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Fees and Expenses
Mutual funds provide a variety of services and benefits that help make saving and investing simple, accessible and affordable. There are different types of fees and expenses associated with the services provided.
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Mutual fund fees generally fall into two categories—sales charges (fees paid directly from your investment) and fund expenses (deducted from fund assets). Information about the different charges and expenses for each mutual fund can be found in the fund's prospectus.
Sales Charges
Sales charges compensate financial advisors for their services. Financial advisors can help you define your needs, narrow the search for investments, assist with lifetime planning and many other financial situations. By offering market knowledge and planning expertise, financial advisors can help with developing a solid asset allocation plan specifically designed to meet your objectives.
Sales charges vary by share class. Different classes of shares allow you to pay sales charges in different ways. For example, Class A shares typically deduct the sales charge up front, at the time of investment. In comparison, Class C shares usually impose a small deferred sales charge that is paid if fund shares are sold within a short time of purchase, often one year. Class C shares will generally have higher annual fees and expenses than Class A shares. To learn more about Franklin Templeton fund sales charges, please consult a fund's prospectus or visit our Share Class Options page.
Breakpoints. There can be sales charge discounts when you make purchases of Class A shares over a certain dollar amount. Details about where these breakpoints occur can be found in the fund's prospectus.
Letter of Intent. If you plan to purchase a large quantity of mutual fund shares within a 13-month period, you may qualify for a discount according to the fund's schedule of breakpoints. If so, you can sign a Letter of Intent (LOI). The LOI is not binding, but failure to complete the purchases required under the LOI will mean loss of the discount on sales charges.
Fund Expenses
Fund expenses are fees that help pay for the ongoing costs of running a fund and other services. Fund expenses help pay for management and administration, reporting costs, taxes, and legal and audit fees.
Management fees. These fees are ongoing and are charged by the fund's investment advisor to manage the fund and select its portfolio of securities. The managers' market knowledge and expertise in selecting appropriate securities for the fund are essential to helping the fund meet its investment objectives, while not incurring undue risk. There may be circumstances in which it is appropriate to charge higher expenses, depending on the fund's investment strategy. For example, certain types of funds require more sophisticated research efforts by their managers, such as international stock funds that typically depend on research from multiple people in multiple locations.
12b-1 fees. These fees are paid by mutual funds to cover marketing and distribution expenses, such as compensating sales professionals, directly from their assets. This fee is assessed against a fund's total net assets.
Can Fees Change?
A mutual fund's directors annually review the management fees paid. Any change in these fees must be approved by a majority of the holders of a fund's shares and a majority of the fund's directors. Any increase in a 12b-1 fee must also be approved by shareholders.
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