YOUR FUND'S OBJECTIVE:
THE FRANKLIN REAL ESTATE SECURITIES FUND SEEKS TO MAXIMIZE TOTAL RETURN BY
INVESTING IN SECURITIES OF COMPANIES IN THE REAL ESTATE INDUSTRY, PRIMARILY
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITS).
Equity real estate investment trusts (REITs) are real estate companies that own
and manage income-producing properties such as apartments or hotels. The income,
primarily rent from these properties, is generally passed on to investors in the
form of dividends. These companies provide experienced property management teams
and generally concentrate on a specific geographic region and property type.
April 30, 1997
Dear Shareholder:
We are pleased to bring you this annual report for the Franklin Real Estate
Securities Fund, which covers the fiscal year ended April 30, 1997.
During the 12 months under review, the U. S. real estate market performed well,
as robust economic growth and limited new property development helped drive
occupancy and rental rates higher. Additionally, cost savings from consolidation
and growing economies of scale had a positive impact on real estate stocks,
contributing to positive cash flow growth for most equity REITs in 1996.
Although real estate fundamentals remained strong in early 1997, prices of real
estate stocks fell slightly after the Federal Reserve Board raised the federal
funds rate, from 5.00% to 5.25%, on March 25. Within this environment, the
fund's Class I shares delivered a one-year total return of +25.97%, as discussed
in the Performance Summary on page 6, outperforming the Standard & Poor's 500(R)
Stock Index, which posted a total return of +25.11%.*
Market capitalization and liquidity of equity REITs have increased significantly
over the past several years, as investors have been attracted by the strong real
estate market. In fact, REITs now represent approximately 8.4% of the Russell
2000(R) Index of small capitalization companies. Even though large, public real
estate companies are beginning to play an important role in the industry, it
remains highly fragmented, and operating results are directly related to
property management capabilities, local economic conditions, and the development
of competing space. These factors are the driving force behind our long-term
investment strategy of focusing on property types and geographic regions with
strong supply and demand fundamentals, while attempting to identify those
management teams with the ability to add value through intensive property
management and strong capital markets experience. In keeping with this strategy,
we maintained the majority of the fund's investments in hotel, apartment,
industrial, office, and self-storage properties, where we anticipate the
strongest cash flow growth, as well as the most favorable supply and demand
fundamentals.
*The Standard & Poor's 500 Stock Index is an index of widely held common stocks
covering a variety of industries. This index, calculated by Standard &
Poor's(R), is a total return index with dividends reinvested. One cannot invest
directly in an index.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the hotel sector was the fund's largest
property-type weighting, representing 19.9% of total net assets. Available hotel
rooms have become scarce in many cities across the country, often causing
business travelers to alter plans or stay in less desirable accommodations. This
contributed to the excellent operating results, attractive valuations, and
significant consolidation activity, which made hotels our strongest performing
sector. During the period, we initiated positions in CapStar Hotel Company,
Candlewood Hotel Company, Inc., and Prime Hospitality Corporation. At the
high-end of the hotel/resort segment, we purchased shares in Vail Resorts, Inc.
We also added to core holdings such as FelCor Suite Hotels, Inc., Winston
Hotels, Inc., and Host Marriott Corporation.
FRANKLIN REAL ESTATE SECURITIES FUND
TOP 10 HOLDINGS ON APRIL 30, 1997
BASED ON TOTAL NET ASSETS
% OF TOTAL
COMPANY, INDUSTRY NET ASSETS
FelCor Suite Hotels, Inc. 3.55%
Hotels
Host Marriott Corp. 3.19%
Hotels
Equity Residential Properties Trust 3.09%
Apartments
CapStar Hotel Co. 2.94%
Hotels
Patriot American Hospitality, Inc. 2.94%
Hotels
Simon DeBartolo Group, Inc. 2.90%
Retail - Regional Malls
Public Storage, Inc. 2.67%
Storage
Pacific Retail Trust 2.45%
Retail - Community Centers
Storage Trust Realty 2.43%
Storage
Highwoods Properties, Inc. 2.27%
Office
FOR A COMPLETE LIST OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 13 OF THIS REPORT.
On April 30, 1997, the apartment sector was the fund's second-largest exposure,
representing 18.5% of total net assets. We continued to maintain large positions
in our core apartment holdings such as Equity Residential Properties Trust,
Security Capital Pacific Trust, and Bay Apartment Communities, Inc. We also
initiated a position in Security Capital Atlantic, Inc., a southeastern
apartment operator focused on the development of mid-priced apartments.
During the fiscal year, we increased the fund's exposure to the office and
industrial property sectors by acquiring shares in Arden Realty Group, Inc.,
Kilroy Realty Corporation, and Meridian Industrial Trust, Inc. These securities
were attractively valued, in our opinion, and should generate above-average cash
flow growth over the next few years. We also added to Security Capital
Industrial Trust, Spieker Properties, Inc., and Highwoods Properties, Inc.,
because their valuations became attractive due to weakness in office sector
securities. As of April 30, 1997, the industrial sector weighting was 10.3% of
total net assets, up from 8.6% one year ago, while the office sector represented
6.9% of total net assets, up from 3.9% at the beginning of the reporting period.
Finally, adhering to our disciplined focus on valuation, we realized gains in
several securities in the home building, industrial, and hotel sectors. We
believed their valuations did not reflectslowing growth rates that could cause
weakness in the future.
Looking forward, we are confident about the prospects for real estate
securities, particularly equity REITs, because of the unique combination of
strong underlying fundamentals, favorable valuations, and attractive growth
opportunities they offer. The fund will continue to focus on high-quality real
estate companies that are creating significant cash flow and dividend growth.
This discussion reflects the strategies we employed for the fund during the
fiscal year, and includes our opinions as of the close of the period. Since
economic and market conditions are constantly changing, our strategies and our
evaluations, conclusions, and decisions regarding portfolio holdings may change
as new circumstances arise. Although past performance of a specific investment
or sector cannot guarantee future performance, such information can be useful in
analyzing securities we purchase and sell for the fund.
Of course, there are special risks involved with investing in a non-diversified
fund concentrating in real estate securities, such as declines in the value of
real estate and increased susceptibility to adverse economic or regulatory
developments. These risks are discussed in the fund's prospectus.
We appreciate your participation in the Franklin Real Estate Securities Fund and
welcome your comments or suggestions.
Sincerely,
Charles B. Johnson
Chairman of the Board
Franklin Real Estate Securities Fund
PERFORMANCE SUMMARY
CLASS I
The Franklin Real Estate Securities Fund's Class I shares provided a cumulative
total return of +25.97% for the one-year period ended April 30, 1997. Cumulative
total return measures the change in value of an investment, assuming
reinvestment of dividends and capital gains, and does not include the initial
sales charge. We always maintain a long-term perspective when managing the fund,
and encourage shareholders to view their investments in a similar manner. As you
can see from the table on page 8, the fund delivered a cumulative total return
of more than 70% since its inception on January 3, 1994.
The price of the fund's Class I shares, as measured by net asset value,
increased $2.80, from $12.64 on April 30, 1996, to $15.44 on April 30, 1997.
During the reporting period, shareholders received distributions totaling 36
cents ($0.36) per share in dividend income and 10 cents ($0.10) per share in
capital gains, of which 6.2 cents ($0.062) represented short-term gains and 3.8
cents ($0.038) represented long-term gains. Of course, past performance is not
predictive of future results. Distributions will vary depending on income earned
by the fund, and any profits realized from the sale of securities in the
portfolio, as well as the level of the fund's operating expenses.
The graph on the following page compares the performance of the fund's Class I
shares since inception with the Standard & Poor's(R) 500 Stock Index (S&P
500(R)) and the Wilshire Real Estate Securities Index. The S&P 500 is a broad
market index consisting of 500 widely held common stocks in a variety of
industries, whereas the Wilshire is an index of publicly traded real estate
securities, including both REITs and Real Estate Operating Companies.
Of course, such unmanaged market indices have inherent performance differentials
in comparison with any fund. Indices do not pay management fees to cover
salaries of security analysts or portfolio managers, nor do they pay commissions
or market spreads to buy and sell stocks. Unlike the indices, mutual funds are
never 100% invested since they need to keep some cash on hand to redeem shares.
The fund's performance figures shown on the graph include the sales charge, all
fund expenses and account fees. If operating expenses such as the fund's had
been applied to the indices, their performances would have been lower. Please
remember that an index is simply a measure of performance, and one cannot invest
directly in an index. Past performance is not predictive of future results.
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
FRANKLIN REAL ESTATE SECURITIES FUND
CLASS I
PERIODS ENDED APRIL 30, 1997
SINCE
INCEPTION
ONE-YEAR THREE-YEAR (1/3/94)
Cumulative Total Return1.......... 25.97% 55.77% 70.10%
Average Annual Total Return2...... 20.26% 14.17% 15.73%
Value of $10,000 Investment3...... $12,026 $14,882 $16,246
4/30/95 4/30/96 4/30/97
One-Year Total Return4 -0.48% 24.25% 25.97%
1. Cumulative total returns represent the change in value of an investment over
the indicated periods and do not include the sales charge.
2. Average annual total returns represent the average annual change in value of
an investment over the indicated periods, and include the 4.5% maximum initial
sales charge.
3. These figures represent the value of a hypothetical $10,000 investment in the
fund over the indicated periods and include the sales charge.
4. One-year total returns represent the change in value of an investment over
the periods ended on the specified dates and do not include the initial sales
charge.
All calculations assume reinvestment of dividends and capital gains at net asset
value. Investment return and principal value will fluctuate with market
conditions. Thus, your shares, when redeemed, may be worth more or less than
their initial cost. Past performance is not predictive of future results.
The fund's manager has agreed in advance to waive a portion of its management
fees, which reduces operating expenses and increases total return to
shareholders. Without this waiver, the fund's total return would have been
lower. The waiver may be discontinued at any time, upon notice to the fund's
Board of Trustees.
PERFORMANCE SUMMARY
CLASS II
The Franklin Real Estate Securities Fund's Class II shares provided a cumulative
total return of +24.94% for the one-year period ended April 30, 1997. Cumulative
total return measures the change in value of an investment, assuming
reinvestment of dividends and capital gains, and does not include sales charges.
We always maintain a long-term perspective when managing the fund, and encourage
shareholders to view their investments in a similar manner. As you can see from
the table on the page 11, the fund delivered a cumulative total return of more
than 53% since inception on May 1, 1995.
The price of the fund's shares, as measured by net asset value, increased $2.70,
from $12.56 on April 30, 1996, to $15.26 on April 30, 1997. During the reporting
period, shareholders received distributions totaling 31.3 cents ($0.313) per
share in dividend income and 10 cents ($0.10) per share in capital gains, of
which 6.2 cents ($0.062) represented short-term gains and 3.8 cents ($0.038)
represented long-term gains. Of course, past performance is not predictive of
future results. Distributions will vary depending on income earned by the fund,
and any profits realized from the sale of securities in the portfolio, as well
as the level of the fund's operating expenses.
The graph on the following page compares the performance of the fund's Class II
shares since inception with the Standard & Poor's(R) 500 Stock Index (S&P
500(R)) and the Wilshire Real Estate Securities Index. The S&P 500 is a broad
market index consisting of 500 widely held common stocks in a variety of
industries, whereas the Wilshire is an index of publicly traded real estate
securities, including both REITs and Real Estate Operating Companies.
Of course, such unmanaged market indices have inherent performance differentials
in comparison with any fund. Indices do not pay management fees to cover
salaries of security analysts or portfolio managers, nor do they pay commissions
or market spreads to buy and sell stocks. Unlike the indices, mutual funds are
never 100% invested since they need to keep some cash on hand to redeem shares.
The fund's performance figures shown on the graph include the sales charges, all
fund expenses and account fees. If operating expenses such as the fund's had
been applied to the indices, their performances would have been lower. Please
remember that an index is simply a measure of performance, and one cannot invest
directly in an index. Past performance is not predictive of future results.
GRAPHIC MATERIAL 4 OMITTED - SEE APPENDIX AT END OF DOCUMENT
FRANKLIN REAL ESTATE SECURITIES FUND
CLASS II
PERIODS ENDED APRIL 30, 1997
SINCE
INCEPTION
ONE-YEAR (5/1/95)
Cumulative Total Return1 24.94% 53.94%
Average Annual Total Return2 22.67% 23.45%
Value of $10,000 Investment3 $12,267 $15,236
1. Cumulative total returns represent the change in value of an investment over
the specified periods and do not include sales charges.
2. Average annual total returns represent the average annual change in value of
an investment over the periods indicated, and include the 1.00% initial sales
charge and 1.00% contingent deferred sales charge, applicable to shares redeemed
within the first 18 months of investment.
3. These figures represent the value of a hypothetical $10,000 investment in the
fund over the indicated periods and include all sales charges.
All calculations assume reinvestment of dividends and capital gains at net asset
value. Investment return and principal value will fluctuate with market
conditions. Thus, your shares, when redeemed, may be worth more or less than
their initial cost. Past performance is not predictive of future results.
The fund's manager has agreed in advance to waive a portion of its management
fees, which reduces operating expenses and increases total return to
shareholders. Without this waiver, the fund's total return would have been
lower. The waiver may be discontinued at any time, upon notice to the fund's
Board of Trustees.
PERFORMANCE SUMMARY
ADVISOR CLASS
The Franklin Real Estate Securities Fund Advisor Class shares provided an
aggregate total return of +.98%, from inception on January 1, 1997, through
April 30, 1997. The price of the fund's shares, as measured by net asset value,
increased $0.15, from $15.30 on January 2, 1997 (day of commencement of sales),
to $15.45 on April 30, 1997. Of course, past performance is not predictive of
future results.
FRANKLIN REAL ESTATE SECURITIES FUND
ADVISOR CLASS
PERIOD ENDED APRIL 30, 1997
SINCE
INCEPTION
(1/1/97)
Aggregate Total Return* .98%
*Aggregate total return represents the change in value of an investment over the
indicated period. Since Advisor Class shares have been in existence for less
than one year, average annual total returns are not provided.
Note: Investment return and principal value will fluctuate with market
conditions. Thus, your shares, when redeemed, may be worth more or less than
their initial cost. Past performance is not predictive of future results.
The fund's manager has agreed in advance to waive a portion of its management
fees, which increases total return to shareholders. If the manager had not taken
this action, the fund's total returns would have been lower. The fee waiver may
be discontinued at any time, upon notice to the fund's Board of Trustees.
FRANKLIN REAL ESTATE SECURITIES TRUST
FRANKLIN REAL ESTATE SECURITIES FUND
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, APRIL 30, 1997
<TABLE>
<CAPTION>
Value
SHARES (NOTE 1)
COMMON STOCKS 93.0%
EQUITY REIT - APARTMENTS 18.5%
<S> <C> <C>
95,000 Amli Residential Properties Trust ............................................ $ 2,101,875
110,000 Bay Apartment Communities, Inc. .............................................. 3,685,000
120,000 Camden Property Trust ........................................................ 3,285,000
150,000 Equity Residential Properties Trust .......................................... 6,562,500
90,000 Evans Withycombe Residential, Inc. ........................................... 1,777,500
110,000 Gables Residential Trust ..................................................... 2,722,500
80,200 Irvine Apartment Communities, Inc. ........................................... 2,145,350
125,000 Oasis Residential, Inc. ...................................................... 2,781,250
65,000 Post Properties, Inc. ........................................................ 2,518,750
210,000 Security Capital Atlantic, Inc................................................ 4,515,000
160,000 Security Capital Pacific Trust ............................................... 3,640,000
150,000 Summit Properties, Inc. ...................................................... 2,962,500
40,697 United Dominion Realty Trust, Inc............................................. 559,584
-------------
39,256,809
-------------
EQUITY REIT - HEALTH CARE 4.0%
89,000 Health Care Property Investors, Inc. ......................................... 2,948,125
130,000 Nationwide Health Properties, Inc............................................. 2,600,000
95,000 Omega Healthcare Investors, Inc............................................... 2,909,375
-------------
8,457,500
-------------
EQUITY REIT - HOTELS 11.2%
92,700 Equity Inns, Inc. ............................................................ 1,251,450
210,000 FelCor Suite Hotels, Inc. .................................................... 7,533,750
290,000 Patriot American Hospitality, Inc............................................. 6,235,000
105,000 Starwood Lodging Trust ....................................................... 4,042,500
370,000 Winston Hotels, Inc. ......................................................... 4,717,500
-------------
23,780,200
-------------
EQUITY REIT - INDUSTRIAL 10.3%
75,000 Duke Realty Investments, Inc.................................................. 2,756,250
170,000 Liberty Property Trust ....................................................... 4,101,250
180,000 Meridian Industrial Trust, Inc................................................ 3,690,000
230,000 Security Capital Industrial Trust ............................................ 4,628,750
120,000 Spieker Properties, Inc. ..................................................... 4,185,000
80,000 Weeks Corp. .................................................................. 2,510,000
-------------
21,871,250
-------------
EQUITY REIT - MIXED PROPERTY TYPE 3.3%
110,000 Colonial Properties Trust .................................................... $ 3,121,250
197,100 Glenborough Realty Trust, Inc. ............................................... 3,892,725
-------------
7,013,975
-------------
EQUITY REIT - OFFICE 6.9%
120,000 Arden Realty Group, Inc....................................................... 2,985,000
70,000 Beacon Properties Corp. ...................................................... 2,161,250
160,000 Crescent Real Estate Equities, Co. .......................................... 4,200,000
155,000 Highwoods Properties, Inc. ................................................... 4,824,375
22,200 aKilroy Realty Corp. ......................................................... 521,700
-------------
14,692,325
-------------
EQUITY REIT - RESIDENTIAL COMMUNITIES 3.0%
25,360 Chateau Properties, Inc. ..................................................... 662,530
131,400 Manufactured Home Communities, Inc. ......................................... 2,759,400
90,000 Sun Communities, Inc. ....................................................... 2,880,000
-------------
6,301,930
-------------
EQUITY REIT - RETAIL - COMMUNITY CENTERS 6.8%
106,600 Burnham Pacific Properties, Inc............................................... 1,332,500
70,000 Developers Diversified Realty Corp. .......................................... 2,581,250
100,000 Kimco Realty Corp. ........................................................... 3,112,500
433,023 b,dPacific Retail Trust....................................................... 5,196,276
35,000 Vornado Realty Trust ......................................................... 2,226,875
-------------
14,449,401
-------------
EQUITY REIT - RETAIL - OUTLET CENTERS 0.7%
30,700 Chelsea GCA Realty, Inc. ..................................................... 1,078,338
19,400 Tanger Factory Outlet Centers, Inc. .......................................... 485,000
-------------
1,563,338
-------------
EQUITY REIT - RETAIL - REGIONAL MALLS 6.2%
215,000 Simon DeBartolo Group, Inc. .................................................. 6,154,375
118,000 The Macerich Co. ............................................................. 3,068,000
160,300 The Mills Corp. .............................................................. 4,027,538
-------------
13,249,913
-------------
EQUITY REIT - STORAGE 7.0%
211,000 Public Storage, Inc. ......................................................... 5,670,625
215,000 Storage Trust Realty ......................................................... 5,160,000
110,000 Storage USA, Inc. ............................................................ 4,138,750
-------------
14,969,375
-------------
HOME BUILDERS 3.2%
40,000 aBeazer Homes USA, Inc. ...................................................... $ 555,000
130,000 aBelmont Homes, Inc. ......................................................... 975,000
130,000 Clayton Homes, Inc. .......................................................... 1,820,000
11,000 Kaufman & Broad Homes Corp. .................................................. 152,625
100,000 aNVR, Inc. ................................................................... 1,275,000
120,000 aSouthern Energy Homes, Inc. ................................................. 1,245,000
35,000 aU.S. Home Corp. ............................................................ 861,875
-------------
6,884,500
-------------
HOTELS 8.7%
385,000 aCandlewood Hotel Co., Inc. .................................................. 3,368,750
220,000 aCapStar Hotel Co. ........................................................... 6,242,500
390,000 aHost Marriott Corp. ......................................................... 6,776,250
126,100 aPrime Hospitality Corp. ..................................................... 2,096,412
-------------
18,483,912
-------------
MIXED PROPERTY TYPE 3.2%
300,000 aSecurity Capital US Realty .................................................. 4,470,000
110,000 aVail Resorts, Inc. .......................................................... 2,241,250
-------------
6,711,250
-------------
Total Common Stocks (Cost $182,461,661) ................................ 197,685,678
-------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
cRECEIVABLES FROM REPURCHASE AGREEMENTS 8.1%
<S> <C> <C>
$17,443,608 Joint Repurchase Agreements, 5.335%, 05/01/97 (Maturity Value $17,247,092)
(Cost $17,244,536)
Aubrey G. Lanston & Co., Inc., (Maturity Value $1,946,708)
Collateral: U.S. Treasury Notes, 5.00% - 7.50%, 03/31/98 - 10/31/99
Barclays de Zoete Wedd Securities, Inc., (Maturity Value $1,673,428)
Collateral: U.S. Treasury Notes, 6.25% - 6.375%, 07/31/98 - 04/30/99
Bear, Stearns & Co., Inc., (Maturity Value $1,946,708)
Collateral: U.S. Treasury Notes, 5.75% - 6.375%, 09/30/97 - 05/15/99
Chase Securities, Inc., (Maturity Value $973,354)
Collateral: U.S. Treasury Notes, 5.25%, 01/31/01
Citicorp Securities, Inc., (Maturity Value $973,354)
Collateral: U.S. Treasury Notes, 5.25% - 8.50%, 12/31/97 - 01/31/02
Daiwa Securities America, Inc., (Maturity Value $1,946,708)
Collateral: U.S. Treasury Notes, 5.25% - 7.875%, 10/31/97 - 12/31/01
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $1,946,708)
Collateral: U.S. Treasury Notes, 4.75% - 7.75%, 08/31/98 - 05/31/01
Fuji Securities, Inc., (Maturity Value $1,946,708)
Collateral: U.S. Treasury Notes, 5.875%, 02/15/00
Sanwa Securities (USA) Co., L.P., (Maturity Value $1,946,708)
Collateral: U.S. Treasury Notes, 5.375 % - 9.125%, 05/31/98 - 12/31/01
UBS Securities L.L.C., (Maturity Value $1,946,708)
Collateral: U.S. Treasury Notes, 6.00% - 8.25%, 07/15/98 - 08/15/99 ....... $ 17,244,536
-------------
Total Investments (Cost $199,706,197)101.1% ........................ 214,930,214
Liabilities in Excess of Other Assets(1.1%)......................... (2,245,404)
-------------
Net Assets100.0% ................................................... $212,684,810
=============
At April 30, 1997, the net unrealized appreciation based on
the cost of investments for income tax purposes of
$199,706,197 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................. $ 16,970,167
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................. (1,746,150)
-------------
Net unrealized appreciation ................................................ $ 15,224,017
=============
</TABLE>
PORTFOLIO ABBREVIATION:
L.L.C. - Limited Liability Corp.
L.P. - Limited Partnership
REIT - Real Estate Investment Trust
aNon-income producing.
bSee Note 6 regarding restricted securities.
cFace amount for repurchase agreements is for the underlying collateral. See
Note 1(f) regarding joint repurchase agreement.
dSee note 1(g) regarding securities purchased on a when-issued or delayed
delivery basis.
The accompanying notes are an integral part of these financial statements.
FRANKLIN REAL ESTATE SECURITIES FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments in securities, at value (identified cost $182,461,661) ............................. $197,685,678
Receivables from repurchase agreements, at value and cost....................................... 17,244,536
Cash ........................................................................................... 483,692
Receivables:
Capital shares sold............................................................................ 1,572,561
Dividends ..................................................................................... 472,585
Investment securities sold .................................................................... 333,766
From affiliates ............................................................................... 32,266
Other assets ................................................................................... 2,250
-------------
Total assets .............................................................................. 217,827,334
-------------
Liabilities:
Payables:
Investment securities purchased
Regular delivery ............................................................................. 2,507,879
When-issued basis ............................................................................ 2,127,996
Capital shares repurchased .................................................................... 120,309
Distribution fees ............................................................................. 200,309
Management fees ............................................................................... 87,257
Shareholder servicing costs ................................................................... 21,000
Accrued expenses and other liabilities ......................................................... 77,774
-------------
Total liabilities ......................................................................... 5,142,524
-------------
Net assets, at value ............................................................................ $212,684,810
=============
Net assets consist of:
Undistributed net investment income ............................................................ $ 1,651,344
Net unrealized appreciation on investments ..................................................... 15,224,017
Accumulated net realized gain from investments ................................................. 934,164
Class I capital shares ......................................................................... 138,822,327
Class II capital shares ........................................................................ 55,424,821
Advisor Class capital shares ................................................................... 628,137
-------------
Net assets, at value ............................................................................ $212,684,810
=============
Class I shares:
Net asset value per share* ($153,520,259/9,942,723 shares outstanding) ........................ $15.44
=============
Maximum offering price per share (100/95.5 of $15.44) .......................................... $16.17
=============
Class II shares:
Net asset value per share* ($58,540,006/3,835,085 shares outstanding) .......................... $15.26
=============
Maximum offering price per share (100/99 of $15.26) ............................................ $15.41
=============
Advisor Class shares:
Net asset value and offering price per share ($624,545/40,415 shares outstanding) .............. $15.45
=============
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
FRANKLIN REAL ESTATE SECURITIES FUND
FINANCIAL STATEMENTS (CONT.)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1997
<TABLE>
<CAPTION>
Investment income:
<S> <C>
Dividends.......................................................................... $4,346,992
Interest .......................................................................... 676,436
-------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Total income ................................................................. 5,023,428
------------
Expenses:
Management fees (Note 5)........................................................... 619,802
Distribution fees - Class I (Note 5)............................................... 179,021
Distribution fees - Class II (Note 5).............................................. 252,191
Shareholder servicing costs (Note 5)............................................... 108,128
Registration and filing fees....................................................... 93,699
Reports to shareholders............................................................ 43,266
Professional fees.................................................................. 9,906
Custodian fees..................................................................... 603
Other.............................................................................. 17,182
Management fees waived by manager (Note 5)......................................... (109,600)
-------------
Total expenses................................................................ 1,214,198
-------------
Net investment income........................................................ 3,809,230
-------------
Realized and unrealized gain on investments:
Net realized gain.................................................................. 1,537,098
Net unrealized appreciation........................................................ 11,595,001
-------------
Net realized and unrealized gain on investments..................................... 13,132,099
-------------
Net increase in net assets resulting from operations................................ $16,941,329
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
FRANKLIN REAL ESTATE SECURITIES TRUST
FRANKLIN REAL ESTATE SECURITIES FUND
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED APRIL 30, 1997 AND 1996
<TABLE>
<CAPTION>
Year ended Year ended
4/30/97 4/30/96
---------- ----------
Increase in net assets:
Operations:
<S> <C> <C>
Net investment income........................................................... $ 3,809,230 $ 1,165,963
Net realized gain from security transactions.................................... 1,537,098 123,399
Net unrealized appreciation on investments...................................... 11,595,001 4,113,462
------------ -----------
Net increase in net assets resulting from operations....................... 16,941,329 5,402,824
Distributions to shareholders:
From undistributed net investment income (Note 7):
Class I........................................................................ (1,977,490) (993,820)
Class II....................................................................... (553,996) (95,584)
From undistributed realized gain:
Class I........................................................................ (549,503) --
Class II....................................................................... (176,830) --
Increase in net assets from capital share transactions (Note 2).................. 159,084,965 18,908,641
------------ -----------
Net increase in net assets................................................. 172,768,475 23,222,061
Net assets:
Beginning of year............................................................... 39,916,335 16,694,274
------------ -----------
End of year (including undistributed net investment income
of $1,651,344 at 4/30/97 and $373,600 at 4/30/96).............................. $212,684,810 $39,916,335
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
FRANKLIN REAL ESTATE SECURITIES TRUST
FRANKLIN REAL ESTATE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Real Estate Securities Trust (the Trust) is an open-end management
investment company (mutual fund), registered under the Investment Company Act of
1940, as amended. The Trust currently consists of one non-diversified series,
Franklin Real Estate Securities Fund (the Fund). The investment objective of the
Fund is total return. The Fund will invest primarily in securities of companies
operating in the real estate industry.
The Fund offers three classes of shares, Class I, Class II and Advisor Class.
Class I shares are sold with a higher front-end sales charge than Class II
shares. There is no front-end sales charge for Advisor Class shares. Class I and
Class II shares may be subject to a contingent deferred sales charge and all
shares have the same rights, except with respect to the effect of the respective
sales charges, the distribution fees borne by each class, voting rights on
matters affecting a single class and the exchange privilege of each class. The
offering of Class II shares began May 1, 1995, at which time all previously
outstanding shares became Class I shares. The offering of Advisor Class shares
began January 1, 1997.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
A. SECURITIES VALUATION:
Portfolio securities listed on a securities exchange or on the NASDAQ for which
market quotations are readily available are valued at the last sale price or, if
there is no sale price, within the range of the most recent quoted bid and asked
prices. Other securities are valued based on a variety of factors, including
yield, risk, maturity, trade activity and recent developments related to the
securities. The Fund may utilize a pricing service, bank or broker/dealer
experienced in such matters to perform any of the pricing functions, under
procedures approved by the Board of Trustees (the Board). Securities for which
market quotations are not available and securities restricted as to resale are
valued in accordance with procedures established by the Board.
B. INCOME TAXES:
The Fund intends to continue to qualify for the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and to make the
requisite distributions to its shareholders which will be sufficient to relieve
it from income and excise taxes.
c. SECURITY TRANSACTIONS:
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions are
determined on the basis of specific identification.
D. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income and estimated expenses are accrued daily.
Realized and unrealized gains or 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.
A portion of the distributions received by the Fund from investments in Real
Estate Investment Trust (REIT) securities may be characterized as tax basis
return of capital (ROC) distributions, which are not recorded as dividend
income, but reduce the cost basis of the REIT securities. ROC distributions
exceeding the cost basis of the REIT security are recognized by the Fund as
capital gain.
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
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 expenses during the reporting
period. Actual results could differ from those estimates.
F. REPURCHASE AGREEMENTS:
The Fund may enter into a joint repurchase agreement whereby its uninvested cash
balance is deposited into a joint cash account to be used to invest in one or
more repurchase agreements with government securities dealers recognized by the
Federal Reserve Board and/or member banks of the Federal Reserve System. The
value and face amount of the joint repurchase agreement are allocated to the
Fund based on its pro-rata interest. A repurchase agreement is accounted for as
a loan by the Fund, to the seller, collateralized by underlying U.S. government
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 of the
underlying securities marked to market daily to maintain coverage of at least
100%. At April 30, 1997, all outstanding repurchase agreements held by the Fund
had been entered into on that date.
g. SECURITIES PURCHASED ON A WHEN-ISSUED BASIS OR DELAYED DELIVERY BASIS:
The Fund may trade securities on a when-issued or delayed delivery basis, with
payment and delivery scheduled for a future date. These transactions are subject
to market fluctuations and are subject to the risk that the value at delivery
date may be more or less than the trade date purchase price. Although the Fund
will generally purchase these securities with the intention of holding the
securities, they may sell the securities before the settlement date. These
securities are identified on the accompanying Statement of Investments in
Securities and Net Assets. The Fund has set aside sufficient investment
securities as collateral for these purchase commitments.
2. TRUST SHARES
At April 30, 1997, there were an unlimited number of $.01 par value shares of
beneficial interest authorized. Transactions in the Trust's shares were as
follows:
<TABLE>
<CAPTION>
Year ended Year ended
April 30, 1997 April 30, 1996
------------------ ---------------------
Class I Shares: Shares Amount Shares Amount
--------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Shares sold ........................................... 10,056,249 $151,008,579 1,592,210 $19,010,690
Shares issued in reinvestment of distributions ........ 149,042 2,193,888 70,974 833,948
Shares redeemed ....................................... (2,923,144) (44,187,776) (580,330) (6,918,681)
----------- ------------- ---------- ------------
Net increase ........................................... 7,282,147 $109,014,691 1,082,854 $12,925,957
=========== ============= ========== ============
2. TRUST SHARES (cont.)
Year ended Year ended
April 30, 1997 April 30, 1996
------------------ --------------------
Class II Shares: Shares Amount Shares Amount
---------- ------------ ---------- -----------
Shares sold ........................................... 3,439,134 $ 51,025,015 498,647 $ 5,965,246
Shares issued in reinvestment of distributions ........ 42,697 622,945 7,698 90,146
Shares redeemed ....................................... (147,017) (2,205,823) (6,084) (72,708)
---------- ------------- ---------- -----------
Net increase ........................................... 3,334,814 $ 49,442,137 500,261 $ 5,982,684
========== ============= ========== ===========
</TABLE>
Period ended
April 30, 1997*
--------------------
Advisor Class Shares: Shares Amount
--------- ----------
Shares sold ............................. 57,886 $ 909,753
Shares redeemed ......................... (17,471) (281,616)
--------- ----------
Net increase ............................. 40,415 $ 628,137
========= ==========
*Effective date of Advisor Class shares was January 1, 1997.
3. DISTRIBUTIONS
At April 30, 1997, for tax purposes, the Fund had accumulated net realized gains
of $934,164.
For tax purposes, the aggregate cost of securities and unrealized appreciation
are the same as for financial reporting purposes at April 30, 1997.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding purchases and sales of short-term
securities) for the year ended April 30, 1997 aggregated $156,233,315 and
$6,466,397, respectively.
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
a. MANAGEMENT AGREEMENT:
Under the terms of a management agreement, Franklin Advisers, Inc., (Advisers)
provides investment advice, administrative services, office space and facilities
to the Fund, and receives fees computed monthly on the average daily net assets
of the Fund as follows:
Annualized Fee Rate Average Daily Net Assets
- ------------------- ---------------------------------------------------
0.625% First $100 million
0.500% Over $100 million, up to and including $250 million
0.450% Over $250 million
Advisers agreed in advance to waive a portion of its management fees, as shown
in the Statement of Operations for the year ended April 30, 1997.
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)
a. MANAGEMENT AGREEMENT: (CONT.)
Under an agreement with Advisers, Franklin Templeton Services, Inc. (FT
Services) provides administrative services and facilities for the Fund. The fee
is paid by Advisers and computed monthly based on average daily net assets. It
is not a separate expense of the Fund.
b. SHAREHOLDER SERVICES AGREEMENT:
Under the terms of a shareholder service agreement with Franklin/Templeton
Investor Services, Inc. (Investor Services) the Fund pays costs on a per
shareholder account basis. Shareholder servicing costs incurred by the Fund for
the year ended April 30, 1997, aggregated $108,128 of which $104,490 was paid to
Investor Services.
c. DISTRIBUTION PLANS AND UNDERWRITING AGREEMENT:
Under the terms of distribution plans pursuant to Rule 12b-1 of the Investment
Company Act of 1940 (the Plans), the Fund reimburses Franklin/Templeton
Distributors, Inc. (Distributors) in an amount up to a maximum of 0.25% per
annum for Class I and 1.00% per annum for Class II of the average daily net
assets of such class for costs incurred in the promotion, offering and marketing
of the Fund's shares. The Plans do not permit nor require payments of excess
costs after termination.
In its capacity as underwriter for the shares of the Fund, Distributors received
commissions on sales of the Fund's shares of beneficial interest. Commissions
are deducted from the gross proceeds received from the sale of the Fund's
shares, and as such are not expenses of the Fund. Distributors may also make
payments, out of its own resources, to dealers for certain sales of the Fund's
shares. Commissions received by Distributors, the amounts paid to other dealers
and any applicable contingent deferred sales charge (CDSC) for the year ended
April 30, 1997, were as follows:
Class I Class II
-------- -------
Total commissions received, including CDSC.......... $2,420,327 $495,316
Paid to other dealers............................... $2,264,991 $973,945
CDSC................................................ $ -- $ 6,832
d. OTHER AFFILIATES AND RELATED PARTY TRANSACTIONS:
Certain officers and directors of the Fund are also officers and/or directors of
Distributors, FT Services, Advisers, and Investor Services, all wholly-owned
subsidiaries of Franklin Resources, Inc.
6. RESTRICTED SECURITIES
A restricted security is a security which has not been registered with the
Securities Exchange Commission pursuant to the Securities Act of 1933. The Fund
may purchase restricted securities through a private offering and they cannot be
sold without prior registration under the Securities Act of 1933 unless such
sale is pursuant to an exemption therefrom. Subsequent costs of registration of
such securities are borne by the issuer. A secondary market exists for certain
privately placed securities. The Fund values these restricted securities as
disclosed in Note 1. At April 30, 1997, the Fund held the following restricted
security representing 2.44% of the Fund's net assets:
Shares Security Acquisition Date Cost Value
- ------ ---------------------------- ---------------- ----------- -----
433,023 Pacific Retail Trust ....... 8/30/96 $4,932,335 $5,196,276
7. FINANCIAL HIGHLIGHTS
Selected data for each share of beneficial interest outstanding throughout each
period are as follows:
<TABLE>
<CAPTION>
Year ended Year ended Year ended January 3, 1994**
April 30, 1997 April 30, 1996 April 30, 1995 to April 30,1994
---------------- ---------------- ---------------- ------------------
CLASS I SHARES:
PER SHARE OPERATING PERFORMANCE*****
<S> <C> <C> <C> <C>
Net asset value at beginning of period .................. $12.64 $10.58 $10.92 $10.00
--------- ------------- ------------- -----------
Net investment income ................................... 0.49 0.43 0.39 0.06
Net realized & unrealized gain (loss) on securities ..... 2.770 2.100 (0.450) 0.860
--------- ------------- ------------- -----------
Total from investment operations ........................ 3.260 2.530 (0.060) 0.920
--------- ------------- ------------- -----------
Distributions from net investment income ................ (0.360) (0.470) (0.280) --
Distributions from realized capital gains ............... (0.100) -- -- --
--------- ------------- ------------- -----------
Total distributions...................................... (0.460) (0.470) (0.280) --
--------- ------------- ------------- -----------
Net asset value at end of period ........................ $15.44 $12.64 $10.58 $10.92
========= ============= ============ ===========
TOTAL RETURN+ ........................................... 25.97% 24.25% (0.48%) 9.20%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (in 000's) .................. $153,520 $33,634 $16,694 $5,634
Ratio of expenses to average net assets++ ............... 0.98% 0.67% 0.25% 0.25%*
Ratio of expenses to average net assets (excluding
waiver and payments by Manager) (Note 5) ............... 1.09% 1.24% 1.40% 2.91%*
Ratio of net investment income to average net assets .... 3.88% 4.38% 4.86% 3.19%*
Portfolio turnover rate ................................. 6.80% 14.40% 3.74% --
Average commission rate+++ .............................. 0.0576 0.0575 -- --
</TABLE>
<TABLE>
<CAPTION>
CLASS II SHARES:***
PER SHARE OPERATING PERFORMANCE*****
<S> <C> <C>
Net asset value at beginning of period ............... $12.56 $10.58
--------- ---------
Net investment income ................................ 0.43 0.44
Net realized & unrealized gain on securities ......... 2.683 1.995
--------- ---------
Total from investment operations ..................... 3.113 2.435
--------- ---------
Distributions from net investment income ............. (0.313) (0.455)
Distributions from realized capital gains ............ (0.100) --
--------- ---------
Total distributions................................... (0.413) (0.460)
--------- ---------
Net asset value at end of period ..................... $15.26 $12.56
========= =========
TOTAL RETURN+......................................... 24.94% 23.21%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (in 000's) ............... $58,540 $6,282
Ratio of expenses to average net assets++ ............ 1.75% 1.41%
Ratio of expenses to average net assets (excluding
waiver by Manager) (Note 5) ......................... 1.86% 1.98%
Ratio of net investment income to average net assets . 2.92% 3.65%
Portfolio turnover rate .............................. 6.80% 14.40%
Average commission rate+++............................ 0.0576 0.0575
</TABLE>
7. FINANCIAL HIGHLIGHTS (cont.)
January 1, 1997****
to April 30, 1997
-------------------
Advisor Class Shares:
Per Share Operating Performance*****
Net asset value at beginning of period ............. $15.30
-------------
Net investment income .............................. 0.18
Net realized & unrealized gain on securities........ (0.030)
-------------
Total from investment operations ................... 0.150
-------------
Net asset value at end of period ................... $15.45
=============
Total Return+....................................... 0.98%
Ratios/Supplemental Data
Net assets at end of period (in 000's).............. $625
Ratio of expenses to average net assets++........... 0.75%*
Ratio of expenses to average net assets
(excluding waiver by Manager) (Note 5)............. 0.86%*
Ratio of net investment income to average net assets 3.44%*
Portfolio turnover rate ............................ 6.80%
Average commission rate+++.......................... 0.0576
+Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It does not include the maximum initial sales
charge and assumes reinvestment of dividends and capital gains, if any, at net
asset value.
++During the year, Advisers agreed in advance to waive a portion of its
management fees and made payments of other expenses.
+++Represents the average broker commission rate per share paid by the fund in
connection with the execution of the Fund's portfolio transactions in equity
securities.
*Annualized
**Effective date of registration.
***Effective date of Class II shares was May 1, 1995.
****Effective date of Advisor Class shares.
*****For the period ending April 30, 1997, per share amounts have been
calculated using the daily average shares outstanding.
Under Section 854(b)(2) of the Internal Revenue Code, the Fund hereby designates
the following percentage of ordinary income dividends paid (including short-term
capital gains distributions, if any) as income qualifying for the dividends
received deduction for the fiscal year ended April 30, 1997: 13.00%.
FRANKLIN REAL ESTATE SECURITIES FUND
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees
of Franklin Real Estate Securities Trust:
We have audited the accompanying statement of assets and liabilities of the
Franklin Real Estate Securities Trust, including the statement of investments in
securities and net assets, as of April 30, 1997, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods presented. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1997, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Franklin Real Estate Securities Trust as of April 30, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and its financial highlights for each of
the periods presented, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
June 10, 1997
Franklin Real Estate Securities Fund Annual Report April 30, 1997.
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING (PURSUANT TO ITEM
304 (a)OF REGULATION S-T)
GRAPHIC MATERIAL (1)
This chart shows in pie format the U.S geographic allocation of the fund's
securities on April 30, 1997, based on total net assets.
U.S. Geographic Allocation on April 30, 1997
National 36.6%
Southeast 21.0%
Southwest 14.1%
Northwest 8.4%
Northeast 6.5%
Midwest 6.4%
Cash & Equivalents 7.0%
GRAPHIC MATERIAL (2)
This chart shows in pie format the property-type allocation of the fund's
securities on April 30, 1997, based on total net assets.
Property-Type Allocation on April 30, 1997
Hotels 19.9%
Apartments 18.5%
Industrial 10.3%
Storage 7.0%
Office 6.9%
Retail-Community Centers 6.8%
Other/Mix 6.5%
Retail-Regional Malls 6.2%
Health Care 4.0%
Home Builders 3.2%
Residential Communities 3.0%
Retail-Outlet Centers 0.7%
Cash & Equivalents 7.0%
GRAPHIC MATERIAL (3)
The following line graph hypothetically compares the performance of the
Franklin Real Estate Securities Fund Class I shares to that of the S&P 500
Stock Index and the Wilshire Real Estate Securities Index, based on a $10,000
investment from 1/3/94 to 4/30/97.
Period Ending Fund S&P500 Wilshire Real Estate
FRANKLIN REAL
ESTATE SECURITIES
DATE FUND S&P 500 WILSHIRE REAL EST.
1/3/94 $9,551 $10,000 $10,000
1/31/94 $9,790 $10,340 $10,300
2/28/94 $10,334 $10,060 $10,721
3/31/94 $10,201 $9,621 $10,225
4/30/94 $10,430 $9,744 $10,339
5/31/94 $10,621 $9,904 $10,554
6/30/94 $10,392 $9,661 $10,347
7/31/94 $10,382 $9,978 $10,370
8/31/94 $10,401 $10,387 $10,363
9/30/94 $10,267 $10,134 $10,190
10/31/94 $9,943 $10,362 $9,817
11/30/94 $9,589 $9,985 $9,433
12/31/94 $10,468 $10,133 $10,164
1/31/95 $10,125 $10,395 $9,836
2/28/95 $10,302 $10,800 $10,144
3/31/95 $10,400 $11,119 $10,203
4/30/95 $10,380 $11,446 $10,129
5/31/95 $10,782 $11,904 $10,464
6/30/95 $10,969 $12,180 $10,647
7/31/95 $11,214 $12,584 $10,818
8/31/95 $11,459 $12,616 $10,950
9/30/95 $11,773 $13,148 $11,151
10/31/95 $11,538 $13,101 $10,806
11/30/95 $11,714 $13,676 $10,918
12/31/95 $12,356 $13,940 $11,551
1/31/96 $12,673 $14,414 $11,711
2/29/96 $12,836 $14,548 $11,943
3/31/96 $12,856 $14,688 $12,039
4/30/96 $12,897 $14,904 $12,094
5/31/96 $13,203 $15,288 $12,363
6/30/96 $13,336 $15,346 $12,611
7/31/96 $13,264 $14,668 $12,498
8/31/96 $13,887 $14,977 $13,029
9/30/96 $14,295 $15,821 $13,355
10/31/96 $14,581 $16,257 $13,717
11/30/96 $15,040 $17,486 $14,286
12/31/96 $16,373 $17,140 $15,811
1/31/97 $16,583 $18,211 $16,037
2/28/97 $16,562 $18,353 $16,046
3/31/97 $16,667 $17,599 $16,101
4/30/97 $16,246 $18,650 $15,581
GRAPHIC MATERIAL (4)
The following line graph hypothetically compares the performance of the
Franklin Real Estate Securities Fund Class II shares to that of the S&P 500
Stock Index and the Wilshire Real Estate Securities Index, based on a $10,000
investment from 5/1/95 to 4/30/97.
Period Ending Fund S&P500 Wilshire Real Estate
FRANKLIN REAL
ESTATE WILSHIRE REAL
DATE SECURITIES Fund S&P 500 EST.
5/1/95 $9,897 $10,000 $10,000
5/31/95 $10,262 $10,400 $10,331
6/30/95 $10,439 $10,641 $10,511
7/31/95 $10,654 $10,995 $10,680
8/31/95 $10,888 $11,022 $10,810
9/30/95 $11,178 $11,487 $11,009
10/31/95 $10,953 $11,446 $10,668
11/30/95 $11,103 $11,948 $10,779
12/31/95 $11,709 $12,179 $11,404
1/31/96 $11,991 $12,593 $11,561
2/29/96 $12,146 $12,710 $11,790
3/31/96 $12,165 $12,832 $11,886
4/30/96 $12,194 $13,021 $11,939
5/31/96 $12,476 $13,357 $12,206
6/30/96 $12,583 $13,407 $12,450
7/31/96 $12,515 $12,815 $12,339
8/31/96 $13,088 $13,085 $12,863
9/30/96 $13,466 $13,822 $13,185
10/31/96 $13,728 $14,203 $13,542
11/30/96 $14,156 $15,277 $14,104
12/31/96 $15,395 $14,975 $15,609
1/31/97 $15,585 $15,911 $15,832
2/28/97 $15,555 $16,035 $15,842
3/31/97 $15,635 $15,376 $15,896
4/30/97 $15,236 $16,294 $15,382
