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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Kubera Cross-border Fund Limited | LSE:KUBC | London | Ordinary Share | KYG522771032 | ORD USD0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.05 | 0.04 | 0.055 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMKUBC
RNS Number : 4921S
Kubera Cross-Border Fund Limited
18 March 2016
Kubera Cross-Border Fund Limited
Annual Results for the year ended 31 December 2015
Kubera Cross-Border Fund Limited ("KUBC" or the "Fund") (LSE/AIM: KUBC) has issued its annual audited results for the year ended 31 December 2015.
Financial Highlights
-- The value of the Fund's net assets decreased from US$ 56.90 million to US$ 55.33 million during the year ended 31 December 2015.
-- The Fund's net asset value ("NAV") per share has remained fairly constant at around US$ 0.50 between 31 December 2014 and 31 December 2015.
-- Consolidated net investment income for the year of US$0.33 million (US$0.55 million loss for year ended 31 December 2014)
Electronic and printed copies of the annual report will be sent to shareholders shortly. Copies of the report will be available, free of charge, from the offices of Grant Thornton UK LLP, 30 Finsbury Square, London EC2P 2YU, and will be available at the Fund's website www.kuberacrossborderfund.com.
About Kubera Cross-Border Fund Limited
Kubera Cross-Border Fund Limited is a closed-end investment company incorporated in the Cayman Islands and traded on the AIM market of the London Stock Exchange. The Fund makes private equity investments in cross-border companies, primarily in businesses that operate in the US-India corridor. The Fund's investment manager, Kubera Partners, brings a strong track record of investing in or managing such businesses. Several of the Fund's portfolio companies also benefit from business activities in the growing Indian domestic market. For further information on the Fund, please visit www.kuberacrossborderfund.com.
For more information contact:
Kubera Partners, LLC (Investment Manager of Kubera Cross-Border Fund Limited)
Ramanan Raghavendran, Managing Partner
Email: info@kuberapartners.com
Numis Securities Limited (Broker)
David Benda, Director
Tel.:+44 (0) 20 7260 1275
Email: d.benda@numiscorp.com
Grant Thornton UK LLP (Nominated Adviser)
Philip Secrett / Jamie Barklem
Tel.: +44 (0) 20 7383 5100
Email: philip.j.secrett@uk.gt.com
Disclaimer:
This announcement may contain certain forward-looking statements with respect to the financial condition, results of operations and business of the Fund and its portfolio companies. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Fund or its portfolio companies' actual performance to be materially different from any future performance expressed or implied by such forward-looking statements. Such forward-looking statements are based on assumptions regarding the Fund and its portfolio companies present and future business strategies and the political and economic environment in which they operate. Reliance should not be placed on these forward-looking statements, which reflect the view of Kubera Partners, LLC as of the date of this release only.
Chairman's Statement
On behalf of the Board of Directors, I am pleased to present the audited financial statements of Kubera Cross-Border Fund Limited ("KUBC" or the "Fund") and its subsidiaries (collectively, the "Group") for the year ended 31 December 2015.
NAV and Discount
The value of the Fund's net assets decreased from US$ 56.90 million to US$ 55.33 million during the year ended 31 December 2015. The Fund's net asset value ("NAV") per share has remained fairly constant at around US$ 0.50 between 31 December 2014 and 31 December 2015.
The Fund's share price decreased from US$ 0.26 as at 31 December 2014 to US$ 0.20 as at 31 December 2015. The discount of the Fund's share price to NAV increased from 50 per cent as at 31 December 2014 to 60 per cent as at 31 December 2015.
Investment Manager
Under the terms of the Investment Management Agreement, the Investment Manager has sole authority over the disposition and realisation of investments. With effect from 1 January 2016, the Fund will not pay the Investment Manager an investment management fee, in line with the resolutions approved at the shareholder Extraordinary General Meeting held in early 2013. The Manager's term will conclude on 26 December 2016, following which the Fund will be self-managed by its board of directors.
Portfolio Valuations
The Fund's annual financial statements are prepared in accordance with US GAAP. The valuations of investments are reviewed and approved by the Audit Committee of the Board on a quarterly basis. All investments are recorded at estimated fair value, in accordance with SFAS 157 that defines and establishes a framework for measuring fair value. The NAV is calculated on this basis. The methodology underlying the Fund's investment valuations is consistent with previous periods.
Audit Committee
All Board members also comprise Audit Committee. Following due consideration, it was resolved that the Audit Committee be disbanded from January 2016 and decisions normally reserved for an Audit Committee will be made by the Board as a whole.
Closing Remarks
The Investment Manager's report provides information on the investment environment in India, together with progress regarding the implementation of the KUBC's realisation policy and performance of each of the Fund's investments. Further detailed information on investments, quarterly net asset values and other material events relating to the Fund are available through news releases made to the London Stock Exchange available on www.londonstockexchange.co.uk
under ticker KUBC and through the Fund's website at www.kuberacrossborderfund.com.
Martin M. Adams
Chairman
Investment Manager's Report
The benchmark 30-stock S&P BSE Sensex index closed at 26,118 on 31 December 2015, a decline of 4.7% during the year. In comparison, the mid-cap index (NIFTY Midcap) during the same period gained by 1.5% to close at 3,415.
During 2015, the US dollar appreciated by 4.7% against the Indian rupee, ending at 66.33 rupees to the US dollar on 31 December 2015, compared to 63.33 at the end of the previous year. The rupee has continued to depreciate since year end.
Portfolio summary
At close of business on 31 December 2015, the Fund's unaudited net asset value per share ("NAV") was US$ 0.50. The aggregate value of shareholder distributions to date together with the NAV amount to US$ 0.83 per share. The denomination of the Fund is in US dollars; the Fund does not hedge the currency risk relating to its investments denominated in Indian rupees.
Since the inception of the Fund, the rupee has depreciated relative to the US dollar by over 46%. The Fund's performance in rupee terms, as of the 31 December 2015 NAV, amounts to a multiple of 1.10x of cost; in US dollar terms as mentioned above it is 0.83x (inclusive of total distributions of $ 0.33/share).
The Manager, with the support of the Board, continues to explore every possibility of realizing value in the remaining holdings of the Fund. Apart from individual company sales processes, the Fund continues to also examine a full portfolio sale. There is no guarantee that any of these efforts will result in a positive outcome.
Independent Auditor's Report
To the Shareholders and Board of Directors of
Kubera Cross-Border Fund Limited
We have audited the accompanying consolidated financial statements of Kubera Cross-Border Fund Limited ('the Company') and its subsidiaries (collectively referred to as 'the Group'), which comprise the consolidated statement of assets and liabilities, including the consolidated schedule of investments as of 31 December 2015 and 31 December 2014 and the related consolidated statement of operations, changes in net assets and cash flows for the years then ended, and the related notes to the consolidated financial statements.
Management's Responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated 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. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
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In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Group as of 31 December 2015 and 31 December 2014, the results of their operations, the changes in their net assets and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
KPMG
Mumbai, India
17 March 2016
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Kubera Cross-Border Fund Limited
Consolidated statement of assets and liabilities
as at 31 December 2015
(Stated in United States Dollars)
Note 2015 2014
Assets
Investments in securities,
at fair value (cost: US$ 61,670,923, 4(a),
previous year: US$ 68,959,723) 4(b) 58,452,133 58,314,228
4(e),
Cash and cash equivalents 7 2,148,934 3,830,802
Prepaid expenses 31,202 119,844
Total assets 60,632,269 62,264,874
------------- -------------
Liabilities
Accounts payable 107,091 213,573
Tax liability 4(g), - -
9
Total liabilities 107,091 213,573
------------- -------------
Net assets 60,525,178 62,051,301
============= =============
Analysis of net assets
Capital and reserves
Share capital 8 1,097,344 1,097,344
Additional paid-in capital 8 111,886,393 111,886,393
Accumulated deficit (57,656,985) (56,080,442)
------------- -------------
55,326,752 56,903,295
Non-controlling interest 10 5,198,426 5,148,006
------------- -------------
5,198,426 5,148,006
Total shareholders' interests 60,525,178 62,051,301
============= =============
Net asset value per share 0.50 0.52
============= =============
Approved by the Board of Directors on 17 March 2016
and signed on its behalf by:
Director
See accompanying notes to the consolidated financial
statements.
Kubera Cross-Border Fund Limited
Consolidated schedule of investments
as at 31 December 2015
(Stated in United States Dollars)
2015 2014
Name of Industry Country Instrument Number Fair % of Number Fair % of
the entity
of shares Cost Value net of shares Cost Value net assets
assets
NeoPath
Limited
(Previously
known as Equity shares
Venture Investment and
Infotek holding Preferred
Limited) company Mauritius shares 27,928,224 - 5,026,864 8.31% 27,928,224 - 5,165,272 8.32%
Compulsorily
convertible
preference
Essel Shyam shares and
Communication Equity
Limited Media services India shares 6,680,371 14,682,134 30,264,509 50.00% 6,680,371 14,682,134 28,206,539 45.46%
Compulsorily
convertible
cumulative
preference
shares,
Synergies Equity
Castings Automotive shares and
Limited components India loans 15,876,948 29,388,556 21,660,760 35.79% 15,876,948 29,388,556 23,125,577 37.27%
Compulsorily
convertible
Life sciences, preference
Financial shares,
services, Equity
IT shares and
Others infrastructure India loans 3,874,241 17,600,233 1,500,000 2.48% 4,587,063 24,889,033 1,816,840 2.93%
Total investments in securities
and loans to portfolio
companies 61,670,923 58,452,133 96.58% 68,959,723 58,314,228 94.0%
----------- ----------- ------- ----------- ----------- -----------
Kubera Cross-Border Fund Limited
Consolidated statement of operations
for the year ended 31 December 2015
(Stated in United States Dollars)
Note 2015 2014
Investment income
Interest 4(a) 5,877 2,275
Dividend 4(a) 369,317 726,588
Foreign exchange loss 4(c) (4,719) -
Other income - 32,500
------------ ------------
370,475 761,363
------------ ------------
Expenses
4(j),
Investment management fee 5 1,602,516 1,902,080
Carried interest 4(k), - -
5
Professional fees 176,372 124,392
Audit fees 55,470 76,930
Insurance 84,934 97,011
Directors' fees and expenses 6 84,600 90,902
Administration fees 141,000 131,500
License fees 19,045 13,734
Custodian fees 9,265 10,044
Other expenses 52,465 23,577
------------ ------------
2,225,667 2,470,170
------------ ------------
Net investment loss before tax (1,855,192) (1,708,807)
Taxation 4(g), - -
9
------------ ------------
Net investment loss after tax (1,855,192) (1,708,807)
------------ ------------
Realized and unrealized gain / (loss) from
investments
Net realized loss from investment 4(a),
in securities 4(b) (7,097,636) (2,754,844)
Net change in unrealized gain from 4(a),
investments in securities 4(b) 7,426,705 2,201,424
Net gain / (loss) from investments 329,069 (553,420)
------------ ------------
Net decrease in net assets resulting
from operations (1,526,123) (2,262,227)
============ ============
Equity holding of parent (1,576,543) (2,271,507)
Non-controlling interest 50,420 9,280
(1,526,123) (2,262,227)
------------ ------------
See accompanying notes to the consolidated
financial statements.
Kubera Cross-Border Fund Limited
Consolidated statement of changes in net assets
as at 31 December 2015
(Stated in United States Dollars)
2015 2014
Operations
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Net investment loss (1,855,192) (1,708,807)
Net realized loss from investments
in securities (7,097,636) (2,754,844)
Net change in unrealized gains from
investments in securities 7,426,705 2,201,424
Net decrease in net assets resulting
from operations (1,526,123) (2,262,227)
Capital share transactions
Issuance of shares - -
Redemption of shares - (88,500)
Decrease in net assets resulting from
capital share transactions - (88,500)
Decrease in net assets (1,526,123) (2,350,727)
Net assets, beginning of year 62,051,301 64,402,028
Net assets, end of year 60,525,178 62,051,301
--------------------------------------------- ------------ ------------
Kubera Cross-Border Fund Limited
Consolidated statement of cash flows
for the year ended 31 December 2015
(Stated in United States Dollars)
2015 2014
Cash flow from operating activities
Net decrease in net assets resulting
from operations (1,526,123) (2,262,227)
Adjustments to reconcile net decrease
in net assets resulting from operations
to net cash provided by / (used in)
operating activities
Net unrealized gain from investments
in securities (7,426,705) (2,201,424)
Realized loss from investment in securities 7,097,636 2,754,844
Proceeds from sale of investment in
securities 191,165 201,630
Change in operating assets and liabilities:
(Increase) / Decrease in prepaid expenses 88,641 (2,460)
Increase / (Decrease) in accounts payables (106,482) 100,548
Net cash used in operating activities (1,681,868) (1,409,089)
Cash flow from financing activities
Capital distribution to non-controlling
interest shareholders - (88,500)
Net cash used in financing activities - (88,500)
Net decrease in cash and cash equivalents (1,681,868) (1,497,589)
------------ --------------
Cash and cash equivalents, beginning of
year 3,830,802 5,328,391
Cash and cash equivalents, end of year 2,148,934 3,830,802
============ ==============
See accompanying notes to the consolidated financial
statements.
1. Organization and principal activity
Kubera Cross-Border Fund Limited ('the Fund') was incorporated in the Cayman Islands on 23 November 2006 as an exempted company with limited liability.
The Fund is a closed-end investment company trading on the AIM market of the London Stock Exchange. The Fund makes private equity investments in cross-border companies, primarily in businesses that operate in the US-India corridor.
The Fund is managed by Kubera Partners, LLC ('the Investment Manager'), a Delaware limited liability company. The Investment Manager is responsible for the day-to-day management of the Fund's investment portfolio in accordance with the Fund's investment objective and policies and has full discretionary investment management authority.
The Fund is a Limited Partner in Kubera Cross-Border Fund LP ('the Partnership'), an exempted limited partnership formed on 28 November 2006, in accordance with the laws of Cayman Islands. The primary business of the Partnership is to purchase and sell investments for the purpose of carrying out an investment strategy that is consistent with the strategy described in the Admission Document and Offering Memorandum of the Fund.
Kubera Cross-Border Fund (GP) Limited, a company incorporated under the laws of the Cayman Islands and a wholly owned subsidiary of the Fund, serves as the General Partner of the Partnership.
The Partnership holds 100% ownership in Kubera Cross-Border Fund (Mauritius) Limited ('Kubera Mauritius'), a company incorporated in Mauritius. The primary business of Kubera Mauritius is to carry on business as an investment holding company.
Kubera Mauritius holds 100% ownership in New Wave Holdings Limited, a company incorporated in Mauritius. The primary business of New Wave Holdings Limited is to carry on business as an investment holding company.
FIM Capital Limited (formerly IOMA Fund and Investment Management Limited), ('the Administrator') is the administrator of the Fund and performs certain administrative and accounting services on behalf of the Fund.
2. Basis of Preparation
The accompanying consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles ('US GAAP'). The Fund is an investment company and follows the accounting and reporting guidance in Financial Accounting Standards Board ('FASB') Accounting Standards Codification Topic 946.
Functional currency
The measurement and presentation currency of the financial statements is the United States dollar rather than the local currency of Cayman Island reflecting the fact that subscriptions to and redemptions from the Company are made in United States dollars and the Company's operations are primarily conducted in United States dollars.
Basis of consolidation
The consolidated financial statements include the accounts of the Fund and its wholly owned subsidiary, Kubera Cross-Border Fund (GP) Limited and its majority owned subsidiaries, the Partnership, Kubera Mauritius and New Wave Holdings Limited (together referred to as the 'Group'). All material inter-company balances and transactions have been eliminated.
3. Use of estimates
US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, the consolidated results of operations during the reporting period and the reported amounts of increases and decreases in net assets from operations during the reporting period. Significant estimates and assumptions are used for, but not limited to, accounting for the fair values of investments in portfolio companies. Management believes that the estimates made in the preparation of the financial statements are prudent and reasonable. Actual results could differ from those estimates. Changes in estimates are reflected in the financial statements in the period in which the changes are made and if material, these effects are disclosed in the notes to the financial statements.
4. Significant accounting policies a. Investment transactions and related investment income and expenses
Investments in securities are held in the custody of Kotak Mahindra Bank Limited. Investment transactions are accounted for on a trade date basis.
Realized gains and losses and movements in unrealized gains and losses are recognized in the statement of operations and determined on a weighted average cost method basis. Movements in fair value are recorded in the statement of operations at each valuation date.
Dividend income is recognized when the right to receive dividend is established and is presented net of withholding taxes. Interest income and expense are recognized on an accruals basis except for securities in default for which interest is recognized on a cash basis.
b. Fair value
Definition and hierarchy
Investments are recorded at estimated fair value as at the balance sheet date. The Group follows ASC 820 "Fair Value Measurements and Disclosures" which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date.
ASC 820 establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Investments measured and reported at fair value as determined by the Board of Directors are classified and disclosed in one of the following categories:
Level I - Unadjusted quoted prices in active markets for identical assets or liabilities that the Group has the ability to access.
Level II - Observable inputs other than quoted prices included in Level 1 that are not observable for the asset or liability either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates, and similar data.
Level III - Unobservable inputs for the asset or liability to the extent that relevant observable inputs are not available, representing the Group's own assumptions about the assumptions that a market participant would use in valuing the asset or liability, and that would be based on the best information available.
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In determining fair value, the Group uses various valuation approaches. Inputs that are used in determining fair value of an instrument may include price information; quotations received from market makers, brokers, dealers and / or counterparties (when available and considered reliable); credit data; volatility statistics and other factors. Inputs, including price information, may be provided by independent pricing services or derived from market data. Inputs can be either observable or unobservable.
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level III. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Valuation
Listed equity securities
Investments in equity securities that are freely tradable and are listed on a national securities exchange are valued at their last sales price as of the valuation date. These investments are classified as Level I in the fair value hierarchy and include common stocks and preferred stock.
Private company
Investment in private company consists of a direct ownership of common and / or preferred stock of a privately held company. The transaction price, excluding transaction costs, is typically the Group's best estimate of fair value at inception. When evidence supports a change to the carrying value from the transaction price, adjustments are made to reflect expected exit values in the investment's principal market under current market conditions.
The Group performs ongoing reviews based on an assessment of trends in the performance of each underlying investment from the inception date through the most recent valuation date. These assessments typically incorporate the original transaction price, recent transactions in the same or similar instruments, completed or pending third-party transactions in the underlying investment or comparable issuers, subsequent rounds of financing, recapitalizations and other transactions across the capital structure, offerings in the equity or debt capital markets and changes in financial ratios or cash flows.
Valuation process
The Group establishes valuation processes and procedures to ensure that the valuation techniques for investments that are categorized within Level III of the fair value hierarchy are fair, consistent, and verifiable. The Group designates the Investment Manager to oversee the entire valuation process of the Group's investments.
The Investment Manager is responsible for reviewing the Group's written valuation processes and procedures, conducting periodic reviews of the valuation policies, and evaluating the overall fairness and consistent application of the valuation policies.
Valuations determined by the Investment Manager are required to be supported by market data, third-party pricing sources; industry accepted pricing models, or other methods the Investment Manager deems to be appropriate, including the use of internal proprietary pricing models.
In completing the valuations of investments in equity shares, preferred shares, compulsorily convertible preference shares, compulsorily convertible cumulative preference shares and loans having a fair value of US$ 58,452,133 (previous year: US$ 58,314,228), the Investment Manager considers the following:
-- recent prices of similar investments, with adjustments to reflect any changes in economic conditions since the date of the transactions that occurred at those prices. Comparable transactions look at multiples such as the EV/EBITDA ratio, among others; and
-- discounted cash flow projections based on reliable estimates of future cash flows. The projected income and expense figures are mathematically extended with adjustments for estimated changes in economic conditions. The discount rates used for valuing equity securities are determined based on historic equity returns for other entities operating in the same industry for which market returns are observable. The discount rate adopted for the investments ranged from 12.6% - 16.4%.
There are significant uncertainties surrounding these assumptions and the impact of such uncertainty cannot be quantified.
The following table summarizes the valuation of the Group's investments based on ASC 820 fair value hierarchy levels as of 31 December 2015.
Total Level I Level II Level III
Investments in securities
and loans to portfolio
companies 58,452,133 - - 58,452,133
Total 58,452,133 - - 58,452,133
----------- -------- ------------- -----------
The changes in the investments classified as Level III are as follows:
Balance at 1 January 2015 57,997,388
Net change in unrealized gains 454,745
-----------
Balance at 31 December 2015 58,452,133
-------------------------------- -----------
The following table summarizes the valuation of the Group's investments based on ASC 820 fair value hierarchy levels as of 31 December 2014.
Total Level I Level II Level III
Investments in securities 58,314,228 316,840 - 57,997,388
Total 58,314,228 316,840 - 57,997,388
--------------------------- ----------- -------- ------------- -----------
The changes in the investments classified as Level III are as follows:
Balance at 1 January 2014 58,468,954
Proceeds from sale (20,000)
Change in net unrealized gain (451,566)
-----------
Balance at 31 December 2014 57,997,388
------------------------------- -----------
Total realized and unrealized gains and losses, if any, recorded for the Level III investments is reported in net realized gain (loss) on investments in securities and net change in unrealized gain (loss) on investments in securities respectively, in the statement of operations. Investment in securities includes loans given to subsidiaries of portfolio companies as financial support for working capital requirement with a fair value of US$2,767,207 (Previous year: US$2,767,207).
During the year ended 31 December 2015, the Group did not have any transfers between any of the levels of the fair value hierarchy.
c. Foreign currency translation
Assets and liabilities denominated in a currency other than the U.S. dollar are translated into U.S. dollars at the exchange rate as at the reporting date. Purchases and sales of investments and income and expenses denominated in currencies other than U.S. dollars are translated at the exchange rate on the respective dates of such transactions.
The Group does not generally isolate that portion of the results of operations arising as a result of changes in the foreign currency exchange rates from the fluctuations arising from changes in the market prices of securities. Accordingly, such foreign currency gain (loss) is included in net realized and unrealized gain (loss) on investments.
d. Buy back
The Fund repurchases its shares by allocating the excess of repurchase price over par value against additional paid-in capital.
e. Cash and cash equivalents
Cash and cash equivalents include highly liquid investments, such as money market funds, that are readily convertible to known amounts of cash within 90 days from the date of purchase. All cash balances are held at major banking institutions.
f. Related parties
Related parties include parties that are defined as such under FASB Accounting Standards Codification Topic 850-10-20 whereby amongst other criteria, parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions.
g. Income taxes
The current charge for income taxes is calculated in accordance with the relevant tax regulations applicable to the Group. Deferred tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between carrying amount of existing assets and liabilities in the consolidated financial statements and their respective tax bases and operating losses carried forward. Deferred tax assets and liabilities are measured using prevailing tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statement of operations in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits of which future realization is not more likely than not.
h. Fair value of financial instruments other than investment in securities
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The Group's investments are accounted as described in Note 4(a). The Group's financial instruments include other current assets, accounts payable and accrued expenses, which are realizable or to be settled within a short period of time. The carrying amounts of these financial instruments approximate their fair values.
i. Comprehensive income
The Group has no comprehensive income other than the net loss disclosed in the statement of operations. Therefore, a statement of comprehensive income has not been prepared.
j. Investment management fees
On 17 January 2013 and subsequently on 7 June 2013, the Board of Directors of the Fund fixed management fees for the years ending 31 December 2013, 2014 and 2015.
If, at any time prior to 31 December 2015, the Net Asset Value is less than 15 per cent of the Net Asset Value as at 1 January 2013, the investment management fees shall be varied by the Independent Board Members to either of the following:
(a) 2 per cent of the Net Asset Value per annum (based on the Net Asset Value at the end of the previous quarter) less the administration fee payable to the Administrator for such period; or
(b) a fixed amount per annum to be determined by the Independent Board Members (which shall be adjusted to take into account the administration fee payable to the Administrator).
j. Investment management fees (Continued)
Based on above, the Board has determined that it shall pay a management fee to the Investment Manager which shall be:
-- US$1,997,079 per annum for the period from 1 January 2013 to 31 December 2014 less the administration fee payable to the Administrator for such period;
-- US$1,697,515 for the period from 1 January 2015 to 31 December 2015 less the administration fee payable to the Administrator.
k. Carried interest
Under the terms of the Partnership Agreement, Kubera Cross-Border Incentives SPC - Carried Interest SP, the Special Limited Partner of the Partnership and an affiliate of the Investment Manager, is entitled to receive a carried interest from the Partnership equivalent to 20 per cent, of the aggregate return over investment received by the Partnership following the full or partial cash realization of an investment.
Aggregate return, for the purposes of calculating the carried interest, is defined as the net realized gains reduced by the net unrealized losses of the Partnership to the date of such distribution. Realized and unrealized gains or losses on each investment are determined on the most recent announced Net Asset Value ('NAV') immediately prior to the date of such distribution.
The payment of carried interest is conditional upon the fact that the last announced adjusted NAV of the Fund prior to the date of distribution should be equal to or greater than the Par Value. The adjusted NAV is arrived at by adding back the value of any income or capital distributions made by the Fund to its shareholders.
In addition, the carried interest payment is adjusted such that, the aggregate cumulative amount of carried interest paid at the date of such distribution will equal 20 per cent, of the eligible carried interest proceeds. Eligible carried interest proceeds may not be less than zero.
l. Recent accounting announcements
There are no recent accounting pronouncements that will have a material impact on the Group's financial condition or results of operations.
5. Investment management fees and carried interest
Investment management fees
For the year ended 31 December 2015, the Fund paid / provided for US$ 1,602,516 towards the investment management fee. (Previous year: US$ 1,902,080)
Carried interest
During the year ended 31 December 2015, no carried interest was paid / provided for by the Fund. (Previous year: Nil)
6. Directors' fees and expenses
The Fund pays each of its directors an annual fee of GBP20,000 and the Chairman is paid an annual fee of GBP25,000, plus reimbursement for out-of-pocket expenses incurred in the performance of their duties. The members of the Audit Committee are paid an annual fee of GBP2,000 and the Chairman of the Audit Committee is paid an annual fee of GBP5,000. Mr. Raghavendran has waived his director's fees as he has interest in the Investment Manager.
The Fund does not remunerate its directors by way of share options and other long term incentives or by way of contribution to a pension scheme.
7. Cash and cash equivalents
2015 2014
Cash at bank 548,934 830,802
Time Deposits 1,600,000 3,000,000
2,148,934 3,830,802
8. Share capital and additional paid-in capital
2015 2014
Authorized share capital:
1,000,000,000 ordinary shares of $0.01
each 10,000,000 10,000,000
----------------------------------------- ------------- -------------
Number Share Additional Total
of Capital paid-in
Shares capital
As at 1 January
2014 109,734,323 1,097,344 111,886,393 112,983,737
Capital distribution - - - -
As at 31 December
2014 109,734,323 1,097,344 111,886,393 112,983,737
As at 1 January
2015 109,734,323 1,097,344 111,886,393 112,983,737
Capital distribution - - - -
As at 31 December
2015 109,734,323 1,097,344 111,886,393 112,983,737
9. Income taxes
Under the laws of the Cayman Islands, the Fund, Kubera Cross-Border Fund (GP) Limited and Kubera Cross-Border Fund LP, are not required to pay any tax on profits, income, gains or appreciations and, in addition, no tax is to be levied on profits, income, gains, or appreciations or which is in the nature of estate duty or inheritance tax on the shares, debentures or other obligations of the Fund and its Cayman based subsidiaries, or by way of withholding in whole or part of a payment of dividend or other distribution of income or capital by the Fund and its Cayman based subsidiaries, to its members or a payment of principal or interest or other sums due under a debenture or other obligation of the Fund and its Cayman based subsidiaries.
Under laws and regulations in Mauritius, the Fund's majority owned subsidiaries, Kubera Cross-Border Fund (Mauritius) Limited and New Wave Holdings Limited, are liable to pay income tax on their net income at a rate of 15%. They are however entitled to a tax credit equivalent to the higher of actual foreign tax suffered or 80% of Mauritius tax payable in respect of their foreign source income tax thus reducing their maximum effective tax rate to 3%. Both subsidiaries have received a tax residence certificate from the Mauritian authorities certifying that they are residents of Mauritius, which is renewable on an annual basis subject to meeting certain conditions and which make them eligible to obtain benefits under the Double Tax Avoidance Treaty between Mauritius and India.
Tax reconciliation 2015 2014 Net decrease in net assets resulting from operations (1,526,123) (2,262,227) Add: Non allowable expense 23,990 (7,271) Add: Loss of non-taxable entities 2,096,432 2,347,257 Less: Movement in unrealized gain on investment in securities / warrants - - Add: Movement in net unrealized loss on investment in securities / warrants Less: Movement in realized gain - - on investment in securities Add: Movement in realized loss - - on investment in securities 7,097,636 2,754,844 Less: Movement in net unrealized gain on investment in securities (7,426,705) (2,201,424) Less: Adjustment of brought forward loss - - Net taxable income 265,230 651,179 Tax @ 15% 39,785 97,677 Foreign tax paid (75,616) (148,767) Tax charge - -
The components of deferred tax balances are as follows:
2015 2014
Deferred tax assets
Business losses - New Wave Holdings Limited 450 9
Less: Valuation allowance (450) (9)
Total deferred tax assets Nil Nil
The Group has established a valuation allowance against the deferred tax asset related to business loss. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Accordingly, based on projections of future taxable income of the periods in which the deferred tax assets would be realizable, management is of the view that it is more likely than not, that the Group will not realize the benefits of the deferred tax assets. Accordingly, the Group has created a valuation allowance against the entire amount of deferred tax assets as of 31 December 2015.
ASC 740, "Accounting for Income Taxes" clarifies when and how to recognize tax benefits in the financial statements with a two-step approach of recognition and measurement. It also requires the enterprise to make explicit disclosures about uncertainties in their income tax positions, including a detailed roll-forward of tax benefits taken that do not qualify for financial statement recognition. There are no uncertain tax positions and related interest and penalties as of 31 December 2015.
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