Financial Statements for the Six Months Ended June 30, 2012 (Unaudited) (Liquidation Basis of Accounting)

Transcription

1 Financial Statements for the Six Months Ended June 30, 2012 (Unaudited) (Liquidation Basis of Accounting)

2 Index June 30, 2012 (Unaudited) (Liquidation Basis of Accounting) Page Financial Statements Statement of Assets, Liabilities and Members Equity (Unaudited) 1 Statement of Operations (Unaudited) 2 Statement of Changes in Members Equity (Unaudited) 3 Statement of Cash Flows (Unaudited) 4 Notes to Financial Statements (Unaudited) 5-11

3 Statement of Assets, Liabilities and Members Equity June 30, 2012 (Unaudited) (Liquidation Basis of Accounting) Assets Cash and cash equivalents $ 30,216,661 Other assets 17 Total assets $ 30,216,678 Liabilities and Members Equity Withholding tax payable $ 609,812 Accrued investment advisory fees 36,680 Total liabilities 646,492 Commitments (Notes 4 and 10) Members equity 29,570,186 Total liabilities and members equity $ 30,216,678 The accompanying notes are an integral part of these financial statements. 1

4 Statement of Operations Six Months Ended June 30, 2012 (Unaudited) (Liquidation Basis of Accounting) Investment Income Interest on cash and cash equivalents $ 1,529 Total investment income 1,529 Expenses General and administrative expenses 9,568 Professional fees and expenses 450 Investment advisory fees (12,359) Total expenses (2,341) Net investment income 3,870 Increase in members equity resulting from operations $ 3,870 The accompanying notes are an integral part of these financial statements. 2

5 Statement of Changes in Members Equity Six Months Ended June 30, 2012 (Unaudited) (Liquidation Basis of Accounting) Managing Members Member Total Members Equity, December 31, 2011 $ 28,084,679 $ 1,481,637 $ 29,566,316 Increase in members equity resulting from operations 3,870-3,870 Members Equity, June 30, 2012 $ 28,088,549 $ 1,481,637 $ 29,570,186 The accompanying notes are an integral part of these financial statements. 3

6 Statement of Cash Flows Six Months Ended June 30, 2012 (Unaudited) (Liquidation Basis of Accounting) Cash Flows from Operating Activities Increase in members equity resulting from operations $ 3,870 Adjustments to reconcile increase in members equity resulting from operations to net cash used in operating activities: Decrease in other assets 282 Decrease in accrued investment advisory fees (84,921) Decrease in accrued general and administrative expenses payable (197,820) Decrease in accrued professional fees and expenses payable (1,998) Net cash used in operating activities (280,587) Cash Flows from Financing Activities Decrease in due from Member 160,205 Net cash provided by financing activities 160,205 Change in cash and cash equivalents (120,382) Cash and Cash Equivalents Beginning of period 30,337,043 End of period $ 30,216,661 The accompanying notes are an integral part of these financial statements. 4

7 Notes to Financial Statements (Unaudited) (Liquidation Basis of Accounting) 1. ORGANIZATION AND GENERAL (the Americas Fund II ) was formed as a Delaware Limited Liability Company on July 14, 2000 and commenced operations on December 28, The Americas Fund II was organized to provide institutional and individual investors (collectively, Investors ) access to a diversified private equity portfolio. The Americas Fund II invested in a range of private equity funds, which primarily invest in the United States of America. Commitments of approximately $107,000,000 were pre-committed to eight private equity funds at December 28, 2000 (commencement of operations). The Americas Fund II invested its committed capital primarily in newly-formed pooled investment vehicles ( Partnership Investments ). Partnership Investments included pools that were formed as early as July The Americas Fund II is co-sponsored by AXA Investment Managers, the asset management group of AXA S.A. ( AXA ) and PineBridge Capital Partners LLC ( PineBridge ), a subsidiary of American International Group, Inc., (PineBridge, together with AXA Investment Managers, the Sponsors ). AXA-AIG Asset Management II, LLC, which is jointly owned by AXA Investment Managers and PineBridge, is the Managing Member of the Americas Fund II. AXA Private Equity U.S., LLC, an affiliate of AXA, is the Investment Advisor of the Americas Fund II and as such has discretionary investment management authority for the Americas Fund II. State Street Bank and Trust Company ( State Street ) is the Administrator of the Americas Fund II. Certain investors in the Americas Fund II invest through feeder funds ( Investment Vehicles ) sponsored by one or both Sponsors of the Americas Fund II. On July 8, 2011, the Americas Fund II entered into an agreement of purchase and sale (the Purchase Agreement ) with CS Strategic Partners IV Investments, L.P. and CS Strategic Partners IV VC Holdings, L.P., (individually a Buyer and collectively, the Buyers ), investment funds managed by affiliates of Credit Suisse Securities (USA) LLC, with respect to all its Partnership Investments for a purchase price of $70,414,839. As of June 30, 2012, all of the Partnership Investments interests had been transferred to the Buyers. As a result of the cessation of operations and commencement of the liquidation of the Americas Fund II, the Americas Fund II changed its basis of accounting from the going concern to the liquidation basis of accounting, which requires that all assets and liabilities be reported at net realizable value or expected payment and that all costs associated with the liquidation of the Americas Fund II be accrued and included in the statement of operations (liquidation basis of accounting). In conjunction with the Purchase Agreement, the Managing Member ceased investment activities and began an orderly process to manage the sale and transfer of the Partnership Investments to the Buyers and the winding down of the Americas Fund II. 5

8 Notes to Financial Statements (Unaudited) (Liquidation Basis of Accounting) (continued) 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed by the Americas Fund II. Use of Estimates The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ( GAAP ). The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from these estimates and such differences may be material. The accompanying financial statements have been prepared on the liquidation basis of accounting. Income/Expense Recognition Interest income and expense are received on an accrual basis. Cash and Cash Equivalents The Americas Fund II considers all short term liquid investments with a maturity of three months or less when purchased to be a cash equivalent. The cash equivalents at June 30, 2012 consist of an interest bearing cash account at State Street. 3. INVESTMENT ADVISORY FEES Prior to January 1, 2007, the Americas Fund II paid the Investment Advisor an investment advisory fee, payable quarterly in advance, determined for each non-managing Member Investor (and with respect to members which are investing through investment vehicles, the Investors in such investment vehicles) equal to a percentage of the capital committed by such member or Investor, in accordance with the following schedule:.90% on the first $5 million in commitments of such Investor,.70% of such Investor s commitments exceeding $5 million and up to $10 million; and.50% of such Investor s commitments exceeding $10 million, subject to certain offsets for certain affiliated investors. Such fee is paid quarterly in advance until the later of expiration of the Commitment Period (defined below) or 5 years from the final closing. Effective January 1, 2007, as permitted by the Operating Agreement, the Managing Member terminated the Commitment Period. The base amount upon which the advisory fee is calculated, at the rates described above, equals the amount of the Investor s funded capital commitments, plus the amounts of such Investor s unfunded capital commitments, if any, available for follow-on investments in existing Partnership Investments, reduced by an amount equal to distributions constituting returns of capital and return of advisory fee to such Investor and not subject to reinvestment, and any cash reserved by the Managing Member. For the six months ended June 30, 2012, the final investment advisory fee was accrued and an amount of 12,359 was subsequently written off. 6

9 Notes to Financial Statements (Unaudited) (Liquidation Basis of Accounting) (continued) 4. CAPITAL COMMITMENTS The initial closing of the sale of interests was held on December 28, The final closing of the Americas Fund II was held on December 31, 2001 and additional closings were held during the year then ended. The Members are not subject to any further obligation of their uncalled commitments to the Americas Fund II. A summary of the capital commitments of the Americas Fund II at June 30, 2012 is shown below: Investments and expenses $ 138,535,000 Americas Fund II s uncalled commitments - Total committed and called capital $ 138,535,000 AXA and affiliates committed and funded capital of approximately $85,000,000 of aggregate Capital Commitments to the Americas Fund II as of June 30, U.S. FEDERAL INCOME TAXATION The Americas Fund II has elected to be treated as a partnership for U.S. federal income tax purposes. No provision has been made in the accompanying financial statements for United States federal, state and local income taxes. As a partnership for U.S. federal income tax purposes, the Managing Member and Members are individually liable for their own tax obligations. It is intended by the Managing Member that the Americas Fund II will not conduct a trade or business in the U.S. or invest in securities the income from which is treated, for U.S. federal income tax purposes, as arising from a U.S. trade or business. If the Americas Fund II is considered to be in a trade or business, a non-u.s. Member will be subject to statutory U.S. federal corporate income tax on its share of any income that is effectively connected to a U.S. trade or business ( Effectively Connected Income ). Currently non- U.S. Members considered foreign corporations would be subject to U.S. federal income tax at the rate of 35%, subject to treaty reductions, if applicable. In addition, non-u.s. corporations may also be subject to branch profits tax, at a rate of 30% (for an effective rate of approximately 54.5%). To the extent income from investments is not Effectively Connected Income, non-u.s. Members will generally not be subject to U.S. income tax in respect of capital gains or U.S. source interest income that qualifies as Portfolio Interest ( Portfolio Interest ) under the U.S. Internal Revenue Code (the Code ). Such income will be subject to withholding tax in respect of any U.S. source dividend income, interest income that does not qualify as Portfolio Interest under the Code, and any other U.S. source fixed or determinable annual or periodic income generally at the current statutory rate of 30%, subject to possible reduction pursuant to any applicable income tax treaty. The Americas Fund II may invest, directly or indirectly, in stock of a passive foreign investment company (a PFIC ). A U.S. shareholder that owns stock in a PFIC, either directly or indirectly, through the application of certain attribution rules, may be subject to an interest charge with respect to certain dividend distributions made by the PFIC in respect of such U.S. shareholder s stock and on any gain recognized by such U.S. shareholder upon the direct or indirect disposition of its stock in the PFIC. 7

10 Notes to Financial Statements (Unaudited) (Liquidation Basis of Accounting) (continued) 5. U.S. FEDERAL INCOME TAXATION continued For U.S. shareholders who are individuals, such gains will also generally be taxed at the ordinary U.S. federal individual income tax rate (up to 35%) instead of the long term capital gains rate (15%). Generally, for U.S. corporations both rates are 35%. The interest charge and application of the ordinary tax rate instead of the capital gains rate may be avoided if the U.S. shareholder makes an election (a QEF Election ), based on certain information provided by the PFIC, to treat the PFIC as a Qualified Electing Fund (a QEF ). In such event, the U.S. shareholder will be taxed currently on its pro rata share of the QEF s ordinary earnings and net capital gains. The ability for certain U.S. partners to make the QEF Election depends on the PFIC s provision of all the information necessary to make the election. No assurance can be given that a PFIC will provide such information to the Americas Fund II or to the general partners or managing members of the Partnership Investments. The Americas Fund II recognizes a tax benefit from an uncertain position only if it is more likely than not that the position is sustainable, based solely on its technical merits and consideration of the relevant taxing authority s widely understood administrative practices and precedents. If this threshold is met, the Americas Fund II should measure the tax benefit as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. The Americas Fund II has concluded there are no significant uncertain tax positions that would require recognition or disclosure in the financial statements as of June 30, The Americas Fund II files a US federal income tax return and state and local tax returns in various jurisdictions. In the normal course of business, the Americas Fund II is subject to examination by federal, state, local and foreign jurisdictions, where applicable, for all open years under the statute of limitations including the six months ended June 30, ALLOCATIONS OF PROFIT AND LOSS Profit and loss generally shall be allocated in a manner corresponding to the order of distributions described in Note DISTRIBUTIONS AND OTHER ALLOCATIONS The Managing Member shall have sole discretion as to the timing, amount and form of payment of all portfolio distributions and short-term distributions. The proceeds received by the Americas Fund II attributable to each Partnership Investment or Direct Investment will be distributed as follows: A. 100% to each Member in an amount equal to its Capital Commitment used to fund such Partnership Investment or Direct Investment, as the case may be (such funded capital commitment referred to herein as Invested Capital ) until such time as such Member has received cumulative distributions attributable to such investment in an amount equal to such Invested Capital; B. 100% to each Member in an amount equal to its Capital Commitment used to pay the advisory fee ( Advisory Fee Capital ) attributable to such investment until such time as each Member has received cumulative distributions attributable to such investment in an amount equal to Advisory Fee Capital attributable to such investment; 8

11 Notes to Financial Statements (Unaudited) (Liquidation Basis of Accounting) (continued) 7. DISTRIBUTIONS AND OTHER ALLOCATIONS continued C. 100% to each Member to provide a cumulative 8% annual rate on the aggregate amount of all such Member s Invested Capital and Advisory Fee Capital (the Preferred Return ) attributable to such investment; D. 100% to the Managing Member until it has received in the aggregate an amount equal to 5% (in the case of Partnership Investments) and 10% (in the case of Direct Investments) of the aggregate amounts distributed pursuant to C. above; and this paragraph D. ; and E. (i.) 95% (in the case of Partnership Investments) and 90% (in the case of Direct Investments) to each Member, and (ii.) 5% (in the case of a Partnership Investment) and 10% (in the case of Direct Investments) to the Managing Member (such 5% and 10%, together with all previous amounts distributed to the Managing Member, referred to as Carried Interest ). Earnings on cash balances received as proceeds from Partnership Investments or Direct Investments will, if and when distributed, be treated as Portfolio Distributions. The Managing Member has determined that the Preferred Return is calculated to the date of receipt by the Americas Fund II of proceeds related to Invested Capital. In the event AXA-AIG Asset Management II, LLC is removed as Managing Member, it will continue to receive the Carried Interest distributions it would have otherwise received pursuant to the preceding formula had it not been so removed. For the six months ended June 30, 2012, the Americas Fund II made no distributions to the Members of the Americas Fund II. Upon termination, liquidating distributions will be made in accordance with Members equity balances at liquidation date. The Managing Member records in the Statement of Changes in Members Equity the provisional amount of Carried Interest ( Accrued Carried Interest ) that would have been allocated had all Partnership Investments been liquidated at their carrying value at the balance sheet date. This method reflects the matching of allocations of unrealized amounts included in Partnership Investment valuations and allocations of realized gains not yet distributed to members. Based on the assumed liquidation of the Partnership Investments at the Americas Fund II s carrying value at June 30, 2012 and applying the distribution methodology described above, the Accrued Carried Interest provisionally allocated to the Managing Member through June 30, 2012 amounted $1,481,637 which was previously recognized. 8. FUND EXPENSES The Americas Fund II will be responsible for all expenses incurred in connection with the organization and operation of the Americas Fund II, including fees paid to the Administrator for administrative services. Transactional expenses are borne by Americas Fund II and may include outof-pocket third-party expenses of the Americas Fund II (including the costs and services provided to the Americas Fund II by persons who are not employees of the Managing Member or its affiliates, including fees and expenses of the attorneys, accountants, auditors, consultants and other third-party professionals) incurred in making, holding, sale or proposed sale of any Portfolio Investment (or proposed Portfolio Investment), and all extraordinary expenses (which include all litigation-related and indemnification expenses). 9

12 Notes to Financial Statements (Unaudited) (Liquidation Basis of Accounting) (continued) 8. FUND EXPENSES, continued At its discretion, the Managing Member may bear certain expenses on behalf of the Americas Fund II. Included within general and administrative expenses in the Statement of Operations for the six months ended June 30, 2012, are approximately $3,490 of expenses incurred by the Managing Member in connection with certain insurance costs, trade memberships and costs of industry conferences and other sundry expenses. The Managing Member has determined that the foregoing expenses are permitted to be charged to the Americas Fund II and are appropriate Americas Fund II expenses. 9. WITHDRAWAL AND TRANSFER A Member may not withdraw from the Americas Fund II or sell, transfer, assign, pledge, or otherwise dispose of its interest, except with the prior written consent of, and on such terms and conditions as determined by, the Managing Member, which consent may be granted or withheld, in the Managing Member s sole and absolute discretion. No partial withdrawals or transfers are permitted. 10. WARRANTIES AND INDEMNIFICATIONS In the normal course of business and throughout the sale process, the Americas Fund II enters into contracts that contain a variety of warranties and indemnifications that provide general indemnifications and has provided certain indemnifications to the Buyers. The Americas Fund II s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Americas Fund II that have not yet occurred. However, based on the Americas Fund II s operations to date, the Managing Member expects the risk of loss to be remote. 11. FINANCIAL HIGHLIGHTS The Americas Fund II is required to disclose financial highlights, which consist of the expense and net investment loss ratios of the six months ended June 30, 2012 and the internal rate of return (IRR) since inception of members equity attributable to non-managing members, net of all fees and carried interest through December 31, 2011 and June 30, The following summarizes the Americas Fund II s financial highlights. Cumulative net Internal Rate of Return to Non-Managing Members: Through December 31, % Through June 30, % (1) (4) Ratios: Total expenses 0.02% Net investment income 0.03% Total capital contributions received to total capital commitments (2) % (1) (3) 10

13 Notes to Financial Statements (Unaudited) (Liquidation Basis of Accounting) (continued) 11 FINANCIAL HIGHLIGHTS, continued (1) (2) (3) (4) The ratios to average limited members equity are calculated for the non-managing members taken as a whole. The computation of such ratios based on the amount of expenses assessed to an individual member s equity account may vary from these ratios based on differing advisory fee arrangements and the timing of capital transactions. Total capital contributions represent total limited members contributed capital. Total capital commitments represent aggregate capital commitments of all members, as of June 30, Cumulative IRR is net of expenses, Carried Interest and Accrued Carried Interest based on unrealized amounts. Contributions and distributions are considered based on the actual dates of the respective cash flows. The ratios do not reflect the Americas Fund II s proportionate share of income and expenses of the Partnership Investments. 12 SUBSEQUENT EVENTS For the six months ended June 30, 2012, the Americas Fund II evaluated subsequent events through August 20, 2012, which is the date the financial statements were available to be issued. No events or transactions requiring recognition or disclosure have been noted. 11