192 P1 02/21
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SUPPLEMENT DATED FEBRUARY 24, 2021
TO THE PROSPECTUS DATED SEPTEMBER 1, 2020 OF
FRANKLIN Real estate securities fund
(a series of Franklin Real Estate Securities Trust)
The prospectus is amended as follows:
I. The following is added to the “Fund Summary – Principal Investment Strategies” section of the prospectus:
The Fund is a “non-diversified” fund, which means it generally invests a greater portion of its assets in the securities of one or more issuers and invests overall in a smaller number of issuers than a diversified fund.
II. The following is added to the “Fund Summary – Principal Risks” section of the prospectus:
Non-Diversification Because the Fund is non-diversified, it may be more sensitive to economic, business, political or other changes affecting individual issuers or investments than a diversified fund, which may negatively impact the Fund's performance and result in greater fluctuation in the value of the Fund’s shares.
III. The following replaces the “Fund Summary – Investment Manager” section of the prospectus:
Investment Manager
Franklin Advisers, Inc. (“Advisers”)
IV. The following replaces the “Fund Summary – Portfolio Managers” section of the prospectus.
Portfolio Managers
Blair Schmicker, CFA
Vice President of Advisers and co-lead portfolio manager of the Fund since 2019.
Daniel Scher
Vice President of Advisers and co-lead portfolio manager of the Fund since 2019.
V. The following is added to the “Fund Details – Principal Investment Policies and Practices” section of the prospectus:
The Fund is a "non-diversified" fund, which means it generally invests a greater portion of its assets in the securities of one or more issuers and invests overall in a smaller number of issuers than a diversified fund.
VI. The following is added to the “Fund Details – Principal Risks” section of the prospectus:
Non-Diversification
The Fund is a "non-diversified" fund. It generally invests a greater portion of its assets in the securities of one or more issuers and invests overall in a smaller number of issuers than a diversified fund. The Fund may be more sensitive to a single economic, business, political, regulatory or other occurrence than a more diversified fund might be, which may result in greater fluctuation in the value of the Fund's shares and a greater risk of loss.
VII. The first paragraph under the “Fund Details – Management” section of the prospectus is replaced with the following:
Management
Franklin Advisers, Inc. (Advisers), One Franklin Parkway, San Mateo, CA 94403-1906, is the Fund's investment manager. Advisers is a wholly owned subsidiary of Franklin Resources, Inc. Together, Advisers and its affiliates manage, as of January 31, 2021, over $1.49 trillion in assets, and have been in the investment management business since 1947.
Franklin Templeton Institutional, LLC (FT Institutional), 280 Park Avenue, New York, New York 10017, served as the Fund’s investment manager from 2008 through February 24, 2021. Effective on February 24, 2021, Advisers began serving as the Fund’s investment manager pursuant to the same fee schedule as FT Institutional.
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VIII. The portfolio manager biographies under the “Fund Details – Management” section of the prospectus are replaced with the following:
Blair Schmicker, CFA Vice President of Advisers
Mr. Schmicker has been a co-lead portfolio manager of the Fund since 2019. He joined Franklin Templeton in 2007.
Daniel Scher Vice President of Advisers
Mr. Scher has been a portfolio manager of the Fund since 2014 and co-lead portfolio manager of the Fund since 2019. He joined Franklin Templeton in 2002.
IX. The second to last paragraph under the “Fund Details – Management” section of the prospectus is replaced with the following:
The Fund pays Advisers a fee for managing the Fund’s assets. For the fiscal year ended April 30, 2020, FT Institutional, the Fund’s prior investment manager, agreed to reduce its fees to reflect reduced services resulting from the Fund’s investment in a Franklin Templeton money fund. However, this fee reduction was less than 0.01% of the Fund’s average net assets. In addition, the transfer agent has contractually agreed to cap transfer agency fees for Class R6 shares of the Fund so that transfer agency fees for the class do not exceed 0.03%, until August 31, 2021. The management fees were 0.51%.
X. The following is added after the “Fund Details – Management” section of the prospectus:
Manager of Managers Structure
The investment manager and the Trust have received an exemptive order from the SEC that allows the Fund to operate in a “manager of managers” structure whereby the investment manager can appoint and replace both wholly-owned and unaffiliated sub-advisors, and enter into, amend and terminate sub-advisory agreements with such sub-advisors, each subject to board approval but without obtaining prior shareholder approval (Manager of Managers Structure). The Fund will, however, inform shareholders of the hiring of any new sub-advisor within 90 days after the hiring. The SEC exemptive order provides the Fund with greater flexibility and efficiency by preventing the Fund from incurring the expense and delays associated with obtaining shareholder approval of such sub-advisory agreements.
The use of the Manager of Managers Structure with respect to the Fund is subject to certain conditions that are set forth in the SEC exemptive order. Under the Manager of Managers Structure, the investment manager has the ultimate responsibility, subject to oversight by the Fund’s board of trustees, to oversee sub-advisors and recommend their hiring, termination and replacement. The investment manager will also, subject to the review and approval of the Fund’s board of trustees: set the Fund’s overall investment strategy; evaluate, select and recommend sub-advisors to manage all or a portion of the Fund’s assets; and implement procedures reasonably designed to ensure that each sub-advisor complies with the Fund’s investment goal, policies and restrictions. Subject to review by the Fund’s board of trustees, the investment manager will allocate and, when appropriate, reallocate the Fund’s assets among sub-advisors and monitor and evaluate the sub-advisors’ performance.
Please keep this supplement with your prospectus for future reference.
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192-SA1 02/21
SUPPLEMENT DATED FEBRUARY 24, 2021
TO THE STATEMENT OF ADDITIONAL INFORMATION
DATED SEPTEMBER 1, 2020 OF
FRANKLIN Real estate securities fund
(a series of Franklin Real Estate Securities Trust)
The Statement of Additional Information (SAI) is amended as follows:
I. Under “Goal, Strategies and Risks - Fundamental Investment Policies” the fifth Fundamental Investment Restriction is replaced with the following:
5. Purchase or sell commodities, except to the extent permitted by the 1940 Act or any rules, exemptions or interpretations thereunder that may be adopted, granted or issued by the SEC.
II. The following is added to the “Goal, Strategies and Risks – Glossary of Investments, Techniques, Strategies and Their Risks” section of the SAI:
Non-Diversification A non-diversified fund for purposes of the 1940 Act may, with respect to more than 25% of its assets, invest more than 5% of its assets (taken at market value at the time of purchase) in the outstanding securities of any single issuer and/or own more than 10% of the outstanding voting securities of any one issuer. However, the Fund intends to meet certain diversification requirements for tax purposes. Generally, to meet federal tax requirements at the close of each quarter, the Fund will not invest more than 25% of its total assets in any one issuer and, with respect to 50% of total assets, will not invest more than 5% of its total assets in any one issuer or more than 10% of the issuer's outstanding voting securities. These limitations do not apply to U.S. government securities and securities issued by regulated investment companies. If applicable federal income tax requirements are revised, the Fund may change its diversification policies without obtaining shareholder approval.
Because a non-diversified fund generally invests a greater portion of its assets in the securities of one or more issuers and/or invests overall in a smaller number of issuers than a diversified fund, the Fund may be more sensitive to a single economic, business, political, regulatory or other occurrence or to the financial results of a single issuer than a more diversified fund might be. Similarly, the Fund's credit risk increases as more of the Fund's assets are invested in a smaller number of issuers.
III. The first paragraph under the “Officers and Trustees – Proxy Voting Policies and Procedures” section of the SAI is replaced with the following:
The board of trustees of the Trust has delegated the authority to vote proxies related to the portfolio securities held by the Fund to the Fund’s investment manager, Franklin Advisers, Inc., in accordance with the Proxy Voting Policies and Procedures (Policies) adopted by the investment manager.
IV. The first paragraph under “Management and Other Services - Investment manager and services provided” section of the SAI is replaced with the following:
Investment manager and services provided Effective February 24, 2021, the Fund’s investment manager is Franklin Advisers, Inc. The investment manager is a wholly owned subsidiary of Resources, a publicly owned company engaged in the financial services industry through its subsidiaries. Charles B. Johnson (former Chairman and Director of Resources) and Rupert H. Johnson, Jr. are the principal shareholders of Resources.
V. The first paragraph under “Organization, Voting Rights and Principal Holders” section of the SAI is replaced with the following:
The Fund is a non-diversified series of Franklin Real Estate Securities Trust (the Trust), an open-end management investment company, commonly called a mutual fund. The Trust was organized as a Delaware statutory trust (a form of entity formerly known as a business trust) on September 22, 1993, and is registered with the SEC.
Please keep this supplement with your SAI for future reference.
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The Board of Trustees of Franklin Real Estate Securities Trust (Trust), on behalf of Franklin Real Estate Securities Fund
(Fund), recently approved, subject to shareholder approval: (1) a new investment management agreement between the Trust and
Franklin Advisers, Inc., on behalf of the Fund; (2) a change in the Fund’s classification from a “diversified”
to a “non-diversified” fund; (3) the operation of the Fund in a “manager of managers” structure in reliance
on an exemptive order from the Securities and Exchange Commission; and (4) an amended fundamental investment restriction regarding
investments in commodities.
It is anticipated that in September 2020 shareholders of the Fund will receive a proxy statement requesting their votes on
such proposals. If such proposals are approved by the Fund’s shareholders, it is expected that such changes will become
effective in late 2020 or early 2021.
The Fund reserves the right to change the above at any time.
Investment Goal
Maximize total return.
Fees and Expenses of the Fund
These tables describe the fees and expenses that you may pay if you buy and hold shares of the Fund.
Please note that the tables and examples below do not reflect any transaction fees that may be charged by financial intermediaries, or commissions that a shareholder may be required to pay directly to its financial intermediary when buying or selling Class R6 or Advisor Class shares.
Shareholder Fees (fees paid directly from your investment)
| Class A | Class C | Class R6 | Advisor Class | |
| Maximum Sales Charge (Load) Imposed on Purchases (as percentage of offering price) | ||||
| Maximum Deferred Sales Charge (Load) (as percentage of the lower of original purchase price or sale proceeds) |
1. There is a 1% contingent deferred sales charge that applies to investments of $1 million or more (see "Investments of $1 Million or More" under "Choosing a Share Class") and purchases by certain retirement plans without an initial sales charge on shares sold within 18 months of purchase.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
| Class A | Class C | Class R6 | Advisor Class | |
| Management fees | ||||
| Distribution and service (12b-1) fees | ||||
| Other expenses | ||||
| Total annual Fund operating expenses | ||||
| Fee waiver and/or expense reimbursement | - |
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| Total annual Fund operating expenses after fee waiver and/or expense reimbursement |
1. The transfer agent has contractually agreed to cap transfer agency fees for Class R6 shares of the Fund so that transfer agency fees for that class do not exceed 0.03% until August 31, 2021. Contractual fee waiver and/or expense reimbursement agreements may not be changed or terminated during the time period set forth above.
Example
This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of the period. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. The Example reflects adjustments made to the Fund's operating expenses due to the fee waivers and/or expense reimbursements by management for the 1 Year numbers only. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| 1 Year | 3 Years | 5 Years | 10 Years | |
| Class A | $ |
$ |
$ |
$ |
| Class C | $ |
$ |
$ |
$ |
| Class R6 | $ |
$ |
$ |
$ |
| Advisor Class | $ |
$ |
$ |
$ |
| Class C | $ |
$ |
$ |
$ |
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A
higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held
in a taxable account. These costs, which are not reflected in annual Fund operating expenses or in the Example, affect the
Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was
Principal Investment Strategies
A REIT is a type of real estate company that is dedicated to owning and usually operating income-producing real estate such as apartments, hotels, industrial properties, office building or shopping centers. REITs typically concentrate on a specific geographic region or property type. The Fund's investments in REITs also include non-traditional REITs such as those that focus on storage and self-storage facilities, cell tower owners and data center owners. While the Fund is not limited to investing in REITs and REIT-like entities, it is expected that the Fund currently will focus on these types of entities. The Fund may also invest up to 20% of its net assets in equity securities of issuers engaged in businesses whose products and services are closely related to the real estate industry. These include manufacturers and distributors of building supplies; financial institutions that issue or service mortgages, such as savings and loan associations or mortgage bankers; and companies whose principal business is unrelated to the real estate industry but which have significant real estate holdings (at least 50% of their assets).
The Fund is a "non-diversified" fund, which means it generally invests a greater portion of its assets in the securities of one or more issuers and may invest overall in a smaller number of issuers than a diversified fund.
The Fund concentrates in securities of companies in the real estate industry, primarily REITs. The Fund currently expects to be invested predominantly in equity securities. The Fund may invest a small portion of its assets in securities of issuers in any foreign country, developed or developing, and in American, European and Global Depositary Receipts. In addition, certain U.S. REITs may hold significant positions in securities of foreign issuers.
When selecting investments for the Fund’s portfolio, the investment manager uses a “bottom-up" security selection process that incorporates macro-level views in the evaluation process. The investment manager’s portfolio construction process combines: bottom-up analysis of individual stock and real estate market fundamentals; and top-down macro overlays to provide regional, property type, and company size perspectives in identifying local cyclical and thematic trends that highlight investment opportunities.
Principal Risks
You could lose money by investing in the Fund. Mutual fund shares are not deposits or obligations of, or guaranteed or endorsed by, any bank, and are not insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency of the U.S. government.
Real Estate Securities By concentrating in the real estate industry, the Fund carries much greater risk of adverse developments in the real estate industry than a fund that invests in a wide variety of industries. Because the Fund concentrates in the real estate industry, there is also the risk that the Fund will perform poorly during a slump in demand for real estate securities. To the extent that the Fund focuses on a particular geographical region of a country, the Fund may be subject to greater risks of adverse developments in that area than a fund that does not focus its investments in a particular region. Real estate values rise and fall in response to a variety of factors, including: local, regional, national and global economic conditions; interest rates; tax and insurance considerations; changes in zoning and other property-related laws; environmental regulations or hazards; overbuilding; increases in property taxes and operating expenses; or value decline in a neighborhood. When economic growth is slow, demand for property decreases and prices may decline.
REITs A REIT's performance depends on the types, values and locations of the properties and companies it owns and how well those properties and companies are managed. A decline in rental income may occur because of extended vacancies, increased competition from other properties, tenants' failure to pay rent or poor management. Because a REIT may be invested in a limited number of projects or in a particular market segment, it may be more susceptible to adverse developments affecting a single project or market segment than more broadly diversified investments. Loss of status as a qualified REIT under the U.S. federal tax laws could adversely affect the value of a particular REIT or the market for REITs as a whole. These risks may also apply to securities of REIT-like entities domiciled outside the U.S.
Market The market values of securities or other investments owned by the Fund will go up or down, sometimes rapidly or unpredictably. The market value of a security or other investment may be reduced by market activity or other results of supply and demand unrelated to the issuer. This is a basic risk associated with all investments. When there are more sellers than buyers, prices tend to fall. Likewise, when there are more buyers than sellers, prices tend to rise.
Stock prices tend to go up and down more dramatically than those of debt securities. A slower-growth or recessionary economic environment could have an adverse effect on the prices of the various stocks held by the Fund.
Foreign Securities (non-U.S.) Investing in foreign securities typically involves more risks than investing in U.S. securities, including risks related to currency exchange rates and policies, country or government specific issues, less favorable trading practices or regulation and greater price volatility. Certain of these risks also may apply to securities of U.S. companies with significant foreign operations. The risks of investing in foreign securities are typically greater in less developed or emerging market countries.
Trade disputes and the imposition of tariffs on goods and services can affect the economies of countries in which the Fund invests, particularly those countries with large export sectors, as well as the global economy. Trade disputes can result in increased costs of production and reduced profitability for non-export-dependent companies that rely on imports to the extent a country engages in retaliatory tariffs. Trade disputes may also lead to increased currency exchange rate volatility.
Non-Diversification
Management The Fund is subject to management risk because it is an actively managed investment portfolio. The Fund's investment manager applies investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that these decisions will produce the desired results.
Performance
Class A Annual Total Returns
| - |
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Average Annual Total Returns
(figures reflect sales charges)
For the periods ended December 31, 2019
| 1 Year | 5 Years | 10 Years | |
| Franklin Real Estate Securities Fund - Class A | |||
| Franklin Real Estate Securities Fund - Class C | |||
| Franklin Real Estate Securities Fund - Class R6 | |||
| Franklin Real Estate Securities Fund - Advisor Class | |||
| MSCI US IMI Real Estate 25/50 Index (index reflects no deduction for fees, expenses or taxes)2 |
1. Since inception May 1, 2013.
2. The inception date of the MSCI US IMI Real Estate 25/50 Index was September 1, 2016; however, the performance prior to its inception has been calculated by MSCI for purposes of the table above.
The figures in the average annual total returns table above reflect the Class A maximum front-end sales charge of 5.50%. Prior to September 10, 2018, Class A shares were subject to a maximum front-end sales charge of 5.75%. If the prior maximum front-end sales charge of 5.75% was reflected, performance for Class A in the average annual total returns table would be lower.
The after-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown only for Class A and after-tax returns for other classes will vary.
Investment Manager
Franklin Advisers, Inc. (Advisers)
Portfolio Managers
Blair Schmicker, CFA Vice President of Advisers and co-lead portfolio manager of the Fund since 2019.
Daniel Scher Vice President of Advisers and co-lead portfolio manager of the Fund since 2019.
Purchase and Sale of Fund Shares
You may purchase or redeem shares of the Fund on any business day online through our website at franklintempleton.com, by mail (Franklin Templeton Investor Services, P.O. Box 997151, Sacramento, CA 95899-7151), or by telephone at (800) 632-2301. For Class A and C, the minimum initial purchase for most accounts is $1,000 (or $25 under an automatic investment plan). Class R6 and Advisor Class are only available to certain qualified investors and the minimum initial investment will vary depending on the type of qualified investor, as described under "Your Account — Choosing a Share Class — Qualified Investors — Class R6" and "— Advisor Class" in the Fund's prospectus. There is no minimum investment for subsequent purchases.
Taxes
The Fund’s distributions are generally taxable to you as ordinary income, capital gains, or some combination of both, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account, in which case your distributions would generally be taxed when withdrawn from the tax-deferred account.
Payments to Broker-Dealers and
Other Financial Intermediaries
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your financial advisor or visit your financial intermediary's website for more information.