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Literal Translation Press article in BIZweek 02 August 2014

$103 Millions Claimed: A Mauritian Management Company at the


heart of a scandal.

Sixty-nine investors of the fund management company, Indian Advantage Fund III (IAFIII), all from
diverse countries are suing the managers of the fund. They are blaming them, among other things, to
have purposely omitted to provide them some information to encourage them to invest in the funds of
ICICI Venture Funds Management Company Ltd (ICICI Venture) and who benefits of the services of the
secretariat of the Mauritian company International Financial Services Limited (IFS)

"Abuse of Rights", "fraudulent conduct", "excessive negligence," "fraudulent tactics It is in those very
harsh terms that the investors of the investment fund Indian Advantage Fund III (IAFIII) describe the acts
and doings of the promoters of the said fund. Thus they brought the matter to the court to seek redress.
The sixty-nine plaintiffs, who seem to have international financial ramifications, are investors coming
from different countries.

The Dynamic India Fund III (DIF III) was established by the ICICI Venture Funds Management Company
Ltd (ICICI Venture) for the purpose of enabling overseas investors invest their funds, through the
intervention of The Western India Trustee and Executor Co Ltd (IAF III), in the real estate market of
India.

The investment fund IAF III was established in February 2005 under Indian law to be registered as a
venture capital fund with the Securities and Exchanges Board of India. IAF III was established to facilitate
investment in real estate by financial institutions such as banks. It was pursuant to an investment
management agreement that ICICI Venture was appointed as the manager of IAF III.

A single document required

The origin of the matter dates back to April 2005 when the ICICI Bank of India and ICICI Venture
approached some investors, including the plaintiffs, all of diverse countries, namely the United Arab
Emirates, Kuwait, Qatar, Bahrain, Oman, the United States, Singapore, Hong Kong, Japan and East
African countries, to invest in their project through IAF III. The project was to develop a real- estate
fund, known as India Real Estate Fund (IAF III) costing 220 millions of dollars. The main aim of the fund
was to develop commercial buildings and high-end residential to attract investors.

From the outset, the ones who lodge this case believe that the entire registration procedure of investors
was made in a total lack of transparency. They explained that the marketing and the promotion of the
Literal Translation Press article in BIZweek 02 August 2014

project was done in such a way so as to deceive the investor and make him believe that the only
document required for the subscription process for the fund was the sheet of paper initially given to
them.

It was not until 2013, after discovering that there was in fact a complete document constituting the
subscription agreement, that a complete copy of the subscription agreement and the Private Placement
Memorandum (PPM) have been finally submitted to them.

The plaintiffs complain that it is only after acknowledging the contents of the Subscription Agreement
and the PPM that they realized that the documents should have been communicated to them well
before their subscription to the investment fund. In their plaint, they aver they were shocked to discover
the non-liability clauses and risk factors in the PPM, noting at the same time that none of these
elements had been communciated to them at the time of subscription in the investment fund IAF III.

Hence, according to them the project was presented to them as a safe investment and commercially
viable, while this was not quite the case.

They were shocked when they realized that the promoters of the funds had never informed them that
their investments would be subject to the terms of the Subscription Agreement and the PPM, and that
the investments would be routed to another fund, so they would have no information as to how this
money would be used or managed.

The investors are also very angry towards the promoters as during the promotional meetings they were
told that the minimum requirement was $500, 000, and they consequently learnt that the promoters
accepted sums such as $50 000 from other investors. Thus the plaintiffs believe that this false
declaration deprived them of this option.

They further stated that they regret that the only document to which they had access and on which they
based their investment was the "Executive Summary" which had been given to them by ICICI Venture.

The investors also explain that on March 22, 2014, DIF III sent a letter to its shareholders, informing
them that with the termination of the funds of IAF III on the 5th of June 2014, a special meeting of
shareholders of DIF III was convened on April 14, 2014, to discuss the future strategy of the fund, as well
as various liquidity options for investors.

Literal Translation Press article in BIZweek 02 August 2014

An obvious conflict of Interests

However, in response to the notice of the special meeting, the shareholders of DIF III, including the
complainants, decided to send an email on the 31st of 2014, notifying International Financial Services
Limited (IFS), the company secretary, that they could not make a decision on the resolutions proposed
and that they would need additional information to better understand the basis of these resolutions.

They also allege that there were obvious conflicts of interest involving the directors of the Board.
Moreover in their plaint, the plaintiffs made serious accusations against IFS averring that the special
meeting of DIF III was conducted in an arbitrary and abusive manner.

Hence, its no surprise that they voted against the proposed resolutions. However, the investors then
received a correspondence from the company informing them that the resolutions proposed at the
special meeting of shareholders were passed by a majority of shareholders present or by proxy.

Moreover, the plaintiffs highlighted that after asking other questions to the managers on the
management of funds, they had arrived at the conclusion that they pre-empted, i.e. that DIF III and its
board of directors, IFS and ICICI Bank and ICICI Venture, have deliberately distorted the facts and
concealed information and acted in violation of the mandate originally given to them.

In their plaint, the plaintiffs extended their theory concerning the deliberate concealment of project
objectives / funds. They targeted the promoters, because initially the funds had been presented as a
'moderate risk fund. However, while the investments were supposed to be 'Class A world type
properties', the promoters have made the investments in properties having a very low value.

In addition to this, while investments should have covered the whole of India, ICICI Venture has focused
exclusively on two areas, which is against the fund's strategy.

According to the investors, another "subterfuge" was that they had been informed during the campaign
promoting the fund, that his term would be five to seven years, without mentioning anything about the
two-year extension.

According to them, DIF III and IFS should act in the main interest of the shareholders, but failed to
provide the required services and thus failed to meet their obligations. They listed some of these
shortcomings:
Literal Translation Press article in BIZweek 02 August 2014


- Knowledge and on-going acceptance of deliberate misrepresentations to investors of material facts.
- Lack of any responsible oversight of the serious incompetence and management turnover of ICICI
Venture.
- Potential knowledge of fraud or corrupt practices by the ICICI Bank and ICICI Venture.
- Unreasonable denial of access to books of records, accounts and financial statements.
- Non-adherence to project timelines concerning the various investments.

The investors are not lenient as to the role of IFS, which they say have failed in its fiduciary duties as
secretary, and this since the incorporation of the funds. They blamed the Mauritian company of not
keeping them regularly informed of the fund's operations. In addition, despite numerous requests, the
shareholders have not received the minutes and other resolutions passed since the incorporation of the
company shareholders.

The plaintiffs summarizing their plaint in these terms cannot be more explicit:
It is the case of the plaintiffs that the acts and doings which constitute a fault, were not accidental
but constitute fraudulent tactics, misrepresentations, deceits and fraudulent schemes and perpetrated
by ICICI Bank and ICICI Venture by themselves and by and through DIF III and its board of directors and
ultimately IFS, of which they are the controlling minds, to get their hands on the funds by the plaintiffs
and managed same negligently.

The plaintiffs believe that the all defendants acted frivolously, and this when they were supposed to
show a 'duty of care' towards investors, and as well as investments that had been entrusted to them.
They are convinced that ICICI Bank has acted negligently and in an abusive manner when it used its
reputation to attract investment, and this without ensuring that ICICI Venture has the capacity and
resources required to manage such funds effectively and professionally.

Thus, by way of reparation for damage sustained, the plaintiffs claim damages in the amount of $103,
699, 376 (See text below) from the promoters and managers of the investment fund.This will most
probably be regarded as a scandal in the financial world, given the seriousness of the case.