UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-07851
Franklin 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)
Craig S. Tyle, 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: 12/31
Date of reporting period: 12/31/14
Item 1. Reports to Stockholders.
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Contents | |
Annual Report | |
Economic and Market Overview | 3 |
Franklin Conservative Allocation | |
Fund | 4 |
Franklin Moderate Allocation Fund | 13 |
Franklin Growth Allocation Fund | 22 |
Financial Highlights and | |
Statements of Investments | 31 |
Financial Statements | 52 |
Notes to Financial Statements | 57 |
Report of Independent Registered | |
Public Accounting Firm | 69 |
Tax Information | 70 |
Board Members and Officers | 72 |
Shareholder Information | 77 |
franklintempleton.com
1
Annual Report
Economic and Market Overview
The global economy grew moderately during 2014 as U.S. economic growth expanded while growth rates in much of the rest of the world declined. U.S. economic activity was supported in some quarters by increased consumer spending, business investment and federal defense spending. The housing market strengthened, and lower gasoline prices and improved job growth contributed to rising retail sales. The U.S. Federal Reserve Board (Fed) began reducing its large-scale bond purchases $10 billion a month in January and ended the buying program in October. But it continued its practice of maintaining holdings of longer term securities at sizable levels. Toward period-end, the Fed stated that it could be patient with regard to raising interest rates and that the interest rate might not rise for at least a couple of meetings, possibly implying at least the first two meetings of 2015.
Outside the U.S., the U.K. economy grew relatively well, supported by the services and manufacturing sectors. In the eurozone, economic growth remained subdued, as concerns persisted about the potential negative impacts to growth from the crisis in Ukraine and China’s moderating growth rate. In June, the European Central Bank (ECB) reduced its main interest rate and, for the first time, set a negative deposit rate; the ECB reduced both rates again in September. The ECB broadened its monetary easing stance by implementing an asset purchase program to prevent deflation and stimulate the economy. Japan’s second- and third-quarter economic contractions indicated the economy was in a recession, although private consumption and exports improved in the third quarter. In October, the Bank of Japan expanded its stimulus measures amid weak domestic demand and as substantially lower crude oil prices exerted further downward pressure on inflation. Near period-end, Japan’s ruling coalition was reelected in early parliamentary elections and subsequently announced a fresh stimulus package aimed at reviving economic growth.
Global developed market stocks, as measured by the MSCI World Index, advanced overall during the 12-month period amid a generally accommodative monetary policy environment and continued strength in corporate earnings. In several emerging markets, economic growth generally moderated. Emerging market stocks overall, as measured by the MSCI Emerging Markets Index, fell for the year, amid headwinds such as soft domestic demand, weak exports, plummeting crude oil prices, regional geopolitical tensions and concerns about possible U.S. interest rate increases. Many emerging market currencies depreciated against the U.S. dollar, leading several central banks to raise interest rates seeking to support their currencies. Several other central banks lowered interest rates to promote economic growth. Gold prices ended the year lower amid benign global inflation and a strong U.S. dollar.
The foregoing information reflects our analysis and opinions as of December 31, 2014. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.
franklintempleton.com Annual Report | 3
Franklin Conservative Allocation Fund
(formerly, Franklin Templeton Conservative Allocation Fund)
This annual report for Franklin Conservative Allocation Fund covers the fiscal year ended December 31, 2014.
Your Fund’s Goal and Main Investments
The Fund seeks the highest level of long-term total return consistent with a lower level of risk.1
Asset Allocation*
Based on Total Net Assets as of 12/31/14
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/ffas1_secx4x1.jpg)
*The asset allocation is based on the Statement of Investments (SOI), which
classifies each underlying fund and other fund investments into a broad asset
class based on its predominant investments under normal market conditions.
Performance Overview
The Fund’s Class A shares delivered a +3.35% cumulative total return for the 12 months under review. In comparison, the Fund’s new equity benchmark, the MSCI All Country World Index (ACWI), which measures equity market performance in global developed and emerging markets, returned +4.71%, while its old equity benchmark, the Standard & Poor’s 500
Index (S&P 500®), a broad measure of U.S. stock performance, returned +13.69%.2 Another equity benchmark, the MSCI Europe, Australasia, Far East (EAFE) Index, which measures global stock performance for developed markets excluding the U.S. and Canada, had a -4.48% total return.2 The Fund’s new fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, posted a +0.48% total return, while its old fixed income benchmark, the Barclays U.S. Aggregate Index, which tracks U.S. investment-grade bonds, generated a +5.97% total return.2 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 6.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.
Investment Strategy
Whenever possible, we attempt to hold the same underlying Franklin Templeton funds and other fund investments (collectively, “fund investments”) in each Allocation Fund’s portfolio and will vary the allocation percentages of the fund investments based upon each Allocation Fund’s risk/return level. Maintaining similarity of the fund investments across the Conservative, Moderate and Growth Allocation Funds is intended to increase the consistency of their results relative to one another. We allocate the Fund’s assets among the broad asset classes, and when selecting equity funds, we consider the fund investments’ foreign and domestic exposure, market capitalization ranges and investment styles (growth versus value). When selecting fixed income funds, we focus primarily on maximizing income appropriate to the Fund’s risk profile.
1. The risk/reward potential is based on the Fund’s goal and level of risk. It is not indicative of the Fund’s actual or implied performance or portfolio composition, which
may change on a continuous basis.
2. Source: Morningstar.
The indexes are unmanaged and include reinvestment of any income or distributions. One cannot invest directly in an index, and an index is not representative of the
Fund’s portfolio.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s SOI, which begins on page 36.
4 | Annual Report franklintempleton.com
FRANKLIN CONSERVATIVE ALLOCATION FUND
Top 10 Fund Holdings | ||
12/31/14 | ||
% of Total | ||
Net Assets | ||
Templeton Global Total Return Fund – Class R6 | 19.5 | % |
Franklin Low Duration Total Return Fund – Class R6 | 12.4 | % |
Franklin Growth Fund – Class R6 | 9.9 | % |
Franklin U.S. Government Securities Fund – Class R6 | 7.4 | % |
Franklin Rising Dividends Fund – Class R6 | 6.5 | % |
Franklin Strategic Income Fund – Class R6 | 5.7 | % |
Franklin DynaTech Fund – Class R6 | 4.1 | % |
iShares Intermediate Credit Bond ETF | 3.5 | % |
Franklin Mutual European Fund – Class R6 | 3.3 | % |
Franklin K2 Alternative Strategies Fund – Class R6 | 3.3 | % |
Manager’s Discussion
The Fund’s performance can be attributed to its allocation among equities and fixed income securities and to the actual performance of the fund investments.
At period-end, Franklin Conservative Allocation Fund allocated 51.4% of total net assets to fixed income, 42.5% to equity and 4.1% to alternative strategies. Domestic fixed income exposure was 56.4% of the total fixed income weighting, with the balance represented by foreign fixed income. Templeton Global Total Return Fund – Class R6, representing 19.5% of the Fund’s total net assets, was our largest fixed income fund weighting at period-end. On the equity side, domestic exposure was 70.6% of the Fund’s total equity weighting, with the balance represented by foreign equity. The portfolio was diversified across capitalization sizes and investment styles, and on December 31, 2014, we held shares in large-, mid- and small-capitalization equity funds, representing both growth and value styles. Franklin Growth Fund – Class R6 was our largest equity fund weighting at 9.9% of total net assets.
During the year under review, our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest domestic value fund holding, Franklin Rising Dividends Fund –Class R6, outperformed the MSCI ACWI. Our largest foreign equity fund holding, Franklin Mutual European Fund –Class R6, underperformed the MSCI ACWI. On the fixed income side, Templeton Global Total Return Fund – Class R6 and Franklin U.S. Government Securities Fund – Class R6 outperformed the Barclays Multiverse Index.
Thank you for your continued participation in Franklin Conservative Allocation Fund. We look forward to serving your future investment needs.
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The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2014, 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 investment manager 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.
CFA® is a trademark owned by CFA Institute.
franklintempleton.com Annual Report | 5
FRANKLIN CONSERVATIVE ALLOCATION FUND
Performance Summary as of December 31, 2014
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 and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses.
Net Asset Value | ||||||
Share Class (Symbol) | 12/31/14 | 12/31/13 | Change | |||
A (FTCIX) | $ | 14.53 | $ | 14.65 | -$ | 0.12 |
C (FTCCX) | $ | 14.27 | $ | 14.40 | -$ | 0.13 |
R (FTCRX) | $ | 14.48 | $ | 14.60 | -$ | 0.12 |
R6 (n/a) | $ | 14.52 | $ | 14.63 | -$ | 0.11 |
Advisor (FTCZX) | $ | 14.52 | $ | 14.64 | -$ | 0.12 |
Distributions (1/1/14–12/31/14) | ||||||||
Dividend | Short-Term | Long-Term | ||||||
Share Class | Income | Capital Gain | Capital Gain | Total | ||||
A | $ | 0.4159 | $ | 0.0212 | $ | 0.1736 | $ | 0.6107 |
C | $ | 0.3079 | $ | 0.0212 | $ | 0.1736 | $ | 0.5027 |
R | $ | 0.3784 | $ | 0.0212 | $ | 0.1736 | $ | 0.5732 |
R6 | $ | 0.4677 | $ | 0.0212 | $ | 0.1736 | $ | 0.6625 |
Advisor | $ | 0.4526 | $ | 0.0212 | $ | 0.1736 | $ | 0.6474 |
6 | Annual Report franklintempleton.com
FRANKLIN CONSERVATIVE ALLOCATION FUND
PERFORMANCE SUMMARY
Performance as of 12/31/141
Cumulative total return excludes sales charges. Average annual total return and value of $10,000 investment include maximum sales charges. Class A: 5.75% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only;
Class R/R6/Advisor Class: no sales charges.
Cumulative | Average Annual | Value of | Total Annual Operating Expenses5 | |||||||||
Share Class | Total Return2 | Total Return3 | $ | 10,000 Investment4 | (with waiver) | (without waiver) | ||||||
A | 1.22 | % | 1.22 | % | ||||||||
1-Year | + | 3.35 | % | -2.57 | % | $ | 9,743 | |||||
5-Year | + | 34.56 | % | + | 4.86 | % | $ | 12,678 | ||||
10-Year | + | 69.74 | % | + | 4.81 | % | $ | 16,000 | ||||
C | 1.97 | % | 1.97 | % | ||||||||
1-Year | + | 2.58 | % | + | 1.59 | % | $ | 10,159 | ||||
5-Year | + | 29.58 | % | + | 5.32 | % | $ | 12,958 | ||||
10-Year | + | 57.48 | % | + | 4.65 | % | $ | 15,748 | ||||
R | 1.47 | % | 1.47 | % | ||||||||
1-Year | + | 3.10 | % | + | 3.10 | % | $ | 10,310 | ||||
5-Year | + | 32.86 | % | + | 5.85 | % | $ | 13,286 | ||||
10-Year | + | 65.57 | % | + | 5.17 | % | $ | 16,557 | ||||
R6 | 0.87 | % | 1.64 | % | ||||||||
1-Year | + | 3.79 | % | + | 3.79 | % | $ | 10,379 | ||||
Since Inception (5/1/13) | + | 10.07 | % | + | 5.92 | % | $ | 11,007 | ||||
Advisor6 | 0.97 | % | 0.97 | % | ||||||||
1-Year | + | 3.61 | % | + | 3.61 | % | $ | 10,361 | ||||
5-Year | + | 36.25 | % | + | 6.38 | % | $ | 13,625 | ||||
10-Year | + | 73.58 | % | + | 5.67 | % | $ | 17,358 |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
franklintempleton.com Annual Report | 7
FRANKLIN CONSERVATIVE ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
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8 | Annual Report franklintempleton.com
FRANKLIN CONSERVATIVE ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued)
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franklintempleton.com Annual Report | 9
FRANKLIN CONSERVATIVE ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued)
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While an asset allocation plan can be a valuable tool to help reduce overall volatility, all investments involve risks, including possible loss of principal. Because
this Fund invests in underlying funds, which may engage in a variety of investment strategies involving certain risks, the Fund may be subject to those same
risks. Typically, the more aggressive the investment, or the greater the potential return, the more risk involved. Generally, investors should be comfortable with
some fluctuation in the value of their investments, especially over the short term. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors
affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest
rates. Thus, as prices of bonds in a fund adjust to a rise in interest rates, that fund’s share price may decline. Foreign investing carries additional risks such
as currency and market volatility and political or social instability, risks that are heightened in developing countries. These risks are described in the Fund’s
prospectus. Investors should consult their financial advisors for help selecting the appropriate fund of funds, or fund combination, based on an evaluation of
their investment objectives and risk tolerance. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce
the desired results.
Class C: | These shares have higher annual fees and expenses than Class A shares. |
Class R: | Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares. |
Class R6: | Shares are available to certain eligible investors as described in the prospectus. |
Advisor Class: | Shares are available to certain eligible investors as described in the prospectus. |
1. The Fund has a fee waiver associated with its investments in a Franklin Templeton money fund, contractually guaranteed through at least its current fiscal year-end.
Class R6 has a fee waiver contractually guaranteed through at least 4/30/15. Fund investment results reflect the fee waivers, to the extent applicable; without these
reductions, the results would have been lower. As of 1/1/13, the Fund changed its target allocation, with short-term investments (formerly a targeted allocation of 20%)
combined into the fixed income allocations; such a change can impact performance.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated.
4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
5. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
6. Effective 12/1/05, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the
following methods of calculation: (a) For periods prior to 12/1/05, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s
maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 12/1/05, actual Advisor Class performance is used reflecting
all charges and fees applicable to that class. Since 12/1/05 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were
+67.03% and +5.81%.
7. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The MSCI EAFE
Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets excluding the U.S. and
Canada. The Barclays U.S. Aggregate Index is a market capitalization-weighted index representing the U.S. investment-grade, fixed-rate, taxable bond market with index
components for government and corporate, mortgage pass-through and asset-backed securities. All issues included are SEC registered, taxable, dollar denominated and
nonconvertible, must have at least one year to final maturity and must be rated investment grade (Baa3/BBB-/BBB- or higher) using the middle rating of Moody’s, S&P and
Fitch, respectively. The MSCI ACWI is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed and
emerging markets. The Barclays Multiverse Index provides a broad-based measure of the global fixed income bond market. The index represents the union of the Global
Aggregate Index and the Global High Yield Index and captures investment-grade and high yield securities in all eligible currencies.
See www.franklintempletondatasources.com for additional data provider information.
10 | Annual Report franklintempleton.com
FRANKLIN CONSERVATIVE ALLOCATION FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs:
- Transaction costs, including sales charges (loads) on Fund purchases; and
- Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:
1. | Divide your account value by $1,000. |
If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6. | |
2. | Multiply the result by the number under the heading “Expenses Paid During Period.” |
If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50. |
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
franklintempleton.com Annual Report | 11
FRANKLIN CONSERVATIVE ALLOCATION FUND | ||||||||
YOUR FUND’S EXPENSES | �� | |||||||
Beginning | Ending | Expenses Paid | Expenses Paid | |||||
Account | Account | During Period* | During Period** | |||||
Share Class | Value 7/1/14 | Value 12/31/14 | 7/1/14–12/31/14 | 7/1/14–12/31/14 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 996.40 | $ | 3.17 | $ | 6.39 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.03 | $ | 3.21 | $ | 6.46 |
C | ||||||||
Actual | $ | 1,000 | $ | 992.50 | $ | 6.93 | $ | 10.14 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,018.25 | $ | 7.02 | $ | 10.26 |
R | ||||||||
Actual | $ | 1,000 | $ | 995.10 | $ | 4.43 | $ | 7.64 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,020.77 | $ | 4.48 | $ | 7.73 |
R6 | ||||||||
Actual | $ | 1,000 | $ | 998.20 | $ | 1.41 | $ | 4.63 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.69 | $ | 1.43 | $ | 4.69 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 997.60 | $ | 1.91 | $ | 5.14 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.29 | $ | 1.94 | $ | 5.19 |
*Expenses are calculated using the most recent six-month expense ratio excluding expenses of the fund investments, net of expense waivers,
annualized for each class (A: 0.63%; C: 1.38%; R: 0.88%; R6: 0.28%; and Advisor: 0.38%), multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
**Expenses are calculated using the most recent six-month expense ratio including expenses of the fund investments, net of expense waivers,
annualized for each class (A: 1.27%; C: 2.02%; R: 1.52%; R6: 0.92%; and Advisor: 1.02%), multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
12 | Annual Report franklintempleton.com
Franklin Moderate Allocation Fund
(formerly, Franklin Templeton Moderate Allocation Fund)
This annual report for Franklin Moderate Allocation Fund covers the fiscal year ended December 31, 2014.
Your Fund’s Goal and Main Investments
The Fund seeks the highest level of long-term total return consistent with a moderate level of risk.1
Asset Allocation*
Based on Total Net Assets as of 12/31/14
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/ffas1_secx13x1.jpg)
*The asset allocation is based on the Statement of Investments (SOI), which
classifies each underlying fund and other fund investments into a broad asset
class based on its predominant investments under normal conditions.
Performance Overview
The Fund’s Class A shares delivered a +4.07% cumulative total return for the 12 months under review. In comparison, the Fund’s new equity benchmark, the MSCI All Country World Index (ACWI), which measures equity market performance in global developed and emerging markets, returned +4.71%, while its old equity benchmark, the Standard & Poor’s 500 Index (S&P 500), a broad measure of U.S. stock performance, returned +13.69%.2 Another equity benchmark, the MSCI Europe, Australasia, Far East (EAFE) Index, which measures global stock performance for developed markets excluding the U.S. and Canada, had a -4.48% total return.2 The Fund’s new fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, posted a +0.48% total return, while its old fixed income benchmark, the Barclays U.S. Aggregate Index, which tracks U.S. investment-grade bonds, generated a +5.97% total return.2 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 15.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.
Investment Strategy
Whenever possible, we attempt to hold the same underlying Franklin Templeton funds and other fund investments (collectively, “fund investments”) in each Allocation Fund’s portfolio and will vary the allocation percentages of the fund investments based upon each Allocation Fund’s risk/return level. Maintaining similarity of the fund investments across the Conservative, Moderate and Growth Allocation Funds is intended to increase the consistency of their results relative to one another. We allocate the Fund’s assets among the broad asset classes, and when selecting equity funds, we consider the fund investments’ foreign and domestic exposure, market capitalization ranges and investment styles (growth versus value). When selecting fixed income funds, we focus primarily on maximizing income appropriate to the Fund’s risk profile.
1. The risk/reward potential is based on the Fund’s goal and level of risk. It is not indicative of the Fund’s actual or implied performance or portfolio composition, which
may change on a continuous basis.
2. Source: Morningstar.
The indexes are unmanaged and include reinvestment of any income or distributions. One cannot invest directly in an index, and an index is not representative of the
Fund’s portfolio.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s SOI, which begins on page 43.
franklintempleton.com Annual Report | 13
FRANKLIN MODERATE ALLOCATION FUND
Top 10 Fund Holdings | ||
12/31/14 | ||
% of Total | ||
Net Assets | ||
Franklin Growth Fund – Class R6 | 13.5 | % |
Templeton Global Total Return Fund – Class R6 | 13.4 | % |
Franklin Low Duration Total Return Fund – Class R6 | 8.9 | % |
Franklin Rising Dividends Fund – Class R6 | 8.6 | % |
Franklin DynaTech Fund – Class R6 | 5.2 | % |
Franklin U.S. Government Securities Fund – Class R6 | 5.1 | % |
Franklin Mutual European Fund – Class R6 | 4.5 | % |
Franklin Strategic Income Fund – Class R6 | 4.0 | % |
Franklin Utilities Fund – Class R6 | 3.9 | % |
Templeton Foreign Fund – Class R6 | 3.9 | % |
Manager’s Discussion
The Fund’s performance can be attributed mainly to its allocation among equities and fixed income securities and to the actual performance of the fund investments.
At period-end, Franklin Moderate Allocation Fund allocated 57.6% of total net assets to equity, 36.3% to fixed income, and 4.2% to alternative strategies. Domestic equity exposure was 70.1% of the total equity weighting, with the balance represented by foreign equity. The portfolio was diversified across capitalization sizes and investment styles, and on December 31, 2014, we held shares in large-, mid- and small-capitalization equity funds, representing both growth and value styles. Franklin Growth Fund – Class R6 was our largest equity fund weighting at 13.5% of total net assets. On the fixed income side, domestic exposure was 57.3% of the Fund’s total income weighting, with the balance represented by foreign fixed income. Templeton Global Total Return Fund – Class R6 was our largest fixed income fund weighting at 13.4% of total net assets.
During the year under review, our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest domestic value fund holding, Franklin Rising Dividends Fund –Class R6, outperformed the MSCI ACWI. Our largest foreign equity fund holding, Franklin Mutual European Fund –Class R6, underperformed the MSCI ACWI. On the fixed income side, Templeton Global Total Return Fund – Class R6 and Franklin U.S. Government Securities Fund – Class R6 outperformed the Barclays Multiverse Index.
Thank you for your continued participation in Franklin Moderate Allocation Fund. We look forward to serving your future investment needs.
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/ffas1_secx14x1.jpg)
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2014, 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 investment manager 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.
14 | Annual Report franklintempleton.com
FRANKLIN MODERATE ALLOCATION FUND
Performance Summary as of December 31, 2014
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 and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses.
Net Asset Value | ||||||
Share Class (Symbol) | 12/31/14 | 12/31/13 | Change | |||
A (FMTIX) | $ | 15.71 | $ | 15.78 | -$ | 0.07 |
C (FTMTX) | $ | 15.33 | $ | 15.42 | -$ | 0.09 |
R (FTMRX) | $ | 15.66 | $ | 15.73 | -$ | 0.07 |
R6 (n/a) | $ | 15.72 | $ | 15.79 | -$ | 0.07 |
Advisor (FMTZX) | $ | 15.72 | $ | 15.79 | -$ | 0.07 |
Distributions (1/1/14–12/31/14) | ||||||||
Dividend | Short-Term | Long-Term | ||||||
Share Class | Income | Capital Gain | Capital Gain | Total | ||||
A | $ | 0.3672 | $ | 0.0280 | $ | 0.3281 | $ | 0.7233 |
C | $ | 0.2516 | $ | 0.0280 | $ | 0.3281 | $ | 0.6077 |
R | $ | 0.3264 | $ | 0.0280 | $ | 0.3281 | $ | 0.6825 |
R6 | $ | 0.4262 | $ | 0.0280 | $ | 0.3281 | $ | 0.7823 |
Advisor | $ | 0.4061 | $ | 0.0280 | $ | 0.3281 | $ | 0.7622 |
franklintempleton.com Annual Report | 15
FRANKLIN MODERATE ALLOCATION FUND
PERFORMANCE SUMMARY
Performance as of 12/31/141
Cumulative total return excludes sales charges. Average annual total return and value of $10,000 investment include maximum sales charges. Class A: 5.75% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only;
Class R/R6/Advisor Class: no sales charges.
Cumulative | Average Annual | Value of | Total Annual Operating Expenses5 | |||||||||
Share Class | Total Return2 | Total Return3 | $ | 10,000 Investment4 | (with waiver) | (without waiver) | ||||||
A | 1.25 | % | 1.25 | % | ||||||||
1-Year | + | 4.07 | % | -1.89 | % | $ | 9,811 | |||||
5-Year | + | 43.54 | % | + | 6.23 | % | $ | 13,528 | ||||
10-Year | + | 82.31 | % | + | 5.57 | % | $ | 17,188 | ||||
C | 2.00 | % | 2.00 | % | ||||||||
1-Year | + | 3.35 | % | + | 2.35 | % | $ | 10,235 | ||||
5-Year | + | 38.25 | % | + | 6.69 | % | $ | 13,825 | ||||
10-Year | + | 69.27 | % | + | 5.40 | % | $ | 16,927 | ||||
R | 1.50 | % | 1.50 | % | ||||||||
1-Year | + | 3.89 | % | + | 3.89 | % | $ | 10,389 | ||||
5-Year | + | 41.86 | % | + | 7.24 | % | $ | 14,186 | ||||
10-Year | + | 77.97 | % | + | 5.93 | % | $ | 17,797 | ||||
R6 | 0.88 | % | 1.04 | % | ||||||||
1-Year | + | 4.52 | % | + | 4.52 | % | $ | 10,452 | ||||
Since Inception (5/1/13) | + | 13.85 | % | + | 8.09 | % | $ | 11,385 | ||||
Advisor6 | 1.00 | % | 1.00 | % | ||||||||
1-Year | + | 4.39 | % | + | 4.39 | % | $ | 10,439 | ||||
5-Year | + | 45.40 | % | + | 7.77 | % | $ | 14,540 | ||||
10-Year | + | 86.63 | % | + | 6.44 | % | $ | 18,663 |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
16 | Annual Report
franklintempleton.com
FRANKLIN MODERATE ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/ffas1_secx17x1.jpg)
franklintempleton.com Annual Report | 17
FRANKLIN MODERATE ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/ffas1_secx18x1.jpg)
18 | Annual Report franklintempleton.com
FRANKLIN MODERATE ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/ffas1_secx19x1.jpg)
While an asset allocation plan can be a valuable tool to help reduce overall volatility, all investments involve risks, including possible loss of principal. Because
this Fund invests in underlying funds, which may engage in a variety of investment strategies involving certain risks, the Fund may be subject to those same
risks. Typically, the more aggressive the investment, or the greater the potential return, the more risk involved. Generally, investors should be comfortable with
some fluctuation in the value of their investments, especially over the short term. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors
affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest
rates. Thus, as prices of bonds in a fund adjust to a rise in interest rates, that fund’s share price may decline. Foreign investing carries additional risks such
as currency and market volatility and political or social instability, risks that are heightened in developing countries. These risks are described in the Fund’s
prospectus. Investors should consult their financial advisors for help selecting the appropriate fund of funds, or fund combination, based on an evaluation of
their investment objectives and risk tolerance. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce
the desired results.
Class C: | These shares have higher annual fees and expenses than Class A shares. |
Class R: | Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares. |
Class R6: | Shares are available to certain eligible investors as described in the prospectus. |
Advisor Class: | Shares are available to certain eligible investors as described in the prospectus. |
1. The Fund has a fee waiver associated with its investments in a Franklin Templeton money fund, contractually guaranteed through at least its current fiscal year-end.
Class R6 has a fee waiver contractually guaranteed through at least 4/30/15. Fund investment results reflect the fee waivers, to the extent applicable; without these
reductions, the results would have been lower. As of 1/1/13, the Fund changed its target allocation, with short-term investments (formerly a targeted allocation of 10%)
combined into the fixed income allocations; such a change can impact performance.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated.
4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
5. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
6. Effective 12/1/05, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the
following methods of calculation: (a) For periods prior to 12/1/05, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s
maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 12/1/05, actual Advisor Class performance is used reflecting
all charges and fees applicable to that class. Since 12/1/05 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were
+77.25% and +6.50%.
7. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The MSCI EAFE
Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets excluding the U.S. and
Canada. The Barclays U.S. Aggregate Index is a market capitalization-weighted index representing the U.S. investment-grade, fixed-rate, taxable bond market with index
components for government and corporate, mortgage pass-through and asset-backed securities. All issues included are SEC registered, taxable, dollar denominated and
nonconvertible, must have at least one year to final maturity and must be rated investment grade (Baa3/BBB-/BBB- or higher) using the middle rating of Moody’s, S&P and
Fitch, respectively. The MSCI ACWI is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed and
emerging markets. The Barclays Multiverse Index provides a broad-based measure of the global fixed income bond market. The index represents the union of the Global
Aggregate Index and the Global High Yield Index and captures investment-grade and high yield securities in all eligible currencies.
See www.franklintempletondatasources.com for additional data provider information.
franklintempleton.com Annual Report | 19
FRANKLIN MODERATE ALLOCATION FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs:
- Transaction costs, including sales charges (loads) on Fund purchases; and
- Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:
1. | Divide your account value by $1,000. |
If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6. | |
2. | Multiply the result by the number under the heading “Expenses Paid During Period.” |
If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50. |
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
20 | Annual Report
franklintempleton.com
FRANKLIN MODERATE ALLOCATION FUND
YOUR FUND’S EXPENSES
Beginning | Ending | Expenses Paid | Expenses Paid | |||||
Account | Account | During Period* | During Period** | |||||
Share Class | Value 7/1/14 | Value 12/31/14 | 7/1/14–12/31/14 | 7/1/14–12/31/14 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 998.80 | $ | 3.27 | $ | 6.50 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,021.93 | $ | 3.31 | $ | 6.56 |
C | ||||||||
Actual | $ | 1,000 | $ | 995.60 | $ | 7.04 | $ | 10.26 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,018.15 | $ | 7.12 | $ | 10.36 |
R | ||||||||
Actual | $ | 1,000 | $ | 998.10 | $ | 4.53 | $ | 7.76 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,020.67 | $ | 4.58 | $ | 7.83 |
R6 | ||||||||
Actual | $ | 1,000 | $ | 1,001.40 | $ | 1.36 | $ | 4.58 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.89 | $ | 1.38 | $ | 4.63 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 1,000.70 | $ | 2.02 | $ | 5.24 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.19 | $ | 2.04 | $ | 5.30 |
*Expenses are calculated using the most recent six-month expense ratio excluding expenses of the fund investments, net of expense waivers,
annualized for each class (A: 0.65%; C: 1.40%; R: 0.90%; R6: 0.27%; and Advisor: 0.40%), multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
**Expenses are calculated using the most recent six-month expense ratio including expenses of the fund investments, net of expense waivers,
annualized for each class (A: 1.29%; C: 2.04%; R: 1.54%; R6: 0.91%; and Advisor: 1.04%), multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
franklintempleton.com Annual Report | 21
Franklin Growth Allocation Fund
(formerly, Franklin Templeton Growth Allocation Fund)
We are pleased to bring you Franklin Growth Allocation Fund’s annual report for the fiscal year ended December 31, 2014.
Your Fund’s Goal and Main Investments
The Fund seeks the highest level of long-term total return consistent with a higher level of risk.1
Asset Allocation*
Based on Total Net Assets as of 12/31/14
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/ffas1_secx22x1.jpg)
*The asset allocation is based on the Statement of Investments (SOI), which
classifies each underlying fund and other fund investments into a broad asset
class based on its predominant investments under normal market conditions.
Performance Overview
The Fund’s Class A shares delivered a +4.95% cumulative total return for the 12 months under review. In comparison, the Fund’s new equity benchmark, the MSCI All Country World Index (ACWI), which measures equity market performance in global developed and emerging markets, returned +4.71%, while its old equity benchmark, the Standard & Poor’s 500 Index (S&P 500), a broad measure of U.S. stock performance, returned +13.69%.2 Another equity benchmark, the MSCI Europe, Australasia, Far East (EAFE) Index, which measures global stock performance for developed markets excluding the U.S. and Canada, had a -4.48% total return.2 The Fund’s new fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, posted a +0.48% total return, while its old fixed income benchmark, the Barclays U.S. Aggregate Index, which tracks U.S. investment-grade bonds, generated a +5.97% total return.2 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 24.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.
Investment Strategy
Whenever possible, we attempt to hold the same underlying Franklin Templeton funds and other fund investments (collectively, “fund investments”) in each Allocation Fund’s portfolio and will vary the allocation percentages of the fund investments based upon each Allocation Fund’s risk/return level. Maintaining similarity of the fund investments across the Conservative, Moderate and Growth Allocation Funds is intended to increase the consistency of their results relative to one another. We allocate the Fund’s assets among the broad asset classes, and when selecting equity funds, we consider the fund investments’ foreign and domestic exposure, market capitalization ranges and investment styles (growth versus value). When selecting fixed income funds, we focus primarily on maximizing income appropriate to the Fund’s risk profile.
1. The risk/reward potential is based on the Fund’s goal and level of risk. It is not indicative of the Fund’s actual or implied performance or portfolio composition, which
may change on a continuous basis.
2. Source: Morningstar.
The indexes are unmanaged and include reinvestment of any income or distributions. One cannot invest directly in an index, and an index is not representative of the
Fund’s portfolio.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s SOI, which begins on page 50.
22 | Annual Report franklintempleton.com
FRANKLIN GROWTH ALLOCATION FUND
Top 10 Fund Holdings | ||
12/31/14 | ||
% of Total | ||
Net Assets | ||
Franklin Growth Fund – Class R6 | 18.6 | % |
Franklin Rising Dividends Fund – Class R6 | 12.4 | % |
Franklin DynaTech Fund – Class R6 | 7.7 | % |
Franklin Mutual European Fund – Class R6 | 6.4 | % |
Templeton Foreign Fund – Class R6 | 5.9 | % |
Franklin Utilities Fund – Class R6 | 5.3 | % |
Franklin International Small Cap Growth Fund – Class R6 | 5.0 | % |
Templeton Global Total Return Fund – Class R6 | 4.0 | % |
Franklin Growth Opportunities Fund – Class R6 | 3.8 | % |
Franklin K2 Alternative Strategies Fund – Class R6 | 3.2 | % |
Manager’s Discussion
The Fund’s performance can be attributed mainly to its allocation among equities and fixed income securities and to the actual performance of the fund investments.
At period-end, Franklin Growth Allocation Fund allocated 82.9% of total net assets to equity, 11.0% to fixed income and 4.1% to alternative strategies. Domestic equity exposure was 68.9% of the total equity weighting, with the balance represented by foreign equity. The portfolio was diversified across capitalization sizes and investment styles, and on December 31, 2014, we held shares in large-, mid- and small-capitalization equity funds, representing both growth and value styles. Franklin Growth Fund – Class R6 was our largest equity fund weighting at 18.6% of total net assets. On the fixed income side, domestic exposure was 57.3% of the Fund’s total income weighting, with the balance represented by foreign fixed income. Templeton Global Total Return Fund – Class R6 was our largest fixed income fund weighting at 4.0% of total net assets.
During the year under review, our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest domestic value fund holding, Franklin Rising Dividends Fund –Class R6, outperformed the MSCI ACWI. Our largest foreign equity fund holding, Franklin Mutual European Fund –Class R6, underperformed the MSCI ACWI. On the fixed income side, Templeton Global Total Return Fund – Class R6 outperformed the Barclays Multiverse Index.
Thank you for your continued participation in Franklin Growth Allocation Fund. We look forward to serving your future investment needs.
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/ffas1_secx23x1.jpg)
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2014, 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 investment manager 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.
franklintempleton.com Annual Report | 23
FRANKLIN GROWTH ALLOCATION FUND
Performance Summary as of December 31, 2014
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 and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses.
Net Asset Value | ||||||
Share Class (Symbol) | 12/31/14 | 12/31/13 | Change | |||
A (FGTIX) | $ | 18.57 | $ | 18.40 | +$ | 0.17 |
C (FTGTX) | $ | 18.15 | $ | 18.00 | +$ | 0.15 |
R (FGTRX) | $ | 18.34 | $ | 18.18 | +$ | 0.16 |
R6 (n/a) | $ | 18.61 | $ | 18.44 | +$ | 0.17 |
Advisor (FGTZX) | $ | 18.62 | $ | 18.45 | +$ | 0.17 |
Distributions (1/1/14–12/31/14) | ||||||||
Dividend | Short-Term | Long-Term | ||||||
Share Class | Income | Capital Gain | Capital Gain | Total | ||||
A | $ | 0.2895 | $ | 0.0516 | $ | 0.3993 | $ | 0.7404 |
C | $ | 0.1581 | $ | 0.0516 | $ | 0.3993 | $ | 0.6090 |
R | $ | 0.2373 | $ | 0.0516 | $ | 0.3993 | $ | 0.6882 |
R6 | $ | 0.3604 | $ | 0.0516 | $ | 0.3993 | $ | 0.8113 |
Advisor | $ | 0.3333 | $ | 0.0516 | $ | 0.3993 | $ | 0.7842 |
24 | Annual Report franklintempleton.com
FRANKLIN GROWTH ALLOCATION FUND
PERFORMANCE SUMMARY
Performance as of 12/31/141
Cumulative total return excludes sales charges. Average annual total return and value of $10,000 investment include maximum sales charges. Class A: 5.75% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only;
Class R/R6/Advisor Class: no sales charges.
Cumulative | Average Annual | Value of | Total Annual Operating Expenses5 | |||||||||
Share Class | Total Return2 | Total Return3 | $ | 10,000 Investment4 | (with waiver) | (without waiver) | ||||||
A | 1.28 | % | 1.32 | % | ||||||||
1-Year | + | 4.95 | % | -1.07 | % | $ | 9,893 | |||||
5-Year | + | 55.35 | % | + | 7.93 | % | $ | 14,646 | ||||
10-Year | + | 92.66 | % | + | 6.15 | % | $ | 18,163 | ||||
C | 2.03 | % | 2.07 | % | ||||||||
1-Year | + | 4.21 | % | + | 3.21 | % | $ | 10,321 | ||||
5-Year | + | 49.61 | % | + | 8.39 | % | $ | 14,961 | ||||
10-Year | + | 78.77 | % | + | 5.98 | % | $ | 17,877 | ||||
R | 1.53 | % | 1.57 | % | ||||||||
1-Year | + | 4.72 | % | + | 4.72 | % | $ | 10,472 | ||||
5-Year | + | 53.42 | % | + | 8.94 | % | $ | 15,342 | ||||
10-Year | + | 87.94 | % | + | 6.51 | % | $ | 18,794 | ||||
R6 | 0.87 | % | 1.58 | % | ||||||||
1-Year | + | 5.38 | % | + | 5.38 | % | $ | 10,538 | ||||
Since Inception (5/1/13) | + | 20.00 | % | + | 11.55 | % | $ | 12,000 | ||||
Advisor6 | 1.03 | % | 1.07 | % | ||||||||
1-Year | + | 5.23 | % | + | 5.23 | % | $ | 10,523 | ||||
5-Year | + | 57.38 | % | + | 9.49 | % | $ | 15,738 | ||||
10-Year | + | 97.24 | % | + | 7.03 | % | $ | 19,724 |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
franklintempleton.com Annual Report | 25
FRANKLIN GROWTH ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/ffas1_secx26x1.jpg)
26 | Annual Report franklintempleton.com
FRANKLIN GROWTH ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/ffas1_secx27x1.jpg)
franklintempleton.com Annual Report | 27
FRANKLIN GROWTH ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/ffas1_secx28x1.jpg)
While an asset allocation plan can be a valuable tool to help reduce overall volatility, all investments involve risks, including possible loss of principal. Because
this Fund invests in underlying funds, which may engage in a variety of investment strategies involving certain risks, the Fund may be subject to those same
risks. Typically, the more aggressive the investment, or the greater the potential return, the more risk involved. Generally, investors should be comfortable with
some fluctuation in the value of their investments, especially over the short term. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors
affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest
rates. Thus, as prices of bonds in a fund adjust to a rise in interest rates, that fund’s share price may decline. Foreign investing carries additional risks such
as currency and market volatility and political or social instability, risks that are heightened in developing countries. These risks are described in the Fund’s
prospectus. Investors should consult their financial advisors for help selecting the appropriate fund of funds, or fund combination, based on an evaluation of
their investment objectives and risk tolerance. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce
the desired results.
Class C: | These shares have higher annual fees and expenses than Class A shares. |
Class R: | Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares. |
Class R6: | Shares are available to certain eligible investors as described in the prospectus. |
Advisor Class: | Shares are available to certain eligible investors as described in the prospectus. |
1. The Fund has a fee waiver associated with its investments in a Franklin Templeton money fund, contractually guaranteed through at least its current fiscal year-end.
Class R6 has a fee waiver contractually guaranteed through at least 4/30/15. Fund investment results reflect the fee waivers, to the extent applicable; without these
reductions, the results would have been lower. As of 1/1/13, the Fund changed its target allocation, with short-term investments (formerly a targeted allocation of 5%)
combined into the fixed income allocations; such a change can impact performance.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated.
4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
5. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
6. Effective 12/1/05, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the
following methods of calculation: (a) For periods prior to 12/1/05, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s
maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 12/1/05, actual Advisor Class performance is used reflecting
all charges and fees applicable to that class. Since 12/1/05 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were
+82.81% and +6.87%.
7. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The MSCI EAFE
Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets excluding the U.S. and
Canada. The Barclays U.S. Aggregate Index is a market capitalization-weighted index representing the U.S. investment-grade, fixed-rate, taxable bond market with index
components for government and corporate, mortgage pass-through and asset-backed securities. All issues included are SEC registered, taxable, dollar denominated and
nonconvertible, must have at least one year to final maturity and must be rated investment grade (Baa3/BBB-/BBB- or higher) using the middle rating of Moody’s, S&P and
Fitch, respectively. The MSCI ACWI is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed and
emerging markets. The Barclays Multiverse Index provides a broad-based measure of the global fixed income bond market. The index represents the union of the Global
Aggregate Index and the Global High Yield Index and captures investment-grade and high yield securities in all eligible currencies.
See www.franklintempletondatasources.com for additional data provider information.
28 | Annual Report franklintempleton.com
FRANKLIN GROWTH ALLOCATION FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs:
- Transaction costs, including sales charges (loads) on Fund purchases; and
- Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:
1. | Divide your account value by $1,000. |
If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6. | |
2. | Multiply the result by the number under the heading “Expenses Paid During Period.” |
If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50. |
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
franklintempleton.com Annual Report | 29
FRANKLIN GROWTH ALLOCATION FUND | ||||||||
YOUR FUND’S EXPENSES | ||||||||
Beginning | Ending | Expenses Paid | Expenses Paid | |||||
Account | Account | During Period* | During Period** | |||||
Share Class | Value 7/1/14 | Value 12/31/14 | 7/1/14–12/31/14 | 7/1/14–12/31/14 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 1,002.40 | $ | 3.23 | $ | 6.56 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,021.93 | $ | 3.26 | $ | 6.61 |
C | ||||||||
Actual | $ | 1,000 | $ | 998.60 | $ | 7.00 | $ | 10.33 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,018.15 | $ | 7.07 | $ | 10.41 |
R | ||||||||
Actual | $ | 1,000 | $ | 1,001.20 | $ | 4.49 | $ | 7.82 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,020.67 | $ | 4.53 | $ | 7.88 |
R6 | ||||||||
Actual | $ | 1,000 | $ | 1,004.50 | $ | 1.16 | $ | 4.50 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.84 | $ | 1.17 | $ | 4.53 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 1,003.60 | $ | 1.97 | $ | 5.30 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.19 | $ | 1.99 | $ | 5.35 |
*Expenses are calculated using the most recent six-month expense ratio excluding expenses of the fund investments, net of expense waivers,
annualized for each class (A: 0.64%; C: 1.39%; R: 0.89%; R6: 0.23%; and Advisor: 0.39%), multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
**Expenses are calculated using the most recent six-month expense ratio including expenses of the fund investments, net of expense waivers,
annualized for each class (A: 1.30%; C: 2.05%; R: 1.55%; R6: 0.89%; and Advisor: 1.05%), multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
30 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
Financial Highlights | |||||||||||||||
Franklin Conservative Allocation Fund | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class A | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 14.65 | $ | 14.06 | $ | 13.33 | $ | 13.74 | $ | 12.72 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.40 | 0.31 | 0.27 | 0.30 | 0.29 | ||||||||||
Net realized and unrealized gains (losses) | 0.09 | 1.12 | 0.79 | (0.40 | ) | 0.97 | |||||||||
Total from investment operations | 0.49 | 1.43 | 1.06 | (0.10 | ) | 1.26 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.42 | ) | (0.32 | ) | (0.30 | ) | (0.31 | ) | (0.24 | ) | |||||
Net realized gains | (0.19 | ) | (0.52 | ) | (0.03 | ) | — | — | |||||||
Total distributions | (0.61 | ) | (0.84 | ) | (0.33 | ) | (0.31 | ) | (0.24 | ) | |||||
Net asset value, end of year | $ | 14.53 | $ | 14.65 | $ | 14.06 | $ | 13.33 | $ | 13.74 | |||||
Total returnd | 3.35 | % | 10.39 | % | 7.99 | % | (0.71 | )% | 10.00 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 0.63 | % | 0.60 | % | 0.53 | % | 0.52 | % | 0.52 | % | |||||
Expenses net of waiver and payments by affiliatese | 0.63 | %f | 0.59 | % | 0.50 | % | 0.50 | % | 0.50 | % | |||||
Net investment incomec | 2.67 | % | 2.11 | % | 1.98 | % | 2.17 | % | 2.25 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 910,523 | $ | 871,541 | $ | 794,429 | $ | 725,675 | $ | 612,828 | |||||
Portfolio turnover rate | 16.67 | % | 57.59 | % | 25.82 | % | 18.67 | % | 10.51 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.64% for the year ended December 31, 2014.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 31
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin Conservative Allocation Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class C | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 14.40 | $ | 13.83 | $ | 13.13 | $ | 13.53 | $ | 12.54 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.28 | 0.20 | 0.17 | 0.19 | 0.19 | ||||||||||
Net realized and unrealized gains (losses) | 0.09 | 1.11 | 0.76 | (0.38 | ) | 0.95 | |||||||||
Total from investment operations | 0.37 | 1.31 | 0.93 | (0.19 | ) | 1.14 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.31 | ) | (0.22 | ) | (0.20 | ) | (0.21 | ) | (0.15 | ) | |||||
Net realized gains | (0.19 | ) | (0.52 | ) | (0.03 | ) | — | — | |||||||
Total distributions | (0.50 | ) | (0.74 | ) | (0.23 | ) | (0.21 | ) | (0.15 | ) | |||||
Net asset value, end of year | $ | 14.27 | $ | 14.40 | $ | 13.83 | $ | 13.13 | $ | 13.53 | |||||
Total returnd | 2.58 | % | 9.61 | % | 7.09 | % | (1.38 | )% | 9.12 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 1.38 | % | 1.35 | % | 1.28 | % | 1.27 | % | 1.27 | % | |||||
Expenses net of waiver and payments by affiliatese | 1.38 | %f | 1.34 | % | 1.25 | % | 1.25 | % | 1.25 | % | |||||
Net investment incomec | 1.92 | % | 1.36 | % | 1.23 | % | 1.42 | % | 1.50 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 549,222 | $ | 524,756 | $ | 452,211 | $ | 426,775 | $ | 366,892 | |||||
Portfolio turnover rate | 16.67 | % | 57.59 | % | 25.82 | % | 18.67 | % | 10.51 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.64% for the year ended December 31, 2014.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
32 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin Conservative Allocation Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class R | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 14.60 | $ | 14.01 | $ | 13.29 | $ | 13.70 | $ | 12.69 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.35 | 0.26 | 0.24 | 0.27 | 0.27 | ||||||||||
Net realized and unrealized gains (losses) | 0.10 | 1.14 | 0.78 | (0.40 | ) | 0.95 | |||||||||
Total from investment operations | 0.45 | 1.40 | 1.02 | (0.13 | ) | 1.22 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.38 | ) | (0.29 | ) | (0.27 | ) | (0.28 | ) | (0.21 | ) | |||||
Net realized gains | (0.19 | ) | (0.52 | ) | (0.03 | ) | — | — | |||||||
Total distributions | (0.57 | ) | (0.81 | ) | (0.30 | ) | (0.28 | ) | (0.21 | ) | |||||
Net asset value, end of year | $ | 14.48 | $ | 14.60 | $ | 14.01 | $ | 13.29 | $ | 13.70 | |||||
Total return | 3.10 | % | 10.14 | % | 7.68 | % | (0.95 | )% | 9.69 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 0.88 | % | 0.85 | % | 0.78 | % | 0.77 | % | 0.77 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.88 | %e | 0.84 | % | 0.75 | % | 0.75 | % | 0.75 | % | |||||
Net investment incomec | 2.42 | % | 1.86 | % | 1.73 | % | 1.92 | % | 2.00 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 159,897 | $ | 166,927 | $ | 178,520 | $ | 149,761 | $ | 109,077 | |||||
Portfolio turnover rate | 16.67 | % | 57.59 | % | 25.82 | % | 18.67 | % | 10.51 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.64% for the year ended December 31, 2014.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 33
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin Conservative Allocation Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class R6 | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 14.63 | $ | 14.62 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.33 | 0.54 | ||||
Net realized and unrealized gains (losses) | 0.22 | 0.32 | ||||
Total from investment operations | 0.55 | 0.86 | ||||
Less distributions from: | ||||||
Net investment income | (0.47 | ) | (0.33 | ) | ||
Net realized gains | (0.19 | ) | (0.52 | ) | ||
Total distributions | (0.66 | ) | (0.85 | ) | ||
Net asset value, end of year | $ | 14.52 | $ | 14.63 | ||
Total returne | 3.79 | % | 6.06 | % | ||
Ratios to average net assetsf | ||||||
Expenses before waiver and payments by affiliatesg | 0.28 | % | 1.06 | % | ||
Expenses net of waiver and payments by affiliatesg | 0.28 | %h | 0.28 | % | ||
Net investment incomed | 3.02 | % | 2.44 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 1,654 | $ | 37 | ||
Portfolio turnover rate | 16.67 | % | 57.59 | % |
aFor the period May 1, 2013 (effective date) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eTotal return is not annualized for periods less than one year.
fRatios are annualized for periods less than one year.
gDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.64% for the year ended December 31, 2014.
hBenefit of waiver and payments by affiliates rounds to less than 0.01%.
34 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin Conservative Allocation Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Advisor Class | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 14.64 | $ | 14.05 | $ | 13.32 | $ | 13.73 | $ | 12.71 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.41 | 0.35 | 0.31 | 0.43 | 0.32 | ||||||||||
Net realized and unrealized gains (losses) | 0.11 | 1.12 | 0.79 | (0.49 | ) | 0.98 | |||||||||
Total from investment operations | 0.52 | 1.47 | 1.10 | (0.06 | ) | 1.30 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.45 | ) | (0.36 | ) | (0.34 | ) | (0.35 | ) | (0.28 | ) | |||||
Net realized gains | (0.19 | ) | (0.52 | ) | (0.03 | ) | — | — | |||||||
Total distributions | (0.64 | ) | (0.88 | ) | (0.37 | ) | (0.35 | ) | (0.28 | ) | |||||
Net asset value, end of year | $ | 14.52 | $ | 14.64 | $ | 14.05 | $ | 13.32 | $ | 13.73 | |||||
Total return | 3.61 | % | 10.67 | % | 8.27 | % | (0.47 | )% | 10.27 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 0.38 | % | 0.35 | % | 0.28 | % | 0.27 | % | 0.27 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.38 | %e | 0.34 | % | 0.25 | % | 0.25 | % | 0.25 | % | |||||
Net investment incomec | 2.92 | % | 2.36 | % | 2.23 | % | 2.42 | % | 2.50 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 90,263 | $ | 105,657 | $ | 85,662 | $ | 80,690 | $ | 14,391 | |||||
Portfolio turnover rate | 16.67 | % | 57.59 | % | 25.82 | % | 18.67 | % | 10.51 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.64% for the year ended December 31, 2014.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 35
FRANKLIN FUND ALLOCATOR SERIES | |||
Statement of Investments, December 31, 2014 | |||
Franklin Conservative Allocation Fund | |||
Shares/Units | Value | ||
Investments in Underlying Funds and Exchange Traded Funds | |||
Alternative Strategies 4.1% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 5,202,283 | $ | 56,340,726 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 1,849,064 | 13,738,545 | |
70,079,271 | |||
Domestic Equity 30.0% | |||
a,bFranklin Biotechnology Discovery Fund, Class R6 | 68,573 | 11,764,411 | |
a,bFranklin DynaTech Fund, Class R6 | 1,487,833 | 70,091,831 | |
a,bFranklin Flex Cap Growth Fund, Class R6 | 318,611 | 16,398,932 | |
aFranklin Growth Fund, Class R6 | 2,275,352 | 170,105,292 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 916,335 | 30,110,755 | |
aFranklin Real Estate Securities Fund, Class R6 | 883,637 | 19,466,527 | |
aFranklin Rising Dividends Fund, Class R6 | 2,142,627 | 111,416,580 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 569,352 | 11,073,895 | |
aFranklin Utilities Fund, Class R6 | 2,484,668 | 44,376,163 | |
iShares Core S&P 500 ETF | 83,508 | 17,277,805 | |
iShares S&P 500 Value ETF | 116,500 | 10,924,205 | |
513,006,396 | |||
Domestic Fixed Income 29.0% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 21,133,434 | 211,968,347 | |
aFranklin Strategic Income Fund, Class R6 | 9,699,192 | 97,088,910 | |
aFranklin U.S. Government Securities Fund, Class R6 | 19,379,956 | 126,357,314 | |
iShares Intermediate Credit Bond ETF | 554,365 | 60,608,725 | |
496,023,296 | |||
Foreign Equity 12.5% | |||
aFranklin International Small Cap Growth Fund, Class R6 | 2,203,618 | 39,819,384 | |
aFranklin Mutual European Fund, Class R6 | 2,725,481 | 56,826,277 | |
iShares Global Infrastructure ETF | 290,739 | 12,254,649 | |
iShares MSCI All Country Asia ex Japan ETF | 168,291 | 10,253,971 | |
aTempleton China World Fund, Class R6 | 419,806 | 12,896,451 | |
aTempleton Foreign Fund, Class R6 | 7,242,263 | 49,754,348 | |
aTempleton Frontier Markets Fund, Class R6 | 1,358,420 | 19,547,666 | |
WisdomTree Japan Hedged Equity Fund ETF (Japan) | 265,670 | 13,078,934 | |
214,431,680 | |||
Foreign Fixed Income 22.4% | |||
aFranklin Emerging Market Debt Opportunities Fund | 4,785,483 | 50,773,969 | |
aTempleton Global Total Return Fund, Class R6 | 26,547,285 | 333,168,425 | |
383,942,394 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $1,514,348,108) 98.0% | 1,677,483,037 |
36 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin Conservative Allocation Fund (continued) | ||||
Shares/Units | Value | |||
Short Term Investments (Cost $37,714,682) 2.2% | ||||
Money Market Funds 2.2% | ||||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 37,714,682 | $ | 37,714,682 | |
Total Investments in Underlying Funds and Exchange Traded Funds | ||||
(Cost $1,552,062,790) 100.2% | 1,715,197,719 | |||
Other Assets, less Liabilities (0.2)% | (3,638,828 | ) | ||
Net Assets 100.0% | $ | 1,711,558,891 |
See Abbreviations on page 68.
aSee Note 3(f) regarding investments in Underlying Funds.
bNon-income producing.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 37
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
Financial Highlights | |||||||||||||||
Franklin Moderate Allocation Fund | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class A | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 15.78 | $ | 14.59 | $ | 13.69 | $ | 14.21 | $ | 12.93 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.34 | 0.27 | 0.29 | 0.30 | 0.32 | ||||||||||
Net realized and unrealized gains (losses) | 0.32 | 1.78 | 0.97 | (0.50 | ) | 1.22 | |||||||||
Total from investment operations | 0.66 | 2.05 | 1.26 | (0.20 | ) | 1.54 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.37 | ) | (0.30 | ) | (0.32 | ) | (0.32 | ) | (0.26 | ) | |||||
Net realized gains | (0.36 | ) | (0.56 | ) | (0.04 | ) | — | — | |||||||
Total distributions | (0.73 | ) | (0.86 | ) | (0.36 | ) | (0.32 | ) | (0.26 | ) | |||||
Net asset value, end of year | $ | 15.71 | $ | 15.78 | $ | 14.59 | $ | 13.69 | $ | 14.21 | |||||
Total returnd | 4.07 | % | 14.35 | % | 9.34 | % | (1.49 | )% | 11.97 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 0.65 | % | 0.61 | % | 0.53 | % | 0.53 | % | 0.53 | % | |||||
Expenses net of waiver and payments by affiliatese | 0.65 | %f | 0.59 | % | 0.50 | % | 0.50 | % | 0.50 | % | |||||
Net investment incomec | 2.08 | % | 1.74 | % | 2.00 | % | 2.15 | % | 2.42 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 1,667,201 | $ | 1,636,122 | $ | 1,452,659 | $ | 1,322,230 | $ | 1,119,369 | |||||
Portfolio turnover rate | 17.95 | % | 46.14 | % | 25.36 | % | 19.76 | % | 13.94 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.64% for the year ended December 31, 2014.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
38 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin Moderate Allocation Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class C | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 15.42 | $ | 14.28 | $ | 13.40 | $ | 13.92 | $ | 12.68 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.21 | 0.15 | 0.17 | 0.19 | 0.22 | ||||||||||
Net realized and unrealized gains (losses) | 0.31 | 1.74 | 0.97 | (0.49 | ) | 1.18 | |||||||||
Total from investment operations | 0.52 | 1.89 | �� | 1.14 | (0.30 | ) | 1.40 | ||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.25 | ) | (0.19 | ) | (0.22 | ) | (0.22 | ) | (0.16 | ) | |||||
Net realized gains | (0.36 | ) | (0.56 | ) | (0.04 | ) | — | — | |||||||
Total distributions | (0.61 | ) | (0.75 | ) | (0.26 | ) | (0.22 | ) | (0.16 | ) | |||||
Net asset value, end of year | $ | 15.33 | $ | 15.42 | $ | 14.28 | $ | 13.40 | $ | 13.92 | |||||
Total returnd | 3.35 | % | 13.41 | % | 8.51 | % | (2.17 | )% | 11.10 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 1.40 | % | 1.36 | % | 1.28 | % | 1.28 | % | 1.28 | % | |||||
Expenses net of waiver and payments by affiliatese | 1.40 | %f | 1.34 | % | 1.25 | % | 1.25 | % | 1.25 | % | |||||
Net investment incomec | 1.33 | % | 0.99 | % | 1.25 | % | 1.40 | % | 1.67 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 716,712 | $ | 701,224 | $ | 605,490 | $ | 554,603 | $ | 460,531 | |||||
Portfolio turnover rate | 17.95 | % | 46.14 | % | 25.36 | % | 19.76 | % | 13.94 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.64% for the year ended December 31, 2014.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 39
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin Moderate Allocation Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class R | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 15.73 | $ | 14.55 | $ | 13.64 | $ | 14.17 | $ | 12.89 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.28 | 0.22 | 0.25 | 0.27 | 0.30 | ||||||||||
Net realized and unrealized gains (losses) | 0.34 | 1.78 | 0.99 | (0.51 | ) | 1.21 | |||||||||
Total from investment operations | 0.62 | 2.00 | 1.24 | (0.24 | ) | 1.51 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.33 | ) | (0.26 | ) | (0.29 | ) | (0.29 | ) | (0.23 | ) | |||||
Net realized gains | (0.36 | ) | (0.56 | ) | (0.04 | ) | — | — | |||||||
Total distributions | (0.69 | ) | (0.82 | ) | (0.33 | ) | (0.29 | ) | (0.23 | ) | |||||
Net asset value, end of year | $ | 15.66 | $ | 15.73 | $ | 14.55 | $ | 13.64 | $ | 14.17 | |||||
Total return | 3.89 | % | 13.97 | % | 9.11 | % | (1.73 | )% | 11.75 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 0.90 | % | 0.86 | % | 0.78 | % | 0.78 | % | 0.78 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.90 | %e | 0.84 | % | 0.75 | % | 0.75 | % | 0.75 | % | |||||
Net investment incomec | 1.83 | % | 1.49 | % | 1.75 | % | 1.90 | % | 2.17 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 263,864 | $ | 286,688 | $ | 274,881 | $ | 248,702 | $ | 198,936 | |||||
Portfolio turnover rate | 17.95 | % | 46.14 | % | 25.36 | % | 19.76 | % | 13.94 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.64% for the year ended December 31, 2014.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
40 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin Moderate Allocation Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class R6 | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 15.79 | $ | 15.33 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.25 | 0.77 | ||||
Net realized and unrealized gains (losses) | 0.47 | 0.56 | ||||
Total from investment operations | 0.72 | 1.33 | ||||
Less distributions from: | ||||||
Net investment income | (0.43 | ) | (0.31 | ) | ||
Net realized gains | (0.36 | ) | (0.56 | ) | ||
Total distributions | (0.79 | ) | (0.87 | ) | ||
Net asset value, end of year | $ | 15.72 | $ | 15.79 | ||
Total returne | 4.52 | % | 8.93 | % | ||
Ratios to average net assetsf | ||||||
Expenses before waiver and payments by affiliatesg | 0.27 | % | 0.44 | % | ||
Expenses net of waiver and payments by affiliatesg | 0.27 | %h | 0.26 | % | ||
Net investment incomed | 2.46 | % | 2.07 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 4,205 | $ | 253 | ||
Portfolio turnover rate | 17.95 | % | 46.14 | % |
aFor the period May 1, 2013 (effective date) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eTotal return is not annualized for periods less than one year.
fRatios are annualized for periods less than one year.
gDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.64% for the year ended December 31, 2014.
hBenefit of waiver and payments by affiliates rounds to less than 0.01%.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 41
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin Moderate Allocation Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Advisor Class | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 15.79 | $ | 14.60 | $ | 13.69 | $ | 14.22 | $ | 12.93 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.33 | 0.32 | 0.36 | 0.37 | 0.36 | ||||||||||
Net realized and unrealized gains (losses) | 0.37 | 1.76 | 0.95 | (0.55 | ) | 1.22 | |||||||||
Total from investment operations | 0.70 | 2.08 | 1.31 | (0.18 | ) | 1.58 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.41 | ) | (0.33 | ) | (0.36 | ) | (0.35 | ) | (0.29 | ) | |||||
Net realized gains | (0.36 | ) | (0.56 | ) | (0.04 | ) | — | — | |||||||
Total distributions | (0.77 | ) | (0.89 | ) | (0.40 | ) | (0.35 | ) | (0.29 | ) | |||||
Net asset value, end of year | $ | 15.72 | $ | 15.79 | $ | 14.60 | $ | 13.69 | $ | 14.22 | |||||
Total return | 4.39 | % | 14.56 | % | 9.61 | % | (1.24 | )% | 12.31 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 0.40 | % | 0.36 | % | 0.28 | % | 0.28 | % | 0.28 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.40 | %e | 0.34 | % | 0.25 | % | 0.25 | % | 0.25 | % | |||||
Net investment incomec | 2.33 | % | 1.99 | % | 2.25 | % | 2.40 | % | 2.67 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 87,612 | $ | 159,303 | $ | 123,176 | $ | 78,605 | $ | 39,641 | |||||
Portfolio turnover rate | 17.95 | % | 46.14 | % | 25.36 | % | 19.76 | % | 13.94 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.64% for the year ended December 31, 2014.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
42 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2014 | |||
Franklin Moderate Allocation Fund | |||
Shares/Units | Value | ||
Investments in Underlying Funds and Exchange Traded Funds | |||
Alternative Strategies 4.2% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 8,440,420 | $ | 91,409,752 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 3,091,053 | 22,966,524 | |
114,376,276 | |||
Domestic Equity 40.4% | |||
a,bFranklin Biotechnology Discovery Fund, Class R6 | 154,628 | 26,528,015 | |
a,bFranklin DynaTech Fund, Class R6 | 3,004,368 | 141,535,786 | |
a,bFranklin Flex Cap Growth Fund, Class R6 | 743,400 | 38,262,796 | |
aFranklin Growth Fund, Class R6 | 4,951,261 | 370,156,289 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 2,052,803 | 67,455,092 | |
aFranklin Real Estate Securities Fund, Class R6 | 2,056,811 | 45,311,541 | |
aFranklin Rising Dividends Fund, Class R6 | 4,519,492 | 235,013,576 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 1,279,158 | 24,879,634 | |
aFranklin Utilities Fund, Class R6 | 6,017,739 | 107,476,817 | |
iShares Core S&P 500 ETF | 133,574 | 27,636,461 | |
iShares S&P 500 Value ETF | 247,000 | 23,161,190 | |
1,107,417,197 | |||
Domestic Fixed Income 20.8% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 24,381,041 | 244,541,843 | |
aFranklin Strategic Income Fund, Class R6 | 10,933,688 | 109,446,214 | |
aFranklin U.S. Government Securities Fund Class R6 | 21,347,055 | 139,182,800 | |
iShares Intermediate Credit Bond ETF | 696,110 | 76,105,707 | |
569,276,564 | |||
Foreign Equity 17.2% | |||
aFranklin International Small Cap Growth Fund, Class R6 | 4,803,065 | 86,791,387 | |
aFranklin Mutual European Fund, Class R6 | 5,859,326 | 122,166,950 | |
iShares Global Infrastructure ETF | 691,049 | 29,127,715 | |
iShares MSCI All Country Asia ex Japan ETF | 375,382 | 22,872,025 | |
aTempleton China World Fund, Class R6 | 849,235 | 26,088,487 | |
aTempleton Foreign Fund, Class R6 | 15,608,526 | 107,230,572 | |
aTempleton Frontier Markets Fund, Class R6 | 3,282,634 | 47,237,105 | |
WisdomTree Japan Hedged Equity Fund ETF (Japan) | 605,475 | 29,807,534 | |
471,321,775 | |||
Foreign Fixed Income 15.5% | |||
aFranklin Emerging Market Debt Opportunities Fund | 5,406,119 | 57,358,919 | |
aTempleton Global Total Return Fund, Class R6 | 29,238,206 | 366,939,485 | |
424,298,404 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $2,288,583,268) 98.1% | 2,686,690,216 |
franklintempleton.com Annual Report | 43
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin Moderate Allocation Fund (continued) | ||||
Shares/Units | Value | |||
Short Term Investments (Cost $60,252,907) 2.2% | ||||
Money Market Funds 2.2% | ||||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 60,252,907 | $ | 60,252,907 | |
Total Investments in Underlying Funds and Exchange Traded Funds | ||||
(Cost $2,348,836,175) 100.3% | 2,746,943,123 | |||
Other Assets, less Liabilities (0.3)% | (7,348,376 | ) | ||
Net Assets 100.0% | $ | 2,739,594,747 |
See Abbreviations on page 68.
aSee Note 3(f) regarding investments in Underlying Funds.
bNon-income producing.
44 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
Financial Highlights | |||||||||||||||
Franklin Growth Allocation Fund | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class A | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 18.40 | $ | 15.81 | $ | 14.53 | $ | 15.25 | $ | 13.51 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.24 | 0.19 | 0.21 | 0.22 | 0.27 | ||||||||||
Net realized and unrealized gains (losses) | 0.67 | 3.09 | 1.32 | (0.70 | ) | 1.66 | |||||||||
Total from investment operations | 0.91 | 3.28 | 1.53 | (0.48 | ) | 1.93 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.29 | ) | (0.25 | ) | (0.25 | ) | (0.24 | ) | (0.19 | ) | |||||
Net realized gains | (0.45 | ) | (0.44 | ) | — | — | — | ||||||||
Total distributions | (0.74 | ) | (0.69 | ) | (0.25 | ) | (0.24 | ) | (0.19 | ) | |||||
Net asset value, end of year | $ | 18.57 | $ | 18.40 | $ | 15.81 | $ | 14.53 | $ | 15.25 | |||||
Total returnd | 4.95 | % | 20.98 | % | 10.52 | % | (3.15 | )% | 14.31 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 0.68 | % | 0.65 | % | 0.55 | % | 0.54 | % | 0.55 | % | |||||
Expenses net of waiver and payments by affiliatese | 0.63 | % | 0.59 | % | 0.50 | % | 0.50 | % | 0.50 | % | |||||
Net investment incomec | 1.25 | % | 1.10 | % | 1.34 | % | 1.49 | % | 1.93 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 887,856 | $ | 814,901 | $ | 655,585 | $ | 568,998 | $ | 498,511 | |||||
Portfolio turnover rate | 17.55 | % | 30.45 | % | 31.36 | % | 20.19 | % | 17.28 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.66% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 45
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin Growth Allocation Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class C | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 18.00 | $ | 15.50 | $ | 14.25 | $ | 14.97 | $ | 13.28 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.09 | 0.06 | 0.09 | 0.11 | 0.16 | ||||||||||
Net realized and unrealized gains (losses) | 0.67 | 3.01 | 1.29 | (0.69 | ) | 1.62 | |||||||||
Total from investment operations | 0.76 | 3.07 | 1.38 | (0.58 | ) | 1.78 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.16 | ) | (0.13 | ) | (0.13 | ) | (0.14 | ) | (0.09 | ) | |||||
Net realized gains | (0.45 | ) | (0.44 | ) | — | — | — | ||||||||
Total distributions | (0.61 | ) | (0.57 | ) | (0.13 | ) | (0.14 | ) | (0.09 | ) | |||||
Net asset value, end of year | $ | 18.15 | $ | 18.00 | $ | 15.50 | $ | 14.25 | $ | 14.97 | |||||
Total returnd | 4.21 | % | 20.04 | % | 9.71 | % | (3.91 | )% | 13.44 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 1.43 | % | 1.40 | % | 1.30 | % | 1.29 | % | 1.30 | % | |||||
Expenses net of waiver and payments by affiliatese | 1.38 | % | 1.34 | % | 1.25 | % | 1.25 | % | 1.25 | % | |||||
Net investment incomec | 0.50 | % | 0.35 | % | 0.59 | % | 0.74 | % | 1.18 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 336,213 | $ | 309,869 | $ | 241,787 | $ | 218,071 | $ | 192,597 | |||||
Portfolio turnover rate | 17.55 | % | 30.45 | % | 31.36 | % | 20.19 | % | 17.28 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.66% for the year ended December 31, 2014.
46 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin Growth Allocation Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class R | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 18.18 | $ | 15.63 | $ | 14.37 | $ | 15.09 | $ | 13.38 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.17 | 0.14 | 0.16 | 0.19 | 0.25 | ||||||||||
Net realized and unrealized gains (losses) | 0.68 | 3.05 | 1.31 | (0.70 | ) | 1.63 | |||||||||
Total from investment operations | 0.85 | 3.19 | 1.47 | (0.51 | ) | 1.88 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.24 | ) | (0.20 | ) | (0.21 | ) | (0.21 | ) | (0.17 | ) | |||||
Net realized gains | (0.45 | ) | (0.44 | ) | — | — | — | ||||||||
Total distributions | (0.69 | ) | (0.64 | ) | (0.21 | ) | (0.21 | ) | (0.17 | ) | |||||
Net asset value, end of year | $ | 18.34 | $ | 18.18 | $ | 15.63 | $ | 14.37 | $ | 15.09 | |||||
Total return | 4.72 | % | 20.67 | % | 10.22 | % | (3.40 | )% | 14.02 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 0.93 | % | 0.90 | % | 0.80 | % | 0.79 | % | 0.80 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.88 | % | 0.84 | % | 0.75 | % | 0.75 | % | 0.75 | % | |||||
Net investment incomec | 1.00 | % | 0.85 | % | 1.09 | % | 1.24 | % | 1.68 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 182,211 | $ | 192,361 | $ | 169,873 | $ | 147,126 | $ | 120,070 | |||||
Portfolio turnover rate | 17.55 | % | 30.45 | % | 31.36 | % | 20.19 | % | 17.28 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.66% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 47
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin Growth Allocation Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class R6 | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 18.44 | $ | 16.88 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.15 | 0.62 | ||||
Net realized and unrealized gains (losses) | 0.83 | 1.68 | ||||
Total from investment operations | 0.98 | 2.30 | ||||
Less distributions from: | ||||||
Net investment income and short term gains received from Underlying Funds | (0.36 | ) | (0.30 | ) | ||
Net realized gains | (0.45 | ) | (0.44 | ) | ||
Total distributions | (0.81 | ) | (0.74 | ) | ||
Net asset value, end of year | $ | 18.61 | $ | 18.44 | ||
Total returne | 5.38 | % | 13.88 | % | ||
Ratios to average net assetsf | ||||||
Expenses before waiver and payments by affiliatesg | 0.28 | % | 0.95 | % | ||
Expenses net of waiver and payments by affiliatesg | 0.23 | % | 0.22 | % | ||
Net investment incomed | 1.65 | % | 1.47 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 1,755 | $ | 42 | ||
Portfolio turnover rate | 17.55 | % | 30.45 | % |
aFor the period May 1, 2013 (effective date) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eTotal return is not annualized for periods less than one year.
fRatios are annualized for periods less than one year.
gDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.66% for the year ended December 31, 2014.
48 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin Growth Allocation Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Advisor Class | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 18.45 | $ | 15.85 | $ | 14.56 | $ | 15.28 | $ | 13.53 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.27 | 0.24 | 0.25 | 0.32 | 0.30 | ||||||||||
Net realized and unrealized gains (losses) | 0.68 | 3.09 | 1.32 | (0.76 | ) | 1.68 | |||||||||
Total from investment operations | 0.95 | 3.33 | 1.57 | (0.44 | ) | 1.98 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.33 | ) | (0.29 | ) | (0.28 | ) | (0.28 | ) | (0.23 | ) | |||||
Net realized gains | (0.45 | ) | (0.44 | ) | — | — | — | ||||||||
Total distributions | (0.78 | ) | (0.73 | ) | (0.28 | ) | (0.28 | ) | (0.23 | ) | |||||
Net asset value, end of year | $ | 18.62 | $ | 18.45 | $ | 15.85 | $ | 14.56 | $ | 15.28 | |||||
Total return | 5.23 | % | 21.26 | % | 10.84 | % | (2.90 | )% | 14.61 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 0.43 | % | 0.40 | % | 0.30 | % | 0.29 | % | 0.30 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.38 | % | 0.34 | % | 0.25 | % | 0.25 | % | 0.25 | % | |||||
Net investment incomec | 1.50 | % | 1.35 | % | 1.59 | % | 1.74 | % | 2.18 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 52,520 | $ | 74,808 | $ | 55,810 | $ | 48,957 | $ | 23,313 | |||||
Portfolio turnover rate | 17.55 | % | 30.45 | % | 31.36 | % | 20.19 | % | 17.28 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.66% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 49
FRANKLIN FUND ALLOCATOR SERIES | |||
Statement of Investments, December 31, 2014 | |||
Franklin Growth Allocation Fund | |||
Shares/Units | Value | ||
Investments in Underlying Funds and Exchange Traded Funds | |||
Alternative Strategies 4.1% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 4,373,496 | $ | 47,364,966 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 1,700,201 | 12,632,494 | |
59,997,460 | |||
Domestic Equity 57.1% | |||
a,bFranklin Biotechnology Discovery Fund, Class R6 | 114,089 | 19,573,050 | |
a,bFranklin DynaTech Fund, Class R6 | 2,381,776 | 112,205,482 | |
a,bFranklin Flex Cap Growth Fund, Class R6 | 553,699 | 28,498,910 | |
aFranklin Growth Fund, Class R6 | 3,643,163 | 272,362,882 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 1,695,447 | 55,712,382 | |
aFranklin Real Estate Securities Fund, Class R6 | 1,636,731 | 36,057,180 | |
aFranklin Rising Dividends Fund, Class R6 | 3,474,131 | 180,654,802 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 926,004 | 18,010,785 | |
aFranklin Utilities Fund, Class R6 | 4,343,712 | 77,578,703 | |
iShares Core S&P 500 ETF | 71,082 | 14,706,866 | |
iShares S&P 500 Value ETF | 190,400 | 17,853,808 | |
833,214,850 | |||
Domestic Fixed Income 6.3% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 3,975,400 | 39,873,265 | |
aFranklin Strategic Income Fund, Class R6 | 1,764,319 | 17,660,832 | |
aFranklin U.S. Government Securities Fund, Class R6 | 3,238,824 | 21,117,136 | |
iShares Intermediate Credit Bond ETF | 127,695 | 13,960,894 | |
92,612,127 | |||
Foreign Equity 25.8% | |||
aFranklin International Small Cap Growth Fund, Class R6 | 4,005,934 | 72,387,228 | |
aFranklin Mutual European Fund, Class R6 | 4,512,129 | 94,077,882 | |
iShares Global Infrastructure ETF | 501,860 | 21,153,399 | |
iShares MSCI All Country Asia ex Japan ETF | 281,524 | 17,153,257 | |
aTempleton China World Fund, Class R6 | 712,145 | 21,877,086 | |
aTempleton Foreign Fund, Class R6 | 12,506,005 | 85,916,251 | |
aTempleton Frontier Markets Fund, Class R6 | 2,951,132 | 42,466,788 | |
WisdomTree Japan Hedged Equity Fund ETF (Japan) | 451,450 | 22,224,883 | |
377,256,774 | |||
Foreign Fixed Income 4.7% | |||
aFranklin Emerging Market Debt Opportunities Fund | 846,174 | 8,977,910 | |
aTempleton Global Total Return Fund, Class R6 | 4,704,538 | 59,041,947 | |
68,019,857 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $1,124,772,071) 98.0% | 1,431,101,068 |
50 | Annual Report
franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin Growth Allocation Fund (continued) | ||||
Shares/Units | Value | |||
Short Term Investments (Cost $36,145,952) 2.5% | ||||
Money Market Funds 2.5% | ||||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 36,145,952 | $ | 36,145,952 | |
Total Investments in Underlying Funds and Exchange Traded Funds | ||||
(Cost $1,160,918,023) 100.5% | 1,467,247,020 | |||
Other Assets, less Liabilities (0.5)% | (6,691,818 | ) | ||
Net Assets 100.0% | $ | 1,460,555,202 |
See Abbreviations on page 68.
aSee Note 3(f) regarding investments in Underlying Funds.
bNon-income producing.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 51
FRANKLIN FUND ALLOCATOR SERIES
Financial Statements
Statements of Assets and Liabilities
December 31, 2014
Franklin | Franklin | Franklin | ||||
Conservative | Moderate | Growth | ||||
Allocation Fund | Allocation Fund | Allocation Fund | ||||
Assets: | ||||||
Cost - Underlying Funds (Note 3f) | $ | 1,434,224,832 | $ | 2,157,559,031 | $ | 1,063,122,667 |
Cost - Exchange traded funds | 117,837,958 | 191,277,144 | 97,795,356 | |||
Total cost of investments | $ | 1,552,062,790 | $ | 2,348,836,175 | $ | 1,160,918,023 |
Value - Underlying Funds (Note 3f) | $ | 1,590,799,430 | $ | 2,538,232,491 | $ | 1,360,193,913 |
Value - Exchange traded funds | 124,398,289 | 208,710,632 | 107,053,107 | |||
Total value of investments | 1,715,197,719 | 2,746,943,123 | 1,467,247,020 | |||
Receivables from capital shares sold | 4,747,662 | 5,866,272 | 2,941,450 | |||
Other assets | 466 | 240 | 834 | |||
Total assets | 1,719,945,847 | 2,752,809,635 | 1,470,189,304 | |||
Liabilities: | ||||||
Payables: | ||||||
Capital shares redeemed | 6,101,734 | 9,586,779 | 7,749,479 | |||
Asset allocation fees | 361,727 | 725,052 | 303,530 | |||
Distribution fees | 1,439,888 | 2,126,420 | 1,088,008 | |||
Transfer agent fees | 404,222 | 653,341 | 408,828 | |||
Accrued expenses and other liabilities | 79,385 | 123,296 | 84,257 | |||
Total liabilities | 8,386,956 | 13,214,888 | 9,634,102 | |||
Net assets, at value | $ | 1,711,558,891 | $ | 2,739,594,747 | $ | 1,460,555,202 |
Net assets consist of: | ||||||
Paid-in capital | $ | 1,518,442,545 | $ | 2,270,630,363 | $ | 1,104,483,334 |
Undistributed net investment income | 621,870 | 757,764 | 230,989 | |||
Net unrealized appreciation (depreciation) | 163,134,929 | 398,106,948 | 306,328,997 | |||
Accumulated net realized gain (loss) | 29,359,547 | 70,099,672 | 49,511,882 | |||
Net assets, at value | $ | 1,711,558,891 | $ | 2,739,594,747 | $ | 1,460,555,202 |
52 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | ||||||||||
FINANCIAL STATEMENTS | ||||||||||
Statements of Assets and Liabilities (continued) | ||||||||||
December 31, 2014 | ||||||||||
Franklin | Franklin | Franklin | ||||||||
Conservative | Moderate | Growth | ||||||||
Allocation Fund | Allocation Fund | Allocation Fund | ||||||||
Class A: | ||||||||||
Net assets, at value | $ | 910,522,884 | $ | 1,667,200,840 | $ | 887,856,169 | ||||
Shares outstanding | 62,664,036 | 106,103,467 | 47,819,227 | |||||||
Net asset value per sharea | $ | 14.53 | $ | 15.71 | $ | 18.57 | ||||
Maximum offering price per share (net asset value per share ÷ 94.25%) | $ | 15.42 | $ | 16.67 | $ | 19.70 | ||||
Class C: | ||||||||||
Net assets, at value | $ | 549,222,022 | $ | 716,712,187 | $ | 336,213,490 | ||||
Shares outstanding | 38,487,813 | 46,754,168 | 18,527,961 | |||||||
Net asset value and maximum offering price per sharea | $ | 14.27 | $ | 15.33 | $ | 18.15 | ||||
Class R: | ||||||||||
Net assets, at value | $ | 159,896,967 | $ | 263,864,174 | $ | 182,211,334 | ||||
Shares outstanding | 11,045,616 | 16,853,151 | 9,932,738 | |||||||
Net asset value and maximum offering price per share | $ | 14.48 | $ | 15.66 | $ | 18.34 | ||||
Class R6: | ||||||||||
Net assets, at value | $ | 1,653,931 | $ | 4,205,330 | $ | 1,754,537 | ||||
Shares outstanding | 113,936 | 267,597 | 94,256 | |||||||
Net asset value and maximum offering price per share | $ | 14.52 | $ | 15.72 | $ | 18.61 | ||||
Advisor Class: | ||||||||||
Net assets, at value | $ | 90,263,087 | $ | 87,612,216 | $ | 52,519,672 | ||||
Shares outstanding | 6,216,759 | 5,573,425 | 2,820,058 | |||||||
Net asset value and maximum offering price per share | $ | 14.52 | $ | 15.72 | $ | 18.62 |
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 53
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL STATEMENTS
Statements of Operations
for the year ended December 31, 2014
Franklin | Franklin | Franklin | |||||||
Conservative | Moderate | Growth | |||||||
Allocation Fund | Allocation Fund | Allocation Fund | |||||||
Investment income: | |||||||||
Dividends: | |||||||||
Underlying Funds (Note 3f) | $ | 53,529,538 | $ | 71,287,655 | $ | 24,813,570 | |||
Exchange traded funds | 2,614,301 | 4,365,577 | 2,223,110 | ||||||
Total investment income | 56,143,839 | 75,653,232 | 27,036,680 | ||||||
Expenses: | |||||||||
Asset allocation fees (Note 3a) | 4,256,965 | 6,962,102 | 3,599,725 | ||||||
Distribution fees: (Note 3c) | |||||||||
Class A | 2,235,802 | 4,159,981 | 2,150,444 | ||||||
Class C | 5,413,699 | 7,131,479 | 3,238,986 | ||||||
Class R | 824,531 | 1,388,991 | 949,498 | ||||||
Transfer agent fees: (Note 3e) | |||||||||
Class A | 962,114 | 2,082,763 | 1,318,721 | ||||||
Class C | 582,666 | 894,201 | 497,776 | ||||||
Class R | 177,757 | 347,729 | 291,140 | ||||||
Class R6 | 379 | 406 | 373 | ||||||
Advisor Class | 106,717 | 138,003 | 82,776 | ||||||
Custodian fees (Note 4) | 959 | 1,631 | 1,292 | ||||||
Reports to shareholders | 120,651 | 245,749 | 157,128 | ||||||
Registration and filing fees | 153,254 | 174,936 | 142,042 | ||||||
Professional fees | 36,514 | 45,582 | 34,980 | ||||||
Trustees’ fees and expenses | 11,565 | 19,091 | 9,748 | ||||||
Other | 24,343 | 31,978 | 23,549 | ||||||
Total expenses | 14,907,916 | 23,624,622 | 12,498,178 | ||||||
Expenses waived/paid by affiliates (Note 3f and 3g) | (18,580 | ) | (22,838 | ) | (653,857 | ) | |||
Net expenses | 14,889,336 | 23,601,784 | 11,844,321 | ||||||
Net investment income | 41,254,503 | 52,051,448 | 15,192,359 | ||||||
Realized and unrealized gains (losses): | |||||||||
Net realized gain (loss) from: | |||||||||
Sale of investments: | |||||||||
Underlying Funds (Note 3f) | 11,912,665 | 37,917,930 | 13,034,075 | ||||||
Exchange traded funds | 3,481,410 | 10,965,766 | 10,489,164 | ||||||
Realized gain distributions: | |||||||||
Underlying Funds (Note 3f) | 25,211,449 | 53,643,291 | 40,133,816 | ||||||
Exchange traded funds | 1,269,227 | 2,892,639 | 2,156,789 | ||||||
Net realized gain (loss) | 41,874,751 | 105,419,626 | 65,813,844 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (31,156,451 | ) | (49,648,092 | ) | (13,542,414 | ) | |||
Net realized and unrealized gain (loss) | 10,718,300 | 55,771,534 | 52,271,430 | ||||||
Net increase (decrease) in net assets resulting from operations | $ | 51,972,803 | $ | 107,822,982 | $ | 67,463,789 |
54 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
Franklin | Franklin | |||||||||||
Conservative Allocation Fund | Moderate Allocation Fund | |||||||||||
Year Ended December 31, | Year Ended December 31, | |||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||
Increase (decrease) in net assets: | ||||||||||||
Operations: | ||||||||||||
Net investment income | $ | 41,254,503 | $ | 29,532,617 | $ | 52,051,448 | $ | 40,028,995 | ||||
Net realized gain (loss) from Underlying Funds and | ||||||||||||
exchange traded funds | 41,874,751 | 56,797,254 | 105,419,626 | 97,896,068 | ||||||||
Net change in unrealized appreciation (depreciation) on | ||||||||||||
investments | (31,156,451 | ) | 66,495,988 | (49,648,092 | ) | 205,334,754 | ||||||
Net increase (decrease) in net assets resulting from | ||||||||||||
operations | 51,972,803 | 152,825,859 | 107,822,982 | 343,259,817 | ||||||||
Distributions to shareholders from: | ||||||||||||
Net investment income: | ||||||||||||
Class A | (25,413,629 | ) | (18,555,162 | ) | (38,129,297 | ) | (29,637,604 | ) | ||||
Class C | (11,597,319 | ) | (7,621,157 | ) | (11,485,730 | ) | (8,164,625 | ) | ||||
Class R | (4,141,289 | ) | (3,249,730 | ) | (5,440,637 | ) | (4,633,673 | ) | ||||
Class R6 | (92,864 | ) | (531 | ) | (289,973 | ) | (3,234 | ) | ||||
Advisor Class | (2,859,868 | ) | (2,354,598 | ) | (2,392,681 | ) | (3,157,309 | ) | ||||
Net realized gains: | ||||||||||||
Class A | (11,696,465 | ) | (29,718,910 | ) | (36,890,069 | ) | (55,661,234 | ) | ||||
Class C | (7,240,053 | ) | (17,962,378 | ) | (16,239,360 | ) | (24,264,814 | ) | ||||
Class R | (2,164,890 | ) | (5,876,783 | ) | (6,067,607 | ) | (10,097,511 | ) | ||||
Class R6 | (82,538 | ) | (871 | ) | (512,949 | ) | (4,773 | ) | ||||
Advisor Class | (1,273,888 | ) | (3,430,085 | ) | (2,391,120 | ) | (5,236,475 | ) | ||||
Total distributions to shareholders | (66,562,803 | ) | (88,770,205 | ) | (119,839,423 | ) | (140,861,252 | ) | ||||
Capital share transactions: (Note 2) | ||||||||||||
Class A | 46,732,968 | 43,179,624 | 38,831,164 | 63,691,660 | ||||||||
Class B | — | (904,216 | ) | — | (1,651,045 | ) | ||||||
Class C | 29,536,406 | 53,442,005 | 19,655,378 | 45,811,134 | ||||||||
Class R | (5,759,784 | ) | (18,951,319 | ) | (21,890,340 | ) | (10,367,488 | ) | ||||
Class R6 | 1,518,695 | 38,095 | 3,122,327 | 255,599 | ||||||||
Advisor Class | (14,796,952 | ) | 16,347,438 | (71,697,229 | ) | 25,631,305 | ||||||
Total capital share transactions | 57,231,333 | 93,151,627 | (31,978,700 | ) | 123,371,165 | |||||||
Net increase (decrease) in net assets | 42,641,333 | 157,207,281 | (43,995,141 | ) | 325,769,730 | |||||||
Net assets: | ||||||||||||
Beginning of year | 1,668,917,558 | 1,511,710,277 | 2,783,589,888 | 2,457,820,158 | ||||||||
End of year | $ | 1,711,558,891 | $ | 1,668,917,558 | $ | 2,739,594,747 | $ | 2,783,589,888 | ||||
Undistributed net investment income included in net assets: | ||||||||||||
End of year | $ | 621,870 | $ | 509,099 | $ | 757,764 | $ | 289,882 |
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 55
FRANKLIN FUND ALLOCATOR SERIES | ||||||
FINANCIAL STATEMENTS | ||||||
Statements of Changes in Net Assets (continued) | ||||||
Franklin Growth Allocation Fund | ||||||
Year Ended December 31, | ||||||
2014 | 2013 | |||||
Increase (decrease) in net assets: | ||||||
Operations: | ||||||
Net investment income | $ | 15,192,359 | $ | 11,439,289 | ||
Net realized gain (loss) from Underlying Funds and exchange traded funds | 65,813,844 | 45,251,728 | ||||
Net change in unrealized appreciation (depreciation) on investments | (13,542,414 | ) | 179,089,166 | |||
Net increase (decrease) in net assets resulting from operations | 67,463,789 | 235,780,183 | ||||
Distributions to shareholders from: | ||||||
Net investment income and short term gains received from Underlying Funds: | ||||||
Class A | (13,601,930 | ) | (10,678,620 | ) | ||
Class C | (2,879,304 | ) | (2,162,450 | ) | ||
Class R | (2,339,058 | ) | (2,126,044 | ) | ||
Class R6 | (39,682 | ) | (679 | ) | ||
Advisor Class | (919,862 | ) | (1,145,252 | ) | ||
Net realized gains: | ||||||
Class A | (20,800,818 | ) | (18,869,198 | ) | ||
Class C | (8,037,905 | ) | (7,282,401 | ) | ||
Class R | (4,570,619 | ) | (4,676,994 | ) | ||
Class R6 | (401,855 | ) | (551 | ) | ||
Advisor Class | (1,273,439 | ) | (1,735,561 | ) | ||
Total distributions to shareholders | (54,864,472 | ) | (48,677,750 | ) | ||
Capital share transactions: (Note 2) | ||||||
Class A | 65,731,634 | 49,959,476 | ||||
Class B | — | (652,170 | ) | |||
Class C | 23,942,365 | 27,297,861 | ||||
Class R | (11,877,769 | ) | (4,719,075 | ) | ||
Class R6 | 943,402 | 41,939 | ||||
Advisor Class | (22,765,242 | ) | 9,263,274 | |||
Total capital share transactions | 55,974,390 | 81,191,305 | ||||
Net increase (decrease) in net assets | 68,573,707 | 268,293,738 | ||||
Net assets: | ||||||
Beginning of year | 1,391,981,495 | 1,123,687,757 | ||||
End of year | $ | 1,460,555,202 | $ | 1,391,981,495 | ||
Undistributed net investment income included in net assets: | ||||||
End of year | $ | 230,989 | $ | 458,782 |
56 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
Notes to Financial Statements
1. Organization and Significant Accounting Policies
Franklin Fund Allocator Series (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end management investment company, consisting of fourteen separate funds, three of which are included in this report (Funds) and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). The financial statements of the remaining funds in the Trust are presented separately. The Funds invest primarily in Franklin Templeton mutual funds (Underlying Funds). The Funds offer five classes of shares: Class A, Class C, Class R, Class R6, and Advisor Class. Each class of shares differs by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees primarily due to differing arrangements for distribution and transfer agent fees.
The accounting policies of the Underlying Funds are outlined in their respective shareholder reports. A copy of the Underlying Funds’ shareholder reports, in which each fund invests, is available on the U.S. Securities and Exchange Commission (SEC) website at sec.gov or at the SEC’s Public Reference Room in Washington, D.C. The Underlying Funds’ shareholder reports are not covered by this report.
Effective June 30, 2014, the following name changes occurred:
Former Trust Name |
Franklin Templeton Fund Allocator Series |
New Trust Name |
Franklin Fund Allocator Series |
Former Fund Name |
Franklin Templeton Conservative Allocation Fund |
Franklin Templeton Moderate Allocation Fund |
Franklin Templeton Growth Allocation Fund |
New Fund Name |
Franklin Conservative Allocation Fund |
Franklin Moderate Allocation Fund |
Franklin Growth Allocation Fund |
The following summarizes the Funds’ significant accounting policies.
a. Financial Instrument Valuation
The Funds’ investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Funds calculate the net asset value (NAV) per share at the close of the New York Stock Exchange (NYSE), generally at 4 p.m. Eastern time (NYSE close) on each day the NYSE is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Funds’ administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation and Liquidity Oversight Committee (VLOC). The VLOC provides administration and oversight of the Funds’ valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Funds to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value. Investments in the Underlying Funds are valued at their closing NAV each trading day. Exchange traded funds (ETFs) listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively.
b. Income Taxes
It is each fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. Each fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.
Each fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of December 31, 2014, and for all open tax years, each fund has determined that no liability for unrecognized tax benefits is required in each fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.
franklintempleton.com Annual Report | 57
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting
Policies (continued)
c. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Estimated expenses are accrued daily. Dividend income and realized gain distributions by Underlying Funds and ETFs are recorded on the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
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 of the Trust. Fund specific expenses are charged directly to the fund that incurred the expense.
The Funds indirectly bear their proportionate share of expenses from the Underlying Funds and ETFs. Since the Underlying Funds and ETFs have varied expense levels and the Funds may own different proportions of the Underlying Funds and ETFs at different times, the amount of expenses incurred indirectly by the Funds will vary.
Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.
d. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP 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 by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Funds, 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. Currently, the Trust expects the risk of loss to be remote.
2. Shares of Beneficial Interest
At December 31, 2014, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:
Franklin | Franklin | |||||||||
Conservative Allocation Fund | Moderate Allocation Fund | |||||||||
Shares | Amount | Shares | Amount | |||||||
Class A Shares: | ||||||||||
Year ended December 31, 2014 | ||||||||||
Shares sold | 15,046,528 | $ | 222,808,539 | 19,016,916 | $ | 303,942,553 | ||||
Shares issued in reinvestment of distributions | 2,451,981 | 36,036,838 | 4,609,341 | 73,314,303 | ||||||
Shares redeemed | (14,327,217 | ) | (212,112,409 | ) | (21,174,769 | ) | (338,425,692 | ) | ||
Net increase (decrease) | 3,171,292 | $ | 46,732,968 | 2,451,488 | $ | 38,831,164 | ||||
Year ended December 31, 2013 | ||||||||||
Shares sold | 16,648,117 | $ | 241,733,382 | 23,365,779 | $ | 357,653,902 | ||||
Shares issued in reinvestment of distributions | 3,237,446 | 46,660,415 | 5,438,812 | 83,418,945 | ||||||
Shares redeemed | (16,899,845 | ) | (245,214,173 | ) | (24,694,524 | ) | (377,381,187 | ) | ||
Net increase (decrease) | 2,985,718 | $ | 43,179,624 | 4,110,067 | $ | 63,691,660 | ||||
58 | Annual Report | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES | ||||||||||||
NOTES TO FINANCIAL STATEMENTS | ||||||||||||
Franklin | Franklin | |||||||||||
Conservative Allocation Fund | Moderate Allocation Fund | |||||||||||
Shares | Amount | Shares | Amount | |||||||||
Class B Shares: | ||||||||||||
Year ended December 31, 2013a | ||||||||||||
Shares redeemed | (63,132 | ) | $ | (904,216 | ) | (110,413 | ) | $ | (1,651,045 | ) | ||
Class C Shares: | ||||||||||||
Year ended December 31, 2014 | ||||||||||||
Shares sold | 7,714,900 | $ | 112,098,574 | 7,476,837 | $ | 116,581,397 | ||||||
Shares issued in reinvestment of distributions | 1,234,859 | 17,819,734 | 1,711,464 | 26,546,906 | ||||||||
Shares redeemed | (6,904,369 | ) | (100,381,902 | ) | (7,913,190 | ) | (123,472,925 | ) | ||||
Net increase (decrease) | 2,045,390 | $ | 29,536,406 | 1,275,111 | $ | 19,655,378 | ||||||
Year ended December 31, 2013 | ||||||||||||
Shares sold | 10,404,962 | $ | 148,391,933 | 9,545,102 | $ | 142,928,615 | ||||||
Shares issued in reinvestment of distributions | 1,710,659 | 24,249,619 | 2,064,905 | 30,964,427 | ||||||||
Shares redeemed | (8,359,797 | ) | (119,199,547 | ) | (8,545,817 | ) | (128,081,908 | ) | ||||
Net increase (decrease) | 3,755,824 | $ | 53,442,005 | 3,064,190 | $ | 45,811,134 | ||||||
Class R Shares: | ||||||||||||
Year ended December 31, 2014 | ||||||||||||
Shares sold | 2,580,624 | $ | 38,099,760 | 2,707,148 | $ | 43,151,286 | ||||||
Shares issued in reinvestment of distributions | 417,661 | 6,118,512 | 707,204 | 11,208,510 | ||||||||
Shares redeemed | (3,388,627 | ) | (49,978,056 | ) | (4,786,277 | ) | (76,250,136 | ) | ||||
Net increase (decrease) | (390,342 | ) | $ | (5,759,784 | ) | (1,371,925 | ) | $ | (21,890,340 | ) | ||
Year ended December 31, 2013 | ||||||||||||
Shares sold | 2,549,498 | $ | 36,820,589 | 3,346,085 | $ | 51,038,389 | ||||||
Shares issued in reinvestment of distributions | 617,855 | 8,869,826 | 936,657 | 14,306,271 | ||||||||
Shares redeemed | (4,473,929 | ) | (64,641,734 | ) | (4,956,052 | ) | (75,712,148 | ) | ||||
Net increase (decrease) | (1,306,576 | ) | $ | (18,951,319 | ) | (673,310 | ) | $ | (10,367,488 | ) | ||
Class R6 Shares: | ||||||||||||
Year ended December 31, 2014 | ||||||||||||
Shares soldb | 648,287 | $ | 9,542,433 | 2,720,251 | $ | 43,024,597 | ||||||
Shares issued on reinvestment of distributions | 11,847 | 175,294 | 50,054 | 802,806 | ||||||||
Shares redeemed | (548,760 | ) | (8,199,032 | ) | (2,518,732 | ) | (40,705,076 | ) | ||||
Net increase (decrease) | 111,374 | $ | 1,518,695 | 251,573 | $ | 3,122,327 | ||||||
Year ended December 31, 2013c | ||||||||||||
Shares sold | 2,487 | $ | 36,994 | 16,103 | $ | 256,949 | ||||||
Shares issued in reinvestment of distributions | 76 | 1,113 | 490 | 7,723 | ||||||||
Shares redeemed | (1 | ) | (12 | ) | (569 | ) | (9,073 | ) | ||||
Net increase (decrease) | 2,562 | $ | 38,095 | 16,024 | $ | 255,599 | ||||||
Advisor Class Shares: | ||||||||||||
Year ended December 31, 2014 | ||||||||||||
Shares sold | 1,229,855 | $ | 18,227,617 | 1,859,022 | $ | 29,661,699 | ||||||
Shares issued in reinvestment of distributions | 270,947 | 3,982,836 | 287,474 | 4,580,070 | ||||||||
Shares redeemedb | (2,501,544 | ) | (37,007,405 | ) | (6,662,568 | ) | (105,938,998 | ) | ||||
Net increase (decrease) | (1,000,742 | ) | $ | (14,796,952 | ) | (4,516,072 | ) | $ | (71,697,229 | ) | ||
Year ended December 31, 2013 | ||||||||||||
Shares sold | 2,194,831 | $ | 31,959,893 | 3,813,226 | $ | 58,650,719 | ||||||
Shares issued in reinvestment of distributions | 388,262 | 5,596,792 | 532,699 | 8,178,878 | ||||||||
Shares redeemed | (1,462,820 | ) | (21,209,247 | ) | (2,694,741 | ) | (41,198,292 | ) | ||||
Net increase (decrease) | 1,120,273 | $ | 16,347,438 | 1,651,184 | $ | 25,631,305 |
franklintempleton.com Annual Report | 59
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest (continued) | ||||||
Franklin | ||||||
Growth Allocation Fund | ||||||
Shares | Amount | |||||
Class A Shares: | ||||||
Year ended December 31, 2014 | ||||||
Shares sold | 10,003,322 | $ | 186,802,241 | |||
Shares issued in reinvestment of distributions | 1,798,598 | 33,718,676 | ||||
Shares redeemed | (8,279,846 | ) | (154,789,283 | ) | ||
Net increase (decrease) | 3,522,074 | $ | 65,731,634 | |||
Year ended December 31, 2013 | ||||||
Shares sold | 10,809,201 | $ | 185,467,878 | |||
Shares issued in reinvestment of distributions | 1,638,582 | 28,875,048 | ||||
Shares redeemed | (9,615,479 | ) | (164,383,450 | ) | ||
Net increase (decrease) | 2,832,304 | $ | 49,959,476 | |||
Class B Shares: | ||||||
Year ended December 31, 2013a | ||||||
Shares redeemed | (40,287 | ) | $ | (652,170 | ) | |
Class C Shares: | ||||||
Year ended December 31, 2014 | ||||||
Shares sold | 3,313,242 | $ | 60,304,468 | |||
Shares issued in reinvestment of distributions | 576,629 | 10,564,815 | ||||
Shares redeemed | (2,572,650 | ) | (46,926,918 | ) | ||
Net increase (decrease) | 1,317,221 | $ | 23,942,365 | |||
Year ended December 31, 2013 | ||||||
Shares sold | 3,998,222 | $ | 66,960,234 | |||
Shares issued in reinvestment of distributions | 532,128 | 9,100,139 | ||||
Shares redeemed | (2,915,582 | ) | (48,762,512 | ) | ||
Net increase (decrease) | 1,614,768 | $ | 27,297,861 | |||
Class R Shares: | ||||||
Year ended December 31, 2014 | ||||||
Shares sold | 1,618,817 | $ | 29,808,390 | |||
Shares issued in reinvestment of distributions | 363,625 | 6,737,449 | ||||
Shares redeemed | (2,630,686 | ) | (48,423,608 | ) | ||
Net increase (decrease) | (648,244 | ) | $ | (11,877,769 | ) | |
Year ended December 31, 2013 | ||||||
Shares sold | 2,061,293 | $ | 35,052,772 | |||
Shares issued in reinvestment of distributions | 380,554 | 6,597,953 | ||||
Shares redeemed | (2,726,900 | ) | (46,369,800 | ) | ||
Net increase (decrease) | (285,053 | ) | $ | (4,719,075 | ) | |
Class R6 Shares: | ||||||
Year ended December 31, 2014 | ||||||
Shares soldb | 1,473,569 | $ | 27,194,749 | |||
Shares issued on reinvestment of distributions | 23,325 | 441,444 | ||||
Shares redeemed | (1,404,939 | ) | (26,692,791 | ) | ||
Net increase (decrease) | 91,955 | $ | 943,402 | |||
Year ended December 31, 2013c | ||||||
Shares sold | 2,563 | $ | 46,761 | |||
Shares issued in reinvestment of distributions | 55 | 1,008 | ||||
Shares redeemed | (317 | ) | (5,830 | ) | ||
Net increase (decrease) | 2,301 | $ | 41,939 |
60 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
Franklin | ||||||
Growth Allocation Fund | ||||||
Shares | Amount | |||||
Advisor Class Shares: | ||||||
Year ended December 31, 2014 | ||||||
Shares sold | 825,057 | $ | 15,541,571 | |||
Shares issued in reinvestment of distributions | 112,789 | 2,122,032 | ||||
Shares redeemedb | (2,173,232 | ) | (40,428,845 | ) | ||
Net increase (decrease) | (1,235,386 | ) | $ | (22,765,242 | ) | |
Year ended December 31, 2013 | ||||||
Shares sold | 1,592,462 | $ | 27,354,738 | |||
Shares issued in reinvestment of distributions | 161,096 | 2,853,350 | ||||
Shares redeemed | (1,219,870 | ) | (20,944,814 | ) | ||
Net increase (decrease) | 533,688 | $ | 9,263,274 |
aEffective March 1, 2013, all Class B shares were converted to Class A.
bEffective January 8, 2014, a portion of Advisor Class shares were exchanged into Class R6.
cFor the period May 1, 2013 (effective date) to December 31, 2013.
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Funds are also officers and/or directors/trustees of certain of the Underlying Funds and of the following subsidiaries:
Subsidiary | 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 |
a. Asset Allocation Fees
The Funds pay an asset allocation fee to Advisers of 0.25% per year of the average daily net assets of each of the Funds for investment advisory services, consisting principally of determining the allocation of assets of the Funds among the designated Underlying Funds and ETFs.
b. Administrative Fees
FT Services, under terms of an agreement, provides administrative services to the Funds and is not paid by the Funds for the services.
c. Distribution Fees
The Board has adopted distribution plans for each share class, with the exception of Class R6 and Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Distribution fees are not charged on shares held by affiliates. Under the Funds’ Class A reimbursement distribution plans, the Funds reimburse Distributors for costs incurred in connection with the servicing, sale and distribution of each fund’s shares up to the maximum annual plan rate. Under the Class A reimbursement distribution plans, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Funds’ Class C and R compensation distribution plans, the Funds pay Distributors for costs incurred in connection with the servicing, sale and distribution of each fund’s shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31 for each fund.
franklintempleton.com Annual Report | 61
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
c. Distribution Fees (continued)
The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:
Class A | 0.25 | % |
Class C | 1.00 | % |
Class R | 0.50 | % |
d. Sales Charges/Underwriting Agreements
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Funds. These charges are deducted from the proceeds of sales of fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Funds of the following commission transactions related to the sales and redemptions of the Funds’ shares for the year:
Franklin | Franklin | Franklin | ||||
Conservative | Moderate | Growth | ||||
Allocation Fund | Allocation Fund | Allocation Fund | ||||
Sales charges retained net of commissions paid to unaffiliated | ||||||
broker/dealers | $ | 642,167 | $ | 1,124,425 | $ | 732,223 |
CDSC retained | $ | 51,627 | $ | 72,268 | $ | 34,338 |
e. Transfer Agent Fees
Each class of shares, except for Class R6, pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations and reimburses Investor Services for out of pocket expenses incurred, including shareholding servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets. Class R6 pays Investor Services transfer agent fees specific to that class.
For the year ended December 31, 2014, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:
Franklin | Franklin | Franklin | ||||
Conservative | Moderate | Growth | ||||
Allocation Fund | Allocation Fund | Allocation Fund | ||||
Transfer agent fees | $ | 708,633 | $ | 1,381,454 | $ | 978,498 |
f. Investments in Underlying Funds
The Funds invest primarily in the Underlying Funds which are managed by Advisers (or by an affiliate of Advisers). The Funds do not invest in the Underlying Funds for the purpose of exercising a controlling influence over the management or policies. Asset allocation fees paid by the Funds are waived on assets invested in Institutional Fiduciary Trust Money Market Portfolio (Sweep Money Fund), as noted on the Statements of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by the Sweep Money Fund. Prior to January 1, 2014, the waiver was accounted for as a reduction to asset allocation fees.
62 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
Investments in Underlying Funds for the year ended December 31, 2014, were as follows: | |||||||||||||||
% of | |||||||||||||||
Underlying | |||||||||||||||
Number of | Number of | Fund Shares | |||||||||||||
Shares Held | Shares | Outstanding | |||||||||||||
at Beginning | Gross | Gross | Held at End | Value at End | Investment | Realized | Held at End | ||||||||
Underlying Funds | of Year | Additions | Reductions | of Year | of Year | Income | Gain (Loss) | of Year | |||||||
Franklin Conservative Allocation | |||||||||||||||
Fund | |||||||||||||||
Franklin Biotechnology Discovery | |||||||||||||||
Fund, Class R6 | 70,478 | 2,655 | (4,560 | ) | 68,573 | $ | 11,764,411 | $ | — | $ | 615,537 | a | 0.67 | % | |
Franklin DynaTech Fund, | |||||||||||||||
Class R6 | 1,542,287 | 49,130 | (103,584 | ) | 1,487,833 | 70,091,831 | — | 3,144,069 | a | 2.85 | % | ||||
Franklin Emerging Market Debt | |||||||||||||||
Opportunities Fundb | 4,282,736 | 579,941 | (77,194 | ) | 4,785,483 | 50,773,969 | 3,987,429 | 170,970 | a | 8.48 | % | ||||
Franklin Flex Cap Growth Fund, | |||||||||||||||
Class R6 | 654,116 | 98,284 | (433,789 | ) | 318,611 | 16,398,932 | — | 10,085,117 | 0.47 | % | |||||
Franklin Growth Fund, Class R6 | 2,427,862 | 14,173 | (166,683 | ) | 2,275,352 | 170,105,292 | 1,055,292 | 3,329,713 | a | 1.51 | % | ||||
Franklin Growth Opportunities Fund, | |||||||||||||||
Class R6 | 832,154 | 135,330 | (51,149 | ) | 916,335 | 30,110,755 | — | 652,552 | 2.80 | % | |||||
Franklin International Growth Fund, | |||||||||||||||
Class R6 | 411,292 | — | (411,292 | ) | — | —c | — | 429,932 | a | — | |||||
Franklin International Small Cap | |||||||||||||||
Growth Fund, Class R6 | 1,903,062 | 437,654 | (137,098 | ) | 2,203,618 | 39,819,384 | 684,105 | 3,282,431 | 2.47 | % | |||||
Franklin K2 Alternative Strategies | |||||||||||||||
Fund, Class R6 | — | 5,202,283 | — | 5,202,283 | 56,340,726 | 490,950 | — | 10.70 | % | ||||||
Franklin Low Duration Total Return | |||||||||||||||
Fund, Class R6 | 16,065,074 | 5,378,928 | (310,568 | ) | 21,133,434 | 211,968,347 | 4,749,542 | (11,684 | ) | 8.60 | % | ||||
Franklin MicroCap Value Fund, | |||||||||||||||
Class R6 | 281,183 | — | (281,183 | ) | — | —c | — | 4,332,284 | a | — | |||||
Franklin Mutual European Fund, | |||||||||||||||
Class R6d | 2,562,801 | 337,954 | (175,274 | ) | 2,725,481 | 56,826,277 | 1,700,590 | 5,242,808 | 2.23 | % | |||||
Franklin Pelagos Commodities | |||||||||||||||
Strategy Fund, Class R6 | 4,186,808 | e | — | (2,337,744 | ) | 1,849,064 | 13,738,545 | — | (3,635,013 | ) | 24.26 | % | |||
Franklin Pelagos Managed Futures | |||||||||||||||
Strategy Fund | 413,012 | — | (413,012 | ) | — | —c | — | (370,519 | ) | — | |||||
Franklin Real Estate Securities Fund, | |||||||||||||||
Class R6 | 933,773 | 16,500 | (66,636 | ) | 883,637 | 19,466,527 | 330,323 | 217,353 | a | 3.35 | % | ||||
Franklin Rising Dividends Fund, | |||||||||||||||
Class R6 | 2,241,682 | 54,379 | (153,434 | ) | 2,142,627 | 111,416,580 | 1,715,665 | 2,739,371 | a | 0.64 | % | ||||
Franklin Small Cap Growth Fund, | |||||||||||||||
Class R6 | 333,547 | 265,658 | (29,853 | ) | 569,352 | 11,073,895 | — | 466,356 | a | 0.39 | % | ||||
Franklin Strategic Income Fund, | |||||||||||||||
Class R6 | 8,896,562 | 975,514 | (172,884 | ) | 9,699,192 | 97,088,910 | 5,348,641 | 903,990 | 1.09 | % | |||||
Franklin U.S. Government Securities | |||||||||||||||
Fund, Class R6 | 29,684,395 | 1,605,551 | (11,909,990 | ) | 19,379,956 | 126,357,314 | 7,033,272 | (2,524,151 | )a | 1.94 | % | ||||
Franklin Utilities Fund, Class R6 | 2,817,003 | 139,095 | (471,430 | ) | 2,484,668 | 44,376,163 | 1,353,120 | 2,501,669 | 0.70 | % | |||||
Institutional Fiduciary Trust Money | |||||||||||||||
Market Portfolio | 27,602,955 | 207,121,266 | (197,009,539 | ) | 37,714,682 | 37,714,682 | — | — | 0.22 | % | |||||
Templeton China World Fund, | |||||||||||||||
Class R6 | 384,726 | 56,768 | (21,688 | ) | 419,806 | 12,896,451 | 209,727 | 1,516,654 | a | 2.10 | % | ||||
Templeton Foreign Fund, | |||||||||||||||
Class R6 | 8,095,742 | 472,780 | (1,326,259 | ) | 7,242,263 | 49,754,348 | 1,680,863 | 2,738,432 | a | 0.77 | % |
franklintempleton.com Annual Report | 63
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
f. Investments in Underlying Funds (continued)
% of | |||||||||||||||
Underlying | |||||||||||||||
Number of | Number of | Fund Shares | |||||||||||||
Shares Held | Shares | Outstanding | |||||||||||||
at Beginning | Gross | Gross | Held at End | Value at End | Investment | Realized | Held at End | ||||||||
Underlying Funds | of Year | Additions | Reductions | of Year | of Year | Income | Gain (Loss) | of Year | |||||||
Franklin Conservative Allocation | |||||||||||||||
Fund (continued) | |||||||||||||||
Templeton Frontier Markets Fund, | |||||||||||||||
Class R6 | 1,349,082 | 102,404 | (93,066 | ) | 1,358,420 | $ | 19,547,666 | $ | 786,894 | $ | 794,631 | a | 1.97 | % | |
Templeton Global Total Return Fund, | |||||||||||||||
Class R6 | 21,390,143 | 5,550,361 | (393,219 | ) | 26,547,285 | 333,168,425 | 22,403,125 | 501,612 | a | 3.83 | % | ||||
Total | $ | 1,590,799,430 | $ | 53,529,538 | $ | 37,124,114 | |||||||||
Franklin Moderate Allocation Fund | |||||||||||||||
Franklin Biotechnology Discovery | |||||||||||||||
Fund, Class R6 | 162,161 | 6,032 | (13,565 | ) | 154,628 | $ | 26,528,015 | $ | — | $ | 1,398,499 | a | 1.51 | % | |
Franklin DynaTech Fund, | |||||||||||||||
Class R6 | 3,173,969 | 100,301 | (269,902 | ) | 3,004,368 | 141,535,786 | — | 6,491,859 | a | 5.76 | % | ||||
Franklin Emerging Market Debt | |||||||||||||||
Opportunities Fundb | 5,193,280 | 631,700 | (418,861 | ) | 5,406,119 | 57,358,919 | 4,504,565 | 149,439 | 9.58 | % | |||||
Franklin Flex Cap Growth Fund, | |||||||||||||||
Class R6 | 1,559,426 | 231,895 | (1,047,921 | ) | 743,400 | 38,262,796 | — | 24,178,741 | a | 1.10 | % | ||||
Franklin Growth Fund, Class R6 | 5,437,223 | 31,180 | (517,142 | ) | 4,951,261 | 370,156,289 | 2,321,667 | 8,900,113 | 3.29 | % | |||||
Franklin Growth Opportunities Fund, | |||||||||||||||
Class R6 | 1,885,229 | 324,361 | (156,787 | ) | 2,052,803 | 67,455,092 | — | 1,532,341 | a | 6.28 | % | ||||
Franklin International Growth Fund, | |||||||||||||||
Class R6 | 921,804 | — | (921,804 | ) | — | —c | — | 965,428 | a | — | |||||
Franklin International Small Cap | |||||||||||||||
Growth Fund, Class R6 | 4,223,679 | 964,355 | (384,969 | ) | 4,803,065 | 86,791,387 | 1,502,125 | 7,420,081 | 5.38 | % | |||||
Franklin K2 Alternative Strategies | |||||||||||||||
Fund, Class R6 | — | 8,695,467 | (255,047 | ) | 8,440,420 | 91,409,752 | 796,539 | 52,908 | 17.36 | % | |||||
Franklin Low Duration Total Return | |||||||||||||||
Fund, Class R6 | 19,675,358 | 6,338,879 | (1,633,196 | ) | 24,381,041 | 244,541,843 | 5,585,016 | (51,264 | ) | 9.92 | % | ||||
Franklin MicroCap Value Fund, | |||||||||||||||
Class R6 | 604,171 | — | (604,171 | ) | — | —c | — | 9,266,519 | a | — | |||||
Franklin Mutual European Fund, | |||||||||||||||
Class R6d | 5,648,509 | 729,123 | (518,306 | ) | 5,859,326 | 122,166,950 | 3,667,586 | 11,229,914 | a | 4.79 | % | ||||
Franklin Pelagos Commodities | |||||||||||||||
Strategy Fund, Class R6 | 5,209,062 | e | — | (2,118,009 | ) | 3,091,053 | 22,966,524 | — | (3,391,716 | ) | 40.56 | % | |||
Franklin Pelagos Managed Futures | |||||||||||||||
Strategy Fund | 511,630 | — | (511,630 | ) | — | —c | — | (802,743 | ) | — | |||||
Franklin Real Estate Securities Fund, | |||||||||||||||
Class R6 | 2,199,870 | 38,531 | (181,590 | ) | 2,056,811 | 45,311,541 | 771,442 | 525,942 | 7.79 | % | |||||
Franklin Rising Dividends Fund, | |||||||||||||||
Class R6 | 4,856,020 | 115,750 | (452,278 | ) | 4,519,492 | 235,013,576 | 3,647,677 | 6,399,413 | a | 1.35 | % | ||||
Franklin Small Cap Growth Fund, | |||||||||||||||
Class R6 | 724,816 | 648,159 | (93,817 | ) | 1,279,158 | 24,879,634 | — | 1,056,680 | a | 0.87 | % | ||||
Franklin Strategic Income Fund, | |||||||||||||||
Class R6 | 10,670,983 | 1,158,186 | (895,481 | ) | 10,933,688 | 109,446,214 | 6,144,656 | 1,136,169 | a | 1.22 | % | ||||
Franklin U.S. Government Securities | |||||||||||||||
Fund, Class R6 | 35,178,492 | 1,536,910 | (15,368,347 | ) | 21,347,055 | 139,182,800 | 8,031,535 | (2,874,645 | ) | 2.13 | % | ||||
Franklin Utilities Fund, Class R6 | 6,924,389 | 340,058 | (1,246,708 | ) | 6,017,739 | 107,476,817 | 3,304,126 | 6,090,893 | a | 1.70 | % |
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FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
% of | |||||||||||||||
Underlying | |||||||||||||||
Number of | Number of | Fund Shares | |||||||||||||
Shares Held | Shares | Outstanding | |||||||||||||
at Beginning | Gross | Gross | Held at End | Value at End | Investment | Realized | Held at End | ||||||||
Underlying Funds | of Year | Additions | Reductions | of Year | of Year | Income | Gain (Loss) | of Year | |||||||
Franklin Moderate Allocation Fund | |||||||||||||||
(continued) | |||||||||||||||
Institutional Fiduciary Trust Money | |||||||||||||||
Market Portfolio | 41,441,411 | 402,155,570 | (383,344,074 | ) | 60,252,907 | $ | 60,252,907 | $ | — | $ | — | 0.35 | % | ||
Templeton China World Fund, | |||||||||||||||
Class R6 | 798,094 | 115,250 | (64,109 | ) | 849,235 | 26,088,487 | 425,785 | 3,219,520 | a | 4.26 | % | ||||
Templeton Foreign Fund, | |||||||||||||||
Class R6 | 18,004,006 | 1,022,644 | (3,418,124 | ) | 15,608,526 | 107,230,572 | 3,635,781 | 6,674,985 | 1.66 | % | |||||
Templeton Frontier Markets Fund, | |||||||||||||||
Class R6 | 3,315,755 | 249,297 | (282,418 | ) | 3,282,634 | 47,237,105 | 1,915,647 | 2,131,947 | 4.76 | % | |||||
Templeton Global Total Return Fund, | |||||||||||||||
Class R6 | 25,067,740 | 6,255,042 | (2,084,576 | ) | 29,238,206 | 366,939,485 | 25,033,508 | (139,802 | ) | 4.21 | % | ||||
Total | $ | 2,538,232,491 | $ | 71,287,655 | $ | 91,561,221 | |||||||||
Franklin Growth Allocation Fund | |||||||||||||||
Franklin Biotechnology Discovery | |||||||||||||||
Fund, Class R6 | 108,957 | 8,168 | (3,036 | ) | 114,089 | $ | 19,573,050 | $ | — | $ | 770,603 | a | 1.12 | % | |
Franklin DynaTech Fund, | |||||||||||||||
Class R6 | 2,288,810 | 156,781 | (63,815 | ) | 2,381,776 | 112,205,482 | — | 3,826,555 | a | 4.57 | % | ||||
Franklin Emerging Market Debt | |||||||||||||||
Opportunities Fundb | 865,398 | 176,660 | (195,884 | ) | 846,174 | 8,977,910 | 756,060 | (65,581 | )a | 1.50 | % | ||||
Franklin Flex Cap Growth Fund, | |||||||||||||||
Class R6 | 1,052,942 | 202,136 | (701,379 | ) | 553,699 | 28,498,910 | — | 14,443,713 | a | 0.82 | % | ||||
Franklin Growth Fund, Class R6 | 3,598,914 | 145,171 | (100,922 | ) | 3,643,163 | 272,362,882 | 1,678,257 | 378,927 | 2.42 | % | |||||
Franklin Growth Opportunities Fund, | |||||||||||||||
Class R6 | 1,441,104 | 294,640 | (40,297 | ) | 1,695,447 | 55,712,382 | — | 1,146,349 | a | 5.19 | % | ||||
Franklin International Growth Fund, | |||||||||||||||
Class R6 | 679,931 | 18,709 | (698,640 | ) | — | —c | — | 698,519 | — | ||||||
Franklin International Small Cap | |||||||||||||||
Growth Fund, Class R6 | 3,218,100 | 877,759 | (89,925 | ) | 4,005,934 | 72,387,228 | 1,235,228 | 6,219,089 | a | 4.48 | % | ||||
Franklin K2 Alternative Strategies | |||||||||||||||
Fund, Class R6 | — | 4,373,496 | — | 4,373,496 | 47,364,966 | 412,735 | — | 9.00 | % | ||||||
Franklin Low Duration Total Return | |||||||||||||||
Fund, Class R6 | 3,219,778 | 1,547,461 | (791,839 | ) | 3,975,400 | 39,873,265 | 889,761 | (36,843 | ) | 1.62 | % | ||||
Franklin MicroCap Value Fund, | |||||||||||||||
Class R6 | 454,665 | 12,463 | (467,128 | ) | — | —c | — | 6,055,053 | — | ||||||
Franklin Mutual European Fund, | |||||||||||||||
Class R6d | 3,932,230 | 690,252 | (110,353 | ) | 4,512,129 | 94,077,882 | 2,794,377 | 8,727,495 | a | 3.69 | % | ||||
Franklin Pelagos Commodities | |||||||||||||||
Strategy Fund, Class R6 | 1,170,588 | e | 562,818 | (33,205 | ) | 1,700,201 | 12,632,494 | — | (42,642 | ) | 22.31 | % | |||
Franklin Pelagos Managed Futures | |||||||||||||||
Strategy Fund | 109,997 | — | (109,997 | ) | — | —c | — | (202,189 | ) | — | |||||
Franklin Real Estate Securities Fund, | |||||||||||||||
Class R6 | 1,597,431 | 84,055 | (44,755 | ) | 1,636,731 | 36,057,180 | 588,209 | 30,094 | 6.20 | % | |||||
Franklin Rising Dividends Fund, | |||||||||||||||
Class R6 | 3,367,599 | 201,138 | (94,606 | ) | 3,474,131 | 180,654,802 | 2,679,105 | 1,729,060 | a | 1.04 | % | ||||
Franklin Small Cap Growth Fund, | |||||||||||||||
Class R6 | 481,030 | 461,282 | (16,308 | ) | 926,004 | 18,010,785 | — | 728,621 | a | 0.63 | % | ||||
Franklin Strategic Income Fund, | |||||||||||||||
Class R6 | 1,848,131 | 335,194 | (419,006 | ) | 1,764,319 | 17,660,832 | 1,006,968 | 194,133 | a | 0.20 | % |
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FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
3. | Transactions with Affiliates (continued) |
f. | Investments in Underlying Funds (continued) |
% of | ||||||||||||||
Underlying | ||||||||||||||
Number of | Number of | Fund Shares | ||||||||||||
Shares Held | Shares | Outstanding | ||||||||||||
at Beginning | Gross | Gross | Held at End | Value at End | Investment | Realized | Held at End | |||||||
Underlying Funds | of Year | Additions | Reductions | of Year | of Year | Income | Gain (Loss) | of Year | ||||||
Franklin Growth Allocation Fund | ||||||||||||||
(continued) | ||||||||||||||
Franklin U.S. Government Securities | ||||||||||||||
Fund, Class R6 | 6,182,355 | 913,815 | (3,857,346 | ) | 3,238,824 | $ | 21,117,136 | $ | 1,327,030 | $ | (299,806 | ) | 0.32 | % |
Franklin Utilities Fund, Class R6 | 4,542,020 | 389,930 | (588,238 | ) | 4,343,712 | 77,578,703 | 2,256,162 | 2,727,373 | a | 1.23 | % | |||
Institutional Fiduciary Trust Money | ||||||||||||||
Market Portfolio | 27,092,338 | 208,995,883 | (199,942,269 | ) | 36,145,952 | 36,145,952 | — | — | 0.21 | % | ||||
Templeton China World Fund, | ||||||||||||||
Class R6 | 612,750 | 116,612 | (17,217 | ) | 712,145 | 21,877,086 | 353,700 | 2,476,767 | a | 3.57 | % | |||
Templeton Foreign Fund, | ||||||||||||||
Class R6 | 12,945,242 | 1,243,932 | (1,683,169 | ) | 12,506,005 | 85,916,251 | 2,884,170 | 2,688,102 | a | 1.33 | % | |||
Templeton Frontier Markets Fund, | ||||||||||||||
Class R6 | 2,712,642 | 314,202 | (75,712 | ) | 2,951,132 | 42,466,788 | 1,698,329 | 1,527,853 | a | 4.28 | % | |||
Templeton Global Total Return Fund, | ||||||||||||||
Class R6 | 4,358,937 | 1,378,714 | (1,033,113 | ) | 4,704,538 | 59,041,947 | 4,253,479 | (553,354 | )a | 0.68 | % | |||
Total | $ | 1,360,193,913 | $ | 24,813,570 | $ | 53,167,891 |
aIncludes realized gain distributions received.
bEffective June 30, 2014, Franklin Templeton Emerging Markets Debt Opportunities Fund was renamed Franklin Emerging Market Debt Opportunities Fund.
cAs of December 31, 2014, no longer held by the fund.
dEffective June 30, 2014, Mutual European Fund was renamed Franklin Mutual European Fund.
eEffective January 10, 2014, the Underlying Fund’s shares were exchanged into Class R6.
g. Waiver and Expense Reimbursements
Advisers and Investor Services have contractually agreed in advance to waive or limit their fees and to assume as their own expense certain expenses otherwise payable by the Funds so that the expenses (excluding distribution fees, and acquired fund fees and expenses) for each class of the Funds do not exceed the following, based on the average net assets of each class (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until April 30, 2015:
Franklin | Franklin | Franklin | ||||
Conservative | Moderate | Growth | ||||
Allocation Fund | Allocation Fund | Allocation Fund | ||||
Class A, Class C, Class R & Advisor Class | 0.40 | % | 0.40 | % | 0.40 | % |
Class R6 | 0.29 | % | 0.28 | % | 0.24 | % |
For Franklin Conservative Allocation Fund and Franklin Moderate Allocation Fund, there were no expenses waived, other than the Sweep Money Fund waiver, during the year ended December 31, 2014.
4. Expense Offset Arrangement
The Funds have entered into an arrangement with their custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Funds’ custodian expenses. During the year ended December 31, 2014, there were no credits earned.
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FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
5. Income Taxes
The tax character of distributions paid during the years ended December 31, 2014 and 2013, was as follows:
Franklin Conservative | Franklin Moderate | Franklin Growth | ||||||||||
Allocation Fund | Allocation Fund | Allocation Fund | ||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||
Distributions paid from: | ||||||||||||
Ordinary income | $ | 46,567,227 | $ | 31,781,178 | $ | 62,536,525 | $ | 46,183,237 | $ | 23,795,165 | $ | 16,113,045 |
Long term capital gain | 19,995,576 | 56,989,027 | 57,302,898 | 94,678,015 | 31,069,307 | 32,564,705 | ||||||
$ | 66,562,803 | $ | 88,770,205 | $ | 119,839,423 | $ | 140,861,252 | $ | 54,864,472 | $ | 48,677,750 |
At December 31, 2014, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:
Franklin | Franklin | Franklin | |||||||
Conservative | Moderate | Growth | |||||||
Allocation Fund | Allocation Fund | Allocation Fund | |||||||
Cost of investments | $ | 1,556,688,959 | $ | 2,353,705,285 | $ | 1,162,410,932 | |||
Unrealized appreciation | $ | 202,244,992 | $ | 445,382,684 | $ | 316,682,623 | |||
Unrealized depreciation | (43,736,232 | ) | (52,144,846 | ) | (11,846,535 | ) | |||
Net unrealized appreciation (depreciation) | $ | 158,508,760 | $ | 393,237,838 | $ | 304,836,088 | |||
Undistributed ordinary income | $ | 2,522,771 | $ | 3,158,580 | $ | 1,491,332 | |||
Undistributed long term capital gains | 32,092,858 | 72,567,961 | 49,744,447 | ||||||
Distributable earnings | $ | 34,615,629 | $ | 75,726,541 | $ | 51,235,779 |
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of short term capital gains distributions from Underlying Funds and ETFs and wash sales.
6. Investment Transactions
Purchases and sales of Underlying Funds and ETFs (excluding short term securities) for the year ended December 31, 2014, were as follows:
Franklin | Franklin | Franklin | ||||
Conservative | Moderate | Growth | ||||
Allocation Fund | Allocation Fund | Allocation Fund | ||||
Purchases | $ | 324,616,280 | $ | 495,658,474 | $ | 302,424,330 |
Sales | $ | 280,443,435 | $ | 559,451,082 | $ | 250,351,090 |
7. Credit Facility
The Funds, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $1.5 billion (Global Credit Facility) which matured on February 13, 2015. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. The Borrowers expect to renew the Global Credit Facility for a total of $2 billion effective February 13, 2015, which matures on February 12, 2016.
franklintempleton.com Annual Report | 67
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
7. Credit Facility (continued)
Under the terms of the Global Credit Facility, the Funds shall, in addition to interest charged on any borrowings made by the Funds and other costs incurred by the Funds, pay their share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon their relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses on the Statements of Operations. During the year ended December 31, 2014, the Funds did not use the Global Credit Facility.
8. Fair Value Measurements
The Funds follow a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds’ own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds’ financial instruments and are summarized in the following fair value hierarchy:
- Level 1 – quoted prices in active markets for identical financial instruments
- Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
- Level 3 – significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of financial instruments)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
For movements between the levels within the fair value hierarchy, the Funds have adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.
At December 31, 2014, all of the Funds’ investments in financial instruments carried at fair value were valued using Level 1 inputs. For detailed categories, see the accompanying Statements of Investments.
9. Subsequent Events
The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.
Abbreviations
Selected Portfolio
ETF Exchange Traded Fund
68 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of Franklin Fund Allocator Series
In our opinion, the accompanying statements of assets and liabilities, including the statements of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Franklin Conservative Allocation Fund, Franklin Moderate Allocation Fund and Franklin Growth Allocation Fund (separate portfolios of Franklin Fund Allocator Series, hereafter referred to as the “Funds”) at December 31, 2014, the results of each of their operations for the year then ended, the changes in each of their net assets and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2014 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 13, 2015
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| 69
FRANKLIN FUND ALLOCATOR SERIES
Tax Information (unaudited)
Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Funds hereby report the maximum amount allowable but no less than the following amounts as long term capital gain dividends for the fiscal year ended December 31, 2014:
Franklin | Franklin | Franklin | |||
Conservative | Moderate | Growth | |||
Allocation Fund | Allocation Fund | Allocation Fund | |||
$ | 19,995,576 | $ | 57,302,898 | $ | 31,069,307 |
Under Section 871(k)(2)(C) of the Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as short term capital gain dividends for purposes of the tax imposed under Section 871(a)(1)(A) of the Code for the fiscal year ended December 31, 2014:
Franklin | Franklin | Franklin | |||
Conservative | Moderate | Growth | |||
Allocation Fund | Allocation Fund | Allocation Fund | |||
$ | 2,462,258 | $ | 4,798,207 | $ | 4,015,329 |
Under Section 854(b)(1)(A) of the Code, the Funds hereby report the following percentage amounts of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2014:
Franklin | Franklin | Franklin | |||
Conservative | Moderate | Growth | |||
Allocation Fund | Allocation Fund | Allocation Fund | |||
9.78 | % | 16.27 | % | 30.68 | % |
Under Section 854(b)(1)(B) of the Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended December 31, 2014:
Franklin | Franklin | Franklin | |||
Conservative | Moderate | Growth | |||
Allocation Fund | Allocation Fund | Allocation Fund | |||
$ | 9,992,432 | $ | 22,188,918 | $ | 16,506,807 |
Distributions, including qualified dividend income, paid during calendar year 2014 will be reported to shareholders on Form 1099-DIV by mid-February 2015. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.
During the fiscal year ended December 31, 2014, the Funds, qualified fund of funds under Section 852(g)(2) of Code, received an allocation of foreign taxes paid from one or more of its underlying funds. As shown in the table below, the Fund hereby reports to shareholders the foreign source income and foreign taxes paid by underlying funds, pursuant to Section 853 of the Code. This written statement will allow shareholders of record on December 29, 2014, to treat their proportionate share of foreign taxes paid by the underlying funds as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.
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FRANKLIN FUND ALLOCATOR SERIES
TAX INFORMATION (UNAUDITED)
The following tables provide a detailed analysis of foreign tax paid, foreign source income, and foreign source qualified dividends as reported by the Funds, to Class A, Class C, Class R, Class R6 and Advisor Class shareholders of record.
Foreign Tax Paid | Foreign Source | Foreign Source Qualified | ||||
Class | Per Share | Income Per Share | Dividends Per Share | |||
Franklin Conservative Allocation Fund | ||||||
Class A | $ | 0.0056 | $ | 0.1753 | $ | 0.0328 |
Class C | $ | 0.0056 | $ | 0.1753 | $ | 0.0328 |
Class R | $ | 0.0056 | $ | 0.1753 | $ | 0.0328 |
Class R6 | $ | 0.0056 | $ | 0.1753 | $ | 0.0328 |
Advisor Class | $ | 0.0056 | $ | 0.1753 | $ | 0.0328 |
Franklin Moderate Allocation Fund | ||||||
Class A | $ | 0.0070 | $ | 0.1653 | $ | 0.0484 |
Class C | $ | 0.0070 | $ | 0.1653 | $ | 0.0484 |
Class R | $ | 0.0070 | $ | 0.1653 | $ | 0.0484 |
Class R6 | $ | 0.0070 | $ | 0.1653 | $ | 0.0484 |
Advisor Class | $ | 0.0070 | $ | 0.1653 | $ | 0.0484 |
Franklin Growth Allocation Fund | ||||||
Class A | $ | 0.0106 | $ | 0.1573 | $ | 0.0840 |
Class C | $ | 0.0106 | $ | 0.1573 | $ | 0.0840 |
Class R | $ | 0.0106 | $ | 0.1573 | $ | 0.0840 |
Class R6 | $ | 0.0106 | $ | 0.1573 | $ | 0.0840 |
Advisor Class | $ | 0.0106 | $ | 0.1573 | $ | 0.0840 |
Foreign Tax Paid Per Share (Column 1) is the amount per share available to you, as a tax credit (assuming you held your shares in the Fund for a minimum of 16 days during the 31-day period beginning 15 days before the ex-dividend date of the Fund’s distribution to which the foreign taxes relate), or, as a tax deduction.
Foreign Source Income Per Share (Column 2) is the amount per share of income dividends attributable to foreign securities held by the underlying funds, plus any foreign taxes withheld on these dividends. The amounts reported include foreign source qualified dividends that have not been adjusted for the rate differential applicable to such dividend income.1
Foreign Source Qualified Dividends Per Share (Column 3) is the amount per share of foreign source qualified dividends, plus any foreign taxes withheld on these dividends. These amounts represent the portion of the Foreign Source Income reported to you in column 2 that were derived from qualified foreign securities held by the underlying funds.1
By mid-February 2015, shareholders will receive Form 1099-DIV which will include their share of taxes paid and foreign source income distributed during the calendar year 2014. The Foreign Source Income reported on Form 1099-DIV has not been adjusted for the rate differential on foreign source qualified dividend income. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their 2014 individual income tax returns.
1Qualified dividends are taxed at reduced long term capital gains tax rates. In determining the amount of foreign tax credit that may be applied against the U.S. tax liability
of individuals receiving foreign source qualified dividends, adjustments may be required to the foreign tax credit limitation calculation to reflect the rate differential applicable
to such dividend income. The rules however permit certain individuals to elect not to apply the rate differential adjustments for capital gains and/or dividends for any taxable
year. Please consult your tax advisor and the instructions to Form 1116 for more information.
franklintempleton.com Annual Report | 71
FRANKLIN FUND ALLOCATOR SERIES
Board Members and Officers
The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupations during at least the past five years and number of portfolios overseen in the Franklin Templeton Investments fund complex are shown below. Generally, each board member serves until that person’s successor is elected and qualified.
Independent Board Members | ||||
Number of Portfolios in | ||||
Name, Year of Birth | Length of | Fund Complex Overseen | Other Directorships Held During | |
and Address | Position | Time Served | by Board Member* | at Least the Past 5 Years |
Harris J. Ashton (1932) | Trustee | Since 1995 | 137 | Bar-S Foods (meat packing company) |
One Franklin Parkway | (1981-2010). | |||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Director of various companies; and formerly, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief Executive | ||||
Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998). | ||||
Mary C. Choksi (1950) | Trustee | Since October | 111 | Avis Budget Group Inc. (car rental), |
One Franklin Parkway | 2014 | Omnicom Group Inc. (advertising and | ||
San Mateo, CA 94403-1906 | marketing communications services) | |||
and H.J. Heinz Company (processed | ||||
foods and allied products) (1998-2006). | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Founding Partner and Senior Managing Director, Strategic Investment Group (investment management group) (1987-present); director of | ||||
various companies; and formerly, Founding Partner and Managing Director, Emerging Markets Management LLC (investment management | ||||
firm) (1987-2011); Loan Officer/Senior Loan Officer/Senior Pension Investment Officer, World Bank Group (international financial institution) | ||||
(1977-1987). | ||||
Sam Ginn (1937) | Trustee | Since 2007 | 111 | ICO Global Communications |
One Franklin Parkway | (Holdings) Limited (satellite company) | |||
San Mateo, CA 94403-1906 | (2006-2010), Chevron Corporation | |||
(global energy company) (1989-2009), | ||||
Hewlett-Packard Company (technology | ||||
company) (1996-2002), Safeway, Inc. | ||||
(grocery retailer) (1991-1998) and | ||||
TransAmerica Corporation (insurance | ||||
company) (1989-1999). | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Private investor; and formerly, Chairman, First Responder Network Authority (FirstNet) (interoperable wireless broadband network) (2012-2014); | ||||
Chairman of the Board, Vodafone AirTouch, PLC (wireless company) (1999-2000); Chairman of the Board and Chief Executive Officer, AirTouch | ||||
Communications (cellular communications) (1993-1998) and Pacific Telesis Group (telephone holding company) (1988-1994). | ||||
Edith E. Holiday (1952) | Trustee | Since 1998 | 137 | Hess Corporation (exploration and |
One Franklin Parkway | refining of oil and gas), H.J. Heinz | |||
San Mateo, CA 94403-1906 | Company (processed foods and | |||
allied products) (1994-2013), RTI | ||||
International Metals, Inc. (manufacture | ||||
and distribution of titanium), Canadian | ||||
National Railway (railroad) and White | ||||
Mountains Insurance Group, Ltd. | ||||
(holding company). | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Director or Trustee of various companies and trusts; and formerly, Assistant to the President of the United States and Secretary of the | ||||
Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and | ||||
Assistant Secretary for Public Affairs and Public Liaison – United States Treasury Department (1988-1989). |
72 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
Independent Board Members (continued) | ||||
Number of Portfolios in | ||||
Name, Year of Birth | Length of | Fund Complex Overseen | Other Directorships Held | |
and Address | Position | Time Served | by Board Member* | During at Least the Past 5 Years |
J. Michael Luttig (1954) | Trustee | Since 2009 | 137 | Boeing Capital Corporation |
One Franklin Parkway | (aircraft financing) (2006-2013). | |||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Executive Vice President, General Counsel and member of the Executive Council, The Boeing Company (aerospace company); and formerly, | ||||
Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006). | ||||
Frank A. Olson (1932) | Trustee | Since 2007 | 137 | Hess Corporation (exploration and |
One Franklin Parkway | refining of oil and gas) (1998-2013). | |||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Director of various companies; and formerly, Chairman of the Board, The Hertz Corporation (car rental) (1980-2000) and Chief Executive | ||||
Officer (1977-1999); and Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines) (June-December 1987). | ||||
Larry D. Thompson (1945) | Trustee | Since 2007 | 137 | Cbeyond, Inc. (business commu- |
One Franklin Parkway | nications provider) (2010-2012), | |||
San Mateo, CA 94403-1906 | The Southern Company (energy | |||
company) (December 2014; | ||||
previously 2010-2012) and Graham | ||||
Holdings Company (education and | ||||
media organization) (2011-present). | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Executive Vice President – Government Affairs, General Counsel and Corporate Secretary, PepsiCo, Inc. (consumer products) (2012-present); | ||||
and formerly, John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (2011-2012); Senior Vice | ||||
President – Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (2004-2011); Senior Fellow of The Brookings Institution | ||||
(2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General, U.S. Department of Justice | ||||
(2001-2003). | ||||
John B. Wilson (1959) | Lead | Trustee since | 111 | None |
One Franklin Parkway | Independent | 2006 and Lead | ||
San Mateo, CA 94403-1906 | Trustee | Independent | ||
Trustee since 2008 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
President, Staples Europe (office supplies) (2012-present); President and Founder, Hyannis Port Capital, Inc. (real estate and private equity | ||||
investing); serves on private and non-profit boards; and formerly, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail) | ||||
(1996-2000); Chief Financial Officer and Executive Vice President – Finance and Strategy, Staples, Inc. (1992-1996); Senior Vice President – | ||||
Corporate Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (consulting firm) | ||||
(1986-1990). |
franklintempleton.com Annual Report | 73
FRANKLIN FUND ALLOCATOR SERIES
Interested Board Members and Officers | ||||
Number of Portfolios in | ||||
Name, Year of Birth | Length of | Fund Complex Overseen | Other Directorships Held | |
and Address | Position | Time Served | by Board Member* | During at Least the Past 5 Years |
**Gregory E. Johnson (1961) | Trustee | Since 2007 | 147 | None |
One Franklin Parkway | ||||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Chairman of the Board, Member – Office of the Chairman, Director, President and Chief Executive Officer, Franklin Resources, Inc.; officer | ||||
and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment | ||||
companies in Franklin Templeton Investments; and Chairman, Investment Company Institute. | ||||
**Rupert H. Johnson, Jr. (1940) Chairman of | Chairman of the | 137 | None | |
One Franklin Parkway | the Board | Board and Trustee | ||
San Mateo, CA 94403-1906 | and Trustee | since 2013 | ||
Principal Occupation During at Least the Past 5 Years: | ||||
Vice Chairman, Member – Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc.; Senior Vice | ||||
President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of | ||||
Franklin Resources, Inc. and of 43 of the investment companies in Franklin Templeton Investments. | ||||
Alison E. Baur (1964) | Vice President | Since 2012 | Not Applicable | Not Applicable |
One Franklin Parkway | ||||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Deputy General Counsel, Franklin Templeton Investments; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of | ||||
46 of the investment companies in Franklin Templeton Investments. | ||||
Laura F. Fergerson (1962) | Chief Executive Since 2009 | Not Applicable | Not Applicable | |
One Franklin Parkway | Officer – | |||
San Mateo, CA 94403-1906 | Finance and | |||
Administration | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Vice President, Franklin Templeton Services, LLC; and officer of 46 of the investment companies in Franklin Templeton Investments. | ||||
Gaston Gardey (1967) | Treasurer, | Since 2009 | Not Applicable | Not Applicable |
One Franklin Parkway | Chief Financial | |||
San Mateo, CA 94403-1906 | Officer and | |||
Chief | ||||
Accounting | ||||
Officer | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Director, Fund Accounting, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin Templeton Investments. | ||||
Aliya S. Gordon (1973) | Vice President | Since 2009 | Not Applicable | Not Applicable |
One Franklin Parkway | ||||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Associate General Counsel, Franklin Templeton Investments; officer of 46 of the investment companies in Franklin Templeton | ||||
Investments; and formerly, Litigation Associate, Steefel, Levitt & Weiss, LLP (2000-2004). |
74 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
Interested Board Members and Officers (continued) | ||||
Number of Portfolios in | ||||
Name, Year of Birth | Length of | Fund Complex Overseen | Other Directorships Held | |
and Address | Position | Time Served | by Board Member* | During at Least the Past 5 Years |
Steven J. Gray (1955) | Vice President | Since 2009 | Not Applicable | Not Applicable |
One Franklin Parkway | ||||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc. and Franklin | ||||
Alternative Strategies Advisers, LLC; and officer of 46 of the investment companies in Franklin Templeton Investments. | ||||
Selena L. Holmes (1965) | Vice President | Since 2012 | Not Applicable | Not Applicable |
100 Fountain Parkway | – AML | |||
St. Petersburg, FL 33716-1205 | Compliance | |||
Principal Occupation During at Least the Past 5 Years: | ||||
Director, Global Compliance Monitoring; Chief Compliance Officer, Franklin Alternative Strategies Advisers, LLC; Vice President, Franklin | ||||
Templeton Companies, LLC; and officer of 46 of the investment companies in Franklin Templeton Investments. | ||||
Edward B. Jamieson (1948) | President and | Since 2010 | Not Applicable | Not Applicable |
One Franklin Parkway | Chief Executive | |||
San Mateo, CA 94403-1906 | Officer – | |||
Investment | ||||
Management | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
President, Chief Investment Officer and Director, Franklin Advisers, Inc.; Executive Vice President, Franklin Templeton Institutional, LLC; and | ||||
officer and/or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 10 of the investment | ||||
companies in Franklin Templeton Investments. | ||||
Kimberly H. Novotny (1972) | Vice President | Since 2013 | Not Applicable | Not Applicable |
300 S.E. 2nd Street | ||||
Fort Lauderdale, FL 33301-1923 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Associate General Counsel, Franklin Templeton Investments; Vice President and Secretary, Fiduciary Trust International of the South; Vice | ||||
President, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 46 of the investment companies | ||||
in Franklin Templeton Investments. | ||||
Robert C. Rosselot (1960) | Chief | Since 2013 | Not Applicable | Not Applicable |
300 S.E. 2nd Street | Compliance | |||
Fort Lauderdale, FL 33301-1923 | Officer | |||
Principal Occupation During at Least the Past 5 Years: | ||||
Director, Global Compliance, Franklin Templeton Investments; Vice President, Franklin Templeton Companies, LLC; officer of 46 of the | ||||
investment companies in Franklin Templeton Investments; and formerly, Senior Associate General Counsel, Franklin Templeton Investments | ||||
(2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013). | ||||
Karen L. Skidmore (1952) | Vice President | Since 2006 | Not Applicable | Not Applicable |
One Franklin Parkway | and Secretary | |||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 46 of the investment companies in Franklin | ||||
Templeton Investments. |
franklintempleton.com Annual Report | 75
FRANKLIN FUND ALLOCATOR SERIES
Interested Board Members and Officers (continued) | ||||
Number of Portfolios in | ||||
Name, Year of Birth | Length of | Fund Complex Overseen | Other Directorships Held | |
and Address | Position | Time Served | by Board Member* | During at Least the Past 5 Years |
Craig S. Tyle (1960) | Vice President | Since 2005 | Not Applicable | Not Applicable |
One Franklin Parkway | ||||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, | ||||
Inc. and of 46 of the investment companies in Franklin Templeton Investments. | ||||
Lori A. Weber (1964) | Vice President | Since 2011 | Not Applicable | Not Applicable |
300 S.E. 2nd Street | ||||
Fort Lauderdale, FL 33301-1923 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and | ||||
Secretary, Templeton Investment Counsel, LLC; Vice President, Fiduciary Trust International of the South; and officer of 46 of the investment | ||||
companies in Franklin Templeton Investments. |
*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton Investments fund complex.
These portfolios have a common investment manager or affiliated investment managers.
**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin
Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Rupert H. Johnson, Jr. is considered to be an interested
person of the Fund under the federal securities laws due to his position as officer and director and major shareholder of Resources.
Note 1: Rupert H. Johnson, Jr. is the uncle of Gregory E. Johnson.
Note 2: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.
The Sarbanes-Oxley Act of 2002 and Rules adopted by the Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee
includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there
is at least one such financial expert on the Audit Committee and has designated John B. Wilson as its audit committee financial expert. The Board believes that
Mr. Wilson qualifies as such an expert in view of his extensive business background and experience, including service as chief financial officer of Staples, Inc.
from 1992 to 1996. Mr. Wilson has been a Member and Chairman of the Fund’s Audit Committee since 2006. As a result of such background and experience, the
Board believes that Mr. Wilson has acquired an understanding of generally accepted accounting principles and financial statements, the general application of
such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth
and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for
financial reporting and an understanding of audit committee functions. Mr. Wilson is an independent Board member as that term is defined under the relevant
Securities and Exchange Commission Rules and Releases.
The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request.
Shareholders may call (800) DIAL BEN/342-5236 to request the SAI.
76 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
Shareholder Information
Proxy Voting Policies and Procedures
The Trust’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Trust uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Trust’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 (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Trust’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.
Quarterly Statement of Investments
The Trust files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.
Householding of Reports and Prospectuses
You will receive the Fund’s financial reports every six months as well as an annual updated summary prospectus (prospectus available upon request). To reduce Fund expenses, we try to identify related shareholders in a household and send only one copy of the financial reports and summary prospectus. This process, called “householding,” will continue indefinitely unless you instruct us otherwise. If you prefer not to have these documents householded, please call us at (800) 632-2301. At any time you may view current prospectuses/summary prospectuses and financial reports on our website. If you choose, you may receive these documents through electronic delivery.
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Contents | |
Annual Report | |
Economic and Market Overview | 3 |
Franklin Corefolio Allocation Fund | 4 |
Franklin Founding Funds | |
Allocation Fund | 13 |
Financial Highlights and | |
Statements of Investments | 22 |
Financial Statements | 32 |
Notes to Financial Statements | 35 |
Report of Independent Registered | |
Public Accounting Firm | 42 |
Tax Information | 43 |
Board Members and Officers | 45 |
Shareholder Information | 50 |
franklintempleton.com
1
Annual Report
Economic and Market Overview
The global economy grew moderately during 2014 as U.S. economic growth expanded while growth rates in much of the rest of the world declined. U.S. economic activity was supported in some quarters by increased consumer spending, business investment and federal defense spending. The housing market strengthened, and lower gasoline prices and improved job growth contributed to rising retail sales. The U.S. Federal Reserve Board (Fed) began reducing its large-scale bond purchases $10 billion a month in January and ended the buying program in October. But it continued its practice of maintaining holdings of longer term securities at sizable levels. Toward period-end, the Fed stated that it could be patient with regard to raising interest rates and that the interest rate might not rise for at least a couple of meetings, possibly implying at least the first two meetings of 2015.
Outside the U.S., the U.K. economy grew relatively well, supported by the services and manufacturing sectors. In the eurozone, economic growth remained subdued, as concerns persisted about the potential negative impacts to growth from the crisis in Ukraine and China’s moderating growth rate. In June, the European Central Bank (ECB) reduced its main interest rate and, for the first time, set a negative deposit rate; the ECB reduced both rates again in September. The ECB broadened its monetary easing stance by implementing an asset purchase program to prevent deflation and stimulate the economy. Japan’s second- and third-quarter economic contractions indicated the economy was in a recession, although private consumption and exports improved in the third quarter. In October, the Bank of Japan expanded its stimulus measures amid weak domestic demand and as substantially lower crude oil prices exerted further downward pressure on inflation. Near period-end, Japan’s ruling coalition was reelected in early parliamentary elections and subsequently announced a fresh stimulus package aimed at reviving economic growth.
Global developed market stocks, as measured by the MSCI World Index, advanced overall during the 12-month period amid a generally accommodative monetary policy environment and continued strength in corporate earnings. In several emerging markets, economic growth generally moderated. Emerging market stocks overall, as measured by the MSCI Emerging Markets Index, fell for the year, amid headwinds such as soft domestic demand, weak exports, plummeting crude oil prices, regional geopolitical tensions and concerns about possible U.S. interest rate increases. Many emerging market currencies depreciated against the U.S. dollar, leading several central banks to raise interest rates seeking to support their currencies. Several other central banks lowered interest rates to promote economic growth. Gold prices ended the year lower amid benign global inflation and a strong U.S. dollar.
The foregoing information reflects our analysis and opinions as of December 31, 2014. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.
franklintempleton.com
Annual Report
| 3
Franklin Corefolio Allocation Fund
(formerly, Franklin Templeton Corefolio Allocation Fund)
This annual report for Franklin Corefolio Allocation Fund covers the fiscal year ended December 31, 2014.
Your Fund’s Goal and Main Investments
The Fund seeks capital appreciation through investments in a combination of Franklin Flex Cap Growth Fund, Franklin Growth Fund, Franklin Mutual Shares Fund and Templeton Growth Fund.
Asset Allocation*
Based on Total Investments as of 12/31/14
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*The asset allocation is based on the Statement of Investments (SOI),
which classifies each underlying fund into a broad asset class.
Performance Overview
The Fund’s Class A shares delivered a +6.48% cumulative total return for the 12 months under review. In comparison, the Fund’s benchmarks, the Standard & Poor’s 500 Index (S&P 500®), which is a broad measure of U.S. stock performance, generated a +13.69% cumulative total return, and the MSCI World Index, which tracks equity performance in global developed markets, produced a +5.50% total return.1 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 6.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.
Investment Strategy
The Fund invests its assets allocated approximately 25% each in Franklin Flex Cap Growth Fund, Franklin Growth Fund, Franklin 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 rebalance the Fund’s allocations to maintain the predetermined weightings in each underlying fund whenever the actual allocations exceed plus or minus 3% of the fixed allocation percentages.
Portfolio Review
The Fund’s performance can be attributed largely to maintaining a relatively static allocation among domestic and foreign equities, fixed income securities, and short-term investments and other net assets, and to the actual performance of the selected underlying funds.
During the period under review, Franklin Flex Cap Growth Fund – Class R6 and Franklin Mutual Shares Fund – Class R6 underperformed the S&P 500, while Franklin Growth Fund –Class R6 outperformed the index. Templeton Growth Fund –Class R6 underperformed the MSCI World Index.
1. Source: Morningstar.
The indexes are unmanaged and include reinvested distributions. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s SOI, which begins on page 26.
4 | Annual Report franklintempleton.com
FRANKLIN COREFOLIO ALLOCATION FUND
Thank you for your continued participation in Franklin Corefolio Allocation Fund. We look forward to serving your future investment needs.
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The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2014, 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 investment manager 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.
CFA® is a trademark owned by CFA Institute.
franklintempleton.com Annual Report | 5
FRANKLIN COREFOLIO ALLOCATION FUND
Performance Summary as of December 31, 2014
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 and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses.
Net Asset Value | ||||||
Share Class (Symbol) | 12/31/14 | 12/31/13 | Change | |||
A (FTCOX) | $ | 18.00 | $ | 17.61 | +$ | 0.39 |
C (FTCLX) | $ | 17.81 | $ | 17.44 | +$ | 0.37 |
R (n/a) | $ | 18.01 | $ | 17.60 | +$ | 0.41 |
Advisor (FCAZX) | $ | 18.03 | $ | 17.64 | +$ | 0.39 |
Distributions (1/1/14–12/31/14) | ||||||
Dividend | Long-Term | |||||
Share Class | Income | Capital Gain | Total | |||
A | $ | 0.2918 | $ | 0.4611 | $ | 0.7529 |
C | $ | 0.1631 | $ | 0.4611 | $ | 0.6242 |
R | $ | 0.2395 | $ | 0.4611 | $ | 0.7006 |
Advisor | $ | 0.3480 | $ | 0.4611 | $ | 0.8091 |
6 | Annual Report franklintempleton.com
FRANKLIN COREFOLIO ALLOCATION FUND
PERFORMANCE SUMMARY
Performance as of 12/31/141
Cumulative total return excludes sales charges. Average annual total return and value of $10,000 investment include maximum sales charges. Class A: 5.75% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only;
Class R/Advisor: no sales charges.
Cumulative | Average Annual | Value of | Total Annual | |||||||
Share Class | Total Return2 | Total Return3 | $ | 10,000 Investment4 | Operating Expenses5 | |||||
A | 1.08 | % | ||||||||
1-Year | + | 6.48 | % | + | 0.38 | % | $ | 10,038 | ||
5-Year | + | 75.91 | % | + | 10.63 | % | $ | 16,573 | ||
10-Year | + | 86.77 | % | + | 5.82 | % | $ | 17,609 | ||
C | 1.79 | % | ||||||||
1-Year | + | 5.69 | % | + | 4.69 | % | $ | 10,469 | ||
5-Year | + | 69.76 | % | + | 11.17 | % | $ | 16,976 | ||
10-Year | + | 74.29 | % | + | 5.71 | % | $ | 17,429 | ||
R | 1.29 | % | ||||||||
1-Year | + | 6.30 | % | + | 6.30 | % | $ | 10,630 | ||
5-Year | + | 74.07 | % | + | 11.72 | % | $ | 17,407 | ||
10-Year | + | 83.11 | % | + | 6.24 | % | $ | 18,311 | ||
Advisor | 0.79 | % | ||||||||
1-Year | + | 6.79 | % | + | 6.79 | % | $ | 10,679 | ||
5-Year | + | 78.49 | % | + | 12.28 | % | $ | 17,849 | ||
10-Year | + | 92.35 | % | + | 6.76 | % | $ | 19,235 |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
franklintempleton.com Annual Report | 7
FRANKLIN COREFOLIO ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/ffas2_secx8x1.jpg)
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/ffas2_secx8x2.jpg)
8 | Annual Report franklintempleton.com
FRANKLIN COREFOLIO ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/ffas2_secx9x1.jpg)
franklintempleton.com Annual Report | 9
FRANKLIN COREFOLIO ALLOCATION FUND
PERFORMANCE SUMMARY
All investments involve risks, including possible loss of principal. Because the Fund invests in underlying funds that may engage in a variety of investment strategies involving certain risks, this Fund of funds may be subject to those same risks. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general conditions. Foreign investing carries additional risks such as currency and market volatility, and political or social instability, risks that are heightened in developing countries. Smaller or relatively new or unseasoned companies can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. Value securities may not increase in price as anticipated or may decline further in value. These and other risks, including investments in specialized industry sectors such as the technology sector, which has been among the most volatile in the market, are discussed in the Fund’s prospectus.
Class C: | These shares have higher annual fees and expenses than Class A shares. |
Class R: | 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: | Shares are available to certain eligible investors as described in the prospectus. |
1. The Fund has a fee waiver associated with its investments in a Franklin Templeton money fund, contractually guaranteed through at least its current fiscal year-end.
Fund investment results reflect the fee waiver, to the extent applicable; without this reduction, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated.
4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
5. Figures are as stated in the Fund’s current prospectus. In periods of volatility, assets may decline significantly, causing total annual Fund operating expenses to become
higher than the figures shown.
6. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The MSCI World
Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets.
See www.franklintempletondatasources.com for additional data provider information.
10 | Annual Report franklintempleton.com
FRANKLIN COREFOLIO ALLOCATION FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs:
- Transaction costs, including sales charges (loads) on Fund purchases; and
- Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:
1. | Divide your account value by $1,000. |
If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6. | |
2. | Multiply the result by the number under the heading “Expenses Paid During Period.” |
If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50. |
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
franklintempleton.com Annual Report | 11
FRANKLIN COREFOLIO ALLOCATION FUND | ||||||||
YOUR FUND’S EXPENSES | ||||||||
Beginning | Ending | Expenses Paid | Expenses Paid | |||||
Account | Account | During Period* | During Period** | |||||
Share Class | Value 7/1/14 | Value 12/31/14 | 7/1/14–12/31/14 | 7/1/14–12/31/14 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 1,002.40 | $ | 2.37 | $ | 5.30 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.84 | $ | 2.40 | $ | 5.35 |
C | ||||||||
Actual | $ | 1,000 | $ | 998.70 | $ | 5.94 | $ | 8.87 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.26 | $ | 6.01 | $ | 8.94 |
R | ||||||||
Actual | $ | 1,000 | $ | 1,001.80 | $ | 3.43 | $ | 6.36 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,021.78 | $ | 3.47 | $ | 6.41 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 1,003.80 | $ | 0.91 | $ | 3.84 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,024.30 | $ | 0.92 | $ | 3.87 |
*Expenses are calculated using the most recent six-month expense ratio excluding expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 0.47%; C: 1.18%; R: 0.68%; and Advisor: 0.18%), multiplied by the average account value over the period,
multiplied by 184/365 to reflect the one-half year period.
**Expenses are calculated using the most recent six-month expense ratio including expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 1.05%; C: 1.76%; R: 1.26%; and Advisor: 0.76%), multiplied by the average account value over the period,
multiplied by 184/365 to reflect the one-half year period.
12 | Annual Report franklintempleton.com
Franklin Founding Funds Allocation Fund
(formerly, Franklin Templeton Founding Funds Allocation Fund)
This annual report for Franklin Founding Funds Allocation Fund covers the fiscal year ended December 31, 2014.
Your Fund’s Goals and Main Investments
The 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, Franklin Mutual Shares Fund and Templeton Growth Fund.
Asset Allocation*
Based on Total Net Assets as of 12/31/14
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/ffas2_secx13x1.jpg)
*The asset allocation is based on the Statement of Investments (SOI),
which classifies each underlying fund into a broad asset class.
Performance Overview
The Fund’s Class A shares delivered a +2.92% cumulative total return for the 12 months under review. In comparison, the Fund’s benchmarks, the Standard & Poor’s 500 Index (S&P 500), which is a broad measure of U.S. stock performance, generated a +13.69% total return and the MSCI World Index, which tracks equity performance in global developed markets, produced a +5.50% total return.1 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 15.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.
Investment Strategy
The Fund invests its assets in an equally weighted combination of Franklin Income Fund, Franklin 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 rebalance the Fund’s allocations to maintain the predetermined equal weightings of approximately 33 1 / 3% of total net assets in each underlying fund whenever the actual allocations exceed plus or minus 3% of the fixed allocation percentages.
Portfolio Review
The Fund’s performance can be attributed largely to maintaining a relatively static allocation among domestic and foreign equities, fixed income securities, and short-term investments and other net assets, and to the actual performance of the selected underlying funds.
During the period under review, Franklin Income Fund –Class R6 and Franklin Mutual Shares Fund – Class R6 under-performed the S&P 500. Templeton Growth Fund – Class R6 underperformed the MSCI World Index.
1. Source: Morningstar.
The indexes are unmanaged and include reinvested distributions. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s SOI, which begins on page 31.
franklintempleton.com Annual Report | 13
FRANKLIN FOUNDING FUNDS ALLOCATION FUND
Thank you for your continued participation in Franklin Founding Funds Allocation Fund. We look forward to serving your future investment needs.
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/ffas2_secx14x1.jpg)
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2014, 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 investment manager 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.
14 | Annual Report franklintempleton.com
FRANKLIN FOUNDING FUNDS ALLOCATION FUND
Performance Summary as of December 31, 2014
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 and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses.
Net Asset Value | ||||||
Share Class (Symbol) | 12/31/14 | 12/31/13 | Change | |||
A (FFALX) | $ | 13.31 | $ | 13.37 | -$ | 0.06 |
C (FFACX) | $ | 13.11 | $ | 13.18 | -$ | 0.07 |
R (FFARX) | $ | 13.33 | $ | 13.39 | -$ | 0.06 |
Advisor (FFAAX) | $ | 13.38 | $ | 13.44 | -$ | 0.06 |
Distributions (1/1/14–12/31/14) | ||
Share Class | Dividend Income | |
A | $ | 0.4562 |
C | $ | 0.3538 |
R | $ | 0.4242 |
Advisor | $ | 0.4925 |
franklintempleton.com Annual Report | 15
FRANKLIN FOUNDING FUNDS ALLOCATION FUND
PERFORMANCE SUMMARY
Performance as of 12/31/141
Cumulative total return excludes sales charges. Average annual total return and value of $10,000 investment include maximum sales charges. Class A: 5.75% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only;
Class R/Advisor: no sales charges.
Cumulative | Average Annual | Value of | Total Annual | |||||||
Share Class | Total Return2 | Total Return3 | $ | 10,000 Investment4 | Operating Expenses5 | |||||
A | 1.02 | % | ||||||||
1-Year | + | 2.92 | % | -3.03 | % | $ | 9,697 | |||
5-Year | + | 61.15 | % | + | 8.72 | % | $ | 15,187 | ||
10-Year | + | 72.24 | % | + | 4.96 | % | $ | 16,233 | ||
C | 1.77 | % | ||||||||
1-Year | + | 2.12 | % | + | 1.13 | % | $ | 10,113 | ||
5-Year | + | 55.03 | % | + | 9.17 | % | $ | 15,503 | ||
10-Year | + | 60.31 | % | + | 4.83 | % | $ | 16,031 | ||
R | 1.27 | % | ||||||||
1-Year | + | 2.68 | % | + | 2.68 | % | $ | 10,268 | ||
5-Year | + | 59.01 | % | + | 9.72 | % | $ | 15,901 | ||
10-Year | + | 68.46 | % | + | 5.35 | % | $ | 16,846 | ||
Advisor | 0.77 | % | ||||||||
1-Year | + | 3.17 | % | + | 3.17 | % | $ | 10,317 | ||
5-Year | + | 63.13 | % | + | 10.28 | % | $ | 16,313 | ||
10-Year | + | 77.10 | % | + | 5.88 | % | $ | 17,710 |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
16 | Annual Report franklintempleton.com
FRANKLIN FOUNDING FUNDS ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/ffas2_secx17x1.jpg)
franklintempleton.com Annual Report | 17
FRANKLIN FOUNDING FUNDS ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/ffas2_secx18x1.jpg)
18 | Annual Report franklintempleton.com
FRANKLIN FOUNDING FUNDS ALLOCATION FUND
PERFORMANCE SUMMARY
All investments involve risks, including possible loss of principal. Because the Fund invests in underlying funds that may engage in a variety of investment strategies involving certain risks, this Fund is subject to these same risks. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bonds are affected by changes in interest rates and the creditworthiness of their issuers. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds adjust to a rise in interest rates, the Fund’s share price may decline. Higher yielding, lower rated corporate bonds entail a greater degree of credit risk compared to investment-grade securities. Foreign investing carries additional risks such as currency and market volatility, and political or social instability, risks that are heightened in developing countries. Value securities may not increase in price as anticipated or may decline further in value. The Fund’s prospectus also includes a description of the main investment risks.
Class C: | These shares have higher annual fees and expenses than Class A shares. |
Class R: | 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: | Shares are available to certain eligible investors as described in the prospectus. |
1. The Fund has a fee waiver associated with its investments in a Franklin Templeton money fund, contractually guaranteed through at least its current fiscal year-end.
Fund investment results reflect the fee waiver, to the extent applicable; without this reduction, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated.
4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
5. Figures are as stated in the Fund’s current prospectus. In periods of volatility, assets may decline significantly, causing total annual Fund operating expenses to become
higher than the figures shown.
6. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The MSCI World
Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets.
See www.franklintempletondatasources.com for additional data provider information.
franklintempleton.com Annual Report | 19
FRANKLIN FOUNDING FUNDS ALLOCATION FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs:
- Transaction costs, including sales charges (loads) on fund purchases; and
- Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:
1. | Divide your account value by $1,000. |
If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6. | |
2. | Multiply the result by the number under the heading “Expenses Paid During Period.” |
If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50. |
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
20 | Annual Report
franklintempleton.com
FRANKLIN FOUNDING FUNDS ALLOCATION FUND
YOUR FUND’S EXPENSES
Beginning | Ending | Expenses Paid | Expenses Paid | |||||
Account | Account | During Period* | During Period** | |||||
Share Class | Value 7/1/14 | Value 12/31/14 | 7/1/14–12/31/14 | 7/1/14–12/31/14 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 958.00 | $ | 2.02 | $ | 4.89 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.14 | $ | 2.09 | $ | 5.04 |
C | ||||||||
Actual | $ | 1,000 | $ | 954.40 | $ | 5.71 | $ | 8.57 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.36 | $ | 5.90 | $ | 8.84 |
R | ||||||||
Actual | $ | 1,000 | $ | 956.90 | $ | 3.26 | $ | 6.12 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,021.88 | $ | 3.36 | $ | 6.31 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 959.50 | $ | 0.79 | $ | 3.65 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,024.40 | $ | 0.82 | $ | 3.77 |
*Expenses are calculated using the most recent six-month expense ratio excluding expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 0.41%; C: 1.16%; R: 0.66%; and Advisor: 0.16%), multiplied by the average account value over the period,
multiplied by 184/365 to reflect the one-half year period.
**Expenses are calculated using the most recent six-month expense ratio including expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 0.99%; C: 1.74%; R: 1.24%; and Advisor: 0.74%), multiplied by the average account value over the period,
multiplied by 184/365 to reflect the one-half year period.
franklintempleton.com Annual Report | 21
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
Financial Highlights | |||||||||||||||
Franklin Corefolio Allocation Fund | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class A | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 17.61 | $ | 13.57 | $ | 11.93 | $ | 12.41 | $ | 11.08 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.23 | 0.11 | 0.11 | 0.11 | 0.15 | ||||||||||
Net realized and unrealized gains (losses) | 0.91 | 4.09 | 1.65 | (0.47 | ) | 1.30 | |||||||||
Total from investment operations | 1.14 | 4.20 | 1.76 | (0.36 | ) | 1.45 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.29 | ) | (0.16 | ) | (0.12 | ) | (0.12 | ) | (0.12 | ) | |||||
Net realized gains | (0.46 | ) | — | — | — | — | |||||||||
Total distributions | (0.75 | ) | (0.16 | ) | (0.12 | ) | (0.12 | ) | (0.12 | ) | |||||
Net asset value, end of year | $ | 18.00 | $ | 17.61 | $ | 13.57 | $ | 11.93 | $ | 12.41 | |||||
Total returnd | 6.48 | % | 31.01 | % | 14.80 | % | (2.90 | )% | 13.13 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 0.48 | % | 0.44 | % | 0.36 | % | 0.39 | % | 0.45 | % | |||||
Expenses net of waiver and payments by affiliatese | 0.48 | %f | 0.44 | % | 0.36 | % | 0.39 | % | 0.38 | % | |||||
Net investment incomec | 1.27 | % | 0.68 | % | 0.86 | % | 0.89 | % | 1.26 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 558,862 | $ | 558,124 | $ | 449,252 | $ | 418,444 | $ | 479,773 | |||||
Portfolio turnover rate | 5.77 | % | 5.90 | % | 2.14 | % | 2.50 | % | 21.72 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds in which the Fund invests.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eDoes not include expenses of the Underlying Funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds was 0.58% for the year
ended December 31, 2014.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
22 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin Corefolio Allocation Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class C | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 17.44 | $ | 13.45 | $ | 11.82 | $ | 12.30 | $ | 10.99 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment income (loss)b,c | 0.10 | (—)d | 0.02 | 0.02 | 0.06 | ||||||||||
Net realized and unrealized gains (losses) | 0.89 | 4.04 | 1.64 | (0.47 | ) | 1.30 | |||||||||
Total from investment operations | 0.99 | 4.04 | 1.66 | (0.45 | ) | 1.36 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.16 | ) | (0.05 | ) | (0.03 | ) | (0.03 | ) | (0.05 | ) | |||||
Net realized gains | (0.46 | ) | — | — | — | — | |||||||||
Total distributions | (0.62 | ) | (0.05 | ) | (0.03 | ) | (0.03 | ) | (0.05 | ) | |||||
Net asset value, end of year | $ | 17.81 | $ | 17.44 | $ | 13.45 | $ | 11.82 | $ | 12.30 | |||||
Total returne | 5.69 | % | 30.09 | % | 14.04 | % | (3.67 | )% | 12.39 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesf | 1.19 | % | 1.15 | % | 1.07 | % | 1.10 | % | 1.17 | % | |||||
Expenses net of waiver and payments by affiliatesf | 1.19 | %g | 1.15 | % | 1.07 | % | 1.10 | % | 1.10 | % | |||||
Net investment income (loss)c | 0.56 | % | (0.03 | )% | 0.15 | % | 0.18 | % | 0.54 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 176,680 | $ | 176,332 | $ | 142,879 | $ | 138,447 | $ | 162,084 | |||||
Portfolio turnover rate | 5.77 | % | 5.90 | % | 2.14 | % | 2.50 | % | 21.72 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds in which the Fund invests.
dAmount rounds to less than $0.01 per share.
eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
fDoes not include expenses of the Underlying Funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds was 0.58% for the year
ended December 31, 2014.
gBenefit of waiver and payments by affiliates rounds to less than 0.01%.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 23
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin Corefolio Allocation Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class R | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 17.60 | $ | 13.56 | $ | 11.93 | $ | 12.41 | $ | 11.08 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.16 | 0.06 | 0.09 | 0.08 | 0.12 | ||||||||||
Net realized and unrealized gains (losses) | 0.95 | 4.11 | 1.64 | (0.47 | ) | 1.31 | |||||||||
Total from investment operations | 1.11 | 4.17 | 1.73 | (0.39 | ) | 1.43 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.24 | ) | (0.13 | ) | (0.10 | ) | (0.09 | ) | (0.10 | ) | |||||
Net realized gains | (0.46 | ) | — | — | — | — | |||||||||
Total distributions | (0.70 | ) | (0.13 | ) | (0.10 | ) | (0.09 | ) | (0.10 | ) | |||||
Net asset value, end of year | $ | 18.01 | $ | 17.60 | $ | 13.56 | $ | 11.93 | $ | 12.41 | |||||
Total return | 6.30 | % | 30.76 | % | 14.49 | % | (3.15 | )% | 12.93 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 0.69 | % | 0.65 | % | 0.57 | % | 0.60 | % | 0.67 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.69 | %e | 0.65 | % | 0.57 | % | 0.60 | % | 0.60 | % | |||||
Net investment incomec | 1.06 | % | 0.47 | % | 0.65 | % | 0.68 | % | 1.04 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 1,545 | $ | 1,903 | $ | 1,856 | $ | 1,686 | $ | 2,188 | |||||
Portfolio turnover rate | 5.77 | % | 5.90 | % | 2.14 | % | 2.50 | % | 21.72 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds in which the Fund invests.
dDoes not include expenses of the Underlying Funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds was 0.58% for the year
ended December 31, 2014.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
24 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin Corefolio Allocation Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Advisor Class | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 17.64 | $ | 13.59 | $ | 11.95 | $ | 12.44 | $ | 11.09 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.32 | 0.18 | 0.18 | 0.17 | 0.26 | ||||||||||
Net realized and unrealized gains (losses) | 0.88 | 4.08 | 1.62 | (0.50 | ) | 1.24 | |||||||||
Total from investment operations | 1.20 | 4.26 | 1.80 | (0.33 | ) | 1.50 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.35 | ) | (0.21 | ) | (0.16 | ) | (0.16 | ) | (0.15 | ) | |||||
Net realized gains | (0.46 | ) | — | — | — | — | |||||||||
Total distributions | (0.81 | ) | (0.21 | ) | (0.16 | ) | (0.16 | ) | (0.15 | ) | |||||
Net asset value, end of year | $ | 18.03 | $ | 17.64 | $ | 13.59 | $ | 11.95 | $ | 12.44 | |||||
Total return | 6.79 | % | 31.38 | % | 15.11 | % | (2.67 | )% | 13.56 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 0.19 | % | 0.15 | % | 0.07 | % | 0.10 | % | 0.17 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.19 | %e | 0.15 | % | 0.07 | % | 0.10 | % | 0.10 | % | |||||
Net investment incomec | 1.56 | % | 0.97 | % | 1.15 | % | 1.18 | % | 1.54 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 18,918 | $ | 15,495 | $ | 10,245 | $ | 7,815 | $ | 7,357 | |||||
Portfolio turnover rate | 5.77 | % | 5.90 | % | 2.14 | % | 2.50 | % | 21.72 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds in which the Fund invests.
dDoes not include expenses of the Underlying Funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds was 0.58% for the year
ended December 31, 2014.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 25
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2014 | ||||
Franklin Corefolio Allocation Fund | ||||
Shares | Value | |||
Investments in Underlying Fundsa | ||||
Domestic Equity 76.1% | ||||
b Franklin Flex Cap Growth Fund, Class R6 | 3,732,210 | $ | 192,096,867 | |
Franklin Growth Fund, Class R6 | 2,568,915 | 192,052,087 | ||
Franklin Mutual Shares Fund, Class R6 | 6,472,059 | 190,990,478 | ||
575,139,432 | ||||
Foreign Equity 24.0% | ||||
Templeton Growth Fund Inc., Class R6 | 7,644,877 | 181,871,618 | ||
Total Investments in Underlying Funds before Short Term Investments | ||||
(Cost $556,163,867) 100.1% | 757,011,050 | |||
Short Term Investments (Cost $69,924) 0.0%† | ||||
Money Market Funds 0.0%† | ||||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 69,924 | 69,924 | ||
Total Investments in Underlying Funds (Cost $556,233,791) 100.1% | 757,080,974 | |||
Other Assets, less Liabilities (0.1)% | (1,075,298 | ) | ||
Net Assets 100.0% | $ | 756,005,676 |
†Rounds to less than 0.1% of net assets.
aSee Note 3(e) regarding investments in Underlying Funds.
bNon-income producing.
26 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
Financial Highlights | |||||||||||||||
Franklin Founding Funds Allocation Fund | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class A | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 13.37 | $ | 11.14 | $ | 9.88 | $ | 10.46 | $ | 9.82 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.46 | 0.32 | 0.35 | 0.35 | 0.36 | ||||||||||
Net realized and unrealized gains (losses) | (0.06 | ) | 2.29 | 1.28 | (0.55 | ) | 0.66 | ||||||||
Total from investment operations | 0.40 | 2.61 | 1.63 | (0.20 | ) | 1.02 | |||||||||
Less distributions from net investment income | (0.46 | ) | (0.38 | ) | (0.37 | ) | (0.38 | ) | (0.38 | ) | |||||
Net asset value, end of year | $ | 13.31 | $ | 13.37 | $ | 11.14 | $ | 9.88 | $ | 10.46 | |||||
Total returnd | 2.92 | % | 23.64 | % | 16.76 | % | (1.95 | )% | 10.61 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 0.41 | % | 0.39 | % | 0.33 | % | 0.34 | % | 0.41 | % | |||||
Expenses net of waiver and payments by affiliatese | 0.41 | %f | 0.39 | % | 0.33 | % | 0.34 | % | 0.35 | % | |||||
Net investment incomec | 3.35 | % | 2.63 | % | 3.24 | % | 3.36 | % | 3.61 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 3,958,706 | $ | 4,170,045 | $ | 3,766,640 | $ | 3,773,080 | $ | 4,771,043 | |||||
Portfolio turnover rate | 3.79 | % | 3.04 | % | 3.59 | % | 3.69 | % | 3.99 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds in which the Fund invests.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eDoes not include expenses of the Underlying Funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds was 0.58% for the year
ended December 31, 2014.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 27
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin Founding Funds Allocation Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class C | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 13.18 | $ | 10.99 | $ | 9.75 | $ | 10.32 | $ | 9.70 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.35 | 0.23 | 0.26 | 0.27 | 0.28 | ||||||||||
Net realized and unrealized gains (losses) | (0.07 | ) | 2.25 | 1.27 | (0.54 | ) | 0.64 | ||||||||
Total from investment operations | 0.28 | 2.48 | 1.53 | (0.27 | ) | 0.92 | |||||||||
Less distributions from net investment income | (0.35 | ) | (0.29 | ) | (0.29 | ) | (0.30 | ) | (0.30 | ) | |||||
Net asset value, end of year | $ | 13.11 | $ | 13.18 | $ | 10.99 | $ | 9.75 | $ | 10.32 | |||||
Total returnd | 2.12 | % | 22.69 | % | 15.87 | % | (2.65 | )% | 9.69 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 1.16 | % | 1.14 | % | 1.08 | % | 1.09 | % | 1.16 | % | |||||
Expenses net of waiver and payments by affiliatese | 1.16 | %f | 1.14 | % | 1.08 | % | 1.09 | % | 1.10 | % | |||||
Net investment incomec | 2.60 | % | 1.88 | % | 2.49 | % | 2.61 | % | 2.86 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 1,745,766 | $ | 1,829,111 | $ | 1,657,087 | $ | 1,743,292 | $ | 2,252,033 | |||||
Portfolio turnover rate | 3.79 | % | 3.04 | % | 3.59 | % | 3.69 | % | 3.99 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds in which the Fund invests.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eDoes not include expenses of the Underlying Funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds was 0.58% for the year
ended December 31, 2014.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
28 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin Founding Funds Allocation Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class R | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 13.39 | $ | 11.16 | $ | 9.89 | $ | 10.48 | $ | 9.84 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.44 | 0.29 | 0.31 | 0.35 | 0.34 | ||||||||||
Net realized and unrealized gains (losses) | (0.08 | ) | 2.29 | 1.30 | (0.58 | ) | 0.65 | ||||||||
Total from investment operations | 0.36 | 2.58 | 1.61 | (0.23 | ) | 0.99 | |||||||||
Less distributions from net investment income | (0.42 | ) | (0.35 | ) | (0.34 | ) | (0.36 | ) | (0.35 | ) | |||||
Net asset value, end of year | $ | 13.33 | $ | 13.39 | $ | 11.16 | $ | 9.89 | $ | 10.48 | |||||
Total return | 2.68 | % | 23.28 | % | 16.52 | % | (2.27 | )% | 10.31 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 0.66 | % | 0.64 | % | 0.58 | % | 0.59 | % | 0.66 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.66 | %e | 0.64 | % | 0.58 | % | 0.59 | % | 0.60 | % | |||||
Net investment incomec | 3.10 | % | 2.38 | % | 2.99 | % | 3.11 | % | 3.36 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 11,619 | $ | 10,597 | $ | 10,058 | $ | 11,922 | $ | 12,568 | |||||
Portfolio turnover rate | 3.79 | % | 3.04 | % | 3.59 | % | 3.69 | % | 3.99 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds in which the Fund invests.
dDoes not include expenses of the Underlying Funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds was 0.58% for the year
ended December 31, 2014.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 29
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin Founding Funds Allocation Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Advisor Class | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 13.44 | $ | 11.20 | $ | 9.93 | $ | 10.52 | $ | 9.87 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.53 | 0.39 | 0.38 | 0.39 | 0.40 | ||||||||||
Net realized and unrealized gains (losses) | (0.10 | ) | 2.26 | 1.29 | (0.57 | ) | 0.66 | ||||||||
Total from investment operations | 0.43 | 2.65 | 1.67 | (0.18 | ) | 1.06 | |||||||||
Less distributions from net investment income | (0.49 | ) | (0.41 | ) | (0.40 | ) | (0.41 | ) | (0.41 | ) | |||||
Net asset value, end of year | $ | 13.38 | $ | 13.44 | $ | 11.20 | $ | 9.93 | $ | 10.52 | |||||
Total return | 3.17 | % | 23.93 | % | 17.08 | % | (1.78 | )% | 10.95 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 0.16 | % | 0.14 | % | 0.08 | % | 0.09 | % | 0.16 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.16 | %e | 0.14 | % | 0.08 | % | 0.09 | % | 0.10 | % | |||||
Net investment incomec | 3.60 | % | 2.88 | % | 3.49 | % | 3.61 | % | 3.86 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 141,932 | $ | 114,369 | $ | 71,487 | $ | 72,427 | $ | 71,126 | |||||
Portfolio turnover rate | 3.79 | % | 3.04 | % | 3.59 | % | 3.69 | % | 3.99 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds in which the Fund invests.
dDoes not include expenses of the Underlying Funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds was 0.58% for the year
ended December 31, 2014.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
30 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2014 | ||||
Franklin Founding Funds Allocation Fund | ||||
Shares | Value | |||
Investments in Underlying Fundsa | ||||
Domestic Equity 33.5% | ||||
Franklin Mutual Shares Fund, Class R6 | 66,439,008 | $ | 1,960,615,131 | |
Domestic Hybrid 33.0% | ||||
Franklin Income Fund, Class R6 | 812,267,014 | 1,933,195,492 | ||
Foreign Equity 33.0% | ||||
Templeton Growth Fund Inc., Class R6 | 81,271,618 | 1,933,451,797 | ||
Total Investments in Underlying Funds before Short Term Investments | ||||
(Cost $5,393,006,227) 99.5% | 5,827,262,420 | |||
Short Term Investments (Cost $37,146,628) 0.6% | ||||
Money Market Funds 0.6% | ||||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 37,146,628 | 37,146,628 | ||
Total Investments in Underlying Funds (Cost $5,430,152,855) 100.1% | 5,864,409,048 | |||
Other Assets, less Liabilities (0.1)% | (6,385,761 | ) | ||
Net Assets 100.0% | $ | 5,858,023,287 |
aSee Note 3(e) regarding investments in Underlying Funds.
bNon-income producing.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 31
FRANKLIN FUND ALLOCATOR SERIES
Financial Statements
Statements of Assets and Liabilities
December 31, 2014
Franklin | Franklin | |||||
Corefolio | Founding Funds | |||||
Allocation Fund | Allocation Fund | |||||
Assets: | ||||||
Investments in Underlying Funds: (Note 3e) | ||||||
Cost | $ | 556,233,791 | $ | 5,430,152,855 | ||
Value | $ | 757,080,974 | $ | 5,864,409,048 | ||
Receivables from capital shares sold | 733,882 | 8,954,744 | ||||
Other assets | 64 | 522 | ||||
Total assets | 757,814,920 | 5,873,364,314 | ||||
Liabilities: | ||||||
Payables: | ||||||
Capital shares redeemed | 1,047,380 | 9,040,820 | ||||
Administrative fees | 19,309 | 148,658 | ||||
Distribution fees | 561,875 | 4,643,691 | ||||
Transfer agent fees | 129,237 | 1,245,085 | ||||
Accrued expenses and other liabilities | 51,443 | 262,773 | ||||
Total liabilities | 1,809,244 | 15,341,027 | ||||
Net assets, at value | $ | 756,005,676 | $ | 5,858,023,287 | ||
Net assets consist of: | ||||||
Paid-in capital | $ | 541,713,402 | $ | 7,978,204,336 | ||
Undistributed net investment income | 308,304 | 8,313,547 | ||||
Net unrealized appreciation (depreciation) | 200,847,183 | 434,256,193 | ||||
Accumulated net realized gain (loss) | 13,136,787 | (2,562,750,789 | ) | |||
Net assets, at value | $ | 756,005,676 | $ | 5,858,023,287 | ||
Class A: | ||||||
Net assets, at value | $ | 558,862,310 | $ | 3,958,705,778 | ||
Shares outstanding | 31,042,234 | 297,527,931 | ||||
Net asset value per sharea | $ | 18.00 | $ | 13.31 | ||
Maximum offering price per share (net asset value per share ÷ 94.25%) | $ | 19.10 | $ | 14.12 | ||
Class C: | ||||||
Net assets, at value | $ | 176,680,444 | $ | 1,745,766,195 | ||
Shares outstanding | 9,918,219 | 133,128,673 | ||||
Net asset value and maximum offering price per sharea | $ | 17.81 | $ | 13.11 | ||
Class R: | ||||||
Net assets, at value | $ | 1,544,894 | $ | 11,619,096 | ||
Shares outstanding | 85,796 | 871,720 | ||||
Net asset value and maximum offering price per share | $ | 18.01 | $ | 13.33 | ||
Advisor Class: | ||||||
Net assets, at value | $ | 18,918,028 | $ | 141,932,218 | ||
Shares outstanding | 1,049,116 | 10,609,374 | ||||
Net asset value and maximum offering price per share | $ | 18.03 | $ | 13.38 |
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
32 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL STATEMENTS
Statements of Operations
for the year ended December 31, 2014
Franklin | Franklin | |||||
Corefolio | Founding Funds | |||||
Allocation Fund | Allocation Fund | |||||
Investment income: | ||||||
Dividends from Underlying Funds (Note 3e) | $ | 13,199,906 | $ | 229,837,821 | ||
Expenses: | ||||||
Administrative fees (Note 3a) | 227,231 | 1,836,767 | ||||
Distribution fees: (Note 3b) | ||||||
Class A | 1,613,497 | 10,386,811 | ||||
Class C | 1,775,915 | 18,265,963 | ||||
Class R | 8,609 | 57,394 | ||||
Transfer agent fees: (Note 3d) | ||||||
Class A | 733,063 | 4,753,105 | ||||
Class C | 231,831 | 2,090,834 | ||||
Class R | 2,247 | 13,103 | ||||
Advisor Class | 21,926 | 148,166 | ||||
Reports to shareholders | 69,447 | 516,283 | ||||
Registration and filing fees | 83,061 | 181,429 | ||||
Professional fees | 29,428 | 73,558 | ||||
Trustees’ fees and expenses | 5,178 | 42,240 | ||||
Other | 10,451 | 43,456 | ||||
Total expenses | 4,811,884 | 38,409,109 | ||||
Expenses waived/paid by affiliates (Note 3e) | (226 | ) | (14,047 | ) | ||
Net expenses | 4,811,658 | 38,395,062 | ||||
Net investment income | 8,388,248 | 191,442,759 | ||||
Realized and unrealized gains (losses): | ||||||
Net realized gain (loss) from: | ||||||
Sale of investments in Underlying Funds (Note 3e) | 12,894,770 | 83,265,093 | ||||
Realized gain distributions by Underlying Funds (Note 3e) | 28,616,339 | — | ||||
Net realized gain (loss) | 41,511,109 | 83,265,093 | ||||
Net change in unrealized appreciation (depreciation) on investments in Underlying Funds | (3,551,863 | ) | (108,863,053 | ) | ||
Net realized and unrealized gain (loss) | 37,959,246 | (25,597,960 | ) | |||
Net increase (decrease) in net assets resulting from operations | $ | 46,347,494 | $ | 165,844,799 |
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 33
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
Franklin Corefolio | Franklin Founding Funds | |||||||||||
Allocation Fund | Allocation Fund | |||||||||||
Year Ended December 31, | Year Ended December 31, | |||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||
Increase (decrease) in net assets: | ||||||||||||
Operations: | ||||||||||||
Net investment income | $ | 8,388,248 | $ | 3,488,783 | $ | 191,442,759 | $ | 140,058,589 | ||||
Net realized gain (loss) from Underlying Funds | 41,511,109 | 37,930,200 | 83,265,093 | 58,304,930 | ||||||||
Net change in unrealized appreciation (depreciation) on | ||||||||||||
investments in Underlying Funds | (3,551,863 | ) | 139,431,540 | (108,863,053 | ) | 1,023,954,491 | ||||||
Net increase (decrease) in net assets resulting | ||||||||||||
from operations | 46,347,494 | 180,850,523 | 165,844,799 | 1,222,318,010 | ||||||||
Distributions to shareholders from: | ||||||||||||
Net investment income and short term gains received | ||||||||||||
from Underlying Funds: | ||||||||||||
Class A | (8,829,349 | ) | (5,135,871 | ) | (133,406,015 | ) | (118,824,164 | ) | ||||
Class C | (1,592,410 | ) | (539,100 | ) | (46,293,686 | ) | (39,966,252 | ) | ||||
Class R | (20,055 | ) | (13,603 | ) | (359,896 | ) | (276,644 | ) | ||||
Advisor Class | (358,226 | ) | (179,676 | ) | (5,003,841 | ) | (3,156,020 | ) | ||||
Net realized gains: | ||||||||||||
Class A | (14,098,077 | ) | — | — | — | |||||||
Class C | (4,523,072 | ) | — | — | — | |||||||
Class R | (40,063 | ) | — | — | — | |||||||
Advisor Class | (436,646 | ) | — | — | — | |||||||
Total distributions to shareholders | (29,897,898 | ) | (5,868,250 | ) | (185,063,438 | ) | (162,223,080 | ) | ||||
Capital share transactions: (Note 2) | ||||||||||||
Class A | (11,607,396 | ) | (21,298,297 | ) | (200,440,623 | ) | (322,569,398 | ) | ||||
Class B | — | (3,233,173 | ) | — | (34,596,414 | ) | ||||||
Class C | (3,453,757 | ) | (7,437,082 | ) | (76,893,558 | ) | (144,240,609 | ) | ||||
Class R | (398,674 | ) | (419,907 | ) | 1,081,592 | (1,342,610 | ) | |||||
Advisor Class | 3,161,219 | 1,932,643 | 29,372,430 | 28,225,950 | ||||||||
Total capital share transactions | (12,298,608 | ) | (30,455,816 | ) | (246,880,159 | ) | (474,523,081 | ) | ||||
Net increase (decrease) in net assets | 4,150,988 | 144,526,457 | (266,098,798 | ) | 585,571,849 | |||||||
Net assets: | ||||||||||||
Beginning of year | 751,854,688 | 607,328,231 | 6,124,122,085 | 5,538,550,236 | ||||||||
End of year | $ | 756,005,676 | $ | 751,854,688 | $ | 5,858,023,287 | $ | 6,124,122,085 | ||||
Undistributed net investment income included in net assets: | ||||||||||||
End of year | $ | 308,304 | $ | 186,306 | $ | 8,313,547 | $ | 1,934,226 |
34 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
Notes to Financial Statements
1. Organization and Significant Accounting Policies
Franklin Fund Allocator Series (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end management investment company, consisting of fourteen separate funds, two of which are included in this report (Funds) and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). The financial statements of the remaining funds in the Trust are presented separately. The Funds invest primarily in Franklin Templeton mutual funds (Underlying Funds). The Funds offer four classes of shares: Class A, Class C, Class R, and Advisor Class. Each class of shares differs by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees primarily due to differing arrangements for distribution and transfer agent fees.
The accounting policies of the Underlying Funds are outlined in their respective shareholder reports. A copy of the Underlying Funds’ shareholder reports, in which each fund invests, is available on the U.S. Securities and Exchange Commission (SEC) website at sec.gov or at the SEC’s Public Reference Room in Washington, D.C. The Underlying Funds’ shareholder reports are not covered by this report.
Effective June 30, 2014, the following name changes occurred:
Former Trust Name |
Franklin Templeton Fund Allocator Series |
New Trust Name |
Franklin Fund Allocator Series |
Former Fund Name |
Franklin Templeton Corefolio Allocation Fund |
Franklin Templeton Founding Funds Allocation Fund |
New Fund Name |
Franklin Corefolio Allocation Fund |
Franklin Founding Funds Allocation Fund |
The following summarizes the Funds’ significant accounting policies.
a. Financial Instrument Valuation
The Funds’ investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Funds calculate the net asset value (NAV) per share at the close of the New York Stock Exchange (NYSE), generally at 4 p.m. Eastern time (NYSE close) on each day the NYSE is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Funds’ administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation and Liquidity Oversight Committee (VLOC). The VLOC provides administration and oversight of the Funds’ valuation policies and procedures, which are approved annually by the Board. Investments in the Underlying Funds are valued at their closing NAV each trading day.
b. Income Taxes
It is each fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. Each fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and if applicable, excise taxes. As a result, no provision for U.S. federal income taxes is required.
Each fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of December 31, 2014, and for all open tax years, each fund has determined that no liability for unrecognized tax benefits is required in each fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.
c. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Estimated expenses are accrued daily. Dividend income and realized gain distributions by Underlying Funds are recorded on the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
franklintempleton.com Annual Report | 35
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting
Policies (continued)
c. Security Transactions, Investment Income, Expenses and Distributions (continued)
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 of the Trust. Fund specific expenses are charged directly to the fund that incurred the expense.
The Funds indirectly bear their proportionate share of expenses from the Underlying Funds. Since the Underlying Funds have varied expense levels and the Funds may own different proportions of the Underlying Funds at different times, the amount of expenses incurred indirectly by the Funds will vary.
Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.
d. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP 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 by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Funds, 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. Currently, the Trust expects the risk of loss to be remote.
2. Shares of Beneficial Interest
At December 31, 2014, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:
Franklin Corefolio | Franklin Founding | ||||||||||
Allocation Fund | Funds Allocation Fund | ||||||||||
Shares | Amount | Shares | Amount | ||||||||
Class A Shares: | |||||||||||
Year ended December 31, 2014 | |||||||||||
Shares sold | 2,413,183 | $ | 43,518,714 | 19,906,286 | $ | 273,633,151 | |||||
Shares issued in reinvestment of distributions | 1,224,302 | 22,288,418 | 9,416,761 | 127,659,936 | |||||||
Shares redeemed | (4,285,411 | ) | (77,414,528 | ) | (43,730,010 | ) | (601,733,710 | ) | |||
Net increase (decrease) | (647,926 | ) | $ | (11,607,396 | ) | (14,406,963 | ) | $ | (200,440,623 | ) | |
Year ended December 31, 2013 | |||||||||||
Shares sold | 3,437,590 | $ | 53,359,599 | 21,436,165 | $ | 262,836,923 | |||||
Shares issued in reinvestment of distributions | 291,186 | 4,981,840 | 8,950,226 | 113,502,952 | |||||||
Shares redeemed | (5,147,580 | ) | (79,639,736 | ) | (56,672,608 | ) | (698,909,273 | ) | |||
Net increase (decrease) | (1,418,804 | ) | $ | (21,298,297 | ) | (26,286,217 | ) | $ | (322,569,398 | ) | |
Class B Sharesa: | |||||||||||
Year ended December 31, 2013 | |||||||||||
Shares sold | 472 | $ | 6,656 | 3,162 | $ | 36,602 | |||||
Shares redeemed | (229,346 | ) | (3,239,829 | ) | (2,957,857 | ) | (34,633,016 | ) | |||
Net increase (decrease) | (228,874 | ) | $ | (3,233,173 | ) | (2,954,695 | ) | $ | (34,596,414 | ) |
36 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | ||||||||||
NOTES TO FINANCIAL STATEMENTS | ||||||||||
Franklin Corefolio | Franklin Founding | |||||||||
Allocation Fund | Funds Allocation Fund | |||||||||
Shares | Amount | Shares | Amount | |||||||
Class C Shares: | ||||||||||
Year ended December 31, 2014 | ||||||||||
Shares sold | 996,127 | $ | 17,701,623 | 9,884,802 | $ | 134,054,863 | ||||
Shares issued in reinvestment of distributions | 326,186 | 5,874,206 | 3,199,427 | 42,547,550 | ||||||
Shares redeemed | (1,516,270 | ) | (27,029,586 | ) | (18,703,992 | ) | (253,495,971 | ) | ||
Net increase (decrease) | (193,957 | ) | $ | (3,453,757 | ) | (5,619,763 | ) | $ | (76,893,558 | ) |
Year ended December 31, 2013 | ||||||||||
Shares sold | 1,222,480 | $ | 19,033,146 | 9,397,146 | $ | 114,668,476 | ||||
Shares issued in reinvestment of distributions | 31,901 | 514,595 | 2,912,284 | 36,529,675 | ||||||
Shares redeemed | (1,767,529 | ) | (26,984,823 | ) | (24,375,919 | ) | (295,438,760 | ) | ||
Net increase (decrease) | (513,148 | ) | $ | (7,437,082 | ) | (12,066,489 | ) | $ | (144,240,609 | ) |
Class R Shares: | ||||||||||
Year ended December 31, 2014 | ||||||||||
Shares sold | 4,924 | $ | 89,486 | 211,459 | $ | 2,909,865 | ||||
Shares issued in reinvestment of distributions | 3,303 | 60,118 | 26,264 | 356,063 | ||||||
Shares redeemed | (30,535 | ) | (548,278 | ) | (157,159 | ) | (2,184,336 | ) | ||
Net increase (decrease) | (22,308 | ) | $ | (398,674 | ) | 80,564 | $ | 1,081,592 | ||
Year ended December 31, 2013 | ||||||||||
Shares sold | 5,007 | $ | 78,357 | 144,102 | $ | 1,780,250 | ||||
Shares issued in reinvestment of distributions | 801 | 13,603 | 21,682 | 275,563 | ||||||
Shares redeemed | (34,547 | ) | (511,867 | ) | (276,170 | ) | (3,398,423 | ) | ||
Net increase (decrease) | (28,739 | ) | $ | (419,907 | ) | (110,386 | ) | $ | (1,342,610 | ) |
Advisor Class Shares: | ||||||||||
Year ended December 31, 2014 | ||||||||||
Shares sold | 206,099 | $ | 3,805,167 | 4,069,923 | $ | 56,722,830 | ||||
Shares issued in reinvestment of distributions | 37,593 | 685,534 | 339,057 | 4,620,646 | ||||||
Shares redeemed | (72,888 | ) | (1,329,482 | ) | (2,309,193 | ) | (31,971,046 | ) | ||
Net increase (decrease) | 170,804 | $ | 3,161,219 | 2,099,787 | $ | 29,372,430 | ||||
Year ended December 31, 2013 | ||||||||||
Shares sold | 240,034 | $ | 3,782,420 | 3,668,813 | $ | 47,263,232 | ||||
Shares issued in reinvestment of distributions | 9,794 | 169,184 | 221,108 | 2,845,113 | ||||||
Shares redeemed | (125,315 | ) | (2,018,961 | ) | (1,765,654 | ) | (21,882,395 | ) | ||
Net increase (decrease) | 124,513 | $ | 1,932,643 | 2,124,267 | $ | 28,225,950 |
aEffective March 1, 2013, all the Class B shares were converted to Class A.
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Funds are also officers and/or directors/trustees of certain of the Underlying Funds and of the following subsidiaries:
Subsidiary | 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 |
franklintempleton.com Annual Report | 37
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
a. Administrative Fees
The Funds pay an administrative fee to FT Services of 0.03% per year of the average daily net assets of each of the Funds for administrative services including monitoring and rebalancing the percentage of each Fund’s investment in the Underlying Funds.
b. Distribution Fees
The Board has adopted distribution plans for each share class, with the exception of Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Distribution fees are not charged on shares held by affiliates. Under the Funds’ Class A reimbursement distribution plans, the Funds reimburse Distributors for costs incurred in connection with the servicing, sale and distribution of each Funds’ shares up to the maximum annual plan rate for each class. Under the Class A reimbursement distribution plans, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Funds’ Class C and R compensation distribution plans, the Funds pay Distributors for costs incurred in connection with the servicing, sale and distribution of each fund’s shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31 for each fund.
The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:
Class A | 0.35 | % |
Class C | 1.00 | % |
Class R | 0.50 | % |
The Board has set the current rate at 0.30% per year for Class A shares for Franklin Corefolio Allocation Fund and at 0.25% per year for Class A shares for Franklin Founding Funds Allocation Fund until further notice and approval by the Board.
c. Sales Charges/Underwriting Agreements
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Funds. These charges are deducted from the proceeds of sales of fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Funds of the following commission transactions related to the sales and redemptions of the Funds’ shares for the year:
Franklin | Franklin | |||
Corefolio | Founding Funds | |||
Allocation Fund | Allocation Fund | |||
Sales charges retained net of commissions paid to unaffiliated | ||||
broker/dealers | $ | 187,701 | $ | 1,113,077 |
CDSC retained | $ | 8,031 | $ | 55,874 |
d. Transfer Agent Fees
Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations and reimburses Investor Services for out of pocket expenses incurred, including shareholding servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets.
For the year ended December 31, 2014, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:
Franklin | Franklin | |||
Corefolio | Founding Funds | |||
Allocation Fund | Allocation Fund | |||
Transfer agent fees | $ | 653,662 | $ | 3,419,236 |
38 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
e. Investments in Underlying Funds
The Funds invest primarily in the Underlying Funds which are managed by Franklin Advisers, Inc. (Advisers), an affiliate of FT Services or an affiliate of Advisers. The Funds do not invest in the Underlying Funds for the purpose of exercising a controlling influence over the management or policies. Administrative fees paid by the Funds are waived on assets invested in Institutional Fiduciary Trust Money Market Portfolio (Sweep Money Fund), as noted on the Statements of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by the Sweep Money Fund. Prior to January 1, 2014, the waiver was accounted for as a reduction to administrative fees.
Investments in Underlying Funds for the year ended December 31, 2014, were as follows: | ||||||||||||||
% of | ||||||||||||||
Underlying | ||||||||||||||
Number of | Number of | Fund Shares | ||||||||||||
Shares Held | Shares | Outstanding | ||||||||||||
at Beginning | Gross | Gross | Held at End | Value at End | Investment | Realized | Held at End | |||||||
Underlying Funds | of Year | Additions | Reductions | of Year | of Year | Income | Gain (Loss) | of Year | ||||||
Franklin Corefolio Allocation | ||||||||||||||
Fund | ||||||||||||||
Franklin Flex Cap Growth Fund, | ||||||||||||||
Class R6 | 3,338,423 | 588,807 | (195,020 | ) | 3,732,210 | $ | 192,096,867 | $ | — | $ | 30,854,118 | a | 5.53 | % |
Franklin Growth Fund, Class R6 | 2,905,310 | 16,152 | (352,547 | ) | 2,568,915 | 192,052,087 | 1,202,711 | 9,348,623 | 1.71 | % | ||||
Franklin Mutual Shares Fund, | ||||||||||||||
Class R6b | 6,575,955 | 213,870 | (317,766 | ) | 6,472,059 | 190,990,478 | 6,385,562 | 1,127,037 | 1.16 | % | ||||
Institutional Fiduciary Trust Money | ||||||||||||||
Market Portfolio | 686,704 | 36,959,945 | (37,576,725 | ) | 69,924 | 69,924 | — | — | —c | |||||
Templeton Growth Fund Inc., | ||||||||||||||
Class R6 | 7,464,658 | 285,115 | (104,896 | ) | 7,644,877 | 181,871,618 | 5,611,633 | 181,331 | 1.11 | % | ||||
Total | $ | 757,080,974 | $ | 13,199,906 | $ | 41,511,109 | ||||||||
Franklin Founding Funds | ||||||||||||||
Allocation Fund | ||||||||||||||
Franklin Income Fund, Class R6 | 838,143,077 | 42,191,334 | (68,067,397 | ) | 812,267,014 | $ | 1,933,195,492 | $ | 103,607,851 | $ | 12,201,437 | 2.11 | % | |
Franklin Mutual Shares Fund, | ||||||||||||||
Class R6b | 71,806,661 | 2,224,016 | (7,591,669 | ) | 66,439,008 | 1,960,615,131 | 66,418,498 | 60,267,655 | 11.90 | % | ||||
Institutional Fiduciary Trust Money | ||||||||||||||
Market Portfolio | 45,704,595 | 300,004,775 | (308,562,742 | ) | 37,146,628 | 37,146,628 | — | — | 0.22 | % | ||||
Templeton Growth Fund Inc., | ||||||||||||||
Class R6 | 81,555,713 | 2,604,197 | (2,888,292 | ) | 81,271,618 | 1,933,451,797 | 59,811,472 | 10,796,001 | 11.78 | % | ||||
Total | $ | 5,864,409,048 | $ | 229,837,821 | $ | 83,265,093 |
aIncludes realized gain distributions received.
bEffective June 30, 2014, Mutual Shares Fund was renamed Franklin Mutual Shares Fund.
cRounds to less than 0.01%.
4. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains. Capital loss carryforwards with no expiration, if any, must be fully utilized before those losses with expiration dates.
franklintempleton.com Annual Report | 39
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
4. Income Taxes (continued) | |||||
At December 31, 2014, the capital loss carryforwards were as follows: | |||||
Franklin | Franklin | ||||
Corefolio | Founding Funds | ||||
Allocation Fund | Allocation Fund | ||||
Capital loss carryforwards subject to expiration: | |||||
2016 | $ | — | $ | 666,677,037 | |
2017 | 5,160,881 | a | 1,091,470,427 | ||
2018 | — | 465,945,460 | |||
Long term capital loss carryforwards not subject to expiration | — | 310,184,412 | |||
Total capital loss carryforwards | $ | 5,160,881 | $ | 2,534,277,336 |
aIncludes $5,160,881 from the merged Franklin Templeton Perspectives Allocation Fund, which may be carried over to offset future capital gains, subject to certain limitations.
During the year ended December 31, 2014, Franklin Corefolio Allocation Fund and Franklin Founding Funds Allocation Fund utilized $8,054,758 and $83,265,093, respectively, of capital loss carryforwards.
The tax character of distributions paid during the years ended December 31, 2014 and 2013, was as follows:
Franklin | Franklin | |||||||
Corefolio | Founding Funds | |||||||
Allocation Fund | Allocation Fund | |||||||
2014 | 2013 | 2014 | 2013 | |||||
Distributions paid from: | ||||||||
Ordinary income | $ | 10,800,040 | $ | 5,868,250 | $ | 185,063,438 | $ | 162,223,080 |
Long term capital gain | 19,097,858 | — | — | — | ||||
Total distributions | $ | 29,897,898 | $ | 5,868,250 | $ | 185,063,438 | $ | 162,223,080 |
At December 31, 2014, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:
Franklin | Franklin | ||||
Corefolio | Founding Funds | ||||
Allocation Fund | Allocation Fund | ||||
Cost of investments | $ | 559,826,510 | $ | 5,458,626,310 | |
Unrealized appreciation | $ | 197,254,464 | $ | 441,383,282 | |
Unrealized depreciation | — | (35,600,544 | ) | ||
Net unrealized appreciation (depreciation) | $ | 197,254,464 | $ | 405,782,738 | |
Undistributed ordinary income | $ | 308,304 | $ | 8,313,545 | |
Undistributed long term capital gains | 21,890,387 | — | |||
Distributable earnings | $ | 22,198,691 | $ | 8,313,545 |
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of short term capital gains distributions from Underlying Funds and wash sales.
40 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
5. Investment Transactions
Purchases and sales of Underlying Funds (excluding short term securities) for the year ended December 31, 2014, were as follows:
Franklin | Franklin | |||
Corefolio | Founding Funds | |||
Allocation Fund | Allocation Fund | |||
Purchases | $ | 43,816,245 | $ | 230,837,821 |
Sales | $ | 48,300,000 | $ | 467,000,000 |
6. Credit Facility
The Funds, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $1.5 billion (Global Credit Facility) which matured on February 13, 2015. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. The Borrowers expect to renew the Global Credit Facility for a total of $2 billion effective February 13, 2015, which matures on February 12, 2016.
Under the terms of the Global Credit Facility, the Funds shall, in addition to interest charged on any borrowings made by the Funds and other costs incurred by the Funds, pay their share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon their relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses on the Statements of Operations. During the year ended December 31, 2014, the Funds did not use the Global Credit Facility.
7. Fair Value Measurements
The Funds follow a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds’ own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds’ financial instruments and are summarized in the following fair value hierarchy:
- Level 1 – quoted prices in active markets for identical financial instruments
- Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
- Level 3 – significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of financial instruments)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
For movements between the levels within the fair value hierarchy, the Funds have adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.
At December 31, 2014, all of the Funds’ investments in financial instruments carried at fair value were valued using Level 1 inputs. For detailed categories, see the accompanying Statements of Investments.
8. Subsequent Events
The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.
franklintempleton.com Annual Report | 41
FRANKLIN FUND ALLOCATOR SERIES
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of Franklin Fund Allocator Series
In our opinion, the accompanying statements of assets and liabilities, including the statements of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Franklin Corefolio Allocation Fund and Franklin Founding Funds Allocation Fund (separate portfolios of Franklin Fund Allocator Series, hereafter referred to as the “Funds”) at December 31, 2014, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2014 by correspondence with the transfer agent, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 13, 2015
42 | Annual Report
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FRANKLIN FUND ALLOCATOR SERIES
Tax Information (unaudited)
Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), Franklin Corefolio Allocation Fund hereby reports the maximum amount allowable but no less than $19,097,858 as a long term capital gain dividend for the fiscal year ended December 31, 2014.
Under Section 854(b)(1)(A) of the Code, the Funds hereby report the following percentage amounts of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2014:
Franklin | Franklin | ||
Corefolio | Founding Funds | ||
Allocation Fund | Allocation Fund | ||
77.63 | % | 56.93 | % |
Under Section 854(b)(1)(B) of the Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended December 31, 2014:
Franklin | Franklin | ||
Corefolio | Founding Funds | ||
Allocation Fund | Allocation Fund | ||
$ | 10,789,630 | $ | 164,801,756 |
Distributions, including qualified dividend income, paid during calendar year 2014 will be reported to shareholders on Form 1099-DIV by mid-February 2015. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.
During the fiscal year ended December 31, 2014, the Funds, qualified fund of funds under Section 852(g)(2) of the Code, received an allocation of foreign taxes paid from one or more of its underlying funds. As shown in the table below, the Fund hereby reports to shareholders the foreign source income and foreign taxes paid by underlying funds, pursuant to Section 853 of the Code. This written statement will allow shareholders of record on December 29, 2014, to treat their proportionate share of foreign taxes paid by the underlying funds as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.
The following table provides a detailed analysis of foreign tax paid, foreign source income, and foreign source qualified dividends as reported by the Funds, to Class A, Class C, Class R, and Advisor Class shareholders of record.
Foreign Tax | Foreign Source | Foreign Source Qualified | ||||
Paid Per Share | Income Per Share | Dividends Per Share | ||||
Franklin Corefolio Allocation Fund | ||||||
Class A | $ | 0.0090 | $ | 0.0925 | $ | 0.0734 |
Class C | $ | 0.0090 | $ | 0.0925 | $ | 0.0734 |
Class R | $ | 0.0090 | $ | 0.0925 | $ | 0.0734 |
Advisor Class | $ | 0.0090 | $ | 0.0925 | $ | 0.0734 |
Franklin Founding Funds Allocation Fund | ||||||
Class A | $ | 0.0091 | $ | 0.0937 | $ | 0.0744 |
Class C | $ | 0.0091 | $ | 0.0937 | $ | 0.0744 |
Class R | $ | 0.0091 | $ | 0.0937 | $ | 0.0744 |
Advisor Class | $ | 0.0091 | $ | 0.0937 | $ | 0.0744 |
Foreign Tax Paid Per Share (Column 1) is the amount per share available to you, as a tax credit (assuming you held your shares in the Fund for a minimum of 16 days during the 31-day period beginning 15 days before the ex-dividend date of the Fund’s distribution to which the foreign taxes relate), or, as a tax deduction.
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Annual Report
| 43
FRANKLIN FUND ALLOCATOR SERIES
TAX INFORMATION (UNAUDITED)
Foreign Source Income Per Share (Column 2) is the amount per share of income dividends attributable to foreign securities held by the underlying funds, plus any foreign taxes withheld on these dividends. The amounts reported include foreign source qualified dividends that have not been adjusted for the rate differential applicable to such dividend income.1
Foreign Source Qualified Dividends Per Share (Column 3) is the amount per share of foreign source qualified dividends, plus any foreign taxes withheld on these dividends. These amounts represent the portion of the Foreign Source Income reported to you in column 2 that were derived from qualified foreign securities held by the underlying funds.1
By mid-February 2015, shareholders will receive Form 1099-DIV which will include their share of taxes paid and foreign source income distributed during the calendar year 2014. The Foreign Source Income reported on Form 1099-DIV has not been adjusted for the rate differential on foreign source qualified dividend income. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their 2014 individual income tax returns.
1Qualified dividends are taxed at reduced long term capital gains tax rates. In determining the amount of foreign tax credit that may be applied against the U.S.
tax liability of individuals receiving foreign source qualified dividends, adjustments may be required to the foreign tax credit limitation calculation to reflect the rate
differential applicable to such dividend income. The rules however permit certain individuals to elect not to apply the rate differential adjustments for capital gains
and/or dividends for any taxable year. Please consult your tax advisor and the instructions to Form 1116 for more information.
44 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
Board Members and Officers
The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupations during at least the past five years and number of portfolios overseen in the Franklin Templeton Investments fund complex are shown below. Generally, each board member serves until that person’s successor is elected and qualified.
Independent Board Members | ||||
Number of Portfolios in | ||||
Name, Year of Birth | Length of | Fund Complex Overseen | Other Directorships Held During | |
and Address | Position | Time Served | by Board Member* | at Least the Past 5 Years |
Harris J. Ashton (1932) | Trustee | Since 1995 | 137 | Bar-S Foods (meat packing company) |
One Franklin Parkway | (1981-2010). | |||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Director of various companies; and formerly, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief Executive | ||||
Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998). | ||||
Mary C. Choksi (1950) | Trustee | Since October | 111 | Avis Budget Group Inc. (car rental), |
One Franklin Parkway | 2014 | Omnicom Group Inc. (advertising and | ||
San Mateo, CA 94403-1906 | marketing communications services) | |||
and H.J. Heinz Company (processed | ||||
foods and allied products) (1998-2006). | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Founding Partner and Senior Managing Director, Strategic Investment Group (investment management group) (1987-present); director of | ||||
various companies; and formerly, Founding Partner and Managing Director, Emerging Markets Management LLC (investment management | ||||
firm) (1987-2011); Loan Officer/Senior Loan Officer/Senior Pension Investment Officer, World Bank Group (international financial institution) | ||||
(1977-1987). | ||||
Sam Ginn (1937) | Trustee | Since 2007 | 111 | ICO Global Communications |
One Franklin Parkway | (Holdings) Limited (satellite company) | |||
San Mateo, CA 94403-1906 | (2006-2010), Chevron Corporation | |||
(global energy company) (1989-2009), | ||||
Hewlett-Packard Company (technology | ||||
company) (1996-2002), Safeway, Inc. | ||||
(grocery retailer) (1991-1998) and | ||||
TransAmerica Corporation (insurance | ||||
company) (1989-1999). | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Private investor; and formerly, Chairman, First Responder Network Authority (FirstNet) (interoperable wireless broadband network) (2012-2014); | ||||
Chairman of the Board, Vodafone AirTouch, PLC (wireless company) (1999-2000); Chairman of the Board and Chief Executive Officer, AirTouch | ||||
Communications (cellular communications) (1993-1998) and Pacific Telesis Group (telephone holding company) (1988-1994). | ||||
Edith E. Holiday (1952) | Trustee | Since 1998 | 137 | Hess Corporation (exploration and |
One Franklin Parkway | refining of oil and gas), H.J. Heinz | |||
San Mateo, CA 94403-1906 | Company (processed foods and | |||
allied products) (1994-2013), RTI | ||||
International Metals, Inc. (manufacture | ||||
and distribution of titanium), Canadian | ||||
National Railway (railroad) and White | ||||
Mountains Insurance Group, Ltd. | ||||
(holding company). | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Director or Trustee of various companies and trusts; and formerly, Assistant to the President of the United States and Secretary of the | ||||
Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and | ||||
Assistant Secretary for Public Affairs and Public Liaison – United States Treasury Department (1988-1989). |
franklintempleton.com Annual Report | 45
FRANKLIN FUND ALLOCATOR SERIES | ||||
Independent Board Members (continued) | ||||
Number of Portfolios in | ||||
Name, Year of Birth | Length of | Fund Complex Overseen | Other Directorships Held During | |
and Address | Position | Time Served | by Board Member* | at Least the Past 5 Years |
J. Michael Luttig (1954) | Trustee | Since 2009 | 137 | Boeing Capital Corporation |
One Franklin Parkway | (aircraft financing) (2006-2013). | |||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Executive Vice President, General Counsel and member of the Executive Council, The Boeing Company (aerospace company); and formerly, | ||||
Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006). | ||||
Frank A. Olson (1932) | Trustee | Since 2007 | 137 | Hess Corporation (exploration and |
One Franklin Parkway | refining of oil and gas) (1998-2013). | |||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Director of various companies; and formerly, Chairman of the Board, The Hertz Corporation (car rental) (1980-2000) and Chief Executive | ||||
Officer (1977-1999); and Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines) (June-December 1987). | ||||
Larry D. Thompson (1945) | Trustee | Since 2007 | 137 | Cbeyond, Inc. (business commu- |
One Franklin Parkway | nications provider) (2010-2012), | |||
San Mateo, CA 94403-1906 | The Southern Company (energy | |||
company) (December 2014; | ||||
previously 2010-2012) and Graham | ||||
Holdings Company (education and | ||||
media organization) (2011-present). | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Executive Vice President – Government Affairs, General Counsel and Corporate Secretary, PepsiCo, Inc. (consumer products) (2012-present); | ||||
and formerly, John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (2011-2012); Senior Vice | ||||
President – Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (2004-2011); Senior Fellow of The Brookings Institution | ||||
(2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General, U.S. Department of Justice | ||||
(2001-2003). | ||||
John B. Wilson (1959) | Lead | Trustee since | 111 | None |
One Franklin Parkway | Independent | 2006 and Lead | ||
San Mateo, CA 94403-1906 | Trustee | Independent | ||
Trustee since 2008 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
President, Staples Europe (office supplies) (2012-present); President and Founder, Hyannis Port Capital, Inc. (real estate and private equity | ||||
investing); serves on private and non-profit boards; and formerly, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail) | ||||
(1996-2000); Chief Financial Officer and Executive Vice President – Finance and Strategy, Staples, Inc. (1992-1996); Senior Vice President – | ||||
Corporate Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (consulting firm) | ||||
(1986-1990). |
46 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
Interested Board Members and Officers | ||||
Number of Portfolios in | ||||
Name, Year of Birth | Length of | Fund Complex Overseen | Other Directorships Held During | |
and Address | Position | Time Served | by Board Member* | at Least the Past 5 Years |
**Gregory E. Johnson (1961) | Trustee | Since 2007 | 147 | None |
One Franklin Parkway | ||||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Chairman of the Board, Member – Office of the Chairman, Director, President and Chief Executive Officer, Franklin Resources, Inc.; officer | ||||
and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment | ||||
companies in Franklin Templeton Investments; and Chairman, Investment Company Institute. | ||||
**Rupert H. Johnson, Jr. (1940) Chairman of | Chairman of the | 137 | None | |
One Franklin Parkway | the Board | Board and Trustee | ||
San Mateo, CA 94403-1906 | and Trustee | since 2013 | ||
Principal Occupation During at Least the Past 5 Years: | ||||
Vice Chairman, Member – Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc.; Senior Vice | ||||
President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of | ||||
Franklin Resources, Inc. and of 43 of the investment companies in Franklin Templeton Investments. | ||||
Alison E. Baur (1964) | Vice President | Since 2012 | Not Applicable | Not Applicable |
One Franklin Parkway | ||||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Deputy General Counsel, Franklin Templeton Investments; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of | ||||
46 of the investment companies in Franklin Templeton Investments. | ||||
Laura F. Fergerson (1962) | Chief Executive Since 2009 | Not Applicable | Not Applicable | |
One Franklin Parkway | Officer – | |||
San Mateo, CA 94403-1906 | Finance and | |||
Administration | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Vice President, Franklin Templeton Services, LLC; and officer of 46 of the investment companies in Franklin Templeton Investments. | ||||
Gaston Gardey (1967) | Treasurer, | Since 2009 | Not Applicable | Not Applicable |
One Franklin Parkway | Chief Financial | |||
San Mateo, CA 94403-1906 | Officer and | |||
Chief | ||||
Accounting | ||||
Officer | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Director, Fund Accounting, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin Templeton Investments. | ||||
Aliya S. Gordon (1973) | Vice President | Since 2009 | Not Applicable | Not Applicable |
One Franklin Parkway | ||||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Associate General Counsel, Franklin Templeton Investments; officer of 46 of the investment companies in Franklin Templeton | ||||
Investments; and formerly, Litigation Associate, Steefel, Levitt & Weiss, LLP (2000-2004). |
franklintempleton.com Annual Report | 47
FRANKLIN FUND ALLOCATOR SERIES | ||||
Interested Board Members and Officers (continued) | ||||
Number of Portfolios in | ||||
Name, Year of Birth | Length of | Fund Complex Overseen | Other Directorships Held During | |
and Address | Position | Time Served | by Board Member* | at Least the Past 5 Years |
Steven J. Gray (1955) | Vice President | Since 2009 | Not Applicable | Not Applicable |
One Franklin Parkway | ||||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc. and Franklin | ||||
Alternative Strategies Advisers, LLC; and officer of 46 of the investment companies in Franklin Templeton Investments. | ||||
Selena L. Holmes (1965) | Vice President | Since 2012 | Not Applicable | Not Applicable |
100 Fountain Parkway | – AML | |||
St. Petersburg, FL 33716-1205 | Compliance | |||
Principal Occupation During at Least the Past 5 Years: | ||||
Director, Global Compliance Monitoring; Chief Compliance Officer, Franklin Alternative Strategies Advisers, LLC; Vice President, Franklin | ||||
Templeton Companies, LLC; and officer of 46 of the investment companies in Franklin Templeton Investments. | ||||
Edward B. Jamieson (1948) | President and | Since 2010 | Not Applicable | Not Applicable |
One Franklin Parkway | Chief Executive | |||
San Mateo, CA 94403-1906 | Officer – | |||
Investment | ||||
Management | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
President, Chief Investment Officer and Director, Franklin Advisers, Inc.; Executive Vice President, Franklin Templeton Institutional, LLC; and | ||||
officer and/or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 10 of the investment | ||||
companies in Franklin Templeton Investments. | ||||
Kimberly H. Novotny (1972) | Vice President | Since 2013 | Not Applicable | Not Applicable |
300 S.E. 2nd Street | ||||
Fort Lauderdale, FL 33301-1923 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Associate General Counsel, Franklin Templeton Investments; Vice President and Secretary, Fiduciary Trust International of the South; Vice | ||||
President, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 46 of the investment companies | ||||
in Franklin Templeton Investments. | ||||
Robert C. Rosselot (1960) | Chief | Since 2013 | Not Applicable | Not Applicable |
300 S.E. 2nd Street | Compliance | |||
Fort Lauderdale, FL 33301-1923 | Officer | |||
Principal Occupation During at Least the Past 5 Years: | ||||
Director, Global Compliance, Franklin Templeton Investments; Vice President, Franklin Templeton Companies, LLC; officer of 46 of the | ||||
investment companies in Franklin Templeton Investments; and formerly, Senior Associate General Counsel, Franklin Templeton Investments | ||||
(2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013). | ||||
Karen L. Skidmore (1952) | Vice President | Since 2006 | Not Applicable | Not Applicable |
One Franklin Parkway | and Secretary | |||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 46 of the investment companies in Franklin | ||||
Templeton Investments. |
48 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
Interested Board Members and Officers (continued) | ||||
Number of Portfolios in | ||||
Name, Year of Birth | Length of | Fund Complex Overseen | Other Directorships Held During | |
and Address | Position | Time Served | by Board Member* | at Least the Past 5 Years |
Craig S. Tyle (1960) | Vice President | Since 2005 | Not Applicable | Not Applicable |
One Franklin Parkway | ||||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, | ||||
Inc. and of 46 of the investment companies in Franklin Templeton Investments. | ||||
Lori A. Weber (1964) | Vice President | Since 2011 | Not Applicable | Not Applicable |
300 S.E. 2nd Street | ||||
Fort Lauderdale, FL 33301-1923 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and | ||||
Secretary, Templeton Investment Counsel, LLC; Vice President, Fiduciary Trust International of the South; and officer of 46 of the investment | ||||
companies in Franklin Templeton Investments. |
*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton Investments fund complex.
These portfolios have a common investment manager or affiliated investment managers.
**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin
Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Rupert H. Johnson, Jr. is considered to be an interested
person of the Fund under the federal securities laws due to his position as officer and director and major shareholder of Resources.
Note 1: Rupert H. Johnson, Jr. is the uncle of Gregory E. Johnson.
Note 2: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.
The Sarbanes-Oxley Act of 2002 and Rules adopted by the Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee
includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there
is at least one such financial expert on the Audit Committee and has designated John B. Wilson as its audit committee financial expert. The Board believes that
Mr. Wilson qualifies as such an expert in view of his extensive business background and experience, including service as chief financial officer of Staples, Inc.
from 1992 to 1996. Mr. Wilson has been a Member and Chairman of the Fund’s Audit Committee since 2006. As a result of such background and experience, the
Board believes that Mr. Wilson has acquired an understanding of generally accepted accounting principles and financial statements, the general application of
such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth
and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for
financial reporting and an understanding of audit committee functions. Mr. Wilson is an independent Board member as that term is defined under the relevant
Securities and Exchange Commission Rules and Releases.
The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request.
Shareholders may call (800) DIAL BEN/342-5236 to request the SAI.
franklintempleton.com Annual Report | 49
FRANKLIN FUND ALLOCATOR SERIES
Shareholder Information
Proxy Voting Policies and Procedures
The Trust’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Trust uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Trust’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 (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Trust’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.
Quarterly Statement of Investments
The Trust files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.
Householding of Reports and Prospectuses
You will receive each Fund’s financial reports every six months as well as an annual updated summary prospectus (prospectus available upon request). To reduce Fund expenses, we try to identify related shareholders in a household and send only one copy of the financial reports and summary prospectus. This process, called “householding,” will continue indefinitely unless you instruct us otherwise. If you prefer not to have these documents householded, please call us at (800) 632-2301. At any time you may view current prospectuses/summary prospectuses and financial reports on our website. If you choose, you may receive these documents through electronic delivery.
50 | Annual Report
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Contents | |
Annual Report | |
Economic and Market Overview | 3 |
Franklin LifeSmartTM 2015 | |
Retirement Target Fund | 4 |
Franklin LifeSmartTM 2020 | |
Retirement Target Fund | 13 |
Franklin LifeSmartTM 2025 | |
Retirement Target Fund | 22 |
Franklin LifeSmartTM 2030 | |
Retirement Target Fund | 31 |
Franklin LifeSmartTM 2035 | |
Retirement Target Fund | 40 |
Franklin LifeSmartTM 2040 | |
Retirement Target Fund | 49 |
Franklin LifeSmartTM 2045 | |
Retirement Target Fund | 58 |
Franklin LifeSmartTM 2050 | |
Retirement Target Fund | 67 |
Financial Highlights and | |
Statements of Investments | 76 |
Financial Statements | 132 |
Notes to Financial Statements | 142 |
Report of Independent Registered | |
Public Accounting Firm | 163 |
Tax Information | 164 |
Board Members and Officers | 167 |
Shareholder Information | 172 |
franklintempleton.com
1
Annual Report
Economic and Market Overview
The global economy grew moderately during 2014 as U.S. economic growth expanded while growth rates in much of the rest of the world declined. U.S. economic activity was supported in some quarters by increased consumer spending, business investment and federal defense spending. The housing market strengthened, and lower gasoline prices and improved job growth contributed to rising retail sales. The U.S. Federal Reserve Board (Fed) began reducing its large-scale bond purchases $10 billion a month in January and ended the buying program in October. But it continued its practice of maintaining holdings of longer term securities at sizable levels. Toward period-end, the Fed stated that it could be patient with regard to raising interest rates and that the interest rate might not rise for at least a couple of meetings, possibly implying at least the first two meetings of 2015.
Outside the U.S., the U.K. economy grew relatively well, supported by the services and manufacturing sectors. In the eurozone, economic growth remained subdued, as concerns persisted about the potential negative impacts to growth from the crisis in Ukraine and China’s moderating growth rate. In June, the European Central Bank (ECB) reduced its main interest rate and, for the first time, set a negative deposit rate; the ECB reduced both rates again in September. The ECB broadened its monetary easing stance by implementing an asset purchase program to prevent deflation and stimulate the economy. Japan’s second- and third-quarter economic contractions indicated the economy was in a recession, although private consumption and exports improved in the third quarter. In October, the Bank of Japan expanded its stimulus measures amid weak domestic demand and as substantially lower crude oil prices exerted further downward pressure on inflation. Near period-end, Japan’s ruling coalition was reelected in early parliamentary elections and subsequently announced a fresh stimulus package aimed at reviving economic growth.
Global developed market stocks, as measured by the MSCI World Index, advanced overall during the 12-month period amid a generally accommodative monetary policy environment and continued strength in corporate earnings. In several emerging markets, economic growth generally moderated. Emerging market stocks overall, as measured by the MSCI Emerging Markets Index, fell for the year, amid headwinds such as soft domestic demand, weak exports, plummeting crude oil prices, regional geopolitical tensions and concerns about possible U.S. interest rate increases. Many emerging market currencies depreciated against the U.S. dollar, leading several central banks to raise interest rates seeking to support their currencies. Several other central banks lowered interest rates to promote economic growth. Gold prices ended the year lower amid benign global inflation and a strong U.S. dollar.
The foregoing information reflects our analysis and opinions as of December 31, 2014. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.
franklintempleton.com Annual Report | 3
Franklin LifeSmart 2015 Retirement Target Fund
This annual report for Franklin LifeSmart 2015 Retirement Target Fund covers the fiscal year ended December 31, 2014.
Your Fund’s Goal and Main Investments
The Fund seeks the highest level of long-term total return, which consists of capital appreciation and income, consistent with the Fund’s asset allocation. The Fund allocates among the broad asset classes of equity and fixed income by investing in a distinctly weighted combination of underlying funds, predominantly other Franklin Templeton mutual funds, with an increasing emphasis on income as the target date of 2015 approaches. The target date is the approximate retirement year of the investor.
Asset Allocation*
Based on Total Net Assets as of 12/31/14
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx4x1.jpg)
*The asset allocation is based on the Statement of Investments (SOI), which
classifies each underlying fund and other fund investments into a broad asset
class based on its predominant investments under normal market conditions.
Performance Overview
The Fund’s Class A shares delivered a +3.07% cumulative total return for the 12 months ended December 31, 2014. In comparison, the Fund’s new equity benchmark, the MSCI All Country World Index (ACWI), which measures equity performance in global developed and emerging markets, returned +4.71%, while its old equity benchmark, the Standard & Poor’s 500 Index (S&P 500®), a broad measure of U.S. stock performance, returned +13.69%.1 Another equity benchmark, the MSCI Europe, Australasia, Far East (EAFE) Index, which measures global stock performance for developed markets excluding the U.S. and Canada, had a -4.48% total return.1 The Fund’s new fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, posted a +0.48% total return, while its old fixed income benchmark, the Barclays U.S. Aggregate Index, which tracks U.S. investment-grade bonds, generated a +5.97% total return.1 The Fund is adding the Payden & Rygel (P&R) 90-Day U.S. Treasury Bill Index, a proxy for short-term investments and other net assets, which returned +0.04%.2 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 6.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.
Investment Strategy
When selecting equity funds, we consider the foreign and domestic exposure, market capitalization ranges, and investment style (growth vs. value) of the underlying Franklin Templeton funds and other fund investments (collectively, “fund investments”). When selecting fixed income funds, we focus primarily on maximizing income appropriate to the Fund’s specific risk profile. In evaluating the risk level of the fund investments, we analyze such factors as: (a) relative and absolute performance, including correlations with other fund investments as well as corresponding benchmarks, and (b) their volatility (the variability of returns from one period to the next). We attempt to invest the assets of each Target Fund in the same fund investments and will vary the fund investments’ allocation percentages based upon each Fund’s risk/return level. We change the Fund’s target asset allocation over time, and it becomes increasingly conservative as the stated target date draws near. At the “landing point” (reached at the target date), the Fund reaches its most conservative asset allocation and thereafter, such strategic asset allocation will generally become fixed.
1. Source: Morningstar.
2. Source: Payden & Rygel.
The indexes are unmanaged and include reinvestment of any income or distributions. One cannot invest directly in an index, and an index is not representative of the
Fund’s portfolio.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s SOI, which begins on page 81.
4 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2015 RETIREMENT TARGET FUND
Top 10 Fund Holdings | ||
12/31/14 | ||
% of Total | ||
Net Assets | ||
Templeton Global Total Return Fund – Class R6 | 24.4 | % |
Franklin Low Duration Total Return Fund – Class R6 | 18.3 | % |
Franklin Strategic Income Fund – Class R6 | 6.5 | % |
iShares Core S&P 500 ETF | 6.1 | % |
iShares Intermediate Credit Bond ETF | 4.6 | % |
Franklin Growth Fund – Class R6 | 4.2 | % |
Franklin Emerging Market Debt Opportunities Fund | 3.3 | % |
Franklin Rising Dividends Fund – Class R6 | 3.1 | % |
Franklin K2 Alternative Strategies Fund – Class R6 | 3.1 | % |
iShares S&P 500 Value ETF | 2.7 | % |
Manager’s Discussion
The Fund’s performance can be attributed largely to its allocation among equities and fixed income securities and to the actual performance of the fund investments. This allocation shifts every year, in accordance with the retirement date associated with the portfolio.
At period-end, Franklin LifeSmart 2015 Retirement Target Fund allocated 37.2% of total net assets to equity, 57.1% to fixed income and 3.9% to alternative strategies. Domestic equity exposure was 71.5% of the total equity weighting, and foreign equity made up the balance. The portfolio was diversified across capitalization sizes and investment styles, and on December 31, 2014, we held shares in large-, mid- and small-capitalization equity funds, representing both growth and value styles. iShares Core S&P 500 ETF, at 6.1% of the Fund’s total net assets, was our largest equity fund weighting at period-end. On the fixed income side, domestic exposure was 51.5% of the Fund’s total fixed income weighting, with the balance in foreign fixed income. Templeton Global Total Return Bond Fund – Class R6 was our largest fixed income fund weighting at 24.4% of total net assets.
Our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest domestic value fund holding, Franklin Rising Dividends Fund – Class R6, outperformed the MSCI ACWI, while our largest foreign equity fund holding, Franklin International Small Cap Growth Fund –Class R6, underperformed the index. On the fixed income side, Templeton Global Total Return Fund – Class R6 and Franklin Low Duration Total Return Fund – Class R6 outperformed the Barclays Multiverse Index.
Thank you for your continued participation in Franklin LifeSmart 2015 Retirement Target Fund. We look forward to serving your future investment needs.
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx5x1.jpg)
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2014, 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 investment manager 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.
CFA® is a trademark owned by CFA Institute.
franklintempleton.com Annual Report | 5
FRANKLIN LIFESMART 2015 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2014
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 and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses.
Net Asset Value | ||||||
Share Class (Symbol) | 12/31/14 | 12/31/13 | Change | |||
A (FTRAX) | $ | 11.67 | $ | 12.28 | -$ | 0.61 |
C (FRTCX) | $ | 11.55 | $ | 12.16 | -$ | 0.61 |
R (FBRLX) | $ | 11.64 | $ | 12.25 | -$ | 0.61 |
R6 (FLMTX) | $ | 11.72 | $ | 12.32 | -$ | 0.60 |
Advisor (FLRDX) | $ | 11.71 | $ | 12.31 | -$ | 0.60 |
Distributions (1/1/14–12/31/14) | ||||||||
Dividend | Short-Term | Long-Term | ||||||
Share Class | Income | Capital Gain | Capital Gain | Total | ||||
A | $ | 0.3983 | $ | 0.1312 | $ | 0.4575 | $ | 0.9870 |
C | $ | 0.3139 | $ | 0.1312 | $ | 0.4575 | $ | 0.9026 |
R | $ | 0.3757 | $ | 0.1312 | $ | 0.4575 | $ | 0.9644 |
R6 | $ | 0.4413 | $ | 0.1312 | $ | 0.4575 | $ | 1.0300 |
Advisor | $ | 0.4352 | $ | 0.1312 | $ | 0.4575 | $ | 1.0239 |
6 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2015 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Performance as of 12/31/141
Cumulative total return excludes sales charges. Average annual total return and value of $10,000 investment include maximum sales charges. Class A: 5.75% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only;
Class R/R6/Advisor Class: no sales charges.
Cumulative | Average Annual | Value of | Total Annual Operating Expenses5 | |||||||||
Share Class | Total Return2 | Total Return3 | $ | 10,000 Investment4 | (with waiver) | (without waiver) | ||||||
A | 0.94 | % | 1.45 | % | ||||||||
1-Year | + | 3.07 | % | -2.87 | % | $ | 9,713 | |||||
5-Year | + | 41.31 | % | + | 5.90 | % | $ | 13,319 | ||||
Since Inception (8/1/06) | + | 61.24 | % | + | 5.10 | % | $ | 15,197 | ||||
C | 1.64 | % | 2.15 | % | ||||||||
1-Year | + | 2.39 | % | + | 1.44 | % | $ | 10,144 | ||||
5-Year | + | 36.40 | % | + | 6.41 | % | $ | 13,640 | ||||
Since Inception (8/1/06) | + | 52.05 | % | + | 5.11 | % | $ | 15,205 | ||||
R | 1.14 | % | 1.65 | % | ||||||||
1-Year | + | 2.89 | % | + | 2.89 | % | $ | 10,289 | ||||
5-Year | + | 39.82 | % | + | 6.93 | % | $ | 13,982 | ||||
Since Inception (8/1/06) | + | 58.48 | % | + | 5.62 | % | $ | 15,848 | ||||
R6 | 0.59 | % | 1.22 | % | ||||||||
1-Year | + | 3.49 | % | + | 3.49 | % | $ | 10,349 | ||||
Since Inception (5/1/13) | + | 11.55 | % | + | 6.77 | % | $ | 11,155 | ||||
Advisor | 0.64 | % | 1.15 | % | ||||||||
1-Year | + | 3.45 | % | + | 3.45 | % | $ | 10,345 | ||||
5-Year | + | 43.50 | % | + | 7.49 | % | $ | 14,350 | ||||
Since Inception (8/1/06) | + | 65.47 | % | + | 6.17 | % | $ | 16,547 |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
franklintempleton.com Annual Report | 7
FRANKLIN LIFESMART 2015 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
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8 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2015 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx9x1.jpg)
franklintempleton.com Annual Report | 9
FRANKLIN LIFESMART 2015 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx10x1.jpg)
The Fund’s investment risk changes over time as its asset allocation changes. Since the Fund invests in underlying funds, which may engage in a variety of
investment strategies involving certain risks, the Fund is subject to those same risks. All investments involve risks, including possible loss of principal. Principal
invested is not guaranteed at any time, including at or after the Fund’s retirement target date, nor is there any guarantee that the Fund will provide sufficient
income at or through the investor’s retirement. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, partic-
ular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the
Fund adjust to a rise in interest rates, the Fund’s share price may decline. Foreign investing carries additional risks such as currency and market volatility and
political or social instability, risks that are heightened in developing countries. These risks are described more fully in the Fund’s prospectus. Investors should
consult their financial advisors for help selecting the appropriate fund of funds, or fund combination, based on an evaluation of their investment objectives,
retirement time horizons and risk tolerance. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the
desired results.
Class C: | These shares have higher annual fees and expenses than Class A shares. |
Class R: | Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares. |
Class R6: | Shares are available to certain eligible investors as described in the prospectus. |
Advisor Class: | Shares are available to certain eligible investors as described in the prospectus. |
1. The Fund has an expense reduction contractually guaranteed through at least 4/30/15 and a fee waiver associated with its investments in a Franklin Templeton money
fund, contractually guaranteed through at least its current fiscal year-end. Fund investment results reflect the expense reduction and fee waiver, to the extent applicable;
without these reductions, the results would have been lower. As of 5/1/11, the Fund’s glide path was modified, and among other changes, reflects a lower starting allocation
to equity funds; such a change can impact performance.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated.
4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
5. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
6. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The MSCI EAFE
Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets excluding the U.S. and
Canada. The Barclays U.S. Aggregate Index is a market capitalization-weighted index representing the U.S. investment-grade, fixed-rate, taxable bond market with index
components for government and corporate, mortgage pass-through and asset-backed securities. All issues included are SEC registered, taxable, dollar denominated and
nonconvertible, must have at least one year to final maturity and must be rated investment grade (Baa3/BBB-/BBB- or higher) using the middle rating of Moody’s, S&P and
Fitch, respectively. The MSCI ACWI is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed and
emerging markets. The Barclays Multiverse Index provides a broad-based measure of the global fixed income bond market. The index represents the union of the Global
Aggregate Index and the Global High Yield Index and captures investment-grade and high yield securities in all eligible currencies.
7. Source: Payden & Rygel. The P&R 90 Day T-Bill Index 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.
See www.franklintempletondatasources.com for additional data provider information.
10 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2015 RETIREMENT TARGET FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs:
- Transaction costs, including sales charges (loads) on Fund purchases; and
- Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:
1. | Divide your account value by $1,000. |
If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6. | |
2. | Multiply the result by the number under the heading “Expenses Paid During Period.” |
If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50. |
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
franklintempleton.com Annual Report | 11
FRANKLIN LIFESMART 2015 RETIREMENT TARGET FUND | ||||||||
YOUR FUND’S EXPENSES | ||||||||
Beginning | Ending | Expenses Paid | Expenses Paid | |||||
Account | Account | During Period* During Period** | ||||||
Share Class | Value 7/1/14 | Value 12/31/14 | 7/1/14–12/31/14 | 7/1/14–12/31/14 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 995.10 | $ | 1.76 | $ | 4.93 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.44 | $ | 1.79 | $ | 4.99 |
C | ||||||||
Actual | $ | 1,000 | $ | 991.50 | $ | 5.27 | $ | 8.43 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.91 | $ | 5.35 | $ | 8.54 |
R | ||||||||
Actual | $ | 1,000 | $ | 994.90 | $ | 2.77 | $ | 5.93 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.43 | $ | 2.80 | $ | 6.01 |
R6 | ||||||||
Actual | $ | 1,000 | $ | 996.90 | $ | 0.00 | $ | 3.17 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,025.21 | $ | 0.00 | $ | 3.21 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 996.70 | $ | 0.25 | $ | 3.42 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,024.95 | $ | 0.26 | $ | 3.47 |
*Expenses are calculated using the most recent six-month expense ratio excluding expenses of the fund investments, net of expense waivers,
annualized for each class (A: 0.35%; C: 1.05%; R: 0.55%; R6: 0.00%; and Advisor: 0.05%), multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
**Expenses are calculated using the most recent six-month expense ratio including expenses of the fund investments, net of expense waivers,
annualized for each class (A: 0.98%; C: 1.68%; R: 1.18%; R6: 0.63%; and Advisor: 0.68%), multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
12 | Annual Report franklintempleton.com
Franklin LifeSmart 2020 Retirement Target Fund
We are pleased to bring you Franklin LifeSmart 2020 Retirement Target Fund’s annual report for the fiscal year ended December 31, 2014.
Your Fund’s Goal and Main Investments
The Fund seeks the highest level of long-term total return, which consists of capital appreciation and income, consistent with the Fund’s asset allocation. The Fund allocates among the broad asset classes of equity and fixed income by investing in a distinctly weighted combination of underlying funds, predominantly other Franklin Templeton mutual funds, with an increasing emphasis on income as the target date of 2020 approaches. The target date is the approximate retirement year of the investor.
Asset Allocation*
Based on Total Net Assets as of 12/31/14
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx13x1.jpg)
*The asset allocation is based on the Statement of Investments (SOI), which
classifies each underlying fund and other fund investments into a broad asset
class based on its predominant investments under normal market conditions.
Performance Overview
The Fund’s Class A shares delivered a +4.83% cumulative total return for the 12 months ended December 31, 2014. In comparison, the Fund’s new equity benchmark, the MSCI All Country World Index (ACWI), which measures equity performance in global developed and emerging markets, returned +4.71%, while its old equity benchmark, the Standard & Poor’s 500 Index (S&P 500), a broad measure of U.S. stock performance, returned +13.69%.1 Another equity benchmark, the MSCI Europe, Australasia, Far East (EAFE) Index, which measures global stock performance for developed markets excluding the U.S. and Canada, had a -4.48% total return.1 The Fund’s new fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, posted a +0.48% total return, while its old fixed income benchmark, the Barclays U.S. Aggregate Index, which tracks U.S. investment-grade bonds, generated a +5.97% total return.1 The Fund is adding the Payden & Rygel (P&R) 90-Day U.S. Treasury Bill Index, a proxy for short-term investments and other net assets, which returned +0.04%.2 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 15.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.
Investment Strategy
When selecting equity funds, we consider the foreign and domestic exposure, market capitalization ranges, and investment style (growth vs. value) of the underlying Franklin Templeton funds and other fund investments (collectively, “fund investments”). When selecting fixed income funds, we focus primarily on maximizing income appropriate to the Fund’s specific risk profile. In evaluating the risk level of the fund investments, we analyze such factors as: (a) relative and absolute performance, including correlations with other fund investments as well as corresponding benchmarks, and (b) their volatility (the variability of returns from one period to the next). We attempt to invest the assets of each Target Fund in the same fund investments and will vary the fund investments’ allocation percentages based upon each Fund’s risk/return level. We change the Fund’s target asset allocation over time, and it becomes increasingly conservative as the stated target date draws near. At the “landing point” (reached at the target date), the Fund reaches its most conservative asset allocation and thereafter, such strategic asset allocation will generally become fixed.
1. Source: Morningstar.
2. Source: Payden & Rygel.
The indexes are unmanaged and include reinvestment of any income or distributions. One cannot invest directly in an index, and an index is not representative of the
Fund’s portfolio.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s SOI, which begins on page 88.
franklintempleton.com Annual Report | 13
FRANKLIN LIFESMART 2020 RETIREMENT TARGET FUND
Top 10 Fund Holdings | ||
12/31/14 | ||
% of Total | ||
Net Assets | ||
Templeton Global Total Return Fund – Class R6 | 14.7 | % |
Franklin Low Duration Total Return Fund – Class R6 | 11.4 | % |
Franklin Growth Fund – Class R6 | 7.9 | % |
iShares Core S&P 500 ETF | 5.9 | % |
Franklin Rising Dividends Fund – Class R6 | 5.4 | % |
Franklin International Small Cap Growth Fund – Class R6 | 5.0 | % |
Franklin DynaTech Fund – Class R6 | 4.6 | % |
Franklin Focused Core Equity Fund – Class R6 | 4.3 | % |
Franklin Strategic Income Fund – Class R6 | 4.1 | % |
Franklin Mutual International Fund – Class R6 | 4.1 | % |
Manager’s Discussion
The Fund’s performance can be attributed largely to its allocation among equities and fixed income securities and to the actual performance of the fund investments. This allocation shifts every year, in accordance with the retirement date associated with the portfolio.
At period-end, Franklin LifeSmart 2020 Retirement Target Fund allocated 58.0% of total net assets to equity, 34.2% to fixed income and 3.7% to alternative strategies. Domestic equity exposure was 69.1% of the total equity weighting, and foreign equity made up the balance. The portfolio was diversified across capitalization sizes and investment styles, and on December 31, 2014, we held shares in large-, mid- and small-capitalization equity funds, representing both growth and value styles. Franklin Growth Fund – Class R6, at 7.9% of the Fund’s total investments, was our largest equity fund weighting at period-end. On the fixed income side, domestic exposure was 52.0% of the Fund’s total fixed income weighting, with the balance in foreign fixed income. Templeton Global Total Return Bond Fund – Class R6 was our largest fixed income fund weighting at 14.7% of total net assets.
Our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest domestic value fund holding, Franklin Rising Dividends Fund – Class R6, outperformed the MSCI ACWI, while our largest foreign equity fund holding, Franklin International Small Cap Growth Fund – Class R6, underperformed the index. On the fixed income side, Templeton Global Total Return Fund – Class R6 and Franklin Low Duration Total Return Fund – Class R6 outperformed the Barclays Multiverse Index.
Thank you for your participation in Franklin LifeSmart 2020 Retirement Target Fund. We look forward to serving your future investment needs.
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx14x1.jpg)
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2014, 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 investment manager 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.
14 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2020 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2014
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 and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses.
Net Asset Value | ||||||
Share Class (Symbol) | 12/31/14 | 12/31/13 | Change | |||
A (FLRMX) | $ | 11.14 | $ | 10.94 | +$ | 0.20 |
C (FLRQX) | $ | 11.08 | $ | 10.90 | +$ | 0.18 |
R (FLRVX) | $ | 11.12 | $ | 10.93 | +$ | 0.19 |
R6 (FRTSX) | $ | 11.15 | $ | 10.95 | +$ | 0.20 |
Advisor (FLROX) | $ | 11.15 | $ | 10.95 | +$ | 0.20 |
Distributions (1/1/14–12/31/14) | ||||||||
Dividend | Short-Term | Long-Term | ||||||
Share Class | Income | Capital Gain | Capital Gain | Total | ||||
A | $ | 0.2683 | $ | 0.0021 | $ | 0.0566 | $ | 0.3270 |
C | $ | 0.2074 | $ | 0.0021 | $ | 0.0566 | $ | 0.2661 |
R | $ | 0.2544 | $ | 0.0021 | $ | 0.0566 | $ | 0.3131 |
R6 | $ | 0.3030 | $ | 0.0021 | $ | 0.0566 | $ | 0.3617 |
Advisor | $ | 0.2956 | $ | 0.0021 | $ | 0.0566 | $ | 0.3543 |
franklintempleton.com Annual Report | 15
FRANKLIN LIFESMART 2020 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Performance as of 12/31/141
Cumulative total return excludes sales charges. Average annual total return and value of $10,000 investment include maximum sales charges. Class A: 5.75% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only;
Class R/R6/Advisor Class: no sales charges.
Cumulative | Average Annual | Value of | Total Annual Operating Expenses5 | |||||||||
Share Class | Total Return2 | Total Return3 | $ | 10,000 Investment4 | (with waiver) | (without waiver) | ||||||
A | 1.00 | % | 11.90 | % | ||||||||
1-Year | + | 4.83 | % | -1.22 | % | $ | 9,878 | |||||
Since Inception (7/1/13) | + | 16.03 | % | + | 6.14 | % | $ | 10,936 | ||||
C | 1.70 | % | 12.60 | % | ||||||||
1-Year | + | 4.09 | % | + | 3.09 | % | $ | 10,309 | ||||
Since Inception (7/1/13) | + | 14.67 | % | + | 9.55 | % | $ | 11,467 | ||||
R | 1.20 | % | 12.10 | % | ||||||||
1-Year | + | 4.61 | % | + | 4.61 | % | $ | 10,461 | ||||
Since Inception (7/1/13) | + | 15.57 | % | + | 10.12 | % | $ | 11,557 | ||||
R6 | 0.65 | % | 12.16 | % | ||||||||
1-Year | + | 5.14 | % | + | 5.14 | % | $ | 10,514 | ||||
Since Inception (7/1/13) | + | 16.54 | % | + | 10.74 | % | $ | 11,654 | ||||
Advisor | 0.70 | % | 11.60 | % | ||||||||
1-Year | + | 5.08 | % | + | 5.08 | % | $ | 10,508 | ||||
Since Inception (7/1/13) | + | 16.45 | % | + | 10.68 | % | $ | 11,645 |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
16 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2020 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx17x1.jpg)
franklintempleton.com Annual Report | 17
FRANKLIN LIFESMART 2020 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx18x1.jpg)
18 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2020 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx19x1.jpg)
The Fund’s investment risk changes over time as its asset allocation changes. Since the Fund invests in underlying funds, which may engage in a variety of
investment strategies involving certain risks, the Fund is subject to those same risks. All investments involve risks, including possible loss of principal. Principal
invested is not guaranteed at any time, including at or after the Fund’s retirement target date, nor is there any guarantee that the Fund will provide sufficient
income at or through the investor’s retirement. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, partic-
ular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the
Fund adjust to a rise in interest rates, the Fund’s share price may decline. Foreign investing carries additional risks such as currency and market volatility and
political or social instability, risks that are heightened in developing countries. These risks are described more fully in the Fund’s prospectus. Investors should
consult their financial advisors for help selecting the appropriate fund of funds, or fund combination, based on an evaluation of their investment objectives,
retirement time horizons and risk tolerance. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the
desired results.
Class C: | These shares have higher annual fees and expenses than Class A shares. |
Class R: | Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares. |
Class R6: | Shares are available to certain eligible investors as described in the prospectus. |
Advisor Class: | Shares are available to certain eligible investors as described in the prospectus. |
1. The Fund has an expense reduction contractually guaranteed through at least 4/30/15 and a fee waiver associated with its investments in a Franklin Templeton money
fund, contractually guaranteed through at least its current fiscal year-end. Fund investment results reflect the expense reduction and fee waiver, to the extent applicable;
without these reductions, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated.
4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
5. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
6. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The MSCI EAFE
Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets excluding the U.S. and
Canada. The Barclays U.S. Aggregate Index is a market capitalization-weighted index representing the U.S. investment-grade, fixed-rate, taxable bond market with index
components for government and corporate, mortgage pass-through and asset-backed securities. All issues included are SEC registered, taxable, dollar denominated and
nonconvertible, must have at least one year to final maturity and must be rated investment grade (Baa3/BBB-/BBB- or higher) using the middle rating of Moody’s, S&P and
Fitch, respectively. The MSCI ACWI is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed and
emerging markets. The Barclays Multiverse Index provides a broad-based measure of the global fixed income bond market. The index represents the union of the Global
Aggregate Index and the Global High Yield Index and captures investment-grade and high yield securities in all eligible currencies.
7. Source: Payden & Rygel. The P&R 90 Day T-Bill Index 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.
See www.franklintempletondatasources.com for additional data provider information.
franklintempleton.com Annual Report | 19
FRANKLIN LIFESMART 2020 RETIREMENT TARGET FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs:
- Transaction costs, including sales charges (loads) on Fund purchases; and
- Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:
1. | Divide your account value by $1,000. |
If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6. | |
2. | Multiply the result by the number under the heading “Expenses Paid During Period.” |
If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50. |
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
20 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2020 RETIREMENT TARGET FUND
YOUR FUND’S EXPENSES
Beginning | Ending | Expenses Paid | Expenses Paid | |||||
Account | Account | During Period* During Period** | ||||||
Share Class | Value 7/1/14 | Value 12/31/14 | 7/1/14–12/31/14 | 7/1/14–12/31/14 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 1,003.60 | $ | 1.77 | $ | 5.05 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.44 | $ | 1.79 | $ | 5.09 |
C | ||||||||
Actual | $ | 1,000 | $ | 999.20 | $ | 5.29 | $ | 8.57 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.91 | $ | 5.35 | $ | 8.64 |
R | ||||||||
Actual | $ | 1,000 | $ | 1,002.10 | $ | 2.78 | $ | 6.06 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.43 | $ | 2.80 | $ | 6.11 |
R6 | ||||||||
Actual | $ | 1,000 | $ | 1,005.10 | $ | 0.00 | $ | 3.29 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,025.21 | $ | 0.00 | $ | 3.31 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 1,004.90 | $ | 0.25 | $ | 3.54 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,024.95 | $ | 0.26 | $ | 3.57 |
*Expenses are calculated using the most recent six-month expense ratio excluding expenses of the fund investments, net of expense waivers,
annualized for each class (A: 0.35%; C: 1.05%; R: 0.55%; R6: 0.00%; and Advisor: 0.05%), multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
**Expenses are calculated using the most recent six-month expense ratio including expenses of the fund investments, net of expense waivers,
annualized for each class (A: 1.00%; C: 1.70%; R: 1.20%; R6: 0.65%; and Advisor: 0.70%), multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
franklintempleton.com Annual Report | 21
Franklin LifeSmart 2025 Retirement Target Fund
We are pleased to bring you Franklin LifeSmart 2025 Retirement Target Fund’s annual report for the fiscal year ended December 31, 2014.
Your Fund’s Goal and Main Investments
The Fund seeks the highest level of long-term total return, which consists of capital appreciation and income, consistent with the Fund’s asset allocation. The Fund allocates among the broad asset classes of equity and fixed income by investing in a distinctly weighted combination of underlying funds, predominantly other Franklin Templeton mutual funds, with an increasing emphasis on income as the target date of 2025 approaches.1 The target date is the approximate retirement year of the investor.
Asset Allocation*
Based on Total Net Assets as of 12/31/14
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx22x1.jpg)
*The asset allocation is based on the Statement of Investments (SOI), which
classifies each underlying fund and other fund investments into a broad asset
class based on its predominant investments under normal market conditions.
Performance Overview
The Fund’s Class A shares delivered a +4.39% cumulative total return for the 12 months ended December 31, 2014. In comparison, the Fund’s new equity benchmark, the MSCI All Country World Index (ACWI), which measures equity performance in global developed and emerging markets, returned +4.71%, while its old equity benchmark, the Standard & Poor’s 500 Index (S&P 500), a broad measure of U.S. stock performance, returned +13.69%.1 Another equity benchmark, the MSCI Europe, Australasia, Far East (EAFE) Index, which measures global stock performance for developed markets excluding the U.S. and Canada, had a -4.48% total return.1 The Fund’s new fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, posted a +0.48% total return, while its old fixed income benchmark, the Barclays U.S. Aggregate Index, which tracks U.S. investment-grade bonds, generated a +5.97% total return.1 The Fund is adding the Payden & Rygel (P&R) 90-Day U.S. Treasury Bill Index, a proxy for short-term investments and other net assets, which returned +0.04%.2 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 24.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.
Investment Strategy
When selecting equity funds, we consider the foreign and domestic exposure, market capitalization ranges, and investment style (growth vs. value) of the underlying Franklin Templeton funds and other fund investments (collectively, “fund investments”). When selecting fixed income funds, we focus primarily on maximizing income appropriate to the Fund’s specific risk profile. In evaluating the risk level of the fund investments, we analyze such factors as: (a) relative and absolute performance, including correlations with other fund investments as well as corresponding benchmarks, and (b) their volatility (the variability of returns from one period to the next). We attempt to invest the assets of each Target Fund in the same fund investments and will vary the fund investments’ allocation percentages based upon each Fund’s risk/return level. We change the Fund’s target asset allocation over time, and it becomes increasingly conservative as the stated target date draws near. At the “landing point” (reached at the target date), the Fund reaches its most conservative asset allocation and thereafter, such strategic asset allocation will generally become fixed.
1. Source: Morningstar.
2. Source: Payden & Rygel.
The indexes are unmanaged and include reinvestment of any income or distributions. One cannot invest directly in an index, and an index is not representative of the
Fund’s portfolio.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s SOI, which begins on page 95.
22 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2025 RETIREMENT TARGET FUND
Top 10 Fund Holdings | ||
12/31/14 | ||
% of Total | ||
Net Assets | ||
Templeton Global Total Return Fund – Class R6 | 9.2 | % |
Franklin Growth Fund – Class R6 | 9.1 | % |
Franklin Rising Dividends Fund – Class R6 | 7.4 | % |
Franklin Low Duration Total Return Fund – Class R6 | 6.6 | % |
Franklin International Small Cap Growth Fund – Class R6 | 5.9 | % |
iShares Core S&P 500 ETF | 5.9 | % |
Franklin DynaTech Fund – Class R6 | 5.7 | % |
Franklin Focused Core Equity Fund – Class R6 | 5.2 | % |
Franklin Mutual International Fund – Class R6 | 4.9 | % |
iShares S&P 500 Value ETF | 4.0 | % |
Manager’s Discussion
The Fund’s performance can be attributed largely to its allocation among equities and fixed income securities and to the actual performance of the fund investments. This allocation shifts every year, in accordance with the retirement date associated with the portfolio.
At period-end, Franklin LifeSmart 2025 Retirement Target Fund allocated 70.3% of total net assets to equity, 21.4% to fixed income and 3.8% to alternative strategies. Domestic equity exposure was 69.4% of the total equity weighting, and foreign equity made up the balance. The portfolio was diversified across capitalization sizes and investment styles, and on December 31, 2014, we held shares in large-, mid- and small-capitalization equity funds, representing both growth and value styles. Franklin Growth Fund – Class R6, at 9.1% of the Fund’s total net assets, was our largest equity fund weighting at period-end. On the fixed income side, domestic exposure was 51.4% of the Fund’s total fixed income weighting, with the balance in foreign fixed income. Templeton Global Total Return Fund –Class R6 was our largest fixed income fund weighting at 9.2% of total net assets.
Our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest domestic value fund holding, Franklin Rising Dividends Fund – Class R6, outperformed the MSCI ACWI, while our largest foreign equity fund holding,
Franklin International Small Cap Growth Fund – Class R6, underperformed the index. On the fixed income side, Templeton Global Total Return Fund – Class R6 and Franklin Low Duration Total Return Fund – Class R6 outperformed the Barclays Multiverse Index.
Thank you for your continued participation in Franklin LifeSmart 2025 Retirement Target Fund. We look forward to serving your future investment needs.
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx23x1.jpg)
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2014, 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 investment manager 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.
franklintempleton.com Annual Report | 23
FRANKLIN LIFESMART 2025 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2014
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 and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses.
Net Asset Value | ||||||
Share Class (Symbol) | 12/31/14 | 12/31/13 | Change | |||
A (FTRTX) | $ | 12.36 | $ | 12.76 | -$ | 0.40 |
C (FTTCX) | $ | 12.18 | $ | 12.60 | -$ | 0.42 |
R (FRELX) | $ | 12.31 | $ | 12.72 | -$ | 0.41 |
R6 (FTLMX) | $ | 12.39 | $ | 12.79 | -$ | 0.40 |
Advisor (FLRFX) | $ | 12.38 | $ | 12.79 | -$ | 0.41 |
Distributions (1/1/14–12/31/14) | ||||||||
Dividend | Short-Term | Long-Term | ||||||
Share Class | Income | Capital Gain | Capital Gain | Total | ||||
A | $ | 0.2823 | $ | 0.1066 | $ | 0.5712 | $ | 0.9601 |
C | $ | 0.1948 | $ | 0.1066 | $ | 0.5712 | $ | 0.8726 |
R | $ | 0.2567 | $ | 0.1066 | $ | 0.5712 | $ | 0.9345 |
R6 | $ | 0.3268 | $ | 0.1066 | $ | 0.5712 | $ | 1.0046 |
Advisor | $ | 0.3205 | $ | 0.1066 | $ | 0.5712 | $ | 0.9983 |
24 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2025 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Performance as of 12/31/141
Cumulative total return excludes sales charges. Average annual total return and value of $10,000 investment include maximum sales charges. Class A: 5.75% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only;
Class R/R6/Advisor Class: no sales charges.
Cumulative | Average Annual | Value of | Total Annual Operating Expenses5 | |||||||||
Share Class | Total Return2 | Total Return3 | $ | 10,000 Investment4 | (with waiver) | (without waiver) | ||||||
A | 0.98 | % | 1.51 | % | ||||||||
1-Year | + | 4.39 | % | -1.62 | % | $ | 9,838 | |||||
5-Year | + | 53.42 | % | + | 7.66 | % | $ | 14,463 | ||||
Since Inception (8/1/06) | + | 65.82 | % | + | 5.45 | % | $ | 15,628 | ||||
C | 1.68 | % | 2.21 | % | ||||||||
1-Year | + | 3.58 | % | + | 2.61 | % | $ | 10,261 | ||||
5-Year | + | 48.17 | % | + | 8.18 | % | $ | 14,817 | ||||
Since Inception (8/1/06) | + | 56.37 | % | + | 5.46 | % | $ | 15,637 | ||||
R | 1.18 | % | 1.71 | % | ||||||||
1-Year | + | 4.12 | % | + | 4.12 | % | $ | 10,412 | ||||
5-Year | + | 51.77 | % | + | 8.70 | % | $ | 15,177 | ||||
Since Inception (8/1/06) | + | 63.00 | % | + | 5.98 | % | $ | 16,300 | ||||
R6 | 0.63 | % | 1.11 | % | ||||||||
1-Year | + | 4.74 | % | + | 4.74 | % | $ | 10,474 | ||||
Since Inception (5/1/13) | + | 19.30 | % | + | 11.15 | % | $ | 11,930 | ||||
Advisor | 0.68 | % | 1.21 | % | ||||||||
1-Year | + | 4.61 | % | + | 4.61 | % | $ | 10,461 | ||||
5-Year | + | 55.64 | % | + | 9.25 | % | $ | 15,564 | ||||
Since Inception (8/1/06) | + | 69.85 | % | + | 6.50 | % | $ | 16,985 |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
franklintempleton.com Annual Report | 25
FRANKLIN LIFESMART 2025 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx26x1.jpg)
26 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2025 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx27x1.jpg)
franklintempleton.com Annual Report | 27
FRANKLIN LIFESMART 2025 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx28x1.jpg)
The Fund’s investment risk changes over time as its asset allocation changes. Since the Fund invests in underlying funds, which may engage in a variety of
investment strategies involving certain risks, the Fund is subject to those same risks. All investments involve risks, including possible loss of principal. Principal
invested is not guaranteed at any time, including at or after the Fund’s retirement target date, nor is there any guarantee that the Fund will provide sufficient
income at or through the investor’s retirement. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, partic-
ular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the
Fund adjust to a rise in interest rates, the Fund’s share price may decline. Foreign investing carries additional risks such as currency and market volatility and
political or social instability, risks that are heightened in developing countries. These risks are described more fully in the Fund’s prospectus. Investors should
consult their financial advisors for help selecting the appropriate fund of funds, or fund combination, based on an evaluation of their investment objectives,
retirement time horizons and risk tolerance. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the
desired results.
Class C: | These shares have higher annual fees and expenses than Class A shares. |
Class R: | Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares. |
Class R6: | Shares are available to certain eligible investors as described in the prospectus. |
Advisor Class: | Shares are available to certain eligible investors as described in the prospectus. |
1. The Fund has an expense reduction contractually guaranteed through at least 4/30/15 and a fee waiver associated with its investments in a Franklin Templeton money
fund, contractually guaranteed through at least its current fiscal year-end. Fund investment results reflect the expense reduction and fee waiver, to the extent applicable;
without these reductions, the results would have been lower. As of 5/1/11, the Fund’s glide path was modified, and among other changes, reflects a lower starting allocation
to equity funds; such a change can impact performance.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated.
4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
5. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
6. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The MSCI EAFE
Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets excluding the U.S. and
Canada. The Barclays U.S. Aggregate Index is a market capitalization-weighted index representing the U.S. investment-grade, fixed-rate, taxable bond market with index
components for government and corporate, mortgage pass-through and asset-backed securities. All issues included are SEC registered, taxable, dollar denominated and
nonconvertible, must have at least one year to final maturity and must be rated investment grade (Baa3/BBB-/BBB- or higher) using the middle rating of Moody’s, S&P and
Fitch, respectively. The MSCI ACWI is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed and
emerging markets. The Barclays Multiverse Index provides a broad-based measure of the global fixed income bond market. The index represents the union of the Global
Aggregate Index and the Global High Yield Index and captures investment-grade and high yield securities in all eligible currencies.
7. Source: Payden & Rygel. The P&R 90 Day T-Bill Index 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.
See www.franklintempletondatasources.com for additional data provider information.
28 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2025 RETIREMENT TARGET FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs:
- Transaction costs, including sales charges (loads) on Fund purchases; and
- Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:
1. | Divide your account value by $1,000. |
If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6. | |
2. | Multiply the result by the number under the heading “Expenses Paid During Period.” |
If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50. |
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
franklintempleton.com Annual Report | 29
FRANKLIN LIFESMART 2025 RETIREMENT TARGET FUND | ||||||||
YOUR FUND’S EXPENSES | ||||||||
Beginning | Ending | Expenses Paid | Expenses Paid | |||||
Account | Account | During Period* During Period** | ||||||
Share Class | Value 7/1/14 | Value 12/31/14 | 7/1/14–12/31/14 | 7/1/14–12/31/14 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 1,003.60 | $ | 1.77 | $ | 5.10 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.44 | $ | 1.79 | $ | 5.14 |
C | ||||||||
Actual | $ | 1,000 | $ | 1,000.10 | $ | 5.29 | $ | 8.62 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.91 | $ | 5.35 | $ | 8.69 |
R | ||||||||
Actual | $ | 1,000 | $ | 1,001.80 | $ | 2.78 | $ | 6.11 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.43 | $ | 2.80 | $ | 6.16 |
R6 | ||||||||
Actual | $ | 1,000 | $ | 1,005.40 | $ | 0.00 | $ | 3.34 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,025.21 | $ | 0.00 | $ | 3.36 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 1,004.30 | $ | 0.25 | $ | 3.59 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,024.95 | $ | 0.26 | $ | 3.62 |
*Expenses are calculated using the most recent six-month expense ratio excluding expenses of the fund investments, net of expense waivers,
annualized for each class (A: 0.35%; C: 1.05%; R: 0.55%; R6: 0.00%; and Advisor: 0.05%), multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
**Expenses are calculated using the most recent six-month expense ratio including expenses of the fund investments, net of expense waivers,
annualized for each class (A: 1.01%; C: 1.71%; R: 1.21%; R6: 0.66%; and Advisor: 0.71%), multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
30 | Annual Report franklintempleton.com
Franklin LifeSmart 2030 Retirement Target Fund
We are pleased to bring you Franklin LifeSmart 2030 Retirement Target Fund’s annual report for the fiscal year ended December 31, 2014.
Your Fund’s Goal and Main Investments
The Fund seeks the highest level of long-term total return, which consists of capital appreciation and income, consistent with the Fund’s asset allocation. The Fund allocates among the broad asset classes of equity and fixed income by investing in a distinctly weighted combination of underlying funds, predominantly other Franklin Templeton mutual funds, with an increasing emphasis on income as the target date of 2030 approaches. The target date is the approximate retirement year of the investor.
Asset Allocation*
Based on Total Net Assets as of 12/31/14
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx31x1.jpg)
*The asset allocation is based on the Statement of Investments (SOI), which
classifies each underlying fund and other fund investments into a broad asset
class based on its predominant investments under normal market conditions.
Performance Overview
The Fund’s Class A shares delivered a +5.28% cumulative total return for the 12 months ended December 31, 2014. In comparison, the Fund’s new equity benchmark, the MSCI All Country World Index (ACWI), which measures equity performance in global developed and emerging markets, returned +4.71%, while its old equity benchmark, the Standard & Poor’s 500 Index (S&P 500), a broad measure of U.S. stock performance, returned +13.69%.1 Another equity benchmark, the MSCI Europe, Australasia, Far East (EAFE) Index, which measures global stock performance for developed markets excluding the U.S. and Canada, had a -4.48% total return.1 The Fund’s new fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, posted a +0.48% total return, while its old fixed income benchmark, the Barclays U.S. Aggregate Index, which tracks U.S. investment-grade bonds, generated a +5.97% total return.1 The Fund is adding the Payden & Rygel (P&R) 90-Day U.S. Treasury Bill Index, a proxy for short-term investments and other net assets, which returned +0.04% .2 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 33.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.
Investment Strategy
When selecting equity funds, we consider the foreign and domestic exposure, market capitalization ranges, and investment style (growth vs. value) of the underlying Franklin Templeton funds and other fund investments (collectively, “fund investments”). When selecting fixed income funds, we focus primarily on maximizing income appropriate to the Fund’s specific risk profile. In evaluating the risk level of the fund investments, we analyze such factors as: (a) relative and absolute performance, including correlations with other fund investments as well as corresponding benchmarks, and (b) their volatility (the variability of returns from one period to the next). We attempt to invest the assets of each Target Fund in the same fund investments and will vary the fund investments’ allocation percentages based upon each Fund’s risk/return level. We change the Fund’s target asset allocation over time, and it becomes increasingly conservative as the stated target date draws near. At the “landing point” (reached at the target date), the Fund reaches its most conservative asset allocation and thereafter, such strategic asset allocation will generally become fixed.
1. Source: Morningstar.
2. Source: Payden & Rygel.
The indexes are unmanaged and include reinvestment of any income or distributions. One cannot invest directly in an index, and an index is not representative of the
Fund’s portfolio.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s SOI, which begins on page 102.
franklintempleton.com Annual Report | 31
FRANKLIN LIFESMART 2030 RETIREMENT TARGET FUND
Top 10 Fund Holdings | ||
12/31/14 | ||
% of Total | ||
Net Assets | ||
Franklin Growth Fund – Class R6 | 10.4 | % |
Templeton Global Total Return Fund – Class R6 | 7.5 | % |
Franklin Rising Dividends Fund – Class R6 | 7.4 | % |
Franklin International Small Cap Growth Fund – Class R6 | 6.6 | % |
Franklin DynaTech Fund – Class R6 | 6.4 | % |
iShares Core S&P 500 ETF | 6.0 | % |
Franklin Low Duration Total Return Fund – Class R6 | 5.7 | % |
Franklin Focused Core Equity Fund – Class R6 | 5.3 | % |
Franklin Mutual International Fund – Class R6 | 5.0 | % |
Franklin Growth Opportunities Fund – Class R6 | 4.1 | % |
Manager’s Discussion
The Fund’s performance can be attributed largely to its allocation among equities and fixed income securities and to the actual performance of the fund investments. This allocation shifts every year, in accordance with the retirement date associated with the portfolio.
At period-end, Franklin LifeSmart 2030 Retirement Target Fund allocated 75.3% of total net assets to equity, 17.9% to fixed income and 3.9% to alternative strategies. Domestic equity exposure was 68.9% of the total equity weighting, and foreign equity made up the balance. The portfolio was diversified across capitalization sizes and investment styles, and on December 31, 2014, we held shares in large-, mid- and small-capitalization equity funds, representing both growth and value styles. Franklin Growth Fund – Class R6, at 10.4% of the Fund’s total net assets, was our largest equity fund weighting at period-end. On the fixed income side, domestic exposure was 52.0% of the Fund’s total fixed income weighting, with the balance in foreign fixed income. Templeton Global Total Return Fund – Class R6 was our largest fixed income fund weighting at 7.5% of total net assets.
Our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest domestic value fund holding, Franklin Rising Dividends Fund – Class R6, outperformed the MSCI ACWI, while our largest foreign equity fund holding, Franklin International Small Cap Growth Fund – Class R6, underperformed the index. On the fixed income side, Templeton Global Total Return Fund – Class R6 and Franklin Low Duration Total Return Fund – Class R6 outperformed the Barclays Multiverse Index.
Thank you for your participation in Franklin LifeSmart 2030 Retirement Target Fund. We look forward to serving your future investment needs.
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx32x1.jpg)
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2014, 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 investment manager 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.
32 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2030 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2014
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 and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses.
Net Asset Value | ||||||
Share Class (Symbol) | 12/31/14 | 12/31/13 | Change | |||
A (FLRSX) | $ | 11.45 | $ | 11.11 | +$ | 0.34 |
C (FLRTX) | $ | 11.38 | $ | 11.09 | +$ | 0.29 |
R (FLRWX) | $ | 11.44 | $ | 11.10 | +$ | 0.34 |
R6 (FLERX) | $ | 11.47 | $ | 11.12 | +$ | 0.35 |
Advisor (FLRZX) | $ | 11.47 | $ | 11.12 | +$ | 0.35 |
Distributions (1/1/14–12/31/14) | ||||||||
Dividend | Short-Term | Long-Term | ||||||
Share Class | Income | Capital Gain | Capital Gain | Total | ||||
A | $ | 0.1832 | $ | 0.0071 | $ | 0.0560 | $ | 0.2463 |
C | $ | 0.1541 | $ | 0.0071 | $ | 0.0560 | $ | 0.2172 |
R | $ | 0.1599 | $ | 0.0071 | $ | 0.0560 | $ | 0.2230 |
R6 | $ | 0.2099 | $ | 0.0071 | $ | 0.0560 | $ | 0.2730 |
Advisor | $ | 0.2047 | $ | 0.0071 | $ | 0.0560 | $ | 0.2678 |
franklintempleton.com Annual Report | 33
FRANKLIN LIFESMART 2030 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Performance as of 12/31/141
Cumulative total return excludes sales charges. Average annual total return and value of $10,000 investment include maximum sales charges. Class A: 5.75% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only;
Class R/R6/Advisor Class: no sales charges.
Cumulative | Average Annual | Value of | Total Annual Operating Expenses5 | |||||||||
Share Class | Total Return2 | Total Return3 | $ | 10,000 Investment4 | (with waiver) | (without waiver) | ||||||
A | 1.02 | % | 21.56 | % | ||||||||
1-Year | + | 5.28 | % | -0.79 | % | $ | 9,921 | |||||
Since Inception (7/1/13) | + | 18.11 | % | + | 7.41 | % | $ | 11,132 | ||||
C | 1.72 | % | 22.26 | % | ||||||||
1-Year | + | 4.67 | % | + | 3.67 | % | $ | 10,367 | ||||
Since Inception (7/1/13) | + | 16.95 | % | + | 10.99 | % | $ | 11,695 | ||||
R | 1.22 | % | 21.76 | % | ||||||||
1-Year | + | 5.07 | % | + | 5.07 | % | $ | 10,507 | ||||
Since Inception (7/1/13) | + | 17.66 | % | + | 11.44 | % | $ | 11,766 | ||||
R6 | 0.67 | % | 21.67 | % | ||||||||
1-Year | + | 5.60 | % | + | 5.60 | % | $ | 10,560 | ||||
Since Inception (7/1/13) | + | 18.63 | % | + | 12.05 | % | $ | 11,863 | ||||
Advisor | 0.72 | % | 21.26 | % | ||||||||
1-Year | + | 5.56 | % | 5.56 | % | $ | 10,556 | |||||
Since Inception (7/1/13) | + | 18.56 | % | + | 12.01 | % | $ | 11,856 |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
34 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2030 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx35x1.jpg)
franklintempleton.com Annual Report | 35
FRANKLIN LIFESMART 2030 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx36x1.jpg)
36 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2030 RETIREMENT TARGET FUND PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx37x1.jpg)
The Fund’s investment risk changes over time as its asset allocation changes. Since the Fund invests in underlying funds, which may engage in a variety of
investment strategies involving certain risks, the Fund is subject to those same risks. All investments involve risks, including possible loss of principal. Principal
invested is not guaranteed at any time, including at or after the Fund’s retirement target date, nor is there any guarantee that the Fund will provide sufficient
income at or through the investor’s retirement. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, partic-
ular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the
Fund adjust to a rise in interest rates, the Fund’s share price may decline. Foreign investing carries additional risks such as currency and market volatility and
political or social instability, risks that are heightened in developing countries. These risks are described more fully in the Fund’s prospectus. Investors should
consult their financial advisors for help selecting the appropriate fund of funds, or fund combination, based on an evaluation of their investment objectives,
retirement time horizons and risk tolerance. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the
desired results.
Class C: | These shares have higher annual fees and expenses than Class A shares. |
Class R: | Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares. |
Class R6: | Shares are available to certain eligible investors as described in the prospectus. |
Advisor Class: | Shares are available to certain eligible investors as described in the prospectus. |
1. The Fund has an expense reduction contractually guaranteed through at least 4/30/15 and a fee waiver associated with its investments in a Franklin Templeton money
fund, contractually guaranteed through at least its current fiscal year-end. Fund investment results reflect the expense reduction and fee waiver, to the extent applicable;
without these reductions, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated.
4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
5. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
6. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The MSCI EAFE
Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets excluding the U.S. and
Canada. The Barclays U.S. Aggregate Index is a market capitalization-weighted index representing the U.S. investment-grade, fixed-rate, taxable bond market with index
components for government and corporate, mortgage pass-through and asset-backed securities. All issues included are SEC registered, taxable, dollar denominated and
nonconvertible, must have at least one year to final maturity and must be rated investment grade (Baa3/BBB-/BBB- or higher) using the middle rating of Moody’s, S&P and
Fitch, respectively. The MSCI ACWI is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed and
emerging markets. The Barclays Multiverse Index provides a broad-based measure of the global fixed income bond market. The index represents the union of the Global
Aggregate Index and the Global High Yield Index and captures investment-grade and high yield securities in all eligible currencies.
7. Source: Payden & Rygel. The P&R 90 Day T-Bill Index 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.
See www.franklintempletondatasources.com for additional data provider information.
franklintempleton.com Annual Report | 37
FRANKLIN LIFESMART 2030 RETIREMENT TARGET FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs:
- Transaction costs, including sales charges (loads) on Fund purchases; and
- Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:
1. | Divide your account value by $1,000. |
If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6. | |
2. | Multiply the result by the number under the heading “Expenses Paid During Period.” |
If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50. |
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
38 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2030 RETIREMENT TARGET FUND
YOUR FUND’S EXPENSES
Beginning | Ending | Expenses Paid | Expenses Paid | |||||
Account | Account | During Period* During Period** | ||||||
Share Class | Value 7/1/14 | Value 12/31/14 | 7/1/14–12/31/14 | 7/1/14–12/31/14 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 1,012.90 | $ | 1.78 | $ | 5.18 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.44 | $ | 1.79 | $ | 5.19 |
C | ||||||||
Actual | $ | 1,000 | $ | 1,009.60 | $ | 5.32 | $ | 8.71 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.91 | $ | 5.35 | $ | 8.74 |
R | ||||||||
Actual | $ | 1,000 | $ | 1,011.80 | $ | 2.79 | $ | 6.19 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.43 | $ | 2.80 | $ | 6.21 |
R6 | ||||||||
Actual | $ | 1,000 | $ | 1,014.30 | $ | 0.00 | $ | 3.40 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,025.21 | $ | 0.00 | $ | 3.41 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 1,014.80 | $ | 0.25 | $ | 3.66 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,024.95 | $ | 0.26 | $ | 3.67 |
*Expenses are calculated using the most recent six-month expense ratio excluding expenses of the fund investments, net of expense waivers,
annualized for each class (A: 0.35%; C:1.05%; R: 0.55%; R6: 0.00%; and Advisor: 0.05%), multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
**Expenses are calculated using the most recent six-month expense ratio including expenses of the fund investments, net of expense waivers,
annualized for each class (A: 1.02%; C: 1.72%; R: 1.22%; R6: 0.67%; and Advisor: 0.72%), multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
franklintempleton.com Annual Report | 39
Franklin LifeSmart 2035 Retirement Target Fund
We are pleased to bring you Franklin LifeSmart 2035 Retirement Target Fund’s annual report for the fiscal year ended December 31, 2014.
Your Fund’s Goal and Main Investments
The Fund seeks the highest level of long-term total return, which consists of capital appreciation and income, consistent with the Fund’s asset allocation. The Fund allocates among the broad asset classes of equity and fixed income by investing in a distinctly weighted combination of underlying funds, predominantly other Franklin Templeton mutual funds, with an increasing emphasis on income as the target date of 2035 approaches. The target date is the approximate retirement year of the investor.
Asset Allocation*
Based on Total Net Assets as of 12/31/14
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx40x1.jpg)
*The asset allocation is based on the Statement of Investments (SOI), which
classifies each underlying fund and other fund investments into a broad asset
class based on its predominant investments under normal market conditions.
Performance Overview
The Fund’s Class A shares delivered a +4.96% cumulative total return for the 12 months ended December 31, 2014. In comparison, the Fund’s new equity benchmark, the MSCI All Country World Index (ACWI), which measures equity performance in global developed and emerging markets, returned +4.71%, while its old equity benchmark, the Standard & Poor’s 500 Index (S&P 500), a broad measure of U.S. stock performance, returned +13.69%.1 Another equity benchmark, the MSCI Europe, Australasia, Far East (EAFE) Index, which measures global stock performance for developed markets excluding the U.S. and Canada, had a -4.48% total return.1 The Fund’s new fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, posted a +0.48% total return, while its old fixed income benchmark, the Barclays U.S. Aggregate Index, which tracks U.S. investment-grade bonds, generated a +5.97% total return.1 The Fund is adding the Payden & Rygel (P&R) 90-Day U.S. Treasury Bill Index, a proxy for short-term investments and other net assets, which returned +0.04%.2 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 42.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.
Investment Strategy
When selecting equity funds, we consider the foreign and domestic exposure, market capitalization ranges, and investment style (growth vs. value) of the underlying Franklin Templeton funds and other fund investments (collectively, “fund investments”). When selecting fixed income funds, we focus primarily on maximizing income appropriate to the Fund’s specific risk profile. In evaluating the risk level of the fund investments, we analyze such factors as: (a) relative and absolute performance, including correlations with other fund investments as well as corresponding benchmarks, and (b) their volatility (the variability of returns from one period to the next). We attempt to invest the assets of each Target Fund in the same fund investments and will vary the fund investments’ allocation percentages based upon each Fund’s risk/return level. We change the Fund’s target asset allocation over time, and it becomes increasingly conservative as the stated target date draws near. At the “landing point” (reached at the target date), the Fund reaches its most conservative asset allocation and thereafter, such strategic asset allocation will generally become fixed.
1. Source: Morningstar.
2. Source: Payden & Rygel.
The indexes are unmanaged and include reinvestment of any income or distributions. One cannot invest directly in an index, and an index is not representative of the
Fund’s portfolio.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s SOI, which begins on page 109.
40 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2035 RETIREMENT TARGET FUND
Top 10 Fund Holdings | ||
12/31/14 | ||
% of Total | ||
Net Assets | ||
Franklin Growth Fund – Class R6 | 10.4 | % |
Franklin Rising Dividends Fund – Class R6 | 8.9 | % |
Franklin International Small Cap Growth Fund – Class R6 | 6.8 | % |
Franklin DynaTech Fund – Class R6 | 6.3 | % |
Franklin Focused Core Equity Fund – Class R6 | 6.1 | % |
iShares Core S&P 500 ETF | 6.0 | % |
Franklin Mutual International Fund – Class R6 | 5.6 | % |
Templeton Global Total Return Fund – Class R6 | 5.4 | % |
iShares S&P 500 Value ETF | 4.6 | % |
Franklin Growth Opportunities Fund – Class R6 | 4.2 | % |
Manager’s Discussion
The Fund’s performance can be attributed largely to its allocation among equities and fixed income securities and to the actual performance of the fund investments. This allocation shifts every year, in accordance with the retirement date associated with the portfolio.
At period-end, Franklin LifeSmart 2035 Retirement Target Fund allocated 80.8% of total net assets to equity, 12.9% to fixed income and 3.9% to alternative strategies. Domestic equity exposure was 69.3% of the total equity weighting, and foreign equity made up the balance. The portfolio was diversified across capitalization sizes and investment styles, and on December 31, 2014, we held shares in large-, mid- and small-capitalization equity funds, representing both growth and value styles. Franklin Growth Fund – Class R6, at 10.4% of the Fund’s total net assets, was our largest equity fund weighting at period-end. On the fixed income side, domestic exposure was 51.9% of the Fund’s total fixed income weighting, with the balance in foreign fixed income. Templeton Global Total Return Fund – Class R6 was our largest fixed income fund weighting at 5.4% of total net assets.
Our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest domestic value fund holding, Franklin Rising Dividends Fund – Class R6, outperformed the MSCI ACWI, while our largest foreign equity fund holding, Franklin International Small Cap Growth Fund – Class R6, underperformed the index. On the fixed income side, Templeton Global Total Return Fund – Class R6 outperformed the Barclays Multiverse Index.
Thank you for your continued participation in Franklin LifeSmart 2035 Retirement Target Fund. We look forward to serving your future investment needs.
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx41x1.jpg)
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2014, 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 investment manager 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.
franklintempleton.com Annual Report | 41
FRANKLIN LIFESMART 2035 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2014
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 and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses.
Net Asset Value | ||||||
Share Class (Symbol) | 12/31/14 | 12/31/13 | Change | |||
A (FRTAX) | $ | 12.67 | $ | 12.85 | -$ | 0.18 |
C (FTRCX) | $ | 12.43 | $ | 12.63 | -$ | 0.20 |
R (FLRGX) | $ | 12.66 | $ | 12.84 | -$ | 0.18 |
R6 (FMTLX) | $ | 12.75 | $ | 12.92 | -$ | 0.17 |
Advisor (FLRHX) | $ | 12.75 | $ | 12.93 | -$ | 0.18 |
Distributions (1/1/14–12/31/14) | ||||||||
Dividend | Short-Term | Long-Term | ||||||
Share Class | Income | Capital Gain | Capital Gain | Total | ||||
A | $ | 0.2369 | $ | 0.0641 | $ | 0.5169 | $ | 0.8179 |
C | $ | 0.1538 | $ | 0.0641 | $ | 0.5169 | $ | 0.7348 |
R | $ | 0.2090 | $ | 0.0641 | $ | 0.5169 | $ | 0.7900 |
R6 | $ | 0.2797 | $ | 0.0641 | $ | 0.5169 | $ | 0.8607 |
Advisor | $ | 0.2735 | $ | 0.0641 | $ | 0.5169 | $ | 0.8545 |
42 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2035 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Performance as of 12/31/141
Cumulative total return excludes sales charges. Average annual total return and value of $10,000 investment include maximum sales charges. Class A: 5.75% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only;
Class R/R6/Advisor Class: no sales charges.
Cumulative | Average Annual | Value of | Total Annual Operating Expenses5 | |||||||||
Share Class | Total Return2 | Total Return3 | $ | 10,000 Investment4 | (with waiver) | (without waiver) | ||||||
A | 0.99 | % | 1.62 | % | ||||||||
1-Year | + | 4.96 | % | -1.05 | % | $ | 9,895 | |||||
5-Year | + | 57.43 | % | + | 8.21 | % | $ | 14,840 | ||||
Since Inception (8/1/06) | + | 66.94 | % | + | 5.53 | % | $ | 15,734 | ||||
C | 1.69 | % | 2.32 | % | ||||||||
1-Year | + | 4.23 | % | + | 3.24 | % | $ | 10,324 | ||||
5-Year | + | 52.16 | % | + | 8.76 | % | $ | 15,216 | ||||
Since Inception (8/1/06) | + | 57.42 | % | + | 5.54 | % | $ | 15,742 | ||||
R | 1.19 | % | 1.82 | % | ||||||||
1-Year | + | 4.75 | % | + | 4.75 | % | $ | 10,475 | ||||
5-Year | + | 55.89 | % | + | 9.29 | % | $ | 15,589 | ||||
Since Inception (8/1/06) | + | 64.30 | % | + | 6.08 | % | $ | 16,430 | ||||
R6 | 0.64 | % | 1.17 | % | ||||||||
1-Year | + | 5.35 | % | + | 5.35 | % | $ | 10,535 | ||||
Since Inception (5/1/13) | + | 21.24 | % | + | 12.24 | % | $ | 12,124 | ||||
Advisor | 0.69 | % | 1.32 | % | ||||||||
1-Year | + | 5.22 | % | + | 5.22 | % | $ | 10,522 | ||||
5-Year | + | 59.84 | % | + | 9.83 | % | $ | 15,984 | ||||
Since Inception (8/1/06) | + | 71.34 | % | + | 6.61 | % | $ | 17,134 |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
franklintempleton.com Annual Report | 43
FRANKLIN LIFESMART 2035 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx44x1.jpg)
44 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2035 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx45x1.jpg)
franklintempleton.com Annual Report | 45
FRANKLIN LIFESMART 2035 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx46x1.jpg)
The Fund’s investment risk changes over time as its asset allocation changes. Since the Fund invests in underlying funds, which may engage in a variety of
investment strategies involving certain risks, the Fund is subject to those same risks. All investments involve risks, including possible loss of principal. Principal
invested is not guaranteed at any time, including at or after the Fund’s retirement target date, nor is there any guarantee that the Fund will provide sufficient
income at or through the investor’s retirement. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, partic-
ular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the
Fund adjust to a rise in interest rates, the Fund’s share price may decline. Foreign investing carries additional risks such as currency and market volatility and
political or social instability, risks that are heightened in developing countries. These risks are described more fully in the Fund’s prospectus. Investors should
consult their financial advisors for help selecting the appropriate fund of funds, or fund combination, based on an evaluation of their investment objectives,
retirement time horizons and risk tolerance. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the
desired results.
Class C: | These shares have higher annual fees and expenses than Class A shares. |
Class R: | Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares. |
Class R6: | Shares are available to certain eligible investors as described in the prospectus. |
Advisor Class: | Shares are available to certain eligible investors as described in the prospectus. |
1. The Fund has an expense reduction contractually guaranteed through at least 4/30/15 and a fee waiver associated with its investments in a Franklin Templeton money
fund, contractually guaranteed through at least its current fiscal year-end. Fund investment results reflect the expense reduction and fee waiver, to the extent applicable;
without these reductions, the results would have been lower. As of 5/1/11, the Fund’s glide path was modified, and among other changes, reflects a lower starting allocation
to equity funds; such a change can impact performance.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated.
4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
5. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
6. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The MSCI EAFE
Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets excluding the U.S. and
Canada. The Barclays U.S. Aggregate Index is a market capitalization-weighted index representing the U.S. investment-grade, fixed-rate, taxable bond market with index
components for government and corporate, mortgage pass-through and asset-backed securities. All issues included are SEC registered, taxable, dollar denominated and
nonconvertible, must have at least one year to final maturity and must be rated investment grade (Baa3/BBB-/BBB- or higher) using the middle rating of Moody’s, S&P and
Fitch, respectively. The MSCI ACWI is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed and
emerging markets. The Barclays Multiverse Index provides a broad-based measure of the global fixed income bond market. The index represents the union of the Global
Aggregate Index and the Global High Yield Index and captures investment-grade and high yield securities in all eligible currencies.
7. Source: Payden & Rygel. The P&R 90 Day T-Bill Index 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.
See www.franklintempletondatasources.com for additional data provider information.
46 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2035 RETIREMENT TARGET FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs:
- Transaction costs, including sales charges (loads) on Fund purchases; and
- Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:
1. | Divide your account value by $1,000. |
If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6. | |
2. | Multiply the result by the number under the heading “Expenses Paid During Period.” |
If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50. |
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
franklintempleton.com Annual Report | 47
FRANKLIN LIFESMART 2035 RETIREMENT TARGET FUND | ||||||||
YOUR FUND’S EXPENSES | ||||||||
Beginning | Ending | Expenses Paid | Expenses Paid | |||||
Account | Account | During Period* During Period** | ||||||
Share Class | Value 7/1/14 | Value 12/31/14 | 7/1/14–12/31/14 | 7/1/14–12/31/14 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 1,006.00 | $ | 1.77 | $ | 5.16 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.44 | $ | 1.79 | $ | 5.19 |
C | ||||||||
Actual | $ | 1,000 | $ | 1,002.80 | $ | 5.30 | $ | 8.68 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.91 | $ | 5.35 | $ | 8.74 |
R | ||||||||
Actual | $ | 1,000 | $ | 1,005.40 | $ | 2.78 | $ | 6.17 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.43 | $ | 2.80 | $ | 6.21 |
R6 | ||||||||
Actual | $ | 1,000 | $ | 1,008.40 | $ | 0.00 | $ | 3.39 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,025.21 | $ | 0.00 | $ | 3.41 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 1,007.90 | $ | 0.25 | $ | 3.64 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,024.95 | $ | 0.26 | $ | 3.67 |
*Expenses are calculated using the most recent six-month expense ratio excluding expenses of the fund investments, net of expense waivers,
annualized for each class (A: 0.35%; C: 1.05%; R: 0.55%; R6: 0.00%; and Advisor: 0.05%), multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
**Expenses are calculated using the most recent six-month expense ratio including expenses of the fund investments, net of expense waivers,
annualized for each class (A: 1.02%; C: 1.72%; R: 1.22%; R6: 0.67%; and Advisor: 0.72%), multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
48 | Annual Report franklintempleton.com
Franklin LifeSmart 2040 Retirement Target Fund
We are pleased to bring you Franklin LifeSmart 2040 Retirement Target Fund’s annual report for the fiscal year ended December 31, 2014.
Your Fund’s Goal and Main Investments
The Fund seeks the highest level of long-term total return, which consists of capital appreciation and income, consistent with the Fund’s asset allocation. The Fund allocates among the broad asset classes of equity and fixed income by investing in a distinctly weighted combination of underlying funds, predominantly other Franklin Templeton mutual funds, with an increasing emphasis on income as the target date of 2040 approaches. The target date is the approximate retirement year of the investor.
Asset Allocation*
Based on Total Net Assets as of 12/31/14
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx49x1.jpg)
*The asset allocation is based on the Statement of Investments (SOI), which
classifies each underlying fund and other fund investments into a broad asset
class based on its predominant investments under normal market conditions.
Performance Overview
The Fund’s Class A shares delivered a +5.67% cumulative total return for the 12 months ended December 31, 2014. In comparison, the Fund’s new equity benchmark, the MSCI All Country World Index (ACWI), which measures equity performance in global developed and emerging markets, returned +4.71%, while its old equity benchmark, the Standard & Poor’s 500 Index (S&P 500), a broad measure of U.S. stock performance, returned +13.69%.1 Another equity benchmark, the MSCI Europe, Australasia, Far East (EAFE) Index, which measures global stock performance for developed markets excluding the U.S. and Canada, had a -4.48% total return.1 The Fund’s new fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, posted a +0.48% total return, while its old fixed income benchmark, the Barclays U.S. Aggregate Index, which tracks U.S. investment-grade bonds, generated a +5.97% total return.1 The Fund is adding the Payden & Rygel (P&R) 90-Day U.S. Treasury Bill Index, a proxy for short-term investments and other net assets, which returned +0.04%.2 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 51.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.
Investment Strategy
When selecting equity funds, we consider the foreign and domestic exposure, market capitalization ranges, and investment style (growth vs. value) of the underlying Franklin Templeton funds and other fund investments (collectively, “fund investments”). When selecting fixed income funds, we focus primarily on maximizing income appropriate to the Fund’s specific risk profile. In evaluating the risk level of the fund investments, we analyze such factors as: (a) relative and absolute performance, including correlations with other fund investments as well as corresponding benchmarks, and (b) their volatility (the variability of returns from one period to the next). We attempt to invest the assets of each Target Fund in the same fund investments and will vary the fund investments’ allocation percentages based upon each Fund’s risk/return level. We change the Fund’s target asset allocation over time, and it becomes increasingly conservative as the stated target date draws near. At the “landing point” (reached at the target date), the Fund reaches its most conservative asset allocation and thereafter, such strategic asset allocation will generally become fixed.
1. Source: Morningstar.
2. Source: Payden & Rygel.
The indexes are unmanaged and include reinvestment of any income or distributions. One cannot invest directly in an index, and an index is not representative of the
Fund’s portfolio.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s SOI, which begins on page 116.
franklintempleton.com Annual Report | 49
FRANKLIN LIFESMART 2040 RETIREMENT TARGET FUND
Top 10 Fund Holdings | ||
12/31/14 | ||
% of Total | ||
Net Assets | ||
Franklin Growth Fund – Class R6 | 12.2 | % |
Franklin Rising Dividends Fund – Class R6 | 7.9 | % |
Franklin DynaTech Fund – Class R6 | 7.3 | % |
Franklin International Small Cap Growth Fund – Class R6 | 7.1 | % |
Franklin Focused Core Equity Fund – Class R6 | 6.2 | % |
Franklin Mutual International Fund – Class R6 | 5.8 | % |
iShares Core S&P 500 ETF | 5.7 | % |
Templeton Global Total Return Fund – R6 | 5.0 | % |
Franklin Growth Opportunities Fund – Class R6 | 4.4 | % |
iShares S&P 500 Value ETF | 3.9 | % |
Manager’s Discussion
The Fund’s performance can be attributed largely to its allocation among equities and fixed income securities and to the actual performance of the fund investments. This allocation shifts every year, in accordance with the retirement date associated with the portfolio.
At period-end, Franklin LifeSmart 2040 Retirement Target Fund allocated 82.2% of total net assets to equity, 11.5% to fixed income and 3.6% to alternative strategies. Domestic equity exposure was 69.1% of the total equity weighting, and foreign equity made up the balance. The portfolio was diversified across capitalization sizes and investment styles, and on December 31, 2014, we held shares in large-, mid- and small-capitalization equity funds, representing both growth and value styles. Franklin Growth Fund – Class R6, at 12.2% of the Fund’s total net assets, was our largest equity fund weighting at period-end. On the fixed income side, domestic exposure was 50.4% of the Fund’s total fixed income weighting, with the balance in foreign fixed income. Templeton Global Total Return Fund – Class R6 was our largest fixed income fund weighting at 5.0% of total net assets.
Our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest domestic value fund holding, Franklin Rising Dividends Fund – Class R6, outperformed the MSCI ACWI, while our largest foreign equity fund holding, Franklin International Small Cap Growth Fund – Class R6, underperformed the index. On the fixed income side, Templeton Global Total Return Fund – Class R6 outperformed the Barclays Multiverse Index.
Thank you for your participation in Franklin LifeSmart 2040 Retirement Target Fund. We look forward to serving your future investment needs.
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx50x1.jpg)
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2014, 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 investment manager 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.
50 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2040 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2014
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 and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses.
Net Asset Value | ||||||
Share Class (Symbol) | 12/31/14 | 12/31/13 | Change | |||
A (FLADX) | $ | 11.58 | $ | 11.19 | +$ | 0.39 |
C (FLOLX) | $ | 11.52 | $ | 11.15 | +$ | 0.37 |
R (FLSGX) | $ | 11.58 | $ | 11.19 | +$ | 0.39 |
R6 (FLREX) | $ | 11.61 | $ | 11.20 | +$ | 0.41 |
Advisor (FLSHX) | $ | 11.61 | $ | 11.20 | +$ | 0.41 |
Distributions (1/1/14–12/31/14) | ||||||||
Dividend | Short-Term | Long-Term | ||||||
Share Class | Income | Capital Gain | Capital Gain | Total | ||||
A | $ | 0.1833 | $ | 0.0007 | $ | 0.0592 | $ | 0.2432 |
C | $ | 0.1307 | $ | 0.0007 | $ | 0.0592 | $ | 0.1906 |
R | $ | 0.1627 | $ | 0.0007 | $ | 0.0592 | $ | 0.2226 |
R6 | $ | 0.2147 | $ | 0.0007 | $ | 0.0592 | $ | 0.2746 |
Advisor | $ | 0.2090 | $ | 0.0007 | $ | 0.0592 | $ | 0.2689 |
franklintempleton.com Annual Report | 51
FRANKLIN LIFESMART 2040 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Performance as of 12/31/141
Cumulative total return excludes sales charges. Average annual total return and value of $10,000 investment include maximum sales charges. Class A: 5.75% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only;
Class R/R6/Advisor Class: no sales charges.
Cumulative | Average Annual | Value of | Total Annual Operating Expenses5 | |||||||||
Share Class | Total Return2 | Total Return3 | $ | 10,000 Investment4 | (with waiver) | (without waiver) | ||||||
A | 1.01 | % | 34.24 | % | ||||||||
1-Year | + | 5.67 | % | -0.38 | % | $ | 9,962 | |||||
Since Inception (7/1/13) | + | 19.31 | % | + | 8.13 | % | $ | 11,245 | ||||
C | 1.71 | % | 34.94 | % | ||||||||
1-Year | + | 5.03 | % | + | 4.03 | % | $ | 10,403 | ||||
Since Inception (7/1/13) | + | 18.12 | % | + | 11.73 | % | $ | 11,812 | ||||
R | 1.21 | % | 34.44 | % | ||||||||
1-Year | + | 5.48 | % | + | 5.48 | % | $ | 10,548 | ||||
Since Inception (7/1/13) | + | 18.99 | % | + | 12.28 | % | $ | 11,899 | ||||
R6 | 0.66 | % | 34.34 | % | ||||||||
1-Year | + | 6.13 | % | + | 6.13 | % | $ | 10,613 | ||||
Since Inception (7/1/13) | + | 20.00 | % | + | 12.91 | % | $ | 12,000 | ||||
Advisor | 0.71 | % | 33.94 | % | ||||||||
1-Year | + | 6.08 | % | + | 6.08 | % | $ | 10,608 | ||||
Since Inception (7/1/13) | + | 19.92 | % | + | 12.86 | % | $ | 11,992 |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
52 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2040 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx53x1.jpg)
franklintempleton.com Annual Report | 53
FRANKLIN LIFESMART 2040 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx54x1.jpg)
54 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2040 RETIREMENT TARGET FUND |
PERFORMANCE SUMMARY |
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued) |
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx55x1.jpg)
The Fund’s investment risk changes over time as its asset allocation changes. Since the Fund invests in underlying funds, which may engage in a variety of
investment strategies involving certain risks, the Fund is subject to those same risks. All investments involve risks, including possible loss of principal. Principal
invested is not guaranteed at any time, including at or after the Fund’s retirement target date, nor is there any guarantee that the Fund will provide sufficient
income at or through the investor’s retirement. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, partic-
ular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the
Fund adjust to a rise in interest rates, the Fund’s share price may decline. Foreign investing carries additional risks such as currency and market volatility and
political or social instability, risks that are heightened in developing countries. These risks are described more fully in the Fund’s prospectus. Investors should
consult their financial advisors for help selecting the appropriate fund of funds, or fund combination, based on an evaluation of their investment objectives,
retirement time horizons and risk tolerance. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the
desired results.
Class C: | These shares have higher annual fees and expenses than Class A shares. |
Class R: | Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares. |
Class R6: | Shares are available to certain eligible investors as described in the prospectus. |
Advisor Class: | Shares are available to certain eligible investors as described in the prospectus. |
1. The Fund has an expense reduction contractually guaranteed through at least 4/30/15 and a fee waiver associated with its investments in a Franklin Templeton money
fund, contractually guaranteed through at least its current fiscal year-end. Fund investment results reflect the expense reduction and fee waiver, to the extent applicable;
without these reductions, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated.
4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
5. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
6. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The MSCI EAFE
Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets excluding the U.S. and
Canada. The Barclays U.S. Aggregate Index is a market capitalization-weighted index representing the U.S. investment-grade, fixed-rate, taxable bond market with index
components for government and corporate, mortgage pass-through and asset-backed securities. All issues included are SEC registered, taxable, dollar denominated and
nonconvertible, must have at least one year to final maturity and must be rated investment grade (Baa3/BBB-/BBB- or higher) using the middle rating of Moody’s, S&P and
Fitch, respectively. The MSCI ACWI is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed and
emerging markets. The Barclays Multiverse Index provides a broad-based measure of the global fixed income bond market. The index represents the union of the Global
Aggregate Index and the Global High Yield Index and captures investment-grade and high yield securities in all eligible currencies.
7. Source: Payden & Rygel. The P&R 90 Day T-Bill Index 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.
See www.franklintempletondatasources.com for additional data provider information.
franklintempleton.com Annual Report | 55
FRANKLIN LIFESMART 2040 RETIREMENT TARGET FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs:
- Transaction costs, including sales charges (loads) on Fund purchases; and
- Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:
1. | Divide your account value by $1,000. |
If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6. | |
2. | Multiply the result by the number under the heading “Expenses Paid During Period.” |
If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50. |
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
56 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2040 RETIREMENT TARGET FUND
YOUR FUND’S EXPENSES
Beginning | Ending | Expenses Paid | Expenses Paid | |||||
Account | Account | During Period* During Period** | ||||||
Share Class | Value 7/1/14 | Value 12/31/14 | 7/1/14–12/31/14 | 7/1/14–12/31/14 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 1,016.80 | $ | 1.78 | $ | 5.19 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.44 | $ | 1.79 | $ | 5.19 |
C | ||||||||
Actual | $ | 1,000 | $ | 1,013.70 | $ | 5.33 | $ | 8.73 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.91 | $ | 5.35 | $ | 8.74 |
R | ||||||||
Actual | $ | 1,000 | $ | 1,016.60 | $ | 2.80 | $ | 6.20 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.43 | $ | 2.80 | $ | 6.21 |
R6 | ||||||||
Actual | $ | 1,000 | $ | 1,018.90 | $ | 0.00 | $ | 3.41 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,025.21 | $ | 0.00 | $ | 3.41 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 1,019.50 | $ | 0.25 | $ | 3.66 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,024.95 | $ | 0.26 | $ | 3.67 |
*Expenses are calculated using the most recent six-month expense ratio excluding expenses of the fund investments, net of expense waivers,
annualized for each class (A: 0.35%; C: 1.05%; R: 0.55%; R6: 0.00%; and Advisor: 0.05%), multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
**Expenses are calculated using the most recent six-month expense ratio including expenses of the fund investments, net of expense waivers,
annualized for each class (A: 1.02%; C: 1.72%; R: 1.22%; R6: 0.67%; and Advisor: 0.72%), multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
franklintempleton.com Annual Report | 57
Franklin LifeSmart 2045 Retirement Target Fund
We are pleased to bring you Franklin LifeSmart 2045 Retirement Target Fund’s annual report for the fiscal year ended December 31, 2014.
Your Fund’s Goal and Main Investments
The Fund seeks the highest level of long-term total return, which consists of capital appreciation and income, consistent with the Fund’s asset allocation. The Fund allocates among the broad asset classes of equity and fixed income by investing in a distinctly weighted combination of underlying funds, predominantly other Franklin Templeton mutual funds, with an increasing emphasis on income as the target date of 2045 approaches. The target date is the approximate retirement year of the investor.
Asset Allocation*
Based on Total Net Assets as of 12/31/14
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx58x1.jpg)
*The asset allocation is based on the Statement of Investments (SOI), which
classifies each underlying fund and other fund investment into a broad asset
class based on its predominant investments under normal market conditions.
Performance Overview
The Fund’s Class A shares delivered a +4.94% cumulative total return for the 12 months ended December 31, 2014. In comparison, the Fund’s new equity benchmark, the MSCI All Country World Index (ACWI), which measures equity performance in global developed and emerging markets, returned +4.71%, while its old equity benchmark, the Standard & Poor’s 500 Index (S&P 500), a broad measure of U.S. stock performance, returned +13.69%.1 Another equity benchmark, the MSCI Europe, Australasia, Far East (EAFE) Index, which measures global stock performance for developed markets excluding the U.S. and Canada, had a -4.48% total return.1 The Fund’s new fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, posted a +0.48% total return, while its old fixed income benchmark, the Barclays U.S. Aggregate Index, which tracks U.S. investment-grade bonds, generated a +5.97% total return.1 The Fund is adding the Payden & Rygel (P&R) 90-Day U.S. Treasury Bill Index, a proxy for short-term investments and other net assets, which returned +0.04%.2 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 60.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.
Investment Strategy
When selecting equity funds, we consider the foreign and domestic exposure, market capitalization ranges, and investment style (growth vs. value) of the underlying Franklin Templeton funds and other fund investments (collectively, “fund investments”). When selecting fixed income funds, we focus primarily on maximizing income appropriate to the Fund’s specific risk profile. In evaluating the risk level of the fund investments, we analyze such factors as: (a) relative and absolute performance, including correlations with other fund investments as well as corresponding benchmarks, and (b) their volatility (the variability of returns from one period to the next). We attempt to invest the assets of each Target Fund in the same fund investments and will vary the fund investments’ allocation percentages based upon each Fund’s risk/return level. We change the Fund’s target asset allocation over time, and it becomes increasingly conservative as the stated target date draws near. At the “landing point” (reached at the target date), the Fund reaches its most conservative asset allocation and thereafter, such strategic asset allocation will generally become fixed.
1. Source: Morningstar.
2. Source: Payden & Rygel.
The indexes are unmanaged and include reinvestment of any income or distributions. One cannot invest directly in an index, and an index is not representative of the
Fund’s portfolio.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s SOI, which begins on page 123.
58 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2045 RETIREMENT TARGET FUND
Top 10 Fund Holdings | ||
12/31/14 | ||
% of Total | ||
Net Assets | ||
Franklin Growth Fund – Class R6 | 11.3 | % |
Franklin Rising Dividends Fund – Class R6 | 9.8 | % |
Franklin DynaTech Fund – Class R6 | 7.1 | % |
Franklin International Small Cap Growth Fund – Class R6 | 7.1 | % |
Franklin Focused Core Equity Fund – Class R6 | 6.1 | % |
iShares Core S&P 500 ETF | 6.0 | % |
Franklin Mutual International Fund – Class R6 | 5.7 | % |
iShares S&P 500 Value ETF | 4.3 | % |
Franklin Utilities Fund – Class R6 | 4.1 | % |
Templeton Global Total Return Fund – Class R6 | 3.7 | % |
Manager’s Discussion
The Fund’s performance can be attributed largely to its allocation among equities and fixed income securities and to the actual performance of the fund investments. This allocation shifts every year, in accordance with the retirement date associated with the portfolio.
At period-end, Franklin LifeSmart 2045 Retirement Target Fund allocated 84.4% of total net assets to equity, 8.9% to fixed income and 4.0% to alternative strategies. Domestic equity exposure was 68.4% of the total equity weighting, and foreign equity made up the balance. The portfolio was diversified across capitalization sizes and investment styles, and on December 31, 2014, we held shares in large-, mid- and small-capitalization equity funds, representing both growth and value styles. Franklin Growth Fund – Class R6, at 11.3% of the Fund’s total net assets, was our largest equity fund weighting at period-end. On the fixed income side, domestic exposure was 52.8% of the Fund’s total fixed income weighting, with the balance in foreign fixed income. Templeton Global Total Return Fund – Class R6 was our largest fixed income fund weighting at 3.7% of total net assets.
Our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest domestic value fund holding, Franklin Rising Dividends Fund – Class R6, outperformed the MSCI ACWI, while our largest foreign equity fund holding, Franklin International Small Cap Growth Fund – Class R6, underperformed the index. On the fixed income side, Templeton Global Total Return Fund – Class R6 outperformed the Barclays Multiverse Index.
Thank you for your continued participation in Franklin LifeSmart 2045 Retirement Target Fund. We look forward to serving your future investment needs.
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx59x1.jpg)
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2014, 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 investment manager 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.
franklintempleton.com Annual Report | 59
FRANKLIN LIFESMART 2045 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2014
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 and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses.
Net Asset Value | ||||||||
Share Class (Symbol) | 12/31/14 | 12/31/13 | Change | |||||
A (FTTAX) | $ | 12.70 | $ | 12.88 | -$ | 0.18 | ||
C (FLRIX) | $ | 12.42 | $ | 12.63 | -$ | 0.21 | ||
R (FLRJX) | $ | 12.66 | $ | 12.82 | -$ | 0.16 | ||
R6 (FMLTX) | $ | 12.77 | $ | 12.95 | -$ | 0.18 | ||
Advisor (FLRLX) | $ | 12.76 | $ | 12.94 | -$ | 0.18 | ||
Distributions (1/1/14–12/31/14) | ||||||||
Dividend | Short-Term | Long-Term | ||||||
Share Class | Income | Capital Gain | Capital Gain | Total | ||||
A | $ | 0.2230 | $ | 0.0740 | $ | 0.5193 | $ | 0.8163 |
C | $ | 0.1414 | $ | 0.0740 | $ | 0.5193 | $ | 0.7347 |
R | $ | 0.1760 | $ | 0.0740 | $ | 0.5193 | $ | 0.7693 |
R6 | $ | 0.2654 | $ | 0.0740 | $ | 0.5193 | $ | 0.8587 |
Advisor | $ | 0.2592 | $ | 0.0740 | $ | 0.5193 | $ | 0.8525 |
60 | Annual Report
franklintempleton.com
FRANKLIN LIFESMART 2045 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Performance as of 12/31/141
Cumulative total return excludes sales charges. Average annual total return and value of $10,000 investment include maximum sales charges. Class A: 5.75% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only;
Class R/R6/Advisor Class: no sales charges.
Cumulative | Average Annual | Value of | Total Annual Operating Expenses5 | |||||||||
Share Class | Total Return2 | Total Return3 | $ | 10,000 Investment4 | (with waiver) | (without waiver) | ||||||
A | 1.00 | % | 1.86 | % | ||||||||
1-Year | + | 4.94 | % | -1.13 | % | $ | 9,887 | |||||
5-Year | + | 60.94 | % | + | 8.68 | % | $ | 15,164 | ||||
Since Inception (8/1/06) | + | 69.12 | % | + | 5.70 | % | $ | 15,940 | ||||
C | 1.70 | % | 2.56 | % | ||||||||
1-Year | + | 4.15 | % | + | 3.16 | % | $ | 10,316 | ||||
5-Year | + | 55.25 | % | + | 9.20 | % | $ | 15,525 | ||||
Since Inception (8/1/06) | + | 59.41 | % | + | 5.70 | % | $ | 15,941 | ||||
R | 1.20 | % | 2.06 | % | ||||||||
1-Year | + | 4.75 | % | + | 4.75 | % | $ | 10,475 | ||||
5-Year | + | 59.20 | % | + | 9.75 | % | $ | 15,920 | ||||
Since Inception (8/1/06) | + | 66.26 | % | + | 6.23 | % | $ | 16,626 | ||||
R6 | 0.65 | % | 1.32 | % | ||||||||
1-Year | + | 5.24 | % | + | 5.24 | % | $ | 10,524 | ||||
Since Inception (5/1/13) | + | 22.16 | % | + | 12.75 | % | $ | 12,216 | ||||
Advisor | 0.70 | % | 1.56 | % | ||||||||
1-Year | + | 5.20 | % | + | 5.20 | % | $ | 10,520 | ||||
5-Year | + | 63.16 | % | + | 10.29 | % | $ | 16,316 | ||||
Since Inception (8/1/06) | + | 73.34 | % | + | 6.75 | % | $ | 17,334 |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
franklintempleton.com Annual Report | 61
FRANKLIN LIFESMART 2045 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx62x1.jpg)
62 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2045 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx63x1.jpg)
franklintempleton.com Annual Report | 63
FRANKLIN LIFESMART 2045 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx64x1.jpg)
The Fund’s investment risk changes over time as its asset allocation changes. Since the Fund invests in underlying funds, which may engage in a variety of
investment strategies involving certain risks, the Fund is subject to those same risks. All investments involve risks, including possible loss of principal. Principal
invested is not guaranteed at any time, including at or after the Fund’s retirement target date, nor is there any guarantee that the Fund will provide sufficient
income at or through the investor’s retirement. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, partic-
ular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the
Fund adjust to a rise in interest rates, the Fund’s share price may decline. Foreign investing carries additional risks such as currency and market volatility and
political or social instability, risks that are heightened in developing countries. These risks are described more fully in the Fund’s prospectus. Investors should
consult their financial advisors for help selecting the appropriate fund of funds, or fund combination, based on an evaluation of their investment objectives,
retirement time horizons and risk tolerance. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the
desired results.
Class C: | These shares have higher annual fees and expenses than Class A shares. |
Class R: | Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares. |
Class R6: | Shares are available to certain eligible investors as described in the prospectus. |
Advisor Class: | Shares are available to certain eligible investors as described in the prospectus. |
1. The Fund has an expense reduction contractually guaranteed through at least 4/30/15 and a fee waiver associated with its investments in a Franklin Templeton money
fund, contractually guaranteed through at least its current fiscal year-end. Fund investment results reflect the expense reduction and fee waiver, to the extent applicable;
without these reductions, the results would have been lower. As of 5/1/11, the Fund’s glide path was modified, and among other changes, reflects a lower starting allocation
to equity funds; such a change can impact performance.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated.
4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
5. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
6. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The MSCI EAFE
Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets excluding the U.S. and
Canada. The Barclays U.S. Aggregate Index is a market capitalization-weighted index representing the U.S. investment-grade, fixed-rate, taxable bond market with index
components for government and corporate, mortgage pass-through and asset-backed securities. All issues included are SEC registered, taxable, dollar denominated and
nonconvertible, must have at least one year to final maturity and must be rated investment grade (Baa3/BBB-/BBB- or higher) using the middle rating of Moody’s, S&P and
Fitch, respectively. The MSCI ACWI is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed and
emerging markets. The Barclays Multiverse Index provides a broad-based measure of the global fixed income bond market. The index represents the union of the Global
Aggregate Index and the Global High Yield Index and captures investment-grade and high yield securities in all eligible currencies.
7. Source: Payden & Rygel. The P&R 90 Day T-Bill Index 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.
See www.franklintempletondatasources.com for additional data provider information.
64 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2045 RETIREMENT TARGET FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs:
- Transaction costs, including sales charges (loads) on Fund purchases; and
- Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:
1. | Divide your account value by $1,000. |
If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6. | |
2. | Multiply the result by the number under the heading “Expenses Paid During Period.” |
If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50. |
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
franklintempleton.com Annual Report | 65
FRANKLIN LIFESMART 2045 RETIREMENT TARGET FUND | ||||||||
YOUR FUND’S EXPENSES | ||||||||
Beginning | Ending | Expenses Paid | Expenses Paid | |||||
Account | Account | During Period* During Period** | ||||||
Share Class | Value 7/1/14 | Value 12/31/14 | 7/1/14–12/31/14 | 7/1/14–12/31/14 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 1,007.20 | $ | 1.77 | $ | 5.16 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.44 | $ | 1.79 | $ | 5.19 |
C | ||||||||
Actual | $ | 1,000 | $ | 1,003.40 | $ | 5.25 | $ | 8.69 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.96 | $ | 5.30 | $ | 8.74 |
R | ||||||||
Actual | $ | 1,000 | $ | 1,006.00 | $ | 2.78 | $ | 6.17 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.43 | $ | 2.80 | $ | 6.21 |
R6 | ||||||||
Actual | $ | 1,000 | $ | 1,008.10 | $ | 0.00 | $ | 3.39 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,025.21 | $ | 0.00 | $ | 3.41 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 1,007.60 | $ | 0.25 | $ | 3.64 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,024.95 | $ | 0.26 | $ | 3.67 |
*Expenses are calculated using the most recent six-month expense ratio excluding expenses of the fund investments, net of expense waivers,
annualized for each class (A: 0.35%; C: 1.05%; R: 0.55%; R6: 0.00%; and Advisor: 0.05%), multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
**Expenses are calculated using the most recent six-month expense ratio including expenses of the fund investments, net of expense waivers,
annualized for each class (A: 1.02%; C: 1.72%; R: 1.22%; R6: 0.67%; and Advisor: 0.72%), multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
66 | Annual Report franklintempleton.com
Franklin LifeSmart 2050 Retirement Target Fund
We are pleased to bring you Franklin LifeSmart 2050 Retirement Target Fund’s annual report for the fiscal year ended December 31, 2014.
Your Fund’s Goal and Main Investments
The Fund seeks the highest level of long-term total return, which consists of capital appreciation and income, consistent with the Fund’s asset allocation. The Fund allocates among the broad asset classes of equity and fixed income by investing in a distinctly weighted combination of underlying funds, predominantly other Franklin Templeton mutual funds, with an increasing emphasis on income as the target date of 2050 approaches. The target date is the approximate retirement year of the investor.
Asset Allocation*
Based on Total Net Assets as of 12/31/14
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx67x1.jpg)
*The asset allocation is based on the Statement of Investments (SOI), which
classifies each underlying fund and other fund investments into a broad asset
class based on its predominant investments under normal market conditions.
Performance Overview
The Fund’s Class A shares delivered a +5.80% cumulative total return for the 12 months ended December 31, 2014. In comparison, the Fund’s new equity benchmark, the MSCI All Country World Index (ACWI), which measures equity performance in global developed and emerging markets, returned +4.71%, while its old equity benchmark, the Standard & Poor’s 500 Index (S&P 500), a broad measure of U.S. stock performance, returned +13.69%.1 Another equity benchmark, the MSCI Europe, Australasia, Far East (EAFE) Index, which measures global stock performance for developed markets excluding the U.S. and Canada, had a -4.48% total return.1 The Fund’s new fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, posted a +0.48% total return, while its old fixed income benchmark, the Barclays U.S. Aggregate Index, which tracks U.S. investment-grade bonds, generated a +5.97% total return.1 The Fund is adding the Payden & Rygel (P&R) 90-Day U.S. Treasury Bill Index, a proxy for short-term investments and other net assets, which returned +0.04%.2 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 69.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.
Investment Strategy
When selecting equity funds, we consider the foreign and domestic exposure, market capitalization ranges, and investment style (growth vs. value) of the underlying Franklin Templeton funds and other fund investments (collectively, “fund investments”). When selecting fixed income funds, we focus primarily on maximizing income appropriate to the Fund’s specific risk profile. In evaluating the risk level of the fund investments, we analyze such factors as: (a) relative and absolute performance, including correlations with other fund investments as well as corresponding benchmarks, and (b) their volatility (the variability of returns from one period to the next). We attempt to invest the assets of each Target Fund in the same fund investments and will vary the fund investments’ allocation percentages based upon each Fund’s risk/return level. We change the Fund’s target asset allocation over time, and it becomes increasingly conservative as the stated target date draws near. At the “landing point” (reached at the target date), the Fund reaches its most conservative asset allocation and thereafter, such strategic asset allocation will generally become fixed.
1. Source: Morningstar.
2. Source: Payden & Rygel.
The indexes are unmanaged and include reinvestment of any income or distributions. One cannot invest directly in an index, and an index is not representative of the
Fund’s portfolio.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s SOI, which begins on page 130.
franklintempleton.com Annual Report | 67
FRANKLIN LIFESMART 2050 RETIREMENT TARGET FUND
Top 10 Fund Holdings | ||
12/31/14 | ||
% of Total | ||
Net Assets | ||
Franklin Growth Fund – Class R6 | 12.9 | % |
Franklin Rising Dividends Fund – Class R6 | 8.7 | % |
Franklin DynaTech Fund – Class R6 | 7.6 | % |
Franklin International Small Cap Growth Fund – Class R6 | 7.4 | % |
Franklin Focused Core Equity Fund – Class R6 | 6.5 | % |
Franklin Mutual International Fund – Class R6 | 6.1 | % |
iShares Core S&P 500 ETF | 6.0 | % |
Franklin Utilities Fund – Class R6 | 4.1 | % |
Franklin Growth Opportunities Fund – Class R6 | 3.7 | % |
iShares S&P 500 Value ETF | 3.7 | % |
Manager’s Discussion
The Fund’s performance can be attributed largely to its allocation among equities and fixed income securities and to the actual performance of the fund investments. This allocation shifts every year, in accordance with the retirement date associated with the portfolio.
At period-end, Franklin LifeSmart 2050 Retirement Target Fund allocated 85.0% of total net assets to equity, 8.6% to fixed income and 3.8% to alternative strategies. Domestic equity exposure was 68.1% of the total equity weighting, and foreign equity made up the balance. The portfolio was diversified across capitalization sizes and investment styles, and on December 31, 2014, we held shares in large-, mid- and small-capitalization equity funds, representing both growth and value styles. Franklin Growth Fund – Class R6, at 12.9% of the Fund’s total net assets, was our largest equity fund weighting at period-end. On the fixed income side, domestic exposure was 52.3% of the Fund’s total fixed income weighting, with the balance in foreign fixed income. Templeton Global Total Return Fund – Class R6 was our largest fixed income fund weighting at 3.6% of total net assets.
Our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest domestic value fund holding, Franklin Rising Dividends Fund – Class R6, outperformed the MSCI ACWI, while our largest foreign equity fund holding, Franklin International Small Cap Growth Fund – Class R6, underperformed the index. On the fixed income side, Templeton Global Total Return Fund – Class R6 outperformed the Barclays Multiverse Index.
Thank you for your participation in Franklin LifeSmart 2050 Retirement Target Fund. We look forward to serving your future investment needs.
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx68x1.jpg)
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2014, 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 investment manager 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.
68 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2050 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2014
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 and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses.
Net Asset Value | ||||||
Share Class (Symbol) | 12/31/14 | 12/31/13 | Change | |||
A (FLSJX) | $ | 11.62 | $ | 11.21 | +$ | 0.41 |
C (FLSKX) | $ | 11.56 | $ | 11.18 | +$ | 0.38 |
R (FLSNX) | $ | 11.63 | $ | 11.21 | +$ | 0.42 |
R6 (FRLEX) | $ | 11.65 | $ | 11.23 | +$ | 0.42 |
Advisor (FLSOX) | $ | 11.65 | $ | 11.22 | +$ | 0.43 |
Distributions (1/1/14–12/31/14) | ||||||||
Dividend | Short-Term | Long-Term | ||||||
Share Class | Income | Capital Gain | Capital Gain | Total | ||||
A | $ | 0.1789 | $ | 0.0148 | $ | 0.0465 | $ | 0.2402 |
C | $ | 0.1314 | $ | 0.0148 | $ | 0.0465 | $ | 0.1927 |
R | $ | 0.1539 | $ | 0.0148 | $ | 0.0465 | $ | 0.2152 |
R6 | $ | 0.2101 | $ | 0.0148 | $ | 0.0465 | $ | 0.2714 |
Advisor | $ | 0.2057 | $ | 0.0148 | $ | 0.0465 | $ | 0.2670 |
franklintempleton.com Annual Report | 69
FRANKLIN LIFESMART 2050 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Performance as of 12/31/141
Cumulative total return excludes sales charges. Average annual total return and value of $10,000 investment include maximum sales charges. Class A: 5.75% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only;
Class R/R6/Advisor Class: no sales charges.
Cumulative | Average Annual | Value of | Total Annual Operating Expenses5 | |||||||||
Share Class | Total Return2 | Total Return3 | $ | 10,000 Investment4 | (with waiver) | (without waiver) | ||||||
A | 1.01 | % | 35.00 | % | ||||||||
1-Year | + | 5.80 | % | -0.25 | % | $ | 9,975 | |||||
Since Inception (7/1/13) | + | 19.70 | % | + | 8.37 | % | $ | 11,282 | ||||
C | 1.71 | % | 35.70 | % | ||||||||
1-Year | + | 5.03 | % | + | 4.03 | % | $ | 10,403 | ||||
Since Inception (7/1/13) | + | 18.50 | % | + | 11.97 | % | $ | 11,850 | ||||
R | 1.21 | % | 35.20 | % | ||||||||
1-Year | + | 5.67 | % | + | 5.67 | % | $ | 10,567 | ||||
Since Inception (7/1/13) | + | 19.43 | % | + | 12.55 | % | $ | 11,943 | ||||
R6 | 0.66 | % | 35.02 | % | ||||||||
1-Year | + | 6.16 | % | + | 6.16 | % | $ | 10,616 | ||||
Since Inception (7/1/13) | + | 20.37 | % | + | 13.15 | % | $ | 12,037 | ||||
Advisor | 0.71 | % | 34.70 | % | ||||||||
1-Year | + | 6.22 | % | + | 6.22 | % | $ | 10,622 | ||||
Since Inception (7/1/13) | + | 20.30 | % | + | 13.10 | % | $ | 12,030 |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
70 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2050 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx71x1.jpg)
franklintempleton.com Annual Report | 71
FRANKLIN LIFESMART 2050 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued)
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72 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2050 RETIREMENT TARGET FUND |
PERFORMANCE SUMMARY |
Total Return Index Comparison for a Hypothetical $10,000 Investment1 (continued) |
![](https://capedge.com/proxy/N-CSR/0001022804-15-000019/rtf_secx73x1.jpg)
The Fund’s investment risk changes over time as its asset allocation changes. Since the Fund invests in underlying funds, which may engage in a variety of
investment strategies involving certain risks, the Fund is subject to those same risks. All investments involve risks, including possible loss of principal. Principal
invested is not guaranteed at any time, including at or after the Fund’s retirement target date, nor is there any guarantee that the Fund will provide sufficient
income at or through the investor’s retirement. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, partic-
ular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the
Fund adjust to a rise in interest rates, the Fund’s share price may decline. Foreign investing carries additional risks such as currency and market volatility and
political or social instability, risks that are heightened in developing countries. These risks are described more fully in the Fund’s prospectus. Investors should
consult their financial advisors for help selecting the appropriate fund of funds, or fund combination, based on an evaluation of their investment objectives,
retirement time horizons and risk tolerance. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the
desired results.
Class C: | These shares have higher annual fees and expenses than Class A shares. |
Class R: | Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares. |
Class R6: | Shares are available to certain eligible investors as described in the prospectus. |
Advisor Class: | Shares are available to certain eligible investors as described in the prospectus. |
1. The Fund has an expense reduction contractually guaranteed through at least 4/30/15 and a fee waiver associated with its investments in a Franklin Templeton money
fund, contractually guaranteed through at least its current fiscal year-end. Fund investment results reflect the expense reduction and fee waiver, to the extent applicable;
without these reductions, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated.
4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
5. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
6. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The MSCI EAFE
Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets excluding the U.S. and
Canada. The Barclays U.S. Aggregate Index is a market capitalization-weighted index representing the U.S. investment-grade, fixed-rate, taxable bond market with index
components for government and corporate, mortgage pass-through and asset-backed securities. All issues included are SEC registered, taxable, dollar denominated and
nonconvertible, must have at least one year to final maturity and must be rated investment grade (Baa3/BBB-/BBB- or higher) using the middle rating of Moody’s, S&P and
Fitch, respectively. The MSCI ACWI is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed and
emerging markets. The Barclays Multiverse Index provides a broad-based measure of the global fixed income bond market. The index represents the union of the Global
Aggregate Index and the Global High Yield Index and captures investment-grade and high yield securities in all eligible currencies.
7. Source: Payden & Rygel. The P&R 90 Day T-Bill Index 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.
See www.franklintempletondatasources.com for additional data provider information.
franklintempleton.com Annual Report | 73
FRANKLIN LIFESMART 2050 RETIREMENT TARGET FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs:
- Transaction costs, including sales charges (loads) on Fund purchases; and
- Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:
1. | Divide your account value by $1,000. |
If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6. | |
2. | Multiply the result by the number under the heading “Expenses Paid During Period.” |
If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50. |
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
74 | Annual Report franklintempleton.com
FRANKLIN LIFESMART 2050 RETIREMENT TARGET FUND
YOUR FUND’S EXPENSES
Beginning | Ending | Expenses Paid | Expenses Paid | |||||
Account | Account | During Period* During Period** | ||||||
Share Class | Value 7/1/14 | Value 12/31/14 | 7/1/14–12/31/14 | 7/1/14–12/31/14 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 1,017.20 | $ | 1.78 | $ | 5.19 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.44 | $ | 1.79 | $ | 5.19 |
C | ||||||||
Actual | $ | 1,000 | $ | 1,012.40 | $ | 5.33 | $ | 8.72 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.91 | $ | 5.35 | $ | 8.74 |
R | ||||||||
Actual | $ | 1,000 | $ | 1,016.10 | $ | 2.79 | $ | 6.20 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.43 | $ | 2.80 | $ | 6.21 |
R6 | ||||||||
Actual | $ | 1,000 | $ | 1,018.50 | $ | 0.00 | $ | 3.41 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,025.21 | $ | 0.00 | $ | 3.41 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 1,018.30 | $ | 0.25 | $ | 3.66 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,024.95 | $ | 0.26 | $ | 3.67 |
*Expenses are calculated using the most recent six-month expense ratio excluding expenses of the fund investments, net of expense waivers,
annualized for each class (A: 0.35%; C: 1.05%; R: 0.55%; R6: 0.00%; and Advisor: 0.05%), multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
**Expenses are calculated using the most recent six-month expense ratio including expenses of the fund investments, net of expense waivers,
annualized for each class (A: 1.02%; C: 1.72%; R: 1.22%; R6: 0.67%; and Advisor: 0.72%), multiplied by the average account value over the
period, multiplied by 184/365 to reflect the one-half year period.
franklintempleton.com Annual Report | 75
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
Financial Highlights | |||||||||||||||
Franklin LifeSmart 2015 Retirement Target Fund | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class A | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.28 | $ | 11.67 | $ | 10.92 | $ | 11.25 | $ | 10.17 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.39 | 0.25 | 0.24 | 0.24 | 0.24 | ||||||||||
Net realized and unrealized gains (losses) | (0.01 | ) | 1.16 | 0.76 | (0.33 | ) | 1.05 | ||||||||
Total from investment operations | 0.38 | 1.41 | 1.00 | (0.09 | ) | 1.29 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.40 | ) | (0.27 | ) | (0.25 | ) | (0.24 | ) | (0.21 | ) | |||||
Net realized gains | (0.59 | ) | (0.53 | ) | — | — | — | ||||||||
Total distributions | (0.99 | ) | (0.80 | ) | (0.25 | ) | (0.24 | ) | (0.21 | ) | |||||
Net asset value, end of year | $ | 11.67 | $ | 12.28 | $ | 11.67 | $ | 10.92 | $ | 11.25 | |||||
Total returnd | 3.07 | % | 12.27 | % | 9.20 | % | (0.82 | )% | 12.77 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 0.84 | % | 0.83 | % | 0.71 | % | 0.80 | % | 0.80 | % | |||||
Expenses net of waiver and payments by affiliatese | 0.35 | % | 0.38 | % | 0.45 | % | 0.45 | % | 0.45 | % | |||||
Net investment incomec | 3.20 | % | 2.04 | % | 2.13 | % | 2.09 | % | 2.30 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 48,121 | $ | 44,347 | $ | 37,507 | $ | 31,073 | $ | 27,230 | |||||
Portfolio turnover rate | 68.98 | % | 73.66 | % | 25.12 | % | 31.55 | % | 17.27 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.63% for the year ended December 31, 2014.
76 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin LifeSmart 2015 Retirement Target Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class C | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.16 | $ | 11.57 | $ | 10.83 | $ | 11.16 | $ | 10.10 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.30 | 0.16 | 0.16 | 0.16 | 0.16 | ||||||||||
Net realized and unrealized gains (losses) | (0.01 | ) | 1.15 | 0.75 | (0.33 | ) | 1.04 | ||||||||
Total from investment operations | 0.29 | 1.31 | 0.91 | (0.17 | ) | 1.20 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.31 | ) | (0.19 | ) | (0.17 | ) | (0.16 | ) | (0.14 | ) | |||||
Net realized gains | (0.59 | ) | (0.53 | ) | — | — | — | ||||||||
Total distributions | (0.90 | ) | (0.72 | ) | (0.17 | ) | (0.16 | ) | (0.14 | ) | |||||
Net asset value, end of year | $ | 11.55 | $ | 12.16 | $ | 11.57 | $ | 10.83 | $ | 11.16 | |||||
Total returnd | 2.39 | % | 11.46 | % | 8.44 | % | (1.51 | )% | 11.91 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 1.54 | % | 1.53 | % | 1.41 | % | 1.50 | % | 1.50 | % | |||||
Expenses net of waiver and payments by affiliatese | 1.05 | % | 1.08 | % | 1.15 | % | 1.15 | % | 1.15 | % | |||||
Net investment incomec | 2.50 | % | 1.34 | % | 1.43 | % | 1.39 | % | 1.60 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 21,189 | $ | 20,395 | $ | 16,912 | $ | 14,217 | $ | 12,133 | |||||
Portfolio turnover rate | 68.98 | % | 73.66 | % | 25.12 | % | 31.55 | % | 17.27 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.63% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 77
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin LifeSmart 2015 Retirement Target Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class R | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.25 | $ | 11.64 | $ | 10.89 | $ | 11.22 | $ | 10.15 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.36 | 0.22 | 0.22 | 0.21 | 0.20 | ||||||||||
Net realized and unrealized gains (losses) | (—)d | 1.16 | 0.75 | (0.32 | ) | 1.06 | |||||||||
Total from investment operations | 0.36 | 1.38 | 0.97 | (0.11 | ) | 1.26 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.38 | ) | (0.24 | ) | (0.22 | ) | (0.22 | ) | (0.19 | ) | |||||
Net realized gains | (0.59 | ) | (0.53 | ) | — | — | — | ||||||||
Total distributions | (0.97 | ) | (0.77 | ) | (0.22 | ) | (0.22 | ) | (0.19 | ) | |||||
Net asset value, end of year | $ | 11.64 | $ | 12.25 | $ | 11.64 | $ | 10.89 | $ | 11.22 | |||||
Total return | 2.89 | % | 12.04 | % | 8.96 | % | (1.02 | )% | 12.46 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 1.04 | % | 1.03 | % | 0.91 | % | 1.00 | % | 1.00 | % | |||||
Expenses net of waiver and payments by affiliatese | 0.55 | % | 0.58 | % | 0.65 | % | 0.65 | % | 0.65 | % | |||||
Net investment incomec | 3.00 | % | 1.84 | % | 1.93 | % | 1.89 | % | 2.10 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 2,828 | $ | 2,279 | $ | 1,862 | $ | 1,815 | $ | 1,401 | |||||
Portfolio turnover rate | 68.98 | % | 73.66 | % | 25.12 | % | 31.55 | % | 17.27 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dAmount rounds to less than $0.01 per share.
eDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.63% for the year ended December 31, 2014.
78 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2015 Retirement Target Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class R6 | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 12.32 | $ | 12.17 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.57 | 0.49 | ||||
Net realized and unrealized gains (losses) | (0.14 | ) | 0.44 | |||
Total from investment operations | 0.43 | 0.93 | ||||
Less distributions from: | ||||||
Net investment income | (0.44 | ) | (0.25 | ) | ||
Net realized gains | (0.59 | ) | (0.53 | ) | ||
Total distributions | (1.03 | ) | (0.78 | ) | ||
Net asset value, end of year | $ | 11.72 | $ | 12.32 | ||
Total returne | 3.49 | % | 7.78 | % | ||
Ratios to average net assetsf | ||||||
Expenses before waiver and payments by affiliatesg | 0.44 | % | 0.60 | % | ||
Expenses net of waiver and payments by affiliatesg | 0.00 | % | 0.00 | % | ||
Net investment incomed | 3.55 | % | 2.42 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 6,709 | $ | 763 | ||
Portfolio turnover rate | 68.98 | % | 73.66 | % |
aFor the period May 1, 2013 (effective date) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eTotal return is not annualized for periods less than one year.
fRatios are annualized for periods less than one year.
gDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.63% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 79
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin LifeSmart 2015 Retirement Target Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Advisor Class | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.31 | $ | 11.70 | $ | 10.94 | $ | 11.28 | $ | 10.19 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.43 | 0.29 | 0.28 | 0.26 | 0.39 | ||||||||||
Net realized and unrealized gains (losses) | (—)d | 1.16 | 0.76 | (0.33 | ) | 0.94 | |||||||||
Total from investment operations | 0.43 | 1.45 | 1.04 | (0.07 | ) | 1.33 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.44 | ) | (0.31 | ) | (0.28 | ) | (0.27 | ) | (0.24 | ) | |||||
Net realized gains | (0.59 | ) | (0.53 | ) | — | — | — | ||||||||
Total distributions | (1.03 | ) | (0.84 | ) | (0.28 | ) | (0.27 | ) | (0.24 | ) | |||||
Net asset value, end of year | $ | 11.71 | $ | 12.31 | $ | 11.70 | $ | 10.94 | $ | 11.28 | |||||
Total return | 3.45 | % | 12.55 | % | 9.59 | % | (0.61 | )% | 13.16 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 0.54 | % | 0.53 | % | 0.41 | % | 0.50 | % | 0.50 | % | |||||
Expenses net of waiver and payments by affiliatese | 0.05 | % | 0.08 | % | 0.15 | % | 0.15 | % | 0.15 | % | |||||
Net investment incomec | 3.50 | % | 2.34 | % | 2.43 | % | 2.39 | % | 2.60 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 2,194 | $ | 2,494 | $ | 1,840 | $ | 1,501 | $ | 1,571 | |||||
Portfolio turnover rate | 68.98 | % | 73.66 | % | 25.12 | % | 31.55 | % | 17.27 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dAmount rounds to less than $0.01 per share.
eDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.63% for the year ended December 31, 2014.
80 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2014 | |||
Franklin LifeSmart 2015 Retirement Target Fund | |||
Shares/Units | Value | ||
Investments in Underlying Funds and Exchange Traded Funds | |||
Alternative Strategies 3.9% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 229,276 | $ | 2,483,054 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 89,402 | 664,256 | |
3,147,310 | |||
Domestic Equity 26.6% | |||
a,bFranklin Biotechnology Discovery Fund, Class R6 | 2,940 | 504,304 | |
a,bFranklin DynaTech Fund, Class R6 | 43,651 | 2,056,396 | |
aFranklin Focused Core Equity Fund, Class R6 | 140,564 | 2,049,424 | |
aFranklin Growth Fund, Class R6 | 45,066 | 3,369,107 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 45,912 | 1,508,661 | |
aFranklin Real Estate Securities Fund, Class R6 | 21,231 | 467,722 | |
aFranklin Rising Dividends Fund, Class R6 | 48,592 | 2,526,768 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 39,435 | 767,004 | |
aFranklin Utilities Fund, Class R6 | 66,067 | 1,179,951 | |
iShares Core S&P 500 ETF | 23,985 | 4,962,496 | |
iShares S&P 500 Value ETF | 22,900 | 2,147,333 | |
21,539,166 | |||
Domestic Fixed Income 29.4% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 1,480,629 | 14,850,708 | |
aFranklin Strategic Income Fund, Class R6 | 525,202 | 5,257,272 | |
iShares Intermediate Credit Bond ETF | 33,715 | 3,686,061 | |
23,794,041 | |||
Foreign Equity 10.6% | |||
aFranklin International Small Cap Growth Fund, Class R6 | 116,071 | 2,097,397 | |
aFranklin Mutual International Fund, Class R6 | 131,527 | 1,918,985 | |
iShares Global Infrastructure ETF | 16,240 | 684,516 | |
iShares MSCI All Country Asia ex Japan ETF | 9,306 | 567,015 | |
aTempleton China World Fund, Class R6 | 15,700 | 482,297 | |
aTempleton Foreign Fund, Class R6 | 133,447 | 916,780 | |
aTempleton Frontier Markets Fund, Class R6 | 55,581 | 799,809 | |
WisdomTree Japan Hedged Equity Fund ETF (Japan) | 23,735 | 1,168,474 | |
8,635,273 | |||
Foreign Fixed Income 27.7% | |||
aFranklin Emerging Market Debt Opportunities Fund | 252,312 | 2,677,030 | |
aTempleton Global Total Return Fund, Class R6 | 1,575,696 | 19,774,980 | |
22,452,010 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $76,442,261) 98.2% | 79,567,800 |
franklintempleton.com
Annual Report
| 81
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin LifeSmart 2015 Retirement Target Fund (continued) | |||
Shares/Units | Value | ||
Short Term Investments (Cost $1,466,544) 1.8% | |||
Money Market Funds 1.8% | |||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 1,466,544 | $ | 1,466,544 |
Total Investments in Underlying Funds and Exchange Traded Funds | |||
(Cost $77,908,805) 100.0% | 81,034,344 | ||
Other Assets, less Liabilities 0.0%† | 7,098 | ||
Net Assets 100.0% | $ | 81,041,442 |
See Abbreviations on page 162.
†Rounds to less than 0.1% of net assets.
aSee Note 3(f) regarding investments in Underlying Funds.
bNon-income producing.
82 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | ||||||
Financial Highlights | ||||||
Franklin LifeSmart 2020 Retirement Target Fund | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class A | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 10.94 | $ | 10.00 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.33 | 0.16 | ||||
Net realized and unrealized gains (losses) | 0.20 | 0.91 | ||||
Total from investment operations | 0.53 | 1.07 | ||||
Less distributions from: | ||||||
Net investment income | (0.27 | ) | (0.13 | ) | ||
Net realized gains | (0.06 | ) | (—)e | |||
Total distributions | (0.33 | ) | (0.13 | ) | ||
Net asset value, end of year | $ | 11.14 | $ | 10.94 | ||
Total returnf | 4.83 | % | 10.69 | % | ||
Ratios to average net assetsg | ||||||
Expenses before waiver and payments by affiliatesh | 2.25 | % | 11.14 | % | ||
Expenses net of waiver and payments by affiliatesh | 0.35 | % | 0.24 | % | ||
Net investment incomed | 3.20 | % | 3.12 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 7,302 | $ | 2,189 | ||
Portfolio turnover rate | 64.70 | % | 33.36 | % |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eAmount rounds to less than $0.01 per share.
fTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
gRatios are annualized for periods less than one year.
hDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.65% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 83
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2020 Retirement Target Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class C | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 10.90 | $ | 10.00 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.24 | 0.18 | ||||
Net realized and unrealized gains (losses) | 0.21 | 0.83 | ||||
Total from investment operations | 0.45 | 1.01 | ||||
Less distributions from: | ||||||
Net investment income | (0.21 | ) | (0.11 | ) | ||
Net realized gains | (0.06 | ) | (—)e | |||
Total distributions | (0.27 | ) | (0.11 | ) | ||
Net asset value, end of year | $ | 11.08 | $ | 10.90 | ||
Total returnf | 4.09 | % | 10.16 | % | ||
Ratios to average net assetsg | ||||||
Expenses before waiver and payments by affiliatesh | 2.95 | % | 11.95 | % | ||
Expenses net of waiver and payments by affiliatesh | 1.05 | % | 1.05 | % | ||
Net investment incomed | 2.50 | % | 2.31 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 2,617 | $ | 250 | ||
Portfolio turnover rate | 64.70 | % | 33.36 | % |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eAmount rounds to less than $0.01 per share.
fTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
gRatios are annualized for periods less than one year.
hDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.65% for the year ended December 31, 2014.
84 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2020 Retirement Target Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class R | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 10.93 | $ | 10.00 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.42 | 0.11 | ||||
Net realized and unrealized gains (losses) | 0.08 | 0.93 | ||||
Total from investment operations | 0.50 | 1.04 | ||||
Less distributions from: | ||||||
Net investment income | (0.25 | ) | (0.11 | ) | ||
Net realized gains | (0.06 | ) | (—)e | |||
Total distributions | (0.31 | ) | (0.11 | ) | ||
Net asset value, end of year | $ | 11.12 | $ | 10.93 | ||
Total returnf | 4.61 | % | 10.48 | % | ||
Ratios to average net assetsg | ||||||
Expenses before waiver and payments by affiliatesh | 2.45 | % | 11.45 | % | ||
Expenses net of waiver and payments by affiliatesh | 0.55 | % | 0.55 | % | ||
Net investment incomed | 3.00 | % | 2.81 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 80 | $ | 11 | ||
Portfolio turnover rate | 64.70 | % | 33.36 | % |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eAmount rounds to less than $0.01 per share.
fTotal return is not annualized for periods less than one year.
gRatios are annualized for periods less than one year.
hDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.65% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 85
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2020 Retirement Target Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class R6 | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 10.95 | $ | 10.00 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.45 | 0.14 | ||||
Net realized and unrealized gains (losses) | 0.11 | 0.94 | ||||
Total from investment operations | 0.56 | 1.08 | ||||
Less distributions from: | ||||||
Net investment income | (0.30 | ) | (0.13 | ) | ||
Net realized gains | (0.06 | ) | (—)e | |||
Total distributions | (0.36 | ) | (0.13 | ) | ||
Net asset value, end of year | $ | 11.15 | $ | 10.95 | ||
Total returnf | 5.14 | % | 10.84 | % | ||
Ratios to average net assetsg | ||||||
Expenses before waiver and payments by affiliatesh | 1.81 | % | 11.51 | % | ||
Expenses net of waiver and payments by affiliatesh | 0.00 | % | 0.00 | % | ||
Net investment incomed | 3.55 | % | 3.36 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 7,361 | $ | 11 | ||
Portfolio turnover rate | 64.70 | % | 33.36 | % |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eAmount rounds to less than $0.01 per share.
fTotal return is not annualized for periods less than one year.
gRatios are annualized for periods less than one year.
hDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.65% for the year ended December 31, 2014.
86 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2020 Retirement Target Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Advisor Class | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 10.95 | $ | 10.00 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.39 | 0.17 | ||||
Net realized and unrealized gains (losses) | 0.17 | 0.91 | ||||
Total from investment operations | 0.56 | 1.08 | ||||
Less distributions from: | ||||||
Net investment income | (0.30 | ) | (0.13 | ) | ||
Net realized gains | (0.06 | ) | (—)e | |||
Total distributions | (0.36 | ) | (0.13 | ) | ||
Net asset value, end of year | $ | 11.15 | $ | 10.95 | ||
Total returnf | 5.08 | % | 10.83 | % | ||
Ratios to average net assetsg | ||||||
Expenses before waiver and payments by affiliatesh | 1.95 | % | 10.95 | % | ||
Expenses net of waiver and payments by affiliatesh | 0.05 | % | 0.05 | % | ||
Net investment incomed | 3.50 | % | 3.31 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 98 | $ | 44 | ||
Portfolio turnover rate | 64.70 | % | 33.36 | % |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eAmount rounds to less than $0.01 per share.
fTotal return is not annualized for periods less than one year.
gRatios are annualized for periods less than one year.
hDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.65% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 87
FRANKLIN FUND ALLOCATOR SERIES | |||
Statement of Investments, December 31, 2014 | |||
Franklin LifeSmart 2020 Retirement Target Fund | |||
Shares/Units | Value | ||
Investments in Underlying Funds and Exchange Traded Funds | |||
Alternative Strategies 3.7% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 47,376 | $ | 513,077 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 18,693 | 138,887 | |
651,964 | |||
Domestic Equity 40.1% | |||
a,bFranklin Biotechnology Discovery Fund, Class R6 | 820 | 140,704 | |
a,bFranklin DynaTech Fund, Class R6 | 17,226 | 811,529 | |
aFranklin Focused Core Equity Fund, Class R6 | 51,900 | 756,700 | |
aFranklin Growth Fund, Class R6 | 18,344 | 1,371,365 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 17,099 | 561,884 | |
aFranklin Real Estate Securities Fund, Class R6 | 7,284 | 160,471 | |
aFranklin Rising Dividends Fund, Class R6 | 17,979 | 934,892 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 13,905 | 270,447 | |
aFranklin Utilities Fund, Class R6 | 25,093 | 448,169 | |
iShares Core S&P 500 ETF | 4,938 | 1,021,672 | |
iShares S&P 500 Value ETF | 5,600 | 525,112 | |
7,002,945 | |||
Domestic Fixed Income 17.8% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 198,426 | 1,990,212 | |
aFranklin Strategic Income Fund, Class R6 | 70,953 | 710,239 | |
iShares Intermediate Credit Bond ETF | 3,790 | 414,360 | |
3,114,811 | |||
Foreign Equity 17.9% | |||
aFranklin International Small Cap Growth Fund, Class R6 | 48,342 | 873,545 | |
aFranklin Mutual International Fund, Class R6 | 48,630 | 709,512 | |
iShares Global Infrastructure ETF | 5,902 | 248,769 | |
iShares MSCI All Country Asia ex Japan ETF | 3,154 | 192,173 | |
aTempleton China World Fund, Class R6 | 5,444 | 167,249 | |
aTempleton Foreign Fund, Class R6 | 49,866 | 342,580 | |
aTempleton Frontier Markets Fund, Class R6 | 19,701 | 283,505 | |
WisdomTree Japan Hedged Equity Fund ETF (Japan) | 6,096 | 300,106 | |
3,117,439 | |||
Foreign Fixed Income 16.4% | |||
aFranklin Emerging Market Debt Opportunities Fund | 27,473 | 291,492 | |
aTempleton Global Total Return Fund, Class R6 | 204,752 | 2,569,634 | |
2,861,126 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $16,958,620) 95.9% | 16,748,285 |
88 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin LifeSmart 2020 Retirement Target Fund (continued) | |||
Shares/Units | Value | ||
Short Term Investments (Cost $369,780) 2.1% | |||
Money Market Funds 2.1% | |||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 369,780 | $ | 369,780 |
Total Investments in Underlying Funds and Exchange Traded Funds | |||
(Cost $17,328,400) 98.0% | 17,118,065 | ||
Other Assets, less Liabilities 2.0% | 339,941 | ||
Net Assets 100.0% | $ | 17,458,006 |
See Abbreviations on page 162.
aSee Note 3(f) regarding investments in Underlying Funds.
bNon-income producing.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 89
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
Financial Highlights | |||||||||||||||
Franklin LifeSmart 2025 Retirement Target Fund | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class A | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.76 | $ | 11.11 | $ | 10.22 | $ | 10.70 | $ | 9.54 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.26 | 0.16 | 0.17 | 0.17 | 0.22 | ||||||||||
Net realized and unrealized gains (losses) | 0.30 | 2.06 | 0.88 | (0.48 | ) | 1.13 | |||||||||
Total from investment operations | 0.56 | 2.22 | 1.05 | (0.31 | ) | 1.35 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.28 | ) | (0.19 | ) | (0.16 | ) | (0.17 | ) | (0.19 | ) | |||||
Net realized gains | (0.68 | ) | (0.38 | ) | — | — | — | ||||||||
Total distributions | (0.96 | ) | (0.57 | ) | (0.16 | ) | (0.17 | ) | (0.19 | ) | |||||
Net asset value, end of year | $ | 12.36 | $ | 12.76 | $ | 11.11 | $ | 10.22 | $ | 10.70 | |||||
Total returnd | 4.39 | % | 20.18 | % | 10.30 | % | (2.86 | )% | 14.14 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 0.83 | % | 0.84 | % | 0.71 | % | 0.80 | % | 0.85 | % | |||||
Expenses net of waiver and payments by affiliatese | 0.35 | % | 0.38 | % | 0.45 | % | 0.45 | % | 0.45 | % | |||||
Net investment incomec | 2.03 | % | 1.31 | % | 1.55 | % | 1.64 | % | 2.25 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 67,854 | $ | 58,811 | $ | 45,299 | $ | 36,506 | $ | 30,983 | |||||
Portfolio turnover rate | 62.00 | % | 47.39 | % | 25.67 | % | 20.06 | % | 19.11 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.66% for the year ended December 31, 2014.
90 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin LifeSmart 2025 Retirement Target Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class C | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.60 | $ | 10.97 | $ | 10.11 | $ | 10.59 | $ | 9.45 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.16 | 0.07 | 0.09 | 0.10 | 0.16 | ||||||||||
Net realized and unrealized gains (losses) | 0.29 | 2.05 | 0.86 | (0.48 | ) | 1.11 | |||||||||
Total from investment operations | 0.45 | 2.12 | 0.95 | (0.38 | ) | 1.27 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.19 | ) | (0.11 | ) | (0.09 | ) | (0.10 | ) | (0.13 | ) | |||||
Net realized gains | (0.68 | ) | (0.38 | ) | — | — | — | ||||||||
Total distributions | (0.87 | ) | (0.49 | ) | (0.09 | ) | (0.10 | ) | (0.13 | ) | |||||
Net asset value, end of year | $ | 12.18 | $ | 12.60 | $ | 10.97 | $ | 10.11 | $ | 10.59 | |||||
Total returnd | 3.58 | % | 19.52 | % | 9.42 | % | (3.54 | )% | 13.41 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 1.53 | % | 1.54 | % | 1.41 | % | 1.50 | % | 1.55 | % | |||||
Expenses net of waiver and payments by affiliatese | 1.05 | % | 1.08 | % | 1.15 | % | 1.15 | % | 1.15 | % | |||||
Net investment incomec | 1.33 | % | 0.61 | % | 0.85 | % | 0.94 | % | 1.55 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 28,712 | $ | 25,248 | $ | 18,312 | $ | 14,309 | $ | 11,194 | |||||
Portfolio turnover rate | 62.00 | % | 47.39 | % | 25.67 | % | 20.06 | % | 19.11 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.66% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 91
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin LifeSmart 2025 Retirement Target Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class R | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.72 | $ | 11.07 | $ | 10.19 | $ | 10.68 | $ | 9.53 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.23 | 0.13 | 0.15 | 0.16 | 0.22 | ||||||||||
Net realized and unrealized gains (losses) | 0.30 | 2.07 | 0.87 | (0.50 | ) | 1.10 | |||||||||
Total from investment operations | 0.53 | 2.20 | 1.02 | (0.34 | ) | 1.32 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.26 | ) | (0.17 | ) | (0.14 | ) | (0.15 | ) | (0.17 | ) | |||||
Net realized gains | (0.68 | ) | (0.38 | ) | — | — | — | ||||||||
Total distributions | (0.94 | ) | (0.55 | ) | (0.14 | ) | (0.15 | ) | (0.17 | ) | |||||
Net asset value, end of year | $ | 12.31 | $ | 12.72 | $ | 11.07 | $ | 10.19 | $ | 10.68 | |||||
Total return | 4.12 | % | 20.05 | % | 10.05 | % | (3.14 | )% | 13.92 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 1.03 | % | 1.04 | % | 0.91 | % | 1.00 | % | 1.05 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.55 | % | 0.58 | % | 0.65 | % | 0.65 | % | 0.65 | % | |||||
Net investment incomec | 1.83 | % | 1.11 | % | 1.35 | % | 1.44 | % | 2.05 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 5,361 | $ | 4,835 | $ | 3,442 | $ | 1,780 | $ | 995 | |||||
Portfolio turnover rate | 62.00 | % | 47.39 | % | 25.67 | % | 20.06 | % | 19.11 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.66% for the year ended December 31, 2014.
92 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2025 Retirement Target Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class R6 | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 12.79 | $ | 11.74 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.41 | 0.55 | ||||
Net realized and unrealized gains (losses) | 0.20 | 1.06 | ||||
Total from investment operations | 0.61 | 1.61 | ||||
Less distributions from: | ||||||
Net investment income and short term gains received from Underlying Funds | (0.33 | ) | (0.18 | ) | ||
Net realized gains | (0.68 | ) | (0.38 | ) | ||
Total distributions | (1.01 | ) | (0.56 | ) | ||
Net asset value, end of year | $ | 12.39 | $ | 12.79 | ||
Total returne | 4.74 | % | 13.90 | % | ||
Ratios to average net assetsf | ||||||
Expenses before waiver and payments by affiliatesg | 0.39 | % | 0.45 | % | ||
Expenses net of waiver and payments by affiliatesg | 0.00 | % | 0.00 | % | ||
Net investment incomed | 2.38 | % | 1.69 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 14,010 | $ | 2,339 | ||
Portfolio turnover rate | 62.00 | % | 47.39 | % |
aFor the period May 1, 2013 (effective date) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eTotal return is not annualized for periods less than one year.
fRatios are annualized for periods less than one year.
gDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.66% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 93
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin LifeSmart 2025 Retirement Target Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Advisor Class | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.79 | $ | 11.12 | $ | 10.23 | $ | 10.72 | $ | 9.55 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.29 | 0.19 | 0.20 | 0.21 | 0.31 | ||||||||||
Net realized and unrealized gains (losses) | 0.30 | 2.08 | 0.88 | (0.50 | ) | 1.07 | |||||||||
Total from investment operations | 0.59 | 2.27 | 1.08 | (0.29 | ) | 1.38 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.32 | ) | (0.22 | ) | (0.19 | ) | (0.20 | ) | (0.21 | ) | |||||
Net realized gains | (0.68 | ) | (0.38 | ) | — | — | — | ||||||||
Total distributions | (1.00 | ) | (0.60 | ) | (0.19 | ) | (0.20 | ) | (0.21 | ) | |||||
Net asset value, end of year | $ | 12.38 | $ | 12.79 | $ | 11.12 | $ | 10.23 | $ | 10.72 | |||||
Total return | 4.61 | % | 20.66 | % | 10.59 | % | (2.65 | )% | 14.53 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 0.53 | % | 0.54 | % | 0.41 | % | 0.50 | % | 0.55 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.05 | % | 0.08 | % | 0.15 | % | 0.15 | % | 0.15 | % | |||||
Net investment incomec | 2.33 | % | 1.61 | % | 1.85 | % | 1.94 | % | 2.55 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 2,814 | $ | 2,487 | $ | 1,873 | $ | 1,847 | $ | 1,530 | |||||
Portfolio turnover rate | 62.00 | % | 47.39 | % | 25.67 | % | 20.06 | % | 19.11 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.66% for the year ended December 31, 2014.
94 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2014 | |||
Franklin LifeSmart 2025 Retirement Target Fund | |||
Shares/Units | Value | ||
Investments in Underlying Funds and Exchange Traded Funds | |||
Alternative Strategies 3.8% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 323,419 | $ | 3,502,630 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 126,611 | 940,719 | |
4,443,349 | |||
Domestic Equity 48.8% | |||
a,bFranklin Biotechnology Discovery Fund, Class R6 | 8,889 | 1,525,052 | |
a,bFranklin DynaTech Fund, Class R6 | 144,889 | 6,825,716 | |
aFranklin Focused Core Equity Fund, Class R6 | 424,331 | 6,186,741 | |
aFranklin Growth Fund, Class R6 | 144,269 | 10,785,520 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 132,232 | 4,345,150 | |
aFranklin Real Estate Securities Fund, Class R6 | 62,303 | 1,372,546 | |
aFranklin Rising Dividends Fund, Class R6 | 168,340 | 8,753,673 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 142,971 | 2,780,784 | |
aFranklin Utilities Fund, Class R6 | 206,213 | 3,682,962 | |
iShares Core S&P 500 ETF | 33,710 | 6,974,599 | |
iShares S&P 500 Value ETF | 50,700 | 4,754,139 | |
57,986,882 | |||
Domestic Fixed Income 11.0% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 776,722 | 7,790,526 | |
aFranklin Strategic Income Fund, Class R6 | 275,210 | 2,754,847 | |
iShares Intermediate Credit Bond ETF | 23,400 | 2,558,322 | |
13,103,695 | |||
Foreign Equity 21.5% | |||
aFranklin International Small Cap Growth Fund, Class R6 | 390,976 | 7,064,944 | |
aFranklin Mutual International Fund, Class R6 | 394,960 | 5,762,471 | |
iShares Global Infrastructure ETF | 47,199 | 1,989,438 | |
iShares MSCI All Country Asia ex Japan ETF | 25,440 | 1,550,059 | |
aTempleton China World Fund, Class R6 | 50,936 | 1,564,749 | |
aTempleton Foreign Fund, Class R6 | 364,219 | 2,502,188 | |
aTempleton Frontier Markets Fund, Class R6 | 159,708 | 2,298,200 | |
WisdomTree Japan Hedged Equity Fund ETF (Japan) | 57,665 | 2,838,848 | |
25,570,897 | |||
Foreign Fixed Income 10.4% | |||
aFranklin Emerging Market Debt Opportunities Fund | 134,129 | 1,423,112 | |
aTempleton Global Total Return Fund, Class R6 | 866,520 | 10,874,828 | |
12,297,940 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $102,134,376) 95.5% | 113,402,763 |
franklintempleton.com Annual Report | 95
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin LifeSmart 2025 Retirement Target Fund (continued) | |||
Shares/Units | Value | ||
Short Term Investments (Cost $2,604,862) 2.2% | |||
Money Market Funds 2.2% | |||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 2,604,862 | $ | 2,604,862 |
Total Investments in Underlying Funds and Exchange Traded Funds | |||
(Cost $104,739,238) 97.7% | 116,007,625 | ||
Other Assets, less Liabilities 2.3% | 2,744,097 | ||
Net Assets 100.0% | $ | 118,751,722 |
See Abbreviations on page 162.
aSee Note 3(f) regarding investments in Underlying Funds.
bNon-income producing.
96 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | ||||||
Financial Highlights | ||||||
Franklin LifeSmart 2030 Retirement Target Fund | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class A | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 11.11 | $ | 10.00 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.25 | 0.15 | ||||
Net realized and unrealized gains (losses) | 0.33 | 1.07 | ||||
Total from investment operations | 0.58 | 1.22 | ||||
Less distributions from: | ||||||
Net investment income and short term gains received from Underlying Funds | (0.18 | ) | (0.11 | ) | ||
Net realized gains | (0.06 | ) | (—)e | |||
Total distributions | (0.24 | ) | (0.11 | ) | ||
Net asset value, end of year | $ | 11.45 | $ | 11.11 | ||
Total returnf | 5.28 | % | 12.19 | % | ||
Ratios to average net assetsg | ||||||
Expenses before waiver and payments by affiliatesh | 2.28 | % | 20.77 | % | ||
Expenses net of waiver and payments by affiliatesh | 0.35 | % | 0.23 | % | ||
Net investment incomed | 2.58 | % | 2.72 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 5,098 | $ | 1,260 | ||
Portfolio turnover rate | 81.33 | % | 12.08 | % |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eAmount rounds to less than $0.01 per share.
fTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
gRatios are annualized for periods less than one year.
hDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 97
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2030 Retirement Target Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class C | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 11.09 | $ | 10.00 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.24 | 0.13 | ||||
Net realized and unrealized gains (losses) | 0.26 | 1.05 | ||||
Total from investment operations | 0.50 | 1.18 | ||||
Less distributions from: | ||||||
Net investment income and short term gains received from Underlying Funds | (0.15 | ) | (0.09 | ) | ||
Net realized gains | (0.06 | ) | (—)e | |||
Total distributions | (0.21 | ) | (0.09 | ) | ||
Net asset value, end of year | $ | 11.38 | $ | 11.09 | ||
Total returnf | 4.67 | % | 11.73 | % | ||
Ratios to average net assetsg | ||||||
Expenses before waiver and payments by affiliatesh | 2.98 | % | 21.59 | % | ||
Expenses net of waiver and payments by affiliatesh | 1.05 | % | 1.05 | % | ||
Net investment incomed | 1.88 | % | 1.90 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 1,950 | $ | 132 | ||
Portfolio turnover rate | 81.33 | % | 12.08 | % |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eAmount rounds to less than $0.01 per share.
fTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
gRatios are annualized for periods less than one year.
hDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
98 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2030 Retirement Target Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class R | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 11.10 | $ | 10.00 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.18 | 0.13 | ||||
Net realized and unrealized gains (losses) | 0.38 | 1.07 | ||||
Total from investment operations | 0.56 | 1.20 | ||||
Less distributions from: | ||||||
Net investment income and short term gains received from Underlying Funds | (0.16 | ) | (0.10 | ) | ||
Net realized gains | (0.06 | ) | (—)e | |||
Total distributions | (0.22 | ) | (0.10 | ) | ||
Net asset value, end of year | $ | 11.44 | $ | 11.10 | ||
Total returnf | 5.07 | % | 11.98 | % | ||
Ratios to average net assetsg | ||||||
Expenses before waiver and payments by affiliatesh | 2.48 | % | 21.09 | % | ||
Expenses net of waiver and payments by affiliatesh | 0.55 | % | 0.55 | % | ||
Net investment incomed | 2.38 | % | 2.40 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 48 | $ | 47 | ||
Portfolio turnover rate | 81.33 | % | 12.08 | % |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eAmount rounds to less than $0.01 per share.
fTotal return is not annualized for periods less than one year.
gRatios are annualized for periods less than one year.
hDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 99
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2030 Retirement Target Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class R6 | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 11.12 | $ | 10.00 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.36 | 0.11 | ||||
Net realized and unrealized gains (losses) | 0.26 | 1.12 | ||||
Total from investment operations | 0.62 | 1.23 | ||||
Less distributions from: | ||||||
Net investment income and short term gains received from Underlying Funds | (0.21 | ) | (0.11 | ) | ||
Net realized gains | (0.06 | ) | (—)e | |||
Total distributions | (0.27 | ) | (0.11 | ) | ||
Net asset value, end of year | $ | 11.47 | $ | 11.12 | ||
Total returnf | 5.60 | % | 12.34 | % | ||
Ratios to average net assetsg | ||||||
Expenses before waiver and payments by affiliatesh | 1.74 | % | 21.00 | % | ||
Expenses net of waiver and payments by affiliatesh | 0.00 | % | 0.00 | % | ||
Net investment incomed | 2.93 | % | 2.95 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 12,041 | $ | 11 | ||
Portfolio turnover rate | 81.33 | % | 12.08 | % |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eAmount rounds to less than $0.01 per share.
fTotal return is not annualized for periods less than one year.
gRatios are annualized for periods less than one year.
hDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
100 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2030 Retirement Target Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Advisor Class | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 11.12 | $ | 10.00 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.23 | 0.13 | ||||
Net realized and unrealized gains (losses) | 0.38 | 1.10 | ||||
Total from investment operations | 0.61 | 1.23 | ||||
Less distributions from: | ||||||
Net investment income and short term gains received from Underlying Funds | (0.20 | ) | (0.11 | ) | ||
Net realized gains | (0.06 | ) | (—)e | |||
Total distributions | (0.26 | ) | (0.11 | ) | ||
Net asset value, end of year | $ | 11.47 | $ | 11.12 | ||
Total returnf | 5.56 | % | 12.32 | % | ||
Ratios to average net assetsg | ||||||
Expenses before waiver and payments by affiliatesh | 1.98 | % | 20.59 | % | ||
Expenses net of waiver and payments by affiliatesh | 0.05 | % | 0.05 | % | ||
Net investment incomed | 2.88 | % | 2.90 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 101 | $ | 82 | ||
Portfolio turnover rate | 81.33 | % | 12.08 | % |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eAmount rounds to less than $0.01 per share.
fTotal return is not annualized for periods less than one year.
gRatios are annualized for periods less than one year.
hDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 101
FRANKLIN FUND ALLOCATOR SERIES | |||
Statement of Investments, December 31, 2014 | |||
Franklin LifeSmart 2030 Retirement Target Fund | |||
Shares/Units | Value | ||
Investments in Underlying Funds and Exchange Traded Funds | |||
Alternative Strategies 3.9% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 54,954 | $ | 595,157 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 21,427 | 159,201 | |
754,358 | |||
Domestic Equity 51.9% | |||
a,bFranklin Biotechnology Discovery Fund, Class R6 | 1,284 | 220,257 | |
a,bFranklin DynaTech Fund, Class R6 | 26,101 | 1,229,614 | |
aFranklin Focused Core Equity Fund, Class R6 | 69,553 | 1,014,082 | |
aFranklin Growth Fund, Class R6 | 26,820 | 2,005,052 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 23,747 | 780,342 | |
aFranklin Real Estate Securities Fund, Class R6 | 11,086 | 244,222 | |
aFranklin Rising Dividends Fund, Class R6 | 27,448 | 1,427,303 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 25,118 | 488,539 | |
aFranklin Utilities Fund, Class R6 | 35,886 | 640,931 | |
iShares Core S&P 500 ETF | 5,600 | 1,158,640 | |
iShares S&P 500 Value ETF | 8,200 | 768,914 | |
9,977,896 | |||
Domestic Fixed Income 9.3% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 108,099 | 1,084,231 | |
aFranklin Strategic Income Fund, Class R6 | 40,044 | 400,838 | |
iShares Intermediate Credit Bond ETF | 2,700 | 295,191 | |
1,780,260 | |||
Foreign Equity 23.4% | |||
aFranklin International Small Cap Growth Fund, Class R6 | 70,613 | 1,275,987 | |
aFranklin Mutual International Fund, Class R6 | 65,271 | 952,311 | |
iShares Global Infrastructure ETF | 8,794 | 370,667 | |
iShares MSCI All Country Asia ex Japan ETF | 4,471 | 272,418 | |
aTempleton China World Fund, Class R6 | 9,590 | 294,603 | |
aTempleton Foreign Fund, Class R6 | 68,119 | 467,978 | |
aTempleton Frontier Markets Fund, Class R6 | 30,174 | 434,198 | |
WisdomTree Japan Hedged Equity Fund ETF (Japan) | 8,933 | 439,772 | |
4,507,934 | |||
Foreign Fixed Income 8.6% | |||
aFranklin Emerging Market Debt Opportunities Fund | 19,359 | 205,402 | |
aTempleton Global Total Return Fund, Class R6 | 115,462 | 1,449,045 | |
1,654,447 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $18,918,022) 97.1% | 18,674,895 |
102 | Annual Report
franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin LifeSmart 2030 Retirement Target Fund (continued) | |||
Shares/Units | Value | ||
Short Term Investments (Cost $276,857) 1.4% | |||
Money Market Funds 1.4% | |||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 276,857 | $ | 276,857 |
Total Investments in Underlying Funds and Exchange Traded Funds | |||
(Cost $19,194,879) 98.5% | 18,951,752 | ||
Other Assets, less Liabilities 1.5% | 286,594 | ||
Net Assets 100.0% | $ | 19,238,346 |
See Abbreviations on page 162.
aSee Note 3(f) regarding investments in Underlying Funds.
bNon-income producing.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 103
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
Financial Highlights | |||||||||||||||
Franklin LifeSmart 2035 Retirement Target Fund | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class A | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.85 | $ | 11.01 | $ | 10.13 | $ | 10.59 | $ | 9.36 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.22 | 0.14 | 0.15 | 0.15 | 0.20 | ||||||||||
Net realized and unrealized gains (losses) | 0.42 | 2.26 | 0.89 | (0.46 | ) | 1.18 | |||||||||
Total from investment operations | 0.64 | 2.40 | 1.04 | (0.31 | ) | 1.38 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.24 | ) | (0.15 | ) | (0.16 | ) | (0.15 | ) | (0.15 | ) | |||||
Net realized gains | (0.58 | ) | (0.41 | ) | (—)d | — | — | ||||||||
Total distributions | (0.82 | ) | (0.56 | ) | (0.16 | ) | (0.15 | ) | (0.15 | ) | |||||
Net asset value, end of year | $ | 12.67 | $ | 12.85 | $ | 11.01 | $ | 10.13 | $ | 10.59 | |||||
Total returne | 4.96 | % | 22.06 | % | 10.33 | % | (2.97 | )% | 14.78 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesf | 0.91 | % | 0.94 | % | 0.83 | % | 0.97 | % | 1.12 | % | |||||
Expenses net of waiver and payments by affiliatesf | 0.35 | % | 0.38 | % | 0.45 | % | 0.45 | % | 0.45 | % | |||||
Net investment incomec | 1.76 | % | 1.17 | % | 1.45 | % | 1.44 | % | 2.06 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 50,264 | $ | 42,510 | $ | 32,095 | $ | 24,328 | $ | 19,677 | |||||
Portfolio turnover rate | 61.73 | % | 49.84 | % | 27.30 | % | 29.19 | % | 23.28 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dAmount rounds to less than $0.01 per share.
eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
fDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
104 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin LifeSmart 2035 Retirement Target Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class C | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.63 | $ | 10.85 | $ | 9.98 | $ | 10.45 | $ | 9.25 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.12 | 0.06 | 0.08 | 0.08 | 0.12 | ||||||||||
Net realized and unrealized gains (losses) | 0.41 | 2.21 | 0.89 | (0.47 | ) | 1.18 | |||||||||
Total from investment operations | 0.53 | 2.27 | 0.97 | (0.39 | ) | 1.30 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.15 | ) | (0.08 | ) | (0.10 | ) | (0.08 | ) | (0.10 | ) | |||||
Net realized gains | (0.58 | ) | (0.41 | ) | (—)d | — | — | ||||||||
Total distributions | (0.73 | ) | (0.49 | ) | (0.10 | ) | (0.08 | ) | (0.10 | ) | |||||
Net asset value, end of year | $ | 12.43 | $ | 12.63 | $ | 10.85 | $ | 9.98 | $ | 10.45 | |||||
Total returne | 4.23 | % | 21.17 | % | 9.72 | % | (3.70 | )% | 14.04 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesf | 1.61 | % | 1.64 | % | 1.53 | % | 1.67 | % | 1.82 | % | |||||
Expenses net of waiver and payments by affiliatesf | 1.05 | % | 1.08 | % | 1.15 | % | 1.15 | % | 1.15 | % | |||||
Net investment incomec | 1.06 | % | 0.47 | % | 0.75 | % | 0.74 | % | 1.36 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 19,965 | $ | 16,873 | $ | 11,124 | $ | 8,300 | $ | 6,669 | |||||
Portfolio turnover rate | 61.73 | % | 49.84 | % | 27.30 | % | 29.19 | % | 23.28 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dAmount rounds to less than $0.01 per share.
eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
fDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 105
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin LifeSmart 2035 Retirement Target Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class R | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.84 | $ | 11.01 | $ | 10.12 | $ | 10.59 | $ | 9.37 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.19 | 0.11 | 0.14 | 0.14 | 0.21 | ||||||||||
Net realized and unrealized gains (losses) | 0.42 | 2.26 | 0.89 | (0.48 | ) | 1.15 | |||||||||
Total from investment operations | 0.61 | 2.37 | 1.03 | (0.34 | ) | 1.36 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.21 | ) | (0.13 | ) | (0.14 | ) | (0.13 | ) | (0.14 | ) | |||||
Net realized gains | (0.58 | ) | (0.41 | ) | (—)d | — | — | ||||||||
Total distributions | (0.79 | ) | (0.54 | ) | (0.14 | ) | (0.13 | ) | (0.14 | ) | |||||
Net asset value, end of year | $ | 12.66 | $ | 12.84 | $ | 11.01 | $ | 10.12 | $ | 10.59 | |||||
Total return | 4.75 | % | 21.77 | % | 10.24 | % | (3.21 | )% | 14.55 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 1.11 | % | 1.14 | % | 1.03 | % | 1.17 | % | 1.32 | % | |||||
Expenses net of waiver and payments by affiliatese | 0.55 | % | 0.58 | % | 0.65 | % | 0.65 | % | 0.65 | % | |||||
Net investment incomec | 1.56 | % | 0.97 | % | 1.25 | % | 1.24 | % | 1.86 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 4,577 | $ | 4,093 | $ | 3,035 | $ | 1,724 | $ | 1,038 | |||||
Portfolio turnover rate | 61.73 | % | 49.84 | % | 27.30 | % | 29.19 | % | 23.28 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dAmount rounds to less than $0.01 per share.
eDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
106 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2035 Retirement Target Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class R6 | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 12.92 | $ | 11.77 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.36 | 0.58 | ||||
Net realized and unrealized gains (losses) | 0.33 | 1.17 | ||||
Total from investment operations | 0.69 | 1.75 | ||||
Less distributions from: | ||||||
Net investment income and short term gains received from Underlying Funds | (0.28 | ) | (0.19 | ) | ||
Net realized gains | (0.58 | ) | (0.41 | ) | ||
Total distributions | (0.86 | ) | (0.60 | ) | ||
Net asset value, end of year | $ | 12.75 | $ | 12.92 | ||
Total returne | 5.35 | % | 15.09 | % | ||
Ratios to average net assetsf | ||||||
Expenses before waiver and payments by affiliatesg | 0.42 | % | 0.49 | % | ||
Expenses net of waiver and payments by affiliatesg | 0.00 | % | 0.00 | % | ||
Net investment incomed | 2.11 | % | 1.55 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 16,262 | $ | 2,532 | ||
Portfolio turnover rate | 61.73 | % | 49.84 | % |
aFor the period May 1, 2013 (effective date) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eTotal return is not annualized for periods less than one year.
fRatios are annualized for periods less than one year.
gDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 107
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin LifeSmart 2035 Retirement Target Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Advisor Class | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.93 | $ | 11.07 | $ | 10.17 | $ | 10.63 | $ | 9.39 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.26 | 0.18 | 0.18 | 0.17 | 0.23 | ||||||||||
Net realized and unrealized gains (losses) | 0.41 | 2.28 | 0.91 | (0.46 | ) | 1.19 | |||||||||
Total from investment operations | 0.67 | 2.46 | 1.09 | (0.29 | ) | 1.42 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.27 | ) | (0.19 | ) | (0.19 | ) | (0.17 | ) | (0.18 | ) | |||||
Net realized gains | (0.58 | ) | (0.41 | ) | (—)d | — | — | ||||||||
Total distributions | (0.85 | ) | (0.60 | ) | (0.19 | ) | (0.17 | ) | (0.18 | ) | |||||
Net asset value, end of year | $ | 12.75 | $ | 12.93 | $ | 11.07 | $ | 10.17 | $ | 10.63 | |||||
Total return | 5.22 | % | 22.43 | % | 10.79 | % | (2.69 | )% | 15.09 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 0.61 | % | 0.64 | % | 0.53 | % | 0.67 | % | 0.82 | % | |||||
Expenses net of waiver and payments by affiliatese | 0.05 | % | 0.08 | % | 0.15 | % | 0.15 | % | 0.15 | % | |||||
Net investment incomec | 2.06 | % | 1.47 | % | 1.75 | % | 1.74 | % | 2.36 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 2,182 | $ | 1,815 | $ | 1,077 | $ | 817 | $ | 840 | |||||
Portfolio turnover rate | 61.73 | % | 49.84 | % | 27.30 | % | 29.19 | % | 23.28 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dAmount rounds to less than $0.01 per share.
eDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
108 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2014 | |||
Franklin LifeSmart 2035 Retirement Target Fund | |||
Shares/Units | Value | ||
Investments in Underlying Funds and Exchange Traded Funds | |||
Alternative Strategies 3.9% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 267,293 | $ | 2,894,784 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 102,696 | 763,033 | |
3,657,817 | |||
Domestic Equity 56.0% | |||
a,bFranklin Biotechnology Discovery Fund, Class R6 | 8,872 | 1,522,074 | |
a,bFranklin DynaTech Fund, Class R6 | 125,016 | 5,889,481 | |
aFranklin Focused Core Equity Fund, Class R6 | 386,899 | 5,640,994 | |
aFranklin Growth Fund, Class R6 | 130,286 | 9,740,178 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 119,254 | 3,918,673 | |
aFranklin Real Estate Securities Fund, Class R6 | 59,367 | 1,307,852 | |
aFranklin Rising Dividends Fund, Class R6 | 159,006 | 8,268,321 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 125,329 | 2,437,649 | |
aFranklin Utilities Fund, Class R6 | 203,433 | 3,633,308 | |
iShares Core S&P 500 ETF | 27,092 | 5,605,335 | |
iShares S&P 500 Value ETF | 45,300 | 4,247,781 | |
52,211,646 | |||
Domestic Fixed Income 6.7% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 360,391 | 3,614,719 | |
aFranklin Strategic Income Fund, Class R6 | 130,027 | 1,301,566 | |
iShares Intermediate Credit Bond ETF | 11,830 | 1,293,373 | |
6,209,658 | |||
Foreign Equity 24.8% | |||
aFranklin International Small Cap Growth Fund, Class R6 | 349,232 | 6,310,620 | |
aFranklin Mutual International Fund, Class R6 | 355,335 | 5,184,338 | |
iShares Global Infrastructure ETF | 42,236 | 1,780,247 | |
iShares MSCI All Country Asia ex Japan ETF | 22,147 | 1,349,418 | |
aTempleton China World Fund, Class R6 | 47,246 | 1,451,389 | |
aTempleton Foreign Fund, Class R6 | 360,354 | 2,475,634 | |
aTempleton Frontier Markets Fund, Class R6 | 151,592 | 2,181,405 | |
WisdomTree Japan Hedged Equity Fund ETF (Japan) | 49,315 | 2,427,777 | |
23,160,828 | |||
Foreign Fixed Income 6.2% | |||
aFranklin Emerging Market Debt Opportunities Fund | 67,581 | 717,034 | |
aTempleton Global Total Return Fund, Class R6 | 399,555 | 5,014,416 | |
5,731,450 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $81,403,786) 97.6% | 90,971,399 |
franklintempleton.com Annual Report | 109
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin LifeSmart 2035 Retirement Target Fund (continued) | |||
Shares/Units | Value | ||
Short Term Investments (Cost $1,512,212) 1.6% | |||
Money Market Funds 1.6% | |||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 1,512,212 | $ | 1,512,212 |
Total Investments in Underlying Funds and Exchange Traded Funds | |||
(Cost $82,916,000) 99.2% | 92,483,611 | ||
Other Assets, less Liabilities 0.8% | 765,992 | ||
Net Assets 100.0% | $ | 93,249,603 |
See Abbreviations on page 162.
aSee Note 3(f) regarding investments in Underlying Funds.
bNon-income producing.
110 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | ||||||
Financial Highlights | ||||||
Franklin LifeSmart 2040 Retirement Target Fund | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class A | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 11.19 | $ | 10.00 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.24 | 0.11 | ||||
Net realized and unrealized gains (losses) | 0.39 | 1.18 | ||||
Total from investment operations | 0.63 | 1.29 | ||||
Less distributions from: | ||||||
Net investment income and short term gains received from Underlying Funds | (0.18 | ) | (0.10 | ) | ||
Net realized gains | (0.06 | ) | (—)e | |||
Total distributions | (0.24 | ) | (0.10 | ) | ||
Net asset value, end of year | $ | 11.58 | $ | 11.19 | ||
Total returnf | 5.67 | % | 12.91 | % | ||
Ratios to average net assetsg | ||||||
Expenses before waiver and payments by affiliatesh | 3.25 | % | 33.48 | % | ||
Expenses net of waiver and payments by affiliatesh | 0.35 | % | 0.25 | % | ||
Net investment incomed | 2.37 | % | 1.98 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 2,891 | $ | 672 | ||
Portfolio turnover rate | 92.38 | % | 16.27 | % |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eAmount rounds to less than $0.01 per share.
fTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
gRatios are annualized for periods less than one year.
hDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 111
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2040 Retirement Target Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class C | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 11.15 | $ | 10.00 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.17 | 0.08 | ||||
Net realized and unrealized gains (losses) | 0.39 | 1.16 | ||||
Total from investment operations | 0.56 | 1.24 | ||||
Less distributions from: | ||||||
Net investment income and short term gains received from Underlying Funds | (0.13 | ) | (0.09 | ) | ||
Net realized gains | (0.06 | ) | (—)e | |||
Total distributions | (0.19 | ) | (0.09 | ) | ||
Net asset value, end of year | $ | 11.52 | $ | 11.15 | ||
Total returnf | 5.03 | % | 12.46 | % | ||
Ratios to average net assetsg | ||||||
Expenses before waiver and payments by affiliatesh | 3.95 | % | 34.28 | % | ||
Expenses net of waiver and payments by affiliatesh | 1.05 | % | 1.05 | % | ||
Net investment incomed | 1.67 | % | 1.18 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 747 | $ | 60 | ||
Portfolio turnover rate | 92.38 | % | 16.27 | % |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eAmount rounds to less than $0.01 per share.
fTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
gRatios are annualized for periods less than one year.
hDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
112 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2040 Retirement Target Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class R | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 11.19 | $ | 10.00 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.20 | 0.07 | ||||
Net realized and unrealized gains (losses) | 0.41 | 1.21 | ||||
Total from investment operations | 0.61 | 1.28 | ||||
Less distributions from: | ||||||
Net investment income and short term gains received from Underlying Funds | (0.16 | ) | (0.09 | ) | ||
Net realized gains | (0.06 | ) | (—)e | |||
Total distributions | (0.22 | ) | (0.09 | ) | ||
Net asset value, end of year | $ | 11.58 | $ | 11.19 | ||
Total returnf | 5.48 | % | 12.81 | % | ||
Ratios to average net assetsg | ||||||
Expenses before waiver and payments by affiliatesh | 3.45 | % | 33.78 | % | ||
Expenses net of waiver and payments by affiliatesh | 0.55 | % | 0.55 | % | ||
Net investment incomed | 2.17 | % | 1.68 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 37 | $ | 11 | ||
Portfolio turnover rate | 92.38 | % | 16.27 | % |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eAmount rounds to less than $0.01 per share.
fTotal return is not annualized for periods less than one year.
gRatios are annualized for periods less than one year.
hDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 113
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2040 Retirement Target Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class R6 | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 11.20 | $ | 10.00 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.33 | 0.10 | ||||
Net realized and unrealized gains (losses) | 0.35 | 1.20 | ||||
Total from investment operations | 0.68 | 1.30 | ||||
Less distributions from: | ||||||
Net investment income and short term gains received from Underlying Funds | (0.21 | ) | (0.10 | ) | ||
Net realized gains | (0.06 | ) | (—)e | |||
Total distributions | (0.27 | ) | (0.10 | ) | ||
Net asset value, end of year | $ | 11.61 | $ | 11.20 | ||
Total returnf | 6.13 | % | 13.07 | % | ||
Ratios to average net assetsg | ||||||
Expenses before waiver and payments by affiliatesh | 2.55 | % | 33.68 | % | ||
Expenses net of waiver and payments by affiliatesh | 0.00 | % | 0.00 | % | ||
Net investment incomed | 2.72 | % | 2.23 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 10,154 | $ | 11 | ||
Portfolio turnover rate | 92.38 | % | 16.27 | % |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eAmount rounds to less than $0.01 per share.
fTotal return is not annualized for periods less than one year.
gRatios are annualized for periods less than one year.
hDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
114 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2040 Retirement Target Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Advisor Class | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 11.20 | $ | 10.00 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.20 | 0.10 | ||||
Net realized and unrealized gains (losses) | 0.48 | 1.20 | ||||
Total from investment operations | 0.68 | 1.30 | ||||
Less distributions from: | ||||||
Net investment income and short term gains received from Underlying Funds | (0.21 | ) | (0.10 | ) | ||
Net realized gains | (0.06 | ) | (—)e | |||
Total distributions | (0.27 | ) | (0.10 | ) | ||
Net asset value, end of year | $ | 11.61 | $ | 11.20 | ||
Total returnf | 6.08 | % | 13.04 | % | ||
Ratios to average net assetsg | ||||||
Expenses before waiver and payments by affiliatesh | 2.95 | % | 33.28 | % | ||
Expenses net of waiver and payments by affiliatesh | 0.05 | % | 0.05 | % | ||
Net investment incomed | 2.67 | % | 2.18 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 23 | $ | 23 | ||
Portfolio turnover rate | 92.38 | % | 16.27 | % |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eAmount rounds to less than $0.01 per share.
fTotal return is not annualized for periods less than one year.
gRatios are annualized for periods less than one year.
hDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 115
FRANKLIN FUND ALLOCATOR SERIES | |||
Statement of Investments, December 31, 2014 | |||
Franklin LifeSmart 2040 Retirement Target Fund | |||
Shares/Units | Value | ||
Investments in Underlying Funds and Exchange Traded Funds | |||
Alternative Strategies 3.6% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 35,616 | $ | 385,721 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 14,590 | 108,407 | |
494,128 | |||
Domestic Equity 56.8% | |||
a,bFranklin Biotechnology Discovery Fund, Class R6 | 1,140 | 195,561 | |
a,bFranklin DynaTech Fund, Class R6 | 21,319 | 1,004,358 | |
aFranklin Focused Core Equity Fund, Class R6 | 59,127 | 862,066 | |
aFranklin Growth Fund, Class R6 | 22,636 | 1,692,303 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 18,569 | 610,170 | |
aFranklin Real Estate Securities Fund, Class R6 | 8,374 | 184,483 | |
aFranklin Rising Dividends Fund, Class R6 | 21,119 | 1,098,179 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 18,679 | 363,318 | |
aFranklin Utilities Fund, Class R6 | 29,890 | 533,839 | |
iShares Core S&P 500 ETF | 3,845 | 795,531 | |
iShares S&P 500 Value ETF | 5,700 | 534,489 | |
7,874,297 | |||
Domestic Fixed Income 5.8% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 50,687 | 508,390 | |
aFranklin Strategic Income Fund, Class R6 | 17,765 | 177,831 | |
iShares Intermediate Credit Bond ETF | 1,128 | 123,324 | |
809,545 | |||
Foreign Equity 25.4% | |||
aFranklin International Small Cap Growth Fund, Class R6 | 54,504 | 984,883 | |
aFranklin Mutual International Fund, Class R6 | 55,371 | 807,867 | |
iShares Global Infrastructure ETF | 6,842 | 288,390 | |
iShares MSCI All Country Asia ex Japan ETF | 3,290 | 200,460 | |
aTempleton China World Fund, Class R6 | 7,515 | 230,875 | |
aTempleton Foreign Fund, Class R6 | 55,339 | 380,181 | |
aTempleton Frontier Markets Fund, Class R6 | 24,038 | 345,908 | |
WisdomTree Japan Hedged Equity Fund ETF (Japan) | 5,653 | 278,297 | |
3,516,861 | |||
Foreign Fixed Income 5.7% | |||
aFranklin Emerging Market Debt Opportunities Fund | 8,863 | 94,034 | |
aTempleton Global Total Return Fund, Class R6 | 55,457 | 695,982 | |
790,016 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $13,663,169) 97.3% | 13,484,847 |
116 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin LifeSmart 2040 Retirement Target Fund (continued) | |||
Shares/Units | Value | ||
Short Term Investments (Cost $210,816) 1.6% | |||
Money Market Funds 1.6% | |||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 210,816 | $ | 210,816 |
Total Investments in Underlying Funds and Exchange Traded Funds | |||
(Cost $13,873,985) 98.9% | 13,695,663 | ||
Other Assets, less Liabilities 1.1% | 156,495 | ||
Net Assets 100.0% | $ | 13,852,158 |
See Abbreviations on page 162.
aSee Note 3(f) regarding investments in Underlying Funds.
bNon-income producing.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 117
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
Financial Highlights | |||||||||||||||
Franklin LifeSmart 2045 Retirement Target Fund | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class A | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.88 | $ | 10.92 | $ | 10.01 | $ | 10.44 | $ | 9.13 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.20 | 0.13 | 0.15 | 0.15 | 0.16 | ||||||||||
Net realized and unrealized gains (losses) | 0.43 | 2.36 | 0.91 | (0.44 | ) | 1.29 | |||||||||
Total from investment operations | 0.63 | 2.49 | 1.06 | (0.29 | ) | 1.45 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.22 | ) | (0.15 | ) | (0.15 | ) | (0.14 | ) | (0.14 | ) | |||||
Net realized gains | (0.59 | ) | (0.38 | ) | — | — | — | ||||||||
Total distributions | (0.81 | ) | (0.53 | ) | (0.15 | ) | (0.14 | ) | (0.14 | ) | |||||
Net asset value, end of year | $ | 12.70 | $ | 12.88 | $ | 10.92 | $ | 10.01 | $ | 10.44 | |||||
Total returnd | 4.94 | % | 23.07 | % | 10.61 | % | (2.81 | )% | 15.92 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 1.11 | % | 1.16 | % | 1.05 | % | 1.30 | % | 1.56 | % | |||||
Expenses net of waiver and payments by affiliatese | 0.35 | % | 0.38 | % | 0.45 | % | 0.45 | % | 0.45 | % | |||||
Net investment incomec | 1.57 | % | 1.08 | % | 1.41 | % | 1.43 | % | 1.80 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 34,259 | $ | 27,991 | $ | 20,765 | $ | 14,762 | $ | 10,090 | |||||
Portfolio turnover rate | 65.20 | % | 44.44 | % | 32.47 | % | 34.66 | % | 25.05 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
118 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin LifeSmart 2045 Retirement Target Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class C | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.63 | $ | 10.73 | $ | 9.84 | $ | 10.28 | $ | 9.01 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.11 | 0.04 | 0.07 | 0.07 | 0.11 | ||||||||||
Net realized and unrealized gains (losses) | 0.41 | 2.31 | 0.90 | (0.43 | ) | 1.25 | |||||||||
Total from investment operations | 0.52 | 2.35 | 0.97 | (0.36 | ) | 1.36 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.14 | ) | (0.07 | ) | (0.08 | ) | (0.08 | ) | (0.09 | ) | |||||
Net realized gains | (0.59 | ) | (0.38 | ) | — | — | — | ||||||||
Total distributions | (0.73 | ) | (0.45 | ) | (0.08 | ) | (0.08 | ) | (0.09 | ) | |||||
Net asset value, end of year | $ | 12.42 | $ | 12.63 | $ | 10.73 | $ | 9.84 | $ | 10.28 | |||||
Total returnd | 4.15 | % | 22.20 | % | 9.85 | % | (3.54 | )% | 15.13 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 1.81 | % | 1.86 | % | 1.74 | % | 2.00 | % | 2.26 | % | |||||
Expenses net of waiver and payments by affiliatese | 1.05 | % | 1.08 | % | 1.14 | % | 1.15 | % | 1.15 | % | |||||
Net investment incomec | 0.87 | % | 0.38 | % | 0.72 | % | 0.73 | % | 1.10 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 11,785 | $ | 9,484 | $ | 6,680 | $ | 5,869 | $ | 4,157 | |||||
Portfolio turnover rate | 65.20 | % | 44.44 | % | 32.47 | % | 34.66 | % | 25.05 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 119
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin LifeSmart 2045 Retirement Target Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Class R | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.82 | $ | 10.88 | $ | 9.99 | $ | 10.42 | $ | 9.12 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.14 | 0.10 | 0.16 | 0.12 | 0.16 | ||||||||||
Net realized and unrealized gains (losses) | 0.47 | 2.35 | 0.87 | (0.43 | ) | 1.27 | |||||||||
Total from investment operations | 0.61 | 2.45 | 1.03 | (0.31 | ) | 1.43 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.18 | ) | (0.13 | ) | (0.14 | ) | (0.12 | ) | (0.13 | ) | |||||
Net realized gains | (0.59 | ) | (0.38 | ) | — | — | — | ||||||||
Total distributions | (0.77 | ) | (0.51 | ) | (0.14 | ) | (0.12 | ) | (0.13 | ) | |||||
Net asset value, end of year | $ | 12.66 | $ | 12.82 | $ | 10.88 | $ | 9.99 | $ | 10.42 | |||||
Total return | 4.75 | % | 22.76 | % | 10.35 | % | (3.01 | )% | 15.66 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 1.31 | % | 1.36 | % | 1.25 | % | 1.50 | % | 1.76 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.55 | % | 0.58 | % | 0.65 | % | 0.65 | % | 0.65 | % | |||||
Net investment incomec | 1.37 | % | 0.88 | % | 1.21 | % | 1.23 | % | 1.60 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 3,474 | $ | 4,564 | $ | 3,336 | $ | 860 | $ | 663 | |||||
Portfolio turnover rate | 65.20 | % | 44.44 | % | 32.47 | % | 34.66 | % | 25.05 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
120 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2045 Retirement Target Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class R6 | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 12.95 | $ | 11.67 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.33 | 0.60 | ||||
Net realized and unrealized gains (losses) | 0.35 | 1.24 | ||||
Total from investment operations | 0.68 | 1.84 | ||||
Less distributions from: | ||||||
Net investment income and short term gains received from Underlying Funds | (0.27 | ) | (0.18 | ) | ||
Net realized gains | (0.59 | ) | (0.38 | ) | ||
Total distributions | (0.86 | ) | (0.56 | ) | ||
Net asset value, end of year | $ | 12.77 | $ | 12.95 | ||
Total returne | 5.24 | % | 16.08 | % | ||
Ratios to average net assetsf | ||||||
Expenses before waiver and payments by affiliatesg | 0.51 | % | 0.60 | % | ||
Expenses net of waiver and payments by affiliatesg | 0.00 | % | 0.00 | % | ||
Net investment incomed | 1.92 | % | 1.46 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 8,987 | $ | 1,718 | ||
Portfolio turnover rate | 65.20 | % | 44.44 | % |
aFor the period May 1, 2013 (effective date) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eTotal return is not annualized for periods less than one year.
fRatios are annualized for periods less than one year.
gDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 121
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin LifeSmart 2045 Retirement Target Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||
Advisor Class | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.94 | $ | 10.96 | $ | 10.05 | $ | 10.48 | $ | 9.16 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.24 | 0.17 | 0.16 | 0.17 | 0.25 | ||||||||||
Net realized and unrealized gains (losses) | 0.43 | 2.37 | 0.93 | (0.44 | ) | 1.24 | |||||||||
Total from investment operations | 0.67 | 2.54 | 1.09 | (0.27 | ) | 1.49 | |||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.26 | ) | (0.18 | ) | (0.18 | ) | (0.16 | ) | (0.17 | ) | |||||
Net realized gains | (0.59 | ) | (0.38 | ) | — | — | — | ||||||||
Total distributions | (0.85 | ) | (0.56 | ) | (0.18 | ) | (0.16 | ) | (0.17 | ) | |||||
Net asset value, end of year | $ | 12.76 | $ | 12.94 | $ | 10.96 | $ | 10.05 | $ | 10.48 | |||||
Total return | 5.20 | % | 23.48 | % | 10.86 | % | (2.55 | )% | 16.26 | % | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 0.81 | % | 0.86 | % | 0.75 | % | 1.00 | % | 1.26 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.05 | % | 0.08 | % | 0.15 | % | 0.15 | % | 0.15 | % | |||||
Net investment incomec | 1.87 | % | 1.38 | % | 1.71 | % | 1.73 | % | 2.10 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 1,576 | $ | 1,188 | $ | 709 | $ | 642 | $ | 499 | |||||
Portfolio turnover rate | 65.20 | % | 44.44 | % | 32.47 | % | 34.66 | % | 25.05 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
dDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
122 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2014 | |||
Franklin LifeSmart 2045 Retirement Target Fund | |||
Shares/Units | Value | ||
Investments in Underlying Funds and Exchange Traded Funds | |||
Alternative Strategies 4.0% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 176,753 | $ | 1,914,232 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 68,635 | 509,955 | |
2,424,187 | |||
Domestic Equity 57.7% | |||
a,bFranklin Biotechnology Discovery Fund, Class R6 | 5,506 | 944,547 | |
a,bFranklin DynaTech Fund, Class R6 | 90,584 | 4,267,391 | |
aFranklin Focused Core Equity Fund, Class R6 | 252,084 | 3,675,381 | |
aFranklin Growth Fund, Class R6 | 90,526 | 6,767,750 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 64,006 | 2,103,247 | |
aFranklin Real Estate Securities Fund, Class R6 | 33,767 | 743,893 | |
aFranklin Rising Dividends Fund, Class R6 | 113,043 | 5,878,244 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 81,875 | 1,592,466 | |
aFranklin Utilities Fund, Class R6 | 136,497 | 2,437,845 | |
iShares Core S&P 500 ETF | 17,538 | 3,628,612 | |
iShares S&P 500 Value ETF | 27,700 | 2,597,429 | |
34,636,805 | |||
Domestic Fixed Income 4.7% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 166,721 | 1,672,215 | |
aFranklin Strategic Income Fund, Class R6 | 56,796 | 568,530 | |
iShares Intermediate Credit Bond ETF | 5,395 | 589,835 | |
2,830,580 | |||
Foreign Equity 26.7% | |||
aFranklin International Small Cap Growth Fund, Class R6 | 235,498 | 4,255,450 | |
aFranklin Mutual International Fund, Class R6 | 236,657 | 3,452,828 | |
iShares Global Infrastructure ETF | 29,875 | 1,259,231 | |
iShares MSCI All Country Asia ex Japan ETF | 15,512 | 945,146 | |
aTempleton China World Fund, Class R6 | 34,225 | 1,051,395 | |
aTempleton Foreign Fund, Class R6 | 289,624 | 1,989,720 | |
aTempleton Frontier Markets Fund, Class R6 | 98,152 | 1,412,407 | |
WisdomTree Japan Hedged Equity Fund ETF (Japan) | 33,495 | 1,648,959 | |
16,015,136 | |||
Foreign Fixed Income 4.2% | |||
aFranklin Emerging Market Debt Opportunities Fund | 29,285 | 310,714 | |
aTempleton Global Total Return Fund, Class R6 | 178,219 | 2,236,642 | |
2,547,356 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $51,778,210) 97.3% | 58,454,064 |
franklintempleton.com Annual Report | 123
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin LifeSmart 2045 Retirement Target Fund (continued) | |||
Shares/Units | Value | ||
Short Term Investments (Cost $1,235,172) 2.0% | |||
Money Market Funds 2.0% | |||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 1,235,172 | $ | 1,235,172 |
Total Investments in Underlying Funds and Exchange Traded Funds | |||
(Cost $53,013,382) 99.3% | 59,689,236 | ||
Other Assets, less Liabilities 0.7% | 391,509 | ||
Net Assets 100.0% | $ | 60,080,745 |
See Abbreviations on page 162.
aSee Note 3(f) regarding investments in Underlying Funds.
bNon-income producing.
124 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | ||||||
Financial Highlights | ||||||
Franklin LifeSmart 2050 Retirement Target Fund | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class A | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 11.21 | $ | 10.00 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.22 | 0.10 | ||||
Net realized and unrealized gains (losses) | 0.43 | 1.21 | ||||
Total from investment operations | 0.65 | 1.31 | ||||
Less distributions from: | ||||||
Net investment income and short term gains received from Underlying Funds | (0.18 | ) | (0.10 | ) | ||
Net realized gains | (0.06 | ) | — | |||
Total distributions | (0.24 | ) | (0.10 | ) | ||
Net asset value, end of year | $ | 11.62 | $ | 11.21 | ||
Total returne | 5.80 | % | 13.14 | % | ||
Ratios to average net assetsf | ||||||
Expenses before waiver and payments by affiliatesg | 4.12 | % | 34.22 | % | ||
Expenses net of waiver and payments by affiliatesg | 0.35 | % | 0.23 | % | ||
Net investment incomed | 2.21 | % | 1.88 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 2,318 | $ | 512 | ||
Portfolio turnover rate | 100.08 | % | 20.66 | % |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
fRatios are annualized for periods less than one year.
gDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 125
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2050 Retirement Target Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class C | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 11.18 | $ | 10.00 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.15 | 0.09 | ||||
Net realized and unrealized gains (losses) | 0.42 | 1.18 | ||||
Total from investment operations | 0.57 | 1.27 | ||||
Less distributions from: | ||||||
Net investment income and short term gains received from Underlying Funds | (0.13 | ) | (0.09 | ) | ||
Net realized gains | (0.06 | ) | — | |||
Total distributions | (0.19 | ) | (0.09 | ) | ||
Net asset value, end of year | $ | 11.56 | $ | 11.18 | ||
Total returne | 5.03 | % | 12.82 | % | ||
Ratios to average net assetsf | ||||||
Expenses before waiver and payments by affiliatesg | 4.82 | % | 35.04 | % | ||
Expenses net of waiver and payments by affiliatesg | 1.05 | % | 1.05 | % | ||
Net investment incomed | 1.51 | % | 1.06 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 943 | $ | 82 | ||
Portfolio turnover rate | 100.08 | % | 20.66 | % |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
fRatios are annualized for periods less than one year.
gDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
126 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2050 Retirement Target Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class R | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 11.21 | $ | 10.00 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.18 | 0.06 | ||||
Net realized and unrealized gains (losses) | 0.45 | 1.24 | ||||
Total from investment operations | 0.63 | 1.30 | ||||
Less distributions from: | ||||||
Net investment income and short term gains received from Underlying Funds | (0.15 | ) | (0.09 | ) | ||
Net realized gains | (0.06 | ) | — | |||
Total distributions | (0.21 | ) | (0.09 | ) | ||
Net asset value, end of year | $ | 11.63 | $ | 11.21 | ||
Total returne | 5.67 | % | 13.02 | % | ||
Ratios to average net assetsf | ||||||
Expenses before waiver and payments by affiliatesg | 4.32 | % | 34.54 | % | ||
Expenses net of waiver and payments by affiliatesg | 0.55 | % | 0.55 | % | ||
Net investment incomed | 2.01 | % | 1.56 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 33 | $ | 11 | ||
Portfolio turnover rate | 100.08 | % | 20.66 | % |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eTotal return is not annualized for periods less than one year.
fRatios are annualized for periods less than one year.
gDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 127
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2050 Retirement Target Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Class R6 | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 11.23 | $ | 10.00 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.32 | 0.09 | ||||
Net realized and unrealized gains (losses) | 0.37 | 1.25 | ||||
Total from investment operations | 0.69 | 1.34 | ||||
Less distributions from: | ||||||
Net investment income and short term gains received from Underlying Funds | (0.21 | ) | (0.11 | ) | ||
Net realized gains | (0.06 | ) | — | |||
Total distributions | (0.27 | ) | (0.11 | ) | ||
Net asset value, end of year | $ | 11.65 | $ | 11.23 | ||
Total returne | 6.16 | % | 13.39 | % | ||
Ratios to average net assetsf | ||||||
Expenses before waiver and payments by affiliatesg | 3.22 | % | 34.36 | % | ||
Expenses net of waiver and payments by affiliatesg | 0.00 | % | 0.00 | % | ||
Net investment incomed | 2.56 | % | 2.11 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 6,348 | $ | 11 | ||
Portfolio turnover rate | 100.08 | % | 20.66 | % |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eTotal return is not annualized for periods less than one year.
fRatios are annualized for periods less than one year.
gDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
128 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2050 Retirement Target Fund (continued) | ||||||
Year Ended | ||||||
December 31, | ||||||
2014 | 2013 | a | ||||
Advisor Class | ||||||
Per share operating performance | ||||||
(for a share outstanding throughout the year) | ||||||
Net asset value, beginning of year | $ | 11.22 | $ | 10.00 | ||
Income from investment operationsb: | ||||||
Net investment incomec,d | 0.23 | 0.10 | ||||
Net realized and unrealized gains (losses) | 0.47 | 1.23 | ||||
Total from investment operations | 0.70 | 1.33 | ||||
Less distributions from: | ||||||
Net investment income and short term gains received from Underlying Funds | (0.21 | ) | (0.11 | ) | ||
Net realized gains | (0.06 | ) | — | |||
Total distributions | (0.27 | ) | (0.11 | ) | ||
Net asset value, end of year | $ | 11.65 | $ | 11.22 | ||
Total returne | 6.22 | % | 13.26 | % | ||
Ratios to average net assetsf | ||||||
Expenses before waiver and payments by affiliatesg | 3.82 | % | 34.04 | % | ||
Expenses net of waiver and payments by affiliatesg | 0.05 | % | 0.05 | % | ||
Net investment incomed | 2.51 | % | 2.06 | % | ||
Supplemental data | ||||||
Net assets, end of year (000’s) | $ | 327 | $ | 75 | ||
Portfolio turnover rate | 100.08 | % | 20.66 | % |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and exchange traded funds in which the
Fund invests.
eTotal return is not annualized for periods less than one year.
fRatios are annualized for periods less than one year.
gDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying
Funds and exchange traded funds was 0.67% for the year ended December 31, 2014.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 129
FRANKLIN FUND ALLOCATOR SERIES | |||
Statement of Investments, December 31, 2014 | |||
Franklin LifeSmart 2050 Retirement Target Fund | |||
Shares/Units | Value | ||
Investments in Underlying Funds and Exchange Traded Funds | |||
Alternative Strategies 3.8% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 27,330 | $ | 295,988 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 11,112 | 82,565 | |
378,553 | |||
Domestic Equity 57.9% | |||
a,bFranklin Biotechnology Discovery Fund, Class R6 | 743 | 127,514 | |
a,bFranklin DynaTech Fund, Class R6 | 16,095 | 758,223 | |
aFranklin Focused Core Equity Fund, Class R6 | 44,752 | 652,484 | |
aFranklin Growth Fund, Class R6 | 17,201 | 1,285,941 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 11,312 | 371,720 | |
aFranklin Real Estate Securities Fund, Class R6 | 5,570 | 122,696 | |
aFranklin Rising Dividends Fund, Class R6 | 16,701 | 868,442 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 10,925 | 212,486 | |
aFranklin Utilities Fund, Class R6 | 22,770 | 406,671 | |
iShares Core S&P 500 ETF | 2,875 | 594,838 | |
iShares S&P 500 Value ETF | 3,900 | 365,703 | |
5,766,718 | |||
Domestic Fixed Income 4.5% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 27,420 | 275,021 | |
aFranklin Strategic Income Fund, Class R6 | 10,564 | 105,742 | |
iShares Intermediate Credit Bond ETF | 643 | 70,299 | |
451,062 | |||
Foreign Equity 27.1% | |||
aFranklin International Small Cap Growth Fund, Class R6 | 40,969 | 740,310 | |
aFranklin Mutual International Fund, Class R6 | 41,571 | 606,520 | |
iShares Global Infrastructure ETF | 5,443 | 229,422 | |
iShares MSCI All Country Asia ex Japan ETF | 2,599 | 158,357 | |
aTempleton China World Fund, Class R6 | 4,093 | 125,729 | |
aTempleton Foreign Fund, Class R6 | 51,863 | 356,300 | |
aTempleton Frontier Markets Fund, Class R6 | 16,764 | 241,237 | |
WisdomTree Japan Hedged Equity Fund ETF (Japan) | 5,031 | 247,676 | |
2,705,551 | |||
Foreign Fixed Income 4.1% | |||
aFranklin Emerging Market Debt Opportunities Fund | 4,950 | 52,514 | |
aTempleton Global Total Return Fund, Class R6 | 28,662 | 359,711 | |
412,225 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $9,775,444) 97.4% | 9,714,109 |
130 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin LifeSmart 2050 Retirement Target Fund (continued) | |||
Shares/Units | Value | ||
Short Term Investments (Cost $152,864) 1.6% | |||
Money Market Funds 1.6% | |||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 152,864 | $ | 152,864 |
Total Investments in Underlying Funds and Exchange Traded Funds | |||
(Cost $9,928,308) 99.0% | 9,866,973 | ||
Other Assets, less Liabilities 1.0% | 102,705 | ||
Net Assets 100.0% | $ | 9,969,678 |
See Abbreviations on page 162.
aSee Note 3(f) regarding investments in Underlying Funds.
bNon-income producing.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 131
FRANKLIN FUND ALLOCATOR SERIES | ||||||||||
Financial Statements | ||||||||||
Statements of Assets and Liabilities | ||||||||||
December 31, 2014 | ||||||||||
Franklin | Franklin | Franklin | Franklin | |||||||
LifeSmart | LifeSmart | LifeSmart | LifeSmart | |||||||
2015 Retirement | 2020 Retirement | 2025 Retirement | 2030 Retirement | |||||||
Target Fund | Target Fund | Target Fund | Target Fund | |||||||
Assets: | ||||||||||
Cost - Underlying Funds (Note 3f) | $ | 65,368,605 | $ | 14,731,314 | $ | 85,675,272 | $ | 16,006,457 | ||
Cost - Exchange traded funds | 12,540,200 | 2,597,086 | 19,063,966 | 3,188,422 | ||||||
Total cost of investments | $ | 77,908,805 | $ | 17,328,400 | $ | 104,739,238 | $ | 19,194,879 | ||
Value - Underlying Funds (Note 3f) | $ | 67,818,449 | $ | 14,415,873 | $ | 95,342,220 | $ | 15,646,150 | ||
Value - Exchange traded funds | 13,215,895 | 2,702,192 | 20,665,405 | 3,305,602 | ||||||
Total value of investments | 81,034,344 | 17,118,065 | 116,007,625 | 18,951,752 | ||||||
Receivables: | ||||||||||
Capital shares sold | 574,399 | 368,905 | 3,040,568 | 314,438 | ||||||
Affiliates | 24,116 | 10,740 | 30,319 | 4,671 | ||||||
Other assets | 6 | 69 | 9 | 44 | ||||||
Total assets | 81,632,865 | 17,497,779 | 119,078,521 | 19,270,905 | ||||||
Liabilities: | ||||||||||
Payables: | ||||||||||
Capital shares redeemed | 495,053 | 5,636 | 199,501 | 3,587 | ||||||
Distribution fees | 61,690 | 7,166 | 85,077 | 5,528 | ||||||
Transfer agent fees | 4,831 | 375 | 6,194 | — | ||||||
Reports to shareholders | 7,499 | 4,310 | 13,782 | 1,468 | ||||||
Professional fees | 22,167 | 22,216 | 22,130 | 21,960 | ||||||
Accrued expenses and other liabilities | 183 | 70 | 115 | 16 | ||||||
Total liabilities | 591,423 | 39,773 | 326,799 | 32,559 | ||||||
Net assets, at value | $ | 81,041,442 | $ | 17,458,006 | $ | 118,751,722 | $ | 19,238,346 | ||
Net assets consist of: | ||||||||||
Paid-in capital | $ | 76,975,828 | $ | 17,489,123 | $ | 105,534,612 | $ | 19,220,870 | ||
Undistributed net investment income | 72,541 | 3,171 | 73,935 | 7,071 | ||||||
Net unrealized appreciation (depreciation) | 3,125,539 | (210,335 | ) | 11,268,387 | (243,127 | ) | ||||
Accumulated net realized gain (loss) | 867,534 | 176,047 | 1,874,788 | 253,532 | ||||||
Net assets, at value | $ | 81,041,442 | $ | 17,458,006 | $ | 118,751,722 | $ | 19,238,346 |
132 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | ||||||||
FINANCIAL STATEMENTS | ||||||||
Statements of Assets and Liabilities (continued) | ||||||||
December 31, 2014 | ||||||||
Franklin | Franklin | Franklin | Franklin | |||||
LifeSmart | LifeSmart | LifeSmart | LifeSmart | |||||
2015 Retirement | 2020 Retirement | 2025 Retirement | 2030 Retirement | |||||
Target Fund | Target Fund | Target Fund | Target Fund | |||||
Class A: | ||||||||
Net assets, at value | $ | 48,121,314 | $ | 7,302,485 | $ | 67,854,444 | $ | 5,098,202 |
Shares outstanding | 4,123,272 | 655,785 | 5,489,244 | 445,296 | ||||
Net asset value per sharea | $ | 11.67 | $ | 11.14 | $ | 12.36 | $ | 11.45 |
Maximum offering price per share (net asset value | ||||||||
per share ÷ 94.25%) | $ | 12.38 | $ | 11.82 | $ | 13.11 | $ | 12.15 |
Class C: | ||||||||
Net assets, at value | $ | 21,189,398 | $ | 2,616,727 | $ | 28,711,743 | $ | 1,950,084 |
Shares outstanding | 1,834,490 | 236,123 | 2,356,776 | 171,423 | ||||
Net asset value and maximum offering price | ||||||||
per sharea | $ | 11.55 | $ | 11.08 | $ | 12.18 | $ | 11.38 |
Class R: | ||||||||
Net assets, at value | $ | 2,828,028 | $ | 79,852 | $ | 5,360,771 | $ | 47,604 |
Shares outstanding | 243,027 | 7,179 | 435,332 | 4,162 | ||||
Net asset value and maximum offering price | ||||||||
per share | $ | 11.64 | $ | 11.12 | $ | 12.31 | $ | 11.44 |
Class R6: | ||||||||
Net assets, at value | $ | 6,709,150 | $ | 7,360,805 | $ | 14,010,417 | $ | 12,041,490 |
Shares outstanding | 572,566 | 659,970 | 1,130,659 | 1,049,686 | ||||
Net asset value and maximum offering price | ||||||||
per share | $ | 11.72 | $ | 11.15 | $ | 12.39 | $ | 11.47 |
Advisor Class: | ||||||||
Net assets, at value | $ | 2,193,552 | $ | 98,137 | $ | 2,814,347 | $ | 100,966 |
Shares outstanding | 187,341 | 8,799 | 227,250 | 8,805 | ||||
Net asset value and maximum offering price | ||||||||
per share | $ | 11.71 | $ | 11.15 | $ | 12.38 | $ | 11.47 |
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 133
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL STATEMENTS
Statements of Assets and Liabilities (continued) | ||||||||||
December 31, 2014 | ||||||||||
Franklin | Franklin | Franklin | Franklin | |||||||
LifeSmart | LifeSmart | LifeSmart | LifeSmart | |||||||
2035 Retirement | 2040 Retirement | 2045 Retirement | 2050 Retirement | |||||||
Target Fund | Target Fund | Target Fund | Target Fund | |||||||
Assets: | ||||||||||
Cost - Underlying Funds (Note 3f) | $ | 67,490,491 | $ | 11,732,202 | $ | 43,194,722 | $ | 8,323,247 | ||
Cost - Exchange traded funds | 15,425,509 | 2,141,783 | 9,818,660 | 1,605,061 | ||||||
Total cost of investments | $ | 82,916,000 | $ | 13,873,985 | $ | 53,013,382 | $ | 9,928,308 | ||
Value - Underlying Funds (Note 3f) | $ | 75,779,680 | $ | 11,475,172 | $ | 49,020,024 | $ | 8,200,678 | ||
Value - Exchange traded funds | 16,703,931 | 2,220,491 | 10,669,212 | 1,666,295 | ||||||
Total value of investments | 92,483,611 | 13,695,663 | 59,689,236 | 9,866,973 | ||||||
Receivables: | ||||||||||
Capital shares sold | 999,147 | 177,414 | 566,789 | 126,220 | ||||||
Affiliates | 23,338 | 4,833 | 26,723 | 6,377 | ||||||
Other assets | 6 | 34 | 5 | 5 | ||||||
Total assets | 93,506,102 | 13,877,944 | 60,282,753 | 9,999,575 | ||||||
Liabilities: | ||||||||||
Payables: | ||||||||||
Capital shares redeemed | 161,762 | — | 132,402 | 3,377 | ||||||
Distribution fees | 61,398 | 2,284 | 38,994 | 2,566 | ||||||
Transfer agent fees | 1,225 | — | — | — | ||||||
Reports to shareholders | 10,067 | 1,620 | 9,199 | 1,962 | ||||||
Professional fees | 21,971 | 21,878 | 21,359 | 21,988 | ||||||
Accrued expenses and other liabilities | 76 | 4 | 54 | 4 | ||||||
Total liabilities | 256,499 | 25,786 | 202,008 | 29,897 | ||||||
Net assets, at value | $ | 93,249,603 | $ | 13,852,158 | $ | 60,080,745 | $ | 9,969,678 | ||
Net assets consist of: | ||||||||||
Paid-in capital | $ | 82,130,004 | $ | 13,814,402 | $ | 52,330,767 | $ | 9,896,259 | ||
Undistributed net investment income | 60,259 | 2,348 | 37,376 | 2,798 | ||||||
Net unrealized appreciation (depreciation) | 9,567,613 | (178,322 | ) | 6,675,854 | (61,335 | ) | ||||
Accumulated net realized gain (loss) | 1,491,727 | 213,730 | 1,036,748 | 131,956 | ||||||
Net assets, at value | $ | 93,249,603 | $ | 13,852,158 | $ | 60,080,745 | $ | 9,969,678 |
134 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||
FINANCIAL STATEMENTS | |||||||||||
Statements of Assets and Liabilities (continued) | |||||||||||
December 31, 2014 | |||||||||||
Franklin | Franklin | Franklin | Franklin | ||||||||
LifeSmart | LifeSmart | LifeSmart | LifeSmart | ||||||||
2035 Retirement | 2040 Retirement | 2045 Retirement | 2050 Retirement | ||||||||
Target Fund | Target Fund | Target Fund | Target Fund | ||||||||
Class A: | |||||||||||
Net assets, at value | $ | 50,264,276 | $ | 2,890,802 | $ | 34,259,194 | $ | 2,318,266 | |||
Shares outstanding | 3,966,194 | 249,562 | 2,698,290 | 199,579 | |||||||
Net asset value per sharea | $ | 12.67 | $ | 11.58 | $ | 12.70 | $ | 11.62 | |||
Maximum offering price per share (net asset value | |||||||||||
per share ÷ 94.25%) | $ | 13.44 | $ | 12.29 | $ | 13.47 | $ | 12.33 | |||
Class C: | |||||||||||
Net assets, at value | $ | 19,965,304 | $ | 746,509 | $ | 11,784,937 | $ | 942,612 | |||
Shares outstanding | 1,606,342 | 64,817 | 948,795 | 81,523 | |||||||
Net asset value and maximum offering price | |||||||||||
per sharea | $ | 12.43 | $ | 11.52 | $ | 12.42 | $ | 11.56 | |||
Class R: | |||||||||||
Net assets, at value | $ | 4,576,661 | $ | 37,252 | $ | 3,473,763 | $ | 33,023 | |||
Shares outstanding | 361,524 | 3,217 | 274,439 | 2,840 | |||||||
Net asset value and maximum offering price | |||||||||||
per share | $ | 12.66 | $ | 11.58 | $ | 12.66 | $ | 11.63 | |||
Class R6: | |||||||||||
Net assets, at value | $ | 16,261,533 | $ | 10,154,324 | $ | 8,987,085 | $ | 6,348,414 | |||
Shares outstanding | 1,275,703 | 874,872 | 703,847 | 544,951 | |||||||
Net asset value and maximum offering price | |||||||||||
per share | $ | 12.75 | $ | 11.61 | $ | 12.77 | $ | 11.65 | |||
Advisor Class: | |||||||||||
Net assets, at value | $ | 2,181,829 | $ | 23,271 | $ | 1,575,766 | $ | 327,363 | |||
Shares outstanding | 171,063 | 2,005 | 123,468 | 28,096 | |||||||
Net asset value and maximum offering price | |||||||||||
per share | $ | 12.75 | $ | 11.61 | $ | 12.76 | $ | 11.65 |
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 135
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL STATEMENTS
Statements of Operations
for the year ended December 31, 2014
Franklin | Franklin | Franklin | Franklin | |||||||||
LifeSmart | LifeSmart | LifeSmart | LifeSmart | |||||||||
2015 Retirement | 2020 Retirement | 2025 Retirement | 2030 Retirement | |||||||||
Target Fund | Target Fund | Target Fund | Target Fund | |||||||||
Investment income: | ||||||||||||
Dividends: | ||||||||||||
Underlying Funds (Note 3f) | $ | 2,508,652 | $ | 317,808 | $ | 2,215,549 | $ | 254,445 | ||||
Exchange traded funds | 218,501 | 31,717 | 318,820 | 36,011 | ||||||||
Total investment income | 2,727,153 | 349,525 | 2,534,369 | 290,456 | ||||||||
Expenses: | ||||||||||||
Asset allocation fees (Note 3a) | 191,886 | 24,513 | 265,648 | 24,665 | ||||||||
Distribution fees: (Note 3c) | ||||||||||||
Class A | 140,016 | 13,748 | 191,690 | 9,851 | ||||||||
Class C | 208,710 | 17,945 | 275,624 | 8,956 | ||||||||
Class R | 14,260 | 179 | 26,153 | 185 | ||||||||
Transfer agent fees: (Note 3e) | ||||||||||||
Class A | 53,160 | 6,882 | 89,464 | 7,532 | ||||||||
Class C | 23,680 | 2,691 | 38,723 | 2,137 | ||||||||
Class R | 3,231 | 54 | 7,332 | 88 | ||||||||
Class R6 | 244 | 230 | 230 | 208 | ||||||||
Advisor Class | 2,435 | 88 | 3,813 | 212 | ||||||||
Custodian fees (Note 4) | 167 | 14 | 183 | 8 | ||||||||
Reports to shareholders | 21,793 | 4,960 | 35,127 | 2,100 | ||||||||
Registration and filing fees | 83,444 | 69,722 | 83,680 | 68,722 | ||||||||
Professional fees | 27,492 | 29,525 | 27,240 | 29,059 | ||||||||
Trustees’ fees and expenses | 508 | — | 694 | — | ||||||||
Amortization of offering costs (Note 1d) | — | 47,172 | — | 47,172 | ||||||||
Other | 4,016 | 908 | 4,100 | 851 | ||||||||
Total expenses | 775,042 | 218,631 | 1,049,701 | 201,746 | ||||||||
Expenses waived/paid by affiliates | ||||||||||||
(Notes 3f and 3g) | (375,604 | ) | (183,540 | ) | (506,509 | ) | (180,666 | ) | ||||
Net expenses | 399,438 | 35,091 | 543,192 | 21,080 | ||||||||
Net investment income | 2,327,715 | 314,434 | 1,991,177 | 269,376 | ||||||||
Realized and unrealized gains (losses): | ||||||||||||
Net realized gain (loss) from: | ||||||||||||
Sale of investments: | ||||||||||||
Underlying Funds (Note 3f) | 3,265,637 | (59,643 | ) | 4,301,109 | (80,962 | ) | ||||||
Exchange traded funds | 91,089 | 9,787 | 251,035 | 11,428 | ||||||||
Realized gain distributions: | ||||||||||||
Underlying Funds (Note 3f) | 780,319 | 243,979 | 1,997,577 | 351,569 | ||||||||
Exchange traded funds | 113,393 | 29,123 | 275,493 | 42,677 | ||||||||
Net realized gain (loss) | 4,250,438 | 223,246 | 6,825,214 | 324,712 | ||||||||
Net change in unrealized appreciation | ||||||||||||
(depreciation) on investments | (4,540,828 | ) | (308,049 | ) | (4,675,189 | ) | (297,002 | ) | ||||
Net realized and unrealized gain (loss) | (290,390 | ) | (84,803 | ) | 2,150,025 | 27,710 | ||||||
Net increase (decrease) in net assets resulting from | ||||||||||||
operations | $ | 2,037,325 | $ | 229,631 | $ | 4,141,202 | $ | 297,086 |
136 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | ||||||||||||
FINANCIAL STATEMENTS | ||||||||||||
Statements of Operations (continued) | ||||||||||||
for the year ended December 31, 2014 | ||||||||||||
Franklin | Franklin | Franklin | Franklin | |||||||||
LifeSmart | LifeSmart | LifeSmart | LifeSmart | |||||||||
2035 Retirement | 2040 Retirement | 2045 Retirement | 2050 Retirement | |||||||||
Target Fund | Target Fund | Target Fund | Target Fund | |||||||||
Investment income: | ||||||||||||
Dividends: | ||||||||||||
Underlying Funds (Note 3f) | $ | 1,450,708 | $ | 150,371 | $ | 857,445 | $ | 109,527 | ||||
Exchange traded funds | 246,167 | 24,111 | 160,103 | 18,027 | ||||||||
Total investment income | 1,696,875 | 174,482 | 1,017,548 | 127,554 | ||||||||
Expenses: | ||||||||||||
Asset allocation fees (Note 3a) | 200,632 | 15,960 | 132,145 | 12,401 | ||||||||
Distribution fees: (Note 3c) | ||||||||||||
Class A | 138,953 | 4,519 | 93,625 | 4,246 | ||||||||
Class C | 184,620 | 3,861 | 107,474 | 5,318 | ||||||||
Class R | 22,156 | 114 | 21,296 | 107 | ||||||||
Transfer agent fees: (Note 3e) | ||||||||||||
Class A | 86,913 | 5,791 | 95,226 | 8,184 | ||||||||
Class C | 34,666 | 1,559 | 32,959 | 3,240 | ||||||||
Class R | 8,335 | 91 | 13,002 | 130 | ||||||||
Class R6 | 225 | 236 | 239 | 203 | ||||||||
Advisor Class | 3,789 | 88 | 4,436 | 1,460 | ||||||||
Custodian fees (Note 4) | 143 | 8 | 166 | 9 | ||||||||
Reports to shareholders | 28,249 | 1,751 | 26,198 | 2,565 | ||||||||
Registration and filing fees | 79,364 | 68,861 | 77,562 | 68,845 | ||||||||
Professional fees | 27,221 | 28,513 | 26,405 | 28,847 | ||||||||
Trustees’ fees and expenses | 513 | — | 104 | — | ||||||||
Amortization of offering costs (Note 1d) | — | 47,177 | — | 46,836 | ||||||||
Other | 3,976 | 831 | 3,820 | 826 | ||||||||
Total expenses | 819,755 | 179,360 | 634,657 | 183,217 | ||||||||
Expenses waived/paid by affiliates | ||||||||||||
(Notes 3f and 3g) | (438,428 | ) | (169,930 | ) | (388,411 | ) | (172,476 | ) | ||||
Net expenses | 381,327 | 9,430 | 246,246 | 10,741 | ||||||||
Net investment income | 1,315,548 | 165,052 | 771,302 | 116,813 | ||||||||
Realized and unrealized gains (losses): | ||||||||||||
Net realized gain (loss) from: | ||||||||||||
Sale of investments: | ||||||||||||
Underlying Funds (Note 3f) | 2,400,534 | (37,555 | ) | 1,705,395 | (43,165 | ) | ||||||
Exchange traded funds | 212,459 | 10,508 | 142,851 | 5,148 | ||||||||
Realized gain distributions: | ||||||||||||
Underlying Funds (Note 3f) | 1,765,534 | 257,533 | 1,218,255 | 193,257 | ||||||||
Exchange traded funds | 235,601 | 27,007 | 160,022 | 24,035 | ||||||||
Net realized gain (loss) | 4,614,128 | 257,493 | 3,226,523 | 179,275 | ||||||||
Net change in unrealized appreciation | ||||||||||||
(depreciation) on investments | (2,514,544 | ) | (215,383 | ) | (1,699,413 | ) | (100,101 | ) | ||||
Net realized and unrealized gain (loss) | 2,099,584 | 42,110 | 1,527,110 | 79,174 | ||||||||
Net increase (decrease) in net assets resulting from | ||||||||||||
operations | $ | 3,415,132 | $ | 207,162 | $ | 2,298,412 | $ | 195,987 |
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 137
FRANKLIN FUND ALLOCATOR SERIES | ||||||||||||
FINANCIAL STATEMENTS | ||||||||||||
Statements of Changes in Net Assets | ||||||||||||
Franklin LifeSmart 2015 | Franklin LifeSmart 2020 | |||||||||||
Retirement Target Fund | Retirement Target Fund | |||||||||||
Year Ended December 31, | Year Ended December 31, | |||||||||||
2014 | 2013 | 2014 | 2013a | |||||||||
Increase (decrease) in net assets: | ||||||||||||
Operations: | ||||||||||||
Net investment income | $ | 2,327,715 | $ | 1,195,300 | $ | 314,434 | $ | 22,753 | ||||
Net realized gain (loss) from Underlying Funds and exchange | ||||||||||||
traded funds | 4,250,438 | 3,177,416 | 223,246 | 32,358 | ||||||||
Net change in unrealized appreciation (depreciation) on | ||||||||||||
investments | (4,540,828 | ) | 3,033,258 | (308,049 | ) | 97,714 | ||||||
Net increase (decrease) in net assets resulting from | ||||||||||||
operations | 2,037,325 | 7,405,974 | 229,631 | 152,825 | ||||||||
Distributions to shareholders from: | ||||||||||||
Net investment income: | ||||||||||||
Class A | (1,534,945 | ) | (949,775 | ) | (154,362 | ) | (24,272 | ) | ||||
Class C | (544,147 | ) | (303,187 | ) | (46,024 | ) | (2,828 | ) | ||||
Class R | (87,705 | ) | (42,834 | ) | (1,539 | ) | (115 | ) | ||||
Class R6 | (183,415 | ) | (9,691 | ) | (148,729 | ) | (131 | ) | ||||
Advisor Class | (78,086 | ) | (58,208 | ) | (2,386 | ) | (511 | ) | ||||
Net realized gains: | ||||||||||||
Class A | (2,272,543 | ) | (1,868,226 | ) | (23,052 | ) | (531 | ) | ||||
Class C | (1,021,897 | ) | (839,329 | ) | (9,327 | ) | (74 | ) | ||||
Class R | (139,550 | ) | (97,222 | ) | (96 | ) | (3 | ) | ||||
Class R6 | (252,497 | ) | (22,736 | ) | (85 | ) | (3 | ) | ||||
Advisor Class | (106,864 | ) | (101,550 | ) | (99 | ) | (11 | ) | ||||
Total distributions to shareholders | (6,221,649 | ) | (4,292,758 | ) | (385,699 | ) | (28,479 | ) | ||||
Capital share transactions: (Note 2) | ||||||||||||
Class A | 6,170,569 | 4,812,095 | 5,113,177 | 2,075,340 | ||||||||
Class C | 1,876,090 | 2,581,227 | 2,358,837 | 243,739 | ||||||||
Class R | 693,679 | 319,645 | 70,138 | 10,000 | ||||||||
Class R6 | 6,393,005 | 782,456 | 7,507,430 | 10,000 | ||||||||
Advisor Class | (185,970 | ) | 549,120 | 59,654 | 41,413 | |||||||
Total capital share transactions | 14,947,373 | 9,044,543 | 15,109,236 | 2,380,492 | ||||||||
Net increase (decrease) in net assets | 10,763,049 | 12,157,759 | 14,953,168 | 2,504,838 | ||||||||
Net assets: | ||||||||||||
Beginning of year | 70,278,393 | 58,120,634 | 2,504,838 | — | ||||||||
End of year | $ | 81,041,442 | $ | 70,278,393 | $ | 17,458,006 | $ | 2,504,838 | ||||
Undistributed net investment income included in net assets: | ||||||||||||
End of year | $ | 72,541 | $ | 22,676 | $ | 3,171 | $ | 629 |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
138 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | ||||||||||||
FINANCIAL STATEMENTS | ||||||||||||
Statements of Changes in Net Assets (continued) | ||||||||||||
Franklin LifeSmart 2025 | Franklin LifeSmart 2030 | |||||||||||
Retirement Target Fund | Retirement Target Fund | |||||||||||
Year Ended December 31, | Year Ended December 31, | |||||||||||
2014 | 2013 | 2014 | 2013a | |||||||||
Increase (decrease) in net assets: | ||||||||||||
Operations: | ||||||||||||
Net investment income | $ | 1,991,177 | $ | 911,498 | $ | 269,376 | $ | 10,340 | ||||
Net realized gain (loss) from Underlying Funds and exchange | ||||||||||||
traded funds | 6,825,214 | 4,141,928 | 324,712 | 23,320 | ||||||||
Net change in unrealized appreciation (depreciation) on | ||||||||||||
investments | (4,675,189 | ) | 9,871,133 | (297,002 | ) | 53,875 | ||||||
Net increase (decrease) in net assets resulting from | ||||||||||||
operations | 4,141,202 | 14,924,559 | 297,086 | 87,535 | ||||||||
Distributions to shareholders from: | ||||||||||||
Net investment income and short term gains received from | ||||||||||||
Underlying Funds: | ||||||||||||
Class A | (1,441,714 | ) | (871,930 | ) | (78,129 | ) | (11,335 | ) | ||||
Class C | (434,794 | ) | (209,139 | ) | (25,790 | ) | (1,005 | ) | ||||
Class R | (105,712 | ) | (59,888 | ) | (654 | ) | (381 | ) | ||||
Class R6 | (250,682 | ) | (32,182 | ) | (215,145 | ) | (111 | ) | ||||
Advisor Class | (68,643 | ) | (41,493 | ) | (1,769 | ) | (802 | ) | ||||
Net realized gains: | ||||||||||||
Class A | (3,469,793 | ) | (1,782,321 | ) | (18,775 | ) | (198 | ) | ||||
Class C | (1,505,335 | ) | (721,153 | ) | (5,210 | ) | (21 | ) | ||||
Class R | (279,799 | ) | (136,382 | ) | (156 | ) | (8 | ) | ||||
Class R6 | (484,097 | ) | (48,820 | ) | (7,475 | ) | (2 | ) | ||||
Advisor Class | (146,176 | ) | (71,758 | ) | (495 | ) | (13 | ) | ||||
Total distributions to shareholders | (8,186,745 | ) | (3,975,066 | ) | (353,598 | ) | (13,876 | ) | ||||
Capital share transactions: (Note 2) | ||||||||||||
Class A | 11,229,371 | 6,266,755 | 3,759,369 | 1,201,089 | ||||||||
Class C | 4,410,269 | 4,065,933 | 1,816,743 | 127,101 | ||||||||
Class R | 694,943 | 854,675 | — | 44,214 | ||||||||
Class R6 | 12,323,031 | 2,357,526 | 12,169,466 | 10,000 | ||||||||
Advisor Class | 419,109 | 299,945 | 16,324 | 76,893 | ||||||||
Total capital share transactions | 29,076,723 | 13,844,834 | 17,761,902 | 1,459,297 | ||||||||
Net increase (decrease) in net assets | 25,031,180 | 24,794,327 | 17,705,390 | 1,532,956 | ||||||||
Net assets: | ||||||||||||
Beginning of year | 93,720,542 | 68,926,215 | 1,532,956 | — | ||||||||
End of year | $ | 118,751,722 | $ | 93,720,542 | $ | 19,238,346 | $ | 1,532,956 | ||||
Undistributed net investment income included in net assets: | ||||||||||||
End of year | $ | 73,935 | $ | 27,710 | $ | 7,071 | $ | 239 |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 139
FRANKLIN FUND ALLOCATOR SERIES | ||||||||||||
FINANCIAL STATEMENTS | ||||||||||||
Statements of Changes in Net Assets (continued) | ||||||||||||
Franklin LifeSmart 2035 | Franklin LifeSmart 2040 | |||||||||||
Retirement Target Fund | Retirement Target Fund | |||||||||||
Year Ended December 31, | Year Ended December 31, | |||||||||||
2014 | 2013 | 2014 | 2013a | |||||||||
Increase (decrease) in net assets: | ||||||||||||
Operations: | ||||||||||||
Net investment income | $ | 1,315,548 | $ | 567,972 | $ | 165,052 | $ | 4,652 | ||||
Net realized gain (loss) from Underlying Funds and exchange | ||||||||||||
traded funds | 4,614,128 | 2,930,055 | 257,493 | 11,239 | ||||||||
Net change in unrealized appreciation (depreciation) on | ||||||||||||
investments | (2,514,544 | ) | 7,908,157 | (215,383 | ) | 37,061 | ||||||
Net increase (decrease) in net assets resulting from | ||||||||||||
operations | 3,415,132 | 11,406,184 | 207,162 | 52,952 | ||||||||
Distributions to shareholders from: | ||||||||||||
Net investment income and short term gains received from | ||||||||||||
Underlying Funds: | ||||||||||||
Class A | (895,972 | ) | (527,275 | ) | (42,238 | ) | (5,500 | ) | ||||
Class C | (236,163 | ) | (106,851 | ) | (7,930 | ) | (463 | ) | ||||
Class R | (72,060 | ) | (40,571 | ) | (489 | ) | (86 | ) | ||||
Class R6 | (338,158 | ) | (36,070 | ) | (152,975 | ) | (103 | ) | ||||
Advisor Class | (44,614 | ) | (25,395 | ) | (417 | ) | (205 | ) | ||||
Net realized gains: | ||||||||||||
Class A | (2,136,291 | ) | (1,360,230 | ) | (7,502 | ) | (220 | ) | ||||
Class C | (871,981 | ) | (504,539 | ) | (2,598 | ) | (20 | ) | ||||
Class R | (200,136 | ) | (121,054 | ) | (117 | ) | (4 | ) | ||||
Class R6 | (483,256 | ) | (48,953 | ) | (1,609 | ) | (4 | ) | ||||
Advisor Class | (93,256 | ) | (54,723 | ) | (115 | ) | (8 | ) | ||||
Total distributions to shareholders | (5,371,887 | ) | (2,825,661 | ) | (215,990 | ) | (6,613 | ) | ||||
Capital share transactions: (Note 2) | ||||||||||||
Class A | 8,560,687 | 4,638,237 | 2,184,069 | 631,703 | ||||||||
Class C | 3,455,375 | 3,687,561 | 677,225 | 58,573 | ||||||||
Class R | 562,243 | 534,079 | 25,470 | 10,000 | ||||||||
Class R6 | 14,399,417 | 2,543,841 | 10,197,181 | 10,000 | ||||||||
Advisor Class | 405,419 | 507,603 | (535 | ) | 20,961 | |||||||
Total capital share transactions | 27,383,141 | 11,911,321 | 13,083,410 | 731,237 | ||||||||
Net increase (decrease) in net assets | 25,426,386 | 20,491,844 | 13,074,582 | 777,576 | ||||||||
Net assets: | ||||||||||||
Beginning of year | 67,823,217 | 47,331,373 | 777,576 | — | ||||||||
End of year | $ | 93,249,603 | $ | 67,823,217 | $ | 13,852,158 | $ | 777,576 | ||||
Undistributed net investment income included in net assets: | ||||||||||||
End of year | $ | 60,259 | $ | 19,239 | $ | 2,348 | $ | 131 |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
140 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | ||||||||||||
FINANCIAL STATEMENTS | ||||||||||||
Statements of Changes in Net Assets (continued) | ||||||||||||
Franklin LifeSmart 2045 | Franklin LifeSmart 2050 | |||||||||||
Retirement Target Fund | Retirement Target Fund | |||||||||||
Year Ended December 31, | Year Ended December 31, | |||||||||||
2014 | 2013 | 2014 | 2013a | |||||||||
Increase (decrease) in net assets: | ||||||||||||
Operations: | ||||||||||||
Net investment income | $ | 771,302 | $ | 351,038 | $ | 116,813 | $ | 4,280 | ||||
Net realized gain (loss) from Underlying Funds and exchange | ||||||||||||
traded funds | 3,226,523 | 1,819,050 | 179,275 | 9,779 | ||||||||
Net change in unrealized appreciation (depreciation) on | ||||||||||||
investments | (1,699,413 | ) | 5,771,935 | (100,101 | ) | 38,766 | ||||||
Net increase (decrease) in net assets resulting from | ||||||||||||
operations | 2,298,412 | 7,942,023 | 195,987 | 52,825 | ||||||||
Distributions to shareholders from: | ||||||||||||
Net investment income and short term gains received from | ||||||||||||
Underlying Funds: | ||||||||||||
Class A | (573,874 | ) | (333,295 | ) | (33,806 | ) | (4,422 | ) | ||||
Class C | (128,295 | ) | (52,405 | ) | (10,280 | ) | (633 | ) | ||||
Class R | (46,475 | ) | (43,659 | ) | (427 | ) | (92 | ) | ||||
Class R6 | (177,480 | ) | (23,741 | ) | (96,340 | ) | (108 | ) | ||||
Advisor Class | (32,068 | ) | (16,140 | ) | (5,638 | ) | (705 | ) | ||||
Net realized gains: | ||||||||||||
Class A | (1,473,826 | ) | (837,141 | ) | (8,447 | ) | — | |||||
Class C | (526,372 | ) | (273,377 | ) | (3,776 | ) | — | |||||
Class R | (179,450 | ) | (128,736 | ) | (105 | ) | — | |||||
Class R6 | (284,880 | ) | (29,120 | ) | (9,214 | ) | — | |||||
Advisor Class | (68,278 | ) | (31,888 | ) | (1,645 | ) | — | |||||
Total distributions to shareholders | (3,490,998 | ) | (1,769,502 | ) | (169,678 | ) | (5,960 | ) | ||||
Capital share transactions: (Note 2) | ||||||||||||
Class A | 6,825,898 | 3,128,951 | 1,768,589 | 476,308 | ||||||||
Class C | 2,521,308 | 1,499,244 | 846,022 | 79,396 | ||||||||
Class R | (1,071,543 | ) | 605,398 | 21,467 | 10,000 | |||||||
Class R6 | 7,635,222 | 1,718,837 | 6,371,333 | 10,000 | ||||||||
Advisor Class | 417,920 | 329,576 | 243,508 | 69,881 | ||||||||
Total capital share transactions | 16,328,805 | 7,282,006 | 9,250,919 | 645,585 | ||||||||
Net increase (decrease) in net assets | 15,136,219 | 13,454,527 | 9,277,228 | 692,450 | ||||||||
Net assets: | ||||||||||||
Beginning of year | 44,944,526 | 31,489,999 | 692,450 | — | ||||||||
End of year | $ | 60,080,745 | $ | 44,944,526 | $ | 9,969,678 | $ | 692,450 | ||||
Undistributed net investment income included in net assets: | ||||||||||||
End of year | $ | 37,376 | $ | 12,964 | $ | 2,798 | $ | 75 |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 141
FRANKLIN FUND ALLOCATOR SERIES
Notes to Financial Statements
1. Organization and Significant Accounting Policies
Franklin Fund Allocator Series (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end management investment company, consisting of fourteen separate funds, eight of which are included in this report (Funds) and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). The financial statements of the remaining funds in the Trust are presented separately. The Funds invest primarily in Franklin Templeton mutual funds (Underlying Funds). The Funds offer five classes of shares: Class A, Class C, Class R, Class R6, and Advisor Class. Each class of shares differs by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees primarily due to differing arrangements for distribution and transfer agent fees.
The accounting policies of the Underlying Funds are outlined in their respective shareholder reports. A copy of the Underlying Funds’ shareholder reports, in which each fund invests, is available on the U.S. Securities and Exchange Commission (SEC) website at sec.gov or at the SEC’s Public Reference Room in Washington, D.C. The Underlying Funds’ shareholder reports are not covered by this report.
Effective June 30, 2014, Franklin Templeton Fund Allocator Series was renamed Franklin Fund Allocator Series.
The following summarizes the Funds’ significant accounting policies.
a. Financial Instrument Valuation
The Funds’ investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Funds calculate the net asset value (NAV) per share at the close of the New York Stock Exchange (NYSE), generally at 4 p.m. Eastern time (NYSE close) on each day the NYSE is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Funds’ administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation and Liquidity Oversight Committee (VLOC). The VLOC provides administration and oversight of the Funds’ valuation policies and procedures, which are approved annually by the Board. Investments in the Underlying Funds are valued at their closing
NAV each trading day. Exchange traded funds (ETFs) listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively.
b. Income Taxes
It is each fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. Each fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.
Each fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of December 31, 2014, and for all open tax years, each fund has determined that no liability for unrecognized tax benefits is required in each fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.
c. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Estimated expenses are accrued daily. Dividend income and realized gain distributions by Underlying Funds and ETFs are recorded on the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
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 of the Trust. Fund specific expenses are charged directly to the fund that incurred the expense.
142 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
The Funds indirectly bear their proportionate share of expenses from the Underlying Funds and ETFs. Since the Underlying Funds and ETFs have varied expense levels and the Funds may own different proportions of the Underlying Funds and ETFs at different times, the amount of expenses incurred indirectly by the Funds will vary.
Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.
d. Offering Costs
Offering costs are amortized on a straight line basis over twelve months.
e. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP 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.
f. Guarantees and Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Funds, 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. Currently, the Trust expects the risk of loss to be remote.
2. Shares of Beneficial Interest
At December 31, 2014, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:
Franklin LifeSmart | Franklin LifeSmart | |||||||||
2015 Retirement | 2020 Retirement | |||||||||
Target Funda | Target Fundb | |||||||||
Shares | Amount | Shares | Amount | |||||||
Class A Shares: | ||||||||||
Year ended December 31, 2014 | ||||||||||
Shares sold | 1,138,380 | $ | 14,073,557 | 506,546 | $ | 5,673,408 | ||||
Shares issued in reinvestment of distributions | 313,379 | 3,724,655 | 15,235 | 170,546 | ||||||
Shares redeemed | (940,611 | ) | (11,627,643 | ) | (66,096 | ) | (730,777 | ) | ||
Net increase (decrease) | 511,148 | $ | 6,170,569 | 455,685 | $ | 5,113,177 | ||||
Year ended December 31, 2013 | ||||||||||
Shares sold | 1,308,882 | $ | 15,890,281 | 224,502 | $ | 2,330,311 | ||||
Shares issued in reinvestment of distributions | 227,640 | 2,764,653 | 2,029 | 22,110 | ||||||
Shares redeemed | (1,138,122 | ) | (13,842,839 | ) | (26,431 | ) | (277,081 | ) | ||
Net increase (decrease) | 398,400 | $ | 4,812,095 | 200,100 | $ | 2,075,340 | ||||
Class C Shares: | ||||||||||
Year ended December 31, 2014 | ||||||||||
Shares sold | 469,764 | $ | 5,751,377 | 214,931 | $ | 2,379,192 | ||||
Shares issued in reinvestment of distributions | 118,197 | 1,387,970 | 4,969 | 55,351 | ||||||
Shares redeemed | (430,341 | ) | (5,263,257 | ) | (6,734 | ) | (75,706 | ) | ||
Net increase (decrease) | 157,620 | $ | 1,876,090 | 213,166 | $ | 2,358,837 | ||||
Year ended December 31, 2013 | ||||||||||
Shares sold | 460,937 | $ | 5,565,468 | 27,481 | $ | 292,945 | ||||
Shares issued in reinvestment of distributions | 81,653 | 981,251 | 256 | 2,786 | ||||||
Shares redeemed | (327,076 | ) | (3,965,492 | ) | (4,780 | ) | (51,992 | ) | ||
Net increase (decrease) | 215,514 | $ | 2,581,227 | 22,957 | $ | 243,739 | ||||
franklintempleton.com | Annual Report | 143 |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest (continued) | |||||||||||
Franklin LifeSmart | Franklin LifeSmart | ||||||||||
2015 Retirement | 2020 Retirement | ||||||||||
Target Funda | Target Fundb | ||||||||||
Shares | Amount | Shares | Amount | ||||||||
Class R Shares: | |||||||||||
Year ended December 31, 2014 | |||||||||||
Shares sold | 124,788 | $ | 1,541,001 | 6,286 | $ | 71,371 | |||||
Shares issued in reinvestment of distributions | 14,644 | 173,814 | 118 | 1,322 | |||||||
Shares redeemed | (82,478 | ) | (1,021,136 | ) | (225 | ) | (2,555 | ) | |||
Net increase (decrease) | 56,954 | $ | 693,679 | 6,179 | $ | 70,138 | |||||
Year ended December 31, 2013 | |||||||||||
Shares sold | 126,413 | $ | 1,528,317 | 1,001 | $ | 10,011 | |||||
Shares issued in reinvestment of distributions | 10,359 | 125,208 | — | — | |||||||
Shares redeemed | (110,588 | ) | (1,333,880 | ) | (1 | ) | (11 | ) | |||
Net increase (decrease) | 26,184 | $ | 319,645 | 1,000 | $ | 10,000 | |||||
Class R6 Shares: | |||||||||||
Year ended December 31, 2014 | |||||||||||
Shares sold | 810,319 | $ | 10,083,538 | 706,698 | $ | 8,046,414 | |||||
Shares issued in reinvestment of distributions | 7,116 | 84,977 | 24 | 264 | |||||||
Shares redeemed | (306,858 | ) | (3,775,510 | ) | (47,752 | ) | (539,248 | ) | |||
Net increase (decrease) | 510,577 | $ | 6,393,005 | 658,970 | $ | 7,507,430 | |||||
Year ended December 31, 2013 | |||||||||||
Shares sold | 59,379 | $ | 750,348 | 1,001 | $ | 10,010 | |||||
Shares issued in reinvestment of distributions | 2,610 | 32,108 | — | — | |||||||
Shares redeemed | — | — | (1 | ) | (10 | ) | |||||
Net increase (decrease) | 61,989 | $ | 782,456 | 1,000 | $ | 10,000 | |||||
Advisor Class Shares: | |||||||||||
Year ended December 31, 2014 | |||||||||||
Shares sold | 60,712 | $ | 759,764 | 26,162 | $ | 292,957 | |||||
Shares issued in reinvestment of distributions | 14,464 | 172,492 | 191 | 2,131 | |||||||
Shares redeemed | (90,371 | ) | (1,118,226 | ) | (21,541 | ) | (235,434 | ) | |||
Net increase (decrease) | (15,195 | ) | $ | (185,970 | ) | 4,812 | $ | 59,654 | |||
Year ended December 31, 2013 | |||||||||||
Shares sold | 42,196 | $ | 511,810 | 3,952 | $ | 41,034 | |||||
Shares issued in reinvestment of distributions | 12,801 | 156,058 | 36 | 389 | |||||||
Shares redeemed | (9,672 | ) | (118,748 | ) | (1 | ) | (10 | ) | |||
Net increase (decrease) | 45,325 | $ | 549,120 | 3,987 | $ | 41,413 | |||||
aFor the period May 1, 2013 (effective date) to December 31, 2013 for Class R6. | |||||||||||
bFor the period July 1, 2013 (commencement of operations) to December 31, 2013. |
144 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||
NOTES TO FINANCIAL STATEMENTS | |||||||||||
Franklin LifeSmart | Franklin LifeSmart | ||||||||||
2025 Retirement | 2030 Retirement | ||||||||||
Target Funda | Target Fundb | ||||||||||
Shares | Amount | Shares | Amount | ||||||||
Class A Shares: | |||||||||||
Year ended December 31, 2014 | |||||||||||
Shares sold | 1,513,145 | $ | 19,494,646 | 341,737 | $ | 3,872,100 | |||||
Shares issued in reinvestment of distributions | 383,827 | 4,822,448 | 7,982 | 91,727 | |||||||
Shares redeemed | (1,015,101 | ) | (13,087,723 | ) | (17,789 | ) | (204,458 | ) | |||
Net increase (decrease) | 881,871 | $ | 11,229,371 | 331,930 | $ | 3,759,369 | |||||
Year ended December 31, 2013 | |||||||||||
Shares sold | 1,456,494 | $ | 17,514,233 | 112,584 | $ | 1,192,416 | |||||
Shares issued in reinvestment of distributions | 211,824 | 2,630,432 | 835 | 9,253 | |||||||
Shares redeemed | (1,139,693 | ) | (13,877,910 | ) | (53 | ) | (580 | ) | |||
Net increase (decrease) | 528,625 | $ | 6,266,755 | 113,366 | $ | 1,201,089 | |||||
Class C Shares: | |||||||||||
Year ended December 31, 2014 | |||||||||||
Shares sold | 601,269 | $ | 7,635,270 | 165,124 | $ | 1,879,175 | |||||
Shares issued in reinvestment of distributions | 138,184 | 1,708,829 | 2,716 | 31,001 | |||||||
Shares redeemed | (387,274 | ) | (4,933,830 | ) | (8,337 | ) | (93,433 | ) | |||
Net increase (decrease) | 352,179 | $ | 4,410,269 | 159,503 | $ | 1,816,743 | |||||
Year ended December 31, 2013 | |||||||||||
Shares sold | 694,242 | $ | 8,279,189 | 12,087 | $ | 128,932 | |||||
Shares issued in reinvestment of distributions | 67,197 | 823,491 | 85 | 934 | |||||||
Shares redeemed | (425,455 | ) | (5,036,747 | ) | (252 | ) | (2,765 | ) | |||
Net increase (decrease) | 335,984 | $ | 4,065,933 | 11,920 | $ | 127,101 | |||||
Class R Shares: | |||||||||||
Year ended December 31, 2014 | |||||||||||
Shares sold | 106,302 | $ | 1,362,966 | 3,287 | $ | 37,604 | |||||
Shares issued in reinvestment of distributions | 24,165 | 302,271 | 51 | 587 | |||||||
Shares redeemed | (75,290 | ) | (970,294 | ) | (3,433 | ) | (38,191 | ) | |||
Net increase (decrease) | 55,177 | $ | 694,943 | (95 | ) | $ | — | ||||
Year ended December 31, 2013 | |||||||||||
Shares sold | 198,623 | $ | 2,365,500 | 4,233 | $ | 43,941 | |||||
Shares issued in reinvestment of distributions | 12,439 | 153,876 | 26 | 291 | |||||||
Shares redeemed | (141,744 | ) | (1,664,701 | ) | (2 | ) | (18 | ) | |||
Net increase (decrease) | 69,318 | $ | 854,675 | 4,257 | $ | 44,214 | |||||
Class R6 Shares: | |||||||||||
Year ended December 31, 2014 | |||||||||||
Shares sold | 1,071,996 | $ | 13,927,445 | 1,124,168 | $ | 13,048,653 | |||||
Shares issued in reinvestment of distributions | 15,562 | 195,828 | — | — | |||||||
Shares redeemed | (139,760 | ) | (1,800,242 | ) | (75,482 | ) | (879,187 | ) | |||
Net increase (decrease) | 947,798 | $ | 12,323,031 | 1,048,686 | $ | 12,169,466 | |||||
Year ended December 31, 2013 | |||||||||||
Shares sold | 176,532 | $ | 2,276,764 | 1,001 | $ | 10,010 | |||||
Shares issued in reinvestment of distributions | 6,329 | 80,762 | — | — | |||||||
Shares redeemed | — | — | (1 | ) | (10 | ) | |||||
Net increase (decrease) | 182,861 | $ | 2,357,526 | 1,000 | $ | 10,000 |
franklintempleton.com Annual Report | 145
FRANKLIN FUND ALLOCATOR SERIES | ||||||||||||
NOTES TO FINANCIAL STATEMENTS | ||||||||||||
2. Shares of Beneficial Interest (continued) | ||||||||||||
Franklin LifeSmart | Franklin LifeSmart | |||||||||||
2025 Retirement | 2030 Retirement | |||||||||||
Target Funda | Target Fundb | |||||||||||
Shares | Amount | Shares | Amount | |||||||||
Advisor Class Shares: | ||||||||||||
Year ended December 31, 2014 | ||||||||||||
Shares sold | 64,856 | $ | 843,185 | 2,199 | $ | 25,200 | ||||||
Shares issued in reinvestment of distributions | 16,249 | 204,646 | 197 | 2,264 | ||||||||
Shares redeemed | (48,334 | ) | (628,722 | ) | (1,001 | ) | (11,140 | ) | ||||
Net increase (decrease) | 32,771 | $ | 419,109 | 1,395 | $ | 16,324 | ||||||
Year ended December 31, 2013 | ||||||||||||
Shares sold | 43,011 | $ | 510,282 | 7,347 | $ | 76,199 | ||||||
Shares issued in reinvestment of distributions | 8,650 | 107,432 | 64 | 704 | ||||||||
Shares redeemed | (25,638 | ) | (317,769 | ) | (1 | ) | (10 | ) | ||||
Net increase (decrease) | 26,023 | $ | 299,945 | 7,410 | $ | 76,893 | ||||||
aFor the period May 1, 2013 (effective date) to December 31, 2013 for Class R6. | ||||||||||||
bFor the period July 1, 2013 (commencement of operations) to December 31, 2013. | ||||||||||||
Franklin LifeSmart | Franklin LifeSmart | |||||||||||
2035 Retirement | 2040 Retirement | |||||||||||
Target Funda | Target Fundb | |||||||||||
Shares | Amount | Shares | Amount | |||||||||
Class A Shares: | ||||||||||||
Year ended December 31, 2014 | ||||||||||||
Shares sold | 908,083 | $ | 11,845,541 | 205,931 | $ | 2,372,454 | ||||||
Shares issued in reinvestment of distributions | 231,370 | 2,968,905 | 3,843 | 44,632 | ||||||||
Shares redeemed | (480,397 | ) | (6,253,759 | ) | (20,256 | ) | (233,017 | ) | ||||
Net increase (decrease) | 659,056 | $ | 8,560,687 | 189,518 | $ | 2,184,069 | ||||||
Year ended December 31, 2013 | ||||||||||||
Shares sold | 987,304 | $ | 11,906,664 | 59,764 | $ | 628,581 | ||||||
Shares issued in reinvestment of distributions | 150,718 | 1,873,931 | 323 | 3,602 | ||||||||
Shares redeemed | (745,082 | ) | (9,142,358 | ) | (43 | ) | (480 | ) | ||||
Net increase (decrease) | 392,940 | $ | 4,638,237 | 60,044 | $ | 631,703 | ||||||
Class C Shares: | ||||||||||||
Year ended December 31, 2014 | ||||||||||||
Shares sold | 455,352 | $ | 5,807,235 | 61,797 | $ | 704,591 | ||||||
Shares issued in reinvestment of distributions | 75,659 | 952,637 | 896 | 10,337 | ||||||||
Shares redeemed | (260,511 | ) | (3,304,497 | ) | (3,254 | ) | (37,703 | ) | ||||
Net increase (decrease) | 270,500 | $ | 3,455,375 | 59,439 | $ | 677,225 | ||||||
Year ended December 31, 2013 | ||||||||||||
Shares sold | 474,238 | $ | 5,598,631 | 5,355 | $ | 58,311 | ||||||
Shares issued in reinvestment of distributions | 43,059 | 524,390 | 35 | 388 | ||||||||
Shares redeemed | (206,995 | ) | (2,435,460 | ) | (12 | ) | (126 | ) | ||||
Net increase (decrease) | 310,302 | $ | 3,687,561 | 5,378 | $ | 58,573 |
146 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | ||||||||||||
NOTES TO FINANCIAL STATEMENTS | ||||||||||||
Franklin LifeSmart | Franklin LifeSmart | |||||||||||
2035 Retirement | 2040 Retirement | |||||||||||
Target Funda | Target Fundb | |||||||||||
Shares | Amount | Shares | Amount | |||||||||
Class R Shares: | ||||||||||||
Year ended December 31, 2014 | ||||||||||||
Shares sold | 107,368 | $ | 1,403,135 | 2,187 | $ | 25,117 | ||||||
Shares issued in reinvestment of distributions | 15,491 | 198,596 | 33 | 384 | ||||||||
Shares redeemed | (80,077 | ) | (1,039,488 | ) | (3 | ) | (31 | ) | ||||
Net increase (decrease) | 42,782 | $ | 562,243 | 2,217 | $ | 25,470 | ||||||
Year ended December 31, 2013 | ||||||||||||
Shares sold | 94,627 | $ | 1,133,064 | 1,001 | $ | 10,011 | ||||||
Shares issued in reinvestment of distributions | 8,728 | 108,350 | — | — | ||||||||
Shares redeemed | (60,404 | ) | (707,335 | ) | (1 | ) | (11 | ) | ||||
Net increase (decrease) | 42,951 | $ | 534,079 | 1,000 | $ | 10,000 | ||||||
Class R6 Shares: | ||||||||||||
Year ended December 31, 2014 | ||||||||||||
Shares sold | 1,209,949 | $ | 16,125,117 | 955,439 | $ | 11,147,448 | ||||||
Shares issued in reinvestment of distributions | 12,998 | 167,922 | 16 | 186 | ||||||||
Shares redeemed | (143,165 | ) | (1,893,622 | ) | (81,583 | ) | (950,453 | ) | ||||
Net increase (decrease) | 1,079,782 | $ | 14,399,417 | 873,872 | $ | 10,197,181 | ||||||
Year ended December 31, 2013 | ||||||||||||
Shares sold | 189,345 | $ | 2,459,073 | 1,001 | $ | 10,010 | ||||||
Shares issued in reinvestment of distributions | 6,576 | 84,768 | — | — | ||||||||
Shares redeemed | — | — | (1 | ) | (10 | ) | ||||||
Net increase (decrease) | 195,921 | $ | 2,543,841 | 1,000 | $ | 10,000 | ||||||
Advisor Class Shares: | ||||||||||||
Year ended December 31, 2014 | ||||||||||||
Shares sold | 44,710 | $ | 589,527 | 1,114 | $ | 12,924 | ||||||
Shares issued in reinvestment of distributions | 10,678 | 137,870 | 23 | 263 | ||||||||
Shares redeemed | (24,717 | ) | (321,978 | ) | (1,192 | ) | (13,722 | ) | ||||
Net increase (decrease) | 30,671 | $ | 405,419 | (55 | ) | $ | (535 | ) | ||||
Year ended December 31, 2013 | ||||||||||||
Shares sold | 46,997 | $ | 552,040 | 2,051 | $ | 20,862 | ||||||
Shares issued in reinvestment of distributions | 6,402 | 80,118 | 10 | 109 | ||||||||
Shares redeemed | (10,258 | ) | (124,555 | ) | (1 | ) | (10 | ) | ||||
Net increase (decrease) | 43,141 | $ | 507,603 | 2,060 | $ | 20,961 | ||||||
aFor the period May 1, 2013 (effective date) to December 31, 2013 for Class R6. | ||||||||||||
bFor the period July 1, 2013 (commencement of operations) to December 31, 2013. |
franklintempleton.com Annual Report | 147
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest (continued) | ||||||||||
Franklin LifeSmart | Franklin LifeSmart | |||||||||
2045 Retirement | 2050 Retirement | |||||||||
Target Funda | Target Fundb | |||||||||
Shares | Amount | Shares | Amount | |||||||
Class A Shares: | ||||||||||
Year ended December 31, 2014 | ||||||||||
Shares sold | 806,549 | $ | 10,536,870 | 155,648 | $ | 1,788,729 | ||||
Shares issued in reinvestment of distributions | 154,590 | 1,987,048 | 3,193 | 37,209 | ||||||
Shares redeemed | (436,152 | ) | (5,698,020 | ) | (4,983 | ) | (57,349 | ) | ||
Net increase (decrease) | 524,987 | $ | 6,825,898 | 153,858 | $ | 1,768,589 | ||||
Year ended December 31, 2013 | ||||||||||
Shares sold | 747,089 | $ | 8,876,144 | 45,783 | $ | 476,936 | ||||
Shares issued in reinvestment of distributions | 92,952 | 1,149,783 | 202 | 2,257 | ||||||
Shares redeemed | (568,099 | ) | (6,896,976 | ) | (264 | ) | (2,885 | ) | ||
Net increase (decrease) | 271,942 | $ | 3,128,951 | 45,721 | $ | 476,308 | ||||
Class C Shares: | ||||||||||
Year ended December 31, 2014 | ||||||||||
Shares sold | 314,837 | $ | 4,013,365 | 75,187 | $ | 857,385 | ||||
Shares issued in reinvestment of distributions | 42,980 | 540,685 | 1,195 | 13,863 | ||||||
Shares redeemed | (160,167 | ) | (2,032,742 | ) | (2,197 | ) | (25,226 | ) | ||
Net increase (decrease) | 197,650 | $ | 2,521,308 | 74,185 | $ | 846,022 | ||||
Year ended December 31, 2013 | ||||||||||
Shares sold | 287,349 | $ | 3,358,448 | 7,339 | $ | 79,409 | ||||
Shares issued in reinvestment of distributions | 22,204 | 267,425 | 49 | 541 | ||||||
Shares redeemed | (181,124 | ) | (2,126,629 | ) | (50 | ) | (554 | ) | ||
Net increase (decrease) | 128,429 | $ | 1,499,244 | 7,338 | $ | 79,396 | ||||
Class R Shares: | ||||||||||
Year ended December 31, 2014 | ||||||||||
Shares sold | 119,001 | $ | 1,543,737 | 1,813 | $ | 21,150 | ||||
Shares issued in reinvestment of distributions | 14,511 | 186,373 | 27 | 317 | ||||||
Shares redeemed | (214,951 | ) | (2,801,653 | ) | — | — | ||||
Net increase (decrease) | (81,439 | ) | $ | (1,071,543 | ) | 1,840 | $ | 21,467 | ||
Year ended December 31, 2013 | ||||||||||
Shares sold | 111,053 | $ | 1,317,814 | 1,001 | $ | 10,011 | ||||
Shares issued in reinvestment of distributions | 12,108 | 149,021 | — | — | ||||||
Shares redeemed | (73,906 | ) | (861,437 | ) | (1 | ) | (11 | ) | ||
Net increase (decrease) | 49,255 | $ | 605,398 | 1,000 | $ | 10,000 | ||||
Class R6 Shares: | ||||||||||
Year ended December 31, 2014 | ||||||||||
Shares sold | 674,936 | $ | 9,009,240 | 611,429 | $ | 7,162,550 | ||||
Shares issued in reinvestment of distributions | 8,952 | 115,736 | —c | 1 | ||||||
Shares redeemed | (112,726 | ) | (1,489,754 | ) | (67,478 | ) | (791,218 | ) | ||
Net increase (decrease) | 571,162 | $ | 7,635,222 | 543,951 | $ | 6,371,333 | ||||
Year ended December 31, 2013 | ||||||||||
Shares sold | 128,609 | $ | 1,666,219 | 1,001 | $ | 10,010 | ||||
Shares issued in reinvestment of distributions | 4,076 | 52,618 | — | — | ||||||
Shares redeemed | — | — | (1 | ) | (10 | ) | ||||
Net increase (decrease) | 132,685 | $ | 1,718,837 | 1,000 | $ | 10,000 |
148 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||
NOTES TO FINANCIAL STATEMENTS | |||||||||||
Franklin LifeSmart | Franklin LifeSmart | ||||||||||
2045 Retirement | 2050 Retirement | ||||||||||
Target Funda | Target Fundb | ||||||||||
Shares | Amount | Shares | Amount | ||||||||
Advisor Class Shares: | |||||||||||
Year ended December 31, 2014 | |||||||||||
Shares sold | 40,025 | $ | 528,680 | 32,370 | $ | 372,509 | |||||
Shares issued in reinvestment of distributions | 7,290 | 94,198 | 624 | 7,284 | |||||||
Shares redeemed | (15,676 | ) | (204,958 | ) | (11,622 | ) | (136,285 | ) | |||
Net increase (decrease) | 31,639 | $ | 417,920 | 21,372 | $ | 243,508 | |||||
Year ended December 31, 2013 | |||||||||||
Shares sold | 33,641 | $ | 404,555 | 6,699 | $ | 69,591 | |||||
Shares issued in reinvestment of distributions | 3,845 | 48,028 | 54 | 600 | |||||||
Shares redeemed | (10,292 | ) | (123,007 | ) | (29 | ) | (310 | ) | |||
Net increase (decrease) | 27,194 | $ | 329,576 | 6,724 | $ | 69,881 |
aFor the period May 1, 2013 (effective date) to December 31, 2013 for Class R6.
bFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
cRounds to less than 1 share.
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Funds are also officers and/or directors/ trustees of certain of the Underlying Funds and of the following subsidiaries:
Subsidiary | 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 |
a. Asset Allocation Fees
The Funds pay an asset allocation fee to Advisers of 0.25% per year of the average daily net assets of each of the Funds for investment advisory services, consisting principally of determining the allocation of assets of the Funds among the designated Underlying Funds and ETFs.
b. Administrative Fees
FT Services, under terms of an agreement, provides administrative services to the Funds and is not paid by the Funds for the services.
c. Distribution Fees
The Board has adopted distribution plans for each share class, with the exception of Class R6 and Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Distribution fees are not charged on shares held by affiliates. Under the Funds’ Class A reimbursement distribution plans, the Funds reimburse Distributors for costs incurred in connection with the servicing, sale and distribution of each fund’s shares up to the maximum annual plan rate for each class. Under the Class A reimbursement distribution plans, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Funds’ Class C and R compensation distribution plans, the Funds pay Distributors for costs incurred in connection with the servicing, sale and distribution of each fund’s shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31 for each fund.
franklintempleton.com Annual Report | 149
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
3. | Transactions with Affiliates (continued) |
c. | Distribution Fees (continued) |
The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:
Class A | 0.35 | % |
Class C | 1.00 | % |
Class R | 0.50 | % |
The Board has set the current rate at 0.30% per year for Class A shares until further notice and approval by the Board.
d. Sales Charges/Underwriting Agreements
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Funds. These charges are deducted from the proceeds of sales of fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Funds of the following commission transactions related to the sales and redemptions of the Funds’ shares for the year:
Franklin | Franklin | Franklin | Franklin | |||||
LifeSmart | LifeSmart | LifeSmart | LifeSmart | |||||
2015 Retirement | 2020 Retirement | 2025 Retirement | 2030 Retirement | |||||
Target Fund | Target Fund | Target Fund | Target Fund | |||||
Sales charges retained net of commissions paid to | ||||||||
unaffiliated broker/dealers | $ | 30,526 | $ | 15,181 | $ | 70,205 | $ | 15,416 |
CDSC retained | $ | 3,176 | $ | 504 | $ | 3,830 | $ | 611 |
Franklin | Franklin | Franklin | Franklin | |||||
LifeSmart | LifeSmart | LifeSmart | LifeSmart | |||||
2035 Retirement | 2040 Retirement | 2045 Retirement | 2050 Retirement | |||||
Target Fund | Target Fund | Target Fund | Target Fund | |||||
Sales charges retained net of commissions paid to | ||||||||
unaffiliated broker/dealers | $ | 52,682 | $ | 10,124 | $ | 42,674 | $ | 9,471 |
CDSC retained | $ | 3,325 | $ | 109 | $ | 2,223 | $ | 129 |
e. Transfer Agent Fees
Each class of shares, except for Class R6, pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations and reimburses Investor Services for out of pocket expenses incurred, including shareholding servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets. Class R6 pays Investor Services transfer agent fees specific to that class.
For the year ended December 31, 2014, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:
Franklin | Franklin | Franklin | Franklin | ||||
LifeSmart | LifeSmart | LifeSmart | LifeSmart | ||||
2015 Retirement | 2020 Retirement | 2025 Retirement | 2030 Retirement | ||||
Target Fund | Target Fund | Target Fund | Target Fund | ||||
Transfer agent fees | $ | 45,005 | $ | 7,142 | $ | 79,120 | $7,341 |
Franklin | Franklin | Franklin | Franklin | ||||
LifeSmart | LifeSmart | LifeSmart | LifeSmart | ||||
2035 Retirement | 2040 Retirement | 2045 Retirement | 2050 Retirement | ||||
Target Fund | Target Fund | Target Fund | Target Fund | ||||
Transfer agent fees | $ | 76,956 | $ | 6,066 | $ | 90,905 | $9,939 |
150 | Annual Report | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
f. Investments in Underlying Funds
The Funds invest primarily in the Underlying Funds which are managed by Advisers (or an affiliate of Advisers). The Funds do not invest in the Underlying Funds for the purpose of exercising a controlling influence over the management or policies. Asset allocation fees paid by the Funds are waived on assets invested in Institutional Fiduciary Trust Money Market Portfolio (Sweep Money Fund), as noted on the Statements of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by the Sweep Money Fund. Prior to January 1, 2014, the waiver was accounted for as a reduction to asset allocation fees.
Investments in Underlying Funds for the year ended December 31, 2014, were as follows: | |||||||||||||||||
% of | |||||||||||||||||
Underlying | |||||||||||||||||
Number of | Number of | Fund Shares | |||||||||||||||
Shares Held | Shares | Outstanding | |||||||||||||||
at Beginning | Gross | Gross Held at End | Value at | Investment | Realized | Held at End | |||||||||||
Underlying Funds | of Year | Additions | Reductions | of Year | End of Year | Income | Gain (Loss) | of Year | |||||||||
Franklin LifeSmart 2015 Retirement | |||||||||||||||||
Target Fund | |||||||||||||||||
Franklin Biotechnology Discovery Fund, | |||||||||||||||||
Class R6 | 15,954 | 2,086 | (15,100 | ) | 2,940 | $ | 504,304 | $ | — | $ | 359,282 | a | 0.03 | % | |||
Franklin DynaTech Fund, Class R6 | 118,840 | 24,458 | (99,647 | ) | 43,651 | 2,056,396 | — | 712,047 | a | 0.08 | % | ||||||
Franklin Emerging Market Debt Opportunities | |||||||||||||||||
Fundb | 173,466 | 120,638 | (41,792 | ) | 252,312 | 2,677,030 | 184,598 | 1,476 | a | 0.45 | % | ||||||
Franklin Flex Cap Growth Fund, Class R6 | 15,558 | 2,791 | (18,349 | ) | — | —c | — | 403,382 | — | ||||||||
Franklin Focused Core Equity Fund, | |||||||||||||||||
Class R6 | — | 176,734 | (36,170 | ) | 140,564 | 2,049,424 | 5,456 | 52,545 | a | 1.68 | % | ||||||
Franklin Growth Fund, Class R6 | 33,117 | 48,438 | (36,489 | ) | 45,066 | 3,369,107 | 32,589 | 262,707 | 0.03 | % | |||||||
Franklin Growth Opportunities Fund, | |||||||||||||||||
Class R6 | 37,269 | 32,226 | (23,583 | ) | 45,912 | 1,508,661 | — | 157,679 | a | 0.14 | % | ||||||
Franklin International Growth Fund, | |||||||||||||||||
Class R6 | 18,644 | 3,328 | (21,972 | ) | — | —c | — | 18,122 | — | ||||||||
Franklin International Small Cap Growth | |||||||||||||||||
Fund, Class R6 | 181,386 | 53,703 | (119,018 | ) | 116,071 | 2,097,397 | 39,424 | 311,657 | a | 0.13 | % | ||||||
Franklin K2 Alternative Strategies Fund, | |||||||||||||||||
Class R6 | — | 229,276 | — | 229,276 | 2,483,054 | 21,637 | — | 0.47 | % | ||||||||
Franklin Low Duration Total Return Fund, | |||||||||||||||||
Class R6 | 680,307 | 965,746 | (165,424 | ) | 1,480,629 | 14,850,708 | 282,529 | (5,174 | ) | 0.60 | % | ||||||
Franklin MicroCap Value Fund, Class R6 | 24,211 | 11,645 | (35,856 | ) | — | —c | — | 185,607 | — | ||||||||
Franklin Mutual European Fund, | |||||||||||||||||
Class R6d | 117,920 | 21,131 | (139,051 | ) | — | —c | 2,352 | 426,125 | — | ||||||||
Franklin Mutual International Fund, | |||||||||||||||||
Class R6 | — | 164,245 | (32,718 | ) | 131,527 | 1,918,985 | 44,440 | 56,099 | a | 2.03 | % | ||||||
Franklin Pelagos Commodities Strategy | |||||||||||||||||
Fund, Class R6 | 171,060 | e | 7,164 | (88,822 | ) | 89,402 | 664,256 | — | (141,978 | ) | 1.17 | % | |||||
Franklin Pelagos Managed Futures Strategy | |||||||||||||||||
Fund | 16,782 | — | (16,782 | ) | — | —c | — | (4,804 | ) | — | |||||||
Franklin Real Estate Securities Fund, | |||||||||||||||||
Class R6 | 43,096 | 23,765 | (45,630 | ) | 21,231 | 467,722 | 14,228 | 77,890 | 0.08 | % | |||||||
Franklin Rising Dividends Fund, Class R6 | 101,772 | 40,948 | (94,128 | ) | 48,592 | 2,526,768 | 65,588 | 723,013 | a | 0.01 | % | ||||||
Franklin Small Cap Growth Fund, | |||||||||||||||||
Class R6 | 55,765 | 35,211 | (51,541 | ) | 39,435 | 767,004 | — | 97,433 | a | 0.03 | % | ||||||
Franklin Strategic Income Fund, Class R6 | 369,572 | 246,370 | (90,740 | ) | 525,202 | 5,257,272 | 260,378 | 48,543 | a | 0.06 | % | ||||||
Franklin U.S. Government Securities Fund, | |||||||||||||||||
Class R6 | 1,235,250 | 550,468 | (1,785,718 | ) | — | —c | 245,655 | (121,689 | ) | — | |||||||
Franklin Utilities Fund, Class R6 | 133,081 | 43,068 | (110,082 | ) | 66,067 | 1,179,951 | 53,673 | 283,377 | a | 0.02 | % | ||||||
franklintempleton.com | Annual Report | | | 151 |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
3. | Transactions with Affiliates (continued) |
f. | Investments in Underlying Funds (continued) |
% of | |||||||||||||||
Underlying | |||||||||||||||
Number of | Number of | Fund Shares | |||||||||||||
Shares Held | Shares | Outstanding | |||||||||||||
at Beginning | Gross | Gross Held at End | Value at | Investment | Realized | Held at End | |||||||||
Underlying Funds | of Year | Additions | Reductions | of Year | End of Year | Income | Gain (Loss) | of Year | |||||||
Franklin LifeSmart 2015 Retirement | |||||||||||||||
Target Fund (continued) | |||||||||||||||
Institutional Fiduciary Trust Money Market | |||||||||||||||
Portfolio | 1,003,530 | 36,876,515 | (36,413,501 | ) | 1,466,544 | $ | 1,466,544 | $ | — | $ | — | 0.01 | % | ||
Templeton China World Fund, Class R6 | 19,897 | 5,620 | (9,817 | ) | 15,700 | 482,297 | 7,843 | 59,401 | a | 0.08 | % | ||||
Templeton Foreign Fund, Class R6 | 182,545 | 41,151 | (90,249 | ) | 133,447 | 916,780 | 30,972 | 97,985 | a | 0.01 | % | ||||
Templeton Frontier Markets Fund, | |||||||||||||||
Class R6 | 74,546 | 18,354 | (37,319 | ) | 55,581 | 799,809 | 39,823 | 19,837 | a | 0.08 | % | ||||
Templeton Global Total Return Fund, | |||||||||||||||
Class R6 | 797,598 | 973,879 | (195,781 | ) | 1,575,696 | 19,774,980 | 1,177,467 | (34,606 | )a | 0.23 | % | ||||
Total | $ | 67,818,449 | $ | 2,508,652 | $ | 4,045,956 | |||||||||
Franklin LifeSmart 2020 Retirement | |||||||||||||||
Target Fund | |||||||||||||||
Franklin Biotechnology Discovery Fund, | |||||||||||||||
Class R6 | 549 | 1,547 | (1,276 | ) | 820 | $ | 140,704 | $ | — | $ | 6,430 | a | 0.01 | % | |
Franklin DynaTech Fund, Class R6 | 5,830 | 24,661 | (13,265 | ) | 17,226 | 811,529 | — | 35,555 | a | 0.03 | % | ||||
Franklin Emerging Market Debt Opportunities | |||||||||||||||
Fundb | 3,702 | 25,461 | (1,690 | ) | 27,473 | 291,492 | 19,825 | 1,125 | a | 0.05 | % | ||||
Franklin Flex Cap Growth Fund, Class R6 | 794 | 3,005 | (3,799 | ) | — | —c | — | 7,505 | — | ||||||
Franklin Focused Core Equity Fund, | |||||||||||||||
Class R6 | — | 55,061 | (3,161 | ) | 51,900 | 756,700 | 1,801 | 14,680 | a | —f | |||||
Franklin Growth Fund, Class R6 | 2,185 | 22,286 | (6,127 | ) | 18,344 | 1,371,365 | 11,063 | 2,679 | 0.01 | % | |||||
Franklin Growth Opportunities Fund, | |||||||||||||||
Class R6 | 1,717 | 16,593 | (1,211 | ) | 17,099 | 561,884 | — | 10,336 | a | 0.05 | % | ||||
Franklin International Growth Fund, | |||||||||||||||
Class R6 | 872 | 3,369 | (4,241 | ) | — | —c | — | (247 | ) | — | |||||
Franklin International Small Cap Growth | |||||||||||||||
Fund, Class R6 | 9,508 | 53,148 | (14,314 | ) | 48,342 | 873,545 | 14,665 | 33,061 | a | 0.05 | % | ||||
Franklin K2 Alternative Strategies Fund, | |||||||||||||||
Class R6 | — | 47,376 | — | 47,376 | 513,077 | 4,471 | — | 0.10 | % | ||||||
Franklin Low Duration Total Return Fund, | |||||||||||||||
Class R6 | 15,784 | 188,993 | (6,351 | ) | 198,426 | 1,990,212 | 29,516 | (160 | ) | 0.08 | % | ||||
Franklin MicroCap Value Fund, Class R6 | 968 | 4,908 | (5,876 | ) | — | —c | — | (4,853 | ) | — | |||||
Franklin Mutual European Fund, | |||||||||||||||
Class R6d | 5,428 | 22,266 | (27,694 | ) | — | —c | 628 | (4,759 | ) | — | |||||
Franklin Mutual International Fund, | |||||||||||||||
Class R6 | — | 51,514 | (2,884 | ) | 48,630 | 709,512 | 16,080 | 25,609 | a | 0.75 | % | ||||
Franklin Pelagos Commodities Strategy | |||||||||||||||
Fund, Class R6 | 3,415 | e | 15,416 | (138 | ) | 18,693 | 138,887 | — | (36 | ) | 0.25 | % | |||
Franklin Pelagos Managed Futures Strategy | |||||||||||||||
Fund | 320 | 12 | (332 | ) | — | —c | — | 42 | — | ||||||
Franklin Real Estate Securities Fund, | |||||||||||||||
Class R6 | 2,037 | 12,905 | (7,658 | ) | 7,284 | 160,471 | 2,784 | (3,252 | ) | 0.03 | % |
152 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
% of | |||||||||||||||
Underlying | |||||||||||||||
Number of | Number of | Fund Shares | |||||||||||||
Shares Held | Shares | Outstanding | |||||||||||||
at Beginning | Gross | Gross Held at End | Value at | Investment | Realized | Held at End | |||||||||
Underlying Funds | of Year | Additions | Reductions | of Year | End of Year | Income | Gain (Loss) | of Year | |||||||
Franklin LifeSmart 2020 Retirement | |||||||||||||||
Target Fund (continued) | |||||||||||||||
Franklin Rising Dividends Fund, Class R6 | 4,876 | 27,841 | (14,738 | ) | 17,979 | $ | 934,892 | $ | 13,904 | $ | 6,054 | a | 0.01 | % | |
Franklin Small Cap Growth Fund, | |||||||||||||||
Class R6 | 2,349 | 18,638 | (7,082 | ) | 13,905 | 270,447 | — | 7,084 | a | 0.01 | % | ||||
Franklin Strategic Income Fund, Class R6 | 9,021 | 66,280 | (4,348 | ) | 70,953 | 710,239 | 24,666 | 6,575 | a | 0.01 | % | ||||
Franklin U.S. Government Securities Fund, | |||||||||||||||
Class R6 | 30,072 | 159,233 | (189,305 | ) | — | —c | 16,085 | (134 | ) | — | |||||
Franklin Utilities Fund, Class R6 | 6,669 | 31,530 | (13,106 | ) | 25,093 | 448,169 | 10,214 | 7,225 | a | 0.01 | % | ||||
Institutional Fiduciary Trust Money Market | |||||||||||||||
Portfolio | — | 4,413,815 | (4,044,035 | ) | 369,780 | 369,780 | — | — | —f | ||||||
Templeton China World Fund, Class R6 | 879 | 4,959 | (394 | ) | 5,444 | 167,249 | 2,666 | 17,609 | a | 0.03 | % | ||||
Templeton Foreign Fund, Class R6 | 8,832 | 44,710 | (3,676 | ) | 49,866 | 342,580 | 11,326 | 6,658 | a | 0.01 | % | ||||
Templeton Frontier Markets Fund, | |||||||||||||||
Class R6 | 3,369 | 17,797 | (1,465 | ) | 19,701 | 283,505 | 11,832 | 4,096 | a | 0.03 | % | ||||
Templeton Global Total Return Fund, | |||||||||||||||
Class R6 | 18,709 | 195,158 | (9,115 | ) | 204,752 | 2,569,634 | 126,282 | 5,454 | a | 0.03 | % | ||||
Total | $ | 14,415,873 | $ | 317,808 | $ | 184,336 | |||||||||
Franklin LifeSmart 2025 Retirement | |||||||||||||||
Target Fund | |||||||||||||||
Franklin Biotechnology Discovery Fund, | |||||||||||||||
Class R6 | 33,215 | 3,465 | (27,791 | ) | 8,889 | $ | 1,525,052 | $ | — | $ | 560,962 | a | 0.09 | % | |
Franklin DynaTech Fund, Class R6 | 279,098 | 50,345 | (184,554 | ) | 144,889 | 6,825,716 | — | 1,179,030 | a | 0.28 | % | ||||
Franklin Emerging Market Debt Opportunities | |||||||||||||||
Fundb | 97,394 | 60,030 | (23,295 | ) | 134,129 | 1,423,112 | 111,761 | 984 | a | 0.24 | % | ||||
Franklin Flex Cap Growth Fund, Class R6 | 31,387 | 4,591 | (35,978 | ) | — | —c | — | 824,049 | — | ||||||
Franklin Focused Core Equity Fund, | |||||||||||||||
Class R6 | — | 427,852 | (3,521 | ) | 424,331 | 6,186,741 | 14,944 | 128,555 | a | 5.06 | % | ||||
Franklin Growth Fund, Class R6 | 71,775 | 121,647 | (49,153 | ) | 144,269 | 10,785,520 | 83,018 | 125,933 | 0.10 | % | |||||
Franklin Growth Opportunities Fund, | |||||||||||||||
Class R6 | 72,393 | 72,799 | (12,960 | ) | 132,232 | 4,345,150 | — | 118,369 | a | 0.40 | % | ||||
Franklin International Growth Fund, | |||||||||||||||
Class R6 | 48,404 | 6,600 | (55,004 | ) | — | —c | — | 45,223 | — | ||||||
Franklin International Small Cap Growth | |||||||||||||||
Fund, Class R6 | 415,470 | 134,212 | (158,706 | ) | 390,976 | 7,064,944 | 120,348 | 531,495 | a | 0.44 | % | ||||
Franklin K2 Alternative Strategies Fund, | |||||||||||||||
Class R6 | — | 323,419 | — | 323,419 | 3,502,630 | 30,522 | — | 0.67 | % | ||||||
Franklin Low Duration Total Return Fund, | |||||||||||||||
Class R6 | 354,640 | 509,554 | (87,472 | ) | 776,722 | 7,790,526 | 154,346 | (2,654 | ) | 0.32 | % | ||||
Franklin MicroCap Value Fund, Class R6 | 43,077 | 23,075 | (66,152 | ) | — | —c | — | 301,563 | — | ||||||
Franklin Mutual European Fund, | |||||||||||||||
Class R6d | 243,881 | 35,739 | (279,620 | ) | — | —c | 5,534 | 786,162 | — | ||||||
Franklin Mutual International Fund, | |||||||||||||||
Class R6 | — | 398,132 | (3,172 | ) | 394,960 | 5,762,471 | 133,449 | 225,149 | a | 6.10 | % | ||||
Franklin Pelagos Commodities Strategy | |||||||||||||||
Fund, Class R6 | 114,106 | e | 20,111 | (7,606 | ) | 126,611 | 940,719 | — | (12,151 | ) | 1.66 | % | |||
Franklin Pelagos Managed Futures Strategy | |||||||||||||||
Fund | 11,101 | — | (11,101 | ) | — | —c | — | (18,169 | ) | — |
franklintempleton.com Annual Report | 153
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
3. | Transactions with Affiliates (continued) |
f. | Investments in Underlying Funds (continued) |
% of | ||||||||||||||||
Underlying | ||||||||||||||||
Number of | Number of | Fund Shares | ||||||||||||||
Shares Held | Shares | Outstanding | ||||||||||||||
at Beginning | Gross | Gross | Held at End | Value at | Investment | Realized | Held at End | |||||||||
Underlying Funds | of Year | Additions | Reductions | of Year | End of Year | Income | Gain (Loss) | of Year | ||||||||
Franklin LifeSmart 2025 Retirement | ||||||||||||||||
Target Fund (continued) | ||||||||||||||||
Franklin Real Estate Securities Fund, | ||||||||||||||||
Class R6 | 85,602 | 51,960 | (75,259 | ) | 62,303 | $ | 1,372,546 | $ | 33,502 | $ | 72,251 | 0.24 | % | |||
Franklin Rising Dividends Fund, Class R6 | 236,182 | 90,683 | (158,525 | ) | 168,340 | 8,753,673 | 173,125 | 730,007 | a | 0.05 | % | |||||
Franklin Small Cap Growth Fund, | ||||||||||||||||
Class R6 | 147,850 | 88,035 | (92,914 | ) | 142,971 | 2,780,784 | — | 172,664 | a | 0.10 | % | |||||
Franklin Strategic Income Fund, Class R6 | 204,580 | 120,416 | (49,786 | ) | 275,210 | 2,754,847 | 148,171 | 25,084 | a | 0.03 | % | |||||
Franklin U.S. Government Securities Fund, | ||||||||||||||||
Class R6 | 719,975 | 386,708 | (1,106,683 | ) | — | —c | 148,441 | (48,383 | ) | — | ||||||
Franklin Utilities Fund, Class R6 | 286,140 | 93,438 | (173,365 | ) | 206,213 | 3,682,962 | 129,580 | 231,855 | a | 0.06 | % | |||||
Institutional Fiduciary Trust Money Market | ||||||||||||||||
Portfolio | 1,468,315 | 42,315,397 | (41,178,850 | ) | 2,604,862 | 2,604,862 | — | — | 0.02 | % | ||||||
Templeton China World Fund, Class R6 | 44,153 | 14,352 | (7,569 | ) | 50,936 | 1,564,749 | 25,234 | 155,328 | a | 0.26 | % | |||||
Templeton Foreign Fund, Class R6 | 341,118 | 81,781 | (58,680 | ) | 364,219 | 2,502,188 | 83,816 | 91,915 | a | 0.04 | % | |||||
Templeton Frontier Markets Fund, | ||||||||||||||||
Class R6 | 147,872 | 37,123 | (25,287 | ) | 159,708 | 2,298,200 | 91,734 | 97,039 | a | 0.23 | % | |||||
Templeton Global Total Return Fund, | ||||||||||||||||
Class R6 | 455,148 | 524,167 | (112,795 | ) | 866,520 | 10,874,828 | 728,024 | (23,574 | )a | 0.12 | % | |||||
Total | $ | 95,342,220 | $ | 2,215,549 | $ | 6,298,686 | ||||||||||
Franklin LifeSmart 2030 Retirement | ||||||||||||||||
Target Fund | ||||||||||||||||
Franklin Biotechnology Discovery Fund, | ||||||||||||||||
Class R6 | 429 | 2,309 | (1,454 | ) | 1,284 | $ | 220,257 | $ | — | $ | 18,337 | a | 0.01 | % | ||
Franklin DynaTech Fund, Class R6 | 4,368 | 39,221 | (17,488 | ) | 26,101 | 1,229,614 | — | 61,835 | a | 0.05 | % | |||||
Franklin Emerging Market Debt Opportunities | ||||||||||||||||
Fundb | 1,395 | 22,282 | (4,318 | ) | 19,359 | 205,402 | 12,179 | (480 | )a | 0.03 | % | |||||
Franklin Flex Cap Growth Fund, Class R6 | 521 | 4,581 | (5,102 | ) | — | —c | — | 8,473 | — | |||||||
Franklin Focused Core Equity Fund, | ||||||||||||||||
Class R6 | — | 73,726 | (4,173 | ) | 69,553 | 1,014,082 | 2,457 | 20,008 | a | —f | ||||||
Franklin Growth Fund, Class R6 | 1,443 | 34,318 | (8,941 | ) | 26,820 | 2,005,052 | 15,625 | 2,139 | 0.02 | % | ||||||
Franklin Growth Opportunities Fund, | ||||||||||||||||
Class R6 | 1,111 | 24,200 | (1,564 | ) | 23,747 | 780,342 | — | 14,410 | a | 0.07 | % | |||||
Franklin International Growth Fund, | ||||||||||||||||
Class R6 | 772 | 6,595 | (7,367 | ) | — | —c | — | (1,823 | ) | — | ||||||
Franklin International Small Cap Growth | ||||||||||||||||
Fund, Class R6 | 6,671 | 83,401 | (19,459 | ) | 70,613 | 1,275,987 | 21,807 | 53,648 | a | 0.08 | % | |||||
Franklin K2 Alternative Strategies Fund, | ||||||||||||||||
Class R6 | — | 54,954 | — | 54,954 | 595,157 | 5,186 | — | 0.11 | % | |||||||
Franklin Low Duration Total Return Fund, | ||||||||||||||||
Class R6 | 5,018 | 124,928 | (21,847 | ) | 108,099 | 1,084,231 | 15,902 | (747 | ) | 0.04 | % | |||||
Franklin MicroCap Value Fund, Class R6 | 735 | 8,516 | (9,251 | ) | — | —c | — | (9,552 | ) | — | ||||||
Franklin Mutual European Fund, Class R6d | 3,807 | 30,642 | (34,449 | ) | — | —c | 785 | (8,108 | ) | — | ||||||
Franklin Mutual International Fund, | ||||||||||||||||
Class R6 | — | 69,071 | (3,800 | ) | 65,271 | 952,311 | 21,946 | 35,191 | a | —f | ||||||
Franklin Pelagos Commodities Strategy | ||||||||||||||||
Fund,Class R6 | 1,389 | e | 20,038 | — | 21,427 | 159,201 | — | — | 0.28 | % | ||||||
154 | | Annual Report | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
% of | |||||||||||||||
Underlying | |||||||||||||||
Number of | Number of | Fund Shares | |||||||||||||
Shares Held | Shares | Outstanding | |||||||||||||
at Beginning | Gross | Gross Held at End | Value at | Investment | Realized | Held at End | |||||||||
Underlying Funds | of Year | Additions | Reductions | of Year | End of Year | Income | Gain (Loss) | of Year | |||||||
Franklin LifeSmart 2030 Retirement | |||||||||||||||
Target Fund (continued) | |||||||||||||||
Franklin Pelagos Managed Futures Strategy | |||||||||||||||
Fund | 134 | — | (134 | ) | — | $ | —c | $ | — | $ | 18 | — | |||
Franklin Real Estate Securities Fund, | |||||||||||||||
Class R6 | 1,462 | 20,600 | (10,976 | ) | 11,086 | 244,222 | 3,650 | (3,982 | ) | 0.04 | % | ||||
Franklin Rising Dividends Fund, Class R6 | 3,552 | 42,573 | (18,677 | ) | 27,448 | 1,427,303 | 18,147 | 11,404 | a | 0.01 | % | ||||
Franklin Small Cap Growth Fund, | |||||||||||||||
Class R6 | 2,301 | 34,807 | (11,990 | ) | 25,118 | 488,539 | — | 13,086 | a | 0.02 | % | ||||
Franklin Strategic Income Fund, Class R6 | 2,848 | 46,634 | (9,438 | ) | 40,044 | 400,838 | 13,813 | 1,677 | a | —f | |||||
Franklin U.S. Government Securities Fund, | |||||||||||||||
Class R6 | 9,112 | 114,422 | (123,534 | ) | — | —c | 7,452 | (869 | ) | — | |||||
Franklin Utilities Fund, Class R6 | 4,590 | 47,105 | (15,809 | ) | 35,886 | 640,931 | 11,929 | 9,456 | a | 0.01 | % | ||||
Institutional Fiduciary Trust Money Market | �� | ||||||||||||||
Portfolio | — | 5,003,307 | (4,726,450 | ) | 276,857 | 276,857 | — | — | —f | ||||||
Templeton China World Fund, Class R6 | 737 | 9,457 | (604 | ) | 9,590 | 294,603 | 4,769 | 32,402 | a | 0.05 | % | ||||
Templeton Foreign Fund, Class R6 | 5,682 | 67,083 | (4,646 | ) | 68,119 | 467,978 | 15,733 | 9,863 | a | 0.01 | % | ||||
Templeton Frontier Markets Fund, | |||||||||||||||
Class R6 | 2,498 | 29,727 | (2,051 | ) | 30,174 | 434,198 | 18,312 | 7,095 | a | 0.04 | % | ||||
Templeton Global Total Return Fund, | |||||||||||||||
Class R6 | 6,325 | 132,767 | (23,630 | ) | 115,462 | 1,449,045 | 64,753 | (2,874 | )a | —f | |||||
Total | $ | 15,646,150 | $ | 254,445 | $ | 270,607 | |||||||||
Franklin LifeSmart 2035 Retirement | |||||||||||||||
Target Fund | |||||||||||||||
Franklin Biotechnology Discovery Fund, | |||||||||||||||
Class R6 | 28,135 | 3,825 | (23,088 | ) | 8,872 | $ | 1,522,074 | $ | — | $ | 429,111 | a | 0.09 | % | |
Franklin DynaTech Fund, Class R6 | 219,610 | 42,015 | (136,609 | ) | 125,016 | 5,889,481 | — | 836,214 | a | 0.24 | % | ||||
Franklin Emerging Market Debt Opportunities | |||||||||||||||
Fundb | 49,365 | 39,591 | (21,375 | ) | 67,581 | 717,034 | 63,058 | (15,749 | )a | 0.12 | % | ||||
Franklin Flex Cap Growth Fund, Class R6 | 27,074 | 5,478 | (32,552 | ) | — | —c | — | 655,922 | — | ||||||
Franklin Focused Core Equity Fund, | |||||||||||||||
Class R6 | — | 391,084 | (4,185 | ) | 386,899 | 5,640,994 | 13,461 | 111,568 | a | 4.61 | % | ||||
Franklin Growth Fund, Class R6 | 62,752 | 107,546 | (40,012 | ) | 130,286 | 9,740,178 | 73,478 | 30,979 | 0.09 | % | |||||
Franklin Growth Opportunities Fund, | |||||||||||||||
Class R6 | 49,762 | 75,591 | (6,099 | ) | 119,254 | 3,918,673 | — | 79,686 | a | 0.37 | % | ||||
Franklin International Growth Fund, | |||||||||||||||
Class R6 | 35,428 | 7,109 | (42,537 | ) | — | —c | — | 30,180 | — | ||||||
Franklin International Small Cap Growth | |||||||||||||||
Fund, Class R6 | 315,372 | 143,161 | (109,301 | ) | 349,232 | 6,310,620 | 106,196 | 331,023 | a | 0.39 | % | ||||
Franklin K2 Alternative Strategies Fund, | |||||||||||||||
Class R6 | — | 267,293 | — | 267,293 | 2,894,784 | 25,225 | — | 0.55 | % | ||||||
Franklin Low Duration Total Return Fund, | |||||||||||||||
Class R6 | 174,229 | 275,964 | (89,802 | ) | 360,391 | 3,614,719 | 71,693 | (5,281 | ) | 0.15 | % | ||||
Franklin MicroCap Value Fund, Class R6 | 31,204 | 22,795 | (53,999 | ) | — | —c | — | 197,637 | — | ||||||
Franklin Mutual European Fund, | |||||||||||||||
Class R6d | 188,555 | 38,384 | (226,939 | ) | — | —c | 4,816 | 576,959 | — | ||||||
Franklin Mutual International Fund, | |||||||||||||||
Class R6 | — | 359,030 | (3,695 | ) | 355,335 | 5,184,338 | 118,869 | 198,666 | a | 5.49 | % | ||||
Franklin Pelagos Commodities Strategy | |||||||||||||||
Fund, Class R6 | 60,010 | e | 48,516 | (5,830 | ) | 102,696 | 763,033 | — | (8,035 | ) | 1.35 | % |
franklintempleton.com Annual Report | 155
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
3. | Transactions with Affiliates (continued) |
f. | Investments in Underlying Funds (continued) |
% of | |||||||||||||||
Underlying | |||||||||||||||
Number of | Number of | Fund Shares | |||||||||||||
Shares Held | Shares | Outstanding | |||||||||||||
at Beginning | Gross | Gross Held at End | Value at | Investment | Realized | Held at End | |||||||||
Underlying Funds | of Year | Additions | Reductions | of Year | End of Year | Income | Gain (Loss) | of Year | |||||||
Franklin LifeSmart 2035 Retirement | |||||||||||||||
Target Fund (continued) | |||||||||||||||
Franklin Pelagos Managed Futures Strategy | |||||||||||||||
Fund | 5,589 | — | (5,589 | ) | — | $ | —c | $ | — | $ | (5,728 | ) | — | ||
Franklin Real Estate Securities Fund, | |||||||||||||||
Class R6 | 67,993 | 53,897 | (62,523 | ) | 59,367 | 1,307,852 | 29,598 | 26,017 | 0.22 | % | |||||
Franklin Rising Dividends Fund, Class R6 | 186,033 | 93,948 | (120,975 | ) | 159,006 | 8,268,321 | 150,593 | 296,601 | a | 0.05 | % | ||||
Franklin Small Cap Growth Fund, | |||||||||||||||
Class R6 | 104,302 | 88,900 | (67,873 | ) | 125,329 | 2,437,649 | — | 104,116 | a | 0.09 | % | ||||
Franklin Strategic Income Fund, Class R6 | 97,149 | 74,597 | (41,719 | ) | 130,027 | 1,301,566 | 68,303 | 4,594 | a | 0.01 | % | ||||
Franklin U.S. Government Securities Fund, | |||||||||||||||
Class R6 | 323,629 | 184,928 | (508,557 | ) | — | —c | 62,803 | (32,694 | ) | — | |||||
Franklin Utilities Fund, Class R6 | 239,377 | 103,244 | (139,188 | ) | 203,433 | 3,633,308 | 116,732 | 118,820 | a | 0.06 | % | ||||
Institutional Fiduciary Trust Money Market | |||||||||||||||
Portfolio | 962,275 | 36,270,783 | (35,720,846 | ) | 1,512,212 | 1,512,212 | — | — | 0.01 | % | |||||
Templeton China World Fund, Class R6 | 35,578 | 15,557 | (3,889 | ) | 47,246 | 1,451,389 | 22,906 | 146,850 | a | 0.23 | % | ||||
Templeton Foreign Fund, Class R6 | 286,395 | 105,471 | (31,512 | ) | 360,354 | 2,475,634 | 81,071 | 65,486 | a | 0.04 | % | ||||
Templeton Frontier Markets Fund, | |||||||||||||||
Class R6 | 119,184 | 45,577 | (13,169 | ) | 151,592 | 2,181,405 | 86,060 | 70,970 | a | 0.22 | % | ||||
Templeton Global Total Return Fund, | |||||||||||||||
Class R6 | 217,058 | 289,595 | (107,098 | ) | 399,555 | 5,014,416 | 355,846 | (77,844 | )a | 0.06 | % | ||||
Total | $ | 75,779,680 | $ | 1,450,708 | $ | 4,166,068 | |||||||||
Franklin LifeSmart 2040 Retirement | |||||||||||||||
Target Fund | |||||||||||||||
Franklin Biotechnology Discovery Fund, | |||||||||||||||
Class R6 | 236 | 1,995 | (1,091 | ) | 1,140 | $ | 195,561 | $ | — | $ | 19,095 | a | 0.01 | % | |
Franklin DynaTech Fund, Class R6 | 2,321 | 32,239 | (13,241 | ) | 21,319 | 1,004,358 | — | 49,808 | a | 0.04 | % | ||||
Franklin Emerging Market Debt Opportunities | |||||||||||||||
Fundb | 468 | 11,396 | (3,001 | ) | 8,863 | 94,034 | 5,282 | 434 | a | 0.02 | % | ||||
Franklin Flex Cap Growth Fund, Class R6 | 284 | 3,763 | (4,047 | ) | — | —c | — | 6,226 | — | ||||||
Franklin Focused Core Equity Fund, | |||||||||||||||
Class R6 | — | 62,211 | (3,084 | ) | 59,127 | 862,066 | 1,926 | 16,095 | a | 0.71 | % | ||||
Franklin Growth Fund, Class R6 | 822 | 28,688 | (6,874 | ) | 22,636 | 1,692,303 | 11,710 | 57 | 0.02 | % | |||||
Franklin Growth Opportunities Fund, | |||||||||||||||
Class R6 | 533 | 19,145 | (1,109 | ) | 18,569 | 610,170 | — | 10,700 | a | 0.06 | % | ||||
Franklin International Growth Fund, | |||||||||||||||
Class R6 | 391 | 5,356 | (5,747 | ) | — | —c | — | (1,829 | ) | — | |||||
Franklin International Small Cap Growth | |||||||||||||||
Fund, Class R6 | 3,365 | 64,739 | (13,600 | ) | 54,504 | 984,883 | 15,508 | 39,650 | a | 0.06 | % | ||||
Franklin K2 Alternative Strategies Fund, | |||||||||||||||
Class R6 | — | 35,616 | — | 35,616 | 385,721 | 3,361 | — | 0.07 | % | ||||||
Franklin Low Duration Total Return Fund, | |||||||||||||||
Class R6 | 1,711 | 59,608 | (10,632 | ) | 50,687 | 508,390 | 6,534 | (115 | ) | 0.02 | % | ||||
Franklin MicroCap Value Fund, Class R6 | 311 | 5,838 | (6,149 | ) | — | —c | — | (6,918 | ) | — | |||||
Franklin Mutual European Fund, | |||||||||||||||
Class R6d | 1,922 | 26,065 | (27,987 | ) | — | —c | 639 | (5,697 | ) | — | |||||
156 | | Annual Report | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
% of | |||||||||||||||
Underlying | |||||||||||||||
Number of | Number of | Fund Shares | |||||||||||||
Shares Held | Shares | Outstanding | |||||||||||||
at Beginning | Gross | Gross | Held at End | Value at | Investment | Realized | Held at End | ||||||||
Underlying Funds | of Year | Additions | Reductions | of Year | End of Year | Income | Gain (Loss) | of Year | |||||||
Franklin LifeSmart 2040 Retirement | |||||||||||||||
Target Fund (continued) | |||||||||||||||
Franklin Mutual International Fund, | |||||||||||||||
Class R6 | — | 58,221 | (2,850 | ) | 55,371 | $ | 807,867 | $ | 17,950 | $ | 29,190 | a | 0.86 | % | |
Franklin Pelagos Commodities Strategy | |||||||||||||||
Fund, Class R6 | 550 | e | 14,040 | — | 14,590 | 108,407 | — | — | 0.19 | % | |||||
Franklin Pelagos Managed Futures Strategy | |||||||||||||||
Fund | 51 | — | (51 | ) | — | —c | — | 5 | — | ||||||
Franklin Real Estate Securities Fund, | |||||||||||||||
Class R6 | 721 | 15,161 | (7,508 | ) | 8,374 | 184,483 | 2,447 | (2,926 | ) | 0.03 | % | ||||
Franklin Rising Dividends Fund, Class R6 | 1,849 | 34,188 | (14,918 | ) | 21,119 | 1,098,179 | 12,578 | 8,022 | a | 0.01 | % | ||||
Franklin Small Cap Growth Fund, | |||||||||||||||
Class R6 | 1,050 | 26,024 | (8,395 | ) | 18,679 | 363,318 | — | 9,049 | a | 0.01 | % | ||||
Franklin Strategic Income Fund, Class R6 | 973 | 23,199 | (6,407 | ) | 17,765 | 177,831 | 4,965 | 1,613 | a | —f | |||||
Franklin U.S. Government Securities Fund, | |||||||||||||||
Class R6 | 3,081 | 63,776 | (66,857 | ) | — | —c | 2,803 | (351 | ) | — | |||||
Franklin Utilities Fund, Class R6 | 2,473 | 38,733 | (11,316 | ) | 29,890 | 533,839 | 8,542 | 6,725 | a | 0.01 | % | ||||
Institutional Fiduciary Trust Money Market | |||||||||||||||
Portfolio | — | 3,829,181 | (3,618,365 | ) | 210,816 | 210,816 | — | — | —f | ||||||
Templeton China World Fund, Class R6 | 386 | 7,540 | (411 | ) | 7,515 | 230,875 | 3,610 | 24,870 | a | 0.04 | % | ||||
Templeton Foreign Fund, Class R6 | 2,945 | 55,640 | (3,246 | ) | 55,339 | 380,181 | 12,323 | 8,534 | a | 0.01 | % | ||||
Templeton Frontier Markets Fund, | |||||||||||||||
Class R6 | 1,281 | 24,164 | (1,407 | ) | 24,038 | 345,908 | 13,270 | 6,735 | a | 0.03 | % | ||||
Templeton Global Total Return Fund, | |||||||||||||||
Class R6 | 2,158 | 67,437 | (14,138 | ) | 55,457 | 695,982 | 26,923 | 1,006 | a | 0.01 | % | ||||
Total | $ | 11,475,172 | $ | 150,371 | $ | 219,978 | |||||||||
Franklin LifeSmart 2045 Retirement | |||||||||||||||
Target Fund | |||||||||||||||
Franklin Biotechnology Discovery Fund, | |||||||||||||||
Class R6 | 18,169 | 3,367 | (16,030 | ) | 5,506 | $ | 944,547 | $ | — | $ | 285,949 | a | 0.05 | % | |
Franklin DynaTech Fund, Class R6 | 156,359 | 40,623 | (106,398 | ) | 90,584 | 4,267,391 | — | 610,512 | a | 0.17 | % | ||||
Franklin Emerging Market Debt Opportunities | |||||||||||||||
Fundb | 23,016 | 18,720 | (12,451 | ) | 29,285 | 310,714 | 24,401 | (1,708 | )a | 0.05 | % | ||||
Franklin Flex Cap Growth Fund, Class R6 | 15,327 | 3,697 | (19,024 | ) | — | —c | — | 378,642 | — | ||||||
Franklin Focused Core Equity Fund, | |||||||||||||||
Class R6 | — | 252,084 | — | 252,084 | 3,675,381 | 8,953 | 76,473 | a | 3.01 | % | |||||
Franklin Growth Fund, Class R6 | 45,518 | 75,271 | (30,263 | ) | 90,526 | 6,767,750 | 52,537 | 32,865 | 0.06 | % | |||||
Franklin Growth Opportunities Fund, | |||||||||||||||
Class R6 | 27,492 | 41,041 | (4,527 | ) | 64,006 | 2,103,247 | — | 46,644 | a | 0.20 | % | ||||
Franklin International Growth Fund, | |||||||||||||||
Class R6 | 24,601 | 6,012 | (30,613 | ) | — | —c | — | 21,196 | — | ||||||
Franklin International Small Cap Growth | |||||||||||||||
Fund, Class R6 | 221,280 | 102,866 | (88,648 | ) | 235,498 | 4,255,450 | 73,110 | 252,127 | a | 0.26 | % | ||||
Franklin K2 Alternative Strategies Fund, | |||||||||||||||
Class R6 | — | 176,753 | — | 176,753 | 1,914,232 | 16,681 | — | 0.36 | % | ||||||
Franklin Low Duration Total Return Fund, | |||||||||||||||
Class R6 | 89,366 | 126,163 | (48,808 | ) | 166,721 | 1,672,215 | 34,707 | (1,521 | ) | 0.07 | % | ||||
Franklin MicroCap Value Fund, Class R6 | 17,771 | 14,664 | (32,435 | ) | — | —c | — | 118,550 | — | ||||||
Franklin Mutual European Fund, | |||||||||||||||
Class R6d | 128,117 | 30,941 | (159,058 | ) | — | —c | 3,182 | 395,812 | — |
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3. | Transactions with Affiliates (continued) |
f. | Investments in Underlying Funds (continued) |
% of | ||||||||||||||||
Underlying | ||||||||||||||||
Number of | Number of | Fund Shares | ||||||||||||||
Shares Held | Shares | Outstanding | ||||||||||||||
at Beginning | Gross | Gross | Held at End | Value at | Investment | Realized | Held at End | |||||||||
Underlying Funds | of Year | Additions | Reductions | of Year | End of Year | Income | Gain (Loss) | of Year | ||||||||
Franklin LifeSmart 2045 Retirement | ||||||||||||||||
Target Fund (continued) | ||||||||||||||||
Franklin Mutual International Fund, | ||||||||||||||||
Class R6 | — | 236,657 | — | 236,657 | $ | 3,452,828 | $ | 79,962 | $ | 135,952 | a | 3.66 | % | |||
Franklin Pelagos Commodities Strategy | ||||||||||||||||
Fund, Class R6 | 34,055 | e | 41,195 | (6,615 | ) | 68,635 | 509,955 | — | (8,641 | ) | 0.90 | % | ||||
Franklin Pelagos Managed Futures Strategy | ||||||||||||||||
Fund | 3,159 | — | (3,159 | ) | — | —c | — | (1,056 | ) | — | ||||||
Franklin Real Estate Securities Fund, | ||||||||||||||||
Class R6 | 38,542 | 34,020 | (38,795 | ) | 33,767 | 743,893 | 17,247 | 13,681 | 0.13 | % | ||||||
Franklin Rising Dividends Fund, Class R6 | 135,441 | 66,845 | (89,243 | ) | 113,043 | 5,878,244 | 108,144 | 222,019 | a | 0.03 | % | |||||
Franklin Small Cap Growth Fund, | ||||||||||||||||
Class R6 | 70,051 | 60,797 | (48,973 | ) | 81,875 | 1,592,466 | — | 72,991 | a | 0.06 | % | |||||
Franklin Strategic Income Fund, Class R6 | 45,777 | 36,232 | (25,213 | ) | 56,796 | 568,530 | 31,603 | 5,322 | a | 0.01 | % | |||||
Franklin U.S. Government Securities Fund, | ||||||||||||||||
Class R6 | 153,136 | 112,386 | (265,522 | ) | — | —c | 31,011 | (23,355 | ) | — | ||||||
Franklin Utilities Fund, Class R6 | 169,143 | 74,661 | (107,307 | ) | 136,497 | 2,437,845 | 81,420 | 93,247 | a | 0.04 | % | |||||
Institutional Fiduciary Trust Money Market | ||||||||||||||||
Portfolio | 329,483 | 26,686,569 | (25,780,880 | ) | 1,235,172 | 1,235,172 | — | — | 0.01 | % | ||||||
Templeton China World Fund, Class R6 | 26,217 | 12,345 | (4,337 | ) | 34,225 | 1,051,395 | 17,098 | 100,891 | a | 0.17 | % | |||||
Templeton Foreign Fund, Class R6 | 239,512 | 89,754 | (39,642 | ) | 289,624 | 1,989,720 | 67,219 | 60,230 | a | 0.03 | % | |||||
Templeton Frontier Markets Fund, | ||||||||||||||||
Class R6 | 80,335 | 31,068 | (13,251 | ) | 98,152 | 1,412,407 | 56,857 | 53,748 | a | 0.14 | % | |||||
Templeton Global Total Return Fund, | ||||||||||||||||
Class R6 | 104,863 | 131,110 | (57,754 | ) | 178,219 | 2,236,642 | 153,313 | (16,920 | )a | 0.03 | % | |||||
Total | $ | 49,020,024 | $ | 857,445 | $ | 2,923,650 | ||||||||||
Franklin LifeSmart 2050 Retirement | ||||||||||||||||
Target Fund | ||||||||||||||||
Franklin Biotechnology Discovery Fund, | ||||||||||||||||
Class R6 | 182 | 1,464 | (903 | ) | 743 | $ | 127,514 | $ | — | $ | 11,457 | a | 0.01 | % | ||
Franklin DynaTech Fund, Class R6 | 1,922 | 25,235 | (11,062 | ) | 16,095 | 758,223 | — | 38,250 | a | 0.03 | % | |||||
Franklin Emerging Market Debt Opportunities | ||||||||||||||||
Fundb | 315 | 9,323 | (4,688 | ) | 4,950 | 52,514 | 3,000 | (1,212 | )a | 0.01 | % | |||||
Franklin Flex Cap Growth Fund, Class R6 | 192 | 2,333 | (2,525 | ) | — | —c | — | 4,429 | — | |||||||
Franklin Focused Core Equity Fund, | ||||||||||||||||
Class R6 | — | 47,932 | (3,180 | ) | 44,752 | 652,484 | 1,527 | 12,742 | a | 0.53 | % | |||||
Franklin Growth Fund, Class R6 | 731 | 22,565 | (6,095 | ) | 17,201 | 1,285,941 | 9,454 | 2,518 | 0.01 | % | ||||||
Franklin Growth Opportunities Fund, | ||||||||||||||||
Class R6 | 359 | 11,951 | (998 | ) | 11,312 | 371,720 | — | 6,825 | a | 0.03 | % | |||||
Franklin International Growth Fund, | ||||||||||||||||
Class R6 | 358 | 4,330 | (4,688 | ) | — | —c | — | (1,172 | ) | — | ||||||
Franklin International Small Cap Growth | ||||||||||||||||
Fund, Class R6 | 2,773 | 50,503 | (12,307 | ) | 40,969 | 740,310 | 12,219 | 28,573 | a | 0.05 | % | |||||
Franklin K2 Alternative Strategies Fund, | ||||||||||||||||
Class R6 | — | 27,330 | — | 27,330 | 295,988 | 2,579 | — | 0.06 | % | |||||||
Franklin Low Duration Total Return Fund, | ||||||||||||||||
Class R6 | 1,238 | 47,307 | (21,125 | ) | 27,420 | 275,021 | 3,851 | (492 | ) | 0.01 | % | |||||
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NOTES TO FINANCIAL STATEMENTS
% of | |||||||||||||||
Underlying | |||||||||||||||
Number of | Number of | Fund Shares | |||||||||||||
Shares Held | Shares | Outstanding | |||||||||||||
at Beginning | Gross | Gross | Held at End | Value at | Investment | Realized | Held at End | ||||||||
Underlying Funds | of Year | Additions | Reductions | of Year | End of Year | Income | Gain (Loss) | of Year | |||||||
Franklin LifeSmart 2050 Retirement | |||||||||||||||
Target Fund (continued) | |||||||||||||||
Franklin MicroCap Value Fund, Class R6 | 204 | 3,701 | (3,905 | ) | — | $ | —c | $ | — | $ | (3,937 | ) | — | ||
Franklin Mutual European Fund, | |||||||||||||||
Class R6d | 1,640 | 20,018 | (21,658 | ) | — | —c | 480 | (4,299 | ) | — | |||||
Franklin Mutual International Fund, | |||||||||||||||
Class R6 | — | 44,460 | (2,889 | ) | 41,571 | 606,520 | 13,786 | 21,914 | a | 0.64 | % | ||||
Franklin Pelagos Commodities Strategy | |||||||||||||||
Fund, Class R6 | 451 | e | 10,661 | — | 11,112 | 82,565 | — | — | 0.15 | % | |||||
Franklin Pelagos Managed Futures Strategy | |||||||||||||||
Fund | 44 | 6 | (50 | ) | — | —c | — | 6 | — | ||||||
Franklin Real Estate Securities Fund, | |||||||||||||||
Class R6 | 509 | 10,600 | (5,539 | ) | 5,570 | 122,696 | 1,760 | (1,816 | ) | 0.02 | % | ||||
Franklin Rising Dividends Fund, Class R6 | 1,608 | 27,353 | (12,260 | ) | 16,701 | 868,442 | 10,568 | 7,092 | a | 0.01 | % | ||||
Franklin Small Cap Growth Fund, | |||||||||||||||
Class R6 | 868 | 16,061 | (6,004 | ) | 10,925 | 212,486 | — | 5,417 | a | 0.01 | % | ||||
Franklin Strategic Income Fund, Class R6 | 701 | 20,496 | (10,633 | ) | 10,564 | 105,742 | 3,423 | (377 | )a | —f | |||||
Franklin U.S. Government Securities Fund, | |||||||||||||||
Class R6 | 2,050 | 42,585 | (44,635 | ) | — | —c | 1,679 | (110 | ) | — | |||||
Franklin Utilities Fund, Class R6 | 2,113 | 31,170 | (10,513 | ) | 22,770 | 406,671 | 7,143 | 5,871 | a | 0.01 | % | ||||
Institutional Fiduciary Trust Money Market | |||||||||||||||
Portfolio | — | 3,267,235 | (3,114,371 | ) | 152,864 | 152,864 | — | — | —f | ||||||
Templeton China World Fund, Class R6 | 337 | 4,352 | (596 | ) | 4,093 | 125,729 | 1,990 | 13,151 | a | 0.02 | % | ||||
Templeton Foreign Fund, Class R6 | 3,115 | 53,954 | (5,206 | ) | 51,863 | 356,300 | 11,697 | 6,754 | a | 0.01 | % | ||||
Templeton Frontier Markets Fund, | |||||||||||||||
Class R6 | 997 | 17,438 | (1,671 | ) | 16,764 | 241,237 | 9,815 | 3,513 | a | 0.02 | % | ||||
Templeton Global Total Return Fund, | |||||||||||||||
Class R6 | 1,317 | 49,679 | (22,334 | ) | 28,662 | 359,711 | 14,556 | (5,005 | )a | —f | |||||
Total | $ | 8,200,678 | $ | 109,527 | $ | 150,092 |
aIncludes realized gain distributions received.
bEffective June 30, 2014, Franklin Templeton Emerging Markets Debt Opportunities Fund was renamed Franklin Emerging Market Debt Opportunities Fund.
cAs of December 31, 2014, no longer held by the fund.
dEffective June 30, 2014, Mutual European Fund was renamed Franklin Mutual European Fund.
eEffective January 10, 2014, the Underlying Fund's shares were exchanged to Class R6.
fRounds to less than 0.01%.
g. Waiver and Expense Reimbursements
Advisers and Investor Services have contractually agreed in advance to waive or limit their respective fees and to assume as their own expense certain expenses otherwise payable by the funds so that the expenses (excluding distribution fees and acquired fund fees and expenses) for Class A, Class C, Class R and Advisor Class of the funds do not exceed 0.05%, and Class R6 does not exceed 0.00% based on the average net assets of each class (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until April 30, 2015.
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NOTES TO FINANCIAL STATEMENTS
4. Expense Offset Arrangement
The Funds have entered into an arrangement with their custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Funds’ custodian expenses. During the year ended December 31, 2014, there were no credits earned.
5. Income Taxes
For tax purposes, the Funds may elect to defer any portion of a post-October capital loss to the first day of the following fiscal year. At December 31, 2014, Franklin LifeSmart 2015 Retirement Target Fund deferred post-October capital losses of $31,208.
The tax character of distributions paid during the years ended December 31, 2014 and 2013, was as follows:
Franklin | Franklin | Franklin | Franklin | |||||||||||||
LifeSmart 2015 | LifeSmart 2020 | LifeSmart 2025 | LifeSmart 2030 | |||||||||||||
Retirement | Retirement | Retirement | Retirement | |||||||||||||
Target Fund | Target Fund | Target Fund | Target Fund | |||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||
Distributions paid from: | ||||||||||||||||
Ordinary income | $ | 3,294,721 | $ | 1,809,218 | $ | 354,209 | $ | 28,479 | $ | 3,260,296 | $ | 1,863,962 | $ | 332,616 | $ | 13,876 |
Long term capital gain | 2,926,928 | 2,483,540 | 31,490 | — | 4,926,449 | 2,111,104 | 20,982 | — | ||||||||
$ | 6,221,649 | $ | 4,292,758 | $ | 385,699 | $ | 28,479 | $ | 8,186,745 | $ | 3,975,066 | $ | 353,598 | $ | 13,876 | |
Franklin | Franklin | Franklin | Franklin | |||||||||||||
LifeSmart 2035 | LifeSmart 2040 | LifeSmart 2045 | LifeSmart 2050 | |||||||||||||
Retirement | Retirement | Retirement | Retirement | |||||||||||||
Target Fund | Target Fund | Target Fund | Target Fund | |||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||
Distributions paid from: | ||||||||||||||||
Ordinary income | $ | 2,039,361 | $ | 1,174,006 | $ | 204,870 | $ | 6,613 | $ | 1,294,478 | $ | 727,573 | $ | 158,953 | $ | 5,960 |
Long term capital gain | 3,332,526 | 1,651,655 | 11,120 | — | 2,196,520 | 1,041,929 | 10,725 | — | ||||||||
$ | 5,371,887 | $ | 2,825,661 | $ | 215,990 | $ | 6,613 | $ | 3,490,998 | $ | 1,769,502 | $ | 169,678 | $ | 5,960 |
At December 31, 2014, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:
Franklin | Franklin | Franklin | Franklin | |||||||||
LifeSmart | LifeSmart | LifeSmart | LifeSmart | |||||||||
2015 Retirement | 2020 Retirement | 2025 Retirement | 2030 Retirement | |||||||||
Target Fund | Target Fund | Target Fund | Target Fund | |||||||||
Cost of investments | $ | 78,159,835 | $ | 17,391,931 | $ | 104,936,755 | $ | 19,283,770 | ||||
Unrealized appreciation | $ | 5,316,309 | $ | 434,906 | $ | 13,368,893 | $ | 503,710 | ||||
Unrealized depreciation | (2,441,800 | ) | (708,772 | ) | (2,298,023 | ) | (835,728 | ) | ||||
Net unrealized appreciation (depreciation) | $ | 2,874,509 | $ | (273,866 | ) | $ | 11,070,870 | $ | (332,018 | ) | ||
Undistributed ordinary income | $ | 72,544 | $ | 10,492 | $ | 173,918 | $ | 15,182 | ||||
Undistributed long term capital gains | 1,149,756 | 232,262 | 1,972,301 | 334,308 | ||||||||
Distributable earnings | $ | 1,222,300 | $ | 242,754 | $ | 2,146,219 | $ | 349,490 |
160 | Annual Report
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NOTES TO FINANCIAL STATEMENTS | ||||||||||||||
Franklin | Franklin | Franklin | Franklin | |||||||||||
LifeSmart | LifeSmart | LifeSmart | LifeSmart | |||||||||||
2035 Retirement | 2040 Retirement | 2045 Retirement | 2050 Retirement | |||||||||||
Target Fund | Target Fund | Target Fund | Target Fund | |||||||||||
Cost of investments | $ | 83,211,811 | $ | 13,913,330 | $ | 53,211,501 | $ | 9,986,783 | ||||||
Unrealized appreciation | $ | 10,874,679 | $ | 348,316 | $ | 7,418,226 | $ | 304,387 | ||||||
Unrealized depreciation | (1,602,879 | ) | (565,983 | ) | (940,491 | ) | (424,197 | ) | ||||||
Net unrealized appreciation (depreciation) | $ | 9,271,800 | $ | (217,667 | ) | $ | 6,477,735 | $ | (119,810 | ) | ||||
Undistributed ordinary income | $ | 178,817 | $ | 13,062 | $ | 103,843 | $ | 9,072 | ||||||
Undistributed long term capital gains | 1,668,983 | 242,365 | 1,168,400 | 184,155 | ||||||||||
Distributable earnings | $ | 1,847,800 | $ | 255,427 | $ | 1,272,243 | $ | 193,227 |
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of short term capital gains distributions from Underlying Funds and ETFs and wash sales.
6. Investment Transactions
Purchases and sales of Underlying Funds and ETFs (excluding short term securities) for the year ended December 31, 2014, were as follows:
Franklin | Franklin | Franklin | Franklin | |||||
LifeSmart | LifeSmart | LifeSmart | LifeSmart | |||||
2015 Retirement | 2020 Retirement | 2025 Retirement | 2030 Retirement | |||||
Target Fund | Target Fund | Target Fund | Target Fund | |||||
Purchases | $ | 62,495,728 | $ | 20,726,749 | $ | 82,585,426 | $ | 25,253,752 |
Sales | $ | 52,288,225 | $ | 6,133,535 | $ | 65,255,458 | $ | 7,691,202 |
Franklin | Franklin | Franklin | Franklin | |||||
LifeSmart | LifeSmart | LifeSmart | LifeSmart | |||||
2035 Retirement | 2040 Retirement | 2045 Retirement | 2050 Retirement | |||||
Target Fund | Target Fund | Target Fund | Target Fund | |||||
Purchases | $ | 69,961,580 | $ | 18,635,234 | $ | 45,927,337 | $ | 14,005,170 |
Sales | $ | 48,899,356 | $ | 5,630,458 | $ | 34,111,748 | $ | 4,744,849 |
7. Credit Facility
The Funds, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $1.5 billion (Global Credit Facility) which matured on February 13, 2015. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. The Borrowers expect to renew the Global Credit Facility for a total of $2 billion effective February 13, 2015, which matures on February 12, 2016.
Under the terms of the Global Credit Facility, the Funds shall, in addition to interest charged on any borrowings made by the Funds and other costs incurred by the Funds, pay their share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon their relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses on the Statements of Operations. During the year ended December 31, 2014, the Funds did not use the Global Credit Facility.
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FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
8. Fair Value Measurements
The Funds follow a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds’ own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds’ financial instruments and are summarized in the following fair value hierarchy:
- Level 1 – quoted prices in active markets for identical financial instruments
- Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
- Level 3 – significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of financial instruments)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
For movements between the levels within the fair value hierarchy, the Funds have adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.
At December 31, 2014, all of the Funds’ investments in financial instruments carried at fair value were valued using Level 1 inputs. For detailed categories, see the accompanying Statements of Investments.
9. Subsequent Events
The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.
Abbreviations
Selected Portfolio
ETF Exchange Traded Fund
162 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of Franklin Fund Allocator Series
In our opinion, the accompanying statements of assets and liabilities, including the statements of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Franklin LifeSmart 2015 Retirement Target Fund, Franklin LifeSmart 2020 Retirement Target Fund, Franklin LifeSmart 2025 Retirement Target Fund, Franklin LifeSmart 2030 Retirement Target Fund, Franklin LifeSmart 2035 Retirement Target Fund, Franklin LifeSmart 2040 Retirement Target Fund, Franklin LifeSmart 2045 Retirement Target Fund, and Franklin LifeSmart 2050 Retirement Target Fund (separate portfolios of Franklin Fund Allocator Series, hereafter referred to as the “Funds”) at December 31, 2014, the results of each of their operations for the year then ended, the changes in each of their net assets and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2014 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 13, 2015
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FRANKLIN FUND ALLOCATOR SERIES
Tax Information (unaudited)
Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Funds hereby report the maximum amount allowable but no less than the following amounts as long term capital gain dividends for the fiscal year ended December 31, 2014:
Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | ||||
2015 Retirement | 2020 Retirement | 2025 Retirement | 2030 Retirement | ||||
Target Fund | Target Fund | Target Fund | Target Fund | ||||
$ | 2,926,928 | $ | 31,490 | $ | 4,926,449 | $ | 20,982 |
Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | ||||
2035 Retirement | 2040 Retirement | 2045 Retirement | 2050 Retirement | ||||
Target Fund | Target Fund | Target Fund | Target Fund | ||||
$ | 3,332,526 | $ | 11,119 | $ | 2,196,520 | $ | 10,725 |
Under Section 871(k)(2)(C) of the Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as short term capital gain dividends for purposes of the tax imposed under Section 871(a)(1)(A) of the Code for the fiscal year ended December 31, 2014:
Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | ||||
2015 Retirement | 2020 Retirement | 2025 Retirement | 2030 Retirement | ||||
Target Fund | Target Fund | Target Fund | Target Fund | ||||
$ | 866,015 | $ | 1,168 | $ | 958,751 | $ | 11,128 |
Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | ||||
2035 Retirement | 2040 Retirement | 2045 Retirement | 2050 Retirement | ||||
Target Fund | Target Fund | Target Fund | Target Fund | ||||
$ | 452,394 | $ | 822 | $ | 336,286 | $ | 12,462 |
Under Section 854(b)(1)(A) of the Code, the Funds hereby report the following percentage amounts of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2014:
Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | ||||
2015 Retirement | 2020 Retirement | 2025 Retirement | 2030 Retirement | ||||
Target Fund | Target Fund | Target Fund | Target Fund | ||||
5.08 | % | 11.31 | % | 13.00 | % | 15.72 | % |
Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | ||||
2035 Retirement | 2040 Retirement | 2045 Retirement | 2050 Retirement | ||||
Target Fund | Target Fund | Target Fund | Target Fund | ||||
18.43 | % | 18.49 | % | 20.74 | % | 19.84 | % |
Under Section 854(b)(1)(B) of the Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended December 31, 2014:
Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | ||||
2015 Retirement | 2020 Retirement | 2025 Retirement | 2030 Retirement | ||||
Target Fund | Target Fund | Target Fund | Target Fund | ||||
$ | 399,757 | $ | 97,665 | $ | 925,855 | $ | 130,412 |
Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | ||||
2035 Retirement | 2040 Retirement | 2045 Retirement | 2050 Retirement | ||||
Target Fund | Target Fund | Target Fund | Target Fund | ||||
$ | 819,804 | $ | 95,889 | $ | 572,968 | $ | 77,503 |
Distributions, including qualified dividend income, paid during calendar year 2014 will be reported to shareholders on Form 1099-DIV by mid-February 2015. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.
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TAX INFORMATION (UNAUDITED)
During the fiscal year ended December 31, 2014, the Funds, qualified fund of funds under Section 852(g)(2) of Code, received an allocation of foreign taxes paid from one or more of its underlying funds. As shown in the table below, the Funds hereby report to shareholders the foreign source income and foreign taxes paid by underlying funds, pursuant to Section 853 of the Code. This written statement will allow shareholders of record on December 29, 2014, to treat their proportionate share of foreign taxes paid by the underlying funds as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.
The following tables provide a detailed analysis of foreign tax paid, foreign source income, and foreign source qualified dividends as reported by the Funds, to Class A, Class C, Class R, Class R6, and Advisor Class shareholders of record.
Foreign Tax | Foreign Source | Foreign Source Qualified | ||||
Class | Paid Per Share | Income Per Share | Dividends Per Share | |||
Franklin LifeSmart 2015 Retirement Target Fund | ||||||
Class A | $ | 0.0034 | $ | 0.1247 | $ | 0.0132 |
Class C | $ | 0.0034 | $ | 0.1247 | $ | 0.0132 |
Class R | $ | 0.0034 | $ | 0.1247 | $ | 0.0132 |
Class R6 | $ | 0.0034 | $ | 0.1247 | $ | 0.0132 |
Advisor Class | $ | 0.0034 | $ | 0.1247 | $ | 0.0132 |
Franklin LifeSmart 2020 Retirement Target Fund | ||||||
Class A | $ | 0.0038 | $ | 0.0862 | $ | 0.0208 |
Class C | $ | 0.0038 | $ | 0.0862 | $ | 0.0208 |
Class R | $ | 0.0038 | $ | 0.0862 | $ | 0.0208 |
Class R6 | $ | 0.0038 | $ | 0.0862 | $ | 0.0208 |
Advisor Class | $ | 0.0038 | $ | 0.0862 | $ | 0.0208 |
Franklin LifeSmart 2025 Retirement Target Fund | ||||||
Class A | $ | 0.0048 | $ | 0.0959 | $ | 0.0281 |
Class C | $ | 0.0048 | $ | 0.0959 | $ | 0.0281 |
Class R | $ | 0.0048 | $ | 0.0959 | $ | 0.0281 |
Class R6 | $ | 0.0048 | $ | 0.0959 | $ | 0.0281 |
Advisor Class | $ | 0.0048 | $ | 0.0959 | $ | 0.0281 |
Franklin LifeSmart 2030 Retirement Target Fund | ||||||
Class A | $ | 0.0047 | $ | 0.0796 | $ | 0.0277 |
Class C | $ | 0.0047 | $ | 0.0796 | $ | 0.0277 |
Class R | $ | 0.0047 | $ | 0.0796 | $ | 0.0277 |
Class R6 | $ | 0.0047 | $ | 0.0796 | $ | 0.0277 |
Advisor Class | $ | 0.0047 | $ | 0.0796 | $ | 0.0277 |
Franklin LifeSmart 2035 Retirement Target Fund | ||||||
Class A | $ | 0.0052 | $ | 0.0871 | $ | 0.0326 |
Class C | $ | 0.0052 | $ | 0.0871 | $ | 0.0326 |
Class R | $ | 0.0052 | $ | 0.0871 | $ | 0.0326 |
Class R6 | $ | 0.0052 | $ | 0.0871 | $ | 0.0326 |
Advisor Class | $ | 0.0052 | $ | 0.0871 | $ | 0.0326 |
Franklin LifeSmart 2040 Retirement Target Fund | ||||||
Class A | $ | 0.0046 | $ | 0.0676 | $ | 0.0293 |
Class C | $ | 0.0046 | $ | 0.0676 | $ | 0.0293 |
Class R | $ | 0.0046 | $ | 0.0676 | $ | 0.0293 |
Class R6 | $ | 0.0046 | $ | 0.0676 | $ | 0.0293 |
Advisor Class | $ | 0.0046 | $ | 0.0676 | $ | 0.0293 |
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FRANKLIN FUND ALLOCATOR SERIES
TAX INFORMATION (UNAUDITED)
Foreign Tax | Foreign Source | Foreign Source Qualified | ||||
Class | Paid Per Share | Income Per Share | Dividends Per Share | |||
Franklin LifeSmart 2045 Retirement Target Fund | ||||||
Class A | $ | 0.0056 | $ | 0.0831 | $ | 0.0365 |
Class C | $ | 0.0056 | $ | 0.0831 | $ | 0.0365 |
Class R | $ | 0.0056 | $ | 0.0831 | $ | 0.0365 |
Class R6 | $ | 0.0056 | $ | 0.0831 | $ | 0.0365 |
Advisor Class | $ | 0.0056 | $ | 0.0831 | $ | 0.0365 |
Franklin LifeSmart 2050 Retirement Target Fund | ||||||
Class A | $ | 0.0050 | $ | 0.0697 | $ | 0.0334 |
Class C | $ | 0.0050 | $ | 0.0697 | $ | 0.0334 |
Class R | $ | 0.0050 | $ | 0.0697 | $ | 0.0334 |
Class R6 | $ | 0.0050 | $ | 0.0697 | $ | 0.0334 |
Advisor Class | $ | 0.0050 | $ | 0.0697 | $ | 0.0334 |
Foreign Tax Paid Per Share (Column 1) is the amount per share available to you, as a tax credit (assuming you held your shares in the Fund for a minimum of 16 days during the 31-day period beginning 15 days before the ex-dividend date of the Fund’s distribution to which the foreign taxes relate), or, as a tax deduction.
Foreign Source Income Per Share (Column 2) is the amount per share of income dividends attributable to foreign securities held by the underlying funds, plus any foreign taxes withheld on these dividends. The amounts reported include foreign source qualified dividends that have not been adjusted for the rate differential applicable to such dividend income.1
Foreign Source Qualified Dividends Per Share (Column 3) is the amount per share of foreign source qualified dividends, plus any foreign taxes withheld on these dividends. These amounts represent the portion of the Foreign Source Income reported to you in column 2 that were derived from qualified foreign securities held by the underlying funds.1
By mid-February 2015, shareholders will receive Form 1099-DIV which will include their share of taxes paid and foreign source income distributed during the calendar year 2014. The Foreign Source Income reported on Form 1099-DIV has not been adjusted for the rate differential on foreign source qualified dividend income. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their 2014 individual income tax returns.
1Qualified dividends are taxed at reduced long term capital gains tax rates. In determining the amount of foreign tax credit that may be applied against the U.S. tax liability
of individuals receiving foreign source qualified dividends, adjustments may be required to the foreign tax credit limitation calculation to reflect the rate differential applicable
to such dividend income. The rules however permit certain individuals to elect not to apply the rate differential adjustments for capital gains and/or dividends for any taxable
year. Please consult your tax advisor and the instructions to Form 1116 for more information.
166 | Annual Report franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
Board Members and Officers
The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupations during at least the past five years and number of portfolios overseen in the Franklin Templeton Investments fund complex are shown below. Generally, each board member serves until that person’s successor is elected and qualified.
Independent Board Members | ||||
Number of Portfolios in | ||||
Name, Year of Birth | Length of | Fund Complex Overseen | Other Directorships Held During | |
and Address | Position | Time Served | by Board Member* | at Least the Past 5 Years |
Harris J. Ashton (1932) | Trustee | Since 1995 | 137 | Bar-S Foods (meat packing company) |
One Franklin Parkway | (1981-2010). | |||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Director of various companies; and formerly, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief Executive | ||||
Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998). | ||||
Mary C. Choksi (1950) | Trustee | Since October | 111 | Avis Budget Group Inc. (car rental), |
One Franklin Parkway | 2014 | Omnicom Group Inc. (advertising and | ||
San Mateo, CA 94403-1906 | marketing communications services) | |||
and H.J. Heinz Company (processed | ||||
foods and allied products) (1998-2006). | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Founding Partner and Senior Managing Director, Strategic Investment Group (investment management group) (1987-present); director of | ||||
various companies; and formerly, Founding Partner and Managing Director, Emerging Markets Management LLC (investment management | ||||
firm) (1987-2011); Loan Officer/Senior Loan Officer/Senior Pension Investment Officer, World Bank Group (international financial institution) | ||||
(1977-1987). | ||||
Sam Ginn (1937) | Trustee | Since 2007 | 111 | ICO Global Communications |
One Franklin Parkway | (Holdings) Limited (satellite company) | |||
San Mateo, CA 94403-1906 | (2006-2010), Chevron Corporation | |||
(global energy company) (1989-2009), | ||||
Hewlett-Packard Company (technology | ||||
company) (1996-2002), Safeway, Inc. | ||||
(grocery retailer) (1991-1998) and | ||||
TransAmerica Corporation (insurance | ||||
company) (1989-1999). | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Private investor; and formerly, Chairman, First Responder Network Authority (FirstNet) (interoperable wireless broadband network) (2012-2014); | ||||
Chairman of the Board, Vodafone AirTouch, PLC (wireless company) (1999-2000); Chairman of the Board and Chief Executive Officer, AirTouch | ||||
Communications (cellular communications) (1993-1998) and Pacific Telesis Group (telephone holding company) (1988-1994). | ||||
Edith E. Holiday (1952) | Trustee | Since 1998 | 137 | Hess Corporation (exploration and |
One Franklin Parkway | refining of oil and gas), H.J. Heinz | |||
San Mateo, CA 94403-1906 | Company (processed foods and | |||
allied products) (1994-2013), RTI | ||||
International Metals, Inc. (manufacture | ||||
and distribution of titanium), Canadian | ||||
National Railway (railroad) and White | ||||
Mountains Insurance Group, Ltd. | ||||
(holding company). | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Director or Trustee of various companies and trusts; and formerly, Assistant to the President of the United States and Secretary of the | ||||
Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and | ||||
Assistant Secretary for Public Affairs and Public Liaison – United States Treasury Department (1988-1989). | ||||
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FRANKLIN FUND ALLOCATOR SERIES | ||||
Independent Board Members (continued) | ||||
Number of Portfolios in | ||||
Name, Year of Birth | Length of | Fund Complex Overseen | Other Directorships Held During | |
and Address | Position | Time Served | by Board Member* | at Least the Past 5 Years |
J. Michael Luttig (1954) | Trustee | Since 2009 | 137 | Boeing Capital Corporation |
One Franklin Parkway | (aircraft financing) (2006-2013). | |||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Executive Vice President, General Counsel and member of the Executive Council, The Boeing Company (aerospace company); and formerly, | ||||
Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006). | ||||
Frank A. Olson (1932) | Trustee | Since 2007 | 137 | Hess Corporation (exploration and |
One Franklin Parkway | refining of oil and gas) (1998-2013). | |||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Director of various companies; and formerly, Chairman of the Board, The Hertz Corporation (car rental) (1980-2000) and Chief Executive | ||||
Officer (1977-1999); and Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines) (June-December 1987). | ||||
Larry D. Thompson (1945) | Trustee | Since 2007 | 137 | Cbeyond, Inc. (business commu- |
One Franklin Parkway | nications provider) (2010-2012), | |||
San Mateo, CA 94403-1906 | The Southern Company (energy | |||
company) (December 2014; | ||||
previously 2010-2012) and Graham | ||||
Holdings Company (education and | ||||
media organization) (2011-present). | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Executive Vice President – Government Affairs, General Counsel and Corporate Secretary, PepsiCo, Inc. (consumer products) (2012-present); | ||||
and formerly, John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (2011-2012); Senior Vice | ||||
President – Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (2004-2011); Senior Fellow of The Brookings Institution | ||||
(2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General, U.S. Department of Justice | ||||
(2001-2003). | ||||
John B. Wilson (1959) | Lead | Trustee since | 111 | None |
One Franklin Parkway | Independent | 2006 and Lead | ||
San Mateo, CA 94403-1906 | Trustee | Independent | ||
Trustee since 2008 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
President, Staples Europe (office supplies) (2012-present); President and Founder, Hyannis Port Capital, Inc. (real estate and private equity | ||||
investing); serves on private and non-profit boards; and formerly, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail) | ||||
(1996-2000); Chief Financial Officer and Executive Vice President – Finance and Strategy, Staples, Inc. (1992-1996); Senior Vice President – | ||||
Corporate Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (consulting firm) | ||||
(1986-1990). | ||||
168 | Annual Report | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
Interested Board Members and Officers | ||||
Number of Portfolios in | ||||
Name, Year of Birth | Length of | Fund Complex Overseen | Other Directorships Held During | |
and Address | Position | Time Served | by Board Member* | at Least the Past 5 Years |
**Gregory E. Johnson (1961) | Trustee | Since 2007 | 147 | None |
One Franklin Parkway | ||||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Chairman of the Board, Member – Office of the Chairman, Director, President and Chief Executive Officer, Franklin Resources, Inc.; officer | ||||
and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment | ||||
companies in Franklin Templeton Investments; and Chairman, Investment Company Institute. | ||||
**Rupert H. Johnson, Jr. (1940) Chairman of | Chairman of the | 137 | None | |
One Franklin Parkway | the Board | Board and Trustee | ||
San Mateo, CA 94403-1906 | and Trustee | since 2013 | ||
Principal Occupation During at Least the Past 5 Years: | ||||
Vice Chairman, Member – Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc.; Senior Vice | ||||
President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of | ||||
Franklin Resources, Inc. and of 43 of the investment companies in Franklin Templeton Investments. | ||||
Alison E. Baur (1964) | Vice President | Since 2012 | Not Applicable | Not Applicable |
One Franklin Parkway | ||||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Deputy General Counsel, Franklin Templeton Investments; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of | ||||
46 of the investment companies in Franklin Templeton Investments. | ||||
Laura F. Fergerson (1962) | Chief Executive Since 2009 | Not Applicable | Not Applicable | |
One Franklin Parkway | Officer – | |||
San Mateo, CA 94403-1906 | Finance and | |||
Administration | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Vice President, Franklin Templeton Services, LLC; and officer of 46 of the investment companies in Franklin Templeton Investments. | ||||
Gaston Gardey (1967) | Treasurer, | Since 2009 | Not Applicable | Not Applicable |
One Franklin Parkway | Chief Financial | |||
San Mateo, CA 94403-1906 | Officer and | |||
Chief | ||||
Accounting | ||||
Officer | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Director, Fund Accounting, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin Templeton Investments. | ||||
Aliya S. Gordon (1973) | Vice President | Since 2009 | Not Applicable | Not Applicable |
One Franklin Parkway | ||||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Associate General Counsel, Franklin Templeton Investments; officer of 46 of the investment companies in Franklin Templeton | ||||
Investments; and formerly, Litigation Associate, Steefel, Levitt & Weiss, LLP (2000-2004). | ||||
franklintempleton.com | Annual Report | 169 |
FRANKLIN FUND ALLOCATOR SERIES | ||||
Interested Board Members and Officers (continued) | ||||
Number of Portfolios in | ||||
Name, Year of Birth | Length of | Fund Complex Overseen | Other Directorships Held During | |
and Address | Position | Time Served | by Board Member* | at Least the Past 5 Years |
Steven J. Gray (1955) | Vice President | Since 2009 | Not Applicable | Not Applicable |
One Franklin Parkway | ||||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc. and Franklin | ||||
Alternative Strategies Advisers, LLC; and officer of 46 of the investment companies in Franklin Templeton Investments. | ||||
Selena L. Holmes (1965) | Vice President | Since 2012 | Not Applicable | Not Applicable |
100 Fountain Parkway | – AML | |||
St. Petersburg, FL 33716-1205 | Compliance | |||
Principal Occupation During at Least the Past 5 Years: | ||||
Director, Global Compliance Monitoring; Chief Compliance Officer, Franklin Alternative Strategies Advisers, LLC; Vice President, Franklin | ||||
Templeton Companies, LLC; and officer of 46 of the investment companies in Franklin Templeton Investments. | ||||
Edward B. Jamieson (1948) | President and | Since 2010 | Not Applicable | Not Applicable |
One Franklin Parkway | Chief Executive | |||
San Mateo, CA 94403-1906 | Officer – | |||
Investment | ||||
Management | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
President, Chief Investment Officer and Director, Franklin Advisers, Inc.; Executive Vice President, Franklin Templeton Institutional, LLC; and | ||||
officer and/or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 10 of the investment | ||||
companies in Franklin Templeton Investments. | ||||
Kimberly H. Novotny (1972) | Vice President | Since 2013 | Not Applicable | Not Applicable |
300 S.E. 2nd Street | ||||
Fort Lauderdale, FL 33301-1923 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Associate General Counsel, Franklin Templeton Investments; Vice President and Secretary, Fiduciary Trust International of the South; Vice | ||||
President, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 46 of the investment companies | ||||
in Franklin Templeton Investments. | ||||
Robert C. Rosselot (1960) | Chief | Since 2013 | Not Applicable | Not Applicable |
300 S.E. 2nd Street | Compliance | |||
Fort Lauderdale, FL 33301-1923 | Officer | |||
Principal Occupation During at Least the Past 5 Years: | ||||
Director, Global Compliance, Franklin Templeton Investments; Vice President, Franklin Templeton Companies, LLC; officer of 46 of the | ||||
investment companies in Franklin Templeton Investments; and formerly, Senior Associate General Counsel, Franklin Templeton Investments | ||||
(2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013). | ||||
Karen L. Skidmore (1952) | Vice President | Since 2006 | Not Applicable | Not Applicable |
One Franklin Parkway | and Secretary | |||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 46 of the investment companies in Franklin | ||||
Templeton Investments. | ||||
170 | Annual Report | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
Interested Board Members and Officers (continued) | ||||
Number of Portfolios in | ||||
Name, Year of Birth | Length of | Fund Complex Overseen | Other Directorships Held During | |
and Address | Position | Time Served | by Board Member* | at Least the Past 5 Years |
Craig S. Tyle (1960) | Vice President | Since 2005 | Not Applicable | Not Applicable |
One Franklin Parkway | ||||
San Mateo, CA 94403-1906 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, | ||||
Inc. and of 46 of the investment companies in Franklin Templeton Investments. | ||||
Lori A. Weber (1964) | Vice President | Since 2011 | Not Applicable | Not Applicable |
300 S.E. 2nd Street | ||||
Fort Lauderdale, FL 33301-1923 | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and | ||||
Secretary, Templeton Investment Counsel, LLC; Vice President, Fiduciary Trust International of the South; and officer of 46 of the investment | ||||
companies in Franklin Templeton Investments. |
*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton Investments fund complex.
These portfolios have a common investment manager or affiliated investment managers.
**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin
Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Rupert H. Johnson, Jr. is considered to be an interested
person of the Fund under the federal securities laws due to his position as officer and director and major shareholder of Resources.
Note 1: Rupert H. Johnson, Jr. is the uncle of Gregory E. Johnson.
Note 2: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.
The Sarbanes-Oxley Act of 2002 and Rules adopted by the Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee
includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there
is at least one such financial expert on the Audit Committee and has designated John B. Wilson as its audit committee financial expert. The Board believes that
Mr. Wilson qualifies as such an expert in view of his extensive business background and experience, including service as chief financial officer of Staples, Inc.
from 1992 to 1996. Mr. Wilson has been a Member and Chairman of the Fund’s Audit Committee since 2006. As a result of such background and experience, the
Board believes that Mr. Wilson has acquired an understanding of generally accepted accounting principles and financial statements, the general application of
such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth
and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for
financial reporting and an understanding of audit committee functions. Mr. Wilson is an independent Board member as that term is defined under the relevant
Securities and Exchange Commission Rules and Releases.
The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request.
Shareholders may call (800) DIAL BEN/342-5236 to request the SAI.
franklintempleton.com Annual Report | 171
FRANKLIN FUND ALLOCATOR SERIES
Shareholder Information
Proxy Voting Policies and Procedures
The Trust’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Trust uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Trust’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 (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Trust’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.
Quarterly Statement of Investments
The Trust files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.
Householding of Reports and Prospectuses
You will receive each Fund’s financial reports every six months as well as an annual updated summary prospectus (prospectus available upon request). To reduce Fund expenses, we try to identify related shareholders in a household and send only one copy of the financial reports and summary prospectus. This process, called “householding,” will continue indefinitely unless you instruct us otherwise. If you prefer not to have these documents householded, please call us at (800) 632-2301. At any time you may view current prospectuses/summary prospectuses and financial reports on our website. If you choose, you may receive these documents through electronic delivery.
172 | Annual Report
franklintempleton.com
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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.
(c) N/A
(d) N/A
(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers and principal 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 John B. Wilson and he is "independent" as defined under the relevant Securities and Exchange Commission Rules and Releases.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or for services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements were $300,703 for the fiscal year ended December 31, 2014 and $345,736 for the fiscal year ended December 31, 2013.
(b) Audit-Related Fees
There were no fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of Item 4.
There were no fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant's investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant that are reasonably related to the performance of the audit of their financial statements.
(c) Tax Fees
There were no fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant for tax compliance, tax advice and tax planning.
The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant for tax compliance, tax advice and tax planning were $0 for the fiscal year ended December 31, 2014 and $6,930 for the fiscal year ended December 31, 2013. The services for which these fees were paid included technical tax consultation for capital gain tax and withholding tax reporting for foreign governments and requirements on local country’s self-certification forms.
(d) All Other Fees
The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant not reported in paragraphs (a)-(c) of Item 4 were $3,932 for the fiscal year ended December 31, 2014 and $0 for the fiscal year ended December 31, 2013. The services for which these fees were paid include review of materials provided to the fund Board in connection with the investment management contract renewal process.
The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant other than services reported in paragraphs (a)-(c) of Item 4 were $155,804 for the fiscal year ended December 31, 2014 and $39,194 for the fiscal year ended December 31, 2013. The services for which these fees were paid included preparation and review of materials provided to the fund Board in connection with the investment management contract renewal process.
(e) (1) The registrant’s audit committee is directly responsible for approving the services to be provided by the auditors, including:
(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to the Fund by the auditors;
(iii) pre-approval of all non-audit related services to be provided to the registrant by the auditors to the registrant’s investment adviser or to any entity that controls, is controlled by or is under common control with the registrant’s investment adviser and that provides ongoing services to the registrant where the non-audit services relate directly to the operations or financial reporting of the registrant; and
(iv)establishment by the audit committee, if deemed necessary or appropriate, as an alternative to committee pre-approval of services to be provided by the auditors, as required by paragraphs (ii) and (iii) above, of policies and procedures to permit such services to be pre-approved by other means, such as through establishment of guidelines or by action of a designated member or members of the committee; provided the policies and procedures are detailed as to the particular service and the committee is informed of each service and such policies and procedures do not include delegation of audit committee responsibilities, as contemplated under the Securities Exchange Act of 1934, to management; subject, in the case of (ii) through (iv), to any waivers, exceptions or exemptions that may be available under applicable law or rules.
(e) (2) None of the services provided to the registrant described in paragraphs (b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) The aggregate non-audit fees paid to the principal accountant for services rendered by the principal accountant to the registrant and the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant were $159,736 for the fiscal year ended December 31, 2014 and $46,124 for the fiscal year ended December 31, 2013.
(h) The registrant’s audit committee of the board has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
Item 5. Audit Committee of Listed Registrants. N/A
Item 6. Schedule of Investments. N/A
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. N/A
Item 8. Portfolio Managers of Closed-End Management Investment Companies. N/A
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. N/A
Item 10. 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 11. 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 changes in the Registrant’s internal controls or in other factors that could materially affect the internal controls over financial reporting subsequent to the date of their evaluation in connection with the preparation of this Shareholder Report on Form N-CSR.
Item 12. Exhibits.
(a)(1) Code of Ethics
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting 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 FUND ALLOCATOR SERIES
By /s/Laura F. Fergerson
Laura F. Fergerson
Chief Executive Officer - Finance and Administration
Date February 26, 2015
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/Laura F. Fergerson
Laura F. Fergerson
Chief Executive Officer - Finance and Administration
Date February 26, 2015
By /s/Gaston Gardey
Gaston Gardey
Chief Financial Officer and Chief Accounting Officer
Date February 26, 2015