Fidelity Investments Canada ULC and Fidelity Premium Tactical Fixed Income Capital Yield Private Pool

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted to certain three-tier structures from multi-layering prohibition in paragraph 2.5(2)(b) of NI 81-102 to permit top funds to invest in funds-of-funds, which are more than 10% invested in underlying funds -- The three-tier fund structure is analogous to the current multi-layering exception in NI 81-102 -- Transparent investment portfolio and accountability for portfolio management -- National Instrument 81-102 Mutual Funds.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 2.5(2)(b) and 19.1.

April 27, 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),

FIDELITY PREMIUM TACTICAL FIXED INCOME CAPITAL YIELD PRIVATE POOL

(the Current Top Fund)

AND ALL FUTURE SIMILAR MUTUAL FUNDS MANAGED BY THE FILER

(together with the Current Top Fund, the Top Funds)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Top Funds for a decision under the securities legislation of the Jurisdiction (the Legislation) exempting the Top Funds from section 2.5(2)(b) of National Instrument 81-102 Mutual Funds (NI 81-102) to permit each Top Fund to obtain exposure to another mutual fund subject to NI 81-102 that is or will be managed by the Filer (each, a Reference Fund) through one or more specified derivatives, which Reference Fund will hold more than 10% of its net asset value in securities of other mutual funds (each, a Third Tier Fund) subject to NI 81-102 that are or will be managed by the Filer (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 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 Filer

1. The Filer will be the manager of each Top Fund, Reference Fund and Third Tier Fund. The Filer or an affiliate of the Filer will be the portfolio adviser of each Top Fund, Reference Fund and Third Tier Fund.

2. The Filer is registered in Ontario in the category of investment fund manager. The Filer is also registered as a portfolio manager and mutual fund dealer in each of the provinces and territories of Canada and under the Commodity Futures Act (Ontario) in the category of commodity trading manager. The head office of the Filer is in Toronto, Ontario.

3. The Filer is not in default of securities legislation in any of the Jurisdictions.

The Top Funds, Reference Funds and Third Tier Funds

4. Each Top Fund, Reference Fund and Third Tier Fund will be either an open-end mutual fund trust that will be created under the laws of the Province of Ontario or a class of a mutual fund corporation.

5. Each Top Fund, Reference Fund and Third Tier Fund will be a reporting issuer under the laws of some or all of the provinces and territories of Canada and subject to NI 81-102. The securities of each Top Fund, Reference Fund and Third Tier Fund will be qualified for distribution pursuant to a simplified prospectus (SP), annual information form (AIF) and Fund Facts that will be prepared and filed in accordance with National Instrument 81-101 Mutual Fund Prospectus Disclosure.

6. A preliminary SP, AIF and Fund Facts in respect of, among others, the Current Top Fund and its Reference Fund, Fidelity Tactical Fixed Income Fund, was filed via SEDAR under project numbers 1876218 and 1876224, respectively, on March 23, 2012.

7. The Top Funds, Reference Funds and Third Tier Funds will all have substantially similar investment objectives in that they will all seek to invest in, or provide a return based on, a portfolio of fixed income securities.

8. The Top Funds are each intended to offer taxable investors a version of a Reference Fund with more tax efficient distributions.

9. Each Top Fund will seek to achieve its investment objective by investing primarily in Canadian equity securities and by obtaining exposure to its Reference Fund through one or more forward agreements or other specified derivatives, the effect of which is to provide the Top Fund with a return that is based on the performance of its Reference Fund.

10. Each Reference Fund is or will be a fund-of-funds that invests or will invest in two or more Third Tier Funds and may also invest directly in fixed income securities.

11. Each Third Tier Fund primarily invests or will invest directly in a portfolio of fixed income securities.

12. No existing Reference Fund or Third Tier Fund is in default of securities legislation in any of the Jurisdictions.

Three-Tier Fund Structure

13. For the purposes of section 2.5 of NI 81-102, each Top Fund will be considered to be holding securities of its Reference Fund because it will enter into one or more forward agreements or other specified derivatives the underlying interest of which will be securities of its Reference Fund. Accordingly, each Top Fund's use of forward agreements or other specified derivatives will result in a three-tier fund of fund structure. This multi-tiered fund structure is contrary to the multi-layering prohibition in clause 2.5(2)(b) of NI 81-102 and does not fit within the exceptions to clause 2.5(2)(b) found in subsection 2.5(4) of NI 81-102.

14. It would be burdensome, expensive and administratively difficult from an operational and portfolio management perspective for each Top Fund to obtain exposure to each Third Tier Fund through forward agreements or other specified derivatives because it would require each Top Fund to enter into multiple forward agreements or other specified derivatives and to adjust the balance between such specified derivatives through the mechanics of those derivatives.

15. It would be more efficient if exposure to a Third Tier Fund occurs at the Third Tier Fund level. Any adjustment made by a Reference Fund to its Third Tier Funds is made by simply acquiring or redeeming securities of the Third Tier Fund in the ordinary course and automatically results in a corresponding indirect adjustment to the Top Fund's exposure to that Third Tier Fund.

16. The investment objectives of each Top Fund will disclose that the Top Fund uses forward agreements or other specified derivatives to track the performance, less transaction and hedging costs, of its Reference Fund, which, in turn, invests in Third Tier Funds.

17. The name of each Top Fund will include part of the name of each Reference Fund and the investment objectives of each Top Fund will specify the full name of its Reference Fund.

18. The SP for each Top Fund will disclose that the accountability for portfolio management is at the level of the Reference Fund with respect to the selection of Third Tier Funds and at the level of the Third Tier Funds with respect to the purchase and sale of fixed income portfolio securities.

19. The Top Funds will comply with the requirements under NI 81-106 relating to top 25 positions portfolio holdings disclosure in its management reports of fund performance and the requirements in Form 81-101F3 relating to top 10 positions portfolio holdings disclosure in its Fund Facts as if the Top Fund were investing directly in the Third Tier Funds.

20. Except for clause 2.5(2)(b), a Top Fund's use of forward agreements or other specified derivatives and investment in a Reference Fund will be made in accordance with the provisions of section 2.5 of NI 81-102.

21. An investment by a Reference Fund in securities of its Third Tier Funds is and will be made in accordance with the provisions of section 2.5 of NI 81-102.

22. The SP for each Top Fund and Reference Fund will disclose that fees and expenses will not be duplicated as a result of investments in underlying funds.

23. An investment by a Top Fund in its Reference Fund and by a Reference Fund in its Third Tier Funds represents the business judgment of responsible persons uninfluenced by considerations other than the best interests of the Top Fund and of its Reference Fund, respectively.

24. The Filer has determined that it would be in the best interests of the Top Funds 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 the proposed investment of each Top Fund in its Reference Fund is otherwise made in compliance with all other requirements of section 2.5 of NI 81-102, except to the extent that discretionary relief has been granted from any such requirement.