“Bull markets are born on pessimism, · The 2013 Franklin Templeton Global Investor Sentiment Survey designed in partnership with ORC International. Included 501 telephone respondents

“ Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”

—Sir John Templeton,

Templeton Funds Founder and Former Chairman

franklintempleton.ca Time to Take Stock 1

The pullback of the stock market in 2008 left a lasting impression on many

investors. The result: a hangover of anxiety about investing in equities and

trillions of dollars sitting in low-yielding savings instruments.1

It’s time to take stock of the current situation facing investors, the human

behaviour that helped land us here and how investors can rebuild their

portfolios to reach their long-term goals.

1] The Investor’s Dilemma See why investors today face a difficult dilemma—at current yields, their investments in

many traditional fixed income vehicles are essentially at a standstill, while their long-term investment goals continue to require capital growth.

2] How We Got Here Learn about the instinctive behaviours that impact how we make decisions. Having a greater

understanding of these behaviours may help you make better decisions when it comes to investing.

3] What Most Investors Are Missing While it may feel like the economy is still struggling, there are many positive developments

that may surprise you.

4] Taking the Next Step Review simple strategies for getting back into the stock market, at your own pace, with your

investment advisor and Franklin Templeton mutual funds.

1. Money Market Accounts and CDs from the U.S.; Money Market Funds and GICs from Canada. As of June 30, 2015.

2 Time to Take Stock franklintempleton.ca

2. Sources: As of June 30, 2015. Money Market Funds: Morningstar Research Inc., Canadian Money Market Funds are represented by the Morningstar Money Market CAD Peer Group Average which contained 207 funds. 1-Year GICs: Bank of Canada. 10-Year Government Bonds: Bloomberg.

The Investor’s DilemmaMarket volatility may have led many investors to flee the stock market into fixed income investments, such as money market funds, GICs and government bonds. Historically low interest rates, along with increased demand, have helped drive down yields. For investors, this means their investments may essentially be at a standstill, but their goals—buying a home, saving for university, retirement and so on—may still require capital growth.

THE $10,000 TRUTH

As of June 30, 2015, if you invested $10,000 in the average money market fund, a one-year GIC or 10-year government bonds for one year, you would earn enough to buy the items in the chart below. Factor in inflation and taxes and these meager yields look even worse.

What a $10,000 Investment Would Yield After One Year 2

Yields as of June 30, 2015

10-Year Government Bonds1-Year GICsMoney Market Funds

0.33%

0.88%

1.68%

1]


AVAILABILITY BIASOur thinking is greatly influenced by what is personally most relevant, recent or dramatic. And little has been more dramatic than the unprecedented events of the 2008 financial crisis that continues to be at the forefront of investors’ minds.

LINGERING PESSIMISM GUIDES PEOPLE’S MONEY

Evidence that post-crisis pessimism is starting to fade is only now becoming apparent as shown below by the positive inflows into equity funds in 2013, 2014 and the first half of 2015.

Canadian Equity Fund Net Flows3

3. Source: Investor Economics Inc. As of June 30, 2015.

How We Got HereWE’RE ONLY HUMAN

The field of behavioural finance examines the psychological and behavioural variables that can come in to play with investing. As humans, our decisions can be influenced by emotions, biases and assumptions, especially when it comes to money. Recognizing that you may be subject to these factors may help you make better investment decisions.

2]

“ The investor’s chief

problem—and even

his worst enemy—is

likely to be himself.”

—BENJAMIN GRAHAM

2008 2009 2010 2011 2012

2013 2014

-$3.95 Billion

-$10.59 Billion

-$7.51 Billion

-$2.93 Billion

-$6.28 Billion

$12.12 Billion

$19.10 Billion

YTD 2015

$9.84 Billion


THE DISCONNECT BETWEEN PERCEPTION AND REALITY

Franklin Templeton surveyed one thousand Americans in 2010, 2011, 2012, 2013 and 2014 and asked them how the stock market finished at the end of the previous year. Until very recently, nearly half of the respondents for each survey answered that the stock market was down or flat.

PERCEPTION—What U.S. Investors Believe Happened

4. Sources: The 2010 Franklin Templeton Global Investor Sentiment Survey, designed in partnership with ORC International, included 1,010 telephone responses from participants age 18 and older in the U.S. from 3/25/10 to 3/28/10. The 2011 Franklin Templeton Global Investor Sentiment Survey, designed in partnership with ORC International, included 1,049 online responses from participants age 18 and older in the U.S. from 1/6/11 to 1/7/11. The 2012 Franklin Templeton Global Investor Sentiment Survey, designed in partnership with Duke University professor Dan Ariely and Qualtrics, included 1,142 online responses from participants age 18 and older in the U.S. from 1/30/12 to 2/13/12. The 2013 Franklin Templeton Global Investor Sentiment Survey designed in partnership with ORC International. Included 501 telephone respondents from participants aged 25 years and older in the U.S. with investable assets of $25,000 or greater from 1/14/13 to 1/25/13. The 2014 Franklin Templeton Global Investor Sentiment Survey designed in partnership with ORC International. Included 501 telephone respondents from participants aged 25 years and older in the U.S. with investable assets of $25,000 or greater from 1/14/14 to 1/25/14. The 2015 Franklin Templeton Global Investor Sentiment Survey designed in partnership with ORC International. Included 501 telephone respondents from participants aged 25 years and older in the U.S. with investable assets of $25,000 or greater from 1/14/15 to 1/25/15.5. Source: © 2015 Morningstar. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Indexes are unmanaged and one cannot invest directly in an index.

REALITY—How the Market Performed

The chart below shows that while U.S. stocks experienced a severe downturn in 2008, performance was positive in the following five years. Misperceptions about stock market returns continue to exist.

S&P 500 Annual Returns5

2008 2009

26.5%

2010 2011 2012 2013

-37.0%

15.1%

2.1%

16.0%

32.4%

Percentage of Survey Respondents Who Said the Stock Market Was Down or Flat4

66%2009

49%2010

70%2011

31%2012

16%2013


LOSS AVERSION Studies have shown that the pain of a loss is much stronger than the reward felt from a gain. In fact, the desire to avoid market losses has caused many investors to move their money out of stocks and into low-yielding fixed income vehicles, trading potential market losses for potential negative real returns once the impact of inflation is factored in.

PERCEIVED SAFETY MAY COME AT A COST

As investors, we may make financial decisions to avoid the pain of loss. Investors’ reluctance to get back into the stock market is evidence of this behaviour.

However, this perceived safety may come at a cost. The chart below shows the average money market fund yield over the past 10 years along with the inflation-adjusted yield. Although some investors may consider money market funds a “more secure” investment option while they wait out stock market volatility, they may not be aware of the potential erosion of their purchasing power.

Money Market Funds’ Average Yield Before and After Inflation6

10-Year Period Ended June 30, 2015

The long wait. If you held your money in cash, it would take over

207 years for your money to double7

6. Sources: Money Market Funds – Morningstar Research Inc. as of June 30, 2015. Canadian Money Market Fund Yield of 0.33% is based on the Morningstar Money Market CAD Peer Group Average which contained 207 funds. Inflation – Bank of Canada, as of June 30, 2015. Based on Canadian Consumer Price Index year-over-year change.7. Average Time to Double Investment is calculated using the following formula: (Natural Log (2) / Natural Log (1+Yield)), Formula for Natural Log is LN. Amount earned on a 1-Year $10,000 investment assumes the investment is made on the as of date below. As of June 30, 2015.

-4%

-2%

0%

2%

4%

1/2005 6/2006 11/2007 4/2009 9/2010 2/2012 7/2013 6/2015

0.33%

In�ation-Adjusted

-0.66%


HERDINGAs social animals, it’s not easy to stand behind an opinion that differs from the majority. We are programmed to follow the crowd and tend to assume the consensus view to be correct. Unfortunately, when it comes to investing, herd mentality may significantly impact long-term results.

THE PROBLEM OF GOING WITH THE FLOW

In the chart below, the orange line represents performance of the S&P/TSX since December 31, 1990 and the green shading represents flows by investors into equity funds. When the index performed well, there was an influx of money to equity funds (buying high)—and when the market pulled back, investors withdrew their money from equities (selling low) and rushed into bond funds.

Canadian Investors Following the Herd Historically Bought High and Sold LowS&P/TSX Composite Index Performance vs. Equity and Bond Fund Net New Flows8

8. Sources: S&P/TSX Composite Index: © 2015 Morningstar Research Inc.; Equity and Bond Fund Flows: Investor Economics. Flows are represented by monthly 12-month net new cash flows. Indexes are unmanaged and one cannot invest directly in an index. As of June 30, 2015.

12/1991 1994 1998 2002 2006 2010 6/2015

-$40,000

$40,000

-$20,000

$10,000Investment

$60,000

$100,000

Equity & BondFund Flows

-$50 Billion

$150 Billion

$50 Billion

$250 Billion

$350 Billion

$450 Billion

-$250 Billion

-$150 Billion

S&P/TSX Composite Index PerformanceEquity Fund FlowsBond Fund Flows

$20,000

$80,000

$550 Billion

S&P/TSX Composite Index

BUYING HIGH

SELLING LOW


9. Source: Bloomberg as of June 30, 2015. Indexes are unmanaged and one cannot invest directly in an index.

INVESTOR RETURNS HAVE BEEN SIGNIFICANTLY LOWER THAN MARKET RETURNS

Herd-like behaviour may have caused many investors to pull their money out of equities at the wrong time and miss some of the best days in the market.

The Benefits of Staying InvestedS&P/TSX Composite TRI Returns 20-Year Period Ended June 30, 20159

“ To buy when others

are despondently

selling and to sell

when others are

buying requires the

greatest fortitude

and pays the greatest

ultimate rewards.”

—SIR JOHN TEMPLETON

Missed the Top 10 Days Missed the Top 15 Days Missed the Top 20 DaysMissed the Top 5 DaysStayed Fully Invested

8.4%

6.5%

5.2%

4.1%

3.1%


What Most Investors Are Missing... The truth is there are positive things happening in the U.S. and around the globe that many investors

may be overlooking.

3]

Global Consumption Is IncreasingChina’s Monthly Car Sales Outpace Those of the U.S.13

2.0 MILLION

1.4MILLION

THE WORLD’S MIDDLE CLASS IS PROJECTED TO REACH 3.8 BILLION BY THE YEAR 202514

...ABOUT THE GLOBAL ECONOMY

...ABOUT U.S. STOCKS

U.S. Household Debt Service Has Been Decreasing11

9.9%12/31/2014

13.2%12/31/07

...ABOUT THE U.S. ECONOMY

S&P 500 COMPANIES’CASH EXCEEDSLONG-TERM AVERAGE15

Based on Total Cash as a Percentage of Total Assets

S&P 500 COMPANIES’DIVIDEND PAYOUTPOTENTIAL APPEARS

STRONGBased on current dividend payout ratio compared to 30-year average

12

Unemployment Has Declined from Its Peak11

10.0%10/31/09

5%

6%

2010 2011 2012 6/2015

7%

10%

9%

5.3%6/30/15

8%

2009

Equity Valuations Still Below Long-Term Average16

S&P 500 1-Year Price to Book Ratio (June 30, 2015)

1995 2000 20102005 6/2015

0.00

1.00

2.00

3.00

6.00

5.00

4.00

2.7As of 6/30/15

3.020-Year Average

5.112/31/99

10. Source: U.S. Bureau of Labor Statistics.11. Source: Federal Reserve (most recent data available). Based on the ratio of debt payments to disposable personal income.12. Source: Compustat via FactSet. Based on a current dividend payout ratio of 39% as of Q2 2015 compared to the 30-year average dividend payout ratio of 51%. © 2015 FactSet Research Systems Inc., all rights reserved.

3] What Most Investors Are Missing...The truth is there are positive things happening in the U.S. and around the globe that many investors may be overlooking.


What Most Investors Are Missing... The truth is there are positive things happening in the U.S. and around the globe that many investors

may be overlooking.

3]

Global Consumption Is IncreasingChina’s Monthly Car Sales Outpace Those of the U.S.13

2.0 MILLION

1.4MILLION

THE WORLD’S MIDDLE CLASS IS PROJECTED TO REACH 3.8 BILLION BY THE YEAR 202514

...ABOUT THE GLOBAL ECONOMY

...ABOUT U.S. STOCKS

U.S. Household Debt Service Has Been Decreasing11

9.9%12/31/2014

13.2%12/31/07

...ABOUT THE U.S. ECONOMY

S&P 500 COMPANIES’CASH EXCEEDSLONG-TERM AVERAGE15

Based on Total Cash as a Percentage of Total Assets

S&P 500 COMPANIES’DIVIDEND PAYOUTPOTENTIAL APPEARS

STRONGBased on current dividend payout ratio compared to 30-year average

12

Unemployment Has Declined from Its Peak11

10.0%10/31/09

5%

6%

2010 2011 2012 6/2015

7%

10%

9%

5.3%6/30/15

8%

2009

Equity Valuations Still Below Long-Term Average16

S&P 500 1-Year Price to Book Ratio (June 30, 2015)

1995 2000 20102005 6/2015

0.00

1.00

2.00

3.00

6.00

5.00

4.00

2.7As of 6/30/15

3.020-Year Average

5.112/31/99

13. Sources: China Automotive Information Net and Bloomberg, as of June 30, 2015. Based on a six-month rolling average.14. Sources: Middle Class Data: Homi Kharas, Brookings Institution, 2012; Population Data: World Bank: Health Nutrition and Population Statistics: Population estimates and projections.15. Source: Ned Davis Research Group, Inc. Based on historical data since 1977. The historical average cash level for 3/31/77–June 30, 2015 was 9.91%; as of June 30, 2015 it was 13.79%.

16. Source: FactSet. ©2015 FactSet Research Systems Inc. All rights reserved. The information contained herein: (1) is proprietary to FactSet Research Systems Inc. and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither FactSet Research Systems Inc. nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. Indexes are unmanaged and one cannot invest directly in an index.


Volatility has kept many investors on the sidelines in low-yielding investments. While “playing it safe” may make sense for investors with short time horizons, this approach leaves long-term investors at risk of not achieving their investment goals.

Armed with the knowledge that we make decisions based on emotion, and that there are many positive signs that point to a potentially bright future for equities, now may be a good time to talk to your investment advisor about stepping back into the stock market.

Taking the Next Step 4]

STEPEarn Income. Work with your investment

advisor to move a portion of your money

out of fixed income investments and

into a balanced fund (a fund that invests

in both stocks and bonds) with a focus

on income.

STRATEGIES TO RE-ENTER THE STOCK MARKET


RUNCapitalize on Opportunity. If you’re ready

to take advantage of potential opportunities

and move back into the stock market

before the rest of the herd, now may be

an opportune time. Talk to your investment

advisor about a strategy that makes sense

based on your investment goals.

WALKBuild a Position. Move more confidently

and develop a plan with your investment

advisor to systematically move your money

off the sidelines and back into equity funds.

By building an equity position using periodic

investments, you may be able to buy more

at market dips and less at market peaks.

Periodic investing plans do not assure a profit and do not

protect against a loss in a declining market.

No matter how you choose to get back into the

stock market—stepping, walking or running—

Franklin Templeton has the funds to get

you started.

TO LEARN MORE about Franklin Templeton mutual funds, talk to your

investment advisor today. An investment advisor can prove invaluable in helping

you define your needs and narrowing the search for investments suitable to your

unique financial objectives.


Over $1trillion (CAD)

ASSETS UNDER MANAGEMENT

65+YEARS OF EXPERIENCE

Offices in over 30COUNTRIES AROUND THE WORLD

150+COUNTRIES SERVED

A globally diversified business18 with:

Our Global Presence

A Premier Investment Management OrganizationFor more than six decades, individuals and institutions around the world have looked to Franklin Templeton Investments17 as a trusted partner in asset management. With an unwavering focus on investment excellence, we offer a unique combination of experience, global perspective and a consistent, disciplined approach to investing that has proven itself across market cycles.

17. Franklin Resources, Inc. is a global investment management organization operating as Franklin Templeton Investments. Franklin Templeton Investments provides global and domestic investment management solutions managed by its Franklin, Templeton, Franklin Mutual Series, Fiduciary Trust, Darby and Franklin Bissett investment teams.18. As of June 30, 2015.

ARGENTINA AUSTRALIA AUSTRIA BAHAMAS BELGIUM BRAZIL CANADA CHINA COLOMBIA FRANCE GERMANY HONG KONG HUNGARY INDIA

ITALY JAPAN LUXEMBOURG MALAYSIA MEXICO NETHERLANDS POLAND ROMANIA RUSSIA SINGAPORE SLOVAKIA SOUTH AFRICA SOUTH KOREA

SPAIN SWEDEN SWITZERLAND THAILAND TURKEY UNITED ARAB EMIRATES UNITED KINGDOM UNITED STATES URUGUAY VIETNAM

Focus on Investment ExcellenceAt the core of our firm, you’ll find multiple independent investment teams—each with a focused area of expertise—from traditional to alternative strategies and multi-asset solutions. And because our portfolio groups operate autonomously, their strategies can be combined to deliver true style and asset class diversification.

All of our investment teams share a common commitment to excellence grounded in rigorous, fundamental research and robust, disciplined risk management. Decade after decade, Franklin Templeton has applied consistent, research-driven processes seeking to deliver strong, long-term results for our clients.

Global Perspective Shaped by Local ExpertiseIn today’s complex and interconnected world, smart investing demands a global perspective. Franklin Templeton pioneered international investing over 60 years ago, and

At Franklin Templeton Investments, we’re dedicated to one goal: delivering exceptional asset management for our clients. By bringing together multiple, world-class investment teams in a single firm, we’re able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the world’s largest asset managers. This has helped us to become a trusted partner to individual and institutional investors across the globe.

our expertise in emerging markets spans more than a quarter of a century. Today, our investment professionals are on the ground across the globe, spotting investment ideas and potential risks firsthand. These locally based teams bring in-depth understanding of local companies, economies and cultural nuances, and share their best thinking across our global research network.

Strength and ExperienceFranklin Templeton is a global leader in asset management serving clients in over 150 countries.19 We run our business with the same prudence we apply to asset management, staying focused on delivering relevant investment solutions, strong long-term results and reliable, personal service. This approach, focused on putting clients first, has helped us to become one of the most trusted names in financial services.

Franklin Templeton InvestmentsGain From Our Perspective®

19. As of 6/30/14. Clients are represented by the total number of unitholder accounts.

Franklin Templeton Investments Corp.5000 Yonge Street, Suite 900Toronto, ON M2N 0A7Client Services: (800) 387-0830Sales Team: (800) FT-FUNDS (383-8637)franklintempleton.ca

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and does not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

© 2015 Franklin Templeton Investments Corp. All rights reserved. TSCA BE 06/15

At Franklin Templeton Investments, we’re dedicated to one goal: delivering exceptional asset management for our clients. By bringing together multiple, world-class investment teams in a single firm, we’re able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the world’s largest asset managers. This has helped us to become a trusted partner to individual and institutional investors across the globe.

“Bull markets are born on pessimism, · The 2013 Franklin Templeton Global Investor Sentiment Survey designed in partnership with ORC International. Included 501 telephone respondents

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