Franklin Bissett Canadian Dividend Fund Product Profile Product Details Fund Assets $592,666,621.04 Fund Inception Date 12/22/2003 Base Currency Morningstar Category Distribution Frequency Fund Codes 1 Series Series A Front Series A DSC Series A Low Load Series F Series F ADM Series I Series O Series PF Series PF ADM Corporate Class Series A Front Series A DSC Series A Low Load Series F Series FT Series I Series O Series OT Series PF Series T Front Series T DSC Series T Low Load Canadian Dividend & Income Equity Monthly TML1017 TML1018 TML1019 TML1020 TML3989 TML3870 TML1021 TML3886 TML5057 TML3476 TML3478 TML3477 TML3479 TML3483 TML3480 TML3481 TML3482 TML3809 TML3484 TML3486 TML3485 Series I and V closed to new investors as of November 22, 2016. Beginning in January 2017, investors switching between Corporate Class funds will trigger a capital gain or loss at the time of the switch due to certain changes in the income tax laws made by the federal government in 2016. Fund Description The fund seeks long-term capital appreciation by investing primarily in dividend-paying or incomeproducing Canadian securities, including common shares, income trust units and preferred shares. Portfolio managers look for quality companies at reasonable prices that have a proven ability to deliver a consistent and growing level of dividends over time. Performance Data 2,3,4 Average Annual Total Returns 5 (%) Since Inception 3 Mths YTD 1 Yr (04/25/2016) Series A 4.83-1.81 2.97 7.64 Management Expense Ratio (as of 12/31/2017 incl. HST) 2.33% The indicated rates of return are the historical annual compounded total returns including changes in share or unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Please call Franklin Templeton Client Services at 1.800.387.0830 or visit www.franklintempleton.ca for the most recent month-end performance. 10% 5% 0% -5% Series A 4.83 3 Mths YTD 1 Yr Since Inception Portfolio Manager Insight 6-1.81 Calendar Year Returns (%) 2017 Series A 4.19 Market Review After a bumpy first quarter, volatility diminished in the second quarter and the S&P/TSX Composite Total Return Index (TRI) advanced 6.8%, its strongest increase since the fourth quarter of 2013. The S&P/TSX Composite TRI has now advanced in three of the past four quarters. Given the strength, 2.97 7.64 1. ADM refers to the Investment Advisory Services Fee purchase option for series F,FT, PF, PF(Hedged), and PFT. Please see the simplified prospectus for further details. 2. Effective April 22, 2016, Franklin Bissett Canadian High Dividend Fund merged into Franklin Bissett Canadian Dividend Fund. Accordingly, past performance data for the period prior to April 22, 2016, would not be comparative. As a result of the merger, the fund s since inception performance calculations use the start date of April 25, 2016. 3. The fund offers other series subject to different fees and expenses, which will affect their performance. 4. Source for Index: FactSet. Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. 5. Periods shorter than one year are shown as cumulative total returns. 6. The information provided is not a complete analysis of every material fact regarding any country, market, industry, security or fund. Because market and economic conditions are subject to change, comments, opinions and analyses are rendered as of the date of this material and may change without notice. A portfolio manager s assessment of a particular security, investment or strategy is not intended as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy; it is intended only to provide insight into the fund s portfolio selection process. Holdings are subject to change.
the Canadian equity market set a new all-time high on June 22, 2018, surpassing the prior high set on January 4, 2018. For a longer-term perspective, the S&P/TSX Composite TRI has posted an unannualized return of 182.8% (11.8% annualized) since the bear market low on March 9, 2009, remaining well entrenched in the current bull market run. For the second quarter, ten of 11 Global Industry Classification sectors posted positive total returns. The best-performing sector was energy (15.8%), followed by health care (14.3%) and information technology (10.9%). The only declining sector was utilities (-0.4%). Performance Review In the second quarter, the fund generated an absolute return of 4.8% (Series A, net of fees). From an absolute return standpoint, the most notable contributors in the second quarter included Enbridge (17.8%), Enbridge Income Fund (17.7%), Inter Pipeline (12.1%) and Vermilion Energy (15.9%) in energy, Nutrien (18.3%) in Materials, Canadian National Railway (14.7%) in industrials and Rogers Communications (9.4%) in telecommunication services. The most notable detractor from absolute performance was Bank of Nova Scotia (-4.2%) in financials. The fund is overweight the utilities, energy and telecommunication services sectors and underweight the materials, industrials and information technology sectors. The fund experienced negative security selection and interaction and sector allocation in the second quarter. Pockets of underperformance among individual energy holdings in energy were partially offset by individual industrial and holdings in industrials and materials. In energy, notable detractors included the fund s overweight position in ARC Resources (-2.2%), as well as not owning the outperforming Suncor Energy (21.1%) and Canadian Natural Resources (18.1%). This was partially offset by the fund s overweight position in Vermilion Energy (15.9%). In industrials, the fund s overweight stance in Horizon North Logistics (26.2%) was a notable positive contributor to relative performance. Other notable detractors from performance included the fund s overweight positions in the underperforming Canadian Imperial Bank of Commerce (1.7%), IGM Financial (2.7%) and Power Financial (-2.0%) in financials, as well as Brookfield Infrastructure Partners (-4.6%), Brookfield Renewable Partners (0.0%) and Fortis (-2.4%) in utilities. From a sector allocation standpoint, the most notable detractor was an overweight position in the underperforming utilities sector, partially offset by being overweight the outperforming energy sector. Trading activity was steady in the second quarter as we were presented with a number of attractive rebalancing opportunities. Additions included Enbridge, Keyera and PrairieSky Royalty in Energy, Nutrien in materials, Manulife and Sun Life in financials and Metro in consumer staples. Positions trimmed included Enbridge Income Fund and Peyto Exploration & Development in energy, Methanex in materials, Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce and the Toronto-Dominion Bank in financials, and Capital Power in utilities. We also established new positions in two stocks, convenience store operator Alimentation Couche-Tard and utility provider Canadian Utilities. We eliminated Choice REIT. Outlook & Strategy The fund has been actively managed through several market regimes of strong and weak sentiment and varying sources of sector leadership. We continue to believe that our performance objectives represent a compelling value proposition. Our confidence is unwavering in the quality of the investment opportunity set, our research capabilities and our ability to consistently execute our investment process. Portfolio Characteristics 7,8 Portfolio S&P/TSX Composite Index Market Capitalization (Millions in ) 42,923 47,838 Dividend Yield 4.23% 2.79% Portfolio Diversification Top Ten Holdings 9 Percent of Total Top Holdings Sector % ROYAL BANK OF CANADA Banks 5.89 CANADIAN IMPERIAL BANK OF COMMERCE Banks 5.21 TORONTO-DOMINION BANK Banks 5.18 CANADIAN NATIONAL RAILWAY CO Transportation 4.66 ENBRIDGE INC Energy 4.18 BANK OF MONTREAL Banks 3.94 BANK OF NOVA SCOTIA Banks 3.94 IGM FINANCIAL INC Diversified Financials 3.73 POWER FINANCIAL CORP Insurance 3.41 INTER PIPELINE LTD Energy 3.24 7. The portfolio characteristics listed are based on the fund s underlying holdings, and do not necessarily reflect the fund s characteristics. Information is historical and may not reflect current or future portfolio characteristics. All holdings are subject to change. 8. The dividend yield quoted here is the yield on securities within the portfolio and should not be used as an indication of the income received from this portfolio. 9. Holdings of the same issuers have been combined. Top ten holdings information is historical and may not reflect current or future portfolio characteristics. All holdings are subject to change. The information provided is not a recommendation to purchase, sell, or hold any particular security. The securities identified do not represent the fund s entire holdings and in the aggregate may represent only a small percentage of such holdings. There is no assurance that securities purchased will remain in the fund, or that securities sold will not be repurchased. The portfolio manager for the fund reserves the right to withhold release of information with respect to holdings that would otherwise be included. franklintempleton.ca 2
Sector Weightings vs. S&P/TSX Composite Index 10 Percent of Equity Equity Percent of Equity Sector Overweight/Underweight 11 Equity Percent of Equity Financials 35.44 33.24 Utilities 7.30 Energy 20.20 24.13 Energy 3.94 Utilities Telecommunication Services 3.50 4.35 7.65 10.80 Telecommunication Services 3.30 Industrials 6.68 10.01 Financials 2.20 Materials 5.42 11.68 Real Estate 1.58 Real Estate Consumer Staples 4.39 2.80 3.07 3.46 Consumer Staples -0.39 Consumer Discretionary 2.42 5.51 Consumer Discretionary -3.10 Health Care Information Technology 0.00 1.30 0.00 3.95 0% 5% 10% 15% 20% 25% 30% 35% 40% Industrials Materials -6.26-3.33 Franklin Bissett Canadian Dividend Fund S&P/TSX Composite Index -10% -5% 0% 5% 10% Asset Allocation 12 Percent of Total Equity 99.22 Cash & Cash Equivalents 0.78 0% 20% 40% 60% 80% 100% 120% Investment Philosophy and Process 1. 2. 3. Equity markets can be inefficient, particularly in the short term; price does not necessarily reflect intrinsic value Sustained profitability and effective capital allocation drive intrinsic value growth Achieving our performance objectives requires a high-conviction investment approach 10,11,12. Information is historical and may not reflect current or future portfolio characteristics. Percentage may not equal 100% due to rounding. All holdings are subject to change. franklintempleton.ca 3
INVESTABLE UNIVERSE 1 Identify Profitable 2 Assess Valuation Companies Estimated intrinsic 3 High full-cycle profitability Secular earnings and cash flow growth value based on present value of future cash flows Durable business model Appropriate capital structure Effective capital allocation Risk Monitoring, Portfolio Rebalancing and Sell Discipline Determine Portfolio Suitability Portfolio concentration and diversification considerations Strategy requirements (market cap/dividend constraints) FRANKLIN BISSETT PORTFOLIO The above chart is for illustrative and discussion purposes only. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. Investment Team Portfolio Manager Years with Firm Years Experience Les Stelmach, CFA, Senior Vice President, Portfolio Manager 12 19 Ryan Crowther, CFA, Vice President, Portfolio Manager 10 16 Glossary Dividend Yield: The annual dividend received on an equity security as a percentage of the price. For a portfolio, the value represents a weighted average of the stocks it holds. It should not be used as an indication of the income received from this portfolio. Market Capitalization: A determination of a company s value, calculated by multiplying the total number of company stock shares outstanding by the price per share. Market capitalization is expressed in millions of. franklintempleton.ca 4
Important Legal Information CFA and Chartered Financial Analyst are trademarks owned by CFA Institute. Standard & Poor s, S&P and S&P 500 are registered trademarks of Standard & Poor s Financial Services LLC. S&P does not sponsor, endorse, sell or promote and S&P index-based product. Important data provider notices and terms available at: www.franklintempletondatasources.com Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus or fund facts document before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Franklin Bissett Investment Management, part of Franklin Templeton Investments Corp. 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 Tel: 800.387.0830 Fax: 866.850.8241 franklintempleton.ca 2018 Franklin Templeton Investments. All rights reserved. 1017 PPE 06/18