Exemption Orders (Discretionary)

CLASSES OF FRANKLIN TEMPLETON TAX CLASS CORP.


2001 BCSECCOM 587


Headnote

Mutual Reliance Review System for Exemptive Relief Applications – Relief granted from certain of the self dealing requirements regarding investments by certain mutual funds of substantially all of the assets of the top funds in units of a mutual fund under common management.

Applicable British Columbia Provisions

Securities Act, R.S.B.C. 1996, c. 418, ss. 120(1), 120(2), 121(2)(b), 121(2)(c), 126(a), 126(d), 127(a) and 130(b).

IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, ONTARIO, QUEBEC, NOVA SCOTIA, and NEWFOUNDLAND

AND

IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

Classes of Franklin Templeton Tax Class Corp.
(the "Tax Fund Corporation"), being

Templeton Growth Tax Class
Templeton International Stock Tax Class
Templeton Emerging Markets Tax Class
Templeton Global Smaller Companies Tax Class
Templeton Canadian Stock Tax Class
Franklin World Growth Tax Class
Franklin U.S. Small Cap Growth Tax Class
Franklin U.S. Aggressive Growth Tax Class
Franklin U.S. Large Cap Growth Tax Class
Franklin World Health Sciences and Biotech Tax Class
Franklin World Telecom Tax Class
Franklin Technology Tax Class
Franklin U.S. Money Market Tax Class
Mutual Beacon Tax Class
Bissett Multinational Growth Tax Class
Bissett Canadian Equity Tax Class
Bissett Small Cap Tax Class
Bissett Bond Tax Class
Bissett Money Market Tax Class
(collectively, the “Classes”)

AND

Franklin Templeton Investments Corp.

MRRS DECISION DOCUMENT

WHEREAS the Canadian securities regulatory authority or regulator (the "Decision Maker") in each of British Columbia, Alberta, Saskatchewan, Ontario, Quebec, Nova Scotia, and Newfoundland (the "Jurisdictions") has received an application from Franklin Templeton Investments Corp. ("Franklin Templeton"), on its own behalf and on behalf of the Classes (the "Current Top Funds") and other classes of the Tax Fund Corporation managed by Franklin Templeton after the date of this Decision (defined herein) having an investment objective that invests substantially all of its assets in another mutual fund managed by Franklin Templeton (individually, a "Top Fund" and, together with the Current Top Funds, the "Top Funds") for a decision pursuant to the securities legislation of the Jurisdictions (the "Legislation") that the following provisions of the Legislation (the "Applicable Requirements") shall not apply to the Top Funds or Franklin Templeton, as the case may be, in respect of certain investments to be made by a Top Fund in an Underlying Fund (as defined herein) from time to time:

(a) the restrictions contained in the Legislation prohibiting a mutual fund from knowingly making or holding an investment in a person or company in which the mutual fund, alone or together with one or more related mutual funds, is a substantial securityholder;

(b) the restrictions contained in the Legislation prohibiting a mutual fund from knowingly making an investment in an issuer in which any officer or director of the mutual fund, its management company or distribution company or an associate of any of them, or any person or company who is a substantial securityholder of the mutual fund, its management company or its distribution company, has a significant interest;

(c) the restrictions contained in the Legislation prohibiting a portfolio manager or, in British Columbia, the mutual fund, from knowingly causing an investment portfolio managed by it to invest in any issuer in which a “responsible person” (as that term is defined in the Legislation) is an officer or director, unless the specific fact is disclosed to the client and, if applicable, the written consent of the client to the investment is obtained before the purchase; and

(d) the requirements contained in the Legislation requiring a management company or, in British Columbia, a mutual fund manager, to file a report relating to a purchase or sale of securities between the mutual fund and any related person or company, or any transaction in which, by arrangement other than an arrangement relating to insider trading in portfolio securities, the mutual fund is a joint participant with one or more of its related persons or companies.

AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the "System"), the Ontario Securities Commission is the principal regulator for this application.

AND WHEREAS it has been represented by Franklin Templeton to the Decision Makers that:

1. Franklin Templeton is a corporation amalgamated under the laws of the Province of Ontario and is or will be the manager of each of the Top Funds and each of the Underlying Funds (collectively, the "Franklin Templeton Funds"). Franklin Templeton’s head office is located in Toronto, Ontario.

2. Each of the Top Funds is or will be classes of shares of the Tax Fund Corporation, a mutual fund corporation incorporated under the laws of the Province of Alberta, the shares of which will be offered for sale in each of the provinces and territories of Canada.

3. Each of the Current Underlying Funds (as defined herein) (other than Templeton Growth Fund, Ltd.) is an open-ended mutual fund trust established under the laws of Ontario or Alberta by a Declaration of Trust. Templeton Growth Fund, Ltd. is an open-end mutual fund corporation, incorporated under the laws of Canada. The Underlying Funds will be open-ended mutual fund trusts established under the laws of Ontario or Alberta by a Declaration of Trust or open-end mutual fund corporations incorporated under the laws of Canada.

4. Each of the Franklin Templeton Funds is or will be a reporting issuer in each of the provinces and territories of Canada.

5. Securities of each of the Franklin Templeton Funds will be qualified for distribution by means of a simplified prospectus and an annual information form filed in accordance with the legislation applicable in each of the provinces and territories of Canada.

6. Each of the Top Funds seeks to achieve its investment objective by investing substantially all of its assets in securities of it’s corresponding Underlying Fund. Except for transitional cash, each of the Top Funds will be 100% invested in securities of it’s corresponding Underlying Fund.

7. Franklin Templeton is currently the manager of Templeton Growth Fund, Ltd., Templeton International Stock Fund, Templeton Emerging Markets Fund, Templeton Global Smaller Companies Fund, Templeton Canadian Stock Fund, Franklin World Growth Fund, Franklin U.S. Small Cap Growth Fund, Franklin U.S. Aggressive Growth Fund, Franklin U.S. Large Cap Growth Fund, Franklin World Health Sciences and Biotech Fund, Franklin World Telecom Fund, Franklin Technology Fund, Franklin U.S. Money Market Fund, Mutual Beacon Fund, Bissett Multinational Growth Fund, Bissett Canadian Equity Fund, Bissett Small Cap Fund, Bissett Bond Fund and Bissett Money Market Fund (the “Current Underlying Funds”) and may in the future establish other mutual fund trusts or corporations (together with the Current Underlying Funds, the “Underlying Funds”).

8. The simplified prospectus for the Top Funds will disclose the investment objectives, investment strategies, risks and restrictions of the Top Fund.

9. Except to the extent evidenced by this Decision and specific approvals granted by the Decision Makers pursuant to National Instrument 81-102 Mutual Funds (“NI 81-102"), the investments by the Top Funds in the Underlying Funds have been structured to comply with the investment restrictions of the Legislation and NI 81-102.

10. In the absence of the Decision, pursuant to the Legislation, each Top Fund is prohibited from knowingly making or holding an investment in a person or company in which the mutual fund, alone or together with one or more related mutual funds, is a substantial securityholder. As a result, in the absence of this Decision the Top Fund would be required to divest itself of any such investments.

11. In the absence of the Decision, pursuant to the Legislation, each Top Fund is prohibited from knowingly making an investment in an issuer in which any officer or director of the mutual fund, its management company or distribution company or an associate of any of them, or any person or company who is a substantial securityholder of a Top Fund, its management company or its distribution company. As a result, in the absence of this Decision the Top Fund would be required to divest itself of any such investments.

12. In the absence of the Decision, Legislation requires Franklin Templeton to file a report on every purchase or sale of securities of the Underlying Funds by the Top Fund.

13. In the absence of this Decision, pursuant to the Legislation, Franklin Templeton is prohibited from causing the Top Fund to invest in the Underlying Funds unless the specific fact is disclosed to securityholders of the Top Fund and the written consent of securityholders of the Top fund is obtained before the purchase.

14. The investments by the Top Fund in securities of the Underlying Funds will represent the business judgment of “responsible persons” (as defined in the Legislation) uninfluenced by considerations other than the best interests of the Top Funds.

AND WHEREAS pursuant to the System this MRRS Decision Document evidences the Decision of each Decision Maker (collectively, the “Decision”);

AND WHEREAS each of the Decision Makers is satisfied that the tests contained in the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met;

THE DECISION of the Decision Makers pursuant to the Legislation is that the Applicable Requirements shall not apply so as to prevent the Top Funds from making and holding an investment in securities of the Underlying Funds or require Franklin Templeton to file a report relating to the purchase or sale of such securities and disclose such purchase or sale to securityholders of the Top Fund and obtain their written consent.

PROVIDED IN EACH CASE THAT:

1. the Decision, as it relates to the jurisdiction of a Decision Maker, will terminate one year after the publication in final form of any legislation or rule of that Decision Maker dealing with matters in subsection 2.5 of NI 81-102.

2. the Decision shall only apply if, at the time a Top Fund makes or holds an investment in its Underlying Fund, the following conditions are satisfied:

(a) the securities of both the Top Fund and the Underlying Fund are being offered for sale in the jurisdiction of the Decision Maker pursuant to a simplified prospectus and annual information form which has been filed with and accepted by the Decision Maker;

(b) the investment by the Top Fund in the Underlying Fund is compatible with the fundamental investment objectives of the Top Fund;

(c) the simplified prospectus discloses the intent of the Top Fund to invest substantially all of its assets in securities of the Underlying Fund, the manager of the Underlying Fund, and all disclosure required for the Underlying Fund in its own simplified prospectus by Part B of Form 81-101F1 Contents of Simplified Prospectus;

(d) the investment objective of the Top Fund discloses that the Top Fund invests substantially all of its assets in securities of the Underlying Fund and the name of the Underlying Fund;

(e) the Underlying Fund is not a mutual fund whose investment objective includes investing directly or indirectly in other mutual funds;

(f) if the Underlying Fund disclosed in the simplified prospectus has been changed, securityholders of the Top Fund have given prior approval and the simplified prospectus has been amended or a new simplified prospectus has been filed to reflect the change;

(g) there are compatible dates for the calculation of the net asset value of the Top Fund and the Underlying Fund for the purpose of the issue and redemption of the securities of such mutual funds;

(h) no sales charges are payable by the Top Fund in relation to its purchases of securities of the Underlying Fund;

(i) no redemption fees or other charges are charged by the Underlying Fund in respect of the redemption by the Top Fund of securities of the Underlying Fund owned by the Top Fund;

(j) no fees or charges of any sort are paid by the Top Fund and the Underlying Fund, by their respective managers or principal distributors, or by any affiliate or associate of any of the foregoing entities, to anyone in respect of the Top Fund’s purchase, holding or redemption of the securities of the Underlying Fund;

(k) the arrangements between or in respect of the Top Fund and the Underlying Fund are such as to avoid the duplication of management fees;

(l) any notice provided to securityholders of the Underlying Fund as required by applicable laws or the constating documents of that Underlying Fund has been delivered by the Top Fund to its securityholders;

(m) all of the disclosure and notice material prepared in connection with a meeting of securityholders of the Underlying Fund and received by the Top Fund has been provided to its securityholders, the securityholders have been permitted to direct a representative of the Top Fund to vote its holdings in the Underlying Fund in accordance with their direction, and the representative of the Top Fund has not voted its holdings in the Underlying Fund except to the extent the securityholders of the Top Fund have directed;

(n) in addition to receiving the annual and, upon request, the semi-annual financial statements of the Top Fund, securityholders of the Top Fund have received appropriate summary disclosure in respect of the Top Fund’s holdings of securities of the Underlying Funds in the financial statements of the Top Fund; and

(o) to the extent that the Top Fund and the Underlying Fund do not use a combined simplified prospectus and annual information form containing disclosure about the Top Fund and the Underlying Fund, copies of the simplified prospectus and annual information form of the Underlying Fund have been provided upon request to securityholders of the Top Fund and the right to receive these documents is disclosed in the simplified prospectus of the Top Fund.

DATED June 5th, 2001.

J.A. Geller R. Stephen Paddon
©2024 British Columbia Securities Commission