ANNUAL
REPORT
JULY 31, 1998
FRANKLIN TEMPLETON
FUND ALLOCATOR SERIES
Franklin Templeton Conservative Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton Growth Target Fund
Thank you for investing with Franklin Templeton. We encourage our investors to
maintain a long-term perspective and remember that all securities markets move
both up and down, as do mutual fund share prices. We appreciate your past
support and look forward to serving your investment needs in the years ahead.
SHAREHOLDER LETTER
CONTENTS
Shareholder Letter............................................ 1
Fund Reports.................................................. 7
Franklin Templeton
Conservative Target Fund ..................................... 7
Franklin Templeton
Moderate Target Fund ........................................ 20
Franklin Templeton
Growth Target Fund .......................................... 34
Financial Highlights &
Statement of Investments ..................................... 48
Financial Statements ......................................... 57
Notes to
Financial Statements ......................................... 61
Independent
Auditor's Report ............................................. 65
Dear Shareholder:
We are pleased to present the annual report for the Franklin Templeton Fund
Allocator Series, composed of the Conservative Target Fund, the Moderate Target
Fund, and the Growth Target Fund, for the year ended July 31, 1998.
Since our semiannual report dated January 31, 1998, U.S. and major European
stock markets resumed their relentless climb, with the biggest gains seen in the
February to April and mid-June to mid-July periods. Corporate earnings growth
explained part of the rise, but a generally bullish psychology played a big
role, too. It's not just the stock market indexes that are at record levels. By
many measures, such as price/earnings ratios and dividend yields, U.S. stock
prices are now at historically high levels of valuation, too. Emerging markets
were the exception to this trend, as the severe declines in Asia that began in
the second half of 1997 persisted into 1998 in the form of weak returns and high
volatility throughout emerging stock markets.
U.S. bond prices also advanced significantly, aided by a continued benign
outlook for inflation, which was reinforced by weakness in Asian economies. This
pushed the yield on the 30-year U.S. Treasury bond down from 6.30% at the
beginning of the reporting period to 5.72% as of July 31, 1998. The dollar
continued its multi-year climb against major foreign currencies, supported by
the strong U.S. economy, particularly in comparison to the moribund Japanese
economy. As a result, the Japanese yen fell to an eight-year low of 146.78 yen
versus the U.S. dollar. The combination of a strong U.S. economy and a vibrant
greenback acted as a magnet for foreign capital, causing U.S. markets and the
U.S. dollar to support one another in a self-reinforcing "virtuous circle." Not
surprisingly, interest-rate-sensitive sectors such as utility stocks performed
well in this environment, while inflation-sensitive sectors such as gold shares
and natural resources stocks fared poorly.
"While it is foolhardy to ignore the warning bells of history, we must also
remember that markets have never played solely by the rules of any particular
prior period."
Although subject to increased volatility, equity markets worldwide leveled off
during the May-July period as many investors grappled with a special kind of
vertigo, brought on by the heights to which stocks had climbed. Without
question, stocks generally have become expensive by historical standards,
especially in the U.S., and downside risk appears to be significant. While it is
foolhardy to ignore the warning bells of history, we must also remember that
markets have never played solely by the rules of any particular prior period.
Rather, each market writes a new set of rules, reflecting the unique confluence
of factors amidst which it operates.
Though some frightening declines may lie ahead, we really have no idea as to
their timing. Rather than try to predict these major moves, we remind ourselves
and our shareholders that ours is a long-term objective which is best served by
a continuous commitment to basic investment principles. This means each of the
three Target Funds will at all times have a significant comitment to long-term
capital growth through equity investments, even though their proportion and
composition will vary from time to time. You are not likely to see dramatic
swings in asset allocation, no matter how scary the headlines.
It should come as no surprise to you to learn that sophisticated, professional
portfolio managers are subject to the same range of human emotions as any other
investor. In managing the Fund Allocator Series, we seek to distinguish
ourselves by how we deal with these emotions. First, we try to recognize
emotions for what they are, remembering that managing from a perspective of
either fear or greed usually leads to misery. Even more importantly, we adhere
to a well-defined asset allocation discipline that is designed to "immunize" our
decision-making process from the influence of emotion.
Likewise, the portfolio managers of the many underlying funds in which the three
Target Funds invest each have their own discipline. In most cases, it is a
"value" discipline which drives them to seek investments priced below their
estimated value. Capturing that difference between price and value is the goal,
but no one knows precisely how long it may take in any instance. Patience,
therefore, is a key virtue in value investing, and rarely more so than in
today's environment. Generally speaking, during the reporting period, the best
performing investments were also the most "expensive." As a result, many of the
underlying Franklin Templeton funds significantly lagged their respective
benchmarks over the past year.
This was particularly true among the international equity funds, where it seems
many of the most attractive values were in the most depressed and volatile
markets. The historically high price levels of equities in most developed
markets have also caused many of Franklin Templeton's value-oriented equity fund
managers to hold higher-than-average cash positions. In a rising market, of
course, this can hurt relative performance. Should the market pull back,
however, it may protect capital and provide buying power for any bargains that
might emerge.
In allocating the Funds' assets, we are not principally concerned with the
short-term relative performance of each underlying fund. Rather, we focus on
satisfying ourselves that the underlying funds stick to the disciplines and
styles that in the past have generated their solid long-term track records. We
believe the value orientation of many of the underlying funds should afford our
investors an important measure of risk control during market declines down the
road. So the last thing we would want to see is a portfolio manager changing
stripes in response to short-term performance concerns.
The return on the Target Funds is determined primarily by two factors: asset
allocation via our selection of underlying funds, and securities selection at
the underlying fund level. Our analysis of performance suggests that asset
allocation decisions, on balance, enhanced the Target Funds' performance over
the past year. However, for reasons discussed above, the individual underlying
funds generally underperformed their respective benchmarks during the period,
which more than offset any benefits derived from asset allocation decisions. The
net result was disappointing performance over the one-year reporting period,
particularly within the context of major equity market performance generally.
Listed on the following page are returns of Class I shares for the three Target
Funds for the 12-month, and from inception, periods ended July 31, 1998, without
taking into account any sales charges.
One-Year Total Return*
Total Return* Since Inception
Class I Shares (7/31/97 - 7/31/98)(12/31/96 - 7/31/98)
Conservative Target Fund 5.41% 15.12%
Moderate Target Fund 3.71% 17.25%
Growth Target Fund 2.63% 16.28%
*Total Return represents the change in value of an investment during the period
indicated, does not include sales charges, and assumes reinvestment of dividends
and capital gains at net asset value.
As discussed more fully in the individual fund reports, we did not participate
in the dramatic rise of the U.S. equity market to the extent we might have
expected, primarily for two reasons. First is our commitment to a strategy of
global diversification. We believe that the inclusion of international asset
classes should improve the risk-return characteristics of our portfolios in the
long run. However, near the end of the reporting period, many foreign stock
markets dramatically lagged the U.S. market, and emerging markets fell the most
of all. The second factor, as discussed earlier, is the tendency of value-based
equity funds, such as ours, to trail broader market indexes in the kind of
"go-go" stock market environment that has prevailed during the past three years.
Nonetheless, performance was within the range of our expected outcomes, albeit
toward the lower end. Most importantly, the Target Funds preserved and enhanced
the purchasing power of their shareholders' invested capital.
I am pleased to report continued solid growth in the size of the three Target
Funds, with total assets for the Fund Allocator Series exceeding $112 million at
July 31, 1998. We appreciate your participation in the Funds and welcome any
comments or suggestions you may have. Thank you for investing with us.
Sincerely,
Donald P. Gould
President and Portfolio Manager
Franklin Templeton Fund Allocator Series
The investment objective of each Fund is the highest level of long-term total
return that is consistent with an acceptable level of risk. Each Fund will
pursue its investment objective through active asset allocation implemented
primarily with investments in a combination of Franklin Templeton Funds.
The Funds all pursue the same investment objective but with different levels of
risk and return. Each Fund is designed to be a long-term investment. The
objective of each Fund compares the three Funds' levels of risk and return
relative to one another and are not intended to imply any particular absolute
level of risk or return for any Fund.
FRANKLIN TEMPLETON
CONSERVATIVE TARGET FUND
Your Fund's Objective: The Franklin Templeton Conservative Target Fund seeks the
highest level of long-term total return achievable at a lower level of risk.
The discussion below provides a general overview of the primary sources of
investment return for the Conservative Target Fund for the one-year period ended
July 31, 1998, and is for informational purposes only. It is important for
investors to recognize that the Fund, and the underlying funds in which the Fund
invests, generally seek to achieve their investment objectives over longer time
horizons than the period under review. Therefore, it is likely that the
performance of the Fund, the underlying funds, and the associated indexes for
any single one-year period will vary considerably from the long-term objectives
and/or expectations of the portfolio managers. Past performance is not
necessarily an indication of future performance and, in particular, recent
performance is not a reliable indicator of future long-term performance. No
conclusions, positive or negative, should be drawn from the following analysis
regarding the efficacy of the investment strategy of either the Fund or the
underlying funds in which it invests.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Managing Risk and Return
In managing the Conservative Target Fund, we continuously monitor risk and
return, and the evolving tradeoff between them. With respect to risk, we are
concerned with both the absolute and relative variety. Absolute risk relates to
the potential range of actual returns of an investment. Naturally, we are most
interested in controlling the "downside" of that range. Relative risk quantifies
the degree to which performance may vary from a specified index or composite of
indexes. We believe both are important, and that investors want good absolute
performance, as well as performance that is understandable within the context of
the current market environment.
Absolute Risk -- The potential range of actual returns of an investment.
Relative Risk -- The return of a particular investment relative to a
possible alternative investment.
Managing tradeoffs requires us to make both objective and subjective evaluations
of risk and return. First, there is always a tradeoff to be made between
absolute and relative risk. A case in point: toward the end of the reporting
period, our risk measurements indicated a rising level of absolute risk
associated with a typical stock-bond mix. Consequently, we adjusted the
portfolio to increase the importance assigned to controlling absolute risk, at
the expense of accepting somewhat greater relative risk. In practice, this meant
a modest shift in portfolio weightings away from growth stocks -- those sporting
higher earnings growth rates and price-earnings multiples -- toward value and
special situation stocks, which we expect to perform relatively better in the
event of a market downturn. The changing balance of risk also resulted in a
small shift from U.S. government securities into higher-yielding corporate
bonds, which have both debt and equity characteristics and usually exhibit less
interest-rate sensitivity than lower-yielding bonds.
There is also, of course, a tradeoff to be made between risk and return. We are
continuously presented with a multitude of portfolio choices along the
risk-return spectrum. However, the tradeoff between risk and return changes over
time. In some periods, higher expected returns are associated with only a modest
amount of incremental risk. Recently, however, our models suggested that we
would have to take on considerable extra risk to increase or even maintain the
levels of expected return that have prevailed over the past few years.
Therefore, we have gradually adjusted over time the risk-return characteristics
of the Conservative Target Fund, moving in the direction of less risk and
accepting slightly lower return expectations in the process.
During the twelve months under review, the Fund's Class Ishares had a total
return of +5.41%, as discussed in the Performance Summary on page 12. This
performance was affected both by its asset allocation and by securities
selection within the various underlying funds in which it was invested.
Asset Allocation
The table to the right illustrates the benchmark allocations we use in managing
the Conservative Target Fund. During the fiscal year, the Fund benefited from an
exposure to U.S. equities (averaging about 35% of net assets) significantly
above our benchmark percentage, and a below benchmark allocation to money market
instruments, which averaged about 13% of net assets. Despite their recent
volatility, U.S. equities, as measured by the unmanaged Standard & Poor's 500
(S&P 500(R)) stock index, turned in a strong performance for the twelve months
under review, achieving a total return of 19.28%. Included in the Fund's U.S.
stock holdings was a modest allocation to utility stocks, which performed very
well in the declining interest rate environment.
Franklin Templeton
Conservative Target Fund
Benchmark Allocation
by Investment Type
U.S. Equities 25%
International Equities 10%
U.S. Fixed Income 45%
Short-Term Obligations
& Other Net Assets 20%
The period was difficult and volatile for many foreign markets. The value of the
Morgan Stanley Capital International (MSCI(R)) Europe, Australasia and Far East
(EAFE) Index, which includes stock markets of industrialized countries outside
the U.S., gained only 5.47%. At the same time, the value of the MSCI Emerging
Markets Free Index, which includes stocks in developing economies, declined a
remarkable 38.07%, reflecting the turmoil in Southeast Asian and other emerging
equity and currency markets. The Fund's performance was adversely affected by a
slight overweighting in international equities and the fact that, on average,
about 2% of the Fund's assets were invested in the very weak emerging markets
equity sector.
During the year under review, U.S. bonds benefited from the anticipated
deflationary effects of the Asian slowdown, and the Lehman Brothers
Government/Corporate Bond Index generated a return of 8.06%. A significant
underweighting of assets in the fixed-income sector also detracted from the
Fund's performance.
Securities Selection1
The Fund's three largest equity fund investments during the period were Franklin
Growth Fund, Mutual Shares Fund, and Mutual Discovery Fund, which in aggregate
comprised approximately 32% of the Fund's average net assets. Although each fund
turned in a strong absolute performance over the period, with returns ranging
between 9% and 13%, each significantly trailed the S&P 500's 19.28% return. This
underperformance was due largely to the "value orientation" of the three funds.
During the reporting period, the market was largely driven by large-cap stocks
with high price/earnings ratios. In such a period, value-oriented funds tend to
hold out-of-favor stocks and higher-than-average cash positions, which
diminished our relative performance. The Conservative Target Fund's performance
was also hampered by the subpar performance of our holdings in Templeton Foreign
Fund and Templeton Developing Markets Trust, which accounted for roughly 4% and
2%, respectively, of the Fund's average assets over the period. These funds also
use a value-driven investment style.
1. All references to underlying funds refer to their Advisor Class or Class Z
shares.
On the fixed-income side, the Fund's three largest investments were Franklin
U.S. Government Securities Fund, Franklin's AGE High Income Fund, and Templeton
Global Bond Fund, which together averaged about 42% of the Fund's assets over
the period. The former two funds delivered steady returns of 6.88% and 8.31%,
respectively, or not much different than the Lehman Brothers
Government/Corporate Bond Index, which returned 8.06% for the period. These two
funds exhibited shorter portfolio durations than the benchmark, which reduced
their potential to benefit from declining interest rates. (Of course, these
funds were also less exposed to potential damage from rising rates.) Templeton
Global Bond Fund, in contrast, returned 3.42%, with performance dampened by the
strength of the U.S. dollar relative to major foreign currencies.
Conclusion
On balance, the Fund's asset allocation had a modestly positive impact on
performance, but this was more than offset by the weak relative performance of
the underlying funds. However, absolute and relative Fund performance both were
within the ranges we projected and, in our opinion, consistent with the Fund's
longer-term objectives.
Please remember that this discussion reflects our views and opinions as of July
31, 1998, the end of the reporting period. Market and economic conditions are
changing constantly, which may affect our strategies and portfolio holdings.
Although historic performance is no guarantee of future results, these insights
may help you better understand our investment and management philosophy. The
Fund may invest a portion of its assets in foreign securities, including
emerging markets. The special risks associated with these types of investments,
as well as other considerations, are discussed in the Fund's prospectus.
PERFORMANCE SUMMARY
Class I
Franklin Templeton Conservative Target Fund - Class I produced a +5.41%
cumulative total return for the one-year period ended July 31, 1998. Cumulative
total return measures the change in value of an investment, assuming
reinvestment of all distributions, and does not include the initial sales
charge.
The Fund's share price, as measured by net asset value, increased $0.13, from
$10.87 on July 31, 1997, to $11.00 on July 31, 1998. During the reporting
period, shareholders received per-share distributions totaling 38.2 cents
($0.382) in income dividends, 3.1 cents ($0.031) in short-term capital gains,
and 2.9 cents ($0.029) in long-term capital gains. Distributions will vary
depending on income earned by the Fund, any profits realized from the sale of
securities in the portfolio, the level of the Fund's operating expenses, and the
impact of these same factors on the underlying funds held in our portfolio.
The graph on the following page compares the performance of Franklin Templeton
Conservative Target Fund - Class I with that of the Standard & Poor's(R) 500
stock index (S&P 500),1 the Morgan Stanley Capital International Europe
Australasia and Far East Index (MSCI-EAFE),2 the Lehman Brothers
Government/Corporate Bond Index (LBGC),3 and the 91-day U.S. Treasury Bill
Index4 for the period since inception on December 31, 1996 to July 31, 1998. We
believe these four indexes are representative of the major categories of the
Fund's allocations. Unmanaged indexes have an inherent performance differential
over any fund. They do not pay management fees to cover salaries of securities
analysts or portfolio managers, or pay commissions or market spreads to buy and
sell securities. Unlike indexes, mutual funds are never fully invested because
they need to have cash on hand to redeem shares or pay for upcoming investments.
In addition, the Fund's performance includes the maximum initial sales charge,
all fund expenses and account fees. If the Fund's costs had been applied to the
indexes, their performance would have been lower. Please remember that an index
is simply a measure of performance and cannot be invested in directly.
1. Index includes mainly large-cap U.S. stocks.
2. Index includes large-cap international stocks in 21 developed countries.
3. Index includes U.S. government bonds, and investment grade debt of U.S.
corporations.
4. Index includes the average yield of the 13 most recent 91-day U.S. Treasury
bills. The value of Treasuries, if held to maturity, is fixed; principal is
guaranteed and interest is fixed. Investment return and share price of Franklin
Templeton Conservative Target Fund will fluctuate with market conditions.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Past performance is not predictive of future results.
Franklin Templeton Conservative Target Fund - Class I
Periods ended 7/31/98
Since
Inception
1-Year (12/31/96)
Cumulative Total Return1 5.41% 15.12%
Average Annual Total Return2 0.69% 6.19%
Value of $10,000 Investment3 $10,069 $10,995
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.50% initial
sales charge.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include the sales charge.
The Fund's manager has agreed in advance to waive or limit the asset allocation
fee and/or make certain payments so that the Fund's direct operating expenses do
not exceed 0.75%. Without this agreement, the Fund's direct operating expenses
would have been higher and total returns would have been lower. The fee waiver
may be discontinued at any time, upon notice to the Fund's Board of Trustees,
under conditions noted in the Fund's prospectus.
All total returns assume reinvestment of dividends and capital gains at net
asset value. Since markets can go down as well as up, investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares.
Class II
Franklin Templeton Conservative Target Fund - Class II produced a +4.56%
cumulative total return for the one-year period ended July 31, 1998. Cumulative
total return measures the change in value of an investment, assuming
reinvestment of all distributions, and does not include sales charges.
The Fund's share price, as measured by net asset value, increased $0.11, from
$10.81 on July 31, 1997, to $10.92 on July 31, 1998. During the reporting
period, shareholders received per-share distributions totaling 31.01 cents
($0.3101) in income dividends, 3.1 cents ($0.031) in short-term capital gains,
and 2.9 cents ($0.029) in long-term capital gains. Distributions will vary
depending on income earned by the Fund, any profits realized from the sale of
securities in the portfolio, the level of the Fund's operating expenses, and the
impact of these same factors on the underlying funds held in our portfolio.
The graph on the following page compares the performance of Franklin Templeton
Conservative Target Fund - Class II with that of the Standard & Poor's(R) 500
stock index (S&P 500),1 the Morgan Stanley Capital International Europe
Australasia and Far East Index (MSCI-EAFE),2 the Lehman Brothers
Government/Corporate Bond Index (LBGC),3 and the 91-day U.S. Treasury Bill
Index4 for the period since inception on December 31, 1996 to July 31, 1998. We
believe these four indexes are representative of the major categories of the
Fund's allocations. Unmanaged indexes have an inherent performance differential
over any fund. They do not pay management fees to cover salaries of securities
analysts or portfolio managers, or pay commissions or market spreads to buy and
sell securities. Unlike indexes, mutual funds are never fully invested because
they need to have cash on hand to redeem shares or pay for upcoming investments.
In addition, the Fund's performance includes the maximum initial sales charge,
all fund expenses and account fees. If the Fund's costs had been applied to the
indexes, their performance would have been lower. Please remember that an index
is simply a measure of performance and cannot be invested in directly.
1. Index includes mainly large-cap U.S. stocks.
2. Index includes large-cap international stocks in 21 developed countries.
3. Index includes U.S. government bonds, and investment grade debt of U.S.
corporations.
4. Index includes the average yield of the 13 most recent 91-day U.S. Treasury
bills. The value of Treasuries, if held to maturity, is fixed; principal is
guaranteed and interest is fixed. Investment return and share price of Franklin
Templeton Conservative Target Fund will fluctuate with market conditions.
Past performance is not predictive of future results.
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Templeton Conservative Target Fund - Class II
Periods ended 7/31/98
Since
Inception
1-Year (12/31/96)
Cumulative Total Return1 4.56% 13.43%
Average Annual Total Return2 2.52% 7.62%
Value of $10,000 Investment3 $10,252 $11,230
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and the 1.0% contingent deferred sales charge, as applicable.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include the sales charge.
The Fund's manager has agreed in advance to waive or limit the asset allocation
fee and/or make certain payments so that the Fund's direct operating expenses do
not exceed 1.50%. Without this agreement, the Fund's direct operating expenses
would have been higher and total returns would have been lower. The fee waiver
may be discontinued at any time, upon notice to the Fund's Board of Trustees,
under conditions noted in the Fund's prospectus.
All total returns assume reinvestment of dividends and capital gains at net
asset value. Since markets can go down as well as up, investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares.
Past performance is not predictive of future results.
FRANKLIN TEMPLETON
MODERATE TARGET FUND
Your Fund's Objective: The Franklin Templeton Moderate Target Fund seeks the
highest level of long-term total return achievable at an intermediate level of
risk.
The discussion below provides a general overview of the primary sources of
investment return for the Moderate Target Fund for the one-year period ended
July 31, 1998, and is for informational purposes only. It is important for
investors to recognize that the Fund, and the underlying funds in which the Fund
invests, generally seek to achieve their investment objectives over longer time
horizons than the period under review. Therefore, it is likely that the
performance of the Fund, the underlying funds, and the associated indexes for
any single twelve-month period will vary considerably from the long-term
objectives and/or expectations of the portfolio managers. Past performance is
not necessarily an indication of future performance and, in particular, recent
performance is not a reliable indicator of future long-term performance. No
conclusions, positive or negative, should be drawn from the following analysis
regarding the efficacy of the investment strategy of either the Fund or the
underlying funds in which it invests.
GRAPHIC MATERIAL 4 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Managing Risk and Return
In managing the Moderate Target Fund, we continuously monitor risk and return,
and the evolving tradeoff between them. With respect to risk, we are concerned
with both the absolute and relative variety. Absolute risk relates to the
potential range of actual returns of an investment. Naturally, we are most
interested in controlling the "downside" of that range. Relative risk quantifies
the degree to which performance may vary from a specified index or composite of
indexes. We believe both are important, and that investors want good absolute
performance, as well as performance that is understandable within the context of
the current market environment.
Managing tradeoffs requires us to make both objective and subjective evaluations
of risk and return. First, there is always a tradeoff to be made between
absolute and relative risk. A case in point: toward the end of the reporting
period, our risk measurements indicated a rising level of absolute risk
associated with a typical stock-bond mix. Consequently, we adjusted the
portfolio to increase the importance assigned to controlling absolute risk, at
the expense of accepting somewhat greater relative risk. In practice, this meant
a modest shift in portfolio weightings away from growth stocks -- those sporting
higher earnings growth rates and price-earnings multiples -- toward value and
special situation stocks, which we expect to perform relatively better in the
event of a market downturn. The changing balance of risk also resulted in a
small shift from U.S. government securities into higher-yielding corporate
bonds, which have both debt and equity characteristics and usually exhibit less
interest-rate sensitivity than lower-yielding bonds.
Absolute Risk -- The potential range of actual returns of an investment.
Relative Risk -- The return of a particular investment relative to a possible
alternative investment.
There is also, of course, a tradeoff to be made between risk and return. We are
continuously presented with a multitude of portfolio choices along the
risk-return spectrum. However, the tradeoff between risk and return changes over
time. In some periods, higher expected returns are associated with only a modest
amount of incremental risk. Recently, however, our models suggested that we
would have to take on considerable extra risk to increase or even maintain the
levels of expected return that have prevailed over the past few years.
Therefore, we have gradually adjusted over time the risk-return characteristics
of the Moderate Target Fund, moving in the direction of less risk and accepting
slightly lower return expectations in the process.
During the twelve months under review, the Fund's Class I shares had a total
return of 3.71%, as discussed in the Performance Summary on page 26. This
performance was affected both by its asset allocation and by securities
selection within the various underlying funds in which it was invested.
Asset Allocation
The table to the left illustrates the benchmark allocations we use in managing
the Moderate Target Fund. During the fiscal year, the Fund benefited from an
exposure to U.S. equities (averaging about 48% of net assets) significantly
above our benchmark percentage. Despite their recent volatility, U.S. equities,
as measured by the unmanaged Standard & Poor's 500 (S&P 500(R)) stock index
turned in a strong performance for the twelve months under review, achieving a
total return of 19.28%. Included in the Fund's U.S. stock holdings was a nearly
5% average allocation to utility stocks, which performed very well in the
declining interest rate environment.
Benchmark Allocation
by Investment Type
U.S. Equities 35%
International Equities 15%
U.S. Fixed Income 35%
Short-Term Obligations
& Other Net Assets 15%
The period was difficult and volatile for many foreign markets. The value of the
Morgan Stanley Capital International (MSCI(R)) Europe, Australasia and Far East
(EAFE) Index, which includes stock markets of industrialized countries outside
the U.S., gained only 5.47%. At the same time, the value of the MSCI Emerging
Markets Index, which includes stocks in developing economies, declined a
remarkable 38.07%, reflecting the turmoil in Southeast Asian and other emerging
equity and currency markets. The Fund held a fairly neutral stance on
international equities during the period, but performance was adversely affected
by the fact that, on average, about 3% of the Fund's assets were invested in the
very weak emerging markets equity sector.
During the year under review, U.S. bonds benefited from the anticipated
deflationary effects of the Asian slowdown, and the Lehman Brothers
Government/Corporate Bond Index generated a return of 8.06%. A significant
underweighting of assets in the fixed-income sector also detracted from the
Fund's performance.
Securities Selection1
The Fund's four largest equity fund investments during the period were Franklin
Growth Fund, Mutual Discovery Fund, Mutual Shares Fund, and Franklin Equity
Fund, which in aggregate comprised approximately 50% of the Fund's average
assets. Each fund turned in a strong absolute performance over the period, with
returns ranging between 9% and 14%, but each significantly trailed the S&P 500's
19.28% return for the period. In the case of the first three funds, this
underperformance was due largely to their "value orientation." During the
reporting period, the market was largely driven by large-cap stocks with high
price/earnings ratios. In such a period, value-oriented funds tend to hold
out-of-favor stocks and higher-than-average cash positions, which diminished our
relative performance. Though more "growth oriented" than the other three funds,
Franklin Equity Fund still applies a "growth at a reasonable price" criterion
that, in hindsight, excluded many market leaders from its portfolio. The
Moderate Target Fund's performance was also hampered by the performance of our
holdings in Templeton Foreign Fund and Templeton Developing Markets Trust, which
accounted for roughly 5.5% and 2.5%, respectively, of the Fund's average assets
over the period. These two funds also use a value-driven investment style.
1. All references to underlying funds refer to their Advisor Class or Class Z
shares.
On the fixed-income side, the Fund's two largest investments were Franklin U.S.
Government Securities Fund and Franklin's AGE High Income Fund, which together
averaged about 21% of the Fund's assets over the period. These funds delivered
steady returns of 6.88% and 8.31%, respectively, or not much different than the
Lehman Brothers Government/Corporate Bond Index, which returned 8.06% for the
period. These two funds exhibited shorter portfolio durations than the
benchmark, which reduced their potential to benefit from declining interest
rates. (Of course, these funds were also less exposed to potential damage from
rising rates.)
Conclusion
On balance, the Fund's asset allocation had a neutral impact on performance,
while securities selection at the underlying fund level resulted in these funds'
weak relative performance and detracted from the overall performance of the
Moderate Target Fund. However, absolute and relative Fund performance both were
within the ranges we projected and, in our opinion, consistent with the Fund's
longer-term objectives.
Please remember that this discussion reflects our views and opinions as of July
31, 1998, the end of the reporting period. Market and economic conditions are
changing constantly, which may affect our strategies and portfolio holdings.
Although historic performance is no guarantee of future results, these insights
may help you better understand our investment and management philosophy. The
Fund may invest a portion of its assets in foreign securities, including
emerging markets. The special risks associated with these types of investments,
as well as other considerations, are discussed in the Fund's prospectus.
PERFORMANCE SUMMARY
Class I
Franklin Templeton Moderate Target Fund - Class I reported a +3.71% cumulative
total return for the one-year period ended July 31, 1998. Cumulative total
return measures the change in value of an investment, assuming reinvestment of
all distributions and does not include the initial sales charge.
The fund's share price, as measured by net asset value, decreased $0.49, from
$11.26 on July 31, 1997, to $10.77 on July 31, 1998. During the reporting
period, shareholders received per-share distributions totaling 38.4 cents
($0.384) in income dividends, 43.52 cents ($0.4352) in short-term capital gains,
and 5.28 cents ($0.0528) in long-term capital gains. Distributions will vary
depending on income earned by the fund, any profits realized from the sale of
securities in the fund's portfolio, the level of the fund's operating expenses,
and the impact of these same factors on the underlying funds held in our
portfolio.
The graph on the following page compares the performance of Franklin Templeton
Moderate Target Fund - Class I with that of the Standard & Poor's 500 stock
index (S&P 500),1 the Morgan Stanley Capital International Europe Australasia
and Far East Index (MSCI-EAFE),2 the Lehman Brothers Government/Corporate Bond
Index (LBGC),3 and the 91-day U.S. Treasury Bill Index4 for the period since
inception on December 31, 1996 to July 31, 1998. We believe these four indexes
are representative of the major categories of the Fund's allocations. Unmanaged
indexes have an inherent performance differential over any fund. They do not pay
management fees to cover salaries of securities analysts or portfolio managers,
or pay commissions or market spreads to buy and sell securities. Unlike indexes,
mutual funds are never fully invested because they need to have cash on hand to
redeem shares or pay for upcoming investments. In addition, the Fund's
performance includes the maximum initial sales charge, all fund expenses and
account fees. If the Fund's costs had been applied to the indexes, their
performance would have been lower. Please remember that an index is simply a
measure of performance and cannot be invested in directly.
1. Index includes mainly large-cap U.S. stocks.
2. Index includes large-cap international stocks in 21 developed countries.
3. Index includes U.S. government bonds, and investment grade debt of U.S.
corporations.
4. Index includes the average yield of the 13 most recent 91-day U.S. Treasury
bills. The value of Treasuries, if held to maturity, is fixed; principal is
guaranteed and interest is fixed. Investment return and share price of Franklin
Templeton Moderate Target Fund will fluctuate with market conditions.
Past performance is not predictive of future results.
GRAPHIC MATERIAL 5 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Templeton Moderate Target Fund - Class I
Periods ended 7/31/98
Since
Inception
1-Year (12/31/96)
Cumulative Total Return1 3.71% 17.25%
Average Annual Total Return2 -0.95% 7.43%
Value of $10,000 Investment3 $9,905 $11,199
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.50% initial
sales charge.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include the sales charge.
The Fund's manager has agreed in advance to waive or limit the asset allocation
fee and/or make certain payments so that the Fund's direct operating expenses do
not exceed 0.75%. Without this agreement, the Fund's direct operating expenses
would have been higher and total returns would have been lower. The fee waiver
may be discontinued at any time, upon notice to the Fund's Board of Trustees,
under conditions noted in the Fund's prospectus.
All total returns assume reinvestment of dividends and capital gains at net
asset value. Since markets can go down as well as up, investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares.
Class II
Franklin Templeton Moderate Target Fund - Class II produced a +2.98% cumulative
total return for the one-year period ended July 31, 1998. Cumulative total
return measures the change in value of an investment, assuming reinvestment of
all distributions, and does not include sales charges.
The Fund's share price, as measured by net asset value, decreased $0.51, from
$11.16 on July 31, 1997, to $10.65 on July 31, 1998. During the reporting
period, shareholders received per-share distributations totaling 32.33 cents
($0.3233) in income dividends, 43.52 cents ($0.4352) in short-term capital
gains, and 5.28 cents ($0.0528) in long-term capital gains. Distributions will
vary depending on income earned by the Fund, any profits realized from the sale
of securities in the fund's portfolio, the level of the Fund's operating
expenses, and the impact of these same factors on the underlying funds held in
our portfolio.
The graph on the following page compares the performance of Franklin Templeton
Moderate Target Fund - Class II with that of the Standard & Poor's 500 stock
index (S&P 500),1 the Morgan Stanley Capital International Europe Australasia
and Far East Index (MSCI-EAFE),2 the Lehman Brothers Government/Corporate Bond
Index (LBGC),3 and the 91-day U.S. Treasury Bill Index4 for the period since
inception on December 31, 1996 to July 31, 1998. We believe these four indexes
are representative of the major categories of the Fund's allocations. Unmanaged
indexes have an inherent performance differential over any fund. They do not pay
management fees to cover salaries of securities analysts or portfolio managers,
or pay commissions or market spreads to buy and sell securities. Unlike indexes,
mutual funds are never fully invested because they need to have cash on hand to
redeem shares or pay for upcoming investments. In addition, the Fund's
performance includes the maximum initial sales charge, all fund expenses and
account fees. If the Fund's costs had been applied to the indexes, their
performance would have been lower. Please remember that an index is simply a
measure of performance and cannot be invested in directly.
1. Index includes mainly large-cap U.S. stocks.
2. Index includes large-cap international stocks in 21 developed countries.
3. Index includes U.S. government bonds, and investment grade debt of U.S.
corporations.
4. Index includes the average yield of the 13 most recent 91-day U.S. Treasury
bills. The value of Treasuries, if held to maturity, is fixed; principal is
guaranteed and interest is fixed. Investment return and share price of Franklin
Templeton Moderate Target Fund will fluctuate with market conditions.
Past performance is not predictive of future results.
GRAPHIC MATERIAL 6 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Templeton Moderate Target Fund - Class II
Periods ended 7/31/98
Since
Inception
1-Year (12/31/96)
Cumulative Total Return1 2.98% 15.18%
Average Annual Total Return2 1.03% 8.67%
Value of $10,000 Investment3 $10,103 $11,404
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and the 1.0% contingent deferred sales charge, as applicable.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include the sales charge.
The Fund's manager has agreed in advance to waive or limit the asset allocation
fee and/or make certain payments so that the Fund's direct operating expenses do
not exceed 1.50%. Without this agreement, the Fund's direct operating expenses
would have been higher and total returns would have been lower. The fee waiver
may be discontinued at any time, upon notice to the Fund's Board of Trustees,
under conditions noted in the Fund's prospectus.
All total returns assume reinvestment of dividends and capital gains at net
asset value. Since markets can go down as well as up, investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares.
FRANKLIN TEMPLETON
GROWTH TARGET FUND
Your Fund's Objective: The Franklin Templeton Growth Target Fund seeks the
highest level of long-term total return achievable at a higher level of risk.
The discussion below provides a general overview of the primary sources of
investment return for the Growth Target Fund for the twelve-month period ended
July 31, 1998, and is for informational purposes only. It is important for
investors to recognize that the Fund, and the underlying funds in which the Fund
invests, generally seek to achieve their investment objectives over longer time
horizons than the period under review. Therefore, it is likely that the
performance of the Fund, the underlying funds, and the associated indexes for
any single one-year period will vary considerably from the long-term objectives
and/or expectations of the portfolio managers. Past performance is not
necessarily an indication of future performance and, in particular, recent
performance is not a reliable indicator of future long-term performance. No
conclusions, positive or negative, should be drawn from the following analysis
regarding the efficacy of the investment strategy of either the Fund or the
underlying funds in which it invests.
GRAPHIC MATERIAL 7 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Managing Risk and Return
In managing the Growth Target Fund, we continuously monitor risk and return, and
the evolving tradeoff between them. With respect to risk, we are concerned with
both the absolute and relative variety. Absolute risk relates to the potential
range of actual returns of an investment. Naturally, we are most interested in
controlling the "downside" of that range. Relative risk quantifies the degree to
which performance may vary from a specified index or composite of indexes. We
believe both are important, and that investors want good absolute performance,
as well as performance that is understandable within the context of the current
market environment.
Managing tradeoffs requires us to make both objective and subjective evaluations
of risk and return. First, there is always a tradeoff to be made between
absolute and relative risk. A case in point: toward the end of the reporting
period, our risk measurements indicated a rising level of absolute risk
associated with a typical stock-bond mix. Consequently, we adjusted the
portfolio to increase the importance assigned to controlling absolute risk, at
the expense of accepting somewhat greater relative risk. In practice, this meant
a modest shift in portfolio weightings away from growth stocks -- those sporting
higher earnings growth rates and price-earnings multiples -- toward value and
special situation stocks, which we expect to perform relatively better in the
event of a market downturn. The changing balance of risk also resulted in a
small shift from U.S. government securities into higher-yielding corporate
bonds, which have both debt and equity characteristics and usually exhibit less
interest-rate sensitivity than lower-yielding bonds.
Absolute Risk -- The potential range of actual returns of an investment.
Relative Risk -- The return of a particular investment relative to a possible
alternative investment.
There is also, of course, a tradeoff to be made between risk and return. We are
continuously presented with a multitude of portfolio choices along the
risk-return spectrum. However, the tradeoff between risk and return changes over
time. In some periods, higher expected returns are associated with only a modest
amount of incremental risk. Recently, however, our models suggested that we
would have to take on considerable extra risk to increase or even maintain the
levels of expected return that have prevailed over the past few years.
Therefore, we have gradually adjusted over time the risk-return characteristics
of the Growth Target Fund, moving in the direction of less risk and accepting
slightly lower return expectations in the process.
During the twelve months under review, the Fund's Class I shares had a total
return of 2.63%, as discussed in the Performance Summary on page 40. This
performance was affected both by its asset allocation and by securities
selection within the various underlying funds in which it was invested.
Asset Allocation
The table to the right illustrates the benchmark allocations we use in managing
the Growth Target Fund. During the fiscal year, the Fund benefited from an
exposure to U.S. equities (averaging about 54% of net assets) significantly
above our benchmark percentage. Despite their recent volatility, U.S. equities,
as measured by the unmanaged Standard & Poor's 500 (S&P 500(R)) stock index
turned in another strongly positive performance for the twelve months under
review, achieving a total return of 19.28%.
Benchmark Allocation
by Investment Type
U.S. Equities 45%
International Equities 20%
U.S. Fixed Income 25%
Short-Term Obligations
& Other Net Assets 10%
The period was difficult and volatile for many foreign markets. The value of the
Morgan Stanley Capital International (MSCI(R)) Europe, Australasia and Far East
(EAFE) Index, which includes stock markets of industrialized countries outside
the U.S., gained only 5.47%. At the same time, the value of the MSCI Emerging
Markets Index, which includes stocks in developing economies, declined a
remarkable 38.07%, reflecting the turmoil in Southeast Asian and other emerging
equity and currency markets. The Fund's performance was helped by a modestly
underweight position in international equities, although this advantage was more
than offset by the fact that, on average, about 4% of the Fund's assets were
invested in the very weak emerging markets equity sector.
During the period under review, U.S. bonds benefited from the anticipated
deflationary effects of the Asian slowdown, and the Lehman Brothers
Government/Corporate Bond Index generated a return of 8.06%. A significant
underweighting of assets in the fixed-income sector also detracted from the
Fund's performance.
Securities Selection1
The Fund's four largest equity fund investments during the period were Franklin
Equity Fund, Franklin Growth Fund, Mutual Discovery Fund, and Mutual Shares
Fund, which in aggregate comprised approximately 57% of the Fund's average net
assets. Although each fund turned in a strong absolute performance over the
period, with returns ranging between 9% and 14%, each significantly trailed the
S&P 500's 19.28% return. In the case of the latter three funds, this
underperformance was due largely to their "value orientation." During the
reporting period, the market was largely driven by large-cap stocks with high
price/earnings ratios. In such a period, value-oriented funds tend to hold
out-of-favor stocks and higher-than-average cash positions, which diminished our
relative performance. Though more "growth oriented" than the other three funds,
Franklin Equity Fund still applies a "growth at a reasonable price" criterion
that, in hindsight, excluded many market leaders from its portfolio. The Growth
Target Fund's performance was also hampered by the performance of our holdings
in Templeton Foreign Fund and Templeton Developing Markets Trust, which
accounted for roughly 5.5% and 2.5%, respectively, of the Fund's average assets
over the period. These funds also use a value-driven investment style.
1. All references to underlying funds refer to their Advisor Class or Class Z
shares.
On the fixed-income side, the Fund's three largest investments were Franklin
U.S. Government Securities Fund, Franklin's AGE High Income Fund, and Templeton
Global Bond Fund, which together averaged about 12% of the Fund's assets over
the period. The former two funds delivered steady returns of 6.88% and 8.31%,
respectively, or not much different than the Lehman Brothers
Government/Corporate Bond Index, which returned 8.06% for the period. These two
funds exhibited shorter portfolio durations than the benchmark, which reduced
their potential to benefit from declining interest rates. (Of course, these
funds were also less exposed to potential damage from rising rates.) Templeton
Global Bond Fund, in contrast, returned 3.42%, with performance dampened by the
strength of the U.S. dollar relative to major foreign currencies.
Conclusion
On balance, the Fund's asset allocation had a neutral impact on performance,
while securities selection at the underlying fund level resulted in these funds'
weak relative performance and detracted from the overall performance of the
Growth Target Fund.
Please remember that this discussion reflects our views and opinions as of July
31, 1998, the end of the reporting period. Market and economic conditions are
changing constantly, which may affect our strategies and portfolio holdings.
Although historic performance is no guarantee of future results, these insights
may help you better understand our investment and management philosophy. The
Fund may invest a portion of its assets in foreign securities, including
emerging markets. The special risks associated with these types of investments,
as well as other considerations, are discussed in the Fund's prospectus.
PERFORMANCE SUMMARY
Class I
Franklin Templeton Growth Target Fund - Class I reported a +2.63% cumulative
total return for the one-year period ended July 31, 1998. Cumulative total
return measures the change in value of an investment, assuming reinvestment of
all distributions and does not include the initial sales charge.
The fund's share price, as measured by net asset value, decreased $0.17, from
$11.33 on July 31, 1997, to $11.16 on July 31, 1998. During the reporting
period, shareholders received per-share distributions totaling 30.1 cents
($0.301) in income dividends, 7.9 cents ($0.079) in short-term capital gains,
and 6.6 cents ($0.066) in long-term capital gains. Distributions will vary
depending on income earned by the fund, any profits realized from the sale of
securities in the fund's portfolio, the level of the fund's operating expenses,
and the impact of these same factors on the underlying funds held in our
portfolio.
The graph on the following page compares the performance of Franklin Templeton
Growth Target Fund - Class I with that of the Standard & Poor's 500 stock index
(S&P 500),1 the Morgan Stanley Capital International Europe Australasia and Far
East Index (MSCI-EAFE),2 the Lehman Brothers Government/Corporate Bond Index
(LBGC),3 and the 91-day U.S. Treasury Bill Index4 for the period since inception
on December 31, 1996 to July 31, 1998. We believe these four indexes are
representative of the major categories of the Fund's allocations. Unmanaged
indexes have an inherent performance differential over any fund. They do not pay
management fees to cover salaries of securities analysts or portfolio managers,
or pay commissions or market spreads to buy and sell securities. Unlike indexes,
mutual funds are never fully invested because they need to have cash on hand to
redeem shares or pay for upcoming investments. In addition, the Fund's
performance includes the maximum initial sales charge, all fund expenses and
account fees. If the Fund's costs had been applied to the indexes, their
performance would have been lower. Please remember that an index is simply a
measure of performance and cannot be invested in directly.
1. Index includes mainly large-cap U.S. stocks.
2. Index includes large-cap international stocks in 21 developed countries.
3. Index includes U.S. government bonds, and investment grade debt of U.S.
corporations.
4. Index includes the average yield of the 13 most recent 91-day U.S. Treasury
bills. The value of Treasuries, if held to maturity, is fixed; principal is
guaranteed and interest is fixed. Investment return and share price of Franklin
Templeton Growth Target Fund will fluctuate with market conditions.
GRAPHIC MATERIAL 8 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Since
Inception
1-Year (12/31/96)
Cumulative Total Return1 2.63% 16.28%
Average Annual Total Return2 -1.95% 6.87%
Value of $10,000 Investment3 $9,805 $11,106
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.50% initial
sales charge.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include the sales charge.
The Fund's manager has agreed in advance to waive or limit the asset allocation
fee and/or make certain payments so that the Fund's direct operating expenses do
not exceed 0.75%. Without this agreement, the Fund's direct operating expenses
would have been higher and total returns would have been lower. The fee waiver
may be discontinued at any time, upon notice to the Fund's Board of Trustees,
under conditions noted in the Fund's prospectus.
All total returns assume reinvestment of dividends and capital gains at net
asset value. Since markets can go down as well as up, investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares.
Class II
Franklin Templeton Growth Target Fund - Class II produced a +1.84% cumulative
total return for the one-year period ended July 31, 1998. Cumulative total
return measures the change in value of an investment, assuming reinvestment of
all distributions, and does not include sales charges.
The Fund's share price, as measured by net asset value, decreased $0.22, from
$11.30 on July 31, 1997, to $11.08 on July 31, 1998. During the reporting
period, shareholders received per-share distributations totaling 26.38 cents
($0.2638) in income dividends, 7.9 cents ($0.079) in short-term capital gains,
and 6.6 cents ($0.066) in long-term capital gains. Distributions will vary
depending on income earned by the Fund, any profits realized from the sale of
securities in the fund's portfolio, the level of the Fund's operating expenses,
and the impact of these same factors on the underlying funds held in our
portfolio.
The graph on the following page compares the performance of Franklin Templeton
Growth Target Fund - Class II with that of the Standard & Poor's 500 stock index
(S&P 500),1 the Morgan Stanley Capital International Europe Australasia and Far
East Index (MSCI-EAFE),2 the Lehman Brothers Government/Corporate Bond Index
(LBGC),3 and the 91-day U.S. Treasury Bill Index4 for the period since inception
on December 31, 1996 to July 31, 1998. We believe these four indexes are
representative of the major categories of the Fund's allocations. Unmanaged
indexes have an inherent perform- ance differential over any fund. They do not
pay management fees to cover salaries of securities analysts or portfolio
managers, or pay commissions or market spreads to buy and sell securities.
Unlike indexes, mutual funds are never fully invested because they need to have
cash on hand to redeem shares or pay for upcoming investments. In addition, the
fund's performance includes the maximum initial sales charge, all Fund expenses
and account fees. If the Fund's costs had been applied to the indexes, their
performance would have been lower. Please remember that an index is simply a
measure of performance and cannot be invested in directly.
1. Index includes mainly large-cap U.S. stocks.
2. Index includes large-cap international stocks in 21 developed countries.
3. Index includes U.S. government bonds, and investment grade debt of U.S.
corporations.
4. Index includes the average yield of the 13 most recent 91-day U.S. Treasury
bills. The value of Treasuries, if held to maturity, is fixed; principal is
guaranteed and interest is fixed. Investment return and share price of Franklin
Templeton Growth Target Fund will fluctuate with market conditions.
Past performance is not predictive of future results.
GRAPHIC MATERIAL 9 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Templeton Growth Target Fund - Class II
Periods ended 7/31/98
Since
Inception
1-Year (12/31/96)
Cumulative Total Return1 1.84% 15.07%
Average Annual Total Return2 -0.12% 8.61%
Value of $10,000 Investment3 $9,988 $11,393
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and the 1.0% contingent deferred sales charge, as applicable.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include the sales charge.
The Fund's manager has agreed in advance to waive or limit the asset allocation
fee and/or make certain payments so that the Fund's direct operating expenses do
not exceed 1.50%. Without this agreement, the Fund's direct operating expenses
would have been higher and total returns would have been lower. The fee waiver
may be discontinued at any time, upon notice to the Fund's Board of Trustees,
under conditions noted in the Fund's prospectus.
All total returns assume reinvestment of dividends and capital gains at net
asset value. Since markets can go down as well as up, investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares.
Past performance is not predictive of future results.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Financial Highlights
Franklin Templeton Conservative Target Fund
<TABLE>
<CAPTION>
CLASS I
YEAR ENDED JULY 31,
---------------------
1998 1997***
---------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year................................................ $10.87 $10.00
---------------------
Income from investment operations:
Net investment income ........................................................... .39 .12
Net realized and unrealized gains ............................................... .18 .80
---------------------
Total from investment operations.................................................. .57 .92
---------------------
Less distributions from:
Net investment income............................................................ (.38) (.05)
Net realized gains............................................................... (.06) --
---------------------
Total distributions............................................................... (.44) (.05)
----------------------
Net asset value, end of year...................................................... $11.00 $10.87
======================
Total return*..................................................................... 5.41% 9.21%
Ratios/supplemental data
Net assets, end of year (000's)................................................... $11,637 $1,609
Ratios to average net assets:
Expenses......................................................................... .76% .59%**
Expenses excluding waiver and payments by affiliate.............................. 1.07% 3.64%**
Net investment income............................................................ 3.88% 3.93%**
Portfolio turnover rate........................................................... 141.96% 33.30%
*Total return does not reflect sales commission or the contingent deferred sales charge, and is not annualized.
**Annualized.
***For the period December 31, 1996 (effective date) to July 31, 1997.
Franklin Templeton Conservative Target Fund (cont.)
CLASS II
YEAR ENDED JULY 31,
---------------------
1998 1997***
---------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year................................................ $10.81 $10.00
---------------------
Income from investment operations:
Net investment income ........................................................... .33 .10
Net realized and unrealized gains ............................................... .15 .75
---------------------
Total from investment operations.................................................. .48 .85
---------------------
Less distributions from:
Net investment income............................................................ (.31) (.04)
Net realized gains............................................................... (.06) --
---------------------
Total distributions............................................................... (.37) (.04)
----------------------
Net asset value, end of year...................................................... $10.92 $10.81
======================
Total return*..................................................................... 4.56% 8.48%
Ratios/supplemental data
Net assets, end of year (000's)................................................... $10,218 $3,010
Ratios to average net assets:
Expenses......................................................................... 1.50% 1.48%**
Expenses excluding waiver and payments by affiliate.............................. 1.81% 4.53%**
Net investment income............................................................ 3.27% 3.04%**
Portfolio turnover rate........................................................... 141.96% 33.30%
*Total return does not reflect sales commission or the contingent deferred sales charge, and is not annualized.
**Annualized.
***For the period December 31, 1996 (effective date) to July 31, 1997.
See notes to financial statements.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Statement of Investments, July 31, 1998
Franklin Templeton Conservative Target Fund SHARES VALUE
<S> <C> <C>
a Mutual Funds 93.0%
Franklin's AGE High Income Fund............................................... 517,299 $1,531,207
Franklin Equity Fund.......................................................... 146,725 1,558,228
Franklin Growth Fund.......................................................... 108,480 3,209,945
Franklin Real Estate Securities Fund.......................................... 45,343 735,017
Franklin Small Cap Growth Fund................................................ 17,869 394,012
Franklin U.S. Government Securities Fund...................................... 1,050,489 7,258,885
Franklin Utilities Fund....................................................... 81,410 862,136
Franklin Value Fund........................................................... 19,080 391,348
Mutual Discovery Fund......................................................... 98,618 1,989,141
Mutual European Fund.......................................................... 41,231 597,862
Mutual Shares Fund............................................................ 38,559 839,050
Templeton Developing Markets Trust............................................ 20,208 215,222
Templeton Foreign Fund........................................................ 73,533 742,689
-------------
Total Long Term Investments (Cost $20,541,525)................................ 20,324,742
-------------
PRINCIPAL
AMOUNT
b Repurchase Agreement 6.6%
Joint Repurchase Agreement, 5.602%, 8/03/98,
(Maturity Value $1,432,752) (Cost $1,432,083)..................................... $1,432,083 1,432,083
BancAmerica Robertson Stephens
Barclays Capital Group, Inc.
Bear, Stearns & Co., Inc.
BT Alex Brown, Inc.
Chase Securities, Inc.
CIBC Wood Gundy Securities Corp.
Deutsche Morgan Grenfell/C.J. Lawrence, Inc.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America, L.L.C.
Greenwich Capital Markets, Inc.
Paribas Corp.
SBC Warburg Dillon Read, Inc.
Collateralized by U.S. Treasury Bills and Notes
Total Investments (Cost $21,973,608) 99.6%.................................... 21,756,825
Other Assets, less Liabilities .4%............................................ 98,236
-------------
Net Assets 100.0%............................................................. $21,855,061
=============
aAll investments in the underlying funds are in Advisor Class or Class Z shares of those funds. Such shares carry no
sales charges or distribution fees.
bInvestment is through participation in a joint account with other funds managed by the investment advisor. At July
31,1998, all repurchase agreements had been
entered into on that date.
See notes to financial statements.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Financial Highlights
Franklin Templeton Moderate Target Fund
CLASS I
YEAR ENDED JULY 31,
------------------------
1998**** 1997***
------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year................................................ $11.26 $10.00
------------------------
Income from investment operations:
Net investment income ........................................................... .37 .17
Net realized and unrealized gains ............................................... .01 1.13
------------------------
Total from investment operations.................................................. .38 1.30
------------------------
Less distributions from:
Net investment income............................................................ (.38) (.04)
Net realized gains............................................................... (.49) --
------------------------
Total distributions............................................................... (.87) (.04)
------------------------
Net asset value, end of year...................................................... $10.77 $11.26
========================
Total return*..................................................................... 3.71% 13.05%
Ratios/supplemental data
Net assets, end of year (000's)................................................... $23,028 $6,498
Ratios to average net assets:
Expenses......................................................................... .77% .67%**
Expenses excluding waiver and payments by affiliate.............................. .94% 1.26%**
Net investment income............................................................ 3.37% 2.69%**
Portfolio turnover rate........................................................... 124.87% 264.78%
*Total return does not reflect sales commission or the contingent deferred sales charge, and is not annualized.
**Annualized.
***For the period December 31, 1996 (effective date) to July 31, 1997.
****Per share amounts have been calculated using the daily average shares outstanding during the period.
Franklin Templeton Moderate Target Fund (cont.)
CLASS II
YEAR ENDED JULY 31,
------------------------
1998**** 1997***
------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year................................................ $11.16 $10.00
------------------------
Income from investment operations:
Net investment income.......................................................... . .30 .07
Net realized and unrealized gains (losses)....................................... -- 1.11
------------------------
Total from investment operations.................................................. .30 1.18
------------------------
Less distributions from:
Net investment income............................................................ (.32) (.02)
Net realized gains............................................................... (.49) --
------------------------
Total distributions............................................................... (.81) (.02)
------------------------
Net asset value, end of year...................................................... $10.65 $11.16
========================
Total return*..................................................................... 2.98% 11.84%
Ratios/supplemental data
Net assets, end of year (000's)................................................... $19,501 $4,695
Ratios to average net assets:
Expenses......................................................................... 1.50% 1.50%**
Expenses excluding waiver and payments by affiliate.............................. 1.68% 2.09%**
Net investment income............................................................ 2.75% 1.86%**
Portfolio turnover rate........................................................... 124.87% 264.78%
*Total return does not reflect sales commission or the contingent deferred sales charge, and is not annualized.
**Annualized.
***For the period December 31, 1996 (effective date) to July 31, 1997.
****Per share amounts have been calculated using the daily average shares outstanding during the period.
See notes to financial statements.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Statement of Investments, July 31, 1998
Franklin Templeton Moderate Target Fund SHARES VALUE
<S> <C> <C>
a Mutual Funds 99.4%
Franklin's AGE High Income Fund............................................... 1,459,579 $ 4,320,355
Franklin Equity Fund.......................................................... 463,653 4,923,995
Franklin Growth Fund.......................................................... 253,431 7,499,030
Franklin Real Estate Securities Fund.......................................... 151,268 2,452,059
Franklin Small Cap Growth Fund................................................ 63,218 1,393,957
Franklin U.S. Government Securities Fund...................................... 574,259 3,968,136
Franklin Utilities Fund....................................................... 167,334 1,772,074
Franklin Value Fund........................................................... 67,587 1,386,225
Mutual Discovery Fund......................................................... 260,630 5,256,909
Mutual European Fund.......................................................... 146,382 2,122,546
Mutual Shares Fund............................................................ 139,446 3,034,358
Templeton Developing Markets Trust............................................ 68,741 732,101
Templeton Foreign Fund........................................................ 210,563 2,126,696
Templeton Global Bond Fund.................................................... 136,394 1,305,298
-------------
Total Long Term Investments ($42,741,822)..................................... 42,293,739
-------------
PRINCIPAL
AMOUNT
b Repurchase Agreement .7%
Joint Repurchase Agreement, 5.602%, 8/03/98,
(Maturity Value $276,561) (Cost $276,432)......................................... $276,432 276,432
BancAmerica Robertson Stephens
Barclays Capital Group, Inc.
Bear, Stearns & Co., Inc.
BT Alex Brown, Inc.
Chase Securities, Inc.
CIBC Wood Gundy Securities Corp.
Deutsche Morgan Grenfell/C.J. Lawrence, Inc.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America, L.L.C.
Greenwich Capital Markets, Inc.
Paribas Corp.
SBC Warburg Dillon Read, Inc.
Collateralized by U.S. Treasury Bills and Notes
Total Investments (Cost $43,018,254) 100.1%................................... 42,570,171
Other Assets, less Liabilities (.1%).......................................... (40,526)
-------------
Net Assets 100.0%............................................................. $42,529,645
=============
aAll investments in the underlying funds are in Advisor Class or Class Z shares of those funds. Such shares carry no
sales charges or distribution fees.
bInvestment is through participation in a joint account with other funds managed by the investment advisor. At July 31,
1998, all repurchase agreements had been
entered into on that date.
See notes to financial statements.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Financial Highlights
Franklin Templeton Growth Target Fund
CLASS I
YEAR ENDED JULY 31,
------------------------
1998 1997***
------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year................................................ $11.33 $10.00
------------------------
Income from investment operations:
Net investment income ........................................................... .33 .05
Net realized and unrealized gains (losses)....................................... (.05) 1.28
------------------------
Total from investment operations.................................................. .28 1.33
------------------------
Less distributions from:
Net investment income............................................................ (.30) --
Net realized gains............................................................... (.15) --
------------------------
Total distributions............................................................... (.45) --
------------------------
Net asset value, end of year...................................................... $11.16 $11.33
========================
Total return*..................................................................... 2.63% 13.30%
Ratios/supplemental data
Net assets, end of year (000's)................................................... $27,042 $9,638
Ratios to average net assets:
Expenses......................................................................... .75% .73%**
Expenses excluding waiver and payments by affiliate.............................. .98% 2.19%**
Net investment income............................................................ 2.80% 2.65%**
Portfolio turnover rate........................................................... 118.19% 65.52%
*Total return does not reflect sales commission or the contingent deferred sales
charge, and is not annualized.
**Annualized.
***For the period December 31, 1996 (effective date) to July 31, 1997.
Franklin Templeton Growth Target Fund (cont.)
CLASS II
YEAR ENDED JULY 31,
------------------------
1998 1997***
------------------------
<S> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year................................................ $11.30 $10.00
------------------------
Income from investment operations:
Net investment income ........................................................... .24 .04
Net realized and unrealized gains (losses)....................................... (.05) 1.26
------------------------
Total from investment operations.................................................. .19 1.30
------------------------
Less distributions from:
Net investment income............................................................ (.26) --
Net realized gains............................................................... (.15) --
------------------------
Total distributions............................................................... (.41) --
------------------------
Net asset value, end of year...................................................... $11.08 $11.30
========================
Total return*..................................................................... 1.84% 13.00%
Ratios/supplemental data
Net assets, end of year (000's)................................................... $20,752 $4,733
Ratios to average net assets:
Expenses......................................................................... 1.50% 1.49%**
Expenses excluding waiver and payments by affiliate.............................. 1.73% 2.95%**
Net investment income............................................................ 1.97% 1.89%**
Portfolio turnover rate........................................................... 118.19% 65.52%
*Total return does not reflect sales commission or the contingent deferred sales charge, and is not annualized.
**Annualized.
***For the period December 31, 1996 (effective date) to July 31, 1997.
See notes to financial statements.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Statement of Investments, July 31, 1998
Franklin Templeton Growth Target Fund SHARES VALUE
<S> <C> <C>
a Mutual Funds 99.9%
Franklin's AGE High Income Fund............................................... 669,169 $1,980,741
Franklin Equity Fund.......................................................... 623,659 6,623,262
Franklin Growth Fund.......................................................... 328,306 9,714,603
Franklin Real Estate Securities Fund.......................................... 95,440 1,547,098
Franklin Small Cap Growth Fund................................................ 102,357 2,256,983
Franklin U.S. Government Securities Fund...................................... 214,592 1,482,836
Franklin Utilities Fund....................................................... 103,567 1,096,777
Franklin Value Fund........................................................... 109,421 2,244,229
Mutual Discovery Fund......................................................... 295,499 5,960,232
Mutual European Fund.......................................................... 233,072 3,379,552
Mutual Shares Fund............................................................ 193,230 4,204,688
Templeton Developing Markets Trust............................................ 114,652 1,221,045
Templeton Foreign Fund........................................................ 310,375 3,134,795
Templeton Global Bond Fund.................................................... 206,138 1,972,746
Templeton Global Small Company Growth ........................................ 114,376 945,898
-------------
Total Long Term Investments (Cost $48,643,594)................................ 47,765,485
-------------
PRINCIPAL
AMOUNT
b Repurchase Agreement 1.7%
Joint Repurchase Agreement, 5.602%, 8/03/98,
(Maturity Value $805,662) (Cost $805,286) .................................... $805,286 805,286
BancAmerica Robertson Stephens
Barclays Capital Group, Inc.
Bear, Stearns & Co., Inc.
BT Alex Brown, Inc.
Chase Securities Inc.
CIBC Wood Gundy Securities Corp.
Deutsche Morgan Grenfell/C.J. Lawrence, Inc.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America, L.L.C.
Greenwich Capital Markets, Inc.
Paribas Corp.
SBC Warburg Dillon Read, Inc.
Collateralized by U.S. Treasury Bills and Notes
Total Investments (Cost $49,448,880) 101.6 %.................................. 48,570,771
Other Assets, less Liabilities (1.6)%......................................... (776,594)
-------------
Net Assets 100.0%............................................................. $47,794,177
=============
aAll investments in the underlying funds are in Advisor Class or Class Z shares of those funds. Such shares carry no
sales charges or Rule 12b-1 fees.
bInvestment is through participation in a joint account with other funds managed by the investment advisor. At July 31,
1998, all repurchase agreements had been
entered into on that date.
See notes to financial statements.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Financial Statements
Statements of Assets and Liabilities
July 31, 1998
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
-----------------------------------------------
<S> <C> <C> <C>
Assets:
Investments in securities:
Cost ................................................... $21,973,608 $43,018,254 $49,448,880
===============================================
Value .................................................... 21,756,825 42,570,171 48,570,771
Cash .................................................... 64,333 24,010 22,611
Receivables:
Capital shares sold ...................................... 37,065 255,261 123,947
Organization costs ...................................... 46,694 46,694 46,694
-----------------------------------------------
Total assets ............................................. 21,904,917 42,896,136 48,764,023
-----------------------------------------------
Liabilities:
Payables:
Investment securities purchased .......................... -- 260,000 790,000
Capital shares redeemed .................................. 3,750 2,050 110,174
Affiliates ............................................... 40,211 86,367 44,718
Shareholders ............................................. 292 6,424 8,235
Other liabilities......................................... 5,603 11,650 16,719
-----------------------------------------------
Total liabilities ........................................ 49,856 366,491 969,846
-----------------------------------------------
Net assets, at value ..................................... $21,855,061 $42,529,645 $47,794,177
===============================================
Net assets consist of:
Undistributed net investment income ..................... $132,272 $187,741 $155,461
Net unrealized depreciation ............................. (216,783) (448,083) (878,109)
Accumulated net realized gain ........................... 255,331 402,912 681,750
Capital shares .......................................... 21,684,241 42,387,075 47,835,075
-----------------------------------------------
Net assets, at value ..................................... $21,855,061 $42,529,645 $47,794,177
===============================================
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
-----------------------------------------------
<S> <C> <C> <C>
Class I:
Net assets, at value .................................... $11,637,456 $23,028,319 $27,042,261
===============================================
Shares outstanding ...................................... 1,057,811 2,137,514 2,422,453
===============================================
Net asset value per share* .............................. $11.00 $10.77 $11.16
===============================================
Maximum offering price per share
(net asset value per share / 95.5%)....................... $11.52 $11.28 $11.69
===============================================
Class II:
Net assets, at value .................................... $10,217,605 $19,501,326 $20,751,916
===============================================
Shares outstanding ...................................... 935,350 1,830,957 1,872,304
===============================================
Net asset value per share* .............................. $10.92 $10.65 $11.08
===============================================
Maximum offering price per share
(net asset value per share / 99%)........................ $11.03 $10.76 $11.19
===============================================
*Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See notes to financial statements.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Financial Statements (continued)
Statements of Operations
for the year ended July 31, 1998
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
-----------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends ............................................... $575,613 $1,039,682 $1,066,032
Interest ................................................ 8,158 7,551 8,318
-----------------------------------------------
Total investment income .................................. 583,771 1,047,233 1,074,350
-----------------------------------------------
Expenses:
Asset allocation fees (Note 3) .......................... 31,017 62,386 76,453
Distribution fees (Note 3)
Class I ................................................ 15,354 35,667 43,219
Class II ............................................... 64,663 121,312 133,855
Transfer agent fees (Note 3) ............................ 12,680 29,642 51,976
Reports to shareholders ................................. 3,619 9,843 15,749
Registration and filing fees ............................ 21,132 31,644 31,108
Professional fees ....................................... 7,874 9,492 22,729
Amortization of offering costs .......................... 9,978 9,978 9,978
Amortization of organization costs ...................... 13,667 13,667 13,667
Other ................................................... 341 1,223 1,269
-----------------------------------------------
Total expenses ........................................... 180,325 324,854 400,003
Expenses waived/paid by affiliate (Note 3) ............... (38,524) (43,545) (70,501)
------------------------------------------------
Net expenses ............................................ 141,801 281,309 329,502
-----------------------------------------------
Net investment income .................................. 441,970 765,924 744,848
-----------------------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments............................................. 77,537 18,565 (75,873)
Distributions from Underlying Funds .................... 221,936 624,336 1,078,652
-----------------------------------------------
Net realized gain ..................................... 299,473 642,901 1,002,779
Net unrealized depreciation on investments .............. (426,817) (1,093,493) (1,648,322)
------------------------------------------------
Net realized and unrealized loss ......................... (127,344) (450,592) (645,543)
------------------------------------------------
Net increase in net assets resulting from operations ..... $314,626 $ 315,332 $ 99,305
===============================================
See notes to financial statements.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Financial Statements (continued)
Statements of Changes in Net Assets
for the six months ended July 31, 1998
and the period December 31, 1996 (effective date)to July 31, 1997
Franklin Templeton Franklin Templeton Franklin Templeton
Conservative Target Fund Moderate Target Fund Growth Target Fund
-------------------------------------------------------------------------------------------
1998 1997 1998 1997 1998 1997
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income............. $ 441,970 $ 34,271 $ 765,924 $ 140,811 $ 744,848 $ 55,207
Net realized gain (loss)
from investments................. 299,473 1,422 642,901 608,185 1,002,779 (10,238)
Net unrealized appreciation
(depreciation) on investments.... (426,817) 210,034 (1,093,493) 645,410 (1,648,322) 770,213
===========================================================================================
Net increase
in net assets resulting
from operations.................... 314,626 245,727 315,332 1,394,406 99,305 815,182
Distributions to shareholders from:
Net investment income:
Class I.......................... (177,143) (2,504) (351,014) (44,458) (373,894) --
Class II......................... (162,713) (2,663) (292,695) (3,938) (263,042) --
Net realized gains:
Class I.......................... (24,813) -- (429,281) -- (184,015) --
Class II......................... (31,332) -- (466,577) -- (149,026) --
===========================================================================================
Total distributions to
to shareholders................... (396,001) (5,167) (1,539,567) (48,396) (969,977) --
Capital share transactions: (Note 2)
Class I........................... 10,102,985 1,509,464 17,160,380 5,398,048 17,845,476 9,108,579
Class II.......................... 7,214,620 2,828,807 15,400,546 4,408,896 16,448,949 4,406,663
-------------------------------------------------------------------------------------------
Total capital share transactions... 17,317,605 4,338,271 32,560,926 9,806,944 34,294,425 13,515,242
-------------------------------------------------------------------------------------------
Net increase
in net assets...................... 17,236,230 4,578,831 31,336,691 11,152,954 33,423,753 14,330,424
Net assets:
Beginning of year ................. 4,618,831 40,000 11,192,954 40,000 14,370,424 40,000
-------------------------------------------------------------------------------------------
End of year ....................... $21,855,061 $4,618,831 $42,529,645 $11,192,954 $47,794,177 $14,370,424
===========================================================================================
Undistributed net investment
income included in net assets
End of year....................... $ 132,272 $ 21,261 $ 187,741 $ 55,548 $ 155,461 $ 37,571
===========================================================================================
</TABLE>
See notes to financial statements.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Templeton Fund Allocator Series (the Trust) is registered under the
Investment Company Act of 1940 as an open-end, non-diversified investment
company, consisting of three series (the Funds): Franklin Templeton Conservative
Target Fund (the Conservative Target Fund), Franklin Templeton Moderate Target
Fund (the Moderate Target Fund), and Franklin Templeton Growth Target Fund (the
Growth Target Fund). The Funds' investment objectives are to seek the highest
level of long-term total return that is consistent with an acceptable level of
risk. The following summarizes the Funds' significant accounting policies.
The funds will invest primarily in open-end investment companies that are
members of the Franklin Templeton Group of Funds (individually, an "Underlying
Fund" and collectively, the "Underlying Funds").
a. Security Valuation:
Investments in the Underlying Funds are valued at the closing net asset value
per share of each Underlying Fund on the day of valuation.
b. Income Taxes:
No provision has been made for income taxes because each Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute all of its taxable income.
c. Security Transactions, Investment Income, Expenses and Distributions:
Investments in the Underlying Funds are accounted for on trade date. Realized
gains and losses on security transactions are determined on a specific
identification basis. Interest income and estimated expenses are accrued daily.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.
Common expenses incurred by the Trust are allocated among the Funds based on the
ratio of net assets of each Fund to the combined net assets. Other expenses are
charged to each Fund on a specific identification basis.
Distributions received by the Trust from the Underlying Funds may be a return of
capital (ROC). Such distributions reduce the cost basis of the securities, and
any distributions in excess of the cost basis are recognized as capital gains.
Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
d. Organization Costs:
Organization costs are amortized on a straight-line basis over five years.
e. Offering Costs:
Offering costs are amortized on a straight-line basis over twelve months.
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)
f. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. SHARES OF BENEFICIAL TRUST
The Funds offer two classes of shares: Class I and Class II. The shares have the
same rights except for their initial sales load, distribution fees, voting
rights on matters affecting a single class and the exchange privilege of each
class.
At July 31, 1998, there were an unlimited number of shares authorized ($0.01 par
value). Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
FRANKLIN TEMPLETON FRANKLIN TEMPLETON FRANKLIN TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
-------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class I Shares:
1998
Shares sold ................... 1,389,033 $15,382,734 1,909,614 $21,081,332 1,871,216 $21,309,441
Shares issued in
reinvestment of distributions . 18,639 200,360 73,510 768,110 51,996 553,748
Shares redeemed ............... (497,910) (5,480,109) (422,808) (4,689,062) (351,545) (4,017,713)
-------------------------------------------------------------------------------------------------
Net increase .................. 909,762 $10,102,985 1,560,316 $17,160,380 1,571,667 $17,845,476
================================================================================================
1997*
Shares sold ................... 147,156 $ 1,521,029 2,285,701 $23,471,335 1,057,498 $11,368,939
Shares issued in
reinvestment of distributions 237 2,481 4,211 44,361 -- --
Shares redeemed ............... (1,344) (14,046) (1,714,714) (18,117,648) (208,712) (2,260,360)
-------------------------------------------------------------------------------------------------
Net increase .................. 146,049 $ 1,509,464 575,198 $ 5,398,048 848,786 $ 9,108,579
================================================================================================
Class II Shares:
1998
Shares sold ................... 734,164 $ 8,072,065 1,492,882 $16,344,701 1,595,204 $18,081,468
Shares issued in
reinvestment of distributions 17,910 190,330 73,194 753,971 38,210 405,331
Shares redeemed ............... (95,223) (1,047,775) (155,840) (1,698,126) (180,003) (2,037,850)
-------------------------------------------------------------------------------------------------
Net increase .................. 656,851 $ 7,214,620 1,410,236 $15,400,546 1,453,411 $16,448,949
================================================================================================
1997*
Shares sold ................... 290,216 $ 2,972,947 445,681 $ 4,698,104 424,731 $ 4,492,477
Shares issued in
reinvestment of distributions . 254 2,624 369 3,934 -- --
Shares redeemed ............... (13,971) (146,764) (27,329) (293,142) (7,838) (85,814)
-------------------------------------------------------------------------------------------------
Net increase .................. 276,499 $ 2,828,807 418,721 $ 4,408,896 416,893 $ 4,406,663
================================================================================================
</TABLE>
*For 1997, figures are for the period December 31, 1996 (effective date) to July
31, 1997.
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Trust are also officers and/or directors of
the following entities:
<TABLE>
<CAPTION>
ENTITY AFFILIATION
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
The Underlying Funds The funds in which the Trust invests.
</TABLE>
The Funds pay an asset allocation fee to Advisers of 0.25% per year of the
average daily net assets of each Fund. Under an agreement with Advisers, FT
Services provides administrative services to the Funds. The fee is paid by
Advisers based on average daily net assets, and is not an additional expense of
the Funds.
Advisers agreed in advance to waive management fees and assume payment of other
expenses for the Funds through July 31, 1998 as noted in the Statement of
Operations.
The Funds reimburse Distributors up to 0.25% and 1.00% per year of their average
daily net assets of Class I and Class II, respectively, for costs incurred in
marketing the Funds shares.
Distributors paid net commissions on sales of the Funds' shares, and received
contingent deferred sales charges for the year as follows:
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
-----------------------------------------------
<S> <C> <C> <C>
Net Commissions paid .................. $77,451 $113,352 $118,698
Contingent deferred sales charges...... $ 3,273 $ 5,498 $ 9,605
4. INCOME TAXES
At July 31, 1998, the net unrealized depreciation based on the cost of
investments for income tax purposes was as follows:
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
-----------------------------------------------
<S> <C> <C> <C>
Investments at cost.................... $22,122,742 $43,314,230 $49,733,151
===============================================
Unrealized appreciation................ 131,383 552,247 629,304
Unrealized depreciation................ (497,300) (1,296,306) (1,791,684)
-----------------------------------------------
Net unrealized depreciation............ $ (365,917) $ (744,059) $(1,162,380)
===============================================
Net realized capital gains differ for financial statement and tax purposes
primarily due to differing treatment of wash sales.
5. INVESTMENT TRANSACTIONS
Purchases and sales of Underlying Funds for the year ended July 31, 1998, were
as follows:
Franklin Franklin Franklin
Templeton Templeton Templeton
Conservative Moderate Growth
Target Fund Target Fund Target Fund
-----------------------------------------------
<S> <C> <C> <C>
Purchases.............................. $33,345,335 $63,444,966 $71,004,037
Sales.................................. $17,338,157 $31,181,329 $35,816,427
</TABLE>
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Independent Auditor's Report
To the Shareholders and Board of Trustees
of the Franklin Templeton Fund Allocator Series:
We have audited the accompanying statements of assets and liabilities of each of
the Funds comprising the Franklin Templeton Fund Allocator Series (the Funds),
including each Fund's statement of investments as of July 31, 1998, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights 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 verification of securities owned as of July
31, 1998, through inspection of the Underlying Funds' transfer agent records. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the Funds comprising Franklin Templeton Fund Allocator Series as of July 31,
1998, the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended, and their
financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles.
PricewaterhouseCoopers LLP
San Francisco, California
September 8, 1998
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Tax Information
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Funds hereby
designate the following amounts as capital gain dividends for the fiscal year
ended July 31, 1998:
Capital Gains
----------------------------------------------
28% Rate Gain 20% Rate Gain Total
----------------------------------------------
Franklin Templeton
Conservative Target Fund ... $105,344 $286,183 $391,527
Franklin Templeton
Moderate Target Fund ....... 307,146 407,010 714,156
Franklin Templeton
Growth Target Fund.......... 387,546 714,309 1,101,855
GRAPHIC MATERIAL (1)
This chart shows, in pie format, the Asset Allocation of the Franklin
Templeton Conservative Target Fund, as of July 31, 1998.
U.S. Equities 30%
International Equities 13%
U.S. Fixed Income Securities 40%
Short-Term Investments & Other Net Assets 17%
100%
GRAPHIC MATERIAL (2)
The following line graph hypothetically compares the performance of the
Franklin Templeton Conservative Target Fund - Class I to that of the S&P 500
Stock Index, Morgan Stanley Capital International (MSCI)-Europe Australasia
and Far East Index, Lehman Brothers Government/Corporate Bond Index, and the
91-day U.S. Treasury Bill Index, based on a $10,000 investment from December
31, 1996 to July 31, 1998.
FT CONSERVATIVE MSCI EAFE LB U.S.
TARGET FUND - (NET GOV'T./CORP. TREASURY
DATE CLASS I S&P 500 DIVIDENDS) BOND INDEX BILLS
12/31/96 $9,551 $10,000 $10,000 $10,000 $10,000
1/31/97 $9,704 $10,625 $9,650 $10,012 $10,045
2/28/97 $9,713 $10,708 $9,808 $10,033 $10,083
3/31/97 $9,600 $10,268 $9,844 $9,914 $10,126
4/30/97 $9,629 $10,881 $9,896 $10,058 $10,169
5/31/97 $9,945 $11,543 $10,540 $10,152 $10,224
6/30/97 $10,162 $12,061 $11,121 $10,274 $10,262
7/31/97 $10,430 $13,021 $11,301 $10,588 $10,306
8/31/97 $10,325 $12,291 $10,457 $10,470 $10,351
9/30/97 $10,711 $12,965 $11,042 $10,634 $10,399
10/31/97 $10,489 $12,532 $10,193 $10,804 $10,438
11/30/97 $10,547 $13,112 $10,089 $10,861 $10,484
12/31/97 $10,654 $13,338 $10,177 $10,975 $10,529
1/31/98 $10,644 $13,486 $10,642 $11,130 $10,582
2/28/98 $10,942 $14,458 $11,325 $11,108 $10,623
3/31/98 $11,183 $15,198 $11,674 $11,142 $10,675
4/30/98 $11,243 $15,352 $11,766 $11,198 $10,724
5/31/98 $11,133 $15,088 $11,709 $11,318 $10,771
6/30/98 $11,135 $15,700 $11,798 $11,433 $10,815
7/31/98 $10,995 $15,532 $11,917 $11,442 $10,862
GRAPHIC MATERIAL (3)
The following line graph hypothetically compares the performance of the
Franklin Templeton Conservative Target Fund - Class II to that of the S&P 500
Stock Index, Morgan Stanley Capital International (MSCI)-Europe Australasia
and Far East Index, Lehman Brothers Government/Corporate Bond Index, and the
91-day U.S. Treasury Bill Index, based on a $10,000 investment from December
31, 1996 to July 31, 1998.
FT CONSERVATIVE MSCI EAFE LB U.S.
TARGET FUND - (NET GOV'T./CORP. TREASURY
DATE CLASS II S&P 500 DIVIDENDS) BOND INDEX BILLS
12/31/96 $9,901 $10,000 $10,000 $10,000 $10,000
1/31/97 $10,059 $10,625 $9,650 $10,012 $10,045
2/28/97 $10,050 $10,708 $9,808 $10,033 $10,083
3/31/97 $9,899 $10,268 $9,844 $9,914 $10,126
4/30/97 $9,929 $10,881 $9,896 $10,058 $10,169
5/31/97 $10,257 $11,543 $10,540 $10,152 $10,224
6/30/97 $10,472 $12,061 $11,121 $10,274 $10,262
7/31/97 $10,740 $13,021 $11,301 $10,588 $10,306
8/31/97 $10,611 $12,291 $10,457 $10,470 $10,351
9/30/97 $11,001 $12,965 $11,042 $10,634 $10,399
10/31/97 $10,771 $12,532 $10,193 $10,804 $10,438
11/30/97 $10,831 $13,112 $10,089 $10,861 $10,484
12/31/97 $10,932 $13,338 $10,177 $10,975 $10,529
1/31/98 $10,912 $13,486 $10,642 $11,130 $10,582
2/28/98 $11,209 $14,458 $11,325 $11,108 $10,623
3/31/98 $11,455 $15,198 $11,674 $11,142 $10,675
4/30/98 $11,506 $15,352 $11,766 $11,198 $10,724
5/31/98 $11,393 $15,088 $11,709 $11,318 $10,771
6/30/98 $11,385 $15,700 $11,798 $11,433 $10,815
7/31/98 $11,230 $15,532 $11,917 $11,442 $10,862
GRAPHIC MATERIAL (4)
This chart shows, in pie format, the Asset Allocation of the Franklin
Templeton Moderate Target Fund, as of July 31, 1998.
U.S. Equities 43%
International Equities 19%
U.S. Fixed Income Securities 21%
International Fixed Income Securities 2%
Short-Term Investments & Other Net Assets 15%
100%
GRAPHIC MATERIAL (5)
The following line graph hypothetically compares the performance of the
Franklin Templeton Moderate Target Fund - Class I to that of the S&P 500
Stock Index, Morgan Stanley Capital International (MSCI)-Europe Australasia
and Far East Index, Lehman Brothers Government/Corporate Bond Index, and the
91-day U.S. Treasury Bill Index, based on a $10,000 investment from December
31, 1996 to July 31, 1998.
FT MODERATE MSCI EAFE LB U.S.
TARGET FUND - (NET GOV'T./CORP. TREASURY
DATE CLASS I S&P 500 DIVIDENDS) BOND INDEX BILLS
12/31/96 $9,551 $10,000 $10,000 $10,000 $10,000
1/31/97 $9,799 $10,625 $9,650 $10,012 $10,045
2/28/97 $9,799 $10,708 $9,808 $10,033 $10,083
3/31/97 $9,717 $10,268 $9,844 $9,914 $10,126
4/30/97 $9,803 $10,881 $9,896 $10,058 $10,169
5/31/97 $10,196 $11,543 $10,540 $10,152 $10,224
6/30/97 $10,424 $12,061 $11,121 $10,274 $10,262
7/31/97 $10,798 $13,021 $11,301 $10,588 $10,306
8/31/97 $10,635 $12,291 $10,457 $10,470 $10,351
9/30/97 $11,112 $12,965 $11,042 $10,634 $10,399
10/31/97 $10,774 $12,532 $10,193 $10,804 $10,438
11/30/97 $10,803 $13,112 $10,089 $10,861 $10,484
12/31/97 $10,915 $13,338 $10,177 $10,975 $10,529
1/31/98 $10,864 $13,486 $10,642 $11,130 $10,582
2/28/98 $11,268 $14,458 $11,325 $11,108 $10,623
3/31/98 $11,604 $15,198 $11,674 $11,142 $10,675
4/30/98 $11,666 $15,352 $11,766 $11,198 $10,724
5/31/98 $11,469 $15,088 $11,709 $11,318 $10,771
6/30/98 $11,469 $15,700 $11,798 $11,433 $10,815
7/31/98 $11,199 $15,532 $11,917 $11,442 $10,862
GRAPHIC MATERIAL (6)
The following line graph hypothetically compares the performance of the
Franklin Templeton Moderate Target Fund - Class II to that of the S&P 500
Stock Index, Morgan Stanley Capital International (MSCI)-Europe Australasia
and Far East Index, Lehman Brothers Government/Corporate Bond Index, and the
91-day U.S. Treasury Bill Index, based on a $10,000 investment from December
31, 1996 to July 31, 1998.
FT MODERATE MSCI EAFE LB U.S.
TARGET FUND - (NET GOV'T./CORP. TREASURY
DATE CLASS II S&P 500 DIVIDENDS) BOND INDEX BILLS
12/31/96 $9,901 $10,000 $10,000 $10,000 $10,000
1/31/97 $10,158 $10,625 $9,650 $10,012 $10,045
2/28/97 $10,149 $10,708 $9,808 $10,033 $10,083
3/31/97 $10,001 $10,268 $9,844 $9,914 $10,126
4/30/97 $10,080 $10,881 $9,896 $10,058 $10,169
5/31/97 $10,477 $11,543 $10,540 $10,152 $10,224
6/30/97 $10,707 $12,061 $11,121 $10,274 $10,262
7/31/97 $11,074 $13,021 $11,301 $10,588 $10,306
8/31/97 $10,905 $12,291 $10,457 $10,470 $10,351
9/30/97 $11,378 $12,965 $11,042 $10,634 $10,399
10/31/97 $11,028 $12,532 $10,193 $10,804 $10,438
11/30/97 $11,058 $13,112 $10,089 $10,861 $10,484
12/31/97 $11,177 $13,338 $10,177 $10,975 $10,529
1/31/98 $11,102 $13,486 $10,642 $11,130 $10,582
2/28/98 $11,519 $14,458 $11,325 $11,108 $10,623
3/31/98 $11,851 $15,198 $11,674 $11,142 $10,675
4/30/98 $11,894 $15,352 $11,766 $11,198 $10,724
5/31/98 $11,701 $15,088 $11,709 $11,318 $10,771
6/30/98 $11,683 $15,700 $11,798 $11,433 $10,815
7/31/98 $11,404 $15,532 $11,917 $11,442 $10,862
GRAPHIC MATERIAL (7)
This chart shows, in pie format, the Asset Allocation of the Franklin
Templeton Growth Target Fund, as of July 31, 1998.
U.S. Equities 45%
International Equities 25%
U.S. Fixed Income Securities 9%
International Fixed Income Securities 3%
Short-Term Investments & Other Net Assets 18%
100%
GRAPHIC MATERIAL (8)
The following line graph hypothetically compares the performance of the
Franklin Templeton Growth Target Fund - Class I to that of the S&P 500 Stock
Index, Morgan Stanley Capital International (MSCI)-Europe Australasia and Far
East Index, Lehman Brothers Government/Corporate Bond Index, and the 91-day
U.S. Treasury Bill Index, based on a $10,000 investment from December 31,
1996 to July 31, 1998.
FT GROWTH MSCI EAFE LB U.S.
TARGET FUND - (NET GOV'T./CORP. TREASURY
DATE CLASS I S&P 500 DIVIDENDS) BOND INDEX BILLS
12/31/96 $9,551 $10,000 $10,000 $10,000 $10,000
1/31/97 $9,904 $10,625 $9,650 $10,012 $10,045
2/28/97 $9,838 $10,708 $9,808 $10,033 $10,083
3/31/97 $9,637 $10,268 $9,844 $9,914 $10,126
4/30/97 $9,713 $10,881 $9,896 $10,058 $10,169
5/31/97 $10,181 $11,543 $10,540 $10,152 $10,224
6/30/97 $10,449 $12,061 $11,121 $10,274 $10,262
7/31/97 $10,821 $13,021 $11,301 $10,588 $10,306
8/31/97 $10,630 $12,291 $10,457 $10,470 $10,351
9/30/97 $11,184 $12,965 $11,042 $10,634 $10,399
10/31/97 $10,705 $12,532 $10,193 $10,804 $10,438
11/30/97 $10,715 $13,112 $10,089 $10,861 $10,484
12/31/97 $10,798 $13,338 $10,177 $10,975 $10,529
1/31/98 $10,758 $13,486 $10,642 $11,130 $10,582
2/28/98 $11,256 $14,458 $11,325 $11,108 $10,623
3/31/98 $11,644 $15,198 $11,674 $11,142 $10,675
4/30/98 $11,713 $15,352 $11,766 $11,198 $10,724
5/31/98 $11,445 $15,088 $11,709 $11,318 $10,771
6/30/98 $11,415 $15,700 $11,798 $11,433 $10,815
7/31/98 $11,106 $15,532 $11,917 $11,442 $10,862
GRAPHIC MATERIAL (9)
The following line graph hypothetically compares the performance of the
Franklin Templeton Growth Target Fund - Class II to that of the S&P 500 Stock
Index, Morgan Stanley Capital International (MSCI)-Europe Australasia and Far
East Index, Lehman Brothers Government/Corporate Bond Index, and the 91-day
U.S. Treasury Bill Index, based on a $10,000 investment from December 31,
1996 to July 31, 1998.
FT GROWTH MSCI EAFE LB U.S.
TARGET FUND - (NET GOV'T./CORP. TREASURY
DATE CLASS II S&P 500 DIVIDENDS) BOND INDEX BILLS
12/31/96 $9,901 $10,000 $10,000 $10,000 $10,000
1/31/97 $10,257 $10,625 $9,650 $10,012 $10,045
2/28/97 $10,188 $10,708 $9,808 $10,033 $10,083
3/31/97 $9,990 $10,268 $9,844 $9,914 $10,126
4/30/97 $10,069 $10,881 $9,896 $10,058 $10,169
5/31/97 $10,545 $11,543 $10,540 $10,152 $10,224
6/30/97 $10,802 $12,061 $11,121 $10,274 $10,262
7/31/97 $11,188 $13,021 $11,301 $10,588 $10,306
8/31/97 $10,980 $12,291 $10,457 $10,470 $10,351
9/30/97 $11,549 $12,965 $11,042 $10,634 $10,399
10/31/97 $11,053 $12,532 $10,193 $10,804 $10,438
11/30/97 $11,063 $13,112 $10,089 $10,861 $10,484
12/31/97 $11,126 $13,338 $10,177 $10,975 $10,529
1/31/98 $11,085 $13,486 $10,642 $11,130 $10,582
2/28/98 $11,589 $14,458 $11,325 $11,108 $10,623
3/31/98 $11,980 $15,198 $11,674 $11,142 $10,675
4/30/98 $12,041 $15,352 $11,766 $11,198 $10,724
5/31/98 $11,753 $15,088 $11,709 $11,318 $10,771
6/30/98 $11,722 $15,700 $11,798 $11,433 $10,815
7/31/98 $11,393 $15,532 $11,917 $11,442 $10,862
