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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Pacific Alliance China Land Limited | LSE:PACL | London | Ordinary Share | KYG6846Y1035 | ORD USD0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.18 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMPACL
RNS Number : 8648G
Pacific Alliance China Land Limited
01 June 2017
1 June 2017
Pacific Alliance China Land Limited
Full year results for the period ended 31 December 2016
Pacific Alliance China Land Limited ("PACL" or the "Company"), an AIM-traded, closed-end investment company has today announced its full year audited results to 31 December 2016.
Highlights
-- Net asset value as at 31 December 2016 was US$176.7 million, representing US$2.8694 per share, a 27% increase in NAV on a per share basis year-on-year (31 December 2015; US$2.2601 per share).
-- The Company's shares closed at US$2.0775 on 31 December 2016, a 7.9% increase year-on-year and a 27.6% discount to the audited NAV per share.
-- PACL's NAV and share price have both outperformed major benchmark indices including the FTSE 350 Real Estate Index (F3REAES) and the FTSE AIM All-Share Index (AXX) on a consistent basis since inception.
Company Developments
-- The Company repurchased US$96 million of PACL's ordinary shares in 2016 pursuant to the Share Purchase programs announced in June 2016.
Portfolio and Company Developments
-- The Company has also realized its entire interest in Project Auspice through the PRC JV's sale of all Wanda shares to a third party for corresponding gross cash proceeds of RMB 816.7 million (approximately equal to US$117.6 million). This represented a net IRR of 16% and a net cash multiple of 4x on PACL's initial investment.
Patrick Boot, on behalf of, Pacific Alliance Real Estate Limited commented that:
"Thanks to the improving market sentiment for most of the year and successful JV restructuring in Q4 2016, the Company has successfully realized its entire interest in Project Auspice, the last remaining investment of the Company. Looking forward to 2017, we will focus our efforts on distributing all repatriated proceeds as quickly as possible to shareholders."
For further information please contact:
MANAGER: LEGAL COUNSEL: Patrick Boot Jon Lewis Pacific Alliance Real Estate PAG Limited T: (852) 2918 0088 T: (852) 2918 0088 jlewis@pagasia.com pboot@pagasia.com BROKER: NOMINATED ADVISER: Henry Freeman Philip Secrett Liberum Capital Limited Grant Thornton UK LLP T: (44) 20 3100 2000 T: (44) 20 7383 5100 Henry.Freeman@liberum.com Philip.J.Secrett@uk.gt.com
Notes to Editors:
About Pacific Alliance China Land Limited
Pacific Alliance China Land Limited ("PACL") (AIM: PACL) is a closed-end investment company admitted to trading on the AIM Market of the London Stock Exchange in November 2007. PACL is focused on investing in a portfolio of existing properties, new developments, distressed projects and real estate companies in Greater China.
For more information about PACL, please visit: www.pacl-fund.com
Pacific Alliance China Land Limited is managed by a member of PAG, the Asian alternative investment Company management group. Founded in 2002, PAG is now one of the region's largest Asia-focused alternative investment managers, with funds under management across Private Equity, Real Estate and Absolute Return strategies. PAG has a presence across Asia with over 300 staff working in the region.
For more information about PAG, please visit: www.pagasia.com
Chairperson's Statement
As of 31 December 2016, Pacific Alliance China Land Limited (the "Fund" or "PACL") reported a net asset value (NAV) of US$176.7 million or US$2.8694 per share. This represented a 27.0% increase in NAV on a per share basis year-on-year, and the Fund's share price increased 7.9% year on year.
China's 2016 full year GDP growth came in at 6.7%, which met the Chinese government's pre-set target rate of annual GDP growth of 6.5% to 7% for 2016; however, this marked the country's slowest rate of expansion since 2009, largely due to sluggish global demand and excess industrial capacity. To further stabilize the economy and boost growth, the Chinese government continued its policy support, particularly in terms of credit expansion and fiscal stimulus. In fact, several economic activity indicators, such as purchasing manager surveys and business profits, turned out better than the market had predicted at the beginning of 2016. Due to property stimulus measures, the first three quarters of the year saw both sales volumes and sales prices improve across the country, particularly in tier-one and tier-two cities where a robust recovery took place in residential markets. In response to these overheated housing markets, some local authorities have implemented regulatory tightening measures in many tier-one and tier-two cities since August 2016.
Thanks to the improving market sentiment for most of the year and successful tax restructuring in Q4 2016, the Fund has successfully realized its entire interest in Project Auspice. This exit delivered a net IRR of 16% and a net cash multiple of 4x on PACL's initial investment. In addition, the Fund has also made a distribution of US$96 million, by way of the mandatory share repurchase, from the repatriation of proceeds from Project Diplomat and Project Malls in June 2016.
Our investment strategy has delivered compound annual NAV growth of 12.3% since the Fund's inception in November 2007. We will focus our efforts on distributing all repatriated proceeds as quickly as possible to shareholders. On behalf of the Board of Directors, I would like to thank you for your continued commitment and support.
Margaret Brooke
Chairperson
Investment Managers' Report
On 31 December 2016, the Fund's share price closed at US$2.0775, a 7.9% increase year-on-year and a 27.6% discount to the audited NAV per share. PACL's NAV and share price have both outperformed major benchmark indices including the FTSE 350 Real Estate Index and the FTSE AIM All-Share Index on a consistent basis since inception.
Hot Features
Premium
31 December 31 December
2016 2015
US$ US$
Realized Gain
Investment income 214,592,216 4,356,789
Dividend income 2,848,531 7,473,706
Deposit interest 859,366 582,850
-------------------- --------------------
218,300,113 12,413,345
Change in Unrealized Gain/(Losses)
Derivatives 1,903,639 -
Other real estate investments (117,817,710) (40,906,895)
Listed stock (55,253,795) (17,758,509)
Share of (gains)/losses (payable to)/receivable
from PACL II (138,678) 3,097,747
Foreign exchange (5,737,148) (3,584,103)
-------------------- --------------------
(177,043,692) (59,151,760)
-------------------- --------------------
41,256,421 (46,738,415)
Portfolio Summary
As at 31 December 2016, the Fund held cash of US$164.7 million and investments with a cost of approximately US$4.1 million and fair value of US$6.3 million. The Fund has only foreign exchange derivatives after realization of all its projects.
Investments and Cash Fair value (gross) US$ Type % of total ---------------------- ----------------------- ------------ ----------- FX Hedging 6,339,045 Derivatives 3.71% Cash 164,657,215 Cash (1, 2) 96.29% ---------------------- ----------------------- ------------ ----------- TOTAL 170,996,260 100.00% ---------------------- ----------------------- ------------ -----------
Note
(1) The gross investment value includes an amount attributable to the PACL II shareholders.
(2) Of the total cash of US$164.66 million, US$162.05 million of which is held as RMB in PRC banks.
Realization and return of capital
The Fund successfully exited three projects in the first of half of 2016. In the first quarter of 2016, the Fund sold its 40% interest in Project Diplomat, together with its co-investor, to a local fund managed by CITIC Private Equity Fund Management Co., Ltd. The Fund received net proceeds of US$84 million representing a net IRR of 15.2%. The holdback of RMB35 million, of which the Fund is entitled to 40%, is expected to be recovered by the first half of 2017.
In the first quarter of 2016, the Fund also received gross cash proceeds of RMB248 million from the sale of its Walmart shares (the remaining asset of Project Malls). The proceeds are held by a joint venture owned by the Fund and China Resources, which is currently in liquidation. Once this is completed, the upper level joint venture will also be liquidated and the repatriation process can begin.
Realization and return of capital (Continued)
With the proceeds from the realization of Project Diplomat and Project Malls, the Fund announced a mandatory share repurchase with a total amount of US$96 million in June 2016.
The Fund has also realized its entire interest in Project Auspice through the PRC JV's sale of all Wanda shares to a third party for corresponding gross cash proceeds of RMB 816.7 million (approximately equal to US$117.6 million). This represented a net IRR of 16% and a net cash multiple of 4x on PACL's initial investment.
Conclusion
In 2017, we expect both China's economy and property market to further stabilize in the context of shifting to a more stable and sustainable level of economic growth mode. The Investment Manager will focus its efforts on repatriating and distributing realization proceeds as soon as possible to shareholders.
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
AS AT 31 DECEMBER 2016
Note 2016 2015
US$ US$
Assets
Investments, at fair value (Cost: Nil;
2015: US$44,442,841) 3,4 - 220,174,977
Derivative contracts, at fair value
(Cost: US$4,106,660; 2015: US$2,381,320) 5 6,339,045 2,710,066
Amounts due from PACL II Limited 10(a) - 242,923
Prepayment and other receivables 6 29,107,982 897,134
Cash and bank balances 164,657,215 56,337,382
-------------------- --------------------
Total assets 200,104,242 280,362,482
------------------ ------------------
Liabilities
Provision for taxation 8 20,244,692 43,136,160
Amounts due to PACL II Limited 11(a) 237,755 -
Performance fee payable 9 611,581 -
Provision for investment agency fees 10 1,415,585 2,115,585
Accrued expenses and other payables 848,996 311,929
-------------------- --------------------
Total liabilities 23,358,609 45,563,674
------------------ ------------------
Net assets 176,745,633 234,798,808
Analysis of net assets
Share capital 7 615,967 1,038,874
Share premium - 66,039,620
Capital surplus - 1,816,917
Retained earnings 176,129,666 165,903,397
-------------------- --------------------
Net assets (equivalent to US$2.8694
per share based on 61,596,638 outstanding
shares; 2015: US$2.2601 per share based
on 103,887,384 outstanding shares) 176,745,633 234,798,808
Approved by the Board of Directors
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS
AS AT 31 DECEMBER 2016
2016 2015
Investments - Assets % of % of Cost/principal Fair % % of Cost/principal Fair
net effective value of effective value
assets equity net equity
interest assets interest
held held
US$ US$ US$ US$
UNLISTED EQUITY
Real Estate, China 0.00% 93.77%
Beijing Hines Jing
Sheng Real Estate
Development Co Ltd
("Project Diplomat")
* nil shares (2015: 110,324,259 shares and a
shareholder loan of US$16,479,960) 0.00% 0.00% - - 42.40% 40.00% 16,480,000 99,554,984
SCP Management Co
Ltd ("Project Malls")
* Share capital of nil (2015:RMB 6,000,000) 0.00% 0.00% - - 17.80% 30.00% 5,548,341 41,804,900
Dalian Wanda Commercial
Real Estate Co Ltd
("Project Auspice")
* nil shares (2015:18,000,000 domestic shares) 0.00% 0.00% - - 33.57% 0.48% 22,414,500 78,815,093
DERIVATIVES
3.59% 1.15%
Others 3.59% 4,106,660 6,339,045 1.15% 2,381,320 2,710,066
-------------------- -------------------- -------------------- --------------------
4,106,660 6,339,045 46,824,161 222,885,043
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARED 31 DECEMBER 2016
Note 2016 2015
US$ US$
Income
Dividend income 2,848,531 7,473,706
Interest income 859,366 582,850
Other gains - 45,927
------------------ ------------------
Total income 3,707,897 8,102,483
----------------- -----------------
Expenses
(Reversal of)/tax expense 8 2,307,818 15,112,533
Management fees 9 (3,627,655) (5,261,227)
Investment agency fees reversal 10 - 2,040,470
Legal and professional fees (51,300) (206,749)
Other expenses (1,326,885) (987,125)
Performance fees (611,581) -
------------------ ------------------
Total expenses (3,309,603) 10,697,902
----------------- -----------------
Net investment gain 398,294 18,800,385
----------------- -----------------
Realized and change in unrealized gain/loss
from investments, derivatives and foreign
currency
Net realized gain from investments,
derivatives and foreign currency transactions 214,592,216 4,356,789
Net change in unrealized gain/loss
from investments, derivatives and loss
on translation of assets and liabilities
in foreign currencies 4 (176,905,014) (61,755,414)
Net (increase)/decrease in amount payable
to PACL II Limited from gain attributable
to PACL II Limited 10(a) (138,678) 3,097,747
------------------ ------------------
Net realized and change in unrealized
gain/(loss) from investments, derivatives
and foreign currency 37,548,524 (54,300,878)
----------------- -----------------
Net increase/(decrease) in net assets
from operations 37,946,818 (35,500,493)
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARED 31 DECEMBER 2016
Share capital
and share Capital Tendered Retained
Note premium surplus shares earnings Total
US$ US$ US$ US$ US$
At 1 January
2015 189,833,893 1,816,917 (97,755,406) 201,403,890 295,299,294
Repurchase of
tendered
shares 7 - - (25,208,223) - (25,208,223)
Reissue of
tendered
shares 7 - - 208,230 - 208,230
Cancellation
of
tender
shares 7 (122,755,399) - 122,755,399 - -
Net decrease
in
net assets
from
operations - - - (35,500,493) (35,500,493)
-------------------- ------------------ ------------------ -------------------- --------------------
At 31
December
2015 and
1 January
2016 67,078,494 1,816,917 - 165,903,397 234,798,808
Repurchase
and
cancellation
of
ordinary
shares 7 (66,462,527) (1,816,917) - (27,720,549) (95,999,993)
Net increase
in
net assets
from
operations - - - 37,946,818 37,946,818
-------------------- ------------------ ------------------ -------------------- --------------------
At 31
December
2016 615,967 - - 176,129,666 176,745,633
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2016
Note 2016 2015
US$ US$
Net increase/(decrease) in net assets
from operations 37,946,818 (35,500,493)
Adjustments to reconcile net change
in net assets from operations to net
cash generated from operating activities
Purchase of investments (5,843,256) (2,381,320)
Disposal of investments 260,768,710 10,502,548
Net realized and change in unrealized
gain/loss from investments (38,379,456) 55,074,123
Receivable/(payable) from gain/(loss)
attributable to PACL II Limited 138,678 (3,097,747)
Change in prepayment and other receivables (28,210,848) (288,860)
Change in amounts due to PACL II Limited 342,000 (3,290,499)
Change in performance fees payable 7, 9 611,581 (1,016,628)
Change in provision for taxation (22,891,468) (16,010,916)
Change in provision for investment
agency fees - (2,040,470)
Change in accrued expenses and other
payables (162,933) 134,555
-------------------- --------------------
Net cash generated from operating activities 204,319,826 2,084,293
------------------ ------------------
Cash flows from financing activities
Repurchase of shares 7 (95,999,993) (24,999,993)
-------------------- --------------------
Net cash used in financing activities (95,999,993) (24,999,993)
------------------ ------------------
Net increase/(decrease) in cash and
cash equivalents 108,319,833 (22,915,700)
Beginning balance 56,337,382 79,253,082
-------------------- --------------------
Ending balance, representing cash and
bank balances 164,657,215 56,337,382
Supplementary information to statement of cash flows
Interest income received 859,366 528,316 Dividend income received 2,848,531 7,473,706
Non-cash transaction:
Part of the performance fee payable to the Investment Manager was settled by the Fund's shares. Please refer to Note 6 and 8 for details.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
1. Organization
Pacific Alliance China Land Limited (the "Fund") was incorporated on 5 September 2007 in the Cayman Islands. It is a closed-end Cayman Islands registered, exempted Fund. The address of its registered office is PO Box 472, 2nd Floor, Harbour Place, Grand Cayman KY1-1106, Cayman Islands.
The Fund's ordinary shares are traded on the AIM market of the London Stock Exchange. The Fund can raise additional capital up to the authorized share capital as described in Note 6.
The principal investment objective of the Fund and its subsidiaries (collectively, the "Fund") is to provide shareholders with capital growth and a regular level of income from investments in existing properties, new developments, distressed projects and real estate companies in Greater China.
The Fund's investment activities are managed by Pacific Alliance Real Estate Limited ("PARE" or the "Investment Manager"). The Fund appointed Sanne Fiduciary Services Limited to act as the custodian of certain assets of the Fund, and as the administrator and registrar pursuant to the Administration Custodian and Registrar Agreement.
On 25 July 2014, the Fund's investment policy changed to restrict new investment solely to (a) supporting existing investments, (b) utilizing Renminbi cash assets subject to exchange control restrictions, for low risk short-term investments, and (c) to focus future investment management efforts on the realization of the portfolio and the return of net realization proceeds to shareholders.
As of 31 December 2016, all investments under management were realized and most of the sale proceeds had been received by underlying special purpose vehicles. The Investment Manager is working on the repatriation process and it is expected that the profit and invested capital of project Malls will be repatriated by second quarter of 2017 and fourth quarter of 2017, respectively. For project Auspice, the profit and invested capital is expected to be repatriated by second quarter of 2018 and fourth quarter of 2018. For project Diplomat, the remaining sales proceeds amounting to US$3.6 million is expected to be received by second quarter of 2017. Therefore, the financial statements of the Fund for the year ended 31 December 2016 are considered to be prepared on a going concern basis. The Fund will not be liquidated until the repatriation process is fully completed.
The consolidated financial statements were approved by the Board of Directors on 26 May 2017.
2. Summary of significant accounting policies
The following significant accounting policies are in conformity with accounting principles generally accepted in the United States of America ("US GAAP"). The Fund applies the provisions of Financial Accounting Standards Board ("FASB") Accounting Standard Codification ("ASC") 946-10, Financial Services - Investment Companies (the "Guide"). The Fund is an investment Fund under the Guide. Such policies are consistently followed by the Fund in the preparation of its consolidated financial statements.
(a) Principles of consolidation
These consolidated financial statements include the financial statements of the Fund. Subsidiaries are fully consolidated from the date on which control is transferred to the Fund and deconsolidated from the date that control ceases. Inter-Fund transactions between group companies are eliminated upon consolidation.
The Fund uses wholly and partially owned special purpose vehicles ("SPVs") to hold and transact in certain investments. The Fund's policy is to consolidate, as appropriate, those SPVs in which the Fund has control over significant operating, financial or investing decisions of the entity.
Except when an operating Fund provides services to the Fund, investment in an operating Fund is carried at fair value (refer to Note 2(c) below for fair value measurement).
(b) Use of estimates
The preparation of consolidated financial statements in conformity with US GAAP requires the Fund's management to make estimates and assumptions that affect the reported value of assets and liabilities and disclosures of contingent assets and liabilities as at 31 December 2016 and the reported amounts of income and expenses for the year then ended. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 2(k).
(c) Investments
The Fund may hold both listed securities and unlisted securities, which by nature have limited marketability. The Fund also engages in secured lending transactions.
(i) Recognition and derecognition
Regular purchase and sale of investments are accounted for on the trade date, the date the trade is executed. Costs used in determining realized gains and losses on the disposal of investments are based on the specific identification method for unlisted or unquoted investments. Cost includes legal and due diligence fees associated with the acquisition of investments.
Transfer of investments is accounted for as a sale when the Fund has relinquished control over the transferred assets. Any realized gains and losses from investments are recognized in the consolidated statement of operations.
(ii) Fair value measurement
The Fund is an investment Fund under the Guide. As a result, the Fund records and re-measures its investments on the consolidated statement of assets and liabilities at fair value, with unrealized gains and losses resulting from changes in fair value recognized in the consolidated statement of operations.
Fair value is the amount that would be received to dispose of the investments in an orderly transaction between market participants at the measurement date, i.e. the exit price. Fair value of investments is determined by the Valuation Committee of the Fund, which is established by the Investment Manager and the Board of Directors.
Investments in securities traded on a recognized exchange are value at the traded price on the exchange in which such security was traded on the last business day of the period.
(ii) Fair value measurement (Continued)
The fair values of unlisted or unquoted securities are based on the Fund's valuation models, including earnings multiples (based on the budgeted earnings or historical earnings of the issuer and earnings multiples of comparable listed companies) and discounted cash flows. The Valuation Committee also considers the relevant developments since acquisition of the investments, the original transaction price, recent transactions in the same or similar instruments, completed third-party transactions in comparable instruments, reliable indicative offers from potential buyers and rights in connection with realization. Judgment is used to adjust valuation as necessary for factors such as non-maintainable earnings, tax risk, growth stage, and cash traps. Cross-checks of primary techniques are made against other secondary valuation techniques.
The Fund's secured loan transactions are recorded at fair value, which is determined based on discounted cash flow analyses. Those analyses consider the position size, liquidity, current financial condition of the borrowers, the third-party financing environment, reinvestment rates, recovery lags, discount rates, and default forecasts.
In determining the fair value of certain unlisted securities, the Valuation Committee uses as reference valuations made by independent valuers which rely on the financial data of investees and on estimates made by the management of the investee companies as to the effect of future developments. The independent valuers also assist in the selection of valuation techniques and models. Loans receivable are recorded at fair value in accordance with the guidance set forth in Note 4, and the valuation techniques applied usually take into account the estimated future cash flows, liquidity, credit, market and interest rate factors. However, there are inherent limitations in any valuation technique due to the lack of observable inputs.
Currency options are valued by the Investment Manager using observable inputs, such as quotations received from the counterparty, dealers or brokers, whenever available and considered reliable.
Estimated fair value may differ significantly from the value that would have been used had a readily available market for such investments existed and these differences could be material to the financial statements. Additional information about the level of market observability associated with investments carried at fair value is disclosed in Note 4.
(d) Other receivables and payables
Other receivables and payables are initially measured at fair value and subsequently measured at amortized cost.
(e) Cash and cash equivalents
Cash represents cash at banks and does not include restricted cash such as fixed deposits pledged as security for bank loans. Cash equivalents are defined as short-term, highly liquid investments which mature within three months or less of the date of purchase.
(f) Share capital
Ordinary shares are classified as equity. Where the Fund purchases the Fund's equity share capital, the consideration paid is deducted from equity until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received is included in equity.
(g) Foreign currency translation
The books and records of the Fund are maintained in United States Dollars ("US$"), which is also the functional currency. Assets and liabilities, both monetary and non-monetary, denominated in foreign currencies are translated into US$ by using prevailing exchange rates as at financial reporting date, while income and expenses are translated at the exchange rates in effect during the year.
Gains and losses attributed to changes in the value of foreign currencies for investments, cash balances and other assets and liabilities are reported as foreign exchange gain and loss in the consolidated statement of operations.
(h) Taxation
The Fund may be subject to taxes imposed in jurisdictions in which it invests and operates. Such taxes are generally based on income and gains earned. Taxes are accrued on investment income, realized gains, and unrealized gains, as appropriate, when the income and gains are earned. The Fund accrues for liabilities relating to uncertain tax positions only when such liabilities are probable and can be reasonably estimated in accordance with the authoritative guidance contained in ASC 740 Income Taxes as described in Note 8.
The Fund files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. The Fund uses the asset and liability method to provide income taxes on all transactions recorded in the consolidated financial statements. This method requires that income taxes reflect the expected future tax consequences of temporary differences between carrying amounts of assets or liabilities for book and tax purposes. Accordingly, a deferred tax asset or liability for each temporary difference is determined based on the tax rates that the Fund expects to be in effect when the underlying items of income and expense are realized.
(i) Recognition of income and expenses
Interest income on bank balances is accrued as earned using the effective interest method.
Dividend income is recognized on the ex-dividend date and is recorded net of withholding taxes where applicable.
Expenses are recorded on an accrual basis. Provision of deferred tax expenses is made based on the capital gain from realization of investments as at the year-end.
(j) Critical accounting estimates and assumptions
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
(k) Critical accounting estimates and assumptions (Continued) (i) Fair value of investments
The fair value of unlisted or unquoted securities and loans receivable is determined by using valuation techniques. Judgment is used to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period.
Although best judgment is used in estimating fair value, there are inherent limitations in any valuation technique. Estimated fair value may differ significantly from the value that would have been used had a readily available market for such investments existed and these differences could be material to the consolidated statement of assets, liabilities and partners' capital. Additional information about the level of market observability associated with investments carried at fair value is disclosed in Note 4 below.
3 Concentration of risks (a) Market risk
Market risk represented the potential loss in value of financial instruments caused by movements in market variables, such as equity prices.
Investments were made with a focus on Greater China. Political or economic conditions and the possible imposition of adverse laws or currency exchange restrictions in that region could cause the Fund's investments and the respective markets to become less liquid and also the prices to become more volatile.
The Fund's investments had concentration in a particular industry or sector and performance of that particular industry or sector had a significant impact on the Fund. The Fund's concentration of investments in a particular industry or sector is presented on the consolidated condensed schedule of investments.
The Fund's investments were subject to the risk associated with investing in private equity securities. Investments in private equity securities were illiquid and subject to various restrictions on resale and there can be no assurance that the Fund will be able to realize the value of such investments in a timely manner.
(b) Interest rate risk
Interest rate risk arises from the fluctuations in the prevailing levels of market interest rates which affect the fair value of financial assets and liabilities and future cash flows. The Fund has bank deposits that expose the Fund to interest rate risk. The Fund has direct exposure to interest rate changes in respect of the valuation and cash flows of its interest bearing assets and liabilities.
(c) Currency risk
The Fund has assets and liabilities denominated in currencies other than the US$, the functional currency. The Fund is therefore exposed to currency risk as the value of assets and liabilities denominated in other currencies may fluctuate due to changes in exchange rates. The net assets of the Fund before the impact of currency hedging are denominated in the following currencies:
2016 2015
Net assets Net assets
US$ US$
equivalent equivalent
Renminbi 145,786,802 186,236,562
Pounds Sterling (1,234,793) (11,686)
Singapore Dollars 67 68
Hong Kong Dollars (96,686) (56,896)
The Investment Manager manages the Fund's currency exposure through use of currency options. Refer to Note 5.
(d) Credit risk
The Fund is exposed to credit risk, which is the risk that a counterparty to or an issuer of a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. As at 31 December 2016 the main concentrations of credit risk to which the Fund is exposed arise from derivative contracts, prepayments and other receivables, and cash and bank balances.
Whilst the loans receivable are structured to provide the Fund with adequate collateral in the event of default, enforcement may be subject to the legal system of the countries where the relevant agreements are entered. Even when a contract is enforced, the collateral may not be sufficient to fully compensate the Fund for default losses. In an attempt to mitigate the losses, the Fund, where possible, obtains independent valuations of the collateral on a regular basis and monitors the fair value of collateral relative to the loan amounts plus accrued interest and where necessary, requires additional cash or collateral from the borrower to manage its exposure. However, these valuations do not guarantee the ultimate realizable value of the collateral.
The legal system of the countries in which the Fund invests vary widely in their development, degree of sophistication, attitude, and policies towards bankruptcy, insolvency, liquidation, receivership, default and treatment of creditors and debtors. Furthermore, the effectiveness of the judicial system of the countries in which the Fund invests varies, thus the Fund (or any entity in which the Fund holds a direct or secondary interest) may have difficulty in successfully pursuing claims in the courts of such countries. To the extent that the Fund or an entity in which the Fund holds a direct or secondary interest has obtained a judgment but is required to seek its enforcement in the courts of the countries in which the Fund invests, there can be no assurance that the court will enforce such judgment.
(d) Credit risk (Continued)
The Fund has no investments in loans receivable and bonds issued by counterparties which were unrated by any rating agency as at 31 December 2016 and 2015.
As at 31 December 2016, the Fund has cash and bank balances amounting to US$164,657,215 (2015: US$56,337,382) held in multiple different bank accounts with a number of different financial institutions. The Fund attempts to minimize its credit risk exposure on its cash and bank balances by monitoring the size of its credit exposure to any one counterpart and by only entering into banking relationships with reputable financial institutions.
(e) Liquidity risk
The Fund was exposed to liquidity risk as the majority of the investments of the Fund were illiquid while some of the Fund's liabilities were with short maturity as of 31 December 2015. Illiquid investments included any securities or instruments which are not actively traded on any major securities market or for which no established secondary market exists where the investments can be readily converted into cash. As at 31 December 2016, all investments were fully realized and currently assets are held in cash or disposal receivables as of 31 December 2016. Most of the disposal receivables are expected to be received by second quarter of 2017. Management considered that there was no such liquidity risk exposed by the Fund as of 31 December 2016.
China currently has foreign exchange restrictions, especially in relation to the repatriation of foreign funds. Any unexpected foreign exchange control in China may cause difficulties in the repatriation of funds. The Fund invests in China and is therefore exposed to the risk of repatriating funds out of China on a timely basis to meet its obligations. Please refer its Note 3(c) above for the Fund's exposure to Renminbi.
The Fund is closed-end and, thus, not exposed to redemptions of shares by its shareholders.
4 Investments
The Fund discloses the fair value of its investment in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). Three levels of the fair value hierarchy are as follows:
Level 1 Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access at the measurement date.
Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund's own assumptions used in determining the fair value of investments).
Inputs to measure fair values broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics and other factors. An asset or a liability's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes "observable" requires significant judgment. The Valuation Committee considers observable data to be such market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary and provided by multiple, independent sources that are actively involved in the relevant market. The categorization of an asset or a liability within the hierarchy is based upon the pricing transparency of the asset or liability and does not necessarily correspond to the Valuation Committee's perceived risk of that asset or liability.
In determining an instrument's placement within the hierarchy, the Valuation Committee follows the following:
Level 1 Investments in listed stocks and derivatives that are valued using quoted prices in active markets and are therefore classified within Level 1 of the fair value hierarchy.
Level 2 Investments in illiquid listed stocks and derivatives are valued using the last traded prices of the listed stocks and derivatives after factoring in discounts for liquidity. Such investments are generally classified within Level 2 of the fair value hierarchy.
Level 3 Assets are classified within Level 3 of the fair value hierarchy if they are traded infrequently and therefore have little or no price transparency. Such assets include investments in unlisted stocks, bonds, derivatives and loans receivable. Investments classified within Level 3 have significant unobservable inputs, as they trade infrequently or not at all. When observable prices are not available for these securities, the Valuation Committee uses one or more valuation techniques (e.g., the market approach or the income approach) for which sufficient and reliable data is available. Within Level 3, the use of the market approach generally consists of using comparable market transactions, while the income approach generally consists of the net present value of estimated future cash flows, adjusted as appropriate for liquidity, credit, market and/or other risk factors.
The inputs used by the Valuation Committee in estimating the value of Level 3 investments include the original transaction price, recent transactions in the same or similar instruments, completed or pending third-party transactions in the underlying investment or comparable issuers, subsequent rounds of financing, recapitalizations and other transactions across the capital structure, offerings in the equity or debt capital markets, and changes in financial ratios or cash flows. Valuation of Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability with the amount of such discount estimated by the Valuation Committee in the absence of market information.
The following table summarizes quantitative information about the valuation techniques and the significant unobservable inputs used for Level 3 investments:
2015
Significant
Investment unobservable
assets Fair value Valuation technique(s) inputs Inputs/range
US$
Unlisted Equity 141,359,884 Indicative offer N/A N/A
Last traded
price of H-shares
listed in Hong Liquidity
78,815,093 Kong discount 25%
Discount
Loans receivable - Impairment rate 100%
----------------
220,174,977
All level 3 investments held at 31 December 2015 were disposed during the year 2016, therefore there was no valuation review of level 3 investments as at 31 December 2016.
The following table summarizes the fair value of all instruments within the fair value hierarchy:
Level 1 Level 2 Level 3 Total
US$ US$ US$ US$
As at 31 December
2016
Investments -
derivatives - 6,339,045 - 6,339,045
-------------------- -------------------- -------------------- --------------------
- 6,339,045 - 6,339,045
As at 31 December
2015
Investments - equity - - 220,174,977 220,174,977
Investments - loans
receivable - - - -
Investments -
derivatives - 2,710,066 - 2,710,066
-------------------- -------------------- -------------------- --------------------
- 2,710,066 220,174,977 222,885,043
As at 31 December 2016, investments of US$6,339,045 (2015: US$222,885,043) were held directly by the Fund.
The following table summarizes the movements in fair value of the Fund's Level 3 instruments.
Investments Investments
- unlisted - loans
equity receivable Total
US$ US$ US$
At 1 January 2015 182,266,779 6,145,759 188,412,538
Sale of investments (10,442,185) (60,363) (10,502,548)
Net realized gain/(loss) 10,442,185 (6,085,396) 4,356,789
Net change in unrealized gain/loss (40,906,895) - (40,906,895)
Transfer from level 2 78,815,093 - 78,815,093
-------------------- ------------------ --------------------
At 31 December 2015 and 1 January
2016 220,174,977 - 220,174,977
Sale of investments (256,585,810) - (256,585,810)
Net realized gain/(loss) 214,527,232 - 214,527,232
Net change in unrealized gain/loss (178,116,399) - (178,116,399)
-------------------- ------------------ --------------------
At 31 December 2016 - - -
Investments classified within Level 3 have significant unobservable inputs. The marketability discount applied by the Fund within the valuation of Project Auspice was considered to be an unobservable input, as disclosed in Note 4. As such, during the year ended 31 December 2015, Project Auspice was reclassified from Level 2 to Level 3 given the significance of this unobservable input.
All Level 3 instruments were realised during the year 2016, total net change in unrealized gain on Level 3 instruments disposed are presented in the consolidated statement of operations.
US$
Net change in unrealized gain/loss on realized
investments as at 31 December, 2016 (178,116,399)
Net change in unrealized gain/loss on existing
investments as at 31 December, 2015 (40,906,895)
As at 31 December 2016, the Fund had received part of the sales proceeds from its investment projects and had realized a net gain of US$256,585,810 (2015: US$10,442,185). The net change in unrealized gain/loss on unlisted equity investments amounted to US$178,116,339 (2015: US$40,906,895).
5 Derivative instruments
The Fund transacts in derivative instruments including options with each instrument's primary risk exposure being equity, credit and foreign exchange. The Fund enters into currency options to hedge itself against foreign currency exchange rate risk for its foreign currency denominated assets and liabilities due to adverse foreign currency fluctuations against the US dollar.
The fair value of these derivative instruments is included within the consolidated statement of assets and liabilities with changes in fair value reflected as net realized gains/(losses) from investments or net change in unrealized gains/(losses) from investments within the consolidated statement of operations. The Fund does not designate derivatives as hedging instruments under FASB ASC 815.
The Partnership held Level 2 derivative contracts as follows:
Contractual/
Fair value notional amounts
As at 31 December 2016 Assets Liabilities Assets Liabilities
US$ US$ US$ US$
Currency options 6,339,045 - 159,000,000 -
Contractual/
Fair value notional amounts
As at 31 December 2015 Assets Liabilities Assets Liabilities
US$ US$ US$ US$
Currency options 2,710,066 - 125,600,000 -
The following table indicates the gains and losses on derivatives, by contract type, as included in the consolidated statement of operations.
Year ended 31 December 2016
Average Change in
Average number of unrealized Realized
notional contracts gains/losses gains/(losses)
US$ US$ US$ US$
Currency options 159,000,000 - 1,903,639 64,984
Year ended 31 December 2015
------------------------------------------------------------
Average Change in
Average number of unrealized Realized
notional contracts gains/losses gains/(losses)
US$ US$ US$ US$
Currency options 125,600,000 - 328,746 -
Average notional amounts is derived from the total outstanding contracts at each quarter end. The above realized and unrealized gains/losses on derivatives are included in realize and change in unrealized gains from investments, derivatives and foreign currency in the consolidated statement of operations.
6 Prepayment and other receivables
2016 2015
US$ US$
Interest receivable 630,543 157,674
Receivable from investments disposal 27,973,672 -
Prepayment and other receivables 503,767 739,460
------------------ ------------------
29,107,982 897,134
7 Share capital, share premium, capital surplus and tendered shares
Number
of
shares Share Share Capital Tendered
outstanding capital premium surplus shares Total
US$ US$ US$ US$ US$
As at 1
January 2015 113,502,766 1,898,339 187,935,554 1,816,917 (97,755,406) 93,895,404
Repurchase of
tendered
shares (9,711,785) - - - (25,208,223) (25,208,223)
Cancellation
of tender
shares - (859,465) (121,895,934) - 122,755,399 -
Reissue of
tendered
shares 96,403 - - - 208,230 208,230
-------------------- -------------------- -------------------- -------------------- -------------------- --------------------
As at 31
December
2015 and 1
January
2016 103,887,384 1,038,874 66,039,620 1,816,917 - 68,895,411
Repurchase
and
cancellation
of ordinary
shares (42,290,746) (422,907) (66,039,620) (1,816,917) - (68,279,444)
-------------------- -------------------- -------------------- -------------------- -------------------- --------------------
As at 31
December
2016 61,596,638 615,967 - - - 615,967
As at 31 December 2016, the total number of authorized ordinary shares was 10,000,000,000 (2015: 10,000,000,000) with par value of US$0.01 (2015: US$0.01) per share. The Fund had 61,596,638 (2015: 103,887,384) outstanding ordinary shares. The Fund returned net realization proceeds to shareholders by way of share repurchases. 42,290,746 of the Fund's ordinary shares were repurchased and cancelled in June 2016. 85,946,509 of the Fund's tendered shares were repurchased and cancelled in February 2015.
Position of tendered shares is as follows as at 31 December 2016, no movement during the year 2016:
Number of
shares
repurchased/ Repurchase/
(reissued) reissue price Total
US$ US$
At 1 January 2015 76,331,127 97,755,406
Repurchased in February
2015 9,615,382 2.6000 24,999,993
Cancelled in February 2015 (85,946,509) - -
Repurchased in May 2015
(Note 9) 96,403 2.1600 208,230
Reissued in May 2015 (Note
9) (96,403) 2.1600 (208,230)
------------------ ------------------
At 31 December 2015 and
31 January 2016 - -
8 Taxation
The Fund adopted the authoritative guidance contained in FASB ASC 740 on accounting for and disclosure of uncertainty in tax positions, which require the directors to determine whether a tax position of the Fund is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the tax amount recognized in the financial statements is reduced by the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant taxing authority.
The uncertain tax positions identified by the directors mainly include:
(a) Whether any of the Fund and its offshore SPVs would be deemed as a China Tax Resident Enterprise ("TRE") under the China Corporate Income Tax ("CIT") Law. If an offshore entity is deemed as a China TRE, its income would be subject to China CIT at 25% (rate could be reduced to a lower rate of 9% in certain jurisdiction in China).
(b) Whether any of the Fund and its offshore SPVs that may derive income would be deemed as having an establishment or place in China. If an offshore entity has an establishment or place in China, income derived by the offshore entity that is derived from China by the establishment or place or income that is effectively connected to the establishment or place would be subject to China CIT at 25% (rate could be reduced to a lower rate of 9% in certain jurisdiction in China).
(c) Whether any of the Fund and its offshore SPVs is subject to Hong Kong profits tax. An entity would be subject to Hong Kong profits tax if (i) the entity carries on a trade, profession or business in Hong Kong; (ii) profits are derived from that trade, profession or business carried on in Hong Kong (excluding gains of a capital nature); and (iii) the profits arise in or are derived from Hong Kong, i.e. have a Hong Kong source.
The Investment Manager has assessed that the Fund and its offshore SPVs are not TREs in China and do not have any establishment or place of business in China. Gains from the disposal of investments in China by the Fund or its SPVs may be subject to China withholding tax at 10% without considering the potential relief that may be available under any tax treaty between the tax jurisdiction of the transferor and China. In addition, where Chinese equity investments are held via an offshore intermediate holding Fund, exit of the Chinese equity investment disposal of shares in the offshore intermediate holding Fund could be regarded as an indirect transfer of the Chinese equity investment. According to the General Anti Avoidance Rules under the China CIT Law, if an investment holding structure and investment exit via indirect transfer do not have a reasonable commercial purpose, the Chinese tax authority is empowered to disregard such arrangement and impose withholding tax on the gains from such an indirect transfer. The directors have reviewed the structure of the investment portfolio and assessed the potential withholding tax implications and considered adequate provision to China tax has been made on the Fund's financial statements.
As at 31 December 2016, the Investment Manager has analyzed the open tax years of all jurisdictions subject to tax examination and the provision for deferred tax and uncertain tax amounted to US$19,501,359 (2015: US$33,838,744) and US$743,333 (2015: US$9,297,416) respectively. The Investment Manager has reviewed the structure of the investment portfolio and assessed the potential withholding tax implications and considered adequate provision for China tax has been made on the Fund's consolidated financial statements.
The Investment Manager has reviewed the structure of the Fund's investment portfolio and considered the Fund's exposure to countries in which it invests to be properly reflected in the Fund's consolidated financial statements.
Under current Cayman Islands legislation applicable to an exempted Fund, there is no income tax, capital gains or withholding tax, estate duty, or inheritance tax payable by the Fund in the Cayman Islands.
9 Management fee and performance fees
Pursuant to the Investment Management Agreement dated 20 November 2007, the Investment Manager was appointed to manage the investments of the Fund. The Investment Manager will receive an aggregate management fee of 2% per annum of the quarterly Net Asset Value ("NAV"). The management fee is paid quarterly in advance based on the NAV at the first day of each fiscal quarter. For the year ended 31 December 2016, total management fee amounted to US$3,627,655 (2015: US$5,261,227). There was no management fee payable as at 31 December 2016 (2015: US$49,889).
The Investment Manager is also entitled to receive performance fees from the Fund in the event that the year-end NAV is greater than the higher of (a) the year-end NAV for the last year in which a performance fee was payable ("High Water Mark"); and (b) the NAV on Admission increased by a non-compound annual hurdle rate of 8% ("Hurdle").
The performance fees will be calculated as follows:
-- 0% of the relevant increase in the year-end NAV if the year-end NAV is at or below the Hurdle;
-- 100% of the relevant increase in the year-end NAV above the Hurdle up to a non-compound annual rate of 10% (the "Catch-up"); and
-- 20% of the relevant increase in the year-end NAV above the Catch-up.
For the year ended 31 December 2016, total performance fees amounted to US$611,581 (2015: reversal of US$45,927). As at 31 December 2016, performance fees payable amounted to US$611,581 (2015: US$Nil).
Under the Investment Management Agreement, the performance fees earned by the Investment Manager shall be paid 75% in cash and 25% in the Fund's ordinary shares ("share portion"). The Fund may elect to meet its share obligation either by issuing new shares at NAV or purchasing the equivalent number of shares in the market.
10 Investment agency fees
To facilitate the disposal of an investment, the Fund entered into a consulting agreement with an unrelated third party (the "Consultant"). Under the agreement, the Fund is obligated to pay an investment agency fee to the Consultant based on a percentage of the net realized gain of the investment earned by the Fund upon realization.
For the year ended 31 December 2016, investment agency fees of US$ Nil (2015: US$2,040,470) were reversed based on the reduction of the unrealized gain on the investment net of certain expenses and tax attributable to the investment.
11 Related party transactions
Apart from the related party transactions disclosed in Note 9, the Fund also had the following significant related-party transactions.
(a) Restructuring with PACL II Limited
On 2 March 2009, the Fund held an extraordinary general meeting to approve a tender offer that allowed shareholders to exchange all or part of their shares for shares in PACL II Limited ("PACL II"), a Cayman Islands private vehicle that would be used to realize and distribute cash from exited investments based on the investment and asset positions held by the Fund as at 31 December 2008 ("Tender Offer Portfolio"). PACL II is also managed by the Investment Manager. It was due to, without any further action on the part of its shareholders, automatically wind up and dissolve 3 years after its ordinary shares were first issued. On 5 January 2012, the duration of PACL II was extended by 1 year to 2 March 2013 upon the written election by the Investment Manager. On 28 February 2013, the duration of PACL II was further extended by 2 years to 4 March 2015 upon the written election by the Investment Manager and a major of the shareholders. On 30 January 2015, the Investment Manager made an election to extend the duration of PACL II by 1 year to 4 March 2016.
As part of this restructuring, the Fund repurchased 180,166,107 shares at a tender price of US$1.01 per share in exchange for holders of these shares receiving the same number of shares in PACL II.
Under the terms of the tender offer, PACL II is entitled to receive 50.33% of the proceeds from the Tender Offer Portfolio, which reflects a 5% discount of its proportionate share of the Tender Offer Portfolio. As of 31 December 2016, the amount due to PACL II is recorded as a payable by the Fund, adjusted at each period end based on the movement in the fair value of the underlying assets and the income and expense attributable to the Tender Offer Portfolio. The amount is unsecured, non-interest bearing. The following table summarizes the movements in amount due from/(to) to PACL II.
2016 2015
US$ US$
At 1 January 242,923 (6,145,323)
Distributions to PACL II (344,000) 3,290,499
Net (increase)/decrease in payable from
gain attributable to PACL II (138,678) 3,097,747
------------------ ------------------
At 31 December (237,755) 242,923
(b) Directors' remuneration
The Fund pays each of its directors an annual fee and the total fees incurred amounts to US$30,000 (2015: US$30,000). If a director is a member of the Valuation Committee or Audit Committee, the director also receives an additional annual fee of US$10,000, and the Chairman of either Committee receives an additional annual fee of US$5,000. During the year 2016, Jon-Paul Toppino agreed to waive his directors' fees and committee fees.
(c) Share capital held by funds managed by fellow subsidiaries of the Investment Manager
In June 2016, Pacific Alliance Asia Opportunity Master Fund ("PAX LP") sold 5,709,379 (2015: 1,298,106) ordinary shares of the Fund as part of the Fund's share repurchase transaction (see Note 7) which closed on the same date. PAX LP's interest in the Fund remains unchanged at 13.5%. As at 31 December 2016, PAX LP held 8,315,732 (2015: 14,025,111) shares of the Fund, representing 13.5% (2015:13.5%) of total outstanding shares of the Fund.
PAX LP is managed by a fellow subsidiary of the Investment Manager.
11 Financial highlights
Net asset value per share at the end of the year is as follows:
2016 2015
US$ US$
Per share data (for a share outstanding
throughout the year)
Net asset value at 1 January 2.2601 2.6017
Net investment gain 0.0065 0.1810
Net realized and unrealized gains/(losses)
from investments 0.6028 (0.5226)
-------------- --------------
Net asset value at 31 December 2.8694 2.2601
The following represents the ratios to average net assets and other supplemental information:
2016 2015
Total return before performance fees
(1) 27.40% (13.13%)
Performance fees 0.44% -
Total return after performance fees
(1) 26.96% (13.13%)
Ratios to average net assets (2)
Total expenses 1.82% 4.08%
Net investment gain 0.22% 7.18%
(1) Total return represents the change in NAV (before and after performance fees), adjusted for cash flows in relation to capital transactions for the year.
(2) Average net assets is derived from the beginning and ending NAV, adjusted for cash flows in relation to capital transactions for the year. For the year ended 31 December 2016, the average net assets amounted to US$182,216,962 (2015: US$261,922,782).
12 Commitment and contingency
In the normal course of business, the Fund may enter into arrangements that contain a variety of representations and warranties that provide general indemnification under certain circumstances. The Fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund and which have not yet occurred. However, based on experience, the directors expect the risk of loss to be remote, and, therefore, no provision has been recorded.
For the years ended 31 December 2015 and 2016, there is no unfunded commitment in investments.
13 Subsequent events
Management has performed a subsequent events review from 1 January 2017 through to 26 May 2017, being the date that the financial statements were available to be issued. Management concluded there were no material subsequent events which required additional disclosures in these consolidated financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BFLFBDQFLBBE
(END) Dow Jones Newswires
June 01, 2017 06:30 ET (10:30 GMT)
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