TIDMHYF
RNS Number : 2485B
Himalayan Fund N.V.
12 April 2012
Extract of the
Annual Report 2011
The complete version may be found on
http://www.himalayanfund.nl/annual-reports/
Chairman' Letter 2011
Dear Shareholders,
2011 must have been the most difficult year for investment
management in a long time. Extreme volatility characterized by
sharp movements in a narrow range of stocks made it very difficult
to generate out-performance. In the circumstances, your Fund's
net
asset value (NAV) per share declined by $23.36 from $57.19 to
$33.83, for a loss in value of 40.9%. In the same period the CNX
S&P Nifty Index lost 24.6% in local currency terms, which,
adjusted for Rupee depreciation meant our reference benchmark lost
36.53%, theworst result amongst major world stockmarkets. So, for
the second year in succession we have to report underperformance in
the portfolio, of 4.3%.
We would like to apologise for thisresult but we must say that
having worked closely with the Investment Advisor throughout the
year, we understand the reasons. By year-end, when the NAV per
share closed at the low for theyear (in fact, the low for two and a
half years), we felt quite strongly that both the market and the
currency had overshot on the downside. There was no particular
evidence that this would be reversed this year and forecasts by
well-known market strategists were not optimistic. In the event,
the market and currency have both snapped back sharply.
Wrong-footed strategists have had to reverse Indian asset
allocation cuts, scrambling to addto their recommended
weightings.Net selling of equities by foreign investors in the
whole of 2011 amounted to $350mil, whereas net purchases in 2012
to-date have already exceeded $2bn. At the time of writing, we have
seen a strong liquidity-driven advance, ranking the Indian equity
markets among the best performing in the world.
Equity investment sentiment during 2011 was dominated by
concerns about the direction and strength of the US, European Union
and
Chinese economies as these global growth drivers flirted with a
slowdown or even recession. Also running in parallel through the
whole year and beyond was the overarching Eurozone problem,
exacerbated by the inclination of those in charge to kick the can
down the road. This meant that markets staggeredfrom one
macroeconomic shock to another, with periodic downdrafts when the
Eurozone failed to deal with its core debt problem, or looked like
doing so. We ended the year with the underlying Greek problem
unresolved but some positive economic signals emerging,especially
in the US.
India's economic growth slowed during the year, squeezed between
the Reserve bank's hawkish anti-inflationary stance and an absence
of necessary fiscal consolidation. Tight monetary policy was
sustained through the year with policy rates eventually raised a
total of thirteen times, to 8.5%. This was substantially down to a
systematic attack on stubborn food inflation and the risk of
overspill into primary manufactures. It was also to some extent due
to a feeling on the part of the RBI that they needed to apply added
vigour to managing the monetary aggregates since the government
appeared unlikely to take any action on an expanding fiscal
deficit. The outcome for FY12 is likely to be GDP growth of
slightly under 7% but, helpfully, wholesale price inflation (WPI)
has dropped below the revised RBI target of 7% in time for
year-end. The slowdown in economic activity combined with
moderating inflation has laid the
basis for a cycle of monetary easing and the RBI has prefaced
this with a symbolic cut in the cash reserve ratio (CRR) of
banks.
Historically, a cycle of easing in monetarypolicy in India has a
high correlation with stock market gains, so high expectation of
cuts in policy rates may have been the catalyst for the New Year
surge in the stock markets. Initial optimism about state elections,
especially in the largest state, Uttar Pradesh, has proved
unfounded, handing the Congress Party a real problemin managing its
national coalition and probably postponing economic reforms. In the
likely absence of political initiatives, the anticipated
introduction of the new Direct Tax Code on April 1st will be an
important step in fiscal consolidation. Significant progress has
also been made in the introduction of a national Goods and Services
Tax (GST), a further significant step in the same direction.
Excellent direction of the
GST programme by Sushil Modi, surprisingly a scion of the BJP,
means there is a probability of successful rollout on April 1st
2013.
Corruption scandals have been in the headlines in 2011 but
parliament seems unlikely to get the long-awaited anti-corruption
legislation moving soon. On the other hand, an encouragingnote has
been struck by the Supreme Court with its vigorous action to sort
out the mobile spectrum licensing scandal. A new national
telecommunications policy to be issued by theregulatory body TRAI
has also contributed to lifting clouds from the sector, which will
see earlier licenses revoked, a new spectrum auction and eventually
overdue consolidation. At the time of writing, we have seen another
sharp cut in the CRR and await the Union Budget, postponed to
accommodate the state elections. Hopes for fiscal consolidation may
be frustrated but investors' focus is more likely to be
concentratedon monetary policy and the prospect of lower interest
rates re-igniting private sector investment. Consumer demand is
thesole economic driver to have been sustained through the recent
slowdown, so any additional action to revive public sector
investment as well would be welcome. With all three of these
economic drivers in action, we would be able to run the risk of
this year's
monsoon not matching the last two and still see the market
deliver a year of good returns.
Himalayan Fund is committed to maintaining a portfolio of stocks
selected to generate attractive returns over the long-term and your
Board works closely with the Investment Advisor to achieve this
objective. In the prevailing economic and business environment we
believe the Fund's portfolio comprises a selection of stocks of
companies with high standardsof corporate governance which offer
excellent prospects for high returns. We would like to thank our
shareholders, as well as our business partners Indasia Fund
Advisors and Banque Morval for their sustained support in a very
difficult year. We believe it is highly likely that this year will
see Indian markets outperform other major markets and that your
Fund will deliver excellent returns.
Ian McEvatt
March 28th 2012
Directors' Report 2011
The Fund
The Transaction price of the Fund's shares on the first
Execution Day of the year (January 7, 2011)was $55.48 and on the
last
Execution Day (December 30, 2011) it was $33.84, a fall of 39%.
The net asset value per share at the close of business on
December
31st 2011 was $33.83, compared with $56.89 a year earlier,
representing a decrease in value of 40.5% in the year. The
difference between the two figures is explained by the different
dates and times for calculating the Transaction Prices and the
opening and closing of thebooks for NAV purposes. For comparison
purposes, we follow the performance of the S&P CNX Defty Index
(Defty), an indexpublished by the National Stock Exchange of India
to reflect the movement of itsS&P CNX Nifty stock index in US
Dollar terms. In the year 2011, the Defty declined by 36.7%, so the
Fund's NAV underperformed the Defty by 3.8% for the year.
At the start of 2011,there were 392,575Ordinary Shares of the
Fund in the hands of third party investors; by year-end, this
number had increased to 469,432,an increase of 19.6%. During the
year, the Investment Advisor negotiated a cooperation agreement
with Banque Morval, a Swiss private bank, for the promotion of the
Fund amongst the bank's client base and also throughout
Switzerland. Operating under this agreement with an initial
promotional exercise around mid-year, the Fund saw substantial
inflows. Unfortunately, continuing uncertainty about economic
growth in the major economies and the inability of Eurozone leaders
to agree a solution to its debt crisis, plungedmarkets into a
sustained downdraft and a period of extreme volatility. These
negative external factors, coinciding with the final phases of a
cycle of aggressive monetarytightening in India, caused a slowdown
in industrial activity and investment. Theresulting sharp decline
in Indian markets and the Rupee in the last quarter brought about
the disappointing outcome that the Fund's share price opened at the
high for the year and closed at the low.
The Portfolio
In 2011, politicians all over the world distinguished themselves
by indecision, ignorance of essential economic realities and
indifference to their constituents' interests and opinions
causing spectacular gyrations in risk appetite, sentiment and
markets. This led to intense phases of volatility in global markets
with risk appetite swinging from one extreme to the other and
equity indices being driven by sharp movements in a limited number
of shares. Economic conditionsaround the world faltered, as the
outlook darkened over Europe and the US for long periods, though
towards the year-end small incremental improvements in key US data
started to emerge.
India gets a certain degree of immunity from global concerns due
to the dominance of domestic demand in its economy. Yet the global
uncertainty undermined business sentiment sufficiently that private
sector investment declined as a driver of economic activity from
35% to 30% over the year. As a result, GDP growth fell back to just
6.1% in the final quarter. This slowdown was undoubtedly
accentuated by the relentless tightening of monetarypolicy by the
Reserve Bank of India (RBI) in the face of stubborninflationary
influences. By year-end, however, the RBI had signalledan end to
monetary easing and made a symbolic cut in the Cash Reserve Ratio
(CRR) of banks, providing an optimistic prelude for 2012. This
served as confirmation that the RBI expected inflation to reach its
target level of 7% by the fiscal year-end in March.
By contrast with the previous year, foreign portfolio investment
went into reverse in 2011, as risk averse global investors withdrew
more than $3bn from Indian equities. Currency depreciation due to
net portfolio outflows was exaggerated in the final quarter by
concerns about a rising current account deficit and the risk that
the fiscal deficit target would not be met. As a result, the
S&P CNX Nifty Index lost 36.7% in US Dollar currency terms.
This looked like an extreme overshoot on the downside in both
market and currency terms and a sustained recovery after year-end
appears to confirm this. In a global context, India ranked at the
bottom of the list of equity market returns in 2011.
An eventual fall-off in inflation was substantially driven by
anotherexcellent monsoon which brought abundant harvests and
restored reservoirs to record levels to assure a record winter crop
as well. This brought an increase of nearly 4% in the contribution
of agriculture to overall GDP growth; this was above average but
not quite as dramatic as the previous year due to the higher base
effect. This positive momentum was offset however by increasing
policy level paralysis, which caused a fall-off in government
expenditure, constraining the contribution of public sector
investment to growth. The inability of the Congress party to assert
control over an increasingly fractious coalition eventually led to
parliamentary standstill and the derailment of numerous legislative
priorities and economic reforms. Meanwhile, rising minimum selling
prices for abundant crops combined with the continuing benefits of
rural employment schemes underpinned sustained growth in consumer
demand.
Against this background, portfoliostrategy evolved away from our
earlier commitment to infrastructure development and heavy
industrials towards a more consumer orientated approach. Our
exposure to the Energy sector was cut from almost 25% to just
over
20%; metals & mining was reduced from 9.7% to 4.8% and
Industrial Manufacturing from 16.4% to 10%. Offsetting these
reductions, weincreased the Financial sector by 3.2% to 17.3% by
adding Bank of Baroda, Corporation Bank, Indian Bank and Magma
Financial. InConsumer Goods, we added Titan Industries and
increased our holdingsin EID Parry and Pidilite, raising sector
exposure to
13.4%. In Healthcare, we added Cadila Healthcare, bringing the
Sector holding to 6.7%.We re-introduced the Auto sector by adding a
group of auto ancillary stocks, Balkrishna Industries, Bosch India,
Castrol India and Exide Industries, which brought sector
exposure
to 7.9% at year-end. The Fund enjoyed substantial inflows around
mid-year which enabledus to increase the number of holdings in
theportfolio and towards year-end we increased exposure to
interest-rate sensitive stocks in anticipation of monetary
easing.
Once again, your Board was not happy with the performance of the
Fund in 2011 but we would like to emphasise that managing a
portfolio in the prevailing conditions was extremely difficult. We
believe that the fall in the market in the last quarter and the
simultaneous depreciation of the Rupee were excessive and though
the Fund's NAV per share at year-end was the low for the year, it
offered good value in a historic context. Your Board continues to
monitor the portfolio closely and is confident that the stocks we
hold provide an excellent prospect of performingwell over the
medium term. We believe that in a context of easing monetary
policy,
market support will broaden, adding momentum to portfolios such
as ours which are structured with a view to long-term
value-added.
Risk Management and Administration
The legal structure of the Fund did not change in 2011. The
Investment Advisor is Iceman Capital Advisors Ltd. The
Administrator remains the same, although we were advised that it
has changed its name to Caceis Netherlands NV. The Administrator
calculates theNet Asset Value on a weekly basis. Citibank Mumbai is
the Custodian of the Fund. Your Board has laid down the so-called
system of Administrative Organization and Internal Control(AO/IC)
for the Fund. During the year under review and so far as your
Boardis aware, the fund has effectively operatedunder the system of
AO/IC.
In 2011, your Board undertookthe following administrative and
regulatory actions:
1. Launched new website at: www.himalayanfund.nlas the new
statutory information source for the Fund;
2. Amended the Fund's Principles on Fund Governance;
3. Registered for VAT purposes in The Netherlands;
4. Renewed the Fund's registration as a Foreign Institutional
Investor with the Securities and Exchange Board of India;
In preparation for each quarterlyBoard meeting, the Fund's
Reporting Entity (Inviqta) prepared a checklist of compliance with
corporate governance policy for the Oversight Entity (Mr. Dwight
Makins). The Oversight Entity made a report to eachBoard, drawing
attention to the checklist details. There have been no breaches of
the corporategovernance policy during the year 2011.
The Fund is a long only equity fund and as such does not use
leverage or derivatives in its portfolio. Thus the portfolio is
exposed fully to the market price movements in its holdings of
Indian stocks. There were no significant holdings of debt
instruments in the portfolio, so there is no exposure to credit
risk. The Fund does not engage in securities' lending and has
confirmed with its custodian that its stocks have not been used for
securities' lending. As a matter of policy, the Fund does not hedge
currency exposure in the portfolio.
In 2011, the Rupee depreciated by 18.7% against the US dollar
and this contributed to the decline in portfoliovalue. This
depreciation wasdue to a number of factors, notably a rising
current account deficit, as well as net portfolio outflows and
repayments of foreign currency debts by Indian companies. The
number of public offerings in the Indian market declined
significantly during the year, although a recovery of sorts in
December turned out to be a prelude to a very strong opening for
the market at the start of 2012.
There were no instances during the year when market liquidity
suffered disruptive events which might have prevented orderly
executionof orders.
Your Board works closely with the Investment Advisor especially
during times of heightened volatility and uncertainty. The year
2011 wasone in which adding value in a diversified portfolio of
shares selected with a view to generating long-term returns was
made especially difficult by periods of concentrated movement in
small numbers of shares. We are satisfied that the Investment
Advisor has the substance and procedures to carry out its
responsibilities in a suitable manner and that the Fund's portfolio
reflects the long-term investment objective. In terms of risk
analysis, the portfolio shows a mean monthly return of 1.0% with a
standard deviation of 10.4 and Sharpe ratio of 1.0 over the period
since the appointment of the Investment Advisor. The S&P CNX
Nifty Index generateda mean return of 1.1% with a standard
deviation of 10.3 and a Sharpe ratio of 1.1. The Fund had 39
periods of positive returns against 37 for theindex and both had a
maximum drawdown of 30.7%. The summary conclusion from this
analysis is that the investment management of the Fund added
slightly less value relative to the comparative index. Nonetheless,
the Directors believe that the Investment Advisor has provided a
standardof service which was satisfactory in the prevailing market
conditions.
The Board also reviews the conduct of the administration of the
Fund by the Administrator at regular management meetings. During
the course of the year, the Administrator advised us of
organizational changes which would take effect early in 2012. We
considered theproposed changes in the context of our overall
operational, statutoryand regulatory requirements and invited
alternative proposals to provide the services in question. By way
of conclusion, it was decided that the Fund's best interests could
be preserved by maintainingthe status quo. The Directors believe
that the Administrator is capable of exercising the appropriate
level of control over the operations of the Fund and has done so
during the year under review.
The Fund executes market trades through a panel of stockbrokers
which is selected according to standards of service in trade
execution, settlement, research capability and sales support. The
broker list is reviewed periodically and counterparties may be
added or deleted from time to time. One new broker was added to the
panel during the year and one broker was dropped; another is
currently under review due to a disruption in relationship
management. Payment of commission rebates is not a normal practice
in
Indian markets and the Fund does not maintain soft-dollar
arrangements, nor has it any intention of doing so.
The Directors continue to manage expenditure tightly though
further significant cost reduction is difficult. The TER was again
at an unsatisfactory level however. The long-term solution lies in
introducing new investors and as a consequence of a new Cooperation
Agreement between the Investment Advisor and Banque Morval in
Switzerland, a substantial inflow of funds from new investors was
received around mid-year. Much to our regret, the benefit of
thiswas more than offset by the negative market moves in the last
quarter. We believe that these adverse movements were excessive in
valuationterms and that the Indian market will recover over the
course of the current year and this should move our TER into an
improving trend.
The Outlook
The Directors would like to thank our shareholders, especially
those who joined us for the first time in 2011, for their
continuing support of the Fund. At the time of writing the Indian
market has already recovered stronglyfrom the previous
quarter.Resul ts from important state-level elections have not
helped the incumbent government but are unlikely to prompt early
elections. The result may be adegree of political paralysis but
economic policy will be driven by the RBI which has clearly
embarked on monetaryeasin g and policy rate reductions early in the
second quarter are likely to sustain momentum in the stock markets.
A recovery in global risk appetite is evidenced by renewed flows of
foreign portfolio investment which suggests that the prospects for
generating attractive returns from investment in India are
excellent in themedium term. Fund policy is to invest in companies
from a broad market universe selected for high governance standards
and a strong probability of generatinggrowth in earnings from
participating in the growth of the Indian economy. The Directors
believe that this is reflected in the portfolio of Himalayan
Fund.
Amsterdam, March 28, 2012
Board of Directors
Ian McEvatt, Chairman
Dwight Makins
Robert Meijer
Karin van der Ploeg
Financial statements Himalayan Fund N.V. Annual Report 2011
Balance sheet
(before profit appropriation)
31-12-2011 31-12-2010
USD USD
Notes
Investments
Securities 15.188.036 4.1 21.851.061
Other assets
Cash at banks 719.982 5 775.892
Receivables
Receivable on security transactions 337.678 6.1 -
Other receivables 120.000 6.2 -
457.678 -
Current liabilities (due within one year)
Payable on security transactions 345.474 7.1 -
Due to redemptions 5.212 7.2 22.006
Other liabilities, accruals and deferred
income 118.950 7.3 160.086
Total current liabilities 469.636 182.092
Total of receivables and other assets less
current liabilities 708.024 593.800
Total assets less current liabilities 15.896.060 22.444.861
--------------------- -----------------------------
Shareholders' equity
Issued capital 20.322 8.1 19.490
Share premium 28.689.326 8.2 24.656.811
General reserve -2.231.440 8.3 -5.559.902
Undistributed result current year -10.582.148 8.4 3.328.462
Total shareholders'equity 15.896.060 22.444.861
------------------- ---------------------
Net Asset Value per share 33,83 57,19
Profit & Loss account
01-01-2011 01-01-2010
31-12-2011 31-12-2010
USD USD
Notes
Income from investments
Dividends 164.861 9.1 293.858
Interest income - 9.2 65
Other income 37.944 9.3 8.354
202.805 302.277
Capital gains/losses
Unrealised price gains/losses on investments -10.207.805 4 3.488.913
Unrealised currency gains/losses on investments -2.212.764 4 740.121
Realised price gains/losses on investments 2.679.637 4 -134.222
Realised currency gains/losses on investments -117.375 4 -328.082
Other exchange differences -255.376 -7.175
-10.113.683 3.759.555
Expenses
Investment advisory fees 283.606 10.1 340.993
Other expenses 413.661 10.2 392.377
697.267 733.370
Tax 25.997 -
Total investment result -10.582.148 3.328.462
---------------------- -------------------------
Total investment result per ordinary share -22,54 8,49
Statement of Cash Flows
01-01-2011 01-01-2010
31-12-2011 31-12-2010
USD USD
notes
Cash flow from investing activities
Income from investments 202.805 9 302.277
Expenses -697.267 10 -733.370
Tax 25.997 -
Result of operations -468.465 -431.093
Purchases of investments -8.528.034 4 -2.665.932
Sales of investments 5.332.752 4 4.707.407
-3.195.282 2.041.475
Change in short term receivables -457.678 6 -
Change in current liabilities 287.544 7 27.436
-170.134 27.436
Cash flow from investing activities -3.833.881 1.637.818
Cash flow from financing activities
Received on shares issued 7.456.777 8 706.828
Paid on shares purchased -3.423.430 8 -1.690.574
Cash flow from financing activities 4.033.347 -983.746
Other exchange differences -255.376 -7.175
Change in cash and cash equivalents -55.910 646.897
Cash and cash equivalents as at 1 January 775.892 128.995
--------------------- ------------------------
Cash and cash equivalents as at 31 December 719.982 775.892
--------------------- ------------------------
Notes
1 General
Himalayan Fund N.V. ('the Fund') is an open-end investment
company (in Dutch: beleggingsmaatschappij met veranderlijk
kapitaal) incorporated under Dutch law and has its statutory seat
in Amsterdam. The Fund is listed both on NYSE Euronext Amsterdam
and on The London Stock Exchange.
This semi annual report is preparedin accordance with Part 9
Book 2 of the Dutch Civil Code and the Act on the Financial
Supervision (AFS) ("Wet op het financieel toezicht"). Since
December 1991 the Fund is licensed to undertake investment
activities according to the Act on the Financial Supervision.
2. Principles of valuation
2.1 Investments
The investments are valued based on the following
principles:
- listed securities are valued at the most recent stockmarket
price as at the end of the accounting period which can be
considered fair value;
- non or low marketable securities are, according to the
judgement of the Investment Advisor, valued at the best effort
estimated price, taking into account the standards which the
Investment Advisor thinks fit for the valuation of such
investments.
Expenses related to the purchase of investments are included in
the cost of investments.
Sales charges, if any, are deducted from gross proceeds and will
be expressed in the capital gains/losses.
2.2 Foreign currency translation
Assets and liabilitiesin foreign currencies are translated into
US dollars at the rate of exchange as at the balance sheet date.
All exchange differences are taken to the profit and loss account.
Income and expenses in foreign currenciesare translated at
theexchange rate as per transaction date.
Rates of exchange as at , equivalent of 1 US dollar:
Euro 0,77033 Srilanka Rupee 113,90404
Indian Rupee 53,10500 Bangladesh Taka 81,82998
2.3 Other assets and liabilities
Other assets and liabilities are stated at nominal value. If
required, provisions have been taken for irrecoverable
receivables.
2.4 Income recognitionprinciples
The result is determined by deducting expenses from the proceeds
of dividend, interest and other income in the period under review.
The realized revaluations of investments are determined by
deducting the purchase price from the sale proceeds.
The unrealized revaluations of investments are determined by
deducting the purchase price or the balance sheet value atthe start
of the period under review from the balance sheet value at the end
of the period under review.
Brokerage fees payable on the acquisition of investments, if
any, are considered to be part of the investments costs, andas a
result, are not taken to the profit and loss account.
2.5 Cash flow statement
The Cash Flow statement has been preparedaccording to the
indirect method.
3. Risk Management
Investing in emergingand developing markets carries risks that
are greater than those associated with investment in securities in
developed markets. In particular, prospective investors should
consider the following:
3.1 Currency Fluctuations
The Fund invests primarily in securities denominated in local
currencieswhereas the Ordinary Shares are quoted in US dollars. The
US dollar price at which the Ordinary Shares are valued is
therefore subject to fluctuations in the US dollar/ local currency
exchange rate.
3.2 Counterparty Risk
The Fund deals principally in listed stocks traded on the BSE
and the NSE in India.
All transactions are book-entry and settlement is fully
automated. In the event of non-delivery by either side, the
transaction fails. In this case recovery can be achieved by
delivery against payment or the transaction abandoned.
3.3 Concentration Risk
The investment restrictions for the Fund in section IX
INVESTMENT POLICIES of the Prospectus, limit the possibility for
concentration of risk by stock and sector. Investors should note
that the portfolio will be concentrated in the Indian
sub-continent.
3.4 Market Volatility
Securities exchanges in emerging markets are smaller and subject
to greater volatility than those in developed markets. The Indian
market has in the past experienced significant volatility and there
is no assurance that such volatility will not occur in the
future.
3.5 Market Liquidity
A substantial proportion of market capitalization and trading
value in emerging markets can be represented by a relatively small
number of issuers. Also, there is a lower level of regulation and
monitoring of the activities of investors, brokers and other market
participants than in most developed markets. Disclosure
requirements may be less stringent and there may
be less public information available about corporate activity.
As a result, liquidity may be impaired at times of high volatility.
The Indian markets have withstood high volatility in the recent
past and recovered momentum because of excellent corporate results.
This has shown that the liquidity in the shares of the top
companies is strong, as further emphasized by demand for those
shares through Depository Receipts in overseas markets.
Furthermore, standards of governance and transparency are improving
dramatically under the impetus of the regulatory bodies. Other
contiguous markets are not necessarily the same and the Fund only
invests in them with the utmost care.
3.6 Fund Liquidity
The Fund's rules allow weekly purchases and sales of Ordinary
Shares but in order to allow orderly management of the portfolio in
the interest of continuing shareholders, the value of purchases may
be limited to 5% of the net asset value of the Fund on any one
Execution Day.
3.7 PoliticalEconomy
The Fund's portfolio may be adversely affected by changes in
exchange rates and controls, interest rates, government
policies, inflation, taxation, social and religious
instabilityand regional geo-political developments.
3.8 Legal and Regulatory Compliance
The Fund is responsible for ensuring that no action taken by it
or by any contracted service provider might cause a breach of any
legal or regulatory requirement. The Fund and all of its service
providers maintain adequate control procedures to guard against any
such occurrenceand these procedures are subject to regular review.
Should such a breach occur inadvertently, control procedures should
detect it and institute corrective action without delay.
3.9 Financial Crisis
Almost uniquely amongst financial markets, the Indian financial
sector was insulated against any consequences of the recent
financial crisis by the tight control exercised by theRBI. Bank
balance sheets were free of toxic assets and capital ratios were
maintained. Ratios of non-performing assets remained within
historic norms.
3.10 Credit risk
The principal credit risk is counterparty default (i.e., failure
by thecounterparty to perform as specified in the contract) due to
financial impairment or for other reasons. Credit risk is generally
higher when a nonexchange-traded or foreign
exchange-traded financial instrument is involved. Credit risk is
reduced by dealing with reputable counterparties. The Fund manages
credit risk by monitoring its aggregate exposure to
counterparties.
Notes to the Balance sheet
31-12-2011 31-12-2010
4. Investments USD USD
4.1 Statement of changes in securities
Position as at 1 January 21.851.061 20.125.806
Purchases 8.528.034 2.665.932
Sales -5.332.752 -4.707.407
Unrealised price gains/losses on investments -10.207.805
3.488.913
Unrealised currency gains/losses on investments -2.212.764
740.121
Realised price gains/losses on investments 2.679.637
-134.222
Realised currency gains/losses on investments -117.375
-328.082
Position as at 31 December 15.188.036 21.851.061
__________________ ___________________
Historical cost 14.869.752 9.112.208
The portfolio comprises of shares, mainly listed.
The total unlisted shares held directly by the Fund amounted to
USD 163,073 (2010: USD 156,463). The portfolio breakdown as at 31
December 2011 is specified on pages 19 to 20 of this report.
4.2 Transaction costs
The transaction costs for the purchase of investments are
capitalized within the historical cost price and for sales the
transaction costs are discounted from the sales price. Transaction
costs in 2011 are USD 54,370 (2010: USD 33,426).
5. Cash at banks
This includes immediately due demand depositsat banks.
6. Receivables
6.1 Receivable on security transactions
These include transactions still unsettled as at the balance
sheet date.
6.2 Other receivables
These include other transactions still unsettled as at the
balance sheet date.
7. Current liabilities (due within one year)
7.1 Payable on security transactions
These include transactions still unsettled as at the balance
sheet date.
7.2 Due to redemptions
These include the debts in respect of the redemptions of shares
Himalayan still unsettled as at the balance sheet date.
7.3 Other liabilities, accruals and deferred income
Payable investment advisory fee 60.050 84.811
Payable administration fee 6.174 5.757
Payable auditors fee 19.166 36.499
Other expenses payable 33.560 33.019
118.950 160.086
-------------------- ------------------------
8. Shareholders' equity
The authorised share capital of the Fund is EUR 60,000 (2010:
EUR 60,000) and consistsof:
- Ordinary shares of EUR 0.01 each 5.000.100
- Priority shares of EUR 0.20 each 49.995
31-12-2011 31-12-2010
8.1 Issued capital number USD USD Ordinary shares:
Position as at 1 January 392.187 5.260 5.894
Sold 146.836 1.468 140
Purchased -69.591 -696 -327
Revaluation _______ 60 -447
Position as at 31 December 469.432 6.092 5.260
__________ __________________ __________________
Priority shares:
Position as at 1 January 49.995 14.230 14.230
Sold - - - Revaluation ______ - -
Position as at 31 December 49.995 14.230 14.230
_________ _________________ ___________________
Total issued capital 20.322 19.490
______________ ________________
As at 31 December 2011 the issued and subscribed share capital
amounts to: EUR EUR (Ordinary shares, par value EUR 0.01 (2010: EUR
0.01) 4.450.005 44.500 44.500 (Priority shares, par value EUR 0.20
(2010: EUR 0.20) 49.995 9.999 9.999
54.499 54.499
_______________ _______________
The Fund became open-ended on 7 April 2000. As at 31 December
2011 a total of 3,980,573 Ordinary Shares have been purchased,
meaning that 469,432 Ordinary Shares are still outstandingas at 31
December 2011. Ordinary Shares purchased by theFund are directly
charged against capital and share premium.
8.2 Share premium USD USD
Position as at 1 January 24.656.811 25.639.923
Received on shares sold Paid on shares purchased Revaluation 7.455.309 706.688
of outstanding capital
-3.422.734 -1.690.247
-60 447
Position as at 31 December 28.689.326 24.656.811
----------------- --------------------
8.3 General reserve
31-12-2011 31-12-2010
USD USD
Position as at 1 January -5.559.902 -16.323.605
Transferred from undistributed result 3.328.462 10.763.703
Position as at 31 December -2.231.440 -5.559.902
______________ ________________
8.4 Undistributed result
Position as at 1 January 3.328.462 10.763.703
Transferred to/from general reserve -3.328.462 -10.763.703
Total investment result -10.582.148 3.328.462
Position as at 31 December -10.582.148 3.328.462
______________ ________________
Three years Himalayan Fund N.V.
Net Asset Value (USD x 1,000)
Net Asset Value according to balance
31-12-2011 31-12-2010 31-12-2009
sheet 15.896 22.445 20.100
Less: value priority shares 14 14 14
15.882 22.431 20.086
__________________ _________________ ___________________
Number of Ordinary Shares
outstanding 469.432 392.187 410.804
Per Ordinary Share (USD)
Net Asset Value share 33,83 57,19 48,89
Notes to the Profit & Loss account
9. Income from investments
9.1 Dividends
This refers to net cash dividends including withholding tax.
Stock dividends are considered to be cost free shares. Therefore
stockdividends are not presented as income.
9.2 Interest income
Most of this amount was received on outstandingcash
balances.
9.3 Other income
From March 6, 2009 this refers to the charges of 0.35% received
on shares issued and repurchased.
These costs are to cover transaction costs in relation with the
purchase and sale of Ordinary Shares and are booked as an income
for the Fund.
01-01-2011 01-01-2010
10. Expenses 31-12-2011 31-12-2010
USD USD
10.1 Investment advisory fees
Advisory fee 267.841 325.727
Custody Fee and Charges 15.765 15.266
----------------- --------------------
283.606 340.993
----------------- --------------------
Expenses directly related to the management of investments, like
custody fees and transfer charges as well as other paying agent
fees, are deducted from the result. These expenses are included in
other investment management fees with the exception
of the transfer charges. Transfer charges are accounted for in
the investment revaluation reserve.
10.2 Other expenses
Administration Fees and Charges 76.614 70.885
Company Secretarial and Domiciliation Fees 41.465 39.360
Bank Expenses 13.057 10.183
Regulatory Fees and Charges 25.045 19.366
Legal Expenses -520 7.359
Listing Expenses 37.980 55.248
Audit Fees 47.527 34.168
Fiscal Compliance Fees 2.512 -
Fiscal Advisory Fees 22.304 19.660
Advertising and Promotion 43.649 22.473
Directors Fees 62.415 62.415
Board Expenses 28.265 47.983
Depreciation and Amortization - -
Miscellaneous 13.348 3.277
----------------- --------------------
413.661 392.377
----------------- --------------------
Audit fees include the audit of the financial statements by
theexternal auditor Deloitte amounting to USD 40,834 (2010: USD
31,563).
Expense ratio
The expense ratio (cost ratio) is calculated as follows: the
total expenses of the Fund divided by theaverage NAV*. The expense
ratio of the Fund for the reporting period is equal to: 3.72 %
(2010: 3.42 %).
Turnover ratio
The turnover ratio is calculated as follows: the total sum of
purchases plus sales minus subscriptions minus redemptions divided
by theaverage NAV *.
The turnover ratio of the Fund for the reporting period is equal
to: 15.91 % (2010: 23.23 %).
* - The average Net Asset Value of the Company for reporting
period is calculated as the sum of the Net Asset Value as per31
December 2010, 31 March 2011, 30 June 2011, 30 September 2011 and
31 December 2011 in the proportion
0.5 : 1 : 1 : 1 : 0.5, divided by the weighted number of
observations.
Comparison of real cost with cost according to Prospectus*
According to Prospectus Actual costs
USD USD
Management fee (1) 267.841 267.841
Administration fee (2) 76.614 76.614
Secretarial and Domiciliation fees (3) 41.465 41.465
Costs for the Board (4) 100.000 90.680
*- As per the Prospectus of 7 June 2010.
1) The Investment Advisor receives an annual fee of 1.5 per cent
(calculated on a daily basis) of the Net Asset Value of
theFund.
2) CACEIS NL is paid a fixed fee of EUR 50,000 per year for
administration services.
3) Inviqta has been appointed to provide domicile and company
secretarial services to the Fund for a fixed fee of
EUR 25,000 (exclusive VAT) per year.
4) The Prospectus states that the remuneration of the Directors
is subject to a limit of USD 100,000 in aggregateper year. In2011
the remuneration of the Directors was USD 62,415 (inclusive VAT) in
total so far. Directors fees per person are as follows: Ian
McEvatt*: USD 10,000 (2010: USD 10,000); Dwight Makins: USD 18,500
(2010: USD 18,500); Robert Meijer: USD22,015 (2010: USD 22,015);
Karin van der Ploeg*: USD 11,900 (2010: USD 11,900). Board expenses
(exclusive remuneration of the Directors) amount to USD 28,265 in
2011.
* Ian McEvatt is also a director of the Investment Advisor of
the Fund and Karin van der Ploeg is a partner of Inviqta. It has
been agreed that members of the Board who are also
directors/partners of the service providers of the Fund receive a
fixed annual management fee of USD 10,000.
Employees
The Fund has no employees.
Amsterdam, March 28, 2012
Board of Directors
Ian McEvatt, Chairman
Dwight Makins
Robert Meijer
Karin van der Ploeg
Portfolio breakdown
As per December 31, 2011
percentage of
total Net
Market value Asset Value
India USD %
Auto Ancilliary 1.259.208 7,9
160.000 Balkrishna 471.820
2.000 Bosch 255.178
30.000 Castrol 235.486
150.000 Exide 296.724
Construction 636.816 4,0
--------------- ---------------------- ------------------------------------------------------- -------------------
34.000 Larsen & Toubro 636.816
--------- ---------------------------- ------------------------------------------------------- -------------------
Consumer goods 2.130.393 13,4
------------------ ------------------- ------------------------------------------------------ --------------
130.000 EID Parry 462.056
----------- -------------------------- ------------------------------------------------------ --------------
11.250 Nestle India 867.471
----------- -------------------------- ------------------------------------------------------ --------------
200.000 Pidilite 543.263
----------- -------------------------- ------------------------------------------------------ --------------
80.000 Titan Industries 257.603
----------- -------------------------- ------------------------------------------------------ --------------
Energy 3.282.205 20,6
-------------- ------------------- ---------------------------------------------------------------- -----------------
110.000 Indraprastha Gas 778.109
-------- ------------------------- ---------------------------------------------------------------- -----------------
257.000 ONGC 1.241.808
-------- ------------------------- ---------------------------------------------------------------- -----------------
64.000 Reliance Industries 835.115
-------- ------------------------- ---------------------------------------------------------------- -----------------
260.000 Tata Power 427.173
-------- ------------------------- ---------------------------------------------------------------- -----------------
Financials 2.756.936 17,3
-------------- ------------------- ---------------------------------------------------------------- -----------------
42.000 Bank of Baroda 526.216
-------- ------------------------- ---------------------------------------------------------------- -----------------
76.000 Corporation Bank 500.966
-------- ------------------------- ---------------------------------------------------------------- -----------------
35.000 HDFC 429.748
-------- ------------------------- ---------------------------------------------------------------- -----------------
100.000 HDFC Bank 803.785
-------- ------------------------- ---------------------------------------------------------------- -----------------
89.926 Indian Bank 313.187
-------- ------------------------- ---------------------------------------------------------------- -----------------
180.000 Magma Fincorp 183.034
-------- ------------------------- ---------------------------------------------------------------- -----------------
Healthcare 1.068.847 6,7
-------------- ---------------------- ------------------------------------------------------------- -------------------
40.000 Cadila Healthcare 530.534
-------- ---------------------------- ------------------------------------------------------------- -------------------
170.000 FDC 268.101
-------- ---------------------------- ------------------------------------------------------------- -------------------
72.000 Opto Circuits 270.212
-------- ---------------------------- ------------------------------------------------------------- -------------------
Industrial
Manufacturing 1.591.409 10,0
--------------------- ----------------- ---------------------------------------------------------------- ----------------
17.000 Bharat Electronics 432.259
-------- ------------------------------ ---------------------------------------------------------------- ----------------
90.000 Crompton Greaves 213.709
-------- ------------------------------ ---------------------------------------------------------------- ----------------
262.500 Jain Irrigation 415.745
-------- ------------------------------ ---------------------------------------------------------------- ----------------
90.000 Tata Chemicals 529.696
-------- ------------------------------ ---------------------------------------------------------------- ----------------
Metals 762.540 4,8
--------------- ----------------------- ------------------------------------------------------------ ----------------
42.000 Jindal Steel & Power 358.390
-------- ------------------------------ ------------------------------------------------------------ ----------------
64.000 Tata Iron & Steel 404.150
-------- ------------------------------ ------------------------------------------------------------ ----------------
Technology 1.536.609 9,7
19.000 Infosys 990.215
25.000 TCS 546.394
Total Equity 15.024.963 94,5
Cash 871.096 5,5
Canbank mutual
fund 163.074
Net 708.022 4,5
NAV: 15.896.059
HIMALAYAN FUND N.V.
NOTICE OF THE ANNUAL GENERAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual General Meeting of
Shareholders of Himalayan Fund N.V. (the "Fund") will be held on
Thursday 7 June 2012 at 12h30 at Herengracht 124-128, 1015 BT
Amsterdam.
The annual report of Himalayan Fund N.V. 2011 is now available.
Copies of the annual report 2011 and the agenda are published on
the website of the Fund: http://www.himalayanfund.nl and may be
obtained free of charge at the registered office of the Fund:
Himalayan Fund N.V.
Legmeerdijk 182
1187 NJ Amstelveen
The Netherlands
T/F 020-6411161
himalayan@inviqta.nl
The Board of Directors,
April 12, 2012
Shareholders (and other persons/entities entitled to attend the
Annual General Meeting) registered in the administration of the
intermediaries as defined in the Securities Giro Act (Wet giraal
effectenverkeer) ("Intermediaries" or "Intermediary") on Thursday10
May 2012 (the "Registration Date") who have notified their
attention to attend the Annual General Meeting will have access to
the meeting;
A shareholder shall only be entitled to attend and vote at the
Annual General Meeting whether in person or by proxy if such
shareholder has deposited documentary proof of his shareholding
obtained from their Intermediary, at the Registration Date at the
registered office of the Fund (see above) at the latest at Monday 4
June 2012 before 4 p.m. in respect of which the shareholder shall
be issued a receipt. A receipt must be presented to gain entry to
the meeting;
Any shareholder shall be entitled to attend and vote in person
or by proxy at the above meeting;
A shareholder may appoint one or more proxies to attend and, on
a poll, vote instead of that shareholder. A proxy need not be a
shareholder of the Fund;
All instruments of proxy must be deposited at the registered
office of the Fund at the latest at Monday 4 June 2012 before 4.00
p.m. The lodging of a form of proxy does not prevent a shareholder
from attending and voting if he wishes;
Persons who wish to attend the Annual General Meeting may be
requested to furnish proof of their identity by means of a valid
identity document.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BKBDDPBKDNQD
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