Franklin Templeton Investments Corp. et al.

Headnote

NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval of mutual fund mergers -- approval required because mergers do not meet the criteria for pre-approval -- differences in investment objectives -- one merger not a "qualifying exchange" --securityholders of terminating and continuing funds provided with timely and adequate disclosure regarding the merger.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 5.5(1)(b), 5.6.

May 14, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION 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"),

TEMPLETON GLOBAL BALANCED FUND,

FRANKLIN U.S. SMALL-MID CAP

GROWTH CORPORATE CLASS

AND

BISSETT LARGE CAP FUND

(collectively, the "Terminating Funds")

DECISION

Background

The principal regulator in the Jurisdiction has received an application (the "Application") from the Manager and the Terminating Funds (the "Filers") for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") for approval of the mergers (collectively, the "Mergers" and individually a "Merger") of the Terminating Funds into the Continuing Funds (as defined below) under section 5.5(1)(b) of National Instrument 81-102 ("NI 81-102") (the "Exemption Sought").

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 11-202 Passport System (MI 11-202) 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 (the "Non-Principal Jurisdictions").

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. The following additional terms shall have the following meanings:

"Class" or "Classes" means, individually or collectively, Franklin U.S. Small-Mid Cap Growth Corporate Class and Franklin Flex Cap Growth Corporate Class;

"Continuing Funds" means Templeton Global Income Fund, Franklin Flex Cap Growth Corporate Class and Bissett Canadian Equity Fund;

"Corporate Class Ltd." means Franklin Templeton Corporate Class Ltd.;

"Effective Date" means the close of business on June 6, 2008 or as soon as practicable thereafter;

"Fund" or "Funds" means, individually or collectively, the Terminating Funds and the Continuing Funds;

"Tax Act" means the Income Tax Act (Canada).

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. The Manager is the manager of each of the Funds and the trustee of each of the Funds other than the Classes. The registered head office of the Manager is located in Toronto, Ontario.

2. Corporate Class Ltd. is an open-ended mutual fund corporation incorporated under the laws of Alberta on June 1, 2001. Each of the Classes is a separate class of special shares of Corporate Class Ltd.

3. Templeton Global Balanced Fund, Templeton Global Income Fund, Bissett Large Cap Fund and Bissett Canadian Equity Fund are open-end mutual fund trusts established under the laws of Ontario by a declaration of trust.

4. The Manager intends to merge the Terminating Funds into the Continuing Funds as follows:

a) Templeton Global Balanced Fund into Templeton Global Income Fund;

b) Franklin U.S. Small-Mid Cap Growth Corporate Class into Franklin Flex Cap Growth Corporate Class; and

c) Bissett Large Cap Fund into Bissett Canadian Equity Fund.

5. Pursuant to the Mergers, securityholders of each Terminating Fund will receive securities with the same value and in the same series of the applicable Continuing Fund as they currently own in the Terminating Fund.

6. Securities of the Funds are currently qualified for sale by a simplified prospectus and annual information form dated June 12, 2007, as amended, which has been filed and receipted in the Jurisdiction and each of the Non-Principal Jurisdictions.

7. Each of the Funds is a reporting issuer in the Jurisdiction and each of the Non-Principal Jurisdictions. Neither the Filers nor the Continuing Funds are in default of the securities legislation in the Jurisdiction or in any of the Non-Principal Jurisdictions.

8. Other than circumstances in which the principal regulator or the securities regulatory authority of a Non-Principal Jurisdiction has expressly exempted a Fund therefrom, each of the Funds follows the standard investment restrictions and practices set out in NI 81-102.

9. The net asset value for each series of the Funds is calculated on a daily basis on each day that the Toronto Stock Exchange is open for trading.

10. Securityholders of the Terminating Funds will be asked to approve the Mergers at meetings to be held on May 16, 2008. The Manager, as the sole Class A common shareholder of Corporate Class Ltd., and the securityholders of Franklin Flex Cap Growth Corporate Class will also approve the Merger of Franklin U.S. Small-Mid Cap Growth Corporate Class into Franklin Flex Cap Growth Corporate Class, as required under corporate law.

11. All costs attributable to the Mergers (consisting primarily of legal, proxy solicitation, printing and mailing costs, and including brokerage expenses, if any, incurred in respect of any sale of portfolio assets of the Terminating Funds) will be borne by the Manager and will not be borne by the Terminating Funds or the Continuing Funds.

12. Securityholders of a Terminating Fund will continue to have the right to redeem securities of the Terminating Fund for cash at any time up to the close of business on the business day immediately before the Effective Date (as defined above).

13. Effective as of the close of business on May 30, 2008, the Terminating Funds will cease distribution of securities (except purchases under existing pre-authorized chequing plans). Following the Mergers, all systematic investment programs and systematic withdrawal programs, like pre-authorized chequing plans and systematic withdrawal programs that had been established with respect to the Terminating Funds, will be re-established on a series-for-series basis in the Continuing Funds unless securityholders advise the Manager otherwise. Securityholders may change or cancel any systematic program at any time and securityholders of Terminating Funds who wish to establish one or more systematic programs in respect of their holdings in the Continuing Funds may do so following the Mergers.

14. A material change report, press release and amendments to the simplified prospectus and annual information form, which gave notice of the proposed Mergers, were filed via SEDAR on March 24, 2008.

15. A notice of meeting, a management information circular and a proxy in connection with meetings of securityholders was mailed to securityholders of the Terminating Funds and Franklin Flex Cap Growth Corporate Class, and filed on SEDAR, on April 25, 2008.

16. On October 7, 2005, in connection with a prior fund merger, the Manager received exemptions from the requirement to deliver:

a) the Franklin Templeton Investment Funds simplified prospectus to securityholders of Terminating Funds in connection with all future mergers of mutual funds managed by the Manager (the "Future Mergers") pursuant to paragraph 5.6(1)(f)(ii) of the mutual fund requirements; and

b) the most recent annual and interim financial statements of the Continuing Fund to securityholders of the Terminating Funds in connection with all Future Mergers pursuant to paragraph 5.6(1)(f)(ii) of the mutual fund requirements.

(The relief outlined in (a) and (b) are collectively referred to as the "Prospectus and Financial Statement Delivery Relief".)

17. Further to the Prospectus and Financial Statement Delivery Relief, the material sent to securityholders of the Terminating Funds included a tailored simplified prospectus consisting of:

a) the current Part A of the simplified prospectus of the Continuing Funds, and

b) the current Part B of the simplified prospectus of the Continuing Funds.

18. Further to the Prospectus and Financial Statement Delivery Relief,

a) the information circular sent to securityholders in connection with a Merger provided sufficient information with a Merger to permit securityholders to make an informed decision about the Merger;

b) each Terminating Fund and Continuing Fund has an unqualified audit report in respect of its last completed financial period;

c) the information circular sent to securityholders in connection with a Merger prominently discloses that securityholders can obtain the most recent interim and annual financial statements of the applicable continuing fund by accessing the SEDAR website at www.sedar.com, by accessing the Manager's website at www.franklintempleton.ca, by calling a toll-free number or by contacting the Manager at [email protected]; and

d) Upon request by a securityholder for financial statements, the Manager will make best efforts to provide the securityholder with financial statements of the applicable continuing fund in a timely manner so that the securityholder can make an informed decision regarding a Merger.

19. The Terminating Funds will merge into the Continuing Funds on June 6, 2008 (the "Effective Date") and the Continuing Funds will continue as publicly offered open-end mutual funds governed by the laws of Ontario or Alberta (as applicable).

20. The Mergers of Franklin U.S. Small-Mid Cap Growth Corporate Class into Franklin Flex Cap Growth Corporate Class and Bissett Large Cap Fund into Bissett Canadian Equity Fund will be carried out on a tax-deferred basis.

21. No sales charges will be payable in connection with the acquisition by the Continuing Funds of the investment portfolio of the Terminating Funds.

22. Prior to the date of the Mergers, securities in the portfolio of the Terminating Funds will need to be liquidated if they do not meet the investment objectives or strategies of the Continuing Funds. As a result, the Terminating Funds and Continuing Funds may temporarily hold cash or money market instruments and may not be fully invested in accordance with their investment objectives for a brief period of time prior to, and following the Mergers.

23. The proposed Merger of Franklin U.S. Small-Mid Cap Growth Corporate Class (the "Terminating Fund") into Franklin Flex Cap Growth Corporate Class (the "Continuing Fund") will be structured pursuant to the following steps:

a) Review the Terminating Fund's investment portfolio and consider the portfolio in light of the investment objectives of the Continuing Fund, in consultation with the Continuing Fund. If the Terminating Fund holds investments which are not suitable for the Continuing Fund, those investments may be sold prior the Effective Date. The value of any investments sold prior to the Effective Date will depend on prevailing market conditions. As a result, the Terminating Fund and the Continuing Fund may each temporarily hold cash or money market instruments and may not be fully invested in accordance with its respective investment objectives for a brief period of time prior to, and following the Merger.

b) The articles of incorporation of Corporate Class Ltd. will be amended to authorize the exchange of all outstanding special shares of each series of the Terminating Fund for special shares of the same series of the Continuing Fund.

c) Each securityholder of the Terminating Fund will receive special shares of the same series of the Continuing Fund with a value equal to the value of their special shares in the Terminating Fund as determined on the Effective Date. After this step is complete, securityholders of the Terminating Fund will become securityholders of the Continuing Fund.

d) On the Effective Date, the net assets attributable to the Terminating Fund (being its investment portfolio and other assets, including cash and liabilities) will be included in the portfolio of assets attributable to the Continuing Fund.

e) Immediately after the Merger, the unissued special shares of the Terminating Fund will be cancelled by Corporate Class Ltd., and the Terminating Fund will be terminated.

24. The proposed Mergers of Templeton Global Balanced Fund and Bissett Large Cap Fund (each a "Terminating Fund") into Templeton Global Income Fund and Bissett Canadian Equity Fund, respectively, (each a "Continuing Fund") will be structured pursuant to the following steps:

a) Review each Terminating Fund's investment portfolio and consider the portfolio in light of the investment objectives of the applicable Continuing Fund, in consultation with the Continuing Fund. If a Terminating Fund holds investments which are not suitable for the Continuing Fund, those investments may be sold prior to the Effective Date. The value of any investments sold prior to the Effective Date will depend on prevailing market conditions. As a result, a Terminating Fund and its Continuing Fund may each temporarily hold cash or money market instruments and may not be fully invested in accordance with their respective investment objectives for a brief period of time prior to, and following the Mergers.

b) On the Effective Date, each Terminating Fund will transfer all of its assets which will consist of cash and portfolio securities, less an amount required to satisfy the liabilities of the Terminating Fund, to its Continuing Fund, in exchange for units of the Continuing Fund.

c) Each Terminating Fund will distribute to its unitholders sufficient net income and net realized capital gains so that it will not be subject to tax under Part 1 of the Tax Act for its taxation year ending on the Mergers.

d) Immediately following the above-noted transfer and distribution, each Terminating Fund will distribute to its unitholders the units of the Continuing Fund so that following the distribution, the unitholders of a Terminating Fund will become direct unitholders of the Continuing Fund.

e) As soon as reasonably possible following the Mergers, each Terminating Fund will be wound up.

25. Approval of the Mergers is required because the Mergers do not satisfy all of the criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102 in the following ways:

(a) The fundamental investment objectives of Franklin U.S. Small-Mid Cap Growth Corporate Class may be considered not to be substantially similar to those of Franklin Flex Cap Growth Corporate Class; and

(b) The fundamental investment objectives of Bissett Large Cap Fund may be considered not to be substantially similar to those of Bissett Canadian Equity Fund; and

(c) the Merger of Templeton Global Balanced Fund into Templeton Global Income Fund will not be a "qualifying exchange" or tax-deferred transaction under the Tax Act.

26. Except as noted above, the Mergers will otherwise comply with all of the other criteria for pre-approved reorganizations and transfers set out in section 5.6 of the mutual fund requirements.

27. The Filers submit that the Mergers will result in the following benefits:

a) securityholders of the Terminating Funds and the Continuing Funds will enjoy increased economies of scale and lower fund operating expenses (which are borne indirectly by securityholders) as part of larger combined Continuing Funds;

b) in the case of each Terminating Fund, there will be a savings in brokerage charges over a straight liquidation of the portfolio of securities of the Terminating Funds if they were terminated;

c) the Mergers will eliminate the administrative and regulatory costs of operating each Terminating Fund as a separate mutual fund;

d) the Continuing Funds will have a portfolios of greater value, allowing for increased portfolio diversification opportunities; and

e) the Continuing Funds, as a result of their greater size, will benefit from larger profiles in the marketplace.

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.