Franklin Resources and Harvard University have agreed to settle their differences. The university and the fund firm have been fighting over the control of the two closed end funds -- Templeton China World Fund and Templeton Dragon Fund -- run by Franklin. The settlement was filed yesterday with the SEC.

The university was pushing Franklin to hire a new advisor to the funds as part of an effort to close the gap between the funds' share prices and their NAV. After it filed a proxy resolution to that effect, Franklin sued Harvard and Harvard then counter-sued Franklin.

The firm's both agreed yesterday to drop those suits and settle the matter. Under the agreement, the Templeton China World Fund will convert to an open-end structure. The fund will be able to pay shareholders seeking more than $250,000 in distributions with in-kind securities. Meanwhile, the Templeton Dragon Fund will repurchase up to 15 percent of its outstanding shares at a 7.5 percent discount to its NAV.

In exchange, Harvard agreed to sell or tender all of its shares in the funds and not purchase additional shares in the fund in the future. Harvard Management also agreed to take the distributions on an in-kind, pro rata basis. It also agreed to abstain from voting its proxies at the funds' upcoming annual meetings.  

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