If you are an investor who owns American Depositary Receipts (ADRs), you may wonder how often you have to pay fees for holding these securities. ADRs are certificates that represent shares of foreign companies that trade on U.S. stock exchanges. They allow you to invest in foreign markets without dealing with currency conversion, foreign taxes, or other complexities.
One of the costs associated with owning ADRs is the ADR Fee, which is charged by the depositary bank that issues and maintains the ADRs. This fee covers the administrative expenses of the bank, such as record keeping, custody, dividend distribution, and currency conversion. The fee is usually a few cents per ADR per year, and it is deducted from the dividends or capital gains that you receive from your ADRs.
But how often are these fees deducted from your account? The answer depends on the specific ADR that you own and the agreement between the depositary bank and the foreign issuer. Generally speaking, ADR Fees are normally charged 1 to 4 times a year. Fees are collectively deducted from your account at the end of the month. In some cases, however, the frequency may be higher. For example, if the foreign issuer pays dividends more than 4 times a year, or if there are special events such as stock splits or rights offerings that affect the ADRs, the depositary bank may charge additional fees to cover its extra work.
The amount of the fee is also determined by the depositary bank and the foreign issuer. It is usually a fixed amount per ADR per year, which is divided according to the payment frequency. For instance, if the annual ADR Fee is 2 cents and the payment frequency is 4 times a year, you will pay 0.5 cents for each payment. The fee amount and frequency are disclosed in the ADR prospectus and on the depositary bank's website.
As an ADR investor, you should be aware of the fees that you have to pay and how they affect your returns. You can find out more information about your ADRs by contacting your broker or the depositary bank. You can also compare different ADRs and their fees on online platforms such as adr.com or nasdaq.com.