Franklin Templeton Investments Corp. et al.

Headnote

NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from requirements contained in paragraphs 2.5(2)(a) and 2.5(2)(c) of National Instrument 81-102 Mutual Funds -- Top Funds permitted to invest up to 10% of net assets, in aggregate, in securities of mutual funds governed by the laws of Luxembourg that are sub-funds of an affiliate and managed by the same manager -- Relief subject to certain conditions -- Top Funds are required to divest if laws applicable to Luxembourg mutual funds cease to be materially consistent with Part 2 of NI 81-102.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 2.5(2)(a), 2.5(2)(c), 19.1.

February 21, 2012

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

THE PROVINCE OF ONTARIO

(the "Jurisdiction")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

FRANKLIN TEMPLETON INVESTMENTS CORP.

(the "Manager"), QUOTENTIAL BALANCED

GROWTH PORTFOLIO, QUOTENTIAL BALANCED

GROWTH CORPORATE CLASS PORTFOLIO,

QUOTENTIAL BALANCED INCOME PORTFOLIO,

QUOTENTIAL BALANCED INCOME CORPORATE

CLASS PORTFOLIO, QUOTENTIAL CANADIAN

GROWTH PORTFOLIO, QUOTENTIAL CANADIAN

GROWTH CORPORATE CLASS PORTFOLIO,

QUOTENTIAL DIVERSIFIED INCOME PORTFOLIO,

QUOTENTIAL DIVERSIFIED INCOME CORPORATE

CLASS PORTFOLIO, QUOTENTIAL GLOBAL

BALANCED PORTFOLIO, QUOTENTIAL GLOBAL

BALANCED CORPORATE CLASS PORTFOLIO,

QUOTENTIAL GLOBAL GROWTH PORTFOLIO,

QUOTENTIAL GLOBAL GROWTH CORPORATE

CLASS PORTFOLIO, QUOTENTIAL GROWTH

PORTFOLIO, QUOTENTIAL GROWTH CORPORATE

CLASS PORTFOLIO, QUOTENTIAL MAXIMUM

GROWTH PORTFOLIO, QUOTENTIAL MAXIMUM

GROWTH CORPORATE CLASS PORTFOLIO,

FRANKLIN TEMPLETON GLOBAL BLEND FUND,

FRANKLIN TEMPLETON GLOBAL BLEND

CORPORATE CLASS AND WELLINGTON WEST

FRANKLIN TEMPLETON BALANCED RETIREMENT

INCOME FUND (the "Existing Top Funds")

DECISION

Background

The principal regulator in the Jurisdiction has received an application (the "Application") from the Manager and the Existing Top Funds (the "Filers") for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") exempting the Existing Top Funds and other top funds managed by FTIC after the date of this Decision that invest a portion of their assets in global/international equities or in foreign fixed income by investing in underlying funds with a global/international equity mandate or a foreign fixed income mandate (which together with the Existing Top Funds are referred to collectively as the "Top Funds") from:

(i) the prohibition contained in paragraph 2.5(2)(a) of National Instrument 81-102 Mutual Funds (NI 81-102) against a mutual fund investing in another mutual fund that is not subject to NI 81-102 and National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101); and

(ii) the prohibition contained in paragraph 2.5(2)(c) of NI 81-102 against a mutual fund investing in another mutual fund's securities where those securities are not qualified for distribution in the local jurisdiction (together with paragraph (i) above, the "Exemption Sought")

to enable each Top Fund to invest up to 10 per cent of its net assets, taken at market value at the time of the investment, in aggregate, in SICAV Funds (as defined below) managed by an affiliate.

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission ("OSC") is the principal regulator for this application, and

(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions and Multilateral Instrument 11-102 Procedure and Related Matters have the same meaning if used in this decision, unless otherwise defined.

"Franklin Templeton Investments" means Franklin Resources, Inc. and its subsidiaries.

"FTIF" means Franklin Templeton Investment Funds, an umbrella SICAV (as defined below) with UCITS status (as defined below) under the laws of Luxembourg.

"SICAV" means Société d'Investissment à Capital Variable, an open-end investment company, governed by the laws of Luxembourg.

"SICAV Funds" means each of the existing sub-funds of FTIF and other similar FTIF sub-funds established in the future under FTIF.

"UCITS" means Undertaking for Collective Investment in Transferable Securities and refers to the investment funds authorized by the European Union as investment funds suitable to be distributed in more than one country of Europe.

Representations

This decision is based on the following facts represented by the Filers:

1. The Manager is a corporation existing under the laws of Ontario, having its head office in Toronto, Ontario. The Manager is registered as an investment fund manager in Ontario, and as a portfolio manager and mutual fund dealer in Ontario, British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador and Yukon.

2. The Manager is a wholly-owned subsidiary of Templeton Worldwide, Inc., a Delaware corporation, which is a direct wholly-owned subsidiary of Franklin Resources, Inc. ("FRI"). FRI is a global investment management organization operating as Franklin Templeton Investments. Franklin Templeton Investments provides global and domestic investment management solutions for institutional and retail clients managed by its Franklin, Templeton, Mutual Series, Bissett and Fiduciary Trust investment teams. In addition to Canada, FRI and its subsidiaries maintain offices in 30 other countries.

3. The Manager is the manager of the Existing Top Funds, each complying with NI 81-102 and having a simplified prospectus and annual information form prepared in accordance with NI 81-101.

4. The Manager and the Top Funds are not in default of securities legislation in any Canadian jurisdiction.

5. Each of the promoters, portfolio advisors and principal distributors of the SICAV Funds is or will be an indirect wholly-owned subsidiary of FRI.

6. The SICAV Funds, are distributed in several European countries, pursuant to the European passport implemented by the European Union regulations of collective investment schemes, known as the UCITS Directives (Undertaking for Collective Investment in Transferable Securities) which simplify the cross-border registration/distribution of UCITS in more than one country provided the UCITS Directives are followed. As SICAVs, organized under Part I of the Luxembourg law on undertakings for collective investment vehicles, the Underlying Funds qualify as UCITS.

7. As of June 30, 2010, FTIF managed approximately USD 149.4 billion.

8. The Top Funds use or will use a "fund on fund" structure in allocating their assets among underlying funds managed by the Manager in order to diversify by asset class, investment style, geography, sector weighting and market capitalization with the goal of matching a variety of investment goals and risk tolerance levels.

9. The investment strategies of the Top Funds stipulate or will stipulate that each may invest a portion of its assets in global/international equities and/or in foreign fixed income, which the Top Funds do or will do by investing in underlying funds with a global/international equity mandate and/or with a foreign fixed income mandate.

10. Under normal market conditions, Quotential Balanced Growth Portfolio and Quotential Balanced Growth Corporate Class Portfolio each have an optimal asset mix of 30-50% fixed income and 50-70% equities. Up to 60% of each portfolio may be invested in foreign securities.

11. Portfolio each have an optimal asset mix of 50-70% fixed income and 30-50% equities. Up to 50% of each portfolio may be invested in foreign securities.

12. Under normal market conditions, Quotential Canadian Growth Portfolio and Quotential Canadian Growth Corporate Class Portfolio each have an optimal asset mix of 90-100% Canadian equities and 0-10% fixed income. Up to 10% of each portfolio may be invested in foreign securities.

13. Under normal market conditions, Quotential Diversified Income Portfolio and Quotential Diversified Income Corporate Class Portfolio each have an optimal asset mix of 70-90% fixed income and 10-30% equities. Up to 40% of each portfolio may be invested in foreign securities.

14. Under normal market conditions, Quotential Global Balanced Portfolio and Quotential Global Balanced Corporate Class Portfolio each have an optimal asset mix of 30-50% fixed income and 50-70% equities. 60-100% of each portfolio may be invested in foreign securities.

15. Under normal market conditions, Quotential Global Growth Portfolio and Quotential Global Growth Corporate Class Portfolio each have an optimal asset mix of 90-100% equities and 0-10% fixed income. 90-100% of each portfolio may be invested in foreign securities.

16. Under normal market conditions, Quotential Growth Portfolio and Quotential Growth Corporate Class Portfolio each have an optimal asset mix of 10-30% fixed income and 70-90% equities. 20-70% of each portfolio may be invested in foreign securities.

17. Under normal market conditions, Quotential Maximum Growth Portfolio and Quotential Maximum Growth Corporate Class Portfolio each have an optimal asset mix of 90-100% equities and 0-10% fixed income. 50-100% of each portfolio may be invested in foreign securities.

18. Under normal market conditions, the optimal asset mix for Franklin Templeton Global Blend Fund and Franklin Templeton Global Blend Corporate Class is 45-65% global/international equities and 35-55% fixed income.

19. Section 2.5 of NI 81-102 would permit the Top Funds to invest in the SICAV Funds but for the fact that the SICAV Funds are non-Canadian funds that are not governed by NI 81-101 and NI 81-102.

20. The SICAV Funds are conventional mutual funds and would not be considered hedge funds. None of the SICAV Funds may invest more than 10% of their respective net assets in other mutual funds. An FTIF prospectus has been filed with and approved by the Luxembourg financial sector regulator, Commission de Surveillance du Secteur Financier, which contains disclosure regarding FTIF.

21. Adding the SICAV Funds to the available investment options for the Top Funds would provide the Top Funds with a better ability to actively manage their investments by providing greater opportunities for diversification according to asset class, investment style, geography, sector weighting, duration and market capitalization. Investing in the SICAV Funds would also allow each Top Fund to better capitalize on global economic trends and respond to market conditions.

22. The SICAV Funds are low-cost mutual funds whose investment objectives and strategies make them suitable investment options for the Top Funds. The SICAV Funds are managed by portfolio managers within the Franklin Templeton Investments organization, and accordingly, the Manager will benefit from understanding their investments and the management styles of the portfolio managers, which understanding will benefit the Top Funds.

23. The Filers believe that it is in the best interests of the Top Funds for investments to be made in the SICAV Funds in order to obtain or increase exposure to geographic regions, asset classes, sectors, durations and/or investment styles not otherwise available to the Top Funds in the FTIC fund family.

24. Due to the limited market in Canada for equity and fixed income funds with a narrower or more specific investment mandate, along with the considerable costs and time involved in launching mutual funds, it would not be viable to launch Canadian equivalents of many of the SICAV Funds.

25. The Manager's ability to access the niche asset classes available through the SICAV Funds gives it a better opportunity to enhance return and manage risk.

26. The investments by the Top Funds in the SICAV Funds are proposed to allow the Top Funds to better achieve their investment objectives by investing, to a limited extent, in unique, suitable and professionally managed lower-cost mutual funds, where the investment style and approach are known to the manager of the Top Funds.

27. The Top Funds would otherwise comply fully with section 2.5 of NI 81-102 in investing in the SICAV Funds and provide all disclosure mandated for mutual funds investing in other mutual funds.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:

(A) The SICAV Funds qualify as UCITS and are distributed in accordance with the UCITS directives, which subject the SICAV Funds to investment restrictions and practices that are substantially similar to those that govern the Top Funds;

(B) The investment of the Top Funds in the SICAV Funds otherwise complies with section 2.5 of NI 81-102 and the Top Funds provide the disclosure contemplated for fund of fund investments in NI 81-101. Specifically, the investment by the Top Funds in the SICAV Funds is disclosed in their simplified prospectus;

(C) A Top Fund will not invest in a SICAV Fund if, immediately after the investment, more than 10 per cent of its net assets, taken at market value at the time of the investment, would consist of investments in SICAV Funds; and

(D) The Top Funds shall not acquire any additional securities of the SICAV Funds and shall dispose of the securities of the SICAV Funds then held in an orderly and prudent manner, after the date that the laws applicable to the SICAV Funds that are at the date of this decision substantially similar to Part 2 of NI 81-102, change to be materially inconsistent with Part 2 of NI 81-102.