Franklin Templeton moves toward fee transparency

Franklin Templeton says these changes, if implemented, will provide investors with greater fee transparency and predictability, along with lower or, in some cases, the same management expense ratios (MERs).

A special meeting of investors will be held on or about December 9, in Toronto to vote on the proposals.

“The fixed admin model will provide investors with more transparent and consistent fees so that they can understand the ongoing costs of investing in a fund,” said Dennis Tew, chief financial officer. “If approved, the new fee structure would result in lower MERs for the majority of our funds, and the remaining funds would have the same MERs as they have today.”

Each fund currently pays its own operating expenses, which make up a significant portion of the MER. Operating expenses include such costs as registrar, transfer agency, audit, legal and custodial fees. Under a fixed rate administration fee model, Franklin Templeton will pay the operating expenses of each fund other than certain fund costs, such as directors’ fees and expenses and new governmental fees, in exchange for the funds’ payment of a fixed rate administration fee. By fixing a large portion of operating expenses at a set percentage, the certainty and transparency of 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.

The proposals also include a management fee realignment, which is the other key component of a fund’s MER. Most of the management fee changes being proposed will decrease what is being charged to a fund. However, in order to align the management fees with those charged across the industry and by other similar Franklin Templeton funds, the company’s proposal will result in an increase in the management fee of certain balanced and global equity funds, if approved. The management fee charged to Series A, F, I and T of Franklin Bissett Canadian Balanced Fund and Series A, F and T of Franklin Bissett Canadian Balanced Corporate Class will be increased by 0.10 per cent under the proposal.

Once implemented, the combination of the fixed rate administration fee and management fee increase will result in an MER that is either the same or up to 0.23 per cent lower depending on the fund and series.

The management fee charged to Series A of Templeton Growth Fund, Ltd. and Templeton Growth Corporate Class will be increased by 0.25 per cent under the proposal, which when combined with the proposed fixed rate administration fee, will result in post-implementation MER decreases of 0.10 per cent and 0.06 per cent, respectively.

A complete list of the funds and portfolios that are subject to these proposals, along with additional information, is available at franklintempleton.ca.

If the proposals are approved, the fixed rate administration fee and management fee changes will become effective on or about Jan. 1, 2014.

Franklin Templeton Investments Corp. is a wholly owned subsidiary of San Mateo, Calif.-based Franklin Resources, Inc. (NYSE: BEN).