<PAGE> 1
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.
November 15, 1996
Dear Shareholder:
We are pleased to bring you this semi-annual report of the Franklin Templeton
Japan Fund for the six months ended September 30, 1996.
Throughout this reporting period, several economic indicators suggested that the
Japanese economy was beginning to improve. The unemployment rate declined, the
jobs/applicant ratio increased, housing starts were up, and investment spending
was strong. However, banking reform measures proposed by the Japanese government
did not take effect as anticipated. Due to Japanese Prime Minister Hashimoto's
decision to dissolve the Diet in late September, the proposed legislation was
put on hold until after the October general election. The outcome of this
election could affect the Japanese economy because one of the political parties
involved favors deregulation and a smaller government.
1
<PAGE> 2
FRANKLIN TEMPLETON JAPAN FUND
Portfolio Breakdown on 9/30/96
Based on Total Net Assets
[PIE CHART]
<TABLE>
<S> <C>
Capital Equipment 37.5%
Services 14.5%
Materials 14.1%
Consumer Goods 12.9%
Finance 7.6%
Multi-Industry 4.3%
Short-Term Obligations &
Other Net Assets 9.1%
</TABLE>
The Nikkei 225 Index fluctuated in a fairly tight range during the period.
Standing at 21,406 on March 31, 1996, it rose to a high of 22,666 on June 26,
1996, and ended the period at 21,556. Within this environment, the Fund provided
a six-month total return of -6.70%, as discussed in the Performance Summary on
page 4.
The Fund's performance was hurt as the yen declined in value due to monetary
easing by the Bank of Japan. However, one of our top holdings, Sony Corp., an
international entertainment conglomerate, benefited from the weaker yen because
it made the cost of their goods lower in the United States. Since our main
purpose is to pick stocks, not predict the economic environment, we do not
usually hedge changes in the yen/U.S. dollar relationship. The Fund's
performance was helped as our holdings of Fuji Heavy Industries Ltd., the maker
of the Subaru automobile line, appreciated in value. In addition, capital goods
companies performed well, prompting us to realize profits on our position in
Shinko Electric Industries. Because the Japanese equity market's tight trading
range did not provide opportunities for stocks to sell at prices below our
estimate of their true value, we did not purchase any securities during this
reporting period.
This discussion reflects the strategies we employed for the Fund during the six
months under review, and includes our opinions as of the close of the period.
Since economic and market conditions are constantly changing, our strategies,
evaluations, conclusions and decisions regarding portfolio holdings may change
as new circumstances arise. Although past performance of a specific investment
or sector cannot
2
<PAGE> 3
FRANKLIN TEMPLETON JAPAN FUND
Top 10 Holdings on 9/30/96
Based on Total Net Assets
<TABLE>
Company % of Total
Industry Net Assets
- --------------------------------------------------------------------------------
<S> <C>
Mitsubishi Corp.
Wholesale & International Trade 4.8%
- --------------------------------------------------------------------------------
Fuji Heavy Industries Ltd.
Industrial Components 4.3%
- --------------------------------------------------------------------------------
Tenma Corp.
Miscellaneous Materials & Commodities 4.2%
- --------------------------------------------------------------------------------
Daito Trust Construction Co. Ltd.
Construction & Housing 3.9%
- --------------------------------------------------------------------------------
Chudenko Corp.
Industrial Components 3.9%
- --------------------------------------------------------------------------------
Toyo Engineering Corp.
Industrial Components 3.8%
- --------------------------------------------------------------------------------
Sony Corp.
Appliances & Household Durables 3.7%
- --------------------------------------------------------------------------------
Hokuetsu Paper Mills Ltd.
Forest Products & Paper 3.3%
- --------------------------------------------------------------------------------
Amway Japan Ltd.
Multi-Industry 3.2%
- --------------------------------------------------------------------------------
Toda Corp.
Construction & Housing 3.0%
- --------------------------------------------------------------------------------
</TABLE>
For a complete list of portfolio holdings, please see page 6 of this report.
guarantee future performance, such information can be useful in analyzing
securities we purchase or sell for the Fund.
Looking forward, we believe the performance of Japanese equities is likely to be
closely aligned with the performance of the banking industry. We shall therefore
continue to monitor this sector. In our opinion, Japan still has much work to do
in reshaping its economy, but such action should eventually lead to potential
investment opportunities for shareholders of the Fund.
There are, of course, specific risks involved with investing in a single foreign
country, including increased susceptibility to currency fluctuations, market
volatility, and economic, social and political uncertainty, which are further
discussed in the Fund's prospectus.
Thank you for your continued support of the Franklin Templeton Japan Fund. We
welcome your comments and look forward to serving your investment needs in the
future.
Sincerely,
/s/ William T. Howard, Jr.
- -----------------------------------
William T. Howard, Jr., CFA
Portfolio Manager
Franklin Templeton Japan Fund
3
<PAGE> 4
PERFORMANCE SUMMARY
The Franklin Templeton Japan Fund produced a total return of -6.70% for the
six-month period ended September 30, 1996. Total return measures the change in
value of an investment, assuming reinvestment of dividend and capital gains
distributions, and does not include the initial sales charge.
The Fund's share price, as measured by net asset value, decreased 85 cents
($0.85), from $10.35 on March 31, 1996 to $9.50 on September 30, 1996. During
the reporting period, shareholders received distributions totaling 17 cents
($0.17) per share in short-term capital gains. 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.
FRANKLIN TEMPLETON JAPAN FUND
Periods Ended 9/30/96
<TABLE>
<CAPTION>
Since
Inception
One-Year (7/28/94)
<S> <C>
Cumulative Total Return(1) -1.37% -2.65%
Average Annual Total Return(2) -7.06% -3.87%
Value of $10,000 Investment(3) $9,294 $9,176
</TABLE>
1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include the maximum 5.75% sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods and includes the initial sales charge.
3. These figures represent the value of a hypothetical $10,000 investment in the
fund over the specified periods and include the initial sales charge.
All total return calculations assume reinvestment of dividend and capital gains
distributions when paid. Investment return and principal value will fluctuate
with market conditions, currency fluctuations, and economic, social and
political factors, so that your shares, when redeemed, may be worth more or less
than their original cost. Past performance is not predictive of future results.
All total return calculations reflect the deduction of a proportional share of
Fund expenses on an annual basis. The Fund's Investment Manager and Business
Manager have agreed in advance to reduce their respective fees and, in the case
of the Business Manager, to make certain payments to reduce expenses, which
increases total return to shareholders. If the Managers had not taken this
action, the Fund's total return would have been lower. After December 31, 1996,
the fee reduction may be discontinued at any time.
4
<PAGE> 5
FRANKLIN TEMPLETON JAPAN FUND
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
SIX MONTHS JULY 28, 1994
ENDED (COMMENCEMENT
SEPTEMBER 30, 1996 YEAR ENDED OF OPERATIONS) TO
(UNAUDITED) MARCH 31, 1996 MARCH 31, 1995
------------------ -------------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.35 $ 9.93 $ 10.00
------- ------- -------
Income from investment operations:
Net investment income (loss) (.05) (.02) .10
Net realized and unrealized gain (loss) (.63) .47 (.12)
------- ------- -------
Total from investment operations (.68) .45 (.02)
------- ------- -------
Distributions:
Dividends from net investment income -- (.03) (.05)
Distributions from net realized gains (.17) -- --
------- ------- -------
Total Distributions (.17) (.03) (.05)
------- ------- -------
Change in net asset value (.85) .42 (.07)
------- ------- -------
Net asset value, end of period $ 9.50 $ 10.35 $ 9.93
======= ======= =======
TOTAL RETURN* (6.70)% 4.55% (.19)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 6,831 $ 6,232 $ 1,444
Ratio of expenses to average net assets 2.60%** 4.90% 12.05%**
Ratio of expenses, net of reimbursement, to average
net assets 2.00%** 1.99% 1.25%**
Ratio of net investment income (loss) to average
net assets .96%** (.05)% 1.92%**
Portfolio turnover rate -- 54.97% --
Average commission rate paid (per share) $ .0824 $ .0552
</TABLE>
* TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS. NOT ANNUALIZED FOR
PERIODS OF LESS THAN ONE YEAR.
** ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE> 6
FRANKLIN TEMPLETON JAPAN FUND
Investment Portfolio, September 30, 1996 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
COMMON STOCKS: 90.9%
- ---------------------------------------------------------------------------------------------------------------------
APPLIANCES & HOUSEHOLD DURABLES: 5.8%
Chofu Seisaku Co. Ltd. Jpn. 5,000 $ 117,816
Hualing Holdings Ltd. H.K. 282,000 25,892
Sony Corp. Jpn. 4,000 251,937
----------
395,645
- ---------------------------------------------------------------------------------------------------------------------
BANKING: 2.2%
Hachijuni Bank Ltd. Jpn. 14,000 146,754
- ---------------------------------------------------------------------------------------------------------------------
CHEMICALS: 2.3%
Daicel Chemical Industries Ltd. Jpn. 30,000 158,581
- ---------------------------------------------------------------------------------------------------------------------
CONSTRUCTION & HOUSING: 13.1%
Daito Trust Construction Co. Ltd. Jpn. 20,000 268,781
Kyudenko Corp. Jpn. 13,000 166,555
*Maeda Corp. Jpn. 10,000 86,458
National House Industrial Co. Ltd. Jpn. 11,000 170,497
*Toda Corp. Jpn. 23,000 201,944
----------
894,235
- ---------------------------------------------------------------------------------------------------------------------
ELECTRICAL & ELECTRONICS: 4.7%
Hitachi Ltd. Jpn. 16,000 154,818
Matsushita Electric Industrial Co. Ltd. Jpn. 10,000 167,540
----------
322,358
- ---------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES: 2.5%
*Yamaichi Securities Co. Ltd. Jpn. 28,000 171,841
- ---------------------------------------------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER: 5.9%
Hokuetsu Paper Mills Ltd. Jpn. 29,000 222,667
Rengo Co. Ltd. Jpn. 27,000 180,701
----------
403,368
- ---------------------------------------------------------------------------------------------------------------------
INDUSTRIAL COMPONENTS: 18.4%
Chudenko Corp. Jpn. 8,000 265,197
*Fuji Heavy Industries Ltd. Jpn. 62,000 294,405
Mitsubishi Heavy Industries Ltd. Jpn. 23,000 186,901
Sanyo Electric Co. Ltd. Jpn. 34,000 182,467
Shinko Electric Industries Jpn. 2,000 65,762
Toyo Engineering Corp. Jpn. 42,000 260,019
----------
1,254,751
- ---------------------------------------------------------------------------------------------------------------------
INSURANCE: 2.9%
*Tokio Marine & Fire Insurance Co. Ltd. Jpn. 17,000 201,048
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 7
FRANKLIN TEMPLETON JAPAN FUND
Investment Portfolio, September 30, 1996 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ---------------------------------------------------------------------------------------------------------------------
MACHINERY & ENGINEERING: 1.3%
Hitachi Koki Co. Ltd. Jpn. 10,000 $ 89,594
- ---------------------------------------------------------------------------------------------------------------------
MERCHANDISING: 2.4%
Daiei Inc. Jpn. 17,000 161,448
- ---------------------------------------------------------------------------------------------------------------------
METALS & MINING: 1.7%
Nittetsu Mining Co. Ltd. Jpn. 12,000 112,888
- ---------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS MATERIALS & COMMODITIES: 4.2%
Tenma Corp. Jpn. 14,000 288,492
- ---------------------------------------------------------------------------------------------------------------------
MULTI-INDUSTRY: 4.3%
Amway Japan Ltd. Jpn. 5,000 216,817
Mitsubishi Oil Co. Ltd. Jpn. 10,000 76,155
----------
292,972
- ---------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS: 1.9%
Nippon Telegraph & Telephone Corp. Jpn. 18 132,240
- ---------------------------------------------------------------------------------------------------------------------
TEXTILES & APPAREL: 7.1%
Nisshinbo Industries Inc. Jpn. 17,000 155,355
*Tokyo Style Co. Ltd. Jpn. 8,000 130,448
*Wacoal Corp. Jpn. 16,000 200,690
----------
486,493
- ---------------------------------------------------------------------------------------------------------------------
TRANSPORTATION: 5.4%
*Daiwa Logistics Co. Ltd. Jpn. 8,000 177,037
East Japan Railway Jpn. 40 192,806
----------
369,843
- ---------------------------------------------------------------------------------------------------------------------
WHOLESALE & INTERNATIONAL TRADE: 4.8%
Mitsubishi Corp. Jpn. 26,000 330,780
----------
TOTAL COMMON STOCKS (cost $6,623,206) 6,213,331
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 8
FRANKLIN TEMPLETON JAPAN FUND
Investment Portfolio, September 30, 1996 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
INDUSTRY ISSUE COUNTRY LOCAL CURRENCY** VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 9.0% (cost $613,425)
U.S. Treasury Bills, 4.92% to 5.165% with
maturities to 12/05/96 U.S. 618,000 $ 613,619
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS: 99.9% (cost $7,236,631) 6,826,950
OTHER ASSETS, LESS LIABILITIES: 0.1% 3,633
----------
TOTAL NET ASSETS: 100.0% $6,830,583
==========
</TABLE>
* NON-INCOME PRODUCING.
** CURRENCY OF COUNTRY INDICATED.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 9
FRANKLIN TEMPLETON JAPAN FUND
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1996 (unaudited)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value
(identified cost $7,236,631) $6,826,950
Cash 2,063
Receivables:
Fund shares sold 138,769
Dividends and interest 16,215
Unamortized organization costs 65,081
-----------
Total assets 7,049,078
-----------
Liabilities:
Payables for investment securities
purchased 182,894
Accrued expenses 35,601
-----------
Total liabilities 218,495
-----------
Net assets, at value $6,830,583
===========
Net assets consist of:
Accumulated net investment loss (36,811)
Net unrealized depreciation (409,681)
Accumulated net realized loss (9,967)
Net capital paid in on shares of
beneficial interest 7,287,042
-----------
Net assets, at value $6,830,583
===========
Shares outstanding 718,781
===========
Net asset value per share
($6,830,583 / 718,781) $ 9.50
===========
Maximum offering price
($9.50 / 94.25%) $ 10.08
===========
</TABLE>
STATEMENT OF OPERATIONS
For the six months
September 30, 1996 (unaudited)
<TABLE>
<S> <C> <C>
Investment income:
(net of $3,540 foreign
taxes withheld)
Dividends $ 20,424
Interest 17,261
---------
Total income $ 37,685
Expenses:
Management fees (Note 3) 27,171
Administrative fees (Note 3) 5,436
Distribution fees (Note 3) 12,686
Transfer agent fees (Note 3) 8,200
Custodian fees 1,500
Reports to shareholders 1,000
Audit fees 3,250
Legal fees (Note 3) 1,500
Registration and filing fees 21,200
Trustees' fees and expenses 200
Amortization of organization
costs 11,377
Other 535
---------
Total expenses 94,055
Less expenses reimbursed
(Note 3) (21,574)
---------
Total expenses less
reimbursement 72,481
---------
Net investment loss (34,796)
Realized and unrealized loss:
Net realized loss on:
Investments (153)
Foreign currency transactions (9,151)
---------
(9,304)
Net unrealized depreciation
on investments (446,561)
---------
Net realized and
unrealized loss (455,865)
---------
Net decrease in net assets resulting
from operations $(490,661)
=========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 10
FRANKLIN TEMPLETON JAPAN FUND
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
SEPTEMBER 30, 1996 YEAR ENDED
(UNAUDITED) MARCH 31, 1996
------------------ ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment loss $ (34,796) $ (2,015)
Net realized gain (loss) on investment and foreign currency transactions (9,304) 119,620
Net unrealized appreciation (depreciation) (446,561) 35,226
----------- -----------
Net increase (decrease) in net assets resulting from operations (490,661) 152,831
Distribution to shareholders:
From net investment income -- (4,653)
From net realized gain (119,856) --
Fund share transactions (Note 2) 1,209,329 4,640,078
----------- -----------
Net increase in net assets 598,812 4,788,256
Net assets:
Beginning of period 6,231,771 1,443,515
----------- -----------
End of period $6,830,583 $ 6,231,771
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 11
FRANKLIN TEMPLETON JAPAN FUND
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
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
seeks long-term capital growth by investing primarily in securities of companies
domiciled in Japan and traded in Japanese securities markets. The following
summarizes the Fund's significant accounting policies.
A. SECURITIES VALUATIONS:
Securities listed or traded on a recognized national or foreign exchange or
NASDAQ are valued at the last reported sales prices on the principal exchange on
which the securities are traded. Over-the-counter 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 TRANSACTIONS:
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 currencies
are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customarily
enters into a foreign exchange contract 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
foreign currencies, currency gains or losses realized between the trade and
settlement 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. UNAMORTIZED ORGANIZATION COSTS:
Organization costs are being amortized on a straight line basis over five years.
E. 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
securities 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.
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.
11
<PAGE> 12
FRANKLIN TEMPLETON JAPAN FUND
Notes to Financial Statements (unaudited) (cont.)
- --------------------------------------------------------------------------------
2. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
At September 30, 1996, there were an unlimited number of shares of beneficial
interest authorized ($0.01 par value). Transactions in the Fund's shares were as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1996 MARCH 31, 1996
--------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Shares sold 452,366 $ 4,626,318 1,375,298 $13,696,032
Shares issued on reinvestment of distributions 10,075 104,181 236 2,326
Shares redeemed (345,647) (3,521,170) (918,913) (9,058,280)
-------- ----------- -------- -----------
Net increase 116,794 $ 1,209,329 456,621 $ 4,640,078
======== =========== ======== ===========
</TABLE>
Templeton Global Investors, Inc., the Fund's administrative manager, is the
record owner of 51,239 shares as of September 30, 1996.
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also directors or officers of Templeton
Investment Counsel, Inc. (TICI), Templeton Global Investors, Inc. (TGII),
Franklin Templeton Distributors, Inc. (FTD), and Franklin Templeton Investor
Services (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 administrative 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 million, and 0.075% per annum of such average assets in excess of
$1.2 billion. TICI and TGII have voluntarily agreed to reduce their respective
fees to the extent necessary to limit total expenses to an annual rate of 2.00%
of the Fund's average daily net assets through December 31, 1996. The amount of
reimbursement for the six months ended September 30, 1996 is set forth in the
Statement of Operations. For the six months ended September 30, 1996, FTD
received net commissions of $10,628 from the sale of Fund's shares and FTIS
received fees of $8,200.
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
result in sales of Fund shares. Such distribution fees are set forth in the
Statement of Operations. Under the distribution plan, costs and expenses
exceeding the maximum may be reimbursed in subsequent periods. At September 30,
1996, unreimbursed expenses amounted to $9,830.
An officer of the Fund is a partner of Dechert Price & Rhoads, legal counsel for
the Fund, which firm received fees of $1,500 for the six months ended September
30, 1996.
12
<PAGE> 13
FRANKLIN TEMPLETON JAPAN FUND
Notes to Financial Statements (unaudited) (cont.)
- --------------------------------------------------------------------------------
4. PURCHASES AND SALES OF SECURITIES
Purchases of securities (excluding short-term securities) for the six months
ended September 30, 1996 aggregated $1,311,800. The cost of securities for
federal income tax purposes is the same as that shown in the Investment
Portfolio. Realized gains and losses are reported on an identified cost basis.
At September 30, 1996, the aggregate gross unrealized appreciation and
depreciation of portfolio securities, based on cost for federal income tax
purposes, was as follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 73,461
Unrealized depreciation (483,142)
----------
Net unrealized depreciation $(409,681)
==========
</TABLE>
13
<PAGE> 14
NOTES
<PAGE> 15
LITERATURE REQUEST
- --------------------------------------------------------------------------------
For a free brochure and prospectus, which contain more complete information,
including charges and expenses, call Franklin Fund Information, toll free, at
1-800/DIAL BEN (1-800/342-5236). Please read the prospectus carefully before you
invest or send money. 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.
FRANKLIN TEMPLETON GROUP
GLOBAL GROWTH
Franklin Global Health
Care Fund
Franklin Templeton
Japan Fund
Templeton Developing
Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller
Companies Fund
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Infrastructure Fund
Templeton Global
Opportunities Trust
Templeton Global
Real Estate Fund
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Companies Fund
Templeton Greater
European Fund
Templeton Growth Fund
Templeton Latin America
Fund
Templeton Pacific
Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
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Government Bond Fund
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Global Currency Fund
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and
Income Fund
GLOBAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Hard
Currency Fund
Franklin Templeton High
Income Currency Fund
Templeton Americas
Government Securities Fund
GROWTH
Franklin Blue Chip Fund
Franklin California Growth Fund
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Franklin Equity fund
Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap Growth Fund
Mutual Discovery Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet
Investment Fund
Franklin Convertible
Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund
Franklin Natural Resources Fund
Franklin Real Estate
Securities Fund
Franklin Rising Dividends Fund
Franklin Strategic Income Fund
Franklin Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Shares Fund
Templeton American Trust, Inc.
INCOME
Franklin Adjustable Rate
Securities Fund
Franklin Adjustable U.S.
Government Securities Fund
Franklin's AGE High
Income Fund
Franklin Investment Grade
Income Fund
Franklin Short-Intermediate U.S.
Government Securities Fund
Franklin U.S. Government
Securities Fund
Franklin Money Fund
Franklin Federal Money Fund
FOR NON-U.S. INVESTORS:
Franklin Tax-Advantaged
High Yield Securities Fund
Franklin Tax-Advantaged
International Bond Fund
Franklin Tax-Advantaged
Government Securities Fund
FOR CORPORATIONS:
Franklin Corporate Qualified
Dividend Fund
FRANKLIN FUNDS SEEKING
TAX-FREE INCOME
Federal Intermediate-Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free
Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free
Income Fund
Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC
FUNDS SEEKING
TAX-FREE INCOME
Alabama
Arizona*
Arkansas**
California*
Colorado
Connecticut
Florida*
Georgia*
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Massachusetts***
Michigan*
Minnesota***
Missouri
New Jersey
New York*
North Carolina
Ohio***
Oregon
Pennsylvania
Tennessee**
Texas
Virginia
Washington**
VARIABLE ANNUITIES
Franklin Valuemark(R)
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
*Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and/or a high yield
portfolio (CA) and a money market portfolio (CA and NY).
**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. 11/96.1
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FRANKLIN TEMPLETON
JAPAN FUND
Principal Underwriter:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Shareholder Services
1-800-632-2301
Fund Information
1-800-342-5236
This report must be preceded or accompanied by the current prospectus of
Franklin Templeton Japan Fund, which contains more complete information
including charges and expenses. 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.
FRANKLIN
TEMPLETON
JAPAN
FUND
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1996
[FRANKLIN TEMPLETON LOGO]
[RECYCLE LOGO] TL417 896 11/96
