Form N-CSRS Legg Mason Global Asset For: Mar 31

May 25, 2022 1:10 PM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-22338

 

 

Legg Mason Global Asset Management Trust

(Exact name of registrant as specified in charter)

 

 

620 Eighth Avenue, 47th Floor, New York, NY 10018

(Address of principal executive offices) (Zip code)

 

 

Marc A. De Oliveira

Franklin Templeton

100 First Stamford Place

Stamford, CT 06902

(Name and address of agent for service)

 

 

Registrant’s telephone number, including area code: 877-6LM-FUND/656-3863

Date of fiscal year end: September 30

Date of reporting period: March 31, 2022

 

 

 


ITEM 1. REPORT TO STOCKHOLDERS.

The Semi-Annual Report to Stockholders is filed herewith.


LOGO

 

Semi-Annual Report

 

 

March 31, 2022

 

FRANKLIN

STRATEGIC REAL

RETURN FUND

 

 

 

INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE


What’s inside      
Letter from the president     II  
Performance review     III  
Fund at a glance     1  
Fund expenses     2  
Consolidated schedule of investments     4  
Consolidated statement of assets and liabilities     15  
Consolidated statement of operations     17  
Consolidated statements of changes in net assets     18  
Consolidated financial highlights     19  
Notes to consolidated financial statements     23  
Statement regarding liquidity risk management program     40  

Fund objective

The Fund seeks to provide an attractive long-term real return.

 

Letter from the president

 

LOGO

Dear Shareholder,

We are pleased to provide the semi-annual report of Franklin Strategic Real Return Fund for the six-month reporting period ended March 31, 2022. Please read on for Fund performance information during the Fund’s reporting period.

Special shareholder notice

It is anticipated that Thomas Picciochi will step down as a member of the Fund’s portfolio management team effective on or about June 30, 2022. For more information, please see the Fund’s prospectus supplement dated March 11, 2022.

As always, we remain committed to providing you with excellent service and a full spectrum of investment choices. We also remain committed to supplementing the support you receive from your financial advisor. One way we accomplish this is through our website, www.franklintempleton.com. Here you can gain immediate access to market and investment information, including:

 

 

Fund prices and performance,

 

 

Market insights and commentaries from our portfolio managers, and

 

 

A host of educational resources.

We look forward to helping you meet your financial goals.

Sincerely,

 

LOGO

Jane Trust, CFA

President and Chief Executive Officer

April 29, 2022

 

 

II

   Franklin Strategic Real Return Fund


Performance review

 

For the six months ended March 31, 2022, Class A shares of Franklin Strategic Real Return Fund, excluding sales charges, returned 7.53%. The Fund’s unmanaged benchmark, the Bloomberg U.S. Treasury Inflation-Linked Bond Indexi, returned -0.73% for the same period. The Composite Indexii, representing the Fund’s underlying investments, returned 5.84% over the same time frame. The Lipper Real Return Funds Category Averageiii returned 10.49% over the same time frame.

 

Performance Snapshot as of March 31, 2022  (unaudited)  
(excluding sales charges)   6 months  
Franklin Strategic Real Return Fund:  

Class A

    7.53

Class C

    8.55

Class I

    7.68

Class IS

    7.69
Bloomberg U.S. Treasury Inflation-Linked Bond Index     -0.73
Composite Index     5.84
Lipper Real Return Funds Category Average     10.49

The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. Principal value and investment returns will fluctuate and investors’ shares, when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month-end, please visit our website at www.franklintempleton.com.

All share class returns assume the reinvestment of all distributions, including returns of capital, if any, at net asset value and the deduction of all Fund expenses. Returns have not been adjusted to include sales charges that may apply or the deduction of taxes that a shareholder would pay on Fund distributions. If sales charges were reflected, the performance quoted would be lower. Performance figures for periods shorter than one year represent cumulative figures and are not annualized.

Fund performance figures reflect fee waivers and/or expense reimbursements, without which the performance would have been lower.

 

Total Annual Operating Expenses (unaudited)

As of the Fund’s current prospectus dated January 28, 2022, the gross total annual fund operating expense ratios for Class A, Class C, Class I and Class IS shares were 1.66%, 2.45%, 1.53% and 1.11%, respectively.

Actual expenses may be higher. For example, expenses may be higher than those shown if average net assets decrease. Net assets are more likely to decrease and Fund expense ratios are more likely to increase when markets are volatile.

As a result of expense limitation arrangements, the ratio of total annual fund operating expenses, other than interest, brokerage commissions (except for brokerage commissions paid on purchases and sales of shares of exchange-traded funds (“ETFs”)), dividend expense on short sales, taxes and extraordinary expenses, to average net assets will not exceed 1.35% for Class A shares, 2.10% for Class C shares, 1.10% for Class I shares and 1.00% for Class IS shares. In addition, the ratio of total

 

Franklin Strategic Real Return Fund  

 

III


Performance review (cont’d)

 

annual fund operating expenses for Class IS shares will not exceed the ratio of total annual fund operating expenses for Class I shares. Acquired fund fees and expenses are subject to these arrangements. These expense limitation arrangements cannot be terminated prior to December 31, 2023 without the Board of Trustees’ consent.

 

The manager is permitted to recapture amounts waived and/or reimbursed to a class within three years after the fiscal year in which the manager earned the fee or incurred the expense if the class’ total annual fund operating expenses have fallen to a level below the expense limitation (“expense cap”) in effect at the time the fees were earned or the expenses incurred. In no case will the manager recapture any amount that would result, on any particular business day of the Fund, in the class’ total annual fund operating expenses exceeding the expense cap or any other lower limit then in effect.

As always, thank you for your confidence in our stewardship of your assets.

Sincerely,

 

LOGO

Jane Trust, CFA

President and Chief Executive Officer

April 29, 2022

RISKS: The Fund is subject to interest rate, credit, income, prepayment and inflation risks. As interest rates rise, bond prices fall, reducing the value of a fixed income investment. Changes in inflation will cause the Fund’s income to fluctuate, sometimes substantially. Periods of deflation may adversely affect the Fund’s net asset value. Equity securities are subject to market and price fluctuations. The Fund is non-diversified, and therefore it is permitted to invest a larger percentage of its assets in a smaller number of issuers than a diversified fund, which may magnify the Fund’s losses from events affecting a particular issuer. The Fund is subject to the risks of the underlying funds in which it invests. In addition to the Fund’s operating expenses, you will indirectly bear the operating expenses of any underlying funds, including ETFs. Each underlying fund may engage in active and frequent trading, resulting in higher portfolio turnover and transaction costs. Derivatives, such as options and futures, can be illiquid, may disproportionately increase losses and have a potentially large impact on Fund performance. International investments are subject to special risks including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. Emerging market countries tend to have economic, political, and legal systems that are less developed and are less stable than those of more developed countries. The Fund may use leverage, which may increase volatility and possibility of loss. The Fund may invest in REITs, which are closely linked to the performance of the real estate markets. The Fund is subject to the illiquidity, credit and interest rate risks of REITs, as well as risks associated with small- and mid-cap investments. The model used to manage the Fund’s assets provides no

 

 

IV

   Franklin Strategic Real Return Fund


assurance that the recommended allocation will either maximize returns or minimize risks. There is no assurance that a recommended allocation will prove the ideal allocation in all circumstances. The Fund may engage in short selling, which is a speculative strategy that involves special risks. Unlike the possible loss on a security that is purchased, there is no limit on the amount of loss on an appreciating security that is sold short. Additional risks may include those risks associated with investing in commodities, ETFs, exchange-traded notes (ETNs) and master limited partnerships (MLPs). Please see the Fund’s prospectus for a more complete discussion of these and other risks and the Fund’s investment strategies.

All investments are subject to risk including the possible loss of principal. Past performance is no guarantee of future results. All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

 

        

 

i 

The Bloomberg U.S. Treasury Inflation-Linked Bond Index represents an unmanaged market index made up of U.S. Treasury Inflation Protected securities (TIPS).

 

ii

The Composite Index reflects the blended rate of return of the following underlying indices: 40% Bloomberg U.S. Treasury Inflation-Linked Bond Index, 20% MSCI All Country World Index, 20% S&P GSCI®, 10% FTSE NAREIT All REITs Index and 10% FTSE 1-Month U.S. Treasury Bill Index. The Composite Index is hedged to 50% exposure to the U.S. dollar, as defined by the U.S. Dollar Index (USDX). The Composite Index’s unhedged currency exposure is predominantly U.S. dollar-based. The Fund’s target hedged currency exposure is 50% U.S. dollar, 50% non-U.S. dollar. The Fund may deviate, either up or down, from its target currency allocation due to market conditions.

 

iii

Lipper, Inc., a wholly-owned subsidiary of Refinitiv, provides independent insight on global collective investments. Returns are based on the six-month period ended March 31, 2022, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 94 funds in the Fund’s Lipper category, and excluding sales charges, if any.

 

Franklin Strategic Real Return Fund  

 

V


Fund at a glance (unaudited)

 

Investment breakdown (%) as a percent of total investments

 

 

LOGO

 

The bar graph above represents the composition of the Fund’s investments as of March 31, 2022 and September 30, 2021 and does not include derivatives, such as futures contracts and forward foreign currency contracts. The Fund is actively managed. As a result, the composition of the Fund’s investments is subject to change at any time.

 

Franklin Strategic Real Return Fund 2022 Semi-Annual Report    

 

 

1

 


Fund expenses (unaudited)

 

Example

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including front-end and back-end sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; service and/or distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This example is based on an investment of $1,000 invested on October 1, 2021 and held for the six months ended March 31, 2022.

Actual expenses

The table below titled “Based on Actual Total Return” provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During the Period”.

 

Hypothetical example for comparison purposes

The table below titled “Based on Hypothetical Total Return” provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as front-end or back-end sales charges (loads). Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

 

Based on actual total return1                 Based on hypothetical total return1  
    

Actual

Total Return

Without

Sales

Charge2

   

Beginning

Account

Value

    Ending
Account
Value
    Annualized
Expense
Ratio3
    Expenses
Paid
During
the
Period4
               Hypothetical
Annualized
Total Return
    Beginning
Account
Value
    Ending
Account
Value
    Annualized
Expense
Ratio3
    Expenses
Paid
During
the
Period4
 
Class A     7.53   $ 1,000.00     $ 1,075.30       1.30   $ 6.73       Class A     5.00   $ 1,000.00     $ 1,018.45       1.30   $ 6.54  
Class C     8.55       1,000.00       1,085.50       2.06       10.71       Class C     5.00       1,000.00       1,014.66       2.06       10.35  
Class I     7.68       1,000.00       1,076.80       1.05       5.44       Class I     5.00       1,000.00       1,019.70       1.05       5.29  
Class IS     7.69       1,000.00       1,076.90       0.95       4.92       Class IS     5.00       1,000.00       1,020.19       0.95       4.78  

 

 

 2 

    Franklin Strategic Real Return Fund 2022 Semi-Annual Report


 

1 

For the six months ended March 31, 2022.

 

2 

Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value and does not reflect the deduction of the applicable sales charge with respect to Class A shares or the applicable contingent deferred sales charge (“CDSC”) with respect to Class C shares. Total return is not annualized, as it may not be representative of the total return for the year. Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results.

 

3 

Does not include fees and expenses of the Underlying Funds in which the Fund invests.

 

4 

Expenses (net of compensating balance arrangements, fee waivers and/or expense reimbursements) are equal to each class’ respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (182), then divided by 365.

 

Franklin Strategic Real Return Fund 2022 Semi-Annual Report    

 

3


Consolidated schedule of investments (unaudited)

March 31, 2022

 

Franklin Strategic Real Return Fund

(Percentages shown based on Fund net assets)

 

Security   Rate     Maturity
Date
    Face
Amount†
    Value  
U.S. Treasury Inflation Protected Securities — 38.9%                                

U.S. Treasury Bonds, Inflation Indexed

    2.500     1/15/29       1,309,490     $ 1,596,062  

U.S. Treasury Bonds, Inflation Indexed

    3.875     4/15/29       2,223,286       2,941,128  

U.S. Treasury Bonds, Inflation Indexed

    2.125     2/15/40       494,293       699,603  

U.S. Treasury Bonds, Inflation Indexed

    0.750     2/15/42       2,612,883       2,988,996  

U.S. Treasury Bonds, Inflation Indexed

    1.375     2/15/44       3,341,562       4,288,119  

U.S. Treasury Bonds, Inflation Indexed

    0.250     2/15/50       601,458       632,543  

U.S. Treasury Notes, Inflation Indexed

    0.625     4/15/23       2,716,488       2,832,556  

U.S. Treasury Notes, Inflation Indexed

    0.375     7/15/23       2,416,220       2,536,514  

U.S. Treasury Notes, Inflation Indexed

    0.625     1/15/24       2,650,846       2,788,499  

U.S. Treasury Notes, Inflation Indexed

    0.500     4/15/24       1,660,963       1,746,056  

U.S. Treasury Notes, Inflation Indexed

    0.125     4/15/25       424,495       443,833  

U.S. Treasury Notes, Inflation Indexed

    0.625     1/15/26       6,129,131       6,536,576  

U.S. Treasury Notes, Inflation Indexed

    0.125     4/15/26       3,537,798       3,699,326  

U.S. Treasury Notes, Inflation Indexed

    0.125     10/15/26       1,440,418       1,514,760  

U.S. Treasury Notes, Inflation Indexed

    0.750     7/15/28       560,020       612,813  

U.S. Treasury Notes, Inflation Indexed

    0.875     1/15/29       5,344,560       5,904,544  

U.S. Treasury Notes, Inflation Indexed

    0.250     7/15/29       769,384       821,884  

U.S. Treasury Notes, Inflation Indexed

    0.125     1/15/30       1,857,675       1,962,317  

U.S. Treasury Notes, Inflation Indexed

    0.125     1/15/32       1,115,653       1,187,608  

Total U.S. Treasury Inflation Protected Securities (Cost — $44,755,410)

 

    45,733,737  
                   Shares         
Common Stocks — 21.1%                                
Communication Services — 1.6%                                

Diversified Telecommunication Services — 0.1%

                               

LG Uplus Corp.

                    12,100       139,421  (a) 

Entertainment — 0.5%

                               

Activision Blizzard Inc.

                    1,738       139,231  

Electronic Arts Inc.

                    970       122,715  

NetEase Inc., ADR

                    1,430       128,256  

Nintendo Co. Ltd.

                    300       151,369  (a) 

Total Entertainment

                            541,571  

Interactive Media & Services — 0.8%

                               

Alphabet Inc., Class A Shares

                    153       425,546  * 

Alphabet Inc., Class C Shares

                    140       391,019  * 

Auto Trader Group PLC

                    14,233       117,823  (a) 

Meta Platforms Inc., Class A Shares

                    286       63,595  * 

Total Interactive Media & Services

                            997,983  

 

See Notes to Consolidated Financial Statements.

 

 

4

    Franklin Strategic Real Return Fund 2022 Semi-Annual Report


Franklin Strategic Real Return Fund

(Percentages shown based on Fund net assets)

 

Security                 Shares     Value  

Wireless Telecommunication Services — 0.2%

                               

MTN Group Ltd.

                    15,200     $ 196,951  (a) 

Total Communication Services

                            1,875,926  
Consumer Discretionary — 1.9%                                

Automobiles — 0.1%

                               

Kia Corp.

                    2,600       157,903  (a) 

Hotels, Restaurants & Leisure — 0.2%

                               

Jack in the Box Inc.

                    1,195       111,625  

Yum! Brands Inc.

                    1,142       135,361  

Total Hotels, Restaurants & Leisure

                            246,986  

Household Durables — 0.1%

                               

PulteGroup Inc.

                    3,600       150,840  

Internet & Direct Marketing Retail — 0.4%

                               

Amazon.com Inc.

                    85       277,096  

eBay Inc.

                    2,100       120,246  

Total Internet & Direct Marketing Retail

                            397,342  

Multiline Retail — 0.2%

                               

Canadian Tire Corp. Ltd., Class A Shares

                    800       120,792  

Target Corp.

                    720       152,798  

Total Multiline Retail

                            273,590  

Specialty Retail — 0.6%

                               

AutoZone Inc.

                    75       153,344  

Home Depot Inc.

                    600       179,598  

Lowe’s Cos. Inc.

                    960       194,102  

TJX Cos. Inc.

                    2,500       151,450  

Total Specialty Retail

                            678,494  

Textiles, Apparel & Luxury Goods — 0.3%

                               

Deckers Outdoor Corp.

                    300       82,131  

Pandora A/S

                    1,738       164,432  (a) 

Under Armour Inc., Class A Shares

                    5,200       88,504  

Total Textiles, Apparel & Luxury Goods

                            335,067  

Total Consumer Discretionary

                            2,240,222  
Consumer Staples — 1.6%                                

Beverages — 0.3%

                               

Remy Cointreau SA

                    750       154,526  (a) 

Treasury Wine Estates Ltd.

                    15,600       133,626  (a) 

Total Beverages

                            288,152  

Food & Staples Retailing — 0.6%

                               

George Weston Ltd.

                    1,300       160,089  

Kroger Co.

                    2,900       166,373  

 

See Notes to Consolidated Financial Statements.

 

Franklin Strategic Real Return Fund 2022 Semi-Annual Report    

 

5


Consolidated schedule of investments (unaudited) (cont’d)

March 31, 2022

 

Franklin Strategic Real Return Fund

(Percentages shown based on Fund net assets)

 

Security                 Shares     Value  

Food & Staples Retailing — continued

                               

Walgreens Boots Alliance Inc.

                    3,800       $170,126  

Walmart Inc.

                    1,600       238,272  

Total Food & Staples Retailing

                            734,860  

Food Products — 0.3%

                               

Hershey Co.

                    650       140,809  

Ingredion Inc.

                    1,017       88,632  

JBS SA

                    17,000       133,863  

Total Food Products

                            363,304  

Household Products — 0.2%

                               

Procter & Gamble Co.

                    1,229       187,791  

Tobacco — 0.2%

                               

Japan Tobacco Inc.

                    6,300       107,844  (a) 

Swedish Match AB

                    19,000       142,919  (a) 

Total Tobacco

                            250,763  

Total Consumer Staples

                            1,824,870  
Energy — 1.8%                                

Oil, Gas & Consumable Fuels — 1.8%

                               

BP PLC

                    42,000       205,255  (a) 

China Shenhua Energy Co. Ltd., Class H Shares

                    54,500       173,839  (a) 

ENEOS Holdings Inc.

                    29,000       108,997  (a) 

EOG Resources Inc.

                    1,740       207,460  

Exxon Mobil Corp.

                    3,700       305,583  

Lundin Energy AB

                    4,200       178,057  (a) 

Marathon Petroleum Corp.

                    2,300       196,650  

PetroChina Co. Ltd., Class H Shares

                    280,000       143,388  (a) 

Phillips 66

                    2,100       181,419  

Shell PLC

                    8,900       244,250  (a) 

Valero Energy Corp.

                    1,700       172,618  

Total Energy

                            2,117,516  
Financials — 1.9%                                

Banks — 0.8%

                               

Bank of America Corp.

                    1,930       79,555  

Citigroup Inc.

                    2,433       129,922  

Comerica Inc.

                    1,800       162,774  

JPMorgan Chase & Co.

                    600       81,792  

Lloyds Banking Group PLC

                    189,203       115,830  (a) 

Postal Savings Bank of China Co. Ltd., Class H Shares

                    129,000       104,148  (a) 

Wells Fargo & Co.

                    4,400       213,224  

Total Banks

                            887,245  

 

See Notes to Consolidated Financial Statements.

 

 

6

    Franklin Strategic Real Return Fund 2022 Semi-Annual Report


Franklin Strategic Real Return Fund

(Percentages shown based on Fund net assets)

 

Security                 Shares     Value  

Capital Markets — 0.2%

                               

Ameriprise Financial Inc.

                    438     $ 131,557  

CI Financial Corp.

                    8,000       127,089  

Total Capital Markets

                            258,646  

Consumer Finance — 0.4%

                               

Capital One Financial Corp.

                    1,083       142,187  

Discover Financial Services

                    1,606       176,965  

Synchrony Financial

                    4,300       149,683  

Total Consumer Finance

                            468,835  

Insurance — 0.5%

                               

Allianz SE, Registered Shares

                    829       197,961  (a) 

Allstate Corp.

                    1,520       210,535  

Legal & General Group PLC

                    29,298       103,887  (a) 

Prudential Financial Inc.

                    1,139       134,596  

Total Insurance

                            646,979  

Total Financials

                            2,261,705  
Health Care — 2.4%                                

Biotechnology — 0.5%

                               

Biogen Inc.

                    488       102,773  

Regeneron Pharmaceuticals Inc.

                    329       229,780  

Vertex Pharmaceuticals Inc.

                    810       211,385  

Total Biotechnology

                            543,938  

Health Care Equipment & Supplies — 0.1%

                               

Masimo Corp.

                    711       103,479  * 

Health Care Providers & Services — 1.1%

                               

Anthem Inc.

                    480       235,786  

Cardinal Health Inc.

                    2,000       113,400  

HCA Healthcare Inc.

                    860       215,533  

McKesson Corp.

                    700       214,291  

Molina Healthcare Inc.

                    600       200,154  

UnitedHealth Group Inc.

                    700       356,979  

Total Health Care Providers & Services

                            1,336,143  

Life Sciences Tools & Services — 0.1%

                               

Bio-Rad Laboratories Inc., Class A Shares

                    260       146,440  * 

Pharmaceuticals — 0.6%

                               

Novo Nordisk A/S, Class B Shares

                    1,987       220,054  (a) 

Ono Pharmaceutical Co. Ltd.

                    6,400       160,733  (a) 

Pfizer Inc.

                    4,300       222,611  

Shionogi & Co. Ltd.

                    1,900       116,686  (a) 

Total Pharmaceuticals

                            720,084  

Total Health Care

                            2,850,084  

 

See Notes to Consolidated Financial Statements.

 

Franklin Strategic Real Return Fund 2022 Semi-Annual Report    

 

7


Consolidated schedule of investments (unaudited) (cont’d)

March 31, 2022

 

Franklin Strategic Real Return Fund

(Percentages shown based on Fund net assets)

 

Security   Shares     Value  
Industrials — 3.1%                

Air Freight & Logistics — 0.3%

               

Deutsche Post AG, Registered Shares

    2,600       $124,848  (a) 

United Parcel Service Inc., Class B Shares

    880       188,725  

Total Air Freight & Logistics

            313,573  

Airlines — 0.1%

               

Southwest Airlines Co.

    3,400       155,720 *  

Building Products — 0.2%

               

Lennox International Inc.

    600       154,716  

Masco Corp.

    2,900       147,900  

Total Building Products

            302,616  

Electrical Equipment — 0.1%

               

ABB Ltd., Registered Shares

    4,100       132,649 (a)  

Industrial Conglomerates — 0.3%

               

3M Co.

    1,200       178,656  

CITIC Ltd.

    65,000       72,035  (a) 

LG Corp.

    1,167       73,265  (a) 

Total Industrial Conglomerates

            323,956  

Machinery — 0.8%

               

Caterpillar Inc.

    940       209,451  

CNH Industrial NV

    9,000       142,507  (a) 

Cummins Inc.

    843       172,908  

Deere & Co.

    500       207,730  

GEA Group AG

    3,100       128,081  (a) 

Zoomlion Heavy Industry Science and Technology Co. Ltd., Class H Shares

    125,200       79,275  (a) 

Total Machinery

            939,952  

Marine — 0.3%

               

A.P. Moller - Maersk A/S, Class B Shares

    53       159,750  (a) 

Evergreen Marine Corp. Ltd.

    33,000       154,326  (a) 

Total Marine

            314,076  

Professional Services — 0.2%

               

ManpowerGroup Inc.

    1,200       112,704  

Wolters Kluwer NV

    1,617       172,129  (a) 

Total Professional Services

            284,833  

Trading Companies & Distributors — 0.8%

               

Marubeni Corp.

    17,700       206,498  (a) 

Mitsubishi Corp.

    4,600       173,319  (a) 

Mitsui & Co. Ltd.

    5,600       152,542  (a) 

 

See Notes to Consolidated Financial Statements.

 

 

8

    Franklin Strategic Real Return Fund 2022 Semi-Annual Report


Franklin Strategic Real Return Fund

(Percentages shown based on Fund net assets)

 

Security                 Shares     Value  

Trading Companies & Distributors — continued

                               

Sumitomo Corp.

                    10,800     $ 187,277  (a) 

W.W. Grainger Inc.

                    332       171,242  

Total Trading Companies & Distributors

                            890,878  

Total Industrials

                            3,658,253  
Information Technology — 4.3%                                

Communications Equipment — 0.2%

                               

Cisco Systems Inc.

                    4,008       223,486  

IT Services — 0.3%

                               

Adyen NV

                    47       92,852  *(a) 

CGI Inc.

                    1,600       127,460  

Gartner Inc.

                    600       178,476  

Total IT Services

                            398,788  

Semiconductors & Semiconductor Equipment — 1.4%

                               

Advanced Micro Devices Inc.

                    1,800       196,812  

Applied Materials Inc.

                    1,600       210,880  

ASM International NV

                    482       174,725  (a) 

ASML Holding NV

                    415       276,805  (a) 

KLA Corp.

                    522       191,083  

MediaTek Inc.

                    4,000       124,716  (a) 

Powertech Technology Inc.

                    38,000       125,419  (a) 

QUALCOMM Inc.

                    1,235       188,733  

United Microelectronics Corp.

                    94,000       173,594  (a) 

Total Semiconductors & Semiconductor Equipment

                            1,662,767  

Software — 1.1%

                               

Check Point Software Technologies Ltd.

                    1,224       169,230  

Fortinet Inc.

                    600       205,044  

Microsoft Corp.

                    2,982       919,381  

Total Software

                            1,293,655  

Technology Hardware, Storage & Peripherals — 1.3%

                               

Apple Inc.

                    6,538       1,141,600  

Logitech International SA, Registered Shares

                    1,300       96,345  (a) 

Samsung Electronics Co. Ltd.

                    3,826       218,570  (a) 

Total Technology Hardware, Storage & Peripherals

                            1,456,515  

Total Information Technology

                            5,035,211  
Materials — 1.9%                                

Chemicals — 0.3%

                               

Huntsman Corp.

                    4,912       184,249  

LyondellBasell Industries NV, Class A Shares

                    1,700       174,794  

Total Chemicals

                            359,043  

 

See Notes to Consolidated Financial Statements.

 

Franklin Strategic Real Return Fund 2022 Semi-Annual Report    

 

9


Consolidated schedule of investments (unaudited) (cont’d)

March 31, 2022

 

Franklin Strategic Real Return Fund

(Percentages shown based on Fund net assets)

 

Security                 Shares     Value  

Metals & Mining — 1.5%

                               

Anglo American Platinum Ltd.

                    1,016     $ 139,518  (a) 

BHP Group Ltd.

                    4,650       178,281  (a) 

First Quantum Minerals Ltd.

                    4,700       162,713  

Fortescue Metals Group Ltd.

                    11,700       179,546  (a) 

Glencore PLC

                    27,300       177,416  (a) 

Nucor Corp.

                    1,425       211,826  

POSCO Holdings Inc.

                    500       120,086  (a) 

Rio Tinto PLC

                    2,750       218,146  (a) 

Teck Resources Ltd., Class B Shares

                    4,100       165,555  

Vale SA

                    9,800       196,616  

Total Metals & Mining

                            1,749,703  

Paper & Forest Products — 0.1%

                               

Louisiana-Pacific Corp.

                    2,600       161,512  

Total Materials

                            2,270,258  
Real Estate — 0.6%                                

Equity Real Estate Investment Trusts (REITs) — 0.4%

                               

Host Hotels & Resorts Inc.

                    7,400       143,782  

Klepierre SA

                    5,300       140,917  (a) 

Stockland

                    40,000       126,266  (a) 

Total Equity Real Estate Investment Trusts (REITs)

                            410,965  

Real Estate Management & Development — 0.2%

                               

Daito Trust Construction Co. Ltd.

                    1,300       137,930  (a) 

Sun Hung Kai Properties Ltd.

                    8,500       101,253  (a) 

Total Real Estate Management & Development

                            239,183  

Total Real Estate

                            650,148  

Total Common Stocks (Cost — $17,532,478)

                            24,784,193  
Investments in Underlying Funds — 8.3%                                

Vanguard Real Estate ETF (Cost — $3,718,134)

                    90,565       9,814,529  
     Rate     Maturity
Date
    Face
Amount†
        
Corporate Bonds & Notes — 2.0%                                
Energy — 1.0%                                

Energy Equipment & Services — 0.0%††

                               

Halliburton Co., Senior Notes

    3.800     11/15/25       2,000       2,045  

Oil, Gas & Consumable Fuels — 1.0%

                               

Apache Corp., Senior Notes

    2.625     1/15/23       29,000       28,950  

Apache Corp., Senior Notes

    4.750     4/15/43       60,000       56,829  

BP Capital Markets America Inc., Senior Notes

    3.588     4/14/27       240,000       243,818  

Devon Energy Corp., Senior Notes

    5.850     12/15/25       230,000       249,130  

 

See Notes to Consolidated Financial Statements.

 

 

10

    Franklin Strategic Real Return Fund 2022 Semi-Annual Report


 

 

Franklin Strategic Real Return Fund

(Percentages shown based on Fund net assets)

 

Security   Rate    

Maturity

Date

   

Face

Amount†

    Value  

Oil, Gas & Consumable Fuels — continued

                               

Energy Transfer LP, Senior Notes

    2.900     5/15/25       20,000     $ 19,584  

Enterprise Products Operating LLC, Senior Notes

    3.125     7/31/29       120,000       117,973  

Enterprise Products Operating LLC, Senior Notes

    2.800     1/31/30       60,000       57,750  

Exxon Mobil Corp., Senior Notes

    3.043     3/1/26       50,000       50,505  

Kinder Morgan Inc., Senior Notes

    4.300     6/1/25       80,000       82,253  

Occidental Petroleum Corp., Senior Notes

    5.550     3/15/26       40,000       42,447  

Occidental Petroleum Corp., Senior Notes

    3.000     2/15/27       60,000       58,775  

Occidental Petroleum Corp., Senior Notes

    3.500     8/15/29       50,000       49,335  

Transcontinental Gas Pipe Line Co. LLC, Senior Notes

    7.850     2/1/26       80,000       91,787  

Western Midstream Operating LP, Senior Notes

    3.600     2/1/25       30,000       29,844  

Total Oil, Gas & Consumable Fuels

                            1,178,980  

Total Energy

                            1,181,025  
Materials — 1.0%                                

Metals & Mining — 0.8%

                               

Anglo American Capital PLC, Senior Notes

    4.000     9/11/27       200,000       200,744  (b) 

Antofagasta PLC, Senior Notes

    2.375     10/14/30       200,000       177,399  (b) 

ArcelorMittal SA, Senior Notes

    7.000     10/15/39       50,000       58,812  

Glencore Funding LLC, Senior Notes

    4.125     3/12/24       40,000       40,568  (b) 

Glencore Funding LLC, Senior Notes

    4.000     3/27/27       50,000       50,229  (b) 

Glencore Funding LLC, Senior Notes

    3.875     10/27/27       90,000       89,856  (b) 

Southern Copper Corp., Senior Notes

    5.250     11/8/42       220,000       249,346  

Teck Resources Ltd., Senior Notes

    3.750     2/1/23       40,000       40,102  

Vale Overseas Ltd., Senior Notes

    6.250     8/10/26       50,000       54,946  

Total Metals & Mining

                            962,002  

Paper & Forest Products — 0.2%

                               

Inversiones CMPC SA, Senior Notes

    4.375     4/4/27       200,000       209,595  (c) 

Total Materials

                            1,171,597  

Total Corporate Bonds & Notes (Cost — $2,313,497)

 

            2,352,622  
Non-U.S. Treasury Inflation Protected Securities — 0.8%

 

                       

Canada — 0.8%

                               

Canadian Government Real Return Bond

    4.250     12/1/26       661,764  CAD      647,297  

Canadian Government Real Return Bond

    1.500     12/1/44       175,969  CAD      167,974  

Canadian Government Real Return Bond

    0.500     12/1/50       134,158  CAD      106,177  

Total Non-U.S. Treasury Inflation Protected Securities (Cost — $953,012)

 

    921,448  
Sovereign Bonds — 0.5%                                

Indonesia — 0.2%

                               

Indonesia Government International Bond, Senior Notes

    4.750     2/11/29       200,000       221,560  

 

See Notes to Consolidated Financial Statements.

 

Franklin Strategic Real Return Fund 2022 Semi-Annual Report    

 

11


Consolidated schedule of investments (unaudited) (cont’d)

March 31, 2022

 

Franklin Strategic Real Return Fund

(Percentages shown based on Fund net assets)

 

Security

  Rate    

Maturity

Date

   

Face

Amount†

    Value  

Peru — 0.1%

                               

Peruvian Government International Bond, Senior Notes

    2.783     1/23/31       160,000     $ 151,040  

United Arab Emirates — 0.2%

                               

Abu Dhabi Government International Bond, Senior Notes

    2.500     9/30/29       200,000       196,408  (b) 

Total Sovereign Bonds (Cost — $580,952)

 

    569,008  

Total Investments before Short-Term Investments (Cost — $69,853,483)

 

    84,175,537  
                   Shares         
Short-Term Investments — 26.1%                                

Dreyfus Government Cash Management, Institutional Shares

    0.201             1,523,795       1,523,795  

Invesco Government & Agency Portfolio, Institutional Class

    0.262             28,630,751       28,630,751  

Invesco Treasury Portfolio, Institutional Class

    0.172             466,682       466,682  

Total Short-Term Investments (Cost — $30,621,228)

 

            30,621,228  

Total Investments — 97.7% (Cost — $100,474,711)

 

    114,796,765  

Other Assets in Excess of Liabilities — 2.3%

                            2,649,019  

Total Net Assets — 100.0%

                          $ 117,445,784  

 

Face amount denominated in U.S. dollars, unless otherwise noted.

 

††

Represents less than 0.1%.

 

*

Non-income producing security.

 

(a) 

Security is valued in good faith in accordance with procedures approved by the Board of Trustees (Note 1).

 

(b) 

Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid pursuant to guidelines approved by the Board of Trustees.

 

(c) 

Security is exempt from registration under Regulation S of the Securities Act of 1933. Regulation S applies to securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. This security has been deemed liquid pursuant to guidelines approved by the Board of Trustees.

 

Abbreviation(s) used in this schedule:

ADR   — American Depositary Receipts
CAD   — Canadian Dollar
ETF   — Exchange-Traded Fund

 

See Notes to Consolidated Financial Statements.

 

 

12

    Franklin Strategic Real Return Fund 2022 Semi-Annual Report


 

 

Franklin Strategic Real Return Fund

 

At March 31, 2022, the Fund had the following open futures contracts:

 

     

Number of

Contracts

    

Expiration

Date

    

Notional

Amount

    

Market

Value

    

Unrealized

Appreciation

(Depreciation)

 
Contracts to Buy:                                             
E-mini S&P 500 Index      26        6/22      $ 5,768,592      $ 5,889,975      $ 121,383  
S&P GSCI      129        4/22        26,406,693        23,390,925        (3,015,768)  
U.S. Treasury 5-Year Notes      14        6/22        1,647,357        1,605,625        (41,732)  
U.S. Treasury 10-Year Notes      14        6/22        1,729,297        1,720,250        (9,047)  
U.S. Treasury Ultra Long- Term Bonds      2        6/22        346,066        354,250        8,184  
Net unrealized depreciation on open futures contracts

 

            $ (2,936,980)  

At March 31, 2022, the Fund had the following open forward foreign currency contracts:

 

Currency

Purchased

   

Currency

Sold

    Counterparty   Settlement
Date
   

Unrealized

Appreciation
(Depreciation)

 
AUD     3,939,000     USD     2,883,517     Bank of New York     4/8/22     $ 64,286  
JPY     27,200,000     USD     229,185     Bank of New York     4/8/22       (5,728)  
USD     870,200     EUR     784,000     Bank of New York     4/8/22       2,709  
AUD     5,184,000     USD     3,867,245     Citibank N.A.     4/8/22       12,270  
CAD     2,313,000     USD     1,815,888     Citibank N.A.     4/8/22       34,255  
CAD     6,776,000     USD     5,319,697     Citibank N.A.     4/8/22       100,350  
CHF     8,221,000     USD     8,800,685     Citibank N.A.     4/8/22       98,263  
JPY     379,000,000     USD     3,140,451     Citibank N.A.     4/8/22       (26,847)  
SEK     13,450,000     USD     1,357,842     Citibank N.A.     4/8/22       72,838  
SEK     17,000,000     USD     1,792,815     Citibank N.A.     4/8/22       15,480  
USD     939,547     CAD     1,205,000     Citibank N.A.     4/8/22       (24,319)  
USD     4,540,947     SEK     44,980,000     Citibank N.A.     4/8/22       (243,588)  
AUD     3,114,000     USD     2,295,044     HSBC Securities Inc.     4/8/22       35,359  
CAD     1,552,000     USD     1,226,150     HSBC Securities Inc.     4/8/22       15,277  
CHF     566,000     USD     612,034     HSBC Securities Inc.     4/8/22       642  
CHF     664,000     USD     708,665     HSBC Securities Inc.     4/8/22       10,092  
CHF     1,123,000     USD     1,216,203     HSBC Securities Inc.     4/8/22       (595)  
EUR     2,141,000     USD     2,375,242     HSBC Securities Inc.     4/8/22       (6,240)  
EUR     3,614,000     USD     3,964,883     HSBC Securities Inc.     4/8/22       33,984  
EUR     17,391,000     USD     19,007,421     HSBC Securities Inc.     4/8/22       235,606  
GBP     2,153,000     USD     2,839,234     HSBC Securities Inc.     4/8/22       (11,142)  
GBP     3,011,000     USD     3,970,708     HSBC Securities Inc.     4/8/22       (15,583)  
JPY     221,300,000     USD     1,921,799     HSBC Securities Inc.     4/8/22       (103,750)  
JPY     530,700,000     USD     4,608,670     HSBC Securities Inc.     4/8/22       (248,803)  
MXN     46,170,000     USD     2,178,247     HSBC Securities Inc.     4/8/22       139,824  
NZD     3,339,000     USD     2,288,167     HSBC Securities Inc.     4/8/22       25,746  

 

See Notes to Consolidated Financial Statements.

 

Franklin Strategic Real Return Fund 2022 Semi-Annual Report    

 

 

13

 


Consolidated schedule of investments (unaudited) (cont’d)

March 31, 2022

 

Franklin Strategic Real Return Fund

 

Currency

Purchased

   

Currency

Sold

    Counterparty   Settlement
Date
   

Unrealized

Appreciation
(Depreciation)

 
NZD     4,229,000     USD     2,893,214     HSBC Securities Inc.     4/8/22     $ 37,466  
NZD     9,051,000     USD     6,277,810     HSBC Securities Inc.     4/8/22       (5,504)  
SEK     26,820,000     USD     2,851,611     HSBC Securities Inc.     4/8/22       1,240  
USD     2,304,451     AUD     3,134,000     HSBC Securities Inc.     4/8/22       (40,919)  
USD     4,413,943     AUD     5,989,000     HSBC Securities Inc.     4/8/22       (68,004)  
USD     2,113,985     CAD     2,660,000     HSBC Securities Inc.     4/8/22       (13,720)  
USD     10,235,385     CHF     9,451,000     HSBC Securities Inc.     4/8/22       5,004  
USD     5,433,034     EUR     4,971,000     HSBC Securities Inc.     4/8/22       (67,345)  
USD     417,723     GBP     317,000     HSBC Securities Inc.     4/8/22       1,325  
USD     771,393     GBP     588,000     HSBC Securities Inc.     4/8/22       (979)  
USD     1,644,590     GBP     1,248,000     HSBC Securities Inc.     4/8/22       5,269  
USD     5,421,977     JPY     627,500,000     HSBC Securities Inc.     4/8/22       266,867  
USD     952,802     NOK     8,380,000     HSBC Securities Inc.     4/8/22       1,032  
USD     4,319,241     NOK     37,960,000     HSBC Securities Inc.     4/8/22       7,880  
USD     951,378     NZD     1,387,000     HSBC Securities Inc.     4/8/22       (9,807)  
USD     8,150,096     NZD     11,893,000     HSBC Securities Inc.     4/8/22       (91,705)  
NOK     19,870,000     USD     2,203,794     UBS Securities LLC     4/8/22       52,970  
NOK     46,730,000     USD     5,182,853     UBS Securities LLC     4/8/22       124,573  
SEK     1,160,000     USD     120,116     UBS Securities LLC     4/8/22       3,274  
USD     43,740     NOK     390,000     UBS Securities LLC     4/8/22       (555)  
USD     659,882     CAD     840,000     Goldman Sachs Group Inc.     4/19/22       (11,979)  
Total

 

  $ 406,769  

 

Abbreviation(s) used in this table:

AUD   — Australian Dollar
CAD   — Canadian Dollar
CHF   — Swiss Franc
EUR   — Euro
GBP   — British Pound
JPY   — Japanese Yen
MXN   — Mexican Peso
NOK   — Norwegian Krone
NZD   — New Zealand Dollar
SEK   — Swedish Krona
USD   — United States Dollar

 

See Notes to Consolidated Financial Statements.

 

 

14

    Franklin Strategic Real Return Fund 2022 Semi-Annual Report


Consolidated statement of assets and liabilities (unaudited)

March 31, 2022

 

Assets:         

Investments, at value (Cost — $100,474,711)

   $ 114,796,765  

Foreign currency, at value (Cost — $1,723,390)

     1,731,974  

Deposits with brokers for open futures contracts

     4,342,657  

Unrealized appreciation on forward foreign currency contracts

     1,403,881  

Interest and dividends receivable

     217,006  

Receivable for Fund shares sold

     202,308  

Prepaid expenses

     32,982  

Total Assets

     122,727,573  
Liabilities:         

Foreign currency collateral due to brokers for open futures contracts, at value (Cost — $2,050,506)

     2,077,227  

Payable for securities purchased

     1,070,842  

Unrealized depreciation on forward foreign currency contracts

     997,112  

Payable to brokers — net variation margin on open futures contracts

     915,963  

Payable for Fund shares repurchased

     100,545  

Investment management fee payable

     21,297  

Service and/or distribution fees payable

     1,198  

Trustees’ fees payable

     853  

Accrued expenses

     96,752  

Total Liabilities

     5,281,789  
Total Net Assets    $ 117,445,784  
Net Assets:         

Par value (Note 7)

   $ 100  

Paid-in capital in excess of par value

     96,527,782  

Total distributable earnings (loss)

     20,917,902  
Total Net Assets    $ 117,445,784  

 

See Notes to Consolidated Financial Statements.

 

Franklin Strategic Real Return Fund 2022 Semi-Annual Report    

 

15


Consolidated statement of assets and liabilities (unaudited) (cont’d)

March 31, 2022

 

Net Assets:         

Class A

     $7,180,009  

Class C

     $459,356  

Class I

     $218,316  

Class IS

     $109,588,103  
Shares Outstanding:         

Class A

     620,960  

Class C

     40,947  

Class I

     18,242  

Class IS

     9,315,845  
Net Asset Value:         

Class A (and redemption price)

     $11.56  

Class C*

     $11.22  

Class I (and redemption price)

     $11.97  

Class IS (and redemption price)

     $11.76  
Maximum Public Offering Price Per Share:         

Class A (based on maximum initial sales charge of 5.75%)

     $12.27  

 

*

Redemption price per share is NAV of Class C shares reduced by a 1.00% CDSC if shares are redeemed within one year from purchase payment (Note 2).

 

See Notes to Consolidated Financial Statements.

 

 

16

    Franklin Strategic Real Return Fund 2022 Semi-Annual Report


Consolidated statement of operations (unaudited)

For the Six Months Ended March 31, 2022

 

Investment Income:         

Dividends

   $ 406,262  

Interest

     920,652  

Less: Foreign taxes withheld

     (15,377)  

Total Investment Income

     1,311,537  
Expenses:         

Investment management fee (Note 2)

     422,082  

Fund accounting fees

     58,941  

Audit and tax fees

     36,134  

Registration fees

     33,791  

Legal fees

     17,880  

Commodity pool reports

     5,994  

Shareholder reports

     4,718  

Trustees’ fees

     3,887  

Service and/or distribution fees (Notes 2 and 5)

     3,391  

Transfer agent fees (Note 5)

     2,317  

Custody fees

     1,150  

Interest expense

     900  

Insurance

     416  

Fees recaptured by investment manager (Note 2)

     151  

Miscellaneous expenses

     5,609  

Total Expenses

     597,361  

Less: Fee waivers and/or expense reimbursements (Notes 2 and 5)

     (59,155)  

Net Expenses

     538,206  
Net Investment Income      773,331  

Realized and Unrealized Gain (Loss) on Investments, Futures Contracts,

Forward Foreign Currency Contracts and Foreign Currency Transactions (Notes 1, 3 and 4):

 

 

Net Realized Gain (Loss) From:

        

Investment transactions

     5,080,276  

Futures contracts

     11,773,113  

Forward foreign currency contracts

     (2,198,198)  

Foreign currency transactions

     (72,644)  

Net Realized Gain

     14,582,547  

Change in Net Unrealized Appreciation (Depreciation) From:

        

Investments

     (3,499,905)  

Futures contracts

     (4,422,003)  

Forward foreign currency contracts

     980,622  

Foreign currencies

     (17,859)  

Change in Net Unrealized Appreciation (Depreciation)

     (6,959,145)  
Net Gain on Investments, Futures Contracts, Forward Foreign Currency Contracts and Foreign Currency Transactions      7,623,402  
Increase in Net Assets From Operations    $ 8,396,733  

 

See Notes to Consolidated Financial Statements.

 

Franklin Strategic Real Return Fund 2022 Semi-Annual Report    

 

 

17

 


Consolidated statements of changes in net assets

 

For the Six Months Ended March 31, 2022 (unaudited)

and the Year Ended September 30, 2021

   2022      2021  
Operations:                  

Net investment income

   $ 773,331      $ 1,583,191  

Net realized gain

     14,582,547        13,866,382  

Change in net unrealized appreciation (depreciation)

     (6,959,145)        7,087,589  

Increase in Net Assets From Operations

     8,396,733        22,537,162  
Distributions to Shareholders From (Notes 1 and 6):                  

Total distributable earnings

     (17,876,153)        (2,398,862)  

Decrease in Net Assets From Distributions to Shareholders

     (17,876,153)        (2,398,862)  
Fund Share Transactions (Note 7):                  

Net proceeds from sale of shares

     6,307,622        4,081,591  

Reinvestment of distributions

     17,864,036        2,397,295  

Cost of shares repurchased

     (8,269,244)        (10,536,194)  

Increase (Decrease) in Net Assets From Fund Share Transactions

     15,902,414        (4,057,308)  

Increase in Net Assets

     6,422,994        16,080,992  
Net Assets:                  

Beginning of period

     111,022,790        94,941,798  

End of period

   $ 117,445,784      $ 111,022,790  

 

See Notes to Consolidated Financial Statements.

 

 

18

    Franklin Strategic Real Return Fund 2022 Semi-Annual Report


Consolidated financial highlights

 

For a share of each class of beneficial interest outstanding throughout each year ended September 30,
unless otherwise noted:
 
Class A Shares1   20222     2021     2020     2019     2018     2017  
Net asset value, beginning of period     $12.72       $10.54       $11.15       $12.24       $11.93       $11.63  
Income (loss) from operations:            

Net investment income

    0.07       0.21       0.05       0.14       0.13       0.05  

Net realized and unrealized gain (loss)

    0.78       2.23       (0.24)       (0.30)       0.60       0.49  

Total income (loss) from operations

    0.85       2.44       (0.19)       (0.16)       0.73       0.54  
Less distributions from:            

Net investment income

    (1.30)       (0.16)       (0.05)       (0.49)       (0.10)        

Net realized gains

    (0.71)       (0.10)       (0.37)       (0.44)       (0.32)       (0.24)  

Total distributions

    (2.01)       (0.26)       (0.42)       (0.93)       (0.42)       (0.24)  
Net asset value, end of period     $11.56       $12.72       $10.54       $11.15       $12.24       $11.93  

Total return3

    7.53     23.37     (1.74)     (0.73)     6.32     4.75
Net assets, end of period (000s)     $7,180       $1,704       $259       $272       $324       $551  
Ratios to average net assets:            

Gross expenses4

    1.50 %5      1.63     1.81     1.68     1.54     1.49 %6 

Net expenses4,7,8

    1.30 5      1.30       1.31       1.32       1.33       1.33 6 

Net investment income

    1.18 5      1.75       0.43       1.27       1.11       0.46  
Portfolio turnover rate     29     41     43     44     61     42

 

1 

Per share amounts have been calculated using the average shares method.

 

2 

For the six months ended March 31, 2022 (unaudited).

 

3 

Performance figures, exclusive of sales charges, may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.

 

4 

Does not include fees and expenses of the Underlying Funds in which the Fund invests.

 

5 

Annualized.

 

6 

Reflects recapture of expenses waived/reimbursed from prior fiscal years.

 

7 

Reflects fee waivers and/or expense reimbursements.

 

8 

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage commissions (except for brokerage commissions paid on purchases and sales of shares of ETFs), dividend expense on short sales, taxes and extraordinary expenses, to average net assets of Class A shares did not exceed 1.35%. This expense limitation arrangement cannot be terminated prior to December 31, 2023 without the Board of Trustees’ consent. Acquired fund fees and expenses are subject to the expense limitation arrangement.

 

See Notes to Consolidated Financial Statements.

 

Franklin Strategic Real Return Fund 2022 Semi-Annual Report    

 

19


Consolidated financial highlights (cont’d)

 

For a share of each class of beneficial interest outstanding throughout each year ended September 30,
unless otherwise noted:
 
Class C Shares1   20222     2021     2020     2019     2018     2017  
Net asset value, beginning of period     $12.14       $10.13       $10.79       $11.82       $11.52       $11.31  
Income (loss) from operations:            

Net investment income (loss)

    0.06       0.02       (0.04)       0.04       0.05       (0.02)  

Net realized and unrealized gain (loss)

    0.85       2.23       (0.21)       (0.27)       0.57       0.47  

Total income (loss) from operations

    0.91       2.25       (0.25)       (0.23)       0.62       0.45  
Less distributions from:            

Net investment income

    (1.12)       (0.14)       (0.04)       (0.36)              

Net realized gains

    (0.71)       (0.10)       (0.37)       (0.44)       (0.32)       (0.24)  

Total distributions

    (1.83)       (0.24)       (0.41)       (0.80)       (0.32)       (0.24)  
Net asset value, end of period     $11.22       $12.14       $10.13       $10.79       $11.82       $11.52  

Total return3

    8.55     22.53     (2.54)     (1.51)     5.51     3.98
Net assets, end of period (000s)     $459       $13       $54       $81       $183       $196  
Ratios to average net assets:            

Gross expenses4

    2.28 %5      2.42     2.45     2.42 %6      2.34     2.28 %6 

Net expenses4,7,8

    2.06 5      2.05       2.06       2.07 6      2.08       2.08 6 

Net investment income (loss)

    1.17 5      0.20       (0.37)       0.40       0.44       (0.18)  
Portfolio turnover rate     29     41     43     44     61     42

 

1 

Per share amounts have been calculated using the average shares method.

 

2 

For the six months ended March 31, 2022 (unaudited).

 

3 

Performance figures, exclusive of CDSC, may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.

 

4 

Does not include fees and expenses of the Underlying Funds in which the Fund invests.

 

5 

Annualized.

 

6 

Reflects recapture of expenses waived/reimbursed from prior fiscal years.

 

7 

Reflects fee waivers and/or expense reimbursements.

 

8 

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage commissions (except for brokerage commissions paid on purchases and sales of shares of ETFs), dividend expense on short sales, taxes and extraordinary expenses, to average net assets of Class C shares did not exceed 2.10%. This expense limitation arrangement cannot be terminated prior to December 31, 2023 without the Board of Trustees’ consent. Acquired fund fees and expenses are subject to the expense limitation arrangement.

 

See Notes to Consolidated Financial Statements.

 

 

20

    Franklin Strategic Real Return Fund 2022 Semi-Annual Report


 

For a share of each class of beneficial interest outstanding throughout each year ended September 30,
unless otherwise noted:
 
Class I Shares1   20222     2021     2020     2019     2018     2017  
Net asset value, beginning of period     $13.07       $10.81       $11.40       $12.52       $12.22       $11.87  
Income (loss) from operations:            

Net investment income

    0.09       0.05       0.06       0.16       0.18       0.11  

Net realized and unrealized gain (loss)

    0.80       2.48       (0.22)       (0.31)       0.60       0.48  

Total income (loss) from operations

    0.89       2.53       (0.16)       (0.15)       0.78       0.59  
Less distributions from:            

Net investment income

    (1.28)       (0.17)       (0.06)       (0.53)       (0.16)        

Net realized gains

    (0.71)       (0.10)       (0.37)       (0.44)       (0.32)       (0.24)  

Total distributions

    (1.99)       (0.27)       (0.43)       (0.97)       (0.48)       (0.24)  
Net asset value, end of period     $11.97       $13.07       $10.81       $11.40       $12.52       $12.22  

Total return3

    7.68     23.72     (1.55)     (0.52)     6.62     5.08
Net assets, end of period (000s)     $218       $51       $515       $1,684       $1,854       $1,674  
Ratios to average net assets:            

Gross expenses4

    1.15 %5,6      1.50     1.31 %6      1.30 %6      1.18     1.20 %6 

Net expenses4,7,8

    1.05 5,6      1.05       1.06 6      1.07 6      1.08       1.08 6 

Net investment income

    1.55 5      0.44       0.51       1.41       1.47       0.97  
Portfolio turnover rate     29     41     43     44     61     42

 

1 

Per share amounts have been calculated using the average shares method.

 

2 

For the six months ended March 31, 2022 (unaudited).

 

3 

Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.

 

4 

Does not include fees and expenses of the Underlying Funds in which the Fund invests.

 

5 

Annualized.

 

6 

Reflects recapture of expenses waived/reimbursed from prior fiscal years.

 

7 

Reflects fee waivers and/or expense reimbursements.

 

8 

As a result of an expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage commissions (except for brokerage commissions paid on purchases and sales of shares of ETFs), dividend expense on short sales, taxes and extraordinary expenses, to average net assets of Class I shares did not exceed 1.10%. This expense limitation arrangement cannot be terminated prior to December 31, 2023 without the Board of Trustees’ consent. Acquired fund fees and expenses are subject to the expense limitation arrangement.

 

See Notes to Consolidated Financial Statements.

 

Franklin Strategic Real Return Fund 2022 Semi-Annual Report    

 

21


Consolidated financial highlights (cont’d)

 

For a share of each class of beneficial interest outstanding throughout each year ended September 30,
unless otherwise noted:
 
Class IS Shares1   20222     2021     2020     2019     2018     2017  
Net asset value, beginning of period     $12.91       $10.67       $11.25       $12.36       $12.08       $11.73  
Income (loss) from operations:            

Net investment income

    0.08       0.18       0.08       0.18       0.19       0.11  

Net realized and unrealized gain (loss)

    0.80       2.33       (0.23)       (0.31)       0.58       0.48  

Total income (loss) from operations

    0.88       2.51       (0.15)       (0.13)       0.77       0.59  
Less distributions from:            

Net investment income

    (1.32)       (0.17)       (0.06)       (0.54)       (0.17)        

Net realized gains

    (0.71)       (0.10)       (0.37)       (0.44)       (0.32)       (0.24)  

Total distributions

    (2.03)       (0.27)       (0.43)       (0.98)       (0.49)       (0.24)  
Net asset value, end of period     $11.76       $12.91       $10.67       $11.25       $12.36       $12.08  

Total return3

    7.69     23.88     (1.45)     (0.35)     6.62     5.14
Net assets, end of period (000s)     $109,588       $109,255       $93,150       $94,463       $102,792       $101,496  
Ratios to average net assets:            

Gross expenses4

    1.05 %5      1.08     1.17 %6      1.17 %6      1.11 %6      1.08

Net expenses4,7,8

    0.95 5      0.95       0.96 6      0.97 6      0.98 6      0.98  

Net investment income

    1.38 5      1.48       0.78       1.65       1.55       0.91  
Portfolio turnover rate     29     41     43     44     61     42

 

1 

Per share amounts have been calculated using the average shares method.

 

2 

For the six months ended March 31, 2022 (unaudited).

 

3 

Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.

 

4 

Does not include fees and expenses of the Underlying Funds in which the Fund invests.

 

5 

Annualized.

 

6 

Reflects recapture of expenses waived/reimbursed from prior fiscal years.

 

7 

Reflects fee waivers and/or expense reimbursements.