SHAREHOLDER LETTER
Dear Shareholder:
We are pleased to bring you this semiannual report for the Franklin Templeton
Fund Allocator Series (Conservative Target Fund, Moderate Target Fund, and
Growth Target Fund) for the year ended January 31, 2000.
ECONOMIC OVERVIEW
During the reporting period, the U.S. economy barreled forward as consumer
confidence rose and the unemployment rate continued its downward trend. In an
effort to cool off the economy and ward off possible future inflation, the
Federal Reserve Board (the Fed) raised interest rates in two separate 0.25%
moves in late 1999. The 30-year Treasury bond yield increased from 6.11% at the
beginning of the period to 6.49% at the end.
Despite the increase in short-term rates, domestic stock markets continued to
rise. During the six months under review, the Dow Jones(R) Industrial Average
was up 2.73%, the Standard & Poor's 500(R) (S&P 500(R)) Index rose 5.60%, and
the technology-laden Nasdaq(R) Index returned an astounding 49.47%.
The bond market, however, presented a different picture. Unlike the equity
markets, broad-based domestic fixed income indexes were adversely affected by
steadily increasing interest rates, and the Lehman Brothers Aggregate Index
posted a return of only 0.66% for the six months under review.
CONTENTS
Shareholder Letter .............. 1
Fund Reports
Franklin Templeton
Conservative Target Fund ....... 4
Franklin Templeton
Moderate Target Fund ........... 8
Franklin Templeton
Growth Target Fund ............. 12
Financial Highlights &
Statement of Investments ........ 16
Financial Statements ............ 25
Notes to
Financial Statements ............ 29
[PYRAMID GRAPHIC]
Elsewhere, many European economies started to improve, a number of Asian
countries rebounded from recent economic crises, and most Latin American
economies enjoyed an upswing due to increasing commodity prices. European,
Pacific Rim and Latin American equity markets generally delivered attractive
results. Returns for many non-Latin American stock markets exceeded 15% for the
six months under review, while the Morgan Stanley Capital International (MSCI)
Latin America Index increased 35.85% during the same period.
Within this environment, the three Target Funds, due largely to their exposure
to Franklin Small Cap Growth Fund, Franklin Aggressive Growth Fund, and Mutual
European Fund, significantly outperformed their benchmark equity indexes, the
MSCI Europe, Australasia, Far East Index and S&P 500 Index.
INVESTMENT STRATEGY
Since the end of April 1999, we have maintained consistent exposure to the three
broad asset classes in which the funds invest (equity, fixed income, and cash
and equivalents) and focused on actively managing the selection of the
underlying funds. For your reference, the following asset class allocations are
prescribed for each Target Fund:
<TABLE>
<CAPTION>
CASH & EQUIVALENTS EQUITY FIXED INCOME
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Conservative Target Fund 20% 40% 40%
Moderate Target Fund 10% 55% 35%
Growth Target Fund 5% 80% 15%
</TABLE>
Whenever possible, we will attempt to hold the same Franklin Templeton funds in
each of the three Target Fund's portfolios. However, underlying Franklin
Templeton fund weightings will differ based on each Target Fund's risk level.
The broad equity allocation of all three Target Funds will generally be
diversified across investment styles, market capitalization sizes, and countries
of origin.
Maintaining similarity of the underlying Franklin Templeton fund investments
across the Allocator Series increased the consistency and relative
predictability of the Target Funds' total returns. We also have improved our
ability to determine and interpret the source of the returns. Looking forward,
we expect our portfolio management discipline will generate consistent and
proportionate investment results.
At the same time, security prices are always subject to volatility. Since no one
can predict exactly how financial markets will perform, and bad years can be
mixed with good, we believe it is important for investors to exercise patience
and focus on their long-term investment goals, rather than on short-term market
movements.
We appreciate your continued participation in the Funds and look forward to
facilitating the fulfillment of your financial goals.
Sincerely,
/s/ Mark Boyadjian
- --------------------------
Mark Boyadjian, CFA
Portfolio Manager
Franklin Templeton Fund Allocator Series
Effective February 1, 2000, T. Anthony Coffey assumed portfolio management
responsibilities for the Franklin Templeton Fund Allocator Series. Mr. Coffey
received a bachelor of arts degree in applied mathematics and economics from
Harvard University and an MBA from the University of California at Los Angeles.
He is a Chartered Financial Analyst (CFA) and a member of the Security Analysts
of San Francisco and the Association for Investment Management and Research
(AIMR). Prior to joining Franklin, Mr. Coffey was an associate for Analysis
Group, Inc., an economic consulting firm specializing in the use of economic
analysis for litigation.
FRANKLIN TEMPLETON
CONSERVATIVE TARGET FUND
Your Fund's Goal: Franklin Templeton Conservative Target Fund seeks the highest
level of long-term total return achievable at a lower level of risk.
[ASSET ALLOCATION PIE CHART]
Asset Allocation
Franklin Templeton Conservative Target Fund
Based on Total Net Assets
1/31/00
Fixed Income
37.8%
Domestic Equity
25.4%
Foreign Equity
14.3%
Cash &
Equivalents 22.5%
During the six months under review, Franklin Templeton Conservative Target Fund
- - Class A provided a +15.00% cumulative total return, as shown in the
Performance Summary on page 6. This performance can be attributed largely to
maintaining a static allocation among equities, fixed-income securities, and
cash and equivalents and by the actual performance of the selected underlying
funds.
At the end of the reporting period, Franklin Templeton Conservative Target
Fund's domestic equity exposure was 64% of its total equity weighting, with the
balance represented by foreign equity. The portfolio was diversified across
capitalization size and investment style, and on January 31, 2000, we held
shares in large-, mid-, and small-capitalization equity funds, representing both
value and growth styles. Franklin Aggressive Growth Fund, representing 9.0% of
the fund's total net assets, was our largest equity fund weighting.
All portfolio holdings mentioned in the report are listed by their complete
legal titles in the Fund's Statement of Investments (SOI), a complete listing of
the Fund's portfolio holdings, including dollar value and number of shares or
principal amount. The SOI begins on page 18.
During the reporting period, we modified the fixed-income portion of the
portfolio to emphasize Franklin's AGE High Income Fund in an effort to increase
the Fund's income-producing potential. The remaining fixed-income holdings were
represented by shares in Franklin Strategic Income Fund and Franklin Bond Fund.
Looking forward, we believe that the Fund will continue to benefit from our
careful analysis and selection of underlying funds, while maintaining the same
relative allocation among the three primary asset classes. Additionally, by
carefully allocating the Fund's assets to both domestic and foreign equity fund
holdings and varying capitalization sizes and investment styles, we hope to
decrease the volatility of its return.
TOP 5 FUND HOLDINGS
Franklin Templeton
Conservative Target Fund
1/31/00
% OF TOTAL
FUND NET ASSETS
- ---------------------------------------
Franklin Institutional
Fiduciary Trust
Money Market Portfolio 23.0%
Franklin's AGE
High Income Fund 18.4%
Franklin Strategic
Income Fund 9.8%
Franklin Bond Fund 9.6%
Franklin Aggressive
Growth Fund 9.0%
FRANKLIN TEMPLETON
CONSERVATIVE TARGET FUND
SIX-MONTH PERFORMANCE SUMMARY AS OF 1/31/00
Six-month total return does not include sales charges. Distributions
will vary based on earnings of the Fund's portfolio and any profits realized
from the sale of the portfolio's securities. Past distributions are not
indicative of future trends. All total returns include reinvested distributions
at net asset value.
CLASS A: Subject to the current, maximum 5.75% initial sales charge. Prior to
August 3, 1998, Fund shares were offered at a lower initial sales charge; thus
actual total returns may differ.
CLASS C: Subject to 1% initial sales charge and 1% contingent deferred sales
charge for shares redeemed within 18 months of investment. These shares have
higher annual fees and expenses than Class A shares.
Past expense reductions by the Fund's manager increased the Fund's total
returns.
CLASS A
Six-Month Total Return +15.00%
Net Asset Value (NAV) (1/31/00) $11.92 (7/31/99) $10.73
Change in NAV +$1.19
Distributions (7/31/99-1/31/00) Dividend Income $0.3448
Short-Term Capital Gain $0.0187
Long-Term Capital Gain $0.0413
------------------------------------
Total $0.4048
CLASS C
Six-Month Total Return +14.53%
Net Asset Value (NAV) (1/31/00) $11.83 (7/31/99) $10.65
Change in NAV +$1.18
Distributions (7/31/99-1/31/00) Dividend Income $0.2963
Short-Term Capital Gain $0.0187
Long-Term Capital Gain $0.0413
------------------------------------
Total $0.3563
Past performance does not guarantee future results.
ADDITIONAL PERFORMANCE
AS OF QUARTER ENDED 12/31/99
INCEPTION
CLASS A 1-YEAR 3-YEAR (12/31/96)
- -------------------------------------------------------------------------
Cumulative Total Return(1) +20.28% +38.15% +38.15%
Average Annual Total Return(2) +13.35% +9.20% + 9.20%
Value of $10,000 Investment(3) $11,335 $13,021 $13,021
INCEPTION
CLASS C 1-YEAR 3-YEAR (12/31/96)
- -------------------------------------------------------------------------
Cumulative Total Return(1) +19.40% +34.72% +34.72%
Average Annual Total Return(2) +17.17% +10.08% +10.08%
Value of $10,000 Investment(3) $11,717 $13,338 $13,338
1. Cumulative total return represents 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 current, applicable,
maximum sales charge(s) for that class.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include the current, applicable, maximum
sales charge(s) for that class.
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.
For updated performance figures, please see "Prices and Performance" at
www.franklintempleton.com, or call Franklin Templeton at 1-800/342-5236.
Past performance does not guarantee future results.
FRANKLIN TEMPLETON
MODERATE TARGET FUND
Your Fund's Goal: Franklin Templeton Moderate Target Fund seeks the highest
level of long-term total return achievable at an intermediate level of risk.
ASSET ALLOCATION
Franklin Templeton Moderate Target Fund
Based on Total Net Assets
1/31/00
-- Domestic Equity
34.9%
-- Fixed Income
32.5%
-- Foreign Equity
18.5%
-- Cash & Equivalents
14.1%
During the six months under review, Franklin Templeton Moderate Target Fund -
Class A provided a +20.61% cumulative total return, as shown in the Performance
Summary on page 10. This performance can be attributed largely to maintaining a
static allocation among equities, fixed-income securities, and cash and
equivalents and by the actual performance of the selected underlying funds.
At the end of the reporting period, Franklin Templeton Moderate Target Fund's
domestic equity exposure was 65% of its total equity weighting, with the balance
represented by foreign equity. The portfolio was diversified across
capitalization size and investment style, and on January 31, 2000, we held
shares in large-, mid-, and small-capitalization equity funds, representing both
value and growth styles. Franklin Small Cap Growth Fund, representing 12.8% of
the Fund's total net assets, was our largest equity fund weighting.
All portfolio holdings mentioned in the report are listed by their complete
legal titles in the Fund's Statement of Investments (SOI), a complete listing of
the Fund's portfolio holdings, including dollar value and number of shares or
principal amount. The SOI begins on page 21.
During the reporting period, we modified the fixed-income portion of the
portfolio to emphasize Franklin's AGE High Income Fund in an effort to increase
the Fund's income-producing potential. The remaining fixed-income holdings were
represented by shares in Franklin Strategic Income Fund and Franklin Bond Fund.
Looking forward, we believe that the Fund will continue to benefit from our
careful analysis and selection of underlying funds, while maintaining the same
relative allocation among the three primary asset classes. Additionally, by
carefully allocating the Fund's assets to both domestic and foreign equity fund
holdings and varying capitalization sizes and investment styles, we hope to
decrease the volatility of its return.
TOP 5 FUND HOLDINGS
Franklin Templeton
Moderate Target Fund
1/31/00
% OF TOTAL
FUND NET ASSETS
- -----------------------------------------
Franklin's AGE
High Income Fund 16.6%
Franklin Institutional
Fiduciary Trust
Money Market Portfolio 15.4%
Franklin Small Cap
Growth Fund 12.8%
Franklin Aggressive
Growth Fund 12.8%
Templeton
Latin America Fund 9.2%
FRANKLIN TEMPLETON
MODERATE TARGET FUND
SIX-MONTH PERFORMANCE SUMMARY AS OF 1/31/00
Six-month total return does not include sales charges. Distributions will vary
based on earnings of the Fund's portfolio and any profits realized from the sale
of the portfolio's securities. Past distributions are not indicative of future
trends. All total returns include reinvested distributions at net asset value.
CLASS A: Subject to the current, maximum 5.75% initial sales charge. Prior to
August 3, 1998, Fund shares were offered at a lower initial sales charge; thus
actual total returns may differ.
CLASS C: Subject to 1% initial sales charge and 1% contingent deferred sales
charge for shares redeemed within 18 months of investment. These shares have
higher annual fees and expenses than Class A shares.
Past expense reductions by the Fund's manager increased the Fund's total
returns.
CLASS A
Six-Month Total Return +20.61%
Net Asset Value (NAV) (1/31/00) $12.24 (7/31/99) $10.44
Change in NAV +$1.80
Distributions (7/31/99-1/31/00) Dividend Income $0.3341
CLASS C
Six-Month Total Return +20.16%
Net Asset Value (NAV) (1/31/00) $12.09 (7/31/99) $10.31
Change in NAV +$1.78
Distributions (7/31/99-1/31/00) Dividend Income $0.2859
Past performance does not guarantee future results.
ADDITIONAL PERFORMANCE
AS OF QUARTER ENDED 12/31/99
INCEPTION
CLASS A 1-YEAR 3-YEAR (12/31/96)
- ----------------------------------------------------------------------------
Cumulative Total Return(1) +27.25% +45.64% +45.64%
Average Annual Total Return(2) +19.88% +11.14% +11.14%
Value of $10,000 Investment(3) $11,988 $13,727 $13,727
INCEPTION
CLASS C 1-YEAR 3-YEAR (12/31/96)
- ----------------------------------------------------------------------------
Cumulative Total Return(1) +26.30% +41.48% +41.48%
Average Annual Total Return(2) +24.06% +11.89% +11.89%
Value of $10,000 Investment(3) $12,406 $14,008 $14,008
1. Cumulative total return represents 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 current, applicable,
maximum sales charge(s) for that class.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include the current, applicable, maximum
sales charge(s) for that class.
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.
For updated performance figures, please see "Prices and Performance" at
www.franklintempleton.com, or call Franklin Templeton at 1-800/342-5236.
Past performance does not guarantee future results.
FRANKLIN TEMPLETON
GROWTH TARGET FUND
Your Fund's Goal: Franklin Templeton Growth Target Fund seeks the highest level
of long-term total return achievable at a higher level of risk.
Asset Allocation
Franklin Templeton Growth Target Fund
Based on Total Net Assets
Domestic Equity 55.8%
Foreign Equity 23.8%
Fixed Income 11.8%
Cash & Equivalents 8.6%
During the six months under review, Franklin Templeton Growth Target Fund -
Class A provided a +29.74% cumulative total return, as shown in the Performance
Summary on page 14. This performance can be attributed largely to maintaining a
static allocation among equities, fixed-income securities, and cash and
equivalents and by the actual performance of the selected underlying funds.
At the end of the reporting period, Franklin Templeton Growth Target Fund's
domestic equity exposure was 70% of its total equity weighting, with the balance
represented by foreign equity. The portfolio was diversified across
capitalization size and investment style, and on January 31, 2000, we held
shares in large-, mid-, and small-capitalization equity funds, representing both
value and growth styles. Franklin Aggressive Growth Fund, representing 19.7% of
the Fund's total net assets, was our largest fund weighting.
All portfolio holdings mentioned in the report are listed by their complete
legal titles in the Fund's Statement of Investments (SOI), a complete listing of
the Fund's portfolio holdings, including dollar value and number of shares or
principal amount. The SOI begins on page 24.
During the reporting period, we modified the fixed-income portion of the
portfolio to emphasize Franklin's AGE High Income Fund in an effort to increase
the Fund's income-producing potential. The remaining fixed-income holdings were
represented by shares in Franklin Bond Fund and Franklin Strategic Income Fund.
Looking forward, we believe that the Fund will continue to benefit from our
careful analysis and selection of underlying funds, while maintaining the same
relative allocation among the three primary asset classes. Additionally, by
carefully allocating the Fund's assets to both domestic and foreign equity fund
holdings and varying capitalization sizes and investment styles, we hope to
decrease the volatility of its return.
TOP 5 FUND HOLDINGS
Franklin Templeton
Growth Target Fund
1/31/00
% OF TOTAL
FUND NET ASSETS
- ---------------------------------------
Franklin Aggressive
Growth Fund 19.7%
Franklin Small Cap
Growth Fund 18.8%
Templeton
Latin America Fund 11.8%
Franklin Institutional
Fiduciary Trust
Money Market Portfolio 9.5%
Mutual European Fund 9.0%
FRANKLIN TEMPLETON GROWTH TARGET FUND
SIX-MONTH PERFORMANCE SUMMARY AS OF 1/31/00
Six-month total return does not include sales charges. Distributions will vary
based on earnings of the Fund's portfolio and any profits realized from the sale
of the portfolio's securities. Past distributions are not indicative of future
trends. All total returns include reinvested distributions at net asset value.
CLASS A: Subject to the current, maximum 5.75% initial sales charge. Prior to
August 3, 1998, Fund shares were offered at a lower initial sales charge; thus
actual total returns may differ.
CLASS C: Subject to 1% initial sales charge and 1% contingent deferred sales
charge for shares redeemed within 18 months of investment. These shares have
higher annual fees and expenses than Class A shares.
Past expense reductions by the Fund's manager increased the Fund's total
returns.
CLASS A
Six-Month Total Return +29.74%
Net Asset Value (NAV) (1/31/00) $13.62 (7/31/99) $11.01
Change in NAV +$2.61
Distributions (7/31/99-1/31/00) Dividend Income $0.3472
Long-Term Capital Gain $0.2876
--------------------------------
Total $0.6348
CLASS C
Six-Month Total Return +29.40%
Net Asset Value (NAV) (1/31/00) $13.57 (7/31/99) $10.92
Change in NAV +$2.65
Distributions (7/31/99-1/31/00) Dividend Income $0.2602
Long-Term Capital Gain $0.2876
--------------------------------
Total $0.5478
Past performance does not guarantee future results.
ADDITIONAL PERFORMANCE
AS OF QUARTER ENDED 12/31/99
INCEPTION
CLASS A 1-YEAR 3-YEAR (12/31/96)
- -------------------------------------------------------------------------
Cumulative Total Return(1) +41.17% +59.42% +59.42%
Average Annual Total Return(2) +33.02% +14.54% +14.54%
Value of $10,000 Investment(3) $13,302 $15,025 $15,025
INCEPTION
CLASS C 1-YEAR 3-YEAR (12/31/96)
- -------------------------------------------------------------------------
Cumulative Total Return(1) +40.06% +56.16% +56.16%
Average Annual Total Return(2) +37.72% +15.63% +15.63%
Value of $10,000 Investment(3) $13,772 $15,462 $15,462
1. Cumulative total return represents 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 current, applicable,
maximum sales charge(s) for that class.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include the current, applicable, maximum
sales charge(s) for that class.
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.
For updated performance figures, please see "Prices and Performance" at
www.franklintempleton.com, or call Franklin Templeton at 1-800/342-5236.
Past performance does not guarantee future results.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Financial Highlights
FRANKLIN TEMPLETON CONSERVATIVE TARGET FUND
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------
SIX MONTHS ENDED
JANUARY 31, 2000(d) YEAR ENDED JULY 31,
(UNAUDITED) 1999(d) 1998 1997(c)
--------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............... $ 10.73 $ 11.00 $ 10.87 $10.00
--------------------------------------------------------------
Income from investment operations:
Net investment income ............................. .32 .41 .39 .12
Net realized and unrealized gains (losses) ........ 1.27 (.08) .18 .80
--------------------------------------------------------------
Total from investment operations ................... 1.59 .33 .57 .92
--------------------------------------------------------------
Less distributions from:
Net investment income ............................. (.34) (.41) (.38) (.05)
Net realized gains ................................ (.06) (.19) (.06) --
--------------------------------------------------------------
Total distributions ................................ (.40) (.60) (.44) (.05)
--------------------------------------------------------------
Net asset value, end of period ..................... $ 11.92 $ 10.73 $ 11.00 $10.87
==============================================================
Total return(a) .................................... 15.00% 3.23% 5.41% 9.21%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .................. $ 15,737 $ 14,850 $11,637 $1,609
Ratios to average net assets:
Expenses .......................................... .76%(b) .75% .76% .59%(b)
Expenses excluding waiver and payments
by affiliate ..................................... .78%(b) .83% 1.07% 3.64%(b)
Net investment income ............................. 5.70%(b) 3.83% 3.88% 3.93%(b)
Portfolio turnover rate ............................ 52.24% 218.87% 141.96% 33.30%
</TABLE>
(a) Total return does not reflect sales commission or the contingent deferred
sales charge, and is not annualized for periods less than one year.
(b) Annualized.
(c) For the period December 31, 1996 (effective date) to July 31, 1997.
(d) Based on average shares outstanding.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Financial Highlights (continued)
FRANKLIN TEMPLETON CONSERVATIVE TARGET FUND (CONT.)
<TABLE>
<CAPTION>
CLASS C
---------------------------------------------------------------
SIX MONTHS ENDED
JANUARY 31, 2000(d) YEAR ENDED JULY 31,
(UNAUDITED) 1999(d) 1998 1997(c)
---------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............... $ 10.65 $ 10.92 $ 10.81 $10.00
---------------------------------------------------------------
Income from investment operations:
Net investment income ............................. .28 .33 .33 .10
Net realized and unrealized gains (losses) ........ 1.26 (.08) .15 .75
---------------------------------------------------------------
Total from investment operations ................... 1.54 .25 .48 .85
---------------------------------------------------------------
Less distributions from:
Net investment income ............................. (.30) (.33) (.31) (.04)
Net realized gains ................................ (.06) (.19) (.06) --
---------------------------------------------------------------
Total distributions ................................ (.36) (.52) (.37) (.04)
---------------------------------------------------------------
Net asset value, end of period ..................... $ 11.83 $ 10.65 $ 10.92 $10.81
===============================================================
Total return(a) .................................... 14.53% 2.49% 4.56% 8.48%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .................. $ 11,278 $10,611 $10,218 $3,010
Ratios to average net assets:
Expenses .......................................... 1.52%(b) 1.50% 1.50% 1.48%(b)
Expenses excluding waiver and payments by affiliate 1.54%(b) 1.58% 1.81% 4.53%(b)
Net investment income ............................. 4.96%(b) 3.13% 3.27% 3.04%(b)
Portfolio turnover rate ............................ 52.24% 218.87% 141.96% 33.30%
</TABLE>
(a) Total return does not reflect sales commission or the contingent deferred
sales charge, and is not annualized for periods less than one year.
(b) Annualized.
(c) For the period December 31, 1996 (effective date) to July 31, 1997.
(d) Based on average shares outstanding.
See notes to financial statements.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS, JANUARY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN TEMPLETON CONSERVATIVE TARGET FUND SHARES VALUE
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUTUAL FUNDS (NOTE 3) 100.5%
CASH EQUIVALENTS 23.0%
Franklin Institutional Fiduciary Trust Money Market Portfolio ................ 6,210,238 $ 6,210,238
-----------
FIXED INCOME 37.8%
Franklin's AGE High Income Fund .............................................. 2,022,163 4,974,522
Franklin Bond Fund ........................................................... 276,912 2,583,592
Franklin Strategic Income Fund ............................................... 266,959 2,658,913
-----------
10,217,027
-----------
DOMESTIC EQUITY 25.4%
Franklin Aggressive Growth Fund .............................................. 103,818 2,439,715
Franklin Large Cap Growth Fund ............................................... 92,544 1,259,527
Franklin Real Estate Securities Fund ......................................... 57,104 729,784
Franklin Small Cap Growth Fund ............................................... 55,806 2,437,600
-----------
6,866,626
-----------
FOREIGN EQUITY 14.3%
Mutual European Fund ......................................................... 79,223 1,368,175
Templeton Latin America Fund ................................................. 182,079 1,968,272
Templeton Pacific Growth Fund ................................................ 45,112 510,663
-----------
3,847,110
-----------
TOTAL INVESTMENTS (COST $25,026,028) 100.5% .................................. 27,141,001
OTHER ASSETS, LESS LIABILITIES (.5)% ......................................... (126,164)
-----------
NET ASSETS 100.0% ............................................................ $27,014,837
===========
</TABLE>
See notes to financial statements.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Financial Highlights
FRANKLIN TEMPLETON MODERATE TARGET FUND
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------
SIX MONTHS ENDED
JANUARY 31, 2000(d) YEAR ENDED JULY 31,
(UNAUDITED) 1999(d) 1998(d) 1997(c)
----------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .............. $ 10.44 $ 10.77 $ 11.26 $ 10.00
----------------------------------------------------------------
Income from investment operations:
Net investment income ............................ .30 .33 .37 .17
Net realized and unrealized gains (losses) ....... 1.84 (.17) .01 1.13
----------------------------------------------------------------
Total from investment operations .................. 2.14 .16 .38 1.30
----------------------------------------------------------------
Less distributions from:
Net investment income ............................ (.33) (.31) (.38) (.04)
Net realized gains ............................... -- (.18) (.49) --
----------------------------------------------------------------
Total distributions ............................... (.33) (.49) (.87) (.04)
----------------------------------------------------------------
Net asset value, end of period .................... $ 12.25 $ 10.44 $ 10.77 $ 11.26
----------------------------------------------------------------
Total return(a) ................................... 20.61% 1.74% 3.71% 13.05%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................. $33,927 $28,694 $23,028 $ 6,498
Ratios to average net assets:
Expenses ......................................... .76%(b) .85% .77% .67%(b)
Expenses excluding waiver and payments by affiliate .76%(b) .85% .94% 1.26%(b)
Net investment income ............................ 5.50%(b) 3.23% 3.37% 2.69%(b)
Portfolio turnover rate ........................... 58.50% 202.78% 124.87% 264.78
</TABLE>
(a) Total return does not reflect sales commission or the contingent deferred
sales charge, and is not annualized for periods less than one year.
(b) Annualized.
(c) For the period December 31, 1996 (effective date) to July 31, 1997.
(d) Based on average shares outstanding.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Financial Highlights (continued)
FRANKLIN TEMPLETON MODERATE TARGET FUND (CONT.)
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------------
SIX MONTHS ENDED
JANUARY 31, 2000(d) YEAR ENDED JULY 31,
(UNAUDITED) 1999(d) 1998(d) 1997(c)
--------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .............. $ 10.31 $ 10.65 $ 11.16 $ 10.00
--------------------------------------------------------------
Income from investment operations:
Net investment income ............................ .26 .25 .30 .07
Net realized and unrealized gains (losses) ....... 1.82 (.17) -- 1.11
--------------------------------------------------------------
Total from investment operations .................. 2.08 .08 .30 1.18
--------------------------------------------------------------
Less distributions from:
Net investment income ............................ (.29) (.24) (.32) (.02)
Net realized gains ............................... -- (.18) (.49) --
--------------------------------------------------------------
Total distributions ............................... (.29) (.42) (.81) (.02)
--------------------------------------------------------------
Net asset value, end of period .................... $ 12.10 $ 10.31 $ 10.65 $ 11.16
--------------------------------------------------------------
Total return(a) ................................... 20.16% .88% 2.98% 11.84%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................. $ 30,489 $24,419 $19,501 $ 4,695
Ratios to average net assets:
Expenses ......................................... 1.50%(b) 1.60% 1.50% 1.50%(b)
Expenses excluding waiver and payments by affiliate 1.50%(b) 1.60% 1.68% 2.09%(b)
Net investment income ............................ 4.68%(b) 2.51% 2.75% 1.86%(b)
Portfolio turnover rate ........................... 58.50% 202.78% 124.87% 264.78
</TABLE>
(a) Total return does not reflect sales commission or the contingent deferred
sales charge, and is not annualized for periods less than one year.
(b) Annualized.
(c) For the period December 31, 1996 (effective date) to July 31, 1997.
(d) Based on average shares outstanding.
See notes to financial statements.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS, JANUARY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN TEMPLETON MODERATE TARGET FUND SHARES VALUE
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUTUAL FUNDS (NOTE 3) 101.3%
CASH EQUIVALENTS 15.4%
Franklin Institutional Fiduciary Trust Money Market Portfolio ................ 9,897,931 $ 9,897,931
-----------
FIXED INCOME 32.5%
Franklin's AGE High Income Fund .............................................. 4,334,504 10,662,880
Franklin Bond Fund ........................................................... 550,263 5,133,954
Franklin Strategic Income Fund ............................................... 516,024 5,139,601
-----------
20,936,435
-----------
DOMESTIC EQUITY 34.9%
Franklin Aggressive Growth Fund .............................................. 349,924 8,223,208
Franklin Large Cap Growth Fund ............................................... 257,534 3,505,037
Franklin Real Estate Securities Fund ......................................... 195,388 2,497,059
Franklin Small Cap Growth Fund ............................................... 188,674 8,241,265
-----------
22,466,569
-----------
FOREIGN EQUITY 18.5%
Mutual European Fund ......................................................... 259,279 4,477,742
Templeton Latin American Fund ................................................ 547,609 5,919,649
Templeton Pacific Growth Fund ................................................ 137,166 1,552,717
-----------
11,950,108
-----------
TOTAL INVESTMENTS (COST $57,886,239) 101.3% .................................. 65,251,043
OTHER ASSETS, LESS LIABILITIES (1.3%) ........................................ (835,740)
-----------
NET ASSETS 100.0% ............................................................ $64,415,303
===========
</TABLE>
See notes to financial statements.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Financial Highlights
FRANKLIN TEMPLETON GROWTH TARGET FUND
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------
SIX MONTHS ENDED
JANUARY 31, 2000(d) YEAR ENDED JULY 31,
(UNAUDITED) 1999(d) 1998 1997(c)
-------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .............. $ 11.01 $ 11.16 $ 11.33 $10.00
-------------------------------------------------------------
Income from investment operations:
Net investment income ............................ .28 .28 .33 .05
Net realized and unrealized gains (losses) ....... 2.97 .11 (.05) 1.28
-------------------------------------------------------------
Total from investment operations .................. 3.25 .39 .28 1.33
-------------------------------------------------------------
Less distributions from:
Net investment income ............................ (.35) (.25) (.30) --
Net realized gains ............................... (.29) (.29) (.15) --
-------------------------------------------------------------
Total distributions ............................... (.64) (.54) (.45) --
-------------------------------------------------------------
Net asset value, end of period .................... $ 13.62 $ 11.01 $ 11.16 $11.33
-------------------------------------------------------------
Total return(a) ................................... 29.74% 3.91% 2.63% 13.30%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................. $51,917 $40,839 $27,042 $9,638
Ratios to average net assets:
Expenses ......................................... .81%(b) .75% .75% .73%(b)
Expenses excluding waiver and payments by affiliate .83%(b) .86% .98% 2.19%(b)
Net investment income ............................ 4.53%(b) 2.61% 2.80% 2.65%(b)
Portfolio turnover rate ........................... 8.11% 207.65% 118.19% 65.52%
</TABLE>
(a) Total return does not reflect sales commission or the contingent deferred
sales charge, and is not annualized for periods less than one year.
(b) Annualized.
(c) For the period December 31, 1996 (effective date) to July 31, 1997.
(d) Based on average shares outstanding.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Financial Highlights (continued)
FRANKLIN TEMPLETON GROWTH TARGET FUND (CONT.)
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------------------
SIX MONTHS ENDED
JANUARY 31, 2000(d) YEAR ENDED JULY 31,
(UNAUDITED) 1999(d) 1998 1997(c)
-------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .............. $ 10.92 $ 11.08 $ 11.30 $10.00
-------------------------------------------------------------
Income from investment operations:
Net investment income ............................ .23 .21 .24 .04
Net realized and unrealized gains (losses) ....... 2.97 .10 (.05) 1.26
-------------------------------------------------------------
Total from investment operations .................. 3.20 .31 .19 1.30
-------------------------------------------------------------
Less distributions from:
Net investment income ............................ (.26) (.18) (.26) --
Net realized gains ............................... (.29) (.29) (.15) --
-------------------------------------------------------------
Total distributions ............................... (.55) (.47) (.41) --
-------------------------------------------------------------
Net asset value, end of period .................... $ 13.57 $ 10.92 $ 11.08 $11.30
-------------------------------------------------------------
Total return(a) ................................... 29.40% 3.12% 1.84% 13.00%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................. $29,070 $21,902 $20,752 $4,733
Ratios to average net assets:
Expenses ......................................... 1.56%(b) 1.50% 1.50% 1.49%(b)
Expenses excluding waiver and payments by affiliate 1.58%(b) 1.61% 1.73% 2.95%(b)
Net investment income ............................ 3.77%(b) 2.00% 1.97% 1.89%(b)
Portfolio turnover rate ........................... 8.11% 207.65% 118.19% 65.52%
</TABLE>
(a) Total return does not reflect sales commission or the contingent deferred
sales charge, and is not annualized for periods less than one year.
(b) Annualized.
(c) For the period December 31, 1996 (effective date) to July 31, 1997.
(d) Based on average shares outstanding.
See notes to financial statements.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS, JANUARY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN TEMPLETON GROWTH TARGET FUND SHARES VALUE
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUTUAL FUNDS (NOTE 3) 100.9%
CASH EQUIVALENTS 9.5%
Franklin Institutional Fiduciary Trust Money Market Portfolio ................ 7,653,855 $ 7,653,855
-----------
FIXED INCOME 11.8%
Franklin's AGE High Income Fund .............................................. 1,828,758 4,498,747
Franklin Bond Fund ........................................................... 271,300 2,531,225
Franklin Strategic Income Fund ............................................... 257,592 2,565,618
-----------
9,595,590
-----------
DOMESTIC EQUITY 55.8%
Franklin Aggressive Growth Fund .............................................. 678,278 15,939,553
Franklin Large Cap Growth Fund ............................................... 512,605 6,976,554
Franklin Real Estate Securities Fund ......................................... 551,292 7,045,515
Franklin Small Cap Growth Fund ............................................... 347,704 15,187,729
-----------
45,149,351
-----------
FOREIGN EQUITY 23.8%
Mutual European Fund ......................................................... 421,563 7,280,398
Templeton Latin America Fund ................................................. 882,660 9,541,562
Templeton Pacific Growth Fund ................................................ 217,548 2,462,653
-----------
19,284,613
-----------
TOTAL INVESTMENTS (COST $66,881,034) 100.9% .................................. 81,683,409
OTHER ASSETS, LESS LIABILITIES (.9)% ......................................... (696,770)
-----------
NET ASSETS 100.0% ............................................................ $80,986,639
===========
</TABLE>
See notes to financial statements.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Financial Statements
STATEMENTS OF ASSETS AND LIABILITIES
JANUARY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN TEMPLETON FRANKLIN TEMPLETON FRANKLIN TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
-------------------------------------------------------------
<S> <C> <C> <C>
Assets:
Investments in securities:
Cost ................................................. $25,026,028 $57,886,239 $66,881,034
=============================================================
Value ................................................ 27,141,001 65,251,043 81,683,409
Receivables:
Capital shares sold .................................. 55,243 251,872 464,189
Dividends and interest ............................... 15,661 33,241 15,343
Organization costs .................................... 26,195 26,195 26,195
Other assets .......................................... 14,666 -- --
-------------------------------------------------------------
Total assets ..................................... 27,252,766 65,562,351 82,189,136
-------------------------------------------------------------
Liabilities:
Payables:
Investment securities purchased ...................... 15,661 31,120 15,343
Capital shares redeemed .............................. 176,907 996,233 1,013,224
Affiliates ........................................... 34,184 75,476 128,741
Shareholders ......................................... 11,177 36,334 41,073
Other liabilities ..................................... -- 7,885 4,116
-------------------------------------------------------------
Total liabilities ................................ 237,929 1,147,048 1,202,497
-------------------------------------------------------------
Net assets, at value ............................ $27,014,837 $64,415,303 $80,986,639
=============================================================
Net assets consist of:
Undistributed net investment income ................... $ 90,905 $ 149,928 $ 42,772
Net unrealized appreciation ........................... 2,114,973 7,364,804 14,802,375
Accumulated net realized gain ......................... 297,080 777,279 816,895
Capital shares ........................................ 24,511,879 56,123,292 65,324,597
-------------------------------------------------------------
Net assets, at value ............................ $27,014,837 $64,415,303 $80,986,639
=============================================================
</TABLE>
25
<PAGE>
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Financial Statements (continued)
STATEMENTS OF ASSETS AND LIABILITIES (CONT.)
JANUARY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN TEMPLETON FRANKLIN TEMPLETON FRANKLIN TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
----------------------------------------------------------
<S> <C> <C> <C>
CLASS A:
Net assets, at value ................................................ $ 15,737,145 $ 33,926,588 $ 51,916,631
==========================================================
Shares outstanding .................................................. 1,320,333 2,770,626 3,810,783
==========================================================
Net asset value per share* .......................................... $ 11.92 $ 12.25 $ 13.62
==========================================================
Maximum offering price per share (net asset value per share / 94.25%) $ 12.65 $ 13.00 $ 14.45
==========================================================
CLASS C:
Net assets, at value ................................................ $ 11,277,692 $ 30,488,715 $ 29,070,008
==========================================================
Shares outstanding .................................................. 953,224 2,520,678 2,142,246
==========================================================
Net asset value per share* ........................................... $ 11.83 $ 12.10 $ 13.57
==========================================================
Maximum offering price per share (net asset value per share / 99.00%) $ 11.95 $ 12.22 $ 13.71
==========================================================
</TABLE>
* Redemption price 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 SIX MONTHS ENDED JANUARY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
FRANKLIN TEMPLETON FRANKLIN TEMPLETON FRANKLIN TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
-------------------------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends .............................................. $ 839,923 $ 1,773,289 $ 1,871,767
Interest 2,144 4,610 5,576
-------------------------------------------------------------
Total investment income ........................... 842,067 1,777,899 1,877,343
-------------------------------------------------------------
Expenses:
Asset Allocation fees (Note 3) ......................... 23,694 62,136 82,182
Distribution fees (Note 3):
Class A ............................................... 19,204 39,643 57,920
Class C ............................................... 54,744 128,872 121,582
Transfer agent fees (Note 3) ........................... 14,264 35,283 74,010
Reports to shareholders ................................ 2,998 13,901 9,290
Registration and filing fees ........................... 14,975 18,683 22,018
Professional fees ...................................... 2,429 4,334 6,204
Trustees' fees and expenses ............................ 521 769 1,021
Amortization of organization costs ..................... 6,833 6,833 6,833
Other .................................................. 2,249 1,192 1,080
-------------------------------------------------------------
Total expenses .................................... 141,911 311,646 382,140
Expenses waived/paid by affiliate (Note 3) ........ (1,534) -- (5,835)
-------------------------------------------------------------
Net expenses ..................................... 140,377 311,646 376,305
-------------------------------------------------------------
Net investment income ........................... 701,690 1,466,253 1,501,038
-------------------------------------------------------------
Realized and unrealized gains:
Net realized gain from:
Investments ........................................... 592,478 1,562,494 1,965,915
Distributions by underlying funds ..................... 74,735 237,829 404,191
-------------------------------------------------------------
Net realized gain ................................. 667,213 1,800,323 2,370,106
Net unrealized appreciation on investments ............. 2,287,506 7,381,043 14,782,526
-------------------------------------------------------------
Net realized and unrealized gain ........................ 2,954,719 9,181,366 17,152,632
=============================================================
Net increase in net assets resulting from operations .... $3,656,409 $10,647,619 $18,653,670
=============================================================
</TABLE>
See notes to financial statements.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JANUARY 31, 2000 (UNAUDITED)
AND THE YEAR ENDED JULY 31, 1999
<TABLE>
<CAPTION>
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
CONSERVATIVE TARGET FUND MODERATE TARGET FUND
-------------------------------------------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JANUARY 31, 2000 JULY 31, 1999 JANUARY 31, 2000 JULY 31, 1999
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ............... $ 701,690 $ 898,863 $ 1,466,253 $ 1,445,031
Net realized gain (loss) from
investments and distributions
by underlying funds ................ 667,213 (8,545) 1,800,323 (540,884)
Net unrealized appreciation on
investments ........................ 2,287,506 44,250 7,381,043 431,844
-------------------------------------------------------------------------
Net increase in
net assets resulting
from operations ................ 3,656,409 934,568 10,647,619 1,335,991
Distributions to shareholders from:
Net investment income:
Class A ............................ (460,408) (525,036) (936,402) (799,593)
Class C ............................ (286,685) (370,036) (647,485) (563,370)
Net realized gains:
Class A ............................ (79,616) (252,162) -- (450,558)
Class C ............................ (58,278) (226,618) -- (436,761)
-------------------------------------------------------------------------
Total distributions to
shareholders ........................ (884,987) (1,373,852) (1,583,887) (2,250,282)
Capital share transactions:
(Note 2)
Class A ............................ (740,542) 3,440,101 164,623 6,174,105
Class C ............................ (477,136) 605,215 2,074,256 5,323,233
-------------------------------------------------------------------------
Total capital share transactions ..... (1,217,678) 4,045,316 2,238,879 11,497,338
Net increase in
net assets ..................... 1,553,744 3,606,032 11,302,611 10,583,047
Net assets
Beginning of period .................. 25,461,093 21,855,061 53,112,692 42,529,645
-------------------------------------------------------------------------
End of period ........................ $ 27,014,837 $ 25,461,093 $ 64,415,303 $ 53,112,692
=========================================================================
Undistributed net investment
income included in net assets:
End of period ....................... $ 90,905 $ 136,308 $ 149,928 $ 267,562
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TEMPLETON
GROWTH TARGET FUND
------------------------------------
SIX MONTHS YEAR
ENDED ENDED
JANUARY 31, 2000 JULY 31, 1999
------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ............... $ 1,501,038 $ 1,348,425
Net realized gain (loss) from
investments and distributions
by underlying funds ................ 2,370,106 973,605
Net unrealized appreciation on
investments ........................ 14,782,526 897,958
------------------------------------
Net increase in
net assets resulting
from operations ................ 18,653,670 3,219,988
Distributions to shareholders from:
Net investment income:
Class A ............................ (1,294,287) (755,529)
Class C ............................ (517,149) (393,545)
Net realized gains:
Class A ............................ (1,063,578) (925,041)
Class C ............................ (572,047) (649,542)
------------------------------------
Total distributions to
shareholders ........................ (3,447,061) (2,723,657)
Capital share transactions:
(Note 2)
Class A ............................ 1,105,485 13,186,278
Class C ............................ 1,934,148 1,263,611
------------------------------------
Total capital share transactions ..... 3,039,633 14,449,889
Net increase in
net assets ..................... 18,246,242 14,946,220
Net assets
Beginning of period .................. 62,740,397 47,794,177
------------------------------------
End of period ........................ $ 80,986,639 $ 62,740,397
====================================
Undistributed net investment
income included in net assets:
End of period ....................... $ 42,772 $ 353,170
====================================
</TABLE>
See notes to financial statements.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Templeton Fund Allocator Series (the Trust) is registered under the
Investment Company Act of 1940 as a non-diversified, open-end investment
company, consisting of three series (the Funds). 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.
a. SECURITY VALUATION
Investments in open-end investment companies (individually, an "Underlying Fund"
and collectively, 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 substantially all of its taxable income.
c. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Securities transactions 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 Funds 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. 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.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Notes to Financial Statements (unaudited) (continued)
2. SHARES OF BENEFICIAL INTEREST
The Funds offer two classes of shares: Class A and Class C. Each class of shares
differs by its initial sales load, distribution fees, voting rights on matters
affecting a single class and the exchange privilege.
At January 31, 2000, there were an unlimited number of shares authorized ($0.01
par value). Transactions in the Funds' shares were as follows:
<TABLE>
<CAPTION>
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
CONSERVATIVE MODERATE
TARGET FUND TARGET FUND
------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES:
Six months ended January 31, 2000
Shares sold ......................................... 252,453 $ 2,819,471 649,510 $ 7,245,553
Shares issued in reinvestment of distributions ...... 45,832 530,285 79,261 926,380
Shares redeemed ..................................... (362,196) (4,090,298) (706,063) (8,007,310)
------------------------------------------------------------------
Net increase (decrease) ............................. (63,911) $ (740,542) 22,708 $ 164,623
==================================================================
Year ended July 31, 1999
Shares sold ......................................... 871,382 $ 9,271,452 2,105,635 $ 21,553,554
Shares issued in reinvestment of distributions ...... 73,079 761,582 123,960 1,240,968
Shares redeemed ..................................... (618,028) (6,592,933) (1,619,191) (16,620,417)
------------------------------------------------------------------
Net increase ........................................ 326,433 $ 3,440,101 610,404 $ 6,174,105
==================================================================
CLASS C SHARES:
Six months ended January 31, 2000
Shares sold ......................................... 125,946 $ 1,415,057 505,645 $ 5,893,501
Shares issued in reinvestment of distributions ...... 27,045 311,856 51,837 601,437
Shares redeemed ..................................... (196,394) (2,204,049) (405,021) (4,420,682)
------------------------------------------------------------------
Net increase (decrease) ............................. (43,403) $ (477,136) 152,461 $ 2,074,256
==================================================================
Year ended July 31, 1999
Shares sold ......................................... 494,936 $ 5,208,996 1,271,888 $ 12,802,752
Shares issued in reinvestment of distributions ...... 52,583 543,981 95,432 943,487
Shares redeemed ..................................... (486,242) (5,147,762) (830,060) (8,423,006)
------------------------------------------------------------------
Net increase ........................................ 61,277 $ 605,215 537,260 $ 5,323,233
==================================================================
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TEMPLETON
GROWTH
TARGET FUND
-----------------------------
SHARES AMOUNT
-----------------------------
<S> <C> <C>
CLASS A SHARES:
Six months ended January 31, 2000
Shares sold ......................................... 1,215,069 $ 14,823,146
Shares issued in reinvestment of distributions ...... 178,294 2,331,733
Shares redeemed ..................................... (1,293,224) (16,049,394)
-----------------------------
Net increase (decrease) ............................. 100,139 $ 1,105,485
=============================
Year ended July 31, 1999
Shares sold ......................................... 2,724,621 $ 28,554,315
Shares issued in reinvestment of distributions ...... 163,538 1,659,277
Shares redeemed ..................................... (1,599,968) (17,027,314)
-----------------------------
Net increase ........................................ 1,288,191 $ 13,186,278
=============================
CLASS C SHARES:
Six months ended January 31, 2000
Shares sold ......................................... 369,127 $ 4,569,455
Shares issued in reinvestment of distributions ...... 79,139 1,051,298
Shares redeemed ..................................... (311,005) (3,686,605)
-----------------------------
Net increase (decrease) ............................. 137,261 $ 1,934,148
=============================
Year ended July 31, 1999
Shares sold ......................................... 999,720 $ 10,409,420
Shares issued in reinvestment of distributions ...... 98,719 999,891
Shares redeemed ..................................... (965,758) (10,145,700)
-----------------------------
Net increase ........................................ 132,681 $ 1,263,611
=============================
</TABLE>
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Notes to Financial Statements (unaudited) (continued)
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
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The Funds invest primarily in the Underlying Funds which are managed by
Advisers.
The Funds pay an asset allocation fee to Advisers of .25% per year of the
average daily net assets of each Fund.
Pursuant to a SEC exemptive order, asset allocation fees were reduced on assets
invested in the Franklin Institutional Fiduciary Trust Money Market Portfolio.
Advisers agreed in advance to waive asset allocation fees for the Conservative
Target Fund and the Growth Target Fund, as noted in the Statement of Operations.
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.
The Funds reimburse Distributors up to .25% and 1.00% per year of the average
daily net assets of Class A and Class C, 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 period 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 .......................................... $21,012 $58,726 $72,846
Contingent deferred sales charges ............................. $ 5,532 $ 9,248 $ 5,368
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The Funds paid transfer agent fees of $123,557 of which $83,353 was paid to
Investors Services.
Included in professional fees are legal fees of $3,159 that were paid to a law
firm in which a partner is an officer of the Fund.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
Notes to Financial Statements (unaudited) (continued)
4. INCOME TAXES
At January 31, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes was as follows:
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
--------------------------------------------------
<S> <C> <C> <C>
Investments at cost .......... $ 25,165,429 $ 58,194,189 $ 67,311,573
==================================================
Unrealized appreciation ...... 2,872,924 9,107,395 16,513,339
Unrealized depreciation ...... (897,352) (2,050,541) (2,141,503)
--------------------------------------------------
Net unrealized appreciation .. $ 1,975,572 $ 7,056,854 $ 14,371,836
==================================================
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Net realized capital gains (losses) differ for financial statement and tax
purposes primarily due to differing treatment of wash sales.
At July 31, 1999, the Conservative Target Fund and the Moderate Target Fund had
tax basis capital losses of $192,145 and $218,464, respectively, which may be
carried over to offset future capital gains. Such losses expire in 2007.
At July 31, 1999, the Moderate Target Fund had deferred capital losses occurring
subsequent to October 31, 1998 of $219,576. For tax purposes, such losses will
be reflected in the year ending July 31, 2000.
5. INVESTMENT TRANSACTIONS
Purchases and sales of Underlying Funds (excluding short-term securities) for
the period ended January 31, 2000, were as follows:
<TABLE>
<CAPTION>
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
---------------------------------------------
<S> <C> <C> <C>
Purchases ... $10,811,091 $29,908,656 $37,676,865
Sales ....... $13,147,356 $31,524,775 $39,514,891
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