Årsrapport 2012 - PRE Management

PRE 

II 

12 

Årsrapport 2012 

PRE China Private Equity II AS 

Organisasjonsnummer 992 201 681

Innhold 

Forvalters rapport 4 

PRE China Private Equity II AS 

Årsberetning 2012 5 

Regnskap og balanse 6 

Kontantstrømoppstilling 9 

Noter 10 

Revisjonsberetning PRE China Private Equity II AS 14 

China New Enterprise Investment Fund II JVC 

Revisjonsberetning 18 

Regnskap 20 

Noter 24 

Årsrapport PRE China Private Equity II AS 3

Forvalters rapport 

PRE China Private Equity II AS (”PRE China II”) gir 

norske investorer tilgang til å investere med 

internasjonale profesjonelle og institusjonelle 

aktører i direkteinvesteringer i Kina. 

PRE China II har som formål å investere alle sine 

midler i fondet China New Enterprise Investment 

Fund II CJV (”CNEI II”). PRE China II ble gjennom 

emisjoner fra februar 2008 til desember 2009 tilført 

emisjonsproveny på NOK 380 mill. og har kommitert 

USD 62,5 mill. i CNEI II. Totalt har internasjonale 

investorer kommitert USD 255 mill. til CNEI II. 

PRE China II har innbetalt USD 35,3 mill. per 

31.12.2012. Utestående investeringsforpliktelse er 

USD 27,1 mill. 

Denne årsrapporten er delt i tre. Først kommer 

forvalters rapport for året, deretter presenteres 

det norske selskapets regnskap, og til slutt 

presenteres det kinesiskbaserte ’limited partnership’ 

som gjennomfører investeringene og oppfølgingen 

av disse. 

CNEI II består av 24 ’limited partners’. PRE China 

II er én av disse. De øvrige deltagerne er fra Japan, 

Kina, Midtøsten, Storbritannia, Luxemburg, 

Liechtenstein, Sveits og Tyskland. Investorene er 

familier, investeringsselskaper, offentlige 

investeringsselskaper, banker og pensjonsfond. 

Forvalters rapport 

Kinesiske styresmakters pågående arbeid for en 

kontrollert økonomisk vekstnedgang pågikk for 

fullt gjennom 2012. Kinesisk bruttonasjonalprodukt 

(“BNP”) endte opp 7,8 % sammenlignet med 2011, 

marginalt over økonomiske prognoser på 7,7 %. 

Hovedårsaken til den overordnede vekstnedgangen 

var et fall i statlige investeringer samt lavere etterspørsel 

etter kinesiske varer og tjenester fra USA 

og et Europa med vedvarende gjeldsproblematikk. 

Innenlandsk forbrukerkonsum sto som den største 

bidragsyteren til videre vekst med 51,8 % av den 

totale BNP-oppgangen. 

4 Årsrapport PRE China Private Equity II AS 

Pål Raaum 

Styreformann 

PRE Management 

Dette til tross for at 4. kvartal markerte den tredje 

sammenhengende måneden med fall i innenlandsk 

forbruk. 

Videre ble det knyttet stor spenning til det kinesiske 

lederskiftet som fant sted i mars 2013 og hvilken 

effekt dette ville ha på det kinesiske, og den globale, 

økonomien. Slik forventet ble det i overgangsperioden 

gjennom andre halvår 2012 og årsskiftet 

2012-2013 igangsatt få statlige tiltak fra den 

sittende regjeringen med en nevneverdig effekt på 

den kinesiske økonomien. 

Majoriteten av økonomiske eksperter og personer 

som følger utviklingen i den kinesiske økonomien 

på en daglig basis, heriblant Johannes Schoeter og 

forvaltningsteamet bak CNEI II, mener den kinesiske 

økonomien har gått over i en stabil og positiv fase. 

Forvalter ser dog ingen sterke indikasjoner på en 

kraftig økning i vekst i 2013. Økonomisk vekst vil 

på mellomlang og lang sikt avhenge av økonomiske 

reformer; lik behandling av private bedrifter, 

reduksjon i statlige monopoler, liberalisering og 

reformer av det kinesiske finansielle systemet, kamp 

mot korrupsjon, samt betydelig mindre innblanding 

fra statlig byråkrati. 

Verdijustert egenkapital (”VEK”) per 31.12.12 for 

PRE China II er beregnet til NOK 7,96 pr. aksje, 

fremdeles under aksjonærenes innskutte kapital på 

om lag NOK 10,00 pr. aksje. CNEI IIs eldre porteføljeselskaper 

har sett en god dollar-denominert verdiutvikling 

gjennom andre halvår 2012. Fondet er dog 

fremdeles i en investeringsfase, og nye porteføljeinvesteringer 

vil slå negativt ut på VEK. Dette fordi 

kapital overført fra PRE China II til CNEI II skal dekke 

både porteføljeinvesteringer og tilknyttede kostnader 

(blant annet finansiell og juridisk due diligence). 

Ledig investeringskapital som bokføres ut av 

balansen til PRE China II vil således ikke veies opp 

likt-for-likt av vekst i porteføljeverdier. 

I tillegg har et svekket vekslingsforhold mellom 

USD og NOK påvirket VEK negativt gjennom 2012. 

Per 31.12.12 var denne vekslingskursen USD/NOK 

5,5664, mot USD/NOK 5,9927 per 31.12.11.

Årsberetning for 2012 

PRE CHINA PRIVATE EQUITY II AS 

Virksomheten til PRE China Private Equity II AS (“Selskapet”) er å investere direkte eller indirekte i fondet 

China New Enterprise Investment Fund II CJV (“CNEI II”). 

Selskapets forretningsadresse er i Oslo. 

Selskapet ble etablert 2. januar 2008. Selskapet har per balansedagen ikke generert inntekter fra sine 

investeringer som følge av at CNEI II fortsatt er i en investeringsfase. Ingen investeringer er realisert. 

Selskapets resultat i 2012 ble et tap på NOK 17,6 mill. 

Selskapets totalkapital er NOK 295,1 mill. per balansedagen og egenkapitalen utgjør NOK 295,1 mill. 

Likviditetsbeholdningen er på NOK 126,6 mill. og anses som tilfredsstillende. 

Selskapet har per 31. desember 2012 innbetalt omlag USD 35,3 mill. i CNEI II. 

Selskapet har ingen ansatte og styret består av 3 menn. Det er ikke iverksatt spesielle tiltak som har 

betydning for likestilling eller arbeidsmiljøet. 

Selskapets bransje og virksomhet medfører verken forurensing eller utslipp som kan være til skade for det ytre 

miljø. I samsvar med regnskapslovens § 3-3 bekreftes det at forutsetningen om fortsatt drift er lagt til grunn 

ved utarbeidelse av regnskapet. 

Etter styrets oppfatning gir det fremlagte resultatregnskapet og balanse, med tilhørende noter fyldestgjørende 

informasjon om driften av Selskapet ved årsskiftet. 

Pål Raaum 

Sign. 

Styrets leder 

Per Morten Bjørseth 

Sign. 

Styremedlem 

Oslo, den 21. juni 2013 

Johannes Schoeter 

Sign. 

Styremedlem 

Tobias Junge 

Sign. 

Daglig leder 


Resultatregnskap 


DRIFTSKOSTNADER Note 2012 2011 

Andre driftskostnader 1, 8 3 475 564 3 571 900 

SUM DRIFTSKOSTNADER 3 475 564 3 571 900 

DRIFTSRESULTAT -3 475 564 -3 571 900 

FINANSINNTEKTER OG -KOSTNADER 

Renteinntekter 589 933 504 108 

Annen finansinntekt 7 0 3 569 783 

Nedskrivning av finansielle anleggsmidler 6 0 29 104 488 

Rentekostnader 387 198 

Annen finanskostnad 7 14 768 687 0 

RESULTAT AV FINANSPOSTER -14 179 141 -25 030 795 

ORDINÆRT RESULTAT FØR SKATT -17 654 706 -28 602 696 

Skatter på ordinært resultat 3 0 0 

ÅRSRESULTAT -17 654 706 -28 602 696 

OVERFØRINGER 

Overført fra overkursfond -17 654 706 -28 602 696 

SUM OVERFØRINGER 4 -17 654 706 -28 602 696 

6 Årsrapport PRE China Private Equity II AS

Balanse 


EIENDELER Note 2012 2011 

ANLEGGSMIDLER 

FINANSIELLE ANLEGGSMIDLER 

Investering i aksjer og andeler 6 168 331 014 97 737 762 

SUM FINANSIELLE ANLEGGSMIDLER 168 331 014 97 737 762 

SUM ANLEGGSMIDLER 168 331 014 97 737 762 

OMLØPSMIDLER 

FORDRINGER 

Andre kortsiktige fordringer 131 188 672 830 

SUM FORDRINGER 131 188 672 830 

Bankinnskudd, kontanter o.l. 2 126 640 180 214 376 696 

SUM OMLØPSMIDLER 126 771 367 215 049 526 

SUM EIENDELER 295 102 381 312 787 289 


Balanse 


EGENKAPITAL OG GJELD Note 2012 2011 

EGENKAPITAL 

INNSKUTT EGENKAPITAL 

Aksjekapital 3 620 312 3 620 312 

Overkursfond 291 440 750 309 095 456 

SUM INNSKUTT EGENKAPITAL 4, 5 295 061 062 312 715 768 

SUM EGENKAPITAL 295 061 062 312 715 768 

GJELD 

KORTSIKTIG GJELD 

Leverandørgjeld 26 006 42 920 

Annen kortsiktig gjeld 15 313 28 601 

SUM KORTSIKTIG GJELD 41 319 71 521 

SUM GJELD 41 319 71 521 

SUM EGENKAPITAL OG GJELD 295 102 381 312 787 289 

Pål Raaum 

Sign. 

Styrets leder 


Per Morten Bjørseth 

Sign. 

Styremedlem 

Oslo, den 21. juni 2013 

Johannes Schoeter 

Sign. 

Styremedlem 

Tobias Junge 

Sign. 

Daglig leder

Kontantstrømoppstilling 


KONTANTSTRØMMER FRA OPERASJONELLE AKTIVITETER 

2012 2011 

Kontantstrømmer fra operasjonelle aktiviteter 

Resultat før skattekostnad -17 654 706 -256 210 

Endring i leverandørgjeld -16 914 -1 958 

Endring i andre tidsavgrensningsposter 528 354 113 772 

Netto kontantstrømmer fra operasjonelle aktiviteter A -17 143 266 -144 396 

KONTANTSTRØMMER FRA INVESTERINGSAKTIVITETER 

Investeringer i aksjer og andeler -70 593 252 -44 631 191 

Netto kontantstrømmer fra investeringsaktiviteter B -70 593 252 -44 631 191 

KONTANTSTRØMMER FRA FINANSIERINGSAKTIVITETER 

Endring i egenkapital 0 0 

Netto kontantstrømmer fra finansieringsaktiviteter C 0 0 

Netto endring i kontanter og kontantekvivalenter A+B+C -87 736 518 -44 775 587 

Beholdning av kontanter og kontantekv. ved periodens begynnelse 214 376 696 259 152 283 

Beholdning av kontanter og kontantekv. ved periodens slutt 126 640 180 214 376 696 


Noter til regnskapet 2012 


Årsregnskapet er satt opp i samsvar med regnskapsloven og NRS 8 - God regnskapsskikk for små foretak. 

Hovedregel for vurdering og klassifisering av eiendeler og gjeld 

Eiendeler bestemt til varig eie eller bruk er klassifisert som anleggsmidler. Andre eiendeler er klassifisert 

omløpsmidler. Fordringer som skal tilbakebetales innen ett år er uansett klassifisert som omløpsmidler. 

Ved klassifisering av kortsiktig og langsiktig gjeld er tilsvarende kriterier lagt til grunn. 

Anleggsmidler vurderes til anskaffelseskost, men nedskrives til virkelig verdi når verdifallet ikke forventes å 

være forbigående. Anleggsmidler med begrenset økonomisk levetid avskrives planmessig. Langsiktig gjeld 

balanseføres til nominelt mottatt beløp på etableringstidspunktet. Langsiktig gjeld oppskrives ikke til virkelig 

verdi som følge av renteendring. 

Omløpsmidler vurderes til laveste av anskaffelseskost og virkelig verdi. Kortsiktig gjeld balanseføres til 

nominelt mottatt beløp på etableringstidspunktet. Kortsiktig gjeld oppskrives ikke til virkelig verdi som følge 

av renteendring. 

Enkelte poster er vurdert etter andre regler, og redegjøres for nedenfor. 

Fordringer 

Kundefordringer og andre fordringer oppføres til pålydende. 

Skatter 

Skattekostnaden i resultatregnskapet omfatter både periodens betalbare skatt og endring i utsatt skatt. Utsatt 

skatt er beregnet med 28 % på grunnlag av de midlertidige forskjeller som eksisterer mellom regnskapsmessige 

og skattemessige verdier, samt ligningsmessig underskudd til fremføring ved utgangen av regnskapsåret. 

Skatteøkende og skattereduserende midlertidige forskjeller som reverseres eller kan reversere i samme 

periode er utlignet og nettoført. Utsatt skattefordel på netto skattereduserende forskjeller er ikke utlignet 

og på underskudd til fremføring, balanseføres i den grad skattefordelen antas å kunne utnyttes gjennom 

fremtidige skattepliktige overskudd. 

Inntekter 

Selskapets inntekter knytter seg til avkastning på investeringen i aksjer og renteinntekter på bankinnskudd. 

Mottatt utbytte fra investeringen inntektsføres i samme periode som utbetaling skjer, dersom utbyttet 

representerer opptjent inntekt. Renteinntekter inntektsføres etter hvert som de påløper. 

Investering i aksjer 

Investering i aksjer vurderes til anskaffelseskost, men nedskrives til virkelig verdi når verdifallet 

ikke forventes å være forbigående. 

Valuta 

Pengeposter i utenlandsk valuta som er omløpsmidler omregnes til valutakurs på balansedagen. 


Note 1 Lønnskostnader, antall ansatte, godtgjørelser, lån til ansatte, m.v 

Selskapet har ingen ansatte og det er ikke utbetalt godtgjørelse til styret. Selskapet er ikke pliktig til å ha 

ordning for obligatorisk tjenestepensjon i hht. lov om dette. 

Revisor 

Kostnadsført revisjonshonorar for 2012 utgjør NOK 26 875 (inkl. mva.), herav NOK 6 625 for andre tjenester. 

Note 2 Bankinnskudd, kontanter o.l. 

Total likviditetsbeholdning per 31.12.2012: 126 640 180 

Herav bundne bankinnskudd: 0 

Selskapet har ingen forpliktelser som skal dekkes av bundne bankinnskudd per 31.12.2012. 

Note 3 Skatt 

Årets skattekostnad fremkommer slik: 2012 2011 

Betalbar skatt på årets resultat 0 0 

Brutto endring utsatt skatt 0 0 

Skattekostnad ordinært resultat 0 0 

Betalbar skatt i årets skattekostnad fremkommer slik: 

Ordinært resultat før skattekostnad -17 654 706 -28 602 696 

Permanente forskjeller -9 575 112 18 737 891 

Endring midlertidige forskjeller 0 0 

Benyttet fremførbart underskudd 0 0 

Grunnlag betalbar skatt -27 229 818 -9 864 805 

Skatt, 28 % 0 0 


Betalbar skatt i balansen fremkommer slik: 


Sum betalbar skatt 0 0 


Spesifikasjon av grunnlag for utsatt skatt: 

Forskjeller som utlignes: 


Endring 2012 2011 

Aksjer og andre verdipapirer 0 -29 104 488 29 104 488 

Fremførbart underskudd 27 229 817 -102 769 396 -75 539 579 

Sum 27 229 817 -131 873 884 -104 644 067 

Utsatt skatt/skattefordel 7 624 349 -36 924 688 -29 300 339 

Selskapet har valgt å ikke bokføre utsatt skattefordel. 

Note 4 Egenkapital 

Aksjekapital Overkursfond Sum 

Egenkapital 01.01.2012 3 620 312 309 095 456 312 715 768 

Årsresultat 0 -17 654 706 -17 654 706 

Egenkapital 31.12.2012 3 620 312 291 440 750 295 061 062 

Note 5 Aksjekapital og aksjonærinformasjon 

Aksjekapitalen i selskapet per 31.12.2012 består av følgende aksjeklasser: 

Antall Pålydende Balanseført 

Ordinære aksjer 36 203 124 0,10 3 620 312 

Eierstruktur: 

De 10 største aksjonærene per 31.12.2012 var: 

Stemme-/ 

Ord. aksjer eierandel 

RISHAUG FINANS AS 337 425 0,9 % 

MOLVER AS 319 300 0,9 % 

KNUT ÅM 319 300 0,9 % 

CORUNA INVEST AS 313 654 0,9 % 

SKIPS AS PEGASUS 309 430 0,9 % 

ROMARIO INVEST AS 305 966 0,8 % 

ASHEIM INVESTMENTS AS 300 942 0,8 % 

KANUTO HOLDING AS 271 875 0,8 % 

HAUKEN INVEST AS 248 231 0,7 % 

TANERA A/S 239 161 0,7 % 

Totalt antall aksjer 2 965 284 8,2 %

Note 6 Investeringer 

Selskap EK Resultat Bokført verdi Kostpris 

CNEI Fund II L.P 257 205 949 -18 231 118 168 331 014 197 435 502 

Lokasjon: Cayman Island 

Eierandel: 62,19 % 

Note 7 Finansposter 

Annen finansinntekt-/kostnad består i sin helhet av valutagevinst-/tap tilknyttet utestående fordringer, gjeld 

og bankinnskudd i USD. 

Note 8 Annen driftskostnad 

Poster under annen driftskostnad i årsregnskapet fordeler seg slik: 


Revisjonshonorar 26 875 20 000 

Juridisk bistand 50 313 56 632 

Forretningsførerhonorar 405 112 399 967 

Honorar til VPS 30 945 36 548 

Forvaltningshonorar inkl. mva. 2 797 128 2 752 170 

Trykksaker og kopiering 103 565 202 346 

Annen kostnad 61 627 104 238 

Sum annen driftskostnad 3 475 564 3 571 900 





CHINA NEW ENTERPRISE 

INVESTMENT FUND II (PARALLEL), L.P. 

Independent Auditor's Report and 

Consolidated Financial Statements 

For the year ended 31 December 2012

CHINA NEW ENTERPRISE INVESTMENT FUND II (PARALLEL), L.P. 

INDEPENDENT AUDITOR'S REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE YEAR ENDED 31 DECEMBER 2012 

CONTENTS PAGE(S) 

INDEPENDENT AUDITOR'S REPORT 1 - 2 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 3 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 4 

CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL 5 

CONSOLIDATED STATEMENT OF CASH FLOWS 6 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7 - 24 






CONSOLIDATED STATEMENT OF FINANCIAL POSITION 

AT 31 DECEMBER 2012 

(Expressed in US$) 

NOTES 2012 2011 

US$ US$ 

Assets 

Cash and bank balances 2,293,084 1,253,752 

Prepayment and other receivables 8 3,192 245,495 

Financial assets at fair value through profit and loss 6 44,003,308 _________ 28,166,701 _________ 

Total assets 46,299,584 29,665,948 

_________ _________ 

Liabilities 

Other payables 47,958 339,769 

Accrued expenses 44,751 19,500 

_________ _________ 

Total liabilities 92,709 359,269 

_________ _________ 

Net assets 46,206,875 29,306,679 

_________ _________ 

_________ _________ 

Partners' capital 

General partner 45,977 - 

Limited partners 46,160,898 29,306,679 

_________ _________ 

Total partners' capital 46,206,875 29,306,679 

_________ _________ 

_________ _________ 

The notes on pages 7 to 24 form part of these consolidated financial statements. 

- 4 - 



CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL 





Partners' capital as at 1 January 29,306,679 19,790,552 

Capital contribution during the year 20,175,404 12,318,034 

Net decrease in partners' capital resulting from operation (3,275,208) (2,801,907) 

_________ _________ 

Partners' capital as at 31 December 46,206,875 29,306,679 

_________ _________ 

_________ _________ 


- 5 -


CONSOLIDATED STATEMENT OF CASH FLOWS 




Cash flow from operating activities 

Net decrease in partners' capital from operations __________ (3,275,208) __________ (2,801,907) 

Adjustments for: 

Net unrealised losses on financial assets at 

fair value through profit or loss 508,784 20,317 

Decrease/(increase) in other receivable and prepayment 242,302 (243,616) 

Increase in other payables and accrued expenses 2,947 24,581 

Foreign exchange translation gain (10,248) (8,120) 

__________ __________ 

Net cash outflow from operating activities (2,531,423) (3,008,745) 

__________ __________ 

Cash flow from investing activities 

Purchase of investment (16,614,897) (12,385,862) 

__________ __________ 

Net cash used in from investing activities (16,614,897) (12,385,862) 

__________ __________ 

Cash flow from financing activities 

Contributions paid by the partners 20,175,404 12,318,034 

__________ __________ 

Net cash generated from financing activities 20,175,404 12,318,034 

__________ __________ 

Effective of exchange rate changes on cash and cash equivalents 10,248 8,120 

__________ __________ 

Net change in cash and cash equivalents 1,039,332 (3,068,453) 

__________ __________ 

Cash and cash equivalents at the beginning of the period 1,253,752 4,322,205 

__________ __________ 

Cash and cash equivalents at the end of the period, 

represented by cash and bank balances 

__________ 

2,293,084 

__________ __________ 

1,253,752 

__________ 


- 6 - 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 



1. GENERAL INFORMATION 

China New Enterprise Investment Fund II (Parallel), L.P. (the "Fund") is a private equity fund 

incepted in Cayman Islands under the Exempted Limited Partnership Laws (2007 Revision) of the 

Cayman Islands, as amended from time to time. The Fund obtained its business license on 10 

June 2008 (date of inception). The Fund was set up as a parallel fund of China New Enterprise 

Investment Fund II, L.P. ("Primary Fund"), a Cayman Islands exempted limited partnership. The 

terms of the Funds all continue until the Primary Fund is dissolved from final admission date in 

accordance with the contract of the Fund (the "Fund Contract"). 

The general partner and the investment manager of the Fund are China New Enterprise Investment 

Fund II GP Ltd. (the "General Partner") and New Enterprise Management Co. Ltd. (the 

"Investment Manager") respectively. The partners committed total capital of US$100,500,000 of 

which US$56,838,376 representing 56.56% of the total commitment has been accumulatively 

contributed as at 31 December 2012. 

As at 31 December 2012, the Fund has one directly wholly-owned subsidiary, Nordic Invest Co. 

Limited ("Nordic"), which was incorporated in Hong Kong. 

On September 24, 2008, China New Enterprise Investment Fund II ("CNEI Fund II CJV") was 

incorporated in the P.R. China ("PRC") as sino-foreign co-operative joint venture. The Fund, 

China New Enterprise Investment Fund II, L.P. and two PRC investors jointly control the CNEI 

Fund II CJV. For the period of 2011, The Fund committed a total capital of US$21,462,500 to 

CNEI Fund II CJV, which accounts for 38.31% of CNEI Fund II CJV's total committed capital of 

US$56,030,000. For the period of 2012, CNEI Fund II CJV increased its total commitment to 

US$81,030,000, and the Fund's committed capital to CNEI Fund II CJV has increased to 

US$31,393,325, which accounts for 38.74% of CNEI Fund II CJV's total committed capital of 

US$81,030,000. As at 31 December 2012, CNEI Fund II CJV has been accumulatively 

contributed US$ 26,040,907 by the Fund, which represents 82.95% of the total commitment. 

The Fund, its direct subsidiary and joint venture are hereinafter collectively referred to as the 

"Fund". All of the subsidiaries and joint venture are generally used as special purpose vehicles to 

purchase shares in other private companies on behalf of the Fund. 

The Fund's objective is to make equity, quasi-equity, debt and quasi-debt investments side by side 

with the Primary Fund, in companies with substantial operations in, or which plan to have 

substantial operations in, Greater China (comprising mainland China, Hong Kong, Macau and 

Taiwan) and Singapore. 


- 7 -


2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING 

STANDARDS ("IFRS") 

In the current year, the Fund has applied the following new and revised IFRSs. 

Amendments to IFRS 7 Disclosures - Transfers of Financial Assets 

The Fund has applied for the first time the amendments to IFRS 7 Disclosures - Transfers of 

Financial Assets in the current year. The amendments increase the disclosure requirements for 

transactions involving the transfer of financial assets in order to provide greater transparency 

around risk exposures when financial assets are transferred. The application of the amendments 

has no material effect on the Fund's operating results, financial position or other comprehensive 

income in the current year. 

New and revised IFRSs issued but not yet effective 

IFRS 9 Financial Instruments 3 

IFRS 10 Consolidated Financial Statements 1 

IFRS 11 Joint Arrangements 1 

IFRS 12 Disclosure of Interests in Other Entities 1 

IFRS 13 Fair Value Measurement 1 

Amendments to IFRS 7 Disclosures - Offsetting Financial Assets and Financial Liabilities 1 

Amendments to IFRS 7 Mandatory Effective Date of IFRS 9 and Transition 

and IFRS 9 Disclosures 2 

Amendments to IFRS 10, Consolidated Financial Statements, Joint Arrangements 

IFRS 11 and IFRS 12 and Disclosure of Interests in Other Entities: Transition Guidance 1 

Amendments to IFRS 10, 

IFRS 12 and IAS* 27 Investment Entities 2 

IAS 27 (Revised 2011) Separate Financial Statements 1 

IAS 28 (Revised 2011) Investments in Associates and Joint Ventures 1 

Amendments to IAS 1 Presentation of Items of Other Comprehensive Income 4 

Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities 2 

1 

2 

3 

4 

Effective for annual periods beginning on or after 1 January 2013. 



Effective for annual periods beginning on or after 1 July 2012. 

* IAS - International Accounting Standard 

- 8 - 




STANDARDS ("IFRS") - continued 


New and revised IFRSs issued but not yet effective - continued 

IFRS 9 Financial Instruments 

IFRS 9 issued in 2009 introduces new requirements for the classification and measurement of 

financial assets. IFRS 9 amended in 2011 includes the requirements for the classification and 

measurement of financial liabilities and for derecognition. 

Key requirements of IFRS 9 are described as follows: 

IFRS 9 requires all recognized financial assets that are within the scope of IAS 39 

Financial Instruments: Recognition and Measurement to be subsequently measured at 

amortized cost or fair value. Specifically, debt investments that are held within a business 

model whose objective is to collect the contractual cash flows, and that have contractual 

cash flows that are solely payments of principal and interest on the principal outstanding 

are generally measured at amortized cost at the end of subsequent accounting periods. All 

other debt investments and equity investments are measured at their fair values at the end 

of subsequent reporting periods. In addition, under IFRS 9, entities may make an 

irrevocable election to present subsequent changes in the fair value of an equity investment 

(that is not held for trading) in other comprehensive income, with only dividend income 

generally recognized in profit or loss. 

With regard to the measurement of financial liabilities designated as at fair value through 

profit or loss, IFRS 9 requires that the amount of changes in the fair value of the financial 

liability that is attributable to changes in the credit risk of that liability is presented in other 

comprehensive income, unless the recognition of the effects of changes in the liability's 

credit risk in other comprehensive income would create or enlarge an accounting mismatch 

in profit or loss. Changes in fair value of financial liabilities attributable to changes in the 

financial liability's credit risk are not subsequently reclassified to profit or loss. 

Previously, under IAS 39, the entire amount of the change in the fair value of the financial 

liability designated as fair value through profit or loss was presented in profit or loss. 

IFRS 9 is effective for annual periods beginning on or after 1 January 2015, with earlier 

application permitted. 

The Fund is considering the impact of IFRS 9 on the consolidated financial statements and the 

timing of its application. 

New and revised Standards on consolidation, joint arrangements, associates and disclosures 

In June 2011, a package of five standards on consolidation, joint arrangements, associates and 

disclosures was issued, including IFRS 10, IFRS 11, IFRS 12, IAS 27 (as revised in 2011) and 

IAS 28 (as revised in 2011). 

Key requirements of these five standards are described below. 

- 9 -





New and revised Standards on consolidation, joint arrangements, associates and disclosures - 

continued 

IFRS 10 replaces the parts of IAS 27 Consolidated and Separate Financial Statements that deal 

with consolidated financial statements and SIC-Interpretation 12 Consolidation - Special Purpose 

Entities will be withdrawn upon the effective date of IFRS 10. Under IFRS 10, there is only one 

basis for consolidation, that is, control. In addition, IFRS 10 includes a new definition of control 

that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns 

from its involvement with the investee, and (c) the ability to use its power over the investee to 

affect the amount of the investor's returns. Extensive guidance has been added in IFRS 10 to deal 

with complex scenarios. 

IFRS 11 replaces IAS 31 Interests in Joint Ventures. IFRS 11 deals with how a joint arrangement 

of which two or more parties have joint control should be classified. SIC-Interpretation 13 Jointly 

Controlled Entities - Non-Monetary Contributions by Venturers will be withdrawn upon the 

effective date of IFRS 11. Under IFRS 11, joint arrangements are classified as joint operations or 

joint ventures, depending on the rights and obligations of the parties to the arrangements. In 

contrast, under IAS 31, there are three types of joint arrangements: jointly controlled entities, 

jointly controlled assets and jointly controlled operations. In addition, joint ventures under IFRS 

11 are required to be accounted for using the equity method of accounting, whereas jointly 

controlled entities under IAS 31 can be accounted for using the equity method of accounting or 

proportionate accounting. 

IFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, 

joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure 

requirements in IFRS 12 are more extensive than those in the current standards. 

In June 2012, the amendments to IFRS 10, IFRS 11 and IFRS 12 were issued to clarify certain 

transitional guidance on the application of these IFRSs for the first time. 

These five standards, together with amendments relating to the transitional guidance, are effective 

for annual periods beginning on or after 1 January 2013 with earlier application permitted 

provided that all of these standards are applied at the same time. 

The General Investor anticipates that the application of the above new and revised standards and 

amendments issued but not yet effective is not expected to have a material effect on the Fund's 

operating results, financial position or other comprehensive income. 

- 10 - 






IFRS 13 Fair Value Measurement 

IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about 

fair value measurements. The Standard defines fair value, establishes a framework for measuring 

fair value, and requires disclosures about fair value measurements. The scope of IFRS 13 is 

broad; it applies to both financial instrument items and non-financial instrument items for which 

other IFRSs require or permit fair value measurements and disclosures about fair value 

measurements, except in specified circumstances. In general, the disclosure requirements in IFRS 

13 are more extensive than those in the current standards. For example, quantitative and 

qualitative disclosures based on the three-level fair value hierarchy currently required for financial 

instruments only under IFRS 7 Financial Instruments: Disclosures will be extended by IFRS 13 to 

cover all assets and liabilities within its scope. 

IFRS 13 is effective for annual periods beginning on or after 1 January 2013, with earlier 

application permitted. The General Partner anticipates that the application of the new standard is 

not expected to have a material effect on the Fund's consolidated financial statements and 

disclosures in the consolidated financial statements. 

Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities and amendments to 

IFRS 7 Disclosures - Offsetting Financial Assets and Financial Liabilities 

The amendments to IAS 32 clarify existing application issues relating to the offsetting 

requirements. Specifically, the amendments clarify the meaning of "currently has a legally 

enforceable right of set-off" and "simultaneous realization and settlement". 

The amendments to IFRS 7 require entities to disclose information about rights of offset and 

related arrangements (such as collateral posting requirements) for financial instruments under an 

enforceable master netting agreement or similar arrangement. 

The amended offsetting disclosures are required for annual periods beginning on or after 1 January 

2013 and interim periods within those annual periods. The disclosures should also be provided 

retrospectively for all comparative periods. However, the amendments to IAS 32 are not effective 

until annual periods beginning on or after 1 January 2014, with retrospective application required. 

The General Partner anticipates that the application of these amendments to IAS 32 and IFRS 7 is 

not expected to have a material effect on the Fund's disclosures being made with regard to 

offsetting financial assets and financial liabilities. 


- 11 -





Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities 

The amendments to IFRS 10 introduce an exception to consolidating subsidiaries for an 

investment entity, except where the subsidiaries provide services that relate to the investment 

entity's investment activities. Under the amendments to IFRS 10, an investment entity is required 

to measure its interests in subsidiaries at fair value through profit or loss. 

To qualify as an investment entity, certain criteria have to be met. Specifically, an entity is 

required to: 

obtain funds from one or more investors for the purpose of providing them with 

professional investment management services; 

commit to its investor(s) that its business purpose is to invest funds solely for returns from 

capital appreciation, investment income, or both; and 

measure and evaluate performance of substantially all of its investments on a fair value 

basis. 

Consequential amendments to IFRS 12 and IAS 27 have been made to introduce new disclosure 

requirements for investment entities. 

The amendments to IFRS 10, IFRS 12 and IAS 27 are effective for annual periods beginning on or 

after 1 January 2014, with early application permitted. The General Partner anticipates that the 

application of the amendments will have effect on the Fund as the Fund is an investment entity. 

Amendments to IAS 1 Presentation of Items of Other Comprehensive Income 

The amendments to IAS 1 Presentation of Items of Other Comprehensive Income introduce new 

terminology for the statement of comprehensive income and income statement. Under the 

amendments to IAS 1, a 'statement of comprehensive income' is renamed as a 'statement of profit 

or loss and other comprehensive income' and an 'income statement' is renamed as a 'statement of 

profit or loss'. The amendments to IAS 1 retain the option to present profit or loss and other 

comprehensive income in either a single statement or in two separate but consecutive statements. 

However, the amendments to IAS 1 require items of other comprehensive income to be presented 

into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) 

items that may be reclassified subsequently to profit or loss when specific conditions are met. 

Income tax on items of other comprehensive income is required to be allocated on the same basis - 

the amendments do not change the option to present items of other comprehensive income either 

before tax or net of tax. 

The amendments to IAS 1 are effective for annual periods beginning on or after 1 July 2012. The 

presentation of items of other comprehensive income will be modified accordingly when the 

amendments are applied in the future accounting periods. 

- 12 - 



3. SIGNIFICANT ACCOUNTING POLICIES 

Statement of compliance 

The consolidated financial statements have been prepared in accordance with IFRS. 

Basis of preparation 

The consolidated financial statements have been prepared on the historical cost basis, except for 

certain financial assets and liabilities which are measured at fair value. Historical cost is generally 

based on the fair value of the consideration given in exchange for assets. 

As the Fund is a parallel fund of the Primary Fund, the General Partner's interest and capital is not 

included in the Fund's consolidated financial statement, but included in the Primary Fund's 

consolidated financial statement. 

The principal accounting policies adopted are as follows: 

Basis of consolidation 

The consolidated financial statements incorporate the consolidated financial statements of the 

Fund and entities (including special purpose entities) controlled by the Fund (its subsidiaries). 

Control is achieved where the Fund has the power to govern the financial and operating policies of 

an entity so as to obtain benefits from its activities. 

Subsidiaries are consolidated from the date on which control is transferred to the Fund and are no 

longer consolidated from the date that control ceases. Transactions and balances among the Fund 

and its subsidiaries are eliminated upon consolidation. 

The existence and effect of potential voting rights that are presently exercisable or presently 

convertible are considered when assessing whether the Fund controls another entity. Where 

necessary, adjustments are made to the financial statements of subsidiaries to bring their 

accounting policies into line with those used by other members of the Fund. 

All inter-company transactions and balances have been eliminated in full on consolidation. 

A joint venture is a contractual arrangement whereby the Fund and other parties undertake an 

economic activity that is subject to joint control (i.e. when the strategic financial and operating 

policy decisions relating to the activities of the joint venture require the unanimous consent of the 

parties sharing control). 

Joint venture arrangements that involve the establishment of a separate entity in which each 

venture has an interest are referred to as jointly controlled entities. 

The Fund reports its interests in jointly controlled entity using proportionate consolidation, except 

when the investment is classified as held for sale, in which case it is accounted for in accordance 

with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. 

The Fund's share of the assets, liabilities, income and expenses of jointly controlled entities is 

combined with the equivalent items in the consolidated financial statements on a line-by-line basis. 


- 13 -


3. SIGNIFICANT ACCOUNTING POLICIES - continued 

Dividend and interest income 

Dividend income from investments is recognized when the shareholder's right to receive payment 

has been established (provided that it is probable that the economic benefits will flow to the Fund 

and the amount of income can be measured reliably). 

Interest income from a financial asset is recognized when it is probable that the economic benefits 

will flow to the Fund and the amount of income can be measured reliably. Interest income is 

accrued on a time basis, by reference to the principal outstanding and at the effective interest rate 

applicable, which is the rate that exactly discounts estimated future cash receipts through the 

expected life of the financial asset to that asset's net carrying amount on initial recognition. 

Foreign currencies 

Items included in the consolidated financial statements of the Fund are measured in the currency 

of the primary economic environment in which the Fund operates (the "functional currency"). The 

consolidated financial statements of the Fund are presented in currency units ("US$"), which is the 

Fund's functional and presentation currency. The primary objective of the Fund is to generate 

returns in US$, its capital-raising currency. The liquidity of the Fund is managed on a day-to-day 

basis in US$ in order to handle the issue, acquisition and resale of the Fund's redeemable shares. 

Transaction in currencies other than US$ is translated at the foreign currency exchange rate ruling 

at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are 

translated to US$ at the foreign currency closing exchange rate ruling at the year end date. 

Foreign currency exchange differences arising from translation and unrealised gains and losses on 

disposal or settlements of monetary assets and liabilities denominated in foreign currencies that 

are measured at fair value are translated to US$ at the foreign currency exchange rates ruling at the 

dates that the value were determined. Net foreign exchange gains/(losses) on non-monetary and 

monetary financial assets and liabilities other than those classified as at fair value through profit or 

loss are included in foreign currency gains/(losses). 

For the purpose of presenting the consolidated financial statements, the assets and liabilities of the 

Fund's foreign operations are expressed in currency units using exchange rates prevailing at the 

end of the reporting period. Income and expense items are translated at the average exchange 

rates for the period, unless exchange rates fluctuated significantly during that period, in which 

case the exchange rates at the dates of the transactions are used. Exchange differences arising, if 

any, are recognised in other comprehensive income and accumulated in partners' capital 

(attributed to non-controlling interests as appropriate). 

Cash and cash equivalents 

Cash comprises current deposits with banks. Cash equivalents are short term, highly liquid 

investments that are readily convertible to known amounts of cash and which are subject to 

insignificant changes in value, and are held for the purpose of meeting short term cash 

commitments rather than for investment or other purpose. 

- 14 - 




Financial instruments 


Financial assets and financial liabilities are recognised on the Fund's consolidated statements of 

assets and liabilities when the Fund becomes a party to the contractual provisions of the 

instrument. Financial assets and financial liabilities are initially measured at fair value. 

Transaction costs that are directly attributable to the acquisition or issue of financial assets and 

financial liabilities (other than financial assets and financial liabilities at fair value through profit 

or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, 

as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of 

financial assets or financial liabilities at fair value through profit or loss are recognised 

immediately in profit or loss. 

Financial assets 

The Fund's financial assets are classified as financial assets at fair value through profit or loss and 

loans and receivables. All regular way purchases or sales of financial assets are recognised and 

derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of 

financial assets that require delivery of assets within the frame established by convention in the 

marketplace. The accounting policies adopted in respect of each category of financial assets are 

set out below. 

Financial assets at fair value through profit or loss 

Financial assets at fair value through profit or loss has two subcategories, including financial 

assets held for trading and those designated at fair value through profit or loss on initial 

recognition. 

A financial asset other than a financial asset held for trading may be designated as at fair value 

through profit or loss upon initial recognition if: 

such designation eliminates or significantly reduces a measurement or recognition 

inconsistency that would otherwise arise; or 

the financial asset forms part of a group of financial assets or financial liabilities or both, 

which is managed and its performance is evaluated on a fair value basis, in accordance 

with the Fund 's documented risk management or investment strategy, and information 

about the grouping is provided internally on that basis; 

At each reporting date subsequent to initial recognition, financial assets at fair value through profit 

or loss are measured at fair value, with changes in fair value recognised directly in profit or loss in 

the period in which they arise. 

- 15 -



Financial instruments - continued 

Financial assets at fair value through profit or loss - continued 

The fair values of investments in securities designated at fair value through profit or loss are 

determined as follows: 

The Fund may hold investments in publicly traded securities, some of which are subject to selling 

restrictions or held in escrow. Public securities held by the Fund are valued at their closing price 

unless there are legal restrictions in trading, in which case the price may be discounted. For 

investments that are not currently traded in a public market or are subject to restrictions on resale, 

fair values are determined by the General Partner. Factors considered in determining the fair 

values of these investments include purchase price, estimates of liquidation value, subsequent 

equity financing involving third parties or a significant change in operating performance or 

potential resulting in a change in valuation in accordance with the terms of the Fund Contract. 

Loans and receivables 

Loans and receivables are non-derivative financial assets with fixed or determinable payments that 

are not quoted in an active market. At each reporting date subsequent to initial recognition, loans 

and receivables (including deposit for investments in securities, other receivables and cash and 

cash equivalents) are carried at amortised cost using the effective interest method, less any 

identified impairment losses. Interest income is recognised by applying the effective interest rate, 

except for short-term receivables when the recognition of interest would be immaterial. 

Financial liabilities 

Financial liabilities are classified according to the substance of the contractual arrangements 

entered into and the definitions of a financial liability. 

Financial liabilities, including other payables and advance from limited partners, are subsequently 

measured at amortised cost, using the effective interest method. 

Derecognition 

Financial assets are derecognised when the contractual rights to receives cash flows from the asset 

expire; or the financial asset is transferred and the Fund has transferred substantially all the risks 

and rewards of ownership of the financial asset. On derecognition of a financial asset, the 

difference between the asset's carrying amount and the sum of the consideration received and 

receivable is recognised in profit or loss. 

Financial liabilities are derecognised when the obligation specified in the relevant contract is 

discharged, cancelled or expired. The difference between the carrying amount of the financial 

liability derecognised and the consideration paid and payable is recognised in profit or loss. 

Allocation of profits and losses 

Each item of income, gains, losses or deduction of the Fund will generally be allocated among the 

capital accounts of the partners in order to give effect to the provisions of the Fund Contract 

relating to distributions and winding up. 

- 16 - 




Income taxes 

The Fund is exempted for income tax in the Cayman Islands for a period of fifty years from 24 

June 2008. Accordingly, no provision for income taxes has been provided in the accompanying 

consolidated financial statements, as the partners are individually responsible for reporting income 

or loss based on their respective share of the Fund's income and expenses for income tax purposes. 

The Chinese State Administration of Taxation (SAT) released a tax circular (Guoshuihan No. 698 

- "Circular 698") on 15 December 2009 that addresses the transfer of shares by foreign nonresident 

companies. It specifies the Peoples' Republic of China ("PRC") income tax implications 

with respect to foreign companies on gains derived from the sale (directly or indirectly) of equity 

shares of a Chinese company. Circular 698, which is effective retrospectively to 1 January 2008, 

specifies that foreign non-resident companies which had transferred shares of investments in 

China indirectly in the past two years are required to file a series of documents with the Chinese 

tax authority. Furthermore, such foreign non-resident companies may be subject to Chinese 

income tax based on the anti-avoidance rule. Circular 698 will have a significant impact on 

companies that use offshore holding companies as vehicles to invest in China, which will increase 

companies' administrative and compliance burdens. Currently, the General Partner is 

contemplating on how to handle the compliance requirement and might consider conducting 

appropriate filing with the in-charge tax offices. As Circular 698 is relatively new, there is no 

additional official administrative rule on how to interpret such transfer by the SAT. Considering 

that it's subject to the discretion of the SAT (the competent tax authorities) whether this type of 

indirect share transfer shall be levied on PRC income tax, the General Partner believes at their 

best estimation that there would be no additional PRC tax on such disposition of equities shares of 

its investments except for the withholding taxes it already accrued which has been deducted 

against the fair value of its investment. The General Partner would like to closely monitor the 

development of this issue in the future, but also like to remind all limited partners that the SAT 

(the competent tax authorities) may have different judgment on this issue if further official 

interpretation of this Circular becomes available. 

Based on the above analysis and the facts and circumstances, including, notably, the uncertainty of 

the interpretation and administrative practices associated with the applicable PRC tax law as of 31 

December 2012, the General Partner determined that there is no material impact to the Fund's 

consolidated financial statements as of 31 December 2012 and for the year then ended. However, 

the General Partner will continue to assess financial statement impact of PRC tax regulations and 

new interpretive guidance released by the PRC tax authorities. 

Related parties 

Parties are considered related if one party has the ability, directly or indirectly, to control the other 

party or exercise significant influence over the other party in making financial or operational 

decisions. 


- 17 -


4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION 

UNCERTAINTY 

In the application of the Fund's accounting policies, which are described in note 3 to the 

consolidated financial statements, the General Partner is required to make judgements, estimates 

and assumptions about the carrying amounts of assets and liabilities that are not readily apparent 

from other sources. The estimates and associated assumptions are based on historical experience 

and other factors that are considered to be relevant. Actual results may differ from these 

estimates. 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to 

accounting estimates are recognised in the period in which the estimate is revised if the revision 

affects only that period or in the period of the revision and future periods if the revision affects 

both current and future periods. 

The following is the critical judgement, apart from those involving estimations (see below), that 

the General Partner has made in the process of applying the entity's accounting policies and that 

have the most significant effect on the amounts recognised in the consolidated financial 

statements. 

The fair values of investments totalling US$ 44,003,308 or approximately 95.23% of the partners' 

capital as at 31 December 2012 has been determined by the General Partner of the Fund based on 

the methodologies described in Note 3 "Financial instruments" and Note 5.2 "Fair value of 

financial instruments" in the absence of readily ascertainable market values. Because of the 

inherent uncertainty of valuations, estimated fair values of such investments may differ 

significantly from the value of the assets and liabilities that not readily apparent from other 

sources. Actual results may differ from these estimates. 

5. FINANCIAL INSTRUMENTS 

5.1 Financial risk management 

The Fund is exposed to a variety of financial risks including: market price risk, interest rate risk, 

currency risk, credit risk and liquidity risk. The General Partner attributes great importance to 

professional risk management, beginning by carefully diversifying the sourcing of access to 

premier private equity investment opportunities, and proper understanding and negotiation of 

appropriate terms and conditions. The General Partner actively monitors the investments made 

through ongoing interviews with Investment Manager, reviewing analyst reports and consolidated 

financial statements. The Fund has investment guidelines that set out its overall business 

strategies, its tolerance for risk and its general risk management philosophy and has established 

processes to monitor and control the economic impact of these risks. 

Market price risk 

The investments held in the portfolio may be realized only after several years and their fair values 

may change significantly. The General Partner provides the Fund with investment 

recommendations that are consistent with the Fund's objective. The General Partner's 

recommendations are approved by the Investment Committee. 

- 18 - 



5. FINANCIAL INSTRUMENTS - continued 

5.1 Financial risk management - continued 

Market price risk - continued 

The Fund's listed investments are subject to market price risk inherent in all its listed securities 

since the value of holdings may rise as well as fall. The Fund's market price risk is managed 

through close monitoring of market fluctuation and timely disposal of its listed investments. 

As for the non-public investment portfolio the Fund held as of the balance sheet date, it is 

expected that such investment will be disposed of for cash or publicly traded securities. At the 

end of the Fund's life any remaining portfolio company securities may be distributed in specie 

notwithstanding the absence of a public market for such securities. Limited Partner may need to 

hold such securities for an indefinite period of time and may have difficulty recovering their 

capital from such investments. The General Partner mitigates the risk through careful planning of 

portfolio companies' exit models and timetables both before investment and after investment. 

As at 31 December 2012, if the fair values of the Fund's investments as determined by the General 

Partner of the Fund based on the methodologies described in Notes 3 "Financial instruments" had 

increased or decreased by 10%, the partners' capital of the Fund would increase or decrease by 

approximately US$ 4,400,331 accordingly. 

Credit risk 

The Fund takes on exposure to credit risk, which is the risk that counterparty will default on its 

contractual obligations resulting in financial loss to the Fund. The credit risk exposed at 31 

December as follows: 


US$ US$ 

Prepayment and receivables 3,192 245,495 

_____ _______ 

_____ _______ 

Liquidity risk 

All the investments the Fund held are unquoted and subject to specific restriction on 

transferability and disposal. Consequently, risks exist that the Fund might not be able to readily 

dispose of its holdings in such market or investments when it chooses and also that the price 

attained on a disposal is below the amount at which such investments are included in the Fund's 

consolidated statement of financial position. 

The total liability of the Fund is less than 0.21% of partners' capital. 


- 19 -



5.2 Fair value of financial instruments 

The fair value of financial assets traded in active markets (such as publicly traded derivatives and 

trading securities) are based on quoted market prices at the close of trading on the year end date. 

The quoted market price used for financial assets held by the Fund is the current bid price; the 

appropriate quoted market price for financial liabilities is the current asking price. When the Fund 

holds derivatives with offsetting market risks, it uses mid-market prices as a basis for establishing 

fair values for the offsetting risk positions and applies this bid or asking price to the net open 

position, as appropriate. 

A financial instrument is regarded as quoted in an active market if quoted prices are readily and 

regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory 

agency, and those prices represent actual and regularly occurring market transactions on an arm's 

length basis. 

The fair value of financial assets that are not traded in an active market is determined by using 

valuation techniques. The Fund uses a variety of methods and makes assumptions that are based 

on market conditions existing at each year end date. Valuation techniques used for nonstandardised 

financial instruments such as options, currency swaps and other over-the-counter 

derivatives, include the use of comparable recent arm's length transactions, reference to other 

instruments that are substantially the same, discounted cash flow analysis, option pricing models 

and other valuation techniques commonly used by market participants making the maximum use 

of market inputs and relying as little as possible on entity-specific inputs. 

For instruments for which there is no active market, the Fund may use internally developed 

models, which are usually based on valuation methods and techniques generally recognised as 

standard within the industry. Valuation models are used primarily to value unlisted equity, debt 

securities and other debt instruments for which markets were or have been inactive during the 

financial year. Some of the inputs to these models may not be market observable and are therefore 

estimated based on assumptions. 

The output of a model is always an estimate or approximation of a value that cannot be 

determined with certainty, and valuation techniques employed may not fully reflect all factors 

relevant to the positions the Fund holds. Valuations are therefore adjusted, where appropriate, to 

allow for additional factors including model risk, liquidity risk and counterparty risk. 

The carrying value less impairment provision of other receivables and payables are assumed to 

approximate their fair values. 

The following table provides an analysis of financial instruments that are measured subsequent to 

initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair 

value is observable. 

- 20 - 




5.2 Fair value of financial instruments - continued 


Level 1 fair value measurements are those derived from quoted prices (unadjusted) in 

active markets for identical assets or liabilities. 

Level 2 fair value measurements are those derived from inputs other than quoted prices 

included within Level 1 that are observable for the asset or liability, either directly (i.e. as 

prices) or indirectly (i.e. derived from prices). 

Level 3 fair value measurements are those derived from valuation techniques that include 

inputs for the asset or liability that are not based on observable market data (unobservable 

inputs). 

31/12/2012 

Level 1 Level 2 Level 3 Total 

US$ US$ US$ US$ 

Financial assets at fair value 

through profit or loss - - 44,003,308 44,003,308 

______ ______ _________ _________ 

Total - - 44,003,308 44,003,308 

______ ______ _________ _________ 

______ ______ _________ _________ 

31/12/2011 

Level 1 Level 2 Level 3 Total 

US$ US$ US$ US$ 

Financial assets at fair value 

through profit or loss - - 28,166,701 28,166,701 

______ ______ _________ _________ 

Total - - 28,166,701 28,166,701 

______ ______ _________ _________ 

______ ______ _________ _________ 

Reconciliation of Level 3 fair value measurements of financial assets 

Fair value through 

Note profit or loss 

US$ 

Closing balance as at 1 January 2011 15,531,616 

Total gains or losses: 

- in profit or loss (20,317) 

Purchase of investment 12,655,402 

_________ 

Closing balance as at 31 December 2011 28,166,701 

_________ 

Total gains or losses: 

- in profit or loss (508,784) 

Purchase of investment 16,614,897 

Cost adjustment 6 (1) (269,506) 

_________ 

Closing balance as at 31 December 2012 44,003,308 

_________ 

- 21 -


6. FINANCIAL ASSET AT FAIR VALUE THROUGH PROFIT OR LOSS 

As at 31 December 2012 As at 31 December 2011 

Notes Cost Fair value Equity share Cost Fair value Equity share 

US$ US$ % US$ US$ % 

Preferred Share Investment 

Jiangsu Feida Steel Plate 

Joint Stock Co., Ltd. 11,916,977 11,916,977 14.30 11,916,977 11,916,977 14.30 

Nanjing Handson Co., Ltd. (1) 3,899,779 3,650,344 6.35 4,169,285 4,169,285 6.35 

China Dadi Chemical Limited (2) 5,462,040 6,743,895 3.84 5,462,040 5,462,040 4.44 

Ordinary Share Investment 

IAT Automobile Technology Co., Ltd 1,984,868 1,527,252 3.44 1,984,868 3,594,322 3.44 

Guangzhou Men's Life 

Personal Care Co., Ltd. (3) 3,630,385 4,156,251 14.36 3,024,077 3,024,077 12.77 

Juxin International Leasing Co., Ltd (4) 7,872,548 7,872,548 4.83 - - - 

Shanghai Fudan-Zhangjiang 

Bio-Pharmaceutical Co., Ltd. (5) 8,136,041 8,136,041 7.07 - - - 

______ ______ ______ ______ 

Total Financial Asset at Fair 

value through Profit or Loss 42,902,638 44,003,308 26,557,247 28,166,701 

______ ______ ______ ______ 

(1) Pursuant to an investment agreement signed on 28 January 2011, CNEI Fund II CJV 

invested US$10.88 million to acquire 16.59% share of Nanjing Handson Co., Ltd. 

("Handson"), in which US$10.18 million had been paid but US$0.7 million had not yet 

paid as at 31 December 2011. Since Handson did not achieve the agreed profit target, 

CNEI Fund II CJV will not make the last milestone payment; accordingly the investment 

cost of Handson has been adjusted. 

(2) Pursuant to a purchase agreement signed on 12 April 2012, China Dadi Chemical Limited 

("Dadi") completed a new round of financing with a new investor, to whom 3,400,000 

preference shares were issued; and Dadi acquired Shouguang Wanquan Salt Chemical Co., 

Ltd. for consideration of 1,000,000 Ordinary Shares. As a result, the Fund's share interest 

in Dadi was diluted from 4.44% to 3.84%. 

(3) Pursuant to an investment agreement signed in December 2011, CNEI Fund II CJV has the 

option to invest additional RMB10 million (Equivalent to US$1.58 million) with the same 

valuation within 12 months given Guangzhou Men's Life Personal Care Co., Ltd.("Men's 

Life) has further financing needs. CNEI Fund II CJV executed the option during the 

period of 2012. As a result, the share percentage held by CNEI Fund II CJV increased 

from 33.3% to 37.5%. Based on the proportionate interest that the Fund accounts for 

CNEI Fund II CJV, the Fund held 14.36% equity shares of Men's Life. 

(4) Pursuant to an investment agreement signed on 10 December 2012, CNEI Fund II CJV 

invested US$20 million to acquire 12.28% share of Juxin International Leasing Co., Ltd 

("Juxin"), one of the largest financial leasing companies in China's education sector. 

Based on the proportionate interest that the Fund accounts for CNEI Fund II CJV, the 

Fund held 4.83% equity shares of Juxin. 

(5) Pursuant to a purchase agreement signed on 1 February 2012, CNEI Fund II CJV acquired 

18.45% of Shanghai Fudan-Zhangjiang Bio-Pharmaceutical Co., Ltd. ("Fudan-Zhangjiang") 

from China General Technology (Group) Holding Co., Ltd, for consideration of 

RMB133,597,372 (equivalent to US$21,239,947). Fudan-Zhangjiang is one of very few 

Chinese pharmaceutical companies dedicated to new drug development. Based on the 

proportionate interest that the Fund accounts for CNEI Fund II CJV, the Fund held 7.07% 

equity shares of Fudan-Zhangjiang. 

- 22 - 



7. PARTNERS' CAPITAL 


Under the Fund Contract, the Limited Partners have agreed to contribute capital, as requested by 

the General Partner, up to the amount of their total commitments. The total capital commitments 

are reconciled to the contributed capital as follows: 


US$ US$ 

As at 31 December 

Total capital committed 100,500,000 100,500,000 

Less: Outstanding capital commitments not yet called __________ (43,661,624) __________ (63,837,028) 

Total capital contribution 56,838,376 36,662,972 

__________ __________ 

__________ __________ 

Limited Partners has contributed 56.56% of their capital commitment (2011: 36.48%). 

8. RELATED PARTY TRANSACTIONS 

(1) Significant related party transactions 

(a) Management fee 

The Investment Manager, New Enterprise Management Co. Ltd., is entitled to 

management fee, as set forth in the Fund Contract. Management fee is accrued 

monthly and payable semi-annually. 

The Investment Manager charged US$2,512,500 in 2012 as management fee at 

2.5% per annum on limited partners' capital commitment, excluding the designated 

limited partner affiliated with General Partner (2011: US$2,512,500). 

(b) Administration fee 

TMF Fund Services Asia Limited is the Fund's Administrator. The administration 

fee is calculated based on the capital contribution, in accordance with the 

Administration Agreement. The Administrator charged US$80,724 in 2012 as 

administration fee (2011: US$59,531). 

(2) Balance with related parties 

As at 31 As at 31 

December 2012 December 2011 

US$ US$ 

Due from related parties 

- Due from Limited Partner 1,870 1,460 

- Prepaid to other related parties 1,322 1,293 

______ ______ 

______ ______ 

Due to related parties 

- Due to the Administrator 22,221 16,040 

- Due to China New Enterprise Investment Co. 198 22,722 

- Due to other related parties 

______ 

2,251 

______ ______ 

8,215 

______ 

- 23 -


9. CONTINGENCIES 

In the normal course of business, the Fund enters into contracts that contain a variety of 

representations and warranties and which provide general indemnifications. Based on experience, 

the Fund expects the risk of loss related to the Fund's indemnifications to be remote. 

10. INVESTMENT COMMITMENT 

Pursuant to a purchase agreement signed on 06 February 2012, CNEI Fund II CJV will acquire 

3.65% of Fudan-Zhangjiang from Shanghai Zhangjiang Hi-tech Park Development Co., for 

consideration of RMB25,915,096 (equivalent to US$4,122,996). As at 31 December 2012, the 

payment is pending for the approvals by Chinese Authorities therefore CNEI Fund II CJV has a 

contingent obligation of RMB25,915,096 (equivalent to US$4,122,996). Based on the 

proportionate interest that the Fund accounts for CNEI Fund II CJV, the Fund has a contingent 

obligation of RMB9,927,317 (equivalent to US$1,579,340). 

11. SUBSEQUENT EVENT 

Subsequent events have been evaluated through 29 March 2012, which is the date that these 

consolidated financial statements were available to be issued. As a result of the Fund's evaluation, 

the Fund noted no subsequent events that require adjustment to, or disclosure in, these 

consolidated financial statements. 

- 24 - 


PRE Management 

Postboks 1224 Vika 

Kronprinsesse Märthas plass 1 

0110 Oslo 

Design og produksjon: www.kursiv.no

Årsrapport 2012 - PRE Management

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