SEMI ANNUAL REPORT
FEBRUARY 28, 1999
TEMPLETON GLOBAL
REAL ESTATE FUND
[LOGO]
FRANKLIN TEMPLETON(R)
PAGE
[LOGO] CELEBRATING OVER 50 YEARS
Thank you for investing with Franklin Templeton. We encourage our investors to
maintain a long-term perspective and remember that all securities markets move
both up and down, as do mutual fund share prices. We appreciate your past
support and look forward to serving your investment needs in the years ahead.
In 1992, Sir John Templeton retired after a 50-year career of helping investors
manage their money. Currently he devotes all of his time and efforts to the John
Templeton Foundation. A major portion of his assets remain invested in the
Templeton funds which are managed by many of the investment professionals he
selected and trained.
[PHOTO OF JEFFREY A. EVERETT APPEARS HERE]
JEFFREY A. EVERETT, CFA
Portfolio Manager
Templeton Global Real Estate Fund
PAGE
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Shareholder Letter .......................... 1
Performance Summary ......................... 6
Financial Highlights &
Statement of Investments ................... 8
Financial Statements ........................ 13
Notes to Financial Statements ............... 16
</TABLE>
SHAREHOLDER LETTER
Your Fund's Goal: Templeton Global Real Estate Fund seeks long-term capital
growth, and its secondary goal is current income. Under normal market
conditions, the Fund invests primarily in the equity and debt securities of
companies located anywhere in the world that are engaged in or related to the
real estate industry or which own significant real estate assets.
Dear Shareholder:
This semiannual report of Templeton Global Real Estate Fund covers the six
months ended February 28, 1999. As most global equity markets recovered from
their October slump, many indicators pointed toward improved performance for
real estate stocks. In the U.S., Europe and Hong Kong, where the Fund then had
its highest weightings, new supply of properties was limited, and expansion of
many global corporations was contributing to rising occupancy rates while
interest rate declines were lowering financing costs and increasing operating
income for real estate companies. Relatively high dividend yields of many real
estate securities made the sector look even more attractive to us. Despite these
positive indicators, the sector as a whole performed
FUND CATEGORY
[PYRAMID GRAPH]
GLOBAL
GROWTH
GROWTH & INCOME
INCOME
TAX-FREE INCOME
You will find a complete listing of the Fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 10 of
this report.
PAGE
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
2/28/99
[PIE CHART APPEAR HERE]
[THIS CHART SHOWS IN PIE CHART FORMAT THE GEOGRAPHIC DISTRIBUTIO OF TEMPLETON
GLOBAL REAL ESTATE FUND'S PORTFOLIO HOLDINGS ON FEBRUARY 28, 1999, BASED ON
TOTAL NET ASSETS.]
<TABLE>
<CAPTION>
<S> <C>
North America 42.5%
Europe 19.2%
Asia 14.0%
Latin America 5.2%
Other 5.0%
Fixed Income 4.1%
Other Net Assets 10.0%
</TABLE>
poorly when compared with other equities. Within this environment, Templeton
Global Real Estate Fund - Class A shares produced a six-month cumulative total
return of 2.11%, as shown in the Performance Summary on page 7.
During the reporting period, we took advantage of the real estate sector's
weakness to increase several existing positions and initiate new holdings in
stocks we considered undervalued, because we believed investors were likely to
eventually recognize the value of limited supply and increasing liquidity in
global real estate markets.
The Fund's holdings of carefully selected U.S. Real Estate Investment Trusts
(REITs)(1) fluctuated slightly during the six months under review. In our
opinion, stocks like Boston Properties Inc. and Equity Residential Properties,
two REITs with highly respected management teams and well-located assets in
metropolitan areas, have the potential to perform well. We also believe that
Rouse Co., an owner and operator of high-end regional malls in key locations
throughout the U.S., could excel in the retail sector. Although these companies'
performance over the past year has been disappointing, we believe their
management has displayed skill and foresight, and that investors may eventually
revalue their worth.
In Europe, increased demand for space and a limited supply of property
contributed to higher rents in many cities, as the European Monetary Union
encouraged companies there to expand across the continent. Cross-border
competition caused some corporations to exchange property holdings for
relatively liquid shares of real estate firms, and some companies spun off real
estate assets into separate corporate entities. Such spin-offs
1. REIT is a company that owns and manages large real estate investments,
providing investors with potential benefits from owning real estate on a scale
that most individuals could not achieve.
2
PAGE
TOP 10 HOLDINGS
2/28/99
[THIS CHART LISTS THE TOP 10 HOLDINGS, INCLUDING INDUSTRY AND COUNTRY, OF
TEMPLETON GLOBAL REAL ESTATE FUND, BASED ON TOTAL NET ASSETS AS OF 2/28/99.]
<TABLE>
<CAPTION>
COMPANY, % OF TOTAL
INDUSTRY, COUNTRY NET ASSETS
- ----------------- ----------
<S> <C>
Weeks Corp.
Real Estate, U.S. 4.4%
Rouse Co.
Real Estate, U.S. 4.3%
Union du Credit Bail
Immobilier Unibail
Real Estate, France 3.8%
Equity Residential Properties
Real Estate, U.S. 3.6%
Highwoods Properties Inc.
Real Estate, U.S. 3.5%
LTC Properties Inc.
Real Estate, U.S. 3.2%
CBL & Associates
Properties Inc.
Real Estate, U.S. 2.7%
Nationwide Health
Properties Inc.
Real Estate, U.S. 2.5%
Boston Properties Inc.
Real Estate, U.S. 2.4%
Crescent Real Estate
Equities Co.
Real Estate, U.S. 2.2%
</TABLE>
may enhance shareholder value by enabling these new firms to focus on real
estate as a core business, something many European companies have not done in
the past.
During the reporting period, we maintained positions in a number of Asian
property companies, which we believe could be long-term beneficiaries of
improving economic conditions and pent-up demand. Hong Kong holdings, which made
up 10.5% of the total portfolio on February 28, 1999, provided welcome gains,
helping compensate for lagging returns of real estate companies elsewhere. In an
effort to stimulate the economy and ensure adequate public housing, Hong Kong's
government reduced interest rates, and banks were able to re-enter the mortgage
loan market, helping to create a resurgence of residential purchases. At the
same time, property prices there firmed up as it appeared that a government
moratorium on land sales might cause tighter property supply in the near future.
These conditions helped Hong Kong developers Cheung Kong Holdings Ltd. and New
World Development Co. Ltd. sell residential units, providing them with cash for
future land purchases.
Looking forward, we believe that favorable supply and demand trends, low
interest rates and expanding credit may generate growth and consolidation
opportunities for many well-managed real estate companies throughout the world.
In our opinion, U.S. REITs possess compelling fundamentals, which have been
unfairly overlooked by U.S. investors. In 1998, the Standard & Poor's(R) 500
(S&P 500(R)) Index's earnings growth was essentially flat, yet the
price-to-earnings (P/E) multiple increased 25%.
3
PAGE
Essentially, general stock prices rose while company earnings did not. During
the same period, U.S. REIT P/E multiples fell 30%, while earnings growth
declined to 10% annually, down from the 15-20% levels of the previous two years.
Also, the average cash flow growth of U.S. REITs has exceeded the cash flow
growth of the S&P 500 by 2.9% over the past six calendar years.(2) Furthermore,
as of February 28, 1999, REIT dividend yields were 2.4% higher than 10-year U.S.
Treasury bond yields.(3) Based on these factors, we believe investors may come
to realize the merits of U.S. REITs' solid yield and consistent cash flow
growth.
Of course, there are special risks involved with global investing related to
market, currency, economic, social, political and other factors. Emerging market
securities involve similar but heightened risks, in addition to those associated
with their relatively small size and lesser liquidity. Investing in any emerging
market means accepting a certain amount of volatility and, in some cases, severe
market corrections. Since the Fund concentrates on the real estate industry, its
share price may experience greater volatility than those of more broadly
diversified investments. For example, Taiwan's equity market has increased 951%
in the last 15 years, but has suffered six declines of more than 20% during that
time.(4) While short-term volatility can be disconcerting, declines in excess of
50% are not unusual in such markets. These special risks and other
considerations are discussed in the Fund's prospectus.
2. Litt, Jonathan. "REIT Insight," Paine Webber, January 29, 1999, p.2.
3. Source: Standard & Poor's Micropal.
4. Source: Bloomberg. Based on quarterly percentage price change over 15 years
ended December 31, 1998. Market returns are measured in U.S. dollars and do not
include reinvested dividends.
4
PAGE
Please remember that this discussion reflects our views, opinions and portfolio
holdings as of February 28, 1999, the end of the reporting period. However,
market and economic conditions are changing constantly, which can be expected to
affect our strategies and the Fund's portfolio composition. Although past
performance is not predictive of future results, these insights may help give
you a better understanding of our investment and management philosophy.
We thank you for your participation in Templeton Global Real Estate Fund and
look forward to serving you in the future. Please feel free to contact us with
any questions or comments you may have.
Sincerely,
/s/JEFFREY A. EVERETT
- ----------------------
Jeffrey A. Everett, CFA
Portfolio Manager
Templeton Global Real Estate Fund
5
PAGE
PERFORMANCE SUMMARY AS OF 2/28/99
Distributions will vary based on earnings of the Fund's portfolio and any
profits realized from the sale of the portfolio's securities, as well as the
level of each class' operating expenses. Past distributions are not indicative
of future trends. All total returns include reinvested distributions at net
asset value.
PRICE AND DISTRIBUTION INFORMATION (9/1/98 - 2/28/99)
<TABLE>
<CAPTION>
CLASS A CHANGE 2/28/99 8/31/98
- ---------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value - $0.22 $12.48 $12.70
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS
-------------------------------
<S> <C>
Dividend Income $0.5100
Long-term Capital Gain $0.0100
TOTAL $0.5200
</TABLE>
<TABLE>
<CAPTION>
CLASS C CHANGE 2/28/99 8/31/98
- ---------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value - $0.15 $12.40 $12.55
</TABLE>
<TABLE>
<CAPTION>
Distributions
-------------------------------
<S> <C>
Dividend Income $ 0.3814
Long-term Capital Gain $ 0.0100
TOTAL $ 0.3914
</TABLE>
CLASS A (formerly Class I):
Subject to the current, maximum 5.75% initial sales charge. Prior to July 1,
1992, Fund shares were offered at a higher initial sales charge. Thus, actual
total returns would have been lower. On January 1, 1993, the Fund implemented a
Rule 12b-1 plan, which affects subsequent performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and a 1% contingent deferred sales charge
(CDSC) for shares redeemed within 18 months of investment. These shares have
higher annual fees and expenses than Class A shares.
Templeton Global Real Estate Fund paid distributions derived from long-term
capital gains of 1 cent ($0.0100) per share in October, 1998. The Fund hereby
designates such distributions as capital gain dividends per Internal Revenue
Code Section 852 (b)(3).
6 Past performance is not predictive of future results.
PAGE
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 6-MONTH 1-YEAR 5-YEAR (9/12/89)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) 2.11% - 18.75% 1.66% 69.44%
Average Annual Total Return(2) - 3.73% - 23.40% - 0.85% 5.07%
Value $10,000 Investment(3) $9,627 $7,660 $9,584 $15,970
</TABLE>
<TABLE>
<CAPTION>
2/28/95 2/28/96 2/28/97 2/28/98 2/28/99
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
One-Year Total Return(4) - 12.10% 11.79% 18.66% 7.31% - 18.75%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 6-MONTH 1-YEAR 3-YEAR (5/1/95)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) 1.73% - 19.35% 1.07% 12.20%
Average Annual Total Return(2) - 0.30% - 20.93% 0.03% 2.79%
Value of $10,000 Investment(3) $9,970 $7,907 $10,009 $11,111
</TABLE>
<TABLE>
<CAPTION>
2/28/97 2/28/98 2/28/99
------------------------------------------------
<S> <C> <C> <C>
One-Year
Total Return(4) 17.87% 6.32% - 19.35%
</TABLE>
1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the current, applicable,
maximum sales charge(s) for that class. Six-month return has not been
annualized.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include the current, applicable, maximum
sales charge(s) for that class.
4. One-year total return represents the change in value of an investment over
the one-year periods ended on the specified dates and does not include sales
charges.
Since markets can go down as well as up, investment return and principal value
will fluctuate with market conditions, currency volatility and the social,
economic and political climates of countries where the Fund invests. Emerging
markets involve heightened risks related to the same factors, in addition to
those associated with their relatively small size and lesser liquidity. You may
have a gain or loss when you sell your shares.
Past performance is not predictive of future results. 7
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
Financial Highlights
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, 1999 ----------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout
the period)
Net asset value, beginning of
period.............................. $12.70 $16.33 $13.78 $13.20 $13.66 $12.66
---------------------------------------------------------------------------------------
Income from investment operations:
Net investment income.............. .21 .46 .39 .31 .39 .22
Net realized and unrealized gains
(losses)......................... .09 (3.63) 2.58 .64 (.64) 1.00
---------------------------------------------------------------------------------------
Total from investment operations.... .30 (3.17) 2.97 .95 (.25) 1.22
---------------------------------------------------------------------------------------
Less distributions from:
Net investment income.............. (.51) (.33) (.42) (.37) (.21) (.22)
Net realized gains................. (.01) (.05) -- -- -- --
In excess of net realized gains.... -- (.08) -- -- -- --
---------------------------------------------------------------------------------------
Total distributions................. (.52) (.46) (.42) (.37) (.21) (.22)
---------------------------------------------------------------------------------------
Net asset value, end of period...... $12.48 $12.70 $16.33 $13.78 $13.20 $13.66
=======================================================================================
Total Return*....................... 2.11% (19.94)% 22.06% 7.48% (1.74)% 9.69%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's)... $82,581 $97,823 $151,777 $125,875 $130,149 $131,544
Ratios to average net assets:
Expenses........................... 1.54%** 1.45% 1.45% 1.51% 1.55% 1.58%
Net investment income.............. 2.91%** 2.70% 2.55% 2.73% 3.05% 1.97%
Portfolio turnover rate............. 1.30% 23.18% 24.03% 20.07% 38.69% 32.34%
</TABLE>
*Total return does not reflect sales commissions and is not annualized.
**Annualized.
8
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, 1999 --------------------------------------------
(UNAUDITED) 1998 1997 1996 1995+
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
Net asset value, beginning of period.............. $12.55 $16.16 $13.67 $13.17 $12.25
-------------------------------------------------------------------
Income from investment operations:
Net investment income............................ .12 .30 .31 .33 .03
Net realized and unrealized gains (losses)....... .12 (3.57) 2.52 .52 .89
-------------------------------------------------------------------
Total from investment operations.................. .24 (3.27) 2.83 .85 .92
-------------------------------------------------------------------
Less distributions from:
Net investment income............................ (.38) (.21) (.34) (.35) --
Net realized gains............................... (.01) (.05) -- -- --
In excess of net realized gains.................. -- (.08) -- -- --
-------------------------------------------------------------------
Total distributions............................... (.39) (.34) (.34) (.35) --
-------------------------------------------------------------------
Net asset value, end of period.................... $12.40 $12.55 $16.16 $13.67 $13.17
===================================================================
Total Return*..................................... 1.73% (20.61)% 21.12% 6.69% 7.51%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's)................. $4,410 $6,869 $8,917 $5,275 $1,823
Ratios to average net assets:
Expenses......................................... 2.30%** 2.20% 2.20% 2.26% 2.26%**
Net investment income............................ 2.11%** 1.97% 1.74% 2.20% 1.71%**
Portfolio turnover rate........................... 1.30% 23.18% 24.03% 20.07% 38.69%
</TABLE>
*Total return does not reflect sales commissions or the contingent deferred
sales charge and is not annualized.
**Annualized.
+For the period May 1, 1995 (effective date) to August 31, 1995.
See Notes to Financial Statements.
9
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 83.8%
BANKING 3.2%
*Bangkok Bank Public Co. Ltd., fgn.......................... Thailand 291,000 $ 491,238
Banque Nationale de Paris BNP............................... France 8,023 640,290
Development Bank of Singapore Ltd., fgn..................... Singapore 43,000 312,137
HSBC Holdings Plc........................................... Hong Kong 41,301 1,162,095
National Australia Bank Ltd................................. Australia 6,300 105,037
Shinhan Bank Co. Ltd........................................ South Korea 7,946 48,709
-----------
2,759,506
-----------
BUILDING MATERIALS & COMPONENTS 2.5%
Suez Cement Co. ............................................ Egypt 88,000 1,576,600
Unione Cementi Marchino Emiliane (Unicem), di Risp.......... Italy 139,580 637,261
-----------
2,213,861
-----------
CONSTRUCTION & HOUSING .4%
Toda Corp................................................... Japan 70,000 333,333
-----------
ENERGY SOURCES 1.5%
Perez Companc SA, B......................................... Argentina 51,000 207,653
Societe Elf Aquitaine SA, Br. .............................. France 10,317 1,075,926
-----------
1,283,579
-----------
FINANCIAL SERVICES .9%
Housing Development Finance Corp. Ltd....................... India 6,800 363,304
Lend Lease Corp. Ltd........................................ Australia 32,506 403,691
-----------
766,995
-----------
FOREST PRODUCTS & PAPER 1.5%
St. Joe Co.................................................. United States 60,000 1,293,750
-----------
LEISURE & TOURISM 3.1%
Grand Hotel Holdings Ltd.................................... Hong Kong 2,469,000 340,980
Mandarin Oriental Intl. Ltd................................. Singapore 1,501,000 727,985
Oriental Hotel (Thailand) Public Co. Ltd., fgn.............. Thailand 76,200 387,942
*Prime Hospitality Corp..................................... United States 37,200 381,300
Rank Group Plc.............................................. United Kingdom 229,606 873,593
-----------
2,711,800
-----------
MERCHANDISING .8%
Li & Fung Ltd............................................... Hong Kong 70,000 126,488
Wessel & Vett, Theodore AS, C............................... Denmark 12,000 551,052
-----------
677,540
-----------
</TABLE>
10
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
METALS & MINING 2.0%
Anglo American Platinum Corp. Ltd........................... South Africa 1,208 $ 19,851
Boehler Uddeholm AG......................................... Austria 9,500 455,316
Industrias Penoles SA....................................... Mexico 391,100 1,170,746
RGC Ltd..................................................... Australia 447,522 126,438
-----------
1,772,351
-----------
MISC MATERIALS & COMMODITIES .5%
De Beers/Centenary Linked Units, Reg. ...................... South Africa 27,600 475,816
-----------
MULTI-INDUSTRY 6.7%
Cheung Kong Holdings Ltd.................................... Hong Kong 268,000 1,824,659
First Pacific Co............................................ Hong Kong 1,952,667 1,178,241
Hutchison Whampoa Ltd....................................... Hong Kong 210,000 1,456,875
*Metro Pacific Corp. MDI.................................... Philippines 500,000 24,647
Swire Pacific Ltd., B....................................... Hong Kong 800 488
Wheelock and Company Ltd.................................... Hong Kong 2,156,675 1,329,176
-----------
5,814,086
-----------
REAL ESTATE 53.2%
+American Health Properties Inc............................. United States 64,300 1,225,719
Bail Investissement......................................... France 6,626 905,579
+Boston Properties Inc...................................... United States 65,000 2,100,313
*Canlan Investment Corp..................................... Canada 254,000 159,854
+Carramerica Realty Corp.................................... United States 65,000 1,397,500
+CBL & Associates Properties Inc............................ United States 93,900 2,341,631
+Charles E. Smith Residential Realty Inc.................... United States 51,600 1,515,750
China Resources Beijing Land Ltd............................ China 1,520,000 255,042
China Resources Beijing Land Ltd., 144A..................... China 480,300 80,590
*Corporacion Geo SA, B...................................... Mexico 23,000 60,763
+Crescent Real Estate Equities Co........................... United States 91,880 1,917,995
+Equity Residential Properties.............................. United States 75,800 3,107,800
+Federal Realty Investment Trust............................ United States 33,000 728,063
+General Growth Properties.................................. United States 28,830 973,013
+Highwoods Properties Inc................................... United States 127,800 3,059,218
Inversiones y Representacion SA............................. Argentina 344,072 802,009
Inversiones y Representacion SA, GDR........................ Argentina 846 19,617
+LTC Properties Inc......................................... United States 226,000 2,825,000
+Nationwide Health Properties Inc........................... United States 122,000 2,196,000
New Asia Realty and Trust Co. Ltd., A....................... Hong Kong 388,000 320,506
New World Development Co. Ltd............................... Hong Kong 761,109 1,399,865
*Northstar Capital Investment Corp.......................... United States 95,000 1,508,125
*Prima Inmobiliaria SA...................................... Spain 95,500 748,526
+Rouse Co................................................... United States 160,700 3,756,363
*Security Capital US Realty................................. Luxembourg 232,000 1,809,600
+Summit Properties Inc...................................... United States 91,300 1,512,156
Taylor Woodrow Plc.......................................... United Kingdom 315,802 857,525
</TABLE>
11
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
REAL ESTATE (CONT.)
Union du Credit Bail Immobilier Unibail..................... France 26,850 $ 3,301,169
+Weeks Corp................................................. United States 140,400 3,790,800
Westfield Trust, units...................................... Australia 784,365 1,607,265
-----------
46,283,356
-----------
TELECOMMUNICATIONS 1.3%
Telecomunicacoes Brasileiras SA (Telebras).................. Brazil 6,664,000 230,866
Telefonos de Mexico SA (Telmex), L, ADR..................... Mexico 15,700 897,844
-----------
1,128,710
-----------
TRANSPORTATION 2.8%
Florida East Coast Industries Inc........................... United States 44,000 1,193,500
Peninsular & Oriental Steam Navigation Co................... United Kingdom 104,961 1,233,362
-----------
2,426,862
-----------
UTILITIES ELECTRICAL & GAS 3.4%
National Grid Group Plc..................................... United Kingdom 199,070 1,439,875
National Power Plc.......................................... United Kingdom 192,378 1,530,160
-----------
2,970,035
-----------
TOTAL COMMON STOCKS (COST $70,753,213)...................... 72,911,580
===========
PREFERRED STOCKS 2.1%
Banco Itau SA, pfd.......................................... Brazil 1,117,000 392,459
Baumax AG, pfd.............................................. Austria 36,907 607,723
Cia Vale do Rio Doce, A, pfd................................ Brazil 30,800 394,270
Cia Vale do Rio Doce, ADR, pfd.............................. Brazil 31,200 399,391
-----------
TOTAL PREFERRED STOCKS (COST $3,456,240).................... 1,793,843
-----------
<CAPTION>
PRINCIPAL
AMOUNT**
----------
<S> <C> <C> <C>
BONDS 4.1%
Government of Italy, cvt., 5.00%, 6/28/01................... Italy $1,345,000 2,347,025
Revenue Property Ltd., cvt., 6.00%, 3/01/04................. Canada 1,400,000 1,232,000
-----------
TOTAL BONDS (COST $2,750,722)............................... 3,579,025
-----------
TOTAL INVESTMENTS (COST $76,960,175) 90.0%.................. 78,284,448
OTHER ASSETS, LESS LIABILITIES 10.0%........................ 8,706,321
-----------
TOTAL NET ASSETS 100.0%..................................... $86,990,769
===========
</TABLE>
*Non-income producing.
**Securities denominated in U.S. dollars.
+Real Estate Investment Trust (37.30% of total net assets).
See Notes to Financial Statements.
12
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1999 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $76,960,175)..... $78,284,448
Receivables:
Investment securities sold................................ 9,522,850
Fund shares sold.......................................... 69,549
Dividends and interest.................................... 409,686
-----------
Total assets.......................................... 88,286,533
-----------
Liabilities:
Payables:
Fund shares redeemed...................................... 451,283
To affiliates............................................. 97,951
Funds advanced by custodian............................... 667,015
Accrued expenses.......................................... 79,515
-----------
Total liabilities..................................... 1,295,764
-----------
Net assets, at value........................................ $86,990,769
===========
Net assets consist of:
Undistributed net investment income........................ $ 190,999
Net unrealized appreciation................................ 1,324,273
Accumulated net realized loss.............................. (3,010,812)
Beneficial shares.......................................... 88,486,309
-----------
Net assets, at value........................................ $86,990,769
===========
CLASS A:
Net asset value per share ($82,580,951 / 6,616,131 shares
outstanding)............................................. $12.48
===========
Maximum offering price per share ($12.48 / 94.25%)......... $13.24
===========
CLASS C:
Net asset value per share ($4,409,818 / 355,582 shares
outstanding)*............................................ $12.40
===========
Maximum offering price per share ($12.40 / 99.00%)......... $12.53
===========
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
sales charge.
See Notes to Financial Statements.
13
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $25,145)
Dividends.................................................. $ 2,121,738
Interest................................................... 132,811
-----------
Total investment income............................... $ 2,254,549
Expenses:
Management fees (Note 3)................................... 380,114
Administrative fees (Note 3)............................... 76,023
Distribution fees (Note 3)
Class A................................................... 119,789
Class C................................................... 28,157
Transfer agent fees (Note 3)............................... 105,000
Custodian fees............................................. 600
Reports to shareholders.................................... 53,100
Registration and filing fees............................... 17,900
Professional fees.......................................... 11,200
Trustees' fees and expenses................................ 10,500
Other...................................................... 1,139
-----------
Total expenses........................................ 803,522
-----------
Net investment income........................... 1,451,027
-----------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments............................................... (2,222,110)
Foreign currency transactions............................. 34,066
-----------
Net realized loss..................................... (2,188,044)
Net unrealized appreciation on investments............ 3,962,831
-----------
Net realized and unrealized gain............................ 1,774,787
-----------
Net increase in net assets resulting from operations........ $ 3,225,814
===========
</TABLE>
See Notes to Financial Statements.
14
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 28, 1999 YEAR ENDED
(UNAUDITED) AUGUST 31, 1998
---------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 1,451,027 $ 3,805,367
Net realized gain (loss) from investments and foreign
currency transactions................................... (2,188,044) 1,351,358
Net unrealized appreciation (depreciation) on
investments............................................. 3,962,831 (32,063,545)
---------------------------------------
Net increase (decrease) in net assets resulting from
operations............................................ 3,225,814 (26,906,820)
Distributions to shareholders from:
Net investment income:
Class A.................................................. (3,762,372) (3,003,171)
Class C.................................................. (166,616) (118,402)
Net realized gains:
Class A.................................................. (70,499) (466,731)
Class C.................................................. (4,412) (28,174)
In excess of net realized gains:
Class A.................................................. -- (705,284)
Class C.................................................. -- (42,573)
Capital share transactions (Note 2):
Class A.................................................. (14,451,836) (24,576,319)
Class C.................................................. (2,471,513) (154,617)
---------------------------------------
Net decrease in net assets.............................. (17,701,434) (56,002,091)
Net assets:
Beginning of period........................................ 104,692,203 160,694,294
---------------------------------------
End of period.............................................. $ 86,990,769 $104,692,203
=======================================
Undistributed net investment income included in net assets:
End of period.............................................. $ 190,999 $ 2,668,960
=======================================
</TABLE>
See Notes to Financial Statements.
15
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton Global Real Estate Fund (the Fund) is registered under the Investment
Company Act of 1940 as a diversified, open-end investment company. The Fund
seeks long-term capital growth, and its secondary goal is current income. Under
normal conditions, the Fund invests primarily in the equity and debt securities
of companies located anywhere in the world that are 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. SECURITY VALUATION:
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
in accordance with procedures established by the Board of Trustees.
b. FOREIGN CURRENCY TRANSLATION:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date. When
the Fund purchases or sells foreign securities it will customarily enter into a
foreign exchange contract to minimize foreign exchange risk from the trade date
to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
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, and the difference between the recorded
amounts of dividends, interest and foreign withholding taxes, and the U.S.
dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in foreign exchange rates
on foreign currency denominated assets and liabilities other than investments in
securities held at the end of the reporting period.
c. INCOME TAXES:
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute all of its taxable income.
16
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
Notes to Financial Statements (unaudited) (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
d. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Certain income from foreign securities is recorded as soon as information is
available to the Fund. Interest income and estimated expenses are accrued daily.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.
Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
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.
2. BENEFICIAL SHARES
The Fund offers two classes of shares; Class A and Class C shares. Effective
January 1, 1999, Class I and Class II shares were renamed Class A and Class C,
respectively. The shares differ by their initial sales load, distribution fees,
voting rights on matters affecting a single class of shares and the exchange
privilege of each class.
At February 28, 1999, 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, 1999 AUGUST 31, 1998
-------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES:
Shares sold................................................ 448,346 $ 5,946,720 989,236 $ 15,410,679
Shares issued on reinvestment of distributions............. 257,073 3,446,332 239,459 3,769,262
Shares redeemed............................................ (1,791,937) (23,844,888) (2,822,831) (43,756,260)
-------------------------------------------------------------
Net decrease............................................... (1,086,518) $(14,451,836) (1,594,136) $(24,576,319)
=============================================================
</TABLE>
17
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
Notes to Financial Statements (unaudited) (continued)
2. BENEFICIAL SHARES (CONT.)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998
-------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS C SHARES:
Shares sold................................................. 23,991 $ 409,035 202,765 $ 3,004,691
Shares issued on reinvestment of distributions.............. 10,880 144,965 10,557 164,676
Shares redeemed............................................. (226,731) (3,025,513) (217,790) (3,323,984)
-------------------------------------------------------
Net decrease................................................ (191,860) $(2,471,513) (4,468) $ (154,617)
=======================================================
</TABLE>
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Certain officers of the Fund are also officers or directors of Templeton Global
Advisors Ltd. (TGAL), Franklin Templeton Services, Inc. (FT Services),
Franklin/Templeton Distributors, Inc. (Distributors) and Franklin/Templeton
Investor Services, Inc. (Investors Services), the Fund's investment manager,
administrative manager, principal underwriter and transfer agent, respectively.
The Fund pays an investment management fee to TGAL of 0.75% per year of the
average daily net assets of the Fund. The Fund pays an administrative fee to FT
Services based on the Fund's average daily net assets as follows:
<TABLE>
<CAPTION>
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
- -----------------------------------------------------------------
<S> <C>
0.15% First $200 million
0.135% Over $200 million, up to and including $700 million
0.10% Over $700 million, up to and including $1.2 billion
0.075% Over $1.2 billion
</TABLE>
The Fund reimburses Distributors up to 0.25% and 1.00% per year of the average
daily net assets of Class A and Class C shares, respectively, for costs incurred
in marketing the Fund's Class A and Class C shares. Under the Class A
distribution plan, costs exceeding the maximum may be reimbursed in subsequent
periods. At February 28, 1999, unreimbursed costs were $93,938. Distributors
received net commissions from sales of the Fund's shares, and received
contingent deferred sales charges for the period of $5,241 and $1,524,
respectively.
Legal fees of $13,740 were paid to a law firm in which a partner is an officer
of the Fund.
4. INCOME TAXES
At August 31, 1998, the Fund had deferred capital losses and deferred foreign
currency losses occurring subsequent to October 31, 1997 of $516,346 and
$108,756, respectively. For tax purposes, such losses will be reflected in the
year ending August 31, 1999.
18
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
Notes to Financial Statements (unaudited) (continued)
4. INCOME TAXES (CONT.)
At February 28, 1999, the net unrealized appreciation based on the cost of
investments for income tax purposes of $77,271,449 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 12,281,449
Unrealized depreciation..................................... (11,268,450)
------------
Net unrealized appreciation................................. $ 1,012,999
============
</TABLE>
Net investment income and net realized capital gains differ for financial
statement and tax purposes primarily due to differing treatments of passive
foreign investment companies and foreign currency transactions.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended February 28, 1999 aggregated $1,286,603 and $24,746,701,
respectively.
19
PAGE
This page intentionally left blank.
PAGE
LITERATURE REQUEST
For a free brochure and prospectus, which contain more complete information,
including charges and expenses, call Franklin Templeton Fund Information at
1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before
investing or sending 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
GLOBAL GROWTH
Franklin Global Health Care Fund
Mutual Discovery Fund
Templeton Developing
Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller
Companies Fund
Templeton Global
Infrastructure Fund
Templeton Global
Opportunities Trust
Templeton Global Real Estate Fund
Templeton Global
Smaller Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
Franklin Global Utilities Fund
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and
Income Fund
GLOBAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Global
Currency Fund
Franklin Templeton Hard
Currency Fund
Templeton Americas Government
Securities Fund
GROWTH
Franklin Biotechnology
Discovery Fund
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap
Growth Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet
Investment Fund*
Franklin Convertible
Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund*
Franklin Natural Resources Fund
Franklin Real Estate
Securities Fund
Franklin Rising Dividends Fund
Franklin Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual Qualified Fund
Mutual Shares Fund
Fund Allocator Series
Franklin Templeton Conservative
Target Fund
Franklin Templeton Moderate
Target Fund
Franklin Templeton Growth
Target Fund
INCOME
Franklin Adjustable U.S.
Government Securities Fund
Franklin's AGE High Income Fund
Franklin Bond Fund
Franklin Floating Rate Trust
Franklin Investment Grade
Income Fund
Franklin Short-Intermediate
U.S. Government Securities Fund
Franklin Strategic Income Fund
Franklin U.S. Government
Securities Fund
Franklin Federal Money Fund
Franklin Money Fund
FRANKLIN FUNDS SEEKING
TAX-FREE INCOME
Federal Intermediate-Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free
Income Fund
Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC
FUNDS SEEKING
TAX-FREE INCOME
Alabama
Arizona**
California**
Colorado
Connecticut
Florida**
Georgia
Kentucky
Louisiana
Maryland
Massachusetts+
Michigan+
Minnesota+
Missouri
New Jersey
New York**
North Carolina
Ohio+
Oregon
Pennsylvania
Tennessee***
Texas
Virginia
VARIABLE ANNUITIES++
Franklin Valuemark(R)
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
*These funds are now closed to new accounts, with the exception of retirement
plan accounts.
**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.
++Franklin Valuemark and Franklin Templeton Valuemark Income Plus are issued by
Allianz Life Insurance Company of North America or by its wholly owned
subsidiary, Preferred Life Insurance Company of New York, and distributed by
NALAC Financial Plans, LLC. The Franklin Valuemark Funds are managed by Franklin
Advisers, Inc. and its Templeton and Franklin affiliates.
01/99
PAGE
Bulk Rate
U.S. Postage
PAID
So. San Francisco, CA
Permit No. 655
[LOGO]
FRANKLIN TEMPLETON(R)
Templeton Global Real Estate Fund
777 Mariners Island Blvd., P.O. Box 7777
San Mateo, CA 94403-7777
SEMIANNUAL REPORT
PRINCIPAL UNDERWRITER
Franklin/Templeton Distributors, Inc.
777 Mariners Island Blvd.
San Mateo, California 94404-1585
1-800/DIAL BEN(R)
www.franklin-templeton.com
SHAREHOLDER SERVICES
1-800/632-2301
FUND INFORMATION
1-800/342-5236
This report must be preceded or accompanied by the current Templeton Global Real
Estate Fund prospectus, which contains more complete information including risk
factors, 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.
410 S99 04/99 [RECYCLE LOGO] Printed on recycled paper
