Investors in Franklin Templeton’s mutual funds have approved proposals to establish a fixed rate administration fee and to change the management fee currently charged to certain Participating Series.
Upon implementation, these changes will provide investors with greater fee transparency and predictability, along with lower or, in some cases, the same management expense ratios (MERs) as those previously reported.
"Our investors have validated the benefits of a fixed admin fee model with their support of our proposal. This model will provide them with more transparent and consistent fees so that they can understand the ongoing costs of investing in our funds," says Dennis Tew, chief financial officer of Franklin Templeton Investments. "The new fee structure will also result in lower MERs for the majority of our funds, and the remaining funds will have the same MERs as those previously reported."
Effective 1 January 2014, Franklin Templeton will pay the operating expenses of each Participating Series other than certain fund costs, such as directors' fees and expenses and new governmental fees, in exchange for the payment by each Fund of an annual fixed rate administration fee. Operating expenses payable by Franklin Templeton include, but are not limited to, registrar and transfer agency costs, audit fees, legal fees and custodial fees.
Previously, each fund paid all of its own operating expenses, which comprised a portion of the MER of the fund. By fixing a large portion of operating expenses at a set percentage, the certainty and transparency of the MERs will significantly increase. The adoption of a fixed rate administration fee also offers investors protection against rising MERs triggered by declining markets, periods of net redemptions or increased expenses and costs of services.
Certain fund costs, which will continue to be payable by each fund, include borrowing and interest costs, director's fees (as applicable), investor meeting costs as permitted, the fees and expenses of the independent review committee of the funds, and the cost of compliance with any new or changed governmental and regulatory requirements imposed on or after the 10 December 2013 implementation date. In addition, each fund will also pay all applicable taxes (HST, capital taxes, income taxes and withholding taxes).
The fixed rate administration fee proposal also included a management fee realignment, which is the other key component of a fund's MER. Most of the management fee changes will decrease what is being charged to a Participating Series. However, investors in Series A of Templeton Growth Fund and Templeton Growth Corporate Class as well investors in Series A, F, I and T of Franklin Bissett Canadian Balanced Fund and Series A, F and T of Franklin Bissett Canadian Corporate Class approved a proposal to increase the management fees charged to these series. In all cases, for these series, the combination of the fixed rate administration fee and management fee increase will result in a MER that is either the same or lower than had previously been reported.
A quorum was not achieved for the meetings of the following Funds: Franklin Income Hedged Corporate Class, Tapestry Balanced Income Private Portfolio Corporate Class, Tapestry Diversified Income Private Portfolio Corporate Class, Tapestry Global Balanced Private Portfolio Corporate Class and Tapestry Global Growth Private Portfolio Corporate Class. The meetings for these funds, as well as Franklin Bissett Small Cap Corporate Class and Tapestry Growth Private Portfolio Corporate Class, will be adjourned to 16 December.