UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-07851
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FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
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(Exact name of registrant as specified in charter)
ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Address of principal executive offices) (Zip code)
CRAIG S. TYLE, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and address of agent for service)
Registrant's telephone number, including area code: (650) 312-2000
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Date of fiscal year end: 12/31
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Date of reporting period: 12/31/09
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ITEM 1. REPORTS TO STOCKHOLDERS.
DECEMBER 31, 2009
ANNUAL REPORT AND SHAREHOLDER LETTER
Franklin Templeton Conservative Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton Growth Target Fund
SIGN UP FOR ELECTRONIC DELIVERY
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ASSET ALLOCATION
FRANKLIN TEMPLETON
FUND ALLOCATOR SERIES
(FRANKLIN TEMPLETON INVESTMENTS(R) LOGO)
FRANKLIN - TEMPLETON - MUTUAL SERIES
Franklin Templeton Investments
GAIN FROM OUR PERSPECTIVE(R)
Franklin Templeton's distinct multi-manager
structure combines the specialized expertise of
three world-class investment management
groups--Franklin, Templeton and Mutual Series.
SPECIALIZED EXPERTISE Each of our portfolio management groups operates
autonomously, relying on its own research and
staying true to the unique investment disciplines
that underlie its success.
FRANKLIN. Founded in 1947, Franklin is a recognized
leader in fixed income investing and also brings
expertise in growth- and value-style U.S. equity
investing.
TEMPLETON. Founded in 1940, Templeton pioneered
international investing and, in 1954, launched what
has become the industry's oldest global fund. Today,
with offices in over 25 countries, Templeton offers
investors a truly global perspective.
MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what it
believes are undervalued stocks, as well as
arbitrage situations and distressed securities.
TRUE DIVERSIFICATION Because our management groups work independently and
adhere to different investment approaches, Franklin,
Templeton and Mutual Series funds typically have
distinct portfolios. That's why our funds can be
used to build truly diversified allocation plans
covering every major asset class.
RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with exceptional
risk-adjusted returns over the long term, as well as
the reliable, accurate and personal service that has
helped us become one of the most trusted names in
financial services.
MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
(GRAPHIC)
Not part of the annual report
Contents
SHAREHOLDER LETTER ........................................................ 1
ANNUAL REPORT
Economic and Market Overview .............................................. 3
Franklin Templeton Conservative Target Fund ............................... 5
Franklin Templeton Moderate Target Fund ................................... 15
Franklin Templeton Growth Target Fund ..................................... 25
Financial Highlights and Statements of Investments ........................ 35
Financial Statements ...................................................... 53
Notes to Financial Statements ............................................. 58
Report of Independent Registered Public Accounting Firm ................... 69
Tax Designation ........................................................... 70
Board Members and Officers ................................................ 71
Shareholder Information ................................................... 76
Shareholder Letter
Dear Shareholder:
During the year 2009, U.S. economic activity showed signs of stabilization after
a prolonged recession. Government stimulus measures helped thaw credit markets,
the financial system avoided collapse, and many companies reported
better-than-expected earnings after cutting costs. Investors breathed a
collective sigh of relief, and equity markets enjoyed a remarkable rally while
interest rates remained low and inflation was subdued.
Franklin Templeton Fund Allocator Series' annual report goes into greater detail
about prevailing conditions during the period under review. In addition, you
will find performance data, financial information and discussions from the
portfolio manager. Please remember that all securities markets fluctuate, as do
mutual fund share prices.
If you would like more frequent updates, franklintempleton.com provides daily
prices, monthly performance figures, portfolio holdings and other information.
You can also access your account, buy and sell shares, and find helpful
financial planning tools. We hope you will take advantage of these online
services.
Although market conditions are constantly changing, we remain committed to our
disciplined strategy as we manage the Fund, keeping in mind the trust you have
placed in us. As always, we recommend investors consult their financial advisors
and review their portfolios to design a long-term strategy and portfolio
allocation that meet their individual needs, goals and risk tolerance. We firmly
believe that most people benefit from professional advice, and that advice is
invaluable as investors navigate current market conditions.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Not part of the annual report | 1
We thank you for investing with Franklin Templeton, welcome your questions and
comments, and look forward to serving your investment needs in the years ahead.
Sincerely,
/s/ Charles B. Johnson
- -------------------------------------
Charles B. Johnson
Chairman
Franklin Templeton Fund Allocator
Series
THIS LETTER REFLECTS OUR ANALYSIS AND OPINIONS AS OF DECEMBER 31, 2009. 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.
2 | Not part of the annual report
Annual Report
Economic and Market Overview
The U.S. economy ended 2009 in much better shape than it began. After several
quarters of contraction, economic activity expanded in the third and fourth
quarters. In the year's second half, corporate profit growth was higher than
earlier estimates, which may allow businesses to build inventory following a
long period of inventory drawdowns. Economic challenges remain, such as stalled
consumer confidence and job prospects for the unemployed, as stimulus measures
wind down, but several reports pointed to improving economic conditions.
Throughout the year, the Federal Open Market Committee kept U.S. monetary policy
unchanged, announcing it intends to hold the federal funds target rate in the 0%
to 0.25% range "for an extended period" as it lays the groundwork for an
eventual tightening of monetary policy. Late in the period, the labor market
improved somewhat as the economy lost fewer jobs than expected and the
unemployment rate fell slightly, dropping from a period high of 10.2% in October
to 10.0% at period-end.(1)
Globally, equity markets entered 2009 largely pricing in a possible economic
depression and systemic solvency crisis, scenarios that were ultimately averted
by one of the most aggressive global policy responses in financial history. As
government monetary and fiscal intervention began to gain traction toward the
end of the first quarter, equities bottomed and largely reversed their decline,
economic growth stabilized and rebounded, and confidence was rekindled as
investors began to believe the global financial system was finally on the mend.
Emerging market economies fueled the global recovery as governments aggressively
incentivized lending and consumption, resulting in a dramatic recovery that laid
the groundwork for the developing world's equity rally. Growing demand from
emerging markets supported commodity prices, which also posted record gains
during the year. For most of the year, the fading U.S. dollar also helped
underpin the rally in hard assets, while continued euro and yen strength created
headwinds for regional recoveries.
For the 12 months under review, the blue chip stocks of the Dow Jones Industrial
Average delivered a total return of +22.68%, while the broader Standard & Poor's
500 Index (S&P 500) posted a +26.46% total return and
(1.) Source: Bureau of Labor Statistics.
Annual Report | 3
the technology-heavy NASDAQ Composite Index returned +45.32%.(2) Global
developed and emerging markets, as measured by the Morgan Stanley Capital
International (MSCI) All Country World Index, delivered a +35.41% total
return.(3)
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS AND OPINIONS AS OF DECEMBER 31,
2009. 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.
(2.) Source: (C) 2009 Morningstar. All Rights Reserved. The information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted
to be accurate, complete or timely. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from any use of
this information. Past performance is no guarantee of future results. The
Dow Jones Industrial Average is price weighted based on the average market
price of 30 blue chip stocks of companies that are generally industry
leaders. The S&P 500 consists of 500 stocks chosen for market size,
liquidity and industry group representation. Each stock's weight in the
index is proportionate to its market value. The S&P 500 is one of the most
widely used benchmarks of U.S. equity performance. The NASDAQ Composite
Index measures all NASDAQ domestic and international common type stocks
listed on The NASDAQ Stock Market.
(3.) Source: (C) 2009 Morningstar. The MSCI All Country World Index is a free
float-adjusted, market capitalization-weighted index designed to measure
equity market performance in global developed and emerging markets.
4 | Annual Report
Franklin Templeton
Conservative Target Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin Templeton Conservative Target
Fund
seeks the highest level of long-term total return consistent with a lower level
of risk.(1)
ASSET ALLOCATION*
Franklin Templeton Conservative Target Fund
Based on Total Net Assets as of 12/31/09
(PIE CHART)
Domestic Equity............................ 30.0%
Domestic Fixed Income...................... 22.9%
Foreign Fixed Income....................... 14.3%
Foreign Equity............................. 13.1%
Short-Term Investments & Other Net Assets.. 19.7%
* The asset allocation is based on the Statement of Investments (SOI), which
classifies each underlying fund into a broad asset class.
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT franklintempleton.com OR CALL (800) 342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
This annual report for Franklin Templeton Conservative Target Fund covers the
fiscal year ended December 31, 2009.
PERFORMANCE OVERVIEW
Franklin Templeton Conservative Target Fund - Class A delivered a +19.67%
cumulative total return for the 12 months under review. By comparison the Fund's
benchmarks, the Standard & Poor's 500 Index (S&P 500) and Morgan Stanley Capital
International (MSCI) Europe, Australasia, Far East (EAFE) Index for equities,
the Barclays Capital (BC) U.S. Aggregate Index for fixed income, and the Payden
& Rygel (P&R) 90 Day U.S. T-Bill Index for short-term investments and other net
assets, posted total returns of +26.46%,
(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.
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 40.
Annual Report | 5
TOP 10 FUND HOLDINGS
Franklin Templeton Conservative Target Fund
12/31/09
% OF TOTAL
NET ASSETS
----------
Franklin U.S. Government Securities Fund - Advisor Class 12.8%
Templeton Global Bond Fund - Advisor Class 12.7%
Franklin Flex Cap Growth Fund - Advisor Class 10.9%
Franklin Total Return Fund - Advisor Class 10.1%
Mutual Shares Fund - Class Z 7.3%
Mutual European Fund - Class Z 4.5%
Franklin Growth Opportunities Fund - Advisor Class 4.5%
Templeton Foreign Fund - Advisor Class 4.3%
Templeton China World Fund - Advisor Class 2.2%
Franklin Gold and Precious Metals Fund - Advisor Class 2.1%
+32.46%, +5.93% and +0.17%, respectively, during the same time.(2) You can find
the Fund's long-term performance data in the Performance Summary beginning on
page 8.
INVESTMENT STRATEGY
Whenever possible, we attempt to hold the same underlying Franklin Templeton
funds in each Target Fund's portfolio and will vary the underlying funds'
allocation percentages based upon each Target Fund's risk/return level.
Maintaining similarity of the underlying Franklin Templeton fund investments
across the Conservative, Moderate and Growth Target 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 underlying funds' 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.
MANAGER'S DISCUSSION
The Fund's performance can be attributed to its allocation among equities, fixed
income securities, and short-term investments and other net assets, and to the
actual performance of the selected underlying funds.
At period-end, Franklin Templeton Conservative Target Fund's domestic equity
exposure was 69.6% of its total equity weighting, with the balance represented
by foreign equity. The portfolio was diversified across capitalization sizes and
(2.) Source: (C) 2009 Morningstar. All Rights Reserved. The information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted
to be accurate, complete or timely. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from any use of
this information. The S&P 500 consists of 500 stocks chosen for market
size, liquidity and industry group representation. Each stock's weight in
the index is proportionate to its market value. The S&P 500 is one of the
most widely used benchmarks of U.S. equity performance. The MSCI EAFE Index
is a free float-adjusted, market capitalization-weighted index designed to
measure equity market performance in global developed markets excluding the
U.S. and Canada. The BC U.S. Aggregate Index is a market
capitalization-weighted index representing the U.S. investment-grade,
fixed-rate, taxable bond market with index components for government and
corporate, mortgage pass-through and asset-backed securities. All issues
included are SEC registered, taxable, dollar denominated and
nonconvertible, must have at least one year to final maturity and must be
rated investment grade (Baa3/BBB-/BBB- or higher) by Moody's, Standard &
Poor's or Fitch, respectively. The P&R 90 Day U.S. T-Bill Index is a total
return index based on a constant maturity instrument. Payden & Rygel
includes both accrued interest and change in market price in its monthly
total return calculations. The value of Treasuries, if held to maturity, is
fixed; principal is guaranteed and interest is fixed. The indexes are
unmanaged and include reinvested distributions. One cannot invest directly
in an index, and an index is not representative of the Fund's portfolio.
6 | Annual Report
investment styles, and on December 31, 2009, we held shares in large-, mid- and
small-capitalization equity funds, representing both growth and value styles.
Franklin Flex Cap Growth Fund - Advisor Class, representing 10.9% of the Fund's
total net assets, was our largest equity fund weighting at period-end. On the
fixed income side, domestic exposure was 61.6% of the Fund's total income
weighting, with the balance represented by foreign fixed income. Franklin U.S.
Government Securities Fund - Advisor Class was our largest fixed income fund
weighting at 12.8% of total net assets.
Our largest domestic growth fund holding, Franklin Flex Cap Growth Fund -
Advisor Class, and our largest domestic value fund holding, Mutual Shares Fund -
Class Z, outperformed the S&P 500 during the 12-month reporting period. Our
largest foreign equity fund holding, Mutual European Fund - Class Z,
under-performed the MSCI EAFE Index; however, Templeton Foreign Fund - Advisor
Class outperformed. On the fixed income side, Franklin U.S. Government
Securities Fund - Advisor class underperformed the BC U.S. Aggregate Index,
while Templeton Global Bond Fund - Advisor Class outperformed.
Thank you for your continued participation in Franklin Templeton Conservative
Target Fund. We look forward to serving your future investment needs.
(PHOTO OF T. ANTHONY COFFEY)
/s/ T. Anthony Coffey
T. Anthony Coffey, CFA
Portfolio Manager
Franklin Templeton Conservative Target Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF DECEMBER 31, 2009, 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.
Annual Report | 7
Performance Summary as of 12/31/09
FRANKLIN TEMPLETON CONSERVATIVE TARGET FUND
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table 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.
PRICE AND DISTRIBUTION INFORMATION
CLASS A (SYMBOL: FTCIX) CHANGE 12/31/09 12/31/08
- ----------------------- ------ -------- --------
Net Asset Value (NAV) +$1.80 $12.72 $10.92
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.2405
Long-Term Capital Gain $0.0800
TOTAL $0.3205
CLASS B (SYMBOL: N/A) CHANGE 12/31/09 12/31/08
- --------------------- ------ -------- --------
Net Asset Value (NAV) +$1.80 $12.68 $10.88
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.1526
Long-Term Capital Gain $0.0800
TOTAL $0.2326
CLASS C (SYMBOL: FTCCX) CHANGE 12/31/09 12/31/08
- ----------------------- ------ -------- --------
Net Asset Value (NAV) +$1.77 $12.54 $10.77
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.1595
Long-Term Capital Gain $0.0800
TOTAL $0.2395
CLASS R (SYMBOL: FTCRX) CHANGE 12/31/09 12/31/08
- ----------------------- ------ -------- --------
Net Asset Value (NAV) +$1.80 $12.69 $10.89
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.2140
Long-Term Capital Gain $0.0800
TOTAL $0.2940
ADVISOR CLASS (SYMBOL: FTCZX) CHANGE 12/31/09 12/31/08
- ----------------------------- ------ -------- --------
Net Asset Value (NAV) +$1.80 $12.71 $10.91
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.2686
Long-Term Capital Gain $0.0800
TOTAL $0.3486
8 | Annual Report
Performance Summary (CONTINUED)
PERFORMANCE(1)
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURN AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES. CLASS A: 5.75%
MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES CHARGE (CDSC)
DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER; CLASS C: 1%
CDSC IN FIRST YEAR ONLY; CLASS R/ADVISOR CLASS: NO SALES CHARGES.
CLASS A 1-YEAR 5-YEAR 10-YEAR
- ------- ------- ------- ----------
Cumulative Total Return(2) +19.67% +26.15% +57.03%
Average Annual Total Return(3) +12.75% +3.52% +3.99%
Value of $10,000 Investment(4) $11,275 $11,891 $14,795
Total Annual Operating Expenses(5)
Without Waiver 1.37%
With Waiver 1.17%
INCEPTION
CLASS B 1-YEAR 5-YEAR (12/1/03)
- ------- ------- ------- ----------
Cumulative Total Return(2) +18.85% +21.43% +32.46%
Average Annual Total Return(3) +14.85% +3.62% +4.73%
Value of $10,000 Investment(4) $11,485 $11,943 $13,246
Total Annual Operating Expenses(5)
Without Waiver 2.12%
With Waiver 1.92%
CLASS C 1-YEAR 5-YEAR 10-YEAR
- ------- ------- ------- ----------
Cumulative Total Return(2) +18.84% +21.53% +45.77%
Average Annual Total Return(3) +17.84% +3.98% +3.84%
Value of $10,000 Investment(4) $11,784 $12,153 $14,577
Total Annual Operating Expenses(5)
Without Waiver 2.12%
With Waiver 1.92%
INCEPTION
CLASS R 1-YEAR 5-YEAR (1/1/02)
- ------- ------- ------- ----------
Cumulative Total Return(2) +19.45% +24.62% +50.76%
Average Annual Total Return(3) +19.45% +4.50% +5.27%
Value of $10,000 Investment(4) $11,945 $12,462 $15,076
Total Annual Operating Expenses(5)
Without Waiver 1.62%
With Waiver 1.42%
ADVISOR CLASS(6) 1-YEAR 5-YEAR 10-YEAR
- ---------------- ------- ------- ----------
Cumulative Total Return(2) +19.97% +27.39% +58.59%
Average Annual Total Return(3) +19.97% +4.96% +4.72%
Value of $10,000 Investment(4) $11,997 $12,739 $15,859
Total Annual Operating Expenses(5)
Without Waiver 1.12%
With Waiver 0.92%
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.
THE INVESTMENT MANAGER HAS CONTRACTUALLY AGREED TO WAIVE OR LIMIT ITS FEES AND
TO ASSUME AS ITS OWN EXPENSE CERTAIN EXPENSES OTHERWISE PAYABLE BY THE FUND SO
THAT COMMON EXPENSES (I.E., A COMBINATION OF ASSET ALLOCATION FEES AND OTHER
EXPENSES, BUT EXCLUDING RULE 12B-1 FEES AND ACQUIRED FUND FEES AND EXPENSES) FOR
EACH CLASS OF THE FUND DO NOT EXCEED 0.25% (OTHER THAN CERTAIN NONROUTINE
EXPENSES OR COSTS, INCLUDING THOSE RELATING TO LITIGATION, INDEMNIFICATION,
REORGANIZATIONS AND LIQUIDATIONS) UNTIL 4/30/10.
Annual Report | 9
Performance Summary (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR A HYPOTHETICAL $10,000 INVESTMENT(1)
Total return represents the change in value of an investment over the periods
shown. It includes any current, 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.
AVERAGE ANNUAL TOTAL RETURN
CLASS A 12/31/09
- ------- --------
1-Year +12.75%
5-Year +3.52%
10-Year +3.99%
CLASS A (1/1/00-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON MSCI BARCLAYS CAPITAL P&R 90-DAY
CONSERVATIVE TARGET S&P 500 EAFE U.S. AGGREGATE U.S. TREASURY
DATE FUND - CLASS A INDEX INDEX INDEX BILL INDEX
- ---------- ------------------- ------- ------- ---------------- -------------
1/1/2000 $ 9,421 $10,000 $10,000 $10,000 $10,000
1/31/2000 $ 9,320 $ 9,498 $ 9,366 $ 9,967 $10,039
2/28/2000 $10,094 $ 9,318 $ 9,620 $10,088 $10,084
3/31/2000 $ 9,953 $10,229 $ 9,995 $10,221 $10,135
4/30/2000 $ 9,583 $ 9,922 $ 9,471 $10,191 $10,186
5/31/2000 $ 9,379 $ 9,718 $ 9,241 $10,187 $10,241
6/30/2000 $ 9,649 $ 9,958 $ 9,605 $10,399 $10,285
7/31/2000 $ 9,625 $ 9,802 $ 9,204 $10,493 $10,333
8/31/2000 $ 9,998 $10,411 $ 9,286 $10,645 $10,386
9/30/2000 $ 9,895 $ 9,861 $ 8,836 $10,712 $10,443
10/31/2000 $ 9,758 $ 9,819 $ 8,629 $10,783 $10,496
11/30/2000 $ 9,405 $ 9,045 $ 8,307 $10,959 $10,554
12/31/2000 $ 9,709 $ 9,090 $ 8,604 $11,163 $10,615
1/31/2001 $ 9,971 $ 9,412 $ 8,600 $11,345 $10,684
2/28/2001 $ 9,658 $ 8,554 $ 7,956 $11,444 $10,727
3/31/2001 $ 9,409 $ 8,012 $ 7,429 $11,501 $10,781
4/30/2001 $ 9,707 $ 8,635 $ 7,950 $11,454 $10,825
5/31/2001 $ 9,767 $ 8,692 $ 7,676 $11,523 $10,867
6/30/2001 $ 9,724 $ 8,481 $ 7,365 $11,566 $10,899
7/31/2001 $ 9,681 $ 8,397 $ 7,232 $11,825 $10,935
8/31/2001 $ 9,561 $ 7,872 $ 7,050 $11,960 $10,971
9/30/2001 $ 9,039 $ 7,236 $ 6,337 $12,100 $11,019
10/31/2001 $ 9,290 $ 7,374 $ 6,499 $12,353 $11,048
11/30/2001 $ 9,515 $ 7,940 $ 6,739 $12,183 $11,071
12/31/2001 $ 9,620 $ 8,009 $ 6,780 $12,105 $11,089
1/31/2002 $ 9,611 $ 7,892 $ 6,420 $12,203 $11,104
2/28/2002 $ 9,602 $ 7,740 $ 6,465 $12,322 $11,119
3/31/2002 $ 9,800 $ 8,031 $ 6,818 $12,117 $11,136
4/30/2002 $ 9,827 $ 7,544 $ 6,868 $12,352 $11,153
5/31/2002 $ 9,791 $ 7,489 $ 6,961 $12,457 $11,170
6/30/2002 $ 9,508 $ 6,955 $ 6,686 $12,564 $11,187
7/31/2002 $ 9,125 $ 6,413 $ 6,027 $12,716 $11,202
8/31/2002 $ 9,187 $ 6,455 $ 6,014 $12,931 $11,219
9/30/2002 $ 8,904 $ 5,754 $ 5,370 $13,140 $11,237
10/31/2002 $ 9,074 $ 6,260 $ 5,659 $13,080 $11,254
11/30/2002 $ 9,316 $ 6,629 $ 5,917 $13,077 $11,271
12/31/2002 $ 9,255 $ 6,239 $ 5,718 $13,347 $11,283
1/31/2003 $ 9,219 $ 6,076 $ 5,480 $13,358 $11,296
2/28/2003 $ 9,192 $ 5,985 $ 5,355 $13,543 $11,305
3/31/2003 $ 9,180 $ 6,043 $ 5,253 $13,533 $11,318
4/30/2003 $ 9,516 $ 6,540 $ 5,774 $13,645 $11,329
5/31/2003 $ 9,879 $ 6,885 $ 6,130 $13,899 $11,341
6/30/2003 $ 9,936 $ 6,973 $ 6,281 $13,871 $11,355
7/31/2003 $ 9,945 $ 7,096 $ 6,434 $13,405 $11,363
8/31/2003 $10,164 $ 7,234 $ 6,591 $13,494 $11,371
9/30/2003 $10,233 $ 7,157 $ 6,795 $13,851 $11,381
10/31/2003 $10,480 $ 7,562 $ 7,219 $13,722 $11,390
11/30/2003 $10,645 $ 7,629 $ 7,381 $13,755 $11,399
12/31/2003 $10,861 $ 8,029 $ 7,958 $13,895 $11,408
1/31/2004 $10,944 $ 8,176 $ 8,071 $14,007 $11,418
2/29/2004 $11,046 $ 8,290 $ 8,258 $14,158 $11,425
3/31/2004 $11,061 $ 8,165 $ 8,308 $14,264 $11,435
4/30/2004 $10,784 $ 8,037 $ 8,127 $13,893 $11,443
5/31/2004 $10,848 $ 8,147 $ 8,162 $13,838 $11,451
6/30/2004 $10,978 $ 8,305 $ 8,345 $13,916 $11,456
7/31/2004 $10,829 $ 8,030 $ 8,075 $14,054 $11,467
8/31/2004 $10,913 $ 8,063 $ 8,112 $14,322 $11,478
9/30/2004 $11,091 $ 8,150 $ 8,326 $14,361 $11,491
10/31/2004 $11,250 $ 8,275 $ 8,610 $14,481 $11,504
11/30/2004 $11,539 $ 8,610 $ 9,201 $14,366 $11,516
12/31/2004 $11,728 $ 8,902 $ 9,605 $14,498 $11,538
1/31/2005 $11,578 $ 8,685 $ 9,429 $14,589 $11,554
2/28/2005 $11,756 $ 8,868 $ 9,839 $14,503 $11,572
3/31/2005 $11,597 $ 8,711 $ 9,595 $14,428 $11,599
4/30/2005 $11,474 $ 8,546 $ 9,381 $14,624 $11,623
5/31/2005 $11,644 $ 8,818 $ 9,395 $14,782 $11,650
6/30/2005 $11,749 $ 8,830 $ 9,523 $14,862 $11,676
7/31/2005 $11,929 $ 9,159 $ 9,816 $14,727 $11,702
8/31/2005 $11,976 $ 9,075 $10,067 $14,916 $11,734
9/30/2005 $12,064 $ 9,149 $10,517 $14,762 $11,767
10/31/2005 $11,883 $ 8,996 $10,211 $14,645 $11,795
11/30/2005 $12,131 $ 9,337 $10,463 $14,710 $11,834
12/31/2005 $12,280 $ 9,340 $10,951 $14,850 $11,871
1/31/2006 $12,655 $ 9,587 $11,624 $14,851 $11,905
2/28/2006 $12,655 $ 9,613 $11,600 $14,900 $11,943
3/31/2006 $12,790 $ 9,733 $11,988 $14,754 $11,990
4/30/2006 $12,925 $ 9,863 $12,570 $14,727 $12,033
5/31/2006 $12,664 $ 9,580 $12,097 $14,711 $12,080
6/30/2006 $12,672 $ 9,593 $12,101 $14,743 $12,125
7/31/2006 $12,672 $ 9,652 $12,222 $14,942 $12,175
8/31/2006 $12,849 $ 9,881 $12,562 $15,171 $12,228
9/30/2006 $12,898 $10,136 $12,583 $15,304 $12,282
10/31/2006 $13,174 $10,466 $13,074 $15,405 $12,330
11/30/2006 $13,441 $10,665 $13,468 $15,584 $12,382
12/31/2006 $13,497 $10,815 $13,892 $15,493 $12,436
1/31/2007 $13,619 $10,978 $13,987 $15,487 $12,486
2/28/2007 $13,649 $10,764 $14,102 $15,726 $12,535
3/31/2007 $13,784 $10,884 $14,468 $15,726 $12,592
4/30/2007 $14,049 $11,366 $15,124 $15,811 $12,646
5/31/2007 $14,252 $11,763 $15,409 $15,691 $12,703
6/30/2007 $14,213 $11,567 $15,433 $15,645 $12,751
7/31/2007 $14,109 $11,209 $15,207 $15,776 $12,799
8/31/2007 $14,150 $11,377 $14,973 $15,969 $12,872
9/30/2007 $14,609 $11,802 $15,777 $16,090 $12,919
10/31/2007 $14,934 $11,990 $16,399 $16,235 $12,958
11/30/2007 $14,630 $11,489 $15,864 $16,527 $13,017
12/31/2007 $14,616 $11,409 $15,508 $16,573 $13,047
1/31/2008 $14,250 $10,725 $14,077 $16,851 $13,114
2/29/2008 $14,272 $10,376 $14,283 $16,875 $13,136
3/31/2008 $14,155 $10,332 $14,139 $16,932 $13,167
4/30/2008 $14,457 $10,835 $14,925 $16,897 $13,181
5/31/2008 $14,608 $10,975 $15,099 $16,773 $13,187
6/30/2008 $14,082 $10,050 $13,867 $16,759 $13,207
7/31/2008 $13,983 $ 9,965 $13,423 $16,746 $13,233
8/31/2008 $14,005 $10,109 $12,883 $16,905 $13,251
9/30/2008 $13,356 $ 9,209 $11,024 $16,678 $13,287
10/31/2008 $12,243 $ 7,662 $ 8,800 $16,284 $13,308
11/30/2008 $12,020 $ 7,112 $ 8,329 $16,814 $13,322
12/31/2008 $12,363 $ 7,188 $ 8,830 $17,441 $13,320
1/31/2009 $12,114 $ 6,582 $ 7,965 $17,288 $13,319
2/28/2009 $11,661 $ 5,881 $ 7,151 $17,222 $13,321
3/31/2009 $12,139 $ 6,396 $ 7,607 $17,462 $13,325
4/30/2009 $12,764 $ 7,009 $ 8,593 $17,545 $13,329
5/31/2009 $13,197 $ 7,401 $ 9,626 $17,672 $13,330
6/30/2009 $13,204 $ 7,415 $ 9,574 $17,773 $13,331
7/31/2009 $13,767 $ 7,976 $10,449 $18,060 $13,333
8/31/2009 $13,939 $ 8,264 $11,019 $18,247 $13,336
9/30/2009 $14,389 $ 8,573 $11,443 $18,438 $13,338
10/31/2009 $14,285 $ 8,413 $11,300 $18,529 $13,341
11/30/2009 $14,597 $ 8,918 $11,529 $18,769 $13,342
12/31/2009 $14,795 $ 9,090 $11,697 $18,476 $13,342
AVERAGE ANNUAL TOTAL RETURN
CLASS B 12/31/09
- ------- --------
1-Year +14.85%
5-Year +3.62%
Since Inception (12/1/03) +4.73%
CLASS B (12/1/03-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON MSCI BARCLAYS CAPITAL P&R 90-DAY
CONSERVATIVE TARGET S&P 500 EAFE U.S. AGGREGATE U.S. TREASURY
DATE FUND - CLASS B INDEX INDEX INDEX BILL INDEX
- ---------- ------------------- ------- ------- ---------------- -------------
12/1/2003 $10,000 $10,000 $10,000 $10,000 $10,000
12/31/2003 $10,170 $10,524 $10,782 $10,102 $10,008
1/31/2004 $10,239 $10,718 $10,935 $10,183 $10,016
2/29/2004 $10,326 $10,867 $11,189 $10,293 $10,023
3/31/2004 $10,337 $10,703 $11,257 $10,370 $10,031
4/30/2004 $10,068 $10,535 $11,012 $10,101 $10,038
5/31/2004 $10,129 $10,679 $11,059 $10,060 $10,045
6/30/2004 $10,237 $10,887 $11,306 $10,117 $10,050
7/31/2004 $10,098 $10,527 $10,941 $10,217 $10,059
8/31/2004 $10,168 $10,569 $10,991 $10,412 $10,069
9/30/2004 $10,329 $10,684 $11,280 $10,440 $10,080
10/31/2004 $10,468 $10,847 $11,666 $10,528 $10,092
11/30/2004 $10,738 $11,286 $12,466 $10,444 $10,102
12/31/2004 $10,908 $11,670 $13,013 $10,540 $10,122
1/31/2005 $10,751 $11,385 $12,775 $10,606 $10,136
2/28/2005 $10,917 $11,625 $13,330 $10,544 $10,151
3/31/2005 $10,757 $11,419 $13,001 $10,490 $10,175
4/30/2005 $10,643 $11,202 $12,710 $10,632 $10,196
5/31/2005 $10,792 $11,559 $12,729 $10,747 $10,220
6/30/2005 $10,878 $11,575 $12,903 $10,805 $10,243
7/31/2005 $11,045 $12,006 $13,299 $10,707 $10,265
8/31/2005 $11,080 $11,896 $13,639 $10,844 $10,293
9/30/2005 $11,150 $11,993 $14,250 $10,732 $10,323
10/31/2005 $10,982 $11,793 $13,834 $10,647 $10,347
11/30/2005 $11,194 $12,239 $14,177 $10,695 $10,381
12/31/2005 $11,330 $12,243 $14,837 $10,796 $10,414
1/31/2006 $11,669 $12,567 $15,749 $10,797 $10,443
2/28/2006 $11,669 $12,601 $15,717 $10,833 $10,477
3/31/2006 $11,779 $12,758 $16,243 $10,726 $10,518
4/30/2006 $11,886 $12,929 $17,030 $10,707 $10,555
5/31/2006 $11,645 $12,557 $16,389 $10,695 $10,597
6/30/2006 $11,650 $12,574 $16,395 $10,718 $10,637
7/31/2006 $11,632 $12,652 $16,560 $10,863 $10,680
8/31/2006 $11,795 $12,953 $17,019 $11,029 $10,727
9/30/2006 $11,835 $13,287 $17,049 $11,126 $10,774
10/31/2006 $12,071 $13,720 $17,714 $11,200 $10,816
11/30/2006 $12,316 $13,981 $18,248 $11,330 $10,862
12/31/2006 $12,355 $14,177 $18,822 $11,264 $10,909
1/31/2007 $12,457 $14,391 $18,951 $11,259 $10,953
2/28/2007 $12,485 $14,110 $19,106 $11,433 $10,996
3/31/2007 $12,593 $14,267 $19,603 $11,433 $11,046
4/30/2007 $12,836 $14,899 $20,491 $11,495 $11,094
5/31/2007 $13,013 $15,419 $20,878 $11,408 $11,143
6/30/2007 $12,962 $15,163 $20,910 $11,374 $11,185
7/31/2007 $12,857 $14,693 $20,604 $11,469 $11,228
8/31/2007 $12,886 $14,913 $20,287 $11,610 $11,292
9/30/2007 $13,299 $15,471 $21,376 $11,698 $11,333
10/31/2007 $13,587 $15,717 $22,219 $11,803 $11,367
11/30/2007 $13,299 $15,060 $21,494 $12,015 $11,419
12/31/2007 $13,272 $14,955 $21,011 $12,049 $11,445
1/31/2008 $12,948 $14,058 $19,072 $12,251 $11,504
2/29/2008 $12,948 $13,602 $19,352 $12,268 $11,524
3/31/2008 $12,836 $13,543 $19,157 $12,310 $11,550
4/30/2008 $13,111 $14,203 $20,222 $12,284 $11,562
5/31/2008 $13,229 $14,387 $20,457 $12,194 $11,568
6/30/2008 $12,748 $13,174 $18,788 $12,184 $11,586
7/31/2008 $12,647 $13,063 $18,187 $12,174 $11,609
8/31/2008 $12,667 $13,252 $17,454 $12,290 $11,624
9/30/2008 $12,066 $12,071 $14,937 $12,125 $11,656
10/31/2008 $11,058 $10,044 $11,923 $11,839 $11,674
11/30/2008 $10,846 $ 9,323 $11,285 $12,224 $11,687
12/31/2008 $11,145 $ 9,422 $11,964 $12,680 $11,685
1/31/2009 $10,919 $ 8,628 $10,792 $12,568 $11,684
2/28/2009 $10,510 $ 7,709 $ 9,688 $12,521 $11,685
3/31/2009 $10,931 $ 8,385 $10,307 $12,695 $11,689
4/30/2009 $11,486 $ 9,187 $11,643 $12,756 $11,692
5/31/2009 $11,866 $ 9,701 $13,042 $12,848 $11,694
6/30/2009 $11,871 $ 9,720 $12,971 $12,921 $11,694
7/31/2009 $12,368 $10,456 $14,157 $13,130 $11,696
8/31/2009 $12,513 $10,833 $14,929 $13,266 $11,699
9/30/2009 $12,908 $11,237 $15,504 $13,405 $11,700
10/31/2009 $12,814 $11,029 $15,311 $13,471 $11,703
11/30/2009 $13,074 $11,690 $15,621 $13,645 $11,704
12/31/2009 $13,246 $11,916 $15,848 $13,432 $11,704
10 | Annual Report
Performance Summary (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN
CLASS C 12/31/09
- ------- --------
1-Year +17.84%
5-Year +3.98%
10-Year +3.84%
CLASS C (1/1/00-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON MSCI BARCLAYS CAPITAL P&R 90-DAY
CONSERVATIVE TARGET S&P 500 EAFE U.S. AGGREGATE U.S. TREASURY
DATE FUND - CLASS C INDEX INDEX INDEX BILL INDEX
- ---------- ------------------- ------- ------- ---------------- -------------
1/1/2000 $10,000 $10,000 $10,000 $10,000 $10,000
1/31/2000 $ 9,883 $ 9,498 $ 9,366 $ 9,967 $10,039
2/28/2000 $10,702 $ 9,318 $ 9,620 $10,088 $10,084
3/31/2000 $10,541 $10,229 $ 9,995 $10,221 $10,135
4/30/2000 $10,147 $ 9,922 $ 9,471 $10,191 $10,186
5/31/2000 $ 9,928 $ 9,718 $ 9,241 $10,187 $10,241
6/30/2000 $10,198 $ 9,958 $ 9,605 $10,399 $10,285
7/31/2000 $10,172 $ 9,802 $ 9,204 $10,493 $10,333
8/31/2000 $10,553 $10,411 $ 9,286 $10,645 $10,386
9/30/2000 $10,441 $ 9,861 $ 8,836 $10,712 $10,443
10/31/2000 $10,296 $ 9,819 $ 8,629 $10,783 $10,496
11/30/2000 $ 9,912 $ 9,045 $ 8,307 $10,959 $10,554
12/31/2000 $10,226 $ 9,090 $ 8,604 $11,163 $10,615
1/31/2001 $10,496 $ 9,412 $ 8,600 $11,345 $10,684
2/28/2001 $10,164 $ 8,554 $ 7,956 $11,444 $10,727
3/31/2001 $ 9,895 $ 8,012 $ 7,429 $11,501 $10,781
4/30/2001 $10,202 $ 8,635 $ 7,950 $11,454 $10,825
5/31/2001 $10,256 $ 8,692 $ 7,676 $11,523 $10,867
6/30/2001 $10,201 $ 8,481 $ 7,365 $11,566 $10,899
7/31/2001 $10,156 $ 8,397 $ 7,232 $11,825 $10,935
8/31/2001 $10,020 $ 7,872 $ 7,050 $11,960 $10,971
9/30/2001 $ 9,468 $ 7,236 $ 6,337 $12,100 $11,019
10/31/2001 $ 9,724 $ 7,374 $ 6,499 $12,353 $11,048
11/30/2001 $ 9,953 $ 7,940 $ 6,739 $12,183 $11,071
12/31/2001 $10,065 $ 8,009 $ 6,780 $12,105 $11,089
1/31/2002 $10,037 $ 7,892 $ 6,420 $12,203 $11,104
2/28/2002 $10,019 $ 7,740 $ 6,465 $12,322 $11,119
3/31/2002 $10,225 $ 8,031 $ 6,818 $12,117 $11,136
4/30/2002 $10,244 $ 7,544 $ 6,868 $12,352 $11,153
5/31/2002 $10,197 $ 7,489 $ 6,961 $12,457 $11,170
6/30/2002 $ 9,901 $ 6,955 $ 6,686 $12,564 $11,187
7/31/2002 $ 9,498 $ 6,413 $ 6,027 $12,716 $11,202
8/31/2002 $ 9,563 $ 6,455 $ 6,014 $12,931 $11,219
9/30/2002 $ 9,260 $ 5,754 $ 5,370 $13,140 $11,237
10/31/2002 $ 9,429 $ 6,260 $ 5,659 $13,080 $11,254
11/30/2002 $ 9,674 $ 6,629 $ 5,917 $13,077 $11,271
12/31/2002 $ 9,608 $ 6,239 $ 5,718 $13,347 $11,283
1/31/2003 $ 9,560 $ 6,076 $ 5,480 $13,358 $11,296
2/28/2003 $ 9,532 $ 5,985 $ 5,355 $13,543 $11,305
3/31/2003 $ 9,513 $ 6,043 $ 5,253 $13,533 $11,318
4/30/2003 $ 9,845 $ 6,540 $ 5,774 $13,645 $11,329
5/31/2003 $10,225 $ 6,885 $ 6,130 $13,899 $11,341
6/30/2003 $10,277 $ 6,973 $ 6,281 $13,871 $11,355
7/31/2003 $10,277 $ 7,096 $ 6,434 $13,405 $11,363
8/31/2003 $10,496 $ 7,234 $ 6,591 $13,494 $11,371
9/30/2003 $10,560 $ 7,157 $ 6,795 $13,851 $11,381
10/31/2003 $10,808 $ 7,562 $ 7,219 $13,722 $11,390
11/30/2003 $10,970 $ 7,629 $ 7,381 $13,755 $11,399
12/31/2003 $11,189 $ 8,029 $ 7,958 $13,895 $11,408
1/31/2004 $11,265 $ 8,176 $ 8,071 $14,007 $11,418
2/29/2004 $11,362 $ 8,290 $ 8,258 $14,158 $11,425
3/31/2004 $11,375 $ 8,165 $ 8,308 $14,264 $11,435
4/30/2004 $11,077 $ 8,037 $ 8,127 $13,893 $11,443
5/31/2004 $11,144 $ 8,147 $ 8,162 $13,838 $11,451
6/30/2004 $11,257 $ 8,305 $ 8,345 $13,916 $11,456
7/31/2004 $11,103 $ 8,030 $ 8,075 $14,054 $11,467
8/31/2004 $11,180 $ 8,063 $ 8,112 $14,322 $11,478
9/30/2004 $11,364 $ 8,150 $ 8,326 $14,361 $11,491
10/31/2004 $11,518 $ 8,275 $ 8,610 $14,481 $11,504
11/30/2004 $11,808 $ 8,610 $ 9,201 $14,366 $11,516
12/31/2004 $11,994 $ 8,902 $ 9,605 $14,498 $11,538
1/31/2005 $11,819 $ 8,685 $ 9,429 $14,589 $11,554
2/28/2005 $12,004 $ 8,868 $ 9,839 $14,503 $11,572
3/31/2005 $11,835 $ 8,711 $ 9,595 $14,428 $11,599
4/30/2005 $11,708 $ 8,546 $ 9,381 $14,624 $11,623
5/31/2005 $11,864 $ 8,818 $ 9,395 $14,782 $11,650
6/30/2005 $11,969 $ 8,830 $ 9,523 $14,862 $11,676
7/31/2005 $12,144 $ 9,159 $ 9,816 $14,727 $11,702
8/31/2005 $12,183 $ 9,075 $10,067 $14,916 $11,734
9/30/2005 $12,262 $ 9,149 $10,517 $14,762 $11,767
10/31/2005 $12,076 $ 8,996 $10,211 $14,645 $11,795
11/30/2005 $12,311 $ 9,337 $10,463 $14,710 $11,834
12/31/2005 $12,453 $ 9,340 $10,951 $14,850 $11,871
1/31/2006 $12,838 $ 9,587 $11,624 $14,851 $11,905
2/28/2006 $12,829 $ 9,613 $11,600 $14,900 $11,943
3/31/2006 $12,961 $ 9,733 $11,988 $14,754 $11,990
4/30/2006 $13,080 $ 9,863 $12,570 $14,727 $12,033
5/31/2006 $12,803 $ 9,580 $12,097 $14,711 $12,080
6/30/2006 $12,817 $ 9,593 $12,101 $14,743 $12,125
7/31/2006 $12,797 $ 9,652 $12,222 $14,942 $12,175
8/31/2006 $12,968 $ 9,881 $12,562 $15,171 $12,228
9/30/2006 $13,014 $10,136 $12,583 $15,304 $12,282
10/31/2006 $13,286 $10,466 $13,074 $15,405 $12,330
11/30/2006 $13,548 $10,665 $13,468 $15,584 $12,382
12/31/2006 $13,593 $10,815 $13,892 $15,493 $12,436
1/31/2007 $13,707 $10,978 $13,987 $15,487 $12,486
2/28/2007 $13,727 $10,764 $14,102 $15,726 $12,535
3/31/2007 $13,859 $10,884 $14,468 $15,726 $12,592
4/30/2007 $14,118 $11,366 $15,124 $15,811 $12,646
5/31/2007 $14,314 $11,763 $15,409 $15,691 $12,703
6/30/2007 $14,259 $11,567 $15,433 $15,645 $12,751
7/31/2007 $14,143 $11,209 $15,207 $15,776 $12,799
8/31/2007 $14,185 $11,377 $14,973 $15,969 $12,872
9/30/2007 $14,625 $11,802 $15,777 $16,090 $12,919
10/31/2007 $14,955 $11,990 $16,399 $16,235 $12,958
11/30/2007 $14,636 $11,489 $15,864 $16,527 $13,017
12/31/2007 $14,609 $11,409 $15,508 $16,573 $13,047
1/31/2008 $14,239 $10,725 $14,077 $16,851 $13,114
2/29/2008 $14,239 $10,376 $14,283 $16,875 $13,136
3/31/2008 $14,117 $10,332 $14,139 $16,932 $13,167
4/30/2008 $14,422 $10,835 $14,925 $16,897 $13,181
5/31/2008 $14,553 $10,975 $15,099 $16,773 $13,187
6/30/2008 $14,023 $10,050 $13,867 $16,759 $13,207
7/31/2008 $13,912 $ 9,965 $13,423 $16,746 $13,233
8/31/2008 $13,934 $10,109 $12,883 $16,905 $13,251
9/30/2008 $13,277 $ 9,209 $11,024 $16,678 $13,287
10/31/2008 $12,155 $ 7,662 $ 8,800 $16,284 $13,308
11/30/2008 $11,931 $ 7,112 $ 8,329 $16,814 $13,322
12/31/2008 $12,266 $ 7,188 $ 8,830 $17,441 $13,320
1/31/2009 $12,015 $ 6,582 $ 7,965 $17,288 $13,319
2/28/2009 $11,560 $ 5,881 $ 7,151 $17,222 $13,321
3/31/2009 $12,031 $ 6,396 $ 7,607 $17,462 $13,325
4/30/2009 $12,636 $ 7,009 $ 8,593 $17,545 $13,329
5/31/2009 $13,059 $ 7,401 $ 9,626 $17,672 $13,330
6/30/2009 $13,055 $ 7,415 $ 9,574 $17,773 $13,331
7/31/2009 $13,608 $ 7,976 $10,449 $18,060 $13,333
8/31/2009 $13,758 $ 8,264 $11,019 $18,247 $13,336
9/30/2009 $14,198 $ 8,573 $11,443 $18,438 $13,338
10/31/2009 $14,094 $ 8,413 $11,300 $18,529 $13,341
11/30/2009 $14,383 $ 8,918 $11,529 $18,769 $13,342
12/31/2009 $14,577 $ 9,090 $11,697 $18,476 $13,342
AVERAGE ANNUAL TOTAL RETURN
CLASS R 12/31/09
- ------- --------
1-Year +19.45%
5-Year +4.50%
Since Inception (1/1/02) +5.27%
CLASS R (1/1/02-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON MSCI BARCLAYS CAPITAL P&R 90-DAY
CONSERVATIVE TARGET S&P 500 EAFE U.S. AGGREGATE U.S. TREASURY
DATE FUND - CLASS R INDEX INDEX INDEX BILL INDEX
- ---------- ------------------- ------- ------- ---------------- -------------
1/1/2002 $10,000 $10,000 $10,000 $10,000 $10,000
1/31/2002 $ 9,982 $ 9,854 $ 9,469 $10,081 $10,014
2/28/2002 $ 9,972 $ 9,664 $ 9,536 $10,179 $10,027
3/31/2002 $10,178 $10,027 $10,057 $10,009 $10,042
4/30/2002 $10,196 $ 9,420 $10,130 $10,204 $10,057
5/31/2002 $10,159 $ 9,350 $10,267 $10,290 $10,073
6/30/2002 $ 9,869 $ 8,684 $ 9,862 $10,379 $10,088
7/31/2002 $ 9,461 $ 8,007 $ 8,889 $10,505 $10,102
8/31/2002 $ 9,526 $ 8,060 $ 8,871 $10,682 $10,117
9/30/2002 $ 9,232 $ 7,184 $ 7,921 $10,855 $10,133
10/31/2002 $ 9,409 $ 7,816 $ 8,347 $10,806 $10,149
11/30/2002 $ 9,650 $ 8,276 $ 8,727 $10,803 $10,165
12/31/2002 $ 9,591 $ 7,790 $ 8,434 $11,026 $10,175
1/31/2003 $ 9,554 $ 7,586 $ 8,083 $11,035 $10,186
2/28/2003 $ 9,516 $ 7,472 $ 7,898 $11,188 $10,195
3/31/2003 $ 9,510 $ 7,545 $ 7,749 $11,179 $10,207
4/30/2003 $ 9,850 $ 8,166 $ 8,517 $11,272 $10,217
5/31/2003 $10,228 $ 8,596 $ 9,041 $11,482 $10,227
6/30/2003 $10,284 $ 8,706 $ 9,265 $11,459 $10,240
7/31/2003 $10,293 $ 8,859 $ 9,491 $11,074 $10,247
8/31/2003 $10,511 $ 9,032 $ 9,721 $11,147 $10,255
9/30/2003 $10,584 $ 8,936 $10,023 $11,442 $10,263
10/31/2003 $10,831 $ 9,442 $10,648 $11,336 $10,272
11/30/2003 $11,002 $ 9,525 $10,887 $11,363 $10,280
12/31/2003 $11,228 $10,024 $11,738 $11,478 $10,288
1/31/2004 $11,314 $10,208 $11,904 $11,571 $10,297
2/29/2004 $11,410 $10,350 $12,181 $11,696 $10,303
3/31/2004 $11,431 $10,194 $12,255 $11,784 $10,312
4/30/2004 $11,134 $10,034 $11,988 $11,477 $10,319
5/31/2004 $11,210 $10,172 $12,040 $11,431 $10,326
6/30/2004 $11,328 $10,370 $12,308 $11,496 $10,331
7/31/2004 $11,174 $10,026 $11,911 $11,610 $10,341
8/31/2004 $11,260 $10,067 $11,966 $11,831 $10,351
9/30/2004 $11,449 $10,176 $12,280 $11,863 $10,363
10/31/2004 $11,604 $10,332 $12,700 $11,963 $10,375
11/30/2004 $11,902 $10,750 $13,571 $11,867 $10,385
12/31/2004 $12,098 $11,115 $14,167 $11,976 $10,405
1/31/2005 $11,932 $10,844 $13,908 $12,052 $10,420
2/28/2005 $12,117 $11,073 $14,512 $11,981 $10,436
3/31/2005 $11,948 $10,877 $14,153 $11,919 $10,460
4/30/2005 $11,821 $10,670 $13,837 $12,080 $10,482
5/31/2005 $11,996 $11,010 $13,858 $12,211 $10,506
6/30/2005 $12,097 $11,025 $14,047 $12,278 $10,530
7/31/2005 $12,283 $11,435 $14,479 $12,166 $10,553
8/31/2005 $12,332 $11,331 $14,849 $12,322 $10,582
9/30/2005 $12,415 $11,423 $15,513 $12,195 $10,612
10/31/2005 $12,228 $11,232 $15,061 $12,098 $10,636
11/30/2005 $12,474 $11,657 $15,433 $12,152 $10,672
12/31/2005 $12,627 $11,661 $16,153 $12,267 $10,705
1/31/2006 $13,013 $11,970 $17,145 $12,268 $10,736
2/28/2006 $13,013 $12,003 $17,110 $12,309 $10,770
3/31/2006 $13,155 $12,152 $17,683 $12,188 $10,812
4/30/2006 $13,284 $12,315 $18,540 $12,166 $10,851
5/31/2006 $13,005 $11,961 $17,843 $12,153 $10,893
6/30/2006 $13,025 $11,977 $17,849 $12,179 $10,934
7/31/2006 $13,015 $12,051 $18,028 $12,343 $10,979
8/31/2006 $13,197 $12,338 $18,528 $12,532 $11,028
9/30/2006 $13,239 $12,655 $18,561 $12,642 $11,076
10/31/2006 $13,524 $13,068 $19,284 $12,726 $11,119
11/30/2006 $13,798 $13,316 $19,866 $12,874 $11,166
12/31/2006 $13,855 $13,503 $20,491 $12,799 $11,215
1/31/2007 $13,969 $13,707 $20,631 $12,794 $11,260
2/28/2007 $14,000 $13,439 $20,800 $12,991 $11,304
3/31/2007 $14,134 $13,590 $21,340 $12,991 $11,355
4/30/2007 $14,406 $14,192 $22,308 $13,061 $11,404
5/31/2007 $14,615 $14,687 $22,729 $12,962 $11,455
6/30/2007 $14,565 $14,443 $22,764 $12,924 $11,499
7/31/2007 $14,458 $13,995 $22,431 $13,032 $11,542
8/31/2007 $14,501 $14,205 $22,086 $13,192 $11,608
9/30/2007 $14,953 $14,736 $23,272 $13,292 $11,650
10/31/2007 $15,297 $14,970 $24,189 $13,411 $11,686
11/30/2007 $14,974 $14,345 $23,399 $13,652 $11,738
12/31/2007 $14,951 $14,245 $22,874 $13,691 $11,766
1/31/2008 $14,587 $13,391 $20,763 $13,921 $11,826
2/29/2008 $14,598 $12,956 $21,067 $13,940 $11,846
3/31/2008 $14,472 $12,900 $20,856 $13,987 $11,874
4/30/2008 $14,794 $13,528 $22,015 $13,958 $11,886
5/31/2008 $14,938 $13,703 $22,271 $13,856 $11,892
6/30/2008 $14,399 $12,548 $20,454 $13,845 $11,910
7/31/2008 $14,285 $12,442 $19,799 $13,833 $11,934
8/31/2008 $14,308 $12,622 $19,002 $13,965 $11,950
9/30/2008 $13,646 $11,498 $16,261 $13,777 $11,983
10/31/2008 $12,506 $ 9,567 $12,981 $13,452 $12,001
11/30/2008 $12,278 $ 8,880 $12,285 $13,890 $12,014
12/31/2008 $12,621 $ 8,975 $13,025 $14,408 $12,012
1/31/2009 $12,366 $ 8,218 $11,749 $14,281 $12,011
2/28/2009 $11,902 $ 7,343 $10,547 $14,227 $12,013
3/31/2009 $12,385 $ 7,986 $11,221 $14,425 $12,016
4/30/2009 $13,024 $ 8,751 $12,675 $14,494 $12,020
5/31/2009 $13,467 $ 9,240 $14,198 $14,599 $12,021
6/30/2009 $13,467 $ 9,259 $14,121 $14,682 $12,022
7/31/2009 $14,042 $ 9,959 $15,413 $14,919 $12,024
8/31/2009 $14,207 $10,318 $16,253 $15,073 $12,026
9/30/2009 $14,660 $10,703 $16,878 $15,232 $12,028
10/31/2009 $14,565 $10,505 $16,668 $15,307 $12,031
11/30/2009 $14,861 $11,135 $17,006 $15,505 $12,031
12/31/2009 $15,076 $11,350 $17,253 $15,263 $12,032
Annual Report | 11
Performance Summary (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN
ADVISOR CLASS(6) 12/31/09
- ---------------- --------
1-Year +19.97%
5-Year +4.96%
10-Year +4.72%
ADVISOR CLASS (1/1/00-12/31/09)(6)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON
CONSERVATIVE TARGET MSCI BARCLAYS CAPITAL P&R 90-DAY
FUND - ADVISOR S&P 500 EAFE U.S. AGGREGATE U.S. TREASURY
DATE CLASS INDEX INDEX INDEX BILL INDEX
- ---------- ------------------- ------- ------- ---------------- -------------
1/1/2000 $10,000 $10,000 $10,000 $10,000 $10,000
1/31/2000 $ 9,892 $ 9,498 $ 9,366 $ 9,967 $10,039
2/28/2000 $10,714 $ 9,318 $ 9,620 $10,088 $10,084
3/31/2000 $10,564 $10,229 $ 9,995 $10,221 $10,135
4/30/2000 $10,172 $ 9,922 $ 9,471 $10,191 $10,186
5/31/2000 $ 9,955 $ 9,718 $ 9,241 $10,187 $10,241
6/30/2000 $10,241 $ 9,958 $ 9,605 $10,399 $10,285
7/31/2000 $10,216 $ 9,802 $ 9,204 $10,493 $10,333
8/31/2000 $10,612 $10,411 $ 9,286 $10,645 $10,386
9/30/2000 $10,502 $ 9,861 $ 8,836 $10,712 $10,443
10/31/2000 $10,357 $ 9,819 $ 8,629 $10,783 $10,496
11/30/2000 $ 9,983 $ 9,045 $ 8,307 $10,959 $10,554
12/31/2000 $10,305 $ 9,090 $ 8,604 $11,163 $10,615
1/31/2001 $10,584 $ 9,412 $ 8,600 $11,345 $10,684
2/28/2001 $10,251 $ 8,554 $ 7,956 $11,444 $10,727
3/31/2001 $ 9,987 $ 8,012 $ 7,429 $11,501 $10,781
4/30/2001 $10,303 $ 8,635 $ 7,950 $11,454 $10,825
5/31/2001 $10,366 $ 8,692 $ 7,676 $11,523 $10,867
6/30/2001 $10,321 $ 8,481 $ 7,365 $11,566 $10,899
7/31/2001 $10,275 $ 8,397 $ 7,232 $11,825 $10,935
8/31/2001 $10,148 $ 7,872 $ 7,050 $11,960 $10,971
9/30/2001 $ 9,594 $ 7,236 $ 6,337 $12,100 $11,019
10/31/2001 $ 9,860 $ 7,374 $ 6,499 $12,353 $11,048
11/30/2001 $10,099 $ 7,940 $ 6,739 $12,183 $11,071
12/31/2001 $10,211 $ 8,009 $ 6,780 $12,105 $11,089
1/31/2002 $10,201 $ 7,892 $ 6,420 $12,203 $11,104
2/28/2002 $10,192 $ 7,740 $ 6,465 $12,322 $11,119
3/31/2002 $10,402 $ 8,031 $ 6,818 $12,117 $11,136
4/30/2002 $10,430 $ 7,544 $ 6,868 $12,352 $11,153
5/31/2002 $10,392 $ 7,489 $ 6,961 $12,457 $11,170
6/30/2002 $10,092 $ 6,955 $ 6,686 $12,564 $11,187
7/31/2002 $ 9,685 $ 6,413 $ 6,027 $12,716 $11,202
8/31/2002 $ 9,751 $ 6,455 $ 6,014 $12,931 $11,219
9/30/2002 $ 9,450 $ 5,754 $ 5,370 $13,140 $11,237
10/31/2002 $ 9,631 $ 6,260 $ 5,659 $13,080 $11,254
11/30/2002 $ 9,888 $ 6,629 $ 5,917 $13,077 $11,271
12/31/2002 $ 9,824 $ 6,239 $ 5,718 $13,347 $11,283
1/31/2003 $ 9,785 $ 6,076 $ 5,480 $13,358 $11,296
2/28/2003 $ 9,756 $ 5,985 $ 5,355 $13,543 $11,305
3/31/2003 $ 9,743 $ 6,043 $ 5,253 $13,533 $11,318
4/30/2003 $10,100 $ 6,540 $ 5,774 $13,645 $11,329
5/31/2003 $10,486 $ 6,885 $ 6,130 $13,899 $11,341
6/30/2003 $10,546 $ 6,973 $ 6,281 $13,871 $11,355
7/31/2003 $10,556 $ 7,096 $ 6,434 $13,405 $11,363
8/31/2003 $10,788 $ 7,234 $ 6,591 $13,494 $11,371
9/30/2003 $10,861 $ 7,157 $ 6,795 $13,851 $11,381
10/31/2003 $11,123 $ 7,562 $ 7,219 $13,722 $11,390
11/30/2003 $11,298 $ 7,629 $ 7,381 $13,755 $11,399
12/31/2003 $11,528 $ 8,029 $ 7,958 $13,895 $11,408
1/31/2004 $11,616 $ 8,176 $ 8,071 $14,007 $11,418
2/29/2004 $11,724 $ 8,290 $ 8,258 $14,158 $11,425
3/31/2004 $11,741 $ 8,165 $ 8,308 $14,264 $11,435
4/30/2004 $11,446 $ 8,037 $ 8,127 $13,893 $11,443
5/31/2004 $11,515 $ 8,147 $ 8,162 $13,838 $11,451
6/30/2004 $11,652 $ 8,305 $ 8,345 $13,916 $11,456
7/31/2004 $11,494 $ 8,030 $ 8,075 $14,054 $11,467
8/31/2004 $11,583 $ 8,063 $ 8,112 $14,322 $11,478
9/30/2004 $11,773 $ 8,150 $ 8,326 $14,361 $11,491
10/31/2004 $11,941 $ 8,275 $ 8,610 $14,481 $11,504
11/30/2004 $12,248 $ 8,610 $ 9,201 $14,366 $11,516
12/31/2004 $12,448 $ 8,902 $ 9,605 $14,498 $11,538
1/31/2005 $12,289 $ 8,685 $ 9,429 $14,589 $11,554
2/28/2005 $12,478 $ 8,868 $ 9,839 $14,503 $11,572
3/31/2005 $12,309 $ 8,711 $ 9,595 $14,428 $11,599
4/30/2005 $12,179 $ 8,546 $ 9,381 $14,624 $11,623
5/31/2005 $12,359 $ 8,818 $ 9,395 $14,782 $11,650
6/30/2005 $12,470 $ 8,830 $ 9,523 $14,862 $11,676
7/31/2005 $12,661 $ 9,159 $ 9,816 $14,727 $11,702
8/31/2005 $12,712 $ 9,075 $10,067 $14,916 $11,734
9/30/2005 $12,805 $ 9,149 $10,517 $14,762 $11,767
10/31/2005 $12,613 $ 8,996 $10,211 $14,645 $11,795
11/30/2005 $12,876 $ 9,337 $10,463 $14,710 $11,834
12/31/2005 $13,024 $ 9,340 $10,951 $14,850 $11,871
1/31/2006 $13,433 $ 9,587 $11,624 $14,851 $11,905
2/28/2006 $13,433 $ 9,613 $11,600 $14,900 $11,943
3/31/2006 $13,581 $ 9,733 $11,988 $14,754 $11,990
4/30/2006 $13,725 $ 9,863 $12,570 $14,727 $12,033
5/31/2006 $13,448 $ 9,580 $12,097 $14,711 $12,080
6/30/2006 $13,465 $ 9,593 $12,101 $14,743 $12,125
7/31/2006 $13,465 $ 9,652 $12,222 $14,942 $12,175
8/31/2006 $13,653 $ 9,881 $12,562 $15,171 $12,228
9/30/2006 $13,713 $10,136 $12,583 $15,304 $12,282
10/31/2006 $14,008 $10,466 $13,074 $15,405 $12,330
11/30/2006 $14,291 $10,665 $13,468 $15,584 $12,382
12/31/2006 $14,363 $10,815 $13,892 $15,493 $12,436
1/31/2007 $14,492 $10,978 $13,987 $15,487 $12,486
2/28/2007 $14,525 $10,764 $14,102 $15,726 $12,535
3/31/2007 $14,674 $10,884 $14,468 $15,726 $12,592
4/30/2007 $14,956 $11,366 $15,124 $15,811 $12,646
5/31/2007 $15,184 $11,763 $15,409 $15,691 $12,703
6/30/2007 $15,140 $11,567 $15,433 $15,645 $12,751
7/31/2007 $15,029 $11,209 $15,207 $15,776 $12,799
8/31/2007 $15,074 $11,377 $14,973 $15,969 $12,872
9/30/2007 $15,561 $11,802 $15,777 $16,090 $12,919
10/31/2007 $15,919 $11,990 $16,399 $16,235 $12,958
11/30/2007 $15,595 $11,489 $15,864 $16,527 $13,017
12/31/2007 $15,580 $11,409 $15,508 $16,573 $13,047
1/31/2008 $15,201 $10,725 $14,077 $16,851 $13,114
2/29/2008 $15,224 $10,376 $14,283 $16,875 $13,136
3/31/2008 $15,105 $10,332 $14,139 $16,932 $13,167
4/30/2008 $15,440 $10,835 $14,925 $16,897 $13,181
5/31/2008 $15,590 $10,975 $15,099 $16,773 $13,187
6/30/2008 $15,040 $10,050 $13,867 $16,759 $13,207
7/31/2008 $14,934 $ 9,965 $13,423 $16,746 $13,233
8/31/2008 $14,957 $10,109 $12,883 $16,905 $13,251
9/30/2008 $14,273 $ 9,209 $11,024 $16,678 $13,287
10/31/2008 $13,082 $ 7,662 $ 8,800 $16,284 $13,308
11/30/2008 $12,844 $ 7,112 $ 8,329 $16,814 $13,322
12/31/2008 $13,219 $ 7,188 $ 8,830 $17,441 $13,320
1/31/2009 $12,953 $ 6,582 $ 7,965 $17,288 $13,319
2/28/2009 $12,480 $ 5,881 $ 7,151 $17,222 $13,321
3/31/2009 $12,987 $ 6,396 $ 7,607 $17,462 $13,325
4/30/2009 $13,669 $ 7,009 $ 8,593 $17,545 $13,329
5/31/2009 $14,132 $ 7,401 $ 9,626 $17,672 $13,330
6/30/2009 $14,135 $ 7,415 $ 9,574 $17,773 $13,331
7/31/2009 $14,751 $ 7,976 $10,449 $18,060 $13,333
8/31/2009 $14,923 $ 8,264 $11,019 $18,247 $13,336
9/30/2009 $15,414 $ 8,573 $11,443 $18,438 $13,338
10/31/2009 $15,315 $ 8,413 $11,300 $18,529 $13,341
11/30/2009 $15,637 $ 8,918 $11,529 $18,769 $13,342
12/31/2009 $15,859 $ 9,090 $11,697 $18,476 $13,342
ENDNOTES
WHILE AN ASSET ALLOCATION PLAN CAN BE A VALUABLE TOOL TO HELP REDUCE OVERALL
VOLATILITY, ALL INVESTMENTS INVOLVE SOME DEGREE OF RISK. TYPICALLY, THE MORE
AGGRESSIVE THE INVESTMENT, OR THE GREATER THE POTENTIAL RETURN, THE MORE RISK
INVOLVED. GENERALLY, INVESTORS SHOULD BE COMFORTABLE WITH SOME FLUCTUATION IN
THE VALUE OF THEIR INVESTMENTS, ESPECIALLY OVER THE SHORT TERM. STOCKS HAVE
HISTORICALLY OUTPERFORMED OTHER ASSET CLASSES OVER THE LONG TERM, BUT THEY TEND
TO FLUCTUATE MORE DRAMATICALLY OVER THE SHORTER TERM. BOND PRICES GENERALLY MOVE
IN THE OPPOSITE DIRECTION OF INTEREST RATES. THUS, AS PRICES OF BONDS IN A FUND
ADJUST TO A RISE IN INTEREST RATES, THAT FUND'S SHARE PRICE MAY DECLINE. BECAUSE
THIS FUND INVESTS IN UNDERLYING FUNDS, WHICH MAY ENGAGE IN A VARIETY OF
INVESTMENT STRATEGIES INVOLVING CERTAIN RISKS, THE FUND MAY BE SUBJECT TO THOSE
SAME RISKS. THESE RISKS ARE DESCRIBED IN THE FUND'S PROSPECTUS.
CLASS B: These shares have higher annual fees and expenses than Class A
shares.
CLASS C: Prior to 1/1/04, these shares were offered with an initial sales
charge; thus actual total returns would have differed. These
shares have higher annual fees and expenses than Class A shares.
CLASS R: Shares are available to certain eligible investors as described
in the prospectus. These shares have higher annual fees and
expenses than Class A shares.
ADVISOR CLASS: Shares are available to certain eligible investors as described
in the prospectus.
(1.) If the manager had not waived fees, the Fund's total returns would have
been lower.
(2.) Cumulative total return represents the change in value of an investment
over the periods indicated.
(3.) Average annual total return represents the average annual change in value
of an investment over the periods indicated.
(4.) These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated.
(5.) Figures are as stated in the Fund's prospectus current as of the date of
this report. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become
higher than the figures shown.
(6.) Effective 12/1/05, the Fund began offering Advisor Class shares, which do
not have sales charges or a Rule 12b-1 plan. Performance quotations for
this class reflect the following methods of calculation: (a) For periods
prior to 12/1/05, a restated figure is used based upon the Fund's Class A
performance, excluding the effect of Class A's maximum initial sales
charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b)
for periods after 11/30/05, actual Advisor Class performance is used
reflecting all charges and fees applicable to that class. Since 12/1/05
(commencement of sales), the cumulative and average annual total returns of
Advisor Class shares were +22.59% and +5.12%.
(7.) Source: (C) 2009 Morningstar. See page 6 for descriptions of the S&P 500,
the MSCI EAFE Index, the BC U.S. Aggregate Index and the P&R 90 Day U.S.
T-Bill Index.
12 | Annual Report
Your Fund's Expenses
FRANKLIN TEMPLETON CONSERVATIVE TARGET FUND
As a Fund shareholder, you can incur two types of costs:
- - Transaction costs, including sales charges (loads) on Fund purchases; and
- - Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
Annual Report | 13
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES.
Therefore, the second line for each class is useful in comparing ongoing costs
only, and will not help you compare total costs of owning different funds. In
addition, if transaction costs were included, your total costs would have been
higher. Please refer to the Fund prospectus for additional information on
operating expenses.
BEGINNING ENDING
ACCOUNT ACCOUNT EXPENSES PAID EXPENSES PAID
VALUE VALUE DURING PERIOD* DURING PERIOD**
7/1/09 12/31/09 7/1/09-12/31/09 7/1/09-12/31/09
--------- --------- --------------- ---------------
CLASS A
Actual $1,000 $1,120.50 $2.67 $ 6.47
Hypothetical
(5% return before expenses) $1,000 $1,022.68 $2.55 $ 6.16
CLASS B
Actual $1,000 $1,115.80 $6.61 $10.40
Hypothetical
(5% return before expenses) $1,000 $1,018.95 $6.31 $ 9.91
CLASS C
Actual $1,000 $1,116.50 $6.67 $10.46
Hypothetical
(5% return before expenses) $1,000 $1,018.90 $6.36 $ 9.96
CLASS R
Actual $1,000 $1,119.50 $4.01 $ 7.80
Hypothetical
(5% return before expenses) $1,000 $1,021.42 $3.82 $ 7.43
ADVISOR CLASS
Actual $1,000 $1,121.90 $1.34 $ 5.13
Hypothetical
(5% return before expenses) $1,000 $1,023.95 $1.28 $ 4.89
* Expenses are calculated using the most recent six-month expense ratio
excluding expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 0.50%; B: 1.24%; C: 1.25%; R: 0.75%; and
Advisor: 0.25%), multiplied by the average account value over the period,
multiplied by 184/365 to reflect the one-half year period. A portion of the
Fund's expenses have been paid by the underlying funds in which the Fund
invests.
** Expenses are calculated using the most recent six-month expense ratio
including expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 1.21%; B: 1.95%; C: 1.96%; R: 1.46%; and
Advisor: 0.96%), multiplied by the average account value over the period,
multiplied by 184/365 to reflect the one-half year period. A portion of the
Fund's expenses have been paid by the underlying funds in which the Fund
invests.
14 | Annual Report
Franklin Templeton
Moderate Target Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin Templeton Moderate Target Fund
seeks the highest level of long-term total return consistent with a moderate
level of risk.(1)
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT franklintempleton.com OR CALL (800) 342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
ASSET ALLOCATION*
Franklin Templeton Moderate Target Fund
Based on Total Net Assets as of 12/31/09
(PIE CHART)
Domestic Equity ............................. 40.7%
Domestic Fixed Income ....................... 19.7%
Foreign Equity .............................. 17.7%
Foreign Fixed Income ........................ 12.2%
Short-Term Investments & Other Net Assets ... 9.7%
* The asset allocation is based on the Statement of Investments (SOI), which
classifies each underlying fund into a broad asset class.
This annual report for Franklin Templeton Moderate Target Fund covers the fiscal
year ended December 31, 2009.
PERFORMANCE OVERVIEW
Franklin Templeton Moderate Target Fund - Class A delivered a +24.68% cumulative
total return for the 12 months under review. By comparison the Fund's
benchmarks, the Standard & Poor's 500 Index (S&P 500) and Morgan Stanley Capital
International (MSCI) Europe, Australasia, Far East (EAFE) Index for equities,
the Barclays Capital (BC) U.S. Aggregate Index for fixed income, and the Payden
& Rygel (P&R) 90 Day U.S. T-Bill Index for short-term investments and other net
assets, posted total returns of +26.46%,
(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.
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 46.
Annual Report | 15
TOP 10 FUND HOLDINGS
Franklin Templeton Moderate Target Fund 12/31/09
% OF TOTAL
NET ASSETS
----------
Franklin Flex Cap Growth Fund
- Advisor Class 14.4%
Franklin U.S. Government Securities
Fund - Advisor Class 11.1%
Templeton Global Bond Fund
- Advisor Class 10.9%
Mutual Shares Fund - Class Z 9.9%
Franklin Total Return Fund
- Advisor Class 8.6%
Franklin Growth Opportunities Fund
- Advisor Class 6.5%
Mutual European Fund - Class Z 6.3%
Templeton Foreign Fund - Advisor Class 5.6%
Franklin Gold and Precious Metals Fund
- Advisor Class 2.9%
Templeton China World Fund
- Advisor Class 2.9%
+32.46%, +5.93% and +0.17%, respectively, during the same time.(2) You can find
the Fund's long-term performance data in the Performance Summary beginning on
page 18.
INVESTMENT STRATEGY
Whenever possible, we attempt to hold the same underlying Franklin Templeton
funds in each Target Fund's portfolio and will vary the underlying funds'
allocation percentages based upon each Target Fund's risk/return level.
Maintaining similarity of the underlying Franklin Templeton fund investments
across the Conservative, Moderate and Growth Target 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 underlying funds' 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.
MANAGER'S DISCUSSION
The Fund's performance can be attributed to its allocation among equities, fixed
income securities, and short-term investments and other net assets, and to the
actual performance of the selected underlying funds.
At period-end, Franklin Templeton Moderate Target Fund's domestic equity
exposure was 69.7% of its total equity weighting, with the balance represented
(2.) Source: (C) 2009 Morningstar. All Rights Reserved. The information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted
to be accurate, complete or timely. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from any use of
this information. The S&P 500 consists of 500 stocks chosen for market
size, liquidity and industry group representation. Each stock's weight in
the index is proportionate to its market value. The S&P 500 is one of the
most widely used benchmarks of U.S. equity performance. The MSCI EAFE Index
is a free float-adjusted, market capitalization-weighted index designed to
measure equity market performance in global developed markets excluding the
U.S. and Canada. The BC U.S. Aggregate Index is a market
capitalization-weighted index representing the U.S. investment-grade,
fixed-rate, taxable bond market with index components for government and
corporate, mortgage pass-through and asset-backed securities. All issues
included are SEC registered, taxable, dollar denominated and
nonconvertible, must have at least one year to final maturity and must be
rated investment grade (Baa3/BBB-/BBB- or higher) by Moody's, Standard &
Poor's or Fitch, respectively. The P&R 90 Day U.S. T-Bill Index is a total
return index based on a constant maturity instrument. Payden & Rygel
includes both accrued interest and change in market price in its monthly
total return calculations. The value of Treasuries, if held to maturity, is
fixed; principal is guaranteed and interest is fixed. The indexes are
unmanaged and include reinvested distributions. One cannot invest directly
in an index, and an index is not representative of the Fund's portfolio.
16 | Annual Report
by foreign equity. The portfolio was diversified across capitalization sizes and
investment styles, and on December 31, 2009, we held shares in large-, mid-and
small-capitalization equity funds, representing both growth and value styles.
Franklin Flex Cap Growth Fund - Advisor Class, representing 14.4% of the Fund's
total net assets, was our largest equity fund weighting at period-end. On the
fixed income side, domestic exposure was 61.8% of the Fund's total income
weighting, with the balance represented by foreign fixed income. Franklin U.S.
Government Securities Fund - Advisor Class was our largest fixed income fund
weighting at 11.1% of total net assets.
Our largest domestic growth fund holding, Franklin Flex Cap Growth Fund -
Advisor Class, and our largest domestic value fund holding, Mutual Shares Fund -
Class Z, outperformed the S&P 500 during the 12-month reporting period. Our
largest foreign equity fund holding, Mutual European Fund - Class Z,
under-performed the MSCI EAFE Index; however, Templeton Foreign Fund - Advisor
Class outperformed. On the fixed income side, Franklin U.S. Government
Securities Fund - Advisor class underperformed the BC U.S. Aggregate Index,
while Templeton Global Bond Fund - Advisor Class outperformed.
Thank you for your continued participation in Franklin Templeton Moderate Target
Fund. We look forward to serving your future investment needs.
(PHOTO OF T. ANTHONY COFFEY)
/s/ T. Anthony Coffey
T. Anthony Coffey, CFA
Portfolio Manager
Franklin Templeton Moderate Target Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF DECEMBER 31, 2009, 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.
Annual Report | 17
Performance Summary as of 12/31/09
FRANKLIN TEMPLETON MODERATE TARGET FUND
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table 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.
PRICE AND DISTRIBUTION INFORMATION
CLASS A (SYMBOL: FMTIX) CHANGE 12/31/09 12/31/08
- ----------------------- ------ -------- --------
Net Asset Value (NAV) +$2.26 $12.93 $10.67
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.2435
Long-Term Capital Gain $0.0952
TOTAL $0.3387
CLASS B (SYMBOL: FBMTX) CHANGE 12/31/09 12/31/08
- ----------------------- ------ -------- --------
Net Asset Value (NAV) +$2.24 $12.88 $10.64
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.1563
Long-Term Capital Gain $0.0952
TOTAL $0.2515
CLASS C (SYMBOL: FTMTX) CHANGE 12/31/09 12/31/08
- ----------------------- ------ -------- --------
Net Asset Value (NAV) +$2.21 $12.68 $10.47
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.1638
Long-Term Capital Gain $0.0952
TOTAL $0.2590
CLASS R (SYMBOL: FTMRX) CHANGE 12/31/09 12/31/08
- ----------------------- ------ -------- --------
Net Asset Value (NAV) +$2.25 $12.89 $10.64
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.2169
Long-Term Capital Gain $0.0952
TOTAL $0.3121
ADVISOR CLASS (SYMBOL: FMTZX) CHANGE 12/31/09 12/31/08
- ----------------------------- ------ -------- --------
Net Asset Value (NAV) +$2.26 $12.93 $10.67
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.2715
Long-Term Capital Gain $0.0952
TOTAL $0.3667
18 | Annual Report
Performance Summary (CONTINUED)
PERFORMANCE(1)
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURN AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES. CLASS A: 5.75%
MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES CHARGE (CDSC)
DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER; CLASS C: 1%
CDSC IN FIRST YEAR ONLY;
CLASS R/ADVISOR CLASS: NO SALES CHARGES.
CLASS A 1-YEAR 5-YEAR 10-YEAR
- ------- ------- ------- -------
Cumulative Total Return(2) +24.68% +27.01% +49.35%
Average Annual Total Return(3) +17.52% +3.67% +3.48%
Value of $10,000 Investment(4) $11,752 $11,974 $14,072
Total Annual Operating Expenses(5)
Without Waiver 1.43%
With Waiver 1.23%
INCEPTION
CLASS B 1-YEAR 5-YEAR (12/1/03)
- ------- ------- ------- ---------
Cumulative Total Return(2) +23.65% +22.28% +35.71%
Average Annual Total Return(3) +19.65% +3.76% +5.15%
Value of $10,000 Investment(4) $11,965 $12,028 $13,571
Total Annual Operating Expenses(5)
Without Waiver 2.18%
With Waiver 1.98%
CLASS C 1-YEAR 5-YEAR 10-YEAR
- ------- ------- ------- -------
Cumulative Total Return(2) +23.82% +22.44% +38.59%
Average Annual Total Return(3) +22.82% +4.13% +3.32%
Value of $10,000 Investment(4) $12,282 $12,244 $13,859
Total Annual Operating Expenses(5)
Without Waiver 2.18%
With Waiver 1.98%
INCEPTION
CLASS R 1-YEAR 5-YEAR (1/1/02)
- ------- ------- ------- ---------
Cumulative Total Return(2) +24.37% +25.46% +54.34%
Average Annual Total Return(3) +24.37% +4.64% +5.58%
Value of $10,000 Investment(4) $12,437 $12,546 $15,434
Total Annual Operating Expenses(5)
Without Waiver 1.68%
With Waiver 1.48%
ADVISOR CLASS(6) 1-YEAR 5-YEAR 10-YEAR
- ---------------- ------- ------- -------
Cumulative Total Return(2) +24.97% +28.35% +50.93%
Average Annual Total Return(3) +24.97% +5.12% +4.20%
Value of $10,000 Investment(4) $12,497 $12,835 $15,093
Total Annual Operating Expenses(5)
Without Waiver 1.18%
With Waiver 0.98%
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.
THE INVESTMENT MANAGER HAS CONTRACTUALLY AGREED TO WAIVE OR LIMIT ITS FEES AND
TO ASSUME AS ITS OWN EXPENSE CERTAIN EXPENSES OTHERWISE PAYABLE BY THE FUND SO
THAT COMMON EXPENSES (I.E., A COMBINATION OF ASSET ALLOCATION FEES AND OTHER
EXPENSES, BUT EXCLUDING RULE 12B-1 FEES AND ACQUIRED FUND FEES AND EXPENSES) FOR
EACH CLASS OF THE FUND DO NOT EXCEED 0.25% (OTHER THAN CERTAIN NONROUTINE
EXPENSES OR COSTS, INCLUDING THOSE RELATING TO LITIGATION, INDEMNIFICATION,
REORGANIZATIONS AND LIQUIDATIONS) UNTIL 4/30/10.
Annual Report | 19
Performance Summary (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR A HYPOTHETICAL $10,000 INVESTMENT(1)
Total return represents the change in value of an investment over the periods
shown. It includes any current, 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.
AVERAGE ANNUAL TOTAL RETURN
CLASS A 12/31/09
- ------- --------
1-Year +17.52%
5-Year +3.67%
10-Year +3.48%
CLASS A (1/1/00-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN
TEMPLETON
MODERATE BARCLAYS
TARGET MSCI CAPITAL U.S. P&R 90-DAY
FUND - S&P 500 EAFE AGGREGATE U.S. TREASURY
DATE CLASS A INDEX INDEX INDEX BILL INDEX
- ---------- --------- ------- -------- ----------- -------------
1/1/2000 $ 9,422 $10,000 $10,000 $10,000 $10,000
1/31/2000 $ 9,308 $ 9,498 $ 9,366 $ 9,967 $10,039
2/29/2000 $10,342 $ 9,318 $ 9,620 $10,088 $10,084
3/31/2000 $10,136 $10,229 $ 9,995 $10,221 $10,135
4/30/2000 $ 9,647 $ 9,922 $ 9,471 $10,191 $10,186
5/31/2000 $ 9,380 $ 9,718 $ 9,241 $10,187 $10,241
6/30/2000 $ 9,962 $ 9,958 $ 9,605 $10,399 $10,285
7/31/2000 $ 9,862 $ 9,802 $ 9,204 $10,493 $10,333
8/31/2000 $10,408 $10,411 $ 9,286 $10,645 $10,386
9/30/2000 $10,178 $ 9,861 $ 8,836 $10,712 $10,443
10/31/2000 $ 9,806 $ 9,819 $ 8,629 $10,783 $10,496
11/30/2000 $ 9,008 $ 9,045 $ 8,307 $10,959 $10,554
12/31/2000 $ 9,319 $ 9,090 $ 8,604 $11,163 $10,615
1/31/2001 $ 9,653 $ 9,412 $ 8,600 $11,345 $10,684
2/28/2001 $ 9,136 $ 8,554 $ 7,956 $11,444 $10,727
3/31/2001 $ 8,783 $ 8,012 $ 7,429 $11,501 $10,781
4/30/2001 $ 9,221 $ 8,635 $ 7,950 $11,454 $10,825
5/31/2001 $ 9,269 $ 8,692 $ 7,676 $11,523 $10,867
6/30/2001 $ 9,181 $ 8,481 $ 7,365 $11,566 $10,899
7/31/2001 $ 9,068 $ 8,397 $ 7,232 $11,825 $10,935
8/31/2001 $ 8,860 $ 7,872 $ 7,050 $11,960 $10,971
9/30/2001 $ 8,207 $ 7,236 $ 6,337 $12,100 $11,019
10/31/2001 $ 8,497 $ 7,374 $ 6,499 $12,353 $11,048
11/30/2001 $ 8,788 $ 7,940 $ 6,739 $12,183 $11,071
12/31/2001 $ 8,929 $ 8,009 $ 6,780 $12,105 $11,089
1/31/2002 $ 8,896 $ 7,892 $ 6,420 $12,203 $11,104
2/28/2002 $ 8,838 $ 7,740 $ 6,465 $12,322 $11,119
3/31/2002 $ 9,102 $ 8,031 $ 6,818 $12,117 $11,136
4/30/2002 $ 9,077 $ 7,544 $ 6,868 $12,352 $11,153
5/31/2002 $ 9,019 $ 7,489 $ 6,961 $12,457 $11,170
6/30/2002 $ 8,682 $ 6,955 $ 6,686 $12,564 $11,187
7/31/2002 $ 8,190 $ 6,413 $ 6,027 $12,716 $11,202
8/31/2002 $ 8,248 $ 6,455 $ 6,014 $12,931 $11,219
9/30/2002 $ 7,861 $ 5,754 $ 5,370 $13,140 $11,237
10/31/2002 $ 8,096 $ 6,260 $ 5,659 $13,080 $11,254
11/30/2002 $ 8,381 $ 6,629 $ 5,917 $13,077 $11,271
12/31/2002 $ 8,257 $ 6,239 $ 5,718 $13,347 $11,283
1/31/2003 $ 8,198 $ 6,076 $ 5,480 $13,358 $11,296
2/28/2003 $ 8,147 $ 5,985 $ 5,355 $13,543 $11,305
3/31/2003 $ 8,121 $ 6,043 $ 5,253 $13,533 $11,318
4/30/2003 $ 8,503 $ 6,540 $ 5,774 $13,645 $11,329
5/31/2003 $ 8,918 $ 6,885 $ 6,130 $13,899 $11,341
6/30/2003 $ 8,988 $ 6,973 $ 6,281 $13,871 $11,355
7/31/2003 $ 9,048 $ 7,096 $ 6,434 $13,405 $11,363
8/31/2003 $ 9,320 $ 7,234 $ 6,591 $13,494 $11,371
9/30/2003 $ 9,349 $ 7,157 $ 6,795 $13,851 $11,381
10/31/2003 $ 9,674 $ 7,562 $ 7,219 $13,722 $11,390
11/30/2003 $ 9,870 $ 7,629 $ 7,381 $13,755 $11,399
12/31/2003 $10,105 $ 8,029 $ 7,958 $13,895 $11,408
1/31/2004 $10,200 $ 8,176 $ 8,071 $14,007 $11,418
2/29/2004 $10,312 $ 8,290 $ 8,258 $14,158 $11,425
3/31/2004 $10,337 $ 8,165 $ 8,308 $14,264 $11,435
4/30/2004 $10,018 $ 8,037 $ 8,127 $13,893 $11,443
5/31/2004 $10,121 $ 8,147 $ 8,162 $13,838 $11,451
6/30/2004 $10,267 $ 8,305 $ 8,345 $13,916 $11,456
7/31/2004 $10,060 $ 8,030 $ 8,075 $14,054 $11,467
8/31/2004 $10,137 $ 8,063 $ 8,112 $14,322 $11,478
9/30/2004 $10,356 $ 8,150 $ 8,326 $14,361 $11,491
10/31/2004 $10,521 $ 8,275 $ 8,610 $14,481 $11,504
11/30/2004 $10,859 $ 8,610 $ 9,201 $14,366 $11,516
12/31/2004 $11,080 $ 8,902 $ 9,605 $14,498 $11,538
1/31/2005 $10,879 $ 8,685 $ 9,429 $14,589 $11,554
2/28/2005 $11,106 $ 8,868 $ 9,839 $14,503 $11,572
3/31/2005 $10,921 $ 8,711 $ 9,595 $14,428 $11,599
4/30/2005 $10,746 $ 8,546 $ 9,381 $14,624 $11,623
5/31/2005 $10,956 $ 8,818 $ 9,395 $14,782 $11,650
6/30/2005 $11,094 $ 8,830 $ 9,523 $14,862 $11,676
7/31/2005 $11,340 $ 9,159 $ 9,816 $14,727 $11,702
8/31/2005 $11,384 $ 9,075 $10,067 $14,916 $11,734
9/30/2005 $11,498 $ 9,149 $10,517 $14,762 $11,767
10/31/2005 $11,278 $ 8,996 $10,211 $14,645 $11,795
11/30/2005 $11,578 $ 9,337 $10,463 $14,710 $11,834
12/31/2005 $11,738 $ 9,340 $10,951 $14,850 $11,871
1/31/2006 $12,194 $ 9,587 $11,624 $14,851 $11,905
2/28/2006 $12,185 $ 9,613 $11,600 $14,900 $11,943
3/31/2006 $12,372 $ 9,733 $11,988 $14,754 $11,990
4/30/2006 $12,506 $ 9,863 $12,570 $14,727 $12,033
5/31/2006 $12,166 $ 9,580 $12,097 $14,711 $12,080
6/30/2006 $12,188 $ 9,593 $12,101 $14,743 $12,125
7/31/2006 $12,142 $ 9,652 $12,222 $14,942 $12,175
8/31/2006 $12,341 $ 9,881 $12,562 $15,171 $12,228
9/30/2006 $12,389 $10,136 $12,583 $15,304 $12,282
10/31/2006 $12,707 $10,466 $13,074 $15,405 $12,330
11/30/2006 $13,025 $10,665 $13,468 $15,584 $12,382
12/31/2006 $13,096 $10,815 $13,892 $15,493 $12,436
1/31/2007 $13,245 $10,978 $13,987 $15,487 $12,486
2/28/2007 $13,255 $10,764 $14,102 $15,726 $12,535
3/31/2007 $13,419 $10,884 $14,468 $15,726 $12,592
4/30/2007 $13,746 $11,366 $15,124 $15,811 $12,646
5/31/2007 $14,018 $11,763 $15,409 $15,691 $12,703
6/30/2007 $13,966 $11,567 $15,433 $15,645 $12,751
7/31/2007 $13,802 $11,209 $15,207 $15,776 $12,799
8/31/2007 $13,860 $11,377 $14,973 $15,969 $12,872
9/30/2007 $14,401 $11,802 $15,777 $16,090 $12,919
10/31/2007 $14,807 $11,990 $16,399 $16,235 $12,958
11/30/2007 $14,362 $11,489 $15,864 $16,527 $13,017
12/31/2007 $14,326 $11,409 $15,508 $16,573 $13,047
1/31/2008 $13,797 $10,725 $14,077 $16,851 $13,114
2/29/2008 $13,777 $10,376 $14,283 $16,875 $13,136
3/31/2008 $13,623 $10,332 $14,139 $16,932 $13,167
4/30/2008 $14,034 $10,835 $14,925 $16,897 $13,181
5/31/2008 $14,244 $10,975 $15,099 $16,773 $13,187
6/30/2008 $13,582 $10,050 $13,867 $16,759 $13,207
7/31/2008 $13,438 $ 9,965 $13,423 $16,746 $13,233
8/31/2008 $13,469 $10,109 $12,883 $16,905 $13,251
9/30/2008 $12,624 $ 9,209 $11,024 $16,678 $13,287
10/31/2008 $11,262 $ 7,662 $ 8,800 $16,284 $13,308
11/30/2008 $10,939 $ 7,112 $ 8,329 $16,814 $13,322
12/31/2008 $11,287 $ 7,188 $ 8,830 $17,441 $13,320
1/31/2009 $10,959 $ 6,582 $ 7,965 $17,288 $13,319
2/28/2009 $10,430 $ 5,881 $ 7,151 $17,222 $13,321
3/31/2009 $10,977 $ 6,396 $ 7,607 $17,462 $13,325
4/30/2009 $11,710 $ 7,009 $ 8,593 $17,545 $13,329
5/31/2009 $12,221 $ 7,401 $ 9,626 $17,672 $13,330
6/30/2009 $12,215 $ 7,415 $ 9,574 $17,773 $13,331
7/31/2009 $12,870 $ 7,976 $10,449 $18,060 $13,333
8/31/2009 $13,063 $ 8,264 $11,019 $18,247 $13,336
9/30/2009 $13,586 $ 8,573 $11,443 $18,438 $13,338
10/31/2009 $13,435 $ 8,413 $11,300 $18,529 $13,341
11/30/2009 $13,802 $ 8,918 $11,529 $18,769 $13,342
12/31/2009 $14,072 $ 9,090 $11,697 $18,476 $13,342
AVERAGE ANNUAL TOTAL RETURN
CLASS B 12/31/09
- ------- --------
1-Year +19.65%
5-Year +3.76%
Since Inception (12/1/03) +5.15%
CLASS B (12/1/03-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN
TEMPLETON
MODERATE BARCLAYS
TARGET MSCI CAPITAL U.S. P&R 90-DAY
FUND - S&P 500 EAFE AGGREGATE U.S. TREASURY
DATE CLASS B INDEX INDEX INDEX BILL INDEX
- ---------- --------- ------- -------- ----------- -------------
12/1/2003 $10,000 $10,000 $10,000 $10,000 $10,000
12/31/2003 $10,189 $10,524 $10,782 $10,102 $10,008
1/31/2004 $10,284 $10,718 $10,935 $10,183 $10,016
2/29/2004 $10,389 $10,867 $11,189 $10,293 $10,023
3/31/2004 $10,410 $10,703 $11,257 $10,370 $10,031
4/30/2004 $10,088 $10,535 $11,012 $10,101 $10,038
5/31/2004 $10,184 $10,679 $11,059 $10,060 $10,045
6/30/2004 $10,327 $10,887 $11,306 $10,117 $10,050
7/31/2004 $10,110 $10,527 $10,941 $10,217 $10,059
8/31/2004 $10,188 $10,569 $10,991 $10,412 $10,069
9/30/2004 $10,393 $10,684 $11,280 $10,440 $10,080
10/31/2004 $10,550 $10,847 $11,666 $10,528 $10,092
11/30/2004 $10,890 $11,286 $12,466 $10,444 $10,102
12/31/2004 $11,098 $11,670 $13,013 $10,540 $10,122
1/31/2005 $10,896 $11,385 $12,775 $10,606 $10,136
2/28/2005 $11,115 $11,625 $13,330 $10,544 $10,151
3/31/2005 $10,917 $11,419 $13,001 $10,490 $10,175
4/30/2005 $10,742 $11,202 $12,710 $10,632 $10,196
5/31/2005 $10,944 $11,559 $12,729 $10,747 $10,220
6/30/2005 $11,079 $11,575 $12,903 $10,805 $10,243
7/31/2005 $11,317 $12,006 $13,299 $10,707 $10,265
8/31/2005 $11,352 $11,896 $13,639 $10,844 $10,293
9/30/2005 $11,454 $11,993 $14,250 $10,732 $10,323
10/31/2005 $11,225 $11,793 $13,834 $10,647 $10,347
11/30/2005 $11,516 $12,239 $14,177 $10,695 $10,381
12/31/2005 $11,672 $12,243 $14,837 $10,796 $10,414
1/31/2006 $12,118 $12,567 $15,749 $10,797 $10,443
2/28/2006 $12,100 $12,601 $15,717 $10,833 $10,477
3/31/2006 $12,274 $12,758 $16,243 $10,726 $10,518
4/30/2006 $12,408 $12,929 $17,030 $10,707 $10,555
5/31/2006 $12,060 $12,557 $16,389 $10,695 $10,597
6/30/2006 $12,075 $12,574 $16,395 $10,718 $10,637
7/31/2006 $12,021 $12,652 $16,560 $10,863 $10,680
8/31/2006 $12,209 $12,953 $17,019 $11,029 $10,727
9/30/2006 $12,252 $13,287 $17,049 $11,126 $10,774
10/31/2006 $12,559 $13,720 $17,714 $11,200 $10,816
11/30/2006 $12,856 $13,981 $18,248 $11,330 $10,862
12/31/2006 $12,922 $14,177 $18,822 $11,264 $10,909
1/31/2007 $13,060 $14,391 $18,951 $11,259 $10,953
2/28/2007 $13,070 $14,110 $19,106 $11,433 $10,996
3/31/2007 $13,216 $14,267 $19,603 $11,433 $11,046
4/30/2007 $13,530 $14,899 $20,491 $11,495 $11,094
5/31/2007 $13,789 $15,419 $20,878 $11,408 $11,143
6/30/2007 $13,729 $15,163 $20,910 $11,374 $11,185
7/31/2007 $13,559 $14,693 $20,604 $11,469 $11,228
8/31/2007 $13,606 $14,913 $20,287 $11,610 $11,292
9/30/2007 $14,133 $15,471 $21,376 $11,698 $11,333
10/31/2007 $14,523 $15,717 $22,219 $11,803 $11,367
11/30/2007 $14,076 $15,060 $21,494 $12,015 $11,419
12/31/2007 $14,034 $14,955 $21,011 $12,049 $11,445
1/31/2008 $13,495 $14,058 $19,072 $12,251 $11,504
2/29/2008 $13,475 $13,602 $19,352 $12,268 $11,524
3/31/2008 $13,317 $13,543 $19,157 $12,310 $11,550
4/30/2008 $13,710 $14,203 $20,222 $12,284 $11,562
5/31/2008 $13,907 $14,387 $20,457 $12,194 $11,568
6/30/2008 $13,244 $13,174 $18,788 $12,184 $11,586
7/31/2008 $13,103 $13,063 $18,187 $12,174 $11,609
8/31/2008 $13,123 $13,252 $17,454 $12,290 $11,624
9/30/2008 $12,292 $12,071 $14,937 $12,125 $11,656
10/31/2008 $10,961 $10,044 $11,923 $11,839 $11,674
11/30/2008 $10,636 $ 9,323 $11,285 $12,224 $11,687
12/31/2008 $10,976 $ 9,422 $11,964 $12,680 $11,685
1/31/2009 $10,645 $ 8,628 $10,792 $12,568 $11,684
2/28/2009 $10,130 $ 7,709 $ 9,688 $12,521 $11,685
3/31/2009 $10,644 $ 8,385 $10,307 $12,695 $11,689
4/30/2009 $11,347 $ 9,187 $11,643 $12,756 $11,692
5/31/2009 $11,833 $ 9,701 $13,042 $12,848 $11,694
6/30/2009 $11,826 $ 9,720 $12,971 $12,921 $11,694
7/31/2009 $12,453 $10,456 $14,157 $13,130 $11,696
8/31/2009 $12,630 $10,833 $14,929 $13,266 $11,699
9/30/2009 $13,136 $11,237 $15,504 $13,405 $11,700
10/31/2009 $12,979 $11,029 $15,311 $13,471 $11,703
11/30/2009 $13,325 $11,690 $15,621 $13,645 $11,704
12/31/2009 $13,571 $11,916 $15,848 $13,432 $11,704
20 | Annual Report
Performance Summary (CONTINUED)
CLASS C (1/1/00-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN
TEMPLETON
MODERATE BARCLAYS
TARGET MSCI CAPITAL U.S. P&R 90-DAY
FUND - S&P 500 EAFE AGGREGATE U.S. TREASURY
DATE CLASS C INDEX INDEX INDEX BILL INDEX
- ---------- --------- ------- -------- ----------- -------------
1/1/2000 $10,000 $10,000 $10,000 $10,000 $10,000
1/31/2000 $ 9,869 $ 9,498 $ 9,366 $ 9,967 $10,039
2/29/2000 $10,955 $ 9,318 $ 9,620 $10,088 $10,084
3/31/2000 $10,738 $10,229 $ 9,995 $10,221 $10,135
4/30/2000 $10,214 $ 9,922 $ 9,471 $10,191 $10,186
5/31/2000 $ 9,919 $ 9,718 $ 9,241 $10,187 $10,241
6/30/2000 $10,541 $ 9,958 $ 9,605 $10,399 $10,285
7/31/2000 $10,417 $ 9,802 $ 9,204 $10,493 $10,333
8/31/2000 $10,993 $10,411 $ 9,286 $10,645 $10,386
9/30/2000 $10,743 $ 9,861 $ 8,836 $10,712 $10,443
10/31/2000 $10,338 $ 9,819 $ 8,629 $10,783 $10,496
11/30/2000 $ 9,493 $ 9,045 $ 8,307 $10,959 $10,554
12/31/2000 $ 9,817 $ 9,090 $ 8,604 $11,163 $10,615
1/31/2001 $10,164 $ 9,412 $ 8,600 $11,345 $10,684
2/28/2001 $ 9,614 $ 8,554 $ 7,956 $11,444 $10,727
3/31/2001 $ 9,234 $ 8,012 $ 7,429 $11,501 $10,781
4/30/2001 $ 9,692 $ 8,635 $ 7,950 $11,454 $10,825
5/31/2001 $ 9,735 $ 8,692 $ 7,676 $11,523 $10,867
6/30/2001 $ 9,632 $ 8,481 $ 7,365 $11,566 $10,899
7/31/2001 $ 9,513 $ 8,397 $ 7,232 $11,825 $10,935
8/31/2001 $ 9,291 $ 7,872 $ 7,050 $11,960 $10,971
9/30/2001 $ 8,596 $ 7,236 $ 6,337 $12,100 $11,019
10/31/2001 $ 8,896 $ 7,374 $ 6,499 $12,353 $11,048
11/30/2001 $ 9,188 $ 7,940 $ 6,739 $12,183 $11,071
12/31/2001 $ 9,332 $ 8,009 $ 6,780 $12,105 $11,089
1/31/2002 $ 9,288 $ 7,892 $ 6,420 $12,203 $11,104
2/28/2002 $ 9,227 $ 7,740 $ 6,465 $12,322 $11,119
3/31/2002 $ 9,504 $ 8,031 $ 6,818 $12,117 $11,136
4/30/2002 $ 9,469 $ 7,544 $ 6,868 $12,352 $11,153
5/31/2002 $ 9,399 $ 7,489 $ 6,961 $12,457 $11,170
6/30/2002 $ 9,042 $ 6,955 $ 6,686 $12,564 $11,187
7/31/2002 $ 8,532 $ 6,413 $ 6,027 $12,716 $11,202
8/31/2002 $ 8,576 $ 6,455 $ 6,014 $12,931 $11,219
9/30/2002 $ 8,177 $ 5,754 $ 5,370 $13,140 $11,237
10/31/2002 $ 8,407 $ 6,260 $ 5,659 $13,080 $11,254
11/30/2002 $ 8,707 $ 6,629 $ 5,917 $13,077 $11,271
12/31/2002 $ 8,566 $ 6,239 $ 5,718 $13,347 $11,283
1/31/2003 $ 8,495 $ 6,076 $ 5,480 $13,358 $11,296
2/28/2003 $ 8,442 $ 5,985 $ 5,355 $13,543 $11,305
3/31/2003 $ 8,411 $ 6,043 $ 5,253 $13,533 $11,318
4/30/2003 $ 8,794 $ 6,540 $ 5,774 $13,645 $11,329
5/31/2003 $ 9,222 $ 6,885 $ 6,130 $13,899 $11,341
6/30/2003 $ 9,289 $ 6,973 $ 6,281 $13,871 $11,355
7/31/2003 $ 9,342 $ 7,096 $ 6,434 $13,405 $11,363
8/31/2003 $ 9,619 $ 7,234 $ 6,591 $13,494 $11,371
9/30/2003 $ 9,651 $ 7,157 $ 6,795 $13,851 $11,381
10/31/2003 $ 9,972 $ 7,562 $ 7,219 $13,722 $11,390
11/30/2003 $10,169 $ 7,629 $ 7,381 $13,755 $11,399
12/31/2003 $10,410 $ 8,029 $ 7,958 $13,895 $11,408
1/31/2004 $10,500 $ 8,176 $ 8,071 $14,007 $11,418
2/29/2004 $10,607 $ 8,290 $ 8,258 $14,158 $11,425
3/31/2004 $10,621 $ 8,165 $ 8,308 $14,264 $11,435
4/30/2004 $10,297 $ 8,037 $ 8,127 $13,893 $11,443
5/31/2004 $10,387 $ 8,147 $ 8,162 $13,838 $11,451
6/30/2004 $10,538 $ 8,305 $ 8,345 $13,916 $11,456
7/31/2004 $10,313 $ 8,030 $ 8,075 $14,054 $11,467
8/31/2004 $10,385 $ 8,063 $ 8,112 $14,322 $11,478
9/30/2004 $10,603 $ 8,150 $ 8,326 $14,361 $11,491
10/31/2004 $10,765 $ 8,275 $ 8,610 $14,481 $11,504
11/30/2004 $11,108 $ 8,610 $ 9,201 $14,366 $11,516
12/31/2004 $11,319 $ 8,902 $ 9,605 $14,498 $11,538
1/31/2005 $11,110 $ 8,685 $ 9,429 $14,589 $11,554
2/28/2005 $11,337 $ 8,868 $ 9,839 $14,503 $11,572
3/31/2005 $11,141 $ 8,711 $ 9,595 $14,428 $11,599
4/30/2005 $10,960 $ 8,546 $ 9,381 $14,624 $11,623
5/31/2005 $11,168 $ 8,818 $ 9,395 $14,782 $11,650
6/30/2005 $11,299 $ 8,830 $ 9,523 $14,862 $11,676
7/31/2005 $11,545 $ 9,159 $ 9,816 $14,727 $11,702
8/31/2005 $11,581 $ 9,075 $10,067 $14,916 $11,734
9/30/2005 $11,687 $ 9,149 $10,517 $14,762 $11,767
10/31/2005 $11,450 $ 8,996 $10,211 $14,645 $11,795
11/30/2005 $11,750 $ 9,337 $10,463 $14,710 $11,834
12/31/2005 $11,913 $ 9,340 $10,951 $14,850 $11,871
1/31/2006 $12,364 $ 9,587 $11,624 $14,851 $11,905
2/28/2006 $12,346 $ 9,613 $11,600 $14,900 $11,943
3/31/2006 $12,526 $ 9,733 $11,988 $14,754 $11,990
4/30/2006 $12,664 $ 9,863 $12,570 $14,727 $12,033
5/31/2006 $12,305 $ 9,580 $12,097 $14,711 $12,080
6/30/2006 $12,322 $ 9,593 $12,101 $14,743 $12,125
7/31/2006 $12,266 $ 9,652 $12,222 $14,942 $12,175
8/31/2006 $12,461 $ 9,881 $12,562 $15,171 $12,228
9/30/2006 $12,497 $10,136 $12,583 $15,304 $12,282
10/31/2006 $12,814 $10,466 $13,074 $15,405 $12,330
11/30/2006 $13,121 $10,665 $13,468 $15,584 $12,382
12/31/2006 $13,190 $10,815 $13,892 $15,493 $12,436
1/31/2007 $13,333 $10,978 $13,987 $15,487 $12,486
2/28/2007 $13,333 $10,764 $14,102 $15,726 $12,535
3/31/2007 $13,485 $10,884 $14,468 $15,726 $12,592
4/30/2007 $13,810 $11,366 $15,124 $15,811 $12,646
5/31/2007 $14,068 $11,763 $15,409 $15,691 $12,703
6/30/2007 $14,017 $11,567 $15,433 $15,645 $12,751
7/31/2007 $13,841 $11,209 $15,207 $15,776 $12,799
8/31/2007 $13,880 $11,377 $14,973 $15,969 $12,872
9/30/2007 $14,416 $11,802 $15,777 $16,090 $12,919
10/31/2007 $14,820 $11,990 $16,399 $16,235 $12,958
11/30/2007 $14,366 $11,489 $15,864 $16,527 $13,017
12/31/2007 $14,325 $11,409 $15,508 $16,573 $13,047
1/31/2008 $13,777 $10,725 $14,077 $16,851 $13,114
2/29/2008 $13,756 $10,376 $14,283 $16,875 $13,136
3/31/2008 $13,583 $10,332 $14,139 $16,932 $13,167
4/30/2008 $13,990 $10,835 $14,925 $16,897 $13,181
5/31/2008 $14,194 $10,975 $15,099 $16,773 $13,187
6/30/2008 $13,520 $10,050 $13,867 $16,759 $13,207
7/31/2008 $13,373 $ 9,965 $13,423 $16,746 $13,233
8/31/2008 $13,394 $10,109 $12,883 $16,905 $13,251
9/30/2008 $12,545 $ 9,209 $11,024 $16,678 $13,287
10/31/2008 $11,187 $ 7,662 $ 8,800 $16,284 $13,308
11/30/2008 $10,850 $ 7,112 $ 8,329 $16,814 $13,322
12/31/2008 $11,192 $ 7,188 $ 8,830 $17,441 $13,320
1/31/2009 $10,861 $ 6,582 $ 7,965 $17,288 $13,319
2/28/2009 $10,337 $ 5,881 $ 7,151 $17,222 $13,321
3/31/2009 $10,860 $ 6,396 $ 7,607 $17,462 $13,325
4/30/2009 $11,579 $ 7,009 $ 8,593 $17,545 $13,329
5/31/2009 $12,083 $ 7,401 $ 9,626 $17,672 $13,330
6/30/2009 $12,078 $ 7,415 $ 9,574 $17,773 $13,331
7/31/2009 $12,705 $ 7,976 $10,449 $18,060 $13,333
8/31/2009 $12,889 $ 8,264 $11,019 $18,247 $13,336
9/30/2009 $13,405 $ 8,573 $11,443 $18,438 $13,338
10/31/2009 $13,242 $ 8,413 $11,300 $18,529 $13,341
11/30/2009 $13,590 $ 8,918 $11,529 $18,769 $13,342
12/31/2009 $13,859 $ 9,090 $11,697 $18,476 $13,342
AVERAGE ANNUAL TOTAL RETURN
CLASS C 12/31/09
- ------- --------
1-Year +22.82%
5-Year +4.13%
10-Year +3.32%
CLASS R (1/1/02-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN
TEMPLETON
MODERATE BARCLAYS
TARGET MSCI CAPITAL U.S. P&R 90-DAY
FUND - S&P 500 EAFE AGGREGATE U.S. TREASURY
DATE CLASS R INDEX INDEX INDEX BILL INDEX
- ---------- --------- ------- -------- ----------- -------------
1/1/2002 $10,000 $10,000 $10,000 $10,000 $10,000
1/31/2002 $ 9,954 $ 9,854 $ 9,469 $10,081 $10,014
2/28/2002 $ 9,889 $ 9,664 $ 9,536 $10,179 $10,027
3/31/2002 $10,182 $10,027 $10,057 $10,009 $10,042
4/30/2002 $10,154 $ 9,420 $10,130 $10,204 $10,057
5/31/2002 $10,089 $ 9,350 $10,267 $10,290 $10,073
6/30/2002 $ 9,703 $ 8,684 $ 9,862 $10,379 $10,088
7/31/2002 $ 9,162 $ 8,007 $ 8,889 $10,505 $10,102
8/31/2002 $ 9,218 $ 8,060 $ 8,871 $10,682 $10,117
9/30/2002 $ 8,787 $ 7,184 $ 7,921 $10,855 $10,133
10/31/2002 $ 9,040 $ 7,816 $ 8,347 $10,806 $10,149
11/30/2002 $ 9,360 $ 8,276 $ 8,727 $10,803 $10,165
12/31/2002 $ 9,212 $ 7,790 $ 8,434 $11,026 $10,175
1/31/2003 $ 9,146 $ 7,586 $ 8,083 $11,035 $10,186
2/28/2003 $ 9,089 $ 7,472 $ 7,898 $11,188 $10,195
3/31/2003 $ 9,066 $ 7,545 $ 7,749 $11,179 $10,207
4/30/2003 $ 9,483 $ 8,166 $ 8,517 $11,272 $10,217
5/31/2003 $ 9,948 $ 8,596 $ 9,041 $11,482 $10,227
6/30/2003 $10,021 $ 8,706 $ 9,265 $11,459 $10,240
7/31/2003 $10,088 $ 8,859 $ 9,491 $11,074 $10,247
8/31/2003 $10,383 $ 9,032 $ 9,721 $11,147 $10,255
9/30/2003 $10,420 $ 8,936 $10,023 $11,442 $10,263
10/31/2003 $10,772 $ 9,442 $10,648 $11,336 $10,272
11/30/2003 $10,991 $ 9,525 $10,887 $11,363 $10,280
12/31/2003 $11,256 $10,024 $11,738 $11,478 $10,288
1/31/2004 $11,361 $10,208 $11,904 $11,571 $10,297
2/29/2004 $11,477 $10,350 $12,181 $11,696 $10,303
3/31/2004 $11,500 $10,194 $12,255 $11,784 $10,312
4/30/2004 $11,153 $10,034 $11,988 $11,477 $10,319
5/31/2004 $11,259 $10,172 $12,040 $11,431 $10,326
6/30/2004 $11,424 $10,370 $12,308 $11,496 $10,331
7/31/2004 $11,193 $10,026 $11,911 $11,610 $10,341
8/31/2004 $11,270 $10,067 $11,966 $11,831 $10,351
9/30/2004 $11,507 $10,176 $12,280 $11,863 $10,363
10/31/2004 $11,690 $10,332 $12,700 $11,963 $10,375
11/30/2004 $12,067 $10,750 $13,571 $11,867 $10,385
12/31/2004 $12,303 $11,115 $14,167 $11,976 $10,405
1/31/2005 $12,079 $10,844 $13,908 $12,052 $10,420
2/28/2005 $12,332 $11,073 $14,512 $11,981 $10,436
3/31/2005 $12,122 $10,877 $14,153 $11,919 $10,460
4/30/2005 $11,927 $10,670 $13,837 $12,080 $10,482
5/31/2005 $12,161 $11,010 $13,858 $12,211 $10,506
6/30/2005 $12,317 $11,025 $14,047 $12,278 $10,530
7/31/2005 $12,581 $11,435 $14,479 $12,166 $10,553
8/31/2005 $12,630 $11,331 $14,849 $12,322 $10,582
9/30/2005 $12,748 $11,423 $15,513 $12,195 $10,612
10/31/2005 $12,504 $11,232 $15,061 $12,098 $10,636
11/30/2005 $12,836 $11,657 $15,433 $12,152 $10,672
12/31/2005 $13,007 $11,661 $16,153 $12,267 $10,705
1/31/2006 $13,513 $11,970 $17,145 $12,268 $10,736
2/28/2006 $13,503 $12,003 $17,110 $12,309 $10,770
3/31/2006 $13,700 $12,152 $17,683 $12,188 $10,812
4/30/2006 $13,849 $12,315 $18,540 $12,166 $10,851
5/31/2006 $13,472 $11,961 $17,843 $12,153 $10,893
6/30/2006 $13,496 $11,977 $17,849 $12,179 $10,934
7/31/2006 $13,436 $12,051 $18,028 $12,343 $10,979
8/31/2006 $13,657 $12,338 $18,528 $12,532 $11,028
9/30/2006 $13,702 $12,655 $18,561 $12,642 $11,076
10/31/2006 $14,053 $13,068 $19,284 $12,726 $11,119
11/30/2006 $14,396 $13,316 $19,866 $12,874 $11,166
12/31/2006 $14,473 $13,503 $20,491 $12,799 $11,215
1/31/2007 $14,639 $13,707 $20,631 $12,794 $11,260
2/28/2007 $14,649 $13,439 $20,800 $12,991 $11,304
3/31/2007 $14,826 $13,590 $21,340 $12,991 $11,355
4/30/2007 $15,178 $14,192 $22,308 $13,061 $11,404
5/31/2007 $15,478 $14,687 $22,729 $12,962 $11,455
6/30/2007 $15,421 $14,443 $22,764 $12,924 $11,499
7/31/2007 $15,240 $13,995 $22,431 $13,032 $11,542
8/31/2007 $15,293 $14,205 $22,086 $13,192 $11,608
9/30/2007 $15,894 $14,736 $23,272 $13,292 $11,650
10/31/2007 $16,343 $14,970 $24,189 $13,411 $11,686
11/30/2007 $15,840 $14,345 $23,399 $13,652 $11,738
12/31/2007 $15,799 $14,245 $22,874 $13,691 $11,766
1/31/2008 $15,203 $13,391 $20,763 $13,921 $11,826
2/29/2008 $15,192 $12,956 $21,067 $13,940 $11,846
3/31/2008 $15,004 $12,900 $20,856 $13,987 $11,874
4/30/2008 $15,458 $13,528 $22,015 $13,958 $11,886
5/31/2008 $15,691 $13,703 $22,271 $13,856 $11,892
6/30/2008 $14,948 $12,548 $20,454 $13,845 $11,910
7/31/2008 $14,789 $12,442 $19,799 $13,833 $11,934
8/31/2008 $14,823 $12,622 $19,002 $13,965 $11,950
9/30/2008 $13,893 $11,498 $16,261 $13,777 $11,983
10/31/2008 $12,390 $ 9,567 $12,981 $13,452 $12,001
11/30/2008 $12,034 $ 8,880 $12,285 $13,890 $12,014
12/31/2008 $12,410 $ 8,975 $13,025 $14,408 $12,012
1/31/2009 $12,048 $ 8,218 $11,749 $14,281 $12,011
2/28/2009 $11,466 $ 7,343 $10,547 $14,227 $12,013
3/31/2009 $12,061 $ 7,986 $11,221 $14,425 $12,016
4/30/2009 $12,869 $ 8,751 $12,675 $14,494 $12,020
5/31/2009 $13,420 $ 9,240 $14,198 $14,599 $12,021
6/30/2009 $13,417 $ 9,259 $14,121 $14,682 $12,022
7/31/2009 $14,127 $ 9,959 $15,413 $14,919 $12,024
8/31/2009 $14,340 $10,318 $16,253 $15,073 $12,026
9/30/2009 $14,920 $10,703 $16,878 $15,232 $12,028
10/31/2009 $14,754 $10,505 $16,668 $15,307 $12,031
11/30/2009 $15,145 $11,135 $17,006 $15,505 $12,031
12/31/2009 $15,434 $11,350 $17,253 $15,263 $12,032
AVERAGE ANNUAL TOTAL RETURN
CLASS R 12/31/09
- ------- --------
1-Year +24.37%
5-Year +4.64%
Since Inception (1/1/02) +5.58%
Annual Report | 21
Performance Summary (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN
ADVISOR CLASS(6) 12/31/09
- ---------------- --------
1-Year +24.97%
5-Year +5.12%
10-Year +4.20%
ADVISOR CLASS (1/1/00-12/31/09)(6)
(PERFORMANCE GRAPH)
FRANKLIN
TEMPLETON
MODERATE
TARGET BARCLAYS
FUND - MSCI CAPITAL U.S. P&R 90-DAY
ADVISOR S&P 500 EAFE AGGREGATE U.S. TREASURY
DATE CLASS INDEX INDEX INDEX BILL INDEX
- ---------- --------- ------- -------- ----------- -------------
1/1/2000 $10,000 $10,000 $10,000 $10,000 $10,000
1/31/2000 $ 9,879 $ 9,498 $ 9,366 $ 9,967 $10,039
2/29/2000 $10,977 $ 9,318 $ 9,620 $10,088 $10,084
3/31/2000 $10,758 $10,229 $ 9,995 $10,221 $10,135
4/30/2000 $10,239 $ 9,922 $ 9,471 $10,191 $10,186
5/31/2000 $ 9,955 $ 9,718 $ 9,241 $10,187 $10,241
6/30/2000 $10,573 $ 9,958 $ 9,605 $10,399 $10,285
7/31/2000 $10,467 $ 9,802 $ 9,204 $10,493 $10,333
8/31/2000 $11,046 $10,411 $ 9,286 $10,645 $10,386
9/30/2000 $10,802 $ 9,861 $ 8,836 $10,712 $10,443
10/31/2000 $10,408 $ 9,819 $ 8,629 $10,783 $10,496
11/30/2000 $ 9,561 $ 9,045 $ 8,307 $10,959 $10,554
12/31/2000 $ 9,891 $ 9,090 $ 8,604 $11,163 $10,615
1/31/2001 $10,245 $ 9,412 $ 8,600 $11,345 $10,684
2/28/2001 $ 9,697 $ 8,554 $ 7,956 $11,444 $10,727
3/31/2001 $ 9,321 $ 8,012 $ 7,429 $11,501 $10,781
4/30/2001 $ 9,787 $ 8,635 $ 7,950 $11,454 $10,825
5/31/2001 $ 9,838 $ 8,692 $ 7,676 $11,523 $10,867
6/30/2001 $ 9,744 $ 8,481 $ 7,365 $11,566 $10,899
7/31/2001 $ 9,625 $ 8,397 $ 7,232 $11,825 $10,935
8/31/2001 $ 9,403 $ 7,872 $ 7,050 $11,960 $10,971
9/30/2001 $ 8,710 $ 7,236 $ 6,337 $12,100 $11,019
10/31/2001 $ 9,019 $ 7,374 $ 6,499 $12,353 $11,048
11/30/2001 $ 9,327 $ 7,940 $ 6,739 $12,183 $11,071
12/31/2001 $ 9,477 $ 8,009 $ 6,780 $12,105 $11,089
1/31/2002 $ 9,442 $ 7,892 $ 6,420 $12,203 $11,104
2/28/2002 $ 9,380 $ 7,740 $ 6,465 $12,322 $11,119
3/31/2002 $ 9,660 $ 8,031 $ 6,818 $12,117 $11,136
4/30/2002 $ 9,634 $ 7,544 $ 6,868 $12,352 $11,153
5/31/2002 $ 9,572 $ 7,489 $ 6,961 $12,457 $11,170
6/30/2002 $ 9,214 $ 6,955 $ 6,686 $12,564 $11,187
7/31/2002 $ 8,692 $ 6,413 $ 6,027 $12,716 $11,202
8/31/2002 $ 8,754 $ 6,455 $ 6,014 $12,931 $11,219
9/30/2002 $ 8,343 $ 5,754 $ 5,370 $13,140 $11,237
10/31/2002 $ 8,592 $ 6,260 $ 5,659 $13,080 $11,254
11/30/2002 $ 8,895 $ 6,629 $ 5,917 $13,077 $11,271
12/31/2002 $ 8,764 $ 6,239 $ 5,718 $13,347 $11,283
1/31/2003 $ 8,701 $ 6,076 $ 5,480 $13,358 $11,296
2/28/2003 $ 8,647 $ 5,985 $ 5,355 $13,543 $11,305
3/31/2003 $ 8,619 $ 6,043 $ 5,253 $13,533 $11,318
4/30/2003 $ 9,024 $ 6,540 $ 5,774 $13,645 $11,329
5/31/2003 $ 9,465 $ 6,885 $ 6,130 $13,899 $11,341
6/30/2003 $ 9,539 $ 6,973 $ 6,281 $13,871 $11,355
7/31/2003 $ 9,603 $ 7,096 $ 6,434 $13,405 $11,363
8/31/2003 $ 9,891 $ 7,234 $ 6,591 $13,494 $11,371
9/30/2003 $ 9,923 $ 7,157 $ 6,795 $13,851 $11,381
10/31/2003 $10,267 $ 7,562 $ 7,219 $13,722 $11,390
11/30/2003 $10,475 $ 7,629 $ 7,381 $13,755 $11,399
12/31/2003 $10,725 $ 8,029 $ 7,958 $13,895 $11,408
1/31/2004 $10,826 $ 8,176 $ 8,071 $14,007 $11,418
2/29/2004 $10,944 $ 8,290 $ 8,258 $14,158 $11,425
3/31/2004 $10,971 $ 8,165 $ 8,308 $14,264 $11,435
4/30/2004 $10,632 $ 8,037 $ 8,127 $13,893 $11,443
5/31/2004 $10,742 $ 8,147 $ 8,162 $13,838 $11,451
6/30/2004 $10,897 $ 8,305 $ 8,345 $13,916 $11,456
7/31/2004 $10,677 $ 8,030 $ 8,075 $14,054 $11,467
8/31/2004 $10,759 $ 8,063 $ 8,112 $14,322 $11,478
9/30/2004 $10,992 $ 8,150 $ 8,326 $14,361 $11,491
10/31/2004 $11,166 $ 8,275 $ 8,610 $14,481 $11,504
11/30/2004 $11,525 $ 8,610 $ 9,201 $14,366 $11,516
12/31/2004 $11,759 $ 8,902 $ 9,605 $14,498 $11,538
1/31/2005 $11,546 $ 8,685 $ 9,429 $14,589 $11,554
2/28/2005 $11,787 $ 8,868 $ 9,839 $14,503 $11,572
3/31/2005 $11,591 $ 8,711 $ 9,595 $14,428 $11,599
4/30/2005 $11,405 $ 8,546 $ 9,381 $14,624 $11,623
5/31/2005 $11,628 $ 8,818 $ 9,395 $14,782 $11,650
6/30/2005 $11,775 $ 8,830 $ 9,523 $14,862 $11,676
7/31/2005 $12,036 $ 9,159 $ 9,816 $14,727 $11,702
8/31/2005 $12,082 $ 9,075 $10,067 $14,916 $11,734
9/30/2005 $12,204 $ 9,149 $10,517 $14,762 $11,767
10/31/2005 $11,970 $ 8,996 $10,211 $14,645 $11,795
11/30/2005 $12,288 $ 9,337 $10,463 $14,710 $11,834
12/31/2005 $12,465 $ 9,340 $10,951 $14,850 $11,871
1/31/2006 $12,959 $ 9,587 $11,624 $14,851 $11,905
2/28/2006 $12,949 $ 9,613 $11,600 $14,900 $11,943
3/31/2006 $13,147 $ 9,733 $11,988 $14,754 $11,990
4/30/2006 $13,299 $ 9,863 $12,570 $14,727 $12,033
5/31/2006 $12,937 $ 9,580 $12,097 $14,711 $12,080
6/30/2006 $12,969 $ 9,593 $12,101 $14,743 $12,125
7/31/2006 $12,921 $ 9,652 $12,222 $14,942 $12,175
8/31/2006 $13,132 $ 9,881 $12,562 $15,171 $12,228
9/30/2006 $13,181 $10,136 $12,583 $15,304 $12,282
10/31/2006 $13,529 $10,466 $13,074 $15,405 $12,330
11/30/2006 $13,868 $10,665 $13,468 $15,584 $12,382
12/31/2006 $13,945 $10,815 $13,892 $15,493 $12,436
1/31/2007 $14,114 $10,978 $13,987 $15,487 $12,486
2/28/2007 $14,124 $10,764 $14,102 $15,726 $12,535
3/31/2007 $14,294 $10,884 $14,468 $15,726 $12,592
4/30/2007 $14,643 $11,366 $15,124 $15,811 $12,646
5/31/2007 $14,943 $11,763 $15,409 $15,691 $12,703
6/30/2007 $14,896 $11,567 $15,433 $15,645 $12,751
7/31/2007 $14,722 $11,209 $15,207 $15,776 $12,799
8/31/2007 $14,773 $11,377 $14,973 $15,969 $12,872
9/30/2007 $15,359 $11,802 $15,777 $16,090 $12,919
10/31/2007 $15,803 $11,990 $16,399 $16,235 $12,958
11/30/2007 $15,328 $11,489 $15,864 $16,527 $13,017
12/31/2007 $15,292 $11,409 $15,508 $16,573 $13,047
1/31/2008 $14,727 $10,725 $14,077 $16,851 $13,114
2/29/2008 $14,717 $10,376 $14,283 $16,875 $13,136
3/31/2008 $14,547 $10,332 $14,139 $16,932 $13,167
4/30/2008 $14,996 $10,835 $14,925 $16,897 $13,181
5/31/2008 $15,221 $10,975 $15,099 $16,773 $13,187
6/30/2008 $14,515 $10,050 $13,867 $16,759 $13,207
7/31/2008 $14,361 $ 9,965 $13,423 $16,746 $13,233
8/31/2008 $14,405 $10,109 $12,883 $16,905 $13,251
9/30/2008 $13,500 $ 9,209 $11,024 $16,678 $13,287
10/31/2008 $12,043 $ 7,662 $ 8,800 $16,284 $13,308
11/30/2008 $11,698 $ 7,112 $ 8,329 $16,814 $13,322
12/31/2008 $12,077 $ 7,188 $ 8,830 $17,441 $13,320
1/31/2009 $11,726 $ 6,582 $ 7,965 $17,288 $13,319
2/28/2009 $11,172 $ 5,881 $ 7,151 $17,222 $13,321
3/31/2009 $11,753 $ 6,396 $ 7,607 $17,462 $13,325
4/30/2009 $12,538 $ 7,009 $ 8,593 $17,545 $13,329
5/31/2009 $13,084 $ 7,401 $ 9,626 $17,672 $13,330
6/30/2009 $13,086 $ 7,415 $ 9,574 $17,773 $13,331
7/31/2009 $13,788 $ 7,976 $10,449 $18,060 $13,333
8/31/2009 $14,006 $ 8,264 $11,019 $18,247 $13,336
9/30/2009 $14,562 $ 8,573 $11,443 $18,438 $13,338
10/31/2009 $14,412 $ 8,413 $11,300 $18,529 $13,341
11/30/2009 $14,794 $ 8,918 $11,529 $18,769 $13,342
12/31/2009 $15,093 $ 9,090 $11,697 $18,476 $13,342
ENDNOTES
WHILE AN ASSET ALLOCATION PLAN CAN BE A VALUABLE TOOL TO HELP REDUCE OVERALL
VOLATILITY, ALL INVESTMENTS INVOLVE SOME DEGREE OF RISK. TYPICALLY, THE MORE
AGGRESSIVE THE INVESTMENT, OR THE GREATER THE POTENTIAL RETURN, THE MORE RISK
INVOLVED. GENERALLY, INVESTORS SHOULD BE COMFORTABLE WITH SOME FLUCTUATION IN
THE VALUE OF THEIR INVESTMENTS, ESPECIALLY OVER THE SHORT TERM. STOCKS HAVE
HISTORICALLY OUTPERFORMED OTHER ASSET CLASSES OVER THE LONG TERM, BUT THEY TEND
TO FLUCTUATE MORE DRAMATICALLY OVER THE SHORTER TERM. BOND PRICES GENERALLY MOVE
IN THE OPPOSITE DIRECTION OF INTEREST RATES. THUS, AS PRICES OF BONDS IN A FUND
ADJUST TO A RISE IN INTEREST RATES, THAT FUND'S SHARE PRICE MAY DECLINE. BECAUSE
THIS FUND INVESTS IN UNDERLYING FUNDS, WHICH MAY ENGAGE IN A VARIETY OF
INVESTMENT STRATEGIES INVOLVING CERTAIN RISKS, THE FUND MAY BE SUBJECT TO THOSE
SAME RISKS. THESE RISKS ARE DESCRIBED IN THE FUND'S PROSPECTUS.
CLASS B: These shares have higher annual fees and expenses than Class A
shares.
CLASS C: Prior to 1/1/04, these shares were offered with an initial sales
charge; thus actual total returns would have differed. These
shares have higher annual fees and expenses than Class A shares.
CLASS R: Shares are available to certain eligible investors as described
in the prospectus. These shares have higher annual fees and
expenses than Class A shares.
ADVISOR CLASS: Shares are available to certain eligible investors as described
in the prospectus.
(1.) If the manager had not waived fees, the Fund's total returns would have
been lower.
(2.) Cumulative total return represents the change in value of an investment
over the periods indicated.
(3.) Average annual total return represents the average annual change in value
of an investment over the periods indicated.
(4.) These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated.
(5.) Figures are as stated in the Fund's prospectus current as of the date of
this report. In periods of market volatility, assets may decline
significantly, causing total annual fund operating expenses to become
higher than the figures shown.
(6.) Effective 12/1/05, the Fund began offering Advisor Class shares, which do
not have sales charges or a Rule 12b-1 plan. Performance quotations for
this class reflect the following methods of calculation: (a) For periods
prior to 12/1/05, a restated figure is used based upon the Fund's Class A
performance, excluding the effect of Class A's maximum initial sales
charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b)
for periods after 11/30/05, actual Advisor Class performance is used
reflecting all charges and fees applicable to that class. Since 12/1/05
(commencement of sales), the cumulative and average annual total returns of
Advisor Class shares were +21.90% and +4.97%.
(7.) Source: (C) 2009 Morningstar. See page 16 for descriptions of the S&P 500,
the MSCI EAFE Index, the BC U.S. Aggregate Index and the P&R 90 Day U.S.
T-Bill Index.
22 | Annual Report
Your Fund's Expenses
FRANKLIN TEMPLETON MODERATE TARGET FUND
As a Fund shareholder, you can incur two types of costs:
- - Transaction costs, including sales charges (loads) on Fund purchases; and
- - Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
Annual Report | 23
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES.
Therefore, the second line for each class is useful in comparing ongoing costs
only, and will not help you compare total costs of owning different funds. In
addition, if transaction costs were included, your total costs would have been
higher. Please refer to the Fund prospectus for additional information on
operating expenses.
BEGINNING ENDING EXPENSES PAID EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD**
7/1/09 12/31/09 7/1/09-12/31/09 7/1/09-12/31/09
------------- ------------- --------------- ---------------
CLASS A
Actual $1,000 $1,152.10 $2.71 $ 6.94
Hypothetical
(5% return before expenses) $1,000 $1,022.68 $2.55 $ 6.51
CLASS B
Actual $1,000 $1,147.50 $6.71 $10.93
Hypothetical
(5% return before expenses) $1,000 $1,018.95 $6.31 $10.26
CLASS C
Actual $1,000 $1,147.50 $6.77 $10.99
Hypothetical
(5% return before expenses) $1,000 $1,018.90 $6.36 $10.31
CLASS R
Actual $1,000 $1,150.40 $4.07 $ 8.29
Hypothetical
(5% return before expenses) $1,000 $1,021.42 $3.82 $ 7.78
ADVISOR CLASS
Actual $1,000 $1,153.40 $1.36 $ 5.59
Hypothetical
(5% return before expenses) $1,000 $1,023.95 $1.28 $ 5.24
* Expenses are calculated using the most recent six-month expense ratio
excluding expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 0.50%; B: 1.24%; C: 1.25%; R: 0.75%; and
Advisor: 0.25%), multiplied by the average account value over the period,
multiplied by 184/365 to reflect the one-half year period. A portion of the
Fund's expenses have been paid by the underlying funds in which the Fund
invests.
** Expenses are calculated using the most recent six-month expense ratio
including expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 1.28%; B: 2.02%; C: 2.03%; R: 1.53%; and
Advisor: 1.03%), multiplied by the average account value over the period,
multiplied by 184/365 to reflect the one-half year period. A portion of the
Fund's expenses have been paid by the underlying funds in which the Fund
invests.
24 | Annual Report
Franklin Templeton Growth Target Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin Templeton Growth Target Fund
seeks the highest level of long-term total return consistent with a higher level
of risk.(1)
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT franklintempleton.com OR CALL (800) 342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
ASSET ALLOCATION*
Franklin Templeton Growth Target Fund
Based on Total Net Assets as of 12/31/09
(PIE CHART)
Domestic Equity............................. 56.9%
Foreign Equity.............................. 24.7%
Domestic Fixed Income....................... 8.4%
Foreign Fixed Income........................ 5.4%
Short-Term Investments & Other Net Assets... 4.6%
* The asset allocation is based on the Statement of Investments (SOI), which
classifies each underlying fund into a broad asset class.
PERFORMANCE OVERVIEW
Franklin Templeton Growth Target Fund - Class A delivered a +31.08% cumulative
total return for the 12 months under review. By comparison the Fund's
benchmarks, the Standard & Poor's 500 Index (S&P 500) and Morgan Stanley Capital
International (MSCI) Europe, Australasia, Far East (EAFE) Index for equities,
the Barclays Capital (BC) U.S. Aggregate Index for fixed income, and the Payden
& Rygel (P&R) 90 Day U.S. T-Bill Index for short-term investments
(1.) The risk/reward potential is based on the Fund's goal and level of risk. It
is not indicative of the Fund's actual or implied performance or portfolio
composition, which may change on a continuous basis.
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 52.
Annual Report | 25
TOP 10 FUND HOLDINGS
Franklin Templeton Growth Target Fund 12/31/09
% OF TOTAL
NET ASSETS
----------
Franklin Flex Cap Growth Fund
- - Advisor Class 20.2%
Mutual Shares Fund - Class Z 14.2%
Franklin Growth Opportunities Fund
- - Advisor Class 8.7%
Mutual European Fund - Class Z 8.5%
Templeton Foreign Fund
- - Advisor Class 7.7%
Templeton Global Bond Fund
- - Advisor Class 4.7%
Franklin U.S. Government Securities
Fund - Advisor Class 4.6%
Franklin Gold and Precious Metals Fund
- - Advisor Class 4.5%
Templeton China World Fund
- - Advisor Class 3.9%
Franklin Total Return Fund
- - Advisor Class 3.8%
and other net assets, posted total returns of +26.46%, +32.46%, +5.93% and
+0.17%, respectively, during the same time.(2) You can find the Fund's long-term
performance data in the Performance Summary beginning on page 28.
INVESTMENT STRATEGY
Whenever possible, we attempt to hold the same underlying Franklin Templeton
funds in each Target Fund's portfolio and will vary the underlying funds'
allocation percentages based upon each Target Fund's risk/return level.
Maintaining similarity of the underlying Franklin Templeton fund investments
across the Conservative, Moderate and Growth Target 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 underlying funds' 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.
MANAGER'S DISCUSSION
The Fund's performance can be attributed to its allocation among equities, fixed
income securities, and short-term investments and other net assets, and by the
actual performance of the selected underlying funds.
At period-end, Franklin Templeton Growth Target Fund's domestic equity exposure
was 69.7% of its total equity weighting, with the balance represented by foreign
equity. The portfolio was diversified across capitalization sizes and investment
styles, and on December 31, 2009, we held shares in large-, mid-and
small-capitalization equity funds, representing both growth and value
(2.) Source: (C) 2009 Morningstar. All Rights Reserved. The information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted
to be accurate, complete or timely. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from any use of
this information. The S&P 500 consists of 500 stocks chosen for market
size, liquidity and industry group representation. Each stock's weight in
the index is proportionate to its market value. The S&P 500 is one of the
most widely used benchmarks of U.S. equity performance. The MSCI EAFE Index
is a free float-adjusted, market capitalization-weighted index designed to
measure equity market performance in global developed markets excluding the
U.S. and Canada. The BC U.S. Aggregate Index is a market
capitalization-weighted index representing the U.S. investment-grade,
fixed-rate, taxable bond market with index components for government and
corporate, mortgage pass-through and asset-backed securities. All issues
included are SEC registered, taxable, dollar denominated and
nonconvertible, must have at least one year to final maturity and must be
rated investment grade (Baa3/BBB-/BBB- or higher) by Moody's, Standard &
Poor's or Fitch, respectively. The P&R 90 Day U.S. T-Bill Index is a total
return index based on a constant maturity instrument. Payden & Rygel
includes both accrued interest and change in market price in its monthly
total return calculations. The value of Treasuries, if held to maturity, is
fixed; principal is guaranteed and interest is fixed. The indexes are
unmanaged and include reinvested distributions. One cannot invest directly
in an index, and an index is not representative of the Fund's portfolio.
26 | Annual Report
styles. Franklin Flex Cap Growth Fund - Advisor Class, representing 20.2% of the
Fund's total net assets, was our largest equity fund weighting at period-end. On
the fixed income side, domestic exposure was 60.9% of the Fund's total income
weighting, with the balance represented by foreign fixed income. Templeton
Global Bond Fund - Advisor Class was our largest fixed income fund weighting at
4.7% of total net assets.
Our largest domestic growth fund holding, Franklin Flex Cap Growth Fund -Advisor
Class, and our largest domestic value fund holding, Mutual Shares Fund -Class Z,
outperformed the S&P 500 during the 12-month reporting period. Our largest
foreign equity fund holding, Mutual European Fund - Class Z, under-performed the
MSCI EAFE Index; however, Templeton Foreign Fund - Advisor Class outperformed.
On the fixed income side, Franklin U.S. Government Securities Fund - Advisor
class underperformed the BC U.S. Aggregate Index while Templeton Global Bond
Fund - Advisor Class outperformed.
Thank you for your continued participation in Franklin Templeton Growth Target
Fund. We look forward to serving your future investment needs.
(PHOTO OF T. ANTHONY COFFEY)
/s/ T. Anthony Coffey
T. Anthony Coffey, CFA
Portfolio Manager
Franklin Templeton Growth Target Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF DECEMBER 31, 2009, 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.
Annual Report | 27
Performance Summary as of 12/31/09
FRANKLIN TEMPLETON GROWTH TARGET FUND
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table 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.
PRICE AND DISTRIBUTION INFORMATION
CLASS A (SYMBOL: FGTIX) CHANGE 12/31/09 12/31/08
- ----------------------- ------ -------- --------
Net Asset Value (NAV) +$3.03 $13.51 $10.48
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.2099
Long-Term Capital Gain $0.0048
TOTAL $0.2147
CLASS B (SYMBOL: N/A) CHANGE 12/31/09 12/31/08
- --------------------- ------ -------- --------
Net Asset Value (NAV) +$2.96 $13.28 $10.32
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.1266
Long-Term Capital Gain $0.0048
TOTAL $0.1314
CLASS C (SYMBOL: FTGTX) CHANGE 12/31/09 12/31/08
- ----------------------- ------ -------- --------
Net Asset Value (NAV) +$2.97 $13.28 $10.31
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.1276
Long-Term Capital Gain $0.0048
TOTAL $0.1324
CLASS R (SYMBOL: FGTRX) CHANGE 12/31/09 12/31/08
- ----------------------- ------ -------- --------
Net Asset Value (NAV) +$3.00 $13.38 $10.38
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.1873
Long-Term Capital Gain $0.0048
TOTAL $0.1921
ADVISOR CLASS (SYMBOL: FGTZX) CHANGE 12/31/09 12/31/08
- ----------------------------- ------ -------- --------
Net Asset Value (NAV) +$3.04 $13.53 $10.49
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.2383
Long-Term Capital Gain $0.0048
TOTAL $0.2431
28 | Annual Report
Performance Summary (CONTINUED)
PERFORMANCE(1)
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURN AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES. CLASS A: 5.75%
MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES CHARGE (CDSC)
DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER; CLASS C: 1%
CDSC IN FIRST YEAR ONLY; CLASS R/ADVISOR CLASS: NO SALES CHARGES.
CLASS A 1-YEAR 5-YEAR 10-YEAR
- ------- ------- ------- -------
Cumulative Total Return(2) +31.08% +24.01% +28.92%
Average Annual Total Return(3) +23.54% +3.17% +1.97%
Value of $10,000 Investment(4) $12,354 $11,691 $12,155
Total Annual Operating Expenses(5)
Without Waiver 1.58%
With Waiver 1.31%
INCEPTION
CLASS B 1-YEAR 5-YEAR (12/1/03)
- ------- ------- ------- ---------
Cumulative Total Return(2) +30.05% +19.44% +34.23%
Average Annual Total Return(3) +26.05% +3.27% +4.96%
Value of $10,000 Investment(4) $12,605 $11,744 $13,423
Total Annual Operating Expenses(5)
Without Waiver 2.33%
With Waiver 2.06%
CLASS C 1-YEAR 5-YEAR 10-YEAR
- ------- ------- ------- -------
Cumulative Total Return(2) +30.19% +19.49% +19.70%
Average Annual Total Return(3) +29.19% +3.63% +1.81%
Value of $10,000 Investment(4) $12,919 $11,949 $11,970
Total Annual Operating Expenses(5)
Without Waiver 2.33%
With Waiver 2.06%
INCEPTION
CLASS R 1-YEAR 5-YEAR (1/1/02)
- ------- -------- -------- ---------
Cumulative Total Return(2) +30.87% +22.50% +50.14%
Average Annual Total Return(3) +30.87% +4.14% +5.22%
Value of $10,000 Investment(4) $ 13,087 $ 12,250 $ 15,014
Total Annual Operating Expenses(5)
Without Waiver 1.83%
With Waiver 1.56%
ADVISOR CLASS(6) 1-YEAR 5-YEAR 10-YEAR
- ---------------- ------- ------- ---------
Cumulative Total Return(2) +31.43% +25.33% +30.29%
Average Annual Total Return(3) +31.43% +4.62% +2.68%
Value of $10,000 Investment(4) $13,143 $12,533 $13,029
Total Annual Operating Expenses(5)
Without Waiver 1.33%
With Waiver 1.06%
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.
THE INVESTMENT MANAGER HAS CONTRACTUALLY AGREED TO WAIVE OR LIMIT ITS FEES AND
TO ASSUME AS ITS OWN EXPENSE CERTAIN EXPENSES OTHERWISE PAYABLE BY THE FUND SO
THAT COMMON EXPENSES (I.E., A COMBINATION OF ASSET ALLOCATION FEES AND OTHER
EXPENSES, BUT EXCLUDING RULE 12B-1 FEES AND ACQUIRED FUND FEES AND EXPENSES) FOR
EACH CLASS OF THE FUND DO NOT EXCEED 0.25% (OTHER THAN CERTAIN NONROUTINE
EXPENSES OR COSTS, INCLUDING THOSE RELATING TO LITIGATION, INDEMNIFICATION,
REORGANIZATIONS AND LIQUIDATIONS) UNTIL 4/30/10.
Annual Report | 29
Performance Summary (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR A HYPOTHETICAL $10,000 INVESTMENT(1)
Total return represents the change in value of an investment over the periods
shown. It includes any current, 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.
AVERAGE ANNUAL TOTAL RETURN
CLASS A 12/31/09
- ------- --------
1-Year +23.54%
5-Year +3.17%
10-Year +1.97%
CLASS A (1/1/00-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON
CONSERVATIVE TARGET S&P 500 MSCI EAFE BARCLAYS CAPITAL P&R 90-DAY U.S.
DATE FUND - CLASS A INDEX INDEX U.S. AGGREGATE INDEX TREASURY BILL INDEX
- ---------- ------------------- ------- ----------- -------------------- -------------------
1/1/2000 $ 9,421 $10,000 $10,000 $10,000 $10,000
1/31/2000 $ 9,320 $ 9,498 $ 9,366 $ 9,967 $10,039
2/28/2000 $10,094 $ 9,318 $ 9,620 $10,088 $10,084
3/31/2000 $ 9,953 $10,229 $ 9,995 $10,221 $10,135
4/30/2000 $ 9,583 $ 9,922 $ 9,471 $10,191 $10,186
5/31/2000 $ 9,379 $ 9,718 $ 9,241 $10,187 $10,241
6/30/2000 $ 9,649 $ 9,958 $ 9,605 $10,399 $10,285
7/31/2000 $ 9,625 $ 9,802 $ 9,204 $10,493 $10,333
8/31/2000 $ 9,998 $10,411 $ 9,286 $10,645 $10,386
9/30/2000 $ 9,895 $ 9,861 $ 8,836 $10,712 $10,443
10/31/2000 $ 9,758 $ 9,819 $ 8,629 $10,783 $10,496
11/30/2000 $ 9,405 $ 9,045 $ 8,307 $10,959 $10,554
12/31/2000 $ 9,709 $ 9,090 $ 8,604 $11,163 $10,615
1/31/2001 $ 9,971 $ 9,412 $ 8,600 $11,345 $10,684
2/28/2001 $ 9,658 $ 8,554 $ 7,956 $11,444 $10,727
3/31/2001 $ 9,409 $ 8,012 $ 7,429 $11,501 $10,781
4/30/2001 $ 9,707 $ 8,635 $ 7,950 $11,454 $10,825
5/31/2001 $ 9,767 $ 8,692 $ 7,676 $11,523 $10,867
6/30/2001 $ 9,724 $ 8,481 $ 7,365 $11,566 $10,899
7/31/2001 $ 9,681 $ 8,397 $ 7,232 $11,825 $10,935
8/31/2001 $ 9,561 $ 7,872 $ 7,050 $11,960 $10,971
9/30/2001 $ 9,039 $ 7,236 $ 6,337 $12,100 $11,019
10/31/2001 $ 9,290 $ 7,374 $ 6,499 $12,353 $11,048
11/30/2001 $ 9,515 $ 7,940 $ 6,739 $12,183 $11,071
12/31/2001 $ 9,620 $ 8,009 $ 6,780 $12,105 $11,089
1/31/2002 $ 9,611 $ 7,892 $ 6,420 $12,203 $11,104
2/28/2002 $ 9,602 $ 7,740 $ 6,465 $12,322 $11,119
3/31/2002 $ 9,800 $ 8,031 $ 6,818 $12,117 $11,136
4/30/2002 $ 9,827 $ 7,544 $ 6,868 $12,352 $11,153
5/31/2002 $ 9,791 $ 7,489 $ 6,961 $12,457 $11,170
6/30/2002 $ 9,508 $ 6,955 $ 6,686 $12,564 $11,187
7/31/2002 $ 9,125 $ 6,413 $ 6,027 $12,716 $11,202
8/31/2002 $ 9,187 $ 6,455 $ 6,014 $12,931 $11,219
9/30/2002 $ 8,904 $ 5,754 $ 5,370 $13,140 $11,237
10/31/2002 $ 9,074 $ 6,260 $ 5,659 $13,080 $11,254
11/30/2002 $ 9,316 $ 6,629 $ 5,917 $13,077 $11,271
12/31/2002 $ 9,255 $ 6,239 $ 5,718 $13,347 $11,283
1/31/2003 $ 9,219 $ 6,076 $ 5,480 $13,358 $11,296
2/28/2003 $ 9,192 $ 5,985 $ 5,355 $13,543 $11,305
3/31/2003 $ 9,180 $ 6,043 $ 5,253 $13,533 $11,318
4/30/2003 $ 9,516 $ 6,540 $ 5,774 $13,645 $11,329
5/31/2003 $ 9,879 $ 6,885 $ 6,130 $13,899 $11,341
6/30/2003 $ 9,936 $ 6,973 $ 6,281 $13,871 $11,355
7/31/2003 $ 9,945 $ 7,096 $ 6,434 $13,405 $11,363
8/31/2003 $10,164 $ 7,234 $ 6,591 $13,494 $11,371
9/30/2003 $10,233 $ 7,157 $ 6,795 $13,851 $11,381
10/31/2003 $10,480 $ 7,562 $ 7,219 $13,722 $11,390
11/30/2003 $10,645 $ 7,629 $ 7,381 $13,755 $11,399
12/31/2003 $10,861 $ 8,029 $ 7,958 $13,895 $11,408
1/31/2004 $10,944 $ 8,176 $ 8,071 $14,007 $11,418
2/29/2004 $11,046 $ 8,290 $ 8,258 $14,158 $11,425
3/31/2004 $11,061 $ 8,165 $ 8,308 $14,264 $11,435
4/30/2004 $10,784 $ 8,037 $ 8,127 $13,893 $11,443
5/31/2004 $10,848 $ 8,147 $ 8,162 $13,838 $11,451
6/30/2004 $10,978 $ 8,305 $ 8,345 $13,916 $11,456
7/31/2004 $10,829 $ 8,030 $ 8,075 $14,054 $11,467
8/31/2004 $10,913 $ 8,063 $ 8,112 $14,322 $11,478
9/30/2004 $11,091 $ 8,150 $ 8,326 $14,361 $11,491
10/31/2004 $11,250 $ 8,275 $ 8,610 $14,481 $11,504
11/30/2004 $11,539 $ 8,610 $ 9,201 $14,366 $11,516
12/31/2004 $11,728 $ 8,902 $ 9,605 $14,498 $11,538
1/31/2005 $11,578 $ 8,685 $ 9,429 $14,589 $11,554
2/28/2005 $11,756 $ 8,868 $ 9,839 $14,503 $11,572
3/31/2005 $11,597 $ 8,711 $ 9,595 $14,428 $11,599
4/30/2005 $11,474 $ 8,546 $ 9,381 $14,624 $11,623
5/31/2005 $11,644 $ 8,818 $ 9,395 $14,782 $11,650
6/30/2005 $11,749 $ 8,830 $ 9,523 $14,862 $11,676
7/31/2005 $11,929 $ 9,159 $ 9,816 $14,727 $11,702
8/31/2005 $11,976 $ 9,075 $10,067 $14,916 $11,734
9/30/2005 $12,064 $ 9,149 $10,517 $14,762 $11,767
10/31/2005 $11,883 $ 8,996 $10,211 $14,645 $11,795
11/30/2005 $12,131 $ 9,337 $10,463 $14,710 $11,834
12/31/2005 $12,280 $ 9,340 $10,951 $14,850 $11,871
1/31/2006 $12,655 $ 9,587 $11,624 $14,851 $11,905
2/28/2006 $12,655 $ 9,613 $11,600 $14,900 $11,943
3/31/2006 $12,790 $ 9,733 $11,988 $14,754 $11,990
4/30/2006 $12,925 $ 9,863 $12,570 $14,727 $12,033
5/31/2006 $12,664 $ 9,580 $12,097 $14,711 $12,080
6/30/2006 $12,672 $ 9,593 $12,101 $14,743 $12,125
7/31/2006 $12,672 $ 9,652 $12,222 $14,942 $12,175
8/31/2006 $12,849 $ 9,881 $12,562 $15,171 $12,228
9/30/2006 $12,898 $10,136 $12,583 $15,304 $12,282
10/31/2006 $13,174 $10,466 $13,074 $15,405 $12,330
11/30/2006 $13,441 $10,665 $13,468 $15,584 $12,382
12/31/2006 $13,497 $10,815 $13,892 $15,493 $12,436
1/31/2007 $13,619 $10,978 $13,987 $15,487 $12,486
2/28/2007 $13,649 $10,764 $14,102 $15,726 $12,535
3/31/2007 $13,784 $10,884 $14,468 $15,726 $12,592
4/30/2007 $14,049 $11,366 $15,124 $15,811 $12,646
5/31/2007 $14,252 $11,763 $15,409 $15,691 $12,703
6/30/2007 $14,213 $11,567 $15,433 $15,645 $12,751
7/31/2007 $14,109 $11,209 $15,207 $15,776 $12,799
8/31/2007 $14,150 $11,377 $14,973 $15,969 $12,872
9/30/2007 $14,609 $11,802 $15,777 $16,090 $12,919
10/31/2007 $14,934 $11,990 $16,399 $16,235 $12,958
11/30/2007 $14,630 $11,489 $15,864 $16,527 $13,017
12/31/2007 $14,616 $11,409 $15,508 $16,573 $13,047
1/31/2008 $14,250 $10,725 $14,077 $16,851 $13,114
2/29/2008 $14,272 $10,376 $14,283 $16,875 $13,136
3/31/2008 $14,155 $10,332 $14,139 $16,932 $13,167
4/30/2008 $14,457 $10,835 $14,925 $16,897 $13,181
5/31/2008 $14,608 $10,975 $15,099 $16,773 $13,187
6/30/2008 $14,082 $10,050 $13,867 $16,759 $13,207
7/31/2008 $13,983 $ 9,965 $13,423 $16,746 $13,233
8/31/2008 $14,005 $10,109 $12,883 $16,905 $13,251
9/30/2008 $13,356 $ 9,209 $11,024 $16,678 $13,287
10/31/2008 $12,243 $ 7,662 $ 8,800 $16,284 $13,308
11/30/2008 $12,020 $ 7,112 $ 8,329 $16,814 $13,322
12/31/2008 $12,363 $ 7,188 $ 8,830 $17,441 $13,320
1/31/2009 $12,114 $ 6,582 $ 7,965 $17,288 $13,319
2/28/2009 $11,661 $ 5,881 $ 7,151 $17,222 $13,321
3/31/2009 $12,139 $ 6,396 $ 7,607 $17,462 $13,325
4/30/2009 $12,764 $ 7,009 $ 8,593 $17,545 $13,329
5/31/2009 $13,197 $ 7,401 $ 9,626 $17,672 $13,330
6/30/2009 $13,204 $ 7,415 $ 9,574 $17,773 $13,331
7/31/2009 $13,767 $ 7,976 $10,449 $18,060 $13,333
8/31/2009 $13,939 $ 8,264 $11,019 $18,247 $13,336
9/30/2009 $14,389 $ 8,573 $11,443 $18,438 $13,338
10/31/2009 $14,285 $ 8,413 $11,300 $18,529 $13,341
11/30/2009 $14,597 $ 8,918 $11,529 $18,769 $13,342
12/31/2009 $14,795 $ 9,090 $11,697 $18,476 $13,342
AVERAGE ANNUAL TOTAL RETURN
CLASS B 12/31/09
- ------- --------
1-Year +26.05%
5-Year +3.27%
Since Inception (12/1/03) +4.96%
CLASS B (12/1/03-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON
CONSERVATIVE TARGET S&P 500 MSCI EAFE BARCLAYS CAPITAL P&R 90-DAY U.S.
DATE FUND - CLASS B INDEX INDEX U.S. AGGREGATE INDEX TREASURY BILL INDEX
- ---------- ------------------- ------- ----------- -------------------- -------------------
12/1/2003 $10,000 $10,000 $10,000 $10,000 $10,000
12/31/2003 $10,170 $10,524 $10,782 $10,102 $10,008
1/31/2004 $10,239 $10,718 $10,935 $10,183 $10,016
2/29/2004 $10,326 $10,867 $11,189 $10,293 $10,023
3/31/2004 $10,337 $10,703 $11,257 $10,370 $10,031
4/30/2004 $10,068 $10,535 $11,012 $10,101 $10,038
5/31/2004 $10,129 $10,679 $11,059 $10,060 $10,045
6/30/2004 $10,237 $10,887 $11,306 $10,117 $10,050
7/31/2004 $10,098 $10,527 $10,941 $10,217 $10,059
8/31/2004 $10,168 $10,569 $10,991 $10,412 $10,069
9/30/2004 $10,329 $10,684 $11,280 $10,440 $10,080
10/31/2004 $10,468 $10,847 $11,666 $10,528 $10,092
11/30/2004 $10,738 $11,286 $12,466 $10,444 $10,102
12/31/2004 $10,908 $11,670 $13,013 $10,540 $10,122
1/31/2005 $10,751 $11,385 $12,775 $10,606 $10,136
2/28/2005 $10,917 $11,625 $13,330 $10,544 $10,151
3/31/2005 $10,757 $11,419 $13,001 $10,490 $10,175
4/30/2005 $10,643 $11,202 $12,710 $10,632 $10,196
5/31/2005 $10,792 $11,559 $12,729 $10,747 $10,220
6/30/2005 $10,878 $11,575 $12,903 $10,805 $10,243
7/31/2005 $11,045 $12,006 $13,299 $10,707 $10,265
8/31/2005 $11,080 $11,896 $13,639 $10,844 $10,293
9/30/2005 $11,150 $11,993 $14,250 $10,732 $10,323
10/31/2005 $10,982 $11,793 $13,834 $10,647 $10,347
11/30/2005 $11,194 $12,239 $14,177 $10,695 $10,381
12/31/2005 $11,330 $12,243 $14,837 $10,796 $10,414
1/31/2006 $11,669 $12,567 $15,749 $10,797 $10,443
2/28/2006 $11,669 $12,601 $15,717 $10,833 $10,477
3/31/2006 $11,779 $12,758 $16,243 $10,726 $10,518
4/30/2006 $11,886 $12,929 $17,030 $10,707 $10,555
5/31/2006 $11,645 $12,557 $16,389 $10,695 $10,597
6/30/2006 $11,650 $12,574 $16,395 $10,718 $10,637
7/31/2006 $11,632 $12,652 $16,560 $10,863 $10,680
8/31/2006 $11,795 $12,953 $17,019 $11,029 $10,727
9/30/2006 $11,835 $13,287 $17,049 $11,126 $10,774
10/31/2006 $12,071 $13,720 $17,714 $11,200 $10,816
11/30/2006 $12,316 $13,981 $18,248 $11,330 $10,862
12/31/2006 $12,355 $14,177 $18,822 $11,264 $10,909
1/31/2007 $12,457 $14,391 $18,951 $11,259 $10,953
2/28/2007 $12,485 $14,110 $19,106 $11,433 $10,996
3/31/2007 $12,593 $14,267 $19,603 $11,433 $11,046
4/30/2007 $12,836 $14,899 $20,491 $11,495 $11,094
5/31/2007 $13,013 $15,419 $20,878 $11,408 $11,143
6/30/2007 $12,962 $15,163 $20,910 $11,374 $11,185
7/31/2007 $12,857 $14,693 $20,604 $11,469 $11,228
8/31/2007 $12,886 $14,913 $20,287 $11,610 $11,292
9/30/2007 $13,299 $15,471 $21,376 $11,698 $11,333
10/31/2007 $13,587 $15,717 $22,219 $11,803 $11,367
11/30/2007 $13,299 $15,060 $21,494 $12,015 $11,419
12/31/2007 $13,272 $14,955 $21,011 $12,049 $11,445
1/31/2008 $12,948 $14,058 $19,072 $12,251 $11,504
2/29/2008 $12,948 $13,602 $19,352 $12,268 $11,524
3/31/2008 $12,836 $13,543 $19,157 $12,310 $11,550
4/30/2008 $13,111 $14,203 $20,222 $12,284 $11,562
5/31/2008 $13,229 $14,387 $20,457 $12,194 $11,568
6/30/2008 $12,748 $13,174 $18,788 $12,184 $11,586
7/31/2008 $12,647 $13,063 $18,187 $12,174 $11,609
8/31/2008 $12,667 $13,252 $17,454 $12,290 $11,624
9/30/2008 $12,066 $12,071 $14,937 $12,125 $11,656
10/31/2008 $11,058 $10,044 $11,923 $11,839 $11,674
11/30/2008 $10,846 $ 9,323 $11,285 $12,224 $11,687
12/31/2008 $11,145 $ 9,422 $11,964 $12,680 $11,685
1/31/2009 $10,919 $ 8,628 $10,792 $12,568 $11,684
2/28/2009 $10,510 $ 7,709 $ 9,688 $12,521 $11,685
3/31/2009 $10,931 $ 8,385 $10,307 $12,695 $11,689
4/30/2009 $11,486 $ 9,187 $11,643 $12,756 $11,692
5/31/2009 $11,866 $ 9,701 $13,042 $12,848 $11,694
6/30/2009 $11,871 $ 9,720 $12,971 $12,921 $11,694
7/31/2009 $12,368 $10,456 $14,157 $13,130 $11,696
8/31/2009 $12,513 $10,833 $14,929 $13,266 $11,699
9/30/2009 $12,908 $11,237 $15,504 $13,405 $11,700
10/31/2009 $12,814 $11,029 $15,311 $13,471 $11,703
11/30/2009 $13,074 $11,690 $15,621 $13,645 $11,704
12/31/2009 $13,246 $11,916 $15,848 $13,432 $11,704
30 | Annual Report
Performance Summary (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN
CLASS C 12/31/09
- ------- --------
1-Year +29.19%
5-Year +3.63%
10-Year +1.81%
CLASS C (1/1/00-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON
CONSERVATIVE TARGET S&P 500 MSCI EAFE BARCLAYS CAPITAL P&R 90-DAY U.S.
DATE FUND - CLASS C INDEX INDEX U.S. AGGREGATE INDEX TREASURY BILL INDEX
- ---------- ------------------- ------- ----------- -------------------- -------------------
1/1/2000 $10,000 $10,000 $10,000 $10,000 $10,000
1/31/2000 $ 9,883 $ 9,498 $ 9,366 $ 9,967 $10,039
2/28/2000 $10,702 $ 9,318 $ 9,620 $10,088 $10,084
3/31/2000 $10,541 $10,229 $ 9,995 $10,221 $10,135
4/30/2000 $10,147 $ 9,922 $ 9,471 $10,191 $10,186
5/31/2000 $ 9,928 $ 9,718 $ 9,241 $10,187 $10,241
6/30/2000 $10,198 $ 9,958 $ 9,605 $10,399 $10,285
7/31/2000 $10,172 $ 9,802 $ 9,204 $10,493 $10,333
8/31/2000 $10,553 $10,411 $ 9,286 $10,645 $10,386
9/30/2000 $10,441 $ 9,861 $ 8,836 $10,712 $10,443
10/31/2000 $10,296 $ 9,819 $ 8,629 $10,783 $10,496
11/30/2000 $ 9,912 $ 9,045 $ 8,307 $10,959 $10,554
12/31/2000 $10,226 $ 9,090 $ 8,604 $11,163 $10,615
1/31/2001 $10,496 $ 9,412 $ 8,600 $11,345 $10,684
2/28/2001 $10,164 $ 8,554 $ 7,956 $11,444 $10,727
3/31/2001 $ 9,895 $ 8,012 $ 7,429 $11,501 $10,781
4/30/2001 $10,202 $ 8,635 $ 7,950 $11,454 $10,825
5/31/2001 $10,256 $ 8,692 $ 7,676 $11,523 $10,867
6/30/2001 $10,201 $ 8,481 $ 7,365 $11,566 $10,899
7/31/2001 $10,156 $ 8,397 $ 7,232 $11,825 $10,935
8/31/2001 $10,020 $ 7,872 $ 7,050 $11,960 $10,971
9/30/2001 $ 9,468 $ 7,236 $ 6,337 $12,100 $11,019
10/31/2001 $ 9,724 $ 7,374 $ 6,499 $12,353 $11,048
11/30/2001 $ 9,953 $ 7,940 $ 6,739 $12,183 $11,071
12/31/2001 $10,065 $ 8,009 $ 6,780 $12,105 $11,089
1/31/2002 $10,037 $ 7,892 $ 6,420 $12,203 $11,104
2/28/2002 $10,019 $ 7,740 $ 6,465 $12,322 $11,119
3/31/2002 $10,225 $ 8,031 $ 6,818 $12,117 $11,136
4/30/2002 $10,244 $ 7,544 $ 6,868 $12,352 $11,153
5/31/2002 $10,197 $ 7,489 $ 6,961 $12,457 $11,170
6/30/2002 $ 9,901 $ 6,955 $ 6,686 $12,564 $11,187
7/31/2002 $ 9,498 $ 6,413 $ 6,027 $12,716 $11,202
8/31/2002 $ 9,563 $ 6,455 $ 6,014 $12,931 $11,219
9/30/2002 $ 9,260 $ 5,754 $ 5,370 $13,140 $11,237
10/31/2002 $ 9,429 $ 6,260 $ 5,659 $13,080 $11,254
11/30/2002 $ 9,674 $ 6,629 $ 5,917 $13,077 $11,271
12/31/2002 $ 9,608 $ 6,239 $ 5,718 $13,347 $11,283
1/31/2003 $ 9,560 $ 6,076 $ 5,480 $13,358 $11,296
2/28/2003 $ 9,532 $ 5,985 $ 5,355 $13,543 $11,305
3/31/2003 $ 9,513 $ 6,043 $ 5,253 $13,533 $11,318
4/30/2003 $ 9,845 $ 6,540 $ 5,774 $13,645 $11,329
5/31/2003 $10,225 $ 6,885 $ 6,130 $13,899 $11,341
6/30/2003 $10,277 $ 6,973 $ 6,281 $13,871 $11,355
7/31/2003 $10,277 $ 7,096 $ 6,434 $13,405 $11,363
8/31/2003 $10,496 $ 7,234 $ 6,591 $13,494 $11,371
9/30/2003 $10,560 $ 7,157 $ 6,795 $13,851 $11,381
10/31/2003 $10,808 $ 7,562 $ 7,219 $13,722 $11,390
11/30/2003 $10,970 $ 7,629 $ 7,381 $13,755 $11,399
12/31/2003 $11,189 $ 8,029 $ 7,958 $13,895 $11,408
1/31/2004 $11,265 $ 8,176 $ 8,071 $14,007 $11,418
2/29/2004 $11,362 $ 8,290 $ 8,258 $14,158 $11,425
3/31/2004 $11,375 $ 8,165 $ 8,308 $14,264 $11,435
4/30/2004 $11,077 $ 8,037 $ 8,127 $13,893 $11,443
5/31/2004 $11,144 $ 8,147 $ 8,162 $13,838 $11,451
6/30/2004 $11,257 $ 8,305 $ 8,345 $13,916 $11,456
7/31/2004 $11,103 $ 8,030 $ 8,075 $14,054 $11,467
8/31/2004 $11,180 $ 8,063 $ 8,112 $14,322 $11,478
9/30/2004 $11,364 $ 8,150 $ 8,326 $14,361 $11,491
10/31/2004 $11,518 $ 8,275 $ 8,610 $14,481 $11,504
11/30/2004 $11,808 $ 8,610 $ 9,201 $14,366 $11,516
12/31/2004 $11,994 $ 8,902 $ 9,605 $14,498 $11,538
1/31/2005 $11,819 $ 8,685 $ 9,429 $14,589 $11,554
2/28/2005 $12,004 $ 8,868 $ 9,839 $14,503 $11,572
3/31/2005 $11,835 $ 8,711 $ 9,595 $14,428 $11,599
4/30/2005 $11,708 $ 8,546 $ 9,381 $14,624 $11,623
5/31/2005 $11,864 $ 8,818 $ 9,395 $14,782 $11,650
6/30/2005 $11,969 $ 8,830 $ 9,523 $14,862 $11,676
7/31/2005 $12,144 $ 9,159 $ 9,816 $14,727 $11,702
8/31/2005 $12,183 $ 9,075 $10,067 $14,916 $11,734
9/30/2005 $12,262 $ 9,149 $10,517 $14,762 $11,767
10/31/2005 $12,076 $ 8,996 $10,211 $14,645 $11,795
11/30/2005 $12,311 $ 9,337 $10,463 $14,710 $11,834
12/31/2005 $12,453 $ 9,340 $10,951 $14,850 $11,871
1/31/2006 $12,838 $ 9,587 $11,624 $14,851 $11,905
2/28/2006 $12,829 $ 9,613 $11,600 $14,900 $11,943
3/31/2006 $12,961 $ 9,733 $11,988 $14,754 $11,990
4/30/2006 $13,080 $ 9,863 $12,570 $14,727 $12,033
5/31/2006 $12,803 $ 9,580 $12,097 $14,711 $12,080
6/30/2006 $12,817 $ 9,593 $12,101 $14,743 $12,125
7/31/2006 $12,797 $ 9,652 $12,222 $14,942 $12,175
8/31/2006 $12,968 $ 9,881 $12,562 $15,171 $12,228
9/30/2006 $13,014 $10,136 $12,583 $15,304 $12,282
10/31/2006 $13,286 $10,466 $13,074 $15,405 $12,330
11/30/2006 $13,548 $10,665 $13,468 $15,584 $12,382
12/31/2006 $13,593 $10,815 $13,892 $15,493 $12,436
1/31/2007 $13,707 $10,978 $13,987 $15,487 $12,486
2/28/2007 $13,727 $10,764 $14,102 $15,726 $12,535
3/31/2007 $13,859 $10,884 $14,468 $15,726 $12,592
4/30/2007 $14,118 $11,366 $15,124 $15,811 $12,646
5/31/2007 $14,314 $11,763 $15,409 $15,691 $12,703
6/30/2007 $14,259 $11,567 $15,433 $15,645 $12,751
7/31/2007 $14,143 $11,209 $15,207 $15,776 $12,799
8/31/2007 $14,185 $11,377 $14,973 $15,969 $12,872
9/30/2007 $14,625 $11,802 $15,777 $16,090 $12,919
10/31/2007 $14,955 $11,990 $16,399 $16,235 $12,958
11/30/2007 $14,636 $11,489 $15,864 $16,527 $13,017
12/31/2007 $14,609 $11,409 $15,508 $16,573 $13,047
1/31/2008 $14,239 $10,725 $14,077 $16,851 $13,114
2/29/2008 $14,239 $10,376 $14,283 $16,875 $13,136
3/31/2008 $14,117 $10,332 $14,139 $16,932 $13,167
4/30/2008 $14,422 $10,835 $14,925 $16,897 $13,181
5/31/2008 $14,553 $10,975 $15,099 $16,773 $13,187
6/30/2008 $14,023 $10,050 $13,867 $16,759 $13,207
7/31/2008 $13,912 $ 9,965 $13,423 $16,746 $13,233
8/31/2008 $13,934 $10,109 $12,883 $16,905 $13,251
9/30/2008 $13,277 $ 9,209 $11,024 $16,678 $13,287
10/31/2008 $12,155 $ 7,662 $ 8,800 $16,284 $13,308
11/30/2008 $11,931 $ 7,112 $ 8,329 $16,814 $13,322
12/31/2008 $12,266 $ 7,188 $ 8,830 $17,441 $13,320
1/31/2009 $12,015 $ 6,582 $ 7,965 $17,288 $13,319
2/28/2009 $11,560 $ 5,881 $ 7,151 $17,222 $13,321
3/31/2009 $12,031 $ 6,396 $ 7,607 $17,462 $13,325
4/30/2009 $12,636 $ 7,009 $ 8,593 $17,545 $13,329
5/31/2009 $13,059 $ 7,401 $ 9,626 $17,672 $13,330
6/30/2009 $13,055 $ 7,415 $ 9,574 $17,773 $13,331
7/31/2009 $13,608 $ 7,976 $10,449 $18,060 $13,333
8/31/2009 $13,758 $ 8,264 $11,019 $18,247 $13,336
9/30/2009 $14,198 $ 8,573 $11,443 $18,438 $13,338
10/31/2009 $14,094 $ 8,413 $11,300 $18,529 $13,341
11/30/2009 $14,383 $ 8,918 $11,529 $18,769 $13,342
12/31/2009 $14,577 $ 9,090 $11,697 $18,476 $13,342
AVERAGE ANNUAL TOTAL RETURN
CLASS R 12/31/09
- ------- --------
1-Year +30.87%
5-Year +4.14%
Since Inception (1/1/02) +5.22%
CLASS R (1/1/02-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON
CONSERVATIVE TARGET S&P 500 MSCI EAFE BARCLAYS CAPITAL P&R 90-DAY U.S.
DATE FUND - CLASS R INDEX INDEX U.S. AGGREGATE INDEX TREASURY BILL INDEX
- ---------- ------------------- ------- ----------- -------------------- -------------------
1/1/2002 $10,000 $10,000 $10,000 $10,000 $10,000
1/31/2002 $ 9,982 $ 9,854 $ 9,469 $10,081 $10,014
2/28/2002 $ 9,972 $ 9,664 $ 9,536 $10,179 $10,027
3/31/2002 $10,178 $10,027 $10,057 $10,009 $10,042
4/30/2002 $10,196 $ 9,420 $10,130 $10,204 $10,057
5/31/2002 $10,159 $ 9,350 $10,267 $10,290 $10,073
6/30/2002 $ 9,869 $ 8,684 $ 9,862 $10,379 $10,088
7/31/2002 $ 9,461 $ 8,007 $ 8,889 $10,505 $10,102
8/31/2002 $ 9,526 $ 8,060 $ 8,871 $10,682 $10,117
9/30/2002 $ 9,232 $ 7,184 $ 7,921 $10,855 $10,133
10/31/2002 $ 9,409 $ 7,816 $ 8,347 $10,806 $10,149
11/30/2002 $ 9,650 $ 8,276 $ 8,727 $10,803 $10,165
12/31/2002 $ 9,591 $ 7,790 $ 8,434 $11,026 $10,175
1/31/2003 $ 9,554 $ 7,586 $ 8,083 $11,035 $10,186
2/28/2003 $ 9,516 $ 7,472 $ 7,898 $11,188 $10,195
3/31/2003 $ 9,510 $ 7,545 $ 7,749 $11,179 $10,207
4/30/2003 $ 9,850 $ 8,166 $ 8,517 $11,272 $10,217
5/31/2003 $10,228 $ 8,596 $ 9,041 $11,482 $10,227
6/30/2003 $10,284 $ 8,706 $ 9,265 $11,459 $10,240
7/31/2003 $10,293 $ 8,859 $ 9,491 $11,074 $10,247
8/31/2003 $10,511 $ 9,032 $ 9,721 $11,147 $10,255
9/30/2003 $10,584 $ 8,936 $10,023 $11,442 $10,263
10/31/2003 $10,831 $ 9,442 $10,648 $11,336 $10,272
11/30/2003 $11,002 $ 9,525 $10,887 $11,363 $10,280
12/31/2003 $11,228 $10,024 $11,738 $11,478 $10,288
1/31/2004 $11,314 $10,208 $11,904 $11,571 $10,297
2/29/2004 $11,410 $10,350 $12,181 $11,696 $10,303
3/31/2004 $11,431 $10,194 $12,255 $11,784 $10,312
4/30/2004 $11,134 $10,034 $11,988 $11,477 $10,319
5/31/2004 $11,210 $10,172 $12,040 $11,431 $10,326
6/30/2004 $11,328 $10,370 $12,308 $11,496 $10,331
7/31/2004 $11,174 $10,026 $11,911 $11,610 $10,341
8/31/2004 $11,260 $10,067 $11,966 $11,831 $10,351
9/30/2004 $11,449 $10,176 $12,280 $11,863 $10,363
10/31/2004 $11,604 $10,332 $12,700 $11,963 $10,375
11/30/2004 $11,902 $10,750 $13,571 $11,867 $10,385
12/31/2004 $12,098 $11,115 $14,167 $11,976 $10,405
1/31/2005 $11,932 $10,844 $13,908 $12,052 $10,420
2/28/2005 $12,117 $11,073 $14,512 $11,981 $10,436
3/31/2005 $11,948 $10,877 $14,153 $11,919 $10,460
4/30/2005 $11,821 $10,670 $13,837 $12,080 $10,482
5/31/2005 $11,996 $11,010 $13,858 $12,211 $10,506
6/30/2005 $12,097 $11,025 $14,047 $12,278 $10,530
7/31/2005 $12,283 $11,435 $14,479 $12,166 $10,553
8/31/2005 $12,332 $11,331 $14,849 $12,322 $10,582
9/30/2005 $12,415 $11,423 $15,513 $12,195 $10,612
10/31/2005 $12,228 $11,232 $15,061 $12,098 $10,636
11/30/2005 $12,474 $11,657 $15,433 $12,152 $10,672
12/31/2005 $12,627 $11,661 $16,153 $12,267 $10,705
1/31/2006 $13,013 $11,970 $17,145 $12,268 $10,736
2/28/2006 $13,013 $12,003 $17,110 $12,309 $10,770
3/31/2006 $13,155 $12,152 $17,683 $12,188 $10,812
4/30/2006 $13,284 $12,315 $18,540 $12,166 $10,851
5/31/2006 $13,005 $11,961 $17,843 $12,153 $10,893
6/30/2006 $13,025 $11,977 $17,849 $12,179 $10,934
7/31/2006 $13,015 $12,051 $18,028 $12,343 $10,979
8/31/2006 $13,197 $12,338 $18,528 $12,532 $11,028
9/30/2006 $13,239 $12,655 $18,561 $12,642 $11,076
10/31/2006 $13,524 $13,068 $19,284 $12,726 $11,119
11/30/2006 $13,798 $13,316 $19,866 $12,874 $11,166
12/31/2006 $13,855 $13,503 $20,491 $12,799 $11,215
1/31/2007 $13,969 $13,707 $20,631 $12,794 $11,260
2/28/2007 $14,000 $13,439 $20,800 $12,991 $11,304
3/31/2007 $14,134 $13,590 $21,340 $12,991 $11,355
4/30/2007 $14,406 $14,192 $22,308 $13,061 $11,404
5/31/2007 $14,615 $14,687 $22,729 $12,962 $11,455
6/30/2007 $14,565 $14,443 $22,764 $12,924 $11,499
7/31/2007 $14,458 $13,995 $22,431 $13,032 $11,542
8/31/2007 $14,501 $14,205 $22,086 $13,192 $11,608
9/30/2007 $14,953 $14,736 $23,272 $13,292 $11,650
10/31/2007 $15,297 $14,970 $24,189 $13,411 $11,686
11/30/2007 $14,974 $14,345 $23,399 $13,652 $11,738
12/31/2007 $14,951 $14,245 $22,874 $13,691 $11,766
1/31/2008 $14,587 $13,391 $20,763 $13,921 $11,826
2/29/2008 $14,598 $12,956 $21,067 $13,940 $11,846
3/31/2008 $14,472 $12,900 $20,856 $13,987 $11,874
4/30/2008 $14,794 $13,528 $22,015 $13,958 $11,886
5/31/2008 $14,938 $13,703 $22,271 $13,856 $11,892
6/30/2008 $14,399 $12,548 $20,454 $13,845 $11,910
7/31/2008 $14,285 $12,442 $19,799 $13,833 $11,934
8/31/2008 $14,308 $12,622 $19,002 $13,965 $11,950
9/30/2008 $13,646 $11,498 $16,261 $13,777 $11,983
10/31/2008 $12,506 $ 9,567 $12,981 $13,452 $12,001
11/30/2008 $12,278 $ 8,880 $12,285 $13,890 $12,014
12/31/2008 $12,621 $ 8,975 $13,025 $14,408 $12,012
1/31/2009 $12,366 $ 8,218 $11,749 $14,281 $12,011
2/28/2009 $11,902 $ 7,343 $10,547 $14,227 $12,013
3/31/2009 $12,385 $ 7,986 $11,221 $14,425 $12,016
4/30/2009 $13,024 $ 8,751 $12,675 $14,494 $12,020
5/31/2009 $13,467 $ 9,240 $14,198 $14,599 $12,021
6/30/2009 $13,467 $ 9,259 $14,121 $14,682 $12,022
7/31/2009 $14,042 $ 9,959 $15,413 $14,919 $12,024
8/31/2009 $14,207 $10,318 $16,253 $15,073 $12,026
9/30/2009 $14,660 $10,703 $16,878 $15,232 $12,028
10/31/2009 $14,565 $10,505 $16,668 $15,307 $12,031
11/30/2009 $14,861 $11,135 $17,006 $15,505 $12,031
12/31/2009 $15,076 $11,350 $17,253 $15,263 $12,032
Annual Report | 31
Performance Summary (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN
ADVISOR CLASS(6) 12/31/09
- ---------------- --------
1-Year +31.43%
5-Year +4.62%
10-Year +2.68%
ADVISOR CLASS (1/1/00-12/31/09)(6)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON
CONSERVATIVE TARGET
FUND - ADVISOR S&P 500 MSCI EAFE BARCLAYS CAPITAL P&R 90-DAY U.S.
DATE CLASS INDEX INDEX U.S. AGGREGATE INDEX TREASURY BILL INDEX
- ---------- ------------------- ------- ----------- -------------------- -------------------
1/1/2000 $10,000 $10,000 $10,000 $10,000 $10,000
1/31/2000 $ 9,892 $ 9,498 $ 9,366 $ 9,967 $10,039
2/28/2000 $10,714 $ 9,318 $ 9,620 $10,088 $10,084
3/31/2000 $10,564 $10,229 $ 9,995 $10,221 $10,135
4/30/2000 $10,172 $ 9,922 $ 9,471 $10,191 $10,186
5/31/2000 $ 9,955 $ 9,718 $ 9,241 $10,187 $10,241
6/30/2000 $10,241 $ 9,958 $ 9,605 $10,399 $10,285
7/31/2000 $10,216 $ 9,802 $ 9,204 $10,493 $10,333
8/31/2000 $10,612 $10,411 $ 9,286 $10,645 $10,386
9/30/2000 $10,502 $ 9,861 $ 8,836 $10,712 $10,443
10/31/2000 $10,357 $ 9,819 $ 8,629 $10,783 $10,496
11/30/2000 $ 9,983 $ 9,045 $ 8,307 $10,959 $10,554
12/31/2000 $10,305 $ 9,090 $ 8,604 $11,163 $10,615
1/31/2001 $10,584 $ 9,412 $ 8,600 $11,345 $10,684
2/28/2001 $10,251 $ 8,554 $ 7,956 $11,444 $10,727
3/31/2001 $ 9,987 $ 8,012 $ 7,429 $11,501 $10,781
4/30/2001 $10,303 $ 8,635 $ 7,950 $11,454 $10,825
5/31/2001 $10,366 $ 8,692 $ 7,676 $11,523 $10,867
6/30/2001 $10,321 $ 8,481 $ 7,365 $11,566 $10,899
7/31/2001 $10,275 $ 8,397 $ 7,232 $11,825 $10,935
8/31/2001 $10,148 $ 7,872 $ 7,050 $11,960 $10,971
9/30/2001 $ 9,594 $ 7,236 $ 6,337 $12,100 $11,019
10/31/2001 $ 9,860 $ 7,374 $ 6,499 $12,353 $11,048
11/30/2001 $10,099 $ 7,940 $ 6,739 $12,183 $11,071
12/31/2001 $10,211 $ 8,009 $ 6,780 $12,105 $11,089
1/31/2002 $10,201 $ 7,892 $ 6,420 $12,203 $11,104
2/28/2002 $10,192 $ 7,740 $ 6,465 $12,322 $11,119
3/31/2002 $10,402 $ 8,031 $ 6,818 $12,117 $11,136
4/30/2002 $10,430 $ 7,544 $ 6,868 $12,352 $11,153
5/31/2002 $10,392 $ 7,489 $ 6,961 $12,457 $11,170
6/30/2002 $10,092 $ 6,955 $ 6,686 $12,564 $11,187
7/31/2002 $ 9,685 $ 6,413 $ 6,027 $12,716 $11,202
8/31/2002 $ 9,751 $ 6,455 $ 6,014 $12,931 $11,219
9/30/2002 $ 9,450 $ 5,754 $ 5,370 $13,140 $11,237
10/31/2002 $ 9,631 $ 6,260 $ 5,659 $13,080 $11,254
11/30/2002 $ 9,888 $ 6,629 $ 5,917 $13,077 $11,271
12/31/2002 $ 9,824 $ 6,239 $ 5,718 $13,347 $11,283
1/31/2003 $ 9,785 $ 6,076 $ 5,480 $13,358 $11,296
2/28/2003 $ 9,756 $ 5,985 $ 5,355 $13,543 $11,305
3/31/2003 $ 9,743 $ 6,043 $ 5,253 $13,533 $11,318
4/30/2003 $10,100 $ 6,540 $ 5,774 $13,645 $11,329
5/31/2003 $10,486 $ 6,885 $ 6,130 $13,899 $11,341
6/30/2003 $10,546 $ 6,973 $ 6,281 $13,871 $11,355
7/31/2003 $10,556 $ 7,096 $ 6,434 $13,405 $11,363
8/31/2003 $10,788 $ 7,234 $ 6,591 $13,494 $11,371
9/30/2003 $10,861 $ 7,157 $ 6,795 $13,851 $11,381
10/31/2003 $11,123 $ 7,562 $ 7,219 $13,722 $11,390
11/30/2003 $11,298 $ 7,629 $ 7,381 $13,755 $11,399
12/31/2003 $11,528 $ 8,029 $ 7,958 $13,895 $11,408
1/31/2004 $11,616 $ 8,176 $ 8,071 $14,007 $11,418
2/29/2004 $11,724 $ 8,290 $ 8,258 $14,158 $11,425
3/31/2004 $11,741 $ 8,165 $ 8,308 $14,264 $11,435
4/30/2004 $11,446 $ 8,037 $ 8,127 $13,893 $11,443
5/31/2004 $11,515 $ 8,147 $ 8,162 $13,838 $11,451
6/30/2004 $11,652 $ 8,305 $ 8,345 $13,916 $11,456
7/31/2004 $11,494 $ 8,030 $ 8,075 $14,054 $11,467
8/31/2004 $11,583 $ 8,063 $ 8,112 $14,322 $11,478
9/30/2004 $11,773 $ 8,150 $ 8,326 $14,361 $11,491
10/31/2004 $11,941 $ 8,275 $ 8,610 $14,481 $11,504
11/30/2004 $12,248 $ 8,610 $ 9,201 $14,366 $11,516
12/31/2004 $12,448 $ 8,902 $ 9,605 $14,498 $11,538
1/31/2005 $12,289 $ 8,685 $ 9,429 $14,589 $11,554
2/28/2005 $12,478 $ 8,868 $ 9,839 $14,503 $11,572
3/31/2005 $12,309 $ 8,711 $ 9,595 $14,428 $11,599
4/30/2005 $12,179 $ 8,546 $ 9,381 $14,624 $11,623
5/31/2005 $12,359 $ 8,818 $ 9,395 $14,782 $11,650
6/30/2005 $12,470 $ 8,830 $ 9,523 $14,862 $11,676
7/31/2005 $12,661 $ 9,159 $ 9,816 $14,727 $11,702
8/31/2005 $12,712 $ 9,075 $10,067 $14,916 $11,734
9/30/2005 $12,805 $ 9,149 $10,517 $14,762 $11,767
10/31/2005 $12,613 $ 8,996 $10,211 $14,645 $11,795
11/30/2005 $12,876 $ 9,337 $10,463 $14,710 $11,834
12/31/2005 $13,024 $ 9,340 $10,951 $14,850 $11,871
1/31/2006 $13,433 $ 9,587 $11,624 $14,851 $11,905
2/28/2006 $13,433 $ 9,613 $11,600 $14,900 $11,943
3/31/2006 $13,581 $ 9,733 $11,988 $14,754 $11,990
4/30/2006 $13,725 $ 9,863 $12,570 $14,727 $12,033
5/31/2006 $13,448 $ 9,580 $12,097 $14,711 $12,080
6/30/2006 $13,465 $ 9,593 $12,101 $14,743 $12,125
7/31/2006 $13,465 $ 9,652 $12,222 $14,942 $12,175
8/31/2006 $13,653 $ 9,881 $12,562 $15,171 $12,228
9/30/2006 $13,713 $10,136 $12,583 $15,304 $12,282
10/31/2006 $14,008 $10,466 $13,074 $15,405 $12,330
11/30/2006 $14,291 $10,665 $13,468 $15,584 $12,382
12/31/2006 $14,363 $10,815 $13,892 $15,493 $12,436
1/31/2007 $14,492 $10,978 $13,987 $15,487 $12,486
2/28/2007 $14,525 $10,764 $14,102 $15,726 $12,535
3/31/2007 $14,674 $10,884 $14,468 $15,726 $12,592
4/30/2007 $14,956 $11,366 $15,124 $15,811 $12,646
5/31/2007 $15,184 $11,763 $15,409 $15,691 $12,703
6/30/2007 $15,140 $11,567 $15,433 $15,645 $12,751
7/31/2007 $15,029 $11,209 $15,207 $15,776 $12,799
8/31/2007 $15,074 $11,377 $14,973 $15,969 $12,872
9/30/2007 $15,561 $11,802 $15,777 $16,090 $12,919
10/31/2007 $15,919 $11,990 $16,399 $16,235 $12,958
11/30/2007 $15,595 $11,489 $15,864 $16,527 $13,017
12/31/2007 $15,580 $11,409 $15,508 $16,573 $13,047
1/31/2008 $15,201 $10,725 $14,077 $16,851 $13,114
2/29/2008 $15,224 $10,376 $14,283 $16,875 $13,136
3/31/2008 $15,105 $10,332 $14,139 $16,932 $13,167
4/30/2008 $15,440 $10,835 $14,925 $16,897 $13,181
5/31/2008 $15,590 $10,975 $15,099 $16,773 $13,187
6/30/2008 $15,040 $10,050 $13,867 $16,759 $13,207
7/31/2008 $14,934 $ 9,965 $13,423 $16,746 $13,233
8/31/2008 $14,957 $10,109 $12,883 $16,905 $13,251
9/30/2008 $14,273 $ 9,209 $11,024 $16,678 $13,287
10/31/2008 $13,082 $ 7,662 $ 8,800 $16,284 $13,308
11/30/2008 $12,844 $ 7,112 $ 8,329 $16,814 $13,322
12/31/2008 $13,219 $ 7,188 $ 8,830 $17,441 $13,320
1/31/2009 $12,953 $ 6,582 $ 7,965 $17,288 $13,319
2/28/2009 $12,480 $ 5,881 $ 7,151 $17,222 $13,321
3/31/2009 $12,987 $ 6,396 $ 7,607 $17,462 $13,325
4/30/2009 $13,669 $ 7,009 $ 8,593 $17,545 $13,329
5/31/2009 $14,132 $ 7,401 $ 9,626 $17,672 $13,330
6/30/2009 $14,135 $ 7,415 $ 9,574 $17,773 $13,331
7/31/2009 $14,751 $ 7,976 $10,449 $18,060 $13,333
8/31/2009 $14,923 $ 8,264 $11,019 $18,247 $13,336
9/30/2009 $15,414 $ 8,573 $11,443 $18,438 $13,338
10/31/2009 $15,315 $ 8,413 $11,300 $18,529 $13,341
11/30/2009 $15,637 $ 8,918 $11,529 $18,769 $13,342
12/31/2009 $15,859 $ 9,090 $11,697 $18,476 $13,342
ENDNOTES
WHILE AN ASSET ALLOCATION PLAN CAN BE A VALUABLE TOOL TO HELP REDUCE OVERALL
VOLATILITY, ALL INVESTMENTS INVOLVE SOME DEGREE OF RISK. TYPICALLY, THE MORE
AGGRESSIVE THE INVESTMENT, OR THE GREATER THE POTENTIAL RETURN, THE MORE RISK
INVOLVED. GENERALLY, INVESTORS SHOULD BE COMFORTABLE WITH SOME FLUCTUATION IN
THE VALUE OF THEIR INVESTMENTS, ESPECIALLY OVER THE SHORT TERM. STOCKS HAVE
HISTORICALLY OUTPERFORMED OTHER ASSET CLASSES OVER THE LONG TERM, BUT THEY TEND
TO FLUCTUATE MORE DRAMATICALLY OVER THE SHORTER TERM. BOND PRICES GENERALLY MOVE
IN THE OPPOSITE DIRECTION OF INTEREST RATES. THUS, AS PRICES OF BONDS IN A FUND
ADJUST TO A RISE IN INTEREST RATES, THAT FUND'S SHARE PRICE MAY DECLINE. BECAUSE
THIS FUND INVESTS IN UNDERLYING FUNDS, WHICH MAY ENGAGE IN A VARIETY OF
INVESTMENT STRATEGIES INVOLVING CERTAIN RISKS, THE FUND MAY BE SUBJECT TO THOSE
SAME RISKS. THESE RISKS ARE DESCRIBED IN THE FUND'S PROSPECTUS.
CLASS B: These shares have higher annual fees and expenses than Class A
shares.
CLASS C: Prior to 1/1/04, these shares were offered with an initial sales
charge; thus actual total returns would have differed. These
shares have higher annual fees and expenses than Class A shares.
CLASS R: Shares are available to certain eligible investors as described
in the prospectus. These shares have higher annual fees and
expenses than Class A shares.
ADVISOR CLASS: Shares are available to certain eligible investors as described
in the prospectus.
(1.) If the manager had not waived fees, the Fund's total returns would have
been lower.
(2.) Cumulative total return represents the change in value of an investment
over the periods indicated.
(3.) Average annual total return represents the average annual change in value
of an investment over the periods indicated.
(4.) These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated.
(5.) Figures are as stated in the Fund's prospectus current as of the date of
this report. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become
higher than the figures shown.
(6.) Effective 12/1/05, the Fund began offering Advisor Class shares, which do
not have sales charges or a Rule 12b-1 plan. Performance quotations for
this class reflect the following methods of calculation: (a) For periods
prior to 12/1/05, a restated figure is used based upon the Fund's Class A
performance, excluding the effect of Class A's maximum initial sales
charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b)
for periods after 11/30/05, actual Advisor Class performance is used
reflecting all charges and fees applicable to that class. Since 12/1/05
(commencement of sales), the cumulative and average annual total returns of
Advisor Class shares were +16.16% and +3.74%.
(7.) Source: (C) 2009 Morningstar. See page 26 for descriptions of the S&P 500,
the MSCI EAFE Index, the BC U.S. Aggregate Index and the P&R 90 Day U.S.
T-Bill Index.
32 | Annual Report
Your Fund's Expenses
FRANKLIN TEMPLETON GROWTH TARGET FUND
As a Fund shareholder, you can incur two types of costs:
- - Transaction costs, including sales charges (loads) on Fund purchases; and
- - Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
Annual Report | 33
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES.
Therefore, the second line for each class is useful in comparing ongoing costs
only, and will not help you compare total costs of owning different funds. In
addition, if transaction costs were included, your total costs would have been
higher. Please refer to the Fund prospectus for additional information on
operating expenses.
BEGINNING ENDING EXPENSES PAID EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD**
CLASS A 7/1/09 12/31/09 7/1/09-12/31/09 7/1/09-12/31/09
- ------- ------------- ------------- --------------- ---------------
Actual $1,000 $1,196.50 $2.77 $ 7.53
Hypothetical
(5% return before expenses) $1,000 $1,022.68 $2.55 $ 6.92
CLASS B
Actual $1,000 $1,192.90 $6.85 $11.61
Hypothetical
(5% return before expenses) $1,000 $1,018.95 $6.31 $10.66
CLASS C
Actual $1,000 $1,193.00 $6.91 $11.66
Hypothetical
(5% return before expenses) $1,000 $1,018.90 $6.36 $10.71
CLASS R
Actual $1,000 $1,195.70 $4.15 $ 8.91
Hypothetical
(5% return before expenses) $1,000 $1,021.42 $3.82 $ 8.19
ADVISOR CLASS
Actual $1,000 $1,198.70 $1.39 $ 6.15
Hypothetical
(5% return before expenses) $1,000 $1,023.95 $1.28 $ 5.65
* Expenses are calculated using the most recent six-month expense ratio
excluding expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 0.50%; B: 1.24%; C: 1.25%; R: 0.75%; and
Advisor: 0.25%), multiplied by the average account value over the period,
multiplied by 184/365 to reflect the one-half year period. A portion of the
Fund's expenses have been paid by the underlying funds in which the Fund
invests.
** Expenses are calculated using the most recent six-month expense ratio
including expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 1.36%; B: 2.10%; C: 2.11%; R: 1.61%; and
Advisor: 1.11%), multiplied by the average account value over the period,
multiplied by 184/365 to reflect the one-half year period. A portion of the
Fund's expenses have been paid by the underlying funds in which the Fund
invests.
34 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS
FRANKLIN TEMPLETON CONSERVATIVE TARGET FUND
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
CLASS A 2009 2008 2007 2006 2005
- ------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................. $ 10.92 $ 13.59 $ 13.33 $ 12.74 $ 12.48
-------- -------- -------- -------- --------
Income from investment operations(a):
Net investment income(b, c) ...................... 0.25 0.39 0.48 0.41 0.29
Net realized and unrealized gains (losses) ....... 1.87 (2.44) 0.60 0.84 0.29
-------- -------- -------- -------- --------
Total from investment operations .................... 2.12 (2.05) 1.08 1.25 0.58
-------- -------- -------- -------- --------
Less distributions from:
Net investment income ............................ (0.24) (0.38) (0.47) (0.42) (0.32)
Net realized gains ............................... (0.08) (0.24) (0.35) (0.24) --
-------- -------- -------- -------- --------
Total distributions ................................. (0.32) (0.62) (0.82) (0.66) (0.32)
-------- -------- -------- -------- --------
Redemption fees(d) .................................. -- --(e) --(e) --(e) --(e)
-------- -------- -------- -------- --------
Net asset value, end of year ........................ $ 12.72 $ 10.92 $ 13.59 $ 13.33 $ 12.74
======== ======== ======== ======== ========
Total return(f) ..................................... 19.67% (15.41)% 8.29% 9.92% 4.70%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments
by affiliates(g) ................................. 0.56% 0.65% 0.68% 0.69% 0.73%
Expenses net of waiver and payments
by affiliates(g) ................................. 0.50% 0.51% 0.49% 0.50% 0.69%
Net investment income(c) ............................ 2.15% 3.18% 3.52% 3.09% 2.31%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ..................... $443,376 $282,769 $251,570 $194,477 $162,079
Portfolio turnover rate ............................. 11.48% 4.84% 8.11% 11.08% 8.16%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Amount rounds to less than $0.01 per share.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.71% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 35
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON CONSERVATIVE TARGET FUND
YEAR ENDED DECEMBER 31,
----------------------------------------------
CLASS B 2009 2008 2007 2006 2005
- ------- ------ ------- ------ ------ ------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................. $10.88 $ 13.55 $13.29 $12.71 $12.46
------ ------- ------ ------ ------
Income from investment operations(a):
Net investment income(b, c) ...................... 0.16 0.30 0.36 0.30 0.19
Net realized and unrealized gains (losses) ....... 1.87 (2.44) 0.61 0.84 0.29
------ ------- ------ ------ ------
Total from investment operations .................... 2.03 (2.14) 0.97 1.14 0.48
------ ------- ------ ------ ------
Less distributions from:
Net investment income ............................ (0.15) (0.29) (0.36) (0.32) (0.23)
Net realized gains ............................... (0.08) (0.24) (0.35) (0.24) --
------ ------- ------ ------ ------
Total distributions ................................. (0.23) (0.53) (0.71) (0.56) (0.23)
------ ------- ------ ------ ------
Redemption fees(d) .................................. -- --(e) --(e) --(e) --(e)
------ ------- ------ ------ ------
Net asset value, end of year ........................ $12.68 $ 10.88 $13.55 $13.29 $12.71
====== ======= ====== ====== ======
Total return(f) ...................................... 18.85% (16.02)% 7.42% 9.05% 3.87%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments
by affiliates(g) ................................. 1.31% 1.40% 1.43% 1.44% 1.48%
Expenses net of waiver and payments
by affiliates(g) ................................. 1.25% 1.26% 1.24% 1.25% 1.44%
Net investment income(c)............................. 1.40% 2.43% 2.77% 2.34% 1.56%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ..................... $8,591 $ 7,150 $6,497 $6,422 $6,202
Portfolio turnover rate ............................. 11.48% 4.84% 8.11% 11.08% 8.16%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Amount rounds to less than $0.01 per share.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.71% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
36 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON CONSERVATIVE TARGET FUND
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
CLASS C 2009 2008 2007 2006 2005
- ------- -------- -------- -------- ------- -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................. $ 10.77 $ 13.42 $ 13.18 $ 12.60 $ 12.36
-------- -------- -------- ------- -------
Income from investment operations(a):
Net investment income(b, c) ...................... 0.16 0.30 0.38 0.30 0.19
Net realized and unrealized gains (losses) ....... 1.85 (2.41) 0.58 0.85 0.28
-------- -------- -------- ------- -------
Total from investment operations .................... 2.01 (2.11) 0.96 1.15 0.47
-------- -------- -------- ------- -------
Less distributions from:
Net investment income ............................ (0.16) (0.30) (0.37) (0.33) (0.23)
Net realized gains ............................... (0.08) (0.24) (0.35) (0.24) --
-------- -------- -------- ------- -------
Total distributions ................................. (0.24) (0.54) (0.72) (0.57) (0.23)
-------- -------- -------- ------- -------
Redemption fees(d) .................................. -- --(e) --(e) --(e) --(e)
-------- -------- -------- ------- -------
Net asset value, end of year ........................ $ 12.54 $ 10.77 $ 13.42 $ 13.18 $ 12.60
======== ======== ======== ======= =======
Total return(f) ..................................... 18.84% (16.04)% 7.48% 9.16% 3.83%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments
by affiliates(g) ................................. 1.30% 1.39% 1.43% 1.43% 1.47%
Expenses net of waiver and payments
by affiliates(g) ................................. 1.24% 1.25% 1.24% 1.24% 1.43%
Net investment income(c)............................. 1.41% 2.44% 2.77% 2.35% 1.57%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ..................... $253,622 $152,773 $110,914 $76,018 $63,298
Portfolio turnover rate ............................. 11.48% 4.84% 8.11% 11.08% 8.16%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Amount rounds to less than $0.01 per share.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.71% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 37
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON CONSERVATIVE TARGET FUND
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
CLASS R 2009 2008 2007 2006 2005
- ------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $ 10.89 $ 13.55 $ 13.30 $ 12.71 $ 12.46
------- ------- ------- ------- -------
Income from investment operations(a):
Net investment income(b, c) ........................ 0.23 0.37 0.47 0.37 0.26
Net realized and unrealized gains (losses) ......... 1.86 (2.44) 0.57 0.85 0.28
------- ------- ------- ------- -------
Total from investment operations ...................... 2.09 (2.07) 1.04 1.22 0.54
------- ------- ------- ------- -------
Less distributions from:
Net investment income .............................. (0.21) (0.35) (0.44) (0.39) (0.29)
Net realized gains ................................. (0.08) (0.24) (0.35) (0.24) --
------- ------- ------- ------- -------
Total distributions ................................... (0.29) (0.59) (0.79) (0.63) (0.29)
------- ------- ------- ------- -------
Redemption fees(d) .................................... -- --(e) --(e) --(e) --(e)
------- ------- ------- ------- -------
Net asset value, end of year .......................... $ 12.69 $ 10.89 $ 13.55 $ 13.30 $ 12.71
======= ======= ======= ======= =======
Total return(f) ....................................... 19.45% (15.58)% 7.91% 9.73% 4.37%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(g) .. 0.81% 0.90% 0.93% 0.94% 0.98%
Expenses net of waiver and payments by affiliates(g) .. 0.75% 0.76% 0.74% 0.75% 0.94%
Net investment income(c) .............................. 1.90% 2.93% 3.27% 2.84% 2.06%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ....................... $59,184 $29,466 $25,476 $14,490 $14,112
Portfolio turnover rate ............................... 11.48% 4384% 8.11% 11.08% 8.16%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Amount rounds to less than $0.01 per share.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.71% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
38 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON CONSERVATIVE TARGET FUND
YEAR ENDED DECEMBER 31,
---------------------------------------------------
ADVISOR CLASS 2009 2008 2007 2006 2005(a)
- ------------- ------- ------- ------ ------ -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $ 10.91 $ 13.57 $13.31 $12.72 $12.81
------- ------- ------ ------ ------
Income from investment operations(b):
Net investment income(c, d) ........................ 0.30 0.45 0.53 0.45 0.07
Net realized and unrealized gains (losses) ......... 1.85 (2.46) 0.58 0.83 0.02
------- ------- ------ ------ ------
Total from investment operations ...................... 2.15 (2.01) 1.11 1.28 0.09
------- ------- ------ ------ ------
Less distributions from:
Net investment income .............................. (0.27) (0.41) (0.50) (0.45) (0.18)
Net realized gains ................................. (0.08) (0.24) (0.35) (0.24) --
------- ------- ------ ------ ------
Total distributions ................................... (0.35) (0.65) (0.85) (0.69) (0.18)
------- ------- ------ ------ ------
Redemption fees(e) .................................... -- --(f) --(f) --(f) --(f)
------- ------- ------ ------ ------
Net asset value, end of year .......................... $ 12.71 $ 10.91 $13.57 $13.31 $12.72
======= ======= ====== ====== ======
Total return(g) ....................................... 19.97% (15.15)% 8.48% 10.28% 0.68%
RATIOS TO AVERAGE NET ASSETS(h)
Expenses before waiver and payments by affiliates(i) .. 0.31% 0.40% 0.43% 0.44% 0.48%
Expenses net of waiver and payments by affiliates(i) .. 0.25% 0.26% 0.24% 0.25% 0.44%
Net investment income(d) .............................. 2.40% 3.43% 3.77% 3.34% 2.56%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ....................... $10,627 $ 4,307 $3,536 $1,726 $ 753
Portfolio turnover rate ............................... 11.48% 4.84% 8.11% 11.08% 8.16%
(a) For the period December 1, 2005 (effective date) to December 31, 2005.
(b) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(c) Based on average daily shares outstanding.
(d) Recognition 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.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Amount rounds to less than $0.01 per share.
(g) Total return is not annualized for periods less than one year.
(h) Ratios are annualized for periods less than one year.
(i) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.71% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 39
Franklin Templeton Fund Allocator Series
STATEMENT OF INVESTMENTS, DECEMBER 31, 2009
FRANKLIN TEMPLETON CONSERVATIVE TARGET FUND SHARES VALUE
------------------------------------------- ----------- ------------
INVESTMENTS IN UNDERLYING FUNDS(a)
DOMESTIC EQUITY 30.0%
(b) Franklin Flex Cap Growth Fund, Advisor Class ...................... 2,009,530 $ 84,360,079
(b) Franklin Growth Opportunities Fund, Advisor Class ................. 1,839,114 34,906,392
Franklin MicroCap Value Fund, Advisor Class ....................... 575,855 15,548,097
Franklin Natural Resources Fund, Advisor Class .................... 461,977 15,208,281
(b) Franklin Small Cap Growth Fund, Advisor Class ..................... 1,599,055 14,439,470
Franklin Utilities Fund, Advisor Class ............................ 973,080 11,034,722
Mutual Shares Fund, Class Z ....................................... 2,965,617 56,910,197
------------
232,407,238
------------
DOMESTIC FIXED INCOME 22.9%
Franklin Total Return Fund, Advisor Class ......................... 8,148,576 78,307,814
Franklin U.S. Government Securities Fund, Advisor Class ........... 14,886,390 99,143,357
------------
177,451,171
------------
FOREIGN EQUITY 13.1%
Franklin Gold and Precious Metals Fund, Advisor Class ............. 404,391 16,660,925
Mutual European Fund, Class Z ..................................... 1,720,522 35,081,435
Templeton China World Fund, Advisor Class ......................... 486,823 16,712,617
Templeton Foreign Fund, Advisor Class ............................. 5,125,112 33,210,728
------------
101,665,705
------------
FOREIGN FIXED INCOME 14.3%
Franklin Templeton Emerging Market Debt Opportunities Fund ........ 1,096,744 12,009,346
Templeton Global Bond Fund, Advisor Class ......................... 7,774,593 98,659,586
------------
110,668,932
------------
TOTAL INVESTMENTS IN UNDERLYING FUNDS BEFORE SHORT TERM INVESTMENTS
(COST $565,470,917) 80.3% .................................... 622,193,046
------------
SHORT TERM INVESTMENTS (COST $152,256,461) 19.6%
MONEY MARKET FUNDS 19.6%
(c) Institutional Fiduciary Trust Money Market Portfolio, 0.00% ....... 152,256,461 152,256,461
------------
TOTAL INVESTMENTS IN UNDERLYING FUNDS (COST $717,727,378) 99.9% ... 774,449,507
OTHER ASSETS, LESS LIABILITIES 0.1% ............................... 951,018
------------
NET ASSETS 100.0% ................................................. $775,400,525
============
(a) See Note 6 regarding investments in Underlying Funds.
(b) Non-income producing.
(c) The rate shown is the annualized seven-day yield at period end.
The accompanying notes are an integral part of these financial statements.
40 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS
FRANKLIN TEMPLETON MODERATE TARGET FUND
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
CLASS A 2009 2008 2007 2006 2005
- ------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $ 10.67 $ 14.35 $ 14.03 $ 13.14 $ 12.69
-------- -------- -------- -------- --------
Income from investment operations(a):
Net investment income(b, c) ........................ 0.25 0.35 0.43 0.35 0.25
Net realized and unrealized gains (losses) ......... 2.35 (3.31) 0.87 1.15 0.50
-------- -------- -------- -------- --------
Total from investment operations ...................... 2.60 (2.96) 1.30 1.50 0.75
-------- -------- -------- -------- --------
Less distributions from:
Net investment income .............................. (0.24) (0.35) (0.43) (0.38) (0.30)
Net realized gains ................................. (0.10) (0.37) (0.55) (0.23) --
-------- -------- -------- -------- --------
Total distributions ................................... (0.34) (0.72) (0.98) (0.61) (0.30)
-------- -------- -------- -------- --------
Redemption fees(d) .................................... -- --(e) --(e) --(e) --(e)
-------- -------- -------- -------- --------
Net asset value, end of year .......................... $ 12.93 $ 10.67 $ 14.35 $ 14.03 $ 13.14
======== ======== ======== ======== ========
Total return(f) ....................................... 24.68% (21.22)% 9.40% 11.57% 5.94%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(g) .. 0.57% 0.68% 0.68% 0.70% 0.74%
Expenses net of waiver and payments by affiliates(g) .. 0.50% 0.52% 0.50% 0.50% 0.69%
Net investment income(c) .............................. 2.19% 2.74% 2.92% 2.56% 1.93%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ....................... $755,399 $476,415 $491,451 $401,392 $316,754
Portfolio turnover rate 13.71% 7.29% 10.29% 9.40% 10.59%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Amount rounds to less than $0.01 per share.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.78% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 41
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON MODERATE TARGET FUND
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
CLASS B 2009 2008 2007 2006 2005
- ------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $ 10.64 $ 14.31 $ 13.99 $ 13.10 $ 12.66
------- ------- ------- ------- -------
Income from investment operations(a):
Net investment income(b, c) ........................ 0.16 0.25 0.31 0.24 0.15
Net realized and unrealized gains (losses) ......... 2.34 (3.30) 0.88 1.15 0.50
------- ------- ------- ------- -------
Total from investment operations ...................... 2.50 (3.05) 1.19 1.39 0.65
------- ------- ------- ------- -------
Less distributions from:
Net investment income .............................. (0.16) (0.25) (0.32) (0.27) (0.21)
Net realized gains ................................. (0.10) (0.37) (0.55) (0.23) --
------- ------- ------- ------- -------
Total distributions ................................... (0.26) (0.62) (0.87) (0.50) (0.21)
------- ------- ------- ------- -------
Redemption fees(d) .................................... -- --(e) --(e) --(e) --(e)
------- ------- ------- ------- -------
Net asset value, end of year .......................... $ 12.88 $ 10.64 $ 14.31 $ 13.99 $ 13.10
======= ======= ======= ======= =======
Total return(f) ....................................... 23.65% (21.80)% 8.61% 10.70% 5.18%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(g) .. 1.32% 1.43% 1.43% 1.45% 1.49%
Expenses net of waiver and payments by affiliates(g) .. 1.25% 1.27% 1.25% 1.25% 1.44%
Net investment income(c) .............................. 1.44% 1.99% 2.17% 1.81% 1.18%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ....................... $14,448 $11,060 $12,445 $11,533 $10,170
Portfolio turnover rate ............................... 13.71% 7.29% 10.29% 9.40% 10.59%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Amount rounds to less than $0.01 per share.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.78% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
42 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON MODERATE TARGET FUND
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
CLASS C 2009 2008 2007 2006 2005
- ------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $ 10.47 $ 14.11 $ 13.81 $ 12.94 $ 12.50
-------- -------- -------- -------- --------
Income from investment operations(a):
Net investment income(b, c) ........................ 0.17 0.25 0.31 0.24 0.15
Net realized and unrealized gains (losses) ......... 2.30 (3.26) 0.87 1.13 0.50
-------- -------- -------- -------- --------
Total from investment operations ...................... 2.47 (3.01) 1.18 1.37 0.65
-------- -------- -------- -------- --------
Less distributions from:
Net investment income .............................. (0.16) (0.26) (0.33) (0.27) (0.21)
Net realized gains ................................. (0.10) (0.37) (0.55) (0.23) --
-------- -------- -------- -------- --------
Total distributions ................................... (0.26) (0.63) (0.88) (0.50) (0.21)
-------- -------- -------- -------- --------
Redemption fees(d) .................................... -- --(e) --(e) --(e) --(e)
-------- -------- -------- -------- --------
Net asset value, end of year .......................... $ 12.68 $ 10.47 $ 14.11 $ 13.81 $ 12.94
======== ======== ======== ======== ========
Total return(f) ....................................... 23.82% (21.87)% 8.61% 10.72% 5.25%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(g) .. 1.32% 1.43% 1.43% 1.45% 1.48%
Expenses net of waiver and payments by affiliates(g) .. 1.25% 1.27% 1.25% 1.25% 1.43%
Net investment income(c) .............................. 1.44% 1.99% 2.17% 1.81% 1.19%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ....................... $303,794 $164,355 $160,563 $134,465 $112,294
Portfolio turnover rate ............................... 13.71% 7.29% 10.29% 9.40% 10.59%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Amount rounds to less than $0.01 per share.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.78% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 43
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON MODERATE TARGET FUND
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
CLASS R 2009 2008 2007 2006 2005
- ------- -------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ........................ $ 10.64 $ 14.32 $ 14.00 $ 13.11 $ 12.66
-------- ------- ------- ------- -------
Income from investment operations(a):
Net investment income(b,c) ............................. 0.23 0.33 0.39 0.31 0.21
Net realized and unrealized gains (losses) ............. 2.34 (3.32) 0.88 1.15 0.51
-------- ------- ------- ------- -------
Total from investment operations .......................... 2.57 (2.99) 1.27 1.46 0.72
-------- ------- ------- ------- -------
Less distributions from:
Net investment income .................................. (0.22) (0.32) (0.40) (0.34) (0.27)
Net realized gains ..................................... (0.10) (0.37) (0.55) (0.23) --
-------- ------- ------- ------- -------
Total distributions ....................................... (0.32) (0.69) (0.95) (0.57) (0.27)
-------- ------- ------- ------- -------
Redemption fees(d) ........................................ -- --(e) --(e) --(e) --(e)
-------- ------- ------- ------- -------
Net asset value, end of year .............................. $ 12.89 $ 10.64 $ 14.32 $ 14.00 $ 13.11
======== ======= ======= ======= =======
Total return(f) ........................................... 24.37% (21.45)% 9.16% 11.27% 5.73%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(g) ...... 0.82% 0.93% 0.93% 0.95% 0.99%
Expenses net of waiver and payments by affiliates(g) ...... 0.75% 0.77% 0.75% 0.75% 0.94%
Net investment income(c) .................................. 1.94% 2.49% 2.67% 2.31% 1.68%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................... $101,575 $47,009 $40,102 $31,719 $30,403
Portfolio turnover rate ................................... 13.71% 7.29% 10.29% 9.40% 10.59%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Amount rounds to less than $0.01 per share.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.78% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
44 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON MODERATE TARGET FUND
YEAR ENDED DECEMBER 31,
----------------------------------------------------
ADVISOR CLASS 2009 2008 2007 2006 2005(a)
- ------------- ------- -------- ------ ------ -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ........................ $ 10.67 $ 14.35 $14.03 $13.15 $13.23
------- ------- ------ ------ ------
Income from investment operations(b):
Net investment income(c,d) ............................. 0.30 0.40 0.46 0.40 0.08
Net realized and unrealized gains (losses) ............. 2.33 (3.33) 0.88 1.13 0.02
------- ------- ------ ------ ------
Total from investment operations .......................... 2.63 (2.93) 1.34 1.53 0.10
------- ------- ------ ------ ------
Less distributions from:
Net investment income .................................. (0.27) (0.38) (0.47) (0.42) (0.18)
Net realized gains ..................................... (0.10) (0.37) (0.55) (0.23) --
------- ------- ------ ------ ------
Total distributions ....................................... (0.37) (0.75) (1.02) (0.65) (0.18)
------- ------- ------ ------ ------
Redemption fees(e) ........................................ -- --(f) --(f) --(f) --(f)
------- ------- ------ ------ ------
Net asset value, end of year .............................. $ 12.93 $ 10.67 $14.35 $14.03 $13.15
======= ======= ====== ====== ======
Total return(g) ........................................... 24.97% (21.02)% 9.66% 11.87% 0.68%
RATIOS TO AVERAGE NET ASSETS(h)
Expenses before waiver and payments by affiliates(i) ...... 0.32% 0.43% 0.43% 0.45% 0.49%
Expenses net of waiver and payments by affiliates(i) ...... 0.25% 0.27% 0.25% 0.25% 0.44%
Net investment income(d) .................................. 2.44% 2.99% 3.17% 2.81% 2.18%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................... $27,944 $11,489 $9,699 $7,071 $3,890
Portfolio turnover rate ................................... 13.71% 7.29% 10.29% 9.40% 10.59%
(a) For the period December 1, 2005 (effective date) to December 31, 2005.
(b) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(c) Based on average daily shares outstanding.
(d) Recognition 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.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Amount rounds to less than $0.01 per share.
(g) Total return is not annualized for periods less than one year.
(h) Ratios are annualized for periods less than one year.
(i) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.78% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 45
Franklin Templeton Fund Allocator Series
STATEMENT OF INVESTMENTS, DECEMBER 31, 2009
FRANKLIN TEMPLETON MODERATE TARGET FUND SHARES VALUE
--------------------------------------- ----------- --------------
INVESTMENTS IN UNDERLYING FUNDS(a)
DOMESTIC EQUITY 40.7%
(b)Franklin Flex Cap Growth Fund, Advisor Class ................................ 4,133,387 $ 173,519,569
(b)Franklin Growth Opportunities Fund, Advisor Class ........................... 4,097,021 77,761,458
Franklin MicroCap Value Fund, Advisor Class ................................. 1,212,279 32,731,528
Franklin Natural Resources Fund, Advisor Class .............................. 928,539 30,567,498
(b)Franklin Small Cap Growth Fund, Advisor Class ............................... 3,346,288 30,216,978
Franklin Utilities Fund, Advisor Class ...................................... 2,277,761 25,829,811
Mutual Shares Fund, Class Z ................................................. 6,221,784 119,396,039
--------------
490,022,881
--------------
DOMESTIC FIXED INCOME 19.7%
Franklin Total Return Fund, Advisor Class ................................... 10,766,015 103,461,409
Franklin U.S. Government Securities Fund, Advisor Class ..................... 20,075,360 133,701,897
--------------
237,163,306
--------------
FOREIGN EQUITY 17.7%
Franklin Gold and Precious Metals Fund, Advisor Class ....................... 854,370 35,200,064
Mutual European Fund, Class Z ............................................... 3,691,504 75,269,767
Templeton China World Fund, Advisor Class ................................... 1,007,126 34,574,635
Templeton Foreign Fund, Advisor Class ....................................... 10,368,964 67,190,887
--------------
212,235,353
--------------
FOREIGN FIXED INCOME 12.2%
Franklin Templeton Emerging Market Debt Opportunities Fund .................. 1,471,971 16,118,083
Templeton Global Bond Fund, Advisor Class ................................... 10,313,694 130,880,773
--------------
146,998,856
--------------
TOTAL INVESTMENTS IN UNDERLYING FUNDS BEFORE SHORT TERM INVESTMENTS
(COST $972,239,331) 90.3% ................................................ 1,086,420,396
--------------
SHORT TERM INVESTMENTS (COST $116,690,476) 9.7%
MONEY MARKET FUNDS 9.7%
(c)Institutional Fiduciary Trust Money Market Portfolio, 0.00% ................. 116,690,476 116,690,476
--------------
TOTAL INVESTMENTS IN UNDERLYING FUNDS (COST $1,088,929,807) 100.0% .......... 1,203,110,872
OTHER ASSETS, LESS LIABILITIES 0.0%(d) ...................................... 50,618
--------------
NET ASSETS 100.0% ........................................................... $1,203,161,490
==============
(a) See Note 6 regarding investments in Underlying Funds.
(b) Non-income producing.
(c) The rate shown is the annualized seven-day yield at period end.
(d) Rounds to less than 0.1% of net assets.
The accompanying notes are an integral part of these financial statements.
46 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS
FRANKLIN TEMPLETON GROWTH TARGET FUND
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
CLASS A 2009 2008 2007 2006 2005
- ------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ..................... $ 10.48 $ 16.17 $ 15.63 $ 14.10 $ 13.17
-------- -------- -------- -------- --------
Income from investment operations(a):
Net investment income(b,c) .......................... 0.20 0.19 0.32 0.24 0.14
Net realized and unrealized gains (losses) .......... 3.04 (5.00) 1.31 1.73 0.96
-------- -------- -------- -------- --------
Total from investment operations ....................... 3.24 (4.81) 1.63 1.97 1.10
-------- -------- -------- -------- --------
Less distributions from:
Net investment income and short term gains received
from Underlying Funds ............................ (0.21) (0.22) (0.32) (0.32) (0.17)
Net realized gains .................................. --(d) (0.66) (0.77) (0.12) --
-------- -------- -------- -------- --------
Total distributions .................................... (0.21) (0.88) (1.09) (0.44) (0.17)
-------- -------- -------- -------- --------
Redemption fees(e) ..................................... -- --(d) --(d) --(d) --(d)
-------- -------- -------- -------- --------
Net asset value, end of year ........................... $ 13.51 $ 10.48 $ 16.17 $ 15.63 $ 14.10
======== ======== ======== ======== ========
Total return(f) ........................................ 31.08% (30.75)% 10.58% 13.90% 8.47%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(g) ... 0.62% 0.76% 0.74% 0.75% 0.79%
Expenses net of waiver and payments by affiliates(g) ... 0.50% 0.51% 0.50% 0.50% 0.72%
Net investment income(c) ............................... 1.72% 1.43% 1.93% 1.59% 1.07%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................ $398,288 $283,111 $394,689 $319,521 $230,686
Portfolio turnover rate ................................ 16.55% 8.87% 10.36% 9.31% 10.50%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Amount rounds to less than $0.01 per share.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.86% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 47
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON GROWTH TARGET FUND
YEAR ENDED DECEMBER 31,
---------------------------------------------------
CLASS B 2009 2008 2007 2006 2005
- ------- ------ ------- ------ ------ ------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ..................... $10.32 $ 15.91 $15.45 $13.97 $13.09
------ ------- ------ ------ ------
Income from investment operations(a):
Net investment income(b,c) .......................... 0.11 0.09 0.17 0.12 0.04
Net realized and unrealized gains (losses) .......... 2.98 (4.90) 1.31 1.72 0.96
------ ------- ------ ------ ------
Total from investment operations ....................... 3.09 (4.81) 1.48 1.84 1.00
------ ------- ------ ------ ------
Less distributions from:
Net investment income and short term gains received
from Underlying Funds ............................ (0.13) (0.12) (0.25) (0.24) (0.12)
Net realized gains .................................. --(d) (0.66) (0.77) (0.12) --
------ ------- ------ ------ ------
Total distributions .................................... (0.13) (0.78) (1.02) (0.36) (0.12)
------ ------- ------ ------ ------
Redemption fees(e) ..................................... -- --(d) --(d) --(d) --(d)
------ ------- ------ ------ ------
Net asset value, end of year ........................... $13.28 $ 10.32 $15.91 $15.45 $13.97
====== ======= ====== ====== ======
Total return(f) ........................................ 30.05% (31.24)% 9.76% 13.06% 7.63%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(g) ... 1.36% 1.51% 1.49% 1.50% 1.54%
Expenses net of waiver and payments by affiliates(g) ... 1.24% 1.26% 1.25% 1.25% 1.47%
Net investment income(c) ............................... 0.98% 0.68% 1.18% 0.84% 0.32%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................ $8,271 $ 6,261 $8,292 $8,195 $6,468
Portfolio turnover rate ................................ 16.55% 8.87% 10.36% 9.31% 10.50%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Amount rounds to less than $0.01 per share.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.86% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
48 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON GROWTH TARGET FUND
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
CLASS C 2009 2008 2007 2006 2005
- ------- -------- -------- -------- -------- -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ..................... $ 10.31 $ 15.90 $ 15.44 $ 13.97 $ 13.09
-------- -------- -------- -------- -------
Income from investment operations(a):
Net investment income(b,c) .......................... 0.11 0.09 0.19 0.13 0.04
Net realized and unrealized gains (losses) .......... 2.99 (4.90) 1.29 1.70 0.96
-------- -------- -------- -------- -------
Total from investment operations ....................... 3.10 (4.81) 1.48 1.83 1.00
-------- -------- -------- -------- -------
Less distributions from:
Net investment income and short term gains received
from Underlying Funds ............................ (0.13) (0.12) (0.25) (0.24) (0.12)
Net realized gains .................................. --(d) (0.66) (0.77) (0.12) --
-------- -------- -------- -------- -------
Total distributions .................................... (0.13) (0.78) (1.02) (0.36) (0.12)
-------- -------- -------- -------- -------
Redemption fees(e) ..................................... -- --(d) --(d) --(d) --(d)
-------- -------- -------- -------- -------
Net asset value, end of year ........................... $ 13.28 $ 10.31 $ 15.90 $ 15.44 $ 13.97
======== ======== ======== ======== =======
Total return(f) ........................................ 30.19% (31.26)% 9.72% 13.08% 7.63%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(g) ... 1.37% 1.51% 1.49% 1.50% 1.54%
Expenses net of waiver and payments by affiliates(g) ... 1.25% 1.26% 1.25% 1.25% 0.47%
Net investment income(c) ............................... 0.97% 0.68% 1.18% 0.84% 0.32%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................ $153,267 $106,379 $145,218 $122,156 $88,986
Portfolio turnover rate ................................ 16.55% 8.87% 10.36% 9.31% 10.50%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Amount rounds to less than $0.01 per share.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.86% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 49
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON GROWTH TARGET FUND
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
2009 2008 2007 2006 2005
------- ------- ------- ------- -------
CLASS R
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ..................... $ 10.38 $ 16.02 $ 15.52 $ 14.02 $ 13.11
------- ------- ------- ------- -------
Income from investment operations(a):
Net investment income(b,c) .......................... 0.19 0.17 0.29 0.20 0.11
Net realized and unrealized gains (losses) .......... 3.00 (4.96) 1.28 1.71 0.95
------- ------- ------- ------- -------
Total from investment operations ....................... 3.19 (4.79) 1.57 1.91 1.06
------- ------- ------- ------- -------
Less distributions from:
Net investment income and short term gains received
from Underlying Funds ............................ (0.19) (0.19) (0.30) (0.29) (0.15)
Net realized gains .................................. --(d) (0.66) (0.77) (0.12) --
------- ------- ------- ------- -------
Total distributions .................................... (0.19) (0.85) (1.07) (0.41) (0.15)
------- ------- ------- ------- -------
Redemption fees(e) ..................................... -- --(d) --(d) --(d) --(d)
------- ------- ------- ------- -------
Net asset value, end of year ........................... $ 13.38 $ 10.38 $ 16.02 $ 15.52 $ 14.02
======= ======= ======= ======= =======
Total return(f) ........................................ 30.87% (30.92)% 10.31% 13.65% 8.10%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(g) ... 0.87% 1.01% 0.99% 1.00% 1.04%
Expenses net of waiver and payments by affiliates(g) ... 0.75% 0.76% 0.75% 0.75% 0.97%
Net investment income(c) ............................... 1.47% 1.18% 1.68% 1.34% 0.82%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................ $68,599 $35,485 $36,757 $26,215 $19,461
Portfolio turnover rate ................................ 16.55% 8.87% 10.36% 9.31% 10.50%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Amount rounds to less than $0.01 per share.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.86% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
50 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON GROWTH TARGET FUND
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
2009 2008 2007 2006 2005(a)
------- ------- ------ ------ -------
ADVISOR CLASS
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ..................... $ 10.49 $ 16.19 $15.64 $14.10 $14.18
------- ------- ------ ------ ------
Income from investment operations(b):
Net investment income(c,d) .......................... 0.24 0.27 0.38 0.29 0.11
Net realized and unrealized gains (losses) .......... 3.04 (5.06) 1.29 1.72 (0.03)
------- ------- ------ ------ ------
Total from investment operations ....................... 3.28 (4.79) 1.67 2.01 0.08
------- ------- ------ ------ ------
Less distributions from:
Net investment income and short term gains received
from Underlying Funds ............................ (0.24) (0.25) (0.35) (0.35) (0.16)
Net realized gains .................................. --(e) (0.66) (0.77) (0.12) --
------- ------- ------ ------ ------
Total distributions .................................... (0.24) (0.91) (1.12) (0.47) (0.16)
------- ------- ------ ------ ------
Redemption fees(f) ..................................... -- --(e) --(e) --(e) --(e)
------- ------- ------ ------ ------
Net asset value, end of year ........................... $ 13.53 $ 10.49 $16.19 $15.64 $14.10
======= ======= ====== ====== ======
Total return(g) ........................................ 31.43% (30.56)% 10.80% 14.26% 0.54%
RATIOS TO AVERAGE NET ASSETS(h)
Expenses before waiver and payments by affiliates(i) ... 0.37% 0.51% 0.49% 0.50% 0.54%
Expenses net of waiver and payments by affiliates(i) ... 0.25% 0.26% 0.25% 0.25% 0.47%
Net investment income(d) ............................... 1.97% 1.68% 2.18% 1.84% 1.32%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................ $18,994 $11,059 $9,917 $5,593 $3,320
Portfolio turnover rate ................................ 16.55% 8.87% 10.36% 9.31% 10.50%
(a) For the period December 1, 2005 (effective date) to December 31, 2005.
(b) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(c) Based on average daily shares outstanding.
(d) Recognition 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.
(e) Amount rounds to less than $0.01 per share.
(f) Effective September 1, 2008, the redemption fee was eliminated.
(g) Total return is not annualized for periods less than one year.
(h) Ratios are annualized for periods less than one year.
(i) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.86% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 51
Franklin Templeton Fund Allocator Series
STATEMENT OF INVESTMENTS, DECEMBER 31, 2009
FRANKLIN TEMPLETON GROWTH TARGET FUND SHARES VALUE
------------------------------------- ---------- ------------
INVESTMENTS IN UNDERLYING FUNDS(a)
DOMESTIC EQUITY 56.9%
(b)Franklin Flex Cap Growth Fund, Advisor Class .............................. 3,119,847 $130,971,162
(b)Franklin Growth Opportunities Fund, Advisor Class ......................... 2,979,100 56,543,310
Franklin MicroCap Value Fund, Advisor Class ............................... 900,508 24,313,713
Franklin Natural Resources Fund, Advisor Class ............................ 731,516 24,081,498
(b)Franklin Small Cap Growth Fund, Advisor Class ............................. 2,534,271 22,884,470
Franklin Utilities Fund, Advisor Class .................................... 1,585,356 17,977,932
Mutual Shares Fund, Class Z ............................................... 4,787,405 91,870,307
------------
368,642,392
------------
DOMESTIC FIXED INCOME 8.4%
Franklin Total Return Fund, Advisor Class ................................. 2,537,365 24,384,076
Franklin U.S. Government Securities Fund, Advisor Class ................... 4,489,641 29,901,009
------------
54,285,085
------------
FOREIGN EQUITY 24.7%
Franklin Gold and Precious Metals Fund, Advisor Class ..................... 710,067 29,254,771
Mutual European Fund, Class Z ............................................. 2,697,277 54,997,474
Templeton China World Fund, Advisor Class ................................. 743,060 25,509,251
Templeton Foreign Fund, Advisor Class ..................................... 7,739,305 50,150,699
------------
159,912,195
------------
FOREIGN FIXED INCOME 5.4%
Franklin Templeton Emerging Market Debt Opportunities Fund ................ 363,113 3,976,091
Templeton Global Bond Fund, Advisor Class ................................. 2,415,480 30,652,443
------------
34,628,534
------------
TOTAL INVESTMENTS IN UNDERLYING FUNDS BEFORE SHORT TERM INVESTMENTS
(COST $556,164,774) 95.4% .............................................. 617,468,206
------------
SHORT TERM INVESTMENTS (COST $31,270,842) 4.8%
MONEY MARKET FUNDS 4.8%
(c)Institutional Fiduciary Trust Money Market Portfolio, 0.00% ............... 31,270,842 31,270,842
------------
TOTAL INVESTMENTS IN UNDERLYING FUNDS (COST $587,435,616) 100.2% .......... 648,739,048
OTHER ASSETS, LESS LIABILITIES (0.2)% ..................................... (1,321,258)
------------
NET ASSETS 100.0% ......................................................... $647,417,790
============
(a) See Note 6 regarding investments in Underlying Funds.
(b) Non-income producing.
(c) The rate shown is the annualized seven-day yield at period end.
The accompanying notes are an integral part of these financial statements.
52 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 2009
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
------------ -------------- ------------
Assets:
Investments in Underlying Funds: (Note 6)
Cost ....................................... $717,727,378 $1,088,929,807 $587,435,616
------------ -------------- ------------
Value ...................................... $774,449,507 $1,203,110,872 $648,739,048
Receivables:
Capital shares sold ........................ 4,948,502 13,259,297 4,336,720
Underlying Funds (Note 7) .................. 68,936 129,603 100,932
Other assets .................................. 75 112 68
------------ -------------- ------------
Total assets ............................ 779,467,020 1,216,499,884 653,176,768
------------ -------------- ------------
Liabilities:
Payables:
Capital shares redeemed .................... 3,074,118 11,902,108 4,862,018
Affiliates ................................. 770,080 1,096,043 625,429
Accrued expenses and other liabilities ........ 222,297 340,243 271,531
------------ -------------- ------------
Total liabilities ....................... 4,066,495 13,338,394 5,758,978
------------ -------------- ------------
Net assets, at value ................. $775,400,525 $1,203,161,490 $647,417,790
------------ -------------- ------------
Net assets consist of:
Paid-in capital ............................... $740,671,152 $1,131,360,747 $622,107,823
Undistributed net investment income ........... 213,603 315,344 243,751
Net unrealized appreciation (depreciation) .... 56,722,129 114,181,065 61,303,432
Accumulated net realized gain (loss) .......... (22,206,359) (42,695,666) (36,237,216)
------------ -------------- ------------
Net assets, at value ................. $775,400,525 $1,203,161,490 $647,417,790
============ ============== ============
The accompanying notes are an integral part of these financial statements.
Annual Report | 53
Franklin Templeton Fund Allocator Series
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
December 31, 2009
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
------------ ------------ ------------
CLASS A:
Net assets, at value ....................................... $443,375,739 $755,399,341 $398,287,986
------------ ------------ ------------
Shares outstanding ......................................... 34,848,534 58,423,314 29,470,797
------------ ------------ ------------
Net asset value per share(a) ............................... $ 12.72 $ 12.93 $ 13.51
------------ ------------ ------------
Maximum offering price per share (net asset value per
share / 94.25%) ......................................... $ 13.50 $ 13.72 $ 14.33
------------ ------------ ------------
CLASS B:
Net assets, at value ....................................... $ 8,591,370 $ 14,447,871 $ 8,270,508
------------ ------------ ------------
Shares outstanding ......................................... 677,351 1,121,316 622,589
------------ ------------ ------------
Net asset value and maximum offering price per share(a) .... $ 12.68 $ 12.88 $ 13.28
------------ ------------ ------------
CLASS C:
Net assets, at value ....................................... $253,622,188 $303,794,456 $153,266,661
------------ ------------ ------------
Shares outstanding ......................................... 20,225,419 23,967,903 11,539,840
------------ ------------ ------------
Net asset value and maximum offering price per share(a) .... $ 12.54 $ 12.68 $ 13.28
------------ ------------ ------------
CLASS R:
Net assets, at value ....................................... $ 59,184,257 $101,575,468 $ 68,598,939
------------ ------------ ------------
Shares outstanding ......................................... 4,665,316 7,877,923 5,125,943
------------ ------------ ------------
Net asset value and maximum offering price per share ....... $ 12.69 $ 12.89 $ 13.38
------------ ------------ ------------
ADVISOR CLASS:
Net assets, at value ....................................... $ 10,626,971 $ 27,944,354 $ 18,993,696
------------ ------------ ------------
Shares outstanding ......................................... 835,852 2,161,284 1,403,537
------------ ------------ ------------
Net asset value and maximum offering price per share ....... $ 12.71 $ 12.93 $ 13.53
------------ ------------ ------------
(a) Redemption price is equal to net asset value less contingent deferred sales
charges, if applicable.
The accompanying notes are an integral part of these financial statements.
54 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF OPERATIONS
for the year ended December 31, 2009
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
------------ ------------ ------------
Investment income:
Dividends from Underlying Funds (Note 6) ................. $ 15,828,983 $ 24,111,089 $ 11,486,151
------------ ------------ ------------
Expenses:
Asset allocation fees (Note 3a) .......................... 1,219,851 2,039,208 1,236,940
Distribution fees: (Note 3c)
Class A ............................................... 863,713 1,455,312 810,694
Class B ............................................... 74,880 122,601 69,846
Class C ............................................... 1,920,808 2,145,720 1,235,449
Class R ............................................... 213,387 347,724 244,087
Transfer agent fees (Note 3e) ............................ 901,028 1,471,303 1,193,797
Reports to shareholders .................................. 60,748 100,835 74,892
Registration and filing fees ............................. 96,293 99,897 84,257
Professional fees ........................................ 41,177 44,007 36,903
Trustees' fees and expenses .............................. 6,145 9,128 5,479
Other .................................................... 21,071 28,608 18,476
Expenses borne by Underlying Funds (Note 7) .............. (519,852) (937,473) (747,873)
------------ ------------ ------------
Total expenses ..................................... 4,899,249 6,926,870 4,262,947
Expenses waived/paid by affiliates (Note 3f) ....... (337,528) (607,736) (622,545)
------------ ------------ ------------
Net expenses .................................... 4,561,721 6,319,134 3,640,402
------------ ------------ ------------
Net investment income ........................... 11,267,262 17,791,955 7,845,749
------------ ------------ ------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Sale of investments in Underlying Funds ............... (20,026,753) (40,432,232) (34,117,209)
Realized gain distributions by Underlying Funds ....... 365,866 796,690 635,188
------------ ------------ ------------
Net realized gain (loss) ........................ (19,660,887) (39,635,542) (33,482,021)
------------ ------------ ------------
Net change in unrealized appreciation (depreciation)
on investments in Underlying Funds .................... 116,972,429 222,938,456 168,675,705
------------ ------------ ------------
Net realized and unrealized gain (loss) ..................... 97,311,542 183,302,914 135,193,684
------------ ------------ ------------
Net increase (decrease) in net assets resulting from
operations ............................................... $108,578,804 $201,094,869 $143,039,433
============ ============ ============
The accompanying notes are an integral part of these financial statements.
Annual Report | 55
Franklin Templeton Fund Allocator Series
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
CONSERVATIVE TARGET FUND MODERATE TARGET FUND
---------------------------- -------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
---------------------------- -------------------------------
2009 2008 2009 2008
------------ ------------ -------------- -------------
Increase (decrease) in net assets:
Operations:
Net investment income ................................. $ 11,267,262 $ 13,249,694 $ 17,791,955 $ 18,213,483
Net realized gain (loss) from Underlying Funds ........ (19,660,887) 2,841,441 (39,635,542) 6,799,917
Net change in unrealized appreciation (depreciation)
on investments in Underlying Funds ................. 116,972,429 (94,915,134) 222,938,456 (196,772,246)
------------ ------------ -------------- -------------
Net increase (decrease) in net assets resulting
from operations .............................. 108,578,804 (78,823,999) 201,094,869 (171,758,846)
------------ ------------ -------------- -------------
Distributions to shareholders from:
Net investment income:
Class A ............................................ (7,508,736) (9,093,615) (12,955,129) (14,241,980)
Class B ............................................ (99,752) (175,167) (169,874) (248,537)
Class C ............................................ (2,891,086) (3,810,306) (3,474,528) (3,721,764)
Class R ............................................ (859,679) (869,315) (1,463,437) (1,250,162)
Advisor Class ...................................... (187,303) (134,845) (493,631) (346,065)
Net realized gains:
Class A ............................................ (2,327,944) (5,215,326) (4,682,245) (14,041,188)
Class B ............................................ (51,084) (122,096) (100,236) (327,683)
Class C ............................................ (1,316,100) (2,743,261) (1,727,548) (4,781,082)
Class R ............................................ (279,848) (541,689) (524,368) (1,274,713)
Advisor Class ...................................... (40,108) (67,963) (135,129) (281,923)
------------ ------------ -------------- -------------
Total distributions to shareholders ...................... (15,561,640) (22,773,583) (25,726,125) (40,515,097)
------------ ------------ -------------- -------------
Capital share transactions: (Note 2)
Class A ............................................ 106,971,049 92,679,878 165,371,309 128,035,233
Class B ............................................ 318,788 2,232,512 997,675 2,045,174
Class C ............................................ 70,599,426 73,404,375 97,697,787 52,799,515
Class R ............................................ 22,902,697 10,284,248 40,611,926 20,814,658
Advisor Class ...................................... 5,126,951 1,455,357 12,786,593 4,642,852
------------ ------------ -------------- -------------
Total capital share transactions ......................... 205,918,911 180,056,370 317,465,290 208,337,432
------------ ------------ -------------- -------------
Redemption fees .......................................... -- 12,809 -- 4,916
------------ ------------ -------------- -------------
Net increase (decrease) in net assets ........... 298,936,075 78,471,597 492,834,034 (3,931,595)
Net assets:
Beginning of year ........................................ 476,464,450 397,992,853 710,327,456 714,259,051
------------ ------------ -------------- -------------
End of year .............................................. $775,400,525 $476,464,450 $1,203,161,490 $ 710,327,456
============ ============ ============== =============
Undistributed net investment income included in net assets:
End of year .............................................. $ 213,603 $ 427,455 $ 315,344 $ 929,902
============ ============ ============== =============
The accompanying notes are an integral part of these financial statements.
56 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FRANKLIN TEMPLETON
GROWTH TARGET FUND
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
2009 2008
------------ -------------
Increase (decrease) in net assets:
Operations:
Net investment income ................................................. $ 7,845,749 $ 6,496,173
Net realized gain (loss) from Underlying Funds ........................ (33,482,021) 177,061
Net change in unrealized appreciation (depreciation) on investments in
Underlying Funds ................................................... 168,675,705 (197,001,270)
------------ -------------
Net increase (decrease) in net assets resulting from operations .... 143,039,433 (190,328,036)
------------ -------------
Distributions to shareholders from:
Net investment income and short term gains received from Underlying Funds:
Class A ............................................................... (6,002,040) (5,761,341)
Class B ............................................................... (79,879) (72,932)
Class C ............................................................... (1,424,386) (1,258,031)
Class R ............................................................... (893,237) (646,134)
Advisor Class ......................................................... (311,608) (257,043)
Net realized gains:
Class A ............................................................... (133,986) (16,500,974)
Class B ............................................................... (2,919) (368,168)
Class C ............................................................... (51,562) (6,340,529)
Class R ............................................................... (18,681) (1,770,767)
Advisor Class ......................................................... (5,668) (434,667)
------------ -------------
Total distributions to shareholders ......................................... (8,923,966) (33,410,586)
------------ -------------
Capital share transactions: (Note 2)
Class A ............................................................... 31,296,337 34,252,033
Class B ............................................................... 192,275 1,172,839
Class C ............................................................... 14,915,770 16,176,377
Class R ............................................................... 20,371,264 14,662,480
Advisor Class ......................................................... 4,233,458 4,892,287
------------ -------------
Total capital share transactions ............................................ 71,009,104 71,156,016
------------ -------------
Redemption fees ............................................................. -- 2,223
------------ -------------
Net increase (decrease) in net assets .............................. 205,124,571 (152,580,383)
Net assets:
Beginning of year ........................................................ 442,293,219 594,873,602
------------ -------------
End of year .............................................................. $647,417,790 $ 442,293,219
============ =============
Undistributed net investment income included in net assets:
End of year .............................................................. $ 243,751 $ 981,391
============ =============
The accompanying notes are an integral part of these financial statements.
Annual Report | 57
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Templeton Fund Allocator Series (Trust) is registered under the
Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment
company, consisting of ten separate funds, three of which are included in this
report (Funds). The financial statements of the remaining funds in the Trust are
presented separately. The Funds invest primarily in Franklin Templeton mutual
funds (Underlying Funds). The Funds offer five classes of shares: Class A, Class
B, Class C, Class R, and Advisor Class. Each class of shares differs by its
initial sales load, contingent deferred sales charges, distribution fees, voting
rights on matters affecting a single class and its exchange privilege.
The following summarizes the Funds' significant accounting policies.
A. SECURITY VALUATION
Net asset value per share is calculated as of the close of trading of the NYSE.
Investments in the Underlying Funds are valued at their closing net asset value
each trading day.
B. INCOME TAXES
No provision has been made for U.S. income taxes because it is each fund's
policy to qualify as a regulated investment company under the Internal Revenue
Code and to distribute to shareholders substantially all of its taxable income
and net realized gains.
The Funds have reviewed the tax positions, taken on federal income tax returns,
for each of the three open tax years and as of December 31, 2009, and have
determined that no provision for income tax is required in the Funds' financial
statements.
C. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Estimated expenses are accrued daily. Dividend income and realized gain
distributions by Underlying Funds are recorded on the ex-dividend date.
Distributions to shareholders are recorded on the ex-dividend date and are
determined according to income tax regulations (tax basis). Distributable
earnings determined on a tax basis may differ from earnings recorded in
accordance with accounting principles generally accepted in the United States of
America. 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.
58 | Annual Report
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
(CONTINUED)
Common expenses incurred by the Trust are allocated among the funds based on the
ratio of net assets of each fund to the combined net assets of the Trust. Fund
specific expenses are charged directly to the fund that incurred the expense.
The Funds indirectly bear their proportionate share of expenses from the
Underlying Funds. Since the Underlying Funds have varied expense levels and the
Funds may own different proportions of the Underlying Funds at different times,
the amount of expenses incurred indirectly by the Funds will vary.
Realized and unrealized gains and losses and net investment income, not
including class specific expenses, are allocated daily to each class of shares
based upon the relative proportion of net assets of each class. Differences in
per share distributions, by class, are generally due to differences in class
specific expenses.
D. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
E. REDEMPTION FEES
A short term trading redemption fee was imposed, with some exceptions, on any
fund shares that were redeemed or exchanged within seven calendar days following
their purchase date. The redemption fee was 2% of the amount redeemed. Such fees
were retained by the funds and accounted for as an addition to paid-in capital.
Effective September 1, 2008, the redemption fee was eliminated.
F. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified by the Trust against certain liabilities arising out of the
performance of their duties to the Trust. Additionally, in the normal course of
business, the Trust, on behalf of the Funds, enters into contracts with service
providers that contain general indemnification clauses. The Trust's maximum
exposure under these arrangements is unknown as this would involve future claims
that may be made against the Trust that have not yet occurred. Currently, the
Trust expects the risk of loss to be remote.
Annual Report | 59
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST
At December 31, 2009, there were an unlimited number of shares authorized
(without par value). Transactions in the Funds' shares were as follows:
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
CONSERVATIVE TARGET FUND MODERATE TARGET FUND
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- -------------
CLASS A SHARES:
Year ended December 31, 2009
Shares sold .................... 17,172,635 $ 201,914,915 26,240,519 $ 307,600,865
Shares issued in reinvestment of
distributions ............... 751,135 8,952,829 1,412,572 16,855,743
Shares redeemed ................ (8,976,351) (103,896,695) (13,873,127) (159,085,299)
---------- ------------- ----------- -------------
Net increase (decrease) ........ 8,947,419 $ 106,971,049 13,779,964 $ 165,371,309
========== ============= =========== =============
Year ended December 31, 2008
Shares sold .................... 15,568,306 $ 190,953,863 19,698,628 $ 242,960,356
Shares issued in reinvestment of
distributions ............... 1,088,389 13,016,234 2,242,119 27,400,727
Shares redeemed ................ (9,272,012) (111,290,219) (11,533,860) (142,325,850)
---------- ------------- ----------- -------------
Net increase (decrease) ........ 7,384,683 $ 92,679,878 10,406,887 $ 128,035,233
========== ============= =========== =============
CLASS B SHARES:
Year ended December 31, 2009
Shares sold .................... 267,360 $ 3,131,147 381,520 $ 4,393,323
Shares issued in reinvestment of
distributions ............... 11,110 131,573 21,652 256,702
Shares redeemed ................ (257,949) (2,943,932) (321,593) (3,652,350)
---------- ------------- ---------- -------------
Net increase (decrease) ........ 20,521 $ 318,788 81,579 $ 997,675
========== ============= =========== =============
Year ended December 31, 2008
Shares sold .................... 386,978 $ 4,705,293 439,730 $ 5,372,790
Shares issued in reinvestment of
distributions ............... 21,263 252,962 44,191 537,722
Shares redeemed ................ (231,042) (2,725,743) (313,835) (3,865,338)
---------- ------------- ----------- -------------
Net increase (decrease) ........ 177,199 $ 2,232,512 170,086 $ 2,045,174
========== ============= =========== =============
CLASS C SHARES:
Year ended December 31, 2009
Shares sold .................... 10,203,701 $ 117,884,377 12,247,985 $ 141,937,134
Shares issued in reinvestment of
distributions ............... 311,086 3,656,958 402,476 4,735,596
Shares redeemed ................ (4,475,784) (50,941,909) (4,374,031) (48,974,943)
---------- ------------- ----------- -------------
Net increase (decrease) ........ 6,039,003 $ 70,599,426 8,276,430 $ 97,697,787
========== ============= =========== =============
Year ended December 31, 2008
Shares sold .................... 9,143,048 $ 111,410,003 7,246,871 $ 88,052,929
Shares issued in reinvestment of
distributions ............... 485,398 5,720,049 641,662 7,691,753
Shares redeemed ................ (3,708,346) (43,725,677) (3,579,060) (42,945,167)
---------- ------------- ----------- -------------
Net increase (decrease) ........ 5,920,100 $ 73,404,375 4,309,473 $ 52,799,515
========== ============= =========== =============
60 | Annual Report
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
CONSERVATIVE TARGET FUND MODERATE TARGET FUND
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ----------- -------------
CLASS R SHARES:
Year ended December 31, 2009
Shares sold .................... 3,189,920 $ 37,666,834 5,038,649 $ 58,878,618
Shares issued in reinvestment of
distributions ............... 88,948 1,060,448 160,513 1,924,057
Shares redeemed ................ (1,319,654) (15,824,585) (1,737,405) (20,190,749)
---------- ------------- ----------- -------------
Net increase (decrease) ........ 1,959,214 $ 22,902,697 3,461,757 $ 40,611,926
========== ============= =========== =============
Year ended December 31, 2008
Shares sold .................... 1,459,923 $ 18,062,085 2,991,280 $ 37,361,989
Shares issued in reinvestment of
distributions ............... 113,747 1,356,174 202,851 2,464,649
Shares redeemed ................ (747,198) (9,134,011) (1,577,937) (19,011,980)
---------- ------------- ----------- -------------
Net increase (decrease) ........ 826,472 $ 10,284,248 1,616,194 $ 20,814,658
========== ============= =========== =============
ADVISOR CLASS SHARES:
Year ended December 31, 2009
Shares sold .................... 671,018 $ 7,795,493 1,356,321 $ 15,928,497
Shares issued in reinvestment of
distributions ............... 15,518 184,528 45,310 540,649
Shares redeemed ................ (245,606) (2,853,070) (316,992) (3,682,553)
---------- ------------- ----------- -------------
Net increase (decrease) ........ 440,930 $ 5,126,951 1,084,639 $ 12,786,593
========== ============= =========== =============
Year ended December 31, 2008
Shares sold .................... 257,955 $ 2,902,039 495,708 $ 5,839,904
Shares issued in reinvestment of
distributions ............... 16,949 201,287 51,803 626,829
Shares redeemed ................ (140,537) (1,647,969) (146,513) (1,823,881)
---------- ------------- ----------- -------------
Net increase (decrease) ........ 134,367 $ 1,455,357 400,998 $ 4,642,852
========== ============= =========== =============
FRANKLIN TEMPLETON
GROWTH TARGET FUND
--------------------------
SHARES AMOUNT
---------- -------------
CLASS A SHARES:
Year ended December 31, 2009
Shares sold ..................................... 8,815,446 $ 104,177,953
Shares issued in reinvestment of distributions .. 461,206 5,925,832
Shares redeemed ................................. (6,814,913) (78,807,448)
---------- -------------
Net increase (decrease) ......................... 2,461,739 $ 31,296,337
========== =============
Year ended December 31, 2008
Shares sold ..................................... 8,614,981 $ 114,733,064
Shares issued in reinvestment of distributions .. 1,667,657 21,595,931
Shares redeemed ................................. (7,689,195) (102,076,962)
---------- -------------
Net increase (decrease) ......................... 2,593,443 $ 34,252,033
========== =============
Annual Report | 61
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
FRANKLIN TEMPLETON
GROWTH TARGET FUND
-------------------------
SHARES AMOUNT
---------- ------------
CLASS B SHARES:
Year ended December 31, 2009
Shares sold ..................................... 125,137 $ 1,403,321
Shares issued in reinvestment of distributions .. 6,510 80,379
Shares redeemed ................................. (115,777) (1,291,425)
---------- ------------
Net increase (decrease) ......................... 15,870 $ 192,275
========== ============
Year ended December 31, 2008
Shares sold ..................................... 169,541 $ 2,246,202
Shares issued in reinvestment of distributions .. 32,101 421,308
Shares redeemed ................................. (116,215) (1,494,671)
---------- ------------
Net increase (decrease) ......................... 85,427 $ 1,172,839
========== ============
CLASS C SHARES:
Year ended December 31, 2009
Shares sold ..................................... 3,264,850 $ 37,713,863
Shares issued in reinvestment of distributions .. 109,242 1,361,437
Shares redeemed ................................. (2,148,668) (24,159,530)
---------- ------------
Net increase (decrease) ......................... 1,225,424 $ 14,915,770
========== ============
Year ended December 31, 2008
Shares sold ..................................... 3,113,955 $ 41,358,304
Shares issued in reinvestment of distributions .. 526,370 6,908,111
Shares redeemed ................................. (2,459,694) (32,090,038)
---------- ------------
Net increase (decrease) ......................... 1,180,631 $ 16,176,377
========== ============
CLASS R SHARES:
Year ended December 31, 2009
Shares sold ..................................... 2,751,299 $ 32,690,947
Shares issued in reinvestment of distributions .. 70,466 899,880
Shares redeemed ................................. (1,113,624) (13,219,563)
---------- ------------
Net increase (decrease) ......................... 1,708,141 $ 20,371,264
========== ============
Year ended December 31, 2008
Shares sold ..................................... 2,125,306 $ 28,652,652
Shares issued in reinvestment of distributions .. 185,467 2,367,456
Shares redeemed ................................. (1,186,756) (16,357,628)
---------- ------------
Net increase (decrease) ......................... 1,124,017 $ 14,662,480
========== ============
ADVISOR CLASS SHARES:
Year ended December 31, 2009
Shares sold ..................................... 664,936 $ 7,875,082
Shares issued in reinvestment of distributions .. 23,381 301,931
Shares redeemed ................................. (338,833) (3,943,555)
---------- ------------
Net increase (decrease) ......................... 349,484 $ 4,233,458
========== ============
Year ended December 31, 2008
Shares sold ..................................... 529,385 $ 6,071,746
Shares issued in reinvestment of distributions .. 55,379 690,032
Shares redeemed ................................. (143,400) (1,869,491)
---------- ------------
Net increase (decrease) ......................... 441,364 4,892,287
========== ============
62 | Annual Report
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 Trust are also officers and/or directors/trustees of certain of
the Underlying Funds and of the following subsidiaries:
SUBSIDIARY AFFILIATION
- ---------- -----------
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin Templeton Services, LLC (FT Services) Administrative manager
Franklin Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services) Transfer agent
A. ASSET ALLOCATION FEES
The Funds pay an asset allocation fee to Advisers of 0.25% per year of the
average daily net assets of each of the Funds for investment advisory services,
consisting principally of determining the allocation of assets of the Funds
among the designated Underlying Funds.
B. ADMINISTRATIVE FEES
Under an agreement with Advisers, FT Services provides administrative services
to the Funds. The fee is paid by Advisers based on average daily net assets, and
is not an additional expense of the Funds.
C. DISTRIBUTION FEES
The Trust's Board of Trustees has adopted distribution plans for each share
class, with the exception of Advisor Class shares, pursuant to Rule 12b-1 under
the 1940 Act. Under the Funds' Class A reimbursement distribution plans, the
Funds reimburse Distributors for costs incurred in connection with the
servicing, sale and distribution of each fund's shares up to the maximum annual
plan rate. 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 B, 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 maximum annual plan rates, based on the average daily net assets, for each
class, are as follows:
Class A ... 0.25%
Class B ... 1.00%
Class C ... 1.00%
Class R ... 0.50%
Annual Report | 63
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
D. SALES CHARGES/UNDERWRITING AGREEMENTS
Distributors has advised the Funds of the following commission transactions
related to the sales and redemptions of the Funds' shares for the year:
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
------------ ----------- -----------
Sales charges retained net of commissions paid to unaffiliated
broker/dealers ............................................ $535,609 $893,026 $297,151
Contingent deferred sales charges retained ................... $ 36,634 $ 41,281 $ 18,148
E. TRANSFER AGENT FEES
For the year ended December 31, 2009, the Funds paid transfer agent fees as
noted in the Statements of Operations of which the following amounts were
retained by Investor Services:
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
------------ ----------- -----------
Transfer agent fees ... $443,017 $745,749 $651,267
F. WAIVER AND EXPENSE REIMBURSEMENTS
Advisers has contractually agreed in advance to waive or limit its fees and to
assume as its own expense certain expenses otherwise payable by the Funds so
that the common expenses (i.e. a combination of asset allocation fees and other
expenses, but excluding distribution fees and acquired fund fees and expenses)
for each class of the Funds do not exceed 0.25% (other than certain non-routine
expenses or costs, including those relating to litigation, indemnification,
reorganizations, and liquidations) until April 30, 2010. Prior to May 1, 2009,
the common expenses and acquired fund fees and expenses were limited to 0.93%,
1.00% and 1.07% for the Franklin Templeton Conservative Target Fund, Franklin
Templeton Moderate Target Fund and Franklin Templeton Growth Target Fund,
respectively.
(1) Prior to May 1, 2009, expense waiver included the annualized weighted
average expense ratio of the Underlying Funds.
4. INCOME TAXES
For tax purposes, capital losses may be carried over to offset future capital
gains, if any. At December 31, 2009, the capital loss carryforwards were as
follows:
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
------------ ----------- -----------
Capital loss carryforwards expiring in:
2017 ........................................ $16,090,583 $29,854,100 $31,802,912
64 | Annual Report
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES (CONTINUED)
The tax character of distributions paid during the years ended December 31, 2009
and 2008, was as follows:
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
CONSERVATIVE TARGET FUND MODERATE TARGET FUND
-------------------------- -------------------------
2009 2008 2009 2008
------------ ----------- ----------- -----------
Distributions paid from:
Ordinary income ............ $11,553,492 $14,083,248 $18,557,470 $19,808,519
Long term capital gain ..... 4,008,148 8,690,335 7,168,655 20,706,578
----------- ----------- ----------- -----------
$15,561,640 $22,773,583 $25,726,125 $40,515,097
=========== =========== =========== ===========
FRANKLIN TEMPLETON
GROWTH TARGET FUND
--------------------------
2009 2008
------------ -----------
Distributions paid from:
Ordinary income ............ $8,712,906 $ 7,995,480
Long term capital gain ..... 211,060 25,415,106
---------- -----------
$8,923,966 $33,410,586
========== ===========
At December 31, 2009, the cost of investments, net unrealized appreciation
(depreciation) and undistributed ordinary income for income tax purposes were as
follows:
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
------------ -------------- ------------
Cost of investments ......................... $723,843,156 $1,101,771,376 $591,869,922
============ ============== ============
Unrealized appreciation ..................... $ 54,926,244 $ 112,253,757 $ 76,982,091
Unrealized depreciation ..................... (4,319,893) (10,914,261) (20,112,965)
------------ -------------- ------------
Net unrealized appreciation (depreciation) .. $ 50,606,351 $ 101,339,496 $ 56,869,126
============ ============== ============
Distributable earnings -
undistributed ordinary income ............ $ 213,603 $ 315,344 $ 243,751
============ ============== ============
Net investment income differs for financial statement and tax purposes primarily
due to differing treatment of short term capital gains distributions from
Underlying Funds.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales and short term capital gains
distributions from Underlying Funds.
Annual Report | 65
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INVESTMENT TRANSACTIONS
Purchases and sales of Underlying Funds (excluding short term securities) for
the year ended December 31, 2009, were as follows:
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
------------ ------------ ------------
Purchases ... $203,099,587 $392,151,105 $144,754,988
Sales ....... $ 54,846,112 $110,830,753 $ 81,480,860
6. INVESTMENTS IN UNDERLYING FUNDS
The Funds invest primarily in the Underlying Funds which are managed by Advisers
(or an affiliate of Advisers). The Funds do not invest in the Underlying Funds
for the purpose of exercising management or control. At December 31, 2009, the
Funds held the following positions which exceed 5% of the Underlying Funds'
shares outstanding:
NAME OF ISSUER % OF SHARES HELD
- -------------- ----------------
FRANKLIN TEMPLETON CONSERVATIVE TARGET FUND
Franklin Templeton Emerging Market Debt Opportunities Fund ... 10.89%
Franklin Growth Opportunities Fund ........................... 7.71%
FRANKLIN TEMPLETON MODERATE TARGET FUND
Franklin Growth Opportunities Fund ........................... 17.17%
Franklin Templeton Emerging Market Debt Opportunities Fund ... 14.61%
Franklin MicroCap Value Fund ................................. 9.83%
Franklin Small Cap Growth Fund ............................... 8.93%
Franklin Flex Cap Growth Fund ................................ 5.66%
FRANKLIN TEMPLETON GROWTH TARGET FUND
Franklin Growth Opportunities Fund ........................... 12.49%
Franklin MicroCap Value Fund ................................. 7.30%
Franklin Small Cap Growth Fund ............................... 6.76%
The Funds may invest in the Institutional Fiduciary Trust Money Market Portfolio
(Sweep Money Fund), an open-end investment company managed by Advisers. Pursuant
to a SEC exemptive order specific to the Funds' investment in the Sweep Money
Fund, asset allocation fees are reduced on assets invested in the Sweep Money
Fund, in an amount not to exceed the management and administrative fees paid by
the Sweep Money Fund.
7. SPECIAL SERVICING AGREEMENT
On May 1, 2009, the Funds entered into a Special Servicing Agreement (SSA) with
the Underlying Funds and certain service providers of the Funds and of the
Underlying Funds. Under the SSA,
66 | Annual Report
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. SPECIAL SERVICING AGREEMENT (CONTINUED)
each Underlying Fund may pay a portion of the Funds' expenses (other than any
asset allocation, administrative, and distribution fees) to the extent such
payments are less than the amount of the benefits realized or expected to be
realized by the Underlying Fund (e.g., due to reduced costs associated with
servicing accounts) from the investment in the Underlying Fund by the Funds. The
amount of expenses allocated during the year ended December 31, 2009 is noted in
the Statements of Operations.
8. 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 $725
million (Global Credit Facility) to provide 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 January 22,
2010, the Funds renewed the Global Credit Facility, for a total of $750 million,
maturing January 21, 2011.
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 0.10% based upon the unused portion of the Global
Credit Facility, which is reflected in other expenses on the Statements of
Operations. During the year ended December 31, 2009, the Funds did not utilize
the Global Credit Facility.
9. FAIR VALUE MEASUREMENTS
The Trust follows a fair value hierarchy that distinguishes between market data
obtained from independent sources (observable inputs) and the Trust's own market
assumptions (unobservable inputs). These inputs are used in determining the
value of the Funds' investments and are summarized in the following fair value
hierarchy:
- Level 1 - quoted prices in active markets for identical securities
- Level 2 - other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speed, credit risk,
etc.)
- Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities.
Annual Report | 67
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. FAIR VALUE MEASUREMENTS (CONTINUED)
At December 31, 2009, all of the Funds' investments in Underlying Funds carried
at fair value were in Level 1 inputs. For detailed Underlying Fund categories,
see the accompanying Statements of Investments.
10. NEW ACCOUNTING PRONOUNCEMENTS
In January 2010, the Financial Accounting Standards Board issued Accounting
Standards Update (ASU) No. 2010-6, FAIR VALUE MEASUREMENTS AND DISCLOSURES
(TOPIC 820): IMPROVING DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS. ASU No. 2010-6
enhances and clarifies existing fair value measurement disclosure requirements
and is effective for interim and annual periods beginning after December 15,
2009. The Trust is currently evaluating the impact, if any, of applying the
provisions of ASU No. 2010-6.
11. SUBSEQUENT EVENTS
The Funds have evaluated subsequent events through February 15, 2010, the
issuance date of the financial statements and determined that no events have
occurred that require disclosure.
68 | Annual Report
Franklin Templeton Fund Allocator Series
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF FRANKLIN TEMPLETON FUND ALLOCATOR
SERIES
In our opinion, the accompanying statements of assets and liabilities, including
the statements of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Franklin Templeton Conservative
Target Fund, Franklin Templeton Moderate Target Fund and Franklin Templeton
Growth Target Fund (separate portfolios of Franklin Templeton Allocator Series,
hereafter referred to as the "Funds") at December 31, 2009, the results of each
of their operations for the year then ended, the changes in each of their net
assets for each of the two years in the period then ended and the financial
highlights for the periods presented, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of investments in the Underlying Funds at December 31, 2009 by
correspondence with the transfer agent of the Underlying Funds, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 15, 2010
Annual Report | 69
Franklin Templeton Fund Allocator Series
TAX DESIGNATION (UNAUDITED)
Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Funds
designate the maximum amount allowable but no less than the following amounts as
long term capital gain dividends for the fiscal year ended December 31, 2009:
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
- ------------ ----------- -----------
$4,008,148 $7,168,655 $211,060
Under Section 854(b)(2) of the Code, the Funds designate the following
percentage amounts of the ordinary income dividends as income qualifying for the
dividends received deduction for the fiscal year ended December 31, 2009:
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
- ------------ ----------- -----------
8.12% 10.51% 17.50%
Under Section 854(b)(2) of the Code, the Funds designate 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, 2009:
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
CONSERVATIVE MODERATE GROWTH
TARGET FUND TARGET FUND TARGET FUND
- ------------ ----------- -----------
$3,530,634 $7,305,826 $5,691,599
Distributions, including qualified dividend income, paid during calendar year
2009 will be reported to shareholders on Form 1099-DIV in January 2010.
Shareholders are advised to check with their tax advisors for information on the
treatment of these amounts on their individual income tax returns.
70 | Annual Report
Franklin Templeton 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 the past five years and number of portfolios overseen in the Franklin
Templeton Investments fund complex are shown below. Generally, each board member
serves until that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------ --------------- ------------------ ----------------------- -----------------------------------
HARRIS J. ASHTON (1932) Trustee Since 1995 133 Bar-S Foods (meat packing company).
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING 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).
ROBERT F. CARLSON (1928) Trustee Since 2005 110 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Retired; and FORMERLY, Vice President, senior member and President, Board of Administration, California Public Employees
Retirement Systems (CALPERS) (1971-2008); member and Chairman of the Board, Sutter Community Hospitals; member, Corporate Board,
Blue Shield of California; and Chief Counsel, California Department of Transportation.
SAM GINN (1937) Trustee Since 2007 110 ICO Global Communications
One Franklin Parkway (Holdings) Limited (satellite
San Mateo, CA 94403-1906 company).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Private investor; and FORMERLY, Chairman of the Board, Vodafone AirTouch, PLC (wireless company); Chairman of the Board and Chief
Executive Officer, AirTouch Communications (cellular communications) (1993-1998) and Pacific Telesis Groups (telephone holding
company) (1988-1994).
EDITH E. HOLIDAY (1952) Trustee Since 1998 133 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas), H.J.
San Mateo, CA 94403-1906 Heinz Company (processed foods and
allied products), RTI International
Metals, Inc. (manufacture and
distribution of titanium), Canadian
National Railway (railroad) and
White Mountains Insurance Group,
Ltd. (holding company).
PRINCIPAL OCCUPATION DURING 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).
Annual Report | 71
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------ --------------- ------------------ ----------------------- -----------------------------------
FRANK W.T. LAHAYE (1929) Trustee Since 1995 109 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture
capital).
J. MICHAEL LUTTIG (1954) Trustee Since December 133 Boeing Capital Corporation
One Franklin Parkway 2009 (aircraft financing).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President, General Counsel and member of Executive Council, The Boeing Company; and FORMERLY, Federal Appeals
Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006).
FRANK A. OLSON (1932) Trustee Since 2007 133 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer
(1977-1999)); and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
LARRY D. THOMPSON (1945) Trustee Since 2007 141 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (consumer products); and FORMERLY,
Director, Delta Airlines (aviation) (2003-2005) and Providian Financial Corp. (credit card provider) (1997-2001); Senior Fellow
of The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney
General, U.S. Department of Justice (2001-2003).
JOHN B. WILSON (1959) Lead Trustee since 110 None
One Franklin Parkway Independent 2006 and Lead
San Mateo, CA 94403-1906 Trustee Independent
Trustee since
2008
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Founder, Hyannis Port Capital, Inc. (real estate and private equity investing); serves on private and non-profit
boards; and FORMERLY, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail) (1996-2000); Chief Financial
Officer and Executive Vice President - Finance and Strategy, Staples, Inc. (office supplies) (1992-1996); Senior Vice President -
Corporate Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (consulting
firm) (1986-1990).
72 | Annual Report
INTERESTED BOARD MEMBERS AND OFFICERS
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------ --------------- ------------------ ----------------------- -----------------------------------
**CHARLES B. JOHNSON (1933) Trustee and Since 1995 133 None
One Franklin Parkway Chairman of
San Mateo, CA 94403-1906 the Board
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Templeton Worldwide,
Inc.; 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.
** GREGORY E. JOHNSON (1961) Trustee Since 2007 89 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, President and Chief Executive Officer, Franklin Resources, Inc.; President, Templeton Worldwide, Inc.; and officer
and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 32 of the
investment companies in Franklin Templeton Investments.
JAMES M. DAVIS (1952) Chief Chief Compliance Not Applicable Not Applicable
One Franklin Parkway Compliance Officer since 2004
San Mateo, CA 94403-1906 Officer and and Vice
Vice President President - AML
- AML Compliance since
Compliance 2006
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin Resources, Inc. and
of 45 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director of Compliance, Franklin Resources,
Inc. (1994-2001).
LAURA F. FERGERSON (1962) Chief Since March 2009 Not Applicable Not Applicable
One Franklin Parkway Executive
San Mateo, CA 94403-1906 Officer -
Finance and
Administration
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; officer of 45 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Director and member of Audit and Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant
Treasurer of most of the investment companies in Franklin Templeton Investments (1997-2003); and Vice President, Franklin
Templeton Services, LLC (1997-2003).
GASTON GARDEY (1967) Treasurer, Since March 2009 Not Applicable Not Applicable
One Franklin Parkway Chief Financial
San Mateo, CA 94403-1906 Officer and
Chief
Accounting
Officer
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Fund Accounting, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin Templeton
Investments.
Annual Report | 73
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------ --------------- ------------------ ----------------------- -----------------------------------
ALIYA S. GORDON (1973) Vice President Since March 2009 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Templeton Investments; officer of 45 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Litigation Associate, Steefel, Levitt & Weiss, LLP (2000-2004).
DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; officer and/or director, as the case maybe, of some of the
other subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments.
STEVEN J. GRAY (1955) Vice President Since August Not Applicable Not Applicable
One Franklin Parkway 2009
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc.; and
officer of 45 of the investment companies in Franklin Templeton Investments.
RUPERT H. JOHNSON, JR. (1940) President and President and Not Applicable Not Applicable
One Franklin Parkway Chief Chief Executive
San Mateo, CA 94403-1906 Executive Officer -
Officer - Investment
Investment Management
Management since 2002
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc. and
Templeton Worldwide, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the
case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 43 of the investment companies in Franklin
Templeton Investments.
ROBERT C. ROSSELOT (1960) Vice President Since August Not Applicable Not Applicable
500 East Broward Blvd. 2009
Suite 2100
Fort Lauderdale, FL 33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President
and Secretary, Templeton Investment Counsel, LLC; Vice President, Secretary and Trust Officer, Fiduciary Trust International of
the South; and officer of 45 of the investment companies in Franklin Templeton Investments.
KAREN L. SKIDMORE (1952) Vice President Since 2006 Not Applicable Not Applicable
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin
Templeton Investments.
74 | Annual Report
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------ --------------- ------------------ ----------------------- -----------------------------------
CRAIG S. TYLE (1960) Vice President Since 2005 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Counsel and Executive Vice President, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin
Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments; and FORMERLY, Partner, Shearman &
Sterling, LLP (2004-2005); and General Counsel, Investment Company Institute (ICI) (1997-2004).
* We base the number of portfolios on each separate series of the U.S.
registered investment companies within the Franklin Templeton Investments
fund complex. These portfolios have a common investment manager or
affiliated investment managers.
** Charles B. Johnson 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 Franklin Resources, Inc. (Resources),
which is the parent company of the Fund's investment manager and
distributor. 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 Resources.
Note 1: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, 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/(800) 342-5236 TO REQUEST THE SAI.
Annual Report | 75
Franklin Templeton 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, 500 East Broward Boulevard, Suite 1500, Fort Lauderdale, FL
33394, Attention: Proxy Group. Copies of the Trust's proxy voting records are
also made available online at franklintempleton.com and posted on the U.S.
Securities and Exchange Commission's website at sec.gov and reflect the most
recent 12-month period ended June 30.
QUARTERLY STATEMENT OF INVESTMENTS
The Trust files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling (800)
SEC-0330.
76 | Annual Report
Franklin Templeton Funds
LITERATURE REQUEST. TO RECEIVE A PROSPECTUS, PLEASE CALL US AT (800) DIAL
BEN/(800) 342-5236 OR VISIT franklintempleton.com. INVESTORS SHOULD CAREFULLY
CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES BEFORE
INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE CAREFULLY
READ THE PROSPECTUS BEFORE INVESTING. TO ENSURE THE HIGHEST QUALITY OF SERVICE,
WE MAY MONITOR, RECORD AND ACCESS TELEPHONE CALLS TO OR FROM OUR SERVICE
DEPARTMENTS. THESE CALLS CAN BE IDENTIFIED BY THE PRESENCE OF A REGULAR BEEPING
TONE.
VALUE
Franklin All Cap Value Fund
Franklin Balance Sheet Investment Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund(1)
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Quest Fund(2)
Mutual Recovery Fund(3)
Mutual Shares Fund
BLEND
Franklin Focused Core Equity Fund
Franklin Large Cap Equity Fund
Franklin Rising Dividends Fund
GROWTH
Franklin DynaTech Fund
Franklin Flex Cap Growth Fund
Franklin Growth Fund
Franklin Growth Opportunities Fund
Franklin Small Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
SECTOR
Franklin Biotechnology Discovery Fund
Franklin Global Real Estate Fund
Franklin Gold & Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Mutual Financial Services Fund
GLOBAL
Mutual Global Discovery Fund(4)
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
INTERNATIONAL
Franklin India Growth Fund
Franklin International Growth Fund
Franklin International Small Cap Growth Fund
Mutual European Fund
Mutual International Fund
Templeton BRIC Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Emerging Markets Small Cap Fund
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton Frontier Markets Fund
HYBRID
Franklin Balanced Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Templeton Income Fund
ASSET ALLOCATION
Franklin Templeton Corefolio(R) Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund
FIXED INCOME
Franklin Adjustable U.S. Government Securities Fund(5)
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund
Franklin Limited Maturity U.S. Government
Securities Fund(5)
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund(5)
Templeton Global Bond Fund
Templeton Global Total Return Fund
Templeton International Bond Fund
TAX-FREE INCOME(6)
NATIONAL
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(7)
LIMITED-/INTERMEDIATE-TERM
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund
STATE-SPECIFIC
Alabama
Arizona
California(8)
Colorado
Connecticut
Florida
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(9)
Michigan(9)
Minnesota(9)
Missouri
New Jersey
New York(8)
North Carolina
Ohio(9)
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance
Products Trust(10)
(1.) The fund is closed to new investors. Existing shareholders and select
retirement plans can continue adding to their accounts.
(2.) Effective 5/1/09, Mutual Qualified Fund changed its name to Mutual Quest
Fund. The fund's investment goal and strategy remained unchanged.
(3.) The fund is a continuously offered, closed-end fund. Shares may be
purchased daily; there is no daily redemption. However, each quarter,
pending board approval, the fund will authorize the repurchase of 5%-25% of
the outstanding number of shares. Investors may tender all or a portion of
their shares during the tender period.
(4.) Effective 5/1/09, Mutual Discovery Fund changed its name to Mutual Global
Discovery Fund. The fund's investment goal and strategy remained unchanged.
(5.) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
(6.) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are generally
taxable.
(7.) The fund invests primarily in insured municipal securities.
(8.) These funds are available in three or more variations, including long-term
portfolios, intermediate-term portfolios, portfolios of insured securities,
a high-yield portfolio (CA only) and a money market portfolio (CA only).
(9.) The Board of Trustees approved the elimination of the non-fundamental
policy requiring the fund to invest at least 80% of net assets in insured
municipal securities and the removal of the word "Insured" from the fund
name. The changes became effective 2/15/09.
(10.) The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
01/10 Not part of the annual report
(FRANKLIN TEMPLETON INVESTMENTS(R) LOGO) One Franklin Parkway
San Mateo, CA 94403-1906
SIGN UP FOR ELECTRONIC DELIVERY
on franklintempleton.com
ANNUAL REPORT AND SHAREHOLDER LETTER
FRANKLIN TEMPLETON
FUND ALLOCATOR SERIES
INVESTMENT MANAGER
Franklin Advisers, Inc.
DISTRIBUTOR
Franklin Templeton Distributors, Inc.
(800) DIAL BEN(R)
franklintempleton.com
SHAREHOLDER SERVICES
(800) 632-2301
Authorized for distribution only when accompanied or preceded by a prospectus.
Investors should carefully consider a fund's investment goals, risks, charges
and expenses before investing. The prospectus contains this and other
information; please read it carefully before investing.
To ensure the highest quality of service, telephone calls to or from our service
departmentsmay be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
FAS A2009 02/10
DECEMBER 31, 2009
ANNUAL REPORT
AND SHAREHOLDER LETTER
Franklin Templeton
Corefolio Allocation Fund
Franklin Templeton
Founding Funds Allocation Fund
Franklin Templeton
Perspectives Allocation Fund
SIGN UP FOR ELECTRONIC DELIVERY on franklintempleton.com
(GRAPHIC)
ASSET ALLOCATION
FRANKLIN TEMPLETON
FUND ALLOCATOR SERIES
(FRANKLIN TEMPLETON INVESTMENTS(R) LOGO)
FRANKLIN - TEMPLETON - MUTUAL SERIES
Franklin Templeton Investments
GAIN FROM OUR PERSPECTIVE(R)
Franklin Templeton's distinct multi-manager
structure combines the specialized expertise of
three world-class investment management groups--
Franklin, Templeton and Mutual Series.
SPECIALIZED EXPERTISE Each of our portfolio management groups operates
autonomously, relying on its own research and
staying true to the unique investment disciplines
that underlie its success.
FRANKLIN. Founded in 1947, Franklin is a recognized
leader in fixed income investing and also brings
expertise in growth- and value-style U.S. equity
investing.
TEMPLETON. Founded in 1940, Templeton pioneered
international investing and, in 1954, launched what
has become the industry's oldest global fund. Today,
with offices in over 25 countries, Templeton offers
investors a truly global perspective.
MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what it
believes are undervalued stocks, as well as
arbitrage situations and distressed securities.
TRUE DIVERSIFICATION Because our management groups work independently and
adhere to different investment approaches, Franklin,
Templeton and Mutual Series funds typically have
distinct portfolios. That's why our funds can be
used to build truly diversified allocation plans
covering every major asset class.
RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with exceptional
risk-adjusted returns over the long term, as well as
the reliable, accurate and personal service that has
helped us become one of the most trusted names in
financial services.
MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
(GRAPHIC)
Not part of the annual report
Contents
SHAREHOLDER LETTER ........................................................ 1
ANNUAL REPORT
Economic and Market Overview .............................................. 3
Franklin Templeton Corefolio Allocation Fund .............................. 5
Franklin Templeton Founding Funds Allocation Fund ......................... 14
Franklin Templeton Perspectives Allocation Fund ........................... 23
Financial Highlights and Statements of Investments ........................ 32
Financial Statements ...................................................... 49
Notes to Financial Statements ............................................. 54
Report of Independent Registered Public Accounting Firm ................... 65
Tax Designation ........................................................... 66
Board Members and Officers ................................................ 67
Shareholder Information ................................................... 72
Shareholder Letter
Dear Shareholder:
During the year 2009, U.S. economic activity showed signs of stabilization after
a prolonged recession. Government stimulus measures helped thaw credit markets,
the financial system avoided collapse, and many companies reported
better-than-expected earnings after cutting costs. Investors breathed a
collective sigh of relief, and equity markets enjoyed a remarkable rally while
interest rates remained low and inflation was subdued.
Franklin Templeton Fund Allocator Series' annual report goes into greater detail
about prevailing conditions during the period under review. In addition, you
will find performance data, financial information and portfolio reviews. Please
remember that all securities markets fluctuate, as do mutual fund share prices.
If you would like more frequent updates, franklintempleton.com provides daily
prices, monthly performance figures, portfolio holdings and other information.
You can also access your account, buy and sell shares, and find helpful
financial planning tools. We hope you will take advantage of these online
services.
Although market conditions are constantly changing, we remain committed to our
disciplined strategy as we manage the Fund, keeping in mind the trust you have
placed in us. As always, we recommend investors consult their financial advisors
and review their portfolios to design a long-term strategy and portfolio
allocation that meet their individual needs, goals and risk tolerance. We firmly
believe that most people benefit from professional advice, and that advice is
invaluable as investors navigate current market conditions.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Not part of the annual report | 1
We thank you for investing with Franklin Templeton, welcome your questions and
comments, and look forward to serving your investment needs in the years ahead.
Sincerely,
/s/ Charles B. Johnson
Charles B. Johnson
Chairman
Franklin Templeton Fund Allocator Series
THIS LETTER REFLECTS OUR ANALYSIS AND OPINIONS AS OF DECEMBER 31, 2009. 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.
2 | Not part of the annual report
Annual Report
Economic and Market Overview
The U.S. economy ended 2009 in much better shape than it began. After several
quarters of contraction, economic activity expanded in the third and fourth
quarters. In the year's second half, corporate profit growth was higher than
earlier estimates, which may allow businesses to build inventory following a
long period of inventory drawdowns. Economic challenges remain, such as stalled
consumer confidence and job prospects for the unemployed, as stimulus measures
wind down, but several reports pointed to improving economic conditions.
Throughout the year, the Federal Open Market Committee kept U.S. monetary policy
unchanged, announcing it intends to hold the federal funds target rate in the 0%
to 0.25% range "for an extended period" as it lays the groundwork for an
eventual tightening of monetary policy. Late in the period, the labor market
improved somewhat as the economy lost fewer jobs than expected and the
unemployment rate fell slightly, dropping from a period high of 10.2% in October
to 10.0% at period-end.(1)
Globally, equity markets entered 2009 largely pricing in a possible economic
depression and systemic solvency crisis, scenarios that were ultimately averted
by one of the most aggressive global policy responses in financial history. As
government monetary and fiscal intervention began to gain traction toward the
end of the first quarter, equities bottomed and largely reversed their decline,
economic growth stabilized and rebounded, and confidence was rekindled as
investors began to believe the global financial system was finally on the mend.
Emerging market economies fueled the global recovery as governments aggressively
incentivized lending and consumption, resulting in a dramatic recovery that laid
the groundwork for the developing world's equity rally. Growing demand from
emerging markets supported commodity prices, which also posted record gains
during the year. For most of the year, the fading U.S. dollar also helped
underpin the rally in hard assets, while continued euro and yen strength created
headwinds for regional recoveries.
(1.) Source: Bureau of Labor Statistics.
Annual Report | 3
For the 12 months under review, the blue chip stocks of the Dow Jones Industrial
Average delivered a total return of +22.68%, while the broader Standard & Poor's
500 Index (S&P 500) posted a +26.46% total return and the technology-heavy
NASDAQ Composite Index returned +45.32%.(2) Global developed and emerging
markets, as measured by the Morgan Stanley Capital International (MSCI) All
Country World Index, delivered a +35.41% total return.(3)
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS AND OPINIONS AS OF DECEMBER 31,
2009. 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.
(2.) Source: (C) 2009 Morningstar. All Rights Reserved. The information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted
to be accurate, complete or timely. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from any use of
this information. Past performance is no guarantee of future results. The
Dow Jones Industrial Average is price weighted based on the average market
price of 30 blue chip stocks of companies that are generally industry
leaders. The S&P 500 consists of 500 stocks chosen for market size,
liquidity and industry group representation. Each stock's weight in the
index is proportionate to its market value. The S&P 500 is one of the most
widely used benchmarks of U.S. equity performance. The NASDAQ Composite
Index measures all NASDAQ domestic and international common type stocks
listed on The NASDAQ Stock Market.
(3.) Source: (C) 2009 Morningstar. The MSCI All Country World Index is a free
float-adjusted, market capitalization-weighted index designed to measure
equity market performance in global developed and emerging markets.
4 | Annual Report
Franklin Templeton Corefolio Allocation Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin Templeton Corefolio Allocation
Fund seeks capital appreciation through investments in a combination of Franklin
Growth Fund, Mutual Shares Fund and Templeton Growth Fund.
ASSET ALLOCATION*
Franklin Templeton Corefolio Allocation Fund
Based on Total Net Assets as of 12/31/09
(PIE CHART)
Domestic Equity............. 75.1%
Foreign Equity.............. 24.9%
* The asset allocation is based on the Statement of Investments (SOI), which
classifies each underlying fund into a broad asset class.
This annual report for Franklin Templeton Corefolio Allocation Fund covers the
fiscal year ended December 31, 2009.
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT franklintempleton.com OR CALL (800) 342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
PERFORMANCE OVERVIEW
Franklin Templeton Corefolio Allocation Fund - Class A delivered a +32.74%
cumulative total return for the 12 months under review. In comparison, the
Fund's benchmarks, the Standard & Poor's 500 Index (S&P 500) and the Morgan
Stanley Capital International (MSCI) World Index, posted total returns of
+26.46% and +30.79%.(1) You can find other performance data in the Performance
Summary beginning on page 7.
(1.) Source: (C) 2009 Morningstar. All Rights Reserved. The information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted
to be accurate, complete or timely. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from any use of
this information. The S&P 500 consists of 500 stocks chosen for market
size, liquidity and industry group representation. Each stock's weight in
the index is proportionate to its market value. The S&P 500 is one of the
most widely used benchmarks of U.S. equity performance. The MSCI World
Index is a free float-adjusted, market capitalization-weighted index
designed to measure equity market performance in global developed markets.
The indexes are unmanaged and include reinvested distributions. One cannot
invest directly in an index, and an index is not representative of the
Fund's portfolio.
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 37.
Annual Report | 5
INVESTMENT STRATEGY
The Fund invests its assets allocated approximately 50% in Franklin Growth Fund
and approximately 25% each in Mutual Shares Fund and Templeton Growth Fund.
These underlying funds, in turn, invest primarily in U.S. and foreign equity
securities and, to a lesser extent, fixed income and money market securities. As
market conditions affect the underlying funds, we rebalance the Fund's
allocations to maintain the predetermined weightings in each underlying fund
whenever the actual allocations exceed plus or minus 3% of the fixed allocation
percentages.
PORTFOLIO REVIEW
The Fund's performance can be attributed largely to maintaining a relatively
static allocation among domestic and foreign equities, fixed income securities,
and short-term investments and other net assets, and to the actual performance
of the selected underlying funds.
During the fiscal year under review, all three underlying funds had positive
total returns. Franklin Growth Fund - Advisor Class and Mutual Shares Fund -
Class Z outperformed the S&P 500, while Templeton Growth Fund - Advisor Class
performed comparably to the MSCI World Index.
Thank you for your continued participation in Franklin Templeton Corefolio
Allocation Fund. We look forward to serving your future investment needs.
(PHOTO OF T. ANTHONY COFFEY)
/s/ T. Anthony Coffey
T. Anthony Coffey, CFA
Vice President of Franklin Advisers, Inc.
Franklin Templeton Corefolio Allocation Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF DECEMBER 31, 2009, 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.
6 | Annual Report
Performance Summary as of 12/31/09
FRANKLIN TEMPLETON COREFOLIO ALLOCATION FUND
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table 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.
PRICE AND DISTRIBUTION INFORMATION
CLASS A (SYMBOL: FTCOX) CHANGE 12/31/09 12/31/08
- ----------------------- ------- -------- --------
Net Asset Value (NAV) +$2.62 $11.08 $8.46
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.1419
CLASS B (SYMBOL: FBCOX) CHANGE 12/31/09 12/31/08
- ----------------------- ------- -------- --------
Net Asset Value (NAV) +$2.60 $11.04 $8.44
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.0700
CLASS C (SYMBOL: FTCLX) CHANGE 12/31/09 12/31/08
- ----------------------- ------- -------- --------
Net Asset Value (NAV) +$2.59 $10.99 $8.40
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.0729
CLASS R (SYMBOL: N/A) CHANGE 12/31/09 12/31/08
- --------------------- ------- -------- --------
Net Asset Value (NAV) +$2.62 $11.08 $8.46
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.1204
ADVISOR CLASS (SYMBOL: N/A) CHANGE 12/31/09 12/31/08
- --------------------------- ------- -------- --------
Net Asset Value (NAV) +$2.62 $11.09 $8.47
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.1683
Annual Report | 7
Performance Summary (CONTINUED)
PERFORMANCE(1)
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURN AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES. CLASS A: 5.75%
MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES CHARGE (CDSC)
DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER; CLASS C: 1%
CDSC IN FIRST YEAR ONLY; CLASS R/ADVISOR CLASS: NO SALES CHARGES.
INCEPTION
CLASS A 1-YEAR 5-YEAR (8/15/03)
- ------- ------- ------- ---------
Cumulative Total Return(2) +32.74% +6.17% +31.55%
Average Annual Total Return(3) +25.05% +0.02% +3.43%
Value of $10,000 Investment(4) $12,505 $10,010 $12,398
Total Annual Operating Expenses(5)
Without Waiver 1.34%
With Waiver 1.12%
INCEPTION
CLASS B 1-YEAR 5-YEAR (8/15/03)
- ------- ------- ------- ---------
Cumulative Total Return(2) +31.73% +2.64% +25.91%
Average Annual Total Return(3) +27.73% +0.16% +3.68%
Value of $10,000 Investment(4) $12,773 $10,082 $12,591
Total Annual Operating Expenses(5)
Without Waiver 2.04%
With Waiver 1.82%
INCEPTION
CLASS C 1-YEAR 5-YEAR (8/15/03)
- ------- ------- ------- ---------
Cumulative Total Return(2) +31.80% +2.67% +25.83%
Average Annual Total Return(3) +30.80% +0.53% +3.67%
Value of $10,000 Investment(4) $13,080 $10,267 $12,583
Total Annual Operating Expenses(5)
Without Waiver 2.04%
With Waiver 1.82%
INCEPTION
CLASS R 1-YEAR 5-YEAR (8/15/03)
- ------- ------- ------- ---------
Cumulative Total Return(2) +32.49% +5.20% +30.06%
Average Annual Total Return(3) +32.49% +1.02% +4.21%
Value of $10,000 Investment(4) $13,249 $10,520 $13,006
Total Annual Operating Expenses(5)
Without Waiver 1.54%
With Waiver 1.32%
INCEPTION
ADVISOR CLASS 1-YEAR 5-YEAR (8/15/03)
- ------------- ------- ------- ---------
Cumulative Total Return(2) +33.01% +7.77% +33.98%
Average Annual Total Return(3) +33.01% +1.51% +4.69%
Value of $10,000 Investment(4) $13,301 $10,777 $13,398
Total Annual Operating Expenses(5)
Without Waiver 1.04%
With Waiver 0.82%
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.
THE ADMINISTRATOR HAS CONTRACTUALLY AGREED TO WAIVE OR LIMIT ITS FEES AND TO
ASSUME AS ITS OWN EXPENSE CERTAIN EXPENSES OTHERWISE PAYABLE BY THE FUND SO THAT
COMMON EXPENSES (I.E., A COMBINATION OF FUND ADMINISTRATION FEES, AND OTHER
EXPENSES, BUT EXCLUDING RULE 12B-1 FEES AND ACQUIRED FUND FEES AND EXPENSES) FOR
EACH CLASS OF THE FUND DO NOT EXCEED 0.10% (OTHER THAN CERTAIN NONROUTINE
EXPENSES OR COSTS, INCLUDING THOSE RELATING TO LITIGATION, INDEMNIFICATION,
REORGANIZATIONS AND LIQUIDATIONS) UNTIL 4/30/10.
8 | Annual Report
Performance Summary (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR A HYPOTHETICAL $10,000 INVESTMENT(1)
Total return represents the change in value of an investment over the periods
shown. It includes any current, 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.
AVERAGE ANNUAL TOTAL RETURN
CLASS A 12/31/09
- ------- --------
1-Year +25.05%
5-Year +0.02%
Since Inception (8/15/03) +3.43%
CLASS A (8/15/03-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON COREFOLIO S&P 500 MSCI WORLD
DATE ALLOCATION FUND - CLASS A INDEX INDEX
- ---------- ---------------------------- ------- ----------
8/15/2003 $ 9,425 $10,000 $10,000
8/31/2003 $ 9,491 $10,101 $10,113
9/30/2003 $ 9,369 $ 9,993 $10,177
10/31/2003 $ 9,783 $10,559 $10,783
11/30/2003 $ 9,962 $10,652 $10,950
12/31/2003 $10,457 $11,210 $11,639
1/31/2004 $10,600 $11,416 $11,829
2/29/2004 $10,770 $11,575 $12,031
3/31/2004 $10,637 $11,400 $11,956
4/30/2004 $10,533 $11,221 $11,718
5/31/2004 $10,618 $11,375 $11,832
6/30/2004 $10,884 $11,596 $12,080
7/31/2004 $10,448 $11,212 $11,689
8/31/2004 $10,429 $11,258 $11,745
9/30/2004 $10,600 $11,380 $11,971
10/31/2004 $10,770 $11,554 $12,267
11/30/2004 $11,292 $12,021 $12,917
12/31/2004 $11,677 $12,430 $13,414
1/31/2005 $11,333 $12,127 $13,114
2/28/2005 $11,591 $12,382 $13,536
3/31/2005 $11,439 $12,163 $13,279
4/30/2005 $11,237 $11,932 $12,999
5/31/2005 $11,526 $12,312 $13,239
6/30/2005 $11,546 $12,330 $13,360
7/31/2005 $11,951 $12,788 $13,830
8/31/2005 $11,951 $12,671 $13,940
9/30/2005 $12,067 $12,774 $14,306
10/31/2005 $11,845 $12,561 $13,962
11/30/2005 $12,260 $13,036 $14,435
12/31/2005 $12,452 $13,041 $14,758
1/31/2006 $12,756 $13,386 $15,420
2/28/2006 $12,824 $13,422 $15,404
3/31/2006 $13,089 $13,589 $15,749
4/30/2006 $13,268 $13,772 $16,236
5/31/2006 $12,920 $13,375 $15,696
6/30/2006 $12,901 $13,394 $15,698
7/31/2006 $12,851 $13,476 $15,799
8/31/2006 $13,169 $13,797 $16,217
9/30/2006 $13,427 $14,152 $16,415
10/31/2006 $13,875 $14,614 $17,021
11/30/2006 $14,183 $14,891 $17,447
12/31/2006 $14,350 $15,100 $17,806
1/31/2007 $14,625 $15,329 $18,020
2/28/2007 $14,412 $15,029 $17,934
3/31/2007 $14,549 $15,197 $18,270
4/30/2007 $15,130 $15,870 $19,086
5/31/2007 $15,648 $16,424 $19,640
6/30/2007 $15,534 $16,151 $19,495
7/31/2007 $15,078 $15,650 $19,067
8/31/2007 $15,109 $15,885 $19,061
9/30/2007 $15,565 $16,479 $19,974
10/31/2007 $15,969 $16,741 $20,591
11/30/2007 $15,379 $16,041 $19,759
12/31/2007 $15,097 $15,930 $19,510
1/31/2008 $14,089 $14,974 $18,023
2/29/2008 $13,791 $14,488 $17,927
3/31/2008 $13,608 $14,425 $17,764
4/30/2008 $14,206 $15,128 $18,712
5/31/2008 $14,544 $15,324 $19,021
6/30/2008 $13,226 $14,032 $17,511
7/31/2008 $13,259 $13,914 $17,087
8/31/2008 $13,335 $14,115 $16,855
9/30/2008 $11,953 $12,858 $14,858
10/31/2008 $ 9,819 $10,698 $12,044
11/30/2008 $ 9,068 $ 9,931 $11,273
12/31/2008 $ 9,340 $10,036 $11,641
1/31/2009 $ 8,678 $ 9,190 $10,624
2/28/2009 $ 7,883 $ 8,212 $ 9,544
3/31/2009 $ 8,446 $ 8,931 $10,269
4/30/2009 $ 9,396 $ 9,786 $11,432
5/31/2009 $ 9,914 $10,333 $12,482
6/30/2009 $ 9,931 $10,354 $12,431
7/31/2009 $10,785 $11,137 $13,487
8/31/2009 $11,151 $11,539 $14,050
9/30/2009 $11,694 $11,969 $14,615
10/31/2009 $11,428 $11,747 $14,358
11/30/2009 $11,982 $12,452 $14,952
12/31/2009 $12,398 $12,692 $15,225
AVERAGE ANNUAL TOTAL RETURN
CLASS B 12/31/09
- ------- --------
1-Year +27.73%
5-Year +0.16%
Since Inception (8/15/03) +3.68%
CLASS B (8/15/03-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON COREFOLIO S&P 500 MSCI WORLD
DATE ALLOCATION FUND - CLASS B INDEX INDEX
- ---------- ---------------------------- ------- ----------
8/15/2003 $10,000 $10,000 $10,000
8/31/2003 $10,070 $10,101 $10,113
9/30/2003 $ 9,930 $ 9,993 $10,177
10/31/2003 $10,360 $10,559 $10,783
11/30/2003 $10,550 $10,652 $10,950
12/31/2003 $11,062 $11,210 $11,639
1/31/2004 $11,203 $11,416 $11,829
2/29/2004 $11,374 $11,575 $12,031
3/31/2004 $11,223 $11,400 $11,956
4/30/2004 $11,113 $11,221 $11,718
5/31/2004 $11,193 $11,375 $11,832
6/30/2004 $11,474 $11,596 $12,080
7/31/2004 $11,002 $11,212 $11,689
8/31/2004 $10,982 $11,258 $11,745
9/30/2004 $11,143 $11,380 $11,971
10/31/2004 $11,324 $11,554 $12,267
11/30/2004 $11,866 $12,021 $12,917
12/31/2004 $12,268 $12,430 $13,414
1/31/2005 $11,893 $12,127 $13,114
2/28/2005 $12,156 $12,382 $13,536
3/31/2005 $11,996 $12,163 $13,279
4/30/2005 $11,781 $11,932 $12,999
5/31/2005 $12,077 $12,312 $13,239
6/30/2005 $12,087 $12,330 $13,360
7/31/2005 $12,506 $12,788 $13,830
8/31/2005 $12,496 $12,671 $13,940
9/30/2005 $12,608 $12,774 $14,306
10/31/2005 $12,373 $12,561 $13,962
11/30/2005 $12,802 $13,036 $14,435
12/31/2005 $12,990 $13,041 $14,758
1/31/2006 $13,309 $13,386 $15,420
2/28/2006 $13,360 $13,422 $15,404
3/31/2006 $13,639 $13,589 $15,749
4/30/2006 $13,817 $13,772 $16,236
5/31/2006 $13,441 $13,375 $15,696
6/30/2006 $13,420 $13,394 $15,698
7/31/2006 $13,357 $13,476 $15,799
8/31/2006 $13,681 $13,797 $16,217
9/30/2006 $13,942 $14,152 $16,415
10/31/2006 $14,401 $14,614 $17,021
11/30/2006 $14,715 $14,891 $17,447
12/31/2006 $14,879 $15,100 $17,806
1/31/2007 $15,156 $15,329 $18,020
2/28/2007 $14,922 $15,029 $17,934
3/31/2007 $15,055 $15,197 $18,270
4/30/2007 $15,650 $15,870 $19,086
5/31/2007 $16,181 $16,424 $19,640
6/30/2007 $16,051 $16,151 $19,495
7/31/2007 $15,564 $15,650 $19,067
8/31/2007 $15,596 $15,885 $19,061
9/30/2007 $16,062 $16,479 $19,974
10/31/2007 $16,462 $16,741 $20,591
11/30/2007 $15,845 $16,041 $19,759
12/31/2007 $15,548 $15,930 $19,510
1/31/2008 $14,502 $14,974 $18,023
2/29/2008 $14,183 $14,488 $17,927
3/31/2008 $13,992 $14,425 $17,764
4/30/2008 $14,590 $15,128 $18,712
5/31/2008 $14,929 $15,324 $19,021
6/30/2008 $13,574 $14,032 $17,511
7/31/2008 $13,596 $13,914 $17,087
8/31/2008 $13,664 $14,115 $16,855
9/30/2008 $12,241 $12,858 $14,858
10/31/2008 $10,050 $10,698 $12,044
11/30/2008 $ 9,283 $ 9,931 $11,273
12/31/2008 $ 9,558 $10,036 $11,641
1/31/2009 $ 8,867 $ 9,190 $10,624
2/28/2009 $ 8,052 $ 8,212 $ 9,544
3/31/2009 $ 8,629 $ 8,931 $10,269
4/30/2009 $ 9,592 $ 9,786 $11,432
5/31/2009 $10,102 $10,333 $12,482
6/30/2009 $10,119 $10,354 $12,431
7/31/2009 $10,983 $11,137 $13,487
8/31/2009 $11,347 $11,539 $14,050
9/30/2009 $11,893 $11,969 $14,615
10/31/2009 $11,620 $11,747 $14,358
11/30/2009 $12,177 $12,452 $14,952
12/31/2009 $12,591 $12,692 $15,225
Annual Report | 9
Performance Summary (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN
CLASS C 12/31/09
- ------- --------
1-Year +30.80%
5-Year +0.53%
Since Inception (8/15/03) +3.67%
CLASS C (8/15/03-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON COREFOLIO S&P 500 MSCI WORLD
DATE ALLOCATION FUND - CLASS C INDEX INDEX
- ---------- ---------------------------- ------- ----------
8/15/2003 $10,000 $10,000 $10,000
8/31/2003 $10,070 $10,101 $10,113
9/30/2003 $ 9,930 $ 9,993 $10,177
10/31/2003 $10,360 $10,559 $10,783
11/30/2003 $10,540 $10,652 $10,950
12/31/2003 $11,054 $11,210 $11,639
1/31/2004 $11,194 $11,416 $11,829
2/29/2004 $11,365 $11,575 $12,031
3/31/2004 $11,215 $11,400 $11,956
4/30/2004 $11,104 $11,221 $11,718
5/31/2004 $11,194 $11,375 $11,832
6/30/2004 $11,466 $11,596 $12,080
7/31/2004 $10,993 $11,212 $11,689
8/31/2004 $10,973 $11,258 $11,745
9/30/2004 $11,144 $11,380 $11,971
10/31/2004 $11,315 $11,554 $12,267
11/30/2004 $11,858 $12,021 $12,917
12/31/2004 $12,256 $12,430 $13,414
1/31/2005 $11,892 $12,127 $13,114
2/28/2005 $12,155 $12,382 $13,536
3/31/2005 $11,995 $12,163 $13,279
4/30/2005 $11,770 $11,932 $12,999
5/31/2005 $12,066 $12,312 $13,239
6/30/2005 $12,087 $12,330 $13,360
7/31/2005 $12,495 $12,788 $13,830
8/31/2005 $12,495 $12,671 $13,940
9/30/2005 $12,597 $12,774 $14,306
10/31/2005 $12,362 $12,561 $13,962
11/30/2005 $12,801 $13,036 $14,435
12/31/2005 $12,994 $13,041 $14,758
1/31/2006 $13,303 $13,386 $15,420
2/28/2006 $13,365 $13,422 $15,404
3/31/2006 $13,634 $13,589 $15,749
4/30/2006 $13,811 $13,772 $16,236
5/31/2006 $13,435 $13,375 $15,696
6/30/2006 $13,414 $13,394 $15,698
7/31/2006 $13,351 $13,476 $15,799
8/31/2006 $13,675 $13,797 $16,217
9/30/2006 $13,937 $14,152 $16,415
10/31/2006 $14,397 $14,614 $17,021
11/30/2006 $14,710 $14,891 $17,447
12/31/2006 $14,875 $15,100 $17,806
1/31/2007 $15,152 $15,329 $18,020
2/28/2007 $14,918 $15,029 $17,934
3/31/2007 $15,051 $15,197 $18,270
4/30/2007 $15,648 $15,870 $19,086
5/31/2007 $16,179 $16,424 $19,640
6/30/2007 $16,038 $16,151 $19,495
7/31/2007 $15,561 $15,650 $19,067
8/31/2007 $15,593 $15,885 $19,061
9/30/2007 $16,060 $16,479 $19,974
10/31/2007 $16,461 $16,741 $20,591
11/30/2007 $15,843 $16,041 $19,759
12/31/2007 $15,545 $15,930 $19,510
1/31/2008 $14,496 $14,974 $18,023
2/29/2008 $14,176 $14,488 $17,927
3/31/2008 $13,984 $14,425 $17,764
4/30/2008 $14,596 $15,128 $18,712
5/31/2008 $14,924 $15,324 $19,021
6/30/2008 $13,577 $14,032 $17,511
7/31/2008 $13,588 $13,914 $17,087
8/31/2008 $13,667 $14,115 $16,855
9/30/2008 $12,241 $12,858 $14,858
10/31/2008 $10,055 $10,698 $12,044
11/30/2008 $ 9,274 $ 9,931 $11,273
12/31/2008 $ 9,547 $10,036 $11,641
1/31/2009 $ 8,865 $ 9,190 $10,624
2/28/2009 $ 8,047 $ 8,212 $ 9,544
3/31/2009 $ 8,627 $ 8,931 $10,269
4/30/2009 $ 9,581 $ 9,786 $11,432
5/31/2009 $10,104 $10,333 $12,482
6/30/2009 $10,122 $10,354 $12,431
7/31/2009 $10,977 $11,137 $13,487
8/31/2009 $11,354 $11,539 $14,050
9/30/2009 $11,890 $11,969 $14,615
10/31/2009 $11,616 $11,747 $14,358
11/30/2009 $12,176 $12,452 $14,952
12/31/2009 $12,583 $12,692 $15,225
AVERAGE ANNUAL TOTAL RETURN
CLASS R 12/31/09
- ------- --------
1-Year +32.49%
5-Year +1.02%
Since Inception (8/15/03) +4.21%
CLASS R (8/15/03-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON COREFOLIO S&P 500 MSCI WORLD
DATE ALLOCATION FUND - CLASS R INDEX INDEX
- ---------- ---------------------------- ------- ----------
8/15/2003 $10,000 $10,000 $10,000
8/31/2003 $10,070 $10,101 $10,113
9/30/2003 $ 9,940 $ 9,993 $10,177
10/31/2003 $10,380 $10,559 $10,783
11/30/2003 $10,570 $10,652 $10,950
12/31/2003 $11,096 $11,210 $11,639
1/31/2004 $11,236 $11,416 $11,829
2/29/2004 $11,417 $11,575 $12,031
3/31/2004 $11,267 $11,400 $11,956
4/30/2004 $11,156 $11,221 $11,718
5/31/2004 $11,246 $11,375 $11,832
6/30/2004 $11,528 $11,596 $12,080
7/31/2004 $11,065 $11,212 $11,689
8/31/2004 $11,045 $11,258 $11,745
9/30/2004 $11,216 $11,380 $11,971
10/31/2004 $11,397 $11,554 $12,267
11/30/2004 $11,951 $12,021 $12,917
12/31/2004 $12,363 $12,430 $13,414
1/31/2005 $11,998 $12,127 $13,114
2/28/2005 $12,262 $12,382 $13,536
3/31/2005 $12,111 $12,163 $13,279
4/30/2005 $11,886 $11,932 $12,999
5/31/2005 $12,193 $12,312 $13,239
6/30/2005 $12,213 $12,330 $13,360
7/31/2005 $12,633 $12,788 $13,830
8/31/2005 $12,633 $12,671 $13,940
9/30/2005 $12,756 $12,774 $14,306
10/31/2005 $12,520 $12,561 $13,962
11/30/2005 $12,971 $13,036 $14,435
12/31/2005 $13,158 $13,041 $14,758
1/31/2006 $13,479 $13,386 $15,420
2/28/2006 $13,552 $13,422 $15,404
3/31/2006 $13,832 $13,589 $15,749
4/30/2006 $14,022 $13,772 $16,236
5/31/2006 $13,643 $13,375 $15,696
6/30/2006 $13,622 $13,394 $15,698
7/31/2006 $13,569 $13,476 $15,799
8/31/2006 $13,906 $13,797 $16,217
9/30/2006 $14,169 $14,152 $16,415
10/31/2006 $14,642 $14,614 $17,021
11/30/2006 $14,969 $14,891 $17,447
12/31/2006 $15,145 $15,100 $17,806
1/31/2007 $15,435 $15,329 $18,020
2/28/2007 $15,199 $15,029 $17,934
3/31/2007 $15,344 $15,197 $18,270
4/30/2007 $15,958 $15,870 $19,086
5/31/2007 $16,505 $16,424 $19,640
6/30/2007 $16,374 $16,151 $19,495
7/31/2007 $15,892 $15,650 $19,067
8/31/2007 $15,925 $15,885 $19,061
9/30/2007 $16,407 $16,479 $19,974
10/31/2007 $16,823 $16,741 $20,591
11/30/2007 $16,199 $16,041 $19,759
12/31/2007 $15,905 $15,930 $19,510
1/31/2008 $14,841 $14,974 $18,023
2/29/2008 $14,516 $14,488 $17,927
3/31/2008 $14,333 $14,425 $17,764
4/30/2008 $14,953 $15,128 $18,712
5/31/2008 $15,298 $15,324 $19,021
6/30/2008 $13,919 $14,032 $17,511
7/31/2008 $13,942 $13,914 $17,087
8/31/2008 $14,023 $14,115 $16,855
9/30/2008 $12,564 $12,858 $14,858
10/31/2008 $10,325 $10,698 $12,044
11/30/2008 $ 9,532 $ 9,931 $11,273
12/31/2008 $ 9,817 $10,036 $11,641
1/31/2009 $ 9,120 $ 9,190 $10,624
2/28/2009 $ 8,285 $ 8,212 $ 9,544
3/31/2009 $ 8,877 $ 8,931 $10,269
4/30/2009 $ 9,875 $ 9,786 $11,432
5/31/2009 $10,408 $10,333 $12,482
6/30/2009 $10,426 $10,354 $12,431
7/31/2009 $11,323 $11,137 $13,487
8/31/2009 $11,708 $11,539 $14,050
9/30/2009 $12,267 $11,969 $14,615
10/31/2009 $11,987 $11,747 $14,358
11/30/2009 $12,570 $12,452 $14,952
12/31/2009 $13,006 $12,692 $15,225
10 | Annual Report
Performance Summary (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN
ADVISOR CLASS 12/31/09
- ------------- --------
1-Year +33.01%
5-Year +1.51%
Since Inception (8/15/03) +4.69%
ADVISOR CLASS (8/15/03-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON COREFOLIO S&P 500 MSCI WORLD
DATE ALLOCATION FUND - ADVISOR CLASS INDEX INDEX
- ---------- ------------------------------- ------- ----------
8/15/2003 $10,000 $10,000 $10,000
8/31/2003 $10,070 $10,101 $10,113
9/30/2003 $ 9,940 $ 9,993 $10,177
10/31/2003 $10,380 $10,559 $10,783
11/30/2003 $10,580 $10,652 $10,950
12/31/2003 $11,102 $11,210 $11,639
1/31/2004 $11,253 $11,416 $11,829
2/29/2004 $11,434 $11,575 $12,031
3/31/2004 $11,293 $11,400 $11,956
4/30/2004 $11,193 $11,221 $11,718
5/31/2004 $11,273 $11,375 $11,832
6/30/2004 $11,565 $11,596 $12,080
7/31/2004 $11,092 $11,212 $11,689
8/31/2004 $11,082 $11,258 $11,745
9/30/2004 $11,263 $11,380 $11,971
10/31/2004 $11,444 $11,554 $12,267
11/30/2004 $12,008 $12,021 $12,917
12/31/2004 $12,432 $12,430 $13,414
1/31/2005 $12,066 $12,127 $13,114
2/28/2005 $12,341 $12,382 $13,536
3/31/2005 $12,190 $12,163 $13,279
4/30/2005 $11,974 $11,932 $12,999
5/31/2005 $12,282 $12,312 $13,239
6/30/2005 $12,313 $12,330 $13,360
7/31/2005 $12,734 $12,788 $13,830
8/31/2005 $12,744 $12,671 $13,940
9/30/2005 $12,867 $12,774 $14,306
10/31/2005 $12,631 $12,561 $13,962
11/30/2005 $13,083 $13,036 $14,435
12/31/2005 $13,294 $13,041 $14,758
1/31/2006 $13,618 $13,386 $15,420
2/28/2006 $13,691 $13,422 $15,404
3/31/2006 $13,995 $13,589 $15,749
4/30/2006 $14,186 $13,772 $16,236
5/31/2006 $13,804 $13,375 $15,696
6/30/2006 $13,794 $13,394 $15,698
7/31/2006 $13,741 $13,476 $15,799
8/31/2006 $14,090 $13,797 $16,217
9/30/2006 $14,366 $14,152 $16,415
10/31/2006 $14,853 $14,614 $17,021
11/30/2006 $15,192 $14,891 $17,447
12/31/2006 $15,376 $15,100 $17,806
1/31/2007 $15,680 $15,329 $18,020
2/28/2007 $15,452 $15,029 $17,934
3/31/2007 $15,599 $15,197 $18,270
4/30/2007 $16,220 $15,870 $19,086
5/31/2007 $16,796 $16,424 $19,640
6/30/2007 $16,663 $16,151 $19,495
7/31/2007 $16,186 $15,650 $19,067
8/31/2007 $16,220 $15,885 $19,061
9/30/2007 $16,718 $16,479 $19,974
10/31/2007 $17,150 $16,741 $20,591
11/30/2007 $16,519 $16,041 $19,759
12/31/2007 $16,226 $15,930 $19,510
1/31/2008 $15,145 $14,974 $18,023
2/29/2008 $14,826 $14,488 $17,927
3/31/2008 $14,640 $14,425 $17,764
4/30/2008 $15,282 $15,128 $18,712
5/31/2008 $15,644 $15,324 $19,021
6/30/2008 $14,243 $14,032 $17,511
7/31/2008 $14,266 $13,914 $17,087
8/31/2008 $14,360 $14,115 $16,855
9/30/2008 $12,877 $12,858 $14,858
10/31/2008 $10,577 $10,698 $12,044
11/30/2008 $ 9,772 $ 9,931 $11,273
12/31/2008 $10,073 $10,036 $11,641
1/31/2009 $ 9,359 $ 9,190 $10,624
2/28/2009 $ 8,503 $ 8,212 $ 9,544
3/31/2009 $ 9,122 $ 8,931 $10,269
4/30/2009 $10,144 $ 9,786 $11,432
5/31/2009 $10,691 $10,333 $12,482
6/30/2009 $10,722 $10,354 $12,431
7/31/2009 $11,641 $11,137 $13,487
8/31/2009 $12,047 $11,539 $14,050
9/30/2009 $12,632 $11,969 $14,615
10/31/2009 $12,345 $11,747 $14,358
11/30/2009 $12,954 $12,452 $14,952
12/31/2009 $13,398 $12,692 $15,225
ENDNOTES
BECAUSE THE FUND INVESTS IN UNDERLYING FUNDS THAT MAY ENGAGE IN A VARIETY OF
INVESTMENT STRATEGIES INVOLVING CERTAIN RISKS, THIS FUND OF FUNDS IS SUBJECT TO
THESE SAME RISKS. STOCKS HAVE HISTORICALLY OUTPERFORMED OTHER ASSET CLASSES OVER
THE LONG TERM, BUT TEND TO FLUCTUATE MORE DRAMATICALLY OVER THE SHORTER TERM.
FOREIGN INVESTING CARRIES ADDITIONAL RISKS SUCH AS CURRENCY AND MARKET
VOLATILITY, AND POLITICAL OR SOCIAL INSTABILITY. THESE AND OTHER RISKS,
INCLUDING INVESTMENTS IN SPECIALIZED INDUSTRY SECTORS, SUCH AS THE TECHNOLOGY
SECTOR, WHICH HAS BEEN AMONG THE MARKET'S MOST VOLATILE SECTORS, INVOLVES
SPECIAL CONSIDERATIONS. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE
MAIN INVESTMENT RISKS.
CLASS B: These shares have higher annual fees and expenses than Class A
shares.
CLASS C: Prior to 1/1/04, these shares were offered with an initial sales
charge; thus actual total returns would have differed. These
shares have higher annual fees and expenses than Class A shares.
CLASS R: Shares are available to certain eligible investors as described
in the prospectus. These shares have higher annual fees and
expenses than Class A shares.
ADVISOR CLASS: Shares are available to certain eligible investors as described
in the prospectus.
(1.) If the administrator had not waived fees, the Fund's total returns would
have been lower.
(2.) Cumulative total return represents the change in value of an investment
over the periods indicated.
(3.) Average annual total return represents the average annual change in value
of an investment over the periods indicated.
(4.) These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated.
(5.) Figures are as stated in the Fund's prospectus current as of the date of
this report. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become
higher than the figures shown.
(6.) Source: (c) 2009 Morningstar. The S&P 500 consists of 500 stocks chosen for
market size, liquidity and industry group representation. Each stock's
weight in the index is proportionate to its market value. The S&P 500 is
one of the most widely used benchmarks of U.S. equity performance. The MSCI
World Index is a free float-adjusted, market capitalization-weighted index
designed to measure equity market performance in global developed markets.
Annual Report | 11
Your Fund's Expenses
FRANKLIN TEMPLETON COREFOLIO ALLOCATION FUND
As a Fund shareholder, you can incur two types of costs:
- - Transaction costs, including sales charges (loads) on Fund purchases; and
- - Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
12 | Annual Report
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES.
Therefore, the second line for each class is useful in comparing ongoing costs
only, and will not help you compare total costs of owning different funds. In
addition, if transaction costs were included, your total costs would have been
higher. Please refer to the Fund prospectus for additional information on
operating expenses.
BEGINNING ENDING EXPENSES PAID EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD**
7/1/09 12/31/09 7/1/09-12/31/09 7/1/09-12/31/09
------------- ------------- --------------- ---------------
CLASS A
Actual $1,000 $1,248.40 $2.15 $ 6.80
Hypothetical
(5% return before expenses) $1,000 $1,023.29 $1.94 $ 6.11
CLASS B
Actual $1,000 $1,244.30 $6.22 $10.86
Hypothetical
(5% return before expenses) $1,000 $1,019.66 $5.60 $ 9.75
CLASS C
Actual $1,000 $1,243.20 $6.22 $10.86
Hypothetical
(5% return before expenses) $1,000 $1,019.66 $5.60 $ 9.75
CLASS R
Actual $1,000 $1,247.40 $3.40 $ 8.04
Hypothetical
(5% return before expenses) $1,000 $1,022.18 $3.06 $ 7.22
ADVISOR CLASS
Actual $1,000 $1,249.60 $0.57 $ 5.22
Hypothetical
(5% return before expenses) $1,000 $1,024.70 $0.51 $ 4.69
* Expenses are calculated using the most recent six-month expense ratio
excluding expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 0.38%; B: 1.10%; C: 1.10%; R: 0.60%; and
Advisor: 0.10%), multiplied by the average account value over the period,
multiplied by 184/365 to reflect the one-half year period. A portion of the
Fund's expenses have been paid by the underlying funds in which the Fund
invests.
** Expenses are calculated using the most recent six-month expense ratio
including expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 1.20%; B: 1.92%; C: 1.92%; R: 1.42%; and
Advisor: 0.92%), multiplied by the average account value over the period,
multiplied by 184/365 to reflect the one-half year period. A portion of the
Fund's expenses have been paid by the underlying funds in which the Fund
invests.
Annual Report | 13
Franklin Templeton Founding Funds Allocation Fund
YOUR FUND'S GOALS AND MAIN INVESTMENTS: Franklin Templeton Founding Funds
Allocation Fund's principal investment goal is capital appreciation, with a
secondary goal of income. The Fund invests in an equally weighted combination of
Franklin Income Fund, Mutual Shares Fund and Templeton Growth Fund.
This annual report for Franklin Templeton Founding Funds Allocation Fund covers
the fiscal year ended December 31, 2009.
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT franklintempleton.com OR CALL (800) 342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
PERFORMANCE OVERVIEW
Franklin Templeton Founding Funds Allocation Fund - Class A delivered a +31.05%
cumulative total return for the 12 months under review. In comparison, the
Fund's benchmarks, the Standard & Poor's 500 Index (S&P 500) and the Morgan
Stanley Capital International (MSCI) World Index, posted total returns of
+26.46% and +30.79%.(1) You can find other performance data in the Performance
Summary beginning on page 16.
INVESTMENT STRATEGY
The Fund invests its assets in an equally weighted combination of Franklin
Income Fund, Mutual Shares Fund and Templeton Growth Fund. These underlying
funds, in turn, invest primarily in U.S. and foreign equity securities and, to a
lesser extent, fixed income and money market securities. As market conditions
affect the underlying funds, we 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.
(1.) Source: (C) 2009 Morningstar. All Rights Reserved. The information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted
to be accurate, complete or timely. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from any use of
this information. The S&P 500 consists of 500 stocks chosen for market
size, liquidity and industry group representation. Each stock's weight in
the index is proportionate to its market value. The S&P 500 is one of the
most widely used benchmarks of U.S. equity performance. The MSCI World
Index is a free float-adjusted, market capitalization-weighted index
designed to measure equity market performance in global developed markets.
The indexes are unmanaged and include reinvested distributions. One cannot
invest directly in an index, and an index is not representative of the
Fund's portfolio.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 43.
14 | Annual Report
ASSET ALLOCATION*
Franklin Templeton
Founding Funds Allocation Fund
Based on Total Net Assets as of 12/31/09
(BAR CHART)
Domestic Hybrid 33.4%
Domestic Equity 33.3%
Foreign Equity 33.2%
Short-Term Investments
& Other Net Assets 0.1%
* The asset allocation is based on the SOI, which classifies each underlying
fund into a broad asset class.
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 fiscal year under review, all three underlying funds had positive
total returns. Franklin Income Fund - Advisor Class and Mutual Shares Fund -
Class Z outperformed the S&P 500, while Templeton Growth Fund - Advisor Class
performed comparably to the MSCI World Index.
Thank you for your continued participation in Franklin Templeton Founding Funds
Allocation Fund. We look forward to serving your future investment needs.
(PHOTO OF T. ANTHONY COFFEY)
/s/ T. Anthony Coffey
T. Anthony Coffey, CFA
Vice President of Franklin Advisers, Inc.
Franklin Templeton Founding Funds Allocation Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF DECEMBER 31, 2009, 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.
Annual Report | 15
Performance Summary as of 12/31/09
FRANKLIN TEMPLETON FOUNDING FUNDS ALLOCATION FUND
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table 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.
PRICE AND DISTRIBUTION INFORMATION
CLASS A (SYMBOL: FFALX) CHANGE 12/31/09 12/31/08
- ----------------------- ------ -------- --------
Net Asset Value (NAV) +$1.99 $9.82 $7.83
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.3977
CLASS B (SYMBOL: FFABX) CHANGE 12/31/09 12/31/08
- ----------------------- ------ -------- --------
Net Asset Value (NAV) +$1.99 $9.83 $7.84
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.3324
CLASS C (SYMBOL: FFACX) CHANGE 12/31/09 12/31/08
- ----------------------- ------ -------- --------
Net Asset Value (NAV) +$1.96 $9.70 $7.74
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.3336
CLASS R (SYMBOL: FFARX) CHANGE 12/31/09 12/31/08
- ----------------------- ------ -------- --------
Net Asset Value (NAV) +$2.00 $9.84 $7.84
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.3753
ADVISOR CLASS (SYMBOL: FFAAX) CHANGE 12/31/09 12/31/08
- ----------------------------- ------ -------- --------
Net Asset Value (NAV) +$2.00 $9.87 $7.87
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.4211
16 | Annual Report
Performance Summary (CONTINUED)
PERFORMANCE(1)
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURN AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES. CLASS A: 5.75%
MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES CHARGE (CDSC)
DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER; CLASS C: 1%
CDSC IN FIRST YEAR ONLY; CLASS R/ADVISOR CLASS: NO SALES CHARGES.
CLASS A 1-YEAR 5-YEAR INCEPTION (8/15/03)
- ------- ------- ------- -------------------
Cumulative Total Return(2) +31.05% +6.88% +35.46%
Average Annual Total Return(3) +23.48% +0.15% +3.90%
Value of $10,000 Investment(4) $12,348 $10,073 $12,767
Total Annual Operating Expenses(5)
Without Waiver 1.21%
With Waiver 1.07%
CLASS B 1-YEAR 5-YEAR INCEPTION (8/15/03)
- ------- ------- ------- -------------------
Cumulative Total Return(2) +30.09% +3.23% +29.82%
Average Annual Total Return(3) +26.09% +0.32% +4.18%
Value of $10,000 Investment(4) $12,609 $10,163 $12,982
Total Annual Operating Expenses(5)
Without Waiver 1.91%
With Waiver 1.77%
CLASS C 1-YEAR 5-YEAR INCEPTION (8/15/03)
- ------- ------- ------- -------------------
Cumulative Total Return(2) +30.11% +3.40% +29.93%
Average Annual Total Return(3) +29.11% +0.67% +4.19%
Value of $10,000 Investment(4) $12,911 $10,340 $12,993
Total Annual Operating Expenses(5)
Without Waiver 1.91%
With Waiver 1.77%
CLASS R 1-YEAR 5-YEAR INCEPTION (8/15/03)
- ------- ------- ------- -------------------
Cumulative Total Return(2) +30.83% +5.94% +34.21%
Average Annual Total Return(3) +30.83% +1.16% +4.72%
Value of $10,000 Investment(4) $13,083 $10,594 $13,421
Total Annual Operating Expenses(5)
Without Waiver 1.41%
With Waiver 1.27%
ADVISOR CLASS 1-YEAR 5-YEAR INCEPTION (8/15/03)
- ------------- ------- ------- -------------------
Cumulative Total Return(2) +31.35% +8.56% +38.35%
Average Annual Total Return(3) +31.35% +1.66% +5.22%
Value of $10,000 Investment(4) $13,135 $10,856 $13,835
Total Annual Operating Expenses(5)
Without Waiver 0.91%
With Waiver 0.77%
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. FOR MOST RECENT MONTH-END PERFORMANCE, GO TO
franklintempleton.com OR CALL (800) 342-5236.
THE ADMINISTRATOR HAS CONTRACTUALLY AGREED TO WAIVE OR LIMIT ITS FEES AND TO
ASSUME AS ITS OWN EXPENSE CERTAIN EXPENSES OTHERWISE PAYABLE BY THE FUND SO THAT
COMMON EXPENSES (I.E., A COMBINATION OF FUND ADMINISTRATION FEES, AND OTHER
EXPENSES, BUT EXCLUDING RULE 12B-1 FEES AND ACQUIRED FUND FEES AND EXPENSES) FOR
EACH CLASS OF THE FUND DO NOT EXCEED 0.10% (OTHER THAN CERTAIN NONROUTINE
EXPENSES OR COSTS, INCLUDING THOSE RELATING TO LITIGATION, INDEMNIFICATION,
REORGANIZATIONS AND LIQUIDATIONS) UNTIL 4/30/10.
Annual Report | 17
Performance Summary (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR A HYPOTHETICAL $10,000 INVESTMENT(1)
Total return represents the change in value of an investment over the periods
shown. It includes any current, 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.
AVERAGE ANNUAL TOTAL RETURN
CLASS A 12/31/09
- ------- --------
1-Year +23.48%
5-Year +0.15%
Since Inception (8/15/03) +3.90%
CLASS A (8/15/03-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON FOUNDING FUNDS S&P 500
DATE ALLOCATION FUND - CLASS A INDEX MSCI WORLD INDEX
- ---------- --------------------------------- ------- ----------------
8/15/2003 $ 9,425 $10,000 $10,000
8/31/2003 $ 9,463 $10,101 $10,113
9/30/2003 $ 9,519 $ 9,993 $10,177
10/31/2003 $ 9,811 $10,559 $10,783
11/30/2003 $10,019 $10,652 $10,950
12/31/2003 $10,517 $11,210 $11,639
1/31/2004 $10,650 $11,416 $11,829
2/29/2004 $10,850 $11,575 $12,031
3/31/2004 $10,774 $11,400 $11,956
4/30/2004 $10,631 $11,221 $11,718
5/31/2004 $10,641 $11,375 $11,832
6/30/2004 $10,802 $11,596 $12,080
7/31/2004 $10,650 $11,212 $11,689
8/31/2004 $10,783 $11,258 $11,745
9/30/2004 $10,954 $11,380 $11,971
10/31/2004 $11,135 $11,554 $12,267
11/30/2004 $11,610 $12,021 $12,917
12/31/2004 $11,945 $12,430 $13,414
1/31/2005 $11,693 $12,127 $13,114
2/28/2005 $12,082 $12,382 $13,536
3/31/2005 $11,903 $12,163 $13,279
4/30/2005 $11,727 $11,932 $12,999
5/31/2005 $11,903 $12,312 $13,239
6/30/2005 $12,119 $12,330 $13,360
7/31/2005 $12,404 $12,788 $13,830
8/31/2005 $12,473 $12,671 $13,940
9/30/2005 $12,601 $12,774 $14,306
10/31/2005 $12,237 $12,561 $13,962
11/30/2005 $12,404 $13,036 $14,435
12/31/2005 $12,700 $13,041 $14,758
1/31/2006 $13,086 $13,386 $15,420
2/28/2006 $13,157 $13,422 $15,404
3/31/2006 $13,379 $13,589 $15,749
4/30/2006 $13,627 $13,772 $16,236
5/31/2006 $13,400 $13,375 $15,696
6/30/2006 $13,431 $13,394 $15,698
7/31/2006 $13,627 $13,476 $15,799
8/31/2006 $13,937 $13,797 $16,217
9/30/2006 $14,103 $14,152 $16,415
10/31/2006 $14,526 $14,614 $17,021
11/30/2006 $14,857 $14,891 $17,447
12/31/2006 $15,156 $15,100 $17,806
1/31/2007 $15,351 $15,329 $18,020
2/28/2007 $15,275 $15,029 $17,934
3/31/2007 $15,502 $15,197 $18,270
4/30/2007 $16,021 $15,870 $19,086
5/31/2007 $16,407 $16,424 $19,640
6/30/2007 $16,241 $16,151 $19,495
7/31/2007 $15,668 $15,650 $19,067
8/31/2007 $15,613 $15,885 $19,061
9/30/2007 $16,021 $16,479 $19,974
10/31/2007 $16,296 $16,741 $20,591
11/30/2007 $15,811 $16,041 $19,759
12/31/2007 $15,628 $15,930 $19,510
1/31/2008 $14,818 $14,974 $18,023
2/29/2008 $14,459 $14,488 $17,927
3/31/2008 $14,228 $14,425 $17,764
4/30/2008 $14,881 $15,128 $18,712
5/31/2008 $15,023 $15,324 $19,021
6/30/2008 $13,777 $14,032 $17,511
7/31/2008 $13,647 $13,914 $17,087
8/31/2008 $13,623 $14,115 $16,855
9/30/2008 $12,080 $12,858 $14,858
10/31/2008 $10,099 $10,698 $12,044
11/30/2008 $ 9,292 $ 9,931 $11,273
12/31/2008 $ 9,742 $10,036 $11,641
1/31/2009 $ 9,145 $ 9,190 $10,624
2/28/2009 $ 8,336 $ 8,212 $ 9,544
3/31/2009 $ 8,834 $ 8,931 $10,269
4/30/2009 $ 9,755 $ 9,786 $11,432
5/31/2009 $10,377 $10,333 $12,482
6/30/2009 $10,482 $10,354 $12,431
7/31/2009 $11,298 $11,137 $13,487
8/31/2009 $11,668 $11,539 $14,050
9/30/2009 $12,178 $11,969 $14,615
10/31/2009 $11,999 $11,747 $14,358
11/30/2009 $12,331 $12,452 $14,952
12/31/2009 $12,767 $12,692 $15,225
AVERAGE ANNUAL TOTAL RETURN
CLASS B 12/31/09
- ------- --------
1-Year +26.09%
5-Year +0.32%
Since Inception (8/15/03) +4.18%
CLASS B (8/15/03-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON FOUNDING S&P 500
DATE FUNDS ALLOCATION FUND - CLASS B INDEX MSCI WORLD INDEX
- ---------- ------------------------------- ------- ----------------
8/15/2003 $10,000 $10,000 $10,000
8/31/2003 $10,040 $10,101 $10,113
9/30/2003 $10,090 $ 9,993 $10,177
10/31/2003 $10,400 $10,559 $10,783
11/30/2003 $10,610 $10,652 $10,950
12/31/2003 $11,128 $11,210 $11,639
1/31/2004 $11,279 $11,416 $11,829
2/29/2004 $11,470 $11,575 $12,031
3/31/2004 $11,390 $11,400 $11,956
4/30/2004 $11,229 $11,221 $11,718
5/31/2004 $11,229 $11,375 $11,832
6/30/2004 $11,400 $11,596 $12,080
7/31/2004 $11,239 $11,212 $11,689
8/31/2004 $11,360 $11,258 $11,745
9/30/2004 $11,541 $11,380 $11,971
10/31/2004 $11,722 $11,554 $12,267
11/30/2004 $12,216 $12,021 $12,917
12/31/2004 $12,576 $12,430 $13,414
1/31/2005 $12,298 $12,127 $13,114
2/28/2005 $12,689 $12,382 $13,536
3/31/2005 $12,501 $12,163 $13,279
4/30/2005 $12,303 $11,932 $12,999
5/31/2005 $12,490 $12,312 $13,239
6/30/2005 $12,708 $12,330 $13,360
7/31/2005 $12,998 $12,788 $13,830
8/31/2005 $13,061 $12,671 $13,940
9/30/2005 $13,185 $12,774 $14,306
10/31/2005 $12,801 $12,561 $13,962
11/30/2005 $12,967 $13,036 $14,435
12/31/2005 $13,277 $13,041 $14,758
1/31/2006 $13,671 $13,386 $15,420
2/28/2006 $13,735 $13,422 $15,404
3/31/2006 $13,968 $13,589 $15,749
4/30/2006 $14,207 $13,772 $16,236
5/31/2006 $13,968 $13,375 $15,696
6/30/2006 $14,001 $13,394 $15,698
7/31/2006 $14,196 $13,476 $15,799
8/31/2006 $14,500 $13,797 $16,217
9/30/2006 $14,662 $14,152 $16,415
10/31/2006 $15,096 $14,614 $17,021
11/30/2006 $15,443 $14,891 $17,447
12/31/2006 $15,737 $15,100 $17,806
1/31/2007 $15,929 $15,329 $18,020
2/28/2007 $15,850 $15,029 $17,934
3/31/2007 $16,065 $15,197 $18,270
4/30/2007 $16,593 $15,870 $19,086
5/31/2007 $16,996 $16,424 $19,640
6/30/2007 $16,800 $16,151 $19,495
7/31/2007 $16,214 $15,650 $19,067
8/31/2007 $16,145 $15,885 $19,061
9/30/2007 $16,547 $16,479 $19,974
10/31/2007 $16,835 $16,741 $20,591
11/30/2007 $16,318 $16,041 $19,759
12/31/2007 $16,108 $15,930 $19,510
1/31/2008 $15,270 $14,974 $18,023
2/29/2008 $14,887 $14,488 $17,927
3/31/2008 $14,648 $14,425 $17,764
4/30/2008 $15,311 $15,128 $18,712
5/31/2008 $15,446 $15,324 $19,021
6/30/2008 $14,169 $14,032 $17,511
7/31/2008 $14,022 $13,914 $17,087
8/31/2008 $13,985 $14,115 $16,855
9/30/2008 $12,401 $12,858 $14,858
10/31/2008 $10,351 $10,698 $12,044
11/30/2008 $ 9,516 $ 9,931 $11,273
12/31/2008 $ 9,979 $10,036 $11,641
1/31/2009 $ 9,356 $ 9,190 $10,624
2/28/2009 $ 8,528 $ 8,212 $ 9,544
3/31/2009 $ 9,037 $ 8,931 $10,269
4/30/2009 $ 9,967 $ 9,786 $11,432
5/31/2009 $10,590 $10,333 $12,482
6/30/2009 $10,699 $10,354 $12,431
7/31/2009 $11,518 $11,137 $13,487
8/31/2009 $11,895 $11,539 $14,050
9/30/2009 $12,402 $11,969 $14,615
10/31/2009 $12,220 $11,747 $14,358
11/30/2009 $12,545 $12,452 $14,952
12/31/2009 $12,982 $12,692 $15,225
18 | Annual Report
Performance Summary (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN
CLASS C 12/31/09
- ------- --------
1-Year +29.11%
5-Year +0.67%
Since Inception (8/15/03) +4.19%
CLASS C (8/15/03-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON FOUNDING S&P 500 MSCI WORLD
DATE FUNDS ALLOCATION FUND - CLASS C INDEX INDEX
- ---------- ------------------------------- ------- ----------
8/15/2003 $10,000 $10,000 $10,000
8/31/2003 $10,040 $10,101 $10,113
9/30/2003 $10,090 $ 9,993 $10,177
10/31/2003 $10,390 $10,559 $10,783
11/30/2003 $10,610 $10,652 $10,950
12/31/2003 $11,129 $11,210 $11,639
1/31/2004 $11,270 $11,416 $11,829
2/29/2004 $11,471 $11,575 $12,031
3/31/2004 $11,391 $11,400 $11,956
4/30/2004 $11,229 $11,221 $11,718
5/31/2004 $11,229 $11,375 $11,832
6/30/2004 $11,401 $11,596 $12,080
7/31/2004 $11,240 $11,212 $11,689
8/31/2004 $11,360 $11,258 $11,745
9/30/2004 $11,542 $11,380 $11,971
10/31/2004 $11,723 $11,554 $12,267
11/30/2004 $12,216 $12,021 $12,917
12/31/2004 $12,565 $12,430 $13,414
1/31/2005 $12,298 $12,127 $13,114
2/28/2005 $12,688 $12,382 $13,536
3/31/2005 $12,500 $12,163 $13,279
4/30/2005 $12,303 $11,932 $12,999
5/31/2005 $12,490 $12,312 $13,239
6/30/2005 $12,697 $12,330 $13,360
7/31/2005 $12,998 $12,788 $13,830
8/31/2005 $13,060 $12,671 $13,940
9/30/2005 $13,185 $12,774 $14,306
10/31/2005 $12,801 $12,561 $13,962
11/30/2005 $12,967 $13,036 $14,435
12/31/2005 $13,272 $13,041 $14,758
1/31/2006 $13,670 $13,386 $15,420
2/28/2006 $13,734 $13,422 $15,404
3/31/2006 $13,969 $13,589 $15,749
4/30/2006 $14,209 $13,772 $16,236
5/31/2006 $13,969 $13,375 $15,696
6/30/2006 $13,991 $13,394 $15,698
7/31/2006 $14,198 $13,476 $15,799
8/31/2006 $14,504 $13,797 $16,217
9/30/2006 $14,668 $14,152 $16,415
10/31/2006 $15,094 $14,614 $17,021
11/30/2006 $15,444 $14,891 $17,447
12/31/2006 $15,728 $15,100 $17,806
1/31/2007 $15,933 $15,329 $18,020
2/28/2007 $15,853 $15,029 $17,934
3/31/2007 $16,070 $15,197 $18,270
4/30/2007 $16,592 $15,870 $19,086
5/31/2007 $16,999 $16,424 $19,640
6/30/2007 $16,801 $16,151 $19,495
7/31/2007 $16,209 $15,650 $19,067
8/31/2007 $16,151 $15,885 $19,061
9/30/2007 $16,546 $16,479 $19,974
10/31/2007 $16,836 $16,741 $20,591
11/30/2007 $16,314 $16,041 $19,759
12/31/2007 $16,116 $15,930 $19,510
1/31/2008 $15,279 $14,974 $18,023
2/29/2008 $14,891 $14,488 $17,927
3/31/2008 $14,650 $14,425 $17,764
4/30/2008 $15,321 $15,128 $18,712
5/31/2008 $15,445 $15,324 $19,021
6/30/2008 $14,165 $14,032 $17,511
7/31/2008 $14,015 $13,914 $17,087
8/31/2008 $13,978 $14,115 $16,855
9/30/2008 $12,399 $12,858 $14,858
10/31/2008 $10,359 $10,698 $12,044
11/30/2008 $ 9,526 $ 9,931 $11,273
12/31/2008 $ 9,986 $10,036 $11,641
1/31/2009 $ 9,367 $ 9,190 $10,624
2/28/2009 $ 8,528 $ 8,212 $ 9,544
3/31/2009 $ 9,031 $ 8,931 $10,269
4/30/2009 $ 9,973 $ 9,786 $11,432
5/31/2009 $10,592 $10,333 $12,482
6/30/2009 $10,704 $10,354 $12,431
7/31/2009 $11,521 $11,137 $13,487
8/31/2009 $11,891 $11,539 $14,050
9/30/2009 $12,405 $11,969 $14,615
10/31/2009 $12,220 $11,747 $14,358
11/30/2009 $12,550 $12,452 $14,952
12/31/2009 $12,993 $12,692 $15,225
AVERAGE ANNUAL TOTAL RETURN
CLASS R 12/31/09
- ------- --------
1-Year +30.83%
5-Year +1.16%
Since Inception (8/15/03) +4.72%
CLASS R (8/15/03-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON FOUNDING FUNDS S&P 500
DATE ALLOCATION FUND - CLASS R INDEX MSCI WORLD INDEX
- ---------- --------------------------------- ------- ----------------
8/15/2003 $10,000 $10,000 $10,000
8/31/2003 $10,040 $10,101 $10,113
9/30/2003 $10,100 $ 9,993 $10,177
10/31/2003 $10,410 $10,559 $10,783
11/30/2003 $10,630 $10,652 $10,950
12/31/2003 $11,168 $11,210 $11,639
1/31/2004 $11,319 $11,416 $11,829
2/29/2004 $11,521 $11,575 $12,031
3/31/2004 $11,440 $11,400 $11,956
4/30/2004 $11,279 $11,221 $11,718
5/31/2004 $11,289 $11,375 $11,832
6/30/2004 $11,471 $11,596 $12,080
7/31/2004 $11,309 $11,212 $11,689
8/31/2004 $11,440 $11,258 $11,745
9/30/2004 $11,622 $11,380 $11,971
10/31/2004 $11,803 $11,554 $12,267
11/30/2004 $12,307 $12,021 $12,917
12/31/2004 $12,668 $12,430 $13,414
1/31/2005 $12,400 $12,127 $13,114
2/28/2005 $12,803 $12,382 $13,536
3/31/2005 $12,624 $12,163 $13,279
4/30/2005 $12,426 $11,932 $12,999
5/31/2005 $12,614 $12,312 $13,239
6/30/2005 $12,843 $12,330 $13,360
7/31/2005 $13,145 $12,788 $13,830
8/31/2005 $13,207 $12,671 $13,940
9/30/2005 $13,343 $12,774 $14,306
10/31/2005 $12,957 $12,561 $13,962
11/30/2005 $13,134 $13,036 $14,435
12/31/2005 $13,444 $13,041 $14,758
1/31/2006 $13,852 $13,386 $15,420
2/28/2006 $13,928 $13,422 $15,404
3/31/2006 $14,163 $13,589 $15,749
4/30/2006 $14,414 $13,772 $16,236
5/31/2006 $14,174 $13,375 $15,696
6/30/2006 $14,217 $13,394 $15,698
7/31/2006 $14,414 $13,476 $15,799
8/31/2006 $14,743 $13,797 $16,217
9/30/2006 $14,907 $14,152 $16,415
10/31/2006 $15,356 $14,614 $17,021
11/30/2006 $15,717 $14,891 $17,447
12/31/2006 $16,018 $15,100 $17,806
1/31/2007 $16,224 $15,329 $18,020
2/28/2007 $16,144 $15,029 $17,934
3/31/2007 $16,373 $15,197 $18,270
4/30/2007 $16,932 $15,870 $19,086
5/31/2007 $17,340 $16,424 $19,640
6/30/2007 $17,153 $16,151 $19,495
7/31/2007 $16,547 $15,650 $19,067
8/31/2007 $16,489 $15,885 $19,061
9/30/2007 $16,909 $16,479 $19,974
10/31/2007 $17,212 $16,741 $20,591
11/30/2007 $16,687 $16,041 $19,759
12/31/2007 $16,485 $15,930 $19,510
1/31/2008 $15,631 $14,974 $18,023
2/29/2008 $15,240 $14,488 $17,927
3/31/2008 $14,997 $14,425 $17,764
4/30/2008 $15,698 $15,128 $18,712
5/31/2008 $15,835 $15,324 $19,021
6/30/2008 $14,521 $14,032 $17,511
7/31/2008 $14,383 $13,914 $17,087
8/31/2008 $14,346 $14,115 $16,855
9/30/2008 $12,731 $12,858 $14,858
10/31/2008 $10,628 $10,698 $12,044
11/30/2008 $ 9,777 $ 9,931 $11,273
12/31/2008 $10,259 $10,036 $11,641
1/31/2009 $ 9,618 $ 9,190 $10,624
2/28/2009 $ 8,767 $ 8,212 $ 9,544
3/31/2009 $ 9,290 $ 8,931 $10,269
4/30/2009 $10,259 $ 9,786 $11,432
5/31/2009 $10,913 $10,333 $12,482
6/30/2009 $11,022 $10,354 $12,431
7/31/2009 $11,879 $11,137 $13,487
8/31/2009 $12,268 $11,539 $14,050
9/30/2009 $12,804 $11,969 $14,615
10/31/2009 $12,616 $11,747 $14,358
11/30/2009 $12,964 $12,452 $14,952
12/31/2009 $13,421 $12,692 $15,225
Annual Report | 19
Performance Summary (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN
ADVISOR CLASS 12/31/09
- ------------- --------
1-Year +31.35%
5-Year +1.66%
Since Inception (8/15/03) +5.22%
ADVISOR CLASS (8/15/03-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON FOUNDING FUNDS S&P 500
DATE ALLOCATION FUND - ADVISOR CLASS INDEX MSCI WORLD INDEX
- ---------- --------------------------------- ------- ----------------
8/15/2003 $10,000 $10,000 $10,000
8/31/2003 $10,040 $10,101 $10,113
9/30/2003 $10,100 $ 9,993 $10,177
10/31/2003 $10,420 $10,559 $10,783
11/30/2003 $10,640 $10,652 $10,950
12/31/2003 $11,175 $11,210 $11,639
1/31/2004 $11,326 $11,416 $11,829
2/29/2004 $11,538 $11,575 $12,031
3/31/2004 $11,457 $11,400 $11,956
4/30/2004 $11,306 $11,221 $11,718
5/31/2004 $11,326 $11,375 $11,832
6/30/2004 $11,508 $11,596 $12,080
7/31/2004 $11,346 $11,212 $11,689
8/31/2004 $11,477 $11,258 $11,745
9/30/2004 $11,669 $11,380 $11,971
10/31/2004 $11,861 $11,554 $12,267
11/30/2004 $12,375 $12,021 $12,917
12/31/2004 $12,744 $12,430 $13,414
1/31/2005 $12,475 $12,127 $13,114
2/28/2005 $12,889 $12,382 $13,536
3/31/2005 $12,710 $12,163 $13,279
4/30/2005 $12,511 $11,932 $12,999
5/31/2005 $12,710 $12,312 $13,239
6/30/2005 $12,940 $12,330 $13,360
7/31/2005 $13,253 $12,788 $13,830
8/31/2005 $13,326 $12,671 $13,940
9/30/2005 $13,472 $12,774 $14,306
10/31/2005 $13,086 $12,561 $13,962
11/30/2005 $13,263 $13,036 $14,435
12/31/2005 $13,589 $13,041 $14,758
1/31/2006 $14,011 $13,386 $15,420
2/28/2006 $14,087 $13,422 $15,404
3/31/2006 $14,335 $13,589 $15,749
4/30/2006 $14,599 $13,772 $16,236
5/31/2006 $14,357 $13,375 $15,696
6/30/2006 $14,401 $13,394 $15,698
7/31/2006 $14,621 $13,476 $15,799
8/31/2006 $14,952 $13,797 $16,217
9/30/2006 $15,128 $14,152 $16,415
10/31/2006 $15,591 $14,614 $17,021
11/30/2006 $15,955 $14,891 $17,447
12/31/2006 $16,270 $15,100 $17,806
1/31/2007 $16,491 $15,329 $18,020
2/28/2007 $16,421 $15,029 $17,934
3/31/2007 $16,664 $15,197 $18,270
4/30/2007 $17,229 $15,870 $19,086
5/31/2007 $17,653 $16,424 $19,640
6/30/2007 $17,477 $16,151 $19,495
7/31/2007 $16,864 $15,650 $19,067
8/31/2007 $16,817 $15,885 $19,061
9/30/2007 $17,253 $16,479 $19,974
10/31/2007 $17,559 $16,741 $20,591
11/30/2007 $17,029 $16,041 $19,759
12/31/2007 $16,836 $15,930 $19,510
1/31/2008 $15,968 $14,974 $18,023
2/29/2008 $15,584 $14,488 $17,927
3/31/2008 $15,337 $14,425 $17,764
4/30/2008 $16,061 $15,128 $18,712
5/31/2008 $16,201 $15,324 $19,021
6/30/2008 $14,867 $14,032 $17,511
7/31/2008 $14,727 $13,914 $17,087
8/31/2008 $14,702 $14,115 $16,855
9/30/2008 $13,050 $12,858 $14,858
10/31/2008 $10,902 $10,698 $12,044
11/30/2008 $10,038 $ 9,931 $11,273
12/31/2008 $10,533 $10,036 $11,641
1/31/2009 $ 9,891 $ 9,190 $10,624
2/28/2009 $ 9,021 $ 8,212 $ 9,544
3/31/2009 $ 9,556 $ 8,931 $10,269
4/30/2009 $10,546 $ 9,786 $11,432
5/31/2009 $11,229 $10,333 $12,482
6/30/2009 $11,343 $10,354 $12,431
7/31/2009 $12,235 $11,137 $13,487
8/31/2009 $12,633 $11,539 $14,050
9/30/2009 $13,183 $11,969 $14,615
10/31/2009 $13,004 $11,747 $14,358
11/30/2009 $13,361 $12,452 $14,952
12/31/2009 $13,835 $12,692 $15,225
ENDNOTES
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 THESE
SAME RISKS. STOCKS HISTORICALLY HAVE OUTPERFORMED OTHER ASSET CLASSES OVER THE
LONG TERM, BUT TEND TO FLUCTUATE MORE DRAMATICALLY OVER THE SHORT TERM. BONDS
ARE AFFECTED BY CHANGES IN INTEREST RATES AND THE CREDITWORTHINESS OF THEIR
ISSUERS. BOND PRICES GENERALLY MOVE IN THE OPPOSITE DIRECTION OF INTEREST RATES.
THUS, AS PRICES OF BONDS ADJUST TO A RISE IN INTEREST RATES, THE FUND'S SHARE
PRICE MAY DECLINE. HIGHER YIELDING, LOWER RATED CORPORATE BONDS ENTAIL A GREATER
DEGREE OF CREDIT RISK COMPARED TO INVESTMENT-GRADE SECURITIES. FOREIGN
INVESTING, ESPECIALLY IN DEVELOPING COUNTRIES, CARRIES ADDITIONAL RISKS SUCH AS
CURRENCY AND MARKET VOLATILITY, AND POLITICAL OR SOCIAL INSTABILITY. VALUE
SECURITIES MAY NOT INCREASE IN PRICE AS ANTICIPATED OR MAY DECLINE FURTHER IN
VALUE. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT
RISKS.
CLASS B: These shares have higher annual fees and expenses than Class A
shares.
CLASS C: Prior to 1/1/04, these shares were offered with an initial
sales charge; thus actual total returns would have differed.
These shares have higher annual fees and expenses than Class A
shares.
CLASS R: Shares are available to certain eligible investors as described
in the prospectus. These shares have higher annual fees and
expenses than Class A shares.
ADVISOR CLASS: Shares are available to certain eligible investors as
described in the prospectus.
(1.) If the administrator had not waived fees, the Fund's total returns would
have been lower.
(2.) Cumulative total return represents the change in value of an investment
over the periods indicated.
(3.) Average annual total return represents the average annual change in value
of an investment over the periods indicated.
(4.) These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated.
(5.) Figures are as stated in the Fund's prospectus current as of the date of
this report. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become
higher than the figures shown.
(6.) Source: (C) 2009 Morningstar. The S&P 500 consists of 500 stocks chosen for
market size, liquidity and industry group representation. Each stock's
weight in the index is proportionate to its market value. The S&P 500 is
one of the most widely used benchmarks of U.S. equity performance. The MSCI
World Index is a free float-adjusted, market capitalization-weighted index
designed to measure equity market performance in global developed markets.
20 | Annual Report
Your Fund's Expenses
FRANKLIN TEMPLETON FOUNDING FUNDS ALLOCATION FUND
As a Fund shareholder, you can incur two types of costs:
- - Transaction costs, including sales charges (loads) on Fund purchases; and
- - Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
Annual Report | 21
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES.
Therefore, the second line for each class is useful in comparing ongoing costs
only, and will not help you compare total costs of owning different funds. In
addition, if transaction costs were included, your total costs would have been
higher. Please refer to the Fund prospectus for additional information on
operating expenses.
BEGINNING ENDING EXPENSES PAID EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD**
7/1/09 12/31/09 7/1/09-12/31/09 7/1/09-12/31/09
------------- ------------- --------------- ---------------
CLASS A
Actual $1,000 $1,218.00 $2.07 $ 6.32
Hypothetical
(5% return before expenses) $1,000 $1,023.34 $1.89 $ 5.75
CLASS B
Actual $1,000 $1,213.40 $6.08 $10.32
Hypothetical
(5% return before expenses) $1,000 $1,019.71 $5.55 $ 9.40
CLASS C
Actual $1,000 $1,213.80 $6.19 $10.43
Hypothetical
(5% return before expenses) $1,000 $1,019.61 $5.65 $ 9.50
CLASS R
Actual $1,000 $1,217.60 $3.35 $ 7.60
Hypothetical
(5% return before expenses) $1,000 $1,022.18 $3.06 $ 6.92
ADVISOR CLASS
Actual $1,000 $1,219.80 $0.56 $ 4.81
Hypothetical
(5% return before expenses) $1,000 $1,024.70 $0.51 $ 4.38
* Expenses are calculated using the most recent six-month expense ratio
excluding expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 0.37%; B: 1.09%; C: 1.11%; R: 0.60%; and
Advisor: 0.10%), multiplied by the average account value over the period,
multiplied by 184/365 to reflect the one-half year period. A portion of the
Fund's expenses have been paid by the underlying funds in which the Fund
invests.
** Expenses are calculated using the most recent six-month expense ratio
including expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 1.13%; B: 1.85%; C: 1.87%; R: 1.36%; and
Advisor: 0.86%), multiplied by the average account value over the period,
multiplied by 184/365 to reflect the one-half year period. A portion of the
Fund's expenses have been paid by the underlying funds in which the Fund
invests.
22 | Annual Report
Franklin Templeton Perspectives Allocation Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin Templeton Perspectives
Allocation Fund seeks capital appreciation through investments in an equally
weighted combination of Franklin Flex Cap Growth Fund, Mutual Shares Fund and
Templeton Growth Fund.
This annual report for Franklin Templeton Perspectives Allocation Fund covers
the fiscal year ended December 31, 2009.
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT franklintempleton.com OR CALL (800) 342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
PERFORMANCE OVERVIEW
Franklin Templeton Perspectives Allocation Fund - Class A delivered a +30.65%
cumulative total return for the 12 months under review. In comparison, the
Fund's benchmarks, the Standard & Poor's 500 Index (S&P 500) and the Morgan
Stanley Capital International (MSCI) World Index, posted total returns of
+26.46% and +30.79%.(1) You can find other performance data in the Performance
Summary beginning on page 25.
INVESTMENT STRATEGY
The Fund invests its assets in an equally weighted combination of Franklin Flex
Cap Growth Fund, Mutual Shares Fund and Templeton Growth Fund. These underlying
funds, in turn, invest primarily in U.S. and foreign equity securities and, to a
lesser extent, fixed income and money market securities. As market conditions
affect the underlying funds, we 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.
(1.) Source: (C) 2009 Morningstar. All Rights Reserved. The information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted
to be accurate, complete or timely. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from any use of
this information. The S&P 500 consists of 500 stocks chosen for market
size, liquidity and industry group representation. Each stock's weight in
the index is proportionate to its market value. The S&P 500 is one of the
most widely used benchmarks of U.S. equity performance. The MSCI World
Index is a free float-adjusted, market capitalization-weighted index
designed to measure equity market performance in global developed markets.
The indexes are unmanaged and include reinvested distributions. One cannot
invest directly in an index, and an index is not representative of the
Fund's portfolio.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 48.
Annual Report | 23
ASSET ALLOCATION*
Franklin Templeton
Perspectives Allocation Fund
Based on Total Net Assets as of 12/31/09
(BAR CHART)
Domestic Equity 66.5%
Foreign Equity 33.1%
Short-Term Investments & Other Net Assets 0.4%
* The asset allocation is based on the SOI, which classifies each underlying
fund into a broad asset class.
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 fiscal year under review, all three underlying funds had positive
total returns. Franklin Flex Cap Growth Fund - Advisor Class and Mutual Shares
Fund - Class Z outperformed the S&P 500, while Templeton Growth Fund - Advisor
Class performed comparably to the MSCI World Index.
Thank you for your continued participation in Franklin Templeton Perspectives
Allocation Fund. We look forward to serving your future investment needs.
(PHOTO OF T. ANTHONY COFFEY)
/s/ T. Anthony Coffey
T. Anthony Coffey, CFA
Vice President of Franklin Advisers, Inc.
Franklin Templeton Perspectives Allocation Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF DECEMBER 31, 2009, 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
Performance Summary as of 12/31/09
FRANKLIN TEMPLETON PERSPECTIVES ALLOCATION FUND
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table 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.
PRICE AND DISTRIBUTION INFORMATION
CLASS A (SYMBOL: FPAAX) CHANGE 12/31/09 12/31/08
- ----------------------- ------ -------- --------
Net Asset Value (NAV) +$2.25 $9.94 $7.69
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.1024
CLASS C (SYMBOL: FPCAX) CHANGE 12/31/09 12/31/08
- ----------------------- ------ -------- --------
Net Asset Value (NAV) +$2.23 $9.89 $7.66
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.0400
CLASS R (SYMBOL: N/A) CHANGE 12/31/09 12/31/08
- --------------------- ------ -------- --------
Net Asset Value (NAV) +$2.25 $9.95 $7.70
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.0814
ADVISOR CLASS (SYMBOL: N/A) CHANGE 12/31/09 12/31/08
- --------------------------- ------ -------- --------
Net Asset Value (NAV) +$2.26 $9.97 $7.71
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.1267
Annual Report | 25
Performance Summary (CONTINUED)
PERFORMANCE(1)
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURN AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES. CLASS A: 5.75%
MAXIMUM INITIAL SALES CHARGE; CLASS C: 1% CONTINGENT DEFERRED SALES CHARGE IN
FIRST YEAR ONLY; CLASS R/ADVISOR CLASS: NO SALES CHARGES.
INCEPTION
CLASS A 1-YEAR 5-YEAR (8/2/04)
- ------- ------- ------ ---------
Cumulative Total Return(2) +30.65% +4.85% +18.41%
Average Annual Total Return(3) +23.13% -0.23% +2.05%
Value of $10,000 Investment(4) $12,313 $9,885 $11,160
Total Annual Operating Expenses(5)
Without Waiver 1.42%
With Waiver 1.14%
INCEPTION
CLASS C 1-YEAR 5-YEAR (8/2/04)
- ------- ------- ------- ---------
Cumulative Total Return(2) +29.70% +1.29% +14.11%
Average Annual Total Return(3) +28.70% +0.26% +2.47%
Value of $10,000 Investment(4) $12,870 $10,129 $11,411
Total Annual Operating Expenses(5)
Without Waiver 2.12%
With Waiver 1.84%
INCEPTION
CLASS R 1-YEAR 5-YEAR (8/2/04)
- ------- ------- ------- ---------
Cumulative Total Return(2) +30.34% +3.89% +17.21%
Average Annual Total Return(3) +30.34% +0.77% +2.98%
Value of $10,000 Investment(4) $13,034 $10,389 $11,721
Total Annual Operating Expenses(5)
Without Waiver 1.62%
With Waiver 1.34%
INCEPTION
ADVISOR CLASS 1-YEAR 5-YEAR (8/2/04)
- ------------- ------- ------- ---------
Cumulative Total Return(2) +31.02% +6.65% +20.53%
Average Annual Total Return(3) +31.02% +1.30% +3.51%
Value of $10,000 Investment(4) $13,102 $10,665 $12,053
Total Annual Operating Expenses(5)
Without Waiver 1.12%
With Waiver 0.84%
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.
THE ADMINISTRATOR HAS CONTRACTUALLY AGREED TO WAIVE OR LIMIT ITS FEES AND TO
ASSUME AS ITS OWN EXPENSE CERTAIN EXPENSES OTHERWISE PAYABLE BY THE FUND SO THAT
COMMON EXPENSES (I.E., A COMBINATION OF FUND ADMINISTRATION FEES, AND OTHER
EXPENSES, BUT EXCLUDING RULE 12B-1 FEES AND ACQUIRED FUND FEES AND EXPENSES) FOR
EACH CLASS OF THE FUND DO NOT EXCEED 0.10% (OTHER THAN CERTAIN NONROUTINE
EXPENSES OR COSTS, INCLUDING THOSE RELATING TO LITIGATION, INDEMNIFICATION,
REORGANIZATIONS AND LIQUIDATIONS) UNTIL 4/30/10.
26 | Annual Report
Performance Summary (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR A HYPOTHETICAL $10,000 INVESTMENT(1)
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.
AVERAGE ANNUAL TOTAL RETURN
CLASS A 12/31/09
- ------- --------
1-Year +23.13%
5-Year -0.23%
Since Inception (8/2/04) +2.05%
CLASS A (8/2/04-12/31/09)
FRANKLIN TEMPLETON PERSPECTIVES S&P 500 MSCI WORLD
DATE ALLOCATION FUND - CLASS A INDEX INDEX
- ---------- ------------------------------- ------- ----------
8/2/2004 $ 9,425 $10,000 $10,000
8/31/2004 $ 9,510 $10,040 $10,048
9/30/2004 $ 9,670 $10,149 $10,241
10/31/2004 $ 9,840 $10,304 $10,494
11/30/2004 $10,311 $10,721 $11,050
12/31/2004 $10,643 $11,086 $11,475
1/31/2005 $10,367 $10,816 $11,219
2/28/2005 $10,681 $11,043 $11,580
3/31/2005 $10,519 $10,848 $11,360
4/30/2005 $10,328 $10,642 $11,120
5/31/2005 $10,566 $10,981 $11,326
6/30/2005 $10,624 $10,996 $11,429
7/31/2005 $10,958 $11,405 $11,831
8/31/2005 $11,006 $11,301 $11,926
9/30/2005 $11,168 $11,393 $12,239
10/31/2005 $10,910 $11,203 $11,944
11/30/2005 $11,273 $11,626 $12,349
12/31/2005 $11,488 $11,631 $12,626
1/31/2006 $11,916 $11,938 $13,192
2/28/2006 $11,945 $11,971 $13,178
3/31/2006 $12,169 $12,120 $13,473
4/30/2006 $12,318 $12,283 $13,890
5/31/2006 $11,903 $11,929 $13,428
6/30/2006 $11,942 $11,945 $13,429
7/31/2006 $11,922 $12,019 $13,516
8/31/2006 $12,189 $12,305 $13,874
9/30/2006 $12,377 $12,622 $14,043
10/31/2006 $12,753 $13,033 $14,562
11/30/2006 $13,030 $13,281 $14,926
12/31/2006 $13,175 $13,467 $15,233
1/31/2007 $13,461 $13,671 $15,416
2/28/2007 $13,257 $13,404 $15,342
3/31/2007 $13,429 $13,554 $15,629
4/30/2007 $13,948 $14,154 $16,328
5/31/2007 $14,353 $14,648 $16,802
6/30/2007 $14,280 $14,405 $16,678
7/31/2007 $13,865 $13,958 $16,312
8/31/2007 $13,928 $14,167 $16,307
9/30/2007 $14,436 $14,697 $17,088
10/31/2007 $14,789 $14,931 $17,616
11/30/2007 $14,249 $14,307 $16,904
12/31/2007 $14,069 $14,207 $16,690
1/31/2008 $12,969 $13,355 $15,419
2/29/2008 $12,616 $12,921 $15,337
3/31/2008 $12,496 $12,866 $15,197
4/30/2008 $13,142 $13,492 $16,008
5/31/2008 $13,437 $13,667 $16,272
6/30/2008 $12,266 $12,515 $14,980
7/31/2008 $12,223 $12,410 $14,618
8/31/2008 $12,255 $12,589 $14,419
9/30/2008 $10,975 $11,467 $12,711
10/31/2008 $ 9,027 $ 9,541 $10,304
11/30/2008 $ 8,327 $ 8,857 $ 9,644
12/31/2008 $ 8,542 $ 8,951 $ 9,958
1/31/2009 $ 7,909 $ 8,197 $ 9,089
2/28/2009 $ 7,242 $ 7,324 $ 8,165
3/31/2009 $ 7,742 $ 7,965 $ 8,785
4/30/2009 $ 8,597 $ 8,728 $ 9,780
5/31/2009 $ 9,042 $ 9,216 $10,678
6/30/2009 $ 9,067 $ 9,234 $10,634
7/31/2009 $ 9,791 $ 9,933 $11,538
8/31/2009 $10,081 $10,291 $12,020
9/30/2009 $10,582 $10,675 $12,503
10/31/2009 $10,371 $10,477 $12,283
11/30/2009 $10,760 $11,105 $12,791
12/31/2009 $11,160 $11,320 $13,025
AVERAGE ANNUAL TOTAL RETURN
CLASS C 12/31/09
- ------- --------
1-Year +28.70%
5-Year +0.26%
Since Inception (8/2/04) +2.47%
CLASS C (8/2/04-12/31/09)
FRANKLIN TEMPLETON PERSPECTIVES S&P 500 MSCI WORLD
DATE ALLOCATION FUND - CLASS C INDEX INDEX
---- ------------------------------- ------- ----------
8/2/2004 $10,000 $10,000 $10,000
8/31/2004 $10,090 $10,040 $10,048
9/30/2004 $10,250 $10,149 $10,241
10/31/2004 $10,430 $10,304 $10,494
11/30/2004 $10,910 $10,721 $11,050
12/31/2004 $11,266 $11,086 $11,475
1/31/2005 $10,964 $10,816 $11,219
2/28/2005 $11,286 $11,043 $11,580
3/31/2005 $11,115 $10,848 $11,360
4/30/2005 $10,902 $10,642 $11,120
5/31/2005 $11,155 $10,981 $11,326
6/30/2005 $11,206 $10,996 $11,429
7/31/2005 $11,550 $11,405 $11,831
8/31/2005 $11,591 $11,301 $11,926
9/30/2005 $11,763 $11,393 $12,239
10/31/2005 $11,479 $11,203 $11,944
11/30/2005 $11,854 $11,626 $12,349
12/31/2005 $12,080 $11,631 $12,626
1/31/2006 $12,512 $11,938 $13,192
2/28/2006 $12,543 $11,971 $13,178
3/31/2006 $12,769 $12,120 $13,473
4/30/2006 $12,915 $12,283 $13,890
5/31/2006 $12,476 $11,929 $13,428
6/30/2006 $12,518 $11,945 $13,429
7/31/2006 $12,487 $12,019 $13,516
8/31/2006 $12,758 $12,305 $13,874
9/30/2006 $12,946 $12,622 $14,043
10/31/2006 $13,333 $13,033 $14,562
11/30/2006 $13,615 $13,281 $14,926
12/31/2006 $13,761 $13,467 $15,233
1/31/2007 $14,050 $13,671 $15,416
2/28/2007 $13,836 $13,404 $15,342
3/31/2007 $14,006 $13,554 $15,629
4/30/2007 $14,541 $14,154 $16,328
5/31/2007 $14,955 $14,648 $16,802
6/30/2007 $14,868 $14,405 $16,678
7/31/2007 $14,421 $13,958 $16,312
8/31/2007 $14,486 $14,167 $16,307
9/30/2007 $15,010 $14,697 $17,088
10/31/2007 $15,370 $14,931 $17,616
11/30/2007 $14,792 $14,307 $16,904
12/31/2007 $14,602 $14,207 $16,690
1/31/2008 $13,452 $13,355 $15,419
2/29/2008 $13,084 $12,921 $15,337
3/31/2008 $12,947 $12,866 $15,197
4/30/2008 $13,610 $13,492 $16,008
5/31/2008 $13,896 $13,667 $16,272
6/30/2008 $12,684 $12,515 $14,980
7/31/2008 $12,638 $12,410 $14,618
8/31/2008 $12,661 $12,589 $14,419
9/30/2008 $11,334 $11,467 $12,711
10/31/2008 $ 9,321 $ 9,541 $10,304
11/30/2008 $ 8,589 $ 8,857 $ 9,644
12/31/2008 $ 8,798 $ 8,951 $ 9,958
1/31/2009 $ 8,143 $ 8,197 $ 9,089
2/28/2009 $ 7,454 $ 7,324 $ 8,165
3/31/2009 $ 7,960 $ 7,965 $ 8,785
4/30/2009 $ 8,832 $ 8,728 $ 9,780
5/31/2009 $ 9,292 $ 9,216 $10,678
6/30/2009 $ 9,318 $ 9,234 $10,634
7/31/2009 $10,056 $ 9,933 $11,538
8/31/2009 $10,332 $10,291 $12,020
9/30/2009 $10,850 $10,675 $12,503
10/31/2009 $10,620 $10,477 $12,283
11/30/2009 $11,012 $11,105 $12,791
12/31/2009 $11,411 $11,320 $13,025
Annual Report | 27
Performance Summary (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN
CLASS R 12/31/09
- ------- --------
1-Year +30.34%
5-Year +0.77%
Since Inception (8/2/04) +2.98%
CLASS R (8/2/04-12/31/09)
FRANKLIN TEMPLETON PERSPECTIVES S&P 500 MSCI WORLD
DATE ALLOCATION FUND - CLASS R INDEX INDEX
- ---------- ------------------------------- ------- ----------
8/2/2004 $10,000 $10,000 $10,000
8/31/2004 $10,080 $10,040 $10,048
9/30/2004 $10,250 $10,149 $10,241
10/31/2004 $10,440 $10,304 $10,494
11/30/2004 $10,930 $10,721 $11,050
12/31/2004 $11,281 $11,086 $11,475
1/31/2005 $10,989 $10,816 $11,219
2/28/2005 $11,322 $11,043 $11,580
3/31/2005 $11,159 $10,848 $11,360
4/30/2005 $10,946 $10,642 $11,120
5/31/2005 $11,199 $10,981 $11,326
6/30/2005 $11,260 $10,996 $11,429
7/31/2005 $11,605 $11,405 $11,831
8/31/2005 $11,655 $11,301 $11,926
9/30/2005 $11,828 $11,393 $12,239
10/31/2005 $11,554 $11,203 $11,944
11/30/2005 $11,939 $11,626 $12,349
12/31/2005 $12,168 $11,631 $12,626
1/31/2006 $12,612 $11,938 $13,192
2/28/2006 $12,643 $11,971 $13,178
3/31/2006 $12,880 $12,120 $13,473
4/30/2006 $13,037 $12,283 $13,890
5/31/2006 $12,587 $11,929 $13,428
6/30/2006 $12,639 $11,945 $13,429
7/31/2006 $12,608 $12,019 $13,516
8/31/2006 $12,890 $12,305 $13,874
9/30/2006 $13,089 $12,622 $14,043
10/31/2006 $13,487 $13,033 $14,562
11/30/2006 $13,781 $13,281 $14,926
12/31/2006 $13,931 $13,467 $15,233
1/31/2007 $14,223 $13,671 $15,416
2/28/2007 $14,017 $13,404 $15,342
3/31/2007 $14,200 $13,554 $15,629
4/30/2007 $14,738 $14,154 $16,328
5/31/2007 $15,166 $14,648 $16,802
6/30/2007 $15,078 $14,405 $16,678
7/31/2007 $14,639 $13,958 $16,312
8/31/2007 $14,705 $14,167 $16,307
9/30/2007 $15,243 $14,697 $17,088
10/31/2007 $15,616 $14,931 $17,616
11/30/2007 $15,034 $14,307 $16,904
12/31/2007 $14,848 $14,207 $16,690
1/31/2008 $13,687 $13,355 $15,419
2/29/2008 $13,315 $12,921 $15,337
3/31/2008 $13,188 $12,866 $15,197
4/30/2008 $13,869 $13,492 $16,008
5/31/2008 $14,169 $13,667 $16,272
6/30/2008 $12,934 $12,515 $14,980
7/31/2008 $12,888 $12,410 $14,618
8/31/2008 $12,922 $12,589 $14,419
9/30/2008 $11,571 $11,467 $12,711
10/31/2008 $ 9,516 $ 9,541 $10,304
11/30/2008 $ 8,776 $ 8,857 $ 9,644
12/31/2008 $ 8,992 $ 8,951 $ 9,958
1/31/2009 $ 8,327 $ 8,197 $ 9,089
2/28/2009 $ 7,626 $ 7,324 $ 8,165
3/31/2009 $ 8,151 $ 7,965 $ 8,785
4/30/2009 $ 9,051 $ 8,728 $ 9,780
5/31/2009 $ 9,518 $ 9,216 $10,678
6/30/2009 $ 9,545 $ 9,234 $10,634
7/31/2009 $10,306 $ 9,933 $11,538
8/31/2009 $10,599 $10,291 $12,020
9/30/2009 $11,126 $10,675 $12,503
10/31/2009 $10,892 $10,477 $12,283
11/30/2009 $11,302 $11,105 $12,791
12/31/2009 $11,721 $11,320 $13,025
AVERAGE ANNUAL TOTAL RETURN
ADVISOR CLASS 12/31/09
- ------------- --------
1-Year +31.02%
5-Year +1.30%
Since Inception (8/2/04) +3.51%
ADVISOR CLASS (8/2/04-12/31/09)
FRANKLIN TEMPLETON PERSPECTIVES S&P 500 MSCI WORLD
DATE ALLOCATION FUND - ADVISOR CLASS INDEX INDEX
- ---------- ------------------------------- ------- ----------
8/2/2004 $10,000 $10,000 $10,000
8/31/2004 $10,090 $10,040 $10,048
9/30/2004 $10,260 $10,149 $10,241
10/31/2004 $10,450 $10,304 $10,494
11/30/2004 $10,950 $10,721 $11,050
12/31/2004 $11,301 $11,086 $11,475
1/31/2005 $11,008 $10,816 $11,219
2/28/2005 $11,341 $11,043 $11,580
3/31/2005 $11,178 $10,848 $11,360
4/30/2005 $10,975 $10,642 $11,120
5/31/2005 $11,239 $10,981 $11,326
6/30/2005 $11,300 $10,996 $11,429
7/31/2005 $11,655 $11,405 $11,831
8/31/2005 $11,705 $11,301 $11,926
9/30/2005 $11,888 $11,393 $12,239
10/31/2005 $11,614 $11,203 $11,944
11/30/2005 $12,010 $11,626 $12,349
12/31/2005 $12,241 $11,631 $12,626
1/31/2006 $12,697 $11,938 $13,192
2/28/2006 $12,728 $11,971 $13,178
3/31/2006 $12,977 $12,120 $13,473
4/30/2006 $13,134 $12,283 $13,890
5/31/2006 $12,693 $11,929 $13,428
6/30/2006 $12,745 $11,945 $13,429
7/31/2006 $12,724 $12,019 $13,516
8/31/2006 $13,019 $12,305 $13,874
9/30/2006 $13,218 $12,622 $14,043
10/31/2006 $13,618 $13,033 $14,562
11/30/2006 $13,923 $13,281 $14,926
12/31/2006 $14,085 $13,467 $15,233
1/31/2007 $14,390 $13,671 $15,416
2/28/2007 $14,183 $13,404 $15,342
3/31/2007 $14,367 $13,554 $15,629
4/30/2007 $14,932 $14,154 $16,328
5/31/2007 $15,363 $14,648 $16,802
6/30/2007 $15,286 $14,405 $16,678
7/31/2007 $14,843 $13,958 $16,312
8/31/2007 $14,921 $14,167 $16,307
9/30/2007 $15,496 $14,697 $17,088
10/31/2007 $15,884 $14,931 $17,616
11/30/2007 $15,297 $14,307 $16,904
12/31/2007 $15,107 $14,207 $16,690
1/31/2008 $13,930 $13,355 $15,419
2/29/2008 $13,564 $12,921 $15,337
3/31/2008 $13,436 $12,866 $15,197
4/30/2008 $14,138 $13,492 $16,008
5/31/2008 $14,442 $13,667 $16,272
6/30/2008 $13,190 $12,515 $14,980
7/31/2008 $13,155 $12,410 $14,618
8/31/2008 $13,190 $12,589 $14,419
9/30/2008 $11,821 $11,467 $12,711
10/31/2008 $ 9,726 $ 9,541 $10,304
11/30/2008 $ 8,965 $ 8,857 $ 9,644
12/31/2008 $ 9,200 $ 8,951 $ 9,958
1/31/2009 $ 8,520 $ 8,197 $ 9,089
2/28/2009 $ 7,804 $ 7,324 $ 8,165
3/31/2009 $ 8,341 $ 7,965 $ 8,785
4/30/2009 $ 9,259 $ 8,728 $ 9,780
5/31/2009 $ 9,749 $ 9,216 $10,678
6/30/2009 $ 9,776 $ 9,234 $10,634
7/31/2009 $10,566 $ 9,933 $11,538
8/31/2009 $10,877 $10,291 $12,020
9/30/2009 $11,415 $10,675 $12,503
10/31/2009 $11,188 $10,477 $12,283
11/30/2009 $11,619 $11,105 $12,791
12/31/2009 $12,053 $11,320 $13,025
28 | Annual Report
Performance Summary (CONTINUED)
ENDNOTES
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. STOCKS HISTORICALLY HAVE OUTPERFORMED OTHER ASSET CLASSES OVER THE LONG
TERM, BUT TEND TO FLUCTUATE MORE DRAMATICALLY OVER THE SHORT TERM. FOREIGN
INVESTING, ESPECIALLY IN DEVELOPING COUNTRIES, CARRIES ADDITIONAL RISKS SUCH AS
CURRENCY AND MARKET VOLATILITY, AND POLITICAL OR SOCIAL INSTABILITY. THE
PORTFOLIO MAY INCLUDE INVESTMENTS IN THE TECHNOLOGY SECTOR, WHICH HAS BEEN AMONG
THE MOST VOLATILE IN THE MARKET. 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'S PROSPECTUS ALSO INCLUDES A
DESCRIPTION OF THE MAIN INVESTMENT RISKS.
CLASS C: These shares have higher annual fees and expenses than Class A
shares.
CLASS R: Shares are available to certain eligible investors as described
in the prospectus. These shares have higher annual fees and
expenses than Class A shares.
ADVISOR CLASS: Shares are available to certain eligible investors as described
in the prospectus.
(1.) If the administrator had not waived fees, the Fund's total returns would
have been lower.
(2.) Cumulative total return represents the change in value of an investment
over the periods indicated.
(3.) Average annual total return represents the average annual change in value
of an investment over the periods indicated.
(4.) These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated.
(5.) Figures are as stated in the Fund's prospectus current as of the date of
this report. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become
higher than the figures shown.
(6.) Source: (C) 2009 Morningstar. The S&P 500 consists of 500 stocks chosen for
market size, liquidity and industry group representation. Each stock's
weight in the index is proportionate to its market value. The S&P 500 is
one of the most widely used benchmarks of U.S. equity performance. The MSCI
World Index is a free float-adjusted, market capitalization-weighted index
designed to measure equity market performance in global developed markets.
Annual Report | 29
Your Fund's Expenses
FRANKLIN TEMPLETON PERSPECTIVES ALLOCATION FUND
As a Fund shareholder, you can incur two types of costs:
- - Transaction costs, including sales charges (loads) on Fund purchases; and
- - Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
30 | Annual Report
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES.
Therefore, the second line for each class is useful in comparing ongoing costs
only, and will not help you compare total costs of owning different funds. In
addition, if transaction costs were included, your total costs would have been
higher. Please refer to the Fund prospectus for additional information on
operating expenses.
BEGINNING ENDING EXPENSES PAID EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD**
7/1/09 12/31/09 7/1/09-12/31/09 7/1/09-12/31/09
------------- ------------- --------------- ---------------
CLASS A
Actual $1,000 $1,230.80 $2.25 $ 6.92
Hypothetical
(5% return before expenses) $1,000 $1,023.19 $2.04 $ 6.26
CLASS C
Actual $1,000 $1,224.60 $6.28 $10.93
Hypothetical
(5% return before expenses) $1,000 $1,019.56 $5.70 $ 9.91
CLASS R
Actual $1,000 $1,228.00 $3.48 $ 8.14
Hypothetical
(5% return before expenses) $1,000 $1,022.08 $3.16 $ 7.37
ADVISOR CLASS
Actual $1,000 $1,232.90 $0.68 $ 5.35
Hypothetical
(5% return before expenses) $1,000 $1,024.60 $0.61 $ 4.84
* Expenses are calculated using the most recent six-month expense ratio
excluding expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 0.40%; C: 1.12%; R: 0.62%; and Advisor:
0.12%), multiplied by the average account value over the period, multiplied
by 184/365 to reflect the one-half year period. A portion of the Fund's
expenses have been paid by the underlying funds in which the Fund invests.
** Expenses are calculated using the most recent six-month expense ratio
including expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 1.23%; C: 1.95%; R: 1.45%; and Advisor:
0.95%), multiplied by the average account value over the period, multiplied
by 184/365 to reflect the one-half year period. A portion of the Fund's
expenses have been paid by the underlying funds in which the Fund invests.
Annual Report | 31
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS
FRANKLIN TEMPLETON COREFOLIO ALLOCATION FUND
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
CLASS A 2009 2008 2007 2006 2005
- ------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $ 8.46 $ 14.22 $ 14.09 $ 12.71 $ 12.20
-------- -------- -------- -------- --------
Income from investment operations(a):
Net investment income(b, c) ........................ 0.12 0.12 0.15 0.11 0.09
Net realized and unrealized gains (losses) ......... 2.64 (5.46) 0.57 1.81 0.71
-------- -------- -------- -------- --------
Total from investment operations ...................... 2.76 (5.34) 0.72 1.92 0.80
-------- -------- -------- -------- --------
Less distributions from:
Net investment income and short term gains
received from Underlying Funds .................. (0.14) (0.13) (0.17) (0.16) (0.10)
Net realized gains ................................. -- (0.29) (0.42) (0.38) (0.19)
-------- -------- -------- -------- --------
Total distributions ................................... (0.14) (0.42) (0.59) (0.54) (0.29)
-------- -------- -------- -------- --------
Redemption fees(d) .................................... -- --(e) --(e) --(e) --(e)
-------- -------- -------- -------- --------
Net asset value, end of year .......................... $ 11.08 $ 8.46 $ 14.22 $ 14.09 $ 12.71
======== ======== ======== ======== ========
Total return(f) ....................................... 32.74% (38.13)% 5.20% 15.25% 6.63%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(g) .. 0.51% 0.62% 0.64% 0.65% 0.66%
Expenses net of waiver and payments by affiliates(g) .. 0.38% 0.48% 0.50% 0.50% 0.58%
Net investment income(c) .............................. 1.31% 1.01% 0.99% 0.82% 0.72%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ....................... $319,688 $278,539 $497,314 $458,460 $353,016
Portfolio turnover rate ............................... 2.01% 3.20% 1.72% 1.66% 2.49%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Amount rounds to less than $0.01 per share.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.82% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
32| Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON COREFOLIO ALLOCATION FUND
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
CLASS B 2009 2008 2007 2006 2005
- ------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $ 8.44 $ 14.12 $ 13.99 $ 12.62 $ 12.12
------- ------- ------- ------- -------
Income from investment operations(a):
Net investment income(b, c) ........................ 0.05 0.03 0.05 0.01 0.01
Net realized and unrealized gains (losses) ......... 2.62 (5.38) 0.57 1.81 0.70
------- ------- ------- ------- -------
Total from investment operations ...................... 2.67 (5.35) 0.62 1.82 0.71
------- ------- ------- ------- -------
Less distributions from:
Net investment income and short term gains
received from Underlying Funds .................. (0.07) (0.04) (0.07) (0.07) (0.02)
Net realized gains ................................. -- (0.29) (0.42) (0.38) (0.19)
------- ------- ------- ------- -------
Total distributions ................................... (0.07) (0.33) (0.49) (0.45) (0.21)
------- ------- ------- ------- -------
Redemption fees(d) .................................... -- --(e) --(e) --(e) --(e)
------- ------- ------- ------- -------
Net asset value, end of year .......................... $ 11.04 $ 8.44 $ 14.12 $ 13.99 $ 12.62
======= ======= ======= ======= =======
Total return(f) ....................................... 31.73% (38.53)% 4.49% 14.55% 5.89%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(g) .. 1.23% 1.32% 1.31% 1.30% 1.31%
Expenses net of waiver and payments by affiliates(g) .. 1.10% 1.18% 1.16% 1.15% 1.23%
Net investment income(c) .............................. 0.59% 0.31% 0.32% 0.17% 0.07%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ....................... $39,093 $35,616 $72,530 $76,408 $71,496
Portfolio turnover rate ............................... 2.01% 3.20% 1.72% 1.66% 2.49%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Amount rounds to less than $0.01 per share.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.82% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 33
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON COREFOLIO ALLOCATION FUND
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
CLASS C 2009 2008 2007 2006 2005
- ------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $ 8.40 $ 14.08 $ 13.96 $ 12.61 $ 12.11
-------- ------- -------- -------- --------
Income from investment operations(a):
Net investment income(b, c) ........................ 0.05 0.03 0.05 0.02 0.01
Net realized and unrealized gains (losses) ......... 2.61 (5.37) 0.57 1.79 0.71
-------- ------- -------- -------- --------
Total from investment operations ...................... 2.66 (5.34) 0.62 1.81 0.72
-------- ------- -------- -------- --------
Less distributions from:
Net investment income and short term gains
received from Underlying Funds .................. (0.07) (0.05) (0.08) (0.08) (0.03)
Net realized gains ................................. -- (0.29) (0.42) (0.38) (0.19)
-------- ------- -------- -------- --------
Total distributions ................................... (0.07) (0.34) (0.50) (0.46) (0.22)
-------- ------- -------- -------- --------
Redemption fees(d) .................................... -- --(e) --(e) --(e) --(e)
-------- ------- -------- -------- --------
Net asset value, end of year .......................... $ 10.99 $ 8.40 $ 14.08 $ 13.96 $ 12.61
======== ======= ======== ======== ========
Total return(f) ....................................... 31.80% (38.58)% 4.50% 14.48% 6.02%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(g) .. 1.23% 1.31% 1.30% 1.29% 1.29%
Expenses net of waiver and payments by affiliates(g) .. 1.10% 1.17% 1.16% 1.14% 1.21%
Net investment income(c) .............................. 0.59% 0.32% 0.33% 0.18% 0.09%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ....................... $113,040 $99,663 $181,951 $166,688 $132,459
Portfolio turnover rate ............................... 2.01% 3.20% 1.72% 1.66% 2.49%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Amount rounds to less than $0.01 per share.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.82% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
34 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON COREFOLIO ALLOCATION FUND
YEAR ENDED DECEMBER 31,
----------------------------------------------
CLASS R 2009 2008 2007 2006 2005
- ------- ------ ------- ------ ------ ------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ........................ $ 8.46 $ 14.20 $14.07 $12.69 $12.18
------ ------- ------ ------ ------
Income from investment operations(a):
Net investment income(b, c) ............................ 0.11 0.08 0.12 0.09 0.05
Net realized and unrealized gains (losses) ............. 2.63 (5.43) 0.57 1.81 0.73
------ ------- ------ ------ ------
Total from investment operations .......................... 2.74 (5.35) 0.69 1.90 0.78
------ ------- ------ ------ ------
Less distributions from:
Net investment income and short term gains received from
Underlying Funds .................................... (0.12) (0.10) (0.14) (0.14) (0.08)
Net realized gains ..................................... -- (0.29) (0.42) (0.38) (0.19)
------ ------- ------ ------ ------
Total distributions ....................................... (0.12) (0.39) (0.56) (0.52) (0.27)
------ ------- ------ ------ ------
Redemption fees(d) ........................................ -- --(e) --(e) --(e) --(e)
------ ------- ------ ------ ------
Net asset value, end of year .............................. $11.08 $ 8.46 $14.20 $14.07 $12.69
====== ======= ====== ====== ======
Total return(f) ........................................... 32.49% (38.28)% 5.02% 15.10% 6.43%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(g) ...... 0.74% 0.82% 0.81% 0.80% 0.81%
Expenses net of waiver and payments by affiliates(g) ...... 0.61% 0.68% 0.66% 0.65% 0.73%
Net investment income(c) .................................. 1.08% 0.81% 0.82% 0.67% 0.57%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................... $1,365 $ 1,182 $2,602 $2,534 $2,190
Portfolio turnover rate ................................... 2.01% 3.20% 1.72% 1.66% 2.49%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Amount rounds to less than $0.01 per share.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.82% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 35
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON COREFOLIO ALLOCATION FUND
YEAR ENDED DECEMBER 31,
-----------------------------------------------
ADVISOR CLASS 2009 2008 2007 2006 2005
- ------------- ------ ------- ------ ------ ------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ........................ $ 8.47 $ 14.25 $14.12 $12.73 $12.21
------ ------- ------ ------ ------
Income from investment operations(a):
Net investment income(b, c) ............................ 0.15 0.15 0.19 0.15 0.13
Net realized and unrealized gains (losses) ............. 2.64 (5.47) 0.58 1.83 0.72
------ ------- ------ ------ ------
Total from investment operations .......................... 2.79 (5.32) 0.77 1.98 0.85
------ ------- ------ ------ ------
Less distributions from:
Net investment income and short term gains received from
Underlying Funds .................................... (0.17) (0.17) (0.22) (0.21) (0.14)
Net realized gains ..................................... -- (0.29) (0.42) (0.38) (0.19)
------ ------- ------ ------ ------
Total distributions ....................................... (0.17) (0.46) (0.64) (0.59) (0.33)
------ ------- ------ ------ ------
Redemption fees(d) ........................................ -- --(e) --(e) --(e) --(e)
------ ------- ------ ------ ------
Net asset value, end of year .............................. $11.09 $ 8.47 $14.25 $14.12 $12.73
====== ======= ====== ====== ======
Total return .............................................. 33.01% (37.92)% 5.53% 15.65% 6.93%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(f) ...... 0.24% 0.32% 0.31% 0.30% 0.31%
Expenses net of waiver and payments by affiliates(f) ...... 0.11% 0.18% 0.16% 0.15% 0.23%
Net investment income(c) .................................. 1.58% 1.31% 1.32% 1.17% 1.07%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................... $1,915 $ 1,654 $3,243 $3,073 $2,792
Portfolio turnover rate ................................... 2.01% 3.20% 1.72% 1.66% 2.49%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Amount rounds to less than $0.01 per share.
(f) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.82% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
36 | Annual Report
Franklin Templeton Fund Allocator Series
STATEMENT OF INVESTMENTS, DECEMBER 31, 2009
FRANKLIN TEMPLETON COREFOLIO ALLOCATION FUND SHARES VALUE
-------------------------------------------- --------- ------------
INVESTMENTS IN UNDERLYING FUNDS(a)
DOMESTIC EQUITY 75.1%
Franklin Growth Fund, Advisor Class ......................................... 6,121,055 $238,782,346
Mutual Shares Fund, Class Z ................................................. 6,155,883 118,131,393
------------
356,913,739
------------
FOREIGN EQUITY 24.9%
Templeton Growth Fund Inc., Advisor Class ................................... 7,037,625 118,232,092
------------
TOTAL INVESTMENTS IN UNDERLYING FUNDS BEFORE SHORT TERM INVESTMENTS
(COST $485,277,633) 100.0% ............................................... 475,145,831
------------
SHORT TERM INVESTMENTS (COST $853,209) 0.2%
MONEY MARKET FUNDS 0.2%
(b) Institutional Fiduciary Trust Money Market Portfolio, 0.00% ................. 853,209 853,209
------------
TOTAL INVESTMENTS IN UNDERLYING FUNDS (COST $486,130,842) 100.2% ............ 475,999,040
OTHER ASSETS, LESS LIABILITIES (0.2)% ....................................... (898,552)
------------
NET ASSETS 100.0% ........................................................... $475,100,488
============
(a) See Note 6 regarding investments in Underlying Funds.
(b) The rate shown is the annualized seven-day yield at period end.
The accompanying notes are an integral part of these financial statements.
Annual Report | 37
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS
FRANKLIN TEMPLETON FOUNDING FUNDS ALLOCATION FUND
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
CLASS A 2009 2008 2007 2006 2005
- ------- ---------- ---------- ----------- ---------- ----------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ........................ $ 7.83 $ 13.50 $ 13.98 $ 12.50 $ 12.28
---------- ---------- ----------- ---------- ----------
Income from investment operations(a):
Net investment income(b, c) ............................ 0.33 0.37 0.43 0.40 0.37
Net realized and unrealized gains (losses) ............. 2.06 (5.38) --(d) 1.99 0.40
---------- ---------- ----------- ---------- ----------
Total from investment operations .......................... 2.39 (5.01) 0.43 2.39 0.77
---------- ---------- ----------- ---------- ----------
Less distributions from:
Net investment income and short term gains received from
Underlying Funds .................................... (0.40) (0.38) (0.44) (0.44) (0.30)
Net realized gains ..................................... -- (0.28) (0.47) (0.47) (0.25)
---------- ---------- ----------- ---------- ----------
Total distributions ....................................... (0.40) (0.66) (0.91) (0.91) (0.55)
---------- ---------- ----------- ---------- ----------
Redemption fees(e) ........................................ -- --(d) --(d) --(d) --(d)
---------- ---------- ----------- ---------- ----------
Net asset value, end of year .............................. $ 9.82 $ 7.83 $ 13.50 $ 13.98 $ 12.50
========== ========== =========== ========== ==========
Total return(f) ........................................... 31.05% (37.66)% 3.12% 19.34% 6.31%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(g) ...... 0.44% 0.54% 0.55% 0.57% 0.58%
Expenses net of waiver and payments by affiliates(g) ...... 0.37% 0.48% 0.50% 0.50% 0.54%
Net investment income(c) .................................. 3.94% 3.27% 2.99% 3.00% 2.98%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................... $5,333,275 $5,015,566 $10,161,473 $7,288,143 $4,051,695
Portfolio turnover rate ................................... 4.32% 4.16% 0.73% 0.96% 0.74%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Amount rounds to less than $0.01 per share.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.76% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
38 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON FOUNDING FUNDS ALLOCATION FUND
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
CLASS B 2009 2008 2007 2006 2005
- ------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $ 7.84 $ 13.45 $ 13.93 $ 12.46 $ 12.23
-------- -------- -------- -------- --------
Income from investment operations(a):
Net investment income(b, c) ........................ 0.27 0.28 0.35 0.28 0.26
Net realized and unrealized gains (losses) ......... 2.05 (5.32) (0.02) 2.00 0.43
-------- -------- -------- -------- --------
Total from investment operations ...................... 2.32 (5.04) 0.33 2.28 0.69
-------- -------- -------- -------- --------
Less distributions from:
Net investment income and short term gains received
from Underlying Funds ........................... (0.33) (0.29) (0.34) (0.34) (0.21)
Net realized gains ................................. -- (0.28) (0.47) (0.47) (0.25)
-------- -------- -------- -------- --------
Total distributions ................................... (0.33) (0.57) (0.81) (0.81) (0.46)
-------- -------- -------- -------- --------
Redemption fees(d) .................................... -- --(e) --(e) --(e) --(e)
-------- -------- -------- -------- --------
Net asset value, end of year .......................... $ 9.83 $ 7.84 $ 13.45 $ 13.93 $ 12.46
======== ======== ======== ======== ========
Total return(f) ....................................... 30.09% (38.05)% 2.36% 18.53% 5.58%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(g) .. 1.18% 1.24% 1.22% 1.22% 1.23%
Expenses net of waiver and payments by affiliates(g) .. 1.11% 1.18% 1.17% 1.15% 1.19%
Net investment income(c) .............................. 3.20% 2.57% 2.32% 2.35% 2.33%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ....................... $356,094 $344,396 $722,716 $766,452 $688,590
Portfolio turnover rate ............................... 4.32% 4.16% 0.73% 0.96% 0.74%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Amount rounds to less than $0.01 per share.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.76% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 39
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON FOUNDING FUNDS ALLOCATION FUND
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
CLASS C 2009 2008 2007 2006 2005
- ------- ---------- ---------- ---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $ 7.74 $ 13.29 $ 13.78 $ 12.36 $ 12.23
---------- ---------- ---------- ---------- ----------
Income from investment operations(a):
Net investment income(b, c) ........................ 0.27 0.28 0.29 0.31 0.29
Net realized and unrealized gains (losses) ......... 2.02 (5.26) 0.05 1.95 0.39
---------- ---------- ---------- ---------- ----------
Total from investment operations ...................... 2.29 (4.98) 0.34 2.26 0.68
---------- ---------- ---------- ---------- ----------
Less distributions from:
Net investment income and short term gains received
from Underlying Funds ........................... (0.33) (0.29) (0.36) (0.37) (0.30)
Net realized gains ................................. -- (0.28) (0.47) (0.47) (0.25)
---------- ---------- ---------- ---------- ----------
Total distributions ................................... (0.33) (0.57) (0.83) (0.84) (0.55)
---------- ---------- ---------- ---------- ----------
Redemption fees(d) .................................... -- --(e) --(e) --(e) --(e)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year .......................... $ 9.70 $ 7.74 $ 13.29 $ 13.78 $ 12.36
========== ========== ========== ========== ==========
Total return(f) ....................................... 30.11% (38.04)% 2.47% 18.50% 5.63%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(g) .. 1.18% 1.21% 1.22% 1.22% 1.20%
Expenses net of waiver and payments by affiliates(g) .. 1.11% 1.15% 1.17% 1.15% 1.16%
Net investment income(c) .............................. 3.20% 2.60% 2.32% 2.35% 2.36%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ....................... $2,573,664 $2,491,516 $5,295,157 $3,692,307 $2,075,041
Portfolio turnover rate ............................... 4.32% 4.16% 0.73% 0.96% 0.74%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Amount rounds to less than $0.01 per share.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.76% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
40 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON FOUNDING FUNDS ALLOCATION FUND
YEAR ENDED DECEMBER 31,
--------------------------------------------------
CLASS R 2009 2008 2007 2006 2005
- ------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $ 7.84 $ 13.50 $ 13.98 $ 12.50 $ 12.28
------- ------- ------- ------- -------
Income from investment operations(a):
Net investment income(b, c) ........................ 0.31 0.35 0.42 0.37 0.33
Net realized and unrealized gains (losses) ......... 2.07 (5.38) (0.01) 1.99 0.42
------- ------- ------- ------- -------
Total from investment operations ...................... 2.38 (5.03) 0.41 2.36 0.75
------- ------- ------- ------- -------
Less distributions from:
Net investment income and short term gains received
from Underlying Funds ........................... (0.38) (0.35) (0.42) (0.41) (0.28)
Net realized gains ................................. -- (0.28) (0.47) (0.47) (0.25)
------- ------- ------- ------- -------
Total distributions ................................... (0.38) (0.63) (0.89) (0.88) (0.53)
------- ------- ------- ------- -------
Redemption fees(d) .................................... -- --(e) --(e) --(e) --(e)
------- ------- ------- ------- -------
Net asset value, end of year .......................... $ 9.84 $ 7.84 $ 13.50 $ 13.98 $ 12.50
======= ======= ======= ======= =======
Total return(f) ....................................... 30.83% (37.77)% 2.92% 19.15% 6.12%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(g) .. 0.68% 0.74% 0.72% 0.72% 0.73%
Expenses net of waiver and payments by affiliates(g) .. 0.61% 0.68% 0.67% 0.65% 0.69%
Net investment income(c) .............................. 3.70% 3.07% 2.82% 2.85% 2.83%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ....................... $13,331 $14,300 $29,028 $24,435 $17,247
Portfolio turnover rate ............................... 4.32% 4.16% 0.73% 0.96% 0.74%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Amount rounds to less than $0.01 per share.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.76% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 41
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON FOUNDING FUNDS ALLOCATION FUND
YEAR ENDED DECEMBER 31,
--------------------------------------------------
ADVISOR CLASS 2009 2008 2007 2006 2005
- ------------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $ 7.87 $ 13.58 $ 14.05 $ 12.55 $ 12.32
------- ------- ------- ------- -------
Income from investment operations(a):
Net investment income(b, c) ........................ 0.39 0.47 0.48 0.47 0.39
Net realized and unrealized gains (losses) ......... 2.03 (5.49) 0.01 1.98 0.42
------- ------- ------- ------- -------
Total from investment operations ...................... 2.42 (5.02) 0.49 2.45 0.81
------- ------- ------- ------- -------
Less distributions from:
Net investment income and short term gains received
from Underlying Funds ........................... (0.42) (0.41) (0.49) (0.48) (0.33)
Net realized gains ................................. -- (0.28) (0.47) (0.47) (0.25)
------- ------- ------- ------- -------
Total distributions ................................... (0.42) (0.69) (0.96) (0.95) (0.58)
------- ------- ------- ------- -------
Redemption fees(d) .................................... -- --(e) --(e) --(e) --(e)
------- ------- ------- ------- -------
Net asset value, end of year .......................... $ 9.87 $ 7.87 $ 13.58 $ 14.05 $ 12.55
======= ======= ======= ======= =======
Total return .......................................... 31.35% (37.44)% 3.48% 19.73% 6.63%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(f) .. 0.18% 0.24% 0.22% 0.22% 0.23%
Expenses net of waiver and payments by affiliates(f) .. 0.11% 0.18% 0.17% 0.15% 0.19%
Net investment income(c) .............................. 4.20% 3.57% 3.32% 3.35% 3.33%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ....................... $63,994 $35,445 $46,866 $25,124 $12,535
Portfolio turnover rate ............................... 4.32% 4.16% 0.73% 0.96% 0.74%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Amount rounds to less than $0.01 per share.
(f) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.76% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
42 | Annual Report
Franklin Templeton Fund Allocator Series
STATEMENT OF INVESTMENTS, DECEMBER 31, 2009
FRANKLIN TEMPLETON FOUNDING FUNDS ALLOCATION FUND SHARES VALUE
------------------------------------------------- ------------- --------------
INVESTMENTS IN UNDERLYING FUNDS(a)
DOMESTIC EQUITY 33.3%
Mutual Shares Fund, Class Z ........................................... 144,611,186 $2,775,088,659
--------------
DOMESTIC HYBRID 33.4%
Franklin Income Fund, Advisor Class ................................... 1,353,227,646 2,787,648,952
--------------
FOREIGN EQUITY 33.2%
Templeton Growth Fund Inc., Advisor Class ............................. 164,906,605 2,770,430,965
--------------
TOTAL INVESTMENTS IN UNDERLYING FUNDS BEFORE SHORT TERM INVESTMENTS
(COST $10,146,217,848) 99.9% ....................................... 8,333,168,576
--------------
SHORT TERM INVESTMENTS (COST $34,410,141) 0.4%
MONEY MARKET FUNDS 0.4%
(b) Institutional Fiduciary Trust Money Market Portfolio, 0.00% ........... 34,410,141 34,410,141
--------------
TOTAL INVESTMENTS IN UNDERLYING FUNDS (COST $10,180,627,989) 100.3% ... 8,367,578,717
OTHER ASSETS, LESS LIABILITIES (0.3)% ................................. (27,221,766)
--------------
NET ASSETS 100.0% ..................................................... $8,340,356,951
==============
(a) See Note 6 regarding investments in Underlying Funds.
(b) The rate shown is the annualized seven-day yield at period end.
The accompanying notes are an integral part of these financial statements.
Annual Report | 43
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS
FRANKLIN TEMPLETON PERSPECTIVES ALLOCATION FUND
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
CLASS A 2009 2008 2007 2006 2005
- ------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $ 7.69 $ 13.17 $ 12.90 $ 11.79 $ 11.19
-------- -------- -------- -------- --------
Income from investment operations(a):
Net investment income(b, c) ........................ 0.09 0.10 0.15 0.17 0.16
Net realized and unrealized gains (losses) ......... 2.26 (5.20) 0.71 1.55 0.73
-------- -------- -------- -------- --------
Total from investment operations ...................... 2.35 (5.10) 0.86 1.72 0.89
-------- -------- -------- -------- --------
Less distributions from:
Net investment income and short term gains received
from Underlying Funds ........................... (0.10) (0.12) (0.16) (0.19) (0.13)
Net realized gains ................................. -- (0.26) (0.43) (0.42) (0.16)
-------- -------- -------- -------- --------
Total distributions ................................... (0.10) (0.38) (0.59) (0.61) (0.29)
-------- -------- -------- -------- --------
Redemption fees(d) .................................... -- --(e) --(e) --(e) --(e)
-------- -------- -------- -------- --------
Net asset value, end of year .......................... $ 9.94 $ 7.69 $ 13.17 $ 12.90 $ 11.79
======== ======== ======== ======== ========
Total return(f) ....................................... 30.65% (39.29)% 6.79% 14.69% 7.93%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(g) .. 0.56% 0.68% 0.68% 0.72% 0.90%
Expenses net of waiver and payments by affiliates(g) .. 0.40% 0.48% 0.50% 0.50% 0.46%
Net investment income(c) .............................. 1.08% 0.95% 1.09% 1.18% 1.41%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ....................... $160,725 $132,432 $228,876 $190,189 $103,348
Portfolio turnover rate ............................... 6.02% 9.37% 2.53% 0.98% 0.68%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Amount rounds to less than $0.01 per share.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.83% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
44 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON PERSPECTIVES ALLOCATION FUND
YEAR ENDED DECEMBER 31,
--------------------------------------------------
CLASS C 2009 2008 2007 2006 2005
- ------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $ 7.66 $ 13.08 $ 12.82 $ 11.74 $ 11.18
------- ------- ------- ------- -------
Income from investment operations(a):
Net investment income(b, c) ........................ 0.03 0.02 0.06 0.08 0.09
Net realized and unrealized gains (losses) ......... 2.24 (5.14) 0.71 1.54 0.72
------- ------- ------- ------- -------
Total from investment operations ...................... 2.27 (5.12) 0.77 1.62 0.81
------- ------- ------- ------- -------
Less distributions from:
Net investment income and short term gains received
from Underlying Funds ........................... (0.04) (0.04) (0.08) (0.12) (0.09)
Net realized gains ................................. -- (0.26) (0.43) (0.42) (0.16)
------- ------- ------- ------- -------
Total distributions ................................... (0.04) (0.30) (0.51) (0.54) (0.25)
------- ------- ------- ------- -------
Redemption fees(d) .................................... -- --(e) --(e) --(e) --(e)
------- ------- ------- ------- -------
Net asset value, end of year .......................... $ 9.89 $ 7.66 $ 13.08 $ 12.82 $ 11.74
======= ======= ======= ======= =======
Total return(f) ....................................... 29.70% (39.75)% 6.11% 13.92% 7.22%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(g) .. 1.27% 1.37% 1.34% 1.36% 1.55%
Expenses net of waiver and payments by affiliates(g) .. 1.11% 1.17% 1.16% 1.14% 1.11%
Net investment income(c) .............................. 0.37% 0.26% 0.43% 0.54% 0.76%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ....................... $52,314 $46,232 $84,173 $68,482 $36,568
Portfolio turnover rate ............................... 6.02% 9.37% 2.53% 0.98% 0.68%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Amount rounds to less than $0.01 per share.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.83% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 45
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON PERSPECTIVES ALLOCATION FUND
YEAR ENDED DECEMBER 31,
---------------------------------------------
CLASS R 2009 2008 2007 2006 2005
- ------- ------ ------- ------ ------ ------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $ 7.70 $ 13.17 $12.90 $11.79 $11.18
------ ------- ------ ------ ------
Income from investment operations(a):
Net investment income(b, c) ........................ 0.06 0.06 0.11 0.14 0.11
Net realized and unrealized gains (losses) ......... 2.27 (5.18) 0.73 1.55 0.77
------ ------- ------ ------ ------
Total from investment operations ...................... 2.33 (5.12) 0.84 1.69 0.88
------ ------- ------ ------ ------
Less distributions from:
Net investment income and short term gains received
from Underlying Funds ........................... (0.08) (0.09) (0.14) (0.16) (0.11)
Net realized gains ................................. -- (0.26) (0.43) (0.42) (0.16)
------ ------- ------ ------ ------
Total distributions ................................... (0.08) (0.35) (0.57) (0.58) (0.27)
------ ------- ------ ------ ------
Redemption fees(d) .................................... -- --(e) --(e) --(e) --(e)
------ ------- ------ ------ ------
Net asset value, end of year .......................... $ 9.95 $ 7.70 $13.17 $12.90 $11.79
====== ======= ====== ====== ======
Total return(f) ....................................... 30.34% (39.44)% 6.58% 14.49% 7.86%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates(g) .. 0.78% 0.88% 0.85% 0.87% 1.05%
Expenses net of waiver and payments by affiliates(g) .. 0.62% 0.68% 0.67% 0.65% 0.61%
Net investment income(c) .............................. 0.86% 0.75% 0.92% 1.03% 1.26%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ....................... $ 702 $ 693 $1,433 $1,539 $1,287
Portfolio turnover rate ............................... 6.02% 9.37% 2.53% 0.98% 0.68%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Amount rounds to less than $0.01 per share.
(f) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(g) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.83% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
46 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON PERSPECTIVES ALLOCATION FUND
YEAR ENDED DECEMBER 31,
------------------------------------------
ADVISOR CLASS 2009 2008 2007 2006 2005
- ------------- ------ ------ ------ ------ ------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................. $7.71 $13.22 $12.93 $11.81 $11.19
------ ------ ------ ------ ------
Income from investment operations(a):
Net investment income(b, c) ...................... 0.13 0.19 0.24 0.22 0.11
Net realized and unrealized gains (losses) ....... 2.26 (5.29) 0.68 1.54 0.82
------ ------ ------ ------ ------
Total from investment operations .................... 2.39 (5.10) 0.92 1.76 0.93
------ ------ ------ ------ ------
Less distributions from:
Net investment income and short term gains
received from Underlying Funds ................ (0.13) (0.15) (0.20) (0.22) (0.15)
Net realized gains ............................... -- (0.26) (0.43) (0.42) (0.16)
------ ------ ------ ------ ------
Total distributions ................................. (0.13) (0.41) (0.63) (0.64) (0.31)
------ ------ ------ ------ ------
Redemption fees(d) .................................. -- --(e) --(e) --(e) --(e)
------ ------ ------ ------ ------
Net asset value, end of year ........................ $ 9.97 $ 7.71 $13.22 $12.93 $11.81
====== ====== ====== ====== ======
Total return ........................................ 31.02% (39.10)% 7.26% 15.07% 8.31%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by
affiliates(f) .................................... 0.28% 0.38% 0.35% 0.37% 0.55%
Expenses net of waiver and payments by
affiliates(f) .................................... 0.12% 0.18% 0.17% 0.15% 0.11%
Net investment income(c) ............................ 1.36% 1.25% 1.42% 1.53% 1.76%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ..................... $4,192 $2,480 $2,804 $1,931 $1,104
Portfolio turnover rate ............................. 6.02% 9.37% 2.53% 0.98% 0.68%
(a) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(b) Based on average daily shares outstanding.
(c) Recognition 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.
(d) Effective September 1, 2008, the redemption fee was eliminated.
(e) Amount rounds to less than $0.01 per share.
(f) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.83% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 47
Franklin Templeton Fund Allocator Series
STATEMENT OF INVESTMENTS, DECEMBER 31, 2009
FRANKLIN TEMPLETON PERSPECTIVES ALLOCATION FUND SHARES VALUE
- ----------------------------------------------- ------------ ------------
INVESTMENTS IN UNDERLYING FUNDS(a)
DOMESTIC EQUITY 66.5%
(b) Franklin Flex Cap Growth Fund, Advisor Class ............................... 1,722,306 $ 72,302,396
Mutual Shares Fund, Class Z ................................................ 3,785,235 72,638,657
------------
144,941,053
------------
FOREIGN EQUITY 33.1%
Templeton Growth Fund Inc., Advisor Class .................................. 4,291,359 72,094,833
------------
TOTAL INVESTMENTS IN UNDERLYING FUNDS BEFORE SHORT TERM INVESTMENTS
(COST $248,148,560) 99.6% ............................................... 217,035,886
------------
SHORT TERM INVESTMENTS (COST $1,071,505) 0.5%
MONEY MARKET FUNDS 0.5%
(c) Institutional Fiduciary Trust Money Market Portfolio, 0.00% ................ 1,071,505 1,071,505
------------
TOTAL INVESTMENTS IN UNDERLYING FUNDS (COST $249,220,065) 100.1% ........... 218,107,391
OTHER ASSETS, LESS LIABILITIES (0.1)% ...................................... (174,546)
------------
NET ASSETS 100.0% .......................................................... $217,932,845
============
(a) See Note 6 regarding investments in Underlying Funds.
(b) Non-income producing.
(c) The rate shown is the annualized seven-day yield at period end.
The accompanying notes are an integral part of these financial statements.
48| Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 2009
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
COREFOLIO FOUNDING FUNDS PERSPECTIVES
ALLOCATION ALLOCATION ALLOCATION
FUND FUND FUND
------------ --------------- ------------
Assets:
Investments in Underlying Funds: (Note 6)
Cost ............................................................... $486,130,842 $10,180,627,989 $249,220,065
============ =============== ============
Value .............................................................. $475,999,040 $ 8,367,578,717 $218,107,391
Receivables:
Capital shares sold ................................................ 417,937 8,200,109 259,296
Affiliates ......................................................... 130,894 -- 113,093
Underlying Funds (Note 7) .......................................... 90,325 1,213,700 43,380
Other assets .......................................................... 63 1,237 27
------------ --------------- ------------
Total assets .................................................... 476,638,259 8,376,993,763 218,523,187
------------ --------------- ------------
Liabilities:
Payables:
Capital shares redeemed ............................................ 972,568 25,195,669 311,698
Affiliates ......................................................... 446,924 8,407,814 201,413
Unaffiliated transfer agent fees ................................... 70,327 1,354,993 37,542
Accrued expenses and other liabilities ................................ 47,952 1,678,336 39,689
------------ --------------- ------------
Total liabilities ............................................... 1,537,771 36,636,812 590,342
------------ --------------- ------------
Net assets, at value ......................................... $475,100,488 $ 8,340,356,951 $217,932,845
============ =============== ============
Net assets consist of:
Paid-in capital ....................................................... $526,575,969 $12,319,941,744 $270,123,760
Undistributed net investment income ................................... 887,724 38,071,489 348,887
Net unrealized appreciation (depreciation) ............................ (10,131,802) (1,813,049,272) (31,112,674)
Accumulated net realized gain (loss) .................................. (42,231,403) (2,204,607,010) (21,427,128)
------------ --------------- ------------
Net assets, at value ......................................... $475,100,488 $ 8,340,356,951 $217,932,845
============ =============== ============
The accompanying notes are an integral part of these financial statements.
Annual Report | 49
Franklin Templeton Fund Allocator Series
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
December 31, 2009
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
COREFOLIO FOUNDING FUNDS PERSPECTIVES
ALLOCATION ALLOCATION ALLOCATION
FUND FUND FUND
------------ -------------- -------------
CLASS A:
Net assets, at value .................................................. $319,687,841 $5,333,274,783 $160,725,031
------------ -------------- ------------
Shares outstanding .................................................... 28,851,278 542,881,146 16,172,461
------------ -------------- ------------
Net asset value per share(a) .......................................... $ 11.08 $ 9.82 $ 9.94
------------ -------------- ------------
Maximum offering price per share (net asset value per
share / 94.25%) .................................................... $ 11.76 $ 10.42 $ 10.55
------------ -------------- ------------
CLASS B:
Net assets, at value .................................................. $ 39,092,906 $ 356,093,949
------------ --------------
Shares outstanding .................................................... 3,542,296 36,216,138
------------ --------------
Net asset value and maximum offering price per share(a) ............... $ 11.04 $ 9.83
------------ --------------
CLASS C:
Net assets, at value .................................................. $113,040,272 $2,573,663,821 $ 52,314,247
------------ -------------- ------------
Shares outstanding .................................................... 10,284,227 265,405,128 5,287,649
------------ -------------- ------------
Net asset value and maximum offering price per share(a) ............... $ 10.99 $ 9.70 $ 9.89
------------ -------------- ------------
CLASS R:
Net assets, at value .................................................. $ 1,364,690 $ 13,330,573 $ 701,599
------------ -------------- ------------
Shares outstanding .................................................... 123,198 1,355,128 70,487
------------ -------------- ------------
Net asset value and maximum offering price per share .................. $ 11.08 $ 9.84 $ 9.95
------------ -------------- ------------
ADVISOR CLASS:
Net assets, at value .................................................. $ 1,914,779 $ 63,993,825 $ 4,191,968
------------ -------------- ------------
Shares outstanding .................................................... 172,626 6,481,469 420,578
------------ -------------- ------------
Net asset value and maximum offering price per share .................. $ 11.09 $ 9.87 $ 9.97
------------ -------------- ------------
(a) Redemption price is equal to net asset value less contingent deferred sales
charges, if applicable.
The accompanying notes are an integral part of these financial statements.
50 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF OPERATIONS
for the year ended December 31, 2009
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
COREFOLIO FOUNDING FUNDS PERSPECTIVES
ALLOCATION ALLOCATION ALLOCATION
FUND FUND FUND
------------ --------------- -------------
Investment income:
Dividends from Underlying Funds (Note 6) .............................. $ 7,021,178 $ 329,079,733 $ 2,851,186
------------ --------------- ------------
Expenses:
Administrative fees (Note 3a) ......................................... 413,938 7,593,473 190,760
Distribution fees: (Note 3b)
Class A ............................................................ 754,761 12,903,249 392,293
Class B ............................................................ 345,816 3,282,397 --
Class C ............................................................ 979,209 23,619,243 461,152
Class R ............................................................ 5,906 62,801 3,214
Transfer agent fees (Note 3d) ......................................... 995,906 13,071,469 533,196
Reports to shareholders ............................................... 79,850 1,043,261 46,026
Registration and filing fees .......................................... 76,075 204,723 54,948
Professional fees ..................................................... 23,925 125,792 18,408
Trustees' fees and expenses ........................................... 4,696 88,642 2,139
Other ................................................................. 15,577 215,118 9,593
Expenses borne by Underlying Funds (Note 7) ........................... (608,589) (8,837,256) (315,854)
------------ --------------- ------------
Total expenses .................................................. 3,087,070 53,372,912 1,395,875
Expenses waived/paid by affiliates (Note 3e) .................... (544,832) (4,865,384) (303,853)
------------ --------------- ------------
Net expenses ................................................. 2,542,238 48,507,528 1,092,022
------------ --------------- ------------
Net investment income ..................................... 4,478,940 280,572,205 1,759,164
------------ --------------- ------------
Realized and unrealized gains (losses):
Net realized gain (loss) from sale of investments in Underlying Funds (29,576,059) (1,108,190,299) (11,670,589)
Net change in unrealized appreciation (depreciation) on investments
in Underlying Funds ................................................ 141,486,761 2,849,422,623 62,526,844
------------ --------------- ------------
Net realized and unrealized gain (loss) .................................. 111,910,702 1,741,232,324 50,856,255
------------ --------------- ------------
Net increase (decrease) in net assets resulting from operations .......... $116,389,642 $ 2,021,804,529 $ 52,615,419
============ =============== ============
The accompanying notes are an integral part of these financial statements.
Annual Report | 51
Franklin Templeton Fund Allocator Series
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
COREFOLIO ALLOCATION FUND FOUNDING FUNDS ALLOCATION FUND
---------------------------- ---------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
---------------------------- ---------------------------------
2009 2008 2009 2008
------------ ------------- --------------- ---------------
Increase (decrease) in net assets:
Operations:
Net investment income ..................... $ 4,478,940 $ 4,675,740 $ 280,572,205 $ 377,712,264
Net realized gain (loss) from
Underlying Funds ....................... (29,576,059) (10,770,252) (1,108,190,299) (1,044,973,765)
Net change in unrealized appreciation
(depreciation) on investments in
Underlying Funds ....................... 141,486,761 (266,649,939) 2,849,422,623 (4,923,135,686)
------------ ------------- --------------- ---------------
Net increase (decrease) in net assets
resulting from operations ........ 116,389,642 (272,744,451) 2,021,804,529 (5,590,397,187)
------------ ------------- --------------- ---------------
Distributions to shareholders from:
Net investment income and short term gains
received from Underlying Funds:
Class A ................................ (4,102,193) (4,306,007) (219,472,925) (232,663,422)
Class B ................................ (256,249) (173,762) (12,350,841) (12,296,371)
Class C ................................ (762,501) (555,567) (90,453,684) (91,206,625)
Class R ................................ (14,789) (14,468) (512,969) (613,620)
Advisor Class .......................... (28,946) (33,624) (2,151,422) (1,808,459)
Net realized gains:
Class A ................................ -- (9,912,353) -- (206,963,605)
Class B ................................ -- (1,420,594) -- (14,528,676)
Class C ................................ -- (3,696,588) -- (108,826,242)
Class R ................................ -- (51,580) -- (581,731)
Advisor Class .......................... -- (65,462) -- (920,311)
------------ ------------- --------------- ---------------
Total distributions to shareholders .......... (5,164,678) (20,230,005) (324,941,841) (670,409,062)
------------ ------------- --------------- ---------------
Capital share transactions: (Note 2)
Class A ................................ (33,456,082) (25,532,551) (772,871,396) (1,199,297,735)
Class B ................................ (5,968,895) (10,233,436) (61,904,166) (106,380,153)
Class C ................................ (13,057,633) (11,322,678) (438,591,157) (791,796,601)
Class R ................................ (142,150) (480,559) (3,667,697) (3,925,755)
Advisor Class .......................... (153,841) (443,248) 19,305,430 8,144,816
------------ ------------- --------------- ---------------
Total capital share transactions ............. (52,778,601) (48,012,472) (1,257,728,986) (2,093,255,428)
------------ ------------- --------------- ---------------
Redemption fees .............................. -- 1,576 -- 44,669
------------ ------------- --------------- ---------------
Net increase (decrease) in net
assets ........................... 58,446,363 (340,985,352) 439,133,702 (8,354,017,008)
Net assets:
Beginning of year ............................ 416,654,125 757,639,477 7,901,223,249 16,255,240,257
------------ ------------- --------------- ---------------
End of year .................................. $475,100,488 $ 416,654,125 $ 8,340,356,951 $ 7,901,223,249
============ ============= =============== ===============
Undistributed net investment income included in
net assets:
End of year .................................. $ 887,724 $ 1,573,462 $ 38,071,489 $ 82,441,125
============ ============= =============== ===============
The accompanying notes are an integral part of these financial statements.
52 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FRANKLIN TEMPLETON
PERSPECTIVES ALLOCATION FUND
----------------------------
YEAR ENDED DECEMBER 31,
----------------------------
2009 2008
------------ -------------
Increase (decrease) in net assets:
Operations:
Net investment income .................................................... $ 1,759,164 $ 1,994,479
Net realized gain (loss) from Underlying Funds ........................... (11,670,589) (8,917,483)
Net change in unrealized appreciation (depreciation) on investments in
Underlying Funds ...................................................... 62,526,844 (117,330,528)
------------ -------------
Net increase (decrease) in net assets resulting from operations ....... 52,615,419 (124,253,532)
------------ -------------
Distributions to shareholders from:
Net investment income and short term gains received from Underlying Funds:
Class A ............................................................... (1,668,418) (2,005,641)
Class C ............................................................... (218,058) (220,353)
Class R ............................................................... (5,786) (8,254)
Advisor Class ......................................................... (51,620) (47,054)
Net realized gains:
Class A ............................................................... -- (4,521,662)
Class C ............................................................... -- (1,694,032)
Class R ............................................................... -- (29,595)
Advisor Class ......................................................... -- (50,944)
------------ -------------
Total distributions to shareholders ......................................... (1,943,882) (8,577,535)
------------ -------------
Capital share transactions: (Note 2)
Class A ............................................................... (9,429,165) (223,905)
Class C ............................................................... (5,840,654) (3,260,020)
Class R ............................................................... (154,602) (182,809)
Advisor Class ......................................................... 849,619 1,046,832
------------ -------------
Total capital share transactions ............................................ (14,574,802) (2,619,902)
------------ -------------
Redemption fees ............................................................. -- 378
------------ -------------
Net increase (decrease) in net assets .............................. 36,096,735 (135,450,591)
Net assets:
Beginning of year ........................................................... 181,836,110 317,286,701
------------ -------------
End of year ................................................................. $217,932,845 $ 181,836,110
============ =============
Undistributed net investment income included in net assets:
End of year ................................................................. $ 348,887 $ 533,605
============ =============
The accompanying notes are an integral part of these financial statements.
Annual Report | 53
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Templeton Fund Allocator Series (Trust) is registered under the
Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment
company, consisting of ten separate funds, three of which are included in this
report (Funds). The financial statements of the remaining funds in the Trust are
presented separately. The Funds invest primarily in Franklin Templeton mutual
funds (Underlying Funds). The classes of shares offered within each of the Funds
are indicated below. Each class of shares differs by its initial sales load,
contingent deferred sales charges, distribution fees, voting rights on matters
affecting a single class and its exchange privilege.
CLASS A, CLASS B, CLASS C, CLASS R & ADVISOR CLASS CLASS A, CLASS C, CLASS R & ADVISOR CLASS
- -------------------------------------------------- -----------------------------------------------
Franklin Templeton Corefolio Allocation Fund Franklin Templeton Perspectives Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
The following summarizes the Funds' significant accounting policies.
A. SECURITY VALUATION
Net asset value per share is calculated as of the close of trading of the NYSE.
Investments in the Underlying Funds are valued at their closing net asset value
each trading day.
B. INCOME TAXES
No provision has been made for U.S. income taxes because it is each fund's
policy to qualify as a regulated investment company under the Internal Revenue
Code and to distribute to shareholders substantially all of its taxable income
and net realized gains.
The Funds have reviewed the tax positions, taken on federal income tax returns,
for each of the three open tax years and as of December 31, 2009, and have
determined that no provision for income tax is required in the Funds' financial
statements.
C. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Estimated expenses are accrued daily. Dividend income and realized gain
distributions by Underlying Funds are recorded on the ex-dividend date.
Distributions to shareholders are recorded on the ex-dividend date and are
determined according to income tax regulations (tax basis). Distributable
earnings determined on a tax basis may differ from earnings recorded in
accordance with accounting principles generally accepted in the United States of
America. 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.
54 | Annual Report
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
(CONTINUED)
Common expenses incurred by the Trust are allocated among the funds based on the
ratio of net assets of each fund to the combined net assets of the Trust. Fund
specific expenses are charged directly to the fund that incurred the expense.
The Funds indirectly bear their proportionate share of expenses from the
Underlying Funds. Since the Underlying Funds have varied expense levels and the
Funds may own different proportions of the Underlying Funds at different times,
the amount of expenses incurred indirectly by the Funds will vary.
Realized and unrealized gains and losses and net investment income, not
including class specific expenses, are allocated daily to each class of shares
based upon the relative proportion of net assets of each class. Differences in
per share distributions, by class, are generally due to differences in class
specific expenses.
D. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
E. REDEMPTION FEES
A short term trading redemption fee was imposed, with some exceptions, on any
fund shares that were redeemed or exchanged within seven calendar days following
their purchase date. The redemption fee was 2% of the amount redeemed. Such fees
were retained by the funds and accounted for as an addition to paid-in capital.
Effective September 1, 2008, the redemption fee was eliminated.
F. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified by the Trust against certain liabilities arising out of the
performance of their duties to the Trust. Additionally, in the normal course of
business, the Trust, on behalf of the Funds, enters into contracts with service
providers that contain general indemnification clauses. The Trust's maximum
exposure under these arrangements is unknown as this would involve future claims
that may be made against the Trust that have not yet occurred. Currently, the
Trust expects the risk of loss to be remote.
Annual Report | 55
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST
At December 31, 2009, there were an unlimited number of shares authorized
(without par value). Transactions in the Funds' shares were as follows:
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
COREFOLIO FOUNDING FUNDS
ALLOCATION FUND ALLOCATION FUND
-------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ------------ ---------------
CLASS A SHARES:
Year ended December 31, 2009
Shares sold .................... 3,236,280 $ 29,331,084 47,169,528 $ 393,990,378
Shares issued in reinvestment of
distributions ............... 373,671 3,926,536 23,246,159 207,459,244
Shares redeemed ................ (7,671,732) (66,713,702) (168,105,842) (1,374,321,018)
---------- ------------- ------------ ---------------
Net increase (decrease) ........ (4,061,781) $ (33,456,082) (97,690,155) $ (772,871,396)
========== ============= ============ ===============
Year ended December 31, 2008
Shares sold .................... 5,567,019 $ 61,833,850 101,658,440 $ 1,166,213,136
Shares issued in reinvestment of
distributions ............... 1,265,389 13,537,176 45,436,762 415,107,291
Shares redeemed ................ (8,891,290) (100,903,577) (259,459,671) (2,780,618,162)
---------- ------------- ------------ ---------------
Net increase (decrease) ........ (2,058,882) $ (25,532,551) (112,364,469) $(1,199,297,735)
========== ============= ============ ===============
CLASS B SHARES:
Year ended December 31, 2009
Shares sold .................... 64,424 $ 580,399 467,376 $ 3,922,754
Shares issued in reinvestment of
distributions ............... 24,486 240,936 1,293,652 11,520,679
Shares redeemed ................ (768,474) (6,790,230) (9,477,912) (77,347,599)
---------- ------------- ------------ ---------------
Net increase (decrease) ........ (679,564) $ (5,968,895) (7,716,884) $ (61,904,166)
========== ============= ============ ===============
Year ended December 31, 2008
Shares sold .................... 104,352 $ 1,141,683 986,795 $ 10,589,681
Shares issued in reinvestment of
distributions ............... 129,819 1,507,686 2,649,869 24,917,785
Shares redeemed ................ (1,149,669) (12,882,805) (13,417,606) (141,887,619)
---------- ------------- ------------ ---------------
Net increase (decrease) ........ (915,498) $ (10,233,436) (9,780,942) $ (106,380,153)
========== ============= ============ ===============
CLASS C SHARES:
Year ended December 31, 2009
Shares sold .................... 1,160,988 $ 10,404,766 20,266,052 $ 167,747,133
Shares issued in reinvestment of
distributions ............... 72,406 714,452 9,122,355 80,143,253
Shares redeemed ................ (2,807,242) (24,176,851) (86,074,684) (686,481,543)
---------- ------------- ------------ ---------------
Net increase (decrease) ........ (1,573,848) $ (13,057,633) (56,686,277) $ (438,591,157)
========== ============= ============ ===============
Year ended December 31, 2008
Shares sold .................... 2,048,102 $ 22,152,029 45,290,328 $ 503,556,683
Shares issued in reinvestment of
distributions ............... 344,964 3,952,057 18,821,585 174,787,157
Shares redeemed ................ (3,459,667) (37,426,764) (140,521,755) (1,470,140,441)
---------- ------------- ------------ ---------------
Net increase (decrease) ........ (1,066,601) $ (11,322,678) (76,409,842) $ (791,796,601)
========== ============= ============ ===============
56 | Annual Report
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
COREFOLIO FOUNDING FUNDS
ALLOCATION FUND ALLOCATION FUND
------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
------- --------- ---------- ------------
CLASS R SHARES:
Year ended December 31, 2009
Shares sold .................... 17,232 $ 165,388 280,523 $ 2,296,033
Shares issued in reinvestment of
distributions ............... 1,420 14,789 57,378 512,145
Shares redeemed ................ (35,125) (322,327) (806,790) (6,475,875)
------- --------- ---------- ------------
Net increase (decrease) ........ (16,473) $(142,150) (468,889) $ (3,667,697)
======= ========= ========== ============
Year ended December 31, 2008
Shares sold .................... 16,325 $ 200,227 370,382 $ 4,119,404
Shares issued in reinvestment of
distributions ............... 5,950 66,049 129,876 1,191,611
Shares redeemed ................ (65,849) (746,835) (826,353) (9,236,770)
------- --------- ---------- ------------
Net increase (decrease) ........ (43,574) $(480,559) (326,095) $ (3,925,755)
======= ========= ========== ============
ADVISOR CLASS SHARES:
Year ended December 31, 2009
Shares sold .................... 66,906 $ 617,402 3,962,200 $ 35,696,840
Shares issued in reinvestment of
distributions ............... 2,503 26,558 202,485 1,850,429
Shares redeemed ................ (92,057) (797,801) (2,188,271) (18,241,839)
------- --------- ---------- ------------
Net increase (decrease) ........ (22,648) $(153,841) 1,976,414 $ 19,305,430
======= ========= ========== ============
Year ended December 31, 2008
Shares sold .................... 45,547 $ 411,512 2,448,980 $ 23,486,926
Shares issued in reinvestment of
distributions ............... 8,128 84,684 288,863 2,496,414
Shares redeemed ................ (85,974) (939,444) (1,683,911) (17,838,524)
------- --------- ---------- ------------
Net increase (decrease) ........ (32,299) $(443,248) 1,053,932 $ 8,144,816
======= ========= ========== ============
FRANKLIN TEMPLETON
PERSPECTIVES
ALLOCATION FUND
-------------------------
SHARES AMOUNT
---------- ------------
CLASS A SHARES:
Year ended December 31, 2009
Shares sold ..................................... 2,905,762 $ 23,518,960
Shares issued in reinvestment of distributions .. 171,246 1,625,916
Shares redeemed ................................. (4,128,507) (34,574,041)
---------- ------------
Net increase (decrease) ......................... (1,051,499) $ (9,429,165)
========== ============
Year ended December 31, 2008
Shares sold ..................................... 3,470,298 $ 37,241,720
Shares issued in reinvestment of distributions .. 658,516 6,336,696
Shares redeemed ................................. (4,285,488) (43,802,321)
---------- ------------
Net increase (decrease) ......................... (156,674) $ (223,905)
========== ============
Annual Report | 57
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
FRANKLIN TEMPLETON
PERSPECTIVES
ALLOCATION FUND
-------------------------
SHARES AMOUNT
---------- ------------
CLASS C SHARES:
Year ended December 31, 2009
Shares sold ...................................... 686,403 $ 5,596,121
Shares issued in reinvestment of distributions ... 23,422 205,339
Shares redeemed .................................. (1,455,466) (11,642,114)
---------- ------------
Net increase (decrease) .......................... (745,641) $ (5,840,654)
========== ============
Year ended December 31, 2008
Shares sold ...................................... 1,394,980 $ 14,721,259
Shares issued in reinvestment of distributions ... 171,980 1,784,729
Shares redeemed .................................. (1,970,998) (19,766,008)
---------- ------------
Net increase (decrease) .......................... (404,038) $ (3,260,020)
========== ============
CLASS R SHARES:
Year ended December 31, 2009
Shares sold ...................................... 13,708 $ 108,555
Shares issued in reinvestment of distributions ... 616 5,786
Shares redeemed .................................. (33,851) (268,943)
---------- ------------
Net increase (decrease) .......................... (19,527) $ (154,602)
========== ============
Year ended December 31, 2008
Shares sold ...................................... 15,267 $ 171,827
Shares issued in reinvestment of distributions ... 3,789 37,849
Shares redeemed .................................. (37,884) (392,485)
---------- ------------
Net increase (decrease) .......................... (18,828) $ (182,809)
========== ============
ADVISOR CLASS SHARES:
Year ended December 31, 2009
Shares sold ...................................... 312,456 $ 2,800,077
Shares issued in reinvestment of distributions ... 4,975 48,107
Shares redeemed .................................. (218,533) (1,998,565)
---------- ------------
Net increase (decrease) .......................... 98,898 $ 849,619
========== ============
Year ended December 31, 2008
Shares sold ...................................... 193,937 $ 1,925,016
Shares issued in reinvestment of distributions ... 9,626 86,274
Shares redeemed .................................. (93,976) (964,458)
---------- ------------
Net increase (decrease) .......................... 109,587 $ 1,046,832
========== ============
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 Trust 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
58 | Annual Report
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
A. ADMINISTRATIVE FEES
The Funds pay an administrative fee to FT Services of 0.10% per year of the
average daily net assets of each of the Funds for administrative services
including monitoring and rebalancing the percentage of each Fund's investment in
the Underlying Funds.
B. DISTRIBUTION FEES
The Trust's Board of Trustees has adopted distribution plans for each share
class, with the exception of Advisor Class shares, pursuant to Rule 12b-1 under
the 1940 Act.
On December 1, 2008, the Trust's Board of Trustees approved a modification to
the Class A distribution plan, for those funds that had a Class A compensation
plan, changing the form of the plan from a compensation to a reimbursement
distribution plan. Under the distribution plan, 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. This
change was effective February 1, 2009. Under the Class A reimbursement
distribution plans, costs exceeding the maximum for the current plan year cannot
be reimbursed in subsequent periods. Prior to February 1, 2009, under the Funds'
Class A compensation distribution plan, the Funds paid Distributors for costs
incurred in connection with the servicing, sale and distribution of the Funds'
shares up to a certain percentage per year of its average daily net assets.
In addition, under the Funds' 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 maximum annual plan rates, based on the average daily net assets, for each
class, are as follows:
FRANKLIN TEMPLETON FRANKLIN TEMPLETON FRANKLIN TEMPLETON
COREFOLIO FOUNDING FUNDS PERSPECTIVES
ALLOCATION FUND ALLOCATION FUND ALLOCATION FUND
------------------ ------------------ ------------------
Class A... 0.35% 0.35% 0.35%
Class B... 1.00% 1.00% --
Class C... 1.00% 1.00% 1.00%
Class R... 0.50% 0.50% 0.50%
The Board of Trustees has set the current rate at 0.30% per year for Class A
shares for the Franklin Templeton Corefolio Allocation Fund and the Franklin
Templeton Perspectives Allocation Fund, and at 0.25% per year for Class A shares
of the Franklin Templeton Founding Funds Allocation Fund until further notice
and approval by the Board.
Annual Report | 59
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
C. SALES CHARGES/UNDERWRITING AGREEMENTS
Distributors has advised the Funds of the following commission transactions
related to the sales and redemptions of the Funds' shares for the year:
FRANKLIN TEMPLETON FRANKLIN TEMPLETON FRANKLIN TEMPLETON
COREFOLIO FOUNDING FUNDS PERSPECTIVES
ALLOCATION FUND ALLOCATION FUND ALLOCATION FUND
------------------ ------------------ ------------------
Sales charges retained net of commissions
paid to unaffiliated broker/dealers ....... $155,178 $1,876,925 $104,239
Contingent deferred sales charges retained ... $ 18,333 $ 341,241 $ 5,112
D. TRANSFER AGENT FEES
For the year ended December 31, 2009, the Funds paid transfer agent fees as
noted in the Statements of Operations of which the following amounts were
retained by Investor Services:
FRANKLIN TEMPLETON FRANKLIN TEMPLETON FRANKLIN TEMPLETON
COREFOLIO FOUNDING FUNDS PERSPECTIVES
ALLOCATION FUND ALLOCATION FUND ALLOCATION FUND
------------------ ------------------ ------------------
Transfer agent fees .......................... $728,458 $7,972,032 $400,719
E. WAIVER AND EXPENSE REIMBURSEMENTS
FT Services has contractually agreed in advance to waive or limit its fees and
to assume as its own expense certain expenses otherwise payable by the Funds so
that the common expenses (i.e. a combination of administrative fees and other
expenses, but excluding distribution fees and acquired fund fees and expenses)
for each class of the Funds do not exceed 0.10% (other than certain non-routine
expenses or costs, including those relating to litigation, indemnification,
reorganizations, and liquidations) until April 30, 2010. Prior to May 1, 2009,
the common expenses and acquired fund fees and expenses were limited to 0.90%,
0.85% and 0.92% for the Franklin Templeton Corefolio Allocation Fund, Franklin
Templeton Founding Funds Allocation Fund and Franklin Templeton Perspectives
Allocation Fund, respectively.
4. INCOME TAXES
For tax purposes, capital losses may be carried over to offset future capital
gains, if any. At December 31, 2009, the capital loss carryforwards were as
follows:
FRANKLIN TEMPLETON FRANKLIN TEMPLETON FRANKLIN TEMPLETON
COREFOLIO FOUNDING FUNDS PERSPECTIVES
ALLOCATION FUND ALLOCATION FUND ALLOCATION FUND
------------------ ------------------ ------------------
Capital loss carryforwards expiring in:
2016 ...................................... $ 6,021,473 $ 666,677,037 $ 2,696,618
2017 ...................................... 29,756,579 1,134,008,344 7,870,700
----------- -------------- -----------
$35,778,052 $1,800,685,381 $10,567,318
=========== ============== ===========
60 | Annual Report
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES (CONTINUED)
For tax purposes, realized capital losses occurring subsequent to October 31,
may be deferred and treated as occurring on the first day of the following
fiscal year. At December 31, 2009, deferred realized capital losses were as
follows:
FRANKLIN TEMPLETON FRANKLIN TEMPLETON FRANKLIN TEMPLETON
COREFOLIO FOUNDING FUNDS PERSPECTIVES
ALLOCATION FUND ALLOCATION FUND ALLOCATION FUND
------------------ ------------------ ------------------
Realized capital losses ..................... $242,331 $88,404,374 $1,572,645
The tax character of distributions paid during the years ended December 31, 2009
and 2008, was as follows:
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
COREFOLIO FOUNDING FUNDS
ALLOCATION FUND ALLOCATION FUND
------------------------ ---------------------------
2009 2008 2009 2008
---------- ----------- ------------ ------------
Distributions paid from:
Ordinary income ........................... $5,164,678 $ 5,083,428 $324,941,841 $338,588,497
Long term capital gain .................... -- 15,146,577 -- 331,820,565
---------- ----------- ------------ ------------
$5,164,678 $20,230,005 $324,941,841 $670,409,062
========== =========== ============ ============
FRANKLIN
TEMPLETON
PERSPECTIVES
ALLOCATION FUND
-----------------------
2009 2008
---------- ----------
Distributions paid from:
Ordinary income ........................... $1,943,882 $2,286,145
Long term capital gain .................... -- 6,291,390
---------- ----------
$1,943,882 $8,577,535
========== ==========
At December 31, 2009, the cost of investments, net unrealized appreciation
(depreciation), and undistributed ordinary income for income tax purposes were
as follows:
FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON
COREFOLIO FOUNDING FUNDS PERSPECTIVES
ALLOCATION ALLOCATION ALLOCATION
FUND FUND FUND
------------ ---------------- ------------
Cost of investments .......................... $492,341,862 $ 10,496,145,243 $258,507,230
============ ================ ============
Unrealized appreciation ...................... $ 31,002,585 $ -- $ 6,377,482
Unrealized depreciation ...................... 47,345,407) (2,128,566,526) (46,777,321)
------------ ---------------- ------------
Net unrealized appreciation (depreciation).... $(16,342,822) $(2,128,566,526) $(40,399,839)
============ ================ ============
Distributable earnings -
undistributed ordinary income ............. $ 887,724 $ 38,071,489 $ 348,887
============ ================ ============
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatment of wash sales and short term capital gains
distributions from Underlying Funds.
Annual Report | 61
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INVESTMENT TRANSACTIONS
Purchases and sales of Underlying Funds (excluding short term securities) for
the year ended December 31, 2009, were as follows:
FRANKLIN TEMPLETON FRANKLIN TEMPLETON FRANKLIN TEMPLETON
COREFOLIO FOUNDING FUNDS PERSPECTIVES
ALLOCATION FUND ALLOCATION FUND ALLOCATION FUND
------------------ ------------------ ------------------
Purchases ......... $ 8,320,681 $ 329,053,295 $11,450,316
Sales ............. $61,300,658 $1,663,254,424 $25,392,646
6. INVESTMENTS IN UNDERLYING FUNDS
The Funds invest primarily in the Underlying Funds which are managed by Franklin
Advisers, Inc. (Advisers), an affiliate of FT Services, or by an affiliate of
Advisers. The Funds do not invest in the Underlying Funds for the purpose of
exercising management or control. At December 31, 2009, the Funds held the
following positions which exceed 5% of the Underlying Funds' shares outstanding:
NAME OF ISSUER % OF SHARES HELD
- -------------- ----------------
FRANKLIN TEMPLETON COREFOLIO ALLOCATION FUND
Franklin Growth Fund ................................... 7.26%
FRANKLIN TEMPLETON FOUNDING FUNDS ALLOCATION FUND
Mutual Shares Fund ..................................... 17.93%
Templeton Growth Fund Inc. ............................. 14.52%
Franklin Income Fund ................................... 5.55%
The Funds may invest in the Institutional Fiduciary Trust Money Market Portfolio
(Sweep Money Fund), an open-end investment company managed by Advisers. Pursuant
to a SEC exemptive order specific to the Funds' investment in the Sweep Money
Fund, administrative fees are reduced on assets invested in the Sweep Money
Fund, in an amount not to exceed the management and administrative fees paid
by the Sweep Money Fund.
7. SPECIAL SERVICING AGREEMENT
On May 1, 2009, the Funds entered into a Special Servicing Agreement (SSA) with
the Underlying Funds and certain service providers of the Funds and of the
Underlying Funds. Under the SSA, each Underlying Fund may pay a portion of the
Funds' expenses (other than any asset allocation, administrative, and
distribution fees) to the extent such payments are less than the amount of the
benefits realized or expected to be realized by the Underlying Fund (e.g., due
to reduced costs associated with servicing accounts) from the investment in the
Underlying Funds by the Funds. The amount of expenses allocated during the year
ended December 31, 2009 is noted in the Statements of Operations.
62| Annual Report
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. 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 $725
million (Global Credit Facility) to provide 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 January 22,
2010, the funds renewed the Global Credit Facility, for a total of $750 million,
maturing January 21, 2011.
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 its share of fees and expenses incurred in connection with the
implementation and maintenance of the Global Credit Facility, based upon its
relative share of the aggregate net assets of all of the Borrowers, including an
annual commitment fee of 0.10% based upon the unused portion of the Global
Credit Facility, which is reflected in other expenses on the Statements of
Operations. During the year ended December 31, 2009, the Funds did not utilize
the Global Credit Facility.
9. FAIR VALUE MEASUREMENTS
The Trust follows a fair value hierarchy that distinguishes between market data
obtained from independent sources (observable inputs) and the Trust's own market
assumptions (unobservable inputs). These inputs are used in determining the
value of the Funds' investments and are summarized in the following fair value
hierarchy:
- Level 1 - quoted prices in active markets for identical securities
- Level 2 - other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speed, credit risk,
etc.)
- Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities.
At December 31, 2009, all of the Funds' investments in Underlying Funds carried
at fair value were in Level 1 inputs. For detailed Underlying Funds categories,
see the accompanying Statements of Investments.
Annual Report | 63
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. NEW ACCOUNTING PRONOUNCEMENTS
In January 2010, the Financial Accounting Standards Board issued Accounting
Standards Update (ASU) No. 2010-6, Fair Value Measurements and Disclosures
(Topic 820): Improving Disclosures about Fair Value Measurements. ASU No. 2010-6
enhances and clarifies existing fair value measurement disclosure requirements
and is effective for interim and annual periods beginning after December 15,
2009. The Trust is currently evaluating the impact, if any, of applying the
provisions of ASU No. 2010-6.
11. SUBSEQUENT EVENTS
The Funds have evaluated subsequent events through February 15, 2010, the
issuance date of the financial statements and determined that no events have
occurred that require disclosure.
64 | Annual Report
Franklin Templeton Fund Allocator Series
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF FRANKLIN TEMPLETON FUND ALLOCATOR
SERIES
In our opinion, the accompanying statements of assets and liabilities, including
the statements of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Franklin Templeton Corefolio
Allocation Fund, Franklin Templeton Founding Funds Allocation Fund and Franklin
Templeton Perspectives Allocation Fund (separate portfolios of Franklin
Templeton Fund Allocator Series, hereafter referred to as the "Funds") at
December 31, 2009, the results of each of their operations for the year then
ended, the changes in each of their net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of investments in the Underlying Funds at December 31, 2009 by
correspondence with the Transfer Agent of Underlying Funds, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 15, 2010
Annual Report | 65
Franklin Templeton Fund Allocator Series
TAX DESIGNATION (UNAUDITED)
Under Section 854(b)(2) of the Internal Revenue Code (Code), the Funds designate
the following percentage amounts of the ordinary income dividends as income
qualifying for the dividends received deduction for the fiscal year ended
December 31, 2009:
FRANKLIN TEMPLETON FRANKLIN TEMPLETON FRANKLIN TEMPLETON
COREFOLIO FOUNDING FUNDS PERSPECTIVES
ALLOCATION FUND ALLOCATION FUND ALLOCATION FUND
- ------------------ ------------------ ------------------
76.79% 22.60% 50.07%
Under Section 854(b)(2) of the Code, the Funds designate 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, 2009:
FRANKLIN TEMPLETON FRANKLIN TEMPLETON FRANKLIN TEMPLETON
COREFOLIO FOUNDING FUNDS PERSPECTIVES
ALLOCATION FUND ALLOCATION FUND ALLOCATION FUND
- ------------------ ------------------ ------------------
$7,020,681 $146,609,931 $2,850,316
Distributions, including qualified dividend income, paid during calendar year
2009 will be reported to shareholders on Form 1099-DIV in January 2010.
Shareholders are advised to check with their tax advisors for information on the
treatment of these amounts on their individual income tax returns.
66 | Annual Report
Franklin Templeton 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 the past five years and number of portfolios overseen in the Franklin
Templeton Investments fund complex are shown below. Generally, each board member
serves until that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------- --------------- ------------------ ----------------------- -------------------------------------
HARRIS J. ASHTON (1932) Trustee Since 1995 133 Bar-S Foods (meat packing company).
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING 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).
ROBERT F. CARLSON (1928) Trustee Since 2005 110 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Retired; and FORMERLY, Vice President, senior member and President, Board of Administration, California Public Employees
Retirement Systems (CALPERS) (1971-2008); member and Chairman of the Board, Sutter Community Hospitals; member, Corporate Board,
Blue Shield of California; and Chief Counsel, California Department of Transportation.
SAM GINN (1937) Trustee Since 2007 110 ICO Global Communications (Holdings)
One Franklin Parkway Limited (satellite company).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Private investor; and FORMERLY, Chairman of the Board, Vodafone AirTouch, PLC (wireless company); Chairman of the Board and Chief
Executive Officer, AirTouch Communications (cellular communications) (1993-1998) and Pacific Telesis Groups (telephone holding
company) (1988-1994).
EDITH E. HOLIDAY (1952) Trustee Since 1998 133 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas), H.J. Heinz
San Mateo, CA 94403-1906 Company (processed foods and allied
products), RTI International Metals,
Inc. (manufacture and distribution of
titanium), Canadian National Railway
(railroad) and White Mountains
Insurance Group, Ltd. (holding
company).
PRINCIPAL OCCUPATION DURING 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).
Annual Report | 67
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------- --------------- ------------------ ----------------------- -------------------------------------
FRANK W.T. LAHAYE (1929) Trustee Since 1995 109 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture capital).
J. MICHAEL LUTTIG (1954) Trustee Since December 133 Boeing Capital Corporation (aircraft
One Franklin Parkway 2009 financing).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President, General Counsel and member of Executive Council, The Boeing Company; and FORMERLY, Federal Appeals Court
Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006).
FRANK A. OLSON (1932) Trustee Since 2007 133 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer
(1977-1999)); and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
LARRY D. THOMPSON (1945) Trustee Since 2007 141 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (consumer products); and FORMERLY,
Director, Delta Airlines (aviation) (2003-2005) and Providian Financial Corp. (credit card provider) (1997-2001); Senior Fellow of
The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney
General, U.S. Department of Justice (2001-2003).
JOHN B. WILSON (1959) Lead Trustee since 110 None
One Franklin Parkway Independent 2006 and Lead
San Mateo, CA 94403-1906 Trustee Independent
Trustee since
2008
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Founder, Hyannis Port Capital, Inc. (real estate and private equity investing); serves on private and non-profit
boards; and FORMERLY, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail) (1996-2000); Chief Financial
Officer and Executive Vice President - Finance and Strategy, Staples, Inc. (office supplies) (1992-1996); Senior Vice President -
Corporate Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (consulting
firm) (1986-1990).
68 | Annual Report
INTERESTED BOARD MEMBERS AND OFFICERS
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------- --------------- ------------------ ----------------------- -------------------------------------
**CHARLES B. JOHNSON (1933) Trustee and Since 1995 133 None
One Franklin Parkway Chairman of
San Mateo, CA 94403-1906 the Board
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Templeton Worldwide,
Inc.; 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.
**GREGORY E. JOHNSON (1961) Trustee Since 2007 89 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, President and Chief Executive Officer, Franklin Resources, Inc.; President, Templeton Worldwide, Inc.; and officer
and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 32 of the
investment companies in Franklin Templeton Investments.
JAMES M. DAVIS (1952) Chief Chief Compliance Not Applicable Not Applicable
One Franklin Parkway Compliance Officer since 2004
San Mateo, CA 94403-1906 Officer and and Vice
Vice President President - AML
- AML Compliance since
Compliance 2006
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin Resources, Inc. and
of 45 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director of Compliance, Franklin Resources,
Inc. (1994-2001).
LAURA F. FERGERSON (1962) Chief Since March 2009 Not Applicable Not Applicable
One Franklin Parkway Executive
San Mateo, CA 94403-1906 Officer -
Finance and
Administration
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; officer of 45 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Director and member of Audit and Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant
Treasurer of most of the investment companies in Franklin Templeton Investments (1997-2003); and Vice President, Franklin
Templeton Services, LLC (1997-2003).
GASTON GARDEY (1967) Treasurer, Since March 2009 Not Applicable Not Applicable
One Franklin Parkway Chief Financial
San Mateo, CA 94403-1906 Officer and
Chief
Accounting
Officer
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Fund Accounting, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin Templeton
Investments.
Annual Report | 69
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------- --------------- ------------------ ----------------------- -------------------------------------
ALIYA S. GORDON (1973) Vice President Since March 2009 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Templeton Investments; officer of 45 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Litigation Associate, Steefel, Levitt & Weiss, LLP (2000-2004).
- ----------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; officer and/or director, as the case maybe, of some of the other
subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments.
- ----------------------------------------------------------------------------------------------------------------------------------
STEVEN J. GRAY (1955) Vice President Since August Not Applicable Not Applicable
One Franklin Parkway 2009
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc.; and
officer of 45 of the investment companies in Franklin Templeton Investments.
- ----------------------------------------------------------------------------------------------------------------------------------
RUPERT H. JOHNSON, JR. (1940) President and President and Not Applicable Not Applicable
One Franklin Parkway Chief Chief Executive
San Mateo, CA 94403-1906 Executive Officer -
Officer - Investment
Investment Management
Management since 2002
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc. and
Templeton Worldwide, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the
case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 43 of the investment companies in Franklin
Templeton Investments.
- ----------------------------------------------------------------------------------------------------------------------------------
ROBERT C. ROSSELOT (1960) Vice President Since August Not Applicable Not Applicable
500 East Broward Blvd. 2009
Suite 2100
Fort Lauderdale, FL 33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President
and Secretary, Templeton Investment Counsel, LLC; Vice President, Secretary and Trust Officer, Fiduciary Trust International of
the South; and officer of 45 of the investment companies in Franklin Templeton Investments.
- ----------------------------------------------------------------------------------------------------------------------------------
KAREN L. SKIDMORE (1952) Vice President Since 2006 Not Applicable Not Applicable
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin
Templeton Investments.
70 | Annual Report
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------- --------------- ------------------ ----------------------- -------------------------------------
CRAIG S. TYLE (1960) Vice President Since 2005 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Counsel and Executive Vice President, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin
Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments; and FORMERLY, Partner, Shearman &
Sterling, LLP (2004-2005); and General Counsel, Investment Company Institute (ICI) (1997-2004).
* We base the number of portfolios on each separate series of the U.S.
registered investment companies within the Franklin Templeton Investments
fund complex. These portfolios have a common investment manager or
affiliated investment managers.
** Charles B. Johnson 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 Franklin Resources, Inc. (Resources),
which is the parent company of the Fund's investment manager and
distributor. 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 Resources.
Note 1: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, 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/(800) 342-5236 TO REQUEST THE SAI.
Annual Report | 71
Franklin Templeton 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, 500 East Broward Boulevard, Suite 1500, Fort Lauderdale, FL
33394, Attention: Proxy Group. Copies of the Trust's proxy voting records are
also made available online at franklintempleton.com and posted on the U.S.
Securities and Exchange Commission's website at sec.gov and reflect the most
recent 12-month period ended June 30.
QUARTERLY STATEMENT OF INVESTMENTS
The Trust files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling (800)
SEC-0330.
72 | Annual Report
Franklin Templeton Funds
LITERATURE REQUEST. TO RECEIVE A PROSPECTUS, PLEASE CALL US AT (800) DIAL
BEN/(800) 342-5236 OR VISIT franklintempleton.com. INVESTORS SHOULD CAREFULLY
CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES BEFORE
INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE CAREFULLY
READ THE PROSPECTUS BEFORE INVESTING. TO ENSURE THE HIGHEST QUALITY OF SERVICE,
WE MAY MONITOR, RECORD AND ACCESS TELEPHONE CALLS TO OR FROM OUR SERVICE
DEPARTMENTS. THESE CALLS CAN BE IDENTIFIED BY THE PRESENCE OF A REGULAR BEEPING
TONE.
VALUE
Franklin All Cap Value Fund
Franklin Balance Sheet Investment Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund(1)
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Quest Fund(2)
Mutual Recovery Fund(3)
Mutual Shares Fund
BLEND
Franklin Focused Core Equity Fund
Franklin Large Cap Equity Fund
Franklin Rising Dividends Fund
GROWTH
Franklin DynaTech Fund
Franklin Flex Cap Growth Fund
Franklin Growth Fund
Franklin Growth Opportunities Fund
Franklin Small Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
SECTOR
Franklin Biotechnology Discovery Fund
Franklin Global Real Estate Fund
Franklin Gold & Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Mutual Financial Services Fund
GLOBAL
Mutual Global Discovery Fund(4)
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
INTERNATIONAL
Franklin India Growth Fund
Franklin International Growth Fund
Franklin International Small Cap Growth Fund
Mutual European Fund
Mutual International Fund
Templeton BRIC Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Emerging Markets Small Cap Fund
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton Frontier Markets Fund
HYBRID
Franklin Balanced Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Templeton Income Fund
ASSET ALLOCATION
Franklin Templeton Corefolio(R) Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund
FIXED INCOME
Franklin Adjustable U.S. Government Securities Fund(5)
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund
Franklin Limited Maturity U.S. Government Securities Fund(5)
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund(5)
Templeton Global Bond Fund
Templeton Global Total Return Fund
Templeton International Bond Fund
TAX-FREE INCOME(6)
NATIONAL
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(7)
LIMITED-/INTERMEDIATE-TERM
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund
STATE-SPECIFIC
Alabama
Arizona
California(8)
Colorado
Connecticut
Florida
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(9)
Michigan(9)
Minnesota(9)
Missouri
New Jersey
New York(8)
North Carolina
Ohio(9)
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance Products Trust(10)
(1.) The fund is closed to new investors. Existing shareholders and select
retirement plans can continue adding to their accounts.
(2.) Effective 5/1/09, Mutual Qualified Fund changed its name to Mutual Quest
Fund. The fund's investment goal and strategy remained unchanged.
(3.) The fund is a continuously offered, closed-end fund. Shares may be
purchased daily; there is no daily redemption. However, each quarter,
pending board approval, the fund will authorize the repurchase of 5%-25% of
the outstanding number of shares. Investors may tender all or a portion of
their shares during the tender period.
(4.) Effective 5/1/09, Mutual Discovery Fund changed its name to Mutual Global
Discovery Fund. The fund's investment goal and strategy remained unchanged.
(5.) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
(6.) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are generally
taxable.
(7.) The fund invests primarily in insured municipal securities.
(8.) These funds are available in three or more variations, including long-term
portfolios, intermediate-term portfolios, portfolios of insured securities,
a high-yield portfolio (CA only) and a money market portfolio (CA only).
(9.) The Board of Trustees approved the elimination of the non-fundamental
policy requiring the fund to invest at least 80% of net assets in insured
municipal securities and the removal of the word "Insured" from the fund
name. The changes became effective 2/15/09.
(10.) The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
01/10 Not part of the annual report
(FRANKLIN TEMPLETON INVESTMENTS (R) LOGO) One Franklin Parkway
San Mateo, CA 94403-1906
SIGN UP FOR ELECTRONIC DELIVERY
on franklintempleton.com
ANNUAL REPORT AND SHAREHOLDER LETTER
FRANKLIN TEMPLETON
FUND ALLOCATOR SERIES
INVESTMENT MANAGER
Franklin Advisers, Inc.
DISTRIBUTOR
Franklin Templeton Distributors, Inc.
(800) DIAL BEN(R)
franklintempleton.com
SHAREHOLDER SERVICES
(800) 632-2301
Authorized for distribution only when accompanied or preceded by a prospectus.
Investors should carefully consider a fund's investment goals, risks, charges
and expenses before investing. The prospectus contains this and other
information; please read it carefully before investing.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
FAS2 A2009 02/10
DECEMBER 31, 2009
ANNUAL REPORT
AND SHAREHOLDER LETTER
Franklin Templeton
2015 Retirement Target Fund
Franklin Templeton
2025 Retirement Target Fund
Franklin Templeton
2035 Retirement Target Fund
Franklin Templeton
2045 Retirement Target Fund
SIGN UP FOR ELECTRONIC DELIVERY
on franklintempleton.com
(GRAPHIC)
ASSET ALLOCATION
FRANKLIN TEMPLETON
FUND ALLOCATOR SERIES
(GRAPHIC)
(FRANKLIN TEMPLETON INVESTMENTS(R) LOGO)
FRANKLIN - TEMPLETON - MUTUAL SERIES
FRANKLIN TEMPLETON INVESTMENTS
GAIN FROM OUR PERSPECTIVE(R)
Franklin Templeton's distinct multi-manager
structure combines the specialized expertise of
three world-class investment management groups--
Franklin, Templeton and Mutual Series.
SPECIALIZED EXPERTISE Each of our portfolio management groups operates
autonomously, relying on its own research and
staying true to the unique investment disciplines
that underlie its success.
FRANKLIN. Founded in 1947, Franklin is a recognized
leader in fixed income investing and also brings
expertise in growth- and value-style U.S. equity
investing.
TEMPLETON. Founded in 1940, Templeton pioneered
international investing and, in 1954, launched what
has become the industry's oldest global fund. Today,
with offices in over 25 countries, Templeton offers
investors a truly global perspective.
MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what it
believes are undervalued stocks, as well as
arbitrage situations and distressed securities.
TRUE DIVERSIFICATION Because our management groups work independently and
adhere to different investment approaches, Franklin,
Templeton and Mutual Series funds typically have
distinct portfolios. That's why our funds can be
used to build truly diversified allocation plans
covering every major asset class.
RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with exceptional
risk-adjusted returns over the long term, as well as
the reliable, accurate and personal service that has
helped us become one of the most trusted names in
financial services.
MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
(GRAPHIC)
Not part of the annual report
Contents
SHAREHOLDER LETTER ........................................................ 1
ANNUAL REPORT
Economic and Market Overview .............................................. 3
Franklin Templeton 2015 Retirement Target Fund ............................ 5
Franklin Templeton 2025 Retirement Target Fund ............................ 15
Franklin Templeton 2035 Retirement Target Fund ............................ 25
Franklin Templeton 2045 Retirement Target Fund ............................ 35
Financial Highlights and Statements of Investments ........................ 45
Financial Statements ...................................................... 65
Notes to Financial Statements ............................................. 70
Report of Independent Registered Public Accounting Firm ................... 81
Tax Designation ........................................................... 82
Board Members and Officers ................................................ 83
Shareholder Information ................................................... 88
Shareholder Letter
Dear Shareholder:
During the year 2009, U.S. economic activity showed signs of stabilization after
a prolonged recession. Government stimulus measures helped thaw credit markets,
the financial system avoided collapse, and many companies reported
better-than-expected earnings after cutting costs. Investors breathed a
collective sigh of relief, and equity markets enjoyed a remarkable rally while
interest rates remained low and inflation was subdued.
Franklin Templeton Fund Allocator Series' annual report goes into greater detail
about prevailing conditions during the period under review. In addition, you
will find performance data, financial information and discussions from the
portfolio manager. Please remember that all securities markets fluctuate, as do
mutual fund share prices.
If you would like more frequent updates, franklintempleton.com provides daily
prices, monthly performance figures, portfolio holdings and other information.
You can also access your account, buy and sell shares, and find helpful
financial planning tools. We hope you will take advantage of these online
services.
Although market conditions are constantly changing, we remain committed to our
disciplined strategy as we manage the Fund, keeping in mind the trust you have
placed in us. As always, we recommend investors consult their financial advisors
and review their portfolios to design a long-term strategy and portfolio
allocation that meet their individual needs, goals and risk tolerance. We firmly
believe that most people benefit from professional advice, and that advice is
invaluable as investors navigate current market conditions.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Not part of the annual report | 1
We thank you for investing with Franklin Templeton, welcome your questions and
comments, and look forward to serving your investment needs in the years ahead.
Sincerely,
/s/ Charles B. Johnson
Charles B. Johnson
Chairman
Franklin Templeton Fund Allocator Series
THIS LETTER REFLECTS OUR ANALYSIS AND OPINIONS AS OF DECEMBER 31, 2009. 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.
2 | Not part of the annual report
Annual Report
Economic and Market Overview
The U.S. economy ended 2009 in much better shape than it began. After several
quarters of contraction, economic activity expanded in the third and fourth
quarters. In the year's second half, corporate profit growth was higher than
earlier estimates, which may allow businesses to build inventory following a
long period of inventory drawdowns. Economic challenges remain, such as stalled
consumer confidence and job prospects for the unemployed, as stimulus measures
wind down, but several reports pointed to improving economic conditions.
Throughout the year, the Federal Open Market Committee kept U.S. monetary policy
unchanged, announcing it intends to hold the federal funds target rate in the 0%
to 0.25% range "for an extended period" as it lays the groundwork for an
eventual tightening of monetary policy. Late in the period, the labor market
improved somewhat as the economy lost fewer jobs than expected and the
unemployment rate fell slightly, dropping from a period high of 10.2% in October
to 10.0% at period-end.(1)
Globally, equity markets entered 2009 largely pricing in a possible economic
depression and systemic solvency crisis, scenarios that were ultimately averted
by one of the most aggressive global policy responses in financial history. As
government monetary and fiscal intervention began to gain traction toward the
end of the first quarter, equities bottomed and largely reversed their decline,
economic growth stabilized and rebounded, and confidence was rekindled as
investors began to believe the global financial system was finally on the mend.
Emerging market economies fueled the global recovery as governments aggressively
incentivized lending and consumption, resulting in a dramatic recovery that laid
the groundwork for the developing world's equity rally. Growing demand from
emerging markets supported commodity prices, which also posted record gains
during the year. For most of the year, the fading U.S. dollar also helped
underpin the rally in hard assets, while continued euro and yen strength created
headwinds for regional recoveries.
(1.) Source: Bureau of Labor Statistics.
Annual Report | 3
For the 12 months under review, the blue chip stocks of the Dow Jones Industrial
Average delivered a total return of +22.68%, while the broader Standard & Poor's
500 Index (S&P 500) posted a +26.46% total return and the technology-heavy
NASDAQ Composite Index returned +45.32%.(2) Global developed and emerging
markets, as measured by the Morgan Stanley Capital International (MSCI) All
Country World Index, delivered a +35.41% total return.(3)
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS AND OPINIONS AS OF DECEMBER 31,
2009. 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.
(2.) Source: (C) 2009 Morningstar. All Rights Reserved. The information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted
to be accurate, complete or timely. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from any use of
this information. Past performance is no guarantee of future results. The
Dow Jones Industrial Average is price weighted based on the average market
price of 30 blue chip stocks of companies that are generally industry
leaders. The S&P 500 consists of 500 stocks chosen for market size,
liquidity and industry group representation. Each stock's weight in the
index is proportionate to its market value. The S&P 500 is one of the most
widely used benchmarks of U.S. equity performance. The NASDAQ Composite
Index measures all NASDAQ domestic and international common type stocks
listed on The NASDAQ Stock Market.
(3.) Source: (C) 2009 Morningstar. The MSCI All Country World Index is a free
float-adjusted, market capitalization-weighted index designed to measure
equity market performance in global developed and emerging markets.
4 | Annual Report
Franklin Templeton
2015 Retirement Target Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin Templeton 2015 Retirement Target
Fund seeks the highest level of long-term total return, which consists of
capital appreciation and income, consistent with the Fund's asset allocation.
The Fund allocates among the broad asset classes of equity, fixed income and
short-term (money market) investments by investing in a distinctly weighted
combination of Franklin Templeton mutual funds (underlying funds), with an
increasing emphasis on income as the target date of 2015 approaches.
ASSET ALLOCATION*
Franklin Templeton 2015 Retirement Target Fund
Based on Total Net Assets as of 12/31/09
(PIE CHART)
Domestic Equity............................ 45.6%
Foreign Equity............................. 20.8%
Domestic Fixed Income...................... 15.5%
Foreign Fixed Income....................... 9.6%
Short-Term Investments & Other Net Assets.. 8.5%
* The asset allocation is based on the Statement of Investments (SOI), which
classifies each underlying fund into a broad asset class.
This annual report for Franklin Templeton 2015 Retirement Target Fund covers the
fiscal year ended December 31, 2009.
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT franklintempleton.com OR CALL (800) 342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
PERFORMANCE OVERVIEW
Franklin Templeton 2015 Retirement Target Fund - Class A delivered a +28.50%
cumulative total return for the 12 months ended December 31, 2009. By comparison
the Fund's benchmarks, the Standard & Poor's 500 Index (S&P 500) and Morgan
Stanley Capital International (MSCI) Europe, Australasia, Far East (EAFE) Index
for equities, the Barclays Capital (BC) U.S. Aggregate Index for
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 49.
Annual Report | 5
fixed income, and the Payden & Rygel (P&R) 90 Day U.S. T-Bill Index for
short-term investments and other net assets, posted total returns of +26.46%,
+32.46%, +5.93% and +0.17%, respectively, during the same time.(1) You can find
other performance data in the Performance Summary beginning on page 8.
TOP 10 FUND HOLDINGS
Franklin Templeton
2015 Retirement Target Fund
12/31/09
% OF TOTAL
NET ASSETS
----------
Franklin Flex Cap Growth Fund - Advisor Class 16.8%
Mutual Shares Fund - Class Z 11.1%
Franklin U.S. Government Securities Fund - Advisor Class 8.7%
Templeton Global Bond Fund - Advisor Class 8.5%
Mutual European Fund - Class Z 7.3%
Franklin Total Return Fund - Advisor Class 6.8%
Franklin Growth Opportunities Fund - Advisor Class 6.7%
Templeton Foreign Fund - Advisor Class 6.4%
Franklin Gold and Precious Metals Fund - Advisor Class 3.6%
Templeton China World Fund - Advisor Class 3.5%
INVESTMENT STRATEGY
When selecting equity funds, we consider the underlying funds' foreign and
domestic exposure, market capitalization ranges, and investment style (growth
vs. value). When selecting fixed income funds, our primary focus is on
maximizing income appropriate to the Fund's risk profile. In evaluating the risk
level of the underlying funds, we analyze 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
Target Fund in the same underlying funds and will vary the underlying funds'
allocation percentages based upon each Fund's risk/return level. We change the
Fund's target asset allocation gradually over time, and it becomes increasingly
conservative as the stated target date draws near.
MANAGER'S DISCUSSION
The Fund's performance can be attributed largely to its allocation among
equities, fixed income securities, and short-term investments and other net
assets, and to the actual performance of the selected underlying funds. This
allocation shifts every year, in accordance with the retirement date associated
with the portfolio.
(1.) Source: (C) 2009 Morningstar. All Rights Reserved. The information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted
to be accurate, complete or timely. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from any use of
this information. The S&P 500 consists of 500 stocks chosen for market
size, liquidity and industry group representation. Each stock's weight in
the index is proportionate to its market value. The S&P 500 is one of the
most widely used benchmarks of U.S. equity performance. The MSCI EAFE Index
is a free float-adjusted, market capitalization-weighted index designed to
measure equity market performance in global developed markets excluding the
U.S. and Canada. The BC U.S. Aggregate Index is a market
capitalization-weighted index representing the U.S. investment-grade,
fixed-rate, taxable bond market with index components for government and
corporate, mortgage pass-through and asset-backed securities. All issues
included are SEC registered, taxable, dollar denominated and
nonconvertible, must have at least one year to final maturity and must be
rated investment grade (Baa3/BBB-/BBB- or higher) by Moody's, Standard &
Poor's or Fitch, respectively. The P&R 90 Day U.S. T-Bill Index is a total
return index based on a constant maturity instrument. Payden & Rygel
includes both accrued interest and change in market price in its monthly
total return calculations. The value of Treasuries, if held to maturity, is
fixed; principal is guaranteed and interest is fixed. The indexes are
unmanaged and include reinvestment of any income or distributions. One
cannot invest directly in an index, and an index is not representative of
the Fund's portfolio.
6 | Annual Report
At period-end, Franklin Templeton 2015 Retirement Target Fund's domestic equity
exposure was 68.7% of its total equity weighting, and foreign equity made up the
balance. The portfolio was diversified across capitalization sizes and
investment styles, and on December 31, 2009, we held shares in large-, mid- and
small-capitalization equity funds, representing both growth and value styles.
Franklin Flex Cap Growth Fund - Advisor Class, at 16.8% of the Fund's total net
assets, was our largest equity fund weighting at period-end. On the fixed income
side, domestic exposure was 61.8% of the Fund's total fixed income weighting,
with the balance in foreign fixed income. Franklin U.S. Government Securities
Fund - Advisor Class was our largest fixed income fund weighting at 8.7% of
total net assets.
Our largest domestic growth fund holding, Franklin Flex Cap Growth Fund -
Advisor Class, and our largest domestic value fund holding, Mutual Shares Fund -
Class Z, outperformed the S&P 500. Our largest foreign equity holding, Mutual
European Fund - Class Z, trailed the MSCI EAFE Index; however, Templeton Foreign
Fund - Advisor Class outperformed. On the fixed income side, Templeton Global
Bond Fund - Advisor Class outperformed the BC U.S. Aggregate Index, while
Franklin U.S. Government Securities Fund - Advisor Class underperformed.
Thank you for your continued participation in Franklin Templeton 2015 Retirement
Target Fund. We look forward to serving your future investment needs.
(PHOTO OF T. ANTHONY COFFEY)
/s/ T. Anthony Coffey
T. Anthony Coffey, CFA
Portfolio Manager
Franklin Templeton 2015 Retirement Target Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF DECEMBER 31, 2009, 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.
Annual Report | 7
Performance Summary as of 12/31/09
FRANKLIN TEMPLETON 2015 RETIREMENT TARGET FUND
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table 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.
PRICE AND DISTRIBUTION INFORMATION
CLASS A (SYMBOL: FTRAX) CHANGE 12/31/09 12/31/08
- ----------------------- ------ -------- --------
Net Asset Value (NAV) +$2.03 $10.17 $8.14
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.2049
Long-Term Capital Gain $0.0528
TOTAL $0.2577
CLASS C (SYMBOL: N/A) CHANGE 12/31/09 12/31/08
- --------------------- ------ -------- --------
Net Asset Value (NAV) +$2.02 $10.10 $8.08
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.1455
Long-Term Capital Gain $0.0528
TOTAL $0.1983
CLASS R (SYMBOL: N/A) CHANGE 12/31/09 12/31/08
- --------------------- ------ -------- --------
Net Asset Value (NAV) +$2.03 $10.15 $8.12
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.1873
Long-Term Capital Gain $0.0528
TOTAL $0.2401
ADVISOR CLASS (SYMBOL: N/A) CHANGE 12/31/09 12/31/08
- --------------------------- ------ -------- --------
Net Asset Value (NAV) +$2.04 $10.19 $8.15
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.2307
Long-Term Capital Gain $0.0528
TOTAL $0.2835
8 | Annual Report
Performance Summary (CONTINUED)
PERFORMANCE(1)
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURN AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES. CLASS A: 5.75%
MAXIMUM INITIAL SALES CHARGE; CLASS C: 1% CONTINGENT DEFERRED SALES CHARGE IN
FIRST YEAR ONLY; CLASS R/ADVISOR CLASS: NO SALES CHARGES.
CLASS A 1-YEAR 3-YEAR INCEPTION (8/1/06)
- ------- ------- ------- ------------------
Cumulative Total Return(2) +28.50% +5.07% +14.10%
Average Annual Total Return(3) +21.06% -0.32% +2.15%
Value of $10,000 Investment(4) $12,106 $ 9,905 $10,754
Total Annual Operating Expenses(5)
Without Waiver 2.14%
With Waiver 1.21%
CLASS C 1-YEAR 3-YEAR INCEPTION (8/1/06)
- ------- ------- ------- ------------------
Cumulative Total Return(2) +27.75% +2.93% +11.48%
Average Annual Total Return(3) +26.75% +0.97% +3.23%
Value of $10,000 Investment(4) $12,675 $10,293 $11,148
Total Annual Operating Expenses(5)
Without Waiver 2.84%
With Waiver 1.91%
CLASS R 1-YEAR 3-YEAR INCEPTION (8/1/06)
- ------- ------- ------- ------------------
Cumulative Total Return(2) +28.32% +4.48% +13.34%
Average Annual Total Return(3) +28.32% +1.47% +3.73%
Value of $10,000 Investment(4) $12,832 $10,448 $11,334
Total Annual Operating Expenses(5)
Without Waiver 2.34%
With Waiver 1.41%
ADVISOR CLASS 1-YEAR 3-YEAR INCEPTION (8/1/06)
- ------------- ------- ------- ------------------
Cumulative Total Return(2) +28.94% +6.03% +15.31%
Average Annual Total Return(3) +28.94% +1.97% +4.26%
Value of $10,000 Investment(4) $12,894 $10,603 $11,531
Total Annual Operating Expenses(5)
Without Waiver 1.84%
With Waiver 0.91%
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.
THE INVESTMENT MANAGER HAS CONTRACTUALLY AGREED TO WAIVE OR LIMIT ITS FEES AND
TO ASSUME AS ITS OWN EXPENSE CERTAIN EXPENSES OTHERWISE PAYABLE BY THE FUND SO
THAT COMMON EXPENSES (I.E., A COMBINATION OF ASSET ALLOCATION FEES AND OTHER
EXPENSES, BUT EXCLUDING RULE 12B-1 FEES AND ACQUIRED FUND FEES AND EXPENSES) FOR
EACH CLASS OF THE FUND DO NOT EXCEED 0.15% (OTHER THAN CERTAIN NONROUTINE
EXPENSES OR COSTS, INCLUDING THOSE RELATING TO LITIGATION, INDEMNIFICATION,
REORGANIZATIONS AND LIQUIDATIONS) UNTIL 4/30/10.
Annual Report | 9
Performance Summary (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR A HYPOTHETICAL $10,000 INVESTMENT(1)
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.
AVERAGE ANNUAL TOTAL RETURN
CLASS A 12/31/09
- ------- --------
1-Year +21.06%
3-Year -0.32%
Since Inception (8/1/06) +2.15%
CLASS A (8/1/06-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON
2015 RETIREMENT BARCLAYS CAPITAL U.S. PAYDEN & RYGEL 90-DAY
DATE TARGET FUND - CLASS A S&P 500 INDEX MSCI EAFE INDEX AGGREGATE BOND INDEX U.S. TREASURY INDEX
- ---------- --------------------- ------------- --------------- --------------------- ---------------------
8/1/2006 $ 9,425 $10,000 $10,000 $10,000 $10,000
8/31/2006 $ 9,576 $10,238 $10,278 $10,153 $10,044
9/30/2006 $ 9,604 $10,502 $10,296 $10,242 $10,088
10/31/2006 $ 9,887 $10,844 $10,697 $10,310 $10,127
11/30/2006 $10,160 $11,050 $11,020 $10,430 $10,170
12/31/2006 $10,235 $11,205 $11,366 $10,369 $10,214
1/31/2007 $10,378 $11,375 $11,444 $10,365 $10,256
2/28/2007 $10,369 $11,152 $11,538 $10,525 $10,296
3/31/2007 $10,514 $11,277 $11,838 $10,525 $10,343
4/30/2007 $10,801 $11,776 $12,374 $10,582 $10,387
5/31/2007 $11,060 $12,187 $12,608 $10,502 $10,434
6/30/2007 $11,020 $11,985 $12,627 $10,471 $10,473
7/31/2007 $10,845 $11,613 $12,442 $10,558 $10,513
8/31/2007 $10,893 $11,787 $12,251 $10,687 $10,573
9/30/2007 $11,363 $12,228 $12,909 $10,768 $10,611
10/31/2007 $11,733 $12,423 $13,417 $10,865 $10,644
11/30/2007 $11,295 $11,903 $12,980 $11,060 $10,692
12/31/2007 $11,241 $11,821 $12,688 $11,091 $10,716
1/31/2008 $10,657 $11,112 $11,517 $11,278 $10,771
2/29/2008 $10,647 $10,751 $11,686 $11,293 $10,790
3/31/2008 $10,495 $10,704 $11,569 $11,332 $10,815
4/30/2008 $10,872 $11,226 $12,211 $11,308 $10,826
5/31/2008 $11,080 $11,371 $12,354 $11,225 $10,832
6/30/2008 $10,497 $10,412 $11,346 $11,216 $10,848
7/31/2008 $10,366 $10,325 $10,982 $11,207 $10,869
8/31/2008 $10,396 $10,474 $10,540 $11,314 $10,884
9/30/2008 $ 9,621 $ 9,541 $ 9,020 $11,162 $10,914
10/31/2008 $ 8,413 $ 7,939 $ 7,200 $10,898 $10,931
11/30/2008 $ 8,098 $ 7,369 $ 6,814 $11,253 $10,943
12/31/2008 $ 8,369 $ 7,447 $ 7,225 $11,673 $10,941
1/31/2009 $ 8,081 $ 6,820 $ 6,517 $11,570 $10,940
2/28/2009 $ 7,659 $ 6,094 $ 5,851 $11,526 $10,941
3/31/2009 $ 8,128 $ 6,627 $ 6,224 $11,686 $10,945
4/30/2009 $ 8,750 $ 7,262 $ 7,031 $11,742 $10,948
5/31/2009 $ 9,195 $ 7,668 $ 7,876 $11,827 $10,949
6/30/2009 $ 9,185 $ 7,683 $ 7,833 $11,895 $10,950
7/31/2009 $ 9,727 $ 8,264 $ 8,549 $12,087 $10,952
8/31/2009 $ 9,894 $ 8,562 $ 9,015 $12,212 $10,954
9/30/2009 $10,344 $ 8,882 $ 9,362 $12,340 $10,955
10/31/2009 $10,207 $ 8,717 $ 9,246 $12,401 $10,958
11/30/2009 $10,511 $ 9,240 $ 9,433 $12,561 $10,959
12/31/2009 $10,754 $ 9,418 $ 9,570 $12,365 $10,959
AVERAGE ANNUAL TOTAL RETURN
CLASS C 12/31/09
- ------- --------
1-Year +26.75%
3-Year +0.97%
Since Inception (8/1/06) +3.23%
CLASS C (8/1/06-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON
2015 RETIREMENT BARCLAYS CAPITAL U.S. PAYDEN & RYGEL 90-DAY
DATE TARGET FUND - CLASS C S&P 500 INDEX MSCI EAFE INDEX AGGREGATE BOND INDEX U.S. TREASURY INDEX
- ---------- --------------------- ------------- --------------- --------------------- ---------------------
8/1/2006 $10,000 $10,000 $10,000 $10,000 $10,000
8/31/2006 $10,150 $10,238 $10,278 $10,153 $10,044
9/30/2006 $10,180 $10,502 $10,296 $10,242 $10,088
10/31/2006 $10,480 $10,844 $10,697 $10,310 $10,127
11/30/2006 $10,760 $11,050 $11,020 $10,430 $10,170
12/31/2006 $10,830 $11,205 $11,366 $10,369 $10,214
1/31/2007 $10,972 $11,375 $11,444 $10,365 $10,256
2/28/2007 $10,952 $11,152 $11,538 $10,525 $10,296
3/31/2007 $11,096 $11,277 $11,838 $10,525 $10,343
4/30/2007 $11,401 $11,776 $12,374 $10,582 $10,387
5/31/2007 $11,665 $12,187 $12,608 $10,502 $10,434
6/30/2007 $11,613 $11,985 $12,627 $10,471 $10,473
7/31/2007 $11,427 $11,613 $12,442 $10,558 $10,513
8/31/2007 $11,469 $11,787 $12,251 $10,687 $10,573
9/30/2007 $11,961 $12,228 $12,909 $10,768 $10,611
10/31/2007 $12,332 $12,423 $13,417 $10,865 $10,644
11/30/2007 $11,868 $11,903 $12,980 $11,060 $10,692
12/31/2007 $11,807 $11,821 $12,688 $11,091 $10,716
1/31/2008 $11,190 $11,112 $11,517 $11,278 $10,771
2/29/2008 $11,169 $10,751 $11,686 $11,293 $10,790
3/31/2008 $11,003 $10,704 $11,569 $11,332 $10,815
4/30/2008 $11,401 $11,226 $12,211 $11,308 $10,826
5/31/2008 $11,611 $11,371 $12,354 $11,225 $10,832
6/30/2008 $10,993 $10,412 $11,346 $11,216 $10,848
7/31/2008 $10,843 $10,325 $10,982 $11,207 $10,869
8/31/2008 $10,865 $10,474 $10,540 $11,314 $10,884
9/30/2008 $10,057 $ 9,541 $ 9,020 $11,162 $10,914
10/31/2008 $ 8,787 $ 7,939 $ 7,200 $10,898 $10,931
11/30/2008 $ 8,445 $ 7,369 $ 6,814 $11,253 $10,943
12/31/2008 $ 8,726 $ 7,447 $ 7,225 $11,673 $10,941
1/31/2009 $ 8,424 $ 6,820 $ 6,517 $11,570 $10,940
2/28/2009 $ 7,981 $ 6,094 $ 5,851 $11,526 $10,941
3/31/2009 $ 8,469 $ 6,627 $ 6,224 $11,686 $10,945
4/30/2009 $ 9,110 $ 7,262 $ 7,031 $11,742 $10,948
5/31/2009 $ 9,566 $ 7,668 $ 7,876 $11,827 $10,949
6/30/2009 $ 9,550 $ 7,683 $ 7,833 $11,895 $10,950
7/31/2009 $10,107 $ 8,264 $ 8,549 $12,087 $10,952
8/31/2009 $10,271 $ 8,562 $ 9,015 $12,212 $10,954
9/30/2009 $10,736 $ 8,882 $ 9,362 $12,340 $10,955
10/31/2009 $10,593 $ 8,717 $ 9,246 $12,401 $10,958
11/30/2009 $10,901 $ 9,240 $ 9,433 $12,561 $10,959
12/31/2009 $11,148 $ 9,418 $ 9,570 $12,365 $10,959
10 | Annual Report
Performance Summary (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN
CLASS R 12/31/09
- ------- --------
1-Year +28.32%
3-Year +1.47%
Since Inception (8/1/06) +3.73%
CLASS R (8/1/06-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON
2015 RETIREMENT BARCLAYS CAPITAL U.S. PAYDEN & RYGEL 90-DAY
DATE TARGET FUND - CLASS R S&P 500 INDEX MSCI EAFE INDEX AGGREGATE BOND INDEX U.S. TREASURY INDEX
- ---------- --------------------- ------------- --------------- --------------------- ---------------------
8/1/2006 $10,000 $10,000 $10,000 $10,000 $10,000
8/31/2006 $10,160 $10,238 $10,278 $10,153 $10,044
9/30/2006 $10,190 $10,502 $10,296 $10,242 $10,088
10/31/2006 $10,490 $10,844 $10,697 $10,310 $10,127
11/30/2006 $10,770 $11,050 $11,020 $10,430 $10,170
12/31/2006 $10,848 $11,205 $11,366 $10,369 $10,214
1/31/2007 $11,001 $11,375 $11,444 $10,365 $10,256
2/28/2007 $10,990 $11,152 $11,538 $10,525 $10,296
3/31/2007 $11,145 $11,277 $11,838 $10,525 $10,343
4/30/2007 $11,449 $11,776 $12,374 $10,582 $10,387
5/31/2007 $11,714 $12,187 $12,608 $10,502 $10,434
6/30/2007 $11,678 $11,985 $12,627 $10,471 $10,473
7/31/2007 $11,493 $11,613 $12,442 $10,558 $10,513
8/31/2007 $11,534 $11,787 $12,251 $10,687 $10,573
9/30/2007 $12,030 $12,228 $12,909 $10,768 $10,611
10/31/2007 $12,413 $12,423 $13,417 $10,865 $10,644
11/30/2007 $11,948 $11,903 $12,980 $11,060 $10,692
12/31/2007 $11,888 $11,821 $12,688 $11,091 $10,716
1/31/2008 $11,279 $11,112 $11,517 $11,278 $10,771
2/29/2008 $11,258 $10,751 $11,686 $11,293 $10,790
3/31/2008 $11,093 $10,704 $11,569 $11,332 $10,815
4/30/2008 $11,503 $11,226 $12,211 $11,308 $10,826
5/31/2008 $11,714 $11,371 $12,354 $11,225 $10,832
6/30/2008 $11,098 $10,412 $11,346 $11,216 $10,848
7/31/2008 $10,958 $10,325 $10,982 $11,207 $10,869
8/31/2008 $10,980 $10,474 $10,540 $11,314 $10,884
9/30/2008 $10,163 $ 9,541 $ 9,020 $11,162 $10,914
10/31/2008 $ 8,884 $ 7,939 $ 7,200 $10,898 $10,931
11/30/2008 $ 8,551 $ 7,369 $ 6,814 $11,253 $10,943
12/31/2008 $ 8,833 $ 7,447 $ 7,225 $11,673 $10,941
1/31/2009 $ 8,528 $ 6,820 $ 6,517 $11,570 $10,940
2/28/2009 $ 8,082 $ 6,094 $ 5,851 $11,526 $10,941
3/31/2009 $ 8,574 $ 6,627 $ 6,224 $11,686 $10,945
4/30/2009 $ 9,231 $ 7,262 $ 7,031 $11,742 $10,948
5/31/2009 $ 9,702 $ 7,668 $ 7,876 $11,827 $10,949
6/30/2009 $ 9,686 $ 7,683 $ 7,833 $11,895 $10,950
7/31/2009 $10,260 $ 8,264 $ 8,549 $12,087 $10,952
8/31/2009 $10,437 $ 8,562 $ 9,015 $12,212 $10,954
9/30/2009 $10,896 $ 8,882 $ 9,362 $12,340 $10,955
10/31/2009 $10,763 $ 8,717 $ 9,246 $12,401 $10,958
11/30/2009 $11,085 $ 9,240 $ 9,433 $12,561 $10,959
12/31/2009 $11,334 $ 9,418 $ 9,570 $12,365 $10,959
AVERAGE ANNUAL TOTAL RETURN
ADVISOR CLASS 12/31/09
- ------------- --------
1-Year +28.94%
3-Year +1.97%
Since Inception (8/1/06) +4.26%
ADVISOR CLASS (8/1/06-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON
2015 RETIREMENT MSCI EAFE BARCLAYS CAPITAL U.S. PAYDEN & RYGEL 90-DAY
DATE TARGET FUND - ADVISOR CLASS S&P 500 INDEX INDEX AGGREGATE BOND INDEX U.S. TREASURY INDEX
- ---------- --------------------------- ------------- --------- --------------------- ---------------------
8/1/2006 $10,000 $10,000 $10,000 $10,000 $10,000
8/31/2006 $10,160 $10,238 $10,278 $10,153 $10,044
9/30/2006 $10,200 $10,502 $10,296 $10,242 $10,088
10/31/2006 $10,500 $10,844 $10,697 $10,310 $10,127
11/30/2006 $10,790 $11,050 $11,020 $10,430 $10,170
12/31/2006 $10,875 $11,205 $11,366 $10,369 $10,214
1/31/2007 $11,028 $11,375 $11,444 $10,365 $10,256
2/28/2007 $11,028 $11,152 $11,538 $10,525 $10,296
3/31/2007 $11,182 $11,277 $11,838 $10,525 $10,343
4/30/2007 $11,487 $11,776 $12,374 $10,582 $10,387
5/31/2007 $11,762 $12,187 $12,608 $10,502 $10,434
6/30/2007 $11,731 $11,985 $12,627 $10,471 $10,473
7/31/2007 $11,545 $11,613 $12,442 $10,558 $10,513
8/31/2007 $11,597 $11,787 $12,251 $10,687 $10,573
9/30/2007 $12,105 $12,228 $12,909 $10,768 $10,611
10/31/2007 $12,499 $12,423 $13,417 $10,865 $10,644
11/30/2007 $12,043 $11,903 $12,980 $11,060 $10,692
12/31/2007 $11,986 $11,821 $12,688 $11,091 $10,716
1/31/2008 $11,374 $11,112 $11,517 $11,278 $10,771
2/29/2008 $11,353 $10,751 $11,686 $11,293 $10,790
3/31/2008 $11,196 $10,704 $11,569 $11,332 $10,815
4/30/2008 $11,608 $11,226 $12,211 $11,308 $10,826
5/31/2008 $11,830 $11,371 $12,354 $11,225 $10,832
6/30/2008 $11,208 $10,412 $11,346 $11,216 $10,848
7/31/2008 $11,068 $10,325 $10,982 $11,207 $10,869
8/31/2008 $11,101 $10,474 $10,540 $11,314 $10,884
9/30/2008 $10,282 $ 9,541 $ 9,020 $11,162 $10,914
10/31/2008 $ 8,994 $ 7,939 $ 7,200 $10,898 $10,931
11/30/2008 $ 8,648 $ 7,369 $ 6,814 $11,253 $10,943
12/31/2008 $ 8,943 $ 7,447 $ 7,225 $11,673 $10,941
1/31/2009 $ 8,646 $ 6,820 $ 6,517 $11,570 $10,940
2/28/2009 $ 8,197 $ 6,094 $ 5,851 $11,526 $10,941
3/31/2009 $ 8,703 $ 6,627 $ 6,224 $11,686 $10,945
4/30/2009 $ 9,367 $ 7,262 $ 7,031 $11,742 $10,948
5/31/2009 $ 9,842 $ 7,668 $ 7,876 $11,827 $10,949
6/30/2009 $ 9,838 $ 7,683 $ 7,833 $11,895 $10,950
7/31/2009 $10,429 $ 8,264 $ 8,549 $12,087 $10,952
8/31/2009 $10,608 $ 8,562 $ 9,015 $12,212 $10,954
9/30/2009 $11,084 $ 8,882 $ 9,362 $12,340 $10,955
10/31/2009 $10,949 $ 8,717 $ 9,246 $12,401 $10,958
11/30/2009 $11,274 $ 9,240 $ 9,433 $12,561 $10,959
12/31/2009 $11,531 $ 9,418 $ 9,570 $12,365 $10,959
Annual Report | 11
Performance Summary (CONTINUED)
ENDNOTES
WHILE AN ASSET ALLOCATION PLAN CAN BE A VALUABLE TOOL TO HELP REDUCE OVERALL
VOLATILITY, ALL INVESTMENTS INVOLVE SOME DEGREE OF RISK. GENERALLY, INVESTORS
SHOULD BE COMFORTABLE WITH FLUCTUATION IN THE VALUE OF THEIR INVESTMENTS,
ESPECIALLY OVER THE SHORT TERM. STOCKS HAVE HISTORICALLY OUTPERFORMED OTHER
ASSET CLASSES OVER THE LONG TERM, BUT THEY TEND TO FLUCTUATE MORE DRAMATICALLY
OVER THE SHORTER TERM. BOND PRICES GENERALLY MOVE IN THE OPPOSITE DIRECTION OF
INTEREST RATES. THUS, AS PRICES OF BONDS IN THE FUND ADJUST TO A RISE IN
INTEREST RATES, THE FUND'S SHARE PRICE MAY DECLINE. BECAUSE THE FUND INVESTS IN
UNDERLYING FUNDS, WHICH MAY ENGAGE IN A VARIETY OF INVESTMENT STRATEGIES
INVOLVING CERTAIN RISKS, THE FUND MAY BE SUBJECT TO THOSE SAME RISKS. THESE
RISKS ARE DESCRIBED IN THE FUND'S PROSPECTUS.
CLASS C: These shares have higher annual fees and expenses than Class A
shares.
CLASS R: Shares are available to certain eligible investors as described
in the prospectus. These shares have higher annual fees and
expenses than Class A shares.
ADVISOR CLASS: Shares are available to certain eligible investors as described
in the prospectus.
(1.) If the manager had not waived fees, the Fund's total returns would have
been lower.
(2.) Cumulative total return represents the change in value of an investment
over the periods indicated.
(3.) Average annual total return represents the average annual change in value
of an investment over the periods indicated.
(4.) These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated.
(5.) Figures are as stated in the Fund's prospectus current as of the date of
this report. In periods of volatility, assets may decline significantly,
causing total annual Fund operating expenses to become higher than the
figures shown.
(6.) Source: (C) 2009 Morningstar. See page 6 for descriptions of the S&P 500,
the MSCI EAFE Index, the BC U.S. Aggregate Index and the P&R 90 Day U.S.
T-Bill Index.
12 | Annual Report
Your Fund's Expenses
FRANKLIN TEMPLETON 2015 RETIREMENT TARGET FUND
As a Fund shareholder, you can incur two types of costs:
- - Transaction costs, including sales charges (loads) on Fund purchases; and
- - Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
Annual Report | 13
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES.
Therefore, the second line for each class is useful in comparing ongoing costs
only, and will not help you compare total costs of owning different funds. In
addition, if transaction costs were included, your total costs would have been
higher. Please refer to the Fund prospectus for additional information on
operating expenses.
BEGINNING ENDING EXPENSES PAID EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD**
7/1/09 12/31/09 7/1/09-12/31/09 7/1/09-12/31/09
------------- ------------- --------------- ---------------
CLASS A
Actual $1,000 $1,285.00 $2.59 $7.31
Hypothetical
(5% return before expenses) $1,000 $1,022.94 $2.29 $6.46
CLASS C
Actual $1,000 $1,277.50 $6.60 $11.31
Hypothetical
(5% return before expenses) $1,000 $1,019.41 $5.85 $10.01
CLASS R
Actual $1,000 $1,283.20 $3.74 $8.46
Hypothetical
(5% return before expenses) $1,000 $1,021.93 $3.31 $7.48
ADVISOR CLASS
Actual $1,000 $1,289.40 $0.87 $5.60
Hypothetical
(5% return before expenses) $1,000 $1,024.45 $0.77 $4.94
- ----------
* Expenses are calculated using the most recent six-month expense ratio
excluding expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 0.45%; C: 1.15%; R: 0.65%; and Advisor:
0.15%), multiplied by the average account value over the period, multiplied
by 184/365 to reflect the one-half year period. A portion of the Fund's
expenses have been paid by the underlying funds in which the Fund invests.
** Expenses are calculated using the most recent six-month expense ratio
including expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 1.27%; C: 1.97%; R: 1.47%; and Advisor:
0.97%), multiplied by the average account value over the period, multiplied
by 184/365 to reflect the one-half year period. A portion of the Fund's
expenses have been paid by the underlying funds in which the Fund invests.
14 | Annual Report
Franklin Templeton
2025 Retirement Target Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin Templeton 2025 Retirement Target
Fund seeks the highest level of long-term total return, which consists of
capital appreciation and income, consistent with the Fund's asset allocation.
The Fund allocates among the broad asset classes of equity, fixed income and
short-term (money market) investments by investing in a distinctly weighted
combination of Franklin Templeton mutual funds (underlying funds), with an
increasing emphasis on income as the target date of 2025 approaches.
ASSET ALLOCATION*
Franklin Templeton 2025 Retirement Target Fund
Based on Total Net Assets as of 12/31/09
Domestic Equity 55.5%
Foreign Equity 24.7%
Domestic Fixed Income 9.3%
Foreign Fixed Income 5.6%
Short-Term Investments &
Other Net Assets 4.9%
* The asset allocation is based on the Statement of Investments (SOI), which
classifies each underlying fund into a broad asset class.
This annual report for Franklin Templeton 2025 Retirement Target Fund covers the
fiscal year ended December 31, 2009.
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT franklintempleton.com OR CALL (800) 342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
PERFORMANCE OVERVIEW
Franklin Templeton 2025 Retirement Target Fund - Class A delivered a +31.34%
cumulative total return for the 12 months ended December 31, 2009. By comparison
the Fund's benchmarks, the Standard & Poor's 500 Index (S&P 500) and Morgan
Stanley Capital International (MSCI) Europe, Australasia, Far East (EAFE) Index
for equities, the Barclays Capital (BC) U.S. Aggregate Index for
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 54.
Annual Report | 15
fixed income, and the Payden & Rygel (P&R) 90 Day U.S. T-Bill Index for
short-term investments and other net assets, posted total returns of + 26.46%,
+32.46%, +5.93%and +0.17%, respectively, during the same time.(1) You can find
other performance data in the Performance Summary beginning on page 18.
TOP 10 FUND HOLDINGS
Franklin Templeton
2025 Retirement Target Fund
12/31/09
% OF TOTAL
NET ASSETS
----------
Franklin Flex Cap Growth Fund
- - Advisor Class 20.3%
Mutual Shares Fund - Class Z 13.7%
Mutual European Fund - Class Z 8.9%
Franklin Growth Opportunities Fund
- - Advisor Class 8.4%
Templeton Foreign Fund
- - Advisor Class 7.4%
Franklin U.S. Government Securities
Fund - Advisor Class 5.2%
Templeton Global Bond Fund
- - Advisor Class 5.0%
Franklin Gold and Precious Metals
Fund - Advisor Class 4.3%
Franklin Total Return Fund
- - Advisor Class 4.1%
Templeton China World Fund
- - Advisor Class 4.0%
INVESTMENT STRATEGY
When selecting equity funds, we consider the underlying funds' foreign and
domestic exposure, market capitalization ranges, and investment style (growth
vs. value). When selecting fixed income funds, our primary focus is on
maximizing income appropriate to the Fund's risk profile. In evaluating the risk
level of the underlying funds, we analyze 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
Target Fund in the same underlying funds and will vary the underlying funds'
allocation percentages based upon each Fund's risk/return level. We change the
Fund's target asset allocation gradually over time, and it becomes increasingly
conservative as the stated target date draws near.
MANAGER'S DISCUSSION
The Fund's performance can be attributed largely to its allocation among
equities, fixed income securities, and short-term investments and other net
assets, and to the actual performance of the selected underlying funds. This
allocation shifts every year, in accordance with the retirement date associated
with the portfolio.
(1.) Source: (C) 2009 Morningstar. All Rights Reserved. The information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted
to be accurate, complete or timely. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from any use of
this information. The S&P 500 consists of 500 stocks chosen for market
size, liquidity and industry group representation. Each stock's weight in
the index is proportionate to its market value. The S&P 500 is one of the
most widely used benchmarks of U.S. equity performance. The MSCI EAFE Index
is a free float-adjusted, market capitalization-weighted index designed to
measure equity market performance in global developed markets excluding the
U.S. and Canada. The BC U.S. Aggregate Index is a market
capitalization-weighted index representing the U.S. investment-grade,
fixed-rate, taxable bond market with index components for government and
corporate, mortgage pass-through and asset-backed securities. All issues
included are SEC registered, taxable, dollar denominated and
nonconvertible, must have at least one year to final maturity and must be
rated investment grade (Baa3/BBB-/BBB- or higher) by Moody's, Standard &
Poor's or Fitch, respectively. The P&R 90 Day U.S. T-Bill Index is a total
return index based on a constant maturity instrument. Payden & Rygel
includes both accrued interest and change in market price in its monthly
total return calculations. The value of Treasuries, if held to maturity, is
fixed; principal is guaranteed and interest is fixed. The indexes are
unmanaged and include reinvestment of any income or distributions. One
cannot invest directly in an index, and an index is not representative of
the Fund's portfolio.
16 | Annual Report
At period-end, Franklin Templeton 2025 Retirement Target Fund's domestic equity
exposure was 69.2% of its total equity weighting, and foreign equity made up the
balance. The portfolio was diversified across capitalization sizes and
investment styles, and on December 31, 2009, we held shares in large-, mid- and
small-capitalization equity funds, representing both growth and value styles.
Franklin Flex Cap Growth Fund - Advisor Class, at 20.3% of the Fund's total net
assets, was our largest equity fund weighting at period-end. On the fixed income
side, domestic exposure was 62.4% of the Fund's total fixed income weighting,
with the balance in foreign fixed income. Franklin U.S. Government Securities
Fund - Advisor Class was our largest fixed income fund weighting at 5.2% of
total net assets.
Our largest domestic growth fund holding, Franklin Flex Cap Growth Fund -Advisor
Class, and our largest domestic value fund holding, Mutual Shares Fund - Class
Z, outperformed the S&P 500. Our largest foreign equity holding, Mutual European
Fund - Class Z, trailed the MSCI EAFE Index; however, Templeton Foreign Fund -
Advisor Class outperformed. On the fixed income side, Templeton Global Bond Fund
- - Advisor Class outperformed the BC U.S. Aggregate Index while Franklin U.S.
Government Securities Fund - Advisor Class underperformed.
Thank you for your continued participation in Franklin Templeton 2025 Retirement
Target Fund. We look forward to serving your future investment needs.
(PHOTO OF T. ANTHONY COFFEY)
/s/ T. Anthony Coffey
T. Anthony Coffey, CFA
Portfolio Manager
Franklin Templeton 2025 Retirement Target Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF DECEMBER 31, 2009, 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.
Annual Report | 17
Performance Summary as of 12/31/09
FRANKLIN TEMPLETON 2025 RETIREMENT TARGET FUND
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table 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.
PRICE AND DISTRIBUTION INFORMATION
CLASS A (SYMBOL: FTRTX) CHANGE 12/31/09 12/31/08
- ----------------------- ------ -------- --------
Net Asset Value (NAV) +$2.07 $9.54 $7.47
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.1439
Long-Term Capital Gain $0.1001
TOTAL $0.2440
CLASS C (SYMBOL: N/A) CHANGE 12/31/09 12/31/08
- --------------------- ------ -------- --------
Net Asset Value (NAV) +$2.02 $9.45 $7.43
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.0979
Long-Term Capital Gain $0.1001
TOTAL $0.1980
CLASS R (SYMBOL: N/A) CHANGE 12/31/09 12/31/08
- --------------------- ------ -------- --------
Net Asset Value (NAV) +$2.06 $9.53 $7.47
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.1313
Long-Term Capital Gain $0.1001
TOTAL $0.2314
ADVISOR CLASS (SYMBOL: N/A) CHANGE 12/31/09 12/31/08
- --------------------------- ------ -------- --------
Net Asset Value (NAV) +$2.07 $9.55 $7.48
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.1663
Long-Term Capital Gain $0.1001
TOTAL $0.2664
18 | Annual Report
Performance Summary (CONTINUED)
PERFORMANCE(1)
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURN AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES. CLASS A: 5.75%
MAXIMUM INITIAL SALES CHARGE; CLASS C: 1% CONTINGENT DEFERRED SALES CHARGE IN
FIRST YEAR ONLY; CLASS R/ADVISOR CLASS: NO SALES CHARGES.
CLASS A 1-YEAR 3-YEAR INCEPTION (8/1/06)
- ------- ------- ------ ------------------
Cumulative Total Return(2) +31.34% -1.22% +8.08%
Average Annual Total Return(3) +23.72% -2.36% +0.54%
Value of $10,000 Investment(4) $12,372 $9,308 $10,186
Total Annual Operating Expenses(5)
Without Waiver 2.32%
With Waiver 1.26%
CLASS C 1-YEAR 3-YEAR INCEPTION (8/1/06)
- ------- ------- ------ ------------------
Cumulative Total Return(2) +30.18% -3.36% +5.53%
Average Annual Total Return(3) +29.18% -1.13% +1.59%
Value of $10,000 Investment(4) $12,918 $9,664 $10,553
Total Annual Operating Expenses(5)
Without Waiver 3.02%
With Waiver 1.96%
CLASS R 1-YEAR 3-YEAR INCEPTION (8/1/06)
- ------- ------- ------ ------------------
Cumulative Total Return(2) +31.03% -1.75% +7.40%
Average Annual Total Return(3) +31.03% -0.59% +2.11%
Value of $10,000 Investment(4) $13,103 $9,825 $10,740
Total Annual Operating Expenses(5)
Without Waiver 2.52%
With Waiver 1.46%
ADVISOR CLASS 1-YEAR 3-YEAR INCEPTION (8/1/06)
- ------------- ------- ------ ------------------
Cumulative Total Return(2) +31.61% -0.41% +9.13%
Average Annual Total Return(3) +31.61% -0.14% +2.59%
Value of $10,000 Investment(4) $13,161 $9,959 $10,913
Total Annual Operating Expenses(5)
Without Waiver 2.02%
With Waiver 0.96%
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.
THE INVESTMENT MANAGER HAS CONTRACTUALLY AGREED TO WAIVE OR LIMIT ITS FEES AND
TO ASSUME AS ITS OWN EXPENSE CERTAIN EXPENSES OTHERWISE PAYABLE BY THE FUND SO
THAT COMMON EXPENSES (I.E., A COMBINATION OF ASSET ALLOCATION FEES AND OTHER
EXPENSES, BUT EXCLUDING RULE 12B-1 FEES AND ACQUIRED FUND FEES AND EXPENSES) FOR
EACH CLASS OF THE FUND DO NOT EXCEED 0.15% (OTHER THAN CERTAIN NONROUTINE
EXPENSES OR COSTS, INCLUDING THOSE RELATING TO LITIGATION, INDEMNIFICATION,
REORGANIZATIONS AND LIQUIDATIONS) UNTIL 4/30/10.
Annual Report | 19
Performance Summary (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR A HYPOTHETICAL $10,000 INVESTMENT(1)
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.
AVERAGE ANNUAL TOTAL RETURN
CLASS A 12/31/09
- ------- --------
1-Year +23.72%
3-Year -2.36%
Since Inception (8/1/06) +0.54%
CLASS A (8/1/06-12/31/09)
(PERFORMANCE GRAPH)
P&R 90-DAY
FRANKLIN TEMPLETON BARCLAYS U.S.
2025 RETIREMENT CAPITAL U.S. TREASURY
DATE TARGET FUND - CLASS A S&P 500 INDEX MSCI EAFE INDEX AGGREGATE INDEX INDEX
- ---------- --------------------- ------------- --------------- --------------- ----------
8/1/2006 $ 9,425 $10,000 $10,000 $10,000 $10,000
8/31/2006 $ 9,595 $10,238 $10,278 $10,153 $10,044
9/30/2006 $ 9,614 $10,502 $10,296 $10,242 $10,088
10/31/2006 $ 9,934 $10,844 $10,697 $10,310 $10,127
11/30/2006 $10,226 $11,050 $11,020 $10,430 $10,170
12/31/2006 $10,312 $11,205 $11,366 $10,369 $10,214
1/31/2007 $10,494 $11,375 $11,444 $10,365 $10,256
2/28/2007 $10,475 $11,152 $11,538 $10,525 $10,296
3/31/2007 $10,572 $11,277 $11,838 $10,525 $10,343
4/30/2007 $10,898 $11,776 $12,374 $10,582 $10,387
5/31/2007 $11,204 $12,187 $12,608 $10,502 $10,434
6/30/2007 $11,170 $11,985 $12,627 $10,471 $10,473
7/31/2007 $10,956 $11,613 $12,442 $10,558 $10,513
8/31/2007 $11,024 $11,787 $12,251 $10,687 $10,573
9/30/2007 $11,555 $12,228 $12,909 $10,768 $10,611
10/31/2007 $11,964 $12,423 $13,417 $10,865 $10,644
11/30/2007 $11,428 $11,903 $12,980 $11,060 $10,692
12/31/2007 $11,363 $11,821 $12,688 $11,091 $10,716
1/31/2008 $10,619 $11,112 $11,517 $11,278 $10,771
2/29/2008 $10,569 $10,751 $11,686 $11,293 $10,790
3/31/2008 $10,361 $10,704 $11,569 $11,332 $10,815
4/30/2008 $10,848 $11,226 $12,211 $11,308 $10,826
5/31/2008 $11,116 $11,371 $12,354 $11,225 $10,832
6/30/2008 $10,402 $10,412 $11,346 $11,216 $10,848
7/31/2008 $10,238 $10,325 $10,982 $11,207 $10,869
8/31/2008 1$0,259 $10,474 $10,540 $11,314 $10,884
9/30/2008 $ 9,341 $ 9,541 $ 9,020 $11,162 $10,914
10/31/2008 $ 7,873 $ 7,939 $ 7,200 $10,898 $10,931
11/30/2008 $ 7,495 $ 7,369 $ 6,814 $11,253 $10,943
12/31/2008 $ 7,756 $ 7,447 $ 7,225 $11,673 $10,941
1/31/2009 $ 7,434 $ 6,820 $ 6,517 $11,570 $10,940
2/28/2009 $ 6,998 $ 6,094 $ 5,851 $11,526 $10,941
3/31/2009 $ 7,437 $ 6,627 $ 6,224 $11,686 $10,945
4/30/2009 $ 8,072 $ 7,262 $ 7,031 $11,742 $10,948
5/31/2009 $ 8,540 $ 7,668 $ 7,876 $11,827 $10,949
6/30/2009 $ 8,519 $ 7,683 $ 7,833 $11,895 $10,950
7/31/2009 $ 9,088 $ 8,264 $ 8,549 $12,087 $10,952
8/31/2009 $ 9,267 $ 8,562 $ 9,015 $12,212 $10,954
9/30/2009 $ 9,737 $ 8,882 $ 9,362 $12,340 $10,955
10/31/2009 $ 9,567 $ 8,717 $ 9,246 $12,401 $10,958
11/30/2009 $ 9,917 $ 9,240 $ 9,433 $12,561 $10,959
12/31/2009 $10,186 $ 9,418 $ 9,570 $12,365 $10,959
AVERAGE ANNUAL TOTAL RETURN
CLASS C 12/31/09
- ------- --------
1-Year +29.18%
3-Year -1.13%
Since Inception (8/1/06) +1.59%
CLASS C (8/1/06-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON
2025 RETIREMENT BARCLAYS CAPITAL P&R 90-DAY U.S.
DATE TARGET FUND - CLASS C S&P 500 INDEX MSCI EAFE INDEX U.S. AGGREGATE INDEX TREASURY INDEX
- ---------- --------------------- ------------- --------------- -------------------- ---------------
8/1/2006 $10,000 $10,000 $10,000 $10,000 $10,000
8/31/2006 $10,170 $10,238 $10,278 $10,153 $10,044
9/30/2006 $10,190 $10,502 $10,296 $10,242 $10,088
10/31/2006 $10,530 $10,844 $10,697 $10,310 $10,127
11/30/2006 $10,830 $11,050 $11,020 $10,430 $10,170
12/31/2006 $10,920 $11,205 $11,366 $10,369 $10,214
1/31/2007 $11,102 $11,375 $11,444 $10,365 $10,256
2/28/2007 $11,082 $11,152 $11,538 $10,525 $10,296
3/31/2007 $11,175 $11,277 $11,838 $10,525 $10,343
4/30/2007 $11,510 $11,776 $12,374 $10,582 $10,387
5/31/2007 $11,834 $12,187 $12,608 $10,502 $10,434
6/30/2007 $11,790 $11,985 $12,627 $10,471 $10,473
7/31/2007 $11,553 $11,613 $12,442 $10,558 $10,513
8/31/2007 $11,625 $11,787 $12,251 $10,687 $10,573
9/30/2007 $12,174 $12,228 $12,909 $10,768 $10,611
10/31/2007 $12,607 $12,423 $13,417 $10,865 $10,644
11/30/2007 $12,019 $11,903 $12,980 $11,060 $10,692
12/31/2007 $11,950 $11,821 $12,688 $11,091 $10,716
1/31/2008 $11,153 $11,112 $11,517 $11,278 $10,771
2/29/2008 $11,101 $10,751 $11,686 $11,293 $10,790
3/31/2008 $10,880 $10,704 $11,569 $11,332 $10,815
4/30/2008 $11,384 $11,226 $12,211 $11,308 $10,826
5/31/2008 $11,656 $11,371 $12,354 $11,225 $10,832
6/30/2008 $10,902 $10,412 $11,346 $11,216 $10,848
7/31/2008 $10,719 $10,325 $10,982 $11,207 $10,869
8/31/2008 $10,740 $10,474 $10,540 $11,314 $10,884
9/30/2008 $ 9,772 $ 9,541 $ 9,020 $11,162 $10,914
10/31/2008 $ 8,233 $ 7,939 $ 7,200 $10,898 $10,931
11/30/2008 $ 7,835 $ 7,369 $ 6,814 $11,253 $10,943
12/31/2008 $ 8,106 $ 7,447 $ 7,225 $11,673 $10,941
1/31/2009 $ 7,768 $ 6,820 $ 6,517 $11,570 $10,940
2/28/2009 $ 7,299 $ 6,094 $ 5,851 $11,526 $10,941
3/31/2009 $ 7,760 $ 6,627 $ 6,224 $11,686 $10,945
4/30/2009 $ 8,416 $ 7,262 $ 7,031 $11,742 $10,948
5/31/2009 $ 8,897 $ 7,668 $ 7,876 $11,827 $10,949
6/30/2009 $ 8,864 $ 7,683 $ 7,833 $11,895 $10,950
7/31/2009 $ 9,451 $ 8,264 $ 8,549 $12,087 $10,952
8/31/2009 $ 9,628 $ 8,562 $ 9,015 $12,212 $10,954
9/30/2009 $10,098 $ 8,882 $ 9,362 $12,340 $10,955
10/31/2009 $ 9,932 $ 8,717 $ 9,246 $12,401 $10,958
11/30/2009 $10,276 $ 9,240 $ 9,433 $12,561 $10,959
12/31/2009 $10,553 $ 9,418 $ 9,570 $12,365 $10,959
20 | Annual Report
Performance Summary (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN
CLASS R 12/31/09
- ------- --------
1-Year +31.03%
3-Year -0.59%
Since Inception (8/1/06) +2.11%
CLASS R (8/1/06-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON P&R 90-DAY
2025 RETIREMENT BARCLAYS CAPITAL U.S. TREASURY
DATE TARGET FUND - CLASS R S&P 500 INDEX MSCI EAFE INDEX U.S. AGGREGATE INDEX INDEX
- ---------- --------------------- ------------- --------------- -------------------- -------------
8/1/2006 $10,000 $10,000 $10,000 $10,000 $10,000
8/31/2006 $10,180 $10,238 $10,278 $10,153 $10,044
9/30/2006 $10,200 $10,502 $10,296 $10,242 $10,088
10/31/2006 $10,540 $10,844 $10,697 $10,310 $10,127
11/30/2006 $10,840 $11,050 $11,020 $10,430 $10,170
12/31/2006 $10,931 $11,205 $11,366 $10,369 $10,214
1/31/2007 $11,124 $11,375 $11,444 $10,365 $10,256
2/28/2007 $11,103 $11,152 $11,538 $10,525 $10,296
3/31/2007 $11,207 $11,277 $11,838 $10,525 $10,343
4/30/2007 $11,552 $11,776 $12,374 $10,582 $10,387
5/31/2007 $11,877 $12,187 $12,608 $10,502 $10,434
6/30/2007 $11,838 $11,985 $12,627 $10,471 $10,473
7/31/2007 $11,601 $11,613 $12,442 $10,558 $10,513
8/31/2007 $11,683 $11,787 $12,251 $10,687 $10,573
9/30/2007 $12,241 $12,228 $12,909 $10,768 $10,611
10/31/2007 $12,675 $12,423 $13,417 $10,865 $10,644
11/30/2007 $12,097 $11,903 $12,980 $11,060 $10,692
12/31/2007 $12,036 $11,821 $12,688 $11,091 $10,716
1/31/2008 $11,236 $11,112 $11,517 $11,278 $10,771
2/29/2008 $11,184 $10,751 $11,686 $11,293 $10,790
3/31/2008 $10,960 $10,704 $11,569 $11,332 $10,815
4/30/2008 $11,476 $11,226 $12,211 $11,308 $10,826
5/31/2008 $11,750 $11,371 $12,354 $11,225 $10,832
6/30/2008 $11,003 $10,412 $11,346 $11,216 $10,848
7/31/2008 $10,819 $10,325 $10,982 $11,207 $10,869
8/31/2008 $10,841 $10,474 $10,540 $11,314 $10,884
9/30/2008 $ 9,868 $ 9,541 $ 9,020 $11,162 $10,914
10/31/2008 $ 8,312 $ 7,939 $ 7,200 $10,898 $10,931
11/30/2008 $ 7,923 $ 7,369 $ 6,814 $11,253 $10,943
12/31/2008 $ 8,197 $ 7,447 $ 7,225 $11,673 $10,941
1/31/2009 $ 7,856 $ 6,820 $ 6,517 $11,570 $10,940
2/28/2009 $ 7,385 $ 6,094 $ 5,851 $11,526 $10,941
3/31/2009 $ 7,849 $ 6,627 $ 6,224 $11,686 $10,945
4/30/2009 $ 8,519 $ 7,262 $ 7,031 $11,742 $10,948
5/31/2009 $ 9,014 $ 7,668 $ 7,876 $11,827 $10,949
6/30/2009 $ 8,992 $ 7,683 $ 7,833 $11,895 $10,950
7/31/2009 $ 9,593 $ 8,264 $ 8,549 $12,087 $10,952
8/31/2009 $ 9,771 $ 8,562 $ 9,015 $12,212 $10,954
9/30/2009 $10,258 $ 8,882 $ 9,362 $12,340 $10,955
10/31/2009 $10,091 $ 8,717 $ 9,246 $12,401 $10,958
11/30/2009 $10,449 $ 9,240 $ 9,433 $12,561 $10,959
12/31/2009 $10,740 $ 9,418 $ 9,570 $12,365 $10,959
AVERAGE ANNUAL TOTAL RETURN
ADVISOR CLASS 12/31/09
- ------------- --------
1-Year +31.61%
3-Year -0.14%
Since Inception (8/1/06) +2.59%
ADVISOR CLASS (8/1/06-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON 2025 BARCLAYS P&R 90-DAY
RETIREMENT TARGET FUND CAPITAL U.S. U.S. TREASURY
DATE - ADVISOR CLASS S&P 500 INDEX MSCI EAFE INDEX AGGREGATE INDEX INDEX
- ---------- ----------------------- ------------- --------------- --------------- -------------
8/1/2006 $10,000 $10,000 $10,000 $10,000 $10,000
8/31/2006 $10,180 $10,238 $10,278 $10,153 $10,044
9/30/2006 $10,210 $10,502 $10,296 $10,242 $10,088
10/31/2006 $10,550 $10,844 $10,697 $10,310 $10,127
11/30/2006 $10,860 $11,050 $11,020 $10,430 $10,170
12/31/2006 $10,957 $11,205 $11,366 $10,369 $10,214
1/31/2007 $11,140 $11,375 $11,444 $10,365 $10,256
2/28/2007 $11,130 $11,152 $11,538 $10,525 $10,296
3/31/2007 $11,234 $11,277 $11,838 $10,525 $10,343
4/30/2007 $11,579 $11,776 $12,374 $10,582 $10,387
5/31/2007 $11,914 $12,187 $12,608 $10,502 $10,434
6/30/2007 $11,880 $11,985 $12,627 $10,471 $10,473
7/31/2007 $11,652 $11,613 $12,442 $10,558 $10,513
8/31/2007 $11,725 $11,787 $12,251 $10,687 $10,573
9/30/2007 $12,297 $12,228 $12,909 $10,768 $10,611
10/31/2007 $12,743 $12,423 $13,417 $10,865 $10,644
11/30/2007 $12,163 $11,903 $12,980 $11,060 $10,692
12/31/2007 $12,104 $11,821 $12,688 $11,091 $10,716
1/31/2008 $11,301 $11,112 $11,517 $11,278 $10,771
2/29/2008 $11,259 $10,751 $11,686 $11,293 $10,790
3/31/2008 $11,043 $10,704 $11,569 $11,332 $10,815
4/30/2008 $11,561 $11,226 $12,211 $11,308 $10,826
5/31/2008 $11,847 $11,371 $12,354 $11,225 $10,832
6/30/2008 $11,096 $10,412 $11,346 $11,216 $10,848
7/31/2008 $10,923 $10,325 $10,982 $11,207 $10,869
8/31/2008 $10,955 $10,474 $10,540 $11,314 $10,884
9/30/2008 $ 9,967 $ 9,541 $ 9,020 $11,162 $10,914
10/31/2008 $ 8,404 $ 7,939 $ 7,200 $10,898 $10,931
11/30/2008 $ 8,013 $ 7,369 $ 6,814 $11,253 $10,943
12/31/2008 $ 8,292 $ 7,447 $ 7,225 $11,673 $10,941
1/31/2009 $ 7,948 $ 6,820 $ 6,517 $11,570 $10,940
2/28/2009 $ 7,483 $ 6,094 $ 5,851 $11,526 $10,941
3/31/2009 $ 7,952 $ 6,627 $ 6,224 $11,686 $10,945
4/30/2009 $ 8,640 $ 7,262 $ 7,031 $11,742 $10,948
5/31/2009 $ 9,129 $ 7,668 $ 7,876 $11,827 $10,949
6/30/2009 $ 9,107 $ 7,683 $ 7,833 $11,895 $10,950
7/31/2009 $ 9,725 $ 8,264 $ 8,549 $12,087 $10,952
8/31/2009 $ 9,916 $ 8,562 $ 9,015 $12,212 $10,954
9/30/2009 $10,412 $ 8,882 $ 9,362 $12,340 $10,955
10/31/2009 $10,254 $ 8,717 $ 9,246 $12,401 $10,958
11/30/2009 $10,616 $ 9,240 $ 9,433 $12,561 $10,959
12/31/2009 $10,913 $ 9,418 $ 9,570 $12,365 $10,959
Annual Report | 21
Performance Summary (CONTINUED)
ENDNOTES
WHILE AN ASSET ALLOCATION PLAN CAN BE A VALUABLE TOOL TO HELP REDUCE OVERALL
VOLATILITY, ALL INVESTMENTS INVOLVE SOME DEGREE OF RISK. GENERALLY, INVESTORS
SHOULD BE COMFORTABLE WITH FLUCTUATION IN THE VALUE OF THEIR INVESTMENTS,
ESPECIALLY OVER THE SHORT TERM. STOCKS HAVE HISTORICALLY OUTPERFORMED OTHER
ASSET CLASSES OVER THE LONG TERM, BUT THEY TEND TO FLUCTUATE MORE DRAMATICALLY
OVER THE SHORTER TERM. BOND PRICES GENERALLY MOVE IN THE OPPOSITE DIRECTION OF
INTEREST RATES. THUS, AS PRICES OF BONDS IN THE FUND ADJUST TO A RISE IN
INTEREST RATES, THE FUND'S SHARE PRICE MAY DECLINE. BECAUSE THE FUND INVESTS IN
UNDERLYING FUNDS, WHICH MAY ENGAGE IN A VARIETY OF INVESTMENT STRATEGIES
INVOLVING CERTAIN RISKS, THE FUND MAY BE SUBJECT TO THOSE SAME RISKS. THESE
RISKS ARE DESCRIBED IN THE FUND'S PROSPECTUS.
CLASS C: These shares have higher annual fees and expenses than Class A
shares.
CLASS R: Shares are available to certain eligible investors as described
in the prospectus. These shares have higher annual fees and
expenses than Class A shares.
ADVISOR CLASS: Shares are available to certain eligible investors as described
in the prospectus.
(1.) If the manager had not waived fees, the Fund's total returns would have
been lower.
(2.) Cumulative total return represents the change in value of an investment
over the periods indicated.
(3.) Average annual total return represents the average annual change in value
of an investment over the periods indicated.
(4.) These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated.
(5.) Figures are as stated in the Fund's prospectus current as of the date of
this report. In times of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become
higher than the figures shown.
(6.) Source: (C) 2009 Morningstar. See page 16 for descriptions of the S&P 500,
the MSCI EAFE Index, the BC U.S. Aggregate Index and the P&R 90 Day U.S.
T-Bill Index.
22 | Annual Report
Your Fund's Expenses
FRANKLIN TEMPLETON 2025 RETIREMENT TARGET FUND
As a Fund shareholder, you can incur two types of costs:
- - Transaction costs, including sales charges (loads) on Fund purchases; and
- - Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
Annual Report | 23
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES.
Therefore, the second line for each class is useful in comparing ongoing costs
only, and will not help you compare total costs of owning different funds. In
addition, if transaction costs were included, your total costs would have been
higher. Please refer to the Fund prospectus for additional information on
operating expenses.
BEGINNING ENDING EXPENSES PAID EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD**
CLASS A 7/1/09 12/31/09 7/1/09-12/31/09 7/1/09-12/31/09
- ------- ------------- ------------- --------------- ---------------
Actual $1,000 $1,195.70 $2.49 $ 7.25
Hypothetical
(5% return before expenses) $1,000 $1,022.94 $2.29 $ 6.67
CLASS C
Actual $1,000 $1,190.50 $6.35 $11.10
Hypothetical
(5% return before expenses) $1,000 $1,019.41 $5.85 $10.21
CLASS R
Actual $1,000 $1,194.30 $3.60 $ 8.35
Hypothetical
(5% return before expenses) $1,000 $1,021.93 $3.31 $ 7.68
ADVISOR CLASS
Actual $1,000 $1,198.30 $0.83 $ 5.60
Hypothetical
(5% return before expenses) $1,000 $1,024.45 $0.77 $ 5.14
* Expenses are calculated using the most recent six-month expense ratio
excluding expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 0.45%; C: 1.15%; R: 0.65%; and Advisor:
0.15%), multiplied by the average account value over the period, multiplied
by 184/365 to reflect the one-half year period. A portion of the Fund's
expenses have been paid by the underlying funds in which the Fund invests.
** Expenses are calculated using the most recent six-month expense ratio
including expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 1.31%; C: 2.01%; R: 1.51%; and Advisor:
1.01%), multiplied by the average account value over the period, multiplied
by 184/365 to reflect the one-half year period. A portion of the Fund's
expenses have been paid by the underlying funds in which the Fund invests.
24 | Annual Report
Franklin Templeton
2035 Retirement Target Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin Templeton 2035 Retirement Target
Fund seeks the highest level of long-term total return, which consists of
capital appreciation and income, consistent with the Fund's asset allocation.
The Fund allocates among the broad asset classes of equity, fixed income and
short-term (money market) investments by investing in a distinctly weighted
combination of Franklin Templeton mutual funds (underlying funds), with an
increasing emphasis on income as the target date of 2035 approaches.
ASSET ALLOCATION*
Franklin Templeton
2035 Retirement Target Fund
Based on Total Net Assets as of 12/31/09
(BAR CHART)
Domestic Equity 66.0%
Foreign Equity 29.4%
Domestic Fixed Income 2.3%
Foreign Fixed Income 1.5%
Short-Term Investments & Other Net Assets 0.8%
* The asset allocation is based on the Statement of Investments (SOI), which
classifies each underlying fund into a broad asset class.
We are pleased to bring you Franklin Templeton 2035 Retirement Target Fund's
annual report for the fiscal year ended December 31, 2009.
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT franklintempleton.com OR CALL (800) 342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
PERFORMANCE OVERVIEW
Franklin Templeton 2035 Retirement Target Fund - Class A delivered a +35.04%
cumulative total return for the 12 months ended December 31, 2009. By comparison
the Fund's benchmarks, the Standard & Poor's 500 Index (S&P 500) and Morgan
Stanley Capital International (MSCI) Europe, Australasia, Far East (EAFE) Index
for equities, the Barclays Capital (BC) U.S. Aggregate Index for fixed income,
and the Payden & Rygel (P&R) 90 Day U.S. T-Bill Index for short-term investments
and other net assets, posted total returns of +26.46%, +32.46%, +5.93% and
+0.17%, respectively, during the same time.(1) You can find other performance
data in the Performance Summary beginning on page 28.
(1.) Source: (C) 2009 Morningstar. All Rights Reserved. The information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted
to be accurate, complete or timely. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from any use of
this information. The S&P 500 consists of 500 stocks chosen for market
size, liquidity and industry group representation. Each stock's weight in
the index is proportionate to its market value. The S&P 500 is one of the
most widely used benchmarks of U.S. equity performance. The MSCI EAFE Index
is a free float-adjusted, market capitalization-weighted index designed to
measure equity market performance in global developed markets excluding the
U.S. and Canada. The BC U.S. Aggregate Index is a market
capitalization-weighted index representing the U.S. investment-grade,
fixed-rate, taxable bond market with index components for government and
corporate, mortgage pass-through and asset-backed securities. All issues
included are SEC registered, taxable, dollar denominated and
nonconvertible, must have at least one year to final maturity and must be
rated investment grade (Baa3/BBB-/BBB- or higher) by Moody's, Standard &
Poor's or Fitch, respectively. The P&R 90 Day U.S. T-Bill Index is a total
return index based on a constant maturity instrument. Payden & Rygel
includes both accrued interest and change in market price in its monthly
total return calculations. The value of Treasuries, if held to maturity, is
fixed; principal is guaranteed and interest is fixed. The indexes are
unmanaged and include reinvestment of any income or distributions. One
cannot invest directly in an index, and an index is not representative of
the Fund's portfolio.
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 59.
Annual Report | 25
TOP 10 FUND HOLDINGS
Franklin Templeton
2035 Retirement Target Fund
12/31/09
% OF TOTAL
NET ASSETS
----------
Franklin Flex Cap Growth Fund
- - Advisor Class 23.5%
Mutual Shares Fund - Class Z 16.9%
Mutual European Fund - Class Z 10.5%
Franklin Growth Opportunities Fund
- - Advisor Class 9.8%
Templeton Foreign Fund
- - Advisor Class 8.8%
Franklin Gold and Precious Metals
Fund - Advisor Class 5.4%
Templeton China World Fund
- - Advisor Class 4.8%
Franklin Natural Resources Fund
- - Advisor Class 4.4%
Franklin MicroCap Value Fund
- - Advisor Class 4.2%
Franklin Small Cap Growth Fund
- - Advisor Class 4.2%
INVESTMENT STRATEGY
When selecting equity funds, we consider the underlying funds' foreign and
domestic exposure, market capitalization ranges, and investment style (growth
vs. value). When selecting fixed income funds, our primary focus is on obtaining
a maximum amount of current income. In evaluating the risk level of the
underlying funds, we analyze 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 Target
Fund in the same underlying funds and will vary the underlying funds' allocation
percentages based upon each Fund's risk/return level. We change the Fund's
target asset allocation gradually over time, and it becomes increasingly
conservative as the stated target date draws near.
MANAGER'S DISCUSSION
The Fund's performance can be attributed largely to its allocation among
equities, fixed income securities, and short-term investments and other net
assets, and to the actual performance of the selected underlying funds. This
allocation shifts every year, in accordance with the retirement date associated
with the portfolio.
At period-end, Franklin Templeton 2035 Retirement Target Fund's domestic equity
exposure was 69.2% of its total equity weighting, and foreign equity made up the
balance. The portfolio was diversified across capitalization sizes and
investment styles, and on December 31, 2009, we held shares in large-, mid- and
small-capitalization equity funds, representing both growth and value styles.
Franklin Flex Cap Growth Fund - Advisor Class, at 23.5% of the Fund's total net
assets, was our largest equity fund weighting at period-end. On the fixed income
side, domestic exposure was 60.5% of the Fund's total fixed income weighting.
Our largest domestic growth fund holding, Franklin Flex Cap Growth Fund -Advisor
Class, and our largest domestic value fund holding, Mutual Shares Fund - Class
Z, outperformed the S&P 500. Our largest foreign equity holding, Mutual European
Fund - Class Z, trailed the MSCI EAFE Index; however, Templeton Foreign Fund -
Advisor Class outperformed.
26 | Annual Report
Thank you for your continued participation in Franklin Templeton 2035 Retirement
Target Fund. We look forward to serving your future investment needs.
(PHOTO OF T. ANTHONY COFFEY)
/s/ T. Anthony Coffey, CFA
T. Anthony Coffey, CFA
Portfolio Manager
Franklin Templeton 2035 Retirement Target Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF DECEMBER 31, 2009, 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.
Annual Report | 27
Performance Summary as of 12/31/09
FRANKLIN TEMPLETON 2035 RETIREMENT TARGET FUND
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table 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.
PRICE AND DISTRIBUTION INFORMATION
CLASS A (SYMBOL: N/A) CHANGE 12/31/09 12/31/08
- --------------------- ------ -------- --------
Net Asset Value (NAV) +$2.24 $9.36 $7.12
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.1274
Long-Term Capital Gain $0.0982
TOTAL $0.2256
CLASS C (SYMBOL: N/A) CHANGE 12/31/09 12/31/08
- --------------------- ------ -------- --------
Net Asset Value (NAV) +$2.19 $9.25 $7.06
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.0846
Long-Term Capital Gain $0.0982
TOTAL $0.1828
CLASS R (SYMBOL: N/A) CHANGE 12/31/09 12/31/08
- --------------------- ------ -------- --------
Net Asset Value (NAV) +$2.24 $9.37 $7.13
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.1136
Long-Term Capital Gain $0.0982
TOTAL $0.2118
ADVISOR CLASS (SYMBOL: N/A) CHANGE 12/31/09 12/31/08
- --------------------------- ------ -------- --------
Net Asset Value (NAV) +$2.25 $9.39 $7.14
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.1505
Long-Term Capital Gain $0.0982
TOTAL $0.2487
28 | Annual Report
Performance Summary (CONTINUED)
PERFORMANCE(1)
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURN AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES. CLASS A: 5.75%
MAXIMUM INITIAL SALES CHARGE; CLASS C: 1% CONTINGENT DEFERRED SALES CHARGE IN
FIRST YEAR ONLY; CLASS R/ADVISOR CLASS: NO SALES CHARGES.
CLASS A 1-YEAR 3-YEAR INCEPTION (8/1/06)
- ------- ------- ------ ------------------
Cumulative Total Return(2) +35.04% -3.98% +6.04%
Average Annual Total Return(3) +27.35% -3.26% -0.02%
Value of $10,000 Investment(4) $12,735 $9,053 $9,994
Total Annual Operating Expenses(5)
Without Waiver 2.99%
With Waiver 1.30%
CLASS C 1-YEAR 3-YEAR INCEPTION (8/1/06)
- ------- ------- ------ ------------------
Cumulative Total Return(2) +34.00% -6.07% +3.46%
Average Annual Total Return(3) +33.00% -2.06% +1.00%
Value of $10,000 Investment(4) $13,300 $9,393 $10,346
Total Annual Operating Expenses(5)
Without Waiver 3.69%
With Waiver 2.00%
CLASS R 1-YEAR 3-YEAR INCEPTION (8/1/06)
- ------- ------- ------ ------------------
Cumulative Total Return(2) +34.79% -4.53% +5.40%
Average Annual Total Return(3) +34.79% -1.53% +1.55%
Value of $10,000 Investment(4) $13,479 $9,547 $10,540
Total Annual Operating Expenses(5)
Without Waiver 3.19%
With Waiver 1.50%
ADVISOR CLASS 1-YEAR 3-YEAR INCEPTION (8/1/06)
- ------------- ------- ------ ------------------
Cumulative Total Return(2) +35.42% -3.08% +7.20%
Average Annual Total Return(3) +35.42% -1.04% +2.06%
Value of $10,000 Investment(4) $13,542 $9,692 $10,720
Total Annual Operating Expenses(5)
Without Waiver 2.69%
With Waiver 1.00%
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.
THE INVESTMENT MANAGER HAS CONTRACTUALLY AGREED TO WAIVE OR LIMIT ITS FEES AND
TO ASSUME AS ITS OWN EXPENSE CERTAIN EXPENSES OTHERWISE PAYABLE BY THE FUND SO
THAT COMMON EXPENSES (I.E., A COMBINATION OF ASSET ALLOCATION FEES AND OTHER
EXPENSES, BUT EXCLUDING RULE 12B-1 FEES AND ACQUIRED FUND FEES AND EXPENSES) FOR
EACH CLASS OF THE FUND DO NOT EXCEED 0.15% (OTHER THAN CERTAIN NONROUTINE
EXPENSES OR COSTS, INCLUDING THOSE RELATING TO LITIGATION, INDEMNIFICATION,
REORGANIZATIONS AND LIQUIDATIONS) UNTIL 4/30/10.
Annual Report | 29
Performance Summary (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR A HYPOTHETICAL $10,000 INVESTMENT(1)
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.
AVERAGE ANNUAL TOTAL RETURN
CLASS A 12/31/09
- ------- --------
1-Year +27.35%
3-Year -3.26%
Since Inception (8/1/06) -0.02%
CLASS A (8/1/06-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON
2035 RETIREMENT BARCLAYS CAPITAL U.S. PAYDEN & RYGEL 90-DAY
DATE TARGET FUND - CLASS A S&P 500 INDEX MSCI EAFE INDEX AGGREGATE BOND INDEX U.S. TREASURY INDEX
- ---------- --------------------- ------------- --------------- --------------------- ---------------------
8/1/2006 $ 9,425 $10,000 $10,000 $10,000 $10,000
8/31/2006 $ 9,614 $10,238 $10,278 $10,153 $10,044
9/30/2006 $ 9,632 $10,502 $10,296 $10,242 $10,088
10/31/2006 $ 9,981 $10,844 $10,697 $10,310 $10,127
11/30/2006 $10,311 $11,050 $11,020 $10,430 $10,170
12/31/2006 $10,409 $11,205 $11,366 $10,369 $10,214
1/31/2007 $10,610 $11,375 $11,444 $10,365 $10,256
2/28/2007 $10,552 $11,152 $11,538 $10,525 $10,296
3/31/2007 $10,708 $11,277 $11,838 $10,525 $10,343
4/30/2007 $11,062 $11,776 $12,374 $10,582 $10,387
5/31/2007 $11,416 $12,187 $12,608 $10,502 $10,434
6/30/2007 $11,387 $11,985 $12,627 $10,471 $10,473
7/31/2007 $11,094 $11,613 $12,442 $10,558 $10,513
8/31/2007 $11,182 $11,787 $12,251 $10,687 $10,573
9/30/2007 $11,769 $12,228 $12,909 $10,768 $10,611
10/31/2007 $12,268 $12,423 $13,417 $10,865 $10,644
11/30/2007 $11,622 $11,903 $12,980 $11,060 $10,692
12/31/2007 $11,559 $11,821 $12,688 $11,091 $10,716
1/31/2008 $10,654 $11,112 $11,517 $11,278 $10,771
2/29/2008 $10,594 $10,751 $11,686 $11,293 $10,790
3/31/2008 $10,358 $10,704 $11,569 $11,332 $10,815
4/30/2008 $10,915 $11,226 $12,211 $11,308 $10,826
5/31/2008 $11,243 $11,371 $12,354 $11,225 $10,832
6/30/2008 $10,421 $10,412 $11,346 $11,216 $10,848
7/31/2008 $10,216 $10,325 $10,982 $11,207 $10,869
8/31/2008 $10,247 $10,474 $10,540 $11,314 $10,884
9/30/2008 $ 9,189 $ 9,541 $ 9,020 $11,162 $10,914
10/31/2008 $ 7,567 $ 7,939 $ 7,200 $10,898 $10,931
11/30/2008 $ 7,156 $ 7,369 $ 6,814 $11,253 $10,943
12/31/2008 $ 7,401 $ 7,447 $ 7,225 $11,673 $10,941
1/31/2009 $ 7,026 $ 6,820 $ 6,517 $11,570 $10,940
2/28/2009 $ 6,569 $ 6,094 $ 5,851 $11,526 $10,941
3/31/2009 $ 7,021 $ 6,627 $ 6,224 $11,686 $10,945
4/30/2009 $ 7,709 $ 7,262 $ 7,031 $11,742 $10,948
5/31/2009 $ 8,219 $ 7,668 $ 7,876 $11,827 $10,949
6/30/2009 $ 8,196 $ 7,683 $ 7,833 $11,895 $10,950
7/31/2009 $ 8,798 $ 8,264 $ 8,549 $12,087 $10,952
8/31/2009 $ 8,998 $ 8,562 $ 9,015 $12,212 $10,954
9/30/2009 $ 9,491 $ 8,882 $ 9,362 $12,340 $10,955
10/31/2009 $ 9,301 $ 8,717 $ 9,246 $12,401 $10,958
11/30/2009 $ 9,671 $ 9,240 $ 9,433 $12,561 $10,959
12/31/2009 $ 9,994 $ 9,418 $ 9,570 $12,365 $10,959
AVERAGE ANNUAL TOTAL RETURN
CLASS C 12/31/09
- ------- --------
1-Year +33.00%
3-Year -2.06%
Since Inception (8/1/06) +1.00%
CLASS C (8/1/06-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON
2035 RETIREMENT BARCLAYS CAPITAL U.S. PAYDEN & RYGEL 90-DAY
DATE TARGET FUND - CLASS C S&P 500 INDEX MSCI EAFE INDEX AGGREGATE BOND INDEX U.S. TREASURY INDEX
- ---------- --------------------- ------------- --------------- --------------------- ---------------------
8/1/2006 $10,000 $10,000 $10,000 $10,000 $10,000
8/31/2006 $10,190 $10,238 $10,278 $10,153 $10,044
9/30/2006 $10,210 $10,502 $10,296 $10,242 $10,088
10/31/2006 $10,580 $10,844 $10,697 $10,310 $10,127
11/30/2006 $10,910 $11,050 $11,020 $10,430 $10,170
12/31/2006 $11,014 $11,205 $11,366 $10,369 $10,214
1/31/2007 $11,217 $11,375 $11,444 $10,365 $10,256
2/28/2007 $11,146 $11,152 $11,538 $10,525 $10,296
3/31/2007 $11,311 $11,277 $11,838 $10,525 $10,343
4/30/2007 $11,676 $11,776 $12,374 $10,582 $10,387
5/31/2007 $12,051 $12,187 $12,608 $10,502 $10,434
6/30/2007 $12,000 $11,985 $12,627 $10,471 $10,473
7/31/2007 $11,689 $11,613 $12,442 $10,558 $10,513
8/31/2007 $11,782 $11,787 $12,251 $10,687 $10,573
9/30/2007 $12,394 $12,228 $12,909 $10,768 $10,611
10/31/2007 $12,903 $12,423 $13,417 $10,865 $10,644
11/30/2007 $12,208 $11,903 $12,980 $11,060 $10,692
12/31/2007 $12,129 $11,821 $12,688 $11,091 $10,716
1/31/2008 $11,181 $11,112 $11,517 $11,278 $10,771
2/29/2008 $11,108 $10,751 $11,686 $11,293 $10,790
3/31/2008 $10,847 $10,704 $11,569 $11,332 $10,815
4/30/2008 $11,437 $11,226 $12,211 $11,308 $10,826
5/31/2008 $11,763 $11,371 $12,354 $11,225 $10,832
6/30/2008 $10,903 $10,412 $11,346 $11,216 $10,848
7/31/2008 $10,686 $10,325 $10,982 $11,207 $10,869
8/31/2008 $10,708 $10,474 $10,540 $11,314 $10,884
9/30/2008 $ 9,610 $ 9,541 $ 9,020 $11,162 $10,914
10/31/2008 $ 7,903 $ 7,939 $ 7,200 $10,898 $10,931
11/30/2008 $ 7,468 $ 7,369 $ 6,814 $11,253 $10,943
12/31/2008 $ 7,721 $ 7,447 $ 7,225 $11,673 $10,941
1/31/2009 $ 7,327 $ 6,820 $ 6,517 $11,570 $10,940
2/28/2009 $ 6,835 $ 6,094 $ 5,851 $11,526 $10,941
3/31/2009 $ 7,310 $ 6,627 $ 6,224 $11,686 $10,945
4/30/2009 $ 8,023 $ 7,262 $ 7,031 $11,742 $10,948
5/31/2009 $ 8,549 $ 7,668 $ 7,876 $11,827 $10,949
6/30/2009 $ 8,514 $ 7,683 $ 7,833 $11,895 $10,950
7/31/2009 $ 9,147 $ 8,264 $ 8,549 $12,087 $10,952
8/31/2009 $ 9,335 $ 8,562 $ 9,015 $12,212 $10,954
9/30/2009 $ 9,846 $ 8,882 $ 9,362 $12,340 $10,955
10/31/2009 $ 9,635 $ 8,717 $ 9,246 $12,401 $10,958
11/30/2009 $10,024 $ 9,240 $ 9,433 $12,561 $10,959
12/31/2009 $10,346 $ 9,418 $ 9,570 $12,365 $10,959
30 | Annual Report
Performance Summary (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN
CLASS R 12/31/09
- ------- --------
1-Year +34.79%
3-Year -1.53%
Since Inception (8/1/06) +1.55%
CLASS R (8/1/06-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON PAYDEN & RYGEL
2035 RETIREMENT BARCLAYS CAPITAL U.S. 90-DAY U.S.
DATE TARGET FUND - CLASS R S&P 500 INDEX MSCI EAFE INDEX AGGREGATE BOND INDEX TREASURY INDEX
- ---------- --------------------- ------------- --------------- --------------------- --------------
8/1/2006 $10,000 $10,000 $10,000 $10,000 $10,000
8/31/2006 $10,190 $10,238 $10,278 $10,153 $10,044
9/30/2006 $10,220 $10,502 $10,296 $10,242 $10,088
10/31/2006 $10,590 $10,844 $10,697 $10,310 $10,127
11/30/2006 $10,930 $11,050 $11,020 $10,430 $10,170
12/31/2006 $11,040 $11,205 $11,366 $10,369 $10,214
1/31/2007 $11,253 $11,375 $11,444 $10,365 $10,256
2/28/2007 $11,182 $11,152 $11,538 $10,525 $10,296
3/31/2007 $11,337 $11,277 $11,838 $10,525 $10,343
4/30/2007 $11,712 $11,776 $12,374 $10,582 $10,387
5/31/2007 $12,098 $12,187 $12,608 $10,502 $10,434
6/30/2007 $12,057 $11,985 $12,627 $10,471 $10,473
7/31/2007 $11,746 $11,613 $12,442 $10,558 $10,513
8/31/2007 $11,839 $11,787 $12,251 $10,687 $10,573
9/30/2007 $12,462 $12,228 $12,909 $10,768 $10,611
10/31/2007 $12,981 $12,423 $13,417 $10,865 $10,644
11/30/2007 $12,296 $11,903 $12,980 $11,060 $10,692
12/31/2007 $12,227 $11,821 $12,688 $11,091 $10,716
1/31/2008 $11,278 $11,112 $11,517 $11,278 $10,771
2/29/2008 $11,204 $10,751 $11,686 $11,293 $10,790
3/31/2008 $10,953 $10,704 $11,569 $11,332 $10,815
4/30/2008 $11,544 $11,226 $12,211 $11,308 $10,826
5/31/2008 $11,882 $11,371 $12,354 $11,225 $10,832
6/30/2008 $11,010 $10,412 $11,346 $11,216 $10,848
7/31/2008 $10,803 $10,325 $10,982 $11,207 $10,869
8/31/2008 $10,825 $10,474 $10,540 $11,314 $10,884
9/30/2008 $ 9,714 $ 9,541 $ 9,020 $11,162 $10,914
10/31/2008 $ 7,993 $ 7,939 $ 7,200 $10,898 $10,931
11/30/2008 $ 7,558 $ 7,369 $ 6,814 $11,253 $10,943
12/31/2008 $ 7,819 $ 7,447 $ 7,225 $11,673 $10,941
1/31/2009 $ 7,424 $ 6,820 $ 6,517 $11,570 $10,940
2/28/2009 $ 6,931 $ 6,094 $ 5,851 $11,526 $10,941
3/31/2009 $ 7,408 $ 6,627 $ 6,224 $11,686 $10,945
4/30/2009 $ 8,144 $ 7,262 $ 7,031 $11,742 $10,948
5/31/2009 $ 8,683 $ 7,668 $ 7,876 $11,827 $10,949
6/30/2009 $ 8,648 $ 7,683 $ 7,833 $11,895 $10,950
7/31/2009 $ 9,282 $ 8,264 $ 8,549 $12,087 $10,952
8/31/2009 $ 9,494 $ 8,562 $ 9,015 $12,212 $10,954
9/30/2009 $10,004 $ 8,882 $ 9,362 $12,340 $10,955
10/31/2009 $ 9,803 $ 8,717 $ 9,246 $12,401 $10,958
11/30/2009 $10,205 $ 9,240 $ 9,433 $12,561 $10,959
12/31/2009 $10,540 $ 9,418 $ 9,570 $12,365 $10,959
AVERAGE ANNUAL TOTAL RETURN
ADVISOR CLASS 12/31/09
- ------------- --------
1-Year +35.42%
3-Year -1.04%
Since Inception (8/1/06) +2.06%
ADVISOR CLASS (8/1/06-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON BARCLAYS CAPITAL
2035 RETIREMENT U.S. AGGREGATE PAYDEN & RYGEL 90-DAY
DATE TARGET FUND - ADVISOR CLASS S&P 500 INDEX MSCI EAFE INDEX BOND INDEX U.S. TREASURY INDEX
- ---------- --------------------------- ------------- --------------- ---------------- ---------------------
8/1/2006 $10,000 $10,000 $10,000 $10,000 $10,000
8/31/2006 $10,200 $10,238 $10,278 $10,153 $10,044
9/30/2006 $10,230 $10,502 $10,296 $10,242 $10,088
10/31/2006 $10,610 $10,844 $10,697 $10,310 $10,127
11/30/2006 $10,950 $11,050 $11,020 $10,430 $10,170
12/31/2006 $11,060 $11,205 $11,366 $10,369 $10,214
1/31/2007 $11,284 $11,375 $11,444 $10,365 $10,256
2/28/2007 $11,213 $11,152 $11,538 $10,525 $10,296
3/31/2007 $11,388 $11,277 $11,838 $10,525 $10,343
4/30/2007 $11,764 $11,776 $12,374 $10,582 $10,387
5/31/2007 $12,150 $12,187 $12,608 $10,502 $10,434
6/30/2007 $12,120 $11,985 $12,627 $10,471 $10,473
7/31/2007 $11,808 $11,613 $12,442 $10,558 $10,513
8/31/2007 $11,912 $11,787 $12,251 $10,687 $10,573
9/30/2007 $12,535 $12,228 $12,909 $10,768 $10,611
10/31/2007 $13,065 $12,423 $13,417 $10,865 $10,644
11/30/2007 $12,390 $11,903 $12,980 $11,060 $10,692
12/31/2007 $12,314 $11,821 $12,688 $11,091 $10,716
1/31/2008 $11,362 $11,112 $11,517 $11,278 $10,771
2/29/2008 $11,299 $10,751 $11,686 $11,293 $10,790
3/31/2008 $11,047 $10,704 $11,569 $11,332 $10,815
4/30/2008 $11,650 $11,226 $12,211 $11,308 $10,826
5/31/2008 $11,989 $11,371 $12,354 $11,225 $10,832
6/30/2008 $11,125 $10,412 $11,346 $11,216 $10,848
7/31/2008 $10,907 $10,325 $10,982 $11,207 $10,869
8/31/2008 $10,940 $10,474 $10,540 $11,314 $10,884
9/30/2008 $ 9,826 $ 9,541 $ 9,020 $11,162 $10,914
10/31/2008 $ 8,090 $ 7,939 $ 7,200 $10,898 $10,931
11/30/2008 $ 7,653 $ 7,369 $ 6,814 $11,253 $10,943
12/31/2008 $ 7,916 $ 7,447 $ 7,225 $11,673 $10,941
1/31/2009 $ 7,517 $ 6,820 $ 6,517 $11,570 $10,940
2/28/2009 $ 7,029 $ 6,094 $ 5,851 $11,526 $10,941
3/31/2009 $ 7,511 $ 6,627 $ 6,224 $11,686 $10,945
4/30/2009 $ 8,255 $ 7,262 $ 7,031 $11,742 $10,948
5/31/2009 $ 8,800 $ 7,668 $ 7,876 $11,827 $10,949
6/30/2009 $ 8,775 $ 7,683 $ 7,833 $11,895 $10,950
7/31/2009 $ 9,428 $ 8,264 $ 8,549 $12,087 $10,952
8/31/2009 $ 9,642 $ 8,562 $ 9,015 $12,212 $10,954
9/30/2009 $10,174 $ 8,882 $ 9,362 $12,340 $10,955
10/31/2009 $ 9,971 $ 8,717 $ 9,246 $12,401 $10,958
11/30/2009 $10,378 $ 9,240 $ 9,433 $12,561 $10,959
12/31/2009 $10,720 $ 9,418 $ 9,570 $12,365 $10,959
Annual Report | 31
Performance Summary (CONTINUED)
ENDNOTES
WHILE AN ASSET ALLOCATION PLAN CAN BE A VALUABLE TOOL TO HELP REDUCE OVERALL
VOLATILITY, ALL INVESTMENTS INVOLVE SOME DEGREE OF RISK. GENERALLY, INVESTORS
SHOULD BE COMFORTABLE WITH FLUCTUATION IN THE VALUE OF THEIR INVESTMENTS,
ESPECIALLY OVER THE SHORT TERM. STOCKS HAVE HISTORICALLY OUTPERFORMED OTHER
ASSET CLASSES OVER THE LONG TERM, BUT THEY TEND TO FLUCTUATE MORE DRAMATICALLY
OVER THE SHORTER TERM. BOND PRICES GENERALLY MOVE IN THE OPPOSITE DIRECTION OF
INTEREST RATES. THUS, AS PRICES OF BONDS IN THE FUND ADJUST TO A RISE IN
INTEREST RATES, THE FUND'S SHARE PRICE MAY DECLINE. BECAUSE THE FUND INVESTS IN
UNDERLYING FUNDS, WHICH MAY ENGAGE IN A VARIETY OF INVESTMENT STRATEGIES
INVOLVING CERTAIN RISKS, THE FUND MAY BE SUBJECT TO THOSE SAME RISKS. THESE
RISKS ARE DESCRIBED IN THE FUND'S PROSPECTUS.
CLASS C: These shares have higher annual fees and expenses than Class A
shares.
CLASS R: Shares are available to certain eligible investors as described
in the prospectus. These shares have higher annual fees and
expenses than Class A shares.
ADVISOR CLASS: Shares are available to certain eligible investors as described
in the prospectus.
(1.) If the manager had not waived fees, the Fund's total returns would have
been lower.
(2.) Cumulative total return represents the change in value of an investment
over the periods indicated.
(3.) Average annual total return represents the average annual change in value
of an investment over the periods indicated.
(4.) These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated.
(5.) Figures are as stated in the Fund's prospectus current as of the date of
this report. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become
higher than the figures shown.
(6.) Source: (C) 2009 Morningstar. See page 25 for descriptions of the S&P 500,
the MSCI EAFE Index, the BC U.S. Aggregate Index and the P&R 90 Day U.S.
T-Bill Index.
32 | Annual Report
Your Fund's Expenses
FRANKLIN TEMPLETON 2035 RETIREMENT TARGET FUND
As a Fund shareholder, you can incur two types of costs:
- - Transaction costs, including sales charges (loads) on Fund purchases; and
- - Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
Annual Report | 33
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES.
Therefore, the second line for each class is useful in comparing ongoing costs
only, and will not help you compare total costs of owning different funds. In
addition, if transaction costs were included, your total costs would have been
higher. Please refer to the Fund prospectus for additional information on
operating expenses.
BEGINNING ENDING EXPENSES PAID EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD**
CLASS A 7/1/09 12/31/09 7/1/09-12/31/09 7/1/09-12/31/09
- ------- ------------- ------------- --------------- ---------------
Actual $1,000 $1,219.30 $2.52 $ 7.66
Hypothetical
(5% return before expenses) $1,000 $1,022.94 $2.29 $ 6.97
CLASS C
Actual $1,000 $1,215.10 $6.42 $11.56
Hypothetical
(5% return before expenses) $1,000 $1,019.41 $5.85 $10.51
CLASS R
Actual $1,000 $1,218.80 $3.64 $ 8.78
Hypothetical
(5% return before expenses) $1,000 $1,021.93 $3.31 $ 7.98
ADVISOR CLASS
Actual $1,000 $1,221.60 $0.84 $ 5.99
Hypothetical
(5% return before expenses) $1,000 $1,024.45 $0.77 $ 5.45
* Expenses are calculated using the most recent six-month expense ratio
excluding expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 0.45%; C: 1.15%; R: 0.65%; and Advisor:
0.15%), multiplied by the average account value over the period, multiplied
by 184/365 to reflect the one-half year period. A portion of the Fund's
expenses have been paid by the underlying funds in which the Fund invests.
** Expenses are calculated using the most recent six-month expense ratio
including expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 1.37%; C: 2.07%; R: 1.57%; and Advisor:
1.07%), multiplied by the average account value over the period, multiplied
by 184/365 to reflect the one-half year period. A portion of the Fund's
expenses have been paid by the underlying funds in which the Fund invests.
34 | Annual Report
Franklin Templeton
2045 Retirement Target Fund
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin Templeton 2045 Retirement Target
Fund seeks the highest level of long-term total return, which consists of
capital appreciation and income, consistent with the Fund's asset allocation.
The Fund allocates among the broad asset classes of equity, fixed income and
short-term (money market) investments by investing in a distinctly weighted
combination of Franklin Templeton mutual funds (underlying funds), with an
increasing emphasis on income as the target date of 2045 approaches.
ASSET ALLOCATION*
Franklin Templeton 2045 Retirement Target Fund
Based on Total Net Assets as of 12/31/09
(PIE CHART)
Domestic Equity ........... 67.7%
Foreign Equity ............ 30.6%
Short-Term Investments &
Other Net Assets ....... 1.7%
* The asset allocation is based on the Statement of Investments (SOI), which
classifies each underlying fund into a broad asset class.
We are pleased to bring you Franklin Templeton 2045 Retirement Target Fund's
annual report for the fiscal year ended December 31, 2009.
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT franklintempleton.com OR CALL (800) 342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
PERFORMANCE OVERVIEW
Franklin Templeton 2045 Retirement Target Fund - Class A delivered a +36.53%
cumulative total return for the 12 months ended December 31, 2009. By comparison
the Fund's benchmarks, the Standard & Poor's 500 Index (S&P 500) and Morgan
Stanley Capital International (MSCI) Europe, Australasia, Far
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.
Annual Report | 35
East (EAFE) Index for equities, the Barclays Capital (BC) U.S. Aggregate Index
for fixed income, and the Payden & Rygel (P&R) 90 Day U.S. T-Bill Index for
short-term investments and other net assets, posted total returns of +26.46%,
+32.46%, +5.93% and +0.17%, respectively, during the same time.(1) You can find
other performance data in the Performance Summary beginning on page 38.
TOP 10 FUND HOLDINGS
Franklin Templeton
2045 Retirement Target Fund
12/31/09
% OF TOTAL
NET ASSETS
----------
Franklin Flex Cap Growth Fund
- - Advisor Class 24.1%
Mutual Shares Fund - Class Z 16.6%
Mutual European Fund - Class Z 10.9%
Franklin Growth Opportunities Fund
- - Advisor Class 10.4%
Templeton Foreign Fund - Advisor Class 9.0%
Franklin Gold and Precious Metals Fund
- - Advisor Class 5.6%
Templeton China World Fund
- - Advisor Class 5.1%
Franklin Natural Resources Fund
- - Advisor Class 4.7%
Franklin Small Cap Growth Fund
- - Advisor Class 4.4%
Franklin MicroCap Value Fund
- - Advisor Class 4.4%
INVESTMENT STRATEGY
When selecting equity funds, we consider the underlying funds' foreign and
domestic exposure, market capitalization ranges, and investment style (growth
vs. value). When selecting fixed income funds, our primary focus is on obtaining
a maximum amount of current income. In evaluating the risk level of the
underlying funds, we analyze 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 Target
Fund in the same underlying funds and will vary the underlying funds' allocation
percentages based upon each Fund's risk/return level. We change the Fund's
target asset allocation gradually over time, and it becomes increasingly
conservative as the stated target date draws near.
MANAGER'S DISCUSSION
The Fund's performance can be attributed largely to its allocation among
equities, and short-term investments and other net assets, and to the actual
performance of the selected underlying funds. This allocation shifts every year,
in accordance with the retirement date associated with the portfolio.
(1.) Source: (C) 2009 Morningstar. All Rights Reserved. The information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted
to be accurate, complete or timely. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from any use of
this information. The S&P 500 consists of 500 stocks chosen for market
size, liquidity and industry group representation. Each stock's weight in
the index is proportionate to its market value. The S&P 500 is one of the
most widely used benchmarks of U.S. equity performance. The MSCI EAFE Index
is a free float-adjusted, market capitalization-weighted index designed to
measure equity market performance in global developed markets excluding the
U.S. and Canada. The BC U.S. Aggregate Index is a market
capitalization-weighted index representing the U.S. investment-grade,
fixed-rate, taxable bond market with index components for government and
corporate, mortgage pass-through and asset-backed securities. All issues
included are SEC registered, taxable, dollar denominated and
nonconvertible, must have at least one year to final maturity and must be
rated investment grade (Baa3/BBB-/BBB- or higher) by Moody's, Standard &
Poor's or Fitch, respectively. The P&R 90 Day U.S. T-Bill Index is a total
return index based on a constant maturity instrument. Payden & Rygel
includes both accrued interest and change in market price in its monthly
total return calculations. The value of Treasuries, if held to maturity, is
fixed; principal is guaranteed and interest is fixed. The indexes are
unmanaged and include reinvestment of any income or distributions. One
cannot invest directly in an index, and an index is not representative of
the Fund's portfolio.
36 | Annual Report
At period-end, Franklin Templeton 2045 Retirement Target Fund's domestic equity
exposure was 68.9% of its total equity weighting, and foreign equity made up the
balance. The portfolio was diversified across capitalization sizes and
investment styles, and on December 31, 2009, we held shares in large-, mid- and
small-capitalization equity funds, representing both growth and value styles.
Franklin Flex Cap Growth Fund - Advisor Class, at 24.1% of the Fund's total net
assets, was our largest equity fund weighting at period-end.
Our largest domestic growth fund holding, Franklin Flex Cap Growth Fund -
Advisor Class, and our largest domestic value fund holding, Mutual Shares Fund -
Class Z, outperformed the S&P 500. Our largest foreign equity holding, Mutual
European Fund - Class Z, trailed the MSCI EAFE Index; however, Templeton Foreign
Fund - Advisor Class outperformed.
Thank you for your continued participation in Franklin Templeton 2045 Retirement
Target Fund. We look forward to serving your future investment needs.
(PHOTO OF T. ANTHONY COFFEY)
/s/ T. Anthony Coffey
T. Anthony Coffey, CFA
Portfolio Manager
Franklin Templeton 2045 Retirement Target Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF DECEMBER 31, 2009, 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.
Annual Report | 37
Performance Summary as of 12/31/09
FRANKLIN TEMPLETON 2045 RETIREMENT TARGET FUND
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table 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.
PRICE AND DISTRIBUTION INFORMATION
CLASS A (SYMBOL: N/A) CHANGE 12/31/09 12/31/08
- --------------------- ------ -------- --------
Net Asset Value (NAV) +$2.24 $9.13 $6.89
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.0983
Long-Term Capital Gain $0.1448
TOTAL $0.2431
CLASS C (SYMBOL: N/A) CHANGE 12/31/09 12/31/08
- --------------------- ------ -------- --------
Net Asset Value (NAV) +$2.20 $9.01 $6.81
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.0577
Long-Term Capital Gain $0.1448
TOTAL $0.2025
CLASS R (SYMBOL: N/A) CHANGE 12/31/09 12/31/08
- --------------------- ------ -------- --------
Net Asset Value (NAV) +$2.24 $9.12 $6.88
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.0887
Long-Term Capital Gain $0.1448
TOTAL $0.2335
ADVISOR CLASS (SYMBOL: N/A) CHANGE 12/31/09 12/31/08
- --------------------------- ------ -------- --------
Net Asset Value (NAV) +$2.27 $9.16 $6.89
DISTRIBUTIONS (1/1/09-12/31/09)
Dividend Income $0.1186
Long-Term Capital Gain $0.1448
TOTAL $0.2634
38 | Annual Report
Performance Summary (CONTINUED)
PERFORMANCE(1)
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURN AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES. CLASS A: 5.75%
MAXIMUM INITIAL SALES CHARGE; CLASS C: 1% CONTINGENT DEFERRED SALES CHARGE IN
FIRST YEAR ONLY; CLASS R/ADVISOR CLASS: NO SALES CHARGES.
CLASS A 1-YEAR 3-YEAR INCEPTION (8/1/06)
- ------- ------- ------ ------------------
Cumulative Total Return(2) +36.53% -4.95% +5.09%
Average Annual Total Return(3) +28.69% -3.59% -0.28%
Value of $10,000 Investment(4) $12,869 $8,962 $9,905
Total Annual Operating Expenses(5)
Without Waiver 3.99%
With Waiver 1.32%
CLASS C 1-YEAR 3-YEAR INCEPTION (8/1/06)
- ------- ------- ------ ------------------
Cumulative Total Return(2) +35.77% -6.91% +2.68%
Average Annual Total Return(3) +34.77% -2.36% +0.78%
Value of $10,000 Investment(4) $13,477 $9,309 $10,268
Total Annual Operating Expenses(5)
Without Waiver 4.69%
With Waiver 2.02%
CLASS R 1-YEAR 3-YEAR INCEPTION (8/1/06)
- ------- ------- ------ ------------------
Cumulative Total Return(2) +36.45% -5.44% +4.44%
Average Annual Total Return(3) +36.45% -1.85% +1.28%
Value of $10,000 Investment(4) $13,645 $9,456 $10,444
Total Annual Operating Expenses(5)
Without Waiver 4.19%
With Waiver 1.52%
ADVISOR CLASS 1-YEAR 3-YEAR INCEPTION (8/1/06)
- ------------- ------- ------ ------------------
Cumulative Total Return(2) +37.27% -4.04% +6.24%
Average Annual Total Return(3) +37.27% -1.37% +1.79%
Value of $10,000 Investment(4) $13,727 $9,596 $10,624
Total Annual Operating Expenses(5)
Without Waiver 3.69%
With Waiver 1.02%
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.
THE INVESTMENT MANAGER HAS CONTRACTUALLY AGREED TO WAIVE OR LIMIT ITS FEES AND
TO ASSUME AS ITS OWN EXPENSE CERTAIN EXPENSES OTHERWISE PAYABLE BY THE FUND SO
THAT COMMON EXPENSES (I.E., A COMBINATION OF ASSET ALLOCATION FEES AND OTHER
EXPENSES, BUT EXCLUDING RULE 12B-1 FEES AND ACQUIRED FUND FEES AND EXPENSES) FOR
EACH CLASS OF THE FUND DO NOT EXCEED 0.15% (OTHER THAN CERTAIN NONROUTINE
EXPENSES OR COSTS, INCLUDING THOSE RELATING TO LITIGATION, INDEMNIFICATION,
REORGANIZA-TIONS AND LIQUIDATIONS) UNTIL 4/30/10.
Annual Report | 39
Performance Summary (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR A HYPOTHETICAL $10,000 INVESTMENT(1)
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.
AVERAGE ANNUAL TOTAL RETURN
CLASS A 12/31/09
- ------- --------
1-Year +28.69%
3-Year -3.59%
Since Inception (8/1/06) -0.28%
CLASS A (8/1/06-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON PAYDEN & RYGEL
2045 RETIREMENT BARCLAYS CAPITAL U.S. 90-DAY U.S.
DATE TARGET FUND - CLASS A S&P 500 INDEX MSCI EAFE INDEX AGGREGATE BOND INDEX TREASURY INDEX
- ---------- --------------------- ------------- --------------- --------------------- --------------
8/1/2006 $ 9,425 $10,000 $10,000 $10,000 $10,000
8/31/2006 $ 9,614 $10,238 $10,278 $10,153 $10,044
9/30/2006 $ 9,632 $10,502 $10,296 $10,242 $10,088
10/31/2006 $ 9,991 $10,844 $10,697 $10,310 $10,127
11/30/2006 $10,311 $11,050 $11,020 $10,430 $10,170
12/31/2006 $10,420 $11,205 $11,366 $10,369 $10,214
1/31/2007 $10,621 $11,375 $11,444 $10,365 $10,256
2/28/2007 $10,563 $11,152 $11,538 $10,525 $10,296
3/31/2007 $10,738 $11,277 $11,838 $10,525 $10,343
4/30/2007 $11,093 $11,776 $12,374 $10,582 $10,387
5/31/2007 $11,456 $12,187 $12,608 $10,502 $10,434
6/30/2007 $11,432 $11,985 $12,627 $10,471 $10,473
7/31/2007 $11,137 $11,613 $12,442 $10,558 $10,513
8/31/2007 $11,245 $11,787 $12,251 $10,687 $10,573
9/30/2007 $11,846 $12,228 $12,909 $10,768 $10,611
10/31/2007 $12,338 $12,423 $13,417 $10,865 $10,644
11/30/2007 $11,668 $11,903 $12,980 $11,060 $10,692
12/31/2007 $11,600 $11,821 $12,688 $11,091 $10,716
1/31/2008 $10,667 $11,112 $11,517 $11,278 $10,771
2/29/2008 $10,617 $10,751 $11,686 $11,293 $10,790
3/31/2008 $10,380 $10,704 $11,569 $11,332 $10,815
4/30/2008 $10,961 $11,226 $12,211 $11,308 $10,826
5/31/2008 $11,302 $11,371 $12,354 $11,225 $10,832
6/30/2008 $10,451 $10,412 $11,346 $11,216 $10,848
7/31/2008 $10,233 $10,325 $10,982 $11,207 $10,869
8/31/2008 $10,264 $10,474 $10,540 $11,314 $10,884
9/30/2008 $ 9,163 $ 9,541 $ 9,020 $11,162 $10,914
10/31/2008 $ 7,470 $ 7,939 $ 7,200 $10,898 $10,931
11/30/2008 $ 7,012 $ 7,369 $ 6,814 $11,253 $10,943
12/31/2008 $ 7,254 $ 7,447 $ 7,225 $11,673 $10,941
1/31/2009 $ 6,865 $ 6,820 $ 6,517 $11,570 $10,940
2/28/2009 $ 6,391 $ 6,094 $ 5,851 $11,526 $10,941
3/31/2009 $ 6,836 $ 6,627 $ 6,224 $11,686 $10,945
4/30/2009 $ 7,542 $ 7,262 $ 7,031 $11,742 $10,948
5/31/2009 $ 8,079 $ 7,668 $ 7,876 $11,827 $10,949
6/30/2009 $ 8,052 $ 7,683 $ 7,833 $11,895 $10,950
7/31/2009 $ 8,675 $ 8,264 $ 8,549 $12,087 $10,952
8/31/2009 $ 8,868 $ 8,562 $ 9,015 $12,212 $10,954
9/30/2009 $ 9,384 $ 8,882 $ 9,362 $12,340 $10,955
10/31/2009 $ 9,190 $ 8,717 $ 9,246 $12,401 $10,958
11/30/2009 $ 9,566 $ 9,240 $ 9,433 $12,561 $10,959
12/31/2009 $ 9,905 $ 9,418 $ 9,570 $12,365 $10,959
AVERAGE ANNUAL TOTAL RETURN
CLASS C 12/31/09
- ------- --------
1-Year +34.77%
3-Year -2.36%
Since Inception (8/1/06) +0.78%
CLASS C (8/1/06-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON PAYDEN & RYGEL
2045 RETIREMENT BARCLAYS CAPITAL U.S. 90-DAY U.S.
DATE TARGET FUND - CLASS C S&P 500 INDEX MSCI EAFE INDEX AGGREGATE BOND INDEX TREASURY INDEX
- ---------- --------------------- ------------- --------------- --------------------- --------------
8/1/2006 $10,000 $10,000 $10,000 $10,000 $10,000
8/31/2006 $10,190 $10,238 $10,278 $10,153 $10,044
9/30/2006 $10,210 $10,502 $10,296 $10,242 $10,088
10/31/2006 $10,590 $10,844 $10,697 $10,310 $10,127
11/30/2006 $10,920 $11,050 $11,020 $10,430 $10,170
12/31/2006 $11,030 $11,205 $11,366 $10,369 $10,214
1/31/2007 $11,243 $11,375 $11,444 $10,365 $10,256
2/28/2007 $11,172 $11,152 $11,538 $10,525 $10,296
3/31/2007 $11,347 $11,277 $11,838 $10,525 $10,343
4/30/2007 $11,723 $11,776 $12,374 $10,582 $10,387
5/31/2007 $12,098 $12,187 $12,608 $10,502 $10,434
6/30/2007 $12,062 $11,985 $12,627 $10,471 $10,473
7/31/2007 $11,749 $11,613 $12,442 $10,558 $10,513
8/31/2007 $11,843 $11,787 $12,251 $10,687 $10,573
9/30/2007 $12,470 $12,228 $12,909 $10,768 $10,611
10/31/2007 $12,992 $12,423 $13,417 $10,865 $10,644
11/30/2007 $12,271 $11,903 $12,980 $11,060 $10,692
12/31/2007 $12,188 $11,821 $12,688 $11,091 $10,716
1/31/2008 $11,211 $11,112 $11,517 $11,278 $10,771
2/29/2008 $11,137 $10,751 $11,686 $11,293 $10,790
3/31/2008 $10,886 $10,704 $11,569 $11,332 $10,815
4/30/2008 $11,502 $11,226 $12,211 $11,308 $10,826
5/31/2008 $11,841 $11,371 $12,354 $11,225 $10,832
6/30/2008 $10,951 $10,412 $11,346 $11,216 $10,848
7/31/2008 $10,719 $10,325 $10,982 $11,207 $10,869
8/31/2008 $10,741 $10,474 $10,540 $11,314 $10,884
9/30/2008 $ 9,575 $ 9,541 $ 9,020 $11,162 $10,914
10/31/2008 $ 7,803 $ 7,939 $ 7,200 $10,898 $10,931
11/30/2008 $ 7,319 $ 7,369 $ 6,814 $11,253 $10,943
12/31/2008 $ 7,562 $ 7,447 $ 7,225 $11,673 $10,941
1/31/2009 $ 7,151 $ 6,820 $ 6,517 $11,570 $10,940
2/28/2009 $ 6,663 $ 6,094 $ 5,851 $11,526 $10,941
3/31/2009 $ 7,121 $ 6,627 $ 6,224 $11,686 $10,945
4/30/2009 $ 7,854 $ 7,262 $ 7,031 $11,742 $10,948
5/31/2009 $ 8,399 $ 7,668 $ 7,876 $11,827 $10,949
6/30/2009 $ 8,371 $ 7,683 $ 7,833 $11,895 $10,950
7/31/2009 $ 9,016 $ 8,264 $ 8,549 $12,087 $10,952
8/31/2009 $ 9,209 $ 8,562 $ 9,015 $12,212 $10,954
9/30/2009 $ 9,741 $ 8,882 $ 9,362 $12,340 $10,955
10/31/2009 $ 9,526 $ 8,717 $ 9,246 $12,401 $10,958
11/30/2009 $ 9,922 $ 9,240 $ 9,433 $12,561 $10,959
12/31/2009 $10,268 $ 9,418 $ 9,570 $12,365 $10,959
40 | Annual Report
Performance Summary (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN
CLASS R 12/31/09
- ------- --------
1-Year +36.45%
3-Year -1.85%
Since Inception (8/1/06) +1.28%
CLASS R (8/1/06-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON PAYDEN & RYGEL
2045 RETIREMENT BARCLAYS CAPITAL U.S. 90-DAY U.S.
DATE TARGET FUND - CLASS R S&P 500 INDEX MSCI EAFE INDEX AGGREGATE BOND INDEX TREASURY INDEX
- ---------- --------------------- ------------- --------------- --------------------- --------------
8/1/2006 $10,000 $10,000 $10,000 $10,000 $10,000
8/31/2006 $10,200 $10,238 $10,278 $10,153 $10,044
9/30/2006 $10,220 $10,502 $10,296 $10,242 $10,088
10/31/2006 $10,600 $10,844 $10,697 $10,310 $10,127
11/30/2006 $10,940 $11,050 $11,020 $10,430 $10,170
12/31/2006 $11,044 $11,205 $11,366 $10,369 $10,214
1/31/2007 $11,268 $11,375 $11,444 $10,365 $10,256
2/28/2007 $11,207 $11,152 $11,538 $10,525 $10,296
3/31/2007 $11,382 $11,277 $11,838 $10,525 $10,343
4/30/2007 $11,758 $11,776 $12,374 $10,582 $10,387
5/31/2007 $12,144 $12,187 $12,608 $10,502 $10,434
6/30/2007 $12,108 $11,985 $12,627 $10,471 $10,473
7/31/2007 $11,805 $11,613 $12,442 $10,558 $10,513
8/31/2007 $11,909 $11,787 $12,251 $10,687 $10,573
9/30/2007 $12,536 $12,228 $12,909 $10,768 $10,611
10/31/2007 $13,059 $12,423 $13,417 $10,865 $10,644
11/30/2007 $12,359 $11,903 $12,980 $11,060 $10,692
12/31/2007 $12,274 $11,821 $12,688 $11,091 $10,716
1/31/2008 $11,295 $11,112 $11,517 $11,278 $10,771
2/29/2008 $11,231 $10,751 $11,686 $11,293 $10,790
3/31/2008 $10,979 $10,704 $11,569 $11,332 $10,815
4/30/2008 $11,596 $11,226 $12,211 $11,308 $10,826
5/31/2008 $11,958 $11,371 $12,354 $11,225 $10,832
6/30/2008 $11,055 $10,412 $11,346 $11,216 $10,848
7/31/2008 $10,824 $10,325 $10,982 $11,207 $10,869
8/31/2008 $10,846 $10,474 $10,540 $11,314 $10,884
9/30/2008 $ 9,677 $ 9,541 $ 9,020 $11,162 $10,914
10/31/2008 $ 7,892 $ 7,939 $ 7,200 $10,898 $10,931
11/30/2008 $ 7,407 $ 7,369 $ 6,814 $11,253 $10,943
12/31/2008 $ 7,654 $ 7,447 $ 7,225 $11,673 $10,941
1/31/2009 $ 7,242 $ 6,820 $ 6,517 $11,570 $10,940
2/28/2009 $ 6,742 $ 6,094 $ 5,851 $11,526 $10,941
3/31/2009 $ 7,223 $ 6,627 $ 6,224 $11,686 $10,945
4/30/2009 $ 7,958 $ 7,262 $ 7,031 $11,742 $10,948
5/31/2009 $ 8,525 $ 7,668 $ 7,876 $11,827 $10,949
6/30/2009 $ 8,497 $ 7,683 $ 7,833 $11,895 $10,950
7/31/2009 $ 9,144 $ 8,264 $ 8,549 $12,087 $10,952
8/31/2009 $ 9,359 $ 8,562 $ 9,015 $12,212 $10,954
9/30/2009 $ 9,893 $ 8,882 $ 9,362 $12,340 $10,955
10/31/2009 $ 9,688 $ 8,717 $ 9,246 $12,401 $10,958
11/30/2009 $10,086 $ 9,240 $ 9,433 $12,561 $10,959
12/31/2009 $10,444 $ 9,418 $ 9,570 $12,365 $10,959
AVERAGE ANNUAL TOTAL RETURN
ADVISOR CLASS 12/31/09
- ------------- --------
1-Year +37.27%
3-Year -1.37%
Since Inception (8/1/06) +1.79%
ADVISOR CLASS (8/1/06-12/31/09)
(PERFORMANCE GRAPH)
FRANKLIN TEMPLETON
2045 RETIREMENT BARCLAYS CAPITAL U.S. PAYDEN & RYGEL 90-DAY
DATE TARGET FUND - ADVISOR CLASS S&P 500 INDEX MSCI EAFE INDEX AGGREGATE BOND INDEX U.S. TREASURY INDEX
- ---------- --------------------------- ------------- --------------- --------------------- ---------------------
8/1/2006 $10,000 $10,000 $10,000 $10,000 $10,000
8/31/2006 $10,200 $10,238 $10,278 $10,153 $10,044
9/30/2006 $10,230 $10,502 $10,296 $10,242 $10,088
10/31/2006 $10,610 $10,844 $10,697 $10,310 $10,127
11/30/2006 $10,960 $11,050 $11,020 $10,430 $10,170
12/31/2006 $11,072 $11,205 $11,366 $10,369 $10,214
1/31/2007 $11,285 $11,375 $11,444 $10,365 $10,256
2/28/2007 $11,235 $11,152 $11,538 $10,525 $10,296
3/31/2007 $11,420 $11,277 $11,838 $10,525 $10,343
4/30/2007 $11,796 $11,776 $12,374 $10,582 $10,387
5/31/2007 $12,193 $12,187 $12,608 $10,502 $10,434
6/30/2007 $12,167 $11,985 $12,627 $10,471 $10,473
7/31/2007 $11,864 $11,613 $12,442 $10,558 $10,513
8/31/2007 $11,968 $11,787 $12,251 $10,687 $10,573
9/30/2007 $12,606 $12,228 $12,909 $10,768 $10,611
10/31/2007 $13,139 $12,423 $13,417 $10,865 $10,644
11/30/2007 $12,439 $11,903 $12,980 $11,060 $10,692
12/31/2007 $12,362 $11,821 $12,688 $11,091 $10,716
1/31/2008 $11,370 $11,112 $11,517 $11,278 $10,771
2/29/2008 $11,317 $10,751 $11,686 $11,293 $10,790
3/31/2008 $11,064 $10,704 $11,569 $11,332 $10,815
4/30/2008 $11,694 $11,226 $12,211 $11,308 $10,826
5/31/2008 $12,057 $11,371 $12,354 $11,225 $10,832
6/30/2008 $11,162 $10,412 $11,346 $11,216 $10,848
7/31/2008 $10,930 $10,325 $10,982 $11,207 $10,869
8/31/2008 $10,963 $10,474 $10,540 $11,314 $10,884
9/30/2008 $ 9,780 $ 9,541 $ 9,020 $11,162 $10,914
10/31/2008 $ 7,979 $ 7,939 $ 7,200 $10,898 $10,931
11/30/2008 $ 7,482 $ 7,369 $ 6,814 $11,253 $10,943
12/31/2008 $ 7,740 $ 7,447 $ 7,225 $11,673 $10,941
1/31/2009 $ 7,324 $ 6,820 $ 6,517 $11,570 $10,940
2/28/2009 $ 6,830 $ 6,094 $ 5,851 $11,526 $10,941
3/31/2009 $ 7,305 $ 6,627 $ 6,224 $11,686 $10,945
4/30/2009 $ 8,058 $ 7,262 $ 7,031 $11,742 $10,948
5/31/2009 $ 8,642 $ 7,668 $ 7,876 $11,827 $10,949
6/30/2009 $ 8,625 $ 7,683 $ 7,833 $11,895 $10,950
7/31/2009 $ 9,289 $ 8,264 $ 8,549 $12,087 $10,952
8/31/2009 $ 9,495 $ 8,562 $ 9,015 $12,212 $10,954
9/30/2009 $10,057 $ 8,882 $ 9,362 $12,340 $10,955
10/31/2009 $ 9,851 $ 8,717 $ 9,246 $12,401 $10,958
11/30/2009 $10,251 $ 9,240 $ 9,433 $12,561 $10,959
12/31/2009 $10,624 $ 9,418 $ 9,570 $12,365 $10,959
Annual Report | 41
Performance Summary (CONTINUED)
ENDNOTES
WHILE AN ASSET ALLOCATION PLAN CAN BE A VALUABLE TOOL TO HELP REDUCE OVERALL
VOLATILITY, ALL INVESTMENTS INVOLVE SOME DEGREE OF RISK. GENERALLY, INVESTORS
SHOULD BE COMFORTABLE WITH FLUCTUATION IN THE VALUE OF THEIR INVESTMENTS,
ESPECIALLY OVER THE SHORT TERM. STOCKS HAVE HISTORICALLY OUTPERFORMED OTHER
ASSET CLASSES OVER THE LONG TERM, BUT THEY TEND TO FLUCTUATE MORE DRAMATICALLY
OVER THE SHORTER TERM. BOND PRICES GENERALLY MOVE IN THE OPPOSITE DIRECTION OF
INTEREST RATES. THUS, AS PRICES OF BONDS IN THE FUND ADJUST TO A RISE IN
INTEREST RATES, THE FUND'S SHARE PRICE MAY DECLINE. BECAUSE THE FUND INVESTS IN
UNDERLYING FUNDS, WHICH MAY ENGAGE IN A VARIETY OF INVESTMENT STRATEGIES
INVOLVING CERTAIN RISKS, THE FUND MAY BE SUBJECT TO THOSE SAME RISKS. THESE
RISKS ARE DESCRIBED IN THE FUND'S PROSPECTUS.
CLASS C: These shares have higher annual fees and expenses than Class A
shares.
CLASS R: Shares are available to certain eligible investors as described
in the prospectus. These shares have higher annual fees and
expenses than Class A shares.
ADVISOR CLASS: Shares are available to certain eligible investors as described
in the prospectus.
(1.) If the manager had not waived fees, the Fund's total returns would have
been lower.
(2.) Cumulative total return represents the change in value of an investment
over the periods indicated.
(3.) Average annual total return represents the average annual change in value
of an investment over the periods indicated.
(4.) These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated.
(5.) Figures are as stated in the Fund's prospectus current as of the date of
this report. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become
higher than the figures shown.
(6.) Source: (c) 2009 Morningstar. See page 36 for descriptions of the S&P 500,
the MSCI EAFE Index, the BC U.S. Aggregate Index and the P&R 90 Day U.S.
T-Bill Index.
42 | Annual Report
Your Fund's Expenses
FRANKLIN TEMPLETON 2045 RETIREMENT TARGET FUND
As a Fund shareholder, you can incur two types of costs:
- - Transaction costs, including sales charges (loads) on Fund purchases; and
- - Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs,
sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
Annual Report | 43
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES.
Therefore, the second line for each class is useful in comparing ongoing costs
only, and will not help you compare total costs of owning different funds. In
addition, if transaction costs were included, your total costs would have been
higher. Please refer to the Fund prospectus for additional information on
operating expenses.
BEGINNING ENDING EXPENSES PAID EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD**
7/1/09 12/31/09 7/1/09-12/31/09 7/1/09-12/31/09
------------- ------------- --------------- ---------------
CLASS A
Actual $1,000 $1,230.00 $2.53 $ 7.81
Hypothetical
(5% return before expenses) $1,000 $1,022.94 $2.29 $ 7.07
CLASS C
Actual $1,000 $1,226.60 $6.45 $11.73
Hypothetical
(5% return before expenses) $1,000 $1,019.41 $5.85 $10.61
CLASS R
Actual $1,000 $1,229.10 $3.65 $ 8.93
Hypothetical
(5% return before expenses) $1,000 $1,021.93 $3.31 $ 8.08
ADVISOR CLASS
Actual $1,000 $1,231.80 $0.84 $ 6.13
Hypothetical
(5% return before expenses) $1,000 $1,024.45 $0.77 $ 5.55
* Expenses are calculated using the most recent six-month expense ratio
excluding expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 0.45%; C: 1.15%; R: 0.65%; and Advisor:
0.15%), multiplied by the average account value over the period, multiplied
by 184/365 to reflect the one-half year period. A portion of the Fund's
expenses have been paid by the underlying funds in which the Fund invests.
** Expenses are calculated using the most recent six-month expense ratio
including expenses of the underlying funds, net of expense waivers,
annualized for each class (A: 1.39%; C: 2.09%; R: 1.59%; and Advisor:
1.09%), multiplied by the average account value over the period, multiplied
by 184/365 to reflect the one-half year period. A portion of the Fund's
expenses have been paid by the underlying funds in which the Fund invests.
44 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS
FRANKLIN TEMPLETON 2015 RETIREMENT TARGET FUND
YEAR ENDED DECEMBER 31,
--------------------------------------
2009 2008 2007 2006(a)
------- ------- ------ -------
CLASS A
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ..................... $ 8.14 $ 11.35 $10.69 $10.00
------- ------- ------ ------
Income from investment operations(b):
Net investment income(c, d) ......................... 0.19 0.23 0.33 0.13
Net realized and unrealized gains (losses) .......... 2.09 (3.08) 0.72 0.73
------- ------- ------ ------
Total from investment operations ....................... 2.28 (2.85) 1.05 0.86
------- ------- ------ ------
Less distributions from:
Net investment income and short term gains
received from Underlying Funds ................... (0.20) (0.19) (0.23) (0.15)
Net realized gains .................................. (0.05) (0.17) (0.16) (0.02)
------- ------- ------ ------
Total distributions .................................... (0.25) (0.36) (0.39) (0.17)
------- ------- ------ ------
Redemption fees(e) ..................................... -- --(f) --(f) --
------- ------- ------ ------
Net asset value, end of year ........................... $ 10.17 $ 8.14 $11.35 $10.69
======= ======= ====== ======
Total return(g) ........................................ 28.50% (25.55)% 9.84% 8.59%
RATIOS TO AVERAGE NET ASSETS(h)
Expenses before waiver and payments by affiliates(i) ... 1.00% 1.36% 3.60% 12.13%
Expenses net of waiver and payments by affiliates(i) ... 0.46% 0.51% 0.48% 0.50%
Net investment income(d) ............................... 2.11% 2.25% 3.11% 2.92%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................ $17,108 $ 9,407 $5,269 $1,364
Portfolio turnover rate ................................ 12.19% 8.69% 8.19% 2.42%
(a) For the period August 1, 2006 (commencement of operations) to December 31,
2006.
(b) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(c) Based on average daily shares outstanding.
(d) Recognition 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.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Amount rounds to less than $0.01 per share.
(g) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
(h) Ratios are annualized for periods less than one year.
(i) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.82% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 45
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON 2015 RETIREMENT TARGET FUND
YEAR ENDED DECEMBER 31,
-------------------------------------
2009 2008 2007 2006(a)
------ ------- ------ -------
CLASS C
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ..................... $ 8.08 $ 11.28 $10.67 $10.00
------ ------- ------ ------
Income from investment operations(b):
Net investment income(c, d) ......................... 0.13 0.14 0.36 0.14
Net realized and unrealized gains (losses) .......... 2.09 (3.04) 0.60 0.69
------ ------- ------ ------
Total from investment operations ....................... 2.22 (2.90) 0.96 0.83
------ ------- ------ ------
Less distributions from:
Net investment income and short term gains received
from Underlying Funds ............................ (0.15) (0.13) (0.19) (0.14)
Net realized gains .................................. (0.05) (0.17) (0.16) (0.02)
------ ------- ------ ------
Total distributions .................................... (0.20) (0.30) (0.35) (0.16)
------ ------- ------ ------
Redemption fees(e) ..................................... -- --(f) --(f) --
------ ------- ------ ------
Net asset value, end of year ........................... $10.10 $ 8.08 $11.28 $10.67
====== ======= ====== ======
Total return(g) ........................................ 27.75% (26.09)% 9.02% 8.30%
RATIOS TO AVERAGE NET ASSETS(h)
Expenses before waiver and payments by affiliates(i) ... 1.70% 2.04% 4.28% 12.78%
Expenses net of waiver and payments by affiliates(i) ... 1.16% 1.19% 1.16% 1.15%
Net investment income(d) ............................... 1.41% 1.57% 2.43% 2.27%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................ $8,357 $ 4,621 $2,213 $ 63
Portfolio turnover rate ................................ 12.19% 8.69% 8.19% 2.42%
(a) For the period August 1, 2006 (commencement of operations) to December 31,
2006.
(b) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(c) Based on average daily shares outstanding.
(d) Recognition 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.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Amount rounds to less than $0.01 per share.
(g) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
(h) Ratios are annualized for periods less than one year.
(i) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.82% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
46 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON 2015 RETIREMENT TARGET FUND
YEAR ENDED DECEMBER 31,
-------------------------------------
2009 2008 2007 2006(a)
------ ------- ------ -------
CLASS R
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ..................... $ 8.12 $ 11.32 $10.68 $10.00
------ ------- ------ ------
Income from investment operations(b):
Net investment income(c, d) ......................... 0.16 0.18 0.34 0.11
Net realized and unrealized gains (losses) .......... 2.11 (3.05) 0.68 0.74
------ ------- ------ ------
Total from investment operations ....................... 2.27 (2.87) 1.02 0.85
------ ------- ------ ------
Less distributions from:
Net investment income and short term gains received
from Underlying Funds ............................ (0.19) (0.16) (0.22) (0.15)
Net realized gains .................................. (0.05) (0.17) (0.16) (0.02)
------ ------- ------ ------
Total distributions .................................... (0.24) (0.33) (0.38) (0.17)
------ ------- ------ ------
Redemption fees(e) ..................................... -- --(f) --(f) --
------ ------- ------ ------
Net asset value, end of year ........................... $10.15 $ 8.12 $11.32 $10.68
====== ======= ====== ======
Total return(g) ........................................ 28.32% (25.70)% 9.59% 8.48%
RATIOS TO AVERAGE NET ASSETS(h)
Expenses before waiver and payments by affiliates(i) ... 1.20% 1.56% 3.78% 12.28%
Expenses net of waiver and payments by affiliates(i) ... 0.66% 0.71% 0.66% 0.65%
Net investment income(d) ............................... 1.91% 2.05% 2.93% 2.77%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................ $1,365 $ 821 $1,071 $ 11
Portfolio turnover rate ................................ 12.19% 8.69% 8.19% 2.42%
(a) For the period August 1, 2006 (commencement of operations) to December 31,
2006.
(b) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(c) Based on average daily shares outstanding.
(d) Recognition 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.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Amount rounds to less than $0.01 per share.
(g) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
(h) Ratios are annualized for periods less than one year.
(i) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.82% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 47
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON 2015 RETIREMENT TARGET FUND
YEAR ENDED DECEMBER 31,
------------------------------------
ADVISOR CLASS 2009 2008 2007 2006(a)
- ------------- ------ ------- ------ ------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ...................... $ 8.15 $ 11.37 $10.70 $10.00
------ ------- ------ ------
Income from investment operations(b):
Net investment income(c, d) .......................... 0.20 0.25 0.30 0.17
Net realized and unrealized gains (losses) ........... 2.12 (3.09) 0.79 0.71
------ ------- ------ ------
Total from investment operations ........................ 2.32 (2.84) 1.09 0.88
------ ------- ------ ------
Less distributions from:
Net investment income and short term gains received
from Underlying Funds ............................. (0.23) (0.21) (0.26) (0.16)
Net realized gains ................................... (0.05) (0.17) (0.16) (0.02)
------ ------- ------ ------
Total distributions ..................................... (0.28) (0.38) (0.42) (0.18)
------ ------- ------ ------
Redemption fees(e) ...................................... -- --(f) --(f) --
------ ------- ------ ------
Net asset value, end of year ............................ $10.19 $ 8.15 $11.37 $10.70
====== ======= ====== ======
Total return(g) ......................................... 28.94% (25.39)% 10.21% 8.75%
RATIOS TO AVERAGE NET ASSETS(h)
Expenses before waiver and payments by affiliates(i) .... 0.70% 1.06% 3.28% 11.78%
Expenses net of waiver and payments by affiliates(i) .... 0.16% 0.21% 0.16% 0.15%
Net investment income(d) ................................ 2.41% 2.55% 3.43% 3.27%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ......................... $ 199 $ 164 $ 32 $ 20
Portfolio turnover rate ................................. 12.19% 8.69% 8.19% 2.42%
(a) For the period August 1, 2006 (commencement of operations) to December 31,
2006.
(b) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(c) Based on average daily shares outstanding.
(d) Recognition 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.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Amount rounds to less than $0.01 per share.
(g) Total return is not annualized for periods less than one year.
(h) Ratios are annualized for periods less than one year.
(i) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.82% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
48 | Annual Report
Franklin Templeton Fund Allocator Series
STATEMENT OF INVESTMENTS, DECEMBER 31, 2009
FRANKLIN TEMPLETON 2015 RETIREMENT TARGET FUND SHARES VALUE
---------------------------------------------- --------- -----------
INVESTMENTS IN UNDERLYING FUNDS(a)
DOMESTIC EQUITY 45.6%
(b) Franklin Flex Cap Growth Fund, Advisor Class ......................... 107,905 $ 4,529,870
(b) Franklin Growth Opportunities Fund, Advisor Class .................... 95,947 1,821,076
Franklin MicroCap Value Fund, Advisor Class .......................... 29,179 787,840
Franklin Natural Resources Fund, Advisor Class ....................... 25,250 831,224
(b) Franklin Small Cap Growth Fund, Advisor Class ........................ 87,518 790,289
Franklin Utilities Fund, Advisor Class ............................... 49,862 565,427
Mutual Shares Fund, Class Z .......................................... 156,583 3,004,834
-----------
12,330,560
-----------
DOMESTIC FIXED INCOME 15.5%
Franklin Total Return Fund, Advisor Class ............................ 191,306 1,838,449
Franklin U.S. Government Securities Fund, Advisor Class .............. 354,137 2,358,555
-----------
4,197,004
-----------
FOREIGN EQUITY 20.8%
Franklin Gold and Precious Metals Fund, Advisor Class ................ 23,638 973,871
Mutual European Fund, Class Z ........................................ 96,468 1,966,986
Templeton China World Fund, Advisor Class ............................ 27,261 935,859
Templeton Foreign Fund, Advisor Class ................................ 269,012 1,743,196
-----------
5,619,912
-----------
FOREIGN FIXED INCOME 9.6%
Franklin Templeton Emerging Market Debt Opportunities Fund ........... 27,175 297,571
Templeton Global Bond Fund, Advisor Class ............................ 180,808 2,294,451
-----------
2,592,022
-----------
TOTAL INVESTMENTS IN UNDERLYING FUNDS BEFORE SHORT TERM INVESTMENTS
(COST $23,964,540) 91.5% ......................................... 24,739,498
-----------
SHORT TERM INVESTMENTS (COST $2,260,932) 8.4%
MONEY MARKET FUNDS 8.4%
(c) Institutional Fiduciary Trust Money Market Portfolio, 0.00% .......... 2,260,932 2,260,932
-----------
TOTAL INVESTMENTS IN UNDERLYING FUNDS (COST $26,225,472) 99.9% ....... 27,000,430
OTHER ASSETS, LESS LIABILITIES 0.1% .................................. 28,458
-----------
NET ASSETS 100.0% .................................................... $27,028,888
===========
(a) See Note 6 regarding investments in Underlying Funds.
(b) Non-income producing.
(c) The rate shown is the annualized seven-day yield at period end.
The accompanying notes are an integral part of these financial statements.
Annual Report | 49
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS
FRANKLIN TEMPLETON 2025 RETIREMENT TARGET FUND
YEAR ENDED DECEMBER 31,
--------------------------------------
CLASS A 2009 2008 2007 2006(a)
- ------- ------- ------- ------ ------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ...................... $ 7.47 $ 11.45 $10.78 $10.00
------- ------- ------ ------
Income from investment operations(b):
Net investment income(c, d) .......................... 0.16 0.14 0.28 0.12
Net realized and unrealized gains (losses) ........... 2.15 (3.71) 0.82 0.82
------- ------- ------ ------
Total from investment operations ........................ 2.31 (3.57) 1.10 0.94
------- ------- ------ ------
Less distributions from:
Net investment income and short term gains received
from Underlying Funds ............................. (0.14) (0.14) (0.21) (0.14)
Net realized gains ................................... (0.10) (0.27) (0.22) (0.02)
------- ------- ------ ------
Total distributions ..................................... (0.24) (0.41) (0.43) (0.16)
------- ------- ------ ------
Redemption fees(e) ...................................... -- --(f) --(f) --(f)
------- ------- ------ ------
Net asset value, end of year ............................ $ 9.54 $ 7.47 $11.45 $10.78
======= ======= ====== ======
Total return(g) ......................................... 31.34% (31.74)% 10.19% 9.41%
RATIOS TO AVERAGE NET ASSETS(h)
Expenses before waiver and payments by affiliates(i) .... 1.09% 1.50% 3.31% 10.76%
Expenses net of waiver and payments by affiliates(i) .... 0.46% 0.49% 0.47% 0.50%
Net investment income(d) ................................ 1.88% 1.53% 2.55% 2.78%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ......................... $19,725 $ 9,918 $6,952 $1,699
Portfolio turnover rate ................................. 13.43% 6.07% 16.28% 5.36%
(a) For the period August 1, 2006 (commencement of operations) to December 31,
2006.
(b) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(c) Based on average daily shares outstanding.
(d) Recognition 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.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Amount rounds to less than $0.01 per share.
(g) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
(h) Ratios are annualized for periods less than one year.
(i) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.86% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
50 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON 2025 RETIREMENT TARGET FUND
YEAR ENDED DECEMBER 31,
-------------------------------------
CLASS C 2009 2008 2007 2006(a)
- ------- ------ ------- ------ -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $ 7.43 $ 11.40 $10.77 $10.00
------ ------- ------ ------
Income from investment operations(b):
Net investment income(c, d) ........................ 0.10 0.10 0.28 0.10
Net realized and unrealized gains (losses) ......... 2.12 (3.70) 0.74 0.82
------ ------- ------ ------
Total from investment operations ...................... 2.22 (3.60) 1.02 0.92
------ ------- ------ ------
Less distributions from:
Net investment income and short term gains
received from Underlying Funds .................. (0.10) (0.10) (0.17) (0.13)
Net realized gains ................................. (0.10) (0.27) (0.22) (0.02)
------ ------- ------ ------
Total distributions ................................... (0.20) (0.37) (0.39) (0.15)
------ ------- ------ ------
Redemption fees(e) .................................... -- --(f) --(f) --(f)
------ ------- ------ ------
Net asset value, end of year .......................... $ 9.45 $ 7.43 $11.40 $10.77
====== ======= ====== ======
Total return(g) ....................................... 30.18% (32.16)% 9.43% 9.20%
RATIOS TO AVERAGE NET ASSETS(h)
Expenses before waiver and payments by affiliates(i) .. 1.79% 2.20% 3.99% 11.41%
Expenses net of waiver and payments by affiliates(i) .. 1.16% 1.19% 1.15% 1.15%
Net investment income(d) .............................. 1.18% 0.83% 1.87% 2.13%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ....................... $6,308 $ 2,551 $1,104 $ 54
Portfolio turnover rate ............................... 13.43% 6.07% 16.28% 5.36%
(a) For the period August 1, 2006 (commencement of operations) to December 31,
2006.
(b) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(c) Based on average daily shares outstanding.
(d) Recognition 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.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Amount rounds to less than $0.01 per share.
(g) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
(h) Ratios are annualized for periods less than one year.
(i) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.86% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 51
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON 2025 RETIREMENT TARGET FUND
YEAR ENDED DECEMBER 31,
-------------------------------------
CLASS R 2009 2008 2007 2006(a)
- ------- ------ ------- ------ -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ...................... $ 7.47 $ 11.44 $10.77 $10.00
------ ------- ------ ------
Income from investment operations(b):
Net investment income(c, d) .......................... 0.17 0.10 0.27 0.11
Net realized and unrealized gains (losses) ........... 2.12 (3.68) 0.82 0.82
------ ------- ------ ------
Total from investment operations ........................ 2.29 (3.58) 1.09 0.93
------ ------- ------ ------
Less distributions from:
Net investment income and short term gains received
from Underlying Funds ............................. (0.13) (0.12) (0.20) (0.14)
Net realized gains ................................... (0.10) (0.27) (0.22) (0.02)
------ ------- ------ ------
Total distributions ..................................... (0.23) (0.39) (0.42) (0.16)
------ ------- ------ ------
Redemption fees(e) ...................................... -- --(f) --(f) --(f)
------ ------- ------ ------
Net asset value, end of year ............................ $ 9.53 $ 7.47 $11.44 $10.77
====== ======= ====== ======
Total return(g) ......................................... 31.03% (31.90)% 10.11% 9.31%
RATIOS TO AVERAGE NET ASSETS(h)
Expenses before waiver and payments by affiliates(i) .... 1.29% 1.70% 3.49% 10.91%
Expenses net of waiver and payments by affiliates(i) .... 0.66% 0.69% 0.65% 0.65%
Net investment income(d) ................................ 1.68% 1.33% 2.37% 2.63%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ......................... $ 460 $ 155 $ 188 $ 19
Portfolio turnover rate ................................. 13.43% 6.07% 16.28% 5.36%
(a) For the period August 1, 2006 (commencement of operations) to December 31,
2006.
(b) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(c) Based on average daily shares outstanding.
(d) Recognition 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.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Amount rounds to less than $0.01 per share.
(g) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
(h) Ratios are annualized for periods less than one year.
(i) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.86% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
52 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON 2025 RETIREMENT TARGET FUND
YEAR ENDED DECEMBER 31,
-------------------------------------
ADVISOR CLASS 2009 2008 2007 2006(a)
- ------------- ------ ------- ------ --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ...................... $ 7.48 $ 11.46 $10.79 $10.00
------ ------- ------ ------
Income from investment operations(b):
Net investment income(c, d) .......................... 0.17 0.16 0.46 0.20
Net realized and unrealized gains (losses) ........... 2.17 (3.70) 0.67 0.76
------ ------- ------ ------
Total from investment operations ........................ 2.34 (3.54) 1.13 0.96
------ ------- ------ ------
Less distributions from:
Net investment income and short term gains received
from Underlying Funds ............................. (0.17) (0.17) (0.24) (0.15)
Net realized gains ................................... (0.10) (0.27) (0.22) (0.02)
------ ------- ------ ------
Total distributions ..................................... (0.27) (0.44) (0.46) (0.17)
------ ------- ------ ------
Redemption fees(e) ...................................... -- --(f) --(f) --(f)
------ ------- ------ ------
Net asset value, end of year ............................ $ 9.55 $ 7.48 $11.46 $10.79
====== ======= ====== ======
Total return(g) ......................................... 31.61% (31.49)% 10.46% 9.57%
RATIOS TO AVERAGE NET ASSETS(h)
Expenses before waiver and payments by affiliates(i) .... 0.79% 1.20% 2.99% 10.41%
Expenses net of waiver and payments by affiliates(i) .... 0.16% 0.19% 0.15% 0.15%
Net investment income(d) ................................ 2.18% 1.83% 2.87% 3.13%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ......................... $ 463 $ 322 $ 417 $ 51
Portfolio turnover rate ................................. 13.43% 6.07% 16.28% 5.36%
(a) For the period August 1, 2006 (commencement of operations) to December 31,
2006.
(b) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(c) Based on average daily shares outstanding.
(d) Recognition 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.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Amount rounds to less than $0.01 per share.
(g) Total return is not annualized for periods less than one year.
(h) Ratios are annualized for periods less than one year.
(i) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.86% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 53
Franklin Templeton Fund Allocator Series
STATEMENT OF INVESTMENTS, DECEMBER 31, 2009
FRANKLIN TEMPLETON 2025 RETIREMENT TARGET FUND SHARES VALUE
---------------------------------------------- --------- -----------
INVESTMENTS IN UNDERLYING FUNDS(a)
DOMESTIC EQUITY 55.5%
(b) Franklin Flex Cap Growth Fund, Advisor Class ............................ 130,274 $ 5,468,908
(b) Franklin Growth Opportunities Fund, Advisor Class ....................... 118,845 2,255,684
Franklin MicroCap Value Fund, Advisor Class ............................. 34,960 943,923
Franklin Natural Resources Fund, Advisor Class .......................... 30,500 1,004,061
(b) Franklin Small Cap Growth Fund, Advisor Class ........................... 102,689 927,278
Franklin Utilities Fund, Advisor Class .................................. 59,015 669,232
Mutual Shares Fund, Class Z ............................................. 192,383 3,691,830
-----------
14,960,916
-----------
DOMESTIC FIXED INCOME 9.3%
Franklin Total Return Fund, Advisor Class ............................... 114,516 1,100,503
Franklin U.S. Government Securities Fund, Advisor Class ................. 211,990 1,411,855
-----------
2,512,358
-----------
FOREIGN EQUITY 24.7%
Franklin Gold and Precious Metals Fund, Advisor Class ................... 27,969 1,152,314
Mutual European Fund, Class Z ........................................... 117,957 2,405,143
Templeton China World Fund, Advisor Class ............................... 31,798 1,091,628
Templeton Foreign Fund, Advisor Class ................................... 306,985 1,989,262
-----------
6,638,347
-----------
FOREIGN FIXED INCOME 5.6%
Franklin Templeton Emerging Market Debt Opportunities Fund .............. 15,233 166,805
Templeton Global Bond Fund, Advisor Class ............................... 106,328 1,349,302
-----------
1,516,107
-----------
TOTAL INVESTMENTS IN UNDERLYING FUNDS BEFORE SHORT TERM INVESTMENTS
(COST $24,525,580) 95.1% ............................................. 25,627,728
-----------
SHORT TERM INVESTMENTS (COST $1,224,271) 4.5%
MONEY MARKET FUNDS 4.5%
(c) Institutional Fiduciary Trust Money Market Portfolio, 0.00% ............. 1,224,271 1,224,271
-----------
TOTAL INVESTMENTS IN UNDERLYING FUNDS (COST $25,749,851) 99.6% .......... 26,851,999
OTHER ASSETS, LESS LIABILITIES 0.4% ..................................... 103,037
-----------
NET ASSETS 100.0% ....................................................... $26,955,036
===========
(a) See Note 6 regarding investments in Underlying Funds.
(b) Non-income producing.
(c) The rate shown is the annualized seven-day yield at period end.
The accompanying notes are an integral part of these financial statements.
54 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS
FRANKLIN TEMPLETON 2035 RETIREMENT TARGET FUND
YEAR ENDED DECEMBER 31,
--------------------------------------
CLASS A 2009 2008 2007 2006(a)
- ------- ------- ------ ------ -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ............................................. $ 7.12 $11.61 $10.88 $10.00
------- ------ ------ ------
Income from investment operations(b):
Net investment income(c, d) ................................................. 0.13 0.08 0.22 0.09
Net realized and unrealized gains (losses) .................................. 2.34 (4.16) 0.97 0.95
------- ------ ------ ------
Total from investment operations ............................................... 2.47 (4.08) 1.19 1.04
------- ------ ------ ------
Less distributions from:
Net investment income and short term gains received from Underlying Funds ... (0.13) (0.09) (0.16) (0.13)
Net realized gains .......................................................... (0.10) (0.32) (0.30) (0.03)
------- ------ ------ ------
Total distributions ............................................................ (0.23) (0.41) (0.46) (0.16)
------- ------ ------ ------
Redemption fees(e) ............................................................. -- --(f) --(f) --
------- ------ ------ ------
Net asset value, end of year ................................................... $ 9.36 $ 7.12 $11.61 $10.88
======= ====== ====== ======
Total return(g) ................................................................ 35.04% (35.97)% 11.05% 10.44%
RATIOS TO AVERAGE NET ASSETS(h)
Expenses before waiver and payments by affiliates(i) ........................... 1.51% 2.14% 5.16% 13.47%
Expenses net of waiver and payments by affiliates(i) ........................... 0.45% 0.49% 0.48% 0.50%
Net investment income(d) ....................................................... 1.65% 0.87% 2.07% 2.04%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ................................................ $10,391 $5,349 $3,760 $1,171
Portfolio turnover rate ........................................................ 19.76% 7.54% 14.95% 8.29%
(a) For the period August 1, 2006 (commencement of operations) to December 31,
2006.
(b) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(c) Based on average daily shares outstanding.
(d) Recognition 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.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Amount rounds to less than $0.01 per share.
(g) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
(h) Ratios are annualized for periods less than one year.
(i) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.92% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 55
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON 2035 RETIREMENT TARGET FUND
YEAR ENDED DECEMBER 31,
--------------------------------------
CLASS C 2009 2008 2007 2006(a)
- ------- ------ ------- ------- ------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ............................................. $ 7.06 11.52 $ 10.86 $10.00
------ ------- ------- ------
Income from investment operations(b):
Net investment income(c, d) ................................................. 0.09 0.03 0.26 0.12
Net realized and unrealized gains (losses) .................................. 2.28 (4.13) 0.84 0.89
------ ------- ------- ------
Total from investment operations ............................................... 2.37 (4.10) 1.10 1.01
------ ------- ------- ------
Less distributions from:
Net investment income and short term gains received from Underlying Funds ... (0.08) (0.04) (0.14) (0.12)
Net realized gains .......................................................... (0.10) (0.32) (0.30) (0.03)
------ ------- ------- ------
Total distributions ............................................................ (0.18) (0.36) (0.44) (0.15)
------ ------- ------- ------
Redemption fees(e) ............................................................. -- --(f) --(f) --
------ ------- ------- ------
Net asset value, end of year ................................................... $ 9.25 $ 7.06 $ 11.52 $10.86
====== ======= ======= ======
Total return(g) ................................................................ 34.00% (36.34)% 10.12% 10.14%
RATIOS TO AVERAGE NET ASSETS(h)
Expenses before waiver and payments by affiliates(i) ........................... 2.21% 2.84% 5.84% 14.12%
Expenses net of waiver and payments by affiliates(i) ........................... 1.15% 1.19% 1.16% 1.15%
Net investment income(d) ....................................................... 0.95% 0.17% 1.39% 1.39%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ................................................ $3,980 $ 1,522 $ 1,103 $ 57
Portfolio turnover rate ........................................................ 19.76% 7.54% 14.95% 8.29%
(a) For the period August 1, 2006 (commencement of operations) to December 31,
2006.
(b) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(c) Based on average daily shares outstanding.
(d) Recognition 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.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Amount rounds to less than $0.01 per share.
(g) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
(h) Ratios are annualized for periods less than one year.
(i) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.92% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
56 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON 2035 RETIREMENT TARGET FUND
YEAR ENDED DECEMBER 31,
---------------------------------------
2009 2008 2007 2006(a)
------ ------- ------ -------
CLASS R
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ..................... $ 7.13 $ 11.59 $10.88 $10.00
------ ------- ------ ------
Income from investment operations(b):
Net investment income(c, d) ......................... 0.12 0.03 0.28 0.11
Net realized and unrealized gains (losses) .......... 2.33 (4.12) 0.89 0.93
------ ------- ------ ------
Total from investment operations ....................... 2.45 (4.09) 1.17 1.04
------ ------- ------ ------
Less distributions from:
Net investment income and short term
gains received from Underlying Funds ............. (0.11) (0.05) (0.16) (0.13)
Net realized gains .................................. (0.10) (0.32) (0.30) (0.03)
------ ------- ------ ------
Total distributions .................................... (0.21) (0.37) (0.46) (0.16)
------ ------- ------ ------
Redemption fees(e) ..................................... -- --(f) --(f) --
------ ------- ------ ------
Net asset value, end of year ........................... $ 9.37 $ 7.13 $11.59 $10.88
====== ======= ====== ======
Total return(g) ........................................ 34.79% (36.05)% 10.76% 10.40%
RATIOS TO AVERAGE NET ASSETS(h)
Expenses before waiver and payments by affiliates(i) ... 1.71% 2.34% 5.34% 13.62%
Expenses net of waiver and payments by affiliates(i) ... 0.65% 0.69% 0.66% 0.65%
Net investment income(d) ............................... 1.45% 0.67% 1.89% 1.89%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................ $ 368 $ 172 $ 314 $ 23
Portfolio turnover rate ................................ 19.76% 7.54% 14.95% 8.29%
(a) For the period August 1, 2006 (commencement of operations) to December 31,
2006.
(b) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(c) Based on average daily shares outstanding.
(d) Recognition 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.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Amount rounds to less than $0.01 per share.
(g) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
(h) Ratios are annualized for periods less than one year.
(i) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.92% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 57
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON 2035 RETIREMENT TARGET FUND
YEAR ENDED DECEMBER 31,
---------------------------------------
2009 2008 2007 2006(a)
------ ------- ------ -------
ADVISOR CLASS
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ..................... $ 7.14 $ 11.64 $10.89 $10.00
------ ------- ------ ------
Income from investment operations(b):
Net investment income(c, d) ......................... 0.16 0.11 0.20 0.18
Net realized and unrealized gains (losses) .......... 2.34 (4.18) 1.04 0.88
------ ------- ------ ------
Total from investment operations ....................... 2.50 (4.07) 1.24 1.06
------ ------- ------ ------
Less distributions from:
Net investment income and short term gains
received from Underlying Funds ................... (0.15) (0.11) (0.19) (0.14)
Net realized gains .................................. (0.10) (0.32) (0.30) (0.03)
------ ------- ------ ------
Total distributions .................................... (0.25) (0.43) (0.49) (0.17)
------ ------- ------ ------
Redemption fees(e) ..................................... -- --(f) --(f) --
------ ------- ------ ------
Net asset value, end of year ........................... $ 9.39 $ 7.14 $11.64 $10.89
====== ======= ====== ======
Total return(g) ........................................ 35.42% (35.72)% 11.34% 10.60%
RATIOS TO AVERAGE NET ASSETS(h)
Expenses before waiver and payments by affiliates(i) ... 1.21% 1.84% 4.84% 13.12%
Expenses net of waiver and payments by affiliates(i) ... 0.15% 0.19% 0.16% 0.15%
Net investment income(d) ............................... 1.95% 1.17% 2.39% 2.39%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................ $ 493 $ 213 $ 119 $ 59
Portfolio turnover rate ................................ 19.76% 7.54% 14.95% 8.29%
(a) For the period August 1, 2006 (commencement of operations) to December 31,
2006.
(b) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(c) Based on average daily shares outstanding.
(d) Recognition 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.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Amount rounds to less than $0.01 per share.
(g) Total return is not annualized for periods less than one year.
(h) Ratios are annualized for periods less than one year.
(i) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.92% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
58 | Annual Report
Franklin Templeton Fund Allocator Series
STATEMENT OF INVESTMENTS, DECEMBER 31, 2009
FRANKLIN TEMPLETON 2035 RETIREMENT TARGET FUND SHARES VALUE
---------------------------------------------- ------- -----------
INVESTMENTS IN UNDERLYING FUNDS(a)
DOMESTIC EQUITY 66.0%
(b) Franklin Flex Cap Growth Fund, Advisor Class ...................... 85,142 $ 3,574,246
(b) Franklin Growth Opportunities Fund, Advisor Class ................. 78,802 1,495,658
Franklin MicroCap Value Fund, Advisor Class ....................... 23,821 643,169
Franklin Natural Resources Fund, Advisor Class .................... 20,531 675,884
(b) Franklin Small Cap Growth Fund, Advisor Class ..................... 70,935 640,542
Franklin Utilities Fund, Advisor Class ............................ 39,288 445,533
Mutual Shares Fund, Class Z ....................................... 133,972 2,570,914
-----------
10,045,946
-----------
DOMESTIC FIXED INCOME 2.3%
Franklin Total Return Fund, Advisor Class ......................... 16,421 157,809
Franklin U.S. Government Securities Fund, Advisor Class ........... 29,287 195,049
-----------
352,858
-----------
FOREIGN EQUITY 29.4%
Franklin Gold and Precious Metals Fund, Advisor Class ............. 20,056 826,321
Mutual European Fund, Class Z ..................................... 78,279 1,596,105
Templeton China World Fund, Advisor Class ......................... 21,238 729,096
Templeton Foreign Fund, Advisor Class ............................. 205,752 1,333,270
-----------
4,484,792
-----------
FOREIGN FIXED INCOME 1.5%
Franklin Templeton Emerging Market Debt Opportunities Fund ........ 2,328 25,488
Templeton Global Bond Fund, Advisor Class ......................... 15,874 201,438
-----------
226,926
-----------
TOTAL INVESTMENTS IN UNDERLYING FUNDS BEFORE SHORT TERM INVESTMENTS
(COST $14,162,670) 99.2% ....................................... 15,110,522
-----------
SHORT TERM INVESTMENTS (COST $85,862) 0.6%
MONEY MARKET FUNDS 0.6%
(c) Institutional Fiduciary Trust Money Market Portfolio, 0.00% ....... 85,862 85,862
-----------
TOTAL INVESTMENTS IN UNDERLYING FUNDS (COST $14,248,532) 99.8% .... 15,196,384
OTHER ASSETS, LESS LIABILITIES 0.2% ............................... 35,098
-----------
NET ASSETS 100.0% ................................................. $15,231,482
===========
(a) See Note 6 regarding investments in Underlying Funds.
(b) Non-income producing.
(c) The rate shown is the annualized seven-day yield at period end.
The accompanying notes are an integral part of these financial statements.
Annual Report | 59
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS
FRANKLIN TEMPLETON 2045 RETIREMENT TARGET FUND
YEAR ENDED DECEMBER 31,
-------------------------------------
2009 2008 2007 2006(a)
------ ------- ------ -------
CLASS A
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................. $ 6.89 $ 11.57 $10.89 $10.00
------ ------- ------ ------
Income from investment operations(b):
Net investment income(c, d) ..................... 0.12 0.06 0.17 0.08
Net realized and unrealized gains (losses) ...... 2.36 (4.29) 1.06 0.97
------ ------- ------ ------
Total from investment operations ................... 2.48 (4.23) 1.23 1.05
------ ------- ------ ------
Less distributions from:
Net investment income and short term gains
received from Underlying Funds ............... (0.10) (0.08) (0.16) (0.13)
Net realized gains .............................. (0.14) (0.37) (0.39) (0.03)
------ ------- ------ ------
Total distributions ................................ (0.24) (0.45) (0.55) (0.16)
------ ------- ------ ------
Redemption fees(e) ................................. -- --(f) --(f) --
------ ------- ------ ------
Net asset value, end of year ....................... $ 9.13 $ 6.89 $11.57 $10.89
====== ======= ====== ======
Total return(g) .................................... 36.53% (37.46)% 11.32% 10.55%
RATIOS TO AVERAGE NET ASSETS(h)
Expenses before waiver and payments by affiliates(i) 2.03% 3.12% 6.86% 13.15%
Expenses net of waiver and payments by affiliates(i) 0.45% 0.47% 0.47% 0.50%
Net investment income(d) ........................... 1.53% 0.66% 1.70% 1.97%
SUPPLEMENTAL DATA
Net assets, end of year (000's) .................... $6,943 $ 3,389 $2,439 $1,169
Portfolio turnover rate ............................ 14.30% 8.09% 24.40% 8.01%
(a) For the period August 1, 2006 (commencement of operations) to December 31,
2006.
(b) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(c) Based on average daily shares outstanding.
(d) Recognition 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.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Amount rounds to less than $0.01 per share.
(g) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
(h) Ratios are annualized for periods less than one year.
(i) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.94% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
60 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON 2045 RETIREMENT TARGET FUND
YEAR ENDED DECEMBER 31,
-------------------------------------
2009 2008 2007 2006(a)
------ ------- ------ -------
CLASS C
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................. $ 6.81 $ 11.48 $10.87 $10.00
------ ------- ------ ------
Income from investment operations(b):
Net investment income(c, d) ..................... 0.07 0.02 0.23 0.16
Net realized and unrealized gains (losses) ...... 2.33 (4.27) 0.91 0.87
------ ------- ------ ------
Total from investment operations ................... 2.40 (4.25) 1.14 1.03
------ ------- ------ ------
Less distributions from:
Net investment income and short term gains
received from Underlying Funds ............... (0.06) (0.05) (0.14) (0.13)
Net realized gains .............................. (0.14) (0.37) (0.39) (0.03)
------ ------- ------ ------
Total distributions ................................ (0.20) (0.42) (0.53) (0.16)
------ ------- ------ ------
Redemption fees(e) ................................. -- --(f) --(f) --
------ ------- ------ ------
Net asset value, end of year ....................... $ 9.01 $ 6.81 $11.48 $10.87
====== ======= ====== ======
Total return(g) .................................... 35.77% (37.95)% 10.50% 10.30%
RATIOS TO AVERAGE NET ASSETS(h)
Expenses before waiver and payments by affiliates(i) 2.73% 3.82% 7.55% 13.74%
Expenses net of waiver and payments by affiliates(i) 1.15% 1.17% 1.16% 1.09%
Net investment income (loss)(d) .................... 0.83% (0.04)% 1.01% 1.38%
SUPPLEMENTAL DATA
Net assets, end of year (000's) .................... $2,264 $ 958 $ 487 $ 67
Portfolio turnover rate ............................ 14.30% 8.09% 24.40% 8.01%
(a) For the period August 1, 2006 (commencement of operations) to December 31,
2006.
(b) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(c) Based on average daily shares outstanding.
(d) Recognition 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.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Amount rounds to less than $0.01 per share.
(g) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
(h) Ratios are annualized for periods less than one year.
(i) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.94% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 61
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON 2045 RETIREMENT TARGET FUND
YEAR ENDED DECEMBER 31,
-------------------------------------
2009 2008 2007 2006(a)
------ ------- ------ -------
CLASS R
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................. $ 6.88 $ 11.54 $10.88 $10.00
------ ------- ------ ------
Income from investment operations(b):
Net investment income(c, d) ..................... 0.12 0.02 0.24 0.08
Net realized and unrealized gains (losses) ...... 2.35 (4.25) 0.97 0.96
------ ------- ------ ------
Total from investment operations ................... 2.47 (4.23) 1.21 1.04
------ ------- ------ ------
Less distributions from:
Net investment income and short term gains
received from Underlying Funds ............... (0.09) (0.06) (0.16) (0.13)
Net realized gains .............................. (0.14) (0.37) (0.39) (0.03)
------ ------- ------ ------
Total distributions ................................ (0.23) (0.43) (0.55) (0.16)
------ ------- ------ ------
Redemption fees(e) ................................. -- --(f) --(f) --
------ ------- ------ ------
Net asset value, end of year ....................... $ 9.12 $ 6.88 $11.54 $10.88
====== ======= ====== ======
Total return(g) .................................... 36.45% (37.64)% 11.13% 10.44%
RATIOS TO AVERAGE NET ASSETS(h)
Expenses before waiver and payments by
affiliates(i) ................................... 2.23% 3.32% 7.04% 13.30%
Expenses net of waiver and payments by
affiliates(i) ................................... 0.65% 0.67% 0.65% 0.65%
Net investment income(d) ........................... 1.33% 0.46% 1.52% 1.82%
SUPPLEMENTAL DATA
Net assets, end of year (000's) .................... $ 394 $ 156 $ 160 $ 12
Portfolio turnover rate ............................ 14.30% 8.09% 24.40% 8.01%
(a) For the period August 1, 2006 (commencement of operations) to December 31,
2006.
(b) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(c) Based on average daily shares outstanding.
(d) Recognition 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.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Amount rounds to less than $0.01 per share.
(g) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
(h) Ratios are annualized for periods less than one year.
(i) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.94% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
62 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL HIGHLIGHTS (CONTINUED)
FRANKLIN TEMPLETON 2045 RETIREMENT TARGET FUND
YEAR ENDED DECEMBER 31,
-------------------------------------
2009 2008 2007 2006(a)
------ ------- ------ -------
ADVISOR CLASS
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................. $ 6.89 $ 11.59 $10.90 $10.00
------ ------- ------ ------
Income from investment operations(b):
Net investment income(c, d) ..................... 0.14 0.06 0.49 0.12
Net realized and unrealized gains (losses) ...... 2.39 (4.29) 0.78 0.95
------ ------- ------ ------
Total from investment operations ................... 2.53 (4.23) 1.27 1.07
------ ------- ------ ------
Less distributions from:
Net investment income and short term gains
received from Underlying Funds .............. (0.12) (0.10) (0.19) (0.14)
Net realized gains .............................. (0.14) (0.37) (0.39) (0.03)
------ ------- ------ ------
Total distributions ................................ (0.26) (0.47) (0.58) (0.17)
------ ------- ------ ------
Redemption fees(e) ................................. -- --(f) --(f) --
------ ------- ------ ------
Net asset value, end of year ....................... $ 9.16 $ 6.89 $11.59 $10.90
====== ======= ====== ======
Total return(g) .................................... 37.27% (37.39)% 11.65% 10.72%
RATIOS TO AVERAGE NET ASSETS(h)
Expenses before waiver and payments by affiliates(i) 1.73% 2.82% 6.54% 12.80%
Expenses net of waiver and payments by affiliates(i) 0.15% 0.17% 0.15% 0.15%
Net investment income(d) ........................... 1.83% 0.96% 2.02% 2.32%
SUPPLEMENTAL DATA
Net assets, end of year (000's) .................... $ 205 $ 105 $ 164 $ 17
Portfolio turnover rate ............................ 14.30% 8.09% 24.40% 8.01%
(a) For the period August 1, 2006 (commencement of operations) to December 31,
2006.
(b) The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing
of sales and repurchases of the Fund shares in relation to income earned
and/or fluctuating market value of the investments of the Fund.
(c) Based on average daily shares outstanding.
(d) Recognition 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.
(e) Effective September 1, 2008, the redemption fee was eliminated.
(f) Amount rounds to less than $0.01 per share.
(g) Total return is not annualized for periods less than one year.
(h) Ratios are annualized for periods less than one year.
(i) Does not include expenses of the Underlying Funds in which the Fund
invests. The annualized weighted average expense ratio of the Underlying
Funds was 0.94% for the year ended December 31, 2009.
The accompanying notes are an integral part of these financial statements.
Annual Report | 63
Franklin Templeton Fund Allocator Series
STATEMENT OF INVESTMENTS, DECEMBER 31, 2009
FRANKLIN TEMPLETON 2045 RETIREMENT TARGET FUND SHARES VALUE
- ---------------------------------------------- ------- ----------
INVESTMENTS IN UNDERLYING FUNDS(a)
DOMESTIC EQUITY 67.7%
(b) Franklin Flex Cap Growth Fund, Advisor Class .................. 56,378 $2,366,747
(b) Franklin Growth Opportunities Fund, Advisor Class ............. 53,650 1,018,282
Franklin MicroCap Value Fund, Advisor Class ................... 15,943 430,473
Franklin Natural Resources Fund, Advisor Class ................ 14,056 462,726
(b) Franklin Small Cap Growth Fund, Advisor Class ................. 47,738 431,076
Franklin Utilities Fund, Advisor Class ........................ 26,477 300,249
Mutual Shares Fund, Class Z ................................... 84,990 1,630,965
----------
6,640,518
----------
FOREIGN EQUITY 30.6%
Franklin Gold and Precious Metals Fund, Advisor Class ......... 13,313 548,499
Mutual European Fund, Class Z ................................. 52,621 1,072,935
Templeton China World Fund, Advisor Class ..................... 14,485 497,263
Templeton Foreign Fund, Advisor Class ......................... 136,474 884,349
----------
3,003,046
----------
TOTAL INVESTMENTS IN UNDERLYING FUNDS BEFORE SHORT
TERM INVESTMENTS (COST $9,034,440) 98.3% ................... 9,643,564
----------
SHORT TERM INVESTMENTS (COST $18,744) 0.2%
MONEY MARKET FUNDS 0.2%
(c) Institutional Fiduciary Trust Money Market Portfolio, 0.00% ... 18,744 18,744
----------
TOTAL INVESTMENTS IN UNDERLYING FUNDS (COST $9,053,184) 98.5% 9,662,308
OTHER ASSETS, LESS LIABILITIES 1.5% ........................... 143,957
----------
NET ASSETS 100.0% ............................................. $9,806,265
==========
(a) See Note 6 regarding investments in Underlying Funds.
(b) Non-income producing.
(c) The rate shown is the annualized seven-day yield at period end.
The accompanying notes are an integral part of these financial statements.
64 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 2009
FRANKLIN FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON TEMPLETON
2015 2025 2035 2045
RETIREMENT RETIREMENT RETIREMENT RETIREMENT
TARGET FUND TARGET FUND TARGET FUND TARGET FUND
----------- ----------- ----------- -----------
Assets:
Investments in Underlying Funds: (Note 6)
Cost ....................................... $26,225,472 $25,749,851 $14,248,532 $9,053,184
----------- ----------- ----------- ----------
Value ...................................... $27,000,430 $26,851,999 $15,196,384 $9,662,308
Receivables:
Capital shares sold ........................ 32,742 102,028 27,184 89,881
Affiliates ................................. 35,014 53,393 74,270 81,356
Underlying Funds (Note 7) .................. 5,402 5,362 3,686 2,109
----------- ----------- ----------- ----------
Total assets ............................ 27,073,588 27,012,782 15,301,524 9,835,654
----------- ----------- ----------- ----------
Liabilities:
Payables:
Capital shares redeemed .................... 15,923 27,187 42,544 4,004
Reports to shareholders .................... 6,180 6,900 4,839 3,626
Professional fees .......................... 19,245 19,232 19,088 19,051
Unaffiliated transfer agent fees ........... 3,279 4,363 3,538 2,691
Accrued expenses and other liabilities ........ 73 64 33 17
----------- ----------- ----------- ----------
Total liabilities ....................... 44,700 57,746 70,042 29,389
----------- ----------- ----------- ----------
Net assets, at value .................... $27,028,888 $26,955,036 $15,231,482 $9,806,265
----------- ----------- ----------- ----------
Net assets consist of:
Paid-in capital ............................... $27,429,817 $27,311,895 $15,381,878 $9,872,634
Undistributed net investment income ........... 9,528 9,517 5,829 4,856
Net unrealized appreciation (depreciation) .... 774,958 1,102,148 947,852 609,124
Accumulated net realized gain (loss) .......... (1,185,415) (1,468,524) (1,104,077) (680,349)
----------- ----------- ----------- ----------
Net assets, at value .................... $27,028,888 $26,955,036 $15,231,482 $9,806,265
=========== =========== =========== ==========
The accompanying notes are an integral part of these financial statements.
Annual Report | 65
Franklin Templeton Fund Allocator Series
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
December 31, 2009
FRANKLIN FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON TEMPLETON
2015 2025 2035 2045
RETIREMENT RETIREMENT RETIREMENT RETIREMENT
TARGET FUND TARGET FUND TARGET FUND TARGET FUND
----------- ----------- ----------- -----------
CLASS A:
Net assets, at value ...................... $17,107,644 $19,724,875 $10,391,029 $6,943,256
----------- ----------- ----------- ----------
Shares outstanding ........................ 1,682,322 2,067,597 1,110,301 760,313
----------- ----------- ----------- ----------
Net asset value per share(a) .............. $ 10.17 $ 9.54 $ 9.36 $ 9.13
----------- ----------- ----------- ----------
Maximum offering price per share (net asset
value per share / 94.25%) .............. $ 10.79 $ 10.12 $ 9.93 $ 9.69
----------- ----------- ----------- ----------
CLASS C:
Net assets, at value ...................... $ 8,357,298 $ 6,307,692 $ 3,979,532 $2,264,040
----------- ----------- ----------- ----------
Shares outstanding ........................ 827,859 667,269 430,036 251,346
----------- ----------- ----------- ----------
Net asset value and maximum offering price
per share(a) ........................... $ 10.10 $ 9.45 $ 9.25 $ 9.01
----------- ----------- ----------- ----------
CLASS R:
Net assets, at value ...................... $ 1,365,278 $ 459,654 $ 367,795 $ 394,137
----------- ----------- ----------- ----------
Shares outstanding ........................ 134,574 48,244 39,260 43,231
----------- ----------- ----------- ----------
Net asset value and maximum offering price
per share .............................. $ 10.15 $ 9.53 $ 9.37 $ 9.12
----------- ----------- ----------- ----------
ADVISOR CLASS:
Net assets, at value ...................... $ 198,668 $ 462,815 $ 493,126 $ 204,832
----------- ----------- ----------- ----------
Shares outstanding ........................ 19,491 48,465 52,508 22,369
----------- ----------- ----------- ----------
Net asset value and maximum offering price
per share .............................. $ 10.19 $ 9.55 $ 9.39 $ 9.16
----------- ----------- ----------- ----------
(a) Redemption price is equal to net asset value less contingent deferred sales
charges, if applicable.
The accompanying notes are an integral part of these financial statements.
66 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF OPERATIONS
for the year ended December 31, 2009
FRANKLIN FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON TEMPLETON
2015 2025 2035 2045
RETIREMENT RETIREMENT RETIREMENT RETIREMENT
TARGET FUND TARGET FUND TARGET FUND TARGET FUND
----------- ----------- ----------- -----------
Investment income:
Dividends from Underlying Funds (Note 6) ...... $ 496,896 $ 441,759 $ 231,274 $ 135,037
----------- ----------- ---------- -----------
Expenses:
Asset allocation fees (Note 3a) ............... 44,982 45,073 26,938 16,851
Distribution fees: (Note 3c)
Class A .................................... 37,420 42,555 23,359 14,742
Class C .................................... 55,737 41,211 25,749 14,999
Class R .................................... 5,504 1,219 1,312 1,251
Transfer agent fees (Note 3e) ................. 34,168 47,383 42,225 37,306
Reports to shareholders ....................... 16,343 16,887 13,074 10,193
Registration and filing fees .................. 49,362 52,321 48,953 47,897
Professional fees ............................. 22,940 22,876 23,111 22,874
Trustees' fees and expenses ................... 102 87 49 31
Other ......................................... 5,090 5,143 4,841 1,014
Expenses borne by Underlying Funds (Note 7) ... (38,371) (39,352) (26,842) (18,247)
----------- ----------- ---------- -----------
Total expenses .......................... 233,277 235,403 182,769 148,911
Expenses waived/paid by affiliates
(Note 3f) ............................ (104,104) (120,824) (115,386) (107,701)
----------- ----------- ---------- -----------
Net expenses ......................... 129,173 114,579 67,383 41,210
----------- ----------- ---------- -----------
Net investment income ............. 367,723 327,180 163,891 93,827
----------- ----------- ---------- -----------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Sale of investments in Underlying Funds .... (1,075,435) (1,216,954) (933,927) (528,790)
Realized gain distributions by
Underlying Funds ........................ 20,007 23,467 16,099 10,920
----------- ----------- ---------- -----------
Net realized gain (loss) .......... (1,055,428) (1,193,487) (917,828) (517,870)
----------- ----------- ---------- -----------
Net change in unrealized appreciation
(depreciation) on investments in
Underlying Funds ........................... 5,507,987 6,412,582 4,326,510 2,732,571
----------- ----------- ---------- -----------
Net realized and unrealized gain (loss) .......... 4,452,559 5,219,095 3,408,682 2,214,701
----------- ----------- ---------- -----------
Net increase (decrease) in net assets
resulting from operations ..................... $ 4,820,282 $ 5,546,275 $3,572,573 $ 2,308,528
=========== =========== ========== ===========
The accompanying notes are an integral part of these financial statements.
Annual Report | 67
Franklin Templeton Fund Allocator Series
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
FRANKLIN TEMPLETON 2015 FRANKLIN TEMPLETON 2025
RETIREMENT TARGET FUND RETIREMENT TARGET FUND
------------------------- -------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------- -------------------------
2009 2008 2009 2008
----------- ----------- ----------- -----------
Increase (decrease) in net assets:
Operations:
Net investment income ................................. $ 367,723 $ 295,731 $ 327,180 $ 182,034
Net realized gain (loss) from Underlying Funds ........ (1,055,428) 41,856 (1,193,487) 46,702
Net change in unrealized appreciation (depreciation) on
investments in Underlying Funds ................. 5,507,987 (4,633,652) 6,412,582 (5,148,508)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations ................................. 4,820,282 (4,296,065) 5,546,275 (4,919,772)
----------- ----------- ----------- -----------
Distributions to shareholders from:
Net investment income and short term gains received
from Underlying Funds:
Class A ............................................ (301,796) (191,755) (275,272) (181,018)
Class C ............................................ (102,126) (71,295) (59,521) (32,675)
Class R ............................................ (23,917) (16,886) (5,009) (2,414)
Advisor Class ...................................... (4,523) (3,962) (7,912) (6,999)
Net realized gains:
Class A ............................................ (72,395) (143,847) (173,634) (293,606)
Class C ............................................ (29,231) (107,235) (49,256) (51,093)
Class R ............................................ (6,384) (18,739) (2,250) (6,089)
Advisor Class ...................................... (1,070) (3,513) (4,568) (12,457)
----------- ----------- ----------- -----------
Total distributions to shareholders ...................... (541,442) (557,232) (577,422) (586,351)
----------- ----------- ----------- -----------
Capital share transactions: (Note 2)
Class A ............................................ 4,872,295 7,039,466 6,070,768 7,272,636
Class C ............................................ 2,581,320 3,984,119 2,685,980 2,382,415
Class R ............................................ 289,851 72,378 246,752 49,941
Advisor Class ...................................... (6,375) 184,187 35,275 86,251
----------- ----------- ----------- -----------
Total capital share transactions ......................... 7,737,091 11,280,150 9,038,775 9,791,243
----------- ----------- ----------- -----------
Redemption fees .......................................... -- 112 -- 253
----------- ----------- ----------- -----------
Net increase (decrease) in net assets .............. 12,015,931 6,426,965 14,007,628 4,285,373
Net assets:
Beginning of year ..................................... 15,012,957 8,585,992 12,947,408 8,662,035
----------- ----------- ----------- -----------
End of year ........................................... $27,028,888 $15,012,957 $26,955,036 $12,947,408
----------- ----------- ----------- -----------
Undistributed net investment income included in net
assets:
End of year ........................................... $ 9,528 $ 70,075 $ 9,517 $ 25,469
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
68 | Annual Report
Franklin Templeton Fund Allocator Series
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FRANKLIN TEMPLETON 2035 FRANKLIN TEMPLETON 2045
RETIREMENT TARGET FUND RETIREMENT TARGET FUND
------------------------- -------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------- -------------------------
2009 2008 2009 2008
----------- ----------- ----------- -----------
Increase (decrease) in net assets:
Operations:
Net investment income ................................. $ 163,891 $ 53,049 $ 93,827 $ 23,744
Net realized gain (loss) from Underlying Funds ........ (917,828) 2,648 (517,870) 12,489
Net change in unrealized appreciation (depreciation) on
investments in Underlying Funds .................... 4,326,510 (3,303,139) 2,732,571 (2,122,749)
----------- ----------- ---------- -----------
Net increase (decrease) in net assets resulting
from operations ................................. 3,572,573 (3,247,442) 2,308,528 (2,086,516)
----------- ----------- ---------- -----------
Distributions to shareholders from:
Net investment income and short term gains received
from Underlying Funds:
Class A ............................................ (134,526) (63,814) (72,815) (40,147)
Class C ............................................ (32,842) (9,049) (14,103) (7,185)
Class R ............................................ (4,111) (1,220) (3,748) (1,248)
Advisor Class ...................................... (7,347) (3,175) (2,603) (1,555)
Net realized gains:
Class A ............................................ (96,221) (183,268) (92,604) (124,622)
Class C ............................................ (31,557) (45,620) (27,915) (27,951)
Class R ............................................ (3,334) (10,162) (3,857) (10,661)
Advisor Class ...................................... (4,682) (8,438) (2,631) (6,679)
----------- ----------- ---------- -----------
Total distributions to shareholders ......................... (314,620) (324,746) (220,276) (220,048)
----------- ----------- ---------- -----------
Capital share transactions: (Note 2)
Class A ............................................ 2,728,858 4,203,952 2,047,175 2,708,547
Class C ............................................ 1,692,983 1,141,684 846,696 841,350
Class R ............................................ 117,031 (16,717) 157,405 99,956
Advisor Class ...................................... 178,125 203,645 59,416 14,472
----------- ----------- ---------- -----------
Total capital share transactions ............................ 4,716,997 5,532,564 3,110,692 3,664,325
----------- ----------- ---------- -----------
Redemption fees ............................................. -- 105 -- 68
----------- ----------- ---------- -----------
Net increase (decrease) in net assets ........... 7,974,950 1,960,481 5,198,944 1,357,829
Net assets:
Beginning of year ........................................ 7,256,532 5,296,051 4,607,321 3,249,492
----------- ----------- ---------- -----------
End of year .............................................. $15,231,482 $ 7,256,532 $9,806,265 $ 4,607,321
----------- ----------- ---------- -----------
Undistributed net investment income included in net assets:
End of year .............................................. $ 5,829 $ 17,383 $ 4,856 $ 1,970
=========== =========== ========== ===========
The accompanying notes are an integral part of these financial statements.
Annual Report | 69
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Templeton Fund Allocator Series (Trust) is registered under the
Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment
company, consisting of ten separate funds, four of which are included in this
report (Funds). The financial statements of the remaining funds in the Trust are
presented separately. The Funds invest primarily in Franklin Templeton mutual
funds (Underlying Funds). The Funds offer four classes of shares: Class A, Class
C, Class R, and Advisor Class. Each class of shares differs by its initial sales
load, contingent deferred sales charges, distribution fees, voting rights on
matters affecting a single class and its exchange privilege.
The following summarizes the Funds' significant accounting policies.
A. SECURITY VALUATION
Net asset value per share is calculated as of the close of trading of the NYSE.
Investments in the Underlying Funds are valued at their closing net asset value
each trading day.
B. INCOME TAXES
No provision has been made for U.S. income taxes because it is each fund's
policy to qualify as a regulated investment company under the Internal Revenue
Code and to distribute to shareholders substantially all of its taxable income
and net realized gains.
The Funds have reviewed the tax positions, taken on federal income tax returns,
for each of the three open tax years and as of December 31, 2009, and have
determined that no provision for income tax is required in the Funds' financial
statements.
C. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Estimated expenses are accrued daily. Dividend income and realized gain
distributions by Underlying Funds are recorded on the ex-dividend date.
Distributions to shareholders are recorded on the ex-dividend date and are
determined according to income tax regulations (tax basis). Distributable
earnings determined on a tax basis may differ from earnings recorded in
accordance with accounting principles generally accepted in the United States of
America. 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.
70 | Annual Report
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
(CONTINUED)
Common expenses incurred by the Trust are allocated among the funds based on the
ratio of net assets of each fund to the combined net assets of the Trust. Fund
specific expenses are charged directly to the fund that incurred the expense.
The Funds indirectly bear their proportionate share of expenses from the
Underlying Funds. Since the Underlying Funds have varied expense levels and the
Funds may own different proportions of the Underlying Funds at different times,
the amount of expenses incurred indirectly by the Funds will vary.
Realized and unrealized gains and losses and net investment income, not
including class specific expenses, are allocated daily to each class of shares
based upon the relative proportion of net assets of each class. Differences in
per share distributions, by class, are generally due to differences in class
specific expenses.
D. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
E. REDEMPTION FEES
A short term trading redemption fee was imposed, with some exceptions, on any
fund shares that were redeemed or exchanged within seven calendar days following
their purchase date. The redemption fee was 2% of the amount redeemed. Such fees
were retained by the funds and accounted for as an addition to paid-in capital.
Effective September 1, 2008, the redemption fee was eliminated.
F. GUARANTEES AND INDEMNIFICATIONS
Under the Trust's organizational documents, its officers and trustees are
indemnified by the Trust against certain liabilities arising out of the
performance of their duties to the Trust. Additionally, in the normal course of
business, the Trust, on behalf of the Funds enters into contracts with service
providers that contain general indemnification clauses. The Trust's maximum
exposure under these arrangements is unknown as this would involve future claims
that may be made against the Trust that have not yet occurred. Currently, the
Trust expects the risk of loss to be remote.
Annual Report | 71
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST
At December 31, 2009, there were an unlimited number of shares authorized
(without par value). Transactions in the Funds' shares were as follows:
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
2015 RETIREMENT 2025 RETIREMENT
TARGET FUND TARGET FUND
---------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- --------- -----------
CLASS A SHARES:
Year ended December 31, 2009
Shares sold ............................... 907,400 $ 8,161,362 1,043,264 $ 8,564,140
Shares issued in reinvestment of
distributions .......................... 38,856 359,866 50,737 443,738
Shares redeemed ........................... (419,782) (3,648,933) (353,798) (2,937,110)
-------- ----------- --------- -----------
Net increase (decrease) ................... 526,474 $ 4,872,295 740,203 $ 6,070,768
======== =========== ======= ===========
Year ended December 31, 2008
Shares sold ............................... 875,282 $ 8,706,575 961,941 $ 9,374,538
Shares issued in reinvestment of
distributions .......................... 32,398 299,153 49,889 441,620
Shares redeemed ........................... (216,068) (1,966,262) (291,651) (2,543,522)
-------- ----------- --------- -----------
Net increase (decrease) ................... 691,612 $ 7,039,466 720,179 $ 7,272,636
======== =========== ======= ===========
CLASS C SHARES:
Year ended December 31, 2009
Shares sold ............................... 582,526 $ 5,164,172 456,773 $ 3,767,686
Shares issued in reinvestment of
distributions .......................... 12,262 113,127 11,020 94,470
Shares redeemed ........................... (338,573) (2,695,979) (144,058) (1,176,176)
-------- ----------- --------- -----------
Net increase (decrease) ................... 256,215 $ 2,581,320 323,735 $ 2,685,980
======== =========== ======= ===========
Year ended December 31, 2008
Shares sold ............................... 710,317 $ 7,167,011 273,080 $ 2,613,167
Shares issued in reinvestment of
distributions .......................... 16,315 154,225 8,634 76,524
Shares redeemed ........................... (351,199) (3,337,117) (35,040) (307,276)
-------- ----------- --------- -----------
Net increase (decrease) ................... 375,433 $ 3,984,119 246,674 $ 2,382,415
======== =========== ======= ===========
CLASS R SHARES:
Year ended December 31, 2009
Shares sold ............................... 39,669 $ 347,239 28,890 $ 258,030
Shares issued in reinvestment of
distributions .......................... 3,298 30,260 809 7,173
Shares redeemed ........................... (9,445) (87,648) (2,220) (18,451)
-------- ----------- --------- -----------
Net increase (decrease) ................... 33,522 $ 289,851 27,479 $ 246,752
======== =========== ======= ===========
Year ended December 31, 2008
Shares sold ............................... 27,245 $ 283,010 13,572 $ 137,944
Shares issued in reinvestment of
distributions .......................... 3,756 35,625 897 8,225
Shares redeemed ........................... (24,499) (246,257) (10,175) (96,228)
-------- ----------- --------- -----------
Net increase (decrease) ................... 6,502 $ 72,378 4,294 $ 49,941
======== =========== ======= ===========
72 | Annual Report
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
2015 RETIREMENT 2025 RETIREMENT
TARGET FUND TARGET FUND
------------------ ------------------
SHARES AMOUNT SHARES AMOUNT
------ -------- ------ --------
ADVISOR CLASS SHARES:
Year ended December 31, 2009
Shares sold ............................... 11 $ 106 8,478 $ 59,651
Shares issued in reinvestment of
distributions .......................... 595 5,454 1,427 12,480
Shares redeemed ........................... (1,240) (11,935) (4,571) (36,856)
------ -------- ------ --------
Net increase (decrease) ................... (634) $ (6,375) 5,334 $ 35,275
====== ======== ====== ========
Year ended December 31, 2008
Shares sold ............................... 18,911 $201,893 10,079 $110,551
Shares issued in reinvestment of
distributions .......................... 750 7,092 2,132 19,170
Shares redeemed ........................... (2,394) (24,798) (5,464) (43,470)
------ -------- ------ --------
Net increase (decrease) ................... 17,267 $184,187 6,747 $ 86,251
====== ======== ====== ========
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
2035 RETIREMENT 2045 RETIREMENT
TARGET FUND TARGET FUND
---------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- -------- ----------
CLASS A SHARES:
Year ended December 31, 2009
Shares sold ............................... 582,346 $ 4,588,112 359,779 $2,772,073
Shares issued in reinvestment of
distributions .......................... 25,833 218,195 17,365 141,373
Shares redeemed ........................... (249,555) (2,077,449) (108,978) (866,271)
-------- ----------- -------- ----------
Net increase (decrease) ................... 358,624 $ 2,728,858 268,166 $2,047,175
======== =========== ======== ==========
Year ended December 31, 2008
Shares sold ............................... 539,247 $ 5,181,122 312,283 $3,000,890
Shares issued in reinvestment of
distributions .......................... 22,905 206,765 13,716 120,164
Shares redeemed ........................... (134,219) (1,183,935) (44,626) (412,507)
-------- ----------- -------- ----------
Net increase (decrease) ................... 427,933 $ 4,203,952 281,373 $2,708,547
======== =========== ======== ==========
CLASS C SHARES:
Year ended December 31, 2009
Shares sold ............................... 284,199 $ 2,259,656 132,014 $1,014,563
Shares issued in reinvestment of
distributions .......................... 6,606 54,119 4,150 32,495
Shares redeemed ........................... (76,333) (620,792) (25,445) (200,362)
-------- ----------- -------- ----------
Net increase (decrease) ................... 214,472 $ 1,692,983 110,719 $ 846,696
======== =========== ======== ==========
Year ended December 31, 2008
Shares sold ............................... 143,566 $ 1,353,699 103,668 $ 882,722
Shares issued in reinvestment of
distributions .......................... 5,241 48,916 3,042 27,321
Shares redeemed ........................... (28,939) (260,931) (8,500) (68,693)
-------- ----------- -------- ----------
Net increase (decrease) ................... 119,868 $ 1,141,684 98,210 $ 841,350
======== =========== ======== ==========
Annual Report | 73
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
2035 RETIREMENT 2045 RETIREMENT
TARGET FUND TARGET FUND
------------------- -------------------
SHARES AMOUNT SHARES AMOUNT
------- --------- ------- ---------
CLASS R SHARES:
Year ended December 31, 2009
Shares sold .................... 15,155 $ 117,182 23,301 $ 173,778
Shares issued in reinvestment of
distributions ............... 875 7,340 927 7,604
Shares redeemed ................ (919) (7,491) (3,608) (23,977)
------- --------- ------- ---------
Net increase (decrease) ........ 15,111 $ 117,031 20,620 $ 157,405
======= ========= ======= =========
Year ended December 31, 2008
Shares sold .................... 15,557 $ 156,698 19,145 $ 196,091
Shares issued in reinvestment of
distributions ............... 1,147 11,056 1,208 11,418
Shares redeemed ................ (19,649) (184,471) (11,585) (107,553)
------- --------- ------- ---------
Net increase (decrease) ........ (2,945) $ (16,717) 8,768 $ 99,956
======= ========= ======= =========
ADVISOR CLASS SHARES:
Year ended December 31, 2009
Shares sold .................... 21,742 $ 170,755 8,135 $ 65,820
Shares issued in reinvestment of
distributions ............... 1,413 12,029 634 5,235
Shares redeemed ................ (531) (4,659) (1,601) (11,639)
------- --------- ------- ---------
Net increase (decrease) ........ 22,624 $ 178,125 7,168 $ 59,416
======= ========= ======= =========
Year ended December 31, 2008
Shares sold .................... 20,527 $ 212,613 7,432 $ 73,689
Shares issued in reinvestment of
distributions ............... 1,254 11,287 863 7,870
Shares redeemed ................ (2,139) (20,255) (7,256) (67,087)
------- --------- ------- ---------
Net increase (decrease) ........ 19,642 $ 203,645 1,039 $ 14,472
======= ========= ======= =========
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 Trust are also officers and/or directors/trustees of certain of
the Underlying Funds and of the following subsidiaries:
SUBSIDIARY AFFILIATION
- ---------- ----------------------
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin Templeton Services, LLC (FT Services) Administrative manager
Franklin Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services) Transfer agent
74 | Annual Report
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
A. ASSET ALLOCATION FEES
The Funds pay an asset allocation fee to Advisers of 0.25% per year of the
average daily net assets of each of the Funds for investment advisory services,
consisting principally of determining the allocation of assets of the Funds
among the designated Underlying Funds.
B. ADMINISTRATIVE FEES
Under an agreement with Advisers, FT Services provides administrative services
to the Funds. The fee is paid by Advisers based on average daily net assets, and
is not an additional expense of the Funds.
C. DISTRIBUTION FEES
The Trust's Board of Trustees has adopted distribution plans for each share
class, with the exception of Advisor Class shares, pursuant to Rule 12b-1 under
the 1940 Act.
On December 1, 2008, the Trust's Board of Trustees approved a modification to
the Class A distribution plan, for those funds that had a Class A compensation
plan, changing the form of the plan from a compensation to a reimbursement
distribution plan. Under the distribution plan, the Funds reimburse Distributors
for costs incurred in connection with the servicing, sale and distribution of
each Funds' shares up to the maximum annual plan rate for each class. This
change was effective February 1, 2009. Under the Class A reimbursement
distribution plans, costs exceeding the maximum for the current plan year cannot
be reimbursed in subsequent periods. Prior to February 1, 2009, under the Funds'
Class A compensation distribution plan, the Funds paid Distributors for costs
incurred in connection with the servicing, sale and distribution of the Funds'
shares up to a certain percentage per year of its average daily net assets.
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 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 of Trustees has set the current rate at 0.30% per year for Class A
shares until further notice and approval by the Board.
Annual Report | 75
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
D. SALES CHARGES/UNDERWRITING AGREEMENTS
Distributors has advised the Funds of the following commission transactions
related to the sales and redemptions of the Funds' shares for the year:
FRANKLIN FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON TEMPLETON
2015 2025 2035 2045
RETIREMENT RETIREMENT RETIREMENT RETIREMENT
TARGET FUND TARGET FUND TARGET FUND TARGET FUND
----------- ----------- ----------- -----------
Sales charges retained net of commissions paid to
unaffiliated broker/dealers .................. $26,959 $36,572 $21,471 $12,682
Contingent deferred sales charges retained ...... $ 820 $ 743 $ 633 $ 211
E. TRANSFER AGENT FEES
For the year ended December 31, 2009, the Funds paid transfer agent fees as
noted in the Statements of Operations of which the following amounts were
retained by Investor Services:
FRANKLIN FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON TEMPLETON
2015 2025 2035 2045
RETIREMENT RETIREMENT RETIREMENT RETIREMENT
TARGET FUND TARGET FUND TARGET FUND TARGET FUND
----------- ----------- ----------- -----------
Transfer agent fees ............................. $22,646 $32,021 $29,654 $26,675
F. WAIVER AND EXPENSE REIMBURSEMENTS
Advisers has contractually agreed in advance to waive or limit its fees and to
assume as its own expense certain expenses otherwise payable by the Funds so
that the common expenses (i.e. a combination of asset allocation fees and other
expenses, but excluding distribution fees and acquired fund fees and expenses)
for each class of the Funds do not exceed 0.15% (other than certain non-routine
expenses or costs, including those relating to litigation, indemnification,
reorganizations, and liquidations) until April 30, 2010. Prior to May 1, 2009,
the common expenses and acquired fund fees and expenses were limited to 0.97%,
1.00%, 1.04% and 1.04% for the Franklin Templeton 2015 Retirement Target Fund,
Franklin Templeton 2025 Retirement Target Fund, Franklin Templeton 2035
Retirement Target Fund and Franklin Templeton 2045 Retirement Target Fund,
respectively.
G. OTHER AFFILIATED TRANSACTIONS
At December 31, 2009, Advisers owned 9.00% of the Franklin Templeton 2045
Retirement Target Fund's outstanding shares.
76 | Annual Report
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES
For tax purposes, capital losses may be carried over to offset future capital
gains, if any. At December 31, 2009, the capital loss carryforwards were as
follows:
FRANKLIN FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON TEMPLETON
2015 2025 2035 2045
RETIREMENT RETIREMENT RETIREMENT RETIREMENT
TARGET FUND TARGET FUND TARGET FUND TARGET FUND
----------- ----------- ----------- -----------
Capital loss carryforwards expiring in:
2017 ............................... $786,885 $940,348 $560,066 $365,530
The tax character of distributions paid during the years ended December 31, 2009
and 2008, was as follows:
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
2015 RETIREMENT 2025 RETIREMENT
TARGET FUND TARGET FUND
------------------- -------------------
2009 2008 2009 2008
-------- -------- -------- --------
Distributions paid from:
Ordinary income .................... $432,437 $283,898 $348,017 $222,191
Long term capital gain ............. 109,005 273,334 229,405 364,160
-------- -------- -------- --------
541,442 557,232 577,422 586,351
======== ======== ======== ========
FRANKLIN TEMPLETON FRANKLIN TEMPLETON
2035 RETIREMENT 2045 RETIREMENT
TARGET FUND TARGET FUND
------------------- -------------------
2009 2008 2009 2008
-------- -------- -------- --------
Distributions paid from:
Ordinary income .................... $178,895 $ 77,258 $ 93,266 $ 50,135
Long term capital gain ............. 135,725 247,488 127,010 169,913
-------- -------- -------- --------
$314,620 $324,746 $220,276 $220,048
======== ======== ======== ========
At December 31, 2009, the cost of investments, net unrealized appreciation
(depreciation) and undistributed ordinary income for income tax purposes were as
follows:
FRANKLIN FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON TEMPLETON
2015 2025 2035 2045
RETIREMENT RETIREMENT RETIREMENT RETIREMENT
TARGET FUND TARGET FUND TARGET FUND TARGET FUND
----------- ----------- ----------- -----------
Cost of investments ................... $26,624,002 $26,278,030 $14,792,542 $9,368,004
=========== =========== =========== ==========
Unrealized appreciation ............... $ 1,242,521 $ 1,385,965 $ 906,280 $ 607,513
Unrealized depreciation ............... (866,093) (811,996) (502,438) (313,209)
----------- ----------- ----------- ----------
Net unrealized appreciation
(depreciation) ..................... $ 376,428 $ 573,969 $ 403,842 $ 294,304
=========== =========== =========== ==========
Distributable earnings - undistributed
ordinary income .................... $ 9,528 $ 9,517 $ 5,829 $ 4,856
=========== =========== =========== ==========
Annual Report | 77
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES (CONTINUED)
Net investment income (loss) differs for financial statement and tax purposes
primarily due to differing treatment of short term capital gains distributions
from Underlying Funds.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales and short term capital gains
distributions from Underlying Funds.
5. INVESTMENT TRANSACTIONS
Purchases and sales of Underlying Funds (excluding short term securities) for
the year ended December 31, 2009, were as follows:
FRANKLIN FRANKLIN FRANKLIN FRANKLIN
TEMPLETON TEMPLETON TEMPLETON TEMPLETON
2015 2025 2035 2045
RETIREMENT RETIREMENT RETIREMENT RETIREMENT
TARGET FUND TARGET FUND TARGET FUND TARGET FUND
----------- ----------- ----------- -----------
Purchases ............ $8,617,816 $10,538,407 $6,810,536 $3,911,387
Sales ................ $2,186,415 $ 2,406,704 $2,121,384 $ 960,609
6. INVESTMENTS IN UNDERLYING FUNDS
The Funds invest primarily in the Underlying Funds which are managed by Advisers
(or an affiliate of Advisers). The Funds do not invest in the Underlying Funds
for the purpose of exercising management or control. At December 31, 2009, the
Funds held no positions which exceed 5% of the Underlying Funds' shares
outstanding.
The Funds may invest in the Institutional Fiduciary Trust Money Market Portfolio
(Sweep Money Fund), an open-end investment company managed by Advisers. Pursuant
to a SEC exemptive order specific to the Funds' investment in the Sweep Money
Fund, asset allocation fees are reduced on assets invested in the Sweep Money
Fund, in an amount not to exceed the management and administrative fees paid by
the Sweep Money Fund.
7. SPECIAL SERVICING AGREEMENT
On May 1, 2009, the Funds entered into a Special Servicing Agreement (SSA) with
the Underlying Funds and certain service providers of the Funds and of the
Underlying Funds. Under the SSA, each Underlying Fund may pay a portion of the
Funds' expenses (other than any asset allocation, administrative, and
distribution fees) to the extent such payments are less than the amount of the
benefits realized or expected to be realized by the Underlying Fund (e.g., due
to reduced costs associated with servicing accounts) from the investment in the
Underlying Fund by the Funds. The amount of expenses allocated during the year
ended December 31, 2009 is noted in the Statements of Operations.
78 | Annual Report
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. 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 $725
million (Global Credit Facility) to provide 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 January 22,
2010, the Funds renewed the Global Credit Facility, for a total of $750 million,
maturing January 21, 2011.
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 0.10% based upon the unused portion of the Global
Credit Facility, which is reflected in other expenses on the Statements of
Operations. During the year ended December 31, 2009, the Funds did not utilize
the Global Credit Facility.
9. FAIR VALUE MEASUREMENTS
The Trust follows a fair value hierarchy that distinguishes between market data
obtained from independent sources (observable inputs) and the Trust's own market
assumptions (unobservable inputs). These inputs are used in determining the
value of the Funds' investments and are summarized in the following fair value
hierarchy:
- Level 1 - quoted prices in active markets for identical securities
- Level 2 - other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speed, credit risk,
etc.)
- Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities.
At December 31, 2009, all of the Funds' investments in Underlying Funds carried
at fair value were in Level 1 inputs. For detailed Underlying Fund categories,
see the accompanying Statements of Investments.
10. NEW ACCOUNTING PRONOUNCEMENTS
In January 2010, the Financial Accounting Standards Board issued Accounting
Standards Update (ASU) No. 2010-6, FAIR VALUE MEASUREMENTS AND DISCLOSURES
(TOPIC 820): IMPROVING DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS. ASU No. 2010-6
enhances and clarifies existing fair value
Annual Report | 79
Franklin Templeton Fund Allocator Series
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)
measurement disclosure requirements and is effective for interim and annual
periods beginning after December 15, 2009. The Funds are currently evaluating
the impact, if any, of applying the provisions of ASU No. 2010-6.
11. SUBSEQUENT EVENTS
The Funds have evaluated subsequent events through February 15, 2010, the
issuance date of the financial statements and determined that no events have
occurred that require disclosure.
80 | Annual Report
Franklin Templeton Fund Allocator Series
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF FRANKLIN TEMPLETON FUND ALLOCATOR
SERIES
In our opinion, the accompanying statements of assets and liabilities, including
the statements of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Franklin Templeton 2015 Retirement
Target Fund, Franklin Templeton 2025 Retirement Target Fund, Franklin Templeton
2035 Retirement Target Fund and Franklin Templeton 2045 Retirement Target Fund
(separate portfolios of Franklin Templeton Fund Allocator Series, hereafter
referred to as the "Funds") at December 31, 2009, the results of each of their
operations for the year then ended, the changes in each of their net assets for
each of the two years in the period then ended and the financial highlights for
the periods presented, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of investment in the Underlying Funds at December 31, 2009 by
correspondence with the transfer agent of the Underlying Funds, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
February 15, 2010
Annual Report | 81
Franklin Templeton Fund Allocator Series
TAX DESIGNATION (UNAUDITED)
Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Funds
designate the maximum amount allowable but no less than the following amounts as
long term capital gain dividends for the fiscal year ended December 31, 2009:
FRANKLIN TEMPLETON FRANKLIN TEMPLETON FRANKLIN TEMPLETON FRANKLIN TEMPLETON
2015 RETIREMENT 2025 RETIREMENT 2035 RETIREMENT 2045 RETIREMENT
TARGET FUND TARGET FUND TARGET FUND TARGET FUND
- ------------------ ------------------ ------------------ ------------------
$109,005 $229,405 $135,725 $127,010
Under Section 854(b)(2) of the Code, the Funds designate the following
percentage amounts of the ordinary income dividends as income qualifying for the
dividends received deduction for the fiscal year ended December 31, 2009:
FRANKLIN TEMPLETON FRANKLIN TEMPLETON FRANKLIN TEMPLETON FRANKLIN TEMPLETON
2015 RETIREMENT 2025 RETIREMENT 2035 RETIREMENT 2045 RETIREMENT
TARGET FUND TARGET FUND TARGET FUND TARGET FUND
- ------------------ ------------------ ------------------ ------------------
11.15% 16.72% 22.75% 28.09%
Under Section 854(b)(2) of the Code, the Funds designate 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, 2009:
FRANKLIN TEMPLETON FRANKLIN TEMPLETON FRANKLIN TEMPLETON FRANKLIN TEMPLETON
2015 RETIREMENT 2025 RETIREMENT 2035 RETIREMENT 2045 RETIREMENT
TARGET FUND TARGET FUND TARGET FUND TARGET FUND
- ------------------ ------------------ ------------------ ------------------
$186,611 $224,080 $155,192 $100,921
Distributions, including qualified dividend income, paid during calendar year
2009 will be reported to shareholders on Form 1099-DIV in January 2010.
Shareholders are advised to check with their tax advisors for information on the
treatment of these amounts on their individual income tax returns.
82 | Annual Report
Franklin Templeton 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 the past five years and number of portfolios overseen in the Franklin
Templeton Investments fund complex are shown below. Generally, each board member
serves until that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- -------------------------- --------------- --------------- ----------------------- -----------------------------------------
HARRIS J. ASHTON (1932) Trustee Since 1995 133 Bar-S Foods (meat packing company).
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING 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).
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT F. CARLSON (1928) Trustee Since 2005 110 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Retired; and FORMERLY, Vice President, senior member and President, Board of Administration, California Public Employees Retirement
Systems (CALPERS) (1971-2008); member and Chairman of the Board, Sutter Community Hospitals; member, Corporate Board, Blue Shield of
California; and Chief Counsel, California Department of Transportation.
- ------------------------------------------------------------------------------------------------------------------------------------
SAM GINN (1937) Trustee Since 2007 110 ICO Global Communications
One Franklin Parkway (Holdings) Limited (satellite company).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Private investor; and FORMERLY, Chairman of the Board, Vodafone AirTouch, PLC (wireless company); Chairman of the Board and Chief
Executive Officer, AirTouch Communications (cellular communications) (1993-1998) and Pacific Telesis Groups (telephone holding
company) (1988-1994).
- ------------------------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (1952) Trustee Since 1998 133 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas), H.J. Heinz
San Mateo, CA 94403-1906 Company (processed foods and allied
products), RTI International Metals,
Inc. (manufacture and distribution of
titanium), Canadian National Railway
(railroad) and White Mountains Insurance
Group, Ltd. (holding company).
PRINCIPAL OCCUPATION DURING 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).
Annual Report | 83
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- -------------------------- --------------- --------------- ----------------------- -----------------------------------------
FRANK W.T. LAHAYE (1929) Trustee Since 1995 109 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture capital).
- ------------------------------------------------------------------------------------------------------------------------------------
J. MICHAEL LUTTIG (1954) Trustee Since December 133 Boeing Capital Corporation (aircraft
One Franklin Parkway 2009 financing).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President, General Counsel and member of Executive Council, The Boeing Company; and FORMERLY, Federal Appeals Court
Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006).
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK A. OLSON (1932) Trustee Since 2007 133 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer
(1977-1999)); and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
- ------------------------------------------------------------------------------------------------------------------------------------
LARRY D. THOMPSON (1945) Trustee Since 2007 141 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (consumer products); and FORMERLY,
Director, Delta Airlines (aviation) (2003-2005) and Providian Financial Corp. (credit card provider) (1997-2001); Senior Fellow of
The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General,
U.S. Department of Justice (2001-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
JOHN B. WILSON (1959) Lead Trustee since 110 None
One Franklin Parkway Independent 2006 and Lead
San Mateo, CA 94403-1906 Trustee Independent
Trustee since
2008
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Founder, Hyannis Port Capital, Inc. (real estate and private equity investing); serves on private and non-profit
boards; and FORMERLY, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail) (1996-2000); Chief Financial Officer
and Executive Vice President - Finance and Strategy, Staples, Inc. (office supplies) (1992-1996); Senior Vice President - Corporate
Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (consulting firm)
(1986-1990).
84 | Annual Report
INTERESTED BOARD MEMBERS AND OFFICERS
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- -------------------------- --------------- --------------- ----------------------- -----------------------------------------
**CHARLES B. JOHNSON (1933) Trustee and Since 1995 133 None
One Franklin Parkway Chairman of
San Mateo, CA 94403-1906 the Board
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Templeton Worldwide, Inc.;
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.
- ------------------------------------------------------------------------------------------------------------------------------------
**GREGORY E. JOHNSON (1961) Trustee Since 2007 89 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, President and Chief Executive Officer, Franklin Resources, Inc.; President, Templeton Worldwide, Inc.; and officer and/or
director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 32 of the investment
companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (1952) Chief Chief Not Applicable Not Applicable
One Franklin Parkway Compliance Compliance
San Mateo, CA 94403-1906 Officer and Officer since
Vice President 2004 and Vice
- AML President - AML
Compliance Compliance
since 2006
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin Resources, Inc. and of
45 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director of Compliance, Franklin Resources, Inc.
(1994-2001).
- ------------------------------------------------------------------------------------------------------------------------------------
LAURA F. FERGERSON (1962) Chief Since March Not Applicable Not Applicable
One Franklin Parkway Executive 2009
San Mateo, CA 94403-1906 Officer -
Finance and
Administration
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; officer of 45 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Director and member of Audit and Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant
Treasurer of most of the investment companies in Franklin Templeton Investments (1997-2003); and Vice President, Franklin Templeton
Services, LLC (1997-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
GASTON GARDEY (1967) Treasurer, Since March Not Applicable Not Applicable
One Franklin Parkway Chief Financial 2009
San Mateo, CA 94403-1906 Officer and
Chief
Accounting
Officer
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Fund Accounting, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin Templeton
Investments.
Annual Report | 85
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- -------------------------- --------------- --------------- ----------------------- -----------------------------------------
ALIYA S. GORDON (1973) Vice President Since March Not Applicable Not Applicable
One Franklin Parkway 2009
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Templeton Investments; officer of 45 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Litigation Associate, Steefel, Levitt & Weiss, LLP (2000-2004).
- ------------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; officer and/or director, as the case maybe, of some of the other
subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
STEVEN J. GRAY (1955) Vice President Since August Not Applicable Not Applicable
One Franklin Parkway 2009
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc.; and officer
of 45 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
RUPERT H. JOHNSON, JR. President and President and Not Applicable Not Applicable
(1940) One Franklin Chief Chief Executive
Parkway San Mateo, CA Executive Officer -
94403-1906 Officer - Investment
Investment Management
Management since 2002
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc. and
Templeton Worldwide, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the
case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 43 of the investment companies in Franklin
Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT C. ROSSELOT (1960) Vice President Since August Not Applicable Not Applicable
500 East Broward Blvd. 2009
Suite 2100
Fort Lauderdale, FL
33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and
Secretary, Templeton Investment Counsel, LLC; Vice President, Secretary and Trust Officer, Fiduciary Trust International of the
South; and officer of 45 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
KAREN L. SKIDMORE (1952) Vice President Since 2006 Not Applicable Not Applicable
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin
Templeton Investments.
86 | Annual Report
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- -------------------------- --------------- --------------- ----------------------- -----------------------------------------
CRAIG S. TYLE (1960) Vice President Since 2005 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Counsel and Executive Vice President, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin
Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments; and FORMERLY, Partner, Shearman & Sterling,
LLP (2004-2005); and General Counsel, Investment Company Institute (ICI) (1997-2004).
* We base the number of portfolios on each separate series of the U.S.
registered investment companies within the Franklin Templeton Investments
fund complex. These portfolios have a common investment manager or
affiliated investment managers.
** Charles B. Johnson 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 Franklin Resources, Inc. (Resources),
which is the parent company of the Fund's investment manager and
distributor. 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 Resources.
Note 1: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, 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/(800) 342-5236 TO REQUEST THE SAI.
Annual Report | 87
Franklin Templeton 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, 500 East Broward Boulevard, Suite 1500, Fort Lauderdale, FL
33394, Attention: Proxy Group. Copies of the Trust's proxy voting records are
also made available online at franklintempleton.com and posted on the U.S.
Securities and Exchange Commission's website at sec.gov and reflect the most
recent 12-month period ended June 30.
QUARTERLY STATEMENT OF INVESTMENTS
The Trust files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling (800)
SEC-0330.
88 | Annual Report
Franklin Templeton Funds
LITERATURE REQUEST. TO RECEIVE A PROSPECTUS, PLEASE CALL US AT (800) DIAL
BEN/(800) 342-5236 OR VISIT franklintempleton.com. INVESTORS SHOULD CAREFULLY
CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES BEFORE
INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE CAREFULLY
READ THE PROSPECTUS BEFORE INVESTING. TO ENSURE THE HIGHEST QUALITY OF SERVICE,
WE MAY MONITOR, RECORD AND ACCESS TELEPHONE CALLS TO OR FROM OUR SERVICE
DEPARTMENTS. THESE CALLS CAN BE IDENTIFIED BY THE PRESENCE OF A REGULAR BEEPING
TONE.
VALUE
Franklin All Cap Value Fund
Franklin Balance Sheet Investment Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund(1)
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Quest Fund(2)
Mutual Recovery Fund(3)
Mutual Shares Fund
BLEND
Franklin Focused Core Equity Fund
Franklin Large Cap Equity Fund
Franklin Rising Dividends Fund
GROWTH
Franklin DynaTech Fund
Franklin Flex Cap Growth Fund
Franklin Growth Fund
Franklin Growth Opportunities Fund
Franklin Small Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
SECTOR
Franklin Biotechnology Discovery Fund
Franklin Global Real Estate Fund
Franklin Gold & Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Mutual Financial Services Fund
GLOBAL
Mutual Global Discovery Fund(4)
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
INTERNATIONAL
Franklin India Growth Fund
Franklin International Growth Fund
Franklin International Small Cap Growth Fund
Mutual European Fund
Mutual International Fund
Templeton BRIC Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Emerging Markets Small Cap Fund
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton Frontier Markets Fund
HYBRID
Franklin Balanced Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Templeton Income Fund
ASSET ALLOCATION
Franklin Templeton Corefolio(R) Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund
FIXED INCOME
Franklin Adjustable U.S. Government Securities Fund (5)
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund
Franklin Limited Maturity U.S. Government Securities Fund(5)
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund(5)
Templeton Global Bond Fund
Templeton Global Total Return Fund
Templeton International Bond Fund
TAX-FREE INCOME(6)
NATIONAL
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(7)
LIMITED-/INTERMEDIATE-TERM
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund
STATE-SPECIFIC
Alabama
Arizona
California(8)
Colorado
Connecticut
Florida
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(9)
Michigan(9)
Minnesota(9)
Missouri
New Jersey
New York8
North Carolina
Ohio(9)
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance Products Trust (10)
(1.) The fund is closed to new investors. Existing shareholders and select
retirement plans can continue adding to their accounts.
(2.) Effective 5/1/09, Mutual Qualified Fund changed its name to Mutual Quest
Fund. The fund's investment goal and strategy remained unchanged.
(3.) The fund is a continuously offered, closed-end fund. Shares may be
purchased daily; there is no daily redemption. However, each quarter,
pending board approval, the fund will authorize the repurchase of 5%-25% of
the outstanding number of shares. Investors may tender all or a portion of
their shares during the tender period.
(4.) Effective 5/1/09, Mutual Discovery Fund changed its name to Mutual Global
Discovery Fund. The fund's investment goal and strategy remained unchanged.
(5.) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
(6.) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are generally
taxable.
(7.) The fund invests primarily in insured municipal securities.
(8.) These funds are available in three or more variations, including long-term
portfolios, intermediate-term portfolios, portfolios of insured securities,
a high-yield portfolio (CA only) and a money market portfolio (CA only).
(9.) The Board of Trustees approved the elimination of the non-fundamental
policy requiring the fund to invest at least 80% of net assets in insured
municipal securities and the removal of the word "Insured" from the fund
name. The changes became effective 2/15/09.
(10.) The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
01/10 Not part of the annual report
(FRANKLIN TEMPLETON INVESTMENTS(R) LOGO) One Franklin Parkway
San Mateo, CA 94403-1906
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ANNUAL REPORT AND SHAREHOLDER LETTER
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
INVESTMENT MANAGER
Franklin Advisers, Inc.
DISTRIBUTOR
Franklin Templeton Distributors, Inc.
(800) DIAL BEN(R)
franklintempleton.com
SHAREHOLDER SERVICES
(800) 632-2301
Authorized for distribution only when accompanied or preceded by a prospectus.
Investors should carefully consider a fund's investment goals, risks, charges
and expenses before investing. The prospectus contains this and other
information; please read it carefully before investing.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
RTF A2009 02/10
ITEM 2. CODE OF ETHICS.
(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy
of its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The Registrant has an audit committee financial expert serving on its
audit committee.
(2) The audit committee financial expert is John B. Wilson, and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements or for services that are normally provided by the principal
accountant in connection with statutory and regulatory filings or engagements
were $256,047 for the fiscal year ended December 31, 2009 and $245,040 for the
fiscal year ended December 31, 2008.
(b) Audit-Related Fees
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant that are
reasonably related to the performance of the audit of the registrant's financial
statements and are not reported under paragraph (a) of Item 4.
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant's investment
adviser and any entity controlling, controlled by or under common control with
the investment adviser that provides ongoing services to the registrant that are
reasonably related to the performance of the audit of their financial
statements.
(c) Tax Fees
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant for tax compliance, tax
advice and tax planning.
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant for tax
compliance, tax advice and tax planning were $2,762 for the fiscal year ended
December 31, 2009 and $4,000 for the fiscal year ended December 31, 2008. The
services for which these fees were paid included tax compliance and advice.
(d) All Other Fees
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant not reported in
paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended December 31, 2009
and $13,083 for the fiscal year ended December 31, 2008. The services for which
these fees were paid include review of materials provided to the fund Board in
connection with the investment management contract renewal process.
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant other than
services reported in paragraphs (a)-(c) of Item 4 were $0 for the fiscal year
ended December 31, 2009 and $270,994 for the fiscal year ended December 31,
2008. The services for which these fees were paid include review of materials
provided to the fund Board in connection with the investment management contract
renewal process.
(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 $2,762 for the fiscal year ended December 31, 2009 and $288,077
for the fiscal year ended December 31, 2008.
(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 significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and
Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and
Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN TEMPLETON FUND ALLOCATOR SERIES
By /s/LAURA F. FERGERSON
----------------------
Laura F. Fergerson
Chief Executive Officer - Finance and Administration
Date February 25, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/LAURA F. FERGERSON
---------------------
Laura F. Fergerson
Chief Executive Officer - Finance and Administration
Date February 25, 2010
By /s/GASTON GARDEY
----------------
Gaston Gardey
Chief Financial Officer and Chief Accounting Officer
Date February 25, 2010