Asset Allocation Made Easy

(1)

(2)

1. Source: “Quantitative Analysis of Investor Behavior, 2014,” DALBAR, Inc. Most recent data available. An index is unmanaged and one cannot invest directly in an index.

Reaching Your Goals—At Your Pace

Most people can rattle off their investment goals: retirement, college tuition, a new house. That’s easy.

What’s harder is successfully reaching these financial milestones with a comfortable level of volatility.

This is what a good asset allocation strategy is all about—finding a diversified mix of investments that

will let you reach your goals, while giving equal consideration to your tolerance for risk.

The Real Reason Risk Matters

Many investors run into problems when they overestimate their ability to deal with market declines.

Consider the experience of the average investor during the period of 1995–2014, as shown below. While

the stock market, as measured by the S&P 500 Index, grew 9.9% per year on average, investors during

this period earned an average annual total return of just 5.2%.

1

_{One reason may be that some investors}

jumped in and out of the market based on short-term shifts, missing out on longer-term opportunities.

A good asset allocation plan may help you better weather temporary market storms, so you can reach the

long-term results you are after. You should note, however, that asset allocation does not guarantee a profit

or protect against a loss.

DOWNSIDE OF NOT STICKING TO A PLAN

Average Annual Total Returns (20-Year Period Ended 12/31/2014)

|

S&P 500 Index1 _{Average Equity Fund}

Investor’s Annualized Return1

5.2% 9.9%

“ I want my money to grow, but I’m not sure how much

risk I can accept. How can I position my portfolio for

the long term?”

(3)

Asset Allocation at Work

The charts below show how three asset allocation model portfolios performed

historically versus the MSCI All Country World Index (global stocks) and the

Barclays Multiverse Index (global bonds) over the 15-year period ended June 30,

2015.

2

_{Please note not only the total returns of these hypothetical investments, but}

also the standard deviations, which measure return volatility and consistency.

Asset Allocation Models—Historical Performance

2

15-Year Period Ended December 31, 2015

Portfolio Stocks Bonds

40% Stocks • 60% Bonds

15-Year Average Annual Total Return 5.37% 4.67% 4.87%  Stocks . . . 40%

 Bonds . . . 60%

Best One-Year Return 21.81% 35.41% 16.05%

Worst One-Year Return -14.48% -41.85% -3.79%

Standard Deviation of Returns3 _7.89% _16.14% _5.64%

 Bonds . . . 40%

 Bonds . . . 20%

These charts are for illustrative purposes only and do not represent the performance of any Franklin, Templeton or

Franklin Mutual Series

fund.

2. Source: © 2015 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. Stocks are represented by the MSCI AC World Index, a free float-adjusted, market capitalization-weighted index that is designed to measure the equity market performance of global developed and emerging markets. Bonds are represented by the Barclays Multiverse Index which provides a broad-based measure of the global fixed-income bond market. Portfolios were rebalanced annually. Index data represents average annual total returns and includes reinvestment of dividends. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. These are model portfolios and are not recommendations as to the specific allocations. Past performance does not guarantee future results.

3. Standard deviation is a statistical measurement of the range of an investment’s monthly total returns over a 15-year period.

Standard deviation of returns measures the degree to which an investment’s monthly returns

(4)

Best

Worst

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 LARGE GROWTH STOCKS

23.97%

LARGE GROWTH STOCKS

36.53%

42.16%

SMALL GROWTH STOCKS

43.09%

SMALL VALUE STOCKS

22.83%

14.02%

BONDS

10.26%

48.54%

22.25%

FOREIGN STOCKS

14.02%

26.86%

11.63%

BONDS

5.24%

34.47%

29.09%

BONDS

7.84%

18.05%

43.30%

14.89%

5.52%

LARGE STOCKS

22.96%

33.36%

28.58%

28.25%

BONDS

11.63%

BONDS

8.44%

-11.43%

SMALL STOCKS

47.25%

20.70%

LARGE VALUE STOCKS

5.82%

23.48%

9.13%

-28.92%

32.46%

26.85%

4.65%

17.90%

38.82%

13.69%

1.38%

21.99%

31.78%

20.33%

27.30%

6.08%

2.49%

-15.66%

46.03%

18.33%

4.91%

20.80%

7.05%

-33.79%

31.57%

24.50%

2.11%

17.68%

34.52%

12.36%

BONDS

0.55%

21.37%

29.98%

14.67%

21.26%

-3.02%

-9.23%

-20.48%

39.17%

15.71%

4.71%

18.37%

BONDS

6.97%

-34.92%

27.17%

15.10%

-0.48%

16.35%

32.75%

BONDS

5.97%

-0.39%

16.49%

22.36%

BONDS

8.69%

21.04%

-9.10%

-11.71%

-20.85%

31.79%

14.31%

4.55%

15.79%

5.49%

-37.00%

26.46%

15.06%

-2.91%

16.00%

32.39%

5.60%

-1.38%

11.26%

12.95%

1.23%

12.72%

-13.96%

-11.89%

-22.10%

28.68%

10.88%

4.15%

13.35%

1.99%

-38.54%

21.18%

15.05%

-4.18%

14.61%

31.99%

4.89%

-3.13%

6.36%

BONDS

9.65%

-2.55%

BONDS

-0.82%

-22.08%

-12.73%

-23.59%

25.66%

6.13%

4.00%

11.01%

-1.57%

-39.22%

20.58%

8.21%

-5.50%

14.59%

23.29%

4.22%

-4.41%

BONDS

3.63%

2.06%

-6.45%

-1.49%

-22.43%

-21.21%

-30.26%

BONDS

4.10%

BONDS

4.34%

BONDS

2.43%

BONDS

4.33%

-9.78%

-43.06%

BONDS

5.93%

BONDS

6.54%

-11.73%

BONDS

4.21%

BONDS

-2.02%

-4.48%

-7.47%

Why Diversify? Because Winners Rotate.

Perhaps nothing better illustrates the need for an asset allocation strategy than the chart below, which shows

how various asset classes performed on a year-by-year basis over the last 20 years. The best-performing

asset class for each calendar year is at the top of each column. Please remember, past performance does not

guarantee future results.

Annual Return of Key Asset Classes between 1996–2015

4

Ranked in Order of Performance from Best to Worst

(5)

Best

Worst

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 LARGE GROWTH STOCKS

23.97%

36.53%

42.16%

43.09%

22.83%

14.02%

BONDS

10.26%

48.54%

22.25%

14.02%

26.86%

11.63%

BONDS

5.24%

34.47%

29.09%

BONDS

7.84%

18.05%

43.30%

14.89%

5.52%

22.96%

33.36%

28.58%

28.25%

BONDS

11.63%

BONDS

8.44%

-11.43%

47.25%

20.70%

5.82%

23.48%

9.13%

-28.92%

32.46%

26.85%

4.65%

17.90%

38.82%

13.69%

1.38%

21.99%

31.78%

20.33%

27.30%

6.08%

2.49%

-15.66%

46.03%

18.33%

4.91%

20.80%

7.05%

-33.79%

31.57%

24.50%

2.11%

17.68%

34.52%

12.36%

BONDS

0.55%

21.37%

29.98%

14.67%

21.26%

-3.02%

-9.23%

-20.48%

39.17%

15.71%

4.71%

18.37%

BONDS

6.97%

-34.92%

27.17%

15.10%

-0.48%

16.35%

32.75%

BONDS

5.97%

-0.39%

16.49%

22.36%

BONDS

8.69%

21.04%

-9.10%

-11.71%

-20.85%

31.79%

14.31%

4.55%

15.79%

5.49%

-37.00%

26.46%

15.06%

-2.91%

16.00%

32.39%

5.60%

-1.38%

11.26%

12.95%

1.23%

12.72%

-13.96%

-11.89%

-22.10%

28.68%

10.88%

4.15%

13.35%

1.99%

-38.54%

21.18%

15.05%

-4.18%

14.61%

31.99%

4.89%

-3.13%

6.36%

BONDS

9.65%

-2.55%

BONDS

-0.82%

-22.08%

-12.73%

-23.59%

25.66%

6.13%

4.00%

11.01%

-1.57%

-39.22%

20.58%

8.21%

-5.50%

14.59%

23.29%

4.22%

-4.41%

BONDS

3.63%

2.06%

-6.45%

-1.49%

-22.43%

-21.21%

-30.26%

BONDS

4.10%

BONDS

4.34%

BONDS

2.43%

BONDS

4.33%

-9.78%

-43.06%

BONDS

5.93%

BONDS

6.54%

-11.73%

BONDS

4.21%

BONDS

-2.02%

-4.48%

-7.47%

Diversification does not guarantee a profit or protect against a loss.

4. Source: © 2016 Morningstar. Large-cap stocks are represented by the S&P 500 Index; large-cap growth stocks are represented by the S&P 500 Growth Index; large-cap value stocks are represented by the S&P 500 Value Index; small-cap stocks are represented by the Russell 2000®_{Index; small-cap growth stocks are represented by the Russell 2000 Growth Index; small-cap value stocks are represented}

by the Russell 2000 Value Index; foreign stocks are represented by the MSCI EAFE Index; and bonds are represented by the Barclays U.S. Aggregate Index. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges.

“ I don’t want all my eggs in one basket. How can I be

prepared to face any type of market?”

(6)

5. Source: © 2016 Morningstar. The three scenarios above included large-cap stocks, represented by the S&P 500 Index; large-cap growth stocks, represented by the S&P 500 Growth Index; large-cap value stocks, represented by the S&P Value Index; small-cap stocks, represented by the Russell 2000 Index; small-cap growth stocks, represented by the Russell 2000 Growth Index; small-cap value stocks, represented by the Russell 2000 Value Index; foreign stocks, represented by the MSCI EAFE Index; and bonds, represented by the Barclays U.S. Aggregate Index. 6. Each year’s new investments are made into the best-performing asset class index of the previous calendar year.

7. Each year’s new investments are made into the worst-performing asset class index of the previous calendar year.

8. Annual investments are distributed evenly among all eight asset class indexes each year and the portfolio is rebalanced annually.

Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. This illustration assumes that indexes are reasonable representations of asset classes and their returns. However, investment manager performance relative to the different asset class indexes has varied widely during the past 20 years.

Does Asset Allocation Really Work?

Yes. In addition to helping reduce overall volatility and improving your chances to earn more consistent

returns over the long term, keeping assets properly allocated helps investors avoid the temptation to

try and time the market. Consider the three scenarios below, illustrating three different strategies used

by investors. In each scenario, $10,000 was invested annually each January 1 over the past 20 years for

a total investment of $200,000.

5

_{While these returns can’t guarantee future results, as you can see, the}

asset allocation strategy was the most successful during this period.

GROWTH OF $10,000 INVESTED ANNUALLY BETWEEN 1996–2015

Total Investment Value of Portfolio Average Annual Total Return

1. Chasing the Winners

Investing in last year’s best-performing asset class5,6 $200,000 $415,934 6.55%

2. Investing with the Losers

Investing in last year’s worst-performing asset class5,7 $200,000 $405,759 6.34%

3. Asset Allocation

Investing consistently across several asset classes in equal proportion each year5,8

$200,000 $446,458 7.15%

This chart is for illustrative purposes only. It is important to note that an asset allocation strategy does not ensure

results superior to other investment strategies and also does not guarantee a profit or protect against a loss.

The chart does not represent the performance of any Franklin, Templeton or Franklin Mutual Series fund.

“ Some say ‘buy what’s hot,’ others say ‘look for bargains.’

Who should I believe?”

(7)

What’s the Best Fit for You?

One of the first steps in developing your asset allocation strategy is determining how much risk you can

tolerate. Complete the questionnaire below and review the results with your financial advisor as a starting

point to building your financial plan.

RISK TOLERANCE QUESTIONNAIRE

Check off one answer for each question. When you’re finished, add up the corresponding points for each

answer to get your total, which will be used to help you determine what kind of investment mix may be

right for you.

1. What is your current age?

o

Less than 45 5 points

o

45 to 55 4 points

o

56 to 65 3 points

o

66 to 75 2 points

o

Older than 75 1 point

2. When do you expect to need the money you’re investing?

o

10+ years 5 points

o

7–10 years 4 points

o

Less than 1 year 1 point

3. Which of the following best categorizes your highest investing comfort level?

I’m comfortable investing in:

o

Call and put options, and shorting stocks 5 points

o

Individual stocks 4 points

o

Equity mutual funds 3 points

o

Bonds/bond mutual funds 2 points

o

Only CDs, saving bonds and money market funds 1 point

Subtotal:

(8)

continued from the previous page...

4. What are your expectations for the growth of your account over time?

o

Aggressive (13% or more/year) 5 points

o

Significant (9%–12%/year) 4 points

o

Moderate (6%–8%/year) 3 points

o

Steady (4%–5%/year) 2 points

o

Conservative (2%–3%/year) 1 point

5. In a particularly bad market occurring within a one-year time frame, which of the following statements best describes your tolerance for a decline in your account value?

o

I wouldn’t worry about losses in that time frame 5 points

o

If I suffered a loss greater than 25%, I’d be concerned 4 points

o

If I suffered a 10%–25% loss, I’d be concerned 3 points

o

I can only tolerate a small, short-term loss 2 points

o

I’d have a hard time accepting any loss 1 point

6. If you could increase your chances of improving your returns by taking more risk, would you be willing to take:

o

A lot more risk with all of your money 5 points

o

A lot more risk with some of your money 4 points

o

A little more risk with all of your money 3 points

o

A little more risk with some of your money 2 points

o

No more risk 1 point

7. Generally, investments with the highest potential for gains carry the greatest risk of loss.

The scenarios below show the best and worst outcomes of $10,000 invested in five hypothetical portfolios for a five-year period. Which portfolio would you be most comfortable with?

VALUE OF THE ACCOUNT

Best Case Worst Case

o

Portfolio 1 $20,000 $5,000 5 points

o

Portfolio 5 $11,000 $10,000 1 point

Add up the points shown to the right of your selected answers.

Total:

(9)

What Does Your Score Mean?

Match your point total from the questionnaire with the categories and portfolios on the scale below.

9

Please remember, this risk scoring system cannot replace the advice of a financial advisor, but it may

help set the groundwork for an asset allocation strategy that best matches your needs.

Please remember, this questionnaire should be used as a tool to help determine your needs and should

not be viewed as the sole determinant of your investment decisions.

Franklin Templeton Can Help with Asset Allocation

Franklin Templeton offers asset-allocated mutual funds ranging from conservative- to moderate- to

growth-oriented. Each fund’s assets are allocated among equity and fixed income investments by

investing in a distinctly weighted combination of Franklin Templeton funds. The fund manager

rebalances the portfolios as necessary to maintain broad asset class weightings.

Lower Higher Potential Return Lower Higher Conservative (7–16 points) Growth (26–35 points) Relative Risk Stocks Bonds Moderate (17–25 points)

Effective January 1, 2015, Franklin Moderate Allocation Fund increased target allocation to equity funds by 5% (from 55% to 60%) and correspondingly decreased the target allocation to fixed income funds (from 45% to 40%). The Fund’s investment goal remains the same.

9. The categorization of sample portfolios as “conservative,” “moderate” and “growth” is relative.

“ My life is busy. I want an investment plan that’s

simple and hassle-free.”

(10)

RISK TOLERANCE

Lower

FUND GOAL

The fund seeks the highest level of long-term total return consistent with a lower level of risk.10_{This fund may be most appropriate for}

investors with a shorter investment horizon.

CLASS A AVERAGE ANNUAL TOTAL RETURNS

Periods Ended December 31, 2015

With Maximum 5.75% Initial Sales Charges11

1-Year 5-Year 10-Year Since Inception (Date)

-7.90% 2.41% 4.09% 5.34% (12/31/96)

Without Sales Charges

-2.26% 3.64% 4.71% 5.67% (12/31/96)

CLASS A TOTAL ANNUAL OPERATING

EXPENSES

With waiver: 1.27%; Without waiver: 1.27%

The fund has a fee waiver associated with

any investments it makes in a Franklin

Templeton money fund, an arrangement

that is contractually guaranteed through

at least its current fiscal year end. Fund

investment results reflect the fee waiver,

as applicable; without this waiver, the

results would have been lower.

Performance data represents past

performance, which does not guarantee

future results. Current performance may

differ from figures shown. The fund’s

investment return and principal value will

change with market conditions, and you

may have a gain or a loss when you sell

your shares. Please call Franklin Templeton

Investments at (800) DIAL BEN/342-5236

or visit franklintempleton.com for the most

recent month end performance data.

Beta12 _1.05

Standard Deviation13 _7.37%

“ We want our money to grow,

but we’re not sure how much

risk we can handle.”

10. 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.

11. As of January 1, 2013, the funds changed their target allocation, with short-term investments (formerly a targeted allocation of 20% for Conservative Allocation; 10% for Moderate Allocation) combined into the fixed income allocations; such a change can impact performance. The funds’ investment goals remained the same. Class A: Prior to 8/3/98, fund shares were offered at a lower initial sales charge; thus actual returns would have differed. The fund offers other share classes, subject to different fees and expenses that will affect their performance.

12. Beta measures a fund’s market-related risk over a three-year period. For Franklin Conservative Allocation Fund and Franklin Moderate Allocation Fund, beta is calculated using the respective Blended Benchmarks, described below, which each have a beta of 1.00. A beta lower than 1.00 indicates historically lower volatility than the index; higher than 1.00 indicates historically higher volatility. Effective January 1, 2015, Franklin Conservative Allocation Fund’s Blended Benchmark changed to 40% MSCI AC World Index and 60% Barclays Multiverse Index. From January 1, 2013–December 31, 2014, the Blended Benchmark comprised of 28% S&P 500 Index, 12% MSCI EAFE Index and 60% Barclays U.S. Aggregate Index. Effective January 1, 2015, Franklin Moderate Allocation Fund’s Blended Benchmark changed to 60% MSCI AC World Index and 40% Barclays Multiverse Index. From January 1, 2013– December 31, 2014, the Blended Benchmark comprised of 38.5% S&P 500 Index, 16.5% MSCI EAFE Index and 45% Barclays U.S. Aggregate Index. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges.

Franklin Conservative Allocation Fund

0% 5% 10% 15% 20% 0% 5% 10% 15% 20% Stocks Bonds Franklin Conservative Allocation Fund–Class A Risk Return Equity Funds . . . 40% Fixed Income Funds . . . 60%

TOP 10 HOLDINGS

14

As of December 31, 2015

% %

Templeton Global Total Return Fund 19.27 Franklin Strategic Income Fund 5.65 Franklin Low Duration Total Return Fund 12.70 Franklin DynaTech Fund 4.31 Franklin Growth Fund 9.56 Franklin K2 Alternative Strategies Fund 3.54 Franklin U.S. Government Securities Fund 7.75 Templeton Foreign Fund 3.24 Franklin Rising Dividends Fund 5.78 Franklin Mutual European Fund 3.23

RISK VS. RETURN COMPARISON (Without 5.75% Initial Sales Charge)

15

If the sales charge had been included, the return would have been lower.

GENERAL PORTFOLIO ALLOCATION

14

(11)

RISK TOLERANCE

Moderate

FUND GOAL

The fund seeks the highest level of long-term total return consistent with a moderate level of risk.10

This fund may be most appropriate for investors with an intermediate investment horizon.

CLASS A AVERAGE ANNUAL TOTAL RETURNS

-7.54% 3.46% 4.76% 5.74% (12/31/96)

-1.89% 4.69% 5.38% 6.07% (12/31/96)

CLASS A TOTAL ANNUAL OPERATING

EXPENSES

The fund has a fee waiver associated with

any investments it makes in a Franklin

Templeton money fund, an arrangement

that is contractually guaranteed through

at least its current fiscal year end. Fund

investment results reflect the fee waiver,

as applicable; without this waiver, the

results would have been lower.

Performance data represents past

performance, which does not guarantee

future results. Current performance may

differ from figures shown. The fund’s

investment return and principal value will

change with market conditions, and you

may have a gain or a loss when you sell

your shares. Please call Franklin Templeton

Investments at (800) DIAL BEN/342-5236

or visit franklintempleton.com for the most

recent month end performance data.

Beta12 _0.99

“ I want to be sure my financial

strategy stays on track.”

Effective January 1, 2015, Franklin Moderate Allocation Fund increased target allocation to equity funds by 5% (from 55% to 60%) and correspondingly decreased the target allocation to fixed income funds (from 45% to 40%). The Fund’s investment goal remains the same.

13. As of 12/31/15. Standard deviation is a statistical measurement of the range of a fund’s total returns over a ten-year period. In general, higher standard deviation means greater volatility.

14. As of 12/31/15. Holdings are subject to change. For updated information, call Franklin Templeton Investments at (800) DIAL BEN/342-5236 or visit franklintempleton.com. The portfolio manager for the fund reserves the right to withhold release of information with respect to holdings that would otherwise be included in the top 10 holdings list. The asset class of each underlying fund is based on its predominant investments under normal market conditions.

15. Source: © 2016 Morningstar, 12/31/15. Fund returns do not include sales charges and assume reinvestment of dividends and capital gains. Bonds are represented by the Barclays Multiverse Index and stocks are represented by the MSCI All Country World Index. Index data represents average annual total returns and includes reinvestment of dividends. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. Risk is measured by the annualized standard deviation of monthly total returns.

Franklin Moderate Allocation Fund

0% 5% 10% 15% 20% 0% 5% 10% 15% 20% Stocks Bonds Franklin Conservative Allocation Fund–Class A Risk Return

If the sales charge had been included, the return would have been lower.

0% 5% 10% 15% 20% 0% 5% 10% 15% 20% Risk Return

Franklin Moderate Allocation

Fund–Class A _Stocks

Bonds

Equity Funds . . . .60% Fixed Income Funds . . .40%

TOP 10 HOLDINGS

14

% %

Franklin Growth Fund 14.60 Franklin Mutual European Fund 4.88 Templeton Global Total Return Fund 11.26 Templeton Foreign Fund 4.88 Franklin Rising Dividends Fund 8.55 Franklin U.S. Government Securities Fund 4.53 Franklin Low Duration Total Return

Fund 7.77 Franklin International Small Cap Growth Fund 4.49 Franklin DynaTech Fund 6.09 Franklin K2 Alternative Strategies Fund 3.54

RISK VS. RETURN COMPARISON (Without 5.75% Initial Sales Charge)

15

GENERAL PORTFOLIO ALLOCATION

14

(12)

RISK TOLERANCE

Higher

FUND GOAL

The fund seeks the highest level of long-term total return consistent with a higher level of risk.16_{This fund may be most appropriate for}

investors with a longer investment horizon.

CLASS A AVERAGE ANNUAL TOTAL RETURNS

-7.30% 4.73% 5.11% 5.88% (12/31/96)

-1.66% 5.97% 5.74% 6.21% (12/31/96)

CLASS A TOTAL ANNUAL OPERATING

EXPENSES

The fund has an expense reduction

contractually guaranteed through at least

April 30, 2016. The fund may also have

a fee waiver associated with any investments

it makes in a Franklin Templeton money

fund, an arrangement that is contractually

guaranteed through at least its current fiscal

year end. Fund investment results reflect

the expense reduction and fee waiver, as

applicable; without these reductions, the

results would have been lower.

Performance data represents past

performance, which does not guarantee

future results. Current performance may

differ from figures shown. The fund’s

investment return and principal value will

change with market conditions, and you

may have a gain or a loss when you sell

your shares. Please call Franklin Templeton

Investments at (800) DIAL BEN/342-5236

or visit franklintempleton.com for the most

recent month end performance data.

Beta18 _0.92

“ Market’s up today, down

tomorrow. Who knows where

things are headed? I need

a long-term game plan.”

Franklin Growth Allocation Fund

0% 5% 10% 15% 20% 0% 5% 10% 15% 20% Stocks Bonds Risk Return

Franklin Growth Allocation Fund–Class A

TOP 10 HOLDINGS

20

% %

Franklin Growth Fund 18.51 Franklin International Small Cap

Growth Fund 6.41

Franklin Rising Dividends Fund 11.34 Franklin Utilities Fund 4.06 Franklin DynaTech Fund 8.33 Franklin Growth Opportunities Fund 4.04 Templeton Foreign Fund 6.81 Templeton Global Total Return Fund 3.92 Franklin Mutual European Fund 6.48 Franklin K2 Alternative Strategies Fund 3.56

RISK VS. RETURN COMPARISON (Without 5.75% Initial Sales Charge)

21

GENERAL PORTFOLIO ALLOCATION

20

This pie chart reflects the guidelines used by the fund manager to allocate assets among broad asset classes.

If the sales charge had been included, the return would have been lower.

16. 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.

17. As of January 1, 2013, the fund changed its target allocation, with short-term investments (formerly a targeted allocation of 5%) combined into the fixed income allocations; such a change can impact performance. The fund’s investment goal remained the same. Class A: Prior to 8/3/98, fund shares were offered at a lower initial sales charge; thus actual returns would have differed. The fund offers other share classes, subject to different fees and expenses that will affect their performance.

18. Beta measures a fund’s market-related risk over a three-year period. For Franklin Growth Allocation Fund, beta is calculated using the respective Blended Benchmarks, described below, which each have a beta of 1.00. A beta lower than 1.00 indicates historically lower volatility than the index; higher than 1.00 indicates historically higher volatility. Effective January 1, 2015, the Blended Benchmark changed to 80% MSCI AC World Index and 20% Barclays Multiverse Index. From January 1, 2013–December 31, 2014, the Blended Benchmark comprised of 56% S&P 500 Index, 24% MSCI EAFE Index and 20% Barclays U.S. Aggregate Index. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges.

19. As of 12/31/15. Standard deviation is a statistical measurement of the range of a fund’s total returns over a ten-year period. In general, higher standard deviation means greater volatility.

20. As of 12/31/15. Holdings are subject to change. For updated information, call Franklin Templeton Investments at (800) DIAL BEN/ 342-5236 or visit franklintempleton.com. The portfolio manager for the fund reserves the right to withhold release of information with respect to holdings that would otherwise be included in the top 10 holdings list. The asset class of each underlying fund is based on its predominant investments under normal market conditions.

21. Source: © 2016 Morningstar, 12/31/15. Fund returns do not include sales charges and assume reinvestment of dividends and capital gains. Bonds are represented by the Barclays Multiverse Index and stocks are represented by the MSCI All Country World Index. Index data represents average annual total returns and includes reinvestment of dividends. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. Risk is measured by the annualized standard deviation of monthly total returns.

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22. CFA®_{and Chartered Financial Analyst}®_{are trademarks owned by CFA Institute.}

“The Allocation Funds are designed to provide investors with an

investment that is diversified across a variety of markets, styles and

sectors. I focus on combining funds that have shown a history of

consistent performance coupled with low relative correlations in an

effort to lower overall volatility.”

TONY COFFEY, CFA,22_{PORTFOLIO MANAGER}

Why Invest in the Allocation Funds?

Seeks Maximum Return for a Given

Level of Risk

The Allocation Funds were designed to seek maximum

returns consistent with risk tolerance levels for

conservative, moderate and growth-oriented portfolios.

For many investors, especially those who may not have

the time or resources to put together the appropriate

mix of funds, the Allocation Funds offer asset allocation

in one investment vehicle.

Active Investment Process

• The fund’s portfolio manager actively allocates the

Allocation Funds to construct portfolios he believes

are the best combinations of Franklin, Templeton and

Franklin Mutual Series mutual funds to meet each

Allocation Fund’s individual goal.

• When selecting underlying equity funds, the portfolio

manager considers foreign and domestic exposure,

market capitalization ranges and investment style.

• When selecting underlying fixed income funds, the

portfolio manager focuses on obtaining the maximum

amount of current income for an appropriate level of

risk. He also considers various metrics such as average

credit quality and duration.

• When evaluating the risk level of the underlying funds,

the portfolio manager analyzes the funds’ relative and

absolute performance records, including correlations

with other underlying funds, as well as corresponding

benchmarks and their total return volatility records.

Constant Monitoring

The portfolio manager continually monitors the

Allocation Funds, and their underlying funds, for

rebalancing opportunities.

Short-term rebalancing is a function of market

values and net new cash flows, which may change

the allocations from day to day or week to week.

Long-term rebalancing is more strategic in nature.

Typically, the portfolio manager re-evaluates the

underlying funds and makes one or two long-term

changes per quarter.

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At Franklin Templeton Investments, we’re dedicated to one goal: delivering exceptional asset

management for our clients. By bringing together multiple, world-class investment teams in a single

firm, we’re able to offer specialized expertise across styles and asset classes, all supported by the

strength and resources of one of the world’s largest asset managers. This has helped us to become

a trusted partner to individual and institutional investors across the globe.

23. As of 12/31/15. Clients are represented by the total number of shareholder accounts.

Franklin Templeton Investments

Gain From Our Perspective

®

Focus on Investment Excellence

At the core of our firm, you’ll find multiple independent

investment teams—each with a focused area of expertise—

from traditional to alternative strategies and multi-asset

solutions. And because our portfolio groups operate

autonomously, their strategies can be combined to deliver

true style and asset class diversification.

All of our investment teams share a common commitment

to excellence grounded in rigorous, fundamental research

and robust, disciplined risk management. Decade after

decade, our consistent, research-driven processes have

helped Franklin Templeton earn an impressive record of

strong, long-term results.

Global Perspective Shaped by Local Expertise

In today’s complex and interconnected world, smart

investing demands a global perspective. Franklin Templeton

pioneered international investing over 60 years ago, and our

expertise in emerging markets spans more than a quarter

of a century. Today, our investment professionals are on

the ground across the globe, spotting investment ideas and

potential risks firsthand. These locally based teams bring

in-depth understanding of local companies, economies and

cultural nuances, and share their best thinking across our

global research network.

Strength and Experience

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Franklin Templeton Distributors, Inc. One Franklin Parkway

San Mateo, CA 94403-1906 (800) DIAL BEN® / 342-5236

franklintempleton.com

Franklin Templeton Investments Your Source for:

• Mutual Funds • Retirement

• 529 College Savings Plans • Separately Managed Accounts

Franklin Allocation Funds’ Symbols: Conservative Allocation Fund

A Shares: FTCIX

C Shares: FTCCX R Shares: FTCRXAdvisor: FTCZX

Moderate Allocation Fund

A Shares: FMTIX C Shares: FTMTX

R Shares: FTMRX Advisor: FMTZX

Growth Allocation Fund

A Shares: FGTIX C Shares: FTGTX

R Shares: FGTRX Advisor: FGTZX

A FEW MORE WORDS ABOUT ASSET ALLOCATION