MBK PARTNERS FUND II, L.P.

2019 Annual Report Contents

INTRODUCTION 4 Letter to Our Investors 20 Responsible Investing

2019 INVESTMENT REVIEW

26 Investment Summary 28 Investment Reviews 28 NEPA Co., Ltd. This report is available in PDF format which can be downloaded at www.mbkpartnerslp.com

2019 AUDITED FINANCIAL STATEMENTS

MBK PARTNERS FUND II, L.P.

31 Independent Auditor’s Report 33 Statement of Assets and Liabilities 34 Schedule of Investments 35 Statement of Operations 36 Statement of Changes in Partners’ Capital 37 Statement of Cash Flows 38 Notes to Financial Statements 4 MBK Partners Fund II, L.P.

Letter to Our Investors

March 15, 2020

To Our Investors:

FIFTEEN YEARS AGO, we founded MBK Partners on an idea: to bring Western-style buyouts to Asia. Our aim was not merely to disseminate a new technology but to improve it by customizing it to the Asian market and culture. We developed, and refined over the years, a distinctly Asian investment model, based on deep localization and partnerships with sellers and management. Our pioneering approach has had an impact on the way investments are done in North Asia to this day, even as it has driven our industry- leading performance in the region. Consistently strong results have been a hallmark of MBK Partners over the past 15 years. 2019 was no exception. We delivered superior results and reached milestones in our key priorities in the past year. We continued to lead the way in returns performance in Asia, with seven distributions, totaling $3.5 billion. We made 12 investments across Buyouts and Special Situations, deploying $2.3 billion, the highest annual amount in the Firm’s history. We also launched and substantially raised Buyout Fund V, soon to close at around $6.5 billion. Our record flagship fund raise was supported by “re-ups” by nearly all our major LPs. Lastly, we welcomed our first female Partner, the latest testament to our organizational commitment to diversity and inclusion. We achieved these results despite persistent headwinds in the markets. The U.S.-China trade war continued unabated, with barely any progress in negotiations from beginning to end of 2019. The Japan-Korea political row and the Hong Kong protests weighed on 2019 Annual Report 5

the North Asian economies. GDP growth slowed to 6.1% in China, 0.8% in Japan and 2.0% in Korea. This moderate growth was buttressed in large part by fiscal stimulus packages from governments. The major market indices in the region finished in positive territory for the year, despite increased volatility. Shanghai Composite gained 22.3%, Nikkei 18.2% and KOSPI 7.7%. With the new year has come an immense new threat, the COVID-19 viral outbreak. Spreading alarmingly rapidly from Wuhan, China, to Japan and Korea and many other parts of the world, COVID-19 comes in a vulnerable place at an inopportune point in the global business cycle. The adverse impact of the COVID-19 shock on a weakening global economy will be significant and far-reaching; the North Asian economies are already experiencing an unprecedented disruption. In the uncertain environment of 2019, we continued our march of exits. We sold Coway to Woongjin, for multiple of equity of 3.3x and IRRs of 26%, and Orange Life to Shinhan Financial Holdings, for 2.7x MoE and 27% IRRs. Early this year, we completed the sale of Daesung Industrial Gases to Macquarie, for 2.1x MoE and 32% IRRs. These sales represent three of the five largest exits in Asia in the last 12 months. We also completed leveraged recapitalizations of Daesung Industrial Gases (prior to full exit) for $359 million and HKBN for $100 million, and we made interest distributions of $42 million from OCI and Xeno. All told, we realized $3.5 billion in proceeds. By nearly any measure, MBK Partners is the leader in realizations in Asia. In the past 15 years, our realized proceeds total $12.1 billion (including LP co-investment proceeds), the largest amount among Asian GPs. As we have emphasized, we believe our primary job is to deliver maximum dollars to our LPs; we continue to prioritize it over other performance objectives. Even on the basis of relative performance metrics, including notably distributions-to-paid-in capital (DPI) and aggregate capital returned-to-capital raised, MBK Partners is the clear leader among our peers. No one in Asia has done a better job than in returning money to LPs. Our strong performance has been consistent across our funds. We have continually outperformed industry benchmarks in both total value-to-paid-in capital (TVPI) and DPI. All three active MBK Partners Buyout funds, Funds II, III and IV, are top-quartile performers, in both TVPI (globally) and DPI (in Asia). In recognition, MBK Partners was ranked by Institutional Investor as the “Most Consistently Top-Performing Buyout Fund Manager” in the world, along with four other managers, in 2019. Our “fortress portfolio” of companies, built on a sturdy domestic consumption foundation, has weathered the recent storm well. The companies collectively have shown consistent growth in EBITDA, the driver of value accretion in our portfolio. Of our active Funds, Fund II has nearly tripled in value (as reflected by the sum of realized and remaining fair market value) since its inception. Fund III and Special Situations I have doubled in value, and the still young Fund IV has gone up by half. We view fund value accretion over time versus public market indices as a meaningful performance indicator. All four of our funds have significantly outperformed the North Asian public markets over the period of their fund life. Fund II has increased 190.1% versus 95.4% in public markets; Fund III 103.9% versus 54.1%; Fund IV 51.0% versus 1.7%; and Special Situations I 102.7% versus negative 7.8%.

Figure 1: MBKP Fund Performance vs. Public Markets (Dec. 31, 2019)

MBKP Fund KOSPI Nikkei Shanghai Composite NAsia Median

Fund II 350 Fund II +190.1% 250 NAsia +95.4%

150

50 Dec.08 Dec.09 Dec.10 Dec.11 Dec.12 Dec.13 Dec.14 Dec.15 Dec.16 Dec.17 Dec.18 Dec.19

Fund III 250

200 Fund III +103.9%

NAsia 150 +54.1%

100

50 Jun.13 Dec.13 Jun.14 Dec.14 Jun.15 Dec.15 Jun.16 Dec.16 Jun.17 Dec.17 Jun.18 Dec.18 Jun.19 Dec.19 6 MBK Partners Fund II, L.P.

Fund IV 250

Fund IV 150 +51.0%

100 NAsia +1.7%

50 Mar.17 Jun.17 Sep.17 Dec.17 Mar.18 Jun.18 Sep.18 Dec.18 Mar.19 Jun.19 Sep.19 Dec.19

SSF I 250

200 SSF I +102.7%

150

100 NAsia -7.8%

50 Dec.17 Mar.18 Jun.18 Sep.18 Dec.18 Mar.19 Jun.19 Sep.19 Dec.19

On an absolute returns basis, the aggregate marks for all of our funds at year-end 2019 were MoE of 1.9x and IRRs of 18.0%. Fund I (closed) was at 1.5x for an IRR of 7.5%, Fund II at 2.9x and 26.2%, Fund III at 2.0x and 21.1%, Fund IV at 1.5x and 33.8% and Special Situations I at 2.0x and 86.2%. These results demonstrate MBK Partners’ ability to invest and make money through markets good and bad.

Figure 2: Summary Fund-by-Fund Performance (Dec. 31, 2019)

Fund I Fund II Fund III Fund IV SSF I Vintage 2005 2008 2013 2017 2018

Invested Capital and Total Value $4,985 ($ in millions) $3,533 $4,222 $3,716 $3,253 $87

$3,629

$2,796 $2,107 $2,444 $2,107 $1,287 $1,400 $1,452 $1,281 $1,243 $969 $635 Realized Value Unrealized Value $44

Invested Total Invested Total Invested Total Invested Total Invested Total Capital Value Capital Value Capital Value Capital Value Capital Value

Realized Returns 1.5x/7.5% 3.0x/27.1% 2.7x/31.4% 2.1x/31.2% 1.3x/21.7% (MoE/IRR) Overall Returns 1.5x/7.5% 2.9x/26.2% 2.0x/21.1% 1.5x/33.8% 2.0x/86.2%

In 2019, we also continued our recent investment momentum. In the last three years, we have deployed $1.2 billion in China, $1.5 billion in Japan and $1.9 billion in Korea. Last year, we made 12 investments across Buyouts and Special Situations. In Buyouts, we invested $1.6 billion in five companies, acquiring in Godiva Japan, Lotte Card in Korea and eHi, Siyanli and Wendu in China. We also made add-on investments in Accordia and Golfzon. Capitalizing on market uncertainties, Special Situations invested $424 million in five companies, all through structured securities with downside protection: BHC in Korea, Accordia Next Golf in Japan, OCI in Hong Kong and CGI Holdings and Modern Land in China. We are now over 80% deployed in Special Situations I, paving the way for the launch of Fund II in second-half 2020. 2019 Annual Report 7

Through cycles and particularly in unclear environments, our focus has served us well. Our focus starts with a disciplined investment strategy. For 15 years, we have stuck to what we know. We still target North Asia exclusively: all of our 45 investments have been in China, Japan and Korea. We continue to believe our home markets in North Asia represent the most fertile ground for investments in all of Asia. Secondly, we insist on control for Buyouts: 35 out of the 37 investments are control transactions. We adhere to distress or “special” circumstances for Special Situations. Lastly, we emphasize domestic consumption, which underpins our three core sectors of consumer/retail, telecommunications/media and financial services. Consumption plays constitute the lion’s share, over three- quarters, of our portfolio. We believe our reliance on consumption, over exports, has effectively insulated our portfolio against macro shocks and negative exogenous factors, including the U.S.-China trade conflict, currency wars and foreign sovereign debt crises. As the Firm has evolved over 15 years, we have crystallized our market positioning. Our localness has fostered close relationships with the chaebol owner families and management in Korea. This has led to our dominance of chaebol-related buyouts, the most prolific deal category across North Asia. Of our 17 Buyout investments in Korea, eight arechaebol divestitures. In Japan, we have converted our local relationships to partnerships with management of listed mid-cap companies. Of our nine Japanese investments, five are take-private MBOs. In China, we have developed joint-control partnerships with founder-entrepreneurs of leading private companies. Seven of our 11 Chinese investments are of this partnership model. In all three markets, we have harnessed our localness to develop “harmonious” Asian solutions. We continue to grow as an organization. We will have a critical-scale staff of 100 by the end of 2020. The investment team, bound by our “TIE” (teamwork, integrity and excellence) ethos, is experienced, cohesive and stable. We have had no senior turnover over the past four years. 2019 saw the largest class of promotions in our Firm’s history, with 18 people promoted, including In Kyung Lee to Partner. We also expanded our operating group by adding an Operating Partner in Japan, with another soon to follow in China. We have achieved “dynamic equilibrium” in our staff, stable but growing and changing. Importantly, the evolution of our firm is not aimed at growth for growth’s sake; it is toward building a platform to scale. Our continual aim is to scale our franchise and operations through the combination of Buyouts and Special Situations. We are already realizing economies in deal sourcing, industry expertise and value creation as well as in legal, finance and human resources. Scaling our growing firm will be a key factor in our future success. We enter 2020 facing challenges old and new. The oversupply of GP capital has only grown, to a record $105 billion in dry powder in Asia. Valuations in private transactions were up across North Asia. The median purchase multiple in 2019 was 13.0x EBITDA, the highest in more than a decade. But we made our investments at attractive prices. Our investments in 2019 were done at an average 27.7% discount to market. Our conviction remains that proprietary deals are cheaper; the preponderance of our investments was done on a proprietary basis. COVID-19 represents a threat of historic magnitude. China’s share of global output today is nearly 20% (double its 9% share at the SARS outbreak in 2003), and its industrial disruption is leading to a significant impairment of the global supply chain. We expect the impact of the COVID-19 shock on the North Asian economies, as well as the global economy, to be deeper and longer-lasting than SARS. We’re already seeing a significant adverse impact, with China and Korea experiencing unprecedented slowdowns in output and Japan contracting in the first two months of the year. COVID-19 poses a particularly severe threat to our portfolio, and a test of our domestic consumption thesis, given the vulnerability of consumption to public health risks. Experience tells us, however, that opportunities arise from challenges. Having invested through two cycles, the Asia Financial Crisis and the Great Financial Recession, we know this crisis, too, shall pass. There may not be a V-shaped recovery as in the post-SARS experience, but we expect a robust rebound in consumer demand upon resolution of COVID-19. We also know deal opportunities proliferate in times of distress or upheaval. There will be compelling opportunities in Buyouts and especially in Special Situations. We remain mindful of competition, but our growing conviction is that relationships trump all competition. We will bring to bear our relationships with local sellers, advisors, lenders, even regulators and policymakers, to press our competitive advantage. This is the time to make investments. From our founding in March 2005, we have come a long way. We have increased our capital under management to $22 billion, cementing our position as the largest independent private equity manager in Asia, and we have invested $13.6 billion in equity in 41 companies (including exited companies). Most importantly, we have returned a market-leading $12.1 billion to our LPs. We have done all this the right way, with no legal proceedings or investigations in our history. It has been a rewarding journey in many important ways. But, in the poetic words of Robert Frost, still, we have promises to keep, and miles to go before we sleep. We appreciate your taking the journey with us.

Yours truly, Michael ByungJu Kim 8 MBK Partners Fund II, L.P.

Leadership

With a dedicated focus on investments in China, Japan and Korea, MBK Partners is a leader in the North Asian market. MBK Partners has local investment teams in its offices in Beijing, Hong Kong, Seoul, Shanghai and Tokyo. 2019 Annual Report 9 10 MBK Partners Fund II, L.P.

$ 22 billion

Capital under management 2019 Annual Report 11

Largest Independent Asian Private Equity Firm

Established in March 2005 by six founding members who worked together at a global private equity organization, MBK Partners today has over $22 billion in capital under management. Our investors include public and corporate pension funds, sovereign wealth funds, financial institutions, funds of funds and endowments from China, Japan, Korea, Southeast Asia, North America, Western Europe and the Middle East. 12 MBK Partners Fund II, L.P.

Strategy

MBK Partners has a dedicated geographic focus on North Asia - China, Japan and Korea. We rely on deep localization in each of our home markets as a competitive advantage. We have 65 local investment professionals across our offices in Beijing, Hong Kong, Seoul, Shanghai and Tokyo. 2019 Annual Report 13 14 MBK Partners Fund II, L.P.

100 %

Investment professionals native to their markets

Capitalizing on Distressed Opportunities in the Region in Special Situations

Special Situations invests in companies with limited access to capital due to their stage of development, macroeconomic and industry cycles, market inefficiency or any company-specific challenges. We believe providing timely and customized capital solutions to such companies in need is conducive to creating value. 2019 Annual Report 15

Strong Emphasis on Control for Buyouts

MBK Partners Buyouts typically acquires companies through management-led buyouts, buys subsidiary businesses through corporate divestitures, partners with strategic buyers, takes publicly listed companies private and purchases and grows companies through add-on acquisitions. We focus on control investments because we believe control is essential to creating value. 16 MBK Partners Fund II, L.P.

Value Creation

On the strength of our local relationships and market knowledge, MBK Partners has built a leading position in the North Asian market. We invest in a broad range of industries and focus on industry-leading companies to create long-lasting value. 2019 Annual Report 17 18 MBK Partners Fund II, L.P.

Value Creation Experience

MBK Partners seeks to invest in industry-leading companies with sustainable competitive advantages and strong cash flows and earnings. We have long experience in working with management to grow and create value in the companies by developing strategy, optimizing capital structure, adopting global best practices in operations, controls and corporate governance and pursuing strategic growth opportunities. MBK Partners typically has a long-term investment horizon. 2019 Annual Report 19

$ 12.1 billion

Realized proceeds total (including LP co-investment proceeds) 20 MBK Partners Fund II, L.P.

Responsible Investing

We believe responsible behavior has a positive impact on the long-term financial performance of our companies, and healthier companies, in turn, have a positive impact on society. We are committed to investing responsibly and advancing environmental, social and governance (ESG) interests in the communities in which we and our portfolio companies operate.

Principles for Responsible Investment Our Investment Process

In 2013, we signed the United Nations-backed Principles for Throughout our investment process, we work to integrate ESG Responsible Investment (PRI) to demonstrate our commitment to considerations in our decision-making. ESG-related matters comprise ESG management and our fiduciary responsibilities. The Principles a key part of the overall due diligence that we perform on all of our are a voluntary framework which helps us to incorporate ESG investments. The relevance and materiality of ESG factors for an matters into our decision-making and portfolio company ownership investment will vary depending on an investment’s characteristics; practices. in general, however, the following factors are considered during our assessment of an investment opportunity: We commit to the following Principles for our private equity investments, as consistent with our fiduciary responsibilities: 1) Overall compliance with relevant laws and regulations

1. We will incorporate ESG matters into investment analysis 2) Responsible labor practices, working conditions and diversity in and decision-making processes. the workforce 2. We will be active owners and incorporate ESG issues into 3) Environmental risks and opportunities, such as greenhouse gas our ownership policies and practices. emissions, energy use, water use, supply chain management, 3. We will seek appropriate disclosure on ESG issues by the waste management, and use of renewable materials entities in which we invest. 4) Consumer health and safety 4. We will promote acceptance and implementation of the 5) Cybersecurity risk assessment and emergency planning Principles within the investment industry. 5. We will work together to enhance our effectiveness in Post-investment, we incorporate ESG action plans or improvement implementing the Principles. programs into the “100-day plan” we develop with the portfolio company and encourage company management to adhere to the 6. We will each report on our activities and progress towards implementing the Principles. highest standards of ethical business practice and transparency. Our portfolio companies’ annual budgets contain a section on ESG initiatives, which are discussed and approved by the board, and CEOs are expected to provide biannual updates to the board on the progress of such ESG initiatives. Furthermore, through regular communication with our portfolio companies, we are able to continually assess the degree of ESG implementation, partnering to find solutions to certain situations and to share best practices. 2019 Annual Report 21

Our Employees

Our employees are responsible for identifying potential ESG issues Social Impact: and raising these issues during the pre-investment and investment • MBKP ’s “Founding Day” volunteer service - Our employees phases and helping portfolio companies to develop their ESG are actively involved in their communities, volunteering their improvement programs. Recognizing the importance of building time, talent and expertise. In addition to their individual efforts, awareness and competence across the organization, we continue we organize annual opportunities on the Firm Founding Day to to integrate ESG management into the knowledge base of our serve the community in which we live and work. In 2019, we investment professionals through new employee orientation, annual volunteered with Food Angel to prepare food for the impoverished ESG training, and firm-wide communication. MBKP also operates a in Hong Kong, volunteered in the Seoul Association of the code of conduct that stipulates the professional and ethical values Institutes for the Disabled in Seoul, and visited children at the for which the Firm stands and to which employees are expected to Heart to Heart Children’s Foundation and a local orphanage in adhere. Shanghai and Tokyo, respectively.

• Apex was appointed by the Wuhan Government as the key air Our Impact freight forwarder responsible for delivery of epidemic prevention Through our actions and the businesses we invest in, we recognize supplies in the region. As of Feb 2020, 500 tons of supplies were we have a significant opportunity to touch the lives of many people successfully delivered. in the various communities around us. We will continue to engage • HKBN partnered with Junior Achievement Hong Kong to launch closely with our neighboring communities and encourage equally the 18-month “Net’s Be Wise” program, an initiative aimed at active involvement on the part of our portfolio businesses in 2020 enhancing the “Digital Intelligence” of primary school students, and beyond. Selected highlights of our recent activities include: aged 8-12. Through the program, students learned about screen time management, cyber security and online privacy management.

• Accordia Golf and Next Golf organized “Woman’s Life Forum” in November to promote women employees to advance their career in the golf industry.

• Accordia Golf and Next Golf have disaster support agreements with local governments and local golf associations to provide emergency disaster relief services, such as providing its facilities as shelters and food supplies to evacuees. From October to December, Accordia Golf and Next Golf donated JPY4.1million to the Japanese Red Cross Society for emergency relief support in response to two typhoon disasters. 22 MBK Partners Fund II, L.P.

• 2019 was the third year of Tasaki’s scholarship program in • Lotte Card offers a “Point Donation” program, which enables its Myanmar, where Tasaki operates two company-owned aqua members to donate their Lotte points to various NGOs, including farms. Tasaki provided scholarships and stipends to six students Childfund and Goodneighbors. Since 2013, more than 15,000 from the city of Myeik, selected on their academic performance, Lotte Card members have participated in this program and social standing and gender balance. donated KRW200 million.

• Tasaki donated all revenues from the “Tasaki Online Charity • Lotte Card has held an annual blood drive since 2012. In 2019, Project,” launched in March 2019, to the Cultural and Sports 243 Lotte Card employees participated in this campaign, which Support Organization for the Great East Japan Earthquake helped in contributing 1,766 blood donor cards and KRW79.9 Orphans, providing continuous support to children affected by million to the Korea Childhood Leukemia Foundation. the 2011 earthquake and to the Kumamoto prefecture’s 2016 • To enhance traffic safety for children, BHC established 64 speed earthquake recovery project. monitoring displays in school zones in Gwangjin, Nowon and • MH donated products worth approximately $1,220,000 in 2019 to Gangbook area in Seoul. a local goodwill store, operated by the MIRAL Welfare Foundation, • BHC Sunflower Volunteer Program supports volunteers composed to support the employment of disabled, rehabilitated and less- of university students to help out short-handed farm families, child privileged citizens. care facilities and animal shelters on a regular basis. BHC also • As part of Kuroda’s efforts to increase awareness in physical launched BHC Angel Program in which volunteers collect wish fitness, 80 local children participated in a free basketball coaching lists via BHC’s Facebook page and its official blog to fulfill wishes event held in collaboration with Kuroda’s basketball team, “Bullet of families and children in need by providing gifts and hosting Spirits,” and the local government. various events.

• This is the sixth year of Golfzon County’s caddy training program in cooperation with the Korea Hana Foundation to help North Korean refugees integrate better into Korean society. Fourteen caddies who participated in the program are currently working at Golfzon County golf courses.

• As part of a community outreach program, Godiva organized a pastry making activity for 6 kids who were chosen out of 197 applicants at Atelier de Godiva in Kyoto in October.

• Wendu established the “Wendu Education Warmth Fund” to provide financial assistance, work-study program and academic planning to students with under-privileged backgrounds.

• From July to September 2019, Wendu provided financial aid and learning materials to support 98 under-privileged students from rural areas of China, including Tibet, Henan and Shaanxi. 2019 Annual Report 23 24 MBK Partners Fund II, L.P.

Environmental Impact: • Homeplus continued to improve energy savings by investing on • Accordia Golf has been collaborating with Asahi Group to develop high-efficiency equipment. Through 2019, the company invested bio-stimulant and plant activator made from residue of beer yeast, KRW1.9 billion for inverter replacement and auto-control of fans/ which has been shown to reduce greenhouse emissions by 47%. freezers/chillers, saving KRW1.6 billion a year. The investment The number of golf courses implementing this was increased payback period is 1.2 years. from 18 to 54 in 2019.

• 25 Homeplus stores were newly designated as “Green Stores” • Kuroda has been collaborating with the Organization for Industrial, by the Ministry of Environment in 2019 and currently the total Spiritual and Cultural Advancement (“OISCA”), an international number of Green Stores is 53. Green Stores are selected stores NGO, to preserve the environment. In October 2019, Kuroda that incorporate various environment friendly and carbon emission employees participated in an event supported by OISCA, in which saving technology in its facility. people learned and experienced sustainable organic agriculture. Kuroda also held a forest preservation event during the year. • HKBN took part in the “Bottle Collection Challenge” campaign to recycle PET bottles across Hong Kong and remade them into • Siyanli started recycling its products’ outer packaging boxes in reusable tote bags. To help build a sustainable ecosystem, waste 2019. It also works with suppliers, targeting to reduce the use of pickers were employed to take part in the recycling process, plastic and paper by 5% in its packaging over the next five years. enabling them to earn extra income. In addition, proceeds earned from the bag sales were used to improve the lives of the waste pickers. HKBN employees helped collect around 180 kg of plastic bottles from HKBN offices.

• HKBN launched an energy performance project “Something from Nothing,” which was initiated through the help of an external energy consultant. This pioneering effort has stood out for requiring zero initial capital investment from the company, despite the many energy efficiency upgrades that have been carried out inside the office. The expenditure for the retrofitting was fully funded by the consultant, who shares a fraction of the energy cost savings as compensation. The improvement upgrades included augmenting air-conditioning and lighting efficiency across the office and data center locations.

• In February 2019, HKBN began exploring the use of AI technology to optimize energy efficiency for one of its chillers. The system uses big data and machine learning to identify energy saving opportunities. Based on the chiller performance optimization analysis, a potential 7% energy savings can be achieved.

• Accordia Golf and Next Golf introduced eco-friendly air conditioning system to its facilities to reduce greenhouse gas emissions. As of March 2020, over 80% of Accordia Golf courses and over 50% of Next Golf courses were installed with the new air conditioning system. 2019 Annual Report 25

2019 INVESTMENT REVIEW

26 28 Investment Investment Summary Reviews

28 NEPA Co., Ltd. 26 MBK Partners Fund II, L.P.

Investment Summary

ACTIVE INVESTMENTS SUMMARY As of December 31, 2019 (In US$ millions)

Cumulative Cumulative Current Invested Fair Value Fair Market Active Investment Country Closing Date Description Ownership Contributions Distributions Capital 12/31/19 (1) Value Methodology (2)

NEPA Co., Ltd. Korea Apr 2013 Outdoor apparel maker 84.9% (3) $89.9 $0.0 $89.9 $86.6 Market approach

Total Active Investments $89.9 $0.0 $89.9 $86.6

REALIZED INVESTMENTS SUMMARY As of December 31, 2019 (In US$ millions)

Realized Investment Country Investment - Exit Date Description Cumulative Contributions Realized Value Gain Gross IRR Multiple of Equity

KT Rental Corporation Korea Mar 2010 - Jul 2012 Car rental service provider $77.7 $142.2 (4) $64.5 30.4% 1.8x Telecommunications bill aggregation Invoice Inc. Japan Jan 2011 - Dec 2013 140.0 347.3 207.3 47.1% 2.5x service provider Techpack Solutions Co., Ltd. Korea Dec 2008 - Oct 2014 Manufacturer of beverage containers 122.6 226.1 (5) 103.5 11.0% 1.8x

GSE Investment Corporation China Dec 2009 - Dec 2014 Environmental protection service provider 128.5 356.0 (6) 227.5 24.2% 2.8x

Young Hwa Engineering Korea Oct 2009 - Jan 2017 Steel structure manufacturer 105.1 0.0 0.0 N.M. 0.0x

USJ Co., Ltd. Japan May 2009 - Apr 2017 Theme park operator 183.3 1,265.6 1,082.3 36.3% 6.9x

New China Life Insurance Co., Ltd. China Dec 2011 - June 2017 Life insurer 154.2 199.2 45.0 9.4% 1.3x

Komeda Co., Ltd. Japan Feb 2013 - Jul 2017 Coffee chain operator 128.8 598.1 469.3 56.9% 4.6x

Coway Co., Ltd. Korea Nov 2012 - Mar 2019 Consumer health appliance rental provider 150.5 494.5 (7) 344.0 26.2% 3.3x

Total Realized Investments $1,190.7 $3,629.1 $2,543.4 27.1% 3.0x

Notes: (1) Fair value of investments is translated at the local currency exchange rates as of December 31, 2019, and includes the net asset values of the intermediary holding companies related to each investment. (2) Fair value of investments is determined in accordance with ASC820. The market approach generally entails using public trading comparables. (3) Combined ownership with MBK Partners Fund III. 2019 Annual Report 27

ACTIVE INVESTMENTS SUMMARY As of December 31, 2019 (In US$ millions)

Cumulative Cumulative Current Invested Fair Value Fair Market Active Investment Country Closing Date Description Ownership Contributions Distributions Capital 12/31/19 (1) Value Methodology (2)

NEPA Co., Ltd. Korea Apr 2013 Outdoor apparel maker 84.9% (3) $89.9 $0.0 $89.9 $86.6 Market approach

Total Active Investments $89.9 $0.0 $89.9 $86.6

REALIZED INVESTMENTS SUMMARY As of December 31, 2019 (In US$ millions)

Realized Investment Country Investment - Exit Date Description Cumulative Contributions Realized Value Gain Gross IRR Multiple of Equity

KT Rental Corporation Korea Mar 2010 - Jul 2012 Car rental service provider $77.7 $142.2 (4) $64.5 30.4% 1.8x Telecommunications bill aggregation Invoice Inc. Japan Jan 2011 - Dec 2013 140.0 347.3 207.3 47.1% 2.5x service provider Techpack Solutions Co., Ltd. Korea Dec 2008 - Oct 2014 Manufacturer of beverage containers 122.6 226.1 (5) 103.5 11.0% 1.8x

GSE Investment Corporation China Dec 2009 - Dec 2014 Environmental protection service provider 128.5 356.0 (6) 227.5 24.2% 2.8x

Young Hwa Engineering Korea Oct 2009 - Jan 2017 Steel structure manufacturer 105.1 0.0 0.0 N.M. 0.0x

USJ Co., Ltd. Japan May 2009 - Apr 2017 Theme park operator 183.3 1,265.6 1,082.3 36.3% 6.9x

New China Life Insurance Co., Ltd. China Dec 2011 - June 2017 Life insurer 154.2 199.2 45.0 9.4% 1.3x

Komeda Co., Ltd. Japan Feb 2013 - Jul 2017 Coffee chain operator 128.8 598.1 469.3 56.9% 4.6x

Coway Co., Ltd. Korea Nov 2012 - Mar 2019 Consumer health appliance rental provider 150.5 494.5 (7) 344.0 26.2% 3.3x

Total Realized Investments $1,190.7 $3,629.1 $2,543.4 27.1% 3.0x

(4) Represents gross amounts before withholding tax of $2.44 million. (5) Represents gross amounts before withholding tax of $7.72 million. (6) Represents gross amounts before withholding tax of $22.44 million. (7) Represents gross amounts before withholding tax of $39.63 million. 28 MBK Partners Fund II, L.P.

NEPA Co., Ltd. (Korea)

The Company

Valuation/Performance Overview NEPA Co., Ltd. (“NEPA,” or the “Company”) is one of the leading ($ in millions) players in the outdoor apparel market in Korea. The Company designs and sells functional products like specialized jackets, pants and shoes for climbing, hiking and trekking as well as more urban wear like down padding coats, sweatshirts and tee $89.9 $0.0 shirts. Cumulative Contributions Cumulative Distributions NEPA is one of the most well-recognized outdoor apparel companies in Korea and competes directly with more internationally recognized brands such as The North Face and Columbia. The $89.9 $86.6 Company also operates the largest retail network in Korea in the Current Invested Capital Current Investment Fair Value outdoor apparel market, with 395 directly-managed and franchise stores. 4/25/2013 Closing Date The Transaction In April 2013, MBKP acquired 87.4% of NEPA at an enterprise As of December 31, 2019 valuation of $869.6 million, with $89.9 million from Fund II and $200.4 million from Fund III.

In April 2018, NEPA extended the maturity of its debt of KRW213.9 billion by two years. As part of the conditions for the maturity extension, NEPA paid down KRW75.0 billion of acquisition debt, financed by the sale of KRW62.9 billion of inventory assets to a newly established SPC, capitalized with KRW30.0 billion ($28.4 million) in MBKP Fund III equity (“NEPA II”) and KRW35.0 billion in debt financing.

Key Recent Events Since our acquisition in 2013, NEPA has gone from the fifth to the second largest player in the Korean outdoor apparel market, trailing only The North Face.

In May 2019, the Company launched its first digital marketing campaign in China with Tmall, one of the largest B2C e-commerce platforms in China, and several social network services, featuring Jihyun Jun, a Korean actress popular in China.

In July and August 2019, NEPA rolled out award-winning ESG initiatives, the “Rain Tree” campaign, to increase public awareness of the environmental pollution caused by the use of disposable plastic umbrella covers. The campaign installed tree-shaped structures as reusable umbrella covers made from waterproof materials in front of major office buildings throughout Seoul. 2019 Annual Report 29

Financial Performance Overview Local currency results for 2019 vs. 2018 and 2019 US dollar actual vs. plan (as of and for the 12 months ended Dec. 31)

(KRW in billions) 2019 ($ in millions (1))

2018 2019 % YoY Actual Plan % Diff

Revenues 371.1 326.3 -12.1% 282.7 343.4 -17.7% NEPA 336.0 293.1 -12.8% 253.9 306.1 -17.1% NEPA Kids 35.1 33.2 -5.3% 28.8 37.3 -22.9% Gross Profit 220.3 189.0 -14.2% 163.7 207.4 -21.1% Gross Margin 59.4% 57.9% 57.9% 60.4% EBITDA 65.5 45.1 -31.1% 39.1 59.3 -34.1% EBITDA Margin 17.7% 13.8% 13.8% 17.3% Pre-provision EBITDA (2) 58.5 42.5 -27.5% 36.8 59.0 -37.7% EBITDA Margin 15.8% 13.0% 13.0% 17.2% EBIT (2) 48.2 29.0 -40.0% 25.1 45.1 -44.4% EBIT Margin 13.0% 8.9% 8.9% 13.1% Net Debt 207.8 227.2 9.4% 196.9 168.5 16.8%

2018 Actual 2019 Actual 2019 Plan ’18 – ’19 Growth Actual vs. Plan Total Stores 389 395 408 1.5% -3.2% NEPA 312 317 323 1.6% -1.9% NEPA Kids 77 78 85 1.3% -8.2%

(1) $1 = KRW1,154.3 (2) Adjusted for inventory provisioning expenses

In 2019, NEPA recorded total revenues of KRW326.3 billion, a EBITDA was KRW45.1 billion in 2019, a 31.1% decrease from 12.1% decrease from 2018 and 17.7% below plan. Revenue 2018 and 34.1% below plan. EBITDA shortfall was due to underperformance was mainly due to unfavorable weather. The revenue underperformance. The Company focused on increasing 2019 winter season was extraordinarily warm, with the second its in-season product sales ratio to improve margin to offset the highest recorded temperature and the lowest recorded snowfall negative impact from industry-wide high discount rates to in history. Such conditions resulted in a contraction of outdoor stimulate demand amid unfavorable weather condition. market, with down-jacket sales hit the hardest. Net debt increased by 9.4% compared to last year due to (i) lower EBITDA from weak revenues and (ii) cash outflow to inventory factoring SPC (KRW26 billion in 2019). 30 MBK Partners Fund II, L.P.

2019 AUDITED FINANCIAL STATEMENTS

31 MBK Partners Fund II, L.P.

31 Independent Auditor’s Report 33 Statement of Assets and Liabilities 34 Schedule of Investments 35 Statement of Operations 36 Statement of Changes in Partners’ Capital 37 Statement of Cash Flows 38 Notes to Financial Statements 2019 Annual Report 31

Independent Auditor’s Report

TO THE GENERAL PARTNER OF MBK PARTNERS FUND II, L.P. (A Cayman Islands exempted limited partnership)

Opinion What we have audited The financial statements of MBK Partners Fund II, L. P. (the “Partnership”) set out on pages 33 to 44, which comprise:

• the statement of assets and liabilities and the schedule of investment as at December 31, 2019; • the related statement of operations for the year then ended; • the statement of changes in partners’ capital for the year then ended; • the statement of cash flows for the year then ended; and • the notes to the financial statements, which include a summary of significant accounting policies.

Our opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Partnership as at December 31, 2019, and its financial performance and cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence We are independent of the Partnership in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code.

Responsibilities of the General Partner for the Financial Statements The General Partner is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for such internal control as the General Partner determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the General Partner is responsible for evaluating whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Partnership’s ability to continue as a going concern within one year after the date that the financial statements are issued, or available to be issued, and disclosing, as applicable, matters related to this evaluation unless the liquidation basis of accounting is being used by the Partnership. 32 MBK Partners Fund II, L.P.

Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. We report our opinion solely to you, as a body, in accordance with our agreed terms of engagement and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit 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 Partnership’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the General Partner. • Conclude on the appropriateness of the General Partner’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Partnership’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Partnership to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the General Partner regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

PricewaterhouseCoopers Certified Public Accountants Hong Kong, March 27, 2020 2019 Annual Report 33

Statement of Assets and Liabilities

As of December 31, 2019

(stated in United States dollars)

Note 2019 Assets

Investment, at fair value (cost US$89,900,528) 3 86,600,885

Cash and cash equivalents 57,711,263

Accounts receivable and prepayments 723,651

Total assets 145,035,799

Liabilities

Distributions payable 8 57,504,416

Accounts payable and accrued expenses 8 617,660

Total liabilities 58,122,076

Net assets 86,913,723

Partners’ capital

General Partner 5 7,043,797

Limited Partners 5 79,869,926

Partners’ capital 86,913,723

The accompanying notes are an integral part of these financial tatements.s

Approved by MBK Partners GP II, L.P. as General Partner of MBK Partners Fund II, L.P.

Michael B. Kim - Authorised Signatory 34 MBK Partners Fund II, L.P.

Schedule of Investments

As of December 31, 2019

(stated in United States dollars)

2019

Description Effective holding in (fair value as a % of partners’ capital) investee company (%) Cost Fair value

Common stocks (99.64%)

Korea (99.64%)

Unlisted investment

Outdoor apparel 15.70% 89,900,528 86,600,885 NEPA Co., Ltd., through MBK Partners II, Inc. (99.64%)

Total Korea 89,900,528 86,600,885

Total investment 89,900,528 86,600,885

The accompanying notes are an integral part of these financial statements. 2019 Annual Report 35

Statement of Operations

For the Year Ended December 31, 2019

(stated in United States dollars)

2019

Investment income

Interest income 213

Dividend income 1,270

1,483

Expenses

Professional fees (37,106)

Other expenses (919,263)

(956,369)

Net investment loss (954,886)

Net realized gains on investments

Net realized gains on investments 166,176,349

Net change in unrealized loss on investments

Net change in unrealized loss on investments (245,572,696)

Net decrease in partners’ capital resulting from operations (80,351,233)

The accompanying notes are an integral part of these financial statements. 36 MBK Partners Fund II, L.P.

Statement of Changes in Partners’ Capital

For the Year Ended December 31, 2019

(stated in United States dollars)

General Limited Note Partner Partners Total

Partners’ capital as at January 1, 2019 68,692,328 343,700,909 412,393,237

Distributions to partners 5 (46,429,346) (198,698,935) (245,128,281)

Net decrease in partners’ capital resulting from operations (1,644,522) (78,706,711) (80,351,233)

Partners’ capital before movement in unrealized carried interest 20,618,460 66,295,263 86,913,723 as at December 31, 2019

Movement of unrealized carried interest allocation 5 (13,574,663) 13,574,663 -

Partners’ capital after carried interest as at December 31, 2019 7,043,797 79,869,926 86,913,723

The accompanying notes are an integral part of these financial statements. 2019 Annual Report 37

Statement of Cash Flows

For the Year Ended December 31, 2019

(stated in United States dollars)

Note 2019 Cash flows from operating activities

Net decrease in partners’ capital resulting from operations (80,351,233)

Adjustments for:

Net realized gains on investments (166,176,349)

Net change in unrealized loss on investments 245,572,696

Proceeds from sale of investments 245,128,281

Net changes in assets and liabilities:

Decrease in accounts receivable and prepayments 973,910

Increase in accounts payable and accrued expenses 307,041

Net cash provided by operating activities 245,454,346

Cash flows from financing activities

Distributions to partners 5 (237,873,925)

Net cash used in financing activities (237,873,925)

Net increase in cash and cash equivalents 7,580,421

Cash and cash equivalents at the beginning of the year 50,130,842

Cash and cash equivalents at the end of the year 57,711,263

The accompanying notes are an integral part of these financial statements. 38 MBK Partners Fund II, L.P.

Notes to Financial Statements

For the Year Ended December 31, 2019

1. Organization

MBK Partners Fund II, L.P. (the “Partnership”) was registered as an exempted limited partnership under the Exempted Limited Partnership Law of the Cayman Islands on April 8, 2008. The General Partner is MBK Partners GP II, L.P. (the “General Partner”), also an exempted limited partnership established under the Exempted Limited Partnership Law of the Cayman Islands. The primary business objective of the Partnership is to make privately negotiated equity and equity-related investments and/or to make secured or unsecured bridge financings, primarily in North Asia. The Partnership has engaged MBK Management, Inc. (the “Investment Manager”), a related party by virtue of common control, to manage the Partnership’s investments. The administration of the Partnership is delegated to State Street Fund Services (Hong Kong) Limited (the “Administrator”).

The term of the Partnership expired on May 22, 2019. The Partnership seeks to proceed within a reasonable period of time to liquidate the assets and wind up the affairs of the Partnership in accordance with the provision of Section 10.02 of the Partnership’s partnership agreement (the “Partnership Agreement”).

2. Summary of significant accounting policies

(a) Basis of preparation The accompanying financial statements are presented using accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The General Partner has determined that the Partnership is an investment company in conformity with U.S. GAAP. Therefore, the Partnership follows the accounting and reporting guidance for investment companies.

Private equity investments are generally purchased through, and held through “special purpose vehicles” which retain direct legal ownership of the underlying asset. The Partnership, an investment company as defined under the AICPA Audit and Accounting Guide (the “Guide”), does not consolidate or equity account for any of its investee companies in which it has control or significant influence as allowed under U.S. GAAP. There is no impact to the Partnership’s net asset value as a result of consolidation or non-consolidation. The accounting policy adopted by the Partnership for its investments are set out in Note 2(c). Special purpose vehicles in which underlying investments are held are named within the Schedule of Investment.

(b) Functional and presentation currency Partners of the Partnership are geographically diversified, with contribution and distribution of capital denominated in United States dollars (“U.S. dollars”). The performance of the Partnership is measured and reported to the partners in U.S. dollars. The General Partner considers the U.S. dollars as the currency that most faithfully represents the economic effects of the underlying transactions, events and condition. The financial statements are presented in U.S. dollars, which is the Partnership’s functional and presentation currency.

(c) Investments in securities, at fair value Investments are stated at fair value as determined by the General Partner. Fair value is defined as the amount at which an investment could be exchanged in a current transaction with market participants, other than in a forced liquidation or sale. These estimated fair values; however, do not necessarily represent the liquidation value or market value of the investments. In determining the fair value of investments, the General Partner uses its good faith and judgement to estimate the amount at which the investment could be exchanged in a current transaction between willing parties, and utilizing the following principles: (i) Unquoted equity securities are stated at fair value. Factors considered by the General Partner when valuing investments include purchase price, prices received in recent significant private placements of securities of the same issuer, prices and earnings multiples of securities of comparable companies engaged in similar businesses, indicative offers from potential purchasers, changes in the financial condition and prospects of the issuer and discounted cash flow models. (ii) Quoted investments are valued at the closing trade price reported on the principal securities exchange or market on which such assets are traded.

(d) Use of estimates The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the period. Actual results could differ from those estimates. 2019 Annual Report 39

Fair value estimates are made at a specific point in time, based on market conditions and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgement and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

(e) Investment income and expenses Investment income and expenses are recorded in the Statement of Operations on the accruals basis. Transaction costs incurred at the acquisition of an investment are included within the cost of that investment. Transaction costs incurred at the disposal of investments are deducted from the proceeds on sale.

(f) Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts.

(g) Income taxes The Partnership has adopted the U.S. Financial Accounting Standards Board Interpretation No. Accounting Standards Codification 740 (“ASC 740”) “Accounting for Uncertainty Income Tax”, which among other matters, requires the Partnership to determine whether a tax position of the Partnership is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement which could result in the Partnership recording a tax liability that would reduce partners’ capital. For the tax positions meeting the more likely than not threshold, the tax amount recognized in the financial statements is measured as the largest benefit that is greater than a fifty percent likelihood of being realized upon ultimate settlement with the relevant taxing authority.

The Partnership recognises interest and, if applicable, penalties for any uncertain tax positions. Interest and penalty expenses will be recorded as a component of income tax expense.

(h) Allocation of profits and losses Net profits and losses are allocated to the partners in accordance with the Partnership Agreement. Other income and expense items, excluding management fees, are allocated among partners in proportion to their respective capital commitments.

(i) Carried interest allocation Realized and unrealized carried interests are allocated to the General Partner in accordance with the Partnership Agreement and are recognised in the Statement of Changes in Partners’ Capital. The terms of carried interest allocation are set out in Note 5 (b).

(j) Unused commitments Unused commitments from the partners is not shown on the Statement of Assets and Liabilities as the Partnership has no unconditional right to receive cash as long as it has not issued capital calls for investments and expense.

(k) Foreign currency Investments denominated in foreign currencies have been converted to the functional currency at the foreign exchange rate quoted on the last day of the period.

3. Fair value measurements

Investments reflect the Partnership’s allocable share of the estimated fair value of the equity and debt instruments. All investments are initially recognised at cost, being the fair value of the consideration paid and includes all acquisition charges associated with the investment. Investments are subsequently measured at fair value.

The Partnership adopts ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”) (formerly known as Statement of Financial Accounting Standards No. 157 “Fair Value Measurements”) which establishes a fair value hierarchy that prioritises the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). 40 MBK Partners Fund II, L.P.

The three levels of the fair value hierarchy under ASC 820 are as follows:

Level 1 Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Partnership has the ability to access at the measurement date; Level 2 Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active; Level 3 Inputs that are unobservable.

Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the General Partner. The General Partner considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, provided by multiple, independent sources that are actively involved in the relevant market. The categorization of an investment within the hierarchy is based upon the pricing transparency of the investment and does not necessarily correspond to the General Partner’s perceived risk of that investment.

Transaction costs are initially capitalized as a cost of investment at the time of making the investment. Such transaction costs are subsequently expensed for fair value measurement purposes as transaction costs are not an attribute of the asset and therefore not included in the measurement of fair value.

As at December 31, 2019, the Partnership had one equity investment. This equity investment has been classified within level 3, as the investment is a privately issued securities investment and unobservable inputs have been considered in the valuation techniques used to measure its fair value. The General Partner may use one or more valuation techniques (e.g., the market approach and the income approach for which sufficient and reliable data is available). Within level 3, the use of the market approach generally consists of using comparable market transactions, while the use of the income approach generally consists of the net present value of estimated future cash flows, adjusted as appropriate for liquidity, credit, market and/or other risk factors. The selection of appropriate valuation techniques may be affected by the availability of relevant inputs as well as the relative reliability of the inputs. In some cases, one valuation technique may provide the best indication of fair value while in other circumstances, multiple valuation techniques may be appropriate. The results of the application of various techniques may not be equally representative of fair value, due to factors such as assumptions made in the valuation.

In some situations, the General Partner may determine it appropriate to evaluate and weigh the results, as appropriate, to develop a range of possible values, with the fair value based on the General Partner’s assessment of the most representative point within the range.

The inputs used by the General Partner in estimating the value of level 3 investments include the original transaction price, recent transactions in the same or similar instruments, completed or pending third-party transactions in the underlying investment or comparable issuers, subsequent rounds of financing, recapitalizations and other transactions across the capital structure, offerings in the equity or debt capital markets, and changes in financial ratios or cash flows. Level 3 investments may also be adjusted to reflect illiquidity and/or non- transferability, with the amount of such discount estimated by the General Partner in the absence of market information.

The fair value measurement of a level 3 investment does not include transaction costs that may have been capitalized as part of the investment’s cost basis. Assumptions used by the General Partner due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Partnership’s results of operations.

The following table presents the investment carried on the Statement of Assets and Liabilities by level within the valuation hierarchy as at December 31, 2019.

Fair value as at December 31, 2019 (US$) Level 1 Level 2 Level 3 Total

Investment:

Common stocks - - 86,600,885 86,600,885

Total - - 86,600,885 86,600,885 2019 Annual Report 41

The following table includes a roll-forward of the amount for the year ended December 31, 2019 for the investment classified within level 3. The classification of an investment within level 3 is based upon the significance of the unobservable inputs to the overall fair value measurement.

Fair value measurements using level 3 inputs

Investment - common stocks (US$) Balance as at January 1, 2019 131,393,202

Net change in unrealized loss (44,792,317)

Balance at December 31, 2019 86,600,885

All net changes in unrealized losses in the table above are reflected in the Statement of Operations.

The following table summarizes quantitative information about the valuation techniques and the significant unobservable inputs used for level 3 investment as at December 31, 2019:

Investment Fair value Valuation Unobservable assets (US$) technique(s) inputs Note Range Market comparable Enterprise value/ Common stocks 86,600,885 (a) 20.35 companies LTM EBITDA multiple

(a) Represents amounts used when the General Partner has determined that market participants would use such multiples when pricing the investments. LTM means last twelve months, and EBITDA means earnings before interest taxes depreciation and amortization.

4. Financial instruments and associated risks

The Partnership may be subject to various risk factors, including market, credit, liquidity and currency risk.

(a) Market risk Market risks associated with the investment held by the Partnership include deteriorations in value due to macroeconomic factors such as changes in the prevailing level of interest rates and events affecting the economy as a whole as well as factors specific to the issuer of the instrument. Market risk represents the potential loss in fair value of investments caused by movements in market variables, such as interest rates, foreign exchange rates and equity prices.

Due to the long term, specialised nature of the Partnership’s investment objective, the General Partner does not consider the above risks to be of extraordinary significance to the Partnership over the short term. The General Partner regularly monitors these risks in conjunction with its overall monitoring of the Partnership’s investment and considers their impact on their value when determining fair value estimates.

(b) Credit risk Credit risk is the risk that a counterparty will be unable or unwilling to meet its commitments entered into with the Partnership. The Partnership’s credit risk exposures arise from its cash at bank. Cash balances are placed with reputable financial institutions with credit rating of A+ according to the S&P rating and are considered to have minimum credit risks.

(c) Liquidity risk Liquidity risks associated with above instruments result from the possibility that due to the private and illiquid nature of the instruments held, the Partnership may not be able to liquidate its position in any of the instruments in a timely manner. The Partnership manages liquidity risks by the rights to call committed capital from the partners in order to meet any Partnership obligations such as investment acquisitions or settlement fees.

The Partnership may be exposed to liquidity risk if the Partners are not able to meet their capital obligations and commitments as they fall due. The General Partner monitors the partners’ financial status on a regular basis to minimise the liquidity risk.

(d) Currency risk The Partnership holds monetary assets and liabilities denominated in currencies other than U.S. dollars, the Partnership’s functional currency. The Partnership may be exposed to currency risk, as the value of the investments denominated in other currencies will fluctuate due to changes in exchange rates. The General Partner monitors the exchange rate fluctuation on a regular basis and may enter into foreign exchange contracts to minimise the currency risk. 42 MBK Partners Fund II, L.P.

5. Partners’ capital

(a) Capital commitments Each partner has committed to contribute capital to the Partnership. The partners’ obligations to make capital contribution for investments based on their remaining capital commitments to the Partnership expired on December 31, 2013.

As of December 31, 2019, the committed capital of the Limited Partners and the General Partner is US$1,500,000,000 in total, of which US$1,449,427,018 has been funded and US$50,572,982 remained unfunded.

(b) Allocations and distributions All items of income, gain, loss and deduction will be allocated to the separate capital account established and maintained by the Partnership for each partner on a quarterly basis.

Distributions shall be made to the partners in accordance with the following provisions:

1. 100% to the Limited Partners and the General Partner’s limited partner interest (the “Capital Partners”) in proportion to their respective (i) aggregate capital contributions to the disposed investments and partnership expenses allocable to the disposed investments; (ii) plus any write-down on remaining investments (collectively as the “Return Amount”);

2. 100% to the Capital Partners until such time that they receive a 9% cumulative compound return per annum on the Return Amount; 3. 20% to the Capital Partners and 80% to the General Partner until such time that the General Partner receives 20% of the cumulative distributions pursuant to (2) above and this (3); and 4. Thereafter, 80% to the Capital Partners and 20% to the General Partner.

During the year ended December 31, 2019, there were distributions of US$198,698,935 and US$46,429,346 to the Limited Partners and the General Partner respectively. Of the distributions payable during the year ended December 31, 2019, US$237,873,925 had been paid to the Partners. US$7,254,356 remains payable as at December 31, 2019. The distributions to the General Partner comprised of US$5,016,962 in its capacity as a limited partner, which was paid in cash, and US$41,412,384 of realized carried interest to the General Partner of which US$35,050,017 was paid in cash and US$6,362,367 was transferred to an escrow account.

If the partners were to have the Partnership liquidated by using the reported fair value of all assets and liabilities as of December 31, 2019, the accumulated carried interest (“unrealized carried interest”) of US$5,264,990 would have been allocated to the General Partner. The movement in the unrealized carried interest during the year is set out in the table below:

2019 (US$) Unrealized carried interest allocated to General Partner as at January 1 60,252,037

Distribution of realized carried interest (41,412,384)

Change in unrealized carried interest (13,574,663)

Unrealized carried interest allocated to General Partner as at December 31 5,264,990

6. Capital acquisitions

During the year ended December 31, 2019, the Partnership held the investment through special purpose vehicles. As of December 31, 2019, the special purpose vehicles held by the Partnership were:

Troy Capital II Limited, incorporated in Malta, 100% owned. MBK Partners II, Inc., incorporated in Korea, 99.22% owned.

7. Management fees

The Partnership pays to the Investment Manager and its affiliates, a semi-annual management fee in advance equal to 1.5% per annum of the aggregate actively invested capital contributions of the Limited Partners, except for the Limited Partners who are exempted in accordance with the terms of the Partnership Agreement. The management fees can be offset by 80% of transaction fees to related parties, in accordance with the terms of the Partnership Agreement. Please refer to Note 8 for details.

For the year ended December 31, 2019, the Partnership did not incur any management fees after offsetting transaction fees. 2019 Annual Report 43

8. Related party transactions

For the year ended December 31, 2019, the Partnership and its special purpose vehicles did not incur any transaction fees to related parties. The details of management fees charged by the Investment Manager, an affiliate of the General Partner, are set out in Note 7.

Partnership expenses amounted to US$229,863 during the year. As at December 31, 2019, reimbursable expenses payable to the Investment Manager amounting to US$96,877 was included within accounts payable and accrued expenses in the Statement of Assets and Liabilities.

As at December 31, 2019, the distributions payable in the Statement of Assets and Liabilities includes the carried interest due to the General Partner held in an escrow account of US$57,500,696, capital distributions payable from the Partnership to a Limited Partner of US$4,514 netted with capital contribution receivable from the General Partner of US$794.

For the year ended December 31, 2019, a limited partner was an affiliate of the General Partner.

9. Taxation

The Partnership itself is not subject to U.S. Federal income taxes; each partner is individually liable for income taxes, if any, on its share of the Partnership’s net taxable income. Interest, dividends and other income realized by the Partnership from non-U.S. sources and capital gains realized on the sale of securities of non-U.S. issuers may be subject to withholding and other taxes levied by the jurisdiction in which the income is sourced.

From the commencement of operations, the management began assessing whether a tax position of the Partnership is more-likely-than- not to be sustained upon examination by applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement which could result in the Partnership recording a tax liability that would reduce partners’ capital.

The General Partner has analysed the positions held during the period from September 10, 2012 (date of formation) to December 31, 2019 in its major jurisdictions, to determine whether or not there are uncertain tax positions that require financial statement recognition. Based on this review, the General Partner has determined the major tax jurisdictions to be where the Partnership is organised and where the Partnership makes investments; however, no reserves for uncertain tax positions were required to have been recorded. The General Partner is not aware of any tax positions of the Partnership for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially within the next twelve months. As a result, no other income tax liability or expense has been recorded in the accompanying financial statements.

The Partnership recognises interest and, if applicable, penalties for any uncertain tax positions. Interest and penalty expense will be recorded as a component of income tax expense. No interest or penalties were recorded during the year ended December 31, 2019 or accrued for as of December 31, 2019.

10. Financial highlights

The following represents financial highlights attributable to the Limited Partners.

2019 Ratio of expenses before unrealized carried interest to average partners’ net assets 0.60%

Ratio of net investment loss before unrealized carried interest to average partners’ net assets (0.60%)

Ratio of expenses after unrealized carried interest to average partners’ net assets (8.10%)

Ratio of net investment loss after unrealized carried interest to average partners’ net assets 8.10%

Internal rate of return (“IRR”)3 19.69%

3 IRR is net of all management fees and unrealized carried interest.

Ratio of partners’ contributions to partners’ commitments: 44 MBK Partners Fund II, L.P.

Contributed capital (US$) Committed capital (US$) % of committed capital received

General Partner 4 26,969,473 30,700,000 87.85%

Limited Partners 1,422,457,545 1,469,300,000 96.81%

4 The amount includes capital contributed through a subsidiary of the Partnership.

11. Contingencies

In the normal course of business, the Partnership enters into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Partnership’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Partnership that have not yet occurred but expects the risk of having to make any payments or loss under these general business indemnifications to be remote.

12. New accounting pronouncements

In August 2018, FASB announced Accounting Standards Update 2018-13 - Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. ASU 2018-13 modifies the disclosure requirements on fair value measurements in ASC 820 as follows.

The following disclosure requirements were removed from ASC 820: 1. The amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy 2. The policy for timing of transfers between levels 3. The valuation processes for Level 3 fair value measurements 4. For nonpublic entities, the changes in unrealized gains and losses for the period included in earnings for recurring Level 3 fair value measurements held at the end of the reporting period.

The following disclosure requirements were modified in ASC 820: 1. In lieu of a rollforward for Level 3 fair value measurements, a nonpublic entity is required to disclose transfers into and out of Level 3 of the fair value hierarchy and purchases and issues of Level 3 assets and liabilities. 2. For investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly. 3. The amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date.

The Partnership has made the decision not to early adopt ASU 2018-13 for the year ended December 31, 2019.

There are no other accounting developments which are expected to have a significant impact on the Partnership’s financial condition or results of operations.

13. Subsequent events

The Partnership applies the fair value model to measure its investment. As at 31 December 2019, the total fair value of the Partnership’s investment amounted to US$86,600,885 (Note 3), of which Level 3 investment amounted to US$86,600,885. With the COVID-19 outbreak occurring after the year end, it may potentially impact the significant estimates used in the valuation of Level 3 investment in 2020. The General Partner will continue to monitor the situation and its impact on the Partnership.

The General Partner has evaluated subsequent events occurring through March 27, 2020, being the date that these financial statements were available to be issued, and determined that no other subsequent events occurred that would require recognition or additional disclosure in these financial statements.

14. Approval of financial statements

The financial statements were approved by the General Partner on March 27, 2020. www.mbkpartnerslp.com