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FRIEDBERG GLOBAL-MACRO HEDGE FUNDINTERIM FINANCIAL STATEMENTS
JUNE 30, 2017(expressed in U.S. Dollars)
AND
FRIEDBERG GLOBAL-MACRO HEDGE LIMITED PARTNERSHIPINTERIM FINANCIAL STATEMENTS
JUNE 30, 2017(expressed in U.S. Dollars)
FRIEDBERG GLOBAL-MACRO HEDGE FUND ANDFRIEDBERG GLOBAL-MACRO HEDGE FUND LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
JUNE 30, 2017
CONTENTS
1. Fried bergGlobal-M acro H ed ge Fu nd
a. Statements of financialpositionb. Statements of changes in netassets attribu table to hold ers of red eemable u nits
c. Statements of income and comprehensive incomed . Statements of cashflowse. Sched u le of investments
f. N otes to financialstatements
2. Fried bergGlobal-M acro H ed ge Fu nd L imited P artnershipa. Statements of financialpositionb. Statements of netassets attribu table to partners
c. Statements of income and comprehensive income
d . Statements of cashflows
e. Sched u le of investmentsf. N otes to financialstatements
AS AT June 30, 2017 December 31, 2016$ $
Cash balances at broker (note 8) 21,919 84,949Investment in Friedberg Global-Macro Hedge Fund Limited Partnership 124,980,651 111,968,652
TOTAL ASSETS 125,002,570 112,053,601
Accounts payable and accrued liabilities (note 8) 201,386 161,031Redemption payable 360,672 44,147
TOTAL LIABILITIES (excluding net assets attributable to holders of redeemable units) 562,058 205,178
NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS 124,440,512 111,848,423
NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS PER UNIT 7.11 6.84
Approved and authorized for issue by the Manager, Toronto Trust Management Ltd., on August 25, 2017
__________________ Director, Toronto Trust Management Ltd.Enrique Zauderer
__________________ Director, Toronto Trust Management Ltd.Daniel Gordon
LIABILITIES
ASSETS
FRIEDBERG GLOBAL-MACRO HEDGE FUND(a unit trust formed under the Laws of Ontario)
STATEMENTS OF FINANCIAL POSITION(in U.S. dollars)
(UNAUDITED)
See accompanying notes to financial statements
2017 2016$ $
Net assets attributable to holders of redeemable units, beginning of the period 111,848,423 134,672,094
Proceeds from the issuance of Units (note 7) 13,319,677 -
Increase in net assets attributable to holders of redeemable units 4,407,551 2,109,367
Redemption of Units (note 7) (5,135,139) (1,108,113)
Net assets attributable to holders of redeemable units, end of the period 124,440,512 135,673,348
FRIEDBERG GLOBAL-MACRO HEDGE FUND
(in U.S. dollars)
STATEMENTS OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITSFOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
See accompanying notes to financial statements
2017 2016$ $
INCOMEGain on investment in Friedberg Global-Macro Hedge Fund Limited Partnership 5,145,701 2,937,088
EXPENSESManagement fees (note 8) 690,576 790,429Audit and accounting fees 21,784 41,464Legal fee expense (recovery) 21,803 (8,572)Custodian fees 3,987 4,400
TOTAL EXPENSES 738,150 827,721
INCREASE IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS 4,407,551 2,109,367
INCREASE IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE UNITS PER UNIT 0.25 0.13
FRIEDBERG GLOBAL-MACRO HEDGE FUNDSTATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in U.S. dollars)FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
See accompanying notes to financial statements
2016 2015$ $
CASH FLOWS FROM OPERATING ACTIVITIESIncrease in net assets attributable to holders of redeemable units 4,407,551 2,109,367Adjustments for:
Gain on investment in Friedberg Global-Macro Hedge Fund Limited Partnership (5,145,701) (2,937,088)Advances to Friedberg Global-Macro Hedge Fund Limited Partnership (13,360,391) -Drawings from Friedberg Global-Macro Hedge Fund Limited Partnership 5,494,093 1,948,986Net change in working capital items:
Accounts payable and accrued liabilities 40,355 (10,794)Redemptions payable 316,525 -
NET CASH FLOWS FROM OPERATING ACTIVITIES (8,247,568) 1,110,471
CASH FLOWS FROM FINANCING ACTIVITIESProceeds from the issuance of redeemable units 13,319,677 -Aggregate amounts paid on redemption of redeemable units (5,135,139) (1,108,113)
NET CASH FLOWS FROM FINANCING ACTIVITIES 8,184,538 (1,108,113)
NET INCREASE (DECREASE) IN CASH FOR THE PERIOD (63,030) 2,358
CASH, BEGINNING OF THE PERIOD 84,949 555
CASH, END OF THE PERIOD 21,919 2,913
(in U.S. dollars)
FRIEDBERG GLOBAL-MACRO HEDGE FUNDSTATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
See accompanying notes to financial statements
FRIEDBERG GLOBAL-MACRO HEDGE FUND
SCHEDULE OF INVESTMENT PORTFOLIO
JUNE 30, 2017(in U.S. dollars)
Investment fund owned at June 30, 2017 was as follows:
Country Description Fair value
Fair value as
of % of Net
Asset Value
(see note 2)$ %
Canada Friedberg Global-Macro Hedge Fund Limited Partnership 124,980,651 100.43
(UNAUDITED)
See accompanying notes to financial statements
FRIEDBERG GLOBAL-MACRO HEDGE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2017(in U.S. Dollars)(UNAUDITED)
1. GENERAL INFORMATION
Friedberg Global-Macro Hedge Fund (the “Fund”) was organized on September 5, 2006 and commenced trading operations on October
31, 2006. The Fund’s principal place of business is 181 Bay Street, Suite 250, Toronto Ontario, M5J 2T3. Pursuant to an agreementdated July 1, 2011, the Fund transferred certain property (including cash, securities and positions in derivatives) to Friedberg Global-
Macro Hedge Fund Limited Partnership (the “LP”) at their fair value on that date by way of a capital contribution, for all of the limitedpartnership units of the LP, by the Fund to the LP.
The Fund is an open-end mutual fund trust established under the laws of Ontario offering non-transferable, redeemable trust units("Units"). The investment manager and general partner of the LP is Friedberg Advisors LP ("Friedberg Advisors" or the “Investment
Manager”) which is an affiliate of Friedberg Mercantile Group Ltd. ("FMGL"). The administrative manager and trustee of the Fund is
Toronto Trust Management Ltd. (the "Manager" or "TTML"), which is an affiliate of Friedberg Advisors and FMGL.
The Fund is a multi-strategy fund whose investment objective is to seek, through the investments in LP, significant total investmentreturns, consisting of a combination of interest income, currency gains and capital appreciation, by investing, through the LP, in the
following four discrete groups of investments: (i) long positions in fixed income securities; (ii) long and short positions in equitysecurities; (iii) currency forwards and futures contracts and options thereon, and (iv) commodity forwards and futures contracts and
options thereon, and other over-the-counter traded derivatives instruments.
2. BASIS OF PRESENTATION AND ADOPTION OF IFRS
(a) Statement of compliance
These financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial
Reporting.These accounting principles are consistent with those outlined in the Fund’s annual financial statements. These interimfinancial statements do not include all disclosures normally provided in annual financial statements and should be read in
conjunction with the Fund’s financial statements for the year ended December 31, 2016. In management’s opinion, the unauditedfinancial information includes all adjustments (consistent solely of normal recurring adjustments), necessary to present fairly suchinformation. Interim results are not indicative of the results expected for the fiscal year.
Any mention of net asset value (“NAV”) is referring to net asset attributable to holders of redeemable units as reported under
International Financial Reporting Standards (“IFRS”).
(b) Basis of measurement
The financial statements have been prepared on the historical cost basis expect for financial assets and liabilities held at fair value
through profit or loss (“FVTPL”) that have been accounted for based on fair value. Historical cost is generally based on the fairvalue of the consideration given in exchange for assets.
(c) Functional and presentation currency
These financial statements are presented in United States dollars, which is the functional currency of the Fund.
- 2 –(UNAUDITED)
3. SIGNIFICANT ACCOUNTING POLICIES
(a) Financial instruments
(i) Recognition and measurement
Financial instruments are required to be classified into one of the following categories: FVTPL, available-for-sale (“AFS”),loans and receivables, held-to-maturity (‘HTM”) and other financial liabilities. Financial instruments classified as FVTPL
may either be held-for trading or designated as FVTPL.
All financial instruments are measured at fair value on initial recognition. Measurement in subsequent periods depends on the
classification of the financial instrument. Transaction costs are included in the initial carrying amount of the financialinstruments except for financial instruments classified as FVTPL in which case transaction costs are expensed as incurred.
Financial instruments at FVTPL are recognized initially on the trade date, which is the date on which the Fund becomes a
party to the contractual provision of the instrument. Other financial assets and financial liabilities are recognized on the dateon which they are originated.
Financial assets are derecognized when the rights to receive cash flows from the investments have expired or the Fund hastransferred substantially all risks and rewards of ownership. The Fund’s policy is to recognize transfers into and out of the fair
value hierarchy levels as of the date of the event or change in circumstances giving rise to the transfer.
Financial assets and liabilities may be 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 realize the assetand settle the liability simultaneously.
The Fund has not classified any of its financial instruments as loans and receivable, AFS or HTM.
(ii) FVTPL
The Fund classifies all of their cash balances at broker as held for trading, while the investment in Friedberg Asset Allocation
Fund LP and net assets attributable to holders of redeemable units have been designated as FVTPL upon initial recognition.
The Fund’s obligation for net assets attributable to holders of redeemable units is presented at the redemption amount whichapproximates fair value due to their short term nature.
The Fund’s investment in the LP is presented at FVTPL. As there are no quoted prices in active markets, the fair value of the
investment in the LP is based under the carrying value of underlying net assets of the LP, which is determined on a fair valuebasis.
The Fund’s accounting policies for measuring the fair value of its investments are similar to those used in measuring its NAVfor unitholder transactions; therefore it is expected that net assets attributable to holders of redeemable units will be the same
in all material respects as the NAV used in processing Unitholder transactions.
Purchases and sales of financial assets are recognized on their trade date, the date on which the Fund commits to purchase or
sell the investment. Financial assets and liabilities at FVTPL are initially recognized at fair value. Transaction costs areexpensed as incurred in the statements of income and comprehensive income.
Subsequent to initial recognition, all financial assets and liabilities at FVTPL are measured at fair value. Gains and losses
arising from the change in fair value of financial assets and liabilities at FVTPL category are presented in the statements ofincome and comprehensive income.
- 3 –(UNAUDITED)
(iii) Other financial liabilities
Other financial liabilities are initially measured at fair value, net of transaction costs, and are subsequently measured atamortized cost using the effective interest method. The LP’s classifies accounts payable and accrued liabilities andredemptions payable as other financial liabilities.
(b) Cash and cash equivalents
Cash and cash equivalents consist of cash on deposit and short-term, interest bearing notes with a term to maturity of less than
three months from date of purchase. Cash is comprised of deposits with financial institutions.
(c) Investment income
Gain (loss) in the investment in the LP is recognized as it is incurred.
(d) Foreign currency translation
Transactions in foreign currencies, if any, are translated into the Fund’s functional currency using the exchange rate prevailing onthe trade date. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated at the period-
end exchange rate. Any such foreign exchange gains and losses are presented as “Foreign currency translation gain (loss)” in thestatements of income and comprehensive income.
(e) Classification of redeemable Units issued by the Fund
In accordance with IAS 32, FinancialInstru ments: P resentation (“IAS 32”), the Units’ entitlements include a contractualobligation to distribute any net income and net realized capital gains at least annually in cash (at the request of the unitholder) and
therefore, the ongoing redemption feature is not the Units’ only contractual obligation. Therefore, the Units do not meet the criteria
for classification as equity and have been classified as financial liabilities on the statements of financial position.
(f) Increase (decrease) in net assets attributable to holders of redeemable Units per Unit
The increase (decrease) in net assets attributable to holders of redeemable Units per Unit in the statements of income andcomprehensive income is calculated by dividing the increase (decrease) in net assets attributable to holders of redeemable Unitsby the weighted average number of Units outstanding during the period.
(g) Income taxes
The Fund is taxed as a unit trust under the Income Tax Act (Canada). Provided that the Fund makes distributions in each year of
its net taxable income and taxable net capital gains, the Fund will not generally be liable for income tax. It is the intention of the
Fund to distribute all of its net taxable income and net realized capital gains on an annual basis. Accordingly, no income taxprovision has been recorded.
(h) Pending accounting changes
IFRS 9, Financial Instruments (“IFRS 9”) was issued in 2010 and is to replace IAS 39, Financial Instruments: Recognition andMeasurement (“IAS 39”). IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or
fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financialinstruments in the context of its business model and the contractual cash flow characteristics of the financial assets. In addition,
under IFRS 9 the same impairment model is applied to all financial instruments that are subject to impairment accounting. Thecurrent impairment model is replaced with an expected credit loss model which means that a loss event will no longer need to
- 4 –(UNAUDITED)
occur before an impairment allowance is recognized. IFRS 9 is effective for annual periods beginning on or after January 1, 2018.
The Manager is currently evaluating the impact of IFRS 9 on the Fund’s financial statements.
IFRS 7, Financial Instruments – Disclosure has also been amended for disclosures in respect of the transition from IAS 39 to IFRS9. The Manager is currently evaluating the impact of IFRS 7 on the Fund’s financial statements.
IFRS 15, Revenu e from C ontracts withC u stomers (“IFRS 15”) was issued in May 2014. IFRS 15 provides a single, principles-
based, five-step model to be applied to all contracts with customers. The five steps in the model are as follows:
Identify the contract with the customer
Identify the performance obligations in the contract
Determine the transaction price
Allocate the transaction price to the performance obligations in the contract
Recognize revenue when (or as) the entity satisfies a performance obligation
Guidance is provided on topics such as the point in which revenue is recognized, accounting for variable consideration, costs of
fulfilling and obtaining a contract and various related matters. New disclosures about revenue are also introduced. IFRS 15 is tobe effective for annual reporting periods beginning on or after January 1, 2018, with early adoption permitted. The Manager is
currently evaluating the impact of IFRS 15 on the Fund’s financial statements.
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of financial statements in conformity with IFRS requires the Manager to make estimates, judgments and assumptionsthat affect the application of accounting policies, and the reported amounts of assets, liabilities, income and expenses. Actual results
could differ from these estimates.
In making estimates and assumptions, the Manager relies on external information and observable conditions where possible,
supplemented by internal analysis as required. These estimates and assumptions have been applied in a manner consistent with prior
periods and there are no known trends, commitments, events or uncertainties that the Manager believes will materially affect the
methodology or assumptions utilized in making these estimates and assumptions in these financial statements. Estimates and underlyingassumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimatesare revised and in any future periods affected. Areas of significant estimates include accounts payable and accrued liabilities and fair
value of financial instruments.
5. FINANCIAL INSTRUMENTS
The Fund held the following financial instruments as at:
June 30, 2017 December 31, 2016
$ $
FVTPL, measured at fair value:
Assets
Cash balances at broker (a) 21,919 84,949
Investment in Friedberg Asset Allocation Fund Limited Partnership (b) 124,980,651 111,968,652
Liabilities
Net assets attributable to holders of redeemable Units (b) 124,440,512 111,848,423
Financial liabilities, measured at amortized cost:
Accounts payable and accrued liabilities 201,386 161,031
Redemptions payable 360,672 44,147
- 5 –(UNAUDITED)
(a) Held for trading
(b) Designated as FVTPL upon initial recognition
The carrying values of the Fund’s financial instruments approximate their fair values.
FairV alu e H ierarchyof FinancialInstru ments
The Fund has categorized its financial instruments that are carried at fair value, based on the priority of the inputs to the valuationtechniques used to measure fair value, into a three level fair value hierarchy as follows:
Level 1: Fair value is based on unadjusted quoted prices for identical assets or liabilities in an active market. The types of assets andliabilities classified as Level 1 generally include cash balances at broker.
Level 2: Fair value is based on quoted prices for similar assets or liabilities in active markets, valuation that is based on significant
observable inputs, or inputs that are derived principally from or corroborated with observable market data through correlation or othermeans. Currently the Fund has no assets or liabilities that would be in Level 2.
Level 3: Fair value is based on valuation techniques that require one or more significant inputs that are not based on observable marketinputs. These unobservable inputs reflect the Fund’s assumptions about the assumptions market participants would use in pricing the
asset or liability. The types of assets and liabilities classified as Level 3 generally include investment in the LP and net assets attributableto holders of redeemable Units.
The following table presents the Fund’s fair value hierarchy of its financial instruments as at June 30, 2017:
Level 1 Level 3 Total
$ $ $
ASSETS
Cash balances at broker 21,919 - 21,919
Investment in the LP - 124,980,651 124,980,651
21,919 124,980,651 125,002,570
LIABILITIES
Net assets attributable to holders of redeemable units - 124,440,512 124,440,512
The following table presents the Fund’s fair value hierarchy of its financial instruments as at December 31, 2016:
Level 1 Level 3 Total
$ $ $
ASSETS
Cash balances at broker 84,949 - 84,949
Investment in the LP - 111,968,652 111,968,652
84,949 111,968,652 112,053,601
LIABILITIES
Net assets attributable to holders of redeemable units - 111,848,423 111,848,423
- 6 –(UNAUDITED)
6. FINANCIAL INSTRUMENTS RISK
In the normal course of business, the Fund’s investment activities expose it to a variety of financial risks. The Fund has a risk
management framework to monitor, evaluate and manage the principal risks assumed with its financial instruments. The potential risksthat may arise from transacting financial instruments include market risk, currency risk, interest rate risk, credit risk and liquidity risk.
(a) Market price risk
Market price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes inmarket prices whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors
affecting similar financial instruments traded in the market.
P rice sensitivity
As at June 30, 2017 had the prices of the Fund’s investment in the LP decreased or increased by 5% with all other variables held
constant, NAV would have decreased or increased, by $6,249,003. In practice, the actual trading results may differ from thisanalysis and the difference may be material.
(b) Currency risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes inforeign currency exchange rates, which can be caused by market, political and/or other factors which may be subject to intervention
by sovereign governments. The Fund is not exposed to significant currency risk other than exposure through its investment in the
LP.
(c) Interest rate risk
Interest rate risk is the risk that Fund’s investment in LP will fluctuate because of change in market interest rates. The Fund is not
directly exposed to any significant interest rate risks since the Fund’s interest bearing assets are minimal at the reporting date. TheFund is exposed to interest rate risk through its investment in the LP.
(d) Credit risk
The Fund is exposed to credit risk arising from its transactions with its counterparties, related to securities purchases, sales andpositions held by the counterparties on the Fund’s behalf. Credit risk is the risk that one party to a financial instrument will fail to
discharge an obligation and cause the other party to incur a financial loss.
Financial assets which potentially expose the Fund to credit risk consists principally of cash balances at brokers. Credit risk ismanaged by dealing only with counterparties the Fund believes to be creditworthy, setting transaction limits with specific
counterparties and by daily monitoring of credit exposure. Credit risk had minimal impact on the Unitholders of redeemable Units.
The Fund is exposed to credit risk through its investment in the LP.
- 7 –(UNAUDITED)
(e) Liquidity risk
Liquidity risk is the risk that the Fund will encounter difficulty in meeting the obligations associated with its financial liabilities
that are settled by delivering cash or another financial asset. The Fund’s policy and Manager’s approach to managing liquidity isto ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal andstress conditions, including estimated redemptions of Units, without incurring unacceptable losses or risking damage to the Fund’s
reputation. The Fund is considered to be relatively liquid. However, unexpected heavy demand for redemptions of the Fund’s Unitscould result in the Fund and the LP having to dispose of investments at a time when it is not optional to do so in order to meet such
redemption requests.
Please refer to Note 6 of the LP’s financial statements regarding discussion on financial instrument risks relating to the underlying
investments held by the LP.
7. REDEEMABLE UNITS
The Fund is authorized to issue an unlimited number of Units, each of which represents an equal, undivided interest in the NAV of theFund. Each Unit entitles a holder thereof to the same rights and obligations as a holder of any other Unit and no Unitholder is entitled
to any privilege, priority or preference in relation to any other Unitholder. Each Unitholder is entitled to participate equally with respectto any and all distributions made by the Fund. On termination of the Fund, all the Unitholders of record holding outstanding Units are
entitled to receive any assets of the Fund remaining after payment of all debts, liabilities and liquidation expenses of the Fund.
Units are being offered on a continuous basis at current NAV per Unit of the Fund (“NAVPU”). NAVPU is determined on the first
business day of each week and the last business day of every month (each a "Valuation Date").
The Units provide an investor with the right to require redemption for cash at value proportionate to NAVPU at each redemption dateand are classified as liabilities as a result of the Fund’s requirement to distribute net income and capital gains to Unitholders. Unitholders
may redeem some or all of their Units at any Valuation Date by written request to the Manager, at NAVPU less 0.375%. The 0.375%
is retained by the Fund.
The Fund made no distributions to Unitholders during the six months ended June 30, 2017 and 2016.
- 8 –(UNAUDITED)
The following details the changes in the number of Units outstanding for the six months ended June 30, 2017 and 2016, and for the
year ended December 31, 2016:
6 months
ended June
30, 2017
Year ended
December 31,
2016
6 months
ended June
30, 2016
Number of Units outstanding, beginning of the period 16,356,004 16,529,408 16,529,408
Units subscribed during the period 1,874,359 872,957 -
Units redeemed during the period (731,273) (1,046,361) (131,292)
Number of Units outstanding, end of the period 17,499,090 16,356,004 16,398,116
Weighted average number of Units outstanding for the period 17,340,636 16,305,987 16,460,309
8. RELATED PARTY TRANSACTIONS
(a) Management fees
As manager, TTML is entitled to receive management fees, calculated and payable monthly at the annual rate of one percent ofthe NAV of the Fund plus Harmonized Sales Tax, based on the NAV on the last business day of the month. The management fees
are split equally between the Fund and the LP unless TTML determines a more appropriate allocation method. Management fees
paid by the Fund to TTML for the six months ended June 30, 2017 were $690,576 ($790,429 for the six months ended June 30,2016). An amount of $117,066 ($104,785 as at December 31, 2016) was included in accounts payable and accrued liabilities of
the Fund at June 30, 2017.
(b) Cash balances
FGML serves as the Fund’s primary broker. FMGL held cash balances of $21,919 as at June 30, 2017 ($84,949 as at December
31, 2016) on behalf of the Fund.
(c) Subscriptions and redemptions
Directors and officers of FMGL (including their immediate families) subscribed for 505,780 Units (nil in 2016) of the Fund in the
amount of $3,500,000 ($nil in 2016) and redeemed for 268,241 Units (3,702 Units in 2016) of the Fund in the amount of $1,920,937($30,020 in 2016) during the period.
9. CAPITAL MANAGEMENT
Management considers the Fund's capital to consist of NAV.
The Investment Manager manages the capital of the Fund in accordance with the Fund's investment objectives, policies and
restrictions, as outlined in the Fund's prospectus, while maintaining sufficient liquidity to meet participating Unitholderredemptions.
The Fund does not have any externally imposed capital requirements.
FRIEDBERG GLOBAL-MACRO HEDGE FUND LIMITED PARTNERSHIPINTERIM FINANCIAL STATEMENTS
JUNE 30, 2017(expressed in U.S. Dollars)
AS AT June 30, 2017 December 31, 2016$ $
CurrentCash balances at broker (note 8) 15,018,919 33,987,032Cash held as collateral 61,254,128 5,448,209Equity securities 16,899,488 14,474,507Fixed income securities 49,290,672 54,187,120Amounts receivable 2,585,948 2,833,208Unrealized gain on futures and forward contracts (note 8) 547,061 1,359,376Options contracts 11,869,161 6,404,343
TOTAL ASSETS 157,465,377 118,693,795
CurrentAccounts payable and accrued liabilities (notes 8) 873,274 207,430Equity securities sold short 31,162,873 2,136,900Unrealized loss on futures, forward and equity swap contracts (note 8) 254,603 1,705,305Option contracts written - 2,137,868Credit default swap contracts 197,057 541,236
TOTAL LIABILITIES EXCLUDING AMOUNTS ATTRIBUTABLE TO PARTNERS 32,487,807 6,728,739
NET ASSETS 124,977,570 111,965,056
NET ASSETS ATTRIBUTABLE TO LIMITED PARTNER 124,980,651 111,968,652
NET LIABILITIES ATTRIBUTABLE TO GENERAL PARTNER (3,081) (3,596)
124,977,570 111,965,056
Approved and authorized for issue by directors of Friedberg Advisors G.P. Inc., the general partner of Friedberg Advisors LP,the general partner of Friedberg Global-Macro Hedge Fund Limited Partnership, on August 25, 2017.
________________ Director, Friedberg Advisors G.P. Inc.Enrique Zauderer
________________ Director, Friedberg Advisors G.P. Inc.Daniel Gordon
LIABILITIES
FRIEDBERG GLOBAL-MACRO HEDGE FUND LIMITED PARTNERSHIP(a limited partnership formed under the Laws of Manitoba)
STATEMENTS OF FINANCIAL POSITION
ASSETS
(in U.S. Dollars)
(UNAUDITED)
See accompanying notes to financial statements
Friedberg Asset
Allocation Fund,
Limited Partner
Friedberg Advisors
LP, General Partner$ $
Balance as at December 31, 2015 134,849,814 (1,646)
Allocation of comprehensive income for the period 2,937,088 294
Drawings during the period (1,948,986) -
Balance as at June 30, 2016 135,837,916 (1,352)
Balance as at December 31, 2016 111,968,652 (3,596)
Contributions during the period 13,360,391 -
Allocation of comprehensive income for the period (note 7) 5,145,701 515
Drawings during the period (5,494,093) -
Balance as at June 30, 2017 124,980,651 (3,081)
(in U.S. Dollars)
FRIEDBERG GLOBAL-MACRO HEDGE FUND LIMITED PARTNERSHIPSTATEMENTS OF NET ASSETS (LIABILITIES) ATTRIBUTABLE TO PARTNERS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
See accompanying notes to financial statements
2017 2016$ $
INCOME (LOSSES)Change in net unrealized gain/loss on equity securities and equity securities sold short 6,441,158 (7,570,415)Interest 3,008,750 1,479,570Realized gains on fixed income securities 1,204,113 1,289,616Change in net unrealized gain/loss on fixed income securities 556,675 6,133,924Realized gains (losses) on equity securities and equity securities sold short 279,127 (1,853,286)Change in net unrealized gain/loss on options contracts and options contracts written 213,525 1,237,080Change in net unrealized gain/loss on futures, forward and equity swap contracts 34,087 (10,600,097)Change in net unrealized gain/loss on credit default swap contracts 296,819 1,726,420Foreign currency translation gain 25,143 42,668Dividends 17,185 415,398Realized losses on credit default swap contracts (193,872) (2,113,228)Dividend expense on securities sold short (312,545) -Realized losses on options contracts and options contracts written (2,155,666) (436,133)Realized gains (losses) on futures, forward and equity swap contracts (3,168,858) 14,516,779
TOTAL INCOME 6,245,641 4,268,296
EXPENSESManagement fees (note 8) 690,576 790,428Transaction costs (note 8) 353,030 332,803Legal fee expense (recovery) 21,803 (8,572)Audit and accounting fees 21,784 41,464Custodian fees 7,076 9,055Withholding tax on dividends and interest 5,156 65,465Interest - 100,271
TOTAL EXPENSES 1,099,425 1,330,914
NET INCOME AND COMPREHENSIVE INCOME BEFORE ALLOCATION TO LIMITED PARTNER 5,146,216 2,937,382
ALLOCATION TO LIMITED PARTNER 5,145,701 2,937,088
NET INCOME AND COMPREHENSIVE INCOME 515 294
(in U.S. Dollars)
FRIEDBERG GLOBAL-MACRO HEDGE FUND LIMITED PARTNERSHIPSTATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(UNAUDITED)
See accompanying notes to financial statements
2017 2016$ $
CASH FLOWS FROM OPERATING ACTIVITIESComprehensive income 515 294Adjustments for:
Allocation to limited partner 5,145,701 2,937,088Change in net unrealized gain/loss on equity securities and equity securities sold short (6,441,158) 7,570,415Change in net unrealized gain/loss on fixed income securities (556,675) (6,133,924)Change in net unrealized gain/loss on futures, forward and equity swap contracts (34,087) 10,600,097Change in net unrealized gain/loss on options contracts and options contracts written (213,525) (1,237,080)Change in net unrealized gain/loss on credit default swap contracts (296,819) (1,726,420)Realized gains on fixed income securities (1,204,113) (1,289,616)Realized gains (losses) on equity securities and equity securities sold short (279,127) 1,853,286Realized losses on credit default swap contracts 193,872 2,113,228Realized losses on options contracts and options contracts written 2,155,666 436,133Realized gains (losses) on futures, forward and equity swap contracts 3,168,858 (14,516,779)
Purchase of investments (36,016,549) (111,101,345)Proceeds on sale of investments 67,884,054 103,478,347Net change in working capital items:
Amounts receivable 247,260 (1,549,951)Accounts payable and accrued liabilities 665,844 535,901
NET CASH FLOW FROM OPERATING ACTIVITIES 34,419,717 (8,030,326)
CASH FLOWS FROM FINANCING ACTIVITIESContributions by limited partner 13,360,391 -Drawings by limited partner (5,494,093) (1,948,986)
NET CASH FLOW FROM FINANCING ACTIVITIES 7,866,298 (1,948,986)
NET INCREASE (DECREASE) IN CASH FOR THE PERIOD 42,286,015 (9,979,312)
CASH, BEGINNING OF THE PERIOD 33,987,032 6,238,628
CASH, END OF THE PERIOD 76,273,047 (3,740,684)
CASH BALANCES, END OF THE YEARCash balances at broker 15,018,919 14,173,908Cash held as collateral on futures and swap contracts 61,254,128 38,994,842Cash balances due to broker - (56,909,434)
76,273,047 (3,740,684)
FRIEDBERG GLOBAL-MACRO HEDGE FUND LIMITED PARTNERSHIPSTATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016(in U.S. Dollars)
(UNAUDITED)
See accompanying notes to financial statements
FRIEDBERG GLOBAL-MACRO HEDGE FUND LIMITED PARTNERSHIPSCHEDULE OF INVESTMENTS
AS AT JUNE 30, 2017(in U.S. Dollars)
Equity securities owned as at June 30, 2017 were comprised as follows:
Number of shares Country Description Average cost Fair value
Fair value as of % of
Net Asset Value (See
note 2)$ $ %
Gaming123,750 Greece Greek Organization of Football Prognostics S.A. 1,380,249 1,399,155 1.12
C onsu merGoods70,100 Greece Jumbo S.A. 1,234,859 1,279,522 1.02
Technology110,650 Greece Hellenic Telecommunications Organization S.A. 1,255,710 1,331,917 1.07
Financials1,748,083 Greece Alpha Bank A.E. 3,548,883 4,312,220 3.452,731,316 Greece Eurobank Ergasias S.A. 2,089,233 3,056,913 2.458,705,464 Greece National Bank of Greece S.A. 2,293,128 3,310,711 2.658,996,674 Greece Piraeus Bank S.A. 2,000,101 2,209,050 1.77
9,931,345 12,888,894 10.32
13,802,163 16,899,488 13.53
Fixed income securities owned as at June 30, 2017 were comprised as follows:
Face value Currency Coupon rate Maturity Cost Fair value
Fair value as of % of
Net Asset Value (See
note 2)
% $ $ %
Brazil Notas Do Tesouro Nacion Notes 81,404,000 Brazilian real 10.00 January 1, 2025 18,800,659 24,021,749 19.22Brazil Notas Do Tesouro Nacion Notes 86,209,000 Brazilian real 10.00 January 1, 2027 23,180,112 25,268,923 20.22
41,980,771 49,290,672 39.44
The following long options contracts were open as at June 30, 2017:
Contract Country Position
Exercise
price
Shares/ contract
size Expiry date
Option premium
paid/ received Fair value (asset) Fair value (liability)
$ $ $ $Equ ity secu rities
C onsu merD iscretionary
D.R. Horton Inc. United States Call 35.00 175,800 January 18, 2019 764,746 777,911 -iShares U.S. Home Construction United States Call 35.00 2,412,400 January 19, 2018 2,721,917 3,558,290 -iShares U.S. Home Construction United States Call 38.00 4,350,700 January 19, 2018 2,676,520 2,175,350 -Lennar Corp. United States Call 55.00 114,000 January 18, 2019 775,449 775,200 -PulteGroup Inc. United States Call 25.00 246,400 January 18, 2019 746,922 776,160 -
7,685,554 8,062,911C onsu merGoods
Apple Inc. United States Put 115.00 23,100 September 15, 2017 6,753 8,316 -Apple Inc. United States Put 125.00 173,500 September 15, 2017 136,264 169,163 -Whirlpool Corp. United States Call 190.00 33,500 January 18, 2019 837,591 826,613 -
980,608 1,004,092Index
CBOE Volatility Index United States Put 20.00 745,000 August 16, 2017 410,271 391,125 -CBOE SPDR (SPY) United States Call 190.00 220,900 September 15, 2017 303,980 45,285 -
714,251 436,410 -S ervices
Amazon.Com Inc. United States Put 800.00 600 September 15, 2017 1,778 2,535 -Amazon.Com Inc. United States Put 850.00 16,200 September 15, 2017 99,990 147,015 -Netflix Inc. United States Put 125.00 64,300 September 15, 2017 99,079 112,847 -
200,847 262,397TechnologyIntel Corp. United States Put 34.00 1,103,000 September 15, 2017 1,894,529 1,979,887 -
Fu tu res contractsChinese yuan Put 0.1355 1,756,440,000 July 24, 2017 2,903,995 - -Light Crude Call 80.00 1,237,000 January 17, 2018 573,135 43,295 -Nikkei 225 Put 1,525.00 671,000 September 8, 2017 647,990 80,169 -
4,125,120 123,464 -
15,600,909 11,869,161 -
The following options contracts written were open as at June 30, 2017:
Chinese yuan Put 0.1296 1,836,170,000 July 24, 2017 1,594,395 - -
Total options contracts and options contracts written 11,869,161 -
Equity securities sold short at June 30, 2017 were comprised as follows:
Number of shares Country Description Average cost Fair value
Fair value as of % of
Net Asset Value (See
note 2)$ $ %
C onsu merD iscretionary88,600 United States Bed Bath & Beyond Inc. (3,465,593) (2,693,440) 2.1667,200 United States Dillard's Inc., Class A (3,432,537) (3,874,080) 3.10
169,500 United States DSW Inc., Class A (3,341,596) (3,000,998) 2.40215,000 United States Gap Inc. (5,377,122) (4,727,850) 3.78134,500 United States Kohl's Corp. (5,326,378) (5,201,115) 4.16182,000 United States Macy's Inc. (5,322,587) (4,227,860) 3.3839,200 United States Ralph Lauren Corp. (2,726,212) (2,893,352) 2.3229,200 United States Signet Jewelers Ltd. (1,892,876) (1,846,608) 1.48
145,500 United States Urban Barn Outfitters, Inc. (3,350,114) (2,697,570) 2.16
(34,235,015) (31,162,873) 24.94
(UNAUDITED)
See accompanying notes to financial statements
FRIEDBERG GLOBAL-MACRO HEDGE FUND LIMITED PARTNERSHIPSCHEDULE OF INVESTMENTS
AS AT JUNE 30, 2017(in U.S. Dollars)
The following futures and forward contracts were open at June 30, 2017:
Contract Position Size
Open contract price
U.S. dollar amount Settlement date Unrealized gains Unrealized losses$ $ $ $
Forward contracts
C ou nterparty-J.P .M organ S ecu rities,L L C RatingA a3
Brazilian real Short 49,500,000 0.324 14,905,082 July 11, 2017 394,970 -Brazilian real Short 102,000,000 0.335 30,353,085 September 5, 2017 75,585 -
45,258,167
470,555 -Unrealized gain (loss) on forward contracts:
Financialfu tu res contracts
Euro Bund Long 25,700,000€ 1.6240 47,509,954 September, 2017 - (158,088)Euro-BTP Short 32,200,000€ 1.35 49,696,397 September, 2017 76,506 -Nikkei Long 19,900 $5 x Index 2,017.00 40,043,775 September, 2017 - (96,515)
137,250,126
Unrealized gain (loss) on financial futures contracts: 76,506 (254,603)
Total unrealized gain (loss) on open futures and forward contracts 547,061 (254,603)
The followng credit default swap contracts were open at June 30, 2017: Fair value (asset) Fair value (liability)$ $
C ou nterparty-B arclays B ankP L C -RatingA 2
Banco Bilbao Vizcaya Argentaria, SA Long € 3,300,000 5.00% 0.986 3,714,512 September 20, 2017 - (108,283)Kimco Realty Corp. Long $6,000,000 1.00% 0.993 5,958,731 March 20, 2018 - (41,269)Simon Property Group LP Long $7,000,000 1.00% 0.985 6,891,717 March 20, 2019 - (47,505)
16,564,960
Total unrealized gain (loss) on credit default swap contracts - (197,057)
(UNAUDITED)
See accompanying notes to financial statements
FRIEDBERG GLOBAL-MACRO HEDGE FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2017(in U.S. Dollars)(UNAUDITED)
1. GENERAL INFORMATION
The Friedberg Global-Macro Hedge Fund Limited Partnership (the “LP”) was organized on March 3, 2011 and commenced operationsas of July 1, 2011. The LP’s principal place of business is 181 Bay Street, Suite 250, Toronto Ontario, M5J 2T3. The LP is a limitedpartnership established under the laws of Manitoba and an open-end mutual fund. The investment manager and sole general partner of
the LP is Friedberg Advisors LP (“Friedberg Advisors”), which is a limited partnership established under the laws of Ontario. The sole
limited partner of the LP is Friedberg Global-Macro Hedge Fund (the “Fund”). The LP is the entity through which the Fund indirectly
carries on its investment activities. The administrative manager of the LP and the trustee of the Fund is Toronto Trust ManagementLtd. (the “Manager” or “TTML”). Friedberg Advisors and TTML are both controlled by Friedberg Mercantile Group Ltd. (“FGML”).
The LP is a multi-strategy commodity pool whose investment objective is to seek significant total investment returns, consisting of acombination of interest income, dividend income, currency gains and capital appreciation by investing in the following five discrete
groups of investments: (i) equity securities generally; (ii) fixed income securities; (iii) commodity forward and futures contracts andoptions thereon, and other over-the-counter traded derivatives instruments and commodities; (iv) equity and fixed income securities of
real estate companies; and (v) cash and cash equivalents.
2. BASIS OF PRESENTATION
(a) Statement of compliance
These financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial
Reporting.These accounting principles are consistent with those outlined in the LP’s annual financial statements. These interimfinancial statements do not include all disclosures normally provided in annual financial statements and should be read in
conjunction with the LP’s financial statements for the year ended December 31, 2016. In management’s opinion, the unauditedfinancial information includes all adjustments (consistent solely of normal recurring adjustments), necessary to present fairly such
information. Interim results are not indicative of the results expected for the fiscal year.
Any mention of net asset value (“NAV”) is referring to limited partner’s interest as reported under International Financial Reporting
Standards (“IFRS”).
(b) Basis of measurement
The financial statements have been prepared on the historical cost basis except for financial assets and financial liabilities held at
fair value through profit or loss (“FVTPL”) that have been accounted for based on fair value. Historical cost is generally based on
the fair value of the consideration given in exchange for assets.
(c) Functional currency and presentation currency
These financial statements are presented in United States dollars, which is the functional currency of the LP.
- 2 –(UNAUDITED)
-2-
3. SIGNIFICANT ACCOUNTING POLICIES
(a) Financial instruments
(i) Recognition and measurement
Financial instruments are classified into one of the following categories: FVTPL, available-for-sale (“AFS”), loans and
receivables, held-to-maturity (“HTM”) and other financial liabilities. Financial instruments classified as FVTPL may either
be held-for trading or designated as FVTPL.
All financial instruments are measured at fair value on initial recognition. Measurement in subsequent periods depends on the
classification of the financial instrument. Transaction costs are included in the initial carrying amount of the financialinstruments except for financial instruments classified as FVTPL in which case transaction costs are expensed as incurred.
Financial instruments at FVTPL are recognized initially on the trade date, which is the date on which the LP becomes a party
to the contractual provision of the instrument. Other financial assets and financial liabilities are recognized on the date onwhich they are originated.
Financial assets are derecognized when the rights to receive cash flows from the investments have expired or the LP has
transferred substantially all risks and rewards of ownership. The LP’s policy is to recognize transfers into and out of the fair
value hierarchy levels as of the date of the event or change in circumstances giving rise to the transfer.
The LP has not classified any of its financial instruments as AFS or HTM.
(ii) FVTPL
The LP classifies its investments as financial assets at fair value through FVTPL. FVTPL financial assets have two sub-
categories: those designated at FVTPL at inception, and financial assets held for trading. Financial assets designated at FVTPL
at inception are financial instruments that are not classified as held for trading but are managed, and their performance isevaluated, on a fair value basis in accordance with LP’s documented investment strategy. A financial asset is classified as held
for trading if it is acquired or incurred principally for the purpose of selling in the near term or if on initial recognition is partof 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. Derivatives are also categorized as held for trading. The LP classifies all of their cashbalances at brokers, derivative assets and liabilities as held for trading and these are measured at FVTPL, while all debt and
equity investments and LP’s obligation for limited partner’s equity have been designated as FVTPL upon initial recognition.
The LP’s investments are presented at fair value. Investments held that are traded in an active market through recognized
public stock exchanges are valued at quoted market prices at the close of trading on the reporting date. The LP uses the closingmarket price for investments where the closing price falls within that day’s bid-ask spread. In circumstances where the closing
market price does not fall within the bid-ask spread, the Manager determines the point within the bid-ask spread that is the
most representative of fair value based on specific facts and circumstances.
Options are valued at their close price as reported by the principal exchange or over the counter market on which the contractis traded. Any difference resulting from revaluation at the reporting date is treated as unrealized gain (loss) in the statements
of income and comprehensive income.
Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are
traded. The value of the contract is the gain or loss that would be realized upon settlement.
- 3 –(UNAUDITED)
-3-
Unlisted or non-exchange traded investments, or investments where a last sale or close price is unavailable or investments forwhich market quotations are, in the Manager’s opinion, inaccurate, unreliable, or not reflective of all available material
information are valued at their fair value as determined by the Manager using appropriate and accepted industry valuationtechniques including valuation models. The fair value determined using valuation models requires the use of inputs and
assumptions based on observable market data including volatility and other applicable rates or prices. In limited circumstances,the fair value may be determined using valuation techniques that are not supported by observable market data.
Over the counter derivatives (such as currency forward contracts) are valued based on the difference between the contractforward rate and the rate prevailing on a reporting date.
The fair value of other financial assets and liabilities approximates their carrying values due to the short-term nature of these
instruments.
(iii) Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such
assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent measurement of loans
and receivable is at amortized cost using the effective interest method, less any impairment losses. Interest income isrecognized by applying the effective interest rate. The LP classifies amounts receivable, including contracts awaiting
settlement as loans and receivables.
The effective interest method is a method of calculating the amortized cost of a financial asset or liability and of allocation
interest income or expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash
payments, through the expected life of the financial asset or liability, or where appropriate, a shorter period.
At each reporting date, the LP assesses whether there is objective evidence that a financial asset at amortized cost is impaired.
If such evidence exists, the LP recognizes an impairment loss in income (loss) in the statements of income and comprehensiveincome, as the difference between the amortized cost of the financial asset and the present value of the estimated future cash
flows, discounted using the instrument’s original effective interest rate. Impairment losses on financial assets at amortizedcost are reversed in subsequent periods if the amount of the loss decreases and the decrease can be related objectively to an
event occurring after the impairment was recognized.
(iv) Other financial liabilities
Other financial liabilities are initially measured at fair value, net of transaction costs, and are subsequently measured atamortized cost using the effective interest method. The LP classifies accounts payable and accrued liabilities, including
contracts awaiting settlement as other financial liabilities.
(b) Credit default swap contracts
A credit default swap contract is an agreement to transfer credit risk form one party, a buyer of protection, to another party, a sellerof protection. A seller of protection is required to pay a notional or other agreed upon value to the buyer of the protection in the
event of a default by a third party. In return, the seller would receive from the counterparty a periodic stream of payments over the
term of the contract provided that no event of default occurs. If no default occurs, the seller would keep the stream of paymentsand would have no payment obligations.
A buyer of protection would receive a notional or other agreed upon value from the seller of the protection in the event of a defaultby a third party. In return, the buyer would be required to pay to the counterparty a periodic stream of payments over the term of
the contract provided that no event of default occurs.
- 4 –(UNAUDITED)
-4-
The premiums paid or received are included in the statements of income and comprehensive income in “net realized gain (loss) onfutures, forward and swap contracts”. The change in the value of a credit default swap contract is included in the statements offinancial position in “credit default swap contracts” and in the statements of income and comprehensive income in “change in net
unrealized gain/loss on credit default swap contracts”.
When credit default swap contracts are closed out, gains or losses are included in the statements of income and comprehensiveincome in “net realized gains (losses) on credit default swap contracts”.
(c) Equity swap contracts
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 fixed or floating amount and the other party paying the actual return of a stock, a basket of stocksor a stock index.
A buyer of an equity swap contract would receive the total return of the underlying stocks or stock index. In return, the buyer
would be required to pay to the counterparty a fixed or floating amount on the agreed settlement dates.
Any amount received or paid for equity swap contracts is included in the statements of income and comprehensive income in“realized gains (losses) on futures, forward and equity swap contracts”. The change in the value of an equity swap contract is
included in the statements of financial position in “unrealized gain (loss) on open futures, forward and equity swap contracts” and
in the statement of income and comprehensive income in “change in net unrealized gain/loss on futures, forward and equity swapcontracts”.
When the equity swap contracts are closed out, gains or losses are included in the statements of income and comprehensive incomein “net realized gains (losses) on futures, forward and equity swap contracts”.
(d) Transaction costs
Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of an investment, whichinclude fees and commissions paid to agents, advisors, brokers and dealers, levies by regulatory agencies and securities exchanges,
and transfer taxes and duties. Transaction costs are expensed and are included in the statements of income and comprehensiveincome.
(e) Offsetting
Financial assets and liabilities are offset and the net amounts presented in the statements 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.
Income and expenses are presented on a net basis for gains and losses from FVTPL financial instruments and foreign currency
translation gains and losses.
(f) Cash and cash equivalents
Cash and cash equivalents consist of cash on deposit at brokers and short-term, interest bearing notes with a term to maturity ofless than three months from the date of purchase. Cash is comprised of deposits with financial institutions.
(g) Investment income
Investment transactions are accounted for as of the trade date. Realized gains and losses from investment transactions are calculatedon a weighted average cost basis. The difference between fair value and average cost, as recorded in the financial statements, is
included in the statements of income and comprehensive income as part of the net change in unrealized gain (loss) on investments
- 5 –(UNAUDITED)
-5-
and derivatives. Interest income from investments in bonds and short-term investments represents the coupon interest received bythe LP accounted for on an accrual basis. The LP does not amortize premiums paid or discounts received on the purchase of fixedincome securities. Dividend income is recognized on the ex-dividend date.
Income (loss) from derivatives is shown in the statements of income and comprehensive income as net realized gain (loss) on
futures and options contracts and net unrealized gain (loss) on futures and options contracts.
If the LP 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 income andcomprehensive income.
(h) Foreign currency translation
Transactions in foreign currencies, if any, are translated into the LP’s reporting currency using the exchange rate prevailing on thetrade date. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated at the period-end
exchange rate. Foreign currency translation gains and losses are presented as “Foreign currency translation gain (loss)”, except forthose arising from FVTPL financial instruments, which are recognized as a component within net realized gains (losses) and change
in net unrealized gains (losses) in the statements of income and comprehensive income.
(i) Pending accounting changes
IFRS 9, Financial Instruments (“IFRS 9”) was issued in 2010 and is to replace IAS 39, Financial Instruments: Recognition and
Measurement (“IAS 39”). IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or
fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financialinstruments in the context of its business model and the contractual cash flow characteristics of the financial assets. In addition,
under IFRS 9 the same impairment model is applied to all financial instruments that are subject to impairment accounting. Thecurrent impairment model is replaced with an expected credit loss model which means that a loss event will no longer need to
occur before an impairment allowance is recognized. IFRS 9 is effective for annual periods beginning on or after January 1, 2018.
The Manager is currently evaluating the impact of IFRS 9 on the LP’s financial statements.
IFRS 7, Financial Instruments – Disclosure has also been amended for disclosures in respect of the transition from IAS 39 to IFRS9. The Manager is currently evaluating the impact of IFRS 7 on the LP’s financial statements.
IFRS 15, Revenu e from C ontracts withC u stomers (“IFRS 15”) was issued in May 2014. IFRS 15 provides a single, principles-based, five-step model to be applied to all contracts with customers. The five steps in the model are as follows:
Identify the contract with the customer
Identify the performance obligations in the contract
Determine the transaction price
Allocate the transaction price to the performance obligations in the contract
Recognize revenue when (or as) the entity satisfies a performance obligation
Guidance is provided on topics such as the point in which revenue is recognized, accounting for variable consideration, costs offulfilling and obtaining a contract and various related matters. New disclosures about revenue are also introduced. IFRS 15 is to
be effective for annual reporting periods beginning on or after January 1, 2018, with early adoption permitted. The Manager iscurrently evaluating the impact of IFRS 15 on the LP’s financial statements.
- 6 –(UNAUDITED)
-6-
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of financial statements in conformity with IFRS requires the Manager to make estimates, judgments and assumptions
that affect the application of accounting policies, and the reported amounts of assets, liabilities, income and expenses. Actual resultscould differ from these estimates.
In making estimates and assumptions, the Manager relies on external information and observable conditions where possible,supplemented by internal analysis as required. These estimates and assumptions have been applied in a manner consistent with prior
periods and there are no known trends, commitments, events or uncertainties that the Manager believes will materially affect the
methodology or assumptions utilized in making these estimates and assumptions in these financial statements. Estimates and underlyingassumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates
are revised and in any future periods affected.
The LP may hold financial instruments that are not quoted in active markets, including investments. Fair values of such instrumentsare determined using valuation techniques and may be determined using reputable pricing sources. Broker quotes as obtained from
pricing sources may be indicative and not executable. Where no market data is available, the LP may value positions using its ownmodels, which are usually based on valuation methods and techniques generally recognized as standard within the industry. The models
used to determine fair values are validated and periodically reviewed by the Manager.
Models use observable data, to the extent practicable. However, areas such as credit risk, volatilities and correlations require the Manger
to make estimates. Changes in assumptions about these factors could affect the reported fair values of financial instruments. The LP
considers observable data to be market data that is readily available, regularly distributed and updated, reliable and verifiable, not
proprietary, and provided by independent sources that are actively involved in the relevant market. See Note 5 for more information onthe fair value measurement of the Fund’s financial instruments.
- 7 –(UNAUDITED)
-7-
5. FINANCIAL INSTRUMENTS
The Fund held the following financial instruments as at:
June 30, 2017 December 31, 2016
FVTPL, measured at fair value: $ $
Assets
Cash balances at broker (a) 15,018,919 33,987,032
Cash held as collateral on futures and swap contracts (a) 61,254,128 5,448,209
Equity securities (b) 16,899,488 14,474,507
Fixed income securities (b) 49,290,672 54,187,120
Unrealized gain on futures, forwards and equity swap contracts (a) 547,061 1,359,376
Options contracts (a) 11,869,161 6,404,343
Liabilities
Equity securities sold short (b) 31,162,873 2,136,900
Unrealized loss on futures, forwards and equity swap contracts (a) 254,603 1,705,305
Options contracts written (a) - 2,137,868
Credit default swap contracts (a) 197,057 541,236
Limited partner's equity (b) 124,980,651 111,968,652
Loans and receivables, measured at amortized cost:
Amounts receivable, including contracts awaiting settlement 2,585,948 2,833,208
Financial liabilities, measured at amortized costs
Accounts payable and accrued liabilities, including contracts awaiting settlement 873,274 207,430
(a) Held for trading
(b) Designated as FVTPL upon initial recognition
The fair value of these financial instruments approximates their carrying value.
The following table presents the net gain (loss) on financial instruments at FVTPL by category for the period ended June 30, 2017 and
2016:
2017 2016
$ $
Held for trading (4,948,822) 4,373,489
Designated at FVTPL 11,194,463 (105,193)
6,245,641 4,268,296
- 8 –(UNAUDITED)
-8-
FairV alu e H ierarchyof FinancialInstru ments
The LP has categorized its financial instruments that are carried at fair value, based on the priority of the inputs to the valuation
techniques used to measure fair value, into a three level fair value hierarchy as follows:
Level 1: Fair value is based on unadjusted quoted prices for identical assets or liabilities in an active market. The types of assets and
liabilities classified as Level 1 generally include cash balances at broker, equity securities, fixed income securities, equity securitiessold short, options contracts and options contracts written and unrealized gain (loss) on futures contracts.
Level 2: Fair value is based on quoted prices for similar assets or liabilities in active markets, valuation that is based on significantobservable inputs, or inputs that are derived principally from or corroborated with observable market data through correlation or other
means. The types of assets and liabilities classified as level 2 include unrealized gain (loss) on forward and equity swap contracts.
Level 3: Fair value is based on valuation techniques that require one or more significant inputs that are not based on observable marketinputs. These observable inputs reflect the LP’s assumptions about the assumptions market participants would use in pricing the asset
or liability. The types of assets and liabilities classified as Level 3 include credit default swap contracts and limited partner’s equity.
The following table presents the LP’s fair value hierarchy of its financial instruments as at June 30, 2017:
Level 1 Level 2 Level 3 Total
ASSETS $ $ $ $
Cash balances at broker 15,018,919 - - 15,018,919
Cash held as collateral on futures and swap contracts 61,254,128 - - 61,254,128
Equity securities 16,899,488 - - 16,899,488
Fixed income securities 49,290,672 - - 49,290,672
Unrealized gain on futures contracts 76,506 - - 76,506
Unrealized gain on forward contracts - 470,555 - 470,555
Options contracts 11,869,161 - - 11,869,161
154,408,874 470,555 - 154,879,429
LIABILITIES
Equity securities sold short 31,162,873 - - 31,162,873
Unrealized loss on futures contracts 254,603 - - 254,603
Credit default swap contracts - - 197,057 197,057
Limited partner's equity - - 124,980,651 124,980,651
31,417,476 - 125,177,708 156,595,184
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The following table presents the Fund’s fair value hierarchy of its financial instruments as at December 31, 2016:
Level 1 Level 2 Level 3 Total
ASSETS $ $ $ $
Cash balances at broker 33,987,032 - - 33,987,032
Cash held as collateral on futures and swap contracts 5,448,209 - - 5,448,209
Equity securities 14,474,507 - - 14,474,507
Fixed income securities 54,187,120 - - 54,187,120
Unrealized gain on futures contracts 1,121,151 - - 1,121,151
Unrealized gain on forward contracts - 238,225 - 238,225
Options contracts 6,404,343 - - 6,404,343
115,622,362 238,225 - 115,860,587
LIABILITIES
Equity securities sold short 2,136,900 - - 2,136,900
Credit default swap contracts - - 541,236 541,236
Unrealized loss on equity swap contracts - 473,221 - 473,221
Unrealized loss on futures contracts 818,306 - - 818,306
Unrealized loss on forward contracts - 413,778 - 413,778
Options contracts written 2,137,868 - - 2,137,868
Limited partner's equity - - 111,968,652 111,968,652
5,093,074 886,999 112,509,888 118,489,961
6. FINANCIAL INSTRUMENTS RISK
In the normal course of business, the LP’s investment activities expose it to a variety of financial risks. The Manager seeks to minimizepotential adverse effects of these risks for the LP’s performance by employing professional, experienced portfolio advisors and by daily
monitoring of the LP’s positions and market events. To assist in managing risks, the Manager maintains a governance structure that
oversees the LP’s investment activities and monitors compliance with the LP’s stated investment strategies, internal guidelines andsecurities regulations.
Please refer to the most recent information memorandum for a complete discussion of the risks attributed to an investment in the sharesof the LP. Significant financial instrument risks that are relevant to the LP and an analysis of how they are managed are presented
below. Total assets and liabilities presented in the tables below are not intended to match total assets and liabilities disclosed in the
statements of financial position, due to differences of derivative instruments. Certain risks, such as currency and interest rate risk maybe correlated. Such correlation is not taken into account in these financial statements.
(a) Market price risk
Market price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market prices whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factorsaffecting similar financial instruments traded in the market.
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The table below summarizes the LP’s overall market exposure at June 30, 2017:
Fair value % of NAV
$ %
Equity securities 16,899,488 13.53
Fixed income securities 49,290,672 39.44
Equity securities sold short 31,162,873 24.94
Options contracts 11,869,161 9.50
Financial futures contracts (total notional contract value) 137,250,126 0.14
Forward contracts (total notional contract value) 45,258,167 36.21
Credit default swaps (total notional contract value) 16,564,960 13.25
P rice sensitivity
As at June 30, 2017 had the prices of the long investments held in the LP, increased or decreased by 5% with all other variables
held constant, comprehensive income before allocation to limited partner would have increased or decreased by $9,108,901. In
practice, the actual trading results may differ from this analysis and the difference may be material.
As at June 30, 2017 had the prices of the short investments held in the LP, decreased or increased by 5% with all other variables
held constant, comprehensive income before allocation to limited partner would have increased or decreased by $6,305,872. Inpractice, the actual trading results may differ from this analysis and the difference may be material.
(b) Currency risk
Currency risk is the risk that the value of a financial instrument will fluctuate as a result of changes in foreign currency exchangerates, which can be caused by market, political and/or other factors which may be subject to intervention by sovereign governments.
The LP holds assets denominated in currencies other than its measurement currency. The LP is therefore exposed to currency risk,
as the value of the securities denominated in other currencies fluctuates due to changes in exchange rates.
The table below summarizes the LP’s exposure to currency risk (in U.S. dollars) at June 30, 2017:
Futures,
Credit forward, and
Fixed income defualt swap equity swap Options Amounts % of
Currency Equities securities contracts (i) contracts (i) contracts, net receivable Net NAV
$ $ $ $ $ $ $ %
Brazilian real - 49,290,672 - (45,258,167) - 2,557,913 6,590,418 5.27
Euro 16,899,488 - 3,714,512 (2,186,443) - - 18,427,557 14.74
Japanese yen - - - - 80,169 - 80,169 0.06
16,899,488 49,290,672 3,714,512 (47,444,610) 80,169 2,557,913 25,098,144 20.07
(i) These contracts are presented at their full notional value, whereas on the statement of financial position they are stated at their
fair value.
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C u rrency Sensitivity
As at June 30, 2017, had the United States dollar strengthened or weakened by 1% in relation to all currencies, with all other
variables remaining constant, comprehensive income before allocation to limited partner would have increased or decreased by$250,981. This analysis only addresses the impact on the financial instruments with respect to currency movement, and excludes
any other economic or geo-political implications of such currency fluctuation. In practice, the actual result may differ from thisanalysis and the difference may be material.
(c) Interest rate risk
The LP is exposed to the risk that the fair value of future cash flows of its financial instruments will fluctuate as a result of changes
in market interest rates. In general, the value of interest-bearing financial instruments will rise if interest rates fall, and conversely,will generally fall if interest rates rise. How sensitive the LP is to changes in prevailing interest rates depends on other factors like
credit rating of the issuers and the term to maturity of the LP’s investments. The lower the credit rating of the issuers and the longerthe term to maturity, the more sensitive the LP is to changes in prevailing interest rates, thus the higher the interest rate risk.
Although there would be no impact on interest earned on the LP’s holdings of fixed income securities at a fixed rate of interest, anincrease or decrease in interest rates could have an impact on the fair value of the debt securities.
InterestSensitivity
As at June 30, 2017, had interest rates strengthen or weakened by 25 basis points, with all other variables remaining constant,comprehensive income before allocation to limited partner would have increased by $651,514 or decreased by $663,032,
respectively. This analysis only addresses the impact on the financial instruments with respect to interest rate movement, and
excludes any other economic or geo-political implications of such interest rate fluctuation.
(d) Credit risk
The LP is exposed to credit risk arising from its transactions with its counterparties related to securities purchases, sales and
positions held by the counterparties on the LP’s behalf. Credit risk is the risk that one party to a financial instrument will fail todischarge an obligation and cause the other party to incur a financial loss.
Financial assets which potentially expose the LP to credit risk consist principally of investments in cash balances at brokers,
amounts receivable, equity securities, fixed income securities, futures, forward and swap contracts and options contracts. Until thefixed income securities are sold or mature, the LP is exposed to credit risk relating to whether the counterparty will meet its
obligations when they come due. Credit risk is managed by dealing only with counterparties the LP believes to be creditworthy,setting transaction limits with specific counterparties and by daily monitoring of credit exposure. Credit risk did not impact the
values of the LP’s financial liabilities.
Credit default swap contracts involve an arrangement between the LP and the counterparty, in which the LP pays periodic
premiums and the counterparty agrees to make a payment upon the occurrence of a specified credit event. The fair value of open
credit default swap contracts reporting in the statement of financial position may differ from that which would be realized in theevent of the LP terminating its position in the contract. Risks may arise as a result of the failure of the counterparty to the credit
default swap contract to comply with the terms of the swap contract. The loss incurred by the failure of the counterparty is generallylimited to the aggregate of the unrealized gain or loss on the credit default swap contracts in an unrealized position as well as any
collateral posted with the counterparty. Therefore, the LP considers the creditworthiness of the counterparty to a credit defaultswap contract in evaluating potential credit risk. Additionally, risks may arise from unanticipated movements in the fair value ofthe underlying securities and the lack of market liquidity to unwind the positions at current fair values.
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The table below summarizes the LP’s financial intermediaries’ exposure as a percentage of NAV, as at June 30, 2017:
Counterparty
Cash
balances
at broker
Cash held
as
collateral
on futures
and swap
contracts
Amounts
receivable
Equity
securities,
net
Fixed
income
securities
Futures,
forward
and swap
contracts
Options
contracts,
net Total
% % % % % % % %
BarclaysBankP L C - 0.8 - - - - - 0.80
CIBC Mellon 1.05 - 2.07 7.65 39.44 - - 50.21
FMGL 2.00 12.70 - - - 0.23 0.03 14.96
JP Morgan Chase Bank ("JPM") 0.66 16.89 - (5.32) - - 8.70 20.93
Morgan Stanley 8.31 18.55 - (13.74) - - - 13.12
UBS AG("UBS") - 0.06 - - - - 0.76 0.82
12.02 49.00 2.07 (11.41) 39.44 0.23 9.49 100.84
The table below summarizes the LP’s financial intermediaries’ exposure as a percentage of NAV, as at December 31, 2016:
Counterparty
Cash
balances
at broker
Cash held
as
collateral
on futures
and swap
contracts
Amounts
receivable
Equity
securities,
net
Fixed
income
securities
Futures,
forward
and swap
contracts
Options
contracts,
net Total
% % % % % % % %
Barclays Bank PLC - 1.79 - - - - - 1.79
CIBC Mellon 0.09 - 2.56 2.18 48.45 - - 53.28
FMGL 10.96 - - - - 1.22 - 12.18
JPM 19.26 1.08 - 10.76 - - 5.02 36.12
Morgan Stanley - 2.00 - - - - - 2.00
UBS 0.08 - - - - - 0.71 0.79
30.39 4.87 2.56 12.94 48.45 1.22 5.73 106.16
(i) Analysis of credit quality
As at June 30, 2017 the LP was invested in fixed income securities with a BBB/Bbb rating and represented 39.44% of theNAV (48.45% as at December 31, 2016).
The LP has used ratings from Moody’s Investors Service, Inc. Where Moody’s ratings are not available, the LP has used S&Pratings. All ratings are as of the date indicated and do not reflect subsequent changes.
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(ii) Concentration of credit risk
The following are the significant countries of domicile of the LP’s cash balances at brokers, equity securities and fixed income
securities as at June 30, 2017 as a percentage of NAV:
June 30, 2017 December 31, 2016
% %
Brazil 39.61 48.45
Canada 1.05 0.09
Greece 13.58 7.06
Spain 0.04 -
Switzerland 0.06 0.08
United Kingdom 0.81 1.79
United States 43.65 42.30
98.80 99.77
The following are the individual issuers of equity and fixed income securities of that exceed 5% of NAV as at June 30, 2017
as a percentage of NAV:
June 30, 2017 December 31, 2016
% %
Government of Brazil 39.61 48.45
Nobel Energy - 5.88
(e) Liquidity risk
Liquidity risk is the risk that the LP will encounter difficulty in meeting the obligations associated with its financial liabilities thatare settled by delivering cash or another financial asset. The LP’s policy and Manager’s approach to managing liquidity is to
ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressconditions, including estimated redemptions of shares, without incurring unacceptable losses or risking damage to the LP’sreputation. The LP is considered to be relatively liquid. However, unexpected heavy demand for redemptions of the LP’s shares
could result in the LP having to dispose of investments at a time when it is not optional to do so in order to meet such redemptionrequests.
7. ALLOCATION OF COMPREHENSIVE INCOME (LOSS)
The general partner is allocated 0.01% of comprehensive income (loss) before allocation to the limited partner. In addition, as
investment manager of the LP, Friedberg Advisors receives an incentive fee distribution from the LP as an allocation of profit,
calculated and payable quarterly, equal to 20% of net new profits, in any year that such new profits represent a return on partners’
equity that exceeds the current yield on the two-year U.S. Government treasury notes. For the purposes for calculating the net newprofits any net losses of the LP are carried forward and set off against the net profit of the LP of subsequent financial years. An incentivefee distribution of $nil was recognized for six months ended June 30, 2017 ($nil for the six months ended June 30, 2016) and was $nil
was included in accounts payable at June 30, 2017 ($nil at December 31, 2016).
- 14 –(UNAUDITED)
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8. RELATED PARTY TRANSACTIONS
(a) Transaction costs
FMGL serves as one of the LP’s brokers. For the six months ended June 30, 2017, the LP incurred $65,510 ($153,459 for the six
months ended June 30, 2016) in transaction costs on options and futures and forward contracts with FMGL. Transaction costs arecharged to income and comprehensive income. FMGL does not charge the LP brokerage fees in respect of fixed income securities.
(b) Management fees
As manager, TTML is entitled to receive management fees, calculated and payable monthly at the annual rate of one percent of
the NAV of the Fund plus Harmonized Sales Tax (“H.S.T.”), based on the NAV on the last business day of the month. Themanagement fees are split equally between the Fund and the LP unless TTML determines a more appropriate allocation method.
Management fees expense of the LP incurred with TTML for the six months ended June 30, 2017 was $690,576 ($790,428 for thesix months ended June 30, 2016). An amount of $117,066 ($104,785 as at December 31, 2016) was included in accounts payable
and accrued liabilities at June 30, 2017.
(c) Cash balances and securities held at broker
The following details the cash and investments which FGML held on behalf of the LP:
June 30, 2017 December 31, 2016
$ $
Assets
Cash balances at broker 2,501,003 12,260,202
Cash held as collateral 15,878,360 -
Unrealized gain on futures and forward contracts 547,061 1,359,376
18,926,424 13,619,578
Liabilities
Unrealized loss on futures and forward swap contracts 254,603 1,232,084
9. CAPITAL MANAGEMENT
Management considers the LP’s capital to consist of general partner’s equity and limited partner’s equity. The Manager manages thecapital of the LP in accordance with the LP’s investment objectives, policies and restrictions, as outlined in the Fund’s information
memorandum, while maintaining sufficient liquidity to enable shareholder redemptions. The LP does not have any externally imposed
capital requirements.