Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted to allow five global balanced funds to invest more than 10 percent of net assets in debt securities issued by a foreign government or supranational agency, subject to certain condition -- National Instrument 81-102 Mutual Funds.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 2.1(1) and 19.1.

November 13, 2009

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

INVESCO TRIMARK LTD.

(the "Filer")

AND

IN THE MATTER OF

AIM GLOBAL BALANCED FUND,

TRIMARK GLOBAL BALANCED FUND,

TRIMARK GLOBAL BALANCED CLASS,

TRIMARK WORLD BALANCED PRIVATE POOL,

TRIMARK WORLD BALANCED PRIVATE POOL --

CURRENCY NEUTRAL (THE "FUNDS")

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") for an exemption pursuant to section 19.1 of National Instrument 81-102 -- Mutual Funds ("NI 81-102") from subsection 2.1(1) (the "Concentration Restriction"), which prohibits a mutual fund from investing more than 10% of the net assets of the fund, taken at market value at the time of the transaction, in the securities of any issuer (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 in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon Territories, Nunavut and the Northwest Territories.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning in this decision unless otherwise defined.

Representations

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

1. The Filer is an Ontario corporation and is registered with the OSC as an adviser in the category of portfolio manager. The Filer acts as the manager to each of the Funds.

2. Each of the Funds is an investment fund whose securities are offered by simplified prospectus and annual information form filed in accordance with National Instrument 81-101 -- Mutual Fund Prospectus Disclosure. Each Fund is a reporting issuer and is not in default of securities legislation in any of the jurisdictions of Canada.

3. The Funds that are the subject of the application can be broadly categorized as global balanced funds and their investment objectives and strategies are described below:

(a) AIM Global Balanced Fund seeks to provide capital growth and income over the long-term by investing primarily in equities and high-quality fixed-income securities issued by governments or corporations, anywhere in the world. In pursuit of this objective, the equity portion of the Fund is focused primarily on identifying quality companies that have experienced, or exhibit the potential for, accelerating or above average earnings growth. For the fixed-income portion, the Fund looks for total return opportunities based on a combination of income, interest rate movements, currency movements, the overall credit environment, and the credit outlook for specific issuers. The Fund invests on average, approximately 60% of its non-cash assets in equities and 40% in fixed income securities.

(b) Trimark Global Balanced Fund seeks to provide a high total investment return through a combination of income and strong capital growth. The Fund holds a balanced portfolio of equities, convertible and fixed-income securities issued by governments -federal, provincial or municipal - or corporations, anywhere in the world. In its investment strategies, the focus is on a balanced portfolio that emphasizes:

    • Common shares of established companies that have the potential for future growth

    • Convertible securities of growing companies

    • Fixed-income securities issued by governments and corporations anywhere in the world.

(c) Trimark Global Balanced Class seeks to provide a high total investment return through a combination of income and strong capital growth. The Class holds a balanced portfolio of equities, convertible and fixed-income securities issued by governments -federal, provincial or municipal - or corporations, anywhere in the world. In its investment strategies, the focus is on a balanced portfolio that emphasizes:

    • Common shares of established companies that have the potential for future growth

    • Convertible securities of growing companies

    • Fixed-income securities issued by governments and corporations anywhere in the world.

(d) Trimark World Balanced Private Pool seeks to provide a high total investment return through a combination of income and long-term capital growth. The Private Pool holds a balanced portfolio consisting primarily of equity, convertible and fixed-income securities issued by governments --federal, provincial or municipal -- or corporations located anywhere in the world. In its investment strategies, the focus is on a balanced portfolio that emphasizes:

    • Common shares of established companies that have the potential for future growth

    • Convertible securities of growing companies

    • Fixed-income securities issued by governments and corporations anywhere in the world.

(e) Trimark World Balanced Private Pool -- Currency Neutral seeks to provide a high total investment return through a combination of income and long-term capital growth, while seeking to reduce the exposure to fluctuations between foreign currencies and the Canadian dollar. The Private Pool holds a balanced portfolio consisting primarily of equity, convertible and fixed-income securities issued by governments -- federal, provincial or municipal -- or corporations located anywhere in the world. The Private Pool employs investment strategies similar to those of the Trimark World Balanced Private Pool, but also employs strategies to seek to hedge against fluctuations between foreign currencies and the Canadian dollar. To achieve these objectives, the portfolio management team focuses on a balanced portfolio that emphasizes:

    • Common shares of established companies that have the potential for future growth

    • Convertible securities of growing companies

    • Fixed-income securities issued by governments and corporations anywhere in the world.

4. The Funds seek to achieve their objectives through strategies that include, but are not limited to, investing a portion of fund assets in fixed income securities.

5. The Concentration Restriction prevents a Fund from purchasing a security of an issuer or entering into a specified derivatives transaction if, immediately after the transaction, more than 10 per cent of the net assets of the Fund would be invested in the securities of any issuer.

6. The Concentration Restriction does not apply to a purchase of a "government security" which, under NI 81-102, means an evidence of indebtedness issued, or fully and unconditionally guaranteed as to principal and interest, by any of the government of Canada, the government of a jurisdiction or the government of the United States of America.

7. The Filer believes that the risk and liquidity characteristics of the sovereign debt and debt of supranational agencies proposed to be eligible to be acquired by the Funds are similar to the risk and liquidity characteristics of government securities as defined in NI 81-102. As such, the Filer believes that a limited increase in the maximum percentage of net assets of a Fund that can be invested in the sovereign and supranational agency debt referred to above will not result in a material increase in risks to the Funds.

8. By relaxing the limitations in the Concentration Restriction, the relief sought in this Application will enhance the ability of the Funds to pursue and achieve their investment objectives.

9. The Filer believes that relief requested in this Application is not contrary to the public interest, is in the best interests of the Funds and represents the business judgment of responsible persons uninfluenced by considerations other than the best interests of the Funds.

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 provided that:

(a) each Fund may only invest up to:

(i) 35 percent of the proportion of its net assets then invested in evidences of indebtedness, taken at market value at the time of purchase, in evidences of indebtedness of any one issuer if those evidences of indebtedness are issued, or guaranteed fully as to principal and interest, by supranational agencies (as defined in NI 81-102) or governments other than the government of Canada, the government of a jurisdiction, or the government of the United States of America and are rated "AAA" by Standard & Poor's, or have an equivalent rating by one or more other approved credit rating organizations; and

(ii) 20 percent of the proportion of its net assets then invested in evidences of indebtedness, taken at market value at the time of purchase, in evidences of indebtedness of any one issuer if those evidences of indebtedness are issued, or guaranteed fully as to principal and interest, by supranational agencies (as defined in NI 81-102) or governments other than the government of Canada, the government of a jurisdiction, or the government of the United States of America and are rated "AA" by Standard & Poor's, or have an equivalent rating by one or more other approved credit rating organizations.

(b) subparagraphs (i) and (ii) above shall not be combined for any one issuer;

(c) the securities that are purchased pursuant to this Decision are traded on a mature and liquid market;

(d) the acquisition of the securities purchased pursuant to this Decision is consistent with the fundamental investment objectives of each Fund;

(e) the simplified prospectus of the Fund discloses any additional risks associated with the concentration of the net assets of the Fund in securities of fewer issuers, such as the potential additional exposure to the risk of default of the issuer in which the Fund has so invested and the risks, including foreign exchange risks, of investing in the country in which that issuer is located; and

(f) the simplified prospectus of each Fund discloses, in the investment strategy section, the details of the Exemption Sought along with the conditions imposed and the type of securities covered by this Decision.

"Rhonda Goldberg"
Manager, Investment Funds Branch
ONTARIO SECURITIES COMMISSION