TIDMKUBC
RNS Number : 7522F
Kubera Cross-Border Fund Limited
01 August 2016
01 August 2016
Kubera Cross-Border Fund Limited
Interim Results for the six-month period ended 30 June 2016
Kubera Cross-Border Fund Limited (the "Fund") (LSE/AIM: KUBC)
has today published its un-audited interim results for the six
month period ended 30 June 2016.
Electronic copies of the interim report, which are reproduced
below, will be available on 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
Grant Thornton UK LLP (Nominated Adviser)
Philip Secrett/ Jamie Barklem/ Carolyn Sansom
Tel.: +44 (0) 20 7383 5100
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
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
interim report and unaudited financial statements of Kubera
Cross-Border Fund Limited (the "Fund"), for the six month period
ended 30 June 2016.
NAV and Discount
The value of the Fund's net assets decreased from US$ 55.3
million to US$ 53.7 million during the six month period, which
ended on 30 June 2016. The Fund's net asset value ("NAV") per share
decreased marginally from US$ 0.50 to US$ 0.49 between 31 December
2015 (audited) and 30 June 2016 (un-audited). The decrease in NAV
is primarily attributable to the depreciation of Indian Rupee
vis-à-vis the US Dollar (which is the presentation currency of the
Fund) and a decrease in the public equity market multiples of
comparable traded securities used to determine valuations.
The Fund's share price was at US$ 0.14 as at 30 June 2016. The
discount of the Fund's share price to NAV increased from 60 per
cent as at 31 December 2015 to 72 per cent as at 30 June 2016.
Investments
Under the terms of the Investment Management Agreement ("IMA"),
the Investment Manager has sole authority over the disposition and
realisation of investments. Given the substantial co-investment
made by members of the Investment Manager alongside shareholders in
each of the Fund's investments, the Investment Manager's interests
are aligned with shareholders. No fees under the IMA have been
payable since 1 January 2016. The IMA will terminate on 26 December
2016, and the board is in discussions with the principals of the
Manager regarding ongoing (unpaid) formal and informal assistance
with the Fund's investments.
Portfolio Valuations
The Fund's interim 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 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.
Closing Remarks
Many private equity investors in India have been experiencing
difficulties in exiting private equity investments. The periodic
buoyancy of Indian public markets has not been reflected in private
equity exits, across vintages and stages of development. At this
time, prior to the receipt of the proceeds of the Spark buyback,
the Fund has cash on the balance sheet to support approximately two
years' worth of operating expenses. The board is evaluating current
expenses and the amount of cash to be retained to ensure sufficient
runway.
The Investment Manager's report provides information on the
progress regarding the implementation of the Group'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
Quarterly portfolio summary
At close of business on 30 June 2016, the Fund's unaudited net
asset value per share ("NAV") was US$ 0.49. The aggregate value of
shareholder distributions to date and the NAV amount to US$ 0.82
per share. The currency of denomination of the Fund is US Dollars;
the Fund does not hedge the currency risk relating to its
investments denominated in Indian rupees.
The rupee traded within a range of 66 to 68 rupees to the dollar
throughout the quarter, ending at 67.62 on 30 June 2016 compared to
66.33 rupees to the dollar at the end of the previous quarter.
Since the inception of the Fund, the rupee has depreciated relative
to the US dollar by over 40%. The Fund's performance in rupee
terms, as of the 30 June 2016 NAV, amounts to a multiple of 1.10x
of cost; in dollar terms as mentioned above it is 0.80x (inclusive
of total distributions of $ 0.33/share).
In a meeting with major shareholders in May, several options for
reducing the Fund's operating costs were discussed. It was agreed
that these options would be revisited in due course after allowing
the existing realization discussions to proceed further. Finally,
we note that the Investment Management Agreement terminates in
December, at which point the Fund will be self-managed by its board
of directors.
Update on portfolio realization plans
Further details on portfolio operating performance is provided
in the pages that follow. Here we provide more specific updates on
realization plans, and intend on providing similar detail in future
quarterly newsletters.
Portfolio
The Fund received an informal offer for the purchase of the
entire portfolio for approximately 28 cents per share, from a
reputable investment fund that specializes in such secondary
purchases. After consulting with major shareholders, the board of
directors declined this offer. The board is evaluating appointing
an investment bank that focuses on secondary fund sales, and may
choose to go down that path if individual company sales do not
materialize.
PlanetCast
The Fund received an informal offer for the purchase of its
stake in PlanetCast for approximately 19 cents per share, from the
same investment fund that made the full portfolio offer referred to
above. The Manager, after consulting with major shareholders,
declined this offer. The Manager is working closely with the
PlanetCast management team as also the other major shareholders to
explore other options for a sale of the company that might result
in greater proceeds to shareholders.
Venture Infotech
The company's hearings before the tax tribunal - which would be
the next step in the journey to recover the proceeds deposited with
the tax authority in India in 2010 - are continuing. An
inconclusive hearing took place in July, and it is likely that a
decision will be further delayed by several months. We are being
guided in this effort by the entrepreneurs who have an equal amount
of capital at risk, and who have led the effort throughout.
Spark
In light of the Fund's realization policy as also the sentiments
expressed by major shareholders, the Manager has proceeded with a
corporate buyback by Spark of 10.26% of its shares, generating
$856,000 for shareholders. This is the only exit option available
to us at this time, and these proceeds will be kept on the Fund's
balance sheet until there is more clarity on the PlanetCast
outcome, so as to concentrate distributable funds in one
distribution. The Fund will also retain $37,000 in Spark at the
current buyback valuation, and will look to exit this interest in
12 months. We note here that share buybacks in India are governed
by Indian law, which prescribes the formula used for valuation as
also the frequency of buybacks.
Kubera Partners LLC
Investment Manager
KUBERA CROSS-BORDER FUND LIMITED
Consolidated statement of assets and
liabilities
as at 30 June 2016
(Stated in United States
Dollars)
Notes 30 June
30 June 2016 2015
(unaudited) (unaudited)
Assets
Investments in securities,
at fair value 2(e) 57,068,751 57,009,910
Cash and cash equivalents 5 1,769,698 2,794,552
Prepaid expenses 62,849 34,035
--------------------------------- ------ ------------- -------------
Total assets 58,901,298 59,838,497
Liabilities
Accounts payable 142,990 23,069
--------------------------------- ------ ------------- -------------
Total liabilities 142,990 23,069
Net assets 58,758,308 59,815,428
--------------------------------- ------ ------------- -------------
Analysis of net assets
Capital and reserves
Share capital 6 1,097,344 1,097,344
Additional paid-in
capital 6 111,886,393 111,886,393
Accumulated deficit (59,294,267) (58,213,265)
--------------------------------- ------ ------------- -------------
53,689,470 54,770,472
Non-controlling interest 8 5,068,838 5,044,956
--------------------------------- ------ ------------- -------------
5,068,838 5,044,956
Total shareholders' interests 58,758,308 59,815,428
--------------------------------- ------ ------------- -------------
The accompanying notes form an integral part of these
consolidated financial statements.
KUBERA CROSS-BORDER FUND LIMITED
Consolidated statement of assets and liabilities
as at 30 June 2016
(Stated in United States Dollars)
30 June 2016 30 June 2015
(unaudited) (unaudited)
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 Equity
known shares
as Venture Investment and
Infotek holding Preferred
Limited) company Mauritius shares 27,928,224 - 5,057,227 8.61% 27,928,224 - 5,160,839 8.63%
Compulsorily
convertible
Essel preference
Shyam shares
Communication Media and Equity
Limited services India shares 6,680,371 14,682,134 29,962,164 50.99% 6,680,375 14,682,134 28,431,056 47.53%
Compulsorily
convertible
cumulative
preference
shares,
Synergies Equity
Castings Automotive shares
Limited components India and loans 15,876,948 29,388,556 21,073,445 35.87% 15,876,948 29,388,556 21,918,015 36.64%
Compulsorily
Life convertible
sciences, preference
Financial shares,
services, Equity
IT shares
Others infrastructure India and loans 3,874,241 15,503,667 975,865 1.66% 3,874,241 17,600,233 1,500,000 2.51%
Total investments
in securities and
loans to portfolio
companies 59,574,357 57,068,751 97.13% 61,670,923 57,009,910 95.31%
----------- ----------- ------- ----------- ----------- -------
KUBERA CROSS-BORDER FUND LIMITED
Consolidated statement of operations
for the six month period ended 30 June 2016
(Stated in United States
Dollars)
------------------------------------- ------- -------------- -------------
Six months Six months
Notes ended ended
30 June 30 June
2016 2015
(unaudited) (unaudited)
------------------------------------ ------- -------------- -------------
Investment income
Interest 1,560 5,406
Foreign exchange loss (1,862) (3,203)
(302) 2,203
Expenses
Investment management
fee 3 - 801,258
Professional fees 94,596 115,566
Insurance 43,548 43,427
Directors' fees 4 39,363 42,187
Administration fees 66,125 65,750
License fees 2,350 6,186
Custodian fees 5,000 9,265
Other expenses 132,204 41,283
------------------------------------ ------- -------------- -------------
383,186 1,124,922
------------------------------------ ------- -------------- -------------
Net investment loss before
tax (383,488) (1,122,719)
Taxation 7 - -
------------------------------------ ------- -------------- -------------
Net investment loss after
tax (383,488) (1,122,719)
Realized and unrealized (loss)/gain
on investment transactions
Realized loss on investment
in securities - (7,097,636)
Net unrealized gain on
investments in securities 2(e) (1,383,382) 5,984,482
------------------------------------ ------- -------------- -------------
(1,383,382) (1,113,154)
Net decrease in net assets resulting
from operations (1,766,870) (3,243,554)
---------------------------------------------- -------------- -------------
Non-controlling interest (1,637,282) 391,038
Equity holding of parent (129,588) 2,852,516
(1,766,870) (2,235,873)
------------------------------------ ------- -------------- -------------
The accompanying notes form an integral part of these
consolidated financial statements.
KUBERA CROSS-BORDER FUND LIMITED
Consolidated statement of changes in
net assets
as at 30 June
2016
(Stated in United
States Dollars)
----------------------- ---------- ------------ ------------- ---------------- ------------
Share Additional Accumulated Non-controlling Total
capital paid-in deficit interest
capital
----------------------- ---------- ------------ ------------- ---------------- ------------
As at 1 January
2015 1,097,344 111,886,393 (56,080,442) 5,148,006 62,051,301
Net decrease in
net assets resulting
from operations - - (2,132,823) (103,050) (2,235,873)
----------------------- ---------- ------------ ------------- ---------------- ------------
As at 30 June
2015 1,097,344 111,886,393 (58,213,265) 5,044,956 59,815,428
----------------------- ---------- ------------ ------------- ---------------- ------------
As at 1 January
2016 1,097,344 111,886,393 (57,656,985) 5,198,426 60,525,178
Net decrease in
net assets resulting
from operations - - (1,637,282) (129,588) (1,766,870)
----------------------- ---------- ------------ ------------- ---------------- ------------
As at 30 June
2016 1,097,344 111,886,393 (59,294,267) 5,068,838 58,758,308
----------------------- ---------- ------------ ------------- ---------------- ------------
The accompanying notes form an integral part
of these consolidated financial statements.
KUBERA CROSS-BORDER FUND LIMITED
Consolidated statement of cash flows
for the six month period ended 30 June
2016
(Stated in United States Dollars)
-----------------------------------------------------------------
Six
Six months months
ended ended
30 June 30 June
2016 2015
-------------------------------------------------- ------------ ------------
Cash flow from operating activities
Net (decrease)/increase in net assets
resulting from operations (1,766,870) (2,235,873)
Adjustments to reconcile net (decrease)/increase
in net assets resulting
from operations to net cash used
in operating activities:
Net unrealized gain on investments
in securities 1,383,382 (5,984,482)
Realized loss on investment in securities - 7,097,636
Proceeds from sale of investment
in securities - 191,165
Change in operating assets and liabilities:
(Increase)/decrease in other assets (31,647) 85,808
Increase/(decrease) in current liabilities 35,899 (190,504)
-------------------------------------------------- ------------ ------------
(379,236) (1,036,250)
Net change in cash and cash equivalents
during the period (379,236) (863,726)
Cash and cash equivalents at beginning
of period 2,148,934 5,328,435
Cash and cash equivalents at end of
period 1,769,698 4,464,709
--------------------------------------------------- ------------ ------------
The accompanying notes form an integral part
of these consolidated financial statements.
KUBERA CROSS-BORDER FUND LIMITED
Notes to the consolidated financial statements
for the six month period ended 30 June 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 managed by Kubera Partners, LLC (the "Investment
Manager"), a Delaware limited liability company. The Investment
Manager is responsible for the day-to-day management of the Fund's
investment portfolio in accordance with the Fund's investment
objective and policies and has full discretionary investment
management authority.
The Fund is a Limited Partner in Kubera Cross-Border Fund LP
(the "Partnership"), an exempted limited partnership formed on 28
November 2006, in accordance with the laws of the Cayman Islands.
The primary business of the Partnership is to invest in, purchase
and sell investments for the purpose of carrying out an investment
strategy that is consistent with the strategy described in the
Admission Document and Offering Memorandum of the Fund.
Kubera Cross-Border Fund (GP) Limited, a company incorporated
under the laws of the Cayman Islands and a wholly owned subsidiary
of the Fund, serves as the General Partner of the Partnership.
The Partnership holds 100% ownership in Kubera Cross-Border Fund
(Mauritius) Limited ("Kubera Mauritius"), a company incorporated in
Mauritius. The primary business of Kubera Mauritius is to carry on
business as an investment holding company.
Kubera Mauritius holds 100% ownership in New Wave Holdings
Limited, a company incorporated in Mauritius. The primary business
of New Wave Holdings Limited is to carry on business as an
investment holding company.
FIM Capital Limited (the "Administrator") is the administrator
of the Fund.
2. Significant accounting policies
The accompanying consolidated financial statements are prepared
in conformity with U.S. generally accepted accounting principles
("US GAAP"). The significant accounting policies adopted by the
Fund are as follows:
a. Use of estimates
US GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements, the results of operations during the
reporting period and the reported amounts of increases and
decreases in net assets from operations during the reporting
period.
Significant estimates and assumptions are used for, but not
limited to, accounting for the fair values of investments in
portfolio companies. Management believes that the estimates made in
the preparation of the financial statements are prudent and
reasonable. Actual results could differ from those estimates.
Changes in estimates are reflected in the financial statements in
the period in which the changes are made and if material, these
effects are disclosed in the notes to the financial statements.
b. Functional currency
The measurement and presentation currency of the financial
statements is the United States dollar rather than the local
currency of Cayman Islands 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.
c. Basis of consolidation
The consolidated financial statements include the accounts of
the Fund and its wholly owned subsidiary, Kubera Cross-Border Fund
(GP) Limited and its majority owned subsidiaries, Kubera
Cross-Border Fund LP, Kubera Cross-Border Fund (Mauritius) Limited
and New Wave Holdings Limited (together referred to as the
"Group"). All material inter-company balances and transactions have
been eliminated.
d. Investment transactions and related investment income and expenses
Investments in listed securities are held in the custody of
Kotak Mahindra Bank Limited. Investment transactions are accounted
for on a trade date basis.
Realized gains and losses and movements in unrealized gains and
losses are recognized in the statement of operations and determined
on weighted average cost method basis. Movements in fair value are
recorded in the statement of operations at each valuation date.
For listed securities dividend income is recognized on the
ex-dividend date and for unlisted securities dividend income is
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.
e. Fair value
Definition and hierarchy
Investments are recorded at estimated fair value as at the
reporting 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 Fund has the ability to
access.
Level II - Observable inputs other than quoted prices included
in Level I 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 applies 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 inception. When evidence
supports a change to the carrying value from the transaction price,
adjustments are made to reflect expected exit values in the
investment's principal market under current market conditions.
The Group performs ongoing reviews based on an assessment of
trends in the performance of each underlying investment from the
inception date through the most recent valuation date. These
assessments typically incorporate the original transaction price,
recent transactions in the same or similar instruments, completed
or pending third-party transactions in the underlying investment or
comparable issuers, subsequent rounds of financing,
recapitalizations and other transactions across the capital
structure, offerings in the equity or debt capital markets and
changes in financial ratios or cash flows.
Valuation process
The Group establishes valuation processes and procedures to
ensure that the valuation techniques for investments that are
categorized within Level III of the fair value hierarchy are fair,
consistent, and verifiable. The Group designates the Investment
Manager to oversee the entire valuation process of the Group's
investments.
The Investment Manager is responsible for reviewing the Group's
written valuation processes and procedures, conducting periodic
reviews of the valuation policies, and evaluating the overall
fairness and consistent application of the valuation policies.
Valuations determined by the Investment Manager are required to
be supported by market data, third-party pricing sources; industry
accepted pricing models, or other methods the Investment Manager
deems to be appropriate, including the use of internal proprietary
pricing models.
The following table summarizes the valuation of the Group's
investments based on ASC 820 fair value hierarchy levels as of 30
June 2016.
Total Level Level Level
I II III
Investments in
securities 57,592,886 - - 57,592,886
Total 57,592,886 - - 57,592,886
The changes in the investments classified as Level III are as
follows:
Balance at 1 January 2016 58,452,133
Unrealized loss for six month period
ended 30 June 2016 (859,247)
-----------
Balance at 30 June 2016 57,592,886
-----------
Unrealized losses included in earnings
relating to investments held at 30
June 2016 (859,247)
---------------------------------------- -----------
The following table summarizes the valuation of the Group's
investments based on the above ASC 820 fair value hierarchy levels
as of 30 June 2015.
Total Level Level Level
I II III
Investments in
securities 57,009,910 - - 57,009,910
Total 57,009,910 - - 57,009,910
The changes in the investments classified as Level III are as
follows:
Balance at 1 January 2015 57,997,388
Unrealized gain for six month period
ended 30 June 2015 (987,478)
-----------
Balance at 30 June 2015 57,009,910
-----------
Unrealized gains included in earnings
relating to investments held at 30
June 2015 (987,478)
--------------------------------------- -----------
Total realized and unrealized gains and losses, if any, recorded
for the Level III investment is reported in net realized gain
(loss) on investments in securities and net change in unrealized
gain (loss) on investments in securities respectively, in the
statement of operations. Investment in securities includes loans
given to subsidiaries of portfolio companies as financial support
for working capital requirement of $2,767,207 (2015:
$2,767,207).
f. Foreign currency translation
Assets and liabilities denominated in a currency other than the
U.S. dollar are translated into U.S. dollars at the exchange rate
as at the reporting date. Purchases and sales of investments and
income and expenses denominated in currencies other than U.S.
dollars are translated at the exchange rate on the respective dates
of such transactions.
The Group does not generally isolate that portion of the results
of operations arising as a result of changes in the foreign
currency exchange rates from the fluctuations arising from changes
in the market prices of securities. Accordingly, such foreign
currency gain (loss) is included in net realized and unrealized
gain (loss) on investments.
g. Buy back
The Fund repurchases its shares by allocating the excess of
repurchase price over par value against additional paid-in
capital.
h. Cash and cash equivalents
Cash and cash equivalents includes highly liquid investments,
such as money market funds, that are readily convertible to known
amounts of cash within 90 days from the date of purchase. All cash
balances are held at major banking institutions.
i. Related parties
Parties are considered to be related if one party has the
ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making
financial and operating decisions.
j. Income taxes
The current charge for income taxes is calculated in accordance
with the relevant tax regulations applicable to the Group. Deferred
tax assets and liabilities are recognized for future tax
consequences attributable to temporary differences between the
consolidated financial statements carrying amount of existing
assets and liabilities and their respective tax bases and operating
loss carry forwards. Deferred tax assets and liabilities are
measured using prevailing tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
the consolidated statement of operations in the period that
includes the enactment date. The measurement of deferred tax assets
is reduced, if necessary, by a valuation allowance for any tax
benefits of which future realization is not more likely than
not.
k. Fair value of financial instruments other than investment in securities
The Group's investments are accounted as described in Note 2(e).
The Group's financial instruments include other current assets,
accounts payable and accrued expenses, which are realizable or to
be settled within a short period of time. The carrying amounts of
these financial instruments approximate their fair values.
l. Comprehensive income
The Group has no comprehensive income other than the net income
disclosed in the statement of operations. Therefore, a statement of
comprehensive income has not been prepared.
m. Investment management fees
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 does 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 Investment
Manager's appointment will conclude on 26 December 2016, following
which the Fund will be self-managed by the Board of Directors.
Carried interest
Under the terms of the Partnership Agreement, Kubera
Cross-Border Incentives SPC - Carried Interest SP, the Special
Limited Partner of the Partnership and an affiliate of the
Investment Manager, is entitled to receive a carried interest from
the Partnership equivalent to 20 per cent, of the aggregate return
over investment received by the Partnership following the full or
partial cash realization of an investment.
Aggregate return, for the purposes of calculating the carried
interest, is defined as the net realized gains reduced by the net
unrealized losses of the Partnership to the date of such
distribution. Realized and unrealized gains or losses on each
investment are determined on the most recent announced NAV
immediately prior to the date of such distribution.
The payment of carried interest is conditional upon the fact
that the last announced adjusted NAV of the Fund prior to the date
of distribution should be equal to or greater than the Par Value.
The adjusted NAV is arrived at by adding back the value of any
income or capital distributions made by the Fund to its
shareholders.
In addition, the carried interest payment is adjusted such that,
the aggregate cumulative amount of carried interest paid at the
date of such distribution will equal 20 per cent, of the eligible
carried interest proceeds.
Eligible carried interest proceeds may not be less than
zero.
n. Recent accounting announcements
There are no recent accounting pronouncements that will have a
material impact on the Group's financial condition or results of
operations.
o. 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.
3. Investment management fees and carried interest
Investment management fees
During the six month period ended 30 June 2016, the Fund paid
US$ nil (30 June 2015: US$ 801,258) as investment management
fee.
Carried interest
During the six month period ended 30 June 2016, no carried
interest is paid / payable (30 June 2015: Nil).
4. Directors' fees and expenses
The Fund pays each of its directors an annual fee of GBP20,000
and the Chairman is paid an annual fee of GBP25,000, plus
reimbursement for out-of-pocket expenses incurred in the
performance of their duties. Mr. Raghavendran has waived his
director's fees as long as he is interested in the Investment
Manager.
The Fund does not remunerate its directors by way of share
options and other long term incentives or by way of contribution to
a pension scheme.
5. Cash and cash equivalents
30 June 30 June
2016 2015
Cash at bank 512,698 2,794,552
Time deposits 1,257,000 -
1,769,698 2,794,552
6. Share capital and additional paid-in capital
30 June 30 June
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 30
June 2016 109,734,323 1,097,344 111,886,393 112,983,737
As at 30
June 2015 109,734,323 1,097,344 111,886,393 112,983,737
------------ ------------ ---------- ------------ ------------
7. Income taxes
Under the laws of the Cayman Islands, the Fund, Kubera
Cross-Border Fund (GP) Limited and Kubera Cross-Border Fund LP, are
not required to pay any tax on profits, income, gains or
appreciations and, in addition, no tax is to be levied on profits,
income, gains, or appreciations or which is in the nature of estate
duty or inheritance tax on the shares, debentures or other
obligations of the Fund and its Cayman based subsidiaries, or by
way of withholding in whole or part of a payment of dividend or
other distribution of income or capital by the Fund and its Cayman
based subsidiaries, to its members or a payment of principal or
interest or other sums due under a debenture or other obligation of
the Fund and its Cayman based subsidiaries.
Under laws and regulations in Mauritius, the Fund's wholly 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.
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 30 June 2016.
The Fund monitors proposed and issued tax law, regulations and
cases to determine the potential impact to uncertain income tax
positions. As at 30 June 2016, there are no potential subsequent
events that would have a material impact on unrecognized income tax
benefits within the next six months.
8. Non-controlling interest
30 June 30 June
2016 2015
Share capital 7,648,511 7,648,511
Accumulated share of loss (2,533,331) (2,603,555)
Total 5,115,180 5,044,956
Non-controlling interest is primarily composed of the
partnership interests of Kubera Cross-Border Incentives SPC -
Co-Investment Segregated Portfolio, a Cayman Islands company and an
affiliate of the Investment Manager, in the consolidated
affiliates.
9. Transactions with related parties
A. The following table lists the related parties of the Group:
Name Nature of relationship
Ramanan Raghavendran Non-independent Director
Martin Michael Adams Independent Director
Robert Michael Tyler Independent Director
Kubera Partners LLC Investment Manager
Kubera Cross-Border Incentives Special Limited Partner
SPC - Carried Interest of the Partnership
SP
------------------------------- -------------------------
B. During the period transactions with related parties are as disclosed below:
30-Jun-16 30-Jun-15
Investment management fees paid
to Investment Manager - 801,258
Director fee and reimbursement
of expenses paid to Martin Michael
Adams 19,204 28,160
Director fee and reimbursement
of expenses paid to Robert Michael
Tyler 17,784 19,140
------------------------------------- ---------- ----------
10. Financial instruments and associated risks
The Group's investment activities expose it to various types of
risks, which are associated with the financial instruments and
markets in which it invests. The financial instruments expose the
Group in varying degrees to elements of liquidity, market and
credit risk. The following summary is not intended to be a
comprehensive summary of all risks inherent in investing in the
Fund and reference should be made to the Fund's admission document
for a more detailed discussion of risks.
a) Market risk
Market risk is the risk that the value of a financial instrument
will fluctuate as a result of changes in market variables such as
interest, foreign exchange rates and equity prices, whether those
changes are caused by factors specific to the particular security
or factors that affect all securities in the markets. Investments
are typically made with a specific focus on India and thus are
concentrated in that region. Political or economic conditions and
the possible imposition of adverse governmental laws or currency
exchange restrictions in that region could cause the Group's
investments and their markets to be less liquid and prices more
volatile. The Group is exposed to market risk on all of its
investments.
b) Industry risk
The Group's investments may have concentration in a particular
industry or sector and performance of that particular industry or
sector may have a significant impact on the Group. The Group's
investments may also be subject to the risk associated with
investing in private equity securities. Investments in private
equity securities may be illiquid and subject to various
restrictions on resale and there can be no assurance that the Group
will be able to realize the value of such investments in a timely
manner.
c) Credit risk
Credit risk is the risk that an issuer/counterparty will be
unable or unwilling to meet its commitments to the Group. Financial
assets that are potentially subject to significant credit risk
consist of cash and cash equivalents. The maximum credit risk
exposure of these items is their carrying value.
d) Currency risk
The Group has assets denominated in currencies other than the US
Dollar, the functional currency. The Group is therefore exposed to
currency risk as the value of assets denominated in other
currencies will fluctuate due to changes in exchange rates. The
Group's cash and cash equivalents are held in US Dollars.
e) Liquidity risk
The Group is exposed to liquidity risk as a majority of the
Group's investments are largely illiquid. Illiquid investments
include any securities or instruments which are not actively traded
on any major securities market or for which no established
secondary market exists where the investments can be readily
converted into cash. Reduced liquidity resulting from the absence
of an established secondary market may have an adverse effect on
the prices of the Group's investments and the Group's ability to
dispose of them where necessary to meet liquidity requirements. As
a result, the Group may be exposed to significant liquidity
risk.
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.
10. Previous year comparatives
Prior year comparatives have been regrouped and reclassified
wherever necessary to conform to the current year's
presentation.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR QKLFLQDFXBBE
(END) Dow Jones Newswires
August 01, 2016 02:00 ET (06:00 GMT)
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