ASSET ALLOCATION MADE EASY

Transcription

1 ASSET ALLOCATION MADE EASY

2 REACHING YOUR GOALS AT YOUR PACE Most people can rattle off their investment goals: retirement, college tuition, a new house. That s easy. What s harder is successfully reaching these financial milestones with a comfortable level of volatility. This is what a good asset allocation strategy is all about finding a diversified mix of investments that will let you reach your goals, while giving equal consideration to your tolerance for risk. The Real Reason Risk Matters Many investors run into problems when they overestimate their ability to deal with market declines. Consider the experience of the average investor during the period of , as shown below. While the stock market, as measured by the S&P 500 Index, grew 7.7% per year on average, investors during this period earned an average annual total return of just 4.8%. 1 One reason may be that some investors jumped in and out of the market based on short-term shifts, missing out on longer-term opportunities. A good asset allocation plan may help you better weather temporary market storms, so you can reach the long-term results you are after. You should note, however, that asset allocation does not guarantee a profit or protect against a loss. DOWNSIDE OF NOT STICKING TO A PLAN Average Annual Total Returns (20-Year Period Ended 12/31/2016) 7.7% 4.8% S&P 500 Index 1 Average Equity Fund Investor s Annualized Return 1 These charts are for illustrative purposes only and do not represent the performance of any Franklin, Templeton or Franklin Mutual Series fund. Determining your financial goals may not be too complicated, but developing an appropriate asset allocation plan designed to help you meet those goals can be. Working with a financial professional can help. They offer market knowledge and planning expertise, and will take into account your individual investment needs to create an investment strategy tailored to your specific investment goals and risk tolerance. Chances are your financial advisor will also want to review your portfolio with you regularly to determine if adjustments are needed to keep your asset allocation plan on target or make changes as your life goals/circumstances change. 1. Source: Quantitative Analysis of Investor Behavior, 2016, DALBAR, Inc. Most recent data available. Indexes are unmanaged and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. Not FDIC Insured May Lose No Bank Guarantee

3 ASSET ALLOCATION AT WORK The charts below show how three asset allocation model portfolios performed historically versus the MSCI All Country World Index (global stocks) and the Bloomberg Barclays Multiverse Index (global bonds) over the 15-year period ended December 31, Please note not only the total returns of these hypothetical investments, but also the standard deviations, which measure return volatility and consistency. ASSET ALLOCATION MODELS HISTORICAL PERFORMANCE 2 15-Year Period Ended December 31, 2016 Portfolio 40% 60% 15-Year Average Annual Total Return 6.12% 4.96% 6.47% Best One-Year Return 21.80% 35.41% 16.05% % % Worst One-Year Return % % -3.79% Standard Deviation of Returns % 15.63% 5.77% 60% 40% 15-Year Average Annual Total Return 6.44% 4.96% 6.47% Best One-Year Return 26.08% 35.41% 16.05% Worst One-Year Return % % -3.79% % % Standard Deviation of Returns % 15.63% 5.77% 80% 20% 15-Year Average Annual Total Return 6.57% 4.96% 6.47% Best One-Year Return 30.36% 35.41% 16.05% Worst One-Year Return % % -3.79% % % Standard Deviation of Returns % 15.63% 5.77% Standard deviation of returns measures the degree to which an investment s monthly returns vary from the mean. In general, the higher an investment s standard deviation, the greater its volatility. These charts are for illustrative purposes only and do not represent the performance of any Franklin, Templeton or Franklin Mutual Series fund. 2. Source: 2017 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. are represented by the MSCI AC World Index, a free float-adjusted, market capitalization-weighted index that is designed to measure the equity market performance of global developed and emerging markets. are represented by the Bloomberg Barclays Multiverse Index which provides a broad-based measure of the global fixed-income bond market. Portfolios were rebalanced annually. Index data represents average annual total returns and includes reinvestment of dividends. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. These model portfolios should not be considered an investment recommendation for a specific asset allocation strategy. Past performance is not an indicator or a guarantee of future performance. 3. Standard deviation is a statistical measurement of the range of an investment s monthly total returns over a 15-year period. franklintempleton.com Asset Allocation Made Easy 1

4 WHY DIVERSIFY? BECAUSE WINNERS ROTATE. Perhaps nothing better illustrates the need for an asset allocation strategy than the chart below, which shows how various asset classes performed on a year-by-year basis over the last 20 years. The bestperforming asset class for each calendar year is at the top of each column. Please remember, past performance does not guarantee future results. Annual Return of Key Asset Classes Between Ranked in Order of Performance from Best to Worst Best % 42.16% 43.09% 22.83% 14.02% 10.26% 48.54% 22.25% 14.02% 26.86% 33.36% 28.58% 28.25% 11.63% 8.44% % 47.25% 20.70% 5.82% 23.48% 31.78% 20.33% 27.30% 6.08% 2.49% % 46.03% 18.33% 4.91% 20.80% 29.98% 14.67% 21.26% -3.02% -9.23% % 39.17% 15.71% 4.71% 18.37% 22.36% 8.69% 21.04% -9.10% % % 31.79% 14.31% 4.55% 15.79% 12.95% 1.23% 12.72% % % % 28.68% 10.88% 4.15% 13.35% 9.65% -2.55% -0.82% % % % 25.66% 6.13% 4.00% 11.01% Worst 2.06% -6.45% -1.49% % % % 4.10% 4.34% 2.43% 4.33% The indexes above are for illustrative purposes only and do not reflect the performance of any Franklin, Templeton or Franklin Mutual Series fund. For current performance of any Franklin, Templeton or Franklin Mutual Series fund, please visit franklintempleton.com or call (800) DIAL BEN/ Asset Allocation Made Easy franklintempleton.com

5 % 5.24% 34.47% 29.09% 7.84% 18.05% 43.30% 14.89% 5.52% 31.74% Best 9.13% % 32.46% 26.85% 4.65% 17.90% 38.82% 13.69% 1.38% 21.31% 7.05% % 31.57% 24.50% 2.11% 17.68% 34.52% 12.36% 0.55% 17.40% 6.97% % 27.17% 15.10% -0.48% 16.35% 32.75% 5.97% -0.39% 11.96% 5.49% % 26.46% 15.06% -2.91% 16.00% 32.39% 5.60% -1.38% 11.32% 1.99% % 21.18% 15.05% -4.18% 14.61% 31.99% 4.89% -3.13% 6.89% -1.57% % 20.58% 8.21% -5.50% 14.59% 23.29% 4.22% -4.41% 2.65% -9.78% % 5.93% 6.54% % 4.21% -2.02% -4.48% -7.47% 1.51% Worst Diversification does not guarantee a profit or protect against a loss. 4. Source: 2017 Morningstar. -cap stocks are represented by the S&P 500 Index; large-cap growth stocks are represented by the S&P 500 Index; large-cap value stocks are represented by the S&P 500 Index; small-cap stocks are represented by the Russell 2000 Index; small-cap growth stocks are represented by the Russell 2000 Index; small-cap value stocks are represented by the Russell 2000 Index; foreign stocks are represented by the MSCI EAFE Index; and bonds are represented by the Bloomberg Barclays U.S. Aggregate Index. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. franklintempleton.com Asset Allocation Made Easy 3

6 DOES ASSET ALLOCATION REALLY WORK? Yes. In addition to helping reduce overall volatility and improving your chances to earn more consistent returns over the long term, keeping assets properly allocated helps investors avoid the temptation to try and time the market. Consider the three scenarios below, illustrating three different strategies used by investors. In each scenario, $10,000 was invested annually each January 1 over the past 20 years for a total investment of $200, While these returns can t guarantee future results, as you can see, the asset allocation strategy was the most successful during this period. GROWTH OF $10,000 INVESTED ANNUALLY BETWEEN Total investment of portfolio Average annual total return 1. Chasing the Winners Investing in last year s best-performing asset class 5,6 $200,000 $423, % 2. Investing with the Losers Investing in last year s worst-performing asset class 5,7 $200,000 $435, % 3. Asset Allocation Investing consistently across several asset classes $200,000 $465, % in equal proportion each year 5,8 This chart is for illustrative purposes only. It is important to note that an asset allocation strategy does not ensure results superior to other investment strategies and also does not guarantee a profit or protect against a loss. The chart does not represent the performance of any Franklin, Templeton, or Franklin Mutual Series fund. The Allocation Funds are designed to provide investors with an investment that is diversified across a variety of markets, styles and sectors. I focus on combining funds that have shown a history of consistent performance coupled with low relative correlations in an effort to lower overall volatility. TONY COFFEY, CFA, 9 PORTFOLIO MANAGER 5. Source: 2017 Morningstar. The three scenarios above included large-cap stocks, represented by the S&P 500 Index; large-cap growth stocks, represented by the S&P 500 Index; large-cap value stocks, represented by the S&P Index; small-cap stocks, represented by the Russell 2000 Index; small-cap growth stocks, represented by the Russell 2000 Index; small-cap value stocks, represented by the Russell 2000 Index; foreign stocks, represented by the MSCI EAFE Index; and bonds, represented by the Bloomberg Barclays U.S. Aggregate Index. 6. Each year s new investments are made into the best-performing asset class index of the previous calendar year. 7. Each year s new investments are made into the worst-performing asset class index of the previous calendar year. 8. Annual investments are distributed evenly among all eight asset class indexes each year and the portfolio is rebalanced annually. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. This illustration assumes that indexes are reasonable representations of asset classes and their returns. However, investment manager performance relative to the different asset class indexes has varied widely during the past 20 years. 4 Asset Allocation Made Easy franklintempleton.com

7 WHY INVEST IN ALLOCATION FUNDS? Franklin Templeton offers three asset-allocation mutual funds based on potential return and relative risk profiles. 10 Each fund s assets are allocated among equity and fixed income investments by investing in a distinctly weighted combination of Franklin Templeton funds. The fund manager rebalances the portfolios as necessary to maintain broad asset class weightings. Higher Potential Return Moderate Lower Conservative Lower Relative Risk Higher Franklin Templeton Can Help with Asset Allocation Seeks Maximum Return for a Given Level of Risk The Allocation Funds were designed to seek maximum returns consistent with risk tolerance levels for conservative, moderate and growth-oriented portfolios. For many investors, especially those who may not have the time or resources to put together an appropriate mix of funds, the Allocation Funds offer asset allocation in one investment vehicle. Active Investment Process The fund s portfolio manager actively allocates each fund's assets among what he believes to be the best combinations of Franklin, Templeton and Franklin Mutual Series mutual funds to seek to meet each Allocation Fund s individual goal. Constant Monitoring The portfolio manager continually monitors the Allocation Funds, and their underlying funds, for rebalancing opportunities. Determining your financial goals may not be too complicated, but developing an appropriate asset allocation plan designed to help you meet those goals can be. Working with a financial professional can help. They offer market knowledge and planning expertise, and will take into account your individual investment needs to create an investment strategy tailored to your specific investment goals and risk tolerance. Chances are your financial advisor will also want to review your portfolio with you regularly to determine if adjustments are needed to keep your asset allocation plan on target or make changes as your life goals/circumstances change. 9. CFA and Chartered Financial Analyst are trademarks owned by CFA Institute. 10. The categorization of sample portfolios as conservative, moderate and growth is relative. The risk/reward potential is based on the fund s goal and level of risk. It is not indicative of the fund s actual or implied performance or portfolio composition, which may change on a continuous basis. franklintempleton.com Asset Allocation Made Easy 5

8 FRANKLIN CONSERVATIVE ALLOCATION FUND RISK TOLERANCE Lower FUND DESCRIPTION The fund seeks the highest level of long-term total return consistent with an acceptable level of risk 11 by allocating its assets among broad asset classes focusing primarily on a distinctly weighted combination of other mutual funds, predominantly Franklin Templeton funds. The fund is designed for investors seeking a lower level of risk with a shorter investment horizon. AVERAGE ANNUAL TOTAL RETURNS Periods Ended June 30, 2017 Advisor Class 9.07% 5.55% 4.49% 5.91% (12/31/96) Class A With Maximum 5.75% Initial Sales Charges % 4.04% 3.61% 5.46% (12/31/96) Without Sales Charges 8.75% 5.28% 4.22% 5.76% (12/31/96) TOTAL ANNUAL OPERATING EXPENSES With waiver: Advisor Class: 0.99%; Class A: 1.24% Without waiver: Advisor Class: 0.99%; Class A: 1.24% Performance data represents past performance, which does not guarantee future results. Current performance may differ from figures shown. The fund s investment return and principal value will change with market conditions, and you may have a gain or a loss when you sell your shares. Please call Franklin Templeton Investments at (800) DIAL BEN/ or visit franklintempleton.com for the most recent month end performance data. Beta 13 (3-yr) 0.83 Standard Deviation 14 (10-yr) 7.42% We want our money to grow, but we re not sure how much risk we can handle. GENERAL PORTFOLIO ALLOCATION 15 This pie chart reflects the guidelines used by the fund manager to allocate assets among broad asset classes. Return 20% 15% 10% 5% Franklin Conservative Allocation Fund Advisor Class Equity Funds % Fixed Income Funds... 60% TOP 10 HOLDINGS 15 As of June 30, 2017 % % Franklin Low Duration Total Return Fund Franklin DynaTech Fund 6.03 Franklin U.S. Government Securities Fund Franklin Rising Dividends Fund 4.77 Templeton Global Total Return Fund 9.75 Franklin K2 Alternative Strategies Fund 4.61 Franklin Strategic Income Fund 9.17 Franklin Mutual European Fund 3.98 Franklin Fund 9.10 Franklin International Cap Fund RISK VS. RETURN COMPARISON (Advisor Class) Year Period Ended June 30, % 0% 5% 10% 15% 20% Risk Advisor Class shares are only offered to certain eligible investors as stated in the prospectus. They are offered without sales charges or Rule 12b-1 fees. The fund offers multiple share classes, which are subject to different fees and expenses that will affect their performance. Please see the prospectus for details. Effective 12/1/2005, the fund began offering Advisor Class shares. For periods prior to the fund s Advisor Class inception date, a restated figure is used based on the fund s oldest share class, Class A performance, excluding the effect of Class A s maximum initial sales charge but reflecting the effect of the Class A Rule 12b-1 fees; and for periods after the fund s Advisor Class inception date, actual Advisor Class performance is used, reflecting all charges and fees applicable to that class. 11. The risk/reward potential is based on the fund s goal and level of risk. It is not indicative of the fund s actual or implied performance or portfolio composition, which may change on a continuous basis. 12. As of January 1, 2013, the funds changed their target allocation, with short-term investments (formerly a targeted allocation of 20% for Conservative Allocation; 10% for Moderate Allocation) combined into the fixed income allocations; such a change can impact performance. The funds investment goals remained the same. Class A: Prior to 8/3/98, fund shares were offered at a lower initial sales charge; thus actual returns would have differed. 13. Beta measures a fund s market-related risk. For Franklin Conservative Allocation Fund and Franklin Moderate Allocation Fund, beta is calculated using the respective Blended Benchmarks, described below, which each have a beta of A beta lower than 1.00 indicates historically lower volatility than the index; higher than 1.00 indicates historically higher volatility. Effective January 1, 2015, Franklin Conservative Allocation Fund s Blended Benchmark changed to 40% MSCI AC World Index and 60% Bloomberg Barclays Multiverse Index. From January 1, 2013 December 31, 2014, the Blended Benchmark comprised of 28% S&P 500 Index, 12% MSCI EAFE Index and 60% Bloomberg Barclays U.S. Aggregate Index. Effective January 1, 2015, Franklin Moderate Allocation Fund s Blended Benchmark changed to 60% MSCI AC World Index and 40% Bloomberg Barclays Multiverse Index. From January 1, 2013 December 31, 2014, the Blended Benchmark comprised of 38.5% S&P 500 Index, 16.5% MSCI EAFE Index and 45% Bloomberg Barclays U.S. Aggregate Index. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges Asset Allocation Made Easy franklintempleton.com

9 FRANKLIN MODERATE ALLOCATION FUND RISK TOLERANCE Moderate FUND DESCRIPTION The fund seeks the highest level of long-term total return consistent with an acceptable level of risk 11 by allocating its assets among broad asset classes focusing primarily on a distinctly weighted combination of other mutual funds, predominantly Franklin Templeton funds. The fund is designed for investors seeking a moderate level of risk with an intermediate investment horizon. AVERAGE ANNUAL TOTAL RETURNS Periods Ended June 30, 2017 Advisor Class 12.02% 7.25% 5.13% 6.42% (12/31/96) Class A With Maximum 5.75% Initial Sales Charges % 5.73% 4.25% 5.96% (12/31/96) Without Sales Charges 11.77% 6.99% 4.87% 6.26% (12/31/96) TOTAL ANNUAL OPERATING EXPENSES With waiver: Advisor Class: 1.02%; Class A: 1.27% Without waiver: Advisor Class: 1.02%; Class A: 1.27% Performance data represents past performance, which does not guarantee future results. Current performance may differ from figures shown. The fund s investment return and principal value will change with market conditions, and you may have a gain or a loss when you sell your shares. Please call Franklin Templeton Investments at (800) DIAL BEN/ or visit franklintempleton.com for the most recent month end performance data. Beta 13 (3-yr) 0.92 Standard Deviation 14 (10-yr) 9.45% I want to be sure my financial strategy stays on track. GENERAL PORTFOLIO ALLOCATION 15 This pie chart reflects the guidelines used by the fund manager to allocate assets among broad asset classes. Return 20% 15% 10% 5% 0% Franklin Moderate Allocation Fund Advisor Class Equity Funds % Fixed Income Funds...40% TOP 10 HOLDINGS 15 As of June 30, 2017 % % Franklin Fund Franklin Mutual European Fund 5.99 Franklin Low Duration Total Return Fund Franklin International Cap Fund 0% 5% 10% 15% 20% Risk Advisor Class shares are only offered to certain eligible investors as stated in the prospectus. They are offered without sales charges or Rule 12b-1 fees. The fund offers multiple share classes, which are subject to different fees and expenses that will affect their performance. Please see the prospectus for details. Effective 12/1/2005, the fund began offering Advisor Class shares. For periods prior to the fund s Advisor Class inception date, a restated figure is used based on the fund s oldest share class, Class A performance, excluding the effect of Class A s maximum initial sales charge but reflecting the effect of the Class A Rule 12b-1 fees; and for periods after the fund s Advisor Class inception date, actual Advisor Class performance is used, reflecting all charges and fees applicable to that class. Effective January 1, 2015, Franklin Moderate Allocation Fund increased target allocation to equity funds by 5% (from 55% to 60%) and correspondingly decreased the target allocation to fixed income funds (from 45% to 40%). The Fund s investment goal remains the same. 14. As of 6/30/17. Standard deviation is a statistical measurement of the range of a fund s total returns. In general, higher standard deviation means greater volatility. 15. As of 6/30/17. Holdings are subject to change. For updated information, call Franklin Templeton Investments at (800) DIAL BEN/ or visit franklintempleton.com. The portfolio manager for the fund reserves the right to withhold release of information with respect to holdings that would otherwise be included in the top 10 holdings list. The asset class of each underlying fund is based on its predominant investments under normal market conditions. 16. Source: 2017 Morningstar, 6/30/17. Fund returns do not include sales charges and assume reinvestment of dividends and capital gains. are represented by the Bloomberg Barclays Multiverse Index and stocks are represented by the MSCI All Country World Index. Index data represents average annual total returns and includes reinvestment of dividends. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. Risk is measured by the annualized standard deviation of monthly total returns Franklin DynaTech Fund 8.37 Templeton Global Total Return Fund 5.83 Franklin Rising Dividends Fund 7.04 Franklin Strategic Income Fund 5.58 Franklin U.S. Government Securities Fund 6.37 Templeton Fund 4.87 RISK VS. RETURN COMPARISON (Advisor Class) Year Period Ended June 30, 2017 franklintempleton.com Asset Allocation Made Easy 7

10 FRANKLIN GROWTH ALLOCATION FUND RISK TOLERANCE Higher FUND DESCRIPTION The fund seeks the highest level of long-term total return consistent with an acceptable level of risk 17 by allocating its assets among broad asset classes focusing primarily on a distinctly weighted combination of other mutual funds, predominantly Franklin Templeton funds. The fund is designed for investors seeking a higher level of risk with a longer investment horizon. CLASS A AVERAGE ANNUAL TOTAL RETURNS Periods Ended June 30, 2017 Advisor Class 15.09% 9.42% 5.35% 6.67% (12/31/96) Class A With Maximum 5.75% Initial Sales Charges % 7.88% 4.47% 6.21% (12/31/96) Without Sales Charges 14.82% 9.16% 5.08% 6.52% (12/31/96) TOTAL ANNUAL OPERATING EXPENSES With waiver: Advisor Class: 1.07%; Class A: 1.32% Without waiver: Advisor Class: 1.11%; Class A: 1.36% The fund has an expense reduction contractually guaranteed through April 30, Fund investment results reflect the expense reduction; without this reduction, the results would have been lower. Performance data represents past performance, which does not guarantee future results. Current performance may differ from figures shown. The fund s investment return and principal value will change with market conditions, and you may have a gain or a loss when you sell your shares. Please call Franklin Templeton Investments at (800) DIAL BEN/ or visit franklintempleton.com for the most recent month end performance data. Beta 19 (3-yr) 0.93 Standard deviation 20 (10-yr) 12.55% Market s up today, down tomorrow. Who knows where things are headed? I need a long-term game plan. GENERAL PORTFOLIO ALLOCATION 21 This pie chart reflects the guidelines used by the fund manager to allocate assets among broad asset classes. TOP 10 HOLDINGS 21 As of June 30, 2017 % % Franklin Fund Templeton Fund 6.80 Franklin DynaTech Fund Franklin LibertyQ Emerging Markets ETF 6.18 Franklin Rising Dividends Fund 9.29 Franklin K2 Alternative Strategies Fund 4.64 Franklin International Cap 8.38 Franklin Utilities Fund 4.02 Fund Franklin Mutual European Fund 7.97 Financial Select Sector SPDR ETF 3.90 RISK VS. RETURN COMPARISON (Advisor Class) Year Period Ended June 30, 2017 Return 20% 15% 10% 5% 0% Franklin Allocation Fund Advisor Class Equity Funds % Fixed Income Funds...20% 0% 5% 10% 15% 20% Risk Advisor Class shares are only offered to certain eligible investors as stated in the prospectus. They are offered without sales charges or Rule 12b-1 fees. The fund offers multiple share classes, which are subject to different fees and expenses that will affect their performance. Please see the prospectus for details. Effective 12/1/2005, the fund began offering Advisor Class shares. For periods prior to the fund s Advisor Class inception date, a restated figure is used based on the fund s oldest share class, Class A performance, excluding the effect of Class A s maximum initial sales charge but reflecting the effect of the Class A Rule 12b-1 fees; and for periods after the fund s Advisor Class inception date, actual Advisor Class performance is used, reflecting all charges and fees applicable to that class. 17. The risk/reward potential is based on the fund s goal and level of risk. It is not indicative of the fund s actual or implied performance or portfolio composition, which may change on a continuous basis. 18. As of January 1, 2013, the fund changed its target allocation, with short-term investments (formerly a targeted allocation of 5%) combined into the fixed income allocations; such a change can impact performance. The fund s investment goal remained the same. Class A: Prior to 8/3/98, fund shares were offered at a lower initial sales charge; thus actual returns would have differed. 19. Beta measures a fund s market-related risk. For Franklin Allocation Fund, beta is calculated using the respective Blended Benchmarks, described below, which each have a beta of A beta lower than 1.00 indicates historically lower volatility than the index; higher than 1.00 indicates historically higher volatility. Effective January 1, 2015, the Blended Benchmark changed to 80% MSCI AC World Index and 20% Bloomberg Barclays Multiverse Index. From January 1, 2013 December 31, 2014, the Blended Benchmark comprised of 56% S&P 500 Index, 24% MSCI EAFE Index and 20% Bloomberg Barclays U.S. Aggregate Index. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. 20. As of 6/30/17. Standard deviation is a statistical measurement of the range of a fund s total returns. In general, higher standard deviation means greater volatility. 21. As of 6/30/17. Holdings are subject to change. For updated information, call Franklin Templeton Investments at (800) DIAL BEN/ or visit franklintempleton.com. The portfolio manager for the fund reserves the right to withhold release of information with respect to holdings that would otherwise be included in the top 10 holdings list. The asset class of each underlying fund is based on its predominant investments under normal market conditions. 22. Source: 2017 Morningstar, 6/30/17. Fund returns do not include sales charges and assume reinvestment of dividends and capital gains. are represented by the Bloomberg Barclays Multiverse Index and stocks are represented by the MSCI All Country World Index. Index data represents average annual total returns and includes reinvestment of dividends. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. Risk is measured by the annualized standard deviation of monthly total returns. 8 Asset Allocation Made Easy franklintempleton.com

11 FRANKLIN TEMPLETON INVESTMENTS Gain From Our Perspective 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. Focus on Investment Excellence At the core of our firm, you ll find multiple independent investment teams each with a focused area of expertise from traditional to alternative strategies and multi-asset solutions. And because our portfolio groups operate autonomously, their strategies can be combined to deliver true style and asset class diversification. All of our investment teams share a common commitment to excellence grounded in rigorous, fundamental research and robust, disciplined risk management. Decade after decade, our consistent, research-driven processes have helped Franklin Templeton earn an impressive record of strong, long-term results. Global Perspective Shaped by Local Expertise In today s complex and interconnected world, smart investing demands a global perspective. Franklin Templeton pioneered international investing over 60 years ago, and our expertise in emerging markets spans more than a quarter of a century. Today, our investment professionals are on the ground across the globe, spotting investment ideas and potential risks firsthand. These locally based teams bring in-depth understanding of local companies, economies and cultural nuances, and share their best thinking across our global research network. Strength and Experience Franklin Templeton is a global leader in asset management serving clients in over 150 countries.* 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. * As of 12/31/16. Clients are represented by the total number of shareholder accounts. franklintempleton.com Asset Allocation Made Easy 9

12 This communication is general in nature and intended for educational purposes only; it should not be considered tax, legal or investment advice, or an investment recommendation. Consult your financial advisor for personalized advice that is tailored to your specific goals, individual situation, and risk tolerance. A FEW MORE WORDS ABOUT THE RISK While an asset allocation plan can be a valuable tool to help reduce overall volatility, all investments involve risks, including possible loss of principal. Because these funds invest in underlying funds, which may engage in a variety of investment strategies involving certain risks, the Franklin Allocation Funds are subject to those same risks and indirectly bear the fees and expenses of the underlying funds. Typically, the more aggressive the investment, or the greater the potential return, the more risk involved. Generally, investors should be comfortable with some fluctuation in the value of their investments, especially over the short term. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as the prices of bonds in a fund adjust to a rise in interest rates, that fund s share price may decline. investing carries additional risks such as currency and market volatility and political or social instability; risks which are heightened in developing countries. These risks are described in the funds prospectus. Investors should consult their financial advisor for help selecting the appropriate fund of funds, or fund combination, based on an evaluation of their investment objectives and risk tolerance. This brochure must be preceded or accompanied by a current Franklin Allocation Funds summary prospectus and/ or prospectus. Please read a prospectus carefully before you invest or send money. Investors should carefully consider a fund s investment goals, risks, charges and expenses before investing. Franklin Templeton Distributors, Inc. One Franklin Parkway San Mateo, CA (800) DIAL BEN / franklintempleton.com Franklin Allocation Fund Symbols: Conservative Moderate Allocation Fund Allocation Fund Class A: FTCIX Class A: FMTIX Class C: FTCCX Class C: FTMTX Class R: FTCRX Advisor: FTCZX Class R: FTMRX Advisor: FMTZX Allocation Fund Class A: FGTIX Class C: FTGTX Class R: FGTRX Advisor: FGTZX 2017 Franklin Templeton Investments. All rights reserved. UPD 02/18 FAS XB 08/17