Significant accounting policies continued

Notes to the financial statements for the year ended 31 December 2015

3. Significant accounting policies continued

34 i Expenses In accordance with the provisions of the Petroleum Fund Law, all expenses of the Petroleum Fund, not relating to the purchase or sale of securities and recognized in the sale or purchase price, are met by the BCTL and are covered by a management fee. In accordance with Article 6.3 of the Petroleum Fund Law, the management fee paid to the BCTL is recognized as a deduction from the gross receipts of the Petroleum Fund, although it is accounted in the statement of profit or loss and other comprehensive income of the Petroleum Fund. Management and performance fees payable to external fund managers are met from the management fee payable to the BCTL, but disclosed separately in the financial statements. Expenses which are incidental to the acquisition of an investment are included in the cost of that investment. Expenses that are incidental to the disposal of an investment are deducted from the disposal proceeds of the investment. j Taxation The Petroleum Fund is exempt from paying taxes on income, withholding or capital gains under the current system of taxation in the Democratic Republic of Timor-Leste. Income of the Petroleum Fund earned in foreign jurisdictions is subject to the taxes levied in those jurisdictions and amounts may be withheld. Income or gains are recorded gross of withholding taxes in the statement of profit or loss and other comprehensive income. Withholding taxes, to the extent that they are not recoverable, are shown as a separate line item in the statement of profit or loss and other comprehensive income. Cash inflows from investments are presented net of withholding taxes, when applicable.

4. Critical accounting estimates and judgments

The Management of the Petroleum Fund makes estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Estimates use observable data to the extent practicable. However, areas such as credit risk, volatilities and correlations require management to make estimates. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Judgements In the process of applying the Fund’s accounting policies, management has made the following judgements which have the most significant effect on the amounts recognized in the financial statements: Capital Judgments have been made as to whether certain transactions should be recognized as capital or revenue. The basis for these judgments is outlined in Note 3c. Estimates and assumptions The Fund has based its assumptions and estimates on parameters available when the financial statements were prepared. However, existing circumstances and assumptions about future developments may change due to market changes or circumstances arising beyond the control of the Fund. Such changes are reflected in the assumptions when they occur. Taxes Uncertainties exist with respect to the interpretation of complex tax regulations and changes in tax laws on income derived in foreign jurisdictions and the recoverability of amounts withheld. Given the wide range of international investments, differences arising between the actual investment income and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax expense already recorded. The Fund establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it invests. The amounts of such provisions are based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective investments domicile. As the Fund assesses the probability for litigation and subsequent cash outflow with respect to taxes as remote, no contingent liability has been recognized. Notes to the financial statements for the year ended 31 December 2015 35

5. Interest income

Year ended 31122015 Year ended 31122014 USD USD Interest from debt securities at fair value through profit or loss 156,696,468 142,283,687 Interest from cash and cash equivalents 93,063 43,143 156,789,531 142,326,830

6. Other Receivables

As at 31122015 As at 31122014 USD USD Dividends receivable 7,305,867 7,198,092 Withholding tax receivables 10,388,741 7,735,408 Trust distributions receivables 844,088 770,608 Due from brokers receivables 8,326,749 4,311,569 Interest receivables 25,406 47,424 26,890,851 20,063,101