INDEPENDENT AUDITORS REPORT

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2 INDEPENDENT AUDITORS REPORT To the Unitholders of Timbercreek Global Real Estate Fund We have audited the accompanying financial statements of Timbercreek Global Real Estate Fund, which comprise the statements of financial position as at December 31, 2015 and 2014, the statements of comprehensive income, changes in net assets and cash flows for the years then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the fund s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the fund s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Timbercreek Global Real Estate Fund as at December 31, 2015 and 2014, and it s financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards. Chartered Professional Accountants, Licensed Public Accountants March 24, 2016 Toronto, Canada Timbercreek Global Real Estate Fund 1

3 STATEMENTS OF FINANCIAL POSITION Years ended December 31, 2015 and 2014 ASSETS December 31, 2015 December 31, 2014 Due from broker 4,134, ,017 Assets for portfolio assets sold (note 5) 358,802 Dividends and interest receivable 470, ,706 Margin deposited on equity swaps and forward contracts 20,314,425 10,230,000 Derivative assets - forward contracts 23,140 74,384 Derivative assets - equity swaps 449, ,292 Investments, at fair value through profit or loss 92,695,092 91,575,637 LIABILITIES 118,446, ,733,036 Margin facility (note 9) 13,758,950 11,949,245 Management fees payable (note 7(a)(i)) 7,802 23,165 Accounts payable and accrued liabilities 53,371 20,505 Redemptions payable 5,615 Liabilities for portfolio assets purchased (note 6) 45,002 Distributions payable (note 10(b)) 1,578,010 1,394,506 Derivative liabilities - forward contracts 1,878, ,144 Derivative liabilities - equity swaps 1,402,916 18,724,470 13,901,180 Net assets attributable to holders of redeemable units 99,721,824 89,831,856 Net assets attributable to holders of redeemable units per Class: Class A units Class B units Units outstanding (note 10): Class A units 89,922,769 10,799,055 6,752,920 78,539,122 11,292,734 5,852,374 Class B units 761, ,133 Net assets attributable to holders of redeemable units per unit: Class A units Class B units The accompanying notes are an integral part of these financial statements. 2 Timbercreek Global Real Estate Fund

4 STATEMENTS OF COMPREHENSIVE INCOME Years ended December 31, 2015 and 2014 Investment income: December 31, 2015 December 31, 2014 Dividend income 5,055,571 5,068,658 Interest income, for distribution purposes 478, ,538 Distributions from income trusts and partnerships 443, ,436 Net changes in fair value of investments and derivatives (note 13) 1,514,513 10,838,715 7,492,089 16,622,347 Expenses: Management fees (note 7(a)(i)) 1,335,350 1,786,022 Trailer fee (note 7(a)(ii)) 387, ,504 Commissions and other portfolio transaction costs 226, ,365 Other operating costs 152, ,005 Interest and borrowing fees 184, ,087 Audit fees 105, ,995 Independent review committee (note 7(g)) 30,000 28,606 Unitholder reporting 53,145 37,058 Legal fees 56,900 54,841 Foreign dividend withholding tax 640, ,767 3,171,976 3,514,250 Increase in net assets attributable to holders of redeemable units 4,320,113 13,108,097 Increase in net assets attributable to holders of redeemable units per class Class A units 3,766,955 11,380,394 C lass B units 553,158\ 1,727,703 Net assets attributable to holders of re deemable units per unit (note 16): Class A units Class B units The accompanying notes are an integral part of these financial statements. Timbercreek Global Real Estate Fund 3

5 STATEMENTS OF CHANGES IN NET ASSETS Years ended December 31, 2015 and Class A units Class B units Total Net assets attributable to holders of redeemable units, beginning of year 78,539,122 11,292,734 89,831,856 Increase in net assets attributable to holders of redeemable units 3,766, ,158 4,320,113 Issuance of units (note 10) 13,591,620 13,591,620 Issuance costs (note 10) (753,480) (753,480) Distributions to unitholders (note 10(b)) (5,262,540) (643,500) (5,906,040) Redemptions of units (1,333,271) (28,974) (1,362,245) Exchange of units Net assets attributable to holders of redeemable units, end of year 374,363 88,922,769 (374,363) 10,799,055 99,721, Class A units Class B units Total Net assets attributable to holders of redeemable units, beginning of year 73,526,461 10,961,763 84,488,224 Increase in net assets attributable to holders of redeemable units 11,380,394 1,727,703 13,108,097 Issuance of units (note 10) 1,393,375 1,393,375 Issuance costs (note 10) (81,697) (81,697) Distributions to unitholders (note 10(b)) (4,852,941) (666,128) (5,519,069) Redemptions of units (3,386,180) (170,894) (3,557,074) Exchange of units Net assets attributable to holders of redeemable units, end of year 559,710 78,539,122 (559,710) 11,292,734 89,831,856 The accompanying notes are an integral part of these financial statements. 4 Timbercreek Global Real Estate Fund

6 STATEMENTS OF CASH FLOWS Years ended December 31, 2015 and Cash provided by (used in): OPERATING ACTIVITIES Increase in net assets attributable to holders of redeemable units 4,320,113 13,108,097 Adjustments for: Net changes in fair value of i nvestments and derivatives (1,514,513) (10,838,715) Proceeds from sale of investments Purchases of investments Net payments on maturity of forward contracts Net payments received from equi ty swaps Commissions and other portfolio transaction costs Change in non-cash operating items: Decrease in dividends and interest receivable 44,725,822 (39,063,362) (3,253,945) 860, ,313 31,803 66,432,574 (67,162,183) (1,133,000) 2,697, , ,566 Increase (decrease) in accounts payable and accrued liabilities 32,866 (9,930) Decrease in management fees payable (15,363) (3,246) Increase (decrease) in liability for portfolio assets purchased 45,002 (398,789) Increase in portfolio assets sold (358,802) Decrease in due from Timbercreek Asset Management Inc. 1,558,894 (Increase) in due from brok er (3,698,302) (162,370) 2,338,301 4,826,850 FINANCING ACTIVITIES Proceeds from issuance of redeemable units, net Redemptions of units Distributions to unitholders 12,838,140 (1,367,860) (5,722,536) 1,311,678 (3,551,459) (5,554,109) 5,747,744 (7,793,890) Net foreign exchange gain on cash accounts Change in net margin facility 188,675 8,274,720 5,177 (2,961,863) Net margin facility, beginning of year (1,719,245) 1,242,618 Net margin facility, end of year 6,555,475 (1,719,245) Net margin facility is comprised of: Margin deposited on equity swaps and forward contracts 20,314,425 10,230,000 Margin facility (13,758,950) (11,949,245) 6,555,475 (1,719,245) SUPPLEMENTAL INFORMATION Interest paid 187, ,112 Interest received 788,071 1,087,978 Dividends received 4,592,739 4,658,616 The accompanying notes are an integral part of these financial statements. Timbercreek Global Real Estate Fund 5

7 SCHEDULE OF INVESTMENTS December 31, 2015 Description COMMON EQUITIES Australia Number of shares units Average cost Fair value % of net assets Charter Hall Retail REIT 479,842 1,522,684 2,017, Scentre Group 637,500 2,104,628 2,693, Vicinity Centres 1,165,900 3,183,012 3,291, Canada Europe 6,810,324 8,002, Artis Real Estate Investment Trust 187,396 2,336,140 2,398, CHC Realty Capital Corp. 60, , , Dream Global REIT 465,023 3,882,864 4,027, Dream Office REIT 191,363 4,722,778 3,323, InnVest REIT 585,830 2,722,586 3,005, True North Commercial REIT 254,527 1,459,900 1,298, ,694,268 14,221, Befimmo SCA Sicafi 47,769 3,479,532 3,948, Citycon OYJ 378,400 1,272,182 1,364, Eurocommercial Properties NV 50,644 2,169,519 3,028, Intervest Offices & Warehouses NV 63,226 1,704,124 2,315, Mercialys SA 122,228 3,191,994 3,423, TLG Immobilien AG 42, ,183 1,097, Wereldhave NV 41,900 3,148,611 3,255, Hong Kong 15,632,145 18,434, Fortune REIT 2,387,000 1,789,390 3,401, Prosperity REIT 3,908,000 1,620,188 1,946, Sunlight REIT 2,908,000 1,539,333 1,988, New Zealand Kiwi Income Property Trust Singapore 1,662,000 4,948,911 7,336, ,731,640 2,124, ,731,640 2,124, AIMS AMP Capital Industrial REIT 1,757,856 1,960,131 2,360, Cache Logistics Trust 3,053,900 2,776,731 2,714, CapitaLand Retail China Trust 1,020,400 1,409,303 1,485, Mapletree Commercial Trust 1,165,674 1,679,719 1,480, Timbercreek Global Real Estate Fund 7,825,884 8,040,

8 SCHEDULE OF INVESTMENTS December 31, 2015 Description Number of shares units Average cost Fair value % of net assets United States of America Sabra Health Care REIT Inc. 47,344 1,111,736 1,325, Spirit Realty Capital Inc. 8, , , Western Asset Mortgage Capital Corp. 40, , , ,926,761 2,013, Total common equities 54,569,933 60,173, PREFERRED SHARES United States of America Apollo Commercial Real Estate Finance - Series A 8.625% 78,937 2,081,217 2,826, Ashford Hospitality Trust, Inc. - Series D 8.45% 70,103 1,692,937 2,443, Cedar Realty Trust Inc. - Series B 7.25% 59,443 1,636,057 2,032, Pennsylvania REIT - Series A 8.25% 71,052 1,892,743 2,538, Sunstone Hotel Investors, Inc. - Series D 8.0% 85,300 2,064,047 2,982, Total preferred shares 9,367,001 12,822, Total equities 63,936,934 72,996, WARRANTS Canada CHC Realty Capital Corp. 14N ,181,818 Total warrants PRIVATE INVESTMENTS Canada Private debt Sorelle Multi-family Holding LLC _ 1,500,000 1,500, Private real estate Timbercreek Canadian Direct LP (note 7 (d)) 581,500 7,276,518 9,273, United Kingdom Private debt 8,776,518 10,773, Timbercreek Westcott 1,464,964 1,459, Timbercreek Global Real Estate Fund 7

9 SCHEDULE OF INVESTMENTS December 31, 2015 Description Number of shares units Average cost Fair value % of net assets Private common equity Timbercreek UK VTEC LP (note 7 (f)) 3,815,784 4,352, United States of America Private debt 5,280,748 5,811, Pure Living Multi-Family Holding LLC 1,835,400 2,076, Alafaya Multi-Family Holding LLC 942,450 1,038, ,777,850 3,114, Total private investments 16,835,116 19,698, Total investments 80,772,050 92,695, Commissions and other portfolio transaction costs (note 3(c)) (199,859) Total net investments 80,572,191 92,695, Foreign exchange forward contracts (Schedule 1): Unrealized loss, net (1,855,279) (1.86) Equity swaps (Schedule 2): Unrealized loss, net (953,303) (0.96) Other assets, net 9,835, NET ASSETS 99,721, The accompanying notes are an integral part of these financial statements. 8 Timbercreek Global Real Estate Fund

10 SCHEDULE OF INVESTMENTS December 31, 2015 SCHEDULE 1 FOREIGN EXCHANGE FORWARD CONTRACTS Settlement date Currency Counterparty Forward rates Contract price Fair value Unrealized gain (loss) August 17, 2016 G.B.P. CIBC World Markets , ,840 23,140 Derivative assets 23,140 January 6, 2016 Euro CIBC World Markets January 6, 2016 U.S. CIBC World Markets February 1, 2016 Euro CIBC World Markets February 1, 2016 U.S. CIBC World Markets February 16, 2016 U.S. CIBC World Markets March 1, 2016 Euro CIBC World Markets March 1, 2016 U.S. CIBC World Markets April 7, 2016 G.B.P. CIBC World Markets August 17, 2016 G.B.P. CIBC World Markets (11,451,180) (11,722,889) (271,709) (3,785,080) (4,013,590) (228,510) (4,611,798) (4,812,190) (200,392) (6,149,950) (6,504,392) (354,442) (2,996,100) (3,113,683) (117,583) (1,140,800) (1,203,812) (63,012) (3,743,880) (3,874,658) (130,778) (1,426,711) (1,458,982) (32,271) (4,020,492) (4,500,214) (479,722) D erivative liabilities (1,878,419) Total net unrealized loss on foreign exchange forward contracts (1,855,279) The accompanying notes are an integral part of these financial statements. Timbercreek Global Real Estate Fund 9

11 SCHEDULE OF INVESTMENTS December 31, 2015 SCHEDULE 2 EQUITY SWAPS* Security name U.S. Dollar Swaps: Apollo Commercial Real Estate Finance, Inc. Ashford Hospitality Trust Preferred Series E 9.0% Hersha Hospitality Trust Preferred Series B 8.0% NorthStar Realty Europe Corp. Pebblebrook Hotel Trust Preferred Series A 7.875% Pebblebrook Hotel Trust Preferred Series B 8.0% Maturity date March 10, 2016 January 21, 2016 January 21, 2016 November 7, 2016 January 21, 2016 January 21, 2016 Counterparty Contract price Fair value Unrealized gain (loss) J.P. Morgan 2,886,443 3,099, ,089 J.P. Morgan 2,282,285 2,327,075 44,790 J.P. Morgan 2,309,273 2,319,606 10,333 J.P. Morgan 5,400 5,400 J.P. Morgan 884, , J.P. Morgan 1,767,261 1,790,734 23,473 Spirit Realty Capital Inc. July 21, 2016 J.P. Morgan 3,077,837 3,230, ,277 Total unrealized gain on equity swaps Blackstone Mortgage Trust Inc. March 24, 2016 Care Capital Properties, Inc. October 4, 2016 MFA Mortgage Investments Inc. January 21, ,613 J.P. Morgan 1,970,597 1,895,420 (75,177) J.P. Morgan 2,551,700 2,398,860 (152,840) J.P. Morgan 4,414,674 4,357,010 (57,664) NorthStar Realty Finance July 8, 2016 J.P. Morgan 2,269,892 1,494,219 (775,673) Corp. STAG Industrial, Inc. June 14, 2016 J.P. Morgan 3,727,026 3,621,669 (105,357) Two Harbors Investment Corp. Western Asset Mortgage Capital Corp. Total unrealized loss on equity swaps March 3, 2016 March 24, 2016 J.P. Morgan 2,962,087 2,836,448 (125,639) J.P. Morgan 2,050,372 1,939,806 (110,566) (1,402,916) Total net unrealized loss on equity swaps (953,303) * The Fund has the ability to extend these contracts for another year at their maturity date, thereby maintaining the underlying economic exposure of the position. The accompanying notes are an integral part of these financial statements. 10 Timbercreek Global Real Estate Fund

12 1. CORPORATE INFORMATION Timbercreek Global Real Estate Fund (the Fund ) is an investment fund which was created under the laws of the Province of Ontario pursuant to a Declaration of Trust dated August 5, 2010 (the Declaration of Trust ). The Fund s registered office is at 25 Price Street, Toronto, Ontario, Canada M4W 1Z1. The Fund is authorized to issue an unlimited number of redeemable units of three classes, including Class A units, Class B units and Class I units. The Class A units are publicly listed on the Toronto Stock Exchange (the TSX or Exchange ) under the symbol TGF.UN. The 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. In order to achieve its objectives, the Fund invests in a globally diversified portfolio of securities issued in respect of real estate situated primarily in the world s industrialized economies. While the bulk of the portfolio consists of publicly traded real estate securities, the Fund is able to invest up to 20% of its total assets directly in real estate. Further, the Fund is able to invest across the capital structure, including common equities, preferred shares and private direct investments. Timbercreek Asset Management Ltd. is the trustee, manager (the Trustee or Manager ) and portfolio advisor of the Fund. The Manager has been retained to provide fund management and portfolio advisory services pursuant to a management agreement dated August 5, 2010 (the Management Agreement ). 2. BASIS OF PRESENTATION (a) Basis of preparation These financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board ( IASB ). The financial statements were approved by the Board of Directors of the Manager on March 24, (b) Basis of measurement These 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. 3. SIGNIFICANT ACCOUNTING POLICIES (a) Financial assets and financial liabilities (i) Classification The Fund classifies its financial assets and financial liabilities on initial recognition into the following categories: Financial instruments measured at fair value (i) Financial assets and financial liabilities held for trading: A financial asset or financial liability is classified as held for trading if it is acquired or incurred principally for the purpose of selling or repurchasing in the near term or if on initial recognition is part of a portfolio of identifiable financial investments that are managed together and for which there is evidence of a recent actual pattern of short-term profit taking. These include options, foreign exchange forward contracts and equity swaps. The Fund s policy is not to apply hedge accounting. (ii) Financial assets and financial liabilities designated at fair value through profit or loss at inception: Financial assets and financial liabilities designated at fair value through profit or loss at inception are financial instruments that are not classified as held for trading but are managed, and their performance is evaluated on a fair value basis in accordance with the Fund s documented investment strategy. These include common equities, preferred shares and private investments. Timbercreek Global Real Estate Fund 11

13 Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. This category includes margin deposited on equity swaps and forward contracts, due from broker and dividends and interest receivable. Other financial liabilities This category includes all financial liabilities, other than those classified as fair value through profit or loss. These include the margin facility, management fee payable, accounts payable and accrued liabilities, liabilities for portfolio assets purchased and distributions payable. (ii) Recognition and initial measurement Financial assets and financial liabilities at fair value through profit or loss are initially recognized on the trade date, which is the date on which the Fund becomes a party to the contractual provisions of the instrument. Other financial assets and financial liabilities are recognized on the date on which they are originated. Financial assets and financial liabilities at fair value through profit or loss are initially measured at fair value, with transaction costs recognized in profit or loss. Financial assets and financial liabilities not at fair value through profit or loss are initially measured at fair value plus transaction costs that are directly attributable to their acquisition or issue. (iii) Subsequent measurement After initial measurement, the Fund measures financial instruments which are classified at fair value through profit or loss, at fair value. Subsequent changes in the fair value of these financial instruments are recorded in net changes in fair value of investments and derivatives. Interest and dividends earned or paid on these instruments are recorded separately in interest income and dividend income. The Fund s obligation for net assets attributable to holders of redeemable units is presented at the redemption amount which is the residual interest in the Fund. Loans and receivables and other financial liabilities are measured at amortized cost. (iv) Offsetting financial instruments Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. (v) Derecognition The Fund derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial assets are transferred, or in which the Fund neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control of the financial asset. On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset that is derecognized) and the consideration received (including any new asset obtained less any new liability assumed) is recognized in profit or loss. Any interest in such transferred financial assets that is created or retained by the Fund is recognized as a separate asset or liability. The Fund derecognizes a financial liability when its contractual obligations are discharged, are cancelled or expire. (b) Fair value measurements Financial instruments measured at fair value are classified into one of three fair value hierarchy levels, based on the lowest level input that is significant to the fair value measurement in its entirety. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. 12 Timbercreek Global Real Estate Fund

14 The three fair value hierarchy levels are as follows: Level 1 quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and Level 3 inputs for the asset or liability that are not based on observable market data (unobservable inputs). Refer to note 12 for fair value measurements analysis. (i) Valuation framework The Manager has established a Valuation Committee that has responsibility for overseeing fair value measurement and reports to the Board of Directors of the Manager. The Valuation Committee regularly reviews significant unobservable inputs and valuation adjustments. Where third party information such as appraisal services are used to measure fair values, the Valuation Committee assesses the evidence obtained by these third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which valuations should be classified. (ii) Valuation of investments Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal, or in its absence, the most advantageous market to which the Fund has access to at that date. When available, the Fund measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of financial assets and liabilities traded in active markets (such as publicly traded derivatives and securities) is based on quoted market prices at the close of trading on the reporting date. The Fund uses the last traded market price for financial assets and financial liabilities where the last traded price falls within that day s bid-ask spread. In circumstances where the last traded price is not within the bid-ask spread, the Manager determines the point within the bid-ask spread that is most representative of fair value based on the specific facts and circumstances. When the Fund holds derivatives with offsetting market risks, it uses mid-market prices as a basis for establishing fair values for the offsetting risk positions and applies the bid or asking price to the net open position, as appropriate. Private real estate The Fund invests in private direct real estate investments through equity interests held in limited partnerships or trusts, which are recorded at net asset value per unit of the respective entity. The real estate investments underlying the entity s units are recorded at cost from the date of acquisition until receipt of the first appraisal; thereafter, they are valued at fair value based on appraisals. Appraisals for real estate investments are obtained from qualified independent appraisers up to twice per year for each property following the period of acquisition. Other real estate investments, including private debt investments, may be held by these entities and are recorded at fair value, as outlined below. Private debt investments As there are no quoted prices in an active market for these mortgage or loan investments, the Manager makes its determination of fair value based on its assessment of the current lending market for mortgage or loan investments of same or similar terms. Typically, the fair values of these investments approximate their carrying values given the investments consist of short-term loans that are repayable at the option of the borrower without yield maintenance or penalties. When collection of the principal amount of a mortgage or loan is no longer reasonably assured, the fair value of the investment is reduced to the estimated net realizable value of the underlying security. Any unrealized change in the fair value of a mortgage or loan investment is recorded as change in the fair value of investments and derivatives. A realized change in the fair value of a mortgage or loan as a result of a disposition or repayment is recorded as change in the fair value of investments and derivatives. Timbercreek Global Real Estate Fund 13

15 Foreign exchange forward contracts The Fund may enter into foreign exchange contracts for hedging purposes or to establish an exposure to a particular currency. Foreign exchange contracts are valued based on the difference between the contract forward rate and the forward bid rate (for currency held) and the forward ask rate (for currency sold short), on the valuation date. The fair value of foreign exchange forward contract is included in the statements of financial position as derivative assets or derivative liabilities and the change in fair value of a foreign exchange forward contract is included in net changes in fair value of investments and derivatives in the statement of comprehensive income. Equity swaps An equity swap contract is an agreement between two parties to exchange periodic payments based upon a notional principal amount, with one party paying a financing fee and the other party paying the actual return of a stock, a basket of stocks or a stock index. The Fund as a buyer of an equity swap would receive the total return of the underlying stocks or stock index. In return, the Fund would be required to pay a financing fee amount on the agreed settlement dates. The value of an equity swap contract is included in the statements of financial position as derivative assets or derivative liabilities and the change in fair value of an equity swap is included in net changes in fair value of investments and derivatives in the statement of comprehensive income. Margin deposited on equity swaps and forward contracts These amounts relate to cash collateral held by the counterparties on foreign exchange forward contracts and equity swap contracts. (c) Transaction costs Commissions and other portfolio transaction costs, which are incurred on the purchase and sale of an investment, such as fees and commissions paid to agents, advisors, brokers and dealers and exchange fees thatare expensed and included in commissions and other portfolio transaction costs in the statements of comprehensive income. (d) Investment transactions and income recognition Investment transactions are accounted for on a trade-date basis; that is, on the day that a buy or sell order is executed. Dividend income is recognized on the ex-dividend date along with withholding taxes on foreign dividends, if any. Distributions from investment trusts are recorded when declared. Interest income shown on the statements of comprehensive income represents the coupon interest received by the Fund accounted for on an accrual basis. Realized gains and losses from investment transactions are calculated as proceeds of disposition less their average cost. The cost of investments represents the amount paid for each security and is determined on an average-cost basis, excluding transaction costs. (e) Translation of foreign currencies Foreign currency transactions during the period, including purchases and sales of securities, income and expenses, are translated at the exchange rate prevailing on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated at the functional currency rate of exchange at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated into the functional currency at the exchange rate at the date on which the fair value was determined. 14 Timbercreek Global Real Estate Fund

16 Foreign currency transaction gains and losses on financial instruments classified as fair value through profit and loss (FVTPL) are included in profit or loss in the statements of comprehensive income as part of the net changes in fair value of investments and derivatives. (f) Withholding tax expense The Fund generally incurs withholding taxes imposed by certain countries on investment income and capital gains. Such income and gains are recorded on a gross basis and the related withholding taxes are shown as a separate expense in the statements of comprehensive income. (g) Income taxes The Fund has qualified and is expected to continue to qualify as a mutual fund trust under the Income Tax Act (Canada) and, accordingly, is not taxed on the portion of taxable income that is paid or made payable to unitholders. Income tax on net realized capital gains not paid or made payable to unitholders may be recoverable by the Fund in future periods. It is the intention of the Fund to distribute all of its future income and sufficient net realized capital gains so that the Fund will not be subject to income tax. (h) Redeemable units and net assets attributable to holders of redeemable units The Fund issues Class A and Class B units, which are redeemable at the holder s option at the redemption date and do not have identical rights. As a result, redeemable units are classified as liabilities in the statements of financial position. For each Fund unit sold, the Fund receives an amount equal to the net asset value per unit at the date of sale, which is included in net assets attributable to holders of redeemable units. For each unit redeemed, net assets attributable to holders of redeemable units is reduced by the net asset value of the unit at the date of redemption. The redeemable shares are measured at the redemption amount and are considered a residual interest in the Fund. The Fund incurs issuance costs relating to the offerings of redeemable shares. These issuance costs are offset against the gross proceeds received from the redeemable share offerings in the statement of changes in net assets. The Fund s net assets value ( NAV ) is determined by subtracting the aggregate amount of liabilities of the Fund from the total assets of the Fund. The NAV per unit is calculated by dividing the NAV attributable to each class of redeemable units by the total number of outstanding redeemable units for each respective class. There is no difference between the Fund s NAV per unit and net assets attributable to holders of redeemable units per unit. The increase (decrease) in net assets attributable to holders of redeemable units per unit by class in the statements of comprehensive income represents the change in net assets attributable to holders of redeemable units attributable to each class divided by the weighted average number of units of that class outstanding during the reporting period. Income, expenses other than trailer fees, and realized and unrealized capital gains (losses) are distributed amongst the different classes of units in proportion to the amount invested in them. (i) 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 Timbercreek Global Real Estate Fund 15

17 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 financial statements, the Manager 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 Manager relies on external information and observable conditions where possible, supplemented by internal analysis as required. There are no known trends, commitments, events or uncertainties that the Manager believes will materially affect the methodology or assumptions utilized in making those estimates and judgments in these financial statements. (a) Judgments (i) Assessment of investment entities Entities that meet the definition of an investment entity within IFRS 10 are required to measure their subsidiaries at fair value through profit or loss rather than consolidate them. The criteria that define an investment entity are as follows: An entity that obtains funds from one or more investors for the purpose of providing those investors with investment services; An entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and An entity that measures and evaluates the performance of substantially all of its investments on a fair value basis. The Fund s prospectus details its objective of providing returns in the form of investment income and capital appreciation, through investing in a globally diversified portfolio of securities issued in respect of real estate situated primarily in the world s industrialized economies. All investments are reported at fair value to the extent allowed by IFRS. The Manager has concluded that the Fund meets the definition of an investment entity. These conclusions will be reassessed on an annual basis to determine if any of these criteria or characteristics have changed. (ii) Involvement with unconsolidated structured entities The Fund has concluded that the unlisted investment entities in which it invests, but that it does not consolidate, meet the definition of structured entities because: The voting rights in the entities are not dominant rights in deciding who controls them as they relate to administrative tasks only; Each entity s activities are restricted by its prospectus and/or governing agreements; and The funds have narrow and well-defined objectives to provide investment opportunities to investors. (b) Assumptions and estimates (i) Measurement of fair values The Fund measures financial instruments at fair value at each reporting date. The information about assumptions and estimates involved in the determination of fair value with significant unobservable inputs is included in note Timbercreek Global Real Estate Fund

18 5. ASSETS FOR PORTFOLIO ASSETS SOLD Assets for portfolio assets sold represent amounts receivable for unsettled trades. 6. LIABILITIES FOR PORTFOLIO ASSETS PURCHASED Liabilities for portfolio assets purchased represent amounts payable for unsettled trades. 7. RELATED PARTY TRANSACTIONS (a) Timbercreek Asset Management Ltd. (i) Management fee The Fund has entered into a Management Agreement, whereby the Fund pays the Manager a management fee in years where the Fund earns a positive Total Return (as defined below) for that year. The Manager will charge a fee, plus applicable taxes (the Management Fee ), of: 0% of net asset value per annum in years in which the Total Return is negative; 1.25% of net asset value per annum in years in which the Total Return is between 0% and 7.99%; 1.5% of net asset value per annum in years in which the Total Return is between 8% and 11.99%; and 1.8% of net asset value per annum in years in which the Total Return is in excess of 12%. Total Return means the return generated on the units, including income from distributions declared, as well as the appreciation or depreciation in the net asset value per unit, over the calendar year, calculated on December 31 of each year. The Management Fee shall not be paid in respect of the net asset value of the Fund invested in assets or securities for which the Manager and/or its affiliates is paid an investment management fee. The Management Fee is calculated and accrued daily based on the year-to-date annualized Total Return, paid monthly in arrears. In circumstances where the application of this graduated Management Fee applied to the Total Return would result in returns to investors being lower than they would have been under a lower Management Fee, the Management Fee shall be reduced until investors would receive a return at least equal to what they would have received had the Total Return of the Fund implied a lower percentage Management Fee. In consideration for the services received from the Manager for the year ended December 31, 2015, the Fund incurred a Management Fee of 1,335,350 based on 1.25% of net asset value for Class A and Class B (December 31, ,786,022; 1.80% of net asset value for Class A and Class B). As at December 31, 2015, 7,802 (December 31, ,165) was payable to the Manager. (ii)trailer fee The Fund pays the Manager, who will pay to each registered dealer, a trailer fee (the Trailer Fee ) equal to 0.40% annually of the net asset value per Class A unit for each unit held by clients of such registered dealer, plus applicable taxes. The Trailer Fee is calculated at quarter-end and is payable 15 days after the end of each calendar quarter. There is no Trailer Fee applicable to the Class B units. During the year ended December 31, 2015, the Fund incurred Trailer Fees of 387,011 (December 31, ,504). As at December 31, ,961 in Trailer Fees (December 31, ,416) is included in accounts payable and accrued liabilities. (b) Timbercreek Mortgage Investment Corporation and Timbercreek Senior Mortgage Investment Corporation To achieve the Fund s investment objectives, the Fund may co-invest in private debt investments secured by multi-family and/or commercial properties with Timbercreek Mortgage Investment Corporation ( TMIC ), Timbercreek Senior Mortgage Investment Corporation ( TSMIC ), Timbercreek Four Quadrant Global Real Estate Partners ( T4Q ), Timbercreek U.S. Short Term Debt (Founder) LP and Timbercreek Westcott Limited Partnership, entities managed by the Manager or its affiliates. As at December 31, 2015, the Fund has co-invested in four private debt investments totaling 6,073,101 (December 31, Timbercreek Global Real Estate Fund 17

19 975,000) and has co-invested in two private debt investments through Timbercreek Canadian Direct LP ( TCD LP ) totaling 2,047,521 (December 31, three private debt investments, 2,150,589). The debt investments are secured by the properties to which they relate and bear interest at rates ranging between 8.97% and 10.00% ( % and 14.35%). The parent company of the Manager is responsible for the day-to-day operations and providing all general management and administration services. During the year ended December 31, 2015, the Fund earned income on these investments of 608,825 (December 31, ,776). (c) TC Core 2 LP The Fund invested 2,400,000 in TC Core 2 LP, a limited partnership formed for the purpose of acquiring an 11.22% interest in Restier LP ( Restier ). Restier is a limited partnership formed for the purpose of acquiring core, multi-family real estate located throughout Canada. The Manager is the general partner of TC Core 2 LP and is the asset manager, property manager and general partner of Restier, all related parties by virtue of common management. In March 2015, the Fund sold its pro-rata interest in Restier to an unrelated entity for 3,289,560. (d) Timbercreek Canadian Direct LP ( TCD LP ) As at December 31, 2015, the Fund has invested 7,276,518 (December 31, ,800,538) in TCD LP, a limited partnership formed for the purpose of co-investing in direct real estate and private debt investments. The Fund is the sole limited partner of TCD LP and has retained the Manager to provide fund management and investment advisory services. During the year ended December 31, 2015, the Fund received distributions of 2,270,000 ( ,000) from TCD LP which included a return of capital of 1,524,019 ( nil). (e) Timbercreek Global AMC Holdings Partnership ( Global AMC ) During the year ended December 31, 2015, the Fund received proceeds of 733,749 from Global AMC relating to the sale of its assets. Subsequent to year-end, the Fund also received a final payment of 104,882 relating to its investment. (f) Timbercreek UK VTEC LP ( VTEC ) The Fund initially invested 5,000,000 in VTEC and holds an 18.02% limited partnership interest. The Fund has co-invested with T4Q, Timbercreek Asset Management Inc. and other arm s-length parties. The partnership was formed for the purpose of indirectly holding UK loans, which include private debt investments secured by real estate in the United Kingdom. The Fund has entered into foreign exchange forward contracts to hedge its exposure to the British Pound. During the year ended December 31, 2015, the Fund received a distribution of 1,222,592 from the repayment of one UK loan. (g) Independent review committee During the year ended December 31, 2015, fees totaling 30,000 (December 31, ,606) were paid to the members of the independent review committee. 8. OPERATING EXPENSES The Fund is responsible for its operating expenses, including legal, audit, unitholder reporting, transfer agency services, independent review committee fees and the cost of financial and other reports in compliance with all applicable laws, regulations and policies. Such expenses are calculated and accrued daily based on the average net asset value of each class. The Manager pays for such expenses on behalf of the Fund, except for certain expenses, such as interest and taxes, which are reimbursed by the Fund on a monthly basis. 9. MARGIN FACILITY The Fund may utilize various forms of leverage, including its margin facility that allows the Fund to borrow funds from time to time when the Manager determines this to be appropriate. The aggregate amount of leverage by the Fund may not exceed 25% of the aggregate value of the assets of the Fund (the Total Assets ) at the time of use. In the event that the leverage exceeds 25% of Total Assets, the Manager will take reasonable measures to reduce the total borrowings. 18 Timbercreek Global Real Estate Fund

20 The Fund has provided its prime broker an interest in certain assets of the Fund as collateral for leverage purposes. For the year ended December 31, 2015, the Fund s highest and lowest borrowings were approximately 18.4 million and 7.2 million, respectively (or 15.5% and 6.0%, respectively, of Total Assets). For the year ended December 31, 2014, the Fund s highest and lowest borrowings were approximately 20.3 million and 2.4 million, respectively (or 19.5% and 2.3%, respectively, of Total Assets). 10. REDEEMABLE UNITS OF THE FUND The Fund is authorized to issue an unlimited number of redeemable units of three classes, including Class A units, Class B units and Class I units, each of which represents an equal, undivided, beneficial interest in the net assets attributable to holders of redeemable units of the Fund. Class B units are privately held and there is no market through which these units may be sold. The Class I units are privately held and automatically convert into Class B units on the first business day after four months from the date of issuance. As at December 31, 2015, there are no Class I units outstanding (December 31, nil). Each unit of each class entitles the holder to one vote and to participate equally with respect to any and all distributions made by the Fund. On September 28, 2015, the Fund issued 966,000 Class A units with gross proceeds of 13,591,620. In connection with the offering, the Fund incurred issuance costs of 753,480, which includes agent s commissions, issue and structuring costs. The Manager absorbed issuance costs of 255,117. During the year ended December 31, 2015, the unitholders redeemed 91,906 Class A units for 1,333,271 and 2,000 Class B units for 28,974 (December 31, ,732 Class A units for 3,386,180 and 12,515 Class B units for 170,894). During the year ended December 31, 2015 and 2014, the Class A units and Class B units issued and outstanding changed as follows: Class A units Class B units Redeemable units outstanding, January 1, ,852, ,133 Issued 966,000 - Redeemed (91,906) (2,000) Exchanged 26,452 (24,719) Redeemable units outstanding, December 31, ,752, ,414 Class A units Class B units Redeemable units outstanding, January 1, ,966, ,085 Issued 102,984 - Redeemed (259,732) (12,512) Exchanged Redeemable units outstanding, December 31, ,844 5,852,374 (40,440) 788,133 Timbercreek Global Real Estate Fund 19

21 (a) Redemptions Subject to suspension of redemptions by the Trustee in certain circumstances as outlined in the Declaration of Trust, a unitholder is entitled to require payment of the redemption price of all or any of their units by giving written notice to the registrar and transfer agent as follows: (i) Annual Class A units and Class B units may be redeemed on the last business day in February of each year at a redemption price per Class A unit equal to the net asset value per Class A unit and a redemption price per Class B unit equal to the net asset value per Class B unit. Units must be surrendered for annual redemption by February 1 of each year. (ii) Monthly Class A units may be surrendered for redemption on the last business day of any month, other than February, by the 15th day of such month (the Redemption Date ). Payment of the proceeds of redemption will be made on or before the last business day of the following month (the Redemption Payment Date ). Unitholders whose Class A units are surrendered for redemption will be entitled to receive a redemption price per Class A unit equal to the lesser of: (a) 95% of the Trading Price (as defined below) of the Class A units; and (b) the Market Price (as defined below). Any declared and unpaid distributions payable on or before a Redemption Date in respect of Class A units tendered for redemption on such Redemption Date will also be paid on the Redemption Payment Date. Trading Price means the weighted average trading price on the Exchange for the 10 trading days immediately preceding the relevant Redemption Date. Market Price means the closing price of the Class A units on the Exchange on the Redemption Date or, if there was no trade during the relevant period preceding a monthly Redemption Date, the average of the last bid and the last ask price of the Class A units on the Exchange for each day during the relevant period. The Class B units are redeemable monthly on the same terms as the Class A units, provided that the redemption price per Class B unit will be equal to the lesser of: (a) 95% of the Trading Price of the Class A units multiplied by the Class B Exchange Ratio (as defined below); and (b) the Market Price multiplied by the Class B Exchange Ratio. The Class B Exchange Ratio is determined by dividing the net asset value per Class B unit by the net asset value per Class A unit on such date. (b) Distributions The Fund intends to pay distributions to unitholders on a quarterly basis within 15 days following the end of each calendar quarter end. Class A Class B Total Per unit Year ended December 31, 2015 Total 5,262, ,500 5,906,040 Per unit Year ended December 31,2014 Total 4,852, ,128 5,519,069 As at December 31, 2015, 1,578,010 (December 31, ,394,506) was payable to the unitholders. (c) Warrants The Fund filed a prospectus dated June 27, 2014, for an offering of warrants to subscribe for up to 2,871,934 Class A units of the Fund. The Fund allowed each unitholder of record on July 10, 2014 to receive one warrant for each Class A unit of the Fund (a Class A Unit ). Two whole warrants entitled the unitholder to purchase a Class A unit upon payment of the subscription price of The warrants that were not exercised by November 26, 2014 (the Expiry Date ) were void and had no value. The Fund paid an exercise fee of 0.20 per Class A Unit at the time the warrant was exercised, payable to the investment advisor of the Canadian Depository Service participant whose client exercised the warrant, up 20 Timbercreek Global Real Estate Fund