Manitou Investment Management Ltd.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions - Exemption granted from conflict of interest trading prohibition in paragraph 13.5(2)(b) to permit in-specie subscriptions and redemptions by separately managed accounts and pooled funds in pooled funds - Portfolio manager of managed accounts is also portfolio manager of pooled funds and is therefore a "responsible person" - Relief subject to certain conditions.

Applicable Legislative Provisions

National Instrument 31-103 Registration Requirements and Exemptions, s. 13.5(2)(b)(iii).

March 25, 2010

Background

The principal regulator in the Jurisdiction (the Principal Regulator) has received an application from the Filer under the securities legislation of the Jurisdiction of the Principal Regulator (the Legislation) for a decision providing an exemption from the requirement that prohibits a registered adviser from knowingly causing an investment portfolio managed by it, including an investment fund for which it acts as an adviser, to purchase or sell a security from or to the investment portfolio of an investment fund for which a responsible person acts as an adviser (the Exemption Sought), to permit In-Specie Transactions (as defined below) between (i) Pooled Funds (as defined below) and Pooled Funds and (ii) Pooled Funds and Managed Accounts (as defined below).

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 British Columbia, Alberta, Manitoba and Nova Scotia (collectively with Ontario, the Jurisdictions).

Interpretation

Defined terms contained in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined. Certain other defined terms have the meanings given to them above or below under "Representations".

In-Specie Transaction means causing a Managed Account to deliver portfolio securities to a Pooled Fund in respect of the purchase of securities of the Pooled Fund by the Managed Account, or receiving portfolio securities from the investment portfolio of a Pooled Fund in respect of a redemption of securities of the Pooled Fund by the Managed Account. In addition, In-Specie Transaction also means the purchase by a Pooled Fund of securities of another Pooled Fund, and the redemption of securities held by a Pooled Fund in another Pooled Fund, and as payment for such purchase or redemption, in whole or in part, by making good delivery of portfolio securities that meet the investment criteria of that Pooled Fund.

Representations

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

1. The Filer is a corporation incorporated under the laws of the province of Ontario. Its head office is located in Toronto, Ontario.

2. The Filer is registered as a portfolio manager and an exempt market dealer with the Ontario Securities Commission and as a portfolio manager in each of British Columbia, Alberta, Manitoba and Nova Scotia.

3. The Filer is the manager and portfolio manager of certain existing investment funds (the Existing Pooled Funds), including the Manitou Partners Registered Fund and the Manitou Income Fund, and may, in the future, be the manager and portfolio manager of other investment funds, the securities of which are offered pursuant to exemptions from the prospectus requirements in the Jurisdictions (the Future Pooled Funds, and together with the Existing Pooled Funds, the Pooled Funds).

4. A company that is not an affiliate of the Filer acts as trustee of the Existing Pooled Funds and will act in such capacity for each Future Pooled Fund.

5. The Filer and each Existing Pooled Fund are not in default of securities legislation in any Jurisdiction.

6. The Filer offers discretionary portfolio management services to individuals, corporations and other entities (Clients) seeking wealth management or related services under a written agreement (Managed Account Agreement) in connection with a managed account (Managed Account) of the Client with the Filer.

7. Pursuant to the Managed Account Agreement entered into with each Client, the Filer makes investment decisions for each Managed Account and has full discretionary authority to trade in securities for each Managed Account without obtaining the specific consent or instructions of the Client to the trade.

8. The portfolio management services provided by the Filer to each Client consists of the following:

a. each Client executes a Managed Account Agreement whereby the Client authorizes the Filer to supervise, manage and direct purchases and sales in the Client's Managed Account, at the Filer's full discretion on a continuing basis;

b. the Filer's qualified employees perform investment research, securities selection and portfolio management functions with respect to all securities, investments, cash and cash equivalents and other assets in the Managed Account;

c. each Managed Account holds securities and other investments as selected by the Filer in its sole discretion; and

d. the Filer retains overall responsibility for the advice provided to its Clients and has a designated senior officer to oversee and supervise the Managed Account.

9. The Filer's minimum Managed Account size is generally $2 million, which may be waived at the Filer's discretion.

10. Investments in individual securities may at certain times not be appropriate in certain circumstances for the Filer's Clients. Consequently, the Filer may, where authorized under the Managed Account Agreement, from time to time invest Client assets in securities of any one or more of the Pooled Funds in order to give its Clients the benefit of asset diversification and economies of scale regarding minimum commission charges on portfolio trades and generally to facilitate portfolio management.

11. The Filer wishes to be able to enter into transactions that permit payment, in whole or in part, for securities of a Pooled Fund (Fund Securities) purchased by a Managed Account to be made by making good delivery of portfolio securities, held by such Managed Account, to a Pooled Fund, provided those portfolio securities meet the investment criteria of the Pooled Fund.

12. Similarly, following a redemption of Fund Securities by a Managed Account, the Filer wishes to be able to enter into transactions that permit payment, in whole or in part, of redemption proceeds to be satisfied by making good delivery of portfolio securities held in the investment portfolio of a Pooled Fund to such Managed Account, provided those portfolio securities meet the investment criteria of the Managed Account.

13. The Filer anticipates that such In-Specie Transactions will typically occur following a redemption of Fund Securities where a Managed Account invested in such Pooled Fund has experienced a change in circumstances which results in the Managed Account being an ideal candidate for direct holdings of individual portfolio securities rather than Fund Securities, or vice versa.

14. The Filer wishes to be able to enter into In-Specie Transactions for purchases and redemptions of Fund Securities between two Pooled Funds. This will occur where, as part of its portfolio management, a Pooled Fund wishes to obtain exposure to certain investments or category of asset classes invested in by a second Pooled Fund by investing in Fund Securities of that second Pooled Fund. The Filer wishes to be able to enter into transactions that permit payment, in whole or in part, for the Fund Securities to be made by making good delivery of portfolio securities held by the Pooled Fund to the second Pooled Fund in which it seeks to invest. Similarly, following a redemption of Fund Securities, the Filer wishes to be able to enter into transactions that permit payment, in whole or in part, of the redemption proceeds to be satisfied by making good delivery of portfolio securities held in the investment portfolio of the Pooled Fund being redeemed, provided those portfolio securities meet the investment criteria of the Pooled Fund accepting those portfolio securities.

15. Each Managed Account Agreement or other documentation will contain the authorization of the Client for the Filer to engage in In-Specie Transactions on behalf of the Managed Account.

16. The Filer will value portfolio securities under an In-Specie Transaction using the same values to be used on that day to calculate the net asset value for the purpose of the issue price or redemption price of Fund Securities.

17. None of the portfolio securities which are the subject of an In-Specie Transaction will be securities of related issuers of the Filer.

18. A Pooled Fund will keep written records of the In-Specie Transactions, including records of each purchase and sale of portfolio securities and the terms thereof for a period of five years commencing after the end of the financial year in which the trade occurred, the most recent two years in a reasonably accessible place.

19. Since the Filer is the portfolio manager of the Managed Accounts and the Pooled Funds, the Filer would be considered a "responsible person" within the meaning of the Legislation.

20. Prior to entering into an In-Specie Transaction involving a Pooled Fund and/or Managed Account, the proposed transaction will be reviewed to ensure that the conditions of the Exemption Sought are or will be met at the time of the transaction and to determine that the transaction represents the business judgment of the Filer, uninfluenced by considerations other than the best interests of the Pooled Fund and/or Managed Account

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:

a) in connection with an In-Specie Transaction where a Managed Account acquires Fund Securities:

(i) the Filer obtains the prior written consent of the Client of the Managed Account before it engages in any In-Specie Transaction;

(ii) the Pooled Fund would, at the time of payment, be permitted to purchase the securities;

(iii) the securities are acceptable to the Filer as portfolio manager of the Pooled Fund and consistent with the Pooled Fund's investment objective;

(iv) the value of the securities is at least equal to the issue price of the Fund Securities of the Pooled Fund for which they are used as payment, valued as if the securities were portfolio assets of that Pooled Fund;

(v) the account statement next prepared for the Managed Account describes the securities delivered to the Pooled Fund and the value assigned to such securities;

(vi) the Pooled Fund will keep written records of each In-Specie Transaction in a financial year of the Pooled Fund, reflecting details of the securities delivered to the Pooled Fund and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place;

b) in connection with an In-Specie Transaction where a Managed Account redeems Fund Securities:

(i) the Filer obtains the prior written consent of the Client of the Managed Account before it engages in an In-Specie Transaction;

(ii) the securities are acceptable to the Filer as portfolio manager of the Managed Account and consistent with the Managed Account's investment objective;

(iii) the value of the securities is equal to the amount at which those securities were valued in calculating the net asset value per Fund Security used to establish the redemption price;

(iv) the Client of the Managed Account has not provided notice to terminate the Managed Account Agreement;

(v) the account statement next prepared for the Managed Account describes the securities delivered to the Managed Account and the value assigned to such securities; and

(vi) the Pooled Fund will keep written records of each In-Specie Transaction in a financial year of the Pooled Fund, reflecting details of the securities delivered by the Pooled Fund and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place; and

c) in connection with an In-Specie Transaction where a Pooled Fund purchases Fund Securities:

(i) the Pooled Fund would, at the time of payment, be permitted to purchase the securities;

(ii) the securities are acceptable to the Filer as portfolio manager of the Pooled Fund and consistent with such Pooled Fund's investment objective;

(iii) the value of the securities is equal to the issue price of the Fund Securities of the Pooled Fund, valued as if the securities were portfolio assets of that Pooled Fund;

(iv) the Pooled Fund will keep written records of each In-Specie Transaction in a financial year of the Pooled Fund, reflecting details of the securities delivered to the Pooled Fund and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place; and

d) in connection with an In-Specie Transaction where a Pooled Fund redeems Fund Securities:

(i) the securities are acceptable to the Filer as portfolio manager of the Pooled Fund and consistent with the Pooled Fund's investment objective;

(ii) the value of the securities is equal to the amount at which those securities were valued in calculating the net asset value per security used to establish the redemption price;

(iii) the Pooled Fund will keep written records of each In-Specie Transaction in a financial year of the Pooled Fund, reflecting details of the securities delivered by the Pooled Fund and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place;

e) the Filer does not receive any compensation in respect of any In-Specie Transaction and, in respect of any delivery of securities further to an In-Specie Transaction, the only charges paid by the Managed Account or the applicable Pooled Fund is the commission charged by the dealer executing the trade (if any) and/or any administrative charges levied by the custodian.