Perspective from Franklin Templeton Fixed Income Not FDIC Insured | May Lose Value | No Bank Guarantee US MACRO OUTLOOK: NOW LET’S BEND THE ECONOMIC GROWTH CURVE April 2020 A CRISIS LIKE NO OTHER The current economic crisis, triggered by the COVID-19 pandemic, stands in a class of its own, very different in key respects from major past crises—including the 2009 Great Recession and the 1929 Great Depression, often used as comparators. The current recession has been engineered by government fiat in response to health concerns, rather than being due to any fundamental imbalances in the real economy or the financial sector. Policymakers have shut down virtually overnight large parts of the economy—in the United States and other major countries—ordering people to stop working and consumers to stay home, so as to halt the spread of the virus. This had two important implications. First: Policymakers knew very well that the adverse economic impact of extreme social distancing would be immediate and massive, and therefore launched an immediate and massive policy response. Locking down the economy was an unprecedented step—but the engineered nature of the shutdown also made the near-term impact much easier to predict. The degree of uncertainty was much lower than, for example, at the outset of the Global Financial Crisis (GFC). Back in 2007–2008, as the financial system started seizing up, it was extremely hard for policymakers to assess the impact of the meltdown of opaque structured financial products through the intricate interconnections of the global financial system— and the fallout on the real economy. The US Congress approved the Emergency Economic Stabilization Act only in October 2008, over a year after the bank run on Northern Rock in the United Kingdom (September 2007). This time around, when they issued their “stay-at-home” guidelines, policymakers had much greater visibility on what the impact would be, and they knew it would happen very quickly. The dramatic surge in jobless claims was shocking, but not unexpected. The fiscal and monetary policy reaction was expected but shocking in its speed and decisiveness. Sonal Desai, Ph.D. Chief Investment Officer, Franklin Templeton Fixed Income Nikhil Mohan, MSc Economist, Research Analyst Franklin Templeton Fixed Income
Transcript
Perspective fromFranklin TempletonFixed Income
Not FDIC Insured | May Lose Value | No Bank Guarantee
US MACRO OUTLOOK: NOW LET’S BEND THE ECONOMIC GROWTH CURVEApril 2020 A CRISIS LIKE NO OTHER
The current economic crisis, triggered by the COVID-19 pandemic, stands in a class of its own, very different in key respects from major past crises—including the 2009 Great Recession and the 1929 Great Depression, often used as comparators.
The current recession has been engineered by government fi at in response to health concerns, rather than being due to any fundamental imbalances in the real economy or the fi nancial sector. Policymakers have shut down virtually overnight large parts of the economy—in the United States and other major countries—ordering people to stop working and consumers to stay home, so as to halt the spread of the virus. This had two important implications.
First: Policymakers knew very well that the adverse economic impact of extreme social distancing would be immediate and massive, and therefore launched an immediate and massive policy response.
Locking down the economy was an unprecedented step—but the engineered nature of the shutdown also made the near-term impact much easier to predict. The degree of uncertainty was much lower than, for example, at the outset of the Global Financial Crisis (GFC). Back in 2007–2008, as the fi nancial system started seizing up, it was extremely hard for policymakers to assess the impact of the meltdown of opaque structured fi nancial products through the intricate interconnections of the global fi nancial system—and the fallout on the real economy. The US Congress approved the Emergency Economic Stabilization Act only in October 2008, over a year after the bank run on Northern Rock in the United Kingdom (September 2007).
This time around, when they issued their “stay-at-home” guidelines, policymakers had much greater visibility on what the impact would be, and they knew it would happen very quickly. The dramatic surge in jobless claims was shocking, but not unexpected. The fi scal and monetary policy reaction was expected but shocking in its speed and decisiveness.
Sonal Desai, Ph.D.Chief Investment Offi cer,
Franklin Templeton
Fixed Income
Nikhil Mohan, MScEconomist, Research Analyst
Franklin Templeton
Fixed Income
2 US macro outlook: Now let’s bend the economic growth curve
The Federal Reserve (Fed) announced open-ended Quantitative Easing (QE) and launched a new range of facilities to support the flow of credit to households and businesses. The US Congress approved a $2.2 trillion fiscal stimulus aimed at boosting unemployment benefits and helping businesses pay employees—among other priorities. It appears highly likely that more fiscal stimulus might follow soon, with an extension of the Payroll Protection Program as well as some additional support for state and local governments—negotiations in Congress are ongoing at the time of this writing. A substantial second package with an important infrastructure component seems less likely in the near future but should not be ruled out.
Second: Most corporates and businesses have assumed that the sudden stop to the economy will be temporary. This has been especially evident in the very large share of temporary layoffs in total layoffs: temporary layoffs accounted for nearly 80% of the 1.35 million new unemployed recorded in March.1
This is important for two reasons. The first is it signals that even with the current elevated uncertainty, the working assumptions for the majority of businesses and individuals affected is that the disruption to their activity will be temporary: businesses hope to be allowed to reopen soon and to bring many of their employees back on board; workers hope to go back to their jobs. The second is that in previous recessions a higher share of temporary layoffs has been associated with a quicker and stronger employment rebound in those same sectors where the initial job loss had been steepest, as in the 1981–82 recession, which the Fed—led by Paul Volcker—engineered to eradicate high inflation.
CHART 1 HOW WILL IT BE SPENT?
Distribution of $2 Trillion CARES Act (All Amounts in Billions)
April 2020
Loans to large corporations$425.0B
Direct cash transfers to families$300.0B
Extra unemployment insurance bene�ts payments$260.0B
Hospitals$100.0B
State & local governments:education stabilization and other$65.8B
Airline industry$58.0B
Student loans$43.7B
Stockpiling, SNAP, vaccines$42.5B
Veterans’ health care$20.0B
Public Services (others)$17.0B
State and local governments’ COVID response$274.0B
Small businesses$377.0B
Sources: Franklin Templeton Fixed Income Research, US Department of the Treasury.
3 US macro outlook: Now let’s bend the economic growth curve
CHART 2 US TEMPORARY LAYOFFS VERSUS PERMANENT JOB LOSSES
January 1995–March 2020
CHART 3 SOME PARALLELS WITH VOLCKER-ERA RISE IN TEMPORARY LAYOFFS
January 1970–March 2020
-500000
0
500000
1000000
1500000Permanent Job Losers [c.o.p. val 1 month]
Temporary Layo�s [c.o.p. val 1 month]
1/1/201/1/151/1/101/1/051/1/001/1/95
0
Temporary Job Losses
Millions
Sources: Franklin Templeton Fixed Income Research, Macrobond, BLS.
.5
-.5
1.0
2020
1.05 Million
0.18 Million
20152010200520001995
Permanent Job Losses
Fed Funds—Effective
% Y/Y, Percent
Millions
M/M change, millions
Sources: Franklin Templeton Fixed Income Research, Macrobond, BLS, Federal Reserve Bank of Dallas, Federal Reserve, BEA.
4 US macro outlook: Now let’s bend the economic growth curve
ALL SHAPES OF RECOVERY ARE STILL POSSIBLEThe combination of these two factors—the immediate decisive response of policymakers and the readiness and desire to go back to work of employees and businesses—implies that a robust V-shaped recovery is still possible—though by no means guaranteed. In this regard, we should also note that unlike in 2008–2009, a full-fledged financial crisis seems highly unlikely at this stage—and research has shown that a financial crisis makes the impact of recessions deeper and more prolonged.
To put it differently: a very high degree of uncertainty still surrounds both the depth of the recession and the shape of the recovery, and assuming that a U- or L-shaped scenario is inevitable misses the two most crucial features of the current situation discussed above.
A brief parenthesis: talking about V-, U- or L-shaped recoveries can be confusing because much depends on whether we are looking at “sequential” quarter-on-quarter growth rates—favored by macroeconomists—or at annual growth rates. In our analysis, we look at quarter-on-quarter growth, and our assessment of the recovery will focus on the ability to reduce unemployment and bring gross domestic product (GDP) back toward the pre-recession trend.
The depth of the recession and the speed and shape of the recovery hinge on three factors:
1. How quickly and with what precautions policymakers reopen their economies;
2. Whether a second wave of contagion will cause a new round of shutdowns in the second half of the year;
3. To what extent businesses’ and consumers’ behavior will differ once the economies reopen.
Let’s briefly consider these three questions in turn.
First—Reopening the economy: The longer the economy remains shut, the larger the number of businesses that will go bankrupt or decide to throw in the towel, and the more workers will end up permanently unemployed (in the sense of not on temporary unemployment). The consequent erosion of both human and physical capital could undermine the recovery.
Restarting economic activity has now been increasingly recognized as a policy priority—namely because the shutdown is having a disproportionate impact on the most vulnerable sections of the population. In Europe, a number of countries such as Germany, Austria, Denmark and the Czech Republic have already announced or taken the first steps in this direction; even Spain, one of the worst hit, has allowed (some) manufacturing and construction activity to restart. In the United States, the White House has issued guidelines to help states chart their individual paths. Seven East-Coast states are working together to plan a coordinated reopening—as are seven Midwestern states and three West-Coast states.
New COVID-19 cases and new fatalities are now declining at an encouraging pace, which suggests the US economy should be able to commence the resumption of activity during the month of May, with some acceleration in June. We should expect the reopening to be gradual. As Director of the National Institute of Allergy and Infectious Diseases Dr. Anthony Fauci has noted, “it will not be like flipping up a switch.” With the virus still active in the population, policymakers will likely reopen in a staggered way, while main-taining precautions to safeguard the most vulnerable sections of the population and prevent a rapid re-acceleration of contagion.
5 US macro outlook: Now let’s bend the economic growth curve
Second—Risk of a second wave: Most experts expect that in the fall, when the new flu season begins, the coronavirus will also come back—the question is with what intensity. Policymakers are well aware that if contagion flares up again in the fall and forces a renewed shutdown of the economy, the economic and health consequences will be cata-strophic. Our working assumption is therefore that while reopening the economy they will adopt the necessary precautions to prevent it. This will encompass efforts on several fronts: antibody testing, therapy and vaccines. We treat a second wave of contagion intense enough to cause a new shutdown as a tail risk.
Third—Changes in business and consumer behavior: Will people be a lot more reluctant to travel by plane, go to bars and restaurants, take public transport and live in big cities? We believe to some extent the answer is yes, at least in the first few months after the economy reopens. But the intensity and duration of behavioral changes will likely vary across age brackets, reflecting different risk factors, and across countries, reflecting different cultural specificities. We build this into our assumptions on the different pace of recovery for different sectors of the economy.
In the next section of this paper we outline our recession and recovery scenarios for the United States.
A RECESSION THAT TARGETS THE MOST VULNERABLE SECTIONS OF SOCIETY To build our scenarios, we assume that US policymakers will start to gradually reopen their economies in May, with the pace at which different sectors are allowed to restart accelerating in June.
CHART 4 COVID-19 IMPACT BY INDUSTRY—CHANGE IN OPEN HOURS BY US BUSINESSES
March 1, 2020– April 15, 2020
-90%
-80%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
-500000
0
500000
1000000
1500000Permanent Job Losers [c.o.p. val 1 month]
Temporary Layo�s [c.o.p. val 1 month]
1/1/201/1/151/1/101/1/051/1/001/1/95
Percent
Sources: Franklin Templeton Fixed Income Research, Macrobond, Homebase.
15141312111098765432131302928272625242322212019181716151413121110987654321March 2020 April 2020
Beauty & Personal Care RetailLeisure & Entertainment Food & Drink
Home & Repair TransportationProfessional Services Health Care & Fitness
6 US macro outlook: Now let’s bend the economic growth curve
The US economy had entered 2020 in robust shape, with a record-strong labor market, rising household incomes and record-high equity prices. In early March, however, high- frequency data showed the first signs of weakness in the sectors most exposed to the COVID-19 crisis: leisure and hospitality, travel and wholesale and retail trade. Within less than a month, as a number of states issued “shelter in place” orders, activity in several sectors came to a halt and unemployment surged: jobless claims soared to a cumulative of over 22 million by the second week of April, from an average of just over 200,000 over the previous twelve months. Business uncertainty spiked, and both business and consumer confidence plummeted.
The shutdown has affected disproportionately the most vulnerable sectors of society: job losses have been much heavier for less educated, lower-skilled workers and for African American and Hispanic minorities. These categories of workers had been the last to start benefiting from the tight labor market through better jobs and rising incomes, and they generally have very limited financial cushions; the Fed Board’s 2016 Survey of Consumer Finances showed that about 25% of these households have less than $400 in liquid savings, and 60% do not have sufficient liquid savings to last at least three months.
Similarly, workers in the four industries most affected by the shutdown (leisure and hospitality, retail trade, transportation and other services) have median incomes below the nationwide $48,700 level—and they account for nearly 30% of the workforce.
CHART 5 US CONSUMER SENTIMENT AND EXPECTATIONS TURN SHARPLY LOWER
December 2006– April 2020
Index, Jan 2020=100
Sources: Franklin Templeton Fixed Income Research, Macrobond, TCB, University of Michigan.
Less than a High School DiplomaHigh School GraduatesSome College or Associate DegreeBachelor’s Degree & Higher
7 US macro outlook: Now let’s bend the economic growth curve
CHART 7 UNEMPLOYMENT INSURANCE BENEFITS BY STATE
Enhanced Benefits from Stimulus
As of March 2020
$/Week Ratio
Sources: Franklin Templeton Fixed Income Research, Department of Labor.
$1,800
$1,600
$1,400
$1,200
$1,000
$800
$600
$400
$200
Dist
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hom
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0.2
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0.8
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1.2
1.4Average Weekly Wage LHSAverage Weekly State Bene�t LHSAverage Weekly Bene�t with Federal top-up of $600/week LHS
Enhanced Replacement Ratio, RHS
POLICY REACTION: BOTH CUSHION AND STIMULUSThe policy reaction, as mentioned in the previous section, has been equally swift: just two weeks after President Trump declared a national emergency (March 13), Congress approved the Coronavirus Aid, Relief and Economic Security Act (CARES), mobilizing over $2 trillion to boost unemployment benefits, help businesses meet payroll, and get cash into the pockets of households impacted by the shutdown. The Fed had moved even earlier, announcing open-ended QE, and followed up with a new set of facilities to unlock up to $2.3 trillion in lending to households, businesses, financial markets and state and local governments. The Fed’s balance sheet has already expanded by $1.8 trillion in a few weeks, to a new record high of $6.1 trillion.
The focus of both the monetary and fiscal response has been to minimize the adverse impact of the temporary shutdown, helping businesses to remain operational and helping people meet their financial obligations, providing a financial lifeline during a period of income loss.
The policy-provided income support is substantial. The Pandemic Unemployment Assistance (PUA) under the CARES Act more than doubles the nationwide average Unemployment Insurance benefit of $356: workers claiming unemployment insurance benefits will be entitled to an additional $600 per week for up to four months. This will help replace a large share of the pay of low-wage workers; in fact, (a) in certain states
8 US macro outlook: Now let’s bend the economic growth curve
overall unemployment benefits will exceed the pre-crisis weekly wage of some workers, as you can see in the chart above; and (b) nationwide, the enhanced unemployment benefit will exceed average wages in the leisure and hospitality industry by 80% and by 30% in retail trade, as shown in the chart below.
This highlights a very important point: to the extent that this financial assistance gets delivered in an effective and timely manner, it will not just provide a cushion but will in fact give a boost to the purchasing power of certain groups of people—acting more like stimulus than like insurance.
RECOVERY SCENARIOSThere is of course an important degree of uncertainty as to how effective the fiscal response will be. We have therefore simulated two different scenarios: one with “moderate pass through” and one with “strong pass through.” As a benchmark, we have also built a counterfactual “no fiscal stimulus” scenario (or a completely ineffective fiscal policy), to gauge the estimated impact of the fiscal response. Chart 9 below shows our outlook for growth over the next eight quarters under these three scenarios.
CHART 8 US UNEMPLOYMENT INSURANCE BENEFITS BY SECTOR
Enhanced Benefits from Stimulus
As of March 2020
Dollars
Sources: Franklin Templeton Fixed Income Research, Department of Labor.
CHART 9 FRANKLIN TEMPLETON FIXED INCOME GROWTH OUTLOOK FOR THE NEXT EIGHT QUARTERS
Real GDP (%QoQ AR)
Italics indicates forecast. Source: Franklin Templeton Fixed Income Research. There is no assurance that any estimate, forecast or projection will be realized.
No Fiscal Stimulus Moderate Pass Through of Fiscal Stimulus
Strong Pass Through of Fiscal Stimulus
Q4-2019 2.1% 2.1% 2.1%
Q1-2020 -8.7% -8.7% -8.7%
Q2-2020 -29.9% -29.2% -29.2%
Q3-2020 10.3% 16.3% 20.1%
Q4-2020 8.0% 11.0% 14.8%
Q1-2021 6.0% 7.2% 8.1%
Q2-2021 5.4% 6.2% 7.0%
Q3-2021 3.3% 3.4% 3.7%
Q4-2021 2.6% 2.7% 3.0%
Scenario 1 Scenario 2 Scenario 3
9 US macro outlook: Now let’s bend the economic growth curve
In all three scenarios, our projections are built by looking at gross value added and employment in eleven major industries. Moving from no fiscal stimulus to moderate pass through to strong pass through we assume both a stronger recovery in employment and a more robust recovery in productivity. In all three scenarios we assume the same sharp rise in unemployment and significant decline in productivity in both the first and second quarter of 2020.
We assume that leisure and hospitality, wholesale and retail trade, and professional and business services will be the hardest hit, but that all eleven industries will suffer heavy job losses between March and June this year, pushing the unemployment rate to about 15%. We estimate a real GDP contraction of nearly 9% in the first quarter of 2020 and forecast a further near-30% drop in the second quarter.2
In the absence of a fiscal response, our scenario assumes that only half of the jobs lost would come back by the middle of next year, leaving the unemployment rate above 9%. The recovery in GDP would be correspondingly weak, looking more like a U-shaped recovery. The US economy would contract by nearly 6% this year and expand by less than 3% in 2021.
In our moderate fiscal pass-through scenario, the economy would recover three-quarters of the total job losses by the middle of next year. Even a moderate pass through allows for what looks like more of a V-shaped recovery, with annualized quarter-on-quarter growth of 16% in the third quarter and 11% in the fourth quarter of this year. Under the moderate pass through assumption, fiscal support cushions the blow in 2020, limiting the contraction to just under 5%, and results in a 4.5% GDP expansion in 2021, with the unemployment rate falling to 6.5% by the middle of next year.
In the strong pass-through scenario, the economy recovers nearly 90% of its job losses by the middle of next year, bringing the unemployment rate down to 5%. The GDP recovery follows a V-shaped path, with a 20% expansion in the third quarter of 2020 followed
CHART 10 FRANKLIN TEMPLETON FIXED INCOME SCENARIO ANALYSIS
As of March 2020
Trillions ($USD)
Sources: Franklin Templeton Fixed Income Research, Macrobond, FTI Fixed Income Research, BLS, BEA. There is no assurance that any estimate, forecast or projection will be realized.
Moderate Pass through of Fiscal Stimulus Strong Pass through of Fiscal Stimulus Trend
10 US macro outlook: Now let’s bend the economic growth curve
by a 15% expansion in the fourth quarter; the fiscal response limits this year’s recession to “only” 4.5%, followed by a 6% expansion next year.
Note that even in the strong pass through scenario the economy does not get back onto its pre-recession growth path by the end of next year (and three million of those who lost their jobs in the recession are still unemployed).
The hit from the March-May shutdown is so severe that even if a gradual reopening of the economy begins in May, and even with a massive and timely fiscal stimulus, the economy will not have yet fully returned to its pre-crisis growth trend even at the end of next year.
Looking beyond 2021 however, if the fiscal policy pass through proves to be strong, a large part of the damage may well have been mended, and the economy could be back on a solid expansion trajectory.
We should also stress that in our scenarios we have focused on the fiscal policy response, and we have not modeled the impact of the equally decisive monetary policy response— we therefore see potential for some upside above our forecasts.
HEALTH UNCERTAINTY AND ECONOMIC UNCERTAINTY—A HARD TRADEOFFOverall, our simulations underscore the high degree of uncertainty that we still face. While a short and sharp recession is already baked in the cake, many different shapes of recovery are still possible.
Policymakers face a difficult tradeoff between health uncertainty and economic uncertainty. If they reopen the economy in a timely and smooth way, the massive fiscal and monetary stimulus in the pipeline could fuel a very strong recovery over the course of the next six quarters. This requires accepting some uncertainty on the contagion front—but with the right precautions would be feasible. At the other extreme, prolonging the shutdown reduces the virus-related health uncertainty, but increases the risk that rising bankruptcies will increase the share of permanent job losses and lead to a much slower and weaker recovery. We should also bear in mind that a deeper and prolonged recession will carry its own health costs—recessions are associated with a rise in suicides, drug-related deaths, depression and domestic violence.
To fix ideas, the following chart compares our three scenarios to the actual recovery from the GFC. If fiscal stimulus proves ineffective, after an initial rebound the economy would settle on a lackluster growth path not dissimilar from that post-GFC. In our strong pass-through scenario, by comparison, the US economy could stage a much more decisive comeback than ten years ago—capitalizing on the very different nature of the current crisis.
An additional layer of uncertainty lies in the differential speed of recovery of the demand and supply side of the economy, with important implications for price dynamics. Over the next few months it is hard to imagine any upward pressure on inflation. If a strong recovery materializes, however, we need to watch for the possibility that the recovery in demand could gradually result in sustained inflation pressures in light of the substantial monetary and fiscal policy stimulus. In addition, the economy will emerge from this crisis with a massive fiscal and monetary overhang—a much larger Fed balance sheet and an increased ratio of government debt to GDP. This is likely to generate imbalances and dislocations that financial investors will need to monitor and eventually factor into their strategies.
11 US macro outlook: Now let’s bend the economic growth curve
Over the coming weeks, we should of course continue monitoring the trend in new cases, hospitalizations, intensive care unit use and fatalities across individual states. Data over the coming two weeks will hopefully confirm that most if not all states are moving past the peak, leaving the worst behind. But it will be important to keep monitoring these data to check that as social distancing is relaxed and economic activity restarts, any resurgence in contagion remains limited and controlled. Similarly, sustained progress in boosting hospitals’ capacity and further improving testing capabilities will be important to underpin the sustainability of the recovery.
CONCLUSIONWe are tackling a crisis like no other. This implies that we face a whole new set of chal-lenges, but also that we should not assume it will be a replay of the worst past recessions—though that risk exists. Any shape of recovery is still possible. The initial swift and massive policy response puts a robust economic recovery still within our grasp. To achieve it, we believe policymakers need to reopen the economy in a timely manner and with the right health precautions. A smart and speedy restart of economic activity can protect those most vulnerable to the virus and safeguard those most vulnerable to the catastrophic health and economic consequences of a deep prolonged recession. This paper has laid out the alternative macroeconomic scenarios that we believe might still play out—and that form the fundamental analysis backdrop against which we are framing our investment strategy.
CHART 11 FRANKLIN TEMPLETON FIXED INCOME SCENARIO ANALYSIS— GDP FORECAST COMPARISON VS. GLOBAL FINANCIAL CRISIS
As of March 2020
Levels
Quarters
No Fiscal Stimulus
Forecast
Moderate Pass through of Fiscal StimulusStrong Pass through of Fiscal StimulusGFC
Franklin Templeton Fixed Income Research, Macrobond, FTI Fixed Income Research, BLS, BEA. There is no assurance that any estimate, forecast or projection will be realized.
Endnotes1. Source: US Bureau of Labor Statistics, as of March 2020.2. There is no assurance that any estimate, forecast or projection will be realized.
12 US macro outlook: Now let’s bend the economic growth curve
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Products, services and information may not be available in all jurisdictions and are offered outside the U.S. by other FTI affi liates and/or their distributors as local laws and regulation permits. Please consult your own professional adviser or Franklin Templeton institutional contact for further information on availability of products and services in your jurisdiction.
Issued in the U.S. by Franklin Templeton Distributors, Inc., One Franklin Parkway, San Mateo, California 94403-1906, (800) DIAL BEN/342-5236, franklintempleton.com - Franklin Templeton Distributors, Inc. is the principal distributor of Franklin Templeton Investments’ U.S. registered products, which are not FDIC insured; may lose value; and are not bank guaranteed and are available only in jurisdictions where an offer or solicitation of such products is permitted under applicable laws and regulation.
Australia: Issued by Franklin Templeton Investments Australia Limited (ABN 87 006 972 247) (Australian Financial Services License Holder No. 225328), Level 19, 101 Collins Street, Melbourne, Victoria, 3000. Austria/Germany: Issued by Franklin Templeton Investment Services GmbH, Mainzer Landstraße 16, D-60325 Frankfurt am Main, Germany. Authorised in Germany by IHK Frankfurt M., Reg. no. D-F-125-TMX1-08. Tel. 08 00/0 73 80 01 (Germany), 08 00/29 59 11 (Austria), Fax: +49(0)69/2 72 23-120, [email protected], [email protected]. Canada: Issued by Franklin Templeton Investments Corp., 5000 Yonge Street, Suite 900 Toronto, ON, M2N 0A7, Fax: (416) 364-1163, (800) 387-0830, www.franklintempleton.ca. Netherlands: FTIS Branch Amsterdam, World Trade Center Amsterdam, H-Toren, 5e verdieping, Zuidplein 36, 1077 XV Amsterdam, Netherlands. Tel +31 (0) 20 575 2890. United Arab Emirates: Issued by Franklin Templeton Investments (ME) Limited, authorized and regulated by the Dubai Financial Services Authority. Dubai office: Franklin Templeton Investments, The Gate, East Wing, Level 2, Dubai International Financial Centre, P.O. Box 506613, Dubai, U.A.E., Tel.: +9714-4284100 Fax:+9714-4284140. France: Issued by Franklin Templeton France S.A., 20 rue de la Paix, 75002 Paris France. Hong Kong: Issued by Franklin Templeton Investments (Asia) Limited, 17/F, Chater House, 8 Connaught Road Central, Hong Kong. Italy: Issued by Franklin Templeton International Services S.à.r.l. – Italian Branch, Corso Italia, 1 – Milan, 20122, Italy. Japan: Issued by Franklin Templeton Investments Japan Limited. Korea: Issued by Franklin Templeton Investment Trust Management Co., Ltd., 3rd fl., CCMM Building, 12 Youido-Dong, Youngdungpo-Gu, Seoul, Korea 150-968. Luxembourg/Benelux: Issued by Franklin Templeton International Services S.à r.l. – Supervised by the Commission de Surveillance du Secteur Financier - 8A, rue Albert Borschette, L-1246 Luxembourg - Tel: +352-46 66 67-1- Fax: +352-46 66 76. Malaysia: Issued by Franklin Templeton Asset Management (Malaysia) Sdn. Bhd. & Franklin Templeton GSC Asset Management Sdn. Bhd. Poland: Issued by Templeton Asset Management (Poland) TFI S.A.; Rondo ONZ 1; 00-124 Warsaw. Romania: Issued by Bucharest branch of Franklin Templeton Investment Management Limited (“FTIML”) registered with the Romania Financial Supervisory Authority under no. PJM01SFIM/400005/14.09.2009,, and authorized and regulated in the UK by the Financial Conduct Authority. Singapore: Issued by Templeton Asset Management Ltd. Registration No. (UEN) 199205211E. 7 Temasek Boulevard, #38-03 Suntec Tower One, 038987, Singapore. Spain: FTIS Branch Madrid, Professional of the Financial Sector under the Supervision of CNMV, José Ortega y Gasset 29, Madrid, Spain. Tel +34 91 426 3600, Fax +34 91 577 1857. South Africa: Issued by Franklin Templeton Investments SA (PTY) Ltd which is an authorised Financial Services Provider. Tel: +27 (21) 831 7400 ,Fax: +27 (21) 831 7422. Switzerland: Issued by Franklin Templeton Switzerland Ltd, Stockerstrasse 38, CH-8002 Zurich. UK: Issued by Franklin Templeton Investment Management Limited (FTIML), registered office: Cannon Place, 78 Cannon Street, London EC4N 6HL Tel +44 (0)20 7073 8500. Authorized and regulated in the United Kingdom by the Financial Conduct Authority. Nordic regions:Issued by Franklin Templeton International Services S.à r.l. , Contact details: Franklin Templeton International Services S.à r.l., Swedish Branch, filial, Blasieholmsgatan 5, SE-111 48, Stockholm, Sweden. Tel +46 (0)8 545 012 30, [email protected], authorised in the Luxembourg by the Commission de Surveillance du Secteur Financier to conduct cer-tain financial activities in Denmark, in Sweden, in Norway, in Iceland and in Finland. Offshore Americas: In the U.S., this publication is made available only to financial intermediaries by Templeton/Franklin Investment Services, 100 Fountain Parkway, St. Petersburg, Florida 33716. Tel: (800) 239-3894 (USA Toll-Free), (877) 389-0076 (Canada Toll-Free), and Fax: (727) 299-8736. Investments are not FDIC insured; may lose value; and are not bank guaranteed. Distribution outside the U.S. may be made by Templeton Global Advisors Limited or other sub-distributors, intermediaries, dealers or professional investors that have been engaged by Templeton Global Advisors Limited to distribute shares of Franklin Templeton funds in cer-tain jurisdictions. This is not an offer to sell or a solicitation of an offer to purchase securities in any jurisdiction where it would be illegal to do so.
Please visit www.franklinresources.com to be directed to your local Franklin Templeton website.
