility.
Cost
of
investments
..........................................................................
$280,431,661
Unrealized
appreciation
........................................................................
$96,087,602
Unrealized
depreciation
........................................................................
(18,142,640)
Net
unrealized
appreciation
(depreciation)
..........................................................
$77,944,962
Franklin
Real
Estate
Securities
Trust
Notes
to
Financial
Statements
(unaudited)
24
franklintempleton.com
Semiannual
Report
Franklin
Real
Estate
Securities
Fund
(continued)
10.
Fair
Value
Measurements
The
Fund
follows
a
fair
value
hierarchy
that
distinguishes
between
market
data
obtained
from
independent
sources
(observable
inputs)
and
the Fund's
own
market
assumptions
(unobservable
inputs).
These
inputs
are
used
in
determining
the
value
of
the
Fund's 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
Fund's
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.
At
October
31,
2020,
all
of
the
Fund’s
investments
in
financial
instruments
carried
at
fair
value
were
valued
using
Level
1
inputs.
For
detailed
categories,
see
the
accompanying
Statement
of
Investments.
11.
New
Accounting
Pronouncements
In
March
2020,
the
Financial
Accounting
Standards
Board
(FASB)
issued
Accounting
Standards
Update
(ASU)
No.
2020-
04,
Reference
Rate
Reform
(Topic
848)
–
Facilitation
of
the
Effects
of
Reference
Rate
Reform
on
Financial
Reporting.
The
amendments
in
the
ASU
provides
optional
temporary
financial
reporting
relief
from
the
effect
of
certain
types
of
contract
modifications
due
to
the
planned
discontinuation
of
the
London
Interbank
Offered
Rate
(LIBOR)
and
other
interbank-offered
based
reference
rates
as
of
the
end
of
2021.
The
ASU
is
effective
for
certain
reference
rate-related
contract
modifications
that
occur
during
the
period
March
12,
2020
through
December
31,
2022. 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
Fund
has
evaluated
subsequent
events
through
the
issuance
of
the financial
statements
and
determined
that
no
events
have
occurred
that
require
disclosure.
Abbreviations
Selected
Portfolio
REIT
Real
Estate
Investment
Trust
Franklin
Real
Estate
Securities
Trust
Shareholder
Information
25
franklintempleton.com
Semiannual
Report
Board
Approval
of
Investment
Management
Agreements
FRANKLIN
REAL
ESTATE
SECURITIES
TRUST
Franklin
Real
Estate
Securities
Fund
(Fund)
At
a
meeting
held
on
July
15,
2020
(Meeting),
the
Board
of
Trustees
(Board)
of
Franklin
Real
Estate
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
a
new
investment
management
agreement
between
Franklin
Advisers,
Inc.
(Manager)
and
the
Trust,
on
behalf
of
the
Fund
(Management
Agreement)
for
an
initial
two-year
period,
subject
to
prior
approval
of
the
shareholders
of
the
Fund.
The
Independent
Trustees
received
advice
from
and
met
separately
with
Independent
Trustee
counsel
in
considering
whether
to
approve
the
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
considered
a
form
of
the
Management
Agreement,
which
has
terms
that
are
substantially
the
same
as
the
terms
of
the
existing
management
agreement,
except:
(i)
the
investment
manager
is
the
Manager,
rather
than
Franklin
Templeton
Institutional,
LLC
(FT
Institutional);
(ii)
certain
changes
have
been
made
to
accommodate
a
manager-of-managers
structure;
and
(iii)
certain
changes
have
been
made
to
reflect
the
latest
forms
of
investment
management
agreements
used
across
the
Franklin
Templeton
(FT)
complex.
The
Board
further
considered
the
code
of
ethics
applied
to
the
employees
of
the
Manager
and
compliance
policies
and
procedures
of
the
Manager,
which
are
identical
to
those
of
FT
Institutional.
The
Board
discussed
with
management
the
reasons
for
the
request
that
the
Board
approve
the
Management
Agreement,
including
the
improvement
in
the
Fund’s
performance
since
its
portfolio
managers
joined
the
Manager’s
Franklin
Equity
Group.
The
Board
reviewed
and
considered
all
of
the
factors
it
deemed
relevant
in
approving
the
Management
Agreement,
including,
but
not
limited
to:
(i)
the
nature,
extent
and
quality
of
the
services
to
be
provided
by
the
Manager;
(ii)
the
investment
performance
of
the
Fund;
(iii)
the
costs
of
the
services
to
be
provided
to
the
Fund;
and
(iv)
the
extent
to
which
economies
of
scale
are
expected
to
be
realized.
The
Board
noted
Management’s
proposal
to
request
shareholder
approval
to
allow
the
Fund
to
use
a
manager-of-manager
structure
as
many
other
funds
in
the
FT
fund
complex
have
in
place.
In
determining
that
the
terms
of
the
Management
Agreement
are
fair
and
reasonable,
the
Board
noted
the
level
of
services
to
be
provided
under
the
Management
Agreement
and
that
there
was
no
proposed
change
to
the
level
of
investment
management
fees
to
be
paid
by
the
Fund.
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,
including
administrative
services,
to
be
provided
by
the
Manager
and
its
affiliates
to
the
Fund
and
its
shareholders.
In
particular,
the
Board
discussed
the
fact
that
the
Fund’s
current
portfolio
managers
would
continue
to
serve
the
Fund
and
that
there
was
no
expected
change
in
the
nature,
extent
or
quality
of
the
services
to
be
provided
to
the
Fund.
The
Board
noted
the
Manager’s
experience
as
manager
of
other
funds
and
accounts,
including
those
within
the
FT
organization;
the
personnel,
operations,
financial
condition
and
investment
management
capabilities,
methodologies
and
resources
of
the
Manager
and
the
Manager’s
capabilities,
as
demonstrated
by,
among
other
things,
their
policies
and
procedures
reasonably
designed
to
prevent
violations
of
the
Federal
securities
laws,
which
had
previously
been
approved
by
the
Board
in
connection
with
its
oversight
of
other
funds
in
the
FT
organization.
Following
consideration
of
such
information,
the
Board
was
satisfied
with
the
nature,
extent
and
quality
of
services
to
be
provided
by
the
Manager
and
its
affiliates
to
the
Fund
and
its
shareholders.
Fund
Performance
The
Board
noted
its
review
and
consideration
of
the
performance
results
of
the
Fund
in
connection
with
the
April
2020
annual
contract
renewal
process.
The
Board
further
noted
that
since
the
Fund’s
portfolio
managers
became
part
of
the
Manager’s
Franklin
Equity
Group
in
September
2019,
the
Fund’s
performance
has
improved
and
that
the
Fund’s
current
portfolio
managers
would
continue
to
serve
the
Fund.
With
that,
the
Board
was
confident
in
the
abilities
of
such
portfolio
managers
to
continue
the
investment
approach
of
the
Fund
and
to
provide
quality
services
to
the
Fund
and
its
shareholders.
Franklin
Real
Estate
Securities
Trust
Shareholder
Information
26
franklintempleton.com
Semiannual
Report
Comparative
Fees
and
Expenses
The
Board
reviewed
and
considered
information
regarding
the
investment
management
fee
to
be
charged
by
the
Manager.
The
Board
noted
that
the
management
fee
to
be
paid
by
the
Fund
under
the
Management
Agreement
is
identical
to
the
management
fee
the
Fund
currently
pays
FT
Institutional.
The
Board
concluded
that
the
proposed
investment
management
fee
is
reasonable.
Management
Profitability
and
Economies
of
Scale
The
Board
determined
that
its
conclusions
regarding
profitability
and
economies
of
scale
reached
in
connection
with
the
renewal
in
April
2020
of
the
existing
investment
management
agreement
with
FT
Institutional
that
would
continue
in
effect
until
the
date
the
Management
Agreement
becomes
effective
had
not
changed
as
a
result
of
the
proposed
retention
of
the
Manager.
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
Management
Agreement
for
an
initial
two-year
period,
subject
to
prior
approval
of
the
shareholders
of
the
Fund.
Liquidity
Risk
Management
Program
–
Funds
no
HLIM
Each
of
the
Funds
has
adopted
and
implemented
a
written
Liquidity
Risk
Management
Program
(the
“LRMP”)
as
required
by
Rule
22e-4
under
the
Investment
Company
Act
of
1940
(the
“Liquidity
Rule”).
The
LRMP
is
designed
to
assess
and
manage
each
Fund’s
liquidity
risk,
which
is
defined
as
the
risk
that
the
Fund
could
not
meet
requests
to
redeem
shares
issued
by
the
Fund
without
significant
dilution
of
remaining
investors’
interests
in
the
Fund.
In
accordance
with
the
Liquidity
Rule,
the
LRMP
includes
policies
and
procedures
that
provide
for:
(1)
assessment,
management,
and
review
(no
less
frequently
than
annually)
of
each
Fund’s
liquidity
risk;
(2)
classification
of
each
Fund’s
portfolio
holdings
into
one
of
four
liquidity
categories
(Highly
Liquid,
Moderately
Liquid,
Less
Liquid,
and
Illiquid);
(3)
for
Funds
that
do
not
primarily
hold
assets
that
are
Highly
Liquid,
establishing
and
maintaining
a
minimum
percentage
of
the
Fund’s
net
assets
in
Highly
Liquid
investments
(called
a
“Highly
Liquid
Investment
Minimum”
or
“HLIM”);
and
(4)
prohibiting
the
Fund’s
acquisition
of
Illiquid
investments
that
would
result
in
the
Fund
holding
more
than
15%
of
its
net
assets
in
Illiquid
assets.
The
LRMP
also
requires
reporting
to
the
Securities
and
Exchange
Commission
(“SEC”)
(on
a
non-public
basis)
and
to
the
Board
if
the
Fund’s
holdings
of
Illiquid
assets
exceed
15%
of
the
Fund’s
net
assets.
Funds
with
HLIMs
must
have
procedures
for
addressing
HLIM
shortfalls,
including
reporting
to
the
Board
and,
with
respect
to
HLIM
shortfalls
lasting
more
than
seven
consecutive
calendar
days,
reporting
to
the
SEC
(on
a
non-public
basis).
The
Funds’
Board
of
Trustees
approved
the
appointment
of
the
Director
of
Liquidity
Risk
within
the
Investment
Risk
Management
Group
(the
“IRMG”)
as
the
Administrator
of
the
LRMP.
The
IRMG
maintains
the
Investment
Liquidity
Committee
(the
“ILC”)
to
provide
oversight
and
administration
of
policies
and
procedures
governing
liquidity
risk
management
for
FT
products
and
portfolios.
The
ILC
includes
representatives
from
Franklin
Templeton’s
Risk,
Trading,
Global
Compliance,
Investment
Compliance,
Investment
Operations,
Valuation
Committee
and
Product
Management
groups.
In
assessing
and
managing
each
Fund’s
liquidity
risk,
the
ILC
considers,
as
relevant,
a
variety
of
factors,
including
the
Fund’s
investment
strategy
and
the
liquidity
of
its
portfolio
investments
during
both
normal
and
reasonably
foreseeable
stressed
conditions;
its
short
and
long-term
cash
flow
projections;
and
its
cash
holdings
and
access
to
other
funding
sources
including
the
Funds’
interfund
lending
facility
and
line
of
credit.
Classification
of
the
Fund’s
portfolio
holdings
in
the
four
liquidity
categories
is
based
on
the
number
of
days
it
is
reasonably
expected
to
take
to
convert
the
investment
to
cash
(for
Highly
Liquid
and
Moderately
Liquid
holdings)
or
sell
or
dispose
of
the
investment
(for
Less
Liquid
and
Illiquid
investments),
in
current
market
conditions
without
significantly
changing
the
investment’s
market
value.
Each
Fund
primarily
holds
liquid
assets
that
are
defined
under
the
Liquidity
Rule
as
"Highly
Liquid
Investments,"
and
therefore
is
not
required
to
establish
an
HLIM.
Highly
Liquid
Investments
are
defined
as
cash
and
any
investment
reasonably
expected
to
be
convertible
to
cash
in
current
market
conditions
in
three
business
days
or
less
without
the
conversion
to
cash
significantly
changing
the
market
value
of
the
investment.
At
meetings
of
the
Funds’
Board
of
Trustees
held
in
May
2020,
the
Program
Administrator
provided
a
written
report
to
the
Board
addressing
the
adequacy
and
effectiveness
of
the
program
during
the
period
December
1,
2018
to
December
31,
2019.
The
Program
Administrator
report
concluded
that
(i.)
the
LRMP,
as
adopted
and
implemented,
remains
reasonably
designed
to
assess
and
manage
each
Fund’s
liquidity
risk;
(ii.)
the
LRMP,
including
the
Highly
Liquid
Investment
Minimum
(“HLIM”)
where
applicable,
was
implemented
and
operated
effectively
to
achieve
the
goal
of
assessing
and
managing
each
Fund’s
liquidity
risk;
and
(iii.)
each
Fund
was
able
to
meet
requests
for
redemption
Franklin
Real
Estate
Securities
Trust
Shareholder
Information
27
franklintempleton.com
Semiannual
Report
without
significant
dilution
of
remaining
investors’
interests
in
the
Fund.
At
the
same
time,
the
Program
Administrator
also
presented
the
Fund
Board
of
Trustees
an
update
on
liquidity
during
the
first
quarter
of
2020
in
relation
to
the
COVID-19
pandemic.
Proxy
Voting
Policies
and
Procedures
The
Fund’s
investment
manager
has
established
Proxy
Voting
Policies
and
Procedures
(Policies)
that
the
Fund
uses
to
determine
how
to
vote
proxies
relating
to
portfolio
securities.
Shareholders
may
view
the
Fund’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
Fund’s
proxy
voting
records
are
also
made
available
online
at
franklintempleton.com
and
posted
on
the
U.S.
Securities
and
Exchange
Commission’s
website
at
sec.gov
and
reflect
the
most
recent
12-month
period
ended
June
30.
Quarterly
Statement
of
Investments
The
Trust,
on
behalf
of
the
Fund,
files
a
complete
statement
of
investments
with
the
U.S.
Securities
and
Exchange
Commission
for
the
first
and
third
quarters
for
each
fiscal
year
as
an
exhibit
to
its
report
on
Form
N-PORT.
Shareholders
may
view
the
filed
Form
N-PORT
by
visiting
the
Commission’s
website
at
sec.gov.
The
filed
form
may
also
be
viewed
and
copied
at
the
Commission’s
Public
Reference
Room
in
Washington,
DC.
Information
regarding
the
operations
of
the
Public
Reference
Room
may
be
obtained
by
calling
(800)
SEC-0330.
Householding
of
Reports
and
Prospectuses
You
will
receive
the
Fund’s
financial
reports
every
six
months
as
well
as
an
annual
updated
summary
prospectus
(prospectus
available
upon
request).
To
reduce
Fund
expenses,
we
try
to
identify
related
shareholders
in
a
household
and
send
only
one
copy
of
the
financial
reports
and
summary
prospectus.
This
process,
called
“householding,”
will
continue
indefinitely
unless
you
instruct
us
otherwise.
If
you
prefer
not
to
have
these
documents
householded,
please
call
us
at
(800)
632-2301.
At
any
time
you
may
view
current
prospectuses/summary
prospectuses
and
financial
reports
on
our
website.
If
you
choose,
you
may
receive
these
documents
through
electronic
delivery.
192
S
12/20
©
2020
Franklin
Templeton
Investments.
All
rights
reserved.
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.
Semiannual
Report
and
Shareholder
Letter
Franklin
Real
Estate
Securities
Fund
Investment
Manager
Distributor
Shareholder
Services
Franklin
Templeton
Institutional,
LLC
Franklin
Templeton
Distributors,
Inc.
(800)
DIAL
BEN
®
/
342-5236
franklintempleton.com
(800)
632-2301
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 13(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 Mary C. Choksi and she 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 provide reasonable assurance that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934, as amended, 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.
During the period covered by this report, a third-party service provider commenced performing certain accounting and administrative services for the Registrant that are subject to Franklin Templeton’s oversight.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Company. N/A
Item 13. 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 REAL ESTATE SECURITIES TRUST
By _S\MATTHEW T. HINKLE_______________________
Matthew T. Hinkle
Chief Executive Officer – Finance and Administration
Date December 28, 2020
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 December 28, 2020
By _S\GASTON GARDEY________________________
Gaston Gardey
Chief Financial Officer and Chief Accounting Officer
Date December 28, 2020