-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HdPY8ndkEIWqxc9KexsBJStU0Fxq2XZIyGop9dsodnOSILWqDRsZh0cheKzN30/6 kedMp39fvoEX9evv3mtYpQ== 0000853183-99-000015.txt : 19991102 0000853183-99-000015.hdr.sgml : 19991102 ACCESSION NUMBER: 0000853183-99-000015 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990831 FILED AS OF DATE: 19991101 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEMPLETON REAL ESTATE SECURITIES FUND CENTRAL INDEX KEY: 0000853183 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-05844 FILM NUMBER: 99738507 BUSINESS ADDRESS: STREET 1: BROWARD FINANCIAL CENTRE STREET 2: 500 EAST BROWARD BLVD CITY: FORT LAUDERDALE STATE: FL ZIP: 33394-3091 BUSINESS PHONE: 3055277500 MAIL ADDRESS: STREET 2: 500 EAST BROWARD BLVD STE 2100 CITY: FORT LAUDERDALE STATE: FL ZIP: 33394-3091 FORMER COMPANY: FORMER CONFORMED NAME: TEMPLETON REAL ESTATE TRUST DATE OF NAME CHANGE: 19900313 N-30D 1 ANNUAL REPORT DTD 8/31/99 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
CLASS A CHANGE 8/31/99 8/31/98 - --------------------------------------------------------------- Net Asset Value +$1.30 $14.00 $12.70
DISTRIBUTIONS (9/1/98 - 8/31/99) -------------------------------- Dividend Income $0.5100 Long-Term Capital Gain $0.0100 TOTAL $0.5200
CLASS C CHANGE 8/31/99 8/31/98 - --------------------------------------------------------------- Net Asset Value +$1.32 $13.87 $12.55
DISTRIBUTIONS (9/1/98 - 8/31/99) -------------------------------- Dividend Income $0.3814 Long-Term Capital Gain $0.0100 TOTAL $0.3914
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
INCEPTION CLASS A 1-YEAR 5-YEAR (9/12/89) - ------------------------------------------------------------------------------ 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
8/31/95 8/31/96 8/31/97 8/31/98 8/31/99 - ------------------------------------------------------------------------------- One-Year Total Return(4) -1.74% 7.48% 22.06% -19.94% 14.55%
INCEPTION CLASS C 1-YEAR 3-YEAR (5/1/95) - ------------------------------------------------------------------------------- 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
8/31/96 8/31/97 8/31/98 8/31/99 - ------------------------------------------------------------------------------- One-Year Total Return(4) 6.69% 21.12% -20.61% 13.78%
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
CLASS A ---------------------------------------------- YEAR ENDED AUGUST 31, ---------------------------------------------- 1999+ 1998 1997 1996 1995 ---------------------------------------------- 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%
*Total return does not reflect sales commissions. +Based on average weighted shares outstanding. 6 PAGE TEMPLETON GLOBAL REAL ESTATE FUND Financial Highlights (continued)
CLASS C ------------------------------------------------------------------------- YEAR ENDED AUGUST 31, ------------------------------------------------------------------------- 1999++ 1998 1997 1996 1995+ ------------------------------------------------------------------------- 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%
*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
COUNTRY SHARES VALUE - ------------------------------------------------------------------------------------------------------------- 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
8 PAGE TEMPLETON GLOBAL REAL ESTATE FUND STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (CONT.)
COUNTRY SHARES VALUE - ------------------------------------------------------------------------------------------------------------- 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 -----------
PRINCIPAL AMOUNT** ---------- BONDS (COST $550,000) .6% 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 ===========
* 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 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 ============
*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 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 ============
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
1999 1998 ---------------------------------- 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 ==================================
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:
YEAR ENDED AUGUST 31, --------------------------------------------------------------- 1999 1998 --------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT --------------------------------------------------------------- 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) ===============================================================
YEAR ENDED AUGUST 31, ----------------------------------------------------------- 1999 1998 ----------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT ----------------------------------------------------------- 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) ===========================================================
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:
ANNUALIZED FEE RATE AVERAGE DAILY NET ASSETS - ---------------------------------------------------------------------- 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
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: Unrealized appreciation $12,664,770 Unrealized depreciation (4,939,678) ----------- Net unrealized appreciation $ 7,725,092 ===========
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 This page intentionally left blank. -----END PRIVACY-ENHANCED MESSAGE-----