MacKenzie Realty Capital, Inc. 10-K

Item 9A. CONTROLS AND PROCEDURES Evaluation of disclosure controls and procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the 1934 Act) as of the end of the period covered by this report as required by paragraph (b) of Rule 13a-15 or 15d-15 of the 1934 Act. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed by us in the reports we file or submit under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management's Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rules 13a-15(f) and 15d-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that: 1. Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and the dispositions of our assets; 2. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and board of directors; and 3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. 36 TABLE OF CONTENTS Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management's assessment of the effectiveness of our internal control system as of June 30, 2020, was based on the framework for effective internal control over financial reporting described in Internal Control- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment, as of June 30, 2020, our system of internal control over financial reporting was effective at the reasonable assurance level. This annual report does not include an attestation report of the Company's independent registered public accounting firm regarding control over financial reporting. Management's report was not subject to attestation by the Company's independent registered public accounting firm pursuant to Section 989G of the Dodd-Frank Wall Street and Consumer Protection Act, which exempts non-accelerated filers from the auditor attestation requirement of section 404 (b) of the Sarbanes-Oxley Act. Changes in Internal Control over Financial Reporting There were no changes to the Company’s internal control over financial reporting (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that occurred during the year ended June 30, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. OTHER INFORMATION None. PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Board of Directors and Executive Officers Our business and affairs are managed under the direction of our Board of Directors. Accordingly, our Board provides broad supervision over our affairs, including supervision of the duties performed by the Adviser and MacKenzie. Certain employees of MacKenzie are responsible for our day-to-day operations. The names, ages and addresses of our Directors and specified executive officers, together with their principal occupations and other affiliations during the past five years, are set forth below. Each Director and officer holds office for a one-year term to which he or she is elected and until his successor is duly elected and qualifies, or until he resigns or is removed in the manner provided by law. Our Board consists of a majority of Independent Directors. The Director who is an "interested person" (as defined in the 1940 Act) is referred to as an " Interested Director ," a director who is not an Interested Director is referred to herein as an "Independent Director." The address for all officers and Directors is 89 Davis Road, Suite 100, Orinda CA 94563. None of our Directors or officers serves as a director for any other company which (i) has a class of securities registered under section 12 of the 1934 Act, (ii) is subject to section 15(d) of the 1934 Act, or (iii) is registered as an investment company under the 1940 Act, and we only have one investment portfolio. 37 TABLE OF CONTENTS Board of Directors Name and Age Position(s) Held with the Company Term of Office and Length of Time Served Principal Occupation(s) During Past 5 Years Charles “Chip” Patterson†, 49 Chairman of the Board, Interested Director Since 2019 Mr. Chip Patterson, an MRC Executive Officer since May of 2012, is managing director, general counsel, and senior vice president of MCMA and the Manager, and a director of their general partner, and a beneficial owner of all three companies, all since 2005. Mr. Patterson graduated magna cum laude from the University of Michigan Law School with a J.D. degree and with high distinction and Phi Beta Kappa from the University of California at Berkeley with a B.A. degree in Political Science. Prior to joining the Manager in July 2003, he was a securities and corporate finance attorney with the national law firm of Davis Wright Tremaine LLP. Prior to law school, Chip Patterson taught physics, chemistry, and math at the high school level for three years. He also has prior experience in sales, retail, and banking, and is a licensed California Real Estate Broker. Tim Dozois, 58 Director Since 2012 Mr. Dozois was Vice President, Secretary and Corporate Counsel for Pendrell Corporation, a NASDAQ listed company specializing in intellectual property solutions, from June of 2010 until early 2018. He is now sole owner of Conseiller LLC. From January 1996 until March of 2010, Mr. Dozois was an equity partner of Davis Wright Tremaine LLP, a Seattle-based national law firm, where he specialized in private securities work and structured financings, with an emphasis on the acquisition, financing and management of real property assets. He has nearly 30 years of experience supporting leading corporations in securities law compliance, mergers, acquisitions, and real estate acquisition, financing, and management. Mr. Dozois received his B.S. in Financial Management from Oregon State University and his J.D. from the University of Oregon School of Law, where he was Order of the Coif. Tom Frame, 78 Director Since 2012 Mr. Frame was a co-founder of TransCentury Property Management and solely founded Paradigm Investment Corporation. TransCentury began in May of 1973 and has syndicated and managed over 10,000 residential units. During the last 35 years, Mr. Frame has been a principal in the acquisition, financing, restoration, and sale of over $500,000,000 in residential and commercial real estate. Paradigm was founded in June 1986 to sponsor and manage private, closed end "mutual funds." The last of the funds successfully liquidated in December of 2000. Mr. Frame received a BA degree from the University of Kansas in Mathematics in June 1964, a Juris Doctor degree from the San Francisco Law School in June 1975, and an MBA with honors from Pepperdine University in April 1986. Mr. Frame is currently managing his own investments which include residential units, commercial property, and a portfolio of securities. † As a principal of both MacKenzie and the Adviser, Mr. Patterson is an Interested Director. 38 TABLE OF CONTENTS Executive Officers Our current officers are listed in the chart below. As affiliated persons of MacKenzie and/or the Adviser, the officers are "interested persons," as that term is defined in Section 2(a)(19) of the 1940 Act. The address for all officers is 89 Davis Road, Suite 100, Orinda, CA 94563. Name and Age Position(s) Held with the Company Term of Office and Length of Time Served Principal Occupation(s) During Past 5 Years Robert Dixon, 49 Chief Executive Officer and President Since 2012 Robert E. Dixon has been the senior vice president and co-chief investment officer of MacKenzie and the Adviser since 2005, and a director of their general partner, and a beneficial owner of all three companies since 2005. Robert Dixon served as an officer and director of Sutter Holding Company, Inc. from March 2002 until 2005. Mr. Dixon has been president of Sutter Capital Management since its founding. Mr. Dixon received his Master of Business Administration degree from Cornell University in 1998 and has held the Chartered Financial Analyst® designation since 1996. Mr. Dixon received his bachelor's degree in economics from the University of California at Los Angeles in 1992. Paul Koslosky, 58 Chief Financial Officer and Treasurer Since 2012 Mr. Koslosky has been the chief financial officer and treasurer for the Adviser and MacKenzie since 2004. He owns a beneficial interest in each MacKenzie, the Adviser and their general partner. He is responsible for accounting and reporting for MacKenzie, the funds it manages, and other related business interests. Mr. Koslosky graduated from California State University, Hayward in 1983 with a Bachelor of Science degree in Business Administration. Prior to joining MacKenzie in 1997, he spent five years with Zellerbach Paper Company, a billion-dollar paper distributor, as staff accountant and, eventually, financial reporting manager. He worked for Doric Development, an Alameda, California real estate developer with numerous related business interests. At Doric he served as accounting manager responsible for the accounting and reporting for commercial development and construction. From 1995 to 1997 he served as controller at Doric. Glen Fuller, 47 Chief Operating Officer Since 2012 Mr. Fuller has been senior vice president and secretary of MacKenzie since 2000 and the Adviser since 2000, and a director of their general partner, and a beneficial owner of all three companies since 2000. Prior to becoming senior vice president of MacKenzie, he was with MacKenzie for two years as a portfolio manager and research analyst. Prior to joining MacKenzie, Mr. Fuller spent two years running the over the counter trading desk for North Coast Securities Corp. (previously Morgan Fuller Capital Group) with responsibility for both the proprietary and retail trading desks. Mr. Fuller was also the registered options principal and registered municipal bond principal for North Coast Securities Corp., a registered broker-dealer. Mr. Fuller previously held his NASD Series 7, general securities registration. Mr. Fuller has a Bachelor of Arts in Management. Chip Patterson, 49 General Counsel and Secretary Since 2012 Mr. Patterson is a managing director and general counsel of MCMA and our Manager, where he has been employed since 2003. He is a director of their general partner and a beneficial owner of all three companies. Chip Patterson graduated magna cum laude from the University of Michigan Law School with a J.D. degree and with high distinction and Phi Beta Kappa from the University of California at Berkeley with a B.A. degree in Political Science. Prior to joining the Manager in July 2003, he was a securities and corporate finance attorney with the national law firm of Davis Wright Tremaine LLP. Prior to law school, Chip Patterson taught physics, chemistry, and math at the high school level for three years. He also has prior experience in sales, retail, and banking, and is a licensed California Real Estate Broker. Jeri Bluth, 45 Chief Compliance Officer Since 2012 Ms. Bluth has been the Chief Compliance Officer for MacKenzie and the Adviser since 2009. She owns a beneficial interest in each MacKenzie and the Adviser. Mrs. Bluth oversees compliance for all the funds advised by the Adviser, and she oversees the Company's compliance with its Code of Ethics, Bylaws, Charter, and applicable rules and regulations. Mrs. Bluth began her career with MacKenzie Patterson Fuller, Inc. in July of 1996 in the Investor Services Department. During Mrs. Bluth's career with MacKenzie, she graduated from St. Mary's College of California in June 2001, with a Bachelor of Arts degree in Business Management. Christine Simpson, 55 Chief Portfolio Manager Since 2012 Mrs. Simpson has been employed by MacKenzie and its affiliates since 1990, and has been the Adviser's Senior Vice President of Research and Trading since 2005. Mrs. Simpson is responsible for handling the day-to-day operations of The Adviser's research department. During Mrs. Simpson's career with MacKenzie, she graduated: with a Bachelor of Arts degree in Business Management from St. Mary's College of California in October 2004 (with honors), with a Master of Science degree in Financial Analysis and Investment Management in September 2006, and a Master’s in Business Administration in June 2008. 39 TABLE OF CONTENTS Section 16(a) Beneficial Ownership Reporting Compliance Under the federal securities laws, our directors, executive (and certain other) officers and any persons holding more than 10% of our common stock are required to report their ownership of our common stock and any changes in that ownership to us and the SEC. Specific due dates for these reports have been established by regulation, and we are required to report any failure to file by these dates in Fiscal 2020. To our knowledge, based solely on a review of the copies of beneficial ownership reports furnished to us and written representations that no other reports were required, during Fiscal 2020, all of our directors, officers and more than 10% beneficial owners complied with all applicable 1934 Act §16(a) filing requirements. Code of Ethics We have adopted a Code of Ethics which applies to, among others, our senior officers, including our Chief Executive Officer and Chief Financial Officer, as well as all of our officers, directors and employees. Our Code of Ethics requires that all employees and directors avoid any conflict, or the appearance of a conflict, between an individual's personal interests and our interests. Pursuant to our Code of Ethics, each employee and director must disclose any conflicts of interest, or actions or relationships that might give rise to a conflict, to our Chief Compliance Officer. Our Audit Committee is charged with approving any waivers under our Code of Ethics. The Codes of Ethics can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the SEC at (202) 942-8090. The Codes of Ethics are also available on the EDGAR database on the SEC's internet site at www.sec.gov, and, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the SEC's Public Reference Section, Washington, D.C. 20549-0102. Audit Committee The Board of Directors has established an Audit Committee in accordance with 1934 Act §3(a)(58)(A). The Audit Committee operates under a charter approved by our Board of Directors, which contains the responsibilities of the Audit Committee. The Audit Committee's responsibilities include establishing guidelines and making recommendations to our Board of Directors regarding the valuation of our loans and investments, selecting our independent registered public accounting firm, reviewing with such independent registered public accounting firm the planning, scope and results of their audit of our consolidated financial statements, pre‑approving the fees for services performed, reviewing with the independent registered public accounting firm the adequacy of internal control systems, reviewing our annual consolidated financial statements and periodic filings and receiving our audit reports and consolidated financial statements. The audit committee is currently composed of Messrs. Dozois and Frame, neither of whom is an "interested person" of ours as that term is defined in Section 2(a)(19) of the 1940 Act. Mr. Dozois serves as chairman of the audit committee. 40 TABLE OF CONTENTS Item 11. EXECUTIVE COMPENSATION We do not have a compensation committee because our executive officers do not receive any direct compensation from us. Compensation of Directors Our Independent Directors receive an annual retainer of $28,000. They also receive $1,000 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each board meeting in person and $500 for each telephonic meeting, and also receive $500 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each committee meeting. In addition, the chairman of the audit committee receives an annual fee of $1,000 and each chairman of any other committee receives an annual fee of $1,000 for their additional services, if any, in these capacities. No compensation is expected to be paid to directors who are "interested persons" as that term is defined in 1940 Act §2(a)(19). The following table details the compensation accrued to Directors fees during Fiscal 2020. We maintain no pension, equity participation, or retirement plans for our Directors. However, both Independent Directors have been investing a portion of their compensation into Shares of the Company beginning this fiscal year, and have stated that they intend to continue to do so. Name & Position Fiscal Year 2020 Fees (1) Chip Patterson (Chairman of the Board of Directors) $ - Tim Dozois (Independent Director) 34,000 Tom Frame (Independent Director) 34,000 Total Fees $ 68,000 (1) Consists only of directors' fees and does not include reimbursed expenses. Compensation of Executive Officers None of our officers receives direct compensation from us. We have not compensated our executive officers in any of the last three fiscal years. We do not provide any bonus, stock options, stock appreciation rights, non-equity incentive plans, non-qualified deferred compensation or pension benefits to our executive officers. Further, we have no agreements with any officer pertaining to change in control payments. All of our officers and staff are employed by MacKenzie or the Adviser, which pay all of their cash compensation. Compensation Committee Interlocks and Insider Participation We do not have a separate compensation committee utilized to determine the appropriate compensation payable to our executive officers and Directors. The Audit Committee, however, is responsible for, among other things, annually reviewing and approving the compensation policies for our Directors. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table shows the amount of our common stock beneficially owned and based on a total of 12,852,386.91 shares of our common stock outstanding on September 21, 2020, as of that date, by (1) each of our directors and nominees for director, (2) our executive officers and (3) all directors and executive officers as a group. To our knowledge, no other person owns more than 5% of our common stock. The number of shares beneficially owned by each entity, person, director or executive officer is determined under the rules of the Securities and Exchange Commission (the “ SEC ”) and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has the sole or shared voting power or investment power and also any shares that the individual has the right to acquire within 60 days of September 21, 2020, through the exercise of any instrument. Unless otherwise indicated, each person has the sole investment and voting power, or shares such powers with his spouse, with respect to the shares set forth in the table. Unless known otherwise by us, the beneficial ownership information is based on each beneficial owner’s most recent Form 3, Form 4, Form 5, Schedule 13D or Schedule 13G, as applicable. With respect to the Executive Officers listed below, they are limited partners of MPF Successors, LP, as well as officers of its general partner, which owns 47,262.23 shares in us. Mr. C. E. Patterson and his spouse are the sole beneficial owners of 9,222.29 shares owned in a personal holdings limited partnership, and the executive officers below are also in control of its general partner. Thus, they are all deemed to have voting and dispositive control over such shares and the number of shares owned below is the number of shares owned by MPF Successors, LP and the personal holding partnership. The address of each beneficial owner is 89 Davis Road, Orinda, CA 94563. 41 TABLE OF CONTENTS Name and address of Beneficial Owner Nature of Beneficial Ownership Number of Shares Owned Percent of Class Independent Directors: Tim Dozois Directly held 4,111.00 * Tom Frame Directly held 5,213.43 * Interested Director: Charles "Chip" Patterson Indirectly held 59,414.57 * Executive Officers Robert Dixon Indirectly held 59,414.57 * Glen Fuller Indirectly held 59,414.57 * Chip Patterson Indirectly held 59,414.57 * Paul Koslosky Indirectly held 59,414.57 * Directors and Officers as a group (6 person) Indirectly held 68,739.00 * * Represents less than 1% of the number of shares outstanding. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE We are managed by MacKenzie, which is owned by three sub-partnerships that are owned in varying percentages by MacKenzie and the Adviser employees and the extended family of Messrs. C.E. Patterson, Chip Patterson, Glen Fuller and Robert Dixon. The general partner of MacKenzie is MCM-GP, Inc., a California corporation owned by the same individuals. The majority of the beneficial interests of MacKenzie are owned by C.E. Patterson, Berniece A. Patterson, Robert Dixon, Glen Fuller, and Chip Patterson, in addition to other family members. Certain non-family employees of MacKenzie own minority interests in MacKenzie that represent in the aggregate less than 10% of the equity in MacKenzie. MacKenzie manages all of our affairs except for providing investment advice. We are advised by the Adviser, whose investment team members have an average of nearly 20 years of experience investing in real estate-related securities. The Adviser is registered with the SEC and is owned by the same beneficial owners and in the same proportions as MacKenzie. The Adviser is led by its investment team: C.E. Patterson, Founder and Managing Director of the General Partner of MacKenzie and the Adviser; Glen W. Fuller, who serves as Chief Operating Officer and Managing Director of the General Partner of MacKenzie and the Adviser; Chip Patterson, who serves as Managing Director and General Counsel, and Director of the General Partner of MacKenzie and the Adviser; Robert E. Dixon, who serves as Chief Investment Officer and Managing Director of the General Partner of MacKenzie and the Adviser; Paul F. Koslosky, who serves as Chief Financial Officer and Treasurer of the General Partner of MacKenzie and the Adviser; and Christine E. Simpson, who serves as Chief Portfolio Manager and Senior Vice President of Research for the General Partner of MacKenzie and the Adviser. 42 TABLE OF CONTENTS We have entered into two affiliated contracts—the Advisory Agreement, under which the Adviser serves as our investment adviser, and the Administration Agreement, under which MacKenzie furnishes us with certain non-investment management services and administrative services necessary to conduct our day-to-day operations. Each of these agreements is terminable by either party upon proper notice. Payments under the Investment Advisory Agreement in future periods (after the up-front payment of the Portfolio Structuring Fee) are (i) a percentage of the value of our Gross Invested Capital; and (ii) incentive fees based on our income and our performance above specified hurdles (except in the year of liquidation). In Fiscal 2020, 2019 and 2018, Management fees accrued to the Adviser under the Advisory Agreement were $2,549,076, $3,996,097 and $2,817,524, respectively. Administration fees accrued and payable under the Administration Agreement for Fiscal 2020, 2019 and 2018, were $680,000, $570,667 and $432,000, respectively. Administration Agreement fees occur on an ongoing basis as expenses are incurred on our behalf by MacKenzie. However, if MacKenzie withdraws as our administrator, it is liable for any expenses we incur as a result of such withdrawal. The 1940 Act extensively regulates conflicts of interests between BDCs, their directors, investment advisers and their affiliates. For example, the 1940 Act and rules thereunder generally prohibit a BDC's employees, officers, directors, investment adviser and their affiliates from (i) selling securities or property to the BDC, (ii) buying securities or property from the BDC, (iii) borrowing money or property from the BDC, or (iv) entering into joint transactions with the BDC or a company controlled by it. The 1940 Act further prohibits a wider group of persons affiliated with a BDC from entering into such transactions with a BDC unless approved by the BDC's stockholders. In order to ensure that we do not engage in any transactions with any persons affiliated with us that are prohibited by the 1940 Act, we have implemented certain written policies and procedures whereby our executive officers screen each of our transactions for any possible affiliations between the issuer in which we invest, us, companies controlled by us and our executive officers and directors. We do not enter into any agreements unless and until we are satisfied that doing so does not violate our Charter or raise concerns under the 1940 Act or, if such concerns exist, we have taken appropriate actions to seek board review and exemptive or other relief for such transaction. Our Board of Directors review these procedures on an annual basis. There are no plans to eliminate or amend these procedures, regardless of whether we remain a BDC. Our directors have been divided into two groups — interested directors and Independent Directors. An interested director is an "interested person" as defined in 1940 Act §2(a)(19). Our only interested director is Charles “Chip” Patterson. Our independent directors are Tim Dozois and Tom Frame. Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES: The following table presents fees incurred for professional services rendered by Moss Adams LLP, the Company's independent registered public accounting firm, for Fiscal 2020, Fiscal 2019, and Fiscal 2018: Fee Category Fiscal Year 2020 Fiscal Year 2019 Fiscal Year 2018 Audit Fees $ 133,750 $ 123,471 $ 115,825 Audit-Related Fees - - - Tax Fees - - - All Other Fees 12,500 15,610 15,000 Total Fees $ 146,250 $ 139,081 $ 130,825 Audit Fees were for professional services rendered for the audit of our consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by Moss Adams in connection with statutory and regulatory filings or engagements and include quarterly reviews and security counts. Audit-Related Fees were for assurance and related services that are reasonably related to the performance of the audit or review of the Company's consolidated financial statements and are not reported under "Audit Fees." These services include accounting consultations in connection with acquisitions, consultations concerning financial accounting and reporting standards. 43 TABLE OF CONTENTS Tax Fees were for professional services for federal, state and international tax compliance, tax advice and tax planning and include preparation of federal and state income tax returns, and other tax research, consultation, correspondence and advice. All Other Fees are for services other than the services reported above. These fees were incurred for their review of our registration statements. The amounts incurred during Fiscal 2018 were reimbursed by the Adviser under the Advisory Agreement. The Audit Committee has concluded the provision of the non-audit services listed above is compatible with maintaining the independence of Moss Adams LLP. Moss Adams LLP did not bill the Adviser or MacKenzie, for any non-audit services in Fiscal 2020, 2019 or 2018. Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm The Audit Committee pre-approves all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis. 44 TABLE OF CONTENTS PART IV Item 15. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES The following documents are filed as part of this Annual Report on Form 10-K: 1. The Consolidated Financial Statements listed in the Index to Consolidated Financial Statements on Page F-1. 2. The Exhibits listed in the Exhibit Index below. Exhibit No. 1 Description of Document 2.1 Contribution Agreement by and between MacKenzie Realty Operating Partnership, LP and the Addison Group, Dated June 8, 2020 3(i) Articles of Amendment and Restatement (incorporated by reference to Registrant's Post-Effective Amendment No. 3 to Registrant's Registration Statement on Form N-2 (File No. 333-181853), filed on May 14, 2014) 3(ii) First Amended and Restated Bylaws (incorporated by reference to Registrant's Pre-Effective Amendment No. 2 to the Registration Statement on Form N-2 (File No. 333-181853), filed on July 19, 2013) 10.1(i) Amended and Restated Investment Advisory Agreement with MCM Advisers, LP dated as of October 1, 2017 (incorporated by reference to Registrant's Post-Effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 333-212804), filed on November 9, 2017) 10.1(ii) Amendment to the Amended and Restated Investment Advisory Agreement dated as October 1, 2018 (incorporated by reference to Registrant’s Post-Effective Amendment No. 5 to the Registration Statement on Form N-2 (File No. 333-212804), filed on October 29, 2018) 10.1(iii) Agreement of Limited Partnership of MacKenzie Realty Operating Partnership, LP, Dated May 20, 2020 10.2 Form of Investment Adviser Introducing Agreement (pre-December 2016) (incorporated by reference to the Registration Statement on Form N-2(File No. 333-212804) filed on August 1, 2016) 10.3 Form of Amendment to Pre-December 2016 Investment Adviser Introducing Agreement (incorporated by reference to Registrant's Pre-Effective Amendment No. 2 to Registration Statement on Form N-2 (File No. 333-212804) filed on December 19, 2016) 10.4 Form of Investment Adviser Introducing Agreement (beginning December 2016) (incorporated by reference to Registrant's Pre-Effective Amendment No. 2 to Registration Statement on Form N-2 (File No. 333-212804) filed on December 19, 2016) 10.5 Marketing Services Agreement with Arete Wealth Management, LLC dated December 20, 2016 (incorporated by reference to Registrant's Post-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 333-212804) filed on December 22, 2016) 10.6 Form of Sales Agent Agreement (pre August 6, 2014) (incorporated by reference to Registrant's Post-Effective Amendment No. 2 to the Registration Statement on Form N-2 (File No. 333-181853) filed on September 5, 2013) 10.7 Form of Amendment to Sales Agent Agreement (incorporated by reference to Registrant's Post-Effective Amendment No. 4 to the Registration Statement on Form N-2 (File No. 333-181853) filed on August 6, 2014) 10.8 Form of Sales Agent Agreement (for use after August 6, 2014) (incorporated by reference to Registrant's Post-Effective Amendment No. 4 to the Registration Statement on Form N-2 (File No. 333-181853) filed on August 6, 2014) 10.9 Form of Amendment to Sales Agent Agreement (for agreements entered before December 20, 2016) (incorporated by reference to Registrant’s Pre-Effective Amendment No. 2 to the Registration Statement on Form N-2 (File No. 333-212804) filed on December 19, 2016) 10.10 Form of Sales Agent Agreement (beginning December 20, 2016) (incorporated by reference to Registrant's Pre-Effective Amendment No. 1 to the Registrant’s Registration Statement on Form N-2(File No. 333-212804) filed on October 6, 2016) 10.11 Form of Investor Services Agreement with ACS Securities Services, Inc. (incorporated by reference to Registrant's Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 333-181853) filed on May 30, 2013) 10.12 Form of Administration Agreement with MacKenzie Capital Management, LP (incorporated by reference to Registrant's Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 333-181853), filed on May 30, 2013) 10.13 Form of Investor Services Agreement with MacKenzie Capital Management, LP dated November 1, 2018 (incorporated by reference to Post-Effective Amendment No. 6 t o the Registration Statement on Form N-2 ( File No. 333-212804 ), filed on May 10, 2019) 14 Code of Ethics for Principal Executive Officer and Principal Financial Officer ("Officer Code") (incorporated by referenced to Registrant's Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 333-181853), filed on May 30, 2013) 31.1 Section 302 Certification of Robert Dixon (President and Chief Executive Officer) 31.2 Section 302 Certification of Paul Koslosky (Treasurer and Chief Financial Officer) 32.1 Section 1350 Certification of Robert Dixon (President and Chief Executive Officer) 32.2 Section 1350 Certification of Paul Koslosky (Treasurer and Chief Financial Officer) All other exhibits for which provision is made in the applicable regulations of the Securities and Exchange Commission are not required under the related instruction or are inapplicable and therefore have been omitted. Item 16. FORM 10-K SUMMARY None. 45 TABLE OF CONTENTS Index to Audited Consolidated Financial Statements Consolidated Financial Statements Report of Independent Registered Public Accounting Firm F-2 Consolidated Statements of Assets and Liabilities as of June 30, 2020 and 2019 F-3 Consolidated Schedule of Investments as of June 30, 2020 F-4 Consolidated Schedule of Investments as of June 30, 2019 F-5 Consolidated Statements of Operations for the Years Ended June 30, 2020, 2019, and 2018 F-6 Consolidated Statements of Changes in Net Assets for the Years Ended June 30, 2020, 2019, and 2018 F-7 Consolidated Statements of Cash Flows for the Years Ended June 30, 2020, 2019, and 2018 F-8 Notes to Consolidated Financial Statements F-9 F-1 Index to Audited Consolidated Financial Statements Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of MacKenzie Realty Capital, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated statements of assets and liabilities of MacKenzie Realty Capital, Inc. (the “Company”), including the consolidated schedules of investments, as of June 30, 2020 and 2019, the related consolidated statements of operations, changes in net assets, and cash flows for each of the three years in the period ended June 30, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2020 and 2019, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 2020, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Moss Adams LLP San Francisco, California September 21, 2020 We have served as the Company’s auditor since 2012. F-2 Index to Audited Consolidated Financial Statements MacKenzie Realty Capital, Inc. Consolidated Statements of Assets and Liabilities June 30, 2020 June 30, 2019 Assets Investments, at fair value Non-controlled/non-affiliated investments (cost of $48,895,786 and $46,997,608, respectively) $ 38,081,970 $ 48,839,999 Affiliated investments (cost of $12,426,110 and $14,699,474, respectively) 12,107,884 15,916,187 Controlled investments (cost of $43,370,752 and $35,541,173, respectively) 43,515,291 38,488,962 Total investments, at fair value (cost of $104,692,648 and $97,238,255, respectively) 93,705,145 103,245,148 Cash and cash equivalents 8,957,393 1,278,668 Accounts receivable 1,087,432 3,170,068 Other assets 138,773 219,050 Deferred offering costs, net 278,021 440,320 Total assets $ 104,166,764 $ 108,353,254 Liabilities Accounts payable and accrued liabilities $ 135,040 $ 226,722 Dividend payable - 1,877,101 Capital pending acceptance 87,739 668,165 Due to related entities 718,264 2,465,885 Total liabilities 941,043 5,237,873 Net assets Common stock, $0.0001 par value, 80,000,000 shares authorized; 12,836,608.02 and 10,926,319.99 shares issued and outstanding, respectively 1,284 1,093 Capital in excess of par value 116,455,600 99,077,308 Total distributable earnings (distributions in excess of earnings) (13,231,163) 4,036,980 Total net assets 103,225,721 103,115,381 Total liabilities and net assets $ 104,166,764 $ 108,353,254 Net asset value per share $ 8.04 $ 9.44 The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. F-3 Index to Audited Consolidated Financial Statements MacKenzie Realty Capital, Inc. Consolidated Schedule of Investments June 30, 2020 Name Asset Type Shares/Units Cost Basis Total Fair Value % of Net Assets American Finance Trust 7.5% PFD (4) Publicly Traded Company 34,000.00 $ 610,229 $ 797,980 0.78 American Finance Trust Inc., Class A (4) Publicly Traded Company 86,500.00 500,619 686,378 0.66 Apartment Investment & Management Company- Class A (4) Publicly Traded Company 26,200.00 999,945 986,168 0.96 Ashford Hospitality Trust, Inc. (4) Publicly Traded Company 360,000.00 244,092 260,136 0.25 Bluerock Residential Growth REIT, Inc. (4) Publicly Traded Company 70,000.00 513,940 565,600 0.55 CBL & Associates Properties, Inc. - Preferred D (4) Publicly Traded Company 188,000.00 1,707,042 169,200 0.16 City Office REIT, Inc. - Preferred A (4) Publicly Traded Company 12,196.00 201,436 288,679 0.28 CorEnergy Infrastructure 7.375% PFD A (4) Publicly Traded Company 36,031.00 621,401 487,139 0.47 Host Hotels & Resorts Inc (4) Publicly Traded Company 24,500.00 237,354 264,355 0.26 Independence Realty Trust, Inc. (4) Publicly Traded Company 33,000.00 295,551 379,170 0.37 NexPoint Residential Trust, Inc. (4) Publicly Traded Company 8,000.00 294,490 282,800 0.27 One Liberty Properties, Inc. (4) Publicly Traded Company 24,500.00 370,318 431,690 0.42 RLJ Lodging Trust (4) Publicly Traded Company 42,000.00 243,541 396,480 0.38 The Macerich Company (4) Publicly Traded Company 59,943.00 1,018,578 537,689 0.52 VEREIT, Inc (4) Publicly Traded Company 58,000.00 294,437 372,940 0.36 WP Carey, Inc. (4) Publicly Traded Company 5,000.00 301,375 338,250 0.33 Total Publicly Traded Companies 8,454,348 7,244,654 7.02 Benefit Street Partners Realty Trust, Inc. (5) Non Traded Company 239,401.33 3,488,167 2,496,956 2.41 Carter Validus Mission Critical REIT II, Inc. Class A (5) Non Traded Company 288,506.00 1,666,123 1,632,944 1.58 CIM Real Estate Finance Trust, Inc. (5) Non Traded Company 522,144.54 3,043,423 2,349,650 2.28 CNL Healthcare Properties, Inc. (5) Non Traded Company 268,532.71 1,562,429 1,176,173 1.14 Cole Credit Property Trust V, Inc. (5) Non Traded Company 55,455.36 693,789 610,009 0.59 Cole Credit Property Trust V, Inc. Class T (5) Non Traded Company 1,466.55 18,438 16,132 0.02 Cole Office & Industrial REIT (CCIT II), Inc. Class A (5) Non Traded Company 17,792.56 114,700 124,370 0.12 Cole Office & Industrial REIT (CCIT II), Inc. Class T (5) Non Traded Company 1,441.84 6,906 10,078 0.01 Corporate Property Associates 18 Global A Inc. (5) Non Traded Company 4,695.14 39,627 30,471 0.03 First Capital Real Estate Trust, Inc. (5)(6) Non Traded Company 3,792.51 15,161 13,388 0.01 FSP 1441 Main Street (5)(6) Non Traded Company 15.73 8,559 39,128 0.04 FSP 303 East Wacker Drive Corp. Liquidating Trust (5)(6) Non Traded Company 3.00 30 679 - FSP Energy Tower I Corp. Liquidating Trust (2)(5)(6) Non Traded Company 19.35 7,929 9,810 0.01 FSP Grand Boulevard Liquidating Trust (5)(6) Non Traded Company 7.50 8 2,851 - FSP Satellite Place (2)(5)(6) Non Traded Company 19.60 588,176 532,579 0.52 Griffin Capital Essential Asset REIT, Inc. (5) Non Traded Company 23,044.28 151,802 144,027 0.14 Griffin-American Healthcare REIT III, Inc. (5) Non Traded Company 59,480.45 324,537 312,272 0.30 GTJ REIT, Inc. (5) Non Traded Company 1,000.00 11,530 9,280 0.01 Healthcare Trust, Inc. (5) Non Traded Company 479,718.92 4,806,568 3,271,683 3.17 Highlands REIT Inc. (5)(6) Non Traded Company 23,225,520.45 4,120,660 3,019,318 2.92 HGR Liquidating Trust (5)(6) Non Traded Company 73,170.41 244,648 292,682 0.28 Hospitality Investors Trust, Inc. (5)(6) Non Traded Company 20,493.11 90,607 20,083 0.02 InvenTrust Properties Corp. (5) Non Traded Company 2,235,413.80 2,710,159 2,749,559 2.66 KBS Real Estate Investment Trust II, Inc. (5)(6) Non Traded Company 1,365,338.22 3,754,369 2,266,461 2.20 KBS Real Estate Investment Trust III, Inc. (5) Non Traded Company 65,717.13 550,359 529,680 0.51 New York City REIT, Inc. (5)(6) Non Traded Company 319,024.14 3,800,940 3,110,485 3.01 NorthStar Healthcare Income, Inc. (5)(6) Non Traded Company 23,573.29 87,643 35,596 0.03 Phillips Edison & Company, Inc (5) Non Traded Company 851,563.96 6,286,760 4,589,930 4.45 SmartStop Self Storage REIT, Inc. (5) Non Traded Company 7,304.42 54,166 57,048 0.06 Steadfast Apartment REIT (5) Non Traded Company 73,226.79 815,995 741,055 0.72 Strategic Realty Trust, Inc. (5) Non Traded Company 321,296.92 1,252,790 649,020 0.63 Summit Healthcare REIT, Inc. (2)(5)(6) Non Traded Company 1,409,436.22 1,926,736 1,874,550 1.82 The Parking REIT Inc. (5)(6) Non Traded Company 17,989.90 230,880 90,129 0.09 Total Non Traded Companies (1) 42,474,614 32,808,076 31.78 3100 Airport Way South LP (5) LP Interest 1.00 355,000 320,253 0.31 5210 Fountaingate, LP (2)(5)(6) LP Interest 9.89 500,000 425,796 0.41 Bishop Berkeley, LLC (3)(5) LP Interest 4,050.00 4,050,000 3,854,223 3.73 BP3 Affiliate, LLC (2)(5)(6) LP Interest 1,668.00 1,668,000 1,668,000 1.62 BR Cabrillo LLC (5)(6) LP Interest 346,723.23 104,944 104,017 0.10 BR Everwood Investment Co, LLC (2)(5) LP Interest 3,750,000.00 3,750,000 3,750,000 3.63 BR Sunrise Parc Investment Co, LLC (2)(5) LP Interest 2,720,911.00 2,720,911 2,720,911 2.64 Britannia Preferred Members, LLC -Class 1 (3)(5)(6) LP Interest 103.88 2,597,000 3,505,950 3.40 Britannia Preferred Members, LLC -Class 2 (3)(5)(6) LP Interest 514,858.30 6,826,931 7,089,599 6.87 Capitol Hill Partners, LLC (3)(5)(6) LP Interest 190,000.00 1,900,000 1,468,700 1.42 Citrus Park Hotel Holdings, LLC (3)(5) LP Interest 5,000,000.00 5,000,000 5,000,000 4.84 Dimensions28 LLP (3)(5) LP Interest 10,800.00 10,801,015 10,949,688 10.61 Lakemont Partners, LLC (2)(5) LP Interest 1,000.00 941,180 857,160 0.83 MacKenzie Realty Operating Partnership, LP (3)(5)(6) LP Interest 1,451,642.63 12,145,905 11,613,141 11.25 MPF Pacific Gateway - Class B (2)(5)(6) LP Interest 23.20 6,287 7,164 0.01 Redwood Mortgage Investors VIII (5) LP Interest 56,300.04 29,700 12,949 0.01 Satellite Investment Holdings, LLC - Class B (5)(6) LP Interest 0.31 22 8,960 0.01 Secured Income, LP (2)(5)(6) LP Interest 64,670.00 316,890 261,914 0.25 Total LP Interest 53,713,785 53,618,425 51.94 Coastal Realty Business Trust, REEP, Inc. - A (3)(5)(6) Investment Trust 72,320.00 49,901 33,990 0.03 Total Investment Trust 49,901 33,990 0.03 Total Investments $ 104,692,648 $ 93,705,145 90.77 (1) Investments primarily in non-traded public REITs or their successors. (2) Under the 1940 Act, the Company generally is deemed to be an “affiliated person” of a portfolio company if it owns 5% or more of the portfolio company’s voting securities and generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of June 30, 2020, the Company is deemed to be either “affiliated” with, or in “control” of, these portfolio companies despite that fact that the Company does not have the power to exercise control over the management or policies of such portfolio companies. See additional disclosures in Note 5. (3) Under the 1940 Act, the Company generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of June 30, 2020, the Company is deemed to be in “control” of these portfolio companies despite that fact that the Company does not have the power to exercise control over the management or policies of such portfolio companies. See additional disclosures in Note 5. (4) Non-qualifying assets under Section 55(a) of the 1940 Act. As of June 30, 2020, the total percentage of non-qualifying assets is 6.95%, and as a business development company non-qualifying assets may not exceed 30% of our total assets. (5) Investments in illiquid securities, or securities that are not traded on a national exchange. As of June 30, 2020, 83.00% of the Company's total assets are in illiquid securities. (6) Investments in non-income producing securities. As of June 30, 2020, 36.00% of the Company's total assets are in non-income producing securities. The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. F-4 Index to Audited Consolidated Financial Statements MacKenzie Realty Capital, Inc. Consolidated Schedule of Investments June 30, 2019 Name Asset Type Shares/Units Cost Basis Total Fair Value % of Net Assets American Finance Trust Inc., Class A (4) Publicly Traded Company 197,340.00 $ 2,186,682 $ 2,151,006 2.09 Total Publicly Traded Company 2,186,682 2,151,006 2.09 Benefit Street Partners Realty Trust, Inc. (5) Non Traded Company 214,175.77 3,207,614 3,075,563 2.96 BRE Select Hotels Corp. - Preferred A (5) Non Traded Company 358,717.00 594,992 670,801 0.65 Carter Validus Mission Critical REIT (5) Non Traded Company 315,639.56 1,087,300 1,325,686 1.29 Cole Credit Property Trust IV, Inc. (5) Non Traded Company 314,451.92 1,879,482 2,185,441 2.12 Cole Credit Property Trust V, Inc. (5) Non Traded Company 8,631.50 116,442 112,123 0.11 Cole Credit Property Trust V, Inc. Class T (5) Non Traded Company 395.88 5,492 5,143 - CNL Healthcare Properties, Inc. (5)(6) Non Traded Company 104,158.67 658,615 625,994 0.61 Hines Global REIT, Inc. (5) Non Traded Company 17,936.21 120,637 92,013 0.09 Corporate Property Associates 18 Global A Inc. (5) Non Traded Company 4,695.14 39,627 37,139 0.04 First Capital Real Estate Trust, Inc. (5)(6) Non Traded Company 3,792.51 15,161 18,242 0.02 FSP 1441 Main Street (5)(6) Non Traded Company 15.73 8,559 31,245 0.03 FSP 303 East Wacker Drive Corp. Liquidating Trust (5)(6) Non Traded Company 3.00 30 600 - FSP Energy Tower I Corp. Liquidating Trust (2)(5)(6) Non Traded Company 19.35 57,567 57,566 0.06 FSP Grand Boulevard Liquidating Trust (5)(6) Non Traded Company 7.50 8 8 - FSP Satellite Place (2)(5)(6) Non Traded Company 17.60 546,482 712,585 0.69 Griffin-American Healthcare REIT III, Inc. (5) Non Traded Company 686.48 4,494 5,149 - Griffin Capital Essential Asset REIT, Inc. (5) Non Traded Company 21,368.03 140,003 169,021 0.16 GTJ REIT, Inc. (5) Non Traded Company 1,000.00 11,620 11,980 0.01 Healthcare Trust, Inc. (5) Non Traded Company 305,526.76 3,473,952 3,211,086 3.11 Highlands REIT Inc. (5)(6) Non Traded Company 21,255,526.80 3,965,354 3,825,995 3.71 Hospitality Investors Trust, Inc. (5)(6) Non Traded Company 1,650.75 11,802 9,327 0.01 InvenTrust Properties Corp. (5) Non Traded Company 14,799.52 22,603 26,195 0.03 KBS Real Estate Investment Trust II, Inc. (5) Non Traded Company 1,364,838.21 4,776,934 4,831,527 4.69 KBS Real Estate Investment Trust III, Inc. (5) Non Traded Company 62,516.45 515,050 593,906 0.58 New York City REIT, Inc. (5)(6) Non Traded Company 241,297.69 3,032,703 3,136,870 3.04 NorthStar Healthcare Income, Inc. (5)(6) Non Traded Company 23,573.29 87,643 66,477 0.06 Phillips Edison & Company, Inc (5) Non Traded Company 777,332.00 5,760,907 6,350,802 6.16 Steadfast Apartment REIT (5) Non Traded Company 2,083.29 17,197 26,041 0.03 Steadfast Income REIT (5) Non Traded Company 109,471.94 740,163 743,314 0.72 Strategic Realty Trust, Inc. (5) Non Traded Company 199,425.07 792,538 853,539 0.83 Summit Healthcare REIT, Inc. (2)(5)(6) Non Traded Company 1,406,200.22 1,922,248 2,587,408 2.51 The Parking REIT Inc. (5)(6) Non Traded Company 17,989.90 230,880 242,504 0.24 Total Non Traded Company (1) 33,844,099 35,641,290 34.56 3100 Airport Way South LP (5) LP Interest 1.00 355,000 387,990 0.37 5210 Fountaingate, LP (2)(5) LP Interest 9.89 500,000 552,693 0.54 Addison NC, LLC (3)(5)(6) LP Interest 200,000.00 2,000,000 3,600,000 3.49 Addison Property Member, LLC (3)(5) LP Interest 731,485.60 7,316,326 7,314,855 7.08 Arrowpoint Burlington LLC (2)(5) LP Interest 7.50 750,000 1,088,910 1.06 Bishop Berkeley, LLC (3)(5) LP Interest 4,050.00 4,050,000 4,051,013 3.93 BP3 Affiliate, LLC (2)(5)(6) LP Interest 1,350.00 1,350,000 1,350,000 1.31 BR Cabrillo LLC (5)(6) LP Interest 346,723.32 104,942 131,755 0.13 BR Desota Investment Co, LLC (2)(5) LP Interest 4,250,000.00 4,250,000 4,250,000 4.12 BR Quinn35 Investment Co, LLC (2)(5) LP Interest 4,000,000.00 4,000,000 4,000,000 3.88 Britannia Preferred Members, LLC -Class 1 (3)(5)(6) LP Interest 103.88 2,597,000 2,986,550 2.90 Britannia Preferred Members, LLC -Class 2 (3)(5)(6) LP Interest 514,858.30 6,826,931 7,758,915 7.52 Capitol Hill Partners, LLC (3)(5)(6) LP Interest 190,000.00 1,900,000 1,852,500 1.80 CRP I Roll Up, LLC (5) LP Interest 4,500,000.00 4,500,000 4,995,000 4.84 CRP III Roll Up, LLC (5) LP Interest 6,000,000.00 6,000,000 6,540,000 6.34 Dimensions28 LLP (3)(5)(6) LP Interest 10,800.00 10,801,015 10,886,076 10.56 Lakemont Partners, LLC (2)(5) LP Interest 1,000.00 1,000,000 1,007,700 0.98 MPF Pacific Gateway - Class B (2)(5)(6) LP Interest 23.20 6,287 7,316 0.01 Redwood Mortgage Investors VIII (5) LP Interest 56,300.04 29,700 39,410 0.04 Satellite Investment Holdings, LLC - Class A (5) LP Interest 22.00 2,200,000 2,200,000 2.13 Secured Income, LP (2)(5)(6) LP Interest 64,670.00 316,890 302,009 0.29 The Weatherly Building, LLC (5)(6) LP Interest 17.50 118,721 47,846 0.05 The Weatherly, LTD (5)(6) LP Interest 60.00 184,761 63,261 0.06 Total LP Interest 61,157,573 65,413,799 63.43 Coastal Realty Business Trust, REEP, Inc. - A (3)(5)(6) Investment Trust 72,320.00 49,901 39,053 0.04 Total Investment Trust 49,901 39,053 0.04 Total Investments $ 97,238,255 $ 103,245,148 100.12 (1) Investments primarily in non-traded public REITs or their successors. (2) Under the 1940 Act, the Company generally is deemed to be an “affiliated person” of a portfolio company if it owns 5% or more of the portfolio company’s voting securities and generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of June 30, 2019, the Company is deemed to be either “affiliated” with, or in “control” of, these portfolio companies despite that fact that the Company does not have the power to exercise control over the management or policies of such portfolio companies. See additional disclosures in Note 5. (3) Under the 1940 Act, the Company generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of June 30, 2019, the Company is deemed to be in “control” of these portfolio companies despite that fact that the Company does not have the power to exercise control over the management or policies of such portfolio companies. See additional disclosures in Note 5. (4) Non-qualifying assets under Section 55(a) of the 1940 Act. As of June 30, 2019, the total percentage of non-qualifying assets is 1.99%, and as a business development company non-qualifying assets may not exceed 30% of our total assets. (5) Investments in illiquid securities, or securities that are not traded on a national exchange. As of June 30, 2019, 93.30% of the Company's total assets are in illiquid securities. (6) Investments in non-income producing securities. As of June 30, 2019, 37.23% of the Company's total assets are in non-income producing securities. The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. F-5 Index to Audited Consolidated Financial Statements MacKenzie Realty Capital, Inc. Consolidated Statements of Operations Year Ended June 30, 2020 2019 2018 Investment income Non-controlled/non-affiliated investments: Dividend and operational/sales distributions $ 5,012,907 $ 8,995,648 $ 4,673,414 Interest and other income 353,636 374,121 457,835 Affiliated investments: Dividend and operational/sales distributions 1,011,245 1,549,329 157,116 Controlled investments: Dividend and operational/sales distributions 2,352,153 960,192 1,690,000 Total investment income 8,729,941 11,879,290 6,978,365 Operating expenses Base management fee (note 5) 2,549,076 2,206,227 1,725,173 Portfolio structuring fee (note 5) 588,203 707,589 690,220 Subordinated incentive fee (reversal) (note 5) - 1,789,870 1,092,351 Administrative cost reimbursements (note 5) 680,000 570,667 432,000 Transfer agent cost reimbursements (note 5) 80,000 23,333 - Amortization of deferred offering costs 880,138 556,165 374,115 Professional fees 263,868 145,112 206,631 Directors' fees 68,000 64,500 65,000 Printing and mailing 86,507 58,774 38,992 Other general and administrative 65,292 126,295 123,253 Total operating expenses 5,261,084 6,248,532 4,747,735 Net investment income before taxes 3,468,857 5,630,758 2,230,630 Income tax provision (benefit) - (note 2) - (13,348) 3,431 Net investment income 3,468,857 5,644,106 2,227,199 Realized and unrealized gain (loss) on investments Net realized gain (loss) Non-controlled/non-affiliated investments 1,216,657 1,197,788 2,744,629 Affiliated investments: 583,331 - - Controlled investments - 6,262 (52,856) Total net realized gain (loss) 1,799,988 1,204,050 2,691,773 Net unrealized gain (loss) Non-controlled/non-affiliated investments (12,656,209) (5,474,933) 4,765,578 Affiliated investments (1,534,938) 621,817 613,578 Controlled investments (2,803,250) 890,467 467,683 Total net unrealized gain (loss) (16,994,397) (3,962,649) 5,846,839 Total net realized and unrealized gain (loss) on investments (15,194,409) (2,758,599) 8,538,612 Net increase (decrease) in net assets resulting from operations $ (11,725,552) $ 2,885,507 $ 10,765,811 Net increase (decrease) in net assets resulting from operations per share $ (0.96) $ 0.29 $ 1.45 Weighted average common shares outstanding 12,198,040 9,951,816 7,440,841 The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. F-6 Index to Audited Consolidated Financial Statements MacKenzie Realty Capital, Inc. Consolidated Statements of Changes in Net Assets Year Ended June 30, 2020 2019 2018 Operations Net investment income $ 3,468,857 $ 5,644,106 $ 2,227,199 Net realized gain 1,799,988 1,204,050 2,691,773 Net unrealized gain (loss) (16,994,397) (3,962,649) 5,846,839 Net increase (decrease) in net assets resulting from operations (11,725,552) 2,885,507 10,765,811 Dividends Dividends to stockholders (5,542,591) (7,237,635) (6,759,484) Capital share transactions Issuance of common stock 19,505,452 23,244,171 23,007,310 Issuance of common stock through reinvestment of dividends 2,891,349 3,006,069 2,340,042 Redemption of common stock (3,194,670) (2,368,035) (1,454,120) Selling commissions and fees (1,823,648) (2,010,015) (2,293,765) Net increase in net assets resulting from capital share transactions 17,378,483 21,872,190 21,599,467 Total increase in net assets 110,340 17,520,062 25,605,794 Net assets at beginning of the period 103,115,381 85,595,319 59,989,525 Net assets at end of the period $ 103,225,721 $ 103,115,381 $ 85,595,319 The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. F-7 Index to Audited Consolidated Financial Statements MacKenzie Realty Capital, Inc. Consolidated Statements of Cash Flows Year Ended June 30, 2020 2019 2018 Cash flows from operating activities: Net increase (decrease) in net assets resulting from operations $ (11,725,552) $ 2,885,507 $ 10,765,811 Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash from operating activities: Proceeds from sale of investments, net 8,057,094 57,437,720 43,866,485 Return of capital 31,368,113 19,019,276 17,189,743 Purchase of investments (45,079,613) (107,876,237) (79,216,595) Net realized gain on investments (1,799,988) (1,204,050) (2,691,773) Net unrealized (gain) loss on investments 16,994,397 3,962,649 (5,846,839) Amortization of deferred offering costs 880,138 556,165 374,115 Changes in assets and liabilities: Accounts receivable 2,082,636 2,708,225 (3,637,478) Other assets 41,846 180,875 (185,716) Payment of deferred offering costs (717,839) (709,871) (416,922) Accounts payable and accrued liabilities (80,251) 198,907 (53,507) Income tax payable - (37,153) 37,153 Due to related entities (1,747,621) 658,857 1,219,019 Deferred tax liability - (3,518) (41,845) Net cash from operating activities (1,726,640) (22,222,648) (18,638,349) Cash flows from financing activities: Borrowings on margin loan - - 6,012,413 Payments on margin loan - - (6,012,413) Proceeds from issuance of common stock 19,505,452 23,244,171 23,007,310 Redemption of common stock (3,194,670) (2,368,035) (1,454,120) Dividends to stockholders (4,528,343) (3,793,273) (2,980,634) Payment of selling commissions and fees (1,796,648) (2,045,661) (2,184,880) Change in capital pending acceptance (580,426) 21,865 (1,156,790) Net cash from financing activities 9,405,365 15,059,067 15,230,886 Net increase (decrease) in cash and cash equivalents 7,678,725 (7,163,581) (3,407,463) Cash and cash equivalents at beginning of the period 1,278,668 8,442,249 11,849,712 Cash and cash equivalents at end of the period $ 8,957,393 $ 1,278,668 $ 8,442,249 Non-cash financing activities: Issuance of common stock through reinvestment of dividends $ 2,891,349 $ 3,006,069 $ 2,340,042 The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. F-8 Index to Audited Consolidated Financial Statements MacKenzie Realty Capital, Inc. Notes to Consolidated Financial Statements June 30, 2020 NOTE 1 – PRINCIPAL BUSINESS AND ORGANIZATION MacKenzie Realty Capital, Inc. (the "Parent Company," together with its subsidiary as discussed below, the "Company") was incorporated under the general corporation laws of the State of Maryland on January 25, 2012. It is a non-diversified, closed-end investment company that has elected to be regulated as a business development company ("BDC") under the Investment Company Act of 1940, as amended ("1940 Act"). MacKenzie Realty Capital, Inc. The Parent Company has elected to be treated as a real estate investment trust ("REIT") as defined under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Company is authorized to issue 100,000,000 shares, of which (i) 80,000,000 are designated as Common Stock, with a $0.0001 par value per share; and (ii) 20,000,000 are designated as Preferred Stock, with a $0.0001 par value per share. The Company commenced its operations on February 28, 2013, and its fiscal year-end is June 30. The Parent Company filed its initial registration statement in June 2012 with the Securities and Exchange Commission ("SEC") to register the initial public offering (“IPO”) of 5,000,000 shares of the its common stock. The IPO commenced in January 2014 and concluded in October 2016. The Parent Company filed a second registration statement with the SEC to register a subsequent public offering of 15,000,000 shares of its common stock. The second offering commenced in December 2016 and concluded on October 28, 2019. The Parent Company filed a third registration statement with the SEC to register a public offering of 15,000,000 shares of its common stock that was declared effective by the SEC on October 31, 2019. The third offering commenced shortly thereafter and is continuing. The Parent Company’s wholly owned subsidiary, MRC TRS, Inc., (“TRS”) was incorporated under the general corporation laws of the State of California on February 22, 2016, and operates as a taxable REIT subsidiary. TRS started its operation on January 1, 2017, and the financial statements of TRS have been consolidated with the Parent Company beginning with the year ended June 30, 2017. On December 20, 2017, a wholly owned subsidiary of TRS, MacKenzie NY Real Estate 2 Corp., (“MacKenzie NY 2”), was formed for the purpose of making certain limited investments in New York companies. The financial statements of MacKenzie NY 2 have been consolidated with the Company beginning with the quarter ended March 31, 2018. The Company is externally managed by MacKenzie Capital Management, LP ("MacKenzie") under the administration agreement dated and effective as of February 28, 2013 (the "Administration Agreement"). MacKenzie manages all of the Company's affairs except for providing investment advice. The Company is advised by MCM Advisers, LP (the "Adviser") under the advisory agreement amended and restated effective October 1, 2017, and subsequently amended October 23, 2018 (the "Amended and Restated Investment Advisory Agreement”). The Company pursues a strategy focused on investing primarily in illiquid or non-traded debt and equity securities issued by U.S. companies generally owning commercial real estate. These companies are likely to be non-traded REITs, small-capitalization publicly traded REITs, public and private real estate limited partnerships, limited liability companies, and tenancies-in-common. As of June 30, 2020, the Company has raised approximately $130.04 million from the public offerings, including proceeds from the Company’s dividend reinvestment plan ("DRIP") of approximately $11.16 million. Of the total capital raised as of June 30, 2020, approximately $9.46 million has been redeemed under the Company’s share repurchase program. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Consolidation Policy The accompanying consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-K and Regulation S-X. The Company follows the accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company’s wholly owned consolidated subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. Under the 1940 Act rules, regulations pursuant to Article 6 of Regulation S-X and Topic 946 of the Accounting Standards Codification, as amended (the "ASC"), of the Financial Accounting Standards Board ("FASB"), the Company is precluded from consolidating portfolio company investments, including those in which the Company has a controlling interest, unless the portfolio company is an investment company. An exception to this general principle occurs if the Company owns a controlled operating company whose purpose is to provide services to the Company such as an investment adviser or transfer agent. None of the Company’s investments qualifies for this exception. Therefore, the Company’s portfolio company investments, including those in which the Company has a controlling interest, are carried on the consolidated statements of assets and liabilities at fair value with changes to fair value recognized as “Net Unrealized gain (loss)” on the Consolidated Statements of Operations until the investment is realized, usually upon exit, resulting in any gain or loss on exit being recognized as a realized gain or loss. However, in the event that any controlled subsidiary exceeds the tests of significance set forth in Rules 3-09 or 4-08(g) of Regulation S-X, the Company will include required financial information for such subsidiary in the notes or as an attachment to its consolidated financial statements. F-9 Index to Audited Consolidated Financial Statements Use of Estimates The preparation of consolidated financial statements requires management to make estimates and assumptions that affect reported asset values, liabilities, revenues, expenses and unrealized gains (losses) on investments during the reporting period. Material estimates that are susceptible to change, and actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. These balances are insured by the Federal Deposit Insurance Corporation ("FDIC") up to certain limits. At times the cash balances held in financial institutions by the Company may exceed these insured limits. Cash and cash equivalents are carried at cost which approximates fair value. There were no cash equivalents held as of June 30, 2020, and 2019. Organization and Deferred Offering Costs Organization costs include, among other things, the cost of legal services pertaining to the organization and incorporation of the business, incorporation fees and audit fees relating to the IPO and the initial statement of assets and liabilities. These costs are expensed as incurred. Offering costs include, among other things, legal fees and other costs pertaining to the preparation of the registration statements and pre- and post-effective amendments. Offering costs are capitalized as deferred offering costs as incurred by the Company and subsequently amortized to expense over a twelve-month period. Any deferred offering costs that have not been amortized upon the expiration or earlier termination of an offering will be accelerated and expensed upon such expiration or termination. The offering costs incurred by the Company on the second and third public offering are each limited to $1,650,000 plus the savings realized by the Company to the extent that broker fees incurred are less than 10%. Offering costs incurred in excess of these amounts will be reimbursed by the Adviser as discussed in Note 5. The offering costs incurred in connection with the second public offering through December 31, 2019 and June 30, 2019 were $1,843,071 and $1,685,426, respectively. There were no additional offering costs incurred on the second offering after December 31, 2019 since the offering terminated in October 2019. The offering costs incurred in connection with the third public offering through June 30, 2020 were $560,194. There were no offering costs incurred in connection with the third public offering as of June 30, 2019. These offering costs are deferred and expensed over a twelve-month period beginning from the date the registration was declared effective by the SEC. Since the second public offering concluded in October 2019, $404,273 of the deferred offering costs that had not been amortized as of the conclusion date were fully expensed as of December 31, 2019. Amortization of these deferred costs for the year ended June 30, 2020, 2019 and 2018 were $880,138, $556,165 and $374,115, respectively. Income Taxes and Deferred Tax Liability The Parent Company has elected to be treated as a REIT for tax purposes under the Code and as a REIT, the Parent Company is not subject to federal income taxes on amounts that it distributes to the stockholders, provided that, on an annual basis, it distributes at least 90% of its REIT taxable income to the stockholders and meets certain other conditions. To the extent that the Parent Company satisfies the annual distribution requirement but distributes less than 100% of its taxable income, it is either subject to U.S. federal corporate income tax on its undistributed taxable income or 4% excise tax on catch-up distributions paid in the subsequent year. The Parent Company is also subject to tax on built-in gains it realizes during the first five years following REIT election. TRS is a taxable REIT subsidiary of the Company. Therefore, it is subject to federal and state income taxes. F-10 Index to Audited Consolidated Financial Statements The Parent Company satisfied the annual dividend payment and other REIT requirements for the tax years ended December 31, 2019, 2018 and 2017. Therefore, the Parent Company did not incur any tax expense or excise tax for those years. In addition, for the tax year ended December 31, 2020, The Parent Company intends to pay the requisite dividends to stockholders such that The Parent Company would not pay any income taxes on its income. Therefore, The Parent Company did not record any income tax provisions during the years ended June 30, 2020, 2019, and 2018. The income tax provision (benefit) amounts in the consolidated statements of operation for the years ended June 30, 2019 and 2018, relate to the Parent Company’s built-in gain tax adjustments and TRS’ income tax provisions as follows: Year Ended June 30, 2020 June 30, 2019 June 30, 2018 MacKenzie Realty Capital, Inc - built-in gain tax adjustments $ - $ (13,348) $ (3,292) MRC TRS, Inc - income tax expenses - - 6,723 Total Income Tax Provision (Benefit) $ - $ (13,348) $ 3,431 The built-in gain tax adjustment amounts are the differences between the actual and the estimated tax liabilities on the built-in gains realized during the year. Prior to the effective date of its REIT election, The Parent Company had net unrealized built-in gains of $239,595, for which The Parent Company recorded an estimated tax liability of $95,431 as of December 31, 2013. Accordingly, in each subsequent period, the Parent Company only recorded the difference between the actual and estimated tax on the built-in gains it realized during the year as income tax expense or benefit. All unrealized built-in gains after December 31, 2018 were not taxable as the five-year period following the REIT election date ended on December 31, 2018. Therefore, the remaining deferred tax liabilities of $13,348 on the unrealized built-in gains were reversed as income tax benefit during the year ended June 30, 2019. TRS is subject to corporate federal and state income tax on its taxable income at regular statutory rates. However, for the year ended June 30, 2020 and 2019, TRS did not have any taxable income; therefore, TRS did not record any income tax provisions. For the year ended June 30, 2018, it recorded an income tax provision of $6,723. The Company follows ASC 740, Income Taxes, (“ASC 740”) to account for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to the net unrealized investment gain (losses) on existing investments. In estimating future tax consequences, the Company considers all future events, other than enactments of changes in tax laws or rates. The effect on deferred tax assets and liabilities of a change in tax rates will be recognized as income or expense in the period of enactment. In addition, ASC 740 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the consolidated financial statements. As of June 30, 2020, and 2019, there were no uncertain tax positions. Management’s determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including, but not limited to, an on-going analysis of tax laws, regulations and interpretations thereof. Per share Information Net increase or decrease in net assets resulting from operations per common share is calculated using the weighted average number of common shares outstanding for the periods presented. Subsequent Events Subsequent events are events or transactions that occur after the date of the consolidated statements of assets and liabilities but before the date the consolidated financial statements are available to be issued. Subsequent events that provide additional evidence about conditions that existed at the date of the consolidated statements of assets and liabilities are considered in the preparation of the consolidated financial statements presented herein. Subsequent events that occur after the date of the consolidated statements of assets and liabilities that do not provide evidence about the conditions that existed as of the date of the consolidated statements of net assets are considered for disclosure based upon their significance in relation to the Company's consolidated financial statements taken as a whole. F-11 Index to Audited Consolidated Financial Statements Fair Value of Financial Instruments Fair value estimates are made at discrete points in time based on relevant information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. The Company believes that the carrying amounts of its financial instruments, consisting of cash, accounts receivable, due to affiliates, interest payable to affiliates and other accrued expenses and liabilities approximate the fair values of such items. Revenue Recognition Realized gains or losses on investments are recognized in the period of disposal, distribution, or exchange and are measured by the difference between the proceeds from the sale or distribution and the cost basis (adjusted for return of capital, if any) of the investment. Investments are disposed of on a first-in, first-out basis. Operational dividends or distributions received from portfolio investments are recorded as investment income. Distributions resulting from the sale or refinance of an investee’s underlying assets are evaluated by management and recorded as either investment income or as a reduction of cost basis (return of capital). Management determines the estimated fair value of the investment after the sale or refinance and compares this estimate to the adjusted cost basis of the investment. If the estimated fair value is higher than the adjusted cost basis, distributions are recorded as investment income. If the estimated fair value is lower than the adjusted cost basis, distributions are first recorded as return of capital to reduce the cost basis down to the estimated fair value. Distributions in excess of those recorded as return of capital are recorded as investment income. Interest Income Interest income is derived from the investments in notes and recorded on the accrual basis, which approximates the effective interest method, to the extent amounts are expected to be collected. Accrued interest is evaluated for collectability. When a debt security becomes 90 days or more past due and the Company does not expect the debtor to be able to service all of its debt or other obligations, the debt security will generally be placed on non-accrual status and the Company will cease recognizing interest income on that debt security until the borrower has demonstrated the ability and intent to pay contractual amounts due. If a debt security's status significantly improves with respect to the debtor's ability to service the debt or other obligations, or if a debt security is sold or written off, it will be removed from non-accrual status. As of June 30, 2020 and 2019, the Company did not have any investments that were more than 90 days past due or on non-accrual status. Additionally, the Company is not aware of any material changes to the creditworthiness of the borrowers underlying its debt investments. Dividends and Distributions Dividends (and distributions, if any) to common stockholders are recorded on the ex-dividend date. The amount, if any, to be paid as a quarterly dividend (or distribution, if any) is approved quarterly by the Board of Directors and is generally based upon management's estimate of the Company's earnings for the quarter. Accounts Receivable Accounts receivable represent dividends, distributions and sales proceeds recognized in accordance with our revenue recognition policy but not yet received as of the date of the consolidated financial statements. The amounts are generally fully collectible as they are recognized based on completed transactions. The Company monitors and adjusts its receivables and those deemed to be uncollectible are written-off only after all reasonable collection efforts are exhausted. All accounts receivable outstanding as of June 30, 2020, and 2019, are deemed fully collectible. Capital Pending Acceptance The Company admits new stockholders monthly and subscriptions are effective only upon the Company's acceptance. Any gross proceeds received from subscriptions which are not accepted as of the period-end are classified as capital pending acceptance in the consolidated statements of assets and liabilities. As of June 30, 2020 and 2019, capital pending acceptance were $87,739 and $668,165, respectively. F-12 Index to Audited Consolidated Financial Statements Recent Accounting Pronouncements: In August 2018, the FASB issued guidance which changes the fair value disclosure requirements. The new guidance includes new, eliminated and modified fair value disclosures. Among other requirements, the guidance requires disclosure of the range and weighted average of the significant unobservable inputs for Level 3 fair value measurements and the way they are calculated. The guidance also eliminated the following disclosures: (1) amount and reason for transfers between Level I and Level II, (2) policy for timing of transfers between levels of the fair value hierarchy and (3) valuation processes for Level 3 fair value measurement. The guidance is effective for all entities for fiscal years commencing after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted upon issuance of the guidance. The adoption of this guidance is not expected to have a material effect on the Company’s consolidated financial statements. In May 2020, the SEC adopted rules Release No. 33-10786 (the "SEC Release"), Amendments to Financial Disclosures about Acquired and Disposed Businesses , amending Rule 1-02(w)(2) used in the determination of a significant subsidiary. In part, the SEC Release eliminated the use of the asset test, and amended the income and investment tests for determining whether an unconsolidated subsidiary requires additional disclosure in the footnotes of the financial statements. The SEC Release is effective January 1, 2021, and early adoption is permitted. The adoption of the SEC Release on the Company’s consolidated financial statements is not expected to be material. Valuation of Investments The Company's consolidated financial statements include investments that are measured at their estimated fair values in accordance with GAAP. A fair value measurement represents the price at which an orderly transaction would occur between willing market participants at the measurement date. The Company develops fair values for investments based on available inputs which could include pricing that is observed in the marketplace. Examples of market information that the Company attempts to obtain include the following: • Recently quoted trading prices for the same or similar securities; • Recent purchase prices paid for the same or similar securities; • Recent sale prices received for the same or similar securities; • Relevant reports issued by industry analysts and publications; and • Other relevant observable and unobservable inputs, including liquidity discounts. After considering all available indications of the appropriate rate of return that market participants would require, the Company considers the reasonableness of the range indicated by the results to determine an estimate that, in its opinion, is most representative of fair value. The real estate securities in which the Company invests are, due to the absence of an efficient market, generally illiquid. Establishing fair values for illiquid investments is inherently subjective and is often dependent upon significant estimates and modeling assumptions. If either the volume and/or level of trading activity for an investment has significantly changed from normal market conditions, or price quotations or observable inputs are not associated with orderly transactions, the market inputs used might not be relevant. For example, recently quoted trading prices might not be relevant if a ready market does not exist for the quantity of investments that the Company may wish to sell. In circumstances where relevant market inputs cannot be obtained, increased analysis and management judgment are required to estimate fair value. This generally requires the Company to establish the use of internal assumptions about future cash flows, including the cash flows of underlying real property, and appropriate risk-adjusted discount rates. Regardless of the valuation inputs used, the objective of fair value measurement is unchanged from what it would be if markets were operating at normal activity levels and/or transactions were orderly; that is, to determine the current exit price. The Company is under no compulsion to dispose of its investments, and expects to hold them for a substantial period of time. Therefore, estimated values as determined above may not reflect amounts that could be realized upon actual sale at a future date. F-13 Index to Audited Consolidated Financial Statements Fair Value Measurements GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observables used in measuring investments at fair value. Market price is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available actively quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observables and a lesser degree of judgment used in measuring fair value. Investments measured and reported at fair value are classified and disclosed in one of the following categories: Level I – Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded equity securities. The Company does not adjust the quoted price for these investments even in situations where the Company holds a large position and a sale could reasonably impact the quoted price. Level II – Price inputs are quoted prices for similar financial instruments in active markets; quoted prices for identical or similar financial instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets. Investments which are generally included in this category are publicly traded equity securities with restrictions. Level III – Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair values for these investments are estimated by management using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, financial condition, and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant judgment by management. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had an active market for these investments existed. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Management's assessment of the significance of a particular input to the fair value measurement, in its entirety, requires judgment and considers factors specific to the investment. NOTE 3 –INVESTMENTS The following table summarizes the composition of the Company's investments at cost and fair value as of June 30, 2020 and 2019: June 30, 2020 June 30, 2019 Asset Type Cost Fair Value Cost Fair Value Publicly Traded Companies $ 8,454,348 $ 7,244,654 $ 2,186,682 $ 2,151,006 Non Traded Companies 42,474,614 32,808,076 33,844,099 35,641,290 LP Interests 53,713,785 53,618,425 61,157,573 65,413,799 Investment Trust 49,901 33,990 49,901 39,053 Total $ 104,692,648 $ 93,705,145 $ 97,238,255 $ 103,245,148 F-14 Index to Audited Consolidated Financial Statements The following table presents fair value measurements of the Company's investments measured at fair value on a recurring basis as of June 30, 2020, according to the fair value hierarchy: Asset Type Total Level I Level II Level III Publicly Traded Companies $ 7,244,654 $ 7,244,654 $ - $ - Non Traded Companies 32,808,076 - - 32,808,076 LP Interests 53,618,425 - - 53,618,425 Investment Trust 33,990 - - 33,990 Total $ 93,705,145 $ 7,244,654 $ - $ 86,460,491 The following table presents fair value measurements of the Company's investments measured at fair value on a recurring basis as of June 30, 2019, according to the fair value hierarchy: Asset Type Total Level I Level II Level III Publicly Traded Companies $ 2,151,006 $ 2,151,006 $ - $ - Non Traded Companies 35,641,290 - - 35,641,290 LP Interests 65,413,799 - - 65,413,799 Investment Trust 39,053 - - 39,053 Total $ 103,245,148 $ 2,151,006 $ - $ 101,094,142 The following is a reconciliation of the beginning and ending balances for investments measured at fair value on a recurring basis using significant unobservable inputs (Level III) for the year ended June 30, 2020: Balance at July 1, 2019 $ 101,094,142 Purchases of investments 35,586,486 Proceeds from sales, net (3,639,699) Return of capital (31,368,114) Net realized gains 608,053 Net unrealized losses (15,820,377) Ending balance at June 30, 2020 $ 86,460,491 The following is a reconciliation of the beginning and ending balances for investments measured at fair value on a recurring basis using significant unobservable inputs (Level III) for the year ended June 30, 2019: Balance at July 1, 2018 $ 67,923,423 Purchases of investments 76,131,760 Transfers from Level III to Level I (1,991,230) Proceeds from sales, net (21,260,960) Return of capital (19,019,275) Net realized gains 3,229,130 Net unrealized losses (3,918,706) Ending balance at June 30, 2019 $ 101,094,142 The transfers from Level III to Level I category during the year ended June 30, 2020, relates to changes in tradability of the securities in an active market due to two of the Company's investments converting from non-traded REIT shares to publicly traded REIT shares. Transfers are assumed to have occurred at the beginning of the year. For the year ended June 30, 2020, changes in unrealized loss included in earnings relating to Level III investments still held at June 30, 2020, was $12,445,631. For the year ended June 30, 2019, changes in unrealized loss included in earnings relating to Level III investments still held at June 30, 2019, was $2,008,334. F-15 Index to Audited Consolidated Financial Statements The following table shows quantitative information about significant unobservable inputs related to the Level III fair value measurements used at June 30, 2020: Asset Type Fair Value Primary Valuation Techniques Unobservable Inputs Used Range Wt. Average Non Traded Companies $ 541,858 Direct Capitalization Method Capitalization rate 6.5% - 7.6% 7.5% Liquidity discount 32.0% - 35.0% 32.1% Non Traded Companies 65,856 Estimated Liquidation Value Sponsor provided value Liquidity discount 12.0% - 78.0% 45.1% Non Traded Companies 32,200,362 Market Activity Secondary market industry publication Liquidity discount * 7.5% - 12.5% 7.6% LP Interests 24,974,379 Direct Capitalization Method Capitalization rate 3.4% - 6.8% 5.2% Liquidity discount 5.0% - 40.0% 15.5% LP Interests 14,976,861 Discounted Cash Flow Discount rate 9.0% - 20.0% 11.6% Discount term (months) 6.0 - 9.0 7.1 LP Interests 11,724,322 Estimated Liquidation Value Sponsor provided value Underlying property sales contract Underlying property appraisal Liquidity discount 19.0% - 43.0% 41.5% LP Interests 1,942,863 Market Activity Underlying security sales contract Secondary market industry publication Contributed capital Investment Trust 33,990 Market Activity Underlying security sales contract $ 86,460,491 * In the past years, the Company valued Level III investments primarily by reference to secondary market activities. However, due to the COVID-19 pandemic, secondary market activities significantly declined during the second quarter of 2020. While the most active of these securities had transactions reported based on new COVID-19 occupancy and financial information, two of the Level III investments only had earlier reported transactions. Therefore, to determine the fair values of these non-traded securities as of June 30, 2020, management reviewed and evaluated multiple data sources as part of management’s Level III valuation process and applied significant subjective judgment about the effects of overall market declines during times of economic turmoil to arrive at these valuations. Impact of COVID-19 Pandemic The COVID-19 pandemic has adversely impacted the fair value of our investments as of June 30, 2020, and the values assigned as of this date may differ materially from the values that we may ultimately realize with respect to our investments. The impact of the COVID-19 pandemic may not yet be fully reflected in the valuation of our investments as our valuations, and particularly valuations of private investments and private companies, are inherently uncertain, may fluctuate over short periods of time and are often based on estimates, comparisons and qualitative evaluations of private information that is often from a time period earlier, generally two to three months, than the quarter for which we are reporting. Additionally, we may not have yet received information or certifications from our portfolio companies that indicate any or the full extent of declining performance or non-compliance with debt covenants, as applicable, as a result of the COVID-19 pandemic. As a result, our valuations at June 30, 2020 may not show the complete or continuing impact of the COVID-19 pandemic and the resulting measures taken in response thereto. In addition, write downs in the value of our investments have reduced, and any additional write downs may further reduce, our net asset value. Accordingly, we may continue to incur additional net unrealized losses or may incur realized losses after June 30, 2020, which could have a material adverse effect on our business, financial condition and results of operations. F-16 Index to Audited Consolidated Financial Statements The following table shows quantitative information about significant unobservable inputs related to the Level III fair value measurements used at June 30, 2019: Asset Type Fair Value Primary Valuation Techniques Unobservable Inputs Used Range Wt. Average Non Traded Companies $ 1,010,852 Direct Capitalization Method Capitalization rate 6.3% - 6.9% 6.9% Liquidity discount 19.0% - 34.0% 20.7% Non Traded Companies 670,801 Discounted Cash Flow Discount rate 24.0% Discount term (months) 28.0 Non Traded Companies 107,660 Estimated Liquidation Value Sponsor provided value Liquidity discount 12.0% - 70.0% 23.5% Non Traded Companies 33,851,977 Market Activity Secondary market industry publication LP Interests 26,798,895 Direct Capitalization Method Capitalization rate 4.2% - 7.3% 5.3% Liquidity discount 19.0% - 25.0% 19.4% LP Interests 27,636,406 Discounted Cash Flow Discount rate 15.0% - 30.0% 17.8% Discount term (months) 18.0 - 24.0 19.4 LP Interests 250,178 Estimated Liquidation Value Sponsor provided value Underlying contracted agreement Liquidity discount 19.0% - 34.0% 33.2% LP Interests 10,728,320 Market Activity Acquisition Cost Book value of underlying loans Liquidity discount 19.0% - 30.0% 19.4% Investment Trust 39,053 Direct Capitalization Method Capitalization rate 6.0% Liquidity discount 25.0% $ 101,094,142 Unconsolidated Significant Subsidiaries Our investments are generally in small and mid-sized companies in a variety of industries. In accordance with Rules 3-09 and 4-08(g) of Regulation S-X, we must determine which of our unconsolidated controlled investments are considered “significant subsidiaries,” if any. In evaluating these investments, there are three tests utilized to determine if any of our controlled investments are considered significant subsidiaries: the investment test, the asset test, and the income test. Rule 3-09 of Regulation S-X requires separate audited financial statements for any unconsolidated majority-owned subsidiary in an annual report if any of the three tests exceed 20%. Rule 4-08(g) of Regulation S-X requires summarized financial information in an annual report if any of the three tests exceeds 10%. As of June 30, 2020, and 2019, none of our investments was considered a significant subsidiary under Rule 3-09 and 4-08(g) with the exception of MacKenzie Realty Operating Partnership, LP, which was determined to be a significant subsidiary under the asset test as the partnership’s total assets exceeded 20% of the Company’s total assets as of June 30, 2020. Under the Rule 3-09, separate audited financial statements are required to be included in the Company’s annual report. However, as disclosed below under Note 5, the partnership was formed in May 2020 and its fiscal year does not end until December 31, 2020. Therefore, separate audited financial statements of this partnership for its year ended December 31, 2020 will be included in the Company’s annual report for the fiscal year ended June 30, 2021. The summarized financial information of the partnership as of June 30, 2020 is as follows: Total Assets $ 45,517,060 Total Liabilities $ 25,792,551 Total Equity $ 19,724,509 NOTE 4—MARGIN LOANS The Fund has a brokerage account through which it buys and sells publicly traded securities. The provisions of the account allow the Company to borrow on certain securities held in the account. Amounts borrowed are collateralized by the securities held in the account and bear interest at a negotiated rate payable monthly. Securities pledged to secure margin balances cannot be specifically identified as a portion of all securities held in a brokerage account are used as collateral. As of June 30, 2020, the Company had $2,655,155 of margin credit available for cash withdrawal or the ability to purchase up to $18,770,519 in additional publicly traded securities. As of June 30, 2019, the Company had $18,126 of margin credit available for cash withdrawal or the ability to purchase up to $60,419 in additional publicly traded securities. As of June 30, 2020, and 2019, there was no loan outstanding under this short-term credit line. F-17 Index to Audited Consolidated Financial Statements NOTE 5 –RELATED PARTY TRANSACTIONS Amended and Restated Investment Advisory Agreement : Under the Amended and Restated Investment Advisory Agreement, the Company will pay the Adviser a fee for its services consisting of three components — a portfolio structuring fee, a base management fee, and a subordinated incentive fee. The portfolio structuring fee is for the Adviser's initial work performed in identifying, evaluating and structuring the acquisition of assets. The fee equals 3.0% of the gross invested capital (“Gross Invested Capital”), which equals the number of shares issued, multiplied by the offering price of the shares sold ($10.00, regardless of whether or not shares were issued with volume or commission discounts), plus any borrowed funds. These services are performed on an ongoing basis in anticipation of deploying new capital, generally within 15 days of the receipt of capital. Therefore, this fee is expensed in the period the capital is accepted. The base management fee is calculated based on the Company's Gross Invested Capital plus any borrowing for investment purposes. The base management fees range from 1.5% to 3.0%, depending on the level of Gross Invested Capital. The subordinated incentive fee has two parts—income and capital gains. The incentive fee components (other than during liquidation) are designed so that neither the income incentive fee nor the capital gains incentive fee is payable to the Adviser unless our stockholders have first received dividends at a rate of at least 7.0% per annum for the relevant measurement period (a fiscal quarter, for the income incentive fee; a fiscal year, for the capital gains incentive fee). The income incentive fee (the “Income Fee”) is calculated and payable quarterly in arrears as follows: (i) the sum of preliminary net investment income for each fiscal quarter since the effective date of the Amended and Restated Investment Advisory Agreement (October 1, 2017) exceeding 7% of the “Contributed Capital” (which equals the number of shares issued multiplied by the maximum public offering price at the time such shares were sold, regardless of whether or not shares were issued with volume or commission discounts or through the DRIP, as such amount is computed from time to time) on an annualized basis up to 8.75% of Contributed Capital; and (ii) 20.0% of our preliminary net investment income for each fiscal quarter after the effective date exceeding 8.75% of Contributed Capital at an annualized rate; minus (iii) the sum of all previously paid income incentive fees since the effective date, plus (iv) any incremental income incentive fee payable resulting from the reanalysis after calculation of the capital gains incentive fee. The capital gains incentive fee (the “Capital Gains Fee”) is calculated and payable in arrears as of the end of each fiscal year as follows: (i) the sum of all "capital gains" (calculated as net realized capital gains less unrealized capital depreciation) for each fiscal year after the effective date exceeding 7% of the Contributed Capital on an annualized basis up to 8.75% of Contributed Capital, which thresholds are reduced by (but not below zero) the cumulative preliminary net investment income for each fiscal quarter since the effective date (or, increased, in the case of negative cumulative preliminary net investment income); and (ii) 20.0% of all capital gains for each fiscal quarter after the effective date exceeding 8.75% of Contributed Capital at an annualized rate, which threshold is reduced by (but not below zero) the cumulative preliminary net investment income for each fiscal quarter since the effective date (or, increased, in the case of negative cumulative preliminary net investment income); minus (iii) the sum of all previously paid income incentive fees since the effective date and prior to the end of such fiscal year; less (iv) the aggregate amount of all capital gains incentive fees paid in prior fiscal years ending after the effective date. To the extent that such calculation would result in a capital gains incentive fee that exceeds 20% of all realized capital gains for the measurement period, the capital gains incentive fee shall be capped so that under no circumstance does it exceed 20% of the realized capital gains for the measurement period. The portfolio structuring fees for the years ended June 30, 2020, 2019, and 2018 were $588,203, $707,589 and $690,220, respectively. F-18 Index to Audited Consolidated Financial Statements The base management fee is calculated on a quarterly basis at the end of each quarter based on the quarter ended Gross Invested Capital and is payable in arrears. The base management fees for the years ended June 30, 2020, 2019, and 2018, were $2,549,076, $2,206,227 and $1,725,173, respectively. These base management fees were based on the following quarter ended Gross Invested Capital segregated in three columns based on the fee annual percentages: Base Management Fee Annual % 3.0% 2.0% 1.5% Total Gross Invested Capital For the Year Ended June 30, 2020 Quarter ended: September 30, 2019 $ 20,000,000 $ 80,000,000 $ 15,998,789 $ 115,998,789 December 31, 2019 20,000,000 80,000,000 21,409,289 121,409,289 March 30, 2020 20,000,000 80,000,000 27,070,974 127,070,974 June 30, 2020 20,000,000 80,000,000 28,607,752 128,607,752 For the Year Ended June 30, 2019 Quarter ended: September 30, 2018 $ 20,000,000 $ 72,435,844 $ - $ 92,435,844 December 31, 2018 20,000,000 78,322,307 - 98,322,307 March 31, 2019 20,000,000 80,000,000 4,719,872 104,719,872 June 30, 2019 20,000,000 80,000,000 9,263,200 109,263,200 For the Year Ended June 30, 2018 Quarter ended: September 30, 2017 $ 20,000,000 $ 47,783,337 $ - $ 67,783,337 December 31, 2017 20,000,000 53,814,885 - 73,814,885 March 31, 2018 20,000,000 58,474,911 - 78,474,911 June 30, 2018 20,000,000 64,961,416 - 84,961,416 For the year ended June 30, 2020, the Company neither incurred the Capital Gains Fee nor the Income Fee. For the year ended June 30, 2019, the Company incurred $1,789,870 of the Capital Gains Fee; however, did not incur the Income Fee. For the year ended June 30, 2018, the Company incurred $277,691 of the Income Fee and $814,660 of the Capital Gains Fee. Organization and Offering Costs Reimbursement: As provided in the Amended and Restated Investment Advisory Agreement and the prospectus of the Company, offering costs incurred and paid by the Company in excess of $1,650,000 each on the second and third public offering will be reimbursed by the Adviser except to the extent that 10% in broker fees are not incurred (the “broker savings”). In such case, the broker savings will be available to be paid by the Company for marketing expenses or other non‑cash compensation. As of the offering conclusion date, the broker savings was $399,793 on the second public offering. Accordingly, second offering costs in excess of $2,049,793 were reimbursable by the Adviser to the Company. The cumulative offering costs incurred in connection with the second public offering as of December 31, and June 30, 2019 were $1,843,071 and $1,685,426, respectively, both of which were below the reimbursement threshold of $2,049,793. There were no additional offering costs incurred on the second offering after December 31, 2019. Total offering costs incurred on the third public offering as of June 30, 2020, were $560,194, which was also below the reimbursement threshold. Therefore, there were no amounts reimbursable from the Adviser as of June 30, 2020 and June 30, 2019 on account of either public offering. Of the cumulative offering costs incurred on the second public offering by the Company as of December 31, 2019, MacKenzie had paid on behalf of the Company a total of $932,780, all of which was fully reimbursed to MacKenzie as of December 31, 2019. As of June 30, 2019, MacKenzie had paid on behalf of the Company a total of $788,057, of which $116,115 was payable to MacKenzie as of June 30, 2019 and was included as a part of due to related entities in the consolidated statements of assets and liabilities as of June 30, 2019. F-19 Index to Audited Consolidated Financial Statements Of the cumulative offering costs incurred on the third public offering by the Company as of June 30, 2020, MacKenzie had paid on behalf of the Company a total of $300,212, of which $52,492 was payable to MacKenzie as of June 30, 2020 and was included as a part of due to related entities in the consolidated statements of assets and liabilities as of June 30, 2020. During the year ended June 30, 2020, 2019 and 2018, total offering costs paid by MacKenzie on behalf of the Company on its second and third public offerings were $444,935, $550,908, and $237,149, respectively. Administration Agreement: Under the Administration Agreement, the Company reimburses MacKenzie for its allocable portion of overhead and other expenses it incurs in performing its obligations under the Administration Agreement, including furnishing the Company with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities, as well as providing the Company with other administrative services, subject to the Independent Directors' approval. In addition, the Company reimburses MacKenzie for the fees and expenses associated with performing compliance functions, and its allocable portion of the compensation of the Company's Chief Financial Officer, Chief Compliance Officer, Director of Accounting and Financial Reporting, and any administrative support staff. Effective November 1, 2018, transfer agent services are also provided by MacKenzie in-house and the costs incurred by MacKenzie in providing the services are reimbursed by the Company. No fee (only cost reimbursement) is being paid by the Company to MacKenzie for this service. The administrative cost reimbursements for the years ended June 30, 2020, 2019, and 2018, were $680,000, $570,667 and $432,000, respectively. Transfer agent services cost reimbursements for the year ended June 30, 2020 and 2019 were $80,000 and $23,333. The table below outlines the related party expenses incurred for the years ended June 30, 2020, 2019, and 2018, and unpaid as of June 30, 2020, and 2019. Incurred For The Year Ended Unpaid as of Types and Recipient June 30, 2020 June 30, 2019 June 30, 2018 June 30, 2020 June 30, 2019 Base Management fees- the Adviser $ 2,549,076 $ 2,206,227 $ 1,725,173 $ 657,280 $ 584,737 Portfolio Structuring fee- the Adviser 588,203 707,589 690,220 - - Subordinated Incentive fee - the Adviser - 1,789,870 1,092,351 - 1,789,870 Administrative Cost Reimbursements- MacKenzie 680,000 570,667 432,000 - - Transfer agent cost reimbursements - MacKenzie 80,000 23,333 - - (30,000) (3) Organization & Offering Cost (2) - MacKenzie 444,935 550,908 237,149 52,492 116,115 Other expenses (1) - MacKenzie 8,492 5,163 Due to related entities $ 718,264 $ 2,465,885 (1) Expenses paid by MacKenzie to third parties on behalf of the Company to be reimbursed. (2) Offering costs paid by MacKenzie- discussed in Note 5 under organization and offering costs reimbursements. These are amortized over twelve-month period as discussed in Note 2. (3) Transfer agent cost reimbursements for the period of November 1, 2018 through March 14, 2019 that MacKenzie refunded in July 2019. F-20 Index to Audited Consolidated Financial Statements Controlled or Affiliated Investments : Under the 1940 Act, the Company generally is deemed to be an “affiliated person” of a portfolio company if it owns 5% or more of the portfolio company’s voting securities and generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of June 30, 2020, the Company is deemed to be either “affiliated” with, or in “control” of, the below portfolio companies despite the fact that the Company does not have the power to exercise control over the management or policies of these portfolio companies. June 30, 2020: Name of issuer and title of issue Fair Value at June 30, 2019 Gross Additions Transfers Gross Reductions (1) Net Realized Gains (losses) Net Change in Unrealized Gains/(Losses) Fair Value at June 30, 2020 Interest/Dividend/Other income Year Ended June 30, 2020 Affiliated Investments: 5210 Fountaingate, LP $ 552,693 $ - $ - $ - $ - $ (126,897 ) $ 425,796 $ - Arrowpoint Burlington LLC 1,088,910 - - (1,333,331 ) 583,331 (338,910 ) - - BP3 Affiliate, LLC 1,350,000 318,000 - - - - 1,668,000 - BR Desota Investment Co, LLC 4,250,000 - - (4,250,000 ) - - - 46,623 BR Everwood Investment Co, LLC - 3,750,000 - - - - 3,750,000 479,871 BR Quinn35 Investment Co, LLC 4,000,000 - - (4,000,000 ) - - - 167,768 BR Sunrise Parc Investment Co, LLC - 2,720,911 - - - - 2,720,911 253,410 BR Westerly Investment Co, LLC - 4,120,667 - (4,120,667 ) - - - - FSP Energy Tower I Corp. Liquidating Trust 57,566 - - (49,637 ) - 1,881 9,810 37,438 FSP Satellite Place 712,585 41,693 - - - (221,699 ) 532,579 - Lakemont Partners, LLC 1,007,700 - - (58,820 ) - (91,720 ) 857,160 26,135 MPF Pacific Gateway - Class B 7,316 - - - - (152 ) 7,164 - Secured Income, LP 302,009 - - - - (40,095 ) 261,914 - Summit Healthcare REIT, Inc. 2,587,408 4,488 - - - (717,346 ) 1,874,550 - $ 15,916,187 $ 10,955,759 $ - $ (13,812,455 ) $ 583,331 $ (1,534,938 ) $ 12,107,884 $ 1,011,245 Controlled Investments: Addison NC, LLC $ 3,600,000 $ - $ (2,000,000 ) $ - $ - $ (1,600,000 ) $ - $ - Addison Property Member, LLC 7,314,855 - (7,316,326 ) - - 1,471 - 1,176,187 Bishop Berkeley, LLC 4,051,013 - - - - (196,790 ) 3,854,223 69,034 Britannia Preferred Members, LLC -Class 1 2,986,550 - - - - 519,400 3,505,950 - Britannia Preferred Members, LLC -Class 2 7,758,915 - - - - (669,316 ) 7,089,599 - Capitol Hill Partners, LLC 1,852,500 - - - - (383,800 ) 1,468,700 - Citrus Park Hotel Holdings, LLC - 5,000,000 - - - - 5,000,000 287,500 Coastal Realty Business Trust, REEP, Inc. - A 39,053 - - - - (5,063 ) 33,990 - Dimensions28 LLP 10,886,076 - - - - 63,612 10,949,688 485,321 MacKenzie Realty Operating Partnership, LP - 2,829,579 9,316,326 - - (532,764 ) 11,613,141 - Sunlit Holdings, LLC - 5,000,000 - (5,000,000 ) - - - 334,111 $ 38,488,962 $ 12,829,579 $ - $ (5,000,000 ) $ - $ (2,803,250 ) $ 43,515,291 $ 2,352,153 June 30, 2019: Name of issuer and title of issue Fair Value at June 30, 2018 Gross Additions Gross Reductions (1) Net Realized Gains (losses) Net Change in Unrealized Gains/(Losses) Fair Value at June 30, 2019 Interest/Dividend/Other income Year Ended June 30, 2019 Affiliated Investments: 5210 Fountaingate, LP $ 555,728 $ - $ - $ - $ (3,035 ) $ 552,693 $ 18,124 Arrowpoint Burlington LLC 869,072 - - - 219,838 1,088,910 83,333 BP3 Affliliate, LLC - 1,350,000 - - - 1,350,000 - BR Desota Investment Co, LLC - 4,250,000 - - - 4,250,000 205,560 BR Quinn35 Investment Co, LLC - 4,000,000 - - - 4,000,000 69,056 FSP Energy Tower I Corp. Liquidating Trust 301,373 415,374 (661,307 ) - 2,126 57,566 1,080,192 FSP Satellite Place 499,140 151,169 - - 62,276 712,585 - Lakemont Partners, LLC - 1,000,000 - - 7,700 1,007,700 4,381 MPF Pacific Gateway - Class B 6,613 - - - 703 7,316 - Secured Income, LP 320,763 - - - (18,754 ) 302,009 - Summit Healthcare REIT, Inc. 2,043,379 193,066 - - 350,963 2,587,408 88,683 $ 4,596,068 $ 11,359,609 $ (661,307 ) $ - $ 621,817 $ 15,916,187 $ 1,549,329 Controlled Investments: Addison NC, LLC $ 3,000,000 $ - $ - $ - $ 600,000 $ 3,600,000 $ - Addison Property Member, LLC - 7,316,326 - - (1,471 ) 7,314,855 598,191 Bandon PV Holdings, LLC - 5,250,000 (5,256,262 ) 6,262 - - 173,390 Bishop Berkeley, LLC - 4,050,000 - - 1,013 4,051,013 23,011 BR Gate Investment Co, LLC - 3,475,000 (3,475,000 ) - - - - Britannia Preferred Members, LLC -Class 1 - 2,597,000 - - 389,550 2,986,550 - Britannia Preferred Members, LLC -Class 2 2,547,000 5,326,932 - - (115,017 ) 7,758,915 - Capitol Hill Partners, LLC 1,919,000 - - - (66,500 ) 1,852,500 - Coastal Realty Business Trust, REEP, Inc. - A 41,222 - - - (2,169 ) 39,053 - Dimensions28 LLP - 10,801,015 - - 85,061 10,886,076 165,600 $ 7,507,222 $ 38,816,273 $ (8,731,262 ) $ 6,262 $ 890,467 $ 38,488,962 $ 960,192 (1) Gross reductions include sales proceeds and return of capital distributions. F-21 Index to Audited Consolidated Financial Statements Of the investments listed above, the Company (or its affiliates) has the power to exercise control over the management or policies of the portfolio companies listed below: Coastal Realty Business Trust ("CRBT"): CRBT is a Nevada business trust whose trustee is MacKenzie. Each series of the trust has its own beneficiaries and own assets. The Company owns the following two series of CRBT and is the only beneficiary of such series. Under the terms of the agreement, there are no redemption rights to any of the series participants. • CRBT, REEP, Inc.-A has an ownership interest in one of three general partners of a limited partnership which owns one multi-family property located in Frederick, Maryland. MacKenzie Realty Operating Partnership, LP (the “OP”): On May 20, 2020, the Company formed an operating partnership, MacKenzie Realty Operating Partnership, LP (the “OP”). Prior to the formation of the OP, the Company had preferred equity interests in Addison NC, LLC (“Addison NC”) and Addison Property Member, LLC (“Addison Member”). Both companies had ownership interests in Addison Property Owner, LLC (“Property Owner”), which owned an office and industrial development real estate property called Addison Corporate Center. On June 8, 2020, the Company and the OP entered into and closed on a Contribution Agreement with Addison Member, Addison NC, the managing members and other affiliates of these two entities (collectively referred to as the “Addison Group”) whereby the Addison Group and the Company agreed to contribute all of their interests in Property Owner to the OP in exchange for partnership Units in the OP (“OP Units”). At closing, the OP issued 516,144 of Class A OP units to the Addison Group. At closing, the Company also contributed $1,555,861 in cash to the OP, of which $1,311,458 was directly paid to the lender to pay down principal, fees, and reserve deposits in order to secure an extension of Property Owner’s $24.4 million existing mortgage debt (the “Loan”) for up to 2 years, and pursuant to which the lender agreed to the assignment of the membership interests in Property Owner to the OP and to have the Company be the replacement guarantor of the recourse obligations under the Loan. The Loan is secured by the properties owned by Property Owner. In exchange for the cash contributed to the OP and the contribution of the Company’s previously owned indirect equity interest in the Property Owner to the OP, the Company received 1,451,642.63 Class B units in the OP. At closing, the parties also entered into the Agreement of Limited Partnership of the OP that provides for redemption rights for the contributors (and its permitted transferees) to redeem the Class A OP Units for cash or shares of the Company, at the Company’s election. The OP Units will also receive distributions at the same rate paid to holders of the Company’s common stock. MPF Pacific Gateway: MPF Pacific Gateway, which is managed by MacKenzie, is a holding company that owns an investment in a REIT Liquidating Trust. The Company has a 15.82% ownership interest in MPF Pacific Gateway. NOTE 6 – DEBT GUARANTY On June 8, 2020, as part of the Contribution Agreement discussed above under Note 5, the Company replaced as the loan guarantor and the maturity date of the Loan was extended to April 30, 2021, with an option to further extend the maturity date to April 30, 2022. Under the Loan Modification Agreement and Replacement Guaranty, the Company guaranteed only the “Recourse Obligations” under the Loan, typically referred to as “Bad Boy Acts” (such as fraud, intentional misrepresentation, willful misconduct, waste, conversion, intentional failure to pay taxes or maintain insurance, filing for bankruptcy, etc.). As of June 30, 2020, the Company has not recorded any debt guaranty obligation since the borrower, Property Owner, was current on the Loan payments and has sufficient cash flow to meet its monthly payments and there have been no inappropriate actions that would give rise to a guaranty obligation. In addition, the appraised value of the collateral was higher than the loan balance of $24.4 million as of June 30, 2020. F-22 Index to Audited Consolidated Financial Statements NOTE 7 – FINANCIAL HIGHLIGHTS The following is a schedule of financial highlights of the Company for the years ended June 30, 2020, 2019, 2018, 2017 and 2016. For The Year Ended June 30, 2020 June 30, 2019 June 30, 2018 June 30, 2017 June 30, 2016 Per Share Data: Beginning net asset value ("NAV") $ 9.44 $ 10.07 $ 9.84 $ 9.94 $ 10.18 Net investment income (1) 0.28 0.57 0.30 0.33 0.26 Net realized gain (1) 0.15 0.12 0.36 0.31 0.91 Net unrealized gain (loss) (1) (1.39 ) (0.40 ) 0.79 0.39 (0.01 ) Net increase in net assets resulting from operations (0.96 ) 0.29 1.45 1.03 1.16 Issuance of common stock above (below) NAV (1) (4) - (0.21 ) (0.32 ) (0.37 ) (0.68 ) Redemption of common stock below NAV (1) (6) 0.01 0.02 0.01 0.02 0.05 Dividends to stockholders (1) (5) (0.45 ) (0.73 ) (0.91 ) (0.78 ) (0.77 ) Ending NAV $ 8.04 $ 9.44 $ 10.07 $ 9.84 $ 9.94 Weighted average common Shares outstanding 12,198,040 9,951,816 7,440,841 5,183,166 3,073,448 Shares outstanding at the end of period 12,836,608 10,926,320 8,496,142 6,096,773 4,057,319 Net assets at the end of period $ 103,225,721 $ 103,115,381 $ 85,595,319 $ 59,989,525 $ 40,332,191 Average net assets (2) $ 103,170,551 $ 94,355,350 $ 72,792,422 $ 50,160,858 $ 31,346,210 Ratios to average net assets Total expenses 5.10 % 6.62 % 6.52 % 6.05 % 5.83 % Net investment income 3.36 % 5.98 % 3.06 % 3.46 % 2.58 % Total rate of return (2) (3) (11.37 )% 3.06 % 14.79 % 10.67 % 11.49 % (1) Based on weighted average number of shares of common stock outstanding for the period. (2) Average net assets were derived from the beginning and ending period-end net assets. (3) Total return is based on the net increase (decrease) in net assets resulting from operations divided by average net assets. An individual stockholder’s return may vary from this return based on the time of capital transactions. (4) Net of sales commissions and dealer manager fees of $1.00 per share as of October 30, 2019 and $1.03 per share thereafter. (5) Dividends are determined based on taxable income calculated in accordance with income tax regulations which may differ from amounts determined under GAAP. (6) Amounts based on differences between the actual redemption price and the NAVs preceding the redemptions. NOTE 8 – SHARE OFFERINGS AND FEES During the year ended June 30, 2020, the Company issued 1,943,646 shares with gross proceeds of $19,505,452, under the current offering and issued 317,840 shares under the Company's dividend reinvestment plan ("DRIP") with gross proceeds of $2,891,349. For the year ended June 30, 2020, the Company incurred selling commissions and fees of $1,823,648. No selling commissions and fees were incurred for the shares issued under the DRIP. During the year ended June 30, 2019, the Company issued 2,359,285 shares with gross proceeds of $23,244,171, under the current offering and issued 334,008 shares under the Company's dividend reinvestment plan ("DRIP") with gross proceeds of $3,006,069. For the year ended June 30, 2020, the Company incurred selling commissions and fees of $2,010,015. No selling commissions and fees were incurred for the shares issued under the DRIP. F-23 Index to Audited Consolidated Financial Statements NOTE 9 – SHARE REPURCHASE PLAN Pursuant to the Company's share repurchase program, during the year ended June 30, 2020, the Company made three tender offers to purchase its own shares as noted in the below table: Period Total Number of shares Repurchased Repurchase Price Per Share Total Repurchase Consideration During the year ended June 30, 2020: August 13, 2019 through September 16, 2019 70,114.03 $ 9.00 $ 631,026 November 18, 2019 through December 19, 2019 102,739.90 $ 9.00 924,659 February 14, 2020 through March 18, 2020 178,344.44 $ 9.19 1,638,985 351,198.37 $ 3,194,670 During the year ended June 30, 2019, the Company made four tender offers to purchase its own shares as noted in the below table: Period Total Number of shares Repurchased Repurchase Price Per Share Total Repurchase Consideration During the year ended June 30, 2019: August 17, 2018 through September 17, 2018 31,570.04 $ 9.00 $ 284,130 November 14, 2018 through December 18, 2018 19,944.93 $ 9.00 179,505 February 14, 2019 through March 18, 2019 78,252.02 $ 9.00 704,268 May 14, 2019 through June 21, 2019 133,347.94 $ 9.00 1,200,131 263,114.93 $ 2,368,034 On May 11, 2020, after assessing the impacts of the Covid-19 pandemic, the Company’s board of directors unanimously approved the suspension of the Company’s Share Repurchase Program, effective immediately. As a result, the Company did not repurchase any shares thereafter. NOTE 10 – STOCKHOLDER DIVIDENDS AND INCOME TAXES The following table reflects the dividends per share that the Company has declared on its common stock during the year ended June 30, 2020. Dividends During the Quarter Ended Per Share Amount September 30, 2019 $ 0.175 $ 1,983,801 December 31, 2019 0.175 2,096,915 March 31, 2020 0.120 1,461,875 $ 0.470 $ 5,542,591 Of the total dividends paid during the year ended June 30, 2020, $2,891,349 has been reinvested under the Company’s DRIP. On March 31, 2020, after assessing the impacts of the Covid-19 pandemic, the Company’s board of directors unanimously approved the suspension of regular quarterly dividends to the Company’s stockholders, effective immediately. As a result, the Company did not pay or accrue any dividend for the quarter ended June 30, 2020. F-24 Index to Audited Consolidated Financial Statements The following table reflects the dividends per share that the Company has declared on its common stock during the year ended June 30, 2019. Dividends During the Quarter Ended Per Share Amount September 30, 2018 $ 0.175 $ 1,571,551 December 31, 2018 0.206 1,994,972 March 31, 2019 0.175 1,794,012 June 30, 2019 0.175 1,877,100 $ 0.731 $ 7,237,635 Of the total dividends paid during the year ended June 30, 2019, $3,006,069 has been reinvested under the Company’s DRIP. Income Taxes While our fiscal year end for financial reporting purposes is June 30 of each year, our tax year end is December 31 of each year. The information presented in this footnote is based on our tax year end for each period presented, unless otherwise specified. For income tax purposes, dividends paid to stockholders are reported as ordinary income, capital gains, non-taxable return of capital, or a combination thereof. The tax character of dividends paid to stockholders for the tax years ended December 31, 2019, (the most recent tax year end completed and filed) and 2018, were as follows: December 31, 2019 December 31, 2018 Capital gain $ 2,415,285 $ 6,236,421 Ordinary income 3,085,298 - Return of capital 24,521 - Total dividends $ 5,525,104 $ 6,236,421 The tax character of dividends paid to stockholders since December 31, 2019 (the most recent tax year ended completed and filed) through June 30, 2020, is expected to be ordinary income and capital gains. Because of the difference between our fiscal and tax year ends, the final determination of the tax character of dividends will not be made until we file our tax return for the tax year ending December 31, 2019. The components of undistributed earnings on a tax basis as of December 31, 2019 (the most recent tax year end completed and filed) and December 31, 2018, were as follows: December 31, 2019 December 31, 2018 Undistributed long term capital gain $ - $ 129,808 Unrealized fair value appreciation 4,813,649 6,802,996 $ 4,813,649 $ 6,932,804 The following table presents the aggregate gross unrealized appreciation, depreciation, and cost basis of investments for income tax purposes as of: June 30, 2020 June 30, 2019 Aggregate gross unrealized appreciation $ 4,054,329 $ 9,058,278 Aggregate gross unrealized depreciation (12,067,004 ) (827,940 ) Net unrealized appreciation (depreciation) $ (8,012,675 ) $ 8,230,338 Aggregate cost (tax basis) $ 101,717,821 $ 95,014,809 F-25 Index to Audited Consolidated Financial Statements NOTE 11 – QUARTERLY FINANCIAL DATA (UNAUDITED) The following table presents selected unaudited quarterly financial data for each quarter during the years ended June 30, 2020, 2019, and 2018. Quarter Ended September 30, 2019 December 31, 2019 March 31, 2020 June 30, 2020 Net investment income (loss) $ 566,933 $ 859,482 $ 1,871,946 $ 170,496 Net realized gain from sale of investments $ 109,014 $ 1,301,005 $ (174,489 ) $ 564,458 Net unrealized gain (loss) on investments $ 1,056,774 $ (2,294,778 ) $ (9,855,131 ) $ (5,901,262 ) Net increase in net assets resulting from operations $ 1,732,721 $ (134,291 ) $ (8,157,674 ) $ (5,166,308 ) Net increase in net assets resulting from operations per Share $ 0.15 $ (0.01 ) $ (0.65 ) $ (0.40 ) Weighted average Share outstanding 11,391,769 12,070,832 12,533,824 12,805,995 Quarter Ended September 30, 2018 December 31, 2018 March 31, 2019 June 30, 2019 Net investment income (loss) $ 2,871,700 $ 488,253 $ 508,911 $ 1,775,242 Net realized gain from sale of investments $ 3,637,660 $ (1,604,128 ) $ (812,058 ) $ (17,424 ) Net unrealized gain (loss) on investments $ (4,645,656 ) $ 1,438,916 $ 152,181 $ (908,090 ) Net increase in net assets resulting from operations $ 1,863,704 $ 323,041 $ (150,966 ) $ 849,728 Net increase in net assets resulting from operations per Share $ 0.21 $ 0.03 $ (0.01 ) $ 0.08 Weighted average Share outstanding 9,004,403 $ 9,660,553.21 10,314,925 10,844,984 Quarter Ended September 30, 2017 December 31, 2017 March 31, 2018 June 30, 2018 Net investment income $ (373,346 ) $ 1,066,485 $ 2,083,485 $ (549,425 ) Net realized gain from sale of investments $ 848,583 $ 849,890 $ 53,645 $ 939,655 Net unrealized gain (loss) on investments $ 961,773 $ (192,957 ) $ (1,578,694 ) $ 6,656,717 Net increase in net assets resulting from operations $ 1,437,010 $ 1,723,418 $ 558,436 $ 7,046,947 Net increase in net assets resulting from operations per Share $ 0.22 $ 0.24 $ 0.07 $ 0.85 Weighted average Share outstanding 6,577,208 $ 7,205,816 7,723,757 8,271,765 F-26 Index to Audited Consolidated Financial Statements SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MACKENZIE REALTY CAPITAL, INC. (Registrant) By: /s/ Robert Dixon Robert Dixon Chief Executive Officer Date: September 21, 2020 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Robert Dixon Chief Executive Officer September 21, 2020 Robert Dixon (Principal Executive Officer) /s/ Paul Koslosky Chief Financial Officer September 21, 2020 Paul Koslosky (Principal Financial and Accounting Officer) /s/ C.E. Patterson Director September 21, 2020 C.E. Patterson /s/ Tim Dozois Director September 21, 2020 Tim Dozois /s/ Tom Frame Director September 21, 2020 Tom Frame F-27