Timbercreek Asset Management Inc. and Timbercreek Mortgage Investment Fund - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- Relief from investment restrictions prohibiting a mutual fund from knowingly making or holding an investment in a person or company in which the mutual fund, alone or together with one or more related mutual funds, is a substantial security holder - Mutual fund sold pursuant to available exemptions from prospectus and dealer registration requirements investing all net proceeds from sales in units of related Limited Partnership - Mutual fund is a "substantial security holder" of the Partnership - Relief granted subject to certain conditions.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 111(2)(b), 111(3), 113.

December 12, 2007

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO AND ALBERTA

(the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

TIMBERCREEK ASSET MANAGEMENT INC.

(the "Filer")

AND

IN THE MATTER OF

TIMBERCREEK MORTGAGE INVESTMENT FUND

(the "Fund")

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions has received an application from the Filer, on behalf of the Fund for a decision under the securities legislation of the Jurisdictions (the "Legislation") exempting the Fund from the investment restrictions contained in the Legislation which prohibit a mutual fund from knowingly making or holding an investment in a person or company in which the mutual fund, alone or together with one or more related mutual funds, is a substantial securitholder (the "Requested Relief").

Under the Mutual Reliance Review System ("MRRS") for Exemptive Relief Applications:

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

(b) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

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

Representations

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

1. The Filer is a corporation incorporated under the Business Corporations Act (Ontario) with its head office in Toronto, Ontario.

2. The Filer is responsible for management of the day-to-day activities of the Fund and the Partnership (as defined below).

3. Until such time as the Filer becomes registered with the Ontario Securities Commission in the categories of investment counsel and portfolio manager, the Fund and the Partnership have each retained Summerwood Capital Corp. to act as portfolio manager to provide investment advisory services to the Fund and the Partnership, respectively.

4. The Fund is an unincorporated open-ended investment trust which was formed on March 5, 2007 under the laws of Ontario and is governed by a declaration of trust dated March 5, 2007 (the "Declaration of Trust"), as it may be further amended from time to time. The Fund is not a reporting issuer. Pursuant to the Declaration of Trust, the majority of the trustees of the Fund are independent.

5. Timbercreek Mortgage Limited Partnership (the "Partnership") was formed upon the filing of a declaration of limited partnership on January 17, 2007, as amended on March 5, 2007 and is governed by a Limited Partnership Agreement, dated February 28, 2007, between Timbercreek Mortgage Fund GP Inc. (the "General Partner"), the Filer, as the initial limited partner, and each party that subsequently joins the Partnership (the "Limited Partnership Agreement").

6. All of the issued and outstanding shares of the General Partner are held by the Filer. The General Partner is responsible for the control of the business affairs of the Partnership pursuant to the Limited Partnership Agreement, and has appointed the Filer to advise in respect of its business and investments.

7. The Fund was created by the Filer in order to provide indirect exposure to the investment portfolio of the Partnership and its investment strategies through, primarily, direct investments by the Fund in units of the Partnership.

8. The Fund is being sold in Canada to investors on a continuous basis pursuant to available exemptions from the prospectus and dealer registration requirements in accordance with National Instrument 45-106 Prospectus and Registration Exemptions ("NI 45-106"). An offering memorandum (the "Offering Memorandum") in respect of the Fund is available to investors of the Fund.

9. The Partnership is not a reporting issuer and its units are not offered to the public. Pursuant to the Limited Partnership Agreement, the Partnership may not issue any units of the Partnership subsequent to the initial issue of units of the Partnership to the initial limited partner and to the Fund, unless the Fund consents.

10. The objectives of the Fund are (i) to provide holders of units with stable cash distributions, payable quarterly from indirect investments in "authorized investments" meeting the criteria described in the Offering Memorandum, and (ii) to preserve unitholder capital.

11. The Fund intends to meet its objectives by investing in units of the Partnership, which, in turn, invests in a diversified pool of mortgage loans secured by real assets. The Fund may hold interests in the Partnership directly or through a wholly-owned person.

12. The Partnership invests in first mortgages, second mortgages and interim investments, which generally include cash and cash equivalents and MBS pools that are rated "A" or higher.

13. The Fund is a "substantial security holder" in the Partnership pursuant to the Legislation at any time the Fund, alone or together with one or more related mutual funds, holds more than 20% of the outstanding units of the Partnership. On the first closing, the Fund was not a substantial security holder and purchases of units of the Partnership were made. It was initially determined that the investment restrictions in the Legislation described in this decision document did not apply, and the Fund made additional investments in units of the Partnership. Upon a subsequent determination that the Fund could be considered a "mutual fund" for purposes of the Legislation and the Requested Relief was required, an application was promptly submitted. The Fund currently holds all of the outstanding units of the Partnership.

14. Unitholders of the Fund are entitled to require the Fund to redeem, on a monthly basis, at the demand of the holders, the units of the Fund registered in their name for the specified redemption price, which subject to the limitation described below, is the net asset value per unit. However, in the event that the total amount payable by the Fund in respect of all units tendered for redemption in the same calendar month exceeds a specified limit (which may be waived by the trustees), such units will be redeemed in exchange for an amount equal to the fair market value of the units tendered for redemption, as determined by the trustees in their sole discretion. Such redemptions may be paid by way of a combination of cash and an in specie distributions of Fund assets. The Fund may also suspend redemptions of units in specified circumstances, including if the disposal of assets of the Fund is not reasonably practicable.

15. In connection with the purchase of units of the Partnership by the Fund, the Filer will ensure that the arrangements between or in respect of the Fund and the Partnership are such as to avoid the duplication of management fees or incentive fees. In addition, no sales or redemption fees are payable by the Fund in relation to its purchases or redemptions of units of the Partnership.

16. Unitholders of the Fund will have access to copies of the Fund's interim financial statements and audited financial statements which will include disclosure of the Partnership's investments.

17. In the absence of the Requested Relief, the Fund would be precluded from purchasing or holding units of the Partnership due to the investment restrictions contained in the Legislation.

18. The investments by the Fund in units of the Partnership represent the business judgement of responsible persons uninfluenced by considerations other than the best interests of the Fund. Such investments are part of the structure of the Fund rather than an individual portfolio investment decision.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.

The decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that:

1. units of the Fund are sold solely pursuant to available prospectus and dealer registration exemptions in accordance with NI 45-106;

2. no management or incentive fees are payable by the Fund that, to a reasonable person, would duplicate a fee payable by the Partnership for the same service;

3. no sales or redemption fees are payable by the Fund in relation to its purchases or redemptions of units of the Partnership;

4. the Filer does not vote the units of the Partnership that are held by the Fund, unless the Fund is the sole owner of Partnership units at the time of the meeting or effective date of the written resolution; and

5. the Offering Memorandum of the Fund discloses:

(a) that the Fund intends to invest all net proceeds from the sale of its units in Partnership units; and

(b) the fact that both the Fund and the Partnership are managed by the Filer.