Timbercreek Global Real Estate Income Fund

Transcription

1 Notes to Financial Statements Years ended December 31, 2016 and 2015 Interim Financial Statements of Timbercreek Global Real Estate Income Fund

2 NOTICE TO UNITHOLDERS The Auditors of the Fund have not reviewed these interim financial statements. Timbercreek Asset Management Ltd., the Trustee of the Fund, appoints an independent auditor to audit the Fund s annual financial statements. Applicable securities laws require that if an auditor has not reviewed the Fund s interim financial statements, this must be disclosed in an accompanying notice.

3 INTERIM STATEMENTS OF FINANCIAL POSITION June 30, 2017 December 31, 2016 ASSETS Investments, at fair value (note 10) $ 44,870,223 $ 33,369,716 Cash 1,229, ,582 Subscriptions receivable 462, ,366 Due from Manager 170, Dividends and interest receivable 422, ,288 Receivable for portfolio assets sold (note 5) 45,306 LIABILITIES 47,200,005 34,088,031 Payable for portfolio assets purchased (note 6) 825,033 Accounts payable and accrued liabilities 85,124 45,239 Distributions payable 122,928 71,280 Redemptions payable 238,447 32,480 1,271, ,999 Net assets attributable to holders of redeemable $ 45,928,473 $ 33,939,032 Net assets attributable to holders of redeemable per Class: Class A $ 5,820,985 $ 5,473,107 Class F 22,085,805 11,192,469 Class M 16,543,067 15,149,655 Class S 1,461,440 1,205,206 Class T 17, ,595 Units outstanding (note 8): Class A 581, ,603 Class F 2,195,231 1,110,586 Class M 1,693,867 1,548,648 Class S 139, ,984 Class T 1,611 86,940 Net assets attributable to holders of redeemable per unit: Class A $ $ Class F Class M Class S Class T The accompanying notes are an integral part of these interim financial statements.

4 INTERIM STATEMENTS OF COMPREHENSIVE INCOME Investment income Dividend income $ 1,228,915 $ 232,229 Interest income, for distribution purposes 85,440 14,450 Net changes in fair value of investments (note 12) (17,928) 306,288 Expenses 1,296, ,967 Management fees (note 7) 249,378 46,532 Other operating costs 101,803 9,924 Legal fees 68,458 23,508 Commissions and other portfolio transaction costs 62,902 27,509 Accounting fees 26,069 24,292 Audit fees 18,750 16,105 Professional fees 5,951 Bank charges and interest 2,251 Fund administration fees 12,758 Foreign dividend withholding tax 149,992 19, , ,593 Amount absorbed by an affiliate of the Trustee (note 7) (165,807) (86,609) 519,747 93,984 Increase in net assets attributable to holders of redeemable $ 776,680 $ 458,983 Increase in net assets attributable to holders of redeemable per Class (note 11): Class A $ 108,833 $ 127,426 Class F 271, ,255 Class M 344,657 Class S 32,557 51,635 Class T 18,743 40,667 Increase in net assets per unit attributable to holders of redeemable (note 11): Class A $ 0.19 $ 0.62 Class F Class M 0.22 Class S Class T The accompanying notes are an integral part of these interim financial statements. TIMBERCREEK GLOBAL REAL ESTATE INCOME FUND 3

5 INTERIM STATEMENTS OF CHANGES IN NET ASSETS 2017 Class A Class F Class M Class S Class T Net assets attributable to holders of redeemable, beginning of period $ 5,473,107 $ 11,192,469 $ 15,149,655 $ 1,205,206 $ 918,595 $33,939,032 Issuance of 2,391,163 11,750,393 2,206, ,724 16,646,732 Redemptions of (2,126,635) (951,955) (1,157,696) (75,047) (926,662) (5,237,995) Distributions to unitholders (117,658) (471,766) (397,466) (34,698) (5,186) (1,026,774) Reinvestment of distributions 92, , ,466 34,698 11, ,798 Increase in net assets attributable to holders of redeemable 108, , ,657 32,557 18, ,680 Net assets attributable to holders of redeemable, end of period $ 5,820,985 $22,085,804 $ 16,543,068 $ 1,461,440 $ 17,176 $45,928,473 Total 2016 Class A Class F Class S Class T Net assets attributable to holders of redeemable, beginning of period $ 1,165,100 $ 2,276,913 $ 847,762 $ 868,156 $ 5,157,931 Issuance of 1,973,635 3,922, ,770 6,171,191 Redemptions of (204,356) (84,855) (74,467) (1,098) (364,776) Distributions to unitholders (51,707) (110,438) (24,941) (21,566) (208,652) Reinvestment of distributions 36,880 74,285 24,942 21, ,674 Increase in net assets attributable to holders of redeemable 127, ,255 51,635 40, ,983 Net assets attributable to holders of redeemable, end of period $ 3,046,978 $ 6,317,946 $ 1,099,701 $ 907,726 $ 11,372,351 The accompanying notes are an integral part of these interim financial statements. Total TIMBERCREEK GLOBAL REAL ESTATE INCOME FUND 4

6 INTERIM STATEMENTS OF CASH FLOWS Cash provided by (used in): OPERATING ACTIVITIES Increase in net assets from operations $ 776,680 $ 458,983 Adjustments for: Net changes in fair value of investments 17,928 (306,288) Proceeds from sale of investments 11,495,852 2,681,871 Purchases of investments (23,087,285) (8,117,903) Commissions and other portfolio transaction costs 62,902 27,509 Change in non-cash operating items: Increase in dividends and interest receivable (183,861) (26,436) (Increase) decrease in due from Manager (170,139) 3,118 Increase in accounts payable and accrued liabilities 39,885 52,370 Increase in receivable for portfolio assets sold (45,306) (54,470) Increase in payable for portfolio assets purchased 825,033 12,600 FINANCING ACTIVITIES (10,268,311) (5,268,646) Redemptions of (5,032,028) (365,063) Distributions to unitholders (144,328) (26,867) Proceeds from issuances of 16,359,140 5,857,126 11,182,784 5,465,196 Increase (decrease) in cash 914, ,550 Net foreign exchange gain on cash accounts 10,095 2 Cash and cash equivalents, beginning of period 304, ,052 Cash and cash equivalents, end of period $ 1,229,150 $ 505,604 SUPPLEMENTAL INFORMATION Interest paid $ 13 $ Interest received 72,225 14,450 Dividends received, net of withholding tax 908, ,994 The accompanying notes are an integral part of these interim financial statements. TIMBERCREEK GLOBAL REAL ESTATE INCOME FUND 5

7 SCHEDULE OF INVESTMENTS June 30, 2017 Description Shares Average cost Fair value % net assets COMMON EQUITIES Australia Charter Hall Retail REIT 218,017 $ 951,980 $ 884, Folkestone Education Trust 211, , , Vicinity Centres 512,597 1,512,709 1,312, Canada 3,011,457 2,783, Cominar REIT 69,263 1,010, , Dream Global REIT 150,947 1,333,590 1,648, OneREIT 383,848 1,392,397 1,435, RioCan REIT 30, , , Europe 4,537,813 4,692, Citycon OYJ 256, , , Eurocommercial Properties NV 36,473 1,950,812 1,890, Intervest Offices & Warehouses NV 36,051 1,236,226 1,196, Mercialys SA 34, , , Wereldhave NV 30,410 1,907,750 1,934, Hong Kong Japan 6,888,222 6,762, Fortune REIT 1,135,950 1,761,619 1,830, Sunlight REIT 1,558,947 1,238,851 1,327, ,000,470 3,158, Invesco Office J-Reit Inc ,206,884 1,192, Singapore 1,206,884 1,192, AIMS AMP Capital Industrial REIT 327, , , Cache Logistics Trust 748, , , CapitaLand Retail China Trust 975,752 1,420,448 1,509, Frasers Centrepoint Trust 447, , , Frasers Logistics & Industrial Trust 1,198,400 1,110,537 1,220, ,517,083 4,736, TIMBERCREEK GLOBAL REAL ESTATE INCOME FUND 6

8 SCHEDULE OF INVESTMENTS June 30, 2017 Description COMMON EQUITIES (continued) Shares Average cost Fair value % net assets United States of America American Homes 4 Rent 12,500 $ 427,274 $ 366, Apollo Commercial Real Estate Finance 35, , , Blackstone Mortgage Trust Inc. 35,794 1,404,339 1,468, Care Capital Properties Inc. 34,424 1,246,065 1,193, CBL & Associates Properties Inc 105,789 1,538,967 1,157, Colony NorthStar Inc. 41, , , DDR Corp. 101,101 1,588,097 1,190, Kite Realty Group Trust 61,900 1,613,150 1,521, LaSalle Hotel Properties 37,419 1,423,533 1,447, MFA Financial, Inc. 79, , , MGM Growth Properties LLC 23, , , Sabra Health Care REIT, Inc. 27, , , Starwood Property Trust Inc. 51,500 1,493,328 1,497, STORE Capital Corp. 29, , , Two Harbors Investment Corp. 45, , , Western Asset Mortgage Capital Corp. 53, , , ,794,649 16,226, Total common equities 39,956,578 39,551, PREFERRED SHARES United States of America Cedar Realty Trust, Inc. Series B 7.25% 26, , , LaSalle Hotel Properties Preferred Shares 6.30% 11, , , Pennsylvania REIT Series A 8.25% 24, , , STAG Industrial Inc. Series B 6.62% 26, , , Sunstone Hotel Investors Inc. Series E 6.95% 23, , , Total preferred shares 3,884,552 3,778, Total equities 43,841,130 43,329, TIMBERCREEK GLOBAL REAL ESTATE INCOME FUND 7

9 SCHEDULE OF INVESTMENTS June 30, 2017 Description PRIVATE INVESTMENTS United States of America Private Common Equity Shares/un its Average cost Fair value % net assets Adventus Capital Partners Ltd. 1,911 39,001 37, Adventus Realty Limited Partnership 1, Adventus Realty Trust 36, , , Private Convertible Debt Adventus Capital Partners Ltd. Convertible Debt 780, , ,589 41,378 39, Adventus Realty LP Convertible Debt Adventus Realty Trust Convertible Debt 582, , , , , Total private investments 1,609,760 1,540, Total investments 45,450,890 44,870, Commissions and other portfolio transaction costs (note 3(c)) (94,824) Total net investments $ 45,356,066 $ 44,870, Other assets/liabilities, net 1,058, Net Assets Attributable to Holders of Reedemable Units $45,928, The accompanying notes are an integral part of these interim financial statements. TIMBERCREEK GLOBAL REAL ESTATE INCOME FUND 8

10 1. FUND INFORMATION Timbercreek Global Real Estate Income Fund (the Fund ) is an investment trust which was created under the laws of the Province of Ontario pursuant to a Declaration of Trust as amended and restated on June 27, 2016 (the Trust Agreement ). The address of the Fund s registered office is at 25 Price Street, Toronto, Ontario, Canada M4W 1Z1. Timbercreek Asset Management Ltd. is the trustee and portfolio advisor of the Fund (the Trustee ). The Trustee provides management and investment advisory services to the Fund. The Fund commenced active operations on June 18, Effective October 24, 2014, the Trustee amended and restated the Declaration of Trust in order to change the name of the Fund; re-designate Class A of the Fund outstanding on that date to Class S ; redesignate Class B outstanding on that date to Class T ; create new classes A and F of the Fund; and to change the Fund s fundamental investment objectives and make other non-material amendments. Effective June 27, 2016, the Trustee amended and restated the Declaration of Trust to add new class M. The fundamental investment objectives of the Fund are to: (i) provide unitholders with quarterly cash distributions; and (ii) preserve capital while providing the opportunity for long-term capital appreciation for unitholders, by investing in common equity, preferred equity and debt securities issued by real estate investment trusts and other real estate investment issuers. The Fund provides unitholders with exposure to the global real estate market by owning a diversified portfolio of dividend paying real estate securities in developed markets from around the world. 2. BASIS OF PRESENTATION (a) Basis of preparation These interim financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board ( IASB ), including International Accounting Standards ( IAS ) 34 interim financial reporting. The accompanying interim financial statements should be read in conjunction with the notes to the Fund s financial statements for the year ended December 31, 2016, since these financial statements do not contain all disclosures required by IFRS for annual financial statements. These interim financial statements reflect all normal and recurring adjustments which are in the opinion of management, necessary for a fair presentation of the respective interim periods presented. The interim financial statements were authorized by the Board of Directors of the Trustee on August 24, (b) Basis of measurement These interim financial statements have been prepared on a historical cost basis, except for financial assets and financial liabilities at fair value through profit or loss, which are presented at fair value. (c) Functional and presentation currency The Fund s financial statements are presented in Canadian dollars, which is the functional currency of the Fund. TIMBERCREEK GLOBAL REAL ESTATE INCOME FUND 9

11 3. SIGNIFICANT ACCOUNTING POLICIES The accounting policies applied by the Fund in these interim financial statements are the same as those applied by the Fund in its financial statements for the year ended December 31, 2016, which were prepared in accordance with IFRS. Future accounting changes The final version of IFRS 9, Financial Instruments, was issued by the IASB in July 2014 and will replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 introduces a model for classification and measurement, a single, forward-looking expected loss impairment model and a substantially reformed approach to hedge accounting. The new single, principle-based approach for determining the classification of financial assets is driven by cash flow characteristics and the business model in which an asset is held. The new model also results in a single impairment model being applied to all financial instruments, which will require more timely recognition of expected credit losses. It also includes changes in respect of own credit risk in measuring liabilities elected to be measured at fair value, so that gains caused by the deterioration of an entity s own credit risk on such liabilities are no longer recognized in profit or loss. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, but is available for early adoption. In addition, the own credit risk changes can be applied early in isolation without otherwise changing the accounting for financial instruments. The extent of the impact of adoption of the standard has not yet been determined. 4. CRITICAL JUDGMENTS AND ESTIMATES In the preparation of these interim financial statements, the Trustee has made judgments, estimates and assumptions that affect the application of the Fund s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. In making estimates and judgments, the Trustee relies on external information and observable conditions where possible. There are no known trends, commitments, events or uncertainties that the Trustee believes will materially affect the methodology or assumptions utilized in making those estimates and judgments in these interim financial statements. 5. RECEIVABLE FOR PORTFOLIO ASSETS SOLD Receivable for portfolio assets sold represent amounts receivable for unsettled trades. 6. PAYABLE FOR PORTFOLIO ASSETS PURCHASED Payable for portfolio assets purchased represent amounts payable for unsettled trades. 7. RELATED PARTY TRANSACTIONS Management fee The Fund incurs a management fee for each class as follows: - Class A up to 2.00% per annum of the Class A net asset value; - Class F up to 1.00% per annum of the Class F net asset value; TIMBERCREEK GLOBAL REAL ESTATE INCOME FUND 10

12 - Class M up to 1.00% per annum of the Class M net asset value; - Class S 0.80% per annum of the Class S net asset value; and - Class T no management fee payable. The management fee is calculated and accrued daily, aggregated and paid monthly in arrears, plus applicable taxes. Total management fees for the six months ended June 30, 2017 were $249,378 (June 30, $46,532). The Fund incurred total expenses of $685,554 for the six months ended June 30, 2017 (June 30, 2016 $180,593). Out of which, $165,807 (June 30, 2016 $86,609) has been absorbed by Timbercreek Asset Management Inc. ( TAMI ), the parent company of the Trustee. Timbercreek Asset Management Inc. As at June 30, 2017, TAMI holds 1,591 Class T of the Fund (December 31, ,312 Class T ). 8. REDEEMABLE UNITS OF THE FUND The Fund is divided into of participation which may be issued in one or more classes as determined by the Trustee of the Fund. The Trustee can issue an unlimited number of of any class authorized to be issued by the Fund. All of the Fund are voting and vote equally with each other. In accordance with the Trust Agreement, the Fund is authorized to issue an unlimited number of Class A, Class F, Class S, Class T and Class M. During the six months ended June 30, 2017, the changes in were as follows: Class A Class F Class M Class S Class T Redeemable outstanding, January 1, ,603 1,110,586 1,548, ,984 86,940 Issued 236,949 1,149, ,981 28,119 Redeemed (210,119) (93,637) (117,332) (7,036) (86,419) Reinvested distributions 9,177 29,215 40,570 3,300 1,090 Redeemable, outstanding, June 30, ,610 2,195,231 1,693, ,367 1,611 TIMBERCREEK GLOBAL REAL ESTATE INCOME FUND 11

13 During the six months ended June 30, 2016, the changes in were as follows: Class A Class F Class S Class T Redeemable outstanding, January 1, , ,316 82,165 83,175 Issued 200, ,857 27,009 Redeemed (20,854) (8,437) (7,259) (107) Reinvested distributions 3,691 7,399 2,403 2,057 Redeemable outstanding, June 30, , , ,318 85,125 (a) Subscriptions The and fractional may be issued from time to time by the Trustee on behalf of the Fund but only on a valuation date. The subscription price per unit of the class of subscribed for pursuant to an application received and accepted by the Trustee prior to the valuation time on a valuation date will be the class net asset value per unit determined on the valuation date; and after such time on a valuation date or at any time on a date other than a valuation date will be class net asset value per unit determined on the next valuation date following such receipt and acceptance. (b) Redemptions Each unitholder is entitled, at any time, to require the Fund to redeem all or any part of a unitholder s for an amount equal to the class net asset value per unit (as defined in the Trust Agreement), subject to certain restrictions. The Trustee will deduct from the redemption amount any fees or charges to be paid by the unitholder of a class upon redemption of such in such form as the Trustee shall reasonably determine from time to time. (c) Distributions At each quarter-end, the Fund distributes income to unitholders of the Fund and additionally net realized capital gains prior to the fiscal year-end. Unless a unitholder requests cash payment in advance, in writing, distributions are reinvested in additional of the same class of of the Fund. Subsequent to June 30, 2017, the Fund distributes income to unitholders of the Fund at each month-end. 9. CAPITAL AND FINANCIAL RISK MANAGEMENT (a) Capital management The Trustee manages the capital of the Fund, which consists of the net assets attributable to holders of redeemable of the Fund, in accordance with the investment objectives set out in the Trust Agreement. The Fund is not subject to externally imposed capital requirements. In the normal course of business, the Fund is exposed to a variety of financial risks: credit risk, liquidity risk and market risk (including interest rate risk, market price risk and currency risk). The value of investments within the Fund s portfolio can fluctuate on a daily basis as a result of changes in interest rates, general economic conditions and company news related to specific securities within the Fund. The level of risk depends on the Fund s investment objective and the type of securities in which it invests. TIMBERCREEK GLOBAL REAL ESTATE INCOME FUND 12

14 (b) Risk management The Trustee seeks to minimize the potential adverse effects of risk on the Fund s performance by retaining professional, experienced portfolio advisors and analysts, monitoring the Fund s positions and market events and diversifying the investment portfolio within the parameters of the investment objectives. To assist in managing risk, the Trustee uses internal guidelines that identify the target exposures for each type of security, while adhering to the investment restrictions of the Fund. For concentration of risk, refer to the schedule of investments. (i) Credit risk Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Fund. The maximum exposure to credit risk is represented by the total assets of the Fund. All transactions executed by the Fund in listed securities are settled/paid for upon delivery using approved brokers. The risk of default is considered minimal, as delivery of securities sold is only made once the broker has received payment. Payment is made on a purchase once the securities have been received by the broker. The trade will fail if either party fails to meet its obligation. The Fund is exposed to credit risk in preferred share and convertible debt securities which are disclosed in the Fund s schedule of investments. The preferred shares and convertible debt securities are unrated. Given the nature of the real estate industry, many companies traditionally obtain debt financing through mortgages secured by real property and in certain circumstances will issue publicly listed debentures. For those companies which do not have public debt securities, they are typically not rated by the rating agencies. As such, to minimize the risk associated with a fixed return, the Trustee conducts a thorough analysis of the issuer to determine their creditworthiness. Specifically, the Trustee will conduct an analysis of each company analyzing the loan-to-value ratios, debt service coverage ratio and the quality of the company s real estate holdings. (ii) Liquidity risk Liquidity risk is defined as the risk that the Fund may not be able to settle or meet its obligation associated with financial liabilities. The Fund s exposure to liquidity risk is concentrated in the periodic cash redemptions of. The Fund primarily invests in securities that are traded in active markets and can be readily disposed of to pay for redemptions. All financial liabilities mature within twelve months. (iii) Market risk Interest rate risk Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or fair values of financial instruments. Interest rate risk arises when the Fund invests in interest-bearing financial instruments. The Fund is exposed to the risk that the value of such financial instruments will fluctuate due to changes in the prevailing levels of TIMBERCREEK GLOBAL REAL ESTATE INCOME FUND 13

15 market interest rates. There is minimal sensitivity to interest rate fluctuations on any cash and cash equivalents invested at short-term market interest rates. Market price risk Market price risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk). All investments present a risk of loss of capital, specifically the market price risk arising from investment in public securities. If equity prices on the respective stock exchanges for these securities had increased or decreased by 5% at June 30, 2017 with all other variables held constant, the net assets attributable to holders of redeemable of the Fund would have increased or decreased, respectively, by approximately $2,166,471 (December 31, 2016 $1,626,861). In practice, actual results may differ from this sensitivity analysis and the difference could be material. The Trustee aims to moderate this risk through careful selection and diversification of securities and other financial instruments in accordance with the Fund s investment objectives. The Fund s overall market positions are monitored on a daily basis by the Trustee. Financial instruments held by the Fund are susceptible to market price risk arising from uncertainties about future prices of the instruments. Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Currency risk arises from financial instruments (including cash and cash equivalents) that are denominated in a currency other than Canadian dollars, which represents the functional currency of the Fund. As at June 30, 2017, if the Canadian dollar had strengthened or weakened by 1% in relation to the foreign currencies listed below with all other variables being held constant, the Fund s net assets attributable to holders of redeemable would have decreased or increased, respectively, by approximately $393,505 or 0.9% of net assets (December 31, 2016 $289,566 or 0.9% of net assets). In practice, actual results may differ from this sensitivity analysis and the differences could be material. As at June 30, 2017 Fair value of investments Cash Net foreign currency exposure Percentage of net assets Australian Dollar $ 2,783,349 $ (179,231) $ 2,604, % British Pound % Euro 6,762,101 (229,865) 6,532, % Hong Kong Dollar 3,158,467 (86,228) 3,072, % New Zealand Dollar % Singapore Dollar 4,736,588 (71,874) 4,664, % United States Dollar 21,545,394 (223,763) 21,321, % Japanese Yen 1,192,278 (36,751) 1,155, % TIMBERCREEK GLOBAL REAL ESTATE INCOME FUND 14

16 As at December 31, 2016 Fair value of investments Cash Net foreign currency exposure Percentage of net assets Australian Dollar $ 2,318,764 $ 8,054 $ 2,326, % British Pound % Euro 6,078,279 26,889 6,105, % Hong Kong Dollar 2,448, ,448, % New Zealand Dollar 596, , % Singapore Dollar 3,378,830 3,378, % United States Dollar 14,082,032 19,265 14,101, % 10. CLASSIFICATION OF FINANCIAL INSTRUMENTS FAIR VALUE MEASUREMENTS The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy at June*30,*2017: Level 1 Level 2 Level 3 Total Financial assets: Equities $ 43,329,414 $ $ $ 43,329,414 Private common equities 749, ,134 Private convertible debt 791, ,675 $ 43,329,414 $ $ 1,540,809 $ 44,870,223 During the six months ended June 30, 2017, no financial instruments were transferred between any levels. The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy at December*31, 2016: Level 1 Level 2 Level 3 Total Financial assets: Equities $ 32,537,226 $ $ $ 32,537,226 Private common equities 546, ,495 Private convertible debt 285, ,995 $ 32,537,226 $ $ 832,490 $ 33,369,716 During the year ended December 31, 2016, no financial instruments were transferred between any levels. The following table shows a reconciliation of the opening and closing balance of financial instruments recorded in Level 3 for the six months ended June 30, 2017: TIMBERCREEK GLOBAL REAL ESTATE INCOME FUND 15

17 As at January 1, 2017 Realized fair value gain/(loss) Unrealized fair value loss Purchases As at June 30, 2017 Financial assets: Private common equity $ 546,495 $ $ (29,734) $ 232,373 $ 749,134 Private convertible debt 285,995 (36,676) 542, ,675 $ 832,490 $ $ (66,410) $ 774,729 $ 1,540,809 The following table shows a reconciliation of the opening and closing balance of financial instruments recorded in Level 3 for the year ended December 31, 2016: As at January 1, 2016 Realized fair value gain/(loss) Unrealized fair value loss As at December 31, 2016 Purchases Financial assets: Private common equity $ $ $ (2,543) $ 549,038 $ 546,495 Private convertible debt $ 285,995 $ 285,995 $ $ $ (2,543) $ 835,033 $ 832,490 Significant unobservable inputs used in measuring fair value The table below sets out information about significant unobservable inputs used at June 30, 2017 in measuring financial instruments categorized as Level 3 in the fair value hierarchy. Sensitivity to changes in Fair value Fair value at Range significant at June 30, December 31, Unobservable (weighted unobservable Description Valuation technique input average) inputs Unlisted private investments $ 749,134 $ 546,495 Net asset value or recent transactions. The Fund has determined that the reported net asset value and/or value from recent transactions represents fair value at the end of the reporting period. n/a n/a n/a Private convertible debt $ 791,675 $ 285,995 Recent market transaction, representing fair value at period end. n/a n/a n/a TIMBERCREEK GLOBAL REAL ESTATE INCOME FUND 16

18 11. INCREASE IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS PER UNIT The increase in net assets attributable to holders of redeemable per unit for the six months ended June 30, 2017 is calculated as follows: 2017 Class A Class F Class M Class S Class T Increase in net assets attributable to holders of redeemable $ 108,833 $ 271,890 $ 344,657 $ 32,557 $ 18,743 Weighted average of redeemable outstanding during the period 561,673 1,586,231 1,592, ,280 44,042 Increase in net assets attributable to holders of redeemable $ 0.19 $ 0.17 $ 0.22 $ 0.25 $ 0.43 The increase in net assets attributable to holders of redeemable per unit for the six months ended June 30, 2016 is calculated as follows: 2016 Class A Class F Class S Class T Increase in net assets attributable to holders of redeemable $ 127,426 $ 239,255 $ 51,635 $ 40,667 Weighted average of redeemable outstanding during the period 205, ,115 94,034 83,632 Increase in net assets attributable to holders of redeemable $ 0.62 $ 0.69 $ 0.55 $ NET CHANGES IN FAIR VALUE OF INVESTMENTS Six months ended June 30, 2017 Six months ended June 30, 2016 Net change from financial assets and liabilities held for trading: Net realized gain on forward contracts $ $ 34,338 Unrealized depreciation in forward contracts (17,252) Net change from financial assets designated as fair value through profit or loss: Net realized gain on sale of investments, including foreign exchange adjustments 282,536 34,968 Unrealized (depreciation) appreciation in value of investments, including foreign exchange adjustments (300,464) 254,233 $ (17,928) $ 306,287 TIMBERCREEK GLOBAL REAL ESTATE INCOME FUND 17

19 13. INVOLVEMENT WITH UNCONSOLIDATED STRUCTURED ENTITIES The Fund has determined that the underlying funds in which the Fund invests are unconsolidated structured entities. The Fund does not provide and has not committed to providing any additional significant financial or other support to the unconsolidated structured entities other than its investment in the unconsolidated structured entities. The maximum exposure to loss is the carrying amount of the financial assets held. The Fund has no significant influence or control over subsidiaries, associates or unconsolidated structured entities. 14. COMPARATIVE INFORMATION Ceratin prior period financial statement line items have been renamed to comply with the current period presentation of the interim financial statements. TIMBERCREEK GLOBAL REAL ESTATE INCOME FUND 18