<PAGE> PAGE 1
000 B000000 12/31/97
000 C000000 0000014698
000 D000000 N
000 E000000 NF
000 F000000 Y
000 G000000 N
000 H000000 N
000 I000000 3.0
000 J000000 A
001 A000000 FRANKLIN ASSET ALLOCATION FUND
001 B000000 811-730
001 C000000 6503122000
002 A000000 777 MARINERS ISLAND BOULEVARD
002 B000000 SAN MATEO
002 C000000 CA
002 D010000 94404
002 D020000 1585
003 000000 N
004 000000 N
005 000000 N
006 000000 N
007 A000000 N
007 B000000 0
007 C010100 1
007 C010200 2
007 C010300 3
007 C010400 4
007 C010500 5
007 C010600 6
007 C010700 7
007 C010800 8
007 C010900 9
007 C011000 10
008 A000001 FRANKLIN ADVISERS, INC.
008 B000001 A
008 C000001 801-26292
008 D010001 SAN MATEO
008 D020001 CA
008 D030001 94404
008 D040001 1585
010 A000001 FRANKLIN TEMPLETON SERVICES, INC.
010 C010001 SAN MATEO
010 C020001 CA
010 C030001 94404
010 C040001 1585
011 A000001 FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
011 B000001 8-5889
011 C010001 SAN MATEO
011 C020001 CA
011 C030001 94404
011 C040001 1585
<PAGE> PAGE 2
012 A000001 FRANKLIN/TEMPLETON INVESTOR SERVICES, INC.
012 B000001 84-1036
012 C010001 SAN MATEO
012 C020001 CA
012 C030001 94404
012 C040001 1585
013 A000001 COOPERS & LYBRAND L.L.P.
013 B010001 SAN FRANCISCO
013 B020001 CA
013 B030001 94105
013 B040001 2119
014 A000001 FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
014 B000001 8-5889
015 A000001 THE BANK OF NEW YORK
015 B000001 C
015 C010001 NEW YORK
015 C020001 NY
015 C030001 10286
015 E010001 X
015 A000002 THE PHILIPPINE CENTRAL DEPOSITORY, INC
015 B000002 S
015 C010002 MAKATI CITY
015 D010002 PHILIPPINES
015 E040002 X
015 A000003 DELETE
015 A000004 THE BANK OF BOSTON
015 B000004 S
015 C010004 BUENOS AIRES
015 D010004 ARGENTINA
015 E040004 X
015 A000005 AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED
015 B000005 S
015 C010005 MELBOURNE
015 D010005 AUSTRALIA
015 E040005 X
015 A000006 CREDITANSTALT BANKVEREIN
015 B000006 S
015 C010006 VIENNA
015 D010006 AUSTRIA
015 E040006 X
015 A000007 STANDARD CHARTERED BANK PLC
015 B000007 S
015 C010007 DHAKA
015 D010007 BANGLADESH
015 E040007 X
015 A000008 BANQUE BRUXELLES LAMBERT (BBL)
015 B000008 S
015 C010008 BRUSSELS
015 D010008 BELGIUM
015 E040008 X
015 A000009 THE FIRST NATIONAL BANK OF BOSTON
<PAGE> PAGE 3
015 B000009 S
015 C010009 SAO PAULO
015 D010009 BRAZIL
015 E040009 X
015 A000010 ROYAL BANK OF CANADA
015 B000010 S
015 C010010 MONTREAL
015 D010010 CANADA
015 E040010 X
015 A000011 THE FIRST NATIONAL BANK OF BOSTON
015 B000011 S
015 C010011 SANTIAGO
015 D010011 CHILE
015 E040011 X
015 A000012 BANCO DE CHILE
015 B000012 S
015 C010012 SANTIAGO
015 D010012 CHILE
015 E040012 X
015 A000013 DELETE
015 A000014 THE STANDARD CHARTERED BANK, HONG KONG
015 B000014 S
015 C010014 HONG KONG
015 D010014 CHINA
015 E040014 X
015 A000015 CITITRUST COLUMBIA S.A. SOCIEDAD FIDUCIARIA
015 B000015 S
015 C010015 BOGOTA
015 D010015 COLOMBIA
015 E040015 X
015 A000016 CESKOSLOVENSKA OBCHODNI BANKA A.S.
015 B000016 S
015 C010016 PRAGUE
015 D010016 CZECH REPUBLIC
015 E040016 X
015 A000017 DEN DANSKE BANK
015 B000017 S
015 C010017 COPENHAGEN
015 D010017 DENMARK
015 E040017 X
015 A000018 CITIBANK, N.A.
015 B000018 S
015 C010018 QUITO
015 D010018 ECUADOR
015 E040018 X
015 A000019 CITIBANK, N.A. - EGYPT BRANCH
015 B000019 S
015 C010019 CAIRO
015 D010019 EGYPT
015 E040019 X
015 A000020 MERITA BANK LTD. (MB)
<PAGE> PAGE 4
015 B000020 S
015 C010020 HELSINKI
015 D010020 FINLAND
015 E040020 X
015 A000021 BANQUE PARIBAS
015 B000021 S
015 C010021 PARIS
015 D010021 FRANCE
015 E040021 X
015 A000022 DRESDNER BANK AG
015 B000022 S
015 C010022 FRANKFURT/MAIN
015 D010022 GERMANY
015 E040022 X
015 A000023 NATIONAL BANK OF GREECE SA
015 B000023 S
015 C010023 ATHENS
015 D010023 GREECE
015 E040023 X
015 A000024 THE HONGKONG AND SHANGHAI BANKING CORP LTD
015 B000024 S
015 C010024 HONG KONG
015 D010024 CHINA
015 E040024 X
015 A000025 CITIBANK BUDAPEST RT.
015 B000025 S
015 C010025 BUDAPEST
015 D010025 HUNGARY
015 E040025 X
015 A000026 THE HONGKONG AND SHANGHAI BANKING CORP LTD
015 B000026 S
015 C010026 MUMBAI
015 D010026 INDIA
015 E040026 X
015 A000027 THE HONGKONG AND SHANGHAI BANKING CORP LTD
015 B000027 S
015 C010027 JAKARTA
015 D010027 INDONESIA
015 E040027 X
015 A000028 ALLIED IRISH BANKS, PLC (AIB)
015 B000028 S
015 C010028 DUBLIN
015 D010028 IRELAND
015 E040028 X
015 A000029 BANK LEUMI LE-ISRAEL B.M.
015 B000029 S
015 C010029 TEL AVIV
015 D010029 ISRAEL
015 E040029 X
015 A000030 BANCA COMMERCIALE ITALIANA (BCI)
015 B000030 S
<PAGE> PAGE 5
015 C010030 MILAN
015 D010030 ITALY
015 E040030 X
015 A000031 BANK OF TOKYO MITSUBISHI (BTM)
015 B000031 S
015 C010031 TOKYO
015 D010031 JAPAN
015 E040031 X
015 A000032 THE HONGKONG BANK MALAYSIA BERHAD (HBMB)
015 B000032 S
015 C010032 KUALA LUMPUR
015 D010032 MALAYSIA
015 E040032 X
015 A000033 BANCO NACIONAL DE MEXICO
015 B000033 S
015 C010033 MEXICO CITY
015 D010033 MEXICO
015 E040033 X
015 A000034 BANQUE COMMERCIALE DU MAROC (BCM)
015 B000034 S
015 C010034 CASABLANCA
015 D010034 MOROCCO
015 E040034 X
015 A000035 MEESPIERSON
015 B000035 S
015 C010035 AMSTERDAM
015 D010035 NETHERLANDS
015 E040035 X
015 A000036 AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED
015 B000036 S
015 C010036 WELLINGTON
015 D010036 NEW ZEALAND
015 E040036 X
015 A000037 DEN NORSKE BANK ASA
015 B000037 S
015 C010037 OSLO
015 D010037 NORWAY
015 E040037 X
015 A000038 STANDARD CHARTERED BANK (SCB)
015 B000038 S
015 C010038 KARACHI
015 D010038 PAKISTAN
015 E040038 X
015 A000039 CITIBANK, N.A.
015 B000039 S
015 C010039 LIMA
015 D010039 PERU
015 E040039 X
015 A000040 THE HONGKONG AND SHANGHAI BANKING CORP LTD
015 B000040 S
015 C010040 MANILA
<PAGE> PAGE 6
015 D010040 PHILIPPINES
015 E040040 X
015 A000041 BANK HANDLOWY W WARSZAWIE S.A.
015 B000041 S
015 C010041 WARSAW
015 D010041 POLAND
015 E040041 X
015 A000042 BANCO COMERCIAL PORTUGUES S.A.
015 B000042 S
015 C010042 LISBON
015 D010042 PORTUGAL
015 E040042 X
015 A000043 UNITED OVERSEAS BANK LIMITED (UOB)
015 B000043 S
015 C010043 SINGAPORE
015 D010043 SINGAPORE
015 E040043 X
015 A000044 STANDARD CORPORATE AND MERCHANT BANK (SCMB)
015 B000044 S
015 C010044 JOHANNESBURG
015 D010044 SOUTH AFRICA
015 E040044 X
015 A000045 SEOULBANK (SB)
015 B000045 S
015 C010045 SEOUL
015 D010045 SOUTH KOREA
015 E040045 X
015 A000046 BANCO BILBAO VIZCAYA (BBV)
015 B000046 S
015 C010046 MADRID
015 D010046 SPAIN
015 E040046 X
015 A000047 STANDARD CHARTERED BANK (SCB)
015 B000047 S
015 C010047 COLOMBO
015 D010047 SRI LANKA
015 E040047 X
015 A000048 SKANDINAVISKA ENSKILDA BANKEN (SEB)
015 B000048 S
015 C010048 STOCKHOLM
015 D010048 SWEDEN
015 E040048 X
015 A000049 BANK LEU LTD.
015 B000049 S
015 C010049 ZURICH
015 D010049 SWITZERLAND
015 E040049 X
015 A000050 THE HONGKONG AND SHANGHAI BANKING CORP LTD
015 B000050 S
015 C010050 TAIPEI
015 D010050 TAIWAN
<PAGE> PAGE 7
015 E040050 X
015 A000051 THE SIAM COMMERCIAL BANK PUBLIC CO LTD (SCB)
015 B000051 S
015 C010051 BANGKOK
015 D010051 THAILAND
015 E040051 X
015 A000052 OSMANLI BANKASI A.S. (OTTOMAN BANK)
015 B000052 S
015 C010052 ISTANBUL
015 D010052 TURKEY
015 E040052 X
015 A000053 THE BANK OF NEW YORK
015 B000053 S
015 C010053 LONDON
015 D010053 UNITED KINGDOM
015 E040053 X
015 A000054 THE FIRST NATIONAL BANK OF BOSTON
015 B000054 S
015 C010054 MONTEVIDEO
015 D010054 URUGUAY
015 E040054 X
015 A000055 CITIBANK, N.A.
015 B000055 S
015 C010055 CARACAS
015 D010055 VENEZUELA
015 E040055 X
015 A000056 STANBIC BANK BOTSWANA LIMITED (STANBIC)
015 B000056 S
015 C010056 GABARONE
015 D010056 BOTSWANA
015 E040056 X
015 A000057 CREDIT COMMERCIAL DE FRANCE
015 B000057 S
015 C010057 PARIS
015 D010057 FRANCE
015 E040057 X
015 A000058 MERCHANT BANK (GHANA) LIMITED
015 B000058 S
015 C010058 ACCRA
015 D010058 GHANA
015 E040058 X
015 A000059 BANQUE PARIBAS SA
015 B000059 S
015 C010059 MILAN
015 D010059 ITALY
015 E040059 X
015 A000060 JASDEC (DEPOSITORY)
015 B000060 S
015 C010060 TOKYO
015 D010060 JAPAN
015 E040060 X
<PAGE> PAGE 8
015 A000061 THE BRITISH BANK OF THE MIDDLE EAST
015 B000061 S
015 C010061 AMMAN
015 D010061 JORDAN
015 E040061 X
015 A000062 STANBIC BANK KENYA LIMITED (STANBIC)
015 B000062 S
015 C010062 NAIROBI
015 D010062 KENYA
015 E040062 X
015 A000063 BANQUE INTERNATIONALE A LUXEMBOURG
015 B000063 S
015 C010063 LUXEMBOURG CITY
015 D010063 LUXEMBOURG
015 E040063 X
015 A000064 CEDEL (DEPOSITORY)
015 B000064 S
015 C010064 LUXEMBOURG CITY
015 D010064 LUXEMBOURG
015 E040064 X
015 A000065 STANBIC BANK NAMIBIA LIMITED (STANBIC)
015 B000065 S
015 C010065 WINDHOEK
015 D010065 NAMIBIA
015 E040065 X
015 A000066 KAS - ASSOCIATIE NV
015 B000066 S
015 C010066 AMSTERDAM
015 D010066 NETHERLANDS
015 E040066 X
015 A000067 STANBIC MERCHANT BANK NIGERIA LIMITED
015 B000067 S
015 C010067 LAGOS
015 D010067 NIGERIA
015 E040067 X
015 A000068 DEVELOPMENT BANK OF SINGAPORE
015 B000068 S
015 C010068 SINGAPORE
015 D010068 SINGAPORE
015 E040068 X
015 A000069 CESKOSLOVENSKA OBCHODNA BANKA A.S. (CSOB)
015 B000069 S
015 C010069 BRATISLAVA
015 D010069 SLOVAK REPUBLIC
015 E040069 X
015 A000070 STANBIC BANK SWAZILAND LIMITED (STANBIC)
015 B000070 S
015 C010070 MBABANE
015 D010070 SWAZILAND
015 E040070 X
015 A000071 UNION BANK OF SWITZERLAND
<PAGE> PAGE 9
015 B000071 S
015 C010071 ZURICH
015 D010071 SWITZERLAND
015 E040071 X
015 A000072 BANGKOK BANK PUBLIC COMPANY LTD.
015 B000072 S
015 C010072 BANGKOK
015 D010072 THAILAND
015 E040072 X
015 A000073 FIRST CHICAGO CLEARING CENTRE (FCCC)
015 B000073 S
015 C010073 LONDON
015 D010073 UNITED KINGDOM
015 E040073 X
015 A000074 STANBIC BANK ZAMBIA LIMITED (STANBIC)
015 B000074 S
015 C010074 LUSAKA
015 D010074 ZAMBIA
015 E040074 X
015 A000075 STANBIC BANK ZIMBABWE LIMITED (STANBIC)
015 B000075 S
015 C010075 HARARE
015 D010075 ZIMBABWE
015 E040075 X
018 000000 Y
019 A000000 Y
019 B000000 214
019 C000000 FRNKTEMGRP
020 A000001 EDWARDS (A.G.) & SONS, INC.
020 B000001 43-0895447
020 C000001 30
020 A000002 PAINWEBBER, INC.
020 B000002 13-2638166
020 C000002 11
020 A000003 ABN AMRO CHICAGO CORP.
020 B000003 36-2549961
020 C000003 10
020 A000004 MERRIL LYNCH PIERCE FENNER
020 B000004 13-5674085
020 C000004 7
020 A000005 EVEREN SEC., INC.
020 B000005 36-2693816
020 C000005 6
020 A000006 MORGAN (J.P.) SECURITIES, INC.
020 B000006 13-3224016
020 C000006 6
020 A000007 NOMURA SECURITIES INTL, INC.
020 B000007 13-2642206
020 C000007 4
020 A000008 BEAR, STEARNS & CO., INC.
020 B000008 13-3299429
<PAGE> PAGE 10
020 C000008 4
020 A000009 MORGAN STANLEY & CO., INC.
020 B000009 13-2655998
020 C000009 3
020 A000010 ROBERTSON STEPHENS & CO.
020 B000010 94-2524501
020 C000010 3
021 000000 108
022 A000001 UBS SECURITIES,L.L.C.
022 B000001 13-2932996
022 C000001 307344
022 D000001 0
022 A000002 DONALDSON LUFKIN & JENRETTE
022 B000002 13-2741729
022 C000002 291975
022 D000002 0
022 A000003 CIBC WOOD GUNDY SECURITY
022 B000003 13-3639028
022 C000003 282017
022 D000003 0
022 A000004 LEHMAN BROTHERS, INC.
022 B000004 13-2518466
022 C000004 260327
022 D000004 373
022 A000005 SBCI SWISS BANK CORP. INV. BANK
022 B000005 13-2639550
022 C000005 257579
022 D000005 0
022 A000006 FUJI SECURITIES, INC.
022 B000006 13-3038090
022 C000006 256910
022 D000006 0
022 A000007 BEAR, STEARNS & CO., INC.
022 B000007 13-3299429
022 C000007 234859
022 D000007 686
022 A000008 AUBREY LANSTON COMPANY
022 B000008 13-5552129
022 C000008 216399
022 D000008 0
022 A000009 DAIWA SECURITIES AMERICA, INC.
022 B000009 13-5680329
022 C000009 211972
022 D000009 0
022 A000010 BANK OF AMERICA NT & SA
022 B000010 94-1687665
022 C000010 183002
022 D000010 1032
023 C000000 3254408
023 D000000 4799
024 000000 Y
<PAGE> PAGE 11
025 A000001 BANKAMERICA CORP.
025 B000001 95-4035346
025 C000001 E
025 D000001 1460
025 D000002 0
025 D000003 0
025 D000004 0
025 D000005 0
025 D000006 0
025 D000007 0
025 D000008 0
026 A000000 Y
026 B000000 Y
026 C000000 Y
026 D000000 Y
026 E000000 N
026 F000000 N
026 G010000 N
026 G020000 N
026 H000000 N
027 000000 Y
028 A010000 1993
028 A020000 0
028 A030000 0
028 A040000 642
028 B010000 4834
028 B020000 0
028 B030000 0
028 B040000 861
028 C010000 4120
028 C020000 262
028 C030000 0
028 C040000 924
028 D010000 3515
028 D020000 0
028 D030000 0
028 D040000 1290
028 E010000 2415
028 E020000 0
028 E030000 0
028 E040000 892
028 F010000 4473
028 F020000 3325
028 F030000 0
028 F040000 1359
028 G010000 21350
028 G020000 3587
028 G030000 0
028 G040000 5968
028 H000000 21350
029 000000 Y
<PAGE> PAGE 12
030 A000000 390
030 B000000 4.50
030 C000000 0.00
031 A000000 44
031 B000000 0
032 000000 346
033 000000 0
034 000000 Y
035 000000 0
036 A000000 N
036 B000000 0
037 000000 N
038 000000 0
039 000000 Y
040 000000 Y
041 000000 Y
042 A000000 0
042 B000000 0
042 C000000 100
042 D000000 0
042 E000000 0
042 F000000 0
042 G000000 0
042 H000000 0
043 000000 161
044 000000 38
045 000000 Y
046 000000 N
047 000000 Y
048 000000 0.000
048 A010000 100000
048 A020000 0.625
048 B010000 150000
048 B020000 0.500
048 C010000 0
048 C020000 0.000
048 D010000 0
048 D020000 0.000
048 E010000 0
048 E020000 0.000
048 F010000 0
048 F020000 0.000
048 G010000 0
048 G020000 0.000
048 H010000 0
048 H020000 0.000
048 I010000 0
048 I020000 0.000
048 J010000 0
048 J020000 0.000
048 K010000 250000
<PAGE> PAGE 13
048 K020000 0.450
049 000000 N
050 000000 N
051 000000 N
052 000000 N
053 A000000 N
054 A000000 Y
054 B000000 Y
054 C000000 Y
054 D000000 N
054 E000000 N
054 F000000 N
054 G000000 Y
054 H000000 Y
054 I000000 N
054 J000000 Y
054 K000000 N
054 L000000 Y
054 M000000 Y
054 N000000 N
054 O000000 N
055 A000000 N
055 B000000 N
056 000000 N
057 000000 N
058 A000000 N
059 000000 Y
060 A000000 Y
060 B000000 Y
061 000000 100
062 A000000 N
062 B000000 0.0
062 C000000 0.0
062 D000000 0.0
062 E000000 0.0
062 F000000 0.0
062 G000000 0.0
062 H000000 0.0
062 I000000 0.0
062 J000000 0.0
062 K000000 0.0
062 L000000 0.0
062 M000000 0.0
062 N000000 0.0
062 O000000 0.0
062 P000000 0.0
062 Q000000 0.0
062 R000000 0.0
063 A000000 0
063 B000000 0.0
066 A000000 Y
<PAGE> PAGE 14
066 B000000 N
066 C000000 N
066 D000000 N
066 E000000 N
066 F000000 N
066 G000000 Y
067 000000 N
068 A000000 N
068 B000000 N
069 000000 N
070 A010000 Y
070 A020000 Y
070 B010000 Y
070 B020000 Y
070 C010000 Y
070 C020000 N
070 D010000 Y
070 D020000 N
070 E010000 Y
070 E020000 N
070 F010000 Y
070 F020000 N
070 G010000 Y
070 G020000 N
070 H010000 Y
070 H020000 N
070 I010000 N
070 I020000 N
070 J010000 Y
070 J020000 N
070 K010000 Y
070 K020000 N
070 L010000 Y
070 L020000 Y
070 M010000 Y
070 M020000 Y
070 N010000 N
070 N020000 N
070 O010000 Y
070 O020000 N
070 P010000 Y
070 P020000 N
070 Q010000 N
070 Q020000 N
070 R010000 N
070 R020000 N
071 A000000 47302
071 B000000 32716
071 C000000 59951
071 D000000 55
072 A000000 12
<PAGE> PAGE 15
072 B000000 1345
072 C000000 763
072 D000000 0
072 E000000 0
072 F000000 461
072 G000000 0
072 H000000 0
072 I000000 94
072 J000000 4
072 K000000 22
072 L000000 13
072 M000000 6
072 N000000 26
072 O000000 0
072 P000000 0
072 Q000000 0
072 R000000 16
072 S000000 2
072 T000000 181
072 U000000 0
072 V000000 0
072 W000000 4
072 X000000 829
072 Y000000 0
072 Z000000 1279
072AA000000 5449
072BB000000 1964
072CC010000 4935
072CC020000 0
072DD010000 1227
072DD020000 0
072EE000000 3456
073 A010000 0.1490
073 A020000 0.0000
073 B000000 0.3740
073 C000000 0.0000
074 A000000 0
074 B000000 18077
074 C000000 0
074 D000000 17247
074 E000000 784
074 F000000 53670
074 G000000 5
074 H000000 0
074 I000000 0
074 J000000 623
074 K000000 0
074 L000000 517
074 M000000 0
074 N000000 90923
074 O000000 573
<PAGE> PAGE 16
074 P000000 90
074 Q000000 0
074 R010000 0
074 R020000 0
074 R030000 122
074 R040000 508
074 S000000 0
074 T000000 89630
074 U010000 9902
074 U020000 0
074 V010000 9.05
074 V020000 0.00
074 W000000 0.0000
074 X000000 5924
074 Y000000 2941
075 A000000 0
075 B000000 73829
076 000000 0.00
077 A000000 Y
077 B000000 Y
078 000000 N
080 A000000 ICI MUTUAL INSURANCE COMPANY
080 B000000 NONE
080 C000000 150000
081 A000000 Y
081 B000000 213
082 A000000 N
082 B000000 0
083 A000000 N
083 B000000 0
084 A000000 N
084 B000000 0
085 A000000 Y
085 B000000 N
086 A010000 0
086 A020000 0
086 B010000 0
086 B020000 0
086 C010000 0
086 C020000 0
086 D010000 0
086 D020000 0
086 E010000 0
086 E020000 0
086 F010000 0
086 F020000 0
SIGNATURE DIOMEDES LOO-TAM
TITLE TREASURER
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FRANKLIN ASSET ALLOCATION FUND DECEMBER 31, 1997 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 59,514,384
<INVESTMENTS-AT-VALUE> 71,706,204
<RECEIVABLES> 19,216,516
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 90,922,720
<PAYABLE-FOR-SECURITIES> 573,400
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 719,136
<TOTAL-LIABILITIES> 1,292,536
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 76,868,550
<SHARES-COMMON-STOCK> 9,902,204
<SHARES-COMMON-PRIOR> 6,833,908
<ACCUMULATED-NII-CURRENT> 79,306
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 439,059
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,243,269
<NET-ASSETS> 89,630,184
<DIVIDEND-INCOME> 762,891
<INTEREST-INCOME> 1,345,609
<OTHER-INCOME> 0
<EXPENSES-NET> (829,215)
<NET-INVESTMENT-INCOME> 1,279,285
<REALIZED-GAINS-CURRENT> 3,485,295
<APPREC-INCREASE-CURRENT> 4,935,333
<NET-CHANGE-FROM-OPS> 9,699,913
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,226,791)
<DISTRIBUTIONS-OF-GAINS> (3,456,153)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,999,853
<NUMBER-OF-SHARES-REDEEMED> (1,392,075)
<SHARES-REINVESTED> 460,518
<NET-CHANGE-IN-ASSETS> 32,762,934
<ACCUMULATED-NII-PRIOR> 29,261
<ACCUMULATED-GAINS-PRIOR> 405,174
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 461,208
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 829,215
<AVERAGE-NET-ASSETS> 73,829,036
<PER-SHARE-NAV-BEGIN> 8.320
<PER-SHARE-NII> .150
<PER-SHARE-GAIN-APPREC> 1.100
<PER-SHARE-DIVIDEND> (.150)
<PER-SHARE-DISTRIBUTIONS> (.370)
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 9.050
<EXPENSE-RATIO> 1.120
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> .000
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
Franklin Asset Allocation Fund
In planning and performing our audit of the financial
statements of Franklin Asset Allocation Fund for the year
ended December 31, 1997, we considered its internal control,
including controls over safeguarding securities, in order to
determine our auditing procedures for the purpose of
expressing our opinion on the financial statements and to
comply with the requirements of Form NSAR, not to provide
assurance on internal control.
The management of Franklin Asset Allocation Fund is
responsible for establishing and maintaining internal
control. In fulfilling this responsibility, estimates and
judgements by management are required to assess the expected
benefits and related costs of controls. Generally, controls
that are relevant to an audit pertain to the entity's
objective of preparing financial statements for external
purposes that are fairly presented in conformity with
generally accepted accounting principles. Those controls
include the safeguarding of assets against unauthorized
acquisition, use, or disposition.
Because of inherent limitations in internal control, errors
or irregularities may occur and may not be detected. Also,
projection of any evaluation of internal control to future
periods is subject to the risk that it may become inadequate
because of changes in conditions or that the effectiveness
of the design and operation may deteriorate.
Our consideration of internal control would not necessarily
disclose all matters in internal control that might be
material weaknesses under standards established by the
American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or
operation of the specific internal control elements does not
reduce to a relatively low level the risk that errors or
irregularities in amounts that would be material in relation
to the financial statements being audited may occur and not
be detected within a timely period by employees in the
normal course of performing their assigned functions.
However, we noted no matters involving internal control,
including controls over safeguarding securities, that we
consider to be material weaknesses, as defined above as of
December 31, 1997.
This report is intended solely for the information and use
of management and the Securities and Exchange Commission.
S\COOPERS & LYBRAND L.L.P.
Coopers & Lybrand L.L.P.
San Francisco, California
FEBRUARY 3, 1998
