Maiden Interim Results

Wednesday, 27. August 2008 08:02
Pacific Alliance China Land Limited
27 August, 2008


Pacific Alliance Asia China Land Limited
("PACL" or "the Company")

Maiden Interim Results
For the period from 5 September 2007 to 30 June 2008

Pacific Alliance China Land Limited ("PACL" or "the Company"), the
private equity fund focused on investing in a portfolio of
investments in existing properties, new developments, distressed
projects and pre-IPO and IPO real estate companies in Greater China,
today announces its maiden interim results for the period from 5
September 2007 (Date of Incorporation) to 30 June 2008.

Financial Highlights

* Net asset value as at 30 June 2008 was US$412 million,
representing US$1.0335 per share, a 3.35% increase since 22
November 2007 (listing date).
* Profit before tax for the period was US$15 million
* Cash and cash equivalents as at 30 June 2008 of US$198
million

Operational Highlights
* Successful AIM listing and raising of US$400 million on 22
November 2007
* As at 30 June 2008, the Company was approximately 50%
invested with the portfolio allocation, including cash deposits, as
follows; pre-IPO 18.7%, bridge financings 17.3% and co-development
14.5%. The Company expects funds to be fully invested in the coming
months.
* Key investments since listing include:

* December 2007: Cash investment in Hainan Airport Group -
The Company invested US$20 million cash for a 4.9% equity stake in
Hainan Airport Group. The group owns and operates airport
facilities around China and will continue to acquire other
facilities in tourism cities and in the fast growing second and
third tier cities, further strengthening its position as the
leading owner and operator of airport facilities in China.

* January 2008: Cash investment in mid-sized real estate
developer, Pearl River Delta Region, Guandong Province - The
Company invested US$40 million cash in a mid-sized real estate
developer, based in the Pearl River Delta Region, Guandong
Province. It is a strong mid-sized developer, property manager and
interior design firm based in Guangzhou and active throughout
Guangdong province with a focus on mid-end properties with creative
design.

* February 2008: Extension of bridge loan to Beijing
developer in Chaoyang District - The Company extended a US$30
million bridge loan to a Beijing developer. The borrower is
developing a unique high-end comprehensive development in the
Asian/Olympic Game Village Area in Beijing.

* March 2008: Cash investment in Shanghai based property
developer, Yangtze River Delta and Pan-Bohai Rim regions - The
Company invested US$15 million cash in a leading property developer
in the Yangtze River Delta region. This was a strategic pre-IPO
investment in the developer, which has a diversified land bank
totaling 2.4 million square meters in various cities including
Shanghai, Tianjin, Shenyang, Wuxi and Beijing.

* April 2008: Cash investment in Residential property
development, Qingdao - The Company invested US$28 million cash in a
residential property development in Qingdao, one of the fastest
growing second-tier cities in China. The investment will be a
strategic co-development with one of China's largest developers
specializing in mid to high income residential developments in
first and second tier cities. The investment will be structured as
joint acquisition of an existing project company, of which PACL
will own 40%.

* April 2008: Extension of bridge loan to Beijing based
property developer - The Company extended a US$30 million bridge
loan to a Beijing based property developer as part of a combined
US$92 million financing with Pacific Alliance Asia Opportunity
Funds. The borrower has developed a middle class shopping mall
located in a well-established residential area of Beijing.

* June 2008: Investment in a residential property
development in Huzhou - The Company invested US$21 million in a
residential property development in Huzhou, a fast growing
third-tier city with a population of 2.57 million located in the
Yangtze River Delta. Huzhou has a per capita GDP that is greater
than larger cities such as Chengdu, Chongqing and Changsha. The
investment forms a joint venture with Shanghai Jingrui Properties
(Group) Co. Ltd, a mid-sized PRC developer that is minority-owned
by Equity International of Chicago.


Commenting on the results, Patrick Boot, Managing Partner, Pacific
Alliance Real Estate, said:

"We have had a very active investment programme during our first six
months of operation. As a result, we are well on the way to building
a substantial portfolio of property assets in the residential,
office, retail, hospitality and industrial real estate sectors.
Furthermore, we are confident that we can continue to unlock value in
the exciting real estate sector in Greater China".


For more information please contact:


+-------------------------------------------------------------------+
| MANAGER: | LEGAL COUNSEL: |
| Chris Gradel, Managing Partner | Jon Lewis, General Counsel |
| Pacific Alliance Group | Pacific Alliance Group |
| 16/F St. John's Building | 16/F St. John's Building |
| 33 Garden Road | 33 Garden Road |
| Central, Hong Kong | Central, Hong Kong |
| Tel: +852 29180088 | Tel: +852 29180088 |
| Fax: +852 29180881 | Fax: +852 29180881 |
| cgradel@pacific-alliance.com | jlewis@pacific-alliance.com |
| | |
|----------------------------------+--------------------------------|
| BROKER: | NOMINATED ADVISER: |
| Hiroshi Funaki | Philip Secrett |
| LCF Edmond de Rothschild | Grant Thornton UK LLP |
| Securities | Tel: +44 20 7383 5100 |
| Tel: +44 20 7845 5960 | Philip.J.Secrett@gtuk.com |
| Fax: +44 20 7845 5961 | |
| funds@lcfr.co.uk | |
| | |
|----------------------------------+--------------------------------|
| MEDIA RELATIONS: | CISX SPONSOR |
| | |
| Pacific Alliance Group | LCF Edmond de Rothschild |
| Sophie Hoggarth | (C.I.) Limited |
| Pacific Alliance Group | John Falla |
| Tel: +86 21 61135818 | Tel: +44 1481 735579 |
| shoggarth@pacific-alliance.com | johnf@lcfci.com |
| | |
| Financial Dynamics, London | |
| Christine Wood/David Cranmer | |
| Ed Gascoigne-Pees/ David Cranmer | |
| Tel: + 44 20 72697132 | |
| | |
| Financial Dynamics, Asia | |
| Alastair Hetherington/Winnie Lo | |
| Tel: +852 3716 9800 | |
| | |
+-------------------------------------------------------------------+


Notes to Editors:
About Pacific Alliance China Land Limited
Pacific Alliance China Land Limited (AIM:PACL) is a private equity
fund focused on investing in a portfolio of investments in existing
properties, new developments, distressed projects and pre-IPO and IPO
real estate companies in Greater China. The Company was admitted to
trading on the AIM Market of the London Stock Exchange and to listing
on the Channel Islands Stock Exchange in November 2007.

For more information, see www.pacl-fund.com

Chairman's Statement

Since late 2007, real estate prices in China have softened due to the
Government's continued tightening of credit to property developers
and its increasing regulation of foreign investment in real estate.
Chinese property stocks saw large share price drops as the earnings
of developers were squeezed due to higher funding costs and slower
sales. During the same period, the NAV of Pacific Alliance China Land
Limited (the "Company") increased by 3.35% since it was admitted to
the AIM Market of the London Stock Exchange and the Channel Islands
Stock Exchange on 22 November 2007.

The Company's increase in NAV was largely driven by two key factors.
First was an upward revaluation of 13% of the Qingdao residential
co-development project with Qingdao Vanke Real Estate Co. Ltd, a
subsidiary of China Vanke Co. Ltd. which is the largest listed real
estate company in China. The co-development strategy is becoming
increasingly attractive given the Government's continuing tight
credit policy to Chinese property developers. By having RMB
available on-shore the Company can invest in attractive projects at
below market prices, which is an advantage the Company has over many
of its competitors. Second was an upward revaluation of the equity
kicker that was part of the bridge financing for the Beijing Olympic
Project resulting in a 38% gain on the investment to date. The
Company's bridge financing strategy is another good short-term use of
cash until the Company sees more distressed asset acquisition
opportunities, should the tightening continue, or makes investments
to enjoy a rebound should the tightening ease. Other investments are
currently held at cost or accruing interest as appropriate pending
the next quarterly valuation at the end of September.

As at 30 June 2008, the Company was approximately 50% invested with
the portfolio allocation, including cash deposits, as follows;
pre-IPO 18.7%, bridge financings 17.3% and co-development 14.5%. The
Company expects that as funds are fully invested in the coming
months, the portfolio allocation will be approximately 25% pre-IPO
investments, 25% co-development investments, 30% bridge financings,
and 20% distressed asset acquisitions. As the Company's current
bridge financings mature these funds shall be re-invested in
distressed asset acquisition opportunities and the portfolio should
then reflect the Company's target strategy allocation. However, it is
also important the Company retain the flexibility to take advantage
of opportunities resulting from changes in the economy and Government
policy as they develop.

In the first half of 2008, the Investment Manager expanded its team
to 12 dedicated staff focused on China real estate investment and has
quickly established itself as one of the largest and most experienced
real estate teams in China.

Just recently the Government signalled it may begin to relax its
tight credit policy towards the property sector. If the Government
goes ahead with this, it bodes well for the property sector and may
result in a rebound in sales volumes and prices. We are confident
that despite the uncertain outlook for the world economy and the
current weakness of the China real estate market the Company can
continue to deliver attractive risk-adjusted returns through
investing in high quality real estate and developers at attractive
valuations.


Horst F. Geicke
Chairman

26 August, 2008

Investment Manager's Report

Portfolio Performance

As at 30 June 2008, the Company's net asset value per share (NAV) was
US$ 1.0335, a 3.35% increase since 22 November 2007 (listing date).
The Company's share price closed at US$ 0.89 on 30 June 2008.


Realized and Unrealized Income

Total income for the period from 5 September 2007 to 30 June 2008 was
US$ 31,773,472.


Realised Appreciation US$
Investment Interest Income 7,155,599
Deposit Interest 4,768,303
Other Income 238,016

12,161,918
Unrealised Appreciation US$

Bridge Financing 11,547,128
Co-Development 5,760,000
Foreign Exchange 2,304,426
19,611,554
31,773,472



Portfolio Summary

As at 30 June 2008, the Company held investments with a cost of
approximately US$ 185 million and a carrying value of US$ 202
million. The Company's portfolio is diversified across three
strategies including Pre-IPO Financing, Bridge Financing and
Co-Development.


Breakdown of Investments by Strategy


+---------------------------------+
| Type of Investment | % of Total |
|--------------------+------------|
| Deposit | 49.49% |
|--------------------+------------|
| Pre-IPO Financing | 18.71% |
|--------------------+------------|
| Bridge Financing | 17.31% |
|--------------------+------------|
| Co-Development | 14.49% |
+---------------------------------+



+-------------------------------------------------------------------+
| Investments | Value (US$) | Type of | % of | Location |
| | | investment | Total | |
|----------------+-------------+----------------+--------+----------|
| Project Villa | 15,000,000 | Pre-IPO | 3.74% | Greater |
| | | Financing | | China |
|----------------+-------------+----------------+--------+----------|
| Hainan Airport | 20,000,000 | Pre-IPO | 4.99% | Greater |
| Group | | Financing | | China |
|----------------+-------------+----------------+--------+----------|
| Project | | | | Huzhou |
| Shanghai | | | | |
| Jingrui | 20,732,390 | Co-Development | 5.17% | |
|----------------+-------------+----------------+--------+----------|
| | | Bridge | | Beijing |
| Project RMBox | 27,793,950 | Financing | 6.94% | |
|----------------+-------------+----------------+--------+----------|
| Project Blue | | | | Qingdao |
| Bird | 37,350,400 | Co-Development | 9.32% | |
|----------------+-------------+----------------+--------+----------|
| | | Pre-IPO | | Guandong |
| Project Speed | 40,000,000 | Financing | 9.98% | |
|----------------+-------------+----------------+--------+----------|
| Project | | | | Beijing |
| Beijing | | Bridge | | |
| Olympic | 41,547,128 | Financing | 10.37% | |
|----------------+-------------+----------------+--------+----------|
| Cash | 198,318,942 | Deposit | 49.49% | |
+-------------------------------------------------------------------+




Investment Strategy

The Company seeks to achieve attractive risk adjusted returns through
pre-IPO investment in real estate companies, high-yield bridge
financing, co-development with regional real estate development
companies, and acquisition of assets in distressed situations.

Each of these strategies can be considered opportunistic to some
degree given China's current credit crunch. Accordingly, developers
are looking for partners at both corporate (pre-IPO) and project
(co-development) levels given the need to secure alternative
financing sources. They are also being forced to consider bridging
solutions (bridge financings) or selling assets directly (distressed
asset sales) in order to raise capital and keep their businesses
solvent. The Investment Manager will continue to seek and evaluate
opportunities with these characteristics. The scale and nature of
such opportunities will likely evolve with changes in the economy and
Government policies.

Set out below are descriptions of the Company's current strategies:

Pre-IPO Financing

The real estate industry in China is still in its early stage of
development. Private ownership of property became more widespread
with the privatization of State Owned Enterprises during the 90s, and
it's only in the past 10 years that foreign investment in China's
real estate sector has gained momentum. But we are still in the early
stage of the industry's development, and ownership within each sector
(i.e. residential, commercial, hotel, industrial) is still quite
fragmented. As such there are still many opportunities to invest in
good medium-sized real estate companies, providing capital to help
them expand their businesses ahead of an IPO. We will continue to
search all sectors for companies with good business models and strong
management.

Bridge Financing

As the first phase of the credit crunch continues, bridge financing
opportunities will continue as developers are only now beginning to
sell their assets at a discount. Developers will try to keep their
assets as long as possible and pay higher interest rates through
bridge financing if they think they can retain ownership. These
bridge financings are high-yield financings against well
collateralized assets, and we expect to see more of these
opportunities in the next few months. The Investment Manager will
also leverage the network of its other group funds to access a larger
pool of investment opportunities.


Co-Development

Prior to 2007 developers could use leverage to acquire land, and in
2007 when the Government began tightening credit it restricted banks
from lending to property developers. As such, many developers are
becoming more desperate for cash to finance new projects or projects
under development. As a result, developers are now more willing to
work with foreign funds on co-development projects which have a
history of higher returns. The Company will continue looking for
strong co-development partners, who have a good pipeline of projects
across multiple markets, to build good long-term partnerships.

Asset Acquisitions

As the credit crunch deepens we expect to see developers become
sufficiently starved of funds that they will consider selling assets
at distressed prices. We believe this will occur in the second half
of 2008 and into 2009. We have allocated a portion of the Company's
remaining funds for these types of opportunities in the coming months
and it has been, and continues to be, our strategy to reinvest bridge
financing proceeds into distressed asset acquisitions upon maturity.

Conclusion

We have a strong pipeline of attractive investment opportunities
across these specific strategies, and we remain confident the Company
will achieve its objective of providing Shareholders with capital
appreciation and a regular level of income through an annual
dividend.

PACIFIC ALLIANCE CHINA LAND LIMITED
(incorporated in the Cayman Islands with limited liability)

CONSOLIDATED STATEMENT OF NET ASSETS
AS AT 30 JUNE 2008



Note 30-Jun-08

US$
ASSETS
Pre-IPO financing 75,000,000
Bridge financing 69,341,078
Co-development 58,082,790

202,423,868

Cash at bank 2(g), 6 198,318,942
Investment interest receivable 5,810,271
Deposit & prepayments 8,358,431

Total Assets 414,911,512

LIABILITIES
Accrued expenses and other payables 813,302
Provision for taxation 2(j) 1,750,726

Total Liabilities 2,564,028

NET ASSETS
412,347,484


ANALYSIS OF NET ASSETS
Attributable to shareholders 399,115,000
Retained earnings 13,232,484

Net Assets (equivalent to US$ 1.0335 per share
based on 412,347,484
399,000,000 shares of capital stock outstanding)
















































The accompanying notes are an integral part of these consolidated
financial statements

CONSOLIDATED SCHEDULE OF INVESTMENT PORTFOLIO



As at 30 June 2008

Cost Fair Value %

US$ US$

Pre-IPO Investment

Project Villa 15,000,000 15,000,000 3.64

Hainan Airport Group 20,000,000 20,000,000 4.85

Project Speed 40,000,000 40,000,000 9.70

75,000,000 75,000,000

Bridge Financing

Project RMBox 27,793,950 27,793,950 6.74

Project Beijing Olympic 30,000,000 41,547,128 10.08

57,793,950 69,341,078

Co - Development

Project Shanghai Jingrui 20,732,390 20,732,390 5.03

Project Blue Bird 31,590,400 37,350,400 9.06

52,322,790 58,082,790
TOTAL INVESTMENTS 185,116,740 202,423,868



Note: Percentages (%) above are calculated based on net assets.


CONSOLIDATED STATEMENT OF OPERATIONS



Period from
5-Sep-07
to
Note 30-Jun-08

US$

Income
Investment interest income 2(k) 7,155,599
Interest income 2(k) 4,768,303
Other income 238,016

TOTAL INCOME 12,161,918

Expenses
Legal and professional fees -
Investments (2,167,059)
Setup costs (7,880,382)
Management fees 3 (4,853,270)
Other expenses (1,889,551)

TOTAL EXPENSES (16,790,262)

Unrealised gain on investments 17,307,128

Unrealised foreign exchange gain 2(h) 2,304,426

PROFIT BEFORE TAXATION 14,983,210

Provision for taxation 2(j) (1,750,726)


PROFIT AFTER TAXATION AND 13,232,484
NET INCOME CARRIED FORWARD



CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS




Share Share Share Retained Total
Capital Premium Reserves Earnings

US$ US$ US$ US$ US$


As at 22
November
2007
(Listing
Date) 4,000,000 396,000,000 - - 400,000,000

Cancellation
of 1 million
shares on 30
June 2008 (10,000) (990,000) - - (1,000,000)

Additions to
share
reserves - - 115,000 - 115,000

Net
operating
loss during
the period - - - (4,074,644) (4,074,644)

Unrealised
gains on
investments - - - 17,307,128 17,307,128

As at 30 3,990,000 395,010,000 115,000 13,232,484
June 2008 412,347,484



CONSOLIDATED STATEMENT OF CASH FLOWS



Period from
05-Sep-07
to
30-Jun-08

US$
Cash flows from operating activities
Net income 13,232,484

Adjustment to reconcile net gain to net
cash
used in operating activities
Net unrealised appreciation on
investments (17,307,128)
Other receivable (5,810,271)
Deposit & prepayments (8,358,431)
Accrued expenses and other payables 2,564,028

Net cash used in operating activities (15,679,318))

Cash flows from investing activities
Purchase of investments (185,116,740)

Cash flows from financing activities
Share capital 3,990,000
Share premium 395,010,000
Share reserves 115,000

399,115,000


Net increase in cash and cash
equivalents 198,318,942


Analysis of cash and cash equivalents
Cash at bank 198,318,942



Notes to the Consolidated Financial Statements


1. ORGANISATION


Pacific Alliance China Land Limited (the "Company") was incorporated
on 5 September 2007 in the Cayman Islands. It is a closed-end Cayman
Islands registered, exempted company. The address of its registered
office is PO Box 309GT, Ugland House, South Church Street, George
Town, Grand Cayman, Cayman Islands.

The Company's principal investment objectives are to provide
shareholders with capital growth and a regular level of income, from
a diversified portfolio of property in Greater China and to achieve
above average returns for an acceptable level of risk.

The Company's investment activities are managed by Pacific Alliance
Real Estate Limited (the "Investment Manager"). The Company has
appointed Sanne Trust Company Limited to act as administrator,
custodian and registrar of the Company's assets pursuant to the
Custodian Agreement and Fund Administration Services Agreement,
respectively.

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 ("U.S. GAAP"). Such policies are consistently followed by
the Company in the preparation of its consolidated financial
statements.

(a) Principles of Consolidation

The Company uses wholly owned Special Purpose Vehicles (its
"subsidiaries") to hold and transact in certain investments and
lending. These consolidated financial statements include the
financial statements of the Company and its subsidiaries
(collectively the "Group").

Subsidiaries are fully consolidated from the date on which control is
transferred to the Group and deconsolidated from the date that
control ceases. Inter-company transactions between Group companies
are eliminated upon consolidation.

(b) Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements and
accompanying notes. Management believes that the estimates utilized
in preparing the financial statements are reasonable and prudent;
however, actual results could differ from these estimates.

(c) Basis of Accounting for Securities Transactions

Security transactions are accounted for on the trade date, the date
the trade is executed. Costs used in determining realised gains or
losses on the sale of investment securities are based on the specific
identification method. Legal and due diligence fees associated with
acquiring investments are capitalised as part of the cost of the
investment.

(d) Investment Valuation

Securities listed on a stock exchange or traded on any other
regulated market will be valued at the last closing price on such
exchange or market or, if no such price is available, the mean of the
bid and ask price on such day will be used. If there is no such price
or such market price is not representative of the fair market value
of any such security, then the security will be valued at the same
price as at the last reporting date, in consultation with the
Investment Manager, unless there are specific considerations or
events which occurred which the Investment Manager in good faith
considers, with reference to the valuation guidance set out in U.S.
GAAP, to have an impact on the fair market value of such securities,
in which case the securities will be valued in accordance with U.S.
GAAP. If a security is listed on several stock exchanges or markets,
the last closing price on the stock exchange or market which
constitutes the main market for such security will be used.

Securities for which quotations are not readily available are
recorded at fair value with reference to U.S. GAAP and the
International Private Equity and Venture Capital Valuation
Guidelines.

Although the Valuation Committee, which is established by the
Investment Manager and the Board of Directors, uses its best judgment
in estimating fair value, there are inherent limitations in any
estimation 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 financial statements.

If a revaluation of an unlisted security/asset of the Company is
proposed by the Investment Manager, it shall be accepted by the
Company at its revised value only upon approval of the Valuation
Committee. The Investment Manager will present a valuation report
(including a valuation report prepared by an independent external
valuer, as deemed appropriate). The Valuation Committee will accept
or reject the valuation report and may require the Investment Manager
to obtain other third party valuation reports if deemed necessary.
The Investment Manager will revalue all unlisted securities/assets at
least on an annual basis.

The Investment Manager, having obtained Valuation Committee approval,
may adjust the value of any investment if, having regard to currency,
applicable rate of interest, maturity, marketability and/or such
other considerations as it deems relevant, it considers that such
adjustment is required to reflect the fair market value thereof.

If a particular value is not ascertainable as above provided or if
the Investment Manager considers that some other method of valuation
better reflects the fair market value of the relevant investment,
then in such case the method of valuation of the relevant investment
shall be such as the Manager shall decide having first received the
Valuation Committee's approval.

(e) Derivative Financial Instruments

In order to hedge against interest rate risks and currency risk, the
Company may, where appropriate enter in to forward interest rate
agreements, forward currency agreements, interest rate and bond
futures contracts and interest rate swaps and purchase and write put
or call options on interest rates and put or call options on futures
on interest rates. All such financial instruments will be held at
their fair value which is obtained from option pricing models. When
a contract is closed / expired, the Company records a realised gain
or loss equal to the difference between the value of the contract at
the time it was opened and the value at the time it was closed.

(f) Loans Receivable

Loans receivable are carried at cost, which approximates fair value
due to the relatively short maturity of the loans, unless the loan is
impaired. Evaluation of loans for impairment is based on the fair
value of the underlying collateral, which is determined on an
individual loan basis.

(g) Cash and Cash Equivalents

Cash and cash equivalents includes cash at banks and is valued at its
face value with interest accrued to the end of each day.

(h) Foreign Currency Translation

The books and records of the Group are maintained in United States
Dollars ("US$").

Assets and liabilities denominated in foreign currencies are
translated into US$ using period-end spot foreign currency exchange
rates, while revenue and expenses are translated at the daily spot
rates of exchanges. The net realised and unrealised gains or losses
from investments denominated in currencies other than US$ include
that portion of the results of operations arising as a result of
changes in foreign currency exchange rates and the fluctuations
arising from changes in the market prices of securities held or sold
short during the period.

The foreign currency element of net realised gains or losses
represents net foreign currency exchange gains or losses from the
disposition of foreign currencies and other foreign currency
denominated assets and liabilities. The foreign currency translation
element of the changes in unrealised appreciation or depreciation
represents the change in the value of foreign currencies held and
other assets and liabilities arising as a result of changes in
foreign currency exchange rates.

(i) Distribution Policy and Discount Control

Subject to the availability of cash and reserves, the Company will
seek, where circumstances allow, to provide a regular level of income
in the form of a dividend up to an annual dividend yield of six per
cent.

In the event that Ordinary Shares are trading at a substantial
discount to the then prevailing Net Asset Value per Share for an
extended period of time, the Board will consider the most appropriate
method of reducing the discount, which may include making market
purchase of Ordinary Shares and/or implementing a Buyback Programme.
The implementation and timing of any Buyback Programme will be at the
absolute discretion of the Board and not at the option of
Shareholders.

Any repurchase of Ordinary Shares will be made subject to the laws of
the Cayman Islands and within guidelines established from time to
time by the Board (which will take in to account the income and cash
flow requirements of the Company). General purchases of Ordinary
Shares of up to 14.99 per cent of the Ordinary Shares in issue will
only be made through the market and general purchases of over 15%
will be made through a Buyback Programme.

Any purchase will be made using cash at prices below the prevailing
Net Asset Value (NAV) per Share where the Directors believe such
purchases will enhance shareholder value. Such purchases may only be
made provided the price to be paid is not more than the higher of:

(i) five per cent above the average of the middle market
quotations on AIM for the Ordinary Shares for the five Business Days
before the purchase is made

(ii) the higher of the price of the last independent trade and the
highest current independent bid at the time of purchase.

(j) Income Taxes

Under current Cayman Island legislation applicable to an exempt
company, there is no income tax, capital gains or withholding tax,
estate duty, or inheritance tax payable by the Company or by its
shareholders in respect of their shares.

The Company may be subject to taxes imposed in other countries in
which it invests. Such taxes are generally based on income and/or
gains earned. Taxes are accrued and applied to net realised gains
and net change in unrealised appreciation, as applicable, as the
income and/or gains are earned.

No provision for Hong Kong profits tax has been made as the Directors
believe that the Company has no Hong Kong sourced profits during the
period.

A provision of US$ 1,750,726 has been included within the accounts
for China taxation.

(k) Recognition of Income and Expenses

Interest income on cash and bank balances is accrued as earned using
the effective interest method. Interest income on loans is accrued
as earned using the coupon rates of the respective loans, which
approximate the effective interest rates.

Loan origination income is initially recorded as deferred loan
revenue and recognized in income over the life of the loan.

Dividend income is recognised on the ex-dividend date and is recorded
net of withholding tax where applicable.

Expenses are recorded on an accrual basis.


3. MANAGEMENT AND PERFORMANCE FEES

Pursuant to the Investment Management Agreement dated 20 November
2007 between the Company and the Investment Manager, the Investment
Manager was appointed to manage the investments of the Company,
subject to the overall supervision and authorisation of the Directors
and/or the Investment Committee (as appropriate).

The Investment Manager will receive a management fee which shall
equate to one quarter of two per cent of the quarterly NAV of the
Company which shall be paid in US dollars quarterly in advance on the
first business day of each quarter.

For the period from inception to 30 June 2008 the Company incurred
management fees of US$ 4,853,270.

The Investment Manager is also entitled to receive a performance fee
in the event the year end net asset value is greater than (i) the
year end net asset value for the last year in which a performance fee
was payable (the High Water Mark), and (ii) the year end net asset
value for the last year in which a performance fee was payable
increased by an annual hurdle rate of eight percent (the Hurdle).

The performance fee will be calculated as follows:

* 0% of the relevant increase in the year end net asset
value if the year end net asset value is at or below the Hurdle;
* 100% of the relevant increase in year end net asset value
above the Hurdle up to 10% (the "Catch-up");
* 20% of the relevant increase in year end net asset value
above the Catch-up.

The Investment Manager shall be paid 25 percent of any performance
fee in the form of Ordinary Shares at the higher of (i) fair market
value (being the average of the middle market quotation for Ordinary
Shares on AIM for the five prior trading days); and (ii) the then
prevailing Net Asset Value per Share.


4. NET ASSET VALUE

The Company issued 400,000,000 ordinary shares (the "Shares") at the
subscription price of US$ 1.00 per share. The Shares were admitted
to trade on the AIM market of the London Stock Exchange plc and the
Channel Islands Stock Exchange, and dealing commenced on 22 November
2007.

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


5-Sep-07
to

30-Jun-08

US$
Per share operating
performance
(for a share of stock outstanding throughout the
period):
Net asset value at beginning of period
1.0000
Net increase in net assets from operations
0.0335

Net asset value per share at end of period
1.0335

Number of shares in issue (see Note (8))
399,000,000




5. INVESTMENTS

As at 30 June 2008, the Company held investments at fair value,
amounting to US$ 202,423,868 which was determined by the Valuation
Committee to approximate fair value at the date of the statement of
assets. All investments are valued in accordance with the Company's
valuation guidelines as detailed in Note 2(d) above.

A schedule of investments is provided in these financial
statements.

6. CONCENTRATION OF MARKET, CREDIT, CURRENCY AND INDUSTRY
RISKS

The Company's investments (including both investments and loans) may
be subject to various risk factors, including market, credit,
currency and industry risks.

Investments are typically made with specific focus on Greater China
and thus have concentration in that region. Political or economic
conditions and the possible imposition of adverse governmental laws
or currency exchange restrictions in that region could cause any of
the Company's investments and their markets to be less liquid and
prices more volatile. Market risk represents the potential loss in
value of financial instruments caused by movements in market
variables, such as interest and foreign exchange rates and equity
prices.

The Company may have a concentration of investments in a particular
sector. Investment performance of any sector may have a significant
impact on the Company. The Company's investments may also be subject
to the risk associated with investing in private equity securities.
Investments in private equity securities may be illiquid, can be
subject to various restrictions on resale and there can be no
assurance that the Company will be able to realize the value of such
investments in a timely manner.

The Company may be exposed to default risk by its counterparties in
respect of bridge financing contracts and transactions. Whilst the
bridge financing contracts are written with the intention of
providing the Company with adequate collateral in the event of
default, enforcement may be subject to reliance on the domestic legal
systems in different countries in the Asia-Pacific region. Where the
contract is enforced, the collateral may not be of sufficient value
to fully compensate the Company for default losses. In an attempt to
mitigate any losses, the Company, where possible, obtains independent
collateral valuations on a regular basis. However, these valuations
do not guarantee the realizable value of collateral.

The Company is also exposed to concentration of currency and credit
risks on its cash and cash equivalents. The Company maintains its
cash and cash equivalents in reputable financial institutions.

The table below summarises the Group's cash at their fair values
(including those denominated in foreign currencies):



30-Jun-08

US$

Cash at banks - USD - USD 135,418,918 135,418,918
Cash at banks - CNY - CNY 430,640,816 62,828,507
Cash at banks - GBP - GBP 34,369 68,673
Cash at banks - HKD - HKD 22,171 2,844

198,318,942




7. RELATED PARTY TRANSACTIONS

Management fees paid to a related party

For the period ended 30 June 2008, the Company paid management fees
of US$ 4,853,270 to its investment manager, Pacific Alliance Real
Estate Limited. Further details of this fee are provided in Note 3
above.


8. SHARE CAPITAL


30-Jun-08
US$
Authorised
10,000,000,000 ordinary shares of US$ 0.01 100,000,000

Issued and fully paid
399,000,000 ordinary shares of US$ 0.01 3,990,000
Share Premium
399,000,000 at US$ 0.99 395,010,000
Share Reserves 115,000
Shareholder's funds 399,115,000


During the period the Company repurchased and cancelled 1,000,000
shares at a price of US$ 0.885 per share.

9. COMMITMENT AND CONTINGENCY

In the normal course of its operations, the Company enters into
contracts that contain a variety of representations and warranties
and which provide general indemnification. The Company's maximum
exposure under these arrangements is unknown, as this would involve
future claims that may be made against the company that have not yet
occurred. However, based on experience, the Directors expect the
risk of loss to be remote.


10. FINANCIAL HIGHLIGHTS

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


+------------------------------------------+
| | 5-Sep-07 |
| | to |
| | 30-Jun 08 |
|------------------------------+-----------|
| Total Return | 3.06% |
|------------------------------+-----------|
| Ratios to average net assets | |
|------------------------------+-----------|
| Expenses | (2.01%) |
|------------------------------+-----------|
| Net investment gain | 1.64% |
+------------------------------------------+



1. Total return represents the change in value by comparing the
aggregate beginning and ending values of net assets, adjusted for
cash flows related to capital contributions or withdrawals during the
period 5 September 2007 to 30 June 2008.

2. Average net assets were derived from the average value taken
from the net assets balances for the period, adjusted for cash flows
related to capital contributions and withdrawals during the period.
For the period from 5 September 2007 to 30 June 2008, the average net
assets amounted to US$ 403,063,705.

11. SUBSEQUENT EVENTS

On both 2 July 2008 and 8 July 2008 the Company repurchased and
cancelled 1,000,000 ordinary shares of US$ 0.01 each at a price of
US$ 0.89 per share.

A further 1,000,000 ordinary shares of US$ 0.01 each were repurchased
and cancelled on 18 July 2008 at a price of US$ 0.885 per share.
Following this repurchase and cancellation the Company had
396,000,000 ordinary shares in issue.

12. REPORT DISTRIBUTION

Copies of the report are being sent to registered shareholders and
will also be available, free of charge, from the office of Pacific
Alliance Investment Management (HK) Limited, c/o 16/F., St. John's
Building, 33 Garden Road, Hong Kong . A copy of the report will be
posted on the Company's website (www.pacl-fund.com).
Related Links: 
Author:
Hugin
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