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 13, 2009

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.

("FTIC" or the "Manager"),

QUOTENTIAL BALANCED INCOME PORTFOLIO,

QUOTENTIAL BALANCED INCOME CORPORATE

CLASS PORTFOLIO, QUOTENTIAL BALANCED

GROWTH PORTFOLIO, QUOTENTIAL BALANCED

GROWTH CORPORATE CLASS PORTFOLIO,

QUOTENTIAL GROWTH PORTFOLIO, QUOTENTIAL

GROWTH CORPORATE CLASS PORTFOLIO,

QUOTENTIAL GLOBAL BALANCED PORTFOLIO,

QUOTENTIAL GLOBAL BALANCED CORPORATE

CLASS PORTFOLIO, QUOTENTIAL GLOBAL

GROWTH PORTFOLIO, QUOTENTIAL GLOBAL

GROWTH CORPORATE CLASS PORTFOLIO,

QUOTENTIAL MAXIMUM GROWTH PORTFOLIO,

QUOTENTIAL MAXIMUM GROWTH CORPORATE

CLASS PORTFOLIO 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 FTIC 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 by investing in underlying funds with a global/international equity 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 Franklin Templeton Investment Funds Templeton Latin America Fund (the "Latin America Fund") and Franklin Templeton Investment Funds Templeton Asian Growth Fund (the "Asian Growth Fund") and other similar FTIF (as defined below) sub-funds (which together with the Latin America Fund and the Asian Growth Fund are referred to collectively as the "Underlying Funds").

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 MI 11-102 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.

"UCITS" means Undertakings 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. FTIC is a corporation amalgamated under the laws of Ontario, having its head office in Toronto, Ontario. FTIC is registered as an advisor in the categories of investment counsel and/or portfolio manager in Ontario as well as British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Yukon and as a mutual fund dealer in Ontario and Alberta.

2. FTIC 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 28 other countries.

3. FTIC 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. FTIC and the Top Funds are not in default of securities legislation in any Canadian jurisdiction.

5. FTIF is a wholly-owned subsidiary of Franklin Templeton Luxembourg S.A., a Luxembourg corporation, which is an indirect wholly-owned subsidiary of FRI. As of December 31, 2008, FTIF managed approximately USD 40 billion. FTIF includes the Underlying Funds. As of December 31, 2008, the Asian Growth Fund and the Latin America Fund had USD 2.84 billion and USD 1.18 billion in assets under management, respectively.

6. The Underlying 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 (Undertakings 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. 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.

8. The investment objective of Quotential Balanced Income Portfolio and Quotential Balanced Income Corporate Class Portfolio is a balance of current income and long-term capital appreciation by investing in a diversified mix of equity and income mutual funds, with a bias towards income.

9. The investment objective of Quotential Balanced Growth Portfolio, Quotential Balanced Growth Corporate Class Portfolio and Wellington West Franklin Templeton Balanced Retirement Income Fund is a balance of current income and long-term capital appreciation by investing in a diversified mix of equity and income mutual funds, with a bias towards capital appreciation.

10. The investment objective of Quotential Growth Portfolio and Quotential Growth Corporate Class Portfolio is long-term capital appreciation by investing primarily in a diversified mix of equity mutual funds, with additional stability derived from investing in income mutual funds.

11. The investment objective of Quotential Global Balanced Portfolio and Quotential Global Balanced Corporate Class Portfolio is a balance of current and long-term capital appreciation by investing primarily in a diversified mix of equity and income mutual funds which are predominantly global in nature.

12. The investment objective of Quotential Global Growth Portfolio and Quotential Global Growth Corporate Class Portfolio is long-term capital appreciation by investing primarily in a diversified mix of global equity mutual funds.

13. The investment objective of Quotential Maximum Growth Portfolio and Quotential Maximum Growth Corporate Class Portfolio is long-term capital appreciation by investing primarily in a diversified mix of equity mutual funds.

14. The investment strategies of the Top Funds stipulate or will stipulate that each may invest a portion of its assets in global/international equities, which the Top Funds do or will do by investing in underlying funds with a global/international equity mandate. The portion of assets that each Existing Top Fund may invest in global/international equities varies from a range of 3-11% to a range of 90-100%.

15. Section 2.5 of NI 81-102 would permit the Top Funds to invest in the Underlying Funds but for the fact that the Underlying Funds are non-Canadian funds that are neither subject to Canadian laws nor distributed in Canada under a simplified prospectus.

16. The Underlying Funds are sub-funds of FTIF, an umbrella SICAV with UCITS status under the laws of Luxembourg. A FTIF prospectus including the Underlying Funds, has been filed and approved by the Luxembourg financial sector regulator, Commission de Surveillance du Secteur Financier, which contains disclosure regarding the Underlying Funds. The Underlying Funds are subject to investment restrictions and practices that are substantially similar to those that govern the Top Funds. The Underlying Funds are conventional mutual funds and would not be considered hedge funds. None of the Underlying Funds may invest more than 10% of its net assets in other mutual funds.

17. The investment objective of the Latin America Fund is capital appreciation, which under normal market conditions, it seeks to achieve by investing primarily in equity securities and as an ancillary matter in debt securities of issuers incorporated or having their principal business activities in the Latin American region. The Latin America Fund may also invest the balance of the Fund's assets in equity securities and debt obligations of companies and government entities of countries other than the above region.

18. The investment objective of the Asian Growth Fund is capital appreciation, which it seeks to achieve through a policy of investing primarily in equity securities of entities, which are incorporated, or have their area of primary activity, in the Asia Region. The Fund may also invest in equity securities, which are listed on recognized exchanges in capital markets of the Asia Region (excluding Australia, New Zealand and Japan).

19. Adding the Underlying 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 and market capitalization. Investing in the Underlying Funds would also allow each Top Fund to better capitalize on global economic trends and respond to market conditions.

20. The Underlying Funds are low-cost mutual funds whose investment objectives and strategies make them suitable investment options for the Top Funds. The Underlying 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.

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

22. With respect to the Latin America Fund and the Asian Growth Fund in particular, launching Canadian mutual funds focused on the Latin American and Asian regions in which the Top Funds could invest is a less desirable option due to the considerable costs and time involved in launching mutual funds. Moreover, as the mandate of the Top Funds is to invest in underlying mutual funds, investing directly in separate securities in the Latin American and Asian regions is not a viable option.

23. The Top Funds' investment in the Underlying Funds is not for the purposes of distributing the Underlying Funds to the Canadian public. The investments by the Top Funds in the Underlying 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.

24. The Top Funds would otherwise comply fully with section 2.5 of NI 81-102 in investing in the Underlying 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 Underlying Funds qualify as UCITS and are distributed in accordance with the UCITS Directives, which subject the Underlying 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 Underlying 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 Underlying Funds is disclosed in their simplified prospectus;

(C) A Top Fund will not invest in an Underlying 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 Underlying Funds; and

(D) The Top Funds shall not acquire any additional securities of the Underlying Funds and shall dispose of the securities of the Underlying Funds then held in an orderly and prudent manner, after the date that the laws applicable to the Underlying 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.