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.
As at 31 December 2010 and 2011, the Fund did not have any
investments that were categorized as Level 1 within the fair value
hierarchy.
Level 2
Investments in listed stocks for which trading is restricted for
a certain period of time and for which the restriction is
applicable to market participants in general (for example, legal
person shares containing lock-up periods) are valued using the last
traded prices of the listed stocks 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 and bonds 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 fair value measurement of Level 3 investments does not
include transaction costs that may have been capitalized as part of
the security's cost basis. Assumptions used by the Valuation
Committee due to the lack of observable inputs may significantly
impact the resulting fair value and therefore the Fund's results of
operations.
All of the Fund's investments are categorized as Level 3
investments within the fair value hierarchy. The following table
summarizes the movements in fair value of the Fund's Level 3
instruments by captions:
As at 31 December 2011 Level 3
US$
Investments - stocks 253,438,035
Investments - bonds (Note 6) 48,957,746
Investments - loan receivables (Note
5) 9,807,034
Investments - derivatives 258,900
--------------------
312,461,715
As at 31 December 2010 Level 3
US$
Investments - stocks 272,865,493
Investments - bonds (Note 6) 48,957,746
Investments - loan receivables (Note
5) 13,927,947
--------------------
335,751,186
As at 31 December 2011, investments of US$253,438,035 (2010:
US$258,365,493) were held directly by the Fund, and investments of
US$59,023,680 (2010: US$77,385,693) were held through jointly owned
entities with Pacific Alliance Asia Opportunity Fund L.P. ("PAX
L.P."), an investment fund managed by Pacific Alliance Investment
Management Limited, a fellow subsidiary of the Investment
Manager.
The following table summarizes the movements in fair value of
the Fund's Level 3 instruments.
Investments
Investments Investments- - loan Investments
- stocks bonds receivables -derivatives Total
US$ US$ US$ US$ US$
At 1 January
2010 191,611,208 44,976,526 50,005,128 - 286,592,862
Purchase of
investments 22,422,000 - - - 22,422,000
Proceeds from
sale
of investments (32,617,250) - (39,474,822) - (72,092,072)
Net realized
gains 2,932,600 - 12,508,536 - 15,441,136
Net unrealized
gains/(losses) 88,516,935 3,981,220 (9,110,895) - 83,387,260
------------------ ------------------ ------------------ ------------------ ------------------
At 31 December
2010
and
1 January 2011 272,865,493 48,957,746 13,927,947 - 335,751,186
Proceeds from
sale
of investments (109,052,998) - - - (109,052,998)
Net realized
gains 86,349,238 - - - 86,349,238
Net unrealized
gains/(losses) 3,276,302 - (4,120,913) 258,900 (585,711)
------------------ ------------------ ------------------ ------------------ ------------------
At 31 December
2011 253,438,035 48,957,746 9,807,034 258,900 312,461,715
Total net change in unrealized gains on Level 3 instruments as
shown above are presented in the consolidated statement of
operations.
5 Investments - loans receivable
As at 31 December 2011, the Fund had a secured borrowing
receivable from unaffiliated parties amounting to US$9,807,034
(2010: US$13,927,947). The loan will mature in the next 6 months.
The interest rates charged on the loans at 15% per annum during the
year to 31 December 2011 (2010: 35% to 10% per annum).
For the year ended 31 December 2011, total realized gains
recognized on the loan amounted to US$Nil (2010: US$12,508,536) and
net change in unrealized losses for the loan receivable amounted to
US$4,120,913 (2010: US$9,110,895).
6 Investments - bonds
As at 31 December 2011, the Fund had a bond investment from an
unaffiliated party amounting to US$48,957,746 (2010: US$48,957,746)
which will mature within the next 28 months. The Fund held
collateral in the form of assets of the bond issuer and its
subsidiaries. The fair value of the investment is determined by the
Valuation Committee. For the year ended 31 December 2011, total
unrealized gains recognized on the bond amounted to US$Nil (2010:
US$3,981,220).
7 Bank loan and restricted cash
In order to finance the investment projects in different
currencies, the Fund may from time to time enter into loan
agreements with banks which are fully secured by deposits in
currencies other than the denomination of the loans held directly
by the Fund or related entities. In the event that amounts under
the loan agreements are due and not paid, the banks are entitled to
receive an amount of the deposits equal to the unpaid amount.
On 25 February 2011, the Fund borrowed a bank loan of
US$38,121,000 ("the Loan") from a bank based in Hong Kong, due on 1
February 2012, to facilitate a cash distribution to PACL II for its
subsequent distribution to its shareholders. The interest charged
on the Loan is LIBOR plus 2.5% per annum and the Loan was pledged
with a cash allocated from the realization proceed of the Tender
Offer Portfolio (see definition in Note 13(a) below) of US$
43,330,560 or RMB273,000,000 kept by the Fund as a fixed deposit
(the "Pledged Deposit").
As part of the arrangement, all interest income earned from the
Pledged Deposit, Loan-related arrangement and handling fee
expenses, interest expenses incurred on the Loan, and foreign
exchange gains/(losses) arising from the Loan will be allocated to
the PACL II.
Pacific Alliance China L... (LSE:PACL)
Historical Stock Chart
From May 2024 to Jun 2024
Pacific Alliance China L... (LSE:PACL)
Historical Stock Chart
From Jun 2023 to Jun 2024
