FAS P1 09/18
SUPPLEMENT DATED SEPTEMBER 10, 2018
TO THE PROSPECTUS DATED MAY 1, 2018
OF
FRANKLIN FUND ALLOCATOR SERIES
Franklin Conservative Allocation Fund
Franklin Moderate Allocation Fund
Franklin Growth Allocation Fund
The prospectus is amended as follows:
I. The following replaces the “Shareholder Fees” and “Example” tables in the “Fund Summaries – Franklin Conservative Allocation Fund – Fees and Expenses of the Fund” section of the prospectus:
Shareholder Fees
(fees paid directly from your investment)
|
|
Class A1 |
Class C2 |
Class R |
Class R6 |
Advisor Class |
|
Maximum Sales Charge (Load) Imposed on Purchases (as percentage of offering price) |
5.50% |
None |
None |
None |
None |
|
Maximum Deferred Sales Charge (Load) (as percentage of the lower of original purchase price or sale proceeds) |
None |
1.00% |
None |
None |
None |
1. There is a 1% contingent deferred sales charge that applies to investments of $1 million or more (see "Investments of $1 Million or More" under "Choosing a Share Class") and purchases by certain retirement plans without an initial sales charge on shares sold within 18 months of purchase.
2. Effective October 5, 2018, Class C shares that have been held for 10 years or more will convert automatically into Class A shares later in the month of October 2018 and will be subject to Class A shares’ lower Rule 12b-1 fees. Thereafter, Class C shares of the Fund will convert automatically to Class A shares of the Fund on a monthly basis in the month of, or the month following, the 10-year anniversary of the Class C shares’ purchase date. Such conversions will be on the basis of the relative net asset values of the two classes, will not be subject to Class A shares’ sales charges and are not expected to be a taxable event for federal income tax purposes. Certain shares that are invested through retirement plans, omnibus accounts or in certain other instances may not automatically convert if the financial intermediary does not have the ability to track purchases to credit individual shareholders’ holding periods. (See “Your Account – Choosing a Shares Class – Sales Charges – Class C – Automatic Conversion of Class C Shares to Class A Shares After 10-Year Holding Period” for more information.)
Example
|
|
1 Year |
3 Years |
5 Years |
10 Years |
|
Class A |
$ 666 |
$ 910 |
$ 1,173 |
$ 1,925 |
|
Class C |
$ 298 |
$ 612 |
$ 1,052 |
$ 2,275 |
|
Class R |
$ 148 |
$ 459 |
$ 792 |
$ 1,735 |
|
Class R6 |
$ 90 |
$ 283 |
$ 492 |
$ 1,095 |
|
Advisor Class |
$ 97 |
$ 303 |
$ 525 |
$ 1,166 |
|
If you do not sell your shares: |
|
|
|
|
|
Class C |
$ 198 |
$ 612 |
$ 1,052 |
$ 2,275 |
II. The following is added to the “Fund Summaries – Franklin Conservative Allocation Fund – Performance” section of the prospectus:
The figures in the average annual total returns table above reflect the Class A maximum front-end sales charge of 5.75% that was in effect prior to September 10, 2018. Class A shares, however, currently are subject to a maximum front-end sales charge of 5.50% effective on September 10, 2018. If the maximum front-end sales charge of 5.50% was reflected, performance for Class A in the average annual total returns table would be higher.
III. The following replaces the “Shareholder Fees” and “Example” tables in the “Fund Summaries – Franklin Moderate Allocation Fund – Fees and Expenses of the Fund” section of the prospectus:
Shareholder Fees
(fees paid directly from your investment)
|
|
Class A1 |
Class C2 |
Class R |
Class R6 |
Advisor Class |
|
Maximum Sales Charge (Load) Imposed on Purchases (as percentage of offering price) |
5.50% |
None |
None |
None |
None |
|
Maximum Deferred Sales Charge (Load) (as percentage of the lower of original purchase price or sale proceeds) |
None |
1.00% |
None |
None |
None |
1. There is a 1% contingent deferred sales charge that applies to investments of $1 million or more (see "Investments of $1 Million or More" under "Choosing a Share Class") and purchases by certain retirement plans without an initial sales charge on shares sold within 18 months of purchase.
1
2. Effective October 5, 2018, Class C shares that have been held for 10 years or more will convert automatically into Class A shares later in the month of October 2018 and will be subject to Class A shares’ lower Rule 12b-1 fees. Thereafter, Class C shares of the Fund will convert automatically to Class A shares of the Fund on a monthly basis in the month of, or the month following, the 10-year anniversary of the Class C shares’ purchase date. Such conversions will be on the basis of the relative net asset values of the two classes, will not be subject to Class A shares’ sales charges and are not expected to be a taxable event for federal income tax purposes. Certain shares that are invested through retirement plans, omnibus accounts or in certain other instances may not automatically convert if the financial intermediary does not have the ability to track purchases to credit individual shareholders’ holding periods. (See “Your Account – Choosing a Shares Class – Sales Charges – Class C – Automatic Conversion of Class C Shares to Class A Shares After 10-Year Holding Period” for more information.)
Example
|
|
1 Year |
3 Years |
5 Years |
10 Years |
|
Class A |
$ 669 |
$ 922 |
$ 1,194 |
$ 1,967 |
|
Class C |
$ 302 |
$ 624 |
$ 1,073 |
$ 2,317 |
|
Class R |
$ 152 |
$ 471 |
$ 813 |
$ 1,779 |
|
Class R6 |
$ 92 |
$ 287 |
$ 498 |
$ 1,108 |
|
Advisor Class |
$ 101 |
$ 315 |
$ 547 |
$ 1,213 |
|
If you do not sell your shares: |
|
|
|
|
|
Class C |
$ 202 |
$ 624 |
$ 1,073 |
$ 2,317 |
IV. The following is added to the “Fund Summaries – Franklin Moderate Allocation Fund – Performance” section of the prospectus:
The figures in the average annual total returns table above reflect the Class A maximum front-end sales charge of 5.75% that was in effect prior to September 10, 2018. Class A shares, however, currently are subject to a maximum front-end sales charge of 5.50% effective on September 10, 2018. If the maximum front-end sales charge of 5.50% was reflected, performance for Class A in the average annual total returns table would be higher.
V. The following replaces the “Shareholder Fees” and “Example” tables in the “Fund Summaries – Franklin Growth Allocation Fund – Fees and Expenses of the Fund” section of the prospectus:
Shareholder Fees
(fees paid directly from your investment)
|
|
Class A1 |
Class C2 |
Class R |
Class R6 |
Advisor Class |
|
Maximum Sales Charge (Load) Imposed on Purchases (as percentage of offering price) |
5.50% |
None |
None |
None |
None |
|
Maximum Deferred Sales Charge (Load) (as percentage of the lower of original purchase price or sale proceeds) |
None |
1.00% |
None |
None |
None |
1. There is a 1% contingent deferred sales charge that applies to investments of $1 million or more (see "Investments of $1 Million or More" under "Choosing a Share Class") and purchases by certain retirement plans without an initial sales charge on shares sold within 18 months of purchase.
2. Effective October 5, 2018, Class C shares that have been held for 10 years or more will convert automatically into Class A shares later in the month of October 2018 and will be subject to Class A shares’ lower Rule 12b-1 fees. Thereafter, Class C shares of the Fund will convert automatically to Class A shares of the Fund on a monthly basis in the month of, or the month following, the 10-year anniversary of the Class C shares’ purchase date. Such conversions will be on the basis of the relative net asset values of the two classes, will not be subject to Class A shares’ sales charges and are not expected to be a taxable event for federal income tax purposes. Certain shares that are invested through retirement plans, omnibus accounts or in certain other instances may not automatically convert if the financial intermediary does not have the ability to track purchases to credit individual shareholders’ holding periods. (See “Your Account – Choosing a Shares Class – Sales Charges – Class C – Automatic Conversion of Class C Shares to Class A Shares After 10-Year Holding Period” for more information.)
Example
|
|
1 Year |
3 Years |
5 Years |
10 Years |
|
Class A |
$ 671 |
$ 930 |
$ 1,208 |
$ 1,999 |
|
Class C |
$ 304 |
$ 633 |
$ 1,087 |
$ 2,347 |
|
Class R |
$ 154 |
$ 479 |
$ 828 |
$ 1,812 |
|
Class R6 |
$ 92 |
$ 289 |
$ 503 |
$ 1,119 |
|
Advisor Class |
$ 103 |
$ 324 |
$ 562 |
$ 1,247 |
|
If you do not sell your shares: |
|
|
|
|
|
Class C |
$ 204 |
$ 633 |
$ 1,087 |
$ 2,347 |
VI. The following is added to the “Fund Summaries – Franklin Growth Allocation Fund – Performance” section of the prospectus:
The figures in the average annual total returns table above reflect the Class A maximum front-end sales charge of 5.75% that was in effect prior to September 10, 2018. Class A shares, however, currently are subject to a maximum front-end sales charge of 5.50% effective on September 10, 2018. If the maximum front-end sales charge of 5.50% was reflected, performance for Class A in the average annual total returns table would be higher.
VII. The first chart under the “Your Account – Choosing a Share Class” section of the prospectus is replaced with the following:
|
Class A |
Class C |
Class R |
Class R6 |
Advisor Class |
|
Initial sales charge of 5.50% or less |
No initial sales charge |
No initial sales charge |
See "Qualified Investors - Class R6" below |
See "Qualified Investors – Advisor Class" below |
|
Deferred sales charge of 1% on purchases of $1 million or more sold within 18 months |
Deferred sales charge of 1% on shares you sell within 12 months |
Deferred sales charge is not applicable |
|
|
|
Lower annual expenses than Class C or R due to lower distribution fees |
Higher annual expenses than Class A due to higher distribution fees. Automatic conversion to Class A shares after approximately ten years, reducing future annual expenses. |
Higher annual expenses than Class A due to higher distribution fees (lower than Class C). No conversion to Class A shares, so annual expenses do not decrease. |
|
|
2
VIII. The first chart under the “Your Account – Choosing a Share Class – Class A, C & R – Sales Charges – Class A” section of the prospectus is replaced with the following:
|
when you invest this amount |
the sales charge makes up this % of the offering price1 |
which equals this % of your net investment1 |
|
Under $50,000 |
5.50% |
5.82% |
|
$50,000 but under $100,000 |
4.50% |
4.71% |
|
$100,000 but under $250,000 |
3.50% |
3.63% |
|
$250,000 but under $500,000 |
2.50% |
2.56% |
|
$500,000 but under $1 million |
2.00% |
2.04% |
1. The dollar amount of the sales charge is the difference between the offering price of the shares purchased (which factors in the applicable sales charge in this table) and the net asset value of those shares. Since the offering price is calculated to two decimal places using standard rounding criteria, the number of shares purchased and the dollar amount of the sales charge as a percentage of the offering price and of your net investment may be higher or lower depending on whether there was a downward or upward rounding.
IX. The following is added to the “Your Account – Choosing a Shares Class – Sales Charges - Class A – Sales Charge Waivers – Waivers for certain investors” section:
• Class C shareholders whose shares are converted to Class A shares after 10 years under the Class C shares’ conversion feature.
X. The “Notice of Automatic Conversion of Class C Shares to Class A Shares after 10-Year Holding Period” section under the “Your Account” section of the prospectus is removed and the following is added after the “Your Account – Choosing a Shares Class – Sales Charges – Class C – Distribution and Service (12b-1) Fees” section:
Automatic Conversion of Class C Shares to Class A Shares After 10-Year Holding Period
Effective on October 5, 2018, Class C shares’ conversion feature will become effective. The conversion feature provides that Class C shares that have been held for 10 years or more will automatically convert into Class A shares and will be subject to Class A shares’ lower Rule 12b-1 fees (the “Conversion Feature”). On or about October 19, 2018, Class C shares of the Fund that have been outstanding for 10 years or more will automatically convert to Class A shares of the Fund on the basis of the relative net asset values of the two classes. Thereafter, Class C shares of the Fund will convert automatically to Class A shares of the Fund on a monthly basis in the month of, or the month following, the 10-year anniversary of the Class C (or Class C1) shares’ purchase date. The monthly conversion date is expected to occur around the middle of every month and generally falls on a Friday.
Terms of the Conversion Feature. Class C shares that automatically convert to Class A shares of the Fund will convert on the basis of the relative net asset values of the two classes. Shareholders will not pay a sales charge, including a CDSC, upon the conversion of their Class C shares to Class A shares pursuant to the Conversion Feature. The automatic conversion of the Fund’s Class C shares into Class A shares after the 10-year holding period is not expected to be a taxable event for federal income tax purposes. Shareholders should consult with their tax advisor regarding the state and local tax consequences of such conversions.
If you previously owned Class C1 shares of the Fund, the time you held such shares will count towards the 10-year period for automatic conversion to Class A shares. Class C (or Class C1) shares of the Fund acquired through automatic reinvestment of dividends or distributions will convert to Class A shares of the Fund on the conversion date pro rata with the converting Class C shares of the Fund that were not acquired through reinvestment of dividends or distributions.
Class C shares held through a financial intermediary in an omnibus account will be automatically converted into Class A shares only if the intermediary can document that the shareholder has met the required holding period. In certain circumstances, when shares are invested through retirement plans, omnibus accounts, and in certain other instances, the Fund and its agents may not have transparency into how long a shareholder has held Class C (or Class C1) shares for purposes of determining whether such Class C shares are eligible for automatic conversion into Class A shares and the financial intermediary may not have the ability to track purchases to credit individual shareholders’ holding periods. This primarily occurs when shares are invested through certain record keepers for group retirement plans, where the intermediary cannot track share aging at the participant level. In these circumstances, the Fund will not be able to automatically convert Class C shares into Class A shares as described above. In order to determine eligibility for conversion in these circumstances, it is the responsibility of the shareholder or their financial intermediary to notify the Fund that the shareholder is eligible for the conversion of Class C shares to Class A shares, and the shareholder or their financial intermediary may be required to maintain and provide the Fund with records that substantiate the holding period of Class C (and, if applicable, Class C1) shares. In these circumstances, it is the financial intermediary’s (and not the Fund’s) responsibility to keep records and to ensure that the shareholder is credited with the proper holding period. Please consult with your financial intermediary about your shares’ eligibility for this conversion feature.
3
Also effective October 5, 2018, new accounts or plans may not be eligible to purchase Class C shares of the Fund if it is determined that the intermediary cannot track shareholder holding periods to determine whether a shareholder’s Class C shares are eligible for conversion to Class A shares. Accounts or plans (and their successor, related and affiliated plans) that have Class C (or Class C1) shares of the Fund available to participants on or before October 5, 2018, may continue to open accounts for new participants in that share class and purchase additional shares in existing participant accounts. The Fund has no responsibility for overseeing, monitoring or implementing a financial intermediary’s process for determining whether a shareholder meets the required holding period for conversion.
A financial intermediary may sponsor and/or control accounts, programs or platforms that impose a different conversion schedule or different eligibility requirements for the conversion of Class C shares into Class A shares. In these cases, Class C shareholders may convert to Class A shares under the policies of the financial intermediary and the conversion may be structured as an exchange of Class C shares for Class A shares of the Fund. Financial intermediaries will be responsible for making such exchanges in those circumstances. Please consult with your financial intermediary if you have any questions regarding your shares’ conversion from Class C shares to Class A shares.
XI. The following replaces the first sentence in the “Your Account – Choosing a Shares Class – Reinstatement Privilege” section:
If you sell any class of shares of a Franklin Templeton Investments fund, you may reinvest all or a portion of the proceeds from that sale within 90 days within the same share class (or share class equivalent if the share class you redeemed from is closed to new investors) without an initial sales charge.
XII. The following is added to the “Your Account – Exchanging Shares – Exchange Privilege” section:
Exchange Effects on Class C Conversion Feature. Effective October 5, 2018, if you exchange your Class C shares for the same class of shares of another Franklin Templeton fund, the time your shares are held in the initial Fund will count towards the 10-year period for automatic conversion to Class A shares.
XIII. The following replaces the first paragraph under the “Your Account – Account Policies – Calculating Share Price – Class A & C” section of the prospectus:
When you buy shares, you pay the "offering price" for the shares. The "offering price" is determined by dividing the NAV per share by an amount equal to 1 minus the sales charge applicable to the purchase (expressed in decimals), calculated to two decimal places using standard rounding criteria. The number of Fund shares you will be issued will equal the amount invested divided by the applicable offering price for those shares, calculated to three decimal places using standard rounding criteria. For example, if the NAV per share is $10.25 and the applicable sales charge for the purchase is 5.50%, the offering price would be calculated as follows: 10.25 divided by 1.00 minus 0.055 [10.25/0.945] equals 10.582011, which, when rounded to two decimal points, equals 10.58. The offering price per share would be $10.58.
XIV. The following replaces the chart under the “Your Account – Account Policies – Dealer Compensation – Class A, C & R” section of the prospectus:
|
|
Class A |
Class C |
Class R |
|
Commission (%) |
— |
1.001 |
— |
|
Investment under $50,000 |
5.00 |
— |
— |
|
$50,000 but under $100,000 |
4.00 |
— |
— |
|
$100,000 but under $250,000 |
3.00 |
— |
— |
|
$250,000 but under $500,000 |
2.25 |
— |
— |
|
$500,000 but under $1 million |
1.75 |
— |
— |
|
$1 million or more |
up to 1.00 |
— |
— |
|
12b-1 fee to dealer |
0.252, 3 |
1.004 |
0.50 |
1. Commission includes advance of the first year's 0.25% 12b-1 service fee. Distributors may pay a prepaid commission. However, Distributors does not pay a prepaid commission on any purchases by Employer Sponsored Retirement Plans.
2. For purchases at NAV where Distributors paid a prepaid commission, dealers may start to receive the 12b-1 fee in the 13th month after purchase. For purchases at NAV where Distributors did not pay a prepaid commission, dealers may start to receive the 12b-1 fee at the time of purchase.
3. Under the Distribution Plan for Class A, the Fund may pay up to 0.25% to Distributors or others out of which 0.05% generally will be retained by Distributors for its distribution expenses.
4. Dealers may be eligible to receive up to 0.25% at the time of purchase and may be eligible to receive 1% starting in the 13th month. During the first 12 months, the full 12b-1 fee will be paid to Distributors to partially offset the commission and the prepaid service fee paid at the time of purchase. For purchases at NAV where Distributors did not pay a prepaid commission, dealers may start to receive the 12b-1 fee at the time of purchase. After approximately 10 years, Class C shares convert to Class A shares and dealers may then be eligible to receive the 12b-1 fee applicable to Class A.
Please keep this supplement with your prospectus for future reference.
4
FAS SA1 09/18
SUPPLEMENT DATED SEPTEMBER 10, 2018
TO THE STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 2018 OF
FRANKLIN FUND ALLOCATOR SERIES
Franklin Conservative Allocation Fund
Franklin Moderate Allocation Fund
Franklin Growth Allocation Fund
The Statement of Additional Information (“SAI”) is amended as follows:
I. The following replaces the first sentence under “Buying and Selling shares – Initial sales charges:”
The maximum initial sales charge is 5.50% for Class A.
II. The following replaces the second paragraph under “Buying and Selling shares – Initial sales charges – Dealer and Financial intermediary compensation:”
Distributors may pay the following commissions to financial intermediaries who initiate and are responsible for purchases of Class A shares in the following amounts:
|
Amount of Investment |
For Funds with an initial sales charge of 5.50% (%) |
For Funds with an initial sales charge of 4.25% (%) |
For Funds with an initial sales charge of 2.25% (%) |
|
Under $50,000 |
5.00 |
4.00 |
2.00 |
|
$50,000 but under $100,000 |
4.00 |
4.00 |
2.00 |
|
$100,000 but under $250,000 |
3.00 |
3.00 |
1.75 |
|
$250,000 but under $500,000 |
2.25 |
2.25 |
1.25 |
|
$500,000 but under $1 million |
1.75 |
1.00 |
1.00 |
|
$1 million but under $4 million |
1.00 |
1.00 |
1.00 |
|
$4 million but under $10 million |
1.00 |
1.00 |
1.00 |
|
$10 million but under $50 million |
0.50 |
0.50 |
0.50 |
|
$50 million or more |
0.25 |
0.25 |
0.25 |
Consistent with the provisions and limitations set forth in its Class A Rule 12b-1 distribution plan, the Fund may reimburse Distributors for the cost of these commission payments.
III. The following replaces the first paragraph under “Buying and Selling shares – Contingent deferred sales charge (CDSC) - Class A & C:”
Contingent deferred sales charge (CDSC) - Class A & C If you invest any amount in Class C shares, $1 million or more in Class A shares of mutual funds with a maximum initial sales charge of 5.50% or $500,000 or more for mutual funds with a maximum initial sales charge of 4.25% or 2.25%, either as a lump sum or through our cumulative quantity discount or letter of intent programs, a CDSC may apply on any Class A shares you sell within 18 months and any Class C shares you sell within 12 months of purchase. The CDSC is 1% of the value of the shares sold or the net asset value at the time of purchase, whichever is less, for Class A shares of mutual funds with a maximum initial sales charge of 5.50% and for Class C shares. The CDSC is 0.75% of the value of the shares sold or the net asset value at the time of purchase, whichever is less, for Class A shares of mutual funds with a maximum initial sales charge of 4.25% or 2.25%; however this CDSC will change to 1.00% on or after March 10, 2020.
Please keep this supplement with your SAI for future reference.
1
FAS2 P2 0918
SUPPLEMENT DATED SEPTEMBER 10, 2018
TO THE PROSPECTUS DATED MAY 1, 2018
OF
FRANKLIN FUND ALLOCATOR SERIES
Franklin Founding Funds Allocation Fund
Franklin Corefolio Allocation Fund
The prospectus is amended as follows:
I. The following replaces the “Shareholder Fees” and “Example” tables in the “Fund Summaries – Franklin Founding Funds Allocation Fund – Fees and Expenses of the Fund” section of the prospectus:
Shareholder Fees
(fees paid directly from your investment)
|
|
Class A1 |
Class C2 |
Class R |
Class R6 |
Advisor Class |
|
Maximum Sales Charge (Load) Imposed on Purchases (as percentage of offering price) |
5.50% |
None |
None |
None |
None |
|
Maximum Deferred Sales Charge (Load) (as percentage of the lower of original purchase price or sale proceeds) |
None |
1.00% |
None |
None |
None |
1. There is a 1% contingent deferred sales charge that applies to investments of $1 million or more (see "Investments of $1 Million or More" under "Choosing a Share Class") and purchases by certain retirement plans without an initial sales charge on shares sold within 18 months of purchase.
2. Effective October 5, 2018, Class C shares that have been held for 10 years or more will convert automatically into Class A shares later in the month of October 2018 and will be subject to Class A shares’ lower Rule 12b-1 fees. Thereafter, Class C shares of the Fund will convert automatically to Class A shares of the Fund on a monthly basis in the month of, or the month following, the 10-year anniversary of the Class C shares’ purchase date. Such conversions will be on the basis of the relative net asset values of the two classes, will not be subject to Class A shares’ sales charges and are not expected to be a taxable event for federal income tax purposes. Certain shares that are invested through retirement plans, omnibus accounts or in certain other instances may not automatically convert if the financial intermediary does not have the ability to track purchases to credit individual shareholders’ holding periods. (See “Your Account – Choosing a Shares Class – Sales Charges – Class C – Automatic Conversion of Class C Shares to Class A Shares After 10-Year Holding Period” for more information.)
Example
|
|
1 Year |
3 Years |
5 Years |
10 Years |
|
Class A |
$ 644 |
$ 845 |
$ 1,062 |
$ 1,685 |
|
Class C |
$ 276 |
$ 545 |
$ 939 |
$ 2,041 |
|
Class R |
$ 125 |
$ 390 |
$ 676 |
$ 1,489 |
|
Class R6 |
$ 66 |
$ 545 |
$ 1,050 |
$ 2,441 |
|
Advisor Class |
$ 75 |
$ 233 |
$ 406 |
$ 906 |
|
If you do not sell your shares: |
|
|
|
|
|
Class C |
$ 176 |
$ 545 |
$ 939 |
$ 2,041 |
II. The following is added to the “Fund Summaries – Franklin Founding Funds Allocation Fund – Performance” section of the prospectus:
The figures in the average annual total returns table above reflect the Class A maximum front-end sales charge of 5.75% that was in effect prior to September 10, 2018. Class A shares, however, currently are subject to a maximum front-end sales charge of 5.50% effective on September 10, 2018. If the maximum front-end sales charge of 5.50% was reflected, performance for Class A in the average annual total returns table would be higher.
III. The following replaces the “Shareholder Fees” and “Example” tables in the “Fund Summaries – Franklin Corefolio Allocation Fund – Fees and Expenses of the Fund” section of the prospectus:
Shareholder Fees
(fees paid directly from your investment)
|
|
Class A1 |
Class C2 |
Class R |
Class R6 |
Advisor Class |
|
Maximum Sales Charge (Load) Imposed on Purchases (as percentage of offering price) |
5.50% |
None |
None |
None |
None |
|
Maximum Deferred Sales Charge (Load) (as percentage of the lower of original purchase price or sale proceeds) |
None |
1.00% |
None |
None |
None |
1
1. There is a 1% contingent deferred sales charge that applies to investments of $1 million or more (see "Investments of $1 Million or More" under "Choosing a Share Class") and purchases by certain retirement plans without an initial sales charge on shares sold within 18 months of purchase.
2. Effective October 5, 2018, Class C shares that have been held for 10 years or more will convert automatically into Class A shares later in the month of October 2018 and will be subject to Class A shares’ lower Rule 12b-1 fees. Thereafter, Class C shares of the Fund will convert automatically to Class A shares of the Fund on a monthly basis in the month of, or the month following, the 10-year anniversary of the Class C shares’ purchase date. Such conversions will be on the basis of the relative net asset values of the two classes, will not be subject to Class A shares’ sales charges and are not expected to be a taxable event for federal income tax purposes. Certain shares that are invested through retirement plans, omnibus accounts or in certain other instances may not automatically convert if the financial intermediary does not have the ability to track purchases to credit individual shareholders’ holding periods. (See “Your Account – Choosing a Shares Class – Sales Charges – Class C – Automatic Conversion of Class C Shares to Class A Shares After 10-Year Holding Period” for more information.)
Example
|
|
1 Year |
3 Years |
5 Years |
10 Years |
|
Class A |
$ 646 |
$ 851 |
$ 1,072 |
$ 1,707 |
|
Class C |
$ 278 |
$ 551 |
$ 949 |
$ 2,062 |
|
Class R |
$ 127 |
$ 397 |
$ 686 |
$ 1,511 |
|
Class R6 |
$ 68 |
$ 397 |
$ 748 |
$ 1,740 |
|
Advisor Class |
$ 77 |
$ 240 |
$ 417 |
$ 930 |
|
If you do not sell your shares: |
|
|
|
|
|
Class C |
$ 178 |
$ 551 |
$ 949 |
$ 2,062 |
IV. The following is added to the “Fund Summaries – Franklin Corefolio Allocation Fund – Performance” section of the prospectus:
The figures in the average annual total returns table above reflect the Class A maximum front-end sales charge of 5.75% that was in effect prior to September 10, 2018. Class A shares, however, currently are subject to a maximum front-end sales charge of 5.50% effective on September 10, 2018. If the maximum front-end sales charge of 5.50% was reflected, performance for Class A in the average annual total returns table would be higher.
V. The first chart under the “Your Account – Choosing a Share Class” section of the prospectus is replaced with the following:
|
Class A |
Class C |
Class R |
Class R6 |
Advisor Class |
|
Initial sales charge of 5.50% or less |
No initial sales charge |
No initial sales charge |
See "Qualified Investors - Class R6" below |
See "Qualified Investors – Advisor Class" below |
|
Deferred sales charge of 1% on purchases of $1 million or more sold within 18 months |
Deferred sales charge of 1% on shares you sell within 12 months |
Deferred sales charge is not applicable |
|
|
|
Lower annual expenses than Class C or R due to lower distribution fees |
Higher annual expenses than Class A due to higher distribution fees. Automatic conversion to Class A shares after approximately ten years, reducing future annual expenses. |
Higher annual expenses than Class A due to higher distribution fees (lower than Class C). No conversion to Class A shares, so annual expenses do not decrease. |
|
|
VI. The first chart under the “Your Account – Choosing a Share Class – Class A, C & R – Sales Charges – Class A” section of the prospectus is replaced with the following:
|
when you invest this amount |
the sales charge makes up this % of the offering price1 |
which equals this % of your net investment1 |
|
Under $50,000 |
5.50% |
5.82% |
|
$50,000 but under $100,000 |
4.50% |
4.71% |
|
$100,000 but under $250,000 |
3.50% |
3.63% |
|
$250,000 but under $500,000 |
2.50% |
2.56% |
|
$500,000 but under $1 million |
2.00% |
2.04% |
1. The dollar amount of the sales charge is the difference between the offering price of the shares purchased (which factors in the applicable sales charge in this table) and the net asset value of those shares. Since the offering price is calculated to two decimal places using standard rounding criteria, the number of shares purchased and the dollar amount of the sales charge as a percentage of the offering price and of your net investment may be higher or lower depending on whether there was a downward or upward rounding.
2
VII. The following is added to the “Your Account – Choosing a Shares Class – Sales Charges - Class A – Sales Charge Waivers – Waivers for certain investors” section:
• Class C shareholders whose shares are converted to Class A shares after 10 years under the Class C shares’ conversion feature.
VIII. The “Notice of Automatic Conversion of Class C Shares to Class A Shares after 10-Year Holding Period” section under the “Your Account” section of the prospectus is removed and the following is added after the “Your Account – Choosing a Shares Class – Sales Charges – Class C – Distribution and Service (12b-1) Fees” section:
Automatic Conversion of Class C Shares to Class A Shares After 10-Year Holding Period
Effective on October 5, 2018, Class C shares’ conversion feature will become effective. The conversion feature provides that Class C shares that have been held for 10 years or more will automatically convert into Class A shares and will be subject to Class A shares’ lower Rule 12b-1 fees (the “Conversion Feature”). On or about October 19, 2018, Class C shares of the Fund that have been outstanding for 10 years or more will automatically convert to Class A shares of the Fund on the basis of the relative net asset values of the two classes. Thereafter, Class C shares of the Fund will convert automatically to Class A shares of the Fund on a monthly basis in the month of, or the month following, the 10-year anniversary of the Class C (or Class C1) shares’ purchase date. The monthly conversion date is expected to occur around the middle of every month and generally falls on a Friday.
Terms of the Conversion Feature. Class C shares that automatically convert to Class A shares of the Fund will convert on the basis of the relative net asset values of the two classes. Shareholders will not pay a sales charge, including a CDSC, upon the conversion of their Class C shares to Class A shares pursuant to the Conversion Feature. The automatic conversion of the Fund’s Class C shares into Class A shares after the 10-year holding period is not expected to be a taxable event for federal income tax purposes. Shareholders should consult with their tax advisor regarding the state and local tax consequences of such conversions.
If you previously owned Class C1 shares of the Fund, the time you held such shares will count towards the 10-year period for automatic conversion to Class A shares. Class C (or Class C1) shares of the Fund acquired through automatic reinvestment of dividends or distributions will convert to Class A shares of the Fund on the conversion date pro rata with the converting Class C shares of the Fund that were not acquired through reinvestment of dividends or distributions.
Class C shares held through a financial intermediary in an omnibus account will be automatically converted into Class A shares only if the intermediary can document that the shareholder has met the required holding period. In certain circumstances, when shares are invested through retirement plans, omnibus accounts, and in certain other instances, the Fund and its agents may not have transparency into how long a shareholder has held Class C (or Class C1) shares for purposes of determining whether such Class C shares are eligible for automatic conversion into Class A shares and the financial intermediary may not have the ability to track purchases to credit individual shareholders’ holding periods. This primarily occurs when shares are invested through certain record keepers for group retirement plans, where the intermediary cannot track share aging at the participant level. In these circumstances, the Fund will not be able to automatically convert Class C shares into Class A shares as described above. In order to determine eligibility for conversion in these circumstances, it is the responsibility of the shareholder or their financial intermediary to notify the Fund that the shareholder is eligible for the conversion of Class C shares to Class A shares, and the shareholder or their financial intermediary may be required to maintain and provide the Fund with records that substantiate the holding period of Class C (and, if applicable, Class C1) shares. In these circumstances, it is the financial intermediary’s (and not the Fund’s) responsibility to keep records and to ensure that the shareholder is credited with the proper holding period. Please consult with your financial intermediary about your shares’ eligibility for this conversion feature.
Also effective October 5, 2018, new accounts or plans may not be eligible to purchase Class C shares of the Fund if it is determined that the intermediary cannot track shareholder holding periods to determine whether a shareholder’s Class C shares are eligible for conversion to Class A shares. Accounts or plans (and their successor, related and affiliated plans) that have Class C (or Class C1) shares of the Fund available to participants on or before October 5, 2018, may continue to open accounts for new participants in that share class and purchase additional shares in existing participant accounts. The Fund has no responsibility for overseeing, monitoring or implementing a financial intermediary’s process for determining whether a shareholder meets the required holding period for conversion.
A financial intermediary may sponsor and/or control accounts, programs or platforms that impose a different conversion schedule or different eligibility requirements for the conversion of Class C shares into Class A shares. In these cases, Class C shareholders may convert to Class A shares under the policies of the financial intermediary and the conversion may be structured as an exchange of Class C shares for Class A shares of the Fund. Financial intermediaries will be responsible for making such exchanges in those circumstances. Please consult with your financial intermediary if you have any questions regarding your shares’ conversion from Class C shares to Class A shares.
3
IX. The following replaces the first sentence in the “Your Account – Choosing a Shares Class – Reinstatement Privilege” section:
If you sell any class of shares of a Franklin Templeton Investments fund, you may reinvest all or a portion of the proceeds from that sale within 90 days within the same share class (or share class equivalent if the share class you redeemed from is closed to new investors) without an initial sales charge.
X. The following is added to the “Your Account – Exchanging Shares – Exchange Privilege” section:
Exchange Effects on Class C Conversion Feature. Effective October 5, 2018, if you exchange your Class C shares for the same class of shares of another Franklin Templeton fund, the time your shares are held in the initial Fund will count towards the 10-year period for automatic conversion to Class A shares.
XI. The following replaces the first paragraph under the “Your Account – Account Policies – Calculating Share Price – Class A & C” section of the prospectus:
When you buy shares, you pay the "offering price" for the shares. The "offering price" is determined by dividing the NAV per share by an amount equal to 1 minus the sales charge applicable to the purchase (expressed in decimals), calculated to two decimal places using standard rounding criteria. The number of Fund shares you will be issued will equal the amount invested divided by the applicable offering price for those shares, calculated to three decimal places using standard rounding criteria. For example, if the NAV per share is $10.25 and the applicable sales charge for the purchase is 5.50%, the offering price would be calculated as follows: 10.25 divided by 1.00 minus 0.055 [10.25/0.945] equals 10.582011, which, when rounded to two decimal points, equals 10.58. The offering price per share would be $10.58.
XII. The following replaces the chart under the “Your Account – Account Policies – Dealer Compensation – Class A, C & R” section of the prospectus:
|
|
Class A |
Class C |
Class R |
|
Commission (%) |
— |
1.001 |
— |
|
Investment under $50,000 |
5.00 |
— |
— |
|
$50,000 but under $100,000 |
4.00 |
— |
— |
|
$100,000 but under $250,000 |
3.00 |
— |
— |
|
$250,000 but under $500,000 |
2.25 |
— |
— |
|
$500,000 but under $1 million |
1.75 |
— |
— |
|
$1 million or more |
up to 1.00 |
— |
— |
|
12b-1 fee to dealer |
0.252, 3 |
1.004 |
0.50 |
1. Commission includes advance of the first year’s 0.25% 12b‑1 service fee. Distributors may pay a prepaid commission. However, Distributors does not pay a prepaid commission on any purchases by Employer Sponsored Retirement Plans.
2. For purchases at NAV where Distributors paid a prepaid commission, dealers may start to receive the 12b‑1 fee in the 13th month after purchase. For purchases at NAV where Distributors did not pay a prepaid commission, dealers may start to receive the 12b‑1 fee at the time of purchase.
3. Under the Distribution Plan for Class A, the Fund may pay up to 0.35% to Distributors or others, out of which 0.10% generally will be retained by Distributors for its distribution expenses. The board of trustees has currently determined to set such fees under the Plan at 0.25% for the Fund (until further notice), thus reducing the amount that will be retained by Distributors.
4. Dealers may be eligible to receive up to 0.25% at the time of purchase and may be eligible to receive 1% starting in the 13th month. During the first 12 months, the full 12b‑1 fee will be paid to Distributors to partially offset the commission and the prepaid service fee paid at the time of purchase. For purchases at NAV where Distributors did not pay a prepaid commission, dealers may start to receive the 12b‑1 fee at the time of purchase. After approximately 10 years, Class C shares convert to Class A shares and dealers may then be eligible to receive the 12b-1 fee applicable to Class A.
Please keep this supplement with your prospectus for future reference.
4
FAS2 SA1 0918
SUPPLEMENT DATED SEPTEMBER 10, 2018
TO THE STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 2018 OF
FRANKLIN FUND ALLOCATOR SERIES
Franklin Founding Funds Allocation Fund
Franklin Corefolio Allocation Fund
The Statement of Additional Information (“SAI”) is amended as follows:
I. The following replaces the first sentence under “Buying and Selling shares – Initial sales charges:”
The maximum initial sales charge is 5.50% for Class A.
II. The following replaces the second paragraph under “Buying and Selling shares – Initial sales charges – Financial intermediary compensation:”
Distributors may pay the following commissions to financial intermediaries who initiate and are responsible for purchases of Class A shares in the following amounts:
|
Amount of Investment |
For Funds with an initial sales charge of 5.50% (%) |
For Funds with an initial sales charge of 4.25% (%) |
For Funds with an initial sales charge of 2.25% (%) |
|
Under $50,000 |
5.00 |
4.00 |
2.00 |
|
$50,000 but under $100,000 |
4.00 |
4.00 |
2.00 |
|
$100,000 but under $250,000 |
3.00 |
3.00 |
1.75 |
|
$250,000 but under $500,000 |
2.25 |
2.25 |
1.25 |
|
$500,000 but under $1 million |
1.75 |
1.00 |
1.00 |
|
$1 million but under $4 million |
1.00 |
1.00 |
1.00 |
|
$4 million but under $10 million |
1.00 |
1.00 |
1.00 |
|
$10 million but under $50 million |
0.50 |
0.50 |
0.50 |
|
$50 million or more |
0.25 |
0.25 |
0.25 |
Consistent with the provisions and limitations set forth in its Class A Rule 12b-1 distribution plan, the Fund may reimburse Distributors for the cost of these commission payments.
III. The following replaces the first paragraph under “Buying and Selling shares – Contingent deferred sales charge (CDSC) - Class A & C:”
Contingent deferred sales charge (CDSC) - Class A & C If you invest any amount in Class C shares, $1 million or more in Class A shares of mutual funds with a maximum initial sales charge of 5.50% or $500,000 or more for mutual funds with a maximum initial sales charge of 4.25% or 2.25%, either as a lump sum or through our cumulative quantity discount or letter of intent programs, a CDSC may apply on any Class A shares you sell within 18 months and any Class C shares you sell within 12 months of purchase. The CDSC is 1% of the value of the shares sold or the net asset value at the time of purchase, whichever is less, for Class A shares of mutual funds with a maximum initial sales charge of 5.50% and for Class C shares. The CDSC is 0.75% of the value of the shares sold or the net asset value at the time of purchase, whichever is less, for Class A shares of mutual funds with a maximum initial sales charge of 4.25% or 2.25%; however this CDSC will change to 1.00% on or after March 10, 2020.
Please keep this supplement with your SAI for future reference.
1
427 P1 0918
SUPPLEMENT DATED SEPTEMBER 10, 2018
TO THE PROSPECTUS DATED MAY 1, 2018
OF
FRANKLIN LifeSmart™ Retirement INCOME FUND
(Franklin Fund Allocator Series)
The prospectus is amended as follows:
I. The following replaces the “Shareholder Fees” and “Example” tables in the “Fund Summary – Fees and Expenses of the Fund” section of the prospectus:
Shareholder Fees
(fees paid directly from your investment)
|
|
Class A1 |
Class C2 |
Class R |
Class R6 |
Advisor Class |
|
Maximum Sales Charge (Load) Imposed on Purchases (as percentage of offering price) |
5.50% |
None |
None |
None |
None |
|
Maximum Deferred Sales Charge (Load) (as percentage of the lower of original purchase price or sale proceeds) |
None |
1.00% |
None |
None |
None |
1. There is a 1% contingent deferred sales charge that applies to investments of $1 million or more (see "Investments of $1 Million or More" under "Choosing a Share Class") and purchases by certain retirement plans without an initial sales charge on shares sold within 18 months of purchase.
2. Effective October 5, 2018, Class C shares that have been held for 10 years or more will convert automatically into Class A shares later in the month of October 2018 and will be subject to Class A shares’ lower Rule 12b-1 fees. Thereafter, Class C shares of the Fund will convert automatically to Class A shares of the Fund on a monthly basis in the month of, or the month following, the 10-year anniversary of the Class C shares’ purchase date. Such conversions will be on the basis of the relative net asset values of the two classes, will not be subject to Class A shares’ sales charges and are not expected to be a taxable event for federal income tax purposes. Certain shares that are invested through retirement plans, omnibus accounts or in certain other instances may not automatically convert if the financial intermediary does not have the ability to track purchases to credit individual shareholders’ holding periods. (See “Your Account – Choosing a Shares Class – Sales Charges – Class C – Automatic Conversion of Class C Shares to Class A Shares After 10-Year Holding Period” for more information.)
Example
|
|
1 Year |
3 Years |
5 Years |
10 Years |
|
Class A |
$ 621 |
$ 893 |
$ 1,185 |
$ 2,015 |
|
Class C |
$ 252 |
$ 595 |
$ 1,064 |
$ 2,364 |
|
Class R |
$ 101 |
$ 441 |
$ 805 |
$ 1,828 |
|
Class R6 |
$ 45 |
$ 256 |
$ 485 |
$ 1,141 |
|
Advisor Class |
$ 50 |
$ 285 |
$ 538 |
$ 1,264 |
|
If you do not sell your shares: |
|
|
|
|
|
Class C |
$ 152 |
$ 595 |
$ 1,064 |
$ 2,364 |
II. The following is added to the “Fund Summary – Principal Investments” section of the prospectus:
The Fund may have exposure to high yield securities (also known as “junk bonds”).
III. The following is added to the “Fund Summary – Principal Risks” section of the prospectus:
High-Yield Debt Securities Issuers of “lower-rated” or “high-yield” debt securities (also known as “junk bonds”) are not as strong financially as those issuing higher credit quality debt securities. High-yield debt securities are generally considered predominantly speculative by the applicable rating agencies as their issuers are more likely to encounter financial difficulties because they may be more highly leveraged, or because of other considerations. In addition, high yield debt securities generally are more vulnerable to changes in the relevant economy, such as a recession or a sustained period of rising interest rates, that could affect their ability to make interest and principal payments when due. The prices of high-yield debt securities generally fluctuate more than those of higher credit quality. High-yield debt securities are generally more illiquid (harder to sell) and harder to value.
IV. The following is added to the “Fund Summary – Performance” section of the prospectus:
1
The figures in the average annual total returns table above reflect the Class A maximum front-end sales charge of 5.75% that was in effect prior to September 10, 2018. Class A shares, however, currently are subject to a maximum front-end sales charge of 5.50% effective on September 10, 2018. If the maximum front-end sales charge of 5.50% was reflected, performance for Class A in the average annual total returns table would be higher.
V. The following replaces the heading “Risks of Investing in the Underlying Franklin Templeton Funds” and the first sentence under that heading:
Risks of Investing in the Underlying Funds
The following sections describe some of the risks associated with certain of the underlying funds (hereafter the “Fund” or “Funds”).
VI. The first chart under the “Your Account – Choosing a Share Class” section of the prospectus is replaced with the following:
|
Class A |
Class C |
Class R |
Class R6 |
Advisor Class |
|
Initial sales charge of 5.50% or less |
No initial sales charge |
No initial sales charge |
See "Qualified Investors - Class R6" below |
See "Qualified Investors - Advisor Class" below |
|
Deferred sales charge of 1% on purchases of $1 million or more sold within 18 months |
Deferred sales charge of 1% on shares you sell within 12 months |
Deferred sales charge is not applicable |
|
|
|
Lower annual expenses than Class C or R due to lower distribution fees |
Higher annual expenses than Class A due to higher distribution fees. Automatic conversion to Class A shares after approximately ten years, reducing future annual expenses. |
Higher annual expenses than Class A due to higher distribution fees (lower than Class C). No conversion to Class A shares, so annual expenses do not decrease. |
|
|
VII. The first chart under the “Your Account – Choosing a Share Class – Class A, C & R – Sales Charges – Class A” section of the prospectus is replaced with the following:
|
when you invest this amount |
the sales charge makes up this % of the offering price1 |
which equals this % of your net investment1 |
|
Under $50,000 |
5.50% |
5.82% |
|
$50,000 but under $100,000 |
4.50% |
4.71% |
|
$100,000 but under $250,000 |
3.50% |
3.63% |
|
$250,000 but under $500,000 |
2.50% |
2.56% |
|
$500,000 but under $1 million |
2.00% |
2.04% |
1. The dollar amount of the sales charge is the difference between the offering price of the shares purchased (which factors in the applicable sales charge in this table) and the net asset value of those shares. Since the offering price is calculated to two decimal places using standard rounding criteria, the number of shares purchased and the dollar amount of the sales charge as a percentage of the offering price and of your net investment may be higher or lower depending on whether there was a downward or upward rounding.
VIII. The following is added to the “Your Account – Choosing a Shares Class – Sales Charges - Class A – Sales Charge Waivers – Waivers for certain investors” section:
• Class C shareholders whose shares are converted to Class A shares after 10 years under the Class C shares’ conversion feature.
IX. The “Notice of Automatic Conversion of Class C Shares to Class A Shares after 10-Year Holding Period” section under the “Your Account” section of the prospectus is removed and the following is added after the “Your Account – Choosing a Shares Class – Sales Charges – Class C – Distribution and Service (12b-1) Fees” section:
Automatic Conversion of Class C Shares to Class A Shares After 10-Year Holding Period
Effective on October 5, 2018, Class C shares’ conversion feature will become effective. The conversion feature provides that Class C shares that have been held for 10 years or more will automatically convert into Class A shares and will be subject to Class A shares’ lower Rule 12b-1 fees (the “Conversion Feature”). On or about October 19, 2018, Class C shares of the Fund that have been outstanding for 10 years or more will automatically convert to Class A shares of the Fund on the basis of the relative net asset values of the two classes. Thereafter, Class C shares of the Fund will convert automatically to Class A shares of the Fund on a monthly basis in the month of, or the month following, the 10-year anniversary of the Class C (or Class C1) shares’ purchase date. The monthly conversion date is expected to occur around the middle of every month and generally falls on a Friday.
2
Terms of the Conversion Feature. Class C shares that automatically convert to Class A shares of the Fund will convert on the basis of the relative net asset values of the two classes. Shareholders will not pay a sales charge, including a CDSC, upon the conversion of their Class C shares to Class A shares pursuant to the Conversion Feature. The automatic conversion of the Fund’s Class C shares into Class A shares after the 10-year holding period is not expected to be a taxable event for federal income tax purposes. Shareholders should consult with their tax advisor regarding the state and local tax consequences of such conversions.
If you previously owned Class C1 shares of the Fund, the time you held such shares will count towards the 10-year period for automatic conversion to Class A shares. Class C (or Class C1) shares of the Fund acquired through automatic reinvestment of dividends or distributions will convert to Class A shares of the Fund on the conversion date pro rata with the converting Class C shares of the Fund that were not acquired through reinvestment of dividends or distributions.
Class C shares held through a financial intermediary in an omnibus account will be automatically converted into Class A shares only if the intermediary can document that the shareholder has met the required holding period. In certain circumstances, when shares are invested through retirement plans, omnibus accounts, and in certain other instances, the Fund and its agents may not have transparency into how long a shareholder has held Class C (or Class C1) shares for purposes of determining whether such Class C shares are eligible for automatic conversion into Class A shares and the financial intermediary may not have the ability to track purchases to credit individual shareholders’ holding periods. This primarily occurs when shares are invested through certain record keepers for group retirement plans, where the intermediary cannot track share aging at the participant level. In these circumstances, the Fund will not be able to automatically convert Class C shares into Class A shares as described above. In order to determine eligibility for conversion in these circumstances, it is the responsibility of the shareholder or their financial intermediary to notify the Fund that the shareholder is eligible for the conversion of Class C shares to Class A shares, and the shareholder or their financial intermediary may be required to maintain and provide the Fund with records that substantiate the holding period of Class C (and, if applicable, Class C1) shares. In these circumstances, it is the financial intermediary’s (and not the Fund’s) responsibility to keep records and to ensure that the shareholder is credited with the proper holding period. Please consult with your financial intermediary about your shares’ eligibility for this conversion feature.
Also effective October 5, 2018, new accounts or plans may not be eligible to purchase Class C shares of the Fund if it is determined that the intermediary cannot track shareholder holding periods to determine whether a shareholder’s Class C shares are eligible for conversion to Class A shares. Accounts or plans (and their successor, related and affiliated plans) that have Class C (or Class C1) shares of the Fund available to participants on or before October 5, 2018, may continue to open accounts for new participants in that share class and purchase additional shares in existing participant accounts. The Fund has no responsibility for overseeing, monitoring or implementing a financial intermediary’s process for determining whether a shareholder meets the required holding period for conversion.
A financial intermediary may sponsor and/or control accounts, programs or platforms that impose a different conversion schedule or different eligibility requirements for the conversion of Class C shares into Class A shares. In these cases, Class C shareholders may convert to Class A shares under the policies of the financial intermediary and the conversion may be structured as an exchange of Class C shares for Class A shares of the Fund. Financial intermediaries will be responsible for making such exchanges in those circumstances. Please consult with your financial intermediary if you have any questions regarding your shares’ conversion from Class C shares to Class A shares.
X. The following replaces the first sentence in the “Your Account – Choosing a Shares Class – Reinstatement Privilege” section:
If you sell any class of shares of a Franklin Templeton Investments fund, you may reinvest all or a portion of the proceeds from that sale within 90 days within the same share class (or share class equivalent if the share class you redeemed from is closed to new investors) without an initial sales charge.
XI. The following is added to the “Your Account – Exchanging Shares – Exchange Privilege” section:
Exchange Effects on Class C Conversion Feature. Effective October 5, 2018, if you exchange your Class C shares for the same class of shares of another Franklin Templeton fund, the time your shares are held in the initial Fund will count towards the 10-year period for automatic conversion to Class A shares.
XII. The following replaces the first paragraph under the “Your Account – Account Policies – Calculating Share Price – Class A & C” section of the prospectus:
3
When you buy shares, you pay the "offering price" for the shares. The "offering price" is determined by dividing the NAV per share by an amount equal to 1 minus the sales charge applicable to the purchase (expressed in decimals), calculated to two decimal places using standard rounding criteria. The number of Fund shares you will be issued will equal the amount invested divided by the applicable offering price for those shares, calculated to three decimal places using standard rounding criteria. For example, if the NAV per share is $10.25 and the applicable sales charge for the purchase is 5.50%, the offering price would be calculated as follows: 10.25 divided by 1.00 minus 0.055 [10.25/0.945] equals 10.582011, which, when rounded to two decimal points, equals 10.58. The offering price per share would be $10.58.
XIII. The following replaces the chart under the “Your Account – Account Policies – Dealer Compensation – Class A, C & R” section of the prospectus:
|
|
Class A |
Class C |
Class R |
|
Commission (%) |
— |
1.001 |
— |
|
Investment under $50,000 |
5.00 |
— |
— |
|
$50,000 but under $100,000 |
4.00 |
— |
— |
|
$100,000 but under $250,000 |
3.00 |
— |
— |
|
$250,000 but under $500,000 |
2.25 |
— |
— |
|
$500,000 but under $1 million |
1.75 |
— |
— |
|
$1 million or more |
up to 1.00 |
— |
— |
|
12b-1 fee to dealer |
0.252 |
1.003 |
0.50 |
1. Commission includes advance of the first year's 0.25% 12b-1 service fee. Distributors may pay a prepaid commission. However, Distributors does not pay a prepaid commission on any purchases by Employer Sponsored Retirement Plans.
2. For purchases at NAV where Distributors paid a prepaid commission, dealers may start to receive the 12b-1 fee in the 13th month after purchase. For purchases at NAV where Distributors did not pay a prepaid commission, dealers may start to receive the 12b-1 fee at the time of purchase.
3. Dealers may be eligible to receive up to 0.25% at the time of purchase and may be eligible to receive 1% starting in the 13th month. During the first 12 months, the full 12b-1 fee will be paid to Distributors to partially offset the commission and the prepaid service fee paid at the time of purchase. For purchases at NAV where Distributors did not pay a prepaid commission, dealers may start to receive the 12b-1 fee at the time of purchase. After approximately 10 years, Class C shares convert to Class A shares and dealers may then be eligible to receive the 12b-1 fee applicable to Class A.
Please keep this supplement with your prospectus for future reference.
4
RTF P1 0918
SUPPLEMENT DATED SEPTEMBER 10, 2018
TO THE PROSPECTUS DATED MAY 1, 2018
OF
FRANKLIN FUND ALLOCATOR SERIES
Franklin LifeSmart™ 2020 Retirement Target Fund
Franklin LifeSmart™ 2025 Retirement Target Fund
Franklin LifeSmart™ 2030 Retirement Target Fund
Franklin LifeSmart™ 2035 Retirement Target Fund
Franklin LifeSmart™ 2040 Retirement Target Fund
Franklin LifeSmart™ 2045 Retirement Target Fund
Franklin LifeSmart™ 2050 Retirement Target Fund
Franklin LifeSmart™ 2055 Retirement Target Fund
The prospectus is amended as follows:
I. The following replaces the “Shareholder Fees” and “Example” tables in the “Fund Summaries – Franklin LifeSmart™ 2020 Retirement Target Fund – Fees and Expenses of the Fund” section of the prospectus:
Shareholder Fees
(fees paid directly from your investment)
|
|
Class A1 |
Class C2 |
Class R |
Class R6 |
Advisor Class |
|
Maximum Sales Charge (Load) Imposed on Purchases (as percentage of offering price) |
5.50% |
None |
None |
None |
None |
|
Maximum Deferred Sales Charge (Load) (as percentage of the lower of original purchase price or sale proceeds) |
None |
1.00% |
None |
None |
None |
1. There is a 1% contingent deferred sales charge that applies to investments of $1 million or more (see "Investments of $1 Million or More" under "Choosing a Share Class") and purchases by certain retirement plans without an initial sales charge on shares sold within 18 months of purchase.
2. Effective October 5, 2018, Class C shares that have been held for 10 years or more will convert automatically into Class A shares later in the month of October 2018 and will be subject to Class A shares’ lower Rule 12b-1 fees. Thereafter, Class C shares of the Fund will convert automatically to Class A shares of the Fund on a monthly basis in the month of, or the month following, the 10-year anniversary of the Class C shares’ purchase date. Such conversions will be on the basis of the relative net asset values of the two classes, will not be subject to Class A shares’ sales charges and are not expected to be a taxable event for federal income tax purposes. Certain shares that are invested through retirement plans, omnibus accounts or in certain other instances may not automatically convert if the financial intermediary does not have the ability to track purchases to credit individual shareholders’ holding periods. (See “Your Account – Choosing a Shares Class – Sales Charges – Class C – Automatic Conversion of Class C Shares to Class A Shares After 10-Year Holding Period” for more information.)
Example
|
|
1 Year |
3 Years |
5 Years |
10 Years |
|
Class A |
$ 635 |
$ 951 |
$ 1,288 |
$ 2,240 |
|
Class C |
$ 266 |
$ 654 |
$ 1,169 |
$ 2,584 |
|
Class R |
$ 115 |
$ 501 |
$ 912 |
$ 2,061 |
|
Class R6 |
$ 59 |
$ 315 |
$ 591 |
$ 1,378 |
|
Advisor Class |
$ 64 |
$ 346 |
$ 649 |
$ 1,509 |
|
If you do not sell your shares: |
|
|
|
|
|
Class C |
$ 166 |
$ 654 |
$ 1,169 |
$ 2,584 |
II. The following is added to the “Fund Summaries – Franklin LifeSmart™ 2020 Retirement Target Fund – Performance” section of the prospectus:
The figures in the average annual total returns table above reflect the Class A maximum front-end sales charge of 5.75% that was in effect prior to September 10, 2018. Class A shares, however, currently are subject to a maximum front-end sales charge of 5.50% effective on September 10, 2018. If the maximum front-end sales charge of 5.50% was reflected, performance for Class A in the average annual total returns table would be higher.
1
III. The following replaces the “Shareholder Fees” and “Example” tables in the “Fund Summaries – Franklin LifeSmart™ 2025 Retirement Target Fund – Fees and Expenses of the Fund” section of the prospectus:
Shareholder Fees
(fees paid directly from your investment)
|
|
Class A1 |
Class C2 |
Class R |
Class R6 |
Advisor Class |
|
Maximum Sales Charge (Load) Imposed on Purchases (as percentage of offering price) |
5.50% |
None |
None |
None |
None |
|
Maximum Deferred Sales Charge (Load) (as percentage of the lower of original purchase price or sale proceeds) |
None |
1.00% |
None |
None |
None |
1. There is a 1% contingent deferred sales charge that applies to investments of $1 million or more (see "Investments of $1 Million or More" under "Choosing a Share Class") and purchases by certain retirement plans without an initial sales charge on shares sold within 18 months of purchase.
2. Effective October 5, 2018, Class C shares that have been held for 10 years or more will convert automatically into Class A shares later in the month of October 2018 and will be subject to Class A shares’ lower Rule 12b-1 fees. Thereafter, Class C shares of the Fund will convert automatically to Class A shares of the Fund on a monthly basis in the month of, or the month following, the 10-year anniversary of the Class C shares’ purchase date. Such conversions will be on the basis of the relative net asset values of the two classes, will not be subject to Class A shares’ sales charges and are not expected to be a taxable event for federal income tax purposes. Certain shares that are invested through retirement plans, omnibus accounts or in certain other instances may not automatically convert if the financial intermediary does not have the ability to track purchases to credit individual shareholders’ holding periods. (See “Your Account – Choosing a Shares Class – Sales Charges – Class C – Automatic Conversion of Class C Shares to Class A Shares After 10-Year Holding Period” for more information.)
Example
|
|
1 Year |
3 Years |
5 Years |
10 Years |
|
Class A |
$ 636 |
$ 909 |
$ 1,203 |
$ 2,037 |
|
Class C |
$ 267 |
$ 611 |
$ 1,082 |
$ 2,385 |
|
Class R |
$ 116 |
$ 458 |
$ 823 |
$ 1,851 |
|
Class R6 |
$ 60 |
$ 271 |
$ 499 |
$ 1,155 |
|
Advisor Class |
$ 65 |
$ 302 |
$ 557 |
$ 1,288 |
|
If you do not sell your shares: |
|
|
|
|
|
Class C |
$ 167 |
$ 611 |
$ 1,082 |
$ 2,385 |
IV. The following is added to the “Fund Summaries – Franklin LifeSmart™ 2025 Retirement Target Fund – Performance” section of the prospectus:
The figures in the average annual total returns table above reflect the Class A maximum front-end sales charge of 5.75% that was in effect prior to September 10, 2018. Class A shares, however, currently are subject to a maximum front-end sales charge of 5.50% effective on September 10, 2018. If the maximum front-end sales charge of 5.50% was reflected, performance for Class A in the average annual total returns table would be higher.
V. The following replaces the “Shareholder Fees” and “Example” tables in the “Fund Summaries – Franklin LifeSmart™ 2030 Retirement Target Fund – Fees and Expenses of the Fund” section of the prospectus:
Shareholder Fees
(fees paid directly from your investment)
|
|
Class A1 |
Class C2 |
Class R |
Class R6 |
Advisor Class |
|
Maximum Sales Charge (Load) Imposed on Purchases (as percentage of offering price) |
5.50% |
None |
None |
None |
None |
|
Maximum Deferred Sales Charge (Load) (as percentage of the lower of original purchase price or sale proceeds) |
None |
1.00% |
None |
None |
None |
1. There is a 1% contingent deferred sales charge that applies to investments of $1 million or more (see "Investments of $1 Million or More" under "Choosing a Share Class") and purchases by certain retirement plans without an initial sales charge on shares sold within 18 months of purchase.
2. Effective October 5, 2018, Class C shares that have been held for 10 years or more will convert automatically into Class A shares later in the month of October 2018 and will be subject to Class A shares’ lower Rule 12b-1 fees. Thereafter, Class C shares of the Fund will convert automatically to Class A shares of the Fund on a monthly basis in the month of, or the month following, the 10-year anniversary of the Class C shares’ purchase date. Such conversions will be on the basis of the relative net asset values of the two classes, will not be subject to Class A shares’ sales charges and are not expected to be a taxable event for federal income tax purposes. Certain shares that are invested through retirement plans, omnibus accounts or in certain other instances may not automatically convert if the financial intermediary does not have the ability to track purchases to credit individual shareholders’ holding periods. (See “Your Account – Choosing a Shares Class – Sales Charges – Class C – Automatic Conversion of Class C Shares to Class A Shares After 10-Year Holding Period” for more information.)
2
Example
|
|
1 Year |
3 Years |
5 Years |
10 Years |
|
Class A |
$ 637 |
$ 960 |
$ 1,306 |
$ 2,280 |
|
Class C |
$ 268 |
$ 664 |
$ 1,188 |
$ 2,623 |
|
Class R |
$ 117 |
$ 512 |
$ 931 |
$ 2,102 |
|
Class R6 |
$ 61 |
$ 311 |
$ 580 |
$ 1,348 |
|
Advisor Class |
$ 66 |
$ 356 |
$ 668 |
$ 1,552 |
|
If you do not sell your shares: |
|
|
|
|
|
Class C |
$ 168 |
$ 664 |
$ 1,188 |
$ 2,623 |
VI. The following is added to the “Franklin LifeSmart™ 2030 Retirement Target Fund” section of the prospectus:
The figures in the average annual total returns table above reflect the Class A maximum front-end sales charge of 5.75% that was in effect prior to September 10, 2018. Class A shares, however, currently are subject to a maximum front-end sales charge of 5.50% effective on September 10, 2018. If the maximum front-end sales charge of 5.50% was reflected, performance for Class A in the average annual total returns table would be higher.
VII. The following replaces the “Shareholder Fees” and “Example” tables in the “Franklin LifeSmart™ 2035 Retirement Target Fund” section of the prospectus:
Shareholder Fees
(fees paid directly from your investment)
|
|
Class A1 |
Class C2 |
Class R |
Class R6 |
Advisor Class |
|
Maximum Sales Charge (Load) Imposed on Purchases (as percentage of offering price) |
5.50% |
None |
None |
None |
None |
|
Maximum Deferred Sales Charge (Load) (as percentage of the lower of original purchase price or sale proceeds) |
None |
1.00% |
None |
None |
None |
1. There is a 1% contingent deferred sales charge that applies to investments of $1 million or more (see "Investments of $1 Million or More" under "Choosing a Share Class") and purchases by certain retirement plans without an initial sales charge on shares sold within 18 months of purchase.
2. Effective October 5, 2018, Class C shares that have been held for 10 years or more will convert automatically into Class A shares later in the month of October 2018 and will be subject to Class A shares’ lower Rule 12b-1 fees. Thereafter, Class C shares of the Fund will convert automatically to Class A shares of the Fund on a monthly basis in the month of, or the month following, the 10-year anniversary of the Class C shares’ purchase date. Such conversions will be on the basis of the relative net asset values of the two classes, will not be subject to Class A shares’ sales charges and are not expected to be a taxable event for federal income tax purposes. Certain shares that are invested through retirement plans, omnibus accounts or in certain other instances may not automatically convert if the financial intermediary does not have the ability to track purchases to credit individual shareholders’ holding periods. (See “Your Account – Choosing a Shares Class – Sales Charges – Class C – Automatic Conversion of Class C Shares to Class A Shares After 10-Year Holding Period” for more information.)
Example
|
|
1 Year |
3 Years |
5 Years |
10 Years |
|
Class A |
$ 638 |
$ 923 |
$ 1,230 |
$ 2,097 |
|
Class C |
$ 269 |
$ 626 |
$ 1,109 |
$ 2,444 |
|
Class R |
$ 118 |
$ 472 |
$ 851 |
$ 1,913 |
|
Class R6 |
$ 62 |
$ 280 |
$ 514 |
$ 1,189 |
|
Advisor Class |
$ 67 |
$ 317 |
$ 586 |
$ 1,354 |
|
If you do not sell your shares: |
|
|
|
|
|
Class C |
$ 169 |
$ 626 |
$ 1,109 |
$ 2,444 |
VIII. The following is added to the “Fund Summaries – Franklin LifeSmart™ 2035 Retirement Target Fund – Performance” section of the prospectus:
The figures in the average annual total returns table above reflect the Class A maximum front-end sales charge of 5.75% that was in effect prior to September 10, 2018. Class A shares, however, currently are subject to a maximum front-end sales charge of 5.50% effective on September 10, 2018. If the maximum front-end sales charge of 5.50% was reflected, performance for Class A in the average annual total returns table would be higher.
IX. The following replaces the “Shareholder Fees” and “Example” tables in the “Fund Summaries – Franklin LifeSmart™ 2040 Retirement Target Fund – Fees and Expenses of the Fund” section of the prospectus:
3
Shareholder Fees
(fees paid directly from your investment)
|
|
Class A1 |
Class C2 |
Class R |
Class R6 |
Advisor Class |
|
Maximum Sales Charge (Load) Imposed on Purchases (as percentage of offering price) |
5.50% |
None |
None |
None |
None |
|
Maximum Deferred Sales Charge (Load) (as percentage of the lower of original purchase price or sale proceeds) |
None |
1.00% |
None |
None |
None |
1. There is a 1% contingent deferred sales charge that applies to investments of $1 million or more (see "Investments of $1 Million or More" under "Choosing a Share Class") and purchases by certain retirement plans without an initial sales charge on shares sold within 18 months of purchase.
2. Effective October 5, 2018, Class C shares that have been held for 10 years or more will convert automatically into Class A shares later in the month of October 2018 and will be subject to Class A shares’ lower Rule 12b-1 fees. Thereafter, Class C shares of the Fund will convert automatically to Class A shares of the Fund on a monthly basis in the month of, or the month following, the 10-year anniversary of the Class C shares’ purchase date. Such conversions will be on the basis of the relative net asset values of the two classes, will not be subject to Class A shares’ sales charges and are not expected to be a taxable event for federal income tax purposes. Certain shares that are invested through retirement plans, omnibus accounts or in certain other instances may not automatically convert if the financial intermediary does not have the ability to track purchases to credit individual shareholders’ holding periods. (See “Your Account – Choosing a Shares Class – Sales Charges – Class C – Automatic Conversion of Class C Shares to Class A Shares After 10-Year Holding Period” for more information.)
Example
|
|
1 Year |
3 Years |
5 Years |
10 Years |
|
Class A |
$ 639 |
$ 998 |
$ 1,381 |
$ 2,453 |
|
Class C |
$ 270 |
$ 704 |
$ 1,264 |
$ 2,792 |
|
Class R |
$ 119 |
$ 551 |
$ 1,010 |
$ 2,280 |
|
Class R6 |
$ 63 |
$ 332 |
$ 621 |
$ 1,445 |
|
Advisor Class |
$ 68 |
$ 397 |
$ 748 |
$ 1,740 |
|
If you do not sell your shares: |
|
|
|
|
|
Class C |
$ 170 |
$ 704 |
$ 1,264 |
$ 2,792 |
X. The following is added to the “Fund Summaries – Franklin LifeSmart™ 2040 Retirement Target Fund – Performance” section of the prospectus:
The figures in the average annual total returns table above reflect the Class A maximum front-end sales charge of 5.75% that was in effect prior to September 10, 2018. Class A shares, however, currently are subject to a maximum front-end sales charge of 5.50% effective on September 10, 2018. If the maximum front-end sales charge of 5.50% was reflected, performance for Class A in the average annual total returns table would be higher.
XI. The following replaces the “Shareholder Fees” and “Example” tables in the “Fund Summaries – Franklin LifeSmart™ 2045 Retirement Target Fund – Fees and Expenses of the Fund” section of the prospectus:
Shareholder Fees
(fees paid directly from your investment)
|
|
Class A1 |
Class C2 |
Class R |
Class R6 |
Advisor Class |
|
Maximum Sales Charge (Load) Imposed on Purchases (as percentage of offering price) |
5.50% |
None |
None |
None |
None |
|
Maximum Deferred Sales Charge (Load) (as percentage of the lower of original purchase price or sale proceeds) |
None |
1.00% |
None |
None |
None |
1. There is a 1% contingent deferred sales charge that applies to investments of $1 million or more (see "Investments of $1 Million or More" under "Choosing a Share Class") and purchases by certain retirement plans without an initial sales charge on shares sold within 18 months of purchase.
2. Effective October 5, 2018, Class C shares that have been held for 10 years or more will convert automatically into Class A shares later in the month of October 2018 and will be subject to Class A shares’ lower Rule 12b-1 fees. Thereafter, Class C shares of the Fund will convert automatically to Class A shares of the Fund on a monthly basis in the month of, or the month following, the 10-year anniversary of the Class C shares’ purchase date. Such conversions will be on the basis of the relative net asset values of the two classes, will not be subject to Class A shares’ sales charges and are not expected to be a taxable event for federal income tax purposes. Certain shares that are invested through retirement plans, omnibus accounts or in certain other instances may not automatically convert if the financial intermediary does not have the ability to track purchases to credit individual shareholders’ holding periods. (See “Your Account – Choosing a Shares Class – Sales Charges – Class C – Automatic Conversion of Class C Shares to Class A Shares After 10-Year Holding Period” for more information.)
Example
|
|
1 Year |
3 Years |
5 Years |
10 Years |
|
Class A |
$ 640 |
$ 953 |
$ 1,289 |
$ 2,235 |
|
Class C |
$ 271 |
$ 657 |
$ 1,170 |
$ 2,578 |
|
Class R |
$ 120 |
$ 504 |
$ 913 |
$ 2,055 |
|
Class R6 |
$ 64 |
$ 297 |
$ 547 |
$ 1,266 |
|
Advisor Class |
$ 69 |
$ 349 |
$ 649 |
$ 1,503 |
|
If you do not sell your shares: |
|
|
|
|
|
Class C |
$ 171 |
$ 657 |
$ 1,170 |
$ 2,578 |
4
XII. The following is added to the “Fund Summaries – Franklin LifeSmart™ 2045 Retirement Target Fund – Performance” section of the prospectus:
The figures in the average annual total returns table above reflect the Class A maximum front-end sales charge of 5.75% that was in effect prior to September 10, 2018. Class A shares, however, currently are subject to a maximum front-end sales charge of 5.50% effective on September 10, 2018. If the maximum front-end sales charge of 5.50% was reflected, performance for Class A in the average annual total returns table would be higher.
XIII. The following replaces the “Shareholder Fees” and “Example” tables in the “Fund Summaries – Franklin LifeSmart™ 2050 Retirement Target Fund – Fees and Expenses of the Fund” section of the prospectus:
Shareholder Fees
(fees paid directly from your investment)
|
|
Class A1 |
Class C2 |
Class R |
Class R6 |
Advisor Class |
|
Maximum Sales Charge (Load) Imposed on Purchases (as percentage of offering price) |
5.50% |
None |
None |
None |
None |
|
Maximum Deferred Sales Charge (Load) (as percentage of the lower of original purchase price or sale proceeds) |
None |
1.00% |
None |
None |
None |
1. There is a 1% contingent deferred sales charge that applies to investments of $1 million or more (see "Investments of $1 Million or More" under "Choosing a Share Class") and purchases by certain retirement plans without an initial sales charge on shares sold within 18 months of purchase.
2. Effective October 5, 2018, Class C shares that have been held for 10 years or more will convert automatically into Class A shares later in the month of October 2018 and will be subject to Class A shares’ lower Rule 12b-1 fees. Thereafter, Class C shares of the Fund will convert automatically to Class A shares of the Fund on a monthly basis in the month of, or the month following, the 10-year anniversary of the Class C shares’ purchase date. Such conversions will be on the basis of the relative net asset values of the two classes, will not be subject to Class A shares’ sales charges and are not expected to be a taxable event for federal income tax purposes. Certain shares that are invested through retirement plans, omnibus accounts or in certain other instances may not automatically convert if the financial intermediary does not have the ability to track purchases to credit individual shareholders’ holding periods. (See “Your Account – Choosing a Shares Class – Sales Charges – Class C – Automatic Conversion of Class C Shares to Class A Shares After 10-Year Holding Period” for more information.)
Example
|
|
1 Year |
3 Years |
5 Years |
10 Years |
|
Class A |
$ 640 |
$ 1,039 |
$ 1,463 |
$ 2,640 |
|
Class C |
$ 271 |
$ 746 |
$ 1,347 |
$ 2,975 |
|
Class R |
$ 120 |
$ 594 |
$ 1,095 |
$ 2,473 |
|
Class R6 |
$ 64 |
$ 352 |
$ 662 |
$ 1,540 |
|
Advisor Class |
$ 69 |
$ 440 |
$ 836 |
$ 1,943 |
|
If you do not sell your shares: |
|
|
|
|
|
Class C |
$ 171 |
$ 746 |
$ 1,347 |
$ 2,975 |
XIV. The following is added to the “Fund Summaries – Franklin LifeSmart™ 2050 Retirement Target Fund – Performance” section of the prospectus:
The figures in the average annual total returns table above reflect the Class A maximum front-end sales charge of 5.75% that was in effect prior to September 10, 2018. Class A shares, however, currently are subject to a maximum front-end sales charge of 5.50% effective on September 10, 2018. If the maximum front-end sales charge of 5.50% was reflected, performance for Class A in the average annual total returns table would be higher.
XV. The following replaces the “Shareholder Fees” and “Example” tables in the “Fund Summaries – Franklin LifeSmart™ 2055 Retirement Target Fund – Fees and Expenses of the Fund” section of the prospectus:
5
Shareholder Fees
(fees paid directly from your investment)
|
|
Class A1 |
Class C2 |
Class R |
Class R6 |
Advisor Class |
|
Maximum Sales Charge (Load) Imposed on Purchases (as percentage of offering price) |
5.50% |
None |
None |
None |
None |
|
Maximum Deferred Sales Charge (Load) (as percentage of the lower of original purchase price or sale proceeds) |
None |
1.00% |
None |
None |
None |
1. There is a 1% contingent deferred sales charge that applies to investments of $1 million or more (see "Investments of $1 Million or More" under "Choosing a Share Class") and purchases by certain retirement plans without an initial sales charge on shares sold within 18 months of purchase.
2. Effective October 5, 2018, Class C shares that have been held for 10 years or more will convert automatically into Class A shares later in the month of October 2018 and will be subject to Class A shares’ lower Rule 12b-1 fees. Thereafter, Class C shares of the Fund will convert automatically to Class A shares of the Fund on a monthly basis in the month of, or the month following, the 10-year anniversary of the Class C shares’ purchase date. Such conversions will be on the basis of the relative net asset values of the two classes, will not be subject to Class A shares’ sales charges and are not expected to be a taxable event for federal income tax purposes. Certain shares that are invested through retirement plans, omnibus accounts or in certain other instances may not automatically convert if the financial intermediary does not have the ability to track purchases to credit individual shareholders’ holding periods. (See “Your Account – Choosing a Shares Class – Sales Charges – Class C – Automatic Conversion of Class C Shares to Class A Shares After 10-Year Holding Period” for more information.)
Example
|
|
1 Year |
3 Years |
5 Years |
10 Years |
|
Class A |
$ 640 |
$ 1,327 |
$ 2,036 |
$ 3,907 |
|
Class C |
$ 271 |
$ 1,044 |
$ 1,931 |
$ 4,212 |
|
Class R |
$ 120 |
$ 897 |
$ 1,693 |
$ 3,778 |
|
Class R6 |
$ 64 |
$ 597 |
$ 1,157 |
$ 2,685 |
|
Advisor Class |
$ 69 |
$ 747 |
$ 1,450 |
$ 3,320 |
|
If you do not sell your shares: |
|
|
|
|
|
Class C |
$ 171 |
$ 1,044 |
$ 1,931 |
$ 4,212 |
XVI. The following is added to the “Fund Summaries – Franklin LifeSmart™ 2055 Retirement Target Fund – Performance” section of the prospectus:
The figures in the average annual total returns table above reflect the Class A maximum front-end sales charge of 5.75% that was in effect prior to September 10, 2018. Class A shares, however, currently are subject to a maximum front-end sales charge of 5.50% effective on September 10, 2018. If the maximum front-end sales charge of 5.50% was reflected, performance for Class A in the average annual total returns table would be higher.
XVII. The first chart under the “Your Account – Choosing a Share Class” section of the prospectus is replaced with the following:
|
Class A |
Class C |
Class R |
Class R6 |
Advisor Class |
|
Initial sales charge of 5.50% or less |
No initial sales charge |
No initial sales charge |
See "Qualified Investors - Class R6" below |
See "Qualified Investors – Advisor Class" below |
|
Deferred sales charge of 1% on purchases of $1 million or more sold within 18 months |
Deferred sales charge of 1% on shares you sell within 12 months |
Deferred sales charge is not applicable |
|
|
|
Lower annual expenses than Class C or R due to lower distribution fees |
Higher annual expenses than Class A due to higher distribution fees. Automatic conversion to Class A shares after approximately ten years, reducing future annual expenses. |
Higher annual expenses than Class A due to higher distribution fees (lower than Class C). No conversion to Class A shares, so annual expenses do not decrease. |
|
|
XVIII. The first chart under the “Your Account – Choosing a Share Class – Class A, C & R – Sales Charges – Class A” section of the prospectus is replaced with the following:
6
|
when you invest this amount |
the sales charge makes up this % of the offering price1 |
which equals this % of your net investment1 |
|
Under $50,000 |
5.50% |
5.82% |
|
$50,000 but under $100,000 |
4.50% |
4.71% |
|
$100,000 but under $250,000 |
3.50% |
3.63% |
|
$250,000 but under $500,000 |
2.50% |
2.56% |
|
$500,000 but under $1 million |
2.00% |
2.04% |
1. The dollar amount of the sales charge is the difference between the offering price of the shares purchased (which factors in the applicable sales charge in this table) and the net asset value of those shares. Since the offering price is calculated to two decimal places using standard rounding criteria, the number of shares purchased and the dollar amount of the sales charge as a percentage of the offering price and of your net investment may be higher or lower depending on whether there was a downward or upward rounding.
XIX. The following is added to the “Your Account – Choosing a Shares Class – Sales Charges - Class A – Sales Charge Waivers – Waivers for certain investors” section:
• Class C shareholders whose shares are converted to Class A shares after 10 years under the Class C shares’ conversion feature.
XX. The “Notice of Automatic Conversion of Class C Shares to Class A Shares after 10-Year Holding Period” section under the “Your Account” section of the prospectus is removed and the following is added after the “Your Account – Choosing a Shares Class – Sales Charges – Class C – Distribution and Service (12b-1) Fees” section:
Automatic Conversion of Class C Shares to Class A Shares After 10-Year Holding Period
Effective on October 5, 2018, Class C shares’ conversion feature will become effective. The conversion feature provides that Class C shares that have been held for 10 years or more will automatically convert into Class A shares and will be subject to Class A shares’ lower Rule 12b-1 fees (the “Conversion Feature”). On or about October 19, 2018, Class C shares of the Fund that have been outstanding for 10 years or more will automatically convert to Class A shares of the Fund on the basis of the relative net asset values of the two classes. Thereafter, Class C shares of the Fund will convert automatically to Class A shares of the Fund on a monthly basis in the month of, or the month following, the 10-year anniversary of the Class C (or Class C1) shares’ purchase date. The monthly conversion date is expected to occur around the middle of every month and generally falls on a Friday.
Terms of the Conversion Feature. Class C shares that automatically convert to Class A shares of the Fund will convert on the basis of the relative net asset values of the two classes. Shareholders will not pay a sales charge, including a CDSC, upon the conversion of their Class C shares to Class A shares pursuant to the Conversion Feature. The automatic conversion of the Fund’s Class C shares into Class A shares after the 10-year holding period is not expected to be a taxable event for federal income tax purposes. Shareholders should consult with their tax advisor regarding the state and local tax consequences of such conversions.
If you previously owned Class C1 shares of the Fund, the time you held such shares will count towards the 10-year period for automatic conversion to Class A shares. Class C (or Class C1) shares of the Fund acquired through automatic reinvestment of dividends or distributions will convert to Class A shares of the Fund on the conversion date pro rata with the converting Class C shares of the Fund that were not acquired through reinvestment of dividends or distributions.
Class C shares held through a financial intermediary in an omnibus account will be automatically converted into Class A shares only if the intermediary can document that the shareholder has met the required holding period. In certain circumstances, when shares are invested through retirement plans, omnibus accounts, and in certain other instances, the Fund and its agents may not have transparency into how long a shareholder has held Class C (or Class C1) shares for purposes of determining whether such Class C shares are eligible for automatic conversion into Class A shares and the financial intermediary may not have the ability to track purchases to credit individual shareholders’ holding periods. This primarily occurs when shares are invested through certain record keepers for group retirement plans, where the intermediary cannot track share aging at the participant level. In these circumstances, the Fund will not be able to automatically convert Class C shares into Class A shares as described above. In order to determine eligibility for conversion in these circumstances, it is the responsibility of the shareholder or their financial intermediary to notify the Fund that the shareholder is eligible for the conversion of Class C shares to Class A shares, and the shareholder or their financial intermediary may be required to maintain and provide the Fund with records that substantiate the holding period of Class C (and, if applicable, Class C1) shares. In these circumstances, it is the financial intermediary’s (and not the Fund’s) responsibility to keep records and to ensure that the shareholder is credited with the proper holding period. Please consult with your financial intermediary about your shares’ eligibility for this conversion feature.
7
Also effective October 5, 2018, new accounts or plans may not be eligible to purchase Class C shares of the Fund if it is determined that the intermediary cannot track shareholder holding periods to determine whether a shareholder’s Class C shares are eligible for conversion to Class A shares. Accounts or plans (and their successor, related and affiliated plans) that have Class C (or Class C1) shares of the Fund available to participants on or before October 5, 2018, may continue to open accounts for new participants in that share class and purchase additional shares in existing participant accounts. The Fund has no responsibility for overseeing, monitoring or implementing a financial intermediary’s process for determining whether a shareholder meets the required holding period for conversion.
A financial intermediary may sponsor and/or control accounts, programs or platforms that impose a different conversion schedule or different eligibility requirements for the conversion of Class C shares into Class A shares. In these cases, Class C shareholders may convert to Class A shares under the policies of the financial intermediary and the conversion may be structured as an exchange of Class C shares for Class A shares of the Fund. Financial intermediaries will be responsible for making such exchanges in those circumstances. Please consult with your financial intermediary if you have any questions regarding your shares’ conversion from Class C shares to Class A shares.
XXI. The following replaces the first sentence in the “Your Account – Choosing a Shares Class – Reinstatement Privilege” section:
If you sell any class of shares of a Franklin Templeton Investments fund, you may reinvest all or a portion of the proceeds from that sale within 90 days within the same share class (or share class equivalent if the share class you redeemed from is closed to new investors) without an initial sales charge.
XXII. The following is added to the “Your Account – Exchanging Shares – Exchange Privilege” section:
Exchange Effects on Class C Conversion Feature. Effective October 5, 2018, if you exchange your Class C shares for the same class of shares of another Franklin Templeton fund, the time your shares are held in the initial Fund will count towards the 10-year period for automatic conversion to Class A shares.
XXIII. The following replaces the first paragraph under the “Your Account – Account Policies – Calculating Share Price – Class A & C” section of the prospectus:
When you buy shares, you pay the "offering price" for the shares. The "offering price" is determined by dividing the NAV per share by an amount equal to 1 minus the sales charge applicable to the purchase (expressed in decimals), calculated to two decimal places using standard rounding criteria. The number of Fund shares you will be issued will equal the amount invested divided by the applicable offering price for those shares, calculated to three decimal places using standard rounding criteria. For example, if the NAV per share is $10.25 and the applicable sales charge for the purchase is 5.50%, the offering price would be calculated as follows: 10.25 divided by 1.00 minus 0.055 [10.25/0.945] equals 10.582011, which, when rounded to two decimal points, equals 10.58. The offering price per share would be $10.58.
XXIV. The following replaces the chart under the “Your Account – Account Policies – Dealer Compensation – Class A, C & R” section of the prospectus:
|
|
Class A |
Class C |
Class R |
|
Commission (%) |
— |
1.001 |
— |
|
Investment under $50,000 |
5.00 |
— |
— |
|
$50,000 but under $100,000 |
4.00 |
— |
— |
|
$100,000 but under $250,000 |
3.00 |
— |
— |
|
$250,000 but under $500,000 |
2.25 |
— |
— |
|
$500,000 but under $1 million |
1.75 |
— |
— |
|
$1 million or more |
up to 1.00 |
— |
— |
|
12b-1 fee to dealer |
0.252 |
1.003 |
0.50 |
1. Commission includes advance of the first year's 0.25% 12b-1 service fee. Distributors may pay a prepaid commission. However, Distributors does not pay a prepaid commission on any purchases by Employer Sponsored Retirement Plans.
2. For purchases at NAV where Distributors paid a prepaid commission, dealers may start to receive the 12b-1 fee in the 13th month after purchase. For purchases at NAV where Distributors did not pay a prepaid commission, dealers may start to receive the 12b-1 fee at the time of purchase.
3. Dealers may be eligible to receive up to 0.25% at the time of purchase and may be eligible to receive 1% starting in the 13th month. During the first 12 months, the full 12b-1 fee will be paid to Distributors to partially offset the commission and the prepaid service fee paid at the time of purchase. For purchases at NAV where Distributors did not pay a prepaid commission, dealers may start to receive the 12b-1 fee at the time of purchase. After approximately 10 years, Class C shares convert to Class A shares and dealers may then be eligible to receive the 12b-1 fee applicable to Class A.
Please keep this supplement with your prospectus for future reference.
8
RTF SA1 0918
SUPPLEMENT DATED SEPTEMBER 10, 2018
TO THE STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 2018 OF
FRANKLIN FUND ALLOCATOR SERIES
Franklin LifeSmart™ Retirement Income Fund
Franklin LifeSmart™ 2020 Retirement Target Fund
Franklin LifeSmart™ 2025 Retirement Target Fund
Franklin LifeSmart™ 2030 Retirement Target Fund
Franklin LifeSmart™ 2035 Retirement Target Fund
Franklin LifeSmart™ 2040 Retirement Target Fund
Franklin LifeSmart™ 2045 Retirement Target Fund
Franklin LifeSmart™ 2050 Retirement Target Fund
Franklin LifeSmart™ 2055 Retirement Target Fund
The Statement of Additional Information (“SAI”) is amended as follows:
I. The following replaces the first sentence under “Buying and Selling shares – Initial sales charges:”
The maximum initial sales charge is 5.50% for Class A.
II. The following replaces the second paragraph under “Buying and Selling shares – Initial sales charges – Financial intermediary compensation:”
Distributors may pay the following commissions to financial intermediaries who initiate and are responsible for purchases of Class A shares in the following amounts:
|
Amount of Investment |
For Funds with an initial sales charge of 5.50% (%) |
For Funds with an initial sales charge of 4.25% (%) |
For Funds with an initial sales charge of 2.25% (%) |
|
Under $50,000 |
5.00 |
4.00 |
2.00 |
|
$50,000 but under $100,000 |
4.00 |
4.00 |
2.00 |
|
$100,000 but under $250,000 |
3.00 |
3.00 |
1.75 |
|
$250,000 but under $500,000 |
2.25 |
2.25 |
1.25 |
|
$500,000 but under $1 million |
1.75 |
1.00 |
1.00 |
|
$1 million but under $4 million |
1.00 |
1.00 |
1.00 |
|
$4 million but under $10 million |
1.00 |
1.00 |
1.00 |
|
$10 million but under $50 million |
0.50 |
0.50 |
0.50 |
|
$50 million or more |
0.25 |
0.25 |
0.25 |
Consistent with the provisions and limitations set forth in its Class A Rule 12b-1 distribution plan, the Fund may reimburse Distributors for the cost of these commission payments.
III. The following replaces the first paragraph under “Buying and Selling shares – Contingent deferred sales charge (CDSC) - Class A & C:”
Contingent deferred sales charge (CDSC) - Class A & C If you invest any amount in Class C shares, $1 million or more in Class A shares of mutual funds with a maximum initial sales charge of 5.50% or $500,000 or more for mutual funds with a maximum initial sales charge of 4.25% or 2.25%, either as a lump sum or through our cumulative quantity discount or letter of intent programs, a CDSC may apply on any Class A shares you sell within 18 months and any Class C shares you sell within 12 months of purchase. The CDSC is 1% of the value of the shares sold or the net asset value at the time of purchase, whichever is less, for Class A shares of mutual funds with a maximum initial sales charge of 5.50% and for Class C shares. The CDSC is 0.75% of the value of the shares sold or the net asset value at the time of purchase, whichever is less, for Class A shares of mutual funds with a maximum initial sales charge of 4.25% or 2.25%; however this CDSC will change to 1.00% on or after March 10, 2020.
Please keep this supplement with your SAI for future reference.
1
FAS5 P1 0918
SUPPLEMENT DATED SEPTEMBER 10, 2018
TO THE PROSPECTUS DATED OCTOBER 1, 2017
OF
Franklin NextStep Conservative Fund
Franklin NextStep MODERATE Fund
Franklin NextStep GROWTH Fund
(Franklin Fund Allocator Series)
The prospectus is amended as follows:
I. The following replaces the “Shareholder Fees” and “Example” tables in the “Fund Summaries – Franklin NextStep Conservative Fund – Fees and Expenses of the Fund” section of the prospectus:
Shareholder Fees
(fees paid directly from your investment)
|
|
Class A1 |
Class C2 |
Advisor Class |
|
Maximum Sales Charge (Load) Imposed on Purchases (as percentage of offering price) |
5.50% |
None |
None |
|
Maximum Deferred Sales Charge (Load) (as percentage of the lower of original purchase price or sale proceeds) |
None |
1.00% |
None |
1. There is a 1% contingent deferred sales charge that applies to investments of $1 million or more (see "Investments of $1 Million or More" under "Choosing a Share Class") and purchases by certain retirement plans without an initial sales charge on shares sold within 18 months of purchase.
2. Effective October 5, 2018, Class C shares that have been held for 10 years or more will convert automatically into Class A shares later in the month of October 2018 and will be subject to Class A shares’ lower Rule 12b-1 fees. Thereafter, Class C shares of the Fund will convert automatically to Class A shares of the Fund on a monthly basis in the month of, or the month following, the 10-year anniversary of the Class C shares’ purchase date. Such conversions will be on the basis of the relative net asset values of the two classes, will not be subject to Class A shares’ sales charges and are not expected to be a taxable event for federal income tax purposes. Certain shares that are invested through retirement plans, omnibus accounts or in certain other instances may not automatically convert if the financial intermediary does not have the ability to track purchases to credit individual shareholders’ holding periods. (See “Your Account – Choosing a Shares Class – Sales Charges – Class C – Automatic Conversion of Class C Shares to Class A Shares After 10-Year Holding Period” for more information.)
Example
|
|
1 Year |
3 Years |
5 Years |
10 Years |
|
Class A |
$ 649 |
$ 1,967 |
$ 3,237 |
$ 6,214 |
|
Class C |
$ 281 |
$ 1,706 |
$ 3,153 |
$ 6,456 |
|
Advisor Class |
$ 80 |
$ 1,430 |
$ 2,737 |
$ 5,830 |
|
If you do not sell your shares: |
|
|
|
|
|
Class C |
$ 181 |
$ 1,706 |
$ 3,153 |
$ 6,456 |
II. The following replaces the “Shareholder Fees” and “Example” tables in the “Fund Summaries – Franklin NextStep Moderate Fund – Fees and Expenses of the Fund” section of the prospectus:
Shareholder Fees
(fees paid directly from your investment)
|
|
Class A1 |
Class C2 |
Advisor Class |
|
Maximum Sales Charge (Load) Imposed on Purchases (as percentage of offering price) |
5.50% |
None |
None |
|
Maximum Deferred Sales Charge (Load) (as percentage of the lower of original purchase price or sale proceeds) |
None |
1.00% |
None |
1. There is a 1% contingent deferred sales charge that applies to investments of $1 million or more (see "Investments of $1 Million or More" under "Choosing a Share Class") and purchases by certain retirement plans without an initial sales charge on shares sold within 18 months of purchase.
2. Effective October 5, 2018, Class C shares that have been held for 10 years or more will convert automatically into Class A shares later in the month of October 2018 and will be subject to Class A shares’ lower Rule 12b-1 fees. Thereafter, Class C shares of the Fund will convert automatically to Class A shares of the Fund on a monthly basis in the month of, or the month following, the 10-year anniversary of the Class C shares’ purchase date. Such conversions will be on the basis of the relative net asset values of the two classes, will not be subject to Class A shares’ sales charges and are not expected to be a taxable event for federal income tax purposes. Certain shares that are invested through retirement plans, omnibus accounts or in certain other instances may not automatically convert if the financial intermediary does not have the ability to track purchases to credit individual shareholders’ holding periods. (See “Your Account – Choosing a Shares Class – Sales Charges – Class C – Automatic Conversion of Class C Shares to Class A Shares After 10-Year Holding Period” for more information.)
1
Example
|
|
1 Year |
3 Years |
5 Years |
10 Years |
|
Class A |
$ 664 |
$ 1,258 |
$ 1,877 |
$ 3,538 |
|
Class C |
$ 296 |
$ 973 |
$ 1,769 |
$ 3,852 |
|
Advisor Class |
$ 95 |
$ 674 |
$ 1,280 |
$ 2,920 |
|
If you do not sell your shares: |
|
|
|
|
|
Class C |
$ 196 |
$ 973 |
$ 1,769 |
$ 3,852 |
III. The following replaces the “Shareholder Fees” and “Example” tables in the “Fund Summaries – Franklin NextStep Growth Fund – Fees and Expenses of the Fund” section of the prospectus:
Shareholder Fees
(fees paid directly from your investment)
|
|
Class A1 |
Class C2 |
Advisor Class |
|
Maximum Sales Charge (Load) Imposed on Purchases (as percentage of offering price) |
5.50% |
None |
None |
|
Maximum Deferred Sales Charge (Load) (as percentage of the lower of original purchase price or sale proceeds) |
None |
1.00% |
None |
1. There is a 1% contingent deferred sales charge that applies to investments of $1 million or more (see "Investments of $1 Million or More" under "Choosing a Share Class") and purchases by certain retirement plans without an initial sales charge on shares sold within 18 months of purchase.
2. Effective October 5, 2018, Class C shares that have been held for 10 years or more will convert automatically into Class A shares later in the month of October 2018 and will be subject to Class A shares’ lower Rule 12b-1 fees. Thereafter, Class C shares of the Fund will convert automatically to Class A shares of the Fund on a monthly basis in the month of, or the month following, the 10-year anniversary of the Class C shares’ purchase date. Such conversions will be on the basis of the relative net asset values of the two classes, will not be subject to Class A shares’ sales charges and are not expected to be a taxable event for federal income tax purposes. Certain shares that are invested through retirement plans, omnibus accounts or in certain other instances may not automatically convert if the financial intermediary does not have the ability to track purchases to credit individual shareholders’ holding periods. (See “Your Account – Choosing a Shares Class – Sales Charges – Class C – Automatic Conversion of Class C Shares to Class A Shares After 10-Year Holding Period” for more information.)
Example
|
|
1 Year |
3 Years |
5 Years |
10 Years |
|
Class A |
$ 668 |
$ 1,753 |
$ 2,825 |
$ 5,454 |
|
Class C |
$ 301 |
$ 1,484 |
$ 2,734 |
$ 5,718 |
|
Advisor Class |
$ 100 |
$ 1,201 |
$ 2,296 |
$ 5,005 |
|
If you do not sell your shares: |
|
|
|
|
|
Class C |
$ 201 |
$ 1,484 |
$ 2,734 |
$ 5,718 |
IV. The first chart under the “Your Account – Choosing a Share Class” section of the prospectus is replaced with the following:
|
Class A |
Class C |
Advisor Class |
|
Initial sales charge of 5.50% or less |
No initial sales charge |
See "Qualified Investors - Advisor Class" below |
|
Deferred sales charge of 1% on purchases of $1 million or more sold within 18 months |
Deferred sales charge of 1% on shares you sell within 12 months |
|
|
Lower annual expenses than Class C due to lower distribution fees |
Higher annual expenses than Class A due to higher distribution fees. Automatic conversion to Class A shares after approximately ten years, reducing future annual expenses. |
|
V. The first chart under the “Your Account – Choosing a Share Class – Class A & C – Sales Charges – Class A” section of the prospectus is replaced with the following:
2
|
when you invest this amount |
the sales charge makes up this % of the offering price1 |
which equals this % of your net investment1 |
|
Under $50,000 |
5.50% |
5.82% |
|
$50,000 but under $100,000 |
4.50% |
4.71% |
|
$100,000 but under $250,000 |
3.50% |
3.63% |
|
$250,000 but under $500,000 |
2.50% |
2.56% |
|
$500,000 but under $1 million |
2.00% |
2.04% |
1. The dollar amount of the sales charge is the difference between the offering price of the shares purchased (which factors in the applicable sales charge in this table) and the net asset value of those shares. Since the offering price is calculated to two decimal places using standard rounding criteria, the number of shares purchased and the dollar amount of the sales charge as a percentage of the offering price and of your net investment may be higher or lower depending on whether there was a downward or upward rounding.
VI. The following is added to the “Your Account – Choosing a Shares Class – Sales Charges - Class A – Sales Charge Waivers – Waivers for certain investors” section:
• Class C shareholders whose shares are converted to Class A shares after 10 years under the Class C shares’ conversion feature.
VII. The “Notice of Automatic Conversion of Class C Shares to Class A Shares after 10-Year Holding Period” section under the “Your Account” section of the prospectus is removed and the following is added after the “Your Account – Choosing a Shares Class – Sales Charges – Class C – Distribution and Service (12b-1) Fees” section:
Automatic Conversion of Class C Shares to Class A Shares After 10-Year Holding Period
Effective on October 5, 2018, Class C shares’ conversion feature will become effective. The conversion feature provides that Class C shares that have been held for 10 years or more will automatically convert into Class A shares and will be subject to Class A shares’ lower Rule 12b-1 fees (the “Conversion Feature”). On or about October 19, 2018, Class C shares of the Fund that have been outstanding for 10 years or more will automatically convert to Class A shares of the Fund on the basis of the relative net asset values of the two classes. Thereafter, Class C shares of the Fund will convert automatically to Class A shares of the Fund on a monthly basis in the month of, or the month following, the 10-year anniversary of the Class C (or Class C1) shares’ purchase date. The monthly conversion date is expected to occur around the middle of every month and generally falls on a Friday.
Terms of the Conversion Feature. Class C shares that automatically convert to Class A shares of the Fund will convert on the basis of the relative net asset values of the two classes. Shareholders will not pay a sales charge, including a CDSC, upon the conversion of their Class C shares to Class A shares pursuant to the Conversion Feature. The automatic conversion of the Fund’s Class C shares into Class A shares after the 10-year holding period is not expected to be a taxable event for federal income tax purposes. Shareholders should consult with their tax advisor regarding the state and local tax consequences of such conversions.
If you previously owned Class C1 shares of the Fund, the time you held such shares will count towards the 10-year period for automatic conversion to Class A shares. Class C (or Class C1) shares of the Fund acquired through automatic reinvestment of dividends or distributions will convert to Class A shares of the Fund on the conversion date pro rata with the converting Class C shares of the Fund that were not acquired through reinvestment of dividends or distributions.
Class C shares held through a financial intermediary in an omnibus account will be automatically converted into Class A shares only if the intermediary can document that the shareholder has met the required holding period. In certain circumstances, when shares are invested through retirement plans, omnibus accounts, and in certain other instances, the Fund and its agents may not have transparency into how long a shareholder has held Class C (or Class C1) shares for purposes of determining whether such Class C shares are eligible for automatic conversion into Class A shares and the financial intermediary may not have the ability to track purchases to credit individual shareholders’ holding periods. This primarily occurs when shares are invested through certain record keepers for group retirement plans, where the intermediary cannot track share aging at the participant level. In these circumstances, the Fund will not be able to automatically convert Class C shares into Class A shares as described above. In order to determine eligibility for conversion in these circumstances, it is the responsibility of the shareholder or their financial intermediary to notify the Fund that the shareholder is eligible for the conversion of Class C shares to Class A shares, and the shareholder or their financial intermediary may be required to maintain and provide the Fund with records that substantiate the holding period of Class C (and, if applicable, Class C1) shares. In these circumstances, it is the financial intermediary’s (and not the Fund’s) responsibility to keep records and to ensure that the shareholder is credited with the proper holding period. Please consult with your financial intermediary about your shares’ eligibility for this conversion feature.
Also effective October 5, 2018, new accounts or plans may not be eligible to purchase Class C shares of the Fund if it is determined that the intermediary cannot track shareholder holding periods to determine whether a shareholder’s Class C shares are eligible for conversion to Class A shares. Accounts or plans (and their successor, related and affiliated plans) that have Class C (or Class C1) shares of the Fund available to participants on or before October 5, 2018, may continue to open accounts for new participants in that share class and purchase additional shares in existing participant accounts. The Fund has no responsibility for overseeing, monitoring or implementing a financial intermediary’s process for determining whether a shareholder meets the required holding period for conversion.
3
A financial intermediary may sponsor and/or control accounts, programs or platforms that impose a different conversion schedule or different eligibility requirements for the conversion of Class C shares into Class A shares. In these cases, Class C shareholders may convert to Class A shares under the policies of the financial intermediary and the conversion may be structured as an exchange of Class C shares for Class A shares of the Fund. Financial intermediaries will be responsible for making such exchanges in those circumstances. Please consult with your financial intermediary if you have any questions regarding your shares’ conversion from Class C shares to Class A shares.
VIII. The following replaces the first sentence in the “Your Account – Choosing a Shares Class – Reinstatement Privilege” section:
If you sell any class of shares of a Franklin Templeton Investments fund, you may reinvest all or a portion of the proceeds from that sale within 90 days within the same share class (or share class equivalent if the share class you redeemed from is closed to new investors) without an initial sales charge.
IX. The following is added to the “Your Account – Exchanging Shares – Exchange Privilege” section:
Exchange Effects on Class C Conversion Feature. Effective October 5, 2018, if you exchange your Class C shares for the same class of shares of another Franklin Templeton fund, the time your shares are held in the initial Fund will count towards the 10-year period for automatic conversion to Class A shares.
X. The following replaces the first paragraph under the “Your Account – Account Policies – Calculating Share Price – Class A & C” section of the prospectus:
When you buy shares, you pay the "offering price" for the shares. The "offering price" is determined by dividing the NAV per share by an amount equal to 1 minus the sales charge applicable to the purchase (expressed in decimals), calculated to two decimal places using standard rounding criteria. The number of Fund shares you will be issued will equal the amount invested divided by the applicable offering price for those shares, calculated to three decimal places using standard rounding criteria. For example, if the NAV per share is $10.25 and the applicable sales charge for the purchase is 5.50%, the offering price would be calculated as follows: 10.25 divided by 1.00 minus 0.055 [10.25/0.945] equals 10.582011, which, when rounded to two decimal points, equals 10.58. The offering price per share would be $10.58.
XI. The following replaces the chart under the “Your Account – Account Policies – Dealer Compensation – Class A & C” section of the prospectus:
|
|
Class A |
Class C |
|
Commission (%) |
— |
1.001 |
|
Investment under $50,000 |
5.00 |
— |
|
$50,000 but under $100,000 |
4.00 |
— |
|
$100,000 but under $250,000 |
3.00 |
— |
|
$250,000 but under $500,000 |
2.25 |
— |
|
$500,000 but under $1 million |
1.75 |
— |
|
$1 million or more |
up to 1.00 |
— |
|
12b-1 fee to dealer |
0.252, 3 |
1.004 |
1. Commission includes advance of the first year's 0.25% 12b-1 service fee. Distributors may pay a prepaid commission. However, Distributors does not pay a prepaid commission on any purchases by Employer Sponsored Retirement Plans.
2. For purchases at NAV where Distributors paid a prepaid commission, dealers may start to receive the 12b-1 fee in the 13th month after purchase. For purchases at NAV where Distributors did not pay a prepaid commission, dealers may start to receive the 12b-1 fee at the time of purchase.
3. Under the Distribution Plan for Class A, the Fund may pay up to 0.25% to Distributors or others out of which 0.05% generally will be retained by Distributors for its distribution expenses.
4. Dealers may be eligible to receive up to 0.25% at the time of purchase and may be eligible to receive 1% starting in the 13th month. During the first 12 months, the full 12b-1 fee will be paid to Distributors to partially offset the commission and the prepaid service fee paid at the time of purchase. For purchases at NAV where Distributors did not pay a prepaid commission, dealers may start to receive the 12b-1 fee at the time of purchase. After approximately 10 years, Class C shares convert to Class A shares and dealers may then be eligible to receive the 12b-1 fee applicable to Class A.
Please keep this supplement with your prospectus for future reference.
4
FAS5 SA1 0918
SUPPLEMENT DATED SEPTEMBER 10, 2018
TO THE STATEMENT OF ADDITIONAL INFORMATION
DATED OCTOBER 1, 2017
OF
Franklin NextStep Conservative Fund
Franklin NextStep MODERATE Fund
Franklin NextStep GROWTH Fund
(Franklin Fund Allocator Series)
The Statement of Additional Information (“SAI”) is amended as follows:
I. The following replaces the first sentence under “Buying and Selling shares – Initial sales charges:”
The maximum initial sales charge is 5.50% for Class A.
II. The following replaces the second paragraph under “Buying and Selling shares – Initial sales charges – Financial intermediary compensation:”
Distributors may pay the following commissions to financial intermediaries who initiate and are responsible for purchases of Class A shares in the following amounts:
|
Amount of Investment |
For Funds with an initial sales charge of 5.50% (%) |
For Funds with an initial sales charge of 4.25% (%) |
For Funds with an initial sales charge of 2.25% (%) |
|
Under $50,000 |
5.00 |
4.00 |
2.00 |
|
$50,000 but under $100,000 |
4.00 |
4.00 |
2.00 |
|
$100,000 but under $250,000 |
3.00 |
3.00 |
1.75 |
|
$250,000 but under $500,000 |
2.25 |
2.25 |
1.25 |
|
$500,000 but under $1 million |
1.75 |
1.00 |
1.00 |
|
$1 million but under $4 million |
1.00 |
1.00 |
1.00 |
|
$4 million but under $10 million |
1.00 |
1.00 |
1.00 |
|
$10 million but under $50 million |
0.50 |
0.50 |
0.50 |
|
$50 million or more |
0.25 |
0.25 |
0.25 |
Consistent with the provisions and limitations set forth in its Class A Rule 12b-1 distribution plan, the Fund may reimburse Distributors for the cost of these commission payments.
III. The following replaces the first paragraph under “Buying and Selling shares – Contingent deferred sales charge (CDSC) - Class A & C:”
Contingent deferred sales charge (CDSC) - Class A & C If you invest any amount in Class C shares, $1 million or more in Class A shares of mutual funds with a maximum initial sales charge of 5.50% or $500,000 or more for mutual funds with a maximum initial sales charge of 4.25% or 2.25%, either as a lump sum or through our cumulative quantity discount or letter of intent programs, a CDSC may apply on any Class A shares you sell within 18 months and any Class C shares you sell within 12 months of purchase. The CDSC is 1% of the value of the shares sold or the net asset value at the time of purchase, whichever is less, for Class A shares of mutual funds with a maximum initial sales charge of 5.50% and for Class C shares. The CDSC is 0.75% of the value of the shares sold or the net asset value at the time of purchase, whichever is less, for Class A shares of mutual funds with a maximum initial sales charge of 4.25% or 2.25%; however this CDSC will change to 1.00% on or after March 10, 2020.
Please keep this supplement with your SAI for future reference.
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