PACL.L Regulatory News (PACL)

28 April 2020

Pacific Alliance China Land Limited

Full year results for the period ended 31 December 2019

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 2019. 

Highlights

· Net asset value as at 31 December 2019 was US$1.78 million, representing US$0.6697 per share, a 75.37% decrease from 31 December 2018 (US$2.7192 per share).

· The Company's shares closed at US$0.71 on 31 December 2019, a 72.48% decrease from 31 December 2018 and a 6.0% premium to the audited NAV per share.

Company Developments

On 9 April 2020, the Company declared a dividend of US$1.3 million (US$0.49 per share, rounded down to the nearest US$0.01), which is expected to be distributed on 30 April 2020. The Company has also sent a circular (the "Circular") and notice of extraordinary general meeting to be held on 12 May 2020 (the "EGM") for the purpose of proposing a vote on the cancellation of the admission of the Company's ordinary shares to trading on AIM (the "De-Listing"), and the subsequent voluntary liquidation of the Company (the "Proposal"). 

The detailed reasons for, and background to, the Proposal are set out in the Circular. The De-Listing requires the approval of not less than 75 per cent. of the votes cast by Shareholders at the EGM. Should the Proposal resolutions be approved by shareholders, cancellation of the admission to trading on AIM of the Company's ordinary shares is expected to become effective on 13 May 2020.

Upon liquidation, and after setting aside the liquidation expenses, any excess cash will be paid to shareholders in a final distribution or paid to a third-party charity nominated by the shareholders, as determined by the joint voluntary liquidators.

Patrick Boot, on behalf of, Pacific Alliance Real Estate Limited commented that:

 "We look forward to the completion of the delisting and liquidation and I would also like to thank the shareholders, on behalf of the board of directors, for all their support over the many years."

For further information please contact:

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 (formerly known as Pacific Alliance Group), the Asian alternative investment fund 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 400 staff working in the region.

For more information about PAG, please visit: www.pag.com

Chairperson's Statement

As of 31 December 2019, the net asset value (NAV) of Pacific Alliance China Land Limited (the "Fund" or "PACL") was US$1.78 million, or US$0.6697 per share, representing a 75.37% decrease from 31 December 2018.

Following the sale of its assets, PACL no longer has active investments. Upon liquidation, and after setting aside the liquidation expenses, any excess cash will be paid to shareholders in a final distribution, or paid to a third-party charity nominated by the shareholders, as determined by the joint voluntary liquidators.

On behalf of the Board of Directors, I would like to thank you for your continued commitment and support.

Margaret Brooke

Chairperson

Investment Manager's Report

On 31 December 2019, the Fund's share price closed at US$0.71, representing a 72.48% decrease from 31 December 2018 and a 6.02% premium to the NAV per share.

Portfolio Summary

As at 31 December 2019, the Company held cash of US$1.96 million.

Note

(1) The gross investment value includes an amount attributable to the PACL II shareholders.

Distribution

The proceeds of the capital reduction of the Tianjin WOFE were distributed as a dividend of US$5 million to shareholders in September 2019. The Board of Directors has declared a dividend of US$1.3 million on 9 April 2020, which is expected to be paid on 30 April 2020.

The Manager expects the Fund to be delisted by the end of Q2 2020, after which a liquidator will be appointed to wind up the Fund. Once the Fund is delisted, and liquidation is completed, which the Manager expects to take place over the next few months, any excess cash will be paid to shareholders in a final distribution as determined by the appointed liquidators.

Conclusion

The Manager is currently formulating a proposal to Shareholders to commence an orderly wind up of the Fund and cancellation of the Fund's shares from trading on AIM.

PACIFIC ALLIANCE CHINA LAND LIMITED

(Incorporated in the Cayman Islands with limited liability)

CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES

AS AT 31 DECEMBER 2019

Approved by the Board of Directors

PACIFIC ALLIANCE CHINA LAND LIMITED

(Incorporated in the Cayman Islands with limited liability)

CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED 31 DECEMBER 2019

PACIFIC ALLIANCE CHINA LAND LIMITED

(Incorporated in the Cayman Islands with limited liability)

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS

FOR THE YEAR ENDED 31 DECEMBER 2019

PACIFIC ALLIANCE CHINA LAND LIMITED

(Incorporated in the Cayman Islands with limited liability)

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2019

1 Organization

Pacific Alliance China Land Limited (the "Fund") was incorporated on 5 September 2007 in the Cayman Islands. It is a closed-ended 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 2019, all investments under management were realized and all the sale proceeds had been received by underlying special purpose vehicles.

The consolidated financial statements were approved by the Board of Directors on 24 April 2020.

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.

2 Summary of significant accounting policies (Continued)

(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 2019 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(j).

(c) Investments

The Fund may hold both listed securities and unlisted securities, which by nature have limited marketability.

(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.

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.

2 Summary of significant accounting policies (Continued)

(c) Investments (Continued)

(ii) Fair value measurement (Continued)

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 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.

(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 gains and losses in the consolidated statement of operations.

2 Summary of significant accounting policies (Continued)

(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 7.

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.

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. There are no 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.

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.

Since the Fund no longer holds any investment as at 31 December 2019 and 2018, the directors consider that the Fund is not exposed to market price risk.

(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.

3 Concentration of risks (Continued)

(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:

The Investment Manager manages the Fund's currency exposure through use of currency options. Refer to Note 4.

(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 2019 and 2018, the main concentrations of credit risk to which the Fund is exposed arise from other receivables, and cash and bank balances.

As at 31 December 2019, the Fund has cash and bank balances amounting to US$1,960,474 (2018: US$8,035,357) held in multiple different bank accounts with same financial institution. The Fund attempts to minimize its credit risk exposure on its cash and bank balances by monitoring the size of its credit exposure to single counterpart and by only entering into banking relationships with reputable financial institution.

As at December 31, 2019, the Fund had other receivables of US$547,393 (2018: US$546,115), which mainly consists of the consideration US$95,503 (2018: nil) arising from the transfer of SPVs (see Note 9(d) for details), receivable of tax reserve amounting to US$450,000 (2018: US$450,000) in relation to the tax provision of Project HNA (refer to Note 9(e) for details), and amount due from PACL II Limited of US$111,623 (2018: Nil) relating to cash allocation (refer to Note 9(a) for details). All the counterparties are not rated by any credit agencies.

The Fund does not anticipate any material loss as a result of credit risk.

3 Concentration of risks (Continued)

(e) Liquidity risk

Liquidity risk is the risk that the Fund will encounter difficulty in settling a liability or selling an asset at close to its fair value. The Fund manages liquidity risk by maintaining a sufficient amount of liquid assets to ensure operational requirements are fulfilled.

The contractual maturity date of all financial liabilities disclosed in the balance sheet is less than 1 year and balances due within 1 year equal their carrying amounts, as the impact of discounting is not significant. Since the Fund has reserved enough cash to settle expected future obligation, the directors consider the liquidity risk of the Fund to be minimal.

As at 31 December 2019, the Fund has net current assets of US$1,776,680 (2018: US$7,214,144).

The Fund is closed-ended, thus, not exposed to redemptions of shares by its shareholders.

4 Derivative instruments

The Fund transacts in derivative instruments including options with each instrument's primary risk exposure being equity, credit or 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.

There were no derivative contracts held by the Fund as at 31 December 2019 and 2018.

The following table indicates the gains and losses on derivatives, by contract type, as included in the consolidated statement of operations.

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.

4 Derivative instruments (Continued)

As at 31 December 2019 and 2018, the Partnership does not have any derivative assets or cash collateral being used by counterparties to offset derivatives liabilities on its statements of assets, liabilities and partner's capital.

5 Other receivables

6 Share capital, tendered shares and dividend

As at 31 December 2019, the total number of authorized ordinary shares was 10,000,000,000 (2018: 10,000,000,000) with par value of US$0.01 (2018: US$0.01) per share. As at 31 December 2019, the Company had 2,653,078 (2018: 2,653,078) ordinary shares in issue.

During the year ended 31 December 2019, the Fund had a distribution to shareholders of US$5,000,000 by way of a dividend of US$1.88 per share, from the proceeds of the capital reduction of the Tianjin WOFE used for the Project Beijing Olympic.

7 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 2019, 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$Nil (2018: US$Nil) and US$743,333 (2018: US$743,333) 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.

7 Taxation (Continued)

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.

8 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 2019, total management fee amounted to US$109,365 (2018: US$2,067,143); There was US$43,839 management fee payable as at 31 December 2019 (2018: US$ 315,050).

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 2019, total performance fees amounted to US$ Nil (2018: Nil). As at 31 December 2019, performance fees payable amounted to US$ Nil (2018: US$133,162).

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.

9 Related party transactions

Apart from the related party transactions disclosed in Note 8, 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 2019 and 2018, the amount due from/to PACL II is recorded as a receivable from/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 and repayable on demand.

9 Related party transactions (Continued)

(a) Restructuring with PACL II Limited (Continued)

The following table summarizes the movements in amount due from/to PACL II.

(b) Directors' remuneration

The Fund pays each of its directors an annual fee and the total fees incurred amounts to US$30,000 (2018: 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 2019 and 2018, 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

Pacific Alliance Asia Opportunity Master Fund ("PAX LP") is managed by a fellow subsidiary of the Investment Manager.

PAX LP's interest in the Fund remains unchanged at 13.5%. As at 31 December 2019, PAX LP held 358,173 shares of the Company, representing 13.5% of total outstanding shares of the Company.

PAX LP is managed by a fellow subsidiary of the Investment Manager.

(d) SPVs transfer

As at 31 December 2019, the Fund transferred its interest in the SPVs, Empire Growth Holding Limited (BVI) and Kingdom Right Limited (HK), to PAX LP and the transfer consideration was amounting to US$95,503.

(e) Other receivable from fellow subsidiaries of the Investment Manager

As at 31 December 2019, the other receivable US$450,000 from PAX LP is related to the tax provision for Project HNA (the "Proceed"). The Proceed was paid to PAX LP as the reserve for the tax provision.

10 Financial highlights

Net asset value per share at the end of the year is as follows:

The following represents the ratios to average net assets and other supplemental information:

(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 2019, the average net assets amounted to US$5,353,739 (2018: US$95,670,321).

11 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 2019 and 2018, there is no unfunded commitment in investments.

12 Subsequent events

Management has performed a subsequent events review from 1 January 2020 through to 24 April 2020 being the date that the financial statements were available to be issued. On 10 February 2020, the Fund received US$450,000 from PAX LP, which was paid to PAX LP as the tax reserve for the Project HNA (see Note 9(e) for details), as the chance for the payment of the withholding tax for Project HNA is remote. Hence, the Board of Directors decided to reverse the tax provision amounting to US$743,333 on 6 February 2020.

The Investment Manager expects the Fund to be delisted by the end of June 2020 and will start the liquidation process. The Board of Directors has declared a dividend of US$1.3 million on 9 April 2020, which is expected to be paid on 30 April 2020.