Intact Investment Management Inc.

Headnote

MI 11-102 and NP 11-203 -- Relief granted from paragraph 13.5(2)(b) of NI 31-103 to permit trades between investment portfolios of affiliates and limited partnership, all subsidiaries of same parent -- inter-entity trades will comply with conditions of subsection 6.1(2) of NI 81-107 except for requirements to have an Independent Review Committee and obtain its approval of trades.

Applicable Legislative Provisions

National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. ss. 13.5(2)(b), 15.1.

National Instrument 81-107 Independent Review Committee for Investment Funds, ss. 6.1(2), 6.1(4).

December 28, 2011

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the Jurisdiction)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

INTACT INVESTMENT MANAGEMENT INC.

(the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for an exemption pursuant to Section 15.1 of NI 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) from the investment restriction contained in Section 13.5(2)(b) of NI 31-103 in order to permit the Filer to purchase or sell securities to or from the investment portfolio of IFC, the Affiliates, Future Affiliates and the LP (as these terms are defined below) for which the Filer acts as an adviser (the Exemption Sought).

Under the Process for Exemptive Relief Applications:

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) the Filer has provided notice that Subsection 4.7(1) of Multilateral Instrument 11-102 -- Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta and Québec.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

"Current Market Price of the Security" means,

(i) if the security is an exchange-traded security or a foreign exchange-traded security,

A. the closing sale price on the day prior to the transaction as reported on the exchange upon which the security is listed or the quotation trade reporting system upon which the security is quoted, or

B. if there are no reported transactions for the day prior to the transaction, the average of the highest current bid and lowest current ask for the security as displayed on the exchange upon which the security is listed or the quotation trade reporting system upon which the security is quoted, or

C. if the closing sale price on the day prior to the transaction is outside of the closing bid and closing ask, the average of the highest current bid and lowest current ask for the security as displayed on the exchange upon which the security is listed or the quotation trade reporting system upon which the security is quoted; or

(ii) for all other securities, the average of the current values determined on the basis of reasonable inquiry; and

"Market Integrity Requirements" means

(i) if the security is an exchange-traded security, the purchase or sale

A. is printed on a marketplace that executes trades of the security; and

B. complies with the market conduct and display requirements of the marketplace, its regulation services provider and securities regulatory authorities; or

(ii) if the security is a foreign exchange-traded security, the purchase or sale complies with the requirements that govern transparency and trading of foreign exchange traded securities on the foreign exchange or foreign quotation and trade reporting system; or

(iii) for all other securities, the purchase or sale is through a dealer, if the purchase or sale is required to be reported by a registered dealer under applicable securities legislation.

Representations

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

1. The Filer is a corporation incorporated under the Canada Business Corporations Act, and is registered under NI 31-103 in Ontario, Quebec, British Columbia and Alberta as an adviser in the category of portfolio manager.

2. The head office of the Filer is located in Toronto, Ontario.

3. The Filer is a wholly-owned subsidiary of Intact Financial Corporation (IFC).

4. IFC is a holding company incorporated under the Canada Business Corporations Act and is a reporting issuer in all provinces and territories of Canada. IFC's registered and principal business office is located in Toronto, Ontario.

5. The Filer and IFC are not in default of securities legislation in any of the provinces and territories of Canada.

6. IFC conducts insurance business activities primarily through its subsidiaries, Intact Insurance Company (an insurance company organized under the laws of Canada), Novex Insurance Company (an insurance company organized under the laws of Canada), The Nordic Insurance Company of Canada (an insurance company organized under the laws of Canada), Trafalgar Insurance Company of Canada (an insurance company organized under the laws of Canada), Belair Insurance Company Inc. (an insurance company organized under the laws of Québec), I.B. Reinsurance Inc.(an insurance company organized under the laws of Barbados), 866295 Alberta Ltd. (an insurance brokerage holding company organized under the laws of Alberta), Intact General Insurance Inc. (an insurance company organized under the laws of Canada), AXA Farm Insurance Inc. (an insurance company organized under the laws of Québec), AXA General Insurance (an insurance company organized under the laws of Canada), AXA Insurance (Canada) (an insurance company organized under the laws of Canada), AXA Insurance Inc. (an insurance company organized under the laws of Québec) and AXA Pacific Insurance Company (an insurance company organized under the laws of Canada) (collectively, the Affiliates), and any insurance companies that will be created or acquired by IFC and will be a subsidiary of IFC (the Future Affiliates).

7. Except for 866295 Alberta Ltd., the Affiliates and Future Affiliates are or will be regulated insurance companies affiliated with IFC and are or may be limited partners of Intact Investment Limited Partnership (the LP) of which the General Partner is Intact Investment General Partner Inc. Each of the Affiliates and the Future Affiliates are or will be, direct or indirect wholly-owned subsidiaries of IFC.

8. The Filer is the investment manager of the investment portfolios owned by IFC, the LP, the Affiliates and the Future Affiliates pursuant to an Advisor Agreement between the Filer and IFC dated January 1, 1999 (the Advisor Agreement).

9. The Advisor Agreement provides that IFC shall pay to the Filer, as full compensation for services rendered, a quarterly fee based on assets under management.

10. As at September 30, 2011, the IFC investment portfolio amounted to approximately $11.8 billion, which consisted of $0.2 billion of cash and Government of Canada T-Bills, $7.6 billion of debt securities, $1.7 billion of preferred equity, $1.9 billion of common equity and $0.4 billion of broker loans.

11. Each of the Affiliates, Future Affiliates and the LP are not and will not be reporting issuers and do not intend to become reporting issuers in Canada. IFC is the only reporting issuer within the structure of the group and there are no current intentions to change this structure.

12. The Filer wishes to purchase or sell securities to or from the investment portfolio of IFC, the Affiliates, Future Affiliates or the LP for which the Filer is the portfolio manager (the Inter-Entity Trades).

13. Section 13.5 of NI 31-103 prohibits the Filer from Inter-Entity Trades (the Investment Restriction) because the Filer is a responsible person and IFC, the Affiliates and the Future Affiliates are deemed to be responsible persons since they may have access to investment decisions made by the Filer. In addition, the LP is deemed to be a responsible person since the LP is an investment fund for which a responsible person, the Filer, acts as an advisor.

14. The objective of the Inter-Entity Trade is to minimize transaction costs, optimize the investment strategies of IFC, the LP, the Affiliates and the Future Affiliates, and to ensure effective risk management by minimizing market risk due to price fluctuations and market volatility.

15. The Inter-Entity Trades do not give rise to any conflicts of interest because the Inter-Entity Trades will be made within the same corporate family for the ultimate benefit of IFC.

16. Since the Filer applies the same investment objectives and strategies with regard to the investment portfolios of each of IFC, the LP, the Affiliates and the Future Affiliates, the Inter-Entity Trades will be made in the best interests of each party to such trades.

17. The Inter-Entity Trades will be made at the fair market price of the securities and no fees or costs will be paid by or to any parties beyond costs normally associated with such transactions when conducted at arms length.

18. Each of IFC, the Affiliates, Future Affiliates and the LP have entered into an investment management agreement or other documentation with the Filer that permits the Inter-Entity Trades.

19. The Inter-Entity trades will be made directly or indirectly for the exclusive and mutual benefit of IFC, the LP, the Affiliates and the Future Affiliates and in compliance with applicable insurance legislation.

20. The Filer has established written policies and procedures relating to Inter-Entity Trades with IFC, the LP, the Affiliates and the Future Affiliates.

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:

1. Each of the Affiliates, Future Affiliates and the LP are not reporting issuers in Canada;

2. The Inter-Entity Trades are consistent with the investment objectives and strategies of the investment portfolios of each of IFC, the Affiliates, Future Affiliates, and the LP;

3. The investment management agreement or other documentation in respect of the investment portfolios of each of IFC, the Affiliates, Future Affiliates, and the LP permits Inter-Entity Trades;

4. At the time of the Inter-Entity Trade,

(a) the bid and ask price of the security is readily available;

(b) the Inter-Entity Trade is executed at the Current Market Price of the Security;

(c) the Inter-Entity Trade is subject to Market Integrity Requirements; and

(d) the Filer keeps written records of each Inter-Entity Trade including,

(i) a record of each purchase and sale of securities,

(ii) the parties to the trade, and

(iii) the terms of the purchase or sale

for five years after the end of the fiscal year in which the trade occurred, the most recent two years in a reasonably accessible place;

5. Each Inter-Entity Trade represents the business judgment of the Filer uninfluenced by considerations other than the best interests of the investment portfolios of each of IFC, the Affiliates, Future Affiliates, and the LP as the case may be;

6. Each Inter-Entity Trade is in compliance with the Filer's written policies and procedures relating to Inter-Entity Trades;

7. Each Inter-Entity Trade achieves a fair and reasonable result for the investment portfolios of each of IFC, the Affiliates, Future Affiliates, and the LP; and

8. No fees or costs will be paid by or to any parties for any Inter-Entity Trade made between the investment portfolios of each of IFC, the Affiliates, Future Affiliates, and the LP beyond costs normally associated with such transactions when conducted at arms length.