VALUE PARTNERS CHINA GREENCHIP FUND LIMITED 惠理中華新 … · 2017-03-30 · VALUE PARTNERS...

VALUE PARTNERS CHINA GREENCHIP FUND LIMITED(Incorporated as an exempted company in Cayman Islands with limited liability)

A N N U A L R E P O R T 2 0 1 2For the year ended 31 December 2012

惠理中華新星基金

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Value Partners Limited9th Floor, Nexxus Building 41 Connaught Road Central, Hong KongTel: (852) 2880 9263 Fax: (852) 2565 7975Email: [email protected]: www.valuepartners.com.hk

In the event of inconsistency, the English text of this Annual Report shall prevail over the Chinese text.

Contents

VALUE PARTNERS CHINA GREENCHIP FUND LIMITED( Incorporated as an exempted company in the Cayman Islands with l imited l iabil i ty)

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Pages

General information 2-3

Manager’s report 4-10

Statement of responsibilities of the Manager 11

Custodian’s report 12

Independent auditor’s report 13-14

Statement of financial position 15-16

Statement of comprehensive income 17-18

Statement of changes in net assets attributable to shareholders 19

Statement of cash flows 20-21

Notes to the financial statements 22-44

Investment portfolio (unaudited) 45-48

Investment portfolio movements (unaudited) 49

Performance record (unaudited) 50

GENERAL INFORMATION


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Executive DirectorsMr Tse Wai Ming, TimothyMs Choy Kit Hung (appointed on 9 May 2012)Ms Hung Yeuk Yan Renee (appointed on 9 May 2012)Mr Lee Ho Tak (resigned on 30 April 2012)Mr So Chun Ki Louis (resigned on 9 May 2012)

ManagerValue Partners Limited9th Floor, Nexxus Building41 Connaught Road CentralHong Kong

Directors of the ManagerMr Cheah Cheng HyeMr Ho Man KeiMr So Chun Ki Louis

Custodian and Administrator’s AgentHSBC Institutional Trust Services (Asia) Limited1 Queen’s Road CentralHong Kong

Administrator and Principal OfficeBank of Bermuda (Cayman) LimitedP.O. Box 513HSBC House68 West Bay RoadGrand Cayman KY1-1106Cayman Islands

Registered OfficeP.O. Box 309Ugland HouseSouth Church StreetGeorge TownGrand CaymanCayman IslandsBritish West Indies

AuditorPricewaterhouseCoopersP.O. Box 258George TownGrand Cayman, KY1-1104Cayman Islands

Legal AdvisorsWith respect to Cayman Islands lawMaples and Calder53rd Floor, The Center99 Queen’s Road CentralHong Kong

With respect to Hong Kong lawKing & Wood Mallesons13th Floor, Gloucester TowerThe Landmark15 Queen’s Road CentralHong Kong

Information available from:Value Partners Limited9th Floor, Nexxus Building41 Connaught Road CentralHong Kong

Telephone : (852) 2880 9263Fax : (852) 2565 7975Email : [email protected] : www.valuepartners.com.hk


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GENERAL INFORMATION (Continued)


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Recent awards and achievements

Corporate awards

2012 • 2012 – Asia Hedge Fund 25 Value Partners was ranked No. 1 in Asia Hedge Fund 25 for 3 consecutive years

(since 2010) – Institutional Investor, July 2012

• Lipper Fund Awards 2012 Best Equity Group – 3 Years – Lipper*

• 2011 Best of the Best Region Awards CIO of the Year in Asia Co-Winner: Cheah Cheng Hye and Louis So (Value Partners’ Co-CIOs) – Asia Asset Management

2011 • 2011 – Hedge Fund 100 Value Partners was ranked as Asia’s largest hedge fund manager, and 58th worldwide – Institutional Investor, May 2011

• Lipper Fund Awards 2011 – Hong KongBest Equity Group – 3 Years– Lipper▲

* Based on data as of year end 2011.▲ Based on data as of year end 2010.

Value Partners China Greenchip Fund Limited

2013 • Lipper Fund Awards 2013Best Equity Greater China Fund – 5 Years– Lipper^

2012 • Lipper Fund Awards 2012Best Equity Greater China Fund – 3 Years– Lipper^

• 2011 Best of the Best Performance Awards Greater China Region Equity – 3 Years category – Asia Asset Management#

2011 • Lipper Fund Awards 2011 – Hong Kong Best Equity Greater China Fund – 3 Years

– Lipper^ • Best of the Best Awards 2010 Best of the Best Performance Awards – Greater China Region – 3 Years category – Asia Asset Management#

^ The 2013, 2012 and 2011 awards are based on the returns as of year end 2012, 2011 and 2010 respectively.# Judging for the 2011 and 2010 Best of the Best Awards involved the submission of nomination forms to Asia

Asset Management judges, on or before 19 December 2011 and 17 December 2010 respectively. Funds are judged based on their annual performance, ending on 30 September 2011 and 2010 respectively. Judging criteria for the China Greenchip Fund’s performance was dependent on the nominated fund’s fund size, performance against its peers, 3-year return, and monthly and year-to-date.

MANAGER’S REPORT


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2012 was a macro-driven, roller-coaster year for the stockmarket, but Value Partners China Greenchip Fund Limited outperformed the broader market despite the challenging environment. Throughout the year, the Fund also enjoyed a high ranking with superior performance over most of its peers. As a value investor, we adhere to bottom-up stocking picking and held firm to our conviction that by exercising strong discipline and staying contrarian, long-term outperformance can be achieved.

As in the past years, we provide a list of the biggest contributors to the Fund’s return in 2012, in terms of the absolute dollar amount of return contributed and also the percentage return achieved on these investments.

Value Partners China Greenchip Fund Limited: Biggest contributors to 2012 return(Fund size: HK$690.5 million end-2012; HK$500.3 million end-2011)

Gain in 2012 % return in 2012 (in HK$ million) (including dividends)Sunny Optical Tech (Technology hardware) 17.33 up 93%Shenzhou International (Consumer durables and apparel) 15.31 up 71%China State Construction (Construction) 10.12 up 72%Hopefluent Group (Property real estate agency) 9.49 up 31%Techtronic Industries (Home-improvement products) 8.09 up 48%

Given the depth of the Chinese stockmarket, we managed to find companies with sound management and strong fundamentals. Such companies may hold better prospects even if their sector outlook might have turned grim when the market became pessimistic.

China plays a winning hand

With China’s fundamental staying relatively strong, we have identified companies that continue to benefit from the country’s consumption growth, particularly in the smartphones space where demand has been on the rise. Sunny Optical, the top contributor to our portfolio, is a leading Chinese lens and camera module manufacturer whose products are mainly used in cellphone as well as digital camera. We see strong earnings growth potential in the company, driven by the proliferation of low price smartphone in emerging markets and the smartphone camera maga-pixel upgrade cycle. We think the company may continue to be a key beneficiary of low-price smartphone boom in 2013, given their strong relationship with Chinese handset makers and technology lead in camera module manufacturer.


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MANAGER’S REPORT (Continued)


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More reforms with new leaders

For China, 2012 was a year of economic rebalancing and leadership change. In contrast to many bearish investors, we did not believe that there would be a hard landing in China. In the fourth quarter, we saw clear and broad-based signs that the economy had bottomed out. While China’s double-digit growth is something of the past, a GDP growth rate at above 7% would be high enough to bring the size of its economy to double in a decade.

In the once-in-a-decade leadership change in China, Xi Jinping and Li Keqiang became new leaders as expected. We see the transition as a positive development. The new line-up lends much weight to the country’s economic and social reform, with Xi’s experience in market-friendly scientific economic development combined with Li’s knowledge in structural change (the latter being a PhD in economics). Given their previous on-the-ground experience and long, 10-year tenure, both leaders will likely pursue long-term reform policies to drive sustainable growth.

We anticipate a wide range of economic and financial reforms in the coming few years. Reforms orchestrated to liberalize the financial system will cover interest rates, exchange rates, capital account and the development of the bond market. Such reforms will not only deepen the capital market, steer the economy towards consumption and internationalize the RMB, but also help drive long-term funding for urbanization projects. Meanwhile, changes will also be seen in the tax system, fiscal expenditure, resource pricing, private investment in monopoly sectors, as well as residence permit (hukou). Successfully implemented, resources allocation will be more efficient and social stability can be maintained. Unleashing the potential of the inland, in particular, will provide fresh impetus for growth in the coming decade.



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Bottom-up approach the key

In a period of slower but higher-quality growth, we believe our strong fundamental research will play to our advantage as company performance tends to become more differentiated. It is the time when bottom-up stock picking can best capture value for investors, particularly in the small- and mid-cap space.

In conducting our constant on-the-ground research, we have come to notice that exporters have been largely ignored due to challenges in developed markets. One example is Shenzhou International, one of the largest garment manufacturers in China which we have been covering since its IPO in 2005. The company has been a top position in the Fund for the majority of the year, and was one of the top contributors to the Fund’s return in 2012. As a garment manufacturer, Shenzhou derived a majority of their revenues from international sales and investors have been cautious to exporters in an environment of slowing developed market growth. However the company has seen strong demand from its main customers such as Uniqlo, Nike and Adidas. Shenzhou maintains a leadership role in the industry, with a number of competitive advantages. The company has a very quick order turn-around time, which is highly desired by brand owners especially in today’s fast-paced fashion world. The company is gaining market share against smaller players and will likely continue to benefit even under a weak export environment.

Gold exposure and macro overlay

In 2012, because of the turbulent environment we made adjustments to our asset allocation and stock positioning. From a macro perspective, in the first half of the year, we were more conservative and maintained a moderate level of cash, and used hedging at times to reduce the equity exposure of our portfolio. This contrasted significantly with our well-invested allocation since the middle of the third quarter when we viewed investors were being overly pessimistic. We believed stocks were very attractively valued then, and trimmed gold to make room for equities. Our allocation to gold throughout the year helped contribute to the Fund’s return.

During the year we did face difficulty particularly with the macro driven environment. At times we adopted index hedging to limit the Fund’s downside vulnerability, but the results in 2012 have been mixed as we were caught out by the strong rally in January.


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Corporate update

Despite 2012 being a difficult year for fund managers – particularly value investors like us who focus on China’s small- and mid-cap stocks – we are pleased to see net inflow into our funds. This reflects the faith investors have placed in us as well as our disciplined value investing approach. We sincerely thank our investors for their support.

This year marks the 20th anniversary of Value Partners. Strict value investing discipline has taken us a long way, and we will adhere unwaveringly to the principles of this classic investment style as we strive to become the “Temple of Value Investing in Asia.”

Value Partners Limited18 April 2013

All performance figures are sourced from Bloomberg. Individual stock performance is not indicative of fund performance.

Investors should note that investment involves risk. The price of units may go down as well as up and past performance is not indicative of future results. Investors should read the explanatory memorandum for details and risk factors in particular those associated with investment in emerging markets. This commentary has not been reviewed by the Securities and Futures Commission. Issuer: Value Partners Limited.



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Value Partners China Greenchip Fund Limited: 5 biggest holdings of securities as at 31 December 2012

Stock IndustryValuation (2013 Estimates) Remarks

CSOP FTSE China A50 HKD ETF(Code: 2822 HK)

Market cap:US$2.8 billion

Diversified financials

Price: HK$10.70P/E: N/AP/B: N/AYield: N/A

CSOP FTSE China A50 ETF is an exchange-traded fund incorporated in Hong Kong. It seeks to track the performance of the FTSE China A50 Index, and invests most of its assets in the equities of member companies of the said FTSE Index. It is a RMB Qualified Foreign Institutional Investors (RQFII) fund.

China ZhengTong Auto Services(Code: 1728 HK)


Auto dealer Price: HK$5.39P/E: 9.1xP/B: 1.2xYield: N/A

China ZhengTong Auto Services (“ZhengTong”) is a leading 4S dealership operator in China, operating over 66 4S dealership stores covering 27 cities in 12 provinces in China by the end of June 2012, with a focus on premium car brands such as BMW, Land Rover, Audi, Porsche, Volvo etc. Turnover from premium brands accounted for about 88% of the total revenue in the first half of 2012. ZhengTong is one of the Top 3 dealership groups for BMW, Land Rover and Volvo in China in terms of both number of stores and sales volume in 2011 and 2012. We believe the company is set to benefit from the sustained demand growth for premium cars in China as the penetration of premium cars remains lower than developed markets and global average. We also see sustained growth in the related after-sales-service business as the result of rising premium car ownerships, which are not cyclical in nature and generate stable cash flow for the company.

Hopefluent Group(Code: 733 HK)


Property real estate agency

Price: HK$2.66P/E: 7.0xP/B: 0.9xYield: 0.0%

Hopefluent Group is one of the leading nation-wide property agencies in China, which provides service coverage of primary and secondary real estate markets. It is the largest property agency in Guangzhou, with over 30% market share, and it is well positioned to benefit from the long-term growth in Guangzhou’s secondary property market. The company has established close working ties with large-scale property developers, such as China Vanke and China Overseas Land. These long-term business relationships should benefit the company through the growing outsourcing trend as developers gradually contract out their sales functions to professional agencies.


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Value Partners China Greenchip Fund Limited: 5 biggest holdings of securities as at 31 December 2012 (Continued)

Stock IndustryValuation (2013 Estimates) Remarks

Shenzhou International Group(Code: 2313 HK)


Consumer durables and apparel


Shenzhou International is one of the largest garment manufacturers in China, with major customers such as Uniqlo, Nike and Adidas on an OEM basis. Its key competitive advantage is quick order turnaround time, a key performance indicator which is very important to brand owners, especially in today’s fast-paced fashion world. Due to a vertically integrated model (from yarn spinning, fabrics knitting, dyeing, printing, to final garment completion), its delivery time is significantly shorter than its peers. The company enjoys lower procurement costs due to bulk purchases. It is still growing while smaller players are closing down.

Vinda International(Code: 3331 HK)


Paper manufacturer


Vinda International Holdings Ltd (“Vinda”) is one of the leading manufacturers and brands of tissue paper products in China. It has a strong brand with a reputation of quality with broad penetration across the country through a strong distribution network. The company has been producing household paper products for over 25 years and ranks number one in terms of market share for toilet paper roll sales nationally in 2011. However, the use of tissue paper and diapers remains very low in China, especially in rural areas. The usage of paper products is significantly below developed markets and expected to grow rapidly. We believe tightening regulation and quality enforcement may result in further consolidation in the industry benefiting Vinda. We believe the company remains attractively valued compared to its peers.

Note: The above investments made up 19.3% of Value Partners China Greenchip Fund Limited as at 31 December

2012. The stock prices are based on the closing of 31 December 2012.

Individual stock performance/yield is not necessarily indicative of overall fund performance.



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Value Partners China Greenchip Fund LimitedNAV per share = HK$51.09 (as at 31 December 2012)

Since launch return compared to indicesFrom 8 April 2002 to 31 December 2012

+410.9%

+172.4%

+417.7%

-100%

0%

100%

200%

300%

400%

500%

600%

700%

4/02 8/03 12/04 4/06 8/07 12/08 4/10 8/11 12/12

Value Partners China Greenchip Fund LimitedHong Kong Hang Seng Index#

MSCI China Index

# Hang Seng Index refers to Hang Seng Price Return Index up to 31 December 2004, thereafter it is the Hang Seng Total Return Index. Hang Seng Total Return Index includes dividend reinvestment whereas Hang Seng Price Return Index does not take into account reinvestment of dividends.

STATEMENT OF RESPONSIBILITIES OF THE MANAGER


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Manager’s responsibilities

The Manager, Value Partners Limited, is required by the Code on Unit Trusts and Mutual Funds

established by the Securities and Futures Commission of Hong Kong and the amended and

restated Memorandum and Articles of Association dated 19 March 2007 (as amended) to prepare

financial statements for each annual accounting period which give a true and fair view of the

financial position of Value Partners China Greenchip Fund Limited (the “Fund”) at the end

of that period and of the transactions for the period then ended. In preparing these financial

statements, the Manager is required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are prudent and reasonable; and

• prepare the financial statements on the basis that the Fund will continue in operation

unless it is inappropriate to presume this.

The Manager is also required to manage the Fund in accordance with the amended and restated

Memorandum and Articles of Association dated 19 March 2007 (as amended) and take reasonable

steps for the prevention and detection of fraud and other irregularities.

CUSTODIAN’S REPORT


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We hereby confirm that, in our opinion, the Manager, Value Partners Limited, has, in all

material respects, managed Value Partners China Greenchip Fund Limited in accordance with

the provisions of the amended and restated Memorandum and Articles of Association dated 19

March 2007 (as amended) for the year ended 31 December 2012.

For and on behalf of

HSBC Institutional Trust Services (Asia) Limited

Custodian

18 April 2013

INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OFVALUE PARTNERS CHINA GREENCHIP FUND LIMITED


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Report on the financial statements

We have audited the accompanying financial statements of Value Partners China Greenchip

Fund Limited (the “Fund”) set out on pages 15 to 44, which comprise the statement of financial

position as of 31 December 2012, and the statement of comprehensive income, statement of

changes in net assets attributable to shareholders and statement of cash flows for the year then

ended, and notes, comprising a summary of significant accounting policies and other explanatory

information.

Directors’ responsibility for the financial statements

The directors are responsible for the preparation and fair presentation of financial statements in

accordance with International Financial Reporting Standards, and are responsible for ensuring

that the financial statements have been properly prepared in accordance with the relevant

disclosure provisions of the amended and restated Memorandum and Articles of Association

dated 19 March 2007 (as amended) (the “Memorandum and Articles of Association”), and the

relevant financial statements disclosure provisions specified in Appendix E of the Code on Unit

Trusts and Mutual Funds established by the Securities and Futures Commission of Hong Kong

(the “SFC Code”), and for such internal control as the directors determine is necessary to enable

the preparation of financial statements that are free from material misstatement, whether due to

fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing. Those

standards require that we comply with ethical requirements and plan and perform the audit

to obtain reasonable assurance about whether the financial statements are free from material

misstatement.

INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OFVALUE PARTNERS CHINA GREENCHIP FUND LIMITED (Continued)


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Auditor’s responsibility (Continued)

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial statements. The procedures selected depend on the auditor’s judgment,

including the assessment of the risks of material misstatement of the financial statements, whether

due to fraud or error. In making those risk assessments, the auditor considers internal control

relevant to the entity’s preparation and fair presentation of financial statements in order to design

audit procedures that are appropriate in the circumstances, but not for the purpose of expressing

an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating

the appropriateness of accounting policies used and the reasonableness of accounting estimates

made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a

basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial

position of the Fund as of 31 December 2012, and its financial performance and its cash flows

for the year then ended in accordance with International Financial Reporting Standards.

Report on other legal and regulatory disclosure requirements

We report that the financial statements have been properly prepared in accordance with the

relevant disclosure provisions of the Memorandum and Articles of Association and the relevant

financial statements disclosure provisions specified in the SFC Code.

PricewaterhouseCoopersCayman Islands

18 April 2013

STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2012


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2012 2011 Note HK$ HK$

AssetsFinancial assets at fair value

through profit or loss 3(d) 675,000,769 474,529,586

Amounts receivable on sales of investments 833,207 1,137,308

Amounts receivable on subscription of shares 3,706,725 –

Dividends and interest receivables 372,748 1,140,668

Other receivables – 7,629

Margin deposits 4,186,496 4,611,128

Bank balances 52,857,777 45,833,222

Total assets 736,957,722 527,259,541

LiabilitiesFinancial liabilities at fair value

through profit or loss 3(d) 3,819,760 23,515,611

Amounts payable on purchase of investments 25,730,292 4,991,932

Amounts payable on redemption of shares 17,774,179 –

Management fee and performance fee payable 856,097 641,155

Accruals and other payables 322,158 337,251

Liabilities (excluding net assets attributable to shareholders) 48,502,486 29,485,949

The notes on pages 22 to 44 are an integral part of these financial statements.

STATEMENT OF FINANCIAL POSITION (Continued)AS AT 31 DECEMBER 2012


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2012 2011 Note HK$ HK$

Net assets attributable to shareholders (before adjustment on fair value of investments) 5 688,455,236 497,773,592

Adjustment for different bases adopted

by the Fund in arriving at the net

assets attributable to shareholders 5 2,019,780 2,547,953

Net assets attributable to shareholders 5 690,475,016 500,321,545

Net asset value per share– Class N share with 1,387,500

(2011: 1,417,500) shares outstanding 51.09 40.95

– Class A share with 12,126,319

(2011: 10,801,172) shares outstanding 51.09 40.95

Signed by:

Director


STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 31 december 2012


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2012 2011 note hK$ hK$

IncomeDividends 18,283,939 16,465,839

Interest on bank deposits 5,807 2,572

Net realised gain on investments 7,059,992 11,075,887

Change in unrealised gain/loss on investments 126,111,079 (177,870,171 )

Other income 81,715 249,435

Net foreign exchange gain/(loss) 80,090 (605,408 )

Total net income/(loss) 151,622,622 (150,681,846 )

ExpensesManagement fee 6(a) 9,275,379 8,783,232

Transaction costs 3,276,794 3,527,495

Fund services fees 6(c) 1,262,329 1,194,291

Stock borrowing fee 657,293 350,402

Auditor’s remuneration 299,375 296,009

Dividends on securities borrowed 192,720 253,200

Legal and professional fees 73,645 337,740

Safe custody and bank charges 49,755 12,156

Other operating expenses 608,034 647,006

Total operating expenses 15,695,324 15,401,531


STATEMENT OF COMPREHENSIVE INCOME (Continued)For the year ended 31 december 2012


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2012 2011 note hK$ hK$

Profit/(loss) before tax 135,927,298 (166,083,377 )

Withholding tax on dividends

and other investment income 7(d) (498,236 ) (484,224 )

Profit/(loss) after tax 135,429,062 (166,567,601 )

Adjustment for different bases adopted

by the Fund in arriving at the net

assets attributable to shareholders 5 (528,173 ) 156,619

Increase/(decrease) in net assets attributable to shareholders from operations 134,900,889 (166,410,982 )


STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TOSHAREHOLDERSFor the year ended 31 december 2012


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2012 2011 hK$ hK$

Net assets attributable to shareholders as at 1 January (before adjustment on fair value of investments) 497,773,592 621,521,039

Represented by:– Net assets attributable to shareholders as at 1 January 500,321,545 623,912,373

– Adjustment for different bases adopted by the

Fund in arriving at the net assets

attributable to shareholders (2,547,953 ) (2,391,334 )

Net assets attributable to shareholders as at 1 January 500,321,545 623,912,373

Issue of shares 429,666,006 68,432,979

Redemption/repurchase of shares (374,413,424 ) (25,612,825 )

Net increase from share transactions 55,252,582 42,820,154

Profit/(loss) after tax 135,429,062 (166,567,601 )

Adjustment for different bases adopted by the

Fund in arriving at the net assets

attributable to shareholders (528,173 ) 156,619

Increase/(decrease) in net assets attributable to shareholders from operations 134,900,889 (166,410,982 )

Net assets attributable to shareholders as at 31 December 690,475,016 500,321,545



STATEMENT OF CASH FLOWSFor the year ended 31 december 2012

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2012 2011 hK$ hK$

Cash flows from operating activitiesIncrease/(decrease) in net assets attributable to

shareholders from operations 134,900,889 (166,410,982 )

Adjustments for:

Dividends and interest on bank deposits (18,289,746 ) (16,468,411 )

Stock borrowing fee and dividends on

securities borrowed 850,013 603,602

Withholding tax on dividends and

other investment income 498,236 484,224

Adjustment for different bases adopted by

the Fund in arriving at the net assets

attributable to shareholders 528,173 (156,619 )

118,487,565 (181,948,186 )

(Increase)/decrease in financial assets at fair value

through profit or loss (200,471,183 ) 113,839,115

(Decrease)/increase in financial liabilities

at fair value through profit or loss (19,695,851 ) 23,515,611

Decrease in amounts receivable on sales of investments 304,101 19,200

Increase/(decrease) in amounts

payable on purchase of investments 20,738,360 (2,442,609 )

Decrease in other receivables 7,629 27,052

Decrease/(increase) in margin deposits 424,632 (4,610,326 )

Increase/(decrease) in management fee and performance

fee payable and accruals and other payables 292,154 (20,062,590 )



Hand Mark Hand MarkVALUE PARTNERS CHINA GREENCHIP FUND LIMITED

( Incorporated as an exempted company in the Cayman Islands with l imited l iabil i ty)

STATEMENT OF CASH FLOWS (Continued)For the year ended 31 december 2012

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2012 2011 hK$ hK$

Cash used in operations (79,912,593 ) (71,662,733 )

Dividends and interest on bank deposits received 19,057,666 15,779,602

Stock borrowing fee and dividends

on securities borrowed paid (942,318 ) (511,297 )

Withholding tax on dividends and

other investment income paid (498,236 ) (484,224 )

Net cash outflow from operating activities (62,295,481 ) (56,878,652 )

Cash flows from financing activitiesProceeds from issue of shares 425,959,281 92,162,866

Payments on redemption/repurchase of shares (356,639,245 ) (25,940,425 )

Net cash inflow from financing activities 69,320,036 66,222,441

Net increase in cash and cash equivalents 7,024,555 9,343,789

Cash and cash equivalents as at 1 January 45,833,222 36,489,433

Cash and cash equivalents as at 31 December, representing bank balances 52,857,777 45,833,222



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NOTES TO THE FINANCIAL STATEMENTS


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1 GENErAL INFOrMATION

Value Partners China Greenchip Fund Limited (the “Fund”) was a close-ended investment

company registered with limited liability in the Cayman Islands on 16 January 2002. On 19

March 2007, a special resolution was passed at the Extraordinary General Meeting to adopt

the amended and restated Memorandum and Articles of Association of the Fund to become an

open-ended investment company. The Fund is also registered as a mutual fund under the Mutual

Funds Law (revised) of the Cayman Islands on 19 March 2007, and is governed by the laws

of the Cayman Islands and regulated by the Cayman Islands Monetary Authority. Besides, the

Fund is authorised by the Securities and Futures Commission of Hong Kong and is required to

comply with the Code on Unit Trusts and Mutual Funds established by the Securities and Futures

Commission of Hong Kong (the “Code”).

The Fund’s investment objective is to achieve medium-term capital growth through investing

in companies established in Greater China or which derive a majority of their revenue from

business related to Greater China, whether in the form of direct investment or trade.

The Fund’s investment activities are managed by Value Partners Limited (the “Manager”). The

Fund’s administration is delegated to HSBC Institutional Trust Services (Asia) Limited, an

affiliate of the Bank of Bermuda (Cayman) Limited (the “Administrator”). The registered office

of the Fund is P.O. Box 309, Ugland House, South Church Street, George Town, Grand Cayman,

Cayman Islands, British West Indies.

2 SIGNIFICANT ACCOuNTING pOLICIES

The principal accounting policies applied in the preparation of these financial statements are

set out below. These policies have been consistently applied to all the years presented, unless

otherwise stated.

(a) Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting

Standards (“IFRS”). They have been prepared under the historical cost convention, as modified

by the revaluation of financial assets and liabilities at fair value through profit or loss.




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NOTES TO THE FINANCIAL STATEMENTS (Continued)

2 SIGNIFICANT ACCOuNTING pOLICIES (Continued)

(a) Basis of preparation (Continued)

The preparation of financial statements in conformity with IFRS requires the use of accounting

estimates. It also requires the exercise of judgement in the process of applying the Fund’s

accounting policies.

All references to net assets throughout this document refer to net assets attributable to shareholders

unless otherwise stated.

Standards and amendments to existing standards effective 1 January 2012

There are no IFRSs or I (IFRS Interpretations Committee) interpretations that are effective for

the first time for the financial year beginning on or after 1 January 2012 that would be expected

to have a material impact on the Fund.

Standards that are not yet effective and have not been early adopted by the Fund

IFRS 9, “Financial instruments” (effective from 1 January 2015). IFRS 9 addresses the

classification, measurement and recognition of financial assets and financial liabilities.

It replaces the parts of IAS 39 that relate to the classification and measurement of financial

instruments. IFRS 9 requires financial assets to be classified into two measurement categories:

those measured at fair value and those measured at amortised cost. The determination is made

at initial recognition. The classification depends on the entity’s business model for managing

its financial instruments and the contractual cash flow characteristics of the instrument. For

financial liabilities, the standard retains most of the IAS 39 requirements. The main change is

that, in cases where the fair value option is taken for financial liabilities, the part of a fair value

change due to an entity’s own credit risk is recorded in other comprehensive income rather than

the income statement, unless this creates an accounting mismatch. The standard is not expected

to have a significant impact on the Fund’s financial position or performance, as it is expected

that the Fund will continue to classify its financial assets and liabilities (both long and short) as

being at fair value through profit or loss.


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(a) Basis of preparation (Continued)

Standards that are not yet effective and have not been early adopted by the Fund (Continued)

IFRS 13, “Fair value measurements” (effective from 1 January 2013). IFRS 13 aims to improve

consistency and reduce complexity by providing a precise definition of fair value and a single

source of fair value measurement and disclosure requirements for use across IFRSs. The

requirements, which are largely aligned between IFRSs and US Generally Accepted Accounting

Principles (“US GAAP”), do not extend the use of fair value accounting but provide guidance

on how it should be applied where its use is already required or permitted by other standards

within IFRSs or US GAAP. The Manager is still assessing the impact on the Fund’s financial

statements.

(b) Financial assets and liabilities at fair value through profit or loss

(i) Classification

The Fund classifies its investments in equity securities, and related derivatives, as financial assets

or liabilities at fair value through profit or loss. These financial assets and liabilities are classified

as held for trading.

The Fund makes short sales in which a borrowed security is sold in anticipation of a decline

in the market value of that security, or it may use short sales for various arbitrage transactions.

Short sales are classified as financial liabilities at fair value through profit or loss.

(ii) Recognition/derecognition

Regular-way purchases and sales of investments are recognised on the trade date – the date on

which the Fund commits to purchase or sell the investment. Investments are derecognised when

the rights to receive cash flows from the investments have expired or the Fund has transferred

substantially all risks and rewards of ownership.




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(b) Financial assets and liabilities at fair value through profit or loss (Continued)

(iii) Measurement

Financial assets and liabilities at fair value through profit or loss are initially recognised at fair

value. Transaction costs are expensed in the statement of comprehensive income. Subsequent

to initial recognition, all financial assets and liabilities at fair value through profit or loss are

measured at fair value. Gains and losses arising from changes in the fair value of financial assets

and liabilities at fair value through profit or loss are presented in the statement of comprehensive

income in the year in which they arise.

Dividend on short sales of equity securities is included in the statement of comprehensive income

within dividends on securities borrowed.

(iv) Fair value estimation

The fair value of financial instruments traded in active markets (such as publicly traded derivatives

and trading securities) is based on quoted market prices at the reporting date. The quoted market

price used for financial assets held by the Fund is the current bid price; while the quoted market

price for financial liabilities is the current ask price.

The fair value of financial assets and liabilities that are not traded in an active market (for

example, over-the-counter derivatives) is determined by using broker quotes or valuation

techniques. Details of the fair value estimation of these securities are discussed in note 3(d).

(c) Income

Dividend income is recognised when the right to receive payment is established.

Interest income is recognised in the statement of comprehensive income on a time-proportion

basis using the effective interest method.


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(d) Expenses

Expenses are accounted for on an accrual basis.

(e) Foreign currency translation

The financial statements are presented in Hong Kong dollar, which is the Fund’s functional and

presentation currency.

The Fund has adopted Hong Kong dollar as the functional currency of the Fund since the

subscriptions and redemptions of the Fund are mainly transacted in Hong Kong dollars. In

addition, performance measurement and reporting to the shareholders as well as settlement of

fees and expenses are carried out in Hong Kong dollars.

Foreign currency transactions are translated into the functional currency using the exchange

rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting

from the settlement of such transactions and from the translation at year-end exchange rates

of assets and liabilities denominated in foreign currencies are recognised in the statement of

comprehensive income.

(f) Taxation

The Fund currently incurs withholding tax imposed by certain countries on investment income

and capital gains. Such income is recorded gross of withholding tax in the statement of

comprehensive income.

(g) Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term

highly liquid investments with original maturities of 3 months or less.




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3 FINANCIAL rISk MANAGEMENT

The Fund’s activities expose it to a variety of financial risks: market risk (including foreign

exchange risk, price risk and interest rate risk), credit and counterparty risk and liquidity risk.

The risks and respective risk management policies employed by the Fund to manage these risks

are discussed below:

(a) Market risk

(i) Foreign exchange risk

The Fund may hold assets denominated in currencies other than the Hong Kong dollar, the

functional currency, it may therefore be exposed to foreign exchange risk. The Fund’s overall

currency positions are monitored on a daily basis by the Manager.

The table below includes both monetary and non-monetary assets and liabilities held in foreign

currencies together with the percentage of reasonable possible change in foreign currencies and

the estimated impact on net assets.

Total net foreign currency exposures Estimated Non-monetary Monetary percentage impact on net assets net assets change net assets HK$ equivalent HK$ equivalent % HK$

As at 31 December 2012Singapore dollar 5,437,677 1 +/-5 +/-271,884Taiwan dollar 46,304,348 7,377,413 +/-5 +/-2,684,088Thai baht 8,465,846 – +/-5 +/-423,292United States dollar1 53,244,799 10,646,741 +/-0 –

113,452,670 18,024,155


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3 FINANCIAL rISk MANAGEMENT (Continued)

(a) Market risk (Continued)

(i) Foreign exchange risk (Continued)

Total net foreign currency exposures Estimated Non-monetary Monetary percentage impact on net assets net assets change net assets HK$ equivalent HK$ equivalent % HK$

As at 31 December 2011Japanese yen 4,053,058 – +/-5 +/-202,653Taiwan dollar 10,679,315 3,651,520 +/-5 +/-716,542United States dollar1 216,223,206 1,236,116 +/-0 –

230,955,579 4,887,636

1 The United States dollar is currently linked to the Hong Kong dollar, the functional currency, within a narrow range, and is therefore not exposed to significant foreign exchange risk.




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(ii) Price risk

The Manager manages price risk primarily through diversification of the portfolio and through a careful selection of securities and other financial instruments within specified limits as stated in the Explanatory Memorandum. The Fund’s overall market positions are monitored on a daily basis by the Manager.

The Fund’s overall market exposures were as follows:

% of net assets 2012 2011

Financial assets at fair value through profit or loss

Listed equity securitiesChina 1.77 1.47

Hong Kong

– “H” shares 8.93 11.70

– Red chips 6.03 18.92

– Others 64.60 47.89

Japan – 0.81

Singapore 2.66 1.04

Taiwan 6.71 2.13

Thailand 1.23 –

United States 1.32 1.82

93.25 85.78

put options – 0.00

Gold securities 4.51 9.06

Total financial assets at fair value through profit or loss 97.76 94.84


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(ii) Price risk (Continued)


Financial liabilities at fair value through profit or loss

Listed equity securitiesHong Kong

– Red chips – (2.67 )

– Others (0.55 ) (1.99 )

(0.55 ) (4.66 )

Futures contracts – (0.04 )

Total financial liabilities at fair value through profit or loss (0.55 ) (4.70 )




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The table below shows the analysis of equity securities by industry.

2012 2011 % %

Consumer discretionary 38.70 36.59

Information technology 13.33 7.80

Consumer staples 10.78 4.57

Real estate 7.79 11.80

Industrials 7.55 –

Energy 5.37 6.75

Telecommunication services 4.24 –

REITS 2.54 3.29

Healthcare 2.24 1.21

Utilities 2.10 –

Financials 1.77 2.77

Materials 0.28 14.90

Others 3.31 10.32

100.00 100.00

The Fund may sell securities of an issuer short. Short sales made by the Fund involve certain risks and special considerations. Possible losses from short sales differ from losses that could be incurred from a purchase of a security, because losses from short sales may be unlimited, whereas losses from purchases cannot exceed the total amount invested.


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The table below summarises the sensitivity of the Fund’s portfolio of listed equity securities to

equity price movements. The analysis is based on the assumptions that the MSCI China Index

increased/decreased with all other variables held constant and that the fair value of the Fund’s

portfolio of listed equity securities and notional value of the Fund’s futures contracts moved

according to their historical correlation with the index. The Fund is not directly correlated with

any Asian market indices. The index should be used for guidance and performance comparison

purposes only. The Manager does not manage price risk with reference to any market index.

Estimated impact on percentage change net assets 2012 2011 2012 2011 % % HK$ HK$

MSCI China Index +/-30 +/-30 +/-140,669,841 +/-93,092,308

As at 31 December 2012 and 2011, the Fund also invested in gold securities and was therefore

exposed to commodity price risk. The table below summarises the sensitivity of the Fund’s

investments in gold securities to gold price movements.

Estimated impact on percentage change net assets 2012 2011 2012 2011 % % HK$ HK$

Gold price +/-5 +/-5 +/-1,558,710 +/-2,265,971




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(iii) Interest rate risk

The majority of the Fund’s financial assets and liabilities are non-interest bearing. As a result,

the Fund is not subject to significant amounts of risk due to fluctuations in the prevailing levels

of market interest rates.

Cash at banks is subject to interest rate risk as the return is derived from the current inter-bank

lending rates; however, the interest rate risk is not actively managed as it is not considered

significant. As a result, no sensitivity analysis was deemed necessary.

(b) Credit and counterparty risk

The Fund limits its exposure to credit risk by transacting the majority of its securities and

contractual commitment activities with broker-dealers, banks and regulated exchanges that

the Manager considers to be well established. All transactions in listed securities are settled/

paid for upon delivery using approved and reputable brokers. The risk of default is considered

minimal since delivery of securities sold is only made when the broker has received payment. In

a purchase, payment is made when the securities have been received by the broker. If either party

fails to meet its obligation, the trade will fail.


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(b) Credit and counterparty risk (Continued)

The table below shows the exposures to major counterparties at the reporting date. The credit ratings are issued by Moody’s.

2012 2011Counterparty HK$ HK$

Cash with banks and brokers

Aa2 – 47,073,024

Aa3 57,044,273 –

A1 – 3,371,326

Investments placed with custodian

Aa2 – 451,228,787

Aa3 671,181,009 –

A2 – 309

The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets, excluding equity securities, as shown in the statement of financial position.

(c) Liquidity risk

With effect from 25 June 2012, the Fund is exposed to daily (2011: changed from monthly to weekly with effect from 29 June 2011) cash redemptions/repurchases of shares. The Manager considered that there is no significant liquidity risk on redemption/repurchase of shares as according to the amended and restated Memorandum and Articles of Association dated 19 March 2007 (as amended), the Manager may limit the total number of shares redeemed/repurchased on any dealing day to 10% in aggregate of the total number of Class N shares and Class A shares in issue.

The table below analyses the Fund’s non-derivative financial liabilities based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant. The table below reflects captions of the statement of financial position items and shows how much of the net assets can be redeemed if the Manager does not exercise the 10% redemption gate.




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(c) Liquidity risk (Continued)

Less than 3 months 2012 2011 HK$ HK$

Net assets attributable to shareholders 690,475,016 500,321,545

Financial liabilities at fair value through profit or loss 3,819,760 23,300,490

Amounts payable on purchase of investments 25,730,292 4,991,932

Amounts payable on redemption of shares 17,774,179 –

Management fee and performance fee payable 856,097 641,155

Accruals and other payables 322,158 337,251

738,977,502 529,592,373

The table below analyses the Fund’s derivative financial instruments in a loss position for which

the contractual maturities are considered to be essential to an understanding of the timing of cash

flows based on the Fund’s investment strategy.

Less than 1 month 2012 2011 HK$ HK$

Net settled derivativesFutures contracts – 215,121


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(c) Liquidity risk (Continued)

The markets in which the Fund invests may be relatively illiquid and the liquidity of these

markets may fluctuate substantially over time. Investment of the Fund’s assets in relatively

illiquid securities may restrict the ability of the Fund to dispose of its investments at a price

and time that it wishes. The risk of illiquidity also arises in the case of over-the-counter

transactions. The Manager monitors the liquidity of the Fund by conducting liquidity testing

on the investment portfolio on a monthly and ad-hoc basis. The objective of testing is to

monitor liquidity of financial assets to meet the cash outflows on financial liabilities. As at 31

December 2012, the Fund held investments in listed equity securities of HK$642,048,561 (2011:

HK$426,415,854) and other liquid assets, representing bank balances and amounts receivable

on sales of investments, of HK$53,690,984 (2011: HK$46,970,530) that are expected to be able

to realise within 7 days or less to generate cash inflows for managing liquidity risk. As detailed

in the terms of the Explanatory Memorandum, there are circumstances whereby management

of the Fund can suspend redemptions. Management is of the view that the possibility of these

circumstances occurring is highly remote.

Below presents a list of investors who held more than 10% of the net assets of the Fund:

Investor % of net assets

As at 31 December 2012Investor 3 19.30

Investor 4 10.42

As at 31 December 2011Investor 1 49.43

Investor 2 11.15




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(d) Fair value estimation

The following table analyses within the fair value hierarchy the Fund’s financial assets and liabilities (by class) measured at fair value as at the reporting date.

Level 1 Level 2 Level 3 Total HK$ HK$ HK$ HK$

As at 31 December 2012AssetsListed equity securities 642,048,561 – 1,778,000 * 643,826,561Gold securities 31,174,208 – – 31,174,208

Total assets 673,222,769 – 1,778,000 675,000,769

LiabilitiesListed equity securities 3,819,760 – – 3,819,760

As at 31 December 2011AssetsListed equity securities 426,415,854 – 2,794,000 * 429,209,854Put options – 309 – 309Gold securities 45,319,423 – – 45,319,423

Total assets 471,735,277 309 2,794,000 474,529,586

LiabilitiesListed equity securities 23,300,490 – – 23,300,490Futures contracts 215,121 – – 215,121

Total liabilities 23,515,611 – – 23,515,611

* As at 31 December 2012, listed equity securities include an investment (2011: 1) whose trading was suspended. The corresponding fair value is based on the market value of the suspended investment just before its suspension, with an 84% (2011: 75%) discount taken into consideration.


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(d) Fair value estimation (Continued)

Investments whose values are based on quoted market prices in active markets, and therefore classified within level 1, include active listed equity securities, gold securities and derivatives. The Fund does not adjust the quoted price for these investments.

Financial instruments that trade in markets that are not considered to be active and are valued based on quoted market prices or broker quotes, or financial instruments for which there is no active market and are valued based on valuation models supported by observable inputs are classified within level 2. These include over-the-counter derivatives. The quotes are periodically reviewed by the Manager.

Investments classified within level 3 have significant unobservable inputs, as they are traded infrequently.

As the amount of the level 3 investments is not significant to the Fund, changes in the inputs to the valuation models do not have a significant effect on the net asset value of the Fund.

The following table presents the movement in level 3 investments for the year:

Listed equity securities 2012 2011 HK$ HK$

Opening balance 2,794,000 –

Transfers into Level 3 – 17,170,400

Losses recognised in profit and loss (1,016,000 ) (14,376,400 )

Closing balance 1,778,000 2,794,000

Losses for the year included in the

statement of comprehensive income for

investments held at the end of the year (1,016,000 ) (14,376,400 )




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4 DErIvATIvE FINANCIAL INSTruMENTS

At 31 December 2012, the Fund did not hold any derivative financial instruments.

The Fund’s derivative financial instruments at 31 December 2011 are detailed as follows:

Notional Fair value amount Assets Liabilities HK$ HK$

As at 31 December 2011Put options on currencies US$19,900,000 309 –

Futures contracts on Hang Seng Index HK$25,838,400 – 215,121

309 215,121

5 SHArES

The total authorised number of shares is 200,000,000 shares (2011: 200,000,000 shares) with a

par value of HK$0.10 per share (2011: HK$0.10 per share). All issued shares are fully paid and

each carries one voting right.

The Fund’s capital is represented by these shares. They are entitled to payment of a proportionate

share based on the Fund’s net assets on each valuation day. The Fund’s capital is shown as net

assets attributable to shareholders in the statement of financial position. The Fund endeavours

to invest the subscriptions received in appropriate investments while maintaining sufficient

liquidity to meet redemptions/repurchases, such liquidity being augmented by disposal of listed

securities where necessary.


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5 SHArES (Continued)

In accordance with the provisions of the Fund’s Memorandum and Articles of Association

dated 19 March 2007 (as amended), investment positions are valued based on the last traded

market price for the purpose of determining the net asset value per share for subscriptions and

redemptions and for fees calculation. However, as stated in note 2(b)(iv), the accounting policies

of the Fund for the purpose of compliance with IFRS are to value investment positions at bid/ask

price. To determine the net asset value of the Fund for subscriptions and redemptions/repurchases

and for fees calculation, investments have been valued based on the last traded market prices

as of the close of business on the relevant trading day and results in an increase in the value of

investments of HK$2,019,780 (2011: HK$2,547,953) as at 31 December 2012. The amount of

the adjustment also results in a decrease in net assets attributable to shareholders from operations

by HK$528,173 (2011: increase by HK$156,619).

Number of shares in issue

The movement of number of shares in issue during the year was as follows:

Number of Class N shares Number of Class A shares 2012 2011 2012 2011

As at 1 January 1,417,500 1,471,500 10,801,172 9,955,902Subscription of shares – – 9,373,243 1,332,625Redemption/repurchase of shares (30,000 ) (54,000 ) (8,048,096 ) (487,355 )

As at 31 December 1,387,500 1,417,500 12,126,319 10,801,172

Class N shares represent the redeemable shares issued by the Fund prior to the delisting of the

Fund from the Hong Kong Stock Exchange on 26 March 2007. Since then, Class N shares of the

Fund are closed for subscription. Class N shares are redeemable at the option of the shareholders.

Class A shares are offered for both subscription and redemption.




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6 rELATED pArTy TrANSACTIONS/TrANSACTIONS wITH THE MANAGEr AND ITS CONNECTED pErSONS

The following is a summary of significant related party transactions/transactions entered into during the period between the Fund and the Manager and its connected persons. Connected persons of the Manager are those as defined in the Code. All such transactions were entered into in the ordinary course of business and on normal commercial terms.

(a) Management fee

The Manager is entitled to receive a management fee which represents 1.5% per annum of the net asset value of the Fund. The management fee is calculated and accrued daily and payable monthly in arrears.

(b) performance fee

The Manager is entitled to receive a performance fee which represents 15% of the product of the average number of shares in issue during the year and the amount by which the net asset value per share as at the last business day of each calendar year (the “performance fee valuation day”) before accrual of performance fee exceeds the higher of (i) the initial issue price of the shares and (ii) the highest value for the net asset value per share as at the performance fee valuation day for any preceding year in which a performance fee was last calculated and paid (after payment of the performance fee). The performance fee is calculated and accrued daily and payable yearly in arrears.

(c) Fund services fees and safe custody fees

The Administrator and the Custodian, HSBC Institutional Trust Services (Asia) Limited, are entitled to receive the following fund services fees:

• A fixed fee of US$10,500 per annum.

• A variable fee of (i) 0.19% per annum on the first US$100 million of the net asset value of the Fund; (ii) 0.17% per annum on the next US$100 million of the net asset value of the Fund; and (iii) 0.16% per annum thereafter, subject to a minimum of US$5,000 per month. The variable fee is calculated and accrued daily and payable monthly in arrears.


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6 rELATED pArTy TrANSACTIONS/TrANSACTIONS wITH THE MANAGEr AND ITS CONNECTED pErSONS (Continued)

(d) Manager’s and its related parties’ holding in the Fund and common directors

The Manager and its related parties held shares of the Fund as follows:

redemption/ As at Issue of repurchase As at 1 January shares of shares 31 December

year 2012

Class A sharesMr Cheah Cheng Hye* 328,169 – – 328,169Value Partners Limited** 200,000 2,408,379 – 2,608,379

year 2011

Class A sharesMr Cheah Cheng Hye* 326,684 1,485 – 328,169Value Partners Limited** 200,000 – – 200,000

* Mr Cheah Cheng Hye is a director of the Manager.** Value Partners Limited is the Manager.

The Manager did not have any common director (2011: 1) with the Fund as at 31 December 2012.

(e) preliminary charges

The Manager is entitled to receive a preliminary charge on issue of shares which represents up to 5% of the issue price. For the year ended 31 December 2012, total preliminary charges on issue of Class A shares, amounting to HK$22,294 (2011: HK$18,484), were received by the Manager. The preliminary charges are not reflected in the financial statements of the Fund.

(f) Cross Trades with other funds managed by the Manager and/or its associates

During the year ended 31 December 2012, the Fund has transacted with other funds which are

also managed by the Manager and/or its associates. The Fund sold investments amounting to

HK$3,229,504 to such funds. The transactions were carried out at fair value of the investments

on the date of the transactions. The decision was in the best interest of the Fund and fell within

the investment objectives and policies of the Fund. The transactions were executed on arm’s

length terms.




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7 TAxATION

(a) Cayman Islands

The Fund has obtained an undertaking from the Governor-in-Council of the Cayman Islands that, in accordance with Section 6 of the Tax Concessions Law (1999 Revision) of the Cayman Islands, for a period of 20 years from 22 January 2002, no laws thereafter enacted in the Cayman Islands imposing any tax on profits, income, gains or appreciations will apply to the Fund.

(b) Hong kong

No provision for Hong Kong profits tax has been made as the dividend and interest income and

realised gains on sale of investments of the Fund are excluded from the charge to profits tax

under Section 14, 26 or 26A of the Hong Kong Inland Revenue Ordinance.

(c) people’s republic of China (“prC”)

The Fund directly invests in “B” shares of companies listed in the PRC for subscription by

foreign investors and may be subject to PRC withholding tax of 10% on dividend income. A 10%

withholding tax may also be payable on the capital gains derived from the sale of “B” shares.

Under current PRC tax laws, gains derived from the transfer of shares of PRC companies by non-

residents should be subject to a withholding tax of 10%, unless exempt under relevant tax treaties.

The People’s Republic of China State Administration of Taxation (the “SAT”) has remained

silent on the collection of withholding tax for capital gains and until further clarification is issued

by the SAT, the Manager considers that there is significant uncertainty in respect of whether the

Fund has any liability and the extent of such liability with respect to tax on capital gains derived

from the sale of PRC “B” shares. In making this assessment, the Manager has considered (i) the

current position of the SAT, (ii) the absence of a withholding mechanism of the relevant tax and

(iii) current market practice. Accordingly, as at 31 December 2012, the Fund had not made any

provision for the tax on capital gains on “B” shares based on the above judgments made by the

Manager.

(d) Other jurisdictions

Overseas withholding tax was charged on certain dividend and investment income received

during the year.


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8 DISTrIBuTION

No distribution statement is prepared as no distribution has been made.

9 SOFT COMMISSION ArrANGEMENTS

The Manager and/or any company associated with it and its delegates may receive, and are entitled to retain research products and services (known as soft dollar benefits) which are of demonstrable benefit to the Fund (as may be permitted under applicable rules and regulations) from brokers and other persons through whom investment transactions are carried out (“brokers”) provided that the quality of transaction execution is consistent with best execution standards. The Manager will consider many judgemental factors deemed relevant in determining whether a broker will provide best execution, which may include the provision of research products and investment ideas, introductory services to potential investee companies, access to investment opportunities and initial public offerings and placements which are for the benefit of the Fund. The commission rates charged by brokers in these circumstances may be higher than those charged by other brokers who do not offer such services or by the same broker if it only provides execution services. Examples of research products and services that the Manager may receive from brokers include analyses and reports concerning industries, securities and, economic factors and trends. The Fund generally will pay customary full service brokerage rates where execution, research and other services cannot be unbundled for the same commission rate.

In particular cases where execution, research and other services can be unbundled, the Fund will pay a brokerage commission that is discounted from customary full service brokerage rates if no research or other services are provided in addition to brokerage execution. In addition, the Manager has the discretion to cause the Fund to pay brokerage commissions in excess of discounted rates, and up to full service brokerage rates, for quality brokerage execution and the provision of research or other appropriate services that the Manager determines to be beneficial to the Fund.

The Manager may pay brokers commissions for effecting portfolio transactions in excess of amounts other brokers would have charged for effecting similar transactions if the Manager determines in good faith that such amounts are reasonable in relation to the value of the research and other services provided, viewed in terms of the particular transaction or the Manager’s overall duty to its clients.

10 ApprOvAL OF FINANCIAL STATEMENTS

The financial statements were approved by the Board of Directors on 18 April 2013.


INVESTMENT PORTFOLIO (UNAUDITED)AS AT 31 DECEMBER 2012

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% of net Holdings Fair value assets HK$

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Listed equity securities

ChinaWeifu High-Technology Group Co Ltd 488,617 12,254,514 1.77

Hong Kong – “H” sharesBeijing Capital Land Ltd 2,896,000 9,354,080 1.35Beijing Jingkelong Co Ltd 1,327,000 7,059,640 1.02China Petroleum & Chemical Corp 718,000 6,304,040 0.92China Shenhua Energy Co Ltd 280,000 9,478,000 1.37Haitong Securities Co Ltd 588,400 7,766,880 1.12Shanghai Fosun Pharmaceutical (Group) Co Ltd 73,000 851,180 0.13Shanghai Pharmaceuticals Holding Co Ltd 504,000 7,449,120 1.08Wumart Stores Inc 808,000 13,396,640 1.94Zhengzhou Coal Mining Machinery Group Co Ltd 3,400 33,660 0.00

61,693,240 8.93

Hong Kong – Red chipsBrilliance China Automotive Holdings Ltd 884,000 8,451,040 1.22China Mobile Ltd 81,500 7,355,375 1.07China Power International Development Ltd 2,874,000 7,012,560 1.02China State Construction International Holdings Ltd 2,022,000 18,784,380 2.72

41,603,355 6.03

Hong Kong – OthersAeon Stores (Hong Kong) Co Ltd 210,000 4,242,000 0.61Asian Citrus Holdings Ltd 1,543,000 5,647,380 0.82Baoxin Auto Group Ltd 2,047,500 12,837,825 1.86China Singyes Solar Technologies Holdings Ltd 1,119,000 7,374,210 1.07China ZhengTong Auto Services Holdings Ltd 3,885,000 20,862,450 3.02Chow Sang Sang Holdings International Ltd 776,000 13,952,480 2.02CSOP FTSE China A50 ETF HKD 1,996,000 21,317,280 3.09Digital China Holdings Ltd 315,000 4,164,300 0.60Dorsett Hospitality International Ltd 7,152,000 13,302,720 1.93


INVESTMENT PORTFOLIO (UNAUDITED) (Continued)AS AT 31 DECEMBER 2012

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FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Continued)

Listed equity securities (Continued)

Hong Kong – Others (Continued)Emperor Entertainment Hotel Ltd 6,790,000 12,629,400 1.83ENN Energy Holdings Ltd 194,000 6,537,800 0.95Esprit Holdings Ltd 532,900 5,712,688 0.83Fortune REIT 1,427,000 9,089,990 1.32Four Seas Mercantile Holdings Ltd 2,304,000 5,506,560 0.80Galaxy Entertainment Group Ltd 405,000 12,271,500 1.78Haitong International Securities Group Ltd 1,078,000 3,611,300 0.52Hilong Holding Ltd 4,931,000 13,313,700 1.93Hopefluent Group Holdings Ltd 9,390,000 24,977,400 3.62Hosa International Ltd 610,000 1,311,500 0.19Hutchison Telecommunications Hong Kong Holdings Ltd 5,650,000 19,944,500 2.89Ju Teng International Holdings Ltd 1,972,000 7,217,520 1.04Kaisa Group Holdings Ltd 1,742,000 4,180,800 0.60Kingboard Chemical Holdings Ltd 660,500 18,097,700 2.62Kingboard Laminates Holdings Ltd 5,327,000 18,964,120 2.75Labixiaoxin Snacks Group Ltd 2,284,000 6,943,360 1.01Link REIT (The) 187,500 7,265,625 1.05NWS Holdings Ltd 1,032,133 13,397,086 1.94Orient Overseas (International) Ltd 56,000 2,800,000 0.40Oriental Watch Holdings Ltd 2,312,000 6,196,160 0.90Pacific Textiles Holdings Ltd 216,000 1,499,040 0.22Real Gold Mining Ltd* 1,270,000 1,778,000 0.26Shenzhou International Group Holdings Ltd 2,041,000 35,595,040 5.15Shimao Property Holdings Ltd 330,000 4,818,000 0.70Singamas Container Holdings Ltd 3,370,000 6,200,800 0.90SJM Holdings Ltd 594,000 10,656,360 1.54Skyworth Digital Holdings Ltd 1,223,208 4,856,136 0.70Sunny Optical Technology (Group) Co Ltd 2,956,000 15,046,040 2.18Techtronic Industries Co Ltd 1,323,500 19,005,460 2.75Vinda International Holdings Ltd 2,862,000 30,337,200 4.39Xinyi Glass Holdings Ltd 2,628,000 12,535,560 1.82

445,996,990 64.60





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FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Continued)

Listed equity securities (Continued)

SingaporeEzion Holdings Ltd 509,000 5,437,677 0.79Hongkong Land Holdings Ltd 126,000 6,817,201 0.99Tianjin Zhong Xin Pharmaceutical Group Corp Ltd 1,129,000 6,125,932 0.88

18,380,810 2.66

TaiwanAdvantech Co Ltd 17,000 549,152 0.08Asustek Computer Inc 158,000 13,729,869 1.99Formosa International Hotels Corp 147,000 15,285,622 2.21MPI Corp 299,000 4,310,457 0.62Ta Yih Industrial Co Ltd 138,000 1,646,816 0.24Uni-President Enterprises Corp 37,610 535,166 0.08Wah Lee Industrial Corp 11,000 115,851 0.02WPG Holdings Ltd 1,000,000 10,131,415 1.47

46,304,348 6.71

ThailandCentral Plaza Hotel Pcl 1,285,400 8,465,846 1.23

United StatesCharm Communications Inc 18,336 559,991 0.08Spreadtrum Communications Inc 62,800 8,567,467 1.24

9,127,458 1.32

Unlisted equity securitiesEuro-Asia Agricultural (Holdings) Co Ltd 4,266,000 – –

Gold securitiesLoco London Gold securities 2,400 31,174,208 4.51

Total financial assets at fair value through profit or loss 675,000,769 97.76



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FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

Listed equity securities

Hong Kong – OthersChina Liansu Group Holdings Ltd (718,000 ) (3,819,760 ) (0.55 )

Total financial liabilities at fair value through profit or loss (3,819,760 ) (0.55 )

Total investments, net 671,181,009 97.21

Total investments, at cost (Inclusive of transaction cost) 586,200,512

* The trading of this equity security has been suspended.


INVESTMENT PORTFOLIO MOVEMENTS (UNAUDITED)For the year ended 31 december 2012

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Listed equity securitiesChina 1.77 1.47Hong Kong– “H” shares 8.93 11.70– Red chips 6.03 16.25– Others 64.05 45.90Japan – 0.81Singapore 2.66 1.04Taiwan 6.71 2.13Thailand 1.23 –United States 1.32 1.82

92.70 81.12

Put options – 0.00

Futures contracts – (0.04 )

Gold securities 4.51 9.06

Total investments, net 97.21 90.14


PERFORMANCE RECORD (UNAUDITED)

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Net assets (at last traded price)

2012 2011 2010 HK$ HK$ HK$

Net assets 690,475,016 500,321,545 623,912,373

Net asset value per share 51.09 40.95 54.60

Performance record for the past 10 years

Highest Lowest issue price redemption per share price per share HK$ HK$

2012 51.09 40.48

2011 55.18 37.96

2010 54.87 39.09

2009 39.62 18.29

2008 35.46 16.81

2007 47.05 35.35

2006 – –

2005 – 17.01 1

2004 – –

2003 – –

1 TheFundisaclose-endedfundpriortoitsdelistingfromtheHongKongStockExchangeon26March2007.In2005,therewasarepurchaseof50,000sharesbytheFundthroughHongKongStockExchange.

Note: TheFundhaselectedtopreparethefinancialstatementsinaccordancewithIFRS.TherearenomaterialvariationsonaccountingtreatmentbetweenIFRSandUSGAAP.

VALUE PARTNERS CHINA GREENCHIP FUND LIMITED 惠理中華新 … · 2017-03-30 · VALUE PARTNERS...

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