Franklin Templeton Investments is proposing mergers for six corporate class funds.
The changes will be voted on at special meetings of investors to be held on or around 28 November in Toronto.
The mergers are due to certain tax law changes announced by the federal government in 2013. After 31 December 2014, income earned by yield class funds via forward contracts will be treated as ordinary income rather than capital gains.
In addition, with the changes to the tax position of the yield class funds within Franklin Templeton Corporate Class Ltd, it has also been determined that merging Franklin Bissett Bond Corporate Class into its underlying fund is appropriate to decrease the amount of ordinary interest income earned within the corporation.
With each of the proposed mergers, transitioning to a mutual fund trust structure would allow investors to own substantially similar assets in a more tax-efficient manner.
Pending investor and regulatory approvals, five corporate class funds will merge into their corresponding mutual fund trust versions, which have investment objectives that are substantially similar to that of the terminating funds; and Franklin Bissett Money Market Yield Class will merge into its corresponding Corporate Class version.
The proposed mergers include:
• Franklin Bissett Bond Yield Class and Franklin Bissett Bond Corporate Class will merge into Franklin Bissett Bond Fund;
• Franklin Bissett Canadian Short Term Bond Yield Class will merge into Franklin Bissett Canadian Short Term Bond Fund;
• Franklin Bissett Corporate Bond Yield Class will merge into Franklin Bissett Corporate Bond Fund;
• Franklin Bissett Money Market Yield Class will merge into Franklin Bissett Money Market Corporate Class; and
• Templeton Global Bond Hedged Yield Class will merge into Templeton Global Bond Fund.
Franklin Templeton is proposing to merge Templeton Global Bond Hedged Yield Class with its reference fund, Templeton Global Bond Fund, which does not use currency forwards to help eliminate the impact of currency fluctuations between the US and Canadian dollar. Accordingly, security holders in Templeton Global Bond Hedged Yield Class who wish to maintain exposure to a US dollar hedge have the option of initiating a switch to Templeton Global Bond Fund (Hedged) any time before the merger, or shortly thereafter. Franklin Templeton does not charge any fees for such switches.
The above mergers will occur after the close of business on or around 12 December 2014, pending investor and regulatory approvals.
The management and fixed administration fees will remain the same and the management expense ratios (MERs) will remain the same or be lower in the continuing funds. Each proposed merger will be realised on a taxable basis, with the exception of the merger of Franklin Bissett Money Market Yield Class into Franklin Bissett Money Market Corporate Class, which will be executed on a tax-deferred basis.