Franklin Templeton Announces Plans to Convert Franklin Focused Growth Mutual Fund to an ETF

Rhea-AI Summary

Franklin Templeton plans to convert its Franklin Focused Growth mutual fund into an exchange-traded fund (ETF) for U.S. investors, subject to shareholder approval. The conversion is expected to be effective in Q4 2023. This will mark the firm's third mutual fund-to-ETF conversion. The Franklin Focused Growth ETF will maintain similar management and investment strategies but will operate as a non-diversified fund. The reorganization was approved by the mutual fund's board in December 2022, with a shareholder approval meeting set for June 30, 2023. If approved, this will be Franklin Templeton's 60th ETF in the U.S., joining its 59 existing ETFs with approximately $10 billion in assets under management.

Positive

• Conversion enables access to tax efficiencies and structural benefits of an ETF.
• Maintains similar investment strategies and management as the mutual fund.
• Marks the firm's expansion in the U.S. ETF market with 60 total ETFs.

Negative

• The ETF will be non-diversified, potentially increasing investment risk.
• Shareholder approval is pending, introducing uncertainty.

Firm will offer same large-cap growth strategy to U.S. investors with the structural advantages of an ETF

SAN MATEO, Calif.--(BUSINESS WIRE)-- Franklin Templeton announces plans to convert its Franklin Focused Growth mutual fund to an exchange-traded fund (ETF) for U.S. investors. The conversion, which is subject to shareholder approval, is expected to be effective in the fourth calendar quarter of 2023. If approved, this will be the firm’s third mutual fund-to-ETF conversion.

Franklin Focused Growth Fund seeks capital appreciation by investing predominantly in equity securities of companies that the investment manager believes offer compelling growth opportunities. The investment manager considers many factors in the selection criteria, including historical and potential growth in revenues and earnings, assessment of strength and quality of management, and determination of a company’s strategic positioning in its industry.

The new Franklin Focused Growth ETF will be managed in a substantially similar manner as the mutual fund, and the ETF’s investment goal, principal investment strategies, performance benchmark, investment adviser and portfolio management team will be the same as the predecessor mutual fund. One exception is that the ETF, unlike the mutual fund, will be a non-diversified fund (within the meaning of the Investment Company Act of 1940), which means that it will generally invest a greater proportion of its assets in the securities of one or more issuers and will invest overall in a smaller number of issuers than a diversified fund.¹ Matthew J. Moberg, senior vice president and portfolio manager with the Franklin Equity Group, has managed the mutual fund since 2016 and will manage the new ETF.

“We are continually assessing our ETF product lineup for opportunities to diversify our offerings, and we are excited to expand it with the addition of the Franklin Focused Growth strategy,” said Patrick O’Connor, Head of Global ETFs for Franklin Templeton. “The conversion of this mutual fund to an ETF will enable shareholders to invest in a substantially similar strategy as the current mutual fund with the tax efficiencies and structural benefits of an ETF.”

The reorganization of the mutual fund to an ETF was approved by the mutual fund’s governing board at a meeting held on December 14-15, 2022. Shareholders of the mutual fund will receive notice of a special meeting seeking approval of the conversion, as well as information about the ETF, reasons for the proposed reorganization and potential benefits, in the second calendar quarter of 2023. The shareholder meeting for approval of the conversion is scheduled for June 30, 2023.

Franklin Templeton’s U.S. ETF platform provides solutions for a range of market conditions and investment objectives through active, smart beta and passively managed ETFs. Franklin Templeton currently offers 59 ETFs in the U.S. with combined assets under management of approximately $10 billion. If approved by shareholders, this conversion will be the firm’s 60^th ETF available to U.S. investors.

About Franklin Templeton

Franklin Resources, Inc. [NYSE:BEN] is a global investment management organization with subsidiaries operating as Franklin Templeton and serving clients in over 155 countries. Franklin Templeton’s mission is to help clients achieve better outcomes through investment management expertise, wealth management and technology solutions. Through its specialist investment managers, the company offers specialization on a global scale, bringing extensive capabilities in fixed income, equity, alternatives and multi-asset solutions. With offices in more than 30 countries and approximately 1,300 investment professionals, the California-based company has over 75 years of investment experience and approximately $1.4 trillion in assets under management as of December 31, 2022. For more information, please visit franklintempleton.com and follow us on LinkedIn, Twitter and Facebook.

Before investing, carefully consider a fund’s investment objectives, risks, charges and expenses. You can find this and other information in each prospectus, or summary prospectus, if available, at www.franklintempleton.com. Please read it carefully.

All investments involve risks, including possible loss of principal. To the extent the fund focuses on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. Growth stock prices reflect projections of future earnings or revenues, and can, therefore, fall dramatically if the company fails to meet those projections. The fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The fund may also invest in small- and mid-capitalization companies, which can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. Foreign investing carries additional risks such as currency and market volatility, and political or social instability; risks which are heightened in developing countries. The manager’s portfolio selection strategy is not solely based on ESG considerations, and therefore the issuers in which the fund invests may not be considered ESG-focused companies. Integrating ESG considerations into the investment process is not a guarantee that better performance will be achieved. These and other risks are described more fully in the fund's prospectus.

ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns. ETF shares may be bought or sold throughout the day at their market price (MP), not their Net Asset Value (NAV), on the exchange on which they are listed. Shares of ETFs are tradable on secondary markets and may trade either at a premium or a discount to their NAV on the secondary market.

1. As a non-diversified fund, it will be permitted to invest a higher percentage of its assets in any one security than a diversified fund, which may magnify the fund’s losses from events affecting a particular security.

Franklin Distributors, LLC. Member FINRA, SIPC.

NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE.

TN23-8

Copyright © 2023. Franklin Templeton. All rights reserved.

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Franklin Templeton Corporate Communications:

Vanessa Garcia, (917) 562-5151, vanessa.garcia@franklintempleton.com

Source: Franklin Templeton

FAQ

What is the purpose of the Franklin Focused Growth fund conversion to an ETF?

The conversion aims to provide U.S. investors with the same large-cap growth strategy while offering the tax efficiencies and structural benefits of an ETF.

When is the shareholder meeting for the conversion of Franklin Focused Growth fund to an ETF?

The shareholder meeting is scheduled for June 30, 2023.

How many ETFs does Franklin Templeton currently offer?

Franklin Templeton currently offers 59 ETFs in the U.S. If the conversion is approved, the Franklin Focused Growth ETF will be its 60th.

What are the risks associated with the new Franklin Focused Growth ETF?

As a non-diversified fund, the ETF may concentrate investments in fewer issuers, which could magnify losses due to adverse events affecting specific securities.