NOMURA FUNDS CHINA OPPORTUNITIES

Transcription

1 An Investment Company (Société d Investissement à Capital Variable) with one active Sub-Fund CHINA OPPORTUNITIES R.C.S Luxembourg B organised under the Laws of the Grand-Duchy of Luxembourg ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS for the year ended December 31, 2013 No subscription can be received solely on the basis of financial statements. Subscriptions are only valid if made on the basis of the current prospectus accompanied by the latest audited financial statements and the most recent unaudited semi-annual financial statements, if published thereafter.

2 Index Page Management and Administration... 3 Shareholder's Information... 4 Report of the Investment Manager... 5 Report of the réviseur d entreprises agréé... 6 Statement of Net Assets... 8 Statement of Operations... 9 Statement of Changes in Net Assets Statement of Changes in Shares Outstanding Statistical Information Statement of Investments Economic and Geographical Division of Investments Notes to the Financial Statements

3 Management and Administration BOARD OF DIRECTORS Chairman Shigeru SHINOHARA (until March 15, 2013) Chairman Nomura Asset Management U.K. Limited Richard BISSON (from December 10, 2013) President Nomura Asset Management U.K. Limited Directors Hajime USUKI President and Managing Director Nomura Bank (Luxembourg) S.A. Koichi SUDO * Executive Director Nomura Securities Co., Ltd. Mariko YANADA Managing Director Nomura Asset Management Co., Ltd Graham JONES (from September 18, 2013) Vice President, Head of Operations Nomura Asset Management U.K. Limited Investment Adviser to China Opportunities Nomura Asset Management Hong Kong Limited 30/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong Custodian Nomura Bank (Luxembourg) S.A. Bâtiment A - 33, rue de Gasperich L-5826 Hesperange Grand-Duchy of Luxembourg Administrator, Domiciliary, Registrar and Transfer Agent Nomura Bank (Luxembourg) S.A. Bâtiment A - 33, rue de Gasperich L-5826 Hesperange Grand-Duchy of Luxembourg Cabinet de révision agréé Deloitte Audit Société à Responsabilité Limitée 560, rue de Neudorf, L-2220 Luxembourg Grand-Duchy of Luxembourg Management Company RBS (Luxembourg) S.A. 33, rue de Gasperich L-5826 Hesperange Grand-Duchy of Luxembourg Investment Manager Nomura Asset Management U.K. Limited One Angel Lane, London EC4R 3AB United Kingdom Legal Advisors in Luxembourg Elvinger, Hoss & Prussen 2, Place Winston Churchill, L-1340 Luxembourg Grand-Duchy of Luxembourg Distributor for China Opportunities Nomura Asset Management U.K. Limited One Angel Lane, London EC4R 3AB United Kingdom * Mr Koichi SUDO was Chairman of the Board of Directors during the period from March 15, 2013 until December 9,

4 Shareholder's Information Nomura Funds (the Fund ) is an open-ended investment fund and an umbrella fund. As of December 31, 2013, the Fund comprised the following active sub-fund: China Opportunities. Unaudited semi-annual reports and audited annual reports are available at the registered office of the Company, Bâtiment A - 33, rue de Gasperich, L-5826 Hesperange. The annual general meeting of shareholders of the Fund will be held at the registered office of the Fund in Luxembourg normally on the last Monday in June at 11:00 a.m. in each year or, if any such day is not a bank business day in Luxembourg, on the next following bank business day. Notices of all general meetings will be given to the extent required by Luxembourg law by publication in the legal gazette Mémorial and in such other newspapers as the Board of Directors shall determine. The Net Asset Value per Share of each Class, as well as the Subscription Price and Redemption Price, may be obtained from the registered office of the Fund. The combined financial statements are presented in Euro. 4

5 Report of the Investment Manager for the year ended December 31, 2013 Performance review The objective of the Sub-Fund is to achieve long-term capital growth. During the period 31st December 2012 to 31st December 2013, the Sub-Fund s NAV increase was 5.70%, relative to the 3.64% return of the MSCI China Total Return Index, outperforming the benchmark by 2.06%. Stock selection made a positive contribution to the Sub-Fund s performance during the period, as contribution from consumer discretionary and energy sectors were positive. Sector allocation also made a positive contribution to the Sub-Fund s performance during this period, as the portfolio was overweight in the outperforming information technology and health care sectors. In terms of sector weighting, the portfolio increased its exposure to the information technology and utility sectors during the year, largely at the expense of the telecommunication services sector. Investment outlook The economic fluctuation in 2013 bear witness to policymakers difficult balance between restructuring and stable growth. By openly admitting the GDP growth floor target, the central government has made clear to the private sector its intent to stabilize growth. Coupled with the property and infrastructure investment pick-up, entrepreneurs confidence and production have rebounded markedly, driving the better than expected economic performance in 2H13. The Third Plenum of the 18th Standing Committee of CPC has made a breakthrough in providing resolutions to the many issues regarding the comprehensive deepening reforms, and such resolutions offered the general framework and key contents for the next 5-10 years. At the core of the comprehensive deepening reforms, several aspects have exceeded market expectation the market-oriented direction is very well-established; urbanization is the solid direction to go; the reform coverage is well rounded from fiscal, taxation to SOE. The monetary policy shift towards prudence, local investment and financing regulation, and SOE institution reform should help to suppress the reckless growth of state-owned entities and local government financing vehicles (LGFV), and bode well for optimizing resource allocation and driving economic transition. For 2013, GDP growth was 7.7% yoy which was slightly above the government s target of 7.5%. It is believed economic growth will likely remain stable in 2014 on the back of the improving external demand from recovery in developed countries and continuous effort on structural reforms, despite the slowdown in M2 and loan growth suggested that the government is likely to maintain a relatively tight monetary policy stance. Current low inflation environment also means there is little concern about any policy reversal in the near term. Investment strategy Our future sector allocation and stock selection will be based on bottom up approach and active management to generate positive alpha return. We prefer companies that are either leaders in the industry for their competitive positions and management quality or niche players to take advantage of economic growth in China or those that are supported by favourable government policies. We have chosen the following sectors to stand at overweight within the fund for the time being consumer discretionary; utilities and financials while underweighting telecommunication and consumer staples sector because of lack of growth and expensive valuation respectively. The figures stated in this report are historical and not necessary indicative of future performance. 5

6 Deloitte. To the Shareholders of NOMURA FUNDS (Societe d'investissement a Capital Variable) 33, route de Gasperich L-5826 Hesperange Grand-Duchy of Luxembourg Deloitte Audit Societe a responsabil1te l1mitee 560, rue de Neudorf L-2220 Luxembourg BP 1173 L-1011 Luxembourg Tel: Fax: REPORT OF THE REVISE UR D'ENTREPRISES AGREE Following our appointment by the annual general meeting of the Shareholders of the Fund, we have audited the accompanying financial statements of NOMURA FUNDS, which comprise the statement of net assets and the statement of investments as at December 31, 2013 and the statement of operations and the statement of changes in net assets for the year then ended, and a summary of significant accounting policies and other explanatory information. Responsibility of the Board of Directors of the Fundfor the financial statements The Board of Directors of the Fund is responsible for the preparation and fair presentation of these financial statements in accordance with Luxembourg legal and regulatory requirements relating to the preparation of the financial statements and for such internal control as the Board of Directors of the Fund determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Responsibility of the reviseur d'entreprises agree Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted for Luxembourg by the Commission de Surveillance du Secteur Financier. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. Soc1ete a responsab1l1te hmitee au capital de RCS Luxembourg B 67.B95 Autonsat1on d'etabhssement:

7 Deloitte. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the reviseur d 'entreprises agree 's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the reviseur d'entreprises agree considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors of the Fund, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of NOMURA FUNDS as of December 31, 2013, and of the results of its operations and changes in its net assets for the year then ended in accordance with Luxembourg legal and regulatory requirements relating to the preparation of the financial statements. Other matter Supplementary information included in the annual report has been reviewed in the context of our mandate but has not been subject to specific audit procedures carried out in accordance with the standards described above. Consequently, we express no opinion on such information. However, we have no observation to make concerning such information in the context of the financial statements taken as a whole. For Deloitte Audit, Cabinet de revision agree Johnny Yip, Reviseu Partner April 30,

8 Statement of Net Assets as at December 31, 2013 Notes China Opportunities (in USD) Nomura Funds (in Euro) ASSETS Investment in securities at market value 2 39,298,080 28,489,261 (at cost: USD 32,343,606) Cash at banks 827, ,123 Due from brokers 155, ,544 Total Assets 40,281,133 29,201,928 LIABILITIES Payable to brokers 141, ,922 Accrued expenses 8 174, ,438 Total Liabilities 316, ,360 NET ASSETS 39,964,754 28,972,568 Number of Shares Outstanding Net Asset Value per Share 139,651 The accompanying notes form an integral part of these financial statements. 8

9 Statement of Operations for the year ended December 31, 2013 Notes China Opportunities (in USD) Nomura Funds (in Euro) INCOME Dividends received 1,046, ,939 Total Income 1,046, ,939 EXPENSES Management and Investment Management fees 3 390, ,078 Administrator, Domiciliary, Registrar and Transfer Agent fees 4 50,729 36,776 Custodian fees 4 59,951 43,462 Correspondent bank fees 60,227 43,662 Management Company fees 3 58,850 42,663 Legal fees 10,391 7,533 Out-of-pocket expenses 7,820 5,669 Professional fees 41,014 29,733 Subscription tax 7 3,786 2,745 Other expenses 28,201 20,445 Total Expenses 711, ,766 NET INVESTMENT INCOME 335, ,173 Net realised profit on investments 2,075,296 1,504,492 Net realised loss on foreign currencies (403) (292) NET REALISED PROFIT FOR THE YEAR 2,074,893 1,504,200 Change in net unrealised result on investments (202,295) (146,654) NET UNREALISED LOSS FOR THE YEAR (202,295) (146,654) NET INCREASE IN NET ASSETS AS A RESULT OF OPERATIONS 2,208,031 1,600,719 The accompanying notes form an integral part of these financial statements. 9

10 Statement of Changes in Net Assets for the year ended December 31, 2013 Notes China Opportunities (in USD) Nomura Funds (in Euro) Net assets at the beginning of the year 43,013,769 32,586,199 NET INVESTMENT INCOME 335, ,173 NET REALISED PROFIT FOR THE YEAR 2,074,893 1,504,200 NET UNREALISED LOSS FOR THE YEAR (202,295) (146,654) NET INCREASE IN NET ASSETS AS A RESULT OF OPERATIONS 2,208,031 1,600,719 Proceeds from subscriptions of shares 87,000 63,071 Payments for repurchase of shares (5,344,046) (3,874,182) (5,257,046) (3,811,111) Exchange Movement (*) (1,403,239) NET ASSETS AT THE END OF THE YEAR 39,964,754 28,972,568 (*) The exchange movement represents the difference arising from the conversion of the Combined Net assets at the beginning of the year at prevailing exchange rates as at December 31, 2012 and the conversion at prevailing exchange rates as at December 31, The accompanying notes form an integral part of these financial statements. 10

11 Statement of Changes in Shares Outstanding for the year ended December 31, 2013 (Unaudited) Number of shares at the beginning of the year Number of shares issued Number of shares repurchased ( ) Number of shares outstanding at the end of the year Statistical Information as at December 31, 2013 (Unaudited) China Opportunities (expressed in USD) Net Assets at the end of the year 39,964,754 43,013,769 36,504,761 Net Asset Value per Share at the end of the year 139, , ,455 11

12 Statement of Investments as at December 31, 2013 (expressed in US Dollars) Quantity (1) Description Cost Market Value In % of Net Assets TRANSFERABLE SECURITIES ADMITTED TO OFFICIAL EXCHANGE LISTING BERMUDA ORDINARY SHARE 2,096,000 GOME ELECTRICAL APPLIANCES HLDS LTD 273, , ,000 NEWOCEAN ENERGY HLDGS LTD 259, , ,000 SINOPEC KANTONS HOLDINGS 215, , ,000 KUNLUN ENERGY CO LTD 199, , ,000 HAIER ELECTRONICS GROUP CO 75, , ,000 LABIXIAOXIN SNACKS GROUP LTD 177, , ,000 BRILLIANCE CHINA AUTOMOTIVE 114, , ,315,397 1,670, Total BERMUDA 1,315,397 1,670, CAYMAN ISLANDS ORDINARY SHARE 56,200 TENCENT HOLDINGS LTD 1,000,034 3,584, ,000 HENGAN INTL GROUP CO LTD 477, , ,000 WIDSOM HOLDINGS GROUP 372, , ,000 BAOXIN AUTO GROUP LTD 367, , ,876,000 CIFI HOLDINGS GROUP CO LTD 391, , ,000 HILONG HOLDING LTD 264, , ,000 INTERNATIONAL HOUSEWARES RET CO 311, , ,000 CIMC ENRIC HLDGS LTD 280, , ,000 CHINA MEDICAL SYSTEM HLDGS LTD 216, , ,000 CHINA RESOURCES CEMENT HLDG LTD 255, , ,000 GREATVIEW ASEPTIC PACKAGING CO LTD 274, , ,000 SINO BIOPHARMACEUTICAL LTD 215, , ,000 CHAOWEI POWER HOLDINGS LTD 180, , ,000 SITC INTERNATIONAL HOLDINGS 185, , ,000 CHINA RESOURCES LAND LTD 188, , ,000 LI NING CO LTD 188, , ,000 BELLE INTERNATIONAL HOLDINGS 226, , ,000 FREETECH ROAD RECYCLING TECH LTD 120, , ,000 CHINA STATE CONSTRUCTION INTL 115, , ,000 CHINA CONCH VENTURE HOLDINGS 47,742 73, ,679,784 8,762, Total CAYMAN ISLANDS 5,679,784 8,762, (1) Quantity represents a number of units/shares. The accompanying notes form an integral part of these financial statements. 12

13 Statement of Investments (continued) as at December 31, 2013 (expressed in US Dollars) NOMURA FUNDS Quantity (1) Description Cost Market Value In % of Net Assets TRANSFERABLE SECURITIES ADMITTED TO OFFICIAL EXCHANGE LISTING (CONTINUED) CHINA ORDINARY SHARE 4,246,270 CHINA CONSTRUCTION BANK H 2,986,573 3,203, ,510,650 IND & COMM BANK OF CHINA LTD H 2,965,539 3,048, ,000 CHINA LIFE INSURANCE CO LTD H 1,427,481 1,588, ,858,000 BANK OF CHINA LTD H 1,070,661 1,315, ,381,400 CHINA PETROL & CHEM CORP SINOPEC H 884,680 1,127, ,898,000 AGRICULTURAL BANK OF CHINA H 871, , ,046,000 CHINA SHIPPING DEVELOPMENT CO LTD H 527, , ,800 CHINA PACIFIC INSURANCE CO LTD H 647, , ,000 PETROCHINA CO LTD H 645, , ,500 PING AN INSURANCE GROUP CO H 608, , ,176,000 CHINA TELECOM CORP LTD H 609, , ,000 CHINA MINSHENG BANKING CORP H 489, , ,000 ANHUI CONCH H 419, , ,800 SINOPHARM GROUP CO LTD H 485, , ,500 CITIC SECURITITES CO LTD H 345, , ,000 CHINA CINDA ASSET MANAGEME-H 456, , ,000 BEIJING JINGNENG CLEAN ENERGY H 372, , ,000 HAITONG SECURITIES CO LTD H 321, , ,278,000 SINOPEC SHANGHAI PETROCHEMICAL H 299, , ,000 CHINA OILFIELD SERVICES LTD H 244, , ,000 GREAT WALL MOTOR CO LTD H 242, , ,000 GUANGZHOU AUTOMOBILE GROUP H 270, , ,000 HUANENG POWER INTL H 244, , ,500 CHINA RAILWAY CONSTR CORP H 288, , ,000 HUADIAN FUXIN ENERGY CORP -H 251, , ,000 CHINA LONGYUAN POWER GROUP H 165, , ,000 CHINA COAL ENERGY CO H 235, , ,500 CHINA SHENHUA ENERGY CO LTD H 109, , ,000 CHINA COMMUNICATIONS SVCS CORP H 117, , ,000 CHINA SHIPPING CONT LINES CO LTD H 78,506 86, ,730 CHINA VANKE CO LTD B 58,336 85, ,500 BYD CO LTD H 76,911 75, ,817,742 21,069, Total CHINA 18,817,742 21,069, (1) Quantity represents a number of units/shares. The accompanying notes form an integral part of these financial statements. 13

14 Statement of Investments (continued) as at December 31, 2013 (expressed in US Dollars) NOMURA FUNDS Quantity (1) Description Cost Market Value In % of Net Assets TRANSFERABLE SECURITIES ADMITTED TO OFFICIAL EXCHANGE LISTING (CONTINUED) HONG KONG ORDINARY SHARE 232,000 CHINA MOBILE LTD 2,039,196 2,405, ,000 CNOOC LTD 1,590,838 1,653, ,000 CHINA OVERSEAS LAND&INVEST LTD 521, , ,000 LENOVO GROUP LTD 524, , ,000 ENN ENERGY HOLDINGS LTD 362, , ,600 CHINA TAIPING INSURANCE HLDG CO LTD 513, , ,000 CN RESOURCES POWER HOLDING 262, , ,000 KINGSOFT CORP LTD 148, , ,000 WHEELOCK & CO LTD 159, , ,400 HONG KONG EXCHANGES & CLEAR 155, , ,000 GALAXY ENTERTAINMENT GROUP LTD 70, , ,000 AIA GROUP LTD 95, , ,446,215 7,725, Total HONG KONG 6,446,215 7,725, Total TRANSFERABLE SECURITIES ADMITTED TO OFFICIAL EXCHANGE LISTING 32,259,138 39,227, TRANSFERABLE SECURITIES DEALT ON ANOTHER REGULATED MARKET CAYMAN ISLANDS ORDINARY SHARE 54,000 TEXHONG TEXTILE GROUP LTD 84,468 70, ,468 70, Total CAYMAN ISLANDS 84,468 70, Total TRANSFERABLE SECURITIES DEALT ON ANOTHER REGULATED MARKET 84,468 70, TOTAL INVESTMENTS 32,343,606 39,298, (1) Quantity represents a number of units/shares. The accompanying notes form an integral part of these financial statements. 14

15 Economic and Geographical Division of Investments as at December 31, 2013 Economic and Geographical Division In % of Net Assets BERMUDA Information Technology 1.81 Energy 1.16 Telecommunication Services 0.46 Consumer Staples 0.46 Consumer Discretionary CAYMAN ISLANDS Information Technology 9.47 Industrials 3.55 Consumer Discretionary 2.83 Health Care 2.80 Materials 1.94 Telecommunication Services 1.33 Financials CHINA Financials Energy 5.66 Utilities 3.54 Industrials 3.25 Materials 2.96 Telecommunication Services 1.74 Consumer Discretionary 1.55 Health Care 1.27 Information Technology HONG KONG Telecommunication Services 6.02 Financials 4.34 Energy 4.14 Information Technology 2.25 Utilities 2.20 Materials Total Investments

16 Notes to the Financial Statements as at December 31, 2013 Note 1 - The Fund NOMURA FUNDS (the Fund ) was incorporated as an open-ended investment company (Société d Investissement à Capital Variable - SICAV) with multiple compartments on April 6, The duration of the Fund is indefinite. The duration of the Sub-Funds may be limited. The initial capital on incorporation was JPY 5,000,000. On incorporation all the shares representing the initial capital were subscribed for and were fully paid. The Fund has designated a management company subject to chapter 15 of the Luxembourg law of December 17, 2010 regarding undertakings for collective investment as amended. The Articles of Incorporation were published in the Mémorial C, Recueil des Sociétés et Associations on April 18, The Articles of Incorporation are on file with the Registre de Commerce et des Sociétés of Luxembourg. The notice required by Luxembourg law relating to the issue of Shares in the Fund has been deposited with the Registre de Commerce et des Sociétés of Luxembourg. The Fund is designed to offer investors, within the same investment vehicle, a choice between several Sub-Funds, which are managed separately and are distinguished principally by their specific investment policy and/or by the currency in which they are denominated. The Fund is registered under Part I of the Luxembourg law of December 17, 2010 relating to undertakings for collective investment as amended. The Fund is operated in compliance with the Association of the Luxembourg Fund Industry (ALFI) Code of Conduct and the global exposure is monitored by commitment approach. At December 31, 2013, the Fund comprised one active Sub-Fund: (i) China Opportunities which has been established for an indefinite period of time. The Sub-Fund's investment objective is to achieve long term capital growth through investment in an actively managed portfolio of Chinese securities, including primarily equities issued by companies based in or listed/dealt on Regulated Markets in the People's Republic of China (PRC), comprising Hong Kong SAR ( Special Administrative Region ). The Sub-Fund may also invest in companies carrying out a preponderant part of their business activities in the PRC. It is anticipated that the Sub-Fund will invest across the entire range of capitalisations (from small cap to large cap). The Sub-Fund has the option, but not the obligation, to invest in A shares of companies in the PRC. A Shares of companies in the PRC are shares denominated in Renminbi and issued by companies in the PRC and listed on PRC stock exchanges. The Sub-Fund may use derivative techniques and instruments relating to the transferable securities and money market instruments for hedging purposes. Note 2 - Significant Accounting Policies The Fund maintains the books and records of China Opportunities Sub-Fund in its respective currency, U.S. Dollar and prepares combined financial statements in Euro. The financial statements are prepared in accordance with Luxembourg regulations relating to investment funds, including the following significant accounting policies: VALUATION OF SECURITIES (a) Securities listed on Regulated Markets, which operate regularly and are recognised and open to the public, are valued at the last available closing price; in the event that there should be several such markets, on the basis of the last available closing price of the main market for the relevant security. Should the last available closing price for a given security not truly reflect its fair market value, then that security is valued on the basis of the probable sales prices which the Board of Directors deems is prudent to assume; (b) Securities not listed on Regulated Markets, which operate regularly and are recognised and open to the public, are valued on the basis of their last available closing price. Should the last available closing price for a given security not truly reflect its fair market value, then that security is valued by the Board of Directors on the basis of the probable sales price which the Board of Directors deems is prudent to assume; 16

17 Notes to the Financial Statements as at December 31, 2013 (continued) NOMURA FUNDS Note 2 - Significant Accounting Policies (continued) VALUATION OF SECURITIES (CONTINUED) (c) Shares or units in underlying open-ended investment funds are valued at their last available net asset value; (d) Liquid assets and money market instruments may be valued at nominal value plus any accrued interest or on an amortised cost basis. All other assets, where practice allows, may be valued in the same manner. Short-term investments that have a remaining maturity of one year or less may be valued (i) at market value, or (ii) where market value is not available or not representative, at amortised cost; (e) The value of any cash on hand or on deposit, bills and demand notes and accounts receivable, prepaid expenses, cash dividends and interest declared or accrued as aforesaid, and not yet received is deemed to be the full amount thereof, unless, however, the same is unlikely to be paid or received in full, in which case the value thereof is determined after making such discount as the Board of Directors may consider appropriate in such case to reflect the true value thereof. In the event that extraordinary circumstances render such a valuation impracticable or inadequate, the Board of Directors may, at their discretion, prudently and in good faith follow other methods of valuation to be used if they consider that such method of valuation better reflects value and is in accordance with good accounting practice in order to achieve a fair valuation of the assets of the Fund. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME Security transactions are recorded on the trade date. Realised profits and losses on sales of portfolio securities are calculated on a weighted-average cost basis. Dividend income is recorded on the ex-dividend date and interest income is recorded on the basis of interest accrued, premiums amortised and discounts earned. Dividend income is recorded net of withholding tax. FOREIGN CURRENCY TRANSLATION The market value of securities as well as other assets and liabilities stated in currencies other than the reporting currency of the Sub-fund have been translated at the exchange rates prevailing at the date of the annual accounts. Income and expenses not denominated in the reporting currency of the Sub-Fund have been translated at the rate prevailing at the date of transaction. For the preparation of combined financial statements in Euro, the statements of the Sub-Fund have been translated at the exchange rates prevailing at the year-end. Currency rates as at December 31, 2013: 1 USD = EUR 1 USD = HKD COMBINED FINANCIAL STATEMENTS The Fund s total net assets is expressed in EUR and correspond to the difference between the total assets and the total liabilities of the Fund. In order to calculate this value, the net assets of each Sub-Fund is, unless they are already expressed in EUR, converted into EUR and added together. Note 3 - Management Company and Investment Management Fees The Management Company is entitled to a maximum management fee at an annual rate of 0.15% of the average net assets of the Fund for the provision of its services. Funds managed by the Management Company: the list of the funds managed by the Management Company, may be obtained, on simple request, at the registered office of the Management Company. The active Sub-Funds and Classes will incur an annual investment management fee payable to the Investment Manager, which reflects all expenses related to the investment management of the Sub-Funds and Classes. The investment management fee which is expressed as a percentage of the Net Asset Value is specified in the relevant Annex of the Prospectus as follows: 17

18 Notes to the Financial Statements as at December 31, 2013 (continued) NOMURA FUNDS Note 3 - Management Company and Investment Management Fees (continued) CHINA OPPORTUNITIES The Investment Manager is entitled to receive out of the assets of the fund of this Sub-Fund, an investment management fee accrued daily and payable quarterly, not exceeding 1 % per annum of the average total net assets of the Sub-Fund attributable to Class I. The Investment Adviser is paid by the Investment Manager. Note 4 - Custodian, Administrator, Domiciliary, Registrar and Transfer Agent Fees The Custodian, Administrator, Domiciliary, Registrar and Transfer Agent are entitled to receive out of the monies of each Fund a combined fee in accordance with usual practice in Luxembourg for custody, administration, domiciliary, registrar and transfer agent services. Such fee is based on the total net assets of the Sub-Fund and is payable quarterly, in arrears. In addition, the Custodian will be reimbursed for the reasonable out-of-pocket expenses relating to the services thereto. Note 5 - Subscription and Redemption of Shares CHINA OPPORTUNITIES Classes of Shares Class I Shares are available for subscription and are reserved to institutional investors as defined from time to time by the Luxembourg Supervisory Authority. The minimum subscription and minimum holding amounts are of USD 3 million and the subsequent minimum investment amounts are USD 1 million unless the Board of Directors resolves otherwise. Class A Shares are currently not available. The minimum subscription and minimum holding amounts are of USD 50,000. Subscriptions Investors should be aware that subscription to the Shares may be made directly through the Registrar and Transfer Agent as described in the Chapter on Subscriptions. The Initial Offering Period commenced on May 10, 2005 and has closed on June 6, During the Initial Offering Period, Class I Shares were subscribed at a price of USD 50,000 plus the applicable subscription charge. Following the close of the Initial Offering Period, Shares are available for subscription on each Valuation Day. Applications for Shares must be received by the Registrar and Transfer Agent by no later than 8 a.m. (Luxembourg time) on the relevant Valuation Day to be dealt with on the basis of the Net Asset Value per Share calculated on that Valuation Day. Subscription proceeds must be received by the Custodian on an account of the Fund no later than the fifth Business Day following the relevant Valuation Day. Applications for Shares received by the Registrar and Transfer Agent after 8 a.m. (Luxembourg time) will be dealt with on the basis of the Net Asset Value per Share of the next Valuation Day. A subscription charge, not exceeding 5 per cent of the fixed price at which Shares are offered during the Initial Offering Period and thereafter of the Subscription Price, may be added for the purpose of compensating financial intermediaries and other agents who assist in placing the Shares. This charge is to be considered a maximum rate and the intermediaries and other agents may decide at their discretion to waive this charge in whole or in part. No subscription charge was charged on subscriptions recorded during the year under review. Redemptions Shares are redeemable at the option of the Shareholders. Completed redemption requests should be sent to the Registrar and Transfer Agent to be received no later than 8 a.m. (Luxembourg time) on the relevant Valuation Day in order to be dealt with on the basis of the Net Asset Value per Share calculated on that Valuation Day. Redemption requests received by the Registrar and Transfer Agent after 8 a.m. (Luxembourg time) will be dealt with on the basis of the Net Asset Value per Share of the next Valuation Day. No Redemption Charge will be levied for the Sub-Fund. Payment of redemption proceeds will normally be made within six Business Days after the relevant Valuation Day. 18

19 Notes to the Financial Statements as at December 31, 2013 (continued) NOMURA FUNDS Note 6 - Distribution policies CHINA OPPORTUNITIES The Sub-Fund offers the Shares in the form of accumulation shares. The Sub-Fund shall not distribute any dividend and all net investment income and all net realised and unrealised capital gains were accumulated and did increase the Net Asset Value of the Shares of the Sub-Fund. Note 7 - Taxation Under current law and practice the Fund is not liable to any Luxembourg income tax, nor are dividends (if any) paid by the Fund liable to any Luxembourg withholding tax. However, the Fund is liable in Luxembourg to a subscription tax (taxe d abonnement) of 0.05 per cent per annum of its net assets, such tax being payable quarterly and calculated on the Net Asset Value of the Fund at the end of the relevant quarter. The reduced subscription tax s rate of 0.01 per cent per annum will be applicable to the Classes of Shares which are exclusively held by Institutional Investors. To the extent that the assets of the Fund are invested in investment funds which are established in Luxembourg, no such tax is payable. No stamp duty or other tax is payable in Luxembourg on the issue of Shares in the Sub-Fund except for an initial tax of EUR 1,250 which was paid upon incorporation. Under current law and practice, it is anticipated that no Luxembourg capital gains tax will be payable on the realised or unrealised capital appreciation of the assets of the Sub-Fund. Note 8 - Accrued expenses China Opportunities (in USD) Nomura Funds (in Euro) Investment Management fees 98,379 71,320 Administrator, Domiciliary, Registrar and Transfer Agent fees 12,780 9,265 Custodian fees 14,760 10,700 Management Company fees 14,759 10,700 Out-of-pocket expenses 1,970 1,428 Professional fees 30,769 22,306 Subscription tax Accrued expenses 174, ,438 Note 9 - Statement of changes in the investment portfolio The statement of changes in the investment portfolio for the year ended December 31, 2013 for each active Sub-Fund is available free of charge at the Registered Office of the Company. Note 10 - Transactions costs Transactions costs paid by the Sub-Fund during the year ended December 31, 2013 to brokers amounted to: China Opportunities HKD 1,630,402 (equivalent to 210,257 USD) Transactions costs are included in the cost of investments. 19

20 Notes to the Financial Statements as at December 31, 2013 (continued) NOMURA FUNDS Note 11 - Subsequent events After December 31, 2013, the Management Company of the Fund has the intention to transfer the assets of the Fund to a fund domiciled in Ireland and considered different scenarios. At the date of the report there was no evidence that this transfer may be completed before December 31, 2014 and no resolution has been taken by the Management Company in respect of this transfer. 20