N-CSR 1 primary-document.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
FORM N-CSR
 
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)
 
Alison Baur, One Franklin Parkway, San Mateo, CA  94403-1906

(Name and address of agent for service)
 
Registrant's telephone number, including area code: 650 312-2000
 
Date of fiscal year end: 10/31
 
Date of reporting period: 10/31/22
 
 
Item 1. Reports to Stockholders.
 
a.)
 
The following is a copy of the report transmitted to shareholders pursuant to Rule30e-1 under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30e-1.)


b.)
 
Include a copy of each notice transmitted to stockholders in reliance on Rule 30e-3 under the Act (17 CFR 270.30e-3) that contains disclosures specified by paragraph (c)(3) of that rule.
Not Applicable
.
 
 
ANNUAL
REPORT
AND
SHAREHOLDER
LETTER
Franklin
Investors
Securities
Trust
October
31,
2022
Sign
up
for
electronic
delivery
at
franklintempleton.com/edelivery
Franklin
Convertible
Securities
Fund
Franklin
Equity
Income
Fund
Franklin
Managed
Income
Fund
Not
FDIC
Insured
May
Lose
Value
No
Bank
Guarantee
franklintempleton.com
Annual
Report
1
SHAREHOLDER
LETTER
Dear
Shareholder:
During
the
12
months
ended
October
31,
2022,
the
U.S.
economy
showed
mixed
results
as
it
continued
to
recover
from
the
COVID-19
pandemic
amid
declining
unemployment
and
rising
wages
and
personal
consumption.
U.S.
gross
domestic
product
(GDP)
growth
peaked
in
2021’s
fourth
quarter
as
the
reopening
of
businesses,
widespread
vaccinations
and
federal
assistance
programs
continued
to
boost
consumer
spending,
but
GDP
contracted
in
2022’s
first
two
quarters
given
a
record
first-quarter
trade
deficit
and
declines
in
inventory
and
business
investment.
U.S.
economic
growth
resumed
in
2022’s
third
quarter
as
the
trade
deficit
narrowed
and
consumer
spending
continued
to
expand.
Inflation
increased
during
the
12-month
period,
influenced
by
pandemic-related
supply
chain
issues,
higher
energy
prices,
Russia’s
invasion
of
Ukraine
and
broader
price
pressures.
To
combat
high
inflation,
the
U.S.
Federal
Reserve
began
decreasing
its
monthly
asset
purchases
in
November
2021
and
ended
them
in
March
2022.
The
Federal
Reserve
also
raised
the
federal
funds
rate
by
0.25%
in
March,
0.50%
in
May,
and
0.75%
in
each
of
June,
July
and
September,
for
a
total
of
3.00%,
increasing
the
rate
from
0.25%
to
3.25%
during
the
period.
Additionally,
the
Federal
Reserve
stated
its
intention
to
continue
reducing
its
U.S.
Treasury,
government
agency
debt
and
agency
mortgage-backed
securities
holdings,
and
anticipated
future
federal
funds
rate
increases
would
be
appropriate.
Shortly
after
the
reporting
period,
the
Federal
Reserve
raised
the
federal
funds
rate
again
by
0.75%
at
its
November
2022
meeting,
increasing
it
to
4.00%.
During
the
12-month
period,
investor
concerns
about
inflation,
geopolitics
and
interest
rates
pressured
stock
and
bond
valuations.
In
this
environment,
the
prices
of
U.S.
stocks,
as
measured
by
the
Standard
&
Poor’s
®
500
Index
(S&P
500
®
),
declined
15.92%,
(the
index
decreasing
from
4,605.38
to
3,871.98).
1,2
Investment-grade
bonds,
as
measured
by
the
Bloomberg
U.S.
Aggregate
Bond
Index
(Bloomberg
Index),
posted
a
-15.68%
total
return
(an
index
decrease
from
2,354.21
to
1,985.01),
which
includes
reinvestment
of
income
and
distributions.
3
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
professionals
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
annual
report,
covering
Franklin
Convertible
Securities
Fund,
Franklin
Equity
Income
Fund
and
Franklin
Managed
Income
Fund,
includes
more
detail
about
investment
decisions
during
the
period.
All
securities
markets
fluctuate
in
value,
as
do
mutual
fund
share
prices.
We
thank
you
for
investing
with
Franklin,
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
October
31,
2022,
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:
Copyright
©
2022,
S&P
Dow
Jones
Indices
LLC.
All
rights
reserved.
2.
Source:
Morningstar.
The
changes
in
index
prices
shown
for
the
S&P
500
do
not
include
reinvestments
of
income
and
distributions,
which
are
included
in
its
total
return,
which
was:
S&P
500
-14.61%
(index
total
return
resulting
in
a
decrease
from
9,625.02
to
8,218.70).
3.
Sources:
Morningstar
and
Bloomberg
indexes.
For
the
Bloomberg
Index,
only
total
return
as
shown
is
available,
not
price
change
without
the
inclusion
of
reinvested
income
and
distributions.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
franklintempleton.com
Annual
Report
2
Contents
Annual
Report
Economic
and
Market
Overview
3
Franklin
Convertible
Securities
Fund
4
Franklin
Equity
Income
Fund
12
Franklin
Managed
Income
Fund
18
Financial
Highlights
and
Schedules
of
Investments
27
Financial
Statements
60
Notes
to
Financial
Statements
66
Report
of
Independent
Registered
Public
Accounting
Firm
86
Tax
Information
87
Board
Members
and
Officers
88
Shareholder
Information
93
Visit
franklintempleton.com
for
fund
updates,
to
access
your
account,
or
to
find
helpful
financial
planning
tools.
3
franklintempleton.com
Annual
Report
ANNUAL
REPORT
Economic
and
Market
Overview
U.S.
equities,
as
measured
by
the
Standard
&
Poor’s
®
500
Index,
posted
a
-14.61%
total
return
for
the
12
months
ended
October
31,
2022.
1
High
inflation,
rising
interest
rates
and
geopolitical
instability
contributed
to
a
sharp
decline
in
equity
prices.
Although
consumer
spending
continued
to
rise,
deteriorating
financial
conditions
negatively
impacted
consumer
sentiment,
which
improved
slightly
at
the
end
of
the
period
after
falling
in
June
2022
to
the
lowest
level
in
over
60
years.
Elevated
inflation
was
a
major
concern
for
both
consumers
and
investors,
as
inflation
accelerated
in
June
2022
to
the
highest
rate
since
1981.
Continued
supply-chain
disruptions,
strong
consumer
demand,
and
volatile
energy
prices
drove
inflation
higher.
Russia’s
invasion
of
Ukraine
also
disrupted
financial
markets
and
led
to
a
rise
in
oil
and
commodity
prices,
although
much
of
that
increase
abated
by
period-end.
The
U.S.
unemployment
rate
declined
from
4.6%
in
October
2021
to
3.7%
in
October
2022
as
notable
employment
gains
occurred
in
the
leisure
and
hospitality
and
health
care
sectors.
Wages
climbed
at
the
fastest
rate
in
decades,
which
added
to
some
investors’
inflation
concerns.
U.S.
gross
domestic
product
(GDP)
growth
was
robust
in
the
fourth
quarter
of
2021
as
strong
consumer
spending
and
business
investment
in
growing
inventories
supported
the
economy.
GDP
contracted
in
the
first
half
of
2022
due
to
declining
residential
and
business
investment
and
lower
levels
of
government
spending,
but
grew
in
2022’s
third
quarter
amid
a
narrowing
trade
deficit
and
strong
consumer
spending.
Increased
nonresidential
fixed
investment
and
government
spending
also
contributed
to
the
third
quarter
economic
growth.
Rising
interest
rates
translated
to
higher
borrowing
costs
for
individuals
and
businesses.
Mortgage
rates
reached
the
highest
level
since
2007,
and
new
home
construction
slowed
toward
period-end.
In
an
effort
to
control
inflation,
the
U.S.
Federal
Reserve
(Fed)
began
to
raise
the
federal
funds
target
rate
in
March
2022,
the
first
such
increase
since
2018.
The
Fed
raised
the
federal
funds
rate
again
at
each
of
its
four
subsequent
meetings
to
end
the
period
at
a
range
of
3.00%–3.25%.
The
Fed
noted
in
its
September
2022
meeting
that
inflation
remained
elevated
amid
robust
job
growth
and
low
unemployment.
Furthermore,
the
Fed
said
it
would
continue
to
reduce
its
bond
holdings,
and
Fed
Chair
Jerome
Powell
indicated
that
reducing
inflation
was
likely
to
require
a
period
of
below-trend
growth.
The
foregoing
information
reflects
our
analysis
and
opinions
as
of
October
31,
2022.
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.
4
franklintempleton.com
Annual
Report
Franklin
Convertible
Securities
Fund
This
annual
report
for
Franklin
Convertible
Securities
Fund
covers
the
fiscal
year
ended
October
31,
2022.
The
Fund
closed
to
new
investors
with
limited
exceptions
on
August
29,
2018.
Existing
investors
may
continue
to
purchase
additional
shares
of
the
Fund.
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.
Performance
Overview
For
the
12
months
under
review,
the
Fund’s
Class
A
shares
posted
a
-19.94%
cumulative
total
return.
In
comparison,
the
Fund’s
benchmark,
the
ICE
BofA
All
Alternatives
U.S.
Convertibles
Index,
which
tracks
the
domestic
convertible
securities
market,
posted
a
-20.73%
cumulative
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
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.
By
investing
in
convertible
securities,
the
Fund
seeks
the
opportunity
to
participate
in
the
capital
appreciation
of
underlying
stocks,
while
at
the
same
time
relying
on
the
fixed
income
aspect
of
the
convertible
securities
to
provide
current
income
and
reduced
price
volatility,
which
can
limit
the
risk
of
loss
in
a
down
equity
market.
Some
of
the
convertible
securities
in
which
the
Fund
may
invest
have
been
structured
to
provide
enhanced
yield,
increased
equity
exposure
or
enhanced
downside
protection.
These
securities,
generally
referred
to
as
enhanced
convertible
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
During
the
year
under
review,
the
convertible
bond
market
sold
off
substantially,
while
new
convertible
bond
issuance
was
subdued
amid
elevated
financial
market
volatility,
with
many
companies
unwilling
to
issue
convertibles
at
low
stock
prices.
Net
issuance
in
the
convertibles
market
dropped
sharply
in
the
first
ten
months
of
2022
when
compared
with
the
previous
two
years,
though
it
began
to
see
a
solid
rebound
from
August
through
period-end.
Performance
within
the
asset
class
varied
as
the
average
return
for
U.S.-
based
equity-sensitive
convertibles
underperformed
both
balanced
convertibles
and
“busted”
(credit/rate-sensitive)
convertibles.
The
Fund’s
absolute
returns
were
negative
across
eight
out
of
11
equity
sector
allocations.
The
bulk
of
the
overall
losses
occurred
within
our
four
largest
allocations,
which
averaged
over
three
quarters
of
the
overall
portfolio:
information
technology
(IT),
consumer
discretionary,
communication
services
and
health
care.
In
particular,
IT
holdings
collectively
shed
about
a
quarter
of
their
value,
while
those
in
the
consumer
discretionary
sector
declined
by
almost
a
third.
Nearly
all
IT
holdings
were
net
detractors,
and
most
posted
significant
double-digit
percentage
declines,
including
key
detractors
HubSpot,
enterprise
management
cloud
solution
provider
Workday
(sold
by
period-end),
identity
management
software
specialist
Okta,
and
Bill.com
Holdings.
In
general,
many
investors
continued
to
express
their
valuation
concerns
by
divesting
high-tech
companies
that
held
the
potential
to
disrupt
lots
of
businesses
in
the
future
but
Portfolio
Composition
10/31/22
%
of
Total
Net
Assets
Convertible
Bonds
84.1%
Convertible
Preferred
Stocks
14.3%
Short-Term
Investments
&
Other
Net
Assets
1.6%
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
Schedule
of
Investments
(SOI).
The
SOI
begins
on
page
31
.
Franklin
Convertible
Securities
Fund
5
franklintempleton.com
Annual
Report
have
little
or
no
earnings
in
the
present.
Additionally,
the
tech-related
weakness
in
consumer-oriented
end
markets
such
as
personal
computers,
electronics,
smartphones
and
digital
internet
advertising,
continued
to
put
pressure
on
a
wide
range
of
IT
companies.
Application
software
holdings
had
a
substantial
negative
impact,
including
detractors
HubSpot
(software
products
for
inbound
marketing,
sales
and
customer
service)
and
Bill.com
(cloud-based
automated
account
payables/receivables
platform
for
small-
and
mid-
sized
businesses).
Despite
the
near-term
setbacks,
HubSpot
announced
additional
fintech
services
for
its
customer
relationship
management
(CRM)
platform
that
integrates
new
payment
services
(billing,
collection
and
subscriptions),
which
many
investors
believed
could
improve
customer
retention
and
revenue
growth.
Many
of
HubSpot’s
clients
had
previously
reported
issues
with
business-to-business
(B2B)
payments,
so
the
company
appears
to
have
addressed
a
substantial
unmet
need
with
its
recent
moves.
Bill.com,
meanwhile,
posted
impressive
sales
gains
and
transaction
volume
growth,
and
generally
beat
consensus
earnings
estimates
in
its
quarterly
financial
results,
while
its
outlook
for
fiscal
year
2023
called
for
major
increases
in
revenue
and
earnings.
Although
Bill.com
will
not
be
immune
to
a
global
economic
slowdown
or
recession,
we
think
its
secular
growth
and
business
execution
will
continue
to
be
strong.
We
believe
Bill.com
has
an
attractive
long-term
opportunity
to
win
substantial
new
business
in
a
nascent
market,
extend
its
leadership
position
through
its
partnerships
with
large
banks,
significantly
increase
the
monetization
of
payment
flow
on
its
platform,
integrate
and
cross-sell
Divvy
(its
expense
management
and
business
budgeting
software),
leverage
the
data
on
its
expanding
network,
and
ultimately
become
the
de
facto
financial
operating
system
for
its
clients.
All
consumer
discretionary
sector
holdings
weighed
on
returns,
including
Etsy,
Aptiv
(automotive
and
mobility
technology
supplier)
and
RH
(the
holding
company
for
upscale
furniture
and
home
goods
retailer
Restoration
Hardware).
Some
of
the
largest
declines
occurred
in
e-commerce
holdings
as
historically
high
inflation,
sharply
rising
interest
rates
and
stalling
economic
growth
were
seen
as
impinging
on
consumer
spending
beyond
essentials.
In
general,
and
after
online-only
retailers
such
as
Etsy
and
Wayfair
(home
goods
covering
a
wide
range
of
styles
and
budgets)
delivered
sterling
results
in
the
thick
of
the
pandemic,
many
have
struggled
to
sustain
their
growth
momentum
in
recent
quarters,
while
the
latest
trend
data
show
shoppers
have
been
heading
back
to
physical
stores
in
large
numbers
as
pandemic
restrictions
fade.
With
its
pandemic
tailwinds
gone,
these
companies
have
seen
their
profitability
track
lower
with
receding
demand.
Etsy,
which
runs
a
growing
online
marketplace
for
unique
handcrafted
and
artistic
goods,
exhibited
resiliency
in
its
second-quarter
financial
results,
but
has
ultimately
seen
some
tough
year-
over-year
comparisons
as
it
has
been
contending
with
demand
destruction—resulting
in
a
sharp
drop-off
in
sales
volumes—in
the
current
environment.
In
communication
services,
our
positions
in
Sea
and
social
media
company
Snap
were
standout
detractors.
Sea,
a
Southeast
Asian
internet
and
mobile
platform
company,
has
been
investing
heavily
to
grow
its
business
in
three
high-growth
industries:
e-commerce
(Shopee),
digital
payments
and
financial
services
(SeaMoney),
and
video
game
development
and
publishing
(Garena).
Although
its
stock
price
declined
sharply
during
the
period,
company
fundamentals
have
not
deteriorated
meaningfully,
in
our
view,
and
so
the
selling
appeared
to
reflect
some
measure
of
profit-taking
by
investors
following
the
stock’s
gain
of
more
than
1,100%
over
the
2019–2021
period.
Fundamentals
did,
however,
play
a
role
in
the
pullback.
Although
the
platform
continued
to
grow
rapidly
and
the
company
continued
to
generate
positive
cash
flow,
at
times
its
financial
reports
missed
consensus
expectations
on
the
bottom
line.
Garena
continued
to
be
the
most
profitable
segment,
which
allows
Sea
to
invest
in
its
other
businesses,
but
its
growth
has
decelerated.
At
the
same
time,
Shopee’s
operating
losses
accelerated
despite
a
strong
competitive
position
in
Southeast
Asia
and
aggressive
expansions
into
areas
like
Latin
America
and
Europe.
Top
10
Holdings
10/31/22
Company
Industry
,
Country
%
of
Total
Net
Assets
a
a
Dexcom
,
Inc.
2.8%
Health
Care
Equipment
&
Supplies,
United
States
Insulet
Corp.
2.6%
Health
Care
Equipment
&
Supplies,
United
States
Jazz
Investments
I
Ltd.
2.5%
Pharmaceuticals,
United
States
Liberty
Broadband
Corp.
2.4%
Media,
United
States
Zendesk
,
Inc.
2.3%
Software,
United
States
Viavi
Solutions,
Inc.
2.3%
Communications
Equipment,
United
States
Bill.com
Holdings,
Inc.
2.3%
Software,
United
States
Avalara,
Inc.
2.2%
Software,
United
States
Etsy,
Inc.
2.2%
Internet
&
Direct
Marketing
Retail,
United
States
Ivanhoe
Mines
Ltd.
2.2%
Metals
&
Mining,
Canada
Franklin
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To
a
lesser
extent,
the
Fund’s
investments
in
the
health
care,
industrials,
financials,
real
estate
and
materials
sectors
also
saw
widespread
declines.
Avantor
(sold
by
period-end)
was
the
worst
performer
in
health
care,
while
industrials
were
dragged
down
primarily
by
large
declines
in
Lyft
and
Upwork.
The
steepest
decline
at
the
sector
level
occurred
in
financials,
which
had
been
hurt
broadly
by
fears
of
a
global
recession,
and
where
alternative
asset
manager
KKR
Group
was
a
standout
detractor.
Financials,
in
general,
did
not
instill
much
confidence
for
most
of
the
year
as
investors
braced
for
a
tougher
stretch
in
the
economy,
possible
markdowns
of
book
value,
and
cuts
to
earnings
and
dividends.
KKR
runs
a
mix
of
alternative-asset
businesses,
including
private
equity,
a
credit
unit,
real
estate,
and
an
infrastructure
portfolio.
Despite
the
near-term
setbacks,
KKR
continued
to
expand
its
industrial
real
estate
portfolio,
and
has
seen
improvement
in
its
net
investment
income,
performance
fees
and
insurance
operations.
We
continue
to
believe
KKR’s
long-term
secular
growth
drivers
remain
strong.
In
terms
of
what
aided
absolute
returns,
the
Fund’s
utilities,
consumer
staples
and
energy
holdings
booked
12-month
gains
that,
when
combined,
partially
offset
the
overall
losses
across
other
sector
allocations.
In
particular,
utilities
such
as
PG&E
and
Southern
Company
(sold
by
period-end)
rallied
with
double-digit
percentage
returns.
Investors
continued
to
support
a
wide
range
of
noncyclical
utility
companies
as
the
group
tends
to
see
a
boost
when
heightened
equity
market
volatility
drives
investors
toward
options
tied
to
relatively
inelastic
demand
for
essential
services.
PG&E
and
others
have
also
benefited
as
investors
seek
out
equities
offering
high
or
rising
dividends.
By
most
estimates,
Northern
California
utility
PG&E’s
common
stock
was
initially
trading
at
a
discount
to
peers
when
adjusted
for
its
growth
potential,
which
is
among
the
highest
in
the
sector.
Market
fears
of
more
bankruptcy-inducing
wildfire
liabilities
have
eased
three
years
on
from
the
2017-18
disasters.
Political,
regulatory
and
legal
changes
during
the
past
two
years
have
reshaped
the
risk
profile
and
long-term
outlook
for
California
investor-
owned
utilities,
among
which
PG&E
has
also
embarked
on
an
aggressive
carbon-emissions
elimination
program.
Many
investors
were
also
drawn
to
PG&E’s
long
runway
of
potentially
up
to
10%
annual
earnings
growth
to
meet
California’s
environmental
ambitions.
Within
the
consumer
staples
sector,
the
Fund’s
position
in
Bunge
(sold
by
period-end)—a
farm-to-consumer
agribusiness
company
focused
on
grain
trading
and
farm
commodity
exporting
and
logistics,
food
processing,
and
fertilizer—rallied
on
strong
demand
and
surging
agricultural
commodity
prices.
Many
investors
were
expecting
Bunge
to
be
the
kind
of
essential
business
that
can
do
well
in
any
economic
or
business
environment.
The
rest
of
the
Fund’s
notable
individual
contributors
served
to
reduce
the
losses
experienced
in
other
sectors,
including
top
overall
contributor
T-Mobile
USA
(wireless
communication
and
broadband
services)
in
the
communication
services
sector.
T-Mobile,
held
by
the
Fund
through
the
2020
Cash
Mandatory
Exchangeable
Trust,
reported
quarterly
financial
metrics
that
were
ahead
of
consensus
expectations
amid
robust
subscriber
growth
and
upwardly
revised
2022
guidance.
In
our
view,
T-Mobile
is
executing
well
on
its
strategy
to
leverage
its
superior
wireless
spectrum
position
to
take
share
as
the
market
transitions
to
5G
network
technology
and
is
gaining
stronger
traction
as
a
disrupter
in
fixed
wireless
and
enterprise
markets.
Within
health
care,
biotechnology
and
pharmaceuticals
industry
stocks
(and
convertibles)
were
out
of
favor
for
most
of
the
period
but
began
to
recover
during
the
summer
of
2022,
when
they
were
among
the
best-performing
industries.
Within
the
Fund’s
portfolio,
our
investments
in
Neurocrine
Biosciences,
Revance
Therapeutics
and
Intercept
Pharmaceuticals
were
notable
contributors.
As
their
steeply
discounted
valuations
appeared
to
offer
good
entry
points
for
investors,
many
biotech
and
pharma
equities
began
to
show
some
resilience
during
selloffs
and
were
no
longer
the
prominent
underperformers
that
they
were
in
late
2021
and
the
first
four
months
of
2022.
Investors
were
still
waiting
to
see
if
this
technical
rebound
was
supported
by
fundamentals,
as
a
higher
number
of
drug
approvals,
successes
in
clinical
trials,
acquisitions
and
a
positive
regulatory
backdrop
could
go
a
long
way
toward
restoring
greater
confidence.
In
particular,
Neurocrine
develops
pharmaceuticals
for
the
treatment
of
neurological
and
endocrine-related
diseases.
The
company’s
primary
product
is
Ingrezza,
for
the
treatment
of
tardive
dyskinesia,
a
nervous
system
disorder
resulting
from
the
use
of
other
medicines
meant
to
treat
psychiatric
conditions.
Neurocrine
has
seen
steadily
growing
sales
of
Ingrezza,
aiding
the
company’s
bottom
line
even
as
some
investors
grew
concerned
about
volatile
quarter-to-quarter
operating
profit
changes
and
unexpected
expenses.
The
company
has,
however,
seen
major
improvement
in
its
profitability
when
compared
to
the
COVID-19-constrained
numbers
from
2020
and
early
2021.
Elsewhere
in
the
portfolio,
Palo
Alto
Networks
was
a
rare
outlier
to
the
upside
in
the
IT
sector,
while
RBC
Bearings
(ball
and
roller
bearing
manufacturing)
was
the
sole
contributor
in
the
industrials
sector,
where
it
helped
to
reduce
the
losses
associated
with
four
other
holdings.
In
particular,
network
security
specialist
Palo
Alto
Networks
continued
to
Franklin
Convertible
Securities
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7
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see
strong
sales
of
its
next-generation
firewall
appliances,
while
it
has
expanded
its
product
ecosystem
with
newer
cloud-based
and
AI-powered
security
services.
Thank
you
for
your
continued
participation
in
Franklin
Convertible
Securities
Fund.
We
look
forward
to
serving
your
future
investment
needs.
Alan
E.
Muschott,
CFA
Lead
Portfolio
Manager
Eric
Webster,
CFA
Portfolio
Manager
The
foregoing
information
reflects
our
analysis,
opinions
and
portfolio
holdings
as
of
October
31,
2022,
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.
Performance
Summary
as
of
October
31,
2022
Franklin
Convertible
Securities
Fund
8
franklintempleton.com
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Report
The
performance
tables
and
graphs
do
not
reflect
any
taxes
that
a
shareholder
would
pay
on
Fund
dividends,
capital
gain
distributions,
if
any,
or
any
realized
gains
on
the
sale
of
Fund
shares.
Total
return
reflects
reinvestment
of
the
Fund’s
dividends
and
capital
gain
distributions,
if
any,
and
any
unrealized
gains
or
losses.
Your
dividend
income
will
vary
depending
on
dividends
or
interest
paid
by
securities
in
the
Fund’s
portfolio,
adjusted
for
operating
expenses
of
each
class.
Capital
gain
distributions
are
net
profits
realized
from
the
sale
of
portfolio
securities.
Performance
as
of
10/31/22
1
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
2
Average
Annual
Total
Return
3
A
4
1-Year
-19.94%
-24.34%
5-Year
+67.63%
+9.64%
10-Year
+184.41%
+10.39%
Advisor
1-Year
-19.75%
-19.75%
5-Year
+69.78%
+11.17%
10-Year
+191.57%
+11.29%
30-Day
Standardized
Yield
6
Share
Class
Distribution
Rate
5
(with
fee
waiver)
(without
fee
waiver)
A
0.68%
0.71%
0.70%
Advisor
1.02%
1.00%
0.99%
See
page
10
for
Performance
Summary
footnotes.
Franklin
Convertible
Securities
Fund
Performance
Summary
9
franklintempleton.com
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Report
See
page
10
for
Performance
Summary
footnotes.