TIDMKUBC
RNS Number : 1692N
Kubera Cross-Border Fund Limited
24 July 2014
24 July 2014
Kubera Cross-Border Fund Limited
Interim Results for the six-month period ended 30 June 2014
Kubera Cross-Border Fund Limited (the "Fund") (LSE/AIM: KUBC)
has today issued its un-audited interim results for the six month
period 1 January 2014 to 30 June 2014.
Electronic and printed copies of the interim 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 on the
Fund's website www.kuberacrossborderfund.com.
About Kubera Cross-Border Fund Limited
Kubera Cross-Border Fund Limited is a closed-end investment
company incorporated in the Cayman Islands and traded on the AIM
market of the London Stock Exchange. The Fund makes private equity
investments in cross-border companies, primarily in businesses that
operate in the US-India corridor. The Fund's investment manager,
Kubera Partners, brings a strong track record of investing in or
managing such businesses. Several of the Fund's portfolio companies
also benefit from business activities in the growing Indian
domestic market. For further information on the Fund, please visit
www.kuberacrossborderfund.com.
For more information contact:
Kubera Partners, LLC (Investment Manager of Kubera Cross-Border
Fund Limited)
Ramanan Raghavendran, Managing Partner
Email: info@kuberapartners.com
Grant Thornton Corporate Finance (Nominated Adviser)
Philip Secrett, Partner/ David Hignell/ Jamie Barklem
Tel.: +44 (0) 20 7383 5100
Email: philip.j.secrett@uk.gt.com
Numis Securities Limited (Broker)
David Benda, Managing Director
Tel.: +44 (0) 20 7260 1275
Email: d.benda@numis.com
IOMA Fund and Investment Management Limited (Administrator,
Registrar & Secretary)
Philip Scales, Director
Tel.: +44 (0) 1624 681250
Email: Philips@iomagroup.co.im
Disclaimer:
This announcement may contain certain forward-looking statements
with respect to the financial condition, results of operations and
business of the Fund and its portfolio companies. Such
forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the Fund or its
portfolio companies' actual performance to be materially different
from any future performance expressed or implied by such
forward-looking statements. Such forward-looking statements are
based on assumptions regarding the Fund and its portfolio companies
present and future business strategies and the political and
economic environment in which they operate. Reliance should not be
placed on these forward-looking statements, which reflect the view
of Kubera Partners, LLC as of the date of this release only.
CHAIRMAN'S STATEMENT
On behalf of the Board of Directors, I am pleased to present the
interim report and financial statements of Kubera Cross-Border Fund
Limited (the "Fund" or "Company"), for the six month period ended
30 June 2014.
NAV and Discount
The value of the Fund's net assets increased from US$ 59.2
million to US$ 62.1 million during the six month period, which
ended on 30 June 2014. The Fund's net asset value ("NAV") per share
increased by 5% from US$ 0.54 to US$ 0.57 between 31 December 2013
(audited) and 30 June 2014 (un-audited). The increase in NAV is
primarily attributable to the appreciation of Indian Rupee
vis-à-vis the US Dollar, which is the denomination of the Fund, and
an increase in public equity market valuations, which are an input
taken into account when establishing the value of equity interests
in the Fund's portfolio which are publicly traded securities.
The Fund's share price remained fairly constant at US$ 0.31 as
at 30 June 2014. The discount of the Fund's share price to NAV
increased from 43% as at 31 December 2013 to 45% as at 30 June
2014.
EGM
At the Extraordinary General Meeting of the Company held last
year, shareholders passed an ordinary resolution regarding the
future of the Company, resolving that (a) the Fund should not
continue in existence as presently constituted; and (b) the
investment objective and policy of the Fund be changed to seek
realisation of its portfolio of investments in the ordinary course
of business and to return the net proceeds of all such realisations
to Shareholders, following which, the Company will be wound-up. The
Fund will make no new investments, except follow-on investments in
existing investee companies.
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 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
The Manager's report 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 symbol KUBC and through
the Fund's website at www.kuberacrossborderfund.com.
Martin M. Adams
Chairman
INVESTMENT MANAGER'S REPORT
Indian Economy and Market Review(1)
During the quarter, the Indian electorate gave a positive
outcome and for the first time in 30 years, voting a single party
(BJP) to power. It is hoped that this decisive mandate will lead to
a revival in market sentiment and a boost in overall economic
growth.
Indian GDP grew by 4.6% during the quarter ending March 2014,
growing at a similar rate as compared quarter-on-quarter from the
prior financial year. Though local political uncertainty is behind
us, global macro factors, including the volatile Middle East
situation, and local factors such as a possible weak monsoon
continue to influence the Indian economy and capital flows.
Foreign direct investment inflows during the period of January
2014 to June 2014 showed 65% growth to US$ 20.27 billion compared
to US$ 12.3 billion during the comparable period in 2013. An
increased inflow in non-portfolio investments indicates a shift
from a "risk averse" approach towards India. During the first six
months, foreign institutional investors (FIIs) have been net buyers
across financial markets. For the period January 2014 to June 2014,
Indian equity markets witnessed a net inflow of US$ 9.95 billion,
while Indian debt markets saw a net inflow of US$ 10.42
billion.
The BSE Sensex (which comprises 30 stocks) rose by 20% during
the January to June 2014 period. closing at 25,413 on 30 June 2014.
During the same period the mid-cap index (NIFTY Midcap) rose by
45.57%.
The outperformance in equity markets is primarily attributable
to favorable views regarding likely actions to be taken by the
government elected in May 2014, specifically the likelihood of
major economic reform.
Many brokerage firms have revised their GDP estimates and year
ending targets for benchmark equity indices. However in the medium
term, high inflation and the high current account deficit remain
key concerns.
The Indian rupee was volatile against the US dollar (USD) during
the first half of the calendar year 2014. In January, it reached a
high of Rs 63 per USD due to political uncertainty but showed
considerable strength against the USD post the election results,
reaching a low of Rs 58.5 per USD in May 14. The rupee started
depreciating again in the last month of the quarter primarily due
to rising global crude oil prices on the back of unrest in Iraq,
and ended the quarter at 60.045 per USD. During the first six
months of the calendar year 2014, Indian rupee appreciated by 3%
against the US dollar versus a 9% depreciation during the same
period last year.
Portfolio
The Investment Manager remains closely engaged with the Fund's
portfolio companies on a range of strategic issues. Details on the
Fund's portfolio companies' performances are set out below.
[1] Sources: Reserve Bank of India, BSE India, Securities and
Exchange Board of India, Bloomberg & others
Kubera Partners LLC
KUBERA CROSS-BORDER FUND LIMITED
Consolidated statement of assets and
liabilities
as at 30 June 2014
(Stated in United States Dollars)
Notes 30 June 2014 30 June 2013
(unaudited) (unaudited)
Assets
Investments in securities, at
fair value 2(c) 57,983,290 71,430,118
Loans to portfolio companies 2(d),10 5,171,566 5,171,566
Cash and cash equivalents 2(g),5 4,464,709 6,977,174
Interest and dividend receivable 2(d),2(k) - 128,283
Prepaid expenses 82,318 73,788
----------------------------------- ---------- ------------- --------------
Total assets 68,701,833 83,105,059
Liabilities
Accounts payable 31,114 370,258
Tax liability (net) 2(i),7 - -
----------------------------------- ---------- ------------- --------------
Total liabilities 31,114 370,258
Net assets 67,670,769 82,734,801
------------------------------------ ---------- ------------- --------------
Analysis of net assets
Capital and reserves
Share capital 6 1,097,344 1,097,344
Additional paid-in capital 6 111,886,394 111,886,394
Accumulated deficit (50,931,234) (36,985,561)
----------------------------------- ---------- ------------- --------------
62,052,504 75,998,177
Non-controlling interest 8 5,618,265 6,736,624
------------------------------------ ---------- ------------- --------------
5,618,265 6,736,624
Total shareholders' interests 67,670,769 82,734,801
------------------------------------ ---------- ------------- --------------
KUBERA CROSS-BORDER FUND LIMITED
Consolidated schedule of investments
as at 30 June 2014
(Stated in United States Dollars) 30 June 2014 30 June 2013
(unaudited) (unaudited)
---------------------------------------------- -------------------------------------------------
Name of the Industry Country Instrument Number Cost Fair value % of Number Cost Fair value % of
Entity of shares net of net
assets shares assets
Investments in securities (other than warrants)
Investment
NeoPath holding
Limited company Mauritius Equity shares 18,284,614 - 100,000 0.15% 18,284,615 - 100,000 0.12%
Preferred
shares 9,643,610 - 5,601,655 8.28% 9,643,610 - 5,670,860 6.85%
------------ ----------- -------
- 5,701,655 8.43% - 5,770,860 6.97%
----------- ----------- ------- ------------ ----------- -------
Series A
(2007)
United convertible
States participating
Adayana, of preferred
Inc. Education America stock 3,750,000 - - - 3,750,000 15,000,000 1,539,540 1.86%
Series B
(2007) convertible
preferred
stock 1,250,000 - - - 1,250,000 5,000,000 7,310,265 8.84%
Common stock 16,667 - - - 16,667 50,001 - 0.00%
------- ------------ ----------- -------
- - - 20,050,001 8,849,805 10.70%
----------- ----------- ------- ------------ ----------- -------
Compulsorily
Essel Shyam convertible
Communication preference
Limited Media services India shares 5,555,056 12,208,914 22,638,905 32.69% 5,555,056 12,208,914 25,143,416 30.39%
Equity shares 1,125,315 2,473,220 4,586,074 7.54% 1,125,315 2,473,220 5,093,425 6.16%
----------- ------------ ----------- -------
14,682,134 27,224,979 40.23% 14,682,134 30,236,841 36.55%
----------- ----------- ------- ------------ ----------- -------
Ocimum Compulsorily
Biosolutions convertible
(India) preference
Limited Life sciences India shares 3,818,162 14,000,000 99,974 0.15% 3,818,162 14,000,000 99,974 0.09%
Equity shares 1,000 3,667 26 0.00% 1,000 3,667 26 0.00%
------------ ----------- -------
14,003,667 100,000 0.15% 14,003,667 100,000 0.12%
----------- ----------- ------- ------------ ----------- -------
Convertible
Greenearth redeemable
Education Stationary preference
Limited products Singapore shares 455,172 - - - 455,172 20,000,000 1 0.00%
----------- ----------- ------------ ----------- -------
- - - 20,000,000 1 0.00%
----------- ----------- ------- ------------ ----------- -------
Compulsorily
convertible
Synergies cumulative
Castings Automotive preference
Limited components India shares 5,333,334 10,000,000 7,646,739 9.76% 5,333,334 10,000,000 8,225,824 9.94%
Equity shares 10,546,614 16,333,556 15,117,048 23.88% 10,543,614 16,333,556 16,261,857 19.66%
------------ ----------- -------
26,333,556 22,763,787 33.64% 26,333,556 24,487,681 29.60%
----------- ----------- ------- ------------ ----------- -------
Spark Capital
Advisors
(India)
Private Financial
Limited services India Equity shares 55,079 1,500,000 1,545,577 2.28% 55,079 1,500,000 1,500,000 1.81%
------------ ----------- -------
1,500,000 1,545,577 2.28% 1,500,000 1,500,000 1. 81%
----------- ----------- ------- ------------ ----------- -------
GSS Infotech IT
Limited infrastructure India Equity shares 1,000,000 10,225,274 647,282 0.96% 1,000,000 10,225,274 484,930 0.59%
----------- ----------- ------------ ----------- -------
10,225,274 647,282 0.96% 10,225,274 484,930 0.59%
----------- ----------- ------- ------------ ----------- -------
Total investments in securities 66,744,631 57,983,290 85.69% 106,794,632 71,340,188 86.34%
----------- ----------- ------- ------------ ----------- -------
The accompanying notes form an integral part of these consolidated financial statements.
KUBERA CROSS-BORDER FUND LIMITED
Consolidated statement of operations
for the six month period ended 30 June 2014
(Stated in United States Dollars)
----------------------------------------- ---------- -------------- ----------------
Six months Six months
Notes ended ended
30 June 2014 30 June 2013
(unaudited) (unaudited)
--- ------------------------------------ ---------- -------------- ----------------
Investment income
Interest 2(d),2(k) 10,740 61,465
Dividend 362,229 -
372,969 61,465
Expenses
Investment management fee 2(m),3 951,040 998,540
Carried interest 2(n),3 - -
Professional fees 63,652 80,694
Insurance 48,252 51,213
Directors' fees 4 46,645 42,463
Administration fees 65,750 30,483
License fees 2,437 8,463
Custodian fees 5,542 13,197
Brokerage - 37,500
Corporate Tax - -
Other expenses 31,675 79,742
---------------------------------------- ---------- -------------- ----------------
1,214,993 1,342,295
---------------------------------------- ---------- -------------- ----------------
Net investment loss before tax (842,024) (1,280,295)
Taxation 2(i),7 - -
--- ------------------------------------ ---------- -------------- ----------------
Net investment loss after tax (842,024) (1,280,295)
Realized and unrealized gain /(loss) on
investment transactions
Realized gain on investment
in securities 2(c) - 5,376,687
Net unrealized loss on investments
in securities 2(c) 4,085,578 (16,108,576)
---------------------------------------- ---------- -------------- ----------------
4,085,578 (10,731,889)
Net decrease in net assets resulting from
operations 3,243,554 (12,012,719)
----------------------------------------------------- -------------- ----------------
Non-controlling interest 391,038 (950,589)
Equity holding of parent 2,852,516 (11,062,130)
3,243,554 (12,012,719)
---------------------------------------- ---------- -------------- ----------------
The accompanying notes form an integral part of these consolidated
financial statements.
KUBERA CROSS-BORDER FUND LIMITED
Consolidated statement of changes in net assets
as at 30 June 2014
(Stated in United States
Dollars)
-------------------------- ---------- ------------ ------------- ---------------- --------------
Share Additional Accumulated Non-controlling Total
capital paid-in deficit interest
capital
-------------------------- ---------- ------------ ------------- ---------------- --------------
As at 1 January 2013 1,097,344 115,178,423 (25,923,431) 8,180,158 98,532,494
Capital Distribution - (3,292,029) - (492,945) (3,784,974)
Net decrease in net
assets resulting from
operations - - (11,062,130) (950,589) (12,012,719)
-------------------------- ---------- ------------ ------------- ---------------- --------------
As at 30 June 2013 1,097,344 111,886,394 (36,985,561) 6,736,624 82,734,801
-------------------------- ---------- ------------ ------------- ---------------- --------------
As at 1 January 2014 1,097,344 111,886,394 (53,783,750) 5,227,227 64,427,215
Capital Distribution - - - - -
Net increase in net
assets resulting from
operations - - 2,852,516 391,038 3,243,554
-------------------------- ---------- ------------ ------------- ---------------- --------------
As at 30 June 2014 1,097,344 111,886,394 (50,931,234) 5,618,265 67,670,769
-------------------------- ---------- ------------ ------------- ---------------- --------------
The accompanying notes form an integral part of these consolidated
financial statements.
KUBERA CROSS-BORDER FUND LIMITED
Consolidated statement of cash flows
for the six month period ended 30 June 2014
(Stated in United States Dollars)
-----------------------------------------------------------------------
Six months Six months
ended ended
30 June 30 June
2014 2013
-------------------------------------------------------- ------------ -------------
Cash flow from operating activities
Net increase/(decrease) in net assets resulting
from operations 3,243,554 (12,012,719)
Adjustments to reconcile net (decrease) / increase
in net assets resulting
from operations to net (cash used) in / generated
from operating activities:
Net unrealized (gain)/loss on investments in
securities (4,085,578) 16,108,576
Realized gain on investment in securities - (5,376,687)
Purchase of investment in securities - (236,892)
Proceeds from sale of investment in securities - 5,613,579
Change in operating assets and liabilities:
Decrease / (Increase) in other assets 32,920 (59,454)
(Decrease) / Increase in current liabilities (53,920) (87,222)
-------------------------------------------------------- ------------ -------------
(863,726) 3,949,181
Cash flow from financing activities
Capital distribution to non-controlling interest
shareholders - (492,945)
Capital distribution - (3,292,029)
-------------------------------------------------------- ------------ -------------
- (3,784,974)
Net change in cash and cash equivalents during the
year (863,726) 164,207
Cash and cash equivalents at beginning of year 5,328,435 6,262,012
Cash and cash equivalents at end of year 4,464,709 6,426,219
--------------------------------------------------------- ------------ -------------
The accompanying notes form an integral part of these consolidated
financial statements.
KUBERA CROSS-BORDER FUND LIMITED
Notes to the consolidated financial statements
for the six month period ended 30 June 2014
(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 30
June 2014.
Total Level I Level II Level III
Investments in securities 57,983,290 647,282 - 57,336,008
Total 57,983,290 647,282 - 57,336,008
The changes in the investments classified as Level III are as
follows:
Balance at 1 January 2014 53,297,388
Realized gains for six month period ended 30
June 2014
Unrealized gain for six month period ended 30
June 2014 4,038,620
-----------
Balance at 30 June 2014 57,336,008
-----------
Unrealized losses included in earnings relating
to investments held at 30 June 2014 4,038,620
------------------------------------------------- -----------
The following table summarizes the valuation of the Group's
investments based on the above ASC 820 fair value hierarchy levels
as of 30 June 2013.
Total Level I Level II Level III
Investments in securities 71,430,118 484,930 - 70,945,188
Total 71,430,118 484,930 - 70,945,188
The changes in the investments classified as Level III are as
follows:
Balance at 1 January 2013 86,842,269
Purchases during the six month period ended 30
June 2013 236,892
Sale proceeds received during the six month period
ended 30 June 2013 (5,613,759)
Transfers in (out of) Level III -
Realized gains for six month period ended 30 June
2013 5,376,867
Unrealized losses for six month period ended 30
June 2013 (15,897,081)
-------------
Balance at 30 June 2013 70,945,188
-------------
Unrealized losses included in earnings relating
to investments held at 30 June 2013 15,897,081
---------------------------------------------------- -------------
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.
3. Investment management fees and carried interest
Investment management fees
During the six month period ended 30 June 2014, the Fund paid
US$951,040 (30 June 2013: US$ 998,540) as investment management
fee.
Carried interest
During the six month period ended 30 June 2014, no carried
interest is paid / payable (30 June 2013: Nil).
4. Directors' fees and expenses
The Fund pays each of its directors an annual fee of GBP20,000
and the Chairman is paid an annual fee of GBP25,000, plus
reimbursement for out-of-pocket expenses incurred in the
performance of their duties. 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
30 June 30 June
2014 2013
Cash at bank 1,464,709 1,895,265
Time deposits 3,000,000 4,530,954
4,464,709 6,426,219
6. Share capital and additional paid-in capital
30 June 30 June
2014 2013
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 capital
Shares
As at 30 June
2014 109,734,323 1,097,344 111,886,394 112,983,738
As at 1 January
2013 109,734,323 1,097,344 115,178,423 116,275,767
Capital distribution - - (3,292,029) (3,292,029)
As at 30 June
2013 109,734,323 1,097,344 111,886,394 112,983,738
---------------------- ------------ ---------- ----------------- ------------
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.
ASC 740, "Accounting for Income Taxes" clarifies when and how to
recognize tax benefits in the financial statements with a two-step
approach of recognition and measurement. It also requires the
enterprise to make explicit disclosures about uncertainties in
their income tax positions, including a detailed roll-forward of
tax benefits taken that do not qualify for financial statement
recognition. There are no uncertain tax positions and related
interest and penalties as of 30 June 2014.
The Fund monitors proposed and issued tax law, regulations and
cases to determine the potential impact to uncertain income tax
positions. As at 30 June 2014, there are no potential subsequent
events that would have a material impact on unrecognized income tax
benefits within the next six months.
8. Non-controlling interest
30 June 2014 30 June
2013
Share capital 7,648,511 7,648,511
Accumulated share of (loss) / gain (2,030,246) (911,887)
Total 5,618,265 6,736,624
Non-controlling interest is primarily composed of the
partnership interests of Kubera Cross-Border Incentives SPC -
Co-Investment Segregated Portfolio, a Cayman Islands company and an
affiliate of the Investment Manager, in the consolidated
affiliates.
9. Transactions with related parties
A. The following table lists the related parties of the Group:
Name Nature of relationship
Ramanan Director
Raghavendran
Martin Michael Adams Independent Director
Robert Michael Tyler Independent Director
Kubera Partners LLC Investment Manager
Kubera Cross-Border Incentives Special Limited Partner
SPC - Carried Interest SP of the Partnership
------------------------------- ------------------------
B. During the period transactions with related parties are as disclosed below:
30-Jun-14 30-Jun-13
Investment management fees paid to Investment
Manager 951,040 998,540
Expenses incurred by Kubera Partners LLC
on behalf of the Fund - 63,519
Director fee and reimbursement of expenses
paid to Michel Casselman - 4,398
Director fee, audit committee member fee
and reimbursement of expenses paid to Martin
Michael Adams 22,691 25,569
Director fee, audit committee member fee
and reimbursement of expenses paid to Robert
Michael Tyler 21,579 19,677
Director fee and audit committee member fee
paid to Pravin Ratilal Gandhi - 256
----------------------------------------------- ---------- ----------
10. Loans receivables
Loans receivable as at 30 June 2014 are given below:
Borrower name Sector Cost Date of loan Carrying Date
rate of maturity
of interest
(% p.a.)
Ocimum Biosolutions
Inc * 6 December 6 December
(secured) Life Sciences 2,525,035 2010 20.0 2012
Synergies Castings 1 February
USA Inc. Automotive 1,500,000 2012 12.5 3 August 2015
(secured) Components
Synergies Castings 1 February
USA Inc. Automotive 1,000,000 2012 12.5 3 August 2015
(secured) Components
Synergies Castings
USA Inc. Automotive 575,000 30 March 2011 7.0 3 August 2015
(unsecured) Components
Total 5,600,035
Loans receivable as at 30 June 2013 are given below:
Borrower name Sector Cost Date of Carrying Date of maturity
loan rate of
interest
(% 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 August
Inc. Automotive 1,500,000 2010 12.5 2015
(secured) Components
Synergies
Castings USA 1 February 3 August
Inc. Automotive 1,000,000 2010 12.5 2015
(secured) Components
Repayment
of $25,000
starting
Synergies from Oct
Castings USA 30 March 2011 till
Inc. Automotive 575,000 2011 7.0 Nov 2013
(unsecured) Components
Total 5,575,000
11. Impairment loss on loans
The activity in the impairment loss on loan and recorded
investment in loans (unrated) for the years ended 30 June 2014 and
2013 is as follows:
2014 2013
Automotive Life Sciences Total Automotive Life Sciences Total
components components
Impairment
loss on loan
account:
Opening balance* - 428,469 428,469 - 428,469 428,469
Provision - - - - - -
during the
year
Closing balance - 428,469 428,469 - 428,469 428,469
Loans to portfolio
companies:
Closing balance
of loans individually
assessed for
impairment 3,075,000 2,096,566 5,171,566 3,075,000 2,096,566 5,171,566
------------------------ ------------ -------------- ----------- ------------ -------------- -----------
* Includes interest accrued written off of US$ 25,035
The recorded investment in loans and related impairment
allowance as at 30 June 2014 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 30 June 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 -
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 30 June 2014:
Industry 30-60 61-90 Greater Total Total Recorded
Days Days than past financing investment
past past due 90 Days due receivables > 90 days
due 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 30 June 2013:
Industry 30-60 61-90 Greater Total Total financing Recorded
Days Days than past due Receivables investment
past past due 90 Days > 90 days
due past due and 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 -
------------ -------- -------------------- ---------------------------- --------------------------- --------------------------- --------------------
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. 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 30 June 2014.
14. Previous year comparatives
Prior year comparatives have been regrouped and reclassified
wherever necessary to confirm with the current year's
presentation.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DMGZNNFLGDZM
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