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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 : 3314D
Kubera Cross-Border Fund Limited
26 April 2017
Kubera Cross-Border Fund Limited
Annual Results for the year ended 31 December 2016
Kubera Cross-Border Fund Limited ("KUBC" or the "Fund") (LSE/AIM: KUBC) has issued its annual audited results for the year ended 31 December 2016.
Financial Highlights
-- The value of the Fund's net assets decreased from US$55.33 million to US$41.37 million during the year ended 31 December 2016.
-- The Fund's net asset value ("NAV") per share decreased from US$0.50 per share to US$0.38 per share during the year ended 31 December 2016.
-- Consolidated net investment loss for the year of US$14.85 million (US$0.33 million gain for year ended 31 December 2015).
Electronic and printed copies of the annual report will be sent to shareholders shortly. Copies of the report will be available, free of charge, from the offices of Grant Thornton UK LLP, 30 Finsbury Square, London EC2P 2YU, and will be available at the Fund's website www.kuberacrossborderfund.com.
About Kubera Cross-Border Fund Limited
Kubera Cross-Border Fund Limited is a closed-end investment company incorporated in the Cayman Islands and traded on the AIM market of the London Stock Exchange. The Fund makes private equity investments in cross-border companies, primarily in businesses that operate in the US-India corridor. For further information on the Fund, please visit www.kuberacrossborderfund.com.
For more information, contact:
Grant Thornton UK LLP (Nominated Adviser)
Philip Secrett/ Jamie Barklem/ Carolyn Sansom
Tel.: +44 (0) 20 7383 5100
Email: philip.j.secrett@uk.gt.com
Numis Securities Limited (Broker)
David Benda, Managing Director
Tel.: +44 (0) 20 7260 1275
Email: d.benda@numis.com
FIM Capital Limited (Administrator, Registrar & Secretary)
Philip Scales, Director
Tel.: +44 (0) 1624 681250
Email: pscales@fim.co.im
Chairman's Statement
On behalf of the Board of Directors, I am pleased to present the audited financial statements of Kubera Cross-Border Fund Limited (the "Company" or "Fund") and its subsidiaries (collectively, the "Group") for the year ended 31 December 2016.
NAV and Discount
The value of the Fund's net assets decreased from US$ 55.33 million to US$ 41.37 million during the year ended 31 December 2016. As a result, the Fund's net asset value ("NAV") per share decreased from US$ 0.50 per share to US$ 0.38 per share during the year ended 31 December 2016.
The Fund's share price has remained fairly constant at around US$ 0.20 between 31 December 2015 and 31 December 2016. The discount of the Fund's share price to NAV decreased from 60 per cent as at 31 December 2015 to 50 per cent as at 31 December 2016.
Investment Manager
As mentioned in earlier reports, following the expiration of the Investment Management Agreement on 22 December 2016, the Fund is now self- managed by its Board of Directors (the "Board").
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 Board on a quarterly basis. All investments are recorded at estimated fair value, in accordance with ASC 820 that defines and establishes a framework for measuring fair value. The methodology underlying the Fund's investment valuations is consistent with previous periods.
Closing Remarks
The Investment Report provides information on progress regarding the implementation of the Fund'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 Report
At close of business on 31 December 2016, the Fund's audited NAV per share was US$0.38, 27% lower than the unaudited NAV reported on 30 January 2017. The decline is mainly due to reduction in the carrying values of the investments in PlanetCast and Synergies Castings where we have applied transaction discounts to reflect the lack of liquidity and credit risks.
Post year end, on 20 March 2017, we announced that a leading global private equity firm has agreed to purchase Kubera Cross-Border Fund (Mauritius) Limited ("Kubera Mauritius")'s entire equity interest held by PlanetCast for a consideration net of transaction costs estimated at INR 1,475 million, equivalent to approximately US$22.9 million (at exchange rates of 25 April 2017) and US$23.8 million at the exchange rate prevailing as at 31 December 2016. Kubera Mauritius is ultimately owned by the Company.
In the case of Synergies Castings, a dialogue with a prospective buyer is progressing well. The terms of the transaction, if closed, involve a phased purchase of our equity over the 12 months from signing, assuming a variety of conditions are met, and the purchase of our debt over a 12-month period following the purchase of our equity. The aggregate consideration will be US$14.6 million if the transaction completes as currently agreed in principle.
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 2016 and 31 December 2015 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.
Independent Auditor's Report (Continued)
Kubera Cross-Border Fund Limited
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 2016 and 31 December 2015, the results of their operations, changes in 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
25 April 2017
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Kubera Cross-Border Fund Limited
Consolidated statement of assets
and liabilities
as at 31 December 2016
(Stated in United States
Dollars)
Note 2016 2015
Assets
Investments in securities,
at fair value
(cost: US$ 58,131,057, 4(a),
2015: US$ 61,670,923) 4(b) 42,660,364 58,452,133
4(e),
Cash and cash equivalents 7 2,729,884 2,148,934
Prepaid expenses 15,916 31,202
Total assets 45,406,164 60,632,269
------------- --------------
Liabilities
Accounts payable 133,267 107,091
Capital distributions 130,776 -
payable
Tax liability 4(g), - -
9
Total liabilities 264,043 107,091
------------- --------------
Net assets 45,142,121 60,525,178
============= ==============
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 (71,609,051) (57,656,985)
------------- --------------
41,374,686 55,326,752
Non-controlling interest 10 3,767,435 5,198,426
------------- --------------
3,767,435 5,198,426
Total shareholders' interests 45,142,121 60,525,178
============= ==============
Net asset value per share 0.38 0.50
============= ==============
Approved by the Board of Directors on
25 April 2017 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 2016
(Stated in United States Dollars)
2016 2015
Name of the Industry Country Instrument Number Fair % of Number Fair %
entity of
of shares Cost Value net of shares Cost Value net
assets assets
NeoPath
Limited
(Previously Equity
known as shares
Venture Investment and
Infotek holding Preferred
Limited) company Mauritius shares 27,928,224 - 4,568,395 10.12% 27,928,224 - 5,026,864 8.31%
PlanetCast
Media
Services
Limited Compulsorily
(Previously convertible
known as preference
Essel Shyam shares
Communication Media and Equity
Limited) services India shares 6,680,371 14,682,134 22,729,764 50.35% 6,680,371 14,682,134 30,264,509 50.00%
Compulsorily
convertible
cumulative
preference
shares,
Synergies Equity
Castings Automotive shares
Limited components India and loans 15,876,948 29,388,556 15,325,553 33.95% 15,876,948 29,388,556 21,660,760 35.79%
Compulsorily
Life convertible
sciences, preference
Financial shares,
services, Equity
IT shares
Others infrastructure India and loans 3,820,241 14,060,367 36,652 0.08% 3,874,241 17,600,233 1,500,000 2.48%
Total investments in
securities and loans
to portfolio companies 58,131,057 42,660,364 94.50% 61,670,923 58,452,133 96.58%
----------- ----------- ------- ----------- ----------- -------
Kubera Cross-Border Fund Limited
Consolidated statement of operations
for the year ended 31 December
2016
(Stated in United States
Dollars)
Note 2016 2015
Investment income
Interest 4(a) 2,850 5,877
Dividend 4(a) 317,818 369,317
Foreign exchange loss 4(c) (627) (4,719)
------------
320,041 370,475
------------- ------------
Expenses
4(j),
Investment management fee 5 - 1,602,516
Carried interest 4(k), - -
5
Professional fees 255,844 196,444
Audit fees 45,183 55,470
Insurance 87,574 84,934
Directors' fees and expenses 6 68,802 84,600
Administration fees 121,717 141,000
License fees 17,245 19,045
Custodian fees 7,812 9,265
Other expenses 122,917 32,393
------------- ------------
727,094 2,225,667
------------- ------------
Net investment loss before
tax (407,053) (1,855,192)
Taxation 4(g), - -
9
------------- ------------
Net investment loss after
tax (407,053) (1,855,192)
------------- ------------
Realized and unrealized (loss)/gain
from investments
Net realized loss from 4(a),
investment in securities 4(b) (496,840) (7,097,636)
Net change in unrealized
loss from investments in 4(a),
securities 4(b) (14,348,388) 7,426,705
Net (loss)/gain from investments (14,845,228) 329,069
------------- ------------
Net decrease in net assets
resulting from operations (15,252,281) (1,526,123)
============= ============
Equity holding of parent (13,952,066) (1,576,543)
Non-controlling interest (1,300,215) 50,420
(15,252,281) (1,526,123)
------------- ------------
See accompanying notes to the consolidated
financial statements.
Kubera Cross-Border Fund Limited
Consolidated statement of changes in
net assets
as at 31 December 2016
(Stated in United States
Dollars)
2016 2015
Operations
Net investment loss (407,053) (1,855,192)
Net realized loss from investments
in securities (496,840) (7,097,636)
Net change in unrealized
loss from investments in
securities (14,348,388) 7,426,705
------------- ------------
Net decrease in net assets
resulting from operations (15,252,281) (1,526,123)
------------- ------------
Capital share transactions
Issuance of shares - -
Capital distribution (130,776) -
------------- ------------
Decrease in net assets resulting (130,776) -
from capital share transactions
------------- ------------
Decrease in net assets (15,383,057) (1,526,123)
Net assets, beginning of
year 60,525,178 62,051,301
------------- ------------
Net assets, end of year 45,142,121 60,525,178
============= ============
See accompanying notes to the consolidated financial statements.
Kubera Cross-Border Fund Limited
Consolidated statement of cash flows
for the year ended 31 December 2016
(Stated in United States Dollars)
2016 2015
Cash flow from operating activities
Net decrease in net assets
resulting from operations (15,252,281) (1,526,123)
Adjustments to reconcile net
decrease in net assets resulting
from operations to net cash
provided by / (used in) operating
activities
Net unrealized loss / (gain)
from investments in securities 14,348,388 (7,426,705)
Realized loss from investment
in securities 496,840 7,097,636
Proceeds from sale of investment
in securities 946,541 191,165
Change in operating assets
and liabilities:
Decrease in prepaid expenses 15,286 88,641
Increase / (decrease) in accounts
payables 156,952 (106,482)
Net cash provided by / (used
in) operating activities 711,726 (1,681,868)
Cash flow from financing activities
Proceeds from capital distributions, (130,776) -
net of change in capital distributions
payable
Net cash used in financing activities (130,776) -
Net increase / (decrease) in
cash and cash equivalents 580,950 (1,681,868)
------------- ------------
Cash and cash equivalents, beginning
of year 2,148,934 3,830,802
Cash and cash equivalents, end
of year 2,729,884 2,148,934
============= ============
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 2016
(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 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 Partners LLC ('the former Investment Manager'), a Delaware limited liability company, managed the investment portfolios of the Fund and had full discretionary investment management authority until the expiry of the Investment Management Agreement on 22 December 2016. Following the expiration of the Investment Management Agreement, the Fund has been self-managed by the Board of the Fund, Kubera Mauritius and the Partnership.
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, ('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 consolidated financial statements is the United States dollar reflecting the fact that subscriptions to and redemptions from the Fund are made in United States dollars and the Fund'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.
2. Basis of Preparation (Continued)
Going concern
In assessing the going concern basis of preparation of the consolidated financial statements for the year ended 31 December 2016, the Directors, with the assistance of the Administrator, have prepared cash-flow forecasts, and stress-tested the assumptions in those forecasts. The conclusion reached is that while there will always remain inherent uncertainty within the cash flow forecasts, the Directors have a reasonable expectation that the Fund has adequate resources to continue in operational existence for the foreseeable future, and for a period of at least 12 months from the date of signing of these financial statements. Accordingly, they continue to adopt the going concern basis in preparing the consolidated financial statements for the year ended 31 December 2016.
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. The Directors believe that the estimates made in the preparation of the consolidated financial statements are prudent and reasonable. Actual results could differ from those estimates. Changes in estimates are reflected in the consolidated financial statements in the period in which the changes are made and if material, these effects are disclosed in the notes to the consolidated 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 consolidated 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.
4. Significant accounting policies (Continued) b. Fair value (Continued)
Definition and hierarchy (Continued)
Investments measured and reported at fair value as determined by the 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.
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 a 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 acquisition of the investment. 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 acquisition 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.
4. Significant accounting policies (Continued) b. Fair value (Continued)
Definition and hierarchy (Continued)
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 Board oversees the entire valuation process of the Group's investments.
The Board, with assistance from the Administrator, 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 are required to be supported by market data, third-party pricing sources; industry accepted pricing models, or other methods the Board 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$42,660,364 (previous year: US$58,452,133), the Board 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;
-- 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 10.6% - 12.9%; and
-- a discount for lack of marketability to the value as per the valuation model ranging from 20.0% - 30.0%.
-- the present value of the expected tax refund receivable from the Government of India by end of 2018 as per the opinion of tax counsel, discounted by the 2-year Government of India securities yields.
Total Level Level Level
I II III
Investments in securities
and loans to portfolio
companies 42,660,364 - - 42,660,364
Total 42,660,364 - - 42,660,364
----------- ------ ------------- -----------
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 2016.
The changes in the investments classified as Level III are as follows:
Balance at 1 January 2016 58,452,133
Proceeds from sale (946,541)
Realised loss for the year (496,840)
Change in net unrealized loss (14,348,388)
--------------
Balance at 31 December 2016 42,660,364
-------------------------------- --------------
4. Significant accounting policies (Continued)
b. 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 2015.
Total Level Level Level
I II 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
-------------------------------- -----------
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$2,766,826.
During the year ended 31 December 2016, 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 United States Dollar are translated into United States Dollars at the exchange rate as at the reporting date. Purchases and sales of investments and income and expenses denominated in currencies other than United States 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 and reserves on a pro rata basis.
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.
4. Significant accounting policies (Continued) 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.
The Fund is required to determine whether its tax positions are "more likely than not" to be sustained upon examination by applicable taxing authority, based on technical merits of the position. Tax positions not deemed to meet a "more likely than not" threshold would be recorded as a tax expense in the current year. Based on its analysis, the Fund has determined that it has not incurred any liability for unrecognized tax benefits in income tax expense. There were no interest and penalties for the year ended 31 December 2016.
h. Fair value of financial instruments other than investment in securities
The Group's investments are accounted as described in Note 4(a). The Group's financial instruments include other current assets and accounts payable, 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 consolidated statement of operations. Therefore, a statement of comprehensive income has not been prepared.
j. Investment management fees
With effect from 1 January 2016, investment management fees are no longer chargeable. The former Investment Manager received management fees of US$1,697,515 for the period from 1 January 2015 to 31 December 2015 less the administration fee payable to the Administrator.
Following the expiration of the Investment Management Agreement on 22 December 2016, the Fund is self- managed by its Directors.
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 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.
The payment of the carried interest is conditional upon the last announced net asset value (as adjusted to add back the value of any income or capital shareholder distributions to date) at the date of payment of such carried interest, being equal to or greater than the value of the gross proceeds of the original placing of the Fund's shares. In addition, the carried interest payment will be adjusted, up or down, by such amount as is required to achieve the position that, following such distribution, 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 (being the net realized gains of the Partnership to the date of such distribution reduced by the net unrealized losses). Eligible carried interest proceeds may not be less than zero.
4. Significant accounting policies (Continued) 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.
m. Net asset value per share
The net asset value per share is computed by dividing the net assets attributable to the shareholders by the number of shares at the end of the reporting period.
5. Investment management fees and carried interest
Investment management fees
For the year ended 31 December 2016, the Fund paid / provided for US$ Nil towards investment management fees. (Previous year: US$ 1,602,516)
Carried interest
During the year ended 31 December 2016, 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. Mr. Raghavendran has waived his Director's fees as he has interest in the former 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
2016 2015
Cash at bank 1,629,884 548,934
Time Deposits 1,100,000 1,600,000
---------- ----------
2,729,884 2,148,934
--------------- ---------- ----------
8. Share capital and additional paid-in capital
2016 2015
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
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
As at 1 January
2016 109,734,323 1,097,344 111,886,393 112,983,737
Capital distribution - - - -
As at 31 December
2016 109,734,323 1,097,344 111,886,393 112,983,737
---------------------- ------------ ---------- ------------ ------------
Share capital consists of a single class of ordinary shares.
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 and gains or appreciations. 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 entities, 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 entities, 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 entities.
Under laws and regulations in Mauritius, the Fund's majority owned subsidiaries, Kubera Mauritius 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.
No Mauritian capital gains tax is payable on profits arising from sale of securities, and any dividends and redemption proceeds paid by Kubera Mauritius and New Wave Holdings Limited to its shareholders will be exempt in Mauritius from any withholding tax.
Tax reconciliation 2016 2015 Net decrease in net assets resulting from operations (15,252,281) (1,526,123) Add: Non allowable expense 118,767 23,990 Add: Unrealized loss on investment in securities 458,470 2,096,432 Add: Realized loss on investment in securities 496,840 7,097,636 Add: Unrealized loss on investment 14,348,388 (7,426,705) Less: Adjustment of brought forward loss - - Net taxable income 170,184 265,230 Tax @ 15% 25,528 39,785 Foreign tax credit tax credit (25,528) (75,616) Tax charge - -
The components of deferred tax balances are as follows:
2016 2015
Deferred tax assets
Business losses - New Wave Holdings Limited 1,122 9
Less: Valuation allowance (1,122) (9)
Total deferred tax assets Nil Nil
9. Income taxes (Continued)
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 2016.
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 2016.
With the assistance of the Administrator, the Group monitors proposed and issued tax law, regulations and cases to determine the potential impact to uncertain income tax positions. As at 31 December 2016, there are no potential subsequent events that would have a material impact on unrecognized income tax benefits within the next twelve months.
Kubera Mauritius and New Wave Holdings Limited file income tax returns in Mauritius and are not subject to income tax examinations by tax authorities.
The Group's Mauritius tax resident companies expect to obtain benefits under the double taxation treaty between India and Mauritius ("DTAA"). In 2016, the governments of India and Mauritius revised the existing DTAA where certain changes have been brought to the existing tax benefits. The revised DTAA provides for capital gains arising on disposal of shares acquired by a Mauritius company on or after 1 April 2017 to be taxed in India. However, investments in shares acquired up to 31 March 2017 will remain exempted from capital gains tax in India irrespective of the date of disposal. In addition, shares acquired as from 1 April 2017 and disposed of by 31 March 2019 will be taxed at a concessionary rate equivalent to 50% of the domestic tax rate prevailing in India provided the Mauritius company meets the prescribed limitation of benefits clause, which includes a minimum expenditure level in Mauritius.
Disposal of investments made by a Mauritius company in Indian financial instruments other than shares (such as limited partnerships, options, futures, warrants, debentures, and other debt instruments) are not impacted by the change and will continue to be exempted from capital gains tax in India.
10. Non-controlling interest
2016 2015
Share capital 7,648,511 7,648,511
Accumulated share of loss (3,881,076) (2,450,085)
Total 3,767,435 5,198,426
--------------------------- ------------ ------------
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 former Investment Manager, in the consolidated financial statements.
11. Transactions with related parties A. The following table lists the related parties of the Fund: Name Nature of relationship Ramanan Raghavendran Director Martin Michael Adams Independent Director Robert Michael Tyler Independent Director Kubera Cross-Border Incentives Special Limited Partner SPC - Carried Interest of the Partnership SP ------------------------------- ------------------------
11. Transactions with related parties (Continued)
B. Transactions during the year with related parties and amounts outstanding as at 31 December 2016 are as disclosed below:
i. Transactions during the year ended 31 December 2016
2016 2015
Investment management fees paid
to former Investment Manager - 1,602,516
Director fee, consultancy fees and
reimbursement of expenses paid to
Martin Michael Adams 35,627 40,962
Director fee, consultancy fees and
reimbursement of expenses paid to
Robert Michael Tyler 33,175 37,889
------------------------------------ --------------- ------------------
ii. Closing balance as at 31 December 2016
2016 2015
Capital distribution payable to 130,776 -
Kubera Cross-Border Incentives
SPC - Co-Investment SP
-------------------------------- -------------- -----------
12. 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. Risk management is carried out by the Board, with assistance from the Administrator to the extent possible and as appropriate.
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 Fund's admission document for a more detailed discussion of risks.
Considering the unlisted nature of investments, each of the risks viz. market risk, industry risk, credit risk, currency risk, liquidity risk and political, economic and social risk are considered by management while undertaking the fair value of investments on a quarterly basis and appropriately factored in wherever necessary to ensure that they are within the risk appetite.
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.
12. Financial instruments and associated risks (Continued) 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. However, the Group maintains sufficient cash and marketable securities, and aims to maintain flexibility in funding.
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.
13. Financial highlights
The financial highlights presented below consist of the Group's operating expenses and net operating loss ratios for the years ended 31 December 2016 and 31 December 2015, 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 former Investment Manager:
2016 2015
Net operating loss (25.22%) (2.49%)
Operating expenses before carried
interest 1.20% 3.63%
Carried interest - -
Operating expenses after carried
interest 1.20% 3.63%
Cumulative IRR since inception
(including realized & unrealized
gains and losses) (6.38%) (4.73%)
----------------------------------- --------- --------
The net operating loss and operating expenses ratios are computed as a percentage of the Group'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.
14. Subsequent events
On 20 March 2017, the Fund announced that it had entered into a binding sale and purchase agreement to dispose of its entire equity interest in PlanetCast Media Services Ltd ("PlanetCast"). Entities managed by a leading global private equity firm have agreed to purchase the Fund's interest in PlanetCast for a consideration net of transaction costs estimated at INR1,475 million, equivalent to US$22.9 million at 25 April 2017 exchange rates and US$23.8 million at the exchange rate prevailing as at 31 December 2016.
Completion of the transaction is subject to obtaining regulatory approvals from various Government authorities in India, which is not expected to occur for several months. Completion of the transaction is subject to a long stop date of 15 September 2017.
The Board further evaluated subsequent events from the balance sheet date through to
25 April 2017, 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 OKPDBDBKBBQB
(END) Dow Jones Newswires
April 26, 2017 02:01 ET (06:01 GMT)
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