Timbercreek Mortgage Investment Corporation et al.

Headnote

Order pursuant to subsection 121(2) of the Securities Act (Ontario) that an investment fund may make a one-time purchase of securities of a related issuer -- Relief conditional upon the purchase being consistent with the fund's objectives, review and approval of the purchase by the fund's Independent Review Committee and the retention of written records regarding the purchase.

Applicable Legislative Provisions

Ontario Securities Act, R.S.O. 1990, subsections 118(2)(b), and 121(2).

July 4, 2008

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990 c. S.5 AS AMENDED (the "Act")

AND

IN THE MATTER OF

TIMBERCREEK MORTGAGE INVESTMENT CORPORATION

(the "Fund")

AND

IN THE MATTER OF

TIMBERCREEK ASSET MANAGEMENT INC.

(the "Filer")

AND

IN THE MATTER OF

TIMBERCREEK MORTGAGE INVESTMENT FUND

("TMIF")

AND

IN THE MATTER OF

TIMBERCREEK MORTGAGE LIMITED PARTNERSHIP

("TMLP")

AND

IN THE MATTER OF

TIMBERCREEK MORTGAGE FUND GP INC.

(the "General Partner")

ORDER

Background

The Ontario Securities Commission (the "Commission") has received an application from the Filer for a decision under the Act that subsection 118(2)(b) of the Act, which prohibits a portfolio manager from causing any investment portfolio managed by it to purchase or sell the securities of any issuer from or to the account of a "responsible person" as defined in the Act, or an associate of a responsible person or the portfolio manager, shall not apply to the Filer in connection with the purchase of a portfolio of mortgage loans owned by TMLP where the purchase is made from or to the account of a responsible person of the Filer for the investment portfolio of the Fund (the "Requested Relief").

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:

1. The Fund filed a final prospectus dated June 25, 2008 (the "Final Prospectus") with the securities regulators in each of the provinces and territories of Canada (other than Quebec) as SEDAR project no. 01262136 and was issued a receipt dated June 26, 2008 in respect thereof.

The Filer

2. The Fund is a newly-incorporated company established under the laws of the Province of Ontario. The head and registered office and mailing address of the Fund is located at 25 Price Street, Toronto, Ontario M4W 1Z1.

3. The Fund's investment objective is, with a primary focus on capital preservation, to acquire and maintain a diversified portfolio of mortgage loan investments ("Mortgage Assets") that generates attractive, stable returns in order to permit the Filer to pay monthly distributions to its shareholders.

4. The Fund intends to acquire, following the closing of the public offering (the "Offering") of subscription receipts (the "Subscription Receipts"), two portfolios of Mortgage Assets, in order to establish its initial portfolio of Mortgage Assets (the "Initial Portfolio Acquisitions"), which will include a portfolio of mortgages owned by TMIF.

5. The Fund plans to achieve its investment objective by investing in a diversified portfolio of Mortgage Assets (the "Portfolio") consisting primarily of mortgage loans for which the principal amount of the loan, at the time of commitment, together with all other equal and prior ranking mortgages, does not exceed 75% of the value of the underlying real property securing the loan that are directly secured by residential (including multi-residential), office, retail and industrial real property across Canada, primarily located in larger urban markets and their surrounding areas, which are typically more liquid and provide less volatile security for mortgage loans.

The Fund Manager (also, the Filer)

6. The Filer was incorporated under the laws of Ontario on May 31, 2004. The head office, registered office and principal business address of the Filer is located at 25 Price Street, Toronto, Ontario M4W 1Z1.

7. The Filer is registered as an advisor under the Act in the categories of investment counsel and portfolio manager.

8. The Filer will act as manager and portfolio advisor of the Fund pursuant to a fund management agreement dated June 25, 2008.

9. The Filer also acts as the portfolio manager of TMIF.

Timbercreek Mortgage Limited Partnership

10. Timbercreek Mortgage Limited Partnership ("TMLP") is a limited partnership formed under the laws of the Province of Ontario. Timbercreek Mortgage Fund GP Inc. (the "General Partner") is the general partner of TMLP. The General Partner is a wholly-owned subsidiary of the Filer and the sole limited partner of TMLP is TMIF. The principal office of TMLP and the General Partner is located at 25 Price Street, Toronto, Ontario M4W 1Z1.

11. TMIF will purchase from the General Partner all of the issued and outstanding general partner units of TMLP and, thereafter, all of the assets and liabilities of TMLP will be distributed to TMIF pursuant to the termination and wind up of TMLP.

Acquisition of TMIF Mortgages

12. The Fund, TMIF and the General Partner, on behalf of TMLP, will enter into an acquisition agreement to be dated on or before the closing of the Initial Portfolio Acquisitions (the "Seed Portfolio Acquisition Agreement"). The Seed Portfolio Acquisition Agreement will provide, among other things, for the acquisition by the Fund of (i) mortgage loans from TMIF, and immediately thereafter (ii) all of the issued and outstanding units of TMIF, each in accordance with and subject to the prior approval of the unitholders of TMIF (the "TMIF Unitholders") at a meeting of TMIF Unitholders (the "TMIF Meeting") to consider and approve the transactions contemplated by the Seed Portfolio Acquisition Agreement. The completion of the transactions contemplated by the Seed Portfolio Acquisition Agreement will be conditional upon, among other things, the approval thereof by special resolution passed by a two-thirds majority of the TMIF Unitholders. A special meeting of the TMIF Unitholders was held for this purpose on July 2, 2008.

13. The purchase price for the mortgage loans held by TMIF (the "TMIF Mortgages") will be set out in the Seed Portfolio Acquisition Agreement and will be equal to the aggregate carrying value of the TMIF Mortgages (which includes the principal outstanding less any unearned income plus any accrued interest).

14. The acquisition of the TMIF Mortgages will be conditional on (i) all TMIF Mortgages purchased by the Fund not being in default (i.e., not in arrears) and (ii) TMIF representing that the fair values of the TMIF Mortgages are at least equal to their carrying values at the time of their purchase by the Fund.

15. The independent review committee (the "IRC") of the Fund, established pursuant to National Instrument 81-107 Independent Review Committee for Investment Funds, will become fully operational following the closing of the Offering and will review and approve the acquisition of the TMIF Mortgages by the Fund. The independent members of the board of directors of the Fund will approve the Seed Portfolio Acquisition Agreement. These independent directors are the same individuals who will constitute the IRC. The Final Prospectus disclosure describing the acquisition of the TMIF Mortgages has been unanimously approved by the board of directors of the Fund.

16. A description and summary of the loans comprising the TMIF Mortgages is included in the Final Prospectus.

17. The acquisition of the TMIF Mortgages is intended to provide a strong foundation for the Fund and to enhance the Portfolio in order to enable the Fund to achieve its investment objective. Moreover, the Filer believes that the acquisition of the TMIF Mortgages will be materially beneficial for investors in the Fund and TMIF Unitholders, because it will provide all stakeholders with exposure to a larger, more diversified portfolio of mortgage assets.

18. The acquisition of the TMIF Mortgages by the Fund from TMIF and a description and summary of the loans comprising the TMIF Mortgages are specifically disclosed in the Final Prospectus. By purchasing the Subscription Receipts, the shareholders of the Fund are, in effect, consenting to the acquisition of the TMIF Mortgages by the Fund from TMIF.

19. The Fund will file a copy of the Seed Portfolio Acquisition Agreement as a material contract on SEDAR.

20. As portfolio manager of the Fund, the Filer is a "responsible person" as defined in the Act.

21. The Filer is the portfolio manager of the Fund and of TMIF.

Decision

The Commission is satisfied that the test contained in the Act that provides the Commission with the authority to make the decision has been met.

The decision of the Commission under the Act is that the Requested Relief is granted, provided that:

(a) the purchase or sale is consistent with, or is necessary to meet, the investment objectives of the Fund;

(b) the IRC of the Fund reviews and approves the acquisition of the TMIF Mortgages by the Fund; and

(c) the Fund maintains the following written records of the purchases of the TMIF Mortgages:

(i) a record of each purchase and sale of mortgages;

(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.