<PAGE>
FRANKLIN TEMPLETON
JAPAN FUND
- --------------------------------------------------------------------------------
Your Fund's Objective
The Franklin Templeton Japan Fund seeks long-term capital growth by investing
primarily in securities of companies domiciled in Japan and traded in Japanese
securities markets.
- --------------------------------------------------------------------------------
May 15, 1995
Dear Shareholder:
We are pleased to bring you the first annual report of the Franklin Templeton
Japan Fund, which covers the period from the Fund's inception on July 28,
1994, through March 31, 1995. Although this period proved to be quite
challenging for Japanese equities, the Fund significantly outperformed the
Nikkei 225 Index. The index reported a total return of -13.6%, while the
Fund, as shown in the Performance Summary on page 4, delivered a total return
of -0.19%.
In contrast to Wall Street's record-breaking gains, the Japanese stock market
slumped throughout this period, as Japan struggled to overcome a succession of
adverse events. The best-known was the devastating January 1995 earthquake in
Kobe, which negatively affected Japan's economy over the short term. The second
was the resurgence of the yen to post-war highs against the U.S. dollar, which
threatened to deal a serious blow to the earnings of Japanese exporters. Third,
opposition to the government's multi-billion yen plan to bail out two credit
cooperatives highlighted once again the seriousness of many Japanese financial
institutions' bad-debt problems. Finally, Barings PLC, one of Britain's most
respected merchant banks, collapsed on February 26 due to massive losses in
Nikkei futures trading. Due to the above factors, on March 22, the Nikkei Index
closed below 16,000 for the first time since August 1992. Additionally, a recent
report indicated that many Japanese life insurance companies, whose powerful
pool of money usually supports the stock market, have threatened to cease
investing until the Japanese government takes greater strides toward propelling
a questionable economy.
These events have caused some investors to lose confidence in investment
strategies based on the recovery of Japanese corporate earnings. Others are
concerned about
1
<PAGE>
the medium-term prospects for the Japanese economy and stock market, pointing
out drawbacks to Japanese management styles and possible declines in price to
earnings (P/E) ratios. However, there are clear signs that investment conditions
may be improving. For example, Japanese automobile sales rose 14% for the year
ended February 28, 1995, which indicates that consumption is still strong
despite the earthquake. Also, many Japanese business executives are pressing
ahead with significant cost-cutting programs even though there are signs of an
impending earnings recovery. This should translate into potential improvements
in corporate profitability over the medium term.
When choosing securities for the Fund's portfolio, we follow a value-oriented
investment strategy that focuses on P/E ratios, and have been investing
slowly and cautiously as we seek to take advantage of weakness in the market.
As a result of this strategy, on March 31, 1995, 57.5% of the Fund's total
net assets were invested in equities, and
- --------------------------------------------------------------------------------
FRANKLIN TEMPLETON JAPAN FUND
Portfolio Breakdown on 3/31/95
Based on Total Net Assets
[PIE CHART APPEARS HERE SHOWING
PORTFOLIO BREAKDOWN OF THE FUND]
<TABLE>
<CAPTION>
Description Amount
---------------- ------
<S> <C>
Chemicals 2.2%
Forest Products & Paper 2.1%
Consumer Goods 7.2%
Transportation 7.4%
Capital Equipment 21.8%
Finance 7.7%
Multi-Industry 2.6%
Other 6.5%
Short-Term Obligations &
Other Net Assets 42.5%
</TABLE>
the remaining 42.5% in short-term obligations and other assets. Recent stock
purchases include Sony Corp., a major manufacturer of electronic components;
Daicel Chemical Industries Ltd., a bulk chemical producer; and Daiei Inc., a
discount retailer in the Kanto area.
2
<PAGE>
Looking forward, we believe the climate for value investing in Japan is
encouraging. Economic growth appears to be gaining momentum, which could
continue into 1997 and result in rising corporate profits and a stronger
stock market. Although we cannot predict what the future holds for the
Japanese government or the currency markets, we intend to continue focusing
on long-term value, regardless of short-term fluctuations. Of course, there
are special risks involved with investing in a single foreign country,
including increased susceptibility to currency fluctuations, market
volatility, and economic, social, and political uncertainty. These risks are
further discussed in the Fund's prospectus.
We appreciate your continued support and welcome any comments or suggestions
you may have.
Sincerely,
/s/ William T. Howard, Jr.
William T. Howard, Jr., CFA
Portfolio Manager
Franklin Templeton Japan Fund
- --------------------------------------------------------------------------------
FRANKLIN TEMPLETON
JAPAN FUND
<TABLE>
<CAPTION>
Top 10 Holdings on 3/31/95
Based on Total Net Assets
% of Total
Company, Industry Net Assets
- --------------------------------------------------------------------------------
<S> <C>
Chudenko Corp., Industrial Components 2.9%
- --------------------------------------------------------------------------------
Fuji Heavy Industries Ltd., Industrial
Components 2.9%
- --------------------------------------------------------------------------------
National House Industrial Co. Ltd.,
Construction & Housing 2.7%
- --------------------------------------------------------------------------------
Shinko Electric Industries Co. Ltd.,
Industrial Components 2.6%
- --------------------------------------------------------------------------------
Mitsubishi Oil Co. Ltd., Multi-Industry 2.6%
- --------------------------------------------------------------------------------
Maeda Corp., Construction & Housing 2.4%
- --------------------------------------------------------------------------------
Tokio Marine & Fire Insurance Co. Ltd.,
Insurance 2.4%
- --------------------------------------------------------------------------------
Daicel Chemical Industries Ltd., Chemicals 2.3%
- --------------------------------------------------------------------------------
Iino Kaiun Kaisha Ltd., Transportation 2.2%
- --------------------------------------------------------------------------------
Tokyo Style Co. Ltd., Textiles & Apparel 2.2%
- --------------------------------------------------------------------------------
</TABLE>
For a complete list of portfolio holdings, please see page 6 of this report.
- --------------------------------------------------------------------------------
Although Sir John Templeton has not been involved in investment management of
the Templeton funds since October 1992, we were saddened by his recent decision
to step down as Chairman and Director of the U.S. registered Templeton funds.
The independent directors have nominated John Wm. Galbraith, former vice
chairman of Templeton, Galbraith & Hansberger, Ltd. to succeed him. The
investment manager will continue to use the investment philosophies and
principles established by Sir John.
- --------------------------------------------------------------------------------
3
<PAGE>
PERFORMANCE SUMMARY
The Franklin Templeton Japan Fund reported a total return of -0.19% for the
period from its inception on July 28, 1994, through March 31, 1995. Total return
measures the change in value of an investment, assuming reinvestment of
dividends, and does not include the maximum initial sales charge.
During the reporting period, shareholders received 5 cents ($0.05) per share in
dividend income. The Fund's share price, as measured by net asset value,
decreased from $10.00 on July 28, 1994 to $9.93 on March 31, 1995. Of course,
past performance is not indicative of future results, and distributions will
vary depending on income earned by the Fund.
The graph to the right compares the Fund's performance since inception, with the
performance of the unmanaged Nikkei 225 Index. Please remember that the Fund's
performance differs from that of the index because the index does not contain
cash (the Fund generally carries a certain percentage of cash at any given time)
and includes no sales charges or management expenses. Of course, one cannot
invest directly in an index.
- --------------------------------------------------------------------------------
FRANKLIN TEMPLETON JAPAN FUND
Total Return Index Comparison
$10,000 Investment (7/28/94-3/31/95)
[GRAPH APPEARS HERE SHOWING COMPARSION BETWEEN FRANKLIN TEMPLETON JAPAN FUND AND
NIKKEI 225 INDEX]
<TABLE>
<CAPTION>
7/94 3/95
<S> <C> <C>
Franklin Templeton Japan Fund* $ 9,500 $9,407
Nikkei 225 Index $10,000 $9,100
</TABLE>
*Includes all sales charges and represents the change in value of an
investment over the period shown. Total return assumes reinvestment of dividends
and capital gains. Past performance is not indicative of future results.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FRANKLIN TEMPLETON JAPAN FUND
Period ended 3/31/95
<TABLE>
<CAPTION>
Since
Inception
(07/28/94)
<S> <C>
Cumulative Total
Return* -0.19%
Aggregate Total
Return** -5.93%
</TABLE>
*Cumulative total return represents the change in value of an investment over
the specified periods. It does not include the maximum 5.75% initial sales
charge.
**Aggregate total return represents the change in value of an investment over
the specified periods. It includes the maximum 5.75% initial sales charge. Since
the Fund has been in existence for less than one year, average annual total
returns are not provided.
All total return calculations assume reinvestment of dividends. Past expense
limitations increased the Fund's total returns. Investment return and principal
value will fluctuate with market conditions, currencies, and Japan's economic
and political climate, so that your shares, when redeemed, may be worth more or
less than their initial cost. Past performance is not indicative of future
results.
- --------------------------------------------------------------------------------
4
<PAGE>
Franklin Templeton Japan Fund
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
JULY 28, 1994
(COMMENCEMENT
OF OPERATIONS) TO
MARCH 31, 1995
-----------------
<S> <C>
Net asset value, beginning of period $ 10.00
--------
Income from investment operations:
Net investment income .10
Net realized and unrealized loss (.12)
--------
Total from investment operations (.02)
Distributions to shareholders from net investment income (.05)
--------
Change in net asset value (.07)
--------
Net asset value, end of period $ 9.93
========
TOTAL RETURN * (0.19)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 1,444
Ratio of expenses to average net assets 12.05%**
Ratio of expenses, net of reimbursement, to average net
assets 1.25%**
Ratio of net investment income to average net assets 1.92%**
</TABLE>
*TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT ANNUALIZED.
**ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
Franklin Templeton Japan Fund
Investment Portfolio, March 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMON STOCKS: 57.5%
- ----------------------------------------------------------------------------
Appliances & Household Durables: 2.1%
Sony Corp. Jpn. 600 $ 30,069
- ----------------------------------------------------------------------------
Banking: 3.5%
Akita Bank Ltd. Jpn. 3,150 25,004
Hachijuni Bank Ltd. Jpn. 2,000 24,885
----------
49,889
- ----------------------------------------------------------------------------
Chemicals: 2.2%
Daicel Chemical Industries Ltd. Jpn. 6,000 32,488
- ----------------------------------------------------------------------------
Construction & Housing: 7.2%
Maeda Corp. Jpn. 3,000 34,251
National House Industrial Co. Ltd. Jpn. 2,000 39,171
Toda Corp. Jpn. 3,000 30,726
----------
104,148
- ----------------------------------------------------------------------------
Electrical & Electronics: 1.4%
Hitachi Ltd. Jpn. 2,000 20,737
- ----------------------------------------------------------------------------
Financial Services: 1.8%
Yamaichi Securities Co. Ltd. Jpn. 4,000 26,498
- ----------------------------------------------------------------------------
Forest Products & Paper: 2.1%
Rengo Co. Ltd. Jpn. 4,000 30,230
- ----------------------------------------------------------------------------
Industrial Components: 13.2%
Chudenko Corp. Jpn. 1,050 41,734
*Fuji Heavy Industries Ltd. Jpn. 10,000 41,475
Mitsubishi Heavy Industries Ltd. Jpn. 4,000 28,710
Sanyo Electric Co. Ltd. Jpn. 4,000 23,041
Shinko Electric Industries Co. Ltd. Jpn. 2,000 38,249
Toyo Engineering Corp. Jpn. 3,000 17,834
----------
191,043
- ----------------------------------------------------------------------------
Insurance: 2.4%
Tokio Marine & Fire Insurance Co. Ltd. Jpn. 3,000 34,044
- ----------------------------------------------------------------------------
Merchandising: 1.7%
Daiei Inc. Jpn. 2,000 23,963
- ----------------------------------------------------------------------------
Metals & Mining: 1.3%
Nittetsu Mining Co. Ltd. Jpn. 2,000 19,401
- ----------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Franklin Templeton Japan Fund
Investment Portfolio, March 31, 1995 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- ---------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMON STOCKS (CONT.)
- ---------------------------------------------------------------------------
Multi-Industry: 2.6%
Mitsubishi Oil Co. Ltd. Jpn. 4,000 $ 36,866
- ---------------------------------------------------------------------------
Recreation, Other Consumer Goods: 1.6%
Nintendo Co. Ltd. Jpn. 400 23,733
- ---------------------------------------------------------------------------
Telecommunications: 1.8%
Nippon Telegraph & Telephone
Corp. Jpn. 3 25,853
- ---------------------------------------------------------------------------
Textiles & Apparel: 3.5%
Nisshinbo Industries Inc. Jpn. 2,000 18,387
Tokyo Style Co. Ltd. Jpn. 2,000 32,028
----------
50,415
- ---------------------------------------------------------------------------
Transportation: 7.4%
East Japan Railway Jpn. 5 24,482
Iino Kaiun Kaisha Ltd. Jpn. 5,000 32,373
Kyoei Tanker Co. Ltd. Jpn. 5,000 19,528
Nissin Corp. Jpn. 6,000 30,622
----------
107,005
- ---------------------------------------------------------------------------
Wholesale & International Trade: 1.7%
Mitsubishi Corp. Jpn. 2,000 24,194
----------
TOTAL COMMON STOCKS (cost $829,138) 830,576
- ---------------------------------------------------------------------------
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY
- ---------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT TERM OBLIGATIONS: 35.5% (cost
$512,315)
- ---------------------------------------------------------------------------
U.S. Treasury Bills, 5.40% to
5.68% with
maturities to 5/25/95 U.S. $515,000 512,531
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS: 93.0% (cost
$1,341,453) 1,343,107
OTHER ASSETS, LESS LIABILITIES: 7.0% 100,408
----------
TOTAL NET ASSETS: 100.0% $1,443,515
==========
</TABLE>
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
Franklin Templeton Japan Fund
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1995
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (identified cost $1,341,453) $1,343,107
Cash 4,301
Receivables:
Fund shares sold 29,403
Administrative fee reimbursement 30,742
Dividends and interest 3,156
Unamortized organization costs 99,213
----------
Total assets 1,509,922
----------
Liabilities:
Payables:
Investment securities purchased 34,786
Fund shares redeemed 9,548
Accrued expenses 22,073
----------
Total liabilities 66,407
----------
Net assets, at value $1,443,515
==========
Net assets consists of:
Undistributed net investment income $ 7,426
Net unrealized appreciation 1,654
Accumulated net realized loss (3,200)
Net capital paid in on shares of
beneficial interest 1,437,635
----------
Net assets, at value $1,443,515
==========
Shares outstanding 145,366
==========
Net asset value per share ($1,443,515 / 145,366) $ 9.93
==========
Maximum offering price
($9.93 / 94.25%) $ 10.54
==========
</TABLE>
STATEMENT OF OPERATIONS
for the period July 28, 1994
(commencement of operations) to March 31, 1995
<TABLE>
<S> <C> <C>
Investment income: (net of $651
foreign taxes withheld)
Dividends $ 3,687
Interest 16,368
--------
Total income $20,055
Expenses:
Management fees (Note 3) 4,738
Administrative fees (Note 3) 941
Distribution fees (Note 3) 2,221
Transfer agent fees (Note 3) 500
Custodian fees 1,500
Reports to shareholders 24,050
Audit fees 5,500
Legal fees 8,712
Registration and filing fees 2,600
Trustees' fees and expenses 7,500
Amortization of organization costs 17,001
Other 941
--------
Total expenses 76,204
Less expenses reimbursed (Note 3) (68,316)
--------
Total expenses less reimbursement 7,888
-------
Net investment income 12,167
Realized and unrealized loss:
Net realized loss on:
Investments (18)
Foreign currency transactions (3,182)
--------
(3,200)
Net unrealized appreciation
on investments 1,654
--------
Net realized and unrealized loss (1,546)
-------
Net increase in net assets resulting
from operations $10,621
=======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
Franklin Templeton Japan Fund
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
JULY 28, 1994
(COMMENCEMENT OF
OPERATIONS) TO
MARCH 31, 1995
----------------
<S> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 12,167
Net realized loss from security and foreign currency
transactions (3,200)
Net unrealized appreciation 1,654
----------
Net increase in net assets resulting from operations 10,621
Distributions to shareholders from net investment income (4,741)
Fund share transactions (Note 2) 937,635
----------
Net increase in net assets 943,515
Net assets:
Beginning of period 500,000
----------
End of period $1,443,515
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
Franklin Templeton Japan Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Franklin Templeton Japan Fund (the Fund) is an open-end, diversified management
investment company registered under the Investment Company Act of 1940. The
Fund was organized as a Delaware business trust on October 29, 1993 and com-
menced operations on July 28, 1994. The following summarizes the Fund's signif-
icant 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 prices on the principal ex-
change on which the securities are traded. Over-the-counter securities and
listed securities 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 approved 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 securities 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 of its
taxable income to its shareholders. Therefore, no provision has been made for
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 from foreign secu-
rities is recorded as soon as information is available to the Fund. Interest
income 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.
E. Unamortized Organization Costs:
Organization costs are being amortized on a straight line basis over a five
year period.
10
<PAGE>
Franklin Templeton Japan Fund
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
2. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
At March 31, 1995, there were an unlimited number of shares of beneficial in-
terest authorized ($0.01 par value). Transactions in the Fund's shares were as
follows:
<TABLE>
<CAPTION>
PERIOD FROM JULY 28, 1994
(COMMENCEMENT OF OPERATIONS)
TO MARCH 31, 1995
-----------------------------
SHARES AMOUNT
-----------------------------
<S> <C> <C>
Shares sold 132,082 $ 1,297,159
Shares issued on reinvestment of
distributions 296 2,875
Shares redeemed (37,012) (362,399)
------------ ---------------
Net increase 95,366 $ 937,635
============ ===============
</TABLE>
Templeton Global Investors, Inc., the Funds administrative manager, is record
owner of 50,257 shares as of March 31, 1995.
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also directors or officers of Templeton In-
vestment Counsel, Inc. (TICI), and 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 TICI equal, on an annual basis, to 0.75% of the
average daily net assets of the Fund. The Fund pays TGII monthly an administra-
tive 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 million, 0.10% of the next $500 mil-
lion, and 0.075% per annum of such average net assets in excess of $1.2 bil-
lion. TGII has voluntarily agreed to limit expenses (excluding interest, taxes
brokerage commissions and extraordinary expenses) of the Fund to an annual rate
of 1.25% of the Fund's average daily net assets. Effective April 15, 1995, TGII
has agreed to limit these expenses to 2.00% of the Fund's average daily net as-
sets. The amount of reimbursement for the period ended March 31, 1995 is set
forth in the Statement of Operations. For the period ended March 31, 1995, FTD
received net commissions of $5,220 from the sale of Fund's shares and FTIS re-
ceived fees of $500.
Pursuant to a distribution plan, the Fund reimburses FTD monthly (subject to a
limit of 0.35% per annum of the Fund's average daily net assets) for FTD's cost
and expenses in connection with any activity that is primarily intended to re-
sult 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 $8,712 for the year ended March 31,
1995.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the pe-
riod ended March 31, 1995 aggregated $829,138 and $0, respectively. The cost of
securities for federal income tax purposes is the same as that shown in the in-
vestment portfolio. Realized gains and losses are reported on an identified
cost basis.
At March 31, 1995, the aggregate gross unrealized appreciation and depreciation
of portfolio securities, based on cost for federal income taxes purposes, was
as follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 30,713
Unrealized depreciation (29,059)
--------
Net unrealized appreciation $ 1,654
========
</TABLE>
11
<PAGE>
Franklin Templeton Japan Fund
Independent Auditor's Report
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
Franklin Templeton Japan Fund
We have audited the accompanying statement of assets and liabilities, including
the investment portfolio, of Franklin Templeton Japan Fund as of March 31,
1995, and the related statement of operations, the statement of changes in net
assets and the financial highlights for the period from July 28, 1994 (com-
mencement of operations) to March 31, 1995. These financial statements and fi-
nancial highlights are the responsibility of the Fund's management. Our respon-
sibility is to express an opinion on these financial statements and financial
highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial high-
lights 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
March 31, 1995, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement pre-
sentation. We believe that our audit provides a reasonable basis for our opin-
ion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Franklin Templeton Japan Fund as of March 31, 1995, the results of its opera-
tions, the changes in its net assets and the financial highlights for the pe-
riod indicated, in conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
New York, New York
April 28, 1995
12
<PAGE>
NOTES
-----
<PAGE>
NOTES
-----
<PAGE>
The Franklin Templeton Group
- --------------------------------------------------------------------------------
Literature Request -- Call today for a free descriptive brochure and prospectus
on any of the funds listed below. The prospectus contains more complete
information, including fees, charges and expenses, and should be read carefully
before investing or sending money.
TEMPLETON Massachusetts*** German Government Bond Fund
FUNDS Michigan*** Global Government Income Fund
Minnesota*** Investment Grade Income Fund
American Trust Missouri U.S. Government Securities Fund
American Government New Jersey
Securities Fund New York* FRANKLIN FUNDS SEEKING HIGH
Developing Markets North Carolina CURRENT INCOME AND STABILITY
Trust Ohio*** OF PRINCIPAL
Foreign Fund Oregon Adjustable Rate Securities
Global Infrastructure Pennsylvania Fund
Fund Tennessee** Adjustable U.S. Government
Global Opportunities Texas Securities Fund
Trust Virginia Short-Intermediate U.S.
Global Rising Dividends Washington** Government Securities Fund
Fund
Greater European Fund FRANKLIN FUNDS FRANKLIN FUNDS FOR NON-U.S.
Growth Fund SEEKING CAPITAL GROWTH INVESTORS
Income Fund California Tax-Advantaged High Yield
Japan Fund DynaTech Fund Securities Fund
Latin America Fund Growth Fund Tax-Advantaged International
Money Fund Equity Fund Bond Fund
Real Estate Securities Global Health Tax-Advantaged U.S.
Fund Care Fund Government Securities Fund
Smaller Companies Gold Fund
Growth Fund Growth Fund FRANKLIN TEMPLETON
World Fund International INTERNATIONAL CURRENCY FUNDS
Equity Fund Global Currency Fund
FRANKLIN FUNDS Pacific Hard Currency Fund
SEEKING TAX- Growth Fund High Income Currency Fund
FREE INCOME Real Estate
Federal Intermediate Securities FRANKLIN MONEY MARKET FUNDS
Term Fund California Tax-Exempt Money
Tax-Free Income Fund Small Cap Fund
Federal Tax-Free Growth Fund Federal Money Fund
Income Fund IFT U.S. Treasury Money
High Yield Tax-Free Market Portfolio
Income Fund FRANKLIN FUNDS SEEKING Money Fund
Insured Tax-Free GROWTH AND INCOME New York Tax-Exempt Money
Income Fund*** Balance Sheet Fund
Puerto Rico Tax-Free Investment Fund Tax-Exempt Money Fund
Income Fund Convertible Securities
Fund FRANKLIN FUND FOR
FRANKLIN STATE-SPECIFIC Equity Income Fund CORPORATIONS
FUNDS SEEKING TAX-FREE Global Utilities Fund Corporate Qualified Dividend
INCOME Income Fund Fund
Alabama Premier Return Fund
Arizona* Rising Dividends Fund FRANKLIN TEMPLETON VARIABLE
Arkansas** Strategic Income Fund ANNUITIES
California* Utilities Fund Franklin Valuemark
Colorado Franklin Templeton Valuemark
Connecticut FRANKLIN FUNDS SEEKING Income
Florida* HIGH CURRENT INCOME Plus (an intermediate
Georgia AGE High Income Fund annuity)
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Toll-free 1-800/DIAL BEN (1-800/342-5236)
* Two or more fund options available: Long-term portfolio, intermediate-term
portfolio, a portfolio of municipal securities, and a high yield portfolio
(CA).
** The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
*** Portfolio of insured municipal securities.
<PAGE>
FRANKLIN TEMPLETON
JAPAN FUND
Auditors
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017-2416
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 Franklin
Templeton Japan 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 by the presence of a regular beeping tone.
TL417 A95 05/95
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FRANKLIN
TEMPLETON
JAPAN FUND
Annual Report
March 31, 1995
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