Franklin Templeton Investments Corp.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Existing and future investment funds granted exemption to invest up to 10% of net assets, in aggregate, in securities of Irish mutual funds subject to UCITS rules governed by the Central Bank of Ireland and Luxembourg mutual funds authorized by the Commission de Surveillance du Secteur Financier -- subject to conditions.

Applicable Legislative Provisions

National Instrument 81-102 Investment Funds, ss. 2.5(2)(a), (c), and 19.1.

April 21, 2022

IN THE MATTER OF 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 Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of each investment fund subject to the provisions of National Instrument 81-102 Investment Funds (NI 81-102) of which the Filer is, or in the future will be, the manager (collectively, the Funds), for a decision under the securities legislation of the jurisdiction of the principal regulator (the Legislation):

(a) Revoking the Third Decision (as defined below); and

(b) providing an exemption from paragraphs 2.5(2)(a)(i) and (c) of NI 81-102 to permit each Fund to invest up to 10 percent of its net asset value in securities of (i) investment funds formed under Franklin Templeton Investment Funds, a Luxembourg collective asset-management vehicle constituted as an umbrella fund with segregated liability between sub-funds and authorized by the Commission de Surveillance du Secteur Financier (Belgium) pursuant to the UCITS Regulations, and (ii) investment funds formed under either Legg Mason Global Funds Plc, Legg Mason Global Solutions Plc, or Western Asset Liquidity Funds Plc, each an Irish collective asset-management vehicle constituted as an umbrella fund with segregated liability between sub-funds and authorized by the Central Bank of Ireland pursuant to the UCITS Regulations (as defined below), (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) The Ontario Securities Commission is the principal regulator for the application; and

(b) The Filer has provided notice that Sub-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 National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this Application, unless otherwise defined.

Companies Act means the Companies Act 2014 (Ireland) as amended, all enactments which are to be read as one with, or construed or read together with, or as one with, the Companies Act 2014 (Ireland) and every statutory modification and re-enactment thereof for the time being in force.

CSSF means Commission de Surveillance du Secteur Financier.

EU Directives means EU Council Directive 2009/65/EC of 13 July 2009 on the Coordination of Laws, Regulations and Administrative Provisions relating to UCITS, as amended, including but not limited to, Commission Directive 2010/43/EC, Commission Directive 2010/44/EC, and Commission Directive 2014/91/EC.

FTIF means Franklin Templeton Investment Funds, an umbrella SICAV with UCITS status under the laws of Luxembourg.

KIID means a Key Investor Information Document prepared by the UCITS Corporations, FTIF and Western Asset LF for each of the Underlying Funds which contains disclosure similar to that required to be included in a fund facts document prepared under NI 81-101.

LM Funds means Legg Mason Global Funds Plc, an investment company with variable capital, incorporated in Ireland pursuant to the Companies Act and the UCITS Regulation.

LM Solutions means Legg Mason Global Solutions Plc, an investment company with variable capital, incorporated in Ireland pursuant to the Companies Act and the UCITS Regulation.

Original Underlying Fund means a SICAV Fund or a UCITS Fund.

SICAV means Société d'Investissement à Capital Variable, an open-end company, governed by the laws of Luxembourg.

SICAV Funds means each of the existing sub-funds of FTIF and other FTIF sub-funds established in the future under FTIF.

UCITS means Undertaking for Collective Investments 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 in Europe.

UCITS Corporations means LM Funds and LM Solutions.

UCITS Funds means each of the existing sub-funds of the UCITS Corporations and other sub-funds of the UCITS Corporations established in the future under one of the UCITS Corporations.

UCITS Notices means the series of UCITS notices, memorandums, guidelines and letters issued by the Central Bank of Ireland or the CSSF, as the case may be.

UCITS Regulations means the regulations issued by European Union member states that implement the EU Directives.

Underlying Fund means a SICAV Fund, a UCITS Fund or a Western Asset UCITS Fund.

Underlying Fund Manager means Franklin Templeton International Services S.à.r.l, which serves as the promoter, investment manager and distributor to each sub-fund of the UCITS Corporations and FTIF and as promoter and manager of each sub-fund of Western Asset LF. The Underlying Fund Manager is an affiliate of the Filer.

Western Asset LF means Western Asset Liquidity Funds plc.

Western Asset UCITS Funds means each of the existing sub-funds of Western Asset LF and each other sub-fund of Western Asset LF established in the future.

FACTS

The Filer and the Funds

1. The Filer is a corporation amalgamated under the laws of Ontario, having its head office in Toronto, Ontario.

2. The Filer is a wholly-owned subsidiary of Templeton International, Inc., a Delaware corporation, which is an indirect wholly-owned subsidiary of Franklin Resources, Inc. (FRI). FRI is a global investment management organization operating as Franklin Templeton. In addition to Canada, FRI and its subsidiaries maintain offices in 33 other countries.

3. The Filer is registered as an investment fund manager in British Columbia, Alberta, Manitoba, Ontario, Québec, Nova Scotia and Newfoundland & Labrador. The Filer is registered as a portfolio manager, mutual fund dealer and exempt market dealer in each of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland & Labrador and Yukon. The Filer is also registered as a Commodity Trading Manager in Ontario.

4. The Filer is, or will be, the manager of each of the Funds.

5. Each Fund is, or will be, an investment fund established under the laws of a Jurisdiction of Canada and a reporting issuer under the laws of some or all of the Jurisdictions.

6. Each Fund is, or will be, governed by NI 81-102, subject to any relief therefrom granted by the securities regulatory authorities.

7. The securities of each Fund are, or will be, qualified for distribution in some or all of the Jurisdictions under a simplified prospectus prepared in accordance with National Instrument 81-101 -- Mutual Fund Prospectus Disclosure (NI 81-101) or a prospectus prepared in accordance with National Instrument 41-101 -- General Prospectus Requirements (NI 41-101).

8. Neither the Filer nor any of the Funds are, or will be, in default of securities legislation in any of the Jurisdictions.

The Underlying Funds

9. A Fund may, from time to time, invest up to 10% of its net asset value in securities of an Underlying Fund.

10. The UCITS Funds are sub-funds of a UCITS Corporation and are subject to the UCITS Regulations. LM Solutions was incorporated on January 29, 2014 under registration number 538674. LM Funds was incorporated on January 13, 1998 under registration number 278601. The objective of each UCITS Corporation is the collective investment in transferable securities and other liquid financial assets of capital raised from the public and which operates on the basis of risk spreading.

11. The SICAV Funds are sub-funds of FTIF and are subject to UCITS Regulations. FTIF is a wholly-owned subsidiary of Franklin Templeton Management Luxembourg S.A., a Luxembourg corporation, which is an indirect wholly owned subsidiary of FRI.

12. The Western Asset UCITS Funds are sub-funds of Western Asset LF and are subject to the UCITS Regulations. Western Asset LF was incorporated on February 19, 1996 under registration number 244870. The objective of Western Asset LF is the collective investment in transferable securities and/or other liquid financial assets of capital raised from the public operating on the principle of risk spreading in accordance with the UCITS Regulations.

13. The Underlying Funds are conventional mutual funds subject to investment restrictions and practices that are substantially similar to those applicable to the Funds. The Underlying Funds are available for purchase by the public and are generally not considered hedge funds. Each of the Underlying Funds is considered to be an "investment fund" and a "mutual fund" within the meaning of applicable Canadian securities legislation.

14. The Underlying Funds qualify as UCITS and the securities of the Underlying Funds are distributed in accordance with the UCITS Regulations. Each of the UCITS Funds and Western Asset UCITS Funds is regulated by the Central Bank of Ireland and each SICAV Fund is regulated by the CSSF.

15. The Underlying Funds are qualified for purchase by way of a prospectus, relating to the UCITS Corporations, FTIF and Western Asset LF, and an individual prospectus supplement pertaining to each sub-fund of the UCITS Corporations, FTIF, and Western Asset LF, including each of the Underlying Funds. In addition to the prospectus and prospectus supplement, the UCITS Corporations, FTIF and Western Asset LF prepare a KIID for each of the Underlying Funds.

16. The Underlying Fund Manager serves as the promoter, investment manager and distributor to each sub-fund of the UCITS Corporations and FTIF, including the Original Underlying Funds. The Underlying Fund Manager, subject to the supervision of the directors of the UCITS Corporations or FTIF, as the case may be, is responsible for the investment management, distribution and marketing of the UCITS Funds and SICAV Funds. The Underlying Fund Manager provides an investment program for the Underlying Funds and manages the investment of the UCITS Funds and SICAV Funds assets.

17. The Underlying Fund Manager serves as the manager and promoter of each sub-fund of Western Asset LF, including the Western Asset UCITS Funds. Western Asset Management Company, LLC, an indirect wholly-owned subsidiary of FRI acts as the investment manager of the Western Asset UCITS Funds and Western Asset Management Company Limited, also an indirect wholly-owned subsidiary of FRI acts as the distributor of the Western Asset UCITS Funds.

18. The Underlying Fund Manager, being subject to regulatory oversight by the CSSF, is subject to substantially equivalent regulatory oversight as the Filer, which is principally regulated by the OSC. In discharging its duties, the Underlying Fund Manager must conduct its business with due skill, care and diligence.

19. The Filer, the Underlying Fund Manager, and other affiliates of the Filer, make up the asset management business of Franklin Templeton. The Underlying Fund Manager is an indirect wholly-owned subsidiary of FRI. The Underlying Fund Manager is authorized by the CSSF and its investment management business includes management of other Irish and Luxembourg, authorized collective investment schemes, as well as collective investment schemes in the United Kingdom, Delaware (U.S.), Cayman Islands and Romania. Western Asset Management Company LLC is regulated as an investment adviser with the US Securities and Exchange Commission under the Investment Advisers Act of 1940. Western Asset Management Company Limited is authorized and regulated in the United Kingdom by the Financial Conduct Authority and carries out regulated activities as permitted under the Financial Services and Markets Act 2000. Western Asset Management Company Limited is also regulated as an investment adviser with the US Securities and Exchange Commission and by the UK Financial Conduct Authority.

20. The following third parties are involved in providing services in respect of the UCITS Corporations and Western Asset LF:

(a) BNY Mellon Fund Services (Ireland) Designated Activity Company (the Administrator) acts as its administrator, registrar and transfer agent, pursuant to an administration agreement. The Administrator is a designated activity company limited by shares incorporated in Ireland. The Administrator's main business activity is the provision of administrative services to collective investment schemes and other portfolios. The Administrator is a wholly-owned indirect subsidiary of The Bank of New York Mellon Corporation (BNY Mellon).

(b) The Bank of New York Mellon SA/NV, Dublin Branch acts as depositary of the UCITS Corporations. The Bank of New York Mellon SA/NV is a limited liability company established in Belgium. The principal activity of The Bank of New York Mellon SA/NV is asset servicing, which is provided to both third-party and internal clients within The Bank of New York Mellon group. The Bank of New York Mellon SA/NV is regulated and supervised as a significant credit institution by the European Central Bank and the National Bank of Belgium for prudential matters and under the supervision of the Belgian Financial Services and Markets Authority for conduct of business rules. The Depositary is also regulated by certain Irish regulators including the Central Bank for conduct of business rules as well as the Belgian supervision discussed above. The Bank of New York Mellon SA/NV is a wholly-owned subsidiary of BNY Mellon.

(c) PricewaterhouseCoopers LLP (PwC) serves as auditor.

21. The following third parties are involved in providing services in respect of the SICAV Funds:

(a) J.P. Morgan Bank Luxembourg S.A. is the administrative agent of FTIF. J.P. Morgan Bank Luxembourg S.A. provides administration services to FTIF and the Underlying Funds. The administrative agent is a limited liability company incorporated in Luxembourg and is an indirect wholly-owned subsidiary of J.P. Morgan Bank. The administrative agent is regulated by the CSSF.

(b) J.P. Morgan Bank Luxembourg S.A. is the depositary of all of FTIF's assets. The principal activity of the depositary is to act as trustee/depositary of the assets of collective investment schemes. Some of the depositary's main functions are to ensure that the sale, issue, repurchase, redemption and cancellation of shares of FTIF's sub-funds are carried out in accordance with applicable law.

(c) PwC serves as the auditor of FTIF.

22. The Underlying Funds are subject to the following regulatory requirements and restrictions pursuant to, and among others, the EU Directives, which are substantially similar to the requirements and restrictions set forth in NI 81-102:

(a) Each Underlying Fund is subject to a robust risk management framework through prescribed rules on governance, risk, regulation of service providers and safekeeping of assets.

(b) Each Underlying Fund is restricted to investing a maximum of 10% of its net assets in a single issuer.

(c) Each Underlying Fund is subject to investment restrictions designed to limit its holdings of illiquid securities to 10% or less of its net asset value.

(d) Each Underlying Fund holds no more than 10% of its net asset value in securities of other investment funds, including other collective investment undertakings.

(e) Each Underlying Fund is subject to investment restrictions designed to limit holdings of transferrable securities which are not listed on a stock exchange or regulated market to 10% or less of the Underlying Fund's net asset value.

(f) Each Underlying Fund that is a money market fund is subject to investment restrictions and liquidity provisions substantially similar to, if not more onerous than, those that would apply to money market funds subject to NI 81-102.

(g) The rules governing the use of derivatives by the Underlying Funds are comparable to the rules regarding the use of derivatives under NI 81-102 with respect to the types of derivatives allowed to be used, issuer concentration, risk exposure in connection with mark to market value, the disclosure required in offering documents and the monitoring requirements, and with only a slight difference between the two regimes in connection with counterparty credit ratings (A-1 under NI 81-102 versus an effective rating requirement of A-2 for counterparties which are not regulated as credit institutions under the UCITS Regulations).

(h) The rules governing securities lending by the Underlying Funds are comparable to the rules regarding securities lending under NI 81-102 including an overall securities lending limit of 50% of the net assets of the Underlying Fund, the requirement to receive collateral of at least 102%, the inability to sell, reinvest or pledge non-cash collateral, and the right to immediately recall the securities loaned. While collateral received by the Underlying Funds is limited to cash or sovereign debt, the minimum credit rating of the latter is AA-, which is slightly lower than the designated rating under NI 81-102. Furthermore, the borrower under a securities lending transaction involving the Underlying Funds must be subject to prudential supervision rules equivalent to those prescribed under EU law.

(i) Each Underlying Fund makes its net asset value available to the public at the close of business each day.

(j) Each Underlying Fund is required to prepare a prospectus and prospectus supplement that discloses material facts pertaining to each Underlying Fund. The prospectus, together with the corresponding prospectus supplement, provide disclosure that is similar to the disclosure required to be included in a simplified prospectus under NI 81-101 or in a prospectus under NI 41-101.

(k) Each Underlying Fund publishes a KIID which contains disclosure similar to that required to be included in a fund facts document prepared under NI 81-101 or an ETF facts document under NI 41-101.

(l) Each Underlying Fund is subject to continuous disclosure obligations which are similar to the disclosure obligations of the Funds under National Instrument 81-106 Investment Funds Continuous Disclosure.

(m) Any change in the investment objective or material change to the investment policy of an Underlying Fund will only be effected following the written approval of all shareholders of the Underlying Fund or a resolution of a majority of the voting shareholders of that Underlying Fund at a general meeting.

(n) The Underlying Fund Manager is subject to approval by the CSSF to permit it to manage and provide portfolio management advice to each Original Underlying Fund and is subject to an investment management agreement which sets out a duty of care and a standard of care requiring the Underlying Fund Manager to act in the best interest of each Original Underlying Fund and the shareholders of each Original Underlying Fund.

(o) Western Asset Management Company LLC, the investment adviser to the Western Asset UCITS Funds, is regulated by the Securities and Exchange Commission (U.S.) and is subject to an investment management agreement which sets out a duty of care and a standard of care requiring it to act in the best interest of each Western Asset UCITS Fund. Western Asset Management Company Limited is regulated by the Financial Conduct Authority (U.K.) and is subject to regulatory standards applicable to a distributor of funds.

(p) All activities of the Underlying Fund Manager and Western Asset Management Company Limited must be conducted at all times in accordance with the UCITS Regulations, the UCITS Notices and the investment policy of each Underlying Fund and are at all times subject to the supervision of the board of directors of the UCITS Corporations, FTIF and Western Asset LF.

(q) PwC, as auditor of each Underlying Fund is required to prepare an audited set of accounts for each Underlying Fund at least annually.

Investment by Funds in the Underlying Funds

23. The investment objective and strategies of each Fund are, or will be, disclosed in each Fund's prospectus or simplified prospectus and any Fund that invests in an Underlying Fund will be permitted to do so in accordance with its investment objectives and strategies.

24. In particular, the investment strategies of each Fund stipulate, or will stipulate, that the Fund may invest a portion of its assets in other investment funds, domestic and foreign, which will permit each Fund to invest in an Underlying Fund.

25. The prospectus or simplified prospectus of each Fund provides, or will provide, all disclosure mandated for investment funds investing in other investment funds.

26. There will be no duplication of management fees or incentive fees as a result of an investment by a Fund in an Underlying Fund.

27. The amount of loss that could result from an investment by a Fund in an Underlying Fund will be limited to the amount invested by the Fund in such Underlying Fund.

28. No sales charges or redemption fees will be paid by a Fund relating to a subscription for, or redemption of, securities of an Underlying Fund.

29. On February 13, 2009, the Filer was issued the First Decision and on February 21, 2012, the Filer was issued the Second Decision pursuant to which the list of funds permitted to invest in SICAV Funds was expanded to include all Funds that invest in global/international equities or in foreign fixed income securities and the eligible SICAV Funds were extended to include all equity and fixed income SICAV Funds.

30. On July 31, 2020, FRI announced the acquisition of Legg Mason, Inc., which includes Western Asset LF, and the Underlying Fund Manager subsequently became the manager of the UCITS Funds and the Western Asset UCITS Funds on February 1, 2021. On October 27, 2021, the Filer was issued the Third Decision to expand the list of Original Underlying Funds to include the UCITS Funds. As the Filer was still getting familiar with its newly acquired funds, it did not contemplate that the Funds may wish to invest in a Western Asset UCITS Fund. Such an investment is now contemplated. Accordingly, the Third Decision is no longer sufficient to cover the universe of Underlying Funds in which the Funds may wish to invest.

Rationale for Investment in the Underlying Fund

31. The Filer believes that it is in the best interests of the Funds that they be permitted to invest in the Underlying Funds, because such investment would provide an efficient and cost-effective way for the Funds to achieve diversification and obtain unique exposures to the markets in which the Underlying Funds invest.

32. The investment objectives and strategies of the Funds, which contemplate or will contemplate investment in global or international securities, permit or will permit the allocation of assets to global or international securities. As economic conditions change, the Funds may reallocate assets, including on the basis of asset class or geographic region. A Fund will invest in an Underlying Fund to gain exposure to certain unique strategies in global or international markets in circumstances where it would be in the best interests of the Fund to do so through an investment in an investment fund offered elsewhere rather than through investments in individual securities. For example, a Fund will invest in the Underlying Funds in circumstances where certain investment strategies preferred by the Funds are either not available or not cost effective to be implemented through investments in individual securities.

33. By investing in the Underlying Funds, the Funds will obtain the benefits of diversification, which would be more expensive and difficult to replicate using individual securities. This will reduce single issuer risk.

34. Investment by a Fund in an Underlying Fund meets, or will meet, the investment objectives of such Fund.

35. An investment by a Fund in securities of each Underlying Fund will represent the business judgement of responsible persons uninfluenced by considerations other than the best interests of the Fund.

36. Absent the Requested Relief, the investment restriction in paragraph 2.5(2)(a)(i) of NI 81-102 would prohibit a Fund that is a mutual fund from purchasing or holding securities of an Underlying Fund because the Underlying Fund is not subject to NI 81-102.

37. Absent the Requested Relief, the investment restriction in paragraph 2.5(2)(c) of NI 81-102 would prohibit a Fund that is a mutual fund from purchasing or holding securities of an Underlying Fund because the Underlying Fund is not a reporting issuer in the local jurisdiction.

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 Third Decision is hereby revoked and replaced with this Decision; and

(b) the Exemption Sought is granted provided that:

a. the Underlying Funds qualify as UCITS and are distributed in accordance with the UCITS Regulations, which subject the Underlying Funds to investment restrictions and practices that are substantially similar to those that govern the Funds;

b. the investment of the Funds in the Underlying Funds otherwise complies with section 2.5 of NI 81-102 when investing in the Underlying Funds, and the simplified prospectus will provide all applicable disclosure mandated for investment funds investing in other investment funds;

c. a Fund does not invest in an Underlying Fund if, immediately after the investment, more than 10% of its net assets, taken at market value at the time of the investment, would consist of investments in Underlying Funds; and

d. a Fund shall not acquire any additional securities of an Underlying Fund and shall dispose of any securities of an Underlying Fund then held in the event the regulatory regime applicable to the Underlying Funds is changed in any material way.

"Darren McKall"

Manager, Investment Funds & Structured Products

Ontario Securities Commission

Application File #: 2022/0121

SEDAR #: 3349580