Fidelity Investments Canada ULC et al.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions: Relief granted to existing mutual funds subject to NI 81-102 and future mutual funds subject to NI 81-102 to permit the funds to purchase long-term debt securities of a related entity under primary and secondary offerings of the related entity -- certain purchases may be debt securities of product linked shareholders invested in the funds for hedging purposes -- securities purchase agreements must specify that investments by product linked shareholders in the funds are made only for hedging purposes and that the product linked shareholder will fully abstain from voting securities of the fund -- relief subject to conditions including IRC approval, pricing requirements and limits on the amount of securities offered in the primary offering the applicant funds can purchase.

Applicable Legislative Provisions

Securities Act (Ontario), ss. 111(2)(a), 111(2)(c)(ii), 111(3), 113.

July 12, 2011

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

FIDELITY INVESTMENTS CANADA ULC (Fidelity),

FIDELITY CORPORATE BOND FUND (CB Fund),

FIDELITY CANADIAN ASSET ALLOCATION FUND

(CAA Fund) (CB Fund and CAA Fund are,

collectively, the Present Funds),

AND

THE FIDELITY FUNDS (defined below)

(Fidelity, the Present Funds and the Fidelity Funds

are, collectively, the Filers)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filers on behalf of the Present Funds and all other mutual funds now or in the future managed by Fidelity (the Fidelity Funds, and collectively with the Present Funds, the Funds, each, a Fund) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for relief from:

(a) the prohibition in the Legislation of the Jurisdiction (the Related Shareholder Relief) that prohibits a mutual fund from making or holding an investment in any person or company who is a substantial security holder of the mutual fund, its management company or distribution company (each, a Related Shareholder); and

(b) the prohibition in the Legislation of the Jurisdiction (the Related Party Relief) that prohibits a mutual fund from making or holding an investment in an issuer in which a Related Shareholder has a significant interest (each, a Related Party).

(items (a) and (b) are, collectively, 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) in respect of the Related Shareholder Relief and the Related Party Relief, the Filers have 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, New Brunswick, Nova Scotia and Newfoundland and Labrador (the Passport Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions, MI 11-102, National Instrument 81-102 -- Mutual Funds (NI 81-102), National Instrument 81-107 -- Independent Review Committee for Investment Funds (NI 81-107) and National Instrument 31-103 -- Registration Requirements and Exemptions have the same meaning if used in this decision, unless otherwise defined.

In this decision, the following additional terms have the following meanings:

Related Person means a Related Shareholder or a Related Party, depending on the provision that is being considered.

Product Linked Shareholder means any Canadian financial institution or other corporate entity that holds securities of a Fund as a result of, or in connection with, one or more investment products that are linked to the performance of the Fund.

Representations

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

1. Fidelity is or will be the investment fund manager of each of the Funds. Fidelity is registered as an investment fund manager, portfolio manager and mutual fund dealer in each of the provinces and territories of Canada and is registered under the Commodity Futures Act (Ontario) in the category of commodity trading manager.

2. Fidelity or an affiliate is or will be the portfolio adviser to the Funds.

3. The Filers are not in default of securities legislation in the Jurisdiction or any Passport Jurisdiction except for the inadvertent purchase by each Present Fund of debt securities of a Related Shareholder. In the case of CB Fund, a Canadian financial institution has elected, at its discretion, to invest in units of CB Fund in order to hedge its obligation under a forward contract that it has entered into with another mutual fund managed by Fidelity, which forward contract is based on units of CB Fund. As a result of such investment, the Canadian financial institution became a Related Shareholder of CB Fund. CB Fund, in accordance with its investment objective and strategies, has purchased debt securities of this Canadian financial institution and/or its affiliates. In the case of CAA Fund, a corporate entity has invested in units CAA Fund in order to hedge its obligations in connection with a segregated fund offered by this entity, which segregated fund is based on the performance of CAA Fund. As a result of such investment, this corporate entity became a Related Shareholder of CAA Fund. CAA Fund, in accordance with its investment objective and strategies, has purchased debt securities of this corporate entity. As soon as Fidelity realized that each Present Fund held debt securities of a Related Shareholder, it reported the breach to its independent review committee (IRC) and applied for the Exemption Sought as expeditiously as possible.

4. The securities of each of the Funds are or will be qualified for distribution pursuant to simplified prospectuses and annual information forms that have been or will be prepared and filed in accordance with the securities legislation of each of the Jurisdiction and the Passport Jurisdictions.

5. Each of the Funds is or will be a reporting issuer in one or more of the Jurisdiction and the Passport Jurisdictions.

6. The investment strategies of each of the Funds that relies or will rely on the Exemption Sought permit or will permit the Fund to invest in the securities purchased.

7. Fidelity has established or will establish an IRC in respect of each Fund in accordance with the requirements of NI 81-107.

8. The purchase of securities of Related Persons by a Fund will be referred to the IRC of such Fund under section 5.1 of NI 81-107.

9. The IRC of the Fund will comply with section 4.5 of NI 81-107 in connection with any instance that it becomes aware that the Fund did not comply with any of the conditions of this decision.

10. Section 6.2 of NI 81-107 provides an exemption from the prohibitions comprising the Exemption Sought in respect of purchasing securities that are listed and traded on an exchange.

11. However, section 6.2 of NI 81-107 does not permit a Fund to purchase debt securities issued by a Related Person, as most debt securities issued by a Related Person are not listed or traded on an exchange. As a result, at any given point in time, each Fund is or will be restricted from purchasing and holding non-exchange-traded debt securities of any issuer that is a Related Person at that time (Debt Securities).

12. A Fund may wish to purchase Debt Securities in the two circumstances described below.

Investment Products Linked to the Performance of an Underlying Fund

(a) The Present Funds have, and each Fund may have, investors that include Product Linked Shareholders. In many cases, the Product Linked Shareholder has invested, or will invest, in securities of the Fund in order to hedge its obligations in respect of one or more other investment products whose performance is in some way based on the performance of the Fund. Examples of investment products that are linked to the performance of an underlying fund include, without limitation, segregated funds offered by insurance companies, fund-linked notes issued by banks and tax-efficient mutual funds. Depending upon the size of the other investment products and, therefore, the size of the hedge required by the Product Linked Shareholder, the Product Linked Shareholder may become a Related Shareholder of the Fund. In accordance with its investment objective and strategies, each Fund may want to invest in Debt Securities of one or more of its Product Linked Shareholders.

(b) As described in paragraph 3 above, each of the Present Funds has, as at the date hereof, a Related Shareholder that holds units of the applicable Present Fund and each of the Present Funds holds Debt Securities of the relevant Related Shareholder. Accordingly, the Exemption Sought is required to address these holdings by the Present Funds and to permit the Funds to invest in Debt Securities of a Related Person in similar circumstances on the conditions set out in this decision.

(c) Fidelity currently requires each Product Linked Shareholder to enter into a securities purchase agreement with it, as manager of the applicable Fund, whereby the Product Linked Shareholder agrees to purchase securities of the applicable Fund only for hedging purposes. Pursuant to the Exemption Sought, all similar securities purchase agreements going forward will also include the requirement that the Product Linked Shareholder not vote the securities of the applicable Fund.

(d) In reliance on the Exemption Sought, a Product Linked Shareholder that is or becomes a Related Person by virtue of its investment in a Fund, will not be an affiliate or associate of Fidelity or of any affiliate of Fidelity that may act as portfolio adviser of a Fund.

General Investments in Debt Securities

(e) In addition, a Fund may wish to invest in Debt Securities of one or more of its Related Persons because doing so is consistent with the investment objective and strategies of the Fund.

13. Related Persons of a Fund may be significant issuers of highly rated debt securities. The Filers consider that the Funds should have access to such debt securities for the following reasons:

(a) there is a relatively limited and concentrated supply of highly rated corporate debt in Canada;

(b) diversification is reduced to the extent that a Fund is limited with respect to its investment opportunities;

(c) to the extent that a Fund is trying to track or outperform a benchmark, it is important for the Fund to be able to purchase any securities included in the benchmark, which could include Debt Securities; and

(d) to the extent that a Fund holds securities of an issuer and that issuer subsequently becomes a Related Person of that Fund, the Fund would be required to dispose of any Debt Securities, which could be detrimental to the investors of the Fund.

14. A Fund will only purchase Debt Securities of a Related Person if the Debt Securities of such Related Person have been given, and continue to have, at the time of purchase, an approved credit rating by an "approved credit rating organization" within the meaning of those terms in NI 81-102.

15. The Funds may wish to purchase Debt Securities in the secondary market.

16. The Funds may also wish to purchase Debt Securities, other than an asset backed commercial paper security, with a term to maturity of 365 days or more (Long-Term Debt) under a primary distribution or treasury offering by a Related Person (Primary Offering).

17. Each Long Term Debt security will be purchased in a Primary Offering where the terms of the Primary Offering, such as the size and pricing, will be a matter of public record as evidenced in a prospectus, offering memorandum, press release or other public document.

18. The Funds' prospectus contains or will contain disclosure required by securities legislation regarding securityholders that hold more than 10% of a Fund's securities and the risks associated with substantial securityholders, including large redemptions by these securityholders.

19. The Filers have determined that it would be in the best interests of the Funds to receive the Exemption Sought.

Decision

Related Shareholder Relief and Related Party Relief

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 each of the Related Shareholder Relief and the Related Party Relief is granted to permit the Funds to purchase and hold Debt Securities on condition that:

(a) the purchase or holding is consistent with, or is necessary to meet, the investment objective of the Fund;

(b) at the time of the purchase, the IRC of the Fund has approved the transaction in accordance with subsection 5.2(2) of NI 81-107;

(c) Fidelity, as the manager of a Fund, complies with section 5.1 of NI 81-107 and Fidelity and the IRC of the Fund comply with section 5.4 of NI 81-107 for any standing instructions the IRC provides in connection with the transactions;

(d) in the case of Debt Securities to be purchased by a Fund in a Primary Offering:

(i) the Debt Securities purchased are Long-Term Debt and the size of the Primary Offering is at least $100 million;

(ii) at least 2 purchasers who are independent, arm's-length purchasers, which may include "independent underwriters" within the meaning of National Instrument 33-105 -- Underwriting Conflicts, collectively purchase at least 20% of the Primary Offering;

(iii) no Fund shall participate in a Primary Offering if, following its purchase, the Fund would have more than 5% of its net assets invested in Debt Securities of a particular Related Person;

(iv) no Fund shall participate in a Primary Offering if, following its purchase, the Fund, together with related Funds, will hold more than 20% of the Debt Securities issued in the Primary Offering; and

(v) the price paid for the securities by the Fund in the Primary Offering shall be no higher than the lowest price paid by any of the arm's length purchasers who participate in the Primary Offering;

(e) in the case of Debt Securities to be purchased in the secondary market:

(i) the price payable for the security is not more than the ask price of the security;

(ii) the ask price of the security is determined as follows:

(A) if the purchase occurs on a marketplace, the price payable is determined in accordance with the requirements of that marketplace; or

(B) if the purchase does not occur on a marketplace:

(I) the Fund may pay the price for the security at which an independent, arm's length seller is willing to sell the security, or

(II) if the Fund does not purchase the security from an independent, arm's length seller, the Fund must pay the price quoted publicly by an independent marketplace or obtain, immediately before the purchase, at least one quote from an independent, arm's length purchaser or seller and not pay more than that quote;

(iii) the transaction complies with any applicable "market integrity requirements" as defined in NI 81-107;

(f) no later than the time a Fund files its annual financial statements, the Fund files with the securities regulatory authority or regulator the particulars of any investment made in reliance on this relief; and

(g) the decision with respect to Debt Securities purchased pursuant to a Primary Offering or in the secondary market will expire on the coming into force of any securities legislation relating to fund purchases of related party debt securities purchased pursuant to a Primary Offering or in the secondary market.