diff --git a/compiler/frontend/src/org/jetbrains/kotlin/resolve/calls/inference/ConstraintSystemBuilderImpl.kt b/compiler/frontend/src/org/jetbrains/kotlin/resolve/calls/inference/ConstraintSystemBuilderImpl.kt
index d62af5fc9fb..b99cbae8ace 100644
--- a/compiler/frontend/src/org/jetbrains/kotlin/resolve/calls/inference/ConstraintSystemBuilderImpl.kt
+++ b/compiler/frontend/src/org/jetbrains/kotlin/resolve/calls/inference/ConstraintSystemBuilderImpl.kt
@@ -1,5 +1,5 @@
 /*
- * Copyright 2010-2015 JetBrains s.r.o.
+ * Copyright 2010-2016 JetBrains s.r.o.
  *
  * Licensed under the Apache License, Version 2.0 (the "License");
  * you may not use this file except in compliance with the License.
@@ -114,7 +114,7 @@ class ConstraintSystemBuilderImpl(private val mode: Mode = ConstraintSystemBuild
             type.getNestedTypeParameters().mapNotNull { getMyTypeVariable(it) }
 
     override fun addSubtypeConstraint(constrainingType: KotlinType?, subjectType: KotlinType?, constraintPosition: ConstraintPosition) {
-        addConstraint(SUB_TYPE, constrainingType, subjectType, ConstraintContext(constraintPosition, initial = true))
+        addConstraint(SUB_TYPE, constrainingType, subjectType, ConstraintContext(constraintPosition, initial = true, initialReduction = true))
     }
 
     fun addConstraint(
@@ -126,7 +126,8 @@ class ConstraintSystemBuilderImpl(private val mode: Mode = ConstraintSystemBuild
         val constraintPosition = constraintContext.position
 
         // when processing nested constraints, `derivedFrom` information should be reset
-        val newConstraintContext = ConstraintContext(constraintContext.position, derivedFrom = null, initial = false)
+        val newConstraintContext = ConstraintContext(constraintContext.position, derivedFrom = null, initial = false,
+                                                     initialReduction = constraintContext.initialReduction)
         val typeCheckingProcedure = TypeCheckingProcedure(object : TypeCheckingProcedureCallbacks {
             private var depth = 0
 
@@ -194,7 +195,7 @@ class ConstraintSystemBuilderImpl(private val mode: Mode = ConstraintSystemBuild
         if (isErrorOrSpecialType(subType, constraintPosition) || isErrorOrSpecialType(superType, constraintPosition)) return
         if (subType == null || superType == null) return
 
-        if ((subType.hasExactAnnotation() || superType.hasExactAnnotation()) && (constraintKind != EQUAL)) {
+        if (constraintContext.initialReduction && (subType.hasExactAnnotation() || superType.hasExactAnnotation()) && (constraintKind != EQUAL)) {
             return doAddConstraint(EQUAL, subType, superType, constraintContext, typeCheckingProcedure)
         }
 
diff --git a/compiler/frontend/src/org/jetbrains/kotlin/resolve/calls/inference/constraintIncorporation.kt b/compiler/frontend/src/org/jetbrains/kotlin/resolve/calls/inference/constraintIncorporation.kt
index 07b1b8385c7..03dd23eca17 100644
--- a/compiler/frontend/src/org/jetbrains/kotlin/resolve/calls/inference/constraintIncorporation.kt
+++ b/compiler/frontend/src/org/jetbrains/kotlin/resolve/calls/inference/constraintIncorporation.kt
@@ -1,5 +1,5 @@
 /*
- * Copyright 2010-2015 JetBrains s.r.o.
+ * Copyright 2010-2016 JetBrains s.r.o.
  *
  * Licensed under the Apache License, Version 2.0 (the "License");
  * you may not use this file except in compliance with the License.
@@ -35,7 +35,8 @@ data class ConstraintContext(
         val position: ConstraintPosition,
         // see TypeBounds.Bound.derivedFrom
         val derivedFrom: Set<TypeVariable>? = null,
-        val initial: Boolean = false)
+        val initial: Boolean = false,
+        val initialReduction: Boolean = false)
 
 fun ConstraintSystemBuilderImpl.incorporateBound(newBound: Bound) {
     val typeVariable = newBound.typeVariable
diff --git a/compiler/tests-common/org/jetbrains/kotlin/resolve/constraintSystem/AbstractConstraintSystemTest.kt b/compiler/tests-common/org/jetbrains/kotlin/resolve/constraintSystem/AbstractConstraintSystemTest.kt
index 938579f4101..01d50e7ae2c 100644
--- a/compiler/tests-common/org/jetbrains/kotlin/resolve/constraintSystem/AbstractConstraintSystemTest.kt
+++ b/compiler/tests-common/org/jetbrains/kotlin/resolve/constraintSystem/AbstractConstraintSystemTest.kt
@@ -94,7 +94,7 @@ abstract class AbstractConstraintSystemTest : KotlinTestWithEnvironment() {
         for (constraint in constraints) {
             val firstType = getType(constraint.firstType)
             val secondType = getType(constraint.secondType)
-            val context = ConstraintContext(SPECIAL.position(), initial = true)
+            val context = ConstraintContext(SPECIAL.position(), initial = true, initialReduction = true)
             when (constraint.kind) {
                 MyConstraintKind.SUBTYPE -> builder.addSubtypeConstraint(firstType, secondType, context.position)
                 MyConstraintKind.SUPERTYPE -> builder.addSubtypeConstraint(secondType, firstType, context.position)
diff --git a/idea/idea-completion/testData/basic/common/substitutedSignature/SubstitutedSignatureSOE.kt b/idea/idea-completion/testData/basic/common/substitutedSignature/SubstitutedSignatureSOE.kt
new file mode 100644
index 00000000000..cc3a52b9f62
--- /dev/null
+++ b/idea/idea-completion/testData/basic/common/substitutedSignature/SubstitutedSignatureSOE.kt
@@ -0,0 +1,14 @@
+import kotlin.internal.Exact
+
+interface Column<out V>
+
+inline fun <reified V : Enum<V>> String.enumeration(name: String): Column<V> = TODO()
+
+fun <T> foo(c: Column<@Exact T>) { }
+
+
+fun test() {
+    foo("".enu<caret>)
+}
+
+// EXIST: enumeration
diff --git a/idea/idea-completion/tests/org/jetbrains/kotlin/idea/completion/test/JSBasicCompletionTestGenerated.java b/idea/idea-completion/tests/org/jetbrains/kotlin/idea/completion/test/JSBasicCompletionTestGenerated.java
index c43b18c5df5..fff41374671 100644
--- a/idea/idea-completion/tests/org/jetbrains/kotlin/idea/completion/test/JSBasicCompletionTestGenerated.java
+++ b/idea/idea-completion/tests/org/jetbrains/kotlin/idea/completion/test/JSBasicCompletionTestGenerated.java
@@ -2393,6 +2393,12 @@ public class JSBasicCompletionTestGenerated extends AbstractJSBasicCompletionTes
                 String fileName = KotlinTestUtils.navigationMetadata("idea/idea-completion/testData/basic/common/substitutedSignature/SubstitutedSignature6.kt");
                 doTest(fileName);
             }
+
+            @TestMetadata("SubstitutedSignatureSOE.kt")
+            public void testSubstitutedSignatureSOE() throws Exception {
+                String fileName = KotlinTestUtils.navigationMetadata("idea/idea-completion/testData/basic/common/substitutedSignature/SubstitutedSignatureSOE.kt");
+                doTest(fileName);
+            }
         }
 
         @TestMetadata("idea/idea-completion/testData/basic/common/super")
diff --git a/idea/idea-completion/tests/org/jetbrains/kotlin/idea/completion/test/JvmBasicCompletionTestGenerated.java b/idea/idea-completion/tests/org/jetbrains/kotlin/idea/completion/test/JvmBasicCompletionTestGenerated.java
index 8ce218b11d7..af8577c37a9 100644
--- a/idea/idea-completion/tests/org/jetbrains/kotlin/idea/completion/test/JvmBasicCompletionTestGenerated.java
+++ b/idea/idea-completion/tests/org/jetbrains/kotlin/idea/completion/test/JvmBasicCompletionTestGenerated.java
@@ -2393,6 +2393,12 @@ public class JvmBasicCompletionTestGenerated extends AbstractJvmBasicCompletionT
                 String fileName = KotlinTestUtils.navigationMetadata("idea/idea-completion/testData/basic/common/substitutedSignature/SubstitutedSignature6.kt");
                 doTest(fileName);
             }
+
+            @TestMetadata("SubstitutedSignatureSOE.kt")
+            public void testSubstitutedSignatureSOE() throws Exception {
+                String fileName = KotlinTestUtils.navigationMetadata("idea/idea-completion/testData/basic/common/substitutedSignature/SubstitutedSignatureSOE.kt");
+                doTest(fileName);
+            }
         }
 
         @TestMetadata("idea/idea-completion/testData/basic/common/super")