Franklin Templeton Investments Corp. et al.
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief granted under section 62(5) of the Securities Act to permit extension of fund's prospectus lapse date by days to accommodate timing of a proposed fund merger -- no conditions.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5 as am., s. 62(5).
March 23, 2023
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 Filer) AND IN THE MATTER OF THE FUNDS LISTED IN SCHEDULE A (the Terminating ETFs)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer, on behalf of the Terminating ETFs for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) that the time limit for the renewal of the current prospectus of the Terminating ETFs dated May 17, 2022 (the Current ETF Prospectus) be extended to the time limit that would apply if the lapse date of the Current ETF Prospectus was July 21, 2023 (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 this application; and
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon by the Filer and the Terminating ETFs in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island, Québec, Saskatchewan and Yukon (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 decision, unless otherwise defined.
Continuing Funds means Franklin Bissett Core Plus Bond Fund, Franklin Bissett Corporate Bond Fund, Franklin Bissett Short Duration Bond Fund, Franklin Brandywine Global Sustainable Income Optimiser Fund, Franklin ClearBridge Sustainable Global Infrastructure Income Fund, Franklin ClearBridge Sustainable International Growth Fund, Franklin Global Growth Fund, Franklin Innovation Fund and Franklin Western Asset Core Plus Bond Fund.
ETF Facts means a prescribed summary disclosure document required pursuant to NI 41-101 in respect of one or more classes or series of ETF Securities being distributed under a prospectus.
ETF Securities means securities of an exchange-traded class or series of a Continuing Fund that are listed or will be listed on the TSX or another Marketplace, including the ETF Series (as defined below), and that will be distributed pursuant to a simplified prospectus prepared in accordance with NI 81-101 and Form 81-101F1.
Form 81-101F1 means Form 81-101F1 Contents of Simplified Prospectus.
Fund Facts means a prescribed summary disclosure document required pursuant to NI 81-101 in respect of one or more classes or series of Mutual Fund Securities being distributed under a prospectus.
Marketplace means a "marketplace" as defined in National Instrument 21-101 Marketplace Operation that is located in Canada.
Mutual Fund Securities means securities of a non-exchange-traded class or series of a Continuing Fund that are or will be distributed pursuant to a simplified prospectus prepared in accordance with NI 81-101 and Form 81-101F1.
NI 41-101 means National Instrument 41-101 General Prospectus Requirements.
NI 81-101 means National Instrument 81-101 Mutual Fund Prospectus Disclosure.
TSX means the Toronto Stock Exchange.
Representations
This decision is based on the following facts represented by the Filer:
The Filer
1. The Filer is a corporation amalgamated under the laws of Ontario, having its head office in Toronto, Ontario.
2. The Filer is registered as an investment fund manager in British Columbia, Alberta, Manitoba, Ontario, Québec, Nova Scotia and Newfoundland and Labrador, as a mutual fund dealer, portfolio manager and exempt market dealer in each province of Canada and the Yukon, and as a commodity trading manager in Ontario.
3. The Filer is the investment fund manager of each Terminating ETF. The Filer or an affiliate of the Filer is the portfolio manager of the Terminating ETFs.
4. The Filer is not in default of securities legislation in any of the Jurisdictions.
The Funds
5. Each Terminating ETF is a mutual fund established under the laws of a Jurisdiction. Each Terminating ETF is a reporting issuer in the Jurisdictions in which its securities are distributed.
6. Securities of each Terminating ETF are listed on the TSX and are qualified for sale in each of the Jurisdictions under a long form prospectus and ETF Facts dated May 17, 2022, as amended, each of which has been prepared in accordance with NI 41-101.
7. Pursuant to section 62(1) of Securities Act (Ontario) (the Act), the lapse date for the Current ETF Prospectus is May 17, 2023 (the Current Lapse Date). Accordingly, under section 62(2) of the Act, the distribution of securities of each of the Terminating ETFs would have to cease on the Current Lapse Date unless: (i) the Terminating ETFs file a pro forma prospectus at least 30 days prior to the Current Lapse Date; (ii) the final prospectus is filed no later than 10 days after the Current Lapse Date; and (iii) a receipt for the final prospectus is obtained within 20 days after the Current Lapse Date.
8. When the simplified prospectus of the Continuing Funds, each being a mutual fund that offers Mutual Fund Securities and intends to offer ETF Securities, is renewed on or about May 17, 2023, the Filer expects to file a preliminary and pro forma simplified prospectus (the 2023 Mutual Fund Prospectus) to qualify exchange-traded series (ETF Series) of each Continuing Fund, resulting in each Continuing Fund offering both Mutual Fund Securities and ETF Securities under the 2023 Mutual Fund Prospectus. The Filer proposes to merge (each, a Merger and collectively, the Mergers) each Terminating ETF into the ETF Series of the corresponding Continuing Fund on or about July 7, 2023 (the Merger Date).
9. Securities of each Continuing Fund are qualified for sale under a simplified prospectus, annual information form and Fund Facts dated May 27, 2022, as amended, each of which has been prepared in accordance with NI 81-101.
The Exemption Sought
10. If approved, the Mergers will not be effected until the Merger Date. If any Merger is not approved, each relevant Terminating ETF will be terminated and delisted from the TSX on or about July 14, 2023. The Filer is requesting the Exemption Sought to extend the Current Lapse Date for the Terminating ETFs to July 21, 2023. The Filer does not intend to extend the Current Lapse Date for the other exchange-traded funds offered under the Current ETF Prospectus and will instead renew those funds in accordance with the timing required by section 62(2) of the Act.
11. The Exemption Sought will allow the Filer to avoid incurring unnecessary costs and any confusion that may result from renewing the Terminating ETFs under the Current ETF Prospectus, offering the ETF Series of the Continuing Funds under the 2023 Mutual Fund Prospectus and later merging the Terminating ETFs into the ETF Series of the Continuing Funds or terminating the Terminating ETFs, as the case may be.
12. There have been no material changes in the affairs of each Terminating ETF since the date of the Current ETF Prospectus. Accordingly, the Current ETF Prospectus and current ETF Facts of each Terminating ETF represent current information regarding the applicable Terminating ETF.
13. Given the disclosure obligations of the Filer and the Terminating ETFs, should any material change in the business, operations or affairs of the Terminating ETFs occur, the Current ETF Prospectus and the current ETF Facts of the Terminating ETFs will be amended as required under the Legislation.
14. New investors in the Terminating ETFs will receive the most recently filed ETF Facts of the applicable Terminating ETF up to the Merger Date and thereafter will receive the most recently filed ETF Facts of the ETF Series of the corresponding Continuing Fund. In addition, the Current ETF Prospectus will still be available upon request until it is renewed.
15. The Exemption Sought will not affect the accuracy of the information contained in the Current ETF Prospectus and the current ETF Facts of each Terminating ETF and therefore will not be prejudicial to the public interest.
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.
"Darren McKall"
Investment Funds and Structured Products
Ontario Securities Commission
Application File #: 2023/0064
SEDAR File #: 3488507
SCHEDULE "A"
The Terminating ETFs
Franklin Bissett Core Plus Bond Active ETF
Franklin Bissett Corporate Bond Active ETF
Franklin Bissett Short Duration Bond Active ETF
Franklin Brandywine Global Sustainable Income Optimiser Active ETF
Franklin ClearBridge Sustainable Global Infrastructure Income Active ETF
Franklin ClearBridge Sustainable International Growth Active ETF
Franklin Global Growth Active ETF
Franklin Innovation Active ETF
Franklin Western Asset Core Plus Bond Active ETF