KUBC.L Regulatory News (KUBC)

27 March 2013

Kubera Cross-Border Fund Limited

Annual Results for the year ended 31 December 2012

Kubera Cross-Border Fund Limited ("KUBC" or the "Fund") (LSE/AIM: KUBC) has issued its annual audited results for the year ended 31 December 2012.

Financial Highlights

·; Net asset value of the Fund as at 31 December 2012 of US$0.82 per share (US$0.93 per share as at 31 December 2011)

·; Distribution in July 2012 of US$2.19 million or US$ 0.02 per share, pro rata to all shareholders of the Fund in cash from the Fund's additional paid-in capital

·; Consolidated net investment loss for the year of US$3.50 million

·; Consolidated realized gain on investment in securities for the year of US$3.77 million

·; Consolidated unrealized loss on investments in securities for the year of US$10.86 million

Electronic and printed copies of the annual report will be sent to shareholders shortly. Copies of the report will be available, free of charge, from the offices of Grant Thornton UK LLP, 30 Finsbury Square, London EC2P 2YU, and will be available at the Fund's website www.kuberacrossborderfund.com.

About Kubera Cross-Border Fund Limited

Kubera Cross-Border Fund Limited is a closed-end investment company incorporated in the Cayman Islands and traded on the AIM market of the London Stock Exchange. The Fund makes private equity investments in cross-border companies, primarily in businesses that operate in the US-India corridor. The Fund's investment manager, Kubera Partners, brings a strong track record of investing in or managing such businesses. Several of the Fund's portfolio companies also benefit from business activities in the growing Indian domestic market. For further information on the Fund, please visit www.kuberacrossborderfund.com.

For more information contact:

Kubera Partners, LLC (Investment Manager of Kubera Cross-Border Fund Limited)

Ramanan Raghavendran, Managing Partner

Email: info@kuberapartners.com

Numis Securities Limited (Broker)

David Benda, Director

Tel.:+44 (0) 20 7260 1275

Email: d.benda@numiscorp.com

Grant Thornton Corporate Finance (Nominated Adviser)

Philip Secrett, Partner/ David Hignell, Manager

Tel.: +44 (0) 20 7383 5100

Email: philip.j.secrett@uk.gt.com

Disclaimer:

This announcement may contain certain forward-looking statements with respect to the financial condition, results of operations and business of the Fund and its portfolio companies. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Fund or its portfolio companies' actual performance to be materially different from any future performance expressed or implied by such forward-looking statements. Such forward-looking statements are based on assumptions regarding the Fund and its portfolio companies present and future business strategies and the political and economic environment in which they operate. Reliance should not be placed on these forward-looking statements, which reflect the view of Kubera Partners, LLC as of the date of this release only.

CHAIRMAN'S STATEMENT

On behalf of the Board of Directors, I am pleased to present the audited financial statements of Kubera Cross-Border Fund Limited ("KUBC" or the "Company") and its subsidiaries (collectively, the "Fund") for the year ended 31 December 2012.

NAV and Discount

KUBC's audited NAV per share decreased by 12% from US$0.93 to US$0.82 between 31 December 2011 and 31 December 2012. KUBC's share price decreased by 25% from US$0.66 to US$0.49 from 31 December 2011 to 31 December 2012. For the corresponding period, the discount to NAV per share increased from 29% to 40%.

EGM

At the Extraordinary General Meeting of the Company held on 17 January 2013, shareholders passed an ordinary resolution regarding the future of the Company, that (a) KUBC should not continue in existence as presently constituted; and (b) the investment objective and policy of the Fund be changed to seek realization of its portfolio of investments in the ordinary course of business and to return the net proceeds of all such realizations to Shareholders, following which, KUBC will be wound-up. The Fund will make no new investments, except follow-on investments in existing investee companies.

The Board of Directors noted that the above change in investment objective and policy will not result in an immediate or accelerated sale of the Fund's portfolio of investments will occur. Investments will only be realized when, in the opinion of the Investment Manager, appropriate opportunities are presented.

In conjunction with the above resolution, the Investment Management Agreement was also amended on 17 January 2013 to revise the investment management fee payable to the Investment Manager, which will be a decreasing fixed amount over the next three years, subject to certain conditions, details of which are provided in note 17 to the consolidated financial statements.

Investments

Under the terms of the Investment Management Agreement, the Investment Manager has sole authority over the disposition and realisation of KUBC's investments. Given the substantial co-investment made by members of the Investment Manager alongside KUBC in each of the Fund's investments, the Investment Manager's interests are aligned with shareholders.

Portfolio Valuations

The Fund's financial statements are prepared in accordance with US GAAP. The valuations of investments are reviewed and approved by the Audit Committee of the Board, on a quarterly basis. All investments are recorded at estimated fair value, in accordance with SFAS 157 that defines and establishes a framework for measuring fair value. The NAV is calculated on this basis. The methodology underlying the Fund's investment valuations is consistent with previous periods.

Closing Remarks

Further detailed information on investments, quarterly net asset values and other material events relating to the Fund are available through news releases made to the London Stock Exchange available on www.londonstockexchange.co.uk under ticker KUBC and through the Fund's website at www.kuberacrossborderfund.com.

Martin M. Adams

Chairman

INVESTMENT MANAGER'S REPORT

India Economic and Market Review

India's GDP growth fell considerably to 4.5% in the third quarter of FY 2012 as compared to 6.1% in the same quarter last year. This significant slowdown in the economy can be attributed to persistent high interest rates, flagging external demand for Indian goods and services and low capital formation in the domestic economy.

Wholesale Price Inflation (WPI) touched a three-year low of 7.18% in December but retail inflation continued to remain higher and was in double digit at 10.56%.

The Indian Government undertook long anticipated measures towards fiscal consolidation by reducing fuel subsidies and selling stakes in public enterprises. Further, in order to boost capital inflows in the country, the Indian Government increased foreign institutional investors ('FIIs') limits in government securities and corporate bonds by $5 billion each, taking the total investment limit in domestic debt to $75 billion, which is further expected to be increased by $5 billion each, taking the total limit to $85 billion.

For the period January 2012 to December 2012, FIIs invested a total of US$ 31.02 billion in Indian markets, investing US$ 24.37 billion in Indian equities market and US$ 6.65 billion in debt markets

FDI inflows during the period of April 2012 to December 2012 fell by 42% to US$ 16.9 billion compared with US$ 29.2 billion in the same period of 2011. During the entire period, the services sector (financial & non-financial), attracted the highest level of FDI investment with US$ 4 billion, hotel and tourism attracted the second highest level of FDI with US$ 3.1 billion, followed by metallurgical industries, housing & real estate, automobile, drugs and pharmaceuticals, power, followed by computer hardware and software and telecommunications.

The BSE Sensex (which comprises 30 stocks) increased during October and December 2012 rising by 3% and ending at 19,426 points during the quarter. During the same period the mid-cap index (NIFTY Midcap) outperformed the broader market and was up by 4%. At current prices the Indian stock market is trading at a trailing P/E ratio of approximately 16x and a forward P/E ratio of approximately 14x - 15x.

Due to rising macro concerns relating to the increasing fiscal & current account deficit, slowing export & heavy dependence on rising imports (especially crude oil & gold), the India currency ended the quarter at 55 per USD, thereby depreciating approximately by 5% during the quarter.

Portfolio

KUBC's audited NAV per share decreased by 12% from US$0.93 to US$0.82 between 31 December 2011 and 31 December 2012. The decline was primarily on account of revised company forecasts for the current fiscal year in the case of two portfolio companies, the depreciation of Indian Rupee vis-à-vis the US Dollar, which is the currency denomination of the Fund, and a capital distribution of US$0.02 per share in July 2012. The valuation adjustments are reviewed and approved by the Audit Committee of the Board, solely comprising of independent directors.

The Investment Manager evaluates realisation decisions in conjunction with management teams of the portfolio companies who are also substantial owners. The Investment Manager's decision is influenced by operating performance, a leadership position, global strategic interest in the sector, among several variables.

Kubera Partners LLC

Investment Manager

Kubera Cross-Border Fund Limited

Notes to the consolidated financial statements

for the year ended 31 December 2012

(Stated in United States Dollars)

1. Organization and principal activity

Kubera Cross-Border Fund Limited (the "Fund") was incorporated in the Cayman Islands on 23 November 2006 as an exempted company with limited liability.

The Fund is a closed-end investment company trading on AIM market of the London Stock Exchange. The Fund makes private equity investments in cross-border companies, primarily in businesses that operate in the US-India corridor.

The Fund is managed by Kubera Partners, LLC (the "Investment Manager"), a Delaware limited liability company. The Investment Manager is responsible for the day-to-day management of the Fund's investment portfolio in accordance with the Fund's investment objective and policies and has full discretionary investment management authority.

The Fund is a Limited Partner in Kubera Cross-Border Fund LP (the "Partnership"), an exempted limited partnership formed on 28 November 2006, in accordance with the laws of the Cayman Islands. The primary business of the Partnership is to invest in, purchase and sell investments for the purpose of carrying out an investment strategy that is consistent with the strategy described in the Admission Document and Offering Memorandum of the Fund.

Kubera Cross-Border Fund (GP) Limited, a company incorporated under the laws of the Cayman Islands and a wholly owned subsidiary of the Fund, serves as the General Partner of the Partnership.

The Partnership holds 100% ownership in Kubera Cross-Border Fund (Mauritius) Limited ("Kubera Mauritius"), a company incorporated in Mauritius. The primary business of Kubera Mauritius is to carry on business as an investment holding company.

Kubera Mauritius holds 100% ownership in New Wave Holdings Limited, a company incorporated in Mauritius. The primary business of New Wave Holdings Limited is to carry on business as an investment holding company.

Cim Fund Services Ltd. (the "Administrator") is the administrator of the Fund.

2. Significant accounting policies

The significant accounting policies are as follows:

a. Basis of preparation

The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP). US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, the consolidated results of operations during the reporting period and the reported consolidated amounts of increases and decreases in net assets from operations during the reporting period. Significant estimates and assumptions are used for, but not limited to, accounting for the fair values of investments in portfolio companies. Management believes that the estimates made in the preparation of the consolidated financial statements are prudent and reasonable. Actual results could differ from those estimates. Changes in estimates are reflected in the financial statements in the period in which the changes are made and if material, these effects are disclosed in the notes to the consolidated financial statements.

The measurement and presentation currency of the consolidated financial statements is the United States dollar rather than the local currency of the Cayman Islands reflecting the fact that subscriptions to and redemptions from the Fund are made in United States dollars and the Fund's operations are primarily conducted in United States dollars.

b. Basis of consolidation

The consolidated financial statements include the accounts of the Fund and its wholly owned subsidiary, Kubera Cross-Border Fund (GP) Limited and its majority owned subsidiaries, Kubera Cross-Border Fund LP, Kubera Cross-Border Fund (Mauritius) Limited and New Wave Holdings Limited (together referred to as the 'Group'). All material inter-company balances and transactions have been eliminated.

c. Valuation and security transactions

Definition and hierarchy

Securities are held in custody by Kotak Mahindra Bank Limited and Hong Kong & Shanghai Banking Corporation Limited. Security transactions are recorded on the trade date basis. The Group uses the weighted average cost method to determine the realized gain or loss on sale of investments.

Investments are recorded at estimated fair value as at the balance sheet date. The Group follows ASC 820 "Fair Value Measurements and Disclosures" which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.

Fair value of an investment is the amount that would be received to sell the investment in an orderly transaction between market participants at the measurement date (i.e. the exit price).

ASC 820 establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Investments measured and reported at fair value are classified and disclosed in one of the following categories:

Level I - Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded equity securities and are valued at the last closing price on a national securities exchange on the valuation date. As required by ASC 820, the Group does not adjust the quoted price for these investments even in situations, if any, where the Group holds a large position and a sale could reasonably impact the quoted price.

Level II - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, are valued at prices for similar assets or liabilities in markets that are not active, or determined through the use of models or other valuation methodologies. Investments which are generally included in this category are publicly traded equity securities with restrictions and derivative contracts.

Level III - Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment. Due to the inherent uncertainty of these estimates, these fair value estimates may differ materially from the values that would have been used had a ready market for these investments existed. Investments that are included in this category generally are privately held debt and equity securities.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Investment Manager's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

Valuation

Group's valuation policy

Securities listed on a stock exchange or traded on any other regulated market are valued at the last closing price on such exchange or market or, if no such price is available, at the mean of the bid and asked price on such day. If there is no such price or such market price is not representative of the fair market value of any such security, then the security is valued based on quotations readily available from principle-to-principle markets, financial publications, or recognized pricing services, or a good faith estimate of fair value is made in accordance with US GAAP.

If a security is listed on several stock exchanges or markets, the last closing price on the stock exchange or market which constitutes the main market for such security is used.

A discount from values of actively traded securities is taken for holdings of securities when there is a formal restriction that limits sale of the securities. Discounts for restricted equity securities from their market price ranges from 0% to 30%. When determining a discount to actively traded restricted securities, factors taken into consideration include the investee company's trading characteristics, the Group's ability to sell its position when the restriction expires, and the term of the restriction. The adjustment of the discount depends on the duration of the restriction.

In the event that a listed security has no such price or the market price is not representative of the fair market value, the security has limited marketability, or the security is unlisted, its fair value is determined by the Investment Manager, taking into account forward market comparable multiples, trailing market comparable multiples, transaction multiples, and discounted cash flow models. Inputs include trading values on public exchanges for comparable securities, historic, current and projected operating performance, and financing transactions subsequent to the acquisition of the investment. An appropriate discount is taken for holdings in securities where there is a risk associated with a lack of liquidity or marketability. A revaluation of these securities is accepted by the Group only upon majority approval of the independent directors of the Fund.

Valuation process

The Group establishes valuation processes and procedures to ensure that the valuation techniques for investments that are categorized within Level III of the fair value hierarchy are fair, consistent, and verifiable. The Fund designates the Investment Manager to oversee the entire valuation process of the Group's Level III investments.

The Investment Manager is responsible for reviewing the Group's written valuation processes and procedures, conducting periodic reviews of the valuation policies, and evaluating the overall fairness and consistent application of the valuation policies.

Valuations determined by the Investment Manager are required to be supported by market data, third-party pricing sources; industry accepted pricing models, or other methods the Investment Manager deems to be appropriate, including the use of internal proprietary pricing models.

The following table summarizes the valuation of the Group's investments based on ASC 820 fair value hierarchy levels as of 31 December 2012.

The changes in the investments classified as Level III are as follows:

The following table summarizes the valuation of the Group's investments based on ASC 820 fair value hierarchy levels as of 31 December 2011.

The changes in the investments classified as Level III are as follows:

Total realized and unrealized gains and losses, if any, recorded for the Level III investment is reported in net realized gain (loss) on investments in securities and net change in unrealized gain (loss) on investments in securities respectively, in the statement of operations.

Gains and losses from investments, including those that result from foreign currency changes, are recorded in the consolidated statement of operations under net realized gains and losses on investments and net change in unrealized gains and losses on investments.

Unquoted warrants have been recorded at fair value. Changes in fair value are reported in net change in unrealized gain (loss) on investments in securities, in the consolidated statement of operations.

Unquoted warrants are derivative instruments which do not have an active quoted market price. The fair value of the warrants is estimated, using the Black-Scholes model, taking into account the terms and conditions upon which the warrants were granted.

d. Loans, loans impairment and interest income recognition

Loans are reported at their outstanding principal balances net of impairment. The portfolio consist of loans provided to subsidiaries of portfolio companies and bear interest at a market rate based on the borrower's credit quality, the term and face value of the loans. Interest is recognized over the life of the loans at the loan's effective rate of interest. The Group may require collateral for the loans. The Group has not and does not intend to sell these loans receivable. Net change in loans receivable are included in net cash provided by operating activities in the consolidated statement of cash flows. The allowance for doubtful loans account is the Group's best estimate of the amount of credit losses from the Group's loans. The allowance is determined on an individual loan basis if it is probable that the Group will not collect all principal and interest contractually due. The Group considers borrowers' historical payment patterns, borrowers' credit ratings as published by credit rating agencies, if available, borrowers' business performance and general and industry specific economic factors in determining the borrowers' probability of default.

As per Para 310-10-35-22 of ASC 310 on "Receivables", the impairment is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or the fair value of the collateral if the loan is collateral-dependent. The Group does not accrue interest when a loan is considered impaired. When ultimate collectability of the principal balance of the impaired loan is in doubt, all cash receipts on impaired loans are applied to reduce the principal amount of such loans until the principal has been recovered and are recognized as interest income thereafter. Impairment losses are charged against the allowance and increases in the allowance are charged to impairment loss in statement of operations. Loans are written off against the impairment allowance when all possible means of collection have been exhausted and the potential for recovery is considered remote. The Group resumes accrual of interest when it is probable that the Group will collect the remaining principal and interest of an impaired loan. Loans become past due based on how recently payments have been received.

e. Foreign currency translation

The Group's accounting records are maintained in U.S. dollars as follows: (1) the foreign currency market value of investments and other assets and liabilities denominated in foreign currency are translated at the prevailing exchange rate at the end of the period; and (2) purchases and sales, income and expenses are translated at the prevailing exchange rate on the respective date of such transactions. The resulting net foreign currency gain (loss) is included in the consolidated statement of operations.

The Group does not generally segregate the portion of the results of operations arising as a result of changes in the foreign currency exchange rates from the fluctuations arising from changes in the market prices of securities. Accordingly, such foreign currency gain (loss) is included in net realized and unrealized gain (loss) on investments.

f. Buy back

The Group repurchases its shares by allocating the excess of repurchase price over par value against additional paid-in capital.

g. Cash and cash equivalents

Cash and cash equivalents represent amounts held with the Group bank accounts and deposits held with banks having original maturity for a period of less than or equal to three months.

h. Related parties

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions.

i. Income taxes

The current charge for income taxes is calculated in accordance with the relevant tax regulations applicable to the Group. Deferred tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the consolidated financial statements carrying amount of existing assets and liabilities and their respective tax bases and operating loss carry forwards. Deferred tax assets and liabilities are measured using prevailing tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statement of operations in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits of which future realization is not more likely than not.

j. Expenses

The Group bears its own expenses on an accrual basis including, but not limited to organisational costs, brokerage, custody, legal, accounting, audit and other operating and administrative expenses.

k. Revenue recognition

Dividend is accounted when the right to receive the dividend is established. Interest is recorded on a period proportionate basis.

l. Fair value of financial instruments other than investment in securities

The Group's investments are accounted as described in Note 2(c). The Group's financial instruments include other current assets, accounts payable and accrued expenses, which are realizable or to be settled within a short period of time. The carrying amounts of these financial instruments approximate their fair values.

m. Investment management fees

The Investment Manager is entitled to receive an aggregate investment management fee of two per cent per annum of the Fund's net asset value, to be paid quarterly in advance based on the published net asset value of the Fund of the previous quarter or an amount which is agreed by the Board of Directors of the Fund.

n. Carried interest

Under the terms of the Partnership Agreement, Kubera Cross-Border Incentives SPC - Carried Interest SP, the Special Limited Partner of the Partnership is entitled to receive a carried interest from the Partnership equivalent to 20 per cent, of the aggregate return over investment received by the Partnership following the full or partial cash realization of an investment.

The payment of the carried interest is conditional upon the last announced net asset value of the Fund prior to the date of a distribution as adjusted by adding back the value of any income or capital distributions made by the Fund to its shareholders, being equal to or greater than the Par Value. In addition, the carried interest payment is adjusted, up or down, by such amount as is required to achieve the position that, following such distribution, the aggregate cumulative amount of carried interest paid at the date of such distribution will equal 20 per cent, of the eligible carried interest proceeds (being the net realized gains of the Partnership to the date of such distribution reduced by the net unrealized losses). Eligible carried interest proceeds may not be less than zero.

3. Investment management fees and carried interest

Management fees

For the year ended 31 December 2012, the investment management fee was fixed at two per cent per annum of the Fund's net asset value, to be paid quarterly in advance based on the published net asset value of the Fund of the previous quarter.

During the year ended 31 December 2012, the Fund paid US$ 1,997,076 (31 December 2011: US$ 3,117,136) as investment management fee.

Carried interest

During the year ended 31 December 2012, the Fund paid US$ 686,950 (31 December 2011: Nil) as carried interest.

4. Directors' fees and expenses

The Fund pays each of its directors an annual fee of £20,000 and the Chairman is paid an annual fee of £25,000, plus reimbursement for out-of-pocket expenses incurred in the performance of their duties. The members of the Audit Committee are paid an annual fee of £2,000 and the Chairman of the Committee is paid an annual fee of £5,000. Mr. Mahadeva and Mr. Raghavendran have waived their director's fees so long as they are interested in the Investment Manager.

The Fund does not remunerate its directors by way of share options and other long term incentives or by way of contribution to a pension scheme.

5. Cash and cash equivalents

6. Share capital and additional paid-in capital

7. Income taxes

Under the laws of the Cayman Islands, the Fund, Kubera Cross-Border Fund (GP) Limited and Kubera Cross-Border Fund LP, are not required to pay any tax on profits, income, gains or appreciations and, in addition, no tax is to be levied on profits, income, gains, or appreciations or which is in the nature of estate duty or inheritance tax on the shares, debentures or other obligations of the Fund and its Cayman based subsidiaries, or by way of withholding in whole or part of a payment of dividend or other distribution of income or capital by the Fund and its Cayman based subsidiaries, to its members or a payment of principal or interest or other sums due under a debenture or other obligation of the Fund and its Cayman based subsidiaries.

Under laws and regulations in Mauritius, the Fund's majority owned subsidiaries, Kubera Cross-Border Fund (Mauritius) Limited and New Wave Holdings Limited, are liable to pay income tax on their net income at a rate of 15%. They are however entitled to a tax credit equivalent to the higher of actual foreign tax suffered or 80% of Mauritius tax payable in respect of their foreign source income tax thus reducing their maximum effective tax rate to 3%. Both subsidiaries have received a tax residence certificate from the Mauritian authorities certifying that they are residents of Mauritius, which is renewable on an annual basis subject to meeting certain conditions and which make them eligible to obtain benefits under the Double Tax Avoidance Treaty between Mauritius and India.

As at 31 December 2012, New Wave Holdings Limited had accumulated tax losses of US$ 37,287 and therefore no provision for income tax liability arises for the period. The accumulated tax losses can be used and set off against future taxable profits as follows:

Up to the year ending 31 March 2014 - US$ 20,391

Up to the year ending 31 March 2016 - US$ 16,896

The components of deferred tax balances are as follows:

The Group has established a valuation allowance against the deferred tax asset related to business loss. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Accordingly, based on projections of future taxable income of the periods in which the deferred tax assets would be realizable, management is of the view that it is more likely than not, that the Group will not realize the benefits of the deferred tax assets. Accordingly, the Group has created a valuation allowance against the entire amount of deferred tax assets as of 31 December 2012.

ASC 740, "Accounting for Income Taxes" clarifies when and how to recognize tax benefits in the financial statements with a two-step approach of recognition and measurement. It also requires the enterprise to make explicit disclosures about uncertainties in their income tax positions, including a detailed roll-forward of tax benefits taken that do not qualify for financial statement recognition. There are no uncertain tax positions and related interest and penalties as of 31 December 2012.

The Fund monitors proposed and issued tax law, regulations and cases to determine the potential impact to uncertain income tax positions. As at 31 December 2012, there are no potential subsequent events that would have a material impact on unrecognized income tax benefits within the next twelve months.

8. Non-controlling interest

Non-controlling interest is primarily composed of the partnership interests of Kubera Cross-Border Incentives SPC - Co-Investment Segregated Portfolio, a Cayman Islands company and an affiliate of the Investment Manager, in the consolidated affiliates.

9. Transactions with related parties

A. The following table lists the related parties of the Group:

* Resigned w.e.f. 17 January 2013

B. During the period transactions with related parties are as disclosed below:

i. Transactions during the year

ii. Amounts outstanding as at 31 December 2012

10. Loans receivables

Loans receivable as at 31 December 2012 are given below:

Loans receivable as at 31 December 2011 are given below:

11. Impairment loss on loan

The activity in the impairment loss on loan and recorded investment in loans (unrated) for the years ended 31 December 2012 and 2011 is as follows:

The recorded investment in loans and related impairment allowance as at 31 December 2012 is given below:

The recorded investment in loans and related impairment allowance as at 31 December 2011 is given below:

The following table provides an analysis of the aging of the past due loans receivable as of 31 December 2012:

The following table provides an analysis of the aging of the past due loans receivable as of 31 December 2011:

12. Interest income

Interest income consists of the following:

13. Concentration of risks

The Group's investment activities expose it to various types of risks, which are associated with the financial instruments and markets in which it invests. The financial instruments expose the Group in varying degrees to elements of liquidity, market and credit risk. The following summary is not intended to be a comprehensive summary of all risks inherent in investing in the Group and reference should be made to the Group's admission document for a more detailed discussion of risks.

a) Market risk

Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market variables such as interest, foreign exchange rates and equity prices, whether those changes are caused by factors specific to the particular security or factors that affect all securities in the markets. Investments are typically made with a specific focus on India and thus are concentrated in that region. Political or economic conditions and the possible imposition of adverse governmental laws or currency exchange restrictions in that region could cause the Group's investments and their markets to be less liquid and prices more volatile. The Group is exposed to market risk on all of its investments.

b) Industry risk

The Group's investments may have concentration in a particular industry or sector and performance of that particular industry or sector may have a significant impact on the Group. The Group's investments may also be subject to the risk associated with investing in private equity securities. Investments in private equity securities may be illiquid and subject to various restrictions on resale and there can be no assurance that the Group will be able to realize the value of such investments in a timely manner.

c) Credit risk

Credit risk is the risk that an issuer/counterparty will be unable or unwilling to meet its commitments to the Group. Financial assets that are potentially subject to significant credit risk consist of cash and cash equivalents, investments in convertible loans and receivables. The maximum credit risk exposure of these items is their carrying value.

d) Currency risk

The Group has assets denominated in currencies other than the US Dollar, the functional currency. The Group is therefore exposed to currency risk as the value of assets denominated in other currencies will fluctuate due to changes in exchange rates.

The Group's cash and cash equivalents are held in US Dollars.

e) Liquidity risk

The Group is exposed to liquidity risk as a majority of the Group's investments are largely illiquid. Illiquid investments include any securities or instruments which are not actively traded on any major securities market or for which no established secondary market exists where the investments can be readily converted into cash. Reduced liquidity resulting from the absence of an established secondary market may have an adverse effect on the prices of the Group's investments and the Group's ability to dispose of them where necessary to meet liquidity requirements. As a result, the Group may be exposed to significant liquidity risk.

f) Political, economic and social risk

Political, economic and social factors, mainly changes in Indian laws or regulations and the status of India's relations with other countries may adversely affect the value of the Group's investments.

15. Financial highlights

The financial highlights presented below consist of the Fund's operating expenses and net operating loss ratios for the year ended 31 December 2012 and 31 December 2011, and the internal rate of return ("IRR") since the Fund's admission to trading on AIM, net of all expenses, including carried interest to the Investment Manager:

The net operating loss and operating expenses ratios are computed as a percentage of the Fund's average net asset value during the period. Both ratios are presented on an annualized basis. The IRR is computed based on the Fund's actual dates of the cash inflows (capital contributions), outflows (cash and stock distributions) and the ending net asset value at the end of the period/year (residual value) as of each measurement date.

16. Sale of investments held by NeoPath Limited

On 25 August 2010, NeoPath Limited (formerly Venture Infotek Limited), a portfolio company, has sold its 100% holding in Venture Infotek Global Private Limited, its wholly owned subsidiary to Atos Origin (Singapore) Pte Limited (Atos), a company incorporated and resident in Singapore, for a consideration of US$ 110 million. As part of the terms of the share purchase agreement, US$ 69.04 million was paid to NeoPath Limited.

On 21 September 2010, NeoPath Limited declared a dividend of US$ 0.26 per share amounting to US$ 60.51 million, out of which US$ 35.71 million was distributed as dividend to New Wave Holdings Limited. Out of this distribution, New Wave Holdings Limited has credited US$ 21.77 million towards the cost of investment in NeoPath Limited and the balance of US$ 13.94 million was recorded as realized gain on sale of investment.

On 6 July 2012, NeoPath Limited realized partial release of Escrow and distributed the same by way of buyback of 3,520,382 preferred shares; pursuant to which the Group received USD 3.52 million. The Group accounted for it as a realized gain on sale of investment in securities.

During August 2012, NeoPath Limited received a claim letter from Atos claiming an amount of EUR 39.58 million (subject to an overall cap of US$ 25 million) for breach of certain conditions specified in the Share Purchase Agreement. However, management of NeoPath denies these claims and obtained a legal opinion. Based on the legal opinion, the escrow money is fully receivable and accordingly the above claim is not recognized as a liability. Further during October 2012, NeoPath filed for arbitration in Singapore International Arbitration Centre. The proceedings are currently underway and estimated to be completed within a year.

Consequently, based on the above legal opinions, the entire amount of US$ 17.5 million held in escrow is considered as fully recoverable and the present value of the expected escrow release is included in the fair value of the investment in NeoPath Limited as at 31 December 2012.

17. Subsequent events

At the Extraordinary General Meeting of the Fund held on 17 January 2013, shareholders passed an ordinary resolution regarding the future of the Fund, that (a) the Fund should not continue in existence as presently constituted; and (b) the investment objective and policy of the Fund changed to seek realization of its portfolio of investment in the ordinary course of business and to return the net proceeds of all such realizations to Shareholders, following which the Fund will be wound-up. The Fund will make no new investments, except follow-on investments in existing investee companies.

In conjunction with the above resolution, the Investment Management Agreement was amended on 17 January 2013 to revise the investment management fee payable to the Investment Manager as set out below.

With effect from 1 January 2013, and subject to the exception noted below, the annual management fee payable shall be fixed for the calendar years 2013, 2014 and 2015, as follows:

·; 2013 and 2014: $1,997,076,

·; 2015: $1,697,515

The Investment Management Agreement between the Fund and the Investment Manager is for an initial term of seven years ending 26 December 2013. The terms of the Investment Management Agreement currently state that it shall be extended for such period as the Investment Manager deems appropriate, not to exceed three years, i.e. until 26 December 2016, to allow the Investment Manager to effect an orderly disposal of the Group's assets. In the event that, during the period from 2013 to 2015, the net asset value of the Fund falls by over 85 per cent of the net asset value prevailing on 1 January 2013 then the investment management fee payable for the remaining life of the Group shall revert immediately to 2 per cent per annum of NAV, or a fixed fee to be determined by the independent directors at the time to ensure an orderly wind-down.

Mr. Michel Casselman, Mr. Pravin Gandhi and Mr. Kumar Mahadeva resigned as Directors on 27 January 2013.

The Group further evaluated subsequent events from the balance sheet date through to 11 March 2013; the date at which the consolidated financial statements were available to be issued, and determined that there are no other items to disclose.