Timbercreek Senior Mortgage Investment Corporation

Headnote

NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption from National Instrument 81-106 Investment Fund Continuous Disclosure to permit an investment fund that uses specified derivatives to calculate its NAV twice a month subject to certain conditions. Closed-end exchange traded fund does not issue securities continuously, nor are its units redeemable at a price computed by reference to the Fund's NAV per unit. Fund investment is in a portfolio of mortgage loans from across Canada. The mortgage loans comprising the portfolio do not trade in actively quoted markets. Each NAV calculation requires each mortgage loan in the portfolio to be individually assessed and analyzed with respect to (a) market interest rates; (b) credit spreads for similar loans; and (iii) the specific creditworthiness and status of an existing borrower including considering, (i) payment history; (ii) value of underlying property securing the loan or mortgage; (iii) overall economic conditions; (iv) status of construction or property development (if applicable); and (v) other conditions specific to the underlying property or building, all of which is then subject to an independent review by an independent valuator. Given the nature of its underlying securities, it would be impractical, costly and unduly burdensome to provide NAV on a more frequent basis than twice per month.

Applicable Legislative Provisions

National Instrument 81-106 Investment Fund Continuous Disclosure, s. 14.2(3)(b).

June 4, 2012

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

TIMBERCREEK SENIOR MORTGAGE

INVESTMENT CORPORATION

(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 17.1 of NI 81-106 from the requirement set out in section 14.2(3)(b) of NI 81-106 that the Filer must calculate its net asset value at least once every business day (the "Exemption Sought").

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

1. the Ontario Securities Commission is the principal regulator for this application; and

2. 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 the Non-Principal Jurisdictions.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions and MI 11-102 have the same meaning in this decision unless they are otherwise defined in this decision.

Representations

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

1. The Filer is a newly-incorporated federal corporation under the laws of the Canada Business Corporations Act. The head and registered office and mailing address of the Filer is located at 1000 Yonge Street, Suite 500, Toronto, Ontario M4W 2K2.

2. The Filer is not in default of securities legislation in any jurisdiction.

3. The Filer will be a non-redeemable investment fund to which section 14.2(3)(b) of NI 81-106 applies, but will not be subject to the requirements of National Instrument 81-102 -- Mutual Funds ("NI 81-102"). The Filer will not be a "mutual fund" because its shareholders will not be entitled to receive, on demand, an amount computed by reference to the value of a proportionate interest in the whole or in part of the net assets of the Filer, as contemplated in the definition of "mutual fund" in the securities legislation of the Jurisdictions.

4. The Filer's investment objectives are, with a primary focus on capital preservation, to acquire and maintain a diversified portfolio of first mortgage loans ("Mortgage Assets") that generates attractive, stable returns in order to permit the Filer to pay monthly distributions to its shareholders.

5. The Filer intends to acquire, following the closing of the Offering (as defined below), a portfolio of Mortgage Assets (the "Portfolio"), in order to establish its initial portfolio of Mortgage Assets.

6. The Filer will seek to accomplish its investment objectives through investments acquired for the Portfolio. The Manager will seek to generate attractive, stable returns by acquiring a diversified Portfolio of Mortgage Assets that are secured primarily by residential (including multi-residential) real estate as well as office, retail and industrial properties, primarily located in large urban markets and their surrounding areas. These properties are typically more liquid and provide less volatile security for mortgage loans. The Mortgage Assets will be primarily secured by income-producing assets where interest payments on the mortgages can be serviced from cash flow generated by the underlying assets.

7. Timbercreek Asset Management Ltd. (the "Manager") will act as manager and portfolio advisor of the Filer. The Manager was incorporated under the laws of Ontario on June 16, 2008. The head office, registered office and principal business address of the Manager is located at 1000 Yonge Street, Suite 500, Toronto, Ontario M4W 2K2.

8. The Filer intends to make equal monthly cash distributions by way of dividend to holders of shares of record on the last business day of each month.

9. The Filer will make a public offering (the "Offering") of Class A shares ("Class A Shares") in the capital of the Filer and Class B shares ("Class B Shares") in the capital of the Filer in the Jurisdictions.

10. The Final Prospectus of the Filer will qualify the distribution to the public of the Class A Shares in the Jurisdictions.

11. Conditional approval has been granted for the listing of the Class A Shares for trading on the Toronto Stock Exchange (the "TSX").

12. The Filer is authorized to issue an unlimited number of Class A Shares, Class B shares, Class I shares ("Class I Shares"), Class J shares ("Class J Shares") and voting shares (the "Voting Shares"). Before giving effect to the Offering, there are issued and outstanding 99 Voting Shares.

The Class A Shares, Class B Shares, Class I Shares and Class J Shares are entitled to receive dividends as and when declared by the board of directors of the Filer. The holders of Class A Shares, Class B Shares, Class I Shares and Class J Shares are not entitled to vote at meetings of the shareholders of the Filer, other than as required by law or as set forth in the Final Prospectus. The Class A Shares, Class B Shares, Class I Shares and Class J Shares rank equally with each other and in priority to the Voting Shares with respect to the payment of distributions and the repayment of capital on the dissolution, liquidation or winding up of the Filer.

The holders of Voting Shares are not entitled to receive dividends. The holders of the Voting Shares will be entitled to one vote per share. The Voting Shares are redeemable and retractable at a price of $1.00 per share. The Voting Shares rank subsequent to the Class A Shares, Class B Shares, Class I Shares and Class J Shares with respect to distributions on the dissolution, liquidation or winding-up of the Filer.

13. Commencing in March 2012, a Class A Share may be surrendered to the Filer's registrar and transfer agent for redemption on the last business day of any month, other than February (each a "Redemption Date"), by no later than 4:00 p.m. (Toronto time) on the 15th day of such month or the immediately preceding business day in the event that the 15th day is not a business day. Payment of the proceeds of redemption will be made on or before the last business day of the following month (the "Redemption Payment Date"). Shareholders whose Class A Shares are so surrendered for redemption will be entitled to receive a redemption price per Class A Share equal to the lesser of: (i) 95% of the Trading Price (as defined below) of the Class A Shares; and (ii) the Market Price (as defined below). Any distributions declared and unpaid on or before a Redemption Date in respect of Class A Shares tendered for redemption on such Redemption Date will also be paid on the Redemption Payment Date. For these purposes, "Trading Price" means the volume weighted average trading price on the TSX or such other stock exchange on which the Class A Shares may be listed (the "Exchange") for the ten trading days immediately preceding the relevant Redemption Date; and "Market Price" means the closing price of the Class A Shares on the Exchange on the relevant Redemption Date or, if there was no trade on such Redemption Date, the average of the last bid and the last asking prices of the Class A Shares on the Exchange on the Redemption Date.

14. Shares, provided that the redemption price per Class B Share will be equal to The lesser of: (i) 95% of the Trading Price of the Class A Shares multiplied by the Class B Exchange Ratio (as such term is defined in the Final Prospectus); and(ii) the Market Price multiplied by the Class B Exchange Ratio.

15. Commencing in February 2013, Class A Shares may be redeemed on the last business day in February of each year (each, an "Annual Redemption Date") at a redemption price per Class A Share equal to 100% of the applicable net redemption value per Class A Share. Shares must be surrendered for annual redemption to the Filer's registrar and transfer agent by no later than 4:00 p.m. (Toronto time) on or before the first business day in February. Payment of the proceeds of annual redemptions will be made on or before the last business day of the month following the redemption date.

16. Class B Shares may be redeemed on an Annual Redemption Date at a redemption price per Class B Share equal to 100% of the net redemption value per Class B Share.

17. Commencing in March 2012, Class I Shares and Class J Shares may be surrendered to the Filer's registrar and transfer agent for redemption on a Redemption Date by no later than 4:00 p.m. (Toronto time) on the 15th day of such month or the immediately preceding business day in the event that the 15th day is not a business day. Payment of the proceeds of redemption will be made on the Redemption Payment Date. Shareholders whose Class I Shares are so surrendered for redemption will be entitled to receive a redemption price per Class I Share equal to the lesser of: (i) 95% of the Trading Price of the Class A Shares multiplied by the Class I Exchange Ratio (as such term is defined in the Final Prospectus); and (ii) the Market Price multiplied by the Class I Exchange Ratio. Shareholders whose Class J Shares are so surrendered for redemption will be entitled to receive a redemption price per Class J Share equal to the lesser of: (i) 95% of the Trading Price of the Class A Shares multiplied by the Class J Exchange Ratio (as such term is defined in the Final Prospectus); and (ii) the Market Price multiplied by the Class J Exchange Ratio. Any distributions declared and unpaid on or before a Redemption Date in respect of Class I Shares and Class J Shares tendered for redemption on such Redemption Date will also be paid on the Redemption Payment Date.

18. Commencing February 2013, Class I Shares may be redeemed on an Annual Redemption Date at a redemption price per Class I Share equal to 100% of the applicable net redemption value per Class I Share and Class J Shares may be redeemed on an Annual Redemption Date at a redemption price per Class J Share equal to 100% of the applicable net redemption value per Class J Share. Class I Shares and Class J Shares must be surrendered for annual redemption to the Filer's registrar and transfer agent by no later than 4:00 p.m. (Toronto time) on or before the first business day in February. Payment of the proceeds of redemption will be made on or before the last business day of the month following the redemption date.

19. For the purposes of calculating the net redemption value for each class of shares (the "Class Net Redemption Value") in the capital of the Filer, the net asset value of the Filer (the "NAV") and the specific Share Class Expenses (as such term is defined in the Final Prospectus) is allocated to each class of shares in the capital of the Filer. The net redemption value per Class A Share will be the quotient obtained by dividing the Class Net Redemption Value of the Class A Shares by the total number of Class A Shares (immediately before any share redemptions and subscriptions) at the close of business on the relevant date of calculation or the last business day of the relevant month. The net redemption value per Class B Share will be the quotient obtained by dividing the Class Net Redemption Value of the Class B Shares by the total number of Class B Shares (immediately before any share redemptions and subscriptions) at the close of business on the relevant date of calculation or the last business day of the relevant month. The net redemption value per Class I Share will be the quotient obtained by dividing the Class Net Redemption Value of the Class I Shares by the total number of Class I Shares (immediately before any share redemptions and subscriptions) at the close of business on the relevant date of calculation or the last business day of the relevant month. The net redemption value per Class J Share will be the quotient obtained by dividing the Class Net Redemption Value of the Class J Shares by the total number of Class J Shares (immediately before any share redemptions and subscriptions) at the close of business on the relevant date of calculation or the last business day of the relevant month.

20. Under section 14.2(3)(b) of NI 81-106, an investment fund that uses specified derivatives must calculate its net asset value at least once every business day. The Filer will not engage in derivative transactions, other than derivative transactions to hedge interest rate risk and not for speculative purposes.

21. The Fund's ability to calculate its net asset value on a daily basis is affected primarily by the fact that there is no efficient pricing mechanism for the assets that the Fund invests in as the mortgage loans comprising the Portfolio do not trade in actively quoted markets. Each NAV calculation requires each mortgage loan in the portfolio to be individually assessed and analyzed with respect to(a) market interest rates; (b) credit:, spreads for similar loans; and (iii) the specific creditworthiness and status of an existing borrower including considering, (i) payment history; (ii) value of underlying property securing the loan or mortgage; (iii) overall economic conditions; (iv) status of construction or property development (if applicable); and (v) other conditions specific to the underlying property or building. This is in turn subject to an independent review by an independent valuator.

22. Given the nature of its underlying securities, it would be impractical, costly and unduly burdensome to provide NAV on a more frequent basis than twice per month.

23. The costs of complying with the Daily NAV Requirement will not provide incremental benefits to investor protection and market efficiency.

24. The Manager proposes to calculate the NAV of the Filer at the close of business (5:00 p.m. Toronto time) on the 15th day of each calendar month (or the next business day if the 15th day is not a business day) and at the close of business (5:00 p.m. Toronto time) on the last business day of each calendar month. The most recently calculated NAV for the Class A Shares, the Class B Shares, the Class I Shares and the Class J Shares will be available to the public upon request and will be posted at www.timbercreek.com for this purpose.

25. The Final Prospectus discloses that the NAV, when calculated, will be made available through the Internet at www.timbercreek.com.

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 the Filer's (final) prospectus discloses:

1. that the net asset value of the Filer is available to the public upon request;

2. a website that the public can access for this purpose; for so long as:

3. the Class A Shares are listed on the TSX; and

4. the Manager calculates the net asset value of the Filer at least twice per calendar month at the close of business (5:00 p.m. Toronto time) on the 15th day of each calendar month (or the next business day if the 15th day is not a business day) and at the close of business (5:00 p.m. Toronto time) on the last business day of each calendar month and makes the most recently calculated net asset value of the Filer available to the public upon request and posts it at www.timbercreek.com for this purpose.