Fidelity Investments Canada Limited et al. - MRRS Decision
Headnote
Mutual Reliance Review System for Exemptive Relief Applications -- mutual fund merger approval -- lifecycle funds permitted to merge into another fund at a certain date in the future without unitholder approval provided that merger disclosed in prospectus and continuing fund does not change its investment objective.
Rules Cited
National Instrument 81-102 Mutual Funds, s. 5.1.
October 18, 2005
IN THE MATTER OF
NATIONAL INSTRUMENT 81-102
("NI 81-102")
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
FIDELITY INVESTMENTS CANADA LIMITED ("Fidelity")
AND
FIDELITY CLEARPATH™ 2005 PORTFOLIO
FIDELITY CLEARPATH™ 2010 PORTFOLIO
FIDELITY CLEARPATH™ 2015 PORTFOLIO
FIDELITY CLEARPATH™ 2020 PORTFOLIO
FIDELITY CLEARPATH™ 2025 PORTFOLIO
FIDELITY CLEARPATH™ 2030 PORTFOLIO
FIDELITY CLEARPATH™ 2035 PORTFOLIO
FIDELITY CLEARPATH™ 2040 PORTFOLIO
FIDELITY CLEARPATH™ 2045 PORTFOLIO
(collectively, the "Existing Portfolios") and
FIDELITY CLEARPATH™ INCOME PORTFOLIO
(the "Income Portfolio")
MRRS DECISION DOCUMENT
Background
The local securities regulatory authority or regulator (the "Decision Maker") in each of the provinces and territories of Canada (the "Jurisdictions") has received an application from Fidelity, the Existing Portfolios and the Income Portfolio for a decision under NI 81-102 that the Existing Portfolios and any future mutual funds with similar investment objectives to the Existing Portfolios that are hereafter established and managed by Fidelity or an affiliate of Fidelity (together with the Existing Portfolios, collectively the "Portfolios") and the Income Portfolio, be exempt from paragraphs 5.1(f) and (g) of NI 81-102 to permit the Portfolios to combine with the Income Portfolio without the requirement to obtain the prior approval of unitholders (the "Requested Exemption").
Under the Mutual Reliance Review System for Exemptive Relief Applications
(a) the Ontario Securities Commission is the principal regulator for this application, and
(b) this MRRS decision document evidences the decision of each Decision Maker.
Interpretation
Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.
Representations
This decision is based on the following facts represented by Fidelity:
1. Fidelity is a corporation incorporated under the laws of Canada and continued and amalgamated under the laws of Ontario and having its registered head office in Toronto, Ontario.
2. Each of the Portfolios and the Income Portfolio is, or will be, established under the laws of the province of Ontario.
3. Securities of the Portfolios and the Income Portfolio are, or will be, qualified for distribution pursuant to a simplified prospectus and annual information form (the "Prospectus").
4. The Portfolios and the Income Portfolio are, or will be, reporting issuers in each of the provinces and territories of Canada and are not, or will not be, (to the knowledge of Fidelity) in default of any requirements of the Securities Act (Ontario) or applicable securities legislation in each of the other Jurisdictions.
5. The Prospectus discloses, or will disclose, the investment objectives, investment strategies and risks of the Portfolios and of the Income Portfolio.
6. Each of the Portfolios will invest substantially all of its assets in underlying mutual funds managed by Fidelity or its affiliates.
7. The investment objective of each Portfolio is, or will be, to achieve high total investment return and is designed for investors expecting to retire or planning for retirement targeted around a particular year (the "target date").
8. The investment objectives of each Portfolio includes, or will include, the intention to use an asset allocation strategy which will change over time so that investments become more conservative and to combine each Portfolio with the Income Portfolio once the asset allocation is substantially similar to that of the Income Portfolio.
9. It is anticipated that the asset allocation of each Portfolio will be substantially similar to the Income Portfolio approximately 10 years after the target date, at which time it is expected that it will be combined with the Income Portfolio and the unitholders of each Portfolio will become unitholders of the Income Portfolio.
10. The investment objectives of each Portfolio will be substantially in the following form:
"The fund aims to achieve high total investment return.
The fund uses a dynamic asset allocation strategy and invests in underlying Fidelity Funds that invest primarily in a mix of equity securities, fixed income securities and money market instruments. From inception, through to its target date and for a period of approximately 10 years thereafter, an increasing proportion of the funds assets are invested in securities of fixed income funds and money market funds. When the fund's asset allocation is substantially similar to that of the Fidelity ClearPath Income Portfolio, it is expected that the fund will, on prior notice to investors, and on a date determined by Fidelity, be combined with Fidelity ClearPath Income Portfolio and the fund's unitholders will become unitholders of Fidelity ClearPath Income Portfolio."
11. Each Portfolio will be combined with the Income Portfolio by way of merger, reorganization, transfer of assets or wind-up. The precise manner in which this will occur will be determined at the time taking into account income tax and other factors.
12. The Prospectus of the Portfolios includes, or will include, disclosure about the Income Portfolio.
Decision
Each of the Decision Makers is satisfied that the test contained in NI 81-102 that provides the Decision Makers with the jurisdiction to make the decision has been met.
The decision of the Decision Makers under NI 81-102 is that the Requested Relief is granted provided that:
(a) the investment objective of each Portfolio includes the disclosure set out in paragraph 10, and
(b) the investment objective of the Income Portfolio does not change without the prior approval of unitholders of each Portfolio and of the Income Portfolio.