TIDMKUBC
RNS Number : 3650F
Kubera Cross-Border Fund Limited
24 April 2014
24 April 2014
Kubera Cross-Border Fund Limited
Annual Results for the year ended 31 December 2013
Kubera Cross-Border Fund Limited ("KUBC" or the "Fund")
(LSE/AIM: KUBC) has issued its annual audited results for the year
ended 31 December 2013.
Financial Highlights
-- Net asset value of the Fund as at 31 December 2013 of US$0.54
per share (US$0.82 per share as at 31 December 2012)
-- Distribution in June 2013 of US$3.29 million or US$ 0.03 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$28.26 million
-- Consolidated realized loss on investment in securities for the year of US$34.69 million
-- Consolidated unrealized gain on investments in securities for the year of US$6.43 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 UK LLP (Nominated Adviser)
Philip Secrett, Partner/ David Hignell, Manager/ Jamie Barklem,
Executive
Tel.: +44 (0) 20 7383 5100
Email: philip.j.secrett@uk.gt.com
Disclaimer:
This announcement may contain certain forward-looking statements
with respect to the financial condition, results of operations and
business of the Fund and its portfolio companies. Such
forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the Fund or its
portfolio companies' actual performance to be materially different
from any future performance expressed or implied by such
forward-looking statements. Such forward-looking statements are
based on assumptions regarding the Fund and its portfolio companies
present and future business strategies and the political and
economic environment in which they operate. Reliance should not be
placed on these forward-looking statements, which reflect the view
of Kubera Partners, LLC as of the date of this release only.
CHAIRMAN'S STATEMENT
On behalf of the Board of Directors, I am pleased to present the
audited financial statements of Kubera Cross-Border Fund Limited
("KUBC" or the "Fund") and its subsidiaries (collectively, the
"Group") for the year ended 31 December 2013.
NAV and Discount
KUBC's audited NAV per share decreased by 34% from US$0.82 to
US$0.54 between 31 December 2012 and 31 December 2013. KUBC's share
price decreased by 37% from US$0.49 to US$0.31 from 31 December
2012 to 31 December 2013. For the corresponding period, the
discount to NAV per share increased from 40% to 43%.
Since the inception of the Fund, the aggregate value in rupee
terms, has devalued relative to the US dollar by over 39.5%. The
Fund's performance in rupee terms (including both realized and
unrealized values), as of the 31(st) December 2013 NAV, amounts to
a multiple of 1.2x of cost; in dollar terms as mentioned above it
is 0.87x (inclusive of total distributions of $ 0.33/share).
Investments
Under the terms of the Investment Management Agreement, the
Investment Manager has sole authority over the disposition and
realisation of KUBC's investments. Given the substantial
co-investment made by members of the Investment Manager alongside
KUBC in each of the Group's investments, the Investment Manager's
interests are aligned with shareholders.
Portfolio Valuations
The Group's financial statements are prepared in accordance with
US GAAP. The valuations of investments are reviewed and approved by
the Audit Committee of the Board, on a quarterly basis. All
investments are recorded at estimated fair value, in accordance
with SFAS 157 that defines and establishes a framework for
measuring fair value. The NAV is calculated on this basis. The
methodology underlying the Group's investment valuations is
consistent with previous periods.
Change of Administrator and Amendment to Investment Management
Agreement
On 10 June 2013, the Fund announced that it had appointed IOMA
Fund and Investment Management Limited ("IOMA") as administrator,
registrar and company secretary. IOMA will work closely with Cim
Fund Services Ltd in Mauritius, which will continue as
administrator and secretary of Kubera Cross-Border Fund (Mauritius)
Limited, a subsidiary of the Fund, and will continue to assist in
providing administrative services to the Fund and its other
subsidiaries.
The Company has also amended the terms of the investment
management agreement entered into with the Manager, reducing the
investment management fees payable to the Manager by the amount of
the administration fees payable to IOMA.
Closing Remarks
The Manager's report on pages 4 to 5 provides information on the
investment environment in India, together with progress regarding
the implementation of the Group's realisation policy and
performance of each of the Company's investments. Further detailed
information on investments, quarterly net asset values and other
material events relating to the Fund are available through news
releases made to the London Stock Exchange available on
www.londonstockexchange.co.uk under ticker KUBC and through the
Fund's website at www.kuberacrossborderfund.com
Martin M. Adams
Chairman
INVESTMENT MANAGER'S REPORT
India Economic Review
Indian gross domestic product (GDP) growth declined marginally
to 4.7% in the quarter ending December 2013 compared to 4.8% in the
preceding quarter. This decline was primarily on account of
contraction in manufacturing output during the quarter. High cost
of borrowing and delays in securing government approvals have
stalled corporate investments and squeezed cash flows, while high
inflation and a slower pace of hiring have shaken consumer
confidence and forced households to reduce spending.
During the year, India received a total capital inflow of USD
13.46 billion from Foreign Institutional Investors (FIIs), with
equity markets receiving a net inflow of USD 20.55 billion while
debt markets witnessed a net outflow of USD 7.09 billion. As a
result of the high capital inflows into equity markets, the
benchmark equity index (Sensex) rose 8% during the year, whereas
the broader market index (the NIFTY Midcap) underperformed the
Sensex by a significant margin, and was down by 4% during the
year.
The rupee continues to trade at the lower end of its range, but
appreciated marginally to end the year at 61.8 rupees to the US
dollar. Since January 2013, the rupee has weakened by 13% and was
amongst the top losing currencies globally in 2013.
Quarterly portfolio summary
At close of business on 31(st) December 2013, the Fund's audited
net asset value per share ("NAV") was US$ 0.54. The aggregate of
shareholder distributions to date and the NAV amount to US$ 0.87
per share. The denomination of the Fund is US Dollars; the Fund
does not hedge the currency risk relating to its investments
denominated in Indian rupees.
The Investment Manager remains focused on realizing the
remaining portfolio, details of which are provided in this report.
Despite the challenges of a slowing economy and the nature of the
remaining assets of the portfolio, the Investment Manager is
hopeful that the portfolio will be fully realized in the next two
to three years.
Independent Auditors' Report
To the Shareholders' and Board of Directors of
Kubera Cross-Border Fund Limited
We have audited the accompanying consolidated financial
statements of Kubera Cross-Border Fund Limited and its subsidiaries
(collectively referred to as the 'Group'), which comprise the
consolidated statements of assets and liabilities, including the
consolidated schedule of investments as of 31 December 2013 and 31
December 2012 and the related consolidated statements of
operations, consolidated statements of changes in net assets, and
the consolidated statements of cash flows for the years then ended,
and the related notes to the consolidated financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair
presentation of these consolidated financial statements in
accordance with U.S. generally accepted accounting principles; this
includes the design, implementation, and maintenance of internal
control relevant to the preparation and fair presentation of
consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We conducted
our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditors'
judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due
to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity's preparation and
fair presentation of the consolidated financial statements in order
to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity's internal control. Accordingly, we
express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness
of significant accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial
statements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of the Group as of 31 December 2013 and 31 December 2012,
the results of their operations, the changes in their net assets
and their cash flows for the years then ended in accordance with
U.S. generally accepted accounting principles.
KPMG
Mumbai, India
23 April 2014
Kubera Cross-Border Fund Limited
Consolidated Statement of Assets and Liabilities
as at 31 December 2013
(Stated in United States Dollars)
Note 2013 2012
Assets
Investments in securities, 2(d), 2(e),
at fair value 15 53,897,712 87,538,696
2(f), 10,
Loans to portfolio companies 11 5,171,566 5,171,566
Cash and cash equivalents 2(i), 5 5,328,391 6,262,012
Prepaid expenses 117,384 17,700
Total assets 64,515,053 98,989,974
------------- -------------
Liabilities
Accounts payable 113,025 457,480
Tax liability 2(k), 7 - -
Total liabilities 113,025 457,480
------------- -------------
Net assets 64,402,028 98,532,494
============= =============
Analysis of net assets
Capital and reserves
Share capital 6 1,097,344 1,097,344
Additional paid-in capital 6 111,886,393 115,178,423
Accumulated deficit (53,808,935) (25,923,431)
------------- -------------
59,174,802 90,352,336
Non-controlling interest 8 5,227,226 8,180,158
------------- -------------
5,227,226 8,180,158
Total shareholders' interests 64,402,028 98,532,494
============= =============
Net asset value per share 0.59 0.90
============= =============
Approved by the Board of Directors on
23 April 2014 and signed on its behalf:
Director
See accompanying notes to the consolidated
financial statements.
Kubera Cross-Border Fund Limited
Consolidated Schedule of Investments
as at 31 December 2013
(Stated in United States Dollars)
2013 2012
Name of Industry Country Instrument Number Fair % of Number Fair % of
the entity
of shares Cost value net of shares Cost value net
assets assets
NeoPath
Limited
(Previously
known as
Venture Investment
Infotek holding
Limited) company Mauritius Equity shares 18,284,614 - 100,000 0.16% 18,284,615 - 100,000 0.10%
Preferred
shares 9,643,610 - 5,336,679 8.29% 15,020,297 - 13,935,758 14.14%
- 5,436,679 8.45% - 14,035,758 14.24%
------------ ------------- -------- ------------- ------------ --------
Series A
(2007)
United convertible
States participating
Adayana, of preferred
Inc. Education America stock 3,750,000 - - - 3,750,000 15,000,000 13,932,845 14.14%
Series B (2007)
convertible
preferred
stock 1,250,000 - - - 1,250,000 5,000,000 4,644,282 4.71%
Common stock 16,667 - - - 16,667 50,001 46,444 0.05%
Warrants convertible
to common
stock 83,580 - - - 83,580 16,800 - 0.00%
-------- --------
- - - 20,066,801 18,623,570 18.90%
------------ ------------- -------- ------------- ------------ --------
Compulsorily
Essel Shyam convertible
Communication Media preference
Limited services India shares 5,555,056 12,208,914 22,122,731 34.34% 5,555,056 12,208,914 22,736,110 23.08%
Equity shares 1,125,315 2,473,220 4,481,510 6.96% 1,125,315 2,473,220 4,605,765 4.67%
------------ ------------- --------
14,682,134 26,604,241 41.30% 14,682,134 27,341,875 27.75%
------------ ------------- -------- ------------- ------------ --------
Name of Industry Country Instrument Number Cost Fair % of Number Cost Fair % of
the entity of shares value net of shares value net
assets assets
Life India Compulsorily 3,818,162 14,000,000 3,818,162 14,000,000
Ocimum sciences convertible 99,974 0.16% 99,974 0.10%
Biosolutions preference
(India) shares
Limited
Equity shares 1,000 3,667 26 0.00% 1,000 3,667 26 0.00%
------------ ------------- -------- ------------- ------------ --------
14,003,667 100,000 0.16% 14,003,667 100,000 0.10%
------------ ------------- -------- ------------- ------------ --------
Greenearth
Education
Limited
(Previously
known as
Kejriwal Convertible
Stationery redeemable
Holdings Stationery preference
Limited) products Singapore shares 455,172 - - - 455,172 20,000,000 100,000 0.08%
------------ ------------- -------- ------------- ------------ --------
- - - 20,000,000 100,000 0.08%
------------ ------------- -------- ------------- ------------ --------
Compulsorily
convertible
Synergies cumulative
Castings Automotive preference
Limited components India shares 5,333,334 10,000,000 6,602,938 10.25% 5,333,334 10,000,000 8,445,307 8.57%
Equity shares 10,543,614 16,333,556 13,053,530 20.27% 10,543,614 16,333,556 16,695,759 16.94%
------------ ------------- -------- ------------- ------------ --------
26,333,556 19,656,468 30.52% 26,333,556 25,141,066 25.51%
------------ ------------- -------- ------------- ------------ --------
Spark Capital
Advisors
(India)
Private Financial
Limited services India Equity shares 55,079 1,500,000 1,500,000 2.33% 55,079 1,500,000 1,500,000 1.52%
--------
1,500,000 1,500,000 2.33% 1,500,000 1,500,000 1.52%
------------ ------------- -------- ------------- ------------ --------
GSS Infotech
Limited
(Previously
known as
GSS America
Infotech IT
Limited) infrastructure India Equity shares 1,000,000 10,225,274 600,324 0.93% 1,000,000 10,225,274 696,427 0.71%
------------ ------------- ------------- ------------ --------
10,225,274 600,324 0.93% 10,225,274 696,427 0.71%
------------ ------------- -------- ------------- ------------ --------
Total investments in
securities 66,744,631 53,897,712 83.69% 106,811,432 87,538,696 88.84%
============ ============= ======== ============= ============ ========
See accompanying notes to the consolidated financial statements.
Kubera Cross-Border Fund Limited
Consolidated Statement of Operations
for the year ended 31 December
2013
(Stated in United States Dollars)
Note 2013 2012
Investment income
2(d),
Interest 2(f) 103,207 10,082
Dividend 2(d) 162,027 -
Other income 275,888 200
------------- ---------------
541,122 10,282
------------- ---------------
Expenses
2(n),
Investment management fee 3 1,961,097 1,997,076
2(n),
Carried interest 3 - 686,950
Professional fees 249,719 287,238
Insurance 102,425 98,751
Directors' fees and expenses 4 87,485 210,418
Administration fees 96,233 36,500
License fees 17,432 14,034
Custodian fees 17,087 23,127
Brokerage - 75,000
Cost of reports to shareholders 7,055 15,902
Other expenses 83,783 62,122
------------- ---------------
2,622,316 3,507,118
------------- ---------------
Net investment loss before
tax (2,081,194) (3,496,836)
Taxation 2(k), - -
7
------------- ---------------
Net investment loss after tax (2,081,194) (3,496,836)
------------- ---------------
Realized and unrealized gain / (loss)
on investments
Net realized (loss) / gain
on investment in securities 2(d),
* 2(e) (34,690,114) 3,768,239
Net change in unrealized gain
/ ( loss) on investments in 2(d),
securities 2(e) 6,425,817 (10,858,149)
Net loss on investments (28,264,297) (7,089,910)
------------- ---------------
Net decrease in net assets
resulting from operations (30,345,491) (10,586,746)
============= ===============
Equity holding of parent (27,885,504) (9,943,689)
Non-controlling interest (2,459,987) (643,057)
(30,345,491) (10,586,746)
------------- ---------------
*Includes cost of investments written-off
during the year
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 2013
(Stated in United States
Dollars)
Share Additional Accumulated Non-controlling Total
capital paid-in deficit interest
capital
As at 1 January 2012 1,097,344 117,373,109 (15,979,742) 9,156,704 111,647,415
Capital contribution - (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
========== ============ ============= ================ =============
As at 1 January 2013 1,097,344 115,178,423 (25,923,431) 8,180,158 98,532,494
Capital distribution - (3,292,030) - (492,945) (3,784,975)
Net decrease in net
assets resulting from
operations - - (27,885,504) (2,459,987) (30,345,491)
As at 31 December 2013 1,097,344 111,886,393 (53,808,935) 5,227,226 64,402,028
========== ============ ============= ================ =============
See accompanying notes to the consolidated
financial statements.
Kubera Cross-Border Fund Limited
Consolidated Statement of Cash flows
for the year ended 31 December 2013
(Stated in United States Dollars)
2013 2012
Cash flow from operating activities
Net decrease in net assets
resulting from operations (30,345,491) (10,586,746)
Adjustments to reconcile
net decrease in net assets
resulting from operations
to net cash provided by /
(used) in operating activities
Net unrealized (gain) / loss
on investments in securities (6,425,817) 10,858,149
Realized gain on investment
in securities 34,690,114 (3,768,239)
Purchase of investment securities (236,892) -
Proceeds from sale of investment
in securities 5,613,579 3,768,239
Repayment of loan given to
a portfolio company - 25,000
Change in operating assets
and liabilities:
Increase in prepaid expenses (99,684) (1,812)
Decrease in interest receivable - 65,821
(Decrease) / Increase in
accounts payables (344,455) 47,565
Net cash provided by in operating
activities 2,851,354 407,977
Cash flow from financing activities
Capital distribution to non-controlling
interest shareholders (492,945) (333,489)
Capital distribution (3,292,030) (2,194,686)
Net cash used in financing
activities (3,784,975) (2,528,175)
Net decrease in cash and cash
equivalents during the year (933,621) (2,120,198)
------------- --------------
Cash and cash equivalents at
beginning of the year 6,262,012 8,382,210
Cash and cash equivalents at
end of the year 5,328,391 6,262,012
============= ==============
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 2013
(Stated in United States Dollars)
1. Organization and principal activity
Kubera Cross-Border Fund Limited (the "Fund") was incorporated
in the Cayman Islands on 23 November 2006 as an exempted company
with limited liability.
The Fund is a closed-end investment company trading on the AIM
market of the London Stock Exchange. The Fund makes private equity
investments in cross-border companies, primarily in businesses that
operate in the US-India corridor.
The Fund is managed by Kubera Partners, LLC (the "Investment
Manager"), a Delaware limited liability company. The Investment
Manager is responsible for the day-to-day management of the Fund's
investment portfolio in accordance with the Fund's investment
objective and policies and has full discretionary investment
management authority.
The Fund is a Limited Partner in Kubera Cross-Border Fund LP
(the "Partnership"), an exempted limited partnership formed on 28
November 2006, in accordance with the laws of the Cayman Islands.
The primary business of the Partnership is to invest in, purchase
and sell investments for the purpose of carrying out an investment
strategy that is consistent with the strategy described in the
Admission Document and Offering Memorandum of the Fund.
Kubera Cross-Border Fund (GP) Limited, a company incorporated
under the laws of the Cayman Islands and a wholly owned subsidiary
of the Fund, serves as the General Partner of the Partnership.
The Partnership holds 100% ownership in Kubera Cross-Border Fund
(Mauritius) Limited ("Kubera Mauritius"), a company incorporated in
Mauritius. The primary business of Kubera Mauritius is to carry on
business as an investment holding company.
Kubera Mauritius holds 100% ownership in New Wave Holdings
Limited, a company incorporated in Mauritius. The primary business
of New Wave Holdings Limited is to carry on business as an
investment holding company.
IOMA Fund and Investment Management Limited (the
"Administrator") is the administrator of the Fund.
2. Significant accounting policies
The accompanying consolidated financial statements are prepared
in conformity with U.S. generally accepted accounting principles
("US GAAP"). The significant accounting policies adopted by the
Company are as follows:
a. Use of estimates
US GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements, the results of operations during the
reporting period and the reported amounts of increases and
decreases in net assets from operations during the reporting
period. Significant estimates and assumptions are used for, but not
limited to, accounting for the fair values of investments in
portfolio companies. Management believes that the estimates made in
the preparation of the financial statements are prudent and
reasonable. Actual results could differ from those estimates.
Changes in estimates are reflected in the financial statements in
the period in which the changes are made and if material, these
effects are disclosed in the notes to the financial statements.
b. Functional currency
The measurement and presentation currency of the financial
statements is the United States dollar rather than the local
currency of Cayman Island reflecting the fact that subscriptions to
and redemptions from the Company are made in United States dollars
and the Company's operations are primarily conducted in United
States dollars.
c. Basis of consolidation
The consolidated financial statements include the accounts of
the Fund and its wholly owned subsidiary, Kubera Cross-Border Fund
(GP) Limited and its majority owned subsidiaries, Kubera
Cross-Border Fund LP, Kubera Cross-Border Fund (Mauritius) Limited
and New Wave Holdings Limited (together referred to as the
'Group'). All material inter-company balances and transactions have
been eliminated.
d. Investment transactions and related investment income and expenses
Substantially all 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.
Dividend income is recognized on the ex-dividend date and is
presented net of withholding taxes. Interest income and expense are
recognized on an accruals basis except for securities in default
for which interest is recognized on a cash basis.
e. Fair value
Definition and hierarchy
Investments are recorded at estimated fair value as at the
balance sheet date. The Group follows ASC 820 "Fair Value
Measurements and Disclosures" which defines fair value, establishes
a framework for measuring fair value and expands disclosures about
fair value measurements.
Fair value is defined as the price that would be received to
sell an asset or paid to transfer a liability (i.e., the "exit
price") in an orderly transaction between market participants at
the measurement date.
ASC 820 establishes a hierarchical disclosure framework which
prioritizes and ranks the level of market price observability used
in measuring investments at fair value. Market price observability
is impacted by a number of factors, including the type of
investment and the characteristics specific to the investment.
Investments with readily available active quoted prices or for
which fair value can be measured from actively quoted prices
generally will have a higher degree of market price observability
and a lesser degree of judgment used in measuring fair value.
Investments measured and reported at fair value as determined by
the Board of Directors are classified and disclosed in one of the
following categories:
Level I - Unadjusted quoted prices in active markets for
identical assets or liabilities that the Fund has the ability to
access.
Level II - Observable inputs other than quoted prices included
in Level 1 that are not observable for the asset or liability
either directly or indirectly. These inputs may include quoted
prices for the identical instrument on an inactive market, prices
for similar instruments, interest rates, prepayment speeds, credit
risk, yield curves, default rates, and similar data.
Level III - Unobservable inputs for the asset or liability to
the extent that relevant observable inputs are not available,
representing the Group's own assumptions about the assumptions that
a market participant would use in valuing the asset or liability,
and that would be based on the best information available.
In determining fair value, the Group uses various valuation
approaches. Inputs that are used in determining fair value of an
instrument may include price information; quotations received from
market makers, brokers, dealers and / or counterparties (when
available and considered reliable); credit data; volatility
statistics and other factors. Inputs, including price information,
may be provided by independent pricing services or derived from
market data. Inputs can be either observable or unobservable.
The availability of observable inputs can vary from security to
security and is affected by a wide variety of factors, including,
for example, the type of security, whether the security is new and
not yet established in the marketplace, the liquidity of markets,
and other characteristics particular to the security. To the extent
that valuation is based on models or inputs that are less
observable in the market, the determination of fair value requires
more judgment. Accordingly, the degree of judgment exercised in
determining fair value is greatest for instruments categorized in
Level III. The inputs used to measure fair value may fall into
different levels of the fair value hierarchy. In such cases, for
disclosure purposes, the level in the fair value hierarchy within
which the fair value measurement falls in its entirety is
determined based on the lowest level input that is significant to
the fair value measurement in its entirety.
Valuation
Listed equity securities
Investments in equity securities that are freely tradable and
are listed on a national securities exchange are valued at their
last sales price as of the valuation date. These investments are
classified as Level I in the fair value hierarchy and include
common stocks and preferred stock.
Private company
Investment in private company consists of a direct ownership of
common and / or preferred stock of a privately held company. The
transaction price, excluding transaction costs, is typically the
Group's best estimate of fair value at inception. When evidence
supports a change to the carrying value from the transaction price,
adjustments are made to reflect expected exit values in the
investment's principal market under current market conditions.
The Group performs ongoing reviews based on an assessment of
trends in the performance of each underlying investment from the
inception date through the most recent valuation date. These
assessments typically incorporate the original transaction price,
recent transactions in the same or similar instruments, completed
or pending third-party transactions in the underlying investment or
comparable issuers, subsequent rounds of financing,
recapitalizations and other transactions across the capital
structure, offerings in the equity or debt capital markets and
changes in financial ratios or cash flows.
Valuation process
The Group establishes valuation processes and procedures to
ensure that the valuation techniques for investments that are
categorized within Level III of the fair value hierarchy are fair,
consistent, and verifiable. The Group designates the Investment
Manager to oversee the entire valuation process of the Group's
investments.
The Investment Manager is responsible for reviewing the Group's
written valuation processes and procedures, conducting periodic
reviews of the valuation policies, and evaluating the overall
fairness and consistent application of the valuation policies.
Valuations determined by the Investment Manager are required to
be supported by market data, third-party pricing sources; industry
accepted pricing models, or other methods the Investment Manager
deems to be appropriate, including the use of internal proprietary
pricing models.
The following table summarizes the valuation of the Group's
investments based on ASC 820 fair value hierarchy levels as of 31
December 2013.
Total Level Level Level
I II III
Investments
in securities 53,897,712 600,324 - 53,297,388
Total 53,897,712 600,324 - 53,297,388
The changes in the investments classified as Level III are as
follows:
Balance at 1 January 2013 86,842,269
Investment in securities (additional
working capital for an existing
investment) 236,892
Proceeds from sale (Refer note 15) (5,613,579)
Transfers in (out of) Level III -
Realized loss for the year (34,690,114)
Change in net unrealized gain 6,521,920
Balance at 31 December 2013 53,297,388
____________
Unrealized gains included in earnings
relating to investments held at
31 December 2013 6,521,920
--------------------------------------- -------------
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 Level Level
I II 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 (Refer note 15) (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
---------------------------------------- -------------
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.
f. Loans, loans impairment and interest income recognition
Loans are reported at their outstanding principal balances net
of impairment. The portfolio consists 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 changes 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.
g. 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.
h. Buy back
The Fund repurchases its shares by allocating the excess of
repurchase price over par value against additional paid-in
capital.
i. 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.
j. 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.
k. 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.
l. 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.
m. 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.
n. Investment management fees
On 17 January 2013 and subsequently on 7 June 2013, the Board of
Directors of the Company fixed the management fees for the years
2013 to 2015. Provided that if at any time prior to 31 December
2015, the Net Asset Value does not drop below 15 per cent of the
Net Asset Value as at 1 January 2013, the Company shall pay a
management fee to the Manager which shall be:
-- US$1,997,079 per annum for the period from 1 January 2013 to 31 December 2014 less the administration fee payable to IOMA Fund and Investment Management Limited ("IOMA") for such period;
-- US$1,697,515 for the period from 1 January 2015 to 31
December 2015 less the administration fee payable to IOMA.
For periods subsequent to 31 December 2015 the management fee
will be negotiated by both parties at that time.
Carried interest
Under the terms of the Partnership Agreement, Kubera
Cross-Border Incentives SPC - Carried Interest SP, the Special
Limited Partner of the Partnership and an affiliate of the
Investment Manager, is entitled to receive a carried interest from
the Partnership equivalent to 20 per cent, of the aggregate return
over investment received by the Partnership following the full or
partial cash realization of an investment.
Aggregate return, for the purposes of calculating the carried
interest, is defined as the net realized gains reduced by the net
unrealized losses of the Partnership to the date of such
distribution. Realized and unrealized gains or losses on each
investment are determined on the most recent announced NAV
immediately prior to the date of such distribution.
The payment of carried interest is conditional upon the fact
that the last announced adjusted NAV of the Fund prior to the date
of distribution should be equal to or greater than the Par Value.
The adjusted NAV is arrived at by adding back the value of any
income or capital distributions made by the Fund to its
shareholders.
In addition, the carried interest payment is adjusted such that,
the aggregate cumulative amount of carried interest paid at the
date of such distribution will equal 20 per cent, of the eligible
carried interest proceeds.
Eligible carried interest proceeds may not be less than
zero.
o. Recent accounting pronouncements
In June 2013, the Financial Accounting Standards Board issued
Accounting Standards Update No. 2013-08, Financial
Services-Investment Companies (Topic 946): Amendments to the Scope
Measurement and Disclosure Requirements ("ASU 2013-08"). ASU
2013-08 provides clarifying guidance to determine if an entity
qualifies as an investment company. ASU 2013-08 also requires an
investment company to measure non-controlling interests in other
investment companies at fair value. The following disclosures will
also be required upon adoption of ASU 2013-08: (i) whether an
entity is an investment company and is applying the accounting and
reporting guidance for investment companies; (ii) information about
changes, if any, in an entity's status as an investment company;
and (iii) information about financial support provided or
contractually required to be provided by an investment company to
any of its investees. The requirements of ASU 2013-08 are effective
for fiscal years that begin after 15 December 2013. The Investment
Manager is currently evaluating the impact, if any, that these
updates will have on its financial condition or results of
operations.
3. Investment management fees and carried interest
Investment management fees
For the year ended 31 December 2013, the Fund paid / provided
for US$ 1,961,097 towards the investment management fee.
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 Group paid / provided for US$ 1,997,076
towards the investment management fee.
Carried interest
During the year ended 31 December 2013, no carried interest was
paid / provided for by the Fund. During the year ended 31 December
2012, the Fund paid / provided for US$ 686,950 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 Audit
Committee is paid an annual fee of GBP5,000. 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
2013 2012
Cash at bank 5,328,391 732,578
Time deposits - 5,529,434
5,328,391 6,262,012
6. Share capital and additional paid-in capital
2013 2012
Authorized share capital:
1,000,000,000 ordinary shares
of $0.01 each 10,000,000 10,000,000
-------------------------------- ------------- -------------
Number Share Additional Total
of Capital paid-in
Shares capital
As at 1 January
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
As at 1 January
2013 109,734,323 1,097,344 115,178,423 116,275,767
Capital distribution - - (3,292,030) (3,292,030)
As at 31 December
2013 109,734,323 1,097,344 111,886,393 112,983,737
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.
2013 2012
Tax reconciliation
Net decrease in net assets
resulting from operations (30,345,491) (10,586,746)
Add: Non allowable expense
Less: Movement in unrealized
gain on investment in - 75,240
securities / warrants - -
Add: Movement in net
unrealized loss on investment
in securities / warrants - 10,858,149
Less: Movement in realized
gain on investment in
securities
Add: Movement in realized
loss on investment in
securities (5,376,687) (3,768,239)
Less: Exempt income 40,066,801
(270,784) (10,082)
Less: Movement in net (6,425,817) -
unrealized gain on investment
in securities
Less: Adjustment of brought
forward loss
- -
Net taxable income /
(loss) (2,351,978) (3,431,678)
Tax @ 15% - -
Foreign tax paid 33,174 -
Foreign tax credit - -
Tax charge - -
As at 31 December 2013, New Wave Holdings Limited had
accumulated tax losses of US$ 51,610 and therefore no provision for
income tax liability arises for the year. The accumulated tax
losses can be used and set off against future taxable profits as
follows:
Up to the year ending 31 December 2014 - USD 20,391
Up to the year ending 31 December 2016 - USD 16,896
Up to the year ending 31 December 2018 - USD 19,323
The components of deferred tax balances are as follows:
` 2013 2012
Deferred tax assets
Business losses - New Wave Holdings Limited 1,548 1,119
Less: Valuation allowance (1,548) (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 2013.
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 2013.
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 2013 and 31 December 2013, 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
2013 2012
Share capital 7,648,511 8,141,456
Accumulated share of loss 2,421,285 38,702
_________
Total 5,227,226 8,180,158
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 Director*
Mahadeva
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 Special Limited
Incentives SPC - Carried Partner of the
Interest SP 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
2013 2012
Investment management
fees paid to Investment
Manager 1,961,097 1,997,076
Carried interest to Kubera
Cross-Border Incentives
SPC - Carried Interest
SP - 686,950
Expenses incurred by Kubera
Partners LLC on behalf
of the Fund 73,074 47,542
Director fee and reimbursement
of expenses paid to Michel
Casselman 16,398 44,106
Director fee, consultancy
fees, audit committee
member fee and reimbursement
of expenses paid to Martin
Michael Adams 81,109 76,943
Director fee, consultancy
fees, audit committee
member fee and reimbursement
of expenses paid to Robert
Michael Tyler 43,384 43,133
Director fee paid to Pravin
Ratilal Gandhi 6,000 41,486
ii. Amounts outstanding as at 31 December
2013 2012
Consultancy fees payable
to Martin Michael Adams - 33,600
Consultancy fees payable
to Robert Michael Tyler - 3,000
Consultancy fees payable
to Pravin Ratilal Gandhi - 6,000
Consultancy fees payable
to Michel Casselman - 12,000
--------------------------- ------ --------
10. Loans to portfolio companies
Loans receivable as at 31 December 2013 are given below:
Borrower Sector Cost Date of Carrying Date
name loan rate of maturity
of
interest
(%
p.a.)
Ocimum
Biosolutions Life 6 December 6 December
Inc * Sciences 2,525,035 2010 20.0 2012
Synergies
Castings 3 February 3 August
USA Inc. Automotive 1,500,000 2013 12.5 2015
(secured) Components
Synergies
Castings 3 February 3 August
USA Inc. Automotive 1,000,000 2013 12.5 2015
(secured) Components
Synergies
Castings 3 February 3 August
USA Inc. Automotive 575,000 2013 7.0 2015
(unsecured) Components
Total 5,600,035
------------------------------ ---------- ----------- ---------- -------------
*Includes accrued interest of US $ 25,035
Loans receivable as at 31 December 2012 are given below:
Borrower Sector Cost Date of Carrying Date
name loan rate of maturity
of
interest
(%
p.a.)
Ocimum
Biosolutions
Inc * Life 6 December 6 December
(secured) Sciences 2,525,035 2010 20.0 2012
Synergies
Castings 1 February 3 February
USA Inc. Automotive 1,500,000 2012 12.5 2013
(secured) Components
Synergies
Castings 1 February 3 February
USA Inc. Automotive 1,000,000 2012 12.5 2013
(secured) Components
Repayment
of $25,000
starting
Synergies from Oct
Castings 30 March 2011 till
USA Inc. Automotive 575,000 2011 7.0 Nov 2013
(unsecured) Components
Total 5,600,035
*Includes accrued interest of US $ 25,035
11. Impairment loss on loans
The activity in the impairment loss on loan and recorded
investment in loans (unrated) for the years ended 31 December 2013
and 2012 is as follows:
2013 2012
Automotive Life Total Automotive Life Total
components Sciences components Sciences
Impairment
loss on
loan account:
Opening
balance* - 428,469 428,469 - 428,469 428,469
Provision - - - - - -
during the
year
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 3,075,000 2,096,566 5,171,566
----------------- ------------ ------------ ------------ ------------ ------------ ------------
* Includes interest accrued written off of US$ 25,035
The recorded investment in loans and related impairment
allowance as at 31 December 2013 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 - 3,075,000 99,945
Life
Sciences 2,525,035 2,525,035 428,469 2,525,035 -
Total 5,600,035 5,600,035 428,469 5,600,035 99,945
------------ ---------------------------- ---------------------------- -------------------------- ---------------------------- -------------------------
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 - 3,075,000 -
Life
Sciences 2,525,035 2,525,035 428,469 2,525,035 -
Total 5,600,035 5,600,035 428,469 5,600,035 -
------------ ---------------------------- ---------------------------- -------------------------- ---------------------------- --------------------
The following table provides an analysis of the aging of the
past due loans receivable as of 31 December 2013:
Industry 30-60 61-90 Greater Total Total Recorded
Days Days than past financing investment
past past 90 due receivables > 90
due due Days days
past and accruing
due
Automotive - - - - - -
components
Life
Sciences - - 2,096,566 2,096,566 2,096,566 -
_______
Total - - 2,096,566 2,096,566 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 due Receivables > 90 days
due due Days and accruing
past
due
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 -
------------ -------- -------------------- ----------------------------- ---------------------------- ---------------------------- --------------------
12. Financial instruments and associated risks
The Group's investment activities expose it to various types of
risks, which are associated with the financial instruments and
markets in which it invests. The financial instruments expose the
Group in varying degrees to elements of liquidity, market and
credit risk. 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. 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.
13. 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 2013 and 31 December 2012, 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:
2013 2012
Net operating loss 31.46% 7.87%
Operating expenses before
carried interest 2.72% 2.55%
Carried interest - 0.62%
Operating expenses after carried
interest 2.72% 3.17%
Cumulative IRR since inception
(including realized & unrealized (5.12% (1.61%
gains and losses) ) )
----------------------------------- ------- -------
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.
14. Sale of investments held by NeoPath Limited
On 25 August 2010, NeoPath Limited (NeoPath), a portfolio
company of New Wave Holdings Limited, 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 USD 110 million. As part of the terms of the share purchase
agreement, USD 69.04 million was paid to NeoPath for its share of
holding.
In April 2013, NeoPath entered into a settlement with Atos (with
respect to the monies lying in escrow that were subject to an
arbitration process) and received USD 13.07 million as a settlement
amount. NeoPath distributed the same by way of buyback of 5,613,579
preferred shares; pursuant to which New Wave Holdings Limited
received USD 5.61 million. New Wave Holdings Limited accounted for
it as a realized gain on sale of investment in securities.
The only asset now left in NeoPath Limited is the withholding
tax refund. Atos had deducted withholding tax towards Indian income
tax of USD 15.96 million (the Group's share is USD 7.49 million)
and deposited with the Government of India. NeoPath Limited is in
the process of claiming a refund of the withholding tax based on
its position that the capital gains realized on the sale is exempt
from tax in India under the relevant provisions of the
India-Mauritius tax treaty. Consequently, based on the tax counsel
opinion, the entire amount of USD 15.96 million has been considered
as fully recoverable and the present value of the expected tax
refund has been included in the fair value estimate of the
investment in NeoPath as at 31 December 2013.
15. Subsequent events
The Group further evaluated subsequent events from the balance
sheet date through to 23 April 2014; the date at which the
consolidated financial statements were available to be issued, and
determined that there are no other items to disclose.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR QKNDNPBKDNQB
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