Fidelity Investments Canada ULC

Headnote

National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief granted from sections 2.3(f), 2.3(h), 2.5(2)(a) and 2.5(2)(c) of National Instrument 81-102 -- Mutual Funds to permit a mutual fund to use ETFs to invest up to 10 percent of its net assets, in aggregate, in gold, silver and other physical commodities provided that no more than 2.5 percent of the mutual fund's net assets may be invested in any one commodity sector, other than gold and silver -- ETFs will be traded on a Canadian or U.S. stock exchange -- subject to 10 percent exposure to physical commodities, in aggregate, and certain conditions

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 2.3(f) and (h), 2.5(2)(a) and (c), 19.1.

May 11, 2012

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

(the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of Fidelity Tactical Strategies Fund (the Fund) for an exemption pursuant to section 19.1 of National Instrument 81-102 -- Mutual Funds (NI 81-102) exempting the Fund from:

(a) clauses 2.3(f) and (h) of NI 81-102 to permit the Fund to invest indirectly in physical commodities other than gold through investments in Gold/Silver ETFs (as defined below) and/or Commodity ETFs (as defined below);

(b) clauses 2.5(2)(a) and (c) of NI 81-102 to permit the Fund to invest in exchange-traded funds traded on a stock exchange in Canada or the United States, the underlying interest of which is gold or silver, whether on an unlevered basis (Unlevered Gold/Silver ETFs) or based on a multiple of 200% (Leveraged Gold/Silver ETFs and together with Unlevered Gold/Silver ETFs, Gold/Silver ETFs);

(c) clauses 2.5(2)(a) and (c) of NI 81-102 to permit the Fund to invest in exchange-traded funds traded on a stock exchange in Canada or the United States, the underlying interest of which is one or more physical commodities, other than gold or silver, on an unlevered basis (Commodity ETFs); and

(d) clauses 2.5(2)(a) and (c) of NI 81-102 to permit the Fund to invest in exchange-traded funds traded on a stock exchange in Canada or the United States that seek to provide daily results that replicate the daily performance of a specified widely-quoted market index by an inverse multiple of 100% or by a multiple of 200% or an inverse multiple of 200% (collectively, Inverse or Leveraged ETFs and, together with Gold/Silver ETFs and Commodity ETFs, Underlying ETFs)

(collectively, theExemption 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 each of the other provinces and territories of Canada (together with Ontario, the Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions, MI 11-102 and NI 81-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

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

The Fund

1. The Filer is the investment fund manager of the Fund. The Filer is registered as a 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. An affiliate of the Filer is the portfolio adviser to the Fund.

3. The Fund is an open-end mutual fund trust created under the laws of the Province of Ontario.

4. The Filer is not in default of securities legislation in any Jurisdiction.

5. The securities of the Fund are qualified for distribution pursuant to a simplified prospectus and annual information form that was prepared and filed in accordance with the securities legislation of the Jurisdictions. As a result, the Fund is a reporting issuer or the equivalent in each Jurisdiction.

6. The investment objective of the Fund is to aim to achieve high total investment return. The Fund uses an asset allocation approach. It will invest in multiple asset classes, including equities, fixed income securities, commodities and money market instruments of companies and other issuers anywhere in the world by investing primarily in a combination of other mutual funds managed by the Filer and third party exchange-traded funds (ETFs).

7. If the Exemption Sought is granted, the second paragraph of the investment strategies will be amended to read as follows:

"The Fund invests either directly in, or in underlying Fidelity Funds or ETFs that invest in, or with a focus on, global equity and fixed-income securities, commodities and money market instruments. The ETFs that the Fund holds are listed in Canada or the United States and seek to provide daily results that replicate the daily performance of a specified widely-quoted market index, on a leveraged (multiple or inverse multiple of 200%), inverse (inverse multiple of 100%) or unlevered basis. The portfolio managers may change the underlying funds invested in, or the percentage of the Fund's assets invested in any particular mutual fund, at any time."

In addition, the sixth paragraph of the investment strategies will be amended to read as follows:

"In connection with the Fund's investments in commodities, the Fund may invest, in aggregate, up to 10% of its net assets in gold and/or silver, on an unlevered or a leveraged basis, and/or in other physical commodities on a unlevered basis pursuant to regulatory relief obtained by the Fund. These investments will be made through Gold/Silver ETFs and/or other Commodity ETFs. Pursuant to the regulatory relief obtained, no more than 2.5% of the net assets of the Fund may be invested in any one commodity sector other than gold and/or silver. For this purpose, the relevant commodity sectors are energy, grains, industrial metals, livestock, precious metals other than gold and silver and softs (ie., cocoa, cotton, coffee and sugar). The Fund may also invest in underlying Fidelity Funds or ETFs that are index participation units as defined in NI 81-102 that invest in securities of companies involved in one or more commodity sectors."

The Underlying ETFs

8. Each Underlying ETF is a "mutual fund" (as such term is defined under the Securities Act (Ontario)) and is listed and traded on a stock exchange in Canada or the United States.

9. The assets of each Gold/Silver ETF consist primarily of gold or silver, as the case may be, or derivatives that have an underlying interest in gold or silver, as the case may be. The objective of each Gold/Silver ETF is to reflect the price of gold or silver, as the case may be (less the Gold/Silver ETF's expenses and liabilities), whether on an unlevered basis, in the case of the Unlevered Gold/Silver ETFs, or on a leveraged basis, in the case of the Leveraged Gold/Silver ETFs. Each Leveraged Gold/Silver ETF will be rebalanced daily to ensure that its performance and exposure to the price of gold or silver, as the case may be, will not exceed +200% of the corresponding daily performance of the price of gold or silver, as the case may be.

10. The assets of each Commodity ETF consist primarily of one or more physical commodities, other than gold or silver, or derivatives that have an underlying interest in such physical commodity or commodities. These physical commodities may include, without limitation, commodities falling within one of the following commodity sectors: energy, grains, industrial metals, livestock, precious metals other than gold and silver and softs (ie, cocoa, cotton, coffee and sugar). The objective of each Commodity ETF is to reflect the price of the applicable commodity or commodities (less the Commodity ETF's expenses and liabilities) on an unlevered basis.

11. Each Inverse or Leveraged ETF seeks to replicate the daily performance of a specified widely-quoted market index and will be rebalanced daily to ensure that its performance and exposure to its underlying market index will not exceed -100% or +/-200%, as the case may be, of the corresponding daily performance of its underlying market index.

Investments in Underlying ETFs

12. The Fund's investment objective and investment strategies are designed to offer investors an opportunity to obtain exposure to a number of asset classes, including equities, bonds and commodities. To fulfill its investment objective, the Fund requires the ability to invest in physical commodities other than gold.

13. The Filer submits that there are no liquidity concerns with permitting the Fund to invest in Gold/Silver ETFs and/or Commodity ETFs, since the securities of the Underlying ETFs trade on an exchange and are highly liquid.

14. In accordance with its investment objective and investment strategies and in addition to its investments indirectly in commodities, the Fund will be permitted generally to invest in ETFs.

15. In addition to investing in securities of ETFs that are "index participation units" as defined in NI 81-102 (IPUs), the Fund proposes to have the ability to invest in the Underlying ETFs whose securities are not IPUs.

16. One of the asset classes that the Fund proposes to invest in is commodities. To obtain exposure to gold and other physical commodities, the Fund intends to invest in Gold/Silver ETFs and/or Commodity ETFs.

17. In addition, to obtain exposure to the other asset classes that the Fund will invest in, the Fund may also invest in Inverse and/or Leveraged ETFs.

18. The amount of loss that can result from an investment by the Fund in an Underlying ETF will be limited to the amount invested by the Fund in securities of the Underlying ETF.

19. The Underlying ETFs are attractive investments for the Fund, as, in addition to being highly liquid, they provide an efficient and cost effective means of achieving diversification and exposure to the asset classes that the Fund will invest in.

20. In accordance with the investment strategy of the Fund, no more than 10% of the net asset value of the Fund will be invested in commodities, in aggregate, which includes a combination of Gold/Silver ETFs and/or Commodity ETFs taken at market value at the time of purchase. In addition, no more than 2.5% of the net asset value of the Fund may be invested in any one commodity sector, other than gold and/or silver, taken at market value at the time of purchase. For this purpose, the relevant commodity sectors are energy, grains, industrial metals, livestock, precious metals other than gold and silver and softs (ie., cocoa, cotton, coffee and sugar).

21. The aggregate investment in Inverse and/or Leveraged ETFs by the Fund will not exceed 10% of the Fund's net asset value, taken at market value at the time of purchase.

22. The aggregate investment in Underlying ETFs by the Fund will not exceed 10% of the Fund's net asset value, taken at market value at the time of purchase.

23. The prospectus of the Fund will state that the Fund may invest indirectly in gold, silver and other physical commodities and the risks associated with such investments.

24. An investment by the Fund in securities of an Underlying ETF will represent the business judgment of responsible persons uninfluenced by considerations other than the best interest of the Fund.

25. If the Exemption Sought is granted, the Fund will not rely on the gold and silver relief dated November 11, 2010 previously granted to the Filer.

26. The Filer has determined that it would be in the best interests of the Fund to receive the Exemption Sought.

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) the investment by the Fund in securities of Underlying ETFs is in accordance with the fundamental investment objectives of the Fund;

(b) the Fund will limit its exposure to physical commodities (including direct purchases of gold, permitted gold certificates, Gold/Silver ETFs and Commodity ETFs), to no more than 10% of the net assets of the Fund, taken at market value at the time of purchase as applicable;

(c) no more than 2.5% of the net asset value of the Fund may be invested in any one commodity sector, other than gold and/or silver, taken at market value at the time of purchase. For this purpose, the relevant commodity sectors are energy, grains, industrial metals, livestock, precious metals other than gold and silver and softs (ie., cocoa, cotton, coffee and sugar);

(d) the aggregate investment in Inverse or Leveraged ETFs by the Fund will not exceed 10% of the Fund's net asset value, taken at market value at the time of purchase and, in addition, the Fund may not purchase securities of an Inverse or Leveraged ETF that tracks the inverse of its underlying index by no more than 200% (Bear ETFs) or sell any securities short if, immediately after the transaction, the aggregate market value of (i) all securities sold short by the Fund and (ii) all securities of Bear ETFs held by the Fund would exceed 20% of the Fund's net assets, taken at market value at the time of the transaction;

(e) the aggregate investment in Underlying ETFs by the Fund will not exceed 10% of the Fund's net asset value, taken at market value at the time of purchase;

(f) the Fund does not short sell securities of an Underlying ETF;

(g) the securities of the Underlying ETFs are traded on a stock exchange in Canada or the United States;

(h) the securities of the Underlying ETFs are treated as specified derivatives for purposes of Part 2 of NI 81-102; and

(i) the prospectus of the Fund discloses (i) in the investment strategy section of the Fund the fact that the Fund has obtained relief to invest in the Underlying ETFs, together with an explanation of what each Underlying ETF is, and (ii) the risks associated with the Fund's investment in securities of the Underlying ETFs.