A NEW ALTERNATIVE FOR TODAY S INVESTOR. Franklin K2 Multi-Strategy Alternatives Fund

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1 A NEW ALTERNATIVE FOR TODAY S INVESTOR Franklin K2 Multi-Strategy Alternatives Fund

2 MOVING BEYOND THE TRADITIONAL Concerns about the low growth environment, geopolitical instability and interest rate uncertainty have many investors looking for different ways to reduce the impact of market volatility on their portfolios. Hedge strategies, one type of alternative investment, may help by offering investors: 1 2 New Sources of Returns 3 Potential for Improved Risk/Return Profile for Traditional Portfolios Additional Diversification The Franklin K2 Multi-Strategy Alternatives Fund, a fund that seeks to provide investors with the benefits of alternative strategies with lower volatility relative to broader equity markets in a mutual fund structure, is now available to accredited Canadian investors. Key areas of discussion include: The rationale for hedge strategies Benefits of a multi-strategy approach The advantages of a mutual fund structure Why consider Franklin K2 Multi-Strategy Alternatives Fund WHY CONSIDER HEDGE STRATEGIES? FOR THE BETTER PART OF 20 YEARS HEDGE STRATEGIES HAVE OFFERED LONG-TERM LIKE RETURNS WITH LESS RISK Risk vs. Return Comparison (CDN$) (20-Year Period Ending December 31, 2018) Return 9% 6% Hedge Strategies Canadian Equity US Equity 1994 Global Equity 3% 6% 9% 12% 15% 18% Risk For illustrative purposes only; not representative of the Fund s portfolio composition or performance. Past performance is no guarantee of future results. 1. Source: Morningstar Research Inc. Canadian Equity is represented by the S&P/TSX Composite TR Index. US Equity is represented by the S&P 500 Index. Global Equity is represented by the MSCI World Index. Hedge Strategies are represented by the HFRI Fund Weighted Composite Index. Indexes are unmanaged and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. While the information is based on index returns and does not represent the fund s performance, it provides a general indication of the risk/return profile of hedge fund strategies. Returns data represents average annual total returns and assumes reinvestment of interest or dividends. Risk is measured by the annualized standard deviation of monthly total returns.

3 Hedge Strategies Can Help Mitigate Risk in Volatile Markets Hedge strategies may help portfolios weather periods of weak performance. As shown in the charts below, hedge strategies have demonstrated relative strength during bouts of negative stock and bond market returns over the last 25 years. HEDGE STRATEGIES HAVE HISTORICALLY OUTPERFORMED DURING MARKET DOWNTURNS² Calendar Years of Negative Performance for Canadian Equities 25 Year Period Ending December 31, 2018 (CDN$) Hedge Strategies Canadian Equity % % -14.8% 1.4% 2.6% -1.6% 4.6% -12.6% -1.5% -12.4% % -5.3% -4.5% -8.7% -8.3% -8.9% HEDGE STRATEGIES HAVE HISTORICALLY OUTPERFORMED DURING MARKET DOWNTURNS 3 Calendar Years of Negative Performance for Canadian Fixed Income 25 Year Period Ending December 31, 2018 (CDN$) Hedge Strategies Canadian Fixed Income 35% % 25% 2 15% 1 9.1% 5% 4.1% -5% -4.3% -1.1% -1.2% For illustrative purposes only; not representative of the Fund s portfolio composition or performance. Past performance is no guarantee of future results. Source: Morningstar Research Inc. Canadian Equity is represented by the S&P/TSX Composite TR Index. Canadian Fixed Income is represented by the FTSE TMX Canada Universe Bond Index. Hedge Strategies are represented by the HFRI Fund Weighted Composite Index. Indexes are unmanaged and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. Unlike most asset class indexes, HFR Index returns reflect fees and expenses. franklintempleton.ca Franklin K2 Multi-Strategy Alternatives Fund 1

4 Hedge Strategies Have Helped to Smooth Performance ROLLING 3-YEAR RETURN INVESTMENT CDN$ (20 YEARS ENDING DECEMBER 31, 2018) Return Global Equity Hedge Strategies Best 25.54% 15.74% Worst % -2.18% Average 4.83% 4.85%...and Reduce Risk Over the Long Term ROLLING 3-YEAR STANDARD DEVIATION CDN$ (20 YEARS ENDING DECEMBER 31, 2018) 3 16% 12% 8% 4% Risk Global Equity Hedge Strategies Best 15.65% 9.24% Worst 6.63% 4.34% Average 11.25% 7.11% 3. Source: Morningstar Research Inc. Diversification does not guarantee a profit or protect against a loss. Global Equity is represented by the MSCI World Index. Hedge Strategies are represented by the HFRI Fund Weighted Composite Index. Indexes are unmanaged and one cannot invest directly in an index. Returns data represents cumulative total returns and assumes reinvestment of interest or dividends. They do not reflect any fees, expenses or sales charges. Unlike most asset class indexes, HFR Index returns reflect fees and expenses. 2 Franklin K2 Multi-Strategy Alternatives Fund franklintempleton.ca

5 WHY CONSIDER A MULTI-STRATEGY APPROACH? Hedge strategies tend to focus on objectives designed to address key investor goals, such as downside protection and absolute return among others. They may invest in traditional assets, such as stocks and bonds, and non-traditional assets. In addition, sophisticated investment techniques and derivative investments may be used to capture specific types of investing opportunities. Four Hedge Fund Strategies LONG SHORT RELATIVE VALUE Makes long and short investments in common stocks and indices GLOBAL MACRO FRANKLIN K2 MULTI-STRATEGY ALTERNATIVES FUND Intends to profit from pricing inefficiencies EVENT DRIVEN Focuses on macroeconomic opportunities Invests in securities of companies undergoing corporate events THE CHALLENGE: DIFFERENCES IN INDIVIDUAL STRATEGY BEHAVIOUR CAN CAUSE PERFORMANCE DIFFERENTIAL Annual Returns (%) (CDN$) Ranked in Order of Performance from Best to Worst (10 Years Ending 2018) RELATIVE VALUE EVENT DRIVEN RELATIVE VALUE RELATIVE VALUE LONG SHORT GLOBAL MACRO RELATIVE VALUE EVENT DRIVEN LONG SHORT RELATIVE VALUE 25.81% 11.86% 0.15% 10.59% 14.28% 5.58% -0.29% 10.57% 13.29% -0.24% EVENT DRIVEN RELATIVE VALUE EVENT DRIVEN EVENT DRIVEN EVENT DRIVEN RELATIVE VALUE LONG SHORT RELATIVE VALUE EVENT DRIVEN EVENT DRIVEN 25.04% 11.43% % 12.51% 4.02% -0.97% 7.67% 7.59% -2.35% LONG SHORT LONG SHORT GLOBAL MACRO LONG SHORT RELATIVE VALUE LONG SHORT GLOBAL MACRO LONG SHORT RELATIVE VALUE GLOBAL MACRO 24.57% 10.45% -4.16% 7.41% 7.07% 1.81% -1.26% 5.47% 5.14% -3.63% GLOBAL MACRO GLOBAL MACRO LONG SHORT GLOBAL MACRO GLOBAL MACRO EVENT DRIVEN EVENT DRIVEN GLOBAL MACRO GLOBAL MACRO LONG SHORT 4.34% 8.06% -8.38% -0.06% -0.44% 1.08% -3.55% 1.03% % BEST-WORST PERFORMANCE GAP 21.47% % 10.65% 14.72% % 9.53% 11.09% 6.7 Diversification across multiple hedge strategies provides access to potentially stronger performing strategies while seeking to reduce the impact of underperforming segments of the hedge strategies market. 4. Source: Morningstar Research Inc. Long Short Equity is represented by HFRI Equity Hedge (Total) Index; Event Driven is represented by HFRI Event Driven (Total) Index; Global Macro is represented by HFRI Macro (Total) Index; Relative Value is represented by HFRI Relative Value (Total) Index. Indexes are unmanaged and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. For illustrative purposes only; not representative of the Fund s portfolio composition or performance. Past performance is no guarantee of future results. franklintempleton.ca Franklin K2 Multi-Strategy Alternatives Fund 3

6 WHY CONSIDER A MUTUAL FUND STRUCTURE? Hedge funds are still widely viewed as tools for ultra-high net worth and institutional investors. And due to their high investment minimums, low transparency and limited liquidity, hedge funds were not viable options for many investors. Fortunately, with solutions such as the Franklin K2 Multi-Strategy Alternatives Fund, these barriers are being removed as Canadians can now access hedge strategies through a traditional mutual fund structure. Here are some key benefits: Reasons to Consider a Mutual Fund Structure Instead of a Traditional Hedge Fund Hedge Strategies in a Mutual Fund Traditional Hedge Fund ACCESSIBILITY: Is there a low investment minimum? The lower investment minimum allows more investors to access a sophisticated investment strategy, normally reserved for institutions and ultra high net worth investors. LIQUIDITY: Can investors purchase and redeem on a daily basis? The fund is priced each day providing investors liquidity and pricing transparency that many other hedge strategies do not offer. TRANSPARENCY: Are holdings reported on a quarterly basis? Fund s holdings published each quarter, giving you a clear view of what you re investing in. 4 Franklin K2 Multi-Strategy Alternatives Fund franklintempleton.ca

7 WHY CONSIDER FRANKLIN K2 MULTI-STRATEGY ALTERNATIVES FUND? Active Allocation Among Strategies to Enhance Diversification K2/D&S Management Co. LLC. scours its database of 10,000+ hedge fund managers and conducts rigorous, in-depth research to determine which managers are selected for the underlying fund in which Franklin K2 Multi-Strategy Alternatives Fund invests. Based on the risks and opportunities in the market, the team has the flexibility to allocate assets across different hedge strategies and managers. By actively managing the portfolio allocations, the Franklin K2 investment team can help the fund participate in market gains and protect against losses. THE UNDERLYING FUND INVESTS IN THE FOUR MAIN HEDGE STRATEGIES As of December 31, 2018 GLOBAL MACRO Target Allocation 5 Actual Allocation % PORTFOLIO ALLOCATIONS ARE SHIFTED TO CAPITALIZE ON CHANGING MARKET OPPORTUNITIES Hypothetical scenario illustrating how the Underlying Fund may rebalance based on market conditions % LONG SHORT 25% % 5 EVENT DRIVEN % RELATIVE VALUE 3 45% -0.24% 25% Global Financial Downturn Market Recovery Strong Financial Market Why Franklin K2 Advisors: An Unwavering Focus on Hedge Fund Investing The Franklin K2 Investment team joined Franklin Templeton in 2012 and brought with them over 20 years experience focused solely on hedge fund investing. Over its history, Franklin K2 has grown into one of the largest providers of its type, offering alternative solutions to its client base. GLOBAL RESOURCES: More than 100+ employees working in offices around the world are solely dedicated to K2 investment strategies. The team benefits from the global risk management, compliance, trading, technology and operations resources at Franklin Templeton Investments. EXPERTISE: Developing institutional products and customized solutions for over 20 years. EXPERIENCE: The underlying fund s lead portfolio managers have over 90 years of combined industry experience. DEDICATED: Solely focused on hedge strategies, the team regularly reviews a universe of over 10,000 hedge fund managers to determine the 8 to 10 managers that are selected for the portfolio. 5. Target Allocations reflect end of period target allocations. The Fund may shift allocations among strategies at any time. Further, K2 may determine in its sole discretion to not allocate to one or more of the strategies and/or to add new strategies. Accordingly, the above target allocations are presented for illustrative purposes only, and should not be viewed as predictive of the ongoing composition of the Underlying Fund s portfolio (and its managers), which may change at any time. 6. The Franklin K2 Multi-Strategy Alternatives Fund invests substantially all of its assets in units of FTIF Franklin K2 Alternative Strategies Fund (the Underlying Fund), a fund organized under the laws of Luxembourg as a Société d Investissement à Capital Variable (SICAV) that invests in a wide range of non-traditional or alternative strategies. Above is an outline of the investments held in FTIF Franklin K2 Alternative Strategies Fund. Weightings as percentage of invested capital into fund managers (sub-advisors or co-managers). Holdings are subject to change. Due to rounding, the strategy breakdown may not equal Hypothetical investment scenario only. For illustrative purposes only. Actual allocations may vary. franklintempleton.ca Franklin K2 Multi-Strategy Alternatives Fund 5

8 Speak to your financial advisor today to determine if Franklin K2 Multi-Strategy Alternatives Fund is right for you! 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. Franklin K2 Multi-Strategy Alternatives Fund is sold pursuant to the Offering Memorandum exemptions to qualified Canadian investors. Each investor must therefore qualify for an Offering Memorandum exemption in their jurisdiction of residence. Generally, this requires that an investor qualify as an accredited investor (as defined in securities legislation) and purchase the Fund as principal. Effective March 11, 2019, Franklin K2 Alternative Strategies Fund was renamed Franklin K2 Multi-Strategy Alternatives Fund. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the Offering Memorandum before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Franklin Templeton Investments Canada is a business name used by Franklin Templeton Investments Corp. Franklin Templeton Investments Canada 200 King Street West, Suite 1500 Toronto, ON M5H 3T4 fax (866) (800) franklintempleton.ca 2019 Franklin Templeton Investments Corp. All rights reserved. K2ASF CINVE 12/18