Toronto-based Franklin Templeton Investments Corp. is proposing to eliminate two Canadian high-dividend mutual funds and move their unitholders into mutual funds whose holdings are more diversified and target Canadian companies with a history of growing their dividends.
Specifically, the firm plans to terminate Franklin Bissett Canadian High Dividend Fund and move its unitholders into Franklin Bissett Canadian Dividend Fund. Similarly, Franklin Templeton will terminate Franklin Bissett Canadian High Dividend Corporate Class and move its unitholders into Franklin Bissett Canadian Dividend Corporate Class.
The selection of Canadian high-dividend paying companies has dwindled over the past five years and now mainly consists of energy and financial companies, according to the firm’s announcement released on Monday.
“This, in turn, has narrowed the opportunity set for the terminating funds and contributed to increased volatility,” the announcement states. “Thus, the continuing funds, which target the broader opportunity set of established Canadian-centric companies with a history of growing dividends, are better positioned to achieve diversification with lower volatility.”
Both changes are subject to investor and regulatory approval. A special meeting of investors will be held to vote on the changes on or around April 8 in Toronto.
Investors will have until April 21 to redeem their holdings within the funds that are being proposed for termination, or switch to a different fund. If the terminations are approved, any remaining investors in the terminating funds will have their holdings transferred to the continuing fund automatically on a series-by-series, dollar-for-dollar basis.
The firm also announced that, pending regulatory approval, Series I will be added to Franklin Bissett Canadian Dividend Fund on April 11.
Franklin Templeton is also going ahead with a separate termination for Franklin Bissett Treasury Bill Fund, whose unitholders will be moved into Franklin Bissett Money Market Fund on or around April 22.
The firm found that both funds have similar investment objectives, but Franklin Bissett Money Market Fund has a broader mandate in terms of the securities in which it can invest, which ensures diversification and high liquidity. The wider selection of securities also allows the fund to pursue a higher yield and monthly income.
The firm also plans to reduce its management fee by 25 basis points for Series A and Series I of Franklin Bissett Money Market Fund.
The merger of the latter funds does not require an investor vote but is subject to approval from the firm’s independent review committee.
The firm also states that all costs and expenses associated with these mergers will be borne by the manager and will not be charged to the funds.