BUILDING GLOBAL BUSINESSES KUBERA CROSS-BORDER FUND LIMITED

Transcription

1 BUILDING GLOBAL BUSINESSES KUBERA CROSS-BORDER FUND LIMITED ANNUAL REPORT 2011

2 CONTENTS 1 About Us 2 Chairman s Statement 4 Investment Manager s Report 5 Investing Poicy 6 Our Current Portfoio 13 Board of Directors 16 Independent Auditors Report to the Sharehoders 17 Consoidated Statement of Assets and Liabiities 18 Consoidated Schedue of Investments 20 Consoidated Statement of Operations 21 Consoidated Statement of Changes in Net Assets 22 Consoidated Statement of Cash fows 23 Notes to the Consoidated financia Statements 34 Corporate Information

3 1 About Us Kubera Cross-Border Fund (the Fund ) is a cosed-end investment company isted on the AIM market of the London Stock Exchange. The Fund makes private equity investments in cross-border companies, primariy in businesses that operate in the US-India corridor. The fund s investment manager, Kubera Partners LLC, brings a strong track record of investing in or managing such businesses. Severa of the fund s investee companies aso benefit from business activities in the growing Indian domestic market.

4 2 KUBERA CROSS-BORDER FUND ANNUAL REPORT 2011 Chairman s Statement On behaf of the Board of Directors, I am peased to present the audited financia statements of Kubera Cross-Border Fund Limited ( KUBC or the Company ) and its subsidiaries (coectivey, the Fund ) for the year ended 31 December NAV and Discount In 2011, KUBC s audited NAV per share decreased by 8% from US$1.01 to US$0.93 from 31 December 2010 to 31 December The NAV per share incudes US$0.12 (net amount distributabe to sharehoders) hed back as part of the saes proceeds of Venture Infotek, in the form of escrows and tax withhoding. It is currenty expected that over haf of this amount wi be received during KUBC s share price decreased by 8% from US$0.72 to US$0.66 from 31 December 2010 to 30 December The discount to NAV per share remains at 29%. Investments Under the management agreement, the Manager has soe authority over the disposition and reaisation of KUBC s investments. Given the substantia coinvestment made by members of the Manager aongside KUBC in each of the Fund s investments, the Manager s interests are fuy aigned with sharehoders as to the appropriate timing of the disposition of investments. Proceeds from the sae of investments wi be distributed to sharehoders, net of any hodbacks to meet operating expenses. Portfoio Vauations The Fund s financia statements are prepared in accordance with US GAAP. The vauations of investments are reviewed and approved by the Audit Committee of the Board, on a quartery basis. A investments are recorded at estimated fair vaue, in accordance with SFAS 157 that defines and estabishes a framework for measuring fair vaue. The NAV is cacuated on this basis. The methodoogy underying the Fund s investment vauations is consistent with previous periods. Current Portfoio ($ in miions) KUBC s Share Capita Cash Carrying Tota Company Invested Reaized Vaue Vaue Portfoio: Reaized Venture Infotek Infotech Enterprises Tota Portfoio: Unreaized / Party Reaized Adayana Synergies Castings Esse Shyam Communication Ocimum Biosoutions GSS Infotech Kejriwa Stationary Spark Capita Tota Tota Portfoio Per Share Data Current Portfoio NAV 0.86 Cash in hand 0.07 Tota Fund NAV 0.93 Net Fund IRR Notes: 1 Excudes co-investment by affiiates of the Manager, which amounts to 9% of every investment made by the Fund. 2 Incudes oan of US$ 1.1 miion extended to the company in March 2009 and repaid in June Incudes oan of US$ 3.1 miion extended to the company in Juy 2009 and repaid in August Incudes oan of US$ 2.9 miion extended to the company in February 2010 and March Incudes oan of $1.9 miion extended to the company in December 2010; carrying vaue as on 31 December Continuing sharehoders who participated in the origina fundraise at $1.00 per share have a net IRR of 4.2%, based on the 31 December 2011 NAV of $0.93 and cash distribution of $0.28 in October 2010.

5 KUBERA CROSS-BORDER FUND ANNUAL REPORT EGM The Board intends to formay amend the investment strategy by shorty caing for an EGM to bring forward the continuation resoution from 2013 as envisaged in the origina AIM Admission Document. The Board s intention is to obtain sharehoder approva not to continue the Company after existing investments have been sod and not to make any further new investments and to distribute substantiay a reaisation proceeds. Cosing Remarks Further detaied information on investments, quartery net asset vaues and other materia events reating to the Fund are avaiabe through news reeases made to the London Stock Exchange avaiabe on under ticker KUBC and through the Fund s website at NAV Composition 1 (US$ per share) 0.02 Tota NAV US$ 0.93 per share Greenearth Educa on (Previousy known as Kejriwa Sta onery) Ocimum Biosou ons NeoPath Limited (Previousy known as Venture Infotek) GSS Infotech (Previousy known as GSS America) 0.19 Esse Shyam Communica on 0.01 Spark Capita 0.07 Cash (net of receivabes and payabes) 0.24 Synergies Cas ngs Adayana Notes: 1. Excudes co-investment by affiiates of the Manager, which amounts to 9% of every investment made by the Fund. 2. Incudes oan of USD 2.9 miion extended to the company in February 2010 and March Incudes oan of USD 1.9 miion extended to the company in December 2010; carrying vaue as on 31 December Key Informa on Technoogy/ Inteectua Property Manufacturing Services Other Martin M. Adams Chairman

6 4 KUBERA CROSS-BORDER FUND ANNUAL REPORT 2011 Investment Manager s Report India Economic Review The Indian economic growth is ikey to fa to a three-year ow of 6.9 per cent in Lower GDP in FY12 is an outcome of tight monetary poicy and a ogjam in government poicy making, couped with weak goba conditions. The Bombay Stock Exchange Sensex (comprising of 30 stocks) ended the year at 15,455 points, a punge from 20,561 points at the end of 2010, and was down by 24.8% on a year-on-year basis. 21,000 1-yr Absoute Return-Sensex 10 Quartery GDP (%) 20,000 19,000 18, ,000 16,000 15,000 3-Jan-11 2-Feb-11 4-Mar-11 3-Apr-11 3-May-11 2-Jun-11 2-Ju-11 1-Aug Aug Sep Oct Nov Dec Jan- Mar 11 Apr- Jun 11 Ju- Sep 11 Oct- Dec 11 With downside risks of goba events ikey to continue, the Indian economy too is showing cear signs of an economic sowdown in the near term. Over the onger term, the economic fundamentas remain intact and the economy shoud improve and consoidate its position. A discouraging trend in 2011 has been on account of continued outfows from foreign institutiona investors ( FII ). FII have been seing across markets and puing out money from India and other emerging markets. However, for the year to date, overseas funds invested US$ biion in Indian markets (US$ 0.75 biion in Indian equities market &US$ biion in Indian debt markets). We expect the poitica stabiity and investor friendy poicies to be beneficia for the business cimate in India and by extension for a our investments FII Infow (Ou ows) USD Biion During the ast quarter of 2011, the Sensex decined by 697 points, down by ~4.5%. The mid-cap index (NIFTY Midcap) underperformed the broad index significanty during the quarter, and was down by 14.2%. At current prices, the Indian stock market is priced at a forward P/E of 12x-13x. The European debt probem has unquestionaby been the dominant goba factor effecting economies throughout the year, which has been a source of voatiity in goba asset and currency markets. With the kind of voatiity evident in goba capita fows over this period, the Indian Rupee depreciated significanty from to end at per US doar, decining approximatey 18.7% during the year. Portfoio In 2011, KUBC s audited NAV per share decreased by 8% from US$1.01 to US$0.93 from 31 December 2010 to 31 December The decine was primariy on account of revised company forecasts for the current fisca year in the case of two portfoio companies, and the depreciation of Indian Rupee vis-à-vis the US Doar, which is the denomination of the Fund. The vauation adjustments are reviewed and approved by the Audit Committee of the Board, soey comprising of independent directors. The Manager evauates reaisation decisions in conjunction with management teams of the portfoio companies who are aso substantia owners. The Manager's decision is infuenced by operating performance, a eadership position, goba strategic interest in the sector, among severa variabes (1.00) (1.00) Kubera Partners LLC Investment Manager (2.00) (3.00) January February March Apri May June Juy August ust September October November December (2.00) (3.00) Debt Infows Equity Infows Tota Infows (RHS)

7 KUBERA CROSS-BORDER FUND ANNUAL REPORT Investing Poicy KUBC aims to achieve high returns through capita investments in cross-border businesses, whist adhering to the foowing investment poicies and guideines. Target Companies Investee companies wi have strong management teams and at east USD 10 miion in annua revenues (post-acquisition if the investment is intended to faciitate future acquisitions). The investee company wi have a proven performance track record or demonstrate the potentia for good short to medium-term growth. Geographic Focus Investments are primariy in companies or assets ocated in India and in the US. Investments can aso be appropriated to target US companies that use ow cost domicies other than India such as China or the Phiippines, and aso companies that serve other attractive deveoped markets. The geographic mix of investments may vary over time if suitabe opportunities arise and are deemed appropriate for this Company. Type of Investments Investments wi be funded by way of cash. Ordinary shares of the Company wi not be used as consideration for any investments. Number of Investments The Investment Manager expects to activey manage a concentrated portfoio of approximatey 6 to 12 investments when fuy invested, in order to reduce the risk profie of the Company whist aiming for high returns. Borrowings The Company may borrow up to 20% of NAV of the Company (cacuated at the time of borrowing) for investment or shortterm funding purposes. The Company may aso use overdraft and other short-term borrowings to faciitate short-term working capita needs such as expenses or fees payabe by the Company. Reaisation of Investments The Company aims to reaise investments when deemed appropriate by the Investment Manager in ine with the investment objectives. Investments are expected to be hed for two to five years on average athough the Investment Manager has the discretion to hod investments with strong growth prospects beyond this time horizon. Investment Timeine At east haf of the pacing proceeds are expected to be invested within 12 months foowing admission to the Aternative Investment Market of the London Stock Exchange. The Company intends to be fuy invested within 18 months from the date of admission, subject to funds reserved for potentia foow-on investments and future management fees. Uninvested Funds Any cash pending investment, reinvestment or distribution wi be paced in bank deposits, bonds or treasury securities of the USA and its agencies and capita-guaranteed schemes offered by major goba financia institutions. Investment Size The size of each investment wi range between USD 20 miion and USD 70 miion, athough initia investments may be smaer if foow-on investments are anticipated. Initia investments wi not exceed 20% of the Company s Net Asset Vaue (NAV) (cacuated at the time of the investment). Generay, the Company expects to take a minimum stake of 10% in each investee company. Contro of Investee Companies The Company aims to secure a contro position in an investee company, soey or as part of an investment consortium. In cases where the Company hods a minority interest, the Investment Manager wi seek to secure minority protection rights. The Investment Manager wi expect to be on the Board of a investee companies.

8 6 KUBERA CROSS-BORDER FUND ANNUAL REPORT 2011 Our Current Portfoio Note: Fisca years end in March. FY2012 is the fisca year ending March 2012 and estimates for this year are the portfoio company s board approved budgets there is no assurance that these wi be actua achieved resuts. Investment Summary Investment Date May 2007 Percentage of Fund NAV 24% Fund Investment US$ 18.3m for Amount 31.1% equity ownership Manager Co-invest US$ 1.8m for Amount 3.0% equity ownership Types of Security Participating Preferred and Convertibe Preferred in operating company in the US Seected Investor Liquidity Preference Yes Rights Redemption Rights No Board Seats Three Adayana designs, produces, and deivers off-the-shef and customized training and workforce soutions to its customers both eectronicay and through instructor-ed media in specific vertica markets incuding automotive services, defense, agricuture and ife sciences. Company Positioning Differentiated product offering: Adayana s vertica expertise and its unique breadth of services incuding custom course work, extensive ibraries, strong coaboration and creation toos, sound technoogy understanding, and offshore deivery create a strong saes proposition that differentiates the company. Strong business mode: Adayana has successfuy everaged its core competencies and broad service offerings to grow existing verticas and spawn new verticas. Experienced management team: Adayana has a strong top and midde management team with extensive industry experience. Growth The macro environment for the Company remains chaenging, with sowdown in US economy. The Company expects the top ine in FY12 to be fat, in ine with its estimates. However the margins are expected to improve. The Company has high debt eves and has restructured its debt with its current mezzanine ender. This is expected to resut in ower financing cost. The Company is we positioned to meet its revised FY12 projections and is deveoping a robust order book. It has undertaken a number of initiatives to reduce its operationa costs and with significant operating everage, we expect Adayana to significanty improve its profitabiity in the next year US$ miion CAGR 26% FY07 FY08 FY09 FY10 FY11 FY12E

9 KUBERA CROSS-BORDER FUND ANNUAL REPORT Our Current Portfoio Note: Fisca years end in March. FY2012 is the fisca year ending March 2012 and estimates for this year are the portfoio company s board approved budgets there is no assurance that these wi be actua achieved resuts. Investment Summary Investment Date December 2007 Percentage of Fund NAV 1 26% Fund Investment US$ 24.0m for Amount 58.3% equity ownership Manager Co-invest US$ 2.3m for Amount 5.7% equity ownership Types of Security Equity & Preference shares in India operating company Seected Investor Liquidity Preference Yes Rights Redemption Rights No Board Seats Two Synergies Castings Limited ( SCL ) manufactures aoy and chrome-pated whees for goba and Indian Origina Equipment Manufacturers ( OEMs ). The company has one of the few integrated chrome-pating faciities in the word, and is the ony one in India, with the capabiity to manufacture arge diameter whees. Growth SCL cosed FY2011 at a significant uptick to FY2010 due to growth in domestic voumes and new order wins. The Company competed its capacity expansion in Q4 of FY2011. Company Positioning Targeting an attractive niche: SCL is one of the few integrated chrome-pating faciities wordwide with an abiity to produce arge diameter whees. It has a dominant market position in India Design and engineering capabiities: SCL has a word cass manufacturing faciity that has been vaidated by most arge OEMs; exceent, and award-winning, design and engineering capabiities The Company has made good progress on soving its egacy debt issues. In September 2011, KUBC invested an additiona $5 miion in the Company, which were utiized towards setting debt issues with a key ender. FY2012 is expected to be a strong year for the Company on the back of a strong order book and the capacity expansion. SCL expects to maintain its margins during the year. Good mix of domestic and goba OEM business: SCL currenty gets approximatey 50% of its revenues from exports and the rest from the Indian market and has a strong order book both gobay and in the domestic market Capabe management team: SCL is founded by four first-generation entrepreneurs with significant industry experience who hod the key positions in the organization Revenue 2,500 2,000 1,500 1,000 1,108 1,396 INR miion CAGR 13.2% 1, ,572 2, FY07 FY08 FY09 FY10 FY11 FY12E 1. Incudes oans of US$ 2.9 miion extended to the Company in February 2010 and March 2011

10 8 KUBERA CROSS-BORDER FUND ANNUAL REPORT 2011 Our Current Portfoio Note: Fisca years end in March. FY2012 is the fisca year ending March 2012 and estimates for this year are the portfoio company s board approved budgets there is no assurance that these wi be actua achieved resuts. Investment Summary Investment Date November 2008 Percentage of Fund NAV 21% Fund Investment US$ 13.4m for Amount 27.6% equity ownership Manager Co-invest US$ 1.3m for Amount 2.7% equity ownership Types of Security Equity & Preference shares in India operating company Seected Investor Liquidity Preference Yes Rights Redemption Rights Yes Board Seats Two Esse Shyam Communication Limited ( ESCL ) provides soutions for media broadcasting (teeporting, content management, pay outs and mobie via Digita Sateite News Gathering ( DSNG ) vans) and sateite communications industries. ESCL aso impements fu channe buid out projects. Company Positioning Derivative pay on media industry: The media broadcasting industry in India is expected to witness high growth in the coming year with the aunch of severa new channes. As the argest outsourced provider of teeporting and other services, ESCL is we positioned to benefit from this growth. Unique offering: ESCL has a unique portfoio of offerings teeporting, DSNG and system integration capabiities - for the media broadcast industry and has deep and ong term customer reationships. It has a range of services for sateite-based communications which target the arge government spending in this segment. Strong performance record: The company has been profitabe since inception and has grown at over 20% CAGR for ast ten years. Strong management team: ESCL has a strong and oya team incuding the two founding directors with 70 empoyees having been with the firm for over 5 years. Growth ESCL has strengthened its market position as the argest independent teeport operator and the 5th argest VSAT ( Very Sma Aperture Termina ) payer in India, by incurring substantia capex over the ast coupe of years. FY2011 was a strong year for the company with 32% growth in operating profit. FY2012 too is expected to be a strong year for the Company, driven by the growth in Company s core media services business. Teeporting segment continues to be the key revenue driver for Company s overa growth. The Company has expanded its geographic footprint by setting up new teeports in Mumbai and Kochi, which are expected to generate significant growth in the coming years. 1,800 1,500 1, INR miion CAGR 18.2% 1, ,309 1,697 0 FY07 FY08 FY09 FY10 FY11 FY12E

11 KUBERA CROSS-BORDER FUND ANNUAL REPORT Our Current Portfoio Note: Fisca years end in March. FY2012 is the fisca year ending March 2012 and estimates for this year are the portfoio company s board approved budgets there is no assurance that these wi be actua achieved resuts. Investment Summary Investment Date December 2007 Percentage of Fund NAV 1 2% Fund Investment US$ 12.8m for Amount 33.4% equity ownership Manager Co-invest US$ 1.2m for Amount 3.2% equity ownership Types of Security Equity & Preference shares in India operating company Seected Investor Liquidity Preference Yes Rights Redemption Rights Yes Board Seats Two Ocimum offers genomics outsourcing services from offices in India and the US. The company provides information products and software soutions for the research community; basic reagents required in a genomics ab; and outsourced research services, incuding gene expression anaysis, genotyping and hybridization services. The company s customers incude some of the word s argest pharmaceutica and biotech companies. Company Positioning Goba Genomics business: Ocimum informatics, bioresearch and GeneLogic genomics services capabiities provide an opportunity to create a premier genomics outsourcing business Growth Ocimum is having a tough FY12 and has immediate cash fow chaenges. Its US subsidiary (the Geneogic business) has fied for chapter 11 bankruptcy the Company is working with its bankers and enders to find buyers for the business. There are some points of ight in the India business where both the services and information management soutions businesses are growing, abeit from a sma base. Attractive market: The genomics market is fast growing due to increased usage in target discovery by pharmaceutica companies, increasing affordabiity of services and consumabes & emergence of new end markets such as moecuar diagnostics Outsourcing and offshoring potentia: Ocimum is the argest such payer out of India and is we positioned to capture the offshoring wave in genomics and biotechnoogy. 1. Incudes oan of US$ 1.9 miion extended to the company in December 2010; carrying vaue as of 31 December 2011

12 10 KUBERA CROSS-BORDER FUND ANNUAL REPORT 2011 Our Current Portfoio Investment Summary Investment Date January 2008 Percentage of Fund NAV 1% Fund Investment U$ 9.3m for Amount 6.4% equity ownership Manager Co-invest US$ 0.9m for Amount 0.6% equity ownership Types of Security Equity shares Seected Investor Liquidity Preference No Rights Redemption Rights No Board Seats None GSS Infotech provides IT Infrastructure Management services ( IMS ) and Enterprise Appication Integration services ( EAI ) to Fortune 500 cients. The company is isted on the NSE and the BSE in India. Company Positioning Growth INR miion Juy 09-June 10 Juy 10-June 11 Revenue Growth N/A 15% Compeing market opportunity: Both IMS and EAI are high growth segments within the IT services domain. IMS is expected to be the next growth driver for offshore IT as it is reativey under-penetrated compared to appication deveopment and maintenance. EBITDA Margin 19.6% 18.6% The Company registered modest revenue growth in FY11, but overa margins of the company decined as compared to ast financia year. The financia performance of the Company remains voatie during the current financia year.

13 KUBERA CROSS-BORDER FUND ANNUAL REPORT Our Current Portfoio Investment Summary Investment Date Apri 2007 Percentage of Fund NAV 2% Fund Investment US$ 18.2m for Amount 25.1% equity ownership Manager Co-invest US$ 1.8m for Amount 2.4% equity ownership Types of Security Preference shares in hoding company in Singapore Seected Investor Liquidity Preference Yes Rights Redemption Rights Yes Board Seats One Kejriwa Stationery Hodings Limited ( KSHL ) manufactures and distributes paper-based stationery products in the US and the Indian markets using Indian manufacturing and goba sourcing of paper. Company Positioning Cost effective manufacturing: The management had, through an asset ight mode of owned and eased faciities, created cost efficient production faciities to cater to the seasona nature of the industry; In addition, the promoters had strong paper sourcing capabiities Growth The Company continues to strugge. It is ooking at reviving US saes by targeting the US market through tie ups with distributors, everaging the company s eco-friendy re-positioning strategy. The Company is in the process of negotiating a debt restructuring package with its enders. The promoter is aso pursuing opportunities to partner with oca/internationa companies ooking at entering the Indian market. Low anti dumping duties: The US had inficted onerous anti-dumping duties against vendors from China and Indonesia and some vendors in India. KSHL had the owest anti-dumping duty of a major vendors giving it a unique opportunity to capture the arge US back-toschoo market.

14 12 KUBERA CROSS-BORDER FUND ANNUAL REPORT 2011 Our Current Portfoio Investment Summary Investment Date Apri 2008 Percentage of Fund NAV 1% Fund Investment US$ 1.4m for Amount 9.1% equity ownership Manager Co-invest US$ 0.1m Amount for 0.9% equity ownership Types of Security Preference shares in India operating company Seected Investor Liquidity Preference Yes Rights Redemption Rights Yes Board Seats One Spark Capita ( Spark ) is a fu service investment bank with a strong presence in Southern India. Company Positioning Strong management team and good market presence: Despite its smaer size, Spark is among the eading investment banks in South India, particuary in Chennai. The promoters and management team have ong experience in the region and have strong reations with major business houses in South India. Growth The Company is expected to have a robust FY12 on the back of stronger investment banking & asset management activities. Critica mass in major segments: The investment banking practice has stabiized and is we set for the next phase of growth in terms of arger transactions, greater coverage and pubic market opportunities. Simiary, the securities broking business and asset management practice have the necessary buiding bocks in pace for strong growth.

15 KUBERA CROSS-BORDER FUND ANNUAL REPORT Board of Directors Martin Adams Independent Dir ector, Chairman of the Board and Audit Committee Member Mr. Adams is the founder and Managing Director of Vietnam Fund Management Company group (VFMC), which previousy managed The Vietnam Fund Limited the first institutiona private equity fund to speciaise in Vietnam and Beta Viet Nam Fund Limited. Mr. Adams is aso currenty the Chairman of Trinity Capita Pc and Vietnam Resource Investments (Hodings) Limited and a non-executive Director of Aberdeen Latin American Income Fund Limited, Metage Funds Limited, Metage Specia Emerging Markets Fund Limited and Terra Catayst Fund and Trading Emissions Pc. Prior to estabishing VFMC, Mr. Adams worked for the Loyds Bank Group in the United Kingdom, the Netherands, Portuga and Hong Kong. Mr. Adams hods an MA in Economic Science from the University of Aberdeen, where he speciaised in Internationa Economics, Economic Deveopment and Pubic Finance. Michae Tyer Independent Director and Chairman of the Audit Committee Mr. Tyer is Managing Director and Co-founder of Tyer & Company, a provider of anaytica services in teecoms and IT. He is aso a Director and Audit Committee member of the Teecommunications Corporation of New Zeaand (Teecom New Zeaand) - the principa teephone company in New Zeaand and number three in Austraia. He is active in deveoping new modes of operation in service businesses, incuding tecos, ceuar/wireess and cabe TV. In addition to strategic advisory work, Mr. Tyer has concentrated on investment transactions incuding a USD 2.2 biion transaction for Swisscom. Mr. Tyer began his career at BT and has contributed to formative deveopments such as onine deivery of transaction services, the aunch of direct-to-home sateite TV, and the use of everaged eases as a financia too in teecoms and IT. Previousy, Mr. Tyer was a Senior Partner at Booz, Aen & Hamiton. He served as Soan Associate Professor of Technoogy and Pubic Poicy at New York University and as an adjunct member of the facuty (Instructor) at the Massachusetts Institute of Technoogy. Mr. Tyer hods an MA in Natura Sciences (Physics) and Economics from Cambridge University. Pravin Gandhi Independent Director and Audit Committee Member Mr. Gandhi is Managing Partner of the SEED Fund, an eary stage venture capita fund and is aso on the Board of severa private technoogy companies in India. He is aso president of The Indus Entrepreneurs (TIE) Mumbai, a goba non-profit organisation focused on promoting entrepreneurship in India. As an entrepreneur since 1971 and an active private equity investor in the Indian technoogy sector, Mr. Gandhi formed one of the first India-focused equity stage venture capita funds, Infinity Venture Fund. As co-founder of Hinditron Computers Private Limited, Mr. Gandhi payed a key part in the merger of Hinditron and Digita Equipment Corporation to form Digita Equipment India Limited. Key previous positions hed incude: Director on the Board of Digita Equipment India Limited; President of the Manufacturers Association of Information Technoogy, and member of the executive counci of the Nationa Association of Software and Service Companies (NASSCOM) - a trade body and the chamber of commerce of the IT software and services industry in India. Mr. Gandhi hods a BSc in Industria Engineering from Corne University, New York.

16 14 KUBERA CROSS-BORDER FUND ANNUAL REPORT 2011 Board of Directors (continued) Miche Casseman Independent Director Miche Casseman is a Partner at Leeward, a private equity asset manager investing in SMEs in the Beneux and northern France. Before joining Leeward, he worked for 13 years for Petercam SA, where he started in 1998 as a financia anayst and had severa roes with the company, most recenty as Director of Petercam Services responsibe for private equity investments. In this roe he managed or directed investments in aviation and renewabe energy, as we as investments in isted private equity funds in Asia (China, India and Vietnam). Mr. Casseman has amost 20 years of experience, incuding five years at a technoogy firm, now part of Orace, where he started as a consutant and eft as Director of Consuting Services. Mr. Casseman hods two Masters degrees, in Mechanica Engineering and Financia Economics, from the University of Leuven in Begium. Kumar Mahadeva Director Mr. Mahadeva founded Kubera in December 2006 together with Ramanan Raghavendran. He was previousy founder, Chairman and CEO of Cognizant Technoogy Soutions Corporation, a eading goba outsourcing provider. During his decade ong career with Cognizant and prior to his retirement in December 2003, he was instrumenta in creating in excess of USD 5 biion in sharehoder vaue and generating tota sharehoder return in excess of 2,700% (between initia pubic offering in 1998 and December 2003). Prior to founding Cognizant, Mr. Mahadeva was Corporate Vice President and Chief Executive for India and China at D&B (formery Dun & Bradstreet) for five years. Previous positions hed incude Corporate Director for Strategy and Corporate Deveopment at AT&T and Associate Principa at McKinsey & Company. Mr. Mahadeva hods an MSc in Eectrica Engineering from Cambridge University and an MBA from Harvard Business Schoo. Ramanan Raghavendran Director Mr. Raghavendran founded Kubera in December 2006 together with Kumar Mahadeva. Prior to founding Kubera, he was responsibe for eading the successfu cross-border investing efforts at TH Lee Putnam Ventures (THLPV) as a Senior Partner and continues to oversee the THLPV portfoio today. Mr. Raghavendran was formery a Senior Partner at Insight Venture Partners where he invested in business process outsourcing and enterprise software companies, incuding cross-border investing via Connect Capita, an Insight affiiate. Prior to joining Insight, he was a senior member of the investment team at Genera Atantic where he initiated the Internet-reated investment effort and aso ed sector efforts in technoogy services and enterprise software. Mr. Raghavendran began his career at McKinsey & Company. In 2000, Mr. Raghavendran co-founded Impact Partners, the first venture phianthropy firm in India. Entities funded by Impact now serve more than 1.5 miion Indians, mosty underprivieged chidren. He has served on the boards of numerous NGOs in India and in the United States. He is on the Board of Overseers of the Schoo of Arts and Sciences at the University of Pennsyvania; chairs the India Secondary Schoos Committee, which oversees aumni activities in India for Penn Undergraduate Admissions; chairs the Penn Cub of Mumbai; serves on the executive committee of the Center for Advanced Study of India (CASI) at Penn; and serves as a governing counci member of CASI's sister entity in India, the University of Pennsyvania Institute for Advanced Study of India. Mr. Raghavendran hods a BSc in Finance from the University of Pennsyvania's Wharton Schoo and a BSE in Computer Science from the University of Pennsyvania's Moore Schoo of Engineering.

17 KUBERA CROSS-BORDER FUND ANNUAL REPORT This page is intentionay eft bank

18 16 KUBERA CROSS-BORDER FUND ANNUAL REPORT 2011 Independent Auditors Report to the Sharehoders and Board of Directors of Kubera Cross-Border Fund Limited We have audited the accompanying consoidated statement of assets and iabiities of Kubera Cross-Border Fund Limited (the Fund ) and its subsidiaries (coectivey referred to as the Group ), incuding the consoidated schedue of investments as of 31 December 2011 and 31 December 2010 and the reated consoidated statements of operations, consoidated statement of changes in net assets and consoidated cash fows for the years then ended. These consoidated financia statements are the responsibiity of the Fund's management. Our responsibiity is to express an opinion on these consoidated financia statements based on our audits. We conducted our audits in accordance with auditing standards generay accepted in the United States of America. Those standards require that we pan and perform the audit to obtain reasonabe assurance about whether the financia statements are free of materia misstatement. An audit incudes consideration of interna contro over financia reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the interna contro over financia reporting. Accordingy, we express no such opinion. An audit aso incudes examining, on a test basis, evidence supporting the amounts and discosures in the financia statements, assessing the accounting principes used and significant estimates made by management, as we as evauating the overa financia statement presentation. We beieve that our audits provide a reasonabe basis for our opinion. In our opinion, the consoidated financia statements referred to above present fairy, in a materia respects, the consoidated financia position of the Group as of 31 December 2011 and 31 December 2010, the consoidated resuts of their operations, the consoidated changes in their net assets and their consoidated cash fows for the years then ended in conformity with U.S. generay accepted accounting principes. KPMG Mumbai, India 14 March 2012

19 KUBERA CROSS-BORDER FUND ANNUAL REPORT Consoidated statement of assets and iabiities as at 31 December 2011 (Stated in United States Doars) Notes Assets Investments in securities, at fair vaue 2(c) 98,396,844 97,939,094 Loans to portfoio companies 2(d),12 3,100,000 5,000,000 Non performing oan to a portfoio company 2(d),12,13 2,096,566 Cash and cash equivaents 2(g),7 8,382,210 17,200,260 Interest and dividend receivabe 2(d),2(k) 65, ,476 Prepaid expenses 15,888 83,061 Tota assets 112,057, ,360,891 Liabiities Accounts payabe 409,914 Tax iabiity (net) 2(i),9 Tota iabiities 409, ,720 Net assets 111,647, ,893,171 Anaysis of net assets Capita and reserves Share capita 8 1,097,344 1,097,344 Additiona paid-in capita 8 117,373, ,373,109 Accumuated deficit (15,979,742) (7,718,409) 102,490, ,752,044 Non-controing interest 10 9,156,704 9,141,127 9,156,704 9,141,127 Tota sharehoders interests 111,647, ,893,171 Net asset vaue per share The accompanying notes form an integra part of these consoidated financia statements.

20 18 KUBERA CROSS-BORDER FUND ANNUAL REPORT 2011 Consoidated schedue of investments as at 31 December 2011 (Stated in United States Doars) Name of the Entity Industry Country Instrument Investments in securities NeoPath Limited (Previousy known as Investment hoding Mauritius Equity shares Venture Infotek Limited) company Preferred shares Adayana, Inc. Education United States of America Series A (2007) convertibe participating preferred stock Series B (2007) convertibe preferred stock Common stock Warrants convertibe to common stock Esse Shyam Communication Limited Media services India Compusoriy convertibe preference shares Equity shares Ocimum Biosoutions (India) Limited Life sciences India Compusoriy convertibe preference shares Equity shares Greenearth Education Limited (Previousy Stationery products Singapore Convertibe redeemabe known as Kejriwa Stationery Hodings Limited) preference shares Synergies Castings Limited Automotive components India Compusoriy convertibe cumuative preference shares Equity shares Spark Capita Advisors (India) Private Limited Financia services India Convertibe preference shares Equity shares GSS Infotech Limited (Previousy known as IT infrastructure India Equity GSS America Infotech Limited) shares Tota investments in securities The accompanying notes form an integra part of these consoidated financia statements.

21 KUBERA CROSS-BORDER FUND ANNUAL REPORT Number Fair % of Number Fair % of of shares Cost vaue net assets of shares Cost vaue net assets 22,855, , % 134,112,451 17,191, % 23,175,848 16,704, % 16,804, % 17,191, % 3,750,000 15,000,000 20,468, % 3,750,000 15,000,000 19,561, % 1,250,000 5,000,000 6,822, % 1,250,000 5,000,000 7,179, % 16,667 50,001 68, % 16,667 50,001 20, % 83,580 16,800 83,580 16,800 6, % 20,066,801 27,359, % 20,066,801 26,768, % 5,555,056 12,208,914 19,237, % 5,555,056 12,208,914 15,727, % 1,125,315 2,473,220 3,896, % 1,125,315 2,473,220 3,185, % 14,682,134 23,134, % 14,682,134 18,913, % 3,818,162 14,000,000 99, % 3,818,162 14,000,000 5,546, % 1,000 3, % 1,000 3,667 1, % 14,003, , % 14,003,667 5,547, % 455,172 20,000,000 2,269, % 455,172 20,000,000 2,269, % 20,000,000 2,269, % 20,000,000 2,269, % 5,333,334 10,000,000 8,845, % 5,333,334 10,000,000 9,168, % 10,543,614 16,333,556 17,487, % 7,076,298 11,333,556 12,164, % 26,333,556 26,333, % 21,333,556 21,333, % 55,079 1,500,000 1,591, % 55,079 1,500,000 1,500, % 1,500,000 1,591, % 1,500,000 1,500, % 1,000,000 10,225, , % 1,000,000 10,225,274 4,415, % 10,225, , % 10,225,274 4,415, % 106,811,432 98,396, % 101,811,432 97,939, %

22 20 KUBERA CROSS-BORDER FUND ANNUAL REPORT 2011 Consoidated statement of operations for the year ended 31 December December 31 December (Stated in United States Doars) Notes Investment income Interest 14 52, ,596 Dividends 2(k) 252, ,449 Other income 1,500 61, , ,852 Expenses Investment management fee 2(m),3 3,117,136 3,896,420 Carried interest 2(n),3 2,874,197 Impairment oss on oan (incuding write off of ast year s accrued interest US$25,035) ,469 Professiona fees 390, ,382 Insurance 95, ,066 Directors fees 6 139, ,946 Administration fees 36,500 43,251 License fees 14,229 20,447 Custodian fees 20,472 10,399 Brokerage 75, ,534 Other expenses 137, ,186 4,455,217 8,018,828 Net investment oss before tax (4,148,871) (7,019,976) Taxation 2(i),9 Net investment oss after tax (4,148,871) (7,019,976) Reaised and unreaised gain /(oss) on investment transactions Reaised gain on investments in securities 2(c) 15,029,191 Unreaised (oss)/gain on investments in securities 2(c) (4,542,252) 18,653,492 (4,542,252) 33,682,683 Net (decrease)/increase in net assets resuting from operations (8,691,123) 26,662,707 Non-controing interest (429,790) 3,038,529 Equity hoding of parent (8,261,333) 23,624,178 (8,691,123) 26,662,707 The accompanying notes form an integra part of these consoidated financia statements.

23 KUBERA CROSS-BORDER FUND ANNUAL REPORT Consoidated statement of changes in net assets for the year ended 31 December 2011 Additiona Non- Share paid-in Accumuated controing (Stated in United States Doars) capita capita deficit interest Tota As at 1 January ,119, ,737,069 (31,342,587) 9,343, ,856,677 Repurchased during the year (refer Note 8) (21,700) (1,638,350) (1,660,050) Capita contribution 472, ,593 Capita distribution (30,725,610) (3,713,147) (34,438,757) Net increase in net assets resuting from operations 23,624,178 3,038,530 26,662,708 As at 31 December ,097, ,373,109 (7,718,409) 9,141, ,893,171 As at 1 January ,097, ,373,109 (7,718,409) 9,141, ,893,171 Capita contribution 445, ,367 Net decrease in net assets resuting from operations (8,261,333) (429,790) (8,691,123) As at 31 December ,097, ,373,109 (15,979,742) 9,156, ,647,415 The accompanying notes form an integra part of these consoidated financia statements.

24 22 KUBERA CROSS-BORDER FUND ANNUAL REPORT 2011 Consoidated statement of cash fows for the year ended 31 December December 31 December (Stated in United States Doars) Operating activities Net (decrease)/increase in net assets resuting from operations (8,691,123) 26,662,707 Adjustments to reconcie net (decrease)/increase in net assets resuting from operations to net (cash used) in/generated from operating activities Movement in net unreaised (oss)/gain on investments in securities 4,542,252 (18,653,492) Impairment oss on oan (incuding write off of previous year s accrued interest) 428,469 Reaised gain on investments in securities (15,029,191) Purchase of securities (5,000,000) (24,886) Sae of securities 37,748,356 Loans given (650,000) (5,000,000) Repayment of oans 50,000 3,343,200 Change in operating assets and iabiities: Decrease in other assets 114, ,508 (Decrease)/increase in current iabiities (57,805) 377,978 Decrease in tax iabiity (235) (9,263,417) 9,649,945 Financing activities Shares repurchased (1,660,050) Capita distribution (30,725,610) Capita contribution by non-controing interest sharehoders 445, ,593 Capita distribution to non-controing interest sharehoders (3,713,147) 445,367 (35,626,214) Net change in cash and cash equivaents during the year (8,818,050) (5,976,269) Cash and cash equivaents at beginning of year 17,200,260 23,176,529 Cash and cash equivaents at end of year 8,382,210 17,200,260 The accompanying notes form an integra part of these consoidated financia statements.

25 KUBERA CROSS-BORDER FUND ANNUAL REPORT Notes to the consoidated financia statements for the year ended 31 December Organization and principa activity Kubera Cross-Border Fund Limited (the Fund ) was incorporated in the Cayman Isands on 23 November 2006 as an exempted company with imited iabiity. The Fund is a cosed-end investment company trading on Aternative Investment Market (AIM), a market operated by the London Stock Exchange pc. The Fund makes private equity investments in cross-border companies, primariy in businesses that operate in the US-India corridor. The Fund is managed by Kubera Partners, LLC (the Investment Manager ). The Investment Manager is responsibe for the day-to-day management of the Fund s investment portfoio in accordance with the Fund s investment objective and poicies. The Fund is a Limited Partner in Kubera Cross-Border Fund LP (the Partnership ), an exempted imited partnership formed on 28 November 2006, in accordance with the aws of the Cayman Isands. The primary business of the Partnership is to invest in, purchase and se 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 aws of the Cayman Isands and a whoy owned subsidiary of the Fund, serves as the Genera Partner of the Partnership. The Partnership hods 100% ownership in Kubera Cross-Border Fund (Mauritius) Limited ( Kubera Mauritius ), a company incorporated in Mauritius. The primary business of Kubera Mauritius Limited is to carry on business as an investment hoding company. Kubera Mauritius hods 100% ownership in New Wave Hodings Limited, a company incorporated in Mauritius. The primary business of New Wave Hodings Limited is to carry on business as an investment hoding company. 2. Significant accounting poicies The significant accounting poicies are as foows: a. Basis of preparation The consoidated financia statements are prepared in conformity with accounting principes generay accepted in the United States of America (US GAAP). US GAAP requires the management to make estimates and assumptions that affect the reported amounts of assets and iabiities and discosure of contingent assets and iabiities at the date of the consoidated financia statements, the consoidated resuts of operations during the reporting period and the reported consoidated amounts of increases and decreases in net assets from operations during the reporting period. Significant estimates and assumptions are used for, but not imited to, accounting for the fair vaues of investments in portfoio companies. Management beieves that the estimates made in the preparation of the consoidated financia statements are prudent and reasonabe. Actua resuts coud differ from those estimates. Changes in estimates are refected in the financia statements in the period in which the changes are made and if materia, these effects are discosed in the notes to the consoidated financia statements. The measurement and presentation currency of the consoidated financia statements is the United States doar rather than the oca currency of the Cayman Isands refecting the fact that subscriptions to and redemptions from the Fund are made in United States doars and the Fund s operations are primariy conducted in United States doars. b. Basis of consoidation The consoidated financia statements incude the accounts of the Fund and its whoy 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 Hodings Limited (together referred to as the Group ). A materia inter-company baances and transactions have been eiminated. c. Vauation and security transactions Substantiay a securities are hed in custody by the Hong Kong & Shanghai Banking Corporation Limited. Security transactions are recorded on the trade date basis. The Fund uses the weighted average cost method to determine the reaized gain or oss on sae of investments.

26 24 KUBERA CROSS-BORDER FUND ANNUAL REPORT 2011 Notes to the consoidated financia statements for the year ended 31 December 2011 (continued) 2. Significant accounting poicies (continued) Investments are recorded at estimated fair vaue as at the baance sheet date. The Fund foows ASC 820 Fair Vaue Measurements and Discosures which defines fair vaue, estabishes a framework for measuring fair vaue and expands discosures about fair vaue measurements. Fair vaue of an investment is the amount that woud be received to se the investment in an ordery transaction between market participants at the measurement date (i.e. the exit price). ASC 820 estabishes a hierarchica discosure framework which prioritizes and ranks the eve of market price observabiity used in measuring investments at fair vaue. Market price observabiity is impacted by a number of factors, incuding the type of investment and the characteristics specific to the investment. Investments with readiy avaiabe active quoted prices or for which fair vaue can be measured from activey quoted prices generay wi have a higher degree of market price observabiity and a esser degree of judgment used in measuring fair vaue. Investments measured and reported at fair vaue are cassified and discosed in one of the foowing categories: Leve I Quoted prices are avaiabe in active markets for identica investments as of the reporting date. The type of investments incuded in Leve I are pubicy traded equity securities and are vaued at the ast saes price on a nationa securities exchange on the vauation date. As required by ASC 820, the Fund does not adjust the quoted price for these investments even in situations, if any, where the Fund hods a arge position and a sae coud reasonaby impact the quoted price. Leve II Pricing inputs are other than quoted prices in active markets, which are either directy or indirecty observabe as of the reporting date, are vaued at prices for simiar assets or iabiities in markets that are not active, or determined through the use of modes or other vauation methodoogies. Investments which are generay incuded in this category are pubicy traded equity securities with restrictions and derivative contracts. Leve III Pricing inputs are unobservabe and incude situations where there is itte, if any, market activity for the investment. Fair vaue for these investments is determined using vauation methodoogies that consider a range of factors, incuding but not imited to the price at which the investment was acquired, the nature of the investment, oca market conditions, trading vaues on pubic exchanges for comparabe securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair vaue require significant management judgment. Due to the inherent uncertainty of these estimates, these fair vaue estimates may differ materiay from the vaues that woud have been used had a ready market for these investments existed. Investments that are incuded in this category generay are privatey hed debt and equity securities. In certain cases, the inputs used to measure fair vaue may fa into different eves of the fair vaue hierarchy. In such cases, an investment s eve within the fair vaue hierarchy is based on the owest eve of input that is significant to the fair vaue measurement. The Investment Manager s assessment of the significance of a particuar input to the fair vaue measurement in its entirety requires judgment, and considers factors specific to the investment. Fund s vauation poicy Securities isted on a stock exchange or traded on any other reguated market are vaued at the ast cosing price on such exchange or market or, if no such price is avaiabe, at the mean of the bid and asked price on such day. If there is no such price or such market price is not representative of the fair market vaue of any such security, then the security is vaued based on quotations readiy avaiabe from principe-to-principe markets, financia pubications, or recognized pricing services, or a good faith estimate of fair vaue is made in accordance with US GAAP. If a security is isted on severa stock exchanges or markets, the ast cosing price on the stock exchange or market which constitutes the main market for such security is used. A discount from vaues of activey traded securities is taken for hodings of securities when there is a forma restriction that imits sae of the securities. Discounts for restricted equity securities from their market price ranges from 0% to 30%. When determining a discount to activey traded restricted securities, factors taken into consideration incude the investee company s trading characteristics, the Fund s abiity to se its position when the restriction expires, and the term of the restriction. The adjustment of the discount depends on the duration of the restriction. In the event that a isted security has no such price or the market price is not representative of the fair market vaue, the security has imited marketabiity, or the security is unisted, its fair vaue is determined by the Investment Manager, taking into account forward market comparabe mutipes, traiing market comparabe mutipes, transaction mutipes, and