Franklin Templeton Investments Corp. et al.

Headnote

National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from self-dealing provisions in s. 118(2)(b) of the Act and s. 115(6) of the Reg. to permit certain funds to conduct inter-fund trades between mutual funds, pooled funds, and managed accounts managed by the same manager or an affiliate of the same manager - inter-fund trades will comply with conditions in s. 6.1(2) of National Instrument 81-107 - Independent Review Committee for Investment Funds (NI 81-107) including Independent Review Committee approval or client consent -- trades involving exchange-traded securities are permitted to occur at "last sale price" as defined in the Universal Market Integrity Rules - relief also subject to pricing and transparency conditions.

Applicable Legislative Provisions

Securities Act (Ontario), ss. 118(2)(b), 121(2)(a)(ii) and 147.

Ontario Regulation 1015 General Regulation, s. 115(6).

National Instrument 81-107 -- Independent Review Committee for Investment Funds, ss. 6.1(2) and 6.1(4).

April 24, 2009

IN THE MATTER OF

THE SECURITIES LEGISLATION OF ONTARIO

AND

ALBERTA, SASKATCHEWAN, NEW BRUNSWICK,

NOVA SCOTIA, NEWFOUNDLAND AND LABRADOR

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

FRANKLIN TEMPLETON INVESTMENTS CORP. (FTIC)

AND FIDUCIARY TRUST COMPANY OF CANADA (FTCC)

(the Filers) AND THE NI 81-102 FUNDS

AND THE POOLED FUNDS

(as defined below)

DECISION

Background

A. The securities regulatory authority or regulator in Ontario has received an application (the Application) from the Filers under the securities legislation of the principal regulator (the Legislation) for a decision (the Trading Prohibition Exemption Sought) providing an exemption (the Passport Exemption) from the requirement (the Trading Prohibition) that prohibits a portfolio manager from knowingly causing an investment portfolio managed by it to purchase or sell the securities of any issuer from or to the account of a responsible person, any associate of a responsible person or the portfolio manager to permit the following purchases and sales (each purchase or sale, an Inter-Fund Trade):

(i) existing mutual funds and future mutual funds of which a Filer, or an affiliate of a Filer, is the manager and to which National Instrument 81-102 -- Mutual Funds (NI 81-102) applies (each, an NI 81-102 Fund and, collectively, the NI 81-102 Funds) to engage in Inter-Fund Trades of securities with any existing Canadian mutual funds and future Canadian mutual funds managed by a Filer, or an affiliate of a Filer, to which NI 81-102 does not apply (each, a Pooled Fund and, collectively, the Pooled Funds) or to a Canadian fully managed account managed by a Filer, or an affiliate of a Filer, (each, a Managed Account and, collectively, the Managed Accounts);

(ii) an NI 81-102 Fund to engage in Inter-Fund Trades of exchange-traded securities (which term shall include Canadian and foreign exchange-traded securities) with another NI 81-102 Fund at the last sale price, as defined in the Market Integrity Rules of the Investment Industry Regulatory Organization of Canada, prior to the execution of the trade (the Last Sale Price) in lieu of the closing sale price (the Closing Sale Price) contemplated by the definition of current market price referred to in paragraph (e) of Section 6.1(2) of National Instrument 81-107 -- Independent Review Committee for Investment Funds (NI 81-107);

(iii) a Pooled Fund to engage in Inter-Fund Trades of securities with another Pooled Fund, an NI 81-102 Fund or a Managed Account; and

(iv) a Managed Account to engage in Inter-Fund Trades of securities with a Pooled Fund or an NI 81-102 Fund;

B. The securities regulatory authority or regulator (the First Coordinated Exemptive Relief Decision Makers) in each of Ontario and Newfoundland and Labrador (the First Jurisdictions) has received an application from the Filers for a decision (the First Coordinated Exemptive Relief) under the securities legislation of the First Jurisdictions (the Legislation) for the Trading Prohibition Exemption Sought to permit the transactions described in paragraph A above; and

C. The securities regulatory authority or regulator (the Second Coordinated Exemptive Relief Decision Makers and, together with the First Coordinated Exemptive Relief Decision Makers, the Coordinated Exemptive Relief Decision Makers) in each of Ontario, Alberta, Saskatchewan, New Brunswick, Nova Scotia and Newfoundland and Labrador (the Second Jurisdictions) has received an application from the Filers under the securities legislation of the Second Jurisdictions (the Legislation) for a decision (the Investment Counsel Exemption Sought) providing an exemption (the Second Coordinated Exemptive Relief and, together with the First Coordinated Exemptive Relief, the Coordinated Exemptive Relief) from the requirement (the Investment Counsel Prohibition) that prohibits the purchase or sale of any security in which an investment counsel or any associate of an investment counsel has a direct or indirect beneficial interest from or to any portfolio managed or supervised by the investment counsel to permit the transactions described in paragraph A above.

(The Passport Exemption, the First Coordinated Exemptive Relief and the Second Coordinated Exemptive Relief, together, are the Exemptions Sought.)

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:

(a) the Ontario Securities Commission is the principal regulator for the Application;

(b) the Filers have provided notice that Section 4.7 of Multilateral Instrument 11-102 -- Passport System (MI 11-102) is intended to be relied upon in respect of the Trading Prohibition Exemption Sought in British Columbia, Alberta, Saskatchewan, Quebec, New Brunswick and Nova Scotia;

(c) the decision is the decision of the principal regulator; and

(d) the decision evidences the decision of each Coordinated Exemptive Relief Decision Maker.

Interpretation

Terms defined in the securities legislation of the Jurisdiction and the Second Jurisdictions, MI 11-102, National Instrument 14-101 -- Definitions, NI 81-102 or National Instrument 81-107 -- Independent Review Committee for Investment Funds (NI 81-107) have the same meanings in this Decision. Certain other defined terms have the meanings given to them above or below under "Representations".

Representations

1. The head office of each of the Filers is located in Toronto, Ontario.

2. Each of the NI 81-102 Funds and Pooled Funds (each, a Fund and, collectively, the Funds) is, or will be, an open-ended mutual fund trust or mutual fund corporation that is established under the laws of the Province of Ontario, another jurisdiction of Canada or Canada.

3. A Filer, or an affiliate of a Filer, is, or will be, the manager and/or portfolio adviser of each of the Funds.

4. A Filer, or an affiliate of a Filer, is, or will be, a portfolio manager of a Managed Account.

5. The securities of each of the NI 81-102 Funds are or will be qualified for distribution pursuant to simplified prospectus and annual information forms that have been prepared or will be prepared and filed in accordance with the securities legislation of each of Ontario and one or more of the applicable provinces and territories of Canada. The securities of the Pooled Funds are or will be qualified for distribution on a private placement basis pursuant to the Legislation and will not be reporting issuers.

6. A Fund may be an associate of a Filer, or of an affiliate of a Filer, that is a responsible person in respect of a Fund.

7. A Fund may be an associate of a Filer, or of an affiliate of a Filer, that is an investment counsel in respect of a portfolio of a Fund or a Managed Account.

8. The Filer and each of the Funds are not in default of securities legislation in any jurisdiction of Canada.

9. A Filer, or an affiliate of a Filer, has established, or will establish, an independent review committee (IRC) in respect of each NI 81-102 Fund in accordance with the requirements of NI 81-107.

10. A Filer, or an affiliate of a Filer, will establish an IRC (which will likely also be the IRC in respect of the NI 81-102 Funds) in respect of each Pooled Fund. The initial mandate of the IRC of a Pooled Fund will be to approve Inter-Fund Trades between a Pooled Fund and another Fund or a Managed Account.

11. The IRC of the Pooled Funds will be composed by a Filer, or an affiliate of a Filer, in accordance with section 3.7 of NI 81-107 and will be expected to comply with the standard of care set out in section 3.9 of NI 81-107. Further, the IRC of the Pooled Funds will not approve Inter-Fund Trades between a Pooled Fund and another Fund or a Managed Account unless it has made the determination set out in section 5.2(2) of NI 81-107. Inter-Fund Trades involving NI 81-102 Funds will be referred to the IRC of the NI 81-102 Funds under section 5.2(1) of NI 81-107.

12. At the time of an Inter-Fund Trade, each Filer will have in place policies and procedures to enable the NI 81-102 Funds to engage in Inter-Fund Trades with NI 81-102 Funds and Pooled Funds.

13. The investment management agreement or other documentation in respect of a Managed Account will contain the authorization of the client for the portfolio manager on behalf of the Managed Account to engage in Inter-Fund Trades of securities.

14. FTCC is a wholly owned subsidiary of FTIC. Both FTIC and FTCC are part of a global investment organization known as Franklin Templeton Investments that operates in 30 countries and as at January 31, 2009 had over C$ 493 billion in assets under management. The various investment objectives and investment strategies utilized by the members of Franklin Templeton Investments mean that it may be appropriate for different investment portfolios to acquire or dispose of the same securities through the same trading system. While NI 81-107 has authorized Inter-Fund Trades between NI 81-102 Funds managed by the same manager, the Filers have determined that there are significant benefits to be achieved by NI 81-102 Funds from expanding the potential counterparties to include Pooled Funds and Managed Accounts. The Filers have determined that it would be beneficial to extend these benefits to the Pooled Funds and Managed Accounts. These benefits include lower trading costs, reduced market disruption and quicker execution as well as simpler and more reliable compliance procedures. In the absence of the Exemptions Sought, the NI 81-102 Funds, Pooled Funds and Managed Accounts are not able to obtain these trading benefits.

15. A Filer, or an affiliate of a Filer, cannot rely on the exemption from the Trading Prohibition and the Investment Counsel Prohibition codified under Section 6.1(4) of NI 81-107 unless the parties are both NI 81-102 Funds and the Inter-Fund Trade occurs at the current market price which, in the case of exchange-traded securities, includes the Closing Sale Price but not the Last Sale Price.

16. When a Filer, or an affiliate of a Filer, engages in an Inter-Fund Trade of securities between two NI 81-102 Funds, two Pooled Funds, one NI 81-102 Fund and one Pooled Fund or between a Managed Account and a Fund it will follow the following procedures:

(a) the portfolio manager will deliver the trade instructions in respect of a purchase or a sale of a security by a Fund or a Managed Account (Fund A) to a trader on the trading desk of a Filer, or an affiliate of a Filer;

(b) the portfolio manager will deliver the trade instructions in respect of a sale or purchase of a security by a Fund or a Managed Account (Fund B) to a trader on the trading desk of a Filer, or an affiliate of a Filer;

(c) the trader on the trading desk will request the approval of the trading desk compliance officer (the TDCO) to execute the trade as an Inter-Fund Trade between Fund A and Fund B;

(d) once the approval of the TDCO is received, the trader on the trading desk will have the discretion to execute the trade as an Inter-Fund Trade between Fund A and Fund B in accordance with the requirements of paragraphs (c) to (g) of subsection 6.1(2) of NI 81-107 provided that, for exchange-traded securities the Inter-Fund Trade may be executed at the Last Sale Price of the security, determined at the time of the receipt of the approval of the TDCO, prior to the execution of the trade;

(e) the policies applicable to the trading desk will require that all orders are to be executed on a timely basis and will remain open only for 30 days unless the portfolio manager cancels the order sooner; and

(f) the trader on the trading desk will advise the portfolio managers of Fund A and Fund B of the price at which the Inter-Fund Trade occurs.

17. Each of the Filers has determined that it would be in the interests of the NI 81-102 Funds, the Pooled Funds and the Managed Accounts to receive the relief requested for the following reasons:

(i) making NI 81-102 Funds, Pooled Funds and Managed Accounts subject to the same set of rules governing the execution of transactions will result in cost and timing efficiencies in respect of the execution of transactions for the NI 81-102 Funds, the Pooled Funds and the Managed Accounts; and

(ii) making NI 81-102 Funds, Pooled Funds and Managed Accounts subject to the same set of rules governing the execution of transactions will result in less complicated and more reliable compliance procedures, as well as simplified and more efficient monitoring thereof, for a Filer, or an affiliate of a Filer, in connection with the execution of transactions on behalf of NI 81-102 Funds, Pooled Funds and Managed Accounts.

Decision

Each of the principal regulator and the Coordinated Exemptive Relief Decision Makers is satisfied that the decision meets the test set out in the Legislation for the relevant regulator or securities regulatory authority to make the decision.

The decision of the principal regulator and the Coordinated Exemptive Relief Decision Makers under the Legislation is that the Passport Exemption and the Coordinated Exemptive Relief are granted provided the following conditions are satisfied for Inter-Fund Trades:

(a) the Inter-Fund Trade is consistent with the investment objective of the NI 81-102 Fund, the Pooled Fund or the Managed Account;

(b) a Filer, or an affiliate of a Filer, refers the Inter-Fund Trade to the IRC in the manner contemplated by section 5.1 of NI 81-107 and the Filer, or an affiliate of the Filer and the IRC of the Fund comply with section 5.4 of NI 81-107 in respect of any standing instructions an IRC provides in connection with the Inter-Fund Trade;

(c) in the case of an Inter-Fund Trade between an NI 81-102 Fund and an NI 81-102 Fund:

(i) for exchange-traded securities, the Inter-Fund Trade is executed at the Last Sale Price or the Closing Sale Price of the security and the Inter-Fund Trade complies with paragraphs (a),(b), (c),(d), (f) and (g) of subsection 6.1(2) of NI 81-107; and

(ii) for all other securities, the Inter-Fund Trade complies with paragraphs (a) to (g) of subsection 6.1(2) of NI 81-107;

(d) in the case of an Inter-Fund Trade between an NI 81-102 Fund and a Pooled Fund or Managed Account:

(i) the IRC of the NI 81-102 Fund has approved the Inter-Fund Trade in respect of the NI 81-102 Fund in accordance with the terms of section 5.2(2) of NI 81-107;

(ii) if the counterparty is a Pooled Fund, the IRC of the Pooled Fund has approved the Inter-Fund Trade in respect of the Pooled Fund in accordance with the terms of section 5.2(2) of NI 81-107;

(iii) if the counterparty is a Managed Account, the investment management agreement or other documentation in respect of the Managed Account authorizes the Inter-Fund Trade;

(iv) for exchange-traded securities, the Inter-Fund Trade is executed at the Last Sale Price or the Closing Sale Price of the security and the Inter-Fund Trade complies with paragraphs (c),(d),(f) and (g) of subsection 6.1(2) of NI 81-107; and

(v) for all other securities, the Inter-Fund Trade complies with paragraphs (c) to (g) of subsection 6.1(2) of NI 81-107;

(e) in the case of an Inter-Fund Trade between a Pooled Fund and an NI 81-102 Fund or a Managed Account or another Pooled Fund:

(i) the IRC of the Pooled Fund has approved the Inter-Fund Trade in respect of the Pooled Fund in accordance with the terms of Section 5.2(2) of NI 81-107;

(ii) if the counterparty is an NI 81-102 Fund or another Pooled Fund, the IRC of the NI 81-102 Fund or the other Pooled Fund, as the case may be, has approved the Inter-Fund Trade in respect of the NI 81-102 Fund or the other Pooled Fund in accordance with the terms of Section 5.2(2) of NI 81-107;

(iii) if the counterparty is a Managed Account, the investment management agreement or other documentation in respect of the Managed Account authorizes the Inter-Fund Trade;

(iv) for exchange-traded securities, the Inter-Fund Trade is executed at the Last Sale Price or the Closing Sale Price of the security and the Inter-Fund Trade complies with paragraphs (c),(d),(f) and (g) of subsection 6.1(2) of NI 81-107; and

(v) for all other securities, the Inter-Fund Trade complies with paragraphs (c) to (g) of subsection 6.1(2) of NI 81-107;

(f) in the case of an Inter-Fund Trade between a Managed Account and a Fund:

(i) the investment management agreement or other documentation in respect of the Managed Account authorizes the Inter-Fund Trade;

(ii) the IRC of the NI 81-102 Fund or the Pooled Fund, as the case may be, has approved the Inter-Fund Trade in respect of the NI 81-102 Fund or the Pooled Fund in accordance with the terms of Section 5.2(2) of NI 81-107;

(iii) for exchange-traded securities, the Inter-Fund Trade is executed at the Last Sale Price or the Closing Sale Price of the security and the Inter-Fund Trade complies with paragraphs (c),(d),(f) and (g) of subsection 6.1(2) of NI 81-107; and

(iv) for all other securities, the Inter-Fund Trade complies with paragraphs (c) to (g) of subsection 6.1(2) of NI 81-107.