Franklin Templeton Investments Corp. et al.

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Terminating Funds for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) approving the mergers (the Mergers) of the Terminating Funds into the Continuing Funds (defined below) pursuant to paragraph 5.5(1)(b) of National Instrument 81-102 Investment Funds (NI 81-102) (the Approval 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 this application; and

(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut (collectively, the Passport Jurisdictions).

Interpretation

Terms defined 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:

Bond Fund Merger means the merger of Franklin Bissett Bond Corporate Class into Franklin Bissett Bond Fund;

Continuing Funds means Franklin Bissett Bond Fund, Franklin Bissett Canadian Short Term Bond Fund, Franklin Bissett Corporate Bond Fund and Templeton Global Bond Fund;

FTCCL means Franklin Templeton Corporate Class Ltd;

Funds means collectively, the Terminating Funds and the Continuing Funds, and Fund means any one of the Terminating Funds or the Continuing Funds;

IRC means the independent review committee for the Funds;

Tax Act means the Income Tax Act (Canada);

Yield Class means each of Templeton Global Bond Hedged Yield Class, Franklin Bissett Bond Yield Class, Franklin Bissett Canadian Short Term Bond Yield Class and Franklin Bissett Corporate Bond Yield Class; and

Yield Class Mergers means, collectively, the merger of (i) Templeton Global Bond Hedged Yield Class into Templeton Global Bond Fund; (ii) Franklin Bissett Bond Yield Class into Franklin Bissett Bond Fund; (iii) Franklin Bissett Canadian Short Term Bond Yield Class into Franklin Bissett Canadian Short Term Bond Fund; and (iv) Franklin Bissett Corporate Bond Yield Class into Franklin Bissett Corporate Bond Fund.

Representations

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

The Filer

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

2. The Filer is registered as an investment fund manager, portfolio manager, exempt market dealer and mutual fund dealer in the Jurisdiction and is registered as a portfolio manager, exempt market dealer and mutual fund dealer in each of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, Quebec, Saskatchewan and Yukon and as an investment fund manager in each of Alberta, British Columbia, Manitoba, Newfoundland and Labrador, Nova Scotia and Quebec.

3. The Filer is the investment fund manager of each of the Funds.

The Funds

4. FTCCL is an open-end mutual fund corporation incorporated under the laws of Alberta on June 1, 2001. Each of the Terminating Funds is a separate class of special shares of FTCCL.

5. Each of the Continuing Funds is a trust established under the laws of Ontario.

6. Securities of the Funds are currently qualified for sale by a simplified prospectus, annual information form and Fund Facts dated May 29, 2014, which have been filed and receipted in Ontario and each of the Passport Jurisdictions (collectively, the Jurisdictions).

7. Each of the Funds is a reporting issuer in the Jurisdictions.

8. Neither the Filer nor any Fund is in default under the securities legislation in the Jurisdictions.

9. Other than circumstances in which the securities regulatory authorities of the Jurisdictions has expressly exempted a Fund therefrom, each of the Funds follows the standard investment restrictions and practices established under NI 81-102.

Rationale for Mergers

10. The Terminating Funds, other than Franklin Bissett Bond Corporate Class, currently provide tax-efficient fixed income offerings by investing in different types of securities and entering into forward contracts to provide investment returns similar to those generated by certain reference funds that invest in fixed income securities (Reference Funds).

11. The favourable tax treatment of the above arrangements will be eliminated by new rules in the Tax Act, announced on March 21, 2013, that affect the tax treatment of returns earned under "derivative forward agreements".

12. As a result of this change in the Tax Act, the Filer has determined that it will no longer be possible to provide securityholders of the Terminating Funds with their desired exposure to their Reference Funds on a tax-advantaged basis and so the Filer proposes to effect the Mergers.

Approval of the Proposed Mergers

13. The Mergers will not constitute a material change for the Continuing Funds.

14. Securityholders of the Terminating Funds will be asked to approve the relevant Mergers at special meetings expected to be held on or about November 28, 2014.

15. The Filer, as the sole Class A common shareholder of FTCCL will approve the Mergers, as required under the Business Corporations Act (Alberta).

16. Subject to receipt of securityholder approval and the Approval Sought, the Mergers are expected to occur on or about December 12, 2014 (the Effective Date).

17. If securityholder approval is not received at the special meeting in respect of a Fund, then the relevant Merger will not proceed and the relevant Terminating Fund will be terminated on or about January 9, 2015.

Merger Steps

18. It is proposed that the following steps will be carried out to effect the Mergers:

(a) In respect of the proposed Bond Fund Merger:

(i) As the Terminating Fund's investment portfolio currently consists of units of its Continuing Fund, on the Effective Date, the Terminating Fund will redeem its outstanding shares and distribute the units of the Continuing Fund owned by the Terminating Fund to shareholders of the Terminating Fund, in exchange for all such shareholders' existing shares of the Terminating Fund, on a series-for-series and dollar-for-dollar basis; and

(ii) As soon as reasonably possible following the Merger, the articles of FTCCL will be amended to authorize the cancellation of the issued and unissued special shares of the Terminating Fund.

(b) In respect of the Yield Class Mergers:

(i) Each Terminating Fund's investment portfolio currently consists of a common share portfolio and forward contracts and may also include fixed income securities. Prior to the Effective Date, any fixed income securities held by a Terminating Fund will be liquidated for cash;

(ii) On or about December 2, 2014 (the Settlement Date), each Terminating Fund will settle the forward contract with its applicable counterparty (the Counterparty). The Counterparty will pay the settlement amount by redeeming its investment in the applicable Continuing Fund and directing the Continuing Fund to pay the redemption proceeds to the Terminating Fund. Each Terminating Fund will subscribe for units of its applicable Continuing Fund in an amount equal to the value of its assets less an amount required to satisfy the liabilities of the Terminating Fund and in payment thereof, the Terminating Fund will direct the Continuing Fund to use the amount owing to it from the Counterparty. The Terminating Fund will then deliver its common share portfolio to the Counterparty;

(iii) On the Effective Date, each Terminating Fund will use any remaining cash in its portfolio to subscribe for additional units of its applicable Continuing Fund and then each Terminating Fund will redeem its outstanding shares and distribute the units of the Continuing Fund held by the Terminating Fund to shareholders of the Terminating Fund, in exchange for all such shareholders' existing shares of the Terminating Fund, on a series-for-series and dollar-for-dollar basis, except for:

(1) Series R, S and T shares of Templeton Global Bond Hedged Yield Class, which will be exchanged for Series O, F and A units, respectively of Templeton Global Bond Fund, and

(2) Series T shares of Franklin Bissett Corporate Bond Yield Class, which will be exchanged for Series A units of Franklin Bissett Corporate Bond Fund; and

(iv) As soon as reasonably possible following the Mergers, the articles of FTCCL will be amended to authorize the cancellation of the issued and unissued special shares of each Terminating Fund.

19. As soon as reasonably possible following the Mergers, the Terminating Funds will be wound up and the Continuing Funds will continue as publically offered open-end mutual funds.

20. Costs and expenses associated with the Mergers, including the costs of the Meetings, will be borne by the Manager and will not be charged to the Funds. The costs of the Mergers include legal, printing, mailing and regulatory fees, as well as proxy solicitation costs.

Comparison of Terminating Funds and Continuing Funds

21. The Mergers satisfy all of the requirements for pre-approved reorganizations and transfers set out in section 5.6(1) of NI 81-102, except the requirement set out in subsection 5.6(1)(b) that the Mergers be "qualifying exchanges" within the meaning of section 132.2 of the Tax Act or tax-deferred transactions under subsections 85(1), 85.1(1), 86(1) or 87(1) of the Tax Act.

22. No sales charges will be payable by securityholders of the Funds in connection with the Mergers.

Securityholder Disclosure

23. A press release describing the proposed Mergers has been issued and the press release, material change report and amendments to the simplified prospectus, annual information form and Fund Facts, which give notice of the proposed Mergers, have been filed via SEDAR.

24. A notice of meeting, management information circular, proxy and Fund Facts of the applicable series of each Continuing Fund (the Meeting Materials) will be mailed to securityholders of each Terminating Fund commencing on or about November 4, 2014 and will be filed via SEDAR.

25. The Meeting Materials will contain a description of the proposed Mergers, information about the Terminating Funds and the Continuing Funds and income tax considerations for securityholders of the Terminating Funds. The Meeting Materials will also describe the various ways in which investors can obtain a copy of the simplified prospectus and annual information form of the Continuing Funds, as well as the most recent interim and annual financial statements and management reports of fund performance for the Continuing Funds.

Securityholder Purchases and Redemptions

26. Securityholders of each Terminating Fund will continue to have the right to redeem securities of the Terminating Fund for cash or switch into securities of another Franklin Templeton mutual fund (including on a tax-deferred basis to a fund that is a class of FTCCL) at any time up to the close of business on the business day immediately before the Effective Date of the applicable Merger.

27. The Terminating Funds are currently closed to investment, except Franklin Bissett Bond Corporate Class, which permits certain pre-authorized purchase plans only. The Terminating Funds will remain closed to all purchase-type transactions until they are merged with the Continuing Funds on the Effective Date, except for Franklin Bissett Bond Corporate Class which will continue to permit certain pre-authorized purchase plans until December 11, 2014. Systematic withdrawal programs shall remain unaffected until the business day immediately before the Effective Date of the applicable Merger.

28. Following the Mergers, all systematic programs that had been established with respect to the Terminating Funds will be re-established on a series-for-series basis in the applicable Continuing Funds (subject to the exceptions noted in paragraph 18(b)(iii) above), unless securityholders advise the Filer otherwise.

29. Securityholders may change or cancel any systematic program at any time and securityholders of the 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.

IRC Review

30. The Filer has presented the proposed Mergers to the IRC and has obtained a positive recommendation that each Merger, if implemented, would achieve a fair and reasonable result for the Funds.

31. A summary of the IRC's recommendation will be included in the notice of special meeting sent to securityholders of the Terminating Funds as required by subsection 5.1(2) of National Instrument 81-107 Independent Review Committee for Investment Funds.

Benefits of Mergers

32. The Filer believes that the Mergers will benefit securityholders of the Terminating Funds in the following ways:

(a) the proposed Mergers will facilitate an improved after-tax outcome for securityholders, especially after consideration of the other options of: (i) leaving securityholders in the soon to be ineffective Terminating Funds; or (ii) simply winding down the Terminating Funds;

(b) once the transitional arrangements for derivative forward agreements under the Tax Act cease to apply, there is no reasonably foreseeable reason why a securityholder would be better off in a Terminating Fund relative to its Continuing Fund, as securityholders will receive a fund with substantially similar investment objectives;

(c) management and administration fees will not increase and management expense ratios (MER) of each Continuing Fund will remain substantially the same as or, in some cases, be moderately lower than, the MER of its corresponding Terminating Fund; and

(d) the risk profile of each Continuing Fund is the same as that of its corresponding Terminating Fund, except for each Yield Class where, in addition, the risk and cost associated with the forward contracts is not borne by the Continuing Fund.

Reason for Approval Sought

33. Regulatory approval of the Mergers is required because the Mergers do not satisfy one of the criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102 in that the Mergers will not be implemented as "qualifying exchanges" within the meaning of section 132.2 of the Tax Act or as tax-deferred transactions under subsections 85(1), 85.1(1), 86(1) or 87(1) of the Tax Act.

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 Approval Sought is granted, provided that the Filer obtains the prior approval of the securityholders of the Terminating Funds for the Mergers at the special meetings held for that purpose, or any adjournments thereof.

"Raymond Chan"

Manager, Investment Funds and Structured Products

Ontario Securities Commission