Fidelity Investments Canada Limited - MRRS Decision

Headnote

Investment by Top Funds in securities of UnderlyingFunds under an actively managed fund-of-fund structure exemptedfrom the reporting requirements and self-dealing prohibitionsof clauses 111(2)(b), 111(3) and clauses 117(1)(a) and (d).

Statutes Cited

Securities Act (Ontario), R.S.O. c. S.5, asam., 111(2)(b), 111(3), 117(1)(a), and 117(1)(d).

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

BRITISH COLUMBIA, ALBERTA,SASKATCHEWAN,

ONTARIO, NOVA SCOTIA AND NEWFOUNDLAND

AND LABRADOR

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

FIDELITY INVESTMENTS CANADALIMITED

("FIDELITY")

AND

IN THE MATTER OF

FIDELITY DIVERSIFIED INCOMEFUND

(THE "TOP FUND")

MRRS DECISION DOCUMENT

WHEREAS the securities regulatory authorityor regulator (the "Decision Maker") in each of BritishColumbia, Alberta, Saskatchewan, Ontario, Nova Scotia, and Newfoundlandand Labrador (the "Jurisdictions") has received anapplication from Fidelity as Manager of the Top Fund for a decisionby each Decision Maker under the securities legislation of theJurisdictions (the "Legislation") that the followingprovisions of the Legislation (the "Applicable Requirements") shall not apply to the Top Fund or Fidelity, in respectof the Top Fund's investments in securities of Fidelity CanadianBond Fund or Fidelity American High Yield Fund or of other fundsin which the Top Fund may choose to invest (together, the "UnderlyingFunds"):

1. the restrictions contained in the Legislationthat prohibit a mutual fund from knowingly making or holdingan investment in a person or company in which the mutual fund,alone or together with one or more related mutual funds, isa substantial securityholder; and

2. the requirements contained in the Legislationthat a management company or, in British Columbia, a mutualfund manager, file a report of every transaction of purchaseor sale of securities between a mutual fund it manages andany related person or company and any transaction in which,by arrangement other than an arrangement relating to insidertrading in portfolio securities, a mutual fund is a jointparticipant with one or more of its related persons or companies.

AND WHEREAS under the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the principal regulatorfor this application;

AND WHEREAS, unless otherwise defined,the terms herein have the meaning set out in National Instrument14-101 Definitions;

AND WHEREAS the Manager has representedto the Decision Makers that:

1. The Top Fund will be an open-end mutualfund trust established under the laws of the Province of Ontario,and will be a reporting issuer in each of the Jurisdictions.Units of the Top Fund will be qualified for distribution undera simplified prospectus and annual information form (the "Prospectus")filed in each of the Jurisdictions. A preliminary prospectushas been filed in the Jurisdictions under Sedar Project No.565650.

2. The Underlying Funds are open-end mutualfund trusts established under the laws of the Province ofOntario, and are reporting issuers in each of the Jurisdictions.Units of the Underlying Funds are qualified for distributionunder a simplified prospectus and annual information formfiled in each of the Jurisdictions.

3. The Manager is a corporation continuedunder the laws of the Province of Ontario. The Manager's headoffice is located in Toronto, Ontario. The Manager is themanager and trustee of the Top Fund and the Underlying Funds.

4. The investment objective of the Top Fundis to achieve a combination of a steady flow of income andthe potential for capital gains. The Top Fund will be activelymanaged, and may seek to achieve its investment objectiveby investing a portion of its assets in Fidelity CanadianBond Fund and a portion of its assets in Fidelity AmericanHigh Yield Fund. The remaining portion of the assets of theTop Fund will be invested in Canadian equities and U.S. commercialmortgage-backed securities. The Top Fund may choose to investmore than 10% of its assets in securities of each of the FidelityCanadian Bond Fund and the Fidelity American High Yield Fundin order to achieve its neutral mix, which is 22% Canadianbond exposure and 14% American high yield securities exposure.The portfolio manager of the Top Fund will have the discretionto vary the Top Fund's asset mix in response to market conditionsin order to achieve the best overall return. The portfoliomanager of the Top Fund will also have the discretion to buyand sell units of other funds, selected in accordance withthe Top Fund's investment objective, as well as alter itspercentage holdings in any of the funds in which it invests.

5. Except to the extent evidenced by thisDecision and specific approvals granted by the Decision Makerspursuant to National Instrument 81-102 -- Mutual Funds (NI81-102) , the investments by the Top Fund in the UnderlyingFunds will comply with the investment restrictions of theLegislation and NI 81-102.

6. In the absence of this Decision, the TopFund would be prohibited from knowingly making or holdingan investment in Underlying Funds in which the Top Fund, aloneor together with one or more related mutual funds, is a substantialsecurityholder.

7. In the absence of this Decision, Fidelitywould be required to file a report of every transaction ofpurchase or sale by the Top Fund of the securities of theUnderlying Funds.

8. The Top Fund's investment in securitiesof the Underlying Funds will represent the business judgementof responsible persons uninfluenced by considerations otherthan the best interests of the Top Fund.

AND WHEREAS under the System, this MRRSDecision Document evidences the decision of each Decision Maker(collectively, the "Decision");

AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;

THE DECISION of the Decision Makers underthe Legislation is that the Applicable Requirements shall notapply so as to prevent the Top Fund from making and holdinginvestments in securities of the Underlying Funds , or requireFidelity to file a report relating to the purchase or sale ofsuch securities;

PROVIDED IN EACH CASE THAT:

1. The Decision, as it relates to the jurisdictionof a Decision Maker, will terminate one year after the publicationin final form of any legislation or rule of that DecisionMaker dealing with matters in section 2.5 of NI 81-102.

2. The Decision shall only apply if, at thetime the Top Fund makes or holds an investment in the UnderlyingFunds , the following conditions are satisfied:

(a) The Underlying Funds are subject toNI 81-102 and National Instrument 81-101;

(b) The securities of the Top Fund and thesecurities of the Underlying Funds are qualified for distributionin the local jurisdiction;

(c) At the time the Top Fund purchases securitiesof an Underlying Fund, the Underlying Fund does not holdmore than 10% of the market value of its net assets in securitiesof other mutual funds;

(d) The Top Fund shall disclose in its simplifiedprospectus under the "Fees and Expenses" section,that there are fees and expenses payable by the UnderlyingFunds in addition to the fees and expenses payable by theTop Fund;

(e) No management fees or incentive feesare payable by the Top Fund that, to a reasonable person,would duplicate a fee payable by the Underlying Funds forthe same service and this information is disclosed in thesimplified prospectus of the Top Fund under the "Feesand Expenses" section;

(f) No sales fees or redemption fees arepayable by the Top Fund in relation to its purchases orredemptions of the securities of the Underlying Funds ifthe Underlying Fund is managed by the Manager or an affiliateor associate of the Manager and this information is disclosedin the simplified prospectus of the Top Fund under the "Feesand Expenses" section;

(g) No sales fees or redemption fees arepayable by the Top Fund in relation to its purchases orredemptions of the securities of the Underlying Funds that,to a reasonable person, would duplicate a fee payable byan investor in the Top Fund and this information is disclosedin the simplified prospectus of the Top Fund under the "Feesand Expenses" section;

(h) If the Top Fund holds securities ofUnderlying Funds that are managed by the Manager or an affiliateor associate of the Manager, the Top Fund,

1. shall not vote any of those securities;

2. may, if the Manager so chooses, arrangefor all of the securities it holds of the Underlying Fundsto be voted by the beneficial holders of securities ofthe Top Fund; and

3. shall disclose the above informationin the simplified prospectus of the Top Fund under the"Organization and Management Details" section;

(i) The Top Fund and the Underlying Fundsmust have dates for the calculation of net asset value thatare compatible;

(j) The Top Fund shall disclose in its simplifiedprospectus under the "Investment Strategies" section:

1. whether the Top Fund intends to purchasesecurities of, or enter into specified derivative transactionsfor which the underlying interest is based on securitiesof, one or more Underlying Funds;

2. whether or not the Underlying Fundsmay be managed by the Manager or an affiliate or associateof the Manager of the Top Fund;

3. what percentage of net assets of theTop Fund is dedicated to the investment in the securitiesof, or the entering into of specified derivative transactionsfor which the underlying interest is based on the securitiesof, Underlying Funds; and

4. the process or criteria used to selectthe Underlying Funds;

(k) The Top Fund shall disclose in its simplifiedprospectus under the "Top Ten Holdings" section,a statement to the effect that the simplified prospectusand other information about the Underlying Funds are availableon the internet at www.sedar.com;

(l) If more than 10% of the securities ofthe Underlying Funds are held by the Top Fund, the UnderlyingFunds must disclose under the "Risks" sectionof their simplified prospectus, the percentage of securitiesheld by the Top Fund as at a date within 30 days of thedate of the simplified prospectus of the Top Fund. The UnderlyingFunds must also disclose the risks associated with a possibleredemption requested by the Top Fund;

(m) If during the year the Top Fund heldsecurities of Underlying Funds that are not managed by theManager or an affiliate or associate of the Manager, theTop Fund shall provide details in its Annual InformationForm under the "Fund Governance" section, on howthe Manager exercised its discretion with regard to thevoting rights attached to the securities of the UnderlyingFunds when the securityholders of the Underlying Funds werecalled upon to vote.

October 8, 2003.