TIDMHYF
RNS Number : 4961K
Himalayan Fund N.V.
22 August 2012
Half Yearly Report 2012
(partial, please refer to www.himalayanfund.nl for the complete
version)
Directors' Report
The Fund
The Net Asset Value (NAV) per share of your Fund was US$35.03 on June 30(th) 2012, 3.6% higher than the closing
NAV on
December 31(st) , 2011. Over the same period, the Fund's performance benchmark, the S&P CNX Nifty index in US$
terms,
rose by 8.7%. Thus, your Fund underperformed its benchmark by 5.1%. For comparison purposes, the Transaction
Price for
the Fund's shares was US$34.49 on January 6(th) , the first Execution Day of 2012 and on June 29(th) , the last
Execution Day of
the period under review, the Transaction Price was US$34.01, a decline of 1.4%. Over the comparable period,
the
benchmark index gained 4.7%.
The Market
In the first half of 2012, the MSCI World Index grew by 4.2%, a return comparable to the same period in 2011.
The
components of the return, however, tell the tale of the markets in the first half of this year. The US market
gained 8.3% as
optimism that the self-sustaining characteristics of the private sector would overcome a policy standoff typical
of an election
year. Companies, especially those with significant overseas operations or sales, have built up large cash reserves
ready to
finance growth in a sustained recovery. Eurozone markets, on the other hand, retreated by 2.2%, as growth slowed
widely
and company earnings retreated. Policy paralysis in the face of the worsening Euro crisis added to volatility
and negative
sentiment. Emerging markets overall grew by 3.6%, with Asia contributing 3%.
Against this external picture, Indian markets were generally strong in the first half but for foreign investors
returns were cut
by a sharp devaluation of the Rupee. A rising current account deficit and a lack of policy action on the fiscal
deficit
undermined confidence in the currency. The major contributors to the Indian trade deficit were high energy prices
and high
imports of gold. As the year progressed, the softening global economy has undermined demand forecasts for energy,
so the
prices have retreated but the effect for India has been muted by devaluation. The government increased duty
on gold
imports and the volume dried up in April. Further, as the external economy continues to weaken, merchandise
exports are
declining but imports have also been falling, so the currency may have bottomed. All of this has happened without
any sign
of a balance of payments crisis as happened in 1991 and this is worth a comment.
Slow reform of Foreign Direct Investment (FDI) regulations and a controversial tax issue have undermined investor
sentiment. FDI inflows have slowed dramatically, making the job of the Reserve Bank in managing the foreign
reserves and
the balance of payments more difficult. Portfolio inflows have been sustained and stand at nearly $10billion
so far but the
shortfall in FDI is unwelcome given the current account situation. The RBI has made two key moves in response.
First it
eased conditions for large corporates to replace expensive domestic borrowings with lower rate foreign commercial
borrowings and a substantial volume of transactions resulted. Companies were willing to bet that cheaper external
credit
repatriated at a depreciated exchange rate could be repaid at a better rate at maturity. Second, it improved
access to high-
yielding domestic rupee deposits by non-resident Indians (NRIs) and sharply boosted inflows. The consequence
of these
two moves has been to cushion the reduction in foreign reserves due to the current account deficit and forestall
the risk of a
currency crisis.
Indian GDP growth has slowed from the 8-9% range down to the 5-7% range and although some of this has been due
to
external factors domestic policy paralysis is also responsible. A fractious coalition government, facing an
election in two years
and rising demands for transparency in the administration has frozen decision-making to a frustrating degree.
The RBI
stands ready to provide monetary stimulation but will not risk the inflationary impact in the absence of some
fiscal
consolidation, in particular a reduction in the subsidy burden on energy and fertilizer prices and the cost
of food welfare
programmes. In addition, civil servant fears of being engulfed by anti-corruption action is obstructing approvals
of
development projects and slowing down public sector and private sector investment activity. Thus the Indian
consumer has
been the predominant growth driver this year, with rural demand making an exceptional contribution after two
years of
strong growth in the agricultural sector.
Former Finance Minister Mukherjee has been elected President of India. He has been replaced by P. Chidambaram,
a
former incumbent identified with periods of strong growth in the economy and notable reforms. This changeover
has ignited
expectations of policy and reform action to improve investor sentiment and mobilize development projects to
stimulate a
return to higher growth rates. Prime Minister Singh has warned ministers that they must act decisively, to avoid
a credit
rating cut which would make their job more difficult. He has asked an expert panel to make recommendations on
anti tax
avoidance regulations by early September. In the midst of all this movement, action is also expected on key
reforms such as
FDI restrictions in sectors like multi-brand retail and aviation. A weak monsoon this year may affect consumer
demand, so
boosting investment demand through a revival of government action is essential to accelerating GDP growth.
Our portfolio performance was weak in the first half, characterised by some exceptional stock price movements.
Indraprashtha Gas, a city gas distributer in the New Delhi area was hit by a dramatic tariff order which saw
its share price
cut by half. The order has since been quashed in the High Court but the stock was under a cloud for the remainder
of the
period. Bharti Airtel is another stock which has spent much of the period under a regulatory cloud. A Supreme
Court
decision to cancel 122 licenses for 2G spectrum because of a scandal surrounding their issue seemed to clear
the horizon
but even the market leader's stock underperformed significantly. Infosys and Jain Irrigation suffered from weak
performance
and a lack of earnings visibility. These four stocks were the major contributors to the underperformance in
the first half. On
the positive side, our re-entry into the Auto sector saw ancillary companies Exide, Castrol, Bosch and Balkrishna
make
excellent contributions. In other sectors, Larsen & Toubro, HDFC Bank, Corporation Bank and Titan Industries
also made
strong contributions.
The Indian markets still trade at attractive levels of valuation in an historic context. The domestic policy
environment may
see some improvement this quarter, which would undoubtedly stimulate the market. On the external front, there
is no
evidence that the Eurozone is in any hurry to solve its existential crisis but mid-summer data from the US is
looking
encouraging. Meanwhile, China seems to be moving towards domestic stimulus.
Administration
The Fund's Annual Meeting of Shareholders was held on June 7(th) in Amsterdam; the Annual Report for 2011 was
adopted by
unanimous vote and the Directors were discharged from their responsibilities for the year.
The Fund's website provides access to all regulatory and statutory information on the Fund, the address is:
www.himalayanfund.nl
Also, a fund blog is now available at:
http://himalayanfund.blogspot.com/
This provides regular comment which may be of interest to shareholders including a link to the Weekly Market
Commentary.
Please note that the blog's content is opinion only and does not necessarily represent Fund policy or strategy.
Conclusion
The Directors would like to thank our loyal shareholders for their continuing commitment to the Fund in these
most difficult
market conditions. We are taking action to generate new sources of distribution, to keep costs as low as possible
and to
adapt the portfolio to evolving market conditions.
Amsterdam, August 20, 2012
Board of Directors
Ian McEvatt, Chairman
Dwight Makins
Robert Meijer
Karin van der Ploeg
Financial statements
Himalayan Fund N.V.
Semi Annual Report 2012
Balance sheet
(before profit appropriation)
30-06-2012 31-12-2011
USD Notes USD
Investments
Securities 15.181.715 4 15.188.036
Short term receivables
Receivable on security transactions - 5,1 337.678
Receivables from subscription - -
Dividend receivable 74.531 5,2 -
Other receivables - 5,3 120.000
74.531 457.678
Other assets
Cash at banks 67.032 6 719.982
Current liabilities (due within one year)
Payable on security transactions - 7,1 345.474
Due to redemptions - 7,2 5.212
Other liabilities, accruals and deferred income 155.010 7,3 118.950
Total current liabilities 155.010 469.636
Total of receivables and other assets
less current liabilities -13.447 708.024
Total assets less current liabilities 15.168.268 15.896.060
Shareholders' equity
Issued capital 19.718 8.1 20.322
Share premium 27.383.794 8.2 28.689.326
General reserve -12.813.588 8.3 -2.231.440
Undistributed result current year 578.344 8.4 -10.582.148
Total shareholders'equity 15.168.268 15.896.060
Net Asset Value per share 35,03 33,83
Profit & Loss account
01-01-2012 01-01-2011
30-06-2012 30-06-2011
USD Notes USD
Income from investments
Dividends 159.460 9.1 44.165
Interest income - 9.2 0
Other income 4.392 9.3 8.648
163.852 52.813
Capital gains/losses
Unrealised price gains/losses on investments 1.020.133 4 -3.951.737
Unrealised currency gains/losses on investments -444.841 4 29.147
Realised price gains/losses on investments 300.566 4 1.901.961
Realised currency gains/losses on investments -165.215 4 -40.505
Other exchange differences -20.366 -19.702
690.277 -2.080.836
Expenses
Investment advisory fees 129.767 10.1 144.192
Other expenses 161.598 10.2 228.821
291.365 373.013
Tax 15.580 -
Total investment result 578.344 -2.401.036
Total investment result per ordinary share 1,34 -6,93
Statement of Cash Flows
01-01-2012 01-01-2011
30-06-2012 30-06-2011
USD notes USD
Cash flow from investing activities
Income from investments 163.852 9 52.813
Expenses -291.365 10 -373.013
Tax 15.580 -
Result of operations -111.933 -320.200
Purchases of investments -499.580 4 -1.307.347
Sales of investments 1.216.544 4 3.488.237
716.964 2.180.890
Change in short term receivables 383.147 6 -18.903
Change in current liabilities -314.626 7 9.258
68.521 -9.645
Cash flow from investing activities 673.552 1.851.045
Cash flow from financing activities
Received on shares issued 86.355 8 67.633
Paid on shares purchased -1.392.491 8 -2.439.899
Cash flow from financing activities -1.306.136 -2.372.266
Other exchange differences -20.366 -19.702
Change in cash and cash equivalents -652.950 -540.923
Cash and cash equivalents as at 1 January 719.982 775.892
Cash and cash equivalents as at 30 June 67.032 234.969
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 half yearly report is prepared in 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 stock market 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 liabilities in 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 currencies
are translated
at the exchange rate as per transaction date.
Rates of exchange as at 30 June 2012, equivalent of 1 US dollar:
Euro 0,78799 Srilanka Rupee 133,90001
Indian Rupee 55,83499 Bangladesh Taka 81,81498
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 recognition principles
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
at the 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,
and as a result, are not taken to the profit and loss account.
2.5 Cash flow statement
The Cash Flow statement has been prepared according to the indirect method.
3. Risk Management
Investing in emerging and 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 currencies whereas 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 Political Economy
The Fund's portfolio may be adversely affected by changes in exchange rates and controls, interest rates, government
policies, inflation, taxation, social and religious instability and 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 occurrence and 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 the RBI. 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 the counterparty 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
30-06-2012 31-12-2011
4. Investments USD USD
4.1 Statement of changes in securities
Position as at 1 January 15.188.036 21.851.061
Purchases 499.580 8.528.034
Sales -1.216.544 -5.332.752
Unrealised price gains/losses on investments 1.020.133 -10.207.805
Unrealised currency gains/losses on investments -444.841 -2.212.764
Realised price gains/losses on investments 300.566 2.679.637
Realised currency gains/losses on investments -165.215 -117.375
Position as at 30 June 15.181.715 15.188.036
Historical cost 14.288.139 14.869.752
The portfolio comprises of shares, mainly listed.
The total unlisted shares held directly by the Fund amounted to USD 154,484 (31 December 2011 : USD 163,074).
The portfolio breakdown as at 30 June 2012 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 2012 are : USD 6,004 (2011: USD
19,770).
5. Receivables
5.1 Receivable on security transactions
These include transactions still unsettled as at the balance
sheet date.
5.2 Dividend receivable
These include dividend accruals which become payable after balance sheet date.
5.3 Other receivables
These include other transactions still unsettled as at the balance sheet date.
6. Cash at banks
This includes immediately due demand deposits at banks.
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 56.526 60.050
Payable administration fee 5.845 6.174
Payable auditors fee 27.151 19.166
Other expenses payable 65.488 33.560
155.010 118.950
8. Shareholders' equity
The authorised share capital of the Fund is EUR 60,000 (31 December 2011: EUR 60,000) and consists of:
- Ordinary shares of EUR 0.01 each 5.000.100
- Priority shares of EUR 0.20 each 49.995
30-06-2012 31-12-2011
8.1 Issued capital number USD USD
Ordinary shares:
Position as at 1 January 469.432 6.092 5.260
Sold 2.060 21 1.468
Purchased -38.882 -389 -696
Revaluation -236 60
Position as at 30 June 432.610 5.488 6.092
Priority shares:
Position as at 1 January 49.995 14.230 14.230
Sold - - 0
Revaluation - 0
Position as at 30 June 49.995 14.230 14.230
Total issued capital 19.718 20.322
As at 30 June 2012 the issued and subscribed share capital amounts to: EUR EUR
Ordinary shares, par value EUR 0.01 (31 December 2010: EUR 0.01) 4.450.005 44.500 44.500
Priority shares, par value EUR 0.20 (31 December 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 30 June 2012 a total of 4,017,395 Ordinary Shares have
been purchased, meaning that 432,610 Ordinary Shares are still outstanding as at 30 June 2012. Ordinary Shares
purchased by the Fund are directly charged against capital and share premium.
8.2 Share premium USD USD
Position as at 1 January 28.689.326 24.656.811
Received on shares sold 86.334 7.455.309
Paid on shares purchased -1.392.102 -3.422.734
Revaluation of outstanding capital 236 -60
Position as at 30 June 27.383.794 28.689.326
30-06-2012 31-12-2011
USD USD
8.3 General reserve
Position as at 1 January -2.231.440 -5.559.902
Transferred from undistributed result -10.582.148 3.328.462
Position as at 30 June -12.813.588 -2.231.440
8.4 Undistributed result
Position as at 1 January -10.582.148 3.328.462
Transferred to/from general reserve 10.582.148 -3.328.462
Total investment result 578.344 -10.582.148
Position as at 30 June 578.344 -10.582.148
Three years Himalayan Fund N.V.
30-06-2012 31-12-2011 31-12-2010
Net Asset Value (USD x 1,000)
Net Asset Value according to balance
sheet 15.168 15.896 22.445
Less: value priority shares 14 14 14
15.154 15.882 22.431
Number of Ordinary Shares
outstanding 432.610 469.432 392.187
Per Ordinary Share
Net Asset Value
share (USD) 35,03 33,83 57,19
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 outstanding cash 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.
01-01-2012 01-01-2011
10. Expenses 30-06-2012 30-06-2011
USD USD
10.1 Investment advisory fees
Advisory fee 124.767 134.498
Custody Fee and Charges 5.000 9.694
129.767 144.192
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 33.180 36.705
Company Secretarial and Domiciliation Fees 19.275 20.933
Bank Expenses 5.282 6.211
Regulatory Fees and Charges 12.511 13.729
Legal Expenses 3.239 5.149
Listing Expenses - 38.329
Audit Fees 23.167 19.780
Fiscal Advisory Fees 9.393 1.762
Advertising and Promotion 13.438 17.162
Directors Fees 31.208 31.208
Board Expenses 9.782 29.891
Depreciation and Amortization - -
Miscellaneous 1.124 7.963
161.599 228.822
Expense ratio
The expense ratio (cost ratio) is calculated as follows: the total expenses of the Fund divided by the average
NAV*.
The expense ratio of the Fund for the reporting period is equal to: 3.44 % (2011: 3.87 %).
Turnover ratio
The turnover ratio is calculated as follows: the total sum of purchases plus sales minus subscriptions minus
redemptions
divided by the average NAV *.
The turnover ratio of the Fund for the reporting period is equal to: 2.8 % (2011: 23.73 %).
* - The average Net Asset Value of the Company for reporting period is calculated as the sum of the Net Asset
Value as
per 31 December 2011, 31 March 2012 and 30 June 2012 in the proportion 0.5 : 1 : 0.5, divided by the weighted
number
of observations.
Comparison of real cost with cost according to Prospectus*
According to Actual costs
Prospectus
USD USD
Management fee (1) 124.767 124.767
Administration fee (2) 33.180 33.180
Secretarial and Domiciliation fees (3) 19.275 19.275
Costs for the Board (4) 100.000 40.989
*- 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
the Fund.
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 aggregate
per year.
In 2012 the remuneration of the Directors was USD 31,208 (inclusive VAT) in total so far. Directors fees per
person are as
follows: Ian McEvatt*: USD 5,000 (2011: USD 10,000); Dwight Makins: USD 9,250 (2011: USD 18,500); Robert Meijer:
USD 11,008 (2011: USD 22,015); Karin van der Ploeg*: USD 5,950 (2011: USD 11,900). Board expenses (exclusive
remuneration of the Directors) amount to USD 9,782 in 2012.
* 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 US$ 10,000.
Employees
The Fund has no employees.
Amsterdam, August 22, 2012
Board of Directors
Ian McEvatt, Chairman
Dwight Makins
Robert Meijer
Karin van der Ploeg
This information is provided by RNS
The company news service from the London Stock Exchange
END
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