CD PRIVATE EQUITY FUND II - Annual Report 2017

==> picture [199 x 62] intentionally omitted <==

==> picture [511 x 100] intentionally omitted <==

Annual Financial Report

FOR THE YEAR ENDED 31 MARCH 2017

RESPONSIBLE ENTITY Walsh & Company Investments Limited (ACN 152 367 649) (AFSL 410 433)

ARSN 162 057 089

==> picture [511 x 53] intentionally omitted <==

US Select Private Opportunities Fund II

(ARSN 162 057 089)

Registered & Principal Office Level 15, 100 Pacific Highway NORTH SYDNEY NSW 2060

T 1300 883 158 F 1300 883 159 E [email protected]

The ASX code is USG

Auditor

Deloitte Touche Tohmatsu

Grosvenor Place 225 George Street SYDNEY NSW 2000

T +61 2 9322 7000 F +61 2 9322 7001

usselectprivateopportunitiesfund.com.au

deloitte.com.au

Responsible Entity

Walsh & Company Investments Limited

(ACN 152 367 649) (AFSL 410 433)

Level 15, 100 Pacific Highway NORTH SYDNEY NSW 2060

T 1300 454 801 F 1300 883 159 E [email protected]

Unit Register

Boardroom Pty Limited

Level 12, 225 George Street SYDNEY NSW 2000

T 1300 737 760 (Australia) T +61 2 9290 9600 (International) F 1300 653 459

boardroomlimited.com.au

walshandco.com.au

Directors

Alex MacLachlan Tristan O’Connell Warwick Keneally

Secretaries

Simon Barnett Hannah Chan

REPORT TO UNITHOLDERS	I
MANAGER’S REPORT	IV
CORPORATE GOVERNANCE STATEMENT	1
DIRECTORS’ REPORT	9
AUDITOR’S INDEPENDENCE DECLARATION	17
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME	18
STATEMENT OF FINANCIAL POSITION	19
STATEMENT OF CHANGES IN EQUITY	20
STATEMENT OF CASH FLOWS	21
NOTES TO THE FINANCIAL STATEMENTS	23
DIRECTORS’ DECLARATION	48
INDEPENDENT AUDITOR’S REPORT TO THE UNITHOLDERS OF
US SELECT PRIVATE OPPORTUNITIES FUND II	49
UNITHOLDER INFORMATION	54

==> picture [511 x 53] intentionally omitted <==

Report to Unitholders

For the year ended 31 March 2017

Dear Unitholders,

It is my pleasure to present to you our Annual Report for US Select Private Opportunities Fund II ( Fund ) for the financial period ended 31 March 2017 ( FY17 ).

The Fund had a strong year in FY17. The Fund posted a net profit of $6.3 million or 11.41 cents per unit in FY17, compared with a loss of $2.4 million or 4.35 cents per unit in FY16, and paid its second distribution of $0.08 per unit on 1 August 2016. The key component of this result was a $7.4 million fair value movement gain on the Fund’s investment in the US Select Private Opportunities Fund II, L.P. ( LP ). As at 31 March 2017, the Fund had pre-tax net assets of $118.7 million or $2.15 per unit and post-tax net assets of $115.2 million or $2.09 per unit.

The Fund’s strong performance has continued post financial year-end, with distributions from the LP allowing the Fund to announce a further distribution of 10.0 cents per unit on 26 May 2017, taking the total distributions announced to date to 25.0 cents per unit.

The Fund’s investment objectives are to provide Unitholders with exposure to a portfolio of investments in small and mid-market private investment funds and privately held companies, predominantly focused in the United States ( US ), and capital growth over a five to ten-year investment horizon.

The Fund’s exposure to underlying fund managers and investments is through the LP, in which the Fund has an 87.3% interest. The LP has committed US$98.0 million across twelve US smallto-medium-sized private investment funds. At 31 March 2017, the LP had called US$62.9 million (approximately 66.2% of capital committed). The Fund’s proportionate share is approximately US$54.9 million.

At 31 March 2017, the Fund’s portfolio consisted of exposure to 80 companies. While a number of the underlying funds are earlier in their investment cycle, pleasingly, some of the underlying managers continued to realise investments ahead of schedule and delivered solid returns. This resulted in the underlying funds making distributions to the LP during, and post, financial year end.

I US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

I would like to thank fellow board members of the Responsible Entity, the Advisory Board and the Investment Management team for their dedicated efforts towards achieving the Fund’s long-term investment objectives and the excellent results to date. I would also like to thank Unitholders for their continued support as we look to further enhance Australian investors’ exposure to small-tomid-market US-based private investment firms.

Yours faithfully,

==> picture [65 x 33] intentionally omitted <==

Alex MacLachlan

Chairman of the Responsible Entity

26 May 2017

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 II

==> picture [511 x 53] intentionally omitted <==

III US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

Manager’s Report

For the year ended 31 March 2017

At year end, the Fund had US$98.0 million of total capital commitments to twelve underlying investment partners. A snapshot of the portfolio by industry exposure as at 31 March 2017 is shown below.

==> picture [386 x 166] intentionally omitted <==

----- Start of picture text -----

18% Business Services
23%
Consumer Products & Services
6% Distribution
Energy Services
Healthcare
24% Industrial Services
24%
Manufacturing
1% 5%
----- End of picture text -----

Blue Point Capital Partners III, L.P.

Blue Point acquired Fire & Life Safety America, a provider of fire and life safety inspection, repair, monitoring, and installation services to national and regional customers with 16 branches across the Mid-Atlantic and South-East US.

Chicago Pacific Founders Fund, L.P.

In December 2016, Chicago Pacific Founders acquired iN2L, a leading national provider of subscription-based resident engagement technology solutions installed in senior living facilities.

DFW Capital Partners IV, L.P.

Over FY17, DFW continued to perform well above expectations. It completed its sale of Triple-I in February 2017. The remaining six of DFW’s underlying companies are valued above cost and continue to make excellent progress creating value.

IV US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

High Road Capital Partners Fund II, L.P.

High Road did not complete a new platform investment in FY17 despite reviewing over 500 deals and submitting nine bids.

Main Post Growth Capital, L.P.

Main Post added one new investment in FY17, acquiring Milk Makeup, an innovative beauty, skin care and hair care products company, selling online and through brick-and-mortar retailers like Sephora, Urban Outfitters and Birchbox.

NMS Fund II, L.P.

In May 2016, NMS made two new platform investments, acquiring Constellation Behavioral Health ( CBH ) and Avaap. CBH is a leading behavioural health company that offers specialised treatment programs for addiction, mental health, and other co-occurring health disorders. Avaap, is one of the largest providers of IT services and solutions for organisations that use Infor and Epic enterprise software applications.

RFE Investment Partners VIII, L.P.

RFE performed well in FY17 driven by the significant increase in value of JSI Store Fixtures and Wind River Environmental.

Staple Street Capital Partners II, L.P.

In April 2016, Staple Street acquired its first investment, Mid-States Supply Company, a leading value-added distributor of industrial valves, pipe, automation products, fittings and steam specialty items. In June 2016, Staple Street invested in its second platform investment, acquiring ABC Group, a leading automotive supplier of blow moulded and injection moulded thermoplastic components and systems.

Tengram Gen2 Fund, L.P.

In FY17, Tengram exited one investment and started a sale process for two other investments. Laura Geller was successfully sold in December 2016 after delivering solid results.

Tower Arch Partners I, L.P.

Tower Arch had a great FY17. Over the period, Tower Arch made one new platform investment acquiring Corbett Technology Solutions ( CTS ). CTS provides high-impact communications solutions that enable people to consolidate information and collaborate effectively.

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 V

Trive Capital Fund I, L.P.

Trive performed well over FY17, with most of its companies growing revenues and EBITDA. During the period, Trive invested in ParFab Industries, a provider of components and field services for heat and pressure intensive applications related to the downstream energy and petrochemical markets.

US Select Direct Private Equity Fund, L.P.

US Select Direct had another good year, completing one new investment and two sales. In April 2016, the firm added Homepolish, an online marketplace connecting top-quality interior designers to consumers and businesses in search of design services. After exiting its position in Van Pool Transportation in July 2016, US Select Direct also sold 80% of its interest in Sebela Pharmaceuticals in November 2016.

VI US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

==> picture [511 x 53] intentionally omitted <==

Corporate Governance Statement

For the year ended 31 March 2017

Overview

US Select Private Opportunities Fund II ( Fund ) is a listed managed investment scheme, the units of which are listed on the Australian Securities Exchange ( ASX ). The Fund has no employees, and its day-to-day functions and investment activities are managed by Walsh & Company Investments Limited ( Responsible Entity ) and US Select Private Opportunities Fund II, GP ( Investment Manager ), in accordance with the relevant management agreements.

The ASX Corporate Governance Council’s ‘ Corporate Governance Principles and Recommendations ’ provides the guidelines for good corporate governance. The directors of the Responsible Entity ( the Board ) recognise the importance of good corporate governance.

The Fund’s Corporate Governance Charter, which incorporates the Fund’s policies referred to below, is designed to ensure the effective management and operation of the Fund and will remain under regular review. The Corporate Governance Charter is available on the Fund’s website usselectprivateopportunitiesfund.com.au.

A description of the Fund’s adopted practices in respect of the eight Principles and Recommendations from the 3rd Edition of the ASX Corporate Governance Principles and Recommendations are set out below. All these practices, unless otherwise stated, were in place throughout the financial year and to the date of this report.

1 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

1. Lay solid foundations for management and oversight

Board roles and responsibilities

The Board is responsible for the overall operation, strategic direction, leadership and integrity of the Fund and, in particular, is responsible for the Fund’s growth and success. In meeting its responsibilities, the Board undertakes the following functions:

providing and implementing the Fund’s strategic direction;
reviewing and overseeing the operation of systems of risk management, ensuring that significant risks facing the Fund are identified, that appropriate control, monitoring and reporting mechanisms are in place and that risk is appropriately dealt with;
overseeing the integrity of the Fund’s accounting and corporate reporting systems, including the external audit;
ensuring the Board is comprised of individuals who are best to discharge the responsibilities of directors having regard to the law and the best standards of governance;
reviewing and overseeing internal compliance and legal regulatory compliance;
ensuring compliance with the Fund’s Constitution and with the continuous disclosure requirements of the ASX Listing rules and the Corporations Act 2001 ;
overseeing the Fund’s process for making timely and balanced disclosures of all material information concerning the Fund; and
communicating with and protecting the rights and interest of all unitholders.

The Board has established a formal policy which sets out its functions and responsibilities. A review of the policy is conducted annually.

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 2

2. Structure the board to add value

Composition of the Board

The Board is structured to maintain a mix of directors from different backgrounds with complementary skills and experience. Details of each director at the date of this report are given in the Directors’ Report, including the period in office, skills, experience and expertise relevant to the position of director.

The directors of the Responsible Entity at the date of this report are:

Alex MacLachlan
Tristan O’Connell
Warwick Keneally

Having regard to the size of the Fund and the nature of its business, the Board has determined that a Board with three members is the appropriate composition for the Board and will enable it to continue to effectively discharge its responsibilities to the Fund. However, the composition of the Board will be reviewed periodically.

The current Board is not independent. The Board, however, has established a Compliance Committee with a majority of independent Members who are responsible for monitoring the extent to which the Responsible Entity complies with the Fund’s constitution, compliance plan and any relevant regulations. The Committee must provide a report to the Board at least on a quarterly basis and report to ASIC if it is of the view that the Responsible Entity has not complied with the constitution, compliance plan or any relevant regulations. The Fund recognises the ASX Recommendations with respect to establishing remuneration, audit, risk and nomination committees as good corporate governance. However, considering the size of the Fund, the functions that would be performed by these committees are best undertaken by the Board.

The Board will review its view on committees in line with the ASX Recommendations and in light of any changes to the size or nature of the Fund and, if required, may establish committees to assist it in carrying out its functions. At that time, the Board will adopt a charter for such committees in accordance with the ASX Recommendations and industry best practices.

It is the Board’s policy to determine the terms and conditions relating to the appointment and retirement of non-executive directors on a case-by-case basis and in conformity with the requirements of the ASX Listing Rules and the Corporations Act 2001 . In accordance with the corporate governance policy, directors are entitled to seek independent advice at the expense of the Fund. Written approval must be obtained from the chair prior to incurring any expense on behalf of the Fund.

3 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

3. Promote ethical and responsible decision making

Code of conduct

The Board has adopted a Code of Conduct to define the basic principles of business conduct of the Fund and the Responsible Entity. This Code requires the Fund’s personnel to abide by the policies of the Fund and to the law. The Code is a set of principles giving direction and reflecting the Fund’s approach to business conduct and is not a prescriptive list of rules for business behaviour.

Unit trading policy

The Board of the Fund has established a Unit Trading Policy to apply to trading in the Fund’s units on the ASX. This policy outlines the permissible dealing of the Fund’s units while in possession of price sensitive information and applies to all directors of the Responsible Entity and the Investment Manager.

The Policy imposes restrictions and notification requirements, including the imposition of blackout periods, trading windows and the need to obtain pre-trade approval.

Insider trading policy

The Board of the Responsible Entity has established an Insider Trading Policy to apply to trading in the Fund’s units on the ASX. This policy applies to all directors, executives and employees of the Responsible Entity, Investment Manager and their parent company, Dixon Advisory Group. All directors, executives and employees of the Responsible Entity, Investment Manager and their parent company must not deal in the Fund’s units while in possession of price sensitive information. In addition, the general Unit Trading Policy sets out additional restrictions which apply to directors and executives of the Responsible Entity, Investment Manager, and their parent company.

4. Safeguard integrity in financial reporting

Compliance Committee

As a registered managed investment scheme, the Fund has a compliance plan that has been lodged with Australian Securities and Investments Commission ( ASIC ). The compliance plan is reviewed comprehensively every year to ensure that the way in which the Fund operates protects the rights and interests of unitholders and that major compliance risks are identified and properly managed.

The Responsible Entity has formed a Compliance Committee to ensure the Fund complies with the relevant regulations and its constitution. The committee meets and reports to the Board of the Responsible Entity on a quarterly basis.

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 4

The committee is structured with three members, the majority of which are independent. Details of the Compliance Committee members are as follows:

Tristan O’Connell (Internal Member)

Refer to Information on directors (page 10).

Michael Britton (Independent Member)

Michael has over 35 years of commercial and financial services experience, initially with Boral Limited (ASX: BLD) and culminating in 12 years as General Manager of the corporate businesses of The Trust Company Limited (ASX: TRU), where he established the company’s reputation as a leader in the delivery of independent Responsible Entity services. He has represented The Trust Company as a director on the boards of both domestic and offshore operating subsidiary companies and a large number of special purpose companies delivering the Responsible Entity function in both conventional and stapled, ASX listed and unlisted managed investment schemes. Michael has acted as a Responsible Manager, a member of committees of inspection in relation to large insolvency administrations and as an independent compliance committee member for substantial investment managers with portfolios of managed investment schemes. He is an independent director on the board of the un-listed Knights Capital Group Limited, a Perth-based investor and property fund manager, and he is also a Panel Member for the Financial Ombudsman Service Limited.

Michael holds degrees in Jurisprudence and Law from the University of New South Wales and is a Graduate Member of the Australian Institute of Company Directors and a Fellow of the Governance Institute of Australia.

Barry Sechos (Independent Member)

Barry is one of two independent members of the Compliance Committee. Barry is member of the Compliance Committee for the New Energy Solar Fund, the Australian Property Opportunities Fund I, II & III, US Select Private Opportunities Fund I, II & III, Emerging Markets Masters Fund and US Masters Residential Property Fund. Barry is a Director of Sherman Group Limited, a privately owned investment company, and is responsible for managing the legal, financial and operational affairs of Sherman Group Limited. Barry has 30 years experience in corporate law and finance having spent seven years as a banking and finance lawyer at Allen Allen & Hemsley (Sydney, Singapore and London), and eight years as a Director of EquitiLink Funds Management and Aberdeen Asset Management Australia. Barry is also a Director of See Saw Films, a film production and finance group and winner of the 2011 Academy Award for Best Picture, Aberdeen Leaders Limited, an investment company listed on the ASX, Regeneus Limited, an ASX listed biotech company and a Director of Sherman Contemporary Art Foundation, a charitable cultural organisation.

5 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

5. Make timely and balanced disclosure

The Board is committed to complying with its continuous disclosure obligations under the Corporations Act 2001 and ASX Listing Rules, as well as releasing relevant information to the market and unitholders in a timely and direct manner to promote investor confidence in the Fund and its securities.

The Fund has adopted a Continuous Disclosure Policy to ensure the Fund complies with its continuous disclosure requirements. The policy is administered by the Board and monitored by the Compliance Committee.

6. Respect the rights of unitholders

The Fund promotes effective communication with unitholders. The Board has developed a strategy within its Continuous Disclosure Policy to ensure that unitholders are informed of all major developments affecting the Fund’s performance, governance activities and state of affairs. Each unitholder is also provided online access to the Registry to allow them to receive communications from, and send communication to, the Responsible Entity and the Registry. This also includes using a website to facilitate communication with unitholders.

Information is communicated to unitholders through announcements to ASX, releases to the media and dispatch of financial reports. Unitholders are provided with an opportunity to access such reports and releases electronically; copies of all such ASX announcements are linked to the Fund’s website at usselectopportunitiesfund.com.au.

These include:

monthly net asset value estimates
monthly fund updates
quarterly fund updates
half-year report
annual report
occasional announcements to the ASX made in compliance with the Fund’s continuous disclosure requirements
occasional correspondence sent to unitholders on matters of significance to the Fund.

The Board encourages full participation of unitholders at the general meetings held by the Fund to ensure a high level of accountability and identification with the Fund’s strategy. Unitholders who are unable to attend the general meeting are given the opportunity to provide questions or comments ahead of the meeting and where appropriate, these questions are answered at the meeting.

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 6

7. Recognise and manage risk

The Board has accepted the role of identifying, assessing, monitoring and managing the significant areas of risk applicable to the Fund and its operations. It has not established a separate committee to deal with these matters because the directors believe the size of the Fund and its operations do not warrant a separate committee at this time. The Board also monitors and appraises financial performance, including the approval of annual and half-year financial reports and liaising with the Fund’s auditor.

In order to evaluate and continually improve the effectiveness of its risk management and internal control processes, the Responsible Entity has adopted a set of Risk Management Guidelines for the Fund. The Board conducts an annual review of the Fund’s Risk Management Guideline to satisfy itself that the Risk Management framework continues to be sound. During the year ended on 31 March 2017, the Responsible Entity’s Risk Management Framework was reviewed on 9 May 2016 and 16 August 2016.

The Fund does not have a material exposure to sustainability risks.

The Board receives a letter half-yearly from the Fund’s external auditor regarding their procedures and reporting that the financial records have been properly maintained and the financial statements comply with the Accounting Standards.

The Responsible Entity provides declarations required by Section 295A of the Corporations Act 2001 for all financial periods and confirms that in its opinion the financial records of the Fund have been properly maintained and that the financial statements and accompanying notes comply with the Accounting Standards and give a true and fair view of the financial position and performance of the Fund, based on its review of the internal control systems, management of risk, the financial statements and the letter from the Fund’s external auditor.

Details of the Fund’s financial risk management are set out in the notes to the financial statements in the annual report.

8. Remunerate fairly and responsibly

Due to the relatively small size of the Fund and its operations, the Board does not consider it appropriate at this time to establish a formal remuneration committee.

Directors of the Fund are remunerated by the Responsible Entity. In accordance with the Fund’s Constitution, the Responsible Entity is entitled to a management fee for services rendered. Details of the Fund’s related party transactions are disclosed in the notes to financial statements within the Annual Report.

The Fund’s Constitution is available to unitholders on the Fund’s website.

7 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

==> picture [511 x 53] intentionally omitted <==

Directors’ Report

For the year ended 31 March 2017

The directors of Walsh & Company Investments Limited, the Responsible Entity of the US Select Private Opportunities Fund II ( Fund ), present their report together with the annual financial statements of the Fund for the financial year ended 31 March 2017.

Directors

The directors of the Responsible Entity at any time during or since the end of the financial year are listed below:

Alex MacLachlan
Tristan O’Connell
Tom Kline (resigned 16 May 2017)
Warwick Keneally (appointed 16 May 2017)

Directors were in office since the start of the financial year to the date of this report unless otherwise stated.

Information on the directors:

==> picture [69 x 83] intentionally omitted <==

Alex MacLachlan

Alex is currently the Chairman of the Responsible Entity for US Select Private Opportunities Fund Series, Australian Property Opportunities Fund Series, Emerging Markets Masters Fund, New Energy Solar Fund and US Masters Residential Property Fund. Alex is also the Chairman of New Energy Solar Limited and a director of Fort Street Real Estate Capital, the Australian Masters Yield Fund Series and Asian Masters Fund Limited.

Alex joined Dixon Advisory in 2008 to lead the then newly formed Funds Management division of Dixon Advisory and is currently the CEO and Chairman of Walsh & Company Investments Limited.

Before joining Dixon Advisory, Alex was a senior investment banker specialising in the natural resources sector, most recently serving as head of energy, Australasia, for UBS AG in Sydney and prior to that as an investment banker at Credit Suisse First Boston. During his career as an investment banker, Alex advised many of Australia’s and the world’s leading natural resources companies, working with over 30 companies on more than $100 billion in announced mergers and acquisitions and capital markets transactions.

Before specialising in natural resources investment banking, Alex worked in the Japanese Government Bond derivatives markets in London, New York and Sydney.

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 9

He has a Bachelor of Arts from Cornell University and a Masters of Business Administration from The Wharton School, University of Pennsylvania.

During the past three years, Alex has acted as a non-executive director or director of the responsible entity of the following Australian listed public entities:

Asian Masters Fund Limited (since 2009)
Australian Masters Corporate Bond Fund No 5 Limited (since 2009, delisted 26 August 2016)
Australian Masters Yield Fund No 1 Limited (since 2010)
Australian Masters Yield Fund No 2 Limited (since 2010)
Australian Masters Yield Fund No 3 Limited (since 2011)
Australian Masters Yield Fund No 4 Limited (since 2011)
Australian Masters Yield Fund No 5 Limited (since 2012)
Emerging Markets Masters Fund (since 2012)
Global Resource Masters Fund Limited (since 2008, delisted 11 March 2016)
US Masters Residential Property Fund (since 2011)
US Select Private Opportunities Fund (since 2012)
US Select Private Opportunities Fund III (since 2016)

==> picture [69 x 83] intentionally omitted <==

Tristan O’Connell

Tristan O’Connell is the Group Chief Financial Officer and Company Secretary for Evans Dixon and Director of Walsh & Company Investments Limited – the Responsible Entity of Australian Property Opportunities Fund Series, US Select Private Opportunities Fund Series, Emerging Markets Masters Fund, US Masters Residential Property Fund and New Energy Solar. In addition, Tristan is also a trustee of the US Masters Residential Property (USA) Fund.

At Evans Dixon, a significant private wealth management business in Australia operating through Dixon Advisory, Evans & Partners, and Walsh & Company, Tristan oversees the finance and accounting function of the firm’s group of companies. This incorporates funds management accounting for sixteen funds. He began his association with Dixon Advisory in 2005, joining to spearhead its financial management and growth.

Tristan brought to Dixon Advisory more than a decade in corporate financial and management roles within the wholesale markets industry. This included a long tenure at Tullet Prebon, one of the world’s leading inter-dealer broker firms that specialise in over-the-counter interest rate, foreign exchange, energy and credit derivatives. Tristan was Financial Controller of the Australian operation and also held senior finance roles in their Singapore and London offices.

Tristan holds a Bachelor of Commerce from the Australian National University, is a member of CPA Australia and a Fellow of the Financial Services Institute of Australasia.

10 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

During the past three years, Tristan has acted as a non-executive director or director of the responsible entity of the following Australian listed public entities:

Emerging Markets Masters Fund (since 2012)
US Masters Residential Property Fund (since 2011)
US Select Private Opportunities Fund (since 2012)
US Select Private Opportunities Fund III (since 2016)

==> picture [69 x 84] intentionally omitted <==

Tom Kline

Tom Kline is the Executive Director – North America of New Energy Solar. Tom was the inaugural CEO of New Energy Solar and was previously the Chief Operating Officer of Walsh & Company Investments Limited, the Funds Management division of Dixon Advisory.

Tom is chairman of Australian Masters Yield Fund No 4 Limited, Australian Masters Yield Fund No 5 Limited, Fort Street Real Estate Capital Pty Limited and, until 16 May 2017, a director of Walsh & Company Investments Limited, the responsible entity for Emerging Markets Masters Fund, US Select Private Opportunities Fund Series, US Masters Residential Property Fund, and the Australian Property Opportunities Fund Series.

Before Dixon Advisory, Tom worked at UBS AG in Sydney. During his time at UBS, he was a member of the Power, Utilities and Infrastructure team and advised on a wide range of public and private mergers and acquisitions and capital market transactions. Tom advised some of Australia’s leading energy generators and infrastructure players including EnergyAustralia and Transurban. Tom also advised energy and utility companies on the proposed introduction of Australia’s federal carbon trading scheme (Carbon Pollution Reduction Scheme) and implications for fossil fuel and renewable energy generation.

Prior to joining UBS AG, Tom served in the Corporate Finance division of Deloitte where he worked in the Transaction Services, Business Modelling and Valuations Teams.

Tom has a Bachelor of Commerce and Bachelor of Laws (with honours) from Australian National University.

During the past three years, Tom has acted as a non-executive director or director of the responsible entity of the following Australian listed public entities:

Australian Masters Yield Fund No 4 Limited (since 2012)
Australian Masters Yield Fund No 5 Limited (since 2012)
Emerging Markets Masters Fund (since 2012, until 16 May 2017)
US Masters Residential Property Fund (since 2015, until 16 May 2017)
US Select Private Opportunities Fund (since 2012, until 16 May 2017)
US Select Private Opportunities Fund III (since 2016, until 16 May 2017)

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 11

==> picture [69 x 83] intentionally omitted <==

Warwick Keneally

Warwick is currently Head of Finance at Walsh & Company, the funds management division of Dixon Advisory.

On 16 May 2017, Warwick was appointed a director of Walsh & Company Investments Limited, the Responsible Entity for Emerging Markets Masters Fund, US Select Private Opportunities Fund Series, US Masters Residential Property Fund and the Australian Properties Opportunities Fund Series.

Before joining Walsh & Company, Warwick worked in chartered accounting firms specialising in turnaround and restructuring. Warwick started his career with KPMG, working in their Canberra, Sydney and London offices and has undertaken a range of complex restructuring and insolvency engagements across Europe, UK and Australia for a range of Australian, UK, European and US banks.

Warwick has worked with companies and lenders to develop and implement strategic business options, provide advice in relation to continuous disclosure requirements, develop cash forecasting training for national firms, and lectured on cash management. Among his former roles, Warwick worked on the initial stages of the HIH insolvency - as part of the key management group tasked with the wind-down of the global estate.

Warwick has a Bachelor of Economics and Bachelor of Commerce from Australian National University and is a Member of the Institute of Chartered Accountants in Australia.

During the past three years, Warwick has acted as a non-executive director of the responsible entity of the following Australian listed public entities:

Emerging Markets Masters Fund (since 16 May 2017)
US Masters Residential Property Fund (since 16 May 2017)
US Select Private Opportunities Fund (since 16 May 2017)
US Select Private Opportunities Fund III (since 16 May 2017)

12 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

Principal activities and significant changes in nature of activities

The principal activity of the Fund during the financial year was investing in small-to-mid-market private investment funds and privately held companies with a predominate focus in the US. There were no significant changes in the nature of these activities.

Distributions

Distributions paid during the financial year were as follows:

	2017	2016
	$	$
Distribution - 7 cents per unit paid on 31 March 2016 Distribution - 8 cents per unit paid on 1 August 2016	- 4,415,203	3,863,303 -
	4,415,203	3,863,303

Review and results of operations

The profit for the Fund after providing for income tax amounted to $6,299,580 (31 March 2016: loss of $2,398,432).

The Fund has invested in a limited partnership, US Select Private Opportunities Fund II, L.P. ( LP ) which, in turn, invests in small-to-medium-sized private investment funds. The LP committed capital across twelve underlying private investment funds, which focus on a range of industries including consumer products, manufacturing and business services. For the year ended 31 March 2017, these underlying private investment funds made drawdown requests on the LP to fund their investments, management fees and operating expenses. Net drawdown requests made by the underlying private investment funds since inception to the end of the year totalled US$56.3 million.

The Fund has committed capital of US$83.0 million, representing an interest of 87.3% in the LP. The Fund’s proportionate share of the total capital called as at 31 March 2017 was US$54.9 million (or $72.0 million).

Total comprehensive income for the year was $6,299,580 (2016: $2,398,432 loss). The key components of this result included a $7,352,397 fair value movement gain (2016: $569,819) on the Fund’s investment in the LP during the year. As at 31 March 2017, the Fund had net assets of $115,207,829 (2016: $113,323,452), representing $2.09 per unit (2016: $2.05 per unit).

The Fund had a basic and diluted earning per unit of 11.41 cents for the year ended 31 March 2017 (2016: 4.35 cents loss per unit).

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 13

Events subsequent to the reporting period

On 26 May 2017, the Fund announced a distribution of 10.0 cents per ordinary unit which is anticipated to be paid to unitholders on or around 14 June 2017. The record date for determining the entitlement to the distribution is 2 June 2017.

Other than the matter noted above, no matter or circumstance has arisen since 31 March 2017 that has significantly affected, or may significantly affect the Fund’s operations, the results of those operations, or the Fund’s state of affairs in future financial years.

Future developments and expected results of operations

The Fund has committed capital to the LP to fund twelve underlying private investment fund investments expects to complete its investments as the committed capital is called by the LP. The objective of the Fund is to achieve capital growth over a 5 to 10 year investment horizon from its exposure to a portfolio of investments in small and mid-market private investment funds and privately held companies predominately focused in the US.

Environmental regulation

The Fund is not subject to any particular and significant environmental regulations under a law of the Commonwealth or a State or Territory.

Other relevant information

The following lists other relevant information required under the Corporations Act 2001 :

details of fees paid to the Responsible Entity during the financial year – refer to note 18 to the financial statements;
the Responsible Entity did not hold any interests in the Fund at the end of the financial year; and
details of issued interests in the Fund during the financial year – refer to note 7 to the financial statements.

Options

No options were granted over issued or unissued units in the Fund during, or since, the end of the year.

Indemnity and insurance

Under the Fund’s constitution, the Responsible Entity, including its officers and employees, is indemnified out of the Fund’s assets for any loss, damage expense or other liability incurred by it in properly performing or exercising any of its powers, duties or rights in relation to the Fund.

Insurance premiums have been paid, during or since the end of the financial year, for all of the directors of the Responsible Entity of the Fund. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.

14 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

No indemnities have been given or insurance premiums paid, during or since the end of the financial year, for the auditor of the Fund.

Non-audit services

Details of the amounts paid or payable to the auditor, Deloitte Touche Tohmatsu, for non-audit services are outlined in note 19 to the financial statements.

The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 .

The directors are of the opinion that the services as disclosed in note 19 to the financial statements do not compromise the external auditor’s independence requirements of the Corporations Act 2001 for the following reasons:

all non-audit services are reviewed and approved prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and
the nature of the services provided does not compromise the general principles relating to auditor independence in accordance with APES110: Code of Ethics for Professional Accountants set by the Accounting Professionals Ethical Standards Board.

Auditor’s independence declaration

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on the following page.

This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001 .

On behalf of the directors,

==> picture [65 x 34] intentionally omitted <==

Alex MacLachlan

Director

26 May 2017

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 15

==> picture [511 x 53] intentionally omitted <==

Auditor’s Independence Declaration

==> picture [249 x 220] intentionally omitted <==

----- Start of picture text -----

Deloitte Touche Tohmatsu
ABN 74 490 121 060
Deloitte. Grosvenor Place 225 George Street
Sydney, NSW, 2000
Australia
Phone: +61 2 9322 7000
www.deloitte.com.au
The Board of Directors
Walsh & Company Investments Limited
as Responsible Entity for:
US Select Private Opportunities Fund II
Level 15, 100 Pacific Highway
NORTH SYDNEY NSW 2060
26 May 2017
Dear Board Members
US Select Private Opportunities Fund II
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of the Responsible Entity of US Select Private Opportunities
Fund II.
As lead audit partner for the audit of the financial statements of US Select Private Opportunities Fund
II for the financial year ended 31 March 2017, I declare that to the best of my knowledge and belief,
there have been no contraventions of:
(i) the auditor independence requirements of the and Corporations Act 2001 in relation to the audit;
----- End of picture text -----

==> picture [189 x 172] intentionally omitted <==

----- Start of picture text -----

(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Michael Kaplan
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
----- End of picture text -----

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 17

Statement of Profit or Loss and Other Comprehensive Income

For the year ended 31 March 2017

==> picture [388 x 392] intentionally omitted <==

----- Start of picture text -----

2017 2016
NOTE $ $
Revenue 4 295,993 232,268
Foreign exchange gain 158,863 706,145
Fair value movements of equity investments 11 7,352,397 569,819
Expenses
Management and administration fees 18 (532,888) (546,593)
Listing fees (53,558) (50,988)
Audit and advisory fees (176,080) (81,074)
Custody fees (18,003) (41,201)
Share registry fees (29,602) (14,283)
Legal, compliance costs and due diligence (151,242) (97,337)
Other expenses (48,084) (27,796)
Profit before income tax expense 6,797,796 648,960
Income tax expense 5 (498,216) (3,047,392)
Profit/(loss) after income tax expense for the year
attributable to the unitholders of US Select Private
Opportunities Fund II 6,299,580 (2,398,432)
Other comprehensive income for the year, net of tax – –
Total comprehensive income/(loss) for the year
attributable to the unitholders of US Select
Private Opportunities Fund II 6,299,580 (2,398,432)
NOTE CENTS CENTS
Basic earnings/(loss) per unit 6 11.41 (4.35)
Diluted earnings/(loss) per unit 6 11.41 (4.35)
----- End of picture text -----

The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

18 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

Statement of Financial Position

As at 31 March 2017

==> picture [388 x 40] intentionally omitted <==

----- Start of picture text -----

2017 2016
NOTE $ $
----- End of picture text -----

Assets
Current assets
Cash and cash equivalents	8	40,517,044	40,943,173
Receivables	10	957,798	44,814
Total current assets		41,474,842	40,987,987
Non-current assets
Other fnancial assets	11	77,676,553	75,540,599
Total non-current assets		77,676,553	75,540,599
Total assets		119,151,395	116,528,586
Liabilities
Current liabilities
Trade and other payables	12	462,147	180,969
Total current liabilities		462,147	180,969
Non-current liabilities
Deferred tax	13	3,481,419	3,024,165
Total non-current liabilities		3,481,419	3,024,165
Total liabilities		3,943,566	3,205,134
Net assets		115,207,829	113,323,452
Equity
Unit capital	7	87,096,476	87,096,476
Retained earnings		28,111,353	26,226,976
Total equity		115,207,829	113,323,452

The above statement of financial position should be read in conjunction with the accompanying notes.

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 19

Statement of Changes in Equity

For the year ended 31 March 2017

	UNIT CAPITAL	RETAINED EARNINGS	TOTAL EQUITY
	$	$	$
Balance at 1 April 2015 87,096,476 32,488,711 119,585,187 Loss after income tax expense for the year – (2,398,432) (2,398,432) Other comprehensive income for the year, net of tax – – –
Total comprehensive loss for the year – (2,398,432) (2,398,432) Transactions with unitholders in their capacity as unitholders: Distributions paid (note 14) – (3,863,303) (3,863,303)
Balance at 31 March 2016 87,096,476 26,226,976 113,323,452

	UNIT CAPITAL	RETAINED EARNINGS	TOTAL EQUITY
	$	$	$
Balance at 1 April 2016 87,096,476 26,226,976 113,323,452 Proft after income tax expense for the year – 6,299,580 6,299,580 Other comprehensive income for the year, net of tax – – –
Total comprehensive income for the year – 6,299,580 6,299,580 Transactions with unitholders in their capacity as unitholders: Distributions paid (note 14) – (4,415,203) (4,415,203)
Balance at 31 March 2017 87,096,476 28,111,353 115,207,829

The above statement of changes in equity should be read in conjunction with the accompanying notes.

20 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

Statement of Cash Flows

For the year ended 31 March 2017

==> picture [388 x 40] intentionally omitted <==

----- Start of picture text -----

2017 2016
NOTE $ $
----- End of picture text -----

Cash fows from operating activities
Interest income received		289,360	222,314
Net payments to suppliers		(1,059,935)	(879,798)
Income tax paid		–	(23,227)
Net cash used in operating activities	9	(770,575)	(680,711)
Cash fows from investing activities
Payment for investments		–	(33,102,755)
Receipt from distributions		4,680,576	4,928,346
Net cash from/(used in) investing activities		4,680,576	(28,174,409)
Cash fows from fnancing activities
Payment for distribution		(4,454,031)	(3,822,085)
Net cash used in fnancing activities		(4,454,031)	(3,822,085)
Net decrease in cash and cash equivalents		(544,030)	(32,677,205)
Cash and cash equivalents at the beginning
of the fnancial year		40,943,173	72,914,233
Effects of exchange rate changes on cash and
cash equivalents		117,901	706,145
Cash and cash equivalents at
the end of the fnancial year	8	40,517,044	40,943,173

The above statement of cash flows should be read in conjunction with the accompanying notes.

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 21

==> picture [511 x 53] intentionally omitted <==

Notes to the Financial Statements

31 March 2017

1. General information

US Select Private Opportunities Fund II ( Fund ) is a Managed Investment Scheme registered and domiciled in Australia. The principal activities of the Fund are to invest in small-to-mid-market private investment opportunities in the United States of America ( US ), through its capacity as a Limited Partner of the US Select Private Opportunities Fund II, L.P. ( LP ) registered in the Cayman Islands.

Basis of preparation

The financial statements have been prepared on an accrual basis and are based on historical cost with the exception of financial assets, which are measured at fair value. All amounts are presented in Australian dollars unless otherwise noted.

Statement of compliance

The financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards issued by the Australian Accounting Standards Board ( AASB ) and the Corporations Act 2001 . Compliance with Australian Accounting Standards ensures the financial statements and notes to the financial statements of the Fund comply with the International Financial Reporting Standards ( IFRS ) issued by the International Accounting Standards Board ( IASB ).

The financial statements were authorised for issue by the directors on 26 May 2017. For the purposes of preparing the financial statements, the Fund is a for-profit entity.

Adoption of new and revised Accounting Standards

The Fund has adopted all of the new and revised Standards and Interpretations issued by the AASB that are relevant to their operations and effective for the current year.

New and revised Standards and amendments thereof and Interpretations effective for the current year that are relevant to the Fund include:

AASB 1057 ‘Application of Australian Accounting Standards’ and AASB 2015-9 ‘Amendments to Australian Accounting Standards - Scope of Application Paragraphs’
AASB 2014-4 ‘Amendments to Australian Accounting Standards - Clarification of Acceptable Methods of Depreciation and Amortisation’
AASB 2015-1 ‘Amendments to Australian Accounting Standards - Annual Improvements to Australian Accounting Standards 2012 - 2014 Cycle’
AASB 2015-2 ‘Amendments to Australian Accounting Standards - Disclosure Initiative: Amendments to AASB 101’

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 23

No new or revised Standards and Interpretations effective for the current year are considered to materially impact the Fund.

Accounting Standards and Interpretations issued but not yet effective

At the date of the authorisation of the financial statements, the Standards and Interpretations listed below were in issue but not yet effective. The potential impact of the new or revised Standards and Interpretations has not yet been determined, but is not expected to be material.

AASB 15 ‘Revenue from Contracts with Customers’, AASB 2014-5 ‘Amendments to Australian Accounting Standards arising from AASB 15’, AASB 2015-8 ‘Amendments to Australian Accounting Standards – Effective Date of ASSB 15’ and AASB 2016-3 ‘Amendments to Australian Accounting Standards – Clarifications to AASB 15’

These amendments are applicable to annual reporting periods beginning on or after 1 April 2018. The adoption of these amendments from 31 March 2019 is not expected to have a material impact on the Fund.

AASB 16 Leases

This standard is applicable to annual reporting periods beginning on or after 1 April 2019. The adoption of these amendments from 31 March 2020 is not expected to have a material impact on the Fund.

AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture’ and AASB 2015-10 ‘Amendments to Australian Accounting Standards - Effective Date of Amendments to AASB 10 and AASB 128’

AASB 2016-1 ‘Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for Unrealised Losses’

These amendments are applicable to annual reporting periods beginning on or after 1 April 2017. The adoption of these amendments from 31 March 2018 is not expected to have a material impact on the Fund.

AASB 2016-2 ‘Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107’

AASB 2017-1 ‘Amendments to Australian Accounting Standards – Transfers of Investment Property, Annual Improvements 2014 – 2016 Cycle and Other Amendments’

These amendments are applicable to annual reporting periods beginning on or after 1 April 2018.

24 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

The adoption of these amendments from 31 March 2019 is not expected to have a material impact on the Fund.

AASB 2017-2 ‘Amendments to Australian Accounting Standards – Further Annual Improvements 2014 – 2016 Cycle’

At the date of authorisation of the financial statements, the following IASB Standards and IFRIC Interpretations were also in issue but not yet effective, although Australian equivalent Standards and Interpretations have not yet been issued.

IFRIC Interpretation 22 : Foreign Currency Transactions and Advance Consideration

This interpretation is applicable to annual reporting periods beginning on or after 1 April 2018. The adoption of this interpretation from 31 March 2019 is not expected to have a material impact on the Fund.

2. Summary of significant accounting policies

The following accounting policies have been adopted in the preparation and presentation of the financial report.

a) Foreign currencies

The functional and presentation currency of the Fund is Australian dollars. This is based on an assessment that the primary economic environment in which the Fund operates is Australia.

Transactions in foreign currencies are initially recorded in Australian dollars by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies that are outstanding at the reporting date are retranslated at the rate of exchange ruling at the Statement of Financial Position date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined.

Exchange differences arising on translation are recognised in profit or loss in the period in which they arise.

b) Financial instruments

Financial instruments, incorporating financial assets and financial liabilities, are recognised when the Fund becomes a party to the contractual provisions of the instrument.

The Fund has early adopted AASB 9 Financial Instruments, which was issued in December 2014. AASB 9 includes requirements for the classification and measurement of financial assets.

(i) Financial assets

When financial assets are recognised initially, they are measured at fair value plus, in the case of financial assets not at fair value through profit and loss, directly attributable transaction costs.

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 25

Financial assets are subsequently measured at amortised cost using the effective interest rate method only if the following conditions are met, otherwise they are measured at fair value:

where a financial asset is held within a business model for the objective to collect contractual cash flows; and
contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

The effective interest rate method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability.

The Interest held by the Fund in the Limited Partnership (refer to (c) below) does not meet the conditions to satisfy subsequent measurement at amortised cost, and is therefore measured at fair value.

Gains and losses on all financial assets at fair value are recognised in profit or loss.

(ii) Financial liabilities

Financial liabilities are classified as derivative and non-derivative instruments as appropriate. The Fund determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value.

Non-derivative instruments are subsequently measured at amortised cost using the effective interest rate method. Derivative liabilities are subsequently measured at fair value.

(iii) Derecognition

Financial assets are derecognised where the contractual rights to receipt of cash flows expire or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are discharged or cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.

(iv) Fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in the principal (or most advantageous) market at balance date under current market conditions. Fair value is determined based on the bid price for all quoted investments in an active market. Valuation techniques are applied to determine the fair value for all unlisted securities and securities in markets that are not active. The unlisted partnership investment held by the Fund is valued using a ‘proportionate’ value method based on the proportion of the total net asset value of the partnership in which the Fund has an interest at balance date.

26 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

c) Interest in Limited Partnership

The Fund has entered into a partnership arrangement with Cordish Private Ventures, with a primary strategy of investing in US small-to-mid-market private investment funds. The partnership has been structured through a limited partnership vehicle – US Select Private Opportunities Fund II, L.P. ( LP ), in which the Fund has an 87.3% interest. The interest held by the Fund is regarded as a financial asset which is recorded at fair value (refer to note 2(b)(iv) for the fair value valuation basis adopted in respect of the partnership interest held). Subsequent changes in fair value are presented in profit or loss.

Distributions of capital or income received from the LP are recorded against the investment account, reflecting the fact that such amounts would previously have been included in the investment account either through capital contributions made or through fair value movements recognised in respect of unrealised capital or operating profits relating to the underlying investments.

d) Impairment of assets

The directors of the Responsible Entity assess at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, an estimate is made of the asset’s recoverable amount. When the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount through profit or loss.

No impairment assessment is performed in respect of the Interest in the Limited Partnership, where fair value changes are recorded in profit or loss.

e) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.

f) Receivables

Receivables are financial assets with a contractual right to receive fixed or determinable payments that are not quoted in an active market. Receivables are recorded at amounts due less any impairment losses.

g) Taxes

(i) Income tax

Under current Australian income tax laws, the Trust is not liable to pay income tax provided it is not a corporate unit trust or public trading trust and its distributable income for each income year is fully distributed to security holders, by way of cash or reinvestment.

The Fund may be liable to pay income tax in the US dependent on the structure of private investment funds in which the LP invests and in turn the structure of the underlying investments made by the private investment funds. Rates of tax will vary dependent on the source of income derived.

A deferred tax liability is recognised (at the likely rate of tax in the US) based on the difference between the fair value and tax cost base of certain underlying investments in respect of which an

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 27

economic interest is held by the Fund and on which income tax is expected to be payable by the Fund in the US on realisation of such investments.

(ii) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of an item of expense.

Where fees are stated to be exclusive of GST and GST is payable on any fee, the fee will be increased by an amount equal to the GST payable.

Cash flows are included in the Statement of Cash Flows on a gross basis, except for the GST component of cash flows arising from investing and financing activities which are disclosed as operating cash flows.

The Fund qualifies for reduced input tax credits at a minimum rate of 55%.

h) Revenue recognition

Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to the Fund and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

(i) Interest income

Interest income is recognised in profit or loss using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

i) Provisions

Provisions are recognised when there is a present obligation (legal or constructive) as a result of a past event, it is probable an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of obligation.

j) Trade and other payables

Trade and other payables are recognised when the Fund becomes obliged to make future payments resulting from the purchase of goods or services. The balance is unsecured and is recognised as a current liability with the amount being normally paid within 30 days of recognition of the liability.

k) Earnings per unit

Basic earnings per unit is calculated by dividing the profit or loss attributable to unitholders by the weighted average number of units outstanding during the financial period. Diluted earnings per unit is the same as there are no potential dilutive ordinary units.

28 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

l) Unit capital

(i) Ordinary units

Ordinary units are classified as equity. Issued capital is recognised at the fair value of the consideration received by the Fund. Incremental costs directly attributable to the issue of ordinary units are recognised as a deduction from equity.

(ii) Distributions to unitholders

Distributions payable are recognised in the reporting period in which the distributions are declared, determined, or publicly recommended by the board of the Responsible Entity on or before the end of the financial period, but not distributed at balance date.

m) Critical accounting estimates and judgements

In the application of the Fund’s accounting policies, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Accounting policies which are subject to significant accounting estimates and judgements include fair value determination of the interest held by the Fund in the Limited Partnership (refer note 11 (iv)), recognition of a deferred tax liability in respect of likely USA tax obligations which will arise from underlying investment realisations, and selection of Australian dollars as the functional currency of the Fund (refer note 2 (a)).

3. Operating segment

The Fund operates a single reportable segment, that being the business of investing in smallto-mid-market private investments in the United States of America through its interest in a Limited Partnership.

The Responsible Entity of the Fund is the Chief Operating Decision Maker ( CODM ) for the purpose of resource allocation and assessing performance of the operating segment.

Revenue, profit or loss, assets, liabilities and other financial information reported and monitored by the CODM of the single identified segment are reflected in the financial statements and notes to financial statements of the Fund.

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 29

4. Revenue

	2017	2016
	$	$
Interest income	295,993	232,268

5. Income tax expense

==> picture [387 x 40] intentionally omitted <==

----- Start of picture text -----

2017 2016
$ $
----- End of picture text -----

Income tax expense
Current tax	1,489	23,227
Deferred tax:
– In respect of current year	496,727	1,233,679
– In respect of prior years	–	1,790,486
Aggregate income tax expense	498,216	3,047,392
Numerical reconciliation of income tax expense
and tax at the statutory rate
Proft before income tax expense	6,797,796	648,960
Tax at the statutory tax rate of 30%	2,039,339	194,688
Tax effect amounts which are not deductible/(taxable) in
calculating taxable income:
– Income and expenditure of Australian trust not subject to
tax in Australia	(2,039,339)	(194,688)
– Other income assessable to the Fund in the US	1,489	23,227
– Current year fair value movement likely to be subject
to US taxation at 35%	496,727	1,233,679
– Prior years fair value movement likely to be subject to
US taxation at 35%	-	1,790,486
Income tax expense	498,216	3,047,392

30 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

6. Earnings per unit

==> picture [387 x 234] intentionally omitted <==

----- Start of picture text -----

2017 2016
$ $
Profit/(loss) after income tax attributable to the unitholders
of US Select Private Opportunities Fund II 6,299,580 (2,398,432)
NUMBER NUMBER
Weighted average number of ordinary units used in calculating
basic earnings per unit 55,190,040 55,190,040
Weighted average number of ordinary units used in calculating
diluted earnings per unit 55,190,040 55,190,040
CENTS CENTS
Basic earnings/(loss) per unit 11.41 (4.35)
Diluted earnings/(loss) per unit 11.41 (4.35)
----- End of picture text -----

There are no adjustments on the basic earnings per unit for the calculation of diluted earnings per unit and there are no transactions that would significantly change the number of ordinary units at the end of the reporting period.

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 31

7. Equity – unit capital

	2017	2016	2017	2016
	UNITS	UNITS	$	$
Ordinary units – fully paid 55,190,040 55,190,040 87,096,476 87,096,476

All issued units are fully paid. The holders of ordinary units are entitled to one vote per unit at meetings of the Fund and are entitled to receive distributions declared from time to time by the Responsible Entity. There were no movements in unit capital during the year and previous year.

Capital management

The Fund manages its capital to ensure it will be able to continue as a going concern while maximising the return to unitholders. The capital structure of the Fund consists of issued capital amounting to $87,096,476. The Fund is not subject to any externally imposed capital requirements.

8. Current assets – cash and cash equivalents

	2017	2016
	$	$
Cash at bank	40,517,044	40,943,173

The exposure to interest rate risk and a sensitivity analysis is disclosed in note 15 to the financial statements.

32 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

9. Reconciliation of profit/(loss) after income tax to net cash used in operating activities

==> picture [387 x 41] intentionally omitted <==

----- Start of picture text -----

2017 2016
$ $
----- End of picture text -----

Proft/(loss) after income tax expense for the year	6,299,580	(2,398,432)
Adjustments for:
Fair value movements of equity investments	(7,352,397)	(569,819)
Net foreign exchange gain	(117,901)	(706,145)
Change in operating assets and liabilities:
– (Increase) in receivables	(377,117)	(20,390)
– Increase / (decrease) in payables	320,006	(10,090)
– Increase in deferred tax liability	457,254	3,024,165
Net cash used in operating activities	(770,575)	(680,711)

10. Current assets – receivables

	2017	2016
	$	$
Interest receivable 33,958 27,325 GST receivable 16,688 17,489 Income tax refundable 907,152 –
957,798 44,814

There are no balances included in receivables that contain assets that are impaired. All receivables are non-interest bearing and are generally receivable on 30-day terms. No receivable amounts are overdue. The receivables are recorded at carrying amounts that are reasonable approximations of fair value.

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 33

11. Non-current assets – other financial assets

(i) Equity investment constituting interest in Limited Partnership (LP) - at fair value:

	2017	2016	2016
	$	$
US Select Private Opportunities Fund II, LP (LP) 77,676,553 75,540,599

	2017		2016
	$		$
(ii) Reconciliation Balance at the beginning of the year 75,540,599 58,270,145 Capital invested - at cost - 21,628,981 Movement in fair value through proft or loss 7,352,397 569,819 Distributions received from LP (5,216,443)* (4,928,346)
Balance at the end of the year 77,676,553 75,540,599

Included in the ‘movement in fair value’ amount of $7,352,397 (2016: $569,819 gain) is an unrealised foreign exchange translation gain component of $381,550 (2016: $1,122,747 loss). This amount is also net of the Fund’s 87.3% share of management fees paid by the LP to the General Partner of the LP, totalling $2,205,457 (2016: $2,254,016) (refer to note 18).

(iii) Fund’s interest in assets and liabilities of LP

The 87.3% economic interest held by the Fund is not represented by voting rights or other power vested in the Fund to make decisions relating to the assets and liabilities of the LP. As is common practice with Limited Partnership arrangements, the General Partner of the LP is considered to be the party who holds the existing rights to direct the relevant activities of the LP, including the acquisition and disposal of investments.

34 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

The Fund’s 87.3% interest in US Select Private Opportunities Fund II, L.P. at 31 March 2017 is represented by its proportionate interest in the LP’s assets and liabilities as follows:

==> picture [388 x 41] intentionally omitted <==

----- Start of picture text -----

2017 2016
$ $
----- End of picture text -----

Cash	4,478,173	12,553,981
Investment in US private investment funds recorded at fair value:
Blue Point Capital Partners III LP	3,337,246	2,626,840
Chicago Pacifc Founders Fund LP	3,076,224	1,967,118
DFW Capital Partners IV LP	7,070,844	7,030,358
High Road Capital Partners Fund II LP	4,399,682	2,626,767
Main Post Growth Capital Fund LP	2,227,227	852,925
NMS Fund II LP	4,262,995	3,038,220
RFE Investment Partners VIII LP	8,639,960	6,768,002
Staple Street Capital II LP	620,110	(78,727)
Tengram Capital Partners Gen 2 Fund LP	10,843,248	11,503,197
Tower Arch Partners I LP	5,334,847	3,274,881
Trive Capital Fund I LP	10,983,008	8,297,748
US Select Direct Private Equity Fund (US) LP	12,375,889	15,078,386
Due from members	906	903
Prepaid expenses	3,323	-
Tax withheld - distributions	22,871	-
Net assets*	77,676,553	75,540,599

Included in the net assets of $77,676,553 are investments in US private investment funds of $73,171,280 (2016: $62,985,715).

(iv) Valuation

Valuation technique adopted

The fair value of the Fund’s interest in the LP is determined using a ‘proportionate’ value method based on the Fund’s 87.3% interest held in the total net asset values of the LP.

The LP holds investments predominately in US private investment funds, and it (the LP) adopts a similar fair value measurement basis, based on the proportionate interest it holds in the most recent reported total net asset values of the respective investment funds. There is up to a three month difference between the Fund’s reporting date and the date of the most recent reported net assets of the investment funds. The investment funds themselves invest typically in US unlisted equity investments, the fair values of which are determined periodically based on market valuation techniques, which may involve methods and unobservable inputs such as price/earnings analysis or discounted cash flow techniques.

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 35

The fair value of the Fund’s interest in the LP is therefore ultimately based on the market valuation techniques adopted by the investment funds in the measurement of their underlying unlisted equity investments. The fair value is also subject to foreign exchange translation impacts arising from translating the USD denominated interest in the LP to AUD at each balance date. Refer to note 15(a) for Market Risk sensitivity analysis.

Investment risks

As noted above, the LP has invested in underlying private investment funds in the US market, who have in turn invested in a portfolio of private equity investments. Because of the absence of any liquid trading market for these types of investments, it may take longer to liquidate these investments than would be the case for marketable securities and accordingly the value obtained on realisation may differ materially to the estimated fair values at balance date. The fair values assigned by the investment funds are based on a range of factors, including but not limited to the price at which the investments were acquired, the nature of the investments, private and public company comparables used to determine enterprise value, and other techniques using unobservable market inputs such as price/earnings multiples and discounted cash flow models. As such, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. These differences would directly impact the value of the interest held by the LP in the underlying investment funds and consequently the value of the interest held by the Fund in the LP. In addition, further investment valuation uncertainty arises as a result of a time lag of up to three months between the Fund’s reporting date and the date of the most recent reported net assets of the private investment funds. Estimation uncertainty also arises in relation to likely US tax obligations the Fund will incur in connection with realisation of recorded fair value movements (refer note 13).

(v) Capital commitments

As at 31 March 2017, the Fund has made capital commitments totalling US$83.0 million to the LP, of which US$54.9 million has been called at balance date.

As at 31 March 2017, the Fund has uncalled capital commitments of US$28.1 million (or $36.8 million) outstanding to the LP. The capital commitments can be called at any time in the future.

The uncalled capital commitments referred to above were converted at the year-end exchange rate of 0.7629.

36 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

12. Current liabilities – trade and other payables

	2017	2016
	$	$
Trade creditors 13,517 17,465 Accrued liabilities 74,200 120,900 Payable to LP 372,040 - Other payables 2,390 42,604
462,147 180,969

Refer to note 15 for further information on financial instruments.

The average credit period for trade creditors is generally 30 days. No interest is charged on trade creditors from the date of the invoice. The Fund has risk management policies in place to ensure invoices are paid within credit terms.

13. Non-current liabilities – deferred tax

	2017	2016
	$	$
Deferred tax liability 3,481,419 3,024,165

The deferred tax liability has been assessed based on an estimate of likely US tax obligations the Fund will incur upon realisation of recorded fair value movements in connection with certain underlying private equity investments. This estimate is subject to estimation uncertainty as a result of limitations in the availability of information pertaining to the tax structure of the underlying investments in respect of which the Fund has an interest.

14. Equity – distributions

Distributions paid during the financial year were as follows:

	2017	2016
	$	$
Distribution - 7 cents per unit paid on 31 March 2016 – 3,863,303 Distribution - 8 cents per unit paid on 1 August 2016 4,415,203 –
4,415,203 3,863,303

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 37

15. Financial instruments

Financial risk management objectives

The Fund is exposed to the following risks from its use of financial instruments:

market risk (foreign exchange risk, market price risk and interest rate risk);
credit risk; and
liquidity risk.

The Responsible Entity has overall responsibility for the establishment and oversight of the risk management framework, including developing and monitoring risk management policies.

a) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices, such as foreign exchange rates, interest rates and equity prices. The Fund is primarily exposed to market risks arising from fluctuations in market price risk, foreign currency and interest rates. Refer to note 11 for further details of risks relating to equity prices.

Foreign exchange risk

Foreign exchange risk arises on financial instruments that are denominated in a foreign currency. Foreign exchange rate movements will impact on the Australian dollar value of the Fund’s financial assets and liabilities denominated in a currency that is not the Fund’s functional currency.

The Fund is exposed to USD foreign exchange risk through its USD denominated cash balances, its investment activities and income derived from these activities.

The table below details the carrying amounts of the Fund’s foreign exchange risk as at the end of the reporting period. This represents the Australian dollar exposure, converted at an exchange rate of 0.7629.

	ASSETS	ASSETS	LIABILITIES	LIABILITIES
	2017	2016	2017	2016
	$	$	$	$
Cash and cash equivalents 37,288,743 36,944,294 – – Receivables 29,528 14,849 Equity investments 77,676,553 75,540,599 – –
114,994,824112,499,742 – –

38 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

Sensitivity analysis

The effect of the foreign exchange risk relating to equity investments (investment in Limited Partnership) is recorded in profit or loss as part of the overall fair value movement in the investment (refer to note 11). The effect of foreign exchange risk relating to cash and cash equivalents is recorded in profit or loss as a foreign exchange gain or loss.

The Fund considers a 10% movement in the AUD against USD as at 31 March 2017 to be a reasonable possibility at the end of the reporting period. The impact of the strengthening and weakening of AUD against USD in profit or loss and equity is shown by the amounts below as it relates to cash and cash equivalents and equity investments. This analysis assumes that all other variables remain constant.

	AUD STRENGTHENED	AUD STRENGTHENED	AUD STRENGTHENED	AUD WEAKENED	AUD WEAKENED	AUD WEAKENED
2017	% CHANGE	EFFECT ON PROFIT BEFORE TAX	EFFECT ON EQUITY	% CHANGE	EFFECT ON PROFIT BEFORE TAX	EFFECT ON EQUITY
Cash and cash equivalents 10% (3,389,886) (3,389,886) (10%) 4,143,194 4,143,194 Receivables 10% (2,684) (2,684) (10%) 3,281 3,281 Investments 10% (7,061,505) (7,061,505) (10%) 8,630,728 8,630,728
(10,454,075) (10,454,075) 12,777,203 12,777,203

	AUD STRENGTHENED	AUD STRENGTHENED	AUD STRENGTHENED	AUD WEAKENED	AUD WEAKENED	AUD WEAKENED
2016	% CHANGE	EFFECT ON PROFIT BEFORE TAX	EFFECT ON EQUITY	% CHANGE	EFFECT ON PROFIT BEFORE TAX	EFFECT ON EQUITY
Cash and cash equivalents 10% (3,358,572) (3,358,572) (10%) 4,104,922 4,104,922 Receivables 10% (1,350) (1,350) (10%) 1,650 1,650 Equity investments 10% (6,868,327) (6,867,327) (10%) 8,393,400 8,393,400
(10,228,249) (10,227,249) 12,499,972 12,499,972

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 39

Market price risk

Market price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether caused by factors specific to individual investments or factors affecting all instruments traded in the market.

Sensitivity analysis

The Fund considers a 10% increase or decrease to be a reasonably possible change in market prices at the reporting date. The sensitivity analysis below reflects the Fund’s proportionate exposure to market price risk of the underlying equity investments of the private investment partnership excluding any foreign exchange impact. The impact of a 10% movement in market prices (excluding foreign exchange impact) on profit or loss and equity is shown in the table below:

==> picture [388 x 210] intentionally omitted <==

----- Start of picture text -----

AVERAGE PRICE INCREASE AVERAGE PRICE DECREASE
EFFECT EFFECT
ON PROFIT ON PROFIT
% BEFORE EFFECT ON % BEFORE EFFECT ON
2017 CHANGE TAX EQUITY CHANGE TAX EQUITY
Equity investments
(refer Note 11 (iii)) 10% 7,317,128 7,317,128 (10%) (7,317,128) (7,317,128)
AVERAGE PRICE INCREASE AVERAGE PRICE DECREASE
EFFECT EFFECT
ON PROFIT ON PROFIT
% BEFORE EFFECT ON % BEFORE EFFECT ON
2016 CHANGE TAX EQUITY CHANGE TAX EQUITY
Equity investments
(refer Note 11 (iii)) 10% 6,298,572 6,298,572 (10%) (6,298,572) (6,298,572)
----- End of picture text -----

40 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

Interest rate risk

The Fund is exposed to interest rate risk on its variable rate bank deposits. The Fund currently does not hedge against this exposure.

Sensitivity analysis

The Fund considers a 50 basis point increase or decrease to be a reasonably possible change in interest rates. The impact of a 50 basis point movement in interest rates on profit or loss and equity is shown in the table below.

==> picture [389 x 181] intentionally omitted <==

----- Start of picture text -----

BASIS POINTS INCREASE BASIS POINTS DECREASE
EFFECT EFFECT
BASIS ON PROFIT BASIS ON PROFIT
POINTS BEFORE EFFECT ON POINTS BEFORE EFFECT ON
2017 CHANGE TAX EQUITY CHANGE TAX EQUITY
Variable rate bank deposits 50 202,585 202,585 (50) (202,585) (202,585)
BASIS POINTS INCREASE BASIS POINTS DECREASE
EFFECT EFFECT
BASIS ON PROFIT BASIS ON PROFIT
POINTS BEFORE EFFECT ON POINTS BEFORE EFFECT ON
2016 CHANGE TAX EQUITY CHANGE TAX EQUITY
Variable rate bank deposits 50 204,716 204,716 (50) (204,716) (204,716)
----- End of picture text -----

b) Credit risk

Credit risk is the risk that contracting parties to a financial instrument will cause a financial loss for the Fund by failing to discharge an obligation. The Fund manages credit risk by ensuring deposits are made with reputable financial institutions. The majority of funds at year end were deposited with Macquarie Bank Limited (Australia).

The carrying amount of financial assets that represents the maximum credit risk exposure at the end of reporting period are detailed below:

	2017	2016
	$	$
Summary of exposure Cash and cash equivalents 40,517,044 40,943,173 GST receivable 16,688 17,489 Interest receivable 33,958 27,326
40,567,690 40,987,988

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 41

c) Liquidity risk

Liquidity risk is the risk that the Fund will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Fund’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Fund’s reputation.

The Fund’s liquidity primarily comprises cash at bank totalling $40,517,044 at 31 March 2017, which is held to cover its day-to-day running costs and expenditures and to fund its capital commitments to the LP which total $36,793,713 at balance date.

The following is the contractual maturity of financial liabilities and capital commitments. The table has been drawn based on the undiscounted cash flows of liabilities based on the earliest date on which the Fund can be required to settle the liability.

	LESS THAN 12 MONTHS	ON CALL	REMAINING CONTRACTUAL MATURITIES
2017	$	$	$
Non-derivatives Non-interest bearing Trade and other payables 462,147 – 462,147 Capital commitments* – 36,793,713 36,793,713
Total non-derivatives 462,147 36,793,713 37,255,860

LP commitments may be called at any time in the future up until the first to occur of the date the aggregate commitments have been invested, the fifth anniversary date after the first call or certain other specified termination events.

	LESS THAN 12 MONTHS	ON CALL	REMAINING CONTRACTUAL MATURITIES
2016	$	$	$
Non-derivatives Non-interest bearing Trade and other payables 180,969 – 180,969 Capital commitments – 36,659,167 36,659,167
Total non-derivatives 180,969 36,659,167 36,840,136

42 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

16. Fair value measurement

Fair value

The fair value of financial assets and financial liabilities approximate their carrying values at the reporting date.

The table below analyses recurring fair value measurements for financial assets and financial liabilities. The fair value measurements are categorised into different levels in the fair value hierarchy based on the inputs to the valuation techniques used. The different levels are defined as follows:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

	LEVEL 1	LEVEL 2	LEVEL 3	TOTAL
2017	$	$	$	$
Financial assets carried at fair value Other fnancial assets – equity investment constituting interest in US Select Private Opportunities Fund II, LP – – 77,676,553 77,676,553
Total assets – – 77,676,553 77,676,553

	LEVEL 1	LEVEL 2	LEVEL 3	TOTAL
2016	$	$	$	$
Financial assets carried at fair value Other fnancial assets - equity investment constituting interest in US Select Private Opportunities Fund II, LP – – 75,540,599 75,540,599
Total assets – – 75,540,599 75,540,599

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 43

The Fund recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which the transfer has occurred. There were no transfers between levels during the financial year.

Details of the determination of level 3 fair value measurements including the valuation technique adopted and the key underlying unobservable inputs used are set out in note 11.

The Fund has established a control framework with respect to measurement and assessment of fair values. This framework includes a sub-investment committee that has overall responsibility for analysing the performance and fair value movements of underlying US investment fund holdings during each reporting period.

17. Key management personnel disclosures

Directors

Alex MacLachlan, Tristan O’Connell and Tom Kline were directors of the Responsible Entity, Walsh & Company Investments Limited, at the reporting date and are deemed to be key management personnel.

The key management personnel do not receive compensation from the Fund or from the Responsible Entity directly for their management function performed for the Fund.

As at the reporting date, details of directors who hold units for their own benefit or who have an interest in holdings through a third party and the total number of such units held are listed as follows:

==> picture [370 x 22] intentionally omitted <==

----- Start of picture text -----

2017 2016
----- End of picture text -----

Alex MacLachlan	12,500	12,500
Tristan O'Connell	-	-
Tom Kline	11,910	11,910
	24,410	24,410

There were no movements in the directors’ holdings during the year.

44 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

18. Related party disclosures

Key management personnel

Disclosures relating to key management personnel are set out in note 17.

Related party investments in the scheme

The Responsible Entity or its associates does not hold any investments in the scheme.

Management fees

The Responsible Entity’s duties include establishing the Fund’s compliance plan and procedures and monitoring against regulatory and legislative requirements, the issuance of disclosure documents, the appointment and monitoring of external service providers to the Fund, and overall administration of the Fund.

For these services, the Responsible Entity charged management fees of 0.33% per annum (exclusive of GST) on the gross asset value of the Fund. This is comprised of the Responsible Entity Fee of 0.08% per annum and Administration Fee 0.25% per annum. Management fees are paid to the Responsible Entity quarterly in advance.

The total management fees paid to the Responsible Entity for the year ended 31 March 2017 was $391,136 (2016: $420,816), exclusive of GST. There were no outstanding management fees as at 31 March 2017 (2016: nil).

Fund administration fees

Australian Fund Accounting Services Pty Limited, a wholly-owned subsidiary of the Dixon Advisory Group Limited, the parent of the Responsible Entity, provides fund administration services to the Fund under an agreement with the Responsible Entity. These services include net asset valuation, management accounting, statutory reporting, capital management and taxation. Total fund administration fees paid or payable for the year ended 31 March 2017 were $120,000 (2016: $106,839), exclusive of GST.

Investment manager fees

US Select Private Opportunities Fund II, L.P. ( LP ), in which the Fund holds an 87.3% interest, is required to pay its Investment Manager, US Select Private Opportunities Fund II, GP, being an entity associated with the Responsible Entity, for acting on behalf of the limited partnership to acquire, manage and transact on partnership interests within the scope of the limited partnership agreement, a fee equivalent to 2% per annum of the total funds committed by the partners to the LP. The fee is payable quarterly in advance from the funds of the LP. The total fees paid or payable during the year amounted to $2,526,297 (US$1,901,900) (2016: $2,581,919 (US$1,901,900)). The Fund’s interest equates to $2,205,457 (2016: $2,254,016). This fee is recorded in the books of the LP.

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 45

US Select Direct Private Equity Fund (US), LP

At balance date, the Fund’s share of the LP’s investment in US Select Direct Private Equity Fund (US), LP was $12,375,889 (US$9,441,566) (2016: $15,078,386 (US$11,545,520)). The General Partner of this investment is associated with the Responsible Entity of the Fund. The LP’s share of the investment management fees paid to the General Partner for the year ended 31 March 2017 amounted to $199,246 (US$150,000) (2016: $203,632 (US$150,000). The Fund’s 87.3% interest equates to $173,941 (US$130,950) (2016: $177,771 (US$130,950)).

19. Remuneration of auditors

During the financial year the following fees were paid or payable for services provided by Deloitte Touche Tohmatsu, the auditor of the Fund, and its network firms:

==> picture [376 x 41] intentionally omitted <==

----- Start of picture text -----

2017 2016
$ $
----- End of picture text -----

Audit services - Deloitte Touche Tohmatsu
Audit or review of the fnancial statements	57,200	55,500
Other services - Deloitte Touche Tohmatsu
Taxation services	48,400	7,649
	105,600	63,149
Other Audit Firms – Deloitte Tax LLP
Taxation services	37,953	14,235

20. Capital commitments

Other than the capital commitments disclosed in note 11(v) to the financial statements, the Fund does not have any other capital commitments outstanding for the year ended 31 March 2017.

21. Contingent liabilities

The directors of the Responsible Entity are not aware of any potential liabilities or claims against the Fund as at balance date.

22. Events after the reporting period

On 26 May 2017, the Fund announced a distribution of 10.0 cents per ordinary unit which is anticipated to be paid to unitholders on, or around 14 June 2017. The record date for determining the entitlement to the distribution is 2 June 2017.

46 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

==> picture [511 x 53] intentionally omitted <==

Directors’ Declaration

For the year ended 31 March 2017

In the opinion of the directors of the Responsible Entity:

the financial statements and notes thereto are in accordance with the Corporations Act 2001 , including compliance with the Accounting Standards;
the financial statements are in compliance with the International Financial Reporting Standards as stated in the notes to the financial statements;
the attached financial statements and notes give a true and fair view of the Fund’s financial position as at 31 March 2017 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the Fund will be able to pay its debts as and when they become due and payable.

The directors have been given the declarations required by section 295A of the Corporations Act 2001 .

The directors of the Responsible Entity have declared that:

a) financial records of the Fund for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001 ;
b) the financial statements and notes for the financial year comply with the Accounting standards; and
c) the financial statements and notes for the financial year give a true and fair view.

This declaration is made in accordance with a resolution of the directors made pursuant to section 295(5) of the Corporations Act 2001 .

On behalf of the directors,

==> picture [65 x 34] intentionally omitted <==

Alex MacLachlan

Director

26 May 2017

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 48

Independent Auditor’s Report

==> picture [313 x 444] intentionally omitted <==

49 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

==> picture [313 x 444] intentionally omitted <==

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 50

==> picture [313 x 444] intentionally omitted <==

51 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

==> picture [313 x 444] intentionally omitted <==

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 52

==> picture [511 x 53] intentionally omitted <==

Unitholder Information

As at 30 April 2017

Distribution of unitholders

55,190,040 fully paid ordinary units on issue are held by 2,255 unitholders.

==> picture [388 x 22] intentionally omitted <==

----- Start of picture text -----

CATEGORY (SIZE OF HOLDING) NUMBER OF UNITHOLDERS
----- End of picture text -----

1 to 1,000	16
1,001 to 5,000	235
5,001 to 10,000	404
10,001 to 100,000	1,556
100,001 and over	44
Total	2,255
Holding less than a marketable parcel	6

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 54

Top 20 largest holders of units

==> picture [388 x 30] intentionally omitted <==

----- Start of picture text -----

NUMBER OF PERCENTAGE
UNITS HELD OF TOTAL (%)
----- End of picture text -----

Mr Orange Pty Limited	718,750	1.30
Yarraandoo Super Fund A/C	461,429	0.84
Dixon Family S/F A/C	350,679	0.64
Christowel Super Fund A/C	265,000	0.48
Mr White Pension Fund A/C	218,750	0.40
Vonwiller Super Fund A/C	205,179	0.37
Super Fund A/C	200,000	0.36
John G King S/F A/C	199,429	0.36
Futureshift Super Fund A/C	197,179	0.36
ISS Superannuation Fund A/C	190,819	0.35
Aristides Family A/C	183,694	0.33
Pettingell & Gillam S/F A/C	157,929	0.29
J & J Kruger Super Fund A/C	156,250	0.28
Forbes Super Fund A/C	156,250	0.28
Michael Bloom Super Fund A/C	146,429	0.27
James Yates Medical S/F A/C	140,179	0.25
Helen & Roger Allnutt SF A/C	129,419	0.23
D & A Sainsbury S/Fund A/C	126,191	0.23
N & J Hyden Super Fund A/C	125,000	0.23
K & L Chan Super Fund A/C	125,000	0.23
Total	4,453,555	8.08

55 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

Substantial unitholders

There are no substantial unitholders pursuant to the provisions of section 671B of the Corporations Act 2001 .

Voting rights

Each ordinary unit is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands.

Restricted securities

There are no restricted securities issued by the Fund.

Transactions

There were no transactions in securities during the reporting period.

US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017 56

Limited Partnership Agreement

U.S. Select Private Opportunities Fund II GP, LLC ( Investment Manager ), Cordish Private Ventures and Walsh & Company Investments, in its capacity as Responsible Entity of the US Select Private Opportunities Fund II ( the Fund ), have established an exempted limited partnership, US Select Private Opportunities Fund II, L.P. ( LP ), in the Cayman Islands for the purposes of acquiring, directly or indirectly, and dealing with, interests in private investment funds and interests in privately held companies.

Under the terms of the agreement, the Fund, as a Limited Partner, has agreed to make capital contributions towards the acquisition of investments, as directed by the Investment Manager, up to a maximum contribution amount. The limited partners are permitted to satisfy all, or any, of their outstanding capital commitment by making an in-kind contribution of a portfolio investment with the written consent of the other partners.

Under the LP Agreement, it is an event of default to fail to make a capital contribution when due and different consequences may result from an event of default, including (among others) interest being payable on overdue amounts, loss of voting rights or, at the discretion of the Investment Manager, forfeiture of distributions and a 50% reduction in the defaulting partner’s capital account (with such amounts to be distributed to the remaining partners in their pro-rata proportions).

The Investment Manager must ensure that distributions, if any, are made on an annual basis (or more frequently, if so determined by the Investment Manager) in connection with a disposal, interest or other income realised from an investment or income from temporary investments.

In consideration for managing the LP and its investments, the Investment Manager is entitled to an investment management fee of an amount equal to 2% of the aggregate capital commitments made by the partners to the LP, which will be payable quarterly in advance for a period of 10 years.

The partners are prohibited from withdrawing from the LP or otherwise disposing of their interest in the LP in any circumstances without the consent of the Investment Manager. The Investment Manager in turn must obtain the consent of the other limited partner prior to effecting such disposal or transfer. The Investment Manager may not withdraw from the LP, resign as general partner or otherwise dispose of its interest in the LP in any circumstances without the consent of the limited partners.

The LP will be dissolved upon the occurrence of certain termination events, which include (among others), the last business day of the fiscal year in which all investments have been disposed of or where the LP is no longer subject to any funding obligations in respect of investments or management fees. The Investment Manager may terminate or wind up the LP with the consent of all limited partners. As a limited partner, the Responsible Entity does not have the ability to amend the LP Agreement in a material respect, or require early termination or wind up of the LP without the consent of all other partners.

57 US SELECT PRIVATE OPPORTUNITIES FUND II ANNUAL REPORT MARCH 2017

==> picture [511 x 53] intentionally omitted <==

==> picture [511 x 443] intentionally omitted <==

AI assistant

CD PRIVATE EQUITY FUND II — Annual Report 2017

64627_rns_2017-06-26_d99de911-1f48-428c-a394-3ad5de202cdb.pdf

Directory

US Select Private Opportunities Fund II

The ASX code is USG

Auditor

Deloitte Touche Tohmatsu

Responsible Entity

Walsh & Company Investments Limited

Unit Register

Boardroom Pty Limited

Directors

Secretaries

Contents

Report to Unitholders

For the year ended 31 March 2017

Dear Unitholders,

Alex MacLachlan

Manager’s Report

For the year ended 31 March 2017

Blue Point Capital Partners III, L.P.

Chicago Pacific Founders Fund, L.P.

DFW Capital Partners IV, L.P.

High Road Capital Partners Fund II, L.P.

Main Post Growth Capital, L.P.

NMS Fund II, L.P.

RFE Investment Partners VIII, L.P.

Staple Street Capital Partners II, L.P.

Tengram Gen2 Fund, L.P.

Tower Arch Partners I, L.P.

Trive Capital Fund I, L.P.

US Select Direct Private Equity Fund, L.P.

Corporate Governance Statement

For the year ended 31 March 2017

Overview

1. Lay solid foundations for management and oversight

Board roles and responsibilities

2. Structure the board to add value

Composition of the Board

3. Promote ethical and responsible decision making

Code of conduct

Unit trading policy

Insider trading policy

4. Safeguard integrity in financial reporting

Compliance Committee

Tristan O’Connell (Internal Member)

Michael Britton (Independent Member)

Barry Sechos (Independent Member)

5. Make timely and balanced disclosure

6. Respect the rights of unitholders

7. Recognise and manage risk

8. Remunerate fairly and responsibly

Directors’ Report

For the year ended 31 March 2017

Directors

Alex MacLachlan

Tristan O’Connell

Tom Kline

Warwick Keneally

Principal activities and significant changes in nature of activities

Distributions

Review and results of operations

Events subsequent to the reporting period

Future developments and expected results of operations

Environmental regulation

Other relevant information

Options

Indemnity and insurance

Non-audit services

Auditor’s independence declaration

Alex MacLachlan

Auditor’s Independence Declaration

Statement of Profit or Loss and Other Comprehensive Income

For the year ended 31 March 2017

Statement of Financial Position

As at 31 March 2017

Statement of Changes in Equity

For the year ended 31 March 2017

Statement of Cash Flows

CD PRIVATE EQUITY FUND II Annual Report 2017