VALUE PARTNERS CHINA GREENCHIP FUND LIMITED · 2017-03-30 · VALUE PARTNERS CHINA GREENCHIP FUND...

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 1For the year ended 31 December 2011

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 Cayman Is lands with l imited l iabi l i ty)

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Fo r t h e y ea r ended 3 � Decembe r 20 ��

Pages

General information 2-3

Manager’s report 4-11

Statement of responsibilities of the Manager 12

Custodian’s report 13

Independent auditor’s report 14-15

Statement of financial position 16-17

Statement of comprehensive income 18-19

Statement of changes in net assets attributable to shareholders 20

Statement of cash flows 21-22

Notes to the financial statements 23-44

Investment portfolio (unaudited) 45-48

Investment portfolio movements (unaudited) 49

Performance record (unaudited) 50

GENERAL INFORMATION


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Fo r t h e y ea r ended 31 Decembe r �011


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Executive DirectorsMr Lee Ho TakMr So Chun Ki LouisMr Tse Wai Ming

ManagerValue Partners Limited9th Floor, Nexxus Building 41 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) LimitedPO Box 513 GTHSBC House68 West Bay RoadGrand Cayman KY1-1106Cayman Islands

Registered OfficePO Box 309 GTUgland 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 lawMallesons Stephen Jaques13th Floor, Gloucester TowerThe Landmark15 Queen’s Road CentralHong Kong

Information available from:Value Partners Limited9th Floor, Nexxus Building 41 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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Fo r t h e y ea r ended 31 Decembe r �011

Recent awards and achievements

Corporate awards

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 – Asia Hedge Fund 25 Value Partners was ranked No.1 in 2011 Asia Hedge Fund 25 – Institutional Investor, July 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#

• Best Overall Fund Management Firm – Asia Value Partners was recognized as one of the top-three fund management

companies – Thomson Reuters Extel Asia Pacific Survey 2010# The 2012 and 2011 awards are based on data as of year end 2011 and 2010 respectively.

Value Partners China Greenchip Fund Limited

2012 • Lipper Fund Awards 2012 Best 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 Award – Greater China Region – 3 Years category – Asia Asset Management*

^ The 2012 and 2011 awards are based on the returns as of year end 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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Fo r t h e y ea r ended 31 Decembe r 2011


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Value Partners China Greenchip Fund Limited dropped 25.0% in 2011, a year marked by global market turmoil and high volatility. For reference, the Hang Seng Index and MSCI China Index fell by 17.4% and 18.5%, respectively, in 2011.

As a value investor, we tend to focus on the medium to long-term performance of the Fund, and this remains very strong. Since inception 10 years ago, the Fund has made a profit in 8 of the 10 years, with an annualized return of 15.6%. For reference, the Hang Seng Index and MSCI China Index saw 7 years of positive return, respectively, over the same period. (For a table of the annual returns of Value Partners China Greenchip Fund as well as the Hang Seng and MSCI China Indices, please refer to Appendix I as attached.)

As in the past years, we provide a list of the biggest contributors to the Fund’s return in 2011, 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 2011 return(From dealing date of 31 December 2010 to 28 December 2011)(Fund size: HK$500.3 million end-2011; HK$600.5 million end-2010)

Gain in 2011 % return in 2011 (in HK$ million) (including dividends)Brilliance China Automotive (Auto manufacturing) 10.6 up 41.5%China National Building Material (Construction materials) 8.3 up 59.1%Great Wall Motor (Auto manufacturing) 3.3 up 23.6%Chow Sang Sang (Jewellery chain) 2.3 up 8.6%Oriental Watch (Timepiece retail) 2.1 up 42.8%

Valuation at attractive levels

Asia-Pacific stocks have become very cheap. The cyclically-adjusted price-earnings ratio (PE) of the Hang Seng Index for 2012 was at 10.3 times and the Hang Seng China Enterprises Index was at 8.2 times by year-end, while historical average for the past 5 years was 14.2 times and 13.8 times respectively. We now have an unusual situation where dividend yields are generally higher than bond yields in our region (see chart below) – history tells us that it is likely to last for only a short while before going back to normal again.


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MANAGER’S REPORT (Continued)


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MSCI Asia ex-Japan dividend vs 10-year Asian bond yields

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

Jun-98 Jan-00 Oct-01 Jun-03 Jan-05 Oct-06 Jun-08 Feb-10 Oct-11

Asia FE ex-JP div yield

Weighted average 10Y bond yield

(%)

Source: CLSA Asia Pacific Markets, Bloomberg as at 30 November 2011

Dividend yield > 10Y bond yield

We fully expect financial markets to remain very volatile in 2012, influenced by huge macro-forces affecting global economics and politics. To do well, an investor must have access to original and accurate research and strong convictions, and stick to his convictions despite wild swings in market sentiment. The alternative is to be whipsawed, and this is what happened to many of our competitors in 2011. In 2012, we expect investors in China-related markets would enjoy one advantage: the country’s tightening cycle came to an end in late 2011, and from here on, we see the beginning of a new business cycle characterized by selective easing measures, including reductions in bank reserve requirements, thus expanding liquidity in the economy. This is generally good for the stockmarket.

To us, the China story is clearly intact, and with every passing month, we see further indications that the economy can avoid the much-feared “hard landing.” Nor will there be a property crash with local governments already rolling out initiatives to attract buying. Underlying demand for housing is very strong. In fact, the current poor performance of China markets is hard to justify, with fundamentals remaining healthy, as reliance on exports continues to decline (net exports estimated to contribute -0.2% of GDP growth in 2011) and strong domestic demand will keep driving economic growth (consumption’s percentage of GDP in 2011 estimated at 42%) despite external headwinds. The actual implementation of policy relating to the 12th Five-Year Plan next year might surprise on the upside.



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About once a decade, China’s top leadership changes, and in 2012, President Hu Jintao is

expected to retire, with Vice-Premier Xi Jinping becoming the new leader, in a smooth transition.

The size of China’s economy is expected to overtake that of the United States within this decade,

and we continue to see many attractive investment opportunities.

A quick note

A remarkable new development is that companies are increasingly viewed as being safer than

governments. The word’s best companies are well-run, profitable and with prudent balance

sheets. On the other hand, all too many governments are dangerously indebted, inefficient

and controlled by politicians whose only priority seems to be ensuring their own re-election.

So we end up with a two-tier world, of healthy corporates and unhealthy governments.

We’ve reached the point, in 2011, where the conventional wisdom of preferring government-

issued paper to corporate paper is being overturned. Thus, for example, the Wall Street

Journal of 22 December 2011, reported that it had become cheaper to insure against default

by such companies as Nestle, Exxon Mobil and Coca-Cola than against countries such as

Switzerland, Britain, Germany and Japan.

This really supports the case for buying stocks and corporate bonds, rather than leaving

money in paper currencies or government bonds. We see that investors are still reacting in

knee-jerk fashion; faced with unhealthy governments and a sovereign-debt crisis in Europe

and some other parts of the world, investors respond by selling everything. Eventually, people

are going to realize that a big disconnect is happening, and a better alternative is to invest in

strong corporations.

Here in the Asia-Pacific region, we have some of the fastest-growing, most healthy companies

in the world. On top of that, unlike the case in some other parts of the world, we have quite

a number of Asia-Pacific governments that remain in strong health, with many lessons learnt

from the Asian financial crisis of 1998. Undoubtedly, the world faces a difficult economic

outlook, but savings have to be invested somewhere, and we are convinced that investors will

re-discover the merits of putting money to work through the stockmarket, especially in still-

dynamic regions such as Asia.

– – Cheah Cheng Hye, Chairman & Co-Chief Investment Officer


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A defensive portfolio strategy

Generally, we maintain a well-diversified portfolio focused on our core competence: stock-picking (our Investment Team carries out more than 2,500 company visits a year, excluding phone calls). From time to time, to add to the defensive characteristics of the Fund, the portfolio is hedged either by short-selling of index futures or by shorting individual stocks.

Also, as noted in previous reports, the Fund started buying gold from 2008, in various forms, including gold bullion, holding the precious metal as a form of “emergency reserve.” In previous years, gold typically formed about 5% of the fund, but lately, the level has risen to 9% due partly to outperformance. Even after a 20% price fall from its September peak, gold was still the best performing major commodity in 2011.

Value Partners: Corporate update

Over the year, we have added to our investment team to strengthen our research capabilities. Our investment management team grew by 12 individuals in 2011 to become one of the largest investment teams in Asia with 40 investment professionals focusing on Greater China region. Following the acquisition of our new fund management joint venture in Taiwan, called Value Partners Concord Asset Management, our on-the-ground research capability for Taiwan-related stocks is further enhanced.

Finally, our heartfelt appreciation to our investors – with your support, Value Partners Group still enjoyed a significant net inflow of subscriptions in 2011, despite the market difficulties. We are ever mindful of the challenges ahead, and will continue to do our best.

Value Partners Limited26 April 2012

Fund performance mentioned is referred to Value Partners China Greenchip Fund Limited. All performance figures are sourced from HSBC Institutional Trust Services (Asia) Limited and Bloomberg (Data computed in HK$ terms on NAV-to-NAV basis with dividends reinvested) as at 31 December 2011. Performance data is net of all fees.

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 document has not been reviewed by the Securities and Futures Commission. Issuer: Value Partners Limited.



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Appendix I: Performance of Value Partners China Greenchip Fund Limited, Hang Seng Index* and MSCI China Index – 8 April 2002 to 31 December 2011

Value Partners China

Greenchip Fund Ltd.

Hang Seng Index*

MSCI China Index

2002^

200320042005200620072008200920102011Annualized return(since inception years)Volatility▽

(since inception years annualized)Sharpe ratio#

(since inception years annualized)

up 0.6%up 86%up 2%

up 17%up 43%up 35%

down 57%up 117%up 38%

down 25%up 15.6%

23.9%

0.56

down 14%up 35%up 13%up 8%

up 39%up 43%

down 46%up 57%up 9%

down 17%up 8.1%

21.5%

0.27

down 10%up 87%up 2%

up 19%up 83%up 67%

down 51%up 62%up 5%

down 18%up 15.9%

27.6%

0.49

* 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.

^ From 8 April 2002.

▽ Volatility is a measure of the theoretical risk in terms of standard deviation; in general, the lower the number, the less risky the investment, and vice versa.

# Sharpe ratio is a risk-adjusted measure of a portfolio’s performance, calculated by using standard deviation and excess return to determine reward per unit of risk. The higher the Sharpe ratio, the better the fund’s historical risk-adjusted performance. The risk-free rate is currently based on one-month Eurodollar deposit rate.


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Appendix II: Value Partners China Greenchip Fund Limited: 5 biggest holdings of securities as at 31 December 2011

Stock IndustryValuation (2012 Estimates) Remarks

Brilliance China Automotive(Code: 1114 HK)

Market cap:US$5.4 billion

Auto manufacturing

Price: HK$8.38 P/E: 14.0xP/B: 3.3xYield: 0.2%

The company manufactures and distributes minibuses and MPVs in China, and has an equally owned joint venture with BMW (“BMW JV”) to produce sedans in China. In recent years, BMW JV has accelerated capacity expansion and new-model launches, which would help fuel sales growth. With the increase in local content ratios and lower component costs due to larger scale, gradual margin improvement in the medium term could be expected. The low penetration of luxury cars in China, as well as the country’s rising middle-class would continue to support demand growth for luxury cars in China in the coming three to five years. We believe it remains attractive, given the company’s strong long-term earnings growth potential.

China ShenhuaEnergy(Code: 1088 HK)


Coal mining Price: HK$33.70 P/E: 10.6x P/B: 2.0x Yield: 3.6%

China Shenhua Energy (“CSE”) is the world’s largest coal-mining company. The company has a few structural advantages against peers, firstly it benefits from an integrated business model with an integrated coal transportation network consisting of dedicated rail and port facilities. The integrated transportation network endows CSE with a monopoly in shipping coal from Inner Mongolia to the coastal regions, where the demand is high. Secondly, as one of the largest miners, the company benefits from significant scalability compared to peers and strong bargaining power. Thirdly, CSE’s coal is high quality which generates above average margins compared to peers. Finally, like most coal miners, CSE has a significant proportion of sales at key contract prices which are set by government at below market prices. Over time, we believe the market trend would continue and the company will benefit from the price increase.



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Appendix II: Value Partners China Greenchip Fund Limited: 5 biggest holdings of securities as at 31 December 2011 (Continued)

Stock IndustryValuation (2012 Estimates) Remarks

China State Construction(Code: 3311 HK)


Construction Price: HK$5.51 P/E: 9.9x P/B: 1.9x Yield: 2.9%

China State Construction International Holdings Limited (“CSCI”) is as an investment holding company providing corporate management services. With operations in Hong Kong, China, Macau, UAE and India, its main source of revenue includes construction contracts, project management services, provision of connection services and infrastructure project investments. CSCI benefits from the Chinese policy to focus on providing affordable social economic housing and other infrastructure projects, and as a result has secured strong construction order demand for the next 2-3 years.

Shenzhou International Group(Code: 2313 HK)


Consumer durables and apparel

Price: HK$10.54P/E: 5.4xP/B: 1.4xYield: 6.1%

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.

Texwinca Holdings(Code: 321 HK)


Consumer durables and apparel

Price: HK$8.62 P/E: 9.9x P/B: 1.9x Yield: 6.0%

Texwinca is one of the largest dyed fabric and garment manufacturers in China. The company has well established relationships with numerous global fashion brands with its large scale, efficient production, which offers competitive pricing and short-delivery time. Its environmental-friendly facility is also helping the company to gain market share amid tightening environmental restriction in China. In addition to its core garment business, Texwinca also owns a popular fashion brand “Baleno”, which operates over 3,000 outlets in Hong Kong and China.

Note: The above investments made up 22.4% of Value Partners China Greenchip Fund Limited as at 31 December 2011. The stock prices are based on the closing of 31 December 2011.

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$40.95 (as at 31 December 2011)

Since launch return compared to indicesFrom 8 April 2002 to 31 December 2011

+309.5%

+113.7%

+322.6%

-100%

0%

100%

200%

300%

400%

500%

600%

700% Value Partners China Greenchip Fund Limited

Hong Kong Hang Seng Index#

MSCI China Index

4/02 5/03 6/04 7/05 8/06 9/08 10/08 11/09 12/10 12/11

# 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 2011.

For and on behalf of

HsBC institutional trust services (asia) Limited

Custodian

26 April 2012

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 16 to 44, which comprise the statement of financial

position as of 31 December 2011, 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 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.


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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 Fund’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 Fund’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 accompanying financial statements present fairly, in all material respects, the

financial position of the Fund as of 31 December 2011, 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

26 April 2012

STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2011


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2011 2010 Note HK$ HK$

AssetsFinancial assets at fair value through

profit or loss 3(d) 474,529,586 588,368,701

Amounts receivable on sales of investments 1,137,308 1,156,508

Amounts receivable on subscription of shares – 23,729,887

Dividends and interest receivables 1,140,668 451,859

Other receivables 7,629 34,681

Margin deposits 4,611,128 802

Bank balances 45,833,222 36,489,433

Total assets 527,259,541 650,231,871

LiabilitiesFinancial liabilities at fair value through

profit or loss 3(d) 23,515,611 –

Amounts payable on purchase of investments 4,991,932 7,434,541

Amounts payable on redemption of shares – 327,600

Management fee and performance fee payable 641,155 20,539,875

Accruals and other payables 337,251 408,816

Liabilities (excluding net assets attributable to shareholders) 29,485,949 28,710,832

The notes on pages 23 to 44 are an integral part of these financial statements.


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STATEMENT OF FINANCIAL POSITION (Continued)AS AT 31 DECEMBER 2011


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2011 2010 Note HK$ HK$

Net assets attributable to shareholders (before adjustment on fair value of investments) 5 497,773,592 621,521,039

Adjustment for different bases adopted by

the Fund in arriving at the net assets

attributable to shareholders 5 2,547,953 2,391,334

Net assets attributable to shareholders 5 500,321,545 623,912,373

Net asset value per share– Class N share with 1,417,500

(2010: 1,471,500) shares outstanding 40.95 54.60

– Class A share with 10,801,172

(2010: 9,955,902) shares outstanding 40.95 54.60

Signed by:

Director

Director


STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2011


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2011 2010 Note HK$ HK$

IncomeDividends 16,465,839 10,435,134

Interest on bank deposits 2,572 2,764

Net realised gain on investments 11,075,887 118,814,974

Change in unrealised gain/loss on investments (177,870,171 ) 40,123,383

Other income 249,435 879,839

Net foreign exchange (loss)/gain (605,408 ) 222,325

Total net (loss)/income (150,681,846 ) 170,478,419

ExpensesManagement fee 6(a) 8,783,232 6,992,646

Transaction costs 3,527,495 2,664,308

Fund services fees 6(c) 1,194,291 967,319

Stock borrowing fee 350,402 214,798

Legal and professional fees 337,740 72,810

Auditor’s remuneration 296,009 255,085

Dividends on securities borrowed 253,200 84,799

Safe custody and bank charges 12,156 4,515

Performance fee 6(b) – 19,748,546

Other operating expenses 647,006 335,991

Total operating expenses 15,401,531 31,340,817



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STATEMENT OF COMPREHENSIVE INCOME (Continued)FOR THE YEAR ENDED 31 DECEMBER 2011


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2011 2010 Note HK$ HK$

(Loss)/Profit before tax (166,083,377 ) 139,137,602

Withholding tax on dividends and

other investment income 7 (484,224 ) (476,453 )

(Loss)/Profit after tax (166,567,601 ) 138,661,149

Adjustment for different bases adopted

by the Fund in arriving at the net

assets attributable to shareholders 5 156,619 7,517

(Decrease)/Increase in net assets attributable to shareholders from operations (166,410,982 ) 138,668,666


STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TOSHAREHOLDERSFOR THE YEAR ENDED 31 DECEMBER 2011


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2011 2010 HK$ HK$

Net assets attributable to shareholders as at 1 January (before adjustment on fair value of investments) 621,521,039 465,364,856

Represented by:– Net assets attributable to shareholders as at 1 January 623,912,373 467,748,673

– Adjustment for different bases adopted by the

Fund in arriving at the net assets

attributable to shareholders (2,391,334 ) (2,383,817 )

Net assets attributable to shareholders as at 1 January 623,912,373 467,748,673

Issue of shares 68,432,979 136,310,952

Redemption/repurchase of shares (25,612,825 ) (118,815,918 )

Net increase from share transactions 42,820,154 17,495,034

(Loss)/Profit after tax (166,567,601 ) 138,661,149

Adjustment for different bases adopted by the

Fund in arriving at the net assets

attributable to shareholders 156,619 7,517

(Decrease)/Increase in net assets attributable to shareholders from operations (166,410,982 ) 138,668,666

Net assets attributable to shareholders as at31 December 500,321,545 623,912,373



STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2011

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2011 2010 HK$ HK$

Cash flows from operating activities(Decrease)/Increase in net assets attributable to

shareholders from operations (166,410,982 ) 138,668,666

Adjustments for:

Dividends and interest on bank deposits (16,468,411 ) (10,437,898 )

Stock borrowing fee and dividends on

securities borrowed 603,602 299,597


other investment income 484,224 476,453

Adjustment for different bases adopted by

the Fund in arriving at the net assets

attributable to shareholders (156,619 ) (7,517 )

(181,948,186 ) 128,999,301

Decrease/(Increase) in financial assets at fair value

through profit or loss 113,839,115 (110,254,756 )

Increase in financial liabilities at

fair value through profit or loss 23,515,611 –

Decrease in amounts receivable on sales of investments 19,200 1,635,366

(Decrease)/Increase in amounts payable

on purchase of investments (2,442,609 ) 4,547,858

Decrease/(Increase) in other receivables 27,052 (34,658 )

(Increase)/Decrease in margin deposits (4,610,326 ) 3,526,693

(Decrease)/Increase in management fee and performance

fee payable and accruals and other payables (20,062,590 ) 19,920,414



STATEMENT OF CASH FLOWS (Continued)FOR THE YEAR ENDED 31 DECEMBER 2011

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2 2A N N U A L R E P O R T 2 0 1 1


2011 2010 HK$ HK$

Cash (used in)/generated from operations (71,662,733 ) 48,340,218

Dividends and interest on bank deposits received 15,779,602 10,285,736

Stock borrowing fee and dividends

on securities borrowed paid (511,297 ) (303,522 )


other investment income paid (484,224 ) (476,453 )

Net cash (outflow)/inflow from operating activities (56,878,652 ) 57,845,979

Cash flows from financing activitiesProceeds from issue of shares 92,162,866 112,581,065

Payments on redemption/repurchase of shares (25,940,425 ) (172,074,368 )

Net cash inflow/(outflow) from financing activities 66,222,441 (59,493,303 )

Net increase/(decrease) in cash and cash equivalents 9,343,789 (1,647,324 )

Cash and cash equivalents as at 1 January 36,489,433 38,136,757

Cash and cash equivalents as at 31 December, representing bank balances 45,833,222 36,489,433



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NOTES TO THE FINANCIAL STATEMENTS

2 32 3A N N U A L R E P O R T 2 0 1 1


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 Bank of Bermuda (Cayman) Limited (the “Administrator”). The registered office of the Fund is PO Box 309 GT, 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 4A N N U A L R E P O R T 2 0 1 1



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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 2011

IAS 24, “Related party disclosures”, clarifies the definitions of a related party. The new definition clarifies in which circumstances persons and key management personnel affect related party relationships of an entity. The adoption of the amendment did not have any impact on the financial position or performance of the Fund.

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

IFRS 13, “Fair value measurements” (effective from 1 January 2013). The standard improves consistency and reduces complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRS. The requirements 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 IFRS. If an asset or a liability measured at fair value has a bid price and an ask price, the standard requires valuation to be based on a price within the bid-ask spread that is most representative of fair value and allows the use of mid-market pricing or other pricing conventions that are used by market participants as a practical expedient for fair value measurement within a bid-ask spread. The Manager is still assessing the impact on the Fund’s financial statements.


Hand Mark Hand MarkVALUE PARTNERS CHINA GREENCHIP FUND LIMITED

( Incorporated as an exempted company in Cayman Is lands with l imited l iabi l i ty)

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2 52 5A N N U A L R E P O R T 2 0 1 1



(a) Basis of preparation (Continued)

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

IFRS 9, “Financial instruments Part 1: Classification and measurement” (effective from 1 January 2015). IFRS 9 specifies how an entity should classify and measure financial assets and liabilities, including some hybrid contracts. The standard improves and simplifies the approach for classification and measurement of financial assets compared with the requirements of IAS 39. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged. The standard applies a consistent approach to classifying financial assets and replaces the numerous categories of financial assets in IAS 39, each of which had its own classification criteria. 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.

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

(i) Classification

The Fund classifies its investments in debt and 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.


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

(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.

(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 income from financial assets at fair value through profit or loss is recognised in the statement of comprehensive income within dividend income when the Fund’s right to receive payments is established.

Dividend expense 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 year end 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).




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(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.

(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 Non– Estimated monetary Monetary percentage impact on net assets net assets change net assets HK$ HK$ % equivalent equivalent

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

230,955,579 4,887,636




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3 FINANCIAL rISk MANAGEMENT (Continued)

(a) Market risk (Continued)

(i) Foreign exchange risk (Continued)

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

As at 31 December 2010Renminbi – 60,115 +/-5 +/-3,006Singapore dollar 7,291,621 (248,803 ) +/-5 +/-352,141Taiwan dollar 8,099,769 2,578,925 +/-5 +/-533,935United States dollar 1 35,937,743 8,566,097 +/-0 –

51,329,133 10,956,334

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.

(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.


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(ii) Price risk (Continued)

The Fund’s overall market exposures were as follows:

% of net assets 2011 2010

Financial assets at fair value through profit or loss

Listed equity securitiesChina 1.47 5.66Hong Kong– “H” shares 11.70 17.55– Red chips 18.92 9.38– Others 47.89 54.35Japan 0.81 –Singapore 1.04 2.74Taiwan 2.13 1.30United States 1.82 0.35

85.78 91.33

Quoted debt securities – 1.17

Listed equity warrants – 0.02

put options 0.00 0.19

Gold securities 9.06 1.59

Total financial assets at fair value through profit or loss 94.84 94.30




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3 13 1A N N U A L R E P O R T 2 0 1 1






Financial liabilities at fair value through profit or loss

Listed equity securitiesHong Kong– Red chips (2.67 ) –– Others (1.99 ) –

(4.66 ) –

Futures contracts (0.04 ) –

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

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

2011 2010 % %

Consumer discretionary 36.59 25.50Materials 14.90 13.75Financials 14.57 9.41Information technology 7.80 13.98Energy 6.75 8.12Consumer staples 4.57 7.28REITS 3.29 4.12Healthcare 1.21 7.04Others 10.32 10.80

100.00 100.00


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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.

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 2011 2010 2011 2010 % % HK$ HK$

MSCI China Index +/-30 +/-30 +/-93,092,308 +/-137,440,755

As at 31 December 2011 and 2010, 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.




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Estimated impact on percentage change net assets 2011 2010 2011 2010 % % HK$ HK$

Gold price +/-5 +/-5 +/-2,265,971 +/-712,528

(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 year end

date. The credit ratings are issued by Moody’s.

Counterparty 2011 2010 HK$ HK$

Cash with banks and brokers Aa1 – 802 Aa2 47,073,024 36,489,433 A1 3,371,326 –Investments placed with custodian Aa2 451,228,787 588,368,701 A2 309 –

Assets deposited as margin with executing brokers need not be segregated from

the brokers’ own assets. Such assets may therefore be available to the creditors

of such persons in the event of the brokers’ insolvency.

The maximum exposure to credit risk at the year end date is the carrying amount

of the financial assets, excluding equity securities, as shown in the statement of

financial position.

(c) Liquidity risk

The Fund is exposed to monthly 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.




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(c) Liquidity risk (Continued)

The table below analyses the Fund’s non-derivative financial liabilities based

on the remaining period at the year end 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.

Less than 3 months 2011 2010 HK$ HK$

Net assets attributable to shareholders 500,321,545 623,912,373

Financial liabilities at fair value

through profit or loss 23,300,490 –

Amounts payable on purchase of investments 4,991,932 7,434,541

Amounts payable on redemption of shares – 327,600

Management fee and performance fee payable 641,155 20,539,875

Accruals and other payables 337,251 408,816

529,592,373 652,623,205

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 2011 2010 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 2011, the Fund held investments in listed equity securities of HK$426,415,854 (2010: HK$569,818,515) and other liquid assets, representing bank balances and amounts receivable on sales of investments, of HK$46,970,530 (2010: HK$37,645,941) 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 2011Investor 1 49.43Investor 2 11.15

As at 31 December 2010Investor 1 52.85Investor 2 12.79




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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 year end date.

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

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 2010AssetsListed equity securities 569,818,515 – – 569,818,515Quoted debt securities – 7,316,038 – 7,316,038Listed equity warrants 150,500 – – 150,500Call options – 1,155,907 – 1,155,907Gold securities 9,927,741 – – 9,927,741

Total assets 579,896,756 8,471,945 – 588,368,701

* As at 31 December 2011, listed equity securities include an investment whose trading suspended. The corresponding fair value is based on the market value of the suspended investment just before its suspension, with a 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 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 quoted debt securities and over-the-counter derivatives. The quotes are

periodically reviewed by the Manager.

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

Listed equity securities 2011 2010 HK$ HK$

Opening balance – –

Transfers into Level 3 17,170,400 –

Losses recognised in profit and loss (14,376,400 ) –

Closing balance 2,794,000 –

Losses for the year included in the

statement of comprehensive income

for investments held at

the end of the year (14,376,400 ) –




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4 DErIvATIvE FINANCIAL INSTruMENTS

The Fund’s derivative financial instruments at year end 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

As at 31 December 2010Listed equity warrants HK$1,914,360 150,500 –

Call options on TAIEX Index TW$500,665,500 1,155,907 –

1,306,407 –

5 SHArES

The total authorised number of shares is 200,000,000 shares (2010: 200,000,000 shares)

with a par value of HK$0.10 per share (2010: 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$2,547,953 (2010: HK$2,391,334) as at 31 December 2011. The amount of the

adjustment also results in an increase in net assets attributable to shareholders from

operations by HK$156,619 (2010: HK$7,517).

Number of shares in issue

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

Number of Number of Class N shares Class A shares 2011 2010 2011 2010

As at 1 January 1,471,500 1,480,500 9,955,902 10,326,816

Subscription of shares – – 1,332,625 2,555,182

Redemption/repurchase

of shares (54,000 ) (9,000 ) (487,355 ) (2,926,096 )

As at 31 December 1,417,500 1,471,500 10,801,172 9,955,902

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 2011Mr Cheah Cheng Hye* 326,684 1,485 – 328,169

Value Partners Limited** 200,000 – – 200,000

year 2010Mr Cheah Cheng Hye* 326,684 – – 326,684

Value Partners Limited** 200,000 – – 200,000

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

The Manager had 1 common director (2010: 1) with the Fund as at 31 December

2011.

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.




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7 TAxATION (Continued)

(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 2011, 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.

8 DISTrIBuTION

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


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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 26 April 2012.


INVESTMENT PORTFOLIO (UNAUDITED)AS AT 31 DECEMBER 2011

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% of net Holdings Fair value assets HK$

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Listed Equity Securities

ChinaLao Feng Xiang Co Ltd 249,148 3,699,895 0.74Shanghai Friendship Group Inc Ltd 368,200 3,656,672 0.73

7,356,567 1.47

Hong Kong – “H” sharesBeijing Jingkelong Co Ltd 1,327,000 8,492,800 1.70China BlueChemical Ltd 1,760,000 10,260,800 2.05China Shenhua Energy Co Ltd 716,000 24,057,600 4.81Great Wall Motor Co Ltd 27,000 305,100 0.06Qingling Motors Co Ltd 2,486,000 5,096,300 1.02Shandong Chenming Paper Holdings Ltd 957,000 3,617,460 0.72Zhuzhou CSR Times Electric Co Ltd 395,000 6,715,000 1.34

58,545,060 11.70

Hong Kong – Red chipsBrilliance China Automotive Holdings Ltd 4,286,000 35,916,680 7.18China Overseas Land & Investment Ltd 558,000 7,220,520 1.44China Resources Cement Holdings Ltd 1,836,000 10,612,080 2.12China State Construction International Holdings Ltd 2,576,000 14,193,760 2.85COSCO International Holdings Ltd 2,900,000 9,425,000 1.88Shougang Fushan Resources Group Ltd 2,772,000 7,207,200 1.44Lenovo Group Ltd 1,946,000 10,060,820 2.01

94,636,060 18.92


INVESTMENT PORTFOLIO (UNAUDITED) (Continued)AS AT 31 DECEMBER 2011

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

Listed equity securities (Continued)

Hong Kong – OthersAeon Stores (Hong Kong) Co Ltd 440,000 7,735,200 1.55Anton Oilfield Services Group 5,610,000 4,824,600 0.96Asian Citrus Holdings Ltd 1,095,000 4,434,750 0.89BYD Electronic (International) Co Ltd 1,304,500 2,869,900 0.57China Corn Oil Co Ltd 467,000 1,410,340 0.28China Qinfa Group Ltd 54,000 71,280 0.01China Rare Earth Hldgs Ltd 6,462,000 9,822,240 1.96China Rongsheng Heavy Industries Group Holdings Ltd 305,000 649,650 0.13CSI Properties Ltd 22,400,000 4,950,400 0.99Digital China Hldgs Ltd 99,000 1,189,980 0.24Dongyue Group 1,219,000 6,241,280 1.25EcoGreen Fine Chemicals Group Ltd 5,888,000 9,538,560 1.91Emperor International Holdings Ltd 9,879,333 11,855,200 2.37Evergrande Real Estate Group Ltd 3,421,000 11,015,620 2.20Giordano International Ltd 1,910,000 10,715,100 2.14GOME Electrical Appliances Holding Ltd 7,143,000 12,785,970 2.55Hopefluent Group Holdings Ltd 7,335,520 9,902,952 1.98Hutchison Telecommunications Hong Kong Holdings Ltd 4,482,000 13,356,360 2.67Kingboard Chemical Holdings Ltd 419,500 9,564,600 1.91Kingmaker Footwear Holdings Ltd 356,000 366,680 0.07Kosmopolito Hotels International Ltd 4,704,000 5,597,760 1.12Le Saunda Hldgs Ltd 1,572,000 4,118,640 0.82Longfor Properties 314,000 2,741,220 0.55Man Yue Technology Holdings Ltd 528,000 728,640 0.15Midland Hldgs Ltd 1,158,000 4,666,740 0.93Mongolian Mining Corp 657,500 3,859,525 0.77New Media Group Holdings Ltd 6,200,000 1,736,000 0.35Real Gold Mining Ltd* 1,270,000 2,794,000 0.56Royale Furniture Holdings Ltd 1,936,969 3,699,611 0.74Shenzhou International Group 2,041,000 21,512,140 4.30Sinolink Worldwide Holdings 17,522,000 10,162,760 2.03





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Listed equity securities (Continued)

Hong Kong – Others (Continued)Techtronic Industries Co Ltd 1,030,500 8,192,475 1.64Texwinca Holdings Ltd 1,894,000 16,136,880 3.23Victory City International Holdings Ltd 3,963,343 2,972,507 0.59XTEP International Holdings 929,000 2,285,340 0.46Yuexiu Real Estate Investment Trust 4,119,000 14,128,170 2.82Zhongsheng Group Holdings ltd 78,500 1,009,510 0.20

239,642,580 47.89

JapanK’S Holdings Corp 13,300 4,053,058 0.81

SingaporeTianjin Zhong Xin Pharmaceutical Group Corp Ltd 1,418,000 5,178,994 1.04

TaiwanAcer Inc 648,000 5,823,598 1.16Clevo Co 264,000 3,242,409 0.65Uni-President Enterprises Corp 143,000 1,613,307 0.32

10,679,314 2.13

United StatesCharm Communications Inc 105,620 6,746,667 1.35China Distance Education Hldgs Ltd 141,946 2,371,554 0.47

9,118,221 1.82

Put optionsEuropean Call Options USD Put/HKD Call 7.5 17 February 2012 19,900,000 309 0.00



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Gold securitiesLoco London Gold securities 3,700 45,319,423 9.06

Total financial assets at fair value through profit or loss 474,529,586 94.84

FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

Listed equity securities

Hong Kong – Red chipsChina Overseas Land & Investment Ltd (1,030,000 ) (13,369,400 ) (2.67 )

Hong Kong – OthersChina Liansu Group Holdings Ltd (718,000 ) (2,419,660 ) (0.49 )China Rongsheng Heavy Industries Group Holdings Ltd (305,000 ) (655,750 ) (0.13 )Longfor Properties (314,000 ) (2,750,640 ) (0.55 )Want Want China Holdings Ltd (529,000 ) (4,105,040 ) (0.82 )

(9,931,090 ) (1.99 )

Futures contractsHang Seng Index Fut 30 January 2012 (28 ) (215,121 ) (0.04 )

Total financial liabilities at fair value through profit or loss (23,515,611 ) (4.70 )

Total investments, net 451,013,975 90.14

Total investments, at cost 490,530,786

* The trading of this equity security has been suspended.


INVESTMENT PORTFOLIO MOVEMENTS (UNAUDITED)FOR THE YEAR ENDED 31 DECEMBER 2011

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Listed equity securitiesChina 1.47 5.66Hong Kong– “H” shares 11.70 17.55– Red chips 16.25 9.38– Others 45.90 54.35Japan 0.81 –Singapore 1.04 2.74Taiwan 2.13 1.30United States 1.82 0.35

81.12 91.33

Quoted debt securities – 1.17

Listed equity warrants – 0.02

Put options 0.00 0.19

Futures contracts (0.04 ) –

Gold securities 9.06 1.59

Total investments, net 90.14 94.30


PERFORMANCE RECORD (UNAUDITED)

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Net assets (at last traded price)

2011 2010 2009 HK$ HK$ HK$

Net assets 500,321,545 623,912,373 467,748,673

Net asset value per share 40.95 54.60 39.62

Performance record since inception

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

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 – –

2002 (since inception) 10.00 –

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

Note: TheFundhaselectedtopreparethefinancialstatementsinaccordancewithIFRS.TherearenomaterialvariationsonaccountingtreatmentbetweenIFRSandUSGAAP.

VALUE PARTNERS CHINA GREENCHIP FUND LIMITED · 2017-03-30 · VALUE PARTNERS CHINA GREENCHIP FUND...

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Transcript of VALUE PARTNERS CHINA GREENCHIP FUND LIMITED · 2017-03-30 · VALUE PARTNERS CHINA GREENCHIP FUND...