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: 12/31/15
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 | 76 |
Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.
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Economic and Market Overview
U.S. economic growth slowed in 2015’s first quarter but strengthened in 2015’s second quarter amid healthy consumer spending. The third and fourth quarters were less robust as exports slowed and state and local governments reduced their spending. At its December meeting, the U.S. Federal Reserve (the Fed) increased its target range for the federal funds rate to 0.25%–0.50%, as policymakers cited the labor market’s considerable improvement and were reasonably confident that inflation would move back to the Fed’s 2% medium-term objective. Furthermore, the Fed raised its forecast for 2016 U.S. economic growth and lowered its unemployment projection. Despite periods of volatility, the broad U.S. stock market, as measured by the Standard & Poor’s 500 Index, generated a modest positive total return for 2015.
The global economy expanded moderately during the 12 months under review. As measured by the MSCI World Index, stocks in global developed markets overall were nearly unchanged for the year amid some positive developments. Weighing on global stocks at times were worries about China’s slowing economy and tumbling stock market, declining commodity prices, geopolitical tensions between Russia and Turkey, and ongoing uncertainty over the Fed’s timing for raising interest rates. Toward period-end, equity markets recovered somewhat after the Fed increased its federal funds target range, alleviating some uncertainty about a change in U.S. monetary policy. During the year, oil prices declined sharply largely due to increased global supply that exceeded demand. Gold and other commodity prices also fell. The U.S. dollar appreciated against most currencies during the period, which reduced returns of many foreign assets in U.S. dollar terms.
In Europe, U.K. economic growth gained momentum from the services sector, but the economy slowed in 2015 compared with 2014. The eurozone grew moderately and generally benefited during the period from lower oil prices, a weaker euro that supported exports, the European Central Bank’s (ECB’s) accommodative policy and expectations of further ECB stimulus. Although the eurozone’s annual inflation rate declined early in the period, it rose slightly during the rest of the period. The ECB maintained its benchmark interest rates although it reduced its bank deposit rate in December, seeking to boost the region’s slowing growth Japan’s economy continued to grow in 2015’s first quarter. After a decline in the second quarter of 2015, it expanded in the third quarter as capital expenditures improved. The Bank of Japan took several actions during the reporting period, including maintaining its monetary policy, lowering its economic growth and inflation forecasts, and reorganizing its stimulus program to increase exposure to long-term government bonds and exchange-traded funds.
The foregoing information reflects our analysis and opinions as of December 31, 2015. 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.
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Franklin Conservative Allocation Fund
This annual report for Franklin Conservative Allocation Fund covers the fiscal year ended December 31, 2015.
Your Fund’s Goal and Main Investments
The Fund seeks the highest level of long-term total return consistent with an acceptable level of risk.1
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/fas_a0216x5x1.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 had a -2.26% cumulative total return for the 12 months under review. In comparison, the Fund’s equity benchmark, the MSCI All Country World Index (ACWI), which measures equity market performance in global developed and emerging markets, had a -1.84% total return.2 The Fund’s fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, had a -3.29% total return.2 The Fund changed its benchmarks at the beginning of 2015 to the MSC ACWI and Barclays Multiverse Index because the Fund’s investment manager believes the compositions of the new indexes better reflect the Fund’s holdings. 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. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
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.
Top 10 Fund Holdings | ||
12/31/15 | ||
% of Total | ||
Net Assets | ||
Templeton Global Total Return Fund – Class R6 | 19.3 | % |
Franklin Low Duration Total Return Fund – Class R6 | 12.8 | % |
Franklin Growth Fund – Class R6 | 9.6 | % |
Franklin U.S. Government Securities Fund – Class R6 | 7.7 | % |
Franklin Rising Dividends Fund – Class R6 | 5.8 | % |
Franklin Strategic Income Fund – Class R6 | 5.7 | % |
Franklin DynaTech Fund – Class R6 | 4.3 | % |
Franklin K2 Alternative Strategies Fund – Class R6 | 3.5 | % |
Templeton Foreign Fund – Class R6 | 3.2 | % |
Franklin Mutual European Fund – Class R6 | 3.2 | % |
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.
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 o 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.
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FRANKLIN CONSERVATIVE ALLOCATION FUND
At period-end, Franklin Conservative Allocation Fund allocated 51.8% of total net assets to fixed income, 41.1% to equity and 5.4% to alternative strategies. Domestic fixed income exposure was 56.9% of the total fixed income weighting, with the balance represented by foreign fixed income. Templeton Global Total Return Fund – Class R6, representing 19.3% of the Fund’s total net assets, was our largest fixed income fund weighting at period-end. On the equity side, domestic exposure was 65.7% 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, 2015, 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 9.6% of total net assets.
During the 12-month reporting period, our largest domestic growth fund holding, Franklin Growth Fund – Class R6, outperformed the MSCI ACWI, while our largest foreign equity fund holding, Templeton Foreign Fund – Class R6, and our largest domestic value fund holding, Franklin Rising Dividends Fund – Class R6, underperformed the MSCI ACWI. On the fixed income side, Templeton Global Total Return Fund –Class R6 underperformed the Barclays Multiverse Index, while Franklin Low Duration Total Return Fund – Class R6 outperformed.
Thank you for your continued participation in Franklin Conservative Allocation Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2015, 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.
James D. Macey is a senior vice president for Franklin Templeton Solutions. He is a co-manager on several U.S. fund-of-fund products including Franklin Fund Allocator Series. Prior to joining Franklin Templeton Investments in 2015, Mr. Macey was a portfolio manager at Allianz Global Investors where he was a co-lead manager for their target date and retirement income portfolios and was a portfolio manager for their multi-asset U.S. 529 college-savings plans and mutual funds, including target risk and multi-asset real return. He also led the manager research and due diligence process for their multi-asset U.S. team. Mr. Macey has 15 years of financial services industry experience.
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CFA® is a trademark owned by CFA Institute.
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FRANKLIN CONSERVATIVE ALLOCATION FUND
Performance Summary as of December 31, 2015
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) | 12/31/15 | 12/31/14 | Change | |||||
A (FTCIX) | $ | 13.40 | $ | 14.53 | -$ | 1.13 | ||
C (FTCCX) | $ | 13.15 | $ | 14.27 | -$ | 1.12 | ||
R (FTCRX) | $ | 13.35 | $ | 14.48 | -$ | 1.13 | ||
R6 (N/A) | $ | 13.39 | $ | 14.52 | -$ | 1.13 | ||
Advisor (FTCZX) | $ | 13.39 | $ | 14.52 | -$ | 1.13 | ||
Distributions1 (1/1/15–12/31/15) | ||||||||
Dividend | Short-Term | Long-Term | ||||||
Share Class | Income | Capital Gain | Capital Gain | Total | ||||
A | $ | 0.2839 | $ | 0.0159 | $ | 0.5183 | $ | 0.8181 |
C | $ | 0.1797 | $ | 0.0159 | $ | 0.5183 | $ | 0.7139 |
R | $ | 0.2466 | $ | 0.0159 | $ | 0.5183 | $ | 0.7808 |
R6 | $ | 0.3320 | $ | 0.0159 | $ | 0.5183 | $ | 0.8662 |
Advisor | $ | 0.3194 | $ | 0.0159 | $ | 0.5183 | $ | 0.8536 |
See page 10 for Performance Summary footnotes.
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FRANKLIN CONSERVATIVE ALLOCATION FUND
PERFORMANCE SUMMARY
Performance as of 12/31/152
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 | |||||
Share Class | Total Return3 | Total Return4 | $ | 10,000 Investment5 | Operating Expenses6 | |||
A | 1.27 | % | ||||||
1-Year | -2.26 | % | -7.90 | % | $ | 9,210 | ||
5-Year | +19.57 | % | +2.42 | % | $ | 11,268 | ||
10-Year | +58.45 | % | +4.09 | % | $ | 14,931 | ||
C | 2.02 | % | ||||||
1-Year | -2.96 | % | -3.88 | % | $ | 9,612 | ||
5-Year | +15.23 | % | +2.88 | % | $ | 11,523 | ||
10-Year | +47.19 | % | +3.94 | % | $ | 14,719 | ||
R | 1.52 | % | ||||||
1-Year | -2.52 | % | -2.52 | % | $ | 9,748 | ||
5-Year | +18.06 | % | +3.38 | % | $ | 11,806 | ||
10-Year | +54.64 | % | +4.46 | % | $ | 15,464 | ||
R6 | 0.92 | % | ||||||
1-Year | -1.93 | % | -1.93 | % | $ | 9,807 | ||
Since Inception (5/1/13) | +7.95 | % | +2.91 | % | $ | 10,795 | ||
Advisor | 1.02 | % | ||||||
1-Year | -2.02 | % | -2.02 | % | $ | 9,798 | ||
5-Year | +21.07 | % | +3.90 | % | $ | 12,107 | ||
10-Year | +62.56 | % | +4.98 | % | $ | 16,256 |
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.
See page 10 for Performance Summary footnotes.
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FRANKLIN CONSERVATIVE ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2
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/0001022804-16-000131/fas_a0216x9x1.jpg)
See page 10 for Performance Summary footnotes.
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FRANKLIN CONSERVATIVE ALLOCATION FUND PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/fas_a0216x10x1.jpg)
See page 10 for Performance Summary footnotes.
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FRANKLIN CONSERVATIVE ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/fas_a0216x11x1.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 distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income and capital
gain.
2. The Fund has an expense reduction contractually guaranteed through at least 4/30/16 and a fee waiver associated with any investment 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 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.
3. Cumulative total return represents the change in value of an investment over the periods indicated.
4. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been
annualized.
5. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
6. 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.
7. Source: Morningstar. 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.
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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, distribution 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.
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FRANKLIN CONSERVATIVE ALLOCATION FUND
YOUR FUND’S EXPENSES
Beginning | Ending | Expenses Paid | Expenses Paid | |||||
Account | Account | During Period* | During Period** | |||||
Share Class | Value 7/1/15 | Value 12/31/15 | 7/1/15–12/31/15 | 7/1/15–12/31/15 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 964.00 | $ | 3.02 | $ | 6.19 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.13 | $ | 3.11 | $ | 6.36 |
C | ||||||||
Actual | $ | 1,000 | $ | 960.70 | $ | 6.72 | $ | 9.88 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,018.35 | $ | 6.92 | $ | 10.16 |
R | ||||||||
Actual | $ | 1,000 | $ | 962.40 | $ | 4.25 | $ | 7.42 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,020.87 | $ | 4.38 | $ | 7.63 |
R6 | ||||||||
Actual | $ | 1,000 | $ | 965.70 | $ | 1.34 | $ | 4.51 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.84 | $ | 1.38 | $ | 4.63 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 965.30 | $ | 1.78 | $ | 4.95 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.39 | $ | 1.84 | $ | 5.09 |
*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: 0.61%; C: 1.36%; R: 0.86%; R6: 0.27%; and Advisor: 0.36%), 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:1.25%; C:2.00%; R:1.50%; R6:0.91%; and Advisor:1.00%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.
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Franklin Moderate Allocation Fund
This annual report for Franklin Moderate Allocation Fund covers the fiscal year ended December 31, 2015.
Your Fund’s Goal and Main Investments
The Fund seeks the highest level of long-term total return consistent with an acceptable level of risk.1
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/fas_a0216x14x1.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 had a -1.89% cumulative total return for the 12 months under review. In comparison, the Fund’s equity benchmark, the MSCI All Country World Index (ACWI), which measures equity market performance in global developed and emerging markets, had a -1.84% total return.2 The Fund’s fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, had a -3.29% total return.2 The Fund changed its benchmarks at the beginning of 2015 to the MSC ACWI and Barclays Multiverse Index because the Fund’s investment manager believes the compositions of the new indexes better reflect the Fund’s holdings. 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. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
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.
Top 10 Fund Holdings | ||
12/31/15 | ||
% of Total | ||
Net Assets | ||
Franklin Growth Fund – Class R6 | 14.6 | % |
Templeton Global Total Return Fund – Class R6 | 11.3 | % |
Franklin Rising Dividends Fund – Class R6 | 8.6 | % |
Franklin Low Duration Total Return Fund – Class R6 | 7.9 | % |
Franklin DynaTech Fund – Class R6 | 6.1 | % |
Franklin Mutual European Fund – Class R6 | 4.9 | % |
Templeton Foreign Fund – Class R6 | 4.9 | % |
Franklin U.S. Government Securities Fund – Class R6 | 4.5 | % |
Franklin International Small Cap Growth Fund – Class R6 | 4.5 | % |
Franklin K2 Alternative Strategies Fund – Class R6 | 3.6 | % |
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.
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.
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FRANKLIN MODERATE ALLOCATION FUND
At period-end, Franklin Moderate Allocation Fund allocated 61.8% of total net assets to equity, 30.8% to fixed income, and 5.4% to alternative strategies. Domestic equity exposure was 66.2% 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, 2015, 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 14.6% of total net assets. On the fixed income side, domestic exposure was 57.5% 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 11.3% of total net assets.
During the 12 months under review, our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest foreign equity fund holding, Franklin Mutual European Fund – Class R6, outperformed the MSCI ACWI. Our largest domestic value fund holding, Franklin Rising Dividends Fund – Class R6, underperformed the MSCI ACWI. On the fixed income side, Templeton Global Total Return Fund – Class R6 underperformed the Barclays Multiverse Index, while 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/0001022804-16-000131/fas_a0216x15x1.jpg)
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2015, 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.
James D. Macey is a senior vice president for Franklin Templeton Solutions. He is a co-manager on several U.S. fund-of-fund products including Franklin Fund Allocator Series. Prior to joining Franklin Templeton Investments in 2015, Mr. Macey was a portfolio manager at Allianz Global Investors where he was a co-lead manager for their target date and retirement income portfolios and was a portfolio manager for their multi-asset U.S. 529 college-savings plans and mutual funds, including target risk and multi-asset real return. He also led the manager research and due diligence process for their multi-asset U.S. team. Mr. Macey has 15 years of financial services industry experience.
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FRANKLIN MODERATE ALLOCATION FUND
Performance Summary as of December 31, 2015
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) | 12/31/15 | 12/31/14 | Change | |||||
A (FMTIX) | $ | 14.49 | $ | 15.71 | -$ | 1.22 | ||
C (FTMTX) | $ | 14.12 | $ | 15.33 | -$ | 1.21 | ||
R (FTMRX) | $ | 14.44 | $ | 15.66 | -$ | 1.22 | ||
R6 (N/A) | $ | 14.49 | $ | 15.72 | -$ | 1.23 | ||
Advisor (FMTZX) | $ | 14.50 | $ | 15.72 | -$ | 1.22 | ||
Distributions1 (1/1/15–12/31/15) | ||||||||
Dividend | Short-Term | Long-Term | ||||||
Share Class | Income | Capital Gain | Capital Gain | Total | ||||
A | $ | 0.2463 | $ | 0.0141 | $ | 0.6848 | $ | 0.9452 |
C | $ | 0.1353 | $ | 0.0141 | $ | 0.6848 | $ | 0.8342 |
R | $ | 0.2031 | $ | 0.0141 | $ | 0.6848 | $ | 0.9020 |
R6 | $ | 0.3016 | $ | 0.0141 | $ | 0.6848 | $ | 1.0005 |
Advisor | $ | 0.2814 | $ | 0.0141 | $ | 0.6848 | $ | 0.9803 |
See page 19 for Performance Summary footnotes.
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FRANKLIN MODERATE ALLOCATION FUND
PERFORMANCE SUMMARY
Performance as of 12/31/152
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 | |||||
Share Class | Total Return3 | Total Return4 | $ | 10,000 Investment5 | Operating Expenses6 | |||
A | 1.29 | % | ||||||
1-Year | -1.89 | % | -7.54 | % | $ | 9,246 | ||
5-Year | +25.77 | % | +3.46 | % | $ | 11,852 | ||
10-Year | +68.83 | % | +4.76 | % | $ | 15,914 | ||
C | 2.04 | % | ||||||
1-Year | -2.68 | % | -3.60 | % | $ | 9,640 | ||
5-Year | +21.09 | % | +3.90 | % | $ | 12,109 | ||
10-Year | +56.51 | % | +4.58 | % | $ | 15,651 | ||
R | 1.54 | % | ||||||
1-Year | -2.18 | % | -2.18 | % | $ | 9,782 | ||
5-Year | +24.18 | % | +4.43 | % | $ | 12,418 | ||
10-Year | +64.66 | % | +5.11 | % | $ | 16,466 | ||
R6 | 0.91 | % | ||||||
1-Year | -1.59 | % | -1.59 | % | $ | 9,841 | ||
Since Inception (5/1/13) | +12.04 | % | +4.35 | % | $ | 11,204 | ||
Advisor | 1.04 | % | ||||||
1-Year | -1.66 | % | -1.66 | % | $ | 9,834 | ||
5-Year | +27.31 | % | +4.95 | % | $ | 12,731 | ||
10-Year | +73.13 | % | +5.64 | % | $ | 17,313 |
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.
See page 19 for Performance Summary footnotes.
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FRANKLIN MODERATE ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2
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/0001022804-16-000131/fas_a0216x18x1.jpg)
See page 19 for Performance Summary footnotes.
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FRANKLIN MODERATE ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/fas_a0216x19x1.jpg)
See page 19 for Performance Summary footnotes.
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FRANKLIN MODERATE ALLOCATION FUND PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/fas_a0216x20x1.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 distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income and capital
gain.
2. The Fund has an expense reduction contractually guaranteed through at least 4/30/16 and a fee waiver associated with any investment 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 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.
3. Cumulative total return represents the change in value of an investment over the periods indicated.
4. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been
annualized.
5. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
6. 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.
7. Source: Morningstar. 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.
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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, distribution 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.
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FRANKLIN MODERATE ALLOCATION FUND | |||||||||
YOUR FUND’S EXPENSES | |||||||||
Beginning | Ending | Expenses Paid | Expenses Paid | ||||||
Account | Account | During Period* | During Period** | ||||||
Share Class | Value 7/1/15 | Value 12/31/15 | 7/1/15–12/31/15 | 7/1/15–12/31/15 | |||||
A | |||||||||
Actual | $ | 1,000 | $ | 963.20 | $ | 3.07 | $ | 6.33 | |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.08 | $ | 3.16 | $ | 6.51 | |
C | |||||||||
Actual | $ | 1,000 | $ | 958.90 | $ | 6.76 | $ | 10.02 | |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,018.30 | $ | 6.97 | $ | 10.31 | |
R | |||||||||
Actual | $ | 1,000 | $ | 961.40 | $ | 4.30 | $ | 7.56 | |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,020.82 | $ | 4.43 | $ | 7.78 | |
R6 | |||||||||
Actual | $ | 1,000 | $ | 964.90 | $ | 1.34 | $ | 4.61 | |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.84 | $ | 1.38 | $ | 4.74 | |
Advisor | |||||||||
Actual | $ | 1,000 | $ | 964.50 | $ | 1.83 | $ | 5.10 | |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.34 | $ | 1.89 | $ | 5.24 |
*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: 0.62%; C: 1.37%; R: 0.87%; R6: 0.27%; and Advisor: 0.37%), 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: 1.28%; C: 2.03%; R: 1.53%; R6: 0.93%; and Advisor: 1.03%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year
period.
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Franklin Growth Allocation Fund
This annual report for Franklin Growth Allocation Fund covers the fiscal year ended December 31, 2015.
Your Fund’s Goal and Main Investments
The Fund seeks the highest level of long-term total return consistent with an acceptable level of risk.1
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/fas_a0216x23x1.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 had a -1.66% cumulative total return for the 12 months under review. In comparison, the Fund’s equity benchmark, the MSCI All Country World Index (ACWI), which measures equity market performance in global developed and emerging markets, had a -1.84% total return.2 The Fund’s fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, had a -3.29% total return.2 The Fund changed its benchmarks at the beginning of 2015 to the MSC ACWI and Barclays Multiverse Index because the Fund’s investment manager believes the compositions of the new indexes better reflect the Fund’s holdings. 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. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
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.
Top 10 Fund Holdings | ||
12/31/15 | ||
% of Total | ||
Net Assets | ||
Franklin Growth Fund – Class R6 | 18.6 | % |
Franklin Rising Dividends Fund – Class R6 | 11.4 | % |
Franklin DynaTech Fund – Class R6 | 8.4 | % |
Templeton Foreign Fund – Class R6 | 6.8 | % |
Franklin Mutual European Fund – Class R6 | 6.5 | % |
Franklin International Small Cap Growth Fund – Class R6 | 6.4 | % |
Franklin Utilities Fund – Class R6 | 4.1 | % |
Franklin Growth Opportunities Fund – Class R6 | 4.0 | % |
Templeton Global Total Return Fund – Class R6 | 4.0 | % |
Franklin K2 Alternative Strategies Fund – Class R6 | 3.6 | % |
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.
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.
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FRANKLIN GROWTH ALLOCATION FUND
At period-end, Franklin Growth Allocation Fund allocated 82.0% of total net assets to equity, 10.8% to fixed income and 5.4% to alternative strategies. Domestic equity exposure was 65.1% 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, 2015, 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 57.4% 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 12 months under review, our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest foreign equity fund holding, Templeton Foreign Fund – Class R6, performed better than the MSCI ACWI. Our largest domestic value fund holding, Franklin Rising Dividends Fund – Class R6, underperformed the MSCI ACWI. On the fixed income side, Templeton Global Total Return Fund –Class R6 underperformed 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/0001022804-16-000131/fas_a0216x24x1.jpg)
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2015, 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.
James D. Macey is a senior vice president for Franklin Templeton Solutions. He is a co-manager on several U.S. fund-of-fund products including Franklin Fund Allocator Series. Prior to joining Franklin Templeton Investments in 2015, Mr. Macey was a portfolio manager at Allianz Global Investors where he was a co-lead manager for their target date and retirement income portfolios and was a portfolio manager for their multi-asset U.S. 529 college-savings plans and mutual funds, including target risk and multi-asset real return. He also led the manager research and due diligence process for their multi-asset U.S. team. Mr. Macey has 15 years of financial services industry experience.
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FRANKLIN GROWTH ALLOCATION FUND
Performance Summary as of December 31, 2015
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) | 12/31/15 | 12/31/14 | Change | |||||
A (FGTIX) | $ | 17.01 | $ | 18.57 | -$ | 1.56 | ||
C (FTGTX) | $ | 16.59 | $ | 18.15 | -$ | 1.56 | ||
R (FGTRX) | $ | 16.80 | $ | 18.34 | -$ | 1.54 | ||
R6 (N/A) | $ | 17.06 | $ | 18.61 | -$ | 1.55 | ||
Advisor (FGTZX) | $ | 17.06 | $ | 18.62 | -$ | 1.56 | ||
Distributions1 (1/1/15–12/31/15) | ||||||||
Dividend | Short-Term | Long-Term | ||||||
Share Class | Income | Capital Gain | Capital Gain | Total | ||||
A | $ | 0.2134 | $ | 0.0160 | $ | 1.0627 | $ | 1.2921 |
C | $ | 0.0849 | $ | 0.0160 | $ | 1.0627 | $ | 1.1636 |
R | $ | 0.1568 | $ | 0.0160 | $ | 1.0627 | $ | 1.2355 |
R6 | $ | 0.2836 | $ | 0.0160 | $ | 1.0627 | $ | 1.3623 |
Advisor | $ | 0.2581 | $ | 0.0160 | $ | 1.0627 | $ | 1.3368 |
See page 28 for Performance Summary footnotes.
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FRANKLIN GROWTH ALLOCATION FUND
PERFORMANCE SUMMARY
Performance as of 12/31/152
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 Expenses6 | |||||||
Share Class | Total Return3 | Total Return4 | $ | 10,000 Investment5 | (with waiver) | (without waiver) | ||||
A | 1.29 | % | 1.34 | % | ||||||
1-Year | -1.66 | % | -7.30 | % | $ | 9,270 | ||||
5-Year | +33.66 | % | +4.73 | % | $ | 12,598 | ||||
10-Year | +74.68 | % | +5.11 | % | $ | 16,464 | ||||
C | 2.04 | % | 2.09 | % | ||||||
1-Year | -2.41 | % | -3.33 | % | $ | 9,667 | ||||
5-Year | +28.70 | % | +5.18 | % | $ | 12,870 | ||||
10-Year | +62.09 | % | +4.95 | % | $ | 16,209 | ||||
R | 1.54 | % | 1.59 | % | ||||||
1-Year | -1.93 | % | -1.93 | % | $ | 9,807 | ||||
5-Year | +31.95 | % | +5.70 | % | $ | 13,195 | ||||
10-Year | +70.50 | % | +5.48 | % | $ | 17,050 | ||||
R6 | 0.89 | % | 0.94 | % | ||||||
1-Year | -1.27 | % | -1.27 | % | $ | 9,873 | ||||
Since Inception (5/1/13) | +18.48 | % | +6.56 | % | $ | 11,848 | ||||
Advisor | 1.04 | % | 1.09 | % | ||||||
1-Year | -1.41 | % | -1.41 | % | $ | 9,859 | ||||
5-Year | +35.39 | % | +6.25 | % | $ | 13,539 | ||||
10-Year | +79.27 | % | +6.01 | % | $ | 17,927 |
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.
See page 28 for Performance Summary footnotes.
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FRANKLIN GROWTH ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2
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/0001022804-16-000131/fas_a0216x27x1.jpg)
See page 28 for Performance Summary footnotes.
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FRANKLIN GROWTH ALLOCATION FUND PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/fas_a0216x28x1.jpg)
See page 28 for Performance Summary footnotes.
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FRANKLIN GROWTH ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/fas_a0216x29x1.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 distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income and capital
gain.
2. The Fund has an expense reduction contractually guaranteed through at least 4/30/16 and a fee waiver associated with any investment 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 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.
3. Cumulative total return represents the change in value of an investment over the periods indicated.
4. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been
annualized.
5. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
6. 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.
7. Source: Morningstar. 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, distribution 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 7/1/15 | Value 12/31/15 | 7/1/15–12/31/15 | 7/1/15–12/31/15 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 959.80 | $ | 3.26 | $ | 6.62 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,021.88 | $ | 3.36 | $ | 6.82 |
C | ||||||||
Actual | $ | 1,000 | $ | 956.00 | $ | 6.95 | $ | 10.30 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,018.10 | $ | 7.17 | $ | 10.61 |
R | ||||||||
Actual | $ | 1,000 | $ | 958.40 | $ | 4.49 | $ | 7.85 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,020.62 | $ | 4.63 | $ | 8.08 |
R6 | ||||||||
Actual | $ | 1,000 | $ | 962.20 | $ | 1.34 | $ | 4.70 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.84 | $ | 1.38 | $ | 4.84 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 961.40 | $ | 2.03 | $ | 5.39 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.14 | $ | 2.09 | $ | 5.55 |
*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: 0.66%; C: 1.41%; R: 0.91%; R6: 0.27%; and Advisor: 0.41%), 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: 1.34%; C: 2.09%; R: 1.59%; R6: 0.95%; and Advisor: 1.09%), 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, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class A | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 14.53 | $ | 14.65 | $ | 14.06 | $ | 13.33 | $ | 13.74 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.28 | 0.40 | 0.31 | 0.27 | 0.30 | ||||||||||
Net realized and unrealized gains (losses) | (0.60 | ) | 0.09 | 1.12 | 0.79 | (0.40 | ) | ||||||||
Total from investment operations | (0.32 | ) | 0.49 | 1.43 | 1.06 | (0.10 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.28 | ) | (0.42 | ) | (0.32 | ) | (0.30 | ) | (0.31 | ) | |||||
Net realized gains | (0.53 | ) | (0.19 | ) | (0.52 | ) | (0.03 | ) | — | ||||||
Total distributions | (0.81 | ) | (0.61 | ) | (0.84 | ) | (0.33 | ) | (0.31 | ) | |||||
Net asset value, end of year. | $ | 13.40 | $ | 14.53 | $ | 14.65 | $ | 14.06 | $ | 13.33 | |||||
Total returnd | (2.26 | )% | 3.35 | % | 10.39 | % | 7.99 | % | (0.71 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 0.62 | % | 0.63 | % | 0.60 | % | 0.53 | % | 0.52 | % | |||||
Expenses net of waiver and payments by affiliatese | 0.62 | %f | 0.63 | %f | 0.59 | % | 0.50 | % | 0.50 | % | |||||
Net investment incomec | 1.97 | % | 2.67 | % | 2.11 | % | 1.98 | % | 2.17 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 905,537 | $ | 910,523 | $ | 871,541 | $ | 794,429 | $ | 725,675 | |||||
Portfolio turnover rate | 17.69 | % | 16.67 | % | 57.59 | % | 25.82 | % | 18.67 | % |
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’s 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, 2015.
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, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class C | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 14.27 | $ | 14.40 | $ | 13.83 | $ | 13.13 | $ | 13.53 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.17 | 0.28 | 0.20 | 0.17 | 0.19 | ||||||||||
Net realized and unrealized gains (losses) | (0.58 | ) | 0.09 | 1.11 | 0.76 | (0.38 | ) | ||||||||
Total from investment operations | (0.41 | ) | 0.37 | 1.31 | 0.93 | (0.19 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.18 | ) | (0.31 | ) | (0.22 | ) | (0.20 | ) | (0.21 | ) | |||||
Net realized gains | (0.53 | ) | (0.19 | ) | (0.52 | ) | (0.03 | ) | — | ||||||
Total distributions | (0.71 | ) | (0.50 | ) | (0.74 | ) | (0.23 | ) | (0.21 | ) | |||||
Net asset value, end of year. | $ | 13.15 | $ | 14.27 | $ | 14.40 | $ | 13.83 | $ | 13.13 | |||||
Total returnd | (2.96 | )% | 2.58 | % | 9.61 | % | 7.09 | % | (1.38 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 1.37 | % | 1.38 | % | 1.35 | % | 1.28 | % | 1.27 | % | |||||
Expenses net of waiver and payments by affiliatese | 1.37 | %f | 1.38 | %f | 1.34 | % | 1.25 | % | 1.25 | % | |||||
Net investment incomec | 1.22 | % | 1.92 | % | 1.36 | % | 1.23 | % | 1.42 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 536,548 | $ | 549,222 | $ | 524,756 | $ | 452,211 | $ | 426,775 | |||||
Portfolio turnover rate | 17.69 | % | 16.67 | % | 57.59 | % | 25.82 | % | 18.67 | % |
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’s 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, 2015.
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, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class R | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 14.48 | $ | 14.60 | $ | 14.01 | $ | 13.29 | $ | 13.70 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.24 | 0.35 | 0.26 | 0.24 | 0.27 | ||||||||||
Net realized and unrealized gains (losses) | (0.59 | ) | 0.10 | 1.14 | 0.78 | (0.40 | ) | ||||||||
Total from investment operations | (0.35 | ) | 0.45 | 1.40 | 1.02 | (0.13 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.25 | ) | (0.38 | ) | (0.29 | ) | (0.27 | ) | (0.28 | ) | |||||
Net realized gains | (0.53 | ) | (0.19 | ) | (0.52 | ) | (0.03 | ) | — | ||||||
Total distributions | (0.78 | ) | (0.57 | ) | (0.81 | ) | (0.30 | ) | (0.28 | ) | |||||
Net asset value, end of year | $ | 13.35 | $ | 14.48 | $ | 14.60 | $ | 14.01 | $ | 13.29 | |||||
Total return | (2.52 | )% | 3.10 | % | 10.14 | % | 7.68 | % | (0.95 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 0.87 | % | 0.88 | % | 0.85 | % | 0.78 | % | 0.77 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.87 | %e | 0.88 | %e | 0.84 | % | 0.75 | % | 0.75 | % | |||||
Net investment incomec | 1.72 | % | 2.42 | % | 1.86 | % | 1.73 | % | 1.92 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 139,592 | $ | 159,897 | $ | 166,927 | $ | 178,520 | $ | 149,761 | |||||
Portfolio turnover rate | 17.69 | % | 16.67 | % | 57.59 | % | 25.82 | % | 18.67 | % |
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’s 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, 2015.
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, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class R6 | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 14.52 | $ | 14.63 | $ | 14.62 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.36 | 0.33 | 0.54 | ||||||
Net realized and unrealized gains (losses) | (0.63 | ) | 0.22 | 0.32 | |||||
Total from investment operations. | (0.27 | ) | 0.55 | 0.86 | |||||
Less distributions from: | |||||||||
Net investment income | (0.33 | ) | (0.47 | ) | (0.33 | ) | |||
Net realized gains | (0.53 | ) | (0.19 | ) | (0.52 | ) | |||
Total distributions | (0.86 | ) | (0.66 | ) | (0.85 | ) | |||
Net asset value, end of year | $ | 13.39 | $ | 14.52 | $ | 14.63 | |||
Total returne | (1.93 | )% | 3.79 | % | 6.06 | % | |||
Ratios to average net assetsf | |||||||||
Expenses before waiver and payments by affiliatesg | 0.29 | % | 0.28 | % | 1.06 | % | |||
Expenses net of waiver and payments by affiliatesg | 0.28 | % | 0.28 | %h | 0.28 | % | |||
Net investment incomed | 2.31 | % | 3.02 | % | 2.44 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 2,282 | $ | 1,654 | $ | 37 | |||
Portfolio turnover rate | 17.69 | % | 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’s 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, 2015.
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, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Advisor Class | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 14.52 | $ | 14.64 | $ | 14.05 | $ | 13.32 | $ | 13.73 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.32 | 0.41 | 0.35 | 0.31 | 0.43 | ||||||||||
Net realized and unrealized gains (losses) | (0.60 | ) | 0.11 | 1.12 | 0.79 | (0.49 | ) | ||||||||
Total from investment operations | (0.28 | ) | 0.52 | 1.47 | 1.10 | (0.06 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.32 | ) | (0.45 | ) | (0.36 | ) | (0.34 | ) | (0.35 | ) | |||||
Net realized gains | (0.53 | ) | (0.19 | ) | (0.52 | ) | (0.03 | ) | — | ||||||
Total distributions | (0.85 | ) | (0.64 | ) | (0.88 | ) | (0.37 | ) | (0.35 | ) | |||||
Net asset value, end of year. | $ | 13.39 | $ | 14.52 | $ | 14.64 | $ | 14.05 | $ | 13.32 | |||||
Total return | (2.02 | )% | 3.61 | % | 10.67 | % | 8.27 | % | (0.47 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 0.37 | % | 0.38 | % | 0.35 | % | 0.28 | % | 0.27 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.37 | %e | 0.38 | %e | 0.34 | % | 0.25 | % | 0.25 | % | |||||
Net investment incomec | 2.22 | % | 2.92 | % | 2.36 | % | 2.23 | % | 2.42 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 82,234 | $ | 90,263 | $ | 105,657 | $ | 85,662 | $ | 80,690 | |||||
Portfolio turnover rate | 17.69 | % | 16.67 | % | 57.59 | % | 25.82 | % | 18.67 | % |
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’s 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, 2015.
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, 2015 | |||
Franklin Conservative Allocation Fund | |||
Shares | Value | ||
Investments in Underlying Funds and Exchange Traded Funds 98.3% | |||
Alternative Strategies 5.4% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 5,538,042 | $ | 58,980,149 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 5,291,099 | 30,794,197 | |
89,774,346 | |||
Domestic Equity 27.0% | |||
Financial Select Sector SPDR ETF | 955,492 | 22,721,600 | |
a,bFranklin DynaTech Fund, Class R6 | 1,435,394 | 71,956,299 | |
aFranklin Growth Fund, Class R6 | 2,174,815 | 159,566,155 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 876,138 | 30,025,243 | |
aFranklin Real Estate Securities Fund, Class R6 | 844,353 | 19,014,830 | |
aFranklin Rising Dividends Fund, Class R6 | 2,022,338 | 96,445,304 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 543,995 | 9,938,792 | |
aFranklin Utilities Fund, Class R6 | 2,022,512 | 31,389,390 | |
iShares S&P 500 Value ETF | 94,568 | 8,372,105 | |
449,429,718 | |||
Domestic Fixed Income 29.5% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 21,856,514 | 213,756,703 | |
aFranklin Short Duration U.S. Government ETF | 190,323 | 18,656,831 | |
aFranklin Strategic Income Fund, Class R6 | 10,291,767 | 94,272,589 | |
aFranklin U.S. Government Securities Fund, Class R6 | 20,286,816 | 129,227,016 | |
iShares TIPS Bond ETF | 334,694 | 36,709,238 | |
492,622,377 | |||
Foreign Equity 14.1% | |||
Deutsche X-trackers MSCI Europe Hedged Equity ETF | 638,929 | 16,516,315 | |
aFranklin International Growth Fund, Class R6 | 1,395,369 | 14,930,453 | |
aFranklin International Small Cap Growth Fund, Class R6 | 2,661,332 | 49,420,927 | |
aFranklin Mutual European Fund, Class R6 | 2,769,711 | 53,926,278 | |
iShares Core MSCI Emerging Markets ETF | 355,345 | 13,997,039 | |
iShares Global Infrastructure ETF | 118,312 | 4,253,316 | |
aTempleton Foreign Fund, Class R6 | 8,594,475 | 53,973,305 | |
aTempleton Frontier Markets Fund, Class R6 | 1,372,510 | 14,315,276 | |
WisdomTree Japan Hedged Equity ETF (Japan) | 263,636 | 13,202,891 | |
234,535,800 | |||
Foreign Fixed Income 22.3% | |||
aFranklin Emerging Market Debt Opportunities Fund | 5,125,963 | 50,080,654 | |
aTempleton Global Total Return Fund, Class R6 | 27,972,399 | 321,402,859 | |
371,483,513 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $1,589,992,402) | 1,637,845,754 |
36 Annual Report
franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin Conservative Allocation Fund (continued) | ||||
Shares | Value | |||
Short Term Investments (Cost $33,334,181) 2.0% | ||||
Money Market Funds 2.0% | ||||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 33,334,181 | $ | 33,334,181 | |
Total Investments in Underlying Funds and Exchange Traded Funds | ||||
(Cost $1,623,326,583) 100.3% | 1,671,179,935 | |||
Other Assets, less Liabilities (0.3)% | (4,986,384 | ) | ||
Net Assets 100.0% | $ | 1,666,193,551 |
See Abbreviations on page 68.
aSee Note 3f 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, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class A | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 15.71 | $ | 15.78 | $ | 14.59 | $ | 13.69 | $ | 14.21 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.24 | 0.34 | 0.27 | 0.29 | 0.30 | ||||||||||
Net realized and unrealized gains (losses) | (0.51 | ) | 0.32 | 1.78 | 0.97 | (0.50 | ) | ||||||||
Total from investment operations | (0.27 | ) | 0.66 | 2.05 | 1.26 | (0.20 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.25 | ) | (0.37 | ) | (0.30 | ) | (0.32 | ) | (0.32 | ) | |||||
Net realized gains | (0.70 | ) | (0.36 | ) | (0.56 | ) | (0.04 | ) | — | ||||||
Total distributions | (0.95 | ) | (0.73 | ) | (0.86 | ) | (0.36 | ) | (0.32 | ) | |||||
Net asset value, end of year. | $ | 14.49 | $ | 15.71 | $ | 15.78 | $ | 14.59 | $ | 13.69 | |||||
Total returnd | (1.89 | )% | 4.07 | % | 14.35 | % | 9.34 | % | (1.49 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 0.63 | % | 0.65 | % | 0.61 | % | 0.53 | % | 0.53 | % | |||||
Expenses net of waiver and payments by affiliatese | 0.63 | %f | 0.65 | %f | 0.59 | % | 0.50 | % | 0.50 | % | |||||
Net investment incomec | 1.52 | % | 2.08 | % | 1.74 | % | 2.00 | % | 2.15 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 1,594,882 | $ | 1,667,201 | $ | 1,636,122 | $ | 1,452,659 | $ | 1,322,230 | |||||
Portfolio turnover rate | 22.08 | % | 17.95 | % | 46.14 | % | 25.36 | % | 19.76 | % |
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’s 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, 2015.
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, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class C | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 15.33 | $ | 15.42 | $ | 14.28 | $ | 13.40 | $ | 13.92 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.12 | 0.21 | 0.15 | 0.17 | 0.19 | ||||||||||
Net realized and unrealized gains (losses) | (0.49 | ) | 0.31 | 1.74 | 0.97 | (0.49 | ) | ||||||||
Total from investment operations | (0.37 | ) | 0.52 | 1.89 | 1.14 | (0.30 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.14 | ) | (0.25 | ) | (0.19 | ) | (0.22 | ) | (0.22 | ) | |||||
Net realized gains | (0.70 | ) | (0.36 | ) | (0.56 | ) | (0.04 | ) | — | ||||||
Total distributions | (0.84 | ) | (0.61 | ) | (0.75 | ) | (0.26 | ) | (0.22 | ) | |||||
Net asset value, end of year. | $ | 14.12 | $ | 15.33 | $ | 15.42 | $ | 14.28 | $ | 13.40 | |||||
Total returnd | (2.68 | )% | 3.35 | % | 13.41 | % | 8.51 | % | (2.17 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 1.38 | % | 1.40 | % | 1.36 | % | 1.28 | % | 1.28 | % | |||||
Expenses net of waiver and payments by affiliatese | 1.38 | %f | 1.40 | %f | 1.34 | % | 1.25 | % | 1.25 | % | |||||
Net investment incomec | 0.77 | % | 1.33 | % | 0.99 | % | 1.25 | % | 1.40 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 692,872 | $ | 716,712 | $ | 701,224 | $ | 605,490 | $ | 554,603 | |||||
Portfolio turnover rate | 22.08 | % | 17.95 | % | 46.14 | % | 25.36 | % | 19.76 | % |
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’s 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, 2015.
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, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class R | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 15.66 | $ | 15.73 | $ | 14.55 | $ | 13.64 | $ | 14.17 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.19 | 0.28 | 0.22 | 0.25 | 0.27 | ||||||||||
Net realized and unrealized gains (losses) | (0.51 | ) | 0.34 | 1.78 | 0.99 | (0.51 | ) | ||||||||
Total from investment operations | (0.32 | ) | 0.62 | 2.00 | 1.24 | (0.24 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.20 | ) | (0.33 | ) | (0.26 | ) | (0.29 | ) | (0.29 | ) | |||||
Net realized gains | (0.70 | ) | (0.36 | ) | (0.56 | ) | (0.04 | ) | — | ||||||
Total distributions | (0.90 | ) | (0.69 | ) | (0.82 | ) | (0.33 | ) | (0.29 | ) | |||||
Net asset value, end of year. | $ | 14.44 | $ | 15.66 | $ | 15.73 | $ | 14.55 | $ | 13.64 | |||||
Total return | (2.18 | )% | 3.89 | % | 13.97 | % | 9.11 | % | (1.73 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 0.88 | % | 0.90 | % | 0.86 | % | 0.78 | % | 0.78 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.88 | %e | 0.90 | %e | 0.84 | % | 0.75 | % | 0.75 | % | |||||
Net investment incomec | 1.27 | % | 1.83 | % | 1.49 | % | 1.75 | % | 1.90 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 202,854 | $ | 263,864 | $ | 286,688 | $ | 274,881 | $ | 248,702 | |||||
Portfolio turnover rate | 22.08 | % | 17.95 | % | 46.14 | % | 25.36 | % | 19.76 | % |
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’s 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, 2015.
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, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class R6 | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 15.72 | $ | 15.79 | $ | 15.33 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.31 | 0.25 | 0.77 | ||||||
Net realized and unrealized gains (losses) | (0.54 | ) | 0.47 | 0.56 | |||||
Total from investment operations. | (0.23 | ) | 0.72 | 1.33 | |||||
Less distributions from: | |||||||||
Net investment income | (0.30 | ) | (0.43 | ) | (0.31 | ) | |||
Net realized gains | (0.70 | ) | (0.36 | ) | (0.56 | ) | |||
Total distributions | (1.00 | ) | (0.79 | ) | (0.87 | ) | |||
Net asset value, end of year | $ | 14.49 | $ | 15.72 | $ | 15.79 | |||
Total returne | (1.59 | )% | 4.52 | % | 8.93 | % | |||
Ratios to average net assetsf | |||||||||
Expenses before waiver and payments by affiliatesg | 0.28 | % | 0.27 | % | 0.45 | % | |||
Expenses net of waiver and payments by affiliatesg | 0.28 | %h | 0.27 | %h | 0.26 | % | |||
Net investment incomed | 1.87 | % | 2.46 | % | 2.07 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 4,779 | $ | 4,205 | $ | 253 | |||
Portfolio turnover rate | 22.08 | % | 17.95 | % | 46.14 | % |
aForthe 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’s 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, 2015.
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, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Advisor Class | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 15.72 | $ | 15.79 | $ | 14.60 | $ | 13.69 | $ | 14.22 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.25 | 0.33 | 0.32 | 0.36 | 0.37 | ||||||||||
Net realized and unrealized gains (losses) | (0.49 | ) | 0.37 | 1.76 | 0.95 | (0.55 | ) | ||||||||
Total from investment operations | (0.24 | ) | 0.70 | 2.08 | 1.31 | (0.18 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.28 | ) | (0.41 | ) | (0.33 | ) | (0.36 | ) | (0.35 | ) | |||||
Net realized gains | (0.70 | ) | (0.36 | ) | (0.56 | ) | (0.04 | ) | — | ||||||
Total distributions | (0.98 | ) | (0.77 | ) | (0.89 | ) | (0.40 | ) | (0.35 | ) | |||||
Net asset value, end of year. | $ | 14.50 | $ | 15.72 | $ | 15.79 | $ | 14.60 | $ | 13.69 | |||||
Total return | (1.66 | )% | 4.39 | % | 14.56 | % | 9.61 | % | (1.24 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 0.38 | % | 0.40 | % | 0.36 | % | 0.28 | % | 0.28 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.38 | %e | 0.40 | %e | 0.34 | % | 0.25 | % | 0.25 | % | |||||
Net investment incomec | 1.77 | % | 2.33 | % | 1.99 | % | 2.25 | % | 2.40 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 52,975 | $ | 87,612 | $ | 159,303 | $ | 123,176 | $ | 78,605 | |||||
Portfolio turnover rate | 22.08 | % | 17.95 | % | 46.14 | % | 25.36 | % | 19.76 | % |
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’s 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, 2015.
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, 2015 | |||
Franklin Moderate Allocation Fund | |||
Shares | Value | ||
Investments in Underlying Funds and Exchange Traded Funds 98.0% | |||
Alternative Strategies 5.4% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 8,489,495 | $ | 90,413,119 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 8,074,252 | 46,992,146 | |
137,405,265 | |||
Domestic Equity 40.9% | |||
Financial Select Sector SPDR ETF | 2,241,731 | 53,308,363 | |
a,bFranklin DynaTech Fund, Class R6 | 3,104,067 | 155,606,897 | |
aFranklin Growth Fund, Class R6 | 5,082,772 | 372,923,004 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 2,108,659 | 72,263,741 | |
aFranklin Real Estate Securities Fund, Class R6 | 2,118,854 | 47,716,585 | |
aFranklin Rising Dividends Fund, Class R6 | 4,580,581 | 218,447,906 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 1,319,381 | 24,105,093 | |
aFranklin Utilities Fund, Class R6 | 5,431,764 | 84,300,973 | |
iShares S&P 500 Value ETF | 144,948 | 12,832,246 | |
1,041,504,808 | |||
Domestic Fixed Income 17.7% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 20,488,108 | 200,373,694 | |
aFranklin Short Duration U.S. Government ETF | 217,513 | 21,322,191 | |
aFranklin Strategic Income Fund, Class R6 | 9,426,160 | 86,343,625 | |
aFranklin U.S. Government Securities Fund, Class R6 | 18,160,278 | 115,680,970 | |
iShares TIPS Bond ETF | 250,840 | 27,512,131 | |
451,232,611 | |||
Foreign Equity 20.9% | |||
Deutsche X-trackers MSCI Europe Hedged Equity ETF | 980,320 | 25,341,272 | |
aFranklin International Growth Fund, Class R6 | 3,518,060 | 37,643,239 | |
aFranklin International Small Cap Growth Fund, Class R6 | 6,171,863 | 114,611,489 | |
aFranklin Mutual European Fund, Class R6 | 6,403,471 | 124,675,572 | |
iShares Core MSCI Emerging Markets ETF | 757,525 | 29,838,910 | |
iShares Global Infrastructure ETF | 287,836 | 10,347,704 | |
aTempleton Foreign Fund, Class R6 | 19,839,565 | 124,592,471 | |
aTempleton Frontier Markets Fund, Class R6 | 3,562,592 | 37,157,832 | |
WisdomTree Japan Hedged Equity ETF (Japan) | 600,000 | 30,048,000 | |
534,256,489 | |||
Foreign Fixed Income 13.1% | |||
aFranklin Emerging Market Debt Opportunities Fund | 4,703,524 | 45,953,425 | |
aTempleton Global Total Return Fund, Class R6 | 25,025,106 | 287,538,463 | |
333,491,888 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $2,269,143,716) | 2,497,891,061 |
franklintempleton.com
Annual Report
43
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin Moderate Allocation Fund (continued) | ||||
Shares | Value | |||
Short Term Investments (Cost $60,006,957) 2.4% | ||||
Money Market Funds 2.4% | ||||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 60,006,957 | $ | 60,006,957 | |
Total Investments in Underlying Funds and Exchange Traded Funds | ||||
(Cost $2,329,150,673) 100.4% | 2,557,898,018 | |||
Other Assets, less Liabilities (0.4)% | (9,536,609 | ) | ||
Net Assets 100.0% | $ | 2,548,361,409 |
See Abbreviations on page 68.
aSee Note 3f 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, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class A | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 18.57 | $ | 18.40 | $ | 15.81 | $ | 14.53 | $ | 15.25 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.21 | 0.24 | 0.19 | 0.21 | 0.22 | ||||||||||
Net realized and unrealized gains (losses) | (0.48 | ) | 0.67 | 3.09 | 1.32 | (0.70 | ) | ||||||||
Total from investment operations | (0.27 | ) | 0.91 | 3.28 | 1.53 | (0.48 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds and exchange traded funds | (0.21 | ) | (0.29 | ) | (0.25 | ) | (0.25 | ) | (0.24 | ) | |||||
Net realized gains | (1.08 | ) | (0.45 | ) | (0.44 | ) | — | — | |||||||
Total distributions | (1.29 | ) | (0.74 | ) | (0.69 | ) | (0.25 | ) | (0.24 | ) | |||||
Net asset value, end of year. | $ | 17.01 | $ | 18.57 | $ | 18.40 | $ | 15.81 | $ | 14.53 | |||||
Total returnd | (1.66 | )% | 4.95 | % | 20.98 | % | 10.52 | % | (3.15 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 0.67 | % | 0.68 | % | 0.65 | % | 0.55 | % | 0.54 | % | |||||
Expenses net of waiver and payments by affiliatese | 0.65 | % | 0.63 | % | 0.59 | % | 0.50 | % | 0.50 | % | |||||
Net investment incomec | 1.10 | % | 1.25 | % | 1.10 | % | 1.34 | % | 1.49 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 888,096 | $ | 887,856 | $ | 814,901 | $ | 655,585 | $ | 568,998 | |||||
Portfolio turnover rate | 20.40 | % | 17.55 | % | 30.45 | % | 31.36 | % | 20.19 | % |
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’s 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 0.68% for the year ended December 31, 2015.
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, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class C | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 18.15 | $ | 18.00 | $ | 15.50 | $ | 14.25 | $ | 14.97 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.07 | 0.09 | 0.06 | 0.09 | 0.11 | ||||||||||
Net realized and unrealized gains (losses) | (0.47 | ) | 0.67 | 3.01 | 1.29 | (0.69 | ) | ||||||||
Total from investment operations | (0.40 | ) | 0.76 | 3.07 | 1.38 | (0.58 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds and exchange traded funds | (0.08 | ) | (0.16 | ) | (0.13 | ) | (0.13 | ) | (0.14 | ) | |||||
Net realized gains | (1.08 | ) | (0.45 | ) | (0.44 | ) | — | — | |||||||
Total distributions | (1.16 | ) | (0.61 | ) | (0.57 | ) | (0.13 | ) | (0.14 | ) | |||||
Net asset value, end of year. | $ | 16.59 | $ | 18.15 | $ | 18.00 | $ | 15.50 | $ | 14.25 | |||||
Total returnd | (2.41 | )% | 4.21 | % | 20.04 | % | 9.71 | % | (3.91 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 1.42 | % | 1.43 | % | 1.40 | % | 1.30 | % | 1.29 | % | |||||
Expenses net of waiver and payments by affiliatese | 1.40 | % | 1.38 | % | 1.34 | % | 1.25 | % | 1.25 | % | |||||
Net investment incomec | 0.35 | % | 0.50 | % | 0.35 | % | 0.59 | % | 0.74 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 336,557 | $ | 336,213 | $ | 309,869 | $ | 241,787 | $ | 218,071 | |||||
Portfolio turnover rate | 20.40 | % | 17.55 | % | 30.45 | % | 31.36 | % | 20.19 | % |
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’s 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 0.68% for the year ended December 31, 2015.
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, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class R | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 18.34 | $ | 18.18 | $ | 15.63 | $ | 14.37 | $ | 15.09 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.14 | 0.17 | 0.14 | 0.16 | 0.19 | ||||||||||
Net realized and unrealized gains (losses) | (0.44 | ) | 0.68 | 3.05 | 1.31 | (0.70 | ) | ||||||||
Total from investment operations | (0.30 | ) | 0.85 | 3.19 | 1.47 | (0.51 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds and exchange traded funds | (0.16 | ) | (0.24 | ) | (0.20 | ) | (0.21 | ) | (0.21 | ) | |||||
Net realized gains | (1.08 | ) | (0.45 | ) | (0.44 | ) | — | — | |||||||
Total distributions | (1.24 | ) | (0.69 | ) | (0.64 | ) | (0.21 | ) | (0.21 | ) | |||||
Net asset value, end of year. | $ | 16.80 | $ | 18.34 | $ | 18.18 | $ | 15.63 | $ | 14.37 | |||||
Total return | (1.93 | )% | 4.72 | % | 20.67 | % | 10.22 | % | (3.40 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 0.92 | % | 0.93 | % | 0.90 | % | 0.80 | % | 0.79 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.90 | % | 0.88 | % | 0.84 | % | 0.75 | % | 0.75 | % | |||||
Net investment incomec | 0.85 | % | 1.00 | % | 0.85 | % | 1.09 | % | 1.24 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 147,426 | $ | 182,211 | $ | 192,361 | $ | 169,873 | $ | 147,126 | |||||
Portfolio turnover rate | 20.40 | % | 17.55 | % | 30.45 | % | 31.36 | % | 20.19 | % |
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’s 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 0.68% for the year ended December 31, 2015.
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, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class R6 | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 18.61 | $ | 18.44 | $ | 16.88 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.32 | 0.15 | 0.62 | ||||||
Net realized and unrealized gains (losses) | (0.51 | ) | 0.83 | 1.68 | |||||
Total from investment operations. | (0.19 | ) | 0.98 | 2.30 | |||||
Less distributions from: | |||||||||
Net investment income and short term gains received from Underlying Funds and exchange | |||||||||
traded funds | (0.28 | ) | (0.36 | ) | (0.30 | ) | |||
Net realized gains | (1.08 | ) | (0.45 | ) | (0.44 | ) | |||
Total distributions | (1.36 | ) | (0.81 | ) | (0.74 | ) | |||
Net asset value, end of year | $ | 17.06 | $ | 18.61 | $ | 18.44 | |||
Total returne | (1.27 | )% | 5.38 | % | 13.88 | % | |||
Ratios to average net assetsf | |||||||||
Expenses before waiver and payments by affiliatesg | 0.29 | % | 0.28 | % | 0.95 | % | |||
Expenses net of waiver and payments by affiliatesg | 0.26 | % | 0.23 | % | 0.22 | % | |||
Net investment incomed | 1.49 | % | 1.65 | % | 1.47 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 2,549 | $ | 1,755 | $ | 42 | |||
Portfolio turnover rate | 20.40 | % | 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’s 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 0.68% for the year ended December 31, 2015.
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, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Advisor Class | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 18.62 | $ | 18.45 | $ | 15.85 | $ | 14.56 | $ | 15.28 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.25 | 0.27 | 0.24 | 0.25 | 0.32 | ||||||||||
Net realized and unrealized gains (losses) | (0.47 | ) | 0.68 | 3.09 | 1.32 | (0.76 | ) | ||||||||
Total from investment operations | (0.22 | ) | 0.95 | 3.33 | 1.57 | (0.44 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds and exchange traded funds | (0.26 | ) | (0.33 | ) | (0.29 | ) | (0.28 | ) | (0.28 | ) | |||||
Net realized gains | (1.08 | ) | (0.45 | ) | (0.44 | ) | — | — | |||||||
Total distributions | (1.34 | ) | (0.78 | ) | (0.73 | ) | (0.28 | ) | (0.28 | ) | |||||
Net asset value, end of year. | $ | 17.06 | $ | 18.62 | $ | 18.45 | $ | 15.85 | $ | 14.56 | |||||
Total return | (1.41 | )% | 5.23 | % | 21.26 | % | 10.84 | % | (2.90 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 0.42 | % | 0.43 | % | 0.40 | % | 0.30 | % | 0.29 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.40 | % | 0.38 | % | 0.34 | % | 0.25 | % | 0.25 | % | |||||
Net investment incomec | 1.35 | % | 1.50 | % | 1.35 | % | 1.59 | % | 1.74 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 49,634 | $ | 52,250 | $ | 74,808 | $ | 55,810 | $ | 48,957 | |||||
Portfolio turnover rate | 20.40 | % | 17.55 | % | 30.45 | % | 31.36 | % | 20.19 | % |
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’s 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 0.68% for the year ended December 31, 2015.
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, 2015 | |||
Franklin Growth Allocation Fund | |||
Shares | Value | ||
Investments in Underlying Funds and Exchange Traded Funds 98.2% | |||
Alternative Strategies 5.4% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 4,773,803 | $ | 50,840,997 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 4,504,698 | 26,217,341 | |
77,058,338 | |||
Domestic Equity 53.4% | |||
Financial Select Sector SPDR ETF | 1,588,403 | 37,772,223 | |
a,bFranklin DynaTech Fund, Class R6 | 2,375,363 | 119,076,952 | |
aFranklin Growth Fund, Class R6 | 3,603,484 | 264,387,648 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 1,683,916 | 57,707,801 | |
aFranklin Real Estate Securities Fund, Class R6 | 1,627,427 | 36,649,661 | |
aFranklin Rising Dividends Fund, Class R6 | 3,396,850 | 161,995,797 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 919,432 | 16,798,022 | |
aFranklin Utilities Fund, Class R6 | 3,735,821 | 57,979,943 | |
iShares S&P 500 Value ETF | 81,957 | 7,255,653 | |
759,623,700 | |||
Domestic Fixed Income 6.2% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 4,043,897 | 39,549,311 | |
aFranklin Short Duration U.S. Government ETF | 43,840 | 4,297,512 | |
aFranklin Strategic Income Fund, Class R6 | 1,841,518 | 16,868,304 | |
aFranklin U.S. Government Securities Fund, Class R6 | 3,335,076 | 21,244,434 | |
iShares TIPS Bond ETF | 62,015 | 6,801,805 | |
88,761,366 | |||
Foreign Equity 28.6% | |||
Deutsche X-trackers MSCI Europe Hedged Equity ETF | 546,167 | 14,118,417 | |
aFranklin International Growth Fund, Class R6 | 2,523,677 | 27,003,344 | |
aFranklin International Small Cap Growth Fund, Class R6 | 4,926,476 | 91,484,654 | |
aFranklin Mutual European Fund, Class R6 | 4,754,170 | 92,563,689 | |
iShares Core MSCI Emerging Markets ETF | 584,505 | 23,023,652 | |
iShares Global Infrastructure ETF | 207,410 | 7,456,389 | |
aTempleton Foreign Fund, Class R6 | 15,493,988 | 97,302,242 | |
aTempleton Frontier Markets Fund, Class R6 | 3,108,895 | 32,425,776 | |
WisdomTree Japan Hedged Equity ETF (Japan) | 447,272 | 22,399,382 | |
407,777,545 | |||
Foreign Fixed Income 4.6% | |||
aFranklin Emerging Market Debt Opportunities Fund | 891,959 | 8,714,436 | |
aTempleton Global Total Return Fund, Class R6 | 4,877,598 | 56,043,605 | |
64,758,041 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $1,194,588,214) | 1,397,978,990 |
50 Annual Report
franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin Growth Allocation Fund (continued) | ||||
Shares | Value | |||
Short Term Investments (Cost $31,962,324) 2.2% | ||||
Money Market Funds 2.2% | ||||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 31,962,324 | $ | 31,962,324 | |
Total Investments in Underlying Funds and Exchange Traded Funds | ||||
(Cost $1,226,550,538) 100.4% | 1,429,941,314 | |||
Other Assets, less Liabilities (0.4)% | (5,679,326 | ) | ||
Net Assets 100.0% | $ | 1,424,261,988 |
See Abbreviations on page 68.
aSee Note 3f 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, 2015 | ||||||
Franklin | Franklin | Franklin | ||||
Conservative | Moderate | Growth | ||||
Allocation Fund | Allocation Fund | Allocation Fund | ||||
Assets: | ||||||
Cost - Underlying Funds (Note 3f) | $ | 1,503,409,737 | $ | 2,130,625,443 | $ | 1,100,885,932 |
Cost - Exchange traded funds | 119,916,846 | 198,525,230 | 125,664,606 | |||
Total cost of investments | $ | 1,623,326,583 | $ | 2,329,150,673 | $ | 1,226,550,538 |
Value - Underlying Funds (Note 3f) | $ | 1,555,407,431 | $ | 2,368,669,392 | $ | 1,311,113,793 |
Value - Exchange traded funds. | 115,772,504 | 189,228,626 | 118,827,521 | |||
Total value of investments | 1,671,179,935 | 2,557,898,018 | 1,429,941,314 | |||
Receivables: | ||||||
Capital shares sold | 3,965,097 | 4,733,857 | 3,070,334 | |||
Dividends | 34,588 | 39,529 | 7,967 | |||
Other assets | 136 | 218 | 115 | |||
Total assets | 1,675,179,756 | 2,562,671,622 | 1,433,019,730 | |||
Liabilities: | ||||||
Payables: | ||||||
Capital shares redeemed | 6,781,286 | 11,056,103 | 6,856,821 | |||
Asset allocation fees | 348,557 | 532,964 | 288,947 | |||
Distribution fees | 1,402,399 | 2,007,407 | 1,069,933 | |||
Transfer agent fees | 381,492 | 594,220 | 365,976 | |||
Accrued expenses and other liabilities | 72,471 | 119,519 | 176,065 | |||
Total liabilities | 8,986,205 | 14,310,213 | 8,757,742 | |||
Net assets, at value | $ | 1,666,193,551 | $ | 2,548,361,409 | $ | 1,424,261,988 |
Net assets consist of: | ||||||
Paid-incapital | $ | 1,610,295,175 | $ | 2,291,119,779 | $ | 1,195,915,120 |
Undistributed net investment income | 800,076 | 781,622 | 341,120 | |||
Net unrealized appreciation (depreciation) | 47,853,352 | 228,747,345 | 203,390,776 | |||
Accumulated net realized gain (loss) | 7,244,948 | 27,712,663 | 24,614,972 | |||
Net assets, at value | $ | 1,666,193,551 | $ | 2,548,361,409 | $ | 1,424,261,988 |
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, 2015 | ||||||||
Franklin | Franklin | Franklin | ||||||
Conservative | Moderate | Growth | ||||||
Allocation Fund | Allocation Fund | Allocation Fund | ||||||
Class A: | ||||||||
Netassets,atvalue | $ | 905,537,295 | $ | 1,594,882,016 | $ | 888,095,515 | ||
Shares outstanding | 67,561,146 | 110,063,192 | 52,216,125 | |||||
Net asset value per sharea | $ | 13.40 | $ | 14.49 | $ | 17.01 | ||
Maximum offering price per share (net asset value per share ÷ 94.25%) | $ | 14.22 | $ | 15.37 | $ | 18.05 | ||
Class C: | ||||||||
Netassets,atvalue | $ | 536,548,230 | $ | 692,871,675 | $ | 336,557,206 | ||
Shares outstanding | 40,805,195 | 49,087,221 | 20,286,862 | |||||
Net asset value and maximum offering price per sharea | $ | 13.15 | $ | 14.12 | $ | 16.59 | ||
Class R: | ||||||||
Netassets,atvalue | $ | 139,592,150 | $ | 202,853,951 | $ | 147,426,331 | ||
Shares outstanding | 10,454,806 | 14,047,128 | 8,774,777 | |||||
Net asset value and maximum offering price per share | $ | 13.35 | $ | 14.44 | $ | 16.80 | ||
Class R6: | ||||||||
Netassets,atvalue | $ | 2,281,596 | $ | 4,779,229 | $ | 2,548,708 | ||
Shares outstanding | 170,387 | 329,786 | 149,440 | |||||
Net asset value and maximum offering price per share | $ | 13.39 | $ | 14.49 | $ | 17.06 | ||
Advisor Class : | ||||||||
Netassets,atvalue | $ | 82,234,280 | $ | 52,974,538 | $ | 49,634,228 | ||
Shares outstanding | 6,140,248 | 3,653,389 | 2,908,707 | |||||
Net asset value and maximum offering price per share | $ | 13.39 | $ | 14.50 | $ | 17.06 |
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, 2015 | |||||||||
Franklin | Franklin | Franklin | |||||||
Conservative | Moderate | Growth | |||||||
Allocation Fund | Allocation Fund | Allocation Fund | |||||||
Investment income: | |||||||||
Dividends: | |||||||||
Underlying Funds (Note 3f) | $ | 41,682,940 | $ | 53,445,495 | $ | 23,503,188 | |||
Exchange traded funds | 2,758,202 | 4,471,950 | 2,385,954 | ||||||
Total investment income | 44,441,142 | 57,917,445 | 25,889,142 | ||||||
Expenses: | |||||||||
Asset allocation fees (Note3a) | 4,293,792 | 6,719,056 | 3,695,235 | ||||||
Distribution fees: (Note 3c) | |||||||||
Class A | 2,307,676 | 4,146,519 | 2,279,429 | ||||||
Class C | 5,505,065 | 7,145,648 | 3,438,162 | ||||||
Class R | 764,285 | 1,183,392 | 842,365 | ||||||
Transfer agent fees: (Note 3e) | |||||||||
Class A | 949,707 | 1,921,672 | 1,372,279 | ||||||
Class C | 568,342 | 829,392 | 518,149 | ||||||
Class R | 157,690 | 275,296 | 253,565 | ||||||
Class R6 | 475 | 560 | 479 | ||||||
Advisor Class | 90,103 | 83,259 | 77,197 | ||||||
Custodian fees (Note 4) | 1,135 | 1,864 | 818 | ||||||
Reports to shareholders | 105,508 | 196,491 | 145,003 | ||||||
Registration and filing fees | 150,122 | 163,909 | 127,082 | ||||||
Professional fees | 36,853 | 43,073 | 35,462 | ||||||
Trustees’ fees and expenses | 12,325 | 19,531 | 10,591 | ||||||
Other | 23,948 | 31,482 | 20,818 | ||||||
Total expenses | 14,967,026 | 22,761,144 | 12,816,634 | ||||||
Expenses waived/paid by affiliates (Note 3f and 3g) | (58,015 | ) | (77,509 | ) | (396,025 | ) | |||
Net expenses | 14,909,011 | 22,683,635 | 12,420,609 | ||||||
Net investment income | 29,532,131 | 35,233,810 | 13,468,533 | ||||||
Realized and unrealized gains (losses): | |||||||||
Net realized gain (loss) from: | |||||||||
Sale of investments: | |||||||||
Underlying Funds (Note 3f) | 23,825,312 | 28,081,627 | 27,550,083 | ||||||
Exchange traded funds | 2,304,009 | 12,538,878 | 6,932,181 | ||||||
Realized gain distributions: | |||||||||
Underlying Funds (Note 3f) | 16,125,620 | 37,287,555 | 27,289,720 | ||||||
Exchange traded funds | 678,500 | 1,475,796 | 1,073,494 | ||||||
Net realized gain (loss) | 42,933,441 | 79,383,856 | 62,845,478 | ||||||
Net change in unrealized appreciation (depreciation) on investments. | (115,281,577 | ) | (169,359,603 | ) | (102,938,221 | ) | |||
Net realized and unrealized gain (loss) | (72,348,136 | ) | (89,975,747 | ) | (40,092,743 | ) | |||
Net increase (decrease) in net assets resulting from operations | $ | (42,816,005 | ) | $ | (54,741,937 | ) | $ | (26,624,210 | ) |
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 Moderate | |||||||||||
Conservative Allocation Fund | Allocation Fund | |||||||||||
Year Ended December 31, | Year Ended December 31, | |||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||
Increase (decrease) in net assets: | ||||||||||||
Operations: | ||||||||||||
Net investment income | $ | 29,532,131 | $ | 41,254,503 | $ | 35,233,810 | $ | 52,051,448 | ||||
Net realized gain (loss) | 42,933,441 | 41,874,751 | 79,383,856 | 105,419,626 | ||||||||
Net change in unrealized appreciation (depreciation) | (115,281,577 | ) | (31,156,451 | ) | (169,359,603 | ) | (49,648,092 | ) | ||||
Net increase (decrease) in net assets resulting | ||||||||||||
from operations | (42,816,005 | ) | 51,972,803 | (54,741,937 | ) | 107,822,982 | ||||||
Distributions to shareholders from: | ||||||||||||
Net investment income: | ||||||||||||
Class A | (18,437,469 | ) | (25,413,629 | ) | (26,373,066 | ) | (38,129,297 | ) | ||||
Class C | (7,096,466 | ) | (11,597,319 | ) | (6,467,307 | ) | (11,485,730 | ) | ||||
Class R | (2,557,058 | ) | (4,141,289 | ) | (2,854,405 | ) | (5,440,637 | ) | ||||
Class R6 | (49,277 | ) | (92,864 | ) | (92,558 | ) | (289,973 | ) | ||||
Advisor Class | (1,913,425 | ) | (2,859,868 | ) | (1,044,247 | ) | (2,392,681 | ) | ||||
Net realized gains: | ||||||||||||
Class A | (34,590,141 | ) | (11,696,465 | ) | (73,931,506 | ) | (36,890,069 | ) | ||||
Class C | (20,931,281 | ) | (7,240,053 | ) | (32,893,027 | ) | (16,239,360 | ) | ||||
Class R | (5,555,467 | ) | (2,164,890 | ) | (10,090,808 | ) | (6,067,607 | ) | ||||
Class R6 | (78,609 | ) | (82,538 | ) | (209,246 | ) | (512,949 | ) | ||||
Advisor Class | (3,192,772 | ) | (1,273,888 | ) | (3,024,647 | ) | (2,391,120 | ) | ||||
Total distributions to shareholders | (94,401,965 | ) | (66,562,803 | ) | (156,980,817 | ) | (119,839,423 | ) | ||||
Capital share transactions: (Note 2) | ||||||||||||
Class A | 68,912,114 | 46,732,968 | 58,477,157 | 38,831,164 | ||||||||
Class C | 32,038,615 | 29,536,406 | 34,357,140 | 19,655,378 | ||||||||
Class R | (8,686,144 | ) | (5,759,784 | ) | (44,142,289 | ) | (21,890,340 | ) | ||||
Class R6 | 800,684 | 1,518,695 | 966,857 | 3,122,327 | ||||||||
Advisor Class | (1,212,639 | ) | (14,796,952 | ) | (29,169,449 | ) | (71,697,229 | ) | ||||
Total capital share transactions | 91,852,630 | 57,231,333 | 20,489,416 | (31,978,700 | ) | |||||||
Net increase (decrease) in net assets | (45,365,340 | ) | 42,641,333 | (191,233,338 | ) | (43,995,141 | ) | |||||
Net assets: | ||||||||||||
Beginning of year | 1,711,558,891 | 1,668,917,558 | 2,739,594,747 | 2,783,589,888 | ||||||||
End of year | $ | 1,666,193,551 | $ | 1,711,558,891 | $ | 2,548,361,409 | $ | 2,739,594,747 | ||||
Undistributed net investment income included in net assets: | ||||||||||||
End of year | $ | 800,076 | $ | 621,870 | $ | 781,622 | $ | 757,764 |
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, | ||||||
2015 | 2014 | |||||
Increase (decrease) in net assets: | ||||||
Operations: | ||||||
Net investment income | $ | 13,468,533 | $ | 15,192,359 | ||
Net realized gain (loss) | 62,845,478 | 65,813,844 | ||||
Net change in unrealized appreciation (depreciation) | (102,938,221 | ) | (13,542,414 | ) | ||
Net increase (decrease) in net assets resulting from operations | (26,624,210 | ) | 67,463,789 | |||
Distributions to shareholders from: | ||||||
Net investment income and short term gains received from Underlying Funds and exchange traded | ||||||
funds: | ||||||
Class A. | (10,774,648 | ) | (13,601,930 | ) | ||
Class C | (1,670,180 | ) | (2,879,304 | ) | ||
Class R | (1,337,989 | ) | (2,339,058 | ) | ||
Class R6. | (40,509 | ) | (39,682 | ) | ||
Advisor Class | (721,649 | ) | (919,862 | ) | ||
Net realized gains: | ||||||
Class A. | (53,303,108 | ) | (20,800,818 | ) | ||
Class C | (20,658,511 | ) | (8,037,905 | ) | ||
Class R | (9,523,158 | ) | (4,570,619 | ) | ||
Class R6. | (136,324 | ) | (401,855 | ) | ||
Advisor Class | (2,934,714 | ) | (1,273,439 | ) | ||
Total distributions to shareholders | (101,100,790 | ) | (54,864,472 | ) | ||
Capital share transactions: (Note 2) | ||||||
Class A. | 79,558,253 | 65,731,634 | ||||
Class C | 31,096,033 | 23,942,365 | ||||
Class R | (21,571,411 | ) | (11,877,769 | ) | ||
Class R6. | 1,013,444 | 943,402 | ||||
Advisor Class | 1,335,467 | (22,765,242 | ) | |||
Total capital share transactions | 91,431,786 | 55,974,390 | ||||
Net increase (decrease) in net assets | (36,293,214 | ) | 68,573,707 | |||
Net assets: | ||||||
Beginning of year | 1,460,555,202 | 1,391,981,495 | ||||
End of year | $ | 1,424,261,988 | $ | 1,460,555,202 | ||
Undistributed net investment income included in net assets: | ||||||
End of year | $ | 341,120 | $ | 230,989 |
56 Annual Report | The accompanying notes are an integral part of these financial statements.
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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 (1940 Act) as an open-end management investment company, consisting of twenty 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.
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 as of 4 p.m. Eastern time each day the New York Stock Exchange (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 may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of December 31, 2015, each Fund hasdetermined that no tax liability is required in its financial statementsrelated to uncertaintax positions for any open tax years(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’s 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.
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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 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, 2015, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:
Franklin | Franklin Moderate | |||||||||
Conservative Allocation Fund | Allocation Fund | |||||||||
Shares | Amount | Shares | Amount | |||||||
Class A Shares: | ||||||||||
Year ended December 31, 2015 | ||||||||||
Shares sold | 17,092,437 | $ | 244,905,813 | 20,354,348 | $ | 316,387,088 | ||||
Shares issued in reinvestment of distributions | 3,730,409 | 51,852,094 | 6,518,174 | 98,432,261 | ||||||
Shares redeemed. | (15,925,736 | ) | (227,845,793 | ) | (22,912,797 | ) | (356,342,192 | ) | ||
Net increase (decrease) | 4,897,110 | $ | 68,912,114 | 3,959,725 | $ | 58,477,157 | ||||
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 |
58 Annual Report
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NOTES TO FINANCIAL STATEMENTS
Franklin | |||||||||||
Conservative Allocation | Franklin Moderate | ||||||||||
Fund | Allocation Fund | ||||||||||
Shares | Amount | Shares | Amount | ||||||||
Class C Shares: | |||||||||||
Year ended December 31, 2015 | |||||||||||
Shares sold | 8,906,517 | $ | 125,211,385 | 8,598,914 | $ | 130,261,509 | |||||
Shares issued in reinvestment of distributions | 1,965,005 | 26,793,109 | 2,574,921 | 37,990,036 | |||||||
Shares redeemed. | (8,554,139 | ) | (119,965,879 | ) | (8,840,782 | ) | (133,894,405 | ) | |||
Net increase (decrease) | 2,317,383 | $ | 32,038,615 | 2,333,053 | $ | 34,357,140 | |||||
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 | |||||
Class R Shares: | |||||||||||
Year ended December 31, 2015 | |||||||||||
Shares sold | 1,425,914 | $ | 20,445,548 | 1,641,527 | $ | 25,496,276 | |||||
Shares issued in reinvestment of distributions | 568,121 | 7,875,900 | 839,104 | 12,665,188 | |||||||
Shares redeemed. | (2,584,845 | ) | (37,007,592 | ) | (5,286,654 | ) | (82,303,753 | ) | |||
Net increase (decrease) | (590,810 | ) | $ | (8,686,144 | ) | (2,806,023 | ) | $ | (44,142,289 | ) | |
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 | ) | |
Class R6 Shares: | |||||||||||
Year ended December 31, 2015 | |||||||||||
Shares sold | 68,870 | $ | 973,753 | 89,205 | $ | 1,371,085 | |||||
Shares issued in reinvestment of distributions | 9,251 | 127,885 | 20,026 | 301,805 | |||||||
Shares redeemed. | (21,670 | ) | (300,954 | ) | (47,042 | ) | (706,033 | ) | |||
Net increase (decrease) | 56,451 | $ | 800,684 | 62,189 | $ | 966,857 | |||||
Year ended December 31, 2014 | |||||||||||
Shares solda | 648,287 | $ | 9,542,433 | 2,720,251 | $ | 43,024,597 | |||||
Shares issued in 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 | |||||
Advisor Class Shares: | |||||||||||
Year ended December 31, 2015 | |||||||||||
Shares sold | 936,049 | $ | 13,410,437 | 1,214,201 | $ | 19,002,125 | |||||
Shares issued in reinvestment of distributions | 353,270 | 4,910,626 | 249,750 | 3,799,192 | |||||||
Shares redeemed. | (1,365,830 | ) | (19,533,702 | ) | (3,383,987 | ) | (51,970,766 | ) | |||
Net increase (decrease) | (76,511 | ) | $ | (1,212,639 | ) | (1,920,036 | ) | $ | (29,169,449 | ) | |
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 redeemeda | (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 | ) |
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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, 2015 | ||||||
Shares sold | 10,027,542 | $ | 185,661,705 | |||
Shares issued in reinvestment of distributions | 3,533,130 | 63,072,998 | ||||
Shares redeemed | (9,163,774 | ) | (169,176,450 | ) | ||
Net increase (decrease) | 4,396,898 | $ | 79,558,253 | |||
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 | |||
Class C Shares: | ||||||
Year ended December 31, 2015 | ||||||
Shares sold | 3,639,597 | $ | 65,500,165 | |||
Shares issued in reinvestment of distributions | 1,243,202 | 21,716,225 | ||||
Shares redeemed | (3,123,898 | ) | (56,120,357 | ) | ||
Net increase (decrease) | 1,758,901 | $ | 31,096,033 | |||
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 | |||
Class R Shares: | ||||||
Year ended December 31, 2015 | ||||||
Shares sold | 1,196,134 | $ | 21,889,834 | |||
Shares issued in reinvestment of distributions | 600,945 | 10,634,648 | ||||
Shares redeemed | (2,955,040 | ) | (54,095,893 | ) | ||
Net increase (decrease) | (1,157,961 | ) | $ | (21,571,411 | ) | |
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 | ) | |
Class R6 Shares: | ||||||
Year ended December 31, 2015 | ||||||
Shares sold | 55,117 | $ | 1,017,221 | |||
Shares issued in reinvestment of distributions | 9,933 | 176,833 | ||||
Shares redeemed | (9,866 | ) | (180,610 | ) | ||
Net increase (decrease) | 55,184 | $ | 1,013,444 | |||
Year ended December 31, 2014 | ||||||
Shares solda | 1,473,569 | $ | 27,194,749 | |||
Shares issued in reinvestment of distributions | 23,325 | 441,444 | ||||
Shares redeemed | (1,404,939 | ) | (26,692,791 | ) | ||
Net increase (decrease) | 91,955 | $ | 943,402 |
60 Annual Report
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FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
Franklin Growth Allocation | ||||||
Fund | ||||||
Shares | Amount | |||||
Advisor Class Shares: | ||||||
Year ended December 31, 2015 | ||||||
Shares sold | 489,563 | $ | 8,999,282 | |||
Shares issued in reinvestment of distributions | 193,785 | 3,467,793 | ||||
Shares redeemed | (594,699 | ) | (11,131,608 | ) | ||
Net increase (decrease) | 88,649 | $ | 1,335,467 | |||
Year ended December 31, 2014 | ||||||
Shares sold | 825,057 | $ | 15,541,571 | |||
Shares issued in reinvestment of distributions | 112,789 | 2,122,032 | ||||
Shares redeemeda | (2,173,232 | ) | (40,428,845 | ) | ||
Net increase (decrease) | (1,235,386 | ) | $ | (22,765,242 | ) |
aEffective January 8, 2014, a portion of Advisor Class shares were exchanged into Class R6.
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
Under an agreement with Advisers, FT Services 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. 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
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NOTES TO FINANCIAL STATEMENTS
3. | Transactions with Affiliates (continued) |
c. | Distribution Fees (continued) |
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 | 0.25 | % |
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 comissions paid to | ||||||
unaffiliated brokers/dealers | $ | 576,772 | $ | 983,602 | $ | 722,450 |
CDSC retained. | $ | 56,918 | $ | 69,814 | $ | 30,959 |
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, 2015, 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 | $ | 688,922 | $ | 1,311,066 | $ | 1,005,937 |
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 in 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.
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NOTES TO FINANCIAL STATEMENTS
Investments in Underlying Funds for the year ended December 31, 2015, were as follows: | ||||||||||||||
% of | ||||||||||||||
Underlying | ||||||||||||||
Number of | Number of | Fund Shares | ||||||||||||
Shares Held | Shares | Value | Outstanding | |||||||||||
at Beginning | Gross | Gross Held at End | 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 . | 68,573 | — | (68,573 | ) | — | $ | —a | $ | — | $ | 3,752,611 | — | ||
Franklin DynaTech Fund, | ||||||||||||||
Class R6 | 1,487,833 | 32,881 | (85,320 | ) | 1,435,394 | 71,956,299 | — | 2,361,307 | b | 2.22 | % | |||
Franklin Emerging Market | ||||||||||||||
Debt Opportunities Fund | 4,785,483 | 399,202 | (58,722 | ) | 5,125,963 | 50,080,654 | 2,853,202 | (126,278 | ) | 7.79 | % | |||
Franklin Flex Cap Growth | ||||||||||||||
Fund, Class R6 | 318,611 | — | (318,611 | ) | — | —a | — | 8,216,286 | — | |||||
Franklin Growth Fund, | ||||||||||||||
Class R6 | 2,275,352 | 89,557 | (190,094 | ) | 2,174,815 | 159,566,155 | 1,810,212 | 9,849,313 | b | 1.35 | % | |||
Franklin Growth | ||||||||||||||
Opportunities Fund, | ||||||||||||||
Class R6 | 916,335 | 16,574 | (56,771 | ) | 876,138 | 30,025,243 | — | 729,626 | b | 2.17 | % | |||
Franklin International | ||||||||||||||
Growth Fund, Class R6 | — | 1,464,479 | (69,110 | ) | 1,395,369 | 14,930,453 | 73,308 | (58,743 | ) | 3.45 | % | |||
Franklin International Small | ||||||||||||||
Cap Growth Fund, | ||||||||||||||
Class R6 | 2,203,618 | 613,411 | (155,697 | ) | 2,661,332 | 49,420,927 | 902,216 | 679,766 | b | 2.62 | % | |||
Franklin | ||||||||||||||
K2 Alternative Strategies | ||||||||||||||
Fund, Class R6 | 5,202,283 | 704,397 | (368,638 | ) | 5,538,042 | 58,980,149 | 914,934 | 360,744 | b | 22.78 | % | |||
Franklin Low Duration Total | ||||||||||||||
Return Fund, Class R6 | 21,133,434 | 984,947 | (261,867 | ) | 21,856,514 | 213,756,703 | 5,010,870 | (86,416 | ) | 8.61 | % | |||
Franklin Mutual European | ||||||||||||||
Fund, Class R6 | 2,725,481 | 211,356 | (167,126 | ) | 2,769,711 | 53,926,278 | 1,282,193 | 2,321,866 | b | 1.74 | % | |||
Franklin Pelagos | ||||||||||||||
Commodities Strategy | ||||||||||||||
Fund, Class R6 | 1,849,064 | 3,442,035 | — | 5,291,099 | 30,794,197 | — | — | 26.20 | % | |||||
Franklin Real Estate | ||||||||||||||
Securities Fund, Class R6 . | 883,637 | 17,532 | (56,816 | ) | 844,353 | 19,014,830 | 375,917 | 272,249 | 3.29 | % | ||||
Franklin Rising Dividends | ||||||||||||||
Fund, Class R6 | 2,142,627 | 108,980 | (229,269 | ) | 2,022,338 | 96,445,304 | 1,684,691 | 6,606,238 | b | 0.60 | % | |||
Franklin Short Duration U.S. | ||||||||||||||
Government ETF | — | 190,323 | — | 190,323 | 18,656,831 | 166,344 | — | 9.88 | % | |||||
Franklin Small Cap Growth | ||||||||||||||
Fund, Class R6 | 569,352 | 10,244 | (35,601 | ) | 543,995 | 9,938,792 | — | 172,229 | b | 0.31 | % | |||
Franklin Strategic Income | ||||||||||||||
Fund, Class R6 | 9,699,192 | 716,467 | (123,892 | ) | 10,291,767 | 94,272,589 | 4,794,504 | (174,127 | ) | 1.22 | % | |||
Franklin U.S. Government | ||||||||||||||
Securities Fund, Class R6 . | 19,379,956 | 1,151,617 | (244,757 | ) | 20,286,816 | 129,227,016 | 4,573,101 | (75,875 | ) | 2.07 | % | |||
Franklin Utilities Fund, | ||||||||||||||
Class R6 | 2,484,668 | 137,114 | (599,270 | ) | 2,022,512 | 31,389,390 | 1,166,837 | 3,249,723 | b | 0.61 | % | |||
Institutional Fiduciary Trust | ||||||||||||||
Money Market Portfolio | 37,714,682 | 177,600,637 | (181,981,138 | ) | 33,334,181 | 33,334,181 | — | — | 0.17 | % | ||||
Templeton China World | ||||||||||||||
Fund, Class R6 | 419,806 | — | (419,806 | ) | — | —a | — | 2,995,420 | — | |||||
Templeton Foreign Fund, | ||||||||||||||
Class R6 | 7,242,263 | 1,862,665 | (510,453 | ) | 8,594,475 | 53,973,305 | 1,056,639 | (54,616 | )b | 0.85 | % | |||
Templeton Frontier Markets | ||||||||||||||
Fund, Class R6 | 1,358,420 | 103,111 | (89,021 | ) | 1,372,510 | 14,315,276 | 1,082,670 | (262,412 | ) | 4.16 | % |
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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 | Value | Outstanding | |||||||||||
at Beginning | Gross | Gross Held at End | 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 Global Total | ||||||||||||||
Return Fund, Class R6 | 26,547,285 | 1,761,901 | (336,787 | ) | 27,972,399 | $ | 321,402,859 | $ | 13,935,302 | $ | (777,979 | ) | 4.72 | % |
Total | $ | 1,555,407,431 | $ | 41,682,940 | $ | 39,950,932 | ||||||||
Franklin Moderate | ||||||||||||||
Allocation Fund | ||||||||||||||
Franklin Biotechnology | ||||||||||||||
Discovery Fund, Class R6 . | 154,628 | 11,597 | (166,225 | ) | — | $ | —a | $ | — | $ | 8,485,163 | — | ||
Franklin DynaTech Fund, | ||||||||||||||
Class R6 | 3,004,368 | 295,410 | (195,711 | ) | 3,104,067 | 155,606,897 | — | 4,293,591 | b | 4.79 | % | |||
Franklin Emerging Market | ||||||||||||||
Debt Opportunities Fund | 5,406,119 | 266,877 | (969,472 | ) | 4,703,524 | 45,953,425 | 2,618,065 | (1,815,002 | ) | 7.15 | % | |||
Franklin Flex Cap Growth | ||||||||||||||
Fund, Class R6 | 743,400 | 55,477 | (798,877 | ) | — | —a | — | 18,521,394 | — | |||||
Franklin Growth Fund, | ||||||||||||||
Class R6 | 4,951,261 | 577,726 | (446,215 | ) | 5,082,772 | 372,923,004 | 4,230,658 | 14,570,237 | b | 3.15 | % | |||
Franklin Growth | ||||||||||||||
Opportunities Fund, | ||||||||||||||
Class R6 | 2,052,803 | 193,053 | (137,197 | ) | 2,108,659 | 72,263,741 | — | 1,656,449 | b | 5.21 | % | |||
Franklin International | ||||||||||||||
Growth Fund, Class R6 | — | 3,709,196 | (191,136 | ) | 3,518,060 | 37,643,239 | 184,828 | (147,907 | ) | 8.70 | % | |||
Franklin International Small | ||||||||||||||
Cap Growth Fund, | ||||||||||||||
Class R6 | 4,803,065 | 1,732,207 | (363,409 | ) | 6,171,863 | 114,611,489 | 2,092,319 | 1,811,142 | b | 6.07 | % | |||
Franklin | ||||||||||||||
K2 Alternative Strategies | ||||||||||||||
Fund, Class R6 | 8,440,420 | 1,014,639 | (965,564 | ) | 8,489,495 | 90,413,119 | 1,402,541 | 708,028 | b | 34.92 | % | |||
Franklin Low Duration Total | ||||||||||||||
Return Fund, Class R6 | 24,381,041 | 484,892 | (4,377,825 | ) | 20,488,108 | 200,373,694 | 4,807,379 | (675,035 | ) | 8.07 | % | |||
Franklin Mutual European | ||||||||||||||
Fund, Class R6 | 5,859,326 | 927,439 | (383,294 | ) | 6,403,471 | 124,675,572 | 2,965,009 | 5,364,837 | b | 4.03 | % | |||
Franklin Pelagos | ||||||||||||||
Commodities Strategy | ||||||||||||||
Fund, Class R6 | 3,091,053 | 4,983,199 | — | 8,074,252 | 46,992,146 | — | — | 39.98 | % | |||||
Franklin Real Estate | ||||||||||||||
Securities Fund, Class R6 . | 2,056,811 | 197,754 | (135,711 | ) | 2,118,854 | 47,716,585 | 944,450 | (158,752 | ) | 8.26 | % | |||
Franklin Rising Dividends | ||||||||||||||
Fund, Class R6 | 4,519,492 | 582,229 | (521,140 | ) | 4,580,581 | 218,447,906 | 3,826,364 | 10,449,115 | b | 1.36 | % | |||
Franklin Short Duration U.S. | ||||||||||||||
Government ETF | — | 217,513 | — | 217,513 | 21,322,191 | 190,704 | — | 11.29 | % | |||||
Franklin Small Cap Growth | ||||||||||||||
Fund, Class R6 | 1,279,158 | 119,985 | (79,762 | ) | 1,319,381 | 24,105,093 | — | 432,200 | b | 0.76 | % | |||
Franklin Strategic Income | ||||||||||||||
Fund, Class R6 | 10,933,688 | 468,593 | (1,976,121 | ) | 9,426,160 | 86,343,625 | 4,553,077 | (883,027 | ) | 1.12 | % | |||
Franklin U.S. Government | ||||||||||||||
Securities Fund, Class R6 . | 21,347,055 | 657,841 | (3,844,618 | ) | 18,160,278 | 115,680,970 | 4,246,927 | (589,296 | ) | 1.85 | % |
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NOTES TO FINANCIAL STATEMENTS
% of | ||||||||||||||
Underlying | ||||||||||||||
Number of | Number of | Fund Shares | ||||||||||||
Shares Held | Shares | Value | Outstanding | |||||||||||
at Beginning | Gross | Gross Held at End | 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) | ||||||||||||||
Franklin Utilities Fund, | ||||||||||||||
Class R6 | 6,017,739 | 814,996 | (1,400,971 | ) | 5,431,764 | $ | 84,300,973 | $ | 3,084,911 | $ | 5,531,156 | b | 1.63 | % |
Institutional Fiduciary Trust | ||||||||||||||
Money Market Portfolio | 60,252,907 | 370,231,840 | (370,477,790 | ) | 60,006,957 | 60,006,957 | — | — | 0.31 | % | ||||
Templeton China World | ||||||||||||||
Fund, Class R6 | 849,235 | 63,734 | (912,969 | ) | — | —a | — | 6,345,111 | — | |||||
Templeton Foreign Fund, | ||||||||||||||
Class R6 | 15,608,526 | 5,445,971 | (1,214,932 | ) | 19,839,565 | 124,592,471 | 2,439,155 | (154,596 | )b | 1.97 | % | |||
Templeton Frontier Markets | ||||||||||||||
Fund, Class R6 | 3,282,634 | 510,896 | (230,938 | ) | 3,562,592 | 37,157,832 | 2,810,261 | (656,571 | ) | 10.81 | % | |||
Templeton Global Total | ||||||||||||||
Return Fund, Class R6 | 29,238,206 | 1,075,169 | (5,288,269 | ) | 25,025,106 | 287,538,463 | 13,048,847 | (7,719,055 | ) | 4.22 | % | |||
Total | $ | 2,368,669,392 | $ | 53,445,495 | $ | 65,369,182 | ||||||||
Franklin Growth | ||||||||||||||
Allocation Fund | ||||||||||||||
Franklin Biotechnology | ||||||||||||||
Discovery Fund, Class R6 . | 114,089 | — | (114,089 | ) | — | $ | —a | $ | — | $ | 5,994,647 | — | ||
Franklin DynaTech Fund, | ||||||||||||||
Class R6 | 2,381,776 | 54,413 | (60,826 | ) | 2,375,363 | 119,076,952 | — | 2,994,721 | b | 3.67 | % | |||
Franklin Emerging Market | ||||||||||||||
Debt Opportunities Fund | 846,174 | 107,699 | (61,914 | ) | 891,959 | 8,714,436 | 496,480 | (90,995 | ) | 1.36 | % | |||
Franklin Flex Cap Growth | ||||||||||||||
Fund, Class R6 | 553,699 | — | (553,699 | ) | — | —a | — | 13,616,203 | — | |||||
Franklin Growth Fund, | ||||||||||||||
Class R6 | 3,643,163 | 148,388 | (188,067 | ) | 3,603,484 | 264,387,648 | 2,999,369 | 10,914,811 | b | 2.24 | % | |||
Franklin Growth | ||||||||||||||
Opportunities Fund, | ||||||||||||||
Class R6 | 1,695,447 | 31,855 | (43,386 | ) | 1,683,916 | 57,707,801 | — | 1,168,855 | b | 4.16 | % | |||
Franklin International | ||||||||||||||
Growth Fund, Class R6 | — | 2,589,621 | (65,944 | ) | 2,523,677 | 27,003,344 | 132,586 | (45,934 | ) | 6.24 | % | |||
Franklin International Small | ||||||||||||||
Cap Growth Fund, | ||||||||||||||
Class R6 | 4,005,934 | 1,039,263 | (118,721 | ) | 4,926,476 | 91,484,654 | 1,670,122 | 1,438,403 | b | 4.84 | % | |||
Franklin | ||||||||||||||
K2 Alternative Strategies | ||||||||||||||
Fund, Class R6 | 4,373,496 | 580,924 | (180,617 | ) | 4,773,803 | 50,840,997 | 788,675 | 242,983 | b | 19.64 | % | |||
Franklin Low Duration Total | ||||||||||||||
Return Fund, Class R6 | 3,975,400 | 366,583 | (298,086 | ) | 4,043,897 | 39,549,311 | 958,370 | (77,503 | ) | 1.59 | % | |||
Franklin Mutual European | ||||||||||||||
Fund, Class R6 | 4,512,129 | 359,856 | (117,815 | ) | 4,754,170 | 92,563,689 | 2,196,097 | 4,409,818 | b | 2.99 | % | |||
Franklin Pelagos | ||||||||||||||
Commodities Strategy | ||||||||||||||
Fund, Class R6 | 1,700,201 | 2,804,497 | — | 4,504,698 | 26,217,341 | — | — | 22.30 | % | |||||
Franklin Real Estate | ||||||||||||||
Securities Fund, Class R6 . | 1,636,731 | 33,174 | (42,478 | ) | 1,627,427 | 36,649,661 | 711,410 | 26,815 | 6.34 | % | ||||
Franklin Rising Dividends | ||||||||||||||
Fund, Class R6 | 3,474,131 | 182,171 | (259,452 | ) | 3,396,850 | 161,995,797 | 2,785,366 | 6,854,166 | b | 1.01 | % | |||
Franklin Short Duration U.S. | ||||||||||||||
Government ETF | — | 43,840 | — | 43,840 | 4,297,512 | 38,314 | — | 2.28 | % | |||||
Franklin Small Cap Growth | ||||||||||||||
Fund, Class R6 | 926,004 | 17,314 | (23,886 | ) | 919,432 | 16,798,022 | — | 304,898 | b | 0.53 | % |
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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 | Value | Outstanding | |||||||||||
at Beginning | Gross | Gross | Held at End | 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 Strategic Income | ||||||||||||||
Fund, Class R6 | 1,764,319 | 213,369 | (136,170 | ) | 1,841,518 | $ | 16,868,304 | $ | 904,039 | $ | (141,157 | ) | 0.22 | % |
Franklin U.S. Government | ||||||||||||||
Securities Fund, Class R6 . | 3,238,824 | 343,127 | (246,875 | ) | 3,335,076 | 21,244,434 | 791,375 | (31,830 | ) | 0.34 | % | |||
Franklin Utilities Fund, | ||||||||||||||
Class R6 | 4,343,712 | 249,363 | (857,254 | ) | 3,735,821 | 57,979,943 | 2,090,595 | 4,110,780 | b | 1.12 | % | |||
Institutional Fiduciary Trust | ||||||||||||||
Money Market Portfolio | 36,145,952 | 169,664,727 | (173,848,355 | ) | 31,962,324 | 31,962,324 | — | — | 0.16 | % | ||||
Templeton China World | ||||||||||||||
Fund, Class R6 | 712,145 | — | (712,145 | ) | — | —a | — | 4,363,670 | — | |||||
Templeton Foreign Fund, | ||||||||||||||
Class R6 | 12,506,005 | 3,366,747 | (378,764 | ) | 15,493,988 | 97,302,242 | 1,904,892 | (19,729 | )b | 1.54 | % | |||
Templeton Frontier Markets | ||||||||||||||
Fund, Class R6 | 2,951,132 | 233,559 | (75,796 | ) | 3,108,895 | 32,425,776 | 2,452,374 | (421,598 | ) | 9.43 | % | |||
Templeton Global Total | ||||||||||||||
Return Fund, Class R6 | 4,704,538 | 533,911 | (360,851 | ) | 4,877,598 | 56,043,605 | 2,583,124 | (772,221 | ) | 0.82 | % | |||
Total | $ | 1,311,113,793 | $ | 23,503,188 | $ | 54,839,803 |
aAs of December 31, 2015, no longer held by the fund.
bIncludes realized gain distribution received.
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 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, 2016:
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 | 0.30 | % | 0.29 | % | 0.26 | % |
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, 2015, there were no credits earned.
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NOTES TO FINANCIAL STATEMENTS
5. Income Taxes
The tax character of distributions paid during the years ended December 31, 2015 and 2014, was as follows:
Franklin | Franklin | Franklin | ||||||||||
Conservative | Moderate | Growth | ||||||||||
Allocation Fund | Allocation Fund | Allocation Fund | ||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||
Distributions paid from: | ||||||||||||
Ordinary income | $ | 31,946,548 | $ | 46,567,227 | $ | 39,248,227 | $ | 62,536,525 | $ | 15,813,337 | $ | 23,795,165 |
Long term capital gain | 62,455,417 | 19,995,576 | 117,732,590 | 57,302,898 | 85,287,453 | 31,069,307 | ||||||
$ | 94,401,965 | $ | 66,562,803 | $ | 156,980,817 | $ | 119,839,423 | $ | 101,100,790 | $ | 54,864,472 |
At December 31, 2015, 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 | $ | 1,627,426,637 | $ | 2,336,477,261 | $ | 1,228,623,472 | |||
Unrealized appreciation | $ | 155,691,301 | $ | 347,965,929 | $ | 247,072,148 | |||
Unrealized depreciation | (111,938,003 | ) | (126,545,172 | ) | (45,754,306 | ) | |||
Net unrealized appreciation (depreciation) | $ | 43,753,298 | $ | 221,420,757 | $ | 201,317,842 | |||
Undistributed ordinary income | $ | 800,076 | $ | 781,622 | $ | 589,324 | |||
Undistributed long term capital gains | 11,344,998 | 35,039,240 | 26,439,704 | ||||||
Distributable earnings | $ | 12,145,074 | $ | 35,820,862 | $ | 27,029,028 |
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, 2015, were as follows:
Franklin | Franklin | Franklin | ||||
Conservative | Moderate | Growth | ||||
Allocation Fund | Allocation Fund | Allocation Fund | ||||
Purchases | $ | 296,975,828 | $ | 580,066,415 | $ | 294,160,196 |
Sales | $ | 305,103,068 | $ | 730,668,821 | $ | 309,580,911 |
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FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
7. Credit Facility
Certain or all 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 $2 billion (Global Credit Facility) which matured on February 12, 2016. 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. Effective February 12, 2016, the Borrowers renewed the Global Credit Facility for a one year term, maturing February 10, 2017, for a total of $2 billion.
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. Effective February 12, 2016, the annual commitment fee is 0.15%. These fees are reflected in other expenses in the Statements of Operations. During the year ended December 31, 2015, the Funds did not use the Global Credit Facility.
8. Fair Value Measurements
The Funds follows 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, 2015, all of the Funds’ investments in financial instruments carried at fair value were valued using Level 1 inputs.
For detailed categories, see the accompanying Statement 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 disclosureother than those already disclosed in the financial statements.
Abbreviations | |
Selected Portfolio | |
ETF | Exchange Traded Fund |
SPDR | S&P Depository Receipt |
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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, 2015, 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 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, 2015 by correspondence with the transfer agent, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 16, 2016
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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, 2015:
Franklin | Franklin | Franklin | |||
Conservative | Moderate | Growth | |||
Allocation Fund | Allocation Fund | Allocation Fund | |||
$ | 62,455,416 | $ | 117,732,590 | $ | 85,287,453 |
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, 2015:
Franklin | Franklin | Franklin | |||
Conservative | Moderate | Growth | |||
Allocation Fund | Allocation Fund | Allocation Fund | |||
$ | 1,892,854 | $ | 2,400,815 | $ | 1,268,362 |
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, 2015:
Franklin | Franklin | Franklin | |||
Conservative | Moderate | Growth | |||
Allocation Fund | Allocation Fund | Allocation Fund | |||
14.95 | % | 28.83 | % | 50.42 | % |
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, 2015:
Franklin | Franklin | Franklin | |||
Conservative | Moderate | Growth | |||
Allocation Fund | Allocation Fund | Allocation Fund | |||
$ | 9,628,221 | $ | 22,365,343 | $ | 14,587,131 |
Distributions, including qualified dividend income, paid during calendar year 2015 will be reported to shareholders on Form 1099-DIV by mid-February 2016. 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, 2015, 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, 2015, 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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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 Class 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 | $ | 0.0065 | $ | 0.2080 | $ | 0.0244 |
Class C | $ | 0.0065 | $ | 0.2080 | $ | 0.0244 |
Class R | $ | 0.0065 | $ | 0.2080 | $ | 0.0244 |
Class R6 | $ | 0.0065 | $ | 0.2080 | $ | 0.0244 |
Advisor Class | $ | 0.0065 | $ | 0.2080 | $ | 0.0244 |
Franklin Moderate Allocation Fund | ||||||
Class A | $ | 0.0088 | $ | 0.1778 | $ | 0.0405 |
Class C | $ | 0.0088 | $ | 0.1778 | $ | 0.0405 |
Class R | $ | 0.0088 | $ | 0.1778 | $ | 0.0405 |
Class R6 | $ | 0.0088 | $ | 0.1778 | $ | 0.0405 |
Advisor Class | $ | 0.0088 | $ | 0.1778 | $ | 0.0405 |
Franklin Growth Allocation Fund | ||||||
Class A | $ | 0.0131 | $ | 0.1667 | $ | 0.0667 |
Class C | $ | 0.0131 | $ | 0.1667 | $ | 0.0667 |
Class R | $ | 0.0131 | $ | 0.1667 | $ | 0.0667 |
Class R6 | $ | 0.0131 | $ | 0.1667 | $ | 0.0667 |
Advisor Class | $ | 0.0131 | $ | 0.1667 | $ | 0.0667 |
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.
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.
By mid-February 2016, shareholders will receive Form 1099-DIV which will include their share of taxes paid and foreign source income distributed during the calendar year 2015. 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 2015 individual income tax returns.
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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 | |
and Address | Position | Time Served | by Board Member* | During at Least the Past 5 Years |
Harris J. Ashton (1932) | Trustee | Since 1995 | 147 | 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 2014 | 123 | Avis Budget Group Inc. (car rental) |
One Franklin Parkway | (2007-present), Omnicom Group Inc. | |||
San Mateo, CA 94403-1906 | (advertising and marketing | |||
communications services) | ||||
(2011-present) and H.J. Heinz | ||||
Company (processed foods and allied | ||||
products) (1998-2006). | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Advisor, Strategic Investment Group (investment management group) (August 2015-present); director of various companies; and | ||||
formerly, Founding Partner and Senior Managing Director, Strategic Investment Group (1987–2015); Founding Partner and Managing Director, | ||||
Emerging Markets Management LLC (investment management firm) (1987-2011); and Loan Officer/Senior Loan Officer/Senior Pension | ||||
Investment Officer, World Bank Group (international financial institution) (1977-1987). | ||||
Edith E. Holiday (1952) | Trustee | Since 1998 | 147 | Hess Corporation (exploration and |
One Franklin Parkway | refining of oil and gas) (1993-present), | |||
San Mateo, CA 94403-1906 | Canadian National Railway (railroad) | |||
(2001-present), White Mountains | ||||
Insurance Group, Ltd. (holding | ||||
company) (2004-present), RTI | ||||
International Metals, Inc. (manufacture | ||||
and distribution of titanium) | ||||
(1999-2015) and H.J. Heinz Company | ||||
(processed foods and allied products) | ||||
(1994-2013). | ||||
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). | ||||
J. Michael Luttig (1954) | Trustee | Since 2009 | 147 | Boeing Capital Corporation (aircraft |
One Franklin Parkway | 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) (2006-present); | ||||
and formerly, Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006). | ||||
Frank A. Olson (1932) | Trustee | Since 2007 | 147 | 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). |
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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 |
Larry D. Thompson (1945) | Trustee | Since 2007 | 147 | The Southern Company (energy |
One Franklin Parkway | company) (2014-present; previously | |||
San Mateo, CA 94403-1906 | 2010-2012), Graham Holdings | |||
Company (education and media | ||||
organization) (2011-present) and | ||||
Cbeyond, Inc. (business | ||||
communications provider) | ||||
(2010-2012). | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Director of various companies; John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (January 2015; | ||||
previously 2011-2012); and formerly, Executive Vice President – Government Affairs, General Counsel and Corporate Secretary, PepsiCo, | ||||
Inc. (consumer products) (2012-2014); Senior Vice President – Government Affairs, General Counsel and Secretary, PepsiCo, Inc. | ||||
(2004-2011); Senior Fellow of The Brookings Institution (2003-2004); Visiting Professor, (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 | 123 | 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). | ||||
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 | 164 | 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 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; Vice Chairman, Investment Company Institute; and formerly, President, Franklin Resources, Inc. | ||||
(1994-2015). | ||||
**Rupert H. Johnson, Jr. (1940) | Chairman of | Chairman of the | 147 | 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 42 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 44 | ||||
of the investment companies in Franklin Templeton Investments. |
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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 |
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; Vice President, Franklin Advisers, Inc. and Franklin Templeton Institutional, LLC; and | ||||
officer of 44 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: | ||||
Treasurer, U.S. Fund Administration & Reporting, 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; and officer of 44 of the investment companies in Franklin Templeton | ||||
Investments. | ||||
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 44 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 44 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, Fiduciary Trust International of the South and Templeton | ||||
Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 44 of the investment companies in Franklin Templeton | ||||
Investments. |
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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 |
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 44 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 44 of the investment companies in Franklin Templeton | ||||
Investments. | ||||
Navid Tofigh (1972) | Vice President | Since | Not Applicable | Not Applicable |
One Franklin Parkway | November | |||
San Mateo, CA 94403-1906 | 2015 | |||
Principal Occupation During at Least the Past 5 Years: | ||||
Associate General Counsel, Franklin Templeton Investments; and officer of 44 of the investment companies in Franklin Templeton Investments. | ||||
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 44 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; and officer of 44 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.
Note 3: Effective April 30, 2015, Sam Ginn ceased to be a trustee of the Trust.
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.
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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.
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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 | 43 |
Tax Information | 44 |
Board Members and Officers | 46 |
Shareholder Information | 50 |
Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.
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Economic and Market Overview
U.S. economic growth slowed in 2015’s first quarter but strengthened in 2015’s second quarter amid healthy consumer spending. The third and fourth quarters were less robust as exports slowed and state and local governments reduced their spending. At its December meeting, the U.S. Federal Reserve (Fed) increased its target range for the federal funds rate to 0.25%–0.50%, as policymakers cited the labor market’s considerable improvement and were reasonably confident that inflation would move back to the Fed’s 2% medium-term objective. Furthermore, the Fed raised its forecast for 2016 U.S. economic growth and lowered its unemployment projection. Despite periods of volatility, the broad U.S. stock market, as measured by the Standard & Poor’s 500 Index, generated a modest positive total return for 2015.
The global economy expanded moderately during the 12 months under review. As measured by the MSCI World Index, stocks in global developed markets overall were nearly unchanged for the year amid some positive developments. Weighing on global stocks at times were worries about China’s slowing economy and tumbling stock market, declining commodity prices, geopolitical tensions between Russia and Turkey, and ongoing uncertainty over the Fed’s timing for raising interest rates. Toward period-end, equity markets recovered somewhat as the Fed increased its federal funds target range, alleviating some uncertainty about a change in U.S. monetary policy. During the year, oil prices declined sharply largely due to increased global supply that exceeded demand. Gold and other commodity prices also fell. The U.S. dollar appreciated against most currencies during the period, which reduced returns of many foreign assets in U.S. dollar terms.
In Europe, U.K. economic growth gained momentum from the services sector, but the economy slowed in 2015 compared with 2014. The eurozone grew moderately and generally benefited during the period from lower oil prices, a weaker euro that supported exports, the European Central Bank’s (ECB’s) accommodative policy and expectations of further ECB stimulus. Although the eurozone’s annual inflation rate declined early in the period, it rose slightly during the rest of the period. The ECB maintained its benchmark interest rates although it reduced its bank deposit rate in December, seeking to boost the region’s slowing growth Japan’s economy continued to grow in 2015’s first quarter. After a decline in the second quarter of 2015, it expanded in the third quarter as capital expenditures improved. The Bank of Japan took several actions during the reporting period, including maintaining its monetary policy, lowering its economic growth and inflation forecasts, and reorganizing its stimulus program to increase exposure to long-term government bonds and exchange-traded funds.
The foregoing information reflects our analysis and opinions as of December 31, 2015. 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.
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Franklin Corefolio Allocation Fund
This annual report for Franklin Corefolio Allocation Fund covers the fiscal year ended December 31, 2015.
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.
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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 had a -1.20% 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 +1.38% cumulative total return, and the MSCI World Index, which tracks equity performance in global developed markets, had a -0.32% 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. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
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 Growth Fund – Class R6 outperformed the S&P 500, while Franklin Mutual Shares Fund – Class R6 underperformed the index. Templeton Growth Fund – Class R6 underperformed the MSCI World Index.
1. 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 26.
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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, 2015, 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.
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FRANKLIN COREFOLIO ALLOCATION FUND
Performance Summary as of December 31, 2015
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) | 12/31/15 | 12/31/14 | Change | |||
A (FTCOX) | $ | 16.80 | $ | 18.00 | -$ | 1.20 |
C (FTCLX) | $ | 16.61 | $ | 17.81 | -$ | 1.20 |
R (N/A) | $ | 16.81 | $ | 18.01 | -$ | 1.20 |
Advisor (FCAZX) | $ | 16.82 | $ | 18.03 | -$ | 1.21 |
Distributions1 (1/1/15–12/31/15) | ||||||
Dividend | Long-Term | |||||
Share Class | Income | Capital Gain | Total | |||
A | $ | 0.1601 | $ | 0.8620 | $ | 1.0221 |
C | $ | 0.0343 | $ | 0.8620 | $ | 0.8963 |
R | $ | 0.1174 | $ | 0.8620 | $ | 0.9794 |
Advisor | $ | 0.2121 | $ | 0.8620 | $ | 1.0741 |
See page 10 for Performance Summary footnotes.
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FRANKLIN COREFOLIO ALLOCATION FUND
PERFORMANCE SUMMARY
Performance as of 12/31/152
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 Class: no sales charges.
Cumulative | Average Annual | Value of | Total Annual | |||||
Share Class | Total Return3 | Total Return4 | $ | 10,000 Investment5 | Operating Expenses6 | |||
A | 1.06 | % | ||||||
1-Year | -1.20 | % | -6.89 | % | $ | 9,311 | ||
5-Year | +53.63 | % | +7.68 | % | $ | 14,476 | ||
10-Year | +73.05 | % | +5.01 | % | $ | 16,305 | ||
C | 1.77 | % | ||||||
1-Year | -1.92 | % | -2.85 | % | $ | 9,715 | ||
5-Year | +48.15 | % | +8.18 | % | $ | 14,815 | ||
10-Year | +61.24 | % | +4.89 | % | $ | 16,124 | ||
R | 1.27 | % | ||||||
1-Year | -1.43 | % | -1.43 | % | $ | 9,857 | ||
5-Year | +51.93 | % | +8.72 | % | $ | 15,193 | ||
10-Year | +69.59 | % | +5.42 | % | $ | 16,959 | ||
Advisor | 0.77 | % | ||||||
1-Year | -0.96 | % | -0.96 | % | $ | 9,904 | ||
5-Year | +55.67 | % | +9.25 | % | $ | 15,567 | ||
10-Year | +78.15 | % | +5.94 | % | $ | 17,815 |
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.
See page 10 for Performance Summary footnotes.
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FRANKLIN COREFOLIO ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2
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/0001022804-16-000131/fas2_a0216x9x1.jpg)
See page 10 for Performance Summary footnotes.
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FRANKLIN COREFOLIO ALLOCATION FUND
PERFORMANCE SUMMARY
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/fas2_a0216x10x1.jpg)
See page 10 for Performance Summary footnotes.
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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, the 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 the 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 distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income and capital
gain.
2. The Fund has a fee waiver associated with any investment 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.
3. Cumulative total return represents the change in value of an investment over the periods indicated.
4. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been
annualized.
5. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
6. 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.
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 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.
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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, distribution 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.
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FRANKLIN COREFOLIO ALLOCATION FUND | ||||||||
YOUR FUND’S EXPENSES | ||||||||
Beginning | Ending | Expenses Paid | Expenses Paid | |||||
Account | Account | During Period* | During Period** | |||||
Share Class | Value 7/1/15 | Value 12/31/15 | 7/1/15–12/31/15 | 7/1/15–12/31/15 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 956.80 | $ | 2.22 | $ | 5.08 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.94 | $ | 2.29 | $ | 5.24 |
C | ||||||||
Actual | $ | 1,000 | $ | 953.10 | $ | 5.86 | $ | 8.71 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.21 | $ | 6.06 | $ | 9.00 |
R | ||||||||
Actual | $ | 1,000 | $ | 955.60 | $ | 3.40 | $ | 6.26 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,021.73 | $ | 3.52 | $ | 6.46 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 957.60 | $ | 0.94 | $ | 3.80 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,024.25 | $ | 0.97 | $ | 3.92 |
*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: 0.45%; C: 1.19%; R: 0.69%; and Advisor: 0.19%), 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: 1.03%; C: 1.77%; R: 1.27%; and Advisor: 0.77%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.
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Franklin Founding Funds Allocation Fund
This annual report for Franklin Founding Funds Allocation Fund covers the fiscal year ended December 31, 2015.
Your Fund’s Goal 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.
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/fas2_a0216x14x1.jpg)
*The asset allocation is based on the Statment of Investments (SOI), which
classifies each underlying fund into a broad asset class.
Performance Overview
The Fund’s Class A shares had a -6.18% 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 +1.38% total return and the MSCI World Index, which tracks equity performance in global developed markets, had a -0.32% 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. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
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 33S% 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 underperformed the S&P 500. Templeton Growth Fund –Class R6 underperformed the MSCI World Index.
1. 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 31.
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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/0001022804-16-000131/fas2_a0216x15x1.jpg)
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2015, 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.
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FRANKLIN FOUNDING FUNDS ALLOCATION FUND
Performance Summary as of December 31, 2015
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) | 12/31/15 | 12/31/14 | Change | |||
A (FFALX) | $ | 12.14 | $ | 13.31 | -$ | 1.17 |
C (FFACX) | $ | 11.96 | $ | 13.11 | -$ | 1.15 |
R (FFARX) | $ | 12.16 | $ | 13.33 | -$ | 1.17 |
Advisor (FFAAX) | $ | 12.20 | $ | 13.38 | -$ | 1.18 |
Distributions1 (1/1/15–12/31/15) | ||||||
Dividend | ||||||
Share Class | Income | |||||
A | $ | 0.3586 | ||||
C | $ | 0.2596 | ||||
R | $ | 0.3268 | ||||
Advisor | $ | 0.3924 |
See page 19 for Performance Summary footnotes.
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15
FRANKLIN FOUNDING FUNDS ALLOCATION FUND
PERFORMANCE SUMMARY
Performance as of 12/31/152
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 Class: no sales charges.
Cumulative | Average Annual | Value of | Total Annual | |||||
Share Class | Total Return3 | Total Return4 | $ | 10,000 Investment5 | Operating Expenses6 | |||
A | 0.99 | % | ||||||
1-Year | -6.18 | % | -11.56 | % | $ | 8,844 | ||
5-Year | +36.68 | % | +5.19 | % | $ | 12,880 | ||
10-Year | +52.00 | % | +3.66 | % | $ | 14,328 | ||
C | 1.74 | % | ||||||
1-Year | -6.85 | % | -7.76 | % | $ | 9,224 | ||
5-Year | +31.67 | % | +5.66 | % | $ | 13,167 | ||
10-Year | +41.38 | % | +3.52 | % | $ | 14,138 | ||
R | 1.24 | % | ||||||
1-Year | -6.40 | % | -6.40 | % | $ | 9,360 | ||
5-Year | +34.92 | % | +6.17 | % | $ | 13,492 | ||
10-Year | +48.58 | % | +4.04 | % | $ | 14,858 | ||
Advisor | 0.74 | % | ||||||
1-Year | -5.98 | % | -5.98 | % | $ | 9,402 | ||
5-Year | +38.23 | % | +6.69 | % | $ | 13,823 | ||
10-Year | +56.14 | % | +4.56 | % | $ | 15,614 |
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.
See page 19 for Performance Summary footnotes.
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FRANKLIN FOUNDING FUNDS ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2
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/0001022804-16-000131/fas2_a0216x18x1.jpg)
See page 19 for Performance Summary footnotes.
franklintempleton.com
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17
FRANKLIN FOUNDING FUNDS ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/fas2_a0216x19x1.jpg)
See page 19 for Performance Summary footnotes.
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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, the 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 the 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 distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income.
2. The Fund has a fee waiver associated with any investment 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.
3. Cumulative total return represents the change in value of an investment over the periods indicated.
4. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been
annualized.
5. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
6. 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.
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 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, distribution 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.
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FRANKLIN FOUNDING FUNDS ALLOCATION FUND | ||||||||
YOUR FUND’S EXPENSES | ||||||||
Beginning | Ending | Expenses Paid | Expenses Paid | |||||
Account | Account | During Period* | During Period** | |||||
Share Class | Value 7/1/15 | Value 12/31/15 | 7/1/15–12/31/15 | 7/1/15–12/31/15 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 930.40 | $ | 1.99 | $ | 4.87 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.14 | $ | 2.09 | $ | 5.09 |
C | ||||||||
Actual | $ | 1,000 | $ | 927.00 | $ | 5.63 | $ | 8.50 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.36 | $ | 5.90 | $ | 8.89 |
R | ||||||||
Actual | $ | 1,000 | $ | 929.30 | $ | 3.21 | $ | 6.08 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,021.88 | $ | 3.36 | $ | 6.36 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 931.30 | $ | 0.78 | $ | 3.65 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,024.40 | $ | 0.82 | $ | 3.82 |
*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: 1.00%; C: 1.75%; R: 1.25%; and Advisor: 0.75%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.
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FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
Financial Highlights | |||||||||||||||
Franklin Corefolio Allocation Fund | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class A | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 18.00 | $ | 17.61 | $ | 13.57 | $ | 11.93 | $ | 12.41 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.14 | 0.23 | 0.11 | 0.11 | 0.11 | ||||||||||
Net realized and unrealized gains (losses) | (0.32 | ) | 0.91 | 4.09 | 1.65 | (0.47 | ) | ||||||||
Total from investment operations | (0.18 | ) | 1.14 | 4.20 | 1.76 | (0.36 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.16 | ) | (0.29 | ) | (0.16 | ) | (0.12 | ) | (0.12 | ) | |||||
Net realized gains | (0.86 | ) | (0.46 | ) | — | — | — | ||||||||
Total distributions | (1.02 | ) | (0.75 | ) | (0.16 | ) | (0.12 | ) | (0.12 | ) | |||||
Net asset value, end of year. | $ | 16.80 | $ | 18.00 | $ | 17.61 | $ | 13.57 | $ | 11.93 | |||||
Total returnd | (1.20 | )% | 6.48 | % | 31.01 | % | 14.80 | % | (2.90 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expensese | 0.47 | %f | 0.48 | %f | 0.44 | % | 0.36 | % | 0.39 | % | |||||
Net investment incomec | 0.80 | % | 1.27 | % | 0.68 | % | 0.86 | % | 0.89 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 523,540 | $ | 558,862 | $ | 558,124 | $ | 449,252 | $ | 418,444 | |||||
Portfolio turnover rate | 0.53 | % | 5.77 | % | 5.90 | % | 2.14 | % | 2.50 | % |
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’s 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, 2015.
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, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class C | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 17.81 | $ | 17.44 | $ | 13.45 | $ | 11.82 | $ | 12.30 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment income (loss)b,c | 0.02 | 0.10 | (—)d | 0.02 | 0.02 | ||||||||||
Net realized and unrealized gains (losses) | (0.33 | ) | 0.89 | 4.04 | 1.64 | (0.47 | ) | ||||||||
Total from investment operations | (0.31 | ) | 0.99 | 4.04 | 1.66 | (0.45 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.03 | ) | (0.16 | ) | (0.05 | ) | (0.03 | ) | (0.03 | ) | |||||
Net realized gains | (0.86 | ) | (0.46 | ) | — | — | — | ||||||||
Total distributions | (0.89 | ) | (0.62 | ) | (0.05 | ) | (0.03 | ) | (0.03 | ) | |||||
Net asset value, end of year. | $ | 16.61 | $ | 17.81 | $ | 17.44 | $ | 13.45 | $ | 11.82 | |||||
Total returne | (1.92 | )% | 5.69 | % | 30.09 | % | 14.04 | % | (3.67 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expensesf | 1.19 | %g | 1.19 | %g | 1.15 | % | 1.07 | % | 1.10 | % | |||||
Net investment income (loss)c | 0.08 | % | 0.56 | % | (0.03 | )% | 0.15 | % | 0.18 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 172,116 | $ | 176,680 | $ | 176,332 | $ | 142,879 | $ | 138,447 | |||||
Portfolio turnover rate | 0.53 | % | 5.77 | % | 5.90 | % | 2.14 | % | 2.50 | % |
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’s 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, 2015.
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, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class R | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 18.01 | $ | 17.60 | $ | 13.56 | $ | 11.93 | $ | 12.41 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.10 | 0.16 | 0.06 | 0.09 | 0.08 | ||||||||||
Net realized and unrealized gains (losses) | (0.32 | ) | 0.95 | 4.11 | 1.64 | (0.47 | ) | ||||||||
Total from investment operations | (0.22 | ) | 1.11 | 4.17 | 1.73 | (0.39 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.12 | ) | (0.24 | ) | (0.13 | ) | (0.10 | ) | (0.09 | ) | |||||
Net realized gains | (0.86 | ) | (0.46 | ) | — | — | — | ||||||||
Total distributions | (0.98 | ) | (0.70 | ) | (0.13 | ) | (0.10 | ) | (0.09 | ) | |||||
Net asset value, end of year. | $ | 16.81 | $ | 18.01 | $ | 17.60 | $ | 13.56 | $ | 11.93 | |||||
Total return | (1.43 | )% | 6.30 | % | 30.76 | % | 14.49 | % | (3.15 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expensesd | 0.69 | %e | 0.69 | %e | 0.65 | % | 0.57 | % | 0.60 | % | |||||
Net investment incomec | 0.58 | % | 1.06 | % | 0.47 | % | 0.65 | % | 0.68 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 1,423 | $ | 1,545 | $ | 1,903 | $ | 1,856 | $ | 1,686 | |||||
Portfolio turnover rate | 0.53 | % | 5.77 | % | 5.90 | % | 2.14 | % | 2.50 | % |
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’s 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, 2015.
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, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Advisor Class | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 18.03 | $ | 17.64 | $ | 13.59 | $ | 11.95 | $ | 12.44 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.21 | 0.32 | 0.18 | 0.18 | 0.17 | ||||||||||
Net realized and unrealized gains (losses) | (0.35 | ) | 0.88 | 4.08 | 1.62 | (0.50 | ) | ||||||||
Total from investment operations | (0.14 | ) | 1.20 | 4.26 | 1.80 | (0.33 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds | (0.21 | ) | (0.35 | ) | (0.21 | ) | (0.16 | ) | (0.16 | ) | |||||
Net realized gains | (0.86 | ) | (0.46 | ) | — | — | — | ||||||||
Total distributions | (1.07 | ) | (0.81 | ) | (0.21 | ) | (0.16 | ) | (0.16 | ) | |||||
Net asset value, end of year. | $ | 16.82 | $ | 18.03 | $ | 17.64 | $ | 13.59 | $ | 11.95 | |||||
Total return | (0.96 | )% | 6.79 | % | 31.38 | % | 15.11 | % | (2.67 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expensesd | 0.19 | %e | 0.19 | %e | 0.15 | % | 0.07 | % | 0.10 | % | |||||
Net investment incomec | 1.08 | % | 1.56 | % | 0.97 | % | 1.15 | % | 1.18 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 19,396 | $ | 18,918 | $ | 15,495 | $ | 10,245 | $ | 7,815 | |||||
Portfolio turnover rate | 0.53 | % | 5.77 | % | 5.90 | % | 2.14 | % | 2.50 | % |
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’s 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, 2015.
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, 2015 | ||||
Franklin Corefolio Allocation Fund | ||||
Shares | Value | |||
Investments in Underlying Funds 99.9% | ||||
Domestic Equity 75.6% | ||||
a,bFranklin Flex Cap Growth Fund, Class R6 | 3,801,458 | $ | 180,949,419 | |
aFranklin Growth Fund, Class R6 | 2,473,407 | 181,473,884 | ||
aFranklin Mutual Shares Fund, Class R6 | 6,905,289 | 179,399,405 | ||
541,822,708 | ||||
Foreign Equity 24.3% | ||||
aTempleton Growth Fund Inc., Class R6 | 7,963,031 | 174,151,489 | ||
Total Investments in Underlying Funds | ||||
before Short Term Investments (Cost $574,229,879) | 715,974,197 | |||
Short Term Investments (Cost $1,313,882) 0.2% | ||||
Money Market Funds 0.2% | ||||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 1,313,882 | 1,313,882 | ||
Total Investments in Underlying Funds (Cost $575,543,761) 100.1% | 717,288,079 | |||
Other Assets, less Liabilities (0.1)% | (813,170 | ) | ||
Net Assets 100.0% | $ | 716,474,909 |
aSee Note 3e 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, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class A | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 13.31 | $ | 13.37 | $ | 11.14 | $ | 9.88 | $ | 10.46 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.35 | 0.46 | 0.32 | 0.35 | 0.35 | ||||||||||
Net realized and unrealized gains (losses) | (1.16 | ) | (0.06 | ) | 2.29 | 1.28 | (0.55 | ) | |||||||
Total from investment operations | (0.81 | ) | 0.40 | 2.61 | 1.63 | (0.20 | ) | ||||||||
Less distributions from net investment income | (0.36 | ) | (0.46 | ) | (0.38 | ) | (0.37 | ) | (0.38 | ) | |||||
Net asset value, end of year. | $ | 12.14 | $ | 13.31 | $ | 13.37 | $ | 11.14 | $ | 9.88 | |||||
Total returnd | (6.18 | )% | 2.92 | % | 23.64 | % | 16.76 | % | (1.95 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expensese | 0.41 | %f | 0.41 | %f | 0.39 | % | 0.33 | % | 0.34 | % | |||||
Net investment incomec | 2.65 | % | 3.35 | % | 2.63 | % | 3.24 | % | 3.36 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 3,346,192 | $ | 3,958,706 | $ | 4,170,045 | $ | 3,766,640 | $ | 3,773,080 | |||||
Portfolio turnover rate | —% | 3.79 | % | 3.04 | % | 3.59 | % | 3.69 | % |
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’s 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 0.59% for the year
ended December 31, 2015.
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, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class C | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 13.11 | $ | 13.18 | $ | 10.99 | $ | 9.75 | $ | 10.32 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.25 | 0.35 | 0.23 | 0.26 | 0.27 | ||||||||||
Net realized and unrealized gains (losses) | (1.14 | ) | (0.07 | ) | 2.25 | 1.27 | (0.54 | ) | |||||||
Total from investment operations | (0.89 | ) | 0.28 | 2.48 | 1.53 | (0.27 | ) | ||||||||
Less distributions from net investment income | (0.26 | ) | (0.35 | ) | (0.29 | ) | (0.29 | ) | (0.30 | ) | |||||
Net asset value, end of year. | $ | 11.96 | $ | 13.11 | $ | 13.18 | $ | 10.99 | $ | 9.75 | |||||
Total returnd | (6.85 | )% | 2.12 | % | 22.69 | % | 15.87 | % | (2.65 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expensese | 1.16 | %f | 1.16 | %f | 1.14 | % | 1.08 | % | 1.09 | % | |||||
Net investment incomec | 1.90 | % | 2.60 | % | 1.88 | % | 2.49 | % | 2.61 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 1,458,281 | $ | 1,745,766 | $ | 1,829,111 | $ | 1,657,087 | $ | 1,743,292 | |||||
Portfolio turnover rate | —% | 3.79 | % | 3.04 | % | 3.59 | % | 3.69 | % |
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’s 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 0.59% for the year
ended December 31, 2015.
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, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class R | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 13.33 | $ | 13.39 | $ | 11.16 | $ | 9.89 | $ | 10.48 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.32 | 0.44 | 0.29 | 0.31 | 0.35 | ||||||||||
Net realized and unrealized gains (losses) | (1.16 | ) | (0.08 | ) | 2.29 | 1.30 | (0.58 | ) | |||||||
Total from investment operations | (0.84 | ) | 0.36 | 2.58 | 1.61 | (0.23 | ) | ||||||||
Less distributions from net investment income | (0.33 | ) | (0.42 | ) | (0.35 | ) | (0.34 | ) | (0.36 | ) | |||||
Net asset value, end of year. | $ | 12.16 | $ | 13.33 | $ | 13.39 | $ | 11.16 | $ | 9.89 | |||||
Total return | (6.40 | )% | 2.68 | % | 23.28 | % | 16.52 | % | (2.27 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expensesd | 0.66 | %e | 0.66 | %e | 0.64 | % | 0.58 | % | 0.59 | % | |||||
Net investment incomec | 2.40 | % | 3.10 | % | 2.38 | % | 2.99 | % | 3.11 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 10,724 | $ | 11,619 | $ | 10,597 | $ | 10,058 | $ | 11,922 | |||||
Portfolio turnover rate | —% | 3.79 | % | 3.04 | % | 3.59 | % | 3.69 | % |
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’s 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 0.59% for the year
ended December 31, 2015.
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, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Advisor Class | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 13.38 | $ | 13.44 | $ | 11.20 | $ | 9.93 | $ | 10.52 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.39 | 0.53 | 0.39 | 0.38 | 0.39 | ||||||||||
Net realized and unrealized gains (losses) | (1.18 | ) | (0.10 | ) | 2.26 | 1.29 | (0.57 | ) | |||||||
Total from investment operations | (0.79 | ) | 0.43 | 2.65 | 1.67 | (0.18 | ) | ||||||||
Less distributions from net investment income | (0.39 | ) | (0.49 | ) | (0.41 | ) | (0.40 | ) | (0.41 | ) | |||||
Net asset value, end of year. | $ | 12.20 | $ | 13.38 | $ | 13.44 | $ | 11.20 | $ | 9.93 | |||||
Total return | (5.98 | )% | 3.17 | % | 23.93 | % | 17.08 | % | (1.78 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expensesd | 0.16 | %e | 0.16 | %e | 0.14 | % | 0.08 | % | 0.09 | % | |||||
Net investment incomec | 2.90 | % | 3.60 | % | 2.88 | % | 3.49 | % | 3.61 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 123,966 | $ | 141,932 | $ | 114,369 | $ | 71,487 | $ | 72,427 | |||||
Portfolio turnover rate | —% | 3.79 | % | 3.04 | % | 3.59 | % | 3.69 | % |
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’s 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 0.59% for the year
ended December 31, 2015.
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, 2015 | ||||
Franklin Founding Funds Allocation Fund | ||||
Shares | Value | |||
Investments in Underlying Funds 99.3% | ||||
Domestic Equity 33.2% | ||||
aFranklin Mutual Shares Fund, Class R6 | 63,039,216 | $ | 1,637,758,841 | |
Domestic Hybrid 33.1% | ||||
aFranklin Income Fund, Class R6 | 786,503,572 | 1,635,927,430 | ||
Foreign Equity 33.0% | ||||
aTempleton Growth Fund Inc., Class R6 | 74,595,691 | 1,631,407,754 | ||
Total Investments in Underlying Funds | ||||
before Short Term Investments (Cost $5,128,947,451) | 4,905,094,025 | |||
Short Term Investments (Cost $42,916,312) 0.9% | ||||
Money Market Funds 0.9% | ||||
a,bInstitutional Fiduciary Trust Money Market Portfolio. | 42,916,312 | 42,916,312 | ||
Total Investments in Underlying Funds (Cost $5,171,863,763) 100.2% | 4,948,010,337 | |||
Other Assets, less Liabilities (0.2)% | (8,847,681 | ) | ||
Net Assets 100.0% | $ | 4,939,162,656 |
aSee Note 3e 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, 2015 | ||||||
Franklin | Franklin | |||||
Corefolio | Founding Funds | |||||
Allocation Fund | Allocation Fund | |||||
Assets: | ||||||
Investments in Underlying Funds: (Note 3e) | ||||||
Cost | $ | 575,543,761 | $ | 5,171,863,763 | ||
Value | $ | 717,288,079 | $ | 4,948,010,337 | ||
Receivables: | ||||||
Capital shares sold | 662,451 | 5,425,661 | ||||
Other assets | 60 | 460 | ||||
Total assets | 717,950,590 | 4,953,436,458 | ||||
Liabilities: | ||||||
Payables: | ||||||
Capital shares redeemed | 759,542 | 9,000,903 | ||||
Administrative fees | 18,320 | 126,041 | ||||
Distribution fees | 536,729 | 3,935,807 | ||||
Transfer agent fees | 108,774 | 946,877 | ||||
Accrued expenses and other liabilities. | 52,316 | 264,174 | ||||
Total liabilities | 1,475,681 | 14,273,802 | ||||
Net assets, at value | $ | 716,474,909 | $ | 4,939,162,656 | ||
Net assets consist of: | ||||||
Paid-incapital | $ | 553,019,599 | $ | 7,534,799,318 | ||
Undistributed net investment income. | 253,021 | 14,190,856 | ||||
Net unrealized appreciation (depreciation) | 141,744,318 | (223,853,426 | ) | |||
Accumulated net realized gain (loss) | 21,457,971 | (2,385,974,092 | ) | |||
Net assets, at value | $ | 716,474,909 | $ | 4,939,162,656 | ||
Class A: | ||||||
Net assets,at value | $ | 523,540,093 | $ | 3,346,191,961 | ||
Shares outstanding. | 31,163,669 | 275,693,021 | ||||
Net asset value per sharea | $ | 16.80 | $ | 12.14 | ||
Maximum offering price per share (net asset value per share ÷ 94.25%) | $ | 17.82 | $ | 12.88 | ||
Class C: | ||||||
Net assets, at value | $ | 172,116,077 | $ | 1,458,281,156 | ||
Shares outstanding. | 10,361,276 | 121,930,546 | ||||
Net asset value and maximum offering price per sharea | $ | 16.61 | $ | 11.96 | ||
Class R: | ||||||
Net assets, at value | $ | 1,422,606 | $ | 10,724,028 | ||
Shares outstanding. | 84,649 | 882,009 | ||||
Net asset value and maximum offering price per share | $ | 16.81 | $ | 12.16 | ||
Advisor Class : | ||||||
Net assets,at value | $ | 19,396,133 | $ | 123,965,511 | ||
Shares outstanding. | 1,152,870 | 10,157,313 | ||||
Net asset value and maximum offering price per share | $ | 16.82 | $ | 12.20 |
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, 2015 | ||||||
Franklin | Franklin | |||||
Corefolio | Founding Funds | |||||
Allocation Fund | Allocation Fund | |||||
Investment income: | ||||||
Dividends from Underlying Funds (Note 3e) | $ | 9,525,724 | $ | 169,828,947 | ||
Expenses: | ||||||
Administrative fee (Note 3e) | 225,902 | 1,662,773 | ||||
Distribution fees: (Note 3b) | ||||||
Class A | 1,535,623 | 9,357,496 | ||||
Class C | 1,785,204 | 16,423,909 | ||||
Class R | 7,660 | 58,457 | ||||
Transfer agent fees: (Note 3d) | ||||||
Class A | 707,725 | 4,428,736 | ||||
Class C | 228,154 | 1,947,970 | ||||
Class R | 1,960 | 13,818 | ||||
Advisor Class | 24,621 | 164,888 | ||||
Reports to shareholders | 63,903 | 484,157 | ||||
Registration and filing fees | 82,307 | 153,695 | ||||
Professional fees | 35,489 | 61,987 | ||||
Trustees’ fees and expenses | 5,436 | 41,060 | ||||
Other | 11,323 | 47,505 | ||||
Total expenses | 4,715,307 | 34,846,451 | ||||
Expenses waived/paid by affiliates (Note 3e) | (240 | ) | (13,687 | ) | ||
Net expenses. | 4,715,067 | 34,832,764 | ||||
Net investment income | 4,810,657 | 134,996,183 | ||||
Realized and unrealized gains (losses): | ||||||
Net realized gain (loss) from: | ||||||
Sale of investments in Underlying Funds (Note 3e) | 7,055,431 | 79,377,017 | ||||
Realized gain distributions by Underlying Funds (Note 3e) | 37,545,258 | 102,735,259 | ||||
Net realized gain (loss) | 44,600,689 | 182,112,276 | ||||
Net change in unrealized appreciation (depreciation) on investments in Underlying Funds | (59,102,865 | ) | (658,109,619 | ) | ||
Net realized and unrealized gain(loss) | (14,502,176 | ) | (475,997,343 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (9,691,519 | ) | $ | (341,001,160 | ) |
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, | |||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||
Increase (decrease) in net assets: | ||||||||||||
Operations: | ||||||||||||
Net investment income | $ | 4,810,657 | $ | 8,388,248 | $ | 134,996,183 | $ | 191,442,759 | ||||
Netrealizedgain(loss) | 44,600,689 | 41,511,109 | 182,112,276 | 83,265,093 | ||||||||
Net change in unrealized appreciation (depreciation) | (59,102,865 | ) | (3,551,863 | ) | (658,109,619 | ) | (108,863,053 | ) | ||||
Net increase (decrease) in net assets resulting from | ||||||||||||
operations | (9,691,519 | ) | 46,347,494 | (341,001,160 | ) | 165,844,799 | ||||||
Distributions to shareholders from: | ||||||||||||
Net investment income and short term gains received from | ||||||||||||
Underlying Funds: | ||||||||||||
Class A | (4,857,615 | ) | (8,829,349 | ) | (98,500,766 | ) | (133,406,015 | ) | ||||
Class C | (344,671 | ) | (1,592,410 | ) | (31,651,129 | ) | (46,293,686 | ) | ||||
Class R | (9,705 | ) | (20,055 | ) | (288,382 | ) | (359,896 | ) | ||||
Advisor Class | (237,700 | ) | (358,226 | ) | (4,014,176 | ) | (5,003,841 | ) | ||||
Net realized gains: | ||||||||||||
Class A | (26,103,339 | ) | (14,098,077 | ) | — | — | ||||||
Class C | (8,598,561 | ) | (4,523,072 | ) | — | — | ||||||
Class R | (72,612 | ) | (40,063 | ) | — | — | ||||||
Advisor Class | (921,242 | ) | (436,646 | ) | — | — | ||||||
Total distributions to shareholders | (41,145,445 | ) | (29,897,898 | ) | (134,454,453 | ) | (185,063,438 | ) | ||||
Capital share transactions: (Note 2) | ||||||||||||
ClassA | 1,681,278 | (11,607,396 | ) | (291,816,141 | ) | (200,440,623 | ) | |||||
ClassC | 7,843,594 | (3,453,757 | ) | (145,892,163 | ) | (76,893,558 | ) | |||||
ClassR | (17,938 | ) | (398,674 | ) | 143,883 | 1,081,592 | ||||||
Advisor Class | 1,799,263 | 3,161,219 | (5,840,597 | ) | 29,372,430 | |||||||
Total capital share transactions | 11,306,197 | (12,298,608 | ) | (443,405,018 | ) | (246,880,159 | ) | |||||
Net increase (decrease) in net assets | (39,530,767 | ) | 4,150,988 | (918,860,631 | ) | (266,098,798 | ) | |||||
Net assets: | ||||||||||||
Beginning of year | 756,005,676 | 751,854,688 | 5,858,023,287 | 6,124,122,085 | ||||||||
End of year. | $ | 716,474,909 | $ | 756,005,676 | $ | 4,939,162,656 | $ | 5,858,023,287 | ||||
Undistributed net investment income included in net assets: | ||||||||||||
End of year. | $ | 253,021 | $ | 308,304 | $ | 14,190,856 | $ | 8,313,547 |
34 Annual Report | The accompanying notes are an integral part of these financial statements.
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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 (1940 Act) as an open-end management investment company, consisting of twenty 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.
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 as of 4 p.m. Eastern time each day the New York Stock Exchange (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.
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 may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of December 31, 2015, each Fund has determined that no tax liability isrequired in its financial statements related to uncertaintax positions for any open tax years (or expected to be taken on future tax returns). Open tax years are those thatremain subject to examination and are based on each tax jurisdiction’s 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.
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.
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FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting
Policies (continued)
c. Security Transactions, Investment Income, Expenses and Distributions (continued)
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, 2015, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:
Franklin Corefolio | Franklin Founding Funds | |||||||||
Allocation Fund | Allocation Fund | |||||||||
Shares | Amount | Shares | Amount | |||||||
Class A Shares: | ||||||||||
Year ended December 31, 2015 | ||||||||||
Shares sold | 3,001,182 | $ | 54,267,449 | 18,163,303 | $ | 240,044,331 | ||||
Shares issued in reinvestment of distributions | 1,707,783 | 30,211,212 | 7,502,937 | 94,732,766 | ||||||
Shares redeemed | (4,587,530 | ) | (82,797,383 | ) | (47,501,150 | ) | (626,593,238 | ) | ||
Net increase (decrease) | 121,435 | $ | 1,681,278 | (21,834,910 | ) | $ | (291,816,141 | ) | ||
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 | ) |
36 Annual Report
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FRANKLIN FUND ALLOCATOR SERIES | ||||||||||
NOTES TO FINANCIAL STATEMENTS | ||||||||||
Franklin Corefolio | Franklin Founding Funds | |||||||||
Allocation Fund | Allocation Fund | |||||||||
Shares | Amount | Shares | Amount | |||||||
Class C Shares: | ||||||||||
Year ended December 31, 2015 | ||||||||||
Shares sold | 1,337,864 | $ | 23,778,283 | 7,259,845 | $ | 93,929,359 | ||||
Shares issued in reinvestment of distributions | 489,808 | 8,602,866 | 2,368,889 | 29,282,876 | ||||||
Shares redeemed | (1,384,615 | ) | (24,537,555 | ) | (20,826,861 | ) | (269,104,398 | ) | ||
Net increase (decrease) | 443,057 | $ | 7,843,594 | (11,198,127 | ) | $ | (145,892,163 | ) | ||
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 | ) |
Class R Shares: | ||||||||||
Year ended December 31, 2015 | ||||||||||
Shares sold | 2,501 | $ | 44,950 | 157,570 | $ | 2,082,811 | ||||
Shares issued in reinvestment of distributions | 4,643 | 82,317 | 22,443 | 283,329 | ||||||
Shares redeemed | (8,291 | ) | (145,205 | ) | (169,724 | ) | (2,222,257 | ) | ||
Net increase (decrease) | (1,147 | ) | $ | (17,938 | ) | 10,289 | $ | 143,883 | ||
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 | ||
Advisor Class Shares: | ||||||||||
Year ended December 31, 2015 | ||||||||||
Shares sold | 253,472 | $ | 4,523,516 | 2,770,971 | $ | 36,825,401 | ||||
Shares issued in reinvestment of distributions | 53,169 | 939,787 | 291,017 | 3,703,795 | ||||||
Shares redeemed | (202,887 | ) | (3,664,040 | ) | (3,514,049 | ) | (46,369,793 | ) | ||
Net increase (decrease) | 103,754 | $ | 1,799,263 | (452,061 | ) | $ | (5,840,597 | ) | ||
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 |
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 |
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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. 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.
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 | % |
For Franklin Founding Funds Allocation Fund, the Board has set the current rate at 0.25% per year for Class A shares until further notice and approval by the Board.
For Franklin Corefolio Allocation Fund, the Board has set the current rate at 0.25% per year for Class A shares, effective August 1, 2015, until further notice and approval by the Board. Prior to August 1, 2015, the Board had set the rate at 0.30% per year for Class A shares.
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 brokers/dealers | $ | 176,644 | $ | 795,428 |
CDSC retained. | $ | 5,703 | $ | 57,392 |
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.
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FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 2015, 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 | $ | 625,873 | $ | 3,134,856 |
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 in 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, 2015, were as follows:
% of | ||||||||||||||
Underlying | ||||||||||||||
Number of | Number of | Fund Shares | ||||||||||||
Shares Held | Shares | Value | Outstanding | |||||||||||
at Beginning | Gross | Gross Held at End | 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 | 3,732,210 | 436,619 | (367,371 | ) | 3,801,458 | $ | 180,949,419 | $ | — | $ | 20,531,683 | a | 5.45 | % |
Franklin Growth Fund, | ||||||||||||||
Class R6 | 2,568,915 | 104,698 | (200,206 | ) | 2,473,407 | 181,473,884 | 2,062,199 | 12,872,514 | a | 1.54 | % | |||
Franklin Mutual Shares | ||||||||||||||
Fund, Class R6 | 6,472,059 | 591,821 | (158,591 | ) | 6,905,289 | 179,399,405 | 3,999,676 | 11,200,725 | a | 1.21 | % | |||
Institutional Fiduciary | ||||||||||||||
Trust Money Market | ||||||||||||||
Portfolio | 69,924 | 34,617,493 | (33,373,535 | ) | 1,313,882 | 1,313,882 | — | — | 0.01 | % | ||||
Templeton Growth | ||||||||||||||
Fund Inc., Class R6 | 7,644,877 | 326,942 | (8,788 | ) | 7,963,031 | 174,151,489 | 3,463,849 | (4,233 | ) | 1.23 | % | |||
Total | $ | 717,288,079 | $ | 9,525,724 | $ | 44,600,689 | ||||||||
Franklin Founding | ||||||||||||||
Funds Allocation | ||||||||||||||
Fund | ||||||||||||||
Franklin Income Fund, | ||||||||||||||
ClassR6 | 812,267,014 | 44,127,240 | (69,890,682 | ) | 786,503,572 | $ | 1,635,927,430 | $ | 100,515,502 | $ | (2,490,031 | ) | 2.17 | % |
Franklin Mutual Shares | ||||||||||||||
Fund, Class R6 | 66,439,008 | 5,424,822 | (8,824,614 | ) | 63,039,216 | 1,637,758,841 | 36,670,888 | 165,926,989 | a | 11.06 | % | |||
Institutional Fiduciary | ||||||||||||||
Trust Money Market | ||||||||||||||
Portfolio | 37,146,628 | 376,012,481 | (370,242,797 | ) | 42,916,312 | 42,916,312 | — | — | 0.22 | % | ||||
Templeton Growth | ||||||||||||||
Fund Inc., Class R6 | 81,271,618 | 1,514,736 | (8,190,663 | ) | 74,595,691 | 1,631,407,754 | 32,642,557 | 18,675,318 | 11.56 | % | ||||
Total | $ | 4,948,010,337 | $ | 169,828,947 | $ | 182,112,276 | ||||||||
aIncludes realized gain distributions received. |
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FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
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.
At December 31, 2015, the capital loss carryforwards were as follows:
Franklin | ||
Founding Funds | ||
Allocation Fund | ||
Capital loss carryforwards subject to expiration: | ||
2016 | $ | 666,677,037 |
2017 | 1,091,470,427 | |
2018 | 465,945,460 | |
Long term capital loss carryforwards | ||
not subject to expiration | 133,217,452 | |
Total capital loss carry forwards | $ | 2,357,310,376 |
During the year ended December 31, 2015, Franklin Corefolio Allocation Fund and Franklin Founding Funds Allocation Fund utilized $5,160,881 and $176,966,960, respectively, of capital loss carryforwards.
The tax character of distributions paid during the years ended December 31, 2015 and 2014, was as follows:
Franklin | Franklin | |||||||
Corefolio | Founding Funds | |||||||
Allocation Fund | Allocation Fund | |||||||
2015 | 2014 | 2015 | 2014 | |||||
Distributions paid from: | ||||||||
Ordinary income | $ | 5,449,691 | $ | 10,800,040 | $ | 134,454,453 | $ | 185,063,438 |
Long term capital gain | 35,695,754 | 19,097,858 | — | — | ||||
$ | 41,145,445 | $ | 29,897,898 | $ | 134,454,453 | $ | 185,063,438 |
At December 31, 2015, 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 | $ | 579,322,421 | $ | 5,200,527,479 | ||
Unrealized appreciation | $ | 141,744,318 | $ | 110,794,782 | ||
Unrealized depreciation | (3,778,660 | ) | (363,311,924 | ) | ||
Net unrealized appreciation (depreciation) | $ | 137,965,658 | $ | (252,517,142 | ) | |
Undistributed ordinary income | $ | 253,019 | $ | 14,190,855 | ||
Undistributed long term capital gains | 25,236,632 | — | ||||
Distributable earnings | $ | 25,489,651 | $ | 14,190,855 |
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 wash sales.
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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, 2015, were as follows:
Franklin | Franklin | |||
Corefolio | Founding Funds | |||
Allocation Fund | Allocation Fund | |||
Purchases | $ | 4,000,000 | $ | — |
Sales | $ | 40,060,400 | $ | 616,000,000 |
6. Credit Facility
Certain or all 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 $2 billion (Global Credit Facility) which matured on February 12, 2016. 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. Effective February 12, 2016, the Borrowers renewed the Global Credit Facility for a one year term, maturing February 10, 2017, for a total of $2 billion.
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. Effective February 12, 2016, the annual commitment fee is 0.15%. These fees are reflected in other expenses in the Statements of Operations. During the year ended December 31, 2015, 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, 2015, 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.
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FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
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.
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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, 2015, 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 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, 2015 by correspondence with the transfer agent, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 16, 2016
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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 $35,695,754 as a long term capital gain dividend for the fiscal year ended December 31, 2015.
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, 2015:
Franklin | Franklin | ||
Corefolio | Founding Funds | ||
Allocation Fund | Allocation Fund | ||
97.45 | % | 41.58 | % |
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, 2015:
Franklin | Franklin | ||
Corefolio | Founding Funds | ||
Allocation Fund | Allocation Fund | ||
$ | 5,449,691 | $ | 108,363,067 |
Distributions, including qualified dividend income, paid during calendar year 2015 will be reported to shareholders on Form 1099-DIV by mid-February 2016. 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, 2015, 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, 2015, 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 Paid | Foreign Source | Foreign Source Qualified | ||||
Class | Per Share | Income Per Share | Dividends Per Share | |||
Franklin Corefolio Allocation Fund | ||||||
ClassA | $ | 0.0079 | $ | 0.0794 | $ | 0.0593 |
ClassC | $ | 0.0079 | $ | 0.0794 | $ | 0.0593 |
ClassR | $ | 0.0079 | $ | 0.0794 | $ | 0.0593 |
AdvisorClass | $ | 0.0079 | $ | 0.0794 | $ | 0.0593 |
Franklin Founding Funds Allocation Fund | ||||||
ClassA | $ | 0.0078 | $ | 0.0775 | $ | 0.0579 |
ClassC | $ | 0.0078 | $ | 0.0775 | $ | 0.0579 |
ClassR | $ | 0.0078 | $ | 0.0775 | $ | 0.0579 |
AdvisorClass | $ | 0.0078 | $ | 0.0775 | $ | 0.0579 |
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
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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 2016, shareholders will receive Form 1099-DIV which will include their share of taxes paid and foreign source
income distributed during the calendar year 2015. 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 2015 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.
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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 | |
and Address | Position | Time Served | by Board Member* | During at Least the Past 5 Years |
Harris J. Ashton (1932) | Trustee | Since 1995 | 147 | 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 2014 | 123 | Avis Budget Group Inc. (car rental) |
One Franklin Parkway | (2007-present), Omnicom Group Inc. | |||
San Mateo, CA 94403-1906 | (advertising and marketing | |||
communications services) | ||||
(2011-present) and H.J. Heinz | ||||
Company (processed foods and allied | ||||
products) (1998-2006). | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Advisor, Strategic Investment Group (investment management group) (August 2015-present); director of various companies; and | ||||
formerly, Founding Partner and Senior Managing Director, Strategic Investment Group (1987–2015); Founding Partner and Managing Director, | ||||
Emerging Markets Management LLC (investment management firm) (1987-2011); and Loan Officer/Senior Loan Officer/Senior Pension | ||||
Investment Officer, World Bank Group (international financial institution) (1977-1987). | ||||
Edith E. Holiday (1952) | Trustee | Since 1998 | 147 | Hess Corporation (exploration and |
One Franklin Parkway | refining of oil and gas) (1993-present), | |||
San Mateo, CA 94403-1906 | Canadian National Railway (railroad) | |||
(2001-present), White Mountains | ||||
Insurance Group, Ltd. (holding | ||||
company) (2004-present), RTI | ||||
International Metals, Inc. (manufacture | ||||
and distribution of titanium) | ||||
(1999-2015) and H.J. Heinz Company | ||||
(processed foods and allied products) | ||||
(1994-2013). | ||||
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). | ||||
J. Michael Luttig (1954) | Trustee | Since 2009 | 147 | Boeing Capital Corporation (aircraft |
One Franklin Parkway | 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) (2006-present); | ||||
and formerly, Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006). | ||||
Frank A. Olson (1932) | Trustee | Since 2007 | 147 | 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). |
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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 |
Larry D. Thompson (1945) | Trustee | Since 2007 | 147 | The Southern Company (energy |
One Franklin Parkway | company) (2014-present; previously | |||
San Mateo, CA 94403-1906 | 2010-2012), Graham Holdings | |||
Company (education and media | ||||
organization) (2011-present) and | ||||
Cbeyond, Inc. (business | ||||
communications provider) | ||||
(2010-2012). | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Director of various companies; John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (January 2015; | ||||
previously 2011-2012); and formerly, Executive Vice President – Government Affairs, General Counsel and Corporate Secretary, PepsiCo, | ||||
Inc. (consumer products) (2012-2014); Senior Vice President – Government Affairs, General Counsel and Secretary, PepsiCo, Inc. | ||||
(2004-2011); Senior Fellow of The Brookings Institution (2003-2004); Visiting Professor, (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 | 123 | 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). | ||||
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 | 164 | 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 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; Vice Chairman, Investment Company Institute; and formerly, President, Franklin Resources, Inc. | ||||
(1994-2015). | ||||
**Rupert H. Johnson, Jr. (1940) | Chairman of | Chairman of the | 147 | 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 42 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 44 | ||||
of the investment companies in Franklin Templeton Investments. |
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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 |
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; Vice President, Franklin Advisers, Inc. and Franklin Templeton Institutional, LLC; and | ||||
officer of 44 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: | ||||
Treasurer, U.S. Fund Administration & Reporting, 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; and officer of 44 of the investment companies in Franklin Templeton | ||||
Investments. | ||||
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 44 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 44 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, Fiduciary Trust International of the South and Templeton | ||||
Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 44 of the investment companies in Franklin Templeton | ||||
Investments. |
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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 |
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 44 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 44 of the investment companies in Franklin Templeton | ||||
Investments. | ||||
Navid Tofigh (1972) | Vice President | Since | Not Applicable | Not Applicable |
One Franklin Parkway | November | |||
San Mateo, CA 94403-1906 | 2015 | |||
Principal Occupation During at Least the Past 5 Years: | ||||
Associate General Counsel, Franklin Templeton Investments; and officer of 44 of the investment companies in Franklin Templeton Investments. | ||||
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 44 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; and officer of 44 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.
Note 3: Effective April 30, 2015, Sam Ginn ceased to be a trustee of the Trust.
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.
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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.
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Contents | |
Annual Report | |
Economic and Market Overview | 3 |
Franklin LifeSmart™ 2015 Retirement Target Fund | 4 |
Franklin LifeSmart™ 2020 Retirement Target Fund | 14 |
Franklin LifeSmart™ 2025 Retirement Target Fund | 24 |
Franklin LifeSmart™ 2030 Retirement Target Fund | 34 |
Franklin LifeSmart™ 2035 Retirement Target Fund | 44 |
Franklin LifeSmart™ 2040 Retirement Target Fund | 54 |
Franklin LifeSmart™ 2045 Retirement Target Fund | 64 |
Franklin LifeSmart™ 2050 Retirement Target Fund | 74 |
Franklin LifeSmart™ 2055 Retirement Target Fund | 84 |
Financial Highlights and Statements of Investments | 94 |
Financial Statements | 157 |
Notes to Financial Statements | 171 |
Report of Independent Registered Public Accounting | |
Firm | 195 |
Tax Information | 196 |
Board Members and Officers | 200 |
Shareholder Information | 204 |
Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.
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Economic and Market Overview
U.S. economic growth slowed in 2015’s first quarter but strengthened in 2015’s second quarter amid healthy consumer spending. The third and fourth quarters were less robust as exports slowed and state and local governments reduced their spending. At its December meeting, the U.S. Federal Reserve (Fed) increased its target range for the federal funds rate to 0.25%–0.50%, as policymakers cited the labor market’s considerable improvement and were reasonably confident that inflation would move back to the Fed’s 2% medium-term objective. Furthermore, the Fed raised its forecast for 2016 U.S. economic growth and lowered its unemployment projection. Despite periods of volatility, the broad U.S. stock market, as measured by the Standard & Poor’s 500 Index, generated a modest positive total return for 2015.
The global economy expanded moderately during the 12 months under review. As measured by the MSCI World Index, stocks in global developed markets overall were nearly unchanged for the year amid some positive developments. Weighing on global stocks at times were worries about China’s slowing economy and tumbling stock market, declining commodity prices, geopolitical tensions between Russia and Turkey, and ongoing uncertainty over the Fed’s timing for raising interest rates. Toward period-end, equity markets recovered somewhat as the Fed increased its federal funds target range, alleviating some uncertainty about a change in the U.S. monetary policy. During the year, oil prices declined sharply largely due to increased global supply that exceeded demand. Gold and other commodity prices also fell. The U.S. dollar appreciated against most currencies during the period, which reduced returns of many foreign assets in U.S. dollar terms.
In Europe, U.K. economic growth gained momentum from the services sector, but the economy slowed in 2015 compared with 2014. The eurozone grew moderately and generally benefited during the period from lower oil prices, a weaker euro that supported exports, the European Central Bank’s (ECB’s) accommodative policy, an improved 2015 eurozone growth forecast, and expectations of further ECB stimulus. Although the eurozone’s annual inflation rate declined early in the period, it rose slightly during the rest of the period. The ECB maintained its benchmark interest rates although it reduced its bank deposit rate in December, seeking to boost the region’s slowing growth.
Japan’s economy continued to grow in 2015’s first quarter. After a decline in the second quarter of 2015, it expanded in the third quarter as capital expenditures improved. The Bank of Japan took several actions during the reporting period, including maintaining its monetary policy, lowering its economic growth and inflation forecasts, and reorganizing its stimulus program to increase exposure to long-term government bonds and exchange-traded funds.
The foregoing information reflects our analysis and opinions as of December 31, 2015. 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.
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Franklin LifeSmart 2015 Retirement Target Fund
This annual report for Franklin LifeSmart 2015 Retirement Target Fund covers the fiscal year ended December 31, 2015.
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, fixed income and alternative (non-traditional) investments by investing primarily 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.
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*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 had a -2.59% cumulative total return for the 12 months ended December 31, 2015. In comparison, the Fund’s equity benchmark, the MSCI All Country World Index (ACWI), which measures equity market performance in global developed and emerging markets, returned -1.84%.1 The Fund’s fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, had a -3.29% total return.1 The Payden & Rygel (P&R) 90 Day U.S. T-Bill Index, a proxy for short-term investments and other net assets, returned +0.03%.2 The Fund changed its benchmarks at the beginning of 2015 to the MSCI ACWI and Barclays Multiverse Index and added the P&R 90 Day U.S. T-Bill Index because the Fund’s investment manager believes the compositions of the new indexes better reflect the Fund’s holdings. You can find the Fund’s long-term performance data in the Performance Summary beginning on page 7.
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.
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 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, including alternative investment funds, 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 Fund in the same fund investments but will vary the fund investments’ allocation percentages based upon each Fund’s risk/return level. We change the Fund’s target asset allocations over time, reducing its exposure to equity investments, and it becomes increasingly conservative until the stated target date. At the “landing point” (reached at the target date), the Fund reaches its most conservative asset allocation and thereafter, such strategic asset allocation will become fixed.
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
1. 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 99.
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Top 10 Fund Holdings | ||
12/31/15 | ||
% of Total | ||
Net Assets | ||
Templeton Global Total Return Fund – Class R6 | 23.3 | % |
Franklin Low Duration Total Return Fund – Class R6 | 18.3 | % |
Franklin Strategic Income Fund – Class R6 | 6.3 | % |
Franklin K2 Alternative Strategies Fund – Class R6 | 6.2 | % |
Franklin Focused Core Equity Fund – Class R6 | 3.5 | % |
Franklin Growth Fund – Class R6 | 3.5 | % |
Franklin DynaTech Fund – Class R6 | 3.3 | % |
Franklin Emerging Market Debt Opportunities Fund | 3.3 | % |
Deutsche X-trackers MSCI Europe Hedged Equity | ||
ETF | 2.9 | % |
Franklin International Small Cap Growth Fund – | ||
Class R6 | 2.9 | % |
shifts every year, in accordance with the target date associated with the portfolio.
At period-end, Franklin LifeSmart 2015 Retirement Target Fund allocated 35.2% of total net assets to equity, 54.9% to fixed income and 8.1% to alternative strategies. Domestic equity exposure was 53.4% 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, 2015, we held shares in large-, mid- and small-capitalization equity funds, representing both growth and value styles. Franklin Focused Core Equity Fund – Class R6, at 3.5% 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 Fund – Class R6 was our largest fixed income fund weighting at 23.3% of total net assets.
Our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest foreign equity fund holding, Franklin International Small Cap Growth Fund – Class R6, outperformed the MSCI ACWI. Our largest domestic value fund holding, Franklin Rising Dividends Fund – Class R6, underperformed the index. On the fixed income side, Templeton Global Total Return Fund – Class R6 underper-formed the Barclays Multiverse Index.
On December 3, 2015, the Board approved a proposal to reposition the Franklin LifeSmart 2015 Retirement Target Fund, subject to shareholder approval of certain matters. Among other things, the repositioning would involve changing the name of the fund to “Franklin LifeSmart Retirement Income Fund,” and modifying the investment goal to the following: “The Fund’s investment goal is to seek to make monthly distributions, while preserving the investor’s capital over the long term.” In addition, the strategies of the Fund would be modified. Shareholders have or will receive a proxy statement requesting their votes on certain proposals related to the repositioning. If such proposals are approved by the fund’s shareholders, the repositioning is currently expected to be completed on or about May 1, 2016.
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/0001022804-16-000131/rtf_a0216x6x1.jpg)
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2015, 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.
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FRANKLIN LIFESMART 2015 RETIREMENT TARGET FUND
James D. Macey is a senior vice president for Franklin Templeton Solutions. He is a co-manager on several U.S. fund-of-fund products including Franklin Fund Allocator Series. Prior to joining Franklin Templeton Investments in 2015, Mr. Macey was a portfolio manager at Allianz Global Investors where he was a co-lead manager for their target date and retirement income portfolios and was a portfolio manager for their multi-asset U.S. 529 college-savings plans and mutual funds, including target risk and multi-asset real return. He also led the manager research and due diligence process for their multi-asset U.S. team. Mr. Macey has 15 years of financial services industry experience.
CFA® is a trademark owned by CFA Institute.
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FRANKLIN LIFESMART 2015 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2015
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) | 12/31/15 | 12/31/14 | Change | |||
A (FTRAX) | $ | 10.78 | $ | 11.67 | -$ | 0.89 |
C (FRTCX) | $ | 10.66 | $ | 11.55 | -$ | 0.89 |
R (FBRLX) | $ | 10.74 | $ | 11.64 | -$ | 0.90 |
R6 (FLMTX) | $ | 10.82 | $ | 11.72 | -$ | 0.90 |
Advisor (FLRDX) | $ | 10.81 | $ | 11.71 | -$ | 0.90 |
Distributions1 (1/1/15–12/31/15) | ||||||
Dividend | Long-Term | |||||
Share Class | Income | Capital Gain | Total | |||
A | $ | 0.2672 | $ | 0.3317 | $ | 0.5989 |
C | $ | 0.1861 | $ | 0.3317 | $ | 0.5178 |
R | $ | 0.2462 | $ | 0.3317 | $ | 0.5779 |
R6 | $ | 0.3057 | $ | 0.3317 | $ | 0.6374 |
Advisor | $ | 0.2990 | $ | 0.3317 | $ | 0.6307 |
See page 11 for Performance Summary footnotes.
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FRANKLIN LIFESMART 2015 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Performance as of 12/31/152
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 Expenses6 | |||||||
Share Class | Total Return3 | Total Return4 | $ | 10,000 Investment5 | (with waiver) | (without waiver) | ||||
A | 0.98 | % | 1.47 | % | ||||||
1-Year | -2.59 | % | -8.18 | % | $ | 9,182 | ||||
5-Year | +22.07 | % | +2.84 | % | $ | 11,501 | ||||
Since Inception (8/1/06) | +57.06 | % | +4.25 | % | $ | 14,803 | ||||
C | 1.68 | % | 2.17 | % | ||||||
1-Year | -3.32 | % | -4.24 | % | $ | 9,576 | ||||
5-Year | +17.83 | % | +3.34 | % | $ | 11,783 | ||||
Since Inception (8/1/06) | +47.01 | % | +4.18 | % | $ | 14,701 | ||||
R | 1.18 | % | 1.67 | % | ||||||
1-Year | -2.87 | % | -2.87 | % | $ | 9,713 | ||||
5-Year | +20.76 | % | +3.84 | % | $ | 12,076 | ||||
Since Inception (8/1/06) | +53.93 | % | +4.69 | % | $ | 15,393 | ||||
R6 | 0.63 | % | 1.07 | % | ||||||
1-Year | -2.34 | % | -2.34 | % | $ | 9,766 | ||||
Since Inception (5/1/13) | +8.94 | % | +3.26 | % | $ | 10,894 | ||||
Advisor | 0.68 | % | 1.17 | % | ||||||
1-Year | -2.40 | % | -2.40 | % | $ | 9,760 | ||||
5-Year | +23.77 | % | +4.36 | % | $ | 12,377 | ||||
Since Inception (8/1/06) | +61.50 | % | +5.22 | % | $ | 16,150 |
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.
See page 11 for Performance Summary footnotes.
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FRANKLIN LIFESMART 2015 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2
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/0001022804-16-000131/rtf_a0216x10x1.jpg)
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FRANKLIN LIFESMART 2015 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x11x1.jpg)
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FRANKLIN LIFESMART 2015 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x12x1.jpg)
The Fund’s investment risk changes over time as its asset allocation changes. The Fund’s ability to achieve its investment goal depends upon the investment manager’s skill in determining the Fund’s broad asset allocation mix and selecting underlying funds. There is the possibility that the investment manager’s evaluations and assumptions regarding asset classes and underlying funds will not successfully achieve the Fund’s investment goal in view of actual market trends. 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. The Fund’s investment in ETFs may subject the Fund to additional risks than if the Fund had invested directly in the ETFs’ underlying securities. 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, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as the 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. Derivatives, including currency management strategies, involve costs and can create economic leverage in the portfolio, which may result in significant volatility and cause the Fund to participate in losses (as well as gains) in an amount that exceeds the Fund’s initial investment. These risks are described more fully in, and additional 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, retirement time horizons and risk tolerance.
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 distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income and capital
gain.
2. The Fund has an expense reduction contractually guaranteed through at least 4/30/16 and a fee waiver associated with any investment in a Franklin Templeton money fund,
contractually guaranteed through at least its current fiscal year-end. The transfer agent has contractually agreed to cap transfer agency fees for Class R6 shares so that transfer
agency fees for that class do not exceed 0.01% until at least 4/30/16. Fund investment results reflect the expense reduction, fee waiver and fee cap, to the extent applicable;
without these reductions, the results would have been lower. As of October 2013, 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.
3. Cumulative total return represents the change in value of an investment over the periods indicated.
4. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been
annualized.
5. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
6. Figures are as stated in the Fund’s current prospectus and include the effect of acquired fund fees and expenses. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become higher than the figures shown.
7. Source: Morningstar. 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.
8. Source: Payden & Rygel. The P&R 90 Day U.S. 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.
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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, distribution 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.
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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 7/1/15 | Value 12/31/15 | 7/1/15–12/31/15 | 7/1/15–12/31/15 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 958.70 | $ | 1.53 | $ | 4.89 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.64 | $ | 1.58 | $ | 5.04 |
C | ||||||||
Actual | $ | 1,000 | $ | 955.10 | $ | 5.17 | $ | 8.53 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.91 | $ | 5.35 | $ | 8.79 |
R | ||||||||
Actual | $ | 1,000 | $ | 957.40 | $ | 2.71 | $ | 6.07 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.43 | $ | 2.80 | $ | 6.26 |
R6 | ||||||||
Actual | $ | 1,000 | $ | 959.70 | $ | 0.00 | $ | 3.36 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,025.21 | $ | 0.00 | $ | 3.47 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 959.20 | $ | 0.25 | $ | 3.60 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,024.95 | $ | 0.26 | $ | 3.72 |
*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: 0.31%; 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: 0.99%; C: 1.73%; R: 1.23%; R6: 0.68%; and Adviser 0.73%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year
period.
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Franklin LifeSmart 2020 Retirement Target Fund
This annual report for Franklin LifeSmart 2020 Retirement Target Fund covers the fiscal year ended December 31, 2015.
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, fixed income and alternative (non-traditional) investments by investing primarily 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.
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x15x1.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 had a -2.18% cumulative total return for the 12 months ended December 31, 2015. In comparison, the Fund’s equity benchmark, the MSCI All Country World Index (ACWI), which measures equity market performance in global developed and emerging markets, returned -1.84%.1 The Fund’s fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, had a -3.29% total return.1 The Payden & Rygel (P&R) 90 Day U.S. T-Bill Index, a proxy for short-term investments and other net assets, returned +0.03%.2 The Fund changed its benchmarks at the beginning of 2015 to the MSCI ACWI and Barclays Multiverse Index and added the P&R 90 Day U.S. T-Bill Index because the Fund’s investment manager believes the compositions of the new indexes better reflect the Fund’s holdings. You can find more of the Fund’s performance data in the Performance Summary beginning on page 17.
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.
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 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, including alternative investment funds, 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 Fund in the same fund investments but will vary the fund investments’ allocation percentages based upon each Fund’s risk/return level. We change the Fund’s target asset allocations over time, reducing its exposure to equity investments, and it becomes increasingly conservative until the stated target date. At the “landing point” (reached at the target date), the Fund reaches its most conservative asset allocation and thereafter, such strategic asset allocation will become fixed.
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
1. 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 106.
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FRANKLIN LIFESMART 2020 RETIREMENT TARGET FUND
Top 10 Fund Holdings | ||
12/31/15 | ||
% of Total | ||
Net Assets | ||
Templeton Global Total Return Fund – Class R6 | 16.1 | % |
Franklin Low Duration Total Return Fund – Class R6 | 12.6 | % |
Franklin Growth Fund – Class R6 | 6.3 | % |
Franklin Focused Core Equity Fund – Class R6 | 6.1 | % |
Franklin K2 Alternative Strategies Fund – Class R6 | 6.0 | % |
Franklin International Small Cap Growth Fund – | ||
Class R6 | 5.1 | % |
Franklin DynaTech Fund – Class R6 | 4.9 | % |
Franklin Strategic Income Fund – Class R6 | 4.5 | % |
Franklin Mutual International Fund – Class R6 | 3.7 | % |
iShares Core MSCI Emerging Markets ETF | 3.5 | % |
shifts every year, in accordance with the target date associated with the portfolio.
At period-end, Franklin LifeSmart 2020 Retirement Target Fund allocated 53.5% of total net assets to equity, 36.7% to fixed income and 7.9% to alternative strategies. Domestic equity exposure was 55.9% 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, 2015, we held shares in large-, mid- and small-capitalization equity funds, representing both growth and value styles. Franklin Growth Fund – Class R6, at 6.3% of the Fund’s total investments, 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 Fund – Class R6 was our largest fixed income fund weighting at 16.1% of total net assets.
Our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest foreign equity fund holding, Franklin International Small Cap Growth Fund – Class R6, outperformed the MSCI ACWI, while our largest domestic value fund holding, Franklin Rising Dividends Fund –Class R6, underperformed the index. On the fixed income side, Templeton Global Total Return Fund – Class R6 underper- formed the Barclays Multiverse Index, while Franklin Low Duration Total Return – Class R6 performed better than the 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/0001022804-16-000131/rtf_a0216x16x1.jpg)
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2015, 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.
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FRANKLIN LIFESMART 2020 RETIREMENT TARGET FUND
James D. Macey is a senior vice president for Franklin Templeton Solutions. He is a co-manager on several U.S. fund-of-fund products including Franklin Fund Allocator Series. Prior to joining Franklin Templeton Investments in 2015, Mr. Macey was a portfolio manager at Allianz Global Investors where he was a co-lead manager for their target date and retirement income portfolios and was a portfolio manager for their multi-asset U.S. 529 college-savings plans and mutual funds, including target risk and multi-asset real return. He also led the manager research and due diligence process for their multi-asset U.S. team. Mr. Macey has 15 years of financial services industry experience.
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FRANKLIN LIFESMART 2020 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2015
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) | 12/31/15 | 12/31/14 | Change | |||||
A (FLRMX) | $ | 10.61 | $ | 11.14 | -$ | 0.53 | ||
C (FLRQX) | $ | 10.56 | $ | 11.08 | -$ | 0.52 | ||
R (FLRVX) | $ | 10.59 | $ | 11.12 | -$ | 0.53 | ||
R6 (FRTSX) | $ | 10.64 | $ | 11.15 | -$ | 0.51 | ||
Advisor (FLROX) | $ | 10.63 | $ | 11.15 | -$ | 0.52 | ||
Distributions1 (1/1/15–12/31/15) | ||||||||
Dividend | Short-Term | Long-Term | ||||||
Share Class | Income | Capital Gain | Capital Gain | Total | ||||
A | $ | 0.1919 | $ | 0.0035 | $ | 0.0999 | $ | 0.2953 |
C | $ | 0.1196 | $ | 0.0035 | $ | 0.0999 | $ | 0.2230 |
R | $ | 0.1739 | $ | 0.0035 | $ | 0.0999 | $ | 0.2773 |
R6 | $ | 0.2234 | $ | 0.0035 | $ | 0.0999 | $ | 0.3268 |
Advisor | $ | 0.2183 | $ | 0.0035 | $ | 0.0999 | $ | 0.3217 |
See page 21 for Performance Summary footnotes.
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FRANKLIN LIFESMART 2020 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Performance as of 12/31/152
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 Expenses6 | |||||||
Share Class | Total Return3 | Total Return4 | $ | 10,000 Investment5 | (with waiver) | (without waiver) | ||||
A | 1.00 | % | 2.90 | % | ||||||
1-Year | -2.18 | % | -7.80 | % | $ | 9,220 | ||||
Since Inception (7/1/13) | +13.51 | % | +2.73 | % | $ | 10,698 | ||||
C | 1.70 | % | 3.60 | % | ||||||
1-Year | -2.84 | % | -3.79 | % | $ | 9,621 | ||||
Since Inception (7/1/13) | +11.42 | % | +4.42 | % | $ | 11,142 | ||||
R | 1.20 | % | 3.10 | % | ||||||
1-Year | -2.35 | % | -2.35 | % | $ | 9,765 | ||||
Since Inception (7/1/13) | +12.86 | % | +4.96 | % | $ | 11,286 | ||||
R6 | 0.65 | % | 2.46 | % | ||||||
1-Year | -1.80 | % | -1.80 | % | $ | 9,820 | ||||
Since Inception (7/1/13) | +14.44 | % | +5.54 | % | $ | 11,444 | ||||
Advisor | 0.70 | % | 2.60 | % | ||||||
1-Year | -1.85 | % | -1.85 | % | $ | 9,815 | ||||
Since Inception (7/1/13) | +14.30 | % | +5.49 | % | $ | 11,430 |
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.
See page 21 for Performance Summary footnotes.
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FRANKLIN LIFESMART 2020 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2
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/0001022804-16-000131/rtf_a0216x20x1.jpg)
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FRANKLIN LIFESMART 2020 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x21x1.jpg)
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FRANKLIN LIFESMART 2020 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x22x1.jpg)
The Fund’s investment risk changes over time as its asset allocation changes. The Fund’s ability to achieve its investment goal depends upon the investment manager’s skill in determining the Fund’s broad asset allocation mix and selecting underlying funds. There is the possibility that the investment manager’s evaluations and assumptions regarding asset classes and underlying funds will not successfully achieve the Fund’s investment goal in view of actual market trends. 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. The Fund’s investment in ETFs may subject the Fund to additional risks than if the Fund had invested directly in the ETFs’ underlying securities. 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, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as the 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. Derivatives, including currency management strategies, involve costs and can create economic leverage in the portfolio, which may result in significant volatility and cause the Fund to participate in losses (as well as gains) in an amount that exceeds the Fund’s initial investment. These risks are described more fully in, and additional 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, retirement time horizons and risk tolerance.
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 distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income and capital
gain.
2. The Fund has an expense reduction contractually guaranteed through at least 4/30/16 and a fee waiver associated with any investment in a Franklin Templeton money fund,
contractually guaranteed through at least its current fiscal year-end. The transfer agent has contractually agreed to cap transfer agency fees for Class R6 shares so that transfer
agency fees for that class do not exceed 0.01% until at least 4/30/16. Fund investment results reflect the expense reduction, fee waiver and fee cap, to the extent applicable;
without these reductions, the results would have been lower. As of October 2013, 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.
3. Cumulative total return represents the change in value of an investment over the periods indicated.
4. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been
annualized.
5. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
6. Figures are as stated in the Fund’s current prospectus and include the effect of acquired fund fees and expenses. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become higher than the figures shown.
7. Source: Morningstar. 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.
8. Source: Payden & Rygel. The P&R 90 Day U.S. 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.
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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, distribution 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.
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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 7/1/15 | Value 12/31/15 | 7/1/15–12/31/15 | 7/1/15–12/31/15 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 956.00 | $ | 1.53 | $ | 5.08 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.64 | $ | 1.58 | $ | 5.24 |
C | ||||||||
Actual | $ | 1,000 | $ | 951.90 | $ | 5.17 | $ | 8.71 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.91 | $ | 5.35 | $ | 9.00 |
R | ||||||||
Actual | $ | 1,000 | $ | 955.10 | $ | 2.71 | $ | 6.26 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.43 | $ | 2.80 | $ | 6.46 |
R6 | ||||||||
Actual | $ | 1,000 | $ | 957.60 | $ | 0.00 | $ | 3.55 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,025.21 | $ | 0.00 | $ | 3.67 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 957.30 | $ | 0.25 | $ | 3.80 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,024.95 | $ | 0.26 | $ | 3.92 |
*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: 0.31%; 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: 1.03%; C: 1.77%; R: 1.27%; R6: 0.72%; Advisor: 0.77%), multiplied by average account value over the period, multiplied by 184/365 to reflect the one-half year period.
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Franklin LifeSmart 2025 Retirement Target Fund
This annual report for Franklin LifeSmart 2025 Retirement Target Fund covers the fiscal year ended December 31, 2015.
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, fixed income and alternative (non-traditional) investments by investing primarily 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. The target date is the approximate retirement year of the investor.
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x25x1.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 had a -2.08% cumulative total return for the 12 months ended December 31, 2015. In comparison, the Fund’s equity benchmark, the MSCI All Country World Index (ACWI), which measures equity market performance in global developed and emerging markets, returned -1.84%.1 The Fund’s fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, had a -3.29% total return.1 The Payden & Rygel (P&R) 90 Day U.S. T-Bill Index, a proxy for short-term investments and other net assets, returned +0.03%.2 The Fund changed its benchmarks at the beginning of 2015 to the MSCI ACWI and Barclays Multiverse Index and added the P&R 90 Day U.S. T-Bill Index because the Fund’s investment manager believes the compositions of the new indexes better reflect the Fund’s holdings. You can find the Fund’s long-term performance data in the Performance Summary beginning on page 27.
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.
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 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, including alternative investment funds, 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 Fund in the same fund investments but will vary the fund investments’ allocation percentages based upon each Fund’s risk/return level. We change the Fund’s target asset allocations over time, reducing its exposure to equity investments, and it becomes increasingly conservative until the stated target date. At the “landing point” (reached at the target date), the Fund reaches its most conservative asset allocation and thereafter, such strategic asset allocation will become fixed.
1. 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 113.
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FRANKLIN LIFESMART 2025 RETIREMENT TARGET FUND
Top 10 Fund Holdings | ||
12/31/15 | ||
% of Total | ||
Net Assets | ||
Templeton Global Total Return Fund – Class R6 | 10.4 | % |
Franklin Low Duration Total Return Fund – Class R6 | 7.7 | % |
Franklin Focused Core Equity Fund – Class R6 | 7.4 | % |
Franklin Growth Fund – Class R6 | 6.6 | % |
Franklin International Small Cap Growth Fund – | ||
Class R6 | 6.1 | % |
Franklin DynaTech Fund – Class R6 | 6.0 | % |
Franklin K2 Alternative Strategies Fund – Class R6 | 5.9 | % |
iShares Core MSCI Emerging Markets ETF | 4.9 | % |
Franklin Mutual International Fund – Class R6 | 4.7 | % |
Franklin Rising Dividends Fund – Class R6 | 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 target date associated with the portfolio.
At period-end, Franklin LifeSmart 2025 Retirement Target Fund allocated 66.8% of total net assets to equity, 23.3% to fixed income and 7.9% to alternative strategies. Domestic equity exposure was 54.9% 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, 2015, we held shares in large-, mid- and small-capitalization equity funds, representing both growth and value styles. Franklin Focused Core Equity Fund – Class R6, at 7.4% of the Fund’s total net assets, was our largest equity fund weighting at period-end. On the fixed income side, domestic exposure was 49.4% 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 10.4% of total net assets.
Our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest foreign equity fund holding, Franklin International Small Cap Growth Fund – Class R6, outperformed the MSCI ACWI, while our largest domestic value fund holding, Franklin Rising Dividends Fund –Class R6, underperformed the index. On the fixed income side, Templeton Global Total Return Fund – Class R6 underper-formed the Barclays Multiverse Index, while Franklin Low Duration Total Return Fund – Class R6 performed better than the 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/0001022804-16-000131/rtf_a0216x26x1.jpg)
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2015, 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.
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FRANKLIN LIFESMART 2025 RETIREMENT TARGET FUND
James D. Macey is a senior vice president for Franklin Templeton Solutions. He is a co-manager on several U.S. fund-of-fund products including Franklin Fund Allocator Series. Prior to joining Franklin Templeton Investments in 2015, Mr. Macey was a portfolio manager at Allianz Global Investors where he was a co-lead manager for their target date and retirement income portfolios and was a portfolio manager for their multi-asset U.S. 529 college-savings plans and mutual funds, including target risk and multi-asset real return. He also led the manager research and due diligence process for their multi-asset U.S. team. Mr. Macey has 15 years of financial services industry experience.
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FRANKLIN LIFESMART 2025 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2015
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) | 12/31/15 | 12/31/14 | Change | |||||
A (FTRTX) | $ | 11.44 | $ | 12.36 | -$ | 0.92 | ||
C (FTTCX) | $ | 11.27 | $ | 12.18 | -$ | 0.91 | ||
R (FRELX) | $ | 11.40 | $ | 12.31 | -$ | 0.91 | ||
R6 (FTLMX) | $ | 11.47 | $ | 12.39 | -$ | 0.92 | ||
Advisor (FLRFX) | $ | 11.46 | $ | 12.38 | -$ | 0.92 | ||
Distributions1 (1/1/15–12/31/15) | ||||||||
Dividend | Short-Term | Long-Term | ||||||
Share Class | Income | Capital Gain | Capital Gain | Total | ||||
A | $ | 0.1894 | $ | 0.0108 | $ | 0.4758 | $ | 0.6760 |
C | $ | 0.1046 | $ | 0.0108 | $ | 0.4758 | $ | 0.5912 |
R | $ | 0.1656 | $ | 0.0108 | $ | 0.4758 | $ | 0.6522 |
R6 | $ | 0.2289 | $ | 0.0108 | $ | 0.4758 | $ | 0.7155 |
Advisor | $ | 0.2220 | $ | 0.0108 | $ | 0.4758 | $ | 0.7086 |
See page 31 for Performance Summary footnotes.
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FRANKLIN LIFESMART 2025 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Performance as of 12/31/152
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 Expenses6 | |||||||
Share Class | Total Return3 | Total Return4 | $ | 10,000 Investment5 | (with waiver) | (without waiver) | ||||
A | 1.01 | % | 1.49 | % | ||||||
1-Year | -2.08 | % | -7.68 | % | $ | 9,232 | ||||
5-Year | +31.62 | % | +4.41 | % | $ | 12,409 | ||||
Since Inception (8/1/06) | +62.37 | % | +4.62 | % | $ | 15,304 | ||||
C | 1.71 | % | 2.19 | % | ||||||
1-Year | -2.74 | % | -3.67 | % | $ | 9,633 | ||||
5-Year | +27.07 | % | +4.91 | % | $ | 12,707 | ||||
Since Inception (8/1/06) | +52.08 | % | +4.55 | % | $ | 15,208 | ||||
R | 1.21 | % | 1.69 | % | ||||||
1-Year | -2.20 | % | -2.20 | % | $ | 9,780 | ||||
5-Year | +30.30 | % | +5.44 | % | $ | 13,030 | ||||
Since Inception (8/1/06) | +59.41 | % | +5.08 | % | $ | 15,941 | ||||
R6 | 0.66 | % | 1.05 | % | ||||||
1-Year | -1.74 | % | -1.74 | % | $ | 9,826 | ||||
Since Inception (5/1/13) | +17.22 | % | +6.14 | % | $ | 11,722 | ||||
Advisor | 0.71 | % | 1.19 | % | ||||||
1-Year | -1.80 | % | -1.80 | % | $ | 9,820 | ||||
5-Year | +33.44 | % | +5.94 | % | $ | 13,344 | ||||
Since Inception (8/1/06) | +66.79 | % | +5.58 | % | $ | 16,679 |
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.
See page 31 for Performance Summary footnotes.
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FRANKLIN LIFESMART 2025 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2
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/0001022804-16-000131/rtf_a0216x30x1.jpg)
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FRANKLIN LIFESMART 2025 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x31x1.jpg)
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FRANKLIN LIFESMART 2025 RETIREMENT TARGET FUND PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x32x1.jpg)
The Fund’s investment risk changes over time as its asset allocation changes. The Fund’s ability to achieve its investment goal depends upon the investment manager’s skill in determining the Fund’s broad asset allocation mix and selecting underlying funds. There is the possibility that the investment manager’s evaluations and assumptions regarding asset classes and underlying funds will not successfully achieve the Fund’s investment goal in view of actual market trends. 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. The Fund’s investment in ETFs may subject the Fund to additional risks than if the Fund had invested directly in the ETFs’ underlying securities. 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, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as the 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. Derivatives, including currency management strategies, involve costs and can create economic leverage in the portfolio, which may result in significant volatility and cause the Fund to participate in losses (as well as gains) in an amount that exceeds the Fund’s initial investment. These risks are described more fully in, and additional 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, retirement time horizons and risk tolerance.
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 distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income and capital
gain.
2. The Fund has an expense reduction contractually guaranteed through at least 4/30/16 and a fee waiver associated with any investment in a Franklin Templeton money fund,
contractually guaranteed through at least its current fiscal year-end. The transfer agent has contractually agreed to cap transfer agency fees for Class R6 shares so that transfer
agency fees for that class do not exceed 0.01% until at least 4/30/16. Fund investment results reflect the expense reduction, fee waiver and fee cap, to the extent applicable;
without these reductions, the results would have been lower. As of October 2013, 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.
3. Cumulative total return represents the change in value of an investment over the periods indicated.
4. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been
annualized.
5. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
6. Figures are as stated in the Fund’s current prospectus and include the effect of acquired fund fees and expenses. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become higher than the figures shown.
7. Source: Morningstar. 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.
8. Source: Payden & Rygel. The P&R 90 Day U.S. 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
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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, distribution 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.
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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 7/1/15 | Value 12/31/15 | 7/1/15–12/31/15 | 7/1/15–12/31/15 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 951.40 | $ | 1.52 | $ | 5.12 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.64 | $ | 1.58 | $ | 5.30 |
C | ||||||||
Actual | $ | 1,000 | $ | 948.30 | $ | 5.16 | $ | 8.74 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.91 | $ | 5.35 | $ | 9.05 |
R | ||||||||
Actual | $ | 1,000 | $ | 951.70 | $ | 2.71 | $ | 6.30 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.43 | $ | 2.80 | $ | 6.51 |
R6 | ||||||||
Actual | $ | 1,000 | $ | 953.30 | $ | 0.00 | $ | 3.59 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,025.21 | $ | 0.00 | $ | 3.72 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 952.70 | $ | 0.25 | $ | 3.84 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,024.95 | $ | 0.26 | $ | 3.97 |
*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: 0.31%; 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: 1.04%; C: 1.78%; R: 1.28%; R6: 0.73%; and Advisor: 0.78%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year
period.
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Franklin LifeSmart 2030 Retirement Target Fund
This annual report for Franklin LifeSmart 2030 Retirement Target Fund covers the fiscal year ended December 31, 2015.
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, fixed income and alternative (non-traditional) investments by investing primarily 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.
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x35x1.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 had a -1.75% cumulative total return for the 12 months ended December 31, 2015. In comparison, the Fund’s equity benchmark, the MSCI All Country World Index (ACWI), which measures equity market performance in global developed and emerging markets, returned -1.84%.1 The Fund’s fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, had a -3.29% total return.1 The Payden & Rygel (P&R) Day U.S. T-Bill Index, a proxy for short-term investments and other net assets, returned +0.03%.2 The Fund changed its benchmarks at the beginning of 2015 to the MSCI ACWI and Barclays Multiverse Index and added the P&R 90 Day U.S. T-Bill Index because the Fund’s investment manager believes the compositions of the new indexes better reflect the Fund’s holdings. You can find more of the Fund’s performance data in the Performance Summary beginning on page 37.
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.
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 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, including alternative investment funds, 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 Fund in the same fund investments but will vary the fund investments’ allocation percentages based upon each Fund’s risk/return level. We change the Fund’s target asset allocations over time, reducing its exposure to equity investments, and it becomes increasingly conservative until the stated target date. At the “landing point” (reached at the target date), the Fund reaches its most conservative asset allocation and thereafter, such strategic asset allocation will become fixed.
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
1. 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 120.
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FRANKLIN LIFESMART 2030 RETIREMENT TARGET FUND
Top 10 Fund Holdings | ||
12/31/15 | ||
% of Total | ||
Net Assets | ||
Franklin Growth Fund – Class R6 | 8.6 | % |
Franklin Focused Core Equity Fund – Class R6 | 8.2 | % |
Franklin International Small Cap Growth Fund – | ||
Class R6 | 7.5 | % |
Franklin DynaTech Fund – Class R6 | 7.4 | % |
Templeton Global Total Return Fund – Class R6 | 6.4 | % |
Franklin K2 Alternative Strategies Fund – Class R6 | 6.1 | % |
Franklin Mutual International Fund – Class R6 | 5.3 | % |
Franklin Low Duration Total Return Fund – Class R6 | 5.0 | % |
Franklin Growth Opportunities Fund – Class R6 | 4.6 | % |
Franklin Rising Dividends Fund – Class R6 | 4.4 | % |
shifts every year, in accordance with the retirement date associated with the portfolio.
At period-end, Franklin LifeSmart 2030 Retirement Target Fund allocated 74.3% of total net assets to equity, 14.9% to fixed income and 7.9% to alternative strategies. Domestic equity exposure was 57.6% 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, 2015, we held shares in large-, mid- and small-capitalization equity funds, representing both growth and value styles. Franklin Growth Fund – Class R6, at 8.6% of the Fund’s total net assets, was our largest equity fund weighting at period-end. On the fixed income side, domestic exposure was 51.0% 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 6.4% of total net assets.
Our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest foreign equity fund holding, Franklin International Small Cap Growth Fund – Class R6, outperformed the MSCI ACWI, while our largest domestic value fund holding, Franklin Rising Dividends Fund –Class R6, underperformed the index. On the fixed income side, Templeton Global Total Return Fund – Class R6 underper- formed the Barclays Multiverse Index, while Franklin Low Duration Total Return – Class R6 performed better than the 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/0001022804-16-000131/rtf_a0216x36x1.jpg)
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2015, 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.
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FRANKLIN LIFESMART 2030 RETIREMENT TARGET FUND
James D. Macey is a senior vice president for Franklin Templeton Solutions. He is a co-manager on several U.S. fund-of-fund products including Franklin Fund Allocator Series. Prior to joining Franklin Templeton Investments in 2015, Mr. Macey was a portfolio manager at Allianz Global Investors where he was a co-lead manager for their target date and retirement income portfolios and was a portfolio manager for their multi-asset U.S. 529 college-savings plans and mutual funds, including target risk and multi-asset real return. He also led the manager research and due diligence process for their multi-asset U.S. team. Mr. Macey has 15 years of financial services industry experience.
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FRANKLIN LIFESMART 2030 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2015
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) | 12/31/15 | 12/31/14 | Change | |||||
A (FLRSX) | $ | 10.95 | $ | 11.45 | -$ | 0.50 | ||
C (FLRTX) | $ | 10.86 | $ | 11.38 | -$ | 0.52 | ||
R (FLRWX) | $ | 10.94 | $ | 11.44 | -$ | 0.50 | ||
R6 (FLERX) | $ | 10.99 | $ | 11.47 | -$ | 0.48 | ||
Advisor (FLRZX) | $ | 10.98 | $ | 11.47 | -$ | 0.49 | ||
Distributions1 (1/1/15–12/31/15) | ||||||||
Dividend | Short-Term | Long-Term | ||||||
Share Class | Income | Capital Gain | Capital Gain | Total | ||||
A | $ | 0.1576 | $ | 0.0039 | $ | 0.1489 | $ | 0.3104 |
C | $ | 0.1008 | $ | 0.0039 | $ | 0.1489 | $ | 0.2536 |
R | $ | 0.1412 | $ | 0.0039 | $ | 0.1489 | $ | 0.2940 |
R6 | $ | 0.1833 | $ | 0.0039 | $ | 0.1489 | $ | 0.3361 |
Advisor | $ | 0.1803 | $ | 0.0039 | $ | 0.1489 | $ | 0.3331 |
See page 41 for Performance Summary footnotes.
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FRANKLIN LIFESMART 2030 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Performance as of 12/31/152
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 Expenses6 | |||||||
Share Class | Total Return3 | Total Return4 | $ | 10,000 Investment5 | (with waiver) | (without waiver) | ||||
A | 1.02 | % | 2.95 | % | ||||||
1-Year | -1.75 | % | -7.41 | % | $ | 9,259 | ||||
Since Inception (7/1/13) | +16.05 | % | +3.65 | % | $ | 10,938 | ||||
C | 1.72 | % | 3.65 | % | ||||||
1-Year | -2.43 | % | -3.39 | % | $ | 9,661 | ||||
Since Inception (7/1/13) | +14.10 | % | +5.42 | % | $ | 11,410 | ||||
R | 1.22 | % | 3.15 | % | ||||||
1-Year | -1.89 | % | -1.89 | % | $ | 9,811 | ||||
Since Inception (7/1/13) | +15.44 | % | +5.91 | % | $ | 11,544 | ||||
R6 | 0.67 | % | 2.41 | % | ||||||
1-Year | -1.34 | % | -1.34 | % | $ | 9,866 | ||||
Since Inception (7/1/13) | +17.04 | % | +6.49 | % | $ | 11,704 | ||||
Advisor | 0.72 | % | 2.65 | % | ||||||
1-Year | -1.46 | % | -1.46 | % | $ | 9,854 | ||||
Since Inception (7/1/13) | +16.83 | % | +6.42 | % | $ | 11,683 |
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.
See page 41 for Performance Summary footnotes.
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FRANKLIN LIFESMART 2030 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2
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/0001022804-16-000131/rtf_a0216x40x1.jpg)
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FRANKLIN LIFESMART 2030 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x41x1.jpg)
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FRANKLIN LIFESMART 2030 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x42x1.jpg)
The Fund’s investment risk changes over time as its asset allocation changes. The Fund’s ability to achieve its investment goal depends upon the investment manager’s skill in determining the Fund’s broad asset allocation mix and selecting underlying funds. There is the possibility that the investment manager’s evaluations and assumptions regarding asset classes and underlying funds will not successfully achieve the Fund’s investment goal in view of actual market trends. 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. The Fund’s investment in ETFs may subject the Fund to additional risks than if the Fund had invested directly in the ETFs’ underlying securities. 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, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as the 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. Derivatives, including currency management strategies, involve costs and can create economic leverage in the portfolio, which may result in significant volatility and cause the Fund to participate in losses (as well as gains) in an amount that exceeds the Fund’s initial investment. These risks are described more fully in, and additional 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, retirement time horizons and risk tolerance.
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 distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income and capital
gain.
2. The Fund has an expense reduction contractually guaranteed through at least 4/30/16 and a fee waiver associated with any investment in a Franklin Templeton money fund,
contractually guaranteed through at least its current fiscal year-end. The transfer agent has contractually agreed to cap transfer agency fees for Class R6 shares so that transfer
agency fees for that class do not exceed 0.01% until at least 4/30/16. Fund investment results reflect the expense reduction, fee waiver and fee cap, to the extent applicable;
without these reductions, the results would have been lower. As of October 2013, 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.
3. Cumulative total return represents the change in value of an investment over the periods indicated.
4. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been
annualized.
5. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
6. Figures are as stated in the Fund’s current prospectus and include the effect of acquired fund fees and expenses. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become higher than the figures shown.
7. Source: Morningstar. 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.
8. Source: Payden & Rygel. The P&R 90 Day U.S. 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.
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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, distribution 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.
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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 7/1/15 | Value 12/31/15 | 7/1/15–12/31/15 | 7/1/15–12/31/15 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 953.90 | $ | 1.53 | $ | 5.22 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.64 | $ | 1.58 | $ | 5.40 |
C | ||||||||
Actual | $ | 1,000 | $ | 950.10 | $ | 5.16 | $ | 8.85 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.91 | $ | 5.35 | $ | 9.15 |
R | ||||||||
Actual | $ | 1,000 | $ | 953.00 | $ | 2.71 | $ | 6.40 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.43 | $ | 2.80 | $ | 6.61 |
R6 | ||||||||
Actual | $ | 1,000 | $ | 955.80 | $ | 0.00 | $ | 3.70 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,025.21 | $ | 0.00 | $ | 3.82 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 955.70 | $ | 0.25 | $ | 3.94 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,024.95 | $ | 0.26 | $ | 4.08 |
*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: 0.31%; 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: 1.06%; C: 1.80%; R: 1.30%; R6: 0.75%; and Advisor: 0.80%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year
period.
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Franklin LifeSmart 2035 Retirement Target Fund
This annual report for Franklin LifeSmart 2035 Retirement Target Fund covers the fiscal year ended December 31, 2015.
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, fixed income and alternative (non-traditional) investments by investing primarily 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.
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x45x1.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 market conditions.
Performance Overview
The Fund’s Class A shares had a -2.00% cumulative total return for the 12 months ended December 31, 2015. In comparison, the Fund’s equity benchmark, the MSCI All Country World Index (ACWI), which measures equity market performance in global developed and emerging markets, returned -1.84%.1 The Fund’s fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, had a -3.29% total return.1 The Payden & Rygel (P&R) 90 Day U.S. T-Bill Index, a proxy for short-term investments and other net assets, returned +0.03%.2 The Fund changed its benchmarks at the beginning of 2015 to the MSCI ACWI and Barclays Multiverse Index and added the P&R 90 Day U.S. T-Bill Index because the Fund’s investment manager believes the compositions of the new indexes better reflect the Fund’s holdings. You can find the Fund’s long-term performance data in the Performance Summary beginning on page 47.
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.
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 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, including alternative investment funds, 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 Fund in the same fund investments but will vary the fund investments’ allocation percentages based upon each Fund’s risk/return level. We change the Fund’s target asset allocations over time, reducing its exposure to equity investments, and it becomes increasingly conservative until the stated target date. At the “landing point” (reached at the target date), the Fund reaches its most conservative asset allocation and thereafter, such strategic asset allocation will become fixed.
1. 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 127.
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FRANKLIN LIFESMART 2035 RETIREMENT TARGET FUND
Top 10 Fund Holdings | ||
12/31/15 | ||
% of Total | ||
Net Assets | ||
Franklin Focused Core Equity Fund – Class R6 | 8.9 | % |
Franklin Growth Fund – Class R6 | 8.2 | % |
Franklin DynaTech Fund – Class R6 | 7.8 | % |
Franklin International Small Cap Growth Fund – | ||
Class R6 | 7.3 | % |
Franklin K2 Alternative Strategies Fund – Class R6 | 6.1 | % |
iShares Core MSCI Emerging Markets ETF | 5.6 | % |
Franklin Mutual International Fund – Class R6 | 5.5 | % |
Franklin Rising Dividends Fund – Class R6 | 5.2 | % |
Franklin Growth Opportunities Fund – Class R6 | 4.5 | % |
Templeton Global Total Return 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 target date associated with the portfolio.
At period-end, Franklin LifeSmart 2035 Retirement Target Fund allocated 79.7% of total net assets to equity, 9.8% to fixed income and 8.0% to alternative strategies. Domestic equity exposure was 56.5% 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, 2015, we held shares in large-, mid- and small-capitalization equity funds, representing both growth and value styles. Franklin Focused Core Equity Fund – Class R6, at 8.9% of the Fund’s total net assets, was our largest equity fund weighting at period-end. On the fixed income side, domestic exposure was 51.0% 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 4.2% of total net assets.
Our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest foreign equity fund holding, Franklin International Small Cap Growth Fund – Class R6, outperformed the MSCI ACWI, while our largest domestic value fund holding, Franklin Rising Dividends Fund –Class R6, underperformed the index. On the fixed income side, Templeton Global Total Return Fund – Class R underper-formed 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/0001022804-16-000131/rtf_a0216x46x1.jpg)
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2015, 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.
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FRANKLIN LIFESMART 2035 RETIREMENT TARGET FUND
James D. Macey is a senior vice president for Franklin Templeton Solutions. He is a co-manager on several U.S. fund-of-fund products including Franklin Fund Allocator Series. Prior to joining Franklin Templeton Investments in 2015, Mr. Macey was a portfolio manager at Allianz Global Investors where he was a co-lead manager for their target date and retirement income portfolios and was a portfolio manager for their multi-asset U.S. 529 college-savings plans and mutual funds, including target risk and multi-asset real return. He also led the manager research and due diligence process for their multi-asset U.S. team. Mr. Macey has 15 years of financial services industry experience.
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FRANKLIN LIFESMART 2035 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2015
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) | 12/31/15 | 12/31/14 | Change | |||||
A (FRTAX) | $ | 11.78 | $ | 12.67 | -$ | 0.89 | ||
C (FTRCX) | $ | 11.54 | $ | 12.43 | -$ | 0.89 | ||
R (FLRGX) | $ | 11.77 | $ | 12.66 | -$ | 0.89 | ||
R6 (FMTLX) | $ | 11.85 | $ | 12.75 | -$ | 0.90 | ||
Advisor (FLRHX) | $ | 11.86 | $ | 12.75 | -$ | 0.89 | ||
Distributions1 (1/1/15–12/31/15) | ||||||||
Dividend | Short-Term | Long-Term | ||||||
Share Class | Income | Capital Gain | Capital Gain | Total | ||||
A | $ | 0.1819 | $ | 0.0154 | $ | 0.4566 | $ | 0.6539 |
C | $ | 0.0923 | $ | 0.0154 | $ | 0.4566 | $ | 0.5643 |
R | $ | 0.1503 | $ | 0.0154 | $ | 0.4566 | $ | 0.6223 |
R6 | $ | 0.2221 | $ | 0.0154 | $ | 0.4566 | $ | 0.6941 |
Advisor | $ | 0.2114 | $ | 0.0154 | $ | 0.4566 | $ | 0.6834 |
See page 51 for Performance Summary footnotes.
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FRANKLIN LIFESMART 2035 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Performance as of 12/31/152
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 Expenses6 | |||||||
Share Class | Total Return3 | Total Return4 | $ | 10,000 Investment5 | (with waiver) | (without waiver) | ||||
A | 1.02 | % | 1.58 | % | ||||||
1-Year | -2.00 | % | -7.61 | % | $ | 9,239 | ||||
5-Year | +34.42 | % | +4.84 | % | $ | 12,665 | ||||
Since Inception (8/1/06) | +63.61 | % | +4.71 | % | $ | 15,420 | ||||
C | 1.72 | % | 2.28 | % | ||||||
1-Year | -2.76 | % | -3.69 | % | $ | 9,631 | ||||
5-Year | +29.75 | % | +5.35 | % | $ | 12,975 | ||||
Since Inception (8/1/06) | +53.08 | % | +4.63 | % | $ | 15,308 | ||||
R | 1.22 | % | 1.78 | % | ||||||
1-Year | -2.25 | % | -2.25 | % | $ | 9,775 | ||||
5-Year | +33.03 | % | +5.87 | % | $ | 13,303 | ||||
Since Inception (8/1/06) | +60.61 | % | +5.16 | % | $ | 16,061 | ||||
R6 | 0.67 | % | 1.09 | % | ||||||
1-Year | -1.75 | % | -1.75 | % | $ | 9,825 | ||||
Since Inception (5/1/13) | +19.12 | % | +6.78 | % | $ | 11,912 | ||||
Advisor | 0.72 | % | 1.28 | % | ||||||
1-Year | -1.76 | % | -1.76 | % | $ | 9,824 | ||||
5-Year | +36.44 | % | +6.41 | % | $ | 13,644 | ||||
Since Inception (8/1/06) | +68.33 | % | +5.69 | % | $ | 16,833 |
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.
See page 51 for Performance Summary footnotes.
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PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2
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/0001022804-16-000131/rtf_a0216x50x1.jpg)
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FRANKLIN LIFESMART 2035 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x51x1.jpg)
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FRANKLIN LIFESMART 2035 RETIREMENT TARGET FUND PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x52x1.jpg)
The Fund’s investment risk changes over time as its asset allocation changes. The Fund’s ability to achieve its investment goal depends upon the investment manager’s skill in determining the Fund’s broad asset allocation mix and selecting underlying funds. There is the possibility that the investment manager’s evaluations and assumptions regarding asset classes and underlying funds will not successfully achieve the Fund’s investment goal in view of actual market trends. 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. The Fund’s investment in ETFs may subject the Fund to additional risks than if the Fund had invested directly in the ETFs’ underlying securities. 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, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as the 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. Derivatives, including currency management strategies, involve costs and can create economic leverage in the portfolio, which may result in significant volatility and cause the Fund to participate in losses (as well as gains) in an amount that exceeds the Fund’s initial investment. These risks are described more fully in, and additional 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, retirement time horizons and risk tolerance.
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 distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income and capital
gain.
2. The Fund has an expense reduction contractually guaranteed through at least 4/30/16 and a fee waiver associated with any investment in a Franklin Templeton money fund,
contractually guaranteed through at least its current fiscal year-end. The transfer agent has contractually agreed to cap transfer agency fees for Class R6 shares so that transfer
agency fees for that class do not exceed 0.01% until at least 4/30/16. Fund investment results reflect the expense reduction, fee waiver and fee cap, to the extent applicable;
without these reductions, the results would have been lower. As of October 2013, 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.
3. Cumulative total return represents the change in value of an investment over the periods indicated.
4. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been
annualized.
5. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
6. Figures are as stated in the Fund’s current prospectus and include the effect of acquired fund fees and expenses. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become higher than the figures shown.
7. Source: Morningstar. 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.
8. Source: Payden & Rygel. The P&R 90 Day U.S. 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.
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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, distribution 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.
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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 7/1/15 | Value 12/31/15 | 7/1/15–12/31/15 | 7/1/15–12/31/15 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 950.70 | $ | 1.52 | $ | 5.16 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.64 | $ | 1.58 | $ | 5.35 |
C | ||||||||
Actual | $ | 1,000 | $ | 946.40 | $ | 5.15 | $ | 8.78 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.91 | $ | 5.35 | $ | 9.10 |
R | ||||||||
Actual | $ | 1,000 | $ | 948.90 | $ | 2.70 | $ | 6.34 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.43 | $ | 2.80 | $ | 6.56 |
R6 | ||||||||
Actual | $ | 1,000 | $ | 951.80 | $ | 0.00 | $ | 3.64 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,025.21 | $ | 0.00 | $ | 3.77 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 951.00 | $ | 0.25 | $ | 3.88 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,024.95 | $ | 0.26 | $ | 4.02 |
*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: 0.31%; 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: 1.05%; C: 1.79%; R: 1.29%; R6: 0.74%; and Advisor: 0.79%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year
period.
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Franklin LifeSmart 2040 Retirement Target Fund
This annual report for Franklin LifeSmart 2040 Retirement Target Fund covers the fiscal year ended December 31, 2015.
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, fixed income and alternative (non-traditional) investments by investing primarily 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.
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x55x1.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 had a -1.94% cumulative total return for the 12 months ended December 31, 2015. In comparison, the Fund’s equity benchmark, the MSCI All Country World Index (ACWI), which measures equity market performance in global developed and emerging markets, returned -1.84%.1 The Fund’s fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, had a -3.29% total return.1 The Payden & Rygel (P&R) Day U.S. T-Bill Index, a proxy for short-term investments and other net assets, returned +0.03%.2 The Fund changed its benchmarks at the beginning of 2015 to the MSCI ACWI and Barclays Multiverse Index and added the P&R 90 Day U.S. T-Bill Index because the Fund’s investment manager believes the compositions of the new indexes better reflect the Fund’s holdings. You can find more of the Fund’s performance data in the Performance Summary beginning on page 57.
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.
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 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, including alternative investment funds, 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 Fund in the same fund investments but will vary the fund investments’ allocation percentages based upon each Fund’s risk/return level. We change the Fund’s target asset allocations over time, reducing its exposure to equity investments, and it becomes increasingly conservative until the stated target date. At the “landing point” (reached at the target date), the Fund reaches its most conservative asset allocation and thereafter, such strategic asset allocation will become fixed.
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
1. 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 134
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Top 10 Fund Holdings | ||
12/31/15 | ||
% of Total | ||
Net Assets | ||
Franklin Focused Core Equity Fund – Class R6 | 9.4 | % |
Franklin Growth Fund – Class R6 | 9.4 | % |
Franklin DynaTech Fund – Class R6 | 8.2 | % |
Franklin International Small Cap Growth Fund – | ||
Class R6 | 7.9 | % |
Franklin Mutual International Fund – Class R6 | 6.1 | % |
Franklin K2 Alternative Strategies Fund – Class R6 | 6.0 | % |
Franklin Growth Opportunities Fund – Class R6 | 4.9 | % |
iShares Core MSCI Emerging Markets ETF | 4.6 | % |
Franklin Rising Dividends Fund – Class R6 | 4.3 | % |
Templeton Global Total Return Fund – Class R6 | 3.5 | % |
shifts every year, in accordance with the target date associated with the portfolio.
At period-end, Franklin LifeSmart 2040 Retirement Target Fund allocated 81.1% of total net assets to equity, 8.1% to fixed income and 7.8% to alternative strategies. Domestic equity exposure was 56.8% 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, 2015, we held shares in large-, mid- and small capitalization equity funds, representing both growth and value styles. Franklin Focused Core Equity Fund – Class R6, at 9.4% of the Fund’s total net assets, was our largest equity fund weighting at period-end. On the fixed income side, domestic exposure was 50.6% 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 3.5% of total net assets.
Our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest foreign equity fund holding, Franklin International Small Cap Growth Fund – Class R6, outperformed the MSCI ACWI, while our largest domestic value fund holding, Franklin Rising Dividends Fund –Class R6, underperformed the index. On the fixed income side, Templeton Global Total Return Fund – Class R6 underper-formed 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/0001022804-16-000131/rtf_a0216x56x1.jpg)
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2015, 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.
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FRANKLIN LIFESMART 2040 RETIREMENT TARGET FUND
James D. Macey is a senior vice president for Franklin Templeton Solutions. He is a co-manager on several U.S. fund-of-fund products including Franklin Fund Allocator Series. Prior to joining Franklin Templeton Investments in 2015, Mr. Macey was a portfolio manager at Allianz Global Investors where he was a co-lead manager for their target date and retirement income portfolios and was a portfolio manager for their multi-asset U.S. 529 college-savings plans and mutual funds, including target risk and multi-asset real return. He also led the manager research and due diligence process for their multi-asset U.S. team. Mr. Macey has 15 years of financial services industry experience.
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FRANKLIN LIFESMART 2040 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2015
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) | 12/31/15 | 12/31/14 | Change | |||||
A (FLADX) | $ | 11.06 | $ | 11.58 | -$ | 0.52 | ||
C (FLOLX) | $ | 10.97 | $ | 11.52 | -$ | 0.55 | ||
R (FLSGX) | $ | 11.05 | $ | 11.58 | -$ | 0.53 | ||
R6 (FLREX) | $ | 11.10 | $ | 11.61 | -$ | 0.51 | ||
Advisor (FLSHX) | $ | 11.09 | $ | 11.61 | -$ | 0.52 | ||
Distributions1 (1/1/15–12/31/15) | ||||||||
Dividend | Short-Term | Long-Term | ||||||
Share Class | Income | Capital Gain | Capital Gain | Total | ||||
A | $ | 0.1511 | $ | 0.0066 | $ | 0.1482 | $ | 0.3059 |
C | $ | 0.1002 | $ | 0.0066 | $ | 0.1482 | $ | 0.2550 |
R | $ | 0.1381 | $ | 0.0066 | $ | 0.1482 | $ | 0.2929 |
R6 | $ | 0.1777 | $ | 0.0066 | $ | 0.1482 | $ | 0.3325 |
Advisor | $ | 0.1761 | $ | 0.0066 | $ | 0.1482 | $ | 0.3309 |
See page 61 for Performance Summary footnotes.
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FRANKLIN LIFESMART 2040 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Performance as of 12/31/152
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 Expenses6 | |||||||
Share Class | Total Return3 | Total Return4 | $ | 10,000 Investment5 | (with waiver) | (without waiver) | ||||
A | 1.02 | % | 3.92 | % | ||||||
1-Year | -1.94 | % | -7.61 | % | $ | 9,239 | ||||
Since Inception (7/1/13) | +16.99 | % | +3.98 | % | $ | 11,027 | ||||
C | 1.72 | % | 4.62 | % | ||||||
1-Year | -2.66 | % | -3.61 | % | $ | 9,639 | ||||
Since Inception (7/1/13) | +14.98 | % | +5.74 | % | $ | 11,498 | ||||
R | 1.22 | % | 4.12 | % | ||||||
1-Year | -2.14 | % | -2.14 | % | $ | 9,786 | ||||
Since Inception (7/1/13) | +16.44 | % | +6.27 | % | $ | 11,644 | ||||
R6 | 0.67 | % | 3.22 | % | ||||||
1-Year | -1.62 | % | -1.62 | % | $ | 9,838 | ||||
Since Inception (7/1/13) | +18.05 | % | +6.86 | % | $ | 11,805 | ||||
Advisor | 0.72 | % | 3.62 | % | ||||||
1-Year | -1.72 | % | -1.72 | % | $ | 9,828 | ||||
Since Inception (7/1/13) | +17.85 | % | +6.79 | % | $ | 11,785 |
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.
See page 61 for Performance Summary footnotes.
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PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2
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/0001022804-16-000131/rtf_a0216x60x1.jpg)
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FRANKLIN LIFESMART 2040 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
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FRANKLIN LIFESMART 2040 RETIREMENT TARGET FUND PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x62x1.jpg)
The Fund’s investment risk changes over time as its asset allocation changes. The Fund’s ability to achieve its investment goal depends upon the investment manager’s skill in determining the Fund’s broad asset allocation mix and selecting underlying funds. There is the possibility that the investment manager’s evaluations and assumptions regarding asset classes and underlying funds will not successfully achieve the Fund’s investment goal in view of actual market trends. 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. The Fund’s investment in ETFs may subject the Fund to additional risks than if the Fund had invested directly in the ETFs’ underlying securities. 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, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as the 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. Derivatives, including currency management strategies, involve costs and can create economic leverage in the portfolio, which may result in significant volatility and cause the Fund to participate in losses (as well as gains) in an amount that exceeds the Fund’s initial investment. These risks are described more fully in, and additional 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, retirement time horizons and risk tolerance.
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 distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income and capital
gain.
2. The Fund has an expense reduction contractually guaranteed through at least 4/30/16 and a fee waiver associated with any investment in a Franklin Templeton money fund,
contractually guaranteed through at least its current fiscal year-end. The transfer agent has contractually agreed to cap transfer agency fees for Class R6 shares so that transfer
agency fees for that class do not exceed 0.01% until at least 4/30/16. Fund investment results reflect the expense reduction, fee waiver and fee cap, to the extent applicable;
without these reductions, the results would have been lower. As of October 2013, 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.
3. Cumulative total return represents the change in value of an investment over the periods indicated.
4. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been
annualized.
5. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
6. Figures are as stated in the Fund’s current prospectus and include the effect of acquired fund fees and expenses. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become higher than the figures shown.
7. Source: Morningstar. 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.
8. Source: Payden & Rygel. The P&R 90 Day U.S. 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.
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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, distribution 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.
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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 7/1/15 | Value 12/31/15 | 7/1/15–12/31/15 | 7/1/15–12/31/15 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 949.10 | $ | 1.52 | $ | 5.26 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.64 | $ | 1.58 | $ | 5.45 |
C | ||||||||
Actual | $ | 1,000 | $ | 946.00 | $ | 5.15 | $ | 8.88 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.91 | $ | 5.35 | $ | 9.20 |
R | ||||||||
Actual | $ | 1,000 | $ | 947.90 | $ | 2.70 | $ | 6.43 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.43 | $ | 2.80 | $ | 6.67 |
R6 | ||||||||
Actual | $ | 1,000 | $ | 950.70 | $ | 0.00 | $ | 3.74 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,025.21 | $ | 0.00 | $ | 3.87 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 950.50 | $ | 0.25 | $ | 3.98 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,024.95 | $ | 0.26 | $ | 4.13 |
*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: 0.31%; 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: 1.07%; C: 1.81%; R: 1.31%; R6: 0.76%; and Advisor: 0.81%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year
period.
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Franklin LifeSmart 2045 Retirement Target Fund
This annual report for Franklin LifeSmart 2045 Retirement Target Fund covers the fiscal year ended December 31, 2015.
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, fixed income and alternative (non-traditional) investments by investing primarily 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.
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x65x1.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 had a -2.17% cumulative total return for the 12 months ended December 31, 2015. In comparison, the Fund’s equity benchmark, the MSCI All Country World Index (ACWI), which measures equity market performance in global developed and emerging markets, returned -1.84%.1 The Fund’s fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, had a -3.29% total return.1 The Payden & Rygel (P&R) 90 Day U.S. T-Bill Index, a proxy for short-term investments and other net assets, returned +0.03%.2 The Fund changed its benchmarks at the beginning of 2015 to the MSCI ACWI and Barclays Multiverse Index and added the P&R 90 Day U.S. T-Bill Index because the Fund’s investment manager believes the compositions of the new indexes better reflect the Fund’s holdings. You can find the Fund’s long-term performance data in the Performance Summary beginning on page 67.
Performance data represent past performance, which does not guarantee future results. Investment return will fluctuate. 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 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, including alternative investment funds, 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 Fund in the same fund investments but will vary the fund investments’ allocation percentages based upon each Fund’s risk/return level. We change the Fund’s target asset allocations over time, reducing its exposure to equity investments, and it becomes increasingly conservative until the stated target date. At the “landing point” (reached at the target date), the Fund reaches its most conservative asset allocation and thereafter, such strategic asset allocation will become fixed.
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 target date associated with the portfolio.
1. 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 141.
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FRANKLIN LIFESMART 2045 RETIREMENT TARGET FUND
Top 10 Fund Holdings | ||
12/31/15 | ||
% of Total | ||
Net Assets | ||
Franklin Focused Core Equity Fund – Class R6 | 9.3 | % |
Franklin Growth Fund – Class R6 | 9.2 | % |
Franklin DynaTech Fund – Class R6 | 8.0 | % |
Franklin International Small Cap Growth Fund – | ||
Class R6 | 7.8 | % |
Franklin K2 Alternative Strategies Fund – Class R6 | 6.0 | % |
Franklin Mutual International Fund – Class R6 | 6.0 | % |
Franklin Rising Dividends Fund – Class R6 | 5.3 | % |
iShares Core MSCI Emerging Markets ETF | 5.1 | % |
Franklin Growth Opportunities Fund – Class R6 | 3.9 | % |
Financial Select Sector SPDR ETF | 3.3 | % |
At period-end, Franklin LifeSmart 2045 Retirement Target Fund allocated 82.8% of total net assets to equity, 6.5% to fixed income and 7.9% to alternative strategies. Domestic equity exposure was 55.9% 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, 2015, we held shares in large-, mid- and small-capitalization equity funds, representing both growth and value styles. Franklin Focused Core Equity Fund – Class R6, at 9.3% of the Fund’s total net assets, was our largest equity fund weighting at period-end. On the fixed income side, domestic exposure was 52.3% 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 2.8% of total net assets.
Our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest foreign equity fund holding, Franklin International Small Cap Growth Fund – Class R6, outperformed the MSCI ACWI, while our largest domestic value fund holding, Franklin Rising Dividends Fund –Class R6, underperformed the index. On the fixed income side, Templeton Global Total Return Fund – Class R6 underper-formed 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.
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FRANKLIN LIFESMART 2045 RETIREMENT TARGET FUND
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2015, 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.
James D. Macey is a senior vice president for Franklin Templeton Solutions. He is a co-manager on several U.S. fund-of-fund products including Franklin Fund Allocator Series. Prior to joining Franklin Templeton Investments in 2015, Mr. Macey was a portfolio manager at Allianz Global Investors where he was a co-lead manager for their target date and retirement income portfolios and was a portfolio manager for their multi-asset U.S. 529 college-savings plans and mutual funds, including target risk and multi-asset real return. He also led the manager research and due diligence process for their multi-asset U.S. team. Mr. Macey has 15 years of financial services industry experience.
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FRANKLIN LIFESMART 2045 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2015
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) | 12/31/15 | 12/31/14 | Change | |||||
A (FTTAX) | $ | 11.75 | $ | 12.70 | -$ | 0.95 | ||
C (FLRIX) | $ | 11.48 | $ | 12.42 | -$ | 0.94 | ||
R (FLRJX) | $ | 11.71 | $ | 12.66 | -$ | 0.95 | ||
R6 (FMLTX) | $ | 11.83 | $ | 12.77 | -$ | 0.94 | ||
Advisor (FLRLX) | $ | 11.83 | $ | 12.76 | -$ | 0.93 | ||
Distributions1 (1/1/15–12/31/15) | ||||||||
Dividend | Short-Term | Long-Term | ||||||
Share Class | Income | Capital Gain | Capital Gain | Total | ||||
A | $ | 0.1733 | $ | 0.0135 | $ | 0.5069 | $ | 0.6937 |
C | $ | 0.0894 | $ | 0.0135 | $ | 0.5069 | $ | 0.6098 |
R | $ | 0.1514 | $ | 0.0135 | $ | 0.5069 | $ | 0.6718 |
R6 | $ | 0.2124 | $ | 0.0135 | $ | 0.5069 | $ | 0.7328 |
Advisor | $ | 0.1960 | $ | 0.0135 | $ | 0.5069 | $ | 0.7164 |
See page 71 for Performance Summary footnotes.
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FRANKLIN LIFESMART 2045 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Performance as of 12/31/152
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 Expenses6 | |||||||
Share Class | Total Return3 | Total Return4 | $ | 10,000 Investment5 | (with waiver) | (without waiver) | ||||
A | 1.02 | % | 1.78 | % | ||||||
1-Year | -2.17 | % | -7.76 | % | $ | 9,224 | ||||
5-Year | +35.82 | % | +5.06 | % | $ | 12,798 | ||||
Since Inception (8/1/06) | +65.46 | % | +4.83 | % | $ | 15,595 | ||||
C | 1.72 | % | 2.48 | % | ||||||
1-Year | -2.82 | % | -3.74 | % | $ | 9,626 | ||||
5-Year | +31.06 | % | +5.56 | % | $ | 13,106 | ||||
Since Inception (8/1/06) | +54.92 | % | +4.76 | % | $ | 15,492 | ||||
R | 1.22 | % | 1.98 | % | ||||||
1-Year | -2.35 | % | -2.35 | % | $ | 9,765 | ||||
5-Year | +34.41 | % | +6.09 | % | $ | 13,441 | ||||
Since Inception (8/1/06) | +62.35 | % | +5.28 | % | $ | 16,235 | ||||
R6 | 0.67 | % | 1.18 | % | ||||||
1-Year | -1.77 | % | -1.77 | % | $ | 9,823 | ||||
Since Inception (5/1/13) | +20.00 | % | +7.07 | % | $ | 12,000 | ||||
Advisor | 0.72 | % | 1.48 | % | ||||||
1-Year | -1.82 | % | -1.82 | % | $ | 9,818 | ||||
5-Year | +37.78 | % | +6.62 | % | $ | 13,778 | ||||
Since Inception (8/1/06) | +70.18 | % | +5.81 | % | $ | 17,018 |
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.
See page 71 for Performance Summary footnotes.
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FRANKLIN LIFESMART 2045 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2
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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FRANKLIN LIFESMART 2045 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
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FRANKLIN LIFESMART 2045 RETIREMENT TARGET FUND PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x72x1.jpg)
The Fund’s investment risk changes over time as its asset allocation changes. The Fund’s ability to achieve its investment goal depends upon the investment manager’s skill in determining the Fund’s broad asset allocation mix and selecting underlying funds. There is the possibility that the investment manager’s evaluations and assumptions regarding asset classes and underlying funds will not successfully achieve the Fund’s investment goal in view of actual market trends. 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. The Fund’s investment in ETFs may subject the Fund to additional risks than if the Fund had invested directly in the ETFs’ underlying securities. 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, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as the 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. Derivatives, including currency management strategies, involve costs and can create economic leverage in the portfolio, which may result in significant volatility and cause the Fund to participate in losses (as well as gains) in an amount that exceeds the Fund’s initial investment. These risks are described more fully in, and additional 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, retirement time horizons and risk tolerance.
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 distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income and capital
gain.
2. The Fund has an expense reduction contractually guaranteed through at least 4/30/16 and a fee waiver associated with any investment in a Franklin Templeton money fund,
contractually guaranteed through at least its current fiscal year-end. The transfer agent has contractually agreed to cap transfer agency fees for Class R6 shares so that transfer
agency fees for that class do not exceed 0.01% until at least 4/30/16. Fund investment results reflect the expense reduction, fee waiver and fee cap, to the extent applicable;
without these reductions, the results would have been lower. As of October 2013, 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.
3. Cumulative total return represents the change in value of an investment over the periods indicated.
4. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been
annualized.
5. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
6. Figures are as stated in the Fund’s current prospectus and include the effect of acquired fund fees and expenses. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become higher than the figures shown.
7. Source: Morningstar. 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.
8. Source: Payden & Rygel. The P&R 90 Day U.S. 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.
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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, distribution 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.
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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 7/1/15 | Value 12/31/15 | 7/1/15–12/31/15 | 7/1/15–12/31/15 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 948.80 | $ | 1.52 | $ | 5.21 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.44 | $ | 1.58 | $ | 5.40 |
C | ||||||||
Actual | $ | 1,000 | $ | 944.80 | $ | 5.15 | $ | 8.82 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.71 | $ | 5.35 | $ | 9.15 |
R | ||||||||
Actual | $ | 1,000 | $ | 947.70 | $ | 2.70 | $ | 6.38 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.28 | $ | 2.80 | $ | 6.61 |
R6 | ||||||||
Actual | $ | 1,000 | $ | 950.70 | $ | 0.00 | $ | 3.69 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,026.16 | $ | 0.00 | $ | 3.82 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 950.10 | $ | 0.25 | $ | 3.93 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,024.70 | $ | 0.26 | $ | 4.08 |
*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: 0.31%; 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: 1.06%; C: 1.80%; R: 1.30%; R6: 0.75%; and Advisor: 0.80%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year
period.
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Franklin LifeSmart 2050 Retirement Target Fund
This annual report for Franklin LifeSmart 2050 Retirement Target Fund covers the fiscal year ended December 31, 2015.
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, fixed income and alternative (non-traditional) investments by investing primarily 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.
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x75x1.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 had a -1.76% cumulative total return for the 12 months ended December 31, 2015. In comparison, the Fund’s equity benchmark, the MSCI All Country World Index (ACWI), which measures equity market performance in global developed and emerging markets, returned -1.84%.1 The Fund’s fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, had a -3.29% total return.1 The Payden & Rygel (P&R) 90 Day U.S. T-Bill Index, a proxy for short-term investments and other net assets, returned +0.03%.2 The Fund changed its benchmarks at the beginning of 2015 to the MSCI ACWI and Barclays Multiverse Index and added the P&R 90 Day U.S. T-Bill Index because the Fund’s investment manager believes the compositions of the new indexes better reflect the Fund’s holdings. You can find more of the Fund’s performance data in the Performance Summary beginning on page 77.
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.
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 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, including alternative investment funds, 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 Fund in the same fund investments but will vary the fund investments’ allocation percentages based upon each Fund’s risk/return level. We change the Fund’s target asset allocations over time, reducing its exposure to equity investments, and it becomes increasingly conservative until the stated target date. At the “landing point” (reached at the target date), the Fund reaches its most conservative asset allocation and thereafter, such strategic asset allocation will become fixed.
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
1. 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 148.
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Top 10 Fund Holdings | ||
12/31/15 | ||
% of Total | ||
Net Assets | ||
Franklin Focused Core Equity Fund – Class R6 | 10.1 | % |
Franklin Growth Fund – Class R6 | 9.9 | % |
Franklin DynaTech Fund – Class R6 | 8.8 | % |
Franklin International Small Cap Growth Fund – | ||
Class R6 | 8.4 | % |
Franklin Mutual International Fund – Class R6 | 6.5 | % |
Franklin K2 Alternative Strategies Fund – Class R6 | 6.1 | % |
Franklin Rising Dividends Fund – Class R6 | 4.9 | % |
iShares Core MSCI Emerging Markets ETF | 4.9 | % |
Franklin Growth Opportunities Fund – Class R6 | 4.2 | % |
Templeton Foreign Fund – Class R6 | 3.6 | % |
shifts every year, in accordance with the retirement date associated with the portfolio.
At period-end, Franklin LifeSmart 2050 Retirement Target Fund allocated 83.8% of total net assets to equity, 5.6% to fixed income and 8.1% to alternative strategies. Domestic equity exposure was 56.7% 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, 2015, we held shares in large-, mid- and small- capitalization equity funds, representing both growth and value styles. Franklin Focused Core Equity Fund – Class R6, at 10.1% of the Fund’s total net assets, was our largest equity fund weighting at period-end. On the fixed income side, domestic exposure was 51.8% 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 2.4% 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 underper-formed 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/0001022804-16-000131/rtf_a0216x76x1.jpg)
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2015, 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.
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FRANKLIN LIFESMART 2050 RETIREMENT TARGET FUND
James D. Macey is a senior vice president for Franklin Templeton Solutions. He is a co-manager on several U.S. fund-of-fund products including Franklin Fund Allocator Series. Prior to joining Franklin Templeton Investments in 2015, Mr. Macey was a portfolio manager at Allianz Global Investors where he was a co-lead manager for their target date and retirement income portfolios and was a portfolio manager for their multi-asset U.S. 529 college-savings plans and mutual funds, including target risk and multi-asset real return. He also led the manager research and due diligence process for their multi-asset U.S. team. Mr. Macey has 15 years of financial services industry experience.
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Performance Summary as of December 31, 2015
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) | 12/31/15 | 12/31/14 | Change | |||||
A (FLSJX) | $ | 11.11 | $ | 11.62 | -$ | 0.51 | ||
C (FLSKX) | $ | 11.07 | $ | 11.56 | -$ | 0.49 | ||
R (FLSNX) | $ | 11.12 | $ | 11.63 | -$ | 0.51 | ||
R6 (FRLEX) | $ | 11.16 | $ | 11.65 | -$ | 0.49 | ||
Advisor (FLSOX) | $ | 11.16 | $ | 11.65 | -$ | 0.49 | ||
Distributions1 (1/1/15–12/31/15) | ||||||||
Dividend | Short-Term | Long-Term | ||||||
Share Class | Income | Capital Gain | Capital Gain | Total | ||||
A | $ | 0.1612 | $ | 0.0052 | $ | 0.1501 | $ | 0.3165 |
C | $ | 0.0685 | $ | 0.0052 | $ | 0.1501 | $ | 0.2238 |
R | $ | 0.1359 | $ | 0.0052 | $ | 0.1501 | $ | 0.2912 |
R6 | $ | 0.1839 | $ | 0.0052 | $ | 0.1501 | $ | 0.3392 |
Advisor | $ | 0.1785 | $ | 0.0052 | $ | 0.1501 | $ | 0.3338 |
See page 81 for Performance Summary footnotes.
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FRANKLIN LIFESMART 2050 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Performance as of 12/31/152
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 Expenses6 | |||||||
Share Class | Total Return3 | Total Return4 | $ | 10,000 Investment5 | (with waiver) | (without waiver) | ||||
A | 1.02 | % | 4.79 | % | ||||||
1-Year | -1.76 | % | -7.42 | % | $ | 9,258 | ||||
Since Inception (7/1/13) | +17.60 | % | +4.20 | % | $ | 11,084 | ||||
C | 1.72 | % | 5.49 | % | ||||||
1-Year | -2.40 | % | -3.35 | % | $ | 9,665 | ||||
Since Inception (7/1/13) | +15.66 | % | +5.99 | % | $ | 11,566 | ||||
R | 1.22 | % | 4.99 | % | ||||||
1-Year | -1.98 | % | -1.98 | % | $ | 9,802 | ||||
Since Inception (7/1/13) | +17.07 | % | +6.50 | % | $ | 11,707 | ||||
R6 | 0.67 | % | 3.89 | % | ||||||
1-Year | -1.39 | % | -1.39 | % | $ | 9,861 | ||||
Since Inception (7/1/13) | +18.70 | % | +7.10 | % | $ | 11,870 | ||||
Advisor | 0.72 | % | 4.49 | % | ||||||
1-Year | -1.43 | % | -1.43 | % | $ | 9,857 | ||||
Since Inception (7/1/13) | +18.58 | % | +7.05 | % | $ | 11,858 |
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.
See page 81 for Performance Summary footnotes.
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PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2
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/0001022804-16-000131/rtf_a0216x80x1.jpg)
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FRANKLIN LIFESMART 2050 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
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PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x82x1.jpg)
The Fund’s investment risk changes over time as its asset allocation changes. The Fund’s ability to achieve its investment goal depends upon the investment manager’s skill in determining the Fund’s broad asset allocation mix and selecting underlying funds. There is the possibility that the investment manager’s evaluations and assumptions regarding asset classes and underlying funds will not successfully achieve the Fund’s investment goal in view of actual market trends. 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. The Fund’s investment in ETFs may subject the Fund to additional risks than if the Fund had invested directly in the ETFs’ underlying securities. 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, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as the 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. Derivatives, including currency management strategies, involve costs and can create economic leverage in the portfolio, which may result in significant volatility and cause the Fund to participate in losses (as well as gains) in an amount that exceeds the Fund’s initial investment. These risks are described more fully in, and additional 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, retirement time horizons and risk tolerance.
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 distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income and capital
gain.
2. The Fund has an expense reduction contractually guaranteed through at least 4/30/16 and a fee waiver associated with any investment in a Franklin Templeton money fund,
contractually guaranteed through at least its current fiscal year-end. The transfer agent has contractually agreed to cap transfer agency fees for Class R6 shares so that transfer
agency fees for that class do not exceed 0.01% until at least 4/30/16. Fund investment results reflect the expense reduction, fee waiver and fee cap, to the extent applicable;
without these reductions, the results would have been lower. As of October 2013, 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.
3. Cumulative total return represents the change in value of an investment over the periods indicated.
4. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, return has not
been annualized.
5. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
6. Figures are as stated in the Fund’s current prospectus and include the effect of acquired fund fees and expenses. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become higher than the figures shown.
7. Source: Morningstar. 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.
8. Source: Payden & Rygel. The P&R 90 Day U.S. 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.
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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, distribution 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.
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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 7/1/15 | Value 12/31/15 | 7/1/15–12/31/15 | 7/1/15–12/31/15 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 951.60 | $ | 1.52 | $ | 5.21 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.64 | $ | 1.58 | $ | 5.40 |
C | ||||||||
Actual | $ | 1,000 | $ | 948.50 | $ | 5.16 | $ | 8.84 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.91 | $ | 5.35 | $ | 9.15 |
R | ||||||||
Actual | $ | 1,000 | $ | 950.30 | $ | 2.70 | $ | 6.39 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.43 | $ | 2.80 | $ | 6.61 |
R6 | ||||||||
Actual | $ | 1,000 | $ | 953.70 | $ | 0.00 | $ | 3.69 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,025.21 | $ | 0.00 | $ | 3.82 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 953.30 | $ | 0.25 | $ | 3.94 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,024.95 | $ | 0.26 | $ | 4.08 |
*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: 0.31%; 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: 1.06%; C: 1.80%; R: 1.30%; R6: 0.75%; and Advisor: 0.80%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year
period.
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Franklin LifeSmart 2055 Retirement Target Fund
This annual report for Franklin LifeSmart 2055 Retirement Target Fund covers the period since inception on May 1, 2015, through December 31, 2015.
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, fixed income and alternative (non-traditional) investments by investing primarily 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 2055 approaches. The target date is the approximate retirement year of the investor.
Asset Allocation*
Based on Total Net Assets as of 12/31/15
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x85x1.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 had a -5.40% cumulative total return since the Fund’s inception date on May 1, 2015. In comparison, the Fund’s equity benchmark, the MSCI All Country World Index (ACWI), which measures equity market performance in global developed and emerging markets, returned -6.92%.1 The Fund’s fixed income benchmark, the Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, had a -2.59% total return.1 The Payden & Rygel (P&R) 90 Day U.S. T-Bill Index, a proxy for short-term investments and other net assets, returned +0.02%.1 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 87.
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.
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 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, including alternative investment funds, 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 Fund in the same fund investments but will vary the fund investments’ allocation percentages based upon each Fund’s risk/return level. We change the Fund’s target asset allocations over time, reducing its exposure to equity investments, and it becomes increasingly conservative until the stated target date. At the “landing point” (reached at the target date), the Fund reaches its most conservative asset allocation and thereafter, such strategic asset allocation will become fixed.
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 target date associated with the portfolio.
At period-end, Franklin LifeSmart 2055 Retirement Target Fund allocated 83.7% of total net assets to equity, 4.8% to
1. 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 155.
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Top 10 Fund Holdings | ||
12/31/15 | ||
% of Total | ||
Net Assets | ||
Franklin Growth Fund – Class R6 | 10.5 | % |
Franklin Focused Core Equity Fund – Class R6 | 10.1 | % |
Franklin DynaTech Fund – Class R6 | 9.4 | % |
Franklin International Small Cap Growth Fund – | ||
Class R6 | 9.2 | % |
Franklin K2 Alternative Strategies Fund – Class R6 | 6.4 | % |
Franklin Mutual International Fund – Class R6 | 5.8 | % |
Franklin Rising Dividends Fund – Class R6 | 5.3 | % |
Franklin Growth Opportunities Fund – Class R6 | 4.5 | % |
Templeton Foreign Fund – Class R6 | 3.9 | % |
iShares Core MSCI Emerging Markets ETF | 3.6 | % |
fixed income and 8.4% to alternative strategies. Domestic equity exposure was 58.1% 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, 2015, we held shares in large-, mid- and small-capitalization equity funds, representing both growth and value styles. Franklin Growth Fund – Class R6, at 10.5% of the Fund’s total net assets, was our largest equity fund weighting at period-end. On the fixed income side, domestic exposure was 52.1% 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 2.1% of total net assets.
Our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest foreign equity fund holding, Franklin International Small Cap Growth Fund – Class R6, outperformed the MSCI ACWI, while our largest domestic value fund holding, Franklin Rising Dividends Fund –Class R6, underperformed the index. On the fixed income side, Templeton Global Total Return Fund – Class R6 underper-formed the Barclays Multiverse Index.
Thank you for your participation in Franklin LifeSmart 2055 Retirement Target Fund. We look forward to serving your future investment needs.
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x86x1.jpg)
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2015, 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.
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FRANKLIN LIFESMART 2055 RETIREMENT TARGET FUND
James D. Macey is a senior vice president for Franklin Templeton Solutions. He is a co-manager on several U.S. fund-of-fund products including Franklin Fund Allocator Series. Prior to joining Franklin Templeton Investments in 2015, Mr. Macey was a portfolio manager at Allianz Global Investors where he was a co-lead manager for their target date and retirement income portfolios and was a portfolio manager for their multi-asset U.S. 529 college-savings plans and mutual funds, including target risk and multi-asset real return. He also led the manager research and due diligence process for their multi-asset U.S. team. Mr. Macey has 15 years of financial services industry experience.
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FRANKLIN LIFESMART 2055 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2015
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 tables 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) | 12/31/15 | 5/1/15 | Change | |||
A (FLTFX) | $ | 9.34 | $ | 10.00 | -$ | 0.66 |
C (FLTNX) | $ | 9.30 | $ | 10.00 | -$ | 0.70 |
R (FLSBX) | $ | 9.33 | $ | 10.00 | -$ | 0.67 |
R6 (FLSZX) | $ | 9.34 | $ | 10.00 | -$ | 0.66 |
Advisor (FLTKX) | $ | 9.35 | $ | 10.00 | -$ | 0.65 |
Distributions1 (5/1/15–12/31/15) | ||||||
Dividend | ||||||
Share Class | Income | |||||
A | $ | 0.1206 | ||||
C | $ | 0.1017 | ||||
R | $ | 0.1091 | ||||
R6 | $ | 0.1271 | ||||
Advisor | $ | 0.1234 |
See page 91 for Performance Summary footnotes.
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FRANKLIN LIFESMART 2055 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Performance as of 12/31/152
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 Expenses6 | |||||||
Share Class | Total Return3 | Total Return4 | $ | 10,000 Investment5 | (with waiver) | (without waiver) | ||||
A | 1.03 | % | 3.11 | % | ||||||
Since Inception (5/1/15) | -5.40 | % | -10.84 | % | $ | 8,916 | ||||
C | 1.73 | % | 3.81 | % | ||||||
Since Inception (5/1/15) | -5.99 | % | -6.92 | % | $ | 9,308 | ||||
R | 1.23 | % | 3.31 | % | ||||||
Since Inception (5/1/15) | -5.61 | % | -5.61 | % | $ | 9,439 | ||||
R6 | 0.68 | % | 2.39 | % | ||||||
Since Inception (5/1/15) | -5.33 | % | -5.33 | % | $ | 9,467 | ||||
Advisor | 0.73 | % | 2.81 | % | ||||||
Since Inception (5/1/15) | -5.37 | % | -5.37 | % | $ | 9,463 |
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.
See page 91 for Performance Summary footnotes.
88 Annual Report
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FRANKLIN LIFESMART 2055 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2
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/0001022804-16-000131/rtf_a0216x90x1.jpg)
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FRANKLIN LIFESMART 2055 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment2 (continued)
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x91x1.jpg)
90 Annual Report
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FRANKLIN LIFESMART 2055 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
![](https://capedge.com/proxy/N-CSR/0001022804-16-000131/rtf_a0216x92x1.jpg)
The Fund’s investment risk changes over time as its asset allocation changes. The Fund’s ability to achieve its investment goal depends upon the investment manager’s skill in determining the Fund’s broad asset allocation mix and selecting underlying funds. There is the possibility that the investment manager’s evaluations and assumptions regarding asset classes and underlying funds will not successfully achieve the Fund’s investment goal in view of actual market trends. 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. The Fund’s investment in ETFs may subject the Fund to additional risks than if the Fund had invested directly in the ETFs’ underlying securities. 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, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as the 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. Derivatives, including currency management strategies, involve costs and can create economic leverage in the portfolio, which may result in significant volatility and cause the Fund to participate in losses (as well as gains) in an amount that exceeds the Fund’s initial investment. These risks are described more fully in, and additional 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, retirement time horizons and risk tolerance.
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 distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income.
2. The Fund has an expense reduction contractually guaranteed through at least 4/30/16 and a fee waiver associated with any investment in a Franklin Templeton money fund,
contractually guaranteed through at least its current fiscal year-end. The transfer agent has contractually agreed to cap transfer agency fees for Class R6 shares so that transfer
agency fees for that class do not exceed 0.01% until at least 4/30/16. Fund investment results reflect the expense reduction, fee waiver and fee cap, to the extent applicable;
without these reductions, the results would have been lower.
3. Cumulative total return represents the change in value of an investment over the periods indicated.
4. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been
annualized.
5. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
6. Figures are as stated in the Fund’s current prospectus and include the effect of acquired fund fees and expenses. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become higher than the figures shown.
7. Source: Morningstar. 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.
8. Source: Payden & Rygel. The P&R 90 Day U.S. 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.
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FRANKLIN LIFESMART 2055 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, distribution 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.
92 Annual Report
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FRANKLIN LIFESMART 2055 RETIREMENT TARGET FUND | ||||||||
YOUR FUND’S EXPENSES | ||||||||
Beginning | Ending | Expenses Paid | Expenses Paid | |||||
Account | Account | During Period* | During Period** | |||||
Share Class | Value 7/1/15 | Value 12/31/15 | 7/1/15–12/31/15 | 7/1/15–12/31/15 | ||||
A | ||||||||
Actual | $ | 1,000 | $ | 956.10 | $ | 0.79 | $ | 4.63 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,024.40 | $ | 0.82 | $ | 4.79 |
C | ||||||||
Actual | $ | 1,000 | $ | 951.10 | $ | 5.16 | $ | 9.00 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.91 | $ | 5.35 | $ | 9.30 |
R | ||||||||
Actual | $ | 1,000 | $ | 953.90 | $ | 2.46 | $ | 6.30 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.68 | $ | 2.55 | $ | 6.51 |
R6 | ||||||||
Actual | $ | 1,000 | $ | 956.70 | $ | 0.00 | $ | 3.85 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,025.21 | $ | 0.00 | $ | 3.97 |
Advisor | ||||||||
Actual | $ | 1,000 | $ | 956.40 | $ | 0.25 | $ | 4.09 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,024.95 | $ | 0.26 | $ | 4.23 |
*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: 0.16%; C: 1.05%; R: 0.50%; 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: 0.94%; C: 1.83%; R: 1.28%; R6: 0.78%; and Advisor: 0.83%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year
period.
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FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
Financial Highlights | |||||||||||||||
Franklin LifeSmart 2015 Retirement Target Fund | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class A | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 11.67 | $ | 12.28 | $ | 11.67 | $ | 10.92 | $ | 11.25 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.26 | 0.39 | 0.25 | 0.24 | 0.24 | ||||||||||
Net realized and unrealized gains (losses) | (0.55 | ) | (0.01 | ) | 1.16 | 0.76 | (0.33 | ) | |||||||
Total from investment operations | (0.29 | ) | 0.38 | 1.41 | 1.00 | (0.09 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.27 | ) | (0.40 | ) | (0.27 | ) | (0.25 | ) | (0.24 | ) | |||||
Net realized gains | (0.33 | ) | (0.59 | ) | (0.53 | ) | — | — | |||||||
Total distributions | (0.60 | ) | (0.99 | ) | (0.80 | ) | (0.25 | ) | (0.24 | ) | |||||
Net asset value, end o fyear. | $ | 10.78 | $ | 11.67 | $ | 12.28 | $ | 11.67 | $ | 10.92 | |||||
Total returnd | (2.59 | )% | 3.07 | % | 12.27 | % | 9.20 | % | (0.82 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 0.92 | % | 0.84 | % | 0.83 | % | 0.71 | % | 0.80 | % | |||||
Expenses net of waiver and payments by affiliatese | 0.33 | % | 0.35 | % | 0.38 | % | 0.45 | % | 0.45 | % | |||||
Net investment incomec | 2.27 | % | 3.20 | % | 2.04 | % | 2.13 | % | 2.09 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 44,823 | $ | 48,121 | $ | 44,347 | $ | 37,507 | $ | 31,073 | |||||
Portfolio turnover rate | 38.48 | % | 68.98 | % | 73.66 | % | 25.12 | % | 31.55 | % |
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’s 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 0.68% for the year ended December 31, 2015.
94 Annual Report | The accompanying notes are an integral part of these financial statements.
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FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin LifeSmart 2015 Retirement Target Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class C | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 11.55 | $ | 12.16 | $ | 11.57 | $ | 10.83 | $ | 11.16 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.18 | 0.30 | 0.16 | 0.16 | 0.16 | ||||||||||
Net realized and unrealized gains (losses) | (0.55 | ) | (0.01 | ) | 1.15 | 0.75 | (0.33 | ) | |||||||
Total from investment operations | (0.37 | ) | 0.29 | 1.31 | 0.91 | (0.17 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.19 | ) | (0.31 | ) | (0.19 | ) | (0.17 | ) | (0.16 | ) | |||||
Net realized gains | (0.33 | ) | (0.59 | ) | (0.53 | ) | — | — | |||||||
Total distributions | (0.52 | ) | (0.90 | ) | (0.72 | ) | (0.17 | ) | (0.16 | ) | |||||
Net asset value, end of year. | $ | 10.66 | $ | 11.55 | $ | 12.16 | $ | 11.57 | $ | 10.83 | |||||
Total returnd | (3.32 | )% | 2.39 | % | 11.46 | % | 8.44 | % | (1.51 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 1.64 | % | 1.54 | % | 1.53 | % | 1.41 | % | 1.50 | % | |||||
Expenses net of waiver and payments by affiliatese | 1.05 | % | 1.05 | % | 1.08 | % | 1.15 | % | 1.15 | % | |||||
Net investment incomec | 1.55 | % | 2.50 | % | 1.34 | % | 1.43 | % | 1.39 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 20,858 | $ | 21,189 | $ | 20,395 | $ | 16,912 | $ | 14,217 | |||||
Portfolio turnover rate | 38.48 | % | 68.98 | % | 73.66 | % | 25.12 | % | 31.55 | % |
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’s 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 0.68% for the year ended December 31, 2015.
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The accompanying notes are an integral part of these financial statements. | Annual Report 95
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin LifeSmart 2015 Retirement Target Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class R | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 11.64 | $ | 12.25 | $ | 11.64 | $ | 10.89 | $ | 11.22 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.25 | 0.36 | 0.22 | 0.22 | 0.21 | ||||||||||
Net realized and unrealized gains (losses) | (0.57 | ) | (—)d | 1.16 | 0.75 | (0.32 | ) | ||||||||
Total from investment operations | (0.32 | ) | 0.36 | 1.38 | 0.97 | (0.11 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.25 | ) | (0.38 | ) | (0.24 | ) | (0.22 | ) | (0.22 | ) | |||||
Net realized gains | (0.33 | ) | (0.59 | ) | (0.53 | ) | — | — | |||||||
Total distributions | (0.58 | ) | (0.97 | ) | (0.77 | ) | (0.22 | ) | (0.22 | ) | |||||
Net asset value, end of year. | $ | 10.74 | $ | 11.64 | $ | 12.25 | $ | 11.64 | $ | 10.89 | |||||
Total return | (2.87 | )% | 2.89 | % | 12.04 | % | 8.96 | % | (1.02 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 1.14 | % | 1.04 | % | 1.03 | % | 0.91 | % | 1.00 | % | |||||
Expenses net of waiver and payments by affiliatese | 0.55 | % | 0.55 | % | 0.58 | % | 0.65 | % | 0.65 | % | |||||
Net investment incomec | 2.05 | % | 3.00 | % | 1.84 | % | 1.93 | % | 1.89 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 4,130 | $ | 2,828 | $ | 2,279 | $ | 1,862 | $ | 1,815 | |||||
Portfolio turnover rate | 38.48 | % | 68.98 | % | 73.66 | % | 25.12 | % | 31.55 | % |
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’s 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 0.68% for the year ended December 31, 2015.
96 Annual Report | The accompanying notes are an integral part of these financial statements.
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FRANKLIN FUND ALLOCATOR SERIES | |||||||||
FINANCIAL HIGHLIGHTS | |||||||||
Franklin LifeSmart 2015 Retirement Target Fund (continued) | |||||||||
Year Ended December 31, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class R6 | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 11.72 | $ | 12.32 | $ | 12.17 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.31 | 0.57 | 0.49 | ||||||
Net realized and unrealized gains (losses) | (0.57 | ) | (0.14 | ) | 0.44 | ||||
Total from investment operations. | (0.26 | ) | 0.43 | 0.93 | |||||
Less distributions from: | |||||||||
Net investment income | (0.31 | ) | (0.44 | ) | (0.25 | ) | |||
Net realized gains | (0.33 | ) | (0.59 | ) | (0.53 | ) | |||
Total distributions | (0.64 | ) | (1.03 | ) | (0.78 | ) | |||
Net asset value, end of year | $ | 10.82 | $ | 11.72 | $ | 12.32 | |||
Total returne | (2.34 | )% | 3.49 | % | 7.78 | % | |||
Ratios to average net assetsf | |||||||||
Expenses before waiver and payments by affiliatesg | 0.53 | % | 0.44 | % | 0.60 | % | |||
Expenses net of waiver and payments by affiliatesg | —% | —% | —% | ||||||
Net investment incomed | 2.60 | % | 3.55 | % | 2.42 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 6,828 | $ | 6,709 | $ | 763 | |||
Portfolio turnover rate | 38.48 | % | 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’s 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 0.68% for the year ended December 31, 2015.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 97
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin LifeSmart 2015 Retirement Target Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Advisor Class | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 11.71 | $ | 12.31 | $ | 11.70 | $ | 10.94 | $ | 11.28 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.25 | 0.43 | 0.29 | 0.28 | 0.26 | ||||||||||
Net realized and unrealized gains (losses) | (0.52 | ) | (—)d | 1.16 | 0.76 | (0.33 | ) | ||||||||
Total from investment operations | (0.27 | ) | 0.43 | 1.45 | 1.04 | (0.07 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income | (0.30 | ) | (0.44 | ) | (0.31 | ) | (0.28 | ) | (0.27 | ) | |||||
Net realized gains | (0.33 | ) | (0.59 | ) | (0.53 | ) | — | — | |||||||
Total distributions | (0.63 | ) | (1.03 | ) | (0.84 | ) | (0.28 | ) | (0.27 | ) | |||||
Net asset value, end of year. | $ | 10.81 | $ | 11.71 | $ | 12.31 | $ | 11.70 | $ | 10.94 | |||||
Total return | (2.40 | )% | 3.45 | % | 12.55 | % | 9.59 | % | (0.61 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 0.64 | % | 0.54 | % | 0.53 | % | 0.41 | % | 0.50 | % | |||||
Expenses net of waiver and payments by affiliatese | 0.05 | % | 0.05 | % | 0.08 | % | 0.15 | % | 0.15 | % | |||||
Net investment incomec | 2.55 | % | 3.50 | % | 2.34 | % | 2.43 | % | 2.39 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 880 | $ | 2,194 | $ | 2,494 | $ | 1,840 | $ | 1,501 | |||||
Portfolio turnover rate | 38.48 | % | 68.98 | % | 73.66 | % | 25.12 | % | 31.55 | % |
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’s 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 0.68% for the year ended December 31, 2015.
98 Annual Report | The accompanying notes are an integral part of these financial statements.
franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2015 | |||
Franklin LifeSmart 2015 Retirement Target Fund | |||
Shares | Value | ||
Investments in Underlying Funds and Exchange Traded Funds 98.2% | |||
Alternative Strategies 8.1% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 451,280 | $ | 4,806,132 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 258,301 | 1,503,310 | |
6,309,442 | |||
Domestic Equity 18.8% | |||
Financial Select Sector SPDR ETF | 40,832 | 970,985 | |
a,bFranklin DynaTech Fund, Class R6 | 51,579 | 2,585,677 | |
aFranklin Focused Core Equity Fund, Class R6 | 197,870 | 2,724,668 | |
aFranklin Growth Fund, Class R6 | 37,001 | 2,714,732 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 42,630 | 1,460,943 | |
aFranklin Real Estate Securities Fund, Class R6 | 15,107 | 340,199 | |
aFranklin Rising Dividends Fund, Class R6 | 23,500 | 1,120,735 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 36,569 | 668,119 | |
aFranklin Utilities Fund, Class R6 | 29,331 | 455,215 | |
iShares S&P 500 Value ETF | 17,486 | 1,548,036 | |
14,589,309 | |||
Domestic Fixed Income 28.3% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 1,452,606 | 14,206,491 | |
aFranklin Short Duration U.S. Government ETF | 11,574 | 1,134,567 | |
aFranklin Strategic Income Fund, Class R6 | 529,280 | 4,848,207 | |
iShares TIPS Bond ETF | 16,072 | 1,762,777 | |
21,952,042 | |||
Foreign Equity 16.4% | |||
Deutsche X-trackers MSCI Europe Hedged Equity ETF | 87,899 | 2,272,189 | |
a,bFranklin India Growth Fund, Class R6 | 72,983 | 889,669 | |
aFranklin International Growth Fund, Class R6 | 61,574 | 658,837 | |
aFranklin International Small Cap Growth Fund, Class R6 | 120,440 | 2,236,571 | |
aFranklin Mutual International Fund, Class R6 | 123,582 | 1,751,154 | |
iShares Core MSCI Emerging Markets ETF | 51,575 | 2,031,539 | |
iShares Global Infrastructure ETF | 16,240 | 583,828 | |
aTempleton Foreign Fund, Class R6 | 124,079 | 779,214 | |
aTempleton Frontier Markets Fund, Class R6 | 54,682 | 570,331 | |
WisdomTree Japan Hedged Equity ETF (Japan) | 18,181 | 910,504 | |
12,683,836 | |||
Foreign Fixed Income 26.6% | |||
aFranklin Emerging Market Debt Opportunities Fund | 261,704 | 2,556,850 | |
aTempleton Global Total Return Fund, Class R6 | 1,571,674 | 18,058,540 | |
20,615,390 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $77,951,354) | 76,150,019 |
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Annual Report
99
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin LifeSmart 2015 Retirement Target Fund (continued) | ||||
Shares | Value | |||
Short Term Investments (Cost $1,579,144) 2.1% | ||||
Money Market Funds 2.1% | ||||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 1,579,144 | $ | 1,579,144 | |
Total Investments in Underlying Funds and Exchange Traded Funds | ||||
(Cost $79,530,498) 100.3% | 77,729,163 | |||
Other Assets, less Liabilities (0.3)% | (210,093 | ) | ||
Net Assets 100.0% | $ | 77,519,070 |
See Abbreviations on page 194.
aSee Note 3f regarding investments in Underlying Funds.
bNon-income producing.
100 Annual Report | The accompanying notes are an integral part of these financial statements.
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FRANKLIN FUND ALLOCATOR SERIES | |||||||||
Financial Highlights | |||||||||
Franklin LifeSmart 2020 Retirement Target Fund | |||||||||
Year Ended December 31, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class A | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 11.14 | $ | 10.94 | $ | 10.00 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.24 | 0.33 | 0.16 | ||||||
Net realized and unrealized gains (losses) | (0.48 | ) | 0.20 | 0.91 | |||||
Total from investment operations. | (0.24 | ) | 0.53 | 1.07 | |||||
Less distributions from: | |||||||||
Net investment income | (0.19 | ) | (0.27 | ) | (0.13 | ) | |||
Net realized gains | (0.10 | ) | (0.06 | ) | (—)e | ||||
Total distributions | (0.29 | ) | (0.33 | ) | (0.13 | ) | |||
Net asset value, end of year | $ | 10.61 | $ | 11.14 | $ | 10.94 | |||
Total returnf | (2.18 | )% | 4.83 | % | 10.69 | % | |||
Ratios to average net assetsg | |||||||||
Expenses before waiver and payments by affiliatesh | 1.05 | % | 2.25 | % | 11.14 | % | |||
Expenses net of waiver and payments by affiliatesh | 0.32 | % | 0.35 | % | 0.24 | % | |||
Net investment incomed | 2.06 | % | 3.20 | % | 3.12 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 19,895 | $ | 7,302 | $ | 2,189 | |||
Portfolio turnover rate | 47.51 | % | 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’s 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 0.72% for the year ended December 31, 2015.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 101
FRANKLIN FUND ALLOCATOR SERIES | |||||||||
FINANCIAL HIGHLIGHTS | |||||||||
Franklin LifeSmart 2020 Retirement Target Fund (continued) | |||||||||
Year Ended December 31, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class C | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 11.08 | $ | 10.90 | $ | 10.00 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.14 | 0.24 | 0.18 | ||||||
Net realized and unrealized gains (losses) | (0.44 | ) | 0.21 | 0.83 | |||||
Total from investment operations. | (0.30 | ) | 0.45 | 1.01 | |||||
Less distributions from: | |||||||||
Net investment income | (0.12 | ) | (0.21 | ) | (0.11 | ) | |||
Net realized gains | (0.10 | ) | (0.06 | ) | (—)e | ||||
Total distributions | (0.22 | ) | (0.27 | ) | (0.11 | ) | |||
Net asset value, end of year | $ | 10.56 | $ | 11.08 | $ | 10.90 | |||
Total returnf | (2.84 | )% | 4.09 | % | 10.16 | % | |||
Ratios to average net assetsg | |||||||||
Expenses before waiver and payments by affiliatesh | 1.78 | % | 2.95 | % | 11.95 | % | |||
Expenses net of waiver and payments by affiliatesh | 1.05 | % | 1.05 | % | 1.05 | % | |||
Net investment incomed | 1.33 | % | 2.50 | % | 2.31 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 5,221 | $ | 2,617 | $ | 250 | |||
Portfolio turnover rate | 47.51 | % | 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’s 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 0.72% for the year ended December 31, 2015.
102 Annual Report | The accompanying notes are an integral part of these financial statements.
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FRANKLIN FUND ALLOCATOR SERIES | |||||||||
FINANCIAL HIGHLIGHTS | |||||||||
Franklin LifeSmart 2020 Retirement Target Fund (continued) | |||||||||
Year Ended December 31, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class R | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 11.12 | $ | 10.93 | $ | 10.00 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.35 | 0.42 | 0.11 | ||||||
Net realized and unrealized gains (losses) | (0.61 | ) | 0.08 | 0.93 | |||||
Total from investment operations. | (0.26 | ) | 0.50 | 1.04 | |||||
Less distributions from: | |||||||||
Net investment income | (0.17 | ) | (0.25 | ) | (0.11 | ) | |||
Net realized gains | (0.10 | ) | (0.06 | ) | (—)e | ||||
Total distributions | (0.27 | ) | (0.31 | ) | (0.11 | ) | |||
Net asset value, end of year | $ | 10.59 | $ | 11.12 | $ | 10.93 | |||
Total returnf | (2.35 | )% | 4.61 | % | 10.48 | % | |||
Ratios to average net assetsg | |||||||||
Expenses before waiver and payments by affiliatesh | 1.28 | % | 2.45 | % | 11.45 | % | |||
Expenses net of waiver and payments by affiliatesh | 0.55 | % | 0.55 | % | 0.55 | % | |||
Net investment incomed | 1.83 | % | 3.00 | % | 2.81 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 3,189 | $ | 80 | $ | 11 | |||
Portfolio turnover rate | 47.51 | % | 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’s 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 0.72% for the year ended December 31, 2015.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 103
FRANKLIN FUND ALLOCATOR SERIES | |||||||||
FINANCIAL HIGHLIGHTS | |||||||||
Franklin LifeSmart 2020 Retirement Target Fund (continued) | |||||||||
Year Ended December 31, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class R6 | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 11.15 | $ | 10.95 | $ | 10.00 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.23 | 0.45 | 0.14 | ||||||
Net realized and unrealized gains (losses) | (0.42 | ) | 0.11 | 0.94 | |||||
Total from investment operations. | (0.19 | ) | 0.56 | 1.08 | |||||
Less distributions from: | |||||||||
Net investment income | (0.22 | ) | (0.30 | ) | (0.13 | ) | |||
Net realized gains | (0.10 | ) | (0.06 | ) | (—)e | ||||
Total distributions | (0.32 | ) | (0.36 | ) | (0.13 | ) | |||
Net asset value, end of year | $ | 10.64 | $ | 11.15 | $ | 10.95 | |||
Total returnf | (1.80 | )% | 5.14 | % | 10.84 | % | |||
Ratios to average net assetsg | |||||||||
Expenses before waiver and payments by affiliatesh | 0.66 | % | 1.81 | % | 11.51 | % | |||
Expenses net of waiver and payments by affiliatesh | —% | —% | —% | ||||||
Net investment incomed | 2.38 | % | 3.55 | % | 3.36 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 6,751 | $ | 7,361 | $ | 11 | |||
Portfolio turnover rate | 47.51 | % | 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’s 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 0.72% for the year ended December 31, 2015.
104 Annual Report | The accompanying notes are an integral part of these financial statements.
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FRANKLIN FUND ALLOCATOR SERIES | |||||||||
FINANCIAL HIGHLIGHTS | |||||||||
Franklin LifeSmart 2020 Retirement Target Fund (continued) | |||||||||
Year Ended December 31, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Advisor Class | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 11.15 | $ | 10.95 | $ | 10.00 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.25 | 0.39 | 0.17 | ||||||
Net realized and unrealized gains (losses) | (0.45 | ) | 0.17 | 0.91 | |||||
Total from investment operations. | (0.20 | ) | 0.56 | 1.08 | |||||
Less distributions from: | |||||||||
Net investment income | (0.22 | ) | (0.30 | ) | (0.13 | ) | |||
Net realized gains | (0.10 | ) | (0.06 | ) | (—)e | ||||
Total distributions | (0.32 | ) | (0.36 | ) | (0.13 | ) | |||
Net asset value, end of year | $ | 10.63 | $ | 11.15 | $ | 10.95 | |||
Total returnf | (1.85 | )% | 5.08 | % | 10.83 | % | |||
Ratios to average net assetsg | |||||||||
Expenses before waiver and payments by affiliatesh | 0.78 | % | 1.95 | % | 10.95 | % | |||
Expenses net of waiver and payments by affiliatesh | 0.05 | % | 0.05 | % | 0.05 | % | |||
Net investment incomed | 2.33 | % | 3.50 | % | 3.31 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 290 | $ | 98 | $ | 44 | |||
Portfolio turnover rate | 47.51 | % | 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’s 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 0.72% for the year ended December 31, 2015.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 105
FRANKLIN FUND ALLOCATOR SERIES | |||
Statement of Investments, December 31, 2015 | |||
Franklin LifeSmart 2020 Retirement Target Fund | |||
Shares | Value | ||
Investments in Underlying Funds and Exchange Traded Funds 98.1% | |||
Alternative Strategies 7.9% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 199,403 | $ | 2,123,638 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 115,351 | 671,343 | |
2,794,981 | |||
Domestic Equity 29.9% | |||
Financial Select Sector SPDR ETF | 22,458 | 534,051 | |
a,bFranklin DynaTech Fund, Class R6 | 34,518 | 1,730,393 | |
aFranklin Focused Core Equity Fund, Class R6 | 156,985 | 2,161,682 | |
aFranklin Growth Fund, Class R6 | 30,205 | 2,216,163 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 34,167 | 1,170,913 | |
aFranklin Real Estate Securities Fund, Class R6 | 10,741 | 241,892 | |
aFranklin Rising Dividends Fund, Class R6 | 19,451 | 927,632 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 27,744 | 506,882 | |
aFranklin Utilities Fund, Class R6 | 23,934 | 371,453 | |
iShares S&P 500 Value ETF | 7,834 | 693,544 | |
10,554,605 | |||
Domestic Fixed Income 18.9% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 457,082 | 4,470,260 | |
aFranklin Short Duration U.S. Government ETF | 2,100 | 205,857 | |
aFranklin Strategic Income Fund, Class R6 | 173,044 | 1,585,080 | |
iShares TIPS Bond ETF | 3,855 | 422,816 | |
6,684,013 | |||
Foreign Equity 23.6% | |||
Deutsche X-trackers MSCI Europe Hedged Equity ETF | 39,186 | 1,012,958 | |
a,bFranklin India Growth Fund, Class R6 | 48,442 | 590,505 | |
aFranklin International Growth Fund, Class R6 | 46,292 | 495,321 | |
aFranklin International Small Cap Growth Fund, Class R6 | 97,668 | 1,813,686 | |
aFranklin Mutual International Fund, Class R6 | 91,459 | 1,295,978 | |
iShares Core MSCI Emerging Markets ETF | 31,109 | 1,225,384 | |
iShares Global Infrastructure ETF | 7,202 | 258,912 | |
aTempleton Foreign Fund, Class R6 | 99,587 | 625,405 | |
aTempleton Frontier Markets Fund, Class R6 | 41,691 | 434,833 | |
WisdomTree Japan Hedged Equity ETF (Japan) | 11,818 | 591,845 | |
8,344,827 | |||
Foreign Fixed Income 17.8% | |||
aFranklin Emerging Market Debt Opportunities Fund | 58,959 | 576,025 | |
aTempleton Global Total Return Fund, Class R6 | 496,054 | 5,699,659 | |
6,275,684 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $36,202,310) | 34,654,110 |
106 Annual Report
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FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin LifeSmart 2020 Retirement Target Fund (continued) | |||
Shares | Value | ||
Short Term Investments (Cost $651,183) 1.8% | |||
Money Market Funds 1.8% | |||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 651,183 | $ | 651,183 |
Total Investments in Underlying Funds and Exchange Traded Funds | |||
(Cost $36,853,493) 99.9% | 35,305,293 | ||
Other Assets, less Liabilities 0.1% | 40,327 | ||
Net Assets 100.0% | $ | 35,345,620 |
See Abbreviations on page 194.
aSee Note 3f regarding investments in Underlying Funds.
bNon-income producing.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 107
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
Financial Highlights | |||||||||||||||
Franklin LifeSmart 2025 Retirement Target Fund | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class A | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.36 | $ | 12.76 | $ | 11.11 | $ | 10.22 | $ | 10.70 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.19 | 0.26 | 0.16 | 0.17 | 0.17 | ||||||||||
Net realized and unrealized gains (losses) | (0.43 | ) | 0.30 | 2.06 | 0.88 | (0.48 | ) | ||||||||
Total from investment operations | (0.24 | ) | 0.56 | 2.22 | 1.05 | (0.31 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds and exchange traded funds | (0.19 | ) | (0.28 | ) | (0.19 | ) | (0.16 | ) | (0.17 | ) | |||||
Net realized gains | (0.49 | ) | (0.68 | ) | (0.38 | ) | — | — | |||||||
Total distributions | (0.68 | ) | (0.96 | ) | (0.57 | ) | (0.16 | ) | (0.17 | ) | |||||
Net asset value, end of year. | $ | 11.44 | $ | 12.36 | $ | 12.76 | $ | 11.11 | $ | 10.22 | |||||
Total returnd | (2.08 | )% | 4.39 | % | 20.18 | % | 10.30 | % | (2.86 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 0.77 | % | 0.83 | % | 0.84 | % | 0.71 | % | 0.80 | % | |||||
Expenses net of waiver and payments by affiliatese | 0.33 | % | 0.35 | % | 0.38 | % | 0.45 | % | 0.45 | % | |||||
Net investment incomec | 1.52 | % | 2.03 | % | 1.31 | % | 1.55 | % | 1.64 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 72,625 | $ | 67,854 | $ | 58,811 | $ | 45,299 | $ | 36,506 | |||||
Portfolio turnover rate | 36.22 | % | 62.00 | % | 47.39 | % | 25.67 | % | 20.06 | % |
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’s 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 0.73% for the year ended December 31, 2015.
108 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, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class C | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.18 | $ | 12.60 | $ | 10.97 | $ | 10.11 | $ | 10.59 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.10 | 0.16 | 0.07 | 0.09 | 0.10 | ||||||||||
Net realized and unrealized gains (losses) | (0.42 | ) | 0.29 | 2.05 | 0.86 | (0.48 | ) | ||||||||
Total from investment operations | (0.32 | ) | 0.45 | 2.12 | 0.95 | (0.38 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds and exchange traded funds | (0.10 | ) | (0.19 | ) | (0.11 | ) | (0.09 | ) | (0.10 | ) | |||||
Net realized gains | (0.49 | ) | (0.68 | ) | (0.38 | ) | — | — | |||||||
Total distributions | (0.59 | ) | (0.87 | ) | (0.49 | ) | (0.09 | ) | (0.10 | ) | |||||
Net asset value, end of year. | $ | 11.27 | $ | 12.18 | $ | 12.60 | $ | 10.97 | $ | 10.11 | |||||
Total returnd | (2.74 | )% | 3.58 | % | 19.52 | % | 9.42 | % | (3.54 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 1.49 | % | 1.53 | % | 1.54 | % | 1.41 | % | 1.50 | % | |||||
Expenses net of waiver and payments by affiliatese | 1.05 | % | 1.05 | % | 1.08 | % | 1.15 | % | 1.15 | % | |||||
Net investment incomec | 0.80 | % | 1.33 | % | 0.61 | % | 0.85 | % | 0.94 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 29,425 | $ | 28,712 | $ | 25,248 | $ | 18,312 | $ | 14,309 | |||||
Portfolio turnover rate | 36.22 | % | 62.00 | % | 47.39 | % | 25.67 | % | 20.06 | % |
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’s 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 0.73% for the year ended December 31, 2015.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 109
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin LifeSmart 2025 Retirement Target Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class R | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.31 | $ | 12.72 | $ | 11.07 | $ | 10.19 | $ | 10.68 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.17 | 0.23 | 0.13 | 0.15 | 0.16 | ||||||||||
Net realized and unrealized gains (losses) | (0.42 | ) | 0.30 | 2.07 | 0.87 | (0.50 | ) | ||||||||
Total from investment operations | (0.25 | ) | 0.53 | 2.20 | 1.02 | (0.34 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds and exchange traded funds | (0.17 | ) | (0.26 | ) | (0.17 | ) | (0.14 | ) | (0.15 | ) | |||||
Net realized gains | (0.49 | ) | (0.68 | ) | (0.38 | ) | — | — | |||||||
Total distributions | (0.66 | ) | (0.94 | ) | (0.55 | ) | (0.14 | ) | (0.15 | ) | |||||
Net asset value, end of year. | $ | 11.40 | $ | 12.31 | $ | 12.72 | $ | 11.07 | $ | 10.19 | |||||
Total return | (2.20 | )% | 4.12 | % | 20.05 | % | 10.05 | % | (3.14 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 0.99 | % | 1.03 | % | 1.04 | % | 0.91 | % | 1.00 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.55 | % | 0.55 | % | 0.58 | % | 0.65 | % | 0.65 | % | |||||
Net investment incomec | 1.30 | % | 1.83 | % | 1.11 | % | 1.35 | % | 1.44 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 6,062 | $ | 5,361 | $ | 4,835 | $ | 3,442 | $ | 1,780 | |||||
Portfolio turnover rate | 36.22 | % | 62.00 | % | 47.39 | % | 25.67 | % | 20.06 | % |
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’s 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 0.73% for the year ended December 31, 2015.
110 Annual Report | The accompanying notes are an integral part of these financial statements.
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FRANKLIN FUND ALLOCATOR SERIES | |||||||||
FINANCIAL HIGHLIGHTS | |||||||||
Franklin LifeSmart 2025 Retirement Target Fund (continued) | |||||||||
Year Ended December 31, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class R6 | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 12.39 | $ | 12.79 | $ | 11.74 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.24 | 0.41 | 0.55 | ||||||
Net realized and unrealized gains (losses) | (0.44 | ) | 0.20 | 1.06 | |||||
Total from investment operations. | (0.20 | ) | 0.61 | 1.61 | |||||
Less distributions from: | |||||||||
Net investment income and short term gains received from Underlying Funds and exchange | |||||||||
traded funds | (0.23 | ) | (0.33 | ) | (0.18 | ) | |||
Net realized gains | (0.49 | ) | (0.68 | ) | (0.38 | ) | |||
Total distributions | (0.72 | ) | (1.01 | ) | (0.56 | ) | |||
Net asset value, end of year | $ | 11.47 | $ | 12.39 | $ | 12.79 | |||
Total returne | (1.74 | )% | 4.74 | % | 13.90 | % | |||
Ratios to average net assetsf | |||||||||
Expenses before waiver and payments by affiliatesg | 0.36 | % | 0.39 | % | 0.45 | % | |||
Expenses net of waiver and payments by affiliatesg | —% | —% | —% | ||||||
Net investment incomed | 1.85 | % | 2.38 | % | 1.69 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 17,129 | $ | 14,010 | $ | 2,339 | |||
Portfolio turnover rate | 36.22 | % | 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’s 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 0.73% for the year ended December 31, 2015.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 111
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin LifeSmart 2025 Retirement Target Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Advisor Class | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.38 | $ | 12.79 | $ | 11.12 | $ | 10.23 | $ | 10.72 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.16 | 0.29 | 0.19 | 0.20 | 0.21 | ||||||||||
Net realized and unrealized gains (losses) | (0.37 | ) | 0.30 | 2.08 | 0.88 | (0.50 | ) | ||||||||
Total from investment operations | (0.21 | ) | 0.59 | 2.27 | 1.08 | (0.29 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds and exchange traded funds | (0.22 | ) | (0.32 | ) | (0.22 | ) | (0.19 | ) | (0.20 | ) | |||||
Net realized gains | (0.49 | ) | (0.68 | ) | (0.38 | ) | — | — | |||||||
Total distributions | (0.71 | ) | (1.00 | ) | (0.60 | ) | (0.19 | ) | (0.20 | ) | |||||
Net asset value, end of year. | $ | 11.46 | $ | 12.38 | $ | 12.79 | $ | 11.12 | $ | 10.23 | |||||
Total return | (1.80 | )% | 4.61 | % | 20.66 | % | 10.59 | % | (2.65 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 0.49 | % | 0.53 | % | 0.54 | % | 0.41 | % | 0.50 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.05 | % | 0.05 | % | 0.08 | % | 0.15 | % | 0.15 | % | |||||
Net investment incomec | 1.80 | % | 2.33 | % | 1.61 | % | 1.85 | % | 1.94 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 1,194 | $ | 2,814 | $ | 2,487 | $ | 1,873 | $ | 1,847 | |||||
Portfolio turnover rate | 36.22 | % | 62.00 | % | 47.39 | % | 25.67 | % | 20.06 | % |
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’s 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 0.73% for the year ended December 31, 2015.
112 Annual Report | The accompanying notes are an integral part of these financial statements.
franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2015 | |||
Franklin LifeSmart 2025 Retirement Target Fund | |||
Shares | Value | ||
Investments in Underlying Funds and Exchange Traded Funds 98.0% | |||
Alternative Strategies 7.9% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 705,761 | $ | 7,516,356 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 414,644 | 2,413,225 | |
9,929,581 | |||
Domestic Equity 36.7% | |||
Financial Select Sector SPDR ETF | 138,832 | 3,301,425 | |
a,bFranklin DynaTech Fund, Class R6 | 152,651 | 7,652,406 | |
aFranklin Focused Core Equity Fund, Class R6 | 675,621 | 9,303,305 | |
aFranklin Growth Fund, Class R6 | 114,159 | 8,375,848 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 138,933 | 4,761,247 | |
aFranklin Real Estate Securities Fund, Class R6 | 49,228 | 1,108,615 | |
aFranklin Rising Dividends Fund, Class R6 | 106,856 | 5,095,946 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 150,442 | 2,748,579 | |
aFranklin Utilities Fund, Class R6 | 103,559 | 1,607,233 | |
iShares S&P 500 Value ETF | 28,364 | 2,511,065 | |
46,465,669 | |||
Domestic Fixed Income 11.5% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 993,226 | 9,713,751 | |
aFranklin Short Duration U.S. Government ETF | 7,089 | 694,915 | |
aFranklin Strategic Income Fund, Class R6 | 362,116 | 3,316,982 | |
iShares TIPS Bond ETF | 7,858 | 861,865 | |
14,587,513 | |||
Foreign Equity 30.1% | |||
Deutsche X-trackers MSCI Europe Hedged Equity ETF | 142,136 | 3,674,216 | |
a,bFranklin India Growth Fund, Class R6 | 231,127 | 2,817,437 | |
aFranklin International Growth Fund, Class R6 | 255,533 | 2,734,207 | |
aFranklin International Small Cap Growth Fund, Class R6 | 418,599 | 7,773,379 | |
aFranklin Mutual International Fund, Class R6 | 420,030 | 5,951,831 | |
iShares Core MSCI Emerging Markets ETF | 158,669 | 6,249,972 | |
iShares Global Infrastructure ETF | 47,199 | 1,696,804 | |
aTempleton Foreign Fund, Class R6 | 385,762 | 2,422,587 | |
aTempleton Frontier Markets Fund, Class R6 | 178,644 | 1,863,260 | |
WisdomTree Japan Hedged Equity ETF (Japan) | 56,363 | 2,822,659 | |
38,006,352 | |||
Foreign Fixed Income 11.8% | |||
aFranklin Emerging Market Debt Opportunities Fund | 177,862 | 1,737,715 | |
aTempleton Global Total Return Fund, Class R6 | 1,145,644 | 13,163,455 | |
14,901,170 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $121,460,415) | 123,890,285 |
franklintempleton.com
Annual Report
113
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin LifeSmart 2025 Retirement Target Fund (continued) | |||
Shares | Value | ||
Short Term Investments (Cost $2,105,947) 1.7% | |||
Money Market Funds 1.7% | |||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 2,105,947 | $ | 2,105,947 |
Total Investments in Underlying Funds and Exchange Traded Funds | |||
(Cost $123,566,362) 99.7% | 125,996,232 | ||
Other Assets, less Liabilities 0.3% | 438,291 | ||
Net Assets 100.0% | $ | 126,434,523 |
See Abbreviations on page 194.
aSee Note 3f regarding investments in Underlying Funds.
bNon-income producing.
114 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, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class A | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 11.45 | $ | 11.11 | $ | 10.00 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.20 | 0.25 | 0.15 | ||||||
Net realized and unrealized gains (losses) | (0.39 | ) | 0.33 | 1.07 | |||||
Total from investment operations. | (0.19 | ) | 0.58 | 1.22 | |||||
Less distributions from: | |||||||||
Net investment income and short term gains received from Underlying Funds and exchange | |||||||||
traded funds | (0.16 | ) | (0.18 | ) | (0.11 | ) | |||
Net realized gains | (0.15 | ) | (0.06 | ) | (—)e | ||||
Total distributions | (0.31 | ) | (0.24 | ) | (0.11 | ) | |||
Net asset value, end of year | $ | 10.95 | $ | 11.45 | $ | 11.11 | |||
Total returnf | (1.75 | )% | 5.28 | % | 12.19 | % | |||
Ratios to average net assetsg | |||||||||
Expenses before waiver and payments by affiliatesh | 1.17 | % | 2.28 | % | 20.77 | % | |||
Expenses net of waiver and payments by affiliatesh | 0.32 | % | 0.35 | % | 0.23 | % | |||
Net investment incomed | 1.55 | % | 2.58 | % | 2.72 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 13,631 | $ | 5,098 | $ | 1,260 | |||
Portfolio turnover rate | 44.47 | % | 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’s 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 0.75% for the year ended December 31, 2015.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 115
FRANKLIN FUND ALLOCATOR SERIES | |||||||||
FINANCIAL HIGHLIGHTS | |||||||||
Franklin LifeSmart 2030 Retirement Target Fund (continued) | |||||||||
Year Ended December 31, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class C | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 11.38 | $ | 11.09 | $ | 10.00 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.11 | 0.24 | 0.13 | ||||||
Net realized and unrealized gains (losses) | (0.38 | ) | 0.26 | 1.05 | |||||
Total from investment operations. | (0.27 | ) | 0.50 | 1.18 | |||||
Less distributions from: | |||||||||
Net investment income and short term gains received from Underlying Funds and exchange | |||||||||
traded funds | (0.10 | ) | (0.15 | ) | (0.09 | ) | |||
Net realized gains | (0.15 | ) | (0.06 | ) | (—)e | ||||
Total distributions | (0.25 | ) | (0.21 | ) | (0.09 | ) | |||
Net asset value, end of year | $ | 10.86 | $ | 11.38 | $ | 11.09 | |||
Total returnf | (2.43 | )% | 4.67 | % | 11.73 | % | |||
Ratios to average net assetsg | |||||||||
Expenses before waiver and payments by affiliatesh | 1.90 | % | 2.98 | % | 21.59 | % | |||
Expenses net of waiver and payments by affiliatesh | 1.05 | % | 1.05 | % | 1.05 | % | |||
Net investment incomed | 0.82 | % | 1.88 | % | 1.90 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 4,124 | $ | 1,950 | $ | 132 | |||
Portfolio turnover rate | 44.47 | % | 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’s 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 0.75% for the year ended December 31, 2015.
116 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, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class R | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 11.44 | $ | 11.10 | $ | 10.00 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.18 | 0.18 | 0.13 | ||||||
Net realized and unrealized gains (losses) | (0.39 | ) | 0.38 | 1.07 | |||||
Total from investment operations. | (0.21 | ) | 0.56 | 1.20 | |||||
Less distributions from: | |||||||||
Net investment income and short term gains received from Underlying Funds and exchange | |||||||||
traded funds | (0.14 | ) | (0.16 | ) | (0.10 | ) | |||
Net realized gains | (0.15 | ) | (0.06 | ) | (—)e | ||||
Total distributions | (0.29 | ) | (0.22 | ) | (0.10 | ) | |||
Net asset value, end of year | $ | 10.94 | $ | 11.44 | $ | 11.10 | |||
Total returnf | (1.89 | )% | 5.07 | % | 11.98 | % | |||
Ratios to average net assetsg | |||||||||
Expenses before waiver and payments by affiliatesh | 1.40 | % | 2.48 | % | 21.09 | % | |||
Expenses net of waiver and payments by affiliatesh | 0.55 | % | 0.55 | % | 0.55 | % | |||
Net investment incomed | 1.32 | % | 2.38 | % | 2.40 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 870 | $ | 48 | $ | 47 | |||
Portfolio turnover rate | 44.47 | % | 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’s 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 0.75% for the year ended December 31, 2015.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 117
FRANKLIN FUND ALLOCATOR SERIES | |||||||||
FINANCIAL HIGHLIGHTS | |||||||||
Franklin LifeSmart 2030 Retirement Target Fund (continued) | |||||||||
Year Ended December 31, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class R6 | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 11.47 | $ | 11.12 | $ | 10.00 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.20 | 0.36 | 0.11 | ||||||
Net realized and unrealized gains (losses) | (0.35 | ) | 0.26 | 1.12 | |||||
Total from investment operations. | (0.15 | ) | 0.62 | 1.23 | |||||
Less distributions from: | |||||||||
Net investment income and short term gains received from Underlying Funds and exchange | |||||||||
traded funds | (0.18 | ) | (0.21 | ) | (0.11 | ) | |||
Net realized gains | (0.15 | ) | (0.06 | ) | (—)e | ||||
Total distributions | (0.33 | ) | (0.27 | ) | (0.11 | ) | |||
Net asset value, end of year | $ | 10.99 | $ | 11.47 | $ | 11.12 | |||
Total returnf | (1.34 | )% | 5.60 | % | 12.34 | % | |||
Ratios to average net assetsg | |||||||||
Expenses before waiver and payments by affiliatesh | 0.68 | % | 1.74 | % | 21.00 | % | |||
Expenses net of waiver and payments by affiliatesh | —% | —% | —% | ||||||
Net investment incomed | 1.87 | % | 2.93 | % | 2.95 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 13,041 | $ | 12,041 | $ | 11 | |||
Portfolio turnover rate | 44.47 | % | 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’s 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 0.75% for the year ended December 31, 2015.
118 Annual Report | The accompanying notes are an integral part of these financial statements.
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FRANKLIN FUND ALLOCATOR SERIES | |||||||||
FINANCIAL HIGHLIGHTS | |||||||||
Franklin LifeSmart 2030 Retirement Target Fund (continued) | |||||||||
Year Ended December 31, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Advisor Class | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 11.47 | $ | 11.12 | $ | 10.00 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.27 | 0.23 | 0.13 | ||||||
Net realized and unrealized gains (losses) | (0.43 | ) | 0.38 | 1.10 | |||||
Total from investment operations. | (0.16 | ) | 0.61 | 1.23 | |||||
Less distributions from: | |||||||||
Net investment income and short term gains received from Underlying Funds and exchange | |||||||||
traded funds | (0.18 | ) | (0.20 | ) | (0.11 | ) | |||
Net realized gains | (0.15 | ) | (0.06 | ) | (—)e | ||||
Total distributions | (0.33 | ) | (0.26 | ) | (0.11 | ) | |||
Net asset value, end of year | $ | 10.98 | $ | 11.47 | $ | 11.12 | |||
Total returnf | (1.46 | )% | 5.56 | % | 12.32 | % | |||
Ratios to average net assetsg | |||||||||
Expenses before waiver and payments by affiliatesh | 0.90 | % | 1.98 | % | 20.59 | % | |||
Expenses net of waiver and payments by affiliatesh | 0.05 | % | 0.05 | % | 0.05 | % | |||
Net investment incomed | 1.82 | % | 2.88 | % | 2.90 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 303 | $ | 101 | $ | 82 | |||
Portfolio turnover rate | 44.47 | % | 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’s 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 0.75% for the year ended December 31, 2015.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 119
FRANKLIN FUND ALLOCATOR SERIES | |||
Statement of Investments, December 31, 2015 | |||
Franklin LifeSmart 2030 Retirement Target Fund | |||
Shares | Value | ||
Investments in Underlying Funds and Exchange Traded Funds 97.1% | |||
Alternative Strategies 7.9% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 181,672 | $ | 1,934,802 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 102,100 | 594,221 | |
2,529,023 | |||
Domestic Equity 42.8% | |||
Financial Select Sector SPDR ETF | 31,441 | 747,667 | |
a,bFranklin DynaTech Fund, Class R6 | 46,965 | 2,354,354 | |
aFranklin Focused Core Equity Fund, Class R6 | 189,612 | 2,610,955 | |
aFranklin Growth Fund, Class R6 | 37,412 | 2,744,920 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 42,587 | 1,459,448 | |
aFranklin Real Estate Securities Fund, Class R6 | 15,114 | 340,359 | |
aFranklin Rising Dividends Fund, Class R6 | 29,581 | 1,410,727 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 50,843 | 928,904 | |
aFranklin Utilities Fund, Class R6 | 30,936 | 480,129 | |
iShares S&P 500 Value ETF | 6,869 | 608,113 | |
13,685,576 | |||
Domestic Fixed Income 7.6% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 162,759 | 1,591,784 | |
aFranklin Short Duration U.S. Government ETF | 1,063 | 104,203 | |
aFranklin Strategic Income Fund, Class R6 | 62,042 | 568,309 | |
iShares TIPS Bond ETF | 1,589 | 174,281 | |
2,438,577 | |||
Foreign Equity 31.5% | |||
Deutsche X-trackers MSCI Europe Hedged Equity ETF | 34,289 | 886,371 | |
a,bFranklin India Growth Fund, Class R6 | 71,745 | 874,568 | |
aFranklin International Growth Fund, Class R6 | 75,990 | 813,095 | |
aFranklin International Small Cap Growth Fund, Class R6 | 129,080 | 2,397,014 | |
aFranklin Mutual International Fund, Class R6 | 118,633 | 1,681,024 | |
iShares Core MSCI Emerging Markets ETF | 28,479 | 1,121,788 | |
iShares Global Infrastructure ETF | 8,794 | 316,144 | |
aTempleton Foreign Fund, Class R6 | 122,709 | 770,611 | |
aTempleton Frontier Markets Fund, Class R6 | 57,456 | 599,262 | |
WisdomTree Japan Hedged Equity ETF (Japan) | 12,181 | 610,024 | |
10,069,901 | |||
Foreign Fixed Income 7.3% | |||
aFranklin Emerging Market Debt Opportunities Fund | 30,301 | 296,041 | |
aTempleton Global Total Return Fund, Class R6 | 177,412 | 2,038,465 | |
2,334,506 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $32,789,153) | 31,057,583 |
120 Annual Report
franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin LifeSmart 2030 Retirement Target Fund (continued) | |||
Shares | Value | ||
Short Term Investments (Cost $636,750) 2.0% | |||
Money Market Funds 2.0% | |||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 636,750 | $ | 636,750 |
Total Investments in Underlying Funds and Exchange Traded Funds | |||
(Cost $33,425,903) 99.1% | 31,694,333 | ||
Other Assets, less Liabilities 0.9% | 275,331 | ||
Net Assets 100.0% | $ | 31,969,664 |
See Abbreviations on page 194.
aSee Note 3f regarding investments in Underlying Funds.
bNon-income producing.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 121
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
Financial Highlights | |||||||||||||||
Franklin LifeSmart 2035 Retirement Target Fund | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class A | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.67 | $ | 12.85 | $ | 11.01 | $ | 10.13 | $ | 10.59 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.17 | 0.22 | 0.14 | 0.15 | 0.15 | ||||||||||
Net realized and unrealized gains (losses) | (0.41 | ) | 0.42 | 2.26 | 0.89 | (0.46 | ) | ||||||||
Total from investment operations | (0.24 | ) | 0.64 | 2.40 | 1.04 | (0.31 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds and exchange traded funds | (0.18 | ) | (0.24 | ) | (0.15 | ) | (0.16 | ) | (0.15 | ) | |||||
Net realized gains | (0.47 | ) | (0.58 | ) | (0.41 | ) | (—)d | — | |||||||
Total distributions | (0.65 | ) | (0.82 | ) | (0.56 | ) | (0.16 | ) | (0.15 | ) | |||||
Net asset value, end o fyear. | $ | 11.78 | $ | 12.67 | $ | 12.85 | $ | 11.01 | $ | 10.13 | |||||
Total returne | (2.00 | )% | 4.96 | % | 22.06 | % | 10.33 | % | (2.97 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesf | 0.84 | % | 0.91 | % | 0.94 | % | 0.83 | % | 0.97 | % | |||||
Expenses net of waiver and payments by affiliatesf | 0.33 | % | 0.35 | % | 0.38 | % | 0.45 | % | 0.45 | % | |||||
Net investment incomec | 1.30 | % | 1.76 | % | 1.17 | % | 1.45 | % | 1.44 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 53,701 | $ | 50,264 | $ | 42,510 | $ | 32,095 | $ | 24,328 | |||||
Portfolio turnover rate | 33.86 | % | 61.73 | % | 49.84 | % | 27.30 | % | 29.19 | % |
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’s 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 0.74% for the year ended December 31, 2015.
122 Annual Report | The accompanying notes are an integral part of these financial statements.
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FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin LifeSmart 2035 Retirement Target Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class C | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.43 | $ | 12.63 | $ | 10.85 | $ | 9.98 | $ | 10.45 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.07 | 0.12 | 0.06 | 0.08 | 0.08 | ||||||||||
Net realized and unrealized gains (losses) | (0.40 | ) | 0.41 | 2.21 | 0.89 | (0.47 | ) | ||||||||
Total from investment operations | (0.33 | ) | 0.53 | 2.27 | 0.97 | (0.39 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds and exchange traded funds | (0.09 | ) | (0.15 | ) | (0.08 | ) | (0.10 | ) | (0.08 | ) | |||||
Net realized gains | (0.47 | ) | (0.58 | ) | (0.41 | ) | (—)d | — | |||||||
Total distributions | (0.56 | ) | (0.73 | ) | (0.49 | ) | (0.10 | ) | (0.08 | ) | |||||
Net asset value, end of year. | $ | 11.54 | $ | 12.43 | $ | 12.63 | $ | 10.85 | $ | 9.98 | |||||
Total returne | (2.76 | )% | 4.23 | % | 21.17 | % | 9.72 | % | (3.70 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesf | 1.56 | % | 1.61 | % | 1.64 | % | 1.53 | % | 1.67 | % | |||||
Expenses net of waiver and payments by affiliatesf | 1.05 | % | 1.05 | % | 1.08 | % | 1.15 | % | 1.15 | % | |||||
Net investment incomec | 0.58 | % | 1.06 | % | 0.47 | % | 0.75 | % | 0.74 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 19,953 | $ | 19,965 | $ | 16,873 | $ | 11,124 | $ | 8,300 | |||||
Portfolio turnover rate | 33.86 | % | 61.73 | % | 49.84 | % | 27.30 | % | 29.19 | % |
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’s 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 0.74% for the year ended December 31, 2015.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 123
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin LifeSmart 2035 Retirement Target Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class R | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.66 | $ | 12.84 | $ | 11.01 | $ | 10.12 | $ | 10.59 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.13 | 0.19 | 0.11 | 0.14 | 0.14 | ||||||||||
Net realized and unrealized gains (losses) | (0.40 | ) | 0.42 | 2.26 | 0.89 | (0.48 | ) | ||||||||
Total from investment operations | (0.27 | ) | 0.61 | 2.37 | 1.03 | (0.34 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds and exchange traded funds | (0.15 | ) | (0.21 | ) | (0.13 | ) | (0.14 | ) | (0.13 | ) | |||||
Net realized gains | (0.47 | ) | (0.58 | ) | (0.41 | ) | (—)d | — | |||||||
Total distributions | (0.62 | ) | (0.79 | ) | (0.54 | ) | (0.14 | ) | (0.13 | ) | |||||
Net asset value, end of year. | $ | 11.77 | $ | 12.66 | $ | 12.84 | $ | 11.01 | $ | 10.12 | |||||
Total return | (2.25 | )% | 4.75 | % | 21.77 | % | 10.24 | % | (3.21 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 1.06 | % | 1.11 | % | 1.14 | % | 1.03 | % | 1.17 | % | |||||
Expenses net of waiver and payments by affiliatese | 0.55 | % | 0.55 | % | 0.58 | % | 0.65 | % | 0.65 | % | |||||
Net investment incomec | 1.08 | % | 1.56 | % | 0.97 | % | 1.25 | % | 1.24 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 4,688 | $ | 4,577 | $ | 4,093 | $ | 3,035 | $ | 1,724 | |||||
Portfolio turnover rate | 33.86 | % | 61.73 | % | 49.84 | % | 27.30 | % | 29.19 | % |
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’s 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 0.74% for the year ended December 31, 2015.
124 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, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class R6 | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 12.75 | $ | 12.92 | $ | 11.77 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.22 | 0.36 | 0.58 | ||||||
Net realized and unrealized gains (losses) | (0.43 | ) | 0.33 | 1.17 | |||||
Total from investment operations. | (0.21 | ) | 0.69 | 1.75 | |||||
Less distributions from: | |||||||||
Net investment income and short term gains received from Underlying Funds and exchange | |||||||||
traded funds | (0.22 | ) | (0.28 | ) | (0.19 | ) | |||
Net realized gains | (0.47 | ) | (0.58 | ) | (0.41 | ) | |||
Total distributions | (0.69 | ) | (0.86 | ) | (0.60 | ) | |||
Net asset value, end of year | $ | 11.85 | $ | 12.75 | $ | 12.92 | |||
Total returne | (1.75 | )% | 5.35 | % | 15.09 | % | |||
Ratios to average net assetsf | |||||||||
Expenses before waiver and payments by affiliatesg | 0.38 | % | 0.42 | % | 0.49 | % | |||
Expenses net of waiver and payments by affiliatesg | —% | —% | —% | ||||||
Net investment incomed | 1.63 | % | 2.11 | % | 1.55 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 20,244 | $ | 16,262 | $ | 2,532 | |||
Portfolio turnover rate | 33.86 | % | 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’s 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 0.74% for the year ended December 31, 2015.
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The accompanying notes are an integral part of these financial statements. | Annual Report 125
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin LifeSmart 2035 Retirement Target Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Advisor Class | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.75 | $ | 12.93 | $ | 11.07 | $ | 10.17 | $ | 10.63 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.16 | 0.26 | 0.18 | 0.18 | 0.17 | ||||||||||
Net realized and unrealized gains (losses) | (0.37 | ) | 0.41 | 2.28 | 0.91 | (0.46 | ) | ||||||||
Total from investment operations | (0.21 | ) | 0.67 | 2.46 | 1.09 | (0.29 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds and exchange traded funds | (0.21 | ) | (0.27 | ) | (0.19 | ) | (0.19 | ) | (0.17 | ) | |||||
Net realized gains | (0.47 | ) | (0.58 | ) | (0.41 | ) | (—)d | — | |||||||
Total distributions | (0.68 | ) | (0.85 | ) | (0.60 | ) | (0.19 | ) | (0.17 | ) | |||||
Net asset value, end of year. | $ | 11.86 | $ | 12.75 | $ | 12.93 | $ | 11.07 | $ | 10.17 | |||||
Total return | (1.76 | )% | 5.22 | % | 22.43 | % | 10.79 | % | (2.69 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 0.56 | % | 0.61 | % | 0.64 | % | 0.53 | % | 0.67 | % | |||||
Expenses net of waiver and payments by affiliatese | 0.05 | % | 0.05 | % | 0.08 | % | 0.15 | % | 0.15 | % | |||||
Net investment incomec | 1.58 | % | 2.06 | % | 1.47 | % | 1.75 | % | 1.74 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 1,722 | $ | 2,182 | $ | 1,815 | $ | 1,077 | $ | 817 | |||||
Portfolio turnover rate | 33.86 | % | 61.73 | % | 49.84 | % | 27.30 | % | 29.19 | % |
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’s 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 0.74% for the year ended December 31, 2015.
126 Annual Report | The accompanying notes are an integral part of these financial statements.
franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2015 | |||
Franklin LifeSmart 2035 Retirement Target Fund | |||
Shares | Value | ||
Investments in Underlying Funds and Exchange Traded Funds 97.5% | |||
Alternative Strategies 8.0% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 574,628 | $ | 6,119,787 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 328,621 | 1,912,574 | |
8,032,361 | |||
Domestic Equity 45.0% | |||
Financial Select Sector SPDR ETF | 138,832 | 3,301,425 | |
a,bFranklin DynaTech Fund, Class R6 | 155,968 | 7,818,661 | |
aFranklin Focused Core Equity Fund, Class R6 | 648,925 | 8,935,696 | |
aFranklin Growth Fund, Class R6 | 111,676 | 8,193,650 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 132,013 | 4,524,081 | |
aFranklin Real Estate Securities Fund, Class R6 | 48,100 | 1,083,214 | |
aFranklin Rising Dividends Fund, Class R6 | 108,670 | 5,182,475 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 136,610 | 2,495,874 | |
aFranklin Utilities Fund, Class R6 | 106,113 | 1,646,880 | |
iShares S&P 500 Value ETF | 22,580 | 1,999,007 | |
45,180,963 | |||
Domestic Fixed Income 5.0% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 325,304 | 3,181,474 | |
aFranklin Short Duration U.S. Government ETF | 3,435 | 336,723 | |
aFranklin Strategic Income Fund, Class R6 | 118,070 | 1,081,526 | |
iShares TIPS Bond ETF | 3,417 | 374,777 | |
4,974,500 | |||
Foreign Equity 34.7% | |||
Deutsche X-trackers MSCI Europe Hedged Equity ETF | 112,645 | 2,911,873 | |
a,bFranklin India Growth Fund, Class R6 | 217,777 | 2,654,704 | |
aFranklin International Growth Fund, Class R6 | 232,448 | 2,487,198 | |
aFranklin International Small Cap Growth Fund, Class R6 | 394,471 | 7,325,331 | |
aFranklin Mutual International Fund, Class R6 | 392,077 | 5,555,735 | |
iShares Core MSCI Emerging Markets ETF | 141,397 | 5,569,628 | |
iShares Global Infrastructure ETF | 42,236 | 1,518,384 | |
aTempleton Foreign Fund, Class R6 | 393,283 | 2,469,818 | |
aTempleton Frontier Markets Fund, Class R6 | 175,264 | 1,828,002 | |
WisdomTree Japan Hedged Equity ETF (Japan) | 49,090 | 2,458,427 | |
34,779,100 | |||
Foreign Fixed Income 4.8% | |||
aFranklin Emerging Market Debt Opportunities Fund | 61,982 | 605,568 | |
aTempleton Global Total Return Fund, Class R6 | 365,436 | 4,198,860 | |
4,804,428 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $95,544,312) | 97,771,352 |
franklintempleton.com
Annual Report
127
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin LifeSmart 2035 Retirement Target Fund (continued) | |||
Shares | Value | ||
Short Term Investments (Cost $1,797,437) 1.8% | |||
Money Market Funds 1.8% | |||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 1,797,437 | $ | 1,797,437 |
Total Investments in Underlying Funds and Exchange Traded Funds | |||
(Cost $97,341,749) 99.3% | 99,568,789 | ||
Other Assets, less Liabilities 0.7% | 738,652 | ||
Net Assets 100.0% | $ | 100,307,441 |
See Abbreviations on page 194.
aSee Note 3f regarding investments in Underlying Funds.
bNon-income producing.
128 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, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class A | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 11.58 | $ | 11.19 | $ | 10.00 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.18 | 0.24 | 0.11 | ||||||
Net realized and unrealized gains (losses) | (0.40 | ) | 0.39 | 1.18 | |||||
Total from investment operations. | (0.22 | ) | 0.63 | 1.29 | |||||
Less distributions from: | |||||||||
Net investment income and short term gains received from Underlying Funds and exchange | |||||||||
traded funds | (0.15 | ) | (0.18 | ) | (0.10 | ) | |||
Net realized gains | (0.15 | ) | (0.06 | ) | (—)e | ||||
Total distributions | (0.30 | ) | (0.24 | ) | (0.10 | ) | |||
Net asset value, end of year | $ | 11.06 | $ | 11.58 | $ | 11.19 | |||
Total returnf | (1.94 | )% | 5.67 | % | 12.91 | % | |||
Ratios to average net assetsg | |||||||||
Expenses before waiver and payments by affiliatesh | 1.40 | % | 3.25 | % | 33.48 | % | |||
Expenses net of waiver and payments by affiliatesh | 0.32 | % | 0.35 | % | 0.25 | % | |||
Net investment incomed | 1.41 | % | 2.37 | % | 1.98 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 8,177 | $ | 2,891 | $ | 672 | |||
Portfolio turnover rate | 41.55 | % | 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’s 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 0.76% for the year ended December 31, 2015.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 129
FRANKLIN FUND ALLOCATOR SERIES | |||||||||
FINANCIAL HIGHLIGHTS | |||||||||
Franklin LifeSmart 2040 Retirement Target Fund (continued) | |||||||||
Year Ended December 31, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class C | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 11.52 | $ | 11.15 | $ | 10.00 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.11 | 0.17 | 0.08 | ||||||
Net realized and unrealized gains (losses) | (0.41 | ) | 0.39 | 1.16 | |||||
Total from investment operations. | (0.30 | ) | 0.56 | 1.24 | |||||
Less distributions from: | |||||||||
Net investment income and short term gains received from Underlying Funds and exchange | |||||||||
traded funds | (0.10 | ) | (0.13 | ) | (0.09 | ) | |||
Net realized gains | (0.15 | ) | (0.06 | ) | (—)e | ||||
Total distributions | (0.25 | ) | (0.19 | ) | (0.09 | ) | |||
Net asset value, end of year | $ | 10.97 | $ | 11.52 | $ | 11.15 | |||
Total returnf | (2.66 | )% | 5.03 | % | 12.46 | % | |||
Ratios to average net assetsg | |||||||||
Expenses before waiver and payments by affiliatesh | 2.13 | % | 3.95 | % | 34.28 | % | |||
Expenses net of waiver and payments by affiliatesh | 1.05 | % | 1.05 | % | 1.05 | % | |||
Net investment incomed | 0.68 | % | 1.67 | % | 1.18 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 1,988 | $ | 747 | $ | 60 | |||
Portfolio turnover rate | 41.55 | % | 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’s 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 0.76% for the year ended December 31, 2015.
130 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, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class R | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 11.58 | $ | 11.19 | $ | 10.00 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.17 | 0.20 | 0.07 | ||||||
Net realized and unrealized gains (losses) | (0.41 | ) | 0.41 | 1.21 | |||||
Total from investment operations. | (0.24 | ) | 0.61 | 1.28 | |||||
Less distributions from: | |||||||||
Net investment income and short term gains received from Underlying Funds and exchange | |||||||||
traded funds | (0.14 | ) | (0.16 | ) | (0.09 | ) | |||
Net realized gains | (0.15 | ) | (0.06 | ) | (—)e | ||||
Total distributions | (0.29 | ) | (0.22 | ) | (0.09 | ) | |||
Net asset value, end of year | $ | 11.05 | $ | 11.58 | $ | 11.19 | |||
Total returnf | (2.14 | )% | 5.48 | % | 12.81 | % | |||
Ratios to average net assetsg | |||||||||
Expenses before waiver and payments by affiliatesh | 1.63 | % | 3.45 | % | 33.78 | % | |||
Expenses net of waiver and payments by affiliatesh | 0.55 | % | 0.55 | % | 0.55 | % | |||
Net investment incomed | 1.18 | % | 2.17 | % | 1.68 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 1,009 | $ | 37 | $ | 11 | |||
Portfolio turnover rate | 41.55 | % | 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’s 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 0.76% for the year ended December 31, 2015.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 131
FRANKLIN FUND ALLOCATOR SERIES | |||||||||
FINANCIAL HIGHLIGHTS | |||||||||
Franklin LifeSmart 2040 Retirement Target Fund (continued) | |||||||||
Year Ended December 31, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class R6 | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 11.61 | $ | 11.20 | $ | 10.00 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.19 | 0.33 | 0.10 | ||||||
Net realized and unrealized gains (losses) | (0.37 | ) | 0.35 | 1.20 | |||||
Total from investment operations. | (0.18 | ) | 0.68 | 1.30 | |||||
Less distributions from: | |||||||||
Net investment income and short term gains received from Underlying Funds and exchange | |||||||||
traded funds | (0.18 | ) | (0.21 | ) | (0.10 | ) | |||
Net realized gains | (0.15 | ) | (0.06 | ) | (—)e | ||||
Total distributions | (0.33 | ) | (0.27 | ) | (0.10 | ) | |||
Net asset value, end of year | $ | 11.10 | $ | 11.61 | $ | 11.20 | |||
Total returnf | (1.62 | )% | 6.13 | % | 13.07 | % | |||
Ratios to average net assetsg | |||||||||
Expenses before waiver and payments by affiliatesh | 0.82 | % | 2.55 | % | 33.68 | % | |||
Expenses net of waiver and payments by affiliatesh | —% | —% | —% | ||||||
Net investment incomed | 1.73 | % | 2.72 | % | 2.23 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 12,037 | $ | 10,154 | $ | 11 | |||
Portfolio turnover rate | 41.55 | % | 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’s 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 0.76% for the year ended December 31, 2015.
132 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, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Advisor Class | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 11.61 | $ | 11.20 | $ | 10.00 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.40 | 0.20 | 0.10 | ||||||
Net realized and unrealized gains (losses) | (0.59 | ) | 0.48 | 1.20 | |||||
Total from investment operations. | (0.19 | ) | 0.68 | 1.30 | |||||
Less distributions from: | |||||||||
Net investment income and short term gains received from Underlying Funds and exchange | |||||||||
traded funds | (0.18 | ) | (0.21 | ) | (0.10 | ) | |||
Net realized gains | (0.15 | ) | (0.06 | ) | (—)e | ||||
Total distributions | (0.33 | ) | (0.27 | ) | (0.10 | ) | |||
Net asset value, end of year | $ | 11.09 | $ | 11.61 | $ | 11.20 | |||
Total returnf | (1.72 | )% | 6.08 | % | 13.04 | % | |||
Ratios to average net assetsg | |||||||||
Expenses before waiver and payments by affiliatesh | 1.13 | % | 2.95 | % | 33.28 | % | |||
Expenses net of waiver and payments by affiliatesh | 0.05 | % | 0.05 | % | 0.05 | % | |||
Net investment incomed | 1.68 | % | 2.67 | % | 2.18 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 121 | $ | 23 | $ | 23 | |||
Portfolio turnover rate | 41.55 | % | 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’s 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 0.76% for the year ended December 31, 2015.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 133
FRANKLIN FUND ALLOCATOR SERIES | |||
Statement of Investments, December 31, 2015 | |||
Franklin LifeSmart 2040 Retirement Target Fund | |||
Shares | Value | ||
Investments in Underlying Funds and Exchange Traded Funds 97.0% | |||
Alternative Strategies 7.8% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 132,349 | $ | 1,409,514 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 71,199 | 414,378 | |
1,823,892 | |||
Domestic Equity 46.1% | |||
Financial Select Sector SPDR ETF | 26,133 | 621,443 | |
a,bFranklin DynaTech Fund, Class R6 | 38,175 | 1,913,719 | |
aFranklin Focused Core Equity Fund, Class R6 | 159,881 | 2,201,562 | |
aFranklin Growth Fund, Class R6 | 29,956 | 2,197,875 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 33,112 | 1,134,738 | |
aFranklin Real Estate Securities Fund, Class R6 | 10,950 | 246,587 | |
aFranklin Rising Dividends Fund, Class R6 | 20,858 | 994,698 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 33,319 | 608,737 | |
aFranklin Utilities Fund, Class R6 | 25,517 | 396,030 | |
iShares S&P 500 Value ETF | 4,996 | 442,296 | |
10,757,685 | |||
Domestic Fixed Income 4.1% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 64,464 | 630,459 | |
aFranklin Short Duration U.S. Government ETF | 391 | 38,328 | |
aFranklin Strategic Income Fund, Class R6 | 23,405 | 214,388 | |
iShares TIPS Bond ETF | 657 | 72,060 | |
955,235 | |||
Foreign Equity 35.0% | |||
Deutsche X-trackers MSCI Europe Hedged Equity ETF | 25,089 | 648,551 | |
a,bFranklin India Growth Fund, Class R6 | 55,065 | 671,240 | |
aFranklin International Growth Fund, Class R6 | 56,072 | 599,971 | |
aFranklin International Small Cap Growth Fund, Class R6 | 99,132 | 1,840,873 | |
aFranklin Mutual International Fund, Class R6 | 100,048 | 1,417,674 | |
iShares Core MSCI Emerging Markets ETF | 27,539 | 1,084,761 | |
iShares Global Infrastructure ETF | 6,842 | 245,970 | |
aTempleton Foreign Fund, Class R6 | 98,787 | 620,383 | |
aTempleton Frontier Markets Fund, Class R6 | 45,472 | 474,269 | |
WisdomTree Japan Hedged Equity ETF (Japan) | 11,090 | 555,387 | |
8,159,079 | |||
Foreign Fixed Income 4.0% | |||
aFranklin Emerging Market Debt Opportunities Fund | 11,720 | 114,506 | |
aTempleton Global Total Return Fund, Class R6 | 71,403 | 820,418 | |
934,924 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $23,844,640) | 22,630,815 |
134 Annual Report
franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin LifeSmart 2040 Retirement Target Fund (continued) | |||
Shares | Value | ||
Short Term Investments (Cost $421,022) 1.8% | |||
Money Market Funds 1.8% | |||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 421,022 | $ | 421,022 |
Total Investments in Underlying Funds and Exchange Traded Funds | |||
(Cost $24,265,662) 98.8% | 23,051,837 | ||
Other Assets, less Liabilities 1.2% | 281,310 | ||
Net Assets 100.0% | $ | 23,333,147 |
See Abbreviations on page 194.
aSee Note 3f regarding investments in Underlying Funds.
bNon-income producing.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 135
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
Financial Highlights | |||||||||||||||
Franklin LifeSmart 2045 Retirement Target Fund | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class A | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.70 | $ | 12.88 | $ | 10.92 | $ | 10.01 | $ | 10.44 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.16 | 0.20 | 0.13 | 0.15 | 0.15 | ||||||||||
Net realized and unrealized gains (losses) | (0.42 | ) | 0.43 | 2.36 | 0.91 | (0.44 | ) | ||||||||
Total from investment operations | (0.26 | ) | 0.63 | 2.49 | 1.06 | (0.29 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds and exchange traded funds | (0.17 | ) | (0.22 | ) | (0.15 | ) | (0.15 | ) | (0.14 | ) | |||||
Net realized gains | (0.52 | ) | (0.59 | ) | (0.38 | ) | — | — | |||||||
Total distributions | (0.69 | ) | (0.81 | ) | (0.53 | ) | (0.15 | ) | (0.14 | ) | |||||
Net asset value, end of year. | $ | 11.75 | $ | 12.70 | $ | 12.88 | $ | 10.92 | $ | 10.01 | |||||
Total returnd | (2.17 | )% | 4.94 | % | 23.07 | % | 10.61 | % | (2.81 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 1.01 | % | 1.11 | % | 1.16 | % | 1.05 | % | 1.30 | % | |||||
Expenses net of waiver and payments by affiliatese | 0.33 | % | 0.35 | % | 0.38 | % | 0.45 | % | 0.45 | % | |||||
Net investment incomec | 1.26 | % | 1.57 | % | 1.08 | % | 1.41 | % | 1.43 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 38,444 | $ | 34,259 | $ | 27,991 | $ | 20,765 | $ | 14,762 | |||||
Portfolio turnover rate | 34.07 | % | 65.20 | % | 44.44 | % | 32.47 | % | 34.66 | % |
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’s 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 0.75% for the year ended December 31, 2015.
136 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, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class C | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.42 | $ | 12.63 | $ | 10.73 | $ | 9.84 | $ | 10.28 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.07 | 0.11 | 0.04 | 0.07 | 0.07 | ||||||||||
Net realized and unrealized gains (losses) | (0.40 | ) | 0.41 | 2.31 | 0.90 | (0.43 | ) | ||||||||
Total from investment operations | (0.33 | ) | 0.52 | 2.35 | 0.97 | (0.36 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds and exchange traded funds | (0.09 | ) | (0.14 | ) | (0.07 | ) | (0.08 | ) | (0.08 | ) | |||||
Net realized gains | (0.52 | ) | (0.59 | ) | (0.38 | ) | — | — | |||||||
Total distributions | (0.61 | ) | (0.73 | ) | (0.45 | ) | (0.08 | ) | (0.08 | ) | |||||
Net asset value, end of year. | $ | 11.48 | $ | 12.42 | $ | 12.63 | $ | 10.73 | $ | 9.84 | |||||
Total returnd | (2.82 | )% | 4.15 | % | 22.20 | % | 9.85 | % | (3.54 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatese | 1.73 | % | 1.81 | % | 1.86 | % | 1.74 | % | 2.00 | % | |||||
Expenses net of waiver and payments by affiliatese | 1.05 | % | 1.05 | % | 1.08 | % | 1.14 | % | 1.15 | % | |||||
Net investment incomec | 0.54 | % | 0.87 | % | 0.38 | % | 0.72 | % | 0.73 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 12,850 | $ | 11,785 | $ | 9,484 | $ | 6,680 | $ | 5,869 | |||||
Portfolio turnover rate | 34.07 | % | 65.20 | % | 44.44 | % | 32.47 | % | 34.66 | % |
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’s 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 0.75% for the year ended December 31, 2015.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 137
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin LifeSmart 2045 Retirement Target Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Class R | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.66 | $ | 12.82 | $ | 10.88 | $ | 9.99 | $ | 10.42 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.14 | 0.14 | 0.10 | 0.16 | 0.12 | ||||||||||
Net realized and unrealized gains (losses) | (0.42 | ) | 0.47 | 2.35 | 0.87 | (0.43 | ) | ||||||||
Total from investment operations | (0.28 | ) | 0.61 | 2.45 | 1.03 | (0.31 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds and exchange traded funds | (0.15 | ) | (0.18 | ) | (0.13 | ) | (0.14 | ) | (0.12 | ) | |||||
Net realized gains | (0.52 | ) | (0.59 | ) | (0.38 | ) | — | — | |||||||
Total distributions | (0.67 | ) | (0.77 | ) | (0.51 | ) | (0.14 | ) | (0.12 | ) | |||||
Net asset value, end of year. | $ | 11.71 | $ | 12.66 | $ | 12.82 | $ | 10.88 | $ | 9.99 | |||||
Total return | (2.35 | )% | 4.75 | % | 22.76 | % | 10.35 | % | (3.01 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 1.23 | % | 1.31 | % | 1.36 | % | 1.25 | % | 1.50 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.55 | % | 0.55 | % | 0.58 | % | 0.65 | % | 0.65 | % | |||||
Net investment incomec | 1.04 | % | 1.37 | % | 0.88 | % | 1.21 | % | 1.23 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 4,327 | $ | 3,474 | $ | 4,564 | $ | 3,336 | $ | 860 | |||||
Portfolio turnover rate | 34.07 | % | 65.20 | % | 44.44 | % | 32.47 | % | 34.66 | % |
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’s 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 0.75% for the year ended December 31, 2015.
138 Annual Report | The accompanying notes are an integral part of these financial statements.
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FINANCIAL HIGHLIGHTS | |||||||||
Franklin LifeSmart 2045 Retirement Target Fund (continued) | |||||||||
Year Ended December 31, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class R6 | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 12.77 | $ | 12.95 | $ | 11.67 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.21 | 0.33 | 0.60 | ||||||
Net realized and unrealized gains (losses) | (0.42 | ) | 0.35 | 1.24 | |||||
Total from investment operations. | (0.21 | ) | 0.68 | 1.84 | |||||
Less distributions from: | |||||||||
Net investment income and short term gains received from Underlying Funds and exchange | |||||||||
traded funds | (0.21 | ) | (0.27 | ) | (0.18 | ) | |||
Net realized gains | (0.52 | ) | (0.59 | ) | (0.38 | ) | |||
Total distributions | (0.73 | ) | (0.86 | ) | (0.56 | ) | |||
Net asset value, end of year | $ | 11.83 | $ | 12.77 | $ | 12.95 | |||
Total returne | (1.77 | )% | 5.24 | % | 16.08 | % | |||
Ratios to average net assetsf | |||||||||
Expenses before waiver and payments by affiliatesg | 0.45 | % | 0.51 | % | 0.60 | % | |||
Expenses net of waiver and payments by affiliatesg | —% | —% | —% | ||||||
Net investment incomed | 1.59 | % | 1.92 | % | 1.46 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 10,975 | $ | 8,987 | $ | 1,718 | |||
Portfolio turnover rate | 34.07 | % | 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’s 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 0.75% for the year ended December 31, 2015.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 139
FRANKLIN FUND ALLOCATOR SERIES | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin LifeSmart 2045 Retirement Target Fund (continued) | |||||||||||||||
Year Ended December 31, | |||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||
Advisor Class | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the year) | |||||||||||||||
Net asset value, beginning of year | $ | 12.76 | $ | 12.94 | $ | 10.96 | $ | 10.05 | $ | 10.48 | |||||
Income from investment operationsa: | |||||||||||||||
Net investment incomeb,c | 0.13 | 0.24 | 0.17 | 0.16 | 0.17 | ||||||||||
Net realized and unrealized gains (losses) | (0.34 | ) | 0.43 | 2.37 | 0.93 | (0.44 | ) | ||||||||
Total from investment operations | (0.21 | ) | 0.67 | 2.54 | 1.09 | (0.27 | ) | ||||||||
Less distributions from: | |||||||||||||||
Net investment income and short term gains received from | |||||||||||||||
Underlying Funds and exchange traded funds | (0.20 | ) | (0.26 | ) | (0.18 | ) | (0.18 | ) | (0.16 | ) | |||||
Net realized gains | (0.52 | ) | (0.59 | ) | (0.38 | ) | — | — | |||||||
Total distributions | (0.72 | ) | (0.85 | ) | (0.56 | ) | (0.18 | ) | (0.16 | ) | |||||
Net asset value, end of year. | $ | 11.83 | $ | 12.76 | $ | 12.94 | $ | 10.96 | $ | 10.05 | |||||
Total return | (1.82 | )% | 5.20 | % | 23.48 | % | 10.86 | % | (2.55 | )% | |||||
Ratios to average net assets | |||||||||||||||
Expenses before waiver and payments by affiliatesd | 0.73 | % | 0.81 | % | 0.86 | % | 0.75 | % | 1.00 | % | |||||
Expenses net of waiver and payments by affiliatesd | 0.05 | % | 0.05 | % | 0.08 | % | 0.15 | % | 0.15 | % | |||||
Net investment incomec | 1.54 | % | 1.87 | % | 1.38 | % | 1.71 | % | 1.73 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of year (000’s) | $ | 532 | $ | 1,576 | $ | 1,188 | $ | 709 | $ | 642 | |||||
Portfolio turnover rate | 34.07 | % | 65.20 | % | 44.44 | % | 32.47 | % | 34.66 | % |
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’s 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 0.75% for the year ended December 31, 2015.
140 Annual Report | The accompanying notes are an integral part of these financial statements.
franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2015 | |||
Franklin LifeSmart 2045 Retirement Target Fund | |||
Shares | Value | ||
Investments in Underlying Funds and Exchange Traded Funds 97.2% | |||
Alternative Strategies 7.9% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 380,208 | $ | 4,049,216 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 218,352 | 1,270,808 | |
5,320,024 | |||
Domestic Equity 46.3% | |||
Financial Select Sector SPDR ETF | 93,915 | 2,233,299 | |
a,bFranklin DynaTech Fund, Class R6 | 107,343 | 5,381,095 | |
aFranklin Focused Core Equity Fund, Class R6 | 452,173 | 6,226,427 | |
aFranklin Growth Fund, Class R6 | 83,938 | 6,158,549 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 75,558 | 2,589,375 | |
aFranklin Real Estate Securities Fund, Class R6 | 27,146 | 611,324 | |
aFranklin Rising Dividends Fund, Class R6 | 74,450 | 3,550,502 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 96,796 | 1,768,457 | |
aFranklin Utilities Fund, Class R6 | 77,662 | 1,205,307 | |
iShares S&P 500 Value ETF | 15,046 | 1,332,023 | |
31,056,358 | |||
Domestic Fixed Income 3.4% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 147,850 | 1,445,974 | |
aFranklin Short Duration U.S. Government ETF | 1,539 | 150,864 | |
aFranklin Strategic Income Fund, Class R6 | 50,839 | 465,686 | |
iShares TIPS Bond ETF | 1,754 | 192,379 | |
2,254,903 | |||
Foreign Equity 36.5% | |||
Deutsche X-trackers MSCI Europe Hedged Equity ETF | 75,255 | 1,945,342 | |
a,bFranklin India Growth Fund, Class R6 | 163,417 | 1,992,055 | |
aFranklin International Growth Fund, Class R6 | 164,614 | 1,761,375 | |
aFranklin International Small Cap Growth Fund, Class R6 | 283,445 | 5,263,572 | |
aFranklin Mutual International Fund, Class R6 | 283,581 | 4,018,336 | |
iShares Core MSCI Emerging Markets ETF | 86,219 | 3,396,166 | |
iShares Global Infrastructure ETF | 29,875 | 1,074,006 | |
aTempleton Foreign Fund, Class R6 | 342,585 | 2,151,433 | |
aTempleton Frontier Markets Fund, Class R6 | 123,389 | 1,286,943 | |
WisdomTree Japan Hedged Equity ETF (Japan) | 32,727 | 1,638,968 | |
24,528,196 | |||
Foreign Fixed Income 3.1% | |||
aFranklin Emerging Market Debt Opportunities Fund | 26,493 | 258,838 | |
aTempleton Global Total Return Fund, Class R6 | 160,673 | 1,846,139 | |
2,104,977 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $63,709,877) | 65,264,458 |
franklintempleton.com
Annual Report
141
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin LifeSmart 2045 Retirement Target Fund (continued) | |||
Shares | Value | ||
Short Term Investments (Cost $1,463,464) 2.2% | |||
Money Market Funds 2.2% | |||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 1,463,464 | $ | 1,463,464 |
Total Investments in Underlying Funds and Exchange Traded Funds | |||
(Cost $65,173,341) 99.4% | 66,727,922 | ||
Other Assets, less Liabilities 0.6% | 399,940 | ||
Net Assets 100.0% | $ | 67,127,862 |
See Abbreviations on page 194.
aSee Note 3f regarding investments in Underlying Funds.
bNon-income producing.
142 Annual Report | The accompanying notes are an integral part of these financial statements.
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FRANKLIN FUND ALLOCATOR SERIES
Financial Highlights | |||||||||
Franklin LifeSmart 2050 Retirement Target Fund | |||||||||
Year Ended December 31, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class A | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 11.62 | $ | 11.21 | $ | 10.00 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.22 | 0.22 | 0.10 | ||||||
Net realized and unrealized gains (losses) | (0.41 | ) | 0.43 | 1.21 | |||||
Total from investment operations. | (0.19 | ) | 0.65 | 1.31 | |||||
Less distributions from: | |||||||||
Net investment income and short term gains received from Underlying Funds and exchange | |||||||||
traded funds | (0.16 | ) | (0.18 | ) | (0.10 | ) | |||
Net realized gains | (0.16 | ) | (0.06 | ) | — | ||||
Total distributions | (0.32 | ) | (0.24 | ) | (0.10 | ) | |||
Net asset value, end of year | $ | 11.11 | $ | 11.62 | $ | 11.21 | |||
Total returne | (1.76 | )% | 5.80 | % | 13.14 | % | |||
Ratios to average net assetsf | |||||||||
Expenses before waiver and payments by affiliatesg | 1.82 | % | 4.12 | % | 34.22 | % | |||
Expenses net of waiver and payments by affiliatesg | 0.32 | % | 0.35 | % | 0.23 | % | |||
Net investment incomed | 1.47 | % | 2.21 | % | 1.88 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 6,762 | $ | 2,318 | $ | 512 | |||
Portfolio turnover rate | 48.90 | % | 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’s 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 0.75% for the year ended December 31, 2015.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 143
FRANKLIN FUND ALLOCATOR SERIES | |||||||||
FINANCIAL HIGHLIGHTS | |||||||||
Franklin LifeSmart 2050 Retirement Target Fund (continued) | |||||||||
Year Ended December 31, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class C | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 11.56 | $ | 11.18 | $ | 10.00 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.07 | 0.15 | 0.09 | ||||||
Net realized and unrealized gains (losses) | (0.33 | ) | 0.42 | 1.18 | |||||
Total from investment operations. | (0.26 | ) | 0.57 | 1.27 | |||||
Less distributions from: | |||||||||
Net investment income and short term gains received from Underlying Funds and exchange | |||||||||
traded funds | (0.07 | ) | (0.13 | ) | (0.09 | ) | |||
Net realized gains | (0.16 | ) | (0.06 | ) | — | ||||
Total distributions | (0.23 | ) | (0.19 | ) | (0.09 | ) | |||
Net asset value, end of year | $ | 11.07 | $ | 11.56 | $ | 11.18 | |||
Total returne | (2.40 | )% | 5.03 | % | 12.82 | % | |||
Ratios to average net assetsf | |||||||||
Expenses before waiver and payments by affiliatesg | 2.55 | % | 4.82 | % | 35.04 | % | |||
Expenses net of waiver and payments by affiliatesg | 1.05 | % | 1.05 | % | 1.05 | % | |||
Net investment incomed | 0.74 | % | 1.51 | % | 1.06 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 1,921 | $ | 943 | $ | 82 | |||
Portfolio turnover rate | 48.90 | % | 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’s 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 0.75% for the year ended December 31, 2015.
144 Annual Report | The accompanying notes are an integral part of these financial statements.
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FRANKLIN FUND ALLOCATOR SERIES | |||||||||
FINANCIAL HIGHLIGHTS | |||||||||
Franklin LifeSmart 2050 Retirement Target Fund (continued) | |||||||||
Year Ended December 31, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class R | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 11.63 | $ | 11.21 | $ | 10.00 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.16 | 0.18 | 0.06 | ||||||
Net realized and unrealized gains (losses) | (0.37 | ) | 0.45 | 1.24 | |||||
Total from investment operations. | (0.21 | ) | 0.63 | 1.30 | |||||
Less distributions from: | |||||||||
Net investment income and short term gains received from Underlying Funds and exchange | |||||||||
traded funds | (0.14 | ) | (0.15 | ) | (0.09 | ) | |||
Net realized gains | (0.16 | ) | (0.06 | ) | — | ||||
Total distributions | (0.30 | ) | (0.21 | ) | (0.09 | ) | |||
Net asset value, end of year | $ | 11.12 | $ | 11.63 | $ | 11.21 | |||
Total returne | (1.98 | )% | 5.67 | % | 13.02 | % | |||
Ratios to average net assetsf | |||||||||
Expenses before waiver and payments by affiliatesg | 2.05 | % | 4.32 | % | 34.54 | % | |||
Expenses net of waiver and payments by affiliatesg | 0.55 | % | 0.55 | % | 0.55 | % | |||
Net investment incomed | 1.24 | % | 2.01 | % | 1.56 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 747 | $ | 33 | $ | 11 | |||
Portfolio turnover rate | 48.90 | % | 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’s 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 0.75% for the year ended December 31, 2015.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 145
FRANKLIN FUND ALLOCATOR SERIES | |||||||||
FINANCIAL HIGHLIGHTS | |||||||||
Franklin LifeSmart 2050 Retirement Target Fund (continued) | |||||||||
Year Ended December 31, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Class R6 | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 11.65 | $ | 11.23 | $ | 10.00 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.19 | 0.32 | 0.09 | ||||||
Net realized and unrealized gains (losses) | (0.34 | ) | 0.37 | 1.25 | |||||
Total from investment operations. | (0.15 | ) | 0.69 | 1.34 | |||||
Less distributions from: | |||||||||
Net investment income and short term gains received from Underlying Funds and exchange | |||||||||
traded funds | (0.18 | ) | (0.21 | ) | (0.11 | ) | |||
Net realized gains | (0.16 | ) | (0.06 | ) | — | ||||
Total distributions | (0.34 | ) | (0.27 | ) | (0.11 | ) | |||
Net asset value, end of year | $ | 11.16 | $ | 11.65 | $ | 11.23 | |||
Total returne | (1.39 | )% | 6.16 | % | 13.39 | % | |||
Ratios to average net assetsf | |||||||||
Expenses before waiver and payments by affiliatesg | 1.01 | % | 3.22 | % | 34.36 | % | |||
Expenses net of waiver and payments by affiliatesg | —% | —% | —% | ||||||
Net investment incomed | 1.79 | % | 2.56 | % | 2.11 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 8,012 | $ | 6,348 | $ | 11 | |||
Portfolio turnover rate | 48.90 | % | 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’s 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 0.75% for the year ended December 31, 2015.
146 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, | |||||||||
2015 | 2014 | 2013 | a | ||||||
Advisor Class | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the year) | |||||||||
Net asset value, beginning of year | $ | 11.65 | $ | 11.22 | $ | 10.00 | |||
Income from investment operationsb: | |||||||||
Net investment incomec,d | 0.18 | 0.23 | 0.10 | ||||||
Net realized and unrealized gains (losses) | (0.33 | ) | 0.47 | 1.23 | |||||
Total from investment operations. | (0.15 | ) | 0.70 | 1.33 | |||||
Less distributions from: | |||||||||
Net investment income and short term gains received from Underlying Funds and exchange | |||||||||
traded funds | (0.18 | ) | (0.21 | ) | (0.11 | ) | |||
Net realized gains | (0.16 | ) | (0.06 | ) | — | ||||
Total distributions | (0.34 | ) | (0.27 | ) | (0.11 | ) | |||
Net asset value, end of year | $ | 11.16 | $ | 11.65 | $ | 11.22 | |||
Total returne | (1.43 | )% | 6.22 | % | 13.26 | % | |||
Ratios to average net assetsf | |||||||||
Expenses before waiver and payments by affiliatesg | 1.55 | % | 3.82 | % | 34.04 | % | |||
Expenses net of waiver and payments by affiliatesg | 0.05 | % | 0.05 | % | 0.05 | % | |||
Net investment incomed | 1.74 | % | 2.51 | % | 2.06 | % | |||
Supplemental data | |||||||||
Net assets, end of year (000’s) | $ | 394 | $ | 327 | $ | 75 | |||
Portfolio turnover rate | 48.90 | % | 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’s 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 0.75% for the year ended December 31, 2015.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 147
FRANKLIN FUND ALLOCATOR SERIES | |||
Statement of Investments, December 31, 2015 | |||
Franklin LifeSmart 2050 Retirement Target Fund | |||
Shares | Value | ||
Investments in Underlying Funds and Exchange Traded Funds 97.5% | |||
Alternative Strategies 8.1% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 102,765 | $ | 1,094,445 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 59,183 | 344,447 | |
1,438,892 | |||
Domestic Equity 47.5% | |||
Financial Select Sector SPDR ETF | 19,191 | 456,362 | |
a,bFranklin DynaTech Fund, Class R6 | 31,167 | 1,562,377 | |
aFranklin Focused Core Equity Fund, Class R6 | 131,416 | 1,809,598 | |
aFranklin Growth Fund, Class R6 | 24,141 | 1,771,223 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 21,940 | 751,878 | |
aFranklin Real Estate Securities Fund, Class R6 | 7,357 | 165,678 | |
aFranklin Rising Dividends Fund, Class R6 | 18,488 | 881,680 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 21,573 | 394,145 | |
aFranklin Utilities Fund, Class R6 | 21,212 | 329,209 | |
iShares S&P 500 Value ETF | 3,945 | 349,251 | |
8,471,401 | |||
Domestic Fixed Income 2.9% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 34,168 | 334,165 | |
aFranklin Short Duration U.S. Government ETF | 272 | 26,663 | |
aFranklin Strategic Income Fund, Class R6 | 12,467 | 114,198 | |
iShares TIPS Bond ETF | 456 | 50,014 | |
525,040 | |||
Foreign Equity 36.3% | |||
Deutsche X-trackers MSCI Europe Hedged Equity ETF | 19,462 | 503,093 | |
a,bFranklin India Growth Fund, Class R6 | 39,057 | 476,100 | |
aFranklin International Growth Fund, Class R6 | 36,159 | 386,901 | |
aFranklin International Small Cap Growth Fund, Class R6 | 80,852 | 1,501,414 | |
aFranklin Mutual International Fund, Class R6 | 81,652 | 1,157,003 | |
iShares Core MSCI Emerging Markets ETF | 22,016 | 867,210 | |
iShares Global Infrastructure ETF | 5,443 | 195,676 | |
aTempleton Foreign Fund, Class R6 | 100,954 | 633,990 | |
aTempleton Frontier Markets Fund, Class R6 | 34,892 | 363,918 | |
WisdomTree Japan Hedged Equity ETF (Japan) | 7,818 | 391,526 | |
6,476,831 | |||
Foreign Fixed Income 2.7% | |||
aFranklin Emerging Market Debt Opportunities Fund | 5,743 | 56,107 | |
aTempleton Global Total Return Fund, Class R6 | 36,550 | 419,963 | |
476,070 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $18,134,572) | 17,388,234 |
148 Annual Report
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FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin LifeSmart 2050 Retirement Target Fund (continued) | |||
Shares | Value | ||
Short Term Investments (Cost $310,796) 1.7% | |||
Money Market Funds 1.7% | |||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 310,796 | $ | 310,796 |
Total Investments in Underlying Funds and Exchange Traded Funds | |||
(Cost $18,445,368) 99.2% | 17,699,030 | ||
Other Assets, less Liabilities 0.8% | 138,028 | ||
Net Assets 100.0% | $ | 17,837,058 |
See Abbreviations on page 194.
aSee Note 3f regarding investments in Underlying Funds.
bNon-income producing.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 149
FRANKLIN FUND ALLOCATOR SERIES | |||
Financial Highlights | |||
Franklin LifeSmart 2055 Retirement Target Fund | |||
Year Ended | |||
December 31, | |||
2015 | a | ||
Class A | |||
Per share operating performance | |||
(for a share outstanding throughout the period) | |||
Net asset value, beginning of period. | $ | 10.00 | |
Income from investment operationsb: | |||
Net investment incomec,d | 0.16 | ||
Net realized and unrealized gains (losses) | (0.70 | ) | |
Total from investment operations | (0.54 | ) | |
Less distributions from net investment income. | (0.12 | ) | |
Net asset value,end of period | $ | 9.34 | |
Total returne | (5.40 | )% | |
Ratios to average net assetsf | |||
Expenses before waiver and payments by affiliatesg | 9.66 | %h | |
Expenses net of waiver and payments by affiliatesg | 0.19 | % | |
Net investment incomed | 2.62 | % | |
Supplemental data | |||
Net assets,end of period(000’s) | $ | 1,817 | |
Portfolio turnover rate | 78.16 | % |
aFor the period May 1, 2015 (commencement of operations) to December 31, 2015.
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’s 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 0.78% for the year ended December 31, 2015.
hRatios are adjusted to exclude the effects of annualization for non-recurring expenses.
150 Annual Report | The accompanying notes are an integral part of these financial statements.
franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | |||
FINANCIAL HIGHLIGHTS | |||
Franklin LifeSmart 2055 Retirement Target Fund (continued) | |||
Year Ended | |||
December 31, | |||
2015 | a | ||
Class C | |||
Per share operating performance | |||
(for a share outstanding throughout the period) | |||
Net asset value, beginning of period. | $ | 10.00 | |
Income from investment operationsb: | |||
Net investment incomec,d | 0.24 | ||
Net realized and unrealized gains (losses) | (0.84 | ) | |
Total from investment operations | (0.60 | ) | |
Less distributions from net investment income. | (0.10 | ) | |
Net asset value,end of period | $ | 9.30 | |
Total returne | (5.99 | )% | |
Ratios to average net assetsf | |||
Expenses before waiver and payments by affiliatesg | 10.52 | %h | |
Expenses net of waiver and payments by affiliatesg | 1.05 | % | |
Net investment incomed | 1.76 | % | |
Supplemental data | |||
Net assets,end of period(000’s) | $ | 172 | |
Portfolio turnover rate | 78.16 | % |
aFor the period May 1, 2015 (commencement of operations) to December 31, 2015.
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’s 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 0.78% for the year ended December 31, 2015.
hRatios are adjusted to exclude the effects of annualization for non-recurring expenses.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 151
FRANKLIN FUND ALLOCATOR SERIES | |||
FINANCIAL HIGHLIGHTS | |||
Franklin LifeSmart 2055 Retirement Target Fund (continued) | |||
Year Ended | |||
December 31, | |||
2015 | a | ||
Class R | |||
Per share operating performance | |||
(for a share outstanding throughout the period) | |||
Net asset value, beginning of period. | $ | 10.00 | |
Income from investment operationsb: | |||
Net investment incomec,d | 0.18 | ||
Net realized and unrealized gains (losses) | (0.74 | ) | |
Total from investment operations | (0.56 | ) | |
Less distributions from net investment income. | (0.11 | ) | |
Net asset value,end of period | $ | 9.33 | |
Total returne | (5.61 | )% | |
Ratios to average net assetsf | |||
Expenses before waiver and payments by affiliatesg | 9.98 | %h | |
Expenses net of waiver and payments by affiliatesg | 0.51 | % | |
Net investment incomed | 2.30 | % | |
Supplemental data | |||
Netassets,endofperiod(000’s) | $ | 41 | |
Portfolio turnover rate | 78.16 | % |
aFor the period May 1, 2015 (commencement of operations) to December 31, 2015.
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’s 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 0.78% for the year ended December 31, 2015.
hRatios are adjusted to exclude the effects of annualization for non-recurring expenses.
152 Annual Report | The accompanying notes are an integral part of these financial statements.
franklintempleton.com
FRANKLIN FUND ALLOCATOR SERIES | |||
FINANCIAL HIGHLIGHTS | |||
Franklin LifeSmart 2055 Retirement Target Fund (continued) | |||
Year Ended | |||
December 31, | |||
2015 | a | ||
Class R6 | |||
Per share operating performance | |||
(for a share outstanding throughout the period) | |||
Net asset value, beginning of period. | $ | 10.00 | |
Income from investment operationsb: | |||
Net investment incomec,d | 0.32 | ||
Net realized and unrealized gains (losses) | (0.85 | ) | |
Total from investment operations | (0.53 | ) | |
Less distributions from net investment income. | (0.13 | ) | |
Net asset value,end of period | $ | 9.34 | |
Total returne | (5.33 | )% | |
Ratios to average net assetsf | |||
Expenses before waiver and payments by affiliatesg | 10.04 | %h | |
Expenses net of waiver and payments by affiliatesg | —% | ||
Net investment incomed | 2.81 | % | |
Supplemental data | |||
Net assets,end of period(000’s) | $ | 92 | |
Portfolio turnover rate | 78.16 | % |
aFor the period May 1, 2015 (commencement of operations) to December 31, 2015.
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’s 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 0.78% for the year ended December 31, 2015.
hRatios are adjusted to exclude the effects of annualization for non-recurring expenses.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 153
FRANKLIN FUND ALLOCATOR SERIES | |||
FINANCIAL HIGHLIGHTS | |||
Franklin LifeSmart 2055 Retirement Target Fund (continued) | |||
Year Ended | |||
December 31, | |||
2015 | a | ||
Advisor Class | |||
Per share operating performance | |||
(for a share outstanding throughout the period) | |||
Net asset value, beginning of period. | $ | 10.00 | |
Income from investment operationsb: | |||
Net investment incomec,d | 0.10 | ||
Net realized and unrealized gains (losses) | (0.63 | ) | |
Total from investment operations | (0.53 | ) | |
Less distributions from net investment income. | (0.12 | ) | |
Net asset value,end of period | $ | 9.35 | |
Total returne | (5.37 | )% | |
Ratios to average net assetsf | |||
Expenses before waiver and payments by affiliatesg | 9.52 | %h | |
Expenses net of waiver and payments by affiliatesg | 0.05 | % | |
Net investment incomed | 2.76 | % | |
Supplemental data | |||
Net assets,end of period(000’s) | $ | 11 | |
Portfolio turnover rate | 78.16 | % |
aFor the period May 1, 2015 (commencement of operations) to December 31, 2015.
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’s 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 0.78% for the year ended December 31, 2015.
hRatios are adjusted to exclude the effects of annualization for non-recurring expenses.
154 Annual Report | The accompanying notes are an integral part of these financial statements.
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FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2015 | |||
Franklin LifeSmart 2055 Retirement Target Fund | |||
Shares | Value | ||
Investments in Underlying Funds and Exchange Traded Funds 96.9% | |||
Alternative Strategies 8.4% | |||
aFranklin K2 Alternative Strategies Fund, Class R6 | 12,896 | $ | 137,348 |
a,bFranklin Pelagos Commodities Strategy Fund, Class R6 | 7,205 | 41,932 | |
179,280 | |||
Domestic Equity 48.6% | |||
Financial Select Sector SPDR ETF | 1,551 | 36,883 | |
a,bFranklin DynaTech Fund, Class R6 | 3,991 | 200,077 | |
aFranklin Focused Core Equity Fund, Class R6 | 15,642 | 215,396 | |
aFranklin Growth Fund, Class R6 | 3,057 | 224,279 | |
a,bFranklin Growth Opportunities Fund, Class R6 | 2,804 | 96,097 | |
aFranklin Real Estate Securities Fund, Class R6 | 988 | 22,243 | |
aFranklin Rising Dividends Fund, Class R6 | 2,377 | 113,346 | |
a,bFranklin Small Cap Growth Fund, Class R6 | 2,768 | 50,566 | |
aFranklin Utilities Fund, Class R6 | 2,725 | 42,300 | |
iShares S&P 500 Value ETF | 396 | 35,058 | |
1,036,245 | |||
Domestic Fixed Income 2.5% | |||
aFranklin Low Duration Total Return Fund, Class R6 | 3,475 | 33,983 | |
aFranklin Short Duration U.S. Government ETF | 20 | 1,960 | |
aFranklin Strategic Income Fund, Class R6 | 1,454 | 13,317 | |
iShares TIPS Bond ETF | 36 | 3,948 | |
53,208 | |||
Foreign Equity 35.1% | |||
Deutsche X-trackers MSCI Europe Hedged Equity ETF | 2,002 | 51,752 | |
a,bFranklin India Growth Fund, Class R6 | 4,630 | 56,441 | |
aFranklin International Growth Fund, Class R6 | 4,533 | 48,499 | |
aFranklin International Small Cap Growth Fund, Class R6 | 10,517 | 195,308 | |
aFranklin Mutual International Fund, Class R6 | 8,791 | 124,567 | |
iShares Core MSCI Emerging Markets ETF | 1,949 | 76,771 | |
iShares Global Infrastructure ETF | 497 | 17,867 | |
aTempleton Foreign Fund, Class R6 | 13,160 | 82,646 | |
aTempleton Frontier Markets Fund, Class R6 | 4,280 | 44,638 | |
WisdomTree Japan Hedged Equity ETF (Japan) | 981 | 49,128 | |
747,617 | |||
Foreign Fixed Income 2.3% | |||
aFranklin Emerging Market Debt Opportunities Fund | 563 | 5,500 | |
aTempleton Global Total Return Fund, Class R6 | 3,855 | 44,294 | |
49,794 | |||
Total Investments in Underlying Funds and Exchange Traded Funds | |||
before Short Term Investments (Cost $2,134,589) | 2,066,144 |
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Annual Report
155
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin LifeSmart 2055 Retirement Target Fund (continued) | |||
Shares | Value | ||
Short Term Investments (Cost $32,449) 1.5% | |||
Money Market Funds 1.5% | |||
a,bInstitutional Fiduciary Trust Money Market Portfolio | 32,449 | $ | 32,449 |
Total Investments in Underlying Funds and Exchange Traded Funds | |||
(Cost $2,167,038) 98.4% | 2,098,593 | ||
Other Assets, less Liabilities 1.6%. | 33,763 | ||
Net Assets 100.0% | $ | 2,132,356 |
See Abbreviations on page 194.
aSee Note 3f regarding investments in Underlying Funds.
bNon-income producing.
156 Annual Report | The accompanying notes are an integral part of these financial statements.
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FRANKLIN FUND ALLOCATOR SERIES | |||||||||||
Financial Statements | |||||||||||
Statements of Assets and Liabilities | |||||||||||
December 31, 2015 | |||||||||||
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) | $ | 69,159,858 | $ | 31,920,812 | $ | 101,420,954 | $ | 28,759,410 | |||
Cost - Exchange traded funds. | 10,370,640 | 4,932,681 | 22,145,408 | 4,666,493 | |||||||
Total cost of investments | $ | 79,530,498 | $ | 36,853,493 | $ | 123,566,362 | $ | 33,425,903 | |||
Value - Underlying Funds (Note 3f) | $ | 67,649,305 | $ | 30,565,783 | $ | 104,878,226 | $ | 27,229,945 | |||
Value - Exchange traded funds | 10,079,858 | 4,739,510 | 21,118,006 | 4,464,388 | |||||||
Total value of investments | 77,729,163 | 35,305,293 | 125,996,232 | 31,694,333 | |||||||
Receivables: | |||||||||||
Capital shares sold | 290,708 | 112,918 | 739,735 | 328,039 | |||||||
Dividends. | 2,103 | 382 | 1,288 | 193 | |||||||
Affiliates | 111,517 | — | 11,998 | — | |||||||
Other assets | 6 | 2 | 10 | — | |||||||
Total assets | 78,133,497 | 35,418,595 | 126,749,263 | 32,022,565 | |||||||
Liabilities: | |||||||||||
Payables: | |||||||||||
Capital shares redeemed | 413,498 | 19,121 | 189,626 | 8,320 | |||||||
Asset allocation fees | — | 7,458 | — | 6,226 | |||||||
Distribution fees | 59,885 | 19,467 | 84,527 | 12,849 | |||||||
Transfer agent fees | 3,955 | — | 5,430 | — | |||||||
Professional fees | 127,369 | 22,017 | 22,582 | 21,981 | |||||||
Reports to shareholders | 9,528 | 3,223 | 12,321 | 3,509 | |||||||
Affiliates | — | 1,673 | — | — | |||||||
Accrued expenses and other liabilities. | 192 | 16 | 254 | 16 | |||||||
Total liabilities | 614,427 | 72,975 | 314,740 | 52,901 | |||||||
Net assets, at value | $ | 77,519,070 | $ | 35,345,620 | $ | 126,434,523 | $ | 31,969,664 | |||
Net assets consist of: | |||||||||||
Paid-incapital | $ | 79,827,124 | $ | 37,188,129 | $ | 123,042,689 | $ | 33,577,675 | |||
Undistributed net investment income | 72,590 | 24,099 | 151,955 | 19,060 | |||||||
Net unrealized appreciation (depreciation) | (1,801,335 | ) | (1,548,200 | ) | 2,429,870 | (1,731,570 | ) | ||||
Accumulated net realized gain (loss) | (579,309 | ) | (318,408 | ) | 810,009 | 104,499 | |||||
Net assets, at value | $ | 77,519,070 | $ | 35,345,620 | $ | 126,434,523 | $ | 31,969,664 |
franklintempleton.com
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FRANKLIN FUND ALLOCATOR SERIES | ||||||||
FINANCIAL STATEMENTS | ||||||||
Statements of Assets and Liabilities (continued) | ||||||||
December 31, 2015 | ||||||||
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 | $ | 44,823,486 | $ | 19,894,930 | $ | 72,625,395 | $ | 13,631,208 |
Shares outstanding. | 4,159,748 | 1,874,691 | 6,345,794 | 1,244,492 | ||||
Net asset value per sharea | $ | 10.78 | $ | 10.61 | $ | 11.44 | $ | 10.95 |
Maximum offering price per share (net asset value | ||||||||
per share ÷ 94.25%) | $ | 11.44 | $ | 11.26 | $ | 12.14 | $ | 11.62 |
Class C: | ||||||||
Net assets, at value | $ | 20,857,901 | $ | 5,220,841 | $ | 29,424,697 | $ | 4,124,059 |
Shares outstanding. | 1,956,772 | 494,628 | 2,610,625 | 379,808 | ||||
Net asset value and maximum offering price per | ||||||||
sharea | $ | 10.66 | $ | 10.56 | $ | 11.27 | $ | 10.86 |
Class R: | ||||||||
Net assets, at value | $ | 4,129,747 | $ | 3,188,950 | $ | 6,061,845 | $ | 870,376 |
Shares outstanding. | 384,605 | 301,120 | 531,909 | 79,592 | ||||
Net asset value and maximum offering price per | ||||||||
share. | $ | 10.74 | $ | 10.59 | $ | 11.40 | $ | 10.94 |
Class R6: | ||||||||
Net assets, at value | $ | 6,827,788 | $ | 6,751,261 | $ | 17,128,898 | $ | 13,040,583 |
Shares outstanding. | 630,939 | 634,811 | 1,492,962 | 1,186,889 | ||||
Net asset value and maximum offering price per | ||||||||
share. | $ | 10.82 | $ | 10.64 | $ | 11.47 | $ | 10.99 |
Advisor Class: | ||||||||
Net assets, at value | $ | 880,148 | $ | 289,638 | $ | 1,193,688 | $ | 303,438 |
Shares outstanding. | 81,418 | 27,238 | 104,129 | 27,641 | ||||
Net asset value and maximum offering price per | ||||||||
share. | $ | 10.81 | $ | 10.63 | $ | 11.46 | $ | 10.98 |
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
158 Annual Report | The accompanying notes are an integral part of these financial statements.
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FINANCIAL STATEMENTS | ||||||||||
Statements of Assets and Liabilities (continued) | ||||||||||
December 31, 2015 | ||||||||||
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) | $ | 78,278,009 | $ | 20,408,116 | $ | 52,755,973 | $ | 15,486,933 | ||
Cost - Exchange traded funds. | 19,063,740 | 3,857,546 | 12,417,368 | 2,958,435 | ||||||
Total cost of investments | $ | 97,341,749 | $ | 24,265,662 | $ | 65,173,341 | $ | 18,445,368 | ||
Value - Underlying Funds (Note 3f) | $ | 81,435,268 | $ | 19,381,369 | $ | 54,915,739 | $ | 14,885,898 | ||
Value - Exchange traded funds | 18,133,521 | 3,670,468 | 11,812,183 | 2,813,132 | ||||||
Total value of investments | 99,568,789 | 23,051,837 | 66,727,922 | 17,699,030 | ||||||
Receivables: | ||||||||||
Capital shares sold | 903,119 | 328,978 | 535,036 | 203,992 | ||||||
Dividends. | 624 | 71 | 280 | 50 | ||||||
Affiliates | 15,080 | — | 23,258 | — | ||||||
Other assets | 7 | — | 6 | — | ||||||
Total assets | 100,487,619 | 23,380,886 | 67,286,502 | 17,903,072 | ||||||
Liabilities: | ||||||||||
Payables: | ||||||||||
Capital shares redeemed | 86,424 | 6,626 | 84,919 | 27,307 | ||||||
Assetallocationfees | — | 4,885 | — | 3,833 | ||||||
Distribution fees | 60,008 | 7,198 | 41,407 | 6,949 | ||||||
Professional fees | 22,349 | 21,958 | 22,190 | 22,012 | ||||||
Reports to shareholders | 11,209 | 3,408 | 10,033 | 3,925 | ||||||
Affiliates | — | 3,609 | — | 1,988 | ||||||
Accrued expenses and other liabilities. | 188 | 55 | 91 | — | ||||||
Total liabilities | 180,178 | 47,739 | 158,640 | 66,014 | ||||||
Net assets, at value | $ | 100,307,441 | $ | 23,333,147 | $ | 67,127,862 | $ | 17,837,058 | ||
Net assets consist of: | ||||||||||
Paid-incapital | $ | 96,750,654 | $ | 24,458,770 | $ | 64,729,626 | $ | 18,652,864 | ||
Undistributed net investment income | 35,154 | 7,408 | 21,338 | 5,526 | ||||||
Net unrealized appreciation (depreciation) | 2,227,040 | (1,213,825 | ) | 1,554,581 | (746,338 | ) | ||||
Accumulated net realized gain (loss) | 1,294,593 | 80,794 | 822,317 | (74,994 | ) | |||||
Net assets, at value | $ | 100,307,441 | $ | 23,333,147 | $ | 67,127,862 | $ | 17,837,058 |
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 159
FRANKLIN FUND ALLOCATOR SERIES | ||||||||
FINANCIAL STATEMENTS | ||||||||
Statements of Assets and Liabilities (continued) | ||||||||
December 31, 2015 | ||||||||
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 | $ | 53,700,703 | $ | 8,176,892 | $ | 38,443,850 | $ | 6,762,479 |
Shares outstanding. | 4,558,977 | 739,095 | 3,270,624 | 608,417 | ||||
Net asset value per sharea | $ | 11.78 | $ | 11.06 | $ | 11.75 | $ | 11.11 |
Maximum offering price per share (net asset value | ||||||||
per share ÷ 94.25%) | $ | 12.50 | $ | 11.73 | $ | 12.47 | $ | 11.79 |
Class C: | ||||||||
Net assets, at value | $ | 19,952,529 | $ | 1,988,387 | $ | 12,849,947 | $ | 1,920,879 |
Shares outstanding. | 1,728,704 | 181,246 | 1,119,155 | 173,582 | ||||
Net asset value and maximum offering price per | ||||||||
sharea | $ | 11.54 | $ | 10.97 | $ | 11.48 | $ | 11.07 |
Class R: | ||||||||
Net assets, at value | $ | 4,688,149 | $ | 1,009,338 | $ | 4,327,172 | $ | 747,036 |
Shares outstanding. | 398,292 | 91,315 | 369,488 | 67,188 | ||||
Net asset value and maximum offering price per | ||||||||
share. | $ | 11.77 | $ | 11.05 | $ | 11.71 | $ | 11.12 |
Class R6: | ||||||||
Net assets, at value | $ | 20,244,121 | $ | 12,037,250 | $ | 10,974,698 | $ | 8,012,473 |
Shares outstanding. | 1,707,907 | 1,084,665 | 927,938 | 718,162 | ||||
Net asset value and maximum offering price per | ||||||||
share. | $ | 11.85 | $ | 11.10 | $ | 11.83 | $ | 11.16 |
Advisor Class: | ||||||||
Net assets, at value | $ | 1,721,939 | $ | 121,280 | $ | 532,195 | $ | 394,191 |
Shares outstanding. | 145,146 | 10,932 | 44,984 | 35,326 | ||||
Net asset value and maximum offering price per | ||||||||
share. | $ | 11.86 | $ | 11.09 | $ | 11.83 | $ | 11.16 |
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
160 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, 2015 | |||
Franklin | |||
LifeSmart | |||
2055 Retirement | |||
Target Fund | |||
Assets: | |||
Cost - Underlying Funds (Note 3f) | $ | 1,881,149 | |
Cost - Exchange traded funds | 285,889 | ||
Total cost of investments | $ | 2,167,038 | |
Value - Underlying Funds (Note 3f) | $ | 1,827,186 | |
Value - Exchange traded funds. | 271,407 | ||
Total value of investments | 2,098,593 | ||
Cash | 31 | ||
Receivables: | |||
Capital shares sold | 1,098 | ||
Dividends | 4 | ||
Affiliates | 27,240 | ||
Offiering costs | 35,216 | ||
Total assets | 2,162,182 | ||
Liabilities: | |||
Payables: | |||
Capital shares redeemed | 2,428 | ||
Distribution fees | 233 | ||
Professional fees | 25,814 | ||
Reports to shareholders | 1,308 | ||
Accrued expenses and other liabilities | 43 | ||
Total liabilities | 29,826 | ||
Net assets, at value | $ | 2,132,356 | |
Net assets consist of: | |||
Paid-incapital | $ | 2,237,943 | |
Undistributed net investment income | 2,615 | ||
Net unrealized appreciation (depreciation) | (68,445 | ) | |
Accumulated net realized gain (loss) | (39,757 | ) | |
Net assets, at value | $ | 2,132,356 |
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 161
FRANKLIN FUND ALLOCATOR SERIES | |||
FINANCIAL STATEMENTS | |||
Statements of Assets and Liabilities (continued) | |||
December 31, 2015 | |||
Franklin | |||
LifeSmart | |||
2055 Retirement | |||
Target Fund | |||
Class A: | |||
Net assets,at value | $ | 1,816,611 | |
Shares outstanding | 194,492 | ||
Net asset value per sharea | $ | 9.34 | |
Maximum offering price per share (net asset value per share ÷ 94.25%) | $ | 9.91 | |
Class C: | |||
Net assets,at value | $ | 172,038 | |
Shares outstanding | 18,492 | ||
Net asset value and maximum offering price per sharea | $ | 9.30 | |
Class R: | |||
Net assets,at value | $ | 40,505 | |
Shares outstanding | 4,342 | ||
Net asset value and maximum offering price per share | $ | 9.33 | |
Class R6: | |||
Net assets,at value | $ | 92,369 | |
Shares outstanding | 9,889 | ||
Net asset value and maximum offering price per share | $ | 9.34 | |
Advisor Class: | |||
Net assets,at value | $ | 10,833 | |
Shares outstanding | 1,159 | ||
Net asset value and maximum offering price per share | $ | 9.35 |
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
162 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, 2015 | ||||||||||||
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) | $ | 1,823,346 | $ | 530,414 | $ | 1,828,641 | $ | 393,954 | ||||
Exchange traded funds | 272,012 | 94,017 | 493,800 | 94,870 | ||||||||
Total investment income | 2,095,358 | 624,431 | 2,322,441 | 488,824 | ||||||||
Expenses: | ||||||||||||
Asset allocation fees(Note3a) | 201,814 | 65,545 | 314,615 | 65,098 | ||||||||
Distribution fees: (Note 3c) | ||||||||||||
Class A | 132,800 | 36,957 | 200,889 | 26,650 | ||||||||
Class C | 216,080 | 41,331 | 296,028 | 29,428 | ||||||||
Class R | 17,819 | 5,189 | 28,915 | 3,007 | ||||||||
Transfer agent fees: (Note 3e) | ||||||||||||
Class A | 53,486 | 16,525 | 97,162 | 21,245 | ||||||||
Class C | 24,650 | 5,061 | 40,107 | 6,409 | ||||||||
Class R | 4,045 | 1,271 | 7,806 | 1,310 | ||||||||
Class R6 | 184 | 194 | 229 | 174 | ||||||||
Advisor Class | 2,468 | 294 | 4,346 | 363 | ||||||||
Custodian fees (Note 4) | 73 | 34 | 255 | 287 | ||||||||
Reports to shareholders | 17,613 | 6,067 | 27,346 | 10,366 | ||||||||
Registration and filing fees | 72,734 | 73,848 | 74,753 | 72,280 | ||||||||
Professional fees | 131,065 | 25,082 | 26,366 | 25,239 | ||||||||
Trustees’ fees and expenses | 582 | — | 880 | — | ||||||||
Other | 4,191 | 3,700 | 4,478 | 3,765 | ||||||||
Total expenses | 879,604 | 281,098 | 1,124,175 | 265,621 | ||||||||
Expense reductions (Note 4) | — | (9 | ) | — | (8 | ) | ||||||
Expenses waived/paid by affiliates (Note 3f | ||||||||||||
and 3g) | (475,608 | ) | (188,142 | ) | (542,978 | ) | (199,779 | ) | ||||
Net expenses | 403,996 | 92,947 | 581,197 | 65,834 | ||||||||
Net investment income. | 1,691,362 | 531,484 | 1,741,244 | 422,990 | ||||||||
Realized and unrealized gains (losses): | ||||||||||||
Net realized gain (loss) from: | ||||||||||||
Sale of investments: | ||||||||||||
Underlying Funds (Note 3f) | 205,223 | (495,985 | ) | 1,566,606 | (138,216 | ) | ||||||
Exchange traded funds | 277,272 | (83,463 | ) | 1,064,117 | (47,363 | ) | ||||||
Realized gain distributions: | ||||||||||||
Underlying Funds (Note 3f) | 403,395 | 331,971 | 1,420,581 | 393,666 | ||||||||
Exchange traded funds | 53,117 | 31,937 | 145,856 | 32,037 | ||||||||
Net realized gain(loss) | 939,007 | (215,540 | ) | 4,197,160 | 240,124 | |||||||
Net change in unrealized appreciation | ||||||||||||
(depreciation) on investments | (4,926,874 | ) | (1,337,865 | ) | (8,838,517 | ) | (1,488,443 | ) | ||||
Net realized and unrealized gain(loss) | (3,987,867 | ) | (1,553,405 | ) | (4,641,357 | ) | (1,248,319 | ) | ||||
Net increase (decrease) in net assets resulting from | ||||||||||||
operations | $ | (2,296,505 | ) | $ | (1,021,921 | ) | $ | (2,900,113 | ) | $ | (825,329 | ) |
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 163
FRANKLIN FUND ALLOCATOR SERIES | ||||||||||||
FINANCIAL STATEMENTS | ||||||||||||
Statements of Operations (continued) | ||||||||||||
for the year ended December 31, 2015 | ||||||||||||
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) | $ | 1,232,903 | $ | 258,161 | $ | 782,963 | $ | 204,689 | ||||
Exchange traded funds | 410,117 | 75,543 | 261,307 | 56,408 | ||||||||
Total investment income | 1,643,020 | 333,704 | 1,044,270 | 261,097 | ||||||||
Expenses: | ||||||||||||
Asset allocation fees(Note3a) | 251,665 | 48,088 | 164,204 | 36,495 | ||||||||
Distribution fees: (Note 3c) | ||||||||||||
Class A | 150,160 | 16,266 | 104,582 | 11,520 | ||||||||
Class C | 207,230 | 13,051 | 127,038 | 18,931 | ||||||||
Class R | 25,189 | 3,240 | 19,791 | 2,898 | ||||||||
Transfer agent fees: (Note 3e) | ||||||||||||
Class A | 95,904 | 18,356 | 103,948 | 23,154 | ||||||||
Class C | 36,947 | 4,041 | 35,324 | 10,374 | ||||||||
Class R | 8,981 | 2,007 | 10,941 | 3,177 | ||||||||
Class R6 | 156 | 206 | 188 | 196 | ||||||||
Advisor Class | 5,291 | 106 | 4,027 | 2,064 | ||||||||
Custodian fees (Note 4) | 166 | 28 | 108 | 21 | ||||||||
Reports to shareholders | 26,701 | 9,793 | 24,479 | 11,004 | ||||||||
Registration and filing fees. | 72,257 | 70,044 | 78,722 | 70,091 | ||||||||
Professional fees | 26,089 | 25,272 | 26,347 | 25,238 | ||||||||
Trustees’ fees and expenses | 703 | — | 456 | �� | ||||||||
Other | 4,350 | 3,760 | 4,060 | 3,674 | ||||||||
Total expenses | 911,789 | 214,258 | 704,215 | 218,837 | ||||||||
Expense reductions (Note 4) | — | (6 | ) | — | — | |||||||
Expenses waived/paid by affiliates (Note 3f | ||||||||||||
and 3g) | (487,937 | ) | (177,737 | ) | (424,990 | ) | (181,924 | ) | ||||
Net expenses | 423,852 | 36,515 | 279,225 | 36,913 | ||||||||
Net investment income. | 1,219,168 | 297,189 | 765,045 | 224,184 | ||||||||
Realized and unrealized gains (losses): | ||||||||||||
Net realized gain (loss) from: | ||||||||||||
Sale of investments: | ||||||||||||
Underlying Funds (Note 3f) | 1,488,146 | (124,536 | ) | 1,099,886 | (230,457 | ) | ||||||
Exchange traded funds | 857,040 | (54,188 | ) | 576,004 | (32,119 | ) | ||||||
Realized gain distributions: | ||||||||||||
Underlying Funds (Note 3f) | 1,306,543 | 308,262 | 915,075 | 255,521 | ||||||||
Exchange traded funds | 125,426 | 28,284 | 83,641 | 20,196 | ||||||||
Net realized gain (loss) | 3,777,155 | 157,822 | 2,674,606 | 13,141 | ||||||||
Net change in unrealized appreciation | ||||||||||||
(depreciation) on investments | (7,340,573 | ) | (1,035,503 | ) | (5,121,273 | ) | (685,003 | ) | ||||
Net realized and unrealized gain(loss) | (3,563,418 | ) | (877,681 | ) | (2,446,667 | ) | (671,862 | ) | ||||
Net increase (decrease) in net assets resulting from | ||||||||||||
operations | $ | (2,344,250 | ) | $ | (580,492 | ) | $ | (1,681,622 | ) | $ | (447,678 | ) |
164 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, 2015 | |||
Franklin | |||
LifeSmart | |||
2055 Retirement | |||
Target Funda | |||
Investment income: | |||
Dividends: | |||
Underlying Funds (Note 3f) | $ | 21,873 | |
Exchange traded funds | 4,348 | ||
Total investment income | 26,221 | ||
Expenses: | |||
Asset allocation fees(Note3a) | 2,333 | ||
Distribution fees: (Note 3c) | |||
Class A | 1,228 | ||
Class C | 332 | ||
Class R | 58 | ||
Transfer agent fees: (Note 3e) | |||
Class A | 1,980 | ||
Class C | 76 | ||
Class R | 29 | ||
Class R6 | 132 | ||
Advisor Class | 26 | ||
Reports to shareholders | 3,546 | ||
Registration and filing fees. | 4,150 | ||
Professional fees | 28,790 | ||
Amortization of offering costs (Note 1d) | 70,433 | ||
Other | 812 | ||
Total expenses | 113,925 | ||
Expenses waived/paid by affiliates (Note 3f and 3g) | (111,846 | ) | |
Net expenses | 2,079 | ||
Net investment income. | 24,142 | ||
Realized and unrealized gains (losses): | |||
Net realized gain (loss) from: | |||
Sale of investments: | |||
Underlying Funds (Note 3f) | (61,852 | ) | |
Exchange traded funds | (6,953 | ) | |
Realized gain distributions: | |||
Underlying Funds (Note 3f) | 29,945 | ||
Exchange traded funds | 2,470 | ||
Net realized gain (loss) | (36,390 | ) | |
Net change in unrealized appreciation (depreciation) on investments | (68,445 | ) | |
Net realized and unrealized gain(loss) | (104,835 | ) | |
Net increase (decrease) in net assets resulting from operations | $ | (80,693 | ) |
aFor the period May 1, 2015 (commencement of operations) to December 31, 2015.
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 165
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, | |||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||
Increase (decrease) in net assets: | ||||||||||||
Operations: | ||||||||||||
Net investment income | $ | 1,691,362 | $ | 2,327,715 | $ | 531,484 | $ | 314,434 | ||||
Netrealizedgain(loss) | 939,007 | 4,250,438 | (215,540 | ) | 223,246 | |||||||
Net change in unrealized appreciation (depreciation) on | ||||||||||||
investments | (4,926,874 | ) | (4,540,828 | ) | (1,337,865 | ) | (308,049 | ) | ||||
Net increase (decrease) in net assets resulting from operations . | (2,296,505 | ) | 2,037,325 | (1,021,921 | ) | 229,631 | ||||||
Distributions to shareholders from: | ||||||||||||
Net investment income: | ||||||||||||
Class A | (1,088,067 | ) | (1,534,945 | ) | (308,653 | ) | (154,362 | ) | ||||
Class C | (354,116 | ) | (544,147 | ) | (56,340 | ) | (46,024 | ) | ||||
Class R | (84,165 | ) | (87,705 | ) | (35,792 | ) | (1,539 | ) | ||||
Class R6 | (165,835 | ) | (183,415 | ) | (142,677 | ) | (148,729 | ) | ||||
Advisor Class | (51,057 | ) | (78,086 | ) | (5,439 | ) | (2,386 | ) | ||||
Net realized gains: | ||||||||||||
Class A | (1,353,620 | ) | (2,272,543 | ) | (126,473 | ) | (23,052 | ) | ||||
Class C | (628,392 | ) | (1,021,897 | ) | (40,392 | ) | (9,327 | ) | ||||
Class R | (115,856 | ) | (139,550 | ) | (5,233 | ) | (96 | ) | ||||
Class R6 | (182,595 | ) | (252,497 | ) | (66,359 | ) | (85 | ) | ||||
Advisor Class | (53,460 | ) | (106,864 | ) | (2,113 | ) | (99 | ) | ||||
Total distributions to shareholders | (4,077,163 | ) | (6,221,649 | ) | (789,471 | ) | (385,699 | ) | ||||
Capital share transactions: (Note 2) | ||||||||||||
Class A | 385,147 | 6,170,569 | 13,683,152 | 5,113,177 | ||||||||
Class C | 1,382,661 | 1,876,090 | 2,900,298 | 2,358,837 | ||||||||
Class R | 1,629,413 | 693,679 | 3,204,773 | 70,138 | ||||||||
Class R6 | 601,890 | 6,393,005 | (295,625 | ) | 7,507,430 | |||||||
Advisor Class | (1,147,815 | ) | (185,970 | ) | 206,408 | 59,654 | ||||||
Total capital share transactions | 2,851,296 | 14,947,373 | 19,699,006 | 15,109,236 | ||||||||
Net increase (decrease) in net assets | (3,522,372 | ) | 10,763,049 | 17,887,614 | 14,953,168 | |||||||
Net assets: | ||||||||||||
Beginning of year. | 81,041,442 | 70,278,393 | 17,458,006 | 2,504,838 | ||||||||
Endof year | $ | 77,519,070 | $ | 81,041,442 | $ | 35,345,620 | $ | 17,458,006 | ||||
Undistributed net investment income included in net assets: | ||||||||||||
Endof year | $ | 72,590 | $ | 72,541 | $ | 24,099 | $ | 3,171 |
166 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, | |||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||
Increase (decrease) in net assets: | ||||||||||||
Operations: | ||||||||||||
Net investment income. | $ | 1,741,244 | $ | 1,991,177 | $ | 422,990 | $ | 269,376 | ||||
Netrealizedgain(loss) | 4,197,160 | 6,825,214 | 240,124 | 324,712 | ||||||||
Net change in unrealized appreciation (depreciation) on | ||||||||||||
investments | (8,838,517 | ) | (4,675,189 | ) | (1,488,443 | ) | (297,002 | ) | ||||
Net increase (decrease) in net assets resulting from | ||||||||||||
operations | (2,900,113 | ) | 4,141,202 | (825,329 | ) | 297,086 | ||||||
Distributions to shareholders from: | ||||||||||||
Net investment income and short term gains received from | ||||||||||||
Underlying Funds and exchange traded funds: | ||||||||||||
Class A | (1,146,660 | ) | (1,441,714 | ) | (190,865 | ) | (78,129 | ) | ||||
Class C | (262,640 | ) | (434,794 | ) | (37,061 | ) | (25,790 | ) | ||||
Class R | (84,102 | ) | (105,712 | ) | (10,882 | ) | (654 | ) | ||||
Class R6 | (304,913 | ) | (250,682 | ) | (213,369 | ) | (215,145 | ) | ||||
Advisor Class | (43,678 | ) | (68,643 | ) | (4,843 | ) | (1,769 | ) | ||||
Net realized gains: | ||||||||||||
Class A | (2,902,737 | ) | (3,469,793 | ) | (128,435 | ) | (18,775 | ) | ||||
Class C | (1,205,749 | ) | (1,505,335 | ) | (38,391 | ) | (5,210 | ) | ||||
Class R | (238,635 | ) | (279,799 | ) | (10,438 | ) | (156 | ) | ||||
Class R6 | (643,001 | ) | (484,097 | ) | (164,477 | ) | (7,475 | ) | ||||
Advisor Class | (93,048 | ) | (146,176 | ) | (1,397 | ) | (495 | ) | ||||
Total distributions to shareholders. | (6,925,163 | ) | (8,186,745 | ) | (800,158 | ) | (353,598 | ) | ||||
Capital share transactions: (Note 2) | ||||||||||||
Class A | 10,373,548 | 11,229,371 | 9,308,260 | 3,759,369 | ||||||||
Class C | 3,020,435 | 4,410,269 | 2,381,848 | 1,816,743 | ||||||||
Class R | 1,179,900 | 694,943 | 890,825 | — | ||||||||
Class R6 | 4,346,437 | 12,323,031 | 1,563,335 | 12,169,466 | ||||||||
Advisor Class | (1,412,243 | ) | 419,109 | 212,537 | 16,324 | |||||||
Total capital share transactions | 17,508,077 | 29,076,723 | 14,356,805 | 17,761,902 | ||||||||
Net increase (decrease) in net assets | 7,682,801 | 25,031,180 | 12,731,318 | 17,705,390 | ||||||||
Net assets: | ||||||||||||
Beginning of year | 118,751,722 | 93,720,542 | 19,238,346 | 1,532,956 | ||||||||
Endof year | $ | 126,434,523 | $ | 118,751,722 | $ | 31,969,664 | $ | 19,238,346 | ||||
Undistributed net investment income included in net assets: | ||||||||||||
End of year | $ | 151,955 | $ | 73,935 | $ | 19,060 | $ | 7,071 |
franklintempleton.com
The accompanying notes are an integral part of these financial statements. | Annual Report 167
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, | |||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||
Increase (decrease) in net assets: | ||||||||||||
Operations: | ||||||||||||
Net investment income | $ | 1,219,168 | $ | 1,315,548 | $ | 297,189 | $ | 165,052 | ||||
Netrealizedgain(loss) | 3,777,155 | 4,614,128 | 157,822 | 257,493 | ||||||||
Net change in unrealized appreciation (depreciation) on | ||||||||||||
investments | (7,340,573 | ) | (2,514,544 | ) | (1,035,503 | ) | (215,383 | ) | ||||
Net increase (decrease) in net assets resulting from | ||||||||||||
operations | (2,344,250 | ) | 3,415,132 | (580,492 | ) | 207,162 | ||||||
Distributions to shareholders from: | ||||||||||||
Net investment income and short term gains received from | ||||||||||||
Underlying Funds and exchange traded funds: | ||||||||||||
Class A | (798,331 | ) | (895,972 | ) | (108,840 | ) | (42,238 | ) | ||||
Class C | (154,515 | ) | (236,163 | ) | (17,560 | ) | (7,930 | ) | ||||
Class R | (58,053 | ) | (72,060 | ) | (12,373 | ) | (489 | ) | ||||
Class R6 | (362,034 | ) | (338,158 | ) | (188,924 | ) | (152,975 | ) | ||||
Advisor Class | (30,069 | ) | (44,614 | ) | (1,878 | ) | (417 | ) | ||||
Net realized gains: | ||||||||||||
Class A | (2,031,863 | ) | (2,136,291 | ) | (82,422 | ) | (7,502 | ) | ||||
Class C | (785,148 | ) | (871,981 | ) | (16,073 | ) | (2,598 | ) | ||||
Class R | (184,958 | ) | (200,136 | ) | (8,186 | ) | (117 | ) | ||||
Class R6 | (713,641 | ) | (483,256 | ) | (146,303 | ) | (1,609 | ) | ||||
Advisor Class | (99,950 | ) | (93,256 | ) | (328 | ) | (115 | ) | ||||
Total distributions to shareholders | (5,218,562 | ) | (5,371,887 | ) | (582,887 | ) | (215,990 | ) | ||||
Capital share transactions: (Note 2) | ||||||||||||
Class A | 7,462,279 | 8,560,687 | 5,731,645 | 2,184,069 | ||||||||
Class C | 1,490,589 | 3,455,375 | 1,337,877 | 677,225 | ||||||||
Class R | 438,177 | 562,243 | 1,013,215 | 25,470 | ||||||||
Class R6 | 5,456,474 | 14,399,417 | 2,459,595 | 10,197,181 | ||||||||
Advisor Class | (226,869 | ) | 405,419 | 102,036 | (535 | ) | ||||||
Total capital share transactions | 14,620,650 | 27,383,141 | 10,644,368 | 13,083,410 | ||||||||
Net increase (decrease) in net assets | 7,057,838 | 25,426,386 | 9,480,989 | 13,074,582 | ||||||||
Net assets: | ||||||||||||
Beginning of year | 93,249,603 | 67,823,217 | 13,852,158 | 777,576 | ||||||||
End of year | $ | 100,307,441 | $ | 93,249,603 | $ | 23,333,147 | $ | 13,852,158 | ||||
Undistributed net investment income included in net assets: | ||||||||||||
End of year | $ | 35,154 | $ | 60,259 | $ | 7,408 | $ | 2,348 |
168 Annual Report | The accompanying notes are an integral part of these financial statements.
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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, | |||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||
Increase (decrease) in net assets: | ||||||||||||
Operations: | ||||||||||||
Net investment income | $ | 765,045 | $ | 771,302 | $ | 224,184 | $ | 116,813 | ||||
Netrealizedgain(loss) | 2,674,606 | 3,226,523 | 13,141 | 179,275 | ||||||||
Net change in unrealized appreciation (depreciation) on investments . | (5,121,273 | ) | (1,699,413 | ) | (685,003 | ) | (100,101 | ) | ||||
Net increase (decrease) in net assets resulting from operations | (1,681,622 | ) | 2,298,412 | (447,678 | ) | 195,987 | ||||||
Distributions to shareholders from: | ||||||||||||
Net investment income and short term gains received from Underlying | ||||||||||||
Funds and exchange traded funds: | ||||||||||||
Class A | (544,273 | ) | (573,874 | ) | (95,084 | ) | (33,806 | ) | ||||
Class C | (96,180 | ) | (128,295 | ) | (11,718 | ) | (10,280 | ) | ||||
Class R | (53,546 | ) | (46,475 | ) | (8,954 | ) | (427 | ) | ||||
Class R6 | (187,956 | ) | (177,480 | ) | (129,036 | ) | (96,340 | ) | ||||
Advisor Class | (9,105 | ) | (32,068 | ) | (6,199 | ) | (5,638 | ) | ||||
Net realized gains: | ||||||||||||
Class A | (1,584,955 | ) | (1,473,826 | ) | (55,180 | ) | (8,447 | ) | ||||
Class C | (547,282 | ) | (526,372 | ) | (23,832 | ) | (3,776 | ) | ||||
Class R | (171,688 | ) | (179,450 | ) | (8,578 | ) | (105 | ) | ||||
Class R6 | (432,871 | ) | (284,880 | ) | (97,907 | ) | (9,214 | ) | ||||
Advisor Class | (42,264 | ) | (68,278 | ) | (5,059 | ) | (1,645 | ) | ||||
Total distributions to shareholders | (3,670,120 | ) | (3,490,998 | ) | (441,547 | ) | (169,678 | ) | ||||
Capital share transactions: (Note 2) | ||||||||||||
Class A | 7,216,077 | 6,825,898 | 4,788,596 | 1,768,589 | ||||||||
Class C | 2,112,034 | 2,521,308 | 1,084,549 | 846,022 | ||||||||
Class R | 1,195,580 | (1,071,543 | ) | 764,197 | 21,467 | |||||||
Class R6 | 2,844,341 | 7,635,222 | 2,034,275 | 6,371,333 | ||||||||
Advisor Class | (969,173 | ) | 417,920 | 84,988 | 243,508 | |||||||
Total capital share transactions | 12,398,859 | 16,328,805 | 8,756,605 | 9,250,919 | ||||||||
Net increase (decrease) in net assets | 7,047,117 | 15,136,219 | 7,867,380 | 9,277,228 | ||||||||
Net assets: | ||||||||||||
Beginning of year | 60,080,745 | 44,944,526 | 9,969,678 | 692,450 | ||||||||
End of year | $ | 67,127,862 | $ | 60,080,745 | $ | 17,837,058 | $ | 9,969,678 | ||||
Undistributed net investment income included in net assets: | ||||||||||||
End of year | $ | 21,338 | $ | 37,376 | $ | 5,526 | $ | 2,798 |
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The accompanying notes are an integral part of these financial statements. | Annual Report 169
FRANKLIN FUND ALLOCATOR SERIES | |||
FINANCIAL STATEMENTS | |||
Statements of Changes in Net Assets (continued) | |||
Franklin LifeSmart 2055 | |||
Retirement Target Fund | |||
Year Ended December 31, | |||
2015 | a | ||
Increase (decrease) in net assets: | |||
Operations: | |||
Net investment income | $ | 24,142 | |
Net realized gain (loss) | (36,390 | ) | |
Net change in unrealized appreciation (depreciation) on investments | (68,445 | ) | |
Net increase (decrease) in net assets resulting from operations | (80,693 | ) | |
Distributions to shareholders from: | |||
Net investment income: | |||
Class A | (22,241 | ) | |
Class C | (1,725 | ) | |
Class R | (430 | ) | |
Class R6 | (1,096 | ) | |
Advisor Class. | (188 | ) | |
Total distributions to shareholders | (25,680 | ) | |
Capital share transactions: (Note 2) | |||
Class A | 1,916,233 | ||
Class C | 175,801 | ||
Class R | 41,177 | ||
Class R6 | 94,760 | ||
Advisor Class. | 10,758 | ||
Total capital share transactions | 2,238,729 | ||
Net increase (decrease) in net assets | 2,132,356 | ||
Net assets: | |||
End of period | $ | 2,132,356 | |
Undistributed net investment income included in net assets: | |||
End of period | $ | 2,615 |
aFor the period May 1, 2015 (commencement of operations) to Decemeber 31, 2015.
170 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 (1940 Act) as an open-end management investment company, consisting of twenty separate funds, nine 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.
Effective May 1, 2015, the Trust began offering shares of Franklin LifeSmart 2055 Retirement Target Fund.
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.
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 as of 4 p.m. Eastern time each day the New York Stock Exchange (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 may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of December 31, 2015, each Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (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’s 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 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.
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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 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.
2. Shares of Beneficial Interest
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.
At December 31, 2015, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:
Franklin LifeSmart 2015 | Franklin LifeSmart 2020 | |||||||||
Retirement Target Fund | Retirement Target Fund | |||||||||
Shares | Amount | Shares | Amount | |||||||
Class A Shares: | ||||||||||
Year ended December 31, 2015 | ||||||||||
Shares sold. | 973,153 | $ | 11,205,849 | 1,392,607 | $ | 15,612,200 | ||||
Shares issued in reinvestment of distributions | 214,383 | 2,395,400 | 39,788 | 434,025 | ||||||
Shares redeemed | (1,151,060 | ) | (13,216,102 | ) | (213,489 | ) | (2,363,073 | ) | ||
Net increase (decrease) | 36,476 | $ | 385,147 | 1,218,906 | $ | 13,683,152 | ||||
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 |
172 Annual Report
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NOTES TO FINANCIAL STATEMENTS | ||||||||||||
Franklin LifeSmart 2015 | Franklin LifeSmart 2020 | |||||||||||
Retirement Target Fund | Retirement Target Fund | |||||||||||
Shares | Amount | Shares | Amount | |||||||||
Class C Shares: | ||||||||||||
Year ended December 31, 2015 | ||||||||||||
Shares sold. | 592,001 | $ | 6,765,028 | 298,398 | $ | 3,335,955 | ||||||
Shares issued in reinvestment of distributions | 80,147 | 885,056 | 8,855 | 96,732 | ||||||||
Shares redeemed | (549,866 | ) | (6,267,423 | ) | (48,748 | ) | (532,389 | ) | ||||
Net increase(decrease) | 122,282 | $ | 1,382,661 | 258,505 | $ | 2,900,298 | ||||||
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 | ||||||
Class R Shares: | ||||||||||||
Year ended December 31, 2015 | ||||||||||||
Shares sold. | 195,376 | $ | 2,265,532 | 463,394 | $ | 5,051,664 | ||||||
Shares issued in reinvestment of distributions | 14,948 | 165,845 | 3,795 | 40,748 | ||||||||
Shares redeemed | (68,746 | ) | (801,964 | ) | (173,248 | ) | (1,887,639 | ) | ||||
Net increase(decrease) | 141,578 | $ | 1,629,413 | 293,941 | $ | 3,204,773 | ||||||
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 | ||||||
Class R6 Shares: | ||||||||||||
Year ended December 31, 2015 | ||||||||||||
Shares sold. | 235,799 | $ | 2,670,433 | 178,632 | $ | 1,986,882 | ||||||
Shares issued in reinvestment of distributions | 9,057 | 100,098 | 45 | 498 | ||||||||
Shares redeemed | (186,483 | ) | (2,168,641 | ) | (203,836 | ) | (2,283,005 | ) | ||||
Net increase(decrease) | 58,373 | $ | 601,890 | (25,159 | ) | $ | (295,625 | ) | ||||
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 | ||||||
Advisor Class Shares: | ||||||||||||
Year ended December 31, 2015 | ||||||||||||
Shares sold. | 88,654 | $ | 1,049,107 | 17,899 | $ | 200,490 | ||||||
Shares issued in reinvestment of distributions | 8,792 | 100,183 | 660 | 7,230 | ||||||||
Shares redeemed | (203,369 | ) | (2,297,105 | ) | (120 | ) | (1,312 | ) | ||||
Net increase(decrease) | (105,923 | ) | $ | (1,147,815 | ) | 18,439 | $ | 206,408 | ||||
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 |
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NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest (continued) | ||||||||||
Franklin LifeSmart 2025 | Franklin LifeSmart 2030 | |||||||||
Retirement Target Fund | Retirement Target Fund | |||||||||
Shares | Amount | Shares | Amount | |||||||
Class A Shares: | ||||||||||
Year ended December 31, 2015 | ||||||||||
Shares sold. | 1,528,081 | $ | 18,880,592 | 932,809 | $ | 10,837,370 | ||||
Shares issued in reinvestment of distributions | 335,147 | 3,961,975 | 28,188 | 319,300 | ||||||
Shares redeemed | (1,006,678 | ) | (12,469,019 | ) | (161,801 | ) | (1,848,410 | ) | ||
Net increase(decrease) | 856,550 | $ | 10,373,548 | 799,196 | $ | 9,308,260 | ||||
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 | ||||
Class C Shares: | ||||||||||
Year ended December 31, 2015 | ||||||||||
Shares sold. | 602,003 | $ | 7,312,275 | 233,042 | $ | 2,659,877 | ||||
Shares issued in reinvestment of distributions | 111,479 | 1,303,507 | 6,671 | 75,452 | ||||||
Shares redeemed | (459,633 | ) | (5,595,347 | ) | (31,328 | ) | (353,481 | ) | ||
Net increase(decrease) | 253,849 | $ | 3,020,435 | 208,385 | $ | 2,381,848 | ||||
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 | ||||
Class R Shares: | ||||||||||
Year ended December 31, 2015 | ||||||||||
Shares sold. | 220,123 | $ | 2,709,282 | 91,080 | $ | 1,064,956 | ||||
Shares issued in reinvestment of distributions | 22,236 | 261,497 | 1,874 | 21,320 | ||||||
Shares redeemed | (145,782 | ) | (1,790,879 | ) | (17,524 | ) | (195,451 | ) | ||
Net increase(decrease) | 96,577 | $ | 1,179,900 | 75,430 | $ | 890,825 | ||||
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 | ) | $ | — | |||
Class R6 Shares: | ||||||||||
Year ended December 31, 2015 | ||||||||||
Shares sold. | 513,098 | $ | 6,235,994 | 283,129 | $ | 3,266,625 | ||||
Shares issued in reinvestment of distributions | 28,125 | 330,182 | 16 | 177 | ||||||
Shares redeemed | (178,920 | ) | (2,219,739 | ) | (145,942 | ) | (1,703,467 | ) | ||
Net increase(decrease) | 362,303 | $ | 4,346,437 | 137,203 | $ | 1,563,335 | ||||
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 |
174 Annual Report
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NOTES TO FINANCIAL STATEMENTS | |||||||||||||
Franklin LifeSmart 2025 | Franklin LifeSmart 2030 | ||||||||||||
Retirement Target Fund | Retirement Target Fund | ||||||||||||
Shares | Amount | Shares | Amount | ||||||||||
Advisor Class Shares: | |||||||||||||
Year ended December 31, 2015 | |||||||||||||
Shares sold. | 209,451 | $ | 2,626,182 | 18,319 | $ | 206,738 | |||||||
Shares issued in reinvestment of distributions | 10,201 | 123,266 | 557 | 6,239 | |||||||||
Shares redeemed | (342,773 | ) | (4,161,691 | ) | (40 | ) | (440 | ) | |||||
Net increase(decrease) | (123,121 | ) | $ | (1,412,243 | ) | 18,836 | $ | 212,537 | |||||
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 | |||||||
Franklin LifeSmart 2035 | Franklin LifeSmart 2040 | ||||||||||||
Retirement Target Fund | Retirement Target Fund | ||||||||||||
Shares | Amount | Shares | Amount | ||||||||||
Class A Shares: | |||||||||||||
Year ended December 31, 2015 | |||||||||||||
Shares sold | 1,076,865 | $ | 13,700,625 | 562,549 | $ | 6,582,647 | |||||||
Shares issued in reinvestment of distributions | 225,650 | 2,759,202 | 16,652 | 191,262 | |||||||||
Shares redeemed | (709,732 | ) | (8,997,548 | ) | (89,668 | ) | (1,042,264 | ) | |||||
Net increase(decrease) | 592,783 | $ | 7,462,279 | 489,533 | $ | 5,731,645 | |||||||
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 | |||||||
Class C Shares: | |||||||||||||
Year ended December 31, 2015 | |||||||||||||
Shares sold | 443,414 | $ | 5,544,032 | 124,228 | $ | 1,426,858 | |||||||
Shares issued in reinvestment of distributions | 68,829 | 828,272 | 2,943 | 33,633 | |||||||||
Shares redeemed | (389,881 | ) | (4,881,715 | ) | (10,742 | ) | (122,614 | ) | |||||
Net increase(decrease) | 122,362 | $ | 1,490,589 | 116,429 | $ | 1,337,877 | |||||||
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 |
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NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest (continued) | ||||||||||
Franklin LifeSmart 2035 | Franklin LifeSmart 2040 | |||||||||
Retirement Target Fund | Retirement Target Fund | |||||||||
Shares | Amount | Shares | Amount | |||||||
Class R Shares: | ||||||||||
Year ended December 31, 2015 | ||||||||||
Shares sold | 235,763 | $ | 2,977,376 | 90,481 | $ | 1,040,148 | ||||
Shares issued in reinvestment of distributions | 16,450 | 201,269 | 1,771 | 20,266 | ||||||
Shares redeemed | (215,445 | ) | (2,740,468 | ) | (4,154 | ) | (47,199 | ) | ||
Net increase (decrease) | 36,768 | $ | 438,177 | 88,098 | $ | 1,013,215 | ||||
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 | ||||
Class R6 Shares: | ||||||||||
Year ended December 31, 2015 | ||||||||||
Shares sold | 602,113 | $ | 7,663,347 | 300,914 | $ | 3,530,413 | ||||
Shares issued in reinvestment of distributions | 16,122 | 195,564 | 156 | 1,771 | ||||||
Shares redeemed | (186,031 | ) | (2,402,437 | ) | (91,277 | ) | (1,072,589 | ) | ||
Net increase (decrease) | 432,204 | $ | 5,456,474 | 209,793 | $ | 2,459,595 | ||||
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 | ||||
Advisor Class Shares: | ||||||||||
Year ended December 31, 2015 | ||||||||||
Shares sold | 134,090 | $ | 1,764,715 | 8,985 | $ | 102,847 | ||||
Shares issued in reinvestment of distributions | 10,290 | 128,983 | 167 | 1,875 | ||||||
Shares redeemed | (170,297 | ) | (2,120,567 | ) | (225 | ) | (2,686 | ) | ||
Net increase (decrease) | (25,917 | ) | $ | (226,869 | ) | 8,927 | $ | 102,036 | ||
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 | ) |
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NOTES TO FINANCIAL STATEMENTS | |||||||||||
Franklin LifeSmart 2045 | Franklin LifeSmart 2050 | ||||||||||
Retirement Target Fund | Retirement Target Fund | ||||||||||
Shares | Amount | Shares | Amount | ||||||||
Class A Shares: | |||||||||||
Year ended December 31, 2015 | |||||||||||
Shares sold. | 883,349 | $ | 11,288,810 | 554,153 | $ | 6,452,878 | |||||
Shares issued in reinvestment of distributions | 167,732 | 2,049,189 | 13,085 | 150,263 | |||||||
Shares redeemed | (478,747 | ) | (6,121,922 | ) | (158,400 | ) | (1,814,545 | ) | |||
Net increase (decrease) | 572,334 | $ | 7,216,077 | 408,838 | $ | 4,788,596 | |||||
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 | |||||
Class C Shares: | |||||||||||
Year ended December 31, 2015 | |||||||||||
Shares sold. | 325,360 | $ | 4,061,846 | 194,129 | $ | 2,242,175 | |||||
Shares issued in reinvestment of distributions | 45,707 | 547,376 | 3,048 | 35,550 | |||||||
Shares redeemed | (200,707 | ) | (2,497,188 | ) | (105,118 | ) | (1,193,176 | ) | |||
Net increase (decrease) | 170,360 | $ | 2,112,034 | 92,059 | $ | 1,084,549 | |||||
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 | |||||
Class R Shares: | |||||||||||
Year ended December 31, 2015 | |||||||||||
Shares sold. | 176,848 | $ | 2,243,687 | 67,880 | $ | 803,789 | |||||
Shares issued in reinvestment of distributions | 15,550 | 189,048 | 1,488 | 17,241 | |||||||
Shares redeemed | (97,349 | ) | (1,237,155 | ) | (5,020 | ) | (56,833 | ) | |||
Net increase (decrease) | 95,049 | $ | 1,195,580 | 64,348 | $ | 764,197 | |||||
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 | |||
Class R6 Shares: | |||||||||||
Year ended December 31, 2015 | |||||||||||
Shares sold. | 344,636 | $ | 4,380,137 | 291,568 | $ | 3,426,061 | |||||
Shares issued in reinvestment of distributions | 12,066 | 146,695 | 62 | 716 | |||||||
Shares redeemed | (132,611 | ) | (1,682,491 | ) | (118,419 | ) | (1,392,502 | ) | |||
Net increase (decrease) | 224,091 | $ | 2,844,341 | 173,211 | $ | 2,034,275 | |||||
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 | —a | 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 |
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2. Shares of Beneficial Interest (continued) | ||||||||||
Franklin LifeSmart 2045 | Franklin LifeSmart 2050 | |||||||||
Retirement Target Fund | Retirement Target Fund | |||||||||
Shares | Amount | Shares | Amount | |||||||
Advisor Class Shares: | ||||||||||
Year ended December 31, 2015 | ||||||||||
Shares sold. | 43,019 | $ | 559,430 | 7,432 | $ | 87,275 | ||||
Shares issued in reinvestment of distributions | 4,069 | 51,369 | 971 | 11,258 | ||||||
Shares redeemed | (125,572 | ) | (1,579,972 | ) | (1,173 | ) | (13,545 | ) | ||
Net increase(decrease) | (78,484 | ) | $ | (969,173 | ) | 7,230 | $ | 84,988 | ||
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 |
aRounds to less than 1 share. | ||||||
Franklin LifeSmart 2055 | ||||||
Retirement Target Fundb | ||||||
Shares | Amount | |||||
Class A Shares: | ||||||
Year ended December 31, 2015 | ||||||
Shares sold | 239,222 | $ | 2,334,995 | |||
Shares issued in reinvestment of distributions | 1,127 | 10,572 | ||||
Shares redeemed | (45,857 | ) | (429,334 | ) | ||
Net increase (decrease) | 194,492 | $ | 1,916,233 | |||
Class C Shares: | ||||||
Year ended December 31, 2015 | ||||||
Shares sold | 18,474 | $ | 175,668 | |||
Shares issued in reinvestment of distributions | 174 | 1,624 | ||||
Shares redeemed | (156 | ) | (1,491 | ) | ||
Net increase (decrease) | 18,492 | $ | 175,801 | |||
Class R Shares: | ||||||
Year ended December 31, 2015 | ||||||
Shares sold | 4,310 | $ | 40,876 | |||
Shares issued in reinvestment of distributions | 34 | 321 | ||||
Shares redeemed | (2 | ) | (20 | ) | ||
Net increase (decrease) | 4,342 | $ | 41,177 | |||
Class R6 Shares: | ||||||
Year ended December 31, 2015 | ||||||
Shares sold | 10,115 | $ | 96,879 | |||
Shares issued in reinvestment of distributions | 103 | 969 | ||||
Shares redeemed | (329 | ) | (3,088 | ) | ||
Net increase (decrease) | 9,889 | $ | 94,760 |
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NOTES TO FINANCIAL STATEMENTS
Franklin LifeSmart 2055 | |||||
Retirement Target Fundb | |||||
Shares | Amount | ||||
Advisor Class Shares: | |||||
Year ended December 31, 2015 | |||||
Shares sold | 4,734 | $ | 44,866 | ||
Shares issued in reinvestment of distributions | 7 | 64 | |||
Shares redeemed | (3,582 | ) | (34,172 | ) | |
Netincrease(decrease) | 1,159 | $ | 10,758 |
bFor the period May 1, 2015 (commencement of operations) to December 31, 2015.
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
Under an agreement with Advisers, FT Services 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. 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.
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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 0.25% per year for Class A shares, effective August 1, 2015, until further notice and approval by the Board. Prior to August 1, 2015, the Board had set the rate at 0.30% per year for Class A shares.
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 brokers/dealers | $ | 21,826 | $ | 21,220 | $ | 70,309 | $ | 28,103 |
CDSC retained | $ | 7,459 | $ | 853 | $ | 3,523 | $ | 1,154 |
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 brokers/dealers | $ | 53,747 | $ | 18,198 | $ | 49,595 | $ | 21,515 |
CDSC retained | $ | 2,541 | $ | 673 | $ | 2,671 | $ | 273 |
Franklin | ||||||||
LifeSmart | ||||||||
2055 Retirement | ||||||||
Target Fund | ||||||||
Sales charges retained net of commissions paid to | ||||||||
unaffiliated brokers/dealers | $ | 3,104 | ||||||
CDSC retained | $ | 7 | ||||||
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.
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NOTES TO FINANCIAL STATEMENTS
For the year ended December 31, 2015, 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 | $ | 45,183 | $ | 14,623 | $ | 85,032 | $ | 17,171 |
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 | $ | 84,390 | $ | 16,131 | $ | 98,575 | $ | 27,203 |
Franklin | ||||||||
LifeSmart | ||||||||
2055 Retirement | ||||||||
Target Fund | ||||||||
Transfer agent fees | $ | 1,790 |
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 in 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, 2015, were as follows: | |||||||||||||
% of | |||||||||||||
Underlying | |||||||||||||
Number of | Number of | Fund Shares | |||||||||||
Shares Held | Shares | Value | Outstanding | ||||||||||
at Beginning | Gross | Gross Held at End | at End Investment | Realized | Held at End | ||||||||
Underlying Funds | of Year | Additions | Reductions | of Year | of Year | Income | Gain (Loss) | of Year | |||||
Franklin LifeSmart 2015 Retirement | |||||||||||||
Target Fund | |||||||||||||
Franklin Biotechnology Discovery | |||||||||||||
Fund, Class R6 | 2,940 | — | (2,940 | ) | — | $ | —a $ | — | $ | 186,552 | — | ||
Franklin DynaTech Fund, Class R6 | 43,651 | 12,776 | (4,848 | ) | 51,579 | 2,585,677 | — | 144,253 | b | 0.08 | % | ||
Franklin Emerging Market Debt | |||||||||||||
Opportunities Fund | 252,312 | 57,505 | (48,113 | ) | 261,704 | 2,556,850 | 143,823 | (87,001 | ) | 0.40 | % | ||
Franklin Focused Core Equity Fund, | |||||||||||||
Class R6 | 140,564 | 74,132 | (16,826 | ) | 197,870 | 2,724,668 | 20,167 | 55,558 | b | 1.33 | % | ||
Franklin Growth Fund, Class R6 | 45,066 | 6,776 | (14,841 | ) | 37,001 | 2,714,732 | 30,798 | 147,376 | b | 0.02 | % | ||
Franklin Growth Opportunities Fund, | |||||||||||||
Class R6 | 45,912 | 806 | (4,088 | ) | 42,630 | 1,460,943 | — | 35,790 | b | 0.11 | % | ||
Franklin India Growth Fund, Class R6. | — | 77,890 | (4,907 | ) | 72,983 | 889,669 | — | (3,042 | ) | 0.74 | % | ||
Franklin International Growth Fund, | |||||||||||||
Class R6 | — | 65,656 | (4,082 | ) | 61,574 | 658,837 | 3,235 | (3,469 | ) | 0.15 | % | ||
Franklin International Small Cap | |||||||||||||
Growth Fund, Class R6 | 116,071 | 14,719 | (10,350 | ) | 120,440 | 2,236,571 | 40,830 | 53,066 | b | 0.12 | % | ||
Franklin K2 Alternative Strategies | |||||||||||||
Fund, Class R6 | 229,276 | 231,070 | (9,066 | ) | 451,280 | 4,806,132 | 74,556 | 15,786 | b | —c |
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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 | Value | Outstanding | |||||||||||
at Beginning | Gross | Gross Held at End | at End | Investment | Realized | Held at End | ||||||||
Underlying Funds | of Year | Additions | Reductions | of Year | of Year | Income | Gain (Loss) | of Year | ||||||
Franklin LifeSmart 2015 Retirement | ||||||||||||||
Target Fund (continued) | ||||||||||||||
Franklin Low Duration Total Return | �� | |||||||||||||
Fund, Class R6 | 1,480,629 | 281,363 | (309,386 | ) | 1,452,606 | $ | 14,206,491 | $ | 354,224 | $ | (65,427 | ) | 0.57 | % |
Franklin Mutual International Fund, | ||||||||||||||
Class R6 | 131,527 | 3,950 | (11,895 | ) | 123,582 | 1,751,154 | 20,948 | 17,989 | b | 0.79 | % | |||
Franklin Pelagos Commodities | ||||||||||||||
Strategy Fund, Class R6 | 89,402 | 168,899 | — | 258,301 | 1,503,310 | — | — | 1.28 | % | |||||
Franklin Real Estate Securities Fund, | ||||||||||||||
Class R6 | 21,231 | 317 | (6,441 | ) | 15,107 | 340,199 | 6,786 | 42,147 | 0.06 | % | ||||
Franklin Rising Dividends Fund, | ||||||||||||||
Class R6 | 48,592 | 1,391 | (26,483 | ) | 23,500 | 1,120,735 | 26,123 | 508,296 | b | 0.01 | % | |||
Franklin Short Duration U.S. | ||||||||||||||
Government ETF | — | 11,574 | — | 11,574 | 1,134,567 | 10,135 | — | —c | ||||||
Franklin Small Cap Growth Fund, | ||||||||||||||
Class R6 | 39,435 | 689 | (3,555 | ) | 36,569 | 668,119 | — | 22,921 | b | 0.02 | % | |||
Franklin Strategic Income Fund, | ||||||||||||||
Class R6 | 525,202 | 115,615 | (111,537 | ) | 529,280 | 4,848,207 | 224,126 | (97,913 | ) | 0.06 | % | |||
Franklin Utilities Fund, Class R6 | 66,067 | 2,351 | (39,087 | ) | 29,331 | 455,215 | 23,078 | 236,111 | b | 0.01 | % | |||
Institutional Fiduciary Trust Money | ||||||||||||||
Market Portfolio | 1,466,544 | 23,626,952 | (23,514,352 | ) | 1,579,144 | 1,579,144 | — | — | 0.01 | % | ||||
Templeton China World Fund, | ||||||||||||||
Class R6 | 15,700 | — | (15,700 | ) | — | —a | — | 96,655 | — | |||||
Templeton Foreign Fund, Class R6 | 133,447 | 2,527 | (11,895 | ) | 124,079 | 779,214 | 15,255 | 4,944 | b | 0.01 | % | |||
Templeton Frontier Markets Fund, | ||||||||||||||
Class R6 | 55,581 | 4,108 | (5,007 | ) | 54,682 | 570,331 | 43,134 | (13,961 | ) | 0.17 | % | |||
Templeton Global Total Return Fund, | ||||||||||||||
Class R6 | 1,575,696 | 332,388 | (336,410 | ) | 1,571,674 | 18,058,540 | 786,128 | (688,013 | ) | 0.27 | % | |||
Total | $ | 67,649,305 | $ | 1,823,346 | $ | 608,618 | ||||||||
Franklin LifeSmart 2020 Retirement | ||||||||||||||
Target Fund | ||||||||||||||
Franklin Biotechnology Discovery | ||||||||||||||
Fund, Class R6 | 820 | 610 | (1,430 | ) | — | $ | —a $ — | $ | 16,027 | — | ||||
Franklin DynaTech Fund, Class R6 | 17,226 | 22,291 | (4,999 | ) | 34,518 | 1,730,393 | — | 38,874 | b | 0.05 | % | |||
Franklin Emerging Market Debt | ||||||||||||||
Opportunities Fund | 27,473 | 41,445 | (9,959 | ) | 58,959 | 576,025 | 28,688 | (18,732 | ) | 0.09 | % | |||
Franklin Focused Core Equity Fund, | ||||||||||||||
Class R6 | 51,900 | 127,327 | (22,242 | ) | 156,985 | 2,161,682 | 17,475 | 16,878 | b | 1.06 | % | |||
Franklin Growth Fund, Class R6 | 18,344 | 20,632 | (8,771 | ) | 30,205 | 2,216,163 | 27,471 | 65,635 | b | 0.02 | % | |||
Franklin Growth Opportunities Fund, | ||||||||||||||
Class R6 | 17,099 | 22,010 | (4,942 | ) | 34,167 | 1,170,913 | — | 15,424 | b | 0.08 | % | |||
Franklin India Growth Fund, Class R6. | — | 55,090 | (6,648 | ) | 48,442 | 590,505 | — | (8,682 | ) | 0.49 | % | |||
Franklin International Growth Fund, | ||||||||||||||
Class R6 | — | 52,639 | (6,347 | ) | 46,292 | 495,321 | 2,657 | (6,833 | ) | 0.11 | % | |||
Franklin International Small Cap | ||||||||||||||
Growth Fund, Class R6 | 48,342 | 63,922 | (14,596 | ) | 97,668 | 1,813,686 | 36,168 | (23,396 | )b | 0.10 | % | |||
Franklin K2 Alternative Strategies | ||||||||||||||
Fund, Class R6 | 47,376 | 152,027 | — | 199,403 | 2,123,638 | 32,943 | 7,336 | b | 0.17 | % | ||||
Franklin Low Duration Total Return | ||||||||||||||
Fund, Class R6 | 198,426 | 344,727 | (86,071 | ) | 457,082 | 4,470,260 | 79,798 | (17,784 | ) | 0.18 | % |
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NOTES TO FINANCIAL STATEMENTS
% of | ||||||||||||||
Underlying | ||||||||||||||
Number of | Number of | Fund Shares | ||||||||||||
Shares Held | Shares | Value | Outstanding | |||||||||||
at Beginning | Gross | Gross Held at End | at End | Investment | Realized | Held at End | ||||||||
Underlying Funds | of Year | Additions | Reductions | of Year | of Year | Income | Gain (Loss) | of Year | ||||||
Franklin LifeSmart 2020 Retirement | ||||||||||||||
Target Fund (continued) | ||||||||||||||
Franklin Mutual International Fund, | ||||||||||||||
Class R6 | 48,630 | 56,057 | (13,228 | ) | 91,459 | $ | 1,295,978 | $ | 16,932 | $ | (2,700 | )b | 0.59 | % |
Franklin Pelagos Commodities | ||||||||||||||
Strategy Fund, Class R6 | 18,693 | 96,658 | — | 115,351 | 671,343 | — | — | 0.57 | % | |||||
Franklin Real Estate Securities Fund, | ||||||||||||||
Class R6 | 7,284 | 7,247 | (3,790 | ) | 10,741 | 241,892 | 4,085 | 3,273 | 0.04 | % | ||||
Franklin Rising Dividends Fund, | ||||||||||||||
Class R6 | 17,979 | 17,481 | (16,009 | ) | 19,451 | 927,632 | 16,990 | 35,182 | b | 0.01 | % | |||
Franklin Short Duration U.S. | ||||||||||||||
Government ETF | — | 2,100 | — | 2,100 | 205,857 | 1,825 | — | 0.11 | % | |||||
Franklin Small Cap Growth Fund, | ||||||||||||||
Class R6 | 13,905 | 17,896 | (4,057 | ) | 27,744 | 506,882 | — | 2,213 | b | 0.02 | % | |||
Franklin Strategic Income Fund, | ||||||||||||||
Class R6 | 70,953 | 130,796 | (28,705 | ) | 173,044 | 1,585,080 | 52,208 | (31,744 | ) | 0.02 | % | |||
Franklin Utilities Fund, Class R6 | 25,093 | 23,017 | (24,176 | ) | 23,934 | 371,453 | 14,066 | 13 | b | 0.01 | % | |||
Institutional Fiduciary Trust Money | ||||||||||||||
Market Portfolio | 369,780 | 20,900,401 | (20,618,998 | ) | 651,183 | 651,183 | — | — | —c | |||||
Templeton China World Fund, | ||||||||||||||
Class R6 | 5,444 | 3,034 | (8,478 | ) | — | —a | — | (29,260 | ) | — | ||||
Templeton Foreign Fund, Class R6 | 49,866 | 64,147 | (14,426 | ) | 99,587 | 625,405 | 13,368 | (29,341 | )b | 0.01 | % | |||
Templeton Frontier Markets Fund, | ||||||||||||||
Class R6 | 19,701 | 28,021 | (6,031 | ) | 41,691 | 434,833 | 35,928 | (51,794 | ) | 0.13 | % | |||
Templeton Global Total Return Fund, | ||||||||||||||
Class R6 | 204,752 | 373,833 | (82,531 | ) | 496,054 | 5,699,659 | 149,812 | (144,603 | ) | 0.08 | % | |||
Total | $ | 30,565,783 | $ | 530,414 | $ | (164,014 | ) | |||||||
Franklin LifeSmart 2025 Retirement | ||||||||||||||
Target Fund | ||||||||||||||
Franklin Biotechnology Discovery | ||||||||||||||
Fund, Class R6 | 8,889 | 568 | (9,457 | ) | — | $ | —a $ — | $ | 511,209 | — | ||||
Franklin DynaTech Fund, Class R6 | 144,889 | 21,750 | (13,988 | ) | 152,651 | 7,652,406 | — | 187,440 | b | 0.24 | % | |||
Franklin Emerging Market Debt | ||||||||||||||
Opportunities Fund | 134,129 | 50,978 | (7,245 | ) | 177,862 | 1,737,715 | 81,837 | (18,813 | ) | 0.27 | % | |||
Franklin Focused Core Equity Fund, | ||||||||||||||
Class R6 | 424,331 | 312,912 | (61,622 | ) | 675,621 | 9,303,305 | 73,034 | 116,763 | b | 4.55 | % | |||
Franklin Growth Fund, Class R6 | 144,269 | 18,395 | (48,505 | ) | 114,159 | 8,375,848 | 100,807 | 485,091 | b | 0.07 | % | |||
Franklin Growth Opportunities Fund, | ||||||||||||||
Class R6 | 132,232 | 19,387 | (12,686 | ) | 138,933 | 4,761,247 | — | 90,687 | b | 0.34 | % | |||
Franklin India Growth Fund, Class R6. | — | 252,220 | (21,093 | ) | 231,127 | 2,817,437 | — | (28,317 | ) | 2.36 | % | |||
Franklin International Growth Fund, | ||||||||||||||
Class R6 | — | 278,849 | (23,316 | ) | 255,533 | 2,734,207 | 14,239 | (21,510 | ) | 0.63 | % | |||
Franklin International Small Cap | ||||||||||||||
Growth Fund, Class R6 | 390,976 | 65,903 | (38,280 | ) | 418,599 | 7,773,379 | 150,553 | 132,750 | b | 0.41 | % | |||
Franklin K2 Alternative Strategies | ||||||||||||||
Fund, Class R6 | 323,419 | 382,342 | — | 705,761 | 7,516,356 | 116,598 | 25,965 | b | 2.90 | % | ||||
Franklin Low Duration Total Return | ||||||||||||||
Fund, Class R6 | 776,722 | 256,728 | (40,224 | ) | 993,226 | 9,713,751 | 197,548 | (14,883 | ) | 0.39 | % | |||
Franklin Mutual International Fund, | ||||||||||||||
Class R6 | 394,960 | 63,423 | (38,353 | ) | 420,030 | 5,951,831 | 75,526 | 43,353 | b | 2.70 | % | |||
Franklin Pelagos Commodities | ||||||||||||||
Strategy Fund, Class R6 | 126,611 | 288,033 | — | 414,644 | 2,413,225 | — | — | 2.05 | % | |||||
Franklin Real Estate Securities Fund, | ||||||||||||||
Class R6 | 62,303 | 7,436 | (20,511 | ) | 49,228 | 1,108,615 | 21,864 | 96,073 | 0.19 | % |
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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 | Value | Outstanding | |||||||||||
at Beginning | Gross | Gross | Held at End | at End | Investment | Realized | Held at End | |||||||
Underlying Funds | of Year | Additions | Reductions | of Year | of Year | Income | Gain (Loss) | of Year | ||||||
Franklin LifeSmart 2025 Retirement | ||||||||||||||
Target Fund (continued) | ||||||||||||||
Franklin Rising Dividends Fund, | ||||||||||||||
Class R6 | 168,340 | 23,304 | (84,788 | ) | 106,856 | $ | 5,095,946 | $ | 108,704 | $ | 1,182,395 | b | 0.03 | % |
Franklin Short Duration U.S. | ||||||||||||||
Government ETF | — | 7,089 | — | 7,089 | 694,915 | 6,204 | — | 0.37 | % | |||||
Franklin Small Cap Growth Fund, | ||||||||||||||
Class R6 | 142,971 | 21,223 | (13,752 | ) | 150,442 | 2,748,579 | — | 31,224 | b | 0.09 | % | |||
Franklin Strategic Income Fund, | ||||||||||||||
Class R6 | 275,210 | 101,715 | (14,809 | ) | 362,116 | 3,316,982 | 141,767 | (21,498 | ) | 0.04 | % | |||
Franklin Utilities Fund, Class R6 | 206,213 | 27,066 | (129,720 | ) | 103,559 | 1,607,233 | 78,738 | 485,074 | b | 0.03 | % | |||
Institutional Fiduciary Trust Money | ||||||||||||||
Market Portfolio | 2,604,862 | 25,522,685 | (26,021,600 | ) | 2,105,947 | 2,105,947 | — | — | 0.01 | % | ||||
Templeton China World Fund, | ||||||||||||||
Class R6 | 50,936 | 3,232 | (54,168 | ) | — | —a | — | 39,204 | — | |||||
Templeton Foreign Fund, Class R6 | 364,219 | 56,442 | (34,899 | ) | 385,762 | 2,422,587 | 50,260 | (72,759 | )b | 0.04 | % | |||
Templeton Frontier Markets Fund, | ||||||||||||||
Class R6 | 159,708 | 35,436 | (16,500 | ) | 178,644 | 1,863,260 | 149,661 | (147,400 | ) | 0.54 | % | |||
Templeton Global Total Return Fund, | ||||||||||||||
Class R6 | 866,520 | 326,198 | (47,074 | ) | 1,145,644 | 13,163,455 | 461,301 | (114,861 | ) | 0.19 | % | |||
Total | $ | 104,878,226 | $ | 1,828,641 | $ | 2,987,187 | ||||||||
Franklin LifeSmart 2030 Retirement | ||||||||||||||
Target Fund | ||||||||||||||
Franklin Biotechnology Discovery | ||||||||||||||
Fund, Class R6 | 1,284 | 1,173 | (2,457 | ) | — | $ | —a $ — | $ | 20,421 | — | ||||
Franklin DynaTech Fund, Class R6 | 26,101 | 26,444 | (5,580 | ) | 46,965 | 2,354,354 | — | 54,977 | b | 0.07 | % | |||
Franklin Emerging Market Debt | ||||||||||||||
Opportunities Fund | 19,359 | 13,713 | (2,771 | ) | 30,301 | 296,041 | 16,355 | (5,091 | ) | 0.05 | % | |||
Franklin Focused Core Equity Fund, | ||||||||||||||
Class R6 | 69,553 | 137,391 | (17,332 | ) | 189,612 | 2,610,955 | 19,325 | 64,571 | b | 1.28 | % | |||
Franklin Growth Fund, Class R6 | 26,820 | 24,367 | (13,775 | ) | 37,412 | 2,744,920 | 30,168 | 101,148 | b | 0.02 | % | |||
Franklin Growth Opportunities Fund, | ||||||||||||||
Class R6 | 23,747 | 24,175 | (5,335 | ) | 42,587 | 1,459,448 | — | 28,235 | b | 0.11 | % | |||
Franklin India Growth Fund, Class R6. | — | 71,745 | — | 71,745 | 874,568 | — | — | 0.73 | % | |||||
Franklin International Growth Fund, | ||||||||||||||
Class R6 | — | 75,990 | — | 75,990 | 813,095 | 3,992 | — | 0.19 | % | |||||
Franklin International Small Cap | ||||||||||||||
Growth Fund, Class R6 | 70,613 | 74,317 | (15,850 | ) | 129,080 | 2,397,014 | 43,759 | (9,451 | )b | 0.13 | % | |||
Franklin K2 Alternative Strategies | ||||||||||||||
Fund, Class R6 | 54,954 | 126,718 | — | 181,672 | 1,934,802 | 30,014 | 6,684 | b | 0.75 | % | ||||
Franklin Low Duration Total Return | ||||||||||||||
Fund, Class R6 | 108,099 | 70,109 | (15,449 | ) | 162,759 | 1,591,784 | 32,204 | (1,917 | ) | 0.06 | % | |||
Franklin Mutual International Fund, | ||||||||||||||
Class R6 | 65,271 | 68,909 | (15,547 | ) | 118,633 | 1,681,024 | 20,109 | 29,237 | b | 0.76 | % | |||
Franklin Pelagos Commodities | ||||||||||||||
Strategy Fund, Class R6 | 21,427 | 80,673 | — | 102,100 | 594,221 | — | — | 0.51 | % | |||||
Franklin Real Estate Securities Fund, | ||||||||||||||
Class R6 | 11,086 | 8,950 | (4,922 | ) | 15,114 | 340,359 | 5,603 | 5,735 | 0.06 | % | ||||
Franklin Rising Dividends Fund, | ||||||||||||||
Class R6 | 27,448 | 25,273 | (23,140 | ) | 29,581 | 1,410,727 | 24,274 | 60,822 | b | 0.01 | % |
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FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
% of | ||||||||||||||
Underlying | ||||||||||||||
Number of | Number of | Fund Shares | ||||||||||||
Shares Held | Shares | Value | Outstanding | |||||||||||
at Beginning | Gross | Gross | Held at End | at End | Investment | Realized | Held at End | |||||||
Underlying Funds | of Year | Additions | Reductions | of Year | of Year | Income | Gain (Loss) | of Year | ||||||
Franklin LifeSmart 2030 Retirement | ||||||||||||||
Target Fund (continued) | ||||||||||||||
Franklin Short Duration U.S. | ||||||||||||||
Government ETF | — | 1,063 | — | 1,063 | $ | 104,203 | $ | 925 | $ | — | 0.06 | % | ||
Franklin Small Cap Growth Fund, | ||||||||||||||
Class R6 | 25,118 | 31,251 | (5,526 | ) | 50,843 | 928,904 | — | 18,264 | b | 0.03 | % | |||
Franklin Strategic Income Fund, | ||||||||||||||
Class R6 | 40,044 | 27,757 | (5,759 | ) | 62,042 | 568,309 | 22,884 | (3,996 | ) | 0.01 | % | |||
Franklin Utilities Fund, Class R6 | 35,886 | 30,349 | (35,299 | ) | 30,936 | 480,129 | 18,002 | 4,369 | b | 0.01 | % | |||
Institutional Fiduciary Trust Money | ||||||||||||||
Market Portfolio | 276,857 | 15,046,214 | (14,686,321 | ) | 636,750 | 636,750 | — | — | —c | |||||
Templeton China World Fund, | ||||||||||||||
Class R6 | 9,590 | 6,213 | (15,803 | ) | — | —a | — | (47,377 | ) | — | ||||
Templeton Foreign Fund, Class R6 | 68,119 | 70,409 | (15,819 | ) | 122,709 | 770,611 | 15,086 | (15,252 | )b | 0.01 | % | |||
Templeton Frontier Markets Fund, | ||||||||||||||
Class R6 | 30,174 | 33,955 | (6,673 | ) | 57,456 | 599,262 | 43,903 | (35,650 | ) | 0.17 | % | |||
Templeton Global Total Return Fund, | ||||||||||||||
Class R6 | 115,462 | 78,600 | (16,650 | ) | 177,412 | 2,038,465 | 67,351 | (20,279 | ) | 0.03 | % | |||
Total | $ | 27,229,945 | $ | 393,954 | $ | 255,450 | ||||||||
Franklin LifeSmart 2035 Retirement | ||||||||||||||
Target Fund | ||||||||||||||
Franklin Biotechnology Discovery | ||||||||||||||
Fund, Class R6 | 8,872 | 613 | (9,485 | ) | — | $ | —a $ — | $ | 483,330 | — | ||||
Franklin DynaTech Fund, Class R6 | 125,016 | 30,952 | — | 155,968 | 7,818,661 | — | 183,285 | b | 0.24 | % | ||||
Franklin Emerging Market Debt | ||||||||||||||
Opportunities Fund | 67,581 | 3,517 | (9,116 | ) | 61,982 | 605,568 | 34,501 | (17,371 | ) | 0.09 | % | |||
Franklin Focused Core Equity Fund, | ||||||||||||||
Class R6 | 386,899 | 262,026 | — | 648,925 | 8,935,696 | 66,139 | 219,206 | b | 4.38 | % | ||||
Franklin Growth Fund, Class R6 | 130,286 | 15,219 | (33,829 | ) | 111,676 | 8,193,650 | 92,954 | 413,777 | b | 0.07 | % | |||
Franklin Growth Opportunities Fund, | ||||||||||||||
Class R6 | 119,254 | 12,759 | — | 132,013 | 4,524,081 | — | 85,208 | b | 0.33 | % | ||||
Franklin India Growth Fund, Class R6. | — | 217,777 | — | 217,777 | 2,654,704 | — | — | 2.22 | % | |||||
Franklin International Growth Fund, | ||||||||||||||
Class R6 | — | 232,448 | — | 232,448 | 2,487,198 | 12,212 | — | 0.57 | % | |||||
Franklin International Small Cap | ||||||||||||||
Growth Fund, Class R6 | 349,232 | 45,239 | — | 394,471 | 7,325,331 | 133,729 | 141,623 | b | 0.39 | % | ||||
Franklin K2 Alternative Strategies | ||||||||||||||
Fund, Class R6 | 267,293 | 307,335 | — | 574,628 | 6,119,787 | 94,934 | 21,140 | b | 5.86 | % | ||||
Franklin Low Duration Total Return | ||||||||||||||
Fund, Class R6 | 360,391 | 14,918 | (50,005 | ) | 325,304 | 3,181,474 | 78,731 | (10,348 | ) | 0.13 | % | |||
Franklin Mutual International Fund, | ||||||||||||||
Class R6 | 355,335 | 36,742 | — | 392,077 | 5,555,735 | 66,461 | 102,224 | b | 2.52 | % | ||||
Franklin Pelagos Commodities | ||||||||||||||
Strategy Fund, Class R6 | 102,696 | 225,925 | — | 328,621 | 1,912,574 | — | — | 1.63 | % | |||||
Franklin Real Estate Securities Fund, | ||||||||||||||
Class R6 | 59,367 | 4,204 | (15,471 | ) | 48,100 | 1,083,214 | 20,439 | 78,229 | 0.19 | % | ||||
Franklin Rising Dividends Fund, | ||||||||||||||
Class R6 | 159,006 | 19,559 | (69,895 | ) | 108,670 | 5,182,475 | 104,812 | 859,218 | b | 0.03 | % | |||
Franklin Short Duration U.S. | ||||||||||||||
Government ETF | — | 3,435 | — | 3,435 | 336,723 | 2,996 | — | 0.18 | % | |||||
Franklin Small Cap Growth Fund, | ||||||||||||||
Class R6 | 125,329 | 11,281 | — | 136,610 | 2,495,874 | — | 46,846 | b | 0.08 | % | ||||
Franklin Strategic Income Fund, | ||||||||||||||
Class R6 | 130,027 | 6,151 | (18,108 | ) | 118,070 | 1,081,526 | 59,790 | (16,948 | ) | 0.01 | % |
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185
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 | Value | Outstanding | |||||||||||
at Beginning | Gross | Gross | Held at End | at End | Investment | Realized | Held at End | |||||||
Underlying Funds | of Year | Additions | Reductions | of Year | of Year | Income | Gain (Loss) | of Year | ||||||
Franklin LifeSmart 2035 Retirement | ||||||||||||||
Target Fund (continued) | ||||||||||||||
Franklin Utilities Fund, Class R6 | 203,433 | 21,263 | (118,583 | ) | 106,113 | $ | 1,646,880 | $ | 77,158 | $ | 334,709 | b | 0.03 | % |
Institutional Fiduciary Trust Money | ||||||||||||||
Market Portfolio | 1,512,212 | 24,201,997 | (23,916,772 | ) | 1,797,437 | 1,797,437 | — | — | 0.01 | % | ||||
Templeton China World Fund, | ||||||||||||||
Class R6 | 47,246 | 3,238 | (50,484 | ) | — | —a | — | (23,275 | ) | — | ||||
Templeton Foreign Fund, Class R6 | 360,354 | 32,929 | — | 393,283 | 2,469,818 | 48,352 | 1,310 | b | 0.04 | % | ||||
Templeton Frontier Markets Fund, | ||||||||||||||
Class R6 | 151,592 | 23,672 | — | 175,264 | 1,828,002 | 138,253 | — | 0.53 | % | |||||
Templeton Global Total Return Fund, | ||||||||||||||
Class R6 | 399,555 | 22,201 | (56,320 | ) | 365,436 | 4,198,860 | 201,442 | (107,474 | ) | 0.06 | % | |||
Total | $ | 81,435,268 | $ | 1,232,903 | $ | 2,794,689 | ||||||||
Franklin LifeSmart 2040 Retirement | ||||||||||||||
Target Fund | ||||||||||||||
Franklin Biotechnology Discovery | ||||||||||||||
Fund, Class R6 | 1,140 | 645 | (1,785 | ) | — | $ | $ — | $ | 17,735 | — | ||||
Franklin DynaTech Fund, Class R6 | 21,319 | 16,856 | — | 38,175 | 1,913,719 | — | 42,994 | b | 0.06 | % | ||||
Franklin Emerging Market Debt | ||||||||||||||
Opportunities Fund | 8,863 | 9,127 | (6,270 | ) | 11,720 | 114,506 | 6,257 | (10,259 | ) | 0.02 | % | |||
Franklin Focused Core Equity Fund, | ||||||||||||||
Class R6 | 59,127 | 100,754 | — | 159,881 | 2,201,562 | 16,295 | 54,007 | b | 1.08 | % | ||||
Franklin Growth Fund, Class R6 | 22,636 | 15,837 | (8,517 | ) | 29,956 | 2,197,875 | 23,900 | 63,403 | b | 0.02 | % | |||
Franklin Growth Opportunities Fund, | ||||||||||||||
Class R6 | 18,569 | 14,543 | — | 33,112 | 1,134,738 | — | 21,372 | b | 0.08 | % | ||||
Franklin India Growth Fund, Class R6. | — | 55,065 | — | 55,065 | 671,240 | — | — | 0.56 | % | |||||
Franklin International Growth Fund, | ||||||||||||||
Class R6 | — | 56,072 | — | 56,072 | 599,971 | 2,946 | — | 0.14 | % | |||||
Franklin International Small Cap | ||||||||||||||
Growth Fund, Class R6 | 54,504 | 44,628 | — | 99,132 | 1,840,873 | 33,607 | 35,591 | b | 0.10 | % | ||||
Franklin K2 Alternative Strategies | ||||||||||||||
Fund, Class R6 | 35,616 | 96,733 | — | 132,349 | 1,409,514 | 21,865 | 4,869 | b | 0.54 | % | ||||
Franklin Low Duration Total Return | ||||||||||||||
Fund, Class R6 | 50,687 | 49,692 | (35,915 | ) | 64,464 | 630,459 | 12,967 | (6,352 | ) | 0.03 | % | |||
Franklin Mutual International Fund, | ||||||||||||||
Class R6 | 55,371 | 44,677 | — | 100,048 | 1,417,674 | 16,959 | 23,598 | b | 0.64 | % | ||||
Franklin Pelagos Commodities | ||||||||||||||
Strategy Fund, Class R6 | 14,590 | 56,609 | — | 71,199 | 414,378 | — | — | 0.35 | % | |||||
Franklin Real Estate Securities Fund, | ||||||||||||||
Class R6 | 8,374 | 5,240 | (2,664 | ) | 10,950 | 246,587 | 4,120 | 1,505 | 0.04 | % | ||||
Franklin Rising Dividends Fund, | ||||||||||||||
Class R6 | 21,119 | 13,245 | (13,506 | ) | 20,858 | 994,698 | 17,970 | 45,254 | b | 0.01 | % | |||
Franklin Short Duration U.S. | ||||||||||||||
Government ETF | — | 391 | — | 391 | 38,328 | 342 | — | 0.02 | % | |||||
Franklin Small Cap Growth Fund, | ||||||||||||||
Class R6 | 18,679 | 14,640 | — | 33,319 | 608,737 | — | 11,426 | b | 0.02 | % | ||||
Franklin Strategic Income Fund, | ||||||||||||||
Class R6 | 17,765 | 18,535 | (12,895 | ) | 23,405 | 214,388 | 8,921 | (12,875 | ) | —c | ||||
Franklin Utilities Fund, Class R6 | 29,890 | 17,864 | (22,237 | ) | 25,517 | 396,030 | 15,273 | (779 | )b | 0.01 | % |
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FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
% of | ||||||||||||||
Underlying | ||||||||||||||
Number of | Number of | Fund Shares | ||||||||||||
Shares Held | Shares | Value | Outstanding | |||||||||||
at Beginning | Gross | Gross | Held at End | at End | Investment | Realized | Held at End | |||||||
Underlying Funds | of Year | Additions | Reductions | of Year | of Year | Income | Gain (Loss) | of Year | ||||||
Franklin LifeSmart 2040 Retirement | ||||||||||||||
Target Fund (continued) | ||||||||||||||
Institutional Fiduciary Trust Money | ||||||||||||||
Market Portfolio | 210,816 | 11,658,234 | (11,448,028 | ) | 421,022 | $ | 421,022 | $ | — | $ | — | —c | ||
Templeton China World Fund, | ||||||||||||||
Class R6 | 7,515 | 2,915 | (10,430 | ) | — | —a | — | (36,432 | ) | — | ||||
Templeton Foreign Fund, Class R6 | 55,339 | 43,448 | — | 98,787 | 620,383 | 12,145 | 329 | b | 0.01 | % | ||||
Templeton Frontier Markets Fund, | ||||||||||||||
Class R6 | 24,038 | 21,434 | — | 45,472 | 474,269 | 35,869 | — | 0.14 | % | |||||
Templeton Global Total Return Fund, | ||||||||||||||
Class R6 | 55,457 | 56,330 | (40,384 | ) | 71,403 | 820,418 | 28,725 | (71,660 | ) | 0.01 | % | |||
Total | $ | 19,381,369 | $ | 258,161 | $ | 183,726 | ||||||||
Franklin LifeSmart 2045 Retirement | ||||||||||||||
Target Fund | ||||||||||||||
Franklin Biotechnology Discovery | ||||||||||||||
Fund, Class R6 | 5,506 | 602 | (6,108 | ) | — | $ | —a $ — | $ | 296,943 | — | ||||
Franklin DynaTech Fund, Class R6 | 90,584 | 16,759 | — | 107,343 | 5,381,095 | — | 126,144 | b | 0.17 | % | ||||
Franklin Emerging Market Debt | ||||||||||||||
Opportunities Fund | 29,285 | 1,503 | (4,295 | ) | 26,493 | 258,838 | 14,747 | (6,861 | ) | 0.04 | % | |||
Franklin Focused Core Equity Fund, | ||||||||||||||
Class R6 | 252,084 | 200,089 | — | 452,173 | 6,226,427 | 46,086 | 152,744 | b | 3.05 | % | ||||
Franklin Growth Fund, Class R6 | 90,526 | 15,452 | (22,040 | ) | 83,938 | 6,158,549 | 69,866 | 311,687 | b | 0.05 | % | |||
Franklin Growth Opportunities Fund, | ||||||||||||||
Class R6 | 64,006 | 11,552 | — | 75,558 | 2,589,375 | — | 48,769 | b | 0.19 | % | ||||
Franklin India Growth Fund, Class R6. | — | 163,417 | — | 163,417 | 1,992,055 | — | — | 0.10 | % | |||||
Franklin International Growth Fund, | ||||||||||||||
Class R6 | — | 164,614 | — | 164,614 | 1,761,375 | 8,648 | — | 0.41 | % | |||||
Franklin International Small Cap | ||||||||||||||
Growth Fund, Class R6 | 235,498 | 47,947 | — | 283,445 | 5,263,572 | 96,090 | 101,762 | b | 0.28 | % | ||||
Franklin K2 Alternative Strategies | ||||||||||||||
Fund, Class R6 | 176,753 | 203,455 | — | 380,208 | 4,049,216 | 62,814 | 13,988 | b | 0.33 | % | ||||
Franklin Low Duration Total Return | ||||||||||||||
Fund, Class R6 | 166,721 | 6,230 | (25,101 | ) | 147,850 | 1,445,974 | 37,075 | (6,777 | ) | 0.06 | % | |||
Franklin Mutual International Fund, | ||||||||||||||
Class R6 | 236,657 | 46,924 | — | 283,581 | 4,018,336 | 48,070 | 71,503 | b | 1.82 | % | ||||
Franklin Pelagos Commodities | ||||||||||||||
Strategy Fund, Class R6 | 68,635 | 149,717 | — | 218,352 | 1,270,808 | — | — | 1.08 | % | |||||
Franklin Real Estate Securities Fund, | ||||||||||||||
Class R6 | 33,767 | 3,865 | (10,486 | ) | 27,146 | 611,324 | 11,060 | 62,623 | 0.11 | % | ||||
Franklin Rising Dividends Fund, | ||||||||||||||
Class R6 | 113,043 | 18,555 | (57,148 | ) | 74,450 | 3,550,502 | 74,243 | 670,715 | b | 0.02 | % | |||
Franklin Short Duration U.S. | ||||||||||||||
Government ETF | — | 1,539 | — | 1,539 | 150,864 | 1,355 | — | 0.08 | % | |||||
Franklin Small Cap Growth Fund, | ||||||||||||||
Class R6 | 81,875 | 14,921 | — | 96,796 | 1,768,457 | — | 33,193 | b | 0.06 | % | ||||
Franklin Strategic Income Fund, | ||||||||||||||
Class R6 | 56,796 | 2,785 | (8,742 | ) | 50,839 | 465,686 | 27,066 | (10,574 | ) | 0.01 | % | |||
Franklin Utilities Fund, Class R6 | 136,497 | 22,807 | (81,642 | ) | 77,662 | 1,205,307 | 53,429 | 224,209 | b | 0.02 | % | |||
Institutional Fiduciary Trust Money | ||||||||||||||
Market Portfolio | 1,235,172 | 14,681,027 | (14,452,735 | ) | 1,463,464 | 1,463,464 | — | — | 0.01 | % | ||||
Templeton China World Fund, | ||||||||||||||
Class R6 | 34,225 | 2,597 | (36,822 | ) | — | —a | — | (22,707 | ) | — | ||||
Templeton Foreign Fund, Class R6 | 289,624 | 52,961 | — | 342,585 | 2,151,433 | 42,119 | 1,141 | b | 0.03 | % |
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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 | Value | Outstanding | |||||||||||
at Beginning | Gross | Gross Held at End | at End | Investment | Realized | Held at End | ||||||||
Underlying Funds | of Year | Additions | Reductions | of Year | of Year | Income | Gain (Loss) | of Year | ||||||
Franklin LifeSmart 2045 Retirement | ||||||||||||||
Target Fund (continued) | ||||||||||||||
Templeton Frontier Markets Fund, | ||||||||||||||
Class R6 | 98,152 | 25,237 | — | 123,389 | $ | 1,286,943 | $ | 97,332 | $ | — | 0.37 | % | ||
Templeton Global Total Return Fund, | ||||||||||||||
Class R6 | 178,219 | 10,063 | (27,609 | ) | 160,673 | 1,846,139 | 92,963 | (53,541 | ) | 0.03 | % | |||
Total | $ | 54,915,739 | $ | 782,963 | $ | 2,014,961 | ||||||||
Franklin LifeSmart 2050 Retirement | ||||||||||||||
Target Fund | ||||||||||||||
Franklin Biotechnology Discovery | ||||||||||||||
Fund, Class R6 | 743 | 491 | (1,234 | ) | — | $ | —a $ — | $ | 13,532 | — | ||||
Franklin DynaTech Fund, Class R6 | 16,095 | 17,267 | (2,195 | ) | 31,167 | 1,562,377 | — | 30,162 | b | 0.05 | % | |||
Franklin Emerging Market Debt | ||||||||||||||
Opportunities Fund | 4,950 | 9,024 | (8,231 | ) | 5,743 | 56,107 | 4,133 | (6,473 | ) | 0.01 | % | |||
Franklin Focused Core Equity Fund, | ||||||||||||||
Class R6 | 44,752 | 95,872 | (9,208 | ) | 131,416 | 1,809,598 | 14,332 | 26,928 | b | 0.89 | % | |||
Franklin Growth Fund, Class R6 | 17,201 | 15,878 | (8,938 | ) | 24,141 | 1,771,223 | 19,367 | 37,829 | b | 0.01 | % | |||
Franklin Growth Opportunities Fund, | ||||||||||||||
Class R6 | 11,312 | 12,175 | (1,547 | ) | 21,940 | 751,878 | — | 10,975 | b | 0.05 | % | |||
Franklin India Growth Fund, Class R6. | — | 41,813 | (2,756 | ) | 39,057 | 476,100 | — | (4,052 | ) | 0.40 | % | |||
Franklin International Growth Fund, | ||||||||||||||
Class R6 | — | 38,714 | (2,555 | ) | 36,159 | 386,901 | 2,034 | (2,988 | ) | 0.09 | % | |||
Franklin International Small Cap | ||||||||||||||
Growth Fund, Class R6 | 40,969 | 45,571 | (5,688 | ) | 80,852 | 1,501,414 | 29,338 | 3,729 | b | 0.08 | % | |||
Franklin K2 Alternative Strategies | ||||||||||||||
Fund, Class R6 | 27,330 | 78,215 | (2,780 | ) | 102,765 | 1,094,445 | 16,978 | 2,669 | b | 0.42 | % | |||
Franklin Low Duration Total Return | ||||||||||||||
Fund, Class R6 | 27,420 | 56,475 | (49,727 | ) | 34,168 | 334,165 | 8,109 | (9,445 | ) | 0.01 | % | |||
Franklin Mutual International Fund, | ||||||||||||||
Class R6 | 41,571 | 45,798 | (5,717 | ) | 81,652 | 1,157,003 | 14,651 | 6,788 | b | 0.52 | % | |||
Franklin Pelagos Commodities | ||||||||||||||
Strategy Fund, Class R6 | 11,112 | 48,071 | — | 59,183 | 344,447 | — | — | 0.29 | % | |||||
Franklin Real Estate Securities Fund, | ||||||||||||||
Class R6 | 5,570 | 4,411 | (2,624 | ) | 7,357 | 165,678 | 2,824 | 1,394 | 0.03 | % | ||||
Franklin Rising Dividends Fund, | ||||||||||||||
Class R6 | 16,701 | 13,554 | (11,767 | ) | 18,488 | 881,680 | 15,091 | 36,071 | b | 0.01 | % | |||
Franklin Short Duration U.S. | ||||||||||||||
Government ETF | — | 272 | — | 272 | 26,663 | 242 | — | 0.01 | % | |||||
Franklin Small Cap Growth Fund, | ||||||||||||||
Class R6 | 10,925 | 12,167 | (1,519 | ) | 21,573 | 394,145 | — | 3,890 | b | 0.01 | % | |||
Franklin Strategic Income Fund, | ||||||||||||||
Class R6 | 10,564 | 21,038 | (19,135 | ) | 12,467 | 114,198 | 6,408 | (15,539 | ) | —c | ||||
Franklin Utilities Fund, Class R6 | 22,770 | 17,409 | (18,967 | ) | 21,212 | 329,209 | 12,172 | (2,887 | )b | 0.01 | % | |||
Institutional Fiduciary Trust Money | ||||||||||||||
Market Portfolio | 152,864 | 10,562,417 | (10,404,485 | ) | 310,796 | 310,796 | — | — | —c | |||||
Templeton China World Fund, | ||||||||||||||
Class R6 | 4,093 | 1,845 | (5,938 | ) | — | —a | — | (19,044 | ) | — | ||||
Templeton Foreign Fund, Class R6 | 51,863 | 56,168 | (7,077 | ) | 100,954 | 633,990 | 13,138 | (15,581 | )b | 0.01 | % | |||
Templeton Frontier Markets Fund, | ||||||||||||||
Class R6 | 16,764 | 20,589 | (2,461 | ) | 34,892 | 363,918 | 27,940 | (22,089 | ) | 0.11 | % |
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NOTES TO FINANCIAL STATEMENTS
% of | ||||||||||||||
Underlying | ||||||||||||||
Number of | Number of | Fund Shares | ||||||||||||
Shares Held | Shares | Value | Outstanding | |||||||||||
at Beginning | Gross | Gross Held at End | at End | Investment | Realized | Held at End | ||||||||
Underlying Funds | of Year | Additions | Reductions | of Year | of Year | Income | Gain (Loss) | of Year | ||||||
Franklin LifeSmart 2050 Retirement | ||||||||||||||
Target Fund (continued) | ||||||||||||||
Templeton Global Total Return Fund, | ||||||||||||||
Class R6 | 28,662 | 61,063 | (53,175 | ) | 36,550 | $ | 419,963 | $ | 17,932 | $ | (50,805 | ) | 0.01 | % |
Total | $ | 14,885,898 | $ | 204,689 | $ | 25,064 | ||||||||
Franklin LifeSmart 2055 Retirement | ||||||||||||||
Target Fund | ||||||||||||||
Franklin Biotechnology Discovery | ||||||||||||||
Fund, Class R6 | — | 106 | (106 | ) | — | $ | —a $ — | $ | (2,010 | ) | — | |||
Franklin DynaTech Fund, Class R6 | — | 5,391 | (1,400 | ) | 3,991 | 200,077 | — | 2,384 | b | 0.01 | % | |||
Franklin Emerging Market Debt | ||||||||||||||
Opportunities Fund | — | 1,028 | (465 | ) | 563 | 5,500 | 398 | (232 | ) | —c | ||||
Franklin Focused Core Equity Fund, | ||||||||||||||
Class R6 | — | 21,746 | (6,104 | ) | 15,642 | 215,396 | 1,721 | (4,750 | )b | 0.11 | % | |||
Franklin Growth Fund, Class R6 | — | 4,706 | (1,649 | ) | 3,057 | 224,279 | 2,200 | 1,055 | b | —c | ||||
Franklin Growth Opportunities Fund, | ||||||||||||||
Class R6 | — | 3,785 | (981 | ) | 2,804 | 96,097 | — | 550 | b | 0.01 | % | |||
Franklin India Growth Fund, Class R6. | — | 6,171 | (1,541 | ) | 4,630 | 56,441 | — | (1,846 | ) | 0.05 | % | |||
Franklin International Growth Fund, | ||||||||||||||
Class R6 | — | 6,120 | (1,587 | ) | 4,533 | 48,499 | 258 | (1,418 | ) | 0.01 | % | |||
Franklin International Small Cap | ||||||||||||||
Growth Fund, Class R6 | — | 14,194 | (3,677 | ) | 10,517 | 195,308 | 3,865 | (95 | )b | 0.01 | % | |||
Franklin K2 Alternative Strategies | ||||||||||||||
Fund, Class R6 | — | 14,280 | (1,384 | ) | 12,896 | 137,348 | 2,131 | 65 | b | 0.01 | % | |||
Franklin Low Duration Total Return | ||||||||||||||
Fund, Class R6 | — | 6,017 | (2,542 | ) | 3,475 | 33,983 | 592 | (410 | ) | —c | ||||
Franklin Mutual International Fund, | ||||||||||||||
Class R6 | — | 12,857 | (4,066 | ) | 8,791 | 124,567 | 1,885 | (5,762 | )b | 0.06 | % | |||
Franklin Pelagos Commodities | ||||||||||||||
Strategy Fund, Class R6 | — | 8,552 | (1,347 | ) | 7,205 | 41,932 | — | (1,790 | ) | 0.04 | % | |||
Franklin Real Estate Securities Fund, | ||||||||||||||
Class R6 | — | 1,336 | (348 | ) | 988 | 22,243 | 262 | (28 | ) | —c | ||||
Franklin Rising Dividends Fund, | ||||||||||||||
Class R6 | — | 3,928 | (1,551 | ) | 2,377 | 113,346 | 1,176 | 8 | b | —c | ||||
Franklin Short Duration U.S. | ||||||||||||||
Government ETF | — | 20 | — | 20 | 1,960 | 17 | — | —c | ||||||
Franklin Small Cap Growth Fund, | ||||||||||||||
Class R6 | — | 3,738 | (970 | ) | 2,768 | 50,566 | — | (520 | )b | —c | ||||
Franklin Strategic Income Fund, | ||||||||||||||
Class R6 | — | 2,515 | (1,061 | ) | 1,454 | 13,317 | 347 | (656 | ) | —c | ||||
Franklin Utilities Fund, Class R6 | — | 4,811 | (2,086 | ) | 2,725 | 42,300 | 799 | (816 | )b | —c | ||||
Institutional Fiduciary Trust Money | ||||||||||||||
Market Portfolio | — | 1,508,589 | (1,476,140 | ) | 32,449 | 32,449 | — | — | —c | |||||
Templeton China World Fund, | ||||||||||||||
Class R6 | — | 462 | (462 | ) | — | —a | — | (1,882 | ) | — | ||||
Templeton Foreign Fund, Class R6 | — | 17,740 | (4,580 | ) | 13,160 | 82,646 | 2,044 | (5,536 | )b | —c | ||||
Templeton Frontier Markets Fund, | ||||||||||||||
Class R6 | — | 5,854 | (1,574 | ) | 4,280 | 44,638 | 3,350 | (6,190 | ) | 0.01 | % |
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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 | Value | Outstanding | ||||||||||
at Beginning | Gross | Gross | Held at End | at End | Investment | Realized | Held at End | ||||||
Underlying Funds | of Year | Additions | Reductions | of Year | of Year | Income | Gain (Loss) | of Year | |||||
Franklin LifeSmart 2055 Retirement | |||||||||||||
Target Fund (continued) | |||||||||||||
Templeton Global Total Return Fund, | |||||||||||||
Class R6 | — | 6,688 | (2,833 | ) | 3,855 | $ | 44,294 | $ | 828 | $ | (2,028 | ) | —c |
Total | $ | 1,827,186 | $ | 21,873 | $ | (31,907 | ) |
aAs of December 31, 2015, no longer held by the fund.
bIncludes realized gain distributions received.
cRounds 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, 2016.
h. Other Affiliated Transactions
At December 31, 2015, Franklin Resources, Inc. owned 43.79% of Franklin LifeSmart 2055 Retirement Target Fund’s outstanding shares. Investment activities of this shareholder could have a material impact on the Fund.
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, 2015, the custodian fees were reduced as noted in the Statements of Operations.
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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, 2015 and 2014, was 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 | |||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||
Distributions paid | ||||||||||||||||
from: | ||||||||||||||||
Ordinary income | $ | 1,743,240 | $ | 3,294,721 | $ | 556,860 | $ | 354,209 | $ | 1,951,008 | $ | 3,260,296 | $ | 465,702 | $ | 332,616 |
Long term capital | ||||||||||||||||
gain | 2,333,923 | 2,926,928 | 232,611 | 31,490 | 4,974,155 | 4,926,449 | 334,456 | 20,982 | ||||||||
$ | 4,077,163 | $ | 6,221,649 | $ | 789,471 | $ | 385,699 | $ | 6,925,163 | $ | 8,186,745 | $ | 800,158 | $ | 353,598 | |
Franklin | Franklin | Franklin | Franklin | |||||||||||||
LifeSmart | LifeSmart | LifeSmart | LifeSmart | |||||||||||||
2035 Retirement | 2040 Retirement | 2045 Retirement | 2050 Retirement | |||||||||||||
Target Fund | Target Fund | Target Fund | Target Fund | |||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||
Distributions paid | ||||||||||||||||
from: | ||||||||||||||||
Ordinary income | $ | 1,524,783 | $ | 2,039,361 | $ | 340,288 | $ | 204,870 | $ | 960,192 | $ | 1,294,478 | $ | 257,264 | $ | 158,953 |
Long term capital | ||||||||||||||||
gain | 3,693,779 | 3,332,526 | 242,599 | 11,120 | 2,709,928 | 2,196,520 | 184,283 | 10,725 | ||||||||
$ | 5,218,562 | $ | 5,371,887 | $ | 582,887 | $ | 215,990 | $ | 3,670,120 | $ | 3,490,998 | $ | 441,547 | $ | 169,678 | |
Franklin | ||||||||||||||||
LifeSmart | ||||||||||||||||
2055 Retirement | ||||||||||||||||
Target Fund | ||||||||||||||||
2015 | ||||||||||||||||
Distributions paid from: | ||||||||||||||||
Ordinary income | $ | 25,680 |
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NOTES TO FINANCIAL STATEMENTS
5. Income Taxes (continued)
At December 31, 2015, 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 | $ | 80,459,873 | $ | 37,384,007 | $ | 124,311,523 | $ | 33,640,506 | ||||
Unrealized appreciation | $ | 3,468,444 | $ | 254,428 | $ | 9,382,930 | $ | 292,052 | ||||
Unrealized depreciation | (6,199,154 | ) | (2,333,142 | ) | (7,698,221 | ) | (2,238,225 | ) | ||||
Net unrealized appreciation (depreciation) | $ | (2,730,710 | ) | $ | (2,078,714 | ) | $ | 1,684,709 | $ | (1,946,173 | ) | |
Undistributed ordinary income | $ | 72,590 | $ | 24,099 | $ | 412,530 | $ | 19,056 | ||||
Undistributed long term capital gains. | 350,054 | 212,106 | 1,294,577 | 319,107 | ||||||||
Distributable earnings | $ | 422,644 | $ | 236,205 | $ | 1,707,107 | $ | 338,163 | ||||
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 | $ | 97,595,752 | $ | 24,401,475 | $ | 65,338,449 | $ | 18,717,739 | ||||
Unrealized appreciation | $ | 7,572,212 | $ | 238,160 | $ | 4,977,379 | $ | 213,717 | ||||
Unrealized depreciation | (5,599,175 | ) | (1,587,798 | ) | (3,587,906 | ) | (1,232,426 | ) | ||||
Net unrealized appreciation (depreciation) | $ | 1,973,037 | $ | (1,349,638 | ) | $ | 1,389,473 | $ | (1,018,709 | ) | ||
Undistributed ordinary income | $ | 269,535 | $ | 7,404 | $ | 182,944 | $ | 5,524 | ||||
Undistributed long term capital gains. | 1,314,223 | 216,602 | 825,821 | 197,376 | ||||||||
Distributable earnings | $ | 1,583,758 | $ | 224,006 | $ | 1,008,765 | $ | 202,900 | ||||
Franklin | ||||||||||||
LifeSmart | ||||||||||||
2055 Retirement | ||||||||||||
Target Fund | ||||||||||||
Cost of investments | $ | 2,224,422 | ||||||||||
Unrealizedappreciation | $ | 2,225 | ||||||||||
Unrealized depreciation | (128,054 | ) | ||||||||||
Net unrealized appreciation (depreciation) | $ | (125,829 | ) | |||||||||
Undistributed ordinary income | $ | 2,615 | ||||||||||
Undistributed long term capital gains. | 17,628 | |||||||||||
Distributable earnings | $ | 20,243 |
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.
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NOTES TO FINANCIAL STATEMENTS
6. Investment Transactions
Purchases and sales of Underlying Funds and ETFs (excluding short term securities) for the year ended December 31, 2015, 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. | $ | 31,432,999 | $ | 31,092,657 | $ | 57,190,536 | $ | 24,503,411 |
Sales | $ | 30,406,401 | $ | 12,130,078 | $ | 43,738,236 | $ | 11,233,396 |
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. | $ | 42,336,185 | $ | 17,532,006 | $ | 30,257,100 | $ | 15,046,471 |
Sales | $ | 33,077,294 | $ | 7,737,891 | $ | 21,698,002 | $ | 6,884,741 |
Franklin | ||||||||
LifeSmart | ||||||||
2055 Retirement | ||||||||
Target Fund | ||||||||
Purchases. | $ | 3,267,280 | ||||||
Sales | $ | 1,063,885 |
7. Upcoming Reposition
On December 3, 2015, the Board approved a proposal to reposition Franklin LifeSmart 2015 Retirement Target Fund, subject to shareholder approval of certain matters. Among other things, the repositioning would involve changing the name of the Fund to Franklin LifeSmart Retirement Income Fund, and modifying the investment goal to the following: The Fund’s investment goal is to seek to make monthly distributions, while preserving the investor’s capital over the long term. In addition, the strategies of the Fund would be modified. Shareholders have or will receive a proxy statement requesting their votes on certain proposals related to the repositioning. If such proposals are approved by the Fund’s shareholders, the repositioning is currently expected to be completed on or about May 1, 2016.
8. Credit Facility
The Funds, except Franklin LifeSmart 2055 Retirement Target Fund, 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 $2 billion (Global Credit Facility) which matured on February 12, 2016. 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. Effective February 12, 2016, the Borrowers renewed the Global Credit Facility for a one year term, maturing February 10, 2017, for a total of $2 billion. The Franklin LifeSmart 2055 Retirement Target Fund began participating in the Global Credit Facility 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. Effective February 12, 2016, the annual commitment fee is 0.15%. These fees are reflected in other expenses in the Statements of Operations. During the year ended December 31, 2015, the Funds did not use the Global Credit Facility.
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FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
9. 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, 2015, 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.
10. 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 |
SPDR | S&P Depository Receipt |
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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, Franklin LifeSmart 2050 Retirement Target Fund and Franklin LifeSmart 2055 Retirement Target Fund (separate portfolios of Franklin Fund Allocator Series, hereafter referred to as the "Funds") at December 31, 2015, 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, 2015 by correspondence with the transfer agent, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 16, 2016
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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, 2015:
Franklin | Franklin | Franklin | Franklin | ||||
LifeSmart | LifeSmart | LifeSmart | LifeSmart | ||||
2015 Retirement | 2020 Retirement | 2025 Retirement | 2030 Retirement | ||||
Target Fund | Target Fund | Target Fund | Target Fund | ||||
$ | 2,333,923 | $ | 232,611 | $ | 4,974,155 | $ | 334,456 |
Franklin | Franklin | Franklin | Franklin | ||||
LifeSmart | LifeSmart | LifeSmart | LifeSmart | ||||
2035 Retirement | 2040 Retirement | 2045 Retirement | 2050 Retirement | ||||
Target Fund | Target Fund | Target Fund | Target Fund | ||||
$ | 3,693,779 | $ | 242,599 | $ | 2,709,928 | $ | 184,283 |
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, 2015: |
Franklin | Franklin | Franklin | Franklin | ||||
LifeSmart | LifeSmart | LifeSmart | LifeSmart | ||||
2020 Retirement | 2025 Retirement | 2030 Retirement | 2035 Retirement | ||||
Target Fund | Target Fund | Target Fund | Target Fund | ||||
$ | 7,959 | $ | 109,015 | $ | 8,682 | $ | 121,781 |
Franklin | Franklin | Franklin | |||||
LifeSmart | LifeSmart | LifeSmart | |||||
2040 Retirement | 2045 Retirement | 2050 Retirement | |||||
Target Fund | Target Fund | Target Fund | |||||
$ | 10,713 | $ | 69,132 | $ | 6,274 |
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, 2015:
Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | ||||
2015 Retirement | 2020 Retirement | 2025 Retirement | 2030 Retirement | ||||
Target Fund | Target Fund | Target Fund | Target Fund | ||||
6.27 | % | 14.38 | % | 19.25 | % | 20.50 | % |
Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | ||||
2035 Retirement | 2040 Retirement | 2045 Retirement | 2050 Retirement | ||||
Target Fund | Target Fund | Target Fund | Target Fund | ||||
23.14 | % | 22.37 | % | 26.18 | % | 24.51 | % |
Franklin LifeSmart | |||||||
2055 Retirement | |||||||
Target Fund | |||||||
23.98 | % |
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TAX INFORMATION (UNAUDITED)
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, 2015:
Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | ||||
2015 Retirement | 2020 Retirement | 2025 Retirement | 2030 Retirement | ||||
Target Fund | Target Fund | Target Fund | Target Fund | ||||
$ | 358,004 | $ | 216,066 | $ | 1,004,716 | $ | 254,906 |
Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | Franklin LifeSmart | ||||
2035 Retirement | 2040 Retirement | 2045 Retirement | 2050 Retirement | ||||
Target Fund | Target Fund | Target Fund | Target Fund | ||||
$ | 961,284 | $ | 206,568 | $ | 676,414 | $ | 171,755 |
Franklin LifeSmart | |||||||
2055 Retirement | |||||||
Target Fund | |||||||
$ | 17,280 |
Distributions, including qualified dividend income, paid during calendar year 2015 will be reported to shareholders on Form 1099-DIV by mid-February 2016. 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, 2015, 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 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, 2015, 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 Paid | Foreign Source | Foreign Source Qualified | ||||
Class | Per Share | Income Per Share | Dividends Per Share | |||
Franklin LifeSmart 2015 Retirement Target Fund | ||||||
Class A | $ | 0.0043 | $ | 0.1819 | $ | 0.0096 |
Class C | $ | 0.0043 | $ | 0.1819 | $ | 0.0096 |
Class R | $ | 0.0043 | $ | 0.1819 | $ | 0.0096 |
Class R6 | $ | 0.0043 | $ | 0.1819 | $ | 0.0096 |
AdvisorClass | $ | 0.0043 | $ | 0.1819 | $ | 0.0096 |
Franklin LifeSmart 2020 Retirement Target Fund | ||||||
Class A | $ | 0.0047 | $ | 0.1081 | $ | 0.0176 |
Class C | $ | 0.0047 | $ | 0.1081 | $ | 0.0176 |
Class R | $ | 0.0047 | $ | 0.1081 | $ | 0.0176 |
Class R6 | $ | 0.0047 | $ | 0.1081 | $ | 0.0176 |
AdvisorClass | $ | 0.0047 | $ | 0.1081 | $ | 0.0176 |
Franklin LifeSmart 2025 Retirement Target Fund | ||||||
Class A | $ | 0.0057 | $ | 0.1093 | $ | 0.0228 |
Class C | $ | 0.0057 | $ | 0.1093 | $ | 0.0228 |
Class R | $ | 0.0057 | $ | 0.1093 | $ | 0.0228 |
Class R6 | $ | 0.0057 | $ | 0.1093 | $ | 0.0228 |
AdvisorClass | $ | 0.0057 | $ | 0.1093 | $ | 0.0228 |
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TAX INFORMATION (UNAUDITED) | ||||||
Foreign Tax Paid | Foreign Source | Foreign Source Qualified | ||||
Class | Per Share | Income Per Share | Dividends Per Share | |||
Franklin LifeSmart 2030 Retirement Target Fund | ||||||
Class A | $ | 0.0057 | $ | 0.0876 | $ | 0.0244 |
Class C | $ | 0.0057 | $ | 0.0876 | $ | 0.0244 |
Class R | $ | 0.0057 | $ | 0.0876 | $ | 0.0244 |
Class R6 | $ | 0.0057 | $ | 0.0876 | $ | 0.0244 |
AdvisorClass | $ | 0.0057 | $ | 0.0876 | $ | 0.0244 |
Franklin LifeSmart 2035 Retirement Target Fund | ||||||
Class A | $ | 0.0062 | $ | 0.0919 | $ | 0.0268 |
Class C | $ | 0.0062 | $ | 0.0919 | $ | 0.0268 |
Class R | $ | 0.0062 | $ | 0.0919 | $ | 0.0268 |
Class R6 | $ | 0.0062 | $ | 0.0919 | $ | 0.0268 |
AdvisorClass | $ | 0.0062 | $ | 0.0919 | $ | 0.0268 |
Franklin LifeSmart 2040 Retirement Target Fund | ||||||
Class A | $ | 0.0060 | $ | 0.0777 | $ | 0.0270 |
Class C | $ | 0.0060 | $ | 0.0777 | $ | 0.0270 |
Class R | $ | 0.0060 | $ | 0.0777 | $ | 0.0270 |
Class R6 | $ | 0.0060 | $ | 0.0777 | $ | 0.0270 |
AdvisorClass | $ | 0.0060 | $ | 0.0777 | $ | 0.0270 |
Franklin LifeSmart 2045 Retirement Target Fund | ||||||
Class A | $ | 0.0066 | $ | 0.0862 | $ | 0.0298 |
Class C | $ | 0.0066 | $ | 0.0862 | $ | 0.0298 |
Class R | $ | 0.0066 | $ | 0.0862 | $ | 0.0298 |
Class R6 | $ | 0.0066 | $ | 0.0862 | $ | 0.0298 |
AdvisorClass | $ | 0.0066 | $ | 0.0862 | $ | 0.0298 |
Franklin LifeSmart 2050 Retirement Target Fund | ||||||
Class A | $ | 0.0066 | $ | 0.0815 | $ | 0.0311 |
Class C | $ | 0.0066 | $ | 0.0815 | $ | 0.0311 |
Class R | $ | 0.0066 | $ | 0.0815 | $ | 0.0311 |
Class R6 | $ | 0.0066 | $ | 0.0815 | $ | 0.0311 |
AdvisorClass | $ | 0.0066 | $ | 0.0815 | $ | 0.0311 |
Franklin LifeSmart 2055 Retirement Target Fund | ||||||
Class A | $ | 0.0060 | $ | 0.0658 | $ | 0.0291 |
Class C | $ | 0.0060 | $ | 0.0658 | $ | 0.0291 |
Class R | $ | 0.0060 | $ | 0.0658 | $ | 0.0291 |
Class R6 | $ | 0.0060 | $ | 0.0658 | $ | 0.0291 |
AdvisorClass | $ | 0.0060 | $ | 0.0658 | $ | 0.0291 |
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
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TAX INFORMATION (UNAUDITED)
By mid-February 2016, shareholders will receive Form 1099-DIV which will include their share of taxes paid and foreign source income distributed during the calendar year 2015. 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 2015 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.
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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 | |
and Address | Position | Time Served | by Board Member* | During at Least the Past 5 Years |
Harris J. Ashton (1932) | Trustee | Since 1995 | 147 | 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 2014 | 123 | Avis Budget Group Inc. (car rental) |
One Franklin Parkway | (2007-present), Omnicom Group Inc. | |||
San Mateo, CA 94403-1906 | (advertising and marketing | |||
communications services) | ||||
(2011-present) and H.J. Heinz | ||||
Company (processed foods and allied | ||||
products) (1998-2006). | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Senior Advisor, Strategic Investment Group (investment management group) (August 2015-present); director of various companies; and | ||||
formerly, Founding Partner and Senior Managing Director, Strategic Investment Group (1987–2015); Founding Partner and Managing Director, | ||||
Emerging Markets Management LLC (investment management firm) (1987-2011); and Loan Officer/Senior Loan Officer/Senior Pension | ||||
Investment Officer, World Bank Group (international financial institution) (1977-1987). | ||||
Edith E. Holiday (1952) | Trustee | Since 1998 | 147 | Hess Corporation (exploration and |
One Franklin Parkway | refining of oil and gas) (1993-present), | |||
San Mateo, CA 94403-1906 | Canadian National Railway (railroad) | |||
(2001-present), White Mountains | ||||
Insurance Group, Ltd. (holding | ||||
company) (2004-present), RTI | ||||
International Metals, Inc. (manufacture | ||||
and distribution of titanium) | ||||
(1999-2015) and H.J. Heinz Company | ||||
(processed foods and allied products) | ||||
(1994-2013). | ||||
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). | ||||
J. Michael Luttig (1954) | Trustee | Since 2009 | 147 | Boeing Capital Corporation (aircraft |
One Franklin Parkway | 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) (2006-present); | ||||
and formerly, Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006). | ||||
Frank A. Olson (1932) | Trustee | Since 2007 | 147 | 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). |
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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 |
Larry D. Thompson (1945) | Trustee | Since 2007 | 147 | The Southern Company (energy |
One Franklin Parkway | company) (2014-present; previously | |||
San Mateo, CA 94403-1906 | 2010-2012), Graham Holdings | |||
Company (education and media | ||||
organization) (2011-present) and | ||||
Cbeyond, Inc. (business | ||||
communications provider) | ||||
(2010-2012). | ||||
Principal Occupation During at Least the Past 5 Years: | ||||
Director of various companies; John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (January 2015; | ||||
previously 2011-2012); and formerly, Executive Vice President – Government Affairs, General Counsel and Corporate Secretary, PepsiCo, | ||||
Inc. (consumer products) (2012-2014); Senior Vice President – Government Affairs, General Counsel and Secretary, PepsiCo, Inc. | ||||
(2004-2011); Senior Fellow of The Brookings Institution (2003-2004); Visiting Professor, (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 | 123 | 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). | ||||
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 | 164 | 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 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; Vice Chairman, Investment Company Institute; and formerly, President, Franklin Resources, Inc. | ||||
(1994-2015). | ||||
**Rupert H. Johnson, Jr. (1940) | Chairman of | Chairman of the | 147 | 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 42 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 44 | ||||
of the investment companies in Franklin Templeton Investments. |
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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 |
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; Vice President, Franklin Advisers, Inc. and Franklin Templeton Institutional, LLC; and | ||||
officer of 44 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: | ||||
Treasurer, U.S. Fund Administration & Reporting, 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; and officer of 44 of the investment companies in Franklin Templeton | ||||
Investments. | ||||
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 44 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 44 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, Fiduciary Trust International of the South and Templeton | ||||
Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 44 of the investment companies in Franklin Templeton | ||||
Investments. |
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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 |
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 44 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 44 of the investment companies in Franklin Templeton | ||||
Investments. | ||||
Navid Tofigh (1972) | Vice President | Since | Not Applicable | Not Applicable |
One Franklin Parkway | November | |||
San Mateo, CA 94403-1906 | 2015 | |||
Principal Occupation During at Least the Past 5 Years: | ||||
Associate General Counsel, Franklin Templeton Investments; and officer of 44 of the investment companies in Franklin Templeton Investments. | ||||
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 44 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; and officer of 44 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.
Note 3: Effective April 30, 2015, Sam Ginn ceased to be a trustee of the Trust.
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.
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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.
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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 $336,428 for the fiscal year ended December 31, 2015 and $303,651 for the fiscal year ended December 31, 2014.
(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.
There were no 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.
(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 $0 for the fiscal year ended December 31, 2015 and $3,932 for the fiscal year ended December 31, 2014. 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 $581,561 for the fiscal year ended December 31, 2015 and $155,804 for the fiscal year ended December 31, 2014. The services for which these fees were paid include preparation and review of materials provided to the fund Board in connection with the investment management contract renewal process and derivatives assessment, and review of system processes related to fixed income securities.
(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 $581,561 for the fiscal year ended December 31, 2015 and $159,736 for the fiscal year ended December 31, 2014.
(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, 2016
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, 2016
By /s/Gaston Gardey
Gaston Gardey
Chief Financial Officer and Chief Accounting Officer
Date February 26, 2016