<PAGE> 1
Templeton Global
Real Estate Fund
Auditors
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017-2416
Principal Underwriter:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Shareholder Services
1-800-632-2301
Fund Information
1-800-342-5236
This report must be preceded or accompanied by the prospectus of Templeton
Global Real Estate Fund, which contains more complete information including
charges and expenses. 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 by the presence of a regular beeping tone.
TEMPLETON
GLOBAL
REAL ESTATE
FUND
ANNUAL REPORT
AUGUST 31, 1996
[BACKGROUND GRAPHIC OF WORLD GLOBE]
<PAGE> 2
Templeton Global
Real Estate Fund
YOUR FUND'S OBJECTIVE:
The Templeton Global Real Estate 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.
October 15, 1996
Dear Shareholder:
We are pleased to bring you this annual report of the Templeton Global Real
Estate Fund for the period ended August 31, 1996.
During the past fiscal year, real estate stocks underperformed other global
equities, continuing an ongoing trend that has existed for the last few years.
Nearly 60 percent of the 400 real estate company stocks we followed during the
reporting period appreciated by less than 10%, which we believe highlights the
relatively undervalued nature of these securities. Within this environment, the
Fund's Class I shares posted a total return of 7.48% for the one-year period
ended August 31, 1996, as shown in the Performance Summary on page 6.
The principal reason we invest in a security is for its unusual value, and it
usually takes time for this value to be fully recognized in the market.
Therefore, we did not make any significant changes in the Fund's portfolio
during the fiscal year. At the end of the
1
<PAGE> 3
TEMPLETON GLOBAL REAL ESTATE FUND
Geographic Distribution ON 8/31/96
Based on Total Net Assets
<TABLE>
<S> <C>
United States Stocks 62.4%
Asian Stocks 14.6%
Canadian Stocks 3.5%
Australian & New Zealand Stocks 1.2%
European Stocks 13.7%
Latin American Stocks 1.3%
Fixed-Income Securities 0.9%
Short-Term Obligations & Other Net Assets 2.4%
</TABLE>
reporting period, the Fund was invested in 84 companies domiciled in 25
countries, compared with 83 companies in 21 countries one year ago.
Our largest single-country exposure continued to be the U.S., which represented
62.4% of total net assets at the end of the fiscal year. Although much has
been written about the resurgence of real estate investment trusts (REITs) in
the U.S., it is important to remember that other companies are also very
actively and extensively involved in the U.S. real estate market. One such
company is Rouse Corp., the Fund's second-largest holding. Probably best known
for its festival marketplaces and regional malls, Rouse recently diversified
its operations by purchasing premier, non-gaming Las Vegas real estate parcels
from the Hughes Corporation. Shortly afterward, Rouse's stock rose by more than
20%. We believe that Rouse's diverse property holdings, high occupancy rates,
and experienced management team bode well for higher earnings and profits over
the long term.
During the reporting period, we increased our European exposure from 11.9% to
13.7% of total net assets. Although Europe continues to be an area with some
bargain priced stocks, it is difficult for us to identify quality companies
with reasonable long-term prospects. However, we did initiate a position in
Unibail (Union du Credit Bail Immobilier), a French real estate company that
owns office properties in some of Paris' most desirable locations. At the end
of the period, Unibail's stock was selling at a discount to the book value of
its properties and had a dividend yield in excess of 5%. Given information
gleaned from meetings with management and tours of Unibail's properties this
summer, we believe that the company has the potential to increase its earnings
within the next five years due to the quality of its properties, the potential
to increase rental rates, and its high quality, and growing, tenant base.
2
<PAGE> 4
TEMPLETON GLOBAL
REAL ESTATE FUND
Top 10 Equity Holdings on 8/31/96
Based on Total Net Assets
<TABLE>
<CAPTION>
% of Total
Company, Country Net Assets
<S> <C>
Weeks Corp., United States 4.6%
Rouse Co., United States 3.1%
Bluegreen Corp., United States 3.0%
Revenue Property Ltd., Canada 2.9%
CBL & Associates Properties Inc., United States 2.8%
LTC Properties Inc., United States 2.8%
Sun Hung Kai Properties Ltd., Hong Kong 2.8%
Equity Residential Properties, United States 2.7%
Security Capital Pacific Trust, United States 2.7%
Highwoods Properties Inc., United States 2.2%
</TABLE>
FOR A COMPLETE LIST OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 11 OF THIS REPORT.
In Latin America, we initiated a position in IRSA, an Argentine real estate
operator and developer whose stock we purchased at a substantial discount to
the book value of its properties. Among the potential attractions of IRSA are
its extremely low level of competition, particularly competition with access to
the capital markets. Additionally, its tenants are top-tier multinational
corporations, leases are typically reviewed every two years, and rents are paid
in U.S. dollars -- a protection against foreign currency fluctuations and
devaluations. This stock has performed well since we added it to the Fund's
portfolio, and we are very encouraged about the company's long-term prospects
- -- something the stock's valuation has thus far failed to reflect accurately.
Looking forward, we are optimistic about the growth potential for many global
real estate markets. Although these securities delivered relatively lackluster
returns during the fiscal year, we believe that valuations in this industry
appear to be extremely low compared with valuations across many other
industries tracked by our global team of analysts. We also believe that real
estate is an asset class with the potential to show a gradual increase in value
over time, while experiencing below-average volatility. For example, over the
next 15 years, the urban populations of seven Asian countries (China,
Indonesia, Thailand, Malaysia, Singapore, Hong Kong and the Philippines) are
expected to increase by 88%. We therefore believe that Asia's real estate
market has exceptional long-term growth potential. Although Europe's real
estate sector has declined during the past few years due to poor economic
conditions and lower demand for office space, REITs have not yet been utilized
in this capital-starved market. If introduced, they have the potential to
provide much-needed liquidity to this slumping market as they did in the U.S.
during the early 1990s. However, it is most
3
<PAGE> 5
unusual for a stock purchased at a price below its intrinsic value to
appreciate considerably within a short period of time. It is therefore
important to remember that investing, especially in the real estate sector,
requires patience and a long-term outlook.
This discussion reflects the strategies we employed for the Fund during the
fiscal year, and includes our opinions as of the close of the period. Since
economic and market conditions are constantly changing, our strategies and
evaluations, conclusions and decisions regarding portfolio holdings may change
as new circumstances arise. Although past performance of a specific investment
or sector cannot guarantee future performance, such information can be useful
in analyzing securities we purchase or sell for the Fund.
There are, of course, special risks involved with global investing related to
market, currency, economic, social, political, and other factors. Developing
markets involve similar but heightened risks, in addition to risks associated
with the relatively small size and lesser liquidity of these markets. Since the
Fund concentrates on the real estate industry, its share price may be more
volatile than those of more broadly diversified investments. These special
risks and other considerations are discussed in the Fund's prospectus.
We appreciate your participation in the Fund and welcome any comments or
suggestions you may have.
Sincerely,
/s/ Jeffrey A. Everett
JEFFREY A. EVERETT
Jeffrey A. Everett, CFA
Portfolio Manager
Templeton Global Real Estate Fund
4
<PAGE> 6
PERFORMANCE SUMMARY
CLASS I
The Templeton Global Real Estate Fund Class I shares reported a total return of
7.48% for the one-year period ended August 31, 1996. Total return measures the
change in value of an investment, assuming reinvestment of dividends, and does
not include the maximum initial sales charge.
While we expect market volatility in the short term, 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 table on
page 6, the Fund delivered a cumulative total return of more than 58% for the
five-year period ended August 31, 1996.
As measured by net asset value, the Fund's share price increased 58 cents, from
$13.20 on August 31, 1995 to $13.78 on August 31, 1996. During this time,
shareholders received 37.5 cents ($0.375) per share in dividend income. Of
course, past performance is not predictive of future results, and distributions
will vary depending on income earned by the Fund.
The graph on page 6 shows how an investment in the Fund since its inception has
kept your purchasing power well ahead of inflation, as measured by the Consumer
Price Index (CPI). It also compares the Fund's performance, over the same
period, with the performance of the unmanaged Morgan Stanley Capital
International (MSCI) World Index, which tracks 22 equity markets worldwide.
Please remember that the Fund's performance differs from that of the index
because, among other things, the index is not managed according to any
investment strategy, includes no sales charges or management expenses, and does
not contain cash (the Fund generally carries a certain percentage of cash at
any given time). Of course, one cannot invest directly in an index.
5
<PAGE> 7
TEMPLETON GLOBAL
REAL ESTATE FUND - CLASS I
Total Return Index Comparison
$10,000 Investment (9/12/89 - 8/31/96)
<TABLE>
<CAPTION>
Templeton Global Real MSCI World
Date Estate Fund-Class I(1) Index(2) CPI(3)
<S> <C> <C> <C>
9/12/89 $ 9,425 $10,000 $10,000
9/30/89 9,425 10,170 10,019
10/31/89 9,369 9,833 10,067
11/30/89 9,369 10,227 10,091
12/31/89 9,435 10,557 10,108
1/31/90 9,102 10,066 10,212
2/28/90 9,093 9,637 10,260
3/31/90 9,150 9,056 10,316
4/30/90 8,827 8,928 10,333
5/31/90 9,368 9,870 10,356
6/30/90 9,549 9,801 10,412
7/31/90 9,596 9,892 10,452
8/31/90 8,437 8,968 10,548
9/30/90 7,800 8,024 10,637
10/31/90 7,767 8,775 10,700
11/30/90 7,905 8,632 10,724
12/31/90 8,200 8,815 10,724
1/31/91 8,984 9,139 10,788
2/28/91 9,567 9,986 10,805
3/31/91 10,009 9,694 10,821
4/30/91 10,281 9,771 10,837
5/31/91 10,381 9,994 10,869
6/30/91 10,029 9,378 10,901
7/31/91 10,230 9,823 10,917
8/31/91 10,110 9,793 10,949
9/30/91 10,311 10,052 10,997
10/31/91 10,139 10,217 11,014
11/30/91 10,003 9,773 11,046
12/31/91 11,022 10,487 11,053
1/31/92 11,423 10,295 11,070
2/29/92 11,296 10,119 11,110
3/31/92 11,127 9,644 11,166
4/30/92 11,264 9,780 11,182
5/31/92 11,634 10,171 11,198
6/30/92 11,433 9,833 11,238
7/31/92 11,264 9,859 11,262
8/31/92 10,969 10,101 11,293
9/30/92 11,085 10,010 11,325
10/31/92 11,197 9,741 11,364
11/30/92 11,143 9,917 11,380
12/31/92 11,479 9,999 11,372
1/31/93 11,905 10,034 11,428
2/28/93 12,352 10,274 11,468
3/31/93 13,029 10,872 11,508
4/30/93 13,149 11,378 11,540
5/31/93 13,302 11,642 11,557
6/30/93 13,193 11,546 11,573
7/31/93 13,313 11,786 11,573
8/31/93 13,825 12,328 11,605
9/30/93 14,033 12,103 11,630
10/31/93 14,437 12,438 11,677
11/30/93 14,448 11,737 11,685
12/31/93 15,265 12,313 11,685
1/31/94 15,842 13,127 11,717
2/28/94 15,708 12,959 11,757
3/31/94 14,943 12,403 11,797
4/30/94 14,921 12,789 11,813
5/31/94 15,010 12,823 11,822
6/30/94 14,410 12,788 11,862
7/31/94 14,921 13,034 11,894
8/31/94 15,154 13,428 11,941
9/30/94 14,965 13,077 11,974
10/31/94 14,666 13,452 11,982
11/30/94 14,152 12,871 11,998
12/31/94 14,090 12,999 11,998
1/31/95 13,639 12,806 12,046
2/28/95 13,808 12,996 12,094
3/31/95 13,706 13,625 12,134
4/30/95 13,819 14,103 12,174
5/31/95 14,473 14,226 12,198
6/30/95 14,586 14,224 12,222
7/31/95 14,902 14,938 12,222
8/31/95 14,891 14,608 12,254
9/30/95 15,094 15,036 12,279
10/31/95 14,673 14,802 12,319
11/30/95 14,685 15,318 12,311
21/31/95 14,936 15,769 12,302
1/31/96 15,365 16,057 12,375
2/29/96 15,435 16,158 12,414
3/31/96 15,331 16,430 12,479
4/30/96 15,551 16,819 12,527
5/31/96 15,830 16,836 12,551
6/30/96 15,784 16,924 12,559
7/31/96 15,400 16,328 12,583
8/31/96 16,004 16,519 12,607
</TABLE>
1. INCLUDES ALL SALES CHARGES AND REPRESENTS THE CHANGE IN VALUE OF AN
INVESTMENT OVER THE PERIOD SHOWN, ASSUMING REINVESTMENT OF DIVIDENDS AND CAPITAL
GAINS. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
2. INDEX IS UNMANAGED AND INCLUDES REINVESTED DIVIDENDS.
3. SOURCE: U.S. BUREAU OF LABOR STATISTICS.
TEMPLETON GLOBAL
REAL ESTATE FUND - CLASS I
Periods Ended 8/31/96
<TABLE>
<CAPTION>
Since
Inception
One-Year Five-Year (9/12/89)
<S> <C> <C> <C>
Cumulative
Total Return(1) 7.48% 58.31% 69.81%
Average Annual
Total Return(2) 1.26% 8.34% 6.98%
Value of $10,000
Investment(3) $10,126 $14,926 $16,004
</TABLE>
1. CUMULATIVE TOTAL RETURN REPRESENTS THE CHANGE IN VALUE OF AN
INVESTMENT OVER THE INDICATED PERIODS, AND DOES NOT INCLUDE THE MAXIMUM 5.75%
INITIAL SALES CHARGE.
2. AVERAGE ANNUAL TOTAL RETURN REPRESENTS THE AVERAGE ANNUAL CHANGE IN
VALUE OF AN INVESTMENT OVER THE INDICATED PERIODS AND INCLUDES THE INITIAL
SALES CHARGE.
3. THESE FIGURES REPRESENT THE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT
IN THE FUND OVER THE SPECIFIED PERIODS AND INCLUDE THE INITIAL SALES CHARGE.
ALL CALCULATIONS ASSUME REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS WHEN PAID.
PRIOR TO JULY 1, 1992, CLASS I SHARES WERE OFFERED AT A HIGHER INITIAL 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 WITH MARKET CONDITIONS, CURRENCIES AND THE
ECONOMIC AND POLITICAL CLIMATES WHERE INVESTMENTS ARE MADE, SO THAT YOUR
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR INITIAL COST. PAST
PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
Under section 854(b)(2) of the Internal Revenue Code, the Templeton Global Real
Estate Fund hereby designates 10.75% of its ordinary income dividends paid by
the Fund during the fiscal year ended August 31, 1996, as income qualifying for
the corporate dividends received deduction.
6
<PAGE> 8
PERFORMANCE SUMMARY
CLASS II
The Templeton Global Real Estate Fund Class II shares reported a total return
of 6.69% for the one-year period ended August 31, 1996. Total return measures
the change in value of an investment, assuming reinvestment of dividends and
capital gains distributions, and does not include sales charges.
As measured by net asset value, the Fund's share price increased 50 cents, from
$13.17 on August 31, 1995 to $13.67 on August 31, 1996. During this time,
shareholders received 35.3 cents ($0.353) per share in dividend income. Of
course, past performance is not predictive of future results, and distributions
will vary depending on income earned by the Fund.
The graph on page 8 shows how an investment in the Fund since its inception has
kept your purchasing power well ahead of inflation, as measured by the Consumer
Price Index (CPI). It also compares the Fund's performance, over the same
period, with the performance of the unmanaged Morgan Stanley Capital
International (MSCI) World Index, which tracks 22 equity markets worldwide.
Please remember that the Fund's performance differs from that of the index
because, among other things, the index is not managed according to any
investment strategy, includes no sales charges or management expenses, and does
not contain cash (the Fund generally carries a certain percentage of cash at
any given time). Of course, one cannot invest directly in an index.
7
<PAGE> 9
TEMPLETON GLOBAL
REAL ESTATE FUND - CLASS II
Total Return Index Comparison
$10,000 Investment (5/1/95 - 8/31/96)
<TABLE>
<CAPTION>
Templeton Global Real MSCI World
Date Estate Fund-Class II(1) Index(2) CPI(3)
<S> <C> <C> <C>
5/1/95 $ 9,903 $10,000 $10,000
5/31/95 10,364 10,087 10,020
6/30/95 10,437 10,086 10,040
7/31/95 10,663 10,592 10,040
8/31/95 10,639 10,358 10,066
9/30/95 10,784 10,662 10,086
10/31/95 10,471 10,495 10,120
11/30/95 10,479 10,862 10,112
12/31/95 10,652 11,181 10,105
1/31/96 10,952 11,386 10,165
2/29/96 10,993 11,457 10,198
3/31/96 10,910 11,650 10,251
4/30/96 11,060 11,926 10,291
5/31/96 11,251 11,938 10,310
6/30/96 11,209 12,000 10,316
7/31/96 10,935 11,578 10,336
8/31/96 11,260 11,713 10,356
</TABLE>
1. INCLUDES ALL SALES CHARGES AND REPRESENTS THE CHANGE IN VALUE OF AN
INVESTMENT OVER THE PERIOD SHOWN, ASSUMING REINVESTMENT OF DIVIDENDS AND CAPITAL
GAINS. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
2. INDEX IS UNMANAGED AND INCLUDES REINVESTED DIVIDENDS.
3. SOURCE: U.S. BUREAU OF LABOR STATISTICS.
TEMPLETON GLOBAL
REAL ESTATE FUND - CLASS II
Periods Ended 8/31/96
<TABLE>
<CAPTION>
Since
Inception
One-Year (5/1/95)
<S> <C> <C>
Cumulative
Total Return(1) 6.69% 14.70%
Average Annual
Total Return(2) 4.65% 9.30%
Value of $10,000
Investment(3) $10,465 $11,260
</TABLE>
1. CUMULATIVE TOTAL RETURN REPRESENTS THE CHANGE IN VALUE OF AN
INVESTMENT OVER THE INDICATED PERIODS AND DOES NOT INCLUDE THE 1.0% INITIAL
SALES CHARGE AND THE 1.0% CONTINGENT DEFERRED SALES CHARGE, APPLICABLE TO
SHARES REDEEMED WITHIN THE FIRST 18 MONTHS OF INVESTMENT.
2. AVERAGE ANNUAL TOTAL RETURN REPRESENTS THE AVERAGE ANNUAL CHANGE IN
VALUE OF AN INVESTMENT OVER THE INDICATED PERIODS AND INCLUDES ALL SALES
CHARGES.
3. THESE FIGURES REPRESENT THE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT
IN THE FUND OVER THE SPECIFIED PERIODS AND INCLUDE ALL SALES CHARGES.
ALL CALCULATIONS ASSUME REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS WHEN PAID.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE WITH MARKET CONDITIONS,
CURRENCIES AND THE ECONOMIC AND POLITICAL CLIMATES WHERE INVESTMENTS ARE MADE,
SO THAT YOUR SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
INITIAL COST. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
Under section 854(b)(2) of the Internal Revenue Code, the Templeton Global Real
Estate Fund hereby designates 10.75% of its ordinary income dividends paid by
the Fund during the fiscal year ended August 31, 1996, as income qualifying for
the corporate dividends received deduction.
8
<PAGE> 10
TEMPLETON GLOBAL REAL ESTATE FUND
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE--CLASS I
(For a share outstanding throughout the year)
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
-----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 13.20 $ 13.66 $ 12.66 $ 10.40 $ 10.08
-------- --------- -------- -------- --------
Income from investment operations:
Net investment income .31 .39 .22 .25 .37
Net realized and unrealized gain (loss) .64 (.64) 1.00 2.36 .43
-------- --------- -------- -------- --------
Total from investment operations .95 (.25) 1.22 2.61 .80
Distributions to shareholders from net investment income (.37) (.21) (.22) (.35) (.48)
-------- --------- -------- -------- --------
Change in net asset value .58 (.46) 1.00 2.26 .32
-------- --------- -------- -------- --------
Net asset value, end of year $ 13.78 $ 13.20 $ 13.66 $ 12.66 $ 10.40
======== ========= ======== ======== ========
TOTAL RETURN* 7.48% (1.74)% 9.69% 25.94% 8.29%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000) $125,875 $130,149 $131,544 $61,820 $36,955
Ratio of expenses to average net assets 1.51% 1.55% 1.58% 1.68% 1.69%
Ratio of net investment income to average net assets 2.73% 3.05% 1.97% 2.60% 3.64%
Portfolio turnover rate 20.07% 38.69% 32.34% 19.74% 32.35%
Average commission rate paid (per share) $ .0418
</TABLE>
* TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS.
9
<PAGE> 11
TEMPLETON GLOBAL REAL ESTATE FUND
Financial Highlights (cont.)
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE--CLASS II
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1, 1995+
YEAR ENDED THROUGH
AUGUST 31, 1996 AUGUST 31, 1995
--------------- ---------------
<S> <C> <C>
Net asset value, beginning of period $ 13.17 $ 12.25
------- -------
Income from investment operations:
Net investment income .33 .03
Net realized and unrealized gain .52 .89
------- -------
Total from investment operations .85 .92
Distributions to shareholders from net investment income (.35) --
------- -------
Change in net asset value .50 .92
------- -------
Net asset value, end of period $ 13.67 $ 13.17
======= =======
TOTAL RETURN* 6.69% 7.51%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 5,275 $ 1,823
Ratio of expenses to average net assets 2.26% 2.26%**
Ratio of net investment income to average net assets 2.20% 1.71%**
Portfolio turnover rate 20.07% 38.69%
Average commission rate paid (per share) $ .0418
</TABLE>
* TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS OR THE CONTINGENT DEFERRED
SALES CHARGE. NOT ANNUALIZED FOR PERIODS OF LESS THAN ONE YEAR.
** ANNUALIZED.
+ COMMENCEMENT OF SALES.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 12
TEMPLETON GLOBAL REAL ESTATE FUND
Investment Portfolio, August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS: 95.6%
- -------------------------------------------------------------------------------------------------------------------------
BANKING: 3.1%
Banque Nationale de Paris Fr. 30,000 $ 1,080,515
HSBC Holdings PLC H.K. 55,612 960,130
Shinhan Bank Co. Ltd. Kor. 6,880 162,508
TR Financial Corp. U.S. 65,000 1,844,375
------------
4,047,528
- -------------------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS & COMPONENTS: 1.1%
Byucksan Development Co. Ltd. Kor. 66,360 882,910
* Unione Cementi Marchino Emiliane (Unicem) Itl. 28,000 198,233
Unione Cementi Marchino Emiliane (Unicem), di Risp Itl. 139,580 424,831
------------
1,505,974
- -------------------------------------------------------------------------------------------------------------------------
BUSINESS & PUBLIC SERVICES: 1.7%
+ Horizon Group Inc. U.S. 107,520 2,257,920
- -------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION & HOUSING: 7.1%
* Atlantic Gulf Communities Corp. U.S. 150,000 862,500
Dragados y Construcciones SA Sp. 50,000 631,116
Engle Homes U.S. 147,500 1,198,438
Kaufman & Broad Home Corp. U.S. 150,000 1,837,500
* Schuler Homes Inc. U.S. 235,000 1,542,188
Sirti SPA Itl. 180,000 1,115,003
*++ Sundance Homes Inc. U.S. 690,000 1,466,250
Toda Corp. Jpn. 70,000 612,057
------------
9,265,052
- -------------------------------------------------------------------------------------------------------------------------
ENERGY SOURCES: 1.6%
Societe Elf Aquitane SA Fr. 10,317 751,327
Valero Energy Corp. U.S. 60,700 1,282,288
------------
2,033,615
- -------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES: 1.6%
Federal National Mortgage Assn. U.S. 52,000 1,612,000
* India Fund, B Ind. 300,000 512,889
------------
2,124,889
- -------------------------------------------------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER: 4.0%
Assidomaen AB Swe. 47,000 1,171,034
Fletcher Challenge Ltd. Forestry Division, ADR N.Z. 12,769 175,574
Georgia-Pacific Corp. U.S. 20,000 1,487,500
* Mayr-Melnhof Karton AG Aust. 25,000 1,173,957
St. Joe Paper Corp. U.S. 20,000 1,230,000
------------
5,238,065
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 13
TEMPLETON GLOBAL REAL ESTATE FUND
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------------------------------------------------
LEISURE & TOURISM: 2.0%
* Danubius Hotel and Spa RT Hun. 60,000 $ 1,096,580
Grand Hotel Holdings Ltd. H.K. 2,469,000 957,905
Oriental Hotel (Thailand) Public Co. Ltd., fgn. Thai. 93,700 533,207
------------
2,587,692
- -------------------------------------------------------------------------------------------------------------------------
MERCHANDISING: 0.6%
* Wessel & Vett AS, C Den. 12,000 744,885
- -------------------------------------------------------------------------------------------------------------------------
METALS & MINING: 1.2%
Boehler Uddeholm AG Aust. 11,500 896,721
Maanshan Iron & Steel Co. Ltd., H Chn. 3,520,000 637,310
Rustenburg Platinum Holdings Ltd. S.AF. 1,200 20,123
------------
1,554,154
- -------------------------------------------------------------------------------------------------------------------------
MULTI-INDUSTRY: 3.2%
Cheung Kong Holdings Ltd. H.K. 400,000 2,806,337
Inversiones y Representacion Arg. 202,831 562,162
Metro Pacific Corp. Phil. 2,689,539 821,390
------------
4,189,889
- -------------------------------------------------------------------------------------------------------------------------
REAL ESTATE: 65.7%
+ American Health Properties Inc. U.S. 64,300 1,406,563
Bail Investissement Fr. 8,700 1,348,571
+ Beacon Properties Corp U.S. 105,000 2,861,250
*++ Bluegreen Corp. U.S. 1,192,945 3,877,071
*++ Canlan Investment Corp. Can. 595,600 1,904,301
+ Carramerica Realty Corp. U.S. 65,000 1,592,500
* Catellus Development Corp. U.S. 290,000 2,755,000
+ CBL & Associates Properties Inc. U.S. 160,000 3,680,000
+ Charles E. Smith Residential Realty Inc. U.S. 80,000 1,910,000
* Credit Foncier de France SA Fr. 14,002 190,085
+ Equity Residential Properties U.S. 100,000 3,537,500
+ Federal Realty Investment Trust, SBI U.S. 33,000 775,500
+ General Growth Properties U.S. 104,000 2,613,000
+ Health Care Property Investors Inc. U.S. 30,000 1,016,250
+ Highwood Properties Inc. U.S. 96,200 2,861,950
+ Home Properties of New York Inc. U.S. 50,000 1,000,000
Inversiones y Representacion, GDR Arg. 500 13,813
+ IRT Property Co. U.S. 84,200 778,850
+ LTC Properties Inc. U.S. 226,000 3,672,500
+ Meditrust Inc., SBI U.S. 70,400 2,411,200
+ Nationwide Health Properties Inc. U.S. 122,000 2,714,500
New Asia Realty and Trust Co. Ltd., A H.K. 388,000 1,427,559
</TABLE>
12
<PAGE> 14
TEMPLETON GLOBAL REAL ESTATE FUND
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------------------------------------------------
REAL ESTATE (cont.)
New World Development Co. Ltd. H.K. 458,553 $ 2,223,826
* New World Infrastructure Ltd. H.K. 757 1,782
* Newhall Investment Properties U.S. 20,300 --
+ Omega Healthcare Investors U.S. 57,184 1,636,883
Parkway Holdings Ltd. Sing. 209,000 656,467
+ Pennsylvania Real Estate Investment Trust, SBI U.S. 34,000 701,250
+ Post Properties Inc. U.S. 67,000 2,403,625
PT Jaya Properties, fgn. Indo. 1,000,000 1,398,377
Revenue Property Ltd. Can. 1,555,800 2,677,611
Rouse Co. U.S. 156,300 4,044,263
Ryoden Development Ltd. H.K. 3,650,000 892,144
+ Security Capital Industrial Trust, SBI U.S. 86,592 1,558,656
* Security Capital Industrial Trust, rts. U.S. 86,592 4,736
+ Security Capital Pacific Trust, SBI U.S. 168,911 3,526,017
+ South West Property Trust U.S. 150,000 1,968,750
+ Summit Properties Inc. U.S. 85,400 1,633,275
Sun Hung Kai Properties Ltd. H.K. 370,000 3,612,674
Taylor Woodrow PLC U.K. 656,177 1,751,882
Union du Credit Bail Immobilier Unibail Fr. 24,700 2,526,455
* Union Valley Corp. U.S. 1,255 13
+ Weeks Corp. U.S. 210,000 6,011,250
+ Weingarten Realty Investors, SBI U.S. 31,100 1,228,450
* Westfield America Trust Aus. 34,767 28,878
Westfield Trust Units Aus. 754,285 1,390,261
------------
86,225,488
- -------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS: 0.5%
Telecomunicacoes Brasileiras SA, ADR, 144A Braz. 490 36,444
Telefonos de Mexico SA, L, ADR Mex. 20,000 657,500
------------
693,944
- -------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION: 1.3%
Florida East Coast Industries Inc. U.S. 11,000 895,125
Peninsular & Oriental Steam Navigation Co. U.K. 100,000 803,291
------------
1,698,416
- -------------------------------------------------------------------------------------------------------------------------
UTILITIES-ELECTRICAL & GAS: 0.9%
National Power PLC U.K. 192,378 1,208,952
------------
TOTAL COMMON STOCKS (cost $114,187,285) 125,376,463
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 15
TEMPLETON GLOBAL REAL ESTATE FUND
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS: 1.1%
- ------------------------------------------------------------------------------------------------------------------------
+ American Health Properties Inc., pfd. U.S. 6,430 $ 88,413
Baumax AG, pfd. Aust. 25,000 866,663
Nacional Financiera SA, 11.25%, conv., pfd. Mex. 15,700 553,425
------------
TOTAL PREFERRED STOCKS (cost $2,093,772) 1,508,501
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY**
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
BONDS: 0.9% (cost $1,400,000)
- ------------------------------------------------------------------------------------------------------------------------
Revenue Properties, 6.00%, conv., 3/01/04 U.S. 1,400,000 1,148,350
- ------------------------------------------------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 1.9% (cost $2,492,248)
- ------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bills, 4.96% to 5.03% with
maturities to 11/21/96 U.S. 2,519,000 2,492,810
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS: 99.5% (cost $120,173,305) 130,526,124
OTHER ASSETS, LESS LIABILITIES: 0.5% 623,560
------------
TOTAL NET ASSETS: 100.0% $131,149,684
------------
------------
</TABLE>
* NON-INCOME PRODUCING.
** CURRENCY OF COUNTRIES INDICATED.
+ REAL ESTATE INVESTMENT TRUSTS (40.9% OF TOTAL NET ASSETS).
++ SEE NOTE 5.
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 16
TEMPLETON GLOBAL REAL ESTATE FUND
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<TABLE>
<S> <C>
Assets:
Investments in securities, at value
(identified cost $120,173,305) $130,526,124
Receivables:
Investment securities sold 620,121
Fund shares sold 187,620
Dividends and interest 350,725
------------
Total assets 131,684,590
------------
Liabilities:
Payables:
Investment securities purchased 39,075
Fund shares redeemed 276,839
Accrued expenses 218,992
------------
Total liabilities 534,906
------------
Net assets, at value $131,149,684
------------
------------
Net assets consist of:
Undistributed net investment income $ 2,190,285
Net unrealized appreciation 10,352,819
Accumulated net realized loss (6,100,372)
Net capital paid in on shares of
beneficial interest 124,706,952
------------
Net assets, at value $131,149,684
------------
------------
Class I
Net asset value per share
($125,874,702 / 9,132,806 shares
outstanding) $ 13.78
------------
------------
Maximum offering price
($13.78 / 94.25%) $ 14.62
------------
------------
Class II
Net asset value per share
($5,274,982 / 385,866
shares outstanding) $ 13.67
------------
------------
Maximum offering price
($13.67 / 99.00%) $ 13.81
------------
------------
</TABLE>
STATEMENT OF OPERATIONS
for the year ended August 31, 1996
<TABLE>
<S> <C> <C>
Investment income:
(net of $215,219
foreign taxes withheld)
Dividends $ 4,876,859
Interest 566,566
----------
Total income $5,443,425
Expenses:
Management fees (Note 3) 963,473
Administrative fees (Note
3) 192,694
Distribution fees (Note 3)
Class I 313,633
Class II 32,700
Transfer agent fees (Note
3) 224,500
Custodian fees 29,751
Reports to shareholders 92,300
Audit fees 19,500
Legal fees (Note 3) 16,500
Registration and filing
fees 55,100
Trustees' fees and expenses 15,000
Other 3,432
----------
Total expenses 1,958,583
----------
Net investment income 3,484,842
Realized and unrealized gain (loss):
Net realized loss on:
Investments (3,764,288)
Foreign currency
transactions (2,643)
----------
(3,766,931)
Net unrealized appreciation
on investments 9,465,131
----------
Net realized and
unrealized gain 5,698,200
----------
Net increase in net assets
resulting from operations $9,183,042
----------
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 17
TEMPLETON GLOBAL REAL ESTATE FUND
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended August 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 3,484,842 $ 3,961,976
Net realized gain (loss) on investment and foreign currency transactions (3,766,931) 2,650,946
Net unrealized appreciation (depreciation) 9,465,131 (9,032,322)
------------ ------------
Net increase (decrease) in net assets resulting from operations 9,183,042 (2,419,400)
Distributions to shareholders
from net investment income
Class I (3,656,308) (2,183,210)
Class II (58,680) --
Fund share transactions (Note 2)
Class I (9,558,558) 3,224,436
Class II 3,267,549 1,807,089
------------ ------------
Net increase (decrease) in net assets (822,955) 428,915
Net assets:
Beginning of year 131,972,639 131,543,724
------------ ------------
End of year $131,149,684 $131,972,639
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 18
TEMPLETON GLOBAL REAL ESTATE FUND
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Templeton Global Real Estate Fund (the Fund), formerly Templeton Real Estate
Securities Fund, is a Massachusetts business trust and an open-end, diversified
management investment company registered under the Investment Company Act of
1940. The 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.
The following summarizes the Fund's significant accounting policies.
A. SECURITIES VALUATIONS:
Securities listed or traded on a recognized national or foreign exchange or
NASDAQ are valued at the last reported sales prices on the principal exchange on
which the securities are traded. Over-the-counter securities and listed
securities 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
approved in good faith by the Board of Trustees.
B. FOREIGN CURRENCY TRANSACTIONS:
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 currencies
are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customarily
enters into a foreign exchange contract 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
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities 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
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
securities is recorded as soon as information is available to the Fund. Interest
income 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.
E. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
17
<PAGE> 19
TEMPLETON GLOBAL REAL ESTATE FUND
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
2. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
The Fund offers two classes of shares: Class I shares and Class II shares.
Shares of each class are identical except for their initial sales load, a
contingent deferred sales charge on Class II shares, distribution fees, and
voting rights on matters affecting a single class. At August 31, 1996, 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>
CLASS I
--------------------------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 1996 AUGUST 31, 1995
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold 1,668,000 $ 22,151,692 3,107,103 $ 39,860,934
Shares issued on reinvestment
of distributions 243,797 3,114,773 145,407 1,858,319
Shares redeemed (2,640,108) (34,825,023) (3,021,430) (38,494,817)
---------- ------------ ---------- ------------
Net increase (decrease) (728,311) $ (9,558,558) 231,080 $ 3,224,436
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
CLASS II
--------------------------------------------------
FOR THE PERIOD
MAY 1, 1995
YEAR ENDED THROUGH
AUGUST 31, 1996 AUGUST 31, 1995
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold 282,857 $ 3,739,556 139,647 $ 1,822,153
Shares issued on reinvestment
of distributions 4,365 55,597 -- --
Shares redeemed (39,852) (527,604) (1,151) (15,064)
---------- ------------ ---------- ------------
Net increase 247,370 $ 3,267,549 138,496 $ 1,807,089
========== ============ ========== ============
</TABLE>
18
<PAGE> 20
TEMPLETON GLOBAL REAL ESTATE FUND
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also directors or officers of Templeton Global
Advisors Ltd. (TGAL), 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 TGAL equal, on an annual
basis, to 0.75% of the average daily net assets of the Fund. 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 million, 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 year ended August 31, 1996, FTD received net commissions of
$72,693 from the sale of the Funds shares and FTIS received fees of $224,500.
Under the distribution plans for Class I and Class II shares, the Fund
reimburses FTD quarterly for FTD's costs and expenses in connection with any
activity that is primarily intended to result in a sale of Fund shares, subject
to a maximum of 0.25% and 1.00% per annum of the average daily net assets of
Class I and Class II shares, respectively. Under the Class I distribution plan,
costs and expenses exceeding the maximum may be reimbursed in subsequent
periods. At August 31, 1996, unreimbursed expenses amount to $37,537. Class II
shares redeemed within 18 months are subject to a contingent deferred sales
charge. Contingent deferred sales charges of $1,583 were paid to FTD for the
year ended August 31, 1996.
An officer of the Fund is a partner of Dechert Price & Rhoads, legal counsel for
the Fund, which firm received fees of $16,500 for the year ended August 31,
1996.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the year
ended August 31, 1996 aggregated $25,835,025 and $23,718,544, respectively. The
cost of securities for federal income tax purposes is $120,319,605. Realized
gains and losses are reported on an identified cost basis.
At August 31, 1996, the aggregate gross unrealized appreciation and depreciation
of portfolio securities, based on cost for federal income tax purposes, was as
follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 21,599,800
Unrealized depreciation (11,393,281)
------------
Net unrealized appreciation $ 10,206,519
============
</TABLE>
5. HOLDING OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
The Investment Company Act of 1940 defines "affiliated companies" as investments
in portfolio companies in which the Fund owns 5% or more of the outstanding
voting securities. Investments in "affiliated companies" at August 31, 1996
amounted to $7,247,622.
6. CAPITAL LOSS CARRYFORWARD
At August 31, 1996 the Fund had tax basis capital losses of $7,000,000 which may
be carried over to offset future capital gains. Of this amount, $1,000,000 arose
from the merger with National Real Estate Fund on December 14, 1990. Such losses
expire in varying amounts from August 31, 1997 to August 31, 2004.
19
<PAGE> 21
TEMPLETON GLOBAL REAL ESTATE FUND
Independent Auditor's Report
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
Templeton Global Real Estate Fund
We have audited the accompanying statement of assets and liabilities, including
the investment portfolio, of Templeton Global Real Estate Fund as of August 31,
1996, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and the financial highlights for the periods indicated in the
accompanying financial statements. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Templeton Global Real Estate Fund as of August 31, 1996, the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
[McGladrey & Pullen, LLP]
New York, New York
September 27, 1996
20
<PAGE> 22
NOTES
<PAGE> 23
LITERATURE REQUEST
- --------------------------------------------------------------------------------
For a free brochure and prospectus, which contain more complete information,
including charges and expenses, call Franklin Fund Information, toll free, at
1-800/DIAL BEN (1-800/342-5236). Please read the prospectus carefully before you
invest or send money. 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 by the presence of a regular beeping tone.
FRANKLIN TEMPLETON GROUP
<TABLE>
<S> <C> <C> <C>
GLOBAL GROWTH GLOBAL INCOME INCOME FRANKLIN STATE-SPECIFIC
FUNDS SEEKING
Franklin Global Health Franklin Global Government Franklin Adjustable Rate TAX-FREE INCOME
Care Fund Income Fund Securities Fund Alabama
Franklin Templeton Franklin Templeton Hard Franklin Adjustable U.S. Arizona*
Japan Fund Currency Fund Government Securities Fund Arkansas**
Templeton Developing Franklin Templeton High Franklin's AGE High California*
Markets Trust Income Currency Fund Income Fund Colorado
Templeton Foreign Fund Templeton Americas Franklin Investment Grade Connecticut
Templeton Foreign Smaller Government Securities Fund Income Fund Florida*
Companies Fund Franklin Short-Intermediate U.S. Georgia
Templeton Global GROWTH Government Securities Fund Hawaii**
Infrastructure Fund Franklin Blue Chip Fund Franklin U.S. Government Indiana
Templeton Global Franklin California Growth Fund Securities Fund Kentucky
Opportunities Trust Franklin DynaTech Fund Franklin Money Fund Lousiana
Templeton Global Franklin Equity Fund Franklin Federal Money Fund Maryland
Real Estate Fund Franklin Gold Fund Massachesetts***
Templeton Global Smaller Franklin Growth Fund FOR NON-U.S. INVESTORS: Michigan*
Companies Fund Franklin MidCap Growth Fund Franklin Tax-Advantaged Minnesota***
Templeton Greater Franklin Small Cap Growth Fund High Yield Securities Fund Missouri
European Fund Franklin Tax-Advantaged New Jersey
Templeton Growth Fund GROWTH AND INCOME International Bond Fund New York*
Templeton Latin America Franklin Asset Allocation Fund Franklin Tax-Advantaged U.S. North Carolina
Fund Franklin Balance Sheet Government Securities Fund Ohio***
Templeton Pacific Investment Fund Franklin U.S. Government Oregon
Growth Fund Franklin Convertible Pennsylvania
Templeton World Fund Securities Fund FOR CORPORATIONS: Tennessee**
Franklin Equity Income Fund Franklin Corporate Qualified Texas
GLOBAL GROWTH AND INCOME Franklin Income Fund Dividend Fund Virginia**
Franklin Global Utilities Fund Franklin MicroCap Value Fund Washington**
Franklin Templeton German Franklin Natural Resources Fund FRANKLIN FUNDS SEEKING
Government Bond Fund Franklin Real Estate TAX-FREE INCOME VARIABLE ANNUTIES
Franklin Templeton Securities Fund Federal Intermediate-Term Franklin Valuemark(SM)
Global Currency Fund Franklin Rising Dividends Fund Tax-Free Income Fund Franklin Templeton
Templeton Global Bond Fund Franklin Strategic Income Fund Federal Tax-Free Income Fund Valuemark Income Plus
Templeton Growth and Franklin Utilities Fund High Yield Tax-Free (an immediate annuity)
Income Fund Franklin Value Fund Income Fund
Templeton American Trust, Inc. Insured Tax-Free Income Fund
Puerto Rico Tax-Free
Income Fund
Tax-Exempt Money Fund
</TABLE>
*Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and/or a high yield
portfolio (CA) and a money market portfolio (CA and NY).
**The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
***Portfolio of insured municipal securities.
