ANNUAL REPORT
AUGUST 31, 1999
TEMPLETON GLOBAL
REAL ESTATE FUND
[LOGO(R)]
FRANKLIN(R) TEMPLETON(R)
PAGE
[SEAL] FRANKLIN TEMPLETON CELEBRATING OVER 50 YEARS
PAGE
[PHOTO OF JEFFREY A. EVERETT APPEARS HERE]
JEFFREY A. EVERETT, CFA
Portfolio Manager
Templeton Global Real
Estate Fund
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.
PAGE
SHAREHOLDER LETTER
Dear Shareholder:
On September 23, 1999, Templeton Global Real Estate Fund merged into Franklin
Real Estate Securities Fund, a series of Franklin Real Estate Securities Trust.
Therefore, this report, which covers the 12 months ended August 31, 1999, will
be the final one you receive for Templeton Global Real Estate Fund.
During the six months from September 1998 through February 1999, the real estate
sector underperformed most other sectors of the global equity markets. However,
in the subsequent six-month period, the performance of many real estate
securities improved significantly as investors, who had overlooked factors such
as asset price increases and rent growth, demonstrated renewed interest in the
sector. Within this environment, Class A shares of Templeton Global Real Estate
Fund, which had its largest concentration of holdings in the U.S., Europe and
Hong Kong, posted a 14.55% one-year cumulative total return, as shown in the
Performance Summary on page 3.
We would like to take this chance to say thank you for your participation in
Templeton Global Real Estate Fund, and for giving us the opportunity to serve
you.
Sincerely,
/s/JEFFREY A. EVERETT
Jeffrey A. Everett
Portfolio Manager
Templeton Global Real Estate Fund
CONTENTS
Shareholder Letter ..... 1
Performance Summary .... 2
Financial Highlights &
Statement of Investments 6
Financial Statements ... 10
Notes to
Financial Statements ... 13
Independent
Auditor's Report ....... 17
Tax Designation ........ 18
Change in
Independent Auditor .... 19
[PYRAMID GRAPHIC]
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 8 of
this report.
PAGE
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-1plan, which affects subsequent performance.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% contingent deferred sales charge for
shares redeemed within 18 months of investment. These shares have higher annual
fees and expenses than Class A shares.
PERFORMANCE SUMMARY AS OF 8/31/99
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
<TABLE>
<CAPTION>
CLASS A CHANGE 8/31/99 8/31/98
- ---------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value +$1.30 $14.00 $12.70
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (9/1/98 - 8/31/99)
--------------------------------
<S> <C>
Dividend Income $0.5100
Long-Term Capital Gain $0.0100
TOTAL $0.5200
</TABLE>
<TABLE>
<CAPTION>
CLASS C CHANGE 8/31/99 8/31/98
- ---------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value +$1.32 $13.87 $12.55
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (9/1/98 - 8/31/99)
--------------------------------
<S> <C>
Dividend Income $0.3814
Long-Term Capital Gain $0.0100
TOTAL $0.3914
</TABLE>
Templeton Global Real Estate Fund paid distributions derived from long-term
capital gains of 1.0 cent ($0.01) per share in December, 1998. The Fund hereby
designates such distributions as capital gain dividends per Internal Revenue
Code Section 852 (b)(3).
2 Past performance is not predictive of future results.
PAGE
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 1-YEAR 5-YEAR (9/12/89)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 14.55% 18.22% 90.08%
Average Annual Total Return(2) 8.00% 2.19% 6.02%
Value of $10,000 Investment(3) $10,800 $11,142 $17,915
</TABLE>
<TABLE>
<CAPTION>
8/31/95 8/31/96 8/31/97 8/31/98 8/31/99
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One-Year Total Return(4) -1.74% 7.48% 22.06% -19.94% 14.55%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 1-YEAR 3-YEAR (5/1/95)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 13.78% 9.41% 25.50%
Average Annual Total Return(2) 11.63% 2.70% 5.14%
Value of $10,000 Investment(3) $11,163 $10,830 $12,428
</TABLE>
<TABLE>
<CAPTION>
8/31/96 8/31/97 8/31/98 8/31/99
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One-Year Total Return(4) 6.69% 21.12% -20.61% 13.78%
</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.
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. 3
PAGE
AVERAGE ANNUAL TOTAL RETURN
8/31/99
CLASS A
- -----------------------------------
1-Year 8.00%
5-Year 2.19%
Since Inception (9/12/89) 6.02%
TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $10,000 INVESTMENT
The unmanaged index differs from the Fund in composition, does not pay
management fees or expenses and includes reinvested dividends. One cannot invest
directly in an index. Total return represents the change in value of an
investment over the periods shown. It includes the current, applicable, maximum
sales charges, Fund expenses, account fees, and reinvested distributions.
CLASS A
Total Return Index Comparison
$10,000 Investment (9/12/89-8/31/99)
The following line graph compares the performance of Templeton Global Real
Estate Fund's Class A shares with that of the Morgan Stanley Capital
International World Index and the Consumer Price Index, based on a $10,000
investment from 9/12/89 - 8/31/99.
TEMPLETON MSCI WORLD CPI
GLOBAL REAL INDEX
ESTATE FUND - A*
- ----------------------------------------------------------
09/12/1989 $9,425 $10,000 $10,000
09/30/1989 $9,425 $10,418 $10,019
Oct-89 $9,369 $10,072 $10,068
Nov-89 $9,369 $10,476 $10,091
Dec-89 $9,435 $10,814 $10,106
Jan-90 $9,102 $10,311 $10,210
Feb-90 $9,093 $9,870 $10,258
Mar-90 $9,150 $9,276 $10,315
Apr-90 $8,827 $9,144 $10,331
May-90 $9,368 $10,109 $10,355
Jun-90 $9,549 $10,038 $10,411
Jul-90 $9,596 $10,131 $10,451
Aug-90 $8,437 $9,185 $10,547
Sep-90 $7,800 $8,218 $10,635
Oct-90 $7,767 $8,987 $10,699
Nov-90 $7,905 $8,841 $10,723
Dec-90 $8,200 $9,028 $10,723
Jan-91 $8,984 $9,360 $10,787
Feb-91 $9,567 $10,228 $10,803
Mar-91 $10,009 $9,928 $10,819
Apr-91 $10,281 $10,007 $10,835
May-91 $10,381 $10,236 $10,866
Jun-91 $10,029 $9,605 $10,899
Jul-91 $10,230 $10,061 $10,915
Aug-91 $10,110 $10,030 $10,947
Sep-91 $10,311 $10,295 $10,996
Oct-91 $10,139 $10,464 $11,011
Nov-91 $10,003 $10,010 $11,043
Dec-91 $11,022 $10,740 $11,052
Jan-92 $11,423 $10,543 $11,068
Feb-92 $11,296 $10,363 $11,108
Mar-92 $11,127 $9,877 $11,164
Apr-92 $11,264 $10,016 $11,180
May-92 $11,634 $10,416 $11,195
Jun-92 $11,433 $10,069 $11,236
Jul-92 $11,264 $10,096 $11,260
Aug-92 $10,969 $10,344 $11,292
Sep-92 $11,085 $10,251 $11,323
Oct-92 $11,197 $9,975 $11,364
Nov-92 $11,143 $10,156 $11,379
Dec-92 $11,479 $10,240 $11,372
Jan-93 $11,905 $10,276 $11,428
Feb-93 $12,352 $10,521 $11,468
Mar-93 $13,029 $11,133 $11,509
Apr-93 $13,149 $11,651 $11,540
May-93 $13,302 $11,922 $11,556
Jun-93 $13,193 $11,823 $11,572
Jul-93 $13,313 $12,069 $11,572
Aug-93 $13,825 $12,624 $11,604
Sep-93 $14,033 $12,393 $11,628
Oct-93 $14,437 $12,736 $11,677
Nov-93 $14,448 $12,018 $11,685
Dec-93 $15,265 $12,608 $11,684
Jan-94 $15,842 $13,442 $11,717
Feb-94 $15,708 $13,270 $11,757
Mar-94 $14,943 $12,700 $11,798
Apr-94 $14,921 $13,095 $11,813
May-94 $15,010 $13,131 $11,821
Jun-94 $14,410 $13,097 $11,861
Jul-94 $14,921 $13,348 $11,892
Aug-94 $15,154 $13,752 $11,941
Sep-94 $14,965 $13,393 $11,973
Oct-94 $14,666 $13,776 $11,982
Nov-94 $14,152 $13,182 $11,997
Dec-94 $14,090 $13,312 $11,997
Jan-95 $13,639 $13,115 $12,045
Feb-95 $13,808 $13,308 $12,093
Mar-95 $13,706 $13,952 $12,133
Apr-95 $13,819 $14,441 $12,173
May-95 $14,473 $14,567 $12,197
Jun-95 $14,586 $14,566 $12,221
Jul-95 $14,902 $15,298 $12,221
Aug-95 $14,891 $14,959 $12,254
Sep-95 $15,094 $15,398 $12,277
Oct-95 $14,673 $15,159 $12,317
Nov-95 $14,685 $15,688 $12,308
Dec-95 $14,936 $16,150 $12,300
Jan-96 $15,365 $16,444 $12,373
Feb-96 $15,435 $16,547 $12,413
Mar-96 $15,331 $16,826 $12,477
Apr-96 $15,551 $17,224 $12,525
May-96 $15,830 $17,242 $12,549
Jun-96 $15,784 $17,333 $12,557
Jul-96 $15,400 $16,724 $12,581
Aug-96 $16,004 $16,919 $12,605
Sep-96 $16,376 $17,585 $12,645
Oct-96 $16,658 $17,710 $12,685
Nov-96 $17,178 $18,706 $12,709
Dec-96 $17,992 $18,410 $12,709
Jan-97 $18,327 $18,634 $12,749
Feb-97 $18,315 $18,852 $12,787
Mar-97 $18,123 $18,483 $12,819
Apr-97 $17,729 $19,090 $12,834
May-97 $18,662 $20,272 $12,826
Jun-97 $19,080 $21,285 $12,842
Jul-97 $19,906 $22,269 $12,857
Aug-97 $19,535 $20,783 $12,882
Sep-97 $20,540 $21,915 $12,914
Oct-97 $18,651 $20,765 $12,946
Nov-97 $18,784 $21,136 $12,938
Dec-97 $18,940 $21,397 $12,923
Jan-98 $18,768 $21,997 $12,946
Feb-98 $19,654 $23,488 $12,972
Mar-98 $20,073 $24,483 $12,998
Apr-98 $19,703 $24,726 $13,021
May-98 $19,014 $24,420 $13,045
Jun-98 $18,300 $25,003 $13,060
Jul-98 $17,536 $24,966 $13,076
Aug-98 $15,640 $21,641 $13,092
Sep-98 $16,526 $22,027 $13,107
Oct-98 $17,238 $24,023 $13,139
Nov-98 $17,630 $25,455 $13,139
Dec-98 $17,492 $26,703 $13,131
Jan-99 $16,661 $27,291 $13,163
Feb-99 $15,970 $26,568 $13,176
Mar-99 $16,673 $27,679 $13,216
Apr-99 $18,273 $28,773 $13,312
May-99 $18,055 $27,726 $13,312
Jun-99 $18,708 $29,023 $13,312
Jul-99 $18,145 $28,940 $13,352
Aug-99 $17,915 $28,893 $13,384
4 Past performance is not predictive of future results.
PAGE
CLASS C
Total Return Index Comparison
$10,000 Investment (5/1/95-8/31/99)
The following line graph compares the performance of Templeton Global Real
Estate Fund's Class C chares with that of the Morgan Stanley Capital
International World Index and the Consumer Price Index, based on a $10,000
investment from 5/1/95 to 8/31/99.
Templeton Global MSCI CPI
Real Estate Fund World
- C* Index
- -----------------------------------------------------
05/01/1995 $9,903 $10,000 $10,000
05/31/1995 $10,364 $10,088 $10,020
Jun-95 $10,437 $10,086 $10,040
Jul-95 $10,663 $10,593 $10,040
Aug-95 $10,639 $10,359 $10,067
Sep-95 $10,784 $10,663 $10,086
Oct-95 $10,471 $10,497 $10,119
Nov-95 $10,479 $10,863 $10,112
Dec-95 $10,652 $11,183 $10,105
Jan-96 $10,952 $11,387 $10,164
Feb-96 $10,993 $11,458 $10,197
Mar-96 $10,910 $11,651 $10,250
Apr-96 $11,060 $11,927 $10,289
May-96 $11,251 $11,940 $10,309
Jun-96 $11,209 $12,002 $10,316
Jul-96 $10,935 $11,581 $10,335
Aug-96 $11,359 $11,716 $10,355
Sep-96 $11,616 $12,177 $10,388
Oct-96 $11,804 $12,264 $10,421
Nov-96 $12,167 $12,953 $10,441
Dec-96 $12,736 $12,748 $10,441
Jan-97 $12,966 $12,904 $10,473
Feb-97 $12,958 $13,054 $10,505
Mar-97 $12,813 $12,799 $10,531
Apr-97 $12,524 $13,219 $10,544
May-97 $13,171 $14,038 $10,537
Jun-97 $13,460 $14,739 $10,550
Jul-97 $14,031 $15,421 $10,563
Aug-97 $13,758 $14,392 $10,583
Sep-97 $14,456 $15,175 $10,609
Oct-97 $13,120 $14,379 $10,636
Nov-97 $13,197 $14,636 $10,629
Dec-97 $13,290 $14,816 $10,617
Jan-98 $13,168 $15,232 $10,636
Feb-98 $13,777 $16,265 $10,657
Mar-98 $14,064 $16,954 $10,678
Apr-98 $13,803 $17,122 $10,697
May-98 $13,298 $16,910 $10,717
Jun-98 $12,794 $17,314 $10,730
Jul-98 $12,254 $17,288 $10,742
Aug-98 $10,922 $14,985 $10,755
Sep-98 $11,532 $15,253 $10,768
Oct-98 $12,022 $16,635 $10,794
Nov-98 $12,288 $17,627 $10,794
Dec-98 $12,177 $18,491 $10,788
Jan-99 $11,595 $18,898 $10,814
Feb-99 $11,111 $18,398 $10,825
Mar-99 $11,604 $19,167 $10,858
Apr-99 $12,706 $19,925 $10,937
May-99 $12,553 $19,199 $10,937
Jun-99 $13,001 $20,098 $10,937
Jul-99 $12,598 $20,040 $10,969
Aug-99 $12,428 $20,007 $10,996
AVERAGE ANNUAL TOTAL RETURN
8/31/99
CLASS C
- ----------------------------------
1-Year 11.63%
3-Year 2.70%
Since Inception (5/1/95) 5.14%
*Source: Standard and Poor's(R) Micropal. The unmanaged MSCI World Index tracks
the performance of approximately 1,450 securities in 22 countries and is
designed to measure world stock market performance. It includes reinvested
dividends.
**Source: Consumer Price Index, U.S. Bureau of Labor Statistics (8/31/99). The
Consumer Price Index is a commonly used measure of inflation.
One cannot invest directly in an index, nor is an index representative of the
Fund's portfolio.
Past performance is not predictive of future results. 5
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
Financial Highlights
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------
YEAR ENDED AUGUST 31,
----------------------------------------------
1999+ 1998 1997 1996 1995
----------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
Net asset value, beginning of year ..................... $12.70 $16.33 $13.78 $13.20 $13.66
-----------------------------------------------
Income from investment operations:
Net investment income ................................. .38 .46 .39 .31 .39
Net realized and unrealized gains (losses) ............ 1.44 (3.63) 2.58 .64 (.64)
----------------------------------------------
Total from investment operations ....................... 1.82 (3.17) 2.97 .95 (.25)
----------------------------------------------
Less distributions from:
Net investment income ................................. (.51) (.33) (.42) (.37) (.21)
Net realized gains .................................... (.01) (.05) -- -- --
In excess of net realized gains ....................... -- (.08) -- -- --
----------------------------------------------
Total distributions .................................... (.52) (.46) (.42) (.37) (.21)
----------------------------------------------
Net asset value, end of year ........................... $14.00 $12.70 $16.33 $13.78 $13.20
==============================================
Total Return* .......................................... 14.55% (19.94)% 22.06% 7.48% (1.74)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................ $72,691 $97,823 $151,777 $125,875 $130,149
Ratios to average net assets:
Expenses .............................................. 1.63% 1.45% 1.45% 1.51% 1.55%
Net investment income ................................. 2.78% 2.70% 2.55% 2.73% 3.05%
Portfolio turnover rate ................................ 6.89% 23.18% 24.03% 20.07% 38.69%
</TABLE>
*Total return does not reflect sales commissions.
+Based on average weighted shares outstanding.
6
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------------
1999++ 1998 1997 1996 1995+
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
Net asset value, beginning of year .......... $ 12.55 $ 16.16 $ 13.67 $ 13.17 $ 12.25
-------------------------------------------------------------------------
Income from investment operations:
Net investment income ...................... .28 .30 .31 .33 .03
Net realized and unrealized gains (losses) . 1.43 (3.57) 2.52 .52 .89
-------------------------------------------------------------------------
Total from investment operations ............ 1.71 (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 year ................ $ 13.87 $ 12.55 $ 16.16 $ 13.67 $ 13.17
=========================================================================
Total Return* ............................... 13.78% (20.61)% 21.12% 6.69% 7.51%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............. $ 3,685 $ 6,869 $ 8,917 $ 5,275 $ 1,823
Ratios to average net assets:
Expenses ................................... 2.35% 2.20% 2.20% 2.26% 2.26%**
Net investment income ...................... 2.06% 1.97% 1.74% 2.20% 1.71%**
Portfolio turnover rate ..................... 6.89% 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.
++Based on average weighted shares outstanding.
See notes to financial statements. 7
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
STATEMENT OF INVESTMENTS, AUGUST 31, 1999
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 78.1%
BANKING 1.8%
*Bangkok Bank Public Co. Ltd., fgn. .............................. Thailand 291,000 $ 739,734
Development Bank of Singapore Ltd., fgn. ........................ Singapore 50,009 573,041
National Australia Bank Ltd. .................................... Australia 2,553 38,535
Shinhan Bank Co. Ltd. ........................................... South Korea 46 495
-----------
1,351,805
-----------
BUILDING MATERIALS & COMPONENTS .8%
Suez Cement Co. ................................................. Egypt 20,900 299,905
Unione Cementi Marchino Emiliane (Unicem), di Risp .............. Italy 65,580 292,313
-----------
592,218
-----------
CONSTRUCTION & HOUSING 1.1%
Toda Corp. ...................................................... Japan 70,000 384,331
Wienerberger Baustoffindustrie AG ............................... Austria 19,200 456,095
-----------
840,426
-----------
ENERGY SOURCES .5%
Perez Companc SA, B ............................................. Argentina 70,000 407,441
-----------
FINANCIAL SERVICES 1.1%
Housing Development Finance Corp. Ltd. .......................... India 68,000 404,238
Lend Lease Corp. Ltd. ........................................... Australia 32,945 401,808
-----------
806,046
-----------
FOREST PRODUCTS & PAPER 1.8%
St. Joe Co. ..................................................... United States 60,000 1,402,500
LEISURE & TOURISM 4.1%
Grand Hotel Holdings Ltd. ....................................... Hong Kong 1,629,000 260,131
Mandarin Oriental Intl. Ltd. .................................... Singapore 1,501,000 1,013,175
Oriental Hotel (Thailand) Public Co. Ltd., fgn. ................. Thailand 108,200 564,203
*Prime Hospitality Corp. ......................................... United States 37,200 346,425
Rank Group PLC .................................................. United Kingdom 229,606 954,369
-----------
3,138,303
-----------
MERCHANDISING .5%
Wessel & Vett, Theodore AS ...................................... Denmark 7,000 417,667
-----------
METALS & MINING .2%
Goldfields Ltd. ................................................. Australia 185,069 128,529
-----------
MULTI-INDUSTRY 6.4%
Hutchison Whampoa Ltd. .......................................... Hong Kong 210,000 2,048,576
Wheelock and Company Ltd. ....................................... Hong Kong 2,156,675 2,805,151
-----------
4,853,727
-----------
REAL ESTATE 55.5%
+American Health Properties Inc. ................................. United States 64,300 1,269,925
+Boston Properties Inc. .......................................... United States 65,000 2,165,313
+Carramerica Realty Corp. ........................................ United States 65,000 1,495,000
China Resources Beijing Land Ltd. ............................... China 1,520,000 291,662
China Resources Beijing Land Ltd., 144A ......................... China 480,300 92,161
</TABLE>
8
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
REAL ESTATE (CONT.)
+Crescent Real Estate Equities Co. ............................... United States 91,880 $ 1,906,510
+Duke-Weeks Realty Corp. ......................................... United States 193,752 4,347,310
+Equity Residential Properties Trust ............................. United States 75,800 3,335,200
+General Growth Properties ....................................... United States 28,830 958,597
+Highwoods Properties Inc. ....................................... United States 127,800 3,171,038
Inversiones y Representacion SA ................................. Argentina 344,072 997,909
Inversiones y Representacion SA, GDR ............................ Argentina 846 24,534
+LTC Properties Inc. ............................................. United States 226,000 2,514,250
+Nationwide Health Properties Inc. ............................... United States 122,000 1,898,625
New Asia Realty and Trust Co. Ltd., A ........................... Hong Kong 388,000 619,589
New World Development Co. Ltd. .................................. Hong Kong 767,251 1,847,690
*Northstar Capital Investment Corp., 144A ........................ United States 100,000 1,865,000
Revenue Property Ltd. ........................................... Canada 2,200,000 3,479,426
Rouse Co. ....................................................... United States 160,700 3,655,925
+Summit Properties Inc. .......................................... United States 91,300 1,814,588
Taylor Woodrow PLC .............................................. United Kingdom 321,919 955,027
Union du Credit Bail Immobilier Unibail ......................... France 26,850 3,701,003
-----------
42,406,282
-----------
TRANSPORTATION 4.3%
Florida East Coast Industries Inc. .............................. United States 44,000 1,584,000
Peninsular & Oriental Steam Navigation Co. ...................... United Kingdom 106,941 1,722,997
-----------
3,306,997
-----------
TOTAL COMMON STOCKS (COST $51,202,605) .......................... 59,651,941
-----------
PREFERRED STOCKS 1.7%
Baumax AG, pfd. ................................................. Austria 36,907 615,929
Cia Vale do Rio Doce, A, pfd. ................................... Brazil 30,800 682,664
-----------
TOTAL PREFERRED STOCKS (COST $1,924,851) ........................ 1,298,593
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT**
----------
BONDS (COST $550,000) .6%
<S> <C> <C> <C>
Revenue Property Ltd., cvt., 6.00%, 3/01/04 ...................... Canada $ 550,000 453,750
-----------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENT (COST $53,677,456).. 61,404,284
-----------
(a)REPURCHASE AGREEMENT (COST $7,739,000) 10.1%
Deutsche Bank AG, 5.43%, 9/01/99 (Maturity Value $7,740,167)
Collateralized by U.S. Treasury Notes and Bonds .................. United States 7,739,000 7,739,000
-----------
TOTAL INVESTMENTS (COST $61,416,456) 90.5% ....................... 69,143,284
OTHER ASSETS, LESS LIABILITIES 9.5% .............................. 7,232,759
-----------
TOTAL NET ASSETS 100.0% $76,376,043
===========
</TABLE>
* Non-income producing.
** Securities denominated in U.S. dollars.
(a)See Note 1(C) regarding repurchase agreement.
+Real Estate Investment Trust (32.57% of total net assets).
See notes to financial statements. 9
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
Financial Statements
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $53,677,456) ................. $ 61,404,284
Repurchase agreement, at value and cost ................................ 7,739,000
Cash ................................................................... 851,660
Receivables:
Investment securities sold ........................................... 6,810,721
Fund shares sold ..................................................... 10,191
Dividends and interest ............................................... 174,806
Other assets ........................................................... 41,624
------------
Total assets ........................................................ 77,032,286
------------
Liabilities:
Payables:
Fund shares redeemed ................................................. 445,720
To affiliates ........................................................ 106,040
Accrued expenses ....................................................... 104,483
------------
Total liabilities ................................................... 656,243
------------
Net assets, at value .................................................... $ 76,376,043
============
Net assets consist of:
Undistributed net investment income .................................... $ 1,272,500
Net unrealized appreciation ............................................ 7,768,452
Accumulated net realized loss .......................................... (280,223)
Beneficial shares ...................................................... 67,615,314
------------
Net assets, at value .................................................... $ 76,376,043
============
CLASS A:
Net asset value per share ($72,690,899 / 5,194,036 shares outstanding).. $ 14.00
============
Maximum offering price per share ($14.00 / 94.25%) ..................... $ 14.85
============
CLASS C:
Net asset value per share ($3,685,144 / 265,767 shares outstanding)*.... $ 13.87
============
Maximum offering price per share ($13.87 / 99.00%) ..................... $ 14.01
============
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
sales charge.
10 See notes to financial statements.
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
Financial Statements (continued)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1999
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $84,545)
Dividends .............................................................. $ 3,798,064
Interest ............................................................... 332,414
------------
Total investment income ............................................ $ 4,130,478
Expenses:
Management fees (Note 3) ............................................... 701,711
Administrative fees (Note 3) ........................................... 140,342
Distribution fees (Note 3)
Class A .............................................................. 220,395
Class C .............................................................. 47,527
Transfer agent fees (Note 3) ........................................... 255,800
Custodian fees ......................................................... 15,100
Reports to shareholders ................................................ 104,900
Registration and filing fees ........................................... 22,800
Professional fees ...................................................... 26,500
Trustees' fees and expenses ............................................ 20,700
Other .................................................................. 6,064
------------
Total expenses ..................................................... 1,561,839
------------
Net investment income ........................................... 2,568,639
------------
Realized and unrealized gains (losses): Net realized gain (loss) from:
Investments ........................................................... 551,582
Foreign currency transactions ......................................... (45,170)
------------
Net realized gain .................................................. 506,412
Net unrealized appreciation on:
Investments ........................................................... 10,365,386
Translation of assets and liabilities denominated in
foreign currencies .................................................... 41,624
------------
Net unrealized appreciation ........................................... 10,407,010
------------
Net realized and unrealized gain ........................................ 10,913,422
------------
Net increase in net assets resulting from operations .................... $ 13,482,061
============
</TABLE>
See notes to financial statements. 11
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED AUGUST 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................... $ 2,568,639 $ 3,805,367
Net realized gain from investments and foreign currency transactions .... 506,412 1,351,358
Net unrealized appreciation (depreciation) on investments and translation
of assets and liabilities denominated in foreign currencies ............ 10,407,010 (32,063,545)
----------------------------------
Net increase (decrease) in net assets resulting from operations .... 13,482,061 (26,906,820)
Distributions to shareholders from:
Net investment income:
Class A ................................................................ (3,762,360) (3,003,171)
Class C ................................................................ (166,607) (118,402)
Net realized gains:
Class A ................................................................ (70,498) (466,731)
Class C ................................................................ (4,412) (28,174)
In excess of net realized gains:
Class A ................................................................ -- (705,284)
Class C ................................................................ -- (42,573)
Beneficial share transactions (Note 2):
Class A ................................................................ (34,095,626) (24,576,319)
Class C ................................................................ (3,698,718) (154,617)
----------------------------------
Net decrease in net assets ............................................ (28,316,160) (56,002,091)
Net assets:
Beginning of year ......................................................... 104,692,203 160,694,294
==================================
End of year ............................................................... $ 76,376,043 $ 104,692,203
Undistributed net investment income included in net assets:
End of year ............................................................... $ 1,272,500 $ 2,668,960
==================================
</TABLE>
12 See notes to financial statements.
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
Notes to Financial Statements
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 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.
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. REPURCHASE AGREEMENTS:
The Fund may enter into repurchase agreements, which are accounted for as a loan
by the Fund to the seller, collateralized by securities which are delivered to
the Fund's custodian. The market value, including accrued interest, of the
initial collateralization is required to be at least 102% of the dollar amount
invested by the Fund, with the value to the underlying securities marked to
market daily to maintain coverage of at least 100%. At August 31,1999, all
outstanding repurchase agreements held by the Fund has been entered into on that
date.
d. 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.
13
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
e. 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.
f. 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
shares, 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 August 31, 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>
YEAR ENDED AUGUST 31,
---------------------------------------------------------------
1999 1998
---------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES:
Shares sold .................................. 867,481 $ 11,760,010 989,236 $ 15,410,679
Shares issued on reinvestment of distributions 257,108 3,446,808 239,459 3,769,262
Shares redeemed .............................. (3,633,202) (49,302,444) (2,822,831) (43,756,260)
---------------------------------------------------------------
Net decrease ................................. (2,508,613) $(34,095,626) (1,594,136) $(24,576,319)
===============================================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-----------------------------------------------------------
1999 1998
-----------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS C SHARES:
Shares sold .................................. (39,831) $ (458,816) 202,765 $ 3,004,691
Shares issued on reinvestment of distributions 10,879 144,954 10,557 164,676
Shares redeemed .............................. (252,723) (3,384,856) (217,790) (3,323,984)
-----------------------------------------------------------
Net decrease ................................. (281,675) $(3,698,718) (4,468) $ (154,617)
===========================================================
</TABLE>
14
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
Notes to Financial Statements (continued)
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 for costs incurred in marketing the Fund's
shares up to 0.25% and 1.00% per year of the average daily net assets of Class A
and Class C shares, respectively. Under the Class A distribution plan, costs
exceeding the maximum may be reimbursed in subsequent periods. At August 31,
1999, unreimbursed costs were $102,594. Distributors received net commissions
from sales of the Fund's shares and received contingent deferred sales charges
for the year of $12,343 and $3,088, respectively.
4. INCOME TAXES
At August 31, 1999, the net unrealized appreciation based on the cost of
investments for income tax purposes of $61,418,192 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation $12,664,770
Unrealized depreciation (4,939,678)
-----------
Net unrealized appreciation $ 7,725,092
===========
</TABLE>
At August 31, 1999 the Fund had tax basis capital losses of $280,000 available
to offset future gains.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended August 31, 1999 aggregated $6,077,938 and $55,421,162, respectively.
15
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
Notes to Financial Statements (continued)
6. FUND MERGER
The Fund's Board of Trustees' and shareholders approved a proposal to merge the
Fund into Franklin Real Estate Securities Fund. Franklin Real Estate Securities
Fund is affiliated with Franklin Resources, Inc., the parent company of the
Fund's investment manager. The effective date of the merger was September 23,
1999.
In anticipation of the Fund merger, the Fund paid a dividend on September 28,
1999 to shareholders of record on September 20, 1999. The Class A distribution
paid was $0.41 (41 cents) with $0.15 (15 cents) derived from long term capital
gains. The Class C distribution paid was $0.33 (33 cents) with $0.15 (15 cents)
derived from long term capital gains.
16
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
Independent Auditor's Report
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Templeton Global Real Estate
Fund (the "Fund") at August 31, 1999, the results of its operations, the changes
in its net assets and the financial highlights for the year then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at August 31, 1999 by
correspondence with the custodian, provides a reasonable basis for the opinion
expressed above. The financial statements for the year ended August 31, 1998,
including financial highlights for each of the four years in the period then
ended, were audited by other independent accountants whose report dated
September 29, 1998 expressed an unqualified opinion on those financial
statements.
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
September 30, 1999
17
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
Tax Designation
Under Section 854(b)(2) of the Internal Revenue Code, the Fund hereby designates
6.84% of the ordinary income dividends as income qualifying for the dividends
received deduction for the fiscal year ended August 31, 1999.
18
PAGE
TEMPLETON GLOBAL REAL ESTATE FUND
Change in Independent Auditor
On August 13, 1999, McGladrey & Pullen, LLP (McGladrey) resigned as independent
auditors of the Fund. McGladrey resigned pursuant to their agreement to sell
their investment company practice to PricewaterhouseCoopers LLP (PwC). The
McGladrey partners and professionals previously serving the Fund, have joined
PwC and performed the August 31, 1999 audit.
None of the reports of McGladrey on the financial statements of the Fund,
including those of the past two fiscal years have ever contained an adverse
opinion or a disclaimer of opinion, or was qualified or modified as to
uncertainty, audit scope or accounting principles.
During the period McGladrey served the Fund, including the two most recent
fiscal years and subsequent interim period, there were no disagreements with
McGladrey on any matter of accounting principle or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of McGladrey would have caused it to make
reference to the subject matter of disagreement in connection with its report.
On August 31, 1999, the Fund, with the approval of its Board of Trustees and its
Audit Committee, engaged PwC as its independent auditors.
19
PAGE
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