VALUE PARTNERS FUND SEMI-ANNUAL 2019 REPORT For the six months ended 31 December 2019 Value Partners Hong Kong Limited 43rd Floor, The Center 99 Queen’s Road Central, Hong Kong Tel: (852) 2880 9263 Fax: (852) 2565 7975 Email: [email protected] Website: www.valuepartners-group.com

In the event of inconsistency, the English text of this Semi-Annual Report shall prevail over the Chinese text. This report shall not constitute an offer to sell or a solicitation of an offer to buy units in any of the funds. Subscriptions are to be made only on the basis of the information contained in the explanatory memorandum, as supplemented by the latest semi-annual and annual reports. VALUE PARTNERS TAIWAN FUND (A Cayman Islands Unit Trust)

CONTENTS

Pages

General information 2 - 3

Manager’s report 4 - 10

Statement of financial position (unaudited) 11

Investment portfolio (unaudited) 12 - 13

Investment portfolio movements (unaudited) 14

SEMI-ANNUAL REPORT 2019 For the six months ended 31 December 2019 1 VALUE PARTNERS TAIWAN FUND (A Cayman Islands Unit Trust)

GENERAL INFORMATION

Manager Legal Advisors Value Partners Hong Kong Limited With respect to Cayman Islands law 43rd Floor, The Center Maples and Calder 99 Queen’s Road Central P.O. Box 309, Ugland House Hong Kong Grand Cayman, KY1-1104 Cayman Islands Directors of the Manager Dato’ Seri Cheah Cheng Hye With respect to Taiwan law Mr. So Chun Ki Louis Russin & Vecchi Mr. Ho Man Kei, Norman Bank Tower, 9th Floor 205 Tun Hwa North Road Trustee, Registrar, Administrator and Taipei, Taiwan, R.O.C. Principal Office HSBC Trustee (Cayman) Limited With respect to Hong Kong and International law Principle address: Deacons Strathvale House 5th Floor, Alexandra House 90 North Church Street 18 Chater Road Central George Town Hong Kong Grand Cayman KY1-1106 Auditor Cayman Islands PricewaterhouseCoopers P.O. Box 258 GT Registered address: Stravale House P.O. Box 309 South Church Street Ugland House George Town Grand Cayman Grand Cayman KY1-1104 KY1-1104 Cayman Islands Cayman Islands

Custodian, Registrar’s Agent and Information available from: Administrator’s Agent Value Partners Hong Kong Limited HSBC Institutional Trust Services (Asia) 43rd Floor, The Center Limited 99 Queen’s Road Central 1 Queen’s Road Central Hong Kong Hong Kong

Investor hotline : (852) 2143 0688 Fax : (852) 2565 7975 Email : [email protected] Website : www.valuepartners-group.com

SEMI-ANNUAL REPORT 2019 2 For the six months ended 31 December 2019 VALUE PARTNERS TAIWAN FUND (A Cayman Islands Unit Trust)

GENERAL INFORMATION (Continued)

Recent awards and achievements

Corporate awards

2019 • Asia Asset Management 2019 Best of the Best Awards China: Best WFOE House – Asia Asset Management

2018 • I&M Professional Investment Awards 2018 House Performance Awards: Offshore China Equity (10-Year) – Insights and Mandate

• Benchmark Fund of the Year Awards 2018, Hong Kong Greater China Equity House: Outstanding Achiever – Benchmark

• Benchmark Fund of the Year Awards 2018, Hong Kong Asia ex-Japan Equity House: Best-In-Class – Benchmark

2017 • Benchmark Fund of the Year Awards 2017, Hong Kong Manager of the Year - Greater China Equity (Outstanding Award) Dato’ Seri Cheah Cheng Hye and Mr. Louis So (Value Partners’ Co-CIOs) – Benchmark

• AsiaHedge Awards 2017 Management Firm of the Year: Value Partners – AsiaHedge

SEMI-ANNUAL REPORT 2019 For the six months ended 31 December 2019 3 VALUE PARTNERS TAIWAN FUND (A Cayman Islands Unit Trust)

MANAGER'S REPORT

Performance review

During the second half of 2019, Value Partners Taiwan Fund (the “Fund”) gained 18.3% in USD terms. For reference, the Taiwan Stock Exchange Index (“TWSE”) rose 19.9% while the MSCI Taiwan Index increased by 24.1% over the same period, respectively. On a year-to-date basis, the Fund was up 27.2%. For reference, the aforementioned indices were up 32.2% and 36.4% over the same period, respectively.

Increasing resilience amid volatility

While 2019 was the year of volatility driven by the US-China trade developments, the Taiwan equity market is showing resilience. While the market experienced a strong start at the beginning of the year as a result of trade optimism, the Huawei trade ban in May intensified the US-China trade tensions and triggered significant market volatility along with trade developments. Nonetheless, the market was turning resilient to the trade standoffs in the second half of the year on the back of China’s aggressive pursuit of semiconductor development and the continuous supply chain reshuffle efforts. With solid technology leadership in semiconductor and electronic parts manufacturing, many Taiwanese companies benefitted from the trade dispute and saw a stronger outlook for orders. The supply chain reshuffle also helped mitigate the negative tariff impact. The market thus remained solid despite the additional tariff announced in August and further rallied in the fourth quarter on the accelerating 5G networking builds and the initial trade talk breakthrough. On December 13th, US and China tentatively reached the phase one trade agreement that US will indefinitely postpone the new 15% tariffs (previously set to start from December 15th) on US$160 billion of Chinese imports including , laptop and other key consumer electronics.

SEMI-ANNUAL REPORT 2019 4 For the six months ended 31 December 2019 VALUE PARTNERS TAIWAN FUND (A Cayman Islands Unit Trust)

MANAGER’S REPORT (Continued)

Reviving growth in Taiwan

For the full-year 2019, overall exports declined 1.4%1 YoY to US$329.3 billion with the technology sector cushioning the macro headwinds. Technology related exports made up nearly half of total exports and had resumed growth momentum since mid-2019 on back of increasing supply chain flexibility and growing 5G/ semiconductor demand. Total exports thus returned back to positive growth in the fourth quarter, up 1.9%1 YoY vs. 3.1%1 YoY decline in the first three quarters. With improving exports, the Taiwanese government revised up 2019 full-year GDP growth forecast twice in August and November to 2.6%2 YoY from 2.2%2 YoY (estimated in May). Looking into 2020, the government expects improving export outlook, continuing capital investments on advanced technology and capacity reshoring. The government now forecasts 2020 GDP growth to be 2.7%2 YoY and the real exports of goods and services to grow by 3.1%2 year-on-year.

Portfolio update and outlook

In 2019, the Taiwan equity market closed out the best year since 2009 with the technology sector strength outrunning the macro headwinds. While the US-China trade disputes did bring volatility to the supply chain, the technology sector experienced a strong rally during the year (sector share price +51.0%), supported by decent fundamentals on 5G upcycle and the efforts of supply chain reshuffle.

SEMI-ANNUAL REPORT 2019 For the six months ended 31 December 2019 5 VALUE PARTNERS TAIWAN FUND (A Cayman Islands Unit Trust)

MANAGER’S REPORT (Continued)

Portfolio update and outlook (Continued)

The Fund went up by 27.2% throughout 2019 while the MSCI Taiwan Index and the TWSE index were up 36.4% and 32.2% respectively. We switched out from last year end’s more defensive positioning in telecom stocks and increased our positions in bottom-up technology sector names. The switch was still a bit late while the market looked through the risk of corporate earnings downside earlier than our expectation. We hold up to 10% weighting in TSMC as our top holding (due to the fund’s single stock limit) and the stock rallied 57% throughout 2019 driven by stronger 5G demand and more aggressive China semiconductor developments, contributing the most to the fund’s gain during the year. We continue to like TSMC’s solid position and technology leadership and believe the company will consistently deliver 20-30% return on equity and increase its cash dividend payout in the coming years. The fund’s weighting in TSMC, however, is lower than the indexes’ 21-34% weightings and this was a drag for less gain relatively in 2019.

Having said that, many of our non-index stock picks performed well this year. Tripod is a leading supplier of multilayer rigid printed circuit board (PCB) with diversified exposure in server/ networking, smartphone, automobile and memory. The company’s share price rose over 60% during the year on continuous margin beat. We have invested in this quality stock since the beginning of the year and continued to hold it as one of our top five holdings. The company consistently delivered solid revenue growth and margin expansions throughout cycles given its diversified product portfolio and strong knowledge in process control. We like its sustainable earnings momentum and decent shareholder return with more than 5% cash dividend yield.

SEMI-ANNUAL REPORT 2019 6 For the six months ended 31 December 2019 VALUE PARTNERS TAIWAN FUND (A Cayman Islands Unit Trust)

MANAGER’S REPORT (Continued)

Portfolio update and outlook (Continued)

During the fourth quarter of 2019, we have taken profit on some technology positions due to rich valuations after the share price rally. We are mindful on some large cap companies’ relative high valuations and would like to increase positions in the names which are still trading at an attractive valuation with solid earnings drivers. We have been switching to some overlooked technology and industrial names. Looking into 2020, the tentative US-China trade agreements and the gradual recovery of global demand should support Taiwan’s export-oriented economy. Meanwhile, we expect Taiwanese companies to deliver strong fundamentals in 2020, benefiting from the increasing supply chain flexibility (after reshuffle), the government’s supportive stance and the ongoing big trends such as 5G, IoT and China semiconductor developments. We would stick to valuation discipline and continue to look for companies which are overlooked by the market.

Value Partners Hong Kong Limited 21 February 2020

1. Source: Ministry of Finance, R.O.C. (Taiwan), 7 January 2020 2. Source: National Statistics, R.O.C. (Taiwan)

All performance figures are sourced from HSBC Institutional Trust Services (Asia) Limited and Bloomberg (Data computed in USD terms on NAV-to-NAV basis with dividends reinvested) as at 31 December 2019. Performance data is net of all fees. All index performance are for reference only.

Individual stock performance is not indicative of fund performance.

The views expressed are the views of Value Partners Hong Kong Limited only and are subject to change based on market and other conditions. The information provided does not constitute investment advice and it should not be relied on as such. All materials have been obtained from sources believed to be reliable, but their accuracy is not guaranteed. This material contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.

SEMI-ANNUAL REPORT 2019 For the six months ended 31 December 2019 7 VALUE PARTNERS TAIWAN FUND (A Cayman Islands Unit Trust)

MANAGER’S REPORT (Continued)

5 biggest holdings of securities as at 31 December 2019

Valuation Stock Industry (2020 Estimates) Remarks

Hon Hai Precision Technology hardware Price: TWD90.80 Hon Hai Precision Industry is a leading electronics Industry Co Ltd & equipment P/E: 10.0x manufacturing service provider with nearly one million (Code: 2317 TT) P/B: 0.9x employees globally. The company designs and Yield: 4.7% manufactures , PCs, printers, TVs, game Market cap: consoles and networking products for many global giants, US$42.1 billion such as Apple, Dell, Hewlett-Packard, Sony, Nokia and Cisco Systems. Hon Hai has aggressively moved its manufacturing sites from China’s coastal areas to lower- cost inland sites in previous years and further enhanced its cost competitiveness over its peers.

Largan Precision Technology hardware Price: TWD5000.00 designs and manufactures lens for Co Ltd & equipment P/E: 18.9x electronic products and automobile. The company holds (Code: 3008 TT) P/B: 4.4x leading position and enjoys more than 50% market Yield: 1.9% share in high specification smartphone lens market. As Market cap: camera function becomes incrementally important for US$22.4 billion smartphone models to differentiate in the market, we expect the spectacle of smartphone camera lenses to continue upgrading and the manufacturing difficulties of these high spectacle lenses to increase significantly. We expect the company to deliver strong earnings growth in the coming years, driven by both average-selling-price (ASP) upgrade on spectacle enhancement and volume increase from increasing adoption of multiple cameras in a smartphone.

MediaTek Inc Semiconductors Price: TWD443.50 MediaTek is a Taiwanese integrated circuit (IC) design (Code: 2454 TT) & semiconductor P/E: 19.7x company with broad product offerings. The company is equipment P/B: 2.1x a market leader in developing tightly-integrated, power- Market cap: Yield: 2.9% efficient systems-on-chip (SoC) for mobile devices, US$23.6 billion home entertainment products, networking equipment and other Internet of Things (IoT)-related applications. We expect the company to deliver strong earnings growth in the coming years, driven by 5G product launches and enhanced mobile margin profile. We also think the company is well positioned to offer total solution chips to address the increasing IoT applications in the 5G era.

SEMI-ANNUAL REPORT 2019 8 For the six months ended 31 December 2019 VALUE PARTNERS TAIWAN FUND (A Cayman Islands Unit Trust)

MANAGER’S REPORT (Continued)

5 biggest holdings of securities as at 31 December 2019 (Continued)

Valuation Stock Industry (2020 Estimates) Remarks

Taiwan Semiconductors Price: TWD331.00 Taiwan Semiconductor Manufacturing is a world- Semiconductor & semiconductor P/E: 20.8x class independent semiconductor foundry. It provides Manufacturing equipment P/B: 4.7x integrated circuit (IC) design houses with integrated Co Ltd Yield: 3.1% services for process design, wafer manufacturing and (Code: 2330 TT) testing. As a global leader with more than 50% share of the outsourcing market, the company has consistently Market cap: outperformed competitors in terms of technology and US$286.9 billion profitability. We think the company is well-positioned to continue to benefit from the growing IC manufacturing outsourcing market and the rising demand for the internet of things trend, AI chips and new application areas.

Tripod Technology Technology, hardware Price: TWD125.50 Tripod Technology is a leading printed circuit board Corp & equipment P/E: 10.7x (PCB) manufacturer in Taiwan and is also a global player (Code: 3044 TT) P/B: 1.7x in terms of offering PCB solutions. We like its decent Yield: 5.9% management structure and approach as well as solid Market cap: cost-control execution, which help to maintain margin US$2.2 billion stability and solid continuous earnings growth.

Note: The above investments made up 27.94% of Value Partners Taiwan Fund as at 31 December 2019. The stock prices are based on the closing of 31 December 2019.

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

SEMI-ANNUAL REPORT 2019 For the six months ended 31 December 2019 9 VALUE PARTNERS TAIWAN FUND (A Cayman Islands Unit Trust)

MANAGER’S REPORT (Continued)

Value Partners Taiwan Fund NAV per unit = US$24.90 (as at 31 December 2019) Performance since launch From 3 March 2008 to 31 December 2019

160% Value Partners Taiwan Fund +149.0% 140% Taiwan Stock Exchange Weighted Index (USD) +131.9% MSCI Taiwan Index (USD) 120% +113.4% 100%

80%

60%

40%

20%

0%

-20%

40%

60%

80% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

SEMI-ANNUAL REPORT 2019 10 For the six months ended 31 December 2019 VALUE PARTNERS TAIWAN FUND (A Cayman Islands Unit Trust)

STATEMENT OF FINANCIAL POSITION (UNAUDITED) AS AT 31 DECEMBER 2019

31.12.2019 30.06.2019 US$ US$

ASSETS Financial assets at fair value through profit or loss 74,948,742 64,148,558 Amounts receivable on sales of investments 2,624,924 80,182 Amounts receivable on issue of units 72 2,800 Dividends and interest receivables 45,433 281,434 Margin deposit 3,181 1,859 Bank balances 981,939 8,950,426

Total assets 78,604,291 73,465,259

Liabilities Amounts payable on purchases of investments – 6,212,175 Amounts payable on redemption of units – 2,000 Management fees payable 85,472 62,205 Performance fees payable 1,716,843 – Accruals and other payables 85,171 59,058

Total liabilities 1,887,486 6,335,438

Net assets attributable to unitholders 76,716,805 67,129,821

Net asset value per unit with 3,081,162.29 (30.06.2019: 3,189,098.83) units outstanding 24.90 21.05

SEMI-ANNUAL REPORT 2019 For the six months ended 31 December 2019 11 VALUE PARTNERS TAIWAN FUND (A Cayman Islands Unit Trust)

INVESTMENT PORTFOLIO (UNAUDITED) AS AT 31 DECEMBER 2019

% of net Holdings Fair value assets US$ FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Listed Equity Securities

Taiwan Advanced Wireless Semiconductor Co 100,000 332,681 0.43 All Ring Tech Co Ltd 412,000 570,299 0.74 Asia Vital Components Co Ltd 1,787,000 2,488,542 3.24 Axiomtek Co Ltd 547,000 1,047,966 1.37 Cathay Financial Holding Co Ltd 666,000 947,500 1.24 Chicony Electronics Co Ltd 514,000 1,529,532 1.99 Chicony Power Technology Co Ltd 1,256,000 2,637,270 3.44 China General Plastics Corp 1,208,000 840,109 1.10 Chipbond Technology Corp 1,070,000 2,404,133 3.13 CTBC Financial Holding Co Ltd 3,733,880 2,796,493 3.65 Elite Material Co Ltd 585,000 2,679,673 3.49 Flytech Technology Co Ltd 315,000 758,313 0.99 362,000 1,207,938 1.58 Fusheng Precision Co Ltd 511,000 3,066,837 4.00 Genius Electronic Optical Co Ltd 129,000 2,531,822 3.30 Ginko International Co Ltd 323,000 2,289,516 2.98 Holtek Semiconductor Inc 448,000 1,029,059 1.34 Hon Hai Precision Industry Co Ltd 1,291,000 3,919,381 5.11 King Slide Works Co Ltd 160,000 1,936,573 2.52 Kinik Company 639,000 1,472,060 1.92 Largan Precision Co Ltd 19,000 3,176,355 4.14 MediaTek Inc 209,000 3,099,169 4.04 Merida Industry Co Ltd 363,000 2,142,184 2.79 Merry Electronics Co Ltd 26,000 145,611 0.19 Nan Ya Printed Circuit Board Corp 25,000 38,409 0.05 Nova Technology Corp/Taiwan 111,000 616,079 0.80 On-Bright Electronics Incorporated 246,000 1,760,168 2.29 Corp 951,000 2,174,913 2.84 Posiflex Technology Inc 84,000 296,304 0.39

SEMI-ANNUAL REPORT 2019 12 For the six months ended 31 December 2019 VALUE PARTNERS TAIWAN FUND (A Cayman Islands Unit Trust)

INVESTMENT PORTFOLIO (UNAUDITED) (Continued) AS AT 31 DECEMBER 2019

% of net Holdings Fair value assets US$ FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Continued)

Listed Equity Securities (Continued)

Taiwan (Continued) President Chain Store Corp 58,000 589,531 0.77 Primax Electronics Ltd 80,000 169,584 0.22 Realtek Semiconductor Corp 188,000 1,477,172 1.93 Sensortek Technology Corp 3,000 77,034 0.10 Shin Zu Shing Co Ltd 87,000 375,244 0.49 Sigurd Microelectronics Corp 1,318,865 1,635,986 2.13 Sitronix Technology Corp 268,000 1,500,911 1.96 Taiwan Secom Co Ltd 27,000 80,164 0.10 Taiwan Semiconductor Manufacturing Co Ltd 679,000 7,514,553 9.80 Taiwan Union Technology Corp 341,000 1,687,413 2.20 Topco Scientific Co Ltd 366,000 1,291,038 1.68 Tripod Technology Corp 887,000 3,721,969 4.85 TTFB Co Ltd 98,000 896,167 1.17 Uni-President Enterprises Corp 848,000 2,103,803 2.74 Wah Lee Industrial Corp 353,000 666,851 0.87 Wistron NeWeb Corp 485,838 1,226,433 1.60

Total investments, net 74,948,742 97.70

Total investments, at cost (inclusive of transaction cost) 64,460,736

SEMI-ANNUAL REPORT 2019 For the six months ended 31 December 2019 13 VALUE PARTNERS TAIWAN FUND (A Cayman Islands Unit Trust)

INVESTMENT PORTFOLIO MOVEMENTS (UNAUDITED) FOR THE SIX MONTHS ENDED 31 DECEMBER 2019

% of net assets 31.12.2019 30.06.2019

Listed Equity Securities Taiwan 97.70 94.08 Hong Kong – 0.88 United States – 0.60

Total investments 97.70 95.56

SEMI-ANNUAL REPORT 2019 14 For the six months ended 31 December 2019

The sales prospectus or the terms of contract or the Placement Memorandum, the

Articles of Association or the Limited Partnership Agreement or the Trust deed as well as the annual and semi-annual reports of the Fund may be obtained free of charge from the Swiss Representative. In respect of the Shares distributed in Switzerland to

Qualified Investors, place of performance and jurisdiction is at the registered office of the Representative.

Swiss Representative: FIRST INDEPENDENT FUND SERVICES LTD, Klausstrasse 33,

CH-8008 Zurich.

Swiss Paying Agent: NPB Neue Privat Bank AG, Limmatquai 1, CH-8024 Zurich.