Franklin Templeton Investments Corp. (Re), 2018 CanLII 91094

September 6, 2018

(the Jurisdiction)

AND

(Franklin Templeton)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from Franklin Templeton for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation):

(a) for an exemption from the prohibition in section 4.2(1) of National Instrument 81-102 Investment Funds (NI 81-102) to permit the NI 81-102 Funds (as defined below) to purchase debt securities from, or sell debt securities to, a Canadian Pooled Fund (as defined below), or a U.S. Fund (as defined below) (the Section 4.2(1) Relief);

(b) for an exemption from the prohibitions in sections 13.5(2)(b)(ii) and (iii) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) which prohibit a registered adviser from knowingly causing an investment portfolio managed by it, including an investment fund for which it acts as an adviser, to purchase or sell a security from or to the investment portfolio of a responsible person, an associate of a responsible person or an investment fund for which a responsible person acts as an adviser, in order to permit:

(i) a Canadian Fund (as defined below) to purchase securities from or sell securities to a Canadian Fund;

(ii) a Canadian Client Account (as defined below) to purchase securities from or sell securities to a Canadian Fund;

(iii) a Canadian Fund to purchase securities from or sell securities to a U.S. Fund;

(iv) a Canadian Client Account to purchase securities from or sell securities to a U.S. Fund; and

(v) the transactions listed in (i) to (ii) (each, a Canadian Inter-Fund Trade) and (iii) and (iv) (each, a Cross-Border Inter-Fund Trade) to be executed at the last sale price, as defined in the Universal 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 of the security” in section 6.1(1)(a)(i) of National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107) on that trading day where the securities involved in the Inter-Fund Trade are exchange-traded securities (which term shall include Canadian and foreign exchange-traded securities)

((i), (ii), (iii), (iv), and (v) are collectively, the Inter-Fund Trading Relief);

(c) to revoke and replace the Current Relief (as defined below) and the Pooled Fund Debt Relief with the Inter-Fund Trading Relief (the Revocation)

(the Section 4.2(1) Relief, Inter-Fund Trading Relief and Revocation are, collectively, the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:

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

(b) Franklin Templeton has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of the other provinces and territories of Canada (together with Ontario, the Jurisdictions).

Interpretation

Terms defined in MI 11-102, National Instrument 14-101 Definitions, NI 81-102, NI 81-107 and NI 31-103 and have the same meaning if used in this decision, unless otherwise defined. The following terms have the following meanings:

40 Act means the U.S. Investment Company Act of 1940;

40 Act Funds means, collectively, the Existing 40 Act Funds and the Future 40 Act Funds;

Canadian Clients means, collectively, the NI 81-102 Funds, the Canadian Pooled Funds and the Canadian Client Accounts;

Canadian Funds means, collectively, the NI 81-102 Funds and the Canadian Pooled Funds;

Canadian Client Account means an account managed by the Filer that is beneficially owned by a client that is resident or domiciled in Canada and is not a responsible person, and over which the Filer that is registered as a portfolio manager under the securities legislation of one or more provinces or territories of Canada, has discretionary authority;

Canadian Pooled Funds means, collectively, the Existing Canadian Pooled Funds and the Future Canadian Pooled Funds;

Clients means, collectively, the Canadian Clients and the U.S. Clients;

Current Relief means 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 dated April 24, 2009;

Existing 40 Act Fund means each existing investment fund to which the 40 Act applies, for which Templeton or another affiliate of the Filer acts as manager and/or portfolio adviser;

Existing Canadian Pooled Fund means each investment fund domiciled in Canada that is not a reporting issuer, for which the Filer acts as manager and/or portfolio adviser;

Existing NI 81-102 Fund means each existing investment fund, as defined in the Legislation, that is a reporting issuer and subject to NI 81-102, for which the Filer acts as manager and/or portfolio adviser;

Existing U.S. Pooled Fund means each investment fund domiciled in United States to which the 40 Act does not apply, for which Templeton or another affiliate of the Filer acts as manager and/or portfolio adviser;

Filer means Franklin Templeton and any affiliate of Franklin Templeton;

FTI means the global investment organization known as “Franklin Templeton Investments”;

Funds means, collectively, the Canadian Funds and the U.S. Funds (each, a “Fund”);

Future Canadian Pooled Fund means each investment fund, as defined in the Legislation, to be established in the future, that will be domiciled in Canada that will not be a reporting issuer, for which the Filer will act as manager and/or portfolio adviser;

Future 40 Act Fund means each investment fund, to be established in the future, to which the 40 Act will apply, for which Templeton or another affiliate of the Filer will act as manager and/or portfolio adviser;

Future NI 81-102 Fund means each investment fund, as defined in the Legislation, to be established in the future, that will be a reporting issuer and subject to NI 81-102, for which the Filer will act as manager and/or portfolio adviser;

Future U.S. Pooled Fund means each investment fund, to be established in the future, that will be domiciled in the United States to which the 40 Act will not apply, for which Templeton or another affiliate of the Filer will act as manager and/or portfolio adviser;

Global Inter-Fund Trading Policy has the meaning given to it in Representation 35;

Inter-Fund Trades means, collectively, Canadian Inter-Fund Trades, Cross-Border Inter-Fund Trades and, where applicable, all trades pursuant to the Section 4.2(1) Relief;

Investment Management Agreement has the meaning given to it in Representation 13;

IRC means the independent review committee of the Canadian Funds;

Managed Accounts means, collectively, Canadian Client Accounts and U.S. Client Accounts;

NI 81-102 Funds means, collectively, the Existing NI 81-102 Funds and the Future NI 81-102 Funds;

Pooled Fund Debt Relief means the exemptive relief set out in In the Matter of Franklin Templeton Investments Corp. (FTIC) and Fiduciary Trust Company of Canada (FTCC) and the NI 81-102 Funds (April 16, 2009);

Templeton means Templeton Investment Counsel, LLC;

Trust Funds means, collectively, any Funds established as a trust;

U.S. Clients means, collectively, the U.S. Funds and the U.S. Client Accounts;

U.S. Funds means, collectively, the 40 Act Funds and the U.S. Pooled Funds;

U.S. Inter-Fund Trading Rules means the United States Investment Company Act section 270.17a-7 and other applicable laws governing inter-fund trading in the United States;

U.S. Client Account means an account managed by the Filer that is beneficially owned by a client that is resident or domiciled in the United States and is not a responsible person and over which the Filer has discretionary authority; and

U.S. Pooled Funds means, collectively, the Existing U.S. Pooled Funds and the Future U.S. Pooled Funds.

Representations

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

The Filer

Franklin Templeton is a corporation amalgamated under the laws of the Province of Ontario having its head office in Toronto, Ontario.
Franklin Templeton is registered under securities legislation in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland & Labrador, Nova Scotia, Ontario, Prince Edward Island, Quebec, Saskatchewan and Yukon as a portfolio manager and as a dealer in the categories of mutual fund dealer and exempt market dealer. Franklin Templeton is also registered under securities legislation in Alberta, British Columbia, Manitoba, Newfoundland & Labrador, Nova Scotia, Ontario and Quebec as an investment fund manager. Franklin Templeton is also registered under the Commodity Futures Act in Ontario as a Commodity Trading Manager.
The Filer is, or will be, the manager of the Canadian Funds.
The Filer is, or will be, the portfolio manager(s) of the Canadian Funds. The Filer may also appoint sub-advisers for the Canadian Funds.
The Filer is, or will be, a trustee of certain of the Trust Funds with unaffiliated independent trustees acting for the remaining Trust Funds.
The Filer is not in default of securities legislation in any of the Jurisdictions.

Canadian Funds

Each NI 81-102 Fund is, or will be, established under the laws of Ontario, Alberta or Canada as an investment fund that is an open-ended mutual fund trust or an open-ended mutual fund corporation and is, or will be, a reporting issuer in one or more of the Jurisdictions.
The securities of each NI 81-102 Fund are, or will be, qualified for distribution in one or more of the Jurisdictions under a prospectus, or simplified prospectus, annual information form and fund facts, as applicable, prepared and filed in accordance with the securities legislation of such Jurisdictions. Each NI 81-102 Fund is, or will be, subject to the provisions of NI 81-102.
Each Canadian Pooled Fund is, or will be, an investment fund established under the laws of Ontario or Alberta as an open-ended mutual fund trust, open-ended mutual fund corporation or closed-ended trust that is not and will not be a reporting issuer in any of the Jurisdictions.
The securities of the Canadian Pooled Funds will be distributed on a private placement basis pursuant to available exemptions from the prospectus requirement under applicable securities laws in the Jurisdictions. The Canadian Pooled Funds are not, and will not be, subject to NI 81-102.
The Canadian Funds are not in default of securities legislation in any of the Jurisdictions.

Canadian Client Accounts

The Filer offers discretionary investment management services to institutional and individual investors in Canada through the Canadian Client Accounts.
Each Canadian client wishing to receive the discretionary investment management services from the Filer, has entered into, or will enter into, a written agreement (an Investment Management Agreement) whereby the client appoints the Filer, to act as portfolio manager in connection with an investment portfolio of the client with full discretionary authority to trade in securities for the Canadian Client Account without obtaining the specific consent of the client to execute the trade.

Templeton

Templeton is a limited liability company incorporated under the laws of the State of Delaware having its head office in Fort Lauderdale, Florida, USA.
Templeton is registered with the U.S. Securities and Exchange Commission (the SEC) as an adviser under the U.S. Investment Advisers Act of 1940 (the Advisers Act).
In the U.S., all managers of U.S. registered investment companies are registered under, and subject to the requirements of the Advisers Act. In addition, with respect to their management of registered investment companies, registered investment advisers are subject to the requirements of the Investment Company Act of 1940.
Franklin Templeton and Templeton are affiliates. Both Franklin Templeton and Templeton are directly or indirectly controlled by Franklin Resources, Inc., a public company in the United States which is listed for trading on the New York Stock Exchange. FTI includes Franklin Resources, Inc. and its affiliates, a global investment organization that operates globally and as at July 31, 2018, had over C$ $954 billion in assets under management.
Templeton, or another affiliate of Franklin Templeton is, or will be, the manager of the U.S. Funds. Templeton, including affiliates of Franklin Templeton, provide advisory services and portfolio manager(s) to the U.S. Funds. Templeton or another affiliate of the Filer may also appoint sub-advisers for the U.S. Funds.
Current affiliates of Franklin Templeton, other than Templeton, that are registered with the SEC are listed in Appendix A to this Decision.

U.S. Clients

Each 40 Act Fund is, or will be, established under the laws of the State of Delaware (or other U.S. jurisdiction) as an investment fund that is an open-ended and/or closed end investment company pursuant to the 40 Act and the securities of which are, or will be, registered for distribution to the public under the 40 Act.
The securities of each 40 Act Fund are, or will be, registered for distribution pursuant to a registration statement prepared and filed in accordance with the 40 Act. Each 40 Act Fund is, or will be, subject to the provisions of the 40 Act.
Each U.S. Pooled Fund is, or will be, an investment fund established under the laws of the State of Delaware (or other U.S. jurisdiction) as an open-ended mutual fund trust, open-ended mutual fund corporation or trust, limited liability company, limited partnership or closed-ended trust that will not be subject to the 40 Act.
The securities of the U.S. Pooled Funds are, or will be, distributed on a private placement basis pursuant to available exemptions from the registration requirement under the 40 Act (or other applicable securities laws in the United States). The Existing U.S. Pooled Funds are not, and the Future U.S. Pooled Funds will not be, subject to the 40 Act.
Templeton and other affiliates of Franklin Templeton offer discretionary investment management services to institutional and individual investors in the United States through U.S. Client Accounts.

Inter-Fund Trading

The Filer wishes to be able to permit any Canadian Fund or Canadian Client Account to engage in Inter-Fund Trades of portfolio securities with a Fund or Managed Account.
NI 31-103, NI 81-102 and NI 81-107 restrict inter-fund trading. Absent the Exemption Sought, neither the Canadian Funds nor Canadian Client Accounts, nor the Filer on their behalf, will be permitted to engage in Cross-Border Inter-Fund Trades as contemplated in this decision.
The Filer is a responsible person for the purpose of section 13.5(2)(b) of NI 31-103 and prohibited from effecting any Inter-Fund Trades between Canadian Funds or Canadian Client Accounts and certain Trust Funds (if an associate of the Filer) or other Funds (as investment funds for which the Filer, or other responsible person, acts as an adviser).
Each NI 81-102 Fund is prohibited under section 4.2(1) of NI 81-102 from purchasing a security from or selling a security to certain Trust Funds (if an associate of the Filer) and would also be prohibited under section 4.2(1) of NI 81-102 from purchasing a security from or selling a security to a Fund established in the future under a corporate structure that would be an affiliate of the Filer.
The exception in section 4.3(1) of NI 81-102 which permits certain inter-fund trades of securities subject to public quotations is not available for any Inter-Fund Trades of debt securities because debt securities are typically not subject to public quotations.
The exception in section 4.3(2) which permits certain inter-fund trades of debt securities is not available for any Inter-Fund Trades of debt securities between NI 81-102 Funds and other Funds because that exception only applies where funds on both sides of the inter-fund trade are investment funds subject to NI 81-107. The Canadian Pooled Funds and U.S. Funds will not be subject to NI 81-107.
The Filer cannot rely on the exception in subsection 6.1 of NI 81-107 for the Inter-Fund Trades unless each party to the transaction is a reporting issuer and the Inter-Fund Trade occurs at the “current market price of the security” which, in the case of exchange-traded securities, includes the Closing Sale Price but not the Last Sale Price.
Each Inter-Fund Trade will be consistent with the investment objectives of the Fund or Managed Account, as applicable.
The Pooled Fund Debt Relief was obtained to permit Inter-Fund Trades in unlisted debt securities between a NI 81-102 Fund and a Canadian Pooled Fund.
The Current Relief was obtained to permit Canadian Inter-Fund Trades (other than those permitted under regulatory exceptions and the Pooled Fund Debt Relief) between all of the Canadian Clients. For Canadian Client Accounts, which are not subject to an IRC approval process, the Current Relief requires client authorization of Canadian Inter-Fund Trades in the Investment Management Agreement or other documentation.
The Filer, Templeton, and all FTI affiliates are subject to the Franklin Templeton Investments Inter-Account Transaction Policy (the Global Inter-Fund Trading Policy), including a Canadian addendum which ensures that Canadian Inter-Fund Trades are conducted in accordance with the requirements of applicable securities legislation, including NI 81-102 and NI 81-107, the Pooled Fund Debt Relief and the Current Relief.
At the time of a Canadian Inter-Fund Trade, the Filer will have policies and procedures in place to enable the Canadian Funds and Canadian Client Accounts to engage in Canadian Inter-Fund Trades.
At the time of a Cross-Border Inter-Fund Trade, the Filer will have policies and procedures in place to enable the Canadian Funds and Managed Accounts to engage in Cross-Border Inter-Fund Trades.
Franklin Templeton has established in respect of each Existing NI 81-102 Fund, and the Filer, as manager of an NI 81-102 Fund, will establish in respect of each Future NI 81-102 Fund, an IRC in accordance with the requirements of NI 81-107.
Inter-Fund Trades involving an NI 81-102 Fund will be referred to and approved by the IRC of the NI 81-102 Fund under subsection 5.2(1) of NI 81-107 and the Filer, as manager of an NI 81-102 Fund, and the IRC of the NI 81-102 Fund, will comply with section 5.4 of NI 81-107 in respect of any standing instructions the IRC provides in connection with the Inter-Fund Trade. The IRC of the NI 81-102 Funds will not approve an Inter-Fund Trade involving an NI 81-102 Fund unless it has made the determination set out in subsection 5.2(2) of NI 81-107.
Franklin Templeton has established in respect of each Existing Canadian Pooled Fund and the Filer, as manager of a Future Canadian Pooled Fund, will establish in respect of each Future Canadian Pooled Fund, an IRC (which may also be the IRC of the NI 81-102 Funds) to review and approve, including by way of standing instructions, any proposed Inter-Fund Trade involving a Canadian Pooled Fund.
The mandate of the IRC of a Canadian Pooled Fund, among other things, includes or will include, approving Inter-Fund Trades. The IRC of a Canadian Pooled Fund is, or will be, created by the Filer, as manager of a Canadian Pooled Fund, in accordance with the requirements of section 3.7 of NI 81-107 and complies, or will comply, with the standard of care set out in section 3.9 of NI 81-107. The IRC of the Canadian Pooled Funds will not approve any Inter-Fund Trade involving a Canadian Pooled Fund unless it has made the determination set out in subsection 5.2(2) of NI 81-107.
The mandate of the IRC of the NI 81-102 Funds and the Canadian Pooled Funds will be expanded to include approval of Cross-Border Inter-Fund Trades between a Canadian Fund and a U.S. Fund or Managed Account.
Prior to the Filer, engaging in Inter-Fund Trades on behalf of a Canadian Client Account, each Investment Management Agreement or other documentation will contain the authorization of the client for the Filer, as portfolio manager of the Canadian Client Account, to engage in Inter-Fund Trades.
When the Filer engages in an Inter-Fund Trade of securities between Funds or between a Managed Account and a Fund, including Cross-Border Inter-Fund Trades, each will comply with the following procedures, which apply to the Filer, and to any affiliate of the Filer appointed as sub-adviser to the Filer:

(a) the portfolio manager of one Client (Client A) will deliver the trade instructions in respect of a purchase or a sale of a security by Client A to a trader on the trading desk of the Filer, Templeton or one of their affiliates;

(b) the portfolio manager of the other Client (Client B) will deliver the trade instructions in respect of a purchase or a sale of a security by Client B to a trader on the trading desk of the Filer, Templeton or one of their affiliates (this may be the same trading desk or a different trading desk than is handling the order for Client A);

(c) each trader on each trading desk will request the approval of the trading desk compliance officer (the TDCO) to execute the trade as an Inter-Fund Trade between Client A and Client 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 Client A and Client 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 desks will require that: (i) all orders are to be executed on a timely basis, (ii) orders will be executed for no consideration other than cash payment against prompt delivery of a security, (iii) the transaction is consistent with the investment policies of each Fund participating in the transaction as recited in its registration statement or offering documents, (iv) no brokerage commission, fee (except for customary transfer fees) or other remuneration is paid in connection with the transaction, and (v) the transaction complies with all other requirements of applicable law; and

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

If the IRC of a Canadian Fund becomes aware of an instance where the Filer, did not comply with the terms of any decision document issued in connection with the Inter-Fund Trades, including any Cross-Border Inter-Fund Trades, or a condition imposed by securities legislation or the IRC in its approval, the IRC of the Canadian Fund will, as soon as practicable, notify in writing the securities regulatory authority or regulator which is the Canadian Fund’s principal regulator.

Benefits of the Exemption Sought

The securities regulatory authorities in the Jurisdictions granted the Current Relief on the basis that it is in the best interests of the Canadian Clients.
Franklin Templeton has determined that it would be in the best interests of all Clients to permit Inter-Fund Trades, including Cross-Border Inter-Fund Trades, for the following reasons:

(a) because of the various investment objectives and investment strategies that are or will be utilized by the Clients, it may be appropriate for different investment portfolios to acquire or dispose of the same securities. Franklin Templeton has determined that engaging in these Inter-Fund Trades directly rather than with a third party has potential benefits such as lower trading costs, reduced market disruption and quicker execution;

(b) making all Clients 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 all Clients, for example reducing market exposure risk due to delayed execution and improving liquidity for thinly traded securities; and

(c) making all Clients 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 the Filer, in connection with execution of transactions on behalf of all Clients.

The foregoing benefits are currently enjoyed by the Canadian Clients pursuant to the existing regulatory exceptions, the Pooled Fund Debt Relief and the Current Relief. Franklin Templeton has determined that the Exemption Sought is in the best interests of the Canadian Clients because it would extend these benefits to Cross-Border Inter-Fund Trades with U.S. Clients, significantly broadening the pool of potential inter-fund trading counterparties.
U.S. Clients currently conduct inter-fund trading pursuant to the Global Inter-Fund Trading Policy which complies with U.S. Inter-Fund Trading Rules. From a procedural perspective, inter-fund trades involving 40 Act Funds are subject to review and ratification by the applicable U.S. fund board. Also, in order to comply with SEC rules governing inter-fund trades and the Global Inter-Fund Trading Policy as noted above, it is explicitly required that no brokerage commission, fee (except for customary transfer fees) or other remuneration be paid by the accounts in connection with the transition. Cross-Border Inter-Fund Trades would be conducted on FTI’s portfolio management system, which is monitored by an integrated compliance group including representatives of the Franklin Templeton, Templeton and other affiliates.
U.S. Inter-Fund Trading Rules impose similar requirements to the regulatory exceptions, the Pooled Fund Debt Relief and the Current Relief respecting appropriate consideration, policies and procedures, governance and review, recordkeeping and pricing for inter-fund trades. Because the Current Relief permits Canadian Inter-Fund Trades to be executed at the Last Sale Price instead of the Current Sale Price, the Franklin Templeton has determined that there is no material difference between the pricing requirements that apply to Canadian Inter-Fund Trades under the Current Relief and the pricing requirements that apply to inter-fund trades in the United States.
Franklin Templeton has determined that similar regulatory requirements applicable to inter-fund trading in Canada and the United States, together with FTI’s integrated portfolio management system and compliance group, creates a framework for conducting Cross-Border Inter-Fund Trades in a manner which minimizes conflicts of interest and promotes fairness and transparency for all Clients.

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:

a) the Revocation is granted;

b) the Section 4.2(1) Relief is granted provided that the following conditions are satisfied:

(i) the Inter-Fund Trade is consistent with the investment objectives of each of the Funds involved in the trade;

(ii) the IRC of the Canadian Fund involved in the trade has approved the transaction in respect of that Canadian Fund in accordance with the terms of section 5.2 of NI 81-107;

(iii) the fund board of the U.S. Fund, or the trust committee of the entity acting as trustee of the U.S. Fund, involved as a counterparty to the trade has approved policies and procedures that permit Cross-Border Inter-Fund Trades that require any such transaction in respect of that U.S. Fund to be executed in accordance with 40 Act Rule 17a-7;

(iv) the Inter-Fund Trade complies with paragraphs (c) to (g) of subsection 6.1(2) of NI 81-107; and

c) the Inter-Fund Trading Relief is granted provided that the following conditions are satisfied:

(i) the Inter-Fund Trade is consistent with the investment objectives of each of the Clients involved in the trade;

(ii) the Filer, as manager of a Canadian Fund, refers the Inter-Fund Trade involving such Canadian Fund to the IRC of that Canadian Fund in the manner contemplated by section 5.1 of NI 81-107 and the Filer, and the IRC of the Canadian Fund comply with section 5.4 of NI 81-107 in respect of any standing instructions the IRC provides in connection with the Inter-Fund Trade;

(iii) in the case of an Inter-Fund Trade between Canadian Funds:

a. the IRC of each Canadian Fund has approved the Inter-Fund Trade in respect of the Canadian Fund in accordance with the terms of section 5.2(2) of NI 81-107; and

b. the Inter-Fund Trade complies with paragraphs (c) to (g) of subsection 6.1(2) of NI 81-107, except that for the purposes of paragraph (e) of subsection 6.1(2) of NI 81-107 in respect of exchange-traded securities, the current market price of the securities may be the Last Sale Price; and

(iv) in the case of an Inter-Fund Trade between a Canadian Client Account and a Canadian Fund:

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

b. the investment management agreement or other documentation in respect of the Canadian Client Account authorizes the Inter-Fund Trade; and

c. the Inter-Fund Trade complies with paragraphs (c) to (g) of subsection 6.1(2) of NI 81-107, except that for the purposes of paragraph (e) of subsection 6.1(2) of NI 81-107 in respect of exchange-traded securities, the current market price of the securities may be the Last Sale Price; and

(v) in the case of an Inter-Fund Trade between a Canadian Fund and a U.S. Fund:

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

b. the fund board of the U.S. Fund, or the trust committee of the entity acting as trustee of the US Fund, involved in the trade has approved policies and procedures that permit Cross-Border Inter-Fund Trades that require approval or ratification of the transaction in respect of that U.S. Fund in accordance with 1940 Act 17a-7;

d. the Inter-Fund Trade shall only be executed for orders with a quantity of more than 50 standard trading units; and

e. the Inter-Fund Trade shall be printed in Canada on a marketplace as defined in the Securities Act, RSO 1990, c. S. 5; and

(vi) in the case of an Inter-Fund Trade between a Canadian Client Account and a U.S. Fund:

a. the investment management agreement or other documentation in respect of the Canadian Client Account authorizes the Inter-Fund Trade;

d. the Inter-Fund Trade shall only be executed for orders with a quantity of more than 50 standard trading units; and

e. the Inter-Fund Trade shall be printed in Canada on a marketplace as defined in the Securities Act, RSO 1990, c. S. 5; and

(vii) with respect to Cross-Border Inter-Fund Trades only, this decision shall cease to be operative three years from the date of this decision.

“Darren McKall”

____________________________

Darren McKall

Manager, Investment Funds & Structured Products Branch

Ontario Securities Commission

Application File# 2017/0398

SEDAR # 02813016

Appendix A

Current Affiliates of Franklin Templeton Investments Corp. Registered with the SEC

Darby Overseas Partners, L.P.

FASA, LLC

Fiduciary Investment Management International, Inc.

Franklin Advisers, Inc.

Franklin Advisory Services, LLC

Franklin Mutual Advisers, LLC

Franklin Templeton Asset Management (India) Private Limited

Franklin Templeton Institutional, LLC

Franklin Templeton Investimentos (Brasil) LTDA.

Franklin Templeton Investment Management Limited

Franklin Templeton Investment Trust Management Co., Ltd.

Franklin Templeton Investments (Asia) Limited

Franklin Templeton Investments (ME) Limited

Franklin Templeton Portfolio Advisors, Inc.

Franklin Templeton International Services S.A.R.L.

K2/D&S Management Co., L.L.C.

K2 Advisors L.L.C.

Templeton Asset Management Ltd.

Templeton Global Advisors Limited

Templeton Investment Counsel, LLC