惠理大中華高收益債券基金 VALUE PARTNERS GREATER CHINA HIGH YIELD INCOME FUND 半年度報告2014 SEMI-ANNUAL REPORT 2014 截至二零一四年六月三十日止六個月 For the six months ended 30 June 2014 Value Partners Hong Kong Limited 9th Floor, Nexxus Building 41 Connaught Road Central, Hong Kong Tel: (852) 2880 9263 Fax: (852) 2565 7975 Email: [email protected] Website: www.valuepartners.com.hk In the event of inconsistency, the English text of this Semi-Annual Report shall prevail over the Chinese text. VALUE PARTNERS GREATER CHINA HIGH YIELD INCOME FUND (A Cayman Islands Unit Trust) CONTENTS Pages General information 2 - 3 Manager’s report 4 - 6 Statement of financial position (unaudited) 7 - 8 Investment portfolio (unaudited) 9 - 19 Investment portfolio movements (unaudited) 20 SEMI–ANNUAL REPORT 2014 1 For the six months ended 30 June 2014 1 VALUE PARTNERS GREATER CHINA HIGH YIELD INCOME FUND (A Cayman Islands Unit Trust) GENERAL INFORMATION Directors Registered Office Mr Tse Wai Ming, Timothy P.O. Box 484 Mr Mo Chun Wah, Jonathan HSBC House (appointed on 3 July 2013) 68 West Bay Road Grand Cayman KY1-1106 Manager Cayman Islands Value Partners Hong Kong Limited 9th Floor, Nexxus Building Auditor 41 Connaught Road Central PricewaterhouseCoopers Hong Kong P.O. Box 258 George Town Directors of the Manager Grand Cayman, KY1-1104 Dato’ Cheah Cheng Hye Cayman Islands Mr Ho Man Kei, Norman Mr So Chun Ki Louis Legal Advisors With respect to Cayman Islands law Administrator Walkers HSBC Trustee (Cayman) Limited Walker House P.O. Box 484 87 Mary Street, George Town HSBC House Grand Cayman KY1-9001 68 West Bay Road Cayman Islands Grand Cayman KY1-1106 Cayman Islands With respect to Hong Kong and International law Custodian and Administrator’s Agent Deacons HSBC Institutional Trust Services (Asia) Limited 5th Floor, Alexandra House 1 Queen’s Road Central 18 Chater Road Central Hong Kong Hong Kong SEMI–ANNUAL REPORT 2014 2 For the six months ended 30 June 2014 VALUE PARTNERS GREATER CHINA HIGH YIELD INCOME FUND (A Cayman Islands Unit Trust) GENERAL INFORMATION (Continued) Recent awards and achievements Corporate awards 2014 • 2014 Top 100 Hedge Fund Value Partners was ranked as Asia’s largest hedge fund manager, and 58th worldwide – Institutional Investor’s Alpha Magazine, May 2014 • Investment Performance Awards 2014 Asian Fund House of the Year – AsianInvestor • The Asset Triple A, Investor and Fund Management Awards 2014 Asset Management Company of the Year (Hong Kong) – The Asset 2013 • 2013 - Asia Hedge Fund 25 Value Partners was ranked no. 1 in Asia Hedge Fund 25 for 4 consecutive years (since 2010) – Institutional Investor’s Alpha Magazine, September 2013 • 2013 Outstanding Company Awards Outstanding Fund Management Business (Financial Sector) – Hong Kong’s Wen Wei Po SEMI–ANNUAL REPORT 2014 3 For the six months ended 30 June 2014 3 VALUE PARTNERS GREATER CHINA HIGH YIELD INCOME FUND (A Cayman Islands Unit Trust) MANAGER’S REPORT The Asian credit markets started 2014 with a flood of new issue supply from Chinese property developers. Investors’ appetites were repeatedly tested as new deals were printed with increasingly more expensive pricing levels and attractive initial concession over existing issues vanished quickly as most deals were multiple times oversubscribed. As expected, it did not take long before the market showed signs of fatigue in absorbing the new supply. A poor showing of China’s preliminary Purchasing Managers’ Index (PMI) data and the possibility of an onshore trust defaults finally triggered a meaningful selloff in the China high yield space, which was then spread to the other Asian credit markets. The market recovered briefly towards the end of January, only to meet with further negative headlines from other emerging markets, most notably Turkey and South Africa. In January, we took profit on selected positions and were extremely selective in participating in new issues. We became more defensive in face of the continuous supply and raised our cash level accordingly. However, we added a few special-situation and less-followed names which we think offer good current income and interesting upside potential. February can be best described as a directionless month with a slight bearish bias in the Asian credit market. Chinese high yield, in particular high beta Chinese property names, underperformed as weaker manufacturing data as well as continuous concerns over potential onshore trust defaults limited upside performance. The recent depreciation of the Renminbi orchestrated by the authority did not help sentiment either. In this environment, new issue supply has reduced dramatically and the limited window of opportunity for issuing new bonds was only open to issuers with better quality and generous pricings. We viewed this as a positive sign as the market exercised stricter discipline in risk/reward assessment. The portfolio was little changed during the month. We participated in a few selected new issues and took profit from some which we think have run their courses. Cash level was lowered as we invested our capital into a few beaten-down names with good fundamentals. Spooked by the fear over an onshore default in mainland China, China’s high-yield credits, especially property developers, struggled in March. It was our belief that onshore defaults were isolated cases and offshore issuers, in which our Fund invested, were stronger candidates with sound credit profiles, better transparency and multiple funding channels. Nonetheless, the offshore market fell in sympathy in March. We maintained the view that onshore defaults (i) were a part of the Chinese government’s reform process and were therefore largely expected; (ii) were fundamentally conducive to the healthy development of the mainland financial markets; and (iii) were isolated cases whose impact on the offshore market was likely to be more sentimental than economic. During the month, we took profits on a few positions that have pretty much run their courses. We utilized some cash to participate in a select number of new issues that offer values and are expected to see technical support from a trading perspective. April was a relatively quiet month for the secondary market but a rather busy one for primary issuance. Majority of the new issues came outside of China, which we viewed as technically supportive to China’s credit. The Fund was active in the primary market during the month and participated in select new issues which offer attractive valuations and stable credit profiles. We also found pockets of values in some less-crowded markets. SEMI–ANNUAL REPORT 2014 4 For the six months ended 30 June 2014 VALUE PARTNERS GREATER CHINA HIGH YIELD INCOME FUND (A Cayman Islands Unit Trust) MANAGER’S REPORT (Continued) Conditions in the Asian credit markets were supportive in May. In fact, May was the first month this year that the benefits of carry trades were not eclipsed by negative mark-to- market. A generally supportive global equity market, improving China PMI and strong debut performance of a few new high-yield issues buoyed investors’ sentiment and risk appetites. During the month, the Fund continued to be active in both primary and secondary markets. We participated in several new high-yield issues which offered attractive concession over existing issues. We were also involved in one Asian convertible deal whose underlying equity, in our view, may provide good long-term value. Meanwhile, we took profit on some names whose values, we think, were fully priced in. Following the rally in May, the Asian credit markets continued to march higher and posted another solid performance in June. China credits, the underperformer in earlier months of 2014, staged a strong comeback thanks to better China PMI data, strong global equity markets and, most importantly, its attractive relative valuation. Many new issues performed well on debut, and both the dealer community and investors were happy to add risks. In June, the Fund was active in both primary and the secondary markets. We swapped some existing positions with new issues that offered attractive valuation and market technical. We took profits on some sectors and individual names whose current valuation no longer offered attractive risk-reward profile. We initiated a new special-situation position and one convertible position. Both of which, in our view, may offer good upside potential. Outlook Despite the recent rally, China credits (especially high yield bonds) remain cheap compared to US, European and even other Asian credits. We reckon some of the money that was being “forced long” in other non-china exposure may begin to rotate back to China. On the horizon, the market may turn its attention to the upcoming earnings season which may introduce some volatility. We will monitor closely and seek to take advantage of any opportunity that arises. Value Partners Hong Kong Limited 20 August 2014 Performance figures sourced from Bloomberg. Investors should note investment involves risk and past performance is not indicative of future results. Investors should refer to the explanatory memorandum for details and risk factors in particular those associated with investment in China and other markets in the Asian region, non-investment grade debt securities, and in companies with medium or small capitalization. The fund may also invest in derivatives and structured products which can involve material additional risks, e.g. counterparty default risk or insolvency, and may expose the fund to significant losses. SEMI–ANNUAL REPORT 2014 5 For the six months ended