TIDMHYF
RNS Number : 8114M
Himalayan Fund N.V.
02 May 2018
HIMALAYAN FUND N.V. in liquidation
Extract of the Annual Report 2017
The complete version may be found on
http://www.himalayanfund.nl/annual-reports/
Chairman's Letter 2017
Dear Shareholders,
2017 saw extraordinary equity returns generated across the world
as US economic self-confidence was accomanied by economic recovery
in Europe and strong growth elsewhere. Market volatility retreated
to sustained historic lows and the promise of eventual US tax
reform drove valuations to historic highs on the back of steady
earnings growth. In spite of the Federal Resrve gradually removing
monetary stimulus, the MSCI World Index returned an exceptional
20.1% for the year, supprted by a 10.5% return in the US.
Significantly, a sharp recovery in sentiment in Europe drove
markets there up by 22.1% for the year and the Far East added
23.4%. Global Emerging Markets returned 34.4% while the Asian
Emerging Market Index jumped 40.1% as investors saw the year out in
full "risk-on" mode.
In India, the Nifty 50 index closed the year at an all-time high
of 10,530 on sustained buying by domestic and foreign institutional
buying. Following the previous year's underperformance, the Net
Asset Value per share of your Fund rose by $18.81 from $48.66
to
$67.47 in 2017, an increase of 38.7%. Our benchmark, the Nifty
50 Index in USD gained 36.9%, including a 6% appreciation of the
Rupee against the US Dollar. I am pleased to report therefore that
our Fund outperformed by 1.8 percentage points relative to
benchmark for the year.
Having roundly disappointed the previous year, India was one of
the top performing equity markets in the world in 2017, despite
weak economic growth. Two major economic reforms were responsible
for the weakness: the so-called demonetization of late 2016 and the
introduction of a uniform nationwide goods and services tax in
mid-year. The first caused a deceleration to 5.7% in GDP growth in
the June quarter and the second retarded recovery as small
businesses in particular had to adapt to this major business
process change. The government has faced the headwinds with
political and policy consistency, focussing on macroeconomic
stability and long-term bottom-up reform rather than short-term
growth stimulus. Growth duly recovered to 6.3% in the September
quarter and has popped back up above the crucial 7% level in the
December quarter.
A key reform policy for 2017 was implementation of a $32bn
recapitalization of public sector banks, which have been carrying a
crippling burden of bad debts from a history of corruption and poor
credit decision-making. This has constrained their ability to
finance any kind of credit expansion to support growth. During the
year, the Reserve Bank has overseen progressive recognition of bad
debts and proper provisioning for non-performing assets. Now an
infusion of new capital should bring an effective resolution of
impaired assets. This may also usher in a long overdue process of
consolidation and management change to help kick-start a new credit
and investment cycle which is also overdue.
The BJP government has avoided resorting to populist policy
measures for mere political gain and yet has succeeded in
strengthening its position further, although opposition weakness as
helped. The ruling BJP won six out of seven state elections, most
importantly the highly populated states of Uttar Pradesh and
Gujarat. This helps to boost its standing in the Upper house of
parliament, the Raja Sabha, over time and reduce opposition to its
reform agenda. It also suggests that voters are choosing economic
development over petty entitlements and identity politics. The
Prime Minister's policies are reaching the lowest levels of Indian
society, particularly the beneficiaries of subsidies and benefits
now paid by direct transfer. Grass-roots approbation of reform
initiatives will encourage more and with a general election due in
2019 the government will be encouraged to stick to its path of
fiscal consolidation, which has been relaxed slightly to
accommodate the effects of GST implementation.
Last year has seen further development in terms of liquidity in
Indian markets. The effects of key reforms in formalizing the
economy combined with high real interest rates have stimulated
rapid financialization of savings. An important consequence of this
has been a surge in sales of regular savings plans by mutual fund
companies. Mutual fund companies have enjoyed monthly inflows
averaging
$1.5bn a month during the year, leading to an aggregate inflow
of $18bn into equity markets. This compares very well with net
inflows of $7bn for the year from foreign portfolio investors.
Domestic mutual funds now manage an historic high of $134bn in
domestic equity, more than 60% up for the year. Since nearly 40% of
retail investment is now by way of what are called Systematic
Investment Plans this trend is expected to be sustained, so Indian
markets should be less vulnerable to hot foreign liquidity over
time.
In 2017 we continued to pursue our long-term strategic objective
of generating outperformance by selecting stocks with visible
earnings growth potential over the medium term, while demonstrating
high governance standards. We increased our already overweight
position in Consumer stocks, holding more than 28% of the portfolio
in the sector by year-end. We progressively reduced our exposure to
Healthcare to 4.5% during the year out of concerns about the
outlook for their exposure to the US market. In the Financial
sector, we held positions in private sector banks only with a total
exposure of 18.9% of the portfolio at year-end. Thus we remained
underweight the sector, while holding large positions in our two
favoured stocks. Other significant overweight positions were in
Construction and Industrials due to specific stock positions when
index weightings had been reduced. Overall we held positions in 23
stocks during the year with an average of 21 holdings. Our
top-preforming stock was VIP Industries, a Consumer Goods company
returned which returned 135.5%. Kalpataru Power, a Construction
company, returned 90.6% and Indraprashtha Gas, our sole Energy
holding, returned more than 80%, taking a stock split into account.
Our Financial sector stocks again made a significant contribution
to performance with HDFC Bank returning 66% and Kotak Mahindra Bank
44.4%.
Our non-index stocks again made significant contributions to
performance in 2017, notably TV18, Agro Tech Foods, Pidilite
Industries, Supreme industries and Nestle India. The dominance of
Consumer stocks amongst these is notable. On the downside, Lupin
was a big loser, dropping more than 36% as investors lost
confidence in its US generics business prospects. We re-entered ITC
with unfortunate timing, as the government revised its GST
classification of tobacco products causing the stock to lose 14.9%
by year- end. Twelve holdings generated returns better than
benchmark and by year-end we had reduced our most concentrated
positions to disperse risk more widely.
In India, 2017 could be seen as a year of transition: coming to
terms with demonetization, implementing GST and launching the
recapitalization of the state-owned banking sector. In anticipation
of the general election in 2019, Prime Minister Modi now has to
concentrate on accelerating growth in his promised inclusive way.
To do this, he needs to address two key problems: job creation
(mostly an urban problem) and agriculture (rural). It is estimated
that India needs to create some 12 million jobs a year, to absorb
its growing, young workforce. It has never done anything like this
and the task is a little more difficult this year since last year's
reforms have seen many small businesses close rather than adapt.
More than half of the population depends on agriculture and
unsteady income growth over the past few years has led to more
distressed farming loans. Some states are developing farm loan
waiver plans but there is not yet a central policy response.
Meanwhile, stronger crude oil prices may add to inflation pressure
and the balance of payments effect might crimp the government's
scope for action.
On the other hand, most official agencies are revising their GDP
growth forecasts for India steadily upward; the IMF is currently at
7.4% for this fiscal year. India is slowly creeping up the World
Bank's "Ease of doing business" rankings and Moody's upgraded
India's sovereign credit rating for the first time since 2004.
Implementation of the bank recapitalization plan should help
stimulate a new credit and investment cycle as corporate earnings
growth forecasts are revised upwards into the high teens in
percentage terms. Against this background and given the scale of
demographic resources, India should see continued upward market
momentum, in the absence of severe external shocks.
After several years trying to find a sympathetic new promoter
for the Fund and in the face of accelerating costs of compliance
with increasing regulatory requirements, the board has very
reluctantly decided to offer shareholders the opportunity to vote
on a resolution to liquidate the Fund. At a General Meeting of
shareholders on April 5th the necessary resolutions were passed to
put into effect the liquidation of the Fund and to appoint the
Directors as liquidators. As a consequence the portfolio has now
been liquidated and necessary notices are being issued to enable
the liquidation to be completed. We have taken this step with much
sadness as a number of us have been involved with the Fund for many
years. In particular, I would like to thank Dwight Makins and
Pradip Shah, both of whom have supported the Fund since inception.
I would also like to thank the whole Himalayan Fund team for their
long and dedicated service as well as the team at Indasia Fund
Advisors Pte. Ltd. in Mumbai and our Administrators, Depositories
and Custodians at CACEIS in Amsterdam and Citibank in Mumbai.
With thanks and best wishes to all our shareholders. Ian
McEvatt, Liquidator
30 April 2018
Liquidators' Report 2017
The Fund
This is the annual report for the Financial Year ended December
31st 2017. As a result of actions taken since the end of the
Financial Year described in more detail below Himalayan Fund N.V.
is now in liquidation.
In the year under review the Net Asset Value (NAV) per share of
the Fund rose from $48.66 to $67.05, a difference of 37.8%. The
first Execution Day on NYSE Euronext Amsterdam in 2017 was January
6th when the Transaction Price for the Fund's Ordinary Shares was
$49.06; the last Execution Day was December 29th, when the
transaction Price was $$67.05. The difference of $18.40 represented
an increase of 36.7% in value. Between the same two dates, the
Nifty 50USD Index rose from 4204 to 5717, a difference of 35.9%.
Thus the Transaction Price outperformed the Fund's performance
benchmark by 0.8% in the holding period in question.
At the start of 2017, there were 162,323 Ordinary Shares of the
Fund in the hands of shareholders. By the end of the year, the
number had fallen to 135,290, a drop of 16.7%. In the face of
volatile liquidity flows and performance in the Indian markets we
experienced a steady flow of small redemptions through the
year.
The Portfolio
We started the year with twenty-one holdings in the portfolio;
the top ten holdings represented 59.8% of the portfolio and 37.6%
of the total value was invested in stocks which are components of
the Nifty Index. The largest sectoral concentrations were
Financials, with 14.1% of the portfolio, Consumer Goods, with
22.8%, Healthcare with 11.9% and IT with 13.1%. We had no exposure
to Metals and Mining, Telecom or Transportation stocks.
Portfolio turnover during the year was 10.6% as we held a total
of 23 stocks for some period during the year and ended with 21
holdings. At year-end, our sectoral distribution was dominated by
Consumer Goods comprising 28.2% of the portfolio, and Financials
with 18.6%. IT was reduced to 8.1%, Healthcare to 4.5% and the
Construction Sector to 7.5%. Our Auto sector exposure appreciated
to 7.4%. We took profits in the Media sector, reducing our exposure
to 3% of the portfolio.
At year-end, the top four holdings had an aggregate weight of
37.6% the largest holding being Pidilite Industries at 11.1%. There
were 21 holdings; the top ten represented 72.1% of the portfolio
and 36.7% of the portfolio comprised stocks which were components
of the benchmark index.
Administration
The legal structure of the Fund did not change in 2017. The
Board (until the liquidation on 5 April 2018 and thereafter the
liquidators) is still in direct control of investment management
through the Investment Committee, which is convened by the
Chairman, who also acts as record-keeper. Caceis Bank, Netherlands
Branch continues as the Administrator and AIFMD Depository of the
Fund and calculates the Net Asset Value on a weekly basis. Citibank
Mumbai is the local Custodian of the Fund. During the year under
review and so far as The Board is aware, the Fund has effectively
operated in conformity with the Administrative Organization and
Internal Control procedures.
In 2017, The Board held four formal Board Meetings and conducted
one Annual General Meeting.
The Investment Committee continued to receive research services
from the Chairman of the Fund and from Indasia Fund Advisers Pte.
Limited, of Mumbai. 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 is consistent with
the long-term investment objective.
The Board(until the liquidation on 5 April 2018 and thereafter
the liquidators) 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.
Investment in Emerging Markets enjoyed much improved sentiment
in 2017 and India benefitted from net inflows of foreign portfolio
investment amounting to over $30 billions by comparison to outflows
of more than $3bn the previous year. In spite of this surge in
interest, the directors were unable to find a supportive new
promoter for the Fund. Accordingly, at the November board meeting,
the directors gave careful consideration to the strategic outlook
for the business. Given the inability to attract sustained new
inflows, combined with the high expense ratio and accelerating
costs of regulation, they reluctantly decided to give shareholders
the opportunity to vote on the dissolution of the Fund. Following
consultation with regulators in The Netherlands and the UK, notice
was given convening meetings of shareholders on April 5th in
Amsterdam. The relevant resolutions were passed unanimously at the
meetings and the Directors were appointed as liquidators of the
Fund. Following these decisions, action was taken immediately to
liquidate the portfolio and at the date of this report all of the
portfolio holdings have been sold. The necessary notices to
complete the liquidation are now being issued. Thereafter all
outstanding Ordinary Shares will be redeemed.
Compliance
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 have been no breaches of the corporate governance
policy during the year 2017.
In 2017 the Fund responded to an information request from its
Dutch regulator, AFM concerning compliance and risk management
standards for AIFMD. The Directors subsequently attended a meeting
at AFM to discuss action which would be necessary to ensure future
compliance in documentation and risk management standards and
procedures. The matter was considered by the Directors at the
November board meeting, along with strategic options for the future
of the Fund. In the event the Directors decided to propose to
shareholders that the Fund be liquidated so no further action was
taken; the AFM was advised immediately of the Board's decision. 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 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 2017, the Rupee appreciated by 6%
against the US dollar, substantially due to the surplus on India's
capital account due to foreign direct investment and portfolio
investment flows. There were no instances during the year when
market liquidity suffered disruptive events which might have
prevented orderly execution of orders. We encountered some time
delays in the execution of limit sale orders for some lower
capitalization stocks. All of the orders were eventually executed
at the limits set as we moved late in the year to increase overall
liquidity in the portfolio. At the close of the year, the portfolio
was 5.9% in cash.
The Investment Committee also monitors the performance of market
counterparties, notable stock brokers and custodians. We monitor
the performance of brokers on a regular basis, taking account of
execution, price, research and sales support. Transactions are
allocated equally between brokers, though volumes can vary
depending on specialist skills demonstrated, such as execution in
particular market segments or sectors. We experienced no problems
due to market disruption of execution failures during 2017.
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. We confirm for the record,
that our Ordinary Shares are not "rebate shares" and that no
rebates are paid to intermediaries involved in their sale or
promotion.
We continue to receive excellent service from our local market
custodian and had no operational problems or failures in reporting
during the year.
Risk Management
The key risk management guidelines concern concentration in the
portfolio, dispersion of risk and liquidity. We monitor the
aggregate value of the top four holdings against a guideline of
40%. We further observe a 10% limit on the value of any stock
holding. If the value of a holding exceeds this limit due to
appreciation, the holding is reviewed regularly by the Investment
Committee and adjusted where appropriate. Finally, in order to
ensure our stock holdings can contribute to performance, we
generally apply a minimum target weight of 2.5% although an initial
purchase may be smaller.
During the year, the upper concentration limits have been
exceeded due to market appreciation; the positions concerned have
been monitored by the Investment Committee and appropriate action
taken when necessary.
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 5 for risk evaluation purposes and this is reflected in
the KID statement on the Fund's website. This risk rating is due to
a sustained period of stable returns over the timespan of the
analysis. This is not typical for an emerging markets fund and the
Directors feel the indicator does not adequately reflect the risk
of higher levels of return fluctuation than in developed markets.
There are additional risks involved in emerging markets investing,
including exchange rate risk, market risk arising from 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 following quantitative risk data cover sixty one valuation
periods which ended on an NAV calculation date during 2017. The
mean return for the portfolio over the sixty one periods was 0.54%
per period; the comparable figure for the benchmark was 0.52%,
reflecting mean portfolio outperformance of 2 basis points per
period. The standard deviation of returns was 1.3 for the portfolio
and 1.4 for the benchmark, showing similar dispersion of returns
around the mean for the portfolio as for the benchmark.
The highest loss in any period was 3% for the portfolio and 4.3%
for the benchmark and during the year, the portfolio had 43 out of
sixty one periods of positive return by comparison with 45 for the
benchmark.
Relative to the benchmark, the portfolio had a Tracking Error of
1.3 and an Information Ratio of 0.9 for the year. These two ratios
demonstrate that the risk and portfolio management decisions taken
during the year were consistent in adding value in portfolio
returns relative to the benchmark.
The Outlook-liquidation of the Fund
On 21 February 2018 the Board of Himalayan Fund NV decided to
initiate the liquidation of the Fund and has suspended the purchase
and re-purchase of Ordinary Shares with immediate effect. On 5
April 2018 the Extraordinary Meeting of Shareholders agreed with
the dissolution of the Fund and the Directors were appointed as
Liquidators of the Fund. After over 25 years this will also end the
listing on the London Stock Exchange as well as on Euronext
Amsterdam.
The single country investment fund was established in 1990 and
had a listing on both exchanges from the start. At the launch the
Fund had over 100 million US Dollar under management, the last few
years this decreased to around USD 9 million. The Board of
Directors decided to close down the Fund because the current size
of the Fund does no longer sustain all the costs related to
governance and regulatory demands.
The Directors have regularly reviewed the strategic options
available to the Fund. The primary concern of the Directors has
increasingly been the inability, over recent years, to find a new
strategic distribution partner that is capable of generating a
sustained flow of new cash subscriptions to the Fund.
Reluctantly, the Directors have concluded that without assured
new cash inflows, the Board's ability to manage the Fund with firm
control of the expense base is uncertain. Accordingly, against such
a background the Directors have concluded that the best course of
action is to take the advantage of the current valuation level of
the Indian stock markets and to liquidate the Fund.
At the time of writing of this report he portfolio has already
been liquidated and all existing contracts with services providers
and suppliers are being brought to an end. The liquidators will
write a liquidation balance which will be published. After the
publication a waiting term of 2 months starts in which creditors
may object. When no objections are filed all Shareholders will be
compensated in cash based on the number of shares they hold. The
Liquidators estimate that the liquidation costs will give rise to
additional costs of USD 150,000.
There is a currency exchange risk on the conversion of
liquidation proceeds to US Dollars. However, the Rupee/Dollar
exchange rate has been relatively stable in a trading range of less
than 5% and is therefore not deemed a material risk. The
repatriation of proceeds is subject to receiving a tax clearance
from the Indian tax authorities. The Fund's tax advisers have
advised that a negative response is unlikely.
In these circumstances, the Directors would like to thank all of
our service providers for their long and patient support. In
particular we would like to mention our research partners, Indasia
Fund Advisers Pte. Ltd. of Mumbai who have made a substantial
contribution to our investment performance over time.
We also thank our long-standing loyal shareholders for their
commitment and support.
Amsterdam, 30 April 2018
Liquidators Ian McEvatt Dwight Makins Robert Meijer
Karin van der Ploeg
Financial statements
Himalayan Fund N.V.(I.L.)
Annual Report 2017
Balance sheet
(before profit appropriation)
31-12-2017 31-12-2016
USD USD
Notes
Investments
Securities 8,601,655 4.1 7,298,399
Other assets
Cash at banks 604,514 5 670,109
Receivables
Receivable on security transactions
- -
6.1
Other receivables - 6.2 -
- -
Current liabilities (due within
one year)
Payable on security transactions - -
7.1
Due to redemptions - 7.2 12,080
Other liabilities, accruals and
deferred income 64,095 7.3 44,160
Total current liabilities 64,095 56,240
Total of receivables and other
assets less current liabilities 540,419 613,869
Total assets less current liabilities 9,142,074 7,912,268
Shareholders' equity
Issued capital 17,254 8.1 17,171
Share premium 14,783,806 8.2 16,261,438
General reserve -8,366,342 8.3 -7,987,889
Undistributed result current
year 2,707,356 8.4 -378,452
Total shareholders'equity 9,142,074 7,912,268
Net Asset Value per share 67.47 48.66
Profit & Loss account
01-01-2017 01-01-2016
31-12-2017 31-12-2016
USD USD
Notes
Income from investments
Dividends 70,951 9.1 91,814
Interest income 18 9.2 -
Other income 3,347 9.3 7,410
74,316 99,224
Capital gains/losses
Unrealised gains on investments 2,714,584 4 545,633
Unrealised losses on investments -518,974 4 -1,690,172
Realised price gains on investments 1,046,133 4 1,629,156
Realised price losses on investments -81,576 4 -126,585
Realised currency gains on investments 23,365 4 -
Realised currency losses on investments -67,745 4 -365,252
Other exchange differences 1,109 -11,554
3,116,896 -18,774
Expenses
Investment research fees 166,359 10.1 165,145
Other expenses 317,497 10.2 293,757
483,856 458,902
Total investment result 2,707,356 -378,452
------------ ------------
Total investment result per ordinary share 20.01 -2.33
Statement of Cash Flows
01-01-2017 01-01-2016
31-12-2017 31-12-2016
USD USD
notes
Cash flow from investing activities
Income from investments 74,316 9 99,224
Expenses -483,856 10 -458,902
Result of operations -409,540 -359,678
Purchases of investments -353,359 4 -537,921
Sales of investments 2,165,890 4 3,341,053
1,812,531 2,803,132
Change in short term receivables - 6 94,841
Change in current liabilities 7,855 7 -77,827
7,855 17,014
Cash flow from investing activities 1,410,846 2,460,468
Cash flow from financing activities
Received on shares issued 75,752 8 3,629
Paid on shares purchased -1,553,302 8 -2,247,740
Cash flow from financing activities -1,477,550 -2,244,111
Other exchange differences 1,109 -11,554
Change in cash and cash equivalents -65,595 204,803
Cash and cash equivalents as at 1 January 670,109 465,306
------------ ------------
Cash and cash equivalents as at 31 December 604,514 670,109
------------ ------------
Notes
1 General
Himalayan Fund N.V.(i.l.) ('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 prepared in 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.
As a result of actions taken after the end of the Financial year
2017, the Fund is now in liquidation and the Directors have been
appointed as Liquidators. The Liquidators estimate that the
liquidation will give rise to addional costs
of approximately USD 150,000.
At the date of this report the process of liquidation is
underway and the Fund's investment portfolio has been liquidated.
This report has been made under the principles mentioned hereunder
and after this a liquidation report will be prepared to reflect the
fact that the Fund is no longer a going concern.
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;
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 31 December 2017, equivalent of 1 US
dollar:
Euro 0.83278 Srilanka Rupee 153.50000
Indian Rupee 63.82753 Bangladesh Taka 83.17501
------------- -------- ----------------------------- ---------
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
31-12-2017 31-12-2016
4. Investments USD USD
4.1 Statement of changes in securities
Position as at 1 January 7,298,399 10,108,751
Purchases 353,359 537,921
Sales -2,165,890 -3,341,053
Unrealised gains on investments 2,714,584 545,633
Unrealised losses on investments -518,974 -1,690,172
Realised price gains on investments 1,046,133 1,629,156
Realised price losses on investments -81,576 -126,585
Realised currency gains on investments 23,365 -
Realised currency losses on investments -67,745 -365,252
Position as at 31 December 8,601,655 7,298,399
----------- -----------
Historical cost 3,962,496 4,854,850
The portfolio comprises of shares, mainly listed.
The portfolio breakdown as at 31 December 2017 is
specified on page 23 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 2017 are USD 9,654 (2016: USD 11,998).
5. Cash at banks
This includes immediately due demand deposits at 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 research fee 8,852 12,246
Payable administration fee 5,270 3,931
Payable auditors fee 17,882 15,707
Other expenses payable 32,091 12,276
64,095 44,160
8. Shareholders' equity
The authorised share capital of the Fund is EUR 60,000 (2016:
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
31-12-2017 31-12-2016
8.1 Issued capital number USD USD
Ordinary shares:
Position as at 1 January 162,323 2,941 3,522
Sold 1,292 13 1
Purchased -28,325 -283 -455
Revaluation 353 -127
Position as at 31 December 135,290 3,024 2,941
--------- ---------------------- ----------
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 17,254 17,171
---------------------- ----------
As at 31 December 2017 the issued amounts EUR EUR
and subscribed share capital to:
(Ordinary shares, par value EUR
0.01 (2016: EUR 0.01) 4,450,005 44,500 44,500
(Priority shares, par value EUR
0.20 (2016: 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
2017 a total of 4,314,715 Ordinary Shares have been purchased,
meaning that 135,290 Ordinary Shares are still outstanding as at 31
December 2017. 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 16,261,438 18,504,968
Received on shares sold 75,739 3,628
Paid on shares purchased -1,553,018 -2,247,285
Revaluation of outstanding capital -353 127
Position as at 31 December 14,783,806 16,261,438
31-12-2017 31-12-2016
USD USD
8.3 General reserve
Position as at 1 January -7,987,889 -7,942,782
Transferred to undistributed result -378,453 -45,107
Position as at 31 December -8,366,342 -7,987,889
---------------------- ----------
8.4 Undistributed result
Position as at 1 January -378,453 -45,107
Transferred from general reserve 378,453 45,107
Total investment result 2,707,356 -378,452
Position as at 31 December 2,707,356 -378,452
---------------------- ----------
Three years Himalayan Fund N.V.(i.l)
31-12-2017 31-12-2016 31-12-2015
Net Asset Value (USD x 1,000)
Net Asset Value according to balance
sheet 9,142 7,912 10,535
Less: value priority shares 14 14 14
9,128 7,898 10,521
---------- ---------------------- ----------
Number of Ordinary Shares
outstanding 135,290 162,323 207,748
Per Ordinary Share (USD)
Net Asset Value share 67.47 48.66 50.64
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.
01-01-2017 01-01-2016
10. Expenses 31-12-2017 31-12-2016
USD USD
10.1 Investment research fees
Research Fee 161,550 162,000
Custody Fee and Charges 4,809 3,145
---------- ----------
166,359 165,145
---------- ----------
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.
10.2 Other expenses
Administration Fees and Charges 59,381 57,725
Company Secretarial and Domiciliation Fees 34,227 33,471
Bank Expenses 161 224
Regulatory Fees and Charges 21,822 26,672
Listing Expenses 20,600 14,500
Audit Fees 22,447 19,916
Fiscal Advisory Fees 14,300 17,262
Advertising and Promotion 8,041 15,047
Listing Agent Fees 38,235 36,678
Directors Fees 63,228 63,400
Board Expenses 28,374 20,406
Fund liquidation guidance fees 20,000 -
Correspondent Bank fees 5,769 8,612
Miscellaneous 3,442 3,619
VAT Reclaims previous years -22,530 -23,775
--------- ---------
317,497 293,757
--------- ---------
Audit fees include the audit of the financial statements by the
external auditor Mazars amounting to USD 24,700 (2016: USD
23,773).
Ongoing Charges Ratio
The Ongoing Charges Ratio (cost ratio) is calculated as follows:
the total expenses of the Fund divided by the average NAV*. The
Ongoing Charges Ratio of the Fund for the reporting period is equal
to: 5.74 % (2016: 5.12 %).
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: 10.56 % (2016: 18.16 %).
* - 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 the number of observations.
Comparison of real cost with cost
according to Prospectus** According to Prospectus Actual
costs
USD USD
Investment Research fee (1) 144,000 161,550
Administration fee (2) 59,381 59,381
Secretarial and Domiciliation fees
(3) 34,227 34,227
Costs for the Board (4)
**- As per the Prospectus of 7 June
2010. 100,000 91,602
1) Ian McEvatt receives an annual fee of USD 114,000 for
investment research and IndAsia Fund Advisors Pvt Ltd receives an
annual fee of USD 48,000. According to the Prospectus the research
investment fees amount USD 144,000. However, actual costs in 2017
amount USD 161,500. The difference is caused by increased research
fees of Indasia Fund Advisors Pvt.Ltd.
2) CACEIS Bank, Netherlands Branch 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 2017
the remuneration of the Directors was USD 63,228 (inclusive VAT) in
total so far. Directors fees per person are as follows: Ian
McEvatt: USD 10,000 (2016: USD 10,000); Dwight Makins: USD 18,500
(2016: USD 18,500); Robert Meijer: USD 23,754 (2016: USD 22,453);
Karin van der Ploeg***: USD 12,533 (2016: USD 12,476). Board
expenses (exclusive remuneration of the Directors) amount to USD
28,374 in 2017.
*** 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.
Appropriation of result
In accordance with 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.
Post balance sheet events
On April 5, 2018 the General Meeting of Shareholders has decided
to liquidate the Fund, so as from that date the Fund is in
liquidation. The portfolio has been sold and a liquidation balance
will be prepared.
Amsterdam, 30 April 2018
Liquidators,
Ian McEvatt, Chairman Dwight Makins
Robert Meijer
Karin van der Ploeg
Portfolio breakdown
As per 31 December 2017
Percentage
of total Net
Market value Asset Value
India USD %
Auto Ancilliary 678,967 7.4
13,000 Bajaj Auto 678,967
Construction 921,135 10.1
100,000 HeidelbergCement 239,865
92,000 Kalpataru Power Transmission 681,270
Consumer discretionary 608,084 6.7
240,000 Indian Hotels 442,944
30,000 VIP Industries 165,140
Consumer goods 1,761,508 19.3
28,000 Agro Tech Foods 312,188
3,500 Nestle India 431,603
72,000 Pidilite 1,017,717
Consumer staples 206,220
50,000 ITC Dematerialised 206,220
Energy 789,158 8.6
150,000 Indraprastha Gas 789,158
Financials 1,703,737 18.6
27,000 HDFC Bank 792,053
53,000 Kotak Mahindra Bank 838,832
150,000 South Indian Bank 72,852
Healthcare 410,877 4.5
12,000 Lupin 166,405
11,000 Torrent Pharmaceuticals 244,472
Industrials 507,030 5.5
25,000 Supreme Industries 507,030
Media 276,605 3.0
150,000 IBN18 Broadcast 144,295
20,000 Shemaroo Entertainment 132,310
Technology 738,334 8.1
100,000 Firstsource Solutions 64,001
18,000 HCL Technologies 251,130
10,000 Tata Consultancy 423,203
Total Equity 8,601,655 94.1
Cash and cash equivalents 540,419 5.9
NAV: 9,142,074 100.0
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FKDDPABKDBPK
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May 02, 2018 02:00 ET (06:00 GMT)
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