value partners high-dividend stocks fund re… · value partners high-dividend stocks fund (a...
Post on 13-Aug-2020
1 Views
Preview:
TRANSCRIPT
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
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: vpl@vp.com.hkWebsite: 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 HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
A N N U A L R E P O R T 2 0
Fo r t h e y ea r ended 3 Decembe r 20
Pages
General information 2-3
Manager’s report 4-12
Statement of responsibilities of the Manager and the Trustee 13
Trustee’s report 14
Independent auditor’s report 15-16
Statement of financial position 17-18
Statement of comprehensive income 19
Statement of changes in net assets attributable to unitholders 20
Statement of cash flows 21-22
Notes to the financial statements 23-48
Investment portfolio (unaudited) 49-58
Investment portfolio movements (unaudited) 59
Performance record (unaudited) 60
GENERAL INFORMATION
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
A N N U A L R E P O R T 0 1 1
Fo r t h e y ea r ended 31 Decembe r 011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
ManagerValue Partners Limited9th Floor, Nexxus Building41 Connaught Road CentralHong Kong
Directors of the ManagerMr Cheah Cheng HyeMr Ho Man KeiMr So Chun Ki Louis
Trustee, Registrar, Administrator and Principal OfficeBank of Bermuda (Cayman) LimitedP.O. Box 513 GTHSBC House68 West Bay RoadGrand Cayman KY1-1106Cayman Islands
Custodian and Registrar’s Agent HSBC Institutional Trust Services (Asia) Limited1 Queen’s Road CentralHong Kong
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
AuditorPricewaterhouseCoopersP.O. Box 258George TownGrand Cayman, KY1-1104Cayman Islands
Information available from:Value Partners Limited9th Floor, Nexxus Building41 Connaught Road CentralHong Kong
Telephone : (852) 2880 9263Fax : (852) 2565 7975Email : vpl@vp.com.hkWebsite : www.valuepartners.com.hk
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
GENERAL INFORMATION (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
33A N N U A L R E P O R T 0 1 1
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 Kong Best 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
* Based on data as of year end 2011. Based on data as of year end 2010.
Value Partners High-Dividend Stocks Fund
2012 • Lipper Fund Awards 2012 Best Asia Pacific (Ex-Japan) Equity – 5 Years – LipperΩ
2011 • Top 100 Funds of the Year 2010 – Asia Ex-Japan Equity – Benchmark Magazine#
2010 • Lipper Fund Awards 2010 Best Asia Pacific (Ex-Japan) Equity Fund over 3 years – Lipper
Ω Based on data as of year end 2011.# Based on fund size, track record, Morningstar's Star rating and one year absolute ranking as at month end
October 2010. Based on data as of year end 2009.
MANAGER’S REPORT
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
Value Partners High-Dividend Stocks Fund dropped 13.6% in 2011, a year marked by global market turmoil and high volatility. For reference, the MSCI Asia Pacific (ex-Japan) Index fell by 18.0% in 2011. While the market performance was lackluster in the year, there were only a handful of funds that beat the market indices and we are grateful that Value Partners is on this list of funds that outperformed. (Source: Morningstar, as at 31 December 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 18.9%. For reference, the MSCI Asia Pacific (ex-Japan) Index saw 7 years of positive return over the same period. (For a table of the annual returns of Value Partners High-Dividend Stocks Fund as well as the MSCI Asia Pacific (ex-Japan) Index, 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 High-Dividend Stocks Fund: Biggest contributors to 2011 return(Fund size: US$547 million end-2011; US$453 million end-2010)
Gain in 2011 % return in 2011 (in US$ million) (including dividends)China National Building Material (Construction materials) 5.77 up 64.0%Brilliance China Automotive (Auto manufacturing) 5.00 up 28.5%Great Wall Motor (Auto manufacturing) 3.64 up 27.8%Loco London Gold 2.57 up 4.6%Chow Sang Sang (Jewellery chain) 2.49 up 23.5%
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.
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
MANAGER’S REPORT (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
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.
MANAGER’S REPORT (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
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 world’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
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
MANAGER’S REPORT (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
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. The current
portfolio has a bias towards energy-related investments, which has worked out well as we
anticipated correctly that the Chinese authorities will start to reform the pricing mechanism
for natural gas. This most likely will benefit PetroChina, one of our biggest holdings, as the
company is the dominant producer of natural gas in China.
Also, as noted in previous reports, the Fund started buying gold from 2004, 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.
Taiwan-related stocks (constituting 5% of the portfolio), are often overlooked considering their
solid fundamentals – domestic consumption in Taiwan being driven by positive sentiment and
supported by improved income. As the first in a host of leadership changes this year, Taiwan’s
elections brought positive news to the region with President Ma Ying-jeou being reelected. The
result sent a very positive signal to the market – President Ma Ying-jeou won his second term by
7%, a wider-than expected margin, while his Kuomingtang Party (KMT) also managed to secure
a majority in the legislative council. The renewed victory of President Ma removed the market
overhang, since it indicates the general approval of Ma’s open-up policy in cross-strait relations
and pro-economic growth stance.
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.
MANAGER’S REPORT (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
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
All performance figures are sourced from HSBC Institutional Trust Services (Asia) Limited and
Bloomberg (Data computed in US$ 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 prospectus
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.
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
MANAGER’S REPORT (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
Appendix I: Performance of Value Partners High-Dividend Stocks Fund and MSCI Asia Pacific (ex-Japan) Index – 2 September 2002 to 31 December 2011
Value PartnersHigh-Dividend
Stocks FundMSCI Asia Pacific
(ex-Japan) Index
2002^
2003
2004
2005
2006
2007
2008
2009
2010
2011
Annualized return
(since inception years)
Volatility
(since inception years annualized)
Sharpe ratio#
(since inception years annualized)
up 11%
up 81%
up 8%
up 12%
up 36%
up 43%
down 47%
up 84%
up 27%
down 14%
up 18.9%
21.0%
0.79
down 5%
up 44%
up 19%
up 17%
up 29%
up 33%
down 53%
up 68%
up 15%
down 18%
up 9.9%
24.8%
0.31
^ From 2 September 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.
MANAGER’S REPORT (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
1 0A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
Appendix II: Value Partners High-Dividend Stocks Fund: 5 biggest holdings of securities as at 31 December 2011
Stock IndustryValuation(2012 Estimates) Remarks
China ShenhuaEnergy(Code: 1088 HK)
Market cap:US$86.3 billion
Coal mining Price: HK$33.70P/E: 10.6xP/B: 2.0xYield: 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.
Hutchison Whampoa(Code: 13 HK)
Market cap:US$35.7 billion
Conglomerate Price: HK$65.05P/E: 12.6xP/B: 0.8xYield: 3.4%
Hutchison Whampoa Ltd (“HWL”) is an investment holding company. Its operations consist of five businesses: ports and related services; property and hotels; retail; energy and telecommunications. Hutchison is a market leader in most of its businesses and what distinguishes Hutchison from other Hong Kong and China conglomerates is its management’s skill at deal making and efficient operations. Not only is Chairman Li Ka-Shing known for his entrepreneurial spirit, his track record in entering or exiting businesses is solid. Hutchison is one of the largest and most efficient port operators in the world; its retail and property businesses have strong brand presence in Asia and Europe; it also holds valuable oil investments and electricity businesses in Europe and Hong Kong which are effectively duopolies. Hutchison’s telecommunication’s divisions are no longer a drag on its earnings. After years of start-up losses, Hutchison’s European 3G operations reached EBIT breakeven last year, while much of the Asian operations have been streamlined. We believe Hutchison will continue to deliver substantial value to its shareholders.
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
MANAGER’S REPORT (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
1 11 1A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
Stock IndustryValuation(2012 Estimates) Remarks
Industrial & Commercial Bank of China(Code: 1398 HK)
Market cap:US$207.2 billion
Banking Price: HK$4.61P/E: 5.9xP/B: 1.2xYield: 6.0%
Industrial & Commercial Bank of China (“ICBC”) is the largest commercial bank in China in terms of assets, loans and deposits. An extensive network of 16,487 branches and a huge customer base gives ICBC scale advantage in building a consumer banking franchise, allowing it to rely less heavily on interest income in the long run. Already, a quarter of the bank’s income comes from fees and so despite its low loan-to-asset ratio, its return on assets and return on equity are among the best in the industry.
PetroChina(Code: 857 HK)
Market cap:US$227.9 billion
Energy Price: HK$9.67P/E: 8.2xP/B: 1.3xYield: 4.8%
PetroChina is the largest integrated oil company in Asia. Exploration and production assets consist of crude reserves of over 11 billion barrels, and gas reserves of over 65 billion cubic feet. This is complemented by a pipeline network of over 50,000 km in China. Its downstream assets consist of refining, with a crude throughput capacity of over 1 billion tons, and a service-station marketing network of over 18,000 stations. In 2010, the company produced 857 million barrels of oil (“BOE”) and 2.2 billion cubic feet of gas, mostly in China, while its overseas assets in South America, Africa and Central Asia produced 102 million BOE of oil and gas, representing 16% of the total. Crude production grew by 1.7% and gas production grew by 5% over the same period. Gas should drive growth over the next five years, supplemented by pipeline investments. Overseas investments, such as the US$1.7 billion investment in Canada’s Athabasca Oil Sands Corp in 2009, and the US$3 billion joint bid with Shell for Australia’s Arrow Energy also give PetroChina a good avenue for future growth.
Shenzhou International Group(Code: 2313 HK)
Market cap:US$1.7 billion
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.
Note: The above investments made up 24.5% of Value Partners High-Dividend Stocks Fund 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.
Appendix II: Value Partners High-Dividend Stocks Fund: 5 biggest holdings of securities as at 31 December 2011 (Continued)
MANAGER’S REPORT (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
1 2A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
Value Partners High-Dividend Stocks FundNAV per unit = US$50.38 (as at 31 December 2011)
Since launch return compared to indexFrom 2 September 2002 to 31 December 2011
+403.8%
+141.0%
-100%
0%
100%
200%
300%
400%
500%
600%
8/02 12/03 4/05 8/06 12/07 4/09 8/10 12/11
Value Partners H igh-D ividend S tocks Fund
M SC I Asia Pacific (ex-Japan) Index
Statement of reSponSibilitieS of the manager and the truStee
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
1 31 3A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
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 Trust Deed dated
7 August 2002 (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 High-Dividend Stocks
Fund (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 Trust Deed dated 7
August 2002 (as amended) and take reasonable steps for the prevention and detection of fraud
and other irregularities.
trustee’s responsibilities
The Trustee, Bank of Bermuda (Cayman) Limited, is required to:
• ensure that the Fund is managed by the Manager in accordance with the Trust Deed
dated 7 August 2002 (as amended) and that the investment and borrowing powers are
complied with;
• satisfy itself that sufficient accounting and other records have been maintained;
• safeguard the property of the Fund and rights attaching thereto; and
• report to the unitholders for each annual accounting period on the conduct of the Manager
in the management of the Fund.
TrusTee’s reporT
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
1 4A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
We hereby confirm that, in our opinion, the Manager, Value Partners Limited, has, in all material
respects, managed Value Partners High-Dividend Stocks Fund in accordance with the provisions
of the Trust Deed dated 7 August 2002 (as amended) for the year ended 31 December 2011.
For and on behalf of
Bank of Bermuda (Cayman) Limited
Trustee
26 April 2012
INDEPENDENT AUDITOR’S REPORT TO THE TRUSTEE AND THE UNITHOlDERS OF VAlUE PARTNERS HIGH-DIVIDEND STOCKS FUND
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
1 51 5A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
Report on the financial statements
We have audited the accompanying financial statements of Value Partners High-Dividend Stocks
Fund (the “Fund”) set out on pages 17 to 48, 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 unitholders and statement of cash flows for the year then ended, and a
summary of significant accounting policies and other explanatory information.
Management’s responsibility for the financial statements
The Trustee and the Manager (the “Management”) of the Fund 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 Trust Deed dated
7 August 2002 (as amended) (the “Trust Deed”), 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 Management determines 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 TRUSTEE AND THE UNITHOlDERS OF VAlUE PARTNERS HIGH-DIVIDEND STOCKS FUND (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
1 6A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
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 Trust Deed 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
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
1 71 7A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
2011 2010 Note US$ US$
AssetsFinancial assets at fair value through profit or loss 3(d) 521,525,308 446,266,751Amounts receivable on sales of investments 2,206,678 699,986Amounts receivable on issue of units 1,279,311 499,250Dividends and interest receivables 191,221 297,884Other receivables 4,233 –Margin deposits 4,275,497 113Bank balances 52,089,989 35,255,691
Total assets 581,572,237 483,019,675
LiabilitiesFinancial liabilities at fair value through profit or loss 3(d) 29,114,725 310,000Amounts payable on purchase of investments 5,554,624 5,729,116Amounts payable on redemption of units 1,252,645 1,321,869Management fee and performance fee payable 582,252 11,189,626Accruals and other payables 234,623 156,614
Total liabilities 36,738,869 18,707,225
Net assets attributable to unitholders 5 544,833,368 464,312,450
The notes on pages 23 to 48 are an integral part of these financial statements.
STATEMENT OF FINANCIAL POSITION (Continued)AS AT 31 DECEMBER 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
1 8A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
2011 2010 Note US$ US$
Represented by:– Net assets attributable to unitholders (at last traded prices) 5 547,544,265 465,770,042– Adjustment for different bases adopted by the Fund in arriving at the net assets attributable to unitholders 5 (2,710,897 ) (1,457,592 )
Net asset value per unit (at last traded prices) with 10,867,474 (2010: 7,983,977) units outstanding 50.38 58.34
Signed by:Value Partners Limited, Manager
Bank of Bermuda (Cayman) Limited, Trustee
The notes on pages 23 to 48 are an integral part of these financial statements.
STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
1 91 9A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
2011 2010 Note US$ US$
IncomeDividends 16,094,486 8,007,386Interestonbankdeposits 49,861 6,185Netrealisedgainoninvestments 3,070,478 45,377,904Changeinunrealisedgain/lossoninvestments (96,461,615) 38,462,791Otherincome 208,049 410,669Netforeignexchange(loss)/gain (883,774) 439,491
Total net (loss)/income (77,922,515) 92,704,426
ExpensesPerformancefee 6(b) – 10,679,025Managementfee 6(a) 7,074,216 3,947,661Transactioncosts 3,040,440 1,505,176Trusteefee 6(c) 983,796 574,091Stockborrowingfee 288,375 149,584Safecustodyandbankcharges 141,308 81,354Dividendsonsecuritiesborrowed 89,385 55,900Auditor’sremuneration 35,300 27,790Legalandprofessionalfees 32,364 4,053Otheroperatingexpenses 152,602 68,708
Total operating expenses 11,837,786 17,093,342
(Loss)/profit before tax (89,760,301) 75,611,084
Withholdingtaxondividendsandother investmentincome (1,151,592) (591,857)
Total comprehensive (loss)/income (90,911,893) 75,019,227
Thenotesonpages23to48areanintegralpartofthesefinancialstatements.
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERSFOR THE YEAR ENDED 31 DECEMBER 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
2 0A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
2011 2010 US$ US$
Net assets attributable to unitholders as at 1 January 464,312,450 247,507,307
Issueofunits 363,979,243 208,516,038
Redemptionofunits (192,546,432) (66,730,122)
Net increase from unit transactions 171,432,811 141,785,916
Totalcomprehensive(loss)/income (90,911,893) 75,019,227
Net assets attributable to unitholders as at 31 December 544,833,368 464,312,450
Thenotesonpages23to48areanintegralpartofthesefinancialstatements.
STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
2 12 1A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
2011 2010 US$ US$
Cash flows from operating activitiesTotalcomprehensive(loss)/income (90,911,893) 75,019,227
Adjustmentsfor:
Dividendsandinterestonbankdeposits (16,144,347) (8,013,571)
Stockborrowingfeeanddividendson
securitiesborrowed 377,760 205,484
Withholdingtaxondividendsandother
investmentincome 1,151,592 591,857
(105,526,888) 67,802,997
Increaseinfinancialassetsatfairvalue
throughprofitorloss (75,258,557) (214,243,042)
Increaseinfinancialliabilities
atfairvaluethroughprofitorloss 28,804,725 310,000
(Increase)/decreaseinamountsreceivable
onsalesofinvestments (1,506,692) 581,506
(Decrease)/increaseinamountspayableon
purchaseofinvestments (174,492) 5,305,470
(Increase)/decreaseinotherreceivables (4,233) 10,466
(Increase)/decreaseinmargindeposits (4,275,384) 1,678,688
(Decrease)/increaseinmanagementfeeandperformance
feepayable,accrualsandotherpayables (10,536,606) 10,988,847
Thenotesonpages23to48areanintegralpartofthesefinancialstatements.
STATEMENT OF CASH FLOWS (Continued)FOR THE YEAR ENDED 31 DECEMBER 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
2 2A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
2011 2010 US$ US$
Cashusedinoperations (168,478,127) (127,565,068)
Dividendsandinterestonbankdepositsreceived 16,251,010 8,064,441
Stockborrowingfeeanddividendson
securitiesborrowedpaid (377,760) (205,292)
Withholdingtaxondividendsandother
investmentincomepaid (1,144,351) (584,621)
Net cash outflow from operating activities (153,749,228) (120,290,540)
Cash flows from financing activitiesProceedsfromissueofunits 363,199,182 208,021,787
Paymentsonredemptionofunits (192,615,656) (65,758,551)
Net cash inflow from financing activities 170,583,526 142,263,236
Net increase in cash and cash equivalents 16,834,298 21,972,696
Cashandcashequivalentsasat1January 35,255,691 13,282,995
Cash and cash equivalents as at 31 December, representing bank balances 52,089,989 35,255,691
Thenotesonpages23to48areanintegralpartofthesefinancialstatements.
NOTES TO THE FINANCIAL STATEMENTS
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
2 32 3A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
1 GENErAL INFOrMATION
Value Partners High-Dividend Stocks Fund (the “Fund”) is an open-ended unit trust
established by the Trust Deed dated 7 August 2002 (as amended). The Fund is registered
under the Mutual Funds Law (revised) of the Cayman Islands, 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 provide capital appreciation and regular income
to unitholders by investing primarily in a portfolio of relatively higher yielding debt
and equity securities in the Asian region. 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 “Trustee”). The principal office of the Fund is
PO Box 513 GT, HSBC House, 68 West Bay Road, Grand Cayman KY1-1106, Cayman
Islands.
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 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.
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.
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
2 4A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
2 SIGNIFICANT ACCOuNTING pOLICIES (Continued)
(a) Basis of preparation (Continued)
All references to net assets throughout this document refer to net assets
attributable to unitholders 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.
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
2 52 5A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
2 SIGNIFICANT ACCOuNTING pOLICIES (Continued)
(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.
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
2 6A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
2 SIGNIFICANT ACCOuNTING pOLICIES (Continued)
(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.
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
2 72 7A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
2 SIGNIFICANT ACCOuNTING pOLICIES (Continued)
(b) Financial assets and liabilities at fair value through profit or loss (Continued)
(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).
Investments in unlisted funds are fair valued at their closing net asset
value as provided by the respective administrators.
(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.
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
2 8A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
2 SIGNIFICANT ACCOuNTING pOLICIES (Continued)
(e) Foreign currency translation
The financial statements are presented in United States dollar, which is the Fund’s functional and presentation currency.
The Fund has adopted United States dollar as the functional currency of the Fund since the subscriptions and redemptions of the Fund are mainly transacted in United States dollars. In addition, performance measurement and reporting to the unitholders as well as settlement of fees and expenses are carried out in United States 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.
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.
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
2 92 9A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
3 FINANCIAL rISk MANAGEMENT (Continued)
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 United States 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 tables below include 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 US$ US$ % US$ equivalent equivalent
As at 31 December 2011Australian dollar – 1,012,945 +/-5 +/-50,647Hong Kong dollar1 395,488,608 40,327,142 +/-0 –Indonesian rupiah 15,383,166 3,548,142 +/-5 +/-946,565Japanese yen 8,470,466 – +/-5 +/-423,523Korean won – 75 +/-5 +/-4Malaysian ringgit 7,990,635 – +/-5 +/-399,532Philippine peso 4,742,719 3,257,594 +/-5 +/-400,016Renminbi – 21,333,259 +/-5 +/-1,066,663Singapore dollar 6,422,590 2,486,756 +/-5 +/-445,467Taiwan dollar 27,289,702 10,857,229 +/-5 +/-1,907,347Thailand Baht 16,295,937 – +/-5 +/-814,797
482,083,823 82,823,142
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
3 0A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
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 US$ US$ % US$ equivalent equivalent
As at 31 December 2010Australian dollar – 2,168 +/-5 +/-108Hong Kong dollar1 277,759,433 8,287,219 +/-0 –Indonesian rupiah 6,128,188 – +/-5 +/-306,409Korean won 20,623,317 140,737 +/-5 +/-1,038,203Malaysian ringgit 5,058,682 – +/-5 +/-252,934Philippine peso – 4,003,672 +/-5 +/-200,184Renminbi – 4,987,870 +/-5 +/-249,394Singapore dollar 10,659,322 2,020,810 +/-5 +/-634,007Taiwan dollar 31,580,658 8,077,070 +/-5 +/-1,982,886Thailand Baht 7,793,083 – +/-5 +/-389,654
359,602,683 27,519,546
1 The Hong Kong dollar is currently linked to the United States dollar, the functional currency, within a narrow range, and is therefore not exposed to significant foreign exchange risk.
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
3 13 1A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
3 FINANCIAL rISk MANAGEMENT (Continued)
(a) Market risk (Continued)
(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 2011 2010
Financial assets at fair value through profit or loss
Listed equity securitiesChina 1.35 4.27Hong Kong– “H” shares 21.59 17.54– Red chips 8.17 10.12– Others 23.51 28.51Indonesia 2.82 1.32Japan 1.55 –Malaysia 1.47 1.09Philippines 0.87 –Singapore 1.70 4.72South Korea – 4.20Taiwan 5.01 6.80Thailand 2.99 1.68
71.03 80.25
Quoted debt securitiesAustralian dollar 0.19 –Hong Kong dollar 0.90 1.04Indonesian rupiah 0.65 –Philippine peso 0.60 0.86Renminbi 3.92 1.07Singapore dollar 0.26 0.58United States dollar 9.00 8.59
15.52 12.14
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
3 2A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
3 FINANCIAL rISk MANAGEMENT (Continued)
(a) Market risk (Continued)
(ii) Price risk (Continued)
% of net assets 2011 2010
Listed equity warrants – 0.00
put options 0.00 –
Listed investment funds – 0.25
unlisted investment funds 0.03 0.05
Gold securities 9.14 3.42
Total financial assets at fair value through profit or loss 95.72 96.11
Financial liabilities at fair value through profit or loss
Listed equity securitiesHong Kong– “H” shares (0.67 ) –– Red chips (2.63 ) –– Others (1.76 ) –Singapore (0.24 ) (0.07 )
(5.30 ) (0.07 )
Futures contracts (0.04 ) –
Total financial liabilities at fair value through profit or loss (5.34 ) (0.07 )
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
3 33 3A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
3 FINANCIAL rISk MANAGEMENT (Continued)
(a) Market risk (Continued)
(ii) Price risk (Continued)
The table below shows the analysis of equity securities by industry.
2011 2010 % %
Energy 24.05 8.09
Consumer discretionary 21.09 21.36
Financials 18.24 12.45
Industrials 9.46 11.59
Consumer staples 7.40 10.53
Information technology 6.01 13.13
REITs 2.98 5.58
Healthcare 0.43 4.72
Others 10.34 12.55
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.
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 Asia Pacific (ex-Japan) 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 values 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.
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
3 4A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
3 FINANCIAL rISk MANAGEMENT (Continued)
(a) Market risk (Continued)
(ii) Price risk (Continued)
Estimated impact on
percentage change net assets
2011 2010 2011 2010
% % US$ US$
MSCI Asia Pacific
(ex-Japan) Index +/-30 +/-30 +/– 80,414,016 +/– 102,563,470
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.
Estimated impact on
percentage change net assets
2011 2010 2011 2010
% % US$ US$
Gold price +/-5 +/-5 +/– 2,490,396 +/– 794,360
(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. Debt securities
are also subject to interest rate risk; however, the interest rate risk is
not actively managed as it is not considered significant. As a result, no
sensitivity analysis was deemed necessary.
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
3 53 5A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
3 FINANCIAL rISk MANAGEMENT (Continued)
(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.
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 US$ US$
Cash with banks and brokers Aa1 – 113 Aa2 52,699,597 35,190,086 A1 3,600,298 – A3 65,591 65,605Investments placed with custodian Aa2 492,632,206 445,956,751 A2 8,738 –
The table below summarises the credit quality of the Fund’s portfolio of debt securities at the year end date. The credit ratings are issued by Moody’s.
Credit rating 2011 2010 US$ US$
Baa3 1,365,765 –Ba2 1,000,967 –Ba3 6,531,496 7,206,427B1 5,209,271 2,122,964B2 11,423,485 4,876,187Unrated* 58,962,549 42,165,169
84,493,533 56,370,747
* The Manager considers there is no significant risk on the unrated debt securities at the year end date as there was no default history on the unrated debt securities in the past.
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
3 6A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
3 FINANCIAL rISk MANAGEMENT (Continued)
(b) Credit and counterparty risk (Continued)
The table below summarises the unrated debt securities as stated in the table
above by their issuers’ credit rating as at the year end date.
Credit rating 2011 2010 US$ US$
Aaa 3,529,971 –Aa1 3,562,283 –Baa3 – 4,435,645Ba3 1,810,189 –B1 3,280,673 3,996,281Ca 2,058,000 –Unrated 44,721,433 33,733,243
58,962,549 42,165,169
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 daily cash redemptions of units. The Manager considered
that there is no significant liquidity risk on redemption of units as according to
the Trust Deed dated 7 August 2002 (as amended), the Manager may limit the
total number of units redeemed on any dealing day to 10% in aggregate of the
total number of units in issue.
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
3 73 7A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
3 FINANCIAL rISk MANAGEMENT (Continued)
(c) Liquidity risk (Continued)
The tables below analyse 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 tables are the contractual undiscounted cash flows.
Balances due within 12 months equal their carrying balances as the impact of
discounting is not significant. The tables below reflect 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.
2011 2010
Less than No stated Less than No stated
3 months maturity 3 months maturity
US$ US$ US$ US$
Financial liabilities at fair
value through profit or loss – 28,884,364 – 310,000
Amounts payable on purchase
of investments 5,554,624 – 5,729,116 –
Amounts payable on
redemption of units 1,252,645 – 1,321,869 –
Management fee and
performance fee payable 582,252 – 11,189,626 –
Accruals and other payables 234,623 – 156,614 –
7,624,144 28,884,364 18,397,225 310,000
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.
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
3 8A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
3 FINANCIAL rISk MANAGEMENT (Continued)
(c) Liquidity risk (Continued)
Less than 1 month 2011 2010 US$ US$
Net settled derivativesFutures contracts 230,361 –
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 the 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 US$385,820,525 (2010: listed equity securities and listed
investment funds of US$373,776,418) and other liquid assets, representing bank
balances and amounts receivable on sales of investments, of US$54,296,667
(2010: US$35,955,677) that are expected to be able to realise within 7 days or
less to generate cash inflows for managing liquidity risk.
Below presents a list of investors who held more than 10% of the net assets of
the Fund:
Investor % of net assets
As at 31 December 2011Investor 1 30.11
Investor 2 12.89
Investor 3 10.10
As at 31 December 2010Investor 1 34.80
Investor 4 12.21
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
3 93 9A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
3 FINANCIAL rISk MANAGEMENT (Continued)
(d) Fair value estimation
The following table analyses within the fair value hierarchy the Fund’s financial assets and liabilities (by class) measured at fair value as at the year end date.
Level 1 Level 2 Level 3 Total US$ US$ US$ US$
As at 31 December 2011
AssetsListed equity securities 385,820,525 – 1,212,691* 387,033,216Quoted debt securities – 84,493,533 – 84,493,533Put options – 8,738 – 8,738Unlisted investment funds – – 181,901 181,901Gold securities 49,807,920 – – 49,807,920
Total assets 435,628,445 84,502,271 1,394,592 521,525,308
LiabilitiesListed equity securities 28,884,364 – – 28,884,364Futures contracts 230,361 – – 230,361
Total liabilities 29,114,725 – – 29,114,725
As at 31 December 2010
AssetsListed equity securities 372,636,330 – – 372,636,330Quoted debt securities – 56,370,747 – 56,370,747Listed equity warrants 12,589 – – 12,589Listed investment funds 1,140,088 – – 1,140,088Unlisted investment funds – – 219,797 219,797Gold securities 15,887,200 – – 15,887,200
Total assets 389,676,207 56,370,747 219,797 446,266,751
LiabilitiesListed equity securities 310,000 – – 310,000
Total liabilities 310,000 – – 310,000
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
4 0A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
3 FINANCIAL rISk MANAGEMENT (Continued)
(d) Fair value estimation (Continued)
* As at 31 December 2011, listed equity securities include an investment whose trading was 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.
Investments whose values are based on quoted market prices in active markets,
and therefore classified within level 1, include active listed equity securities,
listed investment funds 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.
Investments classified within level 3 have significant unobservable inputs, as
they trade 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.
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
4 14 1A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
3 FINANCIAL rISk MANAGEMENT (Continued)
(d) Fair value estimation (Continued)
The following tables present the movement in level 3 investments for the year:
unlisted investment funds 2011 2010 US$ US$
Opening balance 219,797 168,637Net (losses)/gains recognised in profit and loss (37,896 ) 51,160
Closing balance 181,901 219,797
Net (losses)/gains for the year included in the statement of comprehensive income for investments held at the end of the year (37,896 ) 51,160
Listed equity securities 2011 2010 US$ US$
Opening balance – –Transfers into level 3 7,447,266 –Net losses recognised in profit and loss (6,234,575 ) –
Closing balance 1,212,691 –
Net losses for the year included in the statement of comprehensive income for investments held at the end of the year (6,234,575 ) –
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
4 2A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
4 DErIvATIvE FINANCIAL INSTruMENTS
The Fund’s derivative financial instruments at year end are detailed as follows:
Notional Fair value amount Assets Liabilities US$ US$
As at 31 December 2011Put options on currencies US$128,500,000 8,738 –Futures contracts on Hang Seng Index HK$213,280,538 – 230,361
8,738 230,361
As at 31 December 2010Listed equity warrants HK$1,245,288 12,589 –
5 rEDEEMABLE uNITS
The Fund issues redeemable units, which are redeemable at the holder’s option, are the
most subordinate units in issue, and are therefore classified as equity in accordance with
IFRS.
Net assets attributable to unitholders are stated at assets less liabilities in the statement
of financial position and accounted for in accordance with IFRS. For the purpose
of determining the net asset value per unit for subscriptions and redemptions, the
subscription/redemption price is calculated in accordance with the provisions of the
Trustee Deed dated 7 August 2002 (as amended), which may be different from the
accounting policies under IFRS.
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
4 34 3A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
5 rEDEEMABLE uNITS (Continued)
In accordance with the provisions of the Fund’s Trust Deed dated 7 August 2002 (as
amended), investment positions are valued based on the last traded market price for the
purpose of determining the net asset value per unit for subscriptions and redemptions
and for fees calculation. However, as stated in note 2(b)(iv), the accounting policies of
the Fund for the purpose of compliance with IFRS are to value investment positions at
bid/ask price.
At the year end date, the difference between the net asset value as reported in the
statement of financial position and the net asset value as determined for the purpose of
calculating the net asset value per unit for processing subscription and redemption is
reconciled below.
2011 2010 US$ US$
Net assets attributable to unitholders, as per statement of financial position 544,833,368 464,312,450Adjustment for different bases adopted by the Fund in arriving at the net asset value for processing subscription and redemption
– Adjustment from bid/ask market prices to last traded market prices 2,710,897 1,457,592
Net assets attributable to unitholders (in accordance with the Trust Deed) 547,544,265 465,770,042
The Fund is exposed to daily redemption of units. The Manager may limit the total
number of units redeemed on any dealing day to 10% of the total number of units
in issue in accordance with the Trust Deed dated 7 August 2002 (as amended). The
Fund endeavours to invest the subscriptions received in appropriate investments while
remaining sufficient liquidity to meet redemptions, such liquidity being augmented by
disposal of listed securities where necessary.
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
4 4A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
5 rEDEEMABLE uNITS (Continued)
Number of units in issue
All issued units are fully paid and have no par value. Each unit carries one vote. Units are entitled to dividends and payment of a proportionate share based on the Fund’s net asset value per unit on the redemption date.
The movement of number of units in issue during the year was as follows:
Number of units 2011 2010
As at 1 January 7,983,977 5,422,874Issue of units 6,394,011 3,843,184Redemption of units (3,510,514 ) (1,282,081 )
As at 31 December 10,867,474 7,983,977
6 rELATED pArTy TrANSACTIONS/TrANSACTIONS wITH THE TruSTEE, THE MANAGEr AND THEIr CONNECTED pErSONS
The following is a summary of significant related party transactions/transactions entered into during the period between the Fund and the Trustee, the Manager and their connected persons. Connected persons of the Trustee and 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 1.25% per annum of the net asset value of the Fund. The management fee is calculated weekly, 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 units in issue during the year and the amount by which the net asset value per unit as at 31 December of each year (the “performance fee valuation day”) before accrual of performance fee exceeds the higher of (i) US$10.00 and (ii) the highest value for the net asset value per unit 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.
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
4 54 5A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
6 rELATED pArTy TrANSACTIONS/TrANSACTIONS wITH THE TruSTEE, THE MANAGEr AND THEIr CONNECTED pErSONS (Continued)
(c) Trustee fee
The Trustee is entitled to receive a trustee fee which represents a variable fee of
(i) 0.2% per annum on the first US$100 million of the net asset value of the Fund;
(ii) 0.18% per annum on the next US$100 million of the net asset value of the
Fund; and (iii) 0.165% per annum thereafter, subject to a minimum of US$4,000
per month. The variable fee is calculated and accrued daily and payable monthly
in arrears. The Trustee is also entitled to a fixed fee of US$3,000 per annum
payable quarterly in arrears.
(d) Manager’s and its related parties’ holding in the Fund
The Manager and its related parties held units of the Fund as follows:
As at Issue of redemption As at
1 January units of units 31 December
year 2011 and 2010
Mr Cheah Cheng Hye* 103,447 – – 103,447
Mr Ho Man Kei** 18,097 – – 18,097
Ms To Hau Yin*** 16,264 – – 16,264
Value Partners Limited**** 40,025 – – 40,025
* Mr Cheah Cheng Hye is a director of the Manager.** Mr Ho Man Kei is a director of the Manager.*** Ms To Hau Yin is the spouse of Mr Cheah Cheng Hye, who is a director of
the Manager.**** Value Partners Limited is the Manager.
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
4 6A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
6 rELATED pArTy TrANSACTIONS/TrANSACTIONS wITH THE TruSTEE, THE MANAGEr AND THEIr CONNECTED pErSONS (Continued)
(e) preliminary charges
The Manager is entitled to receive a preliminary charge on issue of units which represents up to 5% of the issue price. For the year ended 31 December 2011, total preliminary charges on issue of units, amounting to US$291,881 (2010: US$234,840), were received by the Manager. The preliminary charges are not reflected in the financial statements of the Fund.
(f) Investment in a fund managed by a related party of the Manager
As at 31 December 2011, the Fund held 189,480 (2010: 189,480) shares of Value Partners Strategic Equity Fund with a total fair value of US$181,901 (2010: US$219,797). Value Partners Strategic Equity Fund is managed by a fellow subsidiary of the Manager. Value Partners Strategic Equity Fund is not authorised in Hong Kong and is not available to the public generally in Hong Kong.
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 81 of the Trusts Law (2001 Revision) of the Cayman Islands, for a period of 50 years from 27 August 2002, no laws thereafter enacted in the Cayman Islands imposing any tax or duty on income, capital assets, 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 sales 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.
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
4 74 7A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
7 TAxATION (Continued)
(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.
NOTES TO THE FINANCIAL STATEMENTS (Continued)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
4 8A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
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 Trustee and the Manager on 26 April 2012.
INVESTMENT PORTFOLIO (UNAUDITED)As At 31 DECEMBER 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
4 94 9A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
% of net Holdings Fair value assets Us$
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Listed equity securities
ChinaChina Vanke Co Ltd 4,721,135 4,574,779 0.84Shanghai Friendship Group Inc Ltd 2,169,468 2,772,580 0.51
7,347,359 1.35
Hong Kong – “H” sharesChina Bluechemical Ltd 12,380,000 9,287,907 1.70China Rongsheng Heavy Industries Group Holdings Ltd 2,564,000 702,791 0.13China Shenhua Energy Co Ltd 6,741,500 29,149,056 5.35CITIC Securities Co Ltd 1,538,000 2,529,390 0.46Great Wall Motor Co Ltd 591,500 860,126 0.16Industrial and Commercial Bank of China Ltd 35,438,980 21,023,781 3.86Longfor Properties 2,622,500 2,946,174 0.54PetroChina Co Ltd 41,103,000 51,148,002 9.39
117,647,227 21.59
Hong Kong – Red chipsBOC Hong Kong (Holdings) Ltd 3,848,000 9,111,325 1.67Brilliance China Automotive Holdings Ltd 13,600,000 14,665,997 2.69China Overseas Land & Investment Ltd 4,554,000 7,583,261 1.39CNOOC Ltd 3,080,000 5,382,440 0.99Shougang Fushan Resources Group Ltd 23,250,000 7,779,022 1.43
44,522,045 8.17
INVESTMENT PORTFOLIO (UNAUDITED) (Continued)As At 31 DECEMBER 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
5 0A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
% of net Holdings Fair value assets Us$
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Continued)
Listed equity securities (Continued)
Hong Kong – OthersAnta Sports Products Ltd 7,059,000 8,384,430 1.54Elec & Eltek International Co Ltd 2,165,000 4,680,539 0.86Emperor International Holdings Ltd 69,618,000 10,750,570 1.97Evergrande Real Estate Group Ltd 29,150,000 12,078,781 2.22Hang Ten Group Holdings Ltd 5,958,000 2,031,772 0.37Hilong Holdings Ltd 2,535,000 450,180 0.08Hutchison Telecommunications Hong Kong Holdings Ltd 29,970,000 11,492,955 2.11Hutchison Whampoa Ltd 2,114,000 17,723,443 3.25Kingboard Laminates Holding Ltd 1,030,000 469,212 0.09Kingmaker Footwear Holdings Ltd 2,992,000 396,577 0.07Lung Kee (Bermuda) Hldgs Ltd 5,402,000 2,446,955 0.45NagaCorp Ltd 17,990,000 4,537,492 0.83Real Gold Mining Ltd* 4,283,500 1,212,691 0.22Royale Furniture Holdings Ltd 8,561,107 2,104,224 0.39Shenzhou International Group 11,440,000 15,516,555 2.85Sinoref Holdings Ltd 30,728,000 2,135,289 0.39Swire Pacific Ltd 717,500 8,651,475 1.59Texwinca Holdings Ltd 5,370,000 5,887,658 1.08XTEP International Holdings Ltd 8,500,500 2,690,966 0.50Yuexiu Real Estate Investment Trust 24,175,000 10,670,611 1.96Yue Yuen Industrial (Holdings) Ltd 839,500 2,646,765 0.49Zhongsheng Group Holdings Ltd 668,500 1,106,295 0.20
128,065,435 23.51
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
INVESTMENT PORTFOLIO (UNAUDITED) (Continued)As At 31 DECEMBER 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
5 15 1A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
% of net Holdings Fair value assets Us$
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Continued)
Listed equity securities (Continued)
IndonesiaErajaya Swasembada Tbk PT 18,935,000 2,044,238 0.37Indomobil Sukses Internasional Tbk PT 3,162,500 4,069,522 0.75Mayora Indah Tbk PT 1,491,000 2,276,337 0.42Perusahaan Perkebunan London Sumatra Indonesia Tbk PT 10,895,000 2,643,553 0.48Salim Ivomas Pratama Tbk PT 27,114,000 3,370,771 0.62Tiga Pilar Sejahtera Food Tbk 18,316,500 978,745 0.18
15,383,166 2.82
JapanK’S Holdings Corp 101,000 3,960,784 0.72Ryohin Keikaku Co Ltd 93,100 4,509,682 0.83
8,470,466 1.55
MalaysiaKulim Malaysia BHD 1,856,700 2,464,698 0.45Sime Darby BHD 1,941,100 5,525,937 1.02
7,990,635 1.47
PhilippinesUniversal Robina Corp 4,336,200 4,742,719 0.87
INVESTMENT PORTFOLIO (UNAUDITED) (Continued)As At 31 DECEMBER 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
5 2A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
% of net Holdings Fair value assets Us$
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Continued)
Listed equity securities (Continued)
SingaporeARA Asset Management Ltd 3,635,500 3,380,431 0.62Beyonics Technology Ltd 1,563,000 306,282 0.06CSE Global Ltd 7,007,000 4,038,462 0.74Tianjin Zhong Xin Pharmaceutical Group Corp Ltd 3,305,000 1,553,350 0.28
9,278,525 1.70
TaiwanAcer Inc 5,431,000 6,280,944 1.15Aten International Co Ltd 1,392,000 2,328,650 0.43Clevo Co 2,481,000 3,921,203 0.72Feng Tay Enterprise Co Ltd 2,531,000 2,175,489 0.40Sporton International Inc 1,512,781 3,069,787 0.56Teco Electric & Machinery Co Ltd 6,915,000 4,072,747 0.75Uni-President Enterprises Corp 1,221,000 1,772,660 0.33Yungtay Engineering Co Ltd 2,438,000 3,668,222 0.67
27,289,702 5.01
ThailandAdvanced Info Service Pcl 1,192,600 5,121,943 0.94Khon Kaen Sugar Industry Pcl 11,945,700 5,035,747 0.92Siam Makro Pcl 810,300 6,138,247 1.13
16,295,937 2.99
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
INVESTMENT PORTFOLIO (UNAUDITED) (Continued)As At 31 DECEMBER 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
5 35 3A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
% of net Holdings Fair value assets Us$
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Continued)
Quoted debt securities
Australian dollarWestern Areas NL (REG) Conv 6.375% 2 July 2014 1,000,000 1,012,944 0.19
Hong Kong dollarHK Govt Bond Programme (Ser 4208) FRN 28 July 2014 25,320,000 3,562,283 0.65Mingfa Group Intl Co Ltd Conv 5.25% 23 May 2016 15,000,000 1,332,223 0.25
4,894,506 0.90
Indonesian rupiahEuropean Bk Recon & Dev (Ser GMTN) 6.5% 17 March 2014 31,000,000,000 3,529,971 0.65
Philippine pesoPetron Corp 7% 10 November 2017 145,000,000 3,257,594 0.60
INVESTMENT PORTFOLIO (UNAUDITED) (Continued)As At 31 DECEMBER 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
5 4A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
% of net Holdings Fair value assets Us$
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Continued)
Quoted debt securities (Continued)
RenminbiBig Will Investments Ltd (Ser HK) 7% 29 April 2014 29,000,000 3,458,992 0.63Bright North Ltd (REG) Conv 1.25% 13 April 2016 14,000,000 1,844,476 0.34China Power International Development Ltd (REG) Conv 2.25% 17 May 2016 16,200,000 2,494,384 0.46Evergrande Real Estate G (REG S) 9.25% 19 January 2016 30,000,000 3,431,952 0.63Evergrande Real Estate G 7.5% 19 January 2014 20,000,000 2,548,351 0.47Kaisa Group Holdings Ltd (Ser 1638) (REG) Conv 8% 20 December 2015 28,600,000 3,280,673 0.60LDK Solar Co Ltd 10% 28 February 2014 15,000,000 1,285,693 0.23Shui On Land Ltd (REG) Conv 4.5% 29 September 2015 21,000,000 2,988,738 0.55
21,333,259 3.92
Singapore dollarOSIM International Ltd Conv 2.75% 05 July 2016 2,000,000 1,422,764 0.26
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
INVESTMENT PORTFOLIO (UNAUDITED) (Continued)As At 31 DECEMBER 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
5 55 5A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
% of net Holdings Fair value assets Us$
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Continued)
Quoted debt securities (Continued)
United States dollarAayan First Sukuk (REG) FRN 20 September 2011 (Defaulted) 2,000,000 620,000 0.11Asia Cement Corp Conv 0% 27 January 2016 3,000,000 2,778,180 0.51BLD Investment (REG) Conv 8.625% 23 March 2015 7,500,000 5,677,234 1.04Bumi Capital Pte Ltd (REG S) (REG) 12% 10 November 2016 2,500,000 2,581,675 0.47Core Projects & Technologies Ltd Conv 7% 07 May 2015 1,000,000 787,184 0.15Country Garden Holding Co (REG S) 11.75% 10 September 2014 3,000,000 3,012,898 0.55Country Garden Holdings Co 10.5% 11 August 2015 1,000,000 936,923 0.17Davomas International Finance (REG S) STP 08 December 2014 4,500,000 2,058,000 0.38Enercoal Resources Ptd Ltd (REG) Conv 9.25% 05 August 2014 1,800,000 1,810,189 0.33ENN Energy Holdings Ltd (REG S) 6% 13 May 2021 1,500,000 1,365,765 0.25Excel Step Investments Conv STP 16 November 2012 1,460,000 1,580,450 0.29EZRA Holdings (REG) Conv 4% 25 November 2014 3,000,000 2,659,440 0.49Hynix Semiconductor Inc (REG) Conv 2.65% 14 May 2105 1,000,000 977,310 0.18Jinkosolar Holding Co Ltd (144A) (REG) Conv 4% 15 May 2016 4,087,000 1,610,937 0.30
INVESTMENT PORTFOLIO (UNAUDITED) (Continued)As At 31 DECEMBER 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
5 6A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
% of net Holdings Fair value assets Us$
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Continued)
Quoted debt securities (Continued)
United States dollar (Continued)KWG Property Holdings LT (REG S) 12.75% 30 March 2016 1,400,000 1,160,683 0.21Listrindo Capital (REG S) (REG) 9.25% 29 January 2015 900,000 1,000,967 0.18Lumena Resources Corp (REG S) 12% 27 October 2014 3,000,000 2,644,000 0.49Olam International Ltd (REG) Conv 6% 15 October 2016 3,000,000 3,193,250 0.59Paladin Energy Ltd (REG) Conv 3.625% 04 November 2015 5,000,000 3,986,398 0.73Renhe Commercial Holdings Co (REG S) (REG) 13% 10 March 2020 2,000,000 1,440,547 0.26Renhe Commercial Holdings Co (REG S) 11.75% 18 May 2015 1,500,000 1,031,677 0.19Shimao Property Holdings Ltd 9.65% 03 August 2017 2,000,000 1,576,364 0.29Star Energy Geothermal Wayang Windu Ltd (REG S) (REG) 11.5% 12 February 2015 2,500,000 2,799,182 0.51Videocon Industries Ltd (REG) Conv 6.75% 16 December 2015 1,400,000 958,342 0.18Welspun Gujarat Stahl (REG) Conv 4.5% 17 October 2014 1,000,000 794,900 0.15
49,042,495 9.00
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND
INVESTMENT PORTFOLIO (UNAUDITED) (Continued)As At 31 DECEMBER 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
5 75 7A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
% of net Holdings Fair value assets Us$
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Continued)
Put optionsUSD Put/HKD Call 7.5 17 February 2012 128,500,000 8,738 0.00
Unlisted investment fundsValue Partners Strategic Equity Fund 189,480 181,901 0.03
Gold securitiesLoco London Gold securities 31,600 49,807,920 9.14
Total financial assets at fair value through profit or loss 521,525,308 95.72
FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
Listed equity securities
Hong Kong – “H” sharesChina Rongsheng Heavy Industries Group Holdings Ltd (2,564,000 ) (709,390 ) (0.13 )Longfor Properties (2,622,500 ) (2,956,299 ) (0.54 )
(3,665,689 ) (0.67 )
Hong Kong – Red chipsChina Overseas Land & Investment Ltd (8,586,000 ) (14,341,489 ) (2.63 )
INVESTMENT PORTFOLIO (UNAUDITED) (Continued)As At 31 DECEMBER 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
5 8A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
% of net Holdings Fair value assets Us$
FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (Continued)
Listed equity securities (Continued)
Hong Kong – OthersASM Pacific Technology Ltd (228,500 ) (2,562,609 ) (0.47 )China Liansu Group Holdings Ltd (6,005,000 ) (2,604,183 ) (0.48 )Want Want China Holdings Ltd (4,414,000 ) (4,407,809 ) (0.81 )
(9,574,601 ) (1.76 )
SingaporeOlam Intl Ltd (795,800 ) (1,302,585 ) (0.24 )
Futures ContractsHang Seng Index Fut 30 January 2012 (233 ) (230,361 ) (0.04 )
Total financial liabilities at fair value through profit or loss (29,114,725 ) (5.34 )
Total investments, net 492,410,583 90.38
Total investments, at cost 511,819,996
* The trading of this equity security has been suspended.
INVESTMENT PORTFOLIO MOVEMENTS (UNAUDITED)FOR THE YEAR ENDED 31 DECEMBER 2011
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
5 95 9A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
% of net assets 2011 2010
Listed equity securitiesChina 1.35 4.27HongKong–“H”shares 20.92 17.54–Redchips 5.54 10.12–Others 21.75 28.51Indonesia 2.82 1.32Japan 1.55 –Malaysia 1.47 1.09Philippines 0.87 –Singapore 1.46 4.65SouthKorea – 4.20Taiwan 5.01 6.80Thailand 2.99 1.68
65.73 80.18
Quoted debt securitiesAustraliandollar 0.19 –HongKongdollar 0.90 1.04Indonesianrupiah 0.65 –Philippinepeso 0.60 0.86Renminbi 3.92 1.07Singaporedollar 0.26 0.58UnitedStatesdollar 9.00 8.59
15.52 12.14
Listed equity warrants – 0.00
Futures contracts (0.04) –
Put options 0.00 –
Listed investment funds – 0.25
Unlisted investment funds 0.03 0.05
Gold securities 9.14 3.42
Total investments, net 90.38 96.04
PERFORMANCE RECORD (UNAUDITED)
VALUE PARTNERS HIGH-DIVIDEND STOCKS FUND(A Cayman Islands Unit Trust)
6 0A N N U A L R E P O R T 2 0 1 1
Fo r t h e y ea r ended 31 Decembe r 2011
Net assets (at last traded prices)
2011 2010 2009 US$ US$ US$
Net assets 547,544,265 465,770,042 248,287,799
Net asset value per unit 50.38 58.34 45.79
Performance record since inception
Lowest Highest redemption issue price price per unit per unit US$ US$
2011 61.21 45.95
2010 60.41 43.34
2009 45.84 23.23
2008 45.39 20.94
2007 49.50 31.84
2006 32.53 24.08
2005 24.00 21.51
2004 22.46 18.75
2003 (since inception) 19.86 9.81
Note: TheFundhaselectedtopreparethefinancialstatementsinaccordancewithIFRS.TherearenomaterialvariationsonaccountingtreatmentbetweenIFRSandUSGAAP.
top related