-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, o8rb7dxB4k8B9wmxEmPzIGGz/m7PZjMFMRq8/00YLwYg68Fhd5yKQd6uGbc8/8fl rQm6ZRoJp8/3vDeLKwXZ6Q== 0000950109-95-001468.txt : 19950501 0000950109-95-001468.hdr.sgml : 19950501 ACCESSION NUMBER: 0000950109-95-001468 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950228 FILED AS OF DATE: 19950428 SROS: NASD SROS: NYSE 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: 1940 Act SEC FILE NUMBER: 811-05844 FILM NUMBER: 95532280 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 SEMI ANNUAL REPORT Templeton Real Estate Securities - -------------------------------------------------------------------------------- Your Fund's Objective: Templeton Real Estate Securities Fund seeks long-term capital growth by investing primarily in securities of domestic and foreign companies which are principally engaged in or related to the real estate industry, or which own significant real estate assets. Current income is a secondary objective. - -------------------------------------------------------------------------------- April 17, 1995 Dear Shareholder: For investors who enjoyed substantial returns on their international portfolios in 1993, the past year was a sobering experience. Early on in 1994, the performance of global securities declined sharply, as rising interest rates put downward pressure on stock prices worldwide. During the past six months -- the period covered in this report of the Templeton Real Estate Securities Fund -- the international economic environment and the securities markets remained volatile. Much of this volatility was centered around emerging markets, which experienced the majority of stock price fluctuations. As we search the world in pursuit of value in real estate securities, we are acutely aware that in certain countries investment conditions have changed dramatically over the past year. For example, land prices in Hong Kong (which were at very high levels) have come down sharply. In the U.S., interest rate increases had a profound impact on real estate equities. In an effort to slow economic growth and keep inflation in check, the Federal Reserve Board raised interest rates six times during 1994. The impact on U.S. real estate equities was predictable and immediate: Real Estate Investment Trusts (REITs) underperformed the Standard & Poor's 500 Index. Shareholders in the Templeton Real Estate Securities Fund could not escape from these macro-economic events. Largely due to global interest rate increases, the Fund's total return performance during the fiscal period 1 that ended February 28, 1995 did not keep pace with its more positive historical results. The Performance Summary on page 6 highlights the importance of looking beyond short-term market fluctuations to the longer-term benefits of global investing. Although the Fund's shorter-term performance was disappointing (-8.88% for the six-month period and -12.10% over one year ), the Fund delivered a total return of 46.50% since its inception on September 12, 1989./1/ Strong Prospects for Global Real Estate Despite inevitable short-term volatility in real estate markets worldwide, we continue to believe in global investment in real estate related equities. One reason is that many more real estate investment opportunities are available abroad than in the United States. Consider that Malaysia, Thailand, Korea and Indonesia, are home to 175 investable real estate companies. This is a very impressive number for these four relatively small emerging market nations. 1. Total return measures the change in value of an investment, assuming reinvestment of dividends and capital gains distributions, and does not include the maximum initial sales charge. Past performance is not indicative of future results. Moreover, international valuations often are more attractive than their U.S. counterparts, and the Canadian real estate market is a good example. Because of the superior values available in that market, we increased the Fund's Canadian holdings significantly during the last six months. Canada is now the Fund's second largest geographic weighting and is home to one of our recent, and best performing, holdings: Canlan Investment Corporation. - -------------------------------------------------------------------------------- Templeton Real Estate Securities Fund Geographic Distribution on 2/28/95 Based on Total Net Assets
Description Amount --------------------- ------------------ United States 54.1% Canada 6.3% Australia 2.1% Latin America 2.5% Asia 11.9% Europe 14.7% Short-Term Obligations & Other Net Assets 8.4%
2 Canlan, a relatively small development company, has shown ability to generate exceptionally high returns on its investments. The company has also gained increased investor attention primarily due to its profitable investments in ice hockey rinks, where demand is high and supply is limited. Hoping to capitalize on this imbalance, the company has embarked on a strategy of investing in ice arenas across Canada, with plans to expand into the United States over the next few years. Another aspect to Canlan is the development of its 330-acre residential golf course community in British Columbia. Judging by sales of lots, which are moving faster than management anticipated, this project will also be very successful. We were able to purchase Canlan stock for approximately 75% of the stock's net asset value. The current management owns 25% of the company and has an outstanding track record. Shareholders' equity has doubled since 1988 -- a remarkable achievement during a difficult period for the Canadian real estate market. The company's long-term prospects have not gone unnoticed by the media, and, in fact, were recently featured in The Wall Street Journal./2/ 2. Larry M. Greenberg, "Canadian Developer Bets on Hockey Craze in the U.S.," The Wall Street Journal, January 9, 1995, Sec. C, p. 1. The Hong Kong Market After Canada, the Fund's highest international concentration is in Hong Kong. Rising interest rates and uncertainty surrounding the transition to Chinese rule in 1997 have hurt the performance of Hong Kong investments. However, we are hopeful that Hong Kong will survive, and even prosper, under Chinese rule. Commercial and residential real estate prices have shown signs of stabilizing, and affordability ratios have improved dramatically from the same time last year. Because of very high demand, limited supply, strong economic growth, and a growing population, the Fund's Hong Kong holdings represent a good value at present. - -------------------------------------------------------------------------------- Templeton Real Estate Securities Fund Top 10 Holdings on 2/28/95 Based on Total Net Assets
% of Total Company, Industry, Country Net Assets - -------------------------------------------------------------------------------- Patten Corp., United States 2.8% - -------------------------------------------------------------------------------- Rouse Co. United States 2.5% - -------------------------------------------------------------------------------- LTC Properties, Inc., United States 2.3% - -------------------------------------------------------------------------------- Revenue Property, Ltd, Canada 2.1% - -------------------------------------------------------------------------------- Property Trust of America, United States 2.1% - -------------------------------------------------------------------------------- Security Capital Industrial Trust, United States 2.0% - -------------------------------------------------------------------------------- Canlan Investment Corp., Canada 2.0% - -------------------------------------------------------------------------------- McArthur/Glen Realty Corp., United States 2.0% - -------------------------------------------------------------------------------- Weeks Corp., United States 1.8% - -------------------------------------------------------------------------------- Wessel & Vett AS, C, Denmark 1.8% - --------------------------------------------------------------------------------
3 We continue to search for investment opportunities throughout Asia in general because of the prospects of continued strong economic growth in that region. Also, we're confident that the low level of home ownership in many Asian countries is likely to create new opportunities for those with the patience and diligence to search for them. At the end of this reporting period, Asian securities made up 11.9% of the Fund's total net assets. Of course, international investments carry special risks, and the Fund's share price and returns will fluctuate with market conditions, currency volatility, and the economic, and political climates where investments are made. Because the fund focuses on the real estate industry, the price may be more volatile than those of more broadly diversified investments. Moreover, there are additional risks associated with investments in developing markets, due to the relatively small size of the markets and the lesser liquidity of their securities. Keep in mind that, while short-term volatility can be disconcerting, declines of as much as 40% to 50% are not unusual in emerging markets. For example, the Hong Kong market has increased 1000% in the last 15 years, but has suffered nine declines of more than 20% during that time. These special risks and other considerations are discussed in the Fund's prospectus. The U.S. Market: a closer look We remain optimistic about the U.S. real estate market, which is reflected in the Fund's composition: 39 of the 85 companies represented are domiciled in the United States. The U.S. remains the single largest country weighting in the Fund, and that weighting increased from 39.7% of total net assets on August 31, 1994 to 54.1% on February 28, 1995. Our confidence in the near-term future of U.S. real estate is based on rising occupancy and rental rates, and on excellent property values in selected domestic markets. Research by Jones Lang Wootton, worldwide real estate specialists, confirms that office prices in several U.S. cities currently are among the most attractive in the world. As we search for new investment opportunities in the United States, we will continue to focus on REITs, which comprised 54% of the Fund's U.S. assets at the end of this period. Despite their disappointing performance in 1994, we believe REITs remain a good value over the longer 4 term primarily because they offer important benefits that are not always associated with direct investments in real estate: liquidity, instantaneous pricing and experienced management. One of the more attractive investments in the U.S., but not classified as a REIT, is Rouse Company, the Maryland based owner of primarily retail shopping malls. Rouse also has industrial holdings as well as extensive land holdings in Columbia, Maryland, a fast growing suburb in the Baltimore/Washington corridor. The company is significantly undervalued relative to its underlying asset value. Moreover, operating results should improve substantially because of cost reduction and more centralized corporate overhead responsibilities. Our Commitment to Shareholders Most importantly, we thank you for your support, and we aim to deserve your continued support in the future. As we look to the future, we are excited because global real estate investing is only in its nascent stages. Potential opportunities abound. Our goal, delivering superior, longer-term results to shareholders of the Templeton Real Estate Securities Fund, remains intact, along with our intrinsic philosophy of searching for the most undervalued securities anywhere in the world. Toward that end, Templeton's global research analysts remain committed to providing you only the highest caliber research, analysis and portfolio management. Sincerely, /s/ Mark Holowesko Mark Holowesko President /s/ Jeffrey A. Everett Jeffrey A. Everett Portfolio Manager 5 Performance Summary The Templeton Real Estate Securities Fund reported a total return of -8.88% for the six-month period ended February 28, 1995. Total return measures the change in value of an investment, assuming reinvestment of dividends and capital gains distributions, and does not include the maximum initial sales charge. Of course, we have always maintained a long-term perspective when managing the Fund, and we encourage shareholders to view their investments in a similar manner. As you can see from the chart to the right, the Fund has delivered a cumulative total return of more than 46% between its inception on September 12, 1989 and February 28, 1995. During the reporting period, the Fund's share price, as measured by net asset value, decreased from $13.66 on August 31, 1994 to $12.24 on February 28, 1995. During this time, shareholders received 21.5 cents ($0.215) in dividend income. Of course, past performance is not predictive of future results, and distributions will vary depending on income earned by the Fund, as well as any profits realized from the sale of securities in the portfolio. There are special risks associated with investments in real estate securities, including declines in the value of real estate. Foreign investing involves the additional risks of currency fluctuations and political uncertainty. These special risks and other considerations are discussed in the Fund's prospectus. - -------------------------------------------------------------------------------- TEMPLETON REAL ESTATE SECURITIES FUND Periods Ended 2/28/95
Since Inception One-Year Three-Year (9/12/89) Average Annual -17.13% 4.85% 6.08% Total Return/3/ Cumulative -12.10% 22.24% 46.50% Total Return/4/
3. Average annual total return represents the average annual change in value of an investment over the indicated periods, assuming reinvestment of dividends and capital gains, and includes the maximum 5.75% initial sales charge. 4. Cumulative total return represents the change in value of an investment over the specified periods, assuming reinvestment of dividends and capital gains. It does not include the maximum 5.75% initial sales charge. Prior to July 1, 1992, Fund shares were offered at a higher sales charge. Thus, actual total return to purchasers of shares during that period would have been somewhat lower than noted above. Investment return and principal value will fluctuate so that your shares, when redeemed, may be worth more or less than their initial cost. Past performance is not predictive of future results. 6 Templeton Real Estate Securities Fund Financial Highlights - -------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (For a share outstanding throughout the period)
SIX MONTHS ENDED YEAR ENDED AUGUST 31 FEBRUARY 28, 1995 ---------------------------------------------- (UNAUDITED) 1994 1993 1992 1991 1990+ ----------------- -------- ------- ------- ------- --------- Net asset value, begin- ning of period $ 13.66 $ 12.66 $ 10.40 $ 10.08 $ 8.88 $ 10.00 -------- -------- ------- ------- ------- --------- Income from investment operations: Net investment income .15 .22 .25 .37 .53 .29 Net realized and unrealized gain (loss) (1.35) 1.00 2.36 .43 1.13 (1.33) -------- -------- ------- ------- ------- --------- Total from investment operations (1.20) 1.22 2.61 .80 1.66 (1.04) -------- -------- ------- ------- ------- --------- Distributions: Dividends from net in- vestment income (.22) (.22) (.35) (.48) (.37) (.08) Distributions from net realized gains -- -- -- -- (.09) -- -------- -------- ------- ------- ------- --------- Total distributions (.22) (.22) (.35) (.48) (.46) (.08) -------- -------- ------- ------- ------- --------- Change in net asset value (1.42) 1.00 2.26 .32 1.20 (1.12) -------- -------- ------- ------- ------- --------- Net asset value, end of period $ 12.24 $ 13.66 $ 12.66 $ 10.40 $ 10.08 $ 8.88 ======== ======== ======= ======= ======= ========= TOTAL RETURN * (8.88)% 9.69% 25.94% 8.29% 20.06% (10.48)% RATIOS/SUPPLEMENTAL DATA Net assets, end of pe- riod (000) $125,501 $131,544 $61,820 $36,955 $32,830 $ 10,065 Ratio of expenses to av- erage net assets 1.60%** 1.58% 1.68% 1.69% 1.98% 2.77%** Ratio of expenses, net of reimbursement, to average net assets 1.60%** 1.58% 1.68% 1.69% 1.25% 1.25%** Ratio of net investment income to average net assets 2.48%** 1.97% 2.60% 3.64% 5.48% 3.59%** Portfolio turnover rate 9.67% 32.34% 19.74% 32.35% 25.24% 9.54%
+PERIOD FROM SEPTEMBER 12, 1989 (COMMENCEMENT OF OPERATIONS) TO AUGUST 31, 1990. *TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT ANNUALIZED IN PERIODS OF LESS THAN ONE YEAR. **ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. 7 Templeton Real Estate Securities Fund Investment Portfolio, February 28, 1995 (unaudited) - --------------------------------------------------------------------------------
INDUSTRY ISSUE COUNTRY SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS: 73.6% - ------------------------------------------------------------------------------- Banking: 5.9% Banque Nationale de Paris Fr. 20,000 $ 887,199 Canadian Imperial Bank of Commerce Can. 40,000 975,995 *Foereningsbanken AB, A Swe. 350,000 606,573 HSBC Holdings PLC H.K. 150,000 1,576,344 Industrial Finance Corp. of Thailand, fgn. Thai. 700,000 1,473,536 Royal Bank of Canada Can. 40,000 825,290 TR Financial Corp. U.S. 65,000 1,040,000 ------------ 7,384,937 - ------------------------------------------------------------------------------- Building Materials & Components: 2.8% BPB Industries PLC U.K. 120,000 558,749 Byucksan Development Co. Ltd. Kor. 66,360 1,134,503 Pioneer International Ltd. Aus. 563,325 1,355,936 Unicem Unione Cementi Marchino Emiliane Itl. 20,000 134,697 Unicem Unione Cementi Marchino Emiliane, di Risp Itl. 99,700 318,478 ------------ 3,502,363 - ------------------------------------------------------------------------------- Construction & Housing: 7.5% *Atlantic Gulf Communities Corp. U.S. 53,100 477,900 Empresas ICA Sociedad Controladora SA, ADR Mex. 85,000 467,500 Engle Homes U.S. 147,500 1,216,875 Kaufman & Broad Home Corp. U.S. 150,000 2,193,750 Raine PLC U.K. 630,000 478,928 *Schuler Homes Inc. U.S. 80,000 830,000 Sirti SPA Itl. 180,000 1,216,377 *Sundance Homes Inc. U.S. 335,000 1,151,563 *U.S. Home Corp. U.S. 75,000 1,368,750 ------------ 9,401,643 - ------------------------------------------------------------------------------- Energy Sources: 2.1% Mobil Corp. U.S. 22,000 1,914,000 Societe Elf Aquitane SA Fr. 10,000 718,144 ------------ 2,632,144 - ------------------------------------------------------------------------------- Financial Services: 1.5% Federal National Mortgage Assn. U.S. 17,000 1,311,125 India Fund, B Ind. 300,000 639,046 ------------ 1,950,171 - -------------------------------------------------------------------------------
8 Templeton Real Estate Securities Fund Investment Portfolio, February 28, 1995 (unaudited) (cont.) - --------------------------------------------------------------------------------
INDUSTRY ISSUE COUNTRY SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS (CONT.) - ------------------------------------------------------------------------------- Forest Products & Paper: 7.5% *Assidomaen AB Swe. 47,000 $ 1,061,469 Georgia-Pacific Corp. U.S. 20,000 1,497,500 Mayr-Melnhof Karton AG Aus. 25,000 1,633,733 Primex Forest Products Ltd. Can. 134,900 980,202 PT Barito Pacific Timber, fgn. Indo. 971,500 1,380,656 Saint Joe Paper Co. U.S. 20,000 1,195,000 Weyerhaeuser Co. U.S. 40,000 1,630,000 ------------ 9,378,560 - ------------------------------------------------------------------------------- Leisure & Tourism: 1.0% Grand Hotel Holdings Ltd. H.K. 2,469,000 830,292 Oriental Hotel Public Co. Ltd., fgn. Thai. 173,200 494,808 *Queens Moat Houses PLC U.K. 350,000 0 ------------ 1,325,100 - ------------------------------------------------------------------------------- Merchandising: 1.8% Wessel & Vett AS, C Den. 36,000 2,204,760 - ------------------------------------------------------------------------------- Metals & Mining: 0.6% Maanshan Iron & Steel Co. Ltd., H Chn. 3,520,000 705,685 - ------------------------------------------------------------------------------- Multi-Industry: 0.1% Swire Pacific Ltd., A H.K. 25,000 175,419 - ------------------------------------------------------------------------------- Real Estate: 41.0% +American Health Properties Inc. U.S. 64,300 1,398,525 Bail Investissement Fr. 8,700 1,387,657 *++Canlan Investment Corp. Can. 542,200 2,480,552 *Catellus Development Corp. U.S. 290,000 1,595,000 +CBL & Associates Properties Inc. U.S. 70,000 1,426,250 +Charles E. Smith Residential Realty Inc. U.S. 40,000 915,000 Credit Foncier de France SA Fr. 5,668 738,271 +Federal Realty Investment Trust U.S. 33,000 697,125 +General Growth Properties U.S. 54,000 1,120,500 Hang Lung Development Co. Ltd. H.K. 485,000 718,263 +Health Care Property Investors Inc. U.S. 30,000 900,000 Home Properties Management Inc. U.S. 50,000 937,500 +IRT Property Co. U.S. 94,200 942,000 +LTC Properties Inc. U.S. 226,000 2,881,500 +McArthur/Glen Realty Corp. U.S. 168,000 2,457,000 +Meditrust Inc. U.S. 40,400 1,292,800 +Merry Land & Investment Co. Inc. U.S. 65,000 1,340,625 +National Health Investors Inc. U.S. 17,000 425,000
9 Templeton Real Estate Securities Fund Investment Portfolio, February 28, 1995 (unaudited) (cont.) - --------------------------------------------------------------------------------
INDUSTRY ISSUE COUNTRY SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS (CONT.) - ------------------------------------------------------------------------------- Real Estate (cont.) +Nationwide Health Properties Inc. U.S. 46,000 $ 1,656,000 New World Development Co. Ltd. H.K. 304,658 831,441 *Newhall Investment Properties U.S. 20,300 0 Omega Healthcare Investors U.S. 57,163 1,379,057 Parkway Holdings Ltd. Sing. 418,000 934,658 *++Patten Corp. U.S. 1,082,038 3,516,624 +Pennsylvania Real Estate Investment Trust U.S. 34,000 722,500 +Property Trust of America U.S. 154,350 2,585,363 *Property Trust, rts. U.S. 154,350 29,836 PT Jaya Properties, fgn. Indo. 250,000 631,626 Revenue Property Ltd. Can. 150,000 296,028 Rouse Co. U.S. 156,300 3,086,925 Ryoden Development Ltd. H.K. 3,650,000 651,491 +Security Capital Industrial Trust U.S. 149,222 2,499,469 +Southwestern Property Trust Inc. U.S. 100,000 1,212,500 Sun Hung Kai Properties Ltd. H.K. 280,000 1,883,205 Taylor Woodrow PLC U.K. 656,177 1,236,678 *Union Valley Corp. U.S. 1,255 79 Weeks Corp. U.S. 100,000 2,212,500 +Weingarten Realty Investors U.S. 31,100 1,127,375 Westfield Trust Units Aus. 735,000 1,259,036 *Westfield Trust Units, new Aus. 19,285 10,252 ------------ 51,416,211 - ------------------------------------------------------------------------------- Telecommunications: 0.4% *Telecomunicacoes Brasileiras SA, ADR Braz. 490 14,363 Telefonos de Mexico SA, L, ADR Mex. 20,000 552,500 ------------ 566,863 - ------------------------------------------------------------------------------- Transportation: 1.4% Florida East Coast Industries Inc. U.S. 11,000 848,375 Peninsular & Oriental Steam Navigation Co. U.K. 100,000 893,239 ------------ 1,741,614 ------------ TOTAL COMMON STOCKS (cost $95,147,838) 92,385,470 - ------------------------------------------------------------------------------- PREFERRED STOCKS: 2.1% - ------------------------------------------------------------------------------- *Baumax AG, pfd. Aus. 25,000 1,068,117 Bowater Inc., B, conv., pfd. U.S. 15,917 455,624 *Nacional Financiera SA, conv., 5/15/98 Mex. 15,700 455,300 Telebras-Telecomunicacoes Brasileiras SA, ADR Braz. 21,500 627,531 ------------ TOTAL PREFERRED STOCKS (cost $1,947,804) 2,606,572 - -------------------------------------------------------------------------------
10 Templeton Real Estate Securities Fund Investment Portfolio, February 28, 1995 (unaudited) (cont.) - --------------------------------------------------------------------------------
PRINCIPAL IN INDUSTRY ISSUE COUNTRY LOCAL CURRENCY** VALUE - --------------------------------------------------------------------------------- BONDS: 15.9% - --------------------------------------------------------------------------------- ARBED SA, 2.50%, conv., 7/15/03 Ger. 2,570,000 $ 1,728,620 Empresas ICA Sociedad Controladora SA, 5.00%, conv., 3/15/04 U.S. 3,500,000 1,085,000 Industrial Credit & Investment Corp. of India, 2.50%, conv., 4/03/00 U.S. 1,200,000 909,000 National Power PLC, 6.25%, 9/23/08 U.K. 833,000 1,454,495 Revenue Properties Ltd., 6.00%, conv., 3/01/04 U.S. 2,800,000 2,324,000 +Southwest Property Trust Inc., 8.00%, conv., 1/15/03 U.S. 250,000 309,375 U.S. Treasury Note, 7.875%, 2/15/96 U.S. 12,000,000 12,151,920 ------------ TOTAL BONDS (cost $23,519,491) 19,962,410 - --------------------------------------------------------------------------------- SHORT TERM OBLIGATIONS: 9.7% (cost $12,208,632) - --------------------------------------------------------------------------------- U.S. Treasury Bills, 5.18% to 5.65% with maturities to 4/20/95 U.S. 12,244,000 12,210,740 - --------------------------------------------------------------------------------- TOTAL INVESTMENTS: 101.3% (cost $132,823,765) 127,165,192 OTHER ASSETS, LESS LIABILITIES: (1.3)% (1,664,501) ------------ TOTAL NET ASSETS: 100.0% $125,500,691 ============
*NON-INCOME PRODUCING. **CURRENCY OF COUNTRY INDICATED. +REAL ESTATE INVESTMENT TRUST (20.6% OF TOTAL NET ASSETS). ++SEE NOTE 5. SEE NOTES TO FINANCIAL STATEMENTS. 11 Templeton Real Estate Securities Fund Financial Statements - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES February 28, 1995 (unaudited) Assets: Investments in securities, at value (identified cost $132,823,765) $127,165,192 Receivables: Fund shares sold 467,027 Dividends and interest 736,935 ------------ Total assets 128,369,154 ------------ Liabilities: Payables: Investment securities purchased 2,354,839 Fund shares redeemed 237,082 Accrued expenses 276,542 ------------ Total liabilities 2,868,463 ------------ Net assets, at value $125,500,691 ============ Net assets consists of: Undistributed net investment income $ 865,879 Net unrealized depreciation (5,658,573) Accumulated net realized loss (1,610,057) Net capital paid in on shares of beneficial interest 131,903,442 ------------ Net assets, at value $125,500,691 ============ Shares outstanding 10,256,124 ============ Net asset value per share ($125,500,691 / 10,256,124) $ 12.24 ============ Maximum offering price ($12.24 / 94.25%) $ 12.99 ============
STATEMENT OF OPERATIONS for the six months ended February 28, 1995 (unaudited) Investment income: (net of $30,871 foreign taxes withheld) Dividends $ 1,691,173 Interest 936,947 ------------ Total income $ 2,628,120 Expenses: Management fees (Note 3) 482,622 Administrative fees (Note 3) 96,523 Distribution fees (Note 3) 162,145 Transfer agent fees (Note 3) 102,500 Custodian fees 58,000 Reports to shareholders 66,444 Audit fees 9,500 Legal fees 3,500 Registration and filing fees 37,000 Trustees' fees and expenses 12,000 Other 1,561 ------------ Total expenses 1,031,795 ------------ Net investment income 1,596,325 Realized and unrealized gain (loss): Net realized gain (loss) on: Investments 1,213,015 Foreign currency transactions (57,030) ------------ 1,155,985 Net unrealized depreciation on investments (15,013,345) ------------ Net realized and unrealized loss (13,857,360) ------------ Net decrease in net assets resulting from operations $(12,261,035) ============
SEE NOTES TO FINANCIAL STATEMENTS. 12 Templeton Real Estate Securities Fund Financial Statements (cont.) - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED FEBRUARY 28, 1995 YEAR ENDED (UNAUDITED) AUGUST 31, 1994 ----------------- --------------- Increase (decrease) in net assets: Operations: Net investment income $ 1,596,325 $ 1,928,443 Net realized gain from security and foreign currency transactions 1,155,985 2,178,205 Net unrealized appreciation (depreciation) (15,013,345) 2,206,703 ------------ ------------ Net increase (decrease) in assets from op- erations (12,261,035) 6,313,351 Distributions to shareholders from net investment income (2,181,358) (1,220,841) Fund share transactions (Note 2) 8,399,360 64,630,790 ------------ ------------ Net increase (decrease) in net assets (6,043,033) 69,723,300 Net assets: Beginning of period 131,543,724 61,820,424 ------------ ------------ End of period $125,500,691 $131,543,724 ============ ============
SEE NOTES TO FINANCIAL STATEMENTS. 13 Templeton Real Estate Securities Fund Notes to Financial Statements (unaudited) - -------------------------------------------------------------------------------- 1. SUMMARY OF ACCOUNTING POLICIES Templeton Real Estate Securities Fund (the Fund), is a Massachusetts business trust and an open-end, diversified management investment company registered un- der the Investment Company Act of 1940. The following summarizes the Fund's significant accounting policies: A. Securities Valuations: Securities listed or traded on a recognized national or foreign stock exchange or NASDAQ are valued at the last reported sales price on the principal exchange on which the securities are traded. Over-the-counter securities and listed se- curities for which no sale is reported are valued at the mean between the last current bid and asked prices. Securities for which market quotations are not readily available are valued at fair value as determined by management and ap- proved in good faith by the Board of Trustees. B. Foreign Currency Translations: Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the rate of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign curren- cies are translated into U.S. dollar amounts on the respective dates of such transactions. When the Fund purchases or sells foreign securities it customar- ily enters into foreign exchange contracts to minimize foreign exchange risk between the trade date and the settlement date of such transactions. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Reported net realized foreign exchange gains or losses arise from sales of for- eign currencies, currency gains or losses realized between the trade and set- tlement dates on security transactions, the differences between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at the end of the fiscal period, resulting from changes in the exchange rates. C. Income Taxes: It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all its taxable income to its shareholders. Therefore, no provision has been made for federal income taxes. D. Security Transactions, Investment Income, Distributions and Expenses: Security transactions are accounted for on a trade date basis. Dividend income is recorded on the ex-dividend date. Certain dividend income on foreign securi- ties is recorded as soon as information is available to the Fund. Interest in- come and estimated expenses are accrued daily. Distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. 14 Templeton Real Estate Securities Fund Notes to Financial Statements (unaudited) (cont.) - -------------------------------------------------------------------------------- 2. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST At February 28, 1995, there were an unlimited number of shares of beneficial interest authorized ($0.01 par value). Transactions in the Fund's shares were as follows:
SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, 1995 AUGUST 31, 1994 ------------------------ ------------------------ SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ------------ Shares sold 1,695,618 $ 22,007,313 5,960,485 $ 81,011,479 Shares issued on rein- vestment of distribu- tions 145,419 1,858,466 75,358 1,001,203 Shares redeemed (1,214,950) (15,466,419) (1,289,281) (17,381,892) ---------- ------------ ---------- ------------ Net increase 626,087 $ 8,399,360 4,746,562 $ 64,630,790 ========== ============ ========== ============
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES Certain officers of the Fund are also directors or officers of Templeton, Galbraith & Hansberger Ltd. (TGH), Templeton Global Investors, Inc. (TGII), Franklin Templeton Distributors, Inc. (FTD), and Franklin Templeton Investor Services, Inc. (FTIS), the Fund's investment manager, administrative manager, principal underwriter, and transfer agent, respectively. The Fund pays monthly an investment management fee to TGH equal, on an annual basis, to 0.75% of the average daily net assets of the Fund. The fee is subject to reduction in any year to the extent that expenses (exclusive of certain expenses) of the Fund exceed 2 1/2% of the first $30 million of net assets, 2% of the next $70 mil- lion of net assets and 1 1/2% of the remainder. During the six months ended February 28, 1995, no reduction in fee was required as a result of this limita- tion. The Fund pays TGII monthly a fee of 0.15% per annum on the first $200 million of the Fund's average daily net assets, 0.135% of the next $500 mil- lion, 0.10% of the next $500 million, and 0.075% per annum of such average net assets in excess of $1.2 billion. For the six months ended February 28, 1995, FTD received net commissions of $98,376 from the sale of the Funds shares and FTIS received fees of $102,500. Pursuant to a Distribution Plan, the Fund reimburses FTD monthly (subject to a limit of 0.25% per annum of the Fund's average daily net assets) for FTD's costs and expenses in connection with any activity which is primarily intended to result in sales of Fund shares. Such distribution fees are set forth in the Statement of Operations. An officer of the Fund is a partner of Dechert Price & Rhoads, legal counsel for the Fund, which firm received fees of $3,500 for the six months ended Feb- ruary 28, 1995. 4. PURCHASES AND SALES OF SECURITIES Purchases and sales of securities (excluding short-term obligations) for the six months ended February 28, 1995 were $37,787,014 and $10,116,204, respec- tively. The cost of securities for federal income tax purposes is $133,128,692. Realized gains and losses are reported on an identified cost basis. At February 28, 1995, the aggregate gross unrealized appreciation and deprecia- tion of portfolio securities, based on cost for federal income tax purposes, was as follows: Unrealized appreciation $ 9,175,984 Unrealized depreciation (15,139,484) ------------ Net unrealized depreciation $ (5,963,500) ============
15 Templeton Real Estate Securities Fund Notes to Financial Statements (unaudited) (cont.) - -------------------------------------------------------------------------------- 5. HOLDING OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES The Investment Company Act of 1940 defines "affiliated companies" as Invest- ments in portfolio companies in which the Company owns 5% or more of the out- standing voting securities. Investments in "affiliated companies" at February 28, 1995, amounted to $5,997,176. 6. CAPITAL LOSS CARRYFORWARD At August 31, 1994, the Fund had tax basis capital losses of $5,900,000 which may be carried over to offset future capital gains. Of this amount, $3,418,000 arose from the merger with National Real Estate Fund on December 14, 1990. Such losses expire in years ending in August 31, 1995 and 2000. 16 NOTES ----- NOTES ----- The Franklin Templeton Group - -------------------------------------------------------------------------------- To receive a free brochure and prospectus, which contain more complete informa- tion, including charges and expenses on each of the funds listed below, call Franklin Fund Information, toll free, at 1-800-DIAL-BEN (1-800-342-5236) or Templeton Fund Information at 1-800-292-9293. Please read the prospectus care- fully before you invest or send money. TEMPLETON FAMILY OF FUNDS Franklin Templeton Japan Fund Templeton American Trust Templeton Americas Government Securities Fund Templeton Developing Markets Trust Templeton Foreign Fund Templeton Global Infrastructure Fund Templeton Global Opportunities Trust Templeton Global Rising Dividends Fund Templeton Growth Fund Templeton Income Fund Templeton Money Fund Templeton Real Estate Securities Fund Templeton Smaller Companies Growth Fund Templeton World Fund FRANKLIN GROUP OF FUNDS(R) FRANKLIN GLOBAL/ INTERNATIONAL FUNDS Franklin Global Health Care Fund Franklin Global Government Income Fund Franklin Global Utilities Fund Franklin International Equity Fund Franklin Pacific Growth Fund FUNDS SEEKING CAPITAL GROWTH Franklin California Growth Fund Franklin DynaTech Fund Franklin Equity Fund Franklin Gold Fund Franklin Growth Fund Franklin Rising Dividends Fund Franklin Small Cap Growth Fund FUNDS SEEKING GROWTH AND INCOME Franklin Balance Sheet Investment Fund Franklin Convertible Securities Fund Franklin Income Fund Franklin Equity Income Fund Franklin Utilities Fund FUNDS SEEKING HIGH CURRENT INCOME Franklin's AGE High Income Fund Franklin Investment Grade Income Fund Franklin Premier Return Fund Franklin U.S. Government Securities Fund FUNDS SEEKING TAX-FREE INCOME Franklin Federal Tax-Free Income Fund Franklin High Yield Tax-Free Income Fund Franklin California High Yield Municipal Fund Franklin Alabama Tax-Free Income Fund Franklin Arizona Tax-Free Income Fund Franklin California Tax-Free Income Fund Franklin Colorado Tax-Free Income Fund Franklin Connecticut Tax-Free Income Fund Franklin Florida Tax-Free Income Fund Franklin Georgia Tax-Free Income Fund Franklin Hawaii Municipal Bond Fund Franklin Indiana Tax-Free Income Fund Franklin Kentucky Tax-Free Income Fund Franklin Louisiana Tax- Free Income Fund Franklin Maryland Tax- Free Income Fund Franklin Missouri Tax-Free Income Fund Franklin New Jersey Tax- Free Income Fund Franklin New York Tax- Free Income Fund Franklin North Carolina Tax-Free Income Fund Franklin Oregon Tax-Free Income Fund Franklin Pennsylvania Tax- Free Income Fund Franklin Puerto Rico Tax- Free Income Fund Franklin Texas Tax-Free Income Fund Franklin Virginia Tax-Free Income Fund Franklin Washington Municipal Bond Fund FUNDS SEEKING TAX-FREE INCOME THROUGH INSURED PORTFOLIOS Franklin Insured Tax-Free Income Fund Franklin Arizona Insured Tax-Free Income Fund Franklin California Insured Tax-Free Income Fund Franklin Florida Insured Tax-Free Income Fund Franklin Massachusetts Insured Tax-Free Income Fund Franklin Michigan Insured Tax-Free Income Fund Franklin Minnesota Insured Tax-Free Income Fund Franklin New York Insured Tax-Free Income Fund Franklin Ohio Insured Tax- Free Income Fund FUNDS SEEKING HIGH CURRENT INCOME AND STABILITY OF PRINCIPAL Franklin Adjustable Rate Securities Fund Franklin Adjustable U.S. Government Securities Fund Franklin Short- Intermediate U.S. Government Securities Fund FUND SEEKING HIGH AFTER-TAX INCOME FOR CORPORATIONS Franklin Corporate Qualified Dividend Fund MONEY MARKET FUNDS SEEKING SAFETY OF PRINCIPAL AND INCOME Franklin Money Fund Franklin Federal Money Fund Franklin Tax-Exempt Money Fund Franklin California Tax- Exempt Money Fund Franklin New York Tax- Exempt Money Fund IFT Franklin U.S. Treasury Money Market Portfolio FUNDS FOR NON-U.S. INVESTORS FRANKLIN PARTNERS FUNDS(R) Franklin Tax-Advantaged High Yield Securities Fund Franklin Tax-Advantaged International Bond Fund Franklin Tax-Advantaged U.S. Government Securities Fund TEMPLETON REAL ESTATE SECURITIES FUND PRINCIPAL UNDERWRITER: Franklin Templeton Distributors, Inc. 700 Central Avenue St. Petersburg, Florida 33701-3628 Account Services 1-800-354-9191 Sales Information 1-800-292-9293 This report must be preceded or accompanied by the prospectus of Templeton Real Estate Securities Fund. Like any investment in securities, the value of the Fund's portfolio will be subject to the risk of loss from market, currency, economic, political and other factors, as well as investment decisions by the investment manager which will not always be profitable or wise. The Fund and its investors are not protected from such losses by the investment manager. Therefore, investors who cannot accept this risk should not invest in shares of the Fund. To ensure the highest quality of service, telephone calls to or from our service departments may be monitored, recorded and accessed. These calls can be determined bythe presence of a regular beeping tone. TL10 S95 04/95 [RECYCLING LOGO APPEARS HERE] TEMPLETON REAL ESTATE SECURITIES FUND Semi-Annual Report February 28, 1995 [LOGO OF FRANKLIN TEMPLETON APPEARS HERE] -----END PRIVACY-ENHANCED MESSAGE-----