Personalized, tax-optimized portfolios at scale

What are the risks?

All investments involve risks, including possible loss of principal. Tax management practices may impact performance, portfolio characteristics and holdings; and may not result in favorable outcomes.

Important information

CANVAS^® is an interactive web-based investment tool developed by O’Shaughnessy Asset Management, L.L.C. (“OSAM”) that permits an investment professional to select a desired investment strategy for the professional’s client.

Any information, statement or opinion set forth herein is general in nature, is not directed to or based on the financial situation or needs of any particular investor, and does not constitute, and should not be construed as, investment advice, forecast of future events, a guarantee of future results, or a recommendation with respect to any particular security or investment strategy or type of retirement account.

Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies should consult their financial professional.

Tax management: Franklin Templeton, its affiliates, and its employees are not in the business of providing tax or legal advice to taxpayers. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties or complying with any applicable tax laws or regulations. Tax related statements, if any, may have been written in connection with the “promotion or marketing” of the transaction(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

Separately Managed Accounts (SMAs) are investment services provided by O’Shaughnessy Asset Management, LLC (OSAM), a federally registered investment adviser. Client portfolios are managed based on investment instructions or advice provided by OSAM. Management is implemented by OSAM, or, in the case of certain programs, the program sponsor or its designee.

These materials are being provided for illustrative and informational purposes only. The information contained herein is obtained from multiple sources that are believed to be reliable. However, such information has not been verified, and may be different from the information included in documents and materials created by the sponsor firm in whose investment program a client participates. Some sponsor firms may require that these materials be preceded or accompanied by investment profiles or other documents or materials prepared by such sponsor firms, which will be provided upon a client’s request. For additional information, documents and/or materials, please contact Franklin Templeton.

Canvas Managed Options Strategies (Canvas Managed Options) are provided by O’Shaughnessy Asset Management, LLC, an affiliate of Franklin Templeton, and an investment advisor registered under the United States Securities and Exchange Commission Investment Advisers Act of 1940.

Canvas Managed Options may rely on the investment objectives described in the relevant investment management agreement and communicated to the client until such time as it shall receive written notice of the modification, alteration, or amendment of such investment objective.

When determining which options to sell and/or repurchase, Canvas Managed Options will consider factors including (but not limited to) option liquidity, maturity, volatility, interest rates, underlying dividends, and time to maturity.

Fees: The fee paid to O’Shaughnessy Asset Management is separate from and does not include the costs of stock and option commissions, clearing member trade agreement fees, exchange fees, dealer spreads (which are embedded in pricing) and other costs associated with the purchase or sale of securities, custodian fees, interest, taxes, and other portfolio expenses, which shall be the sole responsibility of client and shall be paid to parties other than O’Shaughnessy Asset Management. The custodian of the client account will debit the account for payments of any such fees payable to other parties. Management fees will reduce the rate of return on any account or portfolio.

Tax implications: Buying or selling options, and any potential asset sales required to satisfy option obligations, if any, may result in tax consequences for the investors. Investors are encouraged to seek the guidance of their own independent tax advisor prior to implementing any option program. Under no circumstance is O’Shaughnessy Asset Management or its Canvas Managed Options offering tax advice.

Franklin Templeton, its affiliates, and its employees are not in the business of providing tax or legal advice to taxpayers. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties or complying with any applicable tax laws or regulations. Tax-related statements, if any, may have been written in connection with the “promotion or marketing” of the transaction(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

WHAT ARE THE RISKS?

All investments are subject to risk, including possible loss of principal. There is no guarantee or assurance that any option strategy will achieve its investment objective.

Leverage increases the volatility of investment returns and subjects investments to magnified losses and a decline in value.

Short selling is a speculative strategy. Unlike the possible loss on a security that is purchased, there is no limit on the amount of loss on an appreciating security that is sold short.

Risk of loss/opportunity cost: The gain to an investor selling an option is limited to the premium received for the sale of that option.

The loss to an investor buying an option is limited to the premium paid for the purchase of that option.

The loss to an investor selling a put option is limited to the strike price of that option, less the premium received for the sale of that option.

No guarantee of performance: Regardless of the appreciation or depreciation of the strategy’s underlying security or securities, the option strategy may underperform a portfolio that is otherwise identical to the underlying securities or equities owned by the client but did not engage in the option strategy. There is no guarantee that the option strategy will be profitable on a gross or net of fees basis.

Liquidity: There is no guarantee a secondary market in options will be liquid. If Canvas Managed Options is unable to close positions prior to expiry the risk management techniques described herein may not be implemented as described resulting in outsized losses or resulting in the sale of collateral shares.

Not a hedge: Investors selling call options have a maximum profit limited to the value of the premium received. Beyond the premium received, investors retain all the risk of the underlying portfolios and could suffer a loss of 100% of their equity holdings.

Unlimited loss: Investors selling call options accept the potential for unlimited loss as call options have no maximum value, or the risk of their shares being called away. For investors selling covered calls, their loss may be realized in the form of opportunity cost, with the possibility of their shares or ETFs being called away (and sold) at prices far below the market price of those shares or ETFs at the time of exercise.

Options and derivatives risk: Canvas Managed Options and O’Shaughnessy Asset Management offers no guarantee that any of the strategies illustrated herein, will be successful or meet their intended objectives. Market movements or events, both foreseen and unforeseen, may render any strategy unsuccessful and may result in unforeseen losses.

Options are not suitable for all investors and carry additional risks. Investors must ensure that they have read and understood the current options risk disclosure document before entering any options transactions. In addition, investors should consult with a tax, legal and/or financial advisor prior to contemplating any derivative transactions. The options risk disclosure document, “Characteristics and Risks of Standardized Options”, can be accessed at the following web address: https://www.theocc.com/Company-Information/Documents-and-Archives/Options-Disclosure-Document