Letko, Brosseau & Associates Inc.

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) of NI 31-103 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, ss. 13.5(2)(b), 15.1.

June 17, 2011

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

QUÉBEC AND ONTARIO

(the Jurisdictions)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

LETKO, BROSSEAU & ASSOCIATES INC.

(the Filer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) providing an exemption from the requirement in section 13.5(2) b) iii) of National Instrument 31-103 -- Registration Requirements and Exemptions 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, to permit (each purchase and redemption, an In Specie Transaction):

a) the purchase by a Fund (defined below) of securities of another Fund, and the redemption of securities held by a Fund in another 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 objectives of that Fund; and

b) the purchase by a Managed Account (defined below) of securities of a Fund, and the redemption of securities held by a Managed Account in a Fund, and as payment:

i) for such purchase, in whole or in part, by the Managed Account making good delivery of portfolio securities to the Fund; and

ii) for such redemption, in whole or in part, by the Fund making good delivery of portfolio securities to the Managed Account.

(the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

a) the Autorité des marchés financiers is the principal regulator for this application,

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 British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador, and

c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

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

Fund means an investment fund managed by the Filer or managed in the future by the Filer to which National Instrument 81-102 -- Mutual Funds does not apply.

Managed Account means an account over which the Filer has discretionary authority.

Certain other defined terms have the meanings given to them above or below.

Representations

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

1. The Filer is incorporated under the Canada Business Corporations Act, with its head office in Montreal, Quebec.

2. The Filer is registered as a portfolio manager in Québec, Ontario, Alberta, British Columbia, New Brunswick, Nova Scotia, Prince Edward Island, Saskatchewan, Manitoba and Newfoundland and Labrador.

3. The Filer is also registered as investment fund manager in Québec.

4. Each Fund is, or will be, an investment fund established as a trust or corporation under the laws of Canada or a jurisdiction of Canada.

5. The Filer is, or will be the manager and portfolio manager of each of the Funds.

6. Desjardins Trust Inc. acts as trustee, where applicable, and custodian of each of the Funds.

7. The Funds are not, and will not be, reporting issuers in any jurisdiction of Canada.

8. Securities of the Funds are, or will be, distributed pursuant to exemptions from the prospectus requirements in each jurisdiction of Canada.

9. The Filer and each of the Funds are not in default of securities legislation in any jurisdiction of Canada.

10. The Filer is also the portfolio manager of each of the Managed Accounts.

11. Each client who wishes to receive the investment management services of the Filer executes a written agreement (the Letter of Appointment) whereby the client appoints the Filer to act as portfolio manager in connection with an investment portfolio of the client.

12. Pursuant to the Letter of Appointment, the Filer has discretionary authority to trade in securities for the Managed Account without obtaining the specific consent of the client to execute the trade, including investing the Managed Account in Funds for which the Filer is the portfolio manager and for changing those Funds as the Filer determines in accordance with the investment objectives of the Managed Accounts.

13. To ensure that neither the Managed Account nor a Fund incurs significant expenses related to the disposition and acquisition of portfolio securities in connection with the purchase or redemption of securities of a Fund, the Filer proposes to facilitate such purchases and redemptions of the Funds securities by doing In Specie Transactions.

14. The Filer may determine that in lieu of holding individual securities, a Managed Account would be better served to be invested in one or more of the Funds. As a result, the Filer desires to have such Managed Accounts subscribe for securities of the relevant Funds in the form of an In Specie Transaction. Further, future clients of the Filer may have an existing portfolio of securities when they retain the Filer such that the Filer may similarly desire to have the clients subscribe for securities of the relevant Funds in the form of an In Specie Transaction, provided these securities are appropriate for the Fund.

15. In addition, due to portfolio changes for a Managed Account, the Filer may determine to redeem securities of a Fund held by a Managed Account in the form of an In Specie Transaction and subscribe for securities of another Fund or Funds in the form of an In Specie Transaction or simply hold the individual portfolio securities in the Managed Account. Alternatively, the client may determine to terminate its relationship with the Filer or to change its investment objectives and may request a redemption of its securities in a Fund in the form of an In Specie Transaction.

16. The Filer may also determine that a Fund needs exposure to certain investments or categories of asset classes invested by another Fund and would be better served by investing in securities of that Fund. As a result, the Filer wishes to be able to enter into In Specie Transactions between Funds.

17. At the time of an In Specie Transaction, the Filer will have in place policies and procedures to enable the Funds and Managed Accounts to engage in In Specie Transactions with Funds and Managed Accounts, as applicable:

a) prior to engaging in In Specie Transactions on behalf of a Managed Account, the Letter of Appointment or other documentation in respect of the Managed Accounts will contain the authorization of the client for the Filer to engage in In Specie Transactions;

b) the compliance officer of the Filer will pre-approve each In Specie Transaction in connection with the purchase of securities of the Fund and each payment of redemption proceeds in the form of an In Specie Transaction;

c) the portfolio securities transferred in an In Specie Transaction will meet the investment objectives of the Fund or Managed Account, as the case may be, acquiring the portfolio securities;

d) Desjardins Trust Inc. will value the portfolio securities under an In Specie Transaction using the same values that are used to calculate the net asset value for the purpose of the issue price or redemption price of securities of the Fund;

e) none of the portfolio securities which are the subject of each In Specie Transaction will be securities of related issuers of the Filer; and

f) the Fund will keep written records of each In Specie Transaction, including records of each purchase and redemption 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.

18. Effecting In Specie Transactions of securities between a Fund and a Managed Account and between two Funds will allow the Filer to manage each asset class more effectively and reduce transaction costs for the client and the Fund or the two Funds. For example, such trading reduces market impact costs, which can be detrimental to the clients and/or the Fund(s). In Specie Transactions also allow a portfolio manager to retain within its control institutional-size blocks of securities that otherwise would need to be broken and re-assembled.

19. The only cost which will be incurred by a Fund or Managed Account for an In Specie Transaction is an administrative charge levied by the custodian of the Fund in recording the trades.

20. As the Filer is, or will be, the manager and portfolio manager of the Funds and the portfolio manager of the Managed Accounts, as applicable, the Filer would be considered a "responsible person" within the meaning of the applicable provisions of the Legislation. Accordingly, absent the granting of the Exemption Sought, the Filer would be prohibited from engaging in In Specie Transactions.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers 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 securities of a Fund:

i) the Letter of Appointment or other documentation in respect of the Managed Account contains the authorization of the client for the Filer to engage in the In Specie Transactions;

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

iii) the securities are acceptable to the Filer as portfolio manager of the Fund and meet the investment objectives of the Fund;

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

v) none of the securities which are the subject of the In Specie Transaction will be securities of related issuers of the Filer;

vi) the account statement next prepared for the Managed Account will describe the securities delivered to the Fund and the value assigned to such securities; and

vii) the Filer will keep written records of each In Specie Transaction in a financial year of the Fund, reflecting details of the securities delivered to the 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 securities of a Fund:

i) the Letter of Appointment or other documentation in respect of the Managed Account contains the authorization of the client for the Filer to engage in the In Specie Transactions;

ii) the securities are acceptable to the Filer as portfolio manager of the Managed Account and meet the investment objectives of the Managed Account;

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

iv) none of the securities which are the subject of the In Specie Transaction will be securities of related issuers of the Filer;

v) the account statement next prepared for the Managed Account will describe the securities received from the Fund and the value assigned to such securities; and

vi) the Filer will keep written records of each In Specie Transaction in a financial year of the Fund, reflecting details of the securities delivered by the 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.

c) in connection with an In Specie Transaction where a Fund purchases the securities of another Fund:

i) the Fund acquiring the securities 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 Fund and meet the investment objectives of the Fund acquiring the securities;

iii) the value of the portfolio securities is equal to the issue price of the securities of the Fund for which they are used as payment, valued as if the securities were portfolio assets of that Fund;

iv) none of the portfolio securities which are the subject of the In Specie Transaction will be securities of related issuers of the Filer; and

v) the Filer will keep written records of each in Specie Transaction in a financial year of the Fund, reflecting details of the securities delivered to the 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 Fund redeems the securities of another Fund:

i) the securities are acceptable to the Filer as portfolio manager of the Fund and meet the investment objectives of the Fund acquiring the securities;

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

iii) the Filer will keep written records of each In Specie Transaction in a financial year of the Fund, reflecting details of the securities delivered by the 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

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 Fund are administrative charges levied by the custodian.