National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval granted for change of manager of closed-end mutual funds under paragraph 5.5(1)(a) of NI 81-102 -- change of manager is not detrimental to investors or the public interest.
Applicable Legislative Provisions
National Instrument 81-102 Mutual Funds, ss. 5.5(1)(a), 5.5(3), 5.7 and 19.1.
September 10, 2014
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 TD SPONSORED COMPANIES INC. ("TDSCI") AND IN THE MATTER OF TD SPLIT INC., 5 BANC SPLIT INC AND BIG 8 SPLIT INC AND IN THE MATTER OF TIMBERCREEK ASSET MANAGEMENT LTD. ("Timbercreek", together with TDSCI, the "Filers")
The principal regulator in the Jurisdiction has received an application from TDSCI, the administrator and investment fund manager of TD Split Inc., 5Banc Split Inc. and Big 8 Split Inc. (collectively, the "Funds" and each, a "Fund") and Timbercreek for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") for approval pursuant to section 5.5(1)(a) of National Instrument 81-102 -- Mutual Funds ("NI 81-102") of a change in the manager of the Funds (the "Approval Sought").
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application; and
(b) the Filers have 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, Quebec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador.
Terms defined in National Instrument 14-101 -- Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filers:
1. TDSCI and Timbercreek entered into a definitive purchase and sale agreement dated June 24, 2014 (the "Purchase Agreement") under which Timbercreek agreed to acquire the rights to act as administrator and investment fund manager to the Funds under (i) the administration agreement dated November 15, 2010 between TD Split Inc. and TDSCI, (ii) the administration agreement dated December 15, 2011 between 5Banc Split Inc. and TDSCI and (iii) the administration agreement dated December 15, 2013 between Big 8 Split Inc. and TDSCI (collectively, the "Administration Agreements" and each, an "Administration Agreement"). The completion of the transaction (the "Transaction") contemplated by the Purchase Agreement is subject to the satisfaction of closing conditions which include obtaining all required regulatory approvals and approval of shareholders of the Funds.
2. TDSCI and Timbercreek announced the Transaction by press release disseminated on June 24, 2014 and filed on SEDAR by each of the Funds on the same date. A material change report related to the announcement of the Transaction was filed on SEDAR by each of the Funds on July 3, 2014.
3. TDSCI is a corporation incorporated under the Business Corporations Act (Ontario) and is the administrator and investment fund manager of the Funds. The head office of TDSCI is located at 66 Wellington Street West, 9th floor, Toronto-Dominion Bank Tower, Toronto, Ontario, M5K 1A2.
4. Neither TDSCI nor any of the Funds is in default of the securities legislation in any jurisdiction of Canada. TDSCI has determined that the proposed change of manager does not constitute a conflict of interest matter within the meaning of National Instrument 81-107 -- Independent Review Committee for Investment Funds.
5. The Funds, which are closed-end mutual funds, are reporting issuers in the Jurisdictions. The Capital Shares and the Preferred Shares of each of the Funds were qualified for distribution in the Jurisdictions by prospectus and are listed on the Toronto Stock Exchange.
6. Timbercreek is a corporation incorporated under the Business Corporations Act (Ontario). Timbercreek has a value oriented investment philosophy, and specializes in providing conservatively managed, risk averse alternative asset class investment opportunities to institutions, trusts and endowment funds, discretionary investment advisors and qualified individuals. Timbercreek, a wholly owned subsidiary of Timbercreek Asset Management Inc., is an investment management company that employs a conservative and risk averse approach to real estate based investments. Timbercreek Asset Management Inc. is principally owned by 2314716 Ontario Limited, which in turn is principally owned, directly or indirectly, by R. Blair Tamblyn, Ugo Bizzarri and Tye Bousada. Its head office is located at 1000 Yonge Street, Suite 500, Toronto, Ontario, M4W 2K2.
7. Timbercreek is an exempt market dealer in the provinces of Alberta, British Columbia, Ontario and Quebec, and is an investment fund manager and portfolio manager in the province of Ontario.
8. Timbercreek is not in default of the securities legislation in any jurisdiction of Canada.
9. Following the completion of the Transaction, the current directors and officers of the Funds will resign and be replaced by representatives of Timbercreek, as follows.
Director, Chief Executive Officer
Director, Chief Financial Officer
10. Each of Timbercreek's director and officer nominees has the requisite experience and integrity to manage the Funds. Prior to their conversion to non-investment fund reporting issuers in 2013, Timbercreek managed (and still manages) Timbercreek Mortgage Investment Corporation and Timbercreek Senior Mortgage Investment Corporation during their existence as non-redeemable investment Funds subject to National Instruments 81-106 and 81-107. In addition, Timbercreek currently manages Timbercreek Global Real Estate Fund (TSX:TGF), a non-redeemable investment fund subject to National Instruments 81-106 and 81-107 (and NI 81-102 starting September 22, 2014), Timbercreek Global Real Estate Income and Growth Fund, a privately held mutual fund, and Timbercreek acts as sub-advisor to Counsel Global Real Estate Fund, a public mutual fund subject to National Instruments 81-102, 81-106 and 81-107.
11. Following the completion of the Transaction, the current members of the Independent Review Committee (the "IRC") for each of the Funds will cease to be members of each IRC and Timbercreek will appoint its existing IRC consisting of Michelle McCarthy, Chris Slightham and Kenneth Thomson to act as IRC to the Funds.
12. The Transaction will be a benefit to shareholders of the Funds because:
(a) Timbercreek and its affiliates have approximately $4 billion of assets under management and over 500 employees in 18 offices globally. In addition to investing in, owning and managing global real estate and related assets for its investors, Timbercreek currently manages or provides sub-advisory services to other public investment funds.
(b) Timbercreek is currently active in the closed-end fund market and enjoys broad support and participation from the investment dealer community in its offerings; and
(c) Timbercreek can provide the Funds with access to its broad network of systems, resources and people.
13. The Funds will not bear any of the costs and expenses associated with the change in the manager of the Funds from TDSCI to Timbercreek.
14. Timbercreek has provided a notice to the securities administrators pursuant to section 11.9 of NI 31-103 in respect of the Transaction.
15. Shareholders of each of the Funds have approved the Transaction at a special meetings of shareholders of the Funds held on August 22, 2014. In connection with the solicitation of proxies in respect of the meetings, TDSCI prepared and mailed to shareholders an information circular containing the disclosure regarding the change in manager of the Funds required by applicable law.
16. The Funds will continue to operate under their current legal names. Timbercreek's current intention is to maintain the Funds' existing investment objectives and investment strategies and the current 0.25% per annum administration fee of the Funds. In addition, Timbercreek currently has no intention to make any changes to the provisions of the Capital Shares or the Preferred Shares of the Funds or to change the Funds' custodian or transfer agent. Accordingly, the Transaction is not expected to have any material impact on the business, operations or affairs of the Funds or the shareholders of the Funds.
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 Approval Sought is granted.