TIDMKUBC
RNS Number : 7121D
Kubera Cross-Border Fund Limited
27 June 2019
This announcement contains inside information
27 June 2019
Kubera Cross-Border Fund Limited
Annual Results for the year ended 31 December 2018 and Capital
Distribution
Kubera Cross-Border Fund Limited ("KUBC" or the "Fund")
(LSE/AIM: KUBC) is pleased to announce its annual audited results
for the year ended 31 December 2018.
The board of Kubera Cross-Border Fund Limited is also pleased to
announce that it has declared a distribution of capital of USD
19,752,178 to all shareholders of the Fund. The distribution will
consist of a payment of US$ 0.18 per ordinary share ("share")
payable in cash from the Fund's share premium account. The shares
will be marked "ex" on 4 July 2019 and will be paid to shareholders
who are recorded on the register on 5 July 2019. The payment date
shall be 19 July 2019.
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 an electronic copy will
shortly be available on the Fund's website:
www.kuberacrossborderfund.com.
For further information on the Company, please visit
www.kuberacrossborderfund.com.
For more information, contact:
Grant Thornton UK LLP (Nominated Adviser)
Philip Secrett/ Jamie Barklem/ Niall McDonald
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
FIM Capital Limited (Administrator, Registrar &
Secretary)
Philip Scales, Director
Tel.: +44 (0) 1624 681250
Email: pscales@fim.co.im
Chairman's Statement
On behalf of the Board of Directors ("Board"), I am pleased to
present the audited financial statements of Kubera Cross-Border
Fund Limited (the "Fund") for the year ended 31 December 2018.
NAV and Discount
Following the capital distribution on the 2 November 2018 of USD
5.49 million (USD 0.05 per ordinary share) pro rata to all
shareholders of the Fund, the net assets were USD 33.71 million as
at 31 December 2018 (2017: USD 41.11 million). The Fund's net asset
value ("NAV") was USD 0.31 per share at 31 December 2018 (2017: USD
0.37 per share).
The Fund's share price decreased from USD 0.28 at 31 December
2017 to USD 0.21 at 31 December 2018. The discount of the Fund's
share price to NAV decreased from 24% at 31 December 2017 to 32%
per cent at 31 December 2018.
Portfolio Valuations
The Fund's annual financial statements are prepared in
accordance with US GAAP. The valuations of investments are reviewed
and approved by the Board on a quarterly basis. All investments are
recorded at estimated fair value, in accordance with ASC 820, which
defines and establishes a framework for measuring fair value. The
methodology underlying the Fund's investment valuations is
consistent with previous periods.
Distributions to Shareholders
We are pleased to report that the strategic plan to exit from
investments at fair prices and to return capital to shareholders is
progressing favourably.
In total, during 2018, USD 5.49 million was distributed to the
Fund's shareholders. Cash balances attributable to the Fund as at
31 December 2018 were USD 1.59 million.
On 14 June 2019 the Fund announced the completion of the
disposal of the investment in Planetcast Media Services Limited
("PMSL") for net proceeds of INR 1,419 million. This is equivalent
to approximately USD 20.00 million at current exchange rates.
Board has declared a distribution of capital of USD 19,752,178
to all shareholders of the Fund. The distribution will consist of a
payment of US$ 0.18 per ordinary share ("share") payable in cash
from the Fund's share premium account.
The shares will be marked "ex" on 4 July 2019 and will be paid
to shareholders who are recorded on the register on 5 July 2019.
The payment date shall be 19 July 2019.
Following the sale of PMSL, the Board's focus has been on the
sale of the investment in Synergies Castings Limited, valued at 31
December 2018 at USD 7.84 million and the pending NeoPath Limited
tax receipt of USD 3.90 million. The timing of both remain
uncertain.
Costs and Liquidity
The Fund reduced administrative costs by a further 6% to USD
627,000 for the year to 31 December 2018 (2017: USD 669,000). The
current working capital balances are sufficient to sustain normal
operations for the foreseeable future without relying on funding
from asset sales or operational cash flows.
Corporate governance
As required by the AIM Rules for Companies, the Fund was
required to adopt an officially recognised corporate governance
code and provide the required disclosures pursuant to AIM Rule 26,
by 28 September 2018. The Board decided that the Fund should
formally adopt the Quoted Companies Alliance Code (the "QCA Code").
This is a practical, outcome-oriented approach to corporate
governance that is tailored for small and mid-size quoted companies
in the UK and which provides the Fund with the framework to help
ensure that a strong level of governance is maintained.
As Chairman, I am responsible for leading an effective Board,
fostering a good corporate governance culture, maintaining open
communications with the Shareholders and ensuring appropriate
strategic focus and direction for the Group. The Board believe
strongly in the importance of good corporate governance to assist
in achieving objectives and in accountability to stakeholders.
The Fund has updated its Corporate governance statement in
conjunction with the preparation of its annual report and accounts.
The Board notes the QCA Code requirement to provide certain
disclosures set out under principles 1 - 10 of the QCA Code as well
as the requirement under principle 10 which requires the Fund to
identify the omitted disclosures and explain the reason for their
omission. As noted, the Fund is currently in realisation mode and
on the basis the necessary disclosures around how the Fund
approaches corporate governance in line with each of the 10
principles of the QCA Code is contained within its corporate
governance statement, it has opted not to include the specific QCA
Code disclosures in its annual report and accounts.
The Fund's QCA Code corporate governance statement can be viewed
on the Fund's investor webpage at
http://www.kuberacrossborderfund.com/.
Closing Remarks
The Investment Report provides information on progress regarding
the implementation of the Fund's realisation policy and performance
of each of the Fund's investments. Further detailed information on
investments, quarterly net asset values and other material events
relating to the Fund are available through news releases made to
the London Stock Exchange available on www.londonstockexchange.com
under ticker KUBC and through the Fund's website at
www.kuberacrossborderfund.com.
Martin M. Adams
Chairman
Investment Report
Planetcast Media Services Limited
Company Overview
Planetcast Media Services Limited ("PMSL") provides solutions
for the media broadcasting (teleporting, content management,
playouts and mobile connectivity via DSNG vans) and satellite
communications industries. PMSL also implements TV channel build
outs.
Investment Summary
-- Investment amount(1) : USD 13.38 million
-- Investment Date: November 2008
-- KUBC Holding: 27.66%
-- NAV/Share: USD 0.19
-- Type of security: Preference and equity shares in India entity
-- Realisation:
Kubera Cross-Border Fund (Mauritius) Limited ("Kubera
Mauritius") entered into a share purchase agreement with a leading
global private equity firm on 17 March 2017 to sell its investment
in PMSL.
The Fund's investment in PMSL was sold on 14 June 2019 for a
consideration, net of transaction costs of INR 1,419 million(1) .
This is equivalent to USD 20.00 million at current exchange rates.
The fair value of the investment at 31 December 2018 was USD 21.20
million(1) .
(1) The above figures exclude amounts attributable to the former
Manager's co-investment, which is 9% of each investment
Synergies Castings Limited
Company Overview
Synergies Castings Limited ("SCL") manufactures alloy and chrome
plated wheels for OEMs. SCL has one of the few integrated chrome
plating facilities for wheels in the world, and the only one in
India with the capability to manufacture large diameter wheels.
Investment Summary
-- Investment amount(1) : USD 26.45 million
-- Investment Date: December 2007
-- KUBC Holding: 35.42%
-- NAV/Share: USD 0.07
-- Type of security: Equity and preference shares in India entity
-- Realisation:
On 11 August 2017, Kubera Mauritius entered into a share
purchase and loan assignment agreement with Jamy LLC, a private
buyer, for the disposal of its entire equity and debt interests in
SCL for an aggregate consideration band of USD 14.00 to 16.00
million, contingent on the timing of the payments from the buyer.
Kubera Mauritius has used the lower amount, USD 14.00 million (USD
12.76 million excluding former Manager's co-investment) in order to
determine the fair value of the investment. The actual
consideration received may be elsewhere in the range USD 14.00 to
16.00 million, but the exact amount cannot be determined at this
time.
The consideration is payable to Kubera Mauritius in four
tranches. The first tranche of USD 2.80 million was received on 10
August 2017 which includes USD 1.00 million as advance sale
consideration and USD 1.80 million towards the first tranche sale.
As at 31 December 2018, USD 3.59 million of the second tranche of
USD 3.60 million had been received. As at the date of this report,
therefore, USD 6.39 million of the total proceeds has been
received. The original Kubera Mauritius shareholding in SCL was
52.53% which has since been reduced to 35.42% after the first and
second tranche sales.
The Board of the Fund continues to work with the buyer to
complete the sale of Kubera Mauritius' entire interest as soon as
practicable.
The fair value of the investment at 31 December 2018 was USD
7.84 million(1) .
(1) The above figures exclude amounts attributable to the former
Manager's co-investment, which is 9% of each investment.
NeoPath Limited
Company Overview
NeoPath Limited ("Neopath") is a holding company which is
expected, in due course, to receive a withholding tax refund
following the sale of a credit and debit card transactions
processing business in India in 2010. Kubera Mauritius' 46.95%
interest in NeoPath is ultimately held through a wholly owned
subsidiary, New Wave Holdings Limited.
Investment Summary
-- NAV/Share: USD 0.03
-- Current Value: USD 3.90 million(1) which is the realisation
value discounted to reflect the time value of money, lack of
liquidity and credit risks.
-- Realisation:
The pending estimated tax receipt attributable to the Fund is
USD 4.85 million(1) . The timing of the finalisation and receipt of
the tax refund remains uncertain. Kubera Mauritius exited from the
business in 2010 and distributed USD 0.33 per share to investors
from realised cash flows.
The acquirer of the business deducted withholding tax of USD
15.96 million of which 46.95% is attributable to Kubera Mauritius,
which was deposited with the tax authority in India. NeoPath is in
the process of claiming a refund of the withholding tax based on
its position that the capital gain realised on the sale is exempt
from tax in India under the relevant provisions of the
India-Mauritius double taxation treaty. Consequently, based on the
opinion of tax counsel, the entire amount of USD 15.96 million is
considered to be fully recoverable by Neopath. The present value of
the estimated tax refund has been included in the fair value of the
Kubera Mauritius' investment in NeoPath as at 31 December 2018. As
the timing of the finalisation and receipt of the tax refund
remains uncertain, in 2018 NeoPath directly approached the tax
authority requesting an early resolution of the case.
(1) The above figures exclude amounts attributable to the former
Manager's co-investment, which is 9% of each investment.
Minor Portfolio Holdings: Investments holdings < 5%
-- Ocimum Biosolutions: There is no change in status from the prior period.
Independent Auditor's Report
To the Shareholders and Board of Directors of Kubera
Cross-Border Fund Limited
We have audited the accompanying consolidated financial
statements of Kubera Cross-Border Fund Limited ('the Company') and
its subsidiaries (collectively referred to as 'the Group'), which
comprise the consolidated statement of assets and liabilities,
including the schedule of investments, as of 31 December 2018 and
2017, and the related consolidated statements of operations,
changes in net assets, and cash flows for the years then ended, and
the related notes to the consolidated financial statements.
Management's Responsibility for the consolidated financial
statements
Management is responsible for the preparation and fair
presentation of these consolidated financial statements in
accordance with accounting principles generally accepted in the
United States of America; this includes the design, implementation,
and maintenance of internal control relevant to the preparation and
fair presentation of consolidated financial statements that are
free from material misstatement, whether due to fraud or error.
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.
Independent Auditor's Report (Continued)
Kubera Cross-Border Fund Limited
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 2018 and 2017, and the
results of their operations, changes in net assets and their cash
flows for the years then ended in accordance with accounting
principles generally accepted in the United States of America.
KPMG
Mumbai, India
27 June 2019
Kubera Cross-Border Fund Limited
Consolidated statement of assets and liabilities
as at 31 December 2018
(Stated in United States Dollars)
Note 2018 2017
Assets
Investments in securities, at
fair value
(cost: USD 58,131,057, 2017: 4(a),
USD 61,670,923) 4(b) 36,146,337 41,230,029
4(e),
Cash and cash equivalents 6 1,749,404 4,729,610
Prepaid expenses 34,399 22,576
Total assets 37,930,140 45,982,215
------------- -----------------
Liabilities
Accounts payable 4(b) 1,099,616 1,088,822
Total liabilities 1,099,616 1,088,822
------------- -----------------
Net assets 36,830,524 44,893,393
============= =================
Analysis of net assets
Capital and reserves
Share capital 7 1,097,344 1,097,344
Additional paid-in capital 7 106,399,677 111,886,393
Accumulated deficit (73,789,188) (71,873,398)
------------- -----------------
33,707,833 41,110,339
Non-controlling interest 9 3,122,691 3,783,054
------------- -----------------
3,122,691 3,783,054
Total shareholders' interests 36,830,524 44,893,393
============= =================
Net asset value per share 0.31 0.37
============= =================
Approved by the Board of Directors on 27 June 2019
and signed on its behalf by:
Director
See accompanying notes to the consolidated financial
statements.
Kubera Cross-Border Fund Limited
Consolidated schedule of investments
as at 31 December 2018
(Stated in United States Dollars)
2018 2017
---------------------------------
Name of the Industry Country Instrument Number Fair % of Number Fair % of
entity
of shares Value net of shares Value net
assets assets
Equity shares
Investment and
NeoPath holding Preferred
Limited company Mauritius shares 27,928,224 4,283,079 11.63% 27,928,224 4,701,680 10.47%
Compulsorily
convertible
PlanetCast preference
Media shares and
Services Equity
Limited * Media services India shares 6,680,371 23,258,258 63.15% 6,680,371 24,630,462 55.83%
Compulsorily
convertible
cumulative
preference
shares,
Synergies Equity
Castings Automotive shares and
Limited** components India loans 10,752,435 8,605,000 23.36% 15,876,948 11,897,887 29.43%
Others Life sciences, India Compulsorily - - 3,819,162 - -
Financial convertible
services, IT preference
infrastructure shares,
Equity shares
and loans
Total investments in securities and loans to portfolio
companies 36,146,337 98.14% 41,230,029 95.73%
----------- ------- -----------
* The value of PlanetCast Media Services Limited ("PMSL") as at
31 December 2018 is USD 23.26 million (USD 21.20 million excluding
the former Manager's co-investment). As noted on note 13, the
Fund's investment in PMSL was sold on 14 June 2019 for a
consideration, net of transaction costs of INR 1,419 million. This
is equivalent to USD 20.00 million at current exchange rates.
** The value of Synergies Castings Limited as at 31 December
2018 is USD 8.60 million (USD 7.84 million excluding the former
Manager's co-investment).
See accompanying notes to the consolidated financial
statements.
Kubera Cross-Border Fund Limited
Consolidated statement of operations
for the year ended 31 December
2018
(Stated in United States Dollars)
Note 2018 2017
Investment income
Interest 23,126 13,282
Foreign exchange loss (323) (3,340)
Other Income 31,731 -
------------
54,534 9,942
------------ ------------
Expenses
Professional fees 310,510 381,661
Audit fees 40,984 40,022
Insurance 11,544 14,361
Directors' fees and expenses 10 69,269 67,340
Administration fees 110,750 111,743
License fees 8,225 7,952
Custodian fees 21,094 9,020
Other expenses 55,092 36,492
------------ --- ------------
627,468 668,591
------------ ------------
Net investment loss before tax (572,934) (658,649)
Taxation 4(g), - -
8
------------ ------------
Net investment loss after tax (572,934) (658,649)
------------ ------------
Realized and unrealized gain or loss from
investments
Net realized loss from investment 4(a),
in securities 4(b) (2,995,882) (1,324,076)
Net change in unrealized gain 4(a),
from investments in securities 4(b) 1,507,190 1,733,997
Net (loss)/gain from investments (1,488,692) 409,921
------------ ------------
Net decrease in net assets resulting
from operations (2,061,626) (248,728)
============ ============
Equity holding of parent (19,15,640) (265,290)
Non-controlling interest (145,986) 16,562
(2,061,626) (248,728)
------------ ------------
See accompanying notes to the consolidated
financial statements.
Kubera Cross-Border Fund Limited
Consolidated statement of changes in net assets
as at 31 December 2018
(Stated in United States Dollars)
2018 2017
Operations
Net investment loss (572,934) (658,649)
Net realized loss from investments in
securities (2,995,882) (1,324,076)
Net change in unrealized loss from investments
in securities 1,507,190 1,733,997
------------- ------------
Net decrease in net assets resulting
from operations (2,061,626) (248,728)
------------- ------------
Capital share transactions
Capital distribution to the Fund's shareholders (5,486,716) -
Capital distribution to non-controlling
interest (514,527) (130,776)
------------- ------------
Decrease in net assets resulting from
capital share transactions (6,001,243) (130,776)
------------- ------------
Decrease in net assets (8,062,869) (248,728)
Net assets, beginning of year 44,893,393 45,142,121
------------- ------------
Net assets, end of year 36,830,524 44,893,393
============= ============
See accompanying notes to the consolidated financial
statements.
Kubera Cross-Border Fund Limited
Consolidated statement of cash flows
for the year ended 31 December 2018
(Stated in United States Dollars)
2018 2017
Cash flow from operating activities
Net decrease in net assets resulting
from operations (2,061,626) (248,728)
Adjustments to reconcile net decrease
in net assets resulting from operations
to net cash provided by) operating activities:
Net unrealized (gain)/loss from investments
in securities (1,507,190) (1,733,997)
Realized loss from investment in securities 2,995,882 1,324,076
Proceeds from sale of investment in
securities 3,595,000 1,840,256
Change in operating assets and liabilities:
Increase in prepaid expenses (623) (6,660)
Increase in accounts payables 10,794 955,555
Net cash provided by operating activities 3,021,037 2,130,502
Cash flow from financing activities
Capital distributions to the Fund's
shareholders (5,486,716) -
Capital distributions to non-controlling
interest shareholders (514,527) (130,776)
Net cash used in financing activities (6,001,243) (130,776)
Net (decrease)/increase in cash and cash
equivalents (2,980,206) 1,999,726
------------ -----------
Cash and cash equivalents, beginning of
year 4,729,610 2,729,884
Cash and cash equivalents, end of year 1,749,404 4,729,610
============ ===========
See accompanying notes to the consolidated financial
statements.
Notes to the consolidated financial statements for the year
ended 31 December 2018
(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 does not have a fixed
life. As per shareholder resolutions passed in early 2013, the Fund
is in realisation mode, such that the Fund makes no new investments
and becomes a realisation vehicle whose objective is to carry out
an orderly realisation of the portfolio and distribution of the net
proceeds to shareholders.
The Fund is a Limited Partner in Kubera Cross-Border Fund LP
("the Partnership"), an exempted limited partnership formed on 28
November 2006, in accordance with the laws of Cayman Islands.
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 Partners LLC (the "former Investment Manager"), a
Delaware limited liability company, managed the investments of the
Fund and had full discretionary investment management authority
until the expiry of the Investment Management Agreement on 22
December 2016. Following the expiry of the Investment Management
Agreement, the Fund has been self-managed by the Board of Directors
(the "Board").
Kubera Mauritius holds 100% ownership in New Wave Holdings
Limited, a company incorporated in Mauritius. The primary business
of New Wave Holdings Limited is to carry on business as an
investment holding company.
FIM Capital Limited, ("the Administrator") is the administrator
of the Fund and performs certain administrative and accounting
services on behalf of the Fund.
2. Basis of Preparation
The accompanying consolidated financial statements are prepared
in conformity with U.S. generally accepted accounting principles
("US GAAP"). The Fund is an investment company and follows the
accounting and reporting guidance in Financial Accounting Standards
Board ("FASB") Accounting Standards Codification Topic 946.
Functional currency
The measurement and presentation currency of the consolidated
financial statements is United States Dollar reflecting the fact
that subscriptions to and redemptions from the Fund are made in
United States Dollars and the Fund's operations are primarily
conducted in United States Dollars.
Basis of consolidation
The consolidated financial statements include the accounts of
the Fund and its wholly owned subsidiary, Kubera Cross-Border Fund
(GP) Limited and its majority owned subsidiaries, the Partnership,
Kubera Mauritius and New Wave Holdings Limited (together referred
to as the "Group"). All material inter-company balances and
transactions have been eliminated.
2. Basis of Preparation (Continued)
Going concern
In assessing the going concern basis of preparation of the
consolidated financial statements for the year ended 31 December
2018, the Directors, with the assistance of the Administrator, have
prepared cash-flow forecasts, and stress-tested the assumptions in
those forecasts. The conclusion reached is that while there will
always remain inherent uncertainty within the cash flow forecasts,
the Directors have a reasonable expectation that the Fund has
adequate resources backed up by the intent to continue in
operational existence for the foreseeable future, and for a period
of at least 18 months from the date of signing of these financial
statements. Accordingly, they continue to adopt the going concern
basis in preparing the consolidated financial statements for the
year ended 31 December 2018.
3. Use of estimates
US GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements, the consolidated results of
operations during the reporting period and the reported amounts of
increases and decreases in net assets from operations during the
reporting period. Significant estimates and assumptions are used
for, but not limited to, accounting for the fair values of
investments in portfolio companies. The Directors believe that the
estimates made in the preparation of the consolidated financial
statements are prudent and reasonable. Actual results could differ
from those estimates. Changes in estimates are reflected in the
consolidated financial statements in the period in which the
changes are made and if material, these effects are disclosed in
the notes to the consolidated financial statements.
4. Significant accounting policies
a. Investment transactions and related investment income and expenses
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 consolidated statement of operations
and determined on a weighted average cost method basis. Movements
in fair value are recorded in the consolidated statement of
operations at each valuation date.
Dividend income is recognized when the right to receive dividend
is established and is presented net of withholding taxes. Interest
income and expense are recognized on an accruals basis except for
securities in default for which interest is recognized on a cash
basis.
b. Fair value
Definition and hierarchy
Investments are recorded at estimated fair value as at year-end
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.
4. Significant accounting policies (Continued)
b. Fair value (Continued)
Definition and hierarchy (Continued)
Investments measured and reported at fair value as determined by
the Directors are classified and disclosed in one of the following
categories:
Level I - Unadjusted quoted prices in active markets for
identical assets or liabilities that the Group has the ability to
access.
Level II - Observable inputs other than quoted prices included
in Level 1 that are not observable for the asset or liability
either directly or indirectly. These inputs may include quoted
prices for the identical instrument on an inactive market, prices
for similar instruments, interest rates, prepayment speeds, credit
risk, yield curves, default rates, and similar data.
Level III - Unobservable inputs for the asset or liability to
the extent that relevant observable inputs are not available,
representing the Group's own assumptions about the assumptions that
a market participant would use in valuing the asset or liability,
and that would be based on the best information available.
In determining fair value, the Group uses various valuation
approaches. 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.
The valuations of those investments subject to sales and
purchase agreements are based on the net sales proceeds contracted
to be received.
Valuation
Private company
Investment in a private company consists of a direct ownership
of common and/or preferred stock of a privately held company. The
transaction price, excluding transaction costs, is typically the
Board'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 Board, with assistance from the Administrator and advisers,
performs ongoing valuation reviews to ensure the investments are
carried at the appropriate estimated fair values.
4. Significant accounting policies (Continued)
b. Fair value (Continued)
Definition and hierarchy (Continued)
Valuation process
The Board, with assistance from the Administrator and advisers,
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 Board, with assistance from the Administrator and advisers,
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 are required to be supported by market data,
third-party pricing sources; industry accepted pricing models, or
other methods the Board deems to be appropriate, including the use
of internal proprietary pricing models.
In completing the valuations of investments in equity shares,
preferred shares, compulsorily convertible preference shares,
compulsorily convertible cumulative preference shares and loans
having a fair value of USD 36,146,337 (previous year: USD
41,230,029), the Board considers the following:
-- The value of the Fund's interest in Planetcast Media Services
Limited ("PMSL") and Synergies Castings Limited ("SCL") as reported
in these financial statements is based on the selling price
determined in the SPA at exchange rates prevailing at the year-end
date.
-- The value of the NeoPath Limited tax refund receivable is
based on the expected realisation value discounted to reflect the
time value of money, lack of liquidity and credit risks. The timing
of the finalization and receipt of the tax refund remains uncertain
though recent legal opinion has confirmed that the formal hearing
of the matter should take place in the near future, with a final
decision on the case by late 2021
There are significant uncertainties surrounding these
assumptions and the impact of such uncertainty cannot be
quantified.
-
The following table summarizes the valuation of the Group's
investments based on ASC 820 fair value hierarchy levels as of 31
December 2018.
Total Level Level Level III
I II
Investments in securities
and loans to portfolio companies 36,146,337 - - 36,146,337
Total 36,146,337 - - 36,146,337
------------ ------ -------------
The changes in the investments classified as Level III are as
follows:
Balance at 1 January 2018 41,230,029
Proceeds from sale (3,595,000)
Realised loss for the year (2,995,882)
Change in net unrealized gain/(loss) 1,507,190
Balance at 31 December 2018 36,146,337
---------------------------------------
Proceeds of sale of USD 3,595,000 included consideration of USD
2,920,938 for SCL shares which were originally acquired at a cost
of USD 5,916,820 resulting in realized loss of USD 2,995,882.
In addition, a USD 1,000,000 advance was received in 2017 as
part of the sale consideration for first tranche of shares of SCL
which will be set off against the final tranche consideration and
is included in the USD 1,099,616 accounts payable balance.
4. Significant accounting policies (Continued)
b. Fair value (Continued)
During the year ended 31 December 2018 and 31 December 2017, the
Group did not have any transfers between any of the levels of the
fair value hierarchy.
c. Foreign currency translation
Assets and liabilities denominated in a currency other than
United States Dollar are translated into United States Dollars at
the exchange rate as at the reporting date. Purchases and sales of
investments and income and expenses denominated in currencies other
than United States Dollars are translated at the exchange rate on
the respective dates of such transactions.
The Group does not generally isolate that portion of the results
of operations arising as a result of changes in the foreign
currency exchange rates from the fluctuations arising from changes
in the market prices of securities. Accordingly, such foreign
currency gain (loss) is included in net realized and unrealized
gain (loss) on investments.
d. Buy back
The Fund repurchases its shares by allocating the excess of
repurchase price over par value against additional paid-in capital
and reserves on a pro rata basis.
e. Cash and cash equivalents
Cash and cash equivalents are Company assets in cash form or in
a form that can be easily converted to cash. All cash balances are
held at major banking institutions.
f. Related parties
Related parties include parties that are defined as such under
FASB Accounting Standards Codification Topic 850-10-20 whereby
amongst other criteria, parties are considered to be related if one
party has the ability, directly or indirectly, to control the other
party or exercise significant influence over the other party in
making financial and operating decisions.
g. Income taxes
The current charge for income taxes is calculated in accordance
with the relevant tax regulations applicable to the Group. Deferred
tax assets and liabilities are recognized for future tax
consequences attributable to temporary differences between carrying
amount of existing assets and liabilities in the consolidated
financial statements and their respective tax bases and operating
losses carried forward. Deferred tax assets and liabilities are
measured using prevailing tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
the consolidated statement of operations in the period that
includes the enactment date. The measurement of deferred tax assets
is reduced, if necessary, by a valuation allowance for any tax
benefits of which future realization is not more likely than
not.
The Group is required to determine whether its tax positions are
"more likely than not" to be sustained upon examination by
applicable taxing authority, based on technical merits of the
position. Tax positions not deemed to meet a "more likely than not"
threshold would be recorded as a tax expense in the current year.
Based on its analysis, the Fund has determined that it has not
incurred any liability for unrecognized tax benefits in income tax
expense. There were no interest and penalties for the year ended 31
December 2018.
4. Significant accounting policies (Continued)
h. Fair value of financial instruments other than investment in securities
The Group's investments are accounted as described in Note 4(a).
The Group's financial instruments include other current assets and
accounts payable, which are realizable or to be settled within a
short period of time. The carrying amounts of these financial
instruments approximate their fair values.
i. Comprehensive income
The Group has no comprehensive income other than the net loss
disclosed in the consolidated statement of operations. Therefore, a
statement of comprehensive income has not been prepared.
j. Carried interest
Under the terms of the Partnership Agreement, Kubera
Cross-Border Incentives SPC - Carried Interest SP, the Special
Limited Partner of the Partnership is entitled to receive a carried
interest from the Partnership equivalent to 20 per cent, of the
aggregate return over investment received by the Partnership
following the full or partial cash realization of an investment.
The payment of the carried interest is conditional upon the last
announced net asset value (as adjusted to add back the value of any
income or capital shareholder distributions to date) at the date of
payment of such carried interest, being equal to or greater than
the value of the gross proceeds of the original placing of the
Fund's shares. In addition, the carried interest payment will be
adjusted, up or down, by such amount as is required to achieve the
position that, following such distribution, the aggregate
cumulative amount of carried interest paid at the date of such
distribution will equal 20 per cent, of the eligible carried
interest proceeds (being the net realized gains of the Partnership
to the date of such distribution reduced by the net unrealized
losses). Eligible carried interest proceeds may not be less than
zero.
k. Recent accounting pronouncements
There are no recent relevant standards and interpretations that
will have a material impact on the Group's consolidated financial
condition or results of operations.
l. Net asset value per share
The net asset value per share is computed by dividing the net
assets attributable to the shareholders by the number of shares at
the end of the reporting period.
5. Directors' fees and expenses
The Fund pays each of its Directors an annual fee of GBP20,000
and the Chairman is paid an annual fee of GBP25,000, plus
reimbursement for out-of-pocket expenses incurred in the
performance of their duties. Mr. Raghavendran has waived his
Director's fees as he has interest in the former 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.
6. Cash and cash equivalents
2018 2017
Cash at bank 649,404 3,629,610
Time Deposits 1,100,000 1,100,000
---------- ----------
1,749,404 4,729,610
--------------- ---------- ----------
7. Share capital and additional paid-in capital
2018 2017
Authorized share capital:
1,000,000,000 ordinary shares of USD 0.01
each 10,000,000 10,000,000
-------------------------------------------- ------------- -------------
Number Share Additional Total
of Capital paid-in capital
Shares
As at 1 January
2017 109,734,323 1,097,344 111,886,393 112,983,737
Capital distribution - - - -
As at 31 December
2017 109,734,323 1,097,344 111,886,393 112,983,737
As at 1 January
2018 109,734,323 1,097,344 111,886,393 112,983,737
Capital distribution - - (5,486,716) (5,486,716)
As at 31 December
2018 109,734,323 1,097,344 106,399,677 107,497,021
---------------------- ------------ ---------- ----------------- ------------
Share capital consists of a single class of ordinary shares.
8. Income taxes
Under the laws of the Cayman Islands, the Fund, the General
Partner and the Partnership are not required to pay any tax on
profits, income and gains or appreciations. 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
entities, 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 entities, 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 entities.
Under laws and regulations in Mauritius, the Fund's majority
owned subsidiaries, Kubera Mauritius 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%. With effect from 1 January 2019,
the Income Tax (Foreign Tax Credit) has been amended to remove the
deemed foreign tax credit and allow companies holding Category 1
Global Business License ("GBC 1") incorporated on or before 16
October 2017 to claim the deemed foreign tax credit on foreign
source income up to 30 June 2021. Companies may continue to claim
actual foreign tax suffered as a credit risk against tax payable in
Mauritius. Both subsidiaries have received a tax residence
certificate from the Mauritian authorities certifying that they are
residents of Mauritius, which is renewable on an
8. Income taxes (Continued)
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.
No Mauritian capital gains tax is payable on profits arising
from sale of securities, and any dividends and redemption proceeds
paid by Kubera Mauritius and New Wave Holdings Limited to its
shareholders are not subject withholding tax in Mauritius.
With the assistance of the Administrator and advisers, the Board
monitors proposed and issued tax law, regulations and cases to
determine the potential impact to uncertain income tax positions.
As at 31 December 2018, there are no potential subsequent events
that would have a material impact on unrecognized income tax
benefits within the next 12 months.
Tax reconciliation 2018 2017
Net decrease in net assets resulting from operations (2,061,626) (248,728)
Add: Non allowable expense - 226,978
Add: Unrealized loss on investment in securities - 133,285
Add: Realized loss on investment in securities 2,995,882 1,324,076
Add: Unrealized gains on investments (1,507,190) (1,733,997)
Net taxable loss
Tax @ 15% (572,934) (298,386)
Foreign tax credit tax credit - -
Tax charge - -
The deferred tax balances as at 31 December 2018 is nil (2017:
nil).
9. Non-controlling interest
2018 2017
Share capital 7,648,511 7,648,511
Accumulated share of loss (4,525,820) (3,865,457)
Total 3,122,691 3,783,054
--------------------------- ------------
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 former Investment Manager, in the consolidated
financial statements.
10. Transactions with related parties
A. The following table lists the related parties of the Fund:
Name Nature of relationship
Ramanan Raghavendran Director
Martin Michael Adams Independent Director
Robert Michael Tyler Independent Director
Kubera Cross-Border Incentives Special Limited Partner of
SPC - Carried Interest SP the Partnership
Kubera Cross-Border Fund GP Limited
Kubera Cross-Border Fund LP Subsidiary
Kubera Cross-Border Fund (Mauritius) Subsidiary
Limited Subsidiary
New Wave Holdings Limited Subsidiary
-------------------------------------- ---------------------------
Transactions during the year with related parties and amounts
outstanding as at 31 December 2018 are as disclosed below:
i. Transactions during the year ended 31 December 2018
2018 2017
Director fee paid to Martin Michael Adams 35,977 35,061
Director fee paid to Robert Michael Tyler 33,293 32,279
------------------------------------------- ------- -------
ii. Closing balance as at 31 December 2018
2018 2017
Capital distribution payable to Kubera Cross-Border 514,527 -
Incentives SPC - Co-Investment SP
---------------------------------------------------- -------------- -----------
11. 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. Risk management is carried out by the Board, with
assistance from the Administrator to the extent possible and as
appropriate.
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 Fund's admission document for a
more detailed discussion of risks.
Considering the unlisted nature of investments, each of the
risks viz. market risk, industry risk, credit risk, currency risk,
liquidity risk and political, economic and social risk are
considered by management while undertaking the fair value of
investments on a quarterly basis and appropriately factored in
wherever necessary to ensure that they are within the risk
appetite.
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. The Group
does not hedge against foreign exchange movement.
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.
However, the Group maintains sufficient cash, and aims to maintain
flexibility in funding.
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.
12. Financial highlights
The financial highlights presented below consist of the Group's
operating expenses and net operating loss ratios for the years
ended 31 December 2018 and 31 December 2017, 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 former
Investment Manager:
2018 2017
Net operating loss (4.62%) (0.55%)
Operating expenses before carried interest 1.46% 1.49%
Carried interest - -
Operating expenses after carried interest 1.46% 1.49%
Cumulative IRR since inception (including
realized & unrealized gains and losses) (6.56%) (6.01%)
-------------------------------------------- -------- --------
The net operating loss and operating expenses ratios are
computed as a percentage of the Group'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.
13. Subsequent events
Kubera Cross-Border Fund (Mauritius) Limited ("Kubera
Mauritius") entered into a share purchase agreement with a leading
global private equity firm on 17 March 2017 to sell its investment
in PMSL.
The Fund's investment in PMSL was sold on 14 June 2019 for a
consideration, net of transaction costs of INR 1,419 million. This
is equivalent to USD 20.00 million at current exchange rates. The
fair value of the investment at 31 December 2018 was USD 21.20
million.
There were no other significant subsequent events.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR EALKXASSNEFF
(END) Dow Jones Newswires
June 27, 2019 11:10 ET (15:10 GMT)
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