Timbercreek Asset Management Ltd.

Decision

Headnote

National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief granted from the self-dealing prohibition in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations to allow non-redeemable investment funds to invest in securities of underlying funds under common management, domiciled in Luxembourg -- relief subject to certain conditions.

Applicable Legislative Provisions

National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 13.5(2)(a), 15.1.

January 13, 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 TIMBERCREEK ASSET MANAGEMENT LTD. (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) exempting the Filer or an affiliate of the Filer with respect to each of

• Timbercreek Global Real Estate Fund (Global),

• Timbercreek Four Quadrant Global Real Estate Partners (4Q) (Global and 4Q collectively referred to as the Existing Top Funds), and

• any future non-redeemable investment fund that is a reporting issuer in a jurisdiction of Canada or any future non-redeemable investment fund organized under the laws of a province or territory of Canada or the federal laws of Canada, which is not a reporting issuer in a jurisdiction in Canada, in each case, established, advised or managed by the Filer or an affiliate of the Filer after the date hereof (the Future Top Funds and, together with the Existing Top Funds, the Top Funds)

that invests its assets in Sub-Fund 2 (as defined below) and any additional future sub-funds of Timbercreek Real Estate Fund (theAdditional Sub-Funds and, together with Sub-Fund 2, the Sub-Funds) from the restriction in section 13.5(2)(a) of National Instrument 31-103Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) 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 securities of an issuer in which a responsible person or an associate of the responsible person is a partner, officer or director unless this fact is disclosed to the client and the written consent of the client to the purchase is obtained before the purchase (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 (the Principal Regulator); and

2. the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Newfoundland and Labrador, Prince Edward Island, Yukon, Northwest Territories and Nunavut.

Representations

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

1. The Filer is a corporation incorporated under the laws of the Province of Ontario with its head office and registered office located in Toronto, Ontario.

2. The Filer is a direct wholly-owned subsidiary of Timbercreek Asset Management Inc.

3. The Filer is registered in Ontario in the categories of Exempt Market Dealer, Investment Fund Manager and Portfolio Manager. The Filer is also registered in Alberta, British Columbia and Quebec in the category of Exempt Market Dealer.

4. The Filer is not a reporting issuer in any jurisdiction in Canada and is not in default of securities legislation in any jurisdiction of Canada.

The Top Funds

5. None of the Top Funds are, or will be, a mutual fund for the purposes of the Securities Act (Ontario) (the Act).

6. Each of the Top Funds is, or will be, a non-redeemable investment fund within the meaning of the Act.

7. Global is a trust formed under the laws of the Province of Ontario pursuant to a declaration of trust.

8. 4Q is a limited partnership formed under the Limited Partnerships Act (Ontario).

9. Securities of the Top Funds are, and will be, offered in Canada pursuant to a prospectus or applicable prospectus exemption under National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106) in accordance with applicable securities laws.

10. Global's investment objectives are to provide holders of units with quarterly distributions and preserve capital while providing the opportunity for long-term capital appreciation for unitholders by investing in a diversified portfolio of premier real estate securities including common equity, preferred shares and debt of both public and private real estate investment trusts and real estate companies in Canada, United States, United Kingdom, Continental Europe, Japan, Australia, Hong Kong, Singapore and other countries.

11. 4Q's investment objective is to maximize total returns for holders of units, consisting of income and capital appreciation and to provide holders of units with quarterly distributions by investing in a diversified portfolio of real estate investments comprised of both debt and equity investments in private and public issuers and transactions.

12. In order to achieve its objective, each of the Existing Top Funds actively allocates and re-allocates capital based upon the Filer's opinion of the position of the market cycle. The Filer believes that this approach will allow for timely capital allocation decisions on behalf of each of the Existing Top Funds.

13. Pursuant to an investment advisory and management agreement, the Filer or an affiliate of the Filer:

• is, or will be, the manager and/or investment adviser of each of the Top Funds;

• is, or will be, responsible for managing the assets of the Top Funds;

• has, or will have, complete discretion to invest and reinvest the Top Funds' assets; and

• is, or will be, responsible for executing all portfolio transactions in respect of the Top Funds.

14. The Filer or an affiliate of the Filer, as investment fund manager and the portfolio manager of the Top Funds will have full duties and obligations of an investment fund manager and portfolio manager under the Legislation in connection with all aspects of the business, operations and affairs of the Top Funds, including monitoring the underlying investment of the Top Funds and making decisions regarding the Top Funds' exposure to the Sub-Funds.

15. Each of the Existing Top Funds is not in default of securities legislation of any jurisdiction of Canada.

The Sub-Funds

16. Timbercreek Real Estate Fund is an investment company organized as a public limited company (société anonyme) qualifying as an investment company with variable capital (société d'investissement à capital variable) specialised investment fund (fonds d'investissement spécialisé) incorporated in Luxembourg for an unlimited period of time (the SICAV).

17. The SICAV is an umbrella entity that will be composed of one or more sub-funds, each with its own portfolio. The SICAV has filed a prospectus in Luxembourg. Currently, only one sub-fund of the SICAV exists which is capitalized by one investor.

18. After the Exemption Sought is granted, a second sub-fund (Sub-Fund 2) will be created by way of an amendment to the prospectus of the SICAV and the investment restrictions and redemption provisions specific to Sub-Fund 2 will be included in an appendix to the prospectus. Sub-Fund 2 may be capitalized by investments from the Top Funds, the Filer or each of their respective affiliates.

19. In the future, as additional investors to the SICAV are determined, Additional Sub-Funds will be created to accommodate such additional investors and any specific investment restrictions required thereby. In the future, the Top Funds may invest in such Additional Sub-Funds.

20. The Top Funds, the Filer or each of their respective affiliates will be the only investors in any Sub-Fund in which a Top Fund invests.

21. Any Sub-Fund in which a Top Fund invests will not be a mutual fund for the purposes of the Act.

22. The Sub-Funds will not be reporting issuers under the Act.

23. Securities of the Sub-Funds may be offered in Canada, subject to compliance with Canadian securities laws.

24. The investment objectives of each of the Sub-Funds is, or will be, to construct, on a discretionary basis, a diversified, actively managed portfolio of real estate investments by means of investing in real assets, in securities and other assets, including without limitation equity securities, preferred shares, claims and debt of any kind (including loans), convertible or not into common shares and warrants (including origination, mezzanine and secondary transactions) of both public and private real estate investment trusts and real estate companies. Any Sub-Fund in which a Top Fund invests will invest primarily in real estate mortgage financing. Such Sub-Funds may also invest in other financial instruments that may be either listed on recognized stock exchanges or unlisted. Such Sub-Funds may employ leverage to enhance investment returns and use other financial instruments including cash, options, futures, swaps and other derivative instruments in order to enhance returns and/or mitigate risk to achieve an optimal risk/return profile.

Investment in the Sub-Funds

25. Each Top Fund's total investment in the Sub-Funds will not exceed ten percent (10%) of such Top Fund's total assets at the time of the investment.

26. The aggregate amount of borrowing by Global will not exceed 25% of the aggregate value of the total assets of Global at the time of borrowing.

27. If the Filer co-invests with a Top Fund in any Sub-Fund, the amount of the Filer's co-investment will not exceed thirty-five percent (35%) of the net asset value of such Sub-Fund at the time of the investment.

28. Any co-investment with a Top Fund by the Filer in a Sub-Fund will be subject to the prior approval of an independent review committee constituted in accordance with National Instrument 81-107 Independent Review Committee for Investment Funds (an Independent Review Committee).

29. To the extent that the Filer has made a co-investment with a Top Fund in a Sub-Fund, any such investment by a Top Fund will be subject to the prior approval of an Independent Review Committee.

Valuation

30. Subject to the law applicable to the Sub-Funds, the Filer will use valuation procedures substantially as follows in calculating the net asset value of any Sub-Fund in which a Top Fund, the Filer or each of their respective affiliates invest:

(a) the value of any cash, receivables and prepaid expenses, will be carried at face value, unless the Filer deems otherwise;

(b) mortgage loans will be stated at fair value. Interest income on such loans will be recorded on the accrual basis provided that the mortgage loan is not impaired. An impaired mortgage loan is any loan where, in the Filer's opinion, there has been a deterioration of credit quality to the extent that the Sub-Fund no longer has a reasonable assurance as to the timely collection of the full amount of principal and interest. As the mortgage loans comprising the portfolio do not trade in actively quoted markets, the Filer will estimate fair value based upon: (i) market interest rates; (ii) credit spreads for similar loans; and (iii) the specific creditworthiness and status of an existing borrower. The Filer will consider, but not be limited in considering, the following as part of the creditworthiness and status of a borrower: (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;

(c) the value of short-term investments (treasury bills, money market instruments, or similar) will be the cost of such instrument plus accrued interest up to and including the date of calculation; and

(d) the value of any other property will be the value determined by the Filer, which most accurately reflects its fair value.

If an investment cannot be valued under the above guidelines, or if the Filer determines that the above guidelines are at any time inappropriate under the circumstances, then notwithstanding such guidelines, the Filer will make such valuation as it considers fair and reasonable and, if there is an appropriate industry practice, in a manner consistent with such industry practice for valuing such investment.

The directors of the SICAV, together with the Filer or an affiliate of the Filer, will review and, if required from time to time, consider the appropriateness of the valuation guidelines adopted by the Sub-Fund.

31. The valuation procedures in paragraph 30 are and will be applied consistently in calculating the net asset value of each sub-fund of Timbercreek Real Estate Fund whether or not a Top Fund, the Filer or each of their respective affiliates invest in such sub-fund.

Fund-on-Fund Structure

32. The Top Funds allow investors in the Top Funds to obtain exposure to the investment portfolios of the Sub-Funds and their investment strategies through direct investments by the Top Funds in securities of the Sub-Funds (the Fund-on-Fund Structure).

33. Investing in the Sub-Funds will allow the Top Funds to achieve their investment objectives in a cost efficient manner and will not be detrimental to the interests of other securityholders of the Sub-Funds.

34. An investment by a Top Fund in a Sub-Fund can, or will be able to, provide greater diversification for a Top Fund in particular asset classes on a basis which is not materially more expensive than investing directly in the securities held by the applicable Sub-Fund.

35. An investment by a Top Fund in a Sub-Fund is, or will be, compatible with the investment objectives of the Top Fund.

36. The Filer or an affiliate of the Filer is, or will be, entitled to receive monthly management fees, payable in arrears, and/or performance fees with respect to the Top Funds and the Sub-Funds.

37. The Filer or an affiliate of the Filer will ensure that the arrangements between or in respect of a Top Fund and a Sub-Fund, in respect of an investment pursuant to the Fund-on-Fund Structure, avoid the duplication of management fees and incentive fees.

38. There will be no sales fees or redemption fees payable by a Top Fund in respect of an acquisition, disposition or redemption of securities of a Sub-Fund by the Top Fund.

39. The Filer or an affiliate of the Filer will act as the manager and/or investment adviser of any Sub-Fund in which a Top Fund invests, will be responsible for managing the assets of such Sub-Fund, will have complete discretion to invest and reinvest the assets of such Sub-Fund in which the Top Fund's assets are invested, and will be responsible for executing all portfolio transactions in respect thereof.

40. The Filer or an affiliate of the Filer, as manager of the Top Funds, and the portfolio manager of the Tops Funds have or will have controls and processes to monitor any Sub-Fund, including the activities of any such Sub-Fund, in which a Top Fund invests.

41. The Filer or an affiliate of the Filer, in its capacity as manager of the Sub-Funds, will notify the manager of the Top Funds, promptly in writing of any material changes in respect of the Sub-Funds, as the term "material change" is defined in National Instrument 81-106Investment Fund Continuous Disclosure (NI 81-106), so that the manager of the Top Funds will be able to comply with the material change disclosure requirements under NI 81-106.

42. As soon as practicable following the date of this decision but in any event prior to the initial investment in the Sub-Funds, the Filer or an affiliate of the Filer will issue a press release on behalf of the Filer and each of the Existing Top Funds disclosing: (a) that the Exemption Sought has been granted; (b) the fact that the Existing Top Funds may purchase securities of the Sub-Funds; (c) the fact that the Sub-Funds are managed and/or advised by the Filer or an affiliate of the Filer; (d) the approximate percentage of total assets of each Existing Top Fund that is intended to be invested in securities of the Sub-Funds; (e) the process or criteria used to select the Sub-Funds; (f) the type of continuous disclosure documents that the Sub-Funds provide to their securityholders and that the securityholders of an Existing Top Fund will receive, upon request, a copy of each continuous disclosure document a Sub-Fund provides to its securityholders for any Sub-Fund in which the Existing Top Fund invests; (g) the name of the auditor of the Sub-Funds; (h) the financial year-end of the Sub-Funds; (i) that the securityholders of an Existing Top Fund will receive, upon request, a copy of the financial statements and any other financial reports for any Sub-Fund in which the Existing Top Fund invests and the date such financial statements and other financial reports, if any, will be available; (j) the Filer's or the affiliate of the Filer's allocation policy; (k) that substantially all of the assets of each Sub-Fund are held by one custodian which meets substantially the same standards required of custodians as set out in Part 14 of National Instrument 41-101 General Prospectus Requirements; (l) a risk factor that the Sub-Funds are not reporting issuers in Canada; (m) the fact that the Filer may co-invest with a Top Fund in any Sub-Fund provided that the amount of the Filer's co-investment does not exceed thirty-five percent (35%) of the net asset value of such Sub-Fund at the time of the investment; (n) the fact that any co-investment by the Filer in a Sub-Fund will be subject to the prior approval of an Independent Review Committee; and (o) the fact that to the extent the Filer has invested in a Sub-Fund, any investment by a Top Fund in such Sub-Fund will be subject to the prior approval of an Independent Review Committee.

43. The Filer or an affiliate of the Filer will disclose, in any offering memorandum or prospectus, as applicable, that is prepared in connection with an offering of securities of a Future Top Fund or in connection with a subsequent offering of securities of an Existing Top Fund the disclosure in items (b) to (o) of paragraph 42 with respect to such Future Top Fund or Existing Top Fund, as applicable.

44. The Filer or an affiliate of the Filer will disclose in the next regular written communication made after the date of this decision to existing investors in the Existing Top Funds the disclosure in items (b) to (o) of paragraph 42 with respect to such Existing Top Fund.

45. The Filer or an affiliate of the Filer will disclose in the next annual information form for each Existing Top Fund, as applicable, filed after the date of this decision the disclosure in items (b) to (o) of paragraph 42 with respect to such Existing Top Fund.

46. The securityholders of a Top Fund will receive, on request, a copy of each continuous disclosure document a Sub-Fund provides to its securityholders for any Sub-Fund in which the Top Fund invests.

47. Each Top Fund's Management Reports of Fund Performance will include, in respect of any Sub-Fund in which the Top Fund invests, the disclosure mandated by items 2.3, 2.4, 2.5, 4 and 5 of Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance.

48. The Filer or an affiliate of the Filer will not cause the securities of a Sub-Fund held by a Top Fund to be voted at any meeting of the securityholders of the Sub-Fund, but the Filer or an affiliate of the Filer may, if it chooses, arrange for all the securities the Top Fund holds of the Sub-Fund to be voted by the beneficial holders of securities of the Top Fund.

49. A Top Fund and any Sub-Fund in which such Top Fund invests will be valued on the last business day of each month and will, accordingly, have a matching valuation date each month.

50. Units of Global are redeemable on a monthly and annual basis on the last business day of each month, subject to the manager's right to suspend the redemption of units or payment of proceeds in certain circumstances. Units of 4Q are redeemable on a quarterly basis on the last business day of the quarter commencing June 30, 2013, subject to limitations on the percentage of units which may be redeemed and the manager's right to suspend the redemption of units in certain circumstances. Securities of any Sub-Fund in which a Top Fund invests will be redeemable on the last business day of each month, subject to availability of capital, as determined by the manager in its sole discretion, and certain other limitations and restrictions similar to those relating to the Top Funds.

51. No Sub-Fund will also be a Top Fund.

Generally

52. Since the Top Funds are not, or will not be, mutual funds, they are not, or will not be, subject to National Instrument 81-102 Mutual Funds (NI 81-102) and therefore the Top Funds are unable to rely upon the exemption codified under sub-section 2.5(7) of NI 81-102.

53. In the absence of the Exemption Sought, each of the Top Funds would be precluded from investing in a Sub-Fund, unless the consent of each investor in the Top Fund is obtained, since the Filer or an affiliate of the Filer or, an officer and/or director of the Filer or an affiliate of the Filer (considered a responsible person within the meaning of the applicable provisions of NI 31-103) may also be an officer and/or director of, or may perform a similar function for or occupy a similar position with, the Sub-Fund.

54. The Fund-on-Fund Structure does not result in any material increase in fees or expenses to investors in the Top Funds and there are also no sales or redemption charges applicable to the transactions.

55. Investments in the Sub-Funds should not result in a decrease of diversification of investment exposure for investors in the Top Funds as the Sub-Funds will be appropriately diversified. Investing the assets of the Top Funds in the Sub-Funds will enable the Filer or an affiliate of the Filer to achieve greater portfolio diversification in the assets of the Top Funds than investing directly in a portfolio of securities.

56. A Top Fund's investment in the Sub-Funds represents the business judgment of responsible persons uninfluenced by considerations other than the best interests of the investment funds concerned.

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:

I. the Filer or an affiliate of the Filer ensures that:

(a) securities of the Top Funds are distributed in Canada pursuant to a prospectus or applicable prospectus exemption under NI 45-106;

(b) the investment by a Top Fund in a Sub-Fund is compatible with the fundamental objectives of the Top Fund;

(c) no management fees or incentive fees are payable by a Top Fund that, to a reasonable person, would duplicate a fee payable by the Sub-Fund for the same service;

(d) no sales fees or redemption fees are payable by the Top Fund in relation to its purchases or redemptions of securities of a Sub-Fund other than brokerage fees incurred on the purchase or disposition of securities of a Sub-Fund that are purchased or disposed of in the secondary market;

(e) no Top Fund will invest in a Sub-Fund unless the Sub-Fund invests less than 10% of its net asset value in mutual funds other than mutual funds that are "money market funds" (as defined by NI 81-102) or mutual funds that issue "index participation units" (as defined by NI 81-102);

(f) each Top Fund's total investment in the Sub-Funds will not exceed ten percent (10%) of such Top Fund's total assets at the time of the investment;

(g) the Filer or an affiliate of Filer will not cause the securities of a Sub-Fund held by a Top Fund to be voted at any meeting of the securityholders of the Sub-Fund, but the Filer or an affiliate of the Filer may, if it chooses, arrange for all the securities the Top Fund holds of the Sub-Fund to be voted by the beneficial holders of securities of the Top Fund;

(h) as soon as practicable following the date of this decision but in any event prior the initial investment in the Sub-Funds, the Filer or an affiliate of the Filer will issue a press release on behalf of the Filer and each of the Existing Top Funds disclosing items (a) to (o) of paragraph 42;

(i) the Filer or an affiliate of the Filer will disclose, in any offering memorandum or prospectus, as applicable, that is prepared in connection with an offering of securities of a Future Top Fund or in connection with a subsequent offering of securities of an Existing Top Fund the disclosure in items (b) to (o) of paragraph 42 with respect to such Future Top Fund or Existing Top Fund, as applicable;

(j) the Filer or an affiliate of the Filer will disclose in the next regular written communication made after the date of this decision to existing investors in the Existing Top Funds the disclosure in items (b) to (o) of paragraph 42 with respect to such Existing Top Fund;

(k) the Filer or an affiliate of the Filer will disclose in the next annual information form for each Existing Top Fund, as applicable, filed after the date of this decision the disclosure in items (b) to (o) of paragraph 42 with respect to such Existing Top Fund;

(l) the securityholders of a Top Fund will receive, on request, a copy of each continuous disclosure document a Sub-Fund provides to its securityholders for any Sub-Fund in which the Top Fund invests;

(m) each Top Fund's Management Reports of Fund Performance will include, in respect of any Sub-Fund in which the Top Fund invests, the disclosure mandated by items 2.3, 2.4, 2.5, 4 and 5 of Form 81-106F1 Contents of Annual and Interim Management Report of Fund Performance; and

II. the Exemption Sought ceases to apply on the coming into force of any securities legislation relating to purchases by an investment fund of securities issued by an issuer that has a partner, officer or director in common with a 'responsible person' or with an 'associate of a responsible person' as defined in NI 31-103.

 
"Raymond Chan"
Manager, Investment Funds Branch
Ontario Securities Commission