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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Himalayan Fd | LSE:HYF | London | Ordinary Share | NL0000464154 | ORD EUR0.01 |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 35.50 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
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
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May 02, 2018 02:00 ET (06:00 GMT)
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