Fidelity Investments Canada Limited - MRRS Decision

Headnote

MRRS -- Relief granted from multi-layering prohibition to permit mutual funds to invest in securities of a two-tier fund structure that invests more than 10% of the market value of its net assets in another specified underlying fund -- Two-tier fund structure having investment objective that is substantially the same as that of the specified underlying fund, except that two-tier fund's objective includes seeking to eliminate substantially its foreign currency exposure through the use of derivative contracts -- National Instrument 81-102 Mutual Funds, paragraph 2.5(2)(b).

Applicable Legislative Provisions

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

March 20, 2007

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO, BRITISH COLUMBIA, ALBERTA,

SASKATCHEWAN, MANITOBA, QUEBEC,

NEW BRUNSWICK, NOVA SCOTIA,

PRINCE EDWARD ISLAND, NEWFOUNDLAND,

NORTHWEST TERRITORIES, YUKON AND

NUNAVUT

(the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

FIDELITY INVESTMENTS CANADA LIMITED

(the Filer)

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filer on behalf of the mutual funds listed in Schedule A and other mutual funds that are or will be managed by the Filer (collectively, the Funds) for a decision under the securities legislation of the Jurisdictions (the Legislation) granting an exemption from the requirement in paragraph 2.5(2)(b) of National Instrument 81-102 Mutual Funds (NI 81-102) which prohibits a mutual fund from investing in another mutual fund if the other mutual fund holds more than 10% of the market value of its net assets in securities of other mutual funds (the Requested Relief).

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.

"Fidelity Currency Neutral Funds" means Fidelity American High Yield Currency Neutral Fund, Fidelity Global Bond Currency Neutral Fund and such other Fidelity currency neutral funds that are reporting issuers and managed by Fidelity from time to time.

Representations

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

1. The Filer is a corporation incorporated under the laws of Canada, thereafter continued under the laws of Ontario, and subsequently amalgamated under the laws of Ontario. Fidelity has its head office in Toronto, Ontario. The Filer is, or will be, the trustee and manager of the Funds.

2. The Funds and the Fidelity Currency Neutral Funds are, or will be, open-end mutual funds established under the laws of Ontario.

3. The Funds and the Fidelity Currency Neutral Funds are, or will be, reporting issuers under the securities laws of each of the Jurisdictions. None of the currently existing Funds or Fidelity Currency Neutral Funds is in default of any requirements of applicable securities legislation.

4. To achieve their respective investment objectives, certain of the Funds invest primarily in securities of other mutual funds, which may include mutual funds managed by the Filer while other Funds may from time to time invest in mutual funds where it is considered expedient to do so, and in particular may do so where they can obtain exposure to foreign securities without having to separately manage and hedge continuously their foreign currency exposure. The Funds may have exposure to foreign securities to an extent that will vary from time to time and may be up to 100% of the net assets of certain of the Funds at the time that such exposure to foreign securities is obtained.

5. The Filer would like the flexibility to hedge away some or all of the foreign currency exposure in the Funds, where applicable, particularly those Funds that increase their foreign property exposure. The Filer proposes that an efficient and cost effective way to accomplish this would be to have the Funds invest in units of one or more of the Fidelity Currency Neutral Funds.

6. A Fidelity Currency Neutral Fund, as referenced in this decision, is or will be a Fidelity mutual fund whose:

a) investment objective includes seeking to eliminate substantially its foreign currency exposure; and

b) investment strategy is to seek to achieve its investment objective primarily through investing in units of a specified underlying fund (the Underlying Fund) managed by the Filer and using derivative contracts, on an ongoing basis, to hedge substantially its foreign currency exposure.

7. The investment objectives of a Fidelity Currency Neutral Fund and the applicable Underlying Fund will be substantially the same, except that the objective of the Fidelity Currency Neutral Fund will include the objective of seeking to eliminate substantially the Fidelity Currency Neutral Fund's foreign currency exposure.

8. Each Fidelity Currency Neutral Fund is or, in the case of such funds created or reorganized after the date hereof, will be, an open-end mutual fund established under the laws of Ontario and a reporting issuer under the securities laws of each of the Jurisdictions. None of the currently existing Fidelity Currency Neutral Funds is in default of any requirements of applicable securities legislation.

9. The Fidelity Currency Neutral Funds are attractive investments for the Funds because effectively they offer investors the opportunity to invest in a foreign equity market without having to separately manage and hedge continuously their currency exposure to that market. The Fidelity Currency Neutral Funds are able to efficiently hedge their varying foreign currency exposure on a much more efficient and cost effective basis than individual investors.

10. Each Underlying Fund is an open-end mutual fund established under the laws of Ontario and is a reporting issuer under the securities laws of each of the Jurisdictions. None of the existing Underlying Funds is in default of any requirements of applicable securities legislation.

11. An investment by the Funds in units of the Fidelity Currency Neutral Funds will in each case be made in accordance with the provisions of section 2.5 of NI 81-102, except for the requirement in paragraph 2.5(2)(b) that a fund not invest in another fund if the other fund holds more than 10% of the market value of its net assets in securities of other mutual funds.

12. A Fund's investment in units of the Fidelity Currency Neutral Funds will represent the business judgment of responsible persons uninfluenced by considerations other than the best interests of the Fund.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make this decision has been met.

The decision of the Decision Makers under the Legislation is that the Requested Relief is granted to the Funds in connection with their proposed investments in securities of the Fidelity Currency Neutral Funds, provided such investments are made in compliance with each provision of section 2.5 of NI 81-102, except for paragraph 2.5(2)(b).

SCHEDULE A

LIST OF FUNDS

FIDELITY FUNDS