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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 : 9681H
Kubera Cross-Border Fund Limited
20 March 2015
Kubera Cross-Border Fund Limited
Annual Results for the year ended 31 December 2014
Kubera Cross-Border Fund Limited ("KUBC" or the "Fund") (LSE/AIM: KUBC) has issued its annual audited results for the year ended 31 December 2014.
Financial Highlights
-- Net asset value of the Fund as at 31 December 2014 of US$0.52 per share (US$0.54 per share as at 31 December 2013)
-- Consolidated net investment loss for the year of US$0.55 million (US$28.26 million loss for year ended 31 December 2013)
-- Consolidated realized loss on investment in securities for the year of US$2.75 million (US$34.69 million loss for year ended 31 December 2013)
-- Consolidated unrealized gain on investments in securities for the year of US$2.20 million (US$6.43 million gain for year ended 31 December 2013)
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 2014.
NAV and Discount
KUBC's audited NAV per share decreased by 4% from US$0.54 to US$0.52 between 31 December 2013 and 31 December 2014. KUBC's share price decreased by 16% from US$0.31 to US$0.26 from 31 December 2013 to 31 December 2014. For the corresponding period, the discount to NAV per share increased from 43% to 50%.
EGM
At the Extraordinary General Meeting of the Company held last year, shareholders passed an ordinary resolution regarding the future of the Company, resolving that (a) the Fund should not continue in existence as presently constituted; and (b) the investment objective and policy of the Fund be changed to seek realisation of its portfolio of investments in the ordinary course of business and to return the net proceeds of all such realisations to Shareholders, following which, the Company will be wound-up. The Fund will make no new investments, except follow-on investments in existing investee companies.
Investments
Under the terms of the Investment Management Agreement, the Investment Manager has sole authority over the disposition and realisation of KUBC's investments. Given the substantial co-investment made by members of the Investment Manager alongside KUBC in each of the Group's investments, the Investment Manager's interests are aligned with shareholders.
Portfolio Valuations
The Group's financial statements are prepared in accordance with US GAAP. The valuations of investments are reviewed and approved by the Audit Committee of the Board of Directors ("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 Group's investment valuations is consistent with previous periods.
Closing Remarks
The Investment Manager's report provides information on the investment environment in India, together with progress regarding the implementation of the Group's realisation policy and performance of each of the Company'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 symbol KUBC and through the Fund's website at www.kuberacrossborderfund.com.
Martin M. Adams
Chairman
Investment Manager's Report
India Economic Review(1)
At the start of calendar year 2014, investors were upbeat about the growth prospects of India, albeit with some concerns including higher inflation (Wholesale Price Index 6-7%), higher oil prices ($100/bl), higher fiscal deficit, higher interest rates (8%), and uncertainty over anti-tax avoidance rules ("GAAR").
These concerns are waning away, as the Wholesale Price Index fell from 5.11% in January 2014 to -0.39% in January 2015; primarily due to oil prices (drop of 50%), and further softening in manufacturing inflation. The consumer price inflation in January 2015 came at 5.11% year-over-year, within the comfort zone of the Indian central bank. The Reserve Bank of India cut its repo interest rate by 50 basis points in the last 12 months to 7.50%, as inflation showed signs of slowing and the government made efforts to contain the fiscal deficit. What's aiding the case for further cut in rates to bolster growth is the slide in oil price that's pulling down inflation rates across the globe.
The new budget released by the finance ministry focused on boosting growth, and promised higher investment in India's decrepit roads and railways while offering tax cuts to global companies. In another big announcement, the Finance Minister deferred the roll out of anti-tax avoidance rules (GAAR) by two years and announced the much awaited roll out of GST by Apr 1, 2016.
Last month, the government released GDP growth figures based on a new methodology, under which it expects economic expansion of 7.4% in the current fiscal ending March 2015, while the GDP growth rate of the last fiscal year has been revised upward to 6.9%. The new revision in the base year makes it more difficult for analysts to forecast next year's GDP growth rate, but on the basis of the old series it is likely to grow at 7%. After updating the base year and incorporating new data sources, India's recent growth estimates were bumped up sharply, at odds with other indicators of business and consumer activity, from imports to industrial production, that still show weakness. A broader and sustained economic revival will likely be elusive without structural reforms and a continued uptick in foreign investment. One of the fundamental requirements to reduce vulnerability to capital outflows is to maintain appropriate monetary and fiscal policies that ensure good macroeconomic fundamentals.
The new government seeks to increase trade liberalization and openness to foreign direct investment (FDI). The FDI limits in the insurance and defence sectors have been increased from 26% to 49% to help draw more funds into sectors starved of capital and squeezed by stringent regulations. A similar increase in the FDI cap has been approved in construction and medical device sectors.
FDI inflows during the calendar year 2014 showed 248% growth to US$ 42.2 billion compared to US$ 12.1 billion during the comparable period in 2013. Debt markets continue to attract higher investment than equity markets. In the first two months of calendar year 2015, India has managed to attract inflows to the tune of US$ 9.4 billion compared to US$ 4.2 billion during Jan-Feb 2014.
The BSE Sensex (which comprises 30 stocks) reached an all-time high of 28,694 during November 2014 and closed at 27,499 on December 31, 2014. The Sensex continued its upward momentum during the October to December 2014 period by gaining 3.3% and touched its all-time high of 30,000 on Mar 04(th) 2015. During the same period (Oct-Dec 2014) the mid-cap index (NIFTY Midcap) increased by 7.5%.
The rupee traded within a range of 61 to 64 rupees to the dollar throughout the quarter and ended at 63.3 on December 31 compared to 61.8 rupees to the dollar at the end of the previous quarter. During the quarter, the US dollar appreciated by more than 2.5% against the rupee.
(1) Sources: Reserve Bank of India, BSE India, Securities and Exchange Board of India, Thomson Reuters & others.
Quarterly portfolio summary
At close of business on 31 December 2014, the Fund's unaudited net asset value per share ("NAV") was US$ 0.52. The aggregate value of shareholder distributions to date and the NAV amount to US$ 0.85 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. The Manager and the Board continue to discuss the future presentation of portfolio company-specific information, in light of ongoing disposition processes and related commercial issues. In this report, the smaller investments have been aggregated and reporting for these has been simplified in the pages that follow.
The Investment Manager remains focused on realizing the remaining portfolio, details of which are provided in this report. As set out in further detail in the company reports, the on-going sale processes for Essel Shyam and Synergies Castings are proceeding slowly. The Manager, on behalf of the Fund, intends also to, in parallel and without foreclosing individual company sales, selectively explore a partial or full sale of the portfolio. There is no guarantee that such efforts will be successful, given the concentrated portfolio, at a price acceptable to shareholders.
Independent Auditors' 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 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 2014 and 31 December 2013 and the related Consolidated Statement of Operations, Consolidated Statement of Change in Net Assets, and the Consolidated Statement of Cash Flows for the years then ended, and the related Notes to the consolidated financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with U.S. generally accepted accounting principles; 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.
Auditors' 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 auditors' 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
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 2014 and 31 December 2013, the results of their operations, the changes in their net assets and their cash flows for the years then ended in accordance with U.S. generally accepted accounting principles.
KPMG
Mumbai, India
19 March 2015
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Kubera Cross-Border Fund Limited
Consolidated Statement of Assets and Liabilities
as at 31 December 2014
(Stated in United States Dollars)
Note 2014 2013
Assets
Investments in securities, at 2(d),
fair value 2(e) 58,314,228 59,069,278
2(h),
Cash and cash equivalents 5 3,830,802 5,328,391
Prepaid expenses 119,844 117,384
Total assets 62,264,874 64,515,053
------------- -------------
Liabilities
Accounts payable 213,573 113,025
Tax liability 2(j), - -
7
Total liabilities 213,573 113,025
------------- -------------
Net assets 62,051,301 64,402,028
============= =============
Analysis of net assets
Capital and reserves
Share capital 6 1,097,344 1,097,344
Additional paid-in capital 6 111,886,393 111,886,393
Accumulated deficit (56,080,442) (53,808,935)
------------- -------------
56,903,295 59,174,802
Non-controlling interest 8 5,148,006 5,227,226
------------- -------------
5,148,006 5,227,226
Total shareholders' interests 62,051,301 64,402,028
============= =============
Net asset value per share 0.52 0.54
============= =============
Approved by the Board of Directors on 18 March 2015
and signed on its behalf:
Director
See accompanying notes to the consolidated financial
statements.
Kubera Cross-Border Fund Limited
Consolidated Schedule of Investments
as at 31 December 2014
(Stated in United States Dollars)
2014 2013
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 - 5,165,272 8.32% 27,928,224 - 5,436,679 8.44%
Compulsorily
convertible
preference
Essel Shyam shares and
Communication Equity
Limited Media services India shares 6,680,371 14,682,134 28,206,539 45.46% 6,680,371 14,682,134 26,604,241 41.31%
Compulsorily
convertible
cumulative
preference
shares,
Synergies Equity
Castings Automotive shares and
Limited components India loans 15,876,948 29,388,556 23,125,577 37.27% 15,876,948 29,408,556 22,731,468 35.30%
Compulsorily
convertible
Life sciences, preference
Financial shares,
services, Equity
IT shares and
Others infrastructure India loans 4,587,063 24,889,033 1,816,840 2.93% 4,874,241 27,825,507 4,296,890 6.67%
Total investments in securities
and loans to portfolio
companies 68,959,723 58,314,228 94.0% 71,916,197 59,069,278 91.72%
----------- ----------- ------- ----------- ----------- -----------
Kubera Cross-Border Fund Limited
Consolidated Statement of Operations
for the year ended 31 December 2014
(Stated in United States Dollars)
Note 2014 2013
Investment income
2(d),
Interest 2(f) 2,275 103,207
Dividend 2(d) 726,588 162,027
Other income 32,500 275,888
------------ -------------
761,363 541,122
------------ -------------
Expenses
2(m),
Investment management fee 3 1,902,080 1,961,097
Carried interest 2(m), - -
3
Professional fees 201,822 249,719
Insurance 97,011 102,425
Directors' fees and expenses 4 90,902 87,485
Administration fees 131,500 96,233
License fees 13,734 17,432
Custodian fees 10,044 17,087
Cost of reports to shareholders 5,250 7,055
Other expenses 18,327 83,783
------------ -------------
2,470,170 2,622,316
------------ -------------
Net investment loss before tax (1,708,807) (2,081,194)
Taxation 2(i), - -
7
------------ -------------
Net investment loss after tax (1,708,807) (2,081,194)
------------ -------------
Realized and unrealized gain / (loss) on
investments
Net realized loss on investment 2(d),
in securities 2(e) (2,754,844) (34,690,114)
Net change in unrealized gain on 2(d),
investments in securities 2(e) 2,201,424 6,425,817
Net gain/(loss) on investments (553,420) (28,264,297)
------------ -------------
Net decrease in net assets resulting
from operations (2,262,277) (30,345,491)
============ =============
Equity holding of parent (2,271,507) (27,885,504)
Non-controlling interest 9,280 (2,459,9787)
(2,262,227) (30,345,491)
------------ -------------
See accompanying notes to the consolidated
financial statements.
Kubera Cross-Border Fund Limited
Consolidated Statement of Change in Net Assets
for the year ended 31 December
2014
(Stated in United States Dollars)
Share Additional Accumulated Non-controlling Total
capital paid-in deficit interest
capital
As at 1 January 2013 1,097,344 115,178,423 (25,923,431) 8,180,158 98,532,494
Capital distribution - (3,292,030) - (492,945) (3,784,975)
Net decrease in net assets
resulting
from operations - - (27,885,504) (2,459,987) (30,345,491)
As at 31 December 2013 1,097,344 111,886,393 (53,808,935) 5,227,226 64,402,028
=========== ============= ============= ================ =============
As at 1 January 2014 1,097,344 111,886,393 (53,808,935) 5,227,226 64,402,028
Capital distribution - - - (88,500) (88,500)
Net (decrease)/increase in net
assets
resulting from operations - - (2,271,507) 9,280 (2,262,277)
As at 31 December 2014 1,097,344 111,886,393 (56,080,442) 5,148,006 62,051,301
=========== ============= ============= ================ =============
See accompanying notes to the consolidated financial
statements.
Kubera Cross-Border Fund Limited
Consolidated Statement of Cash Flows
for the year ended 31 December 2014
(Stated in United States Dollars)
2014 2013
Cash flow from operating activities
Net decrease in net assets resulting
from operations (2,262,277) (30,345,491)
Adjustments to reconcile net decrease
in net assets resulting from operations
to net cash provided by / (used) in
operating activities
Net unrealized loss on investments in
securities (2,201,424) (6,425,817)
Realized gain on investment in securities 2,754,844 34,690,114
Purchase of investment securities - (236,892)
Proceeds from sale and repayment of
investment in securities 201,630 5,613,579
Change in operating assets and liabilities:
Increase in prepaid expenses (2,460) (99,684)
Decrease in interest receivable - -
(Decrease) / Increase in accounts payables 100,548 (344,455)
Net cash provided by in operating activities (1,409,089) 2,851,354
Cash flow from financing activities
Capital distribution to non-controlling
interest shareholders (88,500) (492,945)
Capital distribution - (3,292,030)
Net cash used in financing activities (88,500) (3,784,975)
Net decrease in cash and cash equivalents
during the year (1,497,589) (933,621)
------------ ------------------
Cash and cash equivalents at beginning
of the year 5,328,391 6,262,012
Cash and cash equivalents at end of the
year 3,830,802 5,328,391
============ ==================
See accompanying notes to the consolidated financial
statements.
Kubera Cross-Border Fund Limited
Notes to the consolidated financial statements
for the year ended 31 December 2014
(Stated in United States Dollars)
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 the Cayman Islands. The primary business of the Partnership is to invest in, 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.
IOMA Fund and Investment Management Limited (the "Administrator") is the administrator of the Fund.
2. Significant accounting policies
The accompanying consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles ("US GAAP"). The significant accounting policies adopted by the Company are as follows:
a. 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 financial statements, the 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.
b. Significant accounting policies (Continued)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.
c. 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, Kubera Cross-Border Fund LP, Kubera Cross-Border Fund (Mauritius) Limited and New Wave Holdings Limited (together referred to as the 'Group'). All material inter-company balances and transactions have been eliminated.
d. Investment transactions and related investment income and expenses
Investment 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 weighted average cost method basis. Movements in fair value are recorded in the statement of operations at each valuation date.
For listed securities dividend income is recognized on the ex-dividend date and for unlisted securities dividend income is recognised 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.
e. 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.
Significant accounting policies (Continued)
e. Fair value (Continued)
Definition and hierarchy (Continued)
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 Fund 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.
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.
2. Significant accounting policies (Continued) e. Fair value (Continued)
Valuation (Continued)
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.
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 57,997,388 316,840 - 58,314,228
Total 57,997,388 316,840 - 58,314,228
=========== ======== ============= ===========
The changes in the investments classified as Level III are as follows:
Balance at 1 January 2014 58,468,954
Investment in securities -
Proceeds from sale (20,000)
Transfers in (out) of Level III -
Realized loss for the year -
Net change in net unrealized loss (451,566)
-----------
Balance at 31 December 2014 57,997,388
----------------------------------- -----------
2. Significant accounting policies (Continued)
e. Fair value (Continued)
Valuation process (Continued)
The following table summarizes the valuation of the Group's investments based on ASC 820 fair value hierarchy levels as of 31 December 2013.
Total Level I Level II Level III
Investments in securities 59,069,278 600,324 - 58,468,954
Total 59,069,278 600,324 - 58,468,954
The changes in the investments classified as Level III are as follows:
Balance at 1 January 2013 86,842,269
Investment in securities (additional working
capital for an existing investment) 236,892
Proceeds from sale (Refer note 15) (5,613,579)
Transfers in (out of) Level III 5,171,566
Realized loss for the year (34,690,114)
Change in net unrealized gain 6,521,920
-------------
Balance at 31 December 2013 58,468,954
---------------------------------------------- -------------
Total realized and unrealized gains and losses, if any, recorded for the Level III investment 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 of $2,767,207(Previous year: $5,171,566).
f. 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.
g. Buy back
The Fund repurchases its shares by allocating the excess of repurchase price over par value against additional paid-in capital.
2. Significant accounting policies (Continued) h. Cash and cash equivalents
Cash and cash equivalents includes 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.
i. Related parties
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.
j. 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 the consolidated financial statements carrying amount of existing assets and liabilities and their respective tax bases and operating loss carry forwards. 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.
k. Fair value of financial instruments other than investment in securities
The Group's investments are accounted as described in Note 2(e). 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.
l. Comprehensive income
The Group has no comprehensive income other than the net income disclosed in the statement of operations. Therefore, a statement of comprehensive income has not been prepared.
2. Significant accounting policies (Continued) m. Investment management fees
On 17 January 2013 and subsequently on 7 June 2013, the Board of Directors of the Company fixed the management fees for the years 2013 to 2015. Provided that if at any time prior to 31 December 2015, the Net Asset Value does not drop below 15 per cent of the Net Asset Value as at 1 January 2013, the Company shall pay a management fee to the 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 IOMA Fund and Investment Management Limited ("IOMA") for such period;
-- US$1,697,515 for the period from 1 January 2015 to 31 December 2015 less the administration fee payable to IOMA.
For periods subsequent to 31 December 2015 the management fee will be negotiated by both parties at that time.
Carried interest
Under the terms of the Partnership Agreement, Kubera Cross-Border Incentives SPC - Carried Interest SP, the Special Limited Partner of the Partnership and an affiliate of the Investment Manager, is entitled to receive a carried interest from the Partnership equivalent to 20 per cent, of the aggregate return over investment received by the Partnership following the full or partial cash realization of an investment.
Aggregate return, for the purposes of calculating the carried interest, is defined as the net realized gains reduced by the net unrealized losses of the Partnership to the date of such distribution. Realized and unrealized gains or losses on each investment are determined on the most recent announced NAV immediately prior to the date of such distribution.
The payment of carried interest is conditional upon the fact that the last announced adjusted NAV of the Fund prior to the date of distribution should be equal to or greater than the Par Value. The adjusted NAV is arrived at by adding back the value of any income or capital distributions made by the Fund to its shareholders.
In addition, the carried interest payment is adjusted such that, the aggregate cumulative amount of carried interest paid at the date of such distribution will equal 20 per cent, of the eligible carried interest proceeds.
Eligible carried interest proceeds may not be less than zero.
n. Recent accounting announcements
There are no recent accounting pronouncements that will have a material impact on the Group's financial condition or results of operations.
3. Investment management fees and carried interest
Investment management fees
For the year ended 31 December 2014, the Fund paid / provided for US$ 1,902,080 towards the investment management fee.
During the year ended 31 December 2013, the Group paid / provided for US$ 1,997,076 towards the investment management fee.
Carried interest
During the year ended 31 December 2014, no carried interest was paid / provided for by the Fund. During the year ended 31 December 2013, no carried interest was paid / provided for by the Fund.
4. 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.
5. Cash and cash equivalents
2014 2012
Cash at bank 830,802 5,328,391
Time Deposits 3,000,000 -
3,830,802 5,328,391
6. Share capital and additional paid-in capital
2014 2013
Authorized share capital:
1,000,000,000 ordinary shares of $0.01
each 10,000,000 10,000,000
----------------------------------------- ------------- -------------
6. Share capital and additional paid-in capital (Continued)
Number Share Additional Total
of Capital paid-in
Shares capital
As at 1 January
2013 109,734,323 1,097,344 115,178,423 116,275,767
Capital distribution - - (3,292,030) (3,292,030)
As at 31 December
2013 109,734,323 1,097,344 111,886,393 112,983,737
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
7. 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.
2014 2013
Tax reconciliation
Net decrease in net assets resulting
from operations (2,262,277) (30,345,491)
Add: Non allowable expense - -
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 - (5,376,687)
Less: Exempt income 2,754,844 40,066,801
- (270,784)
Less: Movement in net unrealized
gain on investment in securities (2,201,424) (6,425,817)
Less: Adjustment of brought forward
loss - -
Net taxable income / (loss) (1,708,857) (2,351,978)
Tax @ 15% - -
Foreign tax paid 148,767 33,174
Foreign tax credit - -
Tax charge - -
7. Income taxes (Continued)
As at 31 December 2014, New Wave Holdings Limited had accumulated tax losses of US$ 281 and therefore no provision for income tax liability arises for the year. The accumulated tax losses can be used and set off against future taxable profits as follows:
Up to the year ending 31 December 2016 - USD 281
The components of deferred tax balances are as follows:
` 2014 2013 Deferred tax assets Business losses - New Wave Holdings Limited 9 1,548 Less: Valuation allowance (9) (1,548) 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 2014.
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 2014.
The Fund monitors proposed and issued tax law, regulations and cases to determine the potential impact to uncertain income tax positions. As at 31 December 2014, there are no potential subsequent events that would have a material impact on unrecognized income tax benefits within the next six months.
8. Non-controlling interest
2014 2013
Share capital 7,648,511 7,648,511
Accumulated share of loss (2,500,505) (2,421,285)
_________ _________
Total 5,148,006 5,227,226
Non-controlling interest is primarily composed of the partnership interests of Kubera Cross-Border Incentives SPC - Co-Investment Segregated Portfolio, a Cayman Islands company and an affiliate of the Investment Manager, in the consolidated affiliates.
9. Transactions with related parties
A. The following table lists the related parties of the Group:
Name Nature of relationship
Ramanan Raghavendran Director
Martin Michael Adams Independent Director
Robert Michael Tyler Independent Director
Kubera Partners LLC Investment Manager
Kubera Cross-Border Incentives Special Limited Partner
SPC - Carried Interest SP of the Partnership
------------------------------- ------------------------
B. During the period transactions with related parties are as disclosed below:
i. Transactions during the year
2014 2013
Investment management fees paid
to Investment Manager 1,902,080 1,961,097
Carried interest to Kubera Cross-Border - -
Incentives SPC - Carried Interest
SP
Expenses incurred by Kubera Partners
LLC on behalf of the Fund - 73,074
Director fee and reimbursement
of expenses paid to Michel Casselman - 16,398
Director fee, consultancy fees,
audit committee member fee and
reimbursement of expenses paid
to Martin Michael Adams 44,208 81,109
Director fee, consultancy fees,
audit committee member fee and
reimbursement of expenses paid
to Robert Michael Tyler 41,943 43,384
Director fee paid to Pravin Ratilal
Gandhi - 6,000
ii. Amounts outstanding as at 31 December
2014 2013
Consultancy fees payable to Martin - -
Michael Adams
Consultancy fees payable to Robert - -
Michael Tyler
Consultancy fees payable to Pravin - -
Ratilal Gandhi - -
Consultancy fees payable to Michel
Casselman
------------------------------------ ----- -----
10. Financial instruments and associated risks
The Group's investment activities expose it to various types of risks, which are associated with the financial instruments and markets in which it invests. The financial instruments expose the Group in varying degrees to elements of liquidity, market and credit risk. The following summary is not intended to be a comprehensive summary of all risks inherent in investing in the Group and reference should be made to the Group's admission document for a more detailed discussion of risks.
10. Financial instruments and associated risks (Continued) a) Market risk
Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market variables such as interest, foreign exchange rates and equity prices, whether those changes are caused by factors specific to the particular security or factors that affect all securities in the markets. Investments are typically made with a specific focus on India and thus are concentrated in that region. Political or economic conditions and the possible imposition of adverse governmental laws or currency exchange restrictions in that region could cause the Group's investments and their markets to be less liquid and prices more volatile. The Group is exposed to market risk on all of its investments.
b) Industry risk
The Group's investments may have concentration in a particular industry or sector and performance of that particular industry or sector may have a significant impact on the Group. The Group's investments may also be subject to the risk associated with investing in private equity securities. Investments in private equity securities may be illiquid and subject to various restrictions on resale and there can be no assurance that the Group will be able to realize the value of such investments in a timely manner.
c) Credit risk
Credit risk is the risk that an issuer/counterparty will be unable or unwilling to meet its commitments to the Group. Financial assets that are potentially subject to significant credit risk consist of cash and cash equivalents. The maximum credit risk exposure of these items is their carrying value.
d) Currency risk
The Group has assets denominated in currencies other than the US Dollar, the functional currency. The Group is therefore exposed to currency risk as the value of assets denominated in other currencies will fluctuate due to changes in exchange rates. The Group's cash and cash equivalents are held in US Dollars.
e) Liquidity risk
The Group is exposed to liquidity risk as a majority of the Group's investments are largely illiquid. Illiquid investments include any securities or instruments which are not actively traded on any major securities market or for which no established secondary market exists where the investments can be readily converted into cash. Reduced liquidity resulting from the absence of an established secondary market may have an adverse effect on the prices of the Group's investments and the Group's ability to dispose of them where necessary to meet liquidity requirements. As a result, the Group may be exposed to significant liquidity risk.
10. Financial instruments and associated risks (Continued) f) Political, economic and social risk
Political, economic and social factors, mainly changes in Indian laws or regulations and the status of India's relations with other countries may adversely affect the value of the Group's investments.
11. Financial highlights
The financial highlights presented below consist of the Fund's operating expenses and net operating loss ratios for the year ended 31 December 2014 and 31 December 2013, and the internal rate of return ("IRR") since the Fund's admission to trading on AIM, net of all expenses, including carried interest to the Investment Manager :
2014 2013
Net operating loss 3.51% 31.46%
Operating expenses before carried interest 3.84% 2.72%
Carried interest - -
Operating expenses after carried interest 3.84% 2.72%
Cumulative IRR since inception (including (5.12%
realized & unrealized gains and losses) (4.92%) )
-------------------------------------------- -------- -------
The net operating loss and operating expenses ratios are computed as a percentage of the Fund's average net asset value during the period. Both ratios are presented on an annualized basis. The IRR is computed based on the Fund's actual dates of the cash inflows (capital contributions), outflows (cash and stock distributions) and the ending net asset value at the end of the period/year (residual value) as of each measurement date.
12. Subsequent events
The Group further evaluated subsequent events from the balance sheet date through to 18 March 2015; the date at which the consolidated financial statements were available to be issued, and determined that there are no other items to disclose.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAPDNFDNSEFF
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