UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSRS

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-7851
--------

FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
----------------------------------------
(Exact name of registrant as specified in charter)

ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
(Address of principal executive offices) (Zip code)

MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
-----------------------------------------------------------------
(Name and address of agent for service)

Registrant's telephone number, including area code: (650) 312-2000
--------------

Date of fiscal year end: 7/31
----

Date of reporting period: 1/31/04
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ITEM 1. REPORTS TO STOCKHOLDERS.

JANUARY 31, 2004

Franklin Templeton
Conservative Target Fund

Franklin Templeton
Moderate Target Fund

Franklin Templeton
Growth Target Fund

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PEOPLE PHOTO

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SEMIANNUAL REPORT AND SHAREHOLDER LETTER ASSET ALLOCATION
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Franklin Templeton
Fund Allocator Series

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FRANKLIN TEMPLETON INVESTMENTS LOGO
Franklin o Templeton o Mutual Series

Franklin Templeton Investments

GAIN FROM OUR PERSPECTIVE

Franklin Templeton's distinct multi-manager structure combines the specialized
expertise of three world-class investment management groups--Franklin, Templeton
and Mutual Series.

SPECIALIZED EXPERTISE

Each of our portfolio management groups operates autonomously, relying on its
own research and staying true to the unique investment disciplines that underlie
its success.

FRANKLIN. Founded in 1947, Franklin is a leader in tax-free investing and a
driving force in fixed income investing around the globe. They also bring
expertise in growth- and value-style U.S. equity investing.

TEMPLETON. Founded in 1940, Templeton pioneered international investing and, in
1954, launched what has become the industry's oldest global fund. Today, with
research offices in over 25 countries, they offer investors the broadest global
reach in the industry.

MUTUAL SERIES. Established in 1949, Mutual Series is dedicated to a unique style
of value investing, searching aggressively for opportunity among undervalued
stocks, arbitrage situations and distressed companies.

TRUE DIVERSIFICATION

Because our management groups work independently and adhere to distinctly
different investment approaches, Franklin, Templeton and Mutual Series funds
typically have a low overlap of securities. That's why our funds can be used to
build truly diversified portfolios covering every major asset class.

RELIABILITY YOU CAN TRUST

At Franklin Templeton Investments, we seek to consistently provide investors
with exceptional risk-adjusted returns over the long term, as well as the
reliable account services that have helped us become one of the most trusted
names in financial services.

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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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[GRAPHIC OMITTED]
BUILDINGS PHOTO

Not part of the semiannual report

Contents

Shareholder Letter ...................... 1

Semiannual Report

Franklin Templeton
Conservative Target Fund ................ 3

Franklin Templeton
Moderate Target Fund .................... 10

Franklin Templeton
Growth Target Fund ...................... 17

Financial Highlights and
Statements of Investments ............... 24

Financial Statements .................... 39

Notes to Financial Statements ........... 44

Proxy Voting Policies and Procedures .... 52

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Shareholder Letter

Dear Shareholder:

The six months ended January 31, 2004, showed signs of robust economic growth,
rising consumer confidence, healthy retail sales and greater corporate earnings.
These had positive implications for financial markets, and the major stock
indexes rallied strongly. Most bond markets also had positive returns as
Treasury bond prices generally rose. We think the economic recovery looks more
durable and inflation should remain subdued, which should be positive for
investors.

Although future economic and market developments are impossible to predict, as
an investor, you can follow certain basic principles in planning for future
needs. First, investing for the long term is important so that you can better
weather short-term market ups and downs. Second, by choosing a mutual fund that
comprises a range of holdings, you can use diversification to help manage
investment risk. You can further diffuse risk exposure by investing in different
asset categories such as stocks and bonds. Third, it may make sense to follow a
regular investment plan, also called dollar cost averaging, investing a certain
amount of money monthly or quarterly. Remember, however, to consider your
financial ability to continue purchases through times of low price levels or
changing economic conditions before committing to such a strategy. Such a plan
does not assure a profit and does not protect against loss in a declining
market. As always, we encourage you to discuss your goals with your financial
advisor who can address concerns about volatility

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EDELIVERY DETAILS
Log in at franklintempleton.com and click on eDelivery. Shareholders who are
registered at franklintempleton.com can receive these reports via email. Not all
accounts are eligible for eDelivery.

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NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
-----------------------------------------------------

Not part of the semiannual report | 1

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STATEMENT ON CURRENT
INDUSTRY ISSUES
- --------------------------------------------------------
In our efforts to fulfill our ongoing commitment
to provide you with timely and accurate information,
we have prepared a statement on current industry
issues as they pertain to Franklin Resources, Inc.
(Franklin Templeton Investments) and our subsidiary
companies. You can find the most updated "Statement
on Current Industry Issues" and a detailed Q&A at
franklintempleton.com, or call us at 1-800/632-2301.
- --------------------------------------------------------

and diversification, periodically review your overall portfolio and help you
stay focused on the long term. We firmly believe that most people benefit from
professional advice, and that advice is never more valuable than during a
volatile market.

In the enclosed semiannual report for Franklin Templeton Fund Allocator Series,
the portfolio manager discusses market conditions and Fund performance during
the period under review. You will also find performance data and financial
information. Please remember that all securities markets move up and down, as do
mutual fund share prices.

If you would like more frequent updates, franklintempleton.com provides daily
prices, monthly performance figures, portfolio holdings and other information.
You can also access your account, buy and sell shares, read timely commentary
from portfolio managers, and find helpful financial planning tools. We hope you
will take advantage of these online services.

We thank you for investing with Franklin Templeton, welcome your questions and
comments, and look forward to serving your investment needs in the years ahead.

Sincerely,

/s/Charles B. Johnson

Charles B. Johnson
Chairman
Franklin Templeton Fund Allocator Series

THIS LETTER REFLECTS OUR ANALYSIS AND OPINIONS AS OF JANUARY 31, 2004. THE
INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, COUNTRY,
INDUSTRY, SECURITY OR FUND. STATEMENTS OF FACT HAVE BEEN OBTAINED FROM SOURCES
CONSIDERED RELIABLE.

2 | Not part of the semiannual report

Semiannual Report

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.

[PIE CHART GRAPHIC OMITTED]
PLOT POINTS FOLLOW:
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Asset Allocation
Franklin Templeton Conservative Target Fund
Based on Total Net Assets as of 1/31/04

Domestic Fixed Income ....................... 28.0%
Domestic Equity ............................. 27.9%
Foreign Fixed Income ........................ 12.1%
Foreign Equity .............................. 11.8%
Short-Term Investments & Other Net Assets ... 20.2%
- --------------------------------------------------------------------------------

We are pleased to bring you this semiannual report for Franklin Templeton
Conservative Target Fund, which covers the period ended January 31, 2004.

PERFORMANCE OVERVIEW

For the six months under review, Franklin Templeton Conservative Target Fund -
Class A posted a +10.05% cumulative total return, as shown in the Performance
Summary beginning on page 7. The Fund outperformed its hybrid benchmark, which
comprised a weighted combination of the Standard & Poor's 500 Composite Index
(S&P 500) and the Morgan Stanley Capital International (MSCI) Europe Australasia
Far East (EAFE) Index for equities, the Lehman Brothers U.S.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND COMPLETE LEGAL
TITLES OF ALL PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF
INVESTMENTS (SOI). THE SOI BEGINS ON PAGE 28.

Semiannual Report | 3

Government/Credit Index for fixed income, and the P&R 90 Day T-Bill for
short-term investments and other net assets. For the reporting period, the
benchmark returned 8.44%.1

ECONOMIC AND MARKET OVERVIEW

During the six months ended January 31, 2004, domestic economic recovery
appeared to be on track. The annualized gross domestic product growth rate
surged 8.2% in the third quarter of 2003 and rose 4.1% in the fourth quarter.
The U.S. dollar's continued weakness, particularly against the euro, led to
modest trade balance improvements. Business sentiment climbed in January 2004 to
its highest level in nearly a decade; and business equipment spending,
especially in information technology, rose in the third and fourth quarters of
2003. Consumer sentiment rose in January to its highest level since November
2000. Consumer spending, however, grew only modestly in fourth quarter 2003
compared with strong third-quarter spending, which was fueled by federal tax
cuts, mortgage refinancing and auto-buying incentives. Slow wage growth, heavy
indebtedness and lower wealth since 2000 despite recent stock market gains
constrained consumer spending.

Lack of job growth remained a risk to the economy during the reporting period,
and although the unemployment rate fell to 5.6% in January, this occurred mainly
because of a labor force decline. At the Federal Reserve Board's (Fed's) January
meeting, Fed policymakers indicated they would not raise interest rates until
the job market improved meaningfully. Thus, they kept the federal funds target
rate at 1.00%, and maintained a neutral stance with respect to future economic
growth and inflation. However, the Fed said it "can be patient" about raising
rates, which was different from previous statements. The change in wording
caused mixed reaction among market analysts about when the Fed might begin
raising rates.

1. Source: Standard & Poor's Micropal. The S&P 500 consists of 500 stocks chosen
for market size, liquidity and industry group representation. Each stock's
weight in the index is proportionate to its market value. The S&P 500 is one of
the most widely used benchmarks of U.S. equity performance. The MSCI EAFE Index
is market capitalization-weighted and measures total returns of equity
securities in developed markets in Europe, Australasia and the Far East. The
Lehman Brothers U.S. Government/Credit Index includes U.S. Treasury or Agency
issued securities and publicly issued U.S. corporate and specified foreign
debentures and secured notes that meet the specified maturity, liquidity and
quality requirements. These include public obligations of the U.S. Treasury with
remaining maturity of one year or more and publicly issued debt of U.S.
governmental agencies, quasi-federal corporations, and corporate or foreign
debt. The credit portion includes both corporate and non-corporate sectors. The
corporate sectors are industrial, utility, and finance, which includes both U.S.
and non-U.S. corporations. The non-corporate sectors are sovereign,
supranational, foreign agency, and foreign local government. All issues included
must have at least one year to final maturity and must be rated investment grade
(Baa3 or better) by Moody's Investors Service. They must also be
dollar-denominated and non-convertible. Total return includes price
appreciation/depreciation and income as a percentage of the original investment.
The index is rebalanced monthly by market capitalization. The P&R 90 Day T-Bill
is a total return index based on a constant maturity instrument. Payden & Rygel
includes both accrued interest and change in market price in its monthly total
return calculations. The benchmark index's weightings are as follows: S&P 500
25%, MSCI EAFE 10%, Lehman Brothers U.S. Government/Credit Index 45% and P&R 90
Day T-Bill 20%. The indexes are unmanaged and include reinvested distributions.
One cannot invest directly in an index, nor is an index representative of the
Fund's portfolio.

4 | Semiannual Report

During the period, equity markets continued a rally that began in March 2003.
Data showing robust economic growth and improved revenue reports from corporate
America seemed to increase investor confidence in the stock markets. The S&P 500
rose 15.22% for the six months under review, while the technology-heavy Nasdaq
Composite Index increased 19.43%.2 As economic data improved, some interest
rates rose from their lows at the beginning of the period but eased toward
period-end. The 10-year Treasury note started the period yielding 4.49% on July
31, 2003, reached a peak of 4.61% on September 2, 2003, then declined to 4.16%
on January 31, 2004.

INVESTMENT STRATEGY

Whenever possible, we attempt to hold the same underlying Franklin Templeton
funds in each Target Fund's portfolio. We generally diversify the Target Funds'
broad equity allocations 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
of the Target Funds' results relative to each other. For your reference,
Franklin Templeton Conservative Target Fund seeks to maintain the following
asset class allocations: 40% equity, 40% fixed income, and 20% short-term
investments and other net assets.

MANAGER'S DISCUSSION

The Fund's performance can be attributed largely to maintaining a static
allocation among equities, fixed income securities, and short-term investments
and other net assets, and by the actual performance of the selected underlying
funds.

At period-end, Franklin Templeton Conservative Target Fund's domestic equity
exposure was 70.3% 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, 2004, we held shares in large-, mid- and
small-capitalization equity funds, representing both value and growth styles.
Franklin Small Cap Growth Fund II-Advisor Class, representing 10.6% of the
Fund's total net assets, was our largest equity fund weighting at period-end. On
the fixed income side, domestic exposure was 69.8% of the Fund's total net
assets, with the balance represented by foreign fixed income. Franklin Strategic
Mortgage Portfolio was our largest fixed income fund weighting at 17.4% of total
net assets.

TOP FIVE FUND HOLDINGS
Franklin Templeton Conservative Target Fund
1/31/04
- -------------------------------------------------------
% OF TOTAL
NET ASSETS
- -------------------------------------------------------
Franklin Strategic Mortgage Portfolio ..... 17.4%
Templeton Global Bond Fund
-Advisor Class ............................ 12.1%
Franklin Small Cap Growth Fund II
-Advisor Class ............................ 10.6%
Franklin Capital Growth Fund
-Advisor Class ............................ 7.4%
Franklin Total Return Fund
-Advisor Class ............................ 6.9%
- -------------------------------------------------------

2. Source: Standard & Poor's Micropal. See footnote 1 for a description of the
S&P 500. The Nasdaq Composite Index measures all domestic and international
common stocks listed on The Nasdaq Stock Market. The index is market
value-weighted and includes over 3,000 companies.

Semiannual Report | 5

While domestic growth fund holdings such as Franklin Small Cap Growth Fund II
- -Advisor Class performed relatively better versus the S&P 500, domestic value
fund holdings such as Mutual Shares Fund-Class Z slightly underperformed it. On
the fixed income side, Templeton Global Bond Fund-Advisor Class underperformed
the Lehman Brothers U.S. Government/Credit Index, and Franklin Strategic Income
Fund-Advisor Class posted strong relative results, largely due to its greater
weighting of high yield securities versus the Lehman Brothers index. However,
some funds with higher quality securities, such as Franklin Strategic Mortgage
Portfolio, underperformed the Lehman Brothers index during the period.

Thank you for your continued participation in Franklin Templeton Conservative
Target Fund. We look forward to serving your future investment needs.

{GRAPHIC OMITTED}
COFFEY PHOTO

/s/T. Anthony Coffey, CRA

T. Anthony Coffey, CFA
Portfolio Manager
Franklin Templeton Conservative Target Fund

THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF
JANUARY 31, 2004, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR MAIN
INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE DEPENDING
ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY NOT BE
RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY. THE
INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, COUNTRY,
INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE, BUT THE ADVISOR MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR
COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT
PHILOSOPHY.

6 | Semiannual Report

Performance Summary as of 1/31/04

FRANKLIN TEMPLETON CONSERVATIVE TARGET FUND

Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table does not reflect any taxes due on
Fund dividends, capital gain distributions, if any, or any realized gains on the
sale of Fund shares. Total return reflects the Fund's dividend income, capital
gain distributions, if any, and any unrealized gains or losses.

PRICE AND DISTRIBUTION INFORMATION

- -------------------------------------------------------------------------------------------------
CLASS A CHANGE 1/31/04 7/31/03
- -------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.94 $11.85 $10.91
DISTRIBUTIONS (8/1/03-1/31/04)
Dividend Income $0.1514
- -------------------------------------------------------------------------------------------------
CLASS B CHANGE 1/31/04 12/1/03
- -------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.17 $11.84 $11.67
DISTRIBUTIONS (12/1/03-1/31/04)
Dividend Income $0.1078
- -------------------------------------------------------------------------------------------------
CLASS C CHANGE 1/31/04 7/31/03
- -------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.93 $11.73 $10.80
DISTRIBUTIONS (8/1/03-1/31/04)
Dividend Income $0.1060
- -------------------------------------------------------------------------------------------------
CLASS R CHANGE 1/31/04 7/31/03
- -------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.94 $11.83 $10.89
DISTRIBUTIONS (8/1/03-1/31/04)
Dividend Income $0.1362

Semiannual Report | Past performance does not guarantee future results. | 7

Performance Summary (CONTINUED)

PERFORMANCE
- -----------------------------------------------------------------------------------------------------
CLASS A 6-MONTH 1-YEAR 5-YEAR INCEPTION (12/31/96)
- -----------------------------------------------------------------------------------------------------

Cumulative Total Return 1 +10.05% +18.71% +38.79% +60.49%
Average Annual Total Return 2 +3.68% +11.89% +5.53% +6.01%
Value of $10,000 Investment 3 $10,368 $11,189 $13,085 $15,126
Avg. Ann. Total Return (12/31/03) 4 +10.63% +5.50% +5.97%
- -----------------------------------------------------------------------------------------------------
CLASS B INCEPTION (12/1/03)
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +2.39%
Aggregate Total Return 5 -1.61%
Value of $10,000 Investment 3 $9,839
Aggregate Total Return (12/31/03) 4, 5 -2.30%
- -----------------------------------------------------------------------------------------------------
CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (12/31/96)
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +9.62% +17.84% +33.74% +51.77%
Average Annual Total Return 2 +8.62% +16.84% +5.99% +6.06%
Value of $10,000 Investment 3 $10,862 $11,684 $13,374 $15,177
Avg. Ann. Total Return (12/31/03) 4 +14.32% +5.74% +5.89%
- -----------------------------------------------------------------------------------------------------
CLASS R 6-MONTH 1-YEAR INCEPTION (1/1/02)
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +9.92% +18.42% +13.14%
Average Annual Total Return 2 +8.92% +17.42% +6.12%
Value of $10,000 Investment 3 $10,892 $11,742 $11,314
Avg. Ann. Total Return (12/31/03) 4 +16.06% +5.98%

ONGOING MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE; MORE
RECENT RETURNS MAY DIFFER FROM THOSE SHOWN. 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 MORE CURRENT PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

8 | Past performance does not guarantee future results. | Semiannual Report

Performance Summary (CONTINUED)

ENDNOTES

THE FUND IS NON-DIVERSIFIED BECAUSE IT INVESTS IN SECURITIES OF A LIMITED NUMBER
OF MUTUAL FUNDS. BECAUSE IT INVESTS IN UNDERLYING FUNDS, WHICH MAY ENGAGE IN A
VARIETY OF INVESTMENT STRATEGIES INVOLVING CERTAIN RISKS, THE FUND MAY BE
SUBJECT TO THESE SAME RISKS. STOCKS HAVE HISTORICALLY OUTPERFORMED OTHER ASSET
CLASSES OVER THE LONG TERM, BUT TEND TO FLUCTUATE MORE DRAMATICALLY OVER THE
SHORT TERM. BONDS ARE AFFECTED BY CHANGES IN INTEREST RATES AND THE
CREDITWORTHINESS OF THEIR ISSUERS. FOREIGN INVESTING HAS ADDITIONAL RISKS SUCH
AS CURRENCY AND MARKET VOLATILITY AND POLITICAL AND SOCIAL INSTABILITY. THERE
ARE OTHER RISKS PERTAINING TO SPECIFIC UNDERLYING FUNDS, SUCH AS THOSE INVOLVING
INVESTMENTS IN SPECIALIZED INDUSTRY SECTORS, SUCH AS THE TECHNOLOGY SECTOR,
WHICH HAS BEEN AMONG THE MARKET'S MOST VOLATILE SECTORS. THE FUND'S PROSPECTUS
ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS.

CLASS A: Subject to the current, maximum 5.75% initial sales charge. Prior to
8/3/98, Fund shares were offered at a lower initial sales charge; thus actual
total returns may differ.

CLASS B: Subject to no initial sales charge, but subject to a contingent
deferred sales charge (CDSC) declining from 4% to 0% over six years. These
shares have higher annual fees and expenses than Class A shares.

CLASS C: Subject to no initial sales charge, but subject to 1% CDSC for shares
redeemed within 12 months of investment. Prior to 1/1/04, these shares were
offered with an initial sales charge; thus actual returns would have differed.
These shares have higher annual fees and expenses than Class A shares.

CLASS R: No initial sales charge, but subject to 1% CDSC for shares redeemed
within 18 months of investment; shares are available to certain eligible
investors as described in the prospectus. These shares have higher annual fees
and expenses than Class A shares.

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 any current, applicable,
maximum sales charge(s). Six-month return has not been annualized.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include any current, applicable, maximum
sales charge(s).
4. In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.
5. Aggregate total return represents the change in value of an investment since
inception. Since Class B shares have existed for less than one year, average
annual total returns are not provided.

Semiannual Report | Past performance does not guarantee future results. | 9

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.

[PIE CHART GRAPHIC OMITTED]
PLOT POINTS FOLLOW:
- --------------------------------------------------------------------------------
Asset Allocation
Franklin Templeton Moderate Target Fund
Based on Total Net Assets as of 1/31/04

Domestic Equity ............................. 37.7%
Domestic Fixed Income ....................... 24.3%
Foreign Equity .............................. 16.3%
Foreign Fixed Income ........................ 10.6%
Short-Term Investments & Other Net Assets ... 11.1%
- --------------------------------------------------------------------------------

We are pleased to bring you this semiannual report for Franklin Templeton
Moderate Target Fund, which covers the period ended January 31, 2004.

PERFORMANCE OVERVIEW

For the six months under review, Franklin Templeton Moderate Target Fund - Class
A posted a +12.74% cumulative total return, as shown in the Performance Summary
beginning on page 14. The Fund outperformed its hybrid benchmark, which
comprised a weighted combination of the Standard & Poor's 500 Composite Index
(S&P 500) and the Morgan Stanley Capital International (MSCI) Europe Australasia
Far East (EAFE) Index for equities, the Lehman Brothers U.S.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND COMPLETE LEGAL
TITLES OF ALL PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF
INVESTMENTS (SOI). THE SOI BEGINS ON PAGE 33.

10 | Semiannual Report

Government/Credit Index for fixed income, and the P&R 90 Day T-Bill for
short-term investments and other net assets. For the reporting period, the
benchmark returned 10.71%.1

ECONOMIC AND MARKET OVERVIEW

1. Source: Standard & Poor's Micropal. The S&P 500 consists of 500 stocks chosen
for market size, liquidity and industry group representation. Each stock's
weight in the index is proportionate to its market value. The S&P 500 is one of
the most widely used benchmarks of U.S. equity performance. The MSCI EAFE Index
is market capitalization-weighted and measures total returns of equity
securities in developed markets in Europe, Australasia and the Far East. The
Lehman Brothers U.S. Government/Credit Index includes U.S. Treasury or Agency
issued securities and publicly issued U.S. corporate and specified foreign
debentures and secured notes that meet the specified maturity, liquidity and
quality requirements. These include public obligations of the U.S. Treasury with
remaining maturity of one year or more and publicly issued debt of U.S.
governmental agencies, quasi-federal corporations, and corporate or foreign
debt. The credit portion includes both corporate and non-corporate sectors. The
corporate sectors are industrial, utility, and finance, which includes both U.S.
and non-U.S. corporations. The non-corporate sectors are sovereign,
supranational, foreign agency, and foreign local government. All issues included
must have at least one year to final maturity and must be rated investment grade
(Baa3 or better) by Moody's Investors Service. They must also be
dollar-denominated and non-convertible. Total return includes price
appreciation/depreciation and income as a percentage of the original investment.
The index is rebalanced monthly by market capitalization. The P&R 90 Day T-Bill
is a total return index based on a constant maturity instrument. Payden & Rygel
includes both accrued interest and change in market price in its monthly total
return calculations. The benchmark index's weightings are as follows: S&P 500
35%, MSCI EAFE 15%, Lehman Brothers U.S. Government/Credit Index 35% and P&R 90
Day T-Bill 15%. The indexes are unmanaged and include reinvested distributions.
One cannot invest directly in an index, nor is an index representative of the
Fund's portfolio.

Semiannual Report | 11

TOP FIVE FUND HOLDINGS
Franklin Templeton Moderate Target Fund
1/31/04
- -----------------------------------------------------
% OF TOTAL
NET ASSETS
- -----------------------------------------------------
Franklin Strategic Mortgage Portfolio ..... 15.1%
Franklin Small Cap Growth Fund II
-Advisor Class ............................ 14.2%
Templeton Global Bond Fund
-Advisor Class ............................ 10.6%
Franklin Capital Growth Fund
-Advisor Class ............................ 9.8%
Mutual Shares Fund
-Class Z .................................. 9.3%
- -----------------------------------------------------

S&P 500 rose 15.22% for the six months under review, while the technology-heavy
Nasdaq Composite Index increased 19.43%.2 As economic data improved, some
interest rates rose from their lows at the beginning of the period but eased
toward period-end. The 10-year Treasury note started the period yielding 4.49%
on July 31, 2003, reached a peak of 4.61% on September 2, 2003, then declined to
4.16% on January 31, 2004.

INVESTMENT STRATEGY

Whenever possible, we attempt to hold the same underlying Franklin Templeton
funds in each Target Fund's portfolio. We generally diversify the Target Funds'
broad equity allocations 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
of the Target Funds' results relative to each other. For your reference,
Franklin Templeton Moderate Target Fund seeks to maintain the following asset
class allocations: 55% equity, 35% fixed income, and 10% short-term investments
and other net assets.

MANAGER'S DISCUSSION

At period-end, Franklin Templeton Moderate Target Fund's domestic equity
exposure was 69.8% 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, 2004, we held shares in large-, mid- and
small-capitalization equity funds, representing both value and growth styles.
Franklin Small Cap Growth Fund II-Advisor Class, representing 14.2% of the
Fund's total net assets, was our largest equity fund weighting at period-end. On
the fixed income side, domestic exposure was 69.6% of the Fund's total net
assets, with the balance represented by foreign fixed income. Franklin Strategic
Mortgage Portfolio was our largest fixed income fund weighting at 15.1% of total
net assets.

While domestic growth fund holdings such as Franklin Small Cap Growth Fund II -
Advisor Class performed relatively better versus the S&P 500, domestic value
fund holdings such as Mutual Shares Fund - Class Z slightly underperformed it.
On the fixed income side, Templeton Global Bond Fund - Advisor Class
underperformed

12 | Semiannual Report

the Lehman Brothers U.S. Government/Credit Index, and Franklin Strategic Income
Fund - Advisor Class posted strong relative results, largely due to its greater
weighting of high yield securities versus the Lehman Brothers index. However,
some funds with higher quality securities, such as Franklin Strategic Mortgage
Portfolio, underperformed the Lehman Brothers index during the period.

Thank you for your continued participation in Franklin Templeton Moderate Target
Fund. We look forward to serving your future investment needs.

{GRAPHIC OMITTED}
COFFEY PHOTO

/s/T. Anthony Coffey, CFA

T. Anthony Coffey, CFA
Portfolio Manager
Franklin Templeton Moderate Target Fund

Semiannual Report | 13

Performance Summary as of 1/31/04

FRANKLIN TEMPLETON MODERATE TARGET FUND

PRICE AND DISTRIBUTION INFORMATION
- -------------------------------------------------------------------------------------------------
CLASS A CHANGE 1/31/04 7/31/03
- -------------------------------------------------------------------------------------------------

Net Asset Value (NAV) +$1.21 $11.85 $10.64
DISTRIBUTIONS (8/1/03-1/31/04)
Dividend Income $0.1401
- -------------------------------------------------------------------------------------------------
CLASS B CHANGE 1/31/04 12/1/03
- -------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.22 $11.84 $11.62
DISTRIBUTIONS (12/1/03-1/31/04)
Dividend Income $0.1085
- -------------------------------------------------------------------------------------------------
CLASS C CHANGE 1/31/04 7/31/03
- -------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.20 $11.68 $10.48
DISTRIBUTIONS (8/1/03-1/31/04)
Dividend Income $0.0955
- -------------------------------------------------------------------------------------------------
CLASS R CHANGE 1/31/04 7/31/03
- -------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.21 $11.83 $10.62
DISTRIBUTIONS (8/1/03-1/31/04)
Dividend Income $0.1262

14 | Past performance does not guarantee future results. | Semiannual Report

Performance Summary (CONTINUED)

PERFORMANCE
- ----------------------------------------------------------------------------------------------------
CLASS A 6-MONTH 1-YEAR 5-YEAR INCEPTION (12/31/96)
- ----------------------------------------------------------------------------------------------------

Cumulative Total Return 1 +12.74% +24.42% +36.53% +57.67%
Average Annual Total Return 2 +6.25% +17.27% +5.18% +5.75%
Value of $10,000 Investment 3 $10,625 $11,727 $12,870 $14,860
Avg. Ann. Total Return (12/31/03) 4 +15.40% +5.15% +5.68%
- ----------------------------------------------------------------------------------------------------
CLASS B INCEPTION (12/1/03)
- ----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +2.84%
Aggregate Total Return 5 -1.16%
Value of $10,000 Investment 3 $9,884
Aggregate Total Return (12/31/03) 4, 5 -2.11%
- ----------------------------------------------------------------------------------------------------
CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (12/31/96)
- ----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +12.39% +23.59% +31.55% +48.55%
Average Annual Total Return 2 +11.39% +22.59% +5.64% +5.74%
Value of $10,000 Investment 3 $11,139 $12,259 $13,155 $14,855
Avg. Ann. Total Return (12/31/03) 4 +19.28% +5.41% +5.54%
- ----------------------------------------------------------------------------------------------------
CLASS R 6-MONTH 1-YEAR INCEPTION (1/1/02)
- ----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +12.62% +24.22% +13.61%
Average Annual Total Return 2 +11.62% +23.22% +6.33%
Value of $10,000 Investment 3 $11,162 $12,322 $11,361
Avg. Ann. Total Return (12/31/03) 4 +21.18% +6.11%

FOR MORE CURRENT PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

Semiannual Report | Past performance does not guarantee future results. | 15

Performance Summary (CONTINUED)

ENDNOTES

THE FUND IS NON-DIVERSIFIED BECAUSE IT INVESTS IN SECURITIES OF A LIMITED NUMBER
OF MUTUAL FUNDS. BECAUSE IT INVESTS IN UNDERLYING FUNDS, WHICH MAY ENGAGE IN A
VARIETY OF INVESTMENT STRATEGIES INVOLVING CERTAIN RISKS, THE FUND MAY BE
SUBJECT TO THESE SAME RISKS. GENERALLY, INVESTMENTS OFFERING POTENTIAL FOR
HIGHER RETURNS ARE ACCOMPANIED BY A HIGHER DEGREE OF RISK. STOCKS HAVE
HISTORICALLY OUTPERFORMED OTHER ASSET CLASSES OVER THE LONG TERM, BUT TEND TO
FLUCTUATE MORE DRAMATICALLY OVER THE SHORT TERM. BONDS ARE AFFECTED BY CHANGES
IN INTEREST RATES AND THE CREDITWORTHINESS OF THEIR ISSUERS. FOREIGN INVESTING
HAS ADDITIONAL RISKS SUCH AS CURRENCY AND MARKET VOLATILITY AND POLITICAL AND
SOCIAL INSTABILITY. THERE ARE OTHER RISKS PERTAINING TO SPECIFIC UNDERLYING
FUNDS, SUCH AS USE OF COMPLEX SECURITIES OR THOSE INVOLVING INVESTMENTS IN
SPECIALIZED INDUSTRY SECTORS, SUCH AS THE TECHNOLOGY SECTOR, WHICH HAS BEEN
AMONG THE MARKET'S MOST VOLATILE SECTORS. THE FUND'S PROSPECTUS ALSO INCLUDES A
DESCRIPTION OF THE MAIN INVESTMENT RISKS.

CLASS A: Subject to the current, maximum 5.75% initial sales charge. Prior to
8/3/98, Fund shares were offered at a lower initial sales charge; thus actual
total returns may differ.

16 | Past performance does not guarantee future results. | Semiannual Report

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.

[PIE CHART GRAPHIC OMITTED]
PLOT POINTS FOLLOW:
- --------------------------------------------------------------------------------
Asset Allocation
Franklin Templeton Growth Target Fund
Based on Total Net Assets as of 1/31/04

Domestic Equity ............................. 56.2%
Foreign Equity .............................. 23.5%
Domestic Fixed Income ....................... 10.3%
Foreign Fixed Income ........................ 4.7%
Short-Term Investments & Other Net Assets ... 5.3%
- --------------------------------------------------------------------------------

We are pleased to bring you this semiannual report for Franklin Templeton Growth
Target Fund, which covers the period ended January 31, 2004.

PERFORMANCE OVERVIEW

For the six months under review, Franklin Templeton Growth Target Fund - Class A
posted a +16.26% cumulative total return, as shown in the Performance Summary
beginning on page 21. The Fund outperformed its hybrid benchmark, which
comprised a weighted combination of the Standard & Poor's 500 Composite Index
(S&P 500) and the Morgan Stanley Capital International (MSCI) Europe Australasia
Far East (EAFE) Index for equities, the Lehman Brothers U.S. Government/Credit

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND COMPLETE LEGAL
TITLES OF ALL PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF
INVESTMENTS (SOI). THE SOI BEGINS ON PAGE 38.

Semiannual Report | 17

Index for fixed income, and the P&R 90 Day T-Bill for short-term investments and
other net assets. For the reporting period, the benchmark returned 13.01%.1

ECONOMIC AND MARKET OVERVIEW

1. Source: Standard & Poor's Micropal. The S&P 500 consists of 500 stocks chosen
for market size, liquidity and industry group representation. Each stock's
weight in the index is proportionate to its market value. The S&P 500 is one of
the most widely used benchmarks of U.S. equity performance. The MSCI EAFE Index
is market capitalization-weighted and measures total returns of equity
securities in developed markets in Europe, Australasia and the Far East. The
Lehman Brothers U.S. Government/Credit Index includes U.S. Treasury or Agency
issued securities and publicly issued U.S. corporate and specified foreign
debentures and secured notes that meet the specified maturity, liquidity and
quality requirements. These include public obligations of the U.S. Treasury with
remaining maturity of one year or more and publicly issued debt of U.S.
governmental agencies, quasi-federal corporations, and corporate or foreign
debt. The credit portion includes both corporate and non-corporate sectors. The
corporate sectors are industrial, utility, and finance, which includes both U.S.
and non-U.S. corporations. The non-corporate sectors are sovereign,
supranational, foreign agency, and foreign local government. All issues included
must have at least one year to final maturity and must be rated investment grade
(Baa3 or better) by Moody's Investors Service. They must also be
dollar-denominated and non-convertible. Total return includes price
appreciation/depreciation and income as a percentage of the original investment.
The index is rebalanced monthly by market capitalization. The P&R 90 Day T-Bill
is a total return index based on a constant maturity instrument. Payden & Rygel
includes both accrued interest and change in market price in its monthly total
return calculations. The benchmark index's weightings are as follows: S&P 500
45%, MSCI EAFE 20%, Lehman Brothers U.S. Government/Credit Index 25% and P&R 90
Day T-Bill 10%. The indexes are unmanaged and include reinvested distributions.
One cannot invest directly in an index, nor is an index representative of the
Fund's portfolio.

18 | Semiannual Report

Nasdaq Composite Index increased 19.43%.2 As economic data improved, some
interest rates rose from their lows at the beginning of the period but eased
toward period-end. The 10-year Treasury note started the period yielding 4.49%
on July 31, 2003, reached a peak of 4.61% on September 2, 2003, then declined to
4.16% on January 31, 2004.

INVESTMENT STRATEGY

Whenever possible, we attempt to hold the same underlying Franklin Templeton
funds in each Target Fund's portfolio. We generally diversify the Target Funds'
broad equity allocations 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
of the Target Funds' results relative to each other. For your reference,
Franklin Templeton Growth Target Fund seeks to maintain the following asset
class allocations: 80% equity, 15% fixed income, and 5% short-term investments
and other net assets.

MANAGER'S DISCUSSION

At period-end, Franklin Templeton Growth Target Fund's domestic equity exposure
was 70.6% 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, 2004, we held shares in large-, mid- and
small-capitalization equity funds, representing both value and growth styles.
Franklin Small Cap Growth Fund II-Advisor Class, representing 21.2% of the
Fund's total net assets, was our largest equity fund weighting at period-end. On
the fixed income side, domestic exposure was 68.6% of the Fund's total net
assets, with the balance represented by foreign fixed income. Franklin Strategic
Mortgage Portfolio was our largest fixed income fund weighting at 6.4% of total
net assets.

TOP FIVE FUND HOLDINGS
Franklin Templeton Growth Target Fund
1/31/04
- -----------------------------------------------
% OF TOTAL
NET ASSETS
- -----------------------------------------------
Franklin Small Cap Growth Fund II
-Advisor Class 21.2%
Franklin Capital Growth Fund
-Advisor Class 14.4%
Mutual Shares Fund
-Class Z 14.0%
Mutual European Fund
-Class Z 11.5%
Templeton Foreign Fund
-Advisor Class 8.1%
- -----------------------------------------------

Semiannual Report | 19

Thank you for your continued participation in Franklin Templeton Growth Target
Fund. We look forward to serving your future investment needs.

[GRAPHIC OMITTED]
COFFEY PHOTO

/s/ T. Anthony Coffey, CFA
T. Anthony Coffey, CFA
Portfolio Manager
Franklin Templeton Growth Target Fund

20 | Semiannual Report

Performance Summary as of 1/31/04

FRANKLIN TEMPLETON GROWTH TARGET FUND

PRICE AND DISTRIBUTION INFORMATION

- -------------------------------------------------------------------------------------------------
CLASS A CHANGE 1/31/04 7/31/03
- -------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.60 $12.06 $10.46
DISTRIBUTIONS (8/1/03-1/31/04)
Dividend Income $0.0983
- -------------------------------------------------------------------------------------------------
CLASS B CHANGE 1/31/04 12/1/03
- -------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.23 $12.03 $11.80
DISTRIBUTIONS (8/1/03-1/31/04)
Dividend Income $0.1156
- -------------------------------------------------------------------------------------------------
CLASS C CHANGE 1/31/04 7/31/03
- -------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.61 $11.99 $10.38
DISTRIBUTIONS (8/1/03-1/31/04)
Dividend Income $0.0284
- -------------------------------------------------------------------------------------------------
CLASS R CHANGE 1/31/04 7/31/03
- -------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.60 $12.00 $10.40
DISTRIBUTIONS (8/1/03-1/31/04)
Dividend Income $0.0839

Semiannual Report | Past performance does not guarantee future results. | 21

Performance Summary (CONTINUED)

Cumulative Total Return 1 +16.26% +33.63% +31.49% +50.79%
Average Annual Total Return 2 +9.56% +25.89% +4.38% +5.09%
Value of $10,000 Investment 3 $10,956 $12,589 $12,390 $14,212
Avg. Ann. Total Return (12/31/03) 4 +22.67% +4.44% +4.96%
- -----------------------------------------------------------------------------------------------------
CLASS B INCEPTION (12/1/03)
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +2.95%
Aggregate Total Return 5 -1.05%
Value of $10,000 Investment 3 $9,895
Aggregate Total Return (12/31/03) 4, 5 -2.25%
- -----------------------------------------------------------------------------------------------------
CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (12/31/96)
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +15.79% +32.51% +26.66% +43.29%
Average Annual Total Return 2 +14.79% +31.51% +4.84% +5.21%
Value of $10,000 Investment 3 $11,479 $13,151 $12,666 $14,329
Avg. Ann. Total Return (12/31/03) 4 +26.74% +4.70% +4.95%
- -----------------------------------------------------------------------------------------------------
CLASS R 6-MONTH 1-YEAR INCEPTION (1/1/02)
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +16.21% +33.25% +11.67%
Average Annual Total Return 2 +15.21% +32.25% +5.45%
Value of $10,000 Investment 3 $11,521 $13,225 $11,167
Avg. Ann. Total Return (12/31/03) 4 +28.84% +5.07%

FOR MORE CURRENT PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

22 | Past performance does not guarantee future results. | Semiannual Report

Performance Summary (CONTINUED)

ENDNOTES

THE FUND IS NON-DIVERSIFIED BECAUSE IT INVESTS IN SECURITIES OF A LIMITED NUMBER
OF MUTUAL FUNDS. BECAUSE IT INVESTS IN UNDERLYING FUNDS, WHICH MAY ENGAGE IN A
VARIETY OF INVESTMENT STRATEGIES INVOLVING CERTAIN RISKS, THE FUND MAY BE
SUBJECT TO THESE SAME RISKS. GENERALLY, INVESTMENTS OFFERING POTENTIAL FOR
HIGHER RETURNS ARE ACCOMPANIED BY A HIGHER DEGREE OF RISK. STOCKS HAVE
HISTORICALLY OUTPERFORMED OTHER ASSET CLASSES OVER THE LONG TERM, BUT TEND TO
FLUCTUATE MORE DRAMATICALLY OVER THE SHORT TERM. BONDS ARE AFFECTED BY CHANGES
IN INTEREST RATES AND THE CREDITWORTHINESS OF THEIR ISSUERS. FOREIGN INVESTING,
ESPECIALLY IN EMERGING MARKETS, HAS ADDITIONAL RISKS SUCH AS CURRENCY AND MARKET
VOLATILITY AND POLITICAL AND SOCIAL INSTABILITY. THERE ARE OTHER RISKS
PERTAINING TO SPECIFIC UNDERLYING FUNDS, SUCH AS USE OF COMPLEX SECURITIES OR
THOSE INVOLVING INVESTMENTS IN SPECIALIZED INDUSTRY SECTORS, SUCH AS THE
TECHNOLOGY SECTOR, WHICH HAS BEEN AMONG THE MARKET'S MOST VOLATILE SECTORS. THE
FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS.

CLASS A: Subject to the current, maximum 5.75% initial sales charge. Prior to
8/3/98, Fund shares were offered at a lower initial sales charge; thus actual
total returns may differ.

Semiannual Report | Past performance does not guarantee future results. | 23

Franklin Templeton Fund Allocator Series

FINANCIAL HIGHLIGHTS

FRANKLIN TEMPLETON CONSERVATIVE TARGET FUND

-------------------------------------------------------------------------
SIX MONTHS ENDED
JANUARY 31, 2004 YEAR ENDED JULY 31,
CLASS A (UNAUDITED) 2003 2002 2001 2000 1999
-------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period .............. $10.91 $10.23 $11.30 $12.13 $10.73 $11.00
-------------------------------------------------------------------
Income from investment operations:
Net investment income a .......................... .14 .23 .31 .54 .58 .41
Net realized and unrealized gains (losses) ....... .95 .69 (.95) (.47) 1.41 (.08)
-------------------------------------------------------------------
Total from investment operations .................. 1.09 .92 (.64) .07 1.99 .33
-------------------------------------------------------------------
Less distributions from:
Net investment income ............................ (.15) (.24) (.34) (.56) (.53) (.41)
Net realized gains ............................... -- -- (.09) (.34) (.06) (.19)
-------------------------------------------------------------------
Total distributions ............................... (.15) (.24) (.43) (.90) (.59) (.60)
-------------------------------------------------------------------
Net asset value, end of period .................... $11.85 $10.91 $10.23 $11.30 $12.13 $10.73
===================================================================
Total return b .................................... 10.05% 8.99% (5.74)% .58% 18.77% 3.23%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................. $97,905 $64,409 $35,991 $26,523 $18,050 $14,850
Ratios to average net assets:
Expenses ......................................... .92% c .91% .96% .92% .98% .75%
Expenses excluding waiver and payments by
affiliate ........................................ .92% c .91% .96% .92% .99% .83%
Net investment income ............................ 2.44% c 2.21% 2.86% 4.61% 4.95% 3.83%
Portfolio turnover rate ........................... .77% 18.03% 5.75% 44.98% 103.79% 218.87%

a Based on average daily shares outstanding.
b Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
c Annualized.

24 | Semiannual Report

Franklin Templeton Fund Allocator Series

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN TEMPLETON CONSERVATIVE TARGET FUND (CONTINUED)

-----------
PERIOD
ENDED
JANUARY 31,
2004 C
CLASS B (UNAUDITED)
-----------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ........................ $11.67
------
Income from investment operations:
Net investment income a .................................... .02
Net realized and unrealized gains (losses) ................. .26
------
Total from investment operations ............................ .28
------
Less distributions from net investment income ............... (.11)
------
Net asset value, end of period .............................. $11.84
======
Total return b .............................................. 2.39%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ........................... $667
Ratios to average net assets:
Expenses ................................................... 1.67%d
Net investment income ...................................... 1.69%d
Portfolio turnover rate ..................................... .77%

a Based on average daily shares outstanding.
b Total return does not reflect contingent deferred sales charge, and is not
annualized for periods less than one year.
c For the period December 1, 2003 (effective date) to January 31, 2004.
d Annualized.

Semiannual Report | 25

Franklin Templeton Fund Allocator Series

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN TEMPLETON CONSERVATIVE TARGET FUND (CONTINUED)

-------------------------------------------------------------------------
SIX MONTHS ENDED
JANUARY 31, 2004 YEAR ENDED JULY 31,
CLASS C (UNAUDITED) 2003 2002 2001 2000 1999
-------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period .............. $10.80 $10.14 $11.20 $12.03 $10.65 $10.92
Income from investment operations:
Net investment income a .......................... .10 .15 .23 .44 .50 .33
Net realized and unrealized gains (losses) ....... .94 .67 (.94) (.46) 1.39 (.08)
-------------------------------------------------------------------
Total from investment operations .................. 1.04 .82 (.71) (.02) 1.89 .25
-------------------------------------------------------------------
Less distributions from:
Net investment income ............................ (.11) (.16) (.26) (.47) (.45) (.33)
Net realized gains ............................... -- -- (.09) (.34) (.06) (.19)
-------------------------------------------------------------------
Total distributions ............................... (.11) (.16) (.35) (.81) (.51) (.52)
-------------------------------------------------------------------
Net asset value, end of period .................... $11.73 $10.80 $10.14 $11.20 $12.03 $10.65
===================================================================
Total return b .................................... 9.62% 8.20% (6.48)% (.16)% 17.88% 2.49%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................. $46,130 $32,344 $22,436 $17,340 $12,548 $10,611
Ratios to average net assets:
Expenses ......................................... 1.67% c 1.66% 1.70% 1.67% 1.71% 1.50%
Expenses excluding waiver and payments by
affiliate ...................................... 1.67% c 1.66% 1.70% 1.67% 1.72% 1.58%
Net investment income ............................ 1.69% c 1.46% 2.15% 3.83% 4.24% 3.13%
Portfolio turnover rate ........................... .77% 18.03% 5.75% 44.98% 103.79% 218.87%

a Based on average daily shares outstanding.
b Total return does not reflect contingent deferred sales charge, and is not
annualized for periods less than one year.
c Annualized.

26 | Semiannual Report

Franklin Templeton Fund Allocator Series

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN TEMPLETON CONSERVATIVE TARGET FUND (CONTINUED)

-----------------------------------------
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 2004 JULY 31,
CLASS R (UNAUDITED) 2003 2002 D
-----------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ............................ $10.89 $10.23 $10.89
------------------------------------
Income from investment operations:
Net investment income a ........................................ .13 .19 .12
Net realized and unrealized gains (losses) ..................... .95 .69 (.70)
------------------------------------
Total from investment operations ................................ 1.08 .88 (.58)
------------------------------------
Less distributions from net investment income ................... (.14) (.22) (.08)
------------------------------------
Net asset value, end of period .................................. $11.83 $10.89 $10.23
====================================
Total return b .................................................. 9.92% 8.79% (5.38)%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............................... $7,629 $5,718 $543
Ratios to average net assets:
Expenses ....................................................... 1.17% c 1.16% 1.21% c
Net investment income .......................................... 2.19% c 1.96% 1.93% c
Portfolio turnover rate ......................................... .77% 18.03% 5.75%

a Based on average daily shares outstanding.
b Total return does not reflect contingent deferred sales charge, and is not
annualized for periods less than one year.
c Annualized.
d For the period January 1, 2002 (effective date) to July 31, 2002.

Semiannual Report | See notes to financial statements. | 27

Franklin Templeton Fund Allocator Series

STATEMENT OF INVESTMENTS, JANUARY 31, 2004 (UNAUDITED)

- --------------------------------------------------------------------------------------------------------------------------
FRANKLIN TEMPLETON CONSERVATIVE TARGET FUND SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
MUTUAL FUNDS (NOTE 1) 99.7%
CASH EQUIVALENTS 19.9%

a Franklin Institutional Fiduciary Trust Money Market Portfolio ........................... 30,396,267 $ 30,396,267
------------
DOMESTIC EQUITY 27.9%
Franklin Capital Growth Fund, Advisor Class ............................................. 1,069,416 11,293,032
Franklin Real Estate Securities Fund, Advisor Class ..................................... 160,747 3,594,307
b Franklin Small Cap Growth Fund II, Advisor Class ........................................ 1,448,885 16,213,028
b Franklin Technology Fund, Advisor Class ................................................. 245,888 1,177,804
Mutual Shares Fund, Class Z ............................................................. 483,636 10,228,906
------------
42,507,077
------------
DOMESTIC FIXED INCOME 28.0%
Franklin Strategic Income Fund, Advisor Class ........................................... 548,955 5,692,663
c Franklin Strategic Mortgage Portfolio ................................................... 2,641,491 26,520,573
Franklin Total Return Fund, Advisor Class ............................................... 1,018,244 10,437,005
------------
42,650,241
------------
FOREIGN EQUITY 11.8%
Franklin Gold & Precious Metals Fund, Advisor Class ..................................... 155,222 2,790,885
Mutual European Fund, Class Z ........................................................... 511,038 8,672,307
Templeton Foreign Fund, Advisor Class ................................................... 595,466 6,472,719
------------
17,935,911
------------
FOREIGN FIXED INCOME 12.1%
Templeton Global Bond Fund, Advisor Class ............................................... 1,815,930 18,395,367
------------
TOTAL INVESTMENTS (COST $138,877,016) 99.7% ............................................. 151,884,863
OTHER ASSETS, LESS LIABILITIES .3% ...................................................... 445,438
------------
NET ASSETS 100.0% ....................................................................... $152,330,301
============

a See Note 7 regarding investments in the Franklin Institutional Fiduciary Trust
Money Market Portfolio.
b Non-income producing.
c See Note 6 regarding investments in underlying funds.

28 | See notes to financial statements. | Semiannual Report

Franklin Templeton Fund Allocator Series

FINANCIAL HIGHLIGHTS

FRANKLIN TEMPLETON MODERATE TARGET FUND

Net asset value, beginning of period ............. $10.64 $ 9.83 $11.31 $12.83 $10.44 $10.77
Income from investment operations:
Net investment income a ......................... .13 .19 .26 .47 .51 .33
Net realized and unrealized gains (losses) ...... 1.22 .81 (1.31) (1.48) 2.35 (.17)
--------------------------------------------------------------------
Total from investment operations ................. 1.35 1.00 (1.05) (1.01) 2.86 .16
--------------------------------------------------------------------
Less distributions from:
Net investment income ........................... (.14) (.19) (.29) (.51) (.47) (.31)
Net realized gains .............................. -- -- (.14) -- d -- (.18)
--------------------------------------------------------------------
Total distributions .............................. (.14) (.19) (.43) (.51) (.47) (.49)
--------------------------------------------------------------------
Net asset value, end of period ................... $11.85 $10.64 $ 9.83 $11.31 $12.83 $10.44
====================================================================
Total return b ................................... 12.74% 10.47% (9.69)% (8.05)% 27.79% 1.74%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................ $180,552 $121,617 $85,035 $70,810 $41,348 $28,694
Ratios to average net assets:
Expenses ........................................ .94% c .98% .96% .87% .83% .85%
Net investment income ........................... 2.29% c 1.89% 2.46% 3.95% 4.20% 3.23%
Portfolio turnover rate .......................... .66% 15.90% 8.88% 46.01% 85.78% 202.78%

Semiannual Report | 29

Franklin Templeton Fund Allocator Series

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN TEMPLETON MODERATE TARGET FUND (CONTINUED)

-----------
PERIOD
ENDED
JANUARY 31,
2004 C
CLASS B (UNAUDITED)
-----------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............................ $11.62
------
Income from investment operations:
Net investment income a ........................................ .03
Net realized and unrealized gains (losses) ..................... .30
------
Total from investment operations ................................ .33
------
Less distributions from net investment income ................... (.11)
------
Net asset value, end of period .................................. $11.84
======
Total return b .................................................. 2.84%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............................... $1,216
Ratios to average net assets:
Expenses ....................................................... 1.69% d
Net investment income .......................................... 1.54% d
Portfolio turnover rate ......................................... .66%

30 | Semiannual Report

Franklin Templeton Fund Allocator Series

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN TEMPLETON MODERATE TARGET FUND (CONTINUED)
-------------------------------------------------------------------------
SIX MONTHS ENDED
JANUARY 31, 2004 YEAR ENDED JULY 31,
CLASS C (UNAUDITED) 2003 2002 2001 2000 1999
-------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ............. $10.48 $ 9.69 $11.16 $12.67 $10.31 $10.65
--------------------------------------------------------------------
Income from investment operations:
Net investment income a ......................... .09 .11 .19 .39 .41 .25
Net realized and unrealized gains (losses) ...... 1.21 .80 (1.31) (1.48) 2.33 (.17)
--------------------------------------------------------------------
Total from investment operations ................. 1.30 .91 (1.12) (1.09) 2.74 .08
--------------------------------------------------------------------
Less distributions from:
Net investment income ........................... (.10) (.12) (.21) (.42) (.38) (.24)
Net realized gains .............................. -- -- (.14) -- d -- (.18)
--------------------------------------------------------------------
Total distributions .............................. (.10) (.12) (.35) (.42) (.38) (.42)
--------------------------------------------------------------------
Net asset value, end of period ................... $11.68 $10.48 $ 9.69 $11.16 $12.67 $10.31
====================================================================
Total return b ................................... 12.39% 9.50% (10.31)% (8.69)% 26.84% .88%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $79,128 $56,341 $39,835 $41,535 $35,506 $24,419
Ratios to average net assets:
Expenses ........................................ 1.69% c 1.73% 1.71% 1.62% 1.57% 1.60%
Net investment income ........................... 1.54% c 1.14% 1.77% 3.30% 3.40% 2.51%
Portfolio turnover rate .......................... .66% 15.90% 8.88% 46.01% 85.78% 202.78%

a Based on average daily shares outstanding.
b Total return does not reflect contingent deferred sales charge, and is not
annualized for periods less than one year.
c Annualized.
d The fund made a capital gain distribution of $.003.

Semiannual Report | 31

Franklin Templeton Fund Allocator Series

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN TEMPLETON MODERATE TARGET FUND (CONTINUED)

--------------------------------------
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 2004 JULY 31,
CLASS R (UNAUDITED) 2003 2002 D
--------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ................................................ $10.62 $ 9.82 $10.79
-------------------------------
Income from investment operations:
Net investment incomea ............................................................. .12 .13 .09
Net realized and unrealized gains (losses) ......................................... 1.22 .85 (.99)
-------------------------------
Total from investment operations .................................................... 1.34 .98 (.90)
-------------------------------
Less distributions from net investment income ....................................... (.13) (.18) (.07)
-------------------------------
Net asset value, end of period ...................................................... $11.83 $10.62 $ 9.82
===============================
Total return b ...................................................................... 12.62% 10.10% (8.38)%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................................................... $15,687 $10,989 $94
Ratios to average net assets:
Expenses ........................................................................... 1.19% c 1.23% 1.21% c
Net investment income .............................................................. 2.04% c 1.64% 1.53% c
Portfolio turnover rate ............................................................. .66% 15.90% 8.88%

32 | See notes to financial statements. | Semiannual Report

Franklin Templeton Fund Allocator Series

STATEMENT OF INVESTMENTS, JANUARY 31, 2004 (UNAUDITED)

- -------------------------------------------------------------------------------------------------------------------------
FRANKLIN TEMPLETON MODERATE TARGET FUND SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------
MUTUAL FUNDS (NOTE 1) 99.0%
CASH EQUIVALENTS 10.1%

a Franklin Institutional Fiduciary Trust Money Market Portfolio .......................... 27,809,932 $ 27,809,932
------------
DOMESTIC EQUITY 37.7%
Franklin Capital Growth Fund, Advisor Class ............................................ 2,562,636 27,061,436
Franklin Real Estate Securities Fund, Advisor Class .................................... 359,374 8,035,613
b Franklin Small Cap Growth Fund II, Advisor Class ....................................... 3,514,945 39,332,235
b,c Franklin Technology Fund, Advisor Class ................................................ 891,198 4,268,840
Mutual Shares Fund, Class Z ............................................................ 1,212,089 25,635,676
------------
104,333,800
------------
DOMESTIC FIXED INCOME 24.3%
Franklin Strategic Income Fund, Advisor Class .......................................... 864,291 8,962,694
c Franklin Strategic Mortgage Portfolio .................................................. 4,149,070 41,656,663
Franklin Total Return Fund, Advisor Class .............................................. 1,620,716 16,612,334
------------
67,231,691
------------
FOREIGN EQUITY 16.3%
Franklin Gold & Precious Metals Fund, Advisor Class .................................... 409,706 7,366,509
Mutual European Fund, Class Z .......................................................... 1,276,261 21,658,147
Templeton Foreign Fund, Advisor Class .................................................. 1,490,697 16,203,875
------------
45,228,531
------------
FOREIGN FIXED INCOME 10.6%
Templeton Global Bond Fund, Advisor Class .............................................. 2,887,985 29,255,290
------------
TOTAL INVESTMENTS (COST $248,355,228) 99.0% ............................................ 273,859,244
OTHER ASSETS, LESS LIABILITIES 1.0% .................................................... 2,724,435
------------
NET ASSETS 100.0% ...................................................................... $276,583,679
============

a See Note 7 regarding investments in the Franklin Institutional Fiduciary Trust
Money Market Portfolio.
b Non-income producing.
c See Note 6 regarding investments in underlying funds.

Semiannual Report | See notes to financial statements. | 33

Franklin Templeton Fund Allocator Series

FINANCIAL HIGHLIGHTS

FRANKLIN TEMPLETON GROWTH TARGET FUND

Net asset value, beginning of period .............. $10.46 $ 9.47 $11.64 $14.50 $11.01 $11.16
--------------------------------------------------------------------
Income from investment operations:
Net investment income a .......................... .09 .08 .13 .38 .40 .28
Net realized and unrealized gains (losses) ....... 1.61 1.01 (2.01) (2.80) 3.77 .11
Total from investment operations .................. 1.70 1.09 (1.88) (2.42) 4.17 .39
Less distributions from:
Net investment income ............................ (.10) (.10) (.13) (.44) (.39) (.25)
Net realized gains ............................... -- -- (.16) -- (.29) (.29)
--------------------------------------------------------------------
Total distributions ............................... (.10) (.10) (.29) (.44) (.68) (.54)
--------------------------------------------------------------------
Net asset value, end of period .................... $12.06 $10.46 $ 9.47 $11.64 $14.50 $11.01
====================================================================
Total return b .................................... 16.26% 11.64% (16.44)% (16.94)% 38.55% 3.91%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................. $147,321 $99,432 $69,663 $67,186 $66,445 $40,839
Ratios to average net assets:
Expenses ......................................... .86% c .92% .93% .85% .84% .75%
Expenses excluding waiver and payments by
affiliate ........................................ .86% c .92% .93% .85% .85% .86%
Net investment income ............................ 1.53% c .84% 1.20% 2.98% 2.93% 2.61%
Portfolio turnover rate ........................... .63% 21.87% 14.24% 59.41% 73.82% 207.65%

34 | Semiannual Report

Franklin Templeton Fund Allocator Series

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN TEMPLETON GROWTH TARGET FUND (CONTINUED)

-----------
PERIOD
ENDED
JANUARY 31,
2004 C
CLASS B (UNAUDITED)
-----------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ....................... $11.80
------
Income from investment operations:
Net investment income a ................................... .01
Net realized and unrealized gains (losses) ................ .34
------
Total from investment operations ........................... .35
------
Less distributions from net investment income .............. (.12)
------
Net asset value, end of period ............................. $12.03
------
Total return b ............................................. 2.95%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .......................... $480
Ratios to average net assets:
Expenses .................................................. 1.61% d
Net investment income ..................................... .78% d
Portfolio turnover rate .................................... .63%

Semiannual Report | 35

Franklin Templeton Fund Allocator Series

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN TEMPLETON GROWTH TARGET FUND (CONTINUED)

Net asset value, beginning of period .............. $10.38 $ 9.40 $11.58 $14.43 $10.92 $11.08
--------------------------------------------------------------------
Income from investment operations:
Net investment incomea ........................... .04 .01 .05 .29 .29 .21
Net realized and unrealized gains (losses) ....... 1.60 1.00 (1.99) (2.79) 3.77 .10
--------------------------------------------------------------------
Total from investment operations .................. 1.64 1.01 (1.94) (2.50) 4.06 .31
--------------------------------------------------------------------
Less distributions from:
Net investment income ............................ (.03) (.03) (.08) (.35) (.26) (.18)
Net realized gains ............................... -- -- (.16) -- (.29) (.29)
--------------------------------------------------------------------
Total distributions ............................... (.03) (.03) (.24) (.35) (.55) (.47)
--------------------------------------------------------------------
Net asset value, end of period .................... $11.99 $10.38 $ 9.40 $11.58 $14.43 $10.92
====================================================================
Total return b .................................... 15.79% 10.74% (17.00)% (17.57)% 37.64% 3.12%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................. $56,967 $40,829 $31,255 $37,884 $38,666 $21,902
Ratios to average net assets:
Expenses ......................................... 1.61% c 1.67% 1.68% 1.60% 1.59% 1.50%
Expenses excluding waiver and payments by
affiliate ........................................ 1.61% c 1.67% 1.68% 1.60% 1.60% 1.61%
Net investment income ............................ .78% c .09% .50% 2.24% 2.16% 2.00%
Portfolio turnover rate ........................... .63% 21.87% 14.24% 59.41% 73.82% 207.65%

a Based on average daily shares outstanding.
b Total return does not reflect contingent deferred sales charge, and is not
annualized for periods less than one year.
c Annualized.

32 | Semiannual Report

Franklin Templeton Fund Allocator Series

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN TEMPLETON GROWTH TARGET FUND (CONTINUED)

-------------------------------------
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 2004 JULY 31,
CLASS R (UNAUDITED) 2003 2002 D
-------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period .................................................. $10.40 $ 9.46 $10.95
------------------------------
Income from investment operations:
Net investment income a .............................................................. .07 .05 .01
Net realized and unrealized gains (losses) ........................................... 1.61 1.00 (1.50)
------------------------------
Total from investment operations ...................................................... 1.68 1.05 (1.49)
------------------------------
Less distributions from net investment income ......................................... (.08) (.11) --
------------------------------
Net asset value, end of period ........................................................ $12.00 $10.40 $ 9.46
==============================
Total return b ........................................................................ 16.21% 11.11% (13.52)%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ..................................................... $8,966 $5,567 $141
Ratios to average net assets:
Expenses ............................................................................. 1.11% c 1.17% 1.18% c
Net investment income ................................................................ 1.28% c .59% .18% c
Portfolio turnover rate ............................................................... .63% 21.87% 14.24%

a Based on average daily shares outstanding.
b Total return does not reflect the contingent deferred sales charge, and is not
annualized for periods less than one year.
c Annualized.
d For the period January 1, 2002 (effective date) to July 31, 2002.

Semiannual Report | See notes to financial statements. | 37

Franklin Templeton Fund Allocator Series

STATEMENT OF INVESTMENTS, JANUARY 31, 2004 (UNAUDITED)

- --------------------------------------------------------------------------------------------------------------------------
FRANKLIN TEMPLETON GROWTH TARGET FUND SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
MUTUAL FUNDS (NOTE 1) 99.6%
CASH EQUIVALENTS 4.9%

a Franklin Institutional Fiduciary Trust Money Market Portfolio .......................... 10,385,359 $ 10,385,359
------------
DOMESTIC EQUITY 56.2%
Franklin Capital Growth Fund, Advisor Class ............................................ 2,914,771 30,779,979
Franklin Real Estate Securities Fund, Advisor Class .................................... 418,570 9,359,228
b Franklin Small Cap Growth Fund II, Advisor Class ....................................... 4,054,404 45,368,785
b,c Franklin Technology Fund, Advisor Class ................................................ 985,515 4,720,615
Mutual Shares Fund, Class Z ............................................................ 1,415,676 29,941,554
------------
120,170,161
------------
DOMESTIC FIXED INCOME 10.3%
Franklin Strategic Income Fund, Advisor Class .......................................... 270,985 2,810,115
Franklin Strategic Mortgage Portfolio .................................................. 1,372,635 13,781,260
Franklin Total Return Fund, Advisor Class .............................................. 534,674 5,480,410
------------
22,071,785
------------
FOREIGN EQUITY 23.5%
Franklin Gold & Precious Metals Fund, Advisor Class .................................... 464,038 8,343,399
Mutual European Fund, Class Z .......................................................... 1,444,325 24,510,191
Templeton Foreign Fund, Advisor Class .................................................. 1,590,004 17,283,346
------------
50,136,936
------------
FOREIGN FIXED INCOME 4.7%
Templeton Global Bond Fund, Advisor Class .............................................. 1,000,377 10,133,814
------------
TOTAL INVESTMENTS (COST $189,821,127) 99.6% ............................................ 212,898,055
OTHER ASSETS, LESS LIABILITIES .4% ..................................................... 836,270
------------
NET ASSETS 100.0% ...................................................................... $213,734,325
============

a See Note 7 regarding investments in the Franklin Institutional Fiduciary Trust
Money Market Portfolio.
b Non-income producing.
c See Note 6 regarding investments in underlying funds.

38 | See notes to financial statements. | Semiannual Report

Franklin Templeton Fund Allocator Series

FINANCIAL STATEMENTS

STATEMENTS OF ASSETS AND LIABILITIES
January 31, 2004 (unaudited)

Investments in securities:
Cost ................................................................... $138,877,016 $248,355,228 $189,821,127
=============================================
Value .................................................................. 151,884,863 273,859,244 212,898,055
Receivables:
Capital shares sold .................................................... 1,130,767 3,584,156 1,406,300
---------------------------------------------
Total assets ....................................................... 153,015,630 277,443,400 214,304,355
---------------------------------------------
Liabilities:
Payables:
Capital shares redeemed ................................................ 490,364 452,549 297,073
Affiliates ............................................................. 165,098 263,902 198,233
Shareholders ........................................................... 9,504 26,883 33,120
Unaffiliated transfer agent fees ....................................... 3,174 103,174 19,771
Other liabilities ....................................................... 17,189 13,213 21,833
---------------------------------------------
Total liabilities .................................................. 685,329 859,721 570,030
---------------------------------------------
Net assets, at value .............................................. $152,330,301 $276,583,679 $213,734,325
=============================================
Net assets consist of:
Undistributed net investment income ..................................... $ 128,654 $ 154,578 $ (60,976)
Net unrealized appreciation (depreciation) .............................. 13,007,847 25,504,016 23,076,928
Accumulated net realized gain (loss) .................................... (2,089,005) (5,505,900) (10,416,016)
Capital shares .......................................................... 141,282,805 256,430,985 201,134,389
---------------------------------------------
Net assets, at value .............................................. $152,330,301 $276,583,679 $213,734,325
=============================================

Semiannual Report | 39

Franklin Templeton Fund Allocator Series

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
January 31, 2004 (unaudited)

--------------------------------------------
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
--------------------------------------------
CLASS A:

Net assets, at value ..................................................... $97,904,572 $180,552,212 $147,320,847
--------------------------------------------
Shares outstanding ....................................................... 8,262,714 15,233,483 12,217,502
--------------------------------------------
Net asset value per share a .............................................. $11.85 $11.85 $12.06
--------------------------------------------
Maximum offering price per share (net asset value per share / 94.25%) .... $12.57 $12.57 $12.80
--------------------------------------------
CLASS B:
Net assets, at value ..................................................... $ 667,025 $ 1,215,615 $ 480,419
--------------------------------------------
Shares outstanding ....................................................... 56,344 102,634 39,940
--------------------------------------------
Net asset value and maximum offering price per share a ................... $11.84 $11.84 $12.03
--------------------------------------------
CLASS C:
Net assets, at value ..................................................... $46,129,847 $ 79,128,375 $ 56,966,695
--------------------------------------------
Shares outstanding ....................................................... 3,933,566 6,774,147 4,750,969
--------------------------------------------
Net asset value and maximum offering price per share a ................... $11.73 $11.68 $11.99
--------------------------------------------
CLASS R:
Net assets, at value ..................................................... $ 7,628,857 $ 15,687,477 $ 8,966,364
--------------------------------------------
Shares outstanding ....................................................... 645,113 1,326,266 747,327
--------------------------------------------
Net asset value and maximum offering price per share a ................... $11.83 $11.83 $12.00
--------------------------------------------

a Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.

40 | See notes to financial statements. | Semiannual Report

Franklin Templeton Fund Allocator Series

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF OPERATIONS
for the six months ended January 31, 2004 (unaudited)

Dividends ............................................................... $ 2,119,251 $ 3,696,250 $ 2,123,962
--------------------------------------------
Expenses:
Asset allocation fees (Note 3) .......................................... 123,023 254,219 208,480
Distribution fees (Note 3)
Class A ................................................................ 100,022 183,587 150,439
Class B ................................................................ 477 758 296
Class C ................................................................ 196,920 337,281 241,127
Class R ................................................................ 16,434 34,668 18,706
Transfer agent fees (Note 3) ............................................ 222,946 442,620 252,181
Reports to shareholders ................................................. 4,923 8,295 8,182
Registration and filing fees ............................................ 59,684 65,868 58,673
Professional fees ....................................................... 9,718 11,182 9,367
Trustees' fees and expenses ............................................. 690 1,693 1,126
Other ................................................................... 3,078 4,701 3,206
--------------------------------------------
Total expenses ..................................................... 737,915 1,344,872 951,783
--------------------------------------------
Net investment income ............................................. 1,381,336 2,351,378 1,172,179
--------------------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments ............................... (657,310) (1,699,432) (1,332,784)
Net unrealized appreciation (depreciation) on investments ............... 10,812,823 25,817,433 25,877,723
--------------------------------------------
Net realized and unrealized gain (loss) .................................. 10,155,513 24,118,001 24,544,939
--------------------------------------------
Net increase (decrease) in net assets resulting from operations .......... $11,536,849 $26,469,379 $25,717,118
============================================

Semiannual Report | See notes to financial statements. | 41

Franklin Templeton Fund Allocator Series

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS
for the six months ended January 31, 2004 (unaudited)
and the year ended July 31, 2003

FRANKLIN TEMPLETON FRANKLIN TEMPLETON
CONSERVATIVE TARGET FUND MODERATE TARGET FUND
-----------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 2004 JULY 31, 2003 JANUARY 31, 2004 JULY 31, 2003
-----------------------------------------------------------------------
Increase (decrease) in net assets:
Operations:

Net investment income ............................ $ 1,381,336 $ 1,458,667 $ 2,351,378 $ 2,429,865
Net realized gain (loss) from investments and
distributions by underlying funds ................. (657,310) (1,300,265) (1,699,432) (2,564,790)
Net unrealized appreciation (depreciation) on
investments ..................................... 10,812,823 7,109,450 25,817,433 16,155,604
-------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations ................... 11,536,849 7,267,852 26,469,379 16,020,679
Distributions to shareholders from:
Net investment income:
Class A ......................................... (1,088,991) (978,809) (1,868,291) (1,809,008)
Class B ......................................... (792) -- (3,185) --
Class C ......................................... (374,729) (386,024) (599,050) (527,698)
Class R ......................................... (81,226) (44,895) (162,463) (44,308)
-------------------------------------------------------------------
Total distributions to shareholders ............... (1,545,738) (1,409,728) (2,632,989) (2,381,014)
Capital share transactions: (Note 2)
Class A ......................................... 27,159,620 24,604,134 43,637,669 27,750,259
Class B ......................................... 666,676 -- 1,214,373 --
Class C ......................................... 10,651,146 8,108,921 15,712,253 12,516,620
Class R ......................................... 1,390,711 4,929,632 3,236,117 10,075,694
-------------------------------------------------------------------
Total capital share transactions .................. 39,868,153 37,642,687 63,800,412 50,342,573
Net increase (decrease) in net assets ........ 49,859,264 43,500,811 87,636,802 63,982,238
Net assets:
Beginning of period ............................... 102,471,037 58,970,226 188,946,877 124,964,639
-------------------------------------------------------------------
End of period ..................................... $152,330,301 $102,471,037 $276,583,679 $188,946,877
===================================================================
Undistributed net investment income included
in net assets:
End of period .................................... $ 128,654 $ 293,056 $ 154,578 $ 436,189
===================================================================

42 | Semiannual Report

Franklin Templeton Fund Allocator Series

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
for the six months ended January 31, 2004 (unaudited)
and the year ended July 31, 2003

--------------------------------
FRANKLIN TEMPLETON
GROWTH TARGET FUND
--------------------------------
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 2004 JULY 31, 2003
--------------------------------
Increase (decrease) in net assets:
Operations:

Net investment income .................................................................. $ 1,172,179 $ 689,632
Net realized gain (loss) from investments and distributions by underlying funds ........ (1,332,784) (6,860,671)
Net unrealized appreciation (depreciation) on investments .............................. 25,877,723 20,265,992
----------------------------
Net increase (decrease) in net assets resulting from operations .................... 25,717,118 14,094,953
Distributions to shareholders from:
Net investment income:
Class A ............................................................................... (1,106,815) (779,346)
Class B ............................................................................... (1,197) --
Class C ............................................................................... (126,008) (93,410)
Class R ............................................................................... (60,735) (23,036)
----------------------------
Total distributions to shareholders ..................................................... (1,294,755) (895,792)
Capital share transactions: (Note 2)
Class A ............................................................................... 31,251,371 20,819,694
Class B ............................................................................... 480,305 --
Class C ............................................................................... 9,399,139 5,923,783
Class R ............................................................................... 2,352,966 4,826,890
----------------------------
Total capital share transactions ........................................................ 43,483,781 31,570,367
Net increase (decrease) in net assets .............................................. 67,906,144 44,769,528
Net assets:
Beginning of period ..................................................................... 145,828,181 101,058,653
----------------------------
End of period ........................................................................... $213,734,325 $145,828,181
============================
Undistributed net investment income included in net assets:
End of period ........................................................................... $ (60,976) $ 61,600
============================

Semiannual Report | See notes to financial statements. | 43

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 an open-end investment company, consisting of
five separate series. All funds included in this report (the Funds) are
non-diversified. The Funds invest primarily in Franklin Templeton mutual funds
(the Underlying Funds). The Funds 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 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.

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. Accounting Estimates

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America 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 expenses during the reporting period. Actual results could differ from those
estimates.

e. Guarantees and Indemnifications

Under the Trust's organizational documents, its officers and trustees are
indemnified against certain liability arising out of the performance of their
duties to the Trust. Additionally, in the normal course of business, the Trust
enters into contracts with service providers that contain general
indemnification clauses. The Trust's maximum exposure under these arrangements
is unknown as this would involve future claims that may be made against the
Trust that have not yet occurred. However, based on experience, the Trust
expects the risk of loss to be remote.

44 | Semiannual Report

Franklin Templeton Fund Allocator Series

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST

The Funds offer four classes of shares: Class A, Class B, Class C and Class R.
Effective December 1, 2003, the Funds began offering a new class of shares,
Class B. Each class of shares differs by its initial sales load, contingent
deferred sales charges, distribution fees, voting rights on matters affecting a
single class and its exchange privilege.

At January 31, 2004, there were an unlimited number of shares authorized ($.01
par value). Transactions in the Funds' shares were as follows:

-----------------------------------------------------------
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
CONSERVATIVE TARGET FUND MODERATE TARGET FUND
-----------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------
CLASS A SHARES:
Six months ended January 31, 2004

Shares sold .......................... 3,226,253 $ 37,055,500 4,637,218 $ 53,142,139
Shares issued in reinvestment of
distributions ........................ 90,872 1,049,078 160,185 1,840,190
Shares redeemed ...................... (957,820) (10,944,958) (994,394) (11,344,660)
-----------------------------------------------------------
Net increase (decrease) .............. 2,359,305 $ 27,159,620 3,803,009 $ 43,637,669
-----------------------------------------------------------
Year ended July 31, 2003
Shares sold .......................... 3,707,449 $ 38,341,265 4,821,511 $ 47,982,378
Shares issued in reinvestment of
distributions ........................ 91,504 944,989 181,352 1,786,613
Shares redeemed ...................... (1,412,210) (14,682,120) (2,227,119) (22,018,732)
-----------------------------------------------------------
Net increase (decrease) .............. 2,386,743 $ 24,604,134 2,775,744 $ 27,750,259
===========================================================
CLASS B SHARES:
Period ended January 31, 2004 a
Shares sold .......................... 56,702 $ 670,977 102,368 $ 1,211,281
Shares issued in reinvestment of
distributions ........................ 60 699 266 3,092
Shares redeemed ...................... (418) (5,000) -- --
-----------------------------------------------------------
Net increase (decrease) .............. 56,344 $ 666,676 102,634 $ 1,214,373
===========================================================
CLASS C SHARES:
Six months ended January 31, 2004
Shares sold .......................... 1,316,313 $ 14,953,246 1,708,188 $ 19,170,884
Shares issued in reinvestment of
distributions ........................ 28,045 321,198 45,636 519,087
Shares redeemed ...................... (406,148) (4,623,298) (353,427) (3,977,718)
-----------------------------------------------------------
Net increase (decrease) .............. 938,210 $ 10,651,146 1,400,397 $ 15,712,253
===========================================================
Year ended July 31, 2003
Shares sold .......................... 1,593,387 $ 16,404,129 2,071,724 $ 20,403,614
Shares issued in reinvestment of
distributions ........................ 32,636 331,999 45,364 438,554
Shares redeemed ...................... (844,205) (8,627,207) (855,493) (8,325,548)
-----------------------------------------------------------
Net increase (decrease) .............. 781,818 $ 8,108,921 1,261,595 $ 12,516,620
===========================================================

Semiannual Report | 45

Franklin Templeton Fund Allocator Series

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST (CONTINUED)

Shares sold ........................... 219,198 $ 2,525,215 466,178 $ 5,256,958
Shares issued in reinvestment of
distributions ......................... 7,041 81,182 14,142 162,338
Shares redeemed ....................... (106,211) (1,215,686) (188,778) (2,183,179)
----------------------------------------------------------
Net increase (decrease) ............... 120,028 $ 1,390,711 291,542 $ 3,236,117
==========================================================
Year ended July 31, 2003
Shares sold ........................... 503,335 $ 5,266,539 1,419,315 $13,943,894
Shares issued in reinvestment of
distributions ......................... 4,288 44,690 4,406 44,126
Shares redeemed ....................... (35,617) (381,597) (398,610) (3,912,326)
----------------------------------------------------------
Net increase (decrease) ............... 472,006 $ 4,929,632 1,025,111 $10,075,694
==========================================================

---------------------------
FRANKLIN TEMPLETON
GROWTH TARGET FUND
---------------------------
SHARES AMOUNT
---------------------------
CLASS A SHARES:
Six months ended January 31, 2004
Shares sold ...................................... 3,643,275 $ 41,889,213
Shares issued in reinvestment of distributions ... 92,118 1,084,234
Shares redeemed .................................. (1,028,103) (11,722,076)
--------------------------
Net increase (decrease) .......................... 2,707,290 $ 31,251,371
==========================
Year ended July 31, 2003
Shares sold ...................................... 4,205,371 $ 40,151,450
Shares issued in reinvestment of distributions ... 82,488 766,310
Shares redeemed .................................. (2,132,910) (20,098,066)
--------------------------
Net increase (decrease) .......................... 2,154,949 $ 20,819,694
==========================
CLASS B SHARES:
Period ended January 31, 2004 a
Shares sold ...................................... 39,850 $ 479,252
Shares issued in reinvestment of distributions ... 90 1,053
Shares redeemed .................................. -- --
--------------------------
Net increase (decrease) .......................... 39,940 $ 480,305
==========================
CLASS C SHARES:
Six months ended January 31, 2004
Shares sold ...................................... 1,266,820 $ 14,434,687
Shares issued in reinvestment of distributions ... 9,938 116,372
Shares redeemed .................................. (460,787) (5,151,920)
--------------------------
Net increase (decrease) .......................... 815,971 $ 9,399,139
==========================
Year ended July 31, 2003
Shares sold ...................................... 1,530,406 $ 14,414,068
Shares issued in reinvestment of distributions ... 9,384 86,986
Shares redeemed .................................. (930,876) (8,577,271)
--------------------------
Net increase (decrease) .......................... 608,914 $ 5,923,783
==========================

46 | Semiannual Report

Franklin Templeton Fund Allocator Series

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST (CONTINUED)

------------------------
FRANKLIN TEMPLETON
GROWTH TARGET FUND
------------------------
SHARES AMOUNT
------------------------
CLASS R SHARES:
Six months ended January 31, 2004

Shares sold ............................................................. 279,742 $ 3,124,709
Shares issued in reinvestment of distributions .......................... 5,180 60,658
Shares redeemed ......................................................... (72,629) (832,401)
------------------------
Net increase (decrease) ................................................. 212,293 $ 2,352,966
========================
Year ended July 31, 2003
Shares sold ............................................................. 648,267 $ 6,010,864
Shares issued in reinvestment of distributions .......................... 2,477 22,937
Shares redeemed ......................................................... (130,564) (1,206,911)
------------------------
Net increase (decrease) ................................................. 520,180 $ 4,826,890
========================

a For the period December 1, 2003 (effective date) to January 31, 2004.

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Trust are also officers and/or directors of
the following entities:

- -------------------------------------------------------------------------------
ENTITY AFFILIATION
- -------------------------------------------------------------------------------
Franklin Advisers Inc. (Advisers) Investment manager
Franklin Templeton Services LLC (FT Services) Administrative manager
Franklin/Templeton Distributors Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services LLC
(Investor Services) Transfer agent

The Funds pay an asset allocation fee to Advisers of .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.

The Funds reimburse Distributors up to .25%, 1.00%, 1.00%, and .50% per year of
the average daily net assets of Class A, Class B, Class C, and Class R,
respectively, for costs incurred in marketing the Funds' shares.

Semiannual Report | 47

Franklin Templeton Fund Allocator Series

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

Distributors paid net commissions on sales of the Funds' shares, and received
contingent deferred sales charges for the period as follows:

--------------------------------------
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
--------------------------------------
Net commissions paid ................... $189,219 $286,401 $231,387
Contingent deferred sales charges ...... $ 9,985 $ 4,006 $ 4,355

The Funds paid transfer agent fees as noted in the Statement of Operations of
which the following amounts were paid to Investor Services:

4. INCOME TAXES

At July 31, 2003, the Funds had tax basis capital losses, which may be carried
over to offset future capital gains. Such losses expire as follows:

--------------------------------------
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
--------------------------------------
Capital loss carryovers expiring in:
2010 .................................. $ 61,769 $ 979,398 $1,668,758
2011 .................................. 483,682 1,014,315 697,564
--------------------------------------
$545,451 $1,993,713 $2,366,322
======================================

At July 31, 2003, the Funds had deferred capital losses occurring subsequent to
October 31, 2002. For tax purposes, such losses will be reflected in the year
ending July 31, 2004.
---------------------------------------
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
---------------------------------------
$696,706 $1,453,541 $5,127,482

48 | Semiannual Report

Franklin Templeton Fund Allocator Series

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

4. INCOME TAXES (CONTINUED)

At January 31, 2004, the net unrealized appreciation (depreciation) based on the
cost of investments for income tax purposes was as follows:

Cost of investments ........................ $139,066,555 $248,714,443 $191,410,555
---------------------------------------------
Unrealized appreciation .................... 13,026,132 25,376,697 24,012,855
Unrealized depreciation .................... (207,824) (231,896) (2,525,355)
---------------------------------------------
Net unrealized appreciation (depreciation) . $ 12,818,308 $ 25,144,801 $ 21,487,500
=============================================

Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatment of wash sales.

5. INVESTMENT TRANSACTIONS

Purchases and sales of Underlying Funds (excluding short-term securities) for
the period ended January 31, 2004, were as follows:

---------------------------------------------
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
---------------------------------------------
Purchases .................... $30,408,648 $53,876,965 $41,586,460
Sales ........................ $ 760,000 $ 1,342,000 $ 1,052,000

6. INVESTMENTS IN UNDERLYING FUNDS

The Funds invest primarily in the Underlying Funds which are managed by
Advisers. The Funds do not invest in the Underlying Funds for the purpose of
exercising management or control. At January 31, 2004, the Funds held the
following positions which exceed 5% of the Underlying Fund's shares outstanding:

- ----------------------------------------------------------------
NAME OF ISSUER % OF SHARES HELD
- ----------------------------------------------------------------

FRANKLIN TEMPLETON CONSERVATIVE TARGET FUND
Franklin Strategic Mortgage Portfolio 6.60%
FRANKLIN TEMPLETON MODERATE TARGET FUND
Franklin Strategic Mortgage Portfolio 10.36%
Franklin Technology Fund, Advisor Class 6.35%
FRANKLIN TEMPLETON GROWTH TARGET FUND
Franklin Technology Fund, Advisor Class 7.02%

Semiannual Report | 49

Franklin Templeton Fund Allocator Series

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

7. INVESTMENTS IN THE FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET
PORTFOLIO

The Funds may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund), an open-end investment company managed by
Advisers. Pursuant to a SEC exemptive order specific to the Funds' investment in
the Sweep Money Fund, asset allocation fees are reduced on assets invested in
the Sweep Money Fund, in an amount not to exceed the asset allocation fees paid
by the Sweep Money Fund.

The Funds earned dividend income from investment in the Sweep Money Fund for the
period ended January 31, 2004 as follows:

---------------------------------------
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
---------------------------------------
$95,602 $90,113 $37,503

8. REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of
the Commonwealth of Massachusetts filed an administrative complaint against
Franklin Resources, Inc. and certain of its subsidiaries (the "Company"),
alleging violations of the Massachusetts Uniform Securities Act. The complaint
arises from activity that occurred in 2001 during which time an officer of a
Company subsidiary was negotiating an agreement with an investor relating to
investments in a mutual fund and a hedge fund.

The Funds, in addition to other entities within Franklin Templeton Investments,
including the Company and other funds, has been named in shareholder class
actions related to the matter described above. The Funds' management believes
that the claims made in the lawsuit are without merit and it intends to defend
vigorously against the allegations. It is anticipated that the Funds may be
named in additional similar civil actions related to the matter described above.

In addition, as part of ongoing investigations by the U.S. Securities and
Exchange Commission (the "SEC"), the U.S. Attorney for the Northern District of
California, the New York Attorney General, the California Attorney General, the
U.S. Attorney for the District of Massachusetts, the Florida Department of
Financial Services, and the Commissioner of Securities and the Attorney General
of the State of West Virginia, relating to certain practices in the mutual fund
industry, including late trading, market timing and sales compensation
arrangements, the Company and its subsidiaries, as well as certain current or
former executives and employees of the Company, have received requests for
information and/or subpoenas to testify or produce documents. The Company and
its current employees are providing documents and information in response to
these requests and subpoenas. In addition, the Company has responded to requests
for similar kinds of information from regulatory authorities in some of the
foreign countries where the Company conducts its global asset management
business.

50 | Semiannual Report

Franklin Templeton Fund Allocator Series

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

8. REGULATORY MATTERS (CONTINUED)

The Staff of the SEC has informed the Company that it intends to recommend that
the Commission authorize an action against the Funds' investment adviser
relating to the frequent trading issues that are the subject of the SEC's
investigation. These issues were previously disclosed as being under
investigation by government authorities and the subject of an internal inquiry
by the Company in its Annual Report on Form 10-K and on its public website. The
Company currently is in discussions with the SEC Staff in an effort to resolve
the issues raised in their investigation. Such discussions are preliminary and
the Funds' management has been advised that the Company cannot predict the
likelihood of whether those discussions will result in a settlement and, if so,
the terms of such settlement. The impact, if any, of these matters on the Funds
is uncertain at this time. If the Company finds that it bears responsibility for
any unlawful or improper conduct, it has committed to making the Funds or their
shareholders whole, as appropriate.

Semiannual Report | 51

Franklin Templeton Fund Allocator Series

PROXY VOTING POLICIES AND PROCEDURES

The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group.

52 | Semiannual Report

Literature Request

For a brochure and prospectus, which contains more complete information,
including charges, expenses and risks, call Franklin Templeton Investments at
1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before
investing or sending money. To ensure the highest quality of service, we may
monitor, record and access telephone calls to or from our service departments.
These calls can be identified by the presence of a regular beeping tone.

FRANKLIN TEMPLETON INVESTMENTS

INTERNATIONAL
Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund

GLOBAL
Franklin Global Aggressive Growth Fund
Franklin Global Growth Fund
Mutual Discovery Fund
Templeton Capital Accumulator Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund Templeton World Fund

GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II 1

VALUE
Franklin Balance Sheet Investment Fund 2
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 2
Franklin Small Cap Value Fund
Mutual Beacon Fund Mutual Qualified Fund
Mutual Recovery Fund 3
Mutual Shares Fund

BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund 4

SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Franklin Technology Fund
Mutual Financial Services Fund

ASSET ALLOCATION
Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds
Allocation Fund

TARGET FUNDS
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund

INCOME
Franklin Adjustable U.S. Government Securities Fund 5
Franklin's AGE High Income Fund
Franklin Federal Money Fund 5, 6
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust 3
Franklin Income Fund Franklin Money Fund 5, 6
Franklin Short-Intermediate U.S. Government Securities Fund 5
Franklin Strategic Income Fund Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund 5
Templeton Global Bond Fund

TAX-FREE INCOME 7
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 8
Tax-Exempt Money Fund 5, 6

LIMITED-TERM
FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund

INTERMEDIATE-TERM FUNDS
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund

STATE-SPECIFIC 7
Alabama
Arizona
California 9
Colorado
Connecticut
Florida 9
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 8
Michigan 8
Minnesota 8
Missouri
New Jersey
New York 9
North Carolina
Ohio 8
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS
Franklin Templeton Variable Insurance
Products Trust 10

1.The fund is closed to new investors. Existing shareholders can continue adding
to their accounts.
2.The fund is only open to existing shareholders as well as select retirement
plans.
3.The fund is a continuously offered, closed-end fund. Shares may be purchased
daily; there is no daily redemption. However, each quarter, pending board
approval, the fund will authorize the repurchase of 5%-25% of the outstanding
number of shares. Investors may tender all or a portion of their shares during
the tender period.
4.Upon reaching approximately $350 million in assets, the fund intends to close
to all investors.
5.An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
6.No assurance exists that the fund's $1.00 per share price will be maintained.
It is possible to lose money by investing in the fund.
7.For investors subject to the alternative minimum tax, a small portion of fund
dividends may be taxable. Distributions of capital gains are generally taxable.
8.Portfolio of insured municipal securities.
9.These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA) and
limited-term, intermediate-term and money market portfolios (CA and NY).
10.The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.

02/04 Not part of the semiannual report

[GRAPHIC OMITTED]
FRANKLIN TEMPLETON INVESTMENTS LOGO

One Franklin Parkway
San Mateo, CA 94403-1906

WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
Eligible shareholders can sign up for eDelivery at franklintempleton.com.
See inside for details.

SEMIANNUAL REPORT AND SHAREHOLDER LETTER
Franklin Templeton
Fund Allocator Series

INVESTMENT MANAGER
Franklin Advisers, Inc.

DISTRIBUTOR
Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com

SHAREHOLDER SERVICES
1-800/632-2301

This report must be preceded or accompanied by the current Franklin Templeton
Fund Allocator Series prospectus, which contains more complete information,
including charges, expenses and risks.

To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.

FAS S2004 03/04

[GRAPHIC OMITTED]

JANUARY 31, 2004
--------------------------------------

Franklin Templeton
Corefolio Allocation Fund

Franklin Templeton
Founding Funds Allocation Fund

SEMIANNUAL REPORT AND SHAREHOLDER LETTER ASSET ALLOCATION

Want to receive
this document
FASTER via email?

FRANKLIN TEMPLETON Eligible shareholders can
FUND ALLOCATOR SERIES sign up for eDelivery at
franklintempleton.com
See inside for details.

[FRANKLIN TEMPLETON INVESTMENTS LOGO OMITTED]

FRANKLIN o TEMPLETON o MUTUAL SERIES

Franklin Templeton Investments
GAIN FROM OUR PERSPECTIVE

Franklin Templeton's distinct multi-manager structure
combines the specialized expertise of three
world-class investment management groups--Franklin,
Templeton and Mutual Series.

SPECIALIZED EXPERTISE Each of our portfolio management groups operates
autonomously, relying on its own research and staying
true to the unique investment disciplines that
underlie its success.

FRANKLIN. Founded in 1947, Franklin is a leader in
tax-free investing and a driving force in fixed
income investing around the globe. They also bring
expertise in growth- and value-style U.S. equity
investing.

TEMPLETON. Founded in 1940, Templeton pioneered
international investing and, in 1954, launched what
has become the industry's oldest global fund. Today,
with research offices in over 25 countries, they
offer investors the broadest global reach in the
industry.

MUTUAL SERIES. Established in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among
undervalued stocks, arbitrage situations and
distressed companies.

TRUE DIVERSIFICATION Because our management groups work independently and
adhere to distinctly different investment approaches,
Franklin, Templeton and Mutual Series funds typically
have a low overlap of securities. That's why our
funds can be used to build truly diversified
portfolios covering every major asset class.

RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with exceptional
risk-adjusted returns over the long term, as well as
the reliable account services that have helped us
become one of the most trusted names in financial
services.

MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS

[BUILDING GRAPHIC OMITTED]

Not part of the semiannual report

<page>

Contents

SHAREHOLDER LETTER............................................1

SEMIANNUAL REPORT

Franklin Templeton Corefolio Allocation Fund .................3

Franklin Templeton Founding Funds Allocation Fund ............9

Financial Highlights and Statements of Investments ..........15

Financial Statements ........................................27

Notes to Financial Statements ...............................31

Proxy Voting Policies and Procedures ........................37

- --------------------------------------------------------------------------------

Shareholder Letter

Dear Shareholder:

The reporting period ended January 31, 2004, showed signs of
robust economic growth, rising consumer confidence, healthy
retail sales and greater corporate earnings. These had positive
implications for financial markets, and the major stock indexes
rallied strongly. Most bond markets also had positive returns as
Treasury bond prices generally rose. We think the economic
recovery looks more durable and inflation should remain subdued,
which should be positive for investors.

Although future economic and market developments are impossible
to predict, as an investor, you can follow certain basic
principles in planning for future needs. First, investing for the
long term is important so that you can better weather short-term
market ups and downs. Second, by choosing a mutual fund that
comprises a range of holdings, you can use diversification to
help manage investment risk. You can further diffuse risk
exposure by investing in different asset categories such as
stocks and bonds. Third, it may make sense to follow a regular
investment plan, also called dollar cost averaging, investing a
certain amount of money monthly or quarterly. Remember, however,
to consider your financial ability to continue purchases through
times of low price levels or changing economic conditions before
committing to such a strategy. Such a plan does not assure a
profit and does not

--------------------------------------------------------------

EDELIVERY DETAILS

Log in at franklintempleton.com and click on eDelivery.
Shareholders who are registered at franklintempleton.com can
receive these reports via email. Not all accounts are eligible
for eDelivery.

NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE

Not part of the semiannual report | 1

<page>

- -------------------------------------------
STATEMENT ON CURRENT
INDUSTRY ISSUES
- -------------------------------------------
In our efforts to fulfill our ongoing com-
mitment to provide you with timely and
accurate information, we have prepared
a statement on current industry issues as
they pertain to Franklin Resources, Inc.
(Franklin Templeton Investments) and
our subsidiary companies. You can find
the most updated "Statement on Current
Industry Issues" and a detailed Q&A at
franklintempleton.com, or call us at
1-800/632-2301.

- -------------------------------------------

protect against loss in a declining market. As always, we encourage
you to discuss your goals with your financial advisor who can address
concerns about volatility and diversification, periodically review
your overall portfolio and help you stay focused on the long term. We
firmly believe that most people benefit from professional advice, and
that advice is never more valuable than during a volatile market.

The enclosed semiannual report for Franklin Templeton Fund Allocator
Series comprises the inaugural reports for Franklin Templeton
Corefolio Allocation Fund and Franklin Templeton Founding Funds
Allocation Fund. The Funds are designed to spread your investment
across multiple asset classes and to automatically keep the
allocations balanced. In the reports, the portfolio manager discusses
market conditions and Fund performance during the period under review.
You will also find performance data and financial information. Please
remember that all securities markets move up and down, as do mutual
fund share prices.

If you would like more frequent updates, franklintempleton.com
provides daily prices, monthly performance figures, portfolio holdings
and other information. You can also access your account, buy and sell
shares, read timely commentary from portfolio managers, and find
helpful financial planning tools. We hope you will take advantage of
these online services.

We thank you for investing with Franklin Templeton, welcome your
questions and comments, and look forward to serving your investment
needs in the years ahead.

Sincerely,

/s/Charles B. Johnson

Charles B. Johnson
Chairman
Franklin Templeton Fund Allocator Series

THIS LETTER REFLECTS OUR ANALYSIS AND OPINIONS AS OF JANUARY 31, 2004.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY
MARKET, COUNTRY, INDUSTRY, SECURITY OR FUND. STATEMENTS OF FACT HAVE
BEEN OBTAINED FROM SOURCES CONSIDERED RELIABLE.

2 | Not part of the semiannual report

<page>

Semiannual Report

Franklin Templeton Corefolio Allocation Fund

YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin Templeton Corefolio
Allocation Fund seeks capital appreciation through investments in an equally
weighted combination of Franklin Growth Fund, Franklin Capital Growth Fund,
Mutual Shares Fund and Templeton Growth Fund.

This inaugural semiannual report for Franklin Templeton Corefolio
Allocation Fund covers the period since inception on August 15,
2003, through January 31, 2004.

PERFORMANCE OVERVIEW

Franklin Templeton Corefolio Allocation Fund - Class A posted a
+12.46% cumulative total return, as shown in the Performance
Summary beginning on page 6, for the period since inception on
August 15, 2003, through January 31, 2004. The Fund
underperformed its hybrid benchmark, which comprised a weighted
combination of the Standard & Poor's 500 Composite Index (S&P
500) and the Morgan Stanley Capital International (MSCI) World
Index. For the reporting period, the benchmark returned 15.18%.1

ECONOMIC AND MARKET OVERVIEW

During the period ended January 31, 2004, domestic economic
recovery appeared to be on track. The annualized gross domestic
product growth rate surged 8.2% in the third quarter of 2003 and
rose 4.1% in the fourth quarter. The U.S. dollar's continued
weakness, particularly against the euro, led to modest trade
balance improvements. Business sentiment climbed in January 2004
to its highest level in nearly a decade; and business equipment
spending, especially in information technology, rose in the third
and fourth quarters of 2003. Consumer sentiment rose in January
to its highest level since November 2000. Consumer spending,
however,

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND
COMPLETE LEGAL TITLES OF ALL PORTFOLIO HOLDINGS ARE LISTED IN THE
FUND'S STATEMENT OF INVESTMENTS (SOI). THE SOI BEGINS ON PAGE 20.

Semiannual Report | 3

<page>

grew only modestly in fourth quarter 2003 compared with strong
third-quarter spending, which was fueled by federal tax cuts,
mortgage refinancing and auto-buying incentives. Slow wage
growth, heavy indebtedness and lower wealth since 2000 despite
recent stock market gains constrained consumer spending.

Lack of job growth remained a risk to the economy during the
reporting period, and although the unemployment rate fell to 5.6%
in January, this occurred mainly because of a labor force
decline. At the Federal Reserve Board's (Fed's) January meeting,
Fed policymakers indicated they would not raise interest rates
until the job market improved meaningfully. Thus, they kept the
federal funds target rate at 1.00%, and maintained a neutral
stance with respect to future economic growth and inflation.
However, the Fed said it "can be patient" about raising rates,
which was different from previous statements. The change in
wording caused mixed reaction among market analysts about when
the Fed might begin raising rates.

During the period, equity markets continued a rally that began in
March 2003. Data showing robust economic growth and improved
revenue reports from corporate America seemed to increase
investor confidence in the stock markets. The S&P 500 rose 14.15%
for the period under review, while the technology-heavy Nasdaq
Composite Index increased 17.00%.2 As economic data improved,
some interest rates rose from their lows at the beginning of the
period but eased toward period-end. The 10-year Treasury note
started the period yielding 4.55% on August 15, 2003, reached a
peak of 4.61% on September 2, 2003, then declined to 4.16% on
January 31, 2004.

INVESTMENT STRATEGY

The Fund invests its assets in an equally weighted combination of
Franklin Growth Fund, Franklin Capital Growth Fund, Mutual Shares
Fund and Templeton Growth Fund. These underlying funds, in turn,
invest primarily in U.S. and foreign equity securities, and, to a
lesser extent, fixed income and money market securities. As
market conditions affect the underlying funds, we regularly
rebalance the Fund's allocations to maintain the predetermined
equal weightings of approximately 25% of total net assets in each
underlying fund.

2. Source: Standard & Poor's Micropal. See footnote 1 for a
description of the S&P 500. The Nasdaq Composite Index measures
all domestic and international common stocks listed on The Nasdaq
Stock Market. The index is market value-weighted and includes
over 3,000 companies.

4 | Semiannual Report

<page>

- --------------------------------------------------------------------------------

PORTFOLIO BREAKDOWN
Franklin Templeton Corefolio Allocation Fund
Based on Total Net Assets as of 1/31/04

[Pie Chart Graphic Omitted]

[] Primarily Domestic Equity ...................71.7%
[] Primarily Foreign Equity ....................24.4%
[] Short-Term Investments &
Other Net Assets .............................3.9%

- --------------------------------------------------------------------------------

MANAGER'S DISCUSSION

During the period from inception on August 15, 2003, through January 31, 2004,
Franklin Growth Fund outperformed the S&P 500, which helped the Fund's
performance. However, Franklin Capital Growth Fund and Mutual Shares Fund
underperformed the S&P 500, while Templeton Growth Fund underperformed the MSCI
World Index, which hindered the Fund's overall return relative to its hybrid
benchmark.

Thank you for your participation in Franklin Templeton Corefolio Allocation
Fund. We look forward to serving your future investment needs.

[Photo of Anthony Coffey Omitted]

/s/T. Anthony Coffey, CFA

T. Anthony Coffey, CFA
Portfolio Manager
Franklin Templeton Corefolio Allocation Fund

Semiannual Report | 5

Performance Summary as of 1/31/04

FRANKLIN TEMPLETON COREFOLIO ALLOCATION FUND

PRICE AND DISTRIBUTION INFORMATION

- ----------------------------------------------------------------------------------------------------------
CLASS A CHANGE 1/31/04 8/15/03
- ----------------------------------------------------------------------------------------------------------

Net Asset Value (NAV) +$1.18 $11.18 $10.00
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (8/15/03-1/31/04)
- ----------------------------------------------------------------------------------------------------------
Dividend Income $0.0643
- ----------------------------------------------------------------------------------------------------------
CLASS B CHANGE 1/31/04 8/15/03
- ----------------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.15 $11.15 $10.00
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (8/15/03-1/31/04)
- ----------------------------------------------------------------------------------------------------------
Dividend Income $0.0517
- ----------------------------------------------------------------------------------------------------------
CLASS C CHANGE 1/31/04 8/15/03
- ----------------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.14 $11.14 $10.00
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (8/15/03-1/31/04)
- ----------------------------------------------------------------------------------------------------------
Dividend Income $0.0530
- ----------------------------------------------------------------------------------------------------------
CLASS R CHANGE 1/31/04 8/15/03
- ----------------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.17 $11.17 $10.00
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (8/15/03-1/31/04)
- ----------------------------------------------------------------------------------------------------------
Dividend Income $0.0646
- ----------------------------------------------------------------------------------------------------------
ADVISOR CLASS CHANGE 1/31/04 8/15/03
- ----------------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.18 $11.18 $10.00
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (8/15/03-1/31/04)
- ----------------------------------------------------------------------------------------------------------
Dividend Income $0.0710
- ----------------------------------------------------------------------------------------------------------

6 | Past performance does not guarantee future results. | Semiannual Report

<page>

Performance Summary (CONTINUED)

PERFORMANCE(1)

- ------------------------------------------------------------------------------------------------------

CLASS A INCEPTION (8/15/03)
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return2 +12.46%
- ------------------------------------------------------------------------------------------------------
Aggregate Total Return3 +6.00%
- ------------------------------------------------------------------------------------------------------
Value of $10,000 Investment4 $10,600
- ------------------------------------------------------------------------------------------------------
Aggregate Total Return (12/31/03)3, 5 +4.57%
- ------------------------------------------------------------------------------------------------------
CLASS B INCEPTION (8/15/03)
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return2 +12.03%
- ------------------------------------------------------------------------------------------------------
Aggregate Total Return3 +8.03%
- ------------------------------------------------------------------------------------------------------
Value of $10,000 Investment4 $10,803
- ------------------------------------------------------------------------------------------------------
Aggregate Total Return (12/31/03)3, 5 +6.62%
- ------------------------------------------------------------------------------------------------------
CLASS C INCEPTION (8/15/03)
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return2 +11.94%
- ------------------------------------------------------------------------------------------------------
Aggregate Total Return3 +10.94%
- ------------------------------------------------------------------------------------------------------
Value of $10,000 Investment4 $11,094
- ------------------------------------------------------------------------------------------------------
Aggregate Total Return (12/31/03)3, 5 +8.45%
- ------------------------------------------------------------------------------------------------------
CLASS R INCEPTION (8/15/03)
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return2 +12.36%
- ------------------------------------------------------------------------------------------------------
Aggregate Total Return3 +11.36%
- ------------------------------------------------------------------------------------------------------
Value of $10,000 Investment4 $11,136
- ------------------------------------------------------------------------------------------------------
Aggregate Total Return (12/31/03)3, 5 +9.96%
- ------------------------------------------------------------------------------------------------------
ADVISOR CLASS INCEPTION (8/15/03)
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return2 +12.53%
- ------------------------------------------------------------------------------------------------------
Aggregate Total Return3 +12.53%
- ------------------------------------------------------------------------------------------------------
Value of $10,000 Investment4 $11,253
- ------------------------------------------------------------------------------------------------------
Aggregate Total Return (12/31/03)3, 5 +11.02%
- ------------------------------------------------------------------------------------------------------

FOR MORE CURRENT PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

Semiannual Report | Past performance does not guarantee future results. | 7

Performance Summary (CONTINUED)

ENDNOTES

CLASS A: Subject to the maximum 5.75% initial sales charge.

CLASS B: Subject to no initial sales charge, but subject to a
contingent deferred sales charge (CDSC) declining from 4% to
0% over six years. These shares have higher annual fees and
expenses than Class A shares.

CLASS C: Subject to no initial sales charge, but subject to 1% CDSC
for shares redeemed within 12 months of investment. Prior to
1/1/04, these shares were offered with an initial sales
charge; thus actual returns would have differed. These
shares have higher annual fees and expenses than Class A
shares.

CLASS R: No initial sales charge, but subject to 1% CDSC for shares
redeemed within 18 months of investment; shares are
available to certain eligible investors as described in the
prospectus. These shares have higher annual fees and
expenses than Class A shares.

ADVISOR CLASS: No initial sales charge or Rule 12b-1 fees; shares are
available to a limited class of investors.

1. The Fund's administrator has agreed in advance to limit its fees and assume
as its own expense certain expenses otherwise payable to the Fund. If the
administrator had not taken this action, the Fund's total return would have been
lower. The agreement will be in place until 1/15/05 or the Fund reaches $250
million; the administrator may end this arrangement at any time.

2. Cumulative total return represents the change in value of an investment since
inception and does not include sales charges.

3. Aggregate total return represents the change in value of an investment since
inception and includes any applicable maximum sales charge(s). Because the Fund
has existed for less than one year, average annual total returns are not
provided.

4. These figures represent the value of a hypothetical $10,000 investment in the
Fund since inception and include any applicable maximum sales charge(s).

5. In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.

8 | Past performance does not guarantee future results. | Semiannual Report

<page>

Franklin Templeton Founding Funds
Allocation Fund

YOUR FUND'S GOALS AND PRIMARY INVESTMENTS: Franklin Templeton Founding Funds
Allocation Fund's principal investment goal is capital appreciation, with a
secondary goal of income. The Fund invests in an equally weighted combination of
Franklin Income Fund, Mutual Shares Fund and Templeton Growth Fund.

This inaugural semiannual report for Franklin Templeton Founding Funds
Allocation Fund covers the period since inception on August 15, 2003,
through January 31, 2004.

PERFORMANCE OVERVIEW

Franklin Templeton Founding Funds Allocation Fund - Class A posted a
+13.00% cumulative total return, as shown in the Performance Summary
beginning on page 12, for the period since inception on August 15,
2003, through January 31, 2004. The Fund underperformed its hybrid
benchmark, which comprised a weighted combination of the Standard &
Poor's 500 Composite Index (S&P 500) and the Morgan Stanley Capital
International (MSCI) World Index. For the reporting period, the
benchmark returned 15.53%.1

ECONOMIC AND MARKET OVERVIEW

During the period ended January 31, 2004, domestic economic recovery
appeared to be on track. The annualized gross domestic product growth
rate surged 8.2% in the third quarter of 2003 and rose 4.1% in the
fourth quarter. The U.S. dollar's continued weakness, particularly
against the euro, led to modest trade balance improvements. Business
sentiment climbed in January 2004 to its highest level in nearly a
decade; and business equipment spending, especially in information
technology, rose in the third and fourth quarters of 2003. Consumer
sentiment rose in

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND COMPLETE
LEGAL TITLES OF ALL PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S
STATEMENT OF INVESTMENTS (SOI). THE SOI BEGINS ON PAGE 26.

Semiannual Report | 9

<page>

January to its highest level since November 2000. Consumer spending,
however, grew only modestly in fourth quarter 2003 compared with
strong third-quarter spending, which was fueled by federal tax cuts,
mortgage refinancing and auto-buying incentives. Slow wage growth,
heavy indebtedness and lower wealth since 2000 despite recent stock
market gains constrained consumer spending.

Lack of job growth remained a risk to the economy during the reporting
period, and although the unemployment rate fell to 5.6% in January,
this occurred mainly because of a labor force decline. At the Federal
Reserve Board's (Fed's) January meeting, Fed policymakers indicated
they would not raise interest rates until the job market improved
meaningfully. Thus, they kept the federal funds target rate at 1.00%,
and maintained a neutral stance with respect to future economic growth
and inflation. However, the Fed said it "can be patient" about raising
rates, which was different from previous statements. The change in
wording caused mixed reaction among market analysts about when the Fed
might begin raising rates.

During the period, equity markets continued a rally that began in
March 2003. Data showing robust economic growth and improved revenue
reports from corporate America seemed to increase investor confidence
in the stock markets. The S&P 500 rose 14.15% for the period under
review, while the technology-heavy Nasdaq Composite Index increased
17.00%.2 As economic data improved, some interest rates rose from
their lows at the beginning of the period but eased toward period-end.
The 10-year Treasury note started the period yielding 4.55% on August
15, 2003, reached a peak of 4.61% on September 2, 2003, then declined
to 4.16% on January 31, 2004.

INVESTMENT STRATEGY

The Fund invests its assets in an equally weighted combination of
Franklin Income Fund, Mutual Shares Fund and Templeton Growth Fund.
These underlying funds, in turn, invest primarily in U.S. and foreign
equity securities, and, to a lesser extent, fixed income and money
market securities. As market conditions affect the underlying funds,
we regularly rebalance the Fund's allocations to maintain the
predetermined equal weightings of approximately 33 1/3% of total net
assets in each underlying fund.

2. Source: Standard & Poor's Micropal. See footnote 1 for a
description of the S&P 500. The Nasdaq Composite Index measures all
domestic and international common stocks listed on The Nasdaq Stock
Market. The index is market value-weighted and includes over 3,000
companies.

10 | Semiannual Report

<page>

- --------------------------------------------------------------------------------

PORTFOLIO BREAKDOWN
Franklin Templeton Founding Funds Allocation Fund
Based on Total Net Assets as of 1/31/04

[pie Chart Graphic Omitted]

[] Primarily Foreign Equity .......................32.3%
[] Domestic Hybrid ................................31.7%
[] Primarily Domestic Equity ......................31.7%
[] Short-Term Investments &
Other Net Assets ............................... 4.3%

- --------------------------------------------------------------------------------

MANAGER'S DISCUSSION

During the period from inception on August 15, 2003, through January 31, 2004,
the Fund's performance benefited from Franklin Income Fund's outperformance
relative to the S&P 500. Mutual Shares Fund and Templeton Growth Fund
underperformed their benchmarks, the S&P 500 and MSCI World Index, respectively,
which hindered Fund performance relative to the hybrid index.

Thank you for your participation in Franklin Templeton Founding Funds Allocation
Fund. We look forward to serving your future investment needs.

[Photo of T. Anthony Coffey Omitted}

/s/T. Anthony Coffey, CFA

T. Anthony Coffey, CFA
Portfolio Manager
Franklin Templeton Founding Funds Allocation Fund

Semiannual Report | 11

<page>

Performance Summary as of 1/31/04

FRANKLIN TEMPLETON FOUNDING FUNDS ALLOCATION FUND

PRICE AND DISTRIBUTION INFORMATION

- ----------------------------------------------------------------------------------------------------------

CLASS A CHANGE 1/31/04 8/15/03
- ----------------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.21 $11.21 $10.00
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (8/15/03-1/31/04)
- ----------------------------------------------------------------------------------------------------------
Dividend Income $0.0875
- ----------------------------------------------------------------------------------------------------------
CLASS B CHANGE 1/31/04 8/15/03
- ----------------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.20 $11.20 $10.00
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (8/15/03-1/31/04)
- ----------------------------------------------------------------------------------------------------------
Dividend Income $0.0768
- ----------------------------------------------------------------------------------------------------------
CLASS C CHANGE 1/31/04 8/15/03
- ----------------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.19 $11.19 $10.00
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (8/15/03-1/31/04)
- ----------------------------------------------------------------------------------------------------------
Dividend Income $0.0776
- ----------------------------------------------------------------------------------------------------------
CLASS R CHANGE 1/31/04 8/15/03
- ----------------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.23 $11.23 $10.00
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (8/15/03-1/31/04)
- ----------------------------------------------------------------------------------------------------------
Dividend Income $0.0868
- ----------------------------------------------------------------------------------------------------------
ADVISOR CLASS CHANGE 1/31/04 8/15/03
- ----------------------------------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.23 $11.23 $10.00
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (8/15/03-1/31/04)
- ----------------------------------------------------------------------------------------------------------
Dividend Income $0.0934
- ----------------------------------------------------------------------------------------------------------

12 | Past performance does not guarantee future results. | Semiannual Report

<page>

Performance Summary (CONTINUED)

PERFORMANCE(1)

- ------------------------------------------------------------------------------------------------------

CLASS A INCEPTION (8/15/03)
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return2 +13.00%
- ------------------------------------------------------------------------------------------------------
Aggregate Total Return3 +6.50%
- ------------------------------------------------------------------------------------------------------
Value of $10,000 Investment4 $10,650
- ------------------------------------------------------------------------------------------------------
Aggregate Total Return (12/31/03)3, 5 +5.17%
- ------------------------------------------------------------------------------------------------------
CLASS B INCEPTION (8/15/03)
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return2 +12.79%
- ------------------------------------------------------------------------------------------------------
Aggregate Total Return3 +8.79%
- ------------------------------------------------------------------------------------------------------
Value of $10,000 Investment4 $10,879
- ------------------------------------------------------------------------------------------------------
Aggregate Total Return (12/31/03)3, 5 +7.28%
- ------------------------------------------------------------------------------------------------------
CLASS C INCEPTION (8/15/03)
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return2 +12.70%
- ------------------------------------------------------------------------------------------------------
Aggregate Total Return3 +11.70%
- ------------------------------------------------------------------------------------------------------
Value of $10,000 Investment4 $11,170
- ------------------------------------------------------------------------------------------------------
Aggregate Total Return (12/31/03)3, 5 +9.20%
- ------------------------------------------------------------------------------------------------------
CLASS R INCEPTION (8/15/03)
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return2 +13.19%
- ------------------------------------------------------------------------------------------------------
Aggregate Total Return3 +12.19%
- ------------------------------------------------------------------------------------------------------
Value of $10,000 Investment4 $11,219
- ------------------------------------------------------------------------------------------------------
Aggregate Total Return (12/31/03)3, 5 +10.68%
- ------------------------------------------------------------------------------------------------------
ADVISOR CLASS INCEPTION (8/15/03)
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return2 +13.26%
- ------------------------------------------------------------------------------------------------------
Aggregate Total Return3 +13.26%
- ------------------------------------------------------------------------------------------------------
Value of $10,000 Investment4 $11,326
- ------------------------------------------------------------------------------------------------------
Aggregate Total Return (12/31/03)3, 5 +11.75%
- ------------------------------------------------------------------------------------------------------

FOR MORE CURRENT PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

Semiannual Report | Past performance does not guarantee future results. | 13

<page>

Performance Summary (CONTINUED)

ENDNOTES

THE FUND IS NON-DIVERSIFIED BECAUSE IT INVESTS IN SECURITIES OF A LIMITED NUMBER
OF MUTUAL FUNDS. BECAUSE IT INVESTS IN UNDERLYING FUNDS, WHICH MAY ENGAGE IN A
VARIETY OF INVESTMENT STRATEGIES INVOLVING CERTAIN RISKS, THE FUND MAY BE
SUBJECT TO THESE SAME RISKS. STOCKS HAVE HISTORICALLY OUTPERFORMED OTHER ASSET
CLASSES OVER THE LONG TERM, BUT TEND TO FLUCTUATE MORE DRAMATICALLY OVER THE
SHORT TERM. BONDS ARE AFFECTED BY CHANGES IN INTEREST RATES AND THE
CREDITWORTHINESS OF THEIR ISSUERS. HIGHER-YIELDING, LOWER-RATED CORPORATE BONDS
ENTAIL A GREATER DEGREE OF CREDIT RISK COMPARED TO INVESTMENT-GRADE SECURITIES.
FOREIGN INVESTING HAS ADDITIONAL RISKS SUCH AS CURRENCY AND MARKET VOLATILITY
AND POLITICAL AND SOCIAL INSTABILITY. THERE ARE OTHER RISKS PERTAINING TO
SPECIFIC UNDERLYING FUNDS, SUCH AS THOSE INVOLVING INVESTMENTS IN SPECIALIZED
INDUSTRY SECTORS, SUCH AS THE TECHNOLOGY SECTOR, WHICH HAS BEEN AMONG THE
MARKET'S MOST VOLATILE SECTORS. THE FUND'S PROSPECTUS ALSO INCLUDES A
DESCRIPTION OF THE MAIN INVESTMENT RISKS.

CLASS A: Subject to the maximum 5.75% initial sales charge.

CLASS B: Subject to no initial sales charge, but subject to a
contingent deferred sales charge (CDSC) declining from 4% to
0% over six years. These shares have higher annual fees and
expenses than Class A shares.

CLASS C: Subject to no initial sales charge, but subject to 1% CDSC for
shares redeemed within 12 months of investment. Prior to
1/1/04, these shares were offered with an initial sales
charge; thus actual returns would have differed. These shares
have higher annual fees and expenses than Class A shares.

CLASS R: No initial sales charge, but subject to 1% CDSC for shares
redeemed within 18 months of investment; shares are available
to certain eligible investors as described in the prospectus.
These shares have higher annual fees and expenses than Class A
shares.

ADVISOR CLASS: No initial sales charge or Rule 12b-1 fees; shares are
available to a limited class of investors.

2. Cumulative total return represents the change in value of an investment since
inception and does not include sales charges.

4. These figures represent the value of a hypothetical $10,000 investment in the
Fund since inception and include any applicable maximum sales charge(s).

5. In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.

14 | Past performance does not guarantee future results. | Semiannual Report

<page>

Franklin Templeton Fund Allocator Series

FINANCIAL HIGHLIGHTS

FRANKLIN TEMPLETON COREFOLIO ALLOCATION FUND

--------------
PERIOD ENDED
JANUARY 31,
2004C
CLASS A (UNAUDITED)
--------------
PER SHARE OPERATING PERFORMANCE

(for a share outstanding throughout the period)

Net asset value, beginning of period .................................................................... $10.00
--------
Income from investment operations:

Net investment income a ............................................................................... .09

Net realized and unrealized gains (losses) ............................................................ 1.15
--------
Total from investment operations ........................................................................ 1.24
--------
Less distributions from net investment income ........................................................... (.06)
--------
Net asset value, end of period .......................................................................... $11.18
========

Total return b .......................................................................................... 12.46%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ....................................................................... $45,767

Ratios to average net assets:

Expenses .............................................................................................. 47%d

Expenses excluding waiver and payments by affiliate ................................................... .98%d

Net investment income ................................................................................. 1.88%d

Portfolio turnover rate ................................................................................. .18%

Semiannual Report | 15

<page>

Franklin Templeton Fund Allocator Series

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN TEMPLETON COREFOLIO ALLOCATION FUND

--------------
PERIOD ENDED
JANUARY 31,
2004C
CLASS B (UNAUDITED)
--------------
PER SHARE OPERATING PERFORMANCE

(for a share outstanding throughout the period)

Net asset value, beginning of period .................................................................... $10.00
--------
Income from investment operations:

Net investment income a ............................................................................... .06

Net realized and unrealized gains (losses) ............................................................ 1.14
--------
Total from investment operations ........................................................................ 1.20
--------
Less distributions from net investment income ........................................................... (.05)
--------

Net asset value, end of period .......................................................................... $11.15
========

Total return b .......................................................................................... 12.03%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ....................................................................... $13,088

Ratios to average net assets:

Expenses .............................................................................................. 1.13%d

Expenses excluding waiver and payments by affiliate ................................................... 1.64%d

Net investment income ................................................................................. 1.22%d

Portfolio turnover rate ................................................................................. .18%

a Based on average daily shares outstanding.
b Total return does not reflect the contingent deferred sales charge, and is not
annualized for periods less than one year.
c For the period August 15, 2003 (effective date) to January 31, 2004.
d Annualized.

16 | Semiannual Report

<page>

Franklin Templeton Fund Allocator Series

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN TEMPLETON COREFOLIO ALLOCATION FUND

--------------
PERIOD ENDED
JANUARY 31,
2004C
CLASS C (UNAUDITED)
--------------
PER SHARE OPERATING PERFORMANCE

(for a share outstanding throughout the period)

Net asset value, beginning of period .................................................................... $10.00
--------
Income from investment operations:

Net investment income a ............................................................................... .06

Net realized and unrealized gains (losses) ............................................................ 1.13
--------
Total from investment operations ........................................................................ 1.19
--------
Less distributions from net investment income ........................................................... (.05)
--------
Net asset value, end of period .......................................................................... $11.14
========

Total return b .......................................................................................... 11.94%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ....................................................................... $31,645

Ratios to average net assets:

Expenses .............................................................................................. 1.13%d

Expenses excluding waiver and payments by affiliate ................................................... 1.64%d

Net investment income ................................................................................. 1.22%d

Portfolio turnover rate ................................................................................. .18%

Semiannual Report | 17

<page>

Franklin Templeton Fund Allocator Series

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN TEMPLETON COREFOLIO ALLOCATION FUND

--------------
PERIOD ENDED
JANUARY 31,
2004C
CLASS R (UNAUDITED)
--------------
PER SHARE OPERATING PERFORMANCE

(for a share outstanding throughout the period)

Net asset value, beginning of period .................................................................... $10.00
--------
Income from investment operations:

Net investment income a ............................................................................... .06

Net realized and unrealized gains (losses) ............................................................ 1.18
--------
Total from investment operations ........................................................................ 1.24
--------
Less distributions from net investment income ........................................................... (.07)
--------
Net asset value, end of period .......................................................................... $11.17
========

Total return b .......................................................................................... 12.36%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ....................................................................... $278

Ratios to average net assets:

Expenses .............................................................................................. 62%d

Expenses excluding waiver and payments by affiliate ................................................... 1.13%d

Net investment income ................................................................................. 1.73%d

Portfolio turnover rate ................................................................................. .18%

18 | Semiannual Report

<page>

Franklin Templeton Fund Allocator Series

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN TEMPLETON COREFOLIO ALLOCATION FUND

--------------
PERIOD ENDED
JANUARY 31,
2004C
ADVISOR CLASS (UNAUDITED)
--------------
PER SHARE OPERATING PERFORMANCE

(for a share outstanding throughout the period)

Net asset value, beginning of period .................................................................... $10.00
--------
Income from investment operations:

Net investment income a ............................................................................... .09

Net realized and unrealized gains (losses) ............................................................ 1.16
--------
Total from investment operations ........................................................................ 1.25
--------
Less distributions from net investment income ........................................................... (.07)
--------

Net asset value, end of period .......................................................................... $11.18
========

Total return b .......................................................................................... 12.53%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ....................................................................... $670

Ratios to average net assets:

Expenses .............................................................................................. 12%d

Expenses excluding waiver and payments by affiliate ................................................... .63%d

Net investment income ................................................................................. 2.23%d

Portfolio turnover rate ................................................................................. .18%

a Based on average daily shares outstanding.
b Total return is not annualized for periods less than one year.
c For the period August 15, 2003 (effective date) to January 31, 2004.
d Annualized.

Semiannual Report | See notes to financial statements. | 19

<page>

Franklin Templeton Fund Allocator Series

STATEMENT OF INVESTMENTS, JANUARY 31, 2004 (UNAUDITED)

- ---------------------------------------------------------------------------------------------------------
FRANKLIN TEMPLETON COREFOLIO ALLOCATION FUND SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
MUTUAL FUNDS (NOTE 1) 97.9%
CASH EQUIVALENTS 1.8%

a Franklin Institutional Fiduciary Trust Money Market Portfolio .......... 1,668,354 $ 1,668,354
------------
DOMESTIC EQUITY 71.7%
Franklin Capital Growth Fund, Advisor Class ............................ 2,055,659 21,707,756
Franklin Custodian Funds - Franklin Growth Fund, Advisor Class ......... 710,387 21,950,960
Mutual Shares Fund, Class Z ............................................ 1,033,735 21,863,485
------------
65,522,201
------------
FOREIGN EQUITY 24.4%
Templeton Growth Fund, Advisor Class ................................... 1,056,758 22,308,162
------------
TOTAL INVESTMENTS (COST $84,815,142) 97.9% ............................. 89,498,717
OTHER ASSETS, LESS LIABILITIES 2.1% .................................... 1,948,663
------------
NET ASSETS 100.0% ...................................................... $91,447,380
------------

a See Note 7 regarding investments in the Franklin Institutional Fiduciary Trust
Money Market Portfolio.

20 | See notes to financial statements. | Semiannual Report

<page>

Franklin Templeton Fund Allocator Series

FINANCIAL HIGHLIGHTS

FRANKLIN TEMPLETON FOUNDING FUNDS ALLOCATION FUND

--------------
PERIOD ENDED
JANUARY 31,
2004C
CLASS A (UNAUDITED)
--------------
PER SHARE OPERATING PERFORMANCE

(for a share outstanding throughout the period)

Net asset value, beginning of period .................................................................... $10.00
--------
Income from investment operations:

Net investment income a ............................................................................... .18

Net realized and unrealized gains (losses) ............................................................ 1.13
--------
Total from investment operations ........................................................................ 1.31
--------
Less distributions from net investment income ........................................................... (.09)
--------

Net asset value, end of period .......................................................................... $11.22
========

Total return b .......................................................................................... 13.00%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ....................................................................... $296,048

Ratios to average net assets:

Expenses .............................................................................................. 49%d

Expenses excluding waiver and payments by affiliate ................................................... .66%d

Net investment income ................................................................................. 3.61%d

Portfolio turnover rate ................................................................................. .39%

Semiannual Report | 21

<page>

Franklin Templeton Fund Allocator Series

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN TEMPLETON FOUNDING FUNDS ALLOCATION FUND

--------------
PERIOD ENDED
JANUARY 31,
2004C
CLASS B (UNAUDITED)
--------------
PER SHARE OPERATING PERFORMANCE

(for a share outstanding throughout the period)

Net asset value, beginning of period .................................................................... $10.00
--------
Income from investment operations:

Net investment income a ............................................................................... .15

Net realized and unrealized gains (losses) ............................................................ 1.13
--------
Total from investment operations ........................................................................ 1.28
--------
Less distributions from net investment income ........................................................... (.08)
--------

Net asset value, end of period .......................................................................... $11.20
========

Total return b .......................................................................................... 12.79%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ....................................................................... $128,189

Ratios to average net assets:

Expenses .............................................................................................. 1.14%d

Expenses excluding waiver and payments by affiliate ................................................... 1.31%d

Net investment income ................................................................................. 2.96%d

Portfolio turnover rate ................................................................................. .39%

22 | Semiannual Report

Franklin Templeton Fund Allocator Series

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN TEMPLETON FOUNDING FUNDS ALLOCATION FUND

--------------
PERIOD ENDED
JANUARY 31,
2004C
CLASS C (UNAUDITED)
--------------
PER SHARE OPERATING PERFORMANCE

(for a share outstanding throughout the period)

Net asset value, beginning of period .................................................................... $10.00
--------
Income from investment operations:

Net investment income a ............................................................................... .15

Net realized and unrealized gains (losses) ............................................................ 1.12
--------
Total from investment operations ........................................................................ 1.27
--------
Less distributions from net investment income ........................................................... (.08)
--------
Net asset value, end of period .......................................................................... $11.19
========

Total return b .......................................................................................... 12.70%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ....................................................................... $232,061

Ratios to average net assets:

Expenses .............................................................................................. 1.14%d

Expenses excluding waiver and payments by affiliate ................................................... 1.31%d

Net investment income ................................................................................. 2.96%d

Portfolio turnover rate ................................................................................. .39%

Semiannual Report | 23

<page>

Franklin Templeton Fund Allocator Series

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN TEMPLETON FOUNDING FUNDS ALLOCATION FUND

--------------
PERIOD ENDED
JANUARY 31,
2004C
CLASS R (UNAUDITED)
--------------
PER SHARE OPERATING PERFORMANCE

(for a share outstanding throughout the period)

Net asset value, beginning of period .................................................................... $10.00
--------
Income from investment operations:

Net investment income a ............................................................................... .16

Net realized and unrealized gains (losses) ............................................................ 1.16
--------
Total from investment operations ........................................................................ 1.32
--------
Less distributions from net investment income ........................................................... (.09)
--------

Net asset value, end of period .......................................................................... $11.23
========

Total return b .......................................................................................... 13.19%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ....................................................................... $1,312

Ratios to average net assets:

Expenses .............................................................................................. .64%d

Expenses excluding waiver and payments by affiliate ................................................... .81%d

Net investment income ................................................................................. 3.46%d

Portfolio turnover rate ................................................................................. .39%

24 | Semiannual Report

<page>

Franklin Templeton Fund Allocator Series

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN TEMPLETON FOUNDING FUNDS ALLOCATION FUND

--------------
PERIOD ENDED
JANUARY 31,
2004C
ADVISOR CLASS (UNAUDITED)
--------------
PER SHARE OPERATING PERFORMANCE

(for a share outstanding throughout the period)

Net asset value, beginning of period .................................................................... $10.00
--------
Income from investment operations:

Net investment income a ............................................................................... .17

Net realized and unrealized gains (losses) ............................................................ 1.15
--------
Total from investment operations ........................................................................ 1.32
--------
Less distributions from net investment income ........................................................... (.09)
--------
Net asset value, end of period .......................................................................... $11.23
========

Total return b .......................................................................................... 13.26%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ....................................................................... $1,402

Ratios to average net assets:

Expenses .............................................................................................. .14%d

Expenses excluding waiver and payments by affiliate ................................................... .31%d

Net investment income ................................................................................. 3.96%d

Portfolio turnover rate ................................................................................. .39%

a Based on average daily shares outstanding.
b Total return is not annualized for periods less than one year.
c For the period August 15, 2003 (effective date) to January 31, 2004.
d Annualized.

Semiannual Report | See notes to financial statements. | 25

<page>

Franklin Templeton Fund Allocator Series

STATEMENT OF INVESTMENTS, JANUARY 31, 2004 (UNAUDITED)

- -----------------------------------------------------------------------------------------------------------------
FRANKLIN TEMPLETON FOUNDING FUNDS ALLOCATION FUND SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
MUTUAL FUNDS (NOTE 1) 97.2%
CASH EQUIVALENTS 1.5%

a Franklin Institutional Fiduciary Trust Money Market Portfolio .............. 9,934,968 $ 9,934,968
-------------

DOMESTIC EQUITY 31.7%
Mutual Shares Fund, Class Z ................................................. 9,867,111 208,689,390
-------------

DOMESTIC HYBRID 31.7%
Franklin Custodian Funds - Franklin Income Fund, Advisor Class .............. 86,325,574 208,907,888

FOREIGN EQUITY 32.3%
Templeton Growth Fund, Advisor Class ........................................ 10,076,115 212,706,782
-------------

TOTAL INVESTMENTS (COST $612,302,883) 97.2% ................................. 640,239,028
OTHER ASSETS, LESS LIABILITIES 2.8% ......................................... 18,773,043
-------------

NET ASSETS 100.0% ........................................................... $659,012,071
=============

a See Note 7 regarding investments in the Franklin Institutional Fiduciary Trust
Money Market Portfolio.

26 | See notes to financial statements. | Semiannual Report

<page>

Franklin Templeton Fund Allocator Series

FINANCIAL STATEMENTS

STATEMENTS OF ASSETS AND LIABILITIES
January 31, 2004 (unaudited)

--------------------------------------
FRANKLIN FRANKLIN
TEMPLETON TEMPLETON
COREFOLIO FOUNDING FUNDS
ALLOCATION FUND ALLOCATION FUND
--------------------------------------
Assets:
Investments in securities:

Cost ....................................................................... $84,815,142 $612,302,883
=====================================
Value ...................................................................... 89,498,717 640,239,028
Receivables:
Capital shares sold ........................................................ 3,701,627 29,468,249
Offering costs (Note 1d) ................................................... 56,893 56,893
-------------------------------------
Total assets .......................................................... 93,257,237 669,764,170
-------------------------------------
Liabilities:
Payables:
Investment securities purchased ............................................ 1,668,379 9,841,785
Capital shares redeemed .................................................... 9,738 315,995
Affiliates ................................................................. 80,163 546,035
Other liabilities ............................................................ 51,577 48,284
-------------------------------------
Total liabilities ...................................................... 1,809,857 10,752,099
-------------------------------------
Net assets, at value ................................................. $91,447,380 $659,012,071
-------------------------------------
Net assets consist of:
Undistributed net investment income .......................................... $ (64,001) $ 401,126
Net unrealized appreciation (depreciation) ................................... 4,683,575 27,936,145
Accumulated net realized gain (loss) ......................................... (208) 478,227
Capital shares ............................................................... 86,828,014 630,196,573
-------------------------------------
Net assets, at value ................................................. $91,447,380 $659,012,071
=====================================

Semiannual Report | 27

<page>

Franklin Templeton Fund Allocator Series

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
January 31, 2004 (unaudited)

-------------------------------------
FRANKLIN FRANKLIN
TEMPLETON TEMPLETON
COREFOLIO FOUNDING FUNDS
ALLOCATION FUND ALLOCATION FUND
-------------------------------------
CLASS A:

Net assets, at value ......................................................... $45,766,686 $296,047,777
=====================================
Shares outstanding ........................................................... 4,092,567 26,397,345
=====================================
Net asset value per share a .................................................. $11.18 $11.22
=====================================
Maximum offering price per share (net asset value per share / 94.25%) ........ $11.86 $11.90
=====================================
CLASS B:
Net assets, at value ......................................................... $13,088,099 $128,189,274
=====================================
Shares outstanding ........................................................... 1,173,891 11,448,604
=====================================
Net asset value and maximum offering price per share a ........................ $11.15 $11.20
=====================================
CLASS C:
Net assets, at value ......................................................... $31,645,231 $232,060,613
=====================================
Shares outstanding ........................................................... 2,840,374 20,729,942
=====================================
Net asset value and maximum offering price per share a ....................... $11.14 $11.19
=====================================
CLASS R:
Net assets, at value ......................................................... $277,777 $1,312,268
=====================================
Shares outstanding ........................................................... 24,868 116,864
=====================================
Net asset value and maximum offering price per share a ....................... $11.17 $11.23
=====================================
ADVISOR CLASS:
Net assets, at value ......................................................... $669,587 $1,402,139
=====================================
Shares outstanding ........................................................... 59,882 124,843
=====================================
Net asset value and maximum offering price per share a ....................... $11.18 $11.23
=====================================

a Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.

28 | See notes to financial statements. | Semiannual Report

<page>

Franklin Templeton Fund Allocator Series

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF OPERATIONS
for the period August 15, 2003 (effective date) to January 31, 2004 (unaudited)

-------------------------------------
FRANKLIN FRANKLIN
TEMPLETON TEMPLETON
COREFOLIO FOUNDING FUNDS
ALLOCATION FUND ALLOCATION FUND
-------------------------------------
Investment income:

Dividends .................................................................... $ 412,026 $ 4,523,537
-------------------------------------
Expenses:
Asset allocation fees (Note 3)................................................ 17,340 110,490
Distribution fees (Note 3)
Class A..................................................................... 30,685 170,651
Class B..................................................................... 25,418 222,158
Class C..................................................................... 62,458 389,681
Class R..................................................................... 196 1,077
Transfer agent fees (Note 3).................................................. 23,782 102,350
Reports to shareholders....................................................... 4,756 4,756
Registration and filing fees.................................................. 5,200 63,000
Amortization of offering costs (Note 1d) ..................................... 47,458 47,458
Professional fees............................................................. 9,921 10,020
Trustees' fees and expenses................................................... 714 714
Other......................................................................... 900 1,500
-------------------------------------
Total expenses.......................................................... 228,828 1,123,855
Expenses waived/paid by affiliate (Note 3) ............................. (89,263) (185,546)
-------------------------------------
Net expenses ......................................................... 139,565 938,309
-------------------------------------
Net investment income............................................... 272,461 3,585,228
-------------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments................................................................... (208) (1,041)
Distributions by underlying funds............................................. -- 479,268
-------------------------------------
Net realized gain (loss)................................................ (208) 478,227
Net unrealized appreciation (depreciation) on investments....................... 4,683,575 27,936,145
-------------------------------------
Net realized and unrealized gain (loss)......................................... 4,683,367 28,414,372
-------------------------------------
Net increase (decrease) in net assets resulting from operations................. $4,955,828 $31,999,600
=====================================

Semiannual Report | See notes to financial statements. | 29

<page>

Franklin Templeton Fund Allocator Series

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS
for the period August 15, 2003 (effective date) to January 31, 2004 (unaudited)

-------------------------------------
FRANKLIN FRANKLIN
TEMPLETON TEMPLETON
COREFOLIO FOUNDING FUNDS
ALLOCATION FUND ALLOCATION FUND
PERIOD ENDED PERIOD ENDED
JANUARY 31, 2004 JANUARY 31, 2004
-------------------------------------
Increase (decrease) in net assets:
Operations:

Net investment income ...................................................... $ 272,461 $ 3,585,228
Net realized gain (loss) from investments and distributions by
underlying funds .......................................................... (208) 478,227
Net unrealized appreciation (depreciation) on investments .................. 4,683,575 27,936,145
-------------------------------------
Net increase (decrease) in net assets resulting from operations ........ 4,955,828 31,999,600
Distributions to shareholders from:
Net investment income:
Class A .................................................................... (180,719) (1,477,369)
Class B .................................................................... (41,268) (599,490)
Class C .................................................................... (112,032) (1,094,668)
Class R .................................................................... (911) (7,674)
Advisor Class .............................................................. (1,532) (4,901)
-------------------------------------
Total distributions to shareholders .......................................... (336,462) (3,184,102)
Capital share transactions: (Note 2)
Class A .................................................................... 43,445,742 283,330,328
Class B .................................................................... 12,436,262 122,378,233
Class C .................................................................... 29,997,103 221,839,018
Class R .................................................................... 257,903 1,245,282
Advisor Class .............................................................. 641,004 1,353,712
-------------------------------------
Total capital share transactions ............................................... 86,778,014 630,146,573
Net increase (decrease) in net assets .................................. 91,397,380 658,962,071
Net assets:
Beginning of period .......................................................... 50,000 50,000
-------------------------------------
End of period ................................................................ $91,447,380 $659,012,071
-------------------------------------
Undistributed net investment income included in net assets:
End of period ................................................................ $ (64,001) $ 401,126
=====================================

30 | See notes to financial statements. | Semiannual Report

<page>

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 an open-end investment company, consisting of
five separate series. All funds included in this report (the Funds) are
non-diversified. The Funds invest primarily in Franklin Templeton mutual funds
(the Underlying Funds). The investment goal of Franklin Templeton Corefolio
Allocation Fund and Franklin Templeton Founding Funds Allocation Fund is capital
appreciation.

The following summarizes the Funds' significant accounting policies.

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

C. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

D. OFFERING COSTS

Offering costs are amortized on a straight line basis over twelve months.

Semiannual Reporto | 31

<page>

Franklin Templeton Fund Allocator Series

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

E. ACCOUNTING ESTIMATES

F. GUARANTEES AND INDEMNIFICATIONS

2. SHARES OF BENEFICIAL INTEREST

The Funds offer five classes of shares: Class A, Class B, Class C, Class R, and
Advisor Class. Each class of shares differs by its initial sales load,
contingent deferred sales charges, distribution fees, voting rights on matters
affecting a single class and its exchange privilege.

At January 31, 2004, there were an unlimited number of shares authorized ($.01
par value). Transactions in the Funds' shares were as follows:

--------------------------------------------------------------------------
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
COREFOLIO FOUNDING FUNDS
ALLOCATION FUND ALLOCATION FUND
--------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------

CLASS A SHARES:
Period ended January 31, 2004a

Shares sold .................. 4,180,661 $44,428,122 26,661,678 $286,195,593
Shares issued on reinvestment
of distributions ........... 15,356 167,079 124,423 1,356,212
Shares redeemed .............. (104,450) (1,149,459) (389,756) (4,221,477)
--------------------------------------------------------------------------
Net increase (decrease)....... 4,091,567 $43,445,742 26,396,345 $283,330,328
==========================================================================
CLASS B SHARES:
Period ended January 31, 2004a
Shares sold .................. 1,197,463 $12,692,715 11,498,207 $122,918,947
Shares issued on reinvestment
of distributions ........... 3,588 38,961 51,974 566,000
Shares redeemed .............. (28,160) (295,414) (102,577) (1,106,714)
--------------------------------------------------------------------------
Net increase (decrease) ...... 1,172,891 $12,436,262 11,447,604 $122,378,233
==========================================================================

32 | Semiannual Report

<page>

Franklin Templeton Fund Allocator Series

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST (CONTINUED)

CLASS C SHARES:
Period ended January 31, 2004a

Shares sold................... 2,889,702 $30,537,366 20,798,226 $222,594,737
Shares issued on reinvestment
of distributions............ 9,577 103,911 90,373 984,161
Shares redeemed .............. (59,905) (644,174) (159,657) (1,739,880)
--------------------------------------------------------------------------
Net increase (decrease)....... 2,839,374 $29,997,103 20,728,942 $221,839,018
==========================================================================
CLASS R SHARES:
Period ended January 31, 2004 a
Shares sold .................. 23,804 $ 257,204 115,434 $ 1,240,594
Shares issued on reinvestment
of distributions ........... 78 846 653 7,124
Shares redeemed .............. (14) (147) (223) (2,436)
--------------------------------------------------------------------------
Net increase (decrease) ...... 23,868 $ 257,903 115,864 $ 1,245,282
==========================================================================
ADVISOR CLASS SHARES:
Period ended January 31, 2004a
Shares sold .................. 59,770 $ 650,335 126,812 $ 1,385,075
Shares issued on reinvestment
of distributions ........... 134 1,461 431 4,709
Shares redeemed .............. (1,022) (10,792) (3,400) (36,072)
--------------------------------------------------------------------------
Net increase (decrease) ...... 58,882 $ 641,004 123,843 $ 1,353,712
==========================================================================

a Effective date was August 15, 2003.

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Trust are also officers and/or directors of
the following entities:

- ------------------------------------------------------------------------------------------------------
ENTITY AFFILIATION
- ------------------------------------------------------------------------------------------------------

Franklin Templeton Services, LLC (FT Services) Administrative manager
Franklin Templeton Distributors Inc. (Distributors) Principal underwriter

Franklin Templeton Investor Services LLC (Investor Services) Transfer agent

The Funds pay an administrative fee to FT Services of .10% per year of the
Funds' average daily net assets.

FT Services has agreed in advance to waive administrative fees and assume
payment of other expenses, as noted in the Statement of Operations.

The Funds reimburse Distributors up to .35%, 1.00%, 1.00%, and .50% per year of
the average daily net assets of Class A, Class B, Class C, and Class R,
respectively, for costs incurred in marketing the Funds' shares.

Semiannual Report | 33

<page>

Franklin Templeton Fund Allocator Series

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

Distributors paid net commissions on sales of the Funds' shares and received
contingent deferred sales charges for the period as follows:

-------------------------------------------
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
COREFOLIO FOUNDING FUNDS
ALLOCATION FUND ALLOCATION FUND
-------------------------------------------
Net commissions paid.................... $132,482 $2,062,775
Contingent deferred sales charges....... $ 3,348 $ 22,866

The Funds paid transfer agent fees as noted in the Statement of Operations of
which the following amounts were paid to Investor Services:

4. INCOME TAXES

At January 31, 2004, the net unrealized appreciation (depreciation) based on the
cost of investments for income tax purposes was as follows:

-------------------------------------------
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
COREFOLIO FOUNDING FUNDS
ALLOCATION FUND ALLOCATION FUND
-------------------------------------------
Cost of investments.................. $84,815,142 $612,302,883
-------------------------------------------
Unrealized appreciation.............. $ 4,683,575 $ 27,936,145
-------------------------------------------
Unrealized depreciation.............. -- --
-------------------------------------------

Net unrealized appreciation
(depreciation)..................... $ 4,683,575 $ 27,936,145
===========================================

5. INVESTMENT TRANSACTIONS

Purchases and sales of Underlying Funds (excluding short-term securities) for
the period ended January 31, 2004, were as follows:

-------------------------------------------
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
COREFOLIO FOUNDING FUNDS
ALLOCATION FUND ALLOCATION FUND
-------------------------------------------
Purchases............................ $83,209,906 $602,776,089
Sales................................ $ 62,910 $ 886,401

34 | Semiannual Report

<page>

Franklin Templeton Fund Allocator Series

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

6. INVESTMENTS IN UNDERLYING FUNDS

The Funds invest primarily in the Underlying Funds which are managed by an
affiliate of FT Services. The Funds do not invest in the Underlying Funds for
the purpose of exercising management or control. At January 31, 2004, the Funds
held no positions which exceeded 5% of the Underlying Funds.

7. INVESTMENT IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

The Funds may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund), an open-end investment company managed by
Franklin Advisers Inc. (an affiliate of the Funds' administrative manager).
Pursuant to a SEC exemptive order specific to the Funds' investment in the Sweep
Money Fund, asset allocation fees are reduced on assets invested in the Sweep
Money Fund, in an amount not to exceed the asset allocation fees paid by the
Sweep Money Fund.

The Funds earned dividend income from investment in the Sweep Money Fund as
follows:

----------------------------------------------------
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
COREFOLIO FOUNDING FUNDS
ALLOCATION FUND ALLOCATION FUND
----------------------------------------------------
$2,355 $17,186
----------------------------------------------------

8. REGULATORY MATTERS

The Funds, in addition to other entities within Franklin Templeton Investments,
including the Company and other funds, have been named in shareholder class
actions related to the matter described above. The Funds' management believes
that the claims made in the lawsuit are without merit and they intend to defend
vigorously against the allegations. It is anticipated that the Funds may be
named in additional similar civil actions related to the matter described above.

Semiannual Report | 35

<page>

Franklin Templeton Fund Allocator Series

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

8. REGULATORY MATTERS (CONTINUED)

The Staff of the SEC has informed the Company that it intends to recommend that
the Commission authorize an action against an affiliate of the Funds' principal
underwriter relating to the frequent trading issues that are the subject of the
SEC's investigation. These issues were previously disclosed as being under
investigation by government authorities and the subject of an internal inquiry
by the Company in its Annual Report on Form 10-K and on its public website. The
Company currently is in discussions with the SEC Staff in an effort to resolve
the issues raised in their investigation. Such discussions are preliminary and
the Funds' management has been advised that the Company cannot predict the
likelihood of whether those discussions will result in a settlement and, if so,
the terms of such settlement. The impact, if any, of these matters on the Funds
is uncertain at this time. If the Company finds that it bears responsibility for
any unlawful or improper conduct, it has committed to making the Funds or their
shareholders whole, as appropriate.

36 | Semiannual Report

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Franklin Templeton Fund Allocator Series

PROXY VOTING POLICIES AND PROCEDURES

Semiannual Report | 37

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Literature Request
For a brochure and prospectus, which contains more complete information,
including charges, expenses and risks, call Franklin Templeton Investments at
1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before
investing or sending money. To ensure the highest quality of service, we may
monitor, record and access telephone calls to or from our service departments.
These calls can be identified by the presence of a regular beeping tone.

FRANKLIN TEMPLETON INVESTMENTS

INTERNATIONAL
Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund

GLOBAL
Franklin Global Aggressive Growth
Fund Franklin Global Growth Fund
Mutual Discovery Fund
Templeton Capital Accumulator Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund

GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II1

VALUE
Franklin Balance Sheet Investment Fund2
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund2
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund3
Mutual Shares Fund

BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund4

ASSET ALLOCATION
Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund

TARGET FUNDS
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund

INCOME
Franklin Adjustable U.S. Government
Securities Fund5
Franklin's AGE High Income Fund
Franklin Federal Money Fund5, 6
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust3
Franklin Income Fund
Franklin Money Fund5, 6
Franklin Short-Intermediate U.S. Government
Securities Fund5
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund5
Templeton Global Bond Fund

TAX-FREE INCOME7
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund8
Tax-Exempt Money Fund5, 6

LIMITED-TERM FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund

INTERMEDIATE-TERM FUNDS
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund

STATE-SPECIFIC7
Alabama
Arizona
California9
Colorado
Connecticut
Florida9
Georgia
Kentucky
Louisiana
Maryland
Massachusetts8
Michigan8
Minnesota8
Missouri
New Jersey
New York9
North Carolina
Ohio8
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS
Franklin Templeton Variable Insurance
Products Trust10

1. The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.

2. The fund is only open to existing shareholders as well as select retirement
plans.

3. The fund is a continuously offered, closed-end fund. Shares may be purchased
daily; there is no daily redemption. However, each quarter, pending board
approval, the fund will authorize the repurchase of 5%-25% of the outstanding
number of shares. Investors may tender all or a portion of their shares during
the tender period.

4. Upon reaching approximately $350 million in assets, the fund intends to close
to all investors.

5. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.

6. No assurance exists that the fund's $1.00 per share price will be maintained.
It is possible to lose money by investing in the fund.

7. For investors subject to the alternative minimum tax, a small portion of fund
dividends may be taxable. Distributions of capital gains are generally taxable.

8. Portfolio of insured municipal securities.

9. These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA) and
limited-term, intermediate-term and money market portfolios (CA and NY).

10. The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.

02/04 Not part of the semiannual report

[FRANKLIN TEMPLETON INVESTMENTS LOGO OMITTED] One Franklin Parkway
San Mateo, CA 94403-1906

[ ] WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
Eligible shareholders can sign up for eDelivery
at franklintempleton.com. See inside for details.

SEMIANNUAL REPORT AND SHAREHOLDER LETTER
FRANKLIN TEMPLETON
FUND ALLOCATOR SERIES

INVESTMENT MANAGER
Franklin Advisers, Inc.

DISTRIBUTOR
Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)

franklintempleton.com

SHAREHOLDER SERVICES
1-800/632-2301

This report must be preceded or accompanied by the current Franklin Templeton
Fund Allocator Series prospectus, which contains more complete information
including charges, expenses and risks.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.

FAS2 S2004 03/04

ITEM 2. CODE OF ETHICS.

(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.

(d) N/A

(f) Pursuant to Item 11(A), the Registrant is attaching as an exhibit a copy of
its code of ethics that applies to its principal executive officers financial
and accounting officer.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

(a)(1) The registrant has an audit committee financial expert serving on its
audit committee.

(2) The audit committee financial expert is Frank W.T. LaHaye, and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. N/A

ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS. N/A

ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no
changes to the procedures by which shareholders may recommend nominees to the
Registrant's Board of Trustees that would require disclosure herein.

ITEM 10. CONTROLS AND PROCEDURES.
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.

Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.

(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.

ITEM 11. EXHIBITS.

(A) Code of Ethics for Principal Executive and Senior Financial Officers.

(B)(1) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Diomedes Loo-Tam, Chief Financial Officer

(B)(2) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Diomedes Loo-Tam, Chief Financial Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

FRANKLIN TEMPLETON FUND ALLOCATOR SERIES

By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date March 31, 2004

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date March 31, 2004

By /s/Diomedes Loo-Tam
Chief Financial Officer
Date March 31, 2004