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: 12/31/17
| Item 1. | Reports to Stockholders. |
Annual Report
and Shareholder Letter
December 31, 2017
Franklin Conservative Allocation Fund
Franklin Moderate Allocation Fund
Franklin Growth Allocation Fund
Sign up for electronic delivery at franklintempleton.com/edelivery
Franklin Templeton Investments
Gain From Our Perspective®
At Franklin Templeton Investments, we’re dedicated to one goal: delivering exceptional asset management for our clients. By bringing together multiple, world-class investment teams in a single firm, we’re able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the world’s largest asset managers. This has helped us to become a trusted partner to individual and institutional investors across the globe.
Dear Shareholder:
During the 12 months ended December 31, 2017, mostly upbeat economic data, improved corporate earnings and supportive monetary policies were positives for US securities markets. After two rate increases earlier in 2017, at its December meeting the US Federal Reserve (Fed) raised the target range for its benchmark federal funds rate 0.25% to 1.25%–1.50% amid ongoing labor market strength, rising economic activity and low inflation in the US. The Fed also announced a gradual monthly reduction in its balance sheet starting in January of 2018 as part of its ongoing plan to normalize monetary policy.
In this environment, US stocks, as measured by the Standard & Poor’s® 500 Index, ended the period with a +21.83% total return.1 Stocks in global developed markets, as measured by the MSCI World Index, returned +23.07% for the same period.1 Investment-grade bonds, as measured by the Bloomberg Barclays US Aggregate Bond Index, posted a +3.54% 12-month total return.1
We are committed to our long-term perspective and disciplined investment approach as we conduct a rigorous, fundamental analysis of securities with a regular emphasis on investment risk management.
We believe active, professional investment management serves investors well. We also recognize the important role of financial advisors in today’s markets and encourage investors to continue to seek their advice. Amid changing markets and economic conditions, we are confident investors with a
well-diversified portfolio and a patient, long-term outlook should be well positioned for the years ahead.
In addition, Franklin Fund Allocator Series’ annual report includes more detail about prevailing conditions and a discussion about investment decisions during the period. Please remember all securities markets fluctuate, as do mutual fund share prices.
We thank you for investing with Franklin Templeton, welcome your questions and comments, and look forward to serving your future investment needs.
Sincerely,
Rupert H. Johnson, Jr.
Chairman
Franklin Fund Allocator Series
This letter reflects our analysis and opinions as of December 31, 2017, unless otherwise indicated. 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.
1. Source: Morningstar.
See www.franklintempletondatasources.com for additional data provider information.
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| Not FDIC Insured | | | | | May Lose Value | | | | | No Bank Guarantee |
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franklintempleton.com | | Not part of the annual report | | | 1 | |
Contents
Annual Report
Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.
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Annual Report
Economic and Market Overview
The global economy grew moderately during the 12-month period under review. In this environment, global developed and emerging market stocks generated a +24.62% total return, as measured by the MSCI All Country World Index.1 Global markets were aided by price gains in oil and other commodities, generally upbeat economic data across regions, the European Central Bank’s (ECB’s) extension of its monetary easing program, and investor optimism about pro-growth and pro-business policies in the US. The prospect for reforms in the European Union (EU) with Emmanuel Macron’s election as France’s president, encouraging corporate earnings reports and the passage of the US tax reform bill also supported global stocks.
However, global markets reflected investor concerns about the terms of the UK’s exit from the EU, political uncertainty in the US and the EU, and geopolitical tensions in the Korean peninsula and other regions. Other concerns included the health of European banks, global oil oversupply despite a pact by major oil-producing countries to extend production cuts, and comments from key central bankers around the world about potentially raising interest rates.
After strengthening in 2017’s second and third quarters, the US economy moderated in the fourth quarter. The economy grew faster in 2017 than in 2016, however, largely due to growth in consumer spending, business investment and exports. The unemployment rate decreased from 4.7% in December 2016 to 4.1% at period-end.2 Annual inflation, as measured by the Consumer Price Index, was 2.1% in December 2016, and while it varied over the 12-month period, remained unchanged at period-end.2 The US Federal Reserve (Fed) raised its target range for the federal funds rate 0.25% three times during the period, amid signs of a growing US economy, strengthening labor market and improving business spending. At its December meeting, the Fed confirmed that the monthly balance sheet reduction would increase from US$10 billion to US$20 billion beginning in January 2018.
In Europe, the UK’s economic growth moderated in 2017 compared to 2016, largely due to slower growth in the services sector. In November, the Bank of England raised its key policy rate 0.25%, its first increase in a decade. The eurozone’s growth accelerated in 2017’s second and third quarters, but moderated in the fourth quarter. However, the eurozone’s 2017
1. Source: Morningstar.
2. Source: Bureau of Labor Statistics.
See www.franklintempletondatasources.com for additional data provider information.
economic growth rate was the fastest in a decade. The bloc’s annual inflation rate, while low, ended higher than in December 2016. The European Central Bank (ECB) kept its benchmark interest rate unchanged during the period. However, at its October meeting, the ECB extended the time frame for its massive bond-buying program from December 2017 to at least September 2018, while reducing the amount of monthly bond purchases in half beginning in January 2018.
In Asia, Japan’s quarterly gross domestic product (GDP) grew for the seventh consecutive quarter, although third-quarter 2017 growth was lower than the previous quarter. The Bank of Japan left its benchmark interest rate unchanged during the period and continued its monetary stimulus measures.
In emerging markets, Brazil’s quarterly GDP grew for the third consecutive quarter, although third-quarter 2017 growth slowed from the previous quarter. The country’s central bank cut its benchmark interest rate several times during the period to spur economic growth. Russia’s GDP grew in 2017’s first three quarters compared to the prior-year periods, amid the Bank of Russia’s continued policy support. China’s GDP grew faster in 2017 than in 2016, supported by solid growth in industrial production, services, fixed-asset investment, retail sales, and imports and exports. The People’s Bank of China left its benchmark interest rate unchanged during the period. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, rose substantially during the period.
The foregoing information reflects our analysis and opinions as of December 31, 2017. 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, 2017.
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
Asset Allocation*
Based on Total Net Assets as of 12/31/17
*The asset allocation is based on the Statement of Investments (SOI), which classifies each underlying fund and other fund investments into a broad asset class based on its predominant investments under normal market conditions.
Performance Overview
The Fund’s Class A shares delivered a +10.58% 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 +24.62% total return.2 The Fund’s fixed income benchmark, the Bloomberg Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, had a +7.69% total return.2 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 6.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell
your shares. Current performance may differ from figures shown. 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
12/31/17
| | | | |
| | | % of Total
Net Assets | |
Franklin Low Duration Total Return Fund – Class R6 | | | 17.0% | |
Franklin U.S. Government Securities Fund – Class R6 | | | 10.7% | |
Templeton Global Total Return Fund – Class R6 | | | 9.7% | |
Franklin Strategic Income Fund – Class R6 | | | 9.3% | |
Franklin Growth Fund – Class R6 | | | 9.0% | |
Franklin DynaTech Fund – Class R6 | | | 6.1% | |
Franklin Rising Dividends Fund – Class R6 | | | 4.7% | |
Franklin LibertyQ Emerging Markets ETF | | | 3.9% | |
Franklin International Small Cap Growth Fund – Class R6 | | | 3.4% | |
Franklin Mutual European Fund – Class R6 | | | 3.3% | |
Manager’s Discussion
The Fund’s performance can be attributed to its allocation among equities and fixed income securities and to the actual performance of the fund investments.
At period-end, Franklin Conservative Allocation Fund allocated 51.8% of total net assets to fixed income, 41.6% to
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. They do not reflect any feed, expenses or sales charges. 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 27.
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FRANKLIN CONSERVATIVE ALLOCATION FUND
equity and 4.9% to alternative strategies. Domestic fixed income exposure was 81.3% of the total fixed income weighting, with the balance represented by foreign fixed income. Franklin Low Duration Total Return Fund – Class R6, representing 17.0% of the Fund’s total net assets, was our largest fixed income fund weighting at period-end. On the equity side, domestic exposure was 65.4% 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, 2017, 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 9.0% of total net assets.
During the 12-month reporting period, our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest foreign equity fund holding, Franklin LibertyQ Emerging Markets ETF, 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, Franklin Low Duration Total Return Fund –Class R6 and Templeton Global Total Return Fund – Class R6 underperformed the Bloomberg Barclays Multiverse Index.
Thank you for your continued participation in Franklin Conservative Allocation Fund. We look forward to serving your future investment needs.
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T. Anthony Coffey, CFA |
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Thomas A. Nelson, CFA |
| | Portfolio Management Team |
CFA® is a trademark owned by CFA Institute.
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2017, 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 CONSERVATIVE ALLOCATION FUND
Performance Summary as of December 31, 2017
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. 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.
Performance as of 12/31/171
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.75% and the minimum is 0%. Class A: 5.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
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| Share Class | | Cumulative
Total Return2 | | | Average Annual
Total Return3 | |
| | |
| A | | | | | | | | |
1-Year | | | +10.58% | | | | +4.21% | |
5-Year | | | +28.72% | | | | +3.94% | |
10-Year | | | +53.68% | | | | +3.77% | |
| | |
| Advisor | | | | | | | | |
1-Year | | | +10.88% | | | | +10.88% | |
5-Year | | | +30.42% | | | | +5.46% | |
10-Year | | | +57.74% | | | | +4.66% | |
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 8 for Performance Summary footnotes.
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FRANKLIN CONSERVATIVE ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
See page 8 for Performance Summary footnotes.
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FRANKLIN CONSERVATIVE ALLOCATION FUND
PERFORMANCE SUMMARY
Distributions (1/1/17–12/31/17)
| | | | | | | | | | | | |
| Share Class | | Net Investment
Income | | | Long-Term
Capital Gain | | | Total | |
| | | |
A | | | $0.2364 | | | | $0.0923 | | | | $0.3287 | |
| | | |
C | | | $0.1261 | | | | $0.0923 | | | | $0.2184 | |
| | | |
R | | | $0.1975 | | | | $0.0923 | | | | $0.2898 | |
| | | |
R6 | | | $0.2891 | | | | $0.0923 | | | | $0.3814 | |
| | | |
Advisor | | | $0.2763 | | | | $0.0923 | | | | $0.3686 | |
Total Annual Operating Expenses5
| | | | | | | | |
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| Share Class | | With Waiver | | | Without Waiver | |
A | | | 1.24% | | | | 1.24% | |
Advisor | | | 0.99% | | | | 0.99% | |
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
All investments involve risks, including possible loss of principal. Because this Fund invests in underlying funds, it is subject to the same risks, and indirectly bears the fees and expenses, of the underlying funds. 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 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 which are heightened in developing countries. Investors should consult their financial advisor for help selecting the appropriate fund of funds, or fund combination, based on an evaluation of their investment objectives and risk tolerance. The Fund’s prospectus also includes a description of the main investment risks.
1. As of 1/1/13, the Fund changed its target allocation, with short-term investments (formerly a targeted allocation of 20%) combined into the fixed income allocations; such a change can impact performance.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
4. 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 Bloomberg 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.
5. Figures are as stated in the Fund’s current prospectus, including the effect of acquired fund fees and expenses, and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
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: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | |
| | | | | Actual
(actual return after expenses) | | Hypothetical
(5% annual return before expenses) | | |
Share
Class | | Beginning
Account
Value 7/1/17 | | Ending
Account
Value 12/31/17 | | Expenses
Paid During
Period
7/1/17–12/31/171,2 | | Ending
Account
Value 12/31/17 | | Expenses
Paid During
Period
7/1/17–12/31/171,2 | | Net
Annualized
Expense
Ratio2 |
| | | | | | |
A | | $1,000 | | $1,044.80 | | $3.25 | | $1,022.03 | | $3.21 | | 0.63% |
C | | $1,000 | | $1,040.80 | | $7.10 | | $1,018.25 | | $7.02 | | 1.38% |
R | | $1,000 | | $1,043.40 | | $4.53 | | $1,020.77 | | $4.48 | | 0.88% |
R6 | | $1,000 | | $1,046.20 | | $1.44 | | $1,023.79 | | $1.43 | | 0.28% |
Advisor | | $1,000 | | $1,046.30 | | $1.96 | | $1,023.29 | | $1.94 | | 0.38% |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
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Franklin Moderate Allocation Fund
This annual report for Franklin Moderate Allocation Fund covers the fiscal year ended December 31, 2017.
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
Asset Allocation*
Based on Total Net Assets as of 12/31/17
*The asset allocation is based on the Statement of Investments (SOI), which classifies each underlying fund and other fund investments into a broad asset class based on its predominant investments under normal market conditions.
Performance Overview
The Fund’s Class A shares delivered a +14.98% 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 +24.62% total return.2 The Fund’s fixed income benchmark, the Bloomberg Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, had a +7.69% total return.2 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 12.
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 | | | |
12/31/17 | | | |
| | | % of Total
Net Assets | |
Franklin Growth Fund – Class R6 | | | 13.8% | |
Franklin Low Duration Total Return Fund – Class R6 | | | 10.7% | |
Franklin DynaTech Fund – Class R6 | | | 8.5% | |
Franklin Rising Dividends Fund – Class R6 | | | 7.0% | |
Franklin U.S. Government Securities Fund – Class R6 | | | 6.5% | |
Templeton Global Total Return Fund – Class R6 | | | 5.9% | |
Franklin Strategic Income Fund – Class R6 | | | 5.7% | |
Franklin LibertyQ Emerging Markets ETF | | | 5.7% | |
Franklin International Small Cap Growth Fund – Class R6 | | | 5.3% | |
Franklin Mutual European Fund – Class R6 | | | 5.0% | |
Manager’s Discussion
The Fund’s performance can be attributed mainly to its allocation among equities and fixed income securities and to the actual performance of the fund investments.
At period-end, Franklin Moderate Allocation Fund allocated 61.8% of total net assets to equity, 31.9% to fixed income, and
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. They do not reflect any feed, expenses or sales charges. 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 34.
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FRANKLIN MODERATE ALLOCATION FUND
4.9% to alternative strategies. Domestic equity exposure was 64.9% of the total equity weighting, with the balance represented by foreign equity. The portfolio was diversified across capitalization sizes and investment styles, and on December 31, 2017, we held shares in large-, mid- and small-capitalization equity funds, representing both growth and value styles. Franklin Growth Fund – Class R6 was our largest equity fund weighting at 13.8% of total net assets. On the fixed income side, domestic exposure was 81.5% of the Fund’s total income weighting, with the balance represented by foreign fixed income. Franklin Low Duration Total Return Fund –Class R6 was our largest fixed income fund weighting at 10.7% of total net assets.
During the 12-month reporting period, our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest foreign equity fund holding, Franklin LibertyQ Emerging Markets ETF, 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, Franklin Low Duration Total Return Fund – Class R6 and Templeton Global Total Return Fund – Class R6 underperformed the Bloomberg Barclays Multiverse Index.
Thank you for your continued participation in Franklin Moderate Allocation Fund. We look forward to serving your future investment needs.
| | |
| |
T. Anthony Coffey, CFA |
| | |
| |
Thomas A. Nelson, CFA |
| | Portfolio Management Team |
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2017, 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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| franklintempleton.com | | Annual Report | | | 11 | |
FRANKLIN MODERATE ALLOCATION FUND
Performance Summary as of December 31, 2017
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. 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.
Performance as of 12/31/171
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.75% and the minimum is 0%. Class A: 5.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| | | | | | | | |
| Share Class | | Cumulative
Total Return2 | | | Average Annual
Total Return3 | |
| | |
| A | | | | | | | | |
1-Year | | | +14.98 | % | | | +8.35 | % |
5-Year | | | +40.89 | % | | | +5.84 | % |
10-Year | | | +66.90 | % | | | +4.63 | % |
| | |
| Advisor | | | | | | | | |
1-Year | | | +15.20 | % | | | +15.20 | % |
5-Year | | | +42.61 | % | | | +7.36 | % |
10-Year | | | +71.13 | % | | | +5.52 | % |
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 14 for Performance Summary footnotes.
| | | | |
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| 12 | | Annual Report | | franklintempleton.com |
FRANKLIN MODERATE ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
See page 14 for Performance Summary footnotes.
| | | | | | |
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| franklintempleton.com | | Annual Report | | | 13 | |
FRANKLIN MODERATE ALLOCATION FUND
PERFORMANCE SUMMARY
Distributions (1/1/17–12/31/17)
| | | | | | | | |
| Share Class | | Net Investment Income | | Short-Term Capital Gain | | Long-Term Capital Gain | | Total |
A | | $0.2887 | | $0.0698 | | $0.6026 | | $0.9611 |
C | | $0.1648 | | $0.0698 | | $0.6026 | | $0.8372 |
R | | $0.2295 | | $0.0698 | | $0.6026 | | $0.9019 |
R6 | | $0.3498 | | $0.0698 | | $0.6026 | | $1.0222 |
Advisor | | $0.3333 | | $0.0698 | | $0.6026 | | $1.0057 |
| | | | |
Total Annual Operating Expenses5 | |
| |
Share Class | | | |
A | | | 1.27% | |
Advisor | | | 1.02% | |
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
All investments involve risks, including possible loss of principal. Because this Fund invests in underlying funds, it is subject to the same risks, and indirectly bears the fees and expenses, of the underlying funds. 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 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 which are heightened in developing countries. Investors should consult their financial advisor for help selecting the appropriate fund of funds, or fund combination, based on an evaluation of their investment objectives and risk tolerance. The Fund’s prospectus also includes a description of the main investment risks.
1. As of 1/1/13, the Fund changed its target allocation, with short-term investments (formerly a targeted allocation of 20%) combined into the fixed income allocations; such a change can impact performance.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
4. 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 Bloomberg 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.
5. Figures are as stated in the Fund’s current prospectus, including the effect of acquired fund fees and expenses, and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
| | | | |
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| 14 | | Annual Report | | franklintempleton.com |
FRANKLIN MODERATE ALLOCATION FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | |
| | | | | Actual
(actual return after expenses) | | Hypothetical
(5% annual return before expenses) | | |
Share
Class | | Beginning
Account
Value 7/1/17 | | Ending
Account
Value 12/31/17 | | Expenses
Paid During
Period
7/1/17–12/31/171,2 | | Ending
Account
Value 12/31/17 | | Expenses
Paid During
Period
7/1/17–12/31/171,2 | | Net
Annualized
Expense
Ratio2 |
| | | | | | |
A | | $1,000 | | $1,064.10 | | $3.38 | | $1,021.93 | | $3.31 | | 0.65% |
C | | $1,000 | | $1,060.60 | | $7.27 | | $1,018.15 | | $7.12 | | 1.40% |
R | | $1,000 | | $1,063.20 | | $4.68 | | $1,020.67 | | $4.58 | | 0.90% |
R6 | | $1,000 | | $1,065.90 | | $1.46 | | $1,023.79 | | $1.43 | | 0.28% |
Advisor | | $1,000 | | $1,065.50 | | $2.08 | | $1,023.19 | | $2.04 | | 0.40% |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 15 | |
Franklin Growth Allocation Fund
This annual report for Franklin Growth Allocation Fund covers the fiscal year ended December 31, 2017.
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
Asset Allocation*
Based on Total Net Assets as of 12/31/17
*The asset allocation is based on the Statement of Investments (SOI), which classifies each underlying fund and other fund investments into a broad asset class based on its predominant investments under normal market conditions.
Performance Overview
The Fund’s Class A shares delivered a +19.45% 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 +24.62% total return.2 The Fund’s fixed income benchmark, the Bloomberg Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, had a +7.69% total return.2 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 18.
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 | | | |
| 12/31/17 | | | |
| | | % of Total
Net Assets | |
Franklin Growth Fund – Class R6 | | | 17.3% | |
Franklin DynaTech Fund – Class R6 | | | 11.3% | |
Franklin Rising Dividends Fund – Class R6 | | | 9.2% | |
Franklin LibertyQ Emerging Markets ETF | | | 7.9% | |
| Franklin International Small Cap Growth Fund – Class R6 | | | 7.4% | |
Franklin Mutual European Fund – Class R6 | | | 6.6% | |
Templeton Foreign Fund – Class R6 | | | 5.8% | |
| Franklin Low Duration Total Return Fund – Class R6 | | | 4.0% | |
Financial Select Sector SPDR ETF | | | 3.9% | |
Franklin Utilities Fund – Class R6 | | | 3.7% | |
Manager’s Discussion
The Fund’s performance can be attributed mainly to its allocation among equities and fixed income securities and to the actual performance of the fund investments.
At period-end, Franklin Growth Allocation Fund allocated 81.9% of total net assets to equity, 11.7% to fixed income and
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. They do not reflect any feed, expenses or sales charges. 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 41.
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| 16 | | Annual Report | | franklintempleton.com |
FRANKLIN GROWTH ALLOCATION FUND
4.9% to alternative strategies. Domestic equity exposure was 63.6% 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, 2017, 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 17.3% of total net assets. On the fixed income side, domestic exposure was 82.1% of the Fund’s total income weighting, with the balance represented by foreign fixed income. Franklin Low Duration Total Return Fund –Class R6 was our largest fixed income fund weighting at 4.0% of total net assets.
During the 12-month reporting period, our largest domestic growth fund holding, Franklin Growth Fund – Class R6, and our largest foreign equity fund holding, Franklin LibertyQ Emerging Markets ETF, 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, Franklin Low Duration Total Return Fund –Class R6 and Templeton Global Total Return Fund – Class R6 underperformed the Bloomberg Barclays Multiverse Index.
Thank you for your continued participation in Franklin Growth Allocation Fund. We look forward to serving your future investment needs.
| | |
| |
T. Anthony Coffey, CFA |
| | |
| |
Thomas A. Nelson, CFA |
| | Portfolio Management Team |
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2017, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 17 | |
FRANKLIN GROWTH ALLOCATION FUND
Performance Summary as of December 31, 2017
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. 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.
Performance as of 12/31/171
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.75% and the minimum is 0%. Class A: 5.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| | | | | | | | |
| Share Class | | Cumulative
Total Return2 | | | Average Annual
Total Return3 | |
| | |
| A | | | | | | | | |
1-Year | | | +19.45% | | | | +12.60% | |
5-Year | | | +57.15% | | | | +8.18% | |
10-Year | | | +74.54% | | | | +5.10% | |
| | |
| Advisor | | | | | | | | |
1-Year | | | +19.77% | | | | +19.77% | |
5-Year | | | +59.12% | | | | +9.73% | |
10-Year | | | +79.11% | | | | +6.00% | |
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 20 for Performance Summary footnotes.
| | | | |
| | | |
| 18 | | Annual Report | | franklintempleton.com |
FRANKLIN GROWTH ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
See page 20 for Performance Summary footnotes.
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 19 | |
FRANKLIN GROWTH ALLOCATION FUND
PERFORMANCE SUMMARY
Distributions (1/1/17–12/31/17)
| | | | | | | | |
Share Class | | Net Investment Income | | Short-Term Capital Gain | | Long-Term Capital Gain | | Total |
A | | $0.3246 | | $0.0818 | | $1.0289 | | $1.4353 |
C | | $0.1798 | | $0.0818 | | $1.0289 | | $1.2905 |
R | | $0.2660 | | $0.0818 | | $1.0289 | | $1.3767 |
R6 | | $0.4020 | | $0.0818 | | $1.0289 | | $1.5127 |
Advisor | | $0.3713 | | $0.0818 | | $1.0289 | | $1.4820 |
Total Annual Operating Expenses5
| | | | | | | | |
| Share Class | | With Waiver | | | Without Waiver | |
A | | | 1.32% | | | | 1.36% | |
Advisor | | | 1.07% | | | | 1.11% | |
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
All investments involve risks, including possible loss of principal. Because this Fund invests in underlying funds, it is subject to the same risks, and indirectly bears the fees and expenses, of the underlying funds. 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 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 which are heightened in developing countries. Investors should consult their financial advisor for help selecting the appropriate fund of funds, or fund combination, based on an evaluation of their investment objectives and risk tolerance. The Fund’s prospectus also includes a description of the main investment risks.
1. The Fund has an expense reduction contractually guaranteed through 4/30/18. Fund investment results reflect the expense reduction; without this reduction, the results would have been lower. As of 1/1/13, the Fund changed its target allocation, with short-term investments (formerly a targeted allocation of 20%) combined into the fixed income allocations; such a change can impact performance.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
4. 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 Bloomberg 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.
5. Figures are as stated in the Fund’s current prospectus, including the effect of acquired fund fees and expenses, and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
| | | | |
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| 20 | | Annual Report | | franklintempleton.com |
FRANKLIN GROWTH ALLOCATION FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | |
| | | | | Actual
(actual return after expenses) | | Hypothetical
(5% annual return before expenses) | | |
Share
Class | | Beginning
Account
Value 7/1/17 | | Ending
Account
Value 12/31/17 | | Expenses
Paid During
Period
7/1/17–12/31/171,2 | | Ending
Account
Value 12/31/17 | | Expenses
Paid During
Period
7/1/17–12/31/171,2 | | Net
Annualized
Expense
Ratio2 |
| | | | | | |
A | | $1,000 | | $1,083.30 | | $3.41 | | $1,021.93 | | $3.31 | | 0.65% |
C | | $1,000 | | $1,079.50 | | $7.34 | | $1,018.15 | | $7.12 | | 1.40% |
R | | $1,000 | | $1,082.40 | | $4.72 | | $1,020.67 | | $4.58 | | 0.90% |
R6 | | $1,000 | | $1,085.40 | | $1.37 | | $1,023.89 | | $1.33 | | 0.26% |
Advisor | | $1,000 | | $1,084.80 | | $2.10 | | $1,023.19 | | $2.04 | | 0.40% |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
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| | | |
| franklintempleton.com | | Annual Report | | | 21 | |
FRANKLIN FUND ALLOCATOR SERIES
Financial Highlights
Franklin Conservative Allocation Fund
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| |
| Class A | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Per share operating performance
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net asset value, beginning of year | | | | | | | $13.74 | | | | $13.40 | | | | $14.53 | | | | $14.65 | | | | $14.06 | |
| | | | |
| | | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net investment incomeb,c | | | | | | | 0.20 | | | | 0.14 | | | | 0.28 | | | | 0.40 | | | | 0.31 | |
| | | | | | |
Net realized and unrealized gains (losses) | | | | | | | 1.25 | | | | 0.45 | | | | (0.60) | | | | 0.09 | | | | 1.12 | |
| | | | |
| | | | | | |
Total from investment operations | | | | | | | 1.45 | | | | 0.59 | | | | (0.32) | | | | 0.49 | | | | 1.43 | |
| | | | |
| | | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | | | | | (0.24) | | | | (0.15) | | | | (0.28) | | | | (0.42) | | | | (0.32) | |
| | | | | | |
Net realized gains | | | | | | | (0.09) | | | | (0.10) | | | | (0.53) | | | | (0.19) | | | | (0.52) | |
| | | | |
| | | | | | |
Total distributions | | | | | | | (0.33) | | | | (0.25) | | | | (0.81) | | | | (0.61) | | | | (0.84) | |
| | | | |
| | | | | | |
Net asset value, end of year | | | | | | | $14.86 | | | | $13.74 | | | | $13.40 | | | | $14.53 | | | | $14.65 | |
| | | | |
| | | | | | |
Total returnd | | | | | | | 10.58% | | | | 4.39% | | | | (2.26)% | | | | 3.35% | | | | 10.39% | |
| | | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Expenses before waiver and payments by affiliatese | | | | | | | 0.63% | | | | 0.63% | | | | 0.62% | | | | 0.63% | | | | 0.60% | |
| | | | | | |
Expenses net of waiver and payments by affiliatese | | | | | | | 0.63%f | | | | 0.63%f | | | | 0.62%f | | | | 0.63%f | | | | 0.59% | |
| | | | | | |
Net investment incomec | | | | | | | 1.37% | | | | 1.01% | | | | 1.97% | | | | 2.67% | | | | 2.11% | |
| | | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net assets, end of year (000’s) | | | | | | | $800,141 | | | | $809,039 | | | | $905,537 | | | | $910,523 | | | | $871,541 | |
| | | | | | |
Portfolio turnover rate | | | | | | | 17.99% | | | | 34.83% | | | | 17.69% | | | | 16.67% | | | | 57.59% | |
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 0.58% for the year ended December 31, 2017.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| | | | |
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| 22 | | 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, | |
| | | | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| |
| Class C | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| Per share operating performance | | | | | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net asset value, beginning of year | | | | | | | $13.47 | | | | $13.15 | | | | $14.27 | | | | $14.40 | | | | $13.83 | |
| | | | |
| | | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net investment incomeb,c | | | | | | | 0.09 | | | | 0.04 | | | | 0.17 | | | | 0.28 | | | | 0.20 | |
| | | | | | |
Net realized and unrealized gains (losses) | | | | | | | 1.23 | | | | 0.43 | | | | (0.58) | | | | 0.09 | | | | 1.11 | |
| | | | |
| | | | | | |
Total from investment operations | | | | | | | 1.32 | | | | 0.47 | | | | (0.41) | | | | 0.37 | | | | 1.31 | |
| | | | |
| | | | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | | | | | (0.13) | | | | (0.05) | | | | (0.18) | | | | (0.31) | | | | (0.22) | |
| | | | | | |
Net realized gains | | | | | | | (0.09) | | | | (0.10) | | | | (0.53) | | | | (0.19) | | | | (0.52) | |
| | | | |
| | | | | | |
Total distributions | | | | | | | (0.22) | | | | (0.15) | | | | (0.71) | | | | (0.50) | | | | (0.74) | |
| | | | |
| | | | | | |
Net asset value, end of year | | | | | | | $14.57 | | | | $13.47 | | | | $13.15 | | | | $14.27 | | | | $14.40 | |
| | | | |
| | | | | | |
Total returnd | | | | | | | 9.80% | | | | 3.55% | | | | (2.96)% | | | | 2.58% | | | | 9.61% | |
| | | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Expenses before waiver and payments by affiliatese | | | | | | | 1.38% | | | | 1.37% | | | | 1.37% | | | | 1.38% | | | | 1.35% | |
| | | | | | |
Expenses net of waiver and payments by affiliatese | | | | | | | 1.38% | f | | | 1.37%f | | | | 1.37% | f | | | 1.38% | f | | | 1.34% | |
| | | | | | |
Net investment incomec | | | | | | | 0.62% | | | | 0.27% | | | | 1.22% | | | | 1.92% | | | | 1.36% | |
| | | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net assets, end of year (000’s) | | | | | | | $423,890 | | | | $470,582 | | | | $536,548 | | | | $549,222 | | | | $524,756 | |
| | | | | | |
Portfolio turnover rate | | | | | | | 17.99% | | | | 34.83% | | | | 17.69% | | | | 16.67% | | | | 57.59% | |
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 0.58% for the year ended December 31, 2017.
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 | | | 23 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin Conservative Allocation Fund (continued)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| |
| Class R | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| Per share operating performance | | | | | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net asset value, beginning of year | | | | | | | $13.69 | | | | $13.35 | | | | $14.48 | | | | $14.60 | | | | $14.01 | |
| | | | |
| | | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net investment incomeb,c | | | | | | | 0.16 | | | | 0.10 | | | | 0.24 | | | | 0.35 | | | | 0.26 | |
| | | | | | |
Net realized and unrealized gains (losses) | | | | | | | 1.24 | | | | 0.45 | | | | (0.59) | | | | 0.10 | | | | 1.14 | |
| | | | |
| | | | | | |
Total from investment operations | | | | | | | 1.40 | | | | 0.55 | | | | (0.35) | | | | 0.45 | | | | 1.40 | |
| | | | |
| | | | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | | | | | (0.20) | | | | (0.11) | | | | (0.25) | | | | (0.38) | | | | (0.29) | |
| | | | | | |
Net realized gains | | | | | | | (0.09) | | | | (0.10) | | | | (0.53) | | | | (0.19) | | | | (0.52) | |
| | | | |
| | | | | | |
Total distributions | | | | | | | (0.29) | | | | (0.21) | | | | (0.78) | | | | (0.57) | | | | (0.81) | |
| | | | |
| | | | | | |
Net asset value, end of year | | | | | | | $14.80 | | | | $13.69 | | | | $13.35 | | | | $14.48 | | | | $14.60 | |
| | | | |
| | | | | | |
Total return | | | | | | | 10.25% | | | | 4.15% | | | | (2.52)% | | | | 3.10% | | | | 10.14% | |
| | | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Expenses before waiver and payments by affiliatesd | | | | | | | 0.88% | | | | 0.88% | | | | 0.87% | | | | 0.88% | | | | 0.85% | |
| | | | | | |
Expenses net of waiver and payments by affiliatesd | | | | | | | 0.88% | e | | | 0.88% | e | | | 0.87% | e | | | 0.88% | e | | | 0.84% | |
| | | | | | |
Net investment incomec | | | | | | | 1.12% | | | | 0.76% | | | | 1.72% | | | | 2.42% | | | | 1.86% | |
| | | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net assets, end of year (000’s) | | | | | | | $103,629 | | | | $124,018 | | | | $139,592 | | | | $159,897 | | | | $166,927 | |
| | | | | | |
Portfolio turnover rate | | | | | | | 17.99% | | | | 34.83% | | | | 17.69% | | | | 16.67% | | | | 57.59% | |
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 0.58% for the year ended December 31, 2017.
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 Conservative Allocation Fund (continued)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| |
| Class R6 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| Per share operating performance | | | | | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net asset value, beginning of year | | | | | | | $13.72 | | | | $13.39 | | | | $14.52 | | | | $14.63 | | | | $14.62 | |
| | | | |
| | | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net investment incomec,d | | | | | | | 0.25 | | | | 0.18 | | | | 0.36 | | | | 0.33 | | | | 0.54 | |
| | | | | | |
Net realized and unrealized gains (losses) | | | | | | | 1.25 | | | | 0.44 | | | | (0.63) | | | | 0.22 | | | | 0.32 | |
| | | | |
| | | | | | |
Total from investment operations | | | | | | | 1.50 | | | | 0.62 | | | | (0.27) | | | | 0.55 | | | | 0.86 | |
| | | | |
| | | | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | | | | | (0.29) | | | | (0.19) | | | | (0.33) | | | | (0.47) | | | | (0.33) | |
| | | | | | |
Net realized gains | | | | | | | (0.09) | | | | (0.10) | | | | (0.53) | | | | (0.19) | | | | (0.52) | |
| | | | |
| | | | | | |
Total distributions | | | | | | | (0.38) | | | | (0.29) | | | | (0.86) | | | | (0.66) | | | | (0.85) | |
| | | | |
| | | | | | |
Net asset value, end of year | | | | | | | $14.84 | | | | $13.72 | | | | $13.39 | | | | $14.52 | | | | $14.63 | |
| | | | |
| | | | | | |
Total returne | | | | | | | 10.99% | | | | 4.69% | | | | (1.93)% | | | | 3.79% | | | | 6.06% | |
| | | | | | |
| Ratios to average net assetsf | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Expenses before waiver and payments by affiliatesg | | | | | | | 0.32% | | | | 0.30% | | | | 0.29% | | | | 0.28% | | | | 1.06% | |
| | | | | | |
Expenses net of waiver and payments by affiliatesg | | | | | | | 0.28% | | | | 0.28% | | | | 0.28% | | | | 0.28%h | | | | 0.28% | |
| | | | | | |
Net investment incomed | | | | | | | 1.72% | | | | 1.36% | | | | 2.31% | | | | 3.02% | | | | 2.44% | |
| | | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net assets, end of year (000’s) | | | | | | | $2,149 | | | | $2,197 | | | | $2,282 | | | | $1,654 | | | | $37 | |
| | | | | | |
Portfolio turnover rate | | | | | | | 17.99% | | | | 34.83% | | | | 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 0.58% for the year ended December 31, 2017.
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 | | | 25 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin Conservative Allocation Fund (continued)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| |
| Advisor Class | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| Per share operating performance | | | | | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net asset value, beginning of year | | | | | | | $13.74 | | | | $13.39 | | | | $14.52 | | | | $14.64 | | | | $14.05 | |
| | | | |
| | | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net investment incomeb,c | | | | | | | 0.25 | | | | 0.17 | | | | 0.32 | | | | 0.41 | | | | 0.35 | |
| | | | | | |
Net realized and unrealized gains (losses) | | | | | | | 1.24 | | | | 0.45 | | | | (0.60) | | | | 0.11 | | | | 1.12 | |
| | | | |
| | | | | | |
Total from investment operations | | | | | | | 1.49 | | | | 0.62 | | | | (0.28) | | | | 0.52 | | | | 1.47 | |
| | | | |
| | | | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | | | | | (0.28) | | | | (0.17) | | | | (0.32) | | | | (0.45) | | | | (0.36) | |
| | | | | | |
Net realized gains | | | | | | | (0.09) | | | | (0.10) | | | | (0.53) | | | | (0.19) | | | | (0.52) | |
| | | | |
| | | | | | |
Total distributions | | | | | | | (0.37) | | | | (0.27) | | | | (0.85) | | | | (0.64) | | | | (0.88) | |
| | | | |
| | | | | | |
Net asset value, end of year | | | | | | | $14.86 | | | | $13.74 | | | | $13.39 | | | | $14.52 | | | | $14.64 | |
| | | | |
| | | | | | |
Total return | | | | | | | 10.88% | | | | 4.69% | | | | (2.02)% | | | | 3.61% | | | | 10.67% | |
| | | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Expenses before waiver and payments by affiliatesd | | | | | | | 0.38% | | | | 0.38% | | | | 0.37% | | | | 0.38% | | | | 0.35% | |
| | | | | | |
Expenses net of waiver and payments by affiliatesd | | | | | | | 0.38% | e | | | 0.38% | e | | | 0.37% | e | | | 0.38% | e | | | 0.34% | |
| | | | | | |
Net investment incomec | | | | | | | 1.62% | | | | 1.26% | | | | 2.22% | | | | 2.92% | | | | 2.36% | |
| | | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net assets, end of year (000’s) | | | | | | | $38,934 | | | | $27,578 | | | | $82,234 | | | | $90,263 | | | | $105,657 | |
| | | | | | |
Portfolio turnover rate | | | | | | | 17.99% | | | | 34.83% | | | | 17.69% | | | | 16.67% | | | | 57.59% | |
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 0.58% for the year ended December 31, 2017.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| | | | |
| | | |
| 26 | | Annual Report | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2017
| | | | | | | | | | | | |
| Franklin Conservative Allocation Fund | | | | | | |
| | | | | | Shares | | | Value | |
| | | | Investments in Underlying Funds and Exchange Traded Funds 98.3% | | | | | | | | |
| | | | Alternative Strategies 4.9% | | | | | | | | |
| | a | | | Franklin K2 Alternative Strategies Fund, Class R6 | | | 3,062,011 | | | $ | 34,692,578 | |
| | a | | | Franklin Pelagos Commodities Strategy Fund, Class R6 | | | 4,757,464 | | | | 31,779,860 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 66,472,438 | |
| | | | | | | | | | | | |
| | | | Domestic Equity 27.2% | | | | | | | | |
| | | | Financial Select Sector SPDR ETF | | | 973,600 | | | | 27,173,176 | |
| | a,b | | | Franklin DynaTech Fund, Class R6 | | | 1,227,952 | | | | 83,193,742 | |
| | a | | | Franklin Growth Fund, Class R6 | | | 1,306,742 | | | | 123,539,374 | |
| | a | | | Franklin LibertyQ U.S. Equity ETF | | | 632,000 | | | | 18,271,057 | |
| | a | | | Franklin Rising Dividends Fund, Class R6 | | | 1,062,619 | | | | 64,915,393 | |
| | a,b | | | Franklin Small Cap Growth Fund, Class R6 | | | 360,599 | | | | 8,567,841 | |
| | a | | | Franklin Utilities Fund, Class R6 | | | 1,330,449 | | | | 25,065,660 | |
| | | | iShares S&P 500 Value ETF | | | 193,555 | | | | 22,111,723 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 372,837,966 | |
| | | | | | | | | | | | |
| | | | Domestic Fixed Income 42.1% | | | | | | | | |
| | a | | | Franklin Floating Rate Daily Access Fund, Class R6 | | | 4,775,895 | | | | 41,884,603 | |
| | a | | | Franklin Low Duration Total Return Fund, Class R6 | | | 23,643,338 | | | | 232,177,580 | |
| | a | | | Franklin Strategic Income Fund, Class R6 | | | 12,986,969 | | | | 127,921,643 | |
| | a | | | Franklin U.S. Government Securities Fund, Class R6 | | | 24,011,063 | | | | 145,987,262 | |
| | | | iShares iBoxx $ Investment Grade Corporate Bond ETF | | | 235,000 | | | | 28,566,600 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 576,537,688 | |
| | | | | | | | | | | | |
| | | | Foreign Equity 14.4% | | | | | | | | |
| | a | | | Franklin FTSE Europe ETF | | | 563,900 | | | | 14,382,270 | |
| | a | | | Franklin International Small Cap Growth Fund, Class R6 | | | 2,321,149 | | | | 46,771,155 | |
| | a | | | Franklin LibertyQ Emerging Markets ETF | | | 1,606,500 | | | | 53,086,792 | |
| | a | | | Franklin Mutual European Fund, Class R6 | | | 2,146,356 | | | | 44,880,300 | |
| | a | | | Templeton Foreign Fund, Class R6 | | | 4,705,606 | | | | 37,362,514 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 196,483,031 | |
| | | | | | | | | | | | |
| | | | Foreign Fixed Income 9.7% | | | | | | | | |
| | a | | | Templeton Global Total Return Fund, Class R6 | | | 11,050,252 | | | | 133,155,536 | |
| | | | | | | | | | | | |
| | | | Total Investments in Underlying Funds and Exchange Traded Funds
before Short Term Investments (Cost $1,142,599,906) | | | | | | | 1,345,486,659 | |
| | | | | | | | | | | | |
| | | |
| | | | Short Term Investments 2.0% | | | | | | | | |
| | | | Money Market Funds (Cost $11,221,101) 0.8% | | | | | | | | |
| | a,c | | | Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 11,221,101 | | | | 11,221,101 | |
| | | | | | | | | | | | |
| | | | | | |
| franklintempleton.com | | Annual Report | | | 27 | |
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
| | | | | | | | | | |
Franklin Conservative Allocation Fund (continued) | | | | | | |
| | | | | Principal
Amount | | | Value | |
| | | Repurchase Agreements (Cost $15,905,783) 1.2% | | | | | | |
| d | | Joint Repurchase Agreement, 1.377%, 1/02/18 (Maturity Value $15,908,217) | | | | | | | | |
| | BNP Paribas Securities Corp. (Maturity Value $2,593,198) | | | | | | | | |
| | Deutsche Bank Securities Inc. (Maturity Value $2,890,364) | | | | | | | | |
| | HSBC Securities (USA) Inc. (Maturity Value $10,372,794) | | | | | | | | |
| | Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $51,861)
| | | | | | | | |
| | Collateralized by U.S. Government Agency Securities, 0.00% - 1.98%, 7/27/18 - 11/22/21;
U.S. Treasury Note, 1.25% - 2.00%, 12/31/18 - 4/30/22; and U.S. Treasury Note, Index Linked, 0.125%, 4/15/18 (valued at $16,225,144) | | $ | 15,905,783 | | | $ | 15,905,783 | |
| | | | | | | | | | |
| | | Total Investments (Cost $1,169,726,790) 100.3% | | | | | 1,372,613,543 | |
| | | Other Assets, less Liabilities (0.3)% | | | | | (3,871,049) | |
| | | | | | | | | | |
| | Net Assets 100.0% | | | | | | $ | 1,368,742,494 | |
| | | | | | | | | | |
See Abbreviations on page 60.
aSee Note 3(f) regarding investments in FT Underlying Funds.
bNon-income producing.
cThe rate shown is the annualized seven-day yield at period end.
dSee Note 1(b) regarding joint repurchase agreement.
| | | | |
| 28 | | 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
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| |
| | | | | | |
| Class A | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Per share operating performance
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net asset value, beginning of year | | | | | | | $14.86 | | | | $14.49 | | | | $15.71 | | | | $15.78 | | | | $14.59 | |
| | | | |
| | | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net investment incomeb,c | | | | | | | 0.20 | | | | 0.14 | | | | 0.24 | | | | 0.34 | | | | 0.27 | |
| | | | | | |
Net realized and unrealized gains (losses) | | | | | | | 2.01 | | | | 0.56 | | | | (0.51) | | | | 0.32 | | | | 1.78 | |
| | | | |
| | | | | | |
Total from investment operations | | | | | | | 2.21 | | | | 0.70 | | | | (0.27) | | | | 0.66 | | | | 2.05 | |
| | | | |
| | | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | | | | | (0.29) | | | | (0.12) | | | | (0.25) | | | | (0.37) | | | | (0.30) | |
| | | | | | |
Net realized gains | | | | | | | (0.67) | | | | (0.21) | | | | (0.70) | | | | (0.36) | | | | (0.56) | |
| | | | |
| | | | | | |
Total distributions | | | | | | | (0.96) | | | | (0.33) | | | | (0.95) | | | | (0.73) | | | | (0.86) | |
| | | | |
| | | | | | |
Net asset value, end of year | | | | | | | $16.11 | | | | $14.86 | | | | $14.49 | | | | $15.71 | | | | $15.78 | |
| | | | |
| | | | | | |
Total returnd | | | | | | | 14.98% | | | | 4.94% | | | | (1.89)% | | | | 4.07% | | | | 14.35% | |
| | | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Expenses before waiver and payments by affiliatese | | | | | | | 0.66% | | | | 0.63% | | | | 0.63% | | | | 0.65% | | | | 0.61% | |
| | | | | | |
Expenses net of waiver and payments by affiliatese | | | | | | | 0.65% | | | | 0.63% | f | | | 0.63% | f | | | 0.65% | f | | | 0.59% | |
| | | | | | |
Net investment incomec | | | | | | | 1.23% | | | | 0.93% | | | | 1.52% | | | | 2.08% | | | | 1.74% | |
| | | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net assets, end of year (000’s) | | | | | | | $1,407,956 | | | | $1,416,532 | | | | $1,594,882 | | | | $1,667,201 | | | | $1,636,122 | |
| | | | | | |
Portfolio turnover rate | | | | | | | 16.86% | | | | 29.22% | | | | 22.08% | | | | 17.95% | | | | 46.14% | |
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 0.60% for the year ended December 31, 2017.
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 | | | 29 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin Moderate Allocation Fund (continued)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| |
| | | | | | |
| Class C | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Per share operating performance
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net asset value, beginning of year | | | | | | | $14.48 | | | | $14.12 | | | | $15.33 | | | | $15.42 | | | | $14.28 | |
| | | | |
| | | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net investment incomeb,c | | | | | | | 0.07 | | | | 0.03 | | | | 0.12 | | | | 0.21 | | | | 0.15 | |
| | | | | | |
Net realized and unrealized gains (losses) | | | | | | | 1.94 | | | | 0.55 | | | | (0.49) | | | | 0.31 | | | | 1.74 | |
| | | | |
| | | | | | |
Total from investment operations | | | | | | | 2.01 | | | | 0.58 | | | | (0.37) | | | | 0.52 | | | | 1.89 | |
| | | | |
| | | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | | | | | (0.16) | | | | (0.01) | | | | (0.14) | | | | (0.25) | | | | (0.19) | |
| | | | | | |
Net realized gains | | | | | | | (0.67) | | | | (0.21) | | | | (0.70) | | | | (0.36) | | | | (0.56) | |
| | | | |
| | | | | | |
Total distributions | | | | | | | (0.83) | | | | (0.22) | | | | (0.84) | | | | (0.61) | | | | (0.75) | |
| | | | |
| | | | | | |
Net asset value, end of year | | | | | | | $15.66 | | | | $14.48 | | | | $14.12 | | | | $15.33 | | | | $15.42 | |
| | | | |
| | | | | | |
Total returnd | | | | | | | 14.10% | | | | 4.25% | | | | (2.68)% | | | | 3.35% | | | | 13.41% | |
| | | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Expenses before waiver and payments by affiliatese | | | | | | | 1.41% | | | | 1.37% | | | | 1.38% | | | | 1.40% | | | | 1.36% | |
| | | | | | |
Expenses net of waiver and payments by affiliatese | | | | | | | 1.40% | | | | 1.37%f | | | | 1.38%f | | | | 1.40%f | | | | 1.34% | |
| | | | | | |
Net investment incomec | | | | | | | 0.48% | | | | 0.19% | | | | 0.77% | | | | 1.33% | | | | 0.99% | |
| | | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net assets, end of year (000’s) | | | | | | | $568,280 | | | | $595,911 | | | | $692,872 | | | | $716,712 | | | | $701,224 | |
| | | | | | |
Portfolio turnover rate | | | | | | | 16.86% | | | | 29.22% | | | | 22.08% | | | | 17.95% | | | | 46.14% | |
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 0.60% for the year ended December 31, 2017.
fBenefit 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
FINANCIAL HIGHLIGHTS
Franklin Moderate Allocation Fund (continued)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| |
| | | | | | |
| Class R | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Per share operating performance
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net asset value, beginning of year | | | | | | | $14.82 | | | | $14.44 | | | | $15.66 | | | | $15.73 | | | | $14.55 | |
| | | | |
| | | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net investment incomeb,c | | | | | | | 0.14 | | | | 0.10 | | | | 0.19 | | | | 0.28 | | | | 0.22 | |
| | | | | | |
Net realized and unrealized gains (losses) | | | | | | | 2.02 | | | | 0.57 | | | | (0.51) | | | | 0.34 | | | | 1.78 | |
| | | | |
| | | | | | |
Total from investment operations | | | | | | | 2.16 | | | | 0.67 | | | | (0.32) | | | | 0.62 | | | | 2.00 | |
| | | | |
| | | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | | | | | (0.23) | | | | (0.08) | | | | (0.20) | | | | (0.33) | | | | (0.26) | |
| | | | | | |
Net realized gains | | | | | | | (0.67) | | | | (0.21) | | | | (0.70) | | | | (0.36) | | | | (0.56) | |
| | | | |
| | | | | | |
Total distributions | | | | | | | (0.90) | | | | (0.29) | | | | (0.90) | | | | (0.69) | | | | (0.82) | |
| | | | |
| | | | | | |
Net asset value, end of year | | | | | | | $16.08 | | | | $14.82 | | | | $14.44 | | | | $15.66 | | | | $15.73 | |
| | | | |
| | | | | | |
Total return | | | | | | | 14.69% | | | | 4.71% | | | | (2.18)% | | | | 3.89% | | | | 13.97% | |
| | | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Expenses before waiver and payments by affiliatesd | | | | | | | 0.91% | | | | 0.88% | | | | 0.88% | | | | 0.90% | | | | 0.86% | |
| | | | | | |
Expenses net of waiver and payments by affiliatesd | | | | | | | 0.90% | | | | 0.88% | e | | | 0.88% | e | | | 0.90% | e | | | 0.84% | |
| | | | | | |
Net investment incomec | | | | | | | 0.98% | | | | 0.68% | | | | 1.27% | | | | 1.83% | | | | 1.49% | |
| | | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net assets, end of year (000’s) | | | | | | | $119,920 | | | | $158,192 | | | | $202,854 | | | | $263,864 | | | | $286,688 | |
| | | | | | |
Portfolio turnover rate | | | | | | | 16.86% | | | | 29.22% | | | | 22.08% | | | | 17.95% | | | | 46.14% | |
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 0.60% for the year ended December 31, 2017.
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 | | | 31 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin Moderate Allocation Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Class R6 | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $14.86 | | | | $14.49 | | | | $15.72 | | | | $15.79 | | | | $15.33 | |
| | | | |
| | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.26 | | | | 0.19 | | | | 0.31 | | | | 0.25 | | | | 0.77 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 2.01 | | | | 0.57 | | | | (0.54 | ) | | | 0.47 | | | | 0.56 | |
| | | | |
| | | | | |
Total from investment operations | | | 2.27 | | | | 0.76 | | | | (0.23 | ) | | | 0.72 | | | | 1.33 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.35 | ) | | | (0.18 | ) | | | (0.30 | ) | | | (0.43 | ) | | | (0.31) | |
| | | | | |
Net realized gains | | | (0.67 | ) | | | (0.21 | ) | | | (0.70 | ) | | | (0.36 | ) | | | (0.56) | |
| | | | |
| | | | | |
Total distributions | | | (1.02 | ) | | | (0.39 | ) | | | (1.00 | ) | | | (0.79 | ) | | | (0.87) | |
| | | | |
| | | | | |
Net asset value, end of year | | | $16.11 | | | | $14.86 | | | | $14.49 | | | | $15.72 | | | | $15.79 | |
| | | | |
| | | | | |
Total returne | | | 15.40% | | | | 5.34% | | | | (1.59)% | | | | 4.52% | | | | 8.93% | |
| | | | | |
| Ratios to average net assetsf | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesg | | | 0.30% | | | | 0.28% | | | | 0.28% | | | | 0.27% | | | | 0.45% | |
| | | | | |
Expenses net of waiver and payments by affiliatesg | | | 0.28% | | | | 0.28% | h | | | 0.28% | h | | | 0.27% | h | | | 0.26% | |
| | | | | |
Net investment incomed | | | 1.60% | | | | 1.28% | | | | 1.87% | | | | 2.46% | | | | 2.07% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $4,492 | | | | $5,106 | | | | $4,779 | | | | $4,205 | | | | $253 | |
| | | | | |
Portfolio turnover rate | | | 16.86% | | | | 29.22% | | | | 22.08% | | | | 17.95% | | | | 46.14% | |
aFor the period May 1, 2013 (effective date) to December 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’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 0.60% for the year ended December 31, 2017.
hBenefit 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 Moderate Allocation Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| Advisor Class | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $14.88 | | | | $14.50 | | | | $15.72 | | | | $15.79 | | | | $14.60 | |
| | | | |
| | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.26 | | | | 0.17 | | | | 0.25 | | | | 0.33 | | | | 0.32 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.98 | | | | 0.58 | | | | (0.49 | ) | | | 0.37 | | | | 1.76 | |
| | | | |
| | | | | |
Total from investment operations | | | 2.24 | | | | 0.75 | | | | (0.24 | ) | | | 0.70 | | | | 2.08 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Underlying Funds and exchange traded funds | | | (0.33 | ) | | | (0.16 | ) | | | (0.28 | ) | | | (0.41 | ) | | | (0.33) | |
| | | | | |
Net realized gains | | | (0.67 | ) | | | (0.21 | ) | | | (0.70 | ) | | | (0.36 | ) | | | (0.56) | |
| | | | |
| | | | | |
Total distributions | | | (1.00 | ) | | | (0.37 | ) | | | (0.98 | ) | | | (0.77 | ) | | | (0.89) | |
| | | | |
| | | | | |
Net asset value, end of year | | | $16.12 | | | | $14.88 | | | | $14.50 | | | | $15.72 | | | | $15.79 | |
| | | | |
| | | | | |
Total return | | | 15.20% | | | | 5.26% | | | | (1.66)% | | | | 4.39% | | | | 14.56% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesd | | | 0.41% | | | | 0.38% | | | | 0.38% | | | | 0.40% | | | | 0.36% | |
| | | | | |
Expenses net of waiver and payments by affiliatesd | | | 0.40% | | | | 0.38% | e | | | 0.38% | e | | | 0.40% | e | | | 0.34% | |
| | | | | |
Net investment incomec | | | 1.48% | | | | 1.18% | | | | 1.77% | | | | 2.33% | | | | 1.99% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $52,575 | | | | $39,052 | | | | $52,975 | | | | $87,612 | | | | $159,303 | |
| | | | | |
Portfolio turnover rate | | | 16.86% | | | | 29.22% | | | | 22.08% | | | | 17.95% | | | | 46.14% | |
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 0.60% for the year ended December 31, 2017.
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
Statement of Investments, December 31, 2017
Franklin Moderate Allocation Fund
| | | | | | | | | | |
| | | | | Shares | | | Value | |
| | Investments in Underlying Funds and Exchange Traded Funds 98.6% | | | | | | | | |
| | Alternative Strategies 4.9% | | | | | | | | |
| a Franklin K2 Alternative Strategies Fund, Class R6 | | | 4,819,654 | | | $ | 54,606,680 | |
| a Franklin Pelagos Commodities Strategy Fund, Class R6 | | | 7,495,307 | | | | 50,068,653 | |
| | | | | | | | | | |
| | | | | | | | | 104,675,333 | |
| | | | | | | | | | |
| | Domestic Equity 40.1% | | | | | | | | |
Financial Select Sector SPDR ETF | | | 2,285,000 | | | | 63,774,350 | |
| a,b Franklin DynaTech Fund, Class R6 | | | 2,697,370 | | | | 182,746,832 | |
| a Franklin Growth Fund, Class R6 | | | 3,137,923 | | | | 296,659,253 | |
| a Franklin LibertyQ U.S. Equity ETF | | | 1,491,600 | | | | 43,122,007 | |
| a Franklin Rising Dividends Fund, Class R6 | | | 2,481,720 | | | | 151,608,304 | |
| a,b Franklin Small Cap Growth Fund, Class R6 | | | 898,062 | | | | 21,337,942 | |
| a Franklin Utilities Fund, Class R6 | | | 3,257,195 | | | | 61,365,547 | |
| | iShares S&P 500 Value ETF | | | 376,769 | | | | 43,042,091 | |
| | | | | | | | | | |
| | | | | | | 863,656,326 | |
| | | | | | | | | | |
| | Domestic Fixed Income 26.0% | | | | | | | | |
| a Franklin Floating Rate Daily Access Fund, Class R6 | | | 4,554,612 | | | | 39,943,948 | |
| a Franklin Low Duration Total Return Fund, Class R6 | | | 23,485,173 | | | | 230,624,402 | |
| a Franklin Strategic Income Fund, Class R6 | | | 12,546,900 | | | | 123,586,961 | |
| a Franklin U.S. Government Securities Fund, Class R6 | | | 22,962,139 | | | | 139,609,805 | |
| | iShares iBoxx $Investment Grade Corporate Bond ETF | | | 216,700 | | | | 26,342,052 | |
| | | | | | | | | | |
| | | | | | | 560,107,168 | |
| | | | | | | | | | |
| | Foreign Equity 21.7% | | | | | | | | |
| a Franklin FTSE Europe ETF | | | 1,355,700 | | | | 34,577,129 | |
| a Franklin International Small Cap Growth Fund, Class R6 | | | 5,695,077 | | | | 114,755,802 | |
| a Franklin LibertyQ Emerging Markets ETF | | | 3,701,700 | | | | 122,322,676 | |
| a Franklin Mutual European Fund, Class R6 | | | 5,109,534 | | | | 106,840,346 | |
| a Templeton Foreign Fund, Class R6 | | | 11,216,882 | | | | 89,062,047 | |
| | | | | | | | | | |
| | | | | | | 467,558,000 | |
| | | | | | | | | | |
| | Foreign Fixed Income 5.9% | | | | | | | | |
| a Templeton Global Total Return Fund, Class R6 | | | 10,484,568 | | | | 126,339,039 | |
| | | | | | | | | | |
| | Total Investments in Underlying Funds and Exchange Traded Funds | | | | | | | | |
| | before Short Term Investments (Cost $1,656,402,226) | | | | | | | 2,122,335,866 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | Short Term Investments 1.8% | | | | | | | | |
| | Money Market Funds (Cost $25,309) 0.0%† | | | | | | | | |
| a,c Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 25,309 | | | | 25,309 | |
| | | | | | | | | | |
| | | | |
| | | |
| 34 | | Annual Report | | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin Moderate Allocation Fund (continued)
| | | | | | | | | | |
| | | | | Principal
Amount | | | Value | |
| | Repurchase Agreements (Cost $38,626,674) 1.8% | | | | | | | | |
dJoint Repurchase Agreement, 1.377%, 1/02/18 (Maturity Value $38,632,582) | | | | | | | | |
| | BNP Paribas Securities Corp. (Maturity Value $6,297,497) | | | | | | | | |
| | Deutsche Bank Securities Inc. (Maturity Value $7,019,154) | | | | | | | | |
| | HSBC Securities (USA) Inc. (Maturity Value $25,189,989) | | | | | | | | |
| | Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $125,942) | | | | | | | | |
| | Collateralized by U.S. Government Agency Securities, 0.00% - 1.98%, 7/27/18 - 11/22/21; U.S. | | | | | | | | |
| | Treasury Note, 1.25% - 2.00%, 12/31/18 - 4/30/22; and U.S. Treasury Note, Index Linked, 0.125%, 4/15/18 (valued at $39,402,230) | | $ | 38,626,674 | | | $ | 38,626,674 | |
| | | | | | | | | | |
| | Total Investments (Cost $1,695,054,209) 100.4% | | | | | | | 2,160,987,849 | |
| | Other Assets, less Liabilities (0.4)% | | | | | | | (7,764,092 | ) |
| | | | | | | | | | |
| | | |
| | Net Assets 100.0% | | | | | | $ | 2,153,223,757 | |
| | | | | | | | | | |
See Abbreviations on page 60.
†Rounds to less than 0.1% of net assets.
aSee Note 3(f) regarding investments in FT Underlying Funds.
bNon-income producing.
cThe rate shown is the annualized seven-day yield at period end.
dSee Note 1(b) regarding joint repurchase agreement.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 35 | |
FRANKLIN FUND ALLOCATOR SERIES
Financial Highlights
Franklin Growth Allocation Fund
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| Class A | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $17.43 | | | | $17.01 | | | | $18.57 | | | | $18.40 | | | | $15.81 | |
| | | | |
| | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.22 | | | | 0.14 | | | | 0.21 | | | | 0.24 | | | | 0.19 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 3.12 | | | | 0.75 | | | | (0.48) | | | | 0.67 | | | | 3.09 | |
| | | | |
| | | | | |
| Total from investment operations | | | 3.34 | | | | 0.89 | | | | (0.27) | | | | 0.91 | | | | 3.28 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.32) | | | | (0.14) | | | | (0.21) | | | | (0.29) | | | | (0.25) | |
| | | | | |
Net realized gains | | | (1.11) | | | | (0.33) | | | | (1.08) | | | | (0.45) | | | | (0.44) | |
| | | | |
| | | | | |
| Total distributions | | | (1.43) | | | | (0.47) | | | | (1.29) | | | | (0.74) | | | | (0.69) | |
| | | | |
| | | | | |
| Net asset value, end of year | | | $19.34 | | | | $17.43 | | | | $17.01 | | | | $18.57 | | | | $18.40 | |
| | | | |
| | | | | |
| Total returnd | | | 19.45% | | | | 5.36% | | | | (1.66)% | | | | 4.95% | | | | 20.98% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Expenses before waiver and payments by affiliatese | | | 0.70% | | | | 0.69% | | | | 0.67% | | | | 0.68% | | | | 0.65% | |
| | | | | |
| Expenses net of waiver and payments by affiliatese | | | 0.65%f | | | | 0.65% | | | | 0.65% | | | | 0.63% | | | | 0.59% | |
| | | | | |
| Net investment incomec | | | 1.14% | | | | 0.83% | | | | 1.10% | | | | 1.25% | | | | 1.10% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Net assets, end of year (000’s) | | | $873,011 | | | | $822,833 | | | | $888,096 | | | | $887,856 | | | | $814,901 | |
| | | | | |
| Portfolio turnover rate | | | 16.90% | | | | 30.19% | | | | 20.40% | | | | 17.55% | | | | 30.45% | |
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 0.61% for the year ended December 31, 2017.
fBenefit of expense reduction rounds to less than 0.01%.
| | | | |
| | | |
| 36 | | 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, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| | | | | | |
| Class C | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Net asset value, beginning of year | | | $16.99 | | | | $16.59 | | | | $18.15 | | | | $18.00 | | | | $15.50 | |
| | | | |
| | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.07 | | | | 0.02 | | | | 0.07 | | | | 0.09 | | | | 0.06 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 3.04 | | | | 0.72 | | | | (0.47) | | | | 0.67 | | | | 3.01 | |
| | | | |
| | | | | |
| Total from investment operations | | | 3.11 | | | | 0.74 | | | | (0.40) | | | | 0.76 | | | | 3.07 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.18) | | | | (0.01) | | | | (0.08) | | | | (0.16) | | | | (0.13) | |
| | | | | |
Net realized gains | | | (1.11) | | | | (0.33) | | | | (1.08) | | | | (0.45) | | | | (0.44) | |
| | | | |
| | | | | |
| Total distributions | | | (1.29) | | | | (0.34) | | | | (1.16) | | | | (0.61) | | | | (0.57) | |
| | | | |
| | | | | |
| Net asset value, end of year | | | $18.81 | | | | $16.99 | | | | $16.59 | | | | $18.15 | | | | $18.00 | |
| | | | |
| | | | | |
| Total returnd | | | 18.56% | | | | 4.59% | | | | (2.41)% | | | | 4.21% | | | | 20.04% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Expenses before waiver and payments by affiliatese | | | 1.45% | | | | 1.43% | | | | 1.42% | | | | 1.43% | | | | 1.40% | |
| | | | | |
| Expenses net of waiver and payments by affiliatese | | | 1.40%f | | | | 1.39% | | | | 1.40% | | | | 1.38% | | | | 1.34% | |
| | | | | |
| Net investment incomec | | | 0.39% | | | | 0.09% | | | | 0.35% | | | | 0.50% | | | | 0.35% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Net assets, end of year (000’s) | | | $311,640 | | | | $308,736 | | | | $336,557 | | | | $336,213 | | | | $309,869 | |
| | | | | |
| Portfolio turnover rate | | | 16.90% | | | | 30.19% | | | | 20.40% | | | | 17.55% | | | | 30.45% | |
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 0.61% for the year ended December 31, 2017.
fBenefit of expense reduction rounds to less than 0.01%.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 37 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin Growth Allocation Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Class R | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $17.22 | | | | $16.80 | | | | $18.34 | | | | $18.18 | | | | $15.63 | |
| | | | |
| | | | | |
Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.15 | | | | 0.09 | | | | 0.14 | | | | 0.17 | | | | 0.14 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 3.11 | | | | 0.75 | | | | (0.44) | | | | 0.68 | | | | 3.05 | |
| | | | |
| | | | | |
Total from investment operations | | | 3.26 | | | | 0.84 | | | | (0.30) | | | | 0.85 | | | | 3.19 | |
| | | | |
| | | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.27) | | | | (0.09) | | | | (0.16) | | | | (0.24) | | | | (0.20) | |
| | | | | |
Net realized gains | | | (1.11) | | | | (0.33) | | | | (1.08) | | | | (0.45) | | | | (0.44) | |
| | | | |
| | | | | |
Total distributions | | | (1.38) | | | | (0.42) | | | | (1.24) | | | | (0.69) | | | | (0.64) | |
| | | | |
| | | | | |
Net asset value, end of year | | | $19.10 | | | | $17.22 | | | | $16.80 | | | | $18.34 | | | | $18.18 | |
| | | | |
| | | | | |
Total return | | | 19.17% | | | | 5.12% | | | | (1.93)% | | | | 4.72% | | | | 20.67% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesd | | | 0.95% | | | | 0.94% | | | | 0.92% | | | | 0.93% | | | | 0.90% | |
| | | | | |
Expenses net of waiver and payments by affiliatesd | | | 0.90%e | | | | 0.90% | | | | 0.90% | | | | 0.88% | | | | 0.84% | |
| | | | | |
Net investment incomec | | | 0.89% | | | | 0.58% | | | | 0.85% | | | | 1.00% | | | | 0.85% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $100,258 | | | | $112,272 | | | | $147,426 | | | | $182,211 | | | | $192,361 | |
| | | | | |
Portfolio turnover rate | | | 16.90% | | | | 30.19% | | | | 20.40% | | | | 17.55% | | | | 30.45% | |
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 0.61% for the year ended December 31, 2017.
eBenefit of expense reduction 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 Growth Allocation Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
Class R6 | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $17.48 | | | | $17.06 | | | | $18.61 | | | | $18.44 | | | | $16.88 | |
| | | | |
| | | | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.31 | | | | 0.22 | | | | 0.32 | | | | 0.15 | | | | 0.62 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 3.12 | | | | 0.74 | | | | (0.51) | | | | 0.83 | | | | 1.68 | |
| | | | |
| | | | | |
Total from investment operations | | | 3.43 | | | | 0.96 | | | | (0.19) | | | | 0.98 | | | | 2.30 | |
| | | | |
| | | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.40) | | | | (0.21) | | �� | | (0.28) | | | | (0.36) | | | | (0.30) | |
| | | | | |
Net realized gains | | | (1.11) | | | | (0.33) | | | | (1.08) | | | | (0.45) | | | | (0.44) | |
| | | | |
| | | | | |
Total distributions | | | (1.51) | | | | (0.54) | | | | (1.36) | | | | (0.81) | | | | (0.74) | |
| | | | |
| | | | | |
Net asset value, end of year | | | $19.40 | | | | $17.48 | | | | $17.06 | | | | $18.61 | | | | $18.44 | |
| | | | |
| | | | | |
Total returne | | | 19.90% | | | | 5.77% | | | | (1.27)% | | | | 5.38% | | | | 13.88% | |
| | | | | |
| Ratios to average net assetsf | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesg | | | 0.31% | | | | 0.30% | | | | 0.29% | | | | 0.28% | | | | 0.95% | |
| | | | | |
Expenses net of waiver and payments by affiliatesg | | | 0.25%h | | | | 0.26% | | | | 0.26% | | | | 0.23% | | | | 0.22% | |
| | | | | |
Net investment incomed | | | 1.54% | | | | 1.22% | | | | 1.49% | | | | 1.65% | | | | 1.47% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $3,364 | | | | $2,822 | | | | $2,549 | | | | $1,755 | | | | $42 | |
| | | | | |
Portfolio turnover rate | | | 16.90% | | | | 30.19% | | | | 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 0.61% for the year ended December 31, 2017.
hBenefit of expense reduction 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 Growth Allocation Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
Advisor Class | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $17.49 | | | | $17.06 | | | | $18.62 | | | | $18.45 | | | | $15.85 | |
| | | | |
| | | | | |
Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.26 | | | | 0.18 | | | | 0.25 | | | | 0.27 | | | | 0.24 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 3.15 | | | | 0.76 | | | | (0.47) | | | | 0.68 | | | | 3.09 | |
| | | | |
| | | | | |
Total from investment operations | | | 3.41 | | | | 0.94 | | | | (0.22) | | | | 0.95 | | | | 3.33 | |
| | | | |
| | | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.37) | | | | (0.18) | | | | (0.26) | | | | (0.33) | | | | (0.29) | |
| | | | | |
Net realized gains | | | (1.11) | | | | (0.33) | | | | (1.08) | | | | (0.45) | | | | (0.44) | |
| | | | |
| | | | | |
Total distributions | | | (1.48) | | | | (0.51) | | | | (1.34) | | | | (0.78) | | | | (0.73) | |
| | | | |
| | | | | |
Net asset value, end of year | | | $19.42 | | | | $17.49 | | | | $17.06 | | | | $18.62 | | | | $18.45 | |
| | | | |
| | | | | |
Total return | | | 19.77% | | | | 5.60% | | | | (1.41)% | | | | 5.23% | | | | 21.26% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesd | | | 0.45% | | | | 0.44% | | | | 0.42% | | | | 0.43% | | | | 0.40% | |
| | | | | |
Expenses net of waiver and payments by affiliatesd | | | 0.40%e | | | | 0.40% | | | | 0.40% | | | | 0.38% | | | | 0.34% | |
| | | | | |
Net investment incomec | | | 1.39% | | | | 1.08% | | | | 1.35% | | | | 1.50% | | | | 1.35% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $38,912 | | | | $39,211 | | | | $49,634 | | | | $52,250 | | | | $74,808 | |
| | | | | |
Portfolio turnover rate | | | 16.90% | | | | 30.19% | | | | 20.40% | | | | 17.55% | | | | 30.45% | |
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 0.61% for the year ended December 31, 2017.
eBenefit of expense reduction 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
Statement of Investments, December 31, 2017
Franklin Growth Allocation Fund
| | | | | | | | | | | | |
| | | | | | Shares | | | Value | |
| | | | Investments in Underlying Funds and Exchange Traded Funds 98.5% | |
| | | | Alternative Strategies 4.9% | | | | | | | | |
| | a | | | Franklin K2 Alternative Strategies Fund, Class R6 | | | 2,959,095 | | | $ | 33,526,546 | |
| | a | | | Franklin Pelagos Commodities Strategy Fund, Class R6 | | | 4,606,601 | | | | 30,772,095 | |
| | | | | | | | | | | | |
| | | |
| | | | | | | | | | | 64,298,641 | |
| | | | | | | | | | | | |
| | | | Domestic Equity 52.1% | | | | | | | | |
| | | | Financial Select Sector SPDR ETF | | | 1,861,300 | | | | 51,948,883 | |
| | a,b | | | Franklin DynaTech Fund, Class R6 | | | 2,218,583 | | | | 150,309,019 | |
| | a | | | Franklin Growth Fund, Class R6 | | | 2,425,586 | | | | 229,314,863 | |
| | a | | | Franklin LibertyQ U.S. Equity ETF | | | 1,150,500 | | | | 33,260,840 | |
| | a | | | Franklin Rising Dividends Fund, Class R6 | | | 2,009,236 | | | | 122,744,256 | |
| | a,b | | | Franklin Small Cap Growth Fund, Class R6 | | | 683,285 | | | | 16,234,862 | |
| | a | | | Franklin Utilities Fund, Class R6 | | | 2,579,038 | | | | 48,589,081 | |
| | | | iShares S&P 500 Value ETF | | | 337,557 | | | | 38,562,512 | |
| | | | | | | | | | | | |
| | | |
| | | | | | | | | | | 690,964,316 | |
| | | | | | | | | | | | |
| | | | Domestic Fixed Income 9.6% | | | | | | | | |
| | a | | | Franklin Floating Rate Daily Access Fund, Class R6 | | | 1,026,096 | | | | 8,998,861 | |
| | a | | | Franklin Low Duration Total Return Fund, Class R6 | | | 5,442,537 | | | | 53,445,711 | |
| | a | | | Franklin Strategic Income Fund, Class R6 | | | 2,803,671 | | | | 27,616,156 | |
| | a | | | Franklin U.S. Government Securities Fund, Class R6 | | | 5,183,303 | | | | 31,514,482 | |
| | | | iShares iBoxx $ Investment Grade Corporate Bond ETF | | | 51,200 | | | | 6,223,872 | |
| | | | | | | | | | | | |
| | | |
| | | | | | | | | | | 127,799,082 | |
| | | | | | | | | | | | |
| | | | Foreign Equity 29.8% | | | | | | | | |
| | a | | | Franklin FTSE Europe ETF | | | 1,133,400 | | | | 28,907,367 | |
| | a | | | Franklin International Small Cap Growth Fund, Class R6 | | | 4,891,350 | | | | 98,560,698 | |
| | a | | | Franklin LibertyQ Emerging Markets ETF | | | 3,164,100 | | | | 104,557,685 | |
| | a | | | Franklin Mutual European Fund, Class R6 | | | 4,178,804 | | | | 87,378,781 | |
| | a | | | Templeton Foreign Fund, Class R6 | | | 9,628,322 | | | | 76,448,880 | |
| | | | | | | | | | | | |
| | | |
| | | | | | | | | | | 395,853,411 | |
| | | | | | | | | | | | |
| | | | Foreign Fixed Income 2.1% | | | | | | | | |
| | a | | | Templeton Global Total Return Fund, Class R6 | | | 2,326,168 | | | | 28,030,329 | |
| | | | | | | | | | | | |
| | | | Total Investments in Underlying Funds and Exchange Traded Funds
before Short Term Investments (Cost $937,154,520) | | | | | | | 1,306,945,779 | |
| | | | | | | | | | | | |
| | | |
| | | | Short Term Investments 1.9% | | | | | | | | |
| | | | Money Market Funds (Cost $15,843) 0.0%† | | | | | | | | |
| | a,c | | | Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 15,843 | | | | 15,843 | |
| | | | | | | | | | | | |
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 41 | |
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin Growth Allocation Fund (continued)
| | | | | | | | | | |
| | | | | Principal
Amount | | | Value | |
| | Repurchase Agreements (Cost $25,007,591) 1.9% | | | | | | | | |
| | | |
d | | Joint Repurchase Agreement, 1.377%, 1/02/18 (Maturity Value $25,011,416) | | | | | | | | |
| | BNP Paribas Securities Corp. (Maturity Value $4,077,111) | | | | | | | | |
| | Deutsche Bank Securities Inc. (Maturity Value $4,544,324) | | | | | | | | |
| | HSBC Securities (USA) Inc. (Maturity Value $16,308,444) | | | | | | | | |
| | Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $81,537) | | | | | | | | |
| | Collateralized by U.S. Government Agency Securities, 0.00% - 1.98%, 7/27/18 - 11/22/21; U.S. | | | | | | | | |
| | Treasury Note, 1.25% - 2.00%, 12/31/18 - 4/30/22; and U.S. Treasury Note, Index Linked, 0.125%, 4/15/18 (valued at $25,509,700) | | $ | 25,007,591 | | | $ | 25,007,591 | |
| | | | | | | | | | |
| | Total Investments (Cost $962,177,954) 100.4% | | | | | | | 1,331,969,213 | |
| | Other Assets, less Liabilities (0.4)% | | | | | | | (4,783,401 | ) |
| | | | | | | | | | |
| | Net Assets 100.0% | | | | | | $ | 1,327,185,812 | |
| | | | | | | | | | |
See Abbreviations on page 60.
†Rounds to less than 0.1% of net assets.
aSee Note 3(f) regarding investments in FT Underlying Funds.
bNon-income producing.
cThe rate shown is the annualized seven-day yield at period end.
dSee Note 1(b) regarding joint repurchase agreement.
| | | | |
| | | |
| 42 | | 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
December 31, 2017
| | | | | | | | | | | | | | | |
| | | Franklin
Conservative
Allocation Fund | | Franklin
Moderate
Allocation Fund | | Franklin
Growth
Allocation Fund |
Assets: | | | | | | | | | | | | | | | |
Investments in securities: | | | | | | | | | | | | | | | |
Cost - Unaffiliated issuers | | | $ | 69,044,992 | | | | $ | 114,169,695 | | | | $ | 80,838,632 | |
Cost - Controlled affiliates (Note 3f) | | | | — | | | | | 230,291,467 | | | | | 146,068,427 | |
Cost - Non-controlled affiliates (Note 3f) | | | | 1,084,776,015 | | | | | 1,311,966,373 | | | | | 710,263,304 | |
Cost - Unaffiliated repurchase agreements | | | | 15,905,783 | | | | | 38,626,674 | | | | | 25,007,591 | |
| | | | | |
| | | |
Value - Unaffiliated issuers | | | $ | 77,851,499 | | | | $ | 133,158,493 | | | | $ | 96,735,267 | |
Value - Controlled affiliates (Note 3f) | | | | — | | | | | 250,090,465 | | | | | 166,725,892 | |
Value - Non-controlled affiliates (Note 3f) | | | | 1,278,856,261 | | | | | 1,739,112,217 | | | | | 1,043,500,463 | |
Value - Unaffiliated repurchase agreements | | | | 15,905,783 | | | | | 38,626,674 | | | | | 25,007,591 | |
Receivables: | | | | | | | | | | | | | | | |
Investment securities sold | | | | 251,348 | | | | | 443,898 | | | | | — | |
Capital shares sold | | | | 1,817,403 | | | | | 2,958,347 | | | | | 1,827,788 | |
Dividends | | | | 269 | | | | | 648 | | | | | 541 | |
Other assets | | | | 167 | | | | | 255 | | | | | 151 | |
| | | | | |
| | | |
Total assets | | | | 1,374,682,730 | | | | | 2,164,390,997 | | | | | 1,333,797,693 | |
| | | | | |
Liabilities: | | | | | | | | | | | | | | | |
Payables: | | | | | | | | | | | | | | | |
Capital shares redeemed | | | | 4,133,424 | | | | | 8,380,988 | | | | | 4,920,903 | |
Asset allocation fees | | | | 285,839 | | | | | 449,051 | | | | | 265,936 | |
Distribution fees | | | | 1,132,715 | | | | | 1,634,217 | | | | | 961,414 | |
Transfer agent fees | | | | 321,183 | | | | | 592,028 | | | | | 376,568 | |
Accrued expenses and other liabilities | | | | 67,075 | | | | | 110,956 | | | | | 87,060 | |
| | | | | |
| | | |
Total liabilities | | | | 5,940,236 | | | | | 11,167,240 | | | | | 6,611,881 | |
| | | | | |
| | | |
Net assets, at value | | | $ | 1,368,742,494 | | | | $ | 2,153,223,757 | | | | $ | 1,327,185,812 | |
| | | | | |
Net assets consist of: | | | | | | | | | | | | | | | |
Paid-in capital | | | $ | 1,164,670,895 | | | | $ | 1,673,367,555 | | | | $ | 942,129,496 | |
Undistributed net investment income | | | | — | | | | | 354,180 | | | | | 274,398 | |
Net unrealized appreciation (depreciation) | | | | 202,886,753 | | | | | 465,933,640 | | | | | 369,791,259 | |
Accumulated net realized gain (loss) | | | | 1,184,846 | | | | | 13,568,382 | | | | | 14,990,659 | |
| | | | | |
| | | |
Net assets, at value | | | $ | 1,368,742,494 | | | | $ | 2,153,223,757 | | | | $ | 1,327,185,812 | |
| | | | | |
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 43 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL STATEMENTS
Statements of Assets and Liabilities (continued)
December 31, 2017
| | | | | | | | | | | | | | | |
| | | Franklin
Conservative
Allocation Fund | | Franklin
Moderate
Allocation Fund | | Franklin
Growth
Allocation Fund |
| | | |
| Class A: | | | | | | | | | | | | | | | |
Net assets, at value | | | $ | 800,140,771 | | | | $ | 1,407,956,158 | | | | $ | 873,011,286 | |
| | | | | |
Shares outstanding | | | | 53,849,468 | | | | | 87,405,387 | | | | | 45,134,140 | |
| | | | | |
Net asset value per sharea | | | | $14.86 | | | | | $16.11 | | | | | $19.34 | |
| | | | | |
Maximum offering price per share (net asset value per share ÷ 94.25%) | | | | $15.77 | | | | | $17.09 | | | | | $20.52 | |
| | | | | |
| | | |
| Class C: | | | | | | | | | | | | | | | |
Net assets, at value | | | $ | 423,890,457 | | | | $ | 568,280,106 | | | | $ | 311,639,637 | |
| | | | | |
Shares outstanding | | | | 29,095,618 | | | | | 36,280,343 | | | | | 16,563,400 | |
| | | | | |
Net asset value and maximum offering price per sharea | | | | $14.57 | | | | | $15.66 | | | | | $18.81 | |
| | | | | |
| | | |
| Class R: | | | | | | | | | | | | | | | |
Net assets, at value | | | $ | 103,628,616 | | | | $ | 119,919,901 | | | | $ | 100,258,414 | |
| | | | | |
Shares outstanding | | | | 7,001,367 | | | | | 7,459,966 | | | | | 5,249,200 | |
| | | | | |
Net asset value and maximum offering price per share | | | | $14.80 | | | | | $16.08 | | | | | $19.10 | |
| | | | | |
| | | |
| Class R6: | | | | | | | | | | | | | | | |
Net assets, at value | | | $ | 2,148,551 | | | | $ | 4,492,264 | | | | $ | 3,364,482 | |
| | | | | |
Shares outstanding | | | | 144,768 | | | | | 278,925 | | | | | 173,393 | |
| | | | | |
Net asset value and maximum offering price per share | | | | $14.84 | | | | | $16.11 | | | | | $19.40 | |
| | | | | |
| | | |
| Advisor Class: | | | | | | | | | | | | | | | |
Net assets, at value | | | $ | 38,934,099 | | | | $ | 52,575,328 | | | | $ | 38,911,993 | |
| | | | | |
Shares outstanding | | | | 2,620,233 | | | | | 3,261,315 | | | | | 2,003,611 | |
| | | | | |
Net asset value and maximum offering price per share | | | | $14.86 | | | | | $16.12 | | | | | $19.42 | |
| | | | | |
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
| | | | |
| | | |
| 44 | | 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, 2017
| | | | | | | | | | | | | | | |
| | | Franklin
Conservative
Allocation Fund | | Franklin
Moderate
Allocation Fund | | Franklin
Growth
Allocation Fund |
Investment income: | | | | | | | | | | | | | | | |
Dividends: | | | | | | | | | | | | | | | |
Unaffiliated issuers | | | $ | 1,929,026 | | | | $ | 2,893,492 | | | | $ | 1,888,475 | |
Controlled affiliates (Note 3f) | | | | — | | | | | 3,670,018 | | | | | 3,000,436 | |
Non-controlled affiliates (Note 3f) | | | | 26,169,941 | | | | | 34,403,382 | | | | | 18,548,198 | |
Interest: | | | | | | | | | | | | | | | |
Unaffiliated issuers | | | | 4,617 | | | | | 6,335 | | | | | 4,477 | |
| | | | | |
| | | |
Total investment income | | | | 28,103,584 | | | | | 40,973,227 | | | | | 23,441,586 | |
| | | | | |
| | | |
Expenses: | | | | | | | | | | | | | | | |
Asset allocation fees (Note 3a) | | | | 3,510,730 | | | | | 5,455,254 | | | | | 3,264,548 | |
Distribution fees: (Note 3c) | | | | | | | | | | | | | | | |
Class A | | | | 1,999,192 | | | | | 3,515,350 | | | | | 2,108,911 | |
Class C | | | | 4,450,626 | | | | | 5,802,281 | | | | | 3,094,880 | |
Class R | | | | 606,010 | | | | | 702,753 | | | | | 529,429 | |
Transfer agent fees: (Note 3e) | | | | | | | | | | | | | | | |
Class A | | | | 902,416 | | | | | 1,935,664 | | | | | 1,485,703 | |
Class C | | | | 503,347 | | | | | 800,432 | | | | | 546,790 | |
Class R | | | | 136,868 | | | | | 193,630 | | | | | 186,694 | |
Class R6 | | | | 1,171 | | | | | 1,536 | | | | | 1,285 | |
Advisor Class | | | | 39,045 | | | | | 67,692 | | | | | 75,680 | |
Custodian fees (Note 4) | | | | 9,318 | | | | | 9,974 | | | | | 5,061 | |
Reports to shareholders | | | | 83,982 | | | | | 149,050 | | | | | 118,088 | |
Registration and filing fees | | | | 106,720 | | | | | 119,724 | | | | | 107,423 | |
Professional fees | | | | 49,725 | | | | | 65,424 | | | | | 53,016 | |
Trustees’ fees and expenses | | | | 9,963 | | | | | 15,418 | | | | | 9,106 | |
Other | | | | 28,115 | | | | | 33,819 | | | | | 23,481 | |
| | | | | |
| | | |
Total expenses | | | | 12,437,228 | | | | | 18,868,001 | | | | | 11,610,095 | |
Expense reductions (Note 4) | | | | — | | | | | — | | | | | (10 | ) |
Expenses waived/paid by affiliates (Note 3f and 3g) | | | | (32,370 | ) | | | | (181,541 | ) | | | | (641,472 | ) |
| | | | | |
| | | |
Net expenses | | | | 12,404,858 | | | | | 18,686,460 | | | | | 10,968,613 | |
| | | | | |
| | | |
Net investment income | | | | 15,698,726 | | | | | 22,286,767 | | | | | 12,472,973 | |
| | | | | |
Realized and unrealized gains (losses): | | | | | | | | | | | | | | | |
Net realized gain (loss) from: | | | | | | | | | | | | | | | |
Sale of investments: | | | | | | | | | | | | | | | |
Unaffiliated issuers | | | | 2,271,628 | | | | | 2,444,748 | | | | | 1,038,439 | |
Controlled affiliates (Note 3f) | | | | — | | | | | (1,166,007 | ) | | | | 809,153 | |
Non-controlled affiliates (Note 3f) | | | | 35,232,353 | | | | | 84,093,771 | | | | | 54,706,579 | |
Capital gain distributions from Underlying Funds: | | | | | | | | | | | | | | | |
Non-controlled affiliates (Note 3f) | | | | 7,690,203 | | | | | 18,157,647 | | | | | 14,574,096 | |
| | | | | |
Net realized gain (loss) | | | | 45,194,184 | | | | | 103,530,159 | | | | | 71,128,267 | |
| | | | | |
Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | | | | | | |
Investments: | | | | | | | | | | | | | | | |
Unaffiliated issuers | | | | 8,679,850 | | | | | 20,690,909 | | | | | 17,571,486 | |
Controlled affiliates (Note 3f) | | | | — | | | | | 29,306,803 | | | | | 21,577,569 | |
Non-controlled affiliates (Note 3f) | | | | 68,825,316 | | | | | 124,307,009 | | | | | 106,883,052 | |
| | | | | |
| | | |
Net change in unrealized appreciation (depreciation) | | | | 77,505,166 | | | | | 174,304,721 | | | | | 146,032,107 | |
| | | | | |
| | | |
Net realized and unrealized gain (loss) | | | | 122,699,350 | | | | | 277,834,880 | | | | | 217,160,374 | |
| | | | | |
| | | |
Net increase (decrease) in net assets resulting from operations | | | $ | 138,398,076 | | | | $ | 300,121,647 | | | | $ | 229,633,347 | |
| | | | | |
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 45 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
| | | | | | | | | | | | | | | | |
| | | Franklin Conservative
Allocation Fund | | | Franklin Moderate
Allocation Fund | |
| | | Year Ended December 31, | | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Increase (decrease) in net assets: | | | | | | | | | | | | | | | | |
Operations: | | | | | | | | | | | | | | | | |
Net investment income | | | $ 15,698,726 | | | $ | 11,895,862 | | | $ | 22,286,767 | | | $ | 17,042,235 | |
Net realized gain (loss) | | | 45,194,184 | | | | (26,521,247 | ) | | | 103,530,159 | | | | 28,421,824 | |
Net change in unrealized appreciation (depreciation) | | | 77,505,166 | | | | 77,528,235 | | | | 174,304,721 | | | | 62,881,574 | |
| | | | |
Net increase (decrease) in net assets resulting from operations | | | 138,398,076 | | | | 62,902,850 | | | | 300,121,647 | | | | 108,345,633 | |
| | | | |
Distributions to shareholders from: | | | | | | | | | | | | | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds: | | | | | | | | | | | | | | | | |
Class A | | | (12,756,455 | ) | | | (9,117,348 | ) | | | (24,708,896 | ) | | | (11,651,361 | ) |
Class C | | | (3,785,648 | ) | | | (1,751,300 | ) | | | (6,075,828 | ) | | | (334,512 | ) |
Class R | | | (1,547,935 | ) | | | (1,067,714 | ) | | | (1,863,421 | ) | | | (838,073 | ) |
Class R6 | | | (44,500 | ) | | | (33,339 | ) | | | (92,980 | ) | | | (60,719 | ) |
Advisor Class | | | (709,610 | ) | | | (683,806 | ) | | | (1,060,074 | ) | | | (419,576 | ) |
Net realized gains: | | | | | | | | | | | | | | | | |
Class A | | | (4,913,982 | ) | | | (6,125,410 | ) | | | (56,816,385 | ) | | | (21,972,875 | ) |
Class C | | | (2,658,955 | ) | | | (3,686,002 | ) | | | (23,816,217 | ) | | | (9,651,391 | ) |
Class R | | | (639,646 | ) | | | (920,983 | ) | | | (5,115,822 | ) | | | (2,588,815 | ) |
Class R6 | | | (13,152 | ) | | | (16,730 | ) | | | (179,277 | ) | | | (85,228 | ) |
Advisor Class | | | (247,411 | ) | | | (598,184 | ) | | | (2,207,406 | ) | | | (742,391 | ) |
| | | | |
| | | | |
Total distributions to shareholders | | | (27,317,294 | ) | | | (24,000,816 | ) | | | (121,936,306 | ) | | | (48,344,941 | ) |
| | | | |
Capital share transactions: (Note 2) | | | | | | | | | | | | | | | | |
Class A | | | (71,791,134 | ) | | | (117,603,198 | ) | | | (123,043,103 | ) | | | (216,989,710 | ) |
Class C | | | (82,306,077 | ) | | | (78,239,119 | ) | | | (74,760,104 | ) | | | (112,586,337 | ) |
Class R | | | (30,282,438 | ) | | | (18,669,848 | ) | | | (51,012,663 | ) | | | (48,961,723 | ) |
Class R6 | | | (233,082 | ) | | | (140,699 | ) | | | (986,002 | ) | | | 200,603 | |
Advisor Class | | | 8,859,036 | | | | (57,027,314 | ) | | | 10,047,532 | | | | (15,232,178 | ) |
| | | | |
| | | | |
Total capital share transactions | | | (175,753,695 | ) | | | (271,680,178 | ) | | | (239,754,340 | ) | | | (393,569,345 | ) |
| | | | |
| | | | |
Net increase (decrease) in net assets | | | (64,672,913 | ) | | | (232,778,144 | ) | | | (61,568,999 | ) | | | (333,568,653 | ) |
Net assets: | | | | | | | | | | | | | | | | |
Beginning of year | | | 1,433,415,407 | | | | 1,666,193,551 | | | | 2,214,792,756 | | | | 2,548,361,409 | |
| | | | |
| | | | |
End of year | | | $1,368,742,494 | | | $ | 1,433,415,407 | | | $ | 2,153,223,757 | | | $ | 2,214,792,756 | |
| | | | |
Undistributed net investment income included in net assets: | | | | | | | | | | | | | | | | |
End of year | | | $ — | | | $ | 2,712,464 | | | $ | 354,180 | | | $ | 11,024,417 | |
| | | | |
| | | | |
| | | |
| 46 | | 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 Growth
Allocation Fund | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | |
Increase (decrease) in net assets: | | | | | | | | |
Operations: | | | | | | | | |
Net investment income | | $ | 12,472,973 | | | $ | 8,745,660 | |
Net realized gain (loss) | | | 71,128,267 | | | | 39,370,486 | |
Net change in unrealized appreciation (depreciation) | | | 146,032,107 | | | | 20,368,376 | |
| | | | |
Net increase (decrease) in net assets resulting from operations | | | 229,633,347 | | | | 68,484,522 | |
| | | | |
Distributions to shareholders from: | | | | | | | | |
Net investment income and short term gains received from Underlying Funds and exchange
traded funds: | | | | | | | | |
Class A | | | (14,178,320 | ) | | | (6,622,325 | ) |
Class C | | | (2,995,168 | ) | | | (199,946 | ) |
Class R | | | (1,449,291 | ) | | | (583,535 | ) |
Class R6 | | | (64,322 | ) | | | (33,831 | ) |
Advisor Class | | | (784,774 | ) | | | (409,994 | ) |
Net realized gains: | | | | | | | | |
Class A | | | (48,153,916 | ) | | | (16,777,167 | ) |
Class C | | | (17,939,263 | ) | | | (6,455,785 | ) |
Class R | | | (5,840,979 | ) | | | (2,416,571 | ) |
Class R6 | | | (173,965 | ) | | | (56,473 | ) |
Advisor Class | | | (2,364,422 | ) | | | (988,239 | ) |
| | | | |
Total distributions to shareholders | | | (93,944,420 | ) | | | (34,543,866 | ) |
| | | | |
Capital share transactions: (Note 2) | | | | | | | | |
Class A | | | (37,113,455 | ) | | | (87,336,666 | ) |
Class C | | | (29,152,612 | ) | | | (35,825,451 | ) |
Class R | | | (23,500,251 | ) | | | (37,642,928 | ) |
Class R6 | | | 247,378 | | | | 185,119 | |
Advisor Class | | | (4,858,912 | ) | | | (11,707,981 | ) |
| | | | |
Total capital share transactions | | | (94,377,852 | ) | | | (172,327,907 | ) |
| | | | |
Net increase (decrease) in net assets | | | 41,311,075 | | | | (138,387,251 | ) |
Net assets: | | | | | | | | |
Beginning of year | | | 1,285,874,737 | | | | 1,424,261,988 | |
| | | | |
End of year | | $ | 1,327,185,812 | | | $ | 1,285,874,737 | |
| | | | |
Undistributed net investment income included in net assets: | | | | | | | | |
End of year | | $ | 274,398 | | | $ | 6,559,625 | |
| | | | |
| | | | | | |
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| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 47 | |
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-three 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 Funds invest primarily in mutual funds (Underlying Funds) and exchange traded funds (ETFs), including affiliated funds managed by Franklin Templeton (FT Underlying Funds). The Funds offer five classes of shares: Class A, Class C, Class R, Class R6, and Advisor Class. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees 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 Committee (VC). The VC provides administration and oversight of the Fund’s 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. 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.
Investments in repurchase agreements are valued at cost, which approximates fair value.
b. Joint Repurchase Agreement
Certain or all Funds enter into a joint repurchase agreement whereby their uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Funds’ custodian. The fair value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Funds, certain MRAs may permit the non-defaulting party to net and close-out all transactions, if any, traded under such agreements. The Funds may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Funds in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Funds at year end, as indicated in the Statements of Investments, had been entered into on December 29, 2017.
c. 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.
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| 48 | | Annual Report | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
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, 2017, 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 in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.
d. 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. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.
The Funds indirectly bear their proportionate share of expenses from the Underlying Funds and ETFs. Since the Underlying Funds and ETFs have varied expense levels and the Funds may own different proportions of the Underlying Funds and ETFs at different times, the amount of expenses incurred indirectly by the Funds will vary.
Realized and unrealized gains and losses and net investment income, excluding 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.
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 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.
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| franklintempleton.com | | Annual Report | | | 49 | |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest
At December 31, 2017, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:
| | | | | | | | | | | | | | | | | | | | |
| | | Franklin Conservative Allocation Fund | | | | | | Franklin Moderate Allocation Fund | |
| | | | |
| | | Shares | | | Amount | | | | | | Shares | | | Amount | |
| | | | | |
| Class A Shares: | | | | | | | | | | | | | | | | | | | | |
Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 9,004,604 | | | $ | 131,248,585 | | | | | | | | 9,324,783 | | | $ | 148,888,926 | |
Shares issued in reinvestment of distributions | | | 1,169,393 | | | | 17,226,035 | | | | | | | | 4,989,594 | | | | 80,015,625 | |
Shares redeemed | | | (15,211,092 | ) | | | (220,265,754 | ) | | | | | | | (22,206,405 | ) | | | (351,947,654 | ) |
| | | | |
Net increase (decrease) | | | (5,037,095 | ) | | $ | (71,791,134 | ) | | | | | | | (7,892,028 | ) | | $ | (123,043,103 | ) |
| | | | |
Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 9,876,237 | | | $ | 132,182,107 | | | | | | | | 11,038,805 | | | $ | 159,601,771 | |
Shares issued in reinvestment of distributions | | | 1,112,500 | | | | 14,914,678 | | | | | | | | 2,296,983 | | | | 33,079,385 | |
Shares redeemed | | | (19,663,320 | ) | | | (264,699,983 | ) | | | | | | | (28,101,565 | ) | | | (409,670,866 | ) |
| | | | |
Net increase (decrease) | | | (8,674,583 | ) | | $ | (117,603,198 | ) | | | | | | | (14,765,777 | ) | | $ | (216,989,710 | ) |
| | | | |
| | | | | |
| Class C Shares: | | | | | | | | | | | | | | | | | | | | |
Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 3,062,213 | | | $ | 43,601,492 | | | | | | | | 4,174,263 | | | $ | 64,540,565 | |
Shares issued in reinvestment of distributions | | | 432,601 | | | | 6,258,410 | | | | | | | | 1,882,828 | | | | 29,326,462 | |
Shares redeemed | | | (9,322,532 | ) | | | (132,165,979 | ) | | | | | | | (10,941,215 | ) | | | (168,627,131 | ) |
| | | | |
Net increase (decrease) | | | (5,827,718 | ) | | $ | (82,306,077 | ) | | | | | | | (4,884,124 | ) | | $ | (74,760,104 | ) |
| | | | |
Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 4,863,793 | | | $ | 63,561,659 | | | | | | | | 4,660,303 | | | $ | 65,455,983 | |
Shares issued in reinvestment of distributions | | | 398,830 | | | | 5,210,489 | | | | | | | | 702,978 | | | | 9,675,738 | |
Shares redeemed | | | (11,144,482 | ) | | | (147,011,267 | ) | | | | | | | (13,286,035 | ) | | | (187,718,058 | ) |
| | | | |
Net increase (decrease) | | | (5,881,859 | ) | | $ | (78,239,119 | ) | | | | | | | (7,922,754 | ) | | $ | (112,586,337 | ) |
| | | | |
| | | | | |
| Class R Shares: | | | | | | | | | | | | | | | | | | | | |
Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 1,259,015 | | | $ | 18,065,627 | | | | | | | | 1,111,557 | | | $ | 17,491,234 | |
Shares issued in reinvestment of distributions | | | 143,453 | | | | 2,103,267 | | | | | | | | 428,561 | | | | 6,845,638 | |
Shares redeemed | | | (3,463,117 | ) | | | (50,451,332 | ) | | | | | | | (4,754,116 | ) | | | (75,349,535 | ) |
| | | | |
Net increase (decrease) | | | (2,060,649 | ) | | $ | (30,282,438 | ) | | | | | | | (3,213,998 | ) | | $ | (51,012,663 | ) |
| | | | |
Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 1,289,646 | | | $ | 17,236,221 | | | | | | | | 1,491,622 | | | $ | 21,589,915 | |
Shares issued in reinvestment of distributions | | | 144,387 | | | | 1,924,897 | | | | | | | | 235,070 | | | | 3,355,220 | |
Shares redeemed | | | (2,826,823 | ) | | | (37,830,966 | ) | | | | | | | (5,099,856 | ) | | | (73,906,858 | ) |
| | | | |
Net increase (decrease) | | | (1,392,790 | ) | | $ | (18,669,848 | ) | | | | | | | (3,373,164 | ) | | $ | (48,961,723 | ) |
| | | | |
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| 50 | | Annual Report | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | | | |
| | | Franklin Conservative | | | | | | Franklin Moderate | |
| | | Allocation Fund | | | | | | Allocation Fund | |
| | | Shares | | | Amount | | | | | | Shares | | | Amount | |
| | | | | |
| Class R6 Shares: | | | | | | | | | | | | | | | | | | | | |
Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 34,784 | | | $ | 497,692 | | | | | | | | 47,563 | | | $ | 762,713 | |
Shares issued in reinvestment of distributions | | | 3,921 | | | | 57,652 | | | | | | | | 16,964 | | | | 272,257 | |
Shares redeemed | | | (54,047 | ) | | | (788,426 | ) | | | | | | | (129,149 | ) | | | (2,020,972 | ) |
| | | | |
Net increase (decrease) | | | (15,342 | ) | | $ | (233,082 | ) | | | | | | | (64,622 | ) | | $ | (986,002 | ) |
| | | | |
Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 57,015 | | | $ | 760,599 | | | | | | | | 144,017 | | | $ | 2,100,685 | |
Shares issued in reinvestment of distributions | | | 3,733 | | | | 50,069 | | | | | | | | 10,086 | | | | 145,947 | |
Shares redeemed | | | (71,025 | ) | | | (951,367 | ) | | | | | | | (140,342 | ) | | | (2,046,029 | ) |
| | | | |
Net increase (decrease) | | | (10,277 | ) | | $ | (140,699 | ) | | | | | | | 13,761 | | | $ | 200,603 | |
| | | | |
| | | | | |
| Advisor Class Shares: | | | | | | | | | | | | | | | | | | | | |
Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 1,635,857 | | | $ | 23,801,332 | | | | | | | | 2,049,885 | | | $ | 32,751,736 | |
Shares issued in reinvestment of distributions | | | 55,464 | | | | 817,655 | | | | | | | | 180,985 | | | | 2,907,174 | |
Shares redeemed | | | (1,078,035 | ) | | | (15,759,951 | ) | | | | | | | (1,594,562 | ) | | | (25,611,378 | ) |
| | | | |
Net increase (decrease) | | | 613,286 | | | $ | 8,859,036 | | | | | | | | 636,308 | | | $ | 10,047,532 | |
| | | | |
Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 1,191,790 | | | $ | 16,036,547 | | | | | | | | 1,189,361 | | | $ | 17,404,912 | |
Shares issued in reinvestment of distributions | | | 92,307 | | | | 1,228,277 | | | | | | | | 74,978 | | | | 1,082,144 | |
Shares redeemed | | | (5,417,398 | ) | | | (74,292,138 | ) | | | | | | | (2,292,721 | ) | | | (33,719,234 | ) |
| | | | |
Net increase (decrease) | | | (4,133,301 | ) | | $ | (57,027,314 | ) | | | | | | | (1,028,382 | ) | | $ | (15,232,178 | ) |
| | | | |
| | | |
| | | Franklin Growth Allocation Fund | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | Shares | | | Amount | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | |
| Class A Shares: | | | | | | | | | | | | | | | | | | | | |
Year ended December 31, 2017 | | | | | | | | | | | | | | | | | �� | | | |
Shares sold | | | 5,937,072 | | | $ | 112,664,399 | | | | | | | | | | | | | |
Shares issued in reinvestment of distributions | | | 3,212,584 | | | | 61,420,478 | | | | | | | | | | | | | |
Shares redeemed | | | (11,228,658 | ) | | | (211,198,332 | ) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Net increase (decrease) | | | (2,079,002 | ) | | $ | (37,113,455 | ) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 19,985,532 | | | $ | 338,147,125 | | | | | | | | | | | | | |
Shares issued in reinvestment of distributions | | | 1,380,599 | | | | 23,061,353 | | | | | | | | | | | | | |
Shares redeemed | | | (26,369,114 | ) | | | (448,545,144 | ) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Net increase (decrease) | | | (5,002,983 | ) | | $ | (87,336,666 | ) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
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| franklintempleton.com | | Annual Report | | | 51 | |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest (continued)
| | | | | | | | |
| | | Franklin Growth
Allocation Fund | |
| | | Shares | | | Amount | |
| | |
| Class C Shares: | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | |
| Shares sold | | | 2,429,258 | | | $ | 44,514,353 | |
| Shares issued in reinvestment of distributions | | | 1,114,303 | | | | 20,670,947 | |
| Shares redeemed | | | (5,152,432 | ) | | | (94,337,912 | ) |
| | | | |
Net increase (decrease) | | | (1,608,871 | ) | | $ | (29,152,612 | ) |
| | | | |
| Year ended December 31, 2016 | | | | | | | | |
| Shares sold | | | 2,640,421 | | | $ | 43,293,123 | |
| Shares issued in reinvestment of distributions | | | 405,959 | | | | 6,488,468 | |
| Shares redeemed | | | (5,160,971 | ) | | | (85,607,042 | ) |
| | | | |
Net increase (decrease) | | | (2,114,591 | ) | | $ | (35,825,451 | ) |
| | | | |
| | |
| Class R Shares: | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | |
| Shares sold | | | 526,041 | | | $ | 9,819,531 | |
| Shares issued in reinvestment of distributions | | | 378,557 | | | | 7,130,932 | |
| Shares redeemed | | | (2,175,939 | ) | | | (40,450,714 | ) |
| | | | |
Net increase (decrease) | | | (1,271,341 | ) | | $ | (23,500,251 | ) |
| | | | |
| Year ended December 31, 2016 | | | | | | | | |
| Shares sold | | | 811,617 | | | $ | 13,599,811 | |
| Shares issued in reinvestment of distributions | | | 178,979 | | | | 2,934,501 | |
| Shares redeemed | | | (3,244,832 | ) | | | (54,177,240 | ) |
| | | | |
Net increase (decrease) | | | (2,254,236 | ) | | $ | (37,642,928 | ) |
| | | | |
| | |
| Class R6 Shares: | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | |
| Shares sold | | | 31,333 | | | $ | 599,216 | |
| Shares issued in reinvestment of distributions | | | 12,398 | | | | 238,287 | |
| Shares redeemed | | | (31,823 | ) | | | (590,125 | ) |
| | | | |
Net increase (decrease) | | | 11,908 | | | $ | 247,378 | |
| | | | |
| Year ended December 31, 2016 | | | | | | | | |
| Shares sold | | | 105,302 | | | $ | 1,799,872 | |
| Shares issued in reinvestment of distributions | | | 5,354 | | | | 90,304 | |
| Shares redeemed | | | (98,611 | ) | | | (1,705,057 | ) |
| | | | |
Net increase (decrease) | | | 12,045 | | | $ | 185,119 | |
| | | | |
| | | | |
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| 52 | | Annual Report | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
| | | | | | | | |
| | | Franklin Growth
Allocation Fund | |
| | | Shares | | | Amount | |
| | |
| Advisor Class Shares: | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | |
| Shares sold | | | 777,973 | | | $ | 14,725,195 | |
| Shares issued in reinvestment of distributions | | | 140,404 | | | | 2,693,652 | |
| Shares redeemed | | | (1,156,752 | ) | | | (22,277,759 | ) |
| | | | |
Net increase (decrease) | | | (238,375 | ) | | $ | (4,858,912 | ) |
| | | | |
| Year ended December 31, 2016 | | | | | | | | |
| Shares sold | | | 941,928 | | | $ | 16,235,915 | |
| Shares issued in reinvestment of distributions | | | 77,488 | | | | 1,299,870 | |
| Shares redeemed | | | (1,686,137 | ) | | | (29,243,766 | ) |
| | | | |
Net increase (decrease) | | | (666,721 | ) | | $ | (11,707,981 | ) |
| | | | |
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 FT 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 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 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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| franklintempleton.com | | Annual Report | | | 53 | |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
c. Distribution Fees (continued)
The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:
| | |
| Class A | | 0.25% |
| Class C | | 1.00% |
| Class R | | 0.50% |
d. Sales Charges/Underwriting Agreements
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Funds. These charges are deducted from the proceeds of sales of fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Funds of the following commission transactions related to the sales and redemptions of the Funds’ shares for the year:
| | | | | | | | | | | | |
| | | Franklin
Conservative
Allocation Fund | | | Franklin
Moderate
Allocation Fund | | | Franklin
Growth
Allocation Fund | |
| |
Sales charges retained net of commissions paid to unaffiliated brokers/dealers | | | $246,935 | | | | $391,130 | | | | $359,758 | |
CDSC retained | | | $ 31,207 | | | | $ 40,959 | | | | $ 38,844 | |
e. Transfer Agent Fees
Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. Effective November 1, 2017, the fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. Prior to November 1, 2017, the fees were account based fees that varied based on fund or account type. In addition, each class reimburses Investor Services for out of pocket expenses incurred and, except for Class R6, reimburses shareholder 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, 2017, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:
| | | | | | | | | | | | |
| | | Franklin
Conservative
Allocation Fund | | | Franklin
Moderate
Allocation Fund | | | Franklin
Growth
Allocation Fund | |
| |
Transfer agent fees | | | $583,601 | | | | $1,033,951 | | | | $873,903 | |
f. Investments in FT Underlying Funds
The Funds invest primarily in FT Underlying Funds which are managed by Advisers (or by an affiliate of Advisers). The Funds do not invest in FT 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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| 54 | | Annual Report | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
Investments in FT Underlying Funds for the year ended December 31, 2017, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| FT Underlying Funds | | Number of
Shares Held
at Beginning
of Year | | | Gross
Additions | | | Gross
Reductions | | | Number of
Shares
Held at End
of Year | | | Value
at End
of Year | | | Dividend
Income | | | Realized
Gain (Loss) | | | Net Change in
Unrealized
Appreciation
(Depreciation) | |
| |
Franklin Conservative Allocation Fund | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-Controlled Affiliates | | | | | | | | | | | | | | | | | | | | | | | | | |
Franklin DynaTech Fund, Class R6 | | | 1,322,480 | | | | 239,546 | | | | (334,074 | ) | | | 1,227,952 | | | $ | 83,193,742 | | | $ | — | | | $ | 4,590,980a | | | | $21,978,061 | |
Franklin Floating Rate Daily Access Fund, Class R6 | | | — | | | | 5,198,398 | | | | (422,503 | ) | | | 4,775,895 | | | | 41,884,603 | | | | 1,335,317 | | | | (20,846 | ) | | | (576,436 | ) |
Franklin FTSE Europe ETF | | | — | | | | 567,500 | | | | (3,600 | ) | | | 563,900 | | | | 14,382,270 | | | | 3,236 | | | | (739 | ) | | | 43,703 | |
Franklin Growth Fund, Class R6 | | | 1,878,039 | | | | 51,797 | | | | (623,094 | ) | | | 1,306,742 | | | | 123,539,374 | | | | 943,747 | | | | 22,922,379a | | | | 8,948,215 | |
Franklin International Small Cap Growth | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fund, Class R6 | | | 2,996,940 | | | | 245,141 | | | | (920,932 | ) | | | 2,321,149 | | | | 46,771,155 | | | | 3,091,017 | | | | 2,827,544a | | | | 9,641,057 | |
Franklin K2 Alternative Strategies Fund, Class R6 | | | 5,855,419 | | | | 49,544 | | | | (2,842,952 | ) | | | 3,062,011 | | | | 34,692,578 | | | | 561,825 | | | | 1,835,589 | | | | 1,020,761 | |
Franklin LibertyQ Emerging Markets ETF | | | 1,238,500 | | | | 711,200 | | | | (343,200 | ) | | | 1,606,500 | | | | 53,086,792 | | | | 1,330,443 | | | | 570,626 | | | | 9,369,099 | |
Franklin LibertyQ U.S. Equity ETF | | | — | | | | 728,900 | | | | (96,900 | ) | | | 632,000 | | | | 18,271,057 | | | | 229,856 | | | | 74,927 | | | | 1,979,677 | |
Franklin Low Duration Total Return Fund, Class R6 | | | 21,122,177 | | | | 5,504,340 | | | | (2,983,179 | ) | | | 23,643,338 | | | | 232,177,580 | | | | 4,815,396 | | | | (877,284 | ) | | | (667,348 | ) |
Franklin Mutual European Fund, Class R6 . | | | 2,492,970 | | | | 517,493 | | | | (864,107 | ) | | | 2,146,356 | | | | 44,880,300 | | | | 681,357 | | | | 429,312 | | | | 4,114,330 | |
Franklin Pelagos Commodities Strategy Fund, Class R6 | | | 5,230,884 | | | | 5,939 | | | | (479,359 | ) | | | 4,757,464 | | | | 31,779,860 | | | | 39,438 | | | | (1,298,952 | ) | | | 1,607,521 | |
Franklin Rising Dividends Fund, Class R6 . | | | 1,745,373 | | | | 52,285 | | | | (735,039 | ) | | | 1,062,619 | | | | 64,915,393 | | | | 1,028,307 | | | | 14,790,198a | | | | (2,227,718 | ) |
Franklin Small Cap Growth Fund, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Class R6 | | | 451,035 | | | | 9,022 | | | | (99,458 | ) | | | 360,599 | | | | 8,567,841 | | | | — | | | | 376,989a | | | | 1,298,584 | |
Franklin Strategic Income Fund, Class R6 . | | | 18,464,604 | | | | 922,655 | | | | (6,400,290 | ) | | | 12,986,969 | | | | 127,921,643 | | | | 3,562,693 | | | | (3,858,586 | ) | | | 7,248,733 | |
Franklin U.S. Government Securities Fund, Class R6 | | | 33,205,449 | | | | 1,860,304 | | | | (11,054,690 | ) | | | 24,011,063 | | | | 145,987,262 | | | | 5,070,276 | | | | (3,329,985 | ) | | | 34,328 | |
Franklin Utilities Fund, Class R6 | | | 1,622,554 | | | | 72,426 | | | | (364,531 | ) | | | 1,330,449 | | | | 25,065,660 | | | | 829,815 | | | | 2,524,045a | | | | (298,264 | ) |
Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 6,351,087 | | | | 229,110,983 | | | | (224,240,969 | ) | | | 11,221,101 | | | | 11,221,101 | | | | 78,720 | | | | — | | | | — | |
Templeton Foreign Fund, Class R6 | | | 6,554,098 | | | | 128,664 | | | | (1,977,156 | ) | | | 4,705,606 | | | | 37,362,514 | | | | 709,294 | | | | 3,071,262 | | | | 3,524,419 | |
Templeton Frontier Markets Fund, Class R6 | | | 769,014 | | | | — | | | | (769,014 | ) | | | — | | | | —b | | | | — | | | | (1,343,170 | ) | | | —b | |
Templeton Global Total Return Fund, Class R6 | | | 7,785,702 | | | | 4,634,051 | | | | (1,369,501 | ) | | | 11,050,252 | | | | 133,155,536 | | | | 1,859,204 | | | | (361,733 | ) | | | 1,786,594 | |
| | | | | | | | | | | | | | | | | | | | |
Total Affiliated Securities | | | | | | | | | | | | | | | | | | $ | 1,278,856,261 | | | $ | 26,169,941 | | | $ | 42,922,556 | | | | $68,825,316 | |
| | | | | | | | | | | | | | | | | | | | |
Franklin Moderate Allocation Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Controlled Affiliates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Franklin FTSE Europe ETF | | | — | | | | 1,363,300 | | | | (7,600 | ) | | | 1,355,700 | | | $ | 34,577,129 | | | $ | 7,777 | | | $ | (1,590 | ) | | | $ 105,067 | |
Franklin LibertyQ Emerging Markets ETF . | | | 2,781,600 | | | | 1,691,600 | | | | (771,500 | ) | | | 3,701,700 | | | | 122,322,676 | | | | 3,060,406 | | | | 1,242,926 | | | | 21,460,136 | |
Franklin LibertyQ U.S. Equity ETF | | | — | | | | 1,718,000 | | | | (226,400 | ) | | | 1,491,600 | | | | 43,122,007 | | | | 539,702 | | | | 152,660 | | | | 4,672,288 | |
Franklin Pelagos Commodities Strategy Fund, Class R6 | | | 8,105,013 | | | | 9,357 | | | | (619,063 | ) | | | 7,495,307 | | | | 50,068,653 | | | | 62,133 | | | | (2,560,003 | ) | | | 3,069,312 | |
| | | | | | | | | | | | | | | | | | | | |
Total Controlled Affiliates | | | | | | | | | | | | | | | | | | $ | 250,090,465 | | | $ | 3,670,018 | | | $ | (1,166,007 | ) | | | $29,306,803 | |
| | | | | | | | | | | | | | | | | | | | |
Non-Controlled Affiliates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Franklin DynaTech Fund, Class R6 | | | 2,850,304 | | | | 533,932 | | | | (686,866 | ) | | | 2,697,370 | | | $ | 182,746,832 | | | $ | — | | | $ | 8,041,458a | | | | $49,187,324 | |
Franklin Floating Rate Daily Access Fund, Class R6 | | | — | | | | 4,922,572 | | | | (367,960 | ) | | | 4,554,612 | | | | 39,943,948 | | | | 1,251,825 | | | | (16,825 | ) | | | (545,468 | ) |
Franklin Growth Fund, Class R6 | | | 4,467,176 | | | | 105,180 | | | | (1,434,433 | ) | | | 3,137,923 | | | | 296,659,253 | | | | 2,262,722 | | | | 51,032,707a | | | | 24,329,904 | |
Franklin International Small Cap Growth Fund, Class R6 | | | 7,274,151 | | | | 569,168 | | | | (2,148,242 | ) | | | 5,695,077 | | | | 114,755,802 | | | | 7,573,027 | | | | 6,399,282a | | | | 23,532,196 | |
Franklin K2 Alternative Strategies Fund, Class R6 | | | 9,060,708 | | | | 77,983 | | | | (4,319,037 | ) | | | 4,819,654 | | | | 54,606,680 | | | | 884,322 | | | | 2,783,455 | | | | 1,639,765 | |
| | | | | | |
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| franklintempleton.com | | Annual Report | | | 55 | |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
f. Investments in FT Underlying Funds (continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| FT Underlying Funds | | Number of
Shares Held
at Beginning
of Year | | | Gross
Additions | | | Gross
Reductions | | | Number of
Shares
Held at End
of Year | | | Value
at End
of Year | | | Dividend
Income | | | Realized
Gain (Loss) | | | Net Change in
Unrealized
Appreciation
(Depreciation) | |
| |
Franklin Moderate Allocation Fund (continued) | | | | | | | | | | | | | | | | | | | | | |
Non-Controlled Affiliates (continued) | | | | | | | | | | | | | | | | | | | | | | | | | |
Franklin Low Duration Total Return Fund, Class R6 | | | 21,415,937 | | | | 5,262,142 | | | | (3,192,906 | ) | | | 23,485,173 | | | $ | 230,624,402 | | | $ | 4,751,909 | | | $ | (932,643 | ) | | | $ (570,218 | ) |
Franklin Mutual European Fund, Class R6 . | | | 5,897,464 | | | | 1,159,082 | | | | (1,947,012 | ) | | | 5,109,534 | | | | 106,840,346 | | | | 1,610,569 | | | | 529,829 | | | | 10,123,339 | |
Franklin Rising Dividends Fund, Class R6 . | | | 4,023,486 | | | | 103,866 | | | | (1,645,632 | ) | | | 2,481,720 | | | | 151,608,304 | | | | 2,364,721 | | | | 32,384,639a | | | | (3,513,463 | ) |
Franklin Small Cap Growth Fund, Class R6 | | | 1,113,321 | | | | 17,545 | | | | (232,804 | ) | | | 898,062 | | | | 21,337,942 | | | | — | | | | 806,010a | | | | 3,309,235 | |
Franklin Strategic Income Fund, Class R6 . | | | 17,639,031 | | | | 1,131,056 | | | | (6,223,187 | ) | | | 12,546,900 | | | | 123,586,961 | | | | 3,386,998 | | | | (3,763,877 | ) | | | 6,984,284 | |
Franklin U.S. Government Securities Fund, Class R6 | | | 31,405,709 | | | | 2,214,601 | | | | (10,658,171 | ) | | | 22,962,139 | | | | 139,609,805 | | | | 4,766,483 | | | | (2,742,106 | ) | | | (350,339 | ) |
Franklin Utilities Fund, Class R6 | | | 3,933,350 | | | | 158,773 | | | | (834,928 | ) | | | 3,257,195 | | | | 61,365,547 | | | | 2,007,056 | | | | 5,912,800a | | | | (604,842 | ) |
Institutional Fiduciary Trust Money Market Portfolio | | | 10,056,485 | | | | 377,853,062 | | | | (387,884,238 | ) | | | 25,309 | | | | 25,309 | | | | 122,605 | | | | — | | | | — | |
Templeton Foreign Fund, Class R6 | | | 15,425,155 | | | | 239,076 | | | | (4,447,349 | ) | | | 11,216,882 | | | | 89,062,047 | | | | 1,690,113 | | | | 5,928,582 | | | | 9,498,243 | |
Templeton Frontier Markets Fund, Class R6 | | | 2,032,287 | | | | — | | | | (2,032,287 | ) | | | — | | | | —b | | | | — | | | | (4,132,104 | ) | | | —b | |
Templeton Global Total Return Fund, Class R6 | | | 7,326,265 | | | | 4,510,295 | | | | (1,351,992 | ) | | | 10,484,568 | | | | 126,339,039 | | | | 1,731,032 | | | | 20,211 | | | | 1,287,049 | |
| | | | | | | | | | | | | | | | | | | | |
Total Non-Controlled Affiliates | | | | | | | | | | | | | | | | | | $ | 1,739,112,217 | | | $ | 34,403,382 | | | $ | 102,251,418 | | | | $124,307,009 | |
| | | | | | | | | | | | | | | | | | | | |
Total Affiliated Securities | | | | | | | | | | | | | | | | | | $ | 1,989,202,682 | | | $ | 38,073,400 | | | $ | 101,085,411 | | | | $153,613,812 | |
| | | | | | | | | | | | | | | | | | | | |
Franklin Growth Allocation Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Controlled Affiliates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Franklin FTSE Europe ETF | | | — | | | | 1,135,400 | | | | (2,000 | ) | | | 1,133,400 | | | $ | 28,907,367 | | | $ | 6,478 | | | $ | (571 | ) | | | $ 87,839 | |
Franklin LibertyQ Emerging Markets ETF . | | | 2,181,500 | | | | 1,460,000 | | | | (477,400 | ) | | | 3,164,100 | | | | 104,557,685 | | | | 2,582,575 | | | | 738,778 | | | | 17,885,904 | |
Franklin LibertyQ U.S. Equity ETF | | | — | | | | 1,277,400 | | | | (126,900 | ) | | | 1,150,500 | | | | 33,260,840 | | | | 411,383 | | | | 70,946 | | | | 3,603,826 | |
| | | | | | | | | | | | | | | | | | | | |
Total Controlled Affiliates | | | | | | | | | | | | | | | | | | $ | 166,725,892 | | | $ | 3,000,436 | | | $ | 809,153 | | | | $ 21,577,569 | |
| | | | | | | | | | | | | | | | | | | | |
Non-Controlled Affiliates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Franklin DynaTech Fund, Class R6 | | | 2,234,676 | | | | 416,019 | | | | (432,112 | ) | | | 2,218,583 | | | $ | 150,309,019 | | | $ | — | | | $ | 4,827,111a | | | | $ 40,593,270 | |
Franklin Floating Rate Daily Access Fund, Class R6 | | | — | | | | 1,161,538 | | | | (135,442 | ) | | | 1,026,096 | | | | 8,998,861 | | | | 273,667 | | | | (7,672 | ) | | | (116,258 | ) |
Franklin Growth Fund, Class R6 | | | 3,289,099 | | | | 77,692 | | | | (941,205 | ) | | | 2,425,586 | | | | 229,314,863 | | | | 1,743,583 | | | | 33,486,077a | | | | 22,961,032 | |
Franklin International Small Cap Growth Fund, Class R6 | | | 5,945,325 | | | | 482,132 | | | | (1,536,107 | ) | | | 4,891,350 | | | | 98,560,698 | | | | 6,490,810 | | | | 4,693,947a | | | | 19,857,649 | |
Franklin K2 Alternative Strategies Fund, Class R6 | | | 5,290,255 | | | | 136,766 | | | | (2,467,926 | ) | | | 2,959,095 | | | | 33,526,546 | | | | 542,942 | | | | 1,429,287 | | | | 1,183,017 | |
Franklin Low Duration Total Return Fund, Class R6 | | | 4,800,161 | | | | 1,893,797 | | | | (1,251,421 | ) | | | 5,442,537 | | | | 53,445,711 | | | | 1,061,367 | | | | (340,970 | ) | | | (10,630 | ) |
Franklin Mutual European Fund, Class R6 . | | | 4,585,247 | | | | 906,119 | | | | (1,312,562 | ) | | | 4,178,804 | | | | 87,378,781 | | | | 1,307,873 | | | | 202,402 | | | | 8,104,199 | |
Franklin Pelagos Commodities Strategy Fund, Class R6 | | | 4,669,018 | | | | 84,426 | | | | (146,843 | ) | | | 4,606,601 | | | | 30,772,095 | | | | 38,187 | | | | (614,894 | ) | | | 979,665 | |
Franklin Rising Dividends Fund, Class R6 . | | | 3,098,631 | | | | 79,706 | | | | (1,169,101 | ) | | | 2,009,236 | | | | 122,744,256 | | | | 1,871,181 | | | | 22,675,597a | | | | 13,510 | |
Franklin Small Cap Growth Fund, Class R6 | | | 805,297 | | | | 12,457 | | | | (134,469 | ) | | | 683,285 | | | | 16,234,862 | | | | — | | | | 521,069a | | | | 2,535,582 | |
Franklin Strategic Income Fund, Class R6 . | | | 3,881,188 | | | | 582,705 | | | | (1,660,222 | ) | | | 2,803,671 | | | | 27,616,156 | | | | 733,539 | | | | (257,026 | ) | | | 948,046 | |
Franklin U.S. Government Securities Fund, Class R6 | | | 6,947,140 | | | | 1,107,897 | | | | (2,871,734 | ) | | | 5,183,303 | | | | 31,514,482 | | | | 1,037,903 | | | | (526,808 | ) | | | (145,746 | ) |
Franklin Utilities Fund, Class R6 | | | 2,962,629 | | | | 120,711 | | | | (504,302 | ) | | | 2,579,038 | | | | 48,589,081 | | | | 1,549,709 | | | | 3,489,534a | | | | 485,804 | |
| | | | |
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| 56 | | Annual Report | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| FT Underlying Funds | | Number of
Shares Held
at Beginning
of Year | | | Gross
Additions | | | Gross
Reductions | | | Number of
Shares Held
at End of
Year | | | Value
at End
of Year | | | Dividend
Income | | | Realized
Gain
(Loss) | | | Net Change in
Unrealized
Appreciation
(Depreciation) | |
| |
Franklin Growth Allocation Fund (continued) | | | | | | | | | | | | | | | | | | | | | |
Non-Controlled Affiliates (continued) | | | | | | | | | | | | | | | | | | | | | |
Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 6,060,504 | | | | 240,433,627 | | | | (246,478,288 | ) | | | 15,843 | | | $ | 15,843 | | | $ | 76,862 | | | $ | — | | | | $ — | |
Templeton Foreign Fund, Class R6 | | | 12,583,040 | | | | 192,885 | | | | (3,147,603 | ) | | | 9,628,322 | | | | 76,448,880 | | | | 1,448,676 | | | | 3,360,071 | | | | 9,328,195 | |
Templeton Frontier Markets Fund, Class R6 | | | 1,841,002 | | | | — | | | | (1,841,002 | ) | | | — | | | | —b | | | | — | | | | (3,753,978 | ) | | | —b | |
Templeton Global Total Return Fund, Class R6 | | | 1,604,547 | | | | 1,221,952 | | | | (500,331 | ) | | | 2,326,168 | | | | 28,030,329 | | | | 371,899 | | | | 96,928 | | | | 165,717 | |
| | | | | | | | | | | | | | | | | | | | |
Total Non-Controlled Affiliates | | | | | | | | | | | | | | | | | | $ | 1,043,500,463 | | | $ | 18,548,198 | | | $ | 69,280,675 | | | | $106,883,052 | |
| | | | | | | | | | | | | | | | | | | | |
Total Affiliated Securities | | | | | | | | | | | | | | | | | | $ | 1,210,226,355 | | | $ | 21,548,634 | | | $ | 70,089,828 | | | | $128,460,621 | |
| | | | | | | | | | | | | | | | | | | | |
aIncludes realized gain distributions received.
bAs of December 31, 2017, no longer held by the fund.
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, 2018. Total expenses waived or paid are not subject to recapture subsequent to the Funds’ fiscal year end.
| | | | | | | | | | | | |
| | | Franklin
Conservative
Fund | | | Franklin
Moderate
Allocation Fund | | | Franklin
Growth Allocation
Fund | |
| |
Class A, Class C, Class R & Advisor Class | | | 0.40% | | | | 0.40% | | | | 0.40% | |
Class R6 | | | 0.28% | | | | 0.28% | | | | 0.25% | |
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, 2017, the custodian fees were reduced as noted in the Statements of Operations.
5. Income Taxes
During the year ended December 31, 2017, the Franklin Conservative Allocation Fund utilized $23,750,205 of capital loss carryforwards.
The tax character of distributions paid during the years ended December 31, 2017 and 2016, was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Franklin Conservative
Allocation Fund | | | Franklin Moderate
Allocation Fund | | | Franklin Growth
Allocation Fund | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| |
Distributions paid from: | | | | | | | | | | | | | | | | | | | | | | | | |
Ordinary income | | $ | 18,844,148 | | | $ | 12,655,818 | | | $ | 42,845,027 | | | $ | 13,304,241 | | | $ | 24,903,773 | | | $ | 8,101,004 | |
| | | | | | |
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FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
5. Income Taxes (continued)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Franklin Conservative
Allocation Fund | | | Franklin Moderate
Allocation Fund | | | Franklin Growth
Allocation Fund | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| |
Long term capital gain | | | 8,473,146 | | | | 11,344,998 | | | | 79,091,279 | | | | 35,040,700 | | | | 69,040,647 | | | | 26,442,862 | |
| | | | |
| | | $27,317,294 | | | $24,000,816 | | | $121,936,306 | | | $48,344,941 | | | $93,944,420 | | | $34,543,866 | |
| | | | |
At December 31, 2017, 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
Conservative
Allocation Fund | | | Franklin
Moderate
Allocation Fund | | | Franklin
Growth
Allocation Fund | |
| |
Cost of investments | | $ | 1,179,918,053 | | | $ | 1,704,317,679 | | | $ | 965,756,122 | |
| | | | |
| | | |
Unrealized appreciation | | $ | 216,785,728 | | | $ | 483,304,314 | | | $ | 374,899,097 | |
Unrealized depreciation | | | (24,090,238 | ) | | | (26,634,144 | ) | | | (8,686,006 | ) |
| | | | |
Net unrealized appreciation (depreciation) | | $ | 192,695,490 | | | $ | 456,670,170 | | | $ | 366,213,091 | |
| | | | |
| | | |
Undistributed ordinary income | | $ | 34,167 | | | $ | 2,473,318 | | | $ | 1,436,264 | |
Undistributed long term capital gains | | | 11,341,935 | | | | 20,712,722 | | | | 17,406,964 | |
| | | | |
Distributable earnings | | $ | 11,376,102 | | | $ | 23,186,040 | | | $ | 18,843,228 | |
| | | | |
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.
The Funds utilized a tax accounting practice to treat a portion of the proceeds from capital shares redeemed as a distribution from realized capital gains.
6. Investment Transactions
Purchases and sales of Underlying Funds and ETFs (excluding short term securities) for the year ended December 31, 2017, were as follows:
| | | | | | | | | | | | |
| | | Franklin
Conservative
Allocation Fund | | | Franklin
Moderate
Allocation Fund | | | Franklin
Growth
Allocation Fund | |
| |
Purchases | | | $250,157,932 | | | | $364,654,997 | | | | $218,684,632 | |
Sales | | | $486,007,519 | | | | $768,821,687 | | | | $432,453,215 | |
7. Credit Facility
The Funds, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 9, 2018. 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 9, 2018, the Borrowers renewed the Global Credit Facility for a one year term, maturing February 8, 2019, for a total of $2 billion.
| | | | |
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FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
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 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statements of Operations. During the year ended December 31, 2017, the Funds did not use the Global Credit Facility.
8. Fair Value Measurements
The Funds follow a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds’ own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds’ financial instruments and are summarized in the following fair value hierarchy:
| | • | | Level 1 – quoted prices in active markets for identical financial instruments |
| | • | | Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.) |
| | • | | Level 3 – significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of financial instruments) |
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
For movements between the levels within the fair value hierarchy, the Funds have adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.
A summary of inputs used as of December 31, 2017, in valuing the Fund’s assets carried at fair value, is as follows:
| | | | | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Franklin Conservative Allocation Fund | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Investments in Securities:a | | | | | | | | | | | | | | | | |
Underlying Funds and Exchange Traded Funds | | $ | 1,345,486,659 | | | $ | — | | | $ | — | | | $ | 1,345,486,659 | |
Short Term Investments | | | 11,221,101 | | | | 15,905,783 | | | | — | | | | 27,126,884 | |
| | | | |
Total Investments in Securities | | $ | 1,356,707,760 | | | $ | 15,905,783 | | | $ | — | | | $ | 1,372,613,543 | |
| | | | |
Franklin Moderate Allocation Fund | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Investments in Securities:a | | | | | | | | | | | | | | | | |
Underlying Funds and Exchange Traded Funds | | $ | 2,122,335,866 | | | $ | — | | | $ | — | | | $ | 2,122,335,866 | |
Short Term Investments | | | 25,309 | | | | 38,626,674 | | | | — | | | | 38,651,983 | |
| | | | |
Total Investments in Securities | | $ | 2,122,361,175 | | | $ | 38,626,674 | | | $ | — | | | $ | 2,160,987,849 | |
| | | | |
Franklin Growth Allocation Fund | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Investments in Securities:a | | | | | | | | | | | | | | | | |
Underlying Funds and Exchange Traded Funds | | $ | 1,306,945,779 | | | $ | — | | | $ | — | | | $ | 1,306,945,779 | |
Short Term Investments | | | 15,843 | | | | 25,007,591 | | | | — | | | | 25,023,434 | |
| | | | |
Total Investments in Securities | | $ | 1,306,961,622 | | | $ | 25,007,591 | | | $ | — | | | $ | 1,331,969,213 | |
| | | | |
aFor detailed Underlying Fund and ETF categories, see the accompanying Statement of Investments.
| | | | | | |
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FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
9. Subsequent Events
The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.
Abbreviations
| | |
Selected Portfolio |
|
ETF | | Exchange Traded Fund |
| FTSE | | Financial Times Stock Exchange |
| SPDR | | S&P Depositary Receipt |
| | | | |
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FRANKLIN FUND ALLOCATOR SERIES
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Fund Allocator Series and Shareholders of Franklin Conservative Allocation Fund, Franklin Moderate Allocation Fund, and Franklin Growth Allocation Fund
Opinions on the Financial Statements
We have audited the accompanying statements of assets and liabilities, including the statements of investments, of Franklin Conservative Allocation Fund, Franklin Moderate Allocation Fund, and Franklin Growth Allocation Fund (the “Funds”) as of December 31, 2017, the related statements of operations for the year ended December 31, 2017, the statements of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of December 31, 2017, 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 ended December 31, 2017, and each of the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinions
These financial statements are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent, and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinions.
PricewaterhouseCoopers LLP
San Francisco, California
February 15, 2018
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
| | | | | | |
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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, 2017:
| | | | | | | | |
| | | Franklin Conservative Allocation Fund | | Franklin Moderate Allocation Fund | | Franklin Growth Allocation Fund | | |
| | | | |
| | | | |
| | $10,282,766 | | $90,043,941 | | $75,985,340 | | |
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, 2017:
| | | | | | | | |
| | | Franklin Conservative Allocation Fund | | Franklin Moderate Allocation Fund | | Franklin Growth Allocation Fund | | |
| | | | |
| | | | |
| | $84,290 | | $9,043,828 | | $5,431,898 | | |
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, 2017:
| | | | | | | | |
| | | Franklin Conservative Allocation Fund | | Franklin Moderate Allocation Fund | | Franklin Growth Allocation Fund | | |
| | | | |
| | | | |
| | $18.91% | | $18.74% | | $25.25% | | |
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, 2017:
| | | | | | | | |
| | | Franklin Conservative Allocation Fund | | Franklin Moderate Allocation Fund | | Franklin Growth Allocation Fund | | |
| | | | |
| | | | |
| | $7,124,930 | | $16,497,203 | | $13,395,422 | | |
Distributions, including qualified dividend income, paid during calendar year 2017 will be reported to shareholders on Form 1099-DIV by mid-February 2018. 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, 2017, the Funds, a 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 27, 2017, to treat their proportionate share of foreign taxes paid by the underlying funds as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.
| | | | |
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FRANKLIN FUND ALLOCATOR SERIES
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.
| | | | | | | | | | | | |
Class | | Foreign Tax Paid
Per Share | | | Foreign Source
Income Per Share | | | Foreign Source Qualified
Dividends Per Share | |
| |
| Franklin Conservative Allocation Fund | | | | | |
Class A | | | $0.0037 | | | | $0.0468 | | | | $0.0247 | |
Class C | | | $0.0037 | | | | $0.0468 | | | | $0.0247 | |
Class R | | | $0.0037 | | | | $0.0468 | | | | $0.0247 | |
Class R6 | | | $0.0037 | | | | $0.0468 | | | | $0.0247 | |
Advisor Class | | | $0.0037 | | | | $0.0468 | | | | $0.0247 | |
| |
| Franklin Moderate Allocation Fund | | | | | |
Class A | | | $0.0057 | | | | $0.0653 | | | | $0.0418 | |
Class C | | | $0.0057 | | | | $0.0653 | | | | $0.0418 | |
Class R | | | $0.0057 | | | | $0.0653 | | | | $0.0418 | |
Class R6 | | | $0.0057 | | | | $0.0653 | | | | $0.0418 | |
Advisor Class | | | $0.0057 | | | | $0.0653 | | | | $0.0418 | |
| |
| Franklin Growth Allocation Fund | | | | | |
Class A | | | $0.0088 | | | | $0.0961 | | | | $0.0684 | |
Class C | | | $0.0088 | | | | $0.0961 | | | | $0.0684 | |
Class R | | | $0.0088 | | | | $0.0961 | | | | $0.0684 | |
Class R6 | | | $0.0088 | | | | $0.0961 | | | | $0.0684 | |
Advisor Class | | | $0.0088 | | | | $0.0961 | | | | $0.0684 | |
Foreign Tax Paid Per Share (Column 1) is the amount per share available to you, as a tax credit (assuming you held your shares in the Fund for a minimum of 16 days during the 31-day period beginning 15 days before the ex-dividend date of the Fund’s distribution to which the foreign taxes relate), or, as a tax deduction.
Foreign Source Income Per Share (Column 2) is the amount per share of income dividends attributable to foreign securities held by the underlying funds, plus any foreign taxes withheld on these dividends. The amounts reported include foreign source qualified dividends that have not been adjusted for the rate differential applicable to such dividend income.1
Foreign Source Qualified Dividends Per Share (Column 3) is the amount per share of foreign source qualified dividends, plus any foreign taxes withheld on these dividends. These amounts represent the portion of the Foreign Source Income reported to you in column 2 that were derived from qualified foreign securities held by the underlying funds.1
By mid-February 2018, shareholders will receive Form 1099-DIV which will include their share of taxes paid and foreign source income distributed during the calendar year 2017. 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 2017 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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FRANKLIN FUND ALLOCATOR SERIES
Special Meeting of Shareholders
MEETING OF SHAREHOLDERS: OCTOBER 30, 2017 AND RECONVENED ON DECEMBER 15, 2017 AND DECEMBER 29, 2017
(UNAUDITED)
A Special Meeting of Shareholders of Franklin Fund Allocator Series was held at the offices of Franklin Templeton Investments, One Franklin Parkway, San Mateo, California on October 30, 2017 and reconvened on December 15, 2017 and December 29, 2017. The purpose of the meeting was to elect Trustees of Franklin Fund Allocator Series and to vote on the following proposals: for each of the Funds, to approve the use of a “manager of managers” structure whereby the Fund’s investment manager would be able to hire and replace subadvisers without shareholder approval; and, for each of the Funds, to approve an amended fundamental investment restriction regarding investments in commodities. At the meeting, (i) the following persons were elected by the shareholders to serve as Trustees of Franklin Fund Allocator Series: Harris J. Ashton, Terrence J. Checki, Mary C. Choksi, Edith E. Holiday, Gregory E. Johnson, Rupert H. Johnson, J. Michael Luttig, Larry D. Thompson, and John B. Wilson; (ii) the proposals to use a “manager of managers” structure and to approve the amended fundamental investment restriction regarding investments in commodities were approved by shareholders of Franklin Conservative Allocation Fund; and (iii) sufficient votes were not received to pass the proposals to use a “manager of managers” structure and to approve the amended fundamental investment restriction regarding investments in commodities for each of Franklin Moderate Allocation Fund and Franklin Growth Allocation Fund. No other business was transacted at the meeting.
The results of the voting at the meeting are as follows:
| Proposal 1. | To elect a Board of Trustees: |
| | | | | | | | |
Name | | For | | | Withheld | |
| | |
Harris J. Ashton | | | 390,516,091 | | | | 13,444,532 | |
| | |
Terrence J. Checki | | | 390,358,474 | | | | 13,602,149 | |
| | |
Mary C. Choksi | | | 390,976,557 | | | | 12,983,067 | |
| | |
Edith E. Holiday | | | 390,925,009 | | | | 13,035,612 | |
| | |
Gregory E. Johnson | | | 390,675,564 | | | | 13,285,060 | |
| | |
Rupert H. Johnson, Jr. | | | 390,454,015 | | | | 13,506,608 | |
| | |
J. Michael Luttig | | | 390,724,016 | | | | 13,236,605 | |
| | |
Larry D. Thompson | | | 390,661,770 | | | | 13,298,853 | |
| | |
John B. Wilson | | | 390,907,907 | | | | 13,052,714 | |
Total Trust Shares Outstanding*: 723,360,102
* As of the record date.
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FRANKLIN FUND ALLOCATOR SERIES
SPECIAL MEETING OF SHAREHOLDERS
| Proposal 2. | To approve the use of a “manager of managers” structure whereby the Fund’s investment manager would be able to hire and replace subadvisers without shareholder approval: |
| | | | |
| Franklin Conservative Allocation Fund | | | |
| | | Shares | |
| |
For | | | 34,299,075 | |
| |
Against | | | 2,302,787 | |
| |
Abstain | | | 1,825,891 | |
| |
Broker Non-Votes | | | 11,774,882 | |
| |
Total Fund Shares Voted | | | 50,202,638 | |
| |
Total Fund Shares Outstanding* | | | 95,532,324 | |
| |
| Franklin Moderate Allocation Fund | | | |
| | | Shares | |
| |
For | | | 46,933,010 | |
| |
Against | | | 3,091,078 | |
| |
Abstain | | | 2,393,543 | |
| |
Broker Non-Votes | | | 19,264,218 | |
| |
Total Fund Shares Voted | | | 71,681,848 | |
| |
Total Fund Shares Outstanding* | | | 134,525,727 | |
| |
| Franklin Growth Allocation Fund | | | |
| | | Shares | |
| |
For | | | 20,453,997 | |
| |
Against | | | 1,605,249 | |
| |
Abstain | | | 834,737 | |
| |
Broker Non-Votes | | | 9,669,214 | |
| |
Total Fund Shares Voted | | | 32,563,192 | |
| |
Total Fund Shares Outstanding* | | | 68,334,723 | |
| Proposal 3. | To approve an amended fundamental investment restriction regarding investments in commodities: |
| | | | |
| Franklin Conservative Allocation Fund | | | |
| | | Shares | |
| |
For | | | 34,582,320 | |
| |
Against | | | 1,346,751 | |
| |
Abstain | | | 2,498,685 | |
| |
Broker Non-Votes | | | 11,774,882 | |
| |
Total Fund Shares Voted | | | 50,202,638 | |
| |
Total Fund Shares Outstanding* | | | 95,532,324 | |
| |
| Franklin Moderate Allocation Fund | | | |
| | | Shares | |
| |
For | | | 47,320,264 | |
| |
Against | | | 1,971,188 | |
| |
Abstain | | | 3,126,178 | |
| |
Broker Non-Votes | | | 19,264,218 | |
| |
Total Fund Shares Voted | | | 71,681,848 | |
| |
Total Fund Shares Outstanding* | | | 134,525,727 | |
| | | | | | |
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FRANKLIN FUND ALLOCATOR SERIES
SPECIAL MEETING OF SHAREHOLDERS
| | | | |
| Franklin Growth Allocation Fund | | | |
| | | Shares | |
| |
For | | | 20,541,559 | |
| |
Against | | | 1,229,018 | |
| |
Abstain | | | 1,123,402 | |
| |
Broker Non-Votes | | | 9,669,214 | |
| |
Total Fund Shares Voted | | | 32,563,192 | |
| |
Total Fund Shares Outstanding | | | 68,334,723 | |
| | | | |
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FRANKLIN FUND ALLOCATOR SERIES
Board Members and Officers
The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupations during at least the past five years and number of US registered 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
| | | | | | | | |
Name, Year of Birth and Address | | Position | | Length of Time Served | | Number of Portfolios in Fund Complex Overseen by Board Member* | | Other Directorships Held During at Least the Past 5 Years |
|
| | | | |
Harris J. Ashton (1932) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since 1995 | | 139 | | Bar-S Foods (meat packing company) (1981-2010). |
|
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). |
|
| | | | |
Terrence J. Checki (1945) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since December 2017 | | 113 | | Hess Corporation (exploration of oil and gas) (2014-present). |
|
Principal Occupation During at Least the Past 5 Years: Member of the Council on Foreign Relations (1996-present); Member of the National Committee on U.S.-China Relations (1999-present); member of the Board of Trustees of the Economic Club of New York (2013 -present); member of the Board of Trustees of the Foreign Policy Association (2005-present) and member of various other boards of trustees and advisory boards; and formerly , Executive Vice President of the Federal Reserve Bank of New York and Head of its Emerging Markets and Internal Affairs Group and Member of Management Committee (1995-2014); and Visiting Fellow at the Council on Foreign Relations (2014). |
|
| | | | |
Mary C. Choksi (1950) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since 2014 | | 139 | | Avis Budget Group Inc. (car rental) (2007-present), Omnicom Group Inc. (advertising and marketing communications services) (2011-present) and White Mountains Insurance Group, Ltd. (holding company) (2017). |
|
Principal Occupation During at Least the Past 5 Years: |
Director of various companies; and formerly, Founder and Senior Advisor, Strategic Investment Group (investment management group) (2015-2017); 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). |
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Edith E. Holiday (1952) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since 1998 | | 139 | | Hess Corporation (exploration and refining of oil and gas) (1993-present), Canadian National Railway (railroad) (2001-present), White Mountains Insurance Group, Ltd. (holding company) (2004-present), Santander Consumer USA Holdings, Inc. (consumer finance) (2016-Present), RTI International Metals, Inc. (manufacture and distribution of titanium) (1999-2015) and H.J. Heinz Company (processed foods and allied products) (1994-2013). |
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Principal Occupation During at Least the Past 5 Years: |
Director or Trustee of various companies and trusts; and formerly, Assistant to the President of the United States and Secretary of the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and Assistant Secretary for Public Affairs and Public Liaison – United States Treasury Department (1988-1989). |
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J. Michael Luttig (1954) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since 2009 | | 139 | | Boeing Capital Corporation (aircraft financing) (2006-2013). |
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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). |
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FRANKLIN FUND ALLOCATOR SERIES
Independent Board Members (continued)
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Name, Year of Birth and Address | | Position | | Length of Time Served | | Number of Portfolios in Fund Complex Overseen by Board Member* | | Other Directorships Held
During at Least the Past 5 Years |
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Larry D. Thompson (1945) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since 2007 | | 139 | | The Southern Company (energy company) (2014-present; previously 2010-2012), Graham Holdings Company (education and media organization) (2011-present) and Cbeyond, Inc. (business communications provider) (2010-2012). |
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Principal Occupation During at Least the Past 5 Years: |
Director of various companies; Counsel, Finch McCranie, LLP (law firm) (2015-present); Independent Compliance Monitor and Auditor, Volkswagen AG (manufacturer of automobiles and commercial vehicles) (2017); 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). |
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John B. Wilson (1959) One Franklin Parkway San Mateo, CA 94403-1906 | | Lead Independent Trustee | | Trustee since 2006 and Lead Independent Trustee since 2008 | | 113 | | None |
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Principal Occupation During at Least the Past 5 Years: |
President and Founder, Hyannis Port Capital, Inc. (real estate and private equity investing) (2002-present); serves on private and non-profit boards; and formerly, President, Staples International and Head of Global Transformation (office supplies) (2012-2016); 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). |
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Interested Board Members and Officers
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Name, Year of Birth and Address | | Position | | Length of Time Served | | Number of Portfolios in Fund Complex Overseen by Board Member* | | Other Directorships Held During at Least the Past 5 Years |
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**Gregory E. Johnson (1961) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since 2007 | | 153 | | None |
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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 43 of the investment companies in Franklin Templeton Investments; Vice Chairman, Investment Company Institute; and formerly, President, Franklin Resources, Inc. (1994-2015). |
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**Rupert H. Johnson, Jr. (1940) One Franklin Parkway San Mateo, CA 94403-1906 | | Chairman of the Board and Trustee | | Since 2013 | | 139 | | None |
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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 41 of the investment companies in Franklin Templeton Investments. |
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Alison E. Baur (1964) One Franklin Parkway San Mateo, CA 94403-1906 | | Vice President | | Since 2012 | | Not Applicable | | Not Applicable |
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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 45 of the investment companies in Franklin Templeton Investments. |
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FRANKLIN FUND ALLOCATOR SERIES
Interested Board Members and Officers (continued)
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Name, Year of Birth and Address | | Position | | Length of Time Served | | Number of Portfolios in Fund Complex Overseen by Board Member* | | Other Directorships Held During at Least the Past 5 Years |
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Gaston Gardey (1967) One Franklin Parkway San Mateo, CA 94403-1906 | | Chief Financial Officer, Chief Accounting Officer and Treasurer | | Since 2009 | | Not Applicable | | Not Applicable |
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Principal Occupation During at Least the Past 5 Years: |
Treasurer, U.S. Fund Administration & Reporting, Franklin Templeton Investments; and officer of 28 of the investment companies in Franklin Templeton Investments. |
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Aliya S. Gordon (1973) One Franklin Parkway San Mateo, CA 94403-1906 | | Vice President | | Since 2009 | | Not Applicable | | Not Applicable |
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Principal Occupation During at Least the Past 5 Years: |
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments. |
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Steven J. Gray (1955) One Franklin Parkway San Mateo, CA 94403-1906 | | Vice President | | Since 2009 | | Not Applicable | | Not Applicable |
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Principal Occupation During at Least the Past 5 Years: |
Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc. and FASA, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments. |
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Matthew T. Hinkle (1971) One Franklin Parkway San Mateo, CA 94403-1906 | | Chief Executive Officer – Finance and Administration | | Since June 2017 | | Not Applicable | | Not Applicable |
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Principal Occupation During at Least the Past 5 Years: |
Senior Vice President, Franklin Templeton Services, LLC; officer of 45 of the investment companies in Franklin Templeton Investments; and formerly, Vice President, Global Tax (2012-April 2017) and Treasurer/Assistant Treasurer, Franklin Templeton Investments (2009-2017). |
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Edward B. Jamieson (1948) One Franklin Parkway San Mateo, CA 94403-1906 | | President and Chief Executive Officer – Investment Management | | Since 2010 | | Not Applicable | | Not Applicable |
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Principal Occupation During at Least the Past 5 Years: |
President 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. |
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Robert Lim (1948) One Franklin Parkway San Mateo, CA 94403-1906 | | Vice President –AML Compliance | | Since 2016 | | Not Applicable | | Not Applicable |
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Principal Occupation During at Least the Past 5 Years: |
Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton Investor Services, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments. |
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Kimberly H. Novotny (1972) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 | | Vice President | | Since 2013 | | Not Applicable | | Not Applicable |
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Principal Occupation During at Least the Past 5 Years: |
Associate General Counsel, Franklin Templeton Investments; Vice President and Corporate Secretary, Fiduciary Trust International of the South; Vice President, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 45 of the investment companies in Franklin Templeton Investments. |
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FRANKLIN FUND ALLOCATOR SERIES
Interested Board Members and Officers (continued)
| | | | | | | | |
Name, Year of Birth and Address | | Position | | Length of Time Served | | Number of Portfolios in Fund Complex Overseen by Board Member* | | Other Directorships Held During at Least the Past 5 Years |
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Robert C. Rosselot (1960) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 | | Chief Compliance Officer | | Since 2013 | | Not Applicable | | Not Applicable |
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Principal Occupation During at Least the Past 5 Years: |
Director, Global Compliance, Franklin Templeton Investments; Vice President, Franklin Templeton Companies, LLC; officer of 45 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). |
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Karen L. Skidmore (1952) One Franklin Parkway San Mateo, CA 94403-1906 | | Vice President and Secretary | | Since 2006 | | Not Applicable | | Not Applicable |
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Principal Occupation During at Least the Past 5 Years: |
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments. |
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Navid J. Tofigh (1972) One Franklin Parkway San Mateo, CA 94403-1906 | | Vice President | | Since 2015 | | Not Applicable | | Not Applicable |
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Principal Occupation During at Least the Past 5 Years: |
Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments. |
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Craig S. Tyle (1960) One Franklin Parkway San Mateo, CA 94403-1906 | | Vice President | | Since 2005 | | Not Applicable | | Not Applicable |
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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 45 of the investment companies in Franklin Templeton Investments. |
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Lori A. Weber (1964) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 | | Vice President | | Since 2011 | | Not Applicable | | Not Applicable |
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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 45 of the investment companies in Franklin Templeton Investments. |
|
*We base the number of portfolios on each separate series of the US registered investment companies within the Franklin Templeton Investments fund complex. These portfolios have a common investment manager or affiliated investment managers.
**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Rupert H. Johnson, Jr. is considered to be an interested person of the Fund under the federal securities laws due to his position as officer and director and major shareholder of Resources.
Note 1: Rupert H. Johnson, Jr. is the uncle of Gregory E. Johnson.
Note 2: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.
The Sarbanes-Oxley Act of 2002 and Rules adopted by the Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there is at least one such financial expert on the Audit Committee and has designated John B. Wilson as its audit committee financial expert. The Board believes that Mr. Wilson qualifies as such an expert in view of his extensive business background and experience, including service as chief financial officer of Staples, Inc. from 1992 to 1996. Mr. Wilson has been a Member and Chairman of the Fund’s Audit Committee since 2006. As a result of such background and experience, the Board believes that Mr. Wilson has acquired an understanding of generally accepted accounting principles and financial statements, the general application of such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for financial reporting and an understanding of audit committee functions. Mr. Wilson is an independent Board member as that term is defined under the relevant Securities and Exchange Commission Rules and Releases.
The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request. Shareholders may call (800) DIAL BEN/342-5236 to request the SAI.
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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 US 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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Annual Report and Shareholder Letter
Franklin Fund Allocator Series
Investment Manager
Franklin Advisers, Inc.
Distributor
Franklin Templeton Distributors, Inc.
(800) DIAL BEN® / 342-5236
franklintempleton.com
Shareholder Services
(800) 632-2301
Authorized for distribution only when accompanied or preceded by a summary prospectus and/or prospectus. Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. A prospectus contains this and other information; please read it carefully before investing.
To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.
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| © 2018 Franklin Templeton Investments. All rights reserved. | | FAS A 02/18 |
Annual Report and Shareholder Letter December 31, 2017 Franklin Fund Allocator Series Franklin Corefolio Allocation Fund Franklin Founding Funds Allocation Fund Sign up for electronic delivery at franklintempleton.com/edelivery
Franklin Templeton Investments
Gain From Our Perspective®
At Franklin Templeton Investments, we’re dedicated to one goal: delivering exceptional asset management for our clients. By bringing together multiple, world-class investment teams in a single firm, we’re able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the world’s largest asset managers. This has helped us to become a trusted partner to individual and institutional investors across the globe.
Dear Shareholder:
During the 12 months ended December 31, 2017, mostly upbeat economic data, improved corporate earnings and supportive monetary policies were positives for US securities markets. After two rate increases earlier in 2017, at its December meeting the US Federal Reserve (Fed) raised the target range for its benchmark federal funds rate 0.25% to 1.25%–1.50% amid ongoing labor market strength, rising economic activity and low inflation in the US. The Fed also announced a gradual monthly reduction in its balance sheet starting in January of 2018 as part of its ongoing plan to normalize monetary policy.
In this environment, US stocks, as measured by the Standard & Poor’s® 500 Index, ended the period with a +21.83% total return.1 Stocks in global developed markets, as measured by the MSCI World Index, returned +23.07% for the same period.1 Investment-grade bonds, as measured by the Bloomberg Barclays US Aggregate Bond Index, posted a +3.54% 12-month total return.1
We are committed to our long-term perspective and disciplined investment approach as we conduct a rigorous, fundamental analysis of securities with a regular emphasis on investment risk management.
We believe active, professional investment management serves investors well. We also recognize the important role of financial advisors in today’s markets and encourage investors to continue to seek their advice. Amid changing markets and economic conditions, we are confident investors with a
1. Source: Morningstar.
See www.franklintempletondatasources.com for additional data provider information.
well-diversified portfolio and a patient, long-term outlook should be well positioned for the years ahead.
In addition, Franklin Fund Allocator Series’ annual report includes more detail about prevailing conditions and a discussion about investment decisions during the period. Please remember all securities markets fluctuate, as do mutual fund share prices.
We thank you for investing with Franklin Templeton, welcome your questions and comments, and look forward to serving your future investment needs.
Sincerely,
Rupert H. Johnson, Jr.
Chairman
Franklin Fund Allocator Series
This letter reflects our analysis and opinions as of December 31, 2017, unless otherwise indicated. 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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| Not FDIC Insured | | | | | May Lose Value | | | | | No Bank Guarantee |
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| franklintempleton.com | | Not part of the annual report | | | 1 | |
Contents
Annual Report
Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.
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| | 2 | | | Annual Report | | franklintempleton.com |
Annual Report
Economic and Market Overview
The global economy grew moderately during the 12-month period under review. In this environment, global developed and emerging market stocks generated a +24.62% total return, as measured by the MSCI All Country World Index.1 Global markets were aided by price gains in oil and other commodities, generally upbeat economic data across regions, the European Central Bank’s (ECB’s) extension of its monetary easing program, and investor optimism about pro-growth and pro-business policies in the US. The prospect for reforms in the European Union (EU) with Emmanuel Macron’s election as France’s president, encouraging corporate earnings reports and the passage of the US tax reform bill also supported global stocks.
However, global markets reflected investor concerns about the terms of the UK’s exit from the EU, political uncertainty in the US and the EU, and geopolitical tensions in the Korean peninsula and other regions. Other concerns included the health of European banks, global oil oversupply despite a pact by major oil-producing countries to extend production cuts, and comments from key central bankers around the world about potentially raising interest rates.
After strengthening in 2017’s second and third quarters, the US economy moderated in the fourth quarter. The economy grew faster in 2017 than in 2016, however, largely due to growth in consumer spending, business investment and exports. The unemployment rate decreased from 4.7% in December 2016 to 4.1% at period-end.2 Annual inflation, as measured by the Consumer Price Index, was 2.1% in December 2016, and while it varied over the 12-month period, remained unchanged at period-end.2 The US Federal Reserve (Fed) raised its target range for the federal funds rate 0.25% three times during the period, amid signs of a growing US economy, strengthening labor market and improving business spending. At its December meeting, the Fed confirmed that the monthly balance sheet reduction would increase from US$10 billion to US$20 billion beginning in January 2018.
In Europe, the UK’s economic growth moderated in 2017 compared to 2016, largely due to slower growth in the services sector. In November, the Bank of England raised its key policy rate 0.25%, its first increase in a decade. The eurozone’s growth accelerated in 2017’s second and third quarters, but moderated in the third quarter. However, the eurozone’s 2017
economic growth rate was the fastest in a decade. The ECB kept its benchmark interest rate unchanged during the period. However, at its October meeting, the ECB extended the time frame for its massive bond-buying program from December 2017 to at least September 2018, while reducing the amount of monthly bond purchases in half beginning in January 2018.
In Asia, Japan’s quarterly gross domestic product (GDP) grew for the seventh consecutive quarter, although third-quarter 2017 growth was lower than the previous quarter. The Bank of Japan left its benchmark interest rate unchanged during the period and continued its monetary stimulus measures.
In emerging markets, Brazil’s quarterly GDP grew for the third consecutive quarter, although third-quarter 2017 growth slowed from the previous quarter. The country’s central bank cut its benchmark interest rate several times during the period to spur economic growth. Russia’s GDP grew in 2017’s first three quarters compared to the prior-year periods, amid the Bank of Russia’s continued policy support. China’s GDP grew faster in 2017 than in 2016, supported by solid growth in industrial production, services, fixed-asset investment, retail sales, and imports and exports. The People’s Bank of China left its benchmark interest rate unchanged during the period. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, rose substantially during the period.
The foregoing information reflects our analysis and opinions as of December 31, 2017. 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.
1. Source: Morningstar.
2. Source: US Bureau of Labor Statistics.
See www.franklintempletondatasources.com for additional data provider information.
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Franklin Corefolio Allocation Fund
This annual report for Franklin Corefolio Allocation Fund covers the fiscal year ended December 31, 2017.
Your Fund’s Goal and Main Investments
The Fund seeks capital appreciation through investments in a combination of Franklin Growth Fund, Franklin Growth Opportunities Fund, Franklin Mutual Shares Fund and Templeton Growth Fund.
Asset Allocation*
Based on Total Net Assets as of 12/31/17
*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 +20.07% 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 US stock performance, generated a +21.83% cumulative total return, and the MSCI World Index, which tracks equity performance in global developed markets, had a +23.07% 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 Growth Fund, Franklin Growth Opportunities Fund, Franklin Mutual Shares Fund and Templeton Growth Fund. These underlying funds, in turn, invest primarily in US 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 Growth Fund – Class R6 and Franklin Growth Opportunities 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 reinvested distributions. They do not reflect any fees, expenses or sales charges. 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 21.
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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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T. Anthony Coffey, CFA Vice President of Franklin Advisers, Inc. |
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2017, 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, 2017
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. 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.
Performance as of 12/31/17
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.75% and the minimum is 0%. Class A: 5.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
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| Share Class | | Cumulative
Total Return1 | | | Average Annual Total Return2 |
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A | | | | | | |
1-Year | | | +20.07% | | | +13.17% |
5-Year | | | +78.13% | | | +10.92% |
10-Year | | | +84.47% | | | +5.69% |
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Advisor | | | | | | |
1-Year | | | +20.40% | | | +20.40% |
5-Year | | | +80.52% | | | +12.54% |
10-Year | | | +89.63% | | | +6.61% |
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 8 for Performance Summary footnotes.
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| 6 | | Annual Report | | franklintempleton.com |
FRANKLIN COREFOLIO ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment
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 COREFOLIO ALLOCATION FUND
PERFORMANCE SUMMARY
Distributions (1/1/17–12/31/17)
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Share Class | | Net Investment
Income | | | Short-Term
Capital Gain | | | Long-Term
Capital Gain | | | Total | |
| | | | |
A | | | $0.1820 | | | | $0.0192 | | | | $0.5779 | | | | $0.7791 | |
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C | | | $0.0343 | | | | $0.0192 | | | | $0.5779 | | | | $0.6314 | |
| | | | |
R | | | $0.1347 | | | | $0.0192 | | | | $0.5779 | | | | $0.7318 | |
| | | | |
R6 (8/1/17–12/31/17) | | | $0.2469 | | | | $0.0192 | | | | $0.2292 | | | | $0.4953 | |
| | | | |
Advisor | | | $0.2333 | | | | $0.0192 | | | | $0.5779 | | | | $0.8304 | |
| | | | |
| Total Annual Operating Expenses4 | |
| |
Share Class | | | |
| |
A | | | 1.04% | |
| |
Advisor | | | 0.79% | |
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
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 may be subject to those same risks. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general conditions. Foreign investing carries additional risks such as currency and market volatility, and political or social instability; risks that are heightened in developing countries. Smaller or relatively new or unseasoned companies can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. Value securities may not increase in price as anticipated or may decline further in value. The Fund includes investments in specialized industry sectors such as the technology sector, which has been among the most volatile in the market. The Fund’s prospectus also includes a description of the main investment risks.
1. Cumulative total return represents the change in value of an investment over the periods indicated.
2. 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.
3. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total US 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.
4. Figures are as stated in the Fund’s current prospectus, including the effect of acquired fund fees and expenses, and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
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| 8 | | Annual Report | | franklintempleton.com |
FRANKLIN COREFOLIO ALLOCATION FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | |
| | | | | Actual
(actual return after expenses) | | Hypothetical
(5% annual return before expenses) | | |
| | | | | | |
Share
Class | | Beginning
Account
Value1 | | Ending
Account
Value 12/31/17 | | Expenses
Paid During
Period2,3 | | Ending
Account
Value 12/31/17 | | Expenses
Paid During
Period
7/1/17–12/31/173 | | Net
Annualized
Expense
Ratio |
| | | | | | |
A | | $1,000 | | $1,078.70 | | $2.41 | | $1,022.89 | | $2.35 | | 0.46% |
C | | $1,000 | | $1,074.70 | | $6.33 | | $1,019.11 | | $6.16 | | 1.21% |
R | | $1,000 | | $1,077.30 | | $3.72 | | $1,021.63 | | $3.62 | | 0.71% |
R6 | | $1,000 | | $1,052.80 | | $0.30 | | $1,020.67 | | $0.30 | | 0.07% |
Advisor | | $1,000 | | $1,080.10 | | $1.10 | | $1,024.15 | | $1.07 | | 0.21% |
1. For Classes A, C, R and Advisor, 7/1/17 for Actual and Hypothetical. For Class R6, 8/1/17 for Actual and 7/1/17 for Hypothetical.
2. For Classes A, C, R and Advisor, 7/1/17–12/31/17. For Class R6, 8/1/17–12/31/17.
3. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/365 to reflect the one-half year period. The multiplier is 153/365 for Actual Class R6 expenses to reflect the number of days since inception.
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| franklintempleton.com | | Annual Report | | | 9 | |
Franklin Founding Funds Allocation Fund
This annual report for Franklin Founding Funds Allocation Fund covers the fiscal year ended December 31, 2017.
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.
Asset Allocation*
Based on Total Net Assets as of 12/31/17
*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 +11.20% 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 US stock performance, generated a +21.83% total return and the MSCI World Index, which tracks equity performance in global developed markets, had a +23.07% total return.1 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 12.
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 US and foreign equity securities and, to a lesser extent, fixed income and money market securities. As market conditions affect the underlying funds, we rebalance the Fund’s allocations to maintain the predetermined equal weightings of approximately 33 1⁄3% of total net assets in each underlying fund whenever the actual allocations exceed plus or minus 3% of the fixed allocation percentages.
Portfolio Review
The Fund’s performance can be attributed largely to maintaining a relatively static allocation among domestic and foreign equities, fixed income securities, and short-term investments and other net assets, and to the actual performance of the selected underlying funds.
During the period under review, Franklin Income Fund –Class R6 and Franklin Mutual Shares Fund – Class R6 underperformed the S&P 500. Templeton Growth Fund –Class R6 underperformed the MSCI World Index.
1. Source: Morningstar.
The indexes are unmanaged and include reinvested distributions. They do not reflect any fees, expenses or sales charges. 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 27.
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| 10 | | Annual Report | | franklintempleton.com |
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.
| | |
| |
T. Anthony Coffey, CFA Vice President of Franklin Advisers, Inc. |
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2017, 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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| | | |
| franklintempleton.com | | Annual Report | | | 11 | |
FRANKLIN FOUNDING FUNDS ALLOCATION FUND
Performance Summary as of December 31, 2017
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. 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.
Performance as of 12/31/17
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.75% and the minimum is 0%. Class A: 5.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| | | | | | | | |
| Share Class | | Cumulative
Total Return1 | | | Average Annual
Total Return2 | |
| | |
A | | | | | | | | |
1-Year | | | +11.20% | | | | +4.82% | |
5-Year | | | +50.71% | | | | +7.27% | |
10-Year | | | +55.92% | | | | +3.93% | |
| | |
Advisor | | | | | | | | |
1-Year | | | +11.58% | | | | +11.58% | |
5-Year | | | +52.66% | | | | +8.83% | |
10-Year | | | +60.05% | | | | +4.82% | |
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 14 for Performance Summary footnotes.
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| | | |
| 12 | | Annual Report | | franklintempleton.com |
FRANKLIN FOUNDING FUNDS ALLOCATION FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment
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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| | | |
| franklintempleton.com | | Annual Report | | | 13 | |
FRANKLIN FOUNDING FUNDS ALLOCATION FUND
PERFORMANCE SUMMARY
Distributions (1/1/17–12/31/17)
| | | | | | | | |
| Share Class | | | | | Net Investment
Income | |
| | |
A | | | | | | | $0.4284 | |
| | |
C | | | | | | | $0.3167 | |
| | |
R | | | | | | | $0.3802 | |
| | |
R6 (8/1/17–12/31/17) | | | | | | | $0.2003 | |
| | |
Advisor | | | | | | | $0.4662 | |
| | |
| Total Annual Operating Expenses4 |
| |
| Share Class | | |
| |
A | | 1.00% |
| |
Advisor | | 0.75% |
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
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.
1. Cumulative total return represents the change in value of an investment over the periods indicated.
2. 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.
3. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total US 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.
4. Figures are as stated in the Fund’s current prospectus, including the effect of acquired fund fees and expenses, and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
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| 14 | | Annual Report | | franklintempleton.com |
FRANKLIN FOUNDING FUNDS ALLOCATION FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | | | |
| | | | | | | Actual
(actual return after expenses) | | Hypothetical
(5% annual return before expenses) | | |
| | | | | | | |
Share
Class | | | | Beginning
Account
Value1 | | Ending
Account
Value 12/31/17 | | Expenses
Paid During
Period2,3 | | Ending
Account
Value 12/31/17 | | Expenses
Paid During
Period
7/1/17–12/31/173 | | Net
Annualized
Expense
Ratio |
| | | | | | |
A | | | | $1,000 | | $1,043.80 | | $2.16 | | $1,023.09 | | $2.14 | | 0.42% |
C | | | | $1,000 | | $1,040.90 | | $6.02 | | $1,019.31 | | $5.96 | | 1.17% |
R | | | | $1,000 | | $1,042.80 | | $3.45 | | $1,021.83 | | $3.41 | | 0.67% |
R6 | | | | $1,000 | | $1,000.60 | | $0.25 | | $1,020.71 | | $0.25 | | 0.06% |
Advisor | | | | $1,000 | | $1,045.70 | | $0.88 | | $1,024.35 | | $0.87 | | 0.17% |
1. For Classes A, C, R and Advisor, 7/1/17 for Actual and Hypothetical. For Class R6, 8/1/17 for Actual and 7/1/17 for Hypothetical.
2. For Classes A, C, R and Advisor, 7/1/17–12/31/17. For Class R6, 8/1/17–12/31/17.
3. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/365 to reflect the one-half year period. The multiplier is 153/365 for Actual Class R6 expenses to reflect the number of days since inception.
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| | | |
| franklintempleton.com | | Annual Report | | | 15 | |
FRANKLIN FUND ALLOCATOR SERIES
Financial Highlights
Franklin Corefolio Allocation Fund
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| |
| | | | | |
| Class A | | | | | | | | | | | | | | | |
| Per share operating performance | | | | | | | | | | | | | | | | | | | | |
| (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $17.06 | | | | $16.80 | | | | $18.00 | | | | $17.61 | | | | $13.57 | |
| | | | |
| | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.17 | | | | 0.14 | | | | 0.14 | | | | 0.23 | | | | 0.11 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 3.23 | | | | 1.07 | | | | (0.32 | ) | | | 0.91 | | | | 4.09 | |
| | | | |
| | | | | |
Total from investment operations | | | 3.40 | | | | 1.21 | | | | (0.18) | | | | 1.14 | | | | 4.20 | |
| | | | |
| | | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Underlying Funds | | | (0.18) | | | | (0.17) | | | | (0.16) | | | | (0.29) | | | | (0.16) | |
| | | | | |
Net realized gains | | | (0.60) | | | | (0.78) | | | | (0.86) | | | | (0.46) | | | | — | |
| | | | |
| | | | | |
Total distributions | | | (0.78 | ) | | | (0.95 | ) | | | (1.02 | ) | | | (0.75 | ) | | | (0.16) | |
| | | | |
| | | | | |
Net asset value, end of year | | | $19.68 | | | | $17.06 | | | | $16.80 | | | | $18.00 | | | | $17.61 | |
| | | | |
| | | | | |
Total returnd | | | 20.07% | | | | 7.64% | | | | (1.20)% | | | | 6.48% | | | | 31.01% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expensese | | | 0.47%f | | | | 0.45%f | | | | 0.47%f | | | | 0.48%f | | | | 0.44% | |
| | | | | |
Net investment incomec | | | 0.90% | | | | 0.83% | | | | 0.80% | | | | 1.27% | | | | 0.68% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $579,707 | | | | $507,530 | | | | $523,540 | | | | $558,862 | | | | $558,124 | |
| | | | | |
Portfolio turnover rate | | | 0.71% | | | | 0.40% | | | | 0.53% | | | | 5.77% | | | | 5.90% | |
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, 2017.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
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| | | |
| 16 | | 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, | |
| | | | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| |
| Class C | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $16.85 | | | | $16.61 | | | | $17.81 | | | | $17.44 | | | | $13.45 | |
| | | | |
| | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income (loss)b,c | | | 0.02 | | | | 0.01 | | | | 0.02 | | | | 0.10 | | | | (—) | d |
| | | | | |
Net realized and unrealized gains (losses) | | | 3.19 | | | | 1.05 | | | | (0.33) | | | | 0.89 | | | | 4.04 | |
| | | | |
| | | | | |
| Total from investment operations | | | 3.21 | | | | 1.06 | | | | (0.31) | | | | 0.99 | | | | 4.04 | |
| | | | |
| | | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Underlying Funds | | | (0.03) | | | | (0.04) | | | | (0.03) | | | | (0.16) | | | | (0.05) | |
| | | | | |
Net realized gains | | | (0.60) | | | | (0.78) | | | | (0.86) | | | | (0.46) | | | | — | |
| | | | |
| | | | | |
Total distributions | | | (0.63) | | | | (0.82) | | | | (0.89) | | | | (0.62) | | | | (0.05) | |
| | | | |
| | | | | |
Net asset value, end of year | | | $19.43 | | | | $16.85 | | | | $16.61 | | | | $17.81 | | | | $17.44 | |
| | | | |
| | | | | |
Total returne | | | 19.20% | | | | 6.82% | | | | (1.92)% | | | | 5.69% | | | | 30.09% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expensesf | | | 1.22%g | | | | 1.20%g | | | | 1.19%g | | | | 1.19%g | | | | 1.15% | |
| | | | | |
Net investment income (loss)c | | | 0.15% | | | | 0.08% | | | | 0.08% | | | | 0.56% | | | | (0.03)% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $170,218 | | | | $160,729 | | | | $172,116 | | | | $176,680 | | | | $176,332 | |
| | | | | |
Portfolio turnover rate | | | 0.71% | | | | 0.40% | | | | 0.53% | | | | 5.77% | | | | 5.90% | |
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, 2017.
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�� | | | 17 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin Corefolio Allocation Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | | | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| |
| Class R | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $17.06 | | | | $16.81 | | | | $18.01 | | | | $17.60 | | | | $13.56 | |
| | | | |
| | | | | |
Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.12 | | | | 0.10 | | | | 0.10 | | | | 0.16 | | | | 0.06 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 3.23 | | | | 1.06 | | | | (0.32) | | | | 0.95 | | | | 4.11 | |
| | | | |
| | | | | |
Total from investment operations | | | 3.35 | | | | 1.16 | | | | (0.22) | | | | 1.11 | | | | 4.17 | |
| | | | |
| | | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Underlying Funds | | | (0.13) | | | | (0.13) | | | | (0.12) | | | | (0.24) | | | | (0.13) | |
| | | | | |
Net realized gains | | | (0.60) | | | | (0.78) | | | | (0.86) | | | | (0.46) | | | | — | |
| | | | |
| | | | | |
Total distributions | | | (0.73) | | | | (0.91) | | | | (0.98) | | | | (0.70) | | | | (0.13) | |
| | | | |
| | | | | |
Net asset value, end of year | | | $19.68 | | | | $17.06 | | | | $16.81 | | | | $18.01 | | | | $17.60 | |
| | | | |
| | | | | |
Total return | | | 19.79% | | | | 7.33% | | | | (1.43)% | | | | 6.30% | | | | 30.76% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expensesd | | | 0.72% | e | | | 0.70% | e | | | 0.69% | e | | | 0.69% | e | | | 0.65% | |
| | | | | |
Net investment incomec | | | 0.65% | | | | 0.58% | | | | 0.58% | | | | 1.06% | | | | 0.47% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $1,629 | | | | $1,461 | | | | $1,423 | | | | $1,545 | | | | $1,903 | |
| | | | | |
Portfolio turnover rate | | | 0.71% | | | | 0.40% | | | | 0.53% | | | | 5.77% | | | | 5.90% | |
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, 2017.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| | | | |
| | | |
| 18 | | 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,
2017a | |
| |
| |
Class R6 | | | | |
| |
| Per share operating performance | | | | |
(for a share outstanding throughout the year) | | | | |
| |
Net asset value, beginning of year | | | $19.18 | |
| | | | |
| |
| Income from investment operationsb: | | | | |
| |
Net investment incomec,d | | | 0.26 | |
| |
Net realized and unrealized gains (losses) | | | 0.73 | |
| | | | |
| |
Total from investment operations | | | 0.99 | |
| | | | |
| |
Less distributions from: | | | | |
| |
Net investment income | | | (0.25) | |
| |
Net realized gains | | | (0.25) | |
| | | | |
| |
Total distributions | | | (0.50) | |
| | | | |
| |
Net asset value, end of year | | | $19.67 | |
| | | | |
| |
Total returne | | | 5.28% | |
| |
| Ratios to average net assetsf | | | | |
| |
Expenses before waiver and payments by affiliatesg | | | 3.47% | |
| |
Expenses net of waiver and payments by affiliatesg | | | 0.08% | |
| |
Net investment incomed | | | 1.29% | |
| |
| Supplemental data | | | | |
| |
Net assets, end of year (000’s) | | | $5 | |
| |
Portfolio turnover rate | | | 0.71% | |
aFor the period August 1, 2017 (effective date) to December 31, 2017.
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 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 in which the Fund invests. The weighted average indirect expenses of the Underlying Funds was 0.58% for the year ended December 31, 2017.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 19 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin Corefolio Allocation Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | | | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| |
| | | | | |
| Advisor Class | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $17.08 | | | | $16.82 | | | | $18.03 | | | | $17.64 | | | | $13.59 | |
| | | | |
| | | | | |
Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.25 | | | | 0.21 | | | | 0.21 | | | | 0.32 | | | | 0.18 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 3.21 | | | | 1.04 | | | | (0.35) | | | | 0.88 | | | | 4.08 | |
| | | | |
| | | | | |
Total from investment operations | | | 3.46 | | | | 1.25 | | | | (0.14) | | | | 1.20 | | | | 4.26 | |
| | | | |
| | | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds | | | (0.23) | | | | (0.21) | | | | (0.21) | | | | (0.35) | | | | (0.21) | |
| | | | | |
Net realized gains | | | (0.60) | | | | (0.78) | | | | (0.86) | | | | (0.46) | | | | — | |
| | | | |
| | | | | |
Total distributions | | | (0.83) | | | | (0.99) | | | | (1.07) | | | | (0.81) | | | | (0.21) | |
| | | | |
| | | | | |
Net asset value, end of year | | | $19.71 | | | | $17.08 | | | | $16.82 | | | | $18.03 | | | | $17.64 | |
| | | | |
| | | | | |
Total return | | | 20.40% | | | | 7.90% | | | | (0.96)% | | | | 6.79% | | | | 31.38% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expensesd | | | 0.22%e | | | | 0.20%e | | | | 0.19%e | | | | 0.19%e | | | | 0.15% | |
| | | | | |
Net investment incomec | | | 1.15% | | | | 1.08% | | | | 1.08% | | | | 1.56% | | | | 0.97% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $33,607 | | | | $22,721 | | | | $19,396 | | | | $18,918 | | | | $15,495 | |
| | | | | |
Portfolio turnover rate | | | 0.71% | | | | 0.40% | | | | 0.53% | | | | 5.77% | | | | 5.90% | |
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, 2017.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| | | | |
| | | |
| 20 | | Annual Report | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2017
Franklin Corefolio Allocation Fund
| | | | | | | | | | |
| | | | | Shares | | | | Value | |
| |
| | Investments in Underlying Funds 100.1% | | | | | | | | |
| | Domestic Equity 75.0% | | | | | | | | |
| a | | Franklin Growth Fund, Class R6 | | | 2,103,909 | | | $ | 198,903,592 | |
| a,b | | Franklin Growth Opportunities Fund, Class R6 | | | 5,018,837 | | | | 196,888,988 | |
| a | | Franklin Mutual Shares Fund, Class R6 | | | 6,736,303 | | | | 192,725,624 | |
| | | | | | | | | | |
| | | | | | | | 588,518,204 | |
| | | | | | | | | | |
| | Foreign Equity 25.1% | | | | | | | | |
| a | | Templeton Growth Fund Inc., Class R6 | | | 7,249,681 | | | | 197,336,318 | |
| | | | | | | | | | |
| | Total Investments in Underlying Funds | | | | | | | | |
| | before Short Term Investments (Cost $531,548,661) | | | | | | | 785,854,522 | |
| | | | | | | | | | |
| | | |
| | Short Term Investments (Cost $79) 0.0%† | | | | | | | | |
| | Money Market Funds 0.0%† | | | | | | | | |
| a,c | | Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 79 | | | | 79 | |
| | | | | | | | | | |
| | Total Investments in Underlying Funds (Cost $531,548,740) 100.1% | | | | | | | 785,854,601 | |
| | Other Assets, less Liabilities (0.1)% | | | | | | | (688,257 | ) |
| | | | | | | | | | |
| | Net Assets 100.0% | | | | | | $ | 785,166,344 | |
| | | | | | | | | | |
†Rounds to less than 0.1% of net assets.
aSee Note 3(e) regarding investments in Underlying Funds.
bNon-income producing.
cThe rate shown is the annualized seven-day yield at period end.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 21 | |
FRANKLIN FUND ALLOCATOR SERIES
Financial Highlights
Franklin Founding Funds Allocation Fund
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| |
| | | | | |
| Class A | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $13.47 | | | | $12.14 | | | | $13.31 | | | | $13.37 | | | | $11.14 | |
| | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
Net investment incomeb,c | | | 0.40 | | | | 0.36 | | | | 0.35 | | | | 0.46 | | | | 0.32 | |
Net realized and unrealized gains (losses) | | | 1.10 | | | | 1.26 | | | | (1.16 | ) | | | (0.06 | ) | | | 2.29 | |
| | | | |
| | | | | |
Total from investment operations | | | 1.50 | | | | 1.62 | | | | (0.81 | ) | | | 0.40 | | | | 2.61 | |
| | | | |
| | | | | |
Less distributions from net investment income | | | (0.43 | ) | | | (0.29 | ) | | | (0.36 | ) | | | (0.46 | ) | | | (0.38) | |
| | | | |
| | | | | |
Net asset value, end of year | | | $14.54 | | | | $13.47 | | | | $12.14 | | | | $13.31 | | | | $13.37 | |
| | | | |
| | | | | |
Total returnd | | | 11.20% | | | | 13.52% | | | | (6.18)% | | | | 2.92% | | | | 23.64% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expensese | | | 0.43%f | | | | 0.42%f | | | | 0.41%f | | | | 0.41%f | | | | 0.39% | |
| | | | | |
Net investment incomec | | | 2.81% | | | | 2.87% | | | | 2.65% | | | | 3.35% | | | | 2.63% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $3,300,005 | | | | $3,310,397 | | | | $3,346,192 | | | | $3,958,706 | | | | $4,170,045 | |
| | | | | |
Portfolio turnover rate | | | 0.48% | | | | 0.06% | | | | —% | | | | 3.79% | | | | 3.04% | |
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, 2017.
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 Founding Funds Allocation Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| |
| | | | | |
| Class C | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $13.27 | | | | $11.96 | | | | $13.11 | | | | $13.18 | | | | $10.99 | |
| | | | |
| | | | | |
Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.28 | | | | 0.26 | | | | 0.25 | | | | 0.35 | | | | 0.23 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.10 | | | | 1.25 | | | | (1.14 | ) | | | (0.07) | | | | 2.25 | |
| | | | |
| | | | | |
Total from investment operations | | | 1.38 | | | | 1.51 | | | | (0.89) | | | | 0.28 | | | | 2.48 | |
| | | | |
| | | | | |
Less distributions from net investment income | | | (0.32) | | | | (0.20) | | | | (0.26) | | | | (0.35) | | | | (0.29) | |
| | | | |
| | | | | |
Net asset value, end of year | | | $14.33 | | | | $13.27 | | | | $11.96 | | | | $13.11 | | | | $13.18 | |
| | | | |
| | | | | |
Total returnd | | | 10.43% | | | | 12.71% | | | | (6.85)% | | | | 2.12% | | | | 22.69% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expensese | | | 1.18%f | | | | 1.17%f | | | | 1.16%f | | | | 1.16%f | | | | 1.14% | |
| | | | | |
Net investment incomec | | | 2.06% | | | | 2.12% | | | | 1.90% | | | | 2.60% | | | | 1.88% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $1,261,997 | | | | $1,402,623 | | | | $1,458,281 | | | | $1,745,766 | | | | $1,829,111 | |
| | | | | |
Portfolio turnover rate | | | 0.48% | | | | 0.06% | | | | —% | | | | 3.79% | | | | 3.04% | |
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, 2017.
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 | | | 23 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin Founding Funds Allocation Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | | |
| | | | | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| |
Class R | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $13.49 | | | | $12.16 | | | | $13.33 | | | | $13.39 | | | | $11.16 | |
| | | | |
| | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.34 | | | | 0.33 | | | | 0.32 | | | | 0.44 | | | | 0.29 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.13 | | | | 1.26 | | | | (1.16 | ) | | | (0.08) | | | | 2.29 | |
| | | | |
| | | | | |
Total from investment operations | | | 1.47 | | | | 1.59 | | | | (0.84) | | | | 0.36 | | | | 2.58 | |
| | | | |
| | | | | |
Less distributions from net investment income | | | (0.38 | ) | | | (0.26 | ) | | | (0.33 | ) | | | (0.42 | ) | | | (0.35) | |
| | | | |
| | | | | |
Net asset value, end of year | | | $14.58 | | | | $13.49 | | | | $12.16 | | | | $13.33 | | | | $13.39 | |
| | | | |
| | | | | |
Total return | | | 10.97% | | | | 13.22% | | | | (6.40)% | | | | 2.68% | | | | 23.28% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expensesd | | | 0.68%e | | | | 0.67%e | | | | 0.66%e | | | | 0.66%e | | | | 0.64% | |
| | | | | |
Net investment incomec | | | 2.56% | | | | 2.62% | | | | 2.40% | | | | 3.10% | | | | 2.38% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $7,843 | | | | $10,776 | | | | $10,724 | | | | $11,619 | | | | $10,597 | |
| | | | | |
Portfolio turnover rate | | | 0.48% | | | | 0.06% | | | | —% | | | | 3.79% | | | | 3.04% | |
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, 2017.
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 Founding Funds Allocation Fund (continued)
| | | | |
| | |
| Year Ended
December 31,
2017a |
|
| |
| Class R6 | | | | |
| |
Per share operating performance (for a share outstanding throughout the year) | | | | |
| |
Net asset value, beginning of year | | | $14.46 | |
| | | | |
| |
| Income from investment operationsb: | | | | |
| |
Net investment incomec,d | | | 0.30 | |
| |
Net realized and unrealized gains (losses) | | | 0.06 | |
| | | | |
| |
Total from investment operations | | | 0.36 | |
| | | | |
| |
Less distributions from net investment income | | | (0.20) | |
| | | | |
| |
Net asset value, end of year | | | $14.62 | |
| | | | |
| |
Total returne | | | 2.56% | |
| |
| Ratios to average net assetsf | | | | |
| |
Expenses before waiver and payments by affiliatesg | | | 4.28% | |
| |
Expenses net of waiver and payments by affiliatesg | | | 0.06% | |
| |
Net investment incomed | | | 3.18% | |
| |
| Supplemental data | | | | |
| |
Net assets, end of year (000’s) | | | $5 | |
| |
Portfolio turnover rate | | | 0.48% | |
aFor the period August 1, 2017 (effective date) to December 31, 2017.
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 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 in which the Fund invests. The weighted average indirect expenses of the Underlying Funds was 0.58% for the year ended December 31, 2017.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 25 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin Founding Funds Allocation Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | | |
| | | 2017 | | | | 2016 | | | | 2015 | | | | 2014 | | | | 2013 | |
| |
| | | | | |
| Advisor Class | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $13.54 | | | | $12.20 | | | | $13.38 | | | | $13.44 | | | | $11.20 | |
| | | | |
| | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.46 | | | | 0.40 | | | | 0.39 | | | | 0.53 | | | | 0.39 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.10 | | | | 1.26 | | | | (1.18 | ) | | | (0.10) | | | | 2.26 | |
| | | | |
| | | | | |
Total from investment operations | | | 1.56 | | | | 1.66 | | | | (0.79) | | | | 0.43 | | | | 2.65 | |
| | | | |
| | | | | |
Less distributions from net investment income | | | (0.47 | ) | | | (0.32 | ) | | | (0.39 | ) | | | (0.49 | ) | | | (0.41) | |
| | | | |
| | | | | |
Net asset value, end of year | | | $14.63 | | | | $13.54 | | | | $12.20 | | | | $13.38 | | | | $13.44 | |
| | | | |
| | | | | |
Total return | | | 11.58% | | | | 13.82% | | | | (5.98)% | | | | 3.17% | | | | 23.93% | |
| | | | | |
Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expensesd | | | 0.18%e | | | | 0.17%e | | | | 0.16%e | | | | 0.16%e | | | | 0.14% | |
| | | | | |
| Net investment incomec | | | 3.06% | | | | 3.12% | | | | 2.90% | | | | 3.60% | | | | 2.88% | |
| | | | | |
Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $174,219 | | | | $131,368 | | | | $123,966 | | | | $141,932 | | | | $114,369 | |
| | | | | |
Portfolio turnover rate | | | 0.48% | | | | 0.06% | | | | —% | | | | 3.79% | | | | 3.04% | |
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, 2017.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| | | | |
| | | |
| 26 | | Annual Report | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2017
Franklin Founding Funds Allocation Fund
| | | | | | | | | | |
| | | | | Shares | | | Value | |
| | | |
| | Investments in Underlying Funds 100.1% | | | | | | | | |
| | Domestic Equity 33.4% | | | | | | | | |
| | | |
a | | Franklin Mutual Shares Fund, Class R6 | | | 55,351,664 | | | $ | 1,583,611,110 | |
| | | | | | | | | | |
| | | |
| | Domestic Hybrid 33.3% | | | | | | | | |
| | | |
a | | Franklin Income Fund, Class R6 | | | 670,219,817 | | | | 1,581,718,767 | |
| | | | | | | | | | |
| | Foreign Equity 33.4% | | | | | | | | |
| | | |
a | | Templeton Growth Fund Inc., Class R6 | | | 58,210,549 | | | | 1,584,491,152 | |
| | | | | | | | | | |
| | Total Investments in Underlying Funds before Short Term Investments (Cost $4,365,378,349) | | | | | | | 4,749,821,029 | |
| | | | | | | | | | |
| | | |
| | Short Term Investments (Cost $760) 0.0%† | | | | | | | | |
| | Money Market Funds 0.0%† | | | | | | | | |
| | | |
a,b | | Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 760 | | | | 760 | |
| | | | | | | | | | |
| | | |
| | Total Investments in Underlying Funds (Cost $4,365,379,109) 100.1% | | | | | | | 4,749,821,789 | |
| | Other Assets, less Liabilities (0.1)% | | | | | | | (5,752,218 | ) |
| | | | | | | | | | |
| | Net Assets 100.0% | | | | | | $ | 4,744,069,571 | |
| | | | | | | | | | |
| †Rounds | to less than 0.1% of net assets. |
| aSee Note | 3(e) regarding investments in Underlying Funds. |
| bThe rate | shown is the annualized seven-day yield at period end. |
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 27 | |
FRANKLIN FUND ALLOCATOR SERIES
Financial Statements
Statements of Assets and Liabilities
December 31, 2017
| | | | | | | | |
| | | Franklin
Corefolio
Allocation
Fund | | | Franklin
Founding Funds
Allocation Fund | |
| | |
Assets: | | | | | | | | |
Investments in securities: | | | | | | | | |
Cost - Non-controlled affiliates (Note 3e) | | | $531,548,740 | | | | $4,365,379,109 | |
| | | | |
| | |
Value - Non-controlled affiliates (Note 3e) | | | $785,854,601 | | | | $4,749,821,789 | |
Cash | | | 167,674 | | | | 3,379,455 | |
Receivables: | | | | | | | | |
Capital shares sold | | | 616,668 | | | | 2,528,815 | |
Other assets | | | 83 | | | | 567 | |
| | | | |
| | |
Total assets | | | 786,639,026 | | | | 4,755,730,626 | |
| | | | |
| | |
Liabilities: | | | | | | | | |
Payables: | | | | | | | | |
Capital shares redeemed | | | 454,841 | | | | 6,125,746 | |
Administrative fees | | | 19,895 | | | | 120,547 | |
Distribution fees | | | 524,143 | | | | 3,467,038 | |
Transfer agent fees | | | 425,339 | | | | 1,734,286 | |
Accrued expenses and other liabilities | | | 48,464 | | | | 213,438 | |
| | | | |
| | |
Total liabilities | | | 1,472,682 | | | | 11,661,055 | |
| | | | |
| | |
Net assets, at value | | | $785,166,344 | | | | $4,744,069,571 | |
| | | | |
| | |
Net assets consist of: | | | | | | | | |
Paid-in capital | | | $509,792,982 | | | | $4,803,073,661 | |
Undistributed net investment income | | | 482,410 | | | | 50,704,599 | |
Net unrealized appreciation (depreciation) | | | 254,305,861 | | | | 384,442,680 | |
Accumulated net realized gain (loss) | | | 20,585,091 | | | | (494,151,369 | ) |
| | | | |
| | |
Net assets, at value | | | $785,166,344 | | | | $4,744,069,571 | |
| | | | |
| | |
| Class A: | | | | | | | | |
Net assets, at value | | | $579,707,169 | | | | $3,300,005,164 | |
| | | | |
Shares outstanding | | | 29,459,648 | | | | 226,891,491 | |
| | | | |
Net asset value per sharea | | | $19.68 | | | | $14.54 | |
| | | | |
Maximum offering price per share (net asset value per share ÷ 94.25%) | | | $20.88 | | | | $15.43 | |
| | | | |
| Class C: | | | | | | | | |
Net assets, at value | | | $170,218,121 | | | | $1,261,997,296 | |
| | | | |
Shares outstanding | | | 8,761,001 | | | | 88,087,017 | |
| | | | |
Net asset value and maximum offering price per sharea | | | $19.43 | | | | $14.33 | |
| | | | |
| Class R: | | | | | | | | |
Net assets, at value | | | $ 1,629,279 | | | | $ 7,842,631 | |
| �� | | | |
Shares outstanding | | | 82,787 | | | | 537,897 | |
| | | | |
Net asset value and maximum offering price per share | | | $19.68 | | | | $14.58 | |
| | | | |
| Class R6: | | | | | | | | |
Net assets, at value | | | $ 5,135 | | | | $ 5,060 | |
| | | | |
Shares outstanding | | | 261 | | | | 346 | |
| | | | |
Net asset value and maximum offering price per shareb | | | $ 19.67 | | | | $ 14.62 | |
| | | | |
| Advisor Class: | | | | | | | | |
Net assets, at value | | | $ 33,606,640 | | | | $ 174,219,420 | |
| | | | |
Shares outstanding | | | 1,704,985 | | | | 11,910,541 | |
| | | | |
Net asset value and maximum offering price per share | | | $19.71 | | | | $14.63 | |
| | | | |
| aRedemption | price is equal to net asset value less contingent deferred sales charges, if applicable. |
| bNet | asset value and maximum offering price may not recalculate due to rounding of net assets and/or shares outstanding. |
| | | | |
| | | |
| 28 | | 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, 2017
| | | | | | | | |
| | | Franklin
Corefolio
Allocation Fund | | | Franklin
Founding Funds
Allocation Fund | |
| | |
Investment income: | | | | | | | | |
Dividends: | | | | | | | | |
Non-controlled affiliates (Note 3e) | | | $ 10,253,329 | | | | $156,719,072 | |
| | | | |
| | |
Expenses: | | | | | | | | |
Administrative fees (Note 3a) | | | 224,454 | | | | 1,449,300 | |
Distribution fees: (Note 3b) | | | | | | | | |
Class A | | | 1,375,575 | | | | 8,315,322 | |
Class C | | | 1,681,398 | | | | 13,338,219 | |
Class R | | | 7,713 | | | | 45,796 | |
Transfer agent fees: (Note 3d) | | | | | | | | |
Class A | | | 870,055 | | | | 4,555,191 | |
Class C | | | 265,877 | | | | 1,830,388 | |
Class R | | | 2,439 | | | | 12,547 | |
Class R6 | | | 73 | | | | 88 | |
Advisor Class | | | 44,976 | | | | 216,890 | |
Reports to shareholders | | | 54,388 | | | | 366,673 | |
Registration and filing fees | | | 100,003 | | | | 151,149 | |
Professional fees | | | 36,928 | | | | 76,002 | |
Trustees’ fees and expenses | | | 5,076 | | | | 33,789 | |
Other | | | 14,677 | | | | 52,474 | |
| | | | |
| | |
Total expenses | | | 4,683,632 | | | | 30,443,828 | |
Expenses waived/paid by affiliates (Note 3e and 3f) | | | (258 | ) | | | (3,003 | ) |
| | | | |
| | |
Net expenses | | | 4,683,374 | | | | 30,440,825 | |
| | | | |
| | |
Net investment income | | | 5,569,955 | | | | 126,278,247 | |
| | | | |
| | |
Realized and unrealized gains (losses): | | | | | | | | |
Net realized gain (loss) from: | | | | | | | | |
Sale of investments: | | | | | | | | |
Non-controlled affiliates (Note 3e) | | | 8,776,622 | | | | 72,370,637 | |
Capital gain distributions from Underlying Funds: | | | | | | | | |
Non-controlled affiliates (Note 3e) | | | 27,522,831 | | | | 68,403,604 | |
| | | | |
| | |
Net realized gain (loss) | | | 36,299,453 | | | | 140,774,241 | |
| | | | |
| | |
Net change in unrealized appreciation (depreciation) on: | | | | | | | | |
Investments: | | | | | | | | |
Non-controlled affiliates (Note 3e) | | | 92,487,360 | | | | 239,603,757 | |
| | | | |
| | |
Net realized and unrealized gain (loss) | | | 128,786,813 | | | | 380,377,998 | |
| | | | |
| | |
Net increase (decrease) in net assets resulting from operations | | | $134,356,768 | | | | $506,656,245 | |
| | | | |
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 29 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
| | | | | | | | | | | | | | | | |
| | | Franklin Corefolio Allocation Fund | | | Franklin Founding Funds Allocation Fund | |
| | | | |
| | | Year Ended December 31, | | | Year Ended December 31, | |
| | | | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | | |
Increase (decrease) in net assets: | | | | | | | | | | | | | | | | |
Operations: | | | | | | | | | | | | | | | | |
Net investment income | | $ | 5,569,955 | | | $ | 4,464,050 | | | $ | 126,278,247 | | | $ | 126,567,176 | |
Net realized gain (loss) | | | 36,299,453 | | | | 23,319,424 | | | | 140,774,241 | | | | 95,973,585 | |
Net change in unrealized appreciation (depreciation) | | | 92,487,360 | | | | 20,074,183 | | | | 239,603,757 | | | | 368,692,349 | |
| | | | |
Net increase (decrease) in net assets resulting from operations | | | 134,356,768 | | | | 47,857,657 | | | | 506,656,245 | | | | 591,233,110 | |
| | | | |
| | | | |
Distributions to shareholders from: | | | | | | | | | | | | | | | | |
Net investment income and short term gains received from | | | | | | | | | | | | | | | | |
Underlying Funds: | | | | | | | | | | | | | | | | |
Class A | | | (5,257,240 | ) | | | (4,860,981 | ) | | | (98,666,117 | ) | | | (73,164,442 | ) |
Class C | | | (301,168 | ) | | | (353,650 | ) | | | (29,019,210 | ) | | | (21,414,705 | ) |
Class R | | | (10,966 | ) | | | (10,552 | ) | | | (216,032 | ) | | | (214,299 | ) |
Class R6 | | | (64 | ) | | | — | | | | (69 | ) | | | — | |
Advisor Class | | | (387,654 | ) | | | (273,325 | ) | | | (5,346,121 | ) | | | (3,114,421 | ) |
Net realized gains: | | | | | | | | | | | | | | | | |
Class A | | | (17,289,079 | ) | | | (23,135,786 | ) | | | — | | | | — | |
Class C | | | (5,280,861 | ) | | | (7,634,487 | ) | | | — | | | | — | |
Class R | | | (49,108 | ) | | | (68,108 | ) | | | — | | | | — | |
Class R6 | | | (65 | ) | | | — | | | | — | | | | — | |
Advisor Class | | | (922,908 | ) | | | (918,626 | ) | | | — | | | | — | |
| | | | |
| | | | |
Total distributions to shareholders | | | (29,499,113 | ) | | | (37,255,515 | ) | | | (133,247,549 | ) | | | (97,907,867 | ) |
| | | | |
| | | | |
Capital share transactions: (Note 2) | | | | | | | | | | | | | | | | |
Class A | | | (4,837,099 | ) | | | (23,919,590 | ) | | | (266,326,868 | ) | | | (372,282,081 | ) |
Class C | | | (14,328,351 | ) | | | (13,720,355 | ) | | | (245,847,581 | ) | | | (198,606,550 | ) |
Class R | | | (47,258 | ) | | | 10,564 | | | | (3,696,768 | ) | | | (1,069,039 | ) |
Class R6 | | | 5,000 | | | | — | | | | 5,000 | | | | — | |
Advisor Class | | | 7,075,931 | | | | 2,992,796 | | | | 31,363,501 | | | | (5,366,638 | ) |
| | | | |
| | | | |
Total capital share transactions | | | (12,131,777 | ) | | | (34,636,585 | ) | | | (484,502,716 | ) | | | (577,324,308 | ) |
| | | | |
| | | | |
Net increase (decrease) in net assets | | | 92,725,878 | | | | (24,034,443 | ) | | | (111,094,020 | ) | | | (83,999,065 | ) |
Net assets: | | | | | | | | | | | | | | | | |
Beginning of year | | | 692,440,466 | | | | 716,474,909 | | | | 4,855,163,591 | | | | 4,939,162,656 | |
| | | | |
| | | | |
End of year | | | $785,166,344 | | | | $692,440,466 | | | | $4,744,069,571 | | | | $4,855,163,591 | |
| | | | |
| | | | |
Undistributed net investment income included in net assets:
End of year | | $ | 482,410 | | | $ | 497,334 | | | $ | 50,704,599 | | | $ | 54,471,274 | |
| | | | |
| | | | |
| | | |
| 30 | | 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-three 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 Funds invest in affiliated mutual funds managed by Franklin Templeton (Underlying Funds). The Funds offer five classes of shares: Class A, Class C, Class R, Class R6 and Advisor Class. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees due to differing arrangements for distribution and transfer agent fees. Effective August 1, 2017, the Funds began offering a new class of shares, Class R6.
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 Committee (VC). The VC provides administration and oversight of the Funds’ valuation policies and procedures, which are approved annually by the Board. Investments in the Underlying Funds are valued at their closing NAV each trading day.
b. Income Taxes
It is each Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. Each Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and 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, 2017, 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 in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.
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. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.
The Funds indirectly bear their proportionate share of expenses from the Underlying Funds. 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.
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 31 | |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting
Policies (continued)
c. Security Transactions, Investment Income, Expenses and Distributions (continued)
Realized and unrealized gains and losses and net investment income, excluding 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, 2017, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:
| | | | | | | | | | | | | | | | | | | | |
| | | Franklin Corefolio
Allocation Fund | | | | | | Franklin Founding Funds
Allocation Fund | |
| | | | | |
| | | Shares | | | Amount | | | | | | Shares | | | Amount | |
| | | | | |
Class A Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 2,817,012 | | | $ | 52,910,655 | | | | | | | | 15,304,440 | | | $ | 217,551,523 | |
| Shares issued in reinvestment of distributions | | | 1,141,388 | | | | 22,008,253 | | | | | | | | 6,557,756 | | | | 93,750,165 | |
| Shares redeemed | | | (4,256,707 | ) | | | (79,756,007 | ) | | | | | | | (40,784,255 | ) | | | (577,628,556) | |
| | | | |
Netincrease (decrease) | | | (298,307 | ) | | $ | (4,837,099 | ) | | | | | | | (18,922,059 | ) | | $ | (266,326,868) | |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 2,026,622 | | | $ | 33,409,181 | | | | | | | | 11,424,321 | | | $ | 142,666,866 | |
| Shares issued in reinvestment of distributions | | | 1,710,558 | | | | 27,406,298 | | | | | | | | 5,568,616 | | | | 70,554,700 | |
| Shares redeemed | | | (5,142,894 | ) | | | (84,735,069 | ) | | | | | | | (46,872,408 | ) | | | (585,503,647) | |
| | | | |
| | | | | |
Netincrease (decrease) | | | (1,405,714 | ) | | $ | (23,919,590 | ) | | | | | | | (29,879,471 | ) | | $ | (372,282,081) | |
| | | | |
| | | | | |
| Class C Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 992,423 | | | $ | 18,395,905 | | | | | | | | 5,064,004 | | | $ | 70,473,622 | |
| Shares issued in reinvestment of distributions | | | 290,484 | | | | 5,486,825 | | | | | | | | 2,019,077 | | | | 28,382,010 | |
| Shares redeemed | | | (2,060,680 | ) | | | (38,211,081 | ) | | | | | | | (24,718,389 | ) | | | (344,703,213) | |
| | | | |
| | | | | |
Net increase (decrease) | | | (777,773 | ) | | $ | (14,328,351 | ) | | | | | | | (17,635,308 | ) | | $ | (245,847,581) | |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 838,806 | | | $ | 13,585,869 | | | | | | | | 5,306,931 | | | $ | 65,224,907 | |
| Shares issued in reinvestment of distributions | | | 492,310 | | | | 7,691,548 | | | | | | | | 1,597,787 | | | | 19,904,491 | |
| Shares redeemed | | | (2,153,618 | ) | | | (34,997,772 | ) | | | | | | | (23,112,939 | ) | | | (283,735,948) | |
| | | | |
| | | | | |
Net increase (decrease) | | | (822,502 | ) | | $ | (13,720,355 | ) | | | | | | | (16,208,221 | ) | | $ | (198,606,550) | |
| | | | |
| | | | |
| 32 | | Annual Report | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | | | |
| | | Franklin Corefolio
Allocation Fund | | | | | | Franklin Founding Funds
Allocation Fund | |
| | | | | |
| | | Shares | | | Amount | | | | | | Shares | | | Amount | |
Class R Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 5,857 | | | $ | 108,807 | | | | | | | | 67,650 | | | $ | 953,078 | |
| Shares issued in reinvestment of distributions | | | 3,123 | | | | 60,074 | | | | | | | | 14,667 | | | | 210,003 | |
| Shares redeemed | | | (11,854 | ) | | | (216,139 | ) | | | | | | | (343,308 | ) | | | (4,859,849) | |
| | | | |
| | | | | |
Net increase (decrease) | | | (2,874 | ) | | $ | (47,258 | ) | | | | | | | (260,991 | ) | | $ | (3,696,768) | |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 10,968 | | | $ | 181,668 | | | | | | | | 167,403 | | | $ | 2,071,803 | |
| Shares issued in reinvestment of distributions | | | 4,929 | | | | 78,660 | | | | | | | | 16,509 | | | | 208,973 | |
| Shares redeemed | | | (14,885 | ) | | | (249,764 | ) | | | | | | | (267,033 | ) | | | (3,349,815) | |
| | | | |
| | | | | |
Net increase (decrease) | | | 1,012 | | | $ | 10,564 | | | | | | | | (83,121 | ) | | $ | (1,069,039) | |
| | | | |
| | | | | |
Class R6 Shares: | | | | | | | | | | | | | | | | | | | | |
Year ended December 31, 2017a | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 261 | | | $ | 5,000 | | | | | | | | 346 | | | $ | 5,000 | |
| | | | |
| | | | | |
| Advisor Class Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 637,225 | | | $ | 12,034,539 | | | | | | | | 5,316,982 | | | $ | 75,701,599 | |
| Shares issued in reinvestment of distributions | | | 53,681 | | | | 1,040,547 | | | | | | | | 329,521 | | | | 4,742,068 | |
| Shares redeemed | | | (316,011 | ) | | | (5,999,155 | ) | | | | | | | (3,436,382 | ) | | | (49,080,166) | |
| | | | |
| | | | | |
| Net increase (decrease) | | | 374,895 | | | $ | 7,075,931 | | | | | | | | 2,210,121 | | | $ | 31,363,501 | |
| | | | |
| | | | | |
Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 321,791 | | | $ | 5,439,280 | | | | | | | | 2,448,383 | | | $ | 30,854,553 | |
| Shares issued in reinvestment of distributions | | | 58,899 | | | | 951,211 | | | | | | | | 223,369 | | | | 2,852,608 | |
| Shares redeemed | | | (203,470 | ) | | | (3,397,695 | ) | | | | | | | (3,128,645 | ) | | | (39,073,799) | |
| | | | |
| | | | | |
Net increase (decrease) | | | 177,220 | | | $ | 2,992,796 | | | | | | | | (456,893 | ) | | $ | (5,366,638) | |
| | | | |
aFor the period August 1, 2017 (effective date) to December 31, 2017.
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 |
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.
| | | | | | |
| franklintempleton.com | | Annual Report | | | 33 | |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
b. 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.
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 until further notice and approval by the Board.
c. Sales Charges/Underwriting Agreements
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Funds. These charges are deducted from the proceeds of sales of fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Funds of the following commission transactions related to the sales and redemptions of the Funds’ shares for the year:
| | | | | | | | |
| | | Franklin
Corefolio
Allocation Fund | | | Franklin
Founding Funds
Allocation Fund | |
| |
Sales charges retained net of commissions paid to unaffiliated brokers/dealers | | | $146,680 | | | | $464,283 | |
CDSC retained | | | $ 7,041 | | | | $ 37,405 | |
d. Transfer Agent Fees
Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. Effective November 1, 2017, the fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. Prior to November 1, 2017, the fees were account based fees that varied based on fund or account type. In addition, each class reimburses Investor Services for out of pocket expenses incurred and, except for Class R6, reimburses shareholder 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, 2017, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:
| | | | | | | | |
| | | Franklin
Corefolio
Allocation Fund | | | Franklin
Founding Funds
Allocation Fund | |
| |
Transfer agent fees | | | $528,552 | | | | $2,392,862 | |
| | | | |
| 34 | | Annual Report | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
e. Investments in Underlying Funds
The Funds invest in 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 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, 2017, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Underlying Funds | | Number of
Shares Held
at Beginning
of Year | | | Gross
Additions | | | Gross
Reductions | | | Number of
Shares
Held at End
of Year | | | Value
at End
of Year | | | Dividend
Income | | | Realized
Gain (Loss) | | | Net Change
in Unrealized
Appreciation
(Depreciation) | |
| |
Franklin Corefolio Allocation Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-Controlled Affiliates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Franklin Growth Fund, Class R6 | | | 2,263,209 | | | | 66,072 | | | | (225,372 | ) | | | 2,103,909 | | | $ | 198,903,592 | | | $ | 1,518,520 | | | $ | 10,954,927a | | | $ | 32,811,944 | |
Franklin Growth Opportunities Fund, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Class R6 | | | 5,120,061 | | | | 372,224 | | | | (473,448 | ) | | | 5,018,837 | | | | 196,888,988 | | | | — | | | | 16,247,695a | | | | 31,248,852 | |
Franklin Mutual Shares Fund, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Class R6 | | | 6,230,761 | | | | 625,569 | | | | (120,027 | ) | | | 6,736,303 | | | | 192,725,624 | | | | 4,584,944 | | | | 8,234,261a | | | | 2,352,481 | |
Institutional Fiduciary Trust Money | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Market Portfolio, 0.89% | | | 329,163 | | | | 34,776,618 | | | | (35,105,702 | ) | | | 79 | | | | 79 | | | | 2,739 | | | | — | | | | — | |
Templeton Growth Fund Inc., | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Class R6 | | | 7,490,909 | | | | 154,513 | | | | (395,741 | ) | | | 7,249,681 | | | | 197,336,318 | | | | 4,147,126 | | | | 862,570 | | | | 26,074,083 | |
| | | | | | | | | | | | | | | | | | | | |
Total Affiliated Securities | | | | | | | | | | | | | | | | | | $ | 785,854,601 | | | $ | 10,253,329 | | | $ | 36,299,453 | | | $ | 92,487,360 | |
| | | | | | | | | | | | | | | | | | | | |
Franklin Founding Funds Allocation Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-Controlled Affiliates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Franklin Income Fund, Class R6 | | | 702,953,600 | | | | 41,319,775 | | | | (74,053,558 | ) | | | 670,219,817 | | | $ | 1,581,718,767 | | | $ | 85,349,534 | | | $ | (789,224 | ) | | $ | 49,011,854 | |
Franklin Mutual Shares Fund, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Class R6 | | | 56,858,363 | | | | 3,729,234 | | | | (5,235,933 | ) | | | 55,351,664 | | | | 1,583,611,110 | | | | 37,788,848 | | | | 101,534,983a | | | | (6,107,520 | ) |
Institutional Fiduciary Trust Money | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Market Portfolio, 0.89% | | | 45,364,019 | | | | 276,014,060 | | | | (321,377,319 | ) | | | 760 | | | | 760 | | | | 28,603 | | | | — | | | | — | |
Templeton Growth Fund Inc., | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Class R6 | | | 68,244,005 | | | | 1,702,639 | | | | (11,736,095 | ) | | | 58,210,549 | | | | 1,584,491,152 | | | | 33,552,087 | | | | 40,028,482 | | | | 196,699,423 | |
| | | | | | | | | | | | | | | | | | | | |
Total Affiliated Securities | | | | | | | | | | | | | | | | | | $ | 4,749,821,789 | | | $ | 156,719,072 | | | $ | 140,774,241 | | | $ | 239,603,757 | |
| | | | | | | | | | | | | | | | | | | | |
aIncludes realized gain distributions received.
f. Waiver and Expense Reimbursements
For the Funds Investor Services has voluntarily agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.03%. Investor Services may discontinue this waiver in the future.
4. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains. At December 31, 2017, the capital loss carryforwards were as follows:
| | | | |
| |
| Franklin
Founding Funds
Allocation Fund |
|
| |
Capital loss carryforwards subject to expiration: | | | | |
2018 | | | $465,945,460 | |
| | | | |
| | | | | | |
| franklintempleton.com | | Annual Report | | | 35 | |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
4. Income Taxes (continued)
During the year ended December 31, 2017, Franklin Founding Funds Allocation Fund utilized $137,484,992 of capital loss carryforwards.
On December 31, 2017, Franklin Founding Funds Allocation Fund had expired capital loss carryforwards of $1,003,221,597, which were reclassified to paid-in capital.
The tax character of distributions paid during the years ended December 31, 2017 and 2016, was as follows:
| | | | | | | | | | | | | | | | |
| | | Franklin Corefolio
Allocation Fund | | | Franklin Founding Funds
Allocation Fund | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| |
Distributions paid from: | | | | | | | | | | | | | | | | |
Ordinary income | | $ | 6,711,024 | | | $ | 5,497,971 | | | $ | 133,247,549 | | | $ | 97,907,867 | |
Long term capital gain | | | 22,788,089 | | | | 31,757,544 | | | | — | | | | — | |
| | | | |
| | | $29,499,113 | | | $37,255,515 | | | $133,247,549 | | | $97,907,867 | |
| | | | |
At December 31, 2017, 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
Corefolio
Allocation Fund | | | Franklin
Founding Funds
Allocation Fund | |
| |
Cost of investments | | $ | 535,002,871 | | | $ | 4,393,585,020 | |
| | | | |
| | |
Unrealized appreciation | | $ | 254,305,861 | | | $ | 416,961,563 | |
Unrealized depreciation | | | (3,454,131 | ) | | | (60,724,794 | ) |
| | | | |
Net unrealized appreciation (depreciation) | | $ | 250,851,730 | | | $ | 356,236,769 | |
| | | | |
| | |
Undistributed ordinary income | | $ | 503,247 | | | $ | 50,704,622 | |
Undistributed long term capital gains | | | 24,018,389 | | | | — | |
| | | | |
| | |
Distributable earnings | | $ | 24,521,636 | | | $ | 50,704,622 | |
| | | | |
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 from Underlying Funds and wash sales.
In accordance with U.S. GAAP permanent differences are reclassified among capital accounts to reflect their tax character. At the year ended December 31, 2017, such reclassifications were as follows:
| | | | |
| |
| Franklin
Founding Funds
Allocation Fund |
|
| |
Paid-in Capital | | $ | (1,003,221,596 | ) |
Undistributed net investment income | | $ | 3,202,627 | |
Accumulated net realized gain (loss) | | $ | 1,000,018,969 | |
Franklin Corefolio Allocation Fund utilized a tax accounting practice to treat a portion of the proceeds from capital shares redeemed as a distribution from net investment income and realized capital gains.
| | | | |
| 36 | | Annual Report | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
5. Investment Transactions
Purchases and sales of Underlying Funds (excluding short term securities) for the year ended December 31, 2017, were as follows:
| | | | | | | | |
| | | Franklin
Corefolio
Allocation Fund | | | Franklin
Founding Funds
Allocation Fund | |
| |
Purchases | | $ | 5,300,000 | | | $ | 23,000,000 | |
Sales | | $ | 51,733,782 | | | $ | 629,767,047 | |
6. Credit Facility
The Funds, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 9, 2018. 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 9, 2018, the Borrowers renewed the Global Credit Facility for a one year term, maturing February 8, 2019, 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 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statements of Operations. During the year ended December 31, 2017, 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, 2017, 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.
| | | | | | |
| franklintempleton.com | | Annual Report | | | 37 | |
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.
| | | | |
| 38 | | Annual Report | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Fund Allocator Series and Shareholders of Franklin Corefolio Allocation Fund and Franklin Founding Funds Allocation Fund
Opinions on the Financial Statements
We have audited the accompanying statements of assets and liabilities, including the statements of investments, of Franklin Corefolio Allocation Fund and Franklin Founding Funds Allocation Fund (the “Funds”) as of December 31, 2017, the related statements of operations for the year ended December 31, 2017, the statements of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of December 31, 2017, 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 ended December 31, 2017, and each of the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinions
These financial statements are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the transfer agent. We believe that our audits provide a reasonable basis for our opinions.
PricewaterhouseCoopers LLP
San Francisco, California
February 15, 2018
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 39 | |
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 $24,924,952 as a long term capital gain dividend for the fiscal year ended December 31, 2017.
Under Section 871(k)(2)(C) of the Code, Franklin Corefolio Allocation Fund hereby reports the maximum amount allowable but no less than $753,932 as a short term capital gain dividend for purposes of the tax imposed under Section 871(a)(1)(A) of the Code for the fiscal year ended December 31, 2017.
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, 2017:
| | | | | | |
Franklin
Corefolio
Allocation Fund | | | Franklin
Founding Funds
Allocation Fund | |
| | |
| | 98.70% | | | | 46.46% | |
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, 2017:
| | | | | | |
Franklin Corefolio
Allocation Fund | | | Franklin
Founding Funds
Allocation Fund | |
| | |
| | $10,223,410 | | | | $100,834,323 | |
Distributions, including qualified dividend income, paid during calendar year 2017 will be reported to shareholders on Form 1099-DIV by mid-February 2018. 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, 2017, the Funds’ qualified fund of funds under Section 852(g)(2) of Code, received an allocation of foreign taxes paid from one or more of its underlying funds. As shown in the table below, the Funds hereby report to shareholders the foreign source income and foreign taxes paid by underlying funds, pursuant to Section 853 of the Code. This written statement will allow shareholders of record on December 27, 2017, 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, Class R6, and Advisor Class shareholders of record.
| | | | | | | | | | | | |
| Class | | Foreign Tax Paid
Per Share | | | Foreign Source
Income Per Share | | | Foreign Source Qualified
Dividends Per Share | |
| |
| | | |
Franklin Corefolio Allocation Fund | | | | | | | | | | | | |
Class A | | | $0.0076 | | | | $0.0748 | | | | $0.0531 | |
Class C | | | $0.0076 | | | | $0.0748 | | | | $0.0531 | |
Class R | | | $0.0076 | | | | $0.0748 | | | | $0.0531 | |
Class R6 | | | $0.0076 | | | | $0.0748 | | | | $0.0531 | |
Advisor Class | | | $0.0076 | | | | $0.0748 | | | | $0.0531 | |
| | | |
Franklin Founding Funds Allocation Fund | | | | | | | | | | | | |
Class A | | | $0.0075 | | | | $0.0732 | | | | $0.0520 | |
Class C | | | $0.0075 | | | | $0.0732 | | | | $0.0520 | |
Class R | | | $0.0075 | | | | $0.0732 | | | | $0.0520 | |
Class R6 | | | $0.0075 | | | | $0.0732 | | | | $0.0520 | |
Advisor Class | | | $0.0075 | | | | $0.0732 | | | | $0.0520 | |
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FRANKLIN FUND ALLOCATOR SERIES
Foreign Tax Paid Per Share (Column 1) is the amount per share available to you, as a tax credit (assuming you held your shares in the Fund for a minimum of 16 days during the 31-day period beginning 15 days before the ex-dividend date of the Fund’s distribution to which the foreign taxes relate), or, as a tax deduction.
Foreign Source Income Per Share (Column 2) is the amount per share of income dividends attributable to foreign securities held by the underlying funds, plus any foreign taxes withheld on these dividends. The amounts reported include foreign source qualified dividends that have not been adjusted for the rate differential applicable to such dividend income.1
Foreign Source Qualified Dividends Per Share (Column 3) is the amount per share of foreign source qualified dividends, plus any foreign taxes withheld on these dividends. These amounts represent the portion of the Foreign Source Income reported to you in column 2 that were derived from qualified foreign securities held by the underlying funds.1
By mid-February 2018, shareholders will receive Form 1099-DIV which will include their share of taxes paid and foreign source income distributed during the calendar year 2017. 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 2017 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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FRANKLIN FUND ALLOCATOR SERIES
Special Meeting of Shareholders
MEETING OF SHAREHOLDERS: OCTOBER 30, 2017 AND RECONVENED ON DECEMBER 15, 2017 AND DECEMBER 29, 2017
(UNAUDITED)
A Special Meeting of Shareholders of Franklin Fund Allocator Series was held at the offices of Franklin Templeton Investments, One Franklin Parkway, San Mateo, California on October 30, 2017 and reconvened on December 15, 2017 and December 29, 2017. The purpose of the meeting was to elect Trustees of Franklin Fund Allocator Series and to vote to approve an amended fundamental investment restriction regarding investments in commodities for each of the Funds. At the meeting, (i) the following persons were elected by the shareholders to serve as Trustees of Franklin Fund Allocator Series: Harris J. Ashton, Terrence J. Checki, Mary C. Choksi, Edith E. Holiday, Gregory E. Johnson, Rupert H. Johnson, Jr., J. Michael Luttig, Larry D. Thompson, and John B. Wilson; (ii) the proposal to approve the amended fundamental investment restriction regarding investments in commodities was approved by shareholders of Franklin Corefolio Allocation Fund; and (iii) sufficient votes were not received to pass the proposal to approve the amended fundamental investment restriction regarding investments in commodities for Franklin Founding Funds Allocation Fund. No other business was transacted at the meeting.
The results of the voting at the meeting are as follows:
Proposal 1. To elect a Board of Trustees:
| | | | | | | | |
| Name | | For | | | Withheld | |
| | |
Harris J. Ashton | | | 390,516,091 | | | | 13,444,532 | |
| | |
Terrence J. Checki | | | 390,358,474 | | | | 13,602,149 | |
| | |
Mary C. Choksi | | | 390,976,557 | | | | 12,983,067 | |
| | |
Edith E. Holiday | | | 390,925,009 | | | | 13,035,612 | |
| | |
Gregory E. Johnson | | | 390,675,564 | | | | 13,285,060 | |
| | |
Rupert H. Johnson, Jr. | | | 390,454,015 | | | | 13,506,608 | |
| | |
J. Michael Luttig | | | 390,724,016 | | | | 13,236,605 | |
| | |
Larry D. Thompson | | | 390,661,770 | | | | 13,298,853 | |
| | |
John B. Wilson | | | 390,907,907 | | | | 13,052,714 | |
Total Trust Shares Outstanding*: 723,360,102
Proposal 2. To approve an amended fundamental investment restriction regarding investments in commodities:
Franklin Corefolio Allocation Fund
| | | | |
| | | Shares | |
| |
For | | | 17,990,563 | |
| |
Against | | | 588,502 | |
| |
Abstain | | | 670,098 | |
| |
Broker Non-Votes | | | 5,340,847 | |
| |
Total Fund Shares Voted | | | 24,590,010 | |
| |
Total Fund Shares Outstanding* | | | 39,942,536 | |
* As of the record date.
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FRANKLIN FUND ALLOCATOR SERIES
SPECIAL MEETING OF SHAREHOLDERS
Franklin Founding Funds Allocation Fund
| | | | |
| | | Shares | |
| |
For | | | 127,977,712 | |
| |
Against | | | 4,409,609 | |
| |
Abstain | | | 7,018,584 | |
| |
Broker Non-Votes | | | 54,728,638 | |
| |
Total Fund Shares Voted | | | 194,134,543 | |
| |
Total Fund Shares Outstanding* | | | 339,036,905 | |
| | | | | | |
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FRANKLIN FUND ALLOCATOR SERIES
Board Members and Officers
The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupations during at least the past five years and number of US registered 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
| | | | | | | | |
Name, Year of Birth
and Address | | Position | | Length of
Time Served | | Number of Portfolios in
Fund Complex Overseen
by Board Member* | | Other Directorships Held During at Least the Past 5 Years |
| | | | |
Harris J. Ashton (1932) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since 1995 | | 139 | | Bar-S Foods (meat packing company) (1981-2010). |
| | |
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). |
Terrence J. Checki (1945) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since December 2017 | | 113 | | Hess Corporation (exploration of oil and gas) (2014-present). |
| | |
Principal Occupation During at Least the Past 5 Years: | | | | |
Member of the Council on Foreign Relations (1996-present); Member of the National Committee on U.S.-China Relations (1999-present); member of the Board of Trustees of the Economic Club of New York (2013 -present); member of the Board of Trustees of the Foreign Policy Association (2005-present) and member of various other boards of trustees and advisory boards; and formerly, Executive Vice President of the Federal Reserve Bank of New York and Head of its Emerging Markets and Internal Affairs Group and Member of Management Committee (1995-2014); and Visiting Fellow at the Council on Foreign Relations (2014). |
Mary C. Choksi (1950) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since 2014 | | 139 | | Avis Budget Group Inc. (car rental) (2007-present), Omnicom Group Inc. (advertising and marketing communications services) (2011-present) and White Mountains Insurance Group, Ltd. (holding company) (2017). |
| | |
Principal Occupation During at Least the Past 5 Years: | | | | |
Director of various companies; and formerly, Founder and Senior Advisor, Strategic Investment Group (investment management group) (2015-2017); 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) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since 1998 | | 139 | | Hess Corporation (exploration and refining of oil and gas) (1993-present), Canadian National Railway (railroad) (2001-present), White Mountains Insurance Group, Ltd. (holding company) (2004-present), Santander Consumer USA Holdings, Inc. (consumer finance) (2016-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) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since 2009 | | 139 | | Boeing Capital Corporation (aircraft financing) (2006-2013). |
| | |
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). |
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FRANKLIN FUND ALLOCATOR SERIES
Independent Board Members (continued)
| | | | | | | | |
Name, Year of Birth and
Address | | Position | | Length of Time Served | | Number of Portfolios in
Fund Complex Overseen
by Board Member* | | Other Directorships Held During at Least the Past 5 Years |
| | | | |
Larry D. Thompson (1945) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since 2007 | | 139 | | The Southern Company (energy company) (2014-present; previously 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; Counsel, Finch McCranie, LLP (law firm) (2015-present); Independent Compliance Monitor and Auditor, Volkswagen AG (manufacturer of automobiles and commercial vehicles) (2017); 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) One Franklin Parkway San Mateo, CA 94403-1906 | | Lead
Independent
Trustee | | Trustee since 2006 and Lead Independent Trustee since 2008 | | 113 | | None |
|
Principal Occupation During at Least the Past 5 Years: |
President and Founder, Hyannis Port Capital, Inc. (real estate and private equity investing) (2002-present); serves on private and non-profit boards; and formerly, President, Staples International and Head of Global Transformation (office supplies) (2012-2016); 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 |
Name, Year of Birth and Address | | Position | | Length of Time Served | | Number of Portfolios in
Fund Complex Overseen
by Board Member* | | Other Directorships Held During at Least the Past 5 Years |
| | | | |
**Gregory E. Johnson (1961) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since 2007 | | 153 | | None |
|
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 43 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) One Franklin Parkway San Mateo, CA 94403-1906 | | Chairman of
the Board
and Trustee | | Since 2013 | | 139 | | None |
|
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 41 of the investment companies in Franklin Templeton Investments. |
Alison E. Baur (1964) One Franklin Parkway San Mateo, CA 94403-1906 | | Vice
President | | Since 2012 | | Not Applicable | | Not Applicable |
|
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 45 of the investment companies in Franklin Templeton Investments. |
| | | | | | |
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FRANKLIN FUND ALLOCATOR SERIES
Interested Board Members and Officers (continued)
| | | | | | | | |
Name, Year of Birth
and Address | | Position | | Length of Time Served | | Number of Portfolios in
Fund Complex Overseen
by Board Member* | | Other Directorships Held
During at
Least the Past 5
Years |
Gaston Gardey (1967)
One Franklin Parkway
San Mateo, CA 94403-1906 | | Chief Financial
Officer,
Chief
Accounting
Officer and
Treasurer | | Since 2009 | | Not Applicable | | Not Applicable |
Principal Occupation During at Least the Past 5 Years: |
Treasurer, U.S. Fund Administration & Reporting, Franklin Templeton Investments; and officer of 28 of the investment companies in Franklin Templeton Investments. |
| | | | |
Aliya S. Gordon (1973)
One Franklin Parkway
San Mateo, CA 94403-1906 | | Vice President | | Since 2009 | | Not Applicable | | Not Applicable |
|
| Principal Occupation During at Least the Past 5 Years: |
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments. |
Steven J. Gray (1955)
One Franklin Parkway
San Mateo, CA 94403-1906 | | Vice President | | Since 2009 | | Not Applicable | | Not Applicable |
|
| Principal Occupation During at Least the Past 5 Years: |
Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc. and FASA, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments. |
| | | | |
Matthew T. Hinkle (1971)
One Franklin Parkway
San Mateo, CA 94403-1906 | | Chief Executive
Officer –
Finance and Administration | | Since
June 2017 | | Not Applicable | | Not Applicable |
Principal Occupation During at Least the Past 5 Years: |
Senior Vice President, Franklin Templeton Services, LLC; officer of 45 of the investment companies in Franklin Templeton Investments; and formerly, Vice President, Global Tax (2012-April 2017) and Treasurer/Assistant Treasurer, Franklin Templeton Investments (2009-2017). |
| | | | |
Edward B. Jamieson (1948)
One Franklin Parkway
San Mateo, CA 94403-1906 | | President and Chief Executive Officer – Investment Management | | Since 2010 | | Not Applicable | | Not Applicable |
Principal Occupation During at Least the Past 5 Years: |
President 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. |
| | | | |
Robert Lim (1948)
One Franklin Parkway
San Mateo, CA 94403-1906 | | Vice President –AML Compliance | | Since 2016 | | Not Applicable | | Not Applicable |
| Principal Occupation During at Least the Past 5 Years: |
Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton Investor Services, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments. |
| | | | |
Kimberly H. Novotny (1972)
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923 | | Vice President | | Since 2013 | | Not Applicable | | Not Applicable |
Principal Occupation During at Least the Past 5 Years: |
Associate General Counsel, Franklin Templeton Investments; Vice President and Corporate Secretary, Fiduciary Trust International of the South; Vice President, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 45 of the investment companies in Franklin Templeton Investments. |
| | | | |
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FRANKLIN FUND ALLOCATOR SERIES
Interested Board Members and Officers (continued)
| | | | | | | | |
Name, Year of Birth
and Address | | Position | | Length of
Time Served | | Number of Portfolios in
Fund Complex Overseen
by Board Member* | | Other Directorships Held
During at Least the Past 5 Years |
| | | | |
Robert C. Rosselot (1960)
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923 | | Chief Compliance Officer | | Since 2013 | | Not Applicable | | Not Applicable |
Principal Occupation During at Least the Past 5 Years: |
Director, Global Compliance, Franklin Templeton Investments; Vice President, Franklin Templeton Companies, LLC; officer of 45 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)
One Franklin Parkway
San Mateo, CA 94403-1906 | | Vice President and Secretary | | Since 2006 | | Not Applicable | | Not Applicable |
Principal Occupation During at Least the Past 5 Years: |
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments. |
| | | | |
Navid J. Tofigh (1972)
One Franklin Parkway
San Mateo, CA 94403-1906 | | Vice President | | Since 2015 | | Not Applicable | | Not Applicable |
Principal Occupation During at Least the Past 5 Years: |
Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments. |
| | | | |
Craig S. Tyle (1960)
One Franklin Parkway
San Mateo, CA 94403-1906 | | Vice President | | Since 2005 | | Not Applicable | | Not Applicable |
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 45 of the investment companies in Franklin Templeton Investments. |
| | | | |
Lori A. Weber (1964)
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923 | | Vice President | | Since 2011 | | Not Applicable | | Not Applicable |
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 45 of the investment companies in Franklin Templeton Investments. |
*We base the number of portfolios on each separate series of the US registered investment companies within the Franklin Templeton Investments fund complex. These portfolios have a common investment manager or affiliated investment managers.
**GregoryE. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Rupert H. Johnson, Jr. is considered to be an interested person of the Fund under the federal securities laws due to his position as officer and director and major shareholder of Resources.
Note 1: Rupert H. Johnson, Jr. is the uncle of Gregory E. Johnson.
Note 2: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.
The Sarbanes-Oxley Act of 2002 and Rules adopted by the Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there is at least one such financial expert on the Audit Committee and has designated John B. Wilson as its audit committee financial expert. The Board believes that Mr. Wilson qualifies as such an expert in view of his extensive business background and experience, including service as chief financial officer of Staples, Inc. from 1992 to 1996. Mr. Wilson has been a Member and Chairman of the Fund’s Audit Committee since 2006. As a result of such background and experience, the Board believes that Mr. Wilson has acquired an understanding of generally accepted accounting principles and financial statements, the general application of such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for financial reporting and an understanding of audit committee functions. Mr. Wilson is an independent Board member as that term is defined under the relevant Securities and Exchange Commission Rules and Releases.
The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request. Shareholders may call (800) DIAL BEN/342-5236 to request the SAI.
| | | | | | |
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| franklintempleton.com | | Annual Report | | | 47 | |
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 US 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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| 48 | | Annual Report | | franklintempleton.com |
| | |
| | Annual Report and Shareholder Letter Franklin Fund Allocator Series |
| | Fund Administrator |
| | Franklin Templeton Services, LLC |
| | Distributor |
| | Franklin Templeton Distributors, Inc. (800) DIAL BEN® / 342-5236 franklintempleton.com |
| | Shareholder Services (800) 632-2301 |
Authorized for distribution only when accompanied or preceded by a summary prospectus and/or prospectus. Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. A prospectus contains this and other information; please read it carefully before investing.
To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.
| | |
| © 2018 Franklin Templeton Investments. All rights reserved. | | FAS2 A 02/18 |
| | |
| | | Annual Report and Shareholder Letter December 31, 2017 |
Franklin Fund Allocator Series
Franklin LifeSmart™
Retirement Income Fund
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2035 Retirement Target Fund
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2045 Retirement Target Fund
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2055 Retirement Target Fund
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Franklin Templeton Investments
Gain From Our Perspective®
At Franklin Templeton Investments, we’re dedicated to one goal: delivering exceptional asset management for our clients. By bringing together multiple, world-class investment teams in a single firm, we’re able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the world’s largest asset managers. This has helped us to become a trusted partner to individual and institutional investors across the globe.
Dear Shareholder:
During the 12 months ended December 31, 2017, mostly upbeat economic data, improved corporate earnings and supportive monetary policies were positives for US securities markets. After two rate increases earlier in 2017, at its December meeting the US Federal Reserve (Fed) raised the target range for its benchmark federal funds rate 0.25% to 1.25%–1.50% amid ongoing labor market strength, rising economic activity and low inflation in the US. The Fed also announced a gradual monthly reduction in its balance sheet starting in January of 2018 as part of its ongoing plan to normalize monetary policy.
In this environment, US stocks, as measured by the Standard & Poor’s® 500 Index, ended the period with a +21.83% total return.1 Stocks in global developed markets, as measured by the MSCI World Index, returned +23.07% for the same period.1 Investment-grade bonds, as measured by the Bloomberg Barclays US Aggregate Bond Index, posted a +3.54% 12-month total return,1 and short-term investments, as measured by the Citigroup 3-Month Treasury Bill Index, returned +0.84%.2
We are committed to our long-term perspective and disciplined investment approach as we conduct a rigorous, fundamental analysis of securities with a regular emphasis on investment risk management.
We believe active, professional investment management serves investors well. We also recognize the important role of financial advisors in today’s markets and encourage investors to continue to seek their advice. Amid changing markets and
economic conditions, we are confident investors with a well-diversified portfolio and a patient, long-term outlook will be well positioned for the years ahead.
In addition, Franklin Fund Allocator Series’ annual report includes more detail about prevailing conditions and a discussion about investment decisions during the period. Please remember all securities markets fluctuate, as do mutual fund share prices.
We thank you for investing with Franklin Templeton, welcome your questions and comments, and look forward to serving your investment needs in the years ahead.
Sincerely,
Rupert H. Johnson, Jr.
Chairman
Franklin Fund Allocator Series
This letter reflects our analysis and opinions as of December 31, 2017, unless otherwise indicated. 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.
1. Source: Morningstar.
2. Source: FactSet.
See www.franklintempletondatasources.com for additional data provider information.
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| Not FDIC Insured | | | | | May Lose Value | | | | | No Bank Guarantee |
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| franklintempleton.com | | Not part of the annual report | | | 1 | |
Contents
Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.
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| | 2 | | | Annual Report | | franklintempleton.com |
Annual Report
Economic and Market Overview
The global economy grew moderately during the 12-month period under review. In this environment, global developed and emerging market stocks generated a +24.62% total return, as measured by the MSCI All Country World Index.1 Global markets were aided by price gains in oil and other commodities, generally upbeat economic data across regions, the European Central Bank’s (ECB’s) extension of its monetary easing program, and investor optimism about pro-growth and pro-business policies in the US. The prospect for reforms in the European Union (EU) with Emmanuel Macron’s election as France’s president, encouraging corporate earnings reports and the passage of the US tax reform bill also supported global stocks.
However, global markets reflected investor concerns about the terms of the UK’s exit from the EU, political uncertainty in the US and the EU, and geopolitical tensions in the Korean peninsula and other regions. Other concerns included the health of European banks, global oil oversupply despite a pact by major oil-producing countries to extend production cuts, and comments from key central bankers around the world about potentially raising interest rates.
After strengthening in 2017’s second and third quarters, the US economy moderated in the fourth quarter. The economy grew faster in 2017 than in 2016, however, largely due to growth in consumer spending, business investment and exports. The unemployment rate decreased from 4.7% in December 2016 to 4.1% at period-end.2 Annual inflation, as measured by the Consumer Price Index, was 2.1% in December 2016, and while it varied over the 12-month period, remained unchanged at period-end.2 The US Federal Reserve (Fed) raised its target range for the federal funds rate 0.25% three times during the period, amid signs of a growing US economy, strengthening labor market and improving business spending. At its December meeting, the Fed confirmed that the monthly balance sheet reduction would increase from US$10 billion to US$20 billion beginning in January 2018.
In Europe, the UK’s economic growth moderated in 2017 compared to 2016, largely due to slower growth in the services sector. In November, the Bank of England raised its key policy rate 0.25%, its first increase in a decade. The eurozone’s growth accelerated in 2017’s second and third quarters, but moderated in the fourth quarter. However, the eurozone’s 2017
economic growth rate was the fastest in a decade. The bloc’s annual inflation rate, while low, ended higher than in December 2016. The European Central Bank (ECB) kept its benchmark interest rate unchanged during the period. However, at its October meeting, the ECB extended the time frame for its massive bond-buying program from December 2017 to at least September 2018, while reducing the amount of monthly bond purchases in half beginning in January 2018.
In Asia, Japan’s quarterly gross domestic product (GDP) grew for the seventh consecutive quarter, although third-quarter 2017 growth was lower than the previous quarter. The Bank of Japan left its benchmark interest rate unchanged during the period and continued its monetary stimulus measures.
In emerging markets, Brazil’s quarterly GDP grew for the third consecutive quarter, although third-quarter 2017 growth slowed from the previous quarter. The country’s central bank cut its benchmark interest rate several times during the period to spur economic growth. Russia’s GDP grew in 2017’s first three quarters compared to the prior-year periods, amid the Bank of Russia’s continued policy support. China’s GDP grew faster in 2017 than in 2016, supported by solid growth in industrial production, services, fixed-asset investment, retail sales, and imports and exports. The People’s Bank of China left its benchmark interest rate unchanged during the period. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, rose substantially during the period.
The foregoing information reflects our analysis and opinions as of December 31, 2017. 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.
1. Source: Morningstar.
2. Source: US Bureau of Labor Statistics.
See www.franklintempletondatasources.com for additional data provider information.
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franklintempleton.com | | Annual Report | | | 3 | |
Franklin LifeSmart Retirement Income Fund
This annual report for Franklin LifeSmart Retirement Income Fund covers the fiscal year ended December 31, 2017.
Your Fund’s Goal and Main Investments
The Fund seeks to make monthly distributions, while preserving the investors’ capital over the long term. The Fund employs an asset allocation strategy, combined with an income generation strategy, designed for investors in retirement. Under normal market conditions, the Fund allocates its assets 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 and exchange-traded funds (ETFs), based on each underlying fund’s predominant asset class and strategy.
Asset Allocation*
Based on Total Net Assets as of 12/31/17
*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.
**Rounds to less than 0.1%.
Performance Overview
The Fund’s Class A shares delivered a +4.84% cumulative total return for the 12 months ended December 31, 2017. 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,
generated a +24.62% total return.1 The Fund’s fixed income benchmark, the Bloomberg Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, delivered a +7.69% total return.1 The Citigroup 3-Month Treasury Bill Index, a proxy for short-term investments and other net assets, returned +0.84%.2 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 6.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
Investment Strategy
When selecting equity funds, the investment manager considers the underlying funds’ foreign and domestic exposure, market capitalization ranges, and investment style (growth vs. value). When selecting fixed-income funds, the investment manager focuses primarily on maximizing income, appropriate to the Fund’s risk profile, and considers the credit quality, duration and maturity of the underlying funds’ portfolios. Certain fixed-income funds may hold securities across the credit quality spectrum, including below investment grade or “junk” bonds. In evaluating the risk level of the underlying funds, including alternative investments funds, the investment manager analyzes such factors as: (a) relative and absolute performance, including correlations with other underlying funds as well as corresponding benchmarks, and (b) their volatility (the variability of returns from one period to the next).
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.
At period-end, our largest domestic fixed income fund holding, Franklin Floating Rate Daily Access Fund – Class R6, and our foreign fixed income fund holding, Templeton Global Total Return Fund – Class R6, underperformed the Fund’s fixed income benchmark, the Bloomberg Barclays Multiverse Index.
1. Source: Morningstar.
2. Source: FactSet.
The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. 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 64.
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| 4 | | Annual Report | | franklintempleton.com |
FRANKLIN LIFESMART RETIREMENT INCOME FUND
| | | | |
| Fund Holdings | | | |
| 12/31/17 | | | |
| | | % of Total
Net Assets | |
Franklin Floating Rate Daily Access Fund – Class R6 | | | 24.6% | |
Franklin Income Fund – Class R6 | | | 21.5% | |
Franklin U.S. Government Securities Fund – Class R6 | | | 15.1% | |
iShares iBoxx High Yield Corporate Bond ETF | | | 9.2% | |
iShares U.S. Preferred Stock ETF | | | 8.4% | |
Franklin High Income Fund – Class R6 | | | 6.8% | |
Morgan Stanley – Index-Linked Notes | | | 5.7% | |
Templeton Global Total Return Fund – Class R6 | | | 4.5% | |
Barclays Bank PLC – Index-Linked Notes | | | 4.2% | |
Our domestic equity fund holding, iShares U.S. Preferred Stock ETF, underperformed the Fund’s equity benchmark, the MSCI ACWI. Our domestic hybrid fund holding, Franklin Income Fund – Class R6, underperformed the MSCI ACWI and outperformed the Bloomberg Barclays Multiverse Index. The index-linked notes increased the level of income the fund was able to generate.
Thank you for your continued participation in Franklin LifeSmart Retirement Income Fund. We look forward to serving your future investment needs.
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T. Anthony Coffey, CFA |
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 | | 
Thomas A. Nelson, CFA |
| | Portfolio Managers |
CFA® is a trademark owned by CFA Institute.
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2017, 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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| franklintempleton.com | | Annual Report | | | 5 | |
FRANKLIN LIFESMART RETIREMENT INCOME FUND
Performance Summary as of December 31, 2017
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.
Performance as of 12/31/171
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.75% and the minimum is 0%. Class A: 5.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
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| Share Class | | Cumulative
Total Return2 | | | Average Annual
Total Return3 | |
| | |
| A | | | | | | | | |
1-Year | | | +4.84% | | | | -1.20% | |
5-Year | | | +24.37% | | | | +3.23% | |
10-Year | | | +45.29% | | | | +3.20% | |
| | |
| Advisor | | | | | | | | |
1-Year | | | +5.09% | | | | +5.09% | |
5-Year | | | +26.05% | | | | +4.74% | |
10-Year | | | +49.46% | | | | +4.10% | |
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| | | 30-Day Standardized Yield4 | |
| Share Class | | (with waiver) | | | (without waiver) | |
A | | | 4.21% | | | | 3.60% | |
C | | | 3.42% | | | | 2.81% | |
R | | | 3.95% | | | | 3.34% | |
R6 | | | 4.51% | | | | 3.96% | |
Advisor | | | 4.45% | | | | 3.84% | |
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 9 for Performance Summary footnotes.
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| 6 | | Annual Report | | franklintempleton.com |
FRANKLIN LIFESMART RETIREMENT INCOME FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
Class A (1/1/08–12/31/17)
Advisor Class (1/1/08–12/31/17)
See page 9 for Performance Summary footnotes.
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| franklintempleton.com | | Annual Report | | | 7 | |
FRANKLIN LIFESMART RETIREMENT INCOME FUND
PERFORMANCE SUMMARY
| | | | | | | | | | | | |
| Net Asset Value | | | | | | | | | |
| | | |
| Share Class (Symbol) | | 12/31/17 | | | 12/31/16 | | | Change | |
A (FTRAX) | | | $11.06 | | | | $10.96 | | | | +$0.10 | |
C (FRTCX) | | | $10.92 | | | | $10.83 | | | | +$0.09 | |
R (FBRLX) | | | $11.01 | | | | $10.92 | | | | +$0.09 | |
R6 (FLMTX) | | | $11.11 | | | | $11.01 | | | | +$0.10 | |
Advisor (FLRDX) | | | $11.10 | | | | $11.00 | | | | +$0.10 | |
| | | | |
| Distributions (1/1/17–12/31/17) | | | |
| Share Class | | Net Investment
Income | |
A | | | $0.4332 | |
C | | | $0.3468 | |
R | | | $0.4032 | |
R6 | | | $0.4680 | |
Advisor | | | $0.4620 | |
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| Total Annual Operating Expenses7 | | | | | | |
| | |
| Share Class | | With Waiver | | | Without Waiver | |
A | | | 0.85% | | | | 1.45% | |
Advisor | | | 0.60% | | | | 1.20% | |
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| 8 | | Annual Report | | franklintempleton.com |
FRANKLIN LIFESMART RETIREMENT INCOME FUND
PERFORMANCE SUMMARY
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
All investments involve risks, including possible loss of principal. 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. 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 which are heightened in developing countries. Investments in equity-linked notes (ELNs) often have risks similar to their underlying securities, which could include management, market, and, as applicable, foreign securities and currency risks. In addition, ELNs are subject to certain debt securities risks, such as interest rate and credit risks, as well as counterparty and liquidity risk. Investments in derivatives involve costs and can create economic leverage, which may result in significant volatility and cause the fund to participate in losses (as well as gains) that exceed the fund’s initial investment. The Fund is not guaranteed to achieve its investment goal of preserving capital while making monthly distributions nor is there any guarantee that the Fund will provide sufficient income at or through the investor’s retirement. In addition, some of its distributions may be treated in part as a return of capital which will decrease shareholders’ cost basis in the Fund and affect the amount of any capital gain or loss that shareholders realize when selling or exchanging Fund shares. The annual payout rate may be adjusted higher or lower from year to year, and could vary substantially over time. It is possible for the Fund to suffer substantial investment losses and simultaneously experience additional asset reductions as a result of its distributions to shareholders under the managed distribution policy. Investors who hold the Fund within a tax-advantaged retirement account should consult their tax advisors to discuss tax consequences of receiving cash distributions. In addition, use of the Fund or election of the option to receive distribution payments in cash may be restricted in certain retirement plans by the terms of the governing plan documents and/or the discretion of the plan administrator. Investors are strongly advised to consult with their financial advisor for assistance before selecting the appropriate fund, based on their goals and personal situations, including time horizon, retirement income needs, risk tolerance and tax bracket. These and other risks are described more fully in the Fund’s prospectus.
1. The Fund has an expense reduction and a fee waiver associated with any investments it makes in a Franklin Templeton money fund, contractually guaranteed through 4/30/18. Fund investment results reflect the expense reduction and fee waiver; without these reductions, the results would have been lower. As of May 1, 2016, the Fund changed its name from Franklin LifeSmart 2015 Retirement Target Date Fund in connection with changes to its strategies including, among other things, the addition of an income generation strategy to support the Fund’s managed distribution policy. Prior to that, 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.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the period indicated. Return for less than one year, if any, has not been annualized.
4. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.
5. 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 Bloomberg 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.
6. Source: FactSet. Citigroup 3-Month Treasury Bill Index is an unmanaged index representing monthly return equivalents of yield averages of the last 3-Month Treasury Bill issues.
7. Figures are as stated in the Fund’s current prospectus, including the effect of acquired fund fees and expenses, and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
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| franklintempleton.com | | Annual Report | | | 9 | |
FRANKLIN LIFESMART RETIREMENT INCOME FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
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| | | | | Actual (actual return after expenses) | | Hypothetical
(5% annual return before expenses) | | |
| | | | | | | | |
| | | | | | | Expenses | | | | Expenses | | Net |
Share Class | | Beginning
Account
Value 7/1/17 | | Ending
Account
Value 12/31/17 | | Paid During
Period 7/1/17–12/31/171,2 | | Ending
Account
Value 12/31/17 | | Paid During
Period 7/1/17–12/31/171,2 | | Annualized
Expense
Ratio2 |
| | | | | | |
A | | $1,000 | | $1,018.80 | | $1.53 | | $1,023.69 | | $1.53 | | 0.30% |
C | | $1,000 | | $1,015.00 | | $5.33 | | $1,019.91 | | $5.35 | | 1.05% |
R | | $1,000 | | $1,016.60 | | $2.80 | | $1,022.43 | | $2.80 | | 0.55% |
R6 | | $1,000 | | $1,019.40 | | $0.00 | | $1,025.21 | | $0.00 | | 0.00% |
Advisor | | $1,000 | | $1,019.10 | | $0.25 | | $1,024.95 | | $0.26 | | 0.05% |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
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| 10 | | Annual Report | | franklintempleton.com |
Franklin LifeSmart 2020 Retirement Target Fund
This annual report for Franklin LifeSmart 2020 Retirement Target Fund covers the fiscal year ended December 31, 2017.
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. Under normal market conditions, the Fund allocates its assets 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 and exchange-traded funds (ETFs), with an increasing emphasis on income as the target date of 2020 approaches. The target date is the approximate retirement year of the investor.
Asset Allocation*
Based on Total Net Assets as of 12/31/17
*The asset allocation is based on the Statement of Investments (SOI), which classifies each underlying fund and other fund investments into a broad asset class based on its predominant investments under normal market conditions.
Performance Overview
The Fund’s Class A shares delivered a +11.53% cumulative total return for the 12 months ended December 31, 2017. 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, generated a +24.62% total return.1 The Fund’s fixed income
benchmark, the Bloomberg Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, produced a +7.69% total return.1 The Citigroup 3-Month Treasury Bill Index, a proxy for short-term investments and other net assets, returned +0.84%.2 You can find more of the Fund’s performance data in the Performance Summary beginning on page 13.
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, the investment manager considers the underlying funds’ foreign and domestic exposure, market capitalization ranges, and investment style (growth vs. value). When selecting fixed-income funds, the investment manager focuses primarily on maximizing income, appropriate to the Fund’s risk profile, and considers the credit quality, duration and maturity of the underlying funds’ portfolios. Certain fixed-income funds may hold securities across the credit quality spectrum, including below investment grade or “junk” bonds. In evaluating the risk level of the underlying funds, including alternative investments funds, the investment manager analyzes such factors as: (a) relative and absolute performance, including correlations with other underlying funds 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 with a target date comprising Franklin Fund Allocator Series (each a “Target Date 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.
2. Source: FactSet.
The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. 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 70.
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franklintempleton.com | | Annual Report | | | 11 | |
FRANKLIN LIFESMART 2020 RETIREMENT TARGET FUND
| | | | |
| Top 10 Fund Holdings | | | |
| 12/31/17 | | | |
| | | % of Total Net Assets | |
Franklin Low Duration Total Return Fund – Class R6 | | | 20.3% | |
Templeton Global Total Return Fund – Class R6 | | | 11.3% | |
Franklin Growth Fund – Class R6 | | | 10.5% | |
Franklin Rising Dividends Fund – Class R6 | | | 4.3% | |
Franklin LibertyQ Emerging Markets ETF | | | 4.2% | |
Franklin Growth Opportunities Fund – Class R6 | | | 4.1% | |
iShares Core U.S. Aggregate Bond ETF | | | 4.1% | |
Franklin FTSE Europe ETF | | | 3.7% | |
Franklin U.S. Government Securities Fund – Class R6 | | | 3.7% | |
Franklin International Small Cap Growth Fund –
Class R6 | | | 3.3% | |
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, our largest domestic value fund holding, Franklin Rising Dividends Fund – Class R6, underperformed the Fund’s equity benchmark, the MSCI ACWI, while our largest domestic growth fund holding, Franklin Growth Fund –Class R6, outperformed the index. Our largest foreign equity fund holding, Franklin LibertyQ Emerging Markets ETF, also outperformed the index. On the fixed income side, our largest domestic fixed income fund holding, Franklin Low Duration Total Return Fund – Class R6, and our foreign fixed income fund holding, Templeton Global Total Return Fund – Class R6, underperformed the Fund’s fixed income benchmark, the Bloomberg Barclays Multiverse Index.
Thank you for your continued participation in Franklin LifeSmart 2020 Retirement Target Fund. We look forward to serving your future investment needs.
| | |
| |
T. Anthony Coffey, CFA |
| |
| |
Thomas A. Nelson, CFA |
| |
| | Portfolio Managers |
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2017, 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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| 12 | | Annual Report | | franklintempleton.com |
FRANKLIN LIFESMART 2020 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2017
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. 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.
Performance as of 12/31/171
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.75% and the minimum is 0%. Class A: 5.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
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| Share Class | | Cumulative
Total Return2 | | | Average Annual
Total Return3 | |
| | |
| A | | | | | | | | |
1-Year | | | +11.53% | | | | +5.13% | |
3-Year | | | +12.41% | | | | +1.94% | |
Since Inception (7/1/13) | | | +30.43% | | | | +4.69% | |
| | |
| Advisor | | | | | | | | |
1-Year | | | +11.88% | | | | +11.88% | |
3-Year | | | +13.41% | | | | +4.29% | |
Since Inception (7/1/13) | | | +32.07% | | | | +6.37% | |
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.
See page 15 for Performance Summary footnotes.
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 13 | |
FRANKLIN LIFESMART 2020 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
Class A (7/1/13–12/31/17)
Advisor Class (7/1/13–12/31/17)
See page 15 for Performance Summary footnotes.
| | | | |
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| 14 | | Annual Report | | franklintempleton.com |
FRANKLIN LIFESMART 2020 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Distributions (1/1/17–12/31/17)
| | | | |
| Share Class | | Net Investment
Income | |
| A | | | $0.1472 | |
| C | | | $0.0644 | |
| R | | | $0.1072 | |
| R6 | | | $0.1812 | |
| Advisor | | | $0.1760 | |
Total Annual Operating Expenses6
| | | | | | | | |
| Share Class | | With Waiver | | | Without Waiver | |
A | | | 0.95% | | | | 1.63% | |
Advisor | | | 0.70% | | | | 1.38% | |
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
The Fund’s investment risk changes over time as its asset allocation changes. Since the Fund invests in underlying funds, which may engage in a variety of investment strategies involving certain risks, the Fund is subject to those same risks. All investments involve risks, including possible loss of principal. Principal invested is not guaranteed at any time, including at or after the Fund’s retirement target date; nor is there any guarantee that the Fund will provide sufficient income at or through the investor’s retirement. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, 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 which are heightened in developing countries. These risks are described more fully in the Fund’s prospectus. Investors should consult their financial advisor 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.
1. The Fund has an expense reduction and a fee waiver associated with any investments it makes in a Franklin Templeton money fund, contractually guaranteed through 4/30/18. Fund investment results reflect the expense reduction and fee waiver; 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.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
4. 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 Bloomberg 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.
5. Source: FactSet. The Citigroup 3-Month Treasury Bill Index is an unmanaged index representing monthly return equivalents of yield averages of the last 3-Month Treasury Bill issues.
6. Figures are as stated in the Fund’s current prospectus, including the effect of acquired fund fees and expenses, and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 15 | |
FRANKLIN LIFESMART 2020 RETIREMENT TARGET FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | |
| | | | | Actual
(actual return after expenses) | | Hypothetical
(5% annual return before expenses) | | |
Share Class | | Beginning
Account
Value 7/1/17 | | Ending
Account
Value 12/31/17 | | Expenses Paid
During Period
7/1/17–12/31/171,2 | | Ending
Account
Value 12/31/17 | | Expenses Paid
During Period
7/1/17–12/31/171,2 | | Net
Annualized
Expense
Ratio2 |
| | | | | | |
A | | $1,000 | | $1,049.60 | | $1.55 | | $1,023.69 | | $1.53 | | 0.30% |
C | | $1,000 | | $1,045.80 | | $5.41 | | $1,019.91 | | $5.35 | | 1.05% |
R | | $1,000 | | $1,048.10 | | $2.84 | | $1,022.43 | | $2.80 | | 0.55% |
R6 | | $1,000 | | $1,051.10 | | $0.00 | | $1,025.21 | | $0.00 | | 0.00% |
Advisor | | $1,000 | | $1,050.90 | | $0.26 | | $1,024.95 | | $0.26 | | 0.05% |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
| | | | |
| | | |
| 16 | | Annual Report | | franklintempleton.com |
Franklin LifeSmart 2025 Retirement Target Fund
This annual report for Franklin LifeSmart 2025 Retirement Target Fund covers the fiscal year ended December 31, 2017.
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. Under normal market conditions, the Fund allocates its assets 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 and exchange-traded funds (ETFs), with an increasing emphasis on income as the target date of 2025 approaches. The target date is the approximate retirement year of the investor.
Asset Allocation*
Based on Total Net Assets as of 12/31/17
*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 +14.95% cumulative total return for the 12 months ended December 31, 2017. 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, generated a +24.62% total return.1 The Fund’s fixed income
benchmark, the Bloomberg Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, produced a +7.69% total return.1 The Citigroup 3-Month Treasury Bill Index, a proxy for short-term investments and other net assets, returned +0.84%.2 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 19.
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, the investment manager considers the underlying funds’ foreign and domestic exposure, market capitalization ranges, and investment style (growth vs. value). When selecting fixed-income funds, the investment manager focuses primarily on maximizing income, appropriate to the Fund’s risk profile, and considers the credit quality, duration and maturity of the underlying funds’ portfolios. Certain fixed-income funds may hold securities across the credit quality spectrum, including below investment grade or “junk” bonds. In evaluating the risk level of the underlying funds, including alternative investments funds, the investment manager analyzes such factors as: (a) relative and absolute performance, including correlations with other underlying funds 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 with a target date comprising Franklin Fund Allocator Series (each a “Target Date 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.
2. Source: FactSet.
The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. 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 77.
| | | | | | |
franklintempleton.com | | Annual Report | | | 17 | |
FRANKLIN LIFESMART 2025 RETIREMENT TARGET FUND
| | | | |
| Top 10 Fund Holdings | | | |
| 12/31/17 | | | |
| | | % of Total
Net Assets | |
Franklin Growth Fund – Class R6 | | | 13.9% | |
Franklin Low Duration Total Return Fund – Class R6 | | | 13.5% | |
Templeton Global Total Return Fund – Class R6 | | | 7.3% | |
Franklin LibertyQ Emerging Markets ETF | | | 6.3% | |
Franklin Rising Dividends Fund – Class R6 | | | 5.8% | |
Franklin Growth Opportunities Fund – Class R6 | | | 5.3% | |
Franklin FTSE Europe ETF | | | 5.0% | |
Franklin International Small Cap Growth Fund –
Class R6 | | | 4.4% | |
Financial Select Sector SPDR ETF | | | 3.6% | |
Franklin LibertyQ U.S. Equity ETF | | | 3.4% | |
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, our largest domestic value fund holding, Franklin Rising Dividends Fund – Class R6, underperformed the Fund’s equity benchmark, the MSCI ACWI, while our largest domestic growth fund holding, Franklin Growth Fund – Class R6, outperformed the index. Our largest foreign equity fund holding, Franklin LibertyQ Emerging Markets ETF, also outperformed the index. On the fixed income side, our largest domestic fixed income fund holding, Franklin Low Duration Total Return Fund – Class R6, and our foreign fixed income fund holding, Templeton Global Total Return Fund – Class R6, underperformed the Fund’s fixed income benchmark, the Bloomberg Barclays Multiverse Index.
Thank you for your continued participation in Franklin LifeSmart 2025 Retirement Target Fund. We look forward to serving your future investment needs.
| | |
| |
T. Anthony Coffey, CFA |
| |
| |
Thomas A. Nelson, CFA |
| | Portfolio Managers |
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2017, 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.
| | | | |
| | | |
| 18 | | Annual Report | | franklintempleton.com |
FRANKLIN LIFESMART 2025 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2017
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. 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.
Performance as of 12/31/171
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.75% and the minimum is 0%. Class A: 5.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| | | | | | | | |
| Share Class | | Cumulative
Total Return2 | | | Average Annual
Total Return3 | |
| | |
| A | | | | | | | | |
1-Year | | | +14.95% | | | | +8.35% | |
5-Year | | | +45.39% | | | | +6.50% | |
10-Year | | | +59.40% | | | | +4.15% | |
| | |
| Advisor | | | | | | | | |
1-Year | | | +15.30% | | | | +15.30% | |
5-Year | | | +47.49% | | | | +8.08% | |
10-Year | | | +63.97% | | | | +5.07% | |
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.
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 19 | |
FRANKLIN LIFESMART 2025 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
Class A (1/1/08–12/31/17)
Advisor Class (1/1/08–12/31/17)
See page 21 for Performance Summary footnotes.
| | | | |
| | | |
| 20 | | Annual Report | | franklintempleton.com |
FRANKLIN LIFESMART 2025 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Distributions (1/1/17–12/31/17)
| | | | |
| Share Class | | Net Investment
Income | |
| A | | | $0.2306 | |
| C | | | $0.1372 | |
| R | | | $0.1892 | |
| R6 | | | $0.2687 | |
| Advisor | | | $0.2627 | |
Total Annual Operating Expenses6
| | | | | | | | |
| | |
| Share Class | | With Waiver | | | Without Waiver | |
| A | | | 0.97% | | | | 1.43% | |
| Advisor | | | 0.72% | | | | 1.18% | |
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
The Fund’s investment risk changes over time as its asset allocation changes. Since the Fund invests in underlying funds, which may engage in a variety of investment strategies involving certain risks, the Fund is subject to those same risks. All investments involve risks, including possible loss of principal. Principal invested is not guaranteed at any time, including at or after the Fund’s retirement target date; nor is there any guarantee that the Fund will provide sufficient income at or through the investor’s retirement. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, 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 which are heightened in developing countries. These risks are described more fully in the Fund’s prospectus. Investors should consult their financial advisor 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.
1. The Fund has an expense reduction and a fee waiver associated with any investments it makes in a Franklin Templeton money fund, contractually guaranteed through 4/30/18. Fund investment results reflect the expense reduction and fee waiver; 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.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
4. 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 Bloomberg 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.
5. Source: FactSet. Citigroup 3-Month Treasury Bill Index is an unmanaged index representing monthly return equivalents of yield averages of the last 3-Month Treasury Bill issues.
6. Figures are as stated in the Fund’s current prospectus, including the effect of acquired fund fees and expenses, and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 21 | |
FRANKLIN LIFESMART 2025 RETIREMENT TARGET FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | |
| | | | | Actual
(actual return after expenses) | | Hypothetical
(5% annual return before expenses) | | |
Share Class | | Beginning
Account
Value 7/1/17 | | Ending
Account
Value 12/31/17 | | Expenses Paid During Period 7/1/17–12/31/171,2
| | Ending
Account
Value 12/31/17 | | Expenses Paid During Period 7/1/17–12/31/171,2 | | Net
Annualized
Expense
Ratio2 |
| �� | | | | | |
| A | | $1,000 | | $1,065.10 | | $1.56 | | $1,023.69 | | $1.53 | | 0.30% |
| C | | $1,000 | | $1,061.80 | | $5.46 | | $1,019.91 | | $5.35 | | 1.05% |
| R | | $1,000 | | $1,064.40 | | $2.86 | | $1,022.43 | | $2.80 | | 0.55% |
| R6 | | $1,000 | | $1,067.20 | | $0.00 | | $1,025.21 | | $0.00 | | 0.00% |
| Advisor | | $1,000 | | $1,066.70 | | $0.26 | | $1,024.95 | | $0.26 | | 0.05% |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
| | | | |
| | | |
| 22 | | Annual Report | | franklintempleton.com |
Franklin LifeSmart 2030 Retirement Target Fund
This annual report for Franklin LifeSmart 2030 Retirement Target Fund covers the fiscal year ended December 31, 2017.
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. Under normal market conditions, the Fund allocates its assets 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 and exchange-traded funds (ETFs), with an increasing emphasis on income as the target date of 2030 approaches. The target date is the approximate retirement year of the investor.
Asset Allocation*
Based on Total Net Assets as of 12/31/17
*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 +16.73% cumulative total return for the 12 months ended December 31, 2017. 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, generated a +24.62% total return.1 The Fund’s fixed income
benchmark, the Bloomberg Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, produced a +7.69% total return.1 The Citigroup 3-Month Treasury Bill Index, a proxy for short-term investments and other net assets, returned +0.84%.2 You can find more of the Fund’s performance data in the Performance Summary beginning on page 25.
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, the investment manager considers the underlying funds’ foreign and domestic exposure, market capitalization ranges, and investment style (growth vs. value). When selecting fixed-income funds, the investment manager focuses primarily on maximizing income, appropriate to the Fund’s risk profile, and considers the credit quality, duration and maturity of the underlying funds’ portfolios. Certain fixed-income funds may hold securities across the credit quality spectrum, including below investment grade or “junk” bonds. In evaluating the risk level of the underlying funds, including alternative investments funds, the investment manager analyzes such factors as: (a) relative and absolute performance, including correlations with other underlying funds 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 with a target date comprising Franklin Fund Allocator Series (each a “Target Date 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.
2. Source: FactSet.
The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. 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 84.
| | | | | | |
franklintempleton.com | | Annual Report | | | 23 | |
FRANKLIN LIFESMART 2030 RETIREMENT TARGET FUND
| | | | |
| Top 10 Fund Holdings | | | |
| 12/31/17 | | | |
| | | % of Total
Net Assets | |
Franklin Growth Fund – Class R6 | | | 15.0% | |
Franklin Low Duration Total Return Fund – Class R6 | | | 10.0% | |
Franklin LibertyQ Emerging Markets ETF | | | 7.0% | |
Franklin Rising Dividends Fund – Class R6 | | | 6.4% | |
Franklin FTSE Europe ETF | | | 5.9% | |
Franklin International Small Cap Growth Fund – Class R6 | | | 5.7% | |
Templeton Global Total Return Fund – Class R6 | | | 5.6% | |
Franklin Growth Opportunities Fund – Class R6 | | | 5.6% | |
Financial Select Sector SPDR ETF | | | 4.0% | |
Franklin LibertyQ U.S. Equity ETF | | | 3.7% | |
Manager’s Discussion
The Fund’s performance can be attributed largely to its allocation among equities and fixed income securities and to the actual performance of the fund investments. This allocation shifts every year, in accordance with the target date associated with the portfolio.
At period-end, our largest domestic value fund holding, Franklin Rising Dividends Fund – Class R6, underperformed the Fund’s equity benchmark, the MSCI ACWI, while our largest domestic growth fund holding, Franklin Growth Fund – Class R6, outperformed the index. Our largest foreign equity fund holding, Franklin LibertyQ Emerging Markets ETF, also outperformed the index. On the fixed income side, our largest domestic fixed income fund holding, Franklin Low Duration Total Return Fund – Class R6, and our foreign fixed income fund holding, Templeton Global Total Return Fund – Class R6, underperformed the Fund’s fixed income benchmark, the Bloomberg Barclays Multiverse Index.
Thank you for your continued participation in Franklin LifeSmart 2030 Retirement Target Fund. We look forward to serving your future investment needs.
| | |
| |
T. Anthony Coffey, CFA |
| |
| |
Thomas A. Nelson, CFA |
| |
| | Portfolio Managers |
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2017, 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.
| | | | |
| | | |
| 24 | | Annual Report | | franklintempleton.com |
FRANKLIN LIFESMART 2030 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2017
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. 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.
Performance as of 12/31/171
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.75% and the minimum is 0%. Class A: 5.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| | | | | | | | |
| Share Class | | Cumulative
Total Return2 | | | Average Annual
Total Return3 | |
| | |
| A | | | | | | | | |
1-Year | | | +16.73% | | | | +9.98% | |
3-Year | | | +18.05% | | | | +3.62% | |
Since Inception (7/1/13) | | | +39.44% | | | | +6.26% | |
| | |
| Advisor | | | | | | | | |
1-Year | | | +16.97% | | | | +16.97% | |
3-Year | | | +18.91% | | | | +5.94% | |
Since Inception (7/1/13) | | | +40.97% | | | | +7.93% | |
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 27 for Performance Summary footnotes.
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 25 | |
FRANKLIN LIFESMART 2030 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
Class A (7/1/13–12/31/17)
Advisor Class (7/1/13–12/31/17)
See page 27 for Performance Summary footnotes.
| | | | |
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| 26 | | Annual Report | | franklintempleton.com |
FRANKLIN LIFESMART 2030 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Distributions (1/1/17–12/31/17)
| | | | |
| Share Class | | Net Investment
Income | |
| A | | | $0.2230 | |
| C | | | $0.1453 | |
| R | | | $0.1834 | |
| R6 | | | $0.2596 | |
| Advisor | | | $0.2540 | |
Total Annual Operating Expenses6
| | | | | | | | |
| | |
| Share Class | | With Waiver | | | Without Waiver | |
| A | | | 0.99% | | | | 1.71% | |
| Advisor | | | 0.74% | | | | 1.46% | |
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
The Fund’s investment risk changes over time as its asset allocation changes. Since the Fund invests in underlying funds, which may engage in a variety of investment strategies involving certain risks, the Fund is subject to those same risks. All investments involve risks, including possible loss of principal. Principal invested is not guaranteed at any time, including at or after the Fund’s retirement target date; nor is there any guarantee that the Fund will provide sufficient income at or through the investor’s retirement. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, 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 which are heightened in developing countries. These risks are described more fully in the Fund’s prospectus. Investors should consult their financial advisor 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.
1. The Fund has an expense reduction and a fee waiver associated with any investments it makes in a Franklin Templeton money fund, contractually guaranteed through 4/30/18. Fund investment results reflect the expense reduction and fee waiver; 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.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
4. 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 Bloomberg 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.
5. Source: FactSet. Citigroup 3-Month Treasury Bill Index is an unmanaged index representing monthly return equivalents of yield averages of the last 3-Month Treasury Bill issues.
6. Figures are as stated in the Fund’s current prospectus, including the effect of acquired fund fees and expenses, and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 27 | |
FRANKLIN LIFESMART 2030 RETIREMENT TARGET FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | |
| | | | | Actual
(actual return after expenses) | | Hypothetical
(5% annual return before expenses) | | |
Share Class | | Beginning
Account
Value 7/1/17 | | Ending
Account
Value 12/31/17 | | Expenses Paid During
Period 7/1/17–12/31/171,2 | | Ending
Account
Value 12/31/17 | | Expenses Paid During
Period 7/1/17–12/31/171,2 | | Net
Annualized
Expense
Ratio2 |
| | | | | | |
A | | $1,000 | | $1,074.10 | | $1.57 | | $1,023.69 | | $1.53 | | 0.30% |
C | | $1,000 | | $1,070.00 | | $5.48 | | $1,019.91 | | $5.35 | | 1.05% |
R | | $1,000 | | $1,072.60 | | $2.87 | | $1,022.43 | | $2.80 | | 0.55% |
R6 | | $1,000 | | $1,075.20 | | $0.00 | | $1,025.21 | | $0.00 | | 0.00% |
Advisor | | $1,000 | | $1,074.80 | | $0.26 | | $1,024.95 | | $0.26 | | 0.05% |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
| | | | |
| | | |
| 28 | | Annual Report | | franklintempleton.com |
Franklin LifeSmart 2035 Retirement Target Fund
This annual report for Franklin LifeSmart 2035 Retirement Target Fund covers the fiscal year ended December 31, 2017.
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. Under normal market conditions, the Fund allocates its assets 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 and exchange-traded funds (ETFs), with an increasing emphasis on income as the target date of 2035 approaches. The target date is the approximate retirement year of the investor.
Asset Allocation*
Based on Total Net Assets as of 12/31/17
*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 +17.93% cumulative total return for the 12 months ended December 31, 2017. 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, generated a +24.62% total return.1 The Fund’s fixed income
benchmark, the Bloomberg Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, produced a +7.69% total return.1 The Citigroup 3-Month Treasury Bill Index, a proxy for short-term investments and other net assets, returned +0.84%.2 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 31.
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, the investment manager considers the underlying funds’ foreign and domestic exposure, market capitalization ranges, and investment style (growth vs. value). When selecting fixed-income funds, the investment manager focuses primarily on maximizing income, appropriate to the Fund’s risk profile, and considers the credit quality, duration and maturity of the underlying funds’ portfolios. Certain fixed-income funds may hold securities across the credit quality spectrum, including below investment grade or “junk” bonds. In evaluating the risk level of the underlying funds, including alternative investments funds, the investment manager analyzes such factors as: (a) relative and absolute performance, including correlations with other underlying funds 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 with a target date comprising Franklin Fund Allocator Series (each a “Target Date 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.
2. Source: FactSet.
The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. 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 91.
| | | | | | |
franklintempleton.com | | Annual Report | | | 29 | |
FRANKLIN LIFESMART 2035 RETIREMENT TARGET FUND
| | | | |
| Top 10 Fund Holdings | | | |
| 12/31/17 | | | |
| | | % of Total
Net Assets | |
Franklin Growth Fund – Class R6 | | | 16.1% | |
Franklin Low Duration Total Return Fund – Class R6 | | | 7.6% | |
Franklin Growth Opportunities Fund – Class R6 | | | 7.1% | |
Franklin LibertyQ Emerging Markets ETF | | | 7.0% | |
Franklin International Small Cap Growth Fund – Class R6 | | | 6.4% | |
Franklin Rising Dividends Fund – Class R6 | | | 6.4% | |
Franklin FTSE Europe ETF | | | 6.2% | |
Templeton Global Total Return Fund – Class R6 | | | 4.3% | |
Financial Select Sector SPDR ETF | | | 4.2% | |
Franklin LibertyQ U.S. Equity ETF | | | 4.1% | |
Manager’s Discussion
The Fund’s performance can be attributed largely to its allocation among equities and fixed income securities and to the actual performance of the fund investments. This allocation shifts every year, in accordance with the target date associated with the portfolio.
At period-end, our largest domestic value fund holding, Franklin Rising Dividends Fund – Class R6, underperformed the Fund’s equity benchmark, the MSCI ACWI, while our largest domestic growth fund holding, Franklin Growth Fund – Class R6, outperformed the index. Our largest foreign equity fund holding, Franklin LibertyQ Emerging Markets ETF, also outperformed the index. On the fixed income side, our largest domestic fixed income fund holding, Franklin Low Duration Total Return Fund – Class R6, and our foreign fixed income fund holding, Templeton Global Total Return Fund – Class R6, underperformed the Fund’s fixed income benchmark, the Bloomberg 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.
| | |
| |
T. Anthony Coffey, CFA |
| |
| |
Thomas A. Nelson, CFA |
| | Portfolio Managers |
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2017, 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.
| | | | |
| | | |
| 30 | | Annual Report | | franklintempleton.com |
FRANKLIN LIFESMART 2035 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2017
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. 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.
Performance as of 12/31/171
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.75% and the minimum is 0%. Class A: 5.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| | | | | | | | |
| Share Class | | Cumulative
Total Return2 | | | Average Annual
Total Return3 | |
| | |
| A | | | | | | | | |
1-Year | | | +17.93% | | | | +11.18% | |
5-Year | | | +52.68% | | | | +7.55% | |
10-Year | | | +62.22% | | | | +4.34% | |
| | |
| Advisor | | | | | | | | |
1-Year | | | +18.24% | | | | +18.24% | |
5-Year | | | +54.75% | | | | +9.13% | |
10-Year | | | +67.16% | | | | +5.27% | |
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.
See page 33 for Performance Summary footnotes.
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 31 | |
FRANKLIN LIFESMART 2035 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
Class A (1/1/08–12/31/17)
Advisor Class (1/1/08–12/31/17)
See page 33 for Performance Summary footnotes.
| | | | |
| | | |
| 32 | | Annual Report | | franklintempleton.com |
FRANKLIN LIFESMART 2035 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Distributions (1/1/17–12/31/17)
| | | | |
| Share Class | | Net Investment Income | |
| A | | | $0.2769 | |
| C | | | $0.1855 | |
| R | | | $0.2369 | |
| R6 | | | $0.3165 | |
| Advisor | | | $0.3098 | |
Total Annual Operating Expenses6
| | | | | | | | |
| | |
| Share Class | | With Waiver | | | Without Waiver | |
| A | | | 0.99% | | | | 1.51% | |
| Advisor | | | 0.74% | | | | 1.26% | |
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
The Fund’s investment risk changes over time as its asset allocation changes. Since the Fund invests in underlying funds, which may engage in a variety of investment strategies involving certain risks, the Fund is subject to those same risks. All investments involve risks, including possible loss of principal. Principal invested is not guaranteed at any time, including at or after the Fund’s retirement target date; nor is there any guarantee that the Fund will provide sufficient income at or through the investor’s retirement. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, 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 which are heightened in developing countries. These risks are described more fully in the Fund’s prospectus. Investors should consult their financial advisor 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.
1. The Fund has an expense reduction and a fee waiver associated with any investments it makes in a Franklin Templeton money fund, contractually guaranteed through 4/30/18. Fund investment results reflect the expense reduction and fee waiver; 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.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
4. 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 Bloomberg 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.
5. Source: FactSet. Citigroup 3-Month Treasury Bill Index is an unmanaged index representing monthly return equivalents of yield averages of the last 3-Month Treasury Bill issues.
6. Figures are as stated in the Fund’s current prospectus, including the effect of acquired fund fees and expenses, and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 33 | |
FRANKLIN LIFESMART 2035 RETIREMENT TARGET FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | |
| | | | | Actual
(actual return after expenses) | | Hypothetical
(5% annual return before expenses) | | |
Share Class | | Beginning
Account
Value 7/1/17 | | Ending
Account
Value 12/31/17 | | Expenses Paid
During Period
7/1/17–12/31/171,2 | | Ending
Account
Value 12/31/17 | | Expenses Paid
During Period
7/1/17–12/31/171,2 | | Net
Annualized
Expense
Ratio2 |
| | | | | | |
| A | | $1,000 | | $1,078.40 | | $1.57 | | $1,023.69 | | $1.53 | | 0.30% |
| C | | $1,000 | | $1,073.90 | | $5.44 | | $1,019.96 | | $5.30 | | 1.04% |
| R | | $1,000 | | $1,077.00 | | $2.88 | | $1,022.43 | | $2.80 | | 0.55% |
| R6 | | $1,000 | | $1,080.00 | | $0.00 | | $1,025.21 | | $0.00 | | 0.00% |
| Advisor | | $1,000 | | $1,079.40 | | $0.26 | | $1,024.95 | | $0.26 | | 0.05% |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
| | | | |
| | | |
| 34 | | Annual Report | | franklintempleton.com |
Franklin LifeSmart 2040 Retirement Target Fund
This annual report for Franklin LifeSmart 2040 Retirement Target Fund covers the fiscal year ended December 31, 2017.
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. Under normal market conditions, the Fund allocates its assets 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 and exchange-traded funds (ETFs), with an increasing emphasis on income as the target date of 2040 approaches. The target date is the approximate retirement year of the investor.
Asset Allocation*
Based on Total Net Assets as of 12/31/17
*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 +18.50% cumulative total return for the 12 months ended December 31, 2017. 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, generated a +24.62% total return.1 The Fund’s fixed income
benchmark, the Bloomberg Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, produced a +7.69% total return.1 The Citigroup 3-Month Treasury Bill Index, a proxy for short-term investments and other net assets, returned +0.84%.2 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, the investment manager considers the underlying funds’ foreign and domestic exposure, market capitalization ranges, and investment style (growth vs. value). When selecting fixed-income funds, the investment manager focuses primarily on maximizing income, appropriate to the Fund’s risk profile, and considers the credit quality, duration and maturity of the underlying funds’ portfolios. Certain fixed-income funds may hold securities across the credit quality spectrum, including below investment grade or “junk” bonds. In evaluating the risk level of the underlying funds, including alternative investments funds, the investment manager analyzes such factors as: (a) relative and absolute performance, including correlations with other underlying funds 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 with a target date comprising Franklin Fund Allocator Series (each a “Target Date 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.
2. Source: FactSet.
The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. 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 98.
| | | | | | |
franklintempleton.com | | Annual Report | | | 35 | |
FRANKLIN LIFESMART 2040 RETIREMENT TARGET FUND
| | | | |
| Top 10 Fund Holdings | | | |
| 12/31/17 | | | |
| | | % of Total
Net Assets | |
Franklin Growth Fund – Class R6 | | | 16.7% | |
Franklin Growth Opportunities Fund – Class R6 | | | 7.6% | |
Franklin LibertyQ Emerging Markets ETF | | | 7.1% | |
Franklin International Small Cap Growth Fund – Class R6 | | | 6.8% | |
Franklin Low Duration Total Return Fund – Class R6 | | | 6.7% | |
Franklin Rising Dividends Fund – Class R6 | | | 6.6% | |
Franklin FTSE Europe ETF | | | 6.3% | |
Franklin LibertyQ U.S. Equity ETF | | | 4.3% | |
Financial Select Sector SPDR ETF | | | 4.3% | |
Franklin Mutual International Fund – Class R6 | | | 3.9% | |
Manager’s Discussion
The Fund’s performance can be attributed largely to its allocation among equities and fixed income securities and to the actual performance of the fund investments. This allocation shifts every year, in accordance with the target date associated with the portfolio.
At period-end, our largest domestic value fund holding, Franklin Rising Dividends Fund – Class R6, underperformed the Fund’s equity benchmark, the MSCI ACWI, while our largest domestic growth fund holding, Franklin Growth Fund – Class R6, outperformed the index. Our largest foreign equity fund holding, Franklin LibertyQ Emerging Markets ETF, also outperformed the index. On the fixed income side, our largest domestic fixed income fund holding, Franklin Low Duration Total Return Fund – Class R6, and our foreign fixed income fund holding, Templeton Global Total Return Fund – Class R6, underperformed the Fund’s fixed income benchmark, the Bloomberg Barclays Multiverse Index.
Thank you for your continued participation in Franklin LifeSmart 2040 Retirement Target Fund. We look forward to serving your future investment needs.
| | |
| |
T. Anthony Coffey, CFA |
| |
| |
Thomas A. Nelson, CFA |
| | Portfolio Managers |
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2017, 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.
| | | | |
| | | |
| 36 | | Annual Report | | franklintempleton.com |
FRANKLIN LIFESMART 2040 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2017
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. 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.
Performance as of 12/31/171
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.75% and the minimum is 0%. Class A: 5.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| | | | | | | | |
| Share Class | | Cumulative Total Return2 | | | Average Annual
Total Return3 | |
| | |
| A | | | | | | | | |
| | |
1-Year | | | +18.50% | | | | +11.72% | |
| | |
3-Year | | | +19.57% | | | | +4.06% | |
| | |
Since Inception (7/1/13) | | | +42.67% | | | | +6.80% | |
| | |
| Advisor | | | | | | | | |
| | |
1-Year | | | +18.88% | | | | +18.88% | |
| | |
3-Year | | | +20.51% | | | | +6.42% | |
| | |
Since Inception (7/1/13) | | | +44.51% | | | | +8.52% | |
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 39 for Performance Summary footnotes.
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 37 | |
FRANKLIN LIFESMART 2040 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
Class A (7/1/13–12/31/17)
Advisor Class (7/1/13–12/31/17)
See page 39 for Performance Summary footnotes.
| | | | |
| | | |
| 38 | | Annual Report | | franklintempleton.com |
FRANKLIN LIFESMART 2040 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Distributions (1/1/17–12/31/17)
| | | | |
| Share Class | | Net Investment
Income | |
| A | | | $0.2325 | |
| C | | | $0.1585 | |
| R | | | $0.1855 | |
| R6 | | | $0.2704 | |
| Advisor | | | $0.2641 | |
Total Annual Operating Expenses6
| | | | | | | | |
| | |
| Share Class | | With Waiver | | | Without Waiver | |
| A | | | 1.00% | | | | 1.89% | |
| Advisor | | | 0.75% | | | | 1.64% | |
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
The Fund’s investment risk changes over time as its asset allocation changes. Since the Fund invests in underlying funds, which may engage in a variety of investment strategies involving certain risks, the Fund is subject to those same risks. All investments involve risks, including possible loss of principal. Principal invested is not guaranteed at any time, including at or after the Fund’s retirement target date; nor is there any guarantee that the Fund will provide sufficient income at or through the investor’s retirement. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, 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 which are heightened in developing countries. These risks are described more fully in the Fund’s prospectus. Investors should consult their financial advisor 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.
1. The Fund has an expense reduction and a fee waiver associated with any investments it makes in a Franklin Templeton money fund, contractually guaranteed through 4/30/18. Fund investment results reflect the expense reduction and fee waiver; 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.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
4. 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 Bloomberg 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.
5. Source: FactSet. Citigroup 3-Month Treasury Bill Index is an unmanaged index representing monthly return equivalents of yield averages of the last 3-Month Treasury Bill issues.
6. Figures are as stated in the Fund’s current prospectus, including the effect of acquired fund fees and expenses, and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 39 | |
FRANKLIN LIFESMART 2040 RETIREMENT TARGET FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | |
| | | | | Actual
(actual return after expenses) | | Hypothetical
(5% annual return before expenses) | | |
Share Class | | Beginning
Account
Value 7/1/17 | | Ending
Account
Value 12/31/17 | | Expenses Paid During Period 7/1/17–12/31/171,2 | | Ending
Account
Value 12/31/17 | | Expenses Paid During Period 7/1/17–12/31/171,2 | | Net Annualized Expense Ratio2 |
| | | | | | |
A | | $1,000 | | $1,081.10 | | $1.57 | | $1,023.69 | | $1.53 | | 0.30% |
C | | $1,000 | | $1,077.20 | | $5.50 | | $1,019.91 | | $5.35 | | 1.05% |
R | | $1,000 | | $1,080.00 | | $2.88 | | $1,022.43 | | $2.80 | | 0.55% |
R6 | | $1,000 | | $1,082.70 | | $0.00 | | $1,025.21 | | $0.00 | | 0.00% |
Advisor | | $1,000 | | $1,082.30 | | $0.26 | | $1,024.95 | | $0.26 | | 0.05% |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
| | | | |
| | | |
| 40 | | Annual Report | | franklintempleton.com |
Franklin LifeSmart 2045 Retirement Target Fund
This annual report for Franklin LifeSmart 2045 Retirement Target Fund covers the fiscal year ended December 31, 2017.
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. Under normal market conditions, the Fund allocates its assets 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 and exchange-traded funds (ETFs), with an increasing emphasis on income as the target date of 2045 approaches. The target date is the approximate retirement year of the investor.
Asset Allocation*
Based on Total Net Assets as of 12/31/17
*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 +18.72% cumulative total return for the 12 months ended December 31, 2017. 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, generated a +24.62% total return.1 The Fund’s fixed income
benchmark, the Bloomberg Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, produced a +7.69% total return.1 The Citigroup 3-Month Treasury Bill Index, a proxy for short-term investments and other net assets, returned +0.84%.2 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 43.
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, the investment manager considers the underlying funds’ foreign and domestic exposure, market capitalization ranges, and investment style (growth vs. value). When selecting fixed-income funds, the investment manager focuses primarily on maximizing income, appropriate to the Fund’s risk profile, and considers the credit quality, duration and maturity of the underlying funds’ portfolios. Certain fixed-income funds may hold securities across the credit quality spectrum, including below investment grade or “junk” bonds. In evaluating the risk level of the underlying funds, including alternative investments funds, the investment manager analyzes such factors as: (a) relative and absolute performance, including correlations with other underlying funds 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 with a target date comprising Franklin Fund Allocator Series (each a “Target Date 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.
2. Source: FactSet.
The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. 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 105.
| | | | | | |
franklintempleton.com | | Annual Report | | | 41 | |
FRANKLIN LIFESMART 2045 RETIREMENT TARGET FUND
| | | | |
| Top 10 Fund Holdings | | | | |
| 12/31/17 | | | |
| | | % of Total
Net Assets | |
Franklin Growth Fund – Class R6 | | | 16.7% | |
Franklin Growth Opportunities Fund – Class R6 | | | 7.6% | |
Franklin LibertyQ Emerging Markets ETF | | | 7.5% | |
Franklin International Small Cap Growth Fund – Class R6 | | | 6.7% | |
Franklin Rising Dividends Fund – Class R6 | | | 6.6% | |
Franklin FTSE Europe ETF | | | 6.5% | |
Franklin Low Duration Total Return Fund – Class R6 | | | 6.1% | |
Financial Select Sector SPDR ETF | | | 4.3% | |
Franklin LibertyQ U.S. Equity ETF | | | 4.3% | |
Templeton Foreign 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, our largest domestic value fund holding, Franklin Rising Dividends Fund – Class R6, underperformed the Fund’s equity benchmark, the MSCI ACWI, while our largest domestic growth fund holding, Franklin Growth Fund – Class R6, outperformed the index. Our largest foreign equity fund holding, Franklin LibertyQ Emerging Markets ETF, also outperformed the index. On the fixed income side, our largest domestic fixed income fund holding, Franklin Low Duration Total Return Fund – Class R6, and our foreign fixed income fund holding, Templeton Global Total Return Fund – Class R6, underperformed the Fund’s fixed income benchmark, the Bloomberg 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.
| | |
| |
T. Anthony Coffey, CFA |
| |
| |
Thomas A. Nelson, CFA |
| |
| | Portfolio Managers |
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2017, 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.
| | | | |
| | | |
| 42 | | Annual Report | | franklintempleton.com |
FRANKLIN LIFESMART 2045 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2017
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. 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.
Performance as of 12/31/171
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.75% and the minimum is 0%. Class A: 5.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| | | | | | | | |
| Share Class | | Cumulative
Total Return2 | | | Average Annual
Total Return3 | |
| | |
| A | | | | | | | | |
1-Year | | | +18.72% | | | | +11.92% | |
5-Year | | | +54.93% | | | | +7.86% | |
10-Year | | | +64.85% | | | | +4.50% | |
| | |
| Advisor | | | | | | | | |
1-Year | | | +19.04% | | | | +19.04% | |
5-Year | | | +57.10% | | | | +9.46% | |
10-Year | | | +69.59% | | | | +5.42% | |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
See page 45 for Performance Summary footnotes.
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 43 | |
FRANKLIN LIFESMART 2045 RETIREMENT TARGET FUND
PERFORMANCE1 SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
Class A (1/1/08–12/31/17)
Advisor Class (1/1/08–12/31/17)
See page 45 for Performance Summary footnotes.
| | | | |
| | | |
| 44 | | Annual Report | | franklintempleton.com |
FRANKLIN LIFESMART 2045 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Distributions (1/1/17–12/31/17)
| | | | |
| Share Class | | Net Investment
Income | |
| A | | | $0.2901 | |
| C | | | $0.1944 | |
| R | | | $0.2573 | |
| R6 | | | $0.3304 | |
| Advisor | | | $0.3231 | |
Total Annual Operating Expenses6
| | | | | | | | |
| | |
| Share Class | | With Waiver | | | Without Waiver | |
A | | | 1.01% | | | | 1.68% | |
Advisor | | | 0.76% | | | | 1.43% | |
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
The Fund’s investment risk changes over time as its asset allocation changes. Since the Fund invests in underlying funds, which may engage in a variety of investment strategies involving certain risks, the Fund is subject to those same risks. All investments involve risks, including possible loss of principal. Principal invested is not guaranteed at any time, including at or after the Fund’s retirement target date; nor is there any guarantee that the Fund will provide sufficient income at or through the investor’s retirement. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, 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 which are heightened in developing countries. These risks are described more fully in the Fund’s prospectus. Investors should consult their financial advisor 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.
1. The Fund has an expense reduction and a fee waiver associated with any investments it makes in a Franklin Templeton money fund, contractually guaranteed through 4/30/18. Fund investment results reflect the expense reduction and fee waiver; 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.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
4. 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 Bloomberg 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.
5. Source: FactSet. Citigroup 3-Month Treasury Bill Index is an unmanaged index representing monthly return equivalents of yield averages of the last 3-Month Treasury Bill issues.
6. Figures are as stated in the Fund’s current prospectus, including the effect of acquired fund fees and expenses, and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 45 | |
FRANKLIN LIFESMART 2045 RETIREMENT TARGET FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | |
| | | | | Actual
(actual return after expenses) | | Hypothetical
(5% annual return before expenses) | | |
Share
Class | | Beginning
Account
Value 7/1/17 | | Ending
Account
Value 12/31/17 | | Expenses
Paid During
Period
7/1/17–12/31/171,2 | | Ending
Account
Value 12/31/17 | | Expenses
Paid During
Period
7/1/17–12/31/171,2 | | Net
Annualized
Expense
Ratio2 |
| | | | | | |
A | | $1,000 | | $1,082.40 | | $1.57 | | $1,023.69 | | $1.53 | | 0.30% |
C | | $1,000 | | $1,077.80 | | $5.45 | | $1,019.96 | | $ 5.30 | | 1.04% |
R | | $1,000 | | $1,081.00 | | $2.88 | | $1,022.43 | | $2.80 | | 0.55% |
R6 | | $1,000 | | $1,084.00 | | $0.00 | | $1,025.21 | | $0.00 | | 0.00% |
Advisor | | $1,000 | | $1,083.40 | | $0.26 | | $1,024.95 | | $0.26 | | 0.05% |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
| | | | |
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| 46 | | Annual Report | | franklintempleton.com |
Franklin LifeSmart 2050 Retirement Target Fund
This annual report for Franklin LifeSmart 2050 Retirement Target Fund covers the fiscal year ended December 31, 2017.
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. Under normal market conditions, the Fund allocates its assets 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 and exchange-traded funds (ETFs), with an increasing emphasis on income as the target date of 2050 approaches. The target date is the approximate retirement year of the investor.
Asset Allocation*
Based on Total Net Assets as of 12/31/17
*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 +18.96% cumulative total return for the 12 months ended December 31, 2017. 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, generated a +24.62% total return.1 The Fund’s fixed income
benchmark, the Bloomberg Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, produced a +7.69% total return.1 The Citigroup 3-Month Treasury Bill Index, a proxy for short-term investments and other net assets, returned +0.84%.2 You can find more of the Fund’s performance data in the Performance Summary beginning on page 49.
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, the investment manager considers the underlying funds’ foreign and domestic exposure, market capitalization ranges, and investment style (growth vs. value). When selecting fixed-income funds, the investment manager focuses primarily on maximizing income, appropriate to the Fund’s risk profile, and considers the credit quality, duration and maturity of the underlying funds’ portfolios. Certain fixed-income funds may hold securities across the credit quality spectrum, including below investment grade or “junk” bonds. In evaluating the risk level of the underlying funds, including alternative investments funds, the investment manager analyzes such factors as: (a) relative and absolute performance, including correlations with other underlying funds 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 with a target date comprising Franklin Fund Allocator Series (each a “Target Date 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.
2. Source: FactSet.
The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. 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 112.
| | | | | | |
franklintempleton.com | | Annual Report | | | 47 | |
FRANKLIN LIFESMART 2050 RETIREMENT TARGET FUND
| | | | |
| Top 10 Fund Holdings | | | |
| 12/31/17 | | | |
| | | % of Total
Net Assets | |
Franklin Growth Fund – Class R6 | | | 17.0% | |
Franklin LibertyQ Emerging Markets ETF | | | 7.9% | |
Franklin Growth Opportunities Fund – Class R6 | | | 7.6% | |
Franklin International Small Cap Growth Fund – Class R6 | | | 6.7% | |
Franklin Rising Dividends Fund – Class R6 | | | 6.6% | |
Franklin FTSE Europe ETF | | | 6.5% | |
Franklin Low Duration Total Return Fund – Class R6 | | | 5.5% | |
Franklin LibertyQ U.S. Equity ETF | | | 4.5% | |
Templeton Foreign Fund – Class R6 | | | 4.3% | |
Financial Select Sector SPDR ETF | | | 4.3% | |
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, our largest domestic value fund holding, Franklin Rising Dividends Fund – Class R6, underperformed the Fund’s equity benchmark, the MSCI ACWI, while our largest domestic growth fund holding, Franklin Growth Fund – Class R6, outperformed the index. Our largest foreign equity fund holding, Franklin LibertyQ Emerging Markets ETF, also outperformed the index. On the fixed income side, our largest domestic fixed income fund holding, Franklin Low Duration Total Return Fund – Class R6, and our foreign fixed income fund holding, Templeton Global Total Return Fund – Class R6, underperformed the Fund’s fixed income benchmark, the Bloomberg Barclays Multiverse Index.
Thank you for your continued participation in Franklin LifeSmart 2050 Retirement Target Fund. We look forward to serving your future investment needs.
| | |
| |
T. Anthony Coffey, CFA |
| |
| |
Thomas A. Nelson, CFA |
| |
| | Portfolio Managers |
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2017, 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.
| | | | |
| | | |
| 48 | | Annual Report | | franklintempleton.com |
FRANKLIN LIFESMART 2050 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2017
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. 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.
Performance as of 12/31/171
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.75% and the minimum is 0%. Class A: 5.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| | | | | | | | |
| Share Class | | Cumulative
Total Return2 | | | Average Annual
Total Return3 | |
| | |
| A | | | | | | | | |
1-Year | | | +18.96% | | | | +12.11% | |
3-Year | | | +20.74% | | | | +4.40% | |
Since Inception (7/1/13) | | | +44.54% | | | | +7.11% | |
| | |
| Advisor | | | | | | | | |
1-Year | | | +19.20% | | | | +19.20% | |
3-Year | | | +21.70% | | | | +6.77% | |
Since Inception (7/1/13) | | | +46.42% | | | | +8.84% | |
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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| franklintempleton.com | | Annual Report | | | 49 | |
FRANKLIN LIFESMART 2050 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
Class A (7/1/13–12/31/17)
Advisor Class (7/1/13–12/31/17)
See page 51 for Performance Summary footnotes.
| | | | |
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| 50 | | Annual Report | | franklintempleton.com |
FRANKLIN LIFESMART 2050 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Distributions (1/1/17–12/31/17)
| | | | |
| Share Class | | Net Investment
Income | |
| A | | | $0.2308 | |
| C | | | $0.1466 | |
| R | | | $0.1981 | |
| R6 | | | $0.2649 | |
| Advisor | | | $0.2589 | |
| | | | | | | | |
| Total Annual Operating Expenses6 | |
| | |
| Share Class | | With Waiver | | | Without Waiver | |
A | | | 1.00% | | | | 2.17% | |
Advisor | | | 0.75% | | | | 1.92% | |
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
The Fund’s investment risk changes over time as its asset allocation changes. Since the Fund invests in underlying funds, which may engage in a variety of investment strategies involving certain risks, the Fund is subject to those same risks. All investments involve risks, including possible loss of principal. Principal invested is not guaranteed at any time, including at or after the Fund’s retirement target date; nor is there any guarantee that the Fund will provide sufficient income at or through the investor’s retirement. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, 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 which are heightened in developing countries. These risks are described more fully in the Fund’s prospectus. Investors should consult their financial advisor 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.
1. The Fund has an expense reduction and a fee waiver associated with any investments it makes in a Franklin Templeton money fund, contractually guaranteed through 4/30/18. Fund investment results reflect the expense reduction and fee waiver; 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.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
4. 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 Bloomberg 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.
5. Source: FactSet. Citigroup 3-Month Treasury Bill Index is an unmanaged index representing monthly return equivalents of yield averages of the last 3-Month Treasury Bill issues.
6. Figures are as stated in the Fund’s current prospectus, including the effect of acquired fund fees and expenses, and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
| | | | | | |
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| franklintempleton.com | | Annual Report | | | 51 | |
FRANKLIN LIFESMART 2050 RETIREMENT TARGET FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | |
| | | | | Actual
(actual return after expenses) | | Hypothetical
(5% annual return before expenses) | | |
Share Class | | Beginning
Account
Value 7/1/17 | | Ending
Account
Value 12/31/17 | | Expenses Paid During
Period 7/1/17–12/31/171,2 | | Ending
Account
Value 12/31/17 | | Expenses Paid During
Period 7/1/17–12/31/171,2 | | Net
Annualized
Expense
Ratio2 |
| | | | | | |
A | | $1,000 | | $1,082.40 | | $1.57 | | $1,023.69 | | $1.53 | | 0.30% |
C | | $1,000 | | $1,078.70 | | $5.50 | | $1,019.91 | | $5.35 | | 1.05% |
R | | $1,000 | | $1,081.50 | | $2.89 | | $1,022.43 | | $2.80 | | 0.55% |
R6 | | $1,000 | | $1,084.70 | | $0.00 | | $1,025.21 | | $0.00 | | 0.00% |
Advisor | | $1,000 | | $1,084.20 | | $0.26 | | $1,024.95 | | $0.26 | | 0.05% |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
| | | | |
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| 52 | | Annual Report | | franklintempleton.com |
Franklin LifeSmart 2055 Retirement Target Fund
This annual report for Franklin LifeSmart 2055 Retirement Target Fund covers the fiscal year ended December 31, 2017.
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. Under normal market conditions, the Fund allocates its assets 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 and exchange-traded funds (ETFs), 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 12/31/17
*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 +19.06% cumulative total return for the 12 months ended December 31, 2017. 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, generated a +24.62% total return.1 The Fund’s fixed income
benchmark, the Bloomberg Barclays Multiverse Index, a broad-based measure of the global fixed income bond market, produced a +7.69% total return.1 The Citigroup 3-Month Treasury Bill Index, a proxy for short-term investments and other net assets, returned +0.84%.2 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 55.
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, the investment manager considers the underlying funds’ foreign and domestic exposure, market capitalization ranges, and investment style (growth vs. value). When selecting fixed-income funds, the investment manager focuses primarily on maximizing income, appropriate to the Fund’s risk profile, and considers the credit quality, duration and maturity of the underlying funds’ portfolios. Certain fixed-income funds may hold securities across the credit quality spectrum, including below investment grade or “junk” bonds. In evaluating the risk level of the underlying funds, including alternative investments funds, the investment manager analyzes such factors as: (a) relative and absolute performance, including correlations with other underlying funds 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 with a target date comprising Franklin Fund Allocator Series (each a “Target Date 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.
2. Source: FactSet.
The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. 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 119.
| | | | | | |
franklintempleton.com | | Annual Report | | | 53 | |
FRANKLIN LIFESMART 2055 RETIREMENT TARGET FUND
| | | | |
| Top 10 Fund Holdings | | | |
| 12/31/17 | | | |
| | | % of Total
Net Assets | |
Franklin Growth Fund – Class R6 | | | 17.4% | |
Franklin Growth Opportunities Fund – Class R6 | | | 7.6% | |
Franklin LibertyQ Emerging Markets ETF | | | 7.6% | |
Franklin International Small Cap Growth Fund –
Class R6 | | | 6.9% | |
Franklin Rising Dividends Fund – Class R6 | | | 6.8% | |
Franklin FTSE Europe ETF | | | 6.6% | |
Franklin Low Duration Total Return Fund – Class R6 | | | 5.6% | |
Franklin LibertyQ U.S. Equity ETF | | | 4.7% | |
Templeton Foreign Fund – Class R6 | | | 4.6% | |
Financial Select Sector SPDR ETF | | | 4.3% | |
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, our largest domestic value fund holding, Franklin Rising Dividends Fund – Class R6, underperformed the Fund’s equity benchmark, the MSCI ACWI, while our largest domestic growth fund holding, Franklin Growth Fund – Class R6, outperformed the index. Our largest foreign equity fund holding, Franklin LibertyQ Emerging Markets ETF, also outperformed the index. On the fixed income side, our largest domestic fixed income fund holding, Franklin Low Duration Total Return Fund – Class R6, and our foreign fixed income fund holding, Templeton Global Total Return Fund – Class R6, underperformed the Fund’s fixed income benchmark, the Bloomberg Barclays Multiverse Index.
Thank you for your continued participation in Franklin LifeSmart 2055 Retirement Target Fund. We look forward to serving your future investment needs.
| | |
| |
T. Anthony Coffey, CFA |
| | |
| |
Thomas A. Nelson, CFA |
| | Portfolio Managers |
The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2017, 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.
| | | | |
| | | |
| 54 | | Annual Report | | franklintempleton.com |
FRANKLIN LIFESMART 2055 RETIREMENT TARGET FUND
Performance Summary as of December 31, 2017
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. 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.
Performance as of 12/31/171
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.75% and the minimum is 0%. Class A: 5.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| | | | | | | | |
| Share Class | | Cumulative
Total Return2 | | | Average Annual
Total Return3 | |
| | |
| A | | | | | | | | |
1-Year | | | +19.06% | | | | +12.19% | |
Since Inception (5/1/15) | | | +16.15% | | | | +3.45% | |
| | |
| Advisor | | | | | | | | |
1-Year | | | +19.27% | | | | +19.27% | |
Since Inception (5/1/15) | | | +16.75% | | | | +5.98% | |
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 57 for Performance Summary footnotes.
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 55 | |
FRANKLIN LIFESMART 2055 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
Class A (5/1/15–12/31/17)
Advisor Class (5/1/15–12/31/17)
See page 57 for Performance Summary footnotes.
| | | | |
| | | |
| 56 | | Annual Report | | franklintempleton.com |
FRANKLIN LIFESMART 2055 RETIREMENT TARGET FUND
PERFORMANCE SUMMARY
Distributions (1/1/17–12/31/17)
| | | | | | | | | | | | |
| Share Class | | Net Investment
Income | | | Long-Term
Capital Gain | | | Total | |
A | | | $0.1911 | | | | $0.0301 | | | | $0.2212 | |
C | | | $0.1367 | | | | $0.0301 | | | | $0.1668 | |
R | | | $0.1609 | | | | $0.0301 | | | | $0.1910 | |
R6 | | | $0.2180 | | | | $0.0301 | | | | $0.2481 | |
Advisor | | | $0.2130 | | | | $0.0301 | | | | $0.2431 | |
| | | | | | | | |
| Total Annual Operating Expenses6 | |
| | |
| Share Class | | With Waiver | | | Without Waiver | |
A | | | 1.00% | | | | 4.71% | |
Advisor | | | 0.75% | | | | 4.46% | |
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
The Fund’s investment risk changes over time as its asset allocation changes. Since the Fund invests in underlying funds, which may engage in a variety of investment strategies involving certain risks, the Fund is subject to those same risks. All investments involve risks, including possible loss of principal. Principal invested is not guaranteed at any time, including at or after the Fund’s retirement target date; nor is there any guarantee that the Fund will provide sufficient income at or through the investor’s retirement. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, 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 which are heightened in developing countries. These risks are described more fully in the Fund’s prospectus. Investors should consult their financial advisor 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.
1. The Fund has an expense reduction and a fee waiver associated with any investments it makes in a Franklin Templeton money fund, contractually guaranteed through 4/30/18. Fund investment results reflect the expense reduction and fee waiver; without these reductions, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
4. 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 Bloomberg 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.
5. Source: FactSet. Citigroup 3-Month Treasury Bill Index is an unmanaged index representing monthly return equivalents of yield averages of the last 3-Month Treasury Bill issues.
6. Figures are as stated in the Fund’s current prospectus, including the effect of acquired fund fees and expenses, and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 57 | |
FRANKLIN LIFESMART 2055 RETIREMENT TARGET FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | |
| | | | | Actual
(actual return after expenses) | | Hypothetical
(5% annual return before expenses) | | |
Share Class | | Beginning
Account
Value 7/1/17 | | Ending
Account
Value 12/31/17 | | Expenses Paid During
Period 7/1/17–12/31/171,2 | | Ending
Account
Value 12/31/17 | | Expenses Paid During
Period 7/1/17–12/31/171,2 | | Net
Annualized
Expense
Ratio2 |
| | | | | | |
A | | $1,000 | | $1,084.10 | | $1.58 | | $1,023.69 | | $1.53 | | 0.30% |
C | | $1,000 | | $1,079.80 | | $5.50 | | $1,019.91 | | $5.35 | | 1.05% |
R | | $1,000 | | $1,081.50 | | $2.89 | | $1,022.43 | | $2.80 | | 0.55% |
R6 | | $1,000 | | $1,085.60 | | $0.00 | | $1,025.21 | | $0.00 | | 0.00% |
Advisor | | $1,000 | | $1,085.10 | | $0.26 | | $1,024.95 | | $0.26 | | 0.05% |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
| | | | |
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| 58 | | Annual Report | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
Financial Highlights
Franklin LifeSmart Retirement Income Fund
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| Class A | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $10.96 | | | | $10.78 | | | | $11.67 | | | | $12.28 | | | | $11.67 | |
| | | | |
| | | | | |
Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.43 | | | | 0.27 | | | | 0.26 | | | | 0.39 | | | | 0.25 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 0.10 | | | | 0.28 | | | | (0.55 | ) | | | (0.01 | ) | | | 1.16 | |
| | | | |
| | | | | |
Total from investment operations | | | 0.53 | | | | 0.55 | | | | (0.29 | ) | | | 0.38 | | | | 1.41 | |
| | | | |
| | | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income | | | (0.43 | ) | | | (0.28 | ) | | | (0.27 | ) | | | (0.40 | ) | | | (0.27 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.05 | ) | | | (0.33 | ) | | | (0.59 | ) | | | (0.53 | ) |
| | | | | |
Tax return of capital | | | — | | | | (0.04 | ) | | | — | | | | — | | | | — | |
| | | | |
| | | | | |
Total distributions | | | (0.43 | ) | | | (0.37 | ) | | | (0.60 | ) | | | (0.99 | ) | | | (0.80 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $11.06 | | | | $10.96 | | | | $10.78 | | | | $11.67 | | | | $12.28 | |
| | | | |
| | | | | |
Total returnd | | | 4.84% | | | | 5.25% | | | | (2.59)% | | | | 3.07% | | | | 12.27% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatese | | | 0.92% | | | | 0.90% | | | | 0.92% | | | | 0.84% | | | | 0.83% | |
| | | | | |
Expenses net of waiver and payments by affiliatese | | | 0.30%f | | | | 0.30% | | | | 0.33% | | | | 0.35% | | | | 0.38% | |
| | | | | |
Net investment incomec | | | 3.89% | | | | 2.50% | | | | 2.27% | | | | 3.20% | | | | 2.04% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $32,397 | | | | $39,713 | | | | $44,823 | | | | $48,121 | | | | $44,347 | |
| | | | | |
Portfolio turnover rate | | | 28.12% | | | | 149.53% | | | | 38.48% | | | | 68.98% | | | | 73.66% | |
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 0.44% for the year ended December 31, 2017.
fBenefit of expense reduction rounds to less than 0.01%.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 59 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart Retirement Income Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| Class C | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $10.83 | | | | $10.66 | | | | $11.55 | | | | $12.16 | | | | $11.57 | |
| | | | |
| | | | | |
Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.34 | | | | 0.19 | | | | 0.18 | | | | 0.30 | | | | 0.16 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 0.10 | | | | 0.28 | | | | (0.55 | ) | | | (0.01 | ) | | | 1.15 | |
| | | | |
| | | | | |
Total from investment operations | | | 0.44 | | | | 0.47 | | | | (0.37 | ) | | | 0.29 | | | | 1.31 | |
| | | | |
| | | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income | | | (0.35 | ) | | | (0.22 | ) | | | (0.19 | ) | | | (0.31 | ) | | | (0.19 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.05 | ) | | | (0.33 | ) | | | (0.59 | ) | | | (0.53 | ) |
| | | | | |
Tax return of capital | | | — | | | | (0.03 | ) | | | — | | | | — | | | | — | |
| | | | |
| | | | | |
Total distributions | | | (0.35 | ) | | | (0.30 | ) | | | (0.52 | ) | | | (0.90 | ) | | | (0.72 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $10.92 | | | | $10.83 | | | | $10.66 | | | | $11.55 | | | | $12.16 | |
| | | | |
| | | | | |
Total returnd | | | 4.07% | | | | 4.50% | | | | (3.32)% | | | | 2.39% | | | | 11.46% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatese | | | 1.67% | | | | 1.64% | | | | 1.64% | | | | 1.54% | | | | 1.53% | |
| | | | | |
Expenses net of waiver and payments by affiliatese | | | 1.05%f | | | | 1.04% | | | | 1.05% | | | | 1.05% | | | | 1.08% | |
| | | | | |
Net investment incomec | | | 3.14% | | | | 1.76% | | | | 1.55% | | | | 2.50% | | | | 1.34% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $16,070 | | | | $17,570 | | | | $20,858 | | | | $21,189 | | | | $20,395 | |
| | | | | |
Portfolio turnover rate | | | 28.12% | | | | 149.53% | | | | 38.48% | | | | 68.98% | | | | 73.66% | |
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 0.44% for the year ended December 31, 2017.
fBenefit of expense reduction rounds to less than 0.01%.
| | | | |
| | | |
| 60 | | Annual Report | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart Retirement Income Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| Class R | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $10.92 | | | | $10.74 | | | | $11.64 | | | | $12.25 | | | | $11.64 | |
| | | | |
| | | | | |
Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.40 | | | | 0.25 | | | | 0.25 | | | | 0.36 | | | | 0.22 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 0.09 | | | | 0.28 | | | | (0.57 | ) | | | (— | )d | | | 1.16 | |
| | | | |
| | | | | |
Total from investment operations | | | 0.49 | | | | 0.53 | | | | (0.32 | ) | | | 0.36 | | | | 1.38 | |
| | | | |
| | | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income | | | (0.40 | ) | | | (0.26 | ) | | | (0.25 | ) | | | (0.38 | ) | | | (0.24 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.05 | ) | | | (0.33 | ) | | | (0.59 | ) | | | (0.53 | ) |
| | | | | |
Tax return of capital | | | — | | | | (0.04 | ) | | | — | | | | — | | | | — | |
| | | | |
| | | | | |
Total distributions | | | (0.40 | ) | | | (0.35 | ) | | | (0.58 | ) | | | (0.97 | ) | | | (0.77 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $11.01 | | | | $10.92 | | | | $10.74 | | | | $11.64 | | | | $12.25 | |
| | | | |
| | | | | |
Total return | | | 4.57% | | | | 4.94% | | | | (2.87)% | | | | 2.89% | | | | 12.04% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatese | | | 1.17% | | | | 1.15% | | | | 1.14% | | | | 1.04% | | | | 1.03% | |
| | | | | |
Expenses net of waiver and payments by affiliatese | | | 0.55%f | | | | 0.55% | | | | 0.55% | | | | 0.55% | | | | 0.58% | |
| | | | | |
Net investment incomec | | | 3.64% | | | | 2.25% | | | | 2.05% | | | | 3.00% | | | | 1.84% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $4,071 | | | | $4,920 | | | | $4,130 | | | | $2,828 | | | | $2,279 | |
| | | | | |
Portfolio turnover rate | | | 28.12% | | | | 149.53% | | | | 38.48% | | | | 68.98% | | | | 73.66% | |
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.
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 0.44% for the year ended December 31, 2017.
fBenefit of expense reduction rounds to less than 0.01%.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 61 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart Retirement Income Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Class R6 | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.01 | | | | $10.82 | | | | $11.72 | | | | $12.32 | | | | $12.17 | |
| | | | |
| | | | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.47 | | | | 0.30 | | | | 0.31 | | | | 0.57 | | | | 0.49 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 0.10 | | | | 0.29 | | | | (0.57 | ) | | | (0.14 | ) | | | 0.44 | |
| | | | |
| | | | | |
Total from investment operations | | | 0.57 | | | | 0.59 | | | | (0.26 | ) | | | 0.43 | | | | 0.93 | |
| | | | |
| | | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income | | | (0.47 | ) | | | (0.31 | ) | | | (0.31 | ) | | | (0.44 | ) | | | (0.25 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.05 | ) | | | (0.33 | ) | | | (0.59 | ) | | | (0.53 | ) |
| | | | | |
Tax return of capital | | | — | | | | (0.04 | ) | | | — | | | | — | | | | — | |
| | | | |
| | | | | |
Total distributions | | | (0.47 | ) | | | (0.40 | ) | | | (0.64 | ) | | | (1.03 | ) | | | (0.78 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $11.11 | | | | $11.01 | | | | $10.82 | | | | $11.72 | | | | $12.32 | |
| | | | |
| | | | | |
Total returne | | | 5.14% | | | | 5.60% | | | | (2.34)% | | | | 3.49% | | | | 7.78% | |
| | | | | |
| Ratios to average net assetsf | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesg | | | 0.52% | | | | 0.55% | | | | 0.53% | | | | 0.44% | | | | 0.60% | |
| | | | | |
Expenses net of waiver and payments by affiliatesg | | | —%h | | | | —% | | | | —% | | | | —% | | | | —% | |
| | | | | |
Net investment incomed | | | 4.19% | | | | 2.80% | | | | 2.60% | | | | 3.55% | | | | 2.42% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $4,031 | | | | $3,930 | | | | $6,828 | | | | $6,709 | | | | $763 | |
| | | | | |
Portfolio turnover rate | | | 28.12% | | | | 149.53% | | | | 38.48% | | | | 68.98% | | | | 73.66% | |
aFor the period May 1, 2013 (effective date) 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 0.44% for the year ended December 31, 2017.
hBenefit of expense reduction rounds to less than 0.01%.
| | | | |
| | | |
| 62 | | Annual Report | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart Retirement Income Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| Advisor Class | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.00 | | | | $10.81 | | | | $11.71 | | | | $12.31 | | | | $11.70 | |
| | | | |
| | | | | |
Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.46 | | | | 0.29 | | | | 0.25 | | | | 0.43 | | | | 0.29 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 0.10 | | | | 0.29 | | | | (0.52 | ) | | | (— | )d | | | 1.16 | |
| | | | |
| | | | | |
Total from investment operations | | | 0.56 | | | | 0.58 | | | | (0.27 | ) | | | 0.43 | | | | 1.45 | |
| | | | |
| | | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income | | | (0.46 | ) | | | (0.30 | ) | | | (0.30 | ) | | | (0.44 | ) | | | (0.31 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.05 | ) | | | (0.33 | ) | | | (0.59 | ) | | | (0.53 | ) |
| | | | | |
Tax return of capital | | | — | | | | (0.04 | ) | | | — | | | | — | | | | — | |
| | | | |
| | | | | |
Total distributions | | | (0.46 | ) | | | (0.39 | ) | | | (0.63 | ) | | | (1.03 | ) | | | (0.84 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $11.10 | | | | $11.00 | | | | $10.81 | | | | $11.71 | | | | $12.31 | |
| | | | |
| | | | | |
Total return | | | 5.09% | | | | 5.55% | | | | (2.40)% | | | | 3.45% | | | | 12.55% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatese | | | 0.67% | | | | 0.65% | | | | 0.64% | | | | 0.54% | | | | 0.53% | |
| | | | | |
Expenses net of waiver and payments by affiliatese | | | 0.05%f | | | | 0.05% | | | | 0.05% | | | | 0.05% | | | | 0.08% | |
| | | | | |
Net investment incomec | | | 4.14% | | | | 2.75% | | | | 2.55% | | | | 3.50% | | | | 2.34% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $2,122 | | | | $1,696 | | | | $880 | | | | $2,194 | | | | $2,494 | |
| | | | | |
Portfolio turnover rate | | | 28.12% | | | | 149.53% | | | | 38.48% | | | | 68.98% | | | | 73.66% | |
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.
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 0.44% for the year ended December 31, 2017.
fBenefit of expense reduction rounds to less than 0.01%.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 63 | |
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2017
| | | | | | | | | | |
| Franklin LifeSmart Retirement Income Fund | |
| | | | | Shares | | | Value | |
| | Investments in Underlying Funds and Exchange Traded Funds 90.1% | | | | | | | | |
| | Domestic Equity 8.4% | | | | | | | | |
| | iShares U.S. Preferred Stock ETF | | | 130,400 | | | $ | 4,964,328 | |
| | | | | | | | | | |
| | Domestic Fixed Income 55.7% | | | | | | | | |
| a | | Franklin Floating Rate Daily Access Fund, Class R6 | | | 1,642,895 | | | | 14,408,195 | |
| a | | Franklin High Income Fund, Class R6 | | | 2,134,595 | | | | 4,013,039 | |
| a | | Franklin U.S. Government Securities Fund, Class R6 | | | 1,455,994 | | | | 8,852,441 | |
| | iShares iBoxx High Yield Corporate Bond ETF | | | 61,900 | | | | 5,401,394 | |
| | | | | | | | | | |
| | | | | | | | | 32,675,069 | |
| | | | | | | | | | |
| | Domestic Hybrid 21.5% | | | | | | | | |
| a | | Franklin Income Fund, Class R6 | | | 5,341,125 | | | | 12,605,056 | |
| | | | | | | | | | |
| | Foreign Fixed Income 4.5% | | | | | | | | |
| a | | Templeton Global Total Return Fund, Class R6 | | | 218,266 | | | | 2,630,100 | |
| | | | | | | | | | |
| | Total Investments in Underlying Funds and Exchange Traded Funds
(Cost $51,681,287) | | | | | | | 52,874,553 | |
| | | | | | | | | | |
| | | |
| | | | | Units | | | | |
| b | | Index-Linked Notes 9.9% | | | | | | | | |
| c,d,e | | Barclays Bank PLC, senior note, 144A, 0.947%, 7/08/19 | | | 2,500 | | | | 2,483,383 | |
| c,f | | Morgan Stanley, senior note, 144A, 4.89%, 3/29/18 | | | 26,778 | | | | 3,345,370 | |
| | | | | | | | | | |
| | Total Index-Linked Notes (Cost $5,497,797) | | | | | | | 5,828,753 | |
| | | | | | | | | | |
| | Total Investments before Short Term Investments (Cost $57,179,084) | | | | | | | 58,703,306 | |
| | | | | | | | | | |
| | | |
| | | | | Shares | | | | |
| | Short Term Investments (Cost $65,050) 0.1% | | | | | | | | |
| | Money Market Funds 0.1% | | | | | | | | |
| a,g | | Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 65,050 | | | | 65,050 | |
| | | | | | | | | | |
| | Total Investments (Cost $57,244,134) 100.1% | | | | | | | 58,768,356 | |
| | Other Assets, less Liabilities (0.1)% | | | | | | | (76,822 | ) |
| | | | | | | | | | |
| | Net Assets 100.0% | | | | | | `$ | 58,691,534 | |
| | | | | | | | | | |
See Abbreviations on page 157.
aSee Note 3(f) regarding investments in FT Underlying Funds.
bSee Note 1(c) regarding index-linked notes.
cSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At December 31, 2017, the aggregate value of these securities was $5,828,753, representing 9.9% of net assets.
dFair valued using significant unobservable inputs. See Note 8 regarding fair value measurements.
eSecurity pays a variable coupon based on the distribution of the SPXDIV Index. The coupon rate shown represents the rate at period end. Cash payment at maturity or upon early redemption is based on the performance of the S&P 500 Index.
fSecurity pays a fixed 2.00% coupon rate and a variable coupon based on the distribution of the Morgan Stanley Custom Enhanced SPX B DT Index. The coupon rate shown represents the combined rate at period end. Cash payment at maturity or upon early redemption is based on the performance of the Morgan Stanley Custom Enhanced SPX B Index.
gThe rate shown is the annualized seven-day yield at period end.
| | | | |
| | | |
| 64 | | Annual Report | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
Financial Highlights
Franklin LifeSmart 2020 Retirement Target Fund
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Class A | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $10.68 | | | | $10.61 | | | | $11.14 | | | | $10.94 | | | | $10.00 | |
| | | | |
| | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.18 | | | | 0.13 | | | | 0.24 | | | | 0.33 | | | | 0.16 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.05 | | | | 0.19 | | | | (0.48 | ) | | | 0.20 | | | | 0.91 | |
| | | | |
| | | | | |
Total from investment operations | | | 1.23 | | | | 0.32 | | | | (0.24 | ) | | | 0.53 | | | | 1.07 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income | | | (0.15 | ) | | | (0.17 | ) | | | (0.19 | ) | | | (0.27 | ) | | | (0.13 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.08 | ) | | | (0.10 | ) | | | (0.06 | ) | | | (— | )e |
| | | | |
| | | | | |
Total distributions | | | (0.15 | ) | | | (0.25 | ) | | | (0.29 | ) | | | (0.33 | ) | | | (0.13 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $11.76 | | | | $10.68 | | | | $10.61 | | | | $11.14 | | | | $10.94 | |
| | | | |
| | | | | |
Total returnf | | | 11.53% | | | | 3.03% | | | | (2.18)% | | | | 4.83% | | | | 10.69% | |
| | | | | |
| Ratios to average net assetsg | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesh | | | 1.02% | | | | 0.98% | | | | 1.05% | | | | 2.25% | | | | 11.14% | |
| | | | | |
Expenses net of waiver and payments by affiliatesh | | | 0.30% | | | | 0.30% | | | | 0.32% | | | | 0.35% | | | | 0.24% | |
| | | | | |
Net investment incomed | | | 1.58% | | | | 1.25% | | | | 2.06% | | | | 3.20% | | | | 3.12% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $20,289 | | | | $19,292 | | | | $19,895 | | | | $7,302 | | | | $2,189 | |
| | | | | |
Portfolio turnover rate | | | 47.93% | | | | 87.38% | | | | 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 0.58% for the year ended December 31, 2017.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 65 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2020 Retirement Target Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Class C | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $10.62 | | | | $10.56 | | | | $11.08 | | | | $10.90 | | | | $10.00 | |
| | | | |
| | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.10 | | | | 0.05 | | | | 0.14 | | | | 0.24 | | | | 0.18 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.03 | | | | 0.18 | | | | (0.44 | ) | | | 0.21 | | | | 0.83 | |
| | | | |
| | | | | |
Total from investment operations | | | 1.13 | | | | 0.23 | | | | (0.30 | ) | | | 0.45 | | | | 1.01 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income | | | (0.06 | ) | | | (0.09 | ) | | | (0.12 | ) | | | (0.21 | ) | | | (0.11 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.08 | ) | | | (0.10 | ) | | | (0.06 | ) | | | (— | )e |
| | | | |
| | | | | |
Total distributions | | | (0.06 | ) | | | (0.17 | ) | | | (0.22 | ) | | | (0.27 | ) | | | (0.11 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $11.69 | | | | $10.62 | | | | $10.56 | | | | $11.08 | | | | $10.90 | |
| | | | |
| | | | | |
Total returnf | | | 10.69% | | | | 2.29% | | | | (2.84)% | | | | 4.09% | | | | 10.16% | |
| | | | | |
| Ratios to average net assetsg | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesh | | | 1.77% | | | | 1.73% | | | | 1.78% | | | | 2.95% | | | | 11.95% | |
| | | | | |
Expenses net of waiver and payments by affiliatesh | | | 1.05% | | | | 1.05% | | | | 1.05% | | | | 1.05% | | | | 1.05% | |
| | | | | |
Net investment incomed | | | 0.83% | | | | 0.50% | | | | 1.33% | | | | 2.50% | | | | 2.31% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $6,287 | | | | $5,138 | | | | $5,221 | | | | $2,617 | | | | $250 | |
| | | | | |
Portfolio turnover rate | | | 47.93% | | | | 87.38% | | | | 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 0.58% for the year ended December 31, 2017.
| | | | |
| | | |
| 66 | | Annual Report | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2020 Retirement Target Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Class R | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $10.66 | | | | $10.59 | | | | $11.12 | | | | $10.93 | | | | $10.00 | |
| | | | |
| | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.12 | | | | 0.10 | | | | 0.35 | | | | 0.42 | | | | 0.11 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.08 | | | | 0.18 | | | | (0.61 | ) | | | 0.08 | | | | 0.93 | |
| | | | |
| | | | | |
Total from investment operations | | | 1.20 | | | | 0.28 | | | | (0.26 | ) | | | 0.50 | | | | 1.04 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income | | | (0.11 | ) | | | (0.13 | ) | | | (0.17 | ) | | | (0.25 | ) | | | (0.11 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.08 | ) | | | (0.10 | ) | | | (0.06 | ) | | | (— | )e |
| | | | |
| | | | | |
Total distributions | | | (0.11 | ) | | | (0.21 | ) | | | (0.27 | ) | | | (0.31 | ) | | | (0.11 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $11.75 | | | | $10.66 | | | | $10.59 | | | | $11.12 | | | | $10.93 | |
| | | | |
| | | | | |
Total returnf | | | 11.26% | | | | 2.74% | | | | (2.35)% | | | | 4.61% | | | | 10.48% | |
| | | | | |
| Ratios to average net assetsg | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesh | | | 1.27% | | | | 1.23% | | | | 1.28% | | | | 2.45% | | | | 11.45% | |
| | | | | |
Expenses net of waiver and payments by affiliatesh | | | 0.55% | | | | 0.55% | | | | 0.55% | | | | 0.55% | | | | 0.55% | |
| | | | | |
Net investment incomed | | | 1.33% | | | | 1.00% | | | | 1.83% | | | | 3.00% | | | | 2.81% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $969 | | | | $3,145 | | | | $3,189 | | | | $80 | | | | $11 | |
| | | | | |
Portfolio turnover rate | | | 47.93% | | | | 87.38% | | | | 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 0.58% for the year ended December 31, 2017.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 67 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2020 Retirement Target Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Class R6 | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $10.70 | | | | $10.64 | | | | $11.15 | | | | $10.95 | | | | $10.00 | |
| | | | |
| | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.21 | | | | 0.17 | | | | 0.23 | | | | 0.45 | | | | 0.14 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.06 | | | | 0.17 | | | | (0.42 | ) | | | 0.11 | | | | 0.94 | |
| | | | |
| | | | | |
Total from investment operations | | | 1.27 | | | | 0.34 | | | | (0.19 | ) | | | 0.56 | | | | 1.08 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income | | | (0.18 | ) | | | (0.20 | ) | | | (0.22 | ) | | | (0.30 | ) | | | (0.13 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.08 | ) | | | (0.10 | ) | | | (0.06 | ) | | | (— | )e |
| | | | |
| | | | | |
Total distributions | | | (0.18 | ) | | | (0.28 | ) | | | (0.32 | ) | | | (0.36 | ) | | | (0.13 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $11.79 | | | | $10.70 | | | | $10.64 | | | | $11.15 | | | | $10.95 | |
| | | | |
| | | | | |
Total returnf | | | 11.93% | | | | 3.33% | | | | (1.80)% | | | | 5.14% | | | | 10.84% | |
| | | | | |
| Ratios to average net assetsg | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesh | | | 0.59% | | | | 0.57% | | | | 0.66% | | | | 1.81% | | | | 11.51% | |
| | | | | |
Expenses net of waiver and payments by affiliatesh | | | —% | | | | —% | | | | —% | | | | —% | | | | —% | |
| | | | | |
Net investment incomed | | | 1.88% | | | | 1.55% | | | | 2.38% | | | | 3.55% | | | | 3.36% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $8,831 | | | | $6,670 | | | | $6,751 | | | | $7,361 | | | | $11 | |
| | | | | |
Portfolio turnover rate | | | 47.93% | | | | 87.38% | | | | 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 0.58% for the year ended December 31, 2017.
| | | | |
| | | |
| 68 | | Annual Report | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2020 Retirement Target Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Advisor Class | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $10.70 | | | | $10.63 | | | | $11.15 | | | | $10.95 | | | | $10.00 | |
| | | | |
| | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.23 | | | | 0.16 | | | | 0.25 | | | | 0.39 | | | | 0.17 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.04 | | | | 0.18 | | | | (0.45 | ) | | | 0.17 | | | | 0.91 | |
| | | | |
| | | | | |
Total from investment operations | | | 1.27 | | | | 0.34 | | | | (0.20 | ) | | | 0.56 | | | | 1.08 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income | | | (0.18 | ) | | | (0.19 | ) | | | (0.22 | ) | | | (0.30 | ) | | | (0.13 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.08 | ) | | | (0.10 | ) | | | (0.06 | ) | | | (— | )e |
| | | | |
| | | | | |
Total distributions | | | (0.18 | ) | | | (0.27 | ) | | | (0.32 | ) | | | (0.36 | ) | | | (0.13 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $11.79 | | | | $10.70 | | | | $10.63 | | | | $11.15 | | | | $10.95 | |
| | | | |
| | | | | |
Total returnf | | | 11.88% | | | | 3.28% | | | | (1.85)% | | | | 5.08% | | | | 10.83% | |
| | | | | |
| Ratios to average net assetsg | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesh | | | 0.77% | | | | 0.73% | | | | 0.78% | | | | 1.95% | | | | 10.95% | |
| | | | | |
Expenses net of waiver and payments by affiliatesh | | | 0.05% | | | | 0.05% | | | | 0.05% | | | | 0.05% | | | | 0.05% | |
| | | | | |
Net investment incomed | | | 1.83% | | | | 1.50% | | | | 2.33% | | | | 3.50% | | | | 3.31% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $691 | | | | $317 | | | | $290 | | | | $98 | | | | $44 | |
| | | | | |
Portfolio turnover rate | | | 47.93% | | | | 87.38% | | | | 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 0.58% for the year ended December 31, 2017.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 69 | |
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2017
Franklin LifeSmart 2020 Retirement Target Fund
| | | | | | | | | | |
| | | | | Shares | | | Value | |
| | Investments in Underlying Funds and Exchange Traded Funds 97.4% | | | | | | | | |
| | Alternative Strategies 4.7% | | | | | | | | |
| a | | Franklin K2 Long Short Credit Fund, Class R6 | | | 86,634 | | | $ | 902,723 | |
| a | | Franklin Pelagos Commodities Strategy Fund, Class R6 | | | 126,603 | | | | 845,712 | |
| | | | | | | | | | |
| | | | | | | 1,748,435 | |
| | | | | | | | | | |
| | Domestic Equity 29.3% | | | | | | | | |
| | Financial Select Sector SPDR ETF | | | 34,800 | | | | 971,268 | |
| a | | Franklin Growth Fund, Class R6 | | | 41,360 | | | | 3,910,204 | |
| a,b | | Franklin Growth Opportunities Fund, Class R6 | | | 38,900 | | | | 1,526,046 | |
| a | | Franklin LibertyQ U.S. Equity ETF | | | 34,600 | | | | 1,000,283 | |
| a | | Franklin Rising Dividends Fund, Class R6 | | | 26,237 | | | | 1,602,829 | |
| a,b | | Franklin Small Cap Growth Fund, Class R6 | | | 21,218 | | | | 504,128 | |
| a | | Franklin Utilities Fund, Class R6 | | | 33,104 | | | | 623,682 | |
| | iShares S&P 500 Value ETF | | | 6,378 | | | | 728,623 | |
| | | | | | | | | | |
| | | | | | | | | 10,867,063 | |
| | | | | | | | | | |
| | Domestic Fixed Income 35.1% | | | | | | | | |
| a | | Franklin Floating Rate Daily Access Fund, Class R6 | | | 113,595 | | | | 996,227 | |
| a | | Franklin Low Duration Total Return Fund, Class R6 | | | 768,049 | | | | 7,542,245 | |
| a | | Franklin Strategic Income Fund, Class R6 | | | 101,065 | | | | 995,493 | |
| a | | Franklin U.S. Government Securities Fund, Class R6 | | | 223,660 | | | | 1,359,850 | |
| | iShares Core U.S. Aggregate Bond ETF | | | 13,800 | | | | 1,508,754 | |
| | iShares iBoxx $ Investment Grade Corporate Bond ETF | | | 5,100 | | | | 619,956 | |
| | | | | | | | | | |
| | | | | | | | | 13,022,525 | |
| | | | | | | | | | |
| | Foreign Equity 17.0% | | | | | | | | |
| a | | Franklin FTSE Europe ETF | | | 54,400 | | | | 1,387,472 | |
| a | | Franklin International Small Cap Growth Fund, Class R6 | | | 59,882 | | | | 1,206,623 | |
| a | | Franklin LibertyQ Emerging Markets ETF | | | 47,400 | | | | 1,566,333 | |
| a | | Franklin Mutual International Fund, Class R6 | | | 47,619 | | | | 760,469 | |
| | iShares Global Infrastructure ETF | | | 10,702 | | | | 483,945 | |
| a | | Templeton Foreign Fund, Class R6 | | | 110,287 | | | | 875,682 | |
| | | | | | | | | | |
| | | | | | | | | 6,280,524 | |
| | | | | | | | | | |
| | Foreign Fixed Income 11.3% | | | | | | | | |
| a | | Templeton Global Total Return Fund, Class R6 | | | 347,950 | | | | 4,192,791 | |
| | | | | | | | | | |
| | Total Investments in Underlying Funds and Exchange Traded Funds before Short Term Investments (Cost $32,926,306) | | | | | | | 36,111,338 | |
| | | | | | | | | | |
| | | |
| | | Short Term Investments 2.6% | | | | | | |
| | Money Market Funds (Cost $904,584) 2.4% | | | | | | | | |
| a,c | | Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 904,584 | | | | 904,584 | |
| | | | | | | | | | |
| | | | |
| | | |
| 70 | | Annual Report | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin LifeSmart 2020 Retirement Target Fund (continued)
| | | | | | | | | | |
| | | | | Principal
Amount | | | Value | |
| | Repurchase Agreements (Cost $64,954) 0.2% | | | | | | | | |
| d | | Joint Repurchase Agreement, 1.377%, 1/02/18 (Maturity Value $64,964) | | | | | | | | |
| | BNP Paribas Securities Corp. (Maturity Value $10,590) | | | | | | | | |
| | Deutsche Bank Securities Inc. (Maturity Value $11,803) | | | | | | | | |
| | HSBC Securities (USA) Inc. (Maturity Value $42,359) | | | | | | | | |
| | Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $212) | | | | | | | | |
| | Collateralized by U.S. Government Agency Securities, 0.00% - 1.98%, 7/27/18 - 11/22/21; U.S. Treasury Note, 1.25% - 2.00%, 12/31/18 - 4/30/22; and U.S. Treasury Note, Index Linked, 0.125%, 4/15/18 (valued at $66,258) | | | $64,954 | | | $ | 64,954 | |
| | | | | | | | | | |
| | Total Investments (Cost $33,895,844) 100.0% | | | | | | | 37,080,876 | |
| | Other Assets, less Liabilities (0.0)%† | | | | | | | (13,631 | ) |
| | | | | | | | | | |
| | Net Assets 100.0% | | | | | | $ | 37,067,245 | |
| | | | | | | | | | |
See Abbreviations on page 157.
†Rounds to less than 0.1% of net assets.
aSee Note 3(f) regarding investments in FT Underlying Funds.
bNon-income producing.
cThe rate shown is the annualized seven-day yield at period end.
dSee Note 1(b) regarding joint repurchase agreement.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 71 | |
FRANKLIN FUND ALLOCATOR SERIES
Financial Highlights
Franklin LifeSmart 2025 Retirement Target Fund
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| Class A | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.49 | | | | $11.44 | | | | $12.36 | | | | $12.76 | | | | $11.11 | |
| | | | |
| | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.19 | | | | 0.14 | | | | 0.19 | | | | 0.26 | | | | 0.16 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.52 | | | | 0.19 | | | | (0.43 | ) | | | 0.30 | | | | 2.06 | |
| | | | |
| | | | | |
| Total from investment operations | | | 1.71 | | | | 0.33 | | | | (0.24 | ) | | | 0.56 | | | | 2.22 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.23 | ) | | | (0.13 | ) | | | (0.19 | ) | | | (0.28 | ) | | | (0.19 | ) |
| | | | | |
| Net realized gains | | | — | | | | (0.15 | ) | | | (0.49 | ) | | | (0.68 | ) | | | (0.38 | ) |
| | | | |
| | | | | |
| Total distributions | | | (0.23 | ) | | | (0.28 | ) | | | (0.68 | ) | | | (0.96 | ) | | | (0.57 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $12.97 | | | | $11.49 | | | | $11.44 | | | | $12.36 | | | | $12.76 | |
| | | | |
| | | | | |
Total returnd | | | 14.95% | | | | 2.96% | | | | (2.08)% | | | | 4.39% | | | | 20.18% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Expenses before waiver and payments by affiliatese | | | 0.80% | | | | 0.76% | | | | 0.77% | | | | 0.83% | | | | 0.84% | |
| | | | | |
| Expenses net of waiver and payments by affiliatese | | | 0.30% | | | | 0.30% | | | | 0.33% | | | | 0.35% | | | | 0.38% | |
| | | | | |
| Net investment incomec | | | 1.52% | | | | 1.18% | | | | 1.52% | | | | 2.03% | | | | 1.31% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $77,510 | | | | $74,746 | | | | $72,625 | | | | $67,854 | | | | $58,811 | |
| | | | | |
| Portfolio turnover rate | | | 34.08% | | | | 83.67% | | | | 36.22% | | | | 62.00% | | | | 47.39% | |
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 0.59% for the year ended December 31, 2017.
| | | | |
| | | |
| 72 | | 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, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| Class C | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Net asset value, beginning of year | | | $11.32 | | | | $11.27 | | | | $12.18 | | | | $12.60 | | | | $10.97 | |
| | | | |
| | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.09 | | | | 0.05 | | | | 0.10 | | | | 0.16 | | | | 0.07 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.50 | | | | 0.20 | | | | (0.42 | ) | | | 0.29 | | | | 2.05 | |
| | | | |
| | | | | |
| Total from investment operations | | | 1.59 | | | | 0.25 | | | | (0.32 | ) | | | 0.45 | | | | 2.12 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.14 | ) | | | (0.05 | ) | | | (0.10 | ) | | | (0.19 | ) | | | (0.11 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.15 | ) | | | (0.49 | ) | | | (0.68 | ) | | | (0.38 | ) |
| | | | |
| | | | | |
| Total distributions | | | (0.14 | ) | | | (0.20 | ) | | | (0.59 | ) | | | (0.87 | ) | | | (0.49 | ) |
| | | | |
| | | | | |
| Net asset value, end of year | | | $12.77 | | | | $11.32 | | | | $11.27 | | | | $12.18 | | | | $12.60 | |
| | | | |
| | | | | |
Total returnd | | | 14.06% | | | | 2.21% | | | | (2.74)% | | | | 3.58% | | | | 19.52% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Expenses before waiver and payments by affiliatese | | | 1.55% | | | | 1.51% | | | | 1.49% | | | | 1.53% | | | | 1.54% | |
| | | | | |
| Expenses net of waiver and payments by affiliatese | | | 1.05% | | | | 1.05% | | | | 1.05% | | | | 1.05% | | | | 1.08% | |
| | | | | |
| Net investment incomec | | | 0.77% | | | | 0.43% | | | | 0.80% | | | | 1.33% | | | | 0.61% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Net assets, end of year (000’s) | | | $27,301 | | | | $26,401 | | | | $29,425 | | | | $28,712 | | | | $25,248 | |
| | | | | |
| Portfolio turnover rate | | | 34.08% | | | | 83.67% | | | | 36.22% | | | | 62.00% | | | | 47.39% | |
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 0.59% for the year ended December 31, 2017.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 73 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2025 Retirement Target Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| Class R | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.44 | | | | $11.40 | | | | $12.31 | | | | $12.72 | | | | $11.07 | |
| | | | |
| | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.14 | | | | 0.11 | | | | 0.17 | | | | 0.23 | | | | 0.13 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.54 | | | | 0.19 | | | | (0.42 | ) | | | 0.30 | | | | 2.07 | |
| | | | |
| | | | | |
Total from investment operations | | | 1.68 | | | | 0.30 | | | | (0.25 | ) | | | 0.53 | | | | 2.20 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.19 | ) | | | (0.11 | ) | | | (0.17 | ) | | | (0.26 | ) | | | (0.17 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.15 | ) | | | (0.49 | ) | | | (0.68 | ) | | | (0.38 | ) |
| | | | |
| | | | | |
Total distributions | | | (0.19 | ) | | | (0.26 | ) | | | (0.66 | ) | | | (0.94 | ) | | | (0.55 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $12.93 | | | | $11.44 | | | | $11.40 | | | | $12.31 | | | | $12.72 | |
| | | | |
| | | | | |
Total return | | | 14.73% | | | | 2.65% | | | | (2.20)% | | | | 4.12% | | | | 20.05% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesd | | | 1.05% | | | | 1.01% | | | | 0.99% | | | | 1.03% | | | | 1.04% | |
| | | | | |
Expenses net of waiver and payments by affiliatesd | | | 0.55% | | | | 0.55% | | | | 0.55% | | | | 0.55% | | | | 0.58% | |
| | | | | |
Net investment incomec | | | 1.27% | | | | 0.93% | | | | 1.30% | | | | 1.83% | | | | 1.11% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $6,166 | | | | $7,411 | | | | $6,062 | | | | $5,361 | | | | $4,835 | |
| | | | | |
Portfolio turnover rate | | | 34.08% | | | | 83.67% | | | | 36.22% | | | | 62.00% | | | | 47.39% | |
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 0.59% for the year ended December 31, 2017.
| | | | |
| | | |
| 74 | | 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, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Class R6 | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Net asset value, beginning of year | | | $11.52 | | | | $11.47 | | | | $12.39 | | | | $12.79 | | | | $11.74 | |
| | | | |
| | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.23 | | | | 0.17 | | | | 0.24 | | | | 0.41 | | | | 0.55 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.53 | | | | 0.20 | | | | (0.44 | ) | | | 0.20 | | | | 1.06 | |
| | | | |
| | | | | |
Total from investment operations | | | 1.76 | | | | 0.37 | | | | (0.20 | ) | | | 0.61 | | | | 1.61 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.27 | ) | | | (0.17 | ) | | | (0.23 | ) | | | (0.33 | ) | | | (0.18 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.15 | ) | | | (0.49 | ) | | | (0.68 | ) | | | (0.38 | ) |
| | | | |
| | | | | |
Total distributions | | | (0.27 | ) | | | (0.32 | ) | | | (0.72 | ) | | | (1.01 | ) | | | (0.56 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $13.01 | | | | $11.52 | | | | $11.47 | | | | $12.39 | | | | $12.79 | |
| | | | |
| | | | | |
Total returne | | | 15.34% | | | | 3.24% | | | | (1.74)% | | | | 4.74% | | | | 13.90% | |
| | | | | |
| Ratios to average net assetsf | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesg | | | 0.37% | | | | 0.37% | | | | 0.36% | | | | 0.39% | | | | 0.45% | |
| | | | | |
Expenses net of waiver and payments by affiliatesg | | | —% | | | | —% | | | | —% | | | | —% | | | | —% | |
| | | | | |
Net investment incomed | | | 1.82% | | | | 1.48% | | | | 1.85% | | | | 2.38% | | | | 1.69% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $17,009 | | | | $13,936 | | | | $17,129 | | | | $14,010 | | | | $2,339 | |
| | | | | |
Portfolio turnover rate | | | 34.08% | | | | 83.67% | | | | 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 0.59% for the year ended December 31, 2017.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 75 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2025 Retirement Target Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| Advisor Class | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Net asset value, beginning of year | | | $11.51 | | | | $11.46 | | | | $12.38 | | | | $12.79 | | | | $11.12 | |
| | | | |
| | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.23 | | | | 0.17 | | | | 0.16 | | | | 0.29 | | | | 0.19 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.52 | | | | 0.19 | | | | (0.37 | ) | | | 0.30 | | | | 2.08 | |
| | | | |
| | | | | |
| Total from investment operations | | | 1.75 | | | | 0.36 | | | | (0.21 | ) | | | 0.59 | | | | 2.27 | |
| | | | |
| | | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from
Underlying Funds and exchange traded funds | | | (0.26 | ) | | | (0.16 | ) | | | (0.22 | ) | | | (0.32 | ) | | | (0.22 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.15 | ) | | | (0.49 | ) | | | (0.68 | ) | | | (0.38 | ) |
| | | | |
| | | | | |
Total distributions | | | (0.26 | ) | | | (0.31 | ) | | | (0.71 | ) | | | (1.00 | ) | | | (0.60 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $13.00 | | | | $11.51 | | | | $11.46 | | | | $12.38 | | | | $12.79 | |
| | | | |
| | | | | |
Total return | | | 15.30% | | | | 3.20% | | | | (1.80)% | | | | 4.61% | | | | 20.66% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesd | | | 0.55% | | | | 0.51% | | | | 0.49% | | | | 0.53% | | | | 0.54% | |
| | | | | |
Expenses net of waiver and payments by affiliatesd | | | 0.05% | | | | 0.05% | | | | 0.05% | | | | 0.05% | | | | 0.08% | |
| | | | | |
Net investment incomec | | | 1.77% | | | | 1.43% | | | | 1.80% | | | | 2.33% | | | | 1.61% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $1,866 | | | | $1,381 | | | | $1,194 | | | | $2,814 | | | | $2,487 | |
| | | | | |
Portfolio turnover rate | | | 34.08% | | | | 83.67% | | | | 36.22% | | | | 62.00% | | | | 47.39% | |
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 0.59% for the year ended December 31, 2017.
| | | | |
| | | |
| 76 | | Annual Report | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2017
Franklin LifeSmart 2025 Retirement Target Fund
| | | | | | | | | | |
| | | | | Shares | | | Value | |
| | Investments in Underlying Funds and Exchange Traded Funds 97.9% | | | | | | | | |
| | | Alternative Strategies 4.8% | | | | | | |
| a | | Franklin K2 Long Short Credit Fund, Class R6 | | | 304,923 | | | $ | 3,177,305 | |
| a | | Franklin Pelagos Commodities Strategy Fund, Class R6 | | | 447,478 | | | | 2,989,152 | |
| | | | | | | | | 6,166,457 | |
| | | Domestic Equity 39.0% | | | | | | |
| | Financial Select Sector SPDR ETF | | | 169,400 | | | | 4,727,954 | |
| a | | Franklin Growth Fund, Class R6 | | | 190,521 | | | | 18,011,853 | |
| a,b | | Franklin Growth Opportunities Fund, Class R6 | | | 176,178 | | | | 6,911,477 | |
| a | | Franklin LibertyQ U.S. Equity ETF | | | 153,900 | | | | 4,449,234 | |
| a | | Franklin Rising Dividends Fund, Class R6 | | | 123,696 | | | | 7,556,565 | |
| a,b | | Franklin Small Cap Growth Fund, Class R6 | | | 117,520 | | | | 2,792,276 | |
| a | | Franklin Utilities Fund, Class R6 | | | 151,930 | | | | 2,862,362 | |
| | iShares S&P 500 Value ETF | | | 29,381 | | | | 3,356,485 | |
| | | | | | | | | 50,668,206 | |
| | Domestic Fixed Income 23.5% | | | | | | | | |
| a | | Franklin Floating Rate Daily Access Fund, Class R6 | | | 246,435 | | | | 2,161,235 | |
| a | | Franklin Low Duration Total Return Fund, Class R6 | | | 1,781,870 | | | | 17,497,960 | |
| a | | Franklin Strategic Income Fund, Class R6 | | | 220,117 | | | | 2,168,148 | |
| a | | Franklin U.S. Government Securities Fund, Class R6 | | | 540,046 | | | | 3,283,482 | |
| | iShares Core U.S. Aggregate Bond ETF | | | 34,000 | | | | 3,717,220 | |
| | iShares iBoxx $ Investment Grade Corporate Bond ETF | | | 13,500 | | | | 1,641,060 | |
| | | | | | | | | 30,469,105 | |
| | | Foreign Equity 23.3% | | | | | | |
| a | | Franklin FTSE Europe ETF | | | 257,000 | | | | 6,554,785 | |
| a | | Franklin International Small Cap Growth Fund, Class R6 | | | 280,645 | | | | 5,655,004 | |
| a | | Franklin LibertyQ Emerging Markets ETF | | | 245,600 | | | | 8,115,852 | |
| a | | Franklin Mutual International Fund, Class R6 | | | 219,075 | | | | 3,498,627 | |
| | iShares Global Infrastructure ETF | | | 59,399 | | | | 2,686,023 | |
| a | | Templeton Foreign Fund, Class R6 | | | 470,403 | | | | 3,734,999 | |
| | | | | | | | | 30,245,290 | |
| | | Foreign Fixed Income 7.3% | | | | | | |
| a | | Templeton Global Total Return Fund, Class R6 | | | 790,981 | | | | 9,531,325 | |
| | Total Investments in Underlying Funds and Exchange Traded Funds before Short Term Investments (Cost $106,867,671) | | | | | | | 127,080,383 | |
| | | |
| | Short Term Investments 2.1% | | | | | | | | |
| | | Money Market Funds (Cost $1,977,315) 1.5% | | | | | | |
| a,c | | Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 1,977,315 | | | | 1,977,315 | |
| | | | | | | | | | |
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 77 | |
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin LifeSmart 2025 Retirement Target Fund (continued)
| | | | | | | | |
| | | Principal
Amount | | | Value | |
Repurchase Agreements (Cost $749,786) 0.6% | | | | | | | | |
dJoint Repurchase Agreement, 1.377%, 1/02/18 (Maturity Value $749,900) | | | | | | | | |
BNP Paribas Securities Corp. (Maturity Value $122,241) | | | | | | | | |
Deutsche Bank Securities Inc. (Maturity Value $136,249) | | | | | | | | |
HSBC Securities (USA) Inc. (Maturity Value $488,965) | | | | | | | | |
Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $2,445) | | | | | | | | |
Collateralized by U.S. Government Agency Securities, 0.00% - 1.98%, 7/27/18 - 11/22/21; U.S. Treasury Note, 1.25% - 2.00%, 12/31/18 - 4/30/22; and U.S. Treasury Note, Index Linked, 0.125%, 4/15/18 (valued at $764,840 ) | | $ | 749,786 | | | $ | 749,786 | |
| | | | | | | | |
Total Investments (Cost $109,594,772) 100.0% | | | | | | | 129,807,484 | |
Other Assets, less Liabilities 0.0%† | | | | | | | 45,213 | |
Net Assets 100.0% | | | | | | $ | 129,852,697 | |
See Abbreviations on page 157.
†Rounds to less than 0.1% of net assets.
aSee Note 3(f) regarding investments in FT Underlying Funds.
bNon-income producing.
cThe rate shown is the annualized seven-day yield at period end.
dSee Note 1(b) regarding joint repurchase agreement.
| | | | |
| | | |
| 78 | | 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, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Class A | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.08 | | | | $10.95 | | | | $11.45 | | | | $11.11 | | | | $10.00 | |
| | | | |
| | | | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.19 | | | | 0.13 | | | | 0.20 | | | | 0.25 | | | | 0.15 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.65 | | | | 0.19 | | | | (0.39 | ) | | | 0.33 | | | | 1.07 | |
| | | | |
| | | | | |
Total from investment operations | | | 1.84 | | | | 0.32 | | | | (0.19 | ) | | | 0.58 | | | | 1.22 | |
| | | | |
| | | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.22 | ) | | | (0.09 | ) | | | (0.16 | ) | | | (0.18 | ) | | | (0.11 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.10 | ) | | | (0.15 | ) | | | (0.06 | ) | | | (— | )e |
| | | | |
| | | | | |
Total distributions | | | (0.22 | ) | | | (0.19 | ) | | | (0.31 | ) | | | (0.24 | ) | | | (0.11 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $12.70 | | | | $11.08 | | | | $10.95 | | | | $11.45 | | | | $11.11 | |
| | | | |
| | | | | |
Total returnf | | | 16.73% | | | | 2.93% | | | | (1.75)% | | | | 5.28% | | | | 12.19% | |
| | | | | |
| Ratios to average net assetsg | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesh | | | 1.08% | | | | 1.02% | | | | 1.17% | | | | 2.28% | | | | 20.77% | |
| | | | | |
Expenses net of waiver and payments by affiliatesh | | | 0.30% | | | | 0.30% | | | | 0.32% | | | | 0.35% | | | | 0.23% | |
| | | | | |
Net investment incomed | | | 1.60% | | | | 1.17% | | | | 1.55% | | | | 2.58% | | | | 2.72% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $19,270 | | | | $16,788 | | | | $13,631 | | | | $5,098 | | | | $1,260 | |
| | | | | |
Portfolio turnover rate | | | 37.45% | | | | 81.66% | | | | 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 0.60% for the year ended December 31, 2017.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 79 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2030 Retirement Target Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Class C | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $10.97 | | | | $10.86 | | | | $11.38 | | | | $11.09 | | | | $10.00 | |
| | | | |
| | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.11 | | | | 0.05 | | | | 0.11 | | | | 0.24 | | | | 0.13 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.63 | | | | 0.17 | | | | (0.38 | ) | | | 0.26 | | | | 1.05 | |
| | | | |
| | | | | |
Total from investment operations | | | 1.74 | | | | 0.22 | | | | (0.27 | ) | | | 0.50 | | | | 1.18 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.15 | ) | | | (0.01 | ) | | | (0.10 | ) | | | (0.15 | ) | | | (0.09 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.10 | ) | | | (0.15 | ) | | | (0.06 | ) | | | (— | )e |
| | | | |
| | | | | |
Total distributions | | | (0.15 | ) | | | (0.11 | ) | | | (0.25 | ) | | | (0.21 | ) | | | (0.09 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $12.56 | | | | $10.97 | | | | $10.86 | | | | $11.38 | | | | $11.09 | |
| | | | |
| | | | | |
Total returnf | | | 15.89% | | | | 2.08% | | | | (2.43)% | | | | 4.67% | | | | 11.73% | |
| | | | | |
| Ratios to average net assetsg | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesh | | | 1.83% | | | | 1.77% | | | | 1.90% | | | | 2.98% | | | | 21.59% | |
| | | | | |
Expenses net of waiver and payments by affiliatesh | | | 1.05% | | | | 1.05% | | | | 1.05% | | | | 1.05% | | | | 1.05% | |
| | | | | |
Net investment incomed | | | 0.85% | | | | 0.42% | | | | 0.82% | | | | 1.88% | | | | 1.90% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $7,642 | | | | $5,127 | | | | $4,124 | | | | $1,950 | | | | $132 | |
| | | | | |
Portfolio turnover rate | | | 37.45% | | | | 81.66% | | | | 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 0.60% for the year ended December 31, 2017.
| | | | |
| | | |
| 80 | | 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, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Class R | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.06 | | | | $10.94 | | | | $11.44 | | | | $11.10 | | | | $10.00 | |
| | | | |
| | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.15 | | | | 0.10 | | | | 0.18 | | | | 0.18 | | | | 0.13 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.65 | | | | 0.18 | | | | (0.39 | ) | | | 0.38 | | | | 1.07 | |
| | | | |
| | | | | |
Total from investment operations | | | 1.80 | | | | 0.28 | | | | (0.21 | ) | | | 0.56 | | | | 1.20 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.18 | ) | | | (0.06 | ) | | | (0.14 | ) | | | (0.16 | ) | | | (0.10 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.10 | ) | | | (0.15 | ) | | | (0.06 | ) | | | (— | )e |
| | | | |
| | | | | |
Total distributions | | | (0.18 | ) | | | (0.16 | ) | | | (0.29 | ) | | | (0.22 | ) | | | (0.10 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $12.68 | | | | $11.06 | | | | $10.94 | | | | $11.44 | | | | $11.10 | |
| | | | |
| | | | | |
Total returnf | | | 16.39% | | | | 2.60% | | | | (1.89)% | | | | 5.07% | | | | 11.98% | |
| | | | | |
| Ratios to average net assetsg | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesh | | | 1.33% | | | | 1.27% | | | | 1.40% | | | | 2.48% | | | | 21.09% | |
| | | | | |
Expenses net of waiver and payments by affiliatesh | | | 0.55% | | | | 0.55% | | | | 0.55% | | | | 0.55% | | | | 0.55% | |
| | | | | |
Net investment incomed | | | 1.35% | | | | 0.92% | | | | 1.32% | | | | 2.38% | | | | 2.40% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $1,148 | | | | $1,398 | | | | $870 | | | | $48 | | | | $47 | |
| | | | | |
Portfolio turnover rate | | | 37.45% | | | | 81.66% | | | | 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 0.60% for the year ended December 31, 2017.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 81 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2030 Retirement Target Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Class R6 | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.12 | | | | $10.99 | | | | $11.47 | | | | $11.12 | | | | $10.00 | |
| | | | |
| | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.23 | | | | 0.16 | | | | 0.20 | | | | 0.36 | | | | 0.11 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.65 | | | | 0.19 | | | | (0.35 | ) | | | 0.26 | | | | 1.12 | |
| | | | |
| | | | | |
Total from investment operations | | | 1.88 | | | | 0.35 | | | | (0.15 | ) | | | 0.62 | | | | 1.23 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.26 | ) | | | (0.12 | ) | | | (0.18 | ) | | | (0.21 | ) | | | (0.11 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.10 | ) | | | (0.15 | ) | | | (0.06 | ) | | | (— | )e |
| | | | |
| | | | | |
Total distributions | | | (0.26 | ) | | | (0.22 | ) | | | (0.33 | ) | | | (0.27 | ) | | | (0.11 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $12.74 | | | | $11.12 | | | | $10.99 | | | | $11.47 | | | | $11.12 | |
| | | | |
| | | | | |
Total returnf | | | 17.01% | | | | 3.20% | | | | (1.34)% | | | | 5.60% | | | | 12.34% | |
| | | | | |
| Ratios to average net assetsg | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesh | | | 0.54% | | | | 0.57% | | | | 0.68% | | | | 1.74% | | | | 21.00% | |
| | | | | |
Expenses net of waiver and payments by affiliatesh | | | —% | | | | —% | | | | —% | | | | —% | | | | —% | |
| | | | | |
Net investment incomed | | | 1.90% | | | | 1.47% | | | | 1.87% | | | | 2.93% | | | | 2.95% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $18,260 | | | | $14,455 | | | | $13,041 | | | | $12,041 | | | | $11 | |
| | | | | |
Portfolio turnover rate | | | 37.45% | | | | 81.66% | | | | 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 0.60% for the year ended December 31, 2017.
| | | | |
| | | |
| 82 �� | | 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, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Advisor Class | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.11 | | | | $10.98 | | | | $11.47 | | | | $11.12 | | | | $10.00 | |
| | | | |
| | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.23 | | | | 0.15 | | | | 0.27 | | | | 0.23 | | | | 0.13 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.64 | | | | 0.19 | | | | (0.43 | ) | | | 0.38 | | | | 1.10 | |
| | | | |
| | | | | |
Total from investment operations | | | 1.87 | | | | 0.34 | | | | (0.16 | ) | | | 0.61 | | | | 1.23 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.25 | ) | | | (0.11 | ) | | | (0.18 | ) | | | (0.20 | ) | | | (0.11 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.10 | ) | | | (0.15 | ) | | | (0.06 | ) | | | (— | )e |
| | | | |
| | | | | |
Total distributions | | | (0.25 | ) | | | (0.21 | ) | | | (0.33 | ) | | | (0.26 | ) | | | (0.11 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $12.73 | | | | $11.11 | | | | $10.98 | | | | $11.47 | | | | $11.12 | |
| | | | |
| | | | | |
Total returnf | | | 16.97% | | | | 3.15% | | | | (1.46)% | | | | 5.56% | | | | 12.32% | |
| | | | | |
| Ratios to average net assetsg | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesh | | | 0.83% | | | | 0.77% | | | | 0.90% | | | | 1.98% | | | | 20.59% | |
| | | | | |
Expenses net of waiver and payments by affiliatesh | | | 0.05% | | | | 0.05% | | | | 0.05% | | | | 0.05% | | | | 0.05% | |
| | | | | |
Net investment incomed | | | 1.85% | | | | 1.42% | | | | 1.82% | | | | 2.88% | | | | 2.90% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $662 | | | | $332 | | | | $303 | | | | $101 | | | | $82 | |
| | | | | |
Portfolio turnover rate | | | 37.45% | | | | 81.66% | | | | 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 0.60% for the year ended December 31, 2017.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 83 | |
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2017
Franklin LifeSmart 2030 Retirement Target Fund
| | | | | | | | | | |
| | | | | Shares | | | Value | |
| | Investments in Underlying Funds and Exchange Traded Funds 97.6% | | | | | | | | |
| | Alternative Strategies 4.7% | | | | | | | | |
| a | | Franklin K2 Long Short Credit Fund, Class R6 | | | 109,217 | | | $ | 1,138,045 | |
a | | Franklin Pelagos Commodities Strategy Fund, Class R6 | | | 160,524 | | | | 1,072,298 | |
| | | | | | | | | | |
| | | | | | | | | 2,210,343 | |
| | | | | | | | | | |
| | Domestic Equity 43.3% | | | | | | | | |
| | Financial Select Sector SPDR ETF | | | 67,200 | | | | 1,875,552 | |
a | | Franklin Growth Fund, Class R6 | | | 74,736 | | | | 7,065,559 | |
a,b | | Franklin Growth Opportunities Fund, Class R6 | | | 66,753 | | | | 2,618,718 | |
a | | Franklin LibertyQ U.S. Equity ETF | | | 59,400 | | | | 1,717,248 | |
a | | Franklin Rising Dividends Fund, Class R6 | | | 49,468 | | | | 3,022,018 | |
a,b | | Franklin Small Cap Growth Fund, Class R6 | | | 55,300 | | | | 1,313,917 | |
a | | Franklin Utilities Fund, Class R6 | | | 64,089 | | | | 1,207,439 | |
| | iShares S&P 500 Value ETF | | | 13,426 | | | | 1,533,786 | |
| | | | | | | | | | |
| | | | | | | | | 20,354,237 | |
| | | | | | | | | | |
| | | Domestic Fixed Income 17.7% | | | | | | |
a | | Franklin Floating Rate Daily Access Fund, Class R6 | | | 70,071 | | | | 614,526 | |
a | | Franklin Low Duration Total Return Fund, Class R6 | | | 478,158 | | | | 4,695,507 | |
a | | Franklin Strategic Income Fund, Class R6 | | | 62,409 | | | | 614,726 | |
a | | Franklin U.S. Government Securities Fund, Class R6 | | | 151,620 | | | | 921,852 | |
| | iShares Core U.S. Aggregate Bond ETF | | | 9,700 | | | | 1,060,501 | |
| | iShares iBoxx $ Investment Grade Corporate Bond ETF | | | 3,200 | | | | 388,992 | |
| | | | | | | | | | |
| | | | | | | | | 8,296,104 | |
| | | | | | | | | | |
| | | Foreign Equity 26.3% | | | | | | |
a | | Franklin FTSE Europe ETF | | | 108,100 | | | | 2,757,091 | |
a | | Franklin International Small Cap Growth Fund, Class R6 | | | 132,768 | | | | 2,675,265 | |
a | | Franklin LibertyQ Emerging Markets ETF | | | 99,700 | | | | 3,294,586 | |
a | | Franklin Mutual International Fund, Class R6 | | | 90,470 | | | | 1,444,811 | |
| | iShares Global Infrastructure ETF | | | 19,394 | | | | 876,997 | |
a | | Templeton Foreign Fund, Class R6 | | | 165,784 | | | | 1,316,321 | |
| | | | | | | | | | |
| | | | | | | | | 12,365,071 | |
| | | | | | | | | | |
| | | Foreign Fixed Income 5.6% | | | | | | |
| a | | Templeton Global Total Return Fund, Class R6 | | | 218,069 | | | | 2,627,734 | |
| | | | | | | | | | |
| | Total Investments in Underlying Funds and Exchange Traded Funds before Short Term Investments (Cost $40,686,182) | | | | | | | 45,853,489 | |
| | | | | | | | | | |
| | | |
| | Short Term Investments 2.1% | | | | | | | | |
| | Money Market Funds (Cost $842,489) 1.8% | | | | | | | | |
a,c | | Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 842,489 | | | | 842,489 | |
| | | | | | | | | | |
| | | | |
| | | |
| 84 | | Annual Report | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin LifeSmart 2030 Retirement Target Fund (continued)
| | | | | | | | | | |
| | | | | Principal
Amount | | | Value | |
| | Repurchase Agreements (Cost $161,510) 0.3% | | | | | | | | |
| d | | Joint Repurchase Agreement, 1.377%, 1/02/18 (Maturity Value $161,535) | | | | | | | | |
| | BNP Paribas Securities Corp. (Maturity Value $26,332) | | | | | | | | |
| | Deutsche Bank Securities Inc. (Maturity Value $29,349) | | | | | | | | |
| | HSBC Securities (USA) Inc. (Maturity Value $105,327) | | | | | | | | |
| | Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $527) | | | | | | | | |
| | Collateralized by U.S. Government Agency Securities, 0.00% - 1.98%, 7/27/18 - 11/22/21; U.S. Treasury Note, 1.25% - 2.00%, 12/31/18 - 4/30/22; and U.S. Treasury Note, Index Linked, 0.125%, 4/15/18 (valued at $164,753) | | | $161,510 | | | $ | 161,510 | |
| | | | | | | | | | |
| | Total Investments (Cost $41,690,181) 99.7% | | | | | | | 46,857,488 | |
| | Other Assets, less Liabilities 0.3% | | | | | | | 125,064 | |
| | | | | | | | | | |
| | Net Assets 100.0% | | | | | | $ | 46,982,552 | |
| | | | | | | | | | |
See Abbreviations on page 157.
aSee Note 3(f) regarding investments in FT Underlying Funds.
bNon-income producing.
cThe rate shown is the annualized seven-day yield at period end.
dSee Note 1(b) regarding joint repurchase agreement.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 85 | |
FRANKLIN FUND ALLOCATOR SERIES
Financial Highlights
Franklin LifeSmart 2035 Retirement Target Fund
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| Class A | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.86 | | | | $11.78 | | | | $12.67 | | | | $12.85 | | | | $11.01 | |
| | | | |
| | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.20 | | | | 0.13 | | | | 0.17 | | | | 0.22 | | | | 0.14 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.92 | | | | 0.23 | | | | (0.41 | ) | | | 0.42 | | | | 2.26 | |
| | | | |
| | | | | |
Total from investment operations | | | 2.12 | | | | 0.36 | | | | (0.24 | ) | | | 0.64 | | | | 2.40 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.28 | ) | | | (0.10 | ) | | | (0.18 | ) | | | (0.24 | ) | | | (0.15 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.18 | ) | | | (0.47 | ) | | | (0.58 | ) | | | (0.41 | ) |
| | | | |
| | | | | |
Total distributions | | | (0.28 | ) | | | (0.28 | ) | | | (0.65 | ) | | | (0.82 | ) | | | (0.56 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $13.70 | | | | $11.86 | | | | $11.78 | | | | $12.67 | | | | $12.85 | |
| | | | |
| | | | | |
Total returnd | | | 17.93% | | | | 3.11% | | | | (2.00)% | | | | 4.96% | | | | 22.06% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatese | | | 0.86% | | | | 0.82% | | | | 0.84% | | | | 0.91% | | | | 0.94% | |
| | | | | |
Expenses net of waiver and payments by affiliatese | | | 0.30% | | | | 0.30% | | | | 0.33% | | | | 0.35% | | | | 0.38% | |
| | | | | |
Net investment incomec | | | 1.55% | | | | 1.15% | | | | 1.30% | | | | 1.76% | | | | 1.17% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $61,238 | | | | $56,650 | | | | $53,701 | | | | $50,264 | | | | $42,510 | |
| | | | | |
Portfolio turnover rate | | | 31.98% | | | | 77.39% | | | | 33.86% | | | | 61.73% | | | | 49.84% | |
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 0.61% for the year ended December 31, 2017.
| | | | |
| | | |
| 86 | | 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, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| Class C | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.61 | | | | $11.54 | | | | $12.43 | | | | $12.63 | | | | $10.85 | |
| | | | |
| | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.10 | | | | 0.04 | | | | 0.07 | | | | 0.12 | | | | 0.06 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.88 | | | | 0.22 | | | | (0.40 | ) | | | 0.41 | | | | 2.21 | |
| | | | |
| | | | | |
Total from investment operations | | | 1.98 | | | | 0.26 | | | | (0.33 | ) | | | 0.53 | | | | 2.27 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.19 | ) | | | (0.01 | ) | | | (0.09 | ) | | | (0.15 | ) | | | (0.08 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.18 | ) | | | (0.47 | ) | | | (0.58 | ) | | | (0.41 | ) |
| | | | |
| | | | | |
Total distributions | | | (0.19 | ) | | | (0.19 | ) | | | (0.56 | ) | | | (0.73 | ) | | | (0.49 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $13.40 | | | | $11.61 | | | | $11.54 | | | | $12.43 | | | | $12.63 | |
| | | | |
| | | | | |
Total returnd | | | 17.09% | | | | 2.34% | | | | (2.76)% | | | | 4.23% | | | | 21.17% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatese | | | 1.60% | | | | 1.57% | | | | 1.56% | | | | 1.61% | | | | 1.64% | |
| | | | | |
Expenses net of waiver and payments by affiliatese | | | 1.04% | | | | 1.05% | | | | 1.05% | | | | 1.05% | | | | 1.08% | |
| | | | | |
Net investment incomec | | | 0.81% | | | | 0.40% | | | | 0.58% | | | | 1.06% | | | | 0.47% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $21,451 | | | | $18,781 | | | | $19,953 | | | | $19,965 | | | | $16,873 | |
| | | | | |
Portfolio turnover rate | | | 31.98% | | | | 77.39% | | | | 33.86% | | | | 61.73% | | | | 49.84% | |
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 0.61% for the year ended December 31, 2017.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 87 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
| | | | | | | | | | |
| Franklin LifeSmart 2035 Retirement Target Fund (continued) |
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| Class R | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.84 | | | | $11.77 | | | | $12.66 | | | | $12.84 | | | | $11.01 | |
| | | | |
| | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.15 | | | | 0.12 | | | | 0.13 | | | | 0.19 | | | | 0.11 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.94 | | | | 0.21 | | | | (0.40 | ) | | | 0.42 | | | | 2.26 | |
| | | | |
| | | | | |
Total from investment operations | | | 2.09 | | | | 0.33 | | | | (0.27 | ) | | | 0.61 | | | | 2.37 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.24 | ) | | | (0.08 | ) | | | (0.15 | ) | | | (0.21 | ) | | | (0.13 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.18 | ) | | | (0.47 | ) | | | (0.58 | ) | | | (0.41 | ) |
| | | | |
| | | | | |
Total distributions | | | (0.24 | ) | | | (0.26 | ) | | | (0.62 | ) | | | (0.79 | ) | | | (0.54 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $13.69 | | | | $11.84 | | | | $11.77 | | | | $12.66 | | | | $12.84 | |
| | | | |
| | | | | |
Total return | | | 17.71% | | | | 2.87% | | | | (2.25)% | | | | 4.75% | | | | 21.77% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesd | | | 1.11% | | | | 1.07% | | | | 1.06% | | | | 1.11% | | | | 1.14% | |
| | | | | |
Expenses net of waiver and payments by affiliatesd | | | 0.55% | | | | 0.55% | | | | 0.55% | | | | 0.55% | | | | 0.58% | |
| | | | | |
Net investment incomec | | | 1.30% | | | | 0.90% | | | | 1.08% | | | | 1.56% | | | | 0.97% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $5,745 | | | | $6,080 | | | | $4,688 | | | | $4,577 | | | | $4,093 | |
| | | | | |
Portfolio turnover rate | | | 31.98% | | | | 77.39% | | | | 33.86% | | | | 61.73% | | | | 49.84% | |
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 0.61% for the year ended December 31, 2017.
| | | | |
| | | |
| 88 | | 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, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Class R6 | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.94 | | | | $11.85 | | | | $12.75 | | | | $12.92 | | | | $11.77 | |
| | | | |
| | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.25 | | | | 0.17 | | | | 0.22 | | | | 0.36 | | | | 0.58 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.93 | | | | 0.23 | | | | (0.43 | ) | | | 0.33 | | | | 1.17 | |
| | | | |
| | | | | |
Total from investment operations | | | 2.18 | | | | 0.40 | | | | (0.21 | ) | | | 0.69 | | | | 1.75 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.32 | ) | | | (0.13 | ) | | | (0.22 | ) | | | (0.28 | ) | | | (0.19 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.18 | ) | | | (0.47 | ) | | | (0.58 | ) | | | (0.41 | ) |
| | | | |
| | | | | |
Total distributions | | | (0.32 | ) | | | (0.31 | ) | | | (0.69 | ) | | | (0.86 | ) | | | (0.60 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $13.80 | | | | $11.94 | | | | $11.85 | | | | $12.75 | | | | $12.92 | |
| | | | |
| | | | | |
Total returne | | | 18.31% | | | | 3.48% | | | | (1.75)% | | | | 5.35% | | | | 15.09% | |
| | | | | |
| Ratios to average net assetsf | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesg | | | 0.38% | | | | 0.39% | | | | 0.38% | | | | 0.42% | | | | 0.49% | |
| | | | | |
Expenses net of waiver and payments by affiliatesg | | | —% | | | | —% | | | | —% | | | | —% | | | | —% | |
| | | | | |
Net investment incomed | | | 1.85% | | | | 1.45% | | | | 1.63% | | | | 2.11% | | | | 1.55% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $26,497 | | | | $22,068 | | | | $20,244 | | | | $16,262 | | | | $2,532 | |
| | | | | |
Portfolio turnover rate | | | 31.98% | | | | 77.39% | | | | 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 0.61% for the year ended December 31, 2017.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 89 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
| | | | | | | | | | |
| Franklin LifeSmart 2035 Retirement Target Fund (continued) |
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| Advisor Class | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.95 | | | | $11.86 | | | | $12.75 | | | | $12.93 | | | | $11.07 | |
| | | | |
| | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.23 | | | | 0.16 | | | | 0.16 | | | | 0.26 | | | | 0.18 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.94 | | | | 0.23 | | | | (0.37 | ) | | | 0.41 | | | | 2.28 | |
| | | | |
| | | | | |
Total from investment operations | | | 2.17 | | | | 0.39 | | | | (0.21 | ) | | | 0.67 | | | | 2.46 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.31 | ) | | | (0.12 | ) | | | (0.21 | ) | | | (0.27 | ) | | | (0.19 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.18 | ) | | | (0.47 | ) | | | (0.58 | ) | | | (0.41 | ) |
| | | | |
| | | | | |
Total distributions | | | (0.31 | ) | | | (0.30 | ) | | | (0.68 | ) | | | (0.85 | ) | | | (0.60 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $13.81 | | | | $11.95 | | | | $11.86 | | | | $12.75 | | | | $12.93 | |
| | | | |
| | | | | |
Total return | | | 18.24% | | | | 3.42% | | | | (1.76)% | | | | 5.22% | | | | 22.43% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesd | | | 0.61% | | | | 0.57% | | | | 0.56% | | | | 0.61% | | | | 0.64% | |
| | | | | |
Expenses net of waiver and payments by affiliatesd | | | 0.05% | | | | 0.05% | | | | 0.05% | | | | 0.05% | | | | 0.08% | |
| | | | | |
Net investment incomec | | | 1.80% | | | | 1.40% | | | | 1.58% | | | | 2.06% | | | | 1.47% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $1,578 | | | | $1,451 | | | | $1,722 | | | | $2,182 | | | | $1,815 | |
| | | | | |
Portfolio turnover rate | | | 31.98% | | | | 77.39% | | | | 33.86% | | | | 61.73% | | | | 49.84% | |
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 0.61% for the year ended December 31, 2017.
| | | | |
| | | |
| 90 | | Annual Report | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2017
Franklin LifeSmart 2035 Retirement Target Fund
| | | | | | | | | | |
| | | | | Shares | | | Value | |
| | Investments in Underlying Funds and Exchange Traded Funds 97.8% | | | | | | | | |
| | Alternative Strategies 4.7% | | | | | | | | |
a | | Franklin K2 Long Short Credit Fund, Class R6 | | | 272,339 | | | $ | 2,837,777 | |
a | | Franklin Pelagos Commodities Strategy Fund, Class R6 | | | 401,076 | | | | 2,679,185 | |
| | | | | | | | | | |
| | | | | | | | | 5,516,962 | |
| | | | | | | | | | |
| | Domestic Equity 45.9% | | | | | | | | |
| | Financial Select Sector SPDR ETF | | | 176,500 | | | | 4,926,115 | |
a | | Franklin Growth Fund, Class R6 | | | 198,598 | | | | 18,775,451 | |
a,b | | Franklin Growth Opportunities Fund, Class R6 | | | 209,805 | | | | 8,230,671 | |
a | | Franklin LibertyQ U.S. Equity ETF | | | 164,000 | | | | 4,741,224 | |
a | | Franklin Rising Dividends Fund, Class R6 | | | 122,435 | | | | 7,479,534 | |
a,b | | Franklin Small Cap Growth Fund, Class R6 | | | 118,226 | | | | 2,809,049 | |
a | | Franklin Utilities Fund, Class R6 | | | 155,847 | | | | 2,936,156 | |
| | iShares S&P 500 Value ETF | | | 31,402 | | | | 3,587,364 | |
| | | | | | | | | | |
| | | | | | | | | 53,485,564 | |
| | | | | | | | | | |
| | Domestic Fixed Income 13.6% | | | | | | | | |
a | | Franklin Floating Rate Daily Access Fund, Class R6 | | | 123,995 | | | | 1,087,436 | |
a | | Franklin Low Duration Total Return Fund, Class R6 | | | 904,326 | | | | 8,880,483 | |
a | | Franklin Strategic Income Fund, Class R6 | | | 107,242 | | | | 1,056,334 | |
a | | Franklin U.S. Government Securities Fund, Class R6 | | | 310,246 | | | | 1,886,296 | |
| | iShares Core U.S. Aggregate Bond ETF | | | 18,400 | | | | 2,011,672 | |
| | iShares iBoxx $ Investment Grade Corporate Bond ETF | | | 7,700 | | | | 936,012 | |
| | | | | | | | | | |
| | | | | | | | | 15,858,233 | |
| | | | | | | | | | |
| | Foreign Equity 29.3% | | | | | | | | |
a | | Franklin FTSE Europe ETF | | | 282,200 | | | | 7,197,511 | |
a | | Franklin International Small Cap Growth Fund, Class R6 | | | 371,243 | | | | 7,480,538 | |
a | | Franklin LibertyQ Emerging Markets ETF | | | 246,900 | | | | 8,158,811 | |
a | | Franklin Mutual International Fund, Class R6 | | | 275,168 | | | | 4,394,437 | |
| | iShares Global Infrastructure ETF | | | 61,836 | | | | 2,796,224 | |
a | | Templeton Foreign Fund, Class R6 | | | 510,656 | | | | 4,054,605 | |
| | | | | | | | | | |
| | | | | | | | | 34,082,126 | |
| | | | | | | | | | |
| | Foreign Fixed Income 4.3% | | | | | | | | |
a | | Templeton Global Total Return Fund, Class R6 | | | 417,150 | | | | 5,026,660 | |
| | | | | | | | | | |
| | | |
| | Total Investments in Underlying Funds and Exchange Traded Funds before Short Term Investments (Cost $94,410,842) | | | | | | | 113,969,545 | |
| | | | | | | | | | |
| | | |
| | Short Term Investments 1.9% | | | | | | | | |
| | Money Market Funds (Cost $1,024,047) 0.9% | | | | | | | | |
a,c | | Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 1,024,047 | | | | 1,024,047 | |
| | | | | | | | | | |
| | | | | | |
| | | |
| franklintempleton.com | | | Annual Report | | | 91 | |
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
Franklin LifeSmart 2035 Retirement Target Fund (continued)
| | | | | | | | | | |
| | | | | Principal
Amount | | | Value | |
| | Repurchase Agreements (Cost $1,110,909) 1.0% | | | | | | | | |
d | | Joint Repurchase Agreement, 1.377%, 1/02/18 (Maturity Value $1,111,078) | | | | | | | | |
| | BNP Paribas Securities Corp. (Maturity Value $181,117) | | | | | | | | |
| | Deutsche Bank Securities Inc. (Maturity Value $201,872) | | | | | | | | |
| | HSBC Securities (USA) Inc. (Maturity Value $724,467) | | | | | | | | |
| | Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $3,622) | | | | | | | | |
| | Collateralized by U.S. Government Agency Securities, 0.00% - 1.98%, 7/27/18 - 11/22/21; U.S. Treasury Note, 1.25% - 2.00%, 12/31/18 -4/30/22; and U.S. Treasury Note, Index Linked, 0.125%, 4/15/18 (valued at $1,133,214 ) | | $ | 1,110,909 | | | $ | 1,110,909 | |
| | | | | | | | | | |
| | Total Investments (Cost $96,545,798) 99.7% | | | | | | | 116,104,501 | |
| | Other Assets, less Liabilities 0.3% | | | | | | | 405,622 | |
| | | | | | | | | | |
| | Net Assets 100.0% | | | | | | $ | 116,510,123 | |
| | | | | | | | | | |
See Abbreviations on page 157.
aSee Note 3(f) regarding investments in FT Underlying Funds.
bNon-income producing.
cThe rate shown is the annualized seven-day yield at period end.
dSee Note 1(b) regarding joint repurchase agreement.
| | | | |
| | | |
| 92 | | 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, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Class A | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Per share operating performance | | | | | | | | | | | | | | | | | | | | |
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of year | | | $11.20 | | | | $11.06 | | | | $11.58 | | | | $11.19 | | | | $10.00 | |
| | | | |
Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.18 | | | | 0.14 | | | | 0.18 | | | | 0.24 | | | | 0.11 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.88 | | | | 0.17 | | | | (0.40 | ) | | | 0.39 | | | | 1.18 | |
| | | | |
Total from investment operations | | | 2.06 | | | | 0.31 | | | | (0.22 | ) | | | 0.63 | | | | 1.29 | |
| | | | |
Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.23 | ) | | | (0.08 | ) | | | (0.15 | ) | | | (0.18 | ) | | | (0.10 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.09 | ) | | | (0.15 | ) | | | (0.06 | ) | | | (— | )e |
| | | | |
Total distributions | | | (0.23 | ) | | | (0.17 | ) | | | (0.30 | ) | | | (0.24 | ) | | | (0.10 | ) |
| | | | |
Net asset value, end of year | | | $13.03 | | | | $11.20 | | | | $11.06 | | | | $11.58 | | | | $11.19 | |
| | | | |
| | | | | |
Total returnf | | | 18.50 | % | | | 2.91 | % | | | (1.94) | % | | | 5.67 | % | | | 12.91 | % |
| | | | | |
| Ratios to average net assetsg | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesh | | | 1.26 | % | | | 1.19 | % | | | 1.40 | % | | | 3.25 | % | | | 33.48 | % |
| | | | | |
Expenses net of waiver and payments by affiliatesh | | | 0.30 | % | | | 0.30 | % | | | 0.32 | % | | | 0.35 | % | | | 0.25 | % |
| | | | | |
Net investment incomed | | | 1.55 | % | | | 1.22 | % | | | 1.41 | % | | | 2.37 | % | | | 1.98 | % |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $14,001 | | | | $13,213 | | | | $8,177 | | | | $2,891 | | | | $672 | |
| | | | | |
Portfolio turnover rate | | | 39.11 | % | | | 72.22 | % | | | 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 0.62% for the year ended December 31, 2017.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 93 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2040 Retirement Target Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Class C | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.05 | | | | $10.97 | | | | $11.52 | | | | $11.15 | | | | $10.00 | |
| | | | |
| | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.11 | | | | 0.05 | | | | 0.11 | | | | 0.17 | | | | 0.08 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.83 | | | | 0.18 | | | | (0.41 | ) | | | 0.39 | | | | 1.16 | |
| | | | |
| | | | | |
Total from investment operations | | | 1.94 | | | | 0.23 | | | | (0.30 | ) | | | 0.56 | | | | 1.24 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.16 | ) | | | (0.06 | ) | | | (0.10 | ) | | | (0.13 | ) | | | (0.09 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.09 | ) | | | (0.15 | ) | | | (0.06 | ) | | | (— | )e |
| | | | |
| | | | | |
Total distributions | | | (0.16 | ) | | | (0.15 | ) | | | (0.25 | ) | | | (0.19 | ) | | | (0.09 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $12.83 | | | | $11.05 | | | | $10.97 | | | | $11.52 | | | | $11.15 | |
| | | | |
| | | | | |
Total returnf | | | 17.63% | | | | 2.17% | | | | (2.66)% | | | | 5.03% | | | | 12.46% | |
| | | | | |
| Ratios to average net assetsg | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesh | | | 2.01% | | | | 1.94% | | | | 2.13% | | | | 3.95% | | | | 34.28% | |
| | | | | |
Expenses net of waiver and payments by affiliatesh | | | 1.05% | | | | 1.05% | | | | 1.05% | | | | 1.05% | | | | 1.05% | |
| | | | | |
Net investment incomed | | | 0.80% | | | | 0.47% | | | | 0.68% | | | | 1.67% | | | | 1.18% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $4,015 | | | | $2,686 | | | | $1,988 | | | | $747 | | | | $60 | |
| | | | | |
Portfolio turnover rate | | | 39.11% | | | | 72.22% | | | | 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 0.62% for the year ended December 31, 2017.
| | | | |
| | | |
| 94 | | 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, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Class R | | | | | | | | | | | | | | | | | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.17 | | | | $11.05 | | | | $11.58 | | | | $11.19 | | | | $10.00 | |
| | | | |
| | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.13 | | | | 0.13 | | | | 0.17 | | | | 0.20 | | | | 0.07 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.91 | | | | 0.16 | | | | (0.41 | ) | | | 0.41 | | | | 1.21 | |
| | | | |
| | | | | |
Total from investment operations | | | 2.04 | | | | 0.29 | | | | (0.24 | ) | | | 0.61 | | | | 1.28 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.19 | ) | | | (0.08 | ) | | | (0.14 | ) | | | (0.16 | ) | | | (0.09 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.09 | ) | | | (0.15 | ) | | | (0.06 | ) | | | (— | )e |
| | | | |
| | | | | |
Total distributions | | | (0.19 | ) | | | (0.17 | ) | | | (0.29 | ) | | | (0.22 | ) | | | (0.09 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $13.02 | | | | $11.17 | | | | $11.05 | | | | $11.58 | | | | $11.19 | |
| | | | |
| | | | | |
Total returnf | | | 18.31% | | | | 2.66% | | | | (2.14)% | | | | 5.48% | | | | 12.81% | |
| | | | | |
| Ratios to average net assetsg | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesh | | | 1.51% | | | | 1.43% | | | | 1.63% | | | | 3.45% | | | | 33.78% | |
| | | | | |
Expenses net of waiver and payments by affiliatesh | | | 0.55% | | | | 0.54% | | | | 0.55% | | | | 0.55% | | | | 0.55% | |
| | | | | |
Net investment incomed | | | 1.30% | | | | 0.98% | | | | 1.18% | | | | 2.17% | | | | 1.68% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $1,519 | | | | $2,188 | | | | $1,009 | | | | $37 | | | | $11 | |
| | | | | |
Portfolio turnover rate | | | 39.11% | | | | 72.22% | | | | 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 0.62% for the year ended December 31, 2017.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 95 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2040 Retirement Target Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Class R6 | | | | | | | | | | | | | | | | | | | | |
Per share operating performance
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.26 | | | | $11.10 | | | | $11.61 | | | | $11.20 | | | | $10.00 | |
| | | | |
| | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.23 | | | | 0.16 | | | | 0.19 | | | | 0.33 | | | | 0.10 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.89 | | | | 0.18 | | | | (0.37 | ) | | | 0.35 | | | | 1.20 | |
| | | | |
| | | | | |
Total from investment operations | | | 2.12 | | | | 0.34 | | | | (0.18 | ) | | | 0.68 | | | | 1.30 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from
Underlying Funds and exchange traded funds | | | (0.27 | ) | | | (0.09 | ) | | | (0.18 | ) | | | (0.21 | ) | | | (0.10 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.09 | ) | | | (0.15 | ) | | | (0.06 | ) | | | (— | )e |
| | | | |
| | | | | |
Total distributions | | | (0.27 | ) | | | (0.18 | ) | | | (0.33 | ) | | | (0.27 | ) | | | (0.10 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $13.11 | | | | $11.26 | | | | $11.10 | | | | $11.61 | | | | $11.20 | |
| | | | |
| | | | | |
Total returnf | | | 18.92% | | | | 3.16% | | | | (1.62)% | | | | 6.13% | | | | 13.07% | |
| | | | | |
| Ratios to average net assetsg | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesh | | | 0.61% | | | | 0.65% | | | | 0.82% | | | | 2.55% | | | | 33.68% | |
| | | | | |
Expenses net of waiver and payments by affiliatesh | | | —% | | | | —% | | | | —% | | | | —% | | | | —% | |
| | | | | |
Net investment incomed | | | 1.85% | | | | 1.52% | | | | 1.73% | | | | 2.72% | | | | 2.23% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $17,521 | | | | $13,867 | | | | $12,037 | | | | $10,154 | | | | $11 | |
| | | | | |
Portfolio turnover rate | | | 39.11% | | | | 72.22% | | | | 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 0.62% for the year ended December 31, 2017.
| | | | |
| | | |
| 96 | | 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, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Advisor Class | | | | | | | | | | | | | | | | | | | | |
Per share operating performance
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.25 | | | | $11.09 | | | | $11.61 | | | | $11.20 | | | | $10.00 | |
| | | | |
| | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.22 | | | | 0.15 | | | | 0.40 | | | | 0.20 | | | | 0.10 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.89 | | | | 0.19 | | | | (0.59 | ) | | | 0.48 | | | | 1.20 | |
| | | | |
| | | | | |
Total from investment operations | | | 2.11 | | | | 0.34 | | | | (0.19 | ) | | | 0.68 | | | | 1.30 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from
Underlying Funds and exchange traded funds | | | (0.26 | ) | | | (0.09 | ) | | | (0.18 | ) | | | (0.21 | ) | | | (0.10 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.09 | ) | | | (0.15 | ) | | | (0.06 | ) | | | (— | )e |
| | | | |
| | | | | |
Total distributions | | | (0.26 | ) | | | (0.18 | ) | | | (0.33 | ) | | | (0.27 | ) | | | (0.10 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $13.10 | | | | $11.25 | | | | $11.09 | | | | $11.61 | | | | $11.20 | |
| | | | |
| | | | | |
Total returnf | | | 18.88% | | | | 3.15% | | | | (1.72)% | | | | 6.08% | | | | 13.04% | |
| | | | | |
| Ratios to average net assetsg | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesh | | | 1.01% | | | | 0.94% | | | | 1.13% | | | | 2.95% | | | | 33.28% | |
| | | | | |
Expenses net of waiver and payments by affiliatesh | | | 0.05% | | | | 0.05% | | | | 0.05% | | | | 0.05% | | | | 0.05% | |
| | | | | |
Net investment incomed | | | 1.80% | | | | 1.47% | | | | 1.68% | | | | 2.67% | | | | 2.18% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $155 | | | | $141 | | | | $121 | | | | $23 | | | | $23 | |
| | | | | |
Portfolio turnover rate | | | 39.11% | | | | 72.22% | | | | 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 0.62% for the year ended December 31, 2017.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 97 | |
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2017
| | | | | | | | | | |
| Franklin LifeSmart 2040 Retirement Target Fund | |
| | | | | Shares | | | Value | |
| | | Investments in Underlying Funds and Exchange Traded Funds 97.4% | | | | | | |
| | | Alternative Strategies 4.7% | | | | | | |
| a | | Franklin K2 Long Short Credit Fund, Class R6 | | | 86,360 | | | $ | 899,878 | |
| a | | Franklin Pelagos Commodities Strategy Fund, Class R6 | | | 127,402 | | | | 851,044 | |
| | | | | | | | | | |
| | | | | | | | | 1,750,922 | |
| | | | | | | | | | |
| | | Domestic Equity 48.1% | | | | | | |
| | Financial Select Sector SPDR ETF | | | 57,100 | | | | 1,593,661 | |
| a | | Franklin Growth Fund, Class R6 | | | 65,804 | | | | 6,221,103 | |
| a,b | | Franklin Growth Opportunities Fund, Class R6 | | | 71,929 | | | | 2,821,776 | |
| a | | Franklin LibertyQ U.S. Equity ETF | | | 55,300 | | | | 1,598,717 | |
| a | | Franklin Rising Dividends Fund, Class R6 | | | 40,411 | | | | 2,468,717 | |
| a,b | | Franklin Small Cap Growth Fund, Class R6 | | | 40,180 | | | | 954,674 | |
| a | | Franklin Utilities Fund, Class R6 | | | 51,662 | | | | 973,305 | |
| | iShares S&P 500 Value ETF | | | 11,017 | | | | 1,258,583 | |
| | | | | | | | | | |
| | | | | | | | | 17,890,536 | |
| | | | | | | | | | |
| | | Domestic Fixed Income 11.6% | | | | | | |
| a | | Franklin Floating Rate Daily Access Fund, Class R6 | | | 35,270 | | | | 309,313 | |
| a | | Franklin Low Duration Total Return Fund, Class R6 | | | 252,322 | | | | 2,477,803 | |
| a | | Franklin Strategic Income Fund, Class R6 | | | 30,286 | | | | 298,320 | |
| a | | Franklin U.S. Government Securities Fund, Class R6 | | | 90,122 | | | | 547,942 | |
| | iShares Core U.S. Aggregate Bond ETF | | | 4,300 | | | | 470,119 | |
| | iShares iBoxx $ Investment Grade Corporate Bond ETF | | | 1,600 | | | | 194,496 | |
| | | | | | | | | | |
| | | | | | | | | 4,297,993 | |
| | | | | | | | | | |
| | | Foreign Equity 29.6% | | | | | | |
| a | | Franklin FTSE Europe ETF | | | 91,500 | | | | 2,333,708 | |
| a | | Franklin International Small Cap Growth Fund, Class R6 | | | 124,690 | | | | 2,512,514 | |
| a | | Franklin LibertyQ Emerging Markets ETF | | | 79,700 | | | | 2,633,687 | |
| a | | Franklin Mutual International Fund, Class R6 | | | 91,940 | | | | 1,468,281 | |
| | iShares Global Infrastructure ETF | | | 17,742 | | | | 802,293 | |
| a | | Templeton Foreign Fund, Class R6 | | | 159,417 | | | | 1,265,770 | |
| | | | | | | | | | |
| | | | | | | | | 11,016,253 | |
| | | | | | | | | | |
| | | Foreign Fixed Income 3.4% | | | | | | |
| a | | Templeton Global Total Return Fund, Class R6 | | | 105,449 | | | | 1,270,655 | |
| | | | | | | | | | |
| | Total Investments in Underlying Funds and Exchange Traded Funds before Short Term Investments (Cost $31,770,505) | | | | | | | 36,226,359 | |
| | | | | | | | | | |
| | | |
| | | Short Term Investments 1.9% | | | | | | |
| | | Money Market Funds (Cost $511,800) 1.4% | | | | | | |
| a,c | | Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 511,800 | | | | 511,800 | |
| | | | | | | | | | |
| | | | |
| | | |
| 98 | | Annual Report | | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
| | | | | | | | | | |
Franklin LifeSmart 2040 Retirement Target Fund (continued) | |
| | | | | Principal
Amount | | | Value | |
| | Repurchase Agreements (Cost $211,733) 0.5% | | | | | | | | |
| d | | Joint Repurchase Agreement, 1.377%, 1/02/18 (Maturity Value $211,765) | | | | | | | | |
| | BNP Paribas Securities Corp. (Maturity Value $34,520) | | | | | | | | |
| | Deutsche Bank Securities Inc. (Maturity Value $38,476) | | | | | | | | |
| | HSBC Securities (USA) Inc. (Maturity Value $138,079) | | | | | | | | |
| | Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $690) | | | | | | | | |
| | Collateralized by U.S. Government Agency Securities, 0.00% - 1.98%, 7/27/18 - 11/22/21; U.S. Treasury Note, 1.25% - 2.00%, 12/31/18 - 4/30/22; and U.S. Treasury Note, Index Linked, 0.125%, 4/15/18 (valued at $215,984) | | $ | 211,733 | | | $ | 211,733 | |
| | | | | | | | | | |
| | Total Investments (Cost $32,494,038) 99.3% | | | | | | | 36,949,892 | |
| | | |
| | Other Assets, less Liabilities 0.7% | | | | | | | 261,558 | |
| | | | | | | | | | |
| | Net Assets 100.0% | | | | | | $ | 37,211,450 | |
| | | | | | | | | | |
See Abbreviations on page 157.
aSee Note 3(f) regarding investments in FT Underlying Funds.
bNon-income producing.
cThe rate shown is the annualized seven-day yield at period end.
dSee Note 1(b) regarding joint repurchase agreement.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 99 | |
FRANKLIN FUND ALLOCATOR SERIES
Financial Highlights
Franklin LifeSmart 2045 Retirement Target Fund
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| Class A | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.86 | | | | $11.75 | | | | $12.70 | | | | $12.88 | | | | $10.92 | |
| | | | |
| | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.20 | | | | 0.14 | | | | 0.16 | | | | 0.20 | | | | 0.13 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 2.01 | | | | 0.24 | | | | (0.42 | ) | | | 0.43 | | | | 2.36 | |
| | | | |
| | | | | |
Total from investment operations | | | 2.21 | | | | 0.38 | | | | (0.26 | ) | | | 0.63 | | | | 2.49 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.29 | ) | | | (0.10 | ) | | | (0.17 | ) | | | (0.22 | ) | | | (0.15 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.17 | ) | | | (0.52 | ) | | | (0.59 | ) | | | (0.38 | ) |
| | | | |
| | | | | |
Total distributions | | | (0.29 | ) | | | (0.27 | ) | | | (0.69 | ) | | | (0.81 | ) | | | (0.53 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $13.78 | | | | $11.86 | | | | $11.75 | | | | $12.70 | | | | $12.88 | |
| | | | |
| | | | | |
Total returnd | | | 18.72% | | | | 3.29% | | | | (2.17)% | | | | 4.94% | | | | 23.07% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatese | | | 1.01% | | | | 0.97% | | | | 1.01% | | | | 1.11% | | | | 1.16% | |
| | | | | |
Expenses net of waiver and payments by affiliatese | | | 0.30% | | | | 0.30% | | | | 0.33% | | | | 0.35% | | | | 0.38% | |
| | | | | |
Net investment incomec | | | 1.53% | | | | 1.15% | | | | 1.26% | | | | 1.57% | | | | 1.08% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $46,783 | | | | $44,521 | | | | $38,444 | | | | $34,259 | | | | $27,991 | |
| | | | | |
Portfolio turnover rate | | | 31.69% | | | | 75.72% | | | | 34.07% | | | | 65.20% | | | | 44.44% | |
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 0.63% for the year ended December 31, 2017.
| | | | |
| | | |
| 100 | | 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, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| Class C | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.57 | | | | $11.48 | | | | $12.42 | | | | $12.63 | | | | $10.73 | |
| | | | |
| | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.10 | | | | 0.04 | | | | 0.07 | | | | 0.11 | | | | 0.04 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.96 | | | | 0.23 | | | | (0.40 | ) | | | 0.41 | | | | 2.31 | |
| | | | |
| | | | | |
Total from investment operations | | | 2.06 | | | | 0.27 | | | | (0.33 | ) | | | 0.52 | | | | 2.35 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.19 | ) | | | (0.01 | ) | | | (0.09 | ) | | | (0.14 | ) | | | (0.07 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.17 | ) | | | (0.52 | ) | | | (0.59 | ) | | | (0.38 | ) |
| | | | |
| | | | | |
Total distributions | | | (0.19 | ) | | | (0.18 | ) | | | (0.61 | ) | | | (0.73 | ) | | | (0.45 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $13.44 | | | | $11.57 | | | | $11.48 | | | | $12.42 | | | | $12.63 | |
| | | | |
| | | | | |
Total returnd | | | 17.92% | | | | 2.43% | | | | (2.82)% | | | | 4.15% | | | | 22.20% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatese | | | 1.75% | | | | 1.72% | | | | 1.73% | | | | 1.81% | | | | 1.86% | |
| | | | | |
Expenses net of waiver and payments by affiliatese | | | 1.04% | | | | 1.05% | | | | 1.05% | | | | 1.05% | | | | 1.08% | |
| | | | | |
Net investment incomec | | | 0.79% | | | | 0.40% | | | | 0.54% | | | | 0.87% | | | | 0.38% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $13,190 | | | | $12,527 | | | | $12,850 | | | | $11,785 | | | | $9,484 | |
| | | | | |
Portfolio turnover rate | | | 31.69% | | | | 75.72% | | | | 34.07% | | | | 65.20% | | | | 44.44% | |
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 0.63% for the year ended December 31, 2017.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 101 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2045 Retirement Target Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| Class R | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.81 | | | | $11.71 | | | | $12.66 | | | | $12.82 | | | | $10.88 | |
| | | | |
| | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.17 | | | | 0.11 | | | | 0.14 | | | | 0.14 | | | | 0.10 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 2.00 | | | | 0.23 | | | | (0.42 | ) | | | 0.47 | | | | 2.35 | |
| | | | |
| | | | | |
Total from investment operations | | | 2.17 | | | | 0.34 | | | | (0.28 | ) | | | 0.61 | | | | 2.45 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.26 | ) | | | (0.07 | ) | | | (0.15 | ) | | | (0.18 | ) | | | (0.13 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.17 | ) | | | (0.52 | ) | | | (0.59 | ) | | | (0.38 | ) |
| | | | |
| | | | | |
Total distributions | | | (0.26 | ) | | | (0.24 | ) | | | (0.67 | ) | | | (0.77 | ) | | | (0.51 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $13.72 | | | | $11.81 | | | | $11.71 | | | | $12.66 | | | | $12.82 | |
| | | | |
| | | | | |
Total return | | | 18.43% | | | | 2.99% | | | | (2.35)% | | | | 4.75% | | | | 22.76% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesd | | | 1.26% | | | | 1.22% | | | | 1.23% | | | | 1.31% | | | | 1.36% | |
| | | | | |
Expenses net of waiver and payments by affiliatesd | | | 0.55% | | | | 0.55% | | | | 0.55% | | | | 0.55% | | | | 0.58% | |
| | | | | |
Net investment incomec | | | 1.28% | | | | 0.90% | | | | 1.04% | | | | 1.37% | | | | 0.88% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $5,464 | | | | $4,682 | | | | $4,327 | | | | $3,474 | | | | $4,564 | |
| | | | | |
Portfolio turnover rate | | | 31.69% | | | | 75.72% | | | | 34.07% | | | | 65.20% | | | | 44.44% | |
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 0.63% for the year ended December 31, 2017.
| | | | |
| | | |
| 102 | | 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, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Class R6 | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.94 | | | | $11.83 | | | | $12.77 | | | | $12.95 | | | | $11.67 | |
| | | | |
| | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.25 | | | | 0.17 | | | | 0.21 | | | | 0.33 | | | | 0.60 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 2.02 | | | | 0.24 | | | | (0.42 | ) | | | 0.35 | | | | 1.24 | |
| | | | |
| | | | | |
Total from investment operations | | | 2.27 | | | | 0.41 | | | | (0.21 | ) | | | 0.68 | | | | 1.84 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.33 | ) | | | (0.13 | ) | | | (0.21 | ) | | | (0.27 | ) | | | (0.18 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.17 | ) | | | (0.52 | ) | | | (0.59 | ) | | | (0.38 | ) |
| | | | |
| | | | | |
Total distributions | | | (0.33 | ) | | | (0.30 | ) | | | (0.73 | ) | | | (0.86 | ) | | | (0.56 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $13.88 | | | | $11.94 | | | | $11.83 | | | | $12.77 | | | | $12.95 | |
| | | | |
| | | | | |
Total returne | | | 19.10% | | | | 3.55% | | | | (1.77)% | | | | 5.24% | | | | 16.08% | |
| | | | | |
| Ratios to average net assetsf | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesg | | | 0.43% | | | | 0.44% | | | | 0.45% | | | | 0.51% | | | | 0.60% | |
| | | | | |
Expenses net of waiver and payments by affiliatesg | | | —% | | | | —% | | | | —% | | | | —% | | | | —% | |
| | | | | |
Net investment incomed | | | 1.83% | | | | 1.45% | | | | 1.59% | | | | 1.92% | | | | 1.46% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $13,787 | | | | $10,912 | | | | $10,975 | | | | $8,987 | | | | $1,718 | |
| | | | | |
Portfolio turnover rate | | | 31.69% | | | | 75.72% | | | | 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 0.63% for the year ended December 31, 2017.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 103 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2045 Retirement Target Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| Advisor Class | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.94 | | | | $11.83 | | | | $12.76 | | | | $12.94 | | | | $10.96 | |
| | | | |
| | | | | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomeb,c | | | 0.23 | | | | 0.15 | | | | 0.13 | | | | 0.24 | | | | 0.17 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 2.03 | | | | 0.25 | | | | (0.34 | ) | | | 0.43 | | | | 2.37 | |
| | | | |
| | | | | |
Total from investment operations | | | 2.26 | | | | 0.40 | | | | (0.21 | ) | | | 0.67 | | | | 2.54 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.32 | ) | | | (0.12 | ) | | | (0.20 | ) | | | (0.26 | ) | | | (0.18 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.17 | ) | | | (0.52 | ) | | | (0.59 | ) | | | (0.38 | ) |
| | | | |
| | | | | |
Total distributions | | | (0.32 | ) | | | (0.29 | ) | | | (0.72 | ) | | | (0.85 | ) | | | (0.56 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $13.88 | | | | $11.94 | | | | $11.83 | | | | $12.76 | | | | $12.94 | |
| | | | |
| | | | | |
Total return | | | 19.04% | | | | 3.49% | | | | (1.82)% | | | | 5.20% | | | | 23.48% | |
| | | | | |
| Ratios to average net assets | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesd | | | 0.76% | | | | 0.72% | | | | 0.73% | | | | 0.81% | | | | 0.86% | |
| | | | | |
Expenses net of waiver and payments by affiliatesd | | | 0.05% | | | | 0.05% | | | | 0.05% | | | | 0.05% | | | | 0.08% | |
| | | | | |
Net investment incomec | | | 1.78% | | | | 1.40% | | | | 1.54% | | | | 1.87% | | | | 1.38% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $602 | | | | $479 | | | | $532 | | | | $1,576 | | | | $1,188 | |
| | | | | |
Portfolio turnover rate | | | 31.69% | | | | 75.72% | | | | 34.07% | | | | 65.20% | | | | 44.44% | |
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 0.63% for the year ended December 31, 2017.
| | | | |
| | | |
| 104 | | Annual Report | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2017
| | | | | | | | | | |
| Franklin LifeSmart 2045 Retirement Target Fund | |
| | | | | Shares | | | Value | |
| | Investments in Underlying Funds and Exchange Traded Funds 97.9% | | | | | | | | |
| | Alternative Strategies 4.8% | | | | | | | | |
| a | | Franklin K2 Long Short Credit Fund, Class R6 | | | 187,404 | | | $ | 1,952,745 | |
a | | Franklin Pelagos Commodities Strategy Fund, Class R6 | | | 275,261 | | | | 1,838,747 | |
| | | | | | | | | | |
| | | | | | | | | 3,791,492 | |
| | | | | | | | | | |
| | Domestic Equity 47.9% | | | | | | | | |
| | Financial Select Sector SPDR ETF | | | 124,000 | | | | 3,460,840 | |
a | | Franklin Growth Fund, Class R6 | | | 140,901 | | | | 13,320,754 | |
a,b | | Franklin Growth Opportunities Fund, Class R6 | | | 154,448 | | | | 6,058,976 | |
a | | Franklin LibertyQ U.S. Equity ETF | | | 119,300 | | | | 3,448,951 | |
a | | Franklin Rising Dividends Fund, Class R6 | | | 86,278 | | | | 5,270,737 | |
a,b | | Franklin Small Cap Growth Fund, Class R6 | | | 87,967 | | | | 2,090,107 | |
a | | Franklin Utilities Fund, Class R6 | | | 110,252 | | | | 2,077,147 | |
| | iShares S&P 500 Value ETF | | | 22,155 | | | | 2,530,987 | |
| | | | | | | | | | |
| | | | | | | | | 38,258,499 | |
| | | | | | | | | | |
| | | Domestic Fixed Income 10.5% | | | | | | |
a | | Franklin Floating Rate Daily Access Fund, Class R6 | | | 65,267 | | | | 572,392 | |
a | | Franklin Low Duration Total Return Fund, Class R6 | | | 494,261 | | | | 4,853,644 | |
a | | Franklin Strategic Income Fund, Class R6 | | | 57,358 | | | | 564,972 | |
a | | Franklin U.S. Government Securities Fund, Class R6 | | | 166,371 | | | | 1,011,535 | |
| | iShares Core U.S. Aggregate Bond ETF | | | 8,700 | | | | 951,171 | |
| | iShares iBoxx $ Investment Grade Corporate Bond ETF | | | 3,300 | | | | 401,148 | |
| | | | | | | | | | |
| | | | | | | | | 8,354,862 | |
| | | | | | | | | | |
| | | Foreign Equity 31.4% | | | | | | |
a | | Franklin FTSE Europe ETF | | | 202,100 | | | | 5,154,561 | |
a | | Franklin International Small Cap Growth Fund, Class R6 | | | 265,700 | | | | 5,353,862 | |
a | | Franklin LibertyQ Emerging Markets ETF | | | 182,300 | | | | 6,024,103 | |
a | | Franklin Mutual International Fund, Class R6 | | | 196,741 | | | | 3,141,949 | |
| | iShares Global Infrastructure ETF | | | 44,875 | | | | 2,029,248 | |
a | | Templeton Foreign Fund, Class R6 | | | 425,835 | | | | 3,381,131 | |
| | | | | | | | | | |
| | | | | | | | | 25,084,854 | |
| | | | | | | | | | |
| | | Foreign Fixed Income 3.3% | | | | | | |
a | | Templeton Global Total Return Fund, Class R6 | | | 218,541 | | | | 2,633,423 | |
| | | | | | | | | | |
| | Total Investments in Underlying Funds and Exchange Traded Funds before Short Term Investments (Cost $64,297,400) | | | | | | | 78,123,130 | |
| | | | | | | | | | |
| | Short Term Investments 1.8% | | | | | | | | |
| | Money Market Funds (Cost $516,375) 0.7% | | | | | | | | |
a,c | | Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 516,375 | | | | 516,375 | |
| | | | | | | | | | |
| | | | | | |
| | | |
| franklintempleton.com | | | Annual Report | | | 105 | |
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
| | | | | | | | | | |
| Franklin LifeSmart 2045 Retirement Target Fund (continued) | |
| | | | | Principal
Amount | | | Value | |
| | Repurchase Agreements (Cost $908,386) 1.1% | | | | | | | | |
| d | | Joint Repurchase Agreement, 1.377%, 1/02/18 (Maturity Value $908,525) | | | | | | | | |
| | BNP Paribas Securities Corp. (Maturity Value $148,098) | | | | | | | | |
| | Deutsche Bank Securities Inc. (Maturity Value $165,070) | | | | | | | | |
| | HSBC Securities (USA) Inc. (Maturity Value $592,395) | | | | | | | | |
| | Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $2,962) | | | | | | | | |
| | Collateralized by U.S. Government Agency Securities, 0.00% - 1.98%, 7/27/18 - 11/22/21; U.S. Treasury Note, 1.25% - 2.00%, 12/31/18 - 4/30/22; and U.S. Treasury Note, Index Linked, 0.125%, 4/15/18 (valued at $926,625 ) | | $ | 908,386 | | | $ | 908,386 | |
| | | | | | | | | | |
| | Total Investments (Cost $65,722,161) 99.7% | | | | | | | 79,547,891 | |
| | Other Assets, less Liabilities 0.3% | | | | | | | 278,712 | |
| | | | | | | | | | |
| | Net Assets 100.0% | | | | | | $ | 79,826,603 | |
| | | | | | | | | | |
See Abbreviations on page 157.
aSee Note 3(f) regarding investments in FT Underlying Funds.
bNon-income producing.
cThe rate shown is the annualized seven-day yield at period end.
dSee Note 1(b) regarding joint repurchase agreement.
| | | | |
| | | |
| 106 | | Annual Report | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
Financial Highlights
Franklin LifeSmart 2050 Retirement Target Fund
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Class A | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.29 | | | | $11.11 | | | | $11.62 | | | | $11.21 | | | | $10.00 | |
| | | | |
| | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.20 | | | | 0.14 | | | | 0.22 | | | | 0.22 | | | | 0.10 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.93 | | | | 0.23 | | | | (0.41 | ) | | | 0.43 | | | | 1.21 | |
| | | | |
| | | | | |
Total from investment operations | | | 2.13 | | | | 0.37 | | | | (0.19 | ) | | | 0.65 | | | | 1.31 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from
Underlying Funds and exchange traded funds | | | (0.23 | ) | | | (0.09 | ) | | | (0.16 | ) | | | (0.18 | ) | | | (0.10 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.10 | ) | | | (0.16 | ) | | | (0.06 | ) | | | — | |
| | | | |
| | | | | |
Total distributions | | | (0.23 | ) | | | (0.19 | ) | | | (0.32 | ) | | | (0.24 | ) | | | (0.10 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $13.19 | | | | $11.29 | | | | $11.11 | | | | $11.62 | | | | $11.21 | |
| | | | |
| | | | | |
Total returne | | | 18.96% | | | | 3.32% | | | | (1.76)% | | | | 5.80% | | | | 13.14% | |
| | | | | |
| Ratios to average net assetsf | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesg | | | 1.53% | | | | 1.47% | | | | 1.82% | | | | 4.12% | | | | 34.22% | |
| | | | | |
Expenses net of waiver and payments by affiliatesg | | | 0.30% | | | | 0.30% | | | | 0.32% | | | | 0.35% | | | | 0.23% | |
| | | | | |
Net investment incomed | | | 1.62% | | | | 1.17% | | | | 1.47% | | | | 2.21% | | | | 1.88% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $13,823 | | | | $10,597 | | | | $6,762 | | | | $2,318 | | | | $512 | |
| | | | | |
Portfolio turnover rate | | | 35.70% | | | | 89.82% | | | | 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 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 0.63% for the year ended December 31, 2017.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 107 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2050 Retirement Target Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Class C | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.24 | | | | $11.07 | | | | $11.56 | | | | $11.18 | | | | $10.00 | |
| | | | |
| | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.11 | | | | 0.05 | | | | 0.07 | | | | 0.15 | | | | 0.09 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.91 | | | | 0.23 | | | | (0.33 | ) | | | 0.42 | | | | 1.18 | |
| | | | |
| | | | | |
Total from investment operations | | | 2.02 | | | | 0.28 | | | | (0.26 | ) | | | 0.57 | | | | 1.27 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from
Underlying Funds and exchange traded funds | | | (0.15 | ) | | | (0.01 | ) | | | (0.07 | ) | | | (0.13 | ) | | | (0.09 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.10 | ) | | | (0.16 | ) | | | (0.06 | ) | | | — | |
| | | | |
| | | | | |
Total distributions | | | (0.15 | ) | | | (0.11 | ) | | | (0.23 | ) | | | (0.19 | ) | | | (0.09 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $13.11 | | | | $11.24 | | | | $11.07 | | | | $11.56 | | | | $11.18 | |
| | | | |
| | | | | |
Total returne | | | 18.03% | | | | 2.56% | | | | (2.40)% | | | | 5.03% | | | | 12.82% | |
| | | | | |
| Ratios to average net assetsf | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesg | | | 2.28% | | | | 2.22% | | | | 2.55% | | | | 4.82% | | | | 35.04% | |
| | | | | |
Expenses net of waiver and payments by affiliatesg | | | 1.05% | | | | 1.05% | | | | 1.05% | | | | 1.05% | | | | 1.05% | |
| | | | | |
Net investment incomed | | | 0.87% | | | | 0.42% | | | | 0.74% | | | | 1.51% | | | | 1.06% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $3,797 | | | | $2,675 | | | | $1,921 | | | | $943 | | | | $82 | |
| | | | | |
Portfolio turnover rate | | | 35.70% | | | | 89.82% | | | | 48.90% | | | | 100.08% | | | | 20.66% | |
aFor the period July 1, 2013 (commencement of operations) to December 31, 2013.
bThe amount shown for a 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 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 0.63% for the year ended December 31, 2017.
| | | | |
| | | |
| 108 | | 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, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Class R | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.29 | | | | $11.12 | | | | $11.63 | | | | $11.21 | | | | $10.00 | |
| | | | |
| | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.16 | | | | 0.11 | | | | 0.16 | | | | 0.18 | | | | 0.06 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.94 | | | | 0.22 | | | | (0.37 | ) | | | 0.45 | | | | 1.24 | |
| | | | |
| | | | | |
Total from investment operations | | | 2.10 | | | | 0.33 | | | | (0.21 | ) | | | 0.63 | | | | 1.30 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.20 | ) | | | (0.06 | ) | | | (0.14 | ) | | | (0.15 | ) | | | (0.09 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.10 | ) | | | (0.16 | ) | | | (0.06 | ) | | | — | |
| | | | |
| | | | | |
Total distributions | | | (0.20 | ) | | | (0.16 | ) | | | (0.30 | ) | | | (0.21 | ) | | | (0.09 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $13.19 | | | | $11.29 | | | | $11.12 | | | | $11.63 | | | | $11.21 | |
| | | | |
| | | | | |
Total returne | | | 18.67% | | | | 3.01% | | | | (1.98)% | | | | 5.67% | | | | 13.02% | |
| | | | | |
| Ratios to average net assetsf | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesg | | | 1.78% | | | | 1.71% | | | | 2.05% | | | | 4.32% | | | | 34.54% | |
| | | | | |
Expenses net of waiver and payments by affiliatesg | | | 0.55% | | | | 0.54% | | | | 0.55% | | | | 0.55% | | | | 0.55% | |
| | | | | |
Net investment incomed | | | 1.37% | | | | 0.93% | | | | 1.24% | | | | 2.01% | | | | 1.56% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $1,608 | | | | $1,219 | | | | $747 | | | | $33 | | | | $11 | |
| | | | | |
Portfolio turnover rate | | | 35.70% | | | | 89.82% | | | | 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 0.63% for the year ended December 31, 2017.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 109 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2050 Retirement Target Fund (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Class R6 | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.34 | | | | $11.16 | | | | $11.65 | | | | $11.23 | | | | $10.00 | |
| | | | |
| | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.24 | | | | 0.15 | | | | 0.19 | | | | 0.32 | | | | 0.09 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.94 | | | | 0.24 | | | | (0.34 | ) | | | 0.37 | | | | 1.25 | |
| | | | |
| | | | | |
Total from investment operations | | | 2.18 | | | | 0.39 | | | | (0.15 | ) | | | 0.69 | | | | 1.34 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.26 | ) | | | (0.11 | ) | | | (0.18 | ) | | | (0.21 | ) | | | (0.11 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.10 | ) | | | (0.16 | ) | | | (0.06 | ) | | | — | |
| | | | |
| | | | | |
Total distributions | | | (0.26 | ) | | | (0.21 | ) | | | (0.34 | ) | | | (0.27 | ) | | | (0.11 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $13.26 | | | | $11.34 | | | | $11.16 | | | | $11.65 | | | | $11.23 | |
| | | | |
| | | | | |
Total returne | | | 19.36% | | | | 3.55% | | | | (1.39)% | | | | 6.16% | | | | 13.39% | |
| | | | | |
| Ratios to average net assetsf | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesg | | | 0.69% | | | | 0.75% | | | | 1.00% | | | | 3.22% | | | | 34.36% | |
| | | | | |
Expenses net of waiver and payments by affiliatesg | | | —% | | | | —% | | | | —% | | | | —% | | | | —% | |
| | | | | |
Net investment incomed | | | 1.92% | | | | 1.47% | | | | 1.79% | | | | 2.56% | | | | 2.11% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $12,099 | | | | $9,174 | | | | $8,012 | | | | $6,348 | | | | $11 | |
| | | | | |
Portfolio turnover rate | | | 35.70% | | | | 89.82% | | | | 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 0.63% for the year ended December 31, 2017.
| | | | |
| | | |
| 110 | | 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, | |
| | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013a | |
| Advisor Class | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Per share operating performance
(for a share outstanding throughout the year) | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net asset value, beginning of year | | | $11.35 | | | | $11.16 | | | | $11.65 | | | | $11.22 | | | | $10.00 | |
| | | | |
| | | | | |
| Income from investment operationsb: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment incomec,d | | | 0.23 | | | | 0.15 | | | | 0.18 | | | | 0.23 | | | | 0.10 | |
| | | | | |
Net realized and unrealized gains (losses) | | | 1.94 | | | | 0.25 | | | | (0.33 | ) | | | 0.47 | | | | 1.23 | |
| | | | |
| | | | | |
Total from investment operations | | | 2.17 | | | | 0.40 | | | | (0.15 | ) | | | 0.70 | | | | 1.33 | |
| | | | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net investment income and short term gains received from
Underlying Funds and exchange traded funds | | | (0.26 | ) | | | (0.11 | ) | | | (0.18 | ) | | | (0.21 | ) | | | (0.11 | ) |
| | | | | |
Net realized gains | | | — | | | | (0.10 | ) | | | (0.16 | ) | | | (0.06 | ) | | | — | |
| | | | |
| | | | | |
Total distributions | | | (0.26 | ) | | | (0.21 | ) | | | (0.34 | ) | | | (0.27 | ) | | | (0.11 | ) |
| | | | |
| | | | | |
Net asset value, end of year | | | $13.26 | | | | $11.35 | | | | $11.16 | | | | $11.65 | | | | $11.22 | |
| | | | |
| | | | | |
Total returne | | | 19.20% | | | | 3.59% | | | | (1.43)% | | | | 6.22% | | | | 13.26% | |
| | | | | |
| Ratios to average net assetsf | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Expenses before waiver and payments by affiliatesg | | | 1.28% | | | | 1.22% | | | | 1.55% | | | | 3.82% | | | | 34.04% | |
| | | | | |
Expenses net of waiver and payments by affiliatesg | | | 0.05% | | | | 0.05% | | | | 0.05% | | | | 0.05% | | | | 0.05% | |
| | | | | |
Net investment incomed | | | 1.87% | | | | 1.42% | | | | 1.74% | | | | 2.51% | | | | 2.06% | |
| | | | | |
| Supplemental data | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net assets, end of year (000’s) | | | $512 | | | | $395 | | | | $394 | | | | $327 | | | | $75 | |
| | | | | |
Portfolio turnover rate | | | 35.70% | | | | 89.82% | | | | 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 0.63% for the year ended December 31, 2017.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 111 | |
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2017
| | | | | | | | | | |
| Franklin LifeSmart 2050 Retirement Target Fund | |
| | | | | Shares | | | Value | |
| | Investments in Underlying Funds and Exchange Traded Funds 97.0% | | | | | | | | |
| | Alternative Strategies 4.7% | | | | | | | | |
| a | | Franklin K2 Long Short Credit Fund, Class R6 | | | 73,455 | | | $ | 765,406 | |
| a | | Franklin Pelagos Commodities Strategy Fund, Class R6 | | | 108,629 | | | | 725,642 | |
| | | | | | | | | | |
| | | | | | | | | 1,491,048 | |
| | | | | | | | | | |
| | Domestic Equity 47.9% | | | | | | | | |
| | Financial Select Sector SPDR ETF | | | 49,000 | | | | 1,367,590 | |
| a | | Franklin Growth Fund, Class R6 | | | 57,252 | | | | 5,412,658 | |
| a,b | | Franklin Growth Opportunities Fund, Class R6 | | | 62,061 | | | | 2,434,663 | |
| a | | Franklin LibertyQ U.S. Equity ETF | | | 49,900 | | | | 1,442,604 | |
| a | | Franklin Rising Dividends Fund, Class R6 | | | 34,398 | | | | 2,101,377 | |
| a,b | | Franklin Small Cap Growth Fund, Class R6 | | | 29,202 | | | | 693,830 | |
| a | | Franklin Utilities Fund, Class R6 | | | 43,825 | | | | 825,655 | |
| | iShares S&P 500 Value ETF | | | 8,492 | | | | 970,126 | |
| | | | | | | | | | |
| | | | | | | | | 15,248,503 | |
| | | | | | | | | | |
| | Domestic Fixed Income 9.9% | | | | | | | | |
| a | | Franklin Floating Rate Daily Access Fund, Class R6 | | | 26,321 | | | | 230,837 | |
| a | | Franklin Low Duration Total Return Fund, Class R6 | | | 177,483 | | | | 1,742,879 | |
| a | | Franklin Strategic Income Fund, Class R6 | | | 22,315 | | | | 219,806 | |
| a | | Franklin U.S. Government Securities Fund, Class R6 | | | 67,091 | | | | 407,910 | |
| | iShares Core U.S. Aggregate Bond ETF | | | 3,500 | | | | 382,655 | |
| | iShares iBoxx $ Investment Grade Corporate Bond ETF | | | 1,500 | | | | 182,340 | |
| | | | | | | | | | |
| | | | | | | | | 3,166,427 | |
| | | | | | | | | | |
| | Foreign Equity 31.5% | | | | | | | | |
| a | | Franklin FTSE Europe ETF | | | 81,500 | | | | 2,078,657 | |
| a | | Franklin International Small Cap Growth Fund, Class R6 | | | 105,648 | | | | 2,128,805 | |
| a | | Franklin LibertyQ Emerging Markets ETF | | | 76,000 | | | | 2,511,420 | |
| a | | Franklin Mutual International Fund, Class R6 | | | 78,616 | | | | 1,255,505 | |
| | iShares Global Infrastructure ETF | | | 15,343 | | | | 693,810 | |
| a | | Templeton Foreign Fund, Class R6 | | | 173,344 | | | | 1,376,348 | |
| | | | | | | | | | |
| | | | | | | | | 10,044,545 | |
| | | | | | | | | | |
| | Foreign Fixed Income 3.0% | | | | | | | | |
| a | | Templeton Global Total Return Fund, Class R6 | | | 79,140 | | | | 953,640 | |
| | | | | | | | | | |
| | Total Investments in Underlying Funds and Exchange Traded Funds before Short Term Investments (Cost $26,961,098) | | | | | | | 30,904,163 | |
| | | | | | | | | | |
| | | |
| | Short Term Investments 2.2% | | | | | | | | |
| | Money Market Funds (Cost $544,475) 1.7% | | | | | | | | |
| a,c | | Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 544,475 | | | | 544,475 | |
| | | | | | | | | | |
| | | | |
| | | |
| 112 | | Annual Report | | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
STATEMENT OF INVESTMENTS
| | | | | | | | | | |
| Franklin LifeSmart 2050 Retirement Target Fund (continued) | |
| | | | | Principal
Amount | | | Value | |
| | Repurchase Agreements (Cost $143,947) 0.5% | | | | | | | | |
| d | | Joint Repurchase Agreement, 1.377%, 1/02/18 (Maturity Value $143,969) | | | | | | | | |
| | BNP Paribas Securities Corp. (Maturity Value $23,468) | | | | | | | | |
| | Deutsche Bank Securities Inc. (Maturity Value $26,158) | | | | | | | | |
| | HSBC Securities (USA) Inc. (Maturity Value $93,874) | | | | | | | | |
| | Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $469) | | | | | | | | |
| | Collateralized by U.S. Government Agency Securities, 0.00% - 1.98%, 7/27/18 - 11/22/21; U.S. Treasury Note, 1.25% - 2.00%, 12/31/18 - 4/30/22; and U.S. Treasury Note, Index Linked, 0.125%, 4/15/18 (valued at $146,837) | | $ | 143,947 | | | $ | 143,947 | |
| | | | | | | | | | |
| | Total Investments (Cost $27,649,520) 99.2% | | | | | | | 31,592,585 | |
| | Other Assets, less Liabilities 0.8% | | | | | | | 247,338 | |
| | | | | | | | | | |
| | Net Assets 100.0% | | | | | | $ | 31,839,923 | |
| | | | | | | | | | |
See Abbreviations on page 157.
aSee Note 3(f) regarding investments in FT Underlying Funds.
bNon-income producing.
cThe rate shown is the annualized seven-day yield at period end.
dSee Note 1(b) regarding joint repurchase agreement.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 113 | |
FRANKLIN FUND ALLOCATOR SERIES
Financial Highlights
Franklin LifeSmart 2055 Retirement Target Fund
| | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015a | |
| Class A | | | | | | | | | | | | |
| | | |
| Per share operating performance | | | | | | | | | | | | |
| (for a share outstanding throughout the year) | | | | | | | | | | | | |
| | | |
Net asset value, beginning of year | | | $9.47 | | | | $9.34 | | | | $10.00 | |
| | | | |
| | | |
| Income from investment operationsb: | | | | | | | | | | | | |
| | | |
Net investment incomec,d | | | 0.18 | | | | 0.12 | | | | 0.16 | |
| | | |
Net realized and unrealized gains (losses) | | | 1.62 | | | | 0.17 | | | | (0.70 | ) |
| | | | |
| | | |
Total from investment operations | | | 1.80 | | | | 0.29 | | | | (0.54 | ) |
| | | | |
| | | |
Less distributions from: | | | | | | | | | | | | |
| | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.19 | ) | | | (0.10 | ) | | | (0.12 | ) |
| | | |
Net realized gains | | | (0.03 | ) | | | (0.06 | ) | | | — | |
| | | | |
| | | |
| Total distributions | | | (0.22 | ) | | | (0.16 | ) | | | (0.12 | ) |
| | | | |
| | | |
| Net asset value, end of year | | | $11.05 | | | | $ 9.47 | | | | $ 9.34 | |
| | | | |
| | | |
Total returne | | | 19.06% | | | | 3.13% | | | | (5.40)% | |
| | | |
| Ratios to average net assetsf | | | | | | | | | | | | |
| | | |
Expenses before waiver and payments by affiliates and expense reductiong | | | 3.18% | | | | 5.09% | | | | 9.66% | |
| | | |
Expenses net of waiver and payments by affiliates and expense reductiong | | | 0.30% | | | | 0.32% | | | | 0.19% | |
| | | |
Net investment incomed | | | 1.75% | | | | 1.43% | | | | 2.62% | |
| | | |
| Supplemental data | | | | | | | | | | | | |
| | | |
Net assets, end of year (000’s) | | | $4,684 | | | | $2,732 | | | | $1,817 | |
| | | |
Portfolio turnover rate | | | 31.85% | | | | 93.35% | | | | 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, except for non-recurring expenses, if any.
gDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds and exchange traded funds was 0.63% for the year ended December 31, 2017.
| | | | |
| | | |
| 114 | | 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, | |
| | | 2017 | | | 2016 | | | 2015a | |
| Class C | | | | | | | | | | | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | |
| | | |
Net asset value, beginning of year | | | $9.39 | | | | $9.30 | | �� | | $10.00 | |
| | | | |
| | | |
Income from investment operationsb: | | | | | | | | | | | | |
| | | |
Net investment incomec,d | | | 0.12 | | | | 0.08 | | | | 0.24 | |
| | | |
Net realized and unrealized gains (losses) | | | 1.58 | | | | 0.14 | | | | (0.84 | ) |
| | | | |
| | | |
Total from investment operations | | | 1.70 | | | | 0.22 | | | | (0.60 | ) |
| | | | |
| | | |
Less distributions from: | | | | | | | | | | | | |
| | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.14 | ) | | | (0.07 | ) | | | (0.10 | ) |
| | | |
Net realized gains | | | (0.03 | ) | | | (0.06 | ) | | | — | |
| | | | |
| | | |
Total distributions | | | (0.17 | ) | | | (0.13 | ) | | | (0.10 | ) |
| | | | |
| | | |
Net asset value, end of year | | | $10.92 | | | | $ 9.39 | | | | $ 9.30 | |
| | | | |
| | | |
| Total returne | | | 18.10% | | | | 2.36% | | | | (5.99)% | |
| | | |
| Ratios to average net assetsf | | | | | | | | | | | | |
| | | |
Expenses before waiver and payments by affiliates and expense reductiong | | | 3.93% | | | | 5.82% | | | | 10.52% | |
| | | |
Expenses net of waiver and payments by affiliates and expense reductiong | | | 1.05% | | | | 1.05% | | | | 1.05% | |
| | | |
Net investment incomed | | | 1.00% | | | | 0.70% | | | | 1.76% | |
| | | |
| Supplemental data | | | | | | | | | | | | |
| | | |
Net assets, end of year (000’s) | | | $1,428 | | | | $572 | | | | $172 | |
| | | |
Portfolio turnover rate | | | 31.85% | | | | 93.35% | | | | 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, except for non-recurring expenses, if any.
gDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds and exchange traded funds was 0.63% for the year ended December 31, 2017.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 115 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2055 Retirement Target Fund (continued)
| | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015a | |
| Class R | | | | | | | | | | | | |
| | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | |
| | | |
Net asset value, beginning of year | | | $9.44 | | | | $9.33 | | | | $10.00 | |
| | | | |
| | | |
Income from investment operationsb: | | | | | | | | | | | | |
| | | |
Net investment incomec,d | | | 0.13 | | | | 0.12 | | | | 0.18 | |
| | | |
Net realized and unrealized gains (losses) | | | 1.63 | | | | 0.14 | | | | (0.74 | ) |
| | | | |
| | | |
Total from investment operations | | | 1.76 | | | | 0.26 | | | | (0.56 | ) |
| | | | |
| | | |
Less distributions from: | | | | | | | | | | | | |
| | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.16 | ) | | | (0.09 | ) | | | (0.11 | ) |
| | | |
Net realized gains | | | (0.03 | ) | | | (0.06 | ) | | | — | |
| | | | |
| | | |
Total distributions | | | (0.19 | ) | | | (0.15 | ) | | | (0.11 | ) |
| | | | |
| | | |
Net asset value, end of year | | | $11.01 | | | | $9.44 | | | | $9.33 | |
| | | | |
| | | |
| Total returne | | | 18.69% | | | | 2.84% | | | | (5.61)% | |
| | | |
| Ratios to average net assetsf | | | | | | | | | | | | |
| | | |
Expenses before waiver and payments by affiliates and expense reductiong | | | 3.43% | | | | 5.32% | | | | 9.98% | |
| | | |
Expenses net of waiver and payments by affiliates and expense reductiong | | | 0.55% | | | | 0.55% | | | | 0.51% | |
| | | |
Net investment incomed | | | 1.50% | | | | 1.20% | | | | 2.30% | |
| | | |
| Supplemental data | | | | | | | | | | | | |
| | | |
Net assets, end of year (000’s) | | | $354 | | | | $357 | | | | $41 | |
| | | |
Portfolio turnover rate | | | 31.85% | | | | 93.35% | | | | 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, except for non-recurring expenses, if any.
gDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds and exchange traded funds was 0.63% for the year ended December 31, 2017.
| | | | |
| | | |
| 116 | | 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, | |
| | | 2017 | | | 2016 | | | 2015a | |
| Class R6 | | | | | | | | | | | | |
| | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | |
| | | |
Net asset value, beginning of year | | | $9.48 | | | | $9.34 | | | | $10.00 | |
| | | | |
| | | |
Income from investment operationsb: | | | | | | | | | | | | |
| | | |
Net investment incomec,d | | | 0.22 | | | | 0.21 | | | | 0.32 | |
| | | |
Net realized and unrealized gains (losses) | | | 1.61 | | | | 0.11 | | | | (0.85 | ) |
| | | | |
| | | |
Total from investment operations | | | 1.83 | | | | 0.32 | | | | (0.53 | ) |
| | | | |
| | | |
Less distributions from: | | | | | | | | | | | | |
| | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.22 | ) | | | (0.12 | ) | | | (0.13 | ) |
| | | |
Net realized gains | | | (0.03 | ) | | | (0.06 | ) | | | — | |
| | | | |
| | | |
Total distributions | | | (0.25 | ) | | | (0.18 | ) | | | (0.13 | ) |
| | | | |
| | | |
Net asset value, end of year | | | $11.06 | | | | $ 9.48 | | | | $ 9.34 | |
| | | | |
| | | |
| Total returne | | | 19.32% | | | | 3.49% | | | | (5.33)% | |
| | | |
| Ratios to average net assetsf | | | | | | | | | | | | |
| | | |
Expenses before waiver and payments by affiliates and expense reductiong | | | 1.85% | | | | 4.21% | | | | 10.04% | |
| | | |
Expenses net of waiver and payments by affiliates and expense reductiong | | | —% | | | | —% | | | | —% | |
| | | |
Net investment incomed | | | 2.05% | | | | 1.75% | | | | 2.81% | |
| | | |
| Supplemental data | | | | | | | | | | | | |
| | | |
Net assets, end of year (000’s) | | | $3,184 | | | | $1,618 | | | | $92 | |
| | | |
Portfolio turnover rate | | | 31.85% | | | | 93.35% | | | | 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, except for non-recurring expenses, if any.
gDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds and exchange traded funds was 0.63% for the year ended December 31, 2017.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 117 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL HIGHLIGHTS
Franklin LifeSmart 2055 Retirement Target Fund (continued)
| | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2017 | | | 2016 | | | 2015a | |
| Advisor Class | | | | | | | | | | | | |
| | | |
Per share operating performance (for a share outstanding throughout the year) | | | | | | | | | | | | |
| | | |
Net asset value, beginning of year | | | $9.48 | | | | $9.35 | | | | $10.00 | |
| | | | |
| | | |
Income from investment operationsb: | | | | | | | | | | | | |
| | | |
Net investment incomec,d | | | 0.20 | | | | 0.13 | | | | 0.10 | |
| | | |
Net realized and unrealized gains (losses) | | | 1.62 | | | | 0.18 | | | | (0.63 | ) |
| | | | |
| | | |
Total from investment operations | | | 1.82 | | | | 0.31 | | | | (0.53 | ) |
| | | | |
| | | |
Less distributions from: | | | | | | | | | | | | |
| | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds | | | (0.21 | ) | | | (0.12 | ) | | | (0.12 | ) |
| | | |
Net realized gains | | | (0.03 | ) | | | (0.06 | ) | | | — | |
| | | | |
| | | |
Total distributions | | | (0.24 | ) | | | (0.18 | ) | | | (0.12 | ) |
| | | | |
| | | |
Net asset value, end of year | | | $11.06 | | | | $ 9.48 | | | | $ 9.35 | |
| | | | |
| | | |
| Total returne | | | 19.27% | | | | 3.45% | | | | (5.37)% | |
| | | |
| Ratios to average net assetsf | | | | | | | | | | | | |
| | | |
Expenses before waiver and payments by affiliatesg | | | 2.93% | | | | 4.82% | | | | 9.52% | |
| | | |
Expenses net of waiver and payments by affiliatesg | | | 0.05% | | | | 0.05% | | | | 0.05% | |
| | | |
Net investment incomed | | | 2.00% | | | | 1.70% | | | | 2.76% | |
| | | |
| Supplemental data | | | | | | | | | | | | |
| | | |
Net assets, end of year (000’s) | | | $32 | | | | $13 | | | | $11 | |
| | | |
Portfolio turnover rate | | | 31.85% | | | | 93.35% | | | | 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, except for non-recurring expenses, if any.
gDoes not include expenses of the Underlying Funds and exchange traded funds in which the Fund invests. The weighted average indirect expenses of the Underlying Funds and exchange traded funds was 0.63% for the year ended December 31, 2017.
| | | | |
| | | |
| 118 | | Annual Report | The accompanying notes are an integral part of these financial statements. | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
Statement of Investments, December 31, 2017
| | | | | | | | | | |
| | | Franklin LifeSmart 2055 Retirement Target Fund | | | | | | |
| | | | | Shares | | | Value | |
| |
| | Investments in Underlying Funds and Exchange Traded Funds 96.5% | | | | | | | | |
| | Alternative Strategies 4.6% | | | | | | | | |
| a | | Franklin K2 Long Short Credit Fund, Class R6 | | | 21,844 | | | $ | 227,616 | |
| a | | Franklin Pelagos Commodities Strategy Fund, Class R6 | | | 32,784 | | | | 218,999 | |
| | | | | | | | | | |
| | | | | | | | | 446,615 | |
| | | | | | | | | | |
| | Domestic Equity 48.0% | | | | | | | | |
| | Financial Select Sector SPDR ETF | | | 15,000 | | | | 418,650 | |
| a | | Franklin Growth Fund, Class R6 | | | 17,843 | | | | 1,686,827 | |
| a,b | | Franklin Growth Opportunities Fund, Class R6 | | | 18,780 | | | | 736,749 | |
| a | | Franklin LibertyQ U.S. Equity ETF | | | 15,800 | | | | 456,777 | |
| a | | Franklin Rising Dividends Fund, Class R6 | | | 10,824 | | | | 661,215 | |
| a,b | | Franklin Small Cap Growth Fund, Class R6 | | | 9,307 | | | | 221,135 | |
| a | | Franklin Utilities Fund, Class R6 | | | 13,928 | | | | 262,409 | |
| | iShares S&P 500 Value ETF | | | 1,795 | | | | 205,061 | |
| | | | | | | | | | |
| | | | | | | | | 4,648,823 | |
| | | | | | | | | | |
| | Domestic Fixed Income 9.3% | | | | | | | | |
| a | | Franklin Floating Rate Daily Access Fund, Class R6 | | | 7,983 | | | | 70,010 | |
| a | | Franklin Low Duration Total Return Fund, Class R6 | | | 55,284 | | | | 542,891 | |
| a | | Franklin Strategic Income Fund, Class R6 | | | 6,743 | | | | 66,418 | |
| a | | Franklin U.S. Government Securities Fund, Class R6 | | | 18,864 | | | | 114,691 | |
| | iShares Core U.S. Aggregate Bond ETF | | | 700 | | | | 76,531 | |
| | iShares iBoxx $ Investment Grade Corporate Bond ETF | | | 200 | | | | 24,312 | |
| | | | | | | | | | |
| | | | | | | | | 894,853 | |
| | | | | | | | | | |
| | Foreign Equity 31.7% | | | | | | | | |
| a | | Franklin FTSE Europe ETF | | | 25,000 | | | | 637,625 | |
| a | | Franklin International Small Cap Growth Fund, Class R6 | | | 33,224 | | | | 669,472 | |
| a | | Franklin LibertyQ Emerging Markets ETF | | | 22,200 | | | | 733,599 | |
| a | | Franklin Mutual International Fund, Class R6 | | | 24,624 | | | | 393,245 | |
| | iShares Global Infrastructure ETF | | | 4,097 | | | | 185,266 | |
| a | | Templeton Foreign Fund, Class R6 | | | 56,457 | | | | 448,268 | |
| | | | | | | | | | |
| | | | | | | | | 3,067,475 | |
| | | | | | | | | | |
| | Foreign Fixed Income 2.9% | | | | | | | | |
| a | | Templeton Global Total Return Fund, Class R6 | | | 23,590 | | | | 284,265 | |
| | | | | | | | | | |
| | Total Investments in Underlying Funds and Exchange Traded Funds before Short Term Investments (Cost $8,397,414) | | | | | | | 9,342,031 | |
| | | | | | | | | | |
| | | |
| | Short Term Investments (Cost $122,197) 1.3% | | | | | | | | |
| | Money Market Funds 1.3% | | | | | | | | |
a,c | | Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 122,197 | | | | 122,197 | |
| | | | | | | | | | |
| | Total Investments in Underlying Funds and Exchange Traded Funds (Cost $8,519,611) 97.8% | | | | | | | 9,464,228 | |
| | Other Assets, less Liabilities 2.2% | | | | | | | 217,488 | |
| | | | | | | | | | |
| | Net Assets 100.0% | | | | | | $ | 9,681,716 | |
| | | | | | | | | | |
See Abbreviations on page 157.
aSee Note 3(f) regarding investments in FT Underlying Funds.
bNon-income producing.
cThe rate shown is the annualized seven-day yield at period end.
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 119 | |
FRANKLIN FUND ALLOCATOR SERIES
Financial Statements
Statements of Assets and Liabilities
December 31, 2017
| | | | | | | | | | | | |
| | | Franklin
LifeSmart
Retirement
Income Fund | | | Franklin
LifeSmart
2020 Retirement
Target Fund | | | Franklin
LifeSmart
2025 Retirement
Target Fund | |
| |
Assets: | | | | | | | | | | | | |
Investments in securities: | | | | | | | | | | | | |
Cost - Unaffiliated issuers | | | $15,747,289 | | | | $ 3,951,872 | | | | $ 14,406,254 | |
Cost - Non-controlled affiliates (Note 3f) | | | 41,496,845 | | | | 29,879,018 | | | | 94,438,732 | |
Cost - Unaffiliated repurchase agreements | | | — | | | | 64,954 | | | | 749,786 | |
| | | | |
Value - Unaffiliated issuers | | | $16,194,475 | | | | $ 4,312,546 | | | | $ 16,128,742 | |
Value - Non-controlled affiliates (Note 3f) | | | 42,573,881 | | | | 32,703,376 | | | | 112,928,956 | |
Value - Unaffiliated repurchase agreements | | | — | | | | 64,954 | | | | 749,786 | |
Receivables: | | | | | | | | | | | | |
Capital shares sold | | | 41,433 | | | | 55,046 | | | | 232,603 | |
Dividends and interest | | | 36,162 | | | | 26 | | | | 123 | |
Affiliates | | | 5,943 | | | | 31,471 | | | | 71,596 | |
Other assets | | | 6 | | | | 6 | | | | 15 | |
| | | | |
Total assets | | | 58,851,900 | | | | 37,167,425 | | | | 130,111,821 | |
| | | | |
Liabilities: | | | | | | | | | | | | |
Payables: | | | | | | | | | | | | |
Capital shares redeemed | | | 462 | | | | 36,439 | | | | 74,454 | |
Distribution fees | | | 43,894 | | | | 19,581 | | | | 81,368 | |
Transfer agent fees | | | 20,938 | | | | 19,785 | | | | 65,772 | |
Reports to shareholders | | | 7,319 | | | | 3,393 | | | | 15,655 | |
Professional fees | | | 87,341 | | | | 20,888 | | | | 21,482 | |
Accrued expenses and other liabilities | | | 412 | | | | 94 | | | | 393 | |
| | | | |
Total liabilities | | | 160,366 | | | | 100,180 | | | | 259,124 | |
| | | | |
Net assets, at value | | | $58,691,534 | | | | $37,067,245 | | | | $129,852,697 | |
| | | | |
Net assets consist of: | | | | | | | | | | | | |
Paid-in capital | | | $59,125,635 | | | | $35,273,175 | | | | $110,561,955 | |
Undistributed net investment income | | | 980 | | | | 122,066 | | | | 190,555 | |
Net unrealized appreciation (depreciation) | | | 1,524,222 | | | | 3,185,032 | | | | 20,212,712 | |
Accumulated net realized gain (loss) | | | (1,959,303 | ) | | | (1,513,028 | ) | | | (1,112,525 | ) |
| | | | |
Net assets, at value | | | $58,691,534 | | | | $37,067,245 | | | | $129,852,697 | |
| | | | |
| | | | |
| | | |
| 120 | | 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, 2017
| | | | | | | | | | | | |
| | | Franklin LifeSmart Retirement Income Fund | | | Franklin LifeSmart 2020 Retirement Target Fund | | | Franklin LifeSmart 2025 Retirement Target Fund | |
| |
| Class A: | | | | | | | | | | | | |
Net assets, at value | | | $32,396,822 | | | | $20,289,299 | | | | $77,510,341 | |
| | | | |
Shares outstanding | | | 2,930,379 | | | | 1,724,982 | | | | 5,973,926 | |
| | | | |
Net asset value per sharea | | | $11.06 | | | | $11.76 | | | | $12.97 | |
| | | | |
Maximum offering price per share (net asset value per share ÷ 94.25%) | | | $11.73 | | | | $12.48 | | | | $13.76 | |
| | | | |
| | | |
| Class C: | | | | | | | | | | | | |
Net assets, at value | | | $16,070,439 | | | | $ 6,287,281 | | | | $27,301,380 | |
| | | | |
Shares outstanding | | | 1,471,499 | | | | 537,682 | | | | 2,137,385 | |
| | | | |
Net asset value and maximum offering price per sharea | | | $10.92 | | | | $11.69 | | | | $12.77 | |
| | | | |
| | | |
| Class R: | | | | | | | | | | | | |
Net assets, at value | | | $ 4,071,142 | | | | $ 969,377 | | | | $ 6,165,715 | |
| | | | |
Shares outstanding | | | 369,820 | | | | 82,531 | | | | 477,018 | |
| | | | |
Net asset value and maximum offering price per share | | | $11.01 | | | | $11.75 | | | | $12.93 | |
| | | | |
| | | |
| Class R6: | | | | | | | | | | | | |
Net assets, at value | | | $ 4,031,125 | | | | $ 8,830,523 | | | | $17,009,317 | |
| | | | |
Shares outstanding | | | 362,961 | | | | 749,080 | | | | 1,307,219 | |
| | | | |
Net asset value and maximum offering price per share | | | $11.11 | | | | $11.79 | | | | $13.01 | |
| | | | |
| | | |
| Advisor Class: | | | | | | | | | | | | |
Net assets, at value | | | $ 2,122,006 | | | | $ 690,765 | | | | $ 1,865,944 | |
| | | | |
Shares outstanding | | | 191,241 | | | | 58,586 | | | | 143,513 | |
| | | | |
Net asset value and maximum offering price per share | | | $11.10 | | | | $11.79 | | | | $13.00 | |
| | | | |
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 | | | 121 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL STATEMENTS
Statements of Assets and Liabilities (continued)
December 31, 2017
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Franklin LifeSmart 2030 Retirement Target Fund | | | Franklin LifeSmart 2035 Retirement Target Fund | | | Franklin LifeSmart 2040 Retirement Target Fund | |
| |
Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
Investments in securities: | | | | | | | | | | | | | | | | | | | | | | | | |
Cost - Unaffiliated issuers | | | | | | | $ 5,086,800 | | | | | | | | $ 12,478,781 | | | | | | | | $ 3,761,767 | |
Cost - Non-controlled affiliates (Note 3f) | | | | | | | 36,441,871 | | | | | | | | 82,956,108 | | | | | | | | 28,520,538 | |
Cost - Unaffiliated repurchase agreements | | | | | | | 161,510 | | | | | | | | 1,110,909 | | | | | | | | 211,733 | |
| | | | |
Value - Unaffiliated issuers | | | | | | | $ 5,735,828 | | | | | | | | $ 14,257,387 | | | | | | | | $ 4,319,152 | |
Value - Non-controlled affiliates (Note 3f) | | | | | | | 40,960,150 | | | | | | | | 100,736,205 | | | | | | | | 32,419,007 | |
Value - Unaffiliated repurchase agreements | | | | | | | 161,510 | | | | | | | | 1,110,909 | | | | | | | | 211,733 | |
Receivables: | | | | | | | | | | | | | | | | | | | | | | | | |
Capital shares sold | | | | | | | 173,361 | | | | | | | | 598,940 | | | | | | | | 296,558 | |
Dividends and interest | | | | | | | 51 | | | | | | | | 134 | | | | | | | | 43 | |
Affiliates | | | | | | | 41,559 | | | | | | | | 71,965 | | | | | | | | 39,790 | |
Other assets | | | | | | | 6 | | | | | | | | 12 | | | | | | | | 2 | |
| | | | |
Total assets | | | | | | | 47,072,465 | | | | | | | | 116,775,552 | | | | | | | | 37,286,285 | |
| | | | |
Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
Payables: | | | | | | | | | | | | | | | | | | | | | | | | |
Capital shares redeemed | | | | | | | 17,000 | | | | | | | | 98,056 | | | | | | | | 13,395 | |
Distribution fees | | | | | | | 21,115 | | | | | | | | 64,573 | | | | | | | | 13,421 | |
Transfer agent fees | | | | | | | 24,824 | | | | | | | | 69,257 | | | | | | | | 21,985 | |
Reports to shareholders | | | | | | | 4,439 | | | | | | | | 10,608 | | | | | | | | 3,864 | |
Professional fees | | | | | | | 22,463 | | | | | | | | 22,636 | | | | | | | | 22,113 | |
Accrued expenses and other liabilities | | | | | | | 72 | | | | | | | | 299 | | | | | | | | 57 | |
| | | | |
Total liabilities | | | | | | | 89,913 | | | | | | | | 265,429 | | | | | | | | 74,835 | |
| | | | |
Net assets, at value | | | | | | | $46,982,552 | | | | | | | | $116,510,123 | | | | | | | | $37,211,450 | |
| | | | |
Net assets consist of: | | | | | | | | | | | | | | | | | | | | | | | | |
Paid-in capital | | | | | | | $42,410,884 | | | | | | | | $ 96,565,319 | | | | | | | | $32,737,275 | |
Undistributed net investment income | | | | | | | 183,923 | | | | | | | | 181,835 | | | | | | | | 139,506 | |
Net unrealized appreciation (depreciation) | | | | | | | 5,167,307 | | | | | | | | 19,558,703 | | | | | | | | 4,455,854 | |
Accumulated net realized gain (loss) | | | | | | | (779,562 | ) | | | | | | | 204,266 | | | | | | | | (121,185 | ) |
| | | | |
Net assets, at value | | | | | | | $46,982,552 | | | | | | | | $116,510,123 | | | | | | | | $37,211,450 | |
| | | | |
| | | | |
| | | |
| 122 | | 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, 2017
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Franklin LifeSmart 2030 Retirement Target Fund | | | Franklin LifeSmart 2035 Retirement Target Fund | | | Franklin LifeSmart 2040 Retirement Target Fund | |
| |
| Class A: | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, at value | | | | | | | $19,270,135 | | | | | | | | $61,238,494 | | | | | | | | $14,001,440 | |
| | | | |
Shares outstanding | | | | | | | 1,517,432 | | | | | | | | 4,468,550 | | | | | | | | 1,074,161 | |
| | | | |
Net asset value per sharea | | | | | | | $12.70 | | | | | | | | $13.70 | | | | | | | | $13.03 | |
| | | | |
Maximum offering price per share (net asset value per share ÷ 94.25%) | | | | | | | $13.47 | | | | | | | | $14.54 | | | | | | | | $13.82 | |
| | | | |
| | | | | | |
| Class C: | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, at value | | | | | | | $ 7,642,457 | | | | | | | | $21,451,135 | | | | | | | | $ 4,014,751 | |
| | | | |
Shares outstanding | | | | | | | 608,486 | | | | | | | | 1,600,356 | | | | | | | | 312,919 | |
| | | | |
Net asset value and maximum offering price per sharea | | | | | | | $12.56 | | | | | | | | $13.40 | | | | | | | | $12.83 | |
| | | | |
| | | | | | |
| Class R: | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, at value | | | | | | | $ 1,148,050 | | | | | | | | $ 5,744,849 | | | | | | | | $ 1,519,056 | |
| | | | |
Shares outstanding | | | | | | | 90,524 | | | | | | | | 419,691 | | | | | | | | 116,712 | |
| | | | |
Net asset value and maximum offering price per share | | | | | | | $12.68 | | | | | | | | $13.69 | | | | | | | | $13.02 | |
| | | | |
| | | | | | |
| Class R6: | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, at value | | | | | | | $18,260,147 | | | | | | | | $26,497,374 | | | | | | | | $17,521,001 | |
| | | | |
Shares outstanding | | | | | | | 1,432,867 | | | | | | | | 1,920,335 | | | | | | | | 1,336,549 | |
| | | | |
Net asset value and maximum offering price per share | | | | | | | $12.74 | | | | | | | | $13.80 | | | | | | | | $13.11 | |
| | | | |
| | | | | | |
| Advisor Class: | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, at value | | | | | | | $ 661,763 | | | | | | | | $ 1,578,271 | | | | | | | | $155,202 | |
| | | | |
Shares outstanding | | | | | | | 51,968 | | | | | | | | 114,255 | | | | | | | | 11,848 | |
| | | | |
Net asset value and maximum offering price per share | | | | | | | $12.73 | | | | | | | | $13.81 | | | | | | | | $13.10 | |
| | | | |
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 | | | 123 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL STATEMENTS
Statements of Assets and Liabilities (continued)
December 31, 2017
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Franklin LifeSmart 2045 Retirement Target Fund | | | Franklin LifeSmart 2050 Retirement Target Fund | | | Franklin LifeSmart 2055 Retirement Target Fund | |
| |
Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
Investments in securities: | | | | | | | | | | | | | | | | | | | | | | | | |
Cost - Unaffiliated issuers | | | | | | | $8,096,722 | | | | | | | | $3,141,365 | | | | | | | | $802,939 | |
Cost - Non-controlled affiliates (Note 3f) | | | | | | | 56,717,053 | | | | | | | | 24,364,208 | | | | | | | | 7,716,672 | |
Cost - Unaffiliated repurchase agreements | | | | | | | 908,386 | | | | | | | | 143,947 | | | | | | | | — | |
| | | | |
Value - Unaffiliated issuers | | | | | | | $9,373,394 | | | | | | | | $3,596,521 | | | | | | | | $909,820 | |
Value - Non-controlled affiliates (Note 3f) | | | | | | | 69,266,111 | | | | | | | | 27,852,117 | | | | | | | | 8,554,408 | |
Value - Unaffiliated repurchase agreements | | | | | | | 908,386 | | | | | | | | 143,947 | | | | | | | | — | |
Cash | | | | | | | — | | | | | | | | — | | | | | | | | 109,161 | |
Receivables: | | | | | | | | | | | | | | | | | | | | | | | | |
Investment securities sold | | | | | | | 37,883 | | | | | | | | — | | | | | | | | — | |
Capital shares sold | | | | | | | 339,069 | | | | | | | | 240,968 | | | | | | | | 119,366 | |
Dividends and interest | | | | | | | 97 | | | | | | | | 39 | | | | | | | | 12 | |
Affiliates | | | | | | | 71,884 | | | | | | | | 85,906 | | | | | | | | 37,013 | |
Other assets | | | | | | | 7 | | | | | | | | 3 | | | | | | | | — | |
| | | | |
Total assets | | | | | | | 79,996,831 | | | | | | | | 31,919,501 | | | | | | | | 9,729,780 | |
| | | | |
Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
Payables: | | | | |
Capital shares redeemed | | | | | | | 17,299 | | | | | | | | 9,485 | | | | | | | | 3,629 | |
Distribution fees | | | | | | | 45,330 | | | | | | | | 12,951 | | | | | | | | 3,734 | |
Transfer agent fees | | | | | | | 77,108 | | | | | | | | 31,932 | | | | | | | | 15,903 | |
Reports to shareholders | | | | | | | 9,166 | | | | | | | | 4,483 | | | | | | | | 2,744 | |
Professional fees | | | | | | | 21,129 | | | | | | | | 20,692 | | | | | | | | 22,017 | |
Accrued expenses and other liabilities | | | | | | | 196 | | | | | | | | 35 | | | | | | | | 37 | |
| | | | |
Total liabilities | | | | | | | 170,228 | | | | | | | | 79,578 | | | | | | | | 48,064 | |
| | | | |
Net assets, at value | | | | | | | $79,826,603 | | | | | | | | $31,839,923 | | | | | | | | $9,681,716 | |
| | | | |
Net assets consist of: | | | | | | | | | | | | | | | | | | | | | | | | |
Paid-in capital | | | | | | | $65,447,747 | | | | | | | | $27,925,277 | | | | | | | | $8,689,457 | |
Undistributed net investment income | | | | | | | 49,764 | | | | | | | | 125,661 | | | | | | | | — | |
Net unrealized appreciation (depreciation) | | | | | | | 13,825,730 | | | | | | | | 3,943,065 | | | | | | | | 944,617 | |
Accumulated net realized gain (loss) | | | | | | | 503,362 | | | | | | | | (154,080 | ) | | | | | | | 47,642 | |
| | | | |
Net assets, at value | | | | | | | $79,826,603 | | | | | | | | $31,839,923 | | | | | | | | $9,681,716 | |
| | | | |
| | | | |
| | | |
| 124 | | 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, 2017
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Franklin LifeSmart 2045 Retirement
Target Fund | | | Franklin LifeSmart 2050 Retirement Target Fund | | | Franklin LifeSmart 2055 Retirement Target Fund | |
| |
| Class A: | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, at value | | | | | | | $46,783,101 | | | | | | | | $13,823,087 | | | | | | | | $4,683,506 | |
| | | | |
Shares outstanding | | | | | | | 3,394,414 | | | | | | | | 1,047,723 | | | | | | | | 423,985 | |
| | | | |
Net asset value per sharea | | | | | | | $13.78 | | | | | | | | $13.19 | | | | | | | | $11.05 | |
| | | | |
Maximum offering price per share (net asset value per share ÷ 94.25%) | | | | | | | $14.62 | | | | | | | | $13.99 | | | | | | | | $11.72 | |
| | | | |
| | | | | | |
| Class C: | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, at value | | | | | | | $13,190,215 | | | | | | | | $ 3,797,370 | | | | | | | | $1,428,031 | |
| | | | |
Shares outstanding | | | | | | | 981,226 | | | | | | | | 289,597 | | | | | | | | 130,766 | |
| | | | |
Net asset value and maximum offering price per sharea | | | | | | | $13.44 | | | | | | | | $13.11 | | | | | | | | $10.92 | |
| | | | |
| | | | | | |
| Class R: | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, at value | | | | | | | $ 5,463,808 | | | | | | | | $ 1,608,376 | | | | | | | | $ 354,141 | |
| | | | |
Shares outstanding | | | | | | | 398,170 | | | | | | | | 121,902 | | | | | | | | 32,152 | |
| | | | |
Net asset value and maximum offering price per share | | | | | | | $13.72 | | | | | | | | $13.19 | | | | | | | | $11.01 | |
| | | | |
| | | | | | |
| Class R6: | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, at value | | | | | | | $13,787,071 | | | | | | | | $12,098,681 | | | | | | | | $3,183,891 | |
| | | | |
Shares outstanding | | | | | | | 993,439 | | | | | | | | 912,340 | | | | | | | | 287,927 | |
| | | | |
Net asset value and maximum offering price per share | | | | | | | $13.88 | | | | | | | | $13.26 | | | | | | | | $11.06 | |
| | | | |
| | | | | | |
| Advisor Class: | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, at value | | | | | | | $ 602,408 | | | | | | | | $ 512,409 | | | | | | | | $ 32,147 | |
| | | | |
Shares outstanding | | | | | | | 43,389 | | | | | | | | 38,633 | | | | | | | | 2,907 | |
| | | | |
Net asset value and maximum offering price per share | | | | | | | $13.88 | | | | | | | | $13.26 | | | | | | | | $11.06 | |
| | | | |
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 | | | 125 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL STATEMENTS
Statements of Operations
for the year ended December 31, 2017
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Franklin LifeSmart Retirement Income Fund | | | Franklin LifeSmart 2020 Retirement Target Fund | | | Franklin LifeSmart 2025 Retirement Target Fund | |
| |
Investment income: | | | | | | | | | | | | | | | | | | | | | | | | |
Dividends: | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated issuers | | | | | | | $ 611,846 | | | | | | | | $ 112,929 | | | | | | | | $ 415,206 | |
Non-controlled affiliates (Note 3f) | | | | | | | 1,795,775 | | | | | | | | 562,687 | | | | | | | | 1,882,890 | |
Interest: | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated issuers | | | | | | | 194,914 | | | | | | | | 52 | | | | | | | | 197 | |
| | | | |
Total investment income | | | | | | | 2,602,535 | | | | | | | | 675,668 | | | | | | | | 2,298,293 | |
| | | | |
Expenses: | | | | | | | | | | | | | | | | | | | | | | | | |
Management and asset allocation fees (Note 3a) | | | | | | | 155,468 | | | | | | | | 89,953 | | | | | | | | 316,023 | |
Distribution fees: (Note 3c) | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | | | | | 86,923 | | | | | | | | 48,734 | | | | | | | | 187,994 | |
Class C | | | | | | | 168,382 | | | | | | | | 55,778 | | | | | | | | 266,804 | |
Class R | | | | | | | 22,180 | | | | | | | | 10,331 | | | | | | | | 36,044 | |
Transfer agent fees: (Note 3e) | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | | | | | 59,964 | | | | | | | | 37,246 | | | | | | | | 141,209 | |
Class C | | | | | | | 29,077 | | | | | | | | 10,657 | | | | | | | | 50,310 | |
Class R | | | | | | | 7,694 | | | | | | | | 3,956 | | | | | | | | 13,543 | |
Class R6 | | | | | | | 807 | | | | | | | | 589 | | | | | | | | 1,078 | |
Advisor Class | | | | | | | 3,325 | | | | | | | | 898 | | | | | | | | 3,050 | |
Custodian fees (Note 4) | | | | | | | 1,132 | | | | | | | | 630 | | | | | | | | 1,230 | |
Reports to shareholders | | | | | | | 13,431 | | | | | | | | 8,385 | | | | | | | | 28,214 | |
Registration and filing fees | | | | | | | 75,802 | | | | | | | | 78,536 | | | | | | | | 76,474 | |
Professional fees | | | | | | | 57,165 | | | | | | | | 28,565 | | | | | | | | 29,623 | |
Trustees’ fees and expenses | | | | | | | 453 | | | | | | | | — | | | | | | | | 880 | |
Other | | | | | | | 3,769 | | | | | | | | 1,638 | | | | | | | | 2,594 | |
| | | | |
Total expenses | | | | | | | 685,572 | | | | | | | | 375,896 | | | | | | | | 1,155,070 | |
Expense reductions (Note 4) | | | | | | | (13 | ) | | | | | | | — | | | | | | | | — | |
Expenses waived/paid by affiliates (Note 3f and 3g) | | | | | | | (378,889 | ) | | | | | | | (247,208 | ) | | | | | | | (608,812 | ) |
| | | | |
Net expenses | | | | | | | 306,670 | | | | | | | | 128,688 | | | | | | | | 546,258 | |
| | | | |
Net investment income | | | | | | | 2,295,865 | | | | | | | | 546,980 | | | | | | | | 1,752,035 | |
| | | | |
Realized and unrealized gains (losses): | | | | | | | | | | | | | | | | | | | | | | | | |
Net realized gain (loss) from: | | | | | | | | | | | | | | | | | | | | | | | | |
Sale of investments: | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated issuers | | | | | | | 36,005 | | | | | | | | 105,924 | | | | | | | | 459,120 | |
Non-controlled affiliates (Note 3f) | | | | | | | 243,669 | | | | | | | | 465,381 | | | | | | | | 2,132,541 | |
Capital gain distributions from Underlying Funds: | | | | | | | | | | | | | | | | | | | | | | | | |
Non-controlled affiliates (Note 3f) | | | | | | | — | | | | | | | | 308,561 | | | | | | | | 1,416,682 | |
| | | | |
Net realized gain (loss) | | | | | | | 279,674 | | | | | | | | 879,866 | | | | | | | | 4,008,343 | |
| | | | |
Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | | | | | | | | | | | | | | | |
Investments: | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated issuers | | | | | | | 277,307 | | | | | | | | 304,569 | | | | | | | | 1,475,860 | |
Non-controlled affiliates (Note 3f) | | | | | | | 21,345 | | | | | | | | 2,169,429 | | | | | | | | 10,209,571 | |
| | | | |
Net change in unrealized appreciation (depreciation) | | | | | | | 298,652 | | | | | | | | 2,473,998 | | | | | | | | 11,685,431 | |
| | | | |
Net realized and unrealized gain (loss) | | | | | | | 578,326 | | | | | | | | 3,353,864 | | | | | | | | 15,693,774 | |
| | | | |
Net increase (decrease) in net assets resulting from operations | | | | | | | $2,874,191 | | | | | | | | $3,900,844 | | | | | | | | $17,445,809 | |
| | | | |
| | | | |
| | | |
| 126 | | 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, 2017
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Franklin LifeSmart 2030 Retirement Target Fund | | | Franklin LifeSmart 2035 Retirement Target Fund | | | Franklin LifeSmart 2040 Retirement Target Fund | |
| |
Investment income: | | | | | | | | | | | | | | | | | | | | | | | | |
Dividends: | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated issuers | | | | | | | $136,005 | | | | | | | | $354,219 | | | | | | | | $106,740 | |
Non-controlled affiliates (Note 3f) | | | | | | | 664,413 | | | | | | | | 1,674,389 | | | | | | | | 530,085 | |
Interest: | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated issuers | | | | | | | 31 | | | | | | | | 72 | | | | | | | | 18 | |
| | | | |
Total investment income | | | | | | | 800,449 | | | | | | | | 2,028,680 | | | | | | | | 636,843 | |
| | | | |
Expenses: | | | | | | | | | | | | | | | | | | | | | | | | |
Asset allocation fees (Note 3a) | | | | | | | 105,415 | | | | | | | | 274,665 | | | | | | | | 86,032 | |
Distribution fees: (Note 3c) | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | | | | | 44,274 | | | | | | | | 145,498 | | | | | | | | 33,466 | |
Class C | | | | | | | 63,402 | | | | | | | | 198,022 | | | | | | | | 33,020 | |
Class R | | | | | | | 5,999 | | | | | | | | 29,429 | | | | | | | | 8,926 | |
Transfer agent fees: (Note 3e) | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | | | | | 52,458 | | | | | | | | 140,295 | | | | | | | | 54,918 | |
Class C | | | | | | | 18,780 | | | | | | | | 48,100 | | | | | | | | 13,547 | |
Class R | | | | | | | 3,556 | | | | | | | | 14,206 | | | | | | | | 7,330 | |
Class R6 | | | | | | | 915 | | | | | | | | 1,336 | | | | | | | | 1,063 | |
Advisor Class | | | | | | | 1,651 | | | | | | | | 3,630 | | | | | | | | 607 | |
Custodian fees (Note 4) | | | | | | | 310 | | | | | | | | 584 | | | | | | | | 289 | |
Reports to shareholders | | | | | | | 10,695 | | | | | | | | 22,782 | | | | | | | | 10,266 | |
Registration and filing fees | | | | | | | 77,134 | | | | | | | | 76,132 | | | | | | | | 76,988 | |
Professional fees | | | | | | | 30,017 | | | | | | | | 30,820 | | | | | | | | 29,443 | |
Trustees’ fees and expenses | | | | | | | — | | | | | | | | 751 | | | | | | | | — | |
Other | | | | | | | 1,670 | | | | | | | | 2,407 | | | | | | | | 4,329 | |
| | | | |
Total expenses | | | | | | | 416,276 | | | | | | | | 988,657 | | | | | | | | 360,224 | |
| | | | |
Expenses waived/paid by affiliates (Note 3f and 3g) | | | | | | | (289,687 | ) | | | | | | | (572,833 | ) | | | | | | | (275,480 | ) |
| | | | |
Net expenses | | | | | | | 126,589 | | | | | | | | 415,824 | | | | | | | | 84,744 | |
| | | | |
Net investment income | | | | | | | 673,860 | | | | | | | | 1,612,856 | | | | | | | | 552,099 | |
| | | | |
Realized and unrealized gains (losses): | | | | | | | | | | | | | | | | | | | | | | | | |
Net realized gain (loss) from: | | | | | | | | | | | | | | | | | | | | | | | | |
Sale of investments: | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated issuers | | | | | | | 147,714 | | | | | | | | 391,306 | | | | | | | | 119,484 | |
Non-controlled affiliates (Note 3f) | | | | | | | 540,640 | | | | | | | | 1,760,459 | | | | | | | | 567,066 | |
Capital gain distributions from Underlying Funds: | | | | | | | | | | | | | | | | | | | | | | | | |
Non-controlled affiliates (Note 3f) | | | | | | | 561,931 | | | | | | | | 1,574,481 | | | | | | | | 526,463 | |
| | | | |
Net realized gain (loss) | | | | | | | 1,250,285 | | | | | | | | 3,726,246 | | | | | | | | 1,213,013 | |
| | | | |
Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | | | | | | | | | | | | | | | |
Investments: | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated issuers | | | | | | | 555,876 | | | | | | | | 1,614,951 | | | | | | | | 499,073 | |
Non-controlled affiliates (Note 3f) | | | | | | | 3,964,520 | | | | | | | | 11,015,926 | | | | | | | | 3,577,782 | |
| | | | |
Net change in unrealized appreciation (depreciation) | | | | | | | 4,520,396 | | | | | | | | 12,630,877 | | | | | | | | 4,076,855 | |
| | | | |
Net realized and unrealized gain (loss) | | | | | | | 5,770,681 | | | | | | | | 16,357,123 | | | | | | | | 5,289,868 | |
| | | | |
Net increase (decrease) in net assets resulting from operations | | | | | | | $6,444,541 | | | | | | | | $17,969,979 | | | | | | | | $5,841,967 | |
| | | | |
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 127 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL STATEMENTS
Statements of Operations (continued)
for the year ended December 31, 2017
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Franklin LifeSmart 2045 Retirement
Target Fund | | | Franklin LifeSmart 2050 Retirement Target Fund | | | Franklin LifeSmart 2055 Retirement Target Fund | |
| |
Investment income: | | | | | | | | | | | | | | | | | | | | | | | | |
Dividends: | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated issuers | | | | | | | $ 243,017 | | | | | | | | $ 84,754 | | | | | | | | $ 20,294 | |
Non-controlled affiliates (Note 3f) | | | | | | | 1,148,713 | | | | | | | | 444,845 | | | | | | | | 131,986 | |
Interest: | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated issuers | | | | | | | 49 | | | | | | | | 11 | | | | | | | | — | |
| | | | |
Total investment income | | | | | | | 1,391,779 | | | | | | | | 529,610 | | | | | | | | 152,280 | |
| | | | |
Expenses: | | | | | | | | | | | | | | | | | | | | | | | | |
Asset allocation fees (Note 3a) | | | | | | | 189,890 | | | | | | | | 68,973 | | | | | | | | 18,523 | |
Distribution fees: (Note 3c) | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | | | | | 112,270 | | | | | | | | 29,465 | | | | | | | | 9,333 | |
Class C | | | | | | | 125,937 | | | | | | | | 32,400 | | | | | | | | 9,815 | |
Class R | | | | | | | 26,062 | | | | | | | | 7,216 | | | | | | | | 1,636 | |
Transfer agent fees: (Note 3e) | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | | | | | 154,637 | | | | | | | | 70,909 | | | | | | | | 41,103 | |
Class C | | | | | | | 43,850 | | | | | | | | 19,492 | | | | | | | | 10,805 | |
Class R | | | | | | | 17,979 | | | | | | | | 8,759 | | | | | | | | 3,603 | |
Class R6 | | | | | | | 1,115 | | | | | | | | 820 | | | | | | | | 566 | |
Advisor Class | | | | | | | 2,148 | | | | | | | | 2,747 | | | | | | | | 300 | |
Custodian fees (Note 4) | | | | | | | 650 | | | | | | | | 116 | | | | | | | | 16 | |
Reports to shareholders | | | | | | | 21,389 | | | | | | | | 11,297 | | | | | | | | 6,836 | |
Registration and filing fees | | | | | | | 75,764 | | | | | | | | 76,573 | | | | | | | | 76,704 | |
Professional fees | | | | | | | 28,808 | | | | | | | | 27,969 | | | | | | | | 29,588 | |
Trustees’ fees and expenses | | | | | | | 523 | | | | | | | | — | | | | | | | | — | |
Other | | | | | | | 2,075 | | | | | | | | 4,279 | | | | | | | | 4,067 | |
| | | | |
Total expenses | | | | | | | 803,097 | | | | | | | | 361,015 | | | | | | | | 212,895 | |
Expenses waived/paid by affiliates (Note 3f and 3g) | | | | | | | (507,015 | ) | | | | | | | (283,470 | ) | | | | | | | (189,602 | ) |
| | | | |
Net expenses | | | | | | | 296,082 | | | | | | | | 77,545 | | | | | | | | 23,293 | |
| | | | |
Net investment income | | | | | | | 1,095,697 | | | | | | | | 452,065 | | | | | | | | 128,987 | |
| | | | |
Realized and unrealized gains (losses): | | | | | | | | | | | | | | | | | | | | | | | | |
Net realized gain (loss) from: | | | | | | | | | | | | | | | | | | | | | | | | |
Sale of investments: | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated issuers | | | | | | | 264,819 | | | | | | | | 94,224 | | | | | | | | 20,623 | |
Non-controlled affiliates (Note 3f) | | | | | | | 1,331,929 | | | | | | | | 406,475 | | | | | | | | 75,309 | |
Capital gain distributions from Underlying Funds: | | | | | | | | | | | | | | | | | | | | | | | | |
Non-controlled affiliates (Note 3f) | | | | | | | 1,139,758 | | | | | | | | 450,406 | | | | | | | | 137,878 | |
| | | | |
Net realized gain (loss) | | | | | | | 2,736,506 | | | | | | | | 951,105 | | | | | | | | 233,810 | |
| | | | |
Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | | | | | | | | | | | | | | | |
Investments: | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated issuers | | | | | | | 1,152,246 | | | | | | | | 323,464 | | | | | | | | 90,454 | |
Non-controlled affiliates (Note 3f) | | | | | | | 7,984,932 | | | | | | | | 2,997,000 | | | | | | | | 792,771 | |
| | | | |
Net change in unrealized appreciation (depreciation) | | | | | | | 9,137,178 | | | | | | | | 3,320,464 | | | | | | | | 883,225 | |
| | | | |
Net realized and unrealized gain (loss) | | | | | | | 11,873,684 | | | | | | | | 4,271,569 | | | | | | | | 1,117,035 | |
| | | | |
Net increase (decrease) in net assets resulting from operations | | | | | | | $12,969,381 | | | | | | | | $4,723,634 | | | | | | | | $1,246,022 | |
| | | | |
| | | | |
| | | |
| 128 | | 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 LifeSmart Retirement Income Fund | | | Franklin LifeSmart 2020 Retirement Target Fund | |
| | | | |
| | | Year Ended December 31, | | | Year Ended December 31, | |
| | | | |
| | | | | | 2017 | | | | | | 2016 | | | | | | 2017 | | | | | | 2016 | |
| |
Increase (decrease) in net assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operations: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | | | | | $ 2,295,865 | | | | | | | | $ 1,654,982 | | | | | | | | $ 546,980 | | | | | | | | $ 408,608 | |
Net realized gain (loss) | | | | | | | 279,674 | | | | | | | | (1,309,613 | ) | | | | | | | 879,866 | | | | | | | | (1,718,865 | ) |
Net change in unrealized appreciation (depreciation) | | | | | | | 298,652 | | | | | | | | 3,026,905 | | | | | | | | 2,473,998 | | | | | | | | 2,259,234 | |
| | | | |
Net increase (decrease) in net assets resulting from operations | | | | | | | 2,874,191 | | | | | | | | 3,372,274 | | | | | | | | 3,900,844 | | | | | | | | 948,977 | |
| | | | |
Distributions to shareholders from: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | | | | | (1,347,314 | ) | | | | | | | (1,067,178 | ) | | | | | | | (253,048 | ) | | | | | | | (295,979 | ) |
Class C | | | | | | | (531,859 | ) | | | | | | | (373,226 | ) | | | | | | | (33,094 | ) | | | | | | | (42,176 | ) |
Class R | | | | | | | (161,786 | ) | | | | | | | (115,568 | ) | | | | | | | (15,307 | ) | | | | | | | (41,080 | ) |
Class R6 | | | | | | | (173,591 | ) | | | | | | | (143,332 | ) | | | | | | | (133,651 | ) | | | | | | | (128,117 | ) |
Advisor Class | | | | | | | (80,364 | ) | | | | | | | (28,206 | ) | | | | | | | (8,207 | ) | | | | | | | (5,734 | ) |
Net realized gains: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | | | | | — | | | | | | | | (207,339 | ) | | | | | | | — | | | | | | | | (147,075 | ) |
Class C | | | | | | | — | | | | | | | | (93,502 | ) | | | | | | | — | | | | | | | | (38,213 | ) |
Class R | | | | | | | — | | | | | | | | (23,580 | ) | | | | | | | — | | | | | | | | (23,056 | ) |
Class R6 | | | | | | | — | | | | | | | | (22,885 | ) | | | | | | | — | | | | | | | | (50,620 | ) |
Advisor Class | | | | | | | — | | | | | | | | (2,809 | ) | | | | | | | — | | | | | | | | (2,386 | ) |
Tax return of capital: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | | | | | — | | | | | | | | (154,983 | ) | | | | | | | — | | | | | | | | — | |
Class C | | | | | | | — | | | | | | | | (55,963 | ) | | | | | | | — | | | | | | | | — | |
Class R | | | | | | | — | | | | | | | | (17,001 | ) | | | | | | | — | | | | | | | | — | |
Class R6 | | | | | | | — | | | | | | | | (20,450 | ) | | | | | | | — | | | | | | | | — | |
Advisor Class | | | | | | | — | | | | | | | | (4,180 | ) | | | | | | | — | | | | | | | | — | |
| | | | |
Total distributions to shareholders | | | | | | | (2,294,914 | ) | | | | | | | (2,330,202 | ) | | | | | | | (443,307 | ) | | | | | | | (774,436 | ) |
| | | | |
Capital share transactions: (Note 2) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | | | | | (7,658,921 | ) | | | | | | | (5,766,509 | ) | | | | | | | (870,559 | ) | | | | | | | (678,470 | ) |
Class C | | | | | | | (1,647,620 | ) | | | | | | | (3,530,632 | ) | | | | | | | 623,599 | | | | | | | | (126,761 | ) |
Class R | | | | | | | (892,189 | ) | | | | | | | 701,188 | | | | | | | | (2,410,573 | ) | | | | | | | (59,597 | ) |
Class R6 | | | | | | | 68,684 | | | | | | | | (2,957,601 | ) | | | | | | | 1,372,114 | | | | | | | | (117,450 | ) |
Advisor Class | | | | | | | 413,703 | | | | | | | | 821,012 | | | | | | | | 332,685 | | | | | | | | 24,559 | |
| | | | |
Total capital share transactions | | | | | | | (9,716,343 | ) | | | | | | | (10,732,542 | ) | | | | | | | (952,734 | ) | | | | | | | (957,719 | ) |
| | | | |
Net increase (decrease) in net assets | | | | | | | (9,137,066 | ) | | | | | | | (9,690,470 | ) | | | | | | | 2,504,803 | | | | | | | | (783,178 | ) |
Net assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning of year | | | | | | | 67,828,600 | | | | | | | | 77,519,070 | | | | | | | | 34,562,442 | | | | | | | | 35,345,620 | |
| | | | |
End of year | | | | | | | $58,691,534 | | | | | | | | $67,828,600 | | | | | | | | $37,067,245 | | | | | | | | $34,562,442 | |
| | | | |
Undistributed net investment income included in net assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
End of year | | | | | | | $ 980 | | | | | | | | $ — | | | | | | | | $ 122,066 | | | | | | | | $ — | |
| | | | |
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 129 | |
FRANKLIN FUND ALLOCATOR SERIES
FINANCIAL STATEMENTS
Statements of Changes in Net Assets (continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Franklin LifeSmart 2025 Retirement Target Fund | | | Franklin LifeSmart 2030 Retirement Target Fund | |
| | | | |
| | | Year Ended December 31, | | | Year Ended December 31, | |
| | | | |
| | | | | | 2017 | | | | | | 2016 | | | | | | 2017 | | | | | | 2016 | |
| |
Increase (decrease) in net assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operations: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | | | | | $ 1,752,035 | | | | | | | | $ 1,310,993 | | | | | | | | $ 673,860 | | | | | | | | $ 411,328 | |
Net realized gain (loss) | | | | | | | 4,008,343 | | | | | | | | (3,773,763 | ) | | | | | | | 1,250,285 | | | | | | | | (1,654,056 | ) |
Net change in unrealized appreciation (depreciation) | | | | | | | 11,685,431 | | | | | | | | 6,097,411 | | | | | | | | 4,520,396 | | | | | | | | 2,378,481 | |
| | | | |
Net increase (decrease) in net assets resulting from operations | | | | | | | 17,445,809 | | | | | | | | 3,634,641 | | | | | | | | 6,444,541 | | | | | | | | 1,135,753 | |
| | | | |
Distributions to shareholders from: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income and short term gains received from | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Underlying Funds and exchange traded funds: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | | | | | (1,374,446 | ) | | | | | | | (878,508 | ) | | | | | | | (327,886 | ) | | | | | | | (126,582 | ) |
Class C | | | | | | | (297,151 | ) | | | | | | | (110,040 | ) | | | | | | | (77,020 | ) | | | | | | | (4,373 | ) |
Class R | | | | | | | (99,527 | ) | | | | | | | (65,898 | ) | | | | | | | (17,966 | ) | | | | | | | (7,457 | ) |
Class R6 | | | | | | | (341,974 | ) | | | | | | | (221,187 | ) | | | | | | | (356,330 | ) | | | | | | | (147,921 | ) |
Advisor Class | | | | | | | (35,619 | ) | | | | | | | (18,598 | ) | | | | | | | (12,533 | ) | | | | | | | (3,285 | ) |
Net realized gains: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | | | | | — | | | | | | | | (950,733 | ) | | | | | | | — | | | | | | | | (142,848 | ) |
Class C | | | | | | | — | | | | | | | | (371,035 | ) | | | | | | | — | | | | | | | | (44,370 | ) |
Class R | | | | | | | — | | | | | | | | (89,222 | ) | | | | | | | — | | | | | | | | (13,218 | ) |
Class R6 | | | | | | | — | | | | | | | | (198,247 | ) | | | | | | | — | | | | | | | | (116,284 | ) |
Advisor Class | | | | | | | — | | | | | | | | (15,098 | ) | | | | | | | — | | | | | | | | (2,570 | ) |
| | | | |
Total distributions to shareholders | | | | | | | (2,148,717 | ) | | | | | | | (2,918,566 | ) | | | | | | | (791,735 | ) | | | | | | | (608,908 | ) |
| | | | |
Capital share transactions: (Note 2) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | | | | | (6,346,715 | ) | | | | | | | 1,701,071 | | | | | | | | 95,351 | | | | | | | | 2,929,403 | |
Class C | | | | | | | (2,345,913 | ) | | | | | | | (3,132,785 | ) | | | | | | | 1,683,531 | | | | | | | | 912,677 | |
Class R | | | | | | | (2,146,310 | ) | | | | | | | 1,274,985 | | | | | | | | (421,357 | ) | | | | | | | 492,452 | |
Class R6 | | | | | | | 1,226,269 | | | | | | | | (3,302,638 | ) | | | | | | | 1,613,558 | | | | | | | | 1,247,649 | |
Advisor Class | | | | | | | 294,008 | | | | | | | | 183,035 | | | | | | | | 259,133 | | | | | | | | 20,840 | |
| | | | |
Total capital share transactions | | | | | | | (9,318,661 | ) | | | | | | | (3,276,332 | ) | | | | | | | 3,230,216 | | | | | | | | 5,603,021 | |
| | | | |
Net increase (decrease) in net assets | | | | | | | 5,978,431 | | | | | | | | (2,560,257 | ) | | | | | | | 8,883,022 | | | | | | | | 6,129,866 | |
Net assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning of year | | | | | | | 123,874,266 | | | | | | | | 126,434,523 | | | | | | | | 38,099,530 | | | | | | | | 31,969,664 | |
| | | | |
End of year | | | | | | | $129,852,697 | | | | | | | | $123,874,266 | | | | | | | | $46,982,552 | | | | | | | | $38,099,530 | |
| | | | |
Undistributed net investment income included in net assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
End of year | | | | | | | $ 190,555 | | | | | | | | $ 512,171 | | | | | | | | $ 183,923 | | | | | | | | $ 270,932 | |
| | | | |
| | | | |
| | | |
| 130 | | 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 2035 | | | Franklin LifeSmart 2040 | |
| | | Retirement Target Fund | | | Retirement Target Fund | |
| | | | |
| | | Year Ended December 31, | | | Year Ended December 31, | |
| | | | |
| | | | | | 2017 | | | | | | 2016 | | | | | | 2017 | | | | | | 2016 | |
| |
Increase (decrease) in net assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operations: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | | | | | $ 1,612,856 | | | | | | | | $ 1,073,370 | | | | | | | | $ 552,099 | | | | | | | | $ 343,851 | |
Net realized gain (loss) | | | | | | | 3,726,246 | | | | | | | | (2,678,698 | ) | | | | | | | 1,213,013 | | | | | | | | (1,016,680 | ) |
Net change in unrealized appreciation (depreciation) | | | | | | | 12,630,877 | | | | | | | | 4,700,786 | | | | | | | | 4,076,855 | | | | | | | | 1,592,824 | |
| | | | |
Net increase (decrease) in net assets resulting from operations | | | | | | | 17,969,979 | | | | | | | | 3,095,458 | | | | | | | | 5,841,967 | | | | | | | | 919,995 | |
| | | | |
Distributions to shareholders from: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income and short term gains received from | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Underlying Funds and exchange traded funds: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | | | | | (1,237,729 | ) | | | | | | | (456,196 | ) | | | | | | | (253,313 | ) | | | | | | | (96,332 | ) |
Class C | | | | | | | (292,039 | ) | | | | | | | (16,809 | ) | | | | | | | (44,336 | ) | | | | | | | (14,559 | ) |
Class R | | | | | | | (103,431 | ) | | | | | | | (38,744 | ) | | | | | | | (28,246 | ) | | | | | | | (14,619 | ) |
Class R6 | | | | | | | (594,604 | ) | | | | | | | (239,563 | ) | | | | | | | (350,580 | ) | | | | | | | (113,150 | ) |
Advisor Class | | | | | | | (33,742 | ) | | | | | | | (15,115 | ) | | | | | | | (3,178 | ) | | | | | | | (933 | ) |
Net realized gains: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | | | | | — | | | | | | | | (866,788 | ) | | | | | | | — | | | | | | | | (81,000 | ) |
Class C | | | | | | | — | | | | | | | | (294,076 | ) | | | | | | | — | | | | | | | | (19,378 | ) |
Class R | | | | | | | — | | | | | | | | (76,428 | ) | | | | | | | — | | | | | | | | (9,693 | ) |
Class R6 | | | | | | | — | | | | | | | | (286,348 | ) | | | | | | | — | | | | | | | | (105,785 | ) |
Advisor Class | | | | | | | — | | | | | | | | (25,258 | ) | | | | | | | — | | | | | | | | (865 | ) |
| | | | |
Total distributions to shareholders | | | | | | | (2,261,545 | ) | | | | | | | (2,315,325 | ) | | | | | | | (679,653 | ) | | | | | | | (456,314 | ) |
| | | | |
Capital share transactions: (Note 2) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | | | | | (3,756,706 | ) | | | | | | | 2,414,240 | | | | | | | | (1,243,051 | ) | | | | | | | 4,880,830 | |
Class C | | | | | | | (162,642 | ) | | | | | | | (1,236,171 | ) | | | | | | | 849,399 | | | | | | | | 664,099 | |
Class R | | | | | | | (1,197,740 | ) | | | | | | | 1,387,939 | | | | | | | | (950,985 | ) | | | | | | | 1,132,018 | |
Class R6 | | | | | | | 978,576 | | | | | | | | 1,659,173 | | | | | | | | 1,305,987 | | | | | | | | 1,603,590 | |
Advisor Class | | | | | | | (89,779 | ) | | | | | | | (282,775 | ) | | | | | | | (7,764 | ) | | | | | | | 18,185 | |
| | | | |
Total capital share transactions | | | | | | | (4,228,291 | ) | | | | | | | 3,942,406 | | | | | | | | (46,414 | ) | | | | | | | 8,298,722 | |
| | | | |
Net increase (decrease) in net assets | | | | | | | 11,480,143 | | | | | | | | 4,722,539 | | | | | | | | 5,115,900 | | | | | | | | 8,762,403 | |
Net assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning of year | | | | | | | 105,029,980 | | | | | | | | 100,307,441 | | | | | | | | 32,095,550 | | | | | | | | 23,333,147 | |
| | | | |
End of year | | | | | | | $116,510,123 | | | | | | | | $105,029,980 | | | | | | | | $37,211,450 | | | | | | | | $32,095,550 | |
| | | | |
Undistributed net investment income included in net assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
End of year | | | | | | | $ 181,835 | | | | | | | | $ 748,992 | | | | | | | | $ 139,506 | | | | | | | | $ 240,354 | |
| | | | |
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 131 | |
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, | |
| | | | |
| | | | | | 2017 | | | | | | 2016 | | | | | | 2017 | | | | | | 2016 | |
| |
Increase (decrease) in net assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operations: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | | | | $ | 1,095,697 | | | | | | | $ | 726,730 | | | | | | | $ | 452,065 | | | | | | | $ | 263,282 | |
Net realized gain (loss) | | | | | | | 2,736,506 | | | | | | | | (1,614,004 | ) | | | | | | | 951,105 | | | | | | | | (712,315 | ) |
Net change in unrealized appreciation (depreciation) | | | | | | | 9,137,178 | | | | | | | | 3,133,971 | | | | | | | | 3,320,464 | | | | | | | | 1,368,939 | |
| | | | |
Net increase (decrease) in net assets resulting from operations | | | | | | | 12,969,381 | | | | | | | | 2,246,697 | | | | | | | | 4,723,634 | | | | | | | | 919,906 | |
| | | | |
Distributions to shareholders from: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income and short term gains received from Underlying | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Funds and exchange traded funds: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | | | | | (991,792 | ) | | | | | | | (360,611 | ) | | | | | | | (227,300 | ) | | | | | | | (79,243 | ) |
Class C | | | | | | | (191,439 | ) | | | | | | | (11,455 | ) | | | | | | | (38,463 | ) | | | | | | | (2,729 | ) |
Class R | | | | | | | (102,628 | ) | | | | | | | (27,720 | ) | | | | | | | (24,090 | ) | | | | | | | (6,596 | ) |
Class R6 | | | | | | | (318,300 | ) | | | | | | | (117,669 | ) | | | | | | | (230,863 | ) | | | | | | | (90,757 | ) |
Advisor Class | | | | | | | (14,750 | ) | | | | | | | (4,985 | ) | | | | | | | (9,680 | ) | | | | | | | (3,716 | ) |
Net realized gains: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | | | | | — | | | | | | | | (593,026 | ) | | | | | | | — | | | | | | | | (72,692 | ) |
Class C | | | | | | | — | | | | | | | | (180,569 | ) | | | | | | | — | | | | | | | | (20,602 | ) |
Class R | | | | | | | — | | | | | | | | (60,988 | ) | | | | | | | — | | | | | | | | (8,463 | ) |
Class R6 | | | | | | | — | | | | | | | | (145,665 | ) | | | | | | | — | | | | | | | | (94,425 | ) |
Advisor Class | | | | | | | — | | | | | | | | (8,268 | ) | | | | | | | — | | | | | | | | (3,495 | ) |
| | | | |
Total distributions to shareholders | | | | | | | (1,618,909 | ) | | | | | | | (1,510,956 | ) | | | | | | | (530,396 | ) | | | | | | | (382,718 | ) |
| | | | |
Capital share transactions: (Note 2) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | | | | | (4,479,414 | ) | | | | | | | 5,592,714 | | | | | | | | 1,431,159 | | | | | | | | 3,681,070 | |
Class C | | | | | | | (1,244,538 | ) | | | | | | | (406,063 | ) | | | | | | | 634,245 | | | | | | | | 700,198 | |
Class R | | | | | | | 7,133 | | | | | | | | 355,637 | | | | | | | | 168,600 | | | | | | | | 447,082 | |
Class R6 | | | | | | | 1,038,166 | | | | | | | | (218,042 | ) | | | | | | | 1,305,479 | | | | | | | | 863,376 | |
Advisor Class | | | | | | | 34,233 | | | | | | | | (67,298 | ) | | | | | | | 47,364 | | | | | | | | (6,134 | ) |
| | | | |
Total capital share transactions | | | | | | | (4,644,420 | ) | | | | | | | 5,256,948 | | | | | | | | 3,586,847 | | | | | | | | 5,685,592 | |
| | | | |
Net increase (decrease) in net assets | | | | | | | 6,706,052 | | | | | | | | 5,992,689 | | | | | | | | 7,780,085 | | | | | | | | 6,222,780 | |
Net assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Beginning of year | | | | | | | 73,120,551 | | | | | | | | 67,127,862 | | | | | | | | 24,059,838 | | | | | | | | 17,837,058 | |
| | | | |
End of year | | | | | | $ | 79,826,603 | | | | | | | $ | 73,120,551 | | | | | | | $ | 31,839,923 | | | | | | | $ | 24,059,838 | |
| | | | |
Undistributed net investment income included in net assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
End of year | | | | | | | $49,764 | | | | | | | | $515,400 | | | | | | | | $125,661 | | | | | | | | $181,312 | |
| | | | |
| | | | |
| | | |
| 132 | | 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 2055 Retirement Target Fund | |
| | | | |
| | | Year Ended December 31, | |
| | | | |
| | | | | | 2017 | | | | | | 2016 | |
| |
Increase (decrease) in net assets: | | | | | | | | | | | | | | | | |
Operations: | | | | | | | | | | | | | | | | |
Net investment income | | | | | | | $ 128,987 | | | | | | | | $ 47,134 | |
Net realized gain (loss) | | | | | | | 233,810 | | | | | | | | (54,517 | ) |
Net change in unrealized appreciation (depreciation) | | | | | | | 883,225 | | | | | | | | 129,837 | |
| | | | |
Net increase (decrease) in net assets resulting from operations | | | | | | | 1,246,022 | | | | | | | | 122,454 | |
| | | | |
Distributions to shareholders from: | | | | | | | | | | | | | | | | |
Net investment income and short term gains received from Underlying Funds and exchange traded funds: | | | | | | | | | | | | | | | | |
Class A | | | | | | | (76,553 | ) | | | | | | | (27,206 | ) |
Class C | | | | | | | (15,831 | ) | | | | | | | (3,443 | ) |
Class R | | | | | | | (5,073 | ) | | | | | | | (3,039 | ) |
Class R6 | | | | | | | (58,541 | ) | | | | | | | (18,759 | ) |
Advisor Class | | | | | | | (612 | ) | | | | | | | (158 | ) |
Net realized gains: | | | | | | | | | | | | | | | | |
Class A | | | | | | | (12,515 | ) | | | | | | | (13,471 | ) |
Class C | | | | | | | (3,807 | ) | | | | | | | (1,934 | ) |
Class R | | | | | | | (949 | ) | | | | | | | (1,284 | ) |
Class R6 | | | | | | | (8,438 | ) | | | | | | | (878 | ) |
Advisor Class | | | | | | | (86 | ) | | | | | | | (74 | ) |
| | | | |
Total distributions to shareholders | | | | | | | (182,405 | ) | | | | | | | (70,246 | ) |
| | | | |
Capital share transactions: (Note 2) | | | | | | | | | | | | | | | | |
Class A | | | | | | | 1,412,621 | | | | | | | | 878,999 | |
Class C | | | | | | | 721,550 | | | | | | | | 396,100 | |
Class R | | | | | | | (53,699 | ) | | | | | | | 308,455 | |
Class R6 | | | | | | | 1,231,508 | | | | | | | | 1,520,706 | |
Advisor Class | | | | | | | 15,487 | | | | | | | | 1,808 | |
| | | | |
Total capital share transactions | | | | | | | 3,327,467 | | | | | | | | 3,106,068 | |
| | | | |
Net increase (decrease) in net assets | | | | | | | 4,391,084 | | | | | | | | 3,158,276 | |
Net assets: | | | | | | | | | | | | | | | | |
Beginning of year | | | | | | | 5,290,632 | | | | | | | | 2,132,356 | |
| | | | |
End of year | | | | | | | $9,681,716 | | | | | | | | $5,290,632 | |
| | | | |
Undistributed net investment income included in net assets: | | | | | | | | | | | | | | | | |
End of year | | | | | | | $ — | | | | | | | | $ 18,072 | |
| | | | |
| | | | | | |
| | | |
| franklintempleton.com | | The accompanying notes are an integral part of these financial statements. | Annual Report | | | 133 | |
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-three 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 Funds invest primarily in mutual funds (Underlying Funds) and exchange traded funds (ETFs), including affiliated funds managed by Franklin Templeton (FT Underlying Funds). The Funds offer five classes of shares: Class A, Class C, Class R, Class R6, and Advisor Class. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees 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 Committee (VC). The VC 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. 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.
Debt securities generally trade in the over-the-counter market rather than on a securities exchange. The Funds’ pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.
Investments in repurchase agreements are valued at cost, which approximates fair value.
The Funds have procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.
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| 134 | | Annual Report | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
b. Joint Repurchase Agreement
Certain or all Funds enter into a joint repurchase agreement whereby their uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Funds’ custodian. The fair value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Funds, certain MRAs may permit the non-defaulting party to net and close-out all transactions, if any, traded under such agreements. The Funds may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Funds in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Funds at year end, as indicated in the Statements of Investments, had been entered into on December 29, 2017.
c. Index-Linked Notes
Certain or all Funds invest in index-linked notes. Index-linked notes are senior, unsecured, subordinated debt securities issued by a financial institution, and the value is based on the price movements of the underlying index. Index-linked notes are designed to provide investors access to the returns of various market benchmarks and intended to replicate the economic effects that would apply had the Fund directly purchased the underlying referenced asset or basket of assets. The risks of investing in index-linked notes include unfavorable price movements in the underlying index and the credit risk of the issuing financial institution. There may be no guarantee of a
return of principal with index-linked notes and the appreciation potential may be limited. Index-linked notes may be more volatile and less liquid than other investments held by the Funds.
d. 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, 2017, 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 in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.
e. 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. Interest income and 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. The Franklin LifeSmart Retirement Income Fund employs a managed distribution policy. Under this policy, the fund will distribute level monthly distributions in any given year regardless of the performance of the fund; however, the twelfth monthly payment may be greater than the initially anticipated amount if additional income or capital gains are required to be distributed. These distributions may include income and capital gains generated by the Underlying Funds, as well as a possible return of capital component, if necessary, to meet the annual distribution rate. The annual payout rate may be adjusted higher or lower from year to year in response to market conditions. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be
| | | | | | |
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| franklintempleton.com | | Annual Report | | | 135 | |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies (continued)
e. Security Transactions, Investment Income, Expenses and Distributions (continued)
permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.
The Funds indirectly bear their proportionate share of expenses from the Underlying Funds and ETFs. Since the Underlying Funds and ETFs have varied expense levels and the Funds may own different proportions of the Underlying Funds and ETFs at different times, the amount of expenses incurred indirectly by the Funds will vary.
Realized and unrealized gains and losses and net investment income, excluding 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.
f. 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.
g. 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, 2017, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:
| | | | | | | | | | | | | | | | | | | | |
| | | Franklin LifeSmart Retirement
Income Fund | | | | | | Franklin LifeSmart 2020
Retirement Target Fund | |
| | | Shares | | | Amount | | | | | | Shares | | | Amount | |
| Class A Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 731,972 | | | $ | 8,120,711 | | | | | | | | 681,275 | | | $ | 7,691,255 | |
| Shares issued in reinvestment of distributions | | | 120,488 | | | | 1,334,419 | | | | | | | | 21,940 | | | | 252,502 | |
| Shares redeemed | | | (1,545,303 | ) | | | (17,114,051 | ) | | | | | | | (784,798 | ) | | | (8,814,316 | ) |
| | | | |
| Net increase (decrease) | | | (692,843 | ) | | $ | (7,658,921 | ) | | | | | | | (81,583 | ) | | $ | (870,559 | ) |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 695,856 | | | $ | 7,455,570 | | | | | | | | 617,122 | | | $ | 6,540,723 | |
| Shares issued in reinvestment of distributions | | | 131,058 | | | | 1,418,310 | | | | | | | | 42,020 | | | | 441,853 | |
| Shares redeemed | | | (1,363,440 | ) | | | (14,640,389 | ) | | | | | | | (727,268 | ) | | | (7,661,046 | ) |
| | | | |
| Net increase (decrease) | | | (536,526 | ) | | $ | (5,766,509 | ) | | | | | | | (68,126 | ) | | $ | (678,470 | ) |
| | | | |
| | | | |
| 136 | | Annual Report | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | | | |
| | | Franklin LifeSmart Retirement
Income Fund | | | | | | Franklin LifeSmart 2020
Retirement Target Fund | |
| | | Shares | | | Amount | | | | | | Shares | | | Amount | |
| | | | | |
| Class C Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 396,707 | | | $ | 4,345,248 | | | | | | | | 175,591 | | | $ | 1,967,931 | |
| Shares issued in reinvestment of distributions | | | 46,522 | | | | 509,094 | | | | | | | | 2,875 | | | | 33,094 | |
| Shares redeemed | | | (593,842 | ) | | | (6,501,962 | ) | | | | | | | (124,566 | ) | | | (1,377,426) | |
| | | | |
| Net increase (decrease) | | | (150,613 | ) | | $ | (1,647,620 | ) | | | | | | | 53,900 | | | $ | 623,599 | |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 302,723 | | | $ | 3,199,411 | | | | | | | | 221,499 | | | $ | 2,302,903 | |
| Shares issued in reinvestment of distributions | | | 45,783 | | | | 489,755 | | | | | | | | 7,681 | | | | 80,216 | |
| Shares redeemed | | | (683,166 | ) | | | (7,219,798 | ) | | | | | | | (240,026 | ) | | | (2,509,880) | |
| | | | |
| Net increase (decrease) | | | (334,660 | ) | | $ | (3,530,632 | ) | | | | | | | (10,846 | ) | | $ | (126,761) | |
| | | | |
| | | | | |
| Class R Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 50,614 | | | $ | 558,692 | | | | | | | | 32,070 | | | $ | 357,038 | |
| Shares issued in reinvestment of distributions | | | 11,283 | | | | 124,440 | | | | | | | | 1,345 | | | | 15,307 | |
| Shares redeemed | | | (142,730 | ) | | | (1,575,321 | ) | | | | | | | (245,948 | ) | | | (2,782,918) | |
| | | | |
| Net increase (decrease) | | | (80,833 | ) | | $ | (892,189 | ) | | | | | | | (212,533 | ) | | $ | (2,410,573) | |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 200,171 | | | $ | 2,125,002 | | | | | | | | 193,372 | | | $ | 2,029,744 | |
| Shares issued in reinvestment of distributions | | | 11,598 | | | | 125,084 | | | | | | | | 6,110 | | | | 64,137 | |
| Shares redeemed | | | (145,721 | ) | | | (1,548,898 | ) | | | | | | | (205,538 | ) | | | (2,153,478) | |
| | | | |
| Net increase (decrease) | | | 66,048 | | | $ | 701,188 | | | | | | | | (6,056 | ) | | $ | (59,597) | |
| | | | |
| | | | | |
| Class R6 Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 89,787 | | | $ | 999,316 | | | | | | | | 251,004 | | | $ | 2,785,379 | |
| Shares issued in reinvestment of distributions | | | 7,934 | | | | 88,300 | | | | | | | | 150 | | | | 1,724 | |
| Shares redeemed | | | (91,591 | ) | | | (1,018,932 | ) | | | | | | | (125,245 | ) | | | (1,414,989) | |
| | | | |
| Net increase (decrease) | | | 6,130 | | | $ | 68,684 | | | | | | | | 125,909 | | | $ | 1,372,114 | |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 134,808 | | | $ | 1,473,919 | | | | | | | | 196,499 | | | $ | 2,090,521 | |
| Shares issued in reinvestment of distributions | | | 8,589 | | | | 93,485 | | | | | | | | 433 | | | | 4,655 | |
| Shares redeemed | | | (417,505 | ) | | | (4,525,005 | ) | | | | | | | (208,572 | ) | | | (2,212,626) | |
| | | | |
| Net increase (decrease) | | | (274,108 | ) | | $ | (2,957,601 | ) | | | | | | | (11,640 | ) | | $ | (117,450) | |
| | | | |
| | | | | |
| Advisor Class Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 54,570 | | | $ | 607,835 | | | | | | | | 121,202 | | | $ | 1,365,924 | |
| Shares issued in reinvestment of distributions | | | 5,148 | | | | 57,243 | | | | | | | | 710 | | | | 8,207 | |
| Shares redeemed | | | (22,567 | ) | | | (251,375 | ) | | | | | | | (92,976 | ) | | | (1,041,446) | |
| | | | |
| Net increase (decrease) | | | 37,151 | | | $ | 413,703 | | | | | | | | 28,936 | | | $ | 332,685 | |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 164,439 | | | $ | 1,779,545 | | | | | | | | 7,866 | | | $ | 82,109 | |
| Shares issued in reinvestment of distributions | | | 2,865 | | | | 31,253 | | | | | | | | 770 | | | | 8,120 | |
| Shares redeemed | | | (94,632 | ) | | | (989,786 | ) | | | | | | | (6,224 | ) | | | (65,670) | |
| | | | |
| Net increase (decrease) | | | 72,672 | | | $ | 821,012 | | | | | | | | 2,412 | | | $ | 24,559 | |
| | | | |
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 137 | |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Franklin LifeSmart 2025
Retirement Target Fund | | | | | | Franklin LifeSmart 2030
Retirement Target Fund | |
| | | Shares | | | Amount | | | | | | Shares | | | Amount | |
| Class A Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 1,193,133 | | | $ | 14,738,650 | | | | | | | | 525,562 | | | $ | 6,304,600 | |
| Shares issued in reinvestment of distributions | | | 106,594 | | | | 1,347,489 | | | | | | | | 26,877 | | | | 327,860 | |
| Shares redeemed | | | (1,829,516 | ) | | | (22,432,854 | ) | | | | | | | (550,283 | ) | | | (6,537,109 | ) |
| | | | |
| Net increase (decrease) | | | (529,789 | ) | | $ | (6,346,715 | ) | | | | | | | 2,156 | | | $ | 95,351 | |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 1,527,835 | | | $ | 17,243,185 | | | | | | | | 775,851 | | | $ | 8,429,666 | |
| Shares issued in reinvestment of distributions | | | 159,079 | | | | 1,789,340 | | | | | | | | 24,988 | | | | 269,391 | |
| Shares redeemed | | | (1,528,993 | ) | | | (17,331,454 | ) | | | | | | | (530,055 | ) | | | (5,769,654 | ) |
| | | | |
| Net increase (decrease) | | | 157,921 | | | $ | 1,701,071 | | | | | | | | 270,784 | | | $ | 2,929,403 | |
| | | | |
| | | | | |
| Class C Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 366,346 | | | $ | 4,411,808 | | | | | | | | 228,867 | | | $ | 2,713,582 | |
| Shares issued in reinvestment of distributions | | | 22,476 | | | | 278,103 | | | | | | | | 6,420 | | | | 76,987 | |
| Shares redeemed | | | (584,107 | ) | | | (7,035,824 | ) | | | | | | | (93,985 | ) | | | (1,107,038 | ) |
| | | | |
| Net increase (decrease) | | | (195,285 | ) | | $ | (2,345,913 | ) | | | | | | | 141,302 | | | $ | 1,683,531 | |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 478,332 | | | $ | 5,300,604 | | | | | | | | 182,868 | | | $ | 1,944,397 | |
| Shares issued in reinvestment of distributions | | | 40,222 | | | | 438,767 | | | | | | | | 4,667 | | | | 48,734 | |
| Shares redeemed | | | (796,509 | ) | | | (8,872,156 | ) | | | | | | | (100,159 | ) | | | (1,080,454 | ) |
| | | | |
| Net increase (decrease) | | | (277,955 | ) | | $ | (3,132,785 | ) | | | | | | | 87,376 | | | $ | 912,677 | |
| | | | |
| | | | | |
| Class R Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 167,790 | | | $ | 2,018,474 | | | | | | | | 35,252 | | | $ | 408,766 | |
| Shares issued in reinvestment of distributions | | | 6,526 | | | | 81,636 | | | | | | | | 1,487 | | | | 17,966 | |
| Shares redeemed | | | (345,027 | ) | | | (4,246,420 | ) | | | | | | | (72,670 | ) | | | (848,089 | ) |
| | | | |
| Net increase (decrease) | | | (170,711 | ) | | $ | (2,146,310 | ) | | | | | | | (35,931 | ) | | $ | (421,357 | ) |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 279,412 | | | $ | 3,125,853 | | | | | | | | 111,812 | | | $ | 1,210,333 | |
| Shares issued in reinvestment of distributions | | | 10,939 | | | | 122,196 | | | | | | | | 1,933 | | | | 20,674 | |
| Shares redeemed | | | (174,531 | ) | | | (1,973,064 | ) | | | | | | | (66,882 | ) | | | (738,555 | ) |
| | | | |
| Net increase (decrease) | | | 115,820 | | | $ | 1,274,985 | | | | | | | | 46,863 | | | $ | 492,452 | |
| | | | |
| | | | | |
| Class R6 Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 291,501 | | | $ | 3,580,167 | | | | | | | | 217,893 | | | $ | 2,634,617 | |
| Shares issued in reinvestment of distributions | | | 6,518 | | | | 82,756 | | | | | | | | 329 | | | | 4,047 | |
| Shares redeemed | | | (200,085 | ) | | | (2,436,654 | ) | | | | | | | (85,585 | ) | | | (1,025,106 | ) |
| | | | |
| Net increase (decrease) | | | 97,934 | | | $ | 1,226,269 | | | | | | | | 132,637 | | | $ | 1,613,558 | |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 325,212 | | | $ | 3,663,572 | | | | | | | | 302,640 | | | $ | 3,302,312 | |
| Shares issued in reinvestment of distributions | | | 11,223 | | | | 126,825 | | | | | | | | 108 | | | | 1,199 | |
| Shares redeemed | | | (620,112 | ) | | | (7,093,035 | ) | | | | | | | (189,407 | ) | | | (2,055,862 | ) |
| | | | |
| Net increase (decrease) | | | (283,677 | ) | | $ | (3,302,638 | ) | | | | | | | 113,341 | | | $ | 1,247,649 | |
| | | | |
| | | | |
| 138 | | Annual Report | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | | | |
| | | Franklin LifeSmart 2025
Retirement Target Fund | | | | | | Franklin LifeSmart 2030
Retirement Target Fund | |
| | | Shares | | | Amount | | | | | | Shares | | | Amount | |
| | | | | |
| Advisor Class Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 82,091 | | | $ | 1,014,059 | | | | | | | | 23,477 | | | $ | 275,141 | |
| Shares issued in reinvestment of distributions | | | 2,151 | | | | 27,340 | | | | | | | | 1,022 | | | | 12,533 | |
| Shares redeemed | | | (60,660 | ) | | | (747,391 | ) | | | | | | | (2,409 | ) | | | (28,541 | ) |
| | | | |
| Net increase (decrease) | | | 23,582 | | | $ | 294,008 | | | | | | | | 22,090 | | | $ | 259,133 | |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 42,218 | | | $ | 483,916 | | | | | | | | 10,128 | | | $ | 106,086 | |
| Shares issued in reinvestment of distributions | | | 2,413 | | | | 27,297 | | | | | | | | 539 | | | | 5,855 | |
| Shares redeemed | | | (28,829 | ) | | | (328,178 | ) | | | | | | | (8,430 | ) | | | (91,101 | ) |
| | | | |
| Net increase (decrease) | | | 15,802 | | | $ | 183,035 | | | | | | | | 2,237 | | | $ | 20,840 | |
| | | | |
| | | |
| | | Franklin LifeSmart 2035
Retirement Target Fund | | | | | | Franklin LifeSmart 2040
Retirement Target Fund | |
| | | Shares | | | Amount | | | | | | Shares | | | Amount | |
| | | | | |
| Class A Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | �� | | | |
| Shares sold | | | 831,333 | | | $ | 10,706,025 | | | | | | | | 413,983 | | | $ | 5,059,943 | |
| Shares issued in reinvestment of distributions | | | 91,237 | | | | 1,212,546 | | | | | | | | 20,192 | | | | 253,301 | |
| Shares redeemed | | | (1,229,900 | ) | | | (15,675,277 | ) | | | | | | | (539,696 | ) | | | (6,556,295 | ) |
| | | | |
| Net increase (decrease) | | | (307,330 | ) | | $ | (3,756,706 | ) | | | | | | | (105,521 | ) | | $ | (1,243,051 | ) |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 1,227,250 | | | $ | 14,276,281 | | | | | | | | 685,758 | | | $ | 7,556,809 | |
| Shares issued in reinvestment of distributions | | | 112,551 | | | | 1,289,236 | | | | | | | | 16,243 | | | | 177,333 | |
| Shares redeemed | | | (1,122,898 | ) | | | (13,151,277 | ) | | | | | | | (261,414 | ) | | | (2,853,312 | ) |
| | | | |
| Net increase (decrease) | | | 216,903 | | | $ | 2,414,240 | | | | | | | | 440,587 | | | $ | 4,880,830 | |
| | | | |
| | | | | |
| Class C Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 304,744 | | | $ | 3,835,120 | | | | | | | | 114,923 | | | $ | 1,389,222 | |
| Shares issued in reinvestment of distributions | | | 21,457 | | | | 275,188 | | | | | | | | 3,625 | | | | 44,336 | |
| Shares redeemed | | | (342,817 | ) | | | (4,272,950 | ) | | | | | | | (48,776 | ) | | | (584,159 | ) |
| | | | |
| Net increase (decrease) | | | (16,616 | ) | | $ | (162,642 | ) | | | | | | | 69,772 | | | $ | 849,399 | |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 351,442 | | | $ | 3,984,942 | | | | | | | | 107,552 | | | $ | 1,157,854 | |
| Shares issued in reinvestment of distributions | | | 25,834 | | | | 284,112 | | | | | | | | 3,167 | | | | 33,937 | |
| Shares redeemed | | | (489,008 | ) | | | (5,505,225 | ) | | | | | | | (48,818 | ) | | | (527,692 | ) |
| | | | |
| Net increase (decrease) | | | (111,732 | ) | | $ | (1,236,171 | ) | | | | | | | 61,901 | | | $ | 664,099 | |
| | | | |
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 139 | |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Franklin LifeSmart 2035
Retirement Target Fund | | | | | | Franklin LifeSmart 2040
Retirement Target Fund | |
| | | Shares | | | Amount | | | | | | Shares | | | Amount | |
| | | | | |
| Class R Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 114,879 | | | $ | 1,480,867 | | | | | | | | 29,094 | | | $ | 347,801 | |
| Shares issued in reinvestment of distributions | | | 6,841 | | | | 90,043 | | | | | | | | 2,304 | | | | 28,246 | |
| Shares redeemed | | | (215,413 | ) | | | (2,768,650 | ) | | | | | | | (110,596 | ) | | | (1,327,032 | ) |
| | | | |
| Net increase (decrease) | | | (93,693 | ) | | $ | (1,197,740 | ) | | | | | | | (79,198 | ) | | $ | (950,985 | ) |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 256,085 | | | $ | 2,976,063 | | | | | | | | 171,432 | | | $ | 1,876,713 | |
| Shares issued in reinvestment of distributions | | | 8,810 | | | | 100,647 | | | | | | | | 2,225 | | | | 24,311 | |
| Shares redeemed | | | (149,803 | ) | | | (1,688,771 | ) | | | | | | | (69,062 | ) | | | (769,006 | ) |
| | | | |
| Net increase (decrease) | | | 115,092 | | | $ | 1,387,939 | | | | | | | | 104,595 | | | $ | 1,132,018 | |
| | | | |
| | | | | |
| Class R6 Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 310,785 | | | $ | 4,056,593 | | | | | | | | 252,480 | | | $ | 3,111,042 | |
| Shares issued in reinvestment of distributions | | | 6,041 | | | | 81,283 | | | | | | | | 630 | | | | 8,021 | |
| Shares redeemed | | | (244,842 | ) | | | (3,159,300 | ) | | | | | | | (147,973 | ) | | | (1,813,076 | ) |
| | | | |
| Net increase (decrease) | | | 71,984 | | | $ | 978,576 | | | | | | | | 105,137 | | | $ | 1,305,987 | |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 578,628 | | | $ | 6,817,030 | | | | | | | | 298,115 | | | $ | 3,268,049 | |
| Shares issued in reinvestment of distributions | | | 5,645 | | | | 65,547 | | | | | | | | 280 | | | | 3,113 | |
| Shares redeemed | | | (443,829 | ) | | | (5,223,404 | ) | | | | | | | (151,648 | ) | | | (1,667,572 | ) |
| | | | |
| Net increase (decrease) | | | 140,444 | | | $ | 1,659,173 | | | | | | | | 146,747 | | | $ | 1,603,590 | |
| | | | |
| | | | | |
| Advisor Class Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 53,937 | | | $ | 700,265 | | | | | | | | 8,494 | | | $ | 105,876 | |
| Shares issued in reinvestment of distributions | | | 2,497 | | | | 33,673 | | | | | | | | 251 | | | | 3,178 | |
| Shares redeemed | | | (63,569 | ) | | | (823,717 | ) | | | | | | | (9,406 | ) | | | (116,818 | ) |
| | | | |
| Net increase (decrease) | | | (7,135 | ) | | $ | (89,779 | ) | | | | | | | (661 | ) | | $ | (7,764 | ) |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 33,208 | | | $ | 388,986 | | | | | | | | 4,243 | | | $ | 47,068 | |
| Shares issued in reinvestment of distributions | | | 3,477 | | | | 40,189 | | | | | | | | 164 | | | | 1,798 | |
| Shares redeemed | | | (60,441 | ) | | | (711,950 | ) | | | | | | | (2,830 | ) | | | (30,681 | ) |
| | | | |
| Net increase (decrease) | | | (23,756 | ) | | $ | (282,775 | ) | | | | | | | 1,577 | | | $ | 18,185 | |
| | | | |
| | | | |
| 140 | | Annual Report | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | | | |
| | | Franklin LifeSmart 2045
Retirement Target Fund | | | | | | Franklin LifeSmart 2050
Retirement Target Fund | |
| | | Shares | | | Amount | | | | | | Shares | | | Amount | |
| | | | | |
| Class A Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 749,360 | | | $ | 9,671,955 | | | | | | | | 431,903 | | | $ | 5,332,879 | |
| Shares issued in reinvestment of distributions | | | 72,025 | | | | 962,628 | | | | | | | | 17,842 | | | | 227,263 | |
| Shares redeemed | | | (1,181,996 | ) | | | (15,113,997 | ) | | | | | | | (340,448 | ) | | | (4,128,983 | ) |
| | | | |
| Net increase (decrease) | | | (360,611 | ) | | $ | (4,479,414 | ) | | | | | | | 109,297 | | | $ | 1,431,159 | |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 1,047,274 | | | $ | 12,170,415 | | | | | | | | 551,064 | | | $ | 6,086,355 | |
| Shares issued in reinvestment of distributions | | | 80,144 | | | | 917,854 | | | | | | | | 13,818 | | | | 151,925 | |
| Shares redeemed | | | (643,017 | ) | | | (7,495,555 | ) | | | | | | | (234,873 | ) | | | (2,557,210 | ) |
| | | | |
| Net increase (decrease) | | | 484,401 | | | $ | 5,592,714 | | | | | | | | 330,009 | | | $ | 3,681,070 | |
| | | | |
| | | | | |
| Class C Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 222,383 | | | $ | 2,776,071 | | | | | | | | 113,908 | | | $ | 1,391,855 | |
| Shares issued in reinvestment of distributions | | | 13,606 | | | | 174,885 | | | | | | | | 3,104 | | | | 38,463 | |
| Shares redeemed | | | (337,139 | ) | | | (4,195,494 | ) | | | | | | | (65,476 | ) | | | (796,073 | ) |
| | | | |
| Net increase (decrease) | | | (101,150 | ) | | $ | (1,244,538 | ) | | | | | | | 51,536 | | | $ | 634,245 | |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 318,196 | | | $ | 3,589,892 | | | | | | | | 116,007 | | | $ | 1,268,037 | |
| Shares issued in reinvestment of distributions | | | 15,898 | | | | 173,952 | | | | | | | | 2,187 | | | | 23,313 | |
| Shares redeemed | | | (370,873 | ) | | | (4,169,907 | ) | | | | | | | (53,715 | ) | | | (591,152 | ) |
| | | | |
| Net increase (decrease) | | | (36,779 | ) | | $ | (406,063 | ) | | | | | | | 64,479 | | | $ | 700,198 | |
| | | | |
| | | | | |
| Class R Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 91,184 | | | $ | 1,162,751 | | | | | | | | 44,001 | | | $ | 539,605 | |
| Shares issued in reinvestment of distributions | | | 6,825 | | | | 90,445 | | | | | | | | 1,912 | | | | 24,086 | |
| Shares redeemed | | | (96,378 | ) | | | (1,246,063 | ) | | | | | | | (31,942 | ) | | | (395,091 | ) |
| | | | |
| Net increase (decrease) | | | 1,631 | | | $ | 7,133 | | | | | | | | 13,971 | | | $ | 168,600 | |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 152,373 | | | $ | 1,746,860 | | | | | | | | 55,187 | | | $ | 609,289 | |
| Shares issued in reinvestment of distributions | | | 6,979 | | | | 79,240 | | | | | | | | 1,378 | | | | 15,064 | |
| Shares redeemed | | | (132,301 | ) | | | (1,470,463 | ) | | | | | | | (15,822 | ) | | | (177,271 | ) |
| | | | |
| Net increase (decrease) | | | 27,051 | | | $ | 355,637 | | | | | | | | 40,743 | | | $ | 447,082 | |
| | | | |
| | | | | |
| Class R6 Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 211,781 | | | $ | 2,758,355 | | | | | | | | 205,547 | | | $ | 2,553,994 | |
| Shares issued in reinvestment of distributions | | | 3,270 | | | | 44,224 | | | | | | | | 294 | | | | 3,787 | |
| Shares redeemed | | | (135,886 | ) | | | (1,764,413 | ) | | | | | | | (102,179 | ) | | | (1,252,302 | ) |
| | | | |
| Net increase (decrease) | | | 79,165 | | | $ | 1,038,166 | | | | | | | | 103,662 | | | $ | 1,305,479 | |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 264,518 | | | $ | 3,069,422 | | | | | | | | 502,692 | | | $ | 5,535,624 | |
| Shares issued in reinvestment of distributions | | | 3,207 | | | | 37,169 | | | | | | | | 200 | | | | 2,226 | |
| Shares redeemed | | | (281,389 | ) | | | (3,324,633 | ) | | | | | | | (412,376 | ) | | | (4,674,474 | ) |
| | | | |
| Net increase (decrease) | | | (13,664 | ) | | $ | (218,042 | ) | | | | | | | 90,516 | | | $ | 863,376 | |
| | | | |
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 141 | |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest (continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Franklin LifeSmart 2045
Retirement Target Fund | | | | | | Franklin LifeSmart 2050
Retirement Target Fund | |
| | | Shares | | | Amount | | | | | | Shares | | | Amount | |
| | | | | |
| Advisor Class Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 24,133 | | | $ | 308,531 | | | | | | | | 3,842 | | | $ | 47,718 | |
| Shares issued in reinvestment of distributions | | | 1,095 | | | | 14,735 | | | | | | | | 754 | | | | 9,680 | |
| Shares redeemed | | | (21,959 | ) | | | (289,033 | ) | | | | | | | (821 | ) | | | (10,034 | ) |
| | | | |
| Net increase (decrease) | | | 3,269 | | | $ | 34,233 | | | | | | | | 3,775 | | | $ | 47,364 | |
| | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 21,630 | | | $ | 248,772 | | | | | | | | 4,060 | | | $ | 45,309 | |
| Shares issued in reinvestment of distributions | | | 1,148 | | | | 13,243 | | | | | | | | 653 | | | | 7,211 | |
| Shares redeemed | | | (27,642 | ) | | | (329,313 | ) | | | | | | | (5,181 | ) | | | (58,654 | ) |
| | | | |
| Net increase (decrease) | | | (4,864 | ) | | $ | (67,298 | ) | | | | | | | (468 | ) | | $ | (6,134 | ) |
| | | | |
| | | | |
| | | Franklin LifeSmart 2055
Retirement Target Fund | | | | | | | | | | |
| | | Shares | | | Amount | | | | | | | | | | |
| | | | | |
| Class A Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 179,712 | | | $ | 1,868,533 | | | | | | | | | | | | | |
| Shares issued in reinvestment of distributions | | | 6,703 | | | | 73,349 | | | | | | | | | | | | | |
| Shares redeemed | | | (50,854 | ) | | | (529,261 | ) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Net increase (decrease) | | | 135,561 | | | $ | 1,412,621 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 167,691 | | | $ | 1,569,365 | | | | | | | | | | | | | |
| Shares issued in reinvestment of distributions | | | 2,970 | | | | 27,647 | | | | | | | | | | | | | |
| Shares redeemed | | | (76,729 | ) | | | (718,013 | ) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Net increase (decrease) | | | 93,932 | | | $ | 878,999 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | |
| Class C Shares: | | | | | | | | | | | | | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 90,816 | | | $ | 939,276 | | | | | | | | | | | | | |
| Shares issued in reinvestment of distributions | | | 1,817 | | | | 19,638 | | | | | | | | | | | | | |
| Shares redeemed | | | (22,755 | ) | | | (237,364 | ) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Net increase (decrease) | | | 69,878 | | | $ | 721,550 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Year ended December 31, 2016 | | | | | | | | | | | | | | | | | | | | |
| Shares sold | | | 56,005 | | | $ | 514,754 | | | | | | | | | | | | | |
| Shares issued in reinvestment of distributions | | | 585 | | | | 5,377 | | | | | | | | | | | | | |
| Shares redeemed | | | (14,194 | ) | | | (124,031 | ) | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Net increase (decrease) | | | 42,396 | | | $ | 396,100 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | |
| 142 | | Annual Report | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
| | | | | | | | |
| | | Franklin LifeSmart 2055
Retirement Target Fund | |
| | | Shares | | | Amount | |
| | |
| Class R Shares: | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | |
| Shares sold | | | 13,895 | | | $ | 144,258 | |
| Shares issued in reinvestment of distributions | | | 555 | | | | 6,022 | |
| Shares redeemed | | | (20,084 | ) | | | (203,979 | ) |
| | | | |
| Net increase (decrease) | | | (5,634 | ) | | $ | (53,699 | ) |
| | | | |
| Year ended December 31, 2016 | | | | | | | | |
| Shares sold | | | 35,820 | | | $ | 330,982 | |
| Shares issued in reinvestment of distributions | | | 457 | | | | 4,253 | |
| Shares redeemed | | | (2,833 | ) | | | (26,780 | ) |
| | | | |
| Net increase (decrease) | | | 33,444 | | | $ | 308,455 | |
| | | | |
| | |
| Class R6 Shares: | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | |
| Shares sold | | | 150,392 | | | $ | 1,583,951 | |
| Shares issued in reinvestment of distributions | | | 683 | | | | 7,493 | |
| Shares redeemed | | | (33,852 | ) | | | (359,936 | ) |
| | | | |
| Net increase (decrease) | | | 117,223 | | | $ | 1,231,508 | |
| | | | |
| Year ended December 31, 2016 | | | | | | | | |
| Shares sold | | | 185,229 | | | $ | 1,752,259 | |
| Shares issued in reinvestment of distributions | | | 340 | | | | 3,178 | |
| Shares redeemed | | | (24,754 | ) | | | (234,731 | ) |
| | | | |
| Net increase (decrease) | | | 160,815 | | | $ | 1,520,706 | |
| | | | |
| | |
| Advisor Class Shares: | | | | | | | | |
| Year ended December 31, 2017 | | | | | | | | |
| Shares sold | | | 1,920 | | | $ | 19,323 | |
| Shares issued in reinvestment of distributions | | | 42 | | | | 455 | |
| Shares redeemed | | | (411 | ) | | | (4,291 | ) |
| | | | |
| Net increase (decrease) | | | 1,551 | | | $ | 15,487 | |
| | | | |
| Year ended December 31, 2016 | | | | | | | | |
| Shares sold | | | 236 | | | $ | 2,172 | |
| Shares issued in reinvestment of distributions | | | 6 | | | | 55 | |
| Shares redeemed | | | (45 | ) | | | (419 | ) |
| | | | |
| Net increase (decrease) | | | 197 | | | $ | 1,808 | |
| | | | |
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 FT 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 |
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 143 | |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
a. Management and Asset Allocation Fees
The Funds, except Franklin LifeSmart Retirement Income Fund, 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 Underlying Funds and ETFs.
Franklin LifeSmart Retirement Income Fund pays an investment management fee to Advisers of 0.25% per year of the average daily net assets of the fund.
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.
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 until further notice and approval by the Board.
d. Sales Charges/Underwriting Agreements
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Funds. These charges are deducted from the proceeds of sales of fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Funds of the following commission transactions related to the sales and redemptions of the Funds’ shares for the year:
| | | | | | | | | | | | |
| | | Franklin
LifeSmart
Retirement
Income Fund | | | Franklin
LifeSmart
2020 Retirement
Target Fund | | | Franklin
LifeSmart
2025 Retirement
Target Fund | |
Sales charges retained net of commissions paid to unaffiliated brokers/dealers | | | $20,846 | | | | $8,712 | | | | $41,405 | |
| CDSC retained | | | $ 1,727 | | | | $ 542 | | | | $ 3,729 | |
| | | | |
| 144 | | Annual Report | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
| | | | | | | | | | | | |
| | | Franklin
LifeSmart 2030 Retirement
Target Fund | | | Franklin
LifeSmart 2035 Retirement
Target Fund | | | Franklin
LifeSmart 2040 Retirement
Target Fund | |
Sales charges retained net of commissions paid to unaffiliated brokers/dealers | | | $20,894 | | | | $38,789 | | | | $17,067 | |
| CDSC retained | | | $ 946 | | | | $ 2,146 | | | | $ 1,180 | |
| | | |
| | | Franklin
LifeSmart
2045 Retirement
Target Fund | | | Franklin
LifeSmart
2050 Retirement
Target Fund | | | Franklin
LifeSmart
2055 Retirement
Target Fund | |
Sales charges retained net of commissions paid to unaffiliated brokers/dealers | | | $36,375 | | | | $17,705 | | | | $9,731 | |
| CDSC retained | | | $ 4,353 | | | | $ 1,838 | | | | $ 752 | |
e. Transfer Agent Fees
Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. Effective November 1, 2017, the fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. Prior to November 1, 2017, the fees were account based fees that varied based on fund or account type. In addition, each class reimburses Investor Services for out of pocket expenses incurred and, except for Class R6, reimburses shareholder 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, 2017, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:
| | | | | | | | | | | | |
| | | Franklin
LifeSmart
Retirement
Income Fund | | | Franklin
LifeSmart 2020 Retirement
Target Fund | | | Franklin
LifeSmart 2025 Retirement
Target Fund | |
| Transfer agent fees | | | $42,312 | | | | $21,041 | | | | $88,487 | |
| | | |
| | | Franklin
LifeSmart
2030 Retirement
Target Fund | | | Franklin
LifeSmart
2035 Retirement
Target Fund | | | Franklin
LifeSmart
2040 Retirement
Target Fund | |
| Transfer agent fees | | | $33,116 | | | | $91,432 | | | | $32,411 | |
| | | |
| | | Franklin
LifeSmart
2045 Retirement
Target Fund | | | Franklin
LifeSmart
2050 Retirement
Target Fund | | | Franklin
LifeSmart
2055 Retirement
Target Fund | |
| Transfer agent fees | | | $99,050 | | | | $47,671 | | | | $27,691 | |
f. Investments in FT Underlying Funds
The Funds invest in FT Underlying Funds which are managed by Advisers (or an affiliate of Advisers). The Funds do not invest in FT Underlying Funds for the purpose of exercising a controlling influence over the management or policies. Management and 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.
| | | | | | |
| | | |
| franklintempleton.com | | Annual Report | | | 145 | |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
f. Investments in FT Underlying Funds (continued)
Investments in FT Underlying Funds for the year ended December 31, 2017, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| FT Underlying Funds | | Number of
Shares Held
at Beginning
of Year | | | Gross
Additions | | | Gross
Reductions | | | Number of
Shares Held at End
of Year | | | Value at End of Year | | | Dividend
Income | | | Realized
Gain (Loss) | | | Net Change in
Unrealized
Appreciation
(Depreciation) | |
| | | | | | | | |
| Franklin LifeSmart Retirement Income Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Non-Controlled Affiliates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Franklin Floating Rate Daily Access Fund, Class R6 | | | 1,884,664 | | | | 448,200 | | | | (689,969 | ) | | | 1,642,895 | | | $ | 14,408,195 | | | $ | 570,431 | | | $ | 24,984 | | | $ | (215,751 | ) |
Franklin High Income Fund, Class R6 | | | — | | | | 2,134,595 | | | | — | | | | 2,134,595 | | | | 4,013,039 | | | | 62,057 | | | | — | | | | (42,317 | ) |
Franklin Income Fund, Class R6 | | | 5,166,874 | | | | 2,347,649 | | | | (2,173,398 | ) | | | 5,341,125 | | | | 12,605,056 | | | | 634,034 | | | | 73,560 | | | | 266,282 | |
Franklin Strategic Income Fund, Class R6 | | | 622,444 | | | | 87,927 | | | | (710,371 | ) | | | — | | | | — | a | | | 87,992 | | | | 357,490 | | | | — | a |
Franklin U.S. Government Securities Fund, Class R6 | | | 2,398,566 | | | | 197,905 | | | | (1,140,477 | ) | | | 1,455,994 | | | | 8,852,441 | | | | 401,368 | | | | (245,481 | ) | | | (5,111 | ) |
Institutional Fiduciary Trust Money Market | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio, 0.89% | | | 15 | | | | 14,580,022 | | | | (14,514,987 | ) | | | 65,050 | | | | 65,050 | | | | 1,881 | | | | — | | | | — | |
Templeton Global Total Return Fund, Class R6 | | | 239,735 | | | | 26,789 | | | | (48,258 | ) | | | 218,266 | | | | 2,630,100 | | | | 38,012 | | | | 33,116 | | | | 18,242 | |
| | | | | | | | | | | | | | | | | | | | |
Total Affiliated Securities | | | | | | | | | | | | | | | | | | $ | 42,573,881 | | | $ | 1,795,775 | | | $ | 243,669 | | | $ | 21,345 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| Franklin LifeSmart 2020 Retirement Target Fund | | | | | | | | | | | | | | | | | | | | | | | | | |
| Non-Controlled Affiliates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Franklin Floating Rate Daily Access Fund, Class R6 | | | — | | | | 131,263 | | | | (17,668 | ) | | | 113,595 | | | $ | 996,227 | | | $ | 29,972 | | | $ | (625 | ) | | $ | (12,986 | ) |
Franklin Focused Core Equity Fund, Class R6 | | | 71,450 | | | | 5,090 | | | | (76,540 | ) | | | — | | | | — | a | | | — | | | | 94,388 | | | | — | a |
Franklin FTSE Europe ETF | | | — | | | | 54,700 | | | | (300 | ) | | | 54,400 | | | | 1,387,472 | | | | 312 | | | | (86 | ) | | | 18,321 | |
Franklin Growth Fund, Class R6 | | | 48,806 | | | | 8,304 | | | | (15,750 | ) | | | 41,360 | | | | 3,910,204 | | | | 29,449 | | | | 156,726 | b | | | 719,020 | |
Franklin Growth Opportunities Fund, Class R6 | | | 43,927 | | | | 9,210 | | | | (14,237 | ) | | | 38,900 | | | | 1,526,046 | | | | — | | | | 137,811 | b | | | 237,938 | |
Franklin India Growth Fund, Class R6 | | | 50,406 | | | | 6,493 | | | | (56,899 | ) | | | — | | | | — | a | | | — | | | | 154,963 | | | | — | a |
Franklin International Small Cap Growth Fund, Class R6 | | | 73,900 | | | | 16,489 | | | | (30,507 | ) | | | 59,882 | | | | 1,206,623 | | | | 79,738 | | | | 44,463 | b | | | 249,442 | |
Franklin K2 Alternative Strategies Fund, Class R6 | | | 90,400 | | | | 10,611 | | | | (101,011 | ) | | | — | | | | — | a | | | — | | | | 45,229 | | | | — | a |
Franklin K2 Long Short Credit Fund, Class R6 | | | 97,573 | | | | 18,154 | | | | (29,093 | ) | | | 86,634 | | | | 902,723 | | | | 17,383 | | | | 26,855 | b | | | 5,541 | |
Franklin LibertyQ Emerging Markets ETF | | | 46,200 | | | | 16,200 | | | | (15,000 | ) | | | 47,400 | | | | 1,566,333 | | | | 39,341 | | | | 11,935 | | | | 285,094 | |
Franklin LibertyQ U.S. Equity ETF | | | — | | | | 41,600 | | | | (7,000 | ) | | | 34,600 | | | | 1,000,283 | | | | 12,307 | | | | 82 | | | | 108,382 | |
Franklin Low Duration Total Return Fund, Class R6 | | | 482,134 | | | | 411,564 | | | | (125,649 | ) | | | 768,049 | | | | 7,542,245 | | | | 142,872 | | | | (17,339 | ) | | | (36,744 | ) |
Franklin Mutual International Fund, Class R6 | | | 56,683 | | | | 9,337 | | | | (18,401 | ) | | | 47,619 | | | | 760,469 | | | | 17,176 | | | | 7,750 | | | | 78,128 | |
Franklin Pelagos Commodities Strategy Fund, Class R6 | | | 104,776 | | | | 38,900 | | | | (17,073 | ) | | | 126,603 | | | | 845,712 | | | | 1,050 | | | | (2,320 | ) | | | 14,535 | |
Franklin Rising Dividends Fund, Class R6 | | | 41,021 | | | | 5,860 | | | | (20,644 | ) | | | 26,237 | | | | 1,602,829 | | | | 24,328 | | | | 95,032 | b | | | 196,538 | |
Franklin Small Cap Growth Fund, Class R6 | | | 25,385 | | | | 4,045 | | | | (8,212 | ) | | | 21,218 | | | | 504,128 | | | | — | | | | 14,691 | b | | | 79,208 | |
Franklin Strategic Income Fund, Class R6 | | | 173,601 | | | | 46,500 | | | | (119,036 | ) | | | 101,065 | | | | 995,493 | | | | 28,095 | | | | 3,755 | | | | 26,925 | |
Franklin U.S. Government Securities Fund, Class R6 | | | 381,149 | | | | 103,640 | | | | (261,129 | ) | | | 223,660 | | | | 1,359,850 | | | | 46,951 | | | | (48,542 | ) | | | 20,022 | |
Franklin Utilities Fund, Class R6 | | | 38,257 | | | | 7,220 | | | | (12,373 | ) | | | 33,104 | | | | 623,682 | | | | 19,629 | | | | 18,849 | b | | | 28,293 | |
Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 190,417 | | | | 12,368,362 | | | | (11,654,195 | ) | | | 904,584 | | | | 904,584 | | | | 2,674 | | | | — | | | | — | |
Templeton Foreign Fund, Class R6 | | | 146,086 | | | | 23,237 | | | | (59,036 | ) | | | 110,287 | | | | 875,682 | | | | 16,594 | | | | 27,079 | | | | 115,876 | |
Templeton Global Total Return Fund, Class R6 | | | 195,805 | | | | 212,819 | | | | (60,674 | ) | | | 347,950 | | | | 4,192,791 | | | | 54,816 | | | | 3,246 | | | | 35,896 | |
| | | | | | | | | | | | | | | | | | | | |
Total Affiliated Securities | | | | | | | | | | | | | | | | | | $ | 32,703,376 | | | $ | 562,687 | | | $ | 773,942 | | | $ | 2,169,429 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | |
| 146 | | Annual Report | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| FT Underlying Funds | | Number of
Shares Held
at Beginning
of Year | | | Gross
Additions | | | Gross
Reductions | | | Number of
Shares Held at End
of Year | | | Value at End of Year | | | Dividend
Income | | | Realized
Gain (Loss) | | | Net Change in
Unrealized
Appreciation
(Depreciation) | |
| | | | | | |
| Franklin LifeSmart 2025 Retirement Target Fund | | | | | | | | | | | | | | | | | | | | | | | | | |
| Non-Controlled Affiliates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Franklin Floating Rate Daily Access Fund, Class R6 | | | — | | | | 269,016 | | | | (22,581 | ) | | | 246,435 | | | $ | 2,161,235 | | | $ | 64,787 | | | $ | (1,017 | ) | | $ | (28,310 | ) |
Franklin Focused Core Equity Fund, Class R6 | | | 310,586 | | | | 4,351 | | | | (314,937 | ) | | | — | | | | — | a | | | — | | | | 364,563 | | | | — | a |
Franklin FTSE Europe ETF | | | — | | | | 258,300 | | | | (1,300 | ) | | | 257,000 | | | | 6,554,785 | | | | 1,469 | | | | (339 | ) | | | 87,218 | |
Franklin Growth Fund, Class R6 | | | 222,262 | | | | 11,072 | | | | (42,813 | ) | | | 190,521 | | | | 18,011,853 | | | | 136,764 | | | | 706,030 | b | | | 3,356,707 | |
Franklin Growth Opportunities Fund, Class R6 | | | 196,335 | | | | 17,623 | | | | (37,780 | ) | | | 176,178 | | | | 6,911,477 | | | | — | | | | 634,176b | | | | 1,083,668 | |
Franklin India Growth Fund, Class R6 | | | 236,461 | | | | 4,409 | | | | (240,870 | ) | | | — | | | | — | a | | | — | | | | 678,993 | | | | — | a |
Franklin International Small Cap Growth Fund, Class R6 | | | 341,435 | | | | 35,291 | | | | (96,081 | ) | | | 280,645 | | | | 5,655,004 | | | | 372,661 | | | | 252,062 | b | | | 1,130,776 | |
Franklin K2 Alternative Strategies Fund, Class R6 | | | 322,782 | | | | 9,080 | | | | (331,862 | ) | | | — | | | | — | a | | | — | | | | 219,525 | | | | — | a |
Franklin K2 Long Short Credit Fund, Class R6 | | | 347,486 | | | | 32,742 | | | | (75,305 | ) | | | 304,923 | | | | 3,177,305 | | | | 61,182 | | | | 91,908 | b | | | 19,206 | |
Franklin LibertyQ Emerging Markets ETF | | | 230,100 | | | | 63,200 | | | | (47,700 | ) | | | 245,600 | | | | 8,115,852 | | | | 200,760 | | | | 63,605 | | | | 1,463,939 | |
Franklin LibertyQ U.S. Equity ETF | | | — | | | | 173,200 | | | | (19,300 | ) | | | 153,900 | | | | 4,449,234 | | | | 54,884 | | | | 8,491 | | | | 482,076 | |
Franklin Low Duration Total Return Fund, Class R6 | | | 1,135,007 | | | | 867,402 | | | | (220,539 | ) | | | 1,781,870 | | | | 17,497,960 | | | | 326,779 | | | | (57,116 | ) | | | (67,994 | ) |
Franklin Mutual International Fund, Class R6 | | | 257,590 | | | | 10,840 | | | | (49,355 | ) | | | 219,075 | | | | 3,498,627 | | | | 79,238 | | | | (35,534 | ) | | | 432,625 | |
Franklin Pelagos Commodities Strategy Fund, Class R6 | | | 384,794 | | | | 98,627 | | | | (35,943 | ) | | | 447,478 | | | | 2,989,152 | | | | 3,709 | | | | (2,699 | ) | | | 51,228 | |
Franklin Rising Dividends Fund, Class R6 | | | 191,281 | | | | 8,506 | | | | (76,091 | ) | | | 123,696 | | | | 7,556,565 | | | | 114,060 | | | | 442,219 | b | | | 942,923 | |
Franklin Small Cap Growth Fund, Class R6 | | | 139,063 | | | | 5,251 | | | | (26,794 | ) | | | 117,520 | | | | 2,792,276 | | | | — | | | | 132,330 | b | | | 389,886 | |
Franklin Strategic Income Fund, Class R6 | | | 390,110 | | | | 76,810 | | | | (246,803 | ) | | | 220,117 | | | | 2,168,148 | | | | 60,768 | | | | (118,833 | ) | | | 185,430 | |
Franklin U.S. Government Securities Fund, Class R6 | | | 931,341 | | | | 189,031 | | | | (580,326 | ) | | | 540,046 | | | | 3,283,482 | | | | 112,032 | | | | (108,751 | ) | | | 41,345 | |
Franklin Utilities Fund, Class R6 | | | 175,188 | | | | 10,979 | | | | (34,237 | ) | | | 151,930 | | | | 2,862,362 | | | | 90,719 | | | | 91,133 | b | | | 137,640 | |
Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 722,986 | | | | 32,200,680 | | | | (30,946,351 | ) | | | 1,977,315 | | | | 1,977,315 | | | | 8,303 | | | | — | | | | — | |
Templeton Foreign Fund, Class R6 | | | 616,488 | | | | 23,051 | | | | (169,136 | ) | | | 470,403 | | | | 3,734,999 | | | | 70,777 | | | | 189,009 | | | | 423,628 | |
Templeton Global Total Return Fund, Class R6 | | | 462,110 | | | | 432,869 | | | | (103,998 | ) | | | 790,981 | | | | 9,531,325 | | | | 123,998 | | | | (532 | ) | | | 77,580 | |
| | | | | | | | | | | | | | | | | | | | |
Total Affiliated Securities | | | | | | | | | | | | | | | | | | $ | 112,928,956 | | | $ | 1,882,890 | | | $ | 3,549,223 | | | $ | 10,209,571 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| Franklin LifeSmart 2030 Retirement Target Fund | | | | | | | | | | | | | | | | | | | | | | | | | |
| Non-Controlled Affiliates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Franklin Floating Rate Daily Access Fund, Class R6 | | | — | | | | 72,574 | | | | (2,503 | ) | | | 70,071 | | | $ | 614,526 | | | $ | 16,760 | | | $ | (92 | ) | | $ | (7,610 | ) |
Franklin Focused Core Equity Fund, Class R6 | | | 100,655 | | | | 5,311 | | | | (105,966 | ) | | | — | | | | — | a | | | — | | | | 135,149 | | | | — | a |
Franklin FTSE Europe ETF | | | — | | | | 108,100 | | | | — | | | | 108,100 | | | | 2,757,091 | | | | 617 | | | | — | | | | 36,495 | |
Franklin Growth Fund, Class R6 | | | 72,816 | | | | 11,197 | | | | (9,277 | ) | | | 74,736 | | | | 7,065,559 | | | | 52,885 | | | | 196,314 | b | | | 1,266,278 | |
Franklin Growth Opportunities Fund, Class R6 | | | 66,763 | | | | 12,539 | | | | (12,549 | ) | | | 66,753 | | | | 2,618,718 | | | | — | | | | 217,265 | b | | | 380,461 | |
Franklin India Growth Fund, Class R6 | | | 85,606 | | | | 6,821 | | | | (92,427 | ) | | | — | | | | — | a | | | — | | | | 261,872 | | | | — | a |
Franklin International Small Cap Growth Fund, Class R6 | | | 134,599 | | | | 29,436 | | | | (31,267 | ) | | | 132,768 | | | | 2,675,265 | | | | 175,755 | | | | 74,649 | b | | | 508,473 | |
Franklin K2 Alternative Strategies Fund, Class R6 | | | 99,662 | | | | 13,114 | | | | (112,776 | ) | | | — | | | | — | a | | | — | | | | 48,406 | | | | — | a |
Franklin K2 Long Short Credit Fund, Class R6 | | | 109,077 | | | | 23,880 | | | | (23,740 | ) | | | 109,217 | | | | 1,138,045 | | | | 21,914 | | | | 23,512 | b | | | 13,580 | |
Franklin LibertyQ Emerging Markets ETF | | | 78,100 | | | | 28,600 | | | | (7,000 | ) | | | 99,700 | | | | 3,294,586 | | | | 80,186 | | | | 2,504 | | | | 565,191 | |
Franklin LibertyQ U.S. Equity ETF | | | — | | | | 65,700 | | | | (6,300 | ) | | | 59,400 | | | | 1,717,248 | | | | 20,723 | | | | (1,378 | ) | | | 183,241 | |
Franklin Low Duration Total Return Fund, Class R6 | | | 270,854 | | | | 230,484 | | | | (23,180 | ) | | | 478,158 | | | | 4,695,507 | | | | 80,008 | | | | (5,193 | ) | | | (27,902 | ) |
Franklin Mutual International Fund, Class R6 | | | 88,600 | | | | 13,038 | | | | (11,168 | ) | | | 90,470 | | | | 1,444,811 | | | | 32,539 | | | | (2,318 | ) | | | 148,755 | |
Franklin Pelagos Commodities Strategy Fund, Class R6 | | | 109,178 | | | | 56,832 | | | | (5,486 | ) | | | 160,524 | | | | 1,072,298 | | | | 1,331 | | | | (1,446 | ) | | | 23,259 | |
| | | | | | |
| franklintempleton.com | | Annual Report | | | 147 | |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
f. Investments in FT Underlying Funds (continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| FT Underlying Funds | | Number of
Shares Held
at Beginning
of Year | | | Gross
Additions | | | Gross
Reductions | | | Number of
Shares Held at End
of Year | | | Value at End of Year | | | Dividend
Income | | | Realized
Gain (Loss) | | | Net Change in
Unrealized
Appreciation
(Depreciation) | |
| | | | | |
| Franklin LifeSmart 2030 Retirement Target Fund (continued) | | | | | | | | | | | | | | | | | | | | | |
| Non-Controlled Affiliates (continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Franklin Rising Dividends Fund, Class R6 | | | 63,789 | | | | 7,898 | | | | (22,219 | ) | | | 49,468 | | | $ | 3,022,018 | | | $ | 43,447 | | | $ | 120,279 | b | | $ | 391,334 | |
Franklin Small Cap Growth Fund, Class R6 | | | 54,396 | | | | 7,680 | | | | (6,776 | ) | | | 55,300 | | | | 1,313,917 | | | | — | | | | 24,474 | b | | | 205,562 | |
Franklin Strategic Income Fund, Class R6 | | | 95,407 | | | | 20,408 | | | | (53,406 | ) | | | 62,409 | | | | 614,726 | | | | 15,559 | | | | (8,448 | ) | | | 23,895 | |
Franklin U.S. Government Securities Fund, Class R6 | | | 224,100 | | | | 48,906 | | | | (121,386 | ) | | | 151,620 | | | | 921,852 | | | | 28,076 | | | | (22,295 | ) | | | 4,745 | |
Franklin Utilities Fund, Class R6 | | | 61,409 | | | | 10,478 | | | | (7,798 | ) | | | 64,089 | | | | 1,207,439 | | | | 35,821 | | | | 20,492 | b | | | 60,303 | |
Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 61,193 | | | | 12,737,617 | | | | (11,956,321 | ) | | | 842,489 | | | | 842,489 | | | | 3,348 | | | | — | | | | — | |
Templeton Foreign Fund, Class R6 | | | 181,114 | | | | 25,511 | | | | (40,841 | ) | | | 165,784 | | | | 1,316,321 | | | | 24,944 | | | | 19,317 | | | | 174,724 | |
Templeton Global Total Return Fund, Class R6 | | | 109,721 | | | | 118,875 | | | | (10,527 | ) | | | 218,069 | | | | 2,627,734 | | | | 30,500 | | | | (492 | ) | | | 13,736 | |
| | | | | | | | | | | | | | | | | | | | |
Total Affiliated Securities | | | | | | | | | | | | | | | | | | $ | 40,960,150 | | | $ | 664,413 | | | $ | 1,102,571 | | | $ | 3,964,520 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| Franklin LifeSmart 2035 Retirement Target Fund | | | | | | | | | | | | | | | | | | | | | | | | | |
| Non-Controlled Affiliates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Franklin Floating Rate Daily Access Fund, Class R6 | | | — | | | | 133,749 | | | | (9,754 | ) | | | 123,995 | | | $ | 1,087,436 | | | $ | 31,129 | | | $ | (325 | ) | | $ | (13,913 | ) |
Franklin Focused Core Equity Fund, Class R6 | | | 307,928 | | | | 1,090 | | | | (309,018 | ) | | | — | | | | — | a | | | — | | | | 314,947 | | | | — | a |
Franklin FTSE Europe ETF | | | — | | | | 282,800 | | | | (600 | ) | | | 282,200 | | | | 7,197,511 | | | | 1,614 | | | | (171 | ) | | | 94,038 | |
Franklin Growth Fund, Class R6 | | | 216,137 | | | | 11,194 | | | | (28,733 | ) | | | 198,598 | | | | 18,775,451 | | | | 141,723 | | | | 601,730 | b | | | 3,496,197 | |
Franklin Growth Opportunities Fund, Class R6 | | | 218,186 | | | | 20,615 | | | | (28,996 | ) | | | 209,805 | | | | 8,230,671 | | | | — | | | | 733,072 | b | | | 1,243,060 | |
Franklin India Growth Fund, Class R6 | | | 231,375 | | | | 2,334 | | | | (233,709 | ) | | | — | | | | — | a | | | — | | | | 652,500 | | | | — | a |
Franklin International Small Cap Growth Fund, Class R6 | | | 421,648 | | | | 46,041 | | | | (96,446 | ) | | | 371,243 | | | | 7,480,538 | | | | 492,086 | | | | 274,585 | b | | | 1,483,429 | |
Franklin K2 Alternative Strategies Fund, Class R6 | | | 276,640 | | | | 14,459 | | | | (291,099 | ) | | | — | | | | — | a | | | — | | | | 179,343 | | | | — | a |
Franklin K2 Long Short Credit Fund, Class R6 | | | 299,300 | | | | 40,713 | | | | (67,674 | ) | | | 272,339 | | | | 2,837,777 | | | | 54,644 | | | | 74,618 | b | | | 21,858 | |
Franklin LibertyQ Emerging Markets ETF | | | 215,500 | | | | 62,000 | | | | (30,600 | ) | | | 246,900 | | | | 8,158,811 | | | | 199,393 | | | | 44,429 | | | | 1,440,322 | |
Franklin LibertyQ U.S. Equity ETF | | | — | | | | 178,600 | | | | (14,600 | ) | | | 164,000 | | | | 4,741,224 | | | | 57,872 | | | | 880 | | | | 513,416 | |
Franklin Low Duration Total Return Fund, Class R6 | | | 548,374 | | | | 456,150 | | | | (100,198 | ) | | | 904,326 | | | | 8,880,483 | | | | 157,654 | | | | (24,263 | ) | | | (38,937 | ) |
Franklin Mutual International Fund, Class R6 | | | 301,451 | | | | 13,261 | | | | (39,544 | ) | | | 275,168 | | | | 4,394,437 | | | | 99,323 | | | | (22,606 | ) | | | 501,037 | |
Franklin Pelagos Commodities Strategy Fund, Class R6 | | | 314,820 | | | | 113,991 | | | | (27,735 | ) | | | 401,076 | | | | 2,679,185 | | | | 3,325 | | | | (3,162 | ) | | | 53,835 | |
Franklin Rising Dividends Fund, Class R6 | | | 176,199 | | | | 7,777 | | | | (61,541 | ) | | | 122,435 | | | | 7,479,534 | | | | 110,490 | | | | 353,133 | b | | | 977,426 | |
Franklin Small Cap Growth Fund, Class R6 | | | 130,369 | | | | 5,092 | | | | (17,235 | ) | | | 118,226 | | | | 2,809,049 | | | | — | | | | 70,220 | b | | | 441,811 | |
Franklin Strategic Income Fund, Class R6 | | | 184,001 | | | | 36,046 | | | | (112,805 | ) | | | 107,242 | | | | 1,056,334 | | | | 28,124 | | | | (40,536 | ) | | | 70,417 | |
Franklin U.S. Government Securities Fund, Class R6 | | | 493,378 | | | | 99,502 | | | | (282,634 | ) | | | 310,246 | | | | 1,886,296 | | | | 60,330 | | | | (52,906 | ) | | | 15,837 | |
Franklin Utilities Fund, Class R6 | | | 166,994 | | | | 10,943 | | | | (22,090 | ) | | | 155,847 | | | | 2,936,156 | | | | 90,387 | | | | 73,010 | b | | | 148,456 | |
Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 376,115 | | | | 26,390,481 | | | | (25,742,549 | ) | | | 1,024,047 | | | | 1,024,047 | | | | 7,634 | | | | — | | | | — | |
Templeton Foreign Fund, Class R6 | | | 622,852 | | | | 24,216 | | | | (136,412 | ) | | | 510,656 | | | | 4,054,605 | | | | 76,833 | | | | 104,940 | | | | 534,604 | |
Templeton Global Total Return Fund, Class R6 | | | 233,322 | | | | 231,735 | | | | (47,907 | ) | | | 417,150 | | | | 5,026,660 | | | | 61,828 | | | | 1,502 | | | | 33,033 | |
| | | | | | | | | | | | | | | | | | | | |
Total Affiliated Securities | | | | | | | | | | | | | | | | | | $ | 100,736,205 | | | $ | 1,674,389 | | | $ | 3,334,940 | | | $ | 11,015,926 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | |
| 148 | | Annual Report | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| FT Underlying Funds | | Number of
Shares Held
at Beginning
of Year | | | Gross
Additions | | | Gross
Reductions | | | Number of
Shares Held at End
of Year | | | Value at End of Year | | | Dividend
Income | | | Realized
Gain (Loss) | | | Net Change in
Unrealized
Appreciation
(Depreciation) | |
| | | | | | | | |
| Franklin LifeSmart 2040 Retirement Target Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Non-Controlled Affiliates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Franklin Floating Rate Daily Access Fund, Class R6 | | | — | | | | 39,039 | | | | (3,769 | ) | | | 35,270 | | | $ | 309,313 | | | $ | 8,523 | | | $ | (128 | ) | | $ | (3,769 | ) |
Franklin Focused Core Equity Fund, Class R6 | | | 99,364 | | | | 4,593 | | | | (103,957 | ) | | | — | | | | — | a | | | — | | | | 126,302 | | | | — | a |
Franklin FTSE Europe ETF | | | — | | | | 91,500 | | | | — | | | | 91,500 | | | | 2,333,708 | | | | 522 | | | | — | | | | 30,286 | |
Franklin Growth Fund, Class R6 | | | 67,717 | | | | 8,943 | | | | (10,856 | ) | | | 65,804 | | | | 6,221,103 | | | | 46,565 | | | | 203,682 | b | | | 1,121,513 | |
Franklin Growth Opportunities Fund, Class R6 | | | 70,803 | | | | 12,569 | | | | (11,443 | ) | | | 71,929 | | | | 2,821,776 | | | | — | | | | 250,536 | b | | | 409,178 | |
Franklin India Growth Fund, Class R6 | | | 76,925 | | | | 4,181 | | | | (81,106 | ) | | | — | | | | — | a | | | — | | | | 228,437 | | | | — | a |
Franklin International Small Cap Growth Fund, Class R6 | | | 134,099 | | | | 25,802 | | | | (35,211 | ) | | | 124,690 | | | | 2,512,514 | | | | 164,646 | | | | 63,949 | b | | | 508,477 | |
Franklin K2 Alternative Strategies Fund, Class R6 | | | 84,269 | | | | 9,655 | | | | (93,924 | ) | | | — | | | | — | a | | | — | | | | 39,132 | | | | — | a |
Franklin K2 Long Short Credit Fund, Class R6 | | | 92,199 | | | | 18,412 | | | | (24,251 | ) | | | 86,360 | | | | 899,878 | | | | 17,328 | | | | 18,233 | b | | | 12,299 | |
Franklin LibertyQ Emerging Markets ETF | | | 67,200 | | | | 24,600 | | | | (12,100 | ) | | | 79,700 | | | | 2,633,687 | | | | 64,467 | | | | 9,897 | | | | 461,824 | |
Franklin LibertyQ U.S. Equity ETF | | | — | | | | 61,700 | | | | (6,400 | ) | | | 55,300 | | | | 1,598,717 | | | | 19,254 | | | | (492 | ) | | | 169,671 | |
Franklin Low Duration Total Return Fund, Class R6 | | | 146,850 | | | | 138,442 | | | | (32,970 | ) | | | 252,322 | | | | 2,477,803 | | | | 42,305 | | | | (1,444 | ) | | | (16,097 | ) |
Franklin Mutual International Fund, Class R6 | | | 95,684 | | | | 11,751 | | | | (15,495 | ) | | | 91,940 | | | | 1,468,281 | | | | 33,073 | | | | (6,632 | ) | | | 162,326 | |
Franklin Pelagos Commodities Strategy Fund, Class R6 | | | 91,571 | | | | 46,064 | | | | (10,233 | ) | | | 127,402 | | | | 851,044 | | | | 1,056 | | | | (2,302 | ) | | | 18,907 | |
Franklin Rising Dividends Fund, Class R6 | | | 54,989 | | | | 6,081 | | | | (20,659 | ) | | | 40,411 | | | | 2,468,717 | | | | 35,993 | | | | 103,096 | b | | | 326,049 | |
Franklin Small Cap Growth Fund, Class R6 | | | 41,829 | | | | 4,983 | | | | (6,632 | ) | | | 40,180 | | | | 954,674 | | | | — | | | | 20,062 | b | | | 150,233 | |
Franklin Strategic Income Fund, Class R6 | | | 50,488 | | | | 10,946 | | | | (31,148 | ) | | | 30,286 | | | | 298,320 | | | | 7,639 | | | | 7,182 | | | | 743 | |
Franklin U.S. Government Securities Fund, Class R6 | | | 137,788 | | | | 32,908 | | | | (80,574 | ) | | | 90,122 | | | | 547,942 | | | | 17,758 | | | | (15,610 | ) | | | 4,807 | |
Franklin Utilities Fund, Class R6 | | | 52,313 | | | | 7,726 | | | | (8,377 | ) | | | 51,662 | | | | 973,305 | | | | 29,447 | | | | 21,600 | b | | | 47,782 | |
Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 183,134 | | | | 10,599,317 | | | | (10,270,651 | ) | | | 511,800 | | | | 511,800 | | | | 2,591 | | | | — | | | | — | |
Templeton Foreign Fund, Class R6 | | | 184,504 | | | | 21,799 | | | | (46,886 | ) | | | 159,417 | | | | 1,265,770 | | | | 23,986 | | | | 26,053 | | | | 168,096 | |
Templeton Global Total Return Fund, Class R6 | | | 56,988 | | | | 62,904 | | | | (14,443 | ) | | | 105,449 | | | | 1,270,655 | | | | 14,932 | | | | 1,976 | | | | 5,457 | |
| | | | | | | | | | | | | | | | | | | | |
Total Affiliated Securities | | | | | | | | | | | | | | | | | | $ | 32,419,007 | | | $ | 530,085 | | | $ | 1,093,529 | | | $ | 3,577,782 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| Franklin LifeSmart 2045 Retirement Target Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Non-Controlled Affiliates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Franklin Floating Rate Daily Access Fund, Class R6 | | | — | | | | 71,787 | | | | (6,520 | ) | | | 65,267 | | | $ | 572,392 | | | $ | 16,354 | | | $ | (246 | ) | | $ | (7,272 | ) |
Franklin Focused Core Equity Fund, Class R6 | | | 226,425 | | | | 4,117 | | | | (230,542 | ) | | | — | | | | — | a | | | — | | | | 229,379 | | | | — | a |
Franklin FTSE Europe ETF | | | — | | | | 203,500 | | | | (1,400 | ) | | | 202,100 | | | | 5,154,561 | | | | 1,158 | | | | (289 | ) | | | 66,844 | |
Franklin Growth Fund, Class R6 | | | 153,668 | | | | 10,121 | | | | (22,888 | ) | | | 140,901 | | | | 13,320,754 | | | | 101,035 | | | | 429,456 | b | | | 2,498,070 | |
Franklin Growth Opportunities Fund, Class R6 | | | 160,883 | | | | 17,485 | | | | (23,920 | ) | | | 154,448 | | | | 6,058,976 | | | | — | | | | 543,833 | b | | | 919,950 | |
Franklin India Growth Fund, Class R6 | | | 152,337 | | | | 3,888 | | | | (156,225 | ) | | | — | | | | — | a | | | — | | | | 450,993 | | | | — | a |
Franklin International Small Cap Growth Fund, Class R6 | | | 302,418 | | | | 37,311 | | | | (74,029 | ) | | | 265,700 | | | | 5,353,862 | | | | 353,486 | | | | 191,236 | b | | | 1,072,934 | |
Franklin K2 Alternative Strategies Fund, Class R6 | | | 191,089 | | | | 11,312 | | | | (202,401 | ) | | | — | | | | — | a | | | — | | | | 123,151 | | | | — | a |
Franklin K2 Long Short Credit Fund, Class R6 | | | 205,705 | | | | 32,728 | | | | (51,029 | ) | | | 187,404 | | | | 1,952,745 | | | | 37,601 | | | | 48,819 | b | | | 17,381 | |
Franklin LibertyQ Emerging Markets ETF | | | 161,000 | | | | 48,200 | | | | (26,900 | ) | | | 182,300 | | | | 6,024,103 | | | | 147,579 | | | | 44,474 | | | | 1,066,429 | |
Franklin LibertyQ U.S. Equity ETF | | | — | | | | 129,300 | | | | (10,000 | ) | | | 119,300 | | | | 3,448,951 | | | | 42,504 | | | | 4,706 | | | | 373,695 | |
Franklin Low Duration Total Return Fund, Class R6 | | | 302,710 | | | | 257,045 | | | | (65,494 | ) | | | 494,261 | | | | 4,853,644 | | | | 83,811 | | | | (6,915 | ) | | | (28,398 | ) |
Franklin Mutual International Fund, Class R6 | | | 216,679 | | | | 12,508 | | | | (32,446 | ) | | | 196,741 | | | | 3,141,949 | | | | 71,162 | | | | (21,683 | ) | | | 365,061 | |
Franklin Pelagos Commodities Strategy Fund, Class R6 | | | 224,286 | | | | 76,470 | | | | (25,495 | ) | | | 275,261 | | | | 1,838,747 | | | | 2,281 | | | | (1,890 | ) | | | 35,398 | |
| | | | | | |
| franklintempleton.com | | Annual Report | | | 149 | |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
f. Investments in FT Underlying Funds (continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| FT Underlying Funds | | Number of
Shares Held
at Beginning
of Year | | | Gross
Additions | | | Gross
Reductions | | | Number of
Shares Held at End
of Year | | | Value at End of Year | | | Dividend
Income | | | Realized
Gain (Loss) | | | Net Change in
Unrealized
Appreciation
(Depreciation) | |
| | | | | |
| Franklin LifeSmart 2045 Retirement Target Fund (continued) | | | | | | | | | | | | | | | | | | | | | |
| Non-Controlled Affiliates (continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Franklin Rising Dividends Fund, Class R6 | | | 124,876 | | | | 7,223 | | | | (45,821 | ) | | | 86,278 | | | $ | 5,270,737 | | | $ | 78,493 | | | $ | 246,258 | b | | $ | 700,305 | |
Franklin Small Cap Growth Fund, Class R6 | | | 97,302 | | | | 5,168 | | | | (14,503 | ) | | | 87,967 | | | | 2,090,107 | | | | — | | | | 52,529 | b | | | 332,149 | |
Franklin Strategic Income Fund, Class R6 | | | 104,214 | | | | 16,209 | | | | (63,065 | ) | | | 57,358 | | | | 564,972 | | | | 15,022 | | | | 17,200 | | | | (1,187 | ) |
Franklin U.S. Government Securities Fund, Class R6 | | | 275,361 | | | | 47,648 | | | | (156,638 | ) | | | 166,371 | | | | 1,011,535 | | | | 32,187 | | | | (29,405 | ) | | | 9,623 | |
Franklin Utilities Fund, Class R6 | | | 118,411 | | | | 9,568 | | | | (17,727 | ) | | | 110,252 | | | | 2,077,147 | | | | 64,480 | | | | 52,474 | b | | | 106,669 | |
Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 468,586 | | | | 18,475,866 | | | | (18,428,077 | ) | | | 516,375 | | | | 516,375 | | | | 5,174 | | | | — | | | | — | |
Templeton Foreign Fund, Class R6 | | | 521,744 | | | | 27,592 | | | | (123,501 | ) | | | 425,835 | | | | 3,381,131 | | | | 64,163 | | | | 88,880 | | | | 448,287 | |
Templeton Global Total Return Fund, Class R6 | | | 129,291 | | | | 122,453 | | | | (33,203 | ) | | | 218,541 | | | | 2,633,423 | | | | 32,223 | | | | 8,727 | | | | 8,994 | |
| | | | | | | | | | | | | | | | | | | | |
Total Affiliated Securities | | | | | | | | | | | | | | | | | | $ | 69,266,111 | | | $ | 1,148,713 | | | $ | 2,471,687 | | | $ | 7,984,932 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| Franklin LifeSmart 2050 Retirement Target Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Non-Controlled Affiliates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Franklin Floating Rate Daily Access Fund, Class R6 | | | — | | | | 28,648 | | | | (2,327 | ) | | | 26,321 | | | $ | 230,837 | | | $ | 6,049 | | | $ | (92 | ) | | $ | (2,716 | ) |
Franklin Focused Core Equity Fund, Class R6 | | | 78,484 | | | | 6,065 | | | | (84,549 | ) | | | — | | | | — | a | | | — | | | | 143,710 | | | | — | a |
Franklin FTSE Europe ETF | | | — | | | | 81,600 | | | | (100 | ) | | | 81,500 | | | | 2,078,657 | | | | 464 | | | | (25 | ) | | | 26,819 | |
Franklin Growth Fund, Class R6 | | | 51,909 | | | | 10,156 | | | | (4,813 | ) | | | 57,252 | | | | 5,412,658 | | | | 40,399 | | | | 128,975 | b | | | 950,044 | |
Franklin Growth Opportunities Fund, Class R6 | | | 53,630 | | | | 13,334 | | | | (4,903 | ) | | | 62,061 | | | | 2,434,663 | | | | — | | | | 183,316 | b | | | 344,440 | |
Franklin India Growth Fund, Class R6 | | | 52,795 | | | | 5,908 | | | | (58,703 | ) | | | — | | | | — | a | | | — | | | | 182,912 | | | | — | a |
Franklin International Small Cap Growth Fund, Class R6 | | | 100,058 | | | | 26,511 | | | | (20,921 | ) | | | 105,648 | | | | 2,128,805 | | | | 139,652 | | | | 53,177 | b | | | 385,305 | |
Franklin K2 Alternative Strategies Fund, Class R6 | | | 62,928 | | | | 9,420 | | | | (72,348 | ) | | | — | | | | — | a | | | — | | | | 33,320 | | | | — | a |
Franklin K2 Long Short Credit Fund, Class R6 | | | 67,452 | | | | 19,302 | | | | (13,299 | ) | | | 73,455 | | | | 765,406 | | | | 14,739 | | | | 13,866 | b | | | 9,069 | |
Franklin LibertyQ Emerging Markets ETF | | | 55,900 | | | | 25,500 | | | | (5,400 | ) | | | 76,000 | | | | 2,511,420 | | | | 60,097 | | | | 2,455 | | | | 414,826 | |
Franklin LibertyQ U.S. Equity ETF | | | — | | | | 52,900 | | | | (3,000 | ) | | | 49,900 | | | | 1,442,604 | | | | 17,180 | | | | (787 | ) | | | 151,892 | |
Franklin Low Duration Total Return Fund, Class R6 | | | 97,303 | | | | 105,567 | | | | (25,387 | ) | | | 177,483 | | | | 1,742,879 | | | | 28,297 | | | | (382 | ) | | | (12,004 | ) |
Franklin Mutual International Fund, Class R6 | | | 71,811 | | | | 13,450 | | | | (6,645 | ) | | | 78,616 | | | | 1,255,505 | | | | 28,257 | | | | 711 | | | | 119,977 | |
Franklin Pelagos Commodities Strategy Fund, Class R6 | | | 70,838 | | | | 40,709 | | | | (2,918 | ) | | | 108,629 | | | | 725,642 | | | | 901 | | | | (770 | ) | | | 17,155 | |
Franklin Rising Dividends Fund, Class R6 | | | 41,207 | | | | 6,492 | | | | (13,301 | ) | | | 34,398 | | | | 2,101,377 | | | | 29,231 | | | | 80,506 | b | | | 264,417 | |
Franklin Small Cap Growth Fund, Class R6 | | | 26,850 | | | | 4,874 | | | | (2,522 | ) | | | 29,202 | | | | 693,830 | | | | — | | | | 12,043 | b | | | 106,840 | |
Franklin Strategic Income Fund, Class R6 | | | 33,073 | | | | 10,400 | | | | (21,158 | ) | | | 22,315 | | | | 219,806 | | | | 5,323 | | | | 8,192 | | | | (3,116 | ) |
Franklin U.S. Government Securities Fund, Class R6 | | | 86,663 | | | | 31,085 | | | | (50,657 | ) | | | 67,091 | | | | 407,910 | | | | 11,577 | | | | (9,380 | ) | | | 1,962 | |
Franklin Utilities Fund, Class R6 | | | 39,182 | | | | 8,347 | | | | (3,704 | ) | | | 43,825 | | | | 825,655 | | | | 23,759 | | | | 12,775b | | | | 39,072 | |
Institutional Fiduciary Trust Money Market Portfolio, 0.89% | | | 181,567 | | | | 8,997,414 | | | | (8,634,506 | ) | | | 544,475 | | | | 544,475 | | | | 2,316 | | | | — | | | | — | |
Templeton Foreign Fund, Class R6 | | | 176,382 | | | | 31,779 | | | | (34,817 | ) | | | 173,344 | | | | 1,376,348 | | | | 26,081 | | | | 11,086 | | | | 181,712 | |
Templeton Global Total Return Fund, Class R6 | | | 38,236 | | | | 52,003 | | | | (11,099 | ) | | | 79,140 | | | | 953,640 | | | | 10,523 | | | | 1,273 | | | | 1,306 | |
| | | | | | | | | | | | | | | | | | | | |
Total Affiliated Securities | | | | | | | | | | | | | | | | | | $ | 27,852,117 | | | $ | 444,845 | | | $ | 856,881 | | | $ | 2,997,000 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | |
| 150 | | Annual Report | | franklintempleton.com |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| FT Underlying Funds | | Number of
Shares Held
at Beginning
of Year | | | Gross
Additions | | | Gross
Reductions | | | Number of
Shares Held at End
of Year | | | Value at End of Year | | | Dividend
Income | | | Realized
Gain (Loss) | | | Net Change in
Unrealized
Appreciation
(Depreciation) | |
| | | | | | | | |
| Franklin LifeSmart 2055 Retirement Target Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Non-Controlled Affiliates | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Franklin Floating Rate Daily Access Fund, Class R6 | | | — | | | | 8,626 | | | | (643 | ) | | | 7,983 | | | $ | 70,010 | | | $ | 1,587 | | | $ | (30 | ) | | $ | (723 | ) |
Franklin Focused Core Equity Fund, Class R6 | | | 17,233 | | | | 4,526 | | | | (21,759 | ) | | | — | | | | — | a | | | — | | | | 31,325 | | | | — | a |
Franklin FTSE Europe ETF | | | — | | | | 25,000 | | | | — | | | | 25,000 | | | | 637,625 | | | | 142 | | | | — | | | | 8,145 | |
Franklin Growth Fund, Class R6 | | | 11,630 | | | | 6,867 | | | | (654 | ) | | | 17,843 | | | | 1,686,827 | | | | 12,438 | | | | 38,039 | b | | | 253,203 | |
Franklin Growth Opportunities Fund, Class R6 | | | 11,687 | | | | 7,734 | | | | (641 | ) | | | 18,780 | | | | 736,749 | | | | — | | | | 54,481 | b | | | 81,802 | |
Franklin India Growth Fund, Class R6 | | | 11,601 | | | | 4,434 | | | | (16,035 | ) | | | — | | | | — | a | | | — | | | | 41,369 | | | | — | a |
Franklin International Small Cap Growth Fund, Class R6 | | | 22,604 | | | | 15,501 | | | | (4,881 | ) | | | 33,224 | | | | 669,472 | | | | 43,637 | | | | 12,817 | b | | | 98,581 | |
Franklin K2 Alternative Strategies Fund, Class R6 | | | 13,497 | | | | 5,365 | | | | (18,862 | ) | | | — | | | | — | a | | | — | | | | 6,494 | | | | — | a |
Franklin K2 Long Short Credit Fund, Class R6 | | | 14,523 | | | | 10,658 | | | | (3,337 | ) | | | 21,844 | | | | 227,616 | | | | 4,383 | | | | 3,853 | b | | | 1,655 | |
Franklin LibertyQ Emerging Markets ETF | | | 11,100 | | | | 12,200 | | | | (1,100 | ) | | | 22,200 | | | | 733,599 | | | | 16,804 | | | | (68 | ) | | | 103,524 | |
Franklin LibertyQ U.S. Equity ETF | | | — | | | | 16,200 | | | | (400 | ) | | | 15,800 | | | | 456,777 | | | | 5,238 | | | | (127 | ) | | | 45,623 | |
Franklin Low Duration Total Return Fund, Class R6 | | | 19,590 | | | | 43,228 | | | | (7,534 | ) | | | 55,284 | | | | 542,891 | | | | 7,521 | | | | (114 | ) | | | (3,752 | ) |
Franklin Mutual International Fund, Class R6 | | | 16,099 | | | | 9,399 | | | | (874 | ) | | | 24,624 | | | | 393,245 | | | | 8,799 | | | | (23 | ) | | | 30,815 | |
Franklin Pelagos Commodities Strategy Fund, Class R6 | | | 15,880 | | | | 17,593 | | | | (689 | ) | | | 32,784 | | | | 218,999 | | | | 272 | | | | (214 | ) | | | 6,193 | |
Franklin Rising Dividends Fund, Class R6 | | | 9,309 | | | | 4,480 | | | | (2,965 | ) | | | 10,824 | | | | 661,215 | | | | 8,384 | | | | 18,587 | b | | | 77,491 | |
Franklin Small Cap Growth Fund, Class R6 | | | 6,123 | | | | 3,529 | | | | (345 | ) | | | 9,307 | | | | 221,135 | | | | — | | | | 3,698 | b | | | 30,697 | |
Franklin Strategic Income Fund, Class R6 | | | 6,730 | | | | 5,182 | | | | (5,169 | ) | | | 6,743 | | | | 66,418 | | | | 1,368 | | | | 867 | | | | 140 | |
Franklin U.S. Government Securities Fund, Class R6 | | | 16,523 | | | | 14,148 | | | | (11,807 | ) | | | 18,864 | | | | 114,691 | | | | 2,717 | | | | (1,894 | ) | | | 59 | |
Franklin Utilities Fund, Class R6 | | | 8,945 | | | | 5,458 | | | | (475 | ) | | | 13,928 | | | | 262,409 | | | | 6,803 | | | | 4,028 | b | | | 8,074 | |
Institutional Fiduciary Trust Money Market | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Portfolio, 0.89% | | | 83,312 | | | | 3,457,364 | | | | (3,418,479 | ) | | | 122,197 | | | | 122,197 | | | | 759 | | | | — | | | | — | |
Templeton Foreign Fund, Class R6 | | | 41,260 | | | | 23,538 | | | | (8,341 | ) | | | 56,457 | | | | 448,268 | | | | 8,495 | | | | 431 | | | | 51,637 | |
Templeton Global Total Return Fund, Class R6 | | | 7,573 | | | | 19,204 | | | | (3,187 | ) | | | 23,590 | | | | 284,265 | | | | 2,639 | | | | (332 | ) | | | (393 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total Affiliated Securities | | | | | | | | | | | | | | | | | | $ | 8,554,408 | | | $ | 131,986 | | | $ | 213,187 | | | $ | 792,771 | |
| | | | | | | | | | | | | | | | | | | | |
aAs of December 31, 2017, no longer held by the fund.
bIncludes realized gain distributions 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 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, 2018. Total expenses waived or paid are not subject to recapture subsequent to the Funds’ fiscal year end.
h. Other Affiliated Transactions
At December 31, 2017, Franklin Advisers, Inc. owned 8.2% of Franklin LifeSmart 2055 Retirement Target Fund’s outstanding shares.
| | | | | | |
| franklintempleton.com | | Annual Report | | | 151 | |
FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
4. Expense Offset Arrangement
The Funds have entered into an arrangement with their custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Funds’ custodian expenses. During the year ended December 31, 2017, the custodian fees were reduced as noted in the Statements of Operations.
5. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains, if any. At December 31, 2017, the capital loss carryforwards were as follows:
| | | | | | | | | | | | |
| | | Franklin
LifeSmart
Retirement
Income Fund | | | Franklin
LifeSmart
2020 Retirement
Target Fund | | | Franklin
LifeSmart
2030 Retirement
Target Fund | |
Capital loss carryforwards not subject to expiration: | | | | | | | | | | | | |
Short term | | | $ 156,956 | | | | $684,887 | | | | $234,049 | |
Long term | | | 1,259,864 | | | | 10,127 | | | | — | |
Total capital loss carryforwards | | | $1,416,820 | | | | $695,014 | | | | $234,049 | |
During the year ended December 31, 2017, the Funds utilized capital loss carryforwards as follows:
| | | | | | | | | | | | | | | | |
| | | Franklin LifeSmart Retirement Income Fund | | | Franklin
LifeSmart
2020 Retirement
Target Fund | | | Franklin
LifeSmart
2025 Retirement
Target Fund | | | Franklin
LifeSmart
2030 Retirement
Target Fund | |
| | | $169,551 | | | | $ 764,967 | | | | $ 2,359,923 | | | | $ 1,163,849 | |
| | Franklin LifeSmart 2035
Retirement Target Fund | | | Franklin
LifeSmart 2040 Retirement
Target Fund | | | Franklin
LifeSmart 2045 Retirement
Target Fund | | | Franklin
LifeSmart 2050 Retirement
Target Fund | |
| | | $2,100,351 | | | | $ 832,264 | | | | $ 1,321,191 | | | | $ 653,707 | |
| | |
| |
| | | Franklin LifeSmart 2055 Retirement Target Fund |
| | $28,717 |
The tax character of distributions paid during the years ended December 31, 2017 and 2016, was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Franklin LifeSmart Retirement
Income Fund | | | Franklin LifeSmart 2020 Retirement Target Fund | | | Franklin LifeSmart 2025 Retirement Target Fund | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Distributions paid from: | | | | | | | | | | | | | | | | | | | | | | | | |
Ordinary income | | | $2,294,914 | | | | $1,727,570 | | | | $443,307 | | | | $508,617 | | | | $2,148,717 | | | | $1,596,928 | |
Long term capital gain | | | — | | | | 350,055 | | | | — | | | | 261,345 | | | | — | | | | 1,321,638 | |
| | | $2,294,914 | | | | $2,077,625 | | | | $443,307 | | | | $769,962 | | | | $2,148,717 | | | | $2,918,566 | |
Return of capital | | | — | | | | 252,577 | | | | — | | | | — | | | | — | | | | — | |
| | | $2,294,914 | | | | $2,330,202 | | | | $443,307 | | | | $769,962 | | | | $2,148,717 | | | | $2,918,566 | |
| | | | |
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FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Franklin LifeSmart 2030 Retirement Target Fund | | | Franklin LifeSmart 2035 Retirement Target Fund | | | Franklin LifeSmart 2040 Retirement Target Fund | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Distributions paid from: | | | | | | | | | | | | | | | | | | | | | | | | |
Ordinary income | | $ | 791,735 | | | $ | 289,801 | | | $ | 2,261,545 | | | $ | 1,001,102 | | | $ | 679,653 | | | $ | 239,712 | |
Long term capital gain | | | — | | | | 319,107 | | | | — | | | | 1,314,223 | | | | — | | | | 216,602 | |
| | $ | 791,735 | | | $ | 608,908 | | | $ | 2,261,545 | | | $ | 2,315,325 | | | $ | 679,653 | | | $ | 456,314 | |
| | | |
| | | Franklin LifeSmart 2045 Retirement Target Fund | | | Franklin LifeSmart 2050 Retirement Target Fund | | | Franklin LifeSmart 2055 Retirement Target Fund | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
Distributions paid from: | | | | | | | | | | | | | | | | | | | | | | | | |
Ordinary income | | $ | 1,618,909 | | | $ | 685,135 | | | $ | 530,396 | | | $ | 183,051 | | | $ | 156,610 | | | $ | 52,618 | |
Long term capital gain | | | — | | | | 825,821 | | | | — | | | | 199,667 | | | | 25,795 | | | | 17,628 | |
| | $ | 1,618,909 | | | $ | 1,510,956 | | | $ | 530,396 | | | $ | 382,718 | | | $ | 182,405 | | | $ | 70,246 | |
At December 31, 2017, 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
LifeSmart
Retirement
Income Fund | | | Franklin
LifeSmart
2020 Retirement
Target Fund | | | Franklin
LifeSmart 2025 Retirement
Target Fund | |
| Cost of investments | | | $57,786,628 | | | | $34,713,851 | | | | $112,087,456 | |
| | | |
Unrealized appreciation | | | $ 2,090,029 | | | | $ 3,325,488 | | | | $ 20,613,376 | |
| Unrealized depreciation | | | (1,108,301 | ) | | | (958,463 | ) | | | (2,893,348 | ) |
Net unrealized appreciation (depreciation) | | | $ 981,728 | | | | $ 2,367,025 | | | | $ 17,720,028 | |
| | | |
Undistributed ordinary income | | | $ 980 | | | | $ 122,066 | | | | $ 190,555 | |
| Undistributed long term capital gains | | | — | | | | — | | | | 1,380,137 | |
Distributable earnings | | | $ 980 | | | | $ 122,066 | | | | $ 1,570,692 | |
| | | |
| | | Franklin
LifeSmart
2030 Retirement
Target Fund | | | Franklin
LifeSmart 2035 Retirement
Target Fund | | | Franklin
LifeSmart 2040 Retirement
Target Fund | |
Cost of investments | | | $42,235,690 | | | | $97,677,709 | | | | $32,896,953 | |
| | | |
Unrealized appreciation | | | $ 5,267,806 | | | | $19,743,383 | | | | $ 4,501,293 | |
| Unrealized depreciation | | | (646,008 | ) | | | (1,316,591 | ) | | | (448,354 | ) |
Net unrealized appreciation (depreciation) | | | $ 4,621,798 | | | | $18,426,792 | | | | $ 4,052,939 | |
| | | |
Undistributed ordinary income | | | $ 183,923 | | | | $ 181,835 | | | | $ 139,506 | |
| Undistributed long term capital gains | | | — | | | | 1,336,175 | | | | 281,724 | |
Distributable earnings | | | $ 183,923 | | | | $ 1,518,010 | | | | $ 421,230 | |
| | | | | | |
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FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
5. Income Taxes (continued)
| | | | | | | | | | | | |
| | | |
| | | Franklin
LifeSmart
2045 Retirement
Target Fund | | | Franklin
LifeSmart
2050 Retirement
Target Fund | | | Franklin
LifeSmart
2055 Retirement
Target Fund | |
Cost of investments | | | $66,401,085 | | | | $28,030,880 | | | | $8,606,975 | |
| | | |
Unrealized appreciation | | | $13,903,476 | | | | $ 3,968,631 | | | | $ 951,788 | |
Unrealized depreciation | | | (756,670 | ) | | | (406,926 | ) | | | (94,535 | ) |
Net unrealized appreciation (depreciation) | | | $13,146,806 | | | | $ 3,561,705 | | | | $ 857,253 | |
| | | |
Undistributed ordinary income | | | $ 49,764 | | | | $ 125,661 | | | | $ 15,657 | |
Undistributed long term capital gains | | | 1,182,284 | | | | 227,274 | | | | 119,352 | |
Distributable earnings | | | $ 1,232,048 | | | | $ 352,935 | | | | $ 135,009 | |
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.
Franklin LifeSmart 2025 Retirement Target Fund, Franklin LifeSmart 2035 Retirement Target Fund, Franklin LifeSmart 2040 Retirement Target Fund, Franklin LifeSmart 2045 Retirement Target Fund and Franklin LifeSmart 2055 Retirement Target Fund utilized a tax accounting practice to treat a portion of the proceeds from capital shares redeemed as a distribution from realized capital gains
6. Investment Transactions
Purchases and sales of Underlying Funds and ETFs (excluding short term securities) for the year ended December 31, 2017, were as follows:
| | | | | | | | | | | | |
| | | |
| | | Franklin
LifeSmart
Retirement
Income Fund | | | Franklin
LifeSmart
2020 Retirement
Target Fund | | | Franklin
LifeSmart
2025 Retirement
Target Fund | |
Purchases | | | $17,471,849 | | | | $17,005,119 | | | | $42,609,462 | |
Sales | | | $29,193,299 | | | | $19,265,765 | | | | $56,304,307 | |
| | | |
| | | Franklin
LifeSmart
2030 Retirement
Target Fund | | | Franklin
LifeSmart 2035 Retirement
Target Fund | | | Franklin
LifeSmart 2040 Retirement
Target Fund | |
Purchases | | | $17,323,074 | | | | $34,722,870 | | | | $13,273,049 | |
Sales | | | $15,579,998 | | | | $43,097,990 | | | | $14,612,714 | |
| | | |
| | | Franklin
LifeSmart 2045 Retirement
Target Fund | | | Franklin
LifeSmart 2050 Retirement
Target Fund | | | Franklin
LifeSmart 2055 Retirement
Target Fund | |
Purchases | | | $23,808,261 | | | | $12,145,294 | | | | $5,242,083 | |
Sales | | | $31,347,069 | | | | $9,697,949 | | | | $2,297,941 | |
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FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
7. Credit Facility
The Funds, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 9, 2018. 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 9, 2018, the Borrowers renewed the Global Credit Facility for a one year term, maturing February 8, 2019, 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 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statements of Operations. During the year ended December 31, 2017, the Funds did not use the Global Credit Facility.
8. Fair Value Measurements
The Funds follow a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds’ own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds’ financial instruments and are summarized in the following fair value hierarchy:
| | • | Level 1 – quoted prices in active markets for identical financial instruments |
| | • | Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.) |
| | • | Level 3 – significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of financial instruments) |
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
For movements between the levels within the fair value hierarchy, the Funds have adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.
A summary of inputs used as of December 31, 2017, in valuing the Funds’ assets carried at fair value, is as follows:
| | | | | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| |
Franklin LifeSmart Retirement Income Fund | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Underlying Funds and Exchange Traded Funds | | $ | 52,874,553 | | | $ | — | | | $ | — | | | $ | 52,874,553 | |
Index-Linked Notes | | | — | | | | 3,345,370 | | | | 2,483,383 | | | | 5,828,753 | |
Short Term Investments | | | 65,050 | | | | — | | | | — | | | | 65,050 | |
| | | | |
Total Investments in Securities | | $ | 52,939,603 | | | $ | 3,345,370 | | | $ | 2,483,383 | | | $ | 58,768,356 | |
| | | | |
Franklin LifeSmart 2020 Retirement Target Fund | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Underlying Funds and Exchange Traded Funds | | $ | 36,111,338 | | | $ | — | | | $ | — | | | $ | 36,111,338 | |
Short Term Investments | | | 904,584 | | | | 64,954 | | | | — | | | | 969,538 | |
| | | | |
Total Investments in Securities | | $ | 37,015,922 | | | $ | 64,954 | | | $ | — | | | $ | 37,080,876 | |
| | | | |
| | | | | | |
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FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
8. Fair Value Measurements (continued)
| | | | | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| |
Franklin LifeSmart 2025 Retirement Target Fund | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Underlying Funds and Exchange Traded Funds | | $ | 127,080,383 | | | $ | — | | | $ | — | | | $ | 127,080,383 | |
Short Term Investments | | | 1,977,315 | | | | 749,786 | | | | — | | | | 2,727,101 | |
| | | | |
Total Investments in Securities | | $ | 129,057,698 | | | $ | 749,786 | | | $ | — | | | $ | 129,807,484 | |
| | | | |
Franklin LifeSmart 2030 Retirement Target Fund | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Underlying Funds and Exchange Traded Funds | | $ | 45,853,489 | | | $ | — | | | $ | — | | | $ | 45,853,489 | |
Short Term Investments | | | 842,489 | | | | 161,510 | | | | — | | | | 1,003,999 | |
| | | | |
Total Investments in Securities | | $ | 46,695,978 | | | $ | 161,510 | | | $ | — | | | $ | 46,857,488 | |
| | | | |
Franklin LifeSmart 2035 Retirement Target Fund | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Underlying Funds and Exchange Traded Funds | | $ | 113,969,545 | | | $ | — | | | $ | — | | | $ | 113,969,545 | |
Short Term Investments | | | 1,024,047 | | | | 1,110,909 | | | | — | | | | 2,134,956 | |
| | | | |
Total Investments in Securities | | $ | 114,993,592 | | | $ | 1,110,909 | | | $ | — | | | $ | 116,104,501 | |
| | | | |
Franklin LifeSmart 2040 Retirement Target Fund | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Underlying Funds and Exchange Traded Funds | | $ | 36,226,359 | | | $ | — | | | $ | — | | | $ | 36,226,359 | |
Short Term Investments | | | 511,800 | | | | 211,733 | | | | — | | | | 723,533 | |
| | | | |
Total Investments in Securities | | $ | 36,738,159 | | | $ | 211,733 | | | $ | — | | | $ | 36,949,892 | |
| | | | |
Franklin LifeSmart 2045 Retirement Target Fund | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Underlying Funds and Exchange Traded Funds | | $ | 78,123,130 | | | $ | — | | | $ | — | | | $ | 78,123,130 | |
Short Term Investments | | | 516,375 | | | | 908,386 | | | | — | | | | 1,424,761 | |
| | | | |
Total Investments in Securities | | $ | 78,639,505 | | | $ | 908,386 | | | $ | — | | | $ | 79,547,891 | |
| | | | |
Franklin LifeSmart 2050 Retirement Target Fund | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Underlying Funds and Exchange Traded Funds | | $ | 30,904,163 | | | $ | — | | | $ | — | | | $ | 30,904,163 | |
Short Term Investments | | | 544,475 | | | | 143,947 | | | | — | | | | 688,422 | |
| | | | |
Total Investments in Securities | | $ | 31,448,638 | | | $ | 143,947 | | | $ | — | | | $ | 31,592,585 | |
| | | | |
Franklin LifeSmart 2055 Retirement Target Fund | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Underlying Funds and Exchange Traded Funds | | $ | 9,342,031 | | | $ | — | | | $ | — | | | $ | 9,342,031 | |
Short Term Investments | | | 122,197 | | | | — | | | | — | | | | 122,197 | |
| | | | |
Total Investments in Securities | | $ | 9,464,228 | | | $ | — | | | $ | — | | | $ | 9,464,228 | |
| | | | |
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FRANKLIN FUND ALLOCATOR SERIES
NOTES TO FINANCIAL STATEMENTS
A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the beginning and/or end of the year. At December 31, 2017, the reconciliation of assets is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Balance at
Beginning
of Year | | | Purchases | | | Sales | | | Transfer
Into
Level 3 | | | Transfer
Out of
Level 3 | | | Cost Basis
Adjustments | | | Net
Realized
Gain
(Loss) | | | Net
Unrealized
Appreciation
(Depreciation) | | | Balance at
End of
Year | | | Net Change in
Unrealized
Appreciation
(Depreciation)
on Assets
Held at Year End | |
Franklin LifeSmart Retirement Income Fund | | | | | | | | | | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Investments in Securities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Index-Linked Notes | | | $— | | | | $2,500,000 | | | | $— | | | | $— | | | | $— | | | | $— | | | | $— | | | | $(16,617) | | | | $2,483,383 | | | | $(16,617) | |
Level 3 investments include financial instruments with values derived using prior transaction prices or third party pricing information without adjustment for which such inputs are unobservable. They may also include fair value of immaterial financial instruments and/or other assets developed using various valuation techniques and unobservable inputs.
9. Subsequent Events
The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.
Abbreviations
| | |
| Selected Portfolio |
| ETF | | Exchange Traded Fund |
| SPDR | | S&P Depository Receipt |
| SPX B | | S&P 500 Index Buy-Write |
| SPX B DT | | S&P 500 Index Buy-Write Distribution |
| SPXDIV | | S&P 500 Dividend Points |
| | | | | | |
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FRANKLIN FUND ALLOCATOR SERIES
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Fund Allocator Series and Shareholders of Franklin LifeSmart Retirement Income 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
Opinions on the Financial Statements
We have audited the accompanying statements of assets and liabilities, including the statements of investments, of Franklin LifeSmart Retirement Income 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, Franklin Lifesmart 2055 Retirement Target Fund (the “Funds”) as of December 31, 2017, the related statements of operations for the year ended December 31, 2017, the statements of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of December 31, 2017, 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 ended December 31, 2017, and each of the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinions
These financial statements are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent, and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinions.
PricewaterhouseCoopers LLP
San Francisco, California February 15, 2018
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
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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, 2017:
| | | | | | | | | | | | | | | | |
Franklin LifeSmart 2025 Retirement Target Fund | | Franklin LifeSmart 2035 Retirement Target Fund | | | Franklin LifeSmart 2040 Retirement Target Fund | | | Franklin LifeSmart 2045 Retirement Target Fund | | | Franklin LifeSmart 2055 Retirement Target Fund | |
$114,286 | | | $100,577 | | | | $26,224 | | | | $105,620 | | | | $43,883 | |
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, 2017:
| | | | | | | | | | | | |
Franklin LifeSmart Retirement Income Fund | | Franklin LifeSmart 2020 Retirement Target Fund | | | Franklin LifeSmart 2025 Retirement Target Fund | | | Franklin LifeSmart 2030 Retirement Target Fund | |
13.23% | | | 21.96% | | | | 21.28% | | | | 22.31% | |
| | | |
Franklin LifeSmart 2035 Retirement Target Fund | | Franklin LifeSmart 2040 Retirement Target Fund | | | Franklin LifeSmart 2045 Retirement Target Fund | | | Franklin LifeSmart 2050 Retirement Target Fund | |
20.39% | | | 22.15% | | | | 20.33% | | | | 23.17% | |
| | | |
Franklin LifeSmart 2055 Retirement Target Fund | | | | | | | | | |
21.93% | | | | | | | | | | | | |
Under Section 854(b)(1)(B) of the Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended December 31, 2017:
| | | | | | | | | | | | |
Franklin LifeSmart Retirement Income Fund | | Franklin LifeSmart 2020 Retirement Target Fund | | | Franklin LifeSmart 2025 Retirement Target Fund | | | Franklin LifeSmart 2030 Retirement Target Fund | |
$417,259 | | | $216,220 | | | | $1,023,063 | | | | $400,748 | |
| | | |
Franklin LifeSmart 2035 Retirement Target Fund | | Franklin LifeSmart 2040 Retirement Target Fund | | | Franklin LifeSmart 2045 Retirement Target Fund | | | Franklin LifeSmart 2050 Retirement Target Fund | |
$1,087,955 | | | $354,012 | | | | $792,823 | | | | $305,354 | |
| | | |
Franklin LifeSmart 2055 Retirement Target Fund | | | | | | | | | |
$88,214 | | | | | | | | | | | | |
Distributions, including qualified dividend income, paid during calendar year 2017 will be reported to shareholders on Form 1099-DIV by mid-February 2018. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.
| | | | | | |
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FRANKLIN FUND ALLOCATOR SERIES
TAX INFORMATION (UNAUDITED)
During the fiscal year ended December 31, 2017, the Fund’s, a 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 27, 2017, 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.
| | | | | | | | |
| Class | | Foreign Tax Paid Per Share | | Foreign Source
Income Per Share | | | Foreign Source Qualified
Dividends Per Share |
| Franklin LifeSmart 2020 Retirement Target Fund | | | | | | | | |
Class A | | $0.0023 | | | $0.0327 | | | $0.0147 |
Class C | | $0.0023 | | | $0.0327 | | | $0.0147 |
Class R | | $0.0023 | | | $0.0327 | | | $0.0147 |
Class R6 | | $0.0023 | | | $0.0327 | | | $0.0147 |
Advisor Class | | $0.0023 | | | $0.0327 | | | $0.0147 |
| | | |
| Franklin LifeSmart 2025 Retirement Target Fund | | | | | | | | |
Class A | | $0.0031 | | | $0.0391 | | | $0.0213 |
Class C | | $0.0031 | | | $0.0391 | | | $0.0213 |
Class R | | $0.0031 | | | $0.0391 | | | $0.0213 |
Class R6 | | $0.0031 | | | $0.0391 | | | $0.0213 |
Advisor Class | | $0.0031 | | | $0.0391 | | | $0.0213 |
| | | |
| Franklin LifeSmart 2030 Retirement Target Fund | | | | | | | | |
Class A | | $0.0031 | | | $0.0402 | | | $0.0239 |
Class C | | $0.0031 | | | $0.0402 | | | $0.0239 |
Class R | | $0.0031 | | | $0.0402 | | | $0.0239 |
Class R6 | | $0.0031 | | | $0.0402 | | | $0.0239 |
Advisor Class | | $0.0031 | | | $0.0402 | | | $0.0239 |
| | | |
| Franklin LifeSmart 2035 Retirement Target Fund | | | | | | | | |
Class A | | $0.0039 | | | $0.0485 | | | $0.0299 |
Class C | | $0.0039 | | | $0.0485 | | | $0.0299 |
Class R | | $0.0039 | | | $0.0485 | | | $0.0299 |
Class R6 | | $0.0039 | | | $0.0485 | | | $0.0299 |
Advisor Class | | $0.0039 | | | $0.0485 | | | $0.0299 |
| | | |
| Franklin LifeSmart 2040 Retirement Target Fund | | | | | | | | |
Class A | | $0.0037 | | | $0.0463 | | | $0.0294 |
Class C | | $0.0037 | | | $0.0463 | | | $0.0294 |
Class R | | $0.0037 | | | $0.0463 | | | $0.0294 |
Class R6 | | $0.0037 | | | $0.0463 | | | $0.0294 |
Advisor Class | | $0.0037 | | | $0.0463 | | | $0.0294 |
| | | |
| Franklin LifeSmart 2045 Retirement Target Fund | | | | | | | | |
Class A | | $0.0042 | | | $0.0516 | | | $0.0328 |
Class C | | $0.0042 | | | $0.0516 | | | $0.0328 |
Class R | | $0.0042 | | | $0.0516 | | | $0.0328 |
Class R6 | | $0.0042 | | | $0.0516 | | | $0.0328 |
Advisor Class | | $0.0042 | | | $0.0516 | | | $0.0328 |
| | | |
| Franklin LifeSmart 2050 Retirement Target Fund | | | | | | | | |
Class A | | $0.0040 | | | $0.0485 | | | $0.0315 |
Class C | | $0.0040 | | | $0.0485 | | | $0.0315 |
Class R | | $0.0040 | | | $0.0485 | | | $0.0315 |
Class R6 | | $0.0040 | | | $0.0485 | | | $0.0315 |
Advisor Class | | $0.0040 | | | $0.0485 | | | $0.0315 |
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TAX INFORMATION (UNAUDITED)
| | | | | | | | | | | | |
Class | | Foreign Tax Paid
Per Share | | | Foreign Source
Income Per Share | | | Foreign Source Qualified
Dividends Per Share | |
| Franklin LifeSmart 2055 Retirement Target Fund | | | | | | | | | | | | |
Class A | | | $0.0033 | | | | $0.0405 | | | | $0.0268 | |
Class C | | | $0.0033 | | | | $0.0405 | | | | $0.0268 | |
Class R | | | $0.0033 | | | | $0.0405 | | | | $0.0268 | |
Class R6 | | | $0.0033 | | | | $0.0405 | | | | $0.0268 | |
Advisor Class | | | $0.0033 | | | | $0.0405 | | | | $0.0268 | |
Foreign Tax Paid Per Share (Column 1) is the amount per share available to you, as a tax credit (assuming you held your shares in the Fund for a minimum of 16 days during the 31-day period beginning 15 days before the ex-dividend date of the Fund’s distribution to which the foreign taxes relate), or, as a tax deduction.
Foreign Source Income Per Share (Column 2) is the amount per share of income dividends attributable to foreign securities held by the underlying funds, plus any foreign taxes withheld on these dividends. The amounts reported include foreign source qualified dividends that have not been adjusted for the rate differential applicable to such dividend income.1
Foreign Source Qualified Dividends Per Share (Column 3) is the amount per share of foreign source qualified dividends, plus any foreign taxes withheld on these dividends. These amounts represent the portion of the Foreign Source Income reported to you in column 2 that were derived from qualified foreign securities held by the underlying funds.1
By mid-February 2018, shareholders will receive Form 1099-DIV which will include their share of taxes paid and foreign source income distributed during the calendar year 2017. 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 2017 individual income tax returns.
1. Qualified 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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Special Meeting of Shareholders
MEETING OF SHAREHOLDERS: OCTOBER 30, 2017 AND RECONVENED ON DECEMBER 15, 2017 AND DECEMBER 29, 2017
(UNAUDITED)
A Special Meeting of Shareholders of Franklin Fund Allocator Series was held at the offices of Franklin Templeton Investments, One Franklin Parkway, San Mateo, California on October 30, 2017 and reconvened on December 15, 2017 and December 29, 2017. The purpose of the meeting was to elect Trustees of Franklin Fund Allocator Series and to vote on the following proposals: for each of the Funds, except Franklin LifeSmart Retirement Income Fund, to approve the use of a “manager of managers” structure whereby the Fund’s investment manager would be able to hire and replace subadvisers without shareholder approval; and for each of the Funds, to approve an amended fundamental investment restriction regarding investments in commodities. At the meeting, (i) the following persons were elected by the shareholders to serve as Trustees of Franklin Fund Allocator Series: Harris J. Ashton, Terrence J. Checki, Mary C. Choksi, Edith E. Holiday, Gregory E. Johnson, Rupert H. Johnson, Jr., J. Michael Luttig, Larry D. Thompson, and John B. Wilson; (ii) the proposal to use a “manager of managers” structure was approved by shareholders of each Fund voting, except Franklin LifeSmart 2045 Retirement Target Fund; and (iii) the proposal to approve the amended fundamental investment restriction regarding investments in commodities was approved by shareholders of each Fund. No other business was transacted at the meeting.
The results of the voting at the meeting are as follows:
Proposal 1. To elect a Board of Trustees:
| | | | | | | | |
| Name | | For | | | Withheld | |
Harris J. Ashton | | | 390,516,091 | | | | 13,444,532 | |
Terrence J. Checki | | | 390,358,474 | | | | 13,602,149 | |
Mary C. Choksi | | | 390,976,557 | | | | 12,983,067 | |
Edith E. Holiday | | | 390,925,009 | | | | 13,035,612 | |
Gregory E. Johnson | | | 390,675,564 | | | | 13,285,060 | |
Rupert H. Johnson, Jr. | | | 390,454,015 | | | | 13,506,608 | |
J. Michael Luttig | | | 390,724,016 | | | | 13,236,605 | |
Larry D. Thompson | | | 390,661,770 | | | | 13,298,853 | |
John B. Wilson | | | 390,907,907 | | | | 13,052,714 | |
Total Trust Shares Outstanding*: 723,360,102
* As of the record date.
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SPECIAL MEETING OF SHAREHOLDERS
| Proposal 2. | To approve the use of a “manager of managers” structure whereby the Fund’s investment manager would be able to hire and replace subadvisers without shareholder approval: |
Franklin LifeSmart 2020 Retirement Target Fund
| | | | |
| | | Shares | |
| |
For | | | 1,756,409 | |
Against | | | 32,805 | |
Abstain | | | 27,884 | |
Broker Non-Votes | | | 591,225 | |
Total Fund Shares Voted | | | 2,408,323 | |
Total Fund Outstanding Shares* | | | 3,045,571 | |
| |
| Franklin LifeSmart 2025 Retirement Target Fund | | | | |
| | | Shares | |
For | | | 4,013,449 | |
Against | | | 267,276 | |
Abstain | | | 232,812 | |
Broker Non-Votes | | | 1,100,424 | |
Total Fund Shares Voted | | | 5,613,963 | |
Total Fund Outstanding Shares* | | | 10,052,054 | |
| |
| Franklin LifeSmart 2030 Retirement Target Fund | | | | |
| | | Shares | |
For | | | 1,995,136 | |
Against | | | 32,117 | |
Abstain | | | 48,511 | |
Broker Non-Votes | | | 521,286 | |
Total Fund Shares Voted | | | 2,597,050 | |
Total Fund Outstanding Shares* | | | 3,467,754 | |
| |
| Franklin LifeSmart 2035 Retirement Target Fund | | | | |
| | | Shares | |
For | | | 3,717,927 | |
Against | | | 187,157 | |
Abstain | | | 26,271 | |
Broker Non-Votes | | | 1,387,124 | |
Total Fund Shares Voted | | | 5,318,481 | |
Total Fund Outstanding Shares* | | | 8,364,587 | |
| |
| Franklin LifeSmart 2040 Retirement Target Fund | | | | |
| | | Shares | |
For | | | 1,625,398 | |
Against | | | 4,158 | |
Abstain | | | 11,324 | |
Broker Non-Votes | | | 310,626 | |
Total Fund Shares Voted | | | 1,951,505 | |
Total Fund Shares Outstanding* | | | 2,692,745 | |
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SPECIAL MEETING OF SHAREHOLDERS
Franklin LifeSmart 2045 Retirement Target Fund
| | | | |
| | | Shares | |
For | | | 2,317,288 | |
Against | | | 237,615 | |
Abstain | | | 53,728 | |
Broker Non-Votes | | | 964,381 | |
Total Fund Shares Voted | | | 3,573,012 | |
Total Fund Shares Outstanding* | | | 5,805,142 | |
| |
| Franklin LifeSmart 2050 Retirement Target Fund | | | | |
| |
| | | Shares | |
For | | | 1,295,693 | |
Against | | | 3,793 | |
Abstain | | | 836 | |
Broker Non-Votes | | | 200,554 | |
Total Fund Shares Voted | | | 1,500,876 | |
Total Fund Shares Outstanding* | | | 2,243,656 | |
| |
| Franklin LifeSmart 2055 Retirement Target Fund | | | | |
| |
| | | Shares | |
For | | | 414,270 | |
Against | | | 10,718 | |
Abstain | | | 556 | |
Broker Non-Votes | | | 87,788 | |
Total Fund Shares Voted | | | 513,332 | |
Total Fund Shares Outstanding* | | | 748,576 | |
| Proposal 3. | To approve an amended fundamental investment restriction regarding investments in commodities: |
Franklin LifeSmart Retirement Income Fund
| | | | |
| | | Shares | |
For | | | 2,558,850 | |
Against | | | 28,752 | |
Abstain | | | 92,466 | |
Broker Non-Votes | | | 555,349 | |
Total Fund Shares Voted | | | 3,235,417 | |
Total Fund Shares Outstanding* | | | 5,474,017 | |
| |
| Franklin LifeSmart 2020 Retirement Target Fund | | | | |
| |
| | | Shares | |
For | | | 1,775,125 | |
Against | | | 12,950 | |
Abstain | | | 29,023 | |
Broker Non-Votes | | | 591,225 | |
Total Fund Shares Voted | | | 2,408,323 | |
Total Fund Shares Outstanding* | | | 3,045,571 | |
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FRANKLIN FUND ALLOCATOR SERIES
SPECIAL MEETING OF SHAREHOLDERS
Franklin LifeSmart 2025 Retirement Target Fund
| | | | |
| | | Shares | |
For | | | 4,109,114 | |
Against | | | 121,704 | |
Abstain | | | 282,721 | |
Broker Non-Votes | | | 1,100,424 | |
Total Fund Shares Voted | | | 5,613,963 | |
Total Fund Shares Outstanding* | | | 10,052,054 | |
| |
| Franklin LifeSmart 2030 Retirement Target Fund | | | | |
| |
| | | Shares | |
For | | | 2,007,020 | |
Against | | | 22,890 | |
Abstain | | | 45,855 | |
Broker Non-Votes | | | 521,286 | |
Total Fund Shares Voted | | | 2,597,050 | |
Total Fund Shares Outstanding* | | | 3,467,754 | |
| |
| Franklin LifeSmart 2035 Retirement Target Fund | | | | |
| |
| | | Shares | |
For | | | 3,788,603 | |
Against | | | 35,179 | |
Abstian | | | 107,574 | |
Broker Non-Votes | | | 1,387,124 | |
Total Fund Shares Voted | | | 5,318,481 | |
Total Fund Shares Outstanding* | | | 8,364,587 | |
| |
| Franklin LifeSmart 2040 Retirement Target Fund | | | | |
| |
| | | Shares | |
For | | | 1,625,398 | |
Against | | | 4,377 | |
Abstain | | | 11,104 | |
Broker Non-Votes | | | 310,626 | |
Total Fund Shares Voted | | | 1,951,505 | |
Total Fund Shares Outstanding* | | | 2,692,745 | |
| |
| Franklin LifeSmart 2045 Retirement Target Fund | | | | |
| |
| | | Shares | |
For | | | 2,543,856 | |
Against | | | 10,001 | |
Abstain | | | 54,774 | |
Broker Non-Votes | | | 964,381 | |
Total Fund Shares Voted | | | 3,573,012 | |
Total Fund Shares Outstanding* | | | 5,805,142 | |
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FRANKLIN FUND ALLOCATOR SERIES
SPECIAL MEETING OF SHAREHOLDERS
Franklin LifeSmart 2050 Retirement Target Fund
| | | | |
| | | Shares | |
For | | | 1,286,839 | |
Against | | | 1,035 | |
Abstain | | | 12,448 | |
Broker Non-Votes | | | 200,554 | |
Total Fund Shares Voted | | | 1,500,876 | |
Total Fund Shares Outstanding* | | | 2,243,656 | |
| |
| Franklin LifeSmart 2055 Retirement Target Fund | | | | |
| |
| | | Shares | |
For | | | 414,129 | |
Against | | | 10,520 | |
Abstain | | | 895 | |
Broker Non-Votes | | | 87,788 | |
Total Fund Shares Voted | | | 513,332 | |
Total Fund Shares Outstanding* | | | 748,576 | |
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FRANKLIN FUND ALLOCATOR SERIES
Board Members and Officers
The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupations during at least the past five years and number of US registered 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
| | | | | | | | |
Name, Year of Birth and Address | | Position | | Length of Time Served | | Number of Portfolios in
Fund Complex Overseen
by Board Member* | | Other Directorships Held During at Least the Past 5 Years |
Harris J. Ashton (1932) | | Trustee | | Since 1995 | | 139 | | 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). |
| | | | | |
| Terrence J. Checki (1945) | | Trustee | | Since December | | 113 | | Hess Corporation (exploration of oil |
One Franklin Parkway | | | | 2017 | | | | and gas) (2014-present). |
San Mateo, CA 94403-1906 | | | | | | | | |
Principal Occupation During at Least the Past 5 Years: Member of the Council on Foreign Relations (1996-present); Member of the National Committee on U.S.-China Relations (1999-present); member of the Board of Trustees of the Economic Club of New York (2013 -present); member of the Board of Trustees of the Foreign Policy Association (2005-present) and member of various other boards of trustees and advisory boards; and formerly, Executive Vice President of the Federal Reserve Bank of New York and Head of its Emerging Markets and Internal Affairs Group and Member of Management Committee (1995-2014); and Visiting Fellow at the Council on Foreign Relations (2014). |
Mary C. Choksi (1950) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since 2014 | | 139 | | Avis Budget Group Inc. (car rental) (2007-present), Omnicom Group Inc. (advertising and marketing communications services) (2011-present) and White Mountains Insurance Group, Ltd. (holding company) (2017). |
Principal Occupation During at Least the Past 5 Years: Director of various companies; and formerly, Founder and Senior Advisor, Strategic Investment Group (investment management group) (2015-2017); 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)
One Franklin Parkway
San Mateo, CA 94403-1906 | | Trustee | | Since 1998 | | 139 | | Hess Corporation (exploration and refining of oil and gas) (1993-present), Canadian National Railway (railroad) (2001-present), White Mountains Insurance Group, Ltd. (holding company) (2004-present), Santander Consumer USA Holdings, Inc. (consumer finance) (2016-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 | | 139 | | 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). |
| | | | | | |
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FRANKLIN FUND ALLOCATOR SERIES
Independent Board Members (continued)
| | | | | | | | |
Name,Year of Birth and Address | | Position | | Length of Time Served | | Number of Portfolios in
Fund Complex Overseen
by Board Member* | | Other Directorships Held
During at Least the
Past 5 Years |
Larry D. Thompson (1945) One Franklin Parkway San Mateo, CA 94403-1906 | | Trustee | | Since 2007 | | 139 | | The Southern Company (energy company) (2014-present; previously 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; Counsel, Finch McCranie, LLP (law firm) (2015-present); Independent Compliance Monitor and Auditor, Volkswagen AG (manufacturer of automobiles and commercial vehicles) (2017); 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)
One Franklin Parkway
San Mateo, CA 94403-1906 | | Lead Independent Trustee | | Trustee since 2006 and Lead Independent Trustee since 2008 | | 113 | | None |
Principal Occupation During at Least the Past 5 Years: President and Founder, Hyannis Port Capital, Inc. (real estate and private equity investing) (2002-present); serves on private and non-profit boards; and formerly, President, Staples International and Head of Global Transformation (office supplies) (2012-2016); 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 |
Name,Year of Birth and Address | | Position | | Length of Time Served | | Number of Portfolios in
Fund Complex Overseen
by Board Member* | | Other Directorships Held
During at Least the Past 5 Years |
**Gregory E. Johnson (1961) | | Trustee | | Since 2007 | | 153 | | 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 43 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)
One Franklin Parkway San Mateo, CA 94403-1906 | | Chairman of the Board and Trustee | | Since 2013 | | 139 | | None |
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 41 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 45 of the investment companies in Franklin Templeton Investments.
| | | | |
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FRANKLIN FUND ALLOCATOR SERIES
Interested Board Members and Officers (continued)
| | | | | | | | |
Name,Year of Birth and Address | | Position | | Length of Time Served | | Number of Portfolios in
Fund Complex Overseen
by Board Member* | | Other Directorships Held
During at Least the Past 5 Years |
Gaston Gardey (1967) | | Chief Financial | | Since 2009 | | Not Applicable | | Not Applicable |
One Franklin Parkway | | Officer, | | | | | | |
San Mateo, CA 94403-1906 | | Chief Accounting Officer and Treasurer | | | | | | |
Principal Occupation During at Least the Past 5 Years: Treasurer, U.S. Fund Administration & Reporting, Franklin Templeton Investments; and officer of 28 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 45 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 FASA, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments. |
Matthew T. Hinkle (1971) | | Chief Executive | | Since | | Not Applicable | | Not Applicable |
| One Franklin Parkway | | Officer – | | June 2017 | | | | |
| San Mateo, CA 94403-1906 | | Finance and Administration | | | | | | |
Principal Occupation During at Least the Past 5 Years: Senior Vice President, Franklin Templeton Services, LLC; officer of 45 of the investment companies in Franklin Templeton Investments; and formerly, Vice President, Global Tax (2012-April 2017) and Treasurer/Assistant Treasurer, Franklin Templeton Investments (2009-2017). |
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 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. |
Robert Lim (1948) | | Vice President | | Since 2016 | | Not Applicable | | Not Applicable |
| One Franklin Parkway | | –AML | | | | | | |
| San Mateo, CA 94403-1906 | | Compliance | | | | | | |
Principal Occupation During at Least the Past 5 Years: Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton Investor Services, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments. |
| Kimberly H. Novotny (1972) | | Vice President | | Since 2013 | | Not Applicable | | Not Applicable |
| 300 S.E. 2nd Street | | | | | | | | |
| Fort Lauderdale, FL 33301-1923 | | | | | | | | |
Principal Occupation During at Least the Past 5 Years: Associate General Counsel, Franklin Templeton Investments; Vice President and Corporate Secretary, Fiduciary Trust International of the South; Vice President, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 45 of the investment companies in Franklin Templeton Investments. |
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FRANKLIN FUND ALLOCATOR SERIES
Interested Board Members and Officers (continued)
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Name,Year of Birth and Address | | Position | | Length of Time Served | | Number of Portfolios in
Fund Complex Overseen
by Board Member* | | Other Directorships Held
During at Least the Past
5 Years |
Robert C. Rosselot (1960) | | Chief | | Since 2013 | | Not Applicable | | Not Applicable |
300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 | | Compliance Officer | | | | | | |
Principal Occupation During at Least the Past 5 Years: Director, Global Compliance, Franklin Templeton Investments; Vice President, Franklin Templeton Companies, LLC; officer of 45 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
San Mateo, CA 94403-1906 | | and Secretary | | | | | | |
Principal Occupation During at Least the Past 5 Years: Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments. |
Navid J. Tofigh (1972) | | Vice President | | Since 2015 | | Not Applicable | | Not Applicable |
One Franklin Parkway
San Mateo, CA 94403-1906 | | | | | | | | |
Principal Occupation During at Least the Past 5 Years: Associate General Counsel, Franklin Templeton Investments; and officer of 45 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 45 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 45 of the investment companies in Franklin Templeton Investments. |
*We base the number of portfolios on each separate series of the US registered investment companies within the Franklin Templeton Investments fund complex. These portfolios have a common investment manager or affiliated investment managers.
**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin
Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Rupert H. Johnson, Jr. is considered to be an interested person of the Fund under the federal securities laws due to his position as officer and director and major shareholder of Resources.
Note 1: Rupert H. Johnson, Jr. is the uncle of Gregory E. Johnson.
Note 2: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.
The Sarbanes-Oxley Act of 2002 and Rules adopted by the Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there is at least one such financial expert on the Audit Committee and has designated John B. Wilson as its audit committee financial expert. The Board believes that Mr. Wilson qualifies as such an expert in view of his extensive business background and experience, including service as chief financial officer of Staples, Inc. from 1992 to 1996. Mr. Wilson has been a Member and Chairman of the Fund’s Audit Committee since 2006. As a result of such background and experience, the Board believes that Mr. Wilson has acquired an understanding of generally accepted accounting principles and financial statements, the general application of such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for financial reporting and an understanding of audit committee functions. Mr. Wilson is an independent Board member as that term is defined under the relevant Securities and Exchange Commission Rules and Releases.
The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request. Shareholders may call (800) DIAL BEN/342-5236 to request the SAI.
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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 US 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 US 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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| | |
 | | Annual Report and Shareholder Letter Franklin Fund Allocator Series |
| | Investment Manager Franklin Advisers, Inc. |
| | Distributor Franklin Templeton Distributors, Inc. (800) DIAL BEN® / 342-5236 franklintempleton.com |
| | Shareholder Services (800) 632-2301 |
Authorized for distribution only when accompanied or preceded by a summary prospectus and/or prospectus. Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. A prospectus contains this and other information; please read it carefully before investing.
To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.
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| © 2018 Franklin Templeton Investments. All rights reserved. | | RTF A 02/18 |
(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 $343,016 for the fiscal year ended December 31, 2017 and $340,229 for the fiscal year ended December 31, 2016.
(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
There were no 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.
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 $14,000 for the fiscal year ended December 31, 2017 and $345,590 for the fiscal year ended December 31, 2016. The services for which these fees were paid included review of materials provided to the fund Board in connection with the investment management contract renewal process and derivatives assessments, review of system processes related to fixed income securities, and benchmarking services in connection with the 2015 ICI TA Survey.
(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 $14,000 for the fiscal year ended December 31, 2017 and $345,590 for the fiscal year ended December 31, 2016.
(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.
(a)(1) Code of Ethics
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, 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 Matthew T. Hinkle, 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
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| By | | /s/ MATTHEW T. HINKLE |
| | Matthew T. Hinkle |
| | Chief Executive Officer – Finance and Administration |
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| Date | | February 26, 2018 |
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.
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| By | | /s/ MATTHEW T. HINKLE |
| | Matthew T. Hinkle |
| | Chief Executive Officer – Finance and Administration |
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| Date | | February 26, 2018 |
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| By | | /s/ GASTON GARDEY |
| | Gaston Gardey |
| | Chief Financial Officer and Chief Accounting Officer |
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| Date | | February 26, 2018 |
