TIDMHYF
RNS Number : 4556F
Himalayan Fund N.V.
24 April 2014
Contents
Multiple year overview Himalayan Fund
N.V. 3
Profile 4
Chairman's Letter 6
Directors' Report 7
Financial statements 11
Balance sheet 12
Profit & Loss account 13
Statement of Cash Flows 14
Notes 15
Notes to the Balance sheet 17
Notes to the Profit & Loss account 20
Portfolio Breakdown 22
Other information 23
Independent Auditor's Report 24
Himalayan Fund N.V.
open-end investment Fund (in Dutch: beleggingsmaatschappij met
veranderlijk kapitaal)
Registered office: c/o Inviqta
Legmeerdijk 182
1187 NJ Amstelveen
The Netherlands
Board of Directors: Ian McEvatt, Chairman
Dwight Makins
Robert Meijer *
Karin van der Ploeg *
Administrator: CACEIS Bank Luxembourg Amsterdam Branch
De Ruyterkade 6-i
1013 AA Amsterdam
The Netherlands
Custodian: Citibank
3rd Floor, Trent House
G Block, Plot No 60
Bandra Kurla Complex
Bandra (East) Mumbai 400 051
India
Listing Agent / Bank: ABN AMRO Bank N.V.
Auditor: Mazars Paardekooper Hoffman Accountants N.V.
P.O. Box 7266
1007 JG Amsterdam
For information or Prospectus: Website: http://www.himalayanfund.nl
Email: himalayan@inviqta.nl
Phone: +31 (0) 20 641 1161
* Dutch resident
Multiple year overview Himalayan Fund N.V.
Net Asset Value (USD x 1,000)
Net Asset Value according to balance
31-12-2013 31-12-2012 31-12-2011 31-12-2010 31-12-2009
Profile
General
Himalayan Fund N.V. (the "Fund") is an open-end investment
company (in Dutch: beleggingsmaatschappij met veranderlijk
kapitaal) incorporated under Dutch Law with its statutory seat
in Amsterdam, The Netherlands. The Fund has 4,450,005 (of which
304,103 are outstanding) Ordinary Shares and 49,995 Priority Shares
in issue.
Objective
The Fund's principal objective is to generate long-term capital
appreciation for its shareholders by investing in the stock markets
of the Indian sub-continent. The Fund currentlyinvests only in the
Indian stock markets; the discretion to invest a small proportion
of the portfolio in contiguous markets is not currently exercised.
The Fund is registered as a Foreign Investment Institution (FII)
with the Securities and Exchange Board of India which enables it to
hold its own investments directly with its custodian, Citibank NA
in Mumbai.
Open-end status
The Fund is classified as an open-end investment company in The
Netherlands and its Ordinary Shares are traded weekly through the
Euronext Fund Service of NYSE Euronext Amsterdam. Liquidity is
assured by the Fund buying and selling its own shares in the market
at a Transaction Price based on Net Asset Value and holding
re-purchased shares in treasury pending re-sale.
Investment advisor
The Investment Advisor is Iceman Capital Advisors Ltd. (Iceman),
appointed by shareholders in the annual general meeting on June
7th, 2006 under an investment advisory agreementof the same date.
Iceman is regulated by the Jersey Financial Services Commission.
The Investment Advisor resigned as per 1 October 2012. As from 1
October 2012 the Fund has
entered into agreements with Mr. Ian McEvatt and IndAsia Fund
Advisors Pvt. Ltd. in Mumbai. Both parties provide the Fund with
research reports.
Registered office
The Fund has appointed Inviqta, a partnership of lawyers
established in Amstelveen, The Netherlands, to provide
domiciliation and company secretarial services.
Administrator
CACEIS Bank Luxembourg Amsterdam Branch established in
Amsterdam, The Netherlands, has been appointed by the Fund as the
Administrator of Himalayan Fund N.V. CACEIS Bank Luxembourg is an
integral part of an international fund administration network
operating under the CACEIS name.
Corporate Governance
The Board of Directors has adopted a Code of Governance
(Principles on Fund Governance) practicewhich is available for
downloading from the official website. The Fund does not actively
use its voting rights at shareholder meetings of companies in which
it has invested.
Taxation
In order to qualify as a Fiscal Investment Institution in The
Netherlands, the Fund is obliged to distribute all of its fiscal
income and will then be subject to 0% rate of Dutch corporate
income tax on its profits. It is the intention that the Fund is
managed in such a way as to maintain this status.
The Fund is registered as a Foreign Investment Institution with
the Securities and Exchange Board of India: this enables the Fund
to enjoy the benefits of the tax treaty between India and The
Netherlands, so that the proceeds of investment in India can be
received free of tax.
For the benefit of UK investors, the Fund has registered with
Her Majesty's Revenue and Customs (HMRC) as a Reporting Fund with
effect from financial year 2011. Subject to regular reporting
requirements, investment in the Fund by UK tax payers will enjoy
equivalent treatment to domesticmutual funds for UK tax purposes.
It is the Fund's intention to maintain compliance with the
requirements of Reporting Fund status.
When the Fund has held investments in Bangladesh and Sri Lanka
in the past, dividends received have been subject to withholding
tax which has been carried as an expense in the profit and loss
account. No capital gains tax is levied in Sri Lanka; the Fund has
been able to claim exemption from capital gains tax in Bangladesh
due to its tax exempt status in The Netherlands.
Chairman's Letter 2013
Dear Shareholders,
In 2013, global equity markets were subject to unprecedented
liquidity swings which drove a sharp differentiation between
developed andemerging market performance. The MSCI World Index
generated a return of 24.1% for the year, driven by individual
developed market returns of between 15% and 30%, notably an
historic annual return of 29.9% in the US. In contrast, the MSCI
Emerging Markets Index saw a decline of 4.98% for the year,
featuring, amongst Asian markets, losses of between 10.5% for China
A shares and25% in Indonesia. In India, the Nifty (S&P CNX
Nifty 50 Index) added 6.8% in local currency terms but with a 13%
depreciation of the Rupee, this translated into a loss of 6.2% in
US dollar terms. The Net Asset Value per share of your Fund fell by
$2.90 from
$38.54 to $35.64 in 2013, a decline of 7.5%, so it is with
regret that I haveto report underperformance of the Fund by 1.3%
relative to
the Nifty in US dollar terms.
Global economic growth struggledto sustain its recovery in 2013
with weak growth in the United States and emerging weakness in
China as the major features. Against such an uncertain background,
investor sentiment was variable at best and subject to dramatic
swings, especially in response to what became known as the
"tapering tantrums". Quantitative Easing (QE) in the US was
perceived to have driven equity market valuations to extended
levels so the prospect of its withdrawal ("tapering") became a
market bogeyman. Thefinancial media succeeded in equating reduction
of QE with monetary tightening and the bond market reacted by
speculating on how soon interest rates would rise. The success of
QE as a domestic economic stimulus was limited by the fact that so
much of the liquidity generated was directed to investment in
emergingmarkets where returns were expected to be greater. Thus the
threatof
"tapering" led to the withdrawal of liquidity from emerging
markets, undermining equity markets and currencies. Countries
regarded as weakened by fiscal and current account deficits were
especially hard hit and this included India, which at one time
experienced depreciation of some 20%.
A little-noticed effect of the "tapering tantrums" around
mid-year was the fact that US bond market speculation on interest
rate rises killed the domestic mortgage market. This had the effect
of slowing the pace of home-building and hence the overall economic
recovery through the summer. As a result, the actual implementation
of "tapering" by the Fed was postponed until 2014. In the meantime,
the Fed has educated the markets to the fact that the reduction of
stimulus was not monetary tightening. The timing of interest rate
rises will depend on the sustained strength of economic recovery
and job-creation and is probably still more than a year away.
Thus India in 2013 was exposed to verypowerful external pressure
from volatility in portfolio liquidity flows (hot money) as well as
weak global growth. Domestically, it was also under a cloud from
weakening domestic demand, very low private sector investment and
delays in public sector investment due to problems in getting
environmental and other official clearances. Further, the
combination of an upcoming generalelection and vigorous exercise of
freedom of information act enquiries brought about decision
paralysis at various levels of government.
There were notable exceptions to theparalysis, however. The
Finance Minister held his nerve in restraining public expenditure
to meet his target of 5% of GDP. He also pushed hard for
disinvestment programmes and the likes of mobile telephonyspectrum
sales to generate capital inflow to help with the fiscal deficit.
He was also responsible for bringing about a turning point in
investor sentiment, with the appointment of a new Reserve Bank of
India governor, Raghuram Rajan who took office in September.
This
former academic with additional background at the IMF was
immediately effective in restoring confidence amongst investors by
taking
action to control the current account deficit, restrain
inflation, boost reserves and broadly re-assert the effectiveness
of the RBI. His reforming efforts continue.
Managing a portfolio of Indian stocks in 2013 was very
challenging. Although the net flow of portfolio investment was
positive for the year, the effect on the market was heavily
concentrated. Foreign investors were the dominant influence and the
main channels were regional ETFs and sovereign wealth funds. As a
result, buying and selling was concentrated in a limited menu of
shares with sometimes no more than five shares driving the entire
movement in the Nifty Index. Thus the market was being driven by
liquidity rather than fundamentals which had the additional effect
of ensuring that news on a stock would drive the price sharply up
or down depending on whether it was positive or negative.
We took a fairly defensive approach with the portfolio
throughout the year, with steady positions in Financials, Energy
and Consumer stocks. For excess returns, we looked to companies
with strong export earnings in the IT and Pharmaceutical sectors.
We held a
long-term position on infrastructure development through Larsen
and Toubro for its quality of management and IDFC for its pivotal
position in financing major projects. Early in the year, we
suffered two significant losses as one of our Pharmaceutical stocks
was hit by the loss of export volumes following a failed USFDA
inspection and our sole public sector bank holding was affected
by
expectations of rising loan loss provisions. We were unable to
recover these setbacks entirely, in spite of excellent performance
from ourIT and remaining Pharmaceutical holdings. These early
setbacks almost entirely account for the performance shortfall in
the Fund for the year.
We continue to pursue a strategy of holding a limited number of
stocks, selected for their long-term earnings prospects as well as
governance standards. We believe in having some highly concentrated
positions in the best companies we can find and saw the benefits of
this in the performances of Infosys, TCS, Lupin, Torrent
Pharmaceuticals and Pidilite Industries in 2013. This year, we see
optimism in the market driven by the expectation of a decisive
outcome to the general election which is now under way. Indian GDP
growth has passed a trough even though recovery may be slow. Moving
from the 5-6% range to 6-7% in the next year may be the most we can
expect but a new government with a decisive mandate can leverage
the benefits already being generated by a new hand on the wheel at
the RBI. The key will be to regenerate some impetus in public
sector infrastructure development and hence revive private sector
investment and get the three main drivers of GDP moving together
again: consumer demand, public investment and private
investment.
May I close by once again thanking our continuing shareholders
for the loyalty and commitment to theFund and also by thanking our
research partners, Indasia Funds Advisors for their continuing
efforts on our behalf. We continue to seek ways of generating new
inflows for the Fund and are hopeful of some success this year as
sentiment on emerging markets in general and India in particular,
improves.
Ian McEvatt
22 April 2014
Directors' Report 2013
The Fund
In the Financial Year 2013, which ran from January 1st to
December 31st, the Net Asset Value (NAV) per share of the Fund fell
from
$38.54 to $35.64, a difference of 7.5%. The first Execution Day
on NYSE Euronext Amsterdam in 2013 was January 4th, when the
Transaction Price for the Fund's OrdinaryShares was $39.31; the
last Execution Day was December 27th, when the transaction Price
was $35.79. The difference of $3.52 represented a decline of 8.9%.
Between the same two dates, the S&P CNX Nifty Index in US
Dollar terms declined by 7.1%. Thus the Transaction Price
underperformed the Fund's performancebenchmark by 1.8% in the
holding period in question.
At the start of 2013, there were 366,411 OrdinaryShares of the
Fund in the hands of shareholders. By the end of the year, the
number had fallen to 304,103, a drop of 17.0%. The emerging markets
generally saw consistent withdrawals of foreign portfolio flows, in
particular those countries showing weaknesses in their fiscal or
current account balances. In the circumstances, with developed
markets far outperforming in 2013, net repurchases of the level
experienced by the Fund were less than might have been expected.
Since the turn of the year, however, the decision to exit the
Indian market might appear to have been ill-timed, as sentiment has
improved dramatically and the market has been reaching record highs
as foreign portfolio flows have accelerated again.
The Portfolio
Any kind of hope that the approval processes for public
infrastructure projects would lead to a revival of private sector
investment and hence a rapid recovery of GDP growth was frustrated
in 2013. Inflation remained a problem throughout the year, limiting
the scope for monetary policy to be used as a stimulus. Fiscal
policy was also constrained as weak consumer confidence dented
aggregate
demand, further depressing growth and direct as well as indirect
tax collection. An excellent monsoon failed to dent food price
inflation, so a new governor of the RBI was obliged to maintain a
hawkish stance on managing inflation expectations, until the
numbers finally started to improve towards year-end. The new
governor did, however, introduce technical and operational
adjustments to the RBIs
toolbox, which had a noticeably positive impact on the current
account deficit and improved the transmission mechanism for
monetary
policy action. Specific actions in the final quarter had the
effect of strengthening defences against the reduction of QER
stimulus in the
US and locking in carry-trade type transactions for the longer
term. Foreign Reserves improved steadily.
For his part, the Finance Minister scored an instant success
with the appointment of Raghuram Rajan as governor of the RBI and
was as good as his word in holding the government to a fiscal
deficit target of 4.8% of GDP. This was difficult and by no means
pretty, as delays in privatizations and a shortfall in tax
collections drove him to increasingly one-off tactics but he was
successful in preventing a wave of election pump-primingthrough
irresponsible handouts. It must be said, however, that the
impending election, along with a rising public reaction to stories
of corruption, had a chilling effect on decision making at the
centre as the year progressed. Thus, an increasing number of cases
about corrupt allocation of licenses and influence-peddling are
before the courts and a long backlog of clearances for public
sector investment projects has built up. The markets anticipate a
decisive, business-friendly outcome to the election on May 16th,
bringing the prospect of a more stable and effective government and
an acceleration of growth.
We began the year with a portfolio of 24 stocks, with a
concentration of 58.7% in Nifty constituent stocks and 57.6% in the
top ten holdings; by the end of the first quarter, we held the same
number of stocks but the concentration in our top ten had increased
while theNifty representation decreased slightly. The portfolio
outperformed its benchmark by 1.5% in the first quarter. By
mid-year, we had cutthe number of holdings to 22, increasing the
concentration in our top ten to 61.6% and slightly reducing our
Nifty representation to
56.4%; the portfolio underperformed its benchmark by 2.2% in the
second quarter. In the third quarter, we reduced the number of
holdings to 21 stocks; the concentration in our top ten holdings
fell back to 60.2% but the Nifty representation increased to 58.4%.
The portfolio underperformed its benchmark by 1.7%. In thefinal
quarter, the number of holdings increased again, to 22;
concentration in our top ten increased sharply, to 68.1% and Nifty
representation increased to 62.8%; the portfolio outperformed its
benchmark by
0.5%. At no time did the value of any one stock exceed 10% of
the portfolio. As no stock exceeded 10% of the portfolio, the sum
of all holdings above 10% never exceeded 40% of the portfolio.
In 2014 so far, the market has been driven by increasing
optimism for an election outcome which will deliver a decisive,
growth orientated government. It is widely expected that the BJP,
led by NarendraModi, Chief Minister of Gujarat, will form the next
government coalition and deliver at the national level the same
kind of sustained growth and business friendly administration as
Gujarat has enjoyed. Even with consistently strong foreign
portfolio and the Nifty reaching new record highs, the overall
market still trades at a valuation level which is around its
long-term average. We would be cautious about how quickly growth
can be accelerated butleading Indian companies have reorganized
their balance sheets and managed their costs effectively enough
that earnings forecasts have passed the bottom of their cycle and
are being revised upwards.
Risk Management and Administration
The legal structure of the Fund did not change in 2013. The
Board is still in direct control of the investment management
through the Investment Committee, which is convened by the
Chairman, who also acts as record-keeper. Caceis Bank Luxembourg
Amsterdam Branch (formerlyCaceis Netherlands NV) continues as the
Administrator of the Fund and calculates the Net Asset Value on a
weekly basis. Citibank Mumbai is the Custodian of the Fund. During
the year under review and so far as your Board is aware, the Fund
has effectively operated in conformity with the Administrative
Organization and Internal Control procedures.
In 2013, your Board held four formal Board Meetings and
conducted one Annual General Meeting. The following administrative
and regulatory actions were undertaken:
28 March 2013 Financial leaflet was replaced by the "essentiële
beleggersinformatie" document (Key investor
document "KID");
5 April 2013 Minor changes in the Principles of Fund Governance;
29 May 2013 Kasbank appointed as bank, clearing/listing agent and fund agent;
25 June 2013 AGM, appointment of Mazars Paardekooper Hoffman
Accountants N.V. to comply with Dutch rules on appointment of
auditors and tax advisors applicable at the time;
30 August 2013 Update of the prospectus (A second supplementary
sheet to the prospectus has incorporated all changes due to the
change of the auditor and the appointment of KasBank).
At this time, your board is involved in ensuring that your Fund
will be compliant with AIFMD (Alternative Investment Fund
Management Directive) when it comes into effect later in the year.
This affects your Fund because it is a public listed company.
Compliance will involve appointing an EU based depositary and your
Board is on the point of doing so.
In preparation for each quarterly Board meeting, the Fund's
Reporting Entity (Inviqta) prepared a checklist of compliance with
corporate governance policy for the Oversight Entity (Mr. Dwight
Makins) and the Board which was discussed during each Board
meeting. There havebeen no breaches of the corporate governance
policy during the year 2013.
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 havenot been used for securities'
lending. As a matter of policy, the Fund does not hedge currency
exposure in the portfolio. In 2013, theRupee depreciated by 13%
against the US dollar and this affected the portfolio valuation.
This depreciation was due to a number of factors, notably a rising
current account deficit and sharp movements of liquidity driven by
a "flight to quality" in fear of the effects of reductions in
Quantitative Easing by the US government. Following the appointment
of the new RBI governor, external reserves were maintained by a
revival of foreign portfolio inflows as well as external borrowings
by Indian companies which were used to reduce the burden of higher
cost Rupee debt. Thanks to a focus by the RBI and SEBI on
encouragingnon-resident (NRI) flows into bank deposits, this was
also a source of considerable support for the external reserves in
the last quarter. There were no instances during the year when
market liquidity suffered disruptive events which might have
prevented orderly execution of orders.
The Investment Committee continued to receive research support
from Indasia Fund Advisers Pte. Ltd. of Mumbai and the Chairman of
the Fund. The Board is satisfied that it has the substance and
procedures to carry out these responsibilities in a suitable manner
and that the Fund's portfolio reflects the long-term investment
objective. In terms of risk analysis, the Board monitors the
Synthetic Risk and Reward Indicator (SRRI) prescribed in Article 8
and Annex I of the KII implementing Regulation on a monthly basis.
According to the SRRI calculation over a five-year timespan, your
Fund is in category 7 for risk evaluation purposes and this is
reflected in the KID statement on the Fund's website. This high
risk rating is typical for an emerging markets fund and reflects
the risk of higher levels of return fluctuation than in developed
economies.There are additional risks involved in emergingmarkets
investing which may not be reflected in the SRRI calculation,
including exchange rate risk, market risk arising from global
liquidity flows, operational risk from weaknesses in local systems
and process failure and focused strategy risk where concentrated
investment strategy may lose the benefits of diversification.
The Board also reviews the conduct of the administration of the
Fund by the Administrator at regular management meetings. 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. We currently have active
brokerage relationships with four brokers in Mumbai and London and
orders are allocated in such a way as to ensure that each receives
approximately the same value of orders over the course of a year.
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.
Emerging markets investment was not a popular choice in 2013 and
attempts at raising new money for the Fund were not successful.
Nonetheless, we were asked in several occasions during the year to
clarify the Fund's stance on paying marketing rebates or trail
fees. The Fund's Ordinary Shares are not and never have been
"rebate shares" and the Fund has no agreements in place to pay
rebates to intermediaries.
The Directors continue to manage expenditure tightly though
further significant cost reduction is difficult. The TER increased
in 2013, largely due to the reduction in the value of total assets,
the denominator in the calculation. We are actively working to
generate new inflows to the Fund and believe that renewed prospects
for attractive returns from investing in India will help with the
effort. Any success in doing so will lead to a steady reduction in
the TER.
The Outlook
The Directors would like to thank our shareholders for their
continuing support of the Fund. The Indian market has started 2014
in optimistic form, in spite of sustained tight monetary policy
from the RBI. Global risk appetite is variable at best, as the main
drivers of global sentiment, the US and Chinese economies continue
to give variable signals. Sustained flows of foreign portfolio
investment into India reflect resurgent confidence amongst foreign
investors, so a recovery in domestic sentiment following a decisive
election outcome should add momentum to the market. Fund policy is
to invest in companies from a broad market universe selected for
high
governance standards and a strong probability of generating
growth in earnings from participating in the growth of the Indian
economy. The Directors believe that Fund's portfolio is well
positioned to benefit from renewed momentum in Indian markets and
that the drive of a new government will revive growth, slowly but
surely.
Amsterdam, 22 April 2014
Board of Directors
Ian McEvatt, Chairman
Dwight Makins
Robert Meijer
Karin van der Ploeg
Financial statements Himalayan Fund N.V. Annual Report 2013
Balance sheet
(before profit appropriation)
31-12-2013 31-12-2012
USD USD
Notes
Investments
Securities 10,741,908 4.1 14,040,910
Other assets
Cash at banks 331,368 5 146,282
Receivables
Receivable on security transactions - 6.1 -
Other receivables - 6.2 10,038
- 10,038
Current liabilities (due within one year)
Payable on security transactions - 7.1 -
Due to redemptions 158,614 7.2 -
Other liabilities, accruals and deferred income 62,078 7.3 60,704
Total current liabilities 220,692 60,704
Total of receivables and other assets less
current liabilities 110,676 95,616
Total assets less current liabilities 10,852,584 14,136,526
--------------------- ----------------------
Shareholders' equity
Issued capital 18,419 8.1 19,059
Share premium 22,748,568 8.2 24,983,207
General reserve -10,865,740 8.3 -12,813,588
Undistributed result current year -1,048,663 8.4 1,947,848
Total shareholders'equity 10,852,584 14,136,526
--------------------- ----------------------
Net Asset Value per share 35.64 38.54
Profit & Loss account
01-01-2013 01-01-2012
31-12-2013 31-12-2012
USD USD
Notes
Income from investments
Dividends 162,790 9.1 301,993
Interest income - 9.2 -
Other income 7,098 9.3 11,368
169,888 313,361
Capital gains/losses
Unrealised price gains/losses on investments -491,998 4 2,167,626
Unrealised currency gains/losses on investments -247,534 4 1,093,073
Realised price gains/losses on investments 712,984 4 411,559
Realised currency gains/losses on investments -707,739 4 -1,522,176
Other exchange differences -31,052 3,174
-765,339 2,153,256
Expenses
Investment advisory fees 172,377 10.1 231,096
Other expenses 302,911 10.2 303,253
475,288 534,349
Tax 22,076 15,580
Total investment result -1,048,663 1,947,848
-------------------- ---------------------
Total investment result per ordinary share -3.45 5.32
Statement of Cash Flows
01-01-2013 01-01-2012
31-12-2013 31-12-2012
USD USD
notes
Cash flow from investing activities
Income from investments 169,888 9 313,361
Expenses -475,288 10 -534,349
Tax 22,076 15,580
Result of operations -283,324 -205,408
Purchases of investments -1,402,672 4 -4,106,469
Sales of investments 3,967,386 4 7,403,677
2,564,714 3,297,208
Change in short term receivables 10,038 6 447,640
Change in current liabilities 159,989 7 -408,932
170,027 38,708
Cash flow from investing activities 2,451,417 3,130,508
Cash flow from financing activities
Received on shares issued 139,355 8 159,809
Paid on shares purchased -2,374,634 8 -3,867,191
Cash flow from financing activities -2,235,279 -3,707,382
Other exchange differences -31,052 3,174
Change in cash and cash equivalents 185,086 -573,700
Cash and cash equivalents as at 1 January 146,282 719,982
--------------------- ---------------------
Cash and cash equivalents as at 31 December 331,368 146,282
--------------------- ---------------------
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 annual report is preparedin accordance with Part 9 of 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 standardswhich 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 currenciesare translated at the
exchange rate as per transaction date.
Rates of exchange as at 31 December 2013, equivalent of 1 US
dollar:
Euro 0.72572 Srilanka Rupee 130.80003
Indian Rupee 61.85500 Bangladesh Taka 77.66501
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 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 corporateactivity. 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 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 amongstfinancial 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 31-12-2013 31-12-2012
4. Investments USD USD
4.1 Statement of changes in securities
Position as at 1 January 14,040,909 15,188,036
Purchases 1,402,672 4,106,469
Sales -3,967,386 -7,403,677
Unrealised price gains/losses on investments -491,998 2,167,626
Unrealised currency gains/losses on investments -247,534 1,093,073
Realised price gains/losses on investments 712,984 411,559
Realised currency gains/losses on investments -707,739 -1,522,176
Position as at 31 December 10,741,908 14,040,910
------------------ --------------------
Historical cost 7,902,458 10,461,927
The portfolio comprises of shares, mainly listed.
The total unlisted shares held directly by the Fund amounted
to USD 133,674 (2012: USD 154,417).
The portfolio breakdown as at 31 December 2013 is specified
on page 21 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 2013 are USD 17,926 (2012: USD 41,599).
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 16,810 7,500
Payable administration fee 5,741 5,493
Payable auditors fee 20,669 29,992
Other expenses payable 18,858 17,719
62,078 60,704
------------------- -----------------------
8. Shareholders' equity
The authorised share capital of the Fund is EUR 60,000 (2012:
EUR 60,000) and consistsof:
- Ordinary shares of EUR 0.01 each 5,000,100
- Priority shares of EUR 0.20 each 49,995 31-12-2013 31-12-2012
8.1 Issued capital number USD USD
Ordinary shares:
Position as at 1 January 366,411 4,829 6,092
Sold 3,791 38 40
Purchased -66,099 -661 -1,070
Revaluation -17 -233
--------------------
Position as at 31 December 304,103 4,189 4,829
-------------------- -------------------- -----------------------
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 18,419 19,059
-------------------- -----------------------
As at 31 December 2013 the issued and
subscribed
share capital amounts to: (Ordinary shares, EUR EUR
par value EUR 0.01 (2012: EUR 0.01) 4,450,005 44,500 44,500
(Priority shares, par value EUR 0.20 (2012:
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
2013 a total of 4,145,902 Ordinary Shares have been purchased,
meaning that 304,103 Ordinary Shares are still outstandingas at 31
December 2013. Ordinary Shares purchased by theFund are directly
charged against capital and share premium.
8.2 Share premium USD USD
Position as at 1 January 24,983,207 28,689,326
Received on shares sold 139,317 159,769
Paid on shares purchased -2,373,973 -3,866,121
Revaluation of outstanding capital 17 233
Position as at 31 December 22,748,568 24,983,207
------------------ --------------------
31-12-2013 31-12-2012
USD USD
8.3 General reserve
Position as at 1 January -12,813,588 -2,231,440
Transferred from undistributed result 1,947,848 -10,582,148
Position as at 31 December -10,865,740 -12,813,588
------------------- ----------------------
8.4 Undistributed result
Position as at 1 January 1,947,848 -10,582,148
Transferred to general reserve -1,947,848 10,582,148
Total investment result -1,048,663 1,947,848
Position as at 31 December -1,048,663 1,947,848
------------------- ----------------------
Three years Himalayan Fund N.V.
31-12-2013 31-12-2012 31-12-2011
Net Asset Value (USD x 1,000)
Net Asset Value according to balance
sheet 10,853 14,137 15,896
Less: value priority shares 14 14 14
10,839 14,123 15,882
--------------------- ------------------- ----------------------
Number of Ordinary Shares
outstanding 304,103 366,411 469,432
Per Ordinary Share (USD)
Net Asset Value share 35.64 38.54 33.83
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,
stock dividends are not presented as income.
9.2 Interest income
Most of this amount was received on outstanding cash
balances.
9.3 Other income
From 6 March 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.
01-01-2013 01-01-2012
10. Expenses 31-12-2013 31-12-2012
USD USD
10.1 Investment advisory fees
Advisory fee 136,032 218,332
Custody Fee and Charges 36,345 12,764
------------------ ---------------------
172,377 231,096
------------------ ---------------------
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 68,826 67,622
Company Secretarial and Domiciliation Fees 40,296 38,239
Bank Expenses 5,396 11,454
Regulatory Fees and Charges 22,555 21,506
Legal Expenses 1,325 -288
Listing Expenses 18,000 17,732
Audit Fees 18,359 33,823
Fiscal Compliance Fees - -
Fiscal Advisory Fees 14,432 16,806
Advertising and Promotion 22,555 22,881
Directors Fees 66,564 62,415
Board Expenses 20,207 18,067
Depreciation and Amortization - -
Miscellaneous 4,396 -7,004
------------------ ---------------------
302,911 303,253
------------------ ---------------------
Audit fees include the audit of the financial statements by
theexternal auditor Deloitte amounting to USD 12,402 (2012: USD
37,824).
Ongoing Charges Ratio
The Ongoing Charges Ratio (cost ratio) is calculated as follows:
the total expenses of the Fund divided by theaverage NAV*. The
Ongoing Charges Ratio of the Fund for the reporting period is equal
to: 3.88 % (2012: 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: 23.33 % (2012: 47.84 %).
* - The average Net Asset Value of the Company for reporting
period is calculated as the sum of every available Net Asset
Value in the current year divided by thenumber of
observations.
Comparison of real cost with cost according
to Prospectus*
According to Prospectus Actual costs
USD USD
Management fee (1) 136,032 136,032
Administration fee (2) 68,826 68,826
Secretarial and Domiciliation fees (3) 40,296 40,296
Costs for the Board (4)
*- As per the Prospectus of 7 June 2010. 100,000 86,771
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 Bank Luxembourg Amsterdam Branch is paid a fixed fee
of EUR 50,000 per year for administration services.
3) Inviqta has been appointed to provide domicileand 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. In2013
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 (2012: USD 10,000); Dwight Makins: USD 18,500
(2012: USD 18,500); Robert Meijer: USD22,420 (2012: USD 22,015);
Karin van der Ploeg*: USD 12,100 (2012: USD 11,900). Board expenses
(exclusive remuneration of the Directors) amount to USD 20,207 in
2013.
* 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, 22 April 2014
Board of Directors
Ian McEvatt, Chairman
Dwight Makins
Robert Meijer
Karin van der Ploeg
Portfolio breakdown
As per 31 December 2013
percentage of total Net
Market value Asset Value
India USD %
Auto Ancilliary 911,085 8.4
9,000 Bajaj Auto 278,032
115,000 Balkrishna 633,053
Construction 814,687 7.5
32,250 Larsen & Toubro 558,008
9,000 Ultra Tech Cement 256,679
Consumer goods 2,490,785 23.0
40,000 ITC 208,132
10,000 Nestle India 855,105
200,000 Pidilite 923,935
60,000 Titan Industries 222,617
10,000 VST Industries 280,996
Energy 1,013,176 9.3
110,000 ONGC 513,766
130,000 Power Grid Corporation of India 209,959
20,000 Reliance Industries 289,451
Financials 2,652,038 24.4
75,000 HDFC Bank 807,352
40,000 ICICI Bank 710,533
120,000 IDFC 212,626
60,000 Kotak Mahindra Bank 706,410
194,675 Magma Fincorp 215,117
Healthcare 1,383,053 12.7
50,000 Lupin 734,096
85,000 Torrent Pharmaceuticals 648,957
Technology 1,343,412 12.4
12,000 Infosys 676,223
19,000 TCS 667,189
Total Equity 10,608,236 97.7
Cash 244,348 2.3
Canbank mutual fund 133,674
Net 110,676 1.0
NAV: 10,852,584
Other information
Personal interest
At the end of, or during the reporting period, none of the
members of the Board of Directors had any interests in securities
also being a part of the investments of the Fund.
Special controlling rights
Special rights are assigned to holders of Priority Shares. The
most important rights are:
- to submit a binding nomination for the appointment of the Directors
- to give their approval in advance of amendments in the
Articles of Association, legal merger, legal split and dissolving
theFund.
The Priority Shares are all held in the name of Iceman Capital
Advisors Ltd.
Priority Shares
During 2012 & 2013 49.995 Priority Shares were held by
Iceman Capital Advisors Ltd. At the beginning of 2009 the nominal
value of the Priority Shares was Eur 0.01 each. On 26 August 2009
the Articles of Association were amended and the nominal value of
the Priority Shares was increased to Eur 0.20 Each.
The directors of Iceman Capital Advisors Ltd. are Messrs. I.
McEvatt, P.J. Nicolle,M.T. Cordwell, J.W. Owen, E.H. Jostrom. The
directors of the Fund and the directors of Iceman Capital Advisors
Ltd. declare that to the best of their knowledge
and belief Appendix X, paragraph C, article10 of the
listingRules of Euronext Amsterdam NV is complied with.
Appropriation of result
In accordancewith the Fund's Articles of Association the Board
will propose to the Annual General Meeting of Shareholders
that the result will be added to the general reserve and that no
dividend will be distributed.
Independent Auditor's report
Reference is made to the independent auditor's report included
hereafter.
Post balance sheet events
There have occurred no significant events after balance sheet
date which will have an impact on the Fund.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR QKQDPBBKDKQB
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