Securities Law & Instruments

Headnote

NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval of mutual fund mergers -- approval required because mergers do not meet the criteria for pre-approval -- certain mergers have differences in investment objectives and fee structures -- certain mergers not a "qualifying exchange" or a tax-deferred transaction under Income Tax Act -- securityholders of terminating funds provided with timely and adequate disclosure regarding the mergers.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 5.5(1)(b, 5.6.

July 6, 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.

("Invesco Trimark")

AND

IN THE MATTER OF

INVESCO TRIMARK CORE AMERICAN EQUITY CLASS,

TRIMARK GLOBAL TECHNOLOGY CLASS,

TRIMARK GLOBAL TECHNOLOGY FUND AND

TRIMARK DISCOVERY FUND

(collectively, the "Terminating Funds")

AND

INVESCO TRIMARK CORE GLOBAL EQUITY CLASS,

TRIMARK U.S. COMPANIES CLASS AND

TRIMARK U.S. COMPANIES FUND

(collectively, the "Continuing Funds")

 

DECISION

Background

The principal regulator in the Jurisdiction has received an application from Invesco Trimark on behalf of the Terminating Funds for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") for approval under subsection 5.5(1)(b) of National Instrument 81-102 Mutual Funds ("NI 81-102") to merge each Terminating Fund into the Continuing Fund opposite its name below (the "Proposed Mergers").

Terminating Fund
Continuing Fund
 
Invesco Trimark Core
Invesco Trimark
American Equity
Core Global Equity
Class
Class
 
Trimark Global
Trimark U.S.
Technology Class
Companies Class
 
Trimark Global
Trimark U.S.
Technology Fund
Companies Fund
 
Trimark Discovery
Trimark U.S.
Fund
Companies Fund

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) Invesco Trimark 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 all of the other provinces and territories of Canada.

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.

Representations

This decision is based on the following facts represented by Invesco Trimark:

1. Invesco Trimark is a corporation amalgamated under the laws of Ontario. Invesco Trimark is an indirect wholly-owned subsidiary of Invesco Ltd., a global investment manager, and is not in default of securities legislation in any jurisdiction. The head office of Invesco Trimark is located in Toronto, Ontario.

2. Invesco Trimark is the manager of each of the Terminating Funds and the Continuing Funds (the "Funds") and is the trustee of each of the Funds except for Invesco Trimark Core American Equity Class, Trimark Global Technology Class, Invesco Trimark Core Global Equity Class and Trimark U.S. Companies Class (the "Classes").

3. Each of the Classes is a separate class of AIM Trimark Corporate Class Inc., a mutual fund corporation incorporated by articles of incorporation under the laws of Ontario on October 4, 1994.

4. Each of the Funds, other than the Classes, is an open-end mutual fund trust established under the laws of Ontario by a declaration of trust.

5. Securities of the Funds are currently qualified for sale by a simplified prospectus and annual information form dated August 11, 2008, as amended, which have been filed and receipted in all of the provinces and territories of Canada.

6. Each of the Funds is a reporting issuer under applicable securities legislation of each province and territory of Canada and is not on the list of defaulting reporting issuers maintained under the applicable securities legislation of any of the provinces and territories of Canada.

7. Other than circumstances in which the securities regulatory authority of a province or territory of Canada has expressly exempted a Fund therefrom, each of the Funds follows the standard investment restrictions and practices established by NI 81-102.

8. The net asset value for each series of the Funds is calculated on a daily basis on each day that The Toronto Stock Exchange is open for trading.

9. Pre-approval of the Proposed Mergers under section 5.6 of NI 81-102 is not available as a reasonable person would not consider the fundamental investment objectives of the relevant Terminating Fund and Continuing Fund in each Proposed Merger to be substantially similar.

10. In the case of the Proposed Mergers of Trimark Global Technology Fund into Trimark U.S. Companies Fund and Trimark Discovery Fund into Trimark U.S. Companies Fund (collectively, the "Trust into Trust Mergers"), pre-approval under section 5.6 of NI 81-102 is not available as these Trust into Trust Mergers will be done on a taxable basis.

11. The Proposed Merger of Invesco Trimark Core American Equity Class, which has a management and advisory fee of 1.5%, into Invesco Trimark Core Global Equity Class, which has a management and advisory fee of 2.0%, involves two funds with fee structures that a reasonable person would not consider to be substantially similar, making pre-approval under section 5.6 of NI 81-102 unavailable for this Proposed Merger.

12. In the case of the Proposed Mergers of Invesco Trimark Core American Equity Class into Invesco Trimark Core Global Equity Class and Trimark Global Technology Class into Trimark U.S. Companies Class (collectively, the "Class into Class Mergers"), Invesco Trimark will be seeking the approval of securityholders of each of the two Terminating Funds pursuant to subsection 5.1(f) of NI 81-102. In addition, Invesco Trimark will be seeking the approval of securityholders of AIM Trimark Corporate Class Inc. as a whole and securityholders of each of the two relevant Continuing Funds as a separate Class pursuant to the Business Corporations Act (Ontario).

13. In the case of the Trust into Trust Mergers, Invesco Trimark will be seeking the approval of securityholders of each of the Terminating Funds pursuant to subsection 5.1(f) of NI 81-102. The approval of the securityholders of the Continuing Funds is not required.

14. Except as described above, the Proposed Mergers meet all of the other criteria for pre-approved reorganizations and transfers under section 5.6 of NI 81-102.

15. Pursuant to the Proposed Mergers, securityholders will receive securities in the same series of the applicable Continuing Fund as they currently own in the Terminating Fund.

16. No sales charges will be payable in connection with the acquisition by a Continuing Fund of the investment portfolio of the applicable Terminating Fund.

17. The portfolios and other assets of the Terminating Funds to be acquired by the applicable Continuing Fund arising from the Proposed Mergers are currently, or will be, acceptable, prior to the effective date of the Proposed Mergers, to the portfolio advisers of the applicable Continuing Fund and are or will be consistent with the investment objectives of the applicable Continuing Fund.

18. Material change reports and press releases were filed via SEDAR on May 6, 2009 with respect to the Proposed Mergers, and amendments to the simplified prospectus and annual information form of the Funds were filed via SEDAR on May 7, 2009.

19. Notices of Meeting, Management Information Circulars and Proxies in connection with meetings of securityholders were filed via SEDAR on June 24, 2009 and will be mailed to securityholders of the Terminating Funds. The Management Information Circulars contain disclosure of the management fees of the Continuing Funds. Securityholders of the Terminating Funds will be asked to approve the Proposed Mergers at meetings to be held on July 30, 2009.

20. As required by the Business Corporations Act (Ontario), securityholders of Invesco Trimark Core Global Equity Class, Trimark U.S. Companies Class and AIM Trimark Corporate Class Inc. will also be mailed the Notices of Meetings, Management Information Circulars and Proxies in connection with the meetings of securityholders, and asked to approve the Proposed Mergers at meetings to be held on July 30, 2009.

21. On June 1, 2004, in connection with a prior fund merger, Invesco Trimark received exemptions from the requirement to deliver:

(a) the current simplified prospectus of the continuing fund to securityholders of terminating funds in connection with all future mergers of mutual funds managed by Invesco Trimark (the "Future Mergers") pursuant to paragraph 5.6(1)(f)(ii) of NI 81-102; and

(b) the most recent annual and interim financial statements of the continuing fund to securityholders of the terminating funds in connection with all Future Mergers pursuant to paragraph 5.6(1)(f)(ii) of NI 81-102.

(The relief outlined in (a) and (b) are collectively referred to as the "Prospectus and Financial Statement Delivery Relief".)

22. In accordance with the Prospectus and Financial Statement Delivery Relief, the material that will be sent to securityholders of the Terminating Funds will include a tailored simplified prospectus consisting of:

(a) the current Part A of the simplified prospectus of the applicable Continuing Fund, and

(b) the current Part B of the simplified prospectus of the applicable Continuing Fund.

23. In accordance with the Prospectus and Financial Statement Delivery Relief:

(a) the management information circular that will be sent to securityholders provides sufficient information about the relevant Proposed Merger to permit securityholders to make an informed decision about the Proposed Merger;

(b) the management information circular that will be sent to securityholders with respect to the relevant Proposed Merger prominently discloses that securityholders can obtain the most recent interim and annual financial statements of the applicable Continuing Fund by accessing the SEDAR website at www.sedar.com, by accessing Invesco Trimark's website, by calling Invesco Trimark's toll-free telephone number servicing securityholders both in English and French, or by faxing a request to Invesco Trimark;

(c) upon request by a securityholder for financial statements, Invesco Trimark will make best efforts to provide the securityholder with financial statements of the applicable Continuing Fund in a timely manner so that the securityholder can make an informed decision regarding the relevant Proposed Merger; and

(d) each Terminating Fund and Continuing Fund has an unqualified audit report in respect of its last completed financial period.

24. Securityholders of a Terminating Fund will continue to have the right to redeem securities of the Terminating Fund for cash at any time up to the close of business on the effective date of the Proposed Mergers.

25. The management information circular to be mailed to securityholders of the Terminating Funds discloses that securities of the Continuing Funds acquired by securityholders upon the Proposed Mergers are subject to the same redemption charges, to which their securities of the Terminating Funds were subject prior to the Proposed Merger. The management information circular also states that any redemption fees payable in connection with units purchased under the deferred sales charge option when unitholders redeem units of the Terminating Fund will apply.

26. The Independent Review Committee of the Funds provided a positive recommendation with respect to the Proposed Mergers and such recommendation is included in the management information circular to be mailed to securityholders of the Terminating Funds.

27. The Class into Class Mergers will each be a tax deferred transaction under subsection 86(1) of the Income Tax Act. The Trust into Trust Mergers will be taxable transactions and will not be qualifying exchanges.

28. Securityholders of the Terminating Funds will be provided with information about the differences between the Terminating Funds and the Continuing Funds as well as the tax implications of the Proposed Mergers in the management information circular, so that the securityholders of the Terminating Funds may consider this information before voting on the Proposed Mergers.

29. Invesco Trimark will pay for the costs of the Proposed Mergers. These costs consist mainly of brokerage charges associated with the trades that occur both before and after the date of the Proposed Mergers and legal, proxy solicitation, printing, mailing and regulatory fees.

30. Each Terminating Fund is expected to merge into the applicable Continuing Fund on or about the close of business on August 14, 2009 and the Continuing Funds will continue as publicly offered open-end mutual funds governed by the laws of Ontario.

31. The Class into Class Mergers will be structured as follows:

(a) Invesco Trimark anticipates that there will be a period of approximately 2 to 3 weeks between the investor meetings at which the investors will vote on the Class into Class Mergers and the implementation of the Class into Class Mergers which receive all necessary approvals. If all necessary approvals are obtained, prior to the date of the Class into Class Mergers, each of the two Terminating Funds will liquidate all of the assets in its portfolio that the portfolio manager(s) of the relevant Continuing Fund do not wish to have in that Continuing Fund, and may hold the proceeds in cash, money market instruments, securities of affiliated money market funds, bonds or other debt securities. Accordingly, the Terminating Funds may not be fully invested in accordance with their investment objectives for this brief period of time prior to its Class into Class Merger;

(b) each of the two Terminating Funds will satisfy or otherwise make provisions for any liabilities attributable to it out of the assets attributable to it;

(c) the value of the underlying portfolio of assets attributable to each of these two Terminating Funds will be determined at the close of business on the effective date of the articles of amendment of AIM Trimark Corporate Class Inc. that change the shares of each of these two Terminating Funds to shares of the relevant Continuing Fund;

(d) all of the issued and outstanding shares of each of these two Terminating Funds will be changed into shares of the relevant Continuing Fund on a dollar-for-dollar and series-by-series basis and distributed to the shareholders of the relevant Terminating Fund;

(e) the shares of the Continuing Fund received by each shareholder of the relevant Terminating Fund will have the same aggregate net asset value as the shares of the Terminating Funds held by that shareholder on the effective date of the relevant Class into Class Merger;

(f) the aggregate net asset value of all of the shares of a Continuing Fund received by all shareholders of the relevant Terminating Fund will equal the value of the portfolio and other assets attributable to that Terminating Fund, and the shares of the Continuing Fund will be issued at the applicable series net asset value per share of the relevant Continuing Fund as of the close of business on the effective date of the relevant Class into Class Merger;

(g) the underlying portfolio of assets attributable to each of these two Terminating Funds will be included in the underlying portfolio of assets attributable to the relevant Continuing Fund; and

(h) as soon as reasonably possible, the shares of each of these two Terminating Funds will be cancelled.

32. The Trust into Trust Mergers will be structured as follows:

(a) Invesco Trimark anticipates that there will be a period of approximately 2 to 3 weeks between the investor meetings at which the investors will vote on the Trust into Trust Mergers and the implementation of the Trust into Trust Mergers which receive all necessary approvals. If all necessary approvals are obtained, prior to the date of the Trust into Trust Mergers, each of the two Terminating Funds will liquidate all of the assets in its portfolio that the portfolio manager of Trimark U.S. Companies Fund does not wish to have in Trimark U.S. Companies Fund, and may hold the proceeds in cash, money market instruments, securities of affiliated money market funds, bonds or other debt securities. As a result, the Terminating Funds may not be fully invested in accordance with their investment objectives for this brief period of time prior to its Trust into Trust Merger;

(b) the value of each Terminating Funds' portfolio and other assets will be determined at the close of business on the effective date of the Trust into Trust Mergers in accordance with the Terminating Funds' declaration of trust;

(c) Trimark U.S. Companies Fund will acquire the investment portfolio and other assets of each Terminating Fund in exchange for units of Trimark U.S. Companies Fund;

(d) Trimark U.S. Companies Fund will not assume the liabilities of the Terminating Funds, and each Terminating Fund will retain sufficient assets to satisfy its estimated liabilities, if any, as of the date of the Proposed Mergers;

(e) the units of Trimark U.S. Companies Fund received by each unitholder of a Terminating Fund will have the same aggregate net asset value as the shares of that Terminating Fund held by that unitholder on the effective date of the relevant Trust into Trust Merger,

(f) the aggregate net asset value of all of the units of Trimark U.S. Companies Fund received by all unitholders of each Terminating Fund will equal the value of the portfolio and other assets attributable to that Terminating Fund, and the units of Trimark U.S. Companies Fund will be issued at the applicable series net asset value per unit as of the close of business on the effective date of the relevant Trust into Trust Merger;

(g) immediately thereafter, the units of the Continuing Fund received by the relevant Terminating Fund will be distributed to unitholders of the Terminating Fund on a dollar-for-dollar and series-by-series basis in exchange for their units in the Terminating Fund; and

(h) as soon as reasonably possible following the Proposed Mergers the Terminating Funds will be wound up.

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 Proposed Mergers are approved.

"Darren McKall"
Assistant Manager, Investment Funds
Ontario Securities Commission