[Federal Register Volume 77, Number 121 (Friday, June 22, 2012)]
[Notices]
[Pages 37718-37720]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-15262]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30105; 812-13900]


Franklin Advisers, Inc. and Franklin Templeton International 
Trust; Notice of Application

June 18, 2012.
AGENCY: Securities and Exchange Commission (the ``Commission'').

ACTION: Notice of an application for an order under section 6(c) of the 
Investment Company Act of 1940, as amended (the ``Act''), for an 
exemption from section 15(a) of the Act and rule 18f-2 under the Act.

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Summary of Application: Applicants request an order that would permit 
them to enter into and materially amend subadvisory agreements without 
shareholder approval.

Applicants: Franklin Advisers, Inc. (the ``Manager'') and Franklin 
Templeton International Trust (the ``Trust'').

DATES:  Filing Dates: The application was filed on May 4, 2011, and 
amended on December 28, 2011, and May 3, 2012.

Hearing or Notification of Hearing: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Commission's Secretary 
and serving applicants with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on July 16, 2012, and should be accompanied by proof of service on 
the applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicants: 
Franklin Advisers, Inc., One Franklin Parkway, San Mateo, California 
94403-1906.

FOR FURTHER INFORMATION CONTACT: Barbara T. Heussler, Senior Attorney, 
at (202) 551-6990, or Janet M. Grossnickle, Assistant Director, at 
(202) 551-6821 (Division of Investment Management, Office of Investment 
Company Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. The Trust, a Delaware statutory trust, is registered under the 
Act as an open-end management investment company that offers series of 
shares (each a ``Series''), each with their own distinct investment 
objectives, policies and restrictions.\1\ Franklin Advisers, Inc., a 
direct, wholly-owned subsidiary of Franklin Resources, is a California 
corporation registered with the Commission as an investment adviser 
under the Investment Advisers Act of 1940 (the ``Advisers Act'') and 
serves as investment manager to each Series pursuant to an investment 
advisory agreement with the Trust (each an ``Investment Advisory 
Agreement'' and together the ``Investment Advisory Agreements''). Any 
future Manager also will be registered with the Commission as an 
investment adviser under the Advisers Act. Franklin Resources is a 
global investment management organization operating as Franklin 
Templeton Investments and is engaged primarily, through various 
subsidiaries, in providing investment management, share distribution, 
transfer agent and administrative services to a family of registered 
funds. Each Investment Advisory Agreement has been or will be approved 
by the Trust's board of trustees (the ``Board''),\2\ including a 
majority of the trustees who are not ``interested persons,'' as defined 
in section 2(a)(19) of the Act, of the Trust or the Adviser (the 
``Independent Board Members''), and by the shareholders of the relevant 
Subadvised Fund in the manner required by sections 15(a) and 15(c) of 
the Act and rule 18f-2 thereunder.\3\
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    \1\ Applicants request that the relief apply to the Applicants, 
as well as to any existing or future series of the Trust and any 
other existing or future registered open-end management investment 
company or series thereof that: (a) Is advised by the Manager or 
another registered investment adviser or their successors that now 
or in the future is directly or indirectly wholly owned by Franklin 
Resources or its successors (included in the term ``Manager''); (b) 
uses the multi-manager structure described in the application (the 
``Multi-Manager Structure''); and (c) complies with the terms and 
conditions of the application (each a ``Subadvised Fund'' and 
collectively, the ``Subadvised Funds''). For the purposes of the 
requested order, ``successor'' is limited to an entity that results 
from a reorganization into another jurisdiction or a change in the 
type of business organization. The only existing registered open-end 
investment company that currently intends to rely on the requested 
order is named as an Applicant. Each Series that is or currently 
intends to be a Subadvised Fund and each Wholly-Owned Sub-Adviser to 
a Subadvised Fund that currently intends to rely on the requested 
order is identified in this application.
    \2\ The term ``Board'' also includes the board of trustees or 
directors of a future Subadvised Fund.
    \3\ Franklin Advisers, Inc. and other Managers will enter into 
investment advisory agreements with respect to future Subadvised 
Funds (any such agreement include in the term ``Investment Advisory 
Agreements'').
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    2. Under the terms of each Investment Advisory Agreement, the 
Manager, subject to oversight of the Board, furnishes a continuous 
investment program for each Series. The Manager periodically reviews 
each Series'

[[Page 37719]]

investment policies and strategies and based on the need of a 
particular Series may recommend changes to the investment policies and 
strategies of the Series for consideration by its Board. For its 
services to each Series, the Manager receives an investment advisory 
fee from that Series as specified in the applicable Investment Advisory 
Agreement.
    3. The terms of each Subadvised Fund's Investment Advisory 
Agreement permit the Manager, subject to the approval of the Board, 
including a majority of the Independent Board Members, and the 
shareholders of the applicable Subadvised Fund (if required by 
applicable law), to delegate portfolio management responsibilities of 
all or a portion of the assets of the Subadvised Fund to sub-advisers 
that are directly or indirectly wholly-owned, as defined in section 
2(a)(43) of the Act, by Franklin Resources (each, a ``Wholly-Owned Sub-
Adviser'') pursuant to an investment sub-advisory agreement (each, a 
``Sub-Advisory Agreement'').\4\ The Manager has overall responsibility 
for the management and investment of the assets of each Series, and 
with respect to each Subadvised Fund, the Manager's responsibilities 
include, recommending the removal or replacement of Wholly-Owned Sub-
Advisers, and determining the portion of that Subadvised Fund's assets 
to be managed by any given Wholly-Owned Sub-Adviser and reallocating 
those assets as necessary from time to time.\5\ Each existing Sub-
Advisory Agreement was approved by the Board, including a majority of 
the Independent Board Members and the shareholders of the applicable 
Subadvised Fund, in accordance with sections 15(a) and 15(c) under the 
Act and rule 18f-2 thereunder. The terms of each Sub-Advisory Agreement 
comply fully with the requirements of section 15(a) of the Act. The 
Wholly-Owned Sub-Advisers, subject to the supervision of the Manager 
and oversight of the Board, determine the securities and other 
instruments to be purchased, sold or entered into by a Subadvised 
Fund's portfolio and place orders with brokers or dealers that they 
select. The Manager is responsible for paying subadvisory fees to each 
Wholly-Owned Sub-Adviser out of the fee paid to the Manager under the 
relevant Investment Advisory Agreement.
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    \4\ The Manager has entered into Sub-Advisory Agreements with 
multiple Wholly-Owned Sub-Advisers to serve as sub-advisers to 
Franklin World Perspectives Fund and Franklin Templeton Global 
Allocation Fund.
    \5\ If the name of any Subadvised Fund contains the name of a 
Wholly-Owned Sub-Adviser, the name of the Manager that serves as the 
primary adviser to the Subadvised Fund, or a trademark or trade name 
owned by that Manager, will precede the name of the Wholly-Owned 
Sub-Adviser.
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    4. Applicants request an order to permit the Manager, subject to 
the approval of the Board, including a majority of the Independent 
Board Members, to take certain actions without obtaining shareholder 
approval: (i) Select Wholly-Owned Sub-Advisers to manage all or a 
portion of the assets of one or more of the Series pursuant to a Sub-
Advisory Agreement; and (ii) materially amend Sub-Advisory Agreements 
with the Wholly-Owned Sub-Advisers.\6\
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    \6\ The requested relief set forth in the Application will not 
extend to sub-advisers other than Wholly-Owned Sub-Advisers.
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Applicants' Legal Analysis

    1. Section 15(a) of the Act provides, in relevant part, that it is 
unlawful for any person to act as an investment adviser to a registered 
investment company except pursuant to a written contract that has been 
approved by the vote of a majority of the company's outstanding voting 
securities. Rule 18f-2 under the Act provides that each series or class 
of securities in a series investment company affected by a matter must 
approve that matter if the Act requires shareholder approval.
    2. Section 6(c) of the Act provides that the Commission may exempt 
any person, security, or transaction or any class or classes of 
persons, securities, or transactions from any provisions of the Act, or 
from any rule thereunder, if such exemption is necessary or appropriate 
in the public interest and consistent with the protection of investors 
and the purposes fairly intended by the policy and provisions of the 
Act. Applicants state that the relief sought with respect to Wholly-
Owned Sub-Advisers would be appropriate in the public interest and 
consistent with the protection of investors and the purposes fairly 
intended by the policy and provisions of the Act.
    3. Applicants assert that the shareholders expect the Manager, 
subject to the review and approval of the Board, to select the Wholly-
Owned Sub-Advisers who are best suited to achieve the Subadvised Fund's 
investment objective. Applicants assert that, from the perspective of 
the shareholder, the role of the Wholly-Owned Sub-Adviser is 
substantially equivalent to the role of the individual portfolio 
managers employed by an investment adviser to a traditional investment 
company. Applicants state that requiring shareholder approval of each 
Sub-Advisory Agreement would impose unnecessary delays and expenses on 
the Subadvised Funds and may preclude the Manager from acting promptly 
in a manner considered advisable by the Board. Applicants note that the 
Investment Advisory Agreement for each Subadvised Fund and sub-advisory 
agreements with sub-advisers other than Wholly-Owned Sub-Advisers, if 
any, will continue to be subject to the shareholder approval 
requirement of section 15(a) of the Act and rule 18f-2 thereunder the 
Act.
    4. Subadvised Funds will inform shareholders of the hiring of a new 
Wholly-Owned Sub-Adviser pursuant to the following procedures 
(``Modified Notice and Access Procedures''): (a) Within 90 days after a 
new Wholly-Owned Sub-Adviser is hired for any Subadvised Fund, that 
Subadvised Fund will send its shareholders either a Multi-manager 
Notice or a Multi-manager Notice and Multi-manager Information 
Statement; \7\ and (b) the Subadvised Fund will make the Multi-manager 
Information Statement available on the Web site identified in the 
Multi-manager Notice no later than when the Multi-manager Notice (or 
Multi-manager Notice and Multi-manager Information Statement) is first 
sent to shareholders, and will maintain it on that Web site for at 
least 90 days. In the circumstances described in this Application, a 
proxy solicitation to approve the appointment of new Wholly-Owned Sub-
Advisers provides no more meaningful information to shareholders than 
the proposed Multi-manager Information Statement. Moreover, as 
indicated above, the Board would comply with the requirements of 
Sections 15(a) and 15(c) of the Act before entering into or amending 
Sub-Advisory Agreements.
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    \7\ A ``Multi-manager Notice'' will be modeled on a Notice of 
Internet Availability as defined in rule 14a-16 under the Securities 
Exchange Act of 1934 (``Exchange Act''), and specifically will, 
among other things: (a) Summarize the relevant information regarding 
the new Wholly-Owned Sub-Adviser; (b) inform shareholders that the 
Multi-manager Information Statement is available on a Web site; (c) 
provide the Web site address; (d) state the time period during which 
the Multi-manager Information Statement will remain available on 
that Web site; (e) provide instructions for accessing and printing 
the Multi-manager Information Statement; and (f) instruct the 
shareholder that a paper or email copy of the Multi-manager 
Information Statement may be obtained, without charge, by contacting 
the Subadvised Funds.
    A ``Multi-manager Information Statement'' will meet the 
requirements of Regulation 14C, Schedule 14C and Item 22 of Schedule 
14A under the Exchange Act for an information statement. Multi-
manager Information Statements will be filed electronically with the 
Commission via the EDGAR system.

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Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Before a Subadvised Fund may rely on the requested order, the 
operation of the Subadvised Fund in the manner described in the 
application, will be approved by a majority of the Subadvised Fund's 
outstanding voting securities, as defined in the Act, or in the case of 
a Subadvised Fund whose public shareholders purchase shares on the 
basis of a prospectus containing the disclosure contemplated by 
condition 2 below, by the initial shareholder before such Subadvised 
Fund's shares are offered to the public.
    2. The prospectus for each Subadvised Fund will disclose the 
existence, substance, and effect of any order granted pursuant to the 
application. In addition, each Subadvised Fund will hold itself out to 
the public as employing the Multi-Manager Structure described in the 
application. The prospectus will prominently disclose that the Manager 
has the ultimate responsibility, subject to oversight by the Board, to 
oversee the Wholly-Owned Sub-Advisers and recommend their hiring, 
termination, and replacement.
    3. Subadvised Funds will inform shareholders of the hiring of a new 
Wholly-Owned Sub-Adviser within 90 days after the hiring of the new 
Wholly-Owned Sub-Adviser pursuant to the Modified Notice and Access 
Procedures.
    4. The Manager will not enter into a Sub-Advisory Agreement with 
any sub-adviser that is not a Wholly-Owned Sub-Adviser without that 
agreement, including the compensation to be paid thereunder, being 
approved by the shareholders of the applicable Subadvised Fund.
    5. At all times, at least a majority of the Board will be 
Independent Members, and the nomination of new or additional 
Independent Board Members will be placed within the discretion of the 
then-existing Independent Board Members.
    6. Whenever a sub-adviser change is proposed for a Subadvised Fund, 
the applicable Board, including a majority of the Independent Board 
Members, will make a separate finding, reflected in the applicable 
Board minutes, that such change is in the best interests of the 
Subadvised Fund and its shareholders, and does not involve a conflict 
of interest from which the Manager or any sub-adviser that is an 
affiliated person of the Manager derives an inappropriate advantage.
    7. The Manager will provide general management services to each 
Subadvised Fund, including overall supervisory responsibility for the 
general management and investment of each Subadvised Fund's assets and, 
subject to review and approval of the Board, will: (a) Set each 
Subadvised Fund's overall investment strategies; (b) evaluate, select 
and recommend Wholly-Owned Sub-Advisers to manage all or a portion of 
each Subadvised Fund's assets; (c) allocate and, when appropriate, 
reallocate each Subadvised Fund's assets among Wholly-Owned Sub-
Advisers; (d) monitor and evaluate the Wholly-Owned Sub-Advisers' 
performance; and (e) implement procedures reasonably designed to ensure 
that the Wholly-Owned Sub-Advisers comply with each Subadvised Fund's 
investment objective, policies and restrictions.
    8. No trustee or officer of the Trust or a Subadvised Fund, or 
director or officer of the Manager will own directly or indirectly 
(other than through a pooled investment vehicle that is not controlled 
by such person), any interest in a sub-adviser to a Subadvised Fund 
except for ownership of interests in the Manager or any entity, except 
a Wholly-Owned Sub-Adviser, that controls, is controlled by, or is 
under common control with the Manager.
    9. In the event the Commission adopts a rule under the Act 
providing substantially similar relief to that in the order requested 
in the application, the requested order will expire on the effective 
date of that rule.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-15262 Filed 6-21-12; 8:45 am]
BILLING CODE 8011-01-P