TIDMKUBC
RNS Number : 9444A
Kubera Cross-Border Fund Limited
27 March 2013
27 March 2013
Kubera Cross-Border Fund Limited
Annual Results for the year ended 31 December 2012
Kubera Cross-Border Fund Limited ("KUBC" or the "Fund")
(LSE/AIM: KUBC) has issued its annual audited results for the year
ended 31 December 2012.
Financial Highlights
-- Net asset value of the Fund as at 31 December 2012 of US$0.82
per share (US$0.93 per share as at 31 December 2011)
-- Distribution in July 2012 of US$2.19 million or US$ 0.02 per
share, pro rata to all shareholders of the Fund in cash from the
Fund's additional paid-in capital
-- Consolidated net investment loss for the year of US$3.50 million
-- Consolidated realized gain on investment in securities for the year of US$3.77 million
-- Consolidated unrealized loss on investments in securities for the year of US$10.86 million
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 Corporate Finance (Nominated Adviser)
Philip Secrett, Partner/ David Hignell, Manager
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 "Company") and its subsidiaries (collectively, the
"Fund") for the year ended 31 December 2012.
NAV and Discount
KUBC's audited NAV per share decreased by 12% from US$0.93 to
US$0.82 between 31 December 2011 and 31 December 2012. KUBC's share
price decreased by 25% from US$0.66 to US$0.49 from 31 December
2011 to 31 December 2012. For the corresponding period, the
discount to NAV per share increased from 29% to 40%.
EGM
At the Extraordinary General Meeting of the Company held on 17
January 2013, shareholders passed an ordinary resolution regarding
the future of the Company, that (a) KUBC should not continue in
existence as presently constituted; and (b) the investment
objective and policy of the Fund be changed to seek realization of
its portfolio of investments in the ordinary course of business and
to return the net proceeds of all such realizations to
Shareholders, following which, KUBC will be wound-up. The Fund will
make no new investments, except follow-on investments in existing
investee companies.
The Board of Directors noted that the above change in investment
objective and policy will not result in an immediate or accelerated
sale of the Fund's portfolio of investments will occur. Investments
will only be realized when, in the opinion of the Investment
Manager, appropriate opportunities are presented.
In conjunction with the above resolution, the Investment
Management Agreement was also amended on 17 January 2013 to revise
the investment management fee payable to the Investment Manager,
which will be a decreasing fixed amount over the next three years,
subject to certain conditions, details of which are provided in
note 17 to the consolidated financial statements.
Investments
Under the terms of the Investment Management Agreement, the
Investment Manager has sole authority over the disposition and
realisation of KUBC's investments. Given the substantial
co-investment made by members of the Investment Manager alongside
KUBC in each of the Fund's investments, the Investment Manager's
interests are aligned with shareholders.
Portfolio Valuations
The Fund's financial statements are prepared in accordance with
US GAAP. The valuations of investments are reviewed and approved by
the Audit Committee of the Board, 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
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
India Economic and Market Review
India's GDP growth fell considerably to 4.5% in the third
quarter of FY 2012 as compared to 6.1% in the same quarter last
year. This significant slowdown in the economy can be attributed to
persistent high interest rates, flagging external demand for Indian
goods and services and low capital formation in the domestic
economy.
Wholesale Price Inflation (WPI) touched a three-year low of
7.18% in December but retail inflation continued to remain higher
and was in double digit at 10.56%.
The Indian Government undertook long anticipated measures
towards fiscal consolidation by reducing fuel subsidies and selling
stakes in public enterprises. Further, in order to boost capital
inflows in the country, the Indian Government increased foreign
institutional investors ('FIIs') limits in government securities
and corporate bonds by $5 billion each, taking the total investment
limit in domestic debt to $75 billion, which is further expected to
be increased by $5 billion each, taking the total limit to $85
billion.
For the period January 2012 to December 2012, FIIs invested a
total of US$ 31.02 billion in Indian markets, investing US$ 24.37
billion in Indian equities market and US$ 6.65 billion in debt
markets
FDI inflows during the period of April 2012 to December 2012
fell by 42% to US$ 16.9 billion compared with US$ 29.2 billion in
the same period of 2011. During the entire period, the services
sector (financial & non-financial), attracted the highest level
of FDI investment with US$ 4 billion, hotel and tourism attracted
the second highest level of FDI with US$ 3.1 billion, followed by
metallurgical industries, housing & real estate, automobile,
drugs and pharmaceuticals, power, followed by computer hardware and
software and telecommunications.
The BSE Sensex (which comprises 30 stocks) increased during
October and December 2012 rising by 3% and ending at 19,426 points
during the quarter. During the same period the mid-cap index (NIFTY
Midcap) outperformed the broader market and was up by 4%. At
current prices the Indian stock market is trading at a trailing P/E
ratio of approximately 16x and a forward P/E ratio of approximately
14x - 15x.
Due to rising macro concerns relating to the increasing fiscal
& current account deficit, slowing export & heavy
dependence on rising imports (especially crude oil & gold), the
India currency ended the quarter at 55 per USD, thereby
depreciating approximately by 5% during the quarter.
Portfolio
KUBC's audited NAV per share decreased by 12% from US$0.93 to
US$0.82 between 31 December 2011 and 31 December 2012. The decline
was primarily on account of revised company forecasts for the
current fiscal year in the case of two portfolio companies, the
depreciation of Indian Rupee vis-à-vis the US Dollar, which is the
currency denomination of the Fund, and a capital distribution of
US$0.02 per share in July 2012. The valuation adjustments are
reviewed and approved by the Audit Committee of the Board, solely
comprising of independent directors.
The Investment Manager evaluates realisation decisions in
conjunction with management teams of the portfolio companies who
are also substantial owners. The Investment Manager's decision is
influenced by operating performance, a leadership position, global
strategic interest in the sector, among several variables.
Kubera Partners LLC
Investment Manager
Kubera Cross-Border Fund Limited
Consolidated Statement of Assets and Liabilities
as at 31 December 2012
(Stated in United States Dollars)
Note 2012 2011
Assets
Investments in securities, at fair
value 2(c) 87,538,696 98,396,844
Loans to portfolio companies 2(d), 10, 11 5,171,566 5,196,566
Cash and cash equivalents 2(g), 5 6,262,012 8,382,210
Interest receivable 2(d), 2(k) - 65,821
Prepaid expenses 17,700 15,888
Total assets 98,989,974 112,057,329
------------- --------------
Liabilities
Accounts payable 457,480 409,914
Tax liability 2(i), 7 - -
Total liabilities 457,480 409,914
------------- --------------
Net assets 98,532,494 111,647,415
============= ==============
Analysis of net assets
Capital and reserves
Share capital 6 1,097,344 1,097,344
Additional paid-in capital 6 115,178,423 117,373,109
Accumulated deficit (25,923,431) (15,979,742)
------------- --------------
90,352,336 102,490,711
Non-controlling interest 8 8,180,158 9,156,704
------------- --------------
8,180,158 9,156,704
Total shareholders' interests 98,532,494 111,647,415
============= ==============
Net asset value per share 0.90 1.02
============= ==============
See accompanying notes to the consolidated financial
statements.
Kubera Cross-Border Fund Limited
Consolidated Schedule of Investments
as at 31 December 2012
(Stated in United States Dollars)
2012 2011
Name of the Industry Country Instrument Number Fair % of Number Fair % of
entity
of shares Cost value net of shares Cost value net
assets assets
NeoPath
Limited
(Previously
known as
Venture Investment
Infotek holding
Limited) company Mauritius Equity shares 18,284,615 - 100,000 0.10% 22,855,769 - 100,000 0.08%
Preferred shares 15,020,297 - 13,935,758 14.14% 23,175,848 - 16,704,654 13.93%
- 14,035,758 14.24% - 16,804,654 14.01%
------------- ------------ ------- ------------- ------------ ----------
United Series A (2007)
States convertible
of participating
Adayana, Inc. Education America preferred stock 3,750,000 15,000,000 13,932,845 14.14% 3,750,000 15,000,000 20,468,156 17.07%
Series B (2007)
convertible
preferred
stock 1,250,000 5,000,000 4,644,282 4.71% 1,250,000 5,000,000 6,822,719 5.69%
Common stock 16,667 50,001 46,444 0.05% 16,667 50,001 68,229 0.06%
Warrants
convertible
to common stock 83,580 16,800 - - 83,580 16,800 - 0.00%
------- ----------
20,066,801 18,623,570 18.90% 20,066,801 27,359,104 22.82%
------------- ------------ ------- ------------- ------------ ----------
Compulsorily
Essel Shyam convertible
Communication preference
Limited Media services India shares 5,555,056 12,208,914 22,736,110 23.07% 5,555,056 12,208,914 19,237,188 16.05%
Equity shares 1,125,315 2,473,220 4,605,765 4.67% 1,125,315 2,473,220 3,896,972 3.25%
------------- ------------- ----------
14,682,134 27,341,875 27.74% 14,682,134 23,134,160 19.30%
------------- ------------ ------- ------------- ------------ ----------
Ocimum Compulsorily
Biosolutions convertible
(India) preference
Limited Life sciences India shares 3,818,162 14,000,000 99,974 0.10% 3,818,162 14,000,000 99,974 0.08%
Equity shares 1,000 3,667 26 0.00% 1,000 3,667 26 0.00%
----------
14,003,667 100,000 0.10% 14,003,667 100,000 0.08%
------------- ------------ ------- ------------- ------------ ----------
Greenearth
Education
Limited
(Previously
known as
Kejriwal Convertible
Stationery redeemable
Holdings Stationery preference
Limited) products Singapore shares 455,172 20,000,000 100,000 0.08% 455,172 20,000,000 2,269,672 1.89%
------------- ------------ ------- ------------- ------------ ----------
20,000,000 100,000 0.08% 20,000,000 2,269,672 1.89%
------------- ------------ ------- ------------- ------------ ----------
Compulsorily
convertible
Synergies cumulative
Castings Automotive preference
Limited components India shares 5,333,334 10,000,000 8,445,307 8.57% 5,333,334 10,000,000 8,845,885 7.38%
Equity shares 10,543,614 16,333,556 16,695,759 16.94% 10,543,614 16,333,556 17,487,671 14.59%
----------
26,333,556 25,141,066 25.51% 26,333,556 26,333,556 21.97%
Spark Capital
Advisors
(India)
Private Financial
Limited services India Equity shares 55,079 1,500,000 1,500,000 1.52% 55,079 1,500,000 1,591,025 1.33%
----------
1,500,000 1,500,000 1.52% 1,500,000 1,591,025 1.33%
------------- ------------ ------- ------------- ------------ ----------
GSS Infotech
Limited
(Previously
known as GSS
America
Infotech IT
Limited) infrastructure India Equity shares 1,000,000 10,225,274 696,427 0.71% 1,000,000 10,225,274 804,673 0.67%
------------- ------------ ------------- ------------ ----------
10,225,274 696,427 0.71% 10,225,274 804,673 0.67%
------------- ------------ ------- ------------- ------------ ----------
Total investments in securities 106,811,432 87,538,696 88.84% 106,811,432 98,396,844 82.06%
============= ============ ======= ============= ============ ==========
See accompanying notes to the consolidated financial statements.
Kubera Cross-Border Fund Limited
Consolidated Statement of Operations
for the year ended 31 December 2012
(Stated in United States Dollars)
Note 2012 2011
Investment income
2(d), 2(k),
Interest 12 10,082 52,584
Dividend 2(k) - 252,262
Other income 200 1,500
-------------- -------------
10,282 306,346
-------------- -------------
Expenses
Investment management fee 2(m), 3 1,997,076 3,117,136
Carried interest 2(n), 3 686,950 -
Impairment loss on a loan 11 - 428,469
Professional fees 287,238 369,553
Insurance 98,751 95,566
Directors' fees 4 210,418 139,948
Administration fees 36,500 36,500
License fees 14,034 14,229
Custodian fees 23,127 20,472
Brokerage 75,000 75,000
Cost of reports to shareholders 15,902 21,084
Other expenses 62,122 137,260
-------------- -------------
3,507,118 4,455,217
-------------- -------------
Net investment loss before tax (3,496,836) (4,148,871)
Taxation 2(i), 7 - -
-------------- -------------
Net investment loss after tax (3,496,836) (4,148,871)
-------------- -------------
Realized and unrealized gain / (loss) on investments
Realized gain on investment in securities 2(c) 3,768,239 -
Net change in unrealized loss on investments
in securities 2(c) (10,858,149) (4,542,252)
Net loss on investments (7,089,910) (4,542,252)
-------------- -------------
Net decrease in net assets resulting
from operations (10,586,746) (8,691,123)
============== =============
Equity holding of parent (9,943,689) (8,261,333)
Non-controlling interest (643,057) (429,790)
(10,586,746) (8,691,123)
-------------- -------------
See accompanying notes to the consolidated financial
statements.
Kubera Cross-Border Fund Limited
Consolidated Statement of changes in Net
Assets
for the year ended 31 December
2012
(Stated in United States
Dollars)
Share Additional Accumulated Non-controlling Total
capital paid-in deficit interest
capital
As at 1 January 2011 1,097,344 117,373,109 0 (7,718,409) 9,141,127 119,893,171
Capital contribution - - - 445,367 445,367
Net decrease in net assets
resulting from operations - - (8,261,333) (429,790) (8,691,123)
As at 31 December 2011 1,097,344 117,373,109 0 (15,979,742) 9,156,704 111,647,415
========== ============ ============= ================ =============
As at 1 January 2012 1,097,344 117,373,109 (15,979,742) 9,156,704 111,647,415
Capital distribution - (2,194,686) - (333,489) (2,528,175)
Net decrease in net assets
resulting from operations - - (9,943,689) (643,057) (10,586,746)
As at 31 December 2012 1,097,344 115,178,423 (25,923,431) 8,180,158 98,532,494
========== ============ ============= ================ =============
See accompanying notes to the consolidated financial
statements.
Kubera Cross-Border Fund Limited
Consolidated Statement of Cash flows
for the year ended 31 December 2012
(Stated in United States Dollars)
2012 2011
Cash flow from operating activities
Net decrease in net assets resulting
from operations (10,586,746) (8,691,123)
Adjustments to reconcile net decrease
in net assets resulting from operations
to net cash provided by / (used) in
operating activities
Net unrealized loss on investments
in securities 10,858,149 4,542,252
Impairment loss on a loan (including
write off of accrued interest) - 428,469
Realized gain on investment in securities (3,768,239) -
Purchase of investment securities - (5,000,000)
Proceeds from sale of investment in 3,768,239 -
securities
Loan given to a portfolio company - (650,000)
Repayment of loan given to a portfolio
company 25,000 50,000
Change in operating assets and liabilities:
(Increase) / Decrease in prepaid expenses (1,812) 67,173
Decrease in interest receivable 65,821 47,617
Increase / (Decrease) in accounts
payables 47,565 (57,805)
Net cash provided by / (used) in operating
activities 407,977 (9,263,417)
Cash flow from financing activities
Capital contribution by non-controlling
interest shareholders - 445,367
Capital distribution to non-controlling (333,489) -
interest shareholders
Capital distribution (2,194,686) -
Net cash (used) in / provided by financing
activities (2,528,175) 445,367
Net change in cash and cash equivalents
during the year (2,120,198) (8,818,050)
-------------- -------------
Cash and cash equivalents at beginning
of the year 8,382,210 17,200,260
Cash and cash equivalents at end of
the year 6,262,012 8,382,210
============== =============
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 2012
(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 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.
Cim Fund Services Ltd. (the "Administrator") is the
administrator of the Fund.
2. Significant accounting policies
The significant accounting policies are as follows:
a. Basis of preparation
The consolidated financial statements are prepared in conformity
with accounting principles generally accepted in the United States
of America (US GAAP). 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
consolidated 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
consolidated 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 consolidated financial
statements.
The measurement and presentation currency of the consolidated
financial statements is the United States dollar rather than the
local currency of the 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.
b. 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.
c. Valuation and security transactions
Definition and hierarchy
Securities are held in custody by Kotak Mahindra Bank Limited
and Hong Kong & Shanghai Banking Corporation Limited. Security
transactions are recorded on the trade date basis. The Group uses
the weighted average cost method to determine the realized gain or
loss on sale of investments.
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 of an investment is the amount that would be received
to sell the investment in an orderly transaction between market
participants at the measurement date (i.e. the exit price).
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 are classified
and disclosed in one of the following categories:
Level I - Quoted prices are available in active markets for
identical investments as of the reporting date. The type of
investments included in Level I are publicly traded equity
securities and are valued at the last closing price on a national
securities exchange on the valuation date. As required by ASC 820,
the Group does not adjust the quoted price for these investments
even in situations, if any, where the Group holds a large position
and a sale could reasonably impact the quoted price.
Level II - Pricing inputs are other than quoted prices in active
markets, which are either directly or indirectly observable as of
the reporting date, are valued at prices for similar assets or
liabilities in markets that are not active, or determined through
the use of models or other valuation methodologies. Investments
which are generally included in this category are publicly traded
equity securities with restrictions and derivative contracts.
Level III - Pricing inputs are unobservable and include
situations where there is little, if any, market activity for the
investment. Fair value for these investments is determined using
valuation methodologies that consider a range of factors, including
but not limited to the price at which the investment was acquired,
the nature of the investment, local market conditions, trading
values on public exchanges for comparable securities, current and
projected operating performance and financing transactions
subsequent to the acquisition of the investment. The inputs into
the determination of fair value require significant management
judgment. Due to the inherent uncertainty of these estimates, these
fair value estimates may differ materially from the values that
would have been used had a ready market for these investments
existed. Investments that are included in this category generally
are privately held debt and equity securities.
In certain cases, the inputs used to measure fair value may fall
into different levels of the fair value hierarchy. In such cases,
an investment's level within the fair value hierarchy is based on
the lowest level of input that is significant to the fair value
measurement. The Investment Manager's assessment of the
significance of a particular input to the fair value measurement in
its entirety requires judgment, and considers factors specific to
the investment.
Valuation
Group's valuation policy
Securities listed on a stock exchange or traded on any other
regulated market are valued at the last closing price on such
exchange or market or, if no such price is available, at the mean
of the bid and asked price on such day. If there is no such price
or such market price is not representative of the fair market value
of any such security, then the security is valued based on
quotations readily available from principle-to-principle markets,
financial publications, or recognized pricing services, or a good
faith estimate of fair value is made in accordance with US
GAAP.
If a security is listed on several stock exchanges or markets,
the last closing price on the stock exchange or market which
constitutes the main market for such security is used.
A discount from values of actively traded securities is taken
for holdings of securities when there is a formal restriction that
limits sale of the securities. Discounts for restricted equity
securities from their market price ranges from 0% to 30%. When
determining a discount to actively traded restricted securities,
factors taken into consideration include the investee company's
trading characteristics, the Group's ability to sell its position
when the restriction expires, and the term of the restriction. The
adjustment of the discount depends on the duration of the
restriction.
In the event that a listed security has no such price or the
market price is not representative of the fair market value, the
security has limited marketability, or the security is unlisted,
its fair value is determined by the Investment Manager, taking into
account forward market comparable multiples, trailing market
comparable multiples, transaction multiples, and discounted cash
flow models. Inputs include trading values on public exchanges for
comparable securities, historic, current and projected operating
performance, and financing transactions subsequent to the
acquisition of the investment. An appropriate discount is taken for
holdings in securities where there is a risk associated with a lack
of liquidity or marketability. A revaluation of these securities is
accepted by the Group only upon majority approval of the
independent directors of the Fund.
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 Fund designates the Investment
Manager to oversee the entire valuation process of the Group's
Level III investments.
The Investment Manager is responsible for reviewing the Group's
written valuation processes and procedures, conducting periodic
reviews of the valuation policies, and evaluating the overall
fairness and consistent application of the valuation policies.
Valuations determined by the Investment Manager are required to
be supported by market data, third-party pricing sources; industry
accepted pricing models, or other methods the Investment Manager
deems to be appropriate, including the use of internal proprietary
pricing models.
The following table summarizes the valuation of the Group's
investments based on ASC 820 fair value hierarchy levels as of 31
December 2012.
Total Level I Level II Level III
Investments in securities 87,538,696 696,427 - 86,842,269
Total 87,538,696 696,427 - 86,842,269
The changes in the investments classified as Level III are as
follows:
Balance at 1 January 2012 97,592,169
Purchases during the year -
Proceeds from sale (3,768,239)
Transfers in (out of) Level III -
Realized gains for the year 3,768,239
Change in net unrealized loss (10,749,900)
Balance at 31 December 2012 86,842,269
Unrealized losses included in earnings relating
to investments held at 31 December 2012 10,749,900
------------------------------------------------- -------------
The following table summarizes the valuation of the Group's
investments based on ASC 820 fair value hierarchy levels as of 31
December 2011.
Total Level I Level II Level III
Investments in securities 98,396,844 804,673 - 97,592,169
Total 98,396,844 804,673 - 97,592,169
The changes in the investments classified as Level III are as
follows:
Balance at 1 January 2011 93,523,379
Purchases during the year 5,000,000
Proceeds from sale -
Transfers in (out of) Level III -
Realized gains for the year -
Change in net unrealized loss (931,210)
Balance at 31 December 2011 97,592,169
Unrealized losses included in earnings relating
to investments held at 31 December 2011 931,210
------------------------------------------------- -----------
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.
Gains and losses from investments, including those that result
from foreign currency changes, are recorded in the consolidated
statement of operations under net realized gains and losses on
investments and net change in unrealized gains and losses on
investments.
Unquoted warrants have been recorded at fair value. Changes in
fair value are reported in net change in unrealized gain (loss) on
investments in securities, in the consolidated statement of
operations.
Unquoted warrants are derivative instruments which do not have
an active quoted market price. The fair value of the warrants is
estimated, using the Black-Scholes model, taking into account the
terms and conditions upon which the warrants were granted.
d. Loans, loans impairment and interest income recognition
Loans are reported at their outstanding principal balances net
of impairment. The portfolio consist of loans provided to
subsidiaries of portfolio companies and bear interest at a market
rate based on the borrower's credit quality, the term and face
value of the loans. Interest is recognized over the life of the
loans at the loan's effective rate of interest. The Group may
require collateral for the loans. The Group has not and does not
intend to sell these loans receivable. Net change in loans
receivable are included in net cash provided by operating
activities in the consolidated statement of cash flows. The
allowance for doubtful loans account is the Group's best estimate
of the amount of credit losses from the Group's loans. The
allowance is determined on an individual loan basis if it is
probable that the Group will not collect all principal and interest
contractually due. The Group considers borrowers' historical
payment patterns, borrowers' credit ratings as published by credit
rating agencies, if available, borrowers' business performance and
general and industry specific economic factors in determining the
borrowers' probability of default.
As per Para 310-10-35-22 of ASC 310 on "Receivables", the
impairment is measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate
or the fair value of the collateral if the loan is
collateral-dependent. The Group does not accrue interest when a
loan is considered impaired. When ultimate collectability of the
principal balance of the impaired loan is in doubt, all cash
receipts on impaired loans are applied to reduce the principal
amount of such loans until the principal has been recovered and are
recognized as interest income thereafter. Impairment losses are
charged against the allowance and increases in the allowance are
charged to impairment loss in statement of operations. Loans are
written off against the impairment allowance when all possible
means of collection have been exhausted and the potential for
recovery is considered remote. The Group resumes accrual of
interest when it is probable that the Group will collect the
remaining principal and interest of an impaired loan. Loans become
past due based on how recently payments have been received.
e. Foreign currency translation
The Group's accounting records are maintained in U.S. dollars as
follows: (1) the foreign currency market value of investments and
other assets and liabilities denominated in foreign currency are
translated at the prevailing exchange rate at the end of the
period; and (2) purchases and sales, income and expenses are
translated at the prevailing exchange rate on the respective date
of such transactions. The resulting net foreign currency gain
(loss) is included in the consolidated statement of operations.
The Group does not generally segregate the 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.
f. Buy back
The Group repurchases its shares by allocating the excess of
repurchase price over par value against additional paid-in
capital.
g. Cash and cash equivalents
Cash and cash equivalents represent amounts held with the Group
bank accounts and deposits held with banks having original maturity
for a period of less than or equal to three months.
h. 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.
i. 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.
j. Expenses
The Group bears its own expenses on an accrual basis including,
but not limited to organisational costs, brokerage, custody, legal,
accounting, audit and other operating and administrative
expenses.
k. Revenue recognition
Dividend is accounted when the right to receive the dividend is
established. Interest is recorded on a period proportionate
basis.
l. Fair value of financial instruments other than investment in securities
The Group's investments are accounted as described in Note 2(c).
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.
m. Investment management fees
The Investment Manager is entitled to receive an aggregate
investment management fee of two per cent per annum of the Fund's
net asset value, to be paid quarterly in advance based on the
published net asset value of the Fund of the previous quarter or an
amount which is agreed by the Board of Directors of the Fund.
n. 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 of the Fund prior to the date of a
distribution as adjusted by adding back the value of any income or
capital distributions made by the Fund to its shareholders, being
equal to or greater than the Par Value. In addition, the carried
interest payment is 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.
3. Investment management fees and carried interest
Management fees
For the year ended 31 December 2012, the investment management
fee was fixed at two per cent per annum of the Fund's net asset
value, to be paid quarterly in advance based on the published net
asset value of the Fund of the previous quarter.
During the year ended 31 December 2012, the Fund paid US$
1,997,076 (31 December 2011: US$ 3,117,136) as investment
management fee.
Carried interest
During the year ended 31 December 2012, the Fund paid US$
686,950 (31 December 2011: Nil) as carried interest.
4. Directors' fees and expenses
The Fund pays each of its directors an annual fee of GBP20,000
and the Chairman is paid an annual fee of GBP25,000, plus
reimbursement for out-of-pocket expenses incurred in the
performance of their duties. The members of the Audit Committee are
paid an annual fee of GBP2,000 and the Chairman of the Committee is
paid an annual fee of GBP5,000. Mr. Mahadeva and Mr. Raghavendran
have waived their director's fees so long as they are 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
2012 2011
Cash at bank 732,578 362,755
Time deposits 5,529,434 8,019,455
6,262,012 8,382,210
6. Share capital and additional paid-in capital
2012 2011
Authorised 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
2011 109,734,323 1,097,344 117,373,109 118,470,453
As at 31 December
2011 109,734,323 1,097,344 117,373,109 118,470,453
As at 1 January
2012 109,734,323 1,097,344 117,373,109 118,470,453
Capital distribution - - (2,194,686) (2,194,686)
As at 31 December
2012 109,734,323 1,097,344 115,178,423 116,275,767
7. Income taxes
Under the laws of the Cayman Islands, the Fund, Kubera
Cross-Border Fund (GP) Limited and Kubera Cross-Border Fund LP, are
not required to pay any tax on profits, income, gains or
appreciations and, in addition, no tax is to be levied on profits,
income, gains, or appreciations or which is in the nature of estate
duty or inheritance tax on the shares, debentures or other
obligations of the Fund and its Cayman based subsidiaries, or by
way of withholding in whole or part of a payment of dividend or
other distribution of income or capital by the Fund and its Cayman
based subsidiaries, to its members or a payment of principal or
interest or other sums due under a debenture or other obligation of
the Fund and its Cayman based subsidiaries.
Under laws and regulations in Mauritius, the Fund's majority
owned subsidiaries, Kubera Cross-Border Fund (Mauritius) Limited
and New Wave Holdings Limited, are liable to pay income tax on
their net income at a rate of 15%. They are however entitled to a
tax credit equivalent to the higher of actual foreign tax suffered
or 80% of Mauritius tax payable in respect of their foreign source
income tax thus reducing their maximum effective tax rate to 3%.
Both subsidiaries have received a tax residence certificate from
the Mauritian authorities certifying that they are residents of
Mauritius, which is renewable on an annual basis subject to meeting
certain conditions and which make them eligible to obtain benefits
under the Double Tax Avoidance Treaty between Mauritius and
India.
2012 2011
Tax reconciliation
Net increase in net assets resulting
from operations (10,586,746) (8,691,123)
Add: Non allowable expense
Less: Movement in unrealised
gain on investment in securities 75,240 75,225
/ warrants - -
Add: Movement in unrealised loss
on investment in securities /
warrants 10,858,149 4,542,252
Less: Movement in realized gain
on investment in securities
Add: Exempt income (3,768,239) -
(10,082) -
Less: Adjustment of brought forward
loss -
-
Net taxable income / (loss) (4,073,646)
Tax @ 15% (3,431,678) -
Foreign tax paid - -
Foreign tax credit - -
Tax charge - -
As at 31 December 2012, New Wave Holdings Limited had
accumulated tax losses of US$ 37,287 and therefore no provision for
income tax liability arises for the period. The accumulated tax
losses can be used and set off against future taxable profits as
follows:
Up to the year ending 31 March 2014 - US$ 20,391
Up to the year ending 31 March 2016 - US$ 16,896
The components of deferred tax balances are as follows:
` 2012 2011
Deferred tax assets
Business losses - New Wave Holdings Limited 1,119 1,119
Less: Valuation allowance (1,119) (1,119)
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 2012.
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 2012.
The Fund monitors proposed and issued tax law, regulations and
cases to determine the potential impact to uncertain income tax
positions. As at 31 December 2012, there are no potential
subsequent events that would have a material impact on unrecognized
income tax benefits within the next twelve months.
8. Non-controlling interest
2012 2011
Share capital 8,141,456 8,474,945
Accumulated share of loss 38,702 681,759
Total 8,180,158 9,156,704
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
Wijayaraj Anandakumar Mahadeva Director*
Ramanan Raghavendran Director
Michel Casselman Independent Director*
Martin Michael Adams Independent Director
Robert Michael Tyler Independent Director
Pravin Ratilal Gandhi Independent Director*
Kubera Partners LLC Investment Manager
Kubera Cross-Border Incentives Special Limited Partner
SPC - Carried Interest SP of the Partnership
------------------------------- ------------------------
* Resigned w.e.f. 17 January 2013
B. During the period transactions with related parties are as disclosed below:
i. Transactions during the year
2012 2011
Investment management fees paid to
Investment Manager 1,997,076 3,117,136
Carried interest to Kubera Cross-Border 686,950 -
Incentives SPC - Carried Interest
SP
Expenses incurred by Kubera Partners
LLC on behalf of the Fund 47,542 119,358
Director fee, consultancy fees and
reimbursement of expenses paid to
Michel Casselman 44,106 35,835
Director fee, consultancy fees, audit
committee member fee and reimbursement
of expenses paid to Martin Michael
Adams 76,943 53,229
Director fee, consultancy fees, audit
committee member fee and reimbursement
of expenses paid to Robert Michael
Tyler 43,133 39,938
Director fee, consultancy fees and
audit committee member fee paid to
Pravin Ratilal Gandhi 41,486 34,933
ii. Amounts outstanding as at 31 December 2012
2012 2011
Reimbursement of expenses payable
to Kubera Partners LLC - 22,052
Consultancy fees payable to Martin
Michael Adams 33,600 18,438
Consultancy fees payable to Robert
Michael Tyler 3,000 9,852
Consultancy fees payable to Pravin
Ratilal Gandhi 6,000 8,543
Consultancy fees payable to Michel
Casselman 12,000 11,333
------------------------------------- -------- --------
10. Loans receivables
Loans receivable as at 31 December 2012 are given below:
Borrower name Sector Cost Date of loan Carrying Original date
rate of interest of maturity
(% p.a.)
Ocimum Biosolutions
Inc 6 December 6 December
(secured) Life Sciences 2,500,000 2010 20.0 2012
Synergies
Castings USA 1 February 3 February
Inc. Automotive 1,500,000 2012 12.5 2013
(secured) Components
Synergies
Castings USA 1 February 3 February
Inc. Automotive 1,000,000 2012 12.5 2013
(secured) Components
Repayment
of $25,000
Synergies starting from
Castings USA 30 March Oct 2011 till
Inc. Automotive 575,000 2011 7.0 Nov 2013
(unsecured) Components
Total 5,575,000
Loans receivable as at 31 December 2011 are given below:
Borrower name Sector Cost Date of loan Carrying Original date
rate of interest of maturity
(% p.a.)
Ocimum Biosolutions
Inc 6 December 6 December
(secured) Life Sciences 2,500,000 2010 20.0 2012
Synergies
Castings USA 5 February 3 February
Inc. Automotive 1,500,000 2010 12.5 2013
(secured) Components
Synergies
Castings USA 30 March 3 February
Inc. Automotive 1,000,000 2010 12.5 2013
(secured) Components
Repayment
of $25,000
Synergies starting from
Castings USA 30 March Oct 2011 till
Inc. Automotive 600,000 2011 7.0 Nov 2013
(unsecured) Components
Total 5,600,000
11. Impairment loss on loan
The activity in the impairment loss on loan and recorded
investment in loans (unrated) for the years ended 31 December 2012
and 2011 is as follows:
2012 2011
Automotive Life Total Automotive Life Total
components Sciences components Sciences
Impairment
loss on loan
account:
Opening balance - 428,469 428,469 - - -
Provision during
the year - - - - 428,469 428,469
Closing balance - 428,469 428,469 - 428,469 428,469
Loans to portfolio
companies:
Closing balance
of loans individually
assessed for
impairment 3,075,000 2,096,566 5,171,566 3,100,000 2,096,566 5,196,566
------------------------ ------------ ---------- ---------- ------------ ---------- ----------
The recorded investment in loans and related impairment
allowance as at 31 December 2012 is given below:
Industry Recorded Unpaid Impairment Average Interest
investment principal allowance recorded income
balance investment recognized
Automotive
components 3,075,000 3,075,000 - 3,087,500 -
Life
Sciences 2,096,566 2,096,566 428,469 2,096,566 -
Total 5,171,566 5,171,566 428,469 5,184,066 -
------------ ---------------------------- ---------------------------- -------------------------- ---------------------------- -----------
The recorded investment in loans and related impairment
allowance as at 31 December 2011 is given below:
Industry Recorded Unpaid Impairment Average Interest
investment principal allowance recorded income
balance Investment recognized
Life
Sciences 2,096,566 2,096,566 428,469 2,096,566 -
Total 2,096,566 2,096,566 428,469 2,096,566 -
---------- ---------------------------- ---------------------------- -------------------------- ---------------------------- -----------
The following table provides an analysis of the aging of the
past due loans receivable as of 31 December 2012:
Industry 30-60 61-90 Greater Total Total Recorded
Days Days than past financing investment
past past 90 Days due receivables > 90 days
due due past and
due accruing
Automotive
components 50,000 - 225,000 275,000 3,075,000 -
Life
Sciences - - 2,096,566 2,096,566 2,096,566 -
_______
Total 50,000 - 2,321,566 2,371,566 5,171,566 -
------------ -------- ------ ----------------------------- ---------------------------- ---------------------------- -----------
The following table provides an analysis of the aging of the
past due loans receivable as of 31 December 2011:
Industry Greater Total Total Recorded
than past due financing investment
90 Days receivables > 90 days
past due and
accruing
Life Sciences 2,096,566 2,096,566 2,096,566 -
Total 2,096,566 2,096,566 2,096,566 -
-------------- ---------------------------- ---------------------------- ---------------------------- ------------
12. Interest income
Interest income consists of the following:
2012 2011
Bank interest 10,082 9,892
Interest on loan - 350,956
Less: withholding
tax - (308,264)
Net Interest Income 10,082 52,584
13. Concentration of risks
The Group's investment activities expose it to various types of
risks, which are associated with the financial instruments and
markets in which it invests. The financial instruments expose the
Group in varying degrees to elements of liquidity, market and
credit risk. The following summary is not intended to be a
comprehensive summary of all risks inherent in investing in the
Group and reference should be made to the Group's admission
document for a more detailed discussion of risks.
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, investments in convertible
loans and receivables. 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.
15. Financial highlights
The financial highlights presented below consist of the Fund's
operating expenses and net operating loss ratios for the year ended
31 December 2012 and 31 December 2011, and the internal rate of
return ("IRR") since the Fund's admission to trading on AIM, net of
all expenses, including carried interest to the Investment
Manager:
2012 2011
Net operating loss 7.87% 7.24%
Operating expenses before carried interest 2.55% 3.71%
Carried interest 0.62% -
Operating expenses after carried interest 3.17% 3.71%
Cumulative IRR since inception through (1.61%
the year end ) (0.49%)
-------------------------------------------- ------- --------
The net operating loss and operating expenses ratios are
computed as a percentage of the Fund's average net asset value
during the period. Both ratios are presented on an annualized
basis. The IRR is computed based on the Fund's actual dates of the
cash inflows (capital contributions), outflows (cash and stock
distributions) and the ending net asset value at the end of the
period/year (residual value) as of each measurement date.
16. Sale of investments held by NeoPath Limited
On 25 August 2010, NeoPath Limited (formerly Venture Infotek
Limited), a portfolio company, has sold its 100% holding in Venture
Infotek Global Private Limited, its wholly owned subsidiary to Atos
Origin (Singapore) Pte Limited (Atos), a company incorporated and
resident in Singapore, for a consideration of US$ 110 million. As
part of the terms of the share purchase agreement, US$ 69.04
million was paid to NeoPath Limited.
On 21 September 2010, NeoPath Limited declared a dividend of US$
0.26 per share amounting to US$ 60.51 million, out of which US$
35.71 million was distributed as dividend to New Wave Holdings
Limited. Out of this distribution, New Wave Holdings Limited has
credited US$ 21.77 million towards the cost of investment in
NeoPath Limited and the balance of US$ 13.94 million was recorded
as realized gain on sale of investment.
On 6 July 2012, NeoPath Limited realized partial release of
Escrow and distributed the same by way of buyback of 3,520,382
preferred shares; pursuant to which the Group received USD 3.52
million. The Group accounted for it as a realized gain on sale of
investment in securities.
During August 2012, NeoPath Limited received a claim letter from
Atos claiming an amount of EUR 39.58 million (subject to an overall
cap of US$ 25 million) for breach of certain conditions specified
in the Share Purchase Agreement. However, management of NeoPath
denies these claims and obtained a legal opinion. Based on the
legal opinion, the escrow money is fully receivable and accordingly
the above claim is not recognized as a liability. Further during
October 2012, NeoPath filed for arbitration in Singapore
International Arbitration Centre. The proceedings are currently
underway and estimated to be completed within a year.
Consequently, based on the above legal opinions, the entire
amount of US$ 17.5 million held in escrow is considered as fully
recoverable and the present value of the expected escrow release is
included in the fair value of the investment in NeoPath Limited as
at 31 December 2012.
17. Subsequent events
At the Extraordinary General Meeting of the Fund held on 17
January 2013, shareholders passed an ordinary resolution regarding
the future of the Fund, that (a) the Fund should not continue in
existence as presently constituted; and (b) the investment
objective and policy of the Fund changed to seek realization of its
portfolio of investment in the ordinary course of business and to
return the net proceeds of all such realizations to Shareholders,
following which the Fund will be wound-up. The Fund will make no
new investments, except follow-on investments in existing investee
companies.
In conjunction with the above resolution, the Investment
Management Agreement was amended on 17 January 2013 to revise the
investment management fee payable to the Investment Manager as set
out below.
With effect from 1 January 2013, and subject to the exception
noted below, the annual management fee payable shall be fixed for
the calendar years 2013, 2014 and 2015, as follows:
-- 2013 and 2014: $1,997,076,
-- 2015: $1,697,515
The Investment Management Agreement between the Fund and the
Investment Manager is for an initial term of seven years ending 26
December 2013. The terms of the Investment Management Agreement
currently state that it shall be extended for such period as the
Investment Manager deems appropriate, not to exceed three years,
i.e. until 26 December 2016, to allow the Investment Manager to
effect an orderly disposal of the Group's assets. In the event
that, during the period from 2013 to 2015, the net asset value of
the Fund falls by over 85 per cent of the net asset value
prevailing on 1 January 2013 then the investment management fee
payable for the remaining life of the Group shall revert
immediately to 2 per cent per annum of NAV, or a fixed fee to be
determined by the independent directors at the time to ensure an
orderly wind-down.
Mr. Michel Casselman, Mr. Pravin Gandhi and Mr. Kumar Mahadeva
resigned as Directors on 27 January 2013.
The Group further evaluated subsequent events from the balance
sheet date through to 11 March 2013; 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
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