<PAGE>
Templeton Real Estate
Securities
- --------------------------------------------------------------------------------
Your Fund's Objective:
Templeton Real Estate Securities Fund seeks long-term capital growth by
investing primarily in securities of domestic and foreign companies which are
principally engaged in or related to the real estate industry, or which own
significant real estate assets. Current income is a secondary objective.
- --------------------------------------------------------------------------------
April 17, 1995
Dear Shareholder:
For investors who enjoyed substantial returns on their international portfolios
in 1993, the past year was a sobering experience. Early on in 1994, the
performance of global securities declined sharply, as rising interest rates put
downward pressure on stock prices worldwide. During the past six months -- the
period covered in this report of the Templeton Real Estate Securities Fund --
the international economic environment and the securities markets remained
volatile.
Much of this volatility was centered around emerging markets, which experienced
the majority of stock price fluctuations.
As we search the world in pursuit of value in real estate securities, we are
acutely aware that in certain countries investment conditions have changed
dramatically over the past year. For example, land prices in Hong Kong (which
were at very high levels) have come down sharply.
In the U.S., interest rate increases had a profound impact on real estate
equities. In an effort to slow economic growth and keep inflation in check, the
Federal Reserve Board raised interest rates six times during 1994. The impact on
U.S. real estate equities was predictable and immediate: Real Estate Investment
Trusts (REITs) underperformed the Standard & Poor's 500 Index.
Shareholders in the Templeton Real Estate Securities Fund could not escape from
these macro-economic events. Largely due to global interest rate increases, the
Fund's total return performance during the fiscal period
1
<PAGE>
that ended February 28, 1995 did not keep pace with its more positive historical
results.
The Performance Summary on page 6 highlights the importance of looking beyond
short-term market fluctuations to the longer-term benefits of global investing.
Although the Fund's shorter-term performance was disappointing (-8.88% for the
six-month period and -12.10% over one year ), the Fund delivered a total return
of 46.50% since its inception on September 12, 1989./1/
Strong Prospects for Global Real Estate
Despite inevitable short-term volatility in real estate markets worldwide, we
continue to believe in global investment in real estate related equities. One
reason is that many more real estate investment opportunities are available
abroad than in the United States. Consider that Malaysia, Thailand, Korea and
Indonesia, are home to 175 investable real estate companies. This is a very
impressive number for these four relatively small emerging market nations.
1. Total return measures the change in value of an investment, assuming
reinvestment of dividends and capital gains distributions, and does not include
the maximum initial sales charge. Past performance is not indicative of future
results.
Moreover, international valuations often are more attractive than their U.S.
counterparts, and the Canadian real estate market is a good example. Because of
the superior values available in that market, we increased the Fund's Canadian
holdings significantly during the last six months. Canada is now the Fund's
second largest geographic weighting and is home to one of our recent, and best
performing, holdings: Canlan Investment Corporation.
- --------------------------------------------------------------------------------
Templeton Real Estate Securities Fund
Geographic Distribution on 2/28/95
Based on Total Net Assets
<TABLE>
<CAPTION>
Description Amount
--------------------- ------------------
<S> <C>
United States 54.1%
Canada 6.3%
Australia 2.1%
Latin America 2.5%
Asia 11.9%
Europe 14.7%
Short-Term Obligations
& Other Net Assets 8.4%
</TABLE>
2
<PAGE>
Canlan, a relatively small development company, has shown ability to generate
exceptionally high returns on its investments. The company has also gained
increased investor attention primarily due to its profitable investments in ice
hockey rinks, where demand is high and supply is limited. Hoping to capitalize
on this imbalance, the company has embarked on a strategy of investing in ice
arenas across Canada, with plans to expand into the United States over the next
few years. Another aspect to Canlan is the development of its 330-acre
residential golf course community in British Columbia. Judging by sales of lots,
which are moving faster than management anticipated, this project will also be
very successful.
We were able to purchase Canlan stock for approximately 75% of the stock's net
asset value. The current management owns 25% of the company and has an
outstanding track record. Shareholders' equity has doubled since 1988 -- a
remarkable achievement during a difficult period for the Canadian real estate
market. The company's long-term prospects have not gone unnoticed by the media,
and, in fact, were recently featured in The Wall Street Journal./2/
2. Larry M. Greenberg, "Canadian Developer Bets on Hockey Craze in the U.S.,"
The Wall Street Journal, January 9, 1995, Sec. C, p. 1.
The Hong Kong Market
After Canada, the Fund's highest international concentration is in Hong Kong.
Rising interest rates and uncertainty surrounding the transition to Chinese rule
in 1997 have hurt the performance of Hong Kong investments. However, we are
hopeful that Hong Kong will survive, and even prosper, under Chinese rule.
Commercial and residential real estate prices have shown signs of stabilizing,
and affordability ratios have improved dramatically from the same time last
year. Because of very high demand, limited supply, strong economic growth, and a
growing population, the Fund's Hong Kong holdings represent a good value at
present.
- --------------------------------------------------------------------------------
Templeton Real Estate
Securities Fund
Top 10 Holdings on 2/28/95
Based on Total Net Assets
<TABLE>
<CAPTION>
% of Total
Company, Industry, Country Net Assets
- --------------------------------------------------------------------------------
<S> <C>
Patten Corp., United States 2.8%
- --------------------------------------------------------------------------------
Rouse Co. United States 2.5%
- --------------------------------------------------------------------------------
LTC Properties, Inc., United States 2.3%
- --------------------------------------------------------------------------------
Revenue Property, Ltd, Canada 2.1%
- --------------------------------------------------------------------------------
Property Trust of America, United States 2.1%
- --------------------------------------------------------------------------------
Security Capital Industrial Trust, United States 2.0%
- --------------------------------------------------------------------------------
Canlan Investment Corp., Canada 2.0%
- --------------------------------------------------------------------------------
McArthur/Glen Realty Corp., United States 2.0%
- --------------------------------------------------------------------------------
Weeks Corp., United States 1.8%
- --------------------------------------------------------------------------------
Wessel & Vett AS, C, Denmark 1.8%
- --------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
We continue to search for investment opportunities throughout Asia in general
because of the prospects of continued strong economic growth in that region.
Also, we're confident that the low level of home ownership in many Asian
countries is likely to create new opportunities for those with the patience and
diligence to search for them. At the end of this reporting period, Asian
securities made up 11.9% of the Fund's total net assets.
Of course, international investments carry special risks, and the Fund's share
price and returns will fluctuate with market conditions, currency volatility,
and the economic, and political climates where investments are made. Because the
fund focuses on the real estate industry, the price may be more volatile than
those of more broadly diversified investments.
Moreover, there are additional risks associated with investments in developing
markets, due to the relatively small size of the markets and the lesser
liquidity of their securities. Keep in mind that, while short-term volatility
can be disconcerting, declines of as much as 40% to 50% are not unusual in
emerging markets. For example, the Hong Kong market has increased 1000% in the
last 15 years, but has suffered nine declines of more than 20% during that time.
These special risks and other considerations are discussed in the Fund's
prospectus.
The U.S. Market: a closer look
We remain optimistic about the U.S. real estate market, which is reflected in
the Fund's composition: 39 of the 85 companies represented are domiciled in the
United States. The U.S. remains the single largest country weighting in the
Fund, and that weighting increased from 39.7% of total net assets on August 31,
1994 to 54.1% on February 28, 1995.
Our confidence in the near-term future of U.S. real estate is based on rising
occupancy and rental rates, and on excellent property values in selected
domestic markets. Research by Jones Lang Wootton, worldwide real estate
specialists, confirms that office prices in several U.S. cities currently are
among the most attractive in the world.
As we search for new investment opportunities in the United States, we will
continue to focus on REITs, which comprised 54% of the Fund's U.S. assets at the
end of this period. Despite their disappointing performance in 1994, we believe
REITs remain a good value over the longer
4
<PAGE>
term primarily because they offer important benefits that are not always
associated with direct investments in real estate: liquidity, instantaneous
pricing and experienced management.
One of the more attractive investments in the U.S., but not classified as a
REIT, is Rouse Company, the Maryland based owner of primarily retail shopping
malls. Rouse also has industrial holdings as well as extensive land holdings in
Columbia, Maryland, a fast growing suburb in the Baltimore/Washington corridor.
The company is significantly undervalued relative to its underlying asset value.
Moreover, operating results should improve substantially because of cost
reduction and more centralized corporate overhead responsibilities.
Our Commitment to Shareholders
Most importantly, we thank you for your support, and we aim to deserve your
continued support in the future. As we look to the future, we are excited
because global real estate investing is only in its nascent stages. Potential
opportunities abound. Our goal, delivering superior, longer-term results to
shareholders of the Templeton Real Estate Securities Fund, remains intact, along
with our intrinsic philosophy of searching for the most undervalued securities
anywhere in the world. Toward that end, Templeton's global research analysts
remain committed to providing you only the highest caliber research, analysis
and portfolio management.
Sincerely,
/s/ Mark Holowesko
Mark Holowesko
President
/s/ Jeffrey A. Everett
Jeffrey A. Everett
Portfolio Manager
5
<PAGE>
Performance Summary
The Templeton Real Estate Securities Fund reported a total return of -8.88% for
the six-month period ended February 28, 1995. Total return measures the change
in value of an investment, assuming reinvestment of dividends and capital gains
distributions, and does not include the maximum initial sales charge. Of course,
we have always maintained a long-term perspective when managing the Fund, and we
encourage shareholders to view their investments in a similar manner. As you can
see from the chart to the right, the Fund has delivered a cumulative total
return of more than 46% between its inception on September 12, 1989 and February
28, 1995.
During the reporting period, the Fund's share price, as measured by net asset
value, decreased from $13.66 on August 31, 1994 to $12.24 on February 28, 1995.
During this time, shareholders received 21.5 cents ($0.215) in dividend income.
Of course, past performance is not predictive of future results, and
distributions will vary depending on income earned by the Fund, as well as any
profits realized from the sale of securities in the portfolio.
There are special risks associated with investments in real estate securities,
including declines in the value of real estate. Foreign investing involves the
additional risks of currency fluctuations and political uncertainty. These
special risks and other considerations are discussed in the Fund's prospectus.
- --------------------------------------------------------------------------------
TEMPLETON REAL ESTATE
SECURITIES FUND
Periods Ended 2/28/95
<TABLE>
<CAPTION>
Since
Inception
One-Year Three-Year (9/12/89)
<S> <C> <C> <C>
Average Annual -17.13% 4.85% 6.08%
Total Return/3/
Cumulative -12.10% 22.24% 46.50%
Total Return/4/
</TABLE>
3. Average annual total return represents the average annual change in value of
an investment over the indicated periods, assuming reinvestment of dividends and
capital gains, and includes the maximum 5.75% initial sales charge.
4. Cumulative total return represents the change in value of an investment over
the specified periods, assuming reinvestment of dividends and capital gains. It
does not include the maximum 5.75% initial sales charge.
Prior to July 1, 1992, Fund shares were offered at a higher sales charge. Thus,
actual total return to purchasers of shares during that period would have been
somewhat lower than noted above. Investment return and principal value will
fluctuate so that your shares, when redeemed, may be worth more or less than
their initial cost.
Past performance is not predictive of future results.
6
<PAGE>
Templeton Real Estate Securities Fund
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED AUGUST 31
FEBRUARY 28, 1995 ----------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990+
----------------- -------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period $ 13.66 $ 12.66 $ 10.40 $ 10.08 $ 8.88 $ 10.00
-------- -------- ------- ------- ------- ---------
Income from investment
operations:
Net investment income .15 .22 .25 .37 .53 .29
Net realized and
unrealized gain (loss) (1.35) 1.00 2.36 .43 1.13 (1.33)
-------- -------- ------- ------- ------- ---------
Total from investment
operations (1.20) 1.22 2.61 .80 1.66 (1.04)
-------- -------- ------- ------- ------- ---------
Distributions:
Dividends from net in-
vestment income (.22) (.22) (.35) (.48) (.37) (.08)
Distributions from net
realized gains -- -- -- -- (.09) --
-------- -------- ------- ------- ------- ---------
Total distributions (.22) (.22) (.35) (.48) (.46) (.08)
-------- -------- ------- ------- ------- ---------
Change in net asset
value (1.42) 1.00 2.26 .32 1.20 (1.12)
-------- -------- ------- ------- ------- ---------
Net asset value, end of
period $ 12.24 $ 13.66 $ 12.66 $ 10.40 $ 10.08 $ 8.88
======== ======== ======= ======= ======= =========
TOTAL RETURN * (8.88)% 9.69% 25.94% 8.29% 20.06% (10.48)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of pe-
riod (000) $125,501 $131,544 $61,820 $36,955 $32,830 $ 10,065
Ratio of expenses to av-
erage net assets 1.60%** 1.58% 1.68% 1.69% 1.98% 2.77%**
Ratio of expenses, net
of reimbursement, to
average net assets 1.60%** 1.58% 1.68% 1.69% 1.25% 1.25%**
Ratio of net investment
income to
average net assets 2.48%** 1.97% 2.60% 3.64% 5.48% 3.59%**
Portfolio turnover rate 9.67% 32.34% 19.74% 32.35% 25.24% 9.54%
</TABLE>
+PERIOD FROM SEPTEMBER 12, 1989 (COMMENCEMENT OF OPERATIONS) TO AUGUST 31,
1990.
*TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT ANNUALIZED IN PERIODS OF
LESS THAN ONE YEAR.
**ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
Templeton Real Estate Securities Fund
Investment Portfolio, February 28, 1995 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS: 73.6%
- -------------------------------------------------------------------------------
Banking: 5.9%
Banque Nationale de Paris Fr. 20,000 $ 887,199
Canadian Imperial Bank of
Commerce Can. 40,000 975,995
*Foereningsbanken AB, A Swe. 350,000 606,573
HSBC Holdings PLC H.K. 150,000 1,576,344
Industrial Finance Corp. of
Thailand, fgn. Thai. 700,000 1,473,536
Royal Bank of Canada Can. 40,000 825,290
TR Financial Corp. U.S. 65,000 1,040,000
------------
7,384,937
- -------------------------------------------------------------------------------
Building Materials & Components: 2.8%
BPB Industries PLC U.K. 120,000 558,749
Byucksan Development Co. Ltd. Kor. 66,360 1,134,503
Pioneer International Ltd. Aus. 563,325 1,355,936
Unicem Unione Cementi
Marchino Emiliane Itl. 20,000 134,697
Unicem Unione Cementi
Marchino Emiliane, di Risp Itl. 99,700 318,478
------------
3,502,363
- -------------------------------------------------------------------------------
Construction & Housing: 7.5%
*Atlantic Gulf Communities
Corp. U.S. 53,100 477,900
Empresas ICA Sociedad
Controladora SA, ADR Mex. 85,000 467,500
Engle Homes U.S. 147,500 1,216,875
Kaufman & Broad Home Corp. U.S. 150,000 2,193,750
Raine PLC U.K. 630,000 478,928
*Schuler Homes Inc. U.S. 80,000 830,000
Sirti SPA Itl. 180,000 1,216,377
*Sundance Homes Inc. U.S. 335,000 1,151,563
*U.S. Home Corp. U.S. 75,000 1,368,750
------------
9,401,643
- -------------------------------------------------------------------------------
Energy Sources: 2.1%
Mobil Corp. U.S. 22,000 1,914,000
Societe Elf Aquitane SA Fr. 10,000 718,144
------------
2,632,144
- -------------------------------------------------------------------------------
Financial Services: 1.5%
Federal National Mortgage
Assn. U.S. 17,000 1,311,125
India Fund, B Ind. 300,000 639,046
------------
1,950,171
- -------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
Templeton Real Estate Securities Fund
Investment Portfolio, February 28, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Forest Products & Paper: 7.5%
*Assidomaen AB Swe. 47,000 $ 1,061,469
Georgia-Pacific Corp. U.S. 20,000 1,497,500
Mayr-Melnhof Karton AG Aus. 25,000 1,633,733
Primex Forest Products Ltd. Can. 134,900 980,202
PT Barito Pacific Timber,
fgn. Indo. 971,500 1,380,656
Saint Joe Paper Co. U.S. 20,000 1,195,000
Weyerhaeuser Co. U.S. 40,000 1,630,000
------------
9,378,560
- -------------------------------------------------------------------------------
Leisure & Tourism: 1.0%
Grand Hotel Holdings Ltd. H.K. 2,469,000 830,292
Oriental Hotel Public Co.
Ltd., fgn. Thai. 173,200 494,808
*Queens Moat Houses PLC U.K. 350,000 0
------------
1,325,100
- -------------------------------------------------------------------------------
Merchandising: 1.8%
Wessel & Vett AS, C Den. 36,000 2,204,760
- -------------------------------------------------------------------------------
Metals & Mining: 0.6%
Maanshan Iron & Steel Co.
Ltd., H Chn. 3,520,000 705,685
- -------------------------------------------------------------------------------
Multi-Industry: 0.1%
Swire Pacific Ltd., A H.K. 25,000 175,419
- -------------------------------------------------------------------------------
Real Estate: 41.0%
+American Health Properties
Inc. U.S. 64,300 1,398,525
Bail Investissement Fr. 8,700 1,387,657
*++Canlan Investment Corp. Can. 542,200 2,480,552
*Catellus Development Corp. U.S. 290,000 1,595,000
+CBL & Associates Properties
Inc. U.S. 70,000 1,426,250
+Charles E. Smith Residential
Realty Inc. U.S. 40,000 915,000
Credit Foncier de France SA Fr. 5,668 738,271
+Federal Realty Investment
Trust U.S. 33,000 697,125
+General Growth Properties U.S. 54,000 1,120,500
Hang Lung Development Co.
Ltd. H.K. 485,000 718,263
+Health Care Property
Investors Inc. U.S. 30,000 900,000
Home Properties Management
Inc. U.S. 50,000 937,500
+IRT Property Co. U.S. 94,200 942,000
+LTC Properties Inc. U.S. 226,000 2,881,500
+McArthur/Glen Realty Corp. U.S. 168,000 2,457,000
+Meditrust Inc. U.S. 40,400 1,292,800
+Merry Land & Investment Co.
Inc. U.S. 65,000 1,340,625
+National Health Investors
Inc. U.S. 17,000 425,000
</TABLE>
9
<PAGE>
Templeton Real Estate Securities Fund
Investment Portfolio, February 28, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Real Estate (cont.)
+Nationwide Health Properties
Inc. U.S. 46,000 $ 1,656,000
New World Development Co.
Ltd. H.K. 304,658 831,441
*Newhall Investment
Properties U.S. 20,300 0
Omega Healthcare Investors U.S. 57,163 1,379,057
Parkway Holdings Ltd. Sing. 418,000 934,658
*++Patten Corp. U.S. 1,082,038 3,516,624
+Pennsylvania Real Estate
Investment Trust U.S. 34,000 722,500
+Property Trust of America U.S. 154,350 2,585,363
*Property Trust, rts. U.S. 154,350 29,836
PT Jaya Properties, fgn. Indo. 250,000 631,626
Revenue Property Ltd. Can. 150,000 296,028
Rouse Co. U.S. 156,300 3,086,925
Ryoden Development Ltd. H.K. 3,650,000 651,491
+Security Capital Industrial
Trust U.S. 149,222 2,499,469
+Southwestern Property Trust
Inc. U.S. 100,000 1,212,500
Sun Hung Kai Properties Ltd. H.K. 280,000 1,883,205
Taylor Woodrow PLC U.K. 656,177 1,236,678
*Union Valley Corp. U.S. 1,255 79
Weeks Corp. U.S. 100,000 2,212,500
+Weingarten Realty Investors U.S. 31,100 1,127,375
Westfield Trust Units Aus. 735,000 1,259,036
*Westfield Trust Units, new Aus. 19,285 10,252
------------
51,416,211
- -------------------------------------------------------------------------------
Telecommunications: 0.4%
*Telecomunicacoes Brasileiras
SA, ADR Braz. 490 14,363
Telefonos de Mexico SA, L,
ADR Mex. 20,000 552,500
------------
566,863
- -------------------------------------------------------------------------------
Transportation: 1.4%
Florida East Coast Industries
Inc. U.S. 11,000 848,375
Peninsular & Oriental Steam
Navigation Co. U.K. 100,000 893,239
------------
1,741,614
------------
TOTAL COMMON STOCKS (cost $95,147,838) 92,385,470
- -------------------------------------------------------------------------------
PREFERRED STOCKS: 2.1%
- -------------------------------------------------------------------------------
*Baumax AG, pfd. Aus. 25,000 1,068,117
Bowater Inc., B, conv., pfd. U.S. 15,917 455,624
*Nacional Financiera SA,
conv., 5/15/98 Mex. 15,700 455,300
Telebras-Telecomunicacoes
Brasileiras SA, ADR Braz. 21,500 627,531
------------
TOTAL PREFERRED STOCKS (cost $1,947,804) 2,606,572
- -------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
Templeton Real Estate Securities Fund
Investment Portfolio, February 28, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
INDUSTRY ISSUE COUNTRY LOCAL CURRENCY** VALUE
<C> <S> <C> <C> <C>
- ---------------------------------------------------------------------------------
BONDS: 15.9%
- ---------------------------------------------------------------------------------
ARBED SA, 2.50%, conv.,
7/15/03 Ger. 2,570,000 $ 1,728,620
Empresas ICA Sociedad
Controladora SA, 5.00%,
conv., 3/15/04 U.S. 3,500,000 1,085,000
Industrial Credit &
Investment Corp. of
India, 2.50%, conv.,
4/03/00 U.S. 1,200,000 909,000
National Power PLC,
6.25%, 9/23/08 U.K. 833,000 1,454,495
Revenue Properties Ltd.,
6.00%, conv., 3/01/04 U.S. 2,800,000 2,324,000
+Southwest Property
Trust Inc., 8.00%,
conv., 1/15/03 U.S. 250,000 309,375
U.S. Treasury Note,
7.875%, 2/15/96 U.S. 12,000,000 12,151,920
------------
TOTAL BONDS (cost $23,519,491) 19,962,410
- ---------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 9.7% (cost $12,208,632)
- ---------------------------------------------------------------------------------
U.S. Treasury Bills,
5.18% to 5.65% with
maturities to 4/20/95 U.S. 12,244,000 12,210,740
- ---------------------------------------------------------------------------------
TOTAL INVESTMENTS: 101.3% (cost $132,823,765) 127,165,192
OTHER ASSETS, LESS LIABILITIES: (1.3)% (1,664,501)
------------
TOTAL NET ASSETS: 100.0% $125,500,691
============
</TABLE>
*NON-INCOME PRODUCING.
**CURRENCY OF COUNTRY INDICATED.
+REAL ESTATE INVESTMENT TRUST (20.6% OF TOTAL NET ASSETS).
++SEE NOTE 5.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
Templeton Real Estate Securities Fund
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1995 (unaudited)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (identified cost
$132,823,765) $127,165,192
Receivables:
Fund shares sold 467,027
Dividends and interest 736,935
------------
Total assets 128,369,154
------------
Liabilities:
Payables:
Investment securities purchased 2,354,839
Fund shares redeemed 237,082
Accrued expenses 276,542
------------
Total liabilities 2,868,463
------------
Net assets, at value $125,500,691
============
Net assets consists of:
Undistributed net investment income $ 865,879
Net unrealized depreciation (5,658,573)
Accumulated net realized loss (1,610,057)
Net capital paid in on shares of beneficial interest 131,903,442
------------
Net assets, at value $125,500,691
============
Shares outstanding 10,256,124
============
Net asset value per share
($125,500,691 / 10,256,124) $ 12.24
============
Maximum offering price
($12.24 / 94.25%) $ 12.99
============
</TABLE>
STATEMENT OF OPERATIONS
for the six months ended February 28, 1995 (unaudited)
<TABLE>
<S> <C> <C>
Investment income: (net of $30,871
foreign taxes withheld)
Dividends $ 1,691,173
Interest 936,947
------------
Total income $ 2,628,120
Expenses:
Management fees (Note 3) 482,622
Administrative fees (Note 3) 96,523
Distribution fees (Note 3) 162,145
Transfer agent fees (Note 3) 102,500
Custodian fees 58,000
Reports to shareholders 66,444
Audit fees 9,500
Legal fees 3,500
Registration and filing fees 37,000
Trustees' fees and expenses 12,000
Other 1,561
------------
Total expenses 1,031,795
------------
Net investment income 1,596,325
Realized and unrealized
gain (loss):
Net realized gain (loss) on:
Investments 1,213,015
Foreign currency transactions (57,030)
------------
1,155,985
Net unrealized depreciation on investments (15,013,345)
------------
Net realized and unrealized loss (13,857,360)
------------
Net decrease in net assets resulting from
operations $(12,261,035)
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
Templeton Real Estate Securities Fund
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FEBRUARY 28, 1995 YEAR ENDED
(UNAUDITED) AUGUST 31, 1994
----------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 1,596,325 $ 1,928,443
Net realized gain from security and foreign
currency transactions 1,155,985 2,178,205
Net unrealized appreciation (depreciation) (15,013,345) 2,206,703
------------ ------------
Net increase (decrease) in assets from op-
erations (12,261,035) 6,313,351
Distributions to shareholders
from net investment income (2,181,358) (1,220,841)
Fund share transactions (Note 2) 8,399,360 64,630,790
------------ ------------
Net increase (decrease) in net assets (6,043,033) 69,723,300
Net assets:
Beginning of period 131,543,724 61,820,424
------------ ------------
End of period $125,500,691 $131,543,724
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
Templeton Real Estate Securities Fund
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Templeton Real Estate Securities Fund (the Fund), is a Massachusetts business
trust and an open-end, diversified management investment company registered un-
der the Investment Company Act of 1940. The following summarizes the Fund's
significant accounting policies:
A. Securities Valuations:
Securities listed or traded on a recognized national or foreign stock exchange
or NASDAQ are valued at the last reported sales price on the principal exchange
on which the securities are traded. Over-the-counter securities and listed se-
curities for which no sale is reported are valued at the mean between the last
current bid and asked prices. Securities for which market quotations are not
readily available are valued at fair value as determined by management and ap-
proved in good faith by the Board of Trustees.
B. Foreign Currency Translations:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of portfolio securities and income items denominated in foreign curren-
cies are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customar-
ily enters into foreign exchange contracts to minimize foreign exchange risk
between the trade date and the settlement date of such transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of for-
eign currencies, currency gains or losses realized between the trade and set-
tlement dates on security transactions, the differences between the amounts of
dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at the end
of the fiscal period, resulting from changes in the exchange rates.
C. Income Taxes:
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all its
taxable income to its shareholders. Therefore, no provision has been made for
federal income taxes.
D. Security Transactions, Investment Income, Distributions and Expenses:
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Certain dividend income on foreign securi-
ties is recorded as soon as information is available to the Fund. Interest in-
come and estimated expenses are accrued daily. Distributions to shareholders,
which are determined in accordance with income tax regulations, are recorded on
the ex-dividend date.
14
<PAGE>
Templeton Real Estate Securities Fund
Notes to Financial Statements (unaudited) (cont.)
- --------------------------------------------------------------------------------
2. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
At February 28, 1995, there were an unlimited number of shares of beneficial
interest authorized ($0.01 par value). Transactions in the Fund's shares were
as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1995 AUGUST 31, 1994
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 1,695,618 $ 22,007,313 5,960,485 $ 81,011,479
Shares issued on rein-
vestment of distribu-
tions 145,419 1,858,466 75,358 1,001,203
Shares redeemed (1,214,950) (15,466,419) (1,289,281) (17,381,892)
---------- ------------ ---------- ------------
Net increase 626,087 $ 8,399,360 4,746,562 $ 64,630,790
========== ============ ========== ============
</TABLE>
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also directors or officers of Templeton,
Galbraith & Hansberger Ltd. (TGH), Templeton Global Investors, Inc. (TGII),
Franklin Templeton Distributors, Inc. (FTD), and Franklin Templeton Investor
Services, Inc. (FTIS), the Fund's investment manager, administrative manager,
principal underwriter, and transfer agent, respectively. The Fund pays monthly
an investment management fee to TGH equal, on an annual basis, to 0.75% of the
average daily net assets of the Fund. The fee is subject to reduction in any
year to the extent that expenses (exclusive of certain expenses) of the Fund
exceed 2 1/2% of the first $30 million of net assets, 2% of the next $70 mil-
lion of net assets and 1 1/2% of the remainder. During the six months ended
February 28, 1995, no reduction in fee was required as a result of this limita-
tion. The Fund pays TGII monthly a fee of 0.15% per annum on the first $200
million of the Fund's average daily net assets, 0.135% of the next $500 mil-
lion, 0.10% of the next $500 million, and 0.075% per annum of such average net
assets in excess of $1.2 billion. For the six months ended February 28, 1995,
FTD received net commissions of $98,376 from the sale of the Funds shares and
FTIS received fees of $102,500.
Pursuant to a Distribution Plan, the Fund reimburses FTD monthly (subject to a
limit of 0.25% per annum of the Fund's average daily net assets) for FTD's
costs and expenses in connection with any activity which is primarily intended
to result in sales of Fund shares. Such distribution fees are set forth in the
Statement of Operations.
An officer of the Fund is a partner of Dechert Price & Rhoads, legal counsel
for the Fund, which firm received fees of $3,500 for the six months ended Feb-
ruary 28, 1995.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term obligations) for the
six months ended February 28, 1995 were $37,787,014 and $10,116,204, respec-
tively. The cost of securities for federal income tax purposes is $133,128,692.
Realized gains and losses are reported on an identified cost basis.
At February 28, 1995, the aggregate gross unrealized appreciation and deprecia-
tion of portfolio securities, based on cost for federal income tax purposes,
was as follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 9,175,984
Unrealized depreciation (15,139,484)
------------
Net unrealized depreciation $ (5,963,500)
============
</TABLE>
15
<PAGE>
Templeton Real Estate Securities Fund
Notes to Financial Statements (unaudited) (cont.)
- --------------------------------------------------------------------------------
5. HOLDING OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
The Investment Company Act of 1940 defines "affiliated companies" as Invest-
ments in portfolio companies in which the Company owns 5% or more of the out-
standing voting securities. Investments in "affiliated companies" at February
28, 1995, amounted to $5,997,176.
6. CAPITAL LOSS CARRYFORWARD
At August 31, 1994, the Fund had tax basis capital losses of $5,900,000 which
may be carried over to offset future capital gains. Of this amount, $3,418,000
arose from the merger with National Real Estate Fund on December 14, 1990. Such
losses expire in years ending in August 31, 1995 and 2000.
16
<PAGE>
NOTES
-----
<PAGE>
NOTES
-----
<PAGE>
The Franklin Templeton Group
- --------------------------------------------------------------------------------
To receive a free brochure and prospectus, which contain more complete informa-
tion, including charges and expenses on each of the funds listed below, call
Franklin Fund Information, toll free, at 1-800-DIAL-BEN (1-800-342-5236) or
Templeton Fund Information at 1-800-292-9293. Please read the prospectus care-
fully before you invest or send money.
TEMPLETON
FAMILY OF FUNDS
Franklin Templeton Japan Fund
Templeton American Trust
Templeton Americas
Government Securities Fund
Templeton Developing
Markets Trust
Templeton Foreign Fund
Templeton Global
Infrastructure Fund
Templeton Global
Opportunities Trust
Templeton Global Rising
Dividends Fund
Templeton Growth Fund
Templeton Income Fund
Templeton Money Fund
Templeton Real Estate
Securities Fund
Templeton Smaller
Companies Growth Fund
Templeton World Fund
FRANKLIN GROUP OF FUNDS(R)
FRANKLIN GLOBAL/
INTERNATIONAL FUNDS
Franklin Global Health Care
Fund
Franklin Global Government
Income Fund
Franklin Global Utilities Fund
Franklin International Equity
Fund
Franklin Pacific Growth Fund
FUNDS SEEKING CAPITAL GROWTH
Franklin California Growth
Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin Small Cap Growth
Fund
FUNDS SEEKING GROWTH AND
INCOME
Franklin Balance Sheet
Investment Fund
Franklin Convertible
Securities Fund
Franklin Income Fund
Franklin Equity Income Fund
Franklin Utilities Fund
FUNDS SEEKING HIGH CURRENT
INCOME
Franklin's AGE High Income
Fund
Franklin Investment Grade Income
Fund
Franklin Premier Return Fund
Franklin U.S. Government
Securities Fund
FUNDS SEEKING TAX-FREE
INCOME
Franklin Federal Tax-Free
Income Fund
Franklin High Yield Tax-Free
Income Fund
Franklin California High Yield
Municipal Fund
Franklin Alabama Tax-Free
Income Fund
Franklin Arizona Tax-Free
Income Fund
Franklin California Tax-Free
Income Fund
Franklin Colorado Tax-Free
Income Fund
Franklin Connecticut Tax-Free
Income Fund
Franklin Florida Tax-Free
Income Fund
Franklin Georgia Tax-Free
Income Fund
Franklin Hawaii Municipal
Bond Fund
Franklin Indiana Tax-Free
Income Fund
Franklin Kentucky Tax-Free
Income Fund
Franklin Louisiana Tax-
Free Income Fund
Franklin Maryland Tax-
Free Income Fund
Franklin Missouri Tax-Free
Income Fund
Franklin New Jersey Tax-
Free Income Fund
Franklin New York Tax-
Free Income Fund
Franklin North Carolina
Tax-Free Income Fund
Franklin Oregon Tax-Free
Income Fund
Franklin Pennsylvania Tax-
Free Income Fund
Franklin Puerto Rico Tax-
Free Income Fund
Franklin Texas Tax-Free
Income Fund
Franklin Virginia Tax-Free
Income Fund
Franklin Washington
Municipal Bond Fund
FUNDS SEEKING TAX-FREE
INCOME THROUGH INSURED
PORTFOLIOS
Franklin Insured Tax-Free
Income Fund
Franklin Arizona Insured
Tax-Free Income Fund
Franklin California Insured
Tax-Free Income Fund
Franklin Florida Insured
Tax-Free Income Fund
Franklin Massachusetts
Insured Tax-Free Income
Fund
Franklin Michigan Insured
Tax-Free Income Fund
Franklin Minnesota Insured
Tax-Free Income Fund
Franklin New York Insured
Tax-Free Income Fund
Franklin Ohio Insured Tax-
Free Income Fund
FUNDS SEEKING HIGH CURRENT
INCOME AND STABILITY OF
PRINCIPAL
Franklin Adjustable Rate
Securities Fund
Franklin Adjustable U.S.
Government Securities
Fund
Franklin Short-
Intermediate U.S.
Government Securities
Fund
FUND SEEKING HIGH AFTER-TAX
INCOME FOR CORPORATIONS
Franklin Corporate
Qualified Dividend Fund
MONEY MARKET FUNDS SEEKING
SAFETY OF PRINCIPAL AND
INCOME
Franklin Money Fund
Franklin Federal Money
Fund
Franklin Tax-Exempt
Money Fund
Franklin California Tax-
Exempt Money Fund
Franklin New York Tax-
Exempt Money Fund
IFT Franklin U.S. Treasury
Money Market Portfolio
FUNDS FOR
NON-U.S. INVESTORS
FRANKLIN PARTNERS FUNDS(R)
Franklin Tax-Advantaged
High Yield Securities Fund
Franklin Tax-Advantaged
International Bond Fund
Franklin Tax-Advantaged
U.S. Government
Securities Fund
<PAGE>
TEMPLETON REAL
ESTATE SECURITIES
FUND
PRINCIPAL UNDERWRITER:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Account Services
1-800-354-9191
Sales Information
1-800-292-9293
This report must be preceded or accompanied by the prospectus of Templeton Real
Estate Securities Fund. Like any investment in securities, the value of the
Fund's portfolio will be subject to the risk of loss from market, currency,
economic, political and other factors, as well as investment decisions by the
investment manager which will not always be profitable or wise. The Fund and
its investors are not protected from such losses by the investment manager.
Therefore, investors who cannot accept this risk should not invest in shares of
the Fund.
To ensure the highest quality of service, telephone calls to or from our
service departments may be monitored, recorded and accessed. These calls can
be determined bythe presence of a regular beeping tone.
TL10 S95 04/95
[RECYCLING LOGO APPEARS HERE]
TEMPLETON
REAL
ESTATE
SECURITIES
FUND
Semi-Annual Report
February 28, 1995
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
