Annual Management Report of Fund Performance

Transcription

1 December 31, 2015 Annual Management Report of Fund Performance This annual management report of fund performance contains financial highlights but does not contain the complete annual financial statements of the investment fund. If you have not received a copy of the annual financial statements with this report, you can get a copy of the annual financial statements at your request, and at no cost, by calling , by writing to us at 5000 Yonge Street, Suite 900, Toronto ON M2N 0A7, or by visiting our website at or SEDAR at Securityholders may also contact us using one of these methods to request a copy of the investment fund s proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosure.

2 Co-Lead Manager Heather McOuatt, CFA Franklin Bissett Investment Management, part of Corp. Industry Experience: 20 years Location: Calgary, AB Co-Lead Manager Jeff Johnson, MBA Franklin Bissett Investment Management, part of Corp. Industry Experience: 21 years Location: Calgary, AB INVESTMENT OBJECTIVE AND STRATEGIES Franklin Bissett Treasury Bill Fund (the Fund ) seeks high current income, liquidity and capital preservation by investing primarily in high-quality money market securities issued by Canadian federal or provincial governments and government agencies. In addition to government-issued products, the Fund may also invest up to 20% in term deposits of Canadian chartered banks, primarily for liquidity purposes. The Fund invests primarily in money market securities maturing in one year or less issued or guaranteed by the Canadian federal government, provincial governments and government agencies. The Fund may also invest in floating rate notes with interest rate reset dates of less than one year. The Fund maintains a dollar-weighted average term to maturity of 90 days or less. RISK The risks of investing in the Fund remain as stated in the prospectus. The Fund is suitable for investors with a low risk tolerance and a shortterm investment time frame. Interest rate risk is the primary risk factor that the Fund s portfolio advisor (the portfolio manager ) manages on a daily basis. However, this risk is greatly mitigated by the very short-term nature of the investments. RESULTS OF OPERATIONS During the past year, Franklin Bissett Treasury Bill Fund Series A units generated total returns of 0.1%. The performance of the Fund s other series is substantially similar to that of its Series A units, except for differences in expense structure. For the return of the Fund s other series (if applicable), please refer to the Past Performance section. As at December 31, 2015, total net asset value of the Fund was $52.0 million, a decrease of 10.3% from December 31, This was primarily driven by $6.1 million in net redemptions and partially offset by a $165,000 increase in net assets from operations. In July, the Bank of Canada (BOC) executed its second rate cut of the year. This move was widely anticipated by the market, as Canadian economic data had been surprising to the downside. At the time of the meeting, one-year T-bill yields had already fallen 20 basis points to fully price in the cut, trading at a level of 0.45%. They continued to fall as the market priced in a further cut to hit a low of 0.35% in the third week of August. Subsequently, the BOC became more balanced in its communications, and one-year T-bills rose steadily through the next few months to peak at 0.57% at the beginning of December, and then trade mainly sideways for the remainder of the year. Provincial yields traded in line with T-bills, with a lag. Volatility in provincial spreads was also elevated during the period, with provincial yields trading between nine and 18 basis points above T-bills. The portfolio manager continued to invest in corporate and provincial issues when they were deemed attractive, and maintained a relatively high corporate exposure through the period. The Fund s government weighting was 100% and the average term was approximately 82 days at the end of the reporting period. The Fund generally maintains an average term of days. The portfolio manager does not actively employ an interest-rate-anticipation strategy. Average net assets of the series of the Fund that bear expenses have decreased for the year ended December 31, This has resulted in a corresponding decrease in expenses. Income decreased due to the results of the Fund s investment activities, including, but not limited to, those previously discussed for the period in review. RECENT DEVELOPMENTS The US Federal Reserve (Fed) made its first Fed Funds rate change in seven years at its December meeting, with an increase of 0.25%. With previous meetings tending to add to uncertainty in global markets, the Fed was as transparent as it could be about its desire to raise rates before the end of 2015, and did so at its last opportunity. The question now becomes what the Fed does from the beginning of 2016 onward, and what the implications would be for the BOC. While the market fully expects further Fed hikes this year, expectations for the BOC have turned from neutral to dovish. With oil prices hovering in the low US$30 range, Canadian gross domestic product (GDP) growth fairly flat (on a year-over-year basis) and headline inflation consistently below the BOC s 2% target, economic conditions at the end of 2015 make a strong case for cutting rates. However, this is not the portfolio manager s base case. The portfolio manager believes that unless there is a significant further deterioration in one of the previously mentioned metrics, the BOC will remain on hold for the time being. On January 18, 2016, Corp. announced that Franklin Bissett Treasury Bill Fund will, subject to Investment Review Committee approval, merge into Franklin Bissett Money Market Fund after close of business on or around April 22, This move was made in order to give investors access to an investment strategy with similar objectives but with a broader mandate in terms of securities in which it can invest. Investors in Franklin Bissett Treasury Bill Fund will receive units of Franklin Bissett Money Market Fund on a dollar-for-dollar and series-by-series basis. Investors are encouraged to consult their financial advisors for more information.

3 FORWARD-LOOKING STATEMENTS Investors should take note that certain statements in this report about a fund, including its strategy and expected future performance, are forward-looking. Forward-looking statements are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as may, will, should, could, expect, anticipate, intend, plan, believe, or estimate or other similar expressions. Any statement that is made concerning future strategies or performance is also a forward-looking statement. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the forward-looking statements. The forward-looking statements are by their nature based on numerous assumptions, which include, amongst other things, that (i) the Fund can attract and maintain investors and has sufficient capital under management to effect its investment strategies, (ii) the investment strategies will produce the results intended by the portfolio manager, and (iii) the markets will react and perform in a manner consistent with the investment strategies. Although the forward-looking statements contained herein are based upon what the portfolio manager believes to be reasonable assumptions, the portfolio manager cannot assure that actual results will be consistent with these forward-looking statements. Forward-looking statements are not guarantees of future performance. Any number of factors could contribute to differing results, including, among other things, general economic, political and market factors, interest and foreign exchange rates, global equity and capital markets, business competition, technological change, changes in government regulations, unexpected judicial or regulatory proceedings and catastrophic events. This list of factors is not exhaustive. Investors should not place undue reliance on forward-looking information and should be aware that the Fund may not update any forward-looking statements, whether as a result of new information, future events or otherwise. RELATED PARTY TRANSACTIONS The Manager is an indirect wholly-owned subsidiary of Franklin Resources, Inc., a global investment management organization known as. The Manager is the manager, registrar and transfer agent and a principal distributor of the Fund. The Manager provides or arranges for the provision of these services for day-to-day Fund operations, including the marketing, promotion and distribution of the Fund and portfolio advisory services. In consideration of management and administrative services, the Fund pays the Manager a monthly management fee based on the average net asset value of each series of the Fund, except Series O and R as applicable, calculated daily, as set out under Management Fees below. During the year ended December 31, 2015, the Fund paid management fees of $339,000 (2014 $411,000). During the year ended December 31, 2015, the Manager waived expenses of $64,000 (2014 $ ). The decision to reduce or rebate expenses is made at the discretion of the Manager. Portfolio Advisor Franklin Bissett Investment Management (the Portfolio Advisor ), part of the Manager, provides investment analysis and recommendations and executes or arranges for brokers to execute portfolio transactions. A portion of the management fee paid to the Manager is payable to the Portfolio Advisor with respect to portfolio advisory services. Principal Distributor As a principal distributor of the Fund, the Manager markets the Fund and arranges for the sale of the Fund through dealers across Canada. The Manager may retain companies to assist in the sale of the Fund under the deferred sales charge option. The Manager s affiliate, FTC Investor Services Inc. ( FTC ISI ), also acts as a principal distributor for Series F, O, R and S units of the Fund, as applicable. For acting as a principal distributor of the applicable series, FTC ISI receives an inter-company service fee of 0.20% from the Manager with respect to those units. Registrar and Transfer Agent In addition to management services, the Manager acts as the registrar and transfer agent of the Fund. These services are in the normal course of operations and are covered by the Administration Fee paid by the Fund to the Manager. Standing Instructions from the Independent Review Committee The Manager relied on standing instructions from the IRC with respect to the allocation of any operating expenses not covered by the fixed administration fee. The Manager relied, or may rely, on standing instructions from the IRC in respect of securities trades amongst mutual funds, investment funds or managed accounts managed by the Manager or an affiliate of the Manager. In both cases, the standing instructions require the Manager to comply with the policies and procedures presented to the IRC with respect to the above matters and to provide periodic reports to the IRC in accordance with NI MANAGEMENT FEES A portion of the management fee paid by the Fund is for trail fees and sales commissions paid to dealers ( Dealer Compensation ). The trail fees are a percentage of the daily average net asset value of each series of the Fund, which is held by the dealer s clients. The remaining portion of the management fee is used to pay for investment management and general administrative services. The table below outlines the Fund s

4 annual management fee and major services paid by the Fund as an approximate percentage of the management fee for each series: Series Management Fees (%) Dealer Compensation (%)* Investment management, general administration and other (%) A F I * Dealer compensation may include other fees related to distribution, which are not payable directly to dealers. The management and administration fee for Series O is paid for by the unitholder to the Manager as follows: First C$500,000 $1 million 0.45% Next C$4 million 0.35% Over C$5 million $10 million 0.25% Certain institutional and ultra-high-net-worth investors may negotiate the management and administration fee. Ultra-high-net-worth investors generally have more than C$10 million in investable assets.

5 Summary of Investment Portfolio (AS AT DECEMBER 31, 2015) REGIONAL WEIGHTINGS (%)* North America ASSET CLASS WEIGHTINGS (%) Treasury Bills Government Bonds Other assets, less liabilities 1.02 TOP 25 HOLDINGS (%) Canada Housing Trust, Secured Note, 2.75%, 6/15/ Province of Alberta, Floating Rate Note, 5/27/ National Housing Association, 2.503%, 7/1/ Canada Housing Trust, Floating Rate Note, Secured Note, 3/15/ Newfoundland Treasury Bill, 0.639%, 2/1/ Newfoundland Treasury Bill, 0.642%, 3/3/ Newfoundland Treasury Bill, 0.604%, 1/19/ Canada Treasury Bill, 0.485%, 7/28/ Province of Saskatchewan, 0.571%, 2/22/ Province of Manitoba, Floating Rate Note, 9/15/ Province of Quebec, Floating Rate Note, 10/23/ Province of Ontario, Floating Rate Note, 4/12/ Province of Ontario, Senior Note, Floating Rate Note, 6/27/ Province of Alberta, 0.63%, 1/21/ Province of Saskatchewan, 0.572%, 1/26/ New Brunswick Treasury Bill, 0.591%, 2/2/ Province of British Columbia, 0.55%, 3/8/ Province of Quebec, 0.55%, 3/24/ Province of British Columbia, 0.78%, 3/11/ Canada Treasury Bill, 0.493%, 8/25/ National Housing Association, 1.354%, 4/1/ National Housing Association, Floating Rate Note, 3/1/ Province of Saskatchewan, 0.539%, 1/20/ Ontario Treasury Bill, 0.61%, 2/17/ Ontario Treasury Bill, 0.65%, 11/30/ TOTAL NET ASSET VALUE: $51,992,989 * Excluding other assets, less liabilities. Above is an outline of the investments held in the Fund as a percentage of the Fund s net assets. Due to ongoing portfolio transactions, the investments and percentages may have changed by the time you purchase units of the Fund. The top 25 holdings are made available quarterly, 60 days after the quarter-end. To obtain a copy, please contact a member of our client services team at or visit

6 Series A (AS AT DECEMBER 31, 2015) FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the fiscal periods ended December 31. Net assets per unit (1) Net assets beginning of period $10.00 $10.00 $10.00 $10.00 $10.00 Increase (decrease) from operations: Total revenue Total expenses (0.07) (0.08) (0.08) (0.08) (0.08) Realized gains (losses) for the period Unrealized gains (losses) for the period Total increase (decrease) from operations (2) Distributions: From income (excluding dividends) (0.01) (0.03) (0.04) (0.05) (0.05) From dividends From capital gains Returns of capital Total annual distributions (3) (0.01) (0.03) (0.04) (0.05) (0.05) Net assets end of period $10.00 $10.00 $10.00 $10.00 $10.00 Ratios and supplemental data: Total net asset value ($ millions) (1) $35.82 $43.63 $53.33 $70.88 $95.38 Number of units outstanding 3,582,256 4,363,283 5,332,977 7,088,126 9,537,675 Management expense ratio (2) 0.82% 0.83% 0.83% 0.83% 0.83% Management expense ratio before waivers or absorptions 0.82% 0.83% 1.47% 1.46% 1.46% Net asset value per unit $10.00 $10.00 $10.00 $10.00 $10.00 For explanatory notes, please refer to Explanatory Notes to Financial Highlights at the end of the section. The opening net assets did not require adjustment upon transition to IFRS on January 1, Information pertaining to years 2012 and prior was derived from the audited annual financial statements prepared under Canadian GAAP. PAST PERFORMANCE The following information assumes that all distributions made by the Fund in the periods shown were reinvested in additional securities of the Fund and does not take into account sales, redemption, distribution or other optional charges that would have reduced returns. Past performance does not necessarily indicate how the Fund will perform in the future. Year-by-Year Returns The bar chart shows the Fund s annual performance for each of the years shown, and illustrates how the investment Fund s performance has changed from year to year. In percentage terms, the bar chart indicates how much an investment made on January 1 would have grown or decreased by the December 31 of each year shown. 6% % 3.8% 2.6% 0.4% 0.2% 0.5% 0.4% 0.4% 0.3% 0.1% 4% 2% 0% -2%

7 Series F (AS AT DECEMBER 31, 2015) FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the fiscal periods ended December 31. Net assets per unit (1) Net assets beginning of period $10.00 $10.00 $10.00 $10.00 $10.00 Increase (decrease) from operations: Total revenue Total expenses (0.04) (0.06) (0.06) (0.06) (0.06) Realized gains (losses) for the period Unrealized gains (losses) for the period Total increase (decrease) from operations (2) Distributions: From income (excluding dividends) (0.04) (0.05) (0.06) (0.07) (0.07) From dividends From capital gains Returns of capital Total annual distributions (3) (0.04) (0.05) (0.06) (0.07) (0.07) Net assets end of period $10.00 $10.00 $10.00 $10.00 $10.00 Ratios and supplemental data: Total net asset value ($ millions) (1) $2.53 $1.57 $2.26 $4.61 $4.99 Number of units outstanding 252, , , , ,331 Management expense ratio (2) 0.55% 0.56% 0.56% 0.56% 0.56% Management expense ratio before waivers or absorptions 0.55% 0.56% 1.20% 1.19% 1.19% Net asset value per unit $10.00 $10.00 $10.00 $10.00 $10.00 For explanatory notes, please refer to Explanatory Notes to Financial Highlights at the end of the section. The opening net assets did not require adjustment upon transition to IFRS on January 1, Information pertaining to years 2012 and prior was derived from the audited annual financial statements prepared under Canadian GAAP. PAST PERFORMANCE The following information assumes that all distributions made by the Fund in the periods shown were reinvested in additional securities of the Fund and does not take into account sales, redemption, distribution or other optional charges that would have reduced returns. Past performance does not necessarily indicate how the Fund will perform in the future. Year-by-Year Returns The bar chart shows the Fund s annual performance for each of the years shown, and illustrates how the investment Fund s performance has changed from year to year. In percentage terms, the bar chart indicates how much an investment made on January 1 would have grown or decreased by the December 31 of each year shown. 6% % 4.1% 2.9% 0.6% 0.4% 0.7% 0.7% 0.6% 0.5% 0.4% 4% 2% 0% -2%

8 Series I (AS AT DECEMBER 31, 2015) FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the fiscal periods ended December 31. Net assets per unit (1) Net assets beginning of period $10.00 $10.00 $10.00 $10.00 $10.00 Increase (decrease) from operations: Total revenue Total expenses (0.05) (0.07) (0.07) (0.07) (0.07) Realized gains (losses) for the period Unrealized gains (losses) for the period Total increase (decrease) from operations (2) Distributions: From income (excluding dividends) (0.03) (0.04) (0.05) (0.06) (0.06) From dividends From capital gains Returns of capital Total annual distributions (3) (0.03) (0.04) (0.05) (0.06) (0.06) Net assets end of period $10.00 $10.00 $10.00 $10.00 $10.00 Ratios and supplemental data: Total net asset value ($ millions) (1) $0.66 $0.47 $0.32 $0.42 $0.22 Number of units outstanding 65,797 46,845 32,238 41,732 22,205 Management expense ratio (2) 0.71% 0.70% 0.71% 0.66% 0.66% Management expense ratio before waivers or absorptions 0.71% 0.70% 1.35% 1.29% 1.29% Net asset value per unit $10.00 $10.00 $10.00 $10.00 $10.00 For explanatory notes, please refer to Explanatory Notes to Financial Highlights at the end of the section. The opening net assets did not require adjustment upon transition to IFRS on January 1, Information pertaining to years 2012 and prior was derived from the audited annual financial statements prepared under Canadian GAAP. PAST PERFORMANCE The following information assumes that all distributions made by the Fund in the periods shown were reinvested in additional securities of the Fund and does not take into account sales, redemption, distribution or other optional charges that would have reduced returns. Past performance does not necessarily indicate how the Fund will perform in the future. Year-by-Year Returns The bar chart shows the Fund s annual performance for each of the years shown, and illustrates how the investment Fund s performance has changed from year to year. In percentage terms, the bar chart indicates how much an investment made on January 1 would have grown or decreased by the December 31 of each year shown. 6% % 3.9% 2.7% 0.5% 0.3% 0.6% 0.6% 0.5% 0.4% 0.3% 4% 2% 0% -2%

9 Series O (AS AT DECEMBER 31, 2015) FINANCIAL HIGHLIGHTS The following tables show selected key financial information about the Fund and are intended to help you understand the Fund s financial performance for the fiscal periods ended December 31. Net assets per unit (1) Net assets beginning of period $10.00 $10.00 $10.00 $10.00 $10.00 Increase (decrease) from operations: Total revenue Total expenses Realized gains (losses) for the period Unrealized gains (losses) for the period Total increase (decrease) from operations (2) Distributions: From income (excluding dividends) (0.09) (0.11) (0.12) (0.13) (0.13) From dividends From capital gains Returns of capital Total annual distributions (3) (0.09) (0.11) (0.12) (0.13) (0.13) Net assets end of period $10.00 $10.00 $10.00 $10.00 $10.00 Ratios and supplemental data: Total net asset value ($ millions) (1) $12.99 $12.28 $11.34 $14.19 $3.40 Number of units outstanding 1,298,658 1,228,480 1,134,402 1,419, ,378 Management expense ratio (2) Management expense ratio before waivers or absorptions 0.64% 0.63% 0.63% Net asset value per unit $10.00 $10.00 $10.00 $10.00 $10.00 For explanatory notes, please refer to Explanatory Notes to Financial Highlights at the end of the section. The opening net assets did not require adjustment upon transition to IFRS on January 1, Information pertaining to years 2012 and prior was derived from the audited annual financial statements prepared under Canadian GAAP. PAST PERFORMANCE The following information assumes that all distributions made by the Fund in the periods shown were reinvested in additional securities of the Fund and does not take into account sales, redemption, distribution or other optional charges that would have reduced returns. Past performance does not necessarily indicate how the Fund will perform in the future. Year-by-Year Returns The bar chart shows the Fund s annual performance for each of the years shown, and illustrates how the investment Fund s performance has changed from year to year. In percentage terms, the bar chart indicates how much an investment made on January 1 would have grown or decreased by the December 31 of each year shown. 6% % 4.6% 3.4% 1.1% 0.9% 1.3% 1.3% 1.2% 1.1% 0.9% 4% 2% 0% -2%

10 EXPLANATORY NOTES TO FINANCIAL HIGHLIGHTS NOTES TO FINANCIAL HIGHLIGHTS Net Assets per Unit: (1) This information is derived from the Fund s audited annual financial statements. In the period a fund or series is established, the financial information is provided from the date of inception to the end of the period. In cases where the net assets per unit presented in the financial statements differ from the net asset value calculated for Fund pricing purposes, an explanation of these differences can be found in the notes to the financial statements. (2) Net assets and distributions are based on the actual number of units outstanding at the relevant time. The increase/decrease in net assets from operations is based on the weighted average number of units outstanding over the fiscal period. This table is not intended to be a reconciliation of opening and closing net assets per unit. (3) Distributions were paid in cash or reinvested in additional units of the Fund or both, and exclude distributions of management fee reductions to unitholders. Ratios and Supplemental Data: (1) This information is provided as at the period-end of the year shown. (2) Management expense ratio is based on total expenses for the stated period and is expressed as an annualized percentage of daily average net asset value during the period. OTHER FUND INFORMATION Reported year-by-year returns for past years may be revised, based on the results of recalculations, audits and/or other historical review processes. Such revisions are considered immaterial to performance disclosure unless otherwise stated. CFA and Chartered Financial Analyst are trademarks owned by CFA Institute.