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