SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C. 20549

                                  FORM 10-Q/A

(Mark One)

(x)   QUARTERLY  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the quarterly period ended             MARCH 31, 1995
                               --------------------------

                                      OR

( )   TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE CHANGE ACT OF 1934

For the transition period from                   to

Commission file number                    1-12700


                    FRANKLIN REAL ESTATE INCOME FUND
            (Exact name of registrant as specified in its charter)


            CALIFORNIA                         77-0185558
(State or other jurisdiction of incorporation or organization)(I.R.S.  Employer
Identification No.)


P. O. BOX 7777,        SAN MATEO, CALIFORNIA                  94403-7777
     (Address of principal executive offices)                 (Zip Code)


Registrant's telephone number, including area code        (415) 312-2000

                                   N/A
Former name, former address and former fiscal year, if changed since last report


   Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No

Common Stock Shares Outstanding as of March 31, 1995, Series A:  3,999,653
Common Stock Shares Outstanding as of March 31, 1995, Series B:     319,308



                         PART I - FINANCIAL INFORMATION

                         Item 2. Management's Discussion
                       and Analysis of Financial Condition
                            AND RESULTS OF OPERATIONS


INTRODUCTION

Management's discussion and analysis of financial condition and results of
operations should be read in conjunction with the Financial Statements and Notes
thereto.

RESULTS OF OPERATIONS

COMPARISON OF THE THREE MONTH PERIOD ENDED MARCH 31, 1995 AND 1994

Net income for the three month period ended March 31, 1995 increased $150,000,
or 51%, as compared to the same period in 1994 due to the following factors: an
increase in rental revenue of $100,000; an increase in interest and dividends of
$1,000; a decrease in other income of $3,000; an increase in interest expense of
$25,000; an increase in depreciation and amortization of $16,000; an increase in
operating expenses of $16,000; an increase in related party expenses of $2,000;
a decrease in general and administrative expense of $43,000, and a decrease in
loss on the sale of mortgage-backed securities of $68,000. Explanations of the
material changes are as follows:

Rental revenue for the three month period ended March 31, 1995 increased
$100,000, or 10%, primarily due to the recognition of rental income from the
Glen Cove Shopping Center acquired on January 31, 1994 and improved occupancy
rates at one of the Company's properties. The average occupancy rate of net
rentable square feet for the three month periods ended March 31, 1995 and 1994
at the Shores Office Complex was 98% and 90%; at the Northport Buildings 97% and
97%, and at the Mira Loma Shopping Center 82% and 84%, respectively.

Total expenses decreased for the three month period ended March 31, 1995 by
$52,000, or 7%, from $738,000 in 1994 to $686,000. The decrease in total
expenses is attributable to the following factors: an increase in interest
expense of $25,000; an increase in depreciation and amortization of $16,000, or
6%; an increase in operating expenses of $16,000, or 7%; an increase in related
party expense of $2,000, or 4%; a decrease in general and administrative expense
of $43,000, or 47%, and a decrease in loss on sale of mortgage-backed securities
of $68,000 or 100%.

Interest expense increased $25,000 reflecting the issuance of an unsecured loan
payable in January, 1994, related to the acquisition of the Glen Cove Center.
This loan was converted into a secured mortgage note in June, 1994.

Depreciation and amortization increased $16,000 and operating expenses increased
$16,000 reflecting the acquisition of rental property in January, 1994.

General and administrative expense decreased $42,000 due to a decrease in
non-recurring consulting fees and legal expenses associated with the potential
acquisitions of real estate that were passed in 1994.

Loss on sale of mortgage-backed securities decreased $68,000 due to the sale of
mortgage-backed securities in January, 1994. The proceeds were used to invest in
rental property.



                           PART I - FINANCIAL INFORMATION

                          Item 2. Management's Discussion
                        and Analysis of Financial Condition
                             AND RESULTS OF OPERATIONS


LIQUIDITY AND CAPITAL RESOURCES

The Company's principal source of capital for the acquisition of properties was
the proceeds from the initial public offering of its stock. The Company
completed its property acquisition phase in 1994 and no further acquisitions are
anticipated. The Company's funds from operations have been its principal source
of capital for property improvements, leasing costs and the payments of
quarterly dividends. At March 31, 1995, the Company's cash reserves, including
mortgage backed securities, aggregated $1,796,000.

As of March 31, 1995, one of the Company's properties was subject to secured
financing with an outstanding balance of approximately $1,970,000. Otherwise,
the Company's properties are owned free of any indebtedness. Interest on the
note accrues at a variable rate of 1.5% in excess of the Union Bank Reference
Rate. Monthly installments of principal and interest commenced August 1, 1994,
and continue until maturity of the note on May 1, 1999. Principal installments
are payable in the amount of $3,700 per month. The note may be prepaid in whole
or in part at any time without penalty.

For the foreseeable future, management believes that the Company's current
sources of capital will continue to be adequate to meet both its operating
requirements and the payment of dividends.

Net cash flow provided by operating activities for the three month period ended
March 31, 1995 increased $71,000 to $787,000 compared to the same period in 1994
primarily due to improved operations at the Company's properties, and an
additional month of cash flow from the Glen Cove Shopping Center purchased on
January 31, 1994.

Funds from Operations for the three month period ended March 31, 1995 and 1994
were $728,000 and $562,000, respectively. The increase is primarily due to the
improvement in net income as described under "Results of Operations" above. The
Company believes that Funds from Operations is helpful in understanding a
property portfolio in that such calculation reflects income from operating
activities and the properties' ability to support general operating expenses and
interest expense before the impact of certain activities, such as gains and
losses from property sales and changes in the accounts receivable and accounts
payable. However, it does not measure whether income is sufficient to fund all
of the Company's cash needs including principal amortization, capital
improvements and distributions to shareholders. Funds from Operations should not
be considered an alternative to net income or any other GAAP measurement of
performance or as an alternative to cash flows from operating, investing, or
financing activities as a measure of liquidity. As defined by the National
Association of Real Estate Investment Trusts, Funds from Operations is net
income ( computed in accordance with GAAP ), excluding gains or losses from debt
restructuring and sales of property, plus depreciation and amortization, and
after adjustment for unconsolidated joint ventures.

IMPACT OF INFLATION
The Company's management believes that inflation may have a positive effect on
the Company's property portfolio, but this effect generally will not be fully
realized until such properties are sold or exchanged. On some leases, the
Company collects overage rents based on increased sales and increased base
rentals as a result of cost of living adjustments. The Company's policy of
negotiating


                           PART I - FINANCIAL INFORMATION

                          Item 2. Management's Discussion
                        and Analysis of Financial Condition
                             AND RESULTS OF OPERATIONS


LIQUIDITY AND CAPITAL RESOURCES (Continued)

IMPACT OF INFLATION (Continued)
leases which incorporate operating expense "pass-through" provisions is intended
to protect the Company against increased operating costs resulting from
inflation.

DIVIDENDS
Dividends are declared quarterly at the discretion of the Board of Directors.
The Company's present dividend policy is to at least annually evaluate the
current dividend rate in light of anticipated tenant turnover over the next two
or three years, the estimated level of associated improvements and leasing
commissions, planned capital expenditures, any debt service requirements and the
Company's other working capital requirements. After balancing these
considerations, and considering the Company's earnings and cash flow, the level
of its liquid reserves and other relevant factors, the Company seeks to
establish a dividend rate which:

       i)   provides  a stable  dividend  which is  sustainable  despite
           short term fluctuations in  property cash flows;
       ii)  maximizes  the  amount of cash  flow  paid out as  dividends
           consistent with the above listed objective;  and
       iii)complies with the Internal Revenue Code requirement that a REIT
           annually pay out as dividends not less than 95% of its taxable
           income.

For the three-month period ended March 31, 1995, the Company declared dividends
totaling $500,000.








                                   SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




                                           FRANKLIN REAL ESTATE INCOME FUND

                                           By:  /S/  DAVID P. GOSS
                                                Chief Executive Officer



                                           Date:       JANUARY 11, 1996