N-CSR

| 1

Annual Report

Economic and Market Overview

The U.S. economy improved steadily but modestly in 2011 despite geopolitical, employment and housing pressures. In contrast, growth outside the U.S. began to slow, which some attributed partly to the effects of Japan’s earthquake on the global supply chain and populist uprisings across the oil-and-gas-producing regions of the Middle East and North Africa. Although manufacturing growth slowed in the second half of the year as high commodity prices reduced purchasing power and demand ebbed, the trend began to reverse near year-end. The U.S. manufacturing sector helped power the domestic economy and led global manufacturing output heading into 2012. European and Asian manufacturing, however, generally weakened throughout 2011 as parts of Europe were in danger of falling back into recession.

The U.S. financial system and household balance sheets continued to improve, but the country still faced persistently high unemployment, a prolonged housing market slump and massive national debt. Inflation rose across much of the world but stayed relatively contained in the U.S., even slowing toward year-end amid declining energy and food prices. The Federal Reserve Board (Fed) sought to boost economic growth by maintaining its accommodative monetary policy and undertook a second round of quantitative easing that ended on June 30. Subsequently, the Fed continued to purchase U.S. Treasuries with proceeds from maturing debt in an effort to support economic growth. Outside the U.S., European policymakers ultimately stepped up their response to their sovereign debt and banking crisis. The European Central Bank cut short-term interest rates and expanded bank lending facilities, and six key global central banks agreed to lower dollar funding costs for Europe’s distressed commercial banks. Chinese policymakers lowered commercial bank reserve requirements and the International Monetary Fund revamped its credit line and eased its lending terms.

Although U.S. stock markets rallied in the spring, worrisome global events and slowing global growth dampened investor sentiment and market volatility surged. Risk-averse investors sought perceived safe havens and seemed to ignore that many companies generated record profits. Despite large swings, U.S. stocks as measured by the Standard & Poor’s^® 500 Index gained 2.11% in 2011.¹ The

1. Source: © 2012 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. STANDARD & POOR’S^®, S&P^® and S&P 500^® are registered trademarks of Standard & Poor’s Financial Services LLC. Standard & Poor’s does not sponsor, endorse, sell or promote any S&P index-based product.

Annual Report | 3

Dow Jones Industrial Average rose 8.38%, reflecting investors’ general preference for large, established U.S. companies.¹ In contrast, developed and emerging world stocks as measured by the MSCI All Country World Index fell 6.86%.¹ Amid general global market declines, perceived safe-haven currencies such as the Japanese yen and Swiss franc rallied strongly, and U.S. Treasuries posted their best one-year return since 2008.

The foregoing information reflects our analysis and opinions as of December 31, 2011. 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.

4 | Annual Report

Franklin Templeton Conservative Allocation Fund

Your Fund’s Goal and Main Investments: Franklin Templeton Conservative Allocation

Fund seeks the highest level of long-term total return consistent with a lower 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.

This annual report for Franklin Templeton Conservative Allocation Fund covers the fiscal year ended December 31, 2011.

Performance Overview

Franklin Templeton Conservative Allocation Fund – Class A had a -0.71% cumulative total return for the 12 months under review. By comparison, the Fund’s equity benchmarks, the Standard & Poor’s 500 Index (S&P 500^®), a broad measure of U.S. stock performance, and MSCI Europe, Australasia, Far East (EAFE) Index, which measures global stock performance excluding the U.S. and Canada, had total returns of +2.11% and -11.73%. The Fund’s fixed income benchmark, the Barclays Capital (BC) U.S. Aggregate Index, which tracks U.S. investment-grade bonds, posted a +7.84% total return. The Payden & Rygel (P&R) 90 Day U.S. T-Bill Index, a proxy for short-term investments and other net assets, had a +0.08% total return for the same period.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 and other fund investments (fund investments) in each Allocation Fund’s portfolio and will vary the allocation percentages of the fund investments based upon each Allocation Fund’s risk/return level. Maintaining similarity of the fund investments across the Conservative, Moderate and Growth Allocation Funds is intended to increase the consistency of their results relative to one another.

1. The risk/reward potential is based on the Fund’s goal and level of risk. It is not indicative of the Fund’s actual or implied performance or portfolio composition, which may change on a continuous basis.

2. Source: © 2012 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 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 40.

Annual Report | 5

We allocate the Fund’s assets among the broad asset classes, and when selecting equity funds, we consider the fund investments’ foreign and domestic exposure, market capitalization ranges and investment styles (growth versus value). When selecting fixed income funds, we focus primarily on maximizing income appropriate to the Fund’s risk profile.

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 fund investments.

At period-end, Franklin Templeton Conservative Allocation Fund allocated 39.4% of total net assets to equity and 41.7% to fixed income. Domestic equity exposure was 71.8% of the total equity weighting, with the balance represented by foreign equity. The portfolio was diversified across capitalization sizes and investment styles, and on December 31, 2011, 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 6.4% of the Fund’s total net assets, was our largest equity fund weighting at period-end. On the fixed income side, domestic exposure was 66.9% 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 17.4% 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, each underperformed the S&P 500 during the 12-month reporting period. Our largest foreign equity fund holding, Mutual European Fund – Class Z, performed better than the MSCI EAFE Index. On the fixed income side, Franklin U.S. Government Securities Fund – Advisor Class and Templeton Global Bond Fund – Advisor Class each underperformed the BC U.S. Aggregate Index.

6 | Annual Report

Thank you for your continued participation in Franklin Templeton Conservative Allocation Fund. We look forward to serving your future investment needs.

CFA^® is a trademark owned by CFA Institute.

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2011, 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 12/31/11

Franklin Templeton Conservative 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: FTCIX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.41	$	13.33	$	13.74
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.3131
Class B (Symbol: n/a)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.40	$	13.30	$	13.70
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.2017
Class C (Symbol: FTCCX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.40	$	13.13	$	13.53
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.2136
Class R (Symbol: FTCRX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.41	$	13.29	$	13.70
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.2807
Advisor Class (Symbol: FTCZX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.41	$	13.32	$	13.73
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.3467

8 | Annual Report

Performance Summary (continued)

Performance¹

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 Return2				-0.71	%	+	19.71	%	+	67.96	%
Average Annual Total Return3				-6.43	%	+	2.45	%	+	4.70	%
Value of $10,000 Investment4			$	9,357		$	11,285		$	15,836
Total Annual Operating Expenses5
Without Waiver	1.21	%
With Waiver	1.15	%
Class B				1-Year			5-Year			Inception (12/1/03)
Cumulative Total Return2				-1.45	%	+	15.37	%	+	42.64	%
Average Annual Total Return3				-5.34	%	+	2.54	%	+	4.49	%
Value of $10,000 Investment4			$	9,466		$	11,337		$	14,264
Total Annual Operating Expenses5
Without Waiver	1.96	%
With Waiver	1.90	%
Class C				1-Year			5-Year			10-Year
Cumulative Total Return2				-1.38	%	+	15.40	%	+	55.85	%
Average Annual Total Return3				-2.35	%	+	2.91	%	+	4.54	%
Value of $10,000 Investment4			$	9,765		$	11,540		$	15,585
Total Annual Operating Expenses5
Without Waiver	1.96	%
With Waiver	1.90	%
Class R				1-Year			5-Year			10-Year
Cumulative Total Return2				-0.95	%	+	18.23	%	+	63.80	%
Average Annual Total Return3				-0.95	%	+	3.41	%	+	5.06	%
Value of $10,000 Investment4			$	9,905		$	11,823		$	16,380
Total Annual Operating Expenses5
Without Waiver	1.46	%
With Waiver	1.40	%
Advisor Class6				1-Year			5-Year			10-Year
Cumulative Total Return2				-0.47	%	+	21.18	%	+	70.46	%
Average Annual Total Return3				-0.47	%	+	3.92	%	+	5.48	%
Value of $10,000 Investment4			$	9,953		$	12,118		$	17,046
Total Annual Operating Expenses5
Without Waiver	0.96	%
With Waiver	0.90	%

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 and administrator have contractually agreed to waive or assume certain expenses so that common expenses (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) until 4/30/12.

Annual Report | 9

Performance Summary (continued)

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

Total return represents the change in value of an investment over the periods shown. It includes any 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.

Annual Report | 11

Endnotes

While an asset allocation plan can be a valuable tool to help reduce overall volatility, all investments involve risks. Typically, the more aggressive
the investment, or the greater the potential return, the more risk involved. Generally, investors should be comfortable with some fluctuation in the
value of their investments, especially over the short term. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting indi-
vidual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest
rates. Thus, as prices of bonds in a fund adjust to a rise in interest rates, that fund’s share price may decline. Foreign investing carries additional
risks such as currency and market volatility and political or social instability; risks that are heightened in developing countries. The Fund is actively
managed but there is no guarantee that the manager’s investment decisions will produce the desired results. 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 and 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 and include the effect of acquired fund fees and expenses. In periods
of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
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 perform-
ance, excluding the effect of Class A’s maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after
12/1/05, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 12/1/05 (commencement of sales), the
cumulative and average annual total returns of Advisor Class shares were +34.54% and +5.00%.
7. Source: © 2012 Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market per-
formance. 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) using the middle rating of Moody’s, Standard & Poor’s and 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.

12 | Annual Report

Your Fund’s Expenses

Franklin Templeton Conservative 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 | 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**
Class A		7/1/11		12/31/11		7/1/11–12/31/11		7/1/11–12/31/11
Actual	$	1,000	$	962.30	$	2.47	$	5.44
Hypothetical (5% return before expenses)	$	1,000	$	1,022.68	$	2.55	$	5.60
Class B
Actual	$	1,000	$	958.80	$	6.17	$	9.13
Hypothetical (5% return before expenses)	$	1,000	$	1,018.90	$	6.36	$	9.40
Class C
Actual	$	1,000	$	959.40	$	6.17	$	9.14
Hypothetical (5% return before expenses)	$	1,000	$	1,018.90	$	6.36	$	9.40
Class R
Actual	$	1,000	$	961.70	$	3.71	$	6.68
Hypothetical (5% return before expenses)	$	1,000	$	1,021.42	$	3.82	$	6.87
Advisor Class
Actual	$	1,000	$	963.60	$	1.24	$	4.21
Hypothetical (5% return before expenses)	$	1,000	$	1,023.95	$	1.28	$	4.33

*Expenses are calculated using the most recent six-month expense ratio excluding expenses of the fund investments, net of expense waivers, annualized for each class (A: 0.50%; B: 1.25%; 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.

**Expenses are calculated using the most recent six-month expense ratio including expenses of the fund investments, net of expense waivers, annualized for each class (A: 1.10%; B: 1.85%; C: 1.85%; R: 1.35%; and Advisor: 0.85%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

14 | Annual Report

Franklin Templeton Moderate Allocation Fund

Your Fund’s Goal and Main Investments: Franklin Templeton Moderate Allocation 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.

This annual report for Franklin Templeton Moderate Allocation Fund covers the fiscal year ended December 31, 2011.

Performance Overview

Franklin Templeton Moderate Allocation Fund – Class A had a -1.49% cumulative total return for the 12 months under review. By comparison, the Fund’s equity benchmarks, the Standard & Poor’s 500 Index (S&P 500), a broad measure of U.S. stock performance, and MSCI Europe, Australasia, Far East (EAFE) Index, which measures global stock performance excluding the U.S. and Canada, had total returns of +2.11% and -11.73%. The Fund’s fixed income benchmark, the Barclays Capital (BC) U.S. Aggregate Index, which tracks U.S. investment-grade bonds, posted a +7.84% total return. The Payden & Rygel (P&R) 90 Day U.S. T-Bill Index, a proxy for short-term investments and other net assets, had a +0.08% total return for the same period.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 and other fund investments (fund investments) in each Allocation Fund’s portfolio and will vary the allocation percentages of the fund investments based upon each Allocation Fund’s risk/return level. Maintaining similarity of the fund investments across the Conservative, Moderate and Growth Allocation Funds is intended to increase the consistency of their results relative to one another.

1. The risk/reward potential is based on the Fund’s goal and level of risk. It is not indicative of the Fund’s actual or implied performance or portfolio composition, which may change on a continuous basis.

2. Source: © 2012 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 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 46.

Annual Report | 15

We allocate the Fund’s assets among the broad asset classes, and when selecting equity funds, we consider the fund investments’ foreign and domestic exposure, market capitalization ranges and investment styles (growth versus value). When selecting fixed income funds, we focus primarily on maximizing income appropriate to the Fund’s risk profile.

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 fund investments.

At period-end, Franklin Templeton Moderate Allocation Fund allocated 53.2% of total net assets to equity and 37.5% to fixed income. Domestic equity exposure was 71.8% of the total equity weighting, with the balance represented by foreign equity. The portfolio was diversified across capitalization sizes and investment styles, and on December 31, 2011, 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 9.2% of the Fund’s total net assets, was our largest equity fund weighting at period-end. On the fixed income side, domestic exposure was 66.4% 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 15.5% 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, each underperformed the S&P 500 during the 12-month reporting period. Our largest foreign equity fund holding, Mutual European Fund – Class Z, performed better than the MSCI EAFE Index. On the fixed income side, Franklin U.S. Government Securities Fund – Advisor Class and Templeton Global Bond Fund – Advisor Class each underperformed the BC U.S. Aggregate Index.

16 | Annual Report

Thank you for your continued participation in Franklin Templeton Moderate Allocation Fund. We look forward to serving your future investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2011, 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 12/31/11

Franklin Templeton Moderate 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: FMTIX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.52	$	13.69	$	14.21
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.3197
Class B (Symbol: FBMTX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.51	$	13.65	$	14.16
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.2054
Class C (Symbol: FTMTX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.52	$	13.40	$	13.92
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.2187
Class R (Symbol: FTMRX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.53	$	13.64	$	14.17
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.2853
Advisor Class (Symbol: FMTZX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.53	$	13.69	$	14.22
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.3545

18 | Annual Report

Performance Summary (continued)

Performance¹

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 Return2				-1.49	%	+	18.53	%	+	73.83	%
Average Annual Total Return3				-7.17	%	+	2.23	%	+	5.06	%
Value of $10,000 Investment4			$	9,283		$	11,168		$	16,381
Total Annual Operating Expenses5
Without Waiver	1.27	%
With Waiver	1.22	%
Class B				1-Year			5-Year			Inception (12/1/03)
Cumulative Total Return2				-2.16	%	+	14.24	%	+	47.61	%
Average Annual Total Return3				-6.01	%	+	2.34	%	+	4.94	%
Value of $10,000 Investment4			$	9,399		$	11,229		$	14,761
Total Annual Operating Expenses5
Without Waiver	2.02	%
With Waiver	1.97	%
Class C				1-Year			5-Year			10-Year
Cumulative Total Return2				-2.17	%	+	14.21	%	+	61.42	%
Average Annual Total Return3				-3.13	%	+	2.69	%	+	4.90	%
Value of $10,000 Investment4			$	9,687		$	11,421		$	16,142
Total Annual Operating Expenses5
Without Waiver	2.02	%
With Waiver	1.97	%
Class R				1-Year			5-Year			10-Year
Cumulative Total Return2				-1.73	%	+	17.10	%	+	69.49	%
Average Annual Total Return3				-1.73	%	+	3.21	%	+	5.42	%
Value of $10,000 Investment4			$	9,827		$	11,710		$	16,949
Total Annual Operating Expenses5
Without Waiver	1.52	%
With Waiver	1.47	%
Advisor Class6				1-Year			5-Year			10-Year
Cumulative Total Return2				-1.24	%	+	20.06	%	+	76.65	%
Average Annual Total Return3				-1.24	%	+	3.72	%	+	5.86	%
Value of $10,000 Investment4			$	9,876		$	12,006		$	17,665
Total Annual Operating Expenses5
Without Waiver	1.02	%
With Waiver	0.97	%

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 and administrator have contractually agreed to waive or assume certain expenses so that common expenses (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) until 4/30/12.

Annual Report | 19

Performance Summary (continued)

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

Total return represents the change in value of an investment over the periods shown. It includes any 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.

20 | Annual Report

Annual Report | 21

Endnotes

While an asset allocation plan can be a valuable tool to help reduce overall volatility, all investments involve risks. Typically, the more aggressive
the investment, or the greater the potential return, the more risk involved. Generally, investors should be comfortable with some fluctuation in the
value of their investments, especially over the short term. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting indi-
vidual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest
rates. Thus, as prices of bonds in a fund adjust to a rise in interest rates, that fund’s share price may decline. Foreign investing carries additional
risks such as currency and market volatility and political or social instability; risks that are heightened in developing countries. The Fund is actively
managed but there is no guarantee that the manager’s investment decisions will produce the desired results. 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 and 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 and include the effect of acquired fund fees and expenses. In periods
of market volatility, assets may decline significantly, causing total annual fund operating expenses to become higher than the figures shown.
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 perform-
ance, excluding the effect of Class A’s maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after
12/1/05, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 12/1/05 (commencement of sales), the
cumulative and average annual total returns of Advisor Class shares were +35.21% and +5.09%.
7. Source: © 2012 Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market per-
formance. 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) using the middle rating of Moody’s, Standard & Poor’s and 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.

22 | Annual Report

Your Fund’s Expenses

Franklin Templeton Moderate 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 | 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		7/1/11		12/31/11		7/1/11–12/31/11		7/1/11–12/31/11
Actual	$	1,000	$	950.10	$	2.46	$	5.75
Hypothetical (5% return before expenses)	$	1,000	$	1,022.68	$	2.55	$	5.96
Class B
Actual	$	1,000	$	947.20	$	6.14	$	9.42
Hypothetical (5% return before expenses)	$	1,000	$	1,018.90	$	6.36	$	9.75
Class C
Actual	$	1,000	$	947.50	$	6.14	$	9.42
Hypothetical (5% return before expenses)	$	1,000	$	1,018.90	$	6.36	$	9.75
Class R
Actual	$	1,000	$	949.40	$	3.69	$	6.98
Hypothetical (5% return before expenses)	$	1,000	$	1,021.42	$	3.82	$	7.22
Advisor Class
Actual	$	1,000	$	952.10	$	1.23	$	4.53
Hypothetical (5% return before expenses)	$	1,000	$	1,023.95	$	1.28	$	4.69

*Expenses are calculated using the most recent six-month expense ratio excluding expenses of the fund investments, net of expense waivers, annualized for each class (A: 0.50%; B: 1.25%; 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.

**Expenses are calculated using the most recent six-month expense ratio including expenses of the fund investments, net of expense waivers, annualized for each class (A: 1.17%; 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.

24 | Annual Report

Franklin Templeton Growth Allocation Fund

Your Fund’s Goal and Main Investments: Franklin Templeton Growth Allocation 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.

This annual report for Franklin Templeton Growth Allocation Fund covers the fiscal year ended December 31, 2011.

Performance Overview

Franklin Templeton Growth Allocation Fund – Class A had a -3.15% cumulative total return for the 12 months under review. By comparison, the Fund’s equity benchmarks, the Standard & Poor’s 500 Index (S&P 500), a broad measure of U.S. stock performance, and MSCI Europe, Australasia, Far East (EAFE) Index, which measures global stock performance excluding the U.S. and Canada, had total returns of +2.11% and -11.73%. The Fund’s fixed income benchmark, the Barclays Capital (BC) U.S. Aggregate Index, which tracks U.S. investment-grade bonds, posted a +7.84% total return. The Payden & Rygel (P&R) 90 Day U.S. T-Bill Index, a proxy for short-term investments and other net assets, had a +0.08% total return for the same period.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 and other fund investments (fund investments) in each Allocation Fund’s portfolio and will vary the allocation percentages of the fund investments based upon each Allocation Fund’s risk/return level. Maintaining similarity of the fund investments across the Conservative, Moderate and Growth Allocation Funds is intended to increase the consistency of their results relative to one another. We allocate the Fund’s assets among the broad asset classes, and when selecting

1. The risk/reward potential is based on the Fund’s goal and level of risk. It is not indicative of the Fund’s actual or implied performance or portfolio composition, which may change on a continuous basis.

2. Source: © 2012 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 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 52.

Annual Report | 25

equity funds, we consider the fund investments’ foreign and domestic exposure, market capitalization ranges and investment styles (growth versus value). When selecting fixed income funds, we focus primarily on maximizing income appropriate to the Fund’s risk profile.

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 fund investments.

At period-end, Franklin Templeton Growth Allocation Fund allocated 78.0% of total net assets to equity and 17.7% to fixed income. Domestic equity exposure was 72.3% of the total equity weighting, with the balance represented by foreign equity. The portfolio was diversified across capitalization sizes and investment styles, and on December 31, 2011, 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 13.7% of the Fund’s total net assets, was our largest equity fund weighting at period-end. On the fixed income side, domestic exposure was 70.1% 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 6.5% 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, each underperformed the S&P 500 during the 12-month reporting period. Our largest foreign equity fund holding, Mutual European Fund – Class Z, performed better than the MSCI EAFE Index. On the fixed income side, Franklin U.S. Government Securities Fund – Advisor Class and Templeton Global Bond Fund – Advisor Class each underperformed the BC U.S. Aggregate Index.

26 | Annual Report

Thank you for your continued participation in Franklin Templeton Growth Allocation Fund. We look forward to serving your future investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2011, 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 12/31/11

Franklin Templeton Growth 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: FGTIX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.72	$	14.53	$	15.25
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.2432
Class B (Symbol: n/a)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.67	$	14.33	$	15.00
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.0940
Class C (Symbol: FTGTX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.72	$	14.25	$	14.97
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.1382
Class R (Symbol: FGTRX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.72	$	14.37	$	15.09
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.2103
Advisor Class (Symbol: FGTZX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.72	$	14.56	$	15.28
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.2792

28 | Annual Report

Performance Summary (continued)

Performance¹

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 Return2				-3.15	%	+	11.13	%	+	69.67	%
Average Annual Total Return3				-8.71	%	+	0.94	%	+	4.80	%
Value of $10,000 Investment4			$	9,129		$	10,476		$	15,987
Total Annual Operating Expenses5
Without Waiver	1.38	%
With Waiver	1.32	%
Class B				1-Year			5-Year			Inception (12/1/03)
Cumulative Total Return2				-3.87	%	+	7.04	%	+	46.52	%
Average Annual Total Return3				-7.69	%	+	1.02	%	+	4.84	%
Value of $10,000 Investment4			$	9,231		$	10,519		$	14,652
Total Annual Operating Expenses5
Without Waiver	2.13	%
With Waiver	2.07	%
Class C				1-Year			5-Year			10-Year
Cumulative Total Return2				-3.91	%	+	7.02	%	+	57.40	%
Average Annual Total Return3				-4.87	%	+	1.37	%	+	4.64	%
Value of $10,000 Investment4			$	9,513		$	10,702		$	15,740
Total Annual Operating Expenses5
Without Waiver	2.13	%
With Waiver	2.07	%
Class R				1-Year			5-Year			10-Year
Cumulative Total Return2				-3.40	%	+	9.83	%	+	65.37	%
Average Annual Total Return3				-3.40	%	+	1.89	%	+	5.16	%
Value of $10,000 Investment4			$	9,660		$	10,983		$	16,537
Total Annual Operating Expenses5
Without Waiver	1.63	%
With Waiver	1.57	%
Advisor Class6				1-Year			5-Year			10-Year
Cumulative Total Return2				-2.90	%	+	12.52	%	+	72.36	%
Average Annual Total Return3				-2.90	%	+	2.39	%	+	5.59	%
Value of $10,000 Investment4			$	9,710		$	11,252		$	17,236
Total Annual Operating Expenses5
Without Waiver	1.13	%
With Waiver	1.07	%

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

The investment manager and administrator have contractually agreed to waive or assume certain expenses so that common expenses (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) until 4/30/12.

Annual Report | 29

Performance Summary (continued)

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

Total return represents the change in value of an investment over the periods shown. It includes any 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.

Annual Report | 31

Endnotes

While an asset allocation plan can be a valuable tool to help reduce overall volatility, all investments involve risks. Typically, the more aggressive
the investment, or the greater the potential return, the more risk involved. Generally, investors should be comfortable with some fluctuation in the
value of their investments, especially over the short term. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting indi-
vidual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest
rates. Thus, as prices of bonds in a fund adjust to a rise in interest rates, that fund’s share price may decline. Foreign investing carries additional
risks such as currency and market volatility and political or social instability; risks that are heightened in developing countries. The Fund is actively
managed but there is no guarantee that the manager’s investment decisions will produce the desired results. 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 and 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 and include the effect of acquired fund fees and expenses. In periods
of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
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 perform-
ance, excluding the effect of Class A’s maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after
12/1/05, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 12/1/05 (commencement of sales), the
cumulative and average annual total returns of Advisor Class shares were +29.26% and +4.31%.
7. Source: © 2012 Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market per-
formance. 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) using the middle rating of Moody’s, Standard & Poor’s and 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.

32 | Annual Report

Your Fund’s Expenses

Franklin Templeton Growth 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 | 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		7/1/11		12/31/11		7/1/11–12/31/11		7/1/11–12/31/11
Actual	$	1,000	$	930.20	$	2.43	$	6.03
Hypothetical (5% return before expenses)	$	1,000	$	1,022.68	$	2.55	$	6.31
Class B
Actual	$	1,000	$	926.80	$	6.07	$	9.66
Hypothetical (5% return before expenses)	$	1,000	$	1,018.90	$	6.36	$	10.11
Class C
Actual	$	1,000	$	926.30	$	6.07	$	9.66
Hypothetical (5% return before expenses)	$	1,000	$	1,018.90	$	6.36	$	10.11
Class R
Actual	$	1,000	$	929.10	$	3.65	$	7.24
Hypothetical (5% return before expenses)	$	1,000	$	1,021.42	$	3.82	$	7.58
Advisor Class
Actual	$	1,000	$	931.40	$	1.22	$	4.82
Hypothetical (5% return before expenses)	$	1,000	$	1,023.95	$	1.28	$	5.04

*Expenses are calculated using the most recent six-month expense ratio excluding expenses of the fund investments, net of expense waivers, annualized for each class (A: 0.50%; B: 1.25%; 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.

**Expenses are calculated using the most recent six-month expense ratio including expenses of the fund investments, net of expense waivers, annualized for each class (A: 1.24%; B: 1.99%; C: 1.99%; R: 1.49%; and Advisor: 0.99%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

34 | Annual Report

Franklin Templeton Fund Allocator Series

Financial Highlights

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of
the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
^bBased on average daily shares outstanding.
^cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and Exchange Traded Funds in which the Fund
invests.
^dEffective September 1, 2008, the redemption fee was eliminated.
^eAmount rounds to less than $0.01 per share.
^fTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
^gDoes not include expenses of the Underlying Funds and Exchange Traded Funds in which the Fund invests. The annualized weighted average expense ratio of the Underlying Funds
and Exchange Traded Funds was was 0.60% for the year ended December 31, 2011.

Annual Report | The accompanying notes are an integral part of these financial statements. | 35

Franklin Templeton Fund Allocator Series

Financial Highlights (continued)

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of
the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
^bBased on average daily shares outstanding.
^cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and Exchange Traded Funds in which the Fund
invests.
^dEffective September 1, 2008, the redemption fee was eliminated.
^eAmount rounds to less than $0.01 per share.
^fTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
^gDoes not include expenses of the Underlying Funds and Exchange Traded Funds in which the Fund invests. The annualized weighted average expense ratio of the Underlying Funds
and Exchange Traded Funds was 0.60% for the year ended December 31, 2011.

36 | The accompanying notes are an integral part of these financial statements. | Annual Report

Franklin Templeton Fund Allocator Series

Financial Highlights (continued)

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of
the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
^bBased on average daily shares outstanding.
^cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and Exchange Traded Funds in which the Fund
invests.
^dEffective September 1, 2008, the redemption fee was eliminated.
^eAmount rounds to less than $0.01 per share.
^fTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
^gDoes not include expenses of the Underlying Funds and Exchange Traded Funds in which the Fund invests. The annualized weighted average expense ratio of the Underlying Funds
and Exchange Traded Funds was 0.60% for the year ended December 31, 2011.

Annual Report | The accompanying notes are an integral part of these financial statements. | 37

Franklin Templeton Fund Allocator Series

Financial Highlights (continued)

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of
the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
^bBased on average daily shares outstanding.
^cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and Exchange Traded Funds in which the Fund
invests.
^dEffective September 1, 2008, the redemption fee was eliminated.
^eAmount rounds to less than $0.01 per share.
^fTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
^gDoes not include expenses of the Underlying Funds and Exchange Traded Funds in which the Fund invests. The annualized weighted average expense ratio of the Underlying Funds
and Exchange Traded Funds was 0.60% for the year ended December 31, 2011.

38 | The accompanying notes are an integral part of these financial statements. | Annual Report

Franklin Templeton Fund Allocator Series

Financial Highlights (continued)

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of
the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
^bBased on average daily shares outstanding.
^cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and Exchange Traded Funds in which the Fund
invests.
^dEffective September 1, 2008, the redemption fee was eliminated.
^eAmount rounds to less than $0.01 per share.
^fDoes not include expenses of the Underlying Funds and Exchange Traded Funds in which the Fund invests. The annualized weighted average expense ratio of the Underlying Funds
and Exchange Traded Funds was 0.60% for the year ended December 31, 2011.

Annual Report | The accompanying notes are an integral part of these financial statements. | 39

Franklin Templeton Fund Allocator Series

Statement of Investments, December 31, 2011

Franklin Templeton Conservative Allocation Fund	Shares/Units		Value
Investments in Underlying Funds and Exchange Traded Funds
Alternative Strategies 0.3%
a,bFranklin Pelagos Commodities Strategy Fund, Advisor Class	210,500	$	2,069,215
a,bFranklin Pelagos Managed Futures Strategy Fund, Advisor Class	210,500		2,113,420
			4,182,635
Domestic Equity 28.3%
a,bFranklin DynaTech Fund, Advisor Class	896,289		26,046,153
a,bFranklin Flex Cap Growth Fund, Advisor Class	1,962,765		88,540,351
bFranklin Growth Fund, Advisor Class	1,309,500		58,469,161
a,bFranklin Growth Opportunities Fund, Advisor Class	743,444		15,552,849
bFranklin MicroCap Value Fund, Advisor Class	597,358		16,678,230
bFranklin Natural Resources Fund, Advisor Class	553,604		20,511,032
bFranklin Rising Dividends Fund, Advisor Class	2,286,740		79,441,348
bFranklin Utilities Fund, Advisor Class	2,596,150		34,892,257
iShares S&P 500 Index Fund, ETF	135,370		17,051,205
bMutual Shares Fund, Class Z	1,761,536		35,142,652
			392,325,238
Domestic Fixed Income 27.9%
bFranklin High Income Fund, Advisor Class	11,038,236		21,524,561
bFranklin Total Return Fund, Advisor Class	8,032,427		80,806,214
bFranklin U.S. Government Securities Fund, Advisor Class	34,627,912		241,010,267
iShares Barclays Aggregate Bond Fund, ETF	395,955		43,654,039
			386,995,081
Foreign Equity 11.1%
bFranklin Gold and Precious Metals Fund, Advisor Class	594,464		22,649,074
bFranklin International Small Cap Growth Fund, Advisor Class	1,791,249		24,396,815
iShares MSCI EAFE Index Fund, ETF	141,070		6,987,197
bMutual European Fund, Class Z	1,979,777		37,516,772
bTempleton China World Fund, Advisor Class	505,439		17,210,211
bTempleton Foreign Fund, Advisor Class	7,778,263		45,502,836
			154,262,905
Foreign Fixed Income 13.8%
bFranklin Templeton Emerging Market Debt Opportunities Fund	2,554,370		28,889,930
bTempleton Global Bond Fund, Advisor Class	13,122,983		162,331,304
			191,221,234
Total Investments in Underlying Funds and Exchange Traded Funds before
Short Term Investments (Cost $1,051,881,078) 81.4%			1,128,987,093
Short Term Investments (Cost $261,282,501) 18.8%
Money Market Funds 18.8%
a,bInstitutional Fiduciary Trust Money Market Portfolio	261,282,501		261,282,501
Total Investments in Underlying Funds and Exchange Traded Funds
(Cost $1,313,163,579) 100.2%			1,390,269,594
Other Assets, less Liabilities (0.2)%			(2,387,865	)
Net Assets 100.0%		$	1,387,881,729
See Abbreviations on page 73.
aNon-income producing.
bSee Note 7 regarding investments in Underlying Funds.
40 | The accompanying notes are an integral part of these financial statements. |	Annual Report

Franklin Templeton Fund Allocator Series

Financial Highlights

Annual Report | The accompanying notes are an integral part of these financial statements. | 41

Franklin Templeton Fund Allocator Series

Statement of Investments, December 31, 2011

Franklin Templeton Moderate Allocation Fund	Shares/Units		Value
Investments in Underlying Funds and Exchange Traded Funds
Alternative Strategies 0.4%
a,bFranklin Pelagos Commodities Strategy Fund, Advisor Class	438,800	$	4,313,404
a,bFranklin Pelagos Managed Futures Strategy Fund, Advisor Class	438,800		4,405,552
			8,718,956
Domestic Equity 38.2%
a,bFranklin DynaTech Fund, Advisor Class	1,814,281		52,722,998
a,bFranklin Flex Cap Growth Fund, Advisor Class	4,513,839		203,619,275
bFranklin Growth Fund, Advisor Class	2,732,897		122,023,860
a,bFranklin Growth Opportunities Fund, Advisor Class	1,734,337		36,282,327
bFranklin MicroCap Value Fund, Advisor Class	1,273,008		35,542,382
bFranklin Natural Resources Fund, Advisor Class	1,153,697		42,744,462
bFranklin Rising Dividends Fund, Advisor Class	4,491,555		156,036,636
bFranklin Utilities Fund, Advisor Class	6,382,259		85,777,559
iShares S&P 500 Index Fund, ETF	214,940		27,073,842
bMutual Shares Fund, Class Z	4,141,238		82,617,708
			844,441,049
Domestic Fixed Income 24.9%
bFranklin High Income Fund, Advisor Class	16,540,092		32,253,179
bFranklin Total Return Fund, Advisor Class	10,650,925		107,148,306
bFranklin U.S. Government Securities Fund, Advisor Class	49,297,812		343,112,775
iShares Barclays Aggregate Bond Fund, ETF	628,000		69,237,000
			551,751,260
Foreign Equity 15.0%
bFranklin Gold and Precious Metals Fund, Advisor Class	1,313,536		50,045,713
bFranklin International Small Cap Growth Fund, Advisor Class	3,901,845		53,143,126
iShares MSCI EAFE Index Fund, ETF	224,130		11,101,159
bMutual European Fund, Class Z	4,448,469		84,298,494
bTempleton China World Fund, Advisor Class	1,088,766		37,072,493
bTempleton Foreign Fund, Advisor Class	16,614,898		97,197,151
			332,858,136
Foreign Fixed Income 12.6%
bFranklin Templeton Emerging Market Debt Opportunities Fund	3,716,986		42,039,110
bTempleton Global Bond Fund, Advisor Class	19,159,786		237,006,557
			279,045,667
Total Investments in Underlying Funds and Exchange Traded Funds before
Short Term Investments (Cost $1,870,112,117) 91.1%			2,016,815,068
Short Term Investments (Cost $197,999,013) 8.9%
Money Market Funds 8.9%
a,bInstitutional Fiduciary Trust Money Market Portfolio	197,999,013		197,999,013
Total Investments in Underlying Funds and Exchange Traded Funds
(Cost $2,068,111,130) 100.0%			2,214,814,081
Other Assets, less Liabilities (0.0)%†			(856,483	)
Net Assets 100.0%		$	2,213,957,598

See Abbreviations on page 73.

^†Rounds to less than 0.1% of net assets.
^aNon-income producing.
^bSee Note 7 regarding investments in Underlying Funds.

46 | The accompanying notes are an integral part of these financial statements. | Annual Report

Franklin Templeton Fund Allocator Series

Financial Highlights

Franklin Templeton Fund Allocator Series

Financial Highlights (continued)

Franklin Templeton Fund Allocator Series

Financial Highlights (continued)

Franklin Templeton Fund Allocator Series

Financial Highlights (continued)

Franklin Templeton Fund Allocator Series

Financial Highlights (continued)

Franklin Templeton Fund Allocator Series

Statement of Investments, December 31, 2011

Franklin Templeton Growth Allocation Fund	Shares/Units		Value
Investments in Underlying Funds and Exchange Traded Funds
Alternative Strategies 0.6%
a,bFranklin Pelagos Commodities Strategy Fund, Advisor Class	307,200	$	3,019,776
a,bFranklin Pelagos Managed Futures Strategy Fund, Advisor Class	307,200		3,084,288
			6,104,064
Domestic Equity 56.4%
a,bFranklin DynaTech Fund, Advisor Class	1,248,285		36,275,166
a,bFranklin Flex Cap Growth Fund, Advisor Class	3,003,782		135,500,623
bFranklin Growth Fund, Advisor Class	1,766,243		78,862,748
a,bFranklin Growth Opportunities Fund, Advisor Class	1,224,252		25,611,354
bFranklin MicroCap Value Fund, Advisor Class	919,668		25,677,134
bFranklin Natural Resources Fund, Advisor Class	805,360		29,838,579
bFranklin Rising Dividends Fund, Advisor Class	3,021,175		104,955,604
bFranklin Utilities Fund, Advisor Class	3,933,664		52,868,441
iShares S&P 500 Index Fund, ETF	95,625		12,044,925
bMutual Shares Fund, Class Z	2,804,870		55,957,165
			557,591,739
Domestic Fixed Income 12.4%
bFranklin High Income Fund, Advisor Class	2,588,825		5,048,209
bFranklin Total Return Fund, Advisor Class	2,163,329		21,763,084
bFranklin U.S. Government Securities Fund, Advisor Class	9,280,541		64,592,563
iShares Barclays Aggregate Bond Fund, ETF	279,455		30,809,914
			122,213,770
Foreign Equity 21.6%
bFranklin Gold and Precious Metals Fund, Advisor Class	801,218		30,526,408
bFranklin International Small Cap Growth Fund, Advisor Class	2,575,403		35,076,982
iShares MSCI EAFE Index Fund, ETF	99,185		4,912,633
bMutual European Fund, Class Z	2,895,709		54,873,683
bTempleton China World Fund, Advisor Class	709,652		24,163,652
bTempleton Foreign Fund, Advisor Class	10,844,661		63,441,268
			212,994,626
Foreign Fixed Income 5.3%
bFranklin Templeton Emerging Market Debt Opportunities Fund	749,693		8,479,031
bTempleton Global Bond Fund, Advisor Class	3,524,146		43,593,692
			52,072,723
Total Investments in Underlying Funds and Exchange Traded Funds before
Short Term Investments (Cost $859,785,086) 96.3%			950,976,922
Short Term Investments (Cost $39,375,622) 4.0%
Money Market Funds 4.0%
a,bInstitutional Fiduciary Trust Money Market Portfolio	39,375,622		39,375,622
Total Investments in Underlying Funds and Exchange Traded Funds
(Cost $899,160,708) 100.3%			990,352,544
Other Assets, less Liabilities (0.3)%			(2,627,084	)
Net Assets 100.0%		$	987,725,460
See Abbreviations on page 73.
aNon-income producing.
bSee Note 7 regarding investments in Underlying Funds.
52 | The accompanying notes are an integral part of these financial statements. |	Annual Report

Franklin Templeton Fund Allocator Series

Financial Statements

Statements of Assets and Liabilities
December 31, 2011

		Franklin			Franklin			Franklin
		Templeton			Templeton			Templeton
		Conservative			Moderate			Growth
		Allocation Fund			Allocation Fund			Allocation Fund
Assets:
Investments in securities:
Cost - Underlying Funds (Note 7)	$	1,247,650,936		$	1,965,038,848		$	852,765,019
Cost - Exchange Traded Funds		65,512,643			103,072,282			46,395,689
Total cost of investments	$	1,313,163,579		$	2,068,111,130		$	899,160,708
Value - Underlying Funds (Note 7)	$	1,322,577,153		$	2,107,402,080		$	942,585,072
Value - Exchange Traded Funds		67,692,441			107,412,001			47,767,472
Total value of investments		1,390,269,594			2,214,814,081			990,352,544
Receivables:
Capital shares sold		3,094,719			5,477,116			1,894,694
Dividends		10,111			17,403			7,512
Underlying Funds (Note 8)		114,853			245,488			127,871
Other assets		29			48			22
Total assets		1,393,489,306			2,220,554,136			992,382,643
Liabilities:
Payables:
Capital shares redeemed		3,913,281			4,004,603			3,452,874
Affiliates		1,403,489			2,107,058			965,963
Unaffiliated transfer agent fees		223,299			376,544			186,207
Accrued expenses and other liabilities		67,508			108,333			52,139
Total liabilities		5,607,577			6,596,538			4,657,183
Net assets, at value	$	1,387,881,729		$	2,213,957,598		$	987,725,460
Net assets consist of:
Paid-in capital	$	1,320,717,832		$	2,084,840,925		$	920,723,064
Undistributed net investment income		1,233,818			3,203,318			3,052,465
Net unrealized appreciation (depreciation)		77,106,015			146,702,951			91,191,836
Accumulated net realized gain (loss)		(11,175,936	)		(20,789,596	)		(27,241,905	)
Net assets, at value	$	1,387,881,729		$	2,213,957,598		$	987,725,460

Annual Report | The accompanying notes are an integral part of these financial statements. | 53

Franklin Templeton Fund Allocator Series

Financial Statements (continued)

Statements of Assets and Liabilities (continued)
December 31, 2011

54 | The accompanying notes are an integral part of these financial statements. | Annual Report

Franklin Templeton Fund Allocator Series

Financial Statements (continued)

Statements of Operations
for the year ended December 31, 2011

Annual Report | The accompanying notes are an integral part of these financial statements. | 55

Franklin Templeton Fund Allocator Series

Financial Statements (continued)

56 | The accompanying notes are an integral part of these financial statements. | Annual Report

Franklin Templeton Fund Allocator Series

Financial Statements (continued)

Annual Report | The accompanying notes are an integral part of these financial statements. | 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. Financial Instrument 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. Exchange Traded Funds (ETFs) listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively.

b. Income Taxes

It is each fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. Each fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.

Each fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of December 31, 2011, and for all open tax years, each fund has determined that no liability for unrecognized tax benefits is required in each fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

c. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Estimated expenses are accrued daily. Dividend income and realized gain distributions by Underlying Funds and ETFs are recorded on the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are

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)

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.

Common expenses incurred by the Trust are allocated among the funds based on the ratio of net assets of each fund to the combined net assets of the Trust. Fund specific expenses are charged directly to the fund that incurred the expense.

The Funds indirectly bear their proportionate share of expenses from the Underlying Funds and ETFs. Since the Underlying Funds and ETFs have varied expense levels and the Funds may own different proportions of the Underlying Funds and ETFs at different times, the amount of expenses incurred indirectly by the Funds will vary.

Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.

d. Accounting Estimates

The preparation of financial statements in accordance with 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. 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, 2011, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

Annual Report | 61

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

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 Funds are also officers and/or directors/trustees of certain of the Underlying Funds and of the following subsidiaries:

Subsidiary	Affiliation
Franklin Advisers, Inc. (Advisers)	Investment manager
Franklin Templeton Services, LLC (FT Services)	Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)	Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)	Transfer agent

a. Asset Allocation Fees

The Funds pay an asset allocation fee to Advisers of 0.25% per year of the average daily net assets of each of the Funds for investment advisory services, consisting principally of determining the allocation of assets of the Funds among the designated Underlying Funds and ETFs.

b. Administrative Fees

FT Services, under terms of an agreement, provides administrative services to the Funds and is not paid by the Funds for the services.

c. Distribution Fees

The 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

Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Funds. These charges are deducted from the proceeds of sales of fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Funds of the following commission transactions related to the sales and redemptions of the Funds’ shares for the year:

		Franklin		Franklin		Franklin
		Templeton		Templeton		Templeton
		Conservative		Moderate		Growth
		Allocation Fund		Allocation Fund		Allocation Fund
Sales charges retained net of commissions paid to
unaffiliated broker/dealers	$	839,822	$	1,741,167	$	790,765
CDSC retained	$	89,262	$	114,279	$	35,159
e. Transfer Agent Fees
For the year ended December 31, 2011, 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
		Allocation Fund		Allocation Fund		Allocation Fund
Transfer agent fees	$	690,075	$	1,342,206	$	842,871
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, 2012.

4. EXPENSE OFFSET ARRANGEMENT

The Funds have entered into an arrangement with their custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Funds’ custodian expenses. During the year ended December 31, 2011, there were no credits earned.

64 | Annual Report

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains, if any. Under the Regulated Investment Company Modernization Act of 2010, capital losses incurred by the Funds in taxable years beginning after December 22, 2010 are not subject to expiration and such losses retain their character as either short-term or long-term, rather than being considered short-term as under previous law. Post-enactment capital losses must be fully utilized prior to utilizing any losses incurred in pre-enactment tax years.

At December 31, 2011, the capital loss carryforwards were as follows:

		Franklin		Franklin		Franklin
		Templeton		Templeton		Templeton
		Conservative		Moderate		Growth
		Allocation Fund		Allocation Fund		Allocation Fund
Capital loss carryforwards subject to expiration:
2017	$	1,636,145	$	1,569,112	$	18,382,551
2018		1,518,252		2,105,446		4,276,244
	$	3,154,397	$	3,674,558	$	22,658,795

During the year ended December 31, 2011, the Funds utilized capital loss carryforwards as follows:

	Franklin		Franklin		Franklin
	Templeton		Templeton		Templeton
	Conservative		Moderate		Growth
	Allocation Fund		Allocation Fund		Allocation Fund
$	14,454,439	$	28,284,988	$	13,420,361

For tax purposes, the Funds may elect to defer any portion of a post-October capital loss to the first day of the following fiscal year. At December 31, 2011, the deferred post-October capital losses were as follows:

		Franklin		Franklin		Franklin
		Templeton		Templeton		Templeton
		Conservative		Moderate		Growth
		Allocation Fund		Allocation Fund		Allocation Fund
Realized capital losses	$	1,872,187	$	3,795,818	$	1,088,323

Annual Report | 65

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

5. INCOME TAXES (continued)

The tax character of distributions paid during the years ended December 31, 2011 and 2010, was as follows:

At December 31, 2011, 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
		Allocation Fund			Allocation Fund			Allocation Fund
Cost of investments	$	1,319,312,935		$	2,081,430,351		$	902,655,497
Unrealized appreciation	$	82,356,772		$	146,886,078		$	97,689,236
Unrealized depreciation		(11,400,113	)		(13,502,348	)		(9,992,189	)
Net unrealized appreciation (depreciation)	$	70,956,659		$	133,383,730		$	87,697,047
Distributable earnings – undistributed ordinary
income	$	1,233,818		$	3,203,318		$	3,052,465

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of short term capital gains distributions from Underlying Funds and ETFs and wash sales.

6. INVESTMENT TRANSACTIONS

Purchases and sales of Underlying Funds and ETFs (excluding short term securities) for the year ended December 31, 2011, were as follows:

		Franklin		Franklin		Franklin
		Templeton		Templeton		Templeton
		Conservative		Moderate		Growth
		Allocation Fund		Allocation Fund		Allocation Fund
Purchases	$	481,482,810	$	859,242,357	$	383,390,732
Sales	$	195,525,408	$	379,792,165	$	185,057,249
66 | Annual Report

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

7. INVESTMENTS IN UNDERLYING FUNDS

The Funds invest primarily in the Underlying Funds which are managed by Advisers (or an affiliate of Advisers). The Funds do not invest in the Underlying Funds for the purpose of exercising a controlling influence over the management or policies.

The Funds may invest in the Institutional Fiduciary Trust Money Market Portfolio (Sweep Money Fund), an open-end investment company managed by Advisers. 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.

Investments in Underlying Funds for the year ended December 31, 2011, were as follows:

Annual Report | 67

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

68 | Annual Report

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

Annual Report | 69

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

8. SPECIAL SERVICING AGREEMENT

The Funds participate in a Special Servicing Agreement (SSA) with the Underlying Funds (except for the Franklin Pelagos Commodities Strategy Fund and Franklin Pelagos Managed Futures Strategy Fund) 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 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 borne by the Underlying Funds during the year ended December 31, 2011 is noted in the Statements of Operations.

70 | Annual Report

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

9. 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 $750 million (Global Credit Facility) which matured on January 20, 2012. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective January 20, 2012, the Borrowers renewed the Global Credit Facility for a total of $1.5 billion, maturing January 18, 2013.

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 0.08% 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, 2011, the Funds did not use the Global Credit Facility.

10. FAIR VALUE MEASUREMENTS

The Funds follow a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds’ own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds’ 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 Funds’ 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.

For movements between the levels within the fair value hierarchy, the Funds have adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

Annual Report | 71

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

10. FAIR VALUE MEASUREMENTS (continued)

The following is a summary of the inputs used as of December 31, 2011, in valuing the Funds’ assets and liabilities carried at fair value:

11. NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in the ASU will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards) and include new guidance for certain fair value measurement principles and disclosure requirements. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Funds believe the adoption of this ASU will not have a material impact on their financial statements.

72 | Annual Report

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

12. SUBSEQUENT EVENTS

The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.

ABBREVIATIONS

Selected Portfolio

ETF - Exchange Traded Fund

Annual Report | 73

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 Allocation Fund, Franklin Templeton Moderate Allocation Fund and Franklin Templeton Growth Allocation Fund (separate portfolios of Franklin Templeton Fund Allocator Series, hereafter referred to as the “Funds”) at December 31, 2011, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2011 by correspondence with the transfer agent of the Underlying Funds and the custodian, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California
February 14, 2012

74 | Annual Report

Franklin Templeton Fund Allocator Series

Tax Information (unaudited)

Under Section 854(b)(1)(A) of the Internal Revenue Code (Code), the Funds hereby report the following percentage amounts of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2011:

Franklin	Franklin	Franklin
Templeton	Templeton	Templeton
Conservative	Moderate	Growth
Allocation Fund	Allocation Fund	Allocation Fund
11.86%	16.11%	33.57%
Under Section 854(b)(1)(B) of the Code, the Funds hereby report the maximum amount allowable
but no less than the following amounts as qualified dividends for purposes of the maximum rate

under Section 1(h)(11) of the Code for the fiscal year ended December 31, 2011:

	Franklin		Franklin		Franklin
	Templeton		Templeton		Templeton
	Conservative		Moderate		Growth
	Allocation Fund		Allocation Fund		Allocation Fund
$	6,962,151	$	15,394,391	$	10,101,357

Distributions, including qualified dividend income, paid during calendar year 2011 will be reported to shareholders on Form 1099-DIV by mid-February 2012. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.

During the fiscal year ended December 31, 2011, the Funds, qualified fund of funds under Section 852(g)(2) of the Code, received an allocation of foreign taxes paid from one or more of their Underlying Funds. As shown in the table below, the Funds hereby report to shareholders the foreign source income and foreign taxes paid by the Underlying Funds, pursuant to Section 853 of the Code. This written statement will allow shareholders of record on December 27, 2011, to treat their proportionate share of foreign taxes paid by the Underlying Funds as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Funds’ distribution.

The following table provides a detailed analysis of foreign tax paid, foreign source income, and foreign qualified dividends as reported by the Funds, to Class A, Class B, Class C, Class R, and Advisor Class shareholders of record.

		Foreign Tax		Foreign Source		Foreign Qualified
Class		Paid Per Share		Income Per Share		Dividends Per Share
Franklin Templeton Conservative Allocation Fund
Class A	$	0.0027	$	0.0960	$	0.0252
Class B	$	0.0027	$	0.0960	$	0.0252
Class C	$	0.0027	$	0.0960	$	0.0252
Class R	$	0.0027	$	0.0960	$	0.0252
Advisor Class	$	0.0027	$	0.0960	$	0.0252

Annual Report | 75

Franklin Templeton Fund Allocator Series

Tax Information (unaudited) (continued)

		Foreign Tax		Foreign Source		Foreign Qualified
Class		Paid Per Share		Income Per Share		Dividends Per Share
Franklin Templeton Moderate Allocation Fund
Class A	$	0.0038	$	0.1094	$	0.0355
Class B	$	0.0038	$	0.1094	$	0.0355
Class C	$	0.0038	$	0.1094	$	0.0355
Class R	$	0.0038	$	0.1094	$	0.0355
Advisor Class	$	0.0038	$	0.1094	$	0.0355
Franklin Templeton Growth Allocation Fund
Class A	$	0.0059	$	0.1015	$	0.0551
Class B	$	0.0059	$	0.1015	$	0.0551
Class C	$	0.0059	$	0.1015	$	0.0551
Class R	$	0.0059	$	0.1015	$	0.0551
Advisor Class	$	0.0059	$	0.1015	$	0.0551

Foreign Tax Paid Per Share (Column 1) is the amount per share available to you, as a tax credit (assuming you held your shares in the Fund for a minimum of 16 days during the 31-day period beginning 15 days before the ex-dividend date of the Funds’ distribution to which the foreign taxes relate), or, as a tax deduction.

Foreign Source Income Per Share (Column 2) is the amount per share of income dividends attributable to foreign securities held by the Underlying Funds, plus any foreign taxes withheld on these dividends. The amounts reported include foreign source qualified dividends that have not been adjusted for the rate differential applicable to such dividend income.¹

Foreign Qualified Dividends Per Share (Column 3) is the amount per share of foreign source qualified dividends, plus any foreign taxes withheld on these dividends. These amounts represent the portion of the Foreign Source Income reported to you in column 2 that were derived from qualified foreign securities held by the Underlying Funds.¹

By mid-February 2012, shareholders will receive Form 1099-DIV which will include their share of taxes paid and foreign source income distributed during the calendar year 2011. The Foreign Source Income reported on Form 1099-DIV has not been adjusted for the rate differential on foreign source qualified dividend income. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their 2011 individual income tax returns.

¹Qualified dividends are taxed at reduced long term capital gains tax rates. In determining the amount of foreign tax credit that may be applied against the U.S. tax liability of individuals receiving foreign source qualified dividends, adjustments may be required to the foreign tax credit limitation calculation to reflect the rate differential applicable to such dividend income. The rules however permit certain individuals to elect not to apply the rate differential adjustments for capital gains and/or dividends for any taxable year. Please consult your tax advisor and the instructions to Form 1116 for more information.

76 | 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 at least the past five years and number of portfolios overseen in the Franklin Templeton Investments fund complex are shown below. Generally, each board member serves until that person’s successor is elected and qualified.

Annual Report | 77

Annual Report | 79

80 | Annual Report

Annual Report | 81

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, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Trust’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.

Quarterly Statement of Investments

The Trust files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.

Householding of Reports and Prospectuses

You will receive each Fund’s financial reports every six months as well as an annual updated summary prospectus (prospectus available upon request). To reduce Fund expenses, we try to identify related shareholders in a household and send only one copy of the financial reports and summary prospectus. This process, called “householding,” will continue indefinitely unless you instruct us otherwise. If you prefer not to have these documents householded, please call us at (800) 632-2301. At any time you may view current prospectuses/summary prospectuses and financial reports on our website. If you choose, you may receive these documents through electronic delivery.

82 | Annual Report

| 1

Annual Report

Economic and Market Overview

The U.S. economy improved steadily but modestly in 2011 despite geopolitical, employment and housing pressures. In contrast, growth outside the U.S. began to slow, which some attributed partly to the effects of Japan’s earthquake on the global supply chain and populist uprisings across the oil-and-gas-producing regions of the Middle East and North Africa. Although manufacturing growth slowed in the second half of the year as high commodity prices reduced purchasing power and demand ebbed, the trend began to reverse near year-end. The U.S. manufacturing sector helped power the domestic economy and led global manufacturing output heading into 2012. European and Asian manufacturing, however, generally weakened throughout 2011 as parts of Europe were in danger of falling back into recession.

The U.S. financial system and household balance sheets continued to improve, but the country still faced persistently high unemployment, a prolonged housing market slump and massive national debt. Inflation rose across much of the world but stayed relatively contained in the U.S., even slowing toward year-end amid declining energy and food prices. The Federal Reserve Board (Fed) sought to boost economic growth by maintaining its accommodative monetary policy and undertook a second round of quantitative easing that ended on June 30. Subsequently, the Fed continued to purchase U.S. Treasuries with proceeds from maturing debt in an effort to support economic growth. Outside the U.S., European policymakers ultimately stepped up their response to their sovereign debt and banking crisis. The European Central Bank cut short-term interest rates and expanded bank lending facilities, and six key global central banks agreed to lower dollar funding costs for Europe’s distressed commercial banks. Chinese policymakers lowered commercial bank reserve requirements and the International Monetary Fund revamped its credit line and eased its lending terms.

Although U.S. stock markets rallied in the spring, worrisome global events and slowing global growth dampened investor sentiment and market volatility surged. Risk-averse investors sought perceived safe havens and seemed to ignore that many companies generated record profits. Despite large swings, U.S. stocks as measured by the Standard & Poor’s^® 500 Index gained 2.11% in 2011.¹ The

1. Source: © 2012 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. STANDARD & POOR’S^®, S&P^® and S&P 500^® are registered trademarks of Standard & Poor’s Financial Services LLC. Standard & Poor’s does not sponsor, endorse, sell or promote any S&P index-based product.

Annual Report | 3

Dow Jones Industrial Average rose 8.38%, reflecting investors’ general preference for large, established U.S. companies.¹ In contrast, developed and emerging world stocks as measured by the MSCI All Country World Index fell 6.86%.¹ Amid general global market declines, perceived safe-haven currencies such as the Japanese yen and Swiss franc rallied strongly, and U.S. Treasuries posted their best one-year return since 2008.

The foregoing information reflects our analysis and opinions as of December 31, 2011. 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.

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 Flex Cap Growth Fund, Franklin Growth Fund, Mutual Shares Fund and Templeton Growth Fund.

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 Corefolio Allocation Fund covers the fiscal year ended December 31, 2011.

Performance Overview

Franklin Templeton Corefolio Allocation Fund – Class A had a -2.90% cumulative total return for the 12 months under review. In comparison with its benchmarks, the Fund performed better than the -5.02% total return of the MSCI World Index, which tracks stock performance in global developed markets, while it underperformed the +2.11% total return of the broad Standard & Poor’s^® 500 Index (S&P 500^®), which is a broad measure of U.S. stock performance.¹ You can find other performance data in the Performance Summary beginning on page 7.

Investment Strategy

The Fund invests its assets allocated approximately 25% each in Franklin Flex Cap Growth Fund, Franklin 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 weightings in each underlying fund whenever the actual allocations exceed plus or minus 3% of the fixed allocation percentages.

1. Source: © 2012 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 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 28.

Annual Report | 5

Portfolio Review

The Fund’s performance can be attributed largely to maintaining a relatively static allocation among domestic and foreign equities, fixed income securities, and short-term investments and other net assets, and to the actual performance of the selected underlying funds.

During the period under review, Franklin Flex Cap Growth Fund –Advisor Class, Franklin Growth Fund – Advisor Class and Mutual Shares Fund – Class Z underperformed the S&P 500. Templeton Growth Fund –Advisor Class underperformed 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.

CFA^® is a trademark owned by CFA Institute.

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2011, 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 12/31/11

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		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.48	$	11.93	$	12.41
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.1209
Class B (Symbol: FBCOX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.47	$	11.90	$	12.37
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.0308
Class C (Symbol: FTCLX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.48	$	11.82	$	12.30
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.0308
Class R (Symbol: n/a)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.48	$	11.93	$	12.41
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.0913
Advisor Class (Symbol: n/a)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.49	$	11.95	$	12.44
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.1583

Annual Report | 7

Performance Summary (continued)

Performance¹

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 Return2				-2.90	%		-5.10	%	+	44.50	%
Average Annual Total Return3				-8.51	%		-2.21	%	+	3.76	%
Value of $10,000 Investment4			$	9,149		$	8,944		$	13,619
Total Annual Operating Expenses5	1.16	%
Class B				1-Year			5-Year			Inception (8/15/03)
Cumulative Total Return2				-3.57	%		-8.39	%	+	36.65	%
Average Annual Total Return3				-7.42	%		-2.10	%	+	3.80	%
Value of $10,000 Investment4			$	9,258		$	8,991		$	13,665
Total Annual Operating Expenses5	1.88	%
Class C				1-Year			5-Year			Inception (8/15/03)
Cumulative Total Return2				-3.67	%		-8.42	%	+	36.23	%
Average Annual Total Return3				-4.63	%		-1.74	%	+	3.76	%
Value of $10,000 Investment4			$	9,537		$	9,158		$	13,623
Total Annual Operating Expenses5	1.88	%
Class R				1-Year			5-Year			Inception (8/15/03)
Cumulative Total Return2				-3.15	%		-6.07	%	+	42.26	%
Average Annual Total Return3				-3.15	%		-1.24	%	+	4.30	%
Value of $10,000 Investment4			$	9,685		$	9,393		$	14,226
Total Annual Operating Expenses5	1.38	%
Advisor Class				1-Year			5-Year			Inception (8/15/03)
Cumulative Total Return2				-2.67	%		-3.69	%	+	48.08	%
Average Annual Total Return3				-2.67	%		-0.75	%	+	4.80	%
Value of $10,000 Investment4			$	9,733		$	9,631		$	14,808
Total Annual Operating Expenses5	0.88	%

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 assume certain expenses so that common expenses (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) until 4/30/12.

8 | Annual Report

Performance Summary (continued)

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

Total return represents the change in value of an investment over the periods shown. It includes any 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.

Annual Report | 9

Performance Summary (continued)

10 | Annual Report

Endnotes

All investments involve risks. Because the Fund invests in underlying funds that may engage in a variety of investment strategies involving certain risks, this Fund of funds may be subject to those same risks. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Foreign investing carries additional risks such as currency and market volatility, and political or social instability; risks that are heightened in developing countries. Smaller or relatively new or unseasoned companies can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. Value securities may not increase in price as anticipated or may decline further in value. The Fund’s prospectus also includes a description of the main investment risks.

Class B: Class C:	These shares have higher annual fees and expenses than Class A shares. 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 and include the effect of acquired fund fees and expenses. In periods of volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

6. Source: © 2012 Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The MSCI World Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets.

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**
Class A		7/1/11		12/31/11		7/1/11–12/31/11		7/1/11–12/31/11
Actual	$	1,000	$	911.40	$	1.93	$	5.64
Hypothetical (5% return before expenses)	$	1,000	$	1,023.19	$	2.04	$	5.96
Class B
Actual	$	1,000	$	908.40	$	5.34	$	9.04
Hypothetical (5% return before expenses)	$	1,000	$	1,019.61	$	5.65	$	9.55
Class C
Actual	$	1,000	$	907.80	$	5.34	$	9.04
Hypothetical (5% return before expenses)	$	1,000	$	1,019.61	$	5.65	$	9.55
Class R
Actual	$	1,000	$	910.50	$	2.94	$	6.65
Hypothetical (5% return before expenses)	$	1,000	$	1,022.13	$	3.11	$	7.02
Advisor Class
Actual	$	1,000	$	913.00	$	0.53	$	4.24
Hypothetical (5% return before expenses)	$	1,000	$	1,024.65	$	0.56	$	4.48

*Expenses are calculated using the most recent six-month expense ratio excluding expenses of the underlying funds, annualized for each class (A: 0.40%; B: 1.11%; C: 1.11%; R: 0.61%; and Advisor: 0.11%) multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

**Expenses are calculated using the most recent six-month expense ratio including expenses of the underlying funds, annualized for each class (A: 1.17%; B: 1.88%; C: 1.88%; R: 1.38%; and Advisor: 0.88%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

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.

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 the Franklin Templeton Founding Funds Allocation Fund covers the fiscal year ended December 31, 2011.

Performance Overview

Franklin Templeton Founding Funds Allocation Fund – Class A had a -1.95% cumulative total return for the 12 months under review. In comparison with its benchmarks, the Fund underperformed the +2.11% total return of the Standard & Poor’s 500 Index (S&P 500), which is a broad measure of U.S. stock performance, and performed better than the -5.02% total return of the MSCI World Index, which tracks stock performance in global developed markets.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: © 2012 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 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 34.

14 | Annual Report

Portfolio Review

The Fund’s performance can be attributed largely to maintaining a relatively static allocation among domestic and foreign equities, fixed income securities, and short-term investments and other net assets, and to the actual performance of the selected underlying funds.

During the period under review, Franklin Income Fund – Advisor Class outperformed the S&P 500, and Mutual Shares Fund – Class Z underperformed the S&P 500. Templeton Growth Fund – Advisor Class underperformed 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.

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2011, 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 12/31/11

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		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.58	$	9.88	$	10.46
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.3842
Class B (Symbol: FFABX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.58	$	9.90	$	10.48
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.2949
Class C (Symbol: FFACX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.57	$	9.75	$	10.32
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.3031
Class R (Symbol: FFARX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.59	$	9.89	$	10.48
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.3597
Advisor Class (Symbol: FFAAX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.59	$	9.93	$	10.52
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.4118

16 | Annual Report

Performance Summary (continued)

Performance¹

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 Return2				-1.95	%		-8.63	%	+	46.92	%
Average Annual Total Return3				-7.60	%		-2.94	%	+	3.96	%
Value of $10,000 Investment4			$	9,240		$	8,613		$	13,848
Total Annual Operating Expenses5	1.07	%
Class B				1-Year			5-Year			Inception (8/15/03)
Cumulative Total Return2				-2.78	%		-11.92	%	+	39.13	%
Average Annual Total Return3				-6.56	%		-2.82	%	+	4.02	%
Value of $10,000 Investment4			$	9,344		$	8,666		$	13,913
Total Annual Operating Expenses5	1.82	%
Class C				1-Year			5-Year			Inception (8/15/03)
Cumulative Total Return2				-2.65	%		-11.79	%	+	38.74	%
Average Annual Total Return3				-3.59	%		-2.48	%	+	3.99	%
Value of $10,000 Investment4			$	9,641		$	8,821		$	13,874
Total Annual Operating Expenses5	1.82	%
Class R				1-Year			5-Year			Inception (8/15/03)
Cumulative Total Return2				-2.27	%		-9.67	%	+	44.68	%
Average Annual Total Return3				-2.27	%		-2.01	%	+	4.51	%
Value of $10,000 Investment4			$	9,773		$	9,033		$	14,468
Total Annual Operating Expenses5	1.32	%
Advisor Class				1-Year			5-Year			Inception (8/15/03)
Cumulative Total Return2				-1.78	%		-7.33	%	+	50.78	%
Average Annual Total Return3				-1.78	%		-1.51	%	+	5.02	%
Value of $10,000 Investment4			$	9,822		$	9,267		$	15,078
Total Annual Operating Expenses5	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 assume certain expenses so that common expenses (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) until 4/30/12.

Annual Report | 17

Performance Summary (continued)

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

Total return represents the change in value of an investment over the periods shown. It includes any 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.

18 | Annual Report

Annual Report | 19

Performance Summary (continued)

8/03	12/05	12/07		12/09	12/11
FT Founding Funds Allocation Fund			S&P 500 6		MSCI World Index6

Endnotes

All investments involve risks. 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. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bonds are affected by changes in interest rates and the creditwor-thiness of their issuers. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds adjust to a rise in interest rates, the Fund’s share price may decline. Higher yielding, lower rated corporate bonds entail a greater degree of credit risk compared to investment-grade securities. Foreign investing carries additional risks such as currency and market volatility and political or social instability; risks which are heightened in developing countries. Value securities may not increase in price as anticipated or may decline further in value. The Fund’s prospectus also includes a description of the main investment risks.

Class 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 and include the effect of acquired fund fees and expenses. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

6. Source: © 2012 Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The MSCI World Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets.

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**
Class A		7/1/11		12/31/11		7/1/11–12/31/11		7/1/11–12/31/11
Actual	$	1,000	$	920.40	$	1.65	$	5.13
Hypothetical (5% return before expenses)	$	1,000	$	1,023.49	$	1.73	$	5.40
Class B
Actual	$	1,000	$	916.30	$	5.26	$	8.74
Hypothetical (5% return before expenses)	$	1,000	$	1,019.71	$	5.55	$	9.20
Class C
Actual	$	1,000	$	916.60	$	5.22	$	8.70
Hypothetical (5% return before expenses)	$	1,000	$	1,019.76	$	5.50	$	9.15
Class R
Actual	$	1,000	$	918.60	$	2.85	$	6.34
Hypothetical (5% return before expenses)	$	1,000	$	1,022.23	$	3.01	$	6.67
Advisor Class
Actual	$	1,000	$	921.10	$	0.44	$	3.92
Hypothetical (5% return before expenses)	$	1,000	$	1,024.75	$	0.46	$	4.13

*Expenses are calculated using the most recent six-month expense ratio excluding expenses of the underlying funds, annualized for each class (A: 0.34%; B: 1.09%; C: 1.08%; R: 0.59%; and Advisor: 0.09%) multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

**Expenses are calculated using the most recent six-month expense ratio including expenses of the underlying funds, annualized for each class (A: 1.06%; B: 1.81%; C: 1.80%; R: 1.31%; and Advisor: 0.81%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

22 | Annual Report

Franklin Templeton Fund Allocator Series

Statement of Investments, December 31, 2011

28 | The accompanying notes are an integral part of these financial statements. | Annual Report

Franklin Templeton Fund Allocator Series

Statement of Investments, December 31, 2011

34 | The accompanying notes are an integral part of these financial statements. | Annual Report

Franklin Templeton Fund Allocator Series

Financial Statements

Statements of Assets and Liabilities
December 31, 2011

Annual Report | The accompanying notes are an integral part of these financial statements. | 35

Franklin Templeton Fund Allocator Series

Financial Statements (continued)

Statements of Assets and Liabilities (continued)
December 31, 2011

36 | The accompanying notes are an integral part of these financial statements. | Annual Report

Franklin Templeton Fund Allocator Series

Financial Statements (continued)

Statements of Operations
for the year ended December 31, 2011

Annual Report | The accompanying notes are an integral part of these financial statements. | 37

Franklin Templeton Fund Allocator Series

Financial Statements (continued)

38 | The accompanying notes are an integral part of these financial statements. | Annual Report

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, two 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. Financial Instrument 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

It is each fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. Each fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.

Each fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of December 31, 2011, and for all open tax years, each fund has determined that no liability for unrecognized tax benefits is required in each fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

c. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Estimated expenses are accrued daily. Dividend income and realized gain distributions by Underlying Funds are recorded on the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with 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.

Annual Report | 39

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. 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.

40 | Annual Report

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

2. SHARES OF BENEFICIAL INTEREST

At December 31, 2011, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:

Annual Report | 41

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 Funds are also officers and/or directors/trustees of certain of the Underlying Funds and of the following subsidiaries:

Subsidiary	Affiliation
Franklin Templeton Services, LLC (FT Services)	Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)	Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)	Transfer agent

42 | Annual Report

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

3.	TRANSACTIONS WITH AFFILIATES (continued)
a.	Administrative Fees

Effective May 1, 2011, the Funds pay an administrative fee to FT Services of 0.03% per year of the average daily net assets of each of the Funds for administrative services including monitoring and rebalancing the percentage of each Fund’s investment in the Underlying Funds.

Prior to May 1, 2011, the Funds paid fees to FT Services of 0.10% per year of the average daily net assets of each of the 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. Under the Funds’ Class A reimbursement distribution plans, the Funds reimburse Distributors for costs incurred in connection with the servicing, sale and distribution of each Funds’ shares up to the maximum annual plan rate. 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	0.35	%
Class B	1.00	%
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 for the Franklin Templeton Corefolio Allocation Fund and at 0.25% per year for Class A for the Franklin Templeton Founding Funds Allocation Fund until further notice and approval by the Board.

c. Sales Charges/Underwriting Agreements

Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Funds. These charges are deducted from the proceeds of sales of fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Funds of the following commission transactions related to the sales and redemptions of the Funds’ shares for the year:

		Franklin Templeton		Franklin Templeton
		Corefolio		Founding Funds
		Allocation Fund		Allocation Fund
Sales charges retained net of commissions paid to unaffiliated
broker/dealers	$	200,824	$	1,110,373
CDSC retained	$	10,315	$	97,618

Annual Report | 43

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

3.	TRANSACTIONS WITH AFFILIATES (continued)
d.	Transfer Agent Fees

For the year ended December 31, 2011, 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
		Corefolio		Founding Funds
		Allocation Fund		Allocation Fund
Transfer agent fees	$	879,444	$	5,527,683

4. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains, if any. Under the Regulated Investment Company Modernization Act of 2010, capital losses incurred by the Funds in taxable years beginning after December 22, 2010 are not subject to expiration and such losses retain their character as either short-term or long-term, rather than being considered short-term as under previous law. Post-enactment capital losses must be fully utilized prior to utilizing any losses incurred in pre-enactment tax years.

At December 31, 2011, the capital loss carryforwards were as follows:
		Franklin Templeton		Franklin Templeton
		Corefolio		Founding Funds
		Allocation Fund		Allocation Fund
Capital loss carryforwards subject to expiration:
2016	$	3,771,460	$	666,677,037
2017		47,549,311		1,091,470,427
2018		2,128,779		465,945,460
Capital loss carryforwards not subject to expiration		—		317,030,756
	$	53,449,550	$	2,541,123,680

During the year ended December 31, 2011, the Franklin Templeton Corefolio Allocation Fund utilized $14,271,876 of capital loss carryforwards.

For tax purposes, the Funds may elect to defer any portion of a post-October capital loss to the first day of the following fiscal year. At December 31, 2011, the Franklin Templeton Founding Funds Allocation Fund deferred post-October capital losses of $27,676,949.

The tax character of distributions paid during the years ended December 31, 2011 and 2010, was as follows:

		Franklin Templeton				Franklin Templeton
		Corefolio Allocation Fund				Founding Funds Allocation Fund
		2011		2010		2011		2010
Distributions paid from
ordinary income	$	4,839,647	$	5,190,555	$	215,384,878	$	258,042,181
44 | Annual Report

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

4. INCOME TAXES (continued)

At December 31, 2011, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income tax purposes were as follows:

		Franklin			Franklin
		Templeton			Templeton
		Corefolio			Founding Funds
		Allocation Fund			Allocation Fund
Cost of investments	$	593,069,456		$	7,125,777,589
Unrealized appreciation	$	57,309,288		$	—
Unrealized depreciation		(60,736,341	)		(1,313,910,767	)
Net unrealized appreciation (depreciation)	$	(3,427,053	)	$	(1,313,910,767	)
Distributable earnings – undistributed ordinary income	$	1,284,890		$	30,229,971

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of wash sales.

5. INVESTMENT TRANSACTIONS

Purchases and sales of Underlying Funds (excluding short term securities) for the year ended December 31, 2011, were as follows:

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 a controlling influence over the management or policies.

The Funds may invest in the Institutional Fiduciary Trust Money Market Portfolio (Sweep Money Fund), an open-end investment company managed by Advisers. 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.

Annual Report | 45

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

6. INVESTMENTS IN UNDERLYING FUNDS (continued)

Investments in Underlying Funds for the year ended December 31, 2011, were as follows:

7. SPECIAL SERVICING AGREEMENT

The Funds participate in 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 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 borne by the Underlying Funds during the year ended December 31, 2011 is noted in the Statements of Operations.

46 | 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 $750 million (Global Credit Facility) which matured on January 20, 2012. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective January 20, 2012, the Borrowers renewed the Global Credit Facility for a total of $1.5 billion, maturing January 18, 2013.

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 0.08% 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, 2011, the Funds did not use the Global Credit Facility.

9. FAIR VALUE MEASUREMENTS

The Funds follow a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds’ own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds’ 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 Funds’ 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.

For movements between the levels within the fair value hierarchy, the Funds have adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

At December 31, 2011, all of the Funds’ investments in Underlying Funds carried at fair value were valued using Level 1 inputs. For detailed categories, see the accompanying Statements of Investments.

Annual Report | 47

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

10. NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in the ASU will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards) and include new guidance for certain fair value measurement principles and disclosure requirements. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Funds believe the adoption of this ASU will not have a material impact on their financial statements.

11. SUBSEQUENT EVENTS

The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.

48 | 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 and Franklin Templeton Founding Funds Allocation Fund (separate portfolios of Franklin Templeton Fund Allocator Series, hereafter referred to as the “Funds”) at December 31, 2011, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2011 by correspondence with the transfer agent of the Underlying Funds, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California
February 14, 2012

Annual Report | 49

Franklin Templeton Fund Allocator Series

Tax Information (unaudited)

Under Section 854(b)(1)(A) of the Internal Revenue Code (Code), the Funds hereby report the following percentage amounts of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2011:

Franklin Templeton		Franklin Templeton
Corefolio		Founding Funds
Allocation Fund		Allocation Fund
93.15	%	35.80	%

Under Section 854(b)(1)(B) of the Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended December 31, 2011:

	Franklin Templeton		Franklin Templeton
	Corefolio		Founding Funds
	Allocation Fund		Allocation Fund
$	4,581,803	$	135,886,557

Distributions, including qualified dividend income, paid during calendar year 2011 will be reported to the shareholders on Form 1099-DIV by mid-February 2012. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.

During the fiscal year ended December 31, 2011, the Funds, qualified fund of funds under Section 852(g)(2) of the Code, received an allocation of foreign taxes paid from one or more of their Underlying Funds. As shown in the table below, the Funds hereby report to shareholders the foreign source income and foreign taxes paid by the Underlying Funds, pursuant to Section 853 of the Code. This written statement will allow shareholders of record on December 27, 2011, to treat their proportionate share of foreign taxes paid by the Underlying Funds as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Funds’ distribution.

The following table provides a detailed analysis of foreign tax paid, and foreign source income, and foreign qualified dividends as reported by the Funds, to Class A, Class B, Class C, Class R, and Advisor Class shareholders of record.

		Foreign Tax		Foreign Source		Foreign Qualified
Class		Paid Per Share		Income Per Share		Dividends Per Share
Franklin Templeton Corefolio Allocation Fund
Class A	$	0.0066	$	0.0596	$	0.0499
Class B	$	0.0066	$	0.0596	$	0.0499
Class C	$	0.0066	$	0.0596	$	0.0499
Class R	$	0.0066	$	0.0596	$	0.0499
Advisor Class	$	0.0066	$	0.0596	$	0.0499

50 | Annual Report

Franklin Templeton Fund Allocator Series

Tax Information (unaudited) (continued)

		Foreign Tax		Foreign Source		Foreign Qualified
Class		Paid Per Share		Income Per Share		Dividends Per Share
Franklin Templeton Founding Funds Allocation Fund
Class A	$	0.0074	$	0.0667	$	0.0559
Class B	$	0.0074	$	0.0667	$	0.0559
Class C	$	0.0074	$	0.0667	$	0.0559
Class R	$	0.0074	$	0.0667	$	0.0559
Advisor Class	$	0.0074	$	0.0667	$	0.0559

Foreign Tax Paid Per Share (Column 1) is the amount per share available to you, as a tax credit (assuming you held your shares in the Fund for a minimum of 16 days during the 31-day period beginning 15 days before the ex-dividend date of the Funds’ distribution to which the foreign taxes relate), or, as a tax deduction.

Foreign Source Income Per Share (Column 2) is the amount per share of income dividends attributable to foreign securities held by the Underlying Funds, plus any foreign taxes withheld on these dividends. The amounts reported include foreign source qualified dividends that have not been adjusted for the rate differential applicable to such dividend income.¹

Foreign Qualified Dividends Per Share (Column 3) is the amount per share of foreign source qualified dividends, plus any foreign taxes withheld on these dividends. These amounts represent the portion of the Foreign Source Income reported to you in column 2 that were derived from qualified foreign securities held by the Underlying Funds.¹

By mid-February 2012, shareholders will receive Form 1099-DIV which will include their share of taxes paid and foreign source income distributed during the calendar year 2011. The Foreign Source Income reported on Form 1099-DIV has not been adjusted for the rate differential on foreign source qualified dividend income. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their 2011 individual income tax returns.

¹Qualified dividends are taxed at reduced long term capital gains tax rates. In determining the amount of foreign tax credit that may be applied against the U.S. tax liability of individuals receiving foreign source qualified dividends, adjustments may be required to the foreign tax credit limitation calculation to reflect the rate differential applicable to such dividend income. The rules however permit certain individuals to elect not to apply the rate differential adjustments for capital gains and/or dividends for any taxable year. Please consult your tax advisor and the instructions to Form 1116 for more information.

Annual Report | 51

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 at least the past five years and number of portfolios overseen in the Franklin Templeton Investments fund complex are shown below. Generally, each board member serves until that person’s successor is elected and qualified.

52 | Annual Report

54 | Annual Report

Annual Report | 55

56 | Annual Report

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, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Trust’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.

Quarterly Statement of Investments

The Trust files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.

Householding of Reports and Prospectuses

You will receive each Fund’s financial reports every six months as well as an annual updated summary prospectus (prospectus available upon request). To reduce Fund expenses, we try to identify related shareholders in a household and send only one copy of the financial reports and summary prospectus. This process, called “householding,” will continue indefinitely unless you instruct us otherwise. If you prefer not to have these documents householded, please call us at (800) 632-2301. At any time you may view current prospectuses/summary prospectuses and financial reports on our website. If you choose, you may receive these documents through electronic delivery.

Annual Report | 57

This page intentionally left blank.

| 1

Annual Report

Economic and Market Overview

The U.S. economy improved steadily but modestly in 2011 despite geopolitical, employment and housing pressures. In contrast, growth outside the U.S. began to slow, which some attributed partly to the effects of Japan’s earthquake on the global supply chain and populist uprisings across the oil-and-gas-producing regions of the Middle East and North Africa. Although manufacturing growth slowed in the second half of the year as high commodity prices reduced purchasing power and demand ebbed, the trend began to reverse near year-end. The U.S. manufacturing sector helped power the domestic economy and led global manufacturing output heading into 2012. European and Asian manufacturing, however, generally weakened throughout 2011 as parts of Europe were in danger of falling back into recession.

The U.S. financial system and household balance sheets continued to improve, but the country still faced persistently high unemployment, a prolonged housing market slump and massive national debt. Inflation rose across much of the world but stayed relatively contained in the U.S., even slowing toward year-end amid declining energy and food prices. The Federal Reserve Board (Fed) sought to boost economic growth by maintaining its accommodative monetary policy and undertook a second round of quantitative easing that ended on June 30. Subsequently, the Fed continued to purchase U.S. Treasuries with proceeds from maturing debt in an effort to support economic growth. Outside the U.S., European policymakers ultimately stepped up their response to their sovereign debt and banking crisis. The European Central Bank cut short-term interest rates and expanded bank lending facilities, and six key global central banks agreed to lower dollar funding costs for Europe’s distressed commercial banks. Chinese policymakers lowered commercial bank reserve requirements and the International Monetary Fund revamped its credit line and eased its lending terms.

Although U.S. stock markets rallied in the spring, worrisome global events and slowing global growth dampened investor sentiment and market volatility surged. Risk-averse investors sought perceived safe havens and seemed to ignore that many companies generated record profits. Despite large swings, U.S. stocks as measured by the Standard & Poor’s^® 500 Index gained 2.11% in 2011.¹ The

1. Source: © 2012 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. STANDARD & POOR’S^®, S&P^® and S&P 500^® are registered trademarks of Standard & Poor’s Financial Services LLC. Standard & Poor’s does not sponsor, endorse, sell or promote any S&P index-based product.

Annual Report | 3

Dow Jones Industrial Average rose 8.38%, reflecting investors’ general preference for large, established U.S. companies.¹ In contrast, developed and emerging world stocks as measured by the MSCI All Country World Index fell 6.86%.¹ Amid general global market declines, perceived safe-haven currencies such as the Japanese yen and Swiss franc rallied strongly, and U.S. Treasuries posted their best one-year return since 2008.

The foregoing information reflects our analysis and opinions as of December 31, 2011. 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.

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.

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 2015 Retirement Target Fund covers the fiscal year ended December 31, 2011.

Performance Overview

Franklin Templeton 2015 Retirement Target Fund – Class A had a -0.82% cumulative total return for the 12 months ended December 31, 2011. By comparison, the Fund’s equity benchmarks, the Standard & Poor’s 500 Index (S&P 500^®), a broad measure of U.S. stock performance, and the MSCI Europe, Australasia, Far East (EAFE) Index, which measures global stock performance excluding the U.S. and Canada, had total returns of +2.11% and -11.73%. The Fund’s fixed income benchmark, the Barclays Capital (BC) U.S. Aggregate Index, which tracks U.S. investment-grade bonds, posted a +7.84% total return. The Payden & Rygel (P&R) 90 Day U.S. T-Bill Index, a proxy for short-term investments and other net assets, had a +0.08% total return for the same period.¹ You can find other performance data in the Performance Summary beginning on page 8.

Investment Strategy

When selecting equity funds, we consider the foreign and domestic exposure, market capitalization ranges, and investment style (growth vs. value) of the

1. Source: © 2012 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 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 49.

Annual Report | 5

underlying Franklin Templeton funds and other fund investments (fund investments). 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 fund investments, we analyze such factors as: (a) relative and absolute performance, including correlations with other fund investments as well as corresponding benchmarks, and (b) their volatility (the variability of returns from one period to the next). We attempt to invest the assets of each Target Fund in the same fund investments and will vary the fund investments’ allocation percentages based upon each Fund’s risk/return level. We change the Fund’s target asset allocation over time, and it becomes increasingly conservative as the stated target date draws near.

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 fund investments. This allocation shifts every year, in accordance with the retirement date associated with the portfolio.

At period-end, Franklin Templeton 2015 Retirement Target Fund allocated 49.9% of total net assets to equity and 38.7% to fixed income. Domestic equity exposure was 71.1% of the total equity weighting, and foreign equity made up the balance. The portfolio was diversified across capitalization sizes and investment styles, and on December 31, 2011, 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 8.3% of the Fund’s total net assets, was our largest equity fund weighting at period-end. On the fixed income side, domestic exposure was 67.4% 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 16.0% 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, underperformed the S&P 500. Our largest foreign equity holding, Templeton Foreign Fund – Advisor Class, underperformed the MSCI EAFE Index, while Mutual European Fund – Class Z performed better than the index. On the fixed income side, Franklin U.S. Government Securities Fund – Advisor Class and Templeton Global Bond Fund – Advisor Class underperformed the BC U.S. Aggregate Index.

6 | Annual Report

Thank you for your continued participation in Franklin Templeton 2015 Retirement Target Fund. We look forward to serving your future investment needs.

CFA^® is a trademark owned by CFA Institute.

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2011, 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 12/31/11

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		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.33	$	10.92	$	11.25
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.2373
Class C (Symbol: FRTCX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.33	$	10.83	$	11.16
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.1608
Class R (Symbol: n/a)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.33	$	10.89	$	11.22
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.2155
Advisor Class (Symbol: n/a)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.34	$	10.94	$	11.28
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.2707

8 | Annual Report

Performance Summary (continued)

Performance¹

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			5-Year			Inception (8/1/06)
Cumulative Total Return2				-0.82	%	+	17.51	%	+	27.60	%
Average Annual Total Return3				-6.55	%	+	2.07	%	+	3.47	%
Value of $10,000 Investment4			$	9,345		$	11,077		$	12,027
Total Annual Operating Expenses5
Without Waiver	1.57	%
With Waiver	1.20	%
Class C				1-Year			5-Year			Inception (8/1/06)
Cumulative Total Return2				-1.51	%	+	13.45	%	+	22.87	%
Average Annual Total Return3				-2.48	%	+	2.56	%	+	3.88	%
Value of $10,000 Investment4			$	9,752		$	11,345		$	12,287
Total Annual Operating Expenses5
Without Waiver	2.27	%
With Waiver	1.90	%
Class R				1-Year			5-Year			Inception (8/1/06)
Cumulative Total Return2				-1.02	%	+	16.31	%	+	26.17	%
Average Annual Total Return3				-1.02	%	+	3.07	%	+	4.39	%
Value of $10,000 Investment4			$	9,898		$	11,631		$	12,617
Total Annual Operating Expenses5
Without Waiver	1.77	%
With Waiver	1.40	%
Advisor Class				1-Year			5-Year			Inception (8/1/06)
Cumulative Total Return2				-0.61	%	+	19.24	%	+	29.68	%
Average Annual Total Return3				-0.61	%	+	3.58	%	+	4.92	%
Value of $10,000 Investment4			$	9,939		$	11,924		$	12,968
Total Annual Operating Expenses5
Without Waiver	1.27	%
With Waiver	0.90	%

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 and administrator have contractually agreed to waive or assume certain expenses so that common expenses (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) until 4/30/12.

Annual Report | 9

Performance Summary (continued)

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.

10 | Annual Report

Annual Report | 11

Performance Summary (continued)

Endnotes

It’s important to note that the principal value of the Fund will fluctuate and is not guaranteed at any time, including at or after the stated target date for the Fund, nor is there any guarantee that the Fund will provide sufficient income, at or through the investor’s retirement. All investments involve risks. Generally, investors should be comfortable with fluctuation in the value of their investments, especially over the short term. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. 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: Class R:	These shares have higher annual fees and expenses than Class A shares. 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 and administrator had not waived fees, the Fund’s total returns would have been lower. As of 5/1/11, the Fund’s glide path was modified, and among other changes, reflects a lower starting allocation to equity funds; such a change can impact performance.

2. Cumulative total return represents the change in value of an investment over the periods indicated.

3. Average annual total return represents the average annual change in value of an investment over the periods indicated. 4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.

5. Figures are as stated in the Fund’s prospectus current as of the date of this report and include the effect of acquired fund fees and expenses. In periods of volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

6. Source: © 2012 Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The MSCI EAFE Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets excluding the U.S. and Canada. The 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) using the middle rating of Moody’s, Standard & Poor’s and 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.

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**
Class A		7/1/11		12/31/11		7/1/11–12/31/11		7/1/11–12/31/11
Actual	$	1,000	$	954.00	$	2.22	$	5.57
Hypothetical (5% return before expenses)	$	1,000	$	1,022.94	$	2.29	$	5.75
Class C
Actual	$	1,000	$	950.20	$	5.65	$	9.00
Hypothetical (5% return before expenses)	$	1,000	$	1,019.41	$	5.85	$	9.30
Class R
Actual	$	1,000	$	952.70	$	3.20	$	6.55
Hypothetical (5% return before expenses)	$	1,000	$	1,021.93	$	3.31	$	6.77
Advisor Class
Actual	$	1,000	$	954.70	$	0.74	$	4.09
Hypothetical (5% return before expenses)	$	1,000	$	1,024.45	$	0.77	$	4.23

*Expenses are calculated using the most recent six-month expense ratio excluding expenses of the fund investments, net of expense waivers, annualized for each class (A: 0.45%; 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.

**Expenses are calculated using the most recent six-month expense ratio including expenses of the fund investments, net of expense waivers, annualized for each class (A: 1.13%; C: 1.83%; R: 1.33%; and Advisor: 0.83%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

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.

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 2025 Retirement Target Fund covers the fiscal year ended December 31, 2011.

Performance Overview

Franklin Templeton 2025 Retirement Target Fund – Class A had a -2.86% cumulative total return for the 12 months ended December 31, 2011. By comparison, the Fund’s equity benchmarks, the Standard & Poor’s 500 Index (S&P 500), a broad measure of U.S. stock performance, and the MSCI Europe, Australasia, Far East (EAFE) Index, which measures global stock performance excluding the U.S. and Canada, had total returns of +2.11% and -11.73%. The Fund’s fixed income benchmark, the Barclays Capital (BC) U.S. Aggregate Index, which tracks U.S. investment-grade bonds, posted a +7.84% total return. The Payden & Rygel (P&R) 90 Day U.S. T-Bill Index, a proxy for short-term investments and other net assets, had a +0.08% total return for the same period.¹ You can find other performance data in the Performance Summary beginning on page 18.

Investment Strategy

When selecting equity funds, we consider the foreign and domestic exposure, market capitalization ranges, and investment style (growth vs. value) of the underlying Franklin Templeton funds and other fund investments (fund investments). When selecting fixed income funds, our primary focus is on maximizing

1. Source: © 2012 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 indexes are unmanaged and include reinvestment of any income 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 55.

Annual Report | 15

income appropriate to the Fund’s risk profile. In evaluating the risk level of the fund investments, we analyze such factors as: (a) relative and absolute performance, including correlations with other fund investments as well as corresponding benchmarks, and (b) their volatility (the variability of returns from one period to the next). We attempt to invest the assets of each Target Fund in the same fund investments and will vary the fund investments’ allocation percentages based upon each Fund’s risk/return level. We change the Fund’s target asset allocation over time, and it becomes increasingly conservative as the stated target date draws near.

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 fund investments. This allocation shifts every year, in accordance with the retirement date associated with the portfolio.

At period-end, Franklin Templeton 2025 Retirement Target Fund allocated 72.0% of total net assets to equity and 21.6% to fixed income. Domestic equity exposure was 71.0% of the total equity weighting, and foreign equity made up the balance. The portfolio was diversified across capitalization sizes and investment styles, and on December 31, 2011, 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 12.7% of the Fund’s total net assets, was our largest equity fund weighting at period-end. On the fixed income side, domestic exposure was 69.4% 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 8.6% 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, underperformed the S&P 500. Our largest foreign equity holding, Templeton Foreign Fund – Advisor Class, underperformed the MSCI EAFE Index, while Mutual European Fund – Class Z performed better than the index. On the fixed income side, Franklin U.S. Government Securities Fund – Advisor Class and Templeton Global Bond Fund – Advisor Class underperformed the BC U.S. Aggregate Index.

16 | Annual Report

Thank you for your continued participation in Franklin Templeton 2025 Retirement Target Fund. We look forward to serving your future investment needs.

Annual Report | 17

Performance Summary as of 12/31/11

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		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.48	$	10.22	$	10.70
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.1725
Class C (Symbol: FTTCX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.48	$	10.11	$	10.59
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.1042
Class R (Symbol: n/a)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.49	$	10.19	$	10.68
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.1534
Advisor Class (Symbol: n/a)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.49	$	10.23	$	10.72
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.2036

18 | Annual Report

Performance Summary (continued)

Performance¹

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			5-Year			Inception (8/1/06)
Cumulative Total Return2				-2.86	%	+	9.52	%	+	19.83	%
Average Annual Total Return3				-8.42	%	+	0.63	%	+	2.27	%
Value of $10,000 Investment4			$	9,158		$	10,321		$	11,294
Total Annual Operating Expenses5
Without Waiver	1.66	%
With Waiver	1.25	%
Class C				1-Year			5-Year			Inception (8/1/06)
Cumulative Total Return2				-3.54	%	+	5.72	%	+	15.44	%
Average Annual Total Return3				-4.50	%	+	1.12	%	+	2.69	%
Value of $10,000 Investment4			$	9,550		$	10,572		$	11,544
Total Annual Operating Expenses5
Without Waiver	2.36	%
With Waiver	1.95	%
Class R				1-Year			5-Year			Inception (8/1/06)
Cumulative Total Return2				-3.14	%	+	8.41	%	+	18.50	%
Average Annual Total Return3				-3.14	%	+	1.63	%	+	3.18	%
Value of $10,000 Investment4			$	9,686		$	10,841		$	11,850
Total Annual Operating Expenses5
Without Waiver	1.86	%
With Waiver	1.45	%
Advisor Class				1-Year			5-Year			Inception (8/1/06)
Cumulative Total Return2				-2.65	%	+	11.04	%	+	21.67	%
Average Annual Total Return3				-2.65	%	+	2.12	%	+	3.69	%
Value of $10,000 Investment4			$	9,735		$	11,104		$	12,167
Total Annual Operating Expenses5
Without Waiver	1.36	%
With Waiver	0.95	%

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 and administrator have contractually agreed to waive or assume certain expenses so that common expenses (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) until 4/30/12.

Annual Report | 19

Performance Summary (continued)

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.

20 | Annual Report

Annual Report | 21

Performance Summary (continued)

Endnotes

It’s important to note that the principal value of the Fund will fluctuate and is not guaranteed at any time, including at or after the stated target date for the Fund, nor is there any guarantee that the Fund will provide sufficient income, at or through the investor’s retirement. All investments involve risks. Generally, investors should be comfortable with fluctuation in the value of their investments, especially over the short term. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. 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: Class R:	These shares have higher annual fees and expenses than Class A shares. 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 and administrator had not waived fees, the Fund’s total returns would have been lower. As of 5/1/11, the Fund’s glide path was modified, and among other changes, reflects a lower starting allocation to equity funds; such a change can impact performance.

2. Cumulative total return represents the change in value of an investment over the periods indicated.

3. Average annual total return represents the average annual change in value of an investment over the periods indicated. 4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.

5. Figures are as stated in the Fund’s prospectus current as of the date of this report and include the effect of acquired fund fees and expenses. In times of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

6. Source: © 2012 Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The MSCI EAFE Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets excluding the U.S. and Canada. The 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) using the middle rating of Moody’s, Standard & Poor’s and 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.

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		7/1/11		12/31/11		7/1/11–12/31/11		7/1/11–12/31/11
Actual	$	1,000	$	932.60	$	2.19	$	5.75
Hypothetical (5% return before expenses)	$	1,000	$	1,022.94	$	2.29	$	6.01
Class C
Actual	$	1,000	$	929.70	$	5.59	$	9.14
Hypothetical (5% return before expenses)	$	1,000	$	1,019.41	$	5.85	$	9.55
Class R
Actual	$	1,000	$	931.80	$	3.16	$	6.72
Hypothetical (5% return before expenses)	$	1,000	$	1,021.93	$	3.31	$	7.02
Advisor Class
Actual	$	1,000	$	934.00	$	0.73	$	4.29
Hypothetical (5% return before expenses)	$	1,000	$	1,024.45	$	0.77	$	4.48

*Expenses are calculated using the most recent six-month expense ratio excluding expenses of the fund investments, net of expense waivers, annualized for each class (A: 0.45%; 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.

**Expenses are calculated using the most recent six-month expense ratio including expenses of the fund investments, net of expense waivers, annualized for each class (A: 1.18%; C: 1.88%; R: 1.38%; and Advisor: 0.88%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

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.

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 2035 Retirement Target Fund covers the fiscal year ended December 31, 2011.

Performance Overview

Franklin Templeton 2035 Retirement Target Fund – Class A had a -2.97% cumulative total return for the 12 months ended December 31, 2011. By comparison, the Fund’s equity benchmarks, the Standard & Poor’s 500 Index (S&P 500), a broad measure of U.S. stock performance, and the MSCI Europe, Australasia, Far East (EAFE) Index, which measures global stock performance excluding the U.S. and Canada, had total returns of +2.11% and -11.73%. The Fund’s fixed income benchmark, the Barclays Capital (BC) U.S. Aggregate Index, which tracks U.S. investment-grade bonds, posted a +7.84% total return. The Payden & Rygel (P&R) 90 Day U.S. T-Bill Index, a proxy for short-term investments and other net assets, had a +0.08% total return for the same period.¹ You can find other performance data in the Performance Summary beginning on page 28.

Investment Strategy

When selecting equity funds, we consider the foreign and domestic exposure, market capitalization ranges, and investment style (growth vs. value) of the underlying Franklin Templeton funds and other fund investments (fund investments). When selecting fixed income funds, our primary focus is on maximizing

1. Source: © 2012 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 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 60.

Annual Report | 25

income appropriate to the Fund’s risk profile. In evaluating the risk level of the fund investments, we analyze such factors as: (a) relative and absolute performance, including correlations with other fund investments as well as corresponding benchmarks, and (b) their volatility (the variability of returns from one period to the next). We attempt to invest the assets of each Target Fund in the same fund investments and will vary the fund investments’ allocation percentages based upon each Fund’s risk/return level. We change the Fund’s target asset allocation over time, and it becomes increasingly conservative as the stated target date draws near.

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 fund investments. This allocation shifts every year, in accordance with the retirement date associated with the portfolio.

At period-end, Franklin Templeton 2035 Retirement Target Fund allocated 77.3% of total net assets to equity, and 17.4% to fixed income. Domestic equity exposure was 71.5% of the total equity weighting, and foreign equity made up the balance. The portfolio was diversified across capitalization sizes and investment styles, and on December 31, 2011, 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 13.2% of the Fund’s total net assets, was our largest equity fund weighting at period-end. On the fixed income side, domestic exposure was 70.7% 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 6.6% 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, underperformed the S&P 500. Our largest foreign equity holding, Templeton Foreign Fund – Advisor Class, underperformed the MSCI EAFE Index, while Mutual European Fund – Class Z performed better than the index. On the fixed income side, Franklin U.S. Government Securities Fund – Advisor Class and Templeton Global Bond Fund – Advisor Class underperformed the BC U.S. Aggregate Index.

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.

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2011, 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 12/31/11

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: FRTAX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.46	$	10.13	$	10.59
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.1458
Class C (Symbol: n/a)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.47	$	9.98	$	10.45
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.0834
Class R (Symbol: n/a)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.47	$	10.12	$	10.59
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.1299
Advisor Class (Symbol: n/a)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.46	$	10.17	$	10.63
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.1745

28 | Annual Report

Performance Summary (continued)

Performance¹

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			5-Year			Inception (8/1/06)
Cumulative Total Return2				-2.97	%	+	6.94	%	+	18.10	%
Average Annual Total Return3				-8.58	%	+	0.16	%	+	2.00	%
Value of $10,000 Investment4			$	9,142		$	10,083		$	11,131
Total Annual Operating Expenses5
Without Waiver	1.97	%
With Waiver	1.30	%
Class C				1-Year			5-Year			Inception (8/1/06)
Cumulative Total Return2				-3.70	%	+	3.15	%	+	13.61	%
Average Annual Total Return3				-4.66	%	+	0.62	%	+	2.38	%
Value of $10,000 Investment4			$	9,534		$	10,315		$	11,361
Total Annual Operating Expenses5
Without Waiver	2.67	%
With Waiver	2.00	%
Class R				1-Year			5-Year			Inception (8/1/06)
Cumulative Total Return2				-3.21	%	+	5.85	%	+	16.85	%
Average Annual Total Return3				-3.21	%	+	1.14	%	+	2.92	%
Value of $10,000 Investment4			$	9,679		$	10,585		$	11,685
Total Annual Operating Expenses5
Without Waiver	2.17	%
With Waiver	1.50	%
Advisor Class				1-Year			5-Year			Inception (8/1/06)
Cumulative Total Return2				-2.69	%	+	8.55	%	+	20.06	%
Average Annual Total Return3				-2.69	%	+	1.65	%	+	3.43	%
Value of $10,000 Investment4			$	9,731		$	10,855		$	12,006
Total Annual Operating Expenses5
Without Waiver	1.67	%
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 and administrator have contractually agreed to waive or assume certain expenses so that common expenses (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) until 4/30/12.

Annual Report | 29

Performance Summary (continued)

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.

30 | Annual Report

Annual Report | 31

Performance Summary (continued)

Endnotes

It’s important to note that the principal value of the Fund will fluctuate and is not guaranteed at any time, including at or after the stated target date for the Fund, nor is there any guarantee that the Fund will provide sufficient income, at or through the investor’s retirement. All investments involve risks. Generally, investors should be comfortable with fluctuation in the value of their investments, especially over the short term. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. 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: Class R:	These shares have higher annual fees and expenses than Class A shares. 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 and administrator had not waived fees, the Fund’s total returns would have been lower. As of 5/1/11, the Fund’s glide path was modified, and among other changes, reflects a lower starting allocation to equity funds; such a change can impact performance.

2. Cumulative total return represents the change in value of an investment over the periods indicated.

3. Average annual total return represents the average annual change in value of an investment over the periods indicated. 4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.

5. Figures are as stated in the Fund’s prospectus current as of the date of this report and include the effect of acquired fund fees and expenses. In periods of volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

6. Source: © 2012 Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The MSCI EAFE Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets excluding the U.S. and Canada. The 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) using the middle rating of Moody’s, Standard & Poor’s and 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.

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		7/1/11		12/31/11		7/1/11–12/31/11		7/1/11–12/31/11
Actual	$	1,000	$	929.50	$	2.19	$	5.88
Hypothetical (5% return before expenses)	$	1,000	$	1,022.94	$	2.29	$	6.16
Class C
Actual	$	1,000	$	925.30	$	5.58	$	9.27
Hypothetical (5% return before expenses)	$	1,000	$	1,019.41	$	5.85	$	9.70
Class R
Actual	$	1,000	$	928.00	$	3.16	$	6.85
Hypothetical (5% return before expenses)	$	1,000	$	1,021.93	$	3.31	$	7.17
Advisor Class
Actual	$	1,000	$	930.70	$	0.73	$	4.43
Hypothetical (5% return before expenses)	$	1,000	$	1,024.45	$	0.77	$	4.63

*Expenses are calculated using the most recent six-month expense ratio excluding expenses of the fund investments, net of expense waivers, annualized for each class (A: 0.45%; 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.

**Expenses are calculated using the most recent six-month expense ratio including expenses of the fund investments, net of expense waivers, annualized for each class (A: 1.21%; C: 1.91%; R: 1.41%; and Advisor: 0.91%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

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.

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 2045 Retirement Target Fund covers the fiscal year ended December 31, 2011.

Performance Overview

Franklin Templeton 2045 Retirement Target Fund – Class A delivered a -2.81% cumulative total return for the 12 months ended December 31, 2011. By comparison, the Fund’s equity benchmarks, the Standard & Poor’s 500 Index (S&P 500), a broad measure of U.S. stock performance, and the MSCI Europe, Australasia, Far East (EAFE) Index, which measures global stock performance excluding the U.S. and Canada, had total returns of +2.11% and -11.73%. The Fund’s fixed income benchmark, the Barclays Capital (BC) U.S. Aggregate Index, which tracks U.S. investment-grade bonds, posted a +7.84% total return. The Payden & Rygel (P&R) 90 Day U.S. T-Bill Index, a proxy for short-term investments and other net assets, had a +0.08% total return for the same period.¹ You can find other performance data in the Performance Summary beginning on page 38.

Investment Strategy

When selecting equity funds, we consider the foreign and domestic exposure, market capitalization ranges, and investment style (growth vs. value) of the underlying Franklin Templeton funds and other fund investments (fund investments). When selecting fixed income funds, our primary focus is on maximizing

1. Source: © 2012 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 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 65.

Annual Report | 35

income appropriate to the Fund’s risk profile. In evaluating the risk level of the fund investments, we analyze such factors as: (a) relative and absolute performance, including correlations with other fund investments as well as corresponding benchmarks, and (b) their volatility (the variability of returns from one period to the next). We attempt to invest the assets of each Target Fund in the same fund investments and will vary the fund investments’ allocation percentages based upon each Fund’s risk/return level. We change the Fund’s target asset allocation over time, and it becomes increasingly conservative as the stated target date draws near.

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 fund investments. This allocation shifts every year, in accordance with the retirement date associated with the portfolio.

At period-end, Franklin Templeton 2045 Retirement Target Fund allocated 79.6% of total net assets to equity and 15.7% to fixed income. Domestic equity exposure was 71.5% of the total equity weighting, and foreign equity made up the balance. The portfolio was diversified across capitalization sizes and investment styles, and on December 31, 2011, 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 13.1% of the Fund’s total net assets, was our largest equity fund weighting at period-end. On the fixed income side, domestic exposure was 70.7% 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 5.7% 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, underperformed the S&P 500. Our largest foreign equity holding, Templeton Foreign Fund – Advisor Class, underperformed the MSCI EAFE Index, while Mutual European Fund – Class Z performed better than the index. On the fixed income side, Franklin U.S. Government Securities Fund – Advisor Class and Templeton Global Bond Fund – Advisor Class underperformed the BC U.S. Aggregate Index.

36 | Annual Report

Thank you for your continued participation in Franklin Templeton 2045 Retirement Target Fund. We look forward to serving your future investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2011, 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 12/31/11

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: FTTAX)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.43	$	10.01	$	10.44
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.1361
Class C (Symbol: n/a)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.44	$	9.84	$	10.28
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.0762
Class R (Symbol: n/a)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.43	$	9.99	$	10.42
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.1167
Advisor Class (Symbol: n/a)				Change		12/31/11		12/31/10
Net Asset Value (NAV)			-$	0.43	$	10.05	$	10.48
Distributions (1/1/11–12/31/11)
Dividend Income	$	0.1629

38 | Annual Report

Performance Summary (continued)

Performance¹

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			5-Year			Inception (8/1/06)
Cumulative Total Return2				-2.81	%	+	7.09	%	+	18.39	%
Average Annual Total Return3				-8.43	%	+	0.19	%	+	2.04	%
Value of $10,000 Investment4			$	9,157		$	10,097		$	11,158
Total Annual Operating Expenses5
Without Waiver	2.44	%
With Waiver	1.33	%
Class C				1-Year			5-Year			Inception (8/1/06)
Cumulative Total Return2				-3.54	%	+	3.38	%	+	14.02	%
Average Annual Total Return3				-4.50	%	+	0.67	%	+	2.45	%
Value of $10,000 Investment4			$	9,550		$	10,338		$	11,402
Total Annual Operating Expenses5
Without Waiver	3.14	%
With Waiver	2.03	%
Class R				1-Year			5-Year			Inception (8/1/06)
Cumulative Total Return2				-3.01	%	+	6.08	%	+	17.16	%
Average Annual Total Return3				-3.01	%	+	1.19	%	+	2.97	%
Value of $10,000 Investment4			$	9,699		$	10,608		$	11,716
Total Annual Operating Expenses5
Without Waiver	2.64	%
With Waiver	1.53	%
Advisor Class				1-Year			5-Year			Inception (8/1/06)
Cumulative Total Return2				-2.55	%	+	8.72	%	+	20.37	%
Average Annual Total Return3				-2.55	%	+	1.69	%	+	3.48	%
Value of $10,000 Investment4			$	9,745		$	10,872		$	12,037
Total Annual Operating Expenses5
Without Waiver	2.14	%
With Waiver	1.03	%

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 and administrator have contractually agreed to waive or assume certain expenses so that common expenses (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) until 4/30/12.

Annual Report | 39

Performance Summary (continued)

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.

40 | Annual Report

Annual Report | 41

Performance Summary (continued)

Endnotes

It’s important to note that the principal value of the Fund will fluctuate and is not guaranteed at any time, including at or after the stated target date for the Fund, nor is there any guarantee that the Fund will provide sufficient income, at or through the investor’s retirement. All investments involve risks. Generally, investors should be comfortable with fluctuation in the value of their investments, especially over the short term. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. 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: Class R:	These shares have higher annual fees and expenses than Class A shares. 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 and administrator had not waived fees, the Fund’s total returns would have been lower. As of 5/1/11, the Fund’s glide path was modified, and among other changes, reflects a lower starting allocation to equity funds; such a change can impact performance.

2. Cumulative total return represents the change in value of an investment over the periods indicated.

3. Average annual total return represents the average annual change in value of an investment over the periods indicated. 4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.

5. Figures are as stated in the Fund’s prospectus current as of the date of this report and include the effect of acquired fund fees and expenses. In periods of volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

6. Source: © 2012 Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The MSCI EAFE Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets excluding the U.S. and Canada. The 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) using the middle rating of Moody’s, Standard & Poor’s and 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.

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**
Class A		7/1/11		12/31/11		7/1/11–12/31/11		7/1/11–12/31/11
Actual	$	1,000	$	927.20	$	2.19	$	5.88
Hypothetical (5% return before expenses)	$	1,000	$	1,022.94	$	2.29	$	6.16
Class C
Actual	$	1,000	$	924.70	$	5.58	$	9.27
Hypothetical (5% return before expenses)	$	1,000	$	1,019.41	$	5.85	$	9.70
Class R
Actual	$	1,000	$	926.90	$	3.16	$	6.85
Hypothetical (5% return before expenses)	$	1,000	$	1,021.93	$	3.31	$	7.17
Advisor Class
Actual	$	1,000	$	929.00	$	0.73	$	4.42
Hypothetical (5% return before expenses)	$	1,000	$	1,024.45	$	0.77	$	4.63

*Expenses are calculated using the most recent six-month expense ratio excluding expenses of the fund investments, net of expense waivers, annualized for each class (A: 0.45%; 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.

**Expenses are calculated using the most recent six-month expense ratio including expenses of the fund investments, net of expense waivers, annualized for each class (A: 1.21%; C: 1.91%; R: 1.41%; and Advisor: 0.91%), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period.

44 | Annual Report

Franklin Templeton Fund Allocator Series

Financial Highlights (continued)

Franklin Templeton 2015 Retirement Target Fund
					Year Ended December 31,
Class C		2011			2010			2009			2008			2007
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	11.16		$	10.10		$	8.08		$	11.28		$	10.67
Income from investment operationsa:
Net investment incomeb,c		0.16			0.16			0.13			0.14			0.36
Net realized and unrealized gains (losses)		(0.33	)		1.04			2.09			(3.04	)		0.60
Total from investment operations		(0.17	)		1.20			2.22			(2.90	)		0.96
Less distributions from:
Net investment income and short term gains received from
Underlying Funds		(0.16	)		(0.14	)		(0.15	)		(0.13	)		(0.19	)
Net realized gains		—			—			(0.05	)		(0.17	)		(0.16	)
Total distributions		(0.16	)		(0.14	)		(0.20	)		(0.30	)		(0.35	)
Redemption feesd		—			—			—			—e			—e
Net asset value, end of year	$	10.83		$	11.16		$	10.10		$	8.08		$	11.28
Total returnf		(1.51	)%		11.91	%		27.75	%		(26.09	)%		9.02	%
Ratios to average net assets
Expenses before waiver and payments by affiliatesg		1.50	%		1.50	%		1.70	%		2.04	%		4.28	%
Expenses net of waiver and payments by affiliatesg		1.15	%		1.15	%		1.16	%		1.19	%		1.16	%
Net investment incomec		1.39	%		1.60	%		1.41	%		1.57	%		2.43	%
Supplemental data
Net assets, end of year (000’s)	$	14,217		$	12,133		$	8,357		$	4,621		$	2,213
Portfolio turnover rate		31.55	%		17.27	%		12.19	%		8.69	%		8.19	%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund. ^bBased on average daily shares outstanding. ^cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and Exchange Traded Funds in which the Fund invests. ^dEffective September 1, 2008, the redemption fee was eliminated. ^eAmount rounds to less than $0.01 per share. ^fTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable. ^gDoes not include expenses of the Underlying Funds and Exchange Traded Funds in which the Fund invests. The annualized weighted average expense ratio of the Underlying Funds and Exchange Traded Funds was 0.68% for the year ended December 31, 2011.

46 | The accompanying notes are an integral part of these financial statements. | Annual Report

Franklin Templeton Fund Allocator Series

Statement of Investments, December 31, 2011

Franklin Templeton 2015 Retirement Target Fund	Shares/Units		Value
Investments in Underlying Funds and Exchange Traded Funds
Alternative Strategies 0.4%
a,bFranklin Pelagos Commodities Strategy Fund, Advisor Class	9,589	$	94,265
a,bFranklin Pelagos Managed Futures Strategy Fund, Advisor Class	9,589		96,278
			190,543
Domestic Equity 35.5%
a,bFranklin DynaTech Fund, Advisor Class	37,240		1,082,208
a,bFranklin Flex Cap Growth Fund, Advisor Class	89,560		4,040,031
bFranklin Growth Fund, Advisor Class	58,581		2,615,625
a,bFranklin Growth Opportunities Fund, Advisor Class	36,615		765,983
bFranklin MicroCap Value Fund, Advisor Class	27,632		771,485
bFranklin Natural Resources Fund, Advisor Class	25,623		949,316
bFranklin Rising Dividends Fund, Advisor Class	90,816		3,154,938
bFranklin Utilities Fund, Advisor Class	115,793		1,556,261
iShares S&P 500 Index Fund, ETF	4,785		602,719
bMutual Shares Fund, Class Z	86,223		1,720,143
			17,258,709
Domestic Fixed Income 26.1%
bFranklin High Income Fund, Advisor Class	344,451		671,680
bFranklin Total Return Fund, Advisor Class	268,934		2,705,478
bFranklin U.S. Government Securities Fund, Advisor Class	1,116,220		7,768,892
iShares Barclays Aggregate Bond Fund, ETF	13,820		1,523,655
			12,669,705
Foreign Equity 14.4%
bFranklin Gold and Precious Metals Fund, Advisor Class	24,633		938,520
bFranklin International Small Cap Growth Fund, Advisor Class	81,938		1,115,998
iShares MSCI EAFE Index Fund, ETF	4,940		244,678
bMutual European Fund, Class Z	94,931		1,798,937
bTempleton China World Fund, Advisor Class	24,464		832,985
bTempleton Foreign Fund, Advisor Class	354,915		2,076,255
			7,007,373
Foreign Fixed Income 12.6%
bFranklin Templeton Emerging Market Debt Opportunities Fund	84,601		956,837
bTempleton Global Bond Fund, Advisor Class	419,698		5,191,669
			6,148,506
Total Investments in Underlying Funds and Exchange Traded Funds before
Short Term Investments (Cost $40,811,348) 89.0%			43,274,836

Annual Report | 49

50 | The accompanying notes are an integral part of these financial statements. | Annual Report

Franklin Templeton Fund Allocator Series

Statement of Investments, December 31, 2011

See Abbreviations on page 86.

^aNon-income producing.
^bSee Note 7 regarding investments in Underlying Funds.

Annual Report | The accompanying notes are an integral part of these financial statements. | 55

Franklin Templeton Fund Allocator Series

Financial Highlights

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of
the Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
^bBased on average daily shares outstanding.
^cRecognition of net investment income by the Fund is affected by the timing of declaration of dividends by the Underlying Funds and Exchange Traded Funds in which the Fund invests.
^dEffective September 1, 2008, the redemption fee was eliminated.
^eAmount rounds to less than $0.01 per share.
^fTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
^gDoes not include expenses of the Underlying Funds and Exchange Traded Funds in which the Fund invests. The annualized weighted average expense ratio of the Underlying Funds
and Exchange Traded Funds was 0.76% for the year ended December 31, 2011.

56 | The accompanying notes are an integral part of these financial statements. | Annual Report

Franklin Templeton Fund Allocator Series

Statement of Investments, December 31, 2011

See Abbreviations on page 86.
aNon-income producing.
bSee Note 7 regarding investments in Underlying Funds.
Annual Report	| The accompanying notes are an integral part of these financial statements.	|	65

Franklin Templeton Fund Allocator Series

Financial Statements

Statements of Assets and Liabilities
December 31, 2011

		Franklin Templeton			Franklin Templeton			Franklin Templeton			Franklin Templeton
		2015 Retirement			2025 Retirement			2035 Retirement			2045 Retirement
		Target Fund			Target Fund			Target Fund			Target Fund
Assets:
Investments in securities:
Cost - Underlying Funds (Note 7)	$	43,393,067		$	49,325,824		$	31,375,688		$	19,784,726
Cost - Exchange Traded Funds		2,274,690			2,505,685			1,602,920			1,003,316
Cost - Repurchase agreements		491,096			—			—			—
Total cost of investments	$	46,158,853		$	51,831,509		$	32,978,608		$	20,788,042
Value - Underlying Funds (Note 7)	$	45,760,193		$	51,941,254		$	33,315,362		$	20,865,359
Value - Exchange Traded Funds		2,371,052			2,606,946			1,659,220			1,046,355
Value - Repurchase agreements		491,096			—			—			—
Total value of investments		48,622,341			54,548,200			34,974,582			21,911,714
Receivables:
Capital shares sold		99,210			106,495			206,773			220,012
Dividends		385			424			270			170
Affiliates		1,755			6,240			56,791			93,284
Total assets		48,723,691			54,661,359			35,238,416			22,225,180
Liabilities:
Payables:
Capital shares redeemed		65,044			172,773			26,067			51,846
Underlying Funds (Note 8)		14,844			64			2,129			857
Reports to shareholders		5,597			7,254			5,946			4,983
Professional fees		28,120			30,253			29,892			29,801
Unaffiliated transfer agent fees		4,803			8,628			6,329			4,097
Accrued expenses and other liabilities		78			82			55			37
Total liabilities		118,486			219,054			70,418			91,621
Net assets, at value	$	48,605,205		$	54,442,305		$	35,167,998		$	22,133,559
Net assets consist of:
Paid-in capital	$	46,942,436		$	53,043,098		$	33,994,385		$	21,516,401
Undistributed net investment income		55,479			56,783			43,486			25,404
Net unrealized appreciation (depreciation)		2,463,488			2,716,691			1,995,974			1,123,672
Accumulated net realized gain (loss)		(856,198	)		(1,374,267	)		(865,847	)		(531,918	)
Net assets, at value	$	48,605,205		$	54,442,305		$	35,167,998		$	22,133,559

66 | The accompanying notes are an integral part of these financial statements. | Annual Report

Franklin Templeton Fund Allocator Series

Financial Statements (continued)

Statements of Assets and Liabilities (continued)
December 31, 2011

Annual Report | The accompanying notes are an integral part of these financial statements. | 67

Franklin Templeton Fund Allocator Series

Financial Statements (continued)

Statements of Operations
for the year ended December 31, 2011

68 | The accompanying notes are an integral part of these financial statements. | Annual Report

Franklin Templeton Fund Allocator Series

Financial Statements (continued)

Annual Report | The accompanying notes are an integral part of these financial statements. | 69

Franklin Templeton Fund Allocator Series

Financial Statements (continued)

70 | The accompanying notes are an integral part of these financial statements. | Annual Report

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. Financial Instrument 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. Exchange Traded Funds (ETFs) listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively.

b. Joint Repurchase Agreement

The Franklin Templeton 2015 Retirement Target Fund enters into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the fund to the seller, collateralized by securities which are delivered to the fund’s custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. The joint repurchase agreement held by the Fund at year end had been entered into on December 30, 2011.

c. Income Taxes

It is each fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. Each fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.

Each fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of December 31, 2011, and for all open tax years, each fund has determined that no liability for unrecognized tax benefits is required in each fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction statute of limitation.

Annual Report | 71

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

1.	ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
d.	Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Estimated expenses are accrued daily. Dividend income and realized gain distributions by Underlying Funds and ETFs are recorded on the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date 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.

Common expenses incurred by the Trust are allocated among the funds based on the ratio of net assets of each fund to the combined net assets of the Trust. Fund specific expenses are charged directly to the fund that incurred the expense.

The Funds indirectly bear their proportionate share of expenses from the Underlying Funds and ETFs. Since the Underlying Funds and ETFs have varied expense levels and the Funds may own different proportions of the Underlying Funds and ETFs at different times, the amount of expenses incurred indirectly by the Funds will vary.

Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.

e. 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.

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.

72 | Annual Report

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

2. SHARES OF BENEFICIAL INTEREST

At December 31, 2011, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:

Annual Report | 73

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

74 | 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 Funds are also officers and/or directors/trustees of certain of the Underlying Funds and of the following subsidiaries:

Subsidiary	Affiliation
Franklin Advisers, Inc. (Advisers)	Investment manager
Franklin Templeton Services, LLC (FT Services)	Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)	Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)	Transfer agent

Annual Report | 75

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 and ETFs.

b. Administrative Fees

FT Services, under the terms of an agreement, provides administrative services to the Funds and is not paid by the Funds for the services.

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 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.

d. Sales Charges/Underwriting Agreements

Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Funds. These charges are deducted from the proceeds of sales of fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised

76 | Annual Report

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

3.	TRANSACTIONS WITH AFFILIATES (continued)
d.	Sales Charges/Underwriting Agreements (continued)

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	$	31,631	$	56,365	$	42,985	$	31,413
CDSC retained	$	926	$	1,356	$	1,547	$	1,294
e. Transfer Agent Fees
For the year ended December 31, 2011, 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	$	35,339	$	58,580	$	53,466	$	51,160
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, 2012.

4. EXPENSE OFFSET ARRANGEMENT

The Funds have entered into an arrangement with their custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Funds’ custodian expenses. During the year ended December 31, 2011, there were no credits earned.

Annual Report | 77

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains, if any. Under the Regulated Investment Company Modernization Act of 2010, capital losses incurred by the Funds in taxable years beginning after December 22, 2010 are not subject to expiration and such losses retain their character as either short-term or long-term, rather than being considered short-term as under previous law. Post-enactment capital losses must be fully utilized prior to utilizing any losses incurred in pre-enactment tax years.

At December 31, 2011, 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	$	6,200	$	347,084	$	38,783	$	—
2018		328,667		315,274		191,801		74,927
	$	334,867	$	662,358	$	230,584	$	74,927

During the year ended December 31, 2011, the Funds utilized capital loss carryforwards as follows:

	Franklin Templeton		Franklin Templeton		Franklin Templeton		Franklin Templeton
	2015 Retirement		2025 Retirement		2035 Retirement		2045 Retirement
	Target Fund		Target Fund		Target Fund		Target Fund
$	780,685	$	593,264	$	521,283	$	417,572

For tax purposes, the Funds may elect to defer any portion of a post-October capital loss to the first day of the following fiscal year. At December 31, 2011, the deferred post-October capital losses 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
Realized capital losses	$	58,841	$	27,927	$	23,795	$	19,785

The tax character of distributions paid during the years ended December 31, 2011 and 2010, was as follows:

		Franklin Templeton				Franklin Templeton
		2015 Retirement				2025 Retirement
		Target Fund				Target Fund
		2011		2010		2011		2010
Distributions paid from ordinary income	$	928,884	$	674,637	$	798,084	$	689,082

78 | Annual Report

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

5. INCOME TAXES (continued)
		Franklin Templeton				Franklin Templeton
		2035 Retirement				2045 Retirement
		Target Fund				Target Fund
		2011		2010		2011		2010
Distributions paid from ordinary income	$	439,642	$	366,131	$	254,018	$	184,127

At December 31, 2011, 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	$	46,621,354		$	52,515,504		$	33,590,073		$	21,225,247
Unrealized appreciation	$	2,555,163		$	2,953,977		$	2,037,798		$	1,222,247
Unrealized depreciation		(554,176	)		(921,281	)		(653,289	)		(535,780	)
Net unrealized appreciation (depreciation)	$	2,000,987		$	2,032,696		$	1,384,509		$	686,467
Distributable earnings –
undistributed ordinary income	$	55,479		$	56,783		$	43,486		$	25,404

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of short term capital gains distributions from Underlying Funds and ETFs and wash sales.

6. INVESTMENT TRANSACTIONS

Purchases and sales of Underlying Funds and ETFs (excluding short term securities) for the year ended December 31, 2011, 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	$	20,065,343	$	22,194,800	$	17,636,280	$	14,182,712
Sales	$	13,353,389	$	9,693,509	$	9,174,504	$	6,517,625

7. INVESTMENTS IN UNDERLYING FUNDS

The Funds invest primarily in the Underlying Funds which are managed by Advisers (or an affiliate of Advisers). The Funds do not invest in the Underlying Funds for the purpose of exercising a controlling influence over the management or policies.

Annual Report | 79

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

7. INVESTMENTS IN UNDERLYING FUNDS (continued)

The Funds may invest in the Institutional Fiduciary Trust Money Market Portfolio (Sweep Money Fund), an open-end investment company managed by Advisers. 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.

Investments in Underlying Funds for the year ended December 31, 2011, were as follows:

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

Annual Report | 81

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

82 | Annual Report

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

^aIncludes realized gain distributions received.
^bAs of December 31 2011, no longer held by the fund.
^cRounds to less than 0.01%.

Annual Report | 83

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

8. SPECIAL SERVICING AGREEMENT

The Funds participate in a Special Servicing Agreement (SSA) with the Underlying Funds (except for the Franklin Pelagos Commodities Strategy Fund and Franklin Pelagos Managed Futures Strategy Fund) 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 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 borne by the Underlying Funds during the year ended December 31, 2011 is noted in the Statements of Operations.

9. 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 $750 million (Global Credit Facility) which matured on January 20, 2012. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective January 20, 2012, the Borrowers renewed the Global Credit Facility for a total of $1.5 billion, maturing January 18, 2013.

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 0.08% 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, 2011, the Funds did not use the Global Credit Facility.

10. FAIR VALUE MEASUREMENTS

The Funds follow a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds’ own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds’ 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 Funds’ own assumptions in determining the fair value of investments)

84 | Annual Report

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

10. FAIR VALUE MEASUREMENTS (continued)

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

For movements between the levels within the fair value hierarchy, the Funds have adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

The following is a summary of the inputs used as of December 31, 2011, in valuing the Funds’ assets and liabilities carried at fair value:

Annual Report | 85

Franklin Templeton Fund Allocator Series

Notes to Financial Statements (continued)

11. NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in the ASU will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards) and include new guidance for certain fair value measurement principles and disclosure requirements. The ASU is effective for interim and annual periods beginning after December 15, 2011. The Funds believe the adoption of this ASU will not have a material impact on their financial statements.

12. SUBSEQUENT EVENTS

The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.

ABBREVIATIONS

Selected Portfolio

ETF - Exchange Traded Fund

86 | 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 the Franklin Templeton 2015 Retirement Target Fund, Franklin Templeton 2025 Retirement Target Fund, Franklin Templeton 2035 Retirement Target Fund, Franklin Templeton 2045 Retirement Target Fund (separate portfolios of Franklin Templeton Fund Allocator Series, hereafter referred to as the “Funds”) at December 31, 2011, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2011 by correspondence with the transfer agent of the Underlying Funds and custodian, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California
February 14, 2012

Annual Report | 87

Franklin Templeton Fund Allocator Series

Tax Information (unaudited)

Under Section 854(b)(1)(A) of the Internal Revenue Code (Code), the Funds hereby report the following percentage amounts of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2011:

Franklin Templeton		Franklin Templeton		Franklin Templeton		Franklin Templeton
2015 Retirement		2025 Retirement		2035 Retirement		2045 Retirement
Target Fund		Target Fund		Target Fund		Target Fund
15.56	%	28.46	%	37.37	%	41.37	%

Under Section 854(b)(1)(B) of the Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended December 31, 2011:

	Franklin Templeton		Franklin Templeton		Franklin Templeton		Franklin Templeton
	2015 Retirement		2025 Retirement		2035 Retirement		2045 Retirement
	Target Fund		Target Fund		Target Fund		Target Fund
$	315,014	$	501,708	$	354,746	$	229,243

Distributions, including qualified dividend income, paid during calendar year 2011 will be reported to shareholders on Form 1099-DIV by mid-February 2012. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.

During the fiscal year ended December 31, 2011, the Funds, qualified fund of funds under Section 852(g)(2) of Code, received an allocation of foreign taxes paid from one or more of their Underlying Funds. As shown in the table below, the Funds hereby report to shareholders the foreign source income and foreign taxes paid by the Underlying Funds, pursuant to Section 853 of the Code. This written statement will allow shareholders of record on December 27, 2011, to treat their proportionate share of foreign taxes paid by the Underlying Funds as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Funds’ distribution.

The following table provides a detailed analysis of foreign tax paid, foreign source income, and foreign qualified dividends as reported by the Funds, to Class A, Class C, Class R, and Advisor Class shareholders of record.

Franklin Templeton Fund Allocator Series

Tax Information (unaudited) (continued)

		Foreign Tax		Foreign Source		Foreign Qualified
Class		Paid Per Share		Income Per Share		Dividends Per Share
Franklin Templeton 2035 Retirement Target Fund
Class A	$	0.0061	$	0.0699	$	0.0388
Class C	$	0.0061	$	0.0699	$	0.0388
Class R	$	0.0061	$	0.0699	$	0.0388
Advisor Class	$	0.0061	$	0.0699	$	0.0388
Franklin Templeton 2045 Retirement Target Fund
Class A	$	0.0063	$	0.0700	$	0.0403
Class C	$	0.0063	$	0.0700	$	0.0403
Class R	$	0.0063	$	0.0700	$	0.0403
Advisor Class	$	0.0063	$	0.0700	$	0.0403

Foreign Tax Paid Per Share (Column 1) is the amount per share available to you, as a tax credit (assuming you held your shares in the Fund for a minimum of 16 days during the 31-day period beginning 15 days before the ex-dividend date of the Funds’ distribution to which the foreign taxes relate), or, as a tax deduction.

Foreign Source Income Per Share (Column 2) is the amount per share of income dividends attributable to foreign securities held by the Underlying Funds, plus any foreign taxes withheld on these dividends. The amounts reported include foreign source qualified dividends that have not been adjusted for the rate differential applicable to such dividend income.¹

Foreign Qualified Dividends Per Share (Column 3) is the amount per share of foreign source qualified dividends, plus any foreign taxes withheld on these dividends. These amounts represent the portion of the Foreign Source Income reported to you in column 2 that were derived from qualified foreign securities held by the Underlying Funds.¹

By mid-February 2012, shareholders will receive Form 1099-DIV which will include their share of taxes paid and foreign source income distributed during the calendar year 2011. The Foreign Source Income reported on Form 1099-DIV has not been adjusted for the rate differential on foreign source qualified dividend income. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their 2011 individual income tax returns.

¹Qualified dividends are taxed at reduced long term capital gains tax rates. In determining the amount of foreign tax credit that may be applied against the U.S. tax liability of individuals receiving foreign source qualified dividends, adjustments may be required to the foreign tax credit limitation calculation to reflect the rate differential applicable to such dividend income. The rules however permit certain individuals to elect not to apply the rate differential adjustments for capital gains and/or dividends for any taxable year. Please consult your tax advisor and the instructions to Form 1116 for more information.

Annual Report | 89

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 at least the past five years and number of portfolios overseen in the Franklin Templeton Investments fund complex are shown below. Generally, each board member serves until that person’s successor is elected and qualified.

90 | Annual Report

92 | Annual Report

Annual Report | 93

94 | Annual Report

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, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Trust’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.

Quarterly Statement of Investments

The Trust files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.

Householding of Reports and Prospectuses

You will receive each Fund’s financial reports every six months as well as an annual updated summary prospectus (prospectus available upon request). To reduce Fund expenses, we try to identify related shareholders in a household and send only one copy of the financial reports and summary prospectus. This process, called “householding,” will continue indefinitely unless you instruct us otherwise. If you prefer not to have these documents householded, please call us at (800) 632-2301. At any time you may view current prospectuses/summary prospectuses and financial reports on our website. If you choose, you may receive these documents through electronic delivery.

Annual Report | 95

This page intentionally left blank.

This page intentionally left blank.

This page intentionally left blank.

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 $242,037 for the fiscal year ended December 31, 2011 and $250,381 for the fiscal year ended December 31, 2010.

(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 $100,000 for the fiscal year ended December 31, 2011 and $35,000 for the fiscal year ended December 31, 2010. The services for which these fees were paid included technical tax consultation for capital gain tax reporting to foreign governments and derivative instruments.

(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, 2011 and $4,269 for the fiscal year ended December 31, 2010. 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, 2011 and $140,531 for the fiscal year ended December 31, 2010. 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 $100,000 for the fiscal year ended December 31, 2011 and $179,800 for the fiscal year ended December 31, 2010.

(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 24, 2012

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 24, 2012

By /s/GASTON GARADEY
Gaston Gardey
Chief Financial Officer and
Chief Accounting Officer
Date February 24, 2012

EX-99.CODE ETH

                                                               Exhibit 12(a)(1)



CODE OF ETHICS FOR PRINCIPAL EXECUTIVES & SENIOR FINANCIAL OFFICERS
------------------------------------------------------------------------------

PROCEDURES   Revised December 19, 2009
-------------------------------------------------------------------------------

                            FRANKLIN TEMPLETON FUNDS
                   CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND
                            SENIOR FINANCIAL OFFICERS

I.  Covered Officers and Purpose of the Code

     This  code of  ethics  (the  "Code")  applies  to the  Principal  Executive
Officers,  Principal  Financial  Officer and Principal  Accounting  Officer (the
"Covered  Officers,"  each of whom is set forth in Exhibit A) of each investment
company advised by a Franklin  Resources  subsidiary and that is registered with
the United States Securities & Exchange  Commission ("SEC")  (collectively,  "FT
Funds") for the purpose of promoting:

     o Honest and ethical conduct, including the ethical resolution of actual or
       apparent conflicts of  interest between personal and  professional
       relationships;

     o Full, fair, accurate, timely and understandable disclosure in reports and
       documents that a registrant files with, or submits to, the SEC and in
       other public communications made by or on behalf of the FT Funds;

     o Compliance with applicable laws and governmental rules and regulations;

     o The prompt internal reporting of violations of the Code to an appropriate
       person or persons identified in the Code; and

     o Accountability for adherence to the Code.

     Each  Covered  Officer  will be  expected  to adhere to a high  standard of
business ethics and must be sensitive to situations that may give rise to actual
as well as apparent conflicts of interest.

II.  Other Policies and Procedures

     This  Code  shall be the sole  code of  ethics  adopted  by the  Funds  for
purposes  of  Section  406 of the  Sarbanes-Oxley  Act and the  rules  and forms
applicable to registered investment companies thereunder.

     Franklin  Resources,  Inc.  has  separately  adopted the CODE OF ETHICS AND
BUSINESS  CONDUCT  ("Business  Conduct"),  which is  applicable to all officers,
directors and employees of Franklin Resources, Inc., including Covered Officers.
It  summarizes  the values,  principles  and business  practices  that guide the
employee's business conduct and also provides a set of basic principles to guide
officers,  directors and employees  regarding the minimum  ethical  requirements
expected of them. It supplements  the values,  principles  and business  conduct
identified in the Code and other existing employee policies.

     Additionally, the Franklin Templeton Funds have separately adopted the CODE
OF ETHICS AND POLICY STATEMENT ON INSIDER TRADING governing personal  securities
trading and other related  matters.  The Code for Insider  Trading  provides for
separate  requirements  that  apply to the  Covered  Officers  and  others,  and
therefore is not part of this Code.

     Insofar as other  policies or procedures of Franklin  Resources,  Inc., the
Funds, the Funds' adviser,  principal  underwriter,  or other service  providers
govern or purport to govern the behavior or activities  of the Covered  Officers
who are  subject to this Code,  they are  superceded  by this Code to the extent
that they overlap or conflict with the  provisions  of this Code.  Please review
these other  documents or consult with the Legal  Department  if have  questions
regarding the applicability of these policies to you.

III. Covered Officers Should Handle Ethically Actual and Apparent Conflicts of
Interest

     OVERVIEW.  A "conflict of interest" occurs when a Covered Officer's private
interest  interferes  with the  interests  of, or his or her  service to, the FT
Funds. For example, a conflict of interest would arise if a Covered Officer,  or
a member of his  family,  receives  improper  personal  benefits  as a result of
apposition with the FT Funds.

     Certain  conflicts  of  interest  arise  out of the  relationships  between
Covered  Officers  and the FT Funds and  already  are  subject  to  conflict  of
interest  provisions in the Investment Company Act of 1940 ("Investment  Company
Act") and the Investment  Advisers Act of 1940 ("Investment  Advisers Act"). For
example,  Covered Officers may not individually  engage in certain  transactions
(such as the purchase or sale of securities or other property) with the FT Funds
because of their status as "affiliated  persons" of the FT Funds.  The FT Funds'
and the investment  advisers' compliance programs and procedures are designed to
prevent, or identify and correct, violations of these provisions. This Code does
not, and is not intended to,  repeat or replace these  programs and  procedures,
and such conflicts fall outside of the parameters of this Code.

     Although  typically not  presenting an  opportunity  for improper  personal
benefit,  conflicts arise from, or as a result of, the contractual  relationship
between the FT Funds,  the  investment  advisers and the fund  administrator  of
which the Covered  Officers are also  officers or employees.  As a result,  this
Code  recognizes  that the Covered  Officers will, in the normal course of their
duties (whether formally for the FT Funds, for the adviser,  the  administrator,
or for all  three),  be  involved  in  establishing  policies  and  implementing
decisions that will have different effects on the adviser, administrator and the
FT Funds.  The  participation  of the  Covered  Officers in such  activities  is
inherent in the contractual  relationship between the FT Funds, the adviser, and
the administrator and is consistent with the performance by the Covered Officers
of their duties as officers of the FT Funds.  Thus,  if performed in  conformity
with the  provisions of the Investment  Company Act and the Investment  Advisers
Act, such activities will be deemed to have been handled ethically. In addition,
it is  recognized  by the FT Funds'  Boards  of  Directors  ("Boards")  that the
Covered  Officers  may  also be  officers  or  employees  of one or  more  other
investment companies covered by this or other codes.

     Other conflicts of interest are covered by the Code, even if such conflicts
of interest are not subject to provisions in the Investment  Company Act and the
Investment  Advisers Act. The following  list provides  examples of conflicts of
interest  under the Code,  but Covered  Officers  should keep in mind that these
examples  are not  exhaustive.  The  overarching  principle is that the personal
interest  of a Covered  Officer  should  not be  placed  improperly  before  the
interest of the FT Funds.

Each Covered Officer must:

     o Not use his or her personal influence  or  personal  relationships
       improperly to influence investment decisions orfinancial reporting by
       the FT Funds whereby the Covered Officer would benefit personally to the
       detriment of the FT Funds;

     o Not cause the FT Funds to take action, or fail to take  action, for the
       individual personal benefit of the Covered Officer rather than the
       benefit the FT Funds;

     o Not retaliate against any other Covered Officer or any employee of the FT
       Funds or their affiliated persons for reports of potential  violations
       that are made in good faith;

     o Report  at  least   annually  the  following  affiliations  or other
       relationships:/1

          o all directorships for public companies and all companies that are
            required to file reports with the SEC;
          o any direct or indirect  business relationship  with any independent
            directors of the FT Funds;
          o any direct or indirect  business relationship with any independent
            public  accounting  firm (which are not related to the routine
            issues related to the firm's service as the Covered Persons
            accountant); and
          o any direct or indirect interest in any transaction with any FT Fund
            that will benefit the officer (not including benefits derived from
            the advisory, sub-advisory, distribution or service agreements with
            affiliates of Franklin Resources).

     These reports will be reviewed by the Legal  Department for compliance with
the Code.

     There are some  conflict  of  interest  situations  that  should  always be
approved  in writing by Franklin  Resources  General  Counsel or Deputy  General
Counsel, if material. Examples of these include/2:

     o Service as a director on the board of any public or private Company;

     o The  receipt  of any gifts in excess  of $100 from any  person,  from any
       corporation or association

     o The receipt of any entertainment from any Company with which the FT Funds
       has current or prospective  business dealings unless such entertainment
       is business related, reasonable in cost, appropriate as to time and
       place, and not so frequent as to raise any question of  impropriety.
       Notwithstanding the foregoing, the Covered Officers must obtain prior
       approval from the Franklin Resources General Counsel for any
       entertainment  with a value in excess of $1000.

     o Any ownership  interest in, or any consulting or employment relationship
       with, any of the FT Fund's service providers, other than an investment
       adviser, principal underwriter, administrator or any affiliated person
       thereof;

     o A direct or  indirect  financial  interest  in  commissions,  transaction
       charges or spreads paid by the FT Funds for   effecting   portfolio
       transactions or for selling or redeeming shares  other than an interest
       arising from the Covered Officer's employment, such as compensation  or
       equity ownership.

     Franklin Resources General Counsel or Deputy General Counsel will provide a
report to the FT Funds  Audit  Committee  of any  approvals  granted at the next
regularly scheduled meeting.

IV. Disclosure and Compliance

     o Each Covered  Officer  should  familiarize  himself  with the  disclosure
       requirements generally applicable to the FT Funds;

     o Each Covered Officer should not knowingly misrepresent, or cause others
       to  misrepresent, facts about the FT Funds to others, whether within or
       outside the FT Funds, including to the FT Funds' directors and auditors,
       and to governmental regulators and self-regulatory organizations;

     o Each Covered Officer should, to the extent appropriate within his or her
       area of responsibility, consult with other officers and employees of the
       FT Funds, the FT Fund's adviser and the administrator with the goal of
       promoting full, fair, accurate, timely and understandable disclosure in
       the reports and documents the FT Funds file with, or submit to, the SEC
       and in other public communications made by the FT Funds; and

     o It is the  responsibility  of each Covered Officer to promote compliance
       with the standards and restrictions imposed by applicable laws, rules and
       regulations.

V. Reporting and Accountability

Each Covered Officer must:

     o Upon becoming a covered officer affirm in writing to the Board that he or
       she has received, read, and understands the Code (see Exhibit B);

     o Annually  thereafter  affirm to the Board that he has  complied  with the
       requirements of the Code; and

     o Notify  Franklin  Resources'  General  Counsel or Deputy General Counsel
       promptly if he or she knows of any violation of this Code. Failure to do
       so is itself is a violation of this Code.

     Franklin Resources' General Counsel and Deputy General Counsel  are
responsible for applying this Code to specific situations in which questions are
presented under  it and have  the  authority  to  interpret  this  Code in any
particular  situation./3 However, the Independent Directors of the respective FT
Funds will consider any  approvals or waivers/4  sought by any Chief  Executive
Officers of the Funds.

     The FT Funds will follow these  procedures in  investigating  and enforcing
this Code:

     o Franklin  Resources General Counsel or Deputy General Counsel will take
       all appropriate action to investigate any potential  violations reported
       to the Legal Department;

     o If,  after such  investigation,  the  General Counsel or Deputy General
       Counsel believes that no violation has occurred, The General Counsel is
       not required to take any further action;

     o Any matter that the General Counsel or Deputy General Counsel believes is
       a  violation  will  be  reported  to  the  Independent   Directors  of
       the appropriate FT Fund;

     o If the Independent Directors concur that a violation has occurred, it
       will inform and make a recommendation to the Board of the appropriate
       FT Fund or Funds, which will consider appropriate action, which may
       include review of, and appropriate modifications to, applicable policies
       and procedures; notification to appropriate personnel of the investment
       adviser or its board; or a recommendation to dismiss the Covered Officer;

     o The Independent Directors will be responsible for granting  waivers, as
       appropriate; and

     o Any changes to or waivers of this Code will, to the extent required, are
       disclosed as provided by SEC rules./5

VI. Other Policies and Procedures

     This Code shall be the sole code of ethics adopted by the FT Funds for
purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms
applicable to registered investment companies thereunder. Insofar as other
policies or procedures of the FT Funds, the FT Funds' advisers, principal
underwriter, or other service providers govern or purport to govern the behavior
or activities of the Covered Officers who are subject to this Code, they are
superseded by this Code to the extent that they overlap or conflict with the
provisions of this Code. The FT Code of Ethics and Policy Statement On Insider
Trading, adopted by the FT Funds, FT investment advisers and FT Fund's principal
underwriter pursuant to Rule 17j-1 under the Investment Company Act, the Code of
Ethics and Business Conduct and more detailed policies and procedures set forth
in FT's Employee Handbook are separate requirements applying to the Covered
Officers and others, and are not part of this Code.

VII. Amendments

     Any  amendments to this Code,  other than  amendments to Exhibit A, must be
approved  or  ratified  by a majority  vote of the FT Funds'  Board  including a
majority of independent directors.

VIII. Confidentiality

     All reports and records  prepared or maintained  pursuant to this Code will
be considered  confidential  and shall be maintained and protected  accordingly.
Except as  otherwise  required by law or this Code,  such  matters  shall not be
disclosed to anyone other than the FT Funds' Board and their counsel.

IX. Internal Use

     The Code is intended  solely for the  internal use by the FT Funds and does
not  constitute an admission,  by or on behalf of any FT Funds,  as to any fact,
circumstance, or legal conclusion.

X. Disclosure on Form N-CSR

     Item 2 of Form N-CSR requires a registered management investment company to
disclose annually whether, as of the end of the period covered by the report, it
has  adopted  a code  of  ethics  that  applies  to the  registrant's  principal
executive officer,  principal financial officer, principal accounting officer or
controller, or persons performing similar functions, regardless of whether these
officers are employed by the registrant or a third party.  If the registrant has
not adopted such a code of ethics, it must explain why it has not done so.

     The  registrant  must also:  (1) file with the SEC a copy of the code as an
exhibit  to its  annual  report;  (2) post the text of the code on its  Internet
website and  disclose,  in its most recent  report on Form N-CSR,  its  Internet
address and the fact that it has posted the code on its Internet website; or (3)
undertake  in its most  recent  report on Form  N-CSR to  provide  to any person
without charge, upon request, a copy of the code and explain the manner in which
such  request may be made.  Disclosure  is also  required of  amendments  to, or
waivers  (including  implicit  waivers)  from,  a  provision  of the code in the
registrant's  annual report on Form N-CSR or on its website.  If the  registrant
intends to satisfy the requirement to disclose amendments and waivers by posting
such  information  on its website,  it will be required to disclose its Internet
address and this intention.

     The Legal Department shall be responsible for ensuring that:

     o a copy of the Code is filed  with the SEC as an exhibit to each Fund's
       annual report; and

     o any  amendments to, or waivers (including implicit waivers) from, a
       provision  of the Code is disclosed in the  registrant's annual report
       on Form N-CSR.

     In the event that the  foregoing  disclosure is omitted or is determined to
be incorrect, the Legal Department shall promptly file such information with the
SEC as an amendment to Form N-CSR.

     In such an event, the Fund Chief  Compliance  Officer shall review the Code
and propose such changes to the Code as are necessary or  appropriate to prevent
reoccurrences.



EXHIBIT A

                 Persons Covered by the Franklin Templeton Funds
                                 Code of Ethics
                                  December 2009

FRANKLIN GROUP OF FUNDS

Edward B. Jamieson        President and Chief Executive Officer - Investment
                          Management
Charles B. Johnson        President and Chief Executive Officer - Investment
                          Management
Rupert H. Johnson, Jr.    President and Chief Executive Officer - Investment
                          Management
William J. Lippman        President and Chief Executive Officer - Investment
                          Management
Christopher Molumphy      President and Chief Executive Officer - Investment
                          Management
Laura Fergerson           Chief Executive Officer - Finance and Administration
Gaston R. Gardy           Chief Financial Officer and Chief Accounting Officer


FRANKLIN MUTUAL SERIES FUNDS

Peter Langerman           Chief Executive Officer-Investment Management
Laura Fergerson           Chief Executive Officer - Finance and Administration
Matthew Hinkle            Chief Financial Officer and Chief Accounting Officer


TEMPLETON GROUP OF FUNDS

Mark Mobius               President and Chief Executive Officer - Investment
                          Management
Christopher J. Molumphy   President and Chief Executive Officer - Investment
                          Management
Gary P. Motyl             President and Chief Executive Officer - Investment
                          Management
Donald F. Reed            President and Chief Executive Officer - Investment
                          Management
Laura Fergerson           Chief Executive Officer - Finance and Administration
Mark H. Otani             Chief Financial Officer and Chief Accounting Officer





                                    EXHIBIT B

                               ACKNOWLEDGMENT FORM
                                    DECEMBER

                    FRANKLIN TEMPLETON FUNDS CODE OF ETHICS
             FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS

INSTRUCTIONS:
1. Complete all sections of this form.
2. Print the completed form, sign, and date.
3. Submit completed form to FT's General Counsel c/o Code of Ethics
   Administration within 10 days of becoming a Covered Officer and by February
   15th of each subsequent year.

INTER-OFFICE MAIL: Code of Ethics Administration, Global Compliance  SM-920/2
Fax: 		   (650) 312-5646
E-MAIL:            Preclear-Code of Ethics (internal address);
                   lpreclear@frk.com (external address)

------------------------------------------------------------------------------
COVERED OFFICER'S NAME:
------------------------------------------------------------------------------
TITLE:
------------------------------------------------------------------------------
DEPARTMENT:
------------------------------------------------------------------------------
LOCATION:
------------------------------------------------------------------------------
CERTIFICATION FOR YEAR ENDING:
------------------------------------------------------------------------------

TO: Franklin Resources General Counsel, Legal Department

I acknowledge receiving, reading and understanding the Franklin Templeton Fund's
Code of Ethics for Principal Executive Officers and Senior Financial Officers
(the "Code"). I will comply fully with all provisions of the Code to the extent
they apply to me during the period of my employment. I further understand and
acknowledge that any violation of the Code may subject me to disciplinary
action, including termination of employment.




       ----------------------------       ----------------------
                Signature                     Date signed






-----------------------------

1. Reporting of these affiliations or other relationships shall be made by
completing the annual Directors and Officers Questionnaire and returning the
questionnaire to Franklin Resources Inc, General Counsel or Deputy General
Counsel.

2. Any activity or relationship that would present a conflict for a Covered
Officer may also present a conflict for the Covered Officer if a member of the
Covered Officer's immediate family engages in such an activity or has such a
relationship. The Cover Person should also obtain written approval by FT's
General Counsel in such situations.

3. Franklin Resources General Counsel and Deputy General Counsel are authorized
to consult, as appropriate, with members of the Audit Committee, counsel to the
FT Funds and counsel to the Independent Directors, and are encouraged to do so.

4. Item 2 of Form N-CSR defines "waiver" as "the approval by the registrant of
a material departure from a provision of the code of ethics" and "implicit
waiver," which must also be disclosed, as "the registrant's failure to take
action within a reasonable period of time regarding a material departure from
a provision of the code of ethics that has been made known to an executive
officer" of the registrant. See Part X.

5. See Part X.

EX-99.CERT

Exhibit 12(a)(2)

I, Laura F. Fergerson, certify that:

1. I have reviewed this report on Form N-CSR of Franklin Templeton Fund Allocator Series; 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 

5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

2/24/2012

S\LAURA F. FERGERSON

Laura F. Fergerson

Chief Executive Officer - Finance and Administration

Exhibit 12(a)(2)

I, Gaston Gardey, certify that:

1. I have reviewed this report on Form N-CSR of Franklin Templeton Fund Allocator Series; 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 

5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

2/24/2012

S\GASTON GARDEY

Gaston Gardey

Chief Financial Officer and Chief Accounting Officer

EX-99.906 CERT

Exhibit 12(b)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Laura F. Fergerson, Chief Executive Officer of the Franklin Templeton Fund Allocator Series (the “Registrant”), certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.The periodic report on Form N-CSR of the Registrant for the period ended 12/31/2011 (the “Form N-CSR”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Dated:  2/24/2012

                                                S\LAURA F. FERGERSON

                                                Laura F. Fergerson

Chief Executive Officer - Finance and Administration

Exhibit 12(b)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Gaston Gardey, Chief Financial Officer of the Franklin Templeton Fund Allocator Series (the “Registrant”), certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.The periodic report on Form N-CSR of the Registrant for the period ended 12/31/2011 (the “Form N-CSR”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Dated:  2/24/2012

                                                S\GASTON GARDEY

                                                Gaston Gardey

Chief Financial Officer and Chief Accounting Officer