NB Private Equity Partners Limited

Transcription

1 NB Private Equity Partners Limited 31 MARCH 2009 INTERIM FINANCIAL REPORT NB Private Equity Partners Limited

2 TABLE OF CONTENTS MANAGEMENT COMMENTARY: COMPANY OVERVIEW... 1 OVERVIEW OF THE INVESTMENT MANAGER... 2 INVESTMENT RESULTS... 3 INVESTMENT PORTFOLIO SUMMARY... 4 INVESTMENT STRATEGY AND CAPITAL DEPLOYMENT... 5 PORTFOLIO AND INVESTMENT ACTIVITY... 6 PORTFOLIO DIVERSIFICATION... 7 DIVERSIFICATION OF UNFUNDED COMMITMENTS... 9 VINTAGE YEAR DIVERSIFICATION PRIVATE EQUITY INVESTMENT PORTFOLIO VALUATION METHODOLOGY PERFORMANCE BY ASSET CLASS CO-INVESTMENT PERFORMANCE LARGEST UNDERLYING INVESTMENTS NB CROSSROADS FUND OF FUNDS INVESTMENTS LIQUIDITY AND CAPITAL RESOURCES MARKET COMMENTARY FORWARD-LOOKING STATEMENTS RISK FACTORS STATEMENT OF RESPONSIBILITY AND CERTAIN INFORMATION DIRECTORS, ADVISORS AND CONTACT INFORMATION CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NB Private Equity Partners Limited

3 COMPANY OVERVIEW Our investment objective is to produce attractive returns on our capital from our private equity investments while managing investment risk through portfolio diversification. We intend to pursue diversification for our private equity investments across asset class, vintage year, geography, industry and sponsor. Our Company Investment Manager NB Private Equity Partners Limited ( NBPE ) Guernsey closed-end investment company 51,160,165 Class A ordinary Shares outstanding 10,000 Class B ordinary Shares outstanding NB Alternatives Over 20 years of private equity investing experience Investment Committee with an aggregate of more than 200 years of experience with private equity investing ~50 investment professionals ~135 administrative and finance professionals Offices in New York, Dallas, London and Hong Kong ($ in millions, except per share data) At 31 March 2009 At 31 December 2008 Net Asset Value $398.7 $430.5 Net Asset Value per Share $7.79 $8.20 Fund Investments $355.6 $359.0 Direct Co-investments $75.8 $89.3 Total Private Equity Investments $431.4 $448.3 Private Equity Investment Level 108% 104% Cash and Cash Equivalents $108.0 $139.2 NB Private Equity Partners Limited 1

4 OVERVIEW OF THE INVESTMENT MANAGER The NB Alternatives group of Neuberger Berman (the Investment Manager ) has over twenty years of investing experience specializing in private equity funds, co-investments and secondary investments and has built relationships with leading private equity sponsors over that time. The Investment Manager makes all of our investment decisions, and we have delegated to the Investment Manager the day-to-day management and operations of our business. The Investment Manager s investment decisions are made by its Fund of Funds Investment Committee (the Investment Committee ), which currently consists of members with an aggregate of more than 200 years of experience with private equity investing. The sourcing and evaluation of our investments is conducted by the Investment Manager s team of approximately 50 investment professionals who specialize in private equity fund investments and co-investments. In addition, the Investment Manager s staff of approximately 135 administrative and finance professionals are responsible for our administrative, financial management and reporting needs. The Investment Manager currently maintains offices in New York, Dallas, London and Hong Kong. Investment Manager Update On 4 May 2009, Neuberger Berman Group LLC ( Neuberger Berman ) announced the completion of an employee-led buyout of the 70-year-old company, creating one of the world s largest private, independent money managers with approximately $158 billion in assets under management for institutions and individuals. New York-based Neuberger Berman is majority-owned by an employee group consisting of portfolio managers and senior professionals of the newly independent company. Neuberger Berman s previous owner, Lehman Brothers Holdings Inc., retains the remainder. Established in 1939, Neuberger Berman has approximately 1,600 employees, including more than 250 investment professionals, and is a leader in providing a broad range of global investment solutions equity, fixed income, and alternatives to institutions and individuals through customized separately managed accounts and funds. For more information please visit the Neuberger Berman website at NB Private Equity Partners Limited 2

5 INVESTMENT RESULTS During the first quarter, net asset value decreased from $430.5 million at 31 December 2008 to $398.7 million, or $7.79 per Share, at 31 March This represents a decrease of $0.41 per Share, or 5%, compared to the net asset value per Share of $8.20 at 31 December In the first quarter of 2009, declining public market valuations, particularly in January and February, and an uncertain economic outlook led to write-downs in the mark-to-market value of credit-related fund investments and the unrealized value of certain privately-held buyout investments. During the first three months of 2009, we had net realized losses of $3.7 million in our private equity portfolio. The portfolio also experienced net unrealized depreciation of $18.7 million related to privately held investments, principally related to the write-down of certain buyout co-investments. In addition, there was a $3.0 million net decrease in the value of credit related fund investments and publicly traded equity securities. Interest and dividend income, foreign exchange adjustments, operating expenses and other items resulted in a $3.1 million decrease in net asset value. However, share repurchases during the quarter through the Liquidity Enhancement Agreement were accretive to net asset value by $0.14 on a per share basis. In the first quarter of 2009, we invested approximately $12.7 million into private equity investments through capital calls and direct coinvestments. Approximately 43% of the capital invested was directed to buyout funds, 32% was deployed into special situations / distressed funds and 25% was invested in growth equity and venture capital funds. In the first quarter of 2009, we received approximately $3.0 million of distributions from our underlying private equity portfolio. A majority of the distributions came from two investments: approximately 43% related to our co-investment in TPF Genco Holdings, LLC and another 35% from Corsair III Financial Services Capital Partners. LTM SHARE PRICE PERFORMANCE AND NET ASSET VALUE PER SHARE Price $12.00 $10.00 $8.00 $7.79 $6.00 $4.00 $2.00 $1.80 $ Mar May Jul Sept Nov Jan Mar-09 Volume (000's) Net Asset Value per Share Price per Share Daily Trading Volume NB Private Equity Partners Limited 3

6 INVESTMENT PORTFOLIO SUMMARY During the first quarter of 2009, we did not commit to any new private equity funds or invest in any direct co-investments. During 2008, we committed approximately $59.4 million to new private equity investments, including 69%, or $41.2 million, to special situations funds and co-investments. As of 31 March 2009, our private equity investment portfolio consisted of 58 fund investments and direct co-investments and the net asset value and total exposure of our private equity portfolio was $431.4 million and $602.1 million, respectively. ($ in millions) PRIVATE EQUITY INVESTMENT PORTFOLIO 31 MARCH 2009 Number of Investments Net Asset Value Unfunded Commitments Total Exposure Fund Investments 39 $355.6 $164.4 $519.9 Direct Co-investments Total Private Equity Investments 58 $431.4 $170.8 $602.1 PORTFOLIO ALLOCATION BASED ON NET ASSET VALUE Fund Investments 82% Direct Co-investments 18% NB Private Equity Partners Limited 4

7 INVESTMENT STRATEGY AND CAPITAL DEPLOYMENT We seek to generate attractive returns on our capital by increasing our net asset value over the long term. We strive to implement our strategy by making investments into high quality private equity funds and direct co-investments, while also maintaining a well-diversified portfolio. In the second half of 2007 and throughout 2008, we tactically allocated a larger portion of our portfolio to the special situations asset class, including distressed funds. As of 31 March 2009, special situations funds and co-investments represented 23% of our investment portfolio based on private equity net asset value. Since 30 June 2008, our special situations managers have deployed over $55 million to take advantage of potential opportunities to generate value through undervalued credit securities, financial restructurings, reorganizations and operational turnarounds of underperforming businesses. During the second half of 2008 through early March 2009, severe dislocations in the credit markets placed negative pressure on valuations, resulting in unrealized mark-to-market losses for a majority of our special situations investments. However, from the middle of March through early June 2009, the credit markets experienced a relative increase in liquidity and new issue activity. Loan and bond prices have increased since the end of the first quarter (although they are still at historically low levels) and a significant amount of restructuring and refinancing activity is beginning to take place. As this activity persists, we believe our special situations managers are well-positioned to capitalize on opportunities to generate attractive returns over the long term. With our private equity investment level at 108% at the end of the first quarter, we will continue to be cautious regarding new investments in order to maintain a conservative capital structure. Q CAPITAL DEPLOYMENT $ in Millions $500 $450 $448.3 $12.7 ($3.0) $431.4 ($26.6) $400 $350 $ December 2008 Private Equity NAV Q Contributions Less: Distributions Received in Q Less: Valuation Adjustments 31 March 2009 Private Equity NAV NB Private Equity Partners Limited 5

8 PORTFOLIO AND INVESTMENT ACTIVITY Portfolio and investment activity in the first quarter of 2009 was as follows: ($ in millions) Fund Investments Direct Co-investments Total Capital Calls / Coinvestments Funded $12.7 $0.0 $12.7 Distributions Received $1.4 $1.6 $3.0 Net Realized Gains (Losses) ($3.1) ($0.0) ($3.1) Net Unrealized Appreciation (Depreciation) ($11.4) ($11.8) ($23.2) New Commitments Amount Committed $0.0 $0.0 $0.0 NB Private Equity Partners Limited 6

9 PORTFOLIO DIVERSIFICATION Consistent with our investment objective, we strive to manage investment risk through appropriate diversification within our private equity portfolio. The graphs below illustrate the breakdown of our private equity investment portfolio based on private equity net asset value as of 31 March DIVERSIFICATION BASED ON PRIVATE EQUITY NET ASSET VALUE 1 Asset Class and Investment Type Vintage Year of Fund or Co-investment 2 Large-cap Buyout Funds 32% Secondary Purchases 2% Growth / Venture 6% Special Sit Coinvest 1% Mid-cap Buyout Funds 20% Large-cap Buyout Coinvest 6% Mid-cap Buyout Coinvest 11% Special Sit Funds 22% % 2000 & Earlier 1% % % % % % % % % Geography Industry Energy / Utilities 24% Financial ServicesConsumer / 11% Retail 10% North America 77% Europe 19% Asia / Rest of World 4% Diversified / Undisclosed / Other 17% Transport. 2% Comm. / Media 5% Business Services 6% Industrials 9% Technology / IT 8% Healthcare 8% 1. The diversification analysis by asset class and investment type is based on the net asset value of underlying fund investments and co-investments. The diversification analysis by vintage year, geography and industry is based on the diversification of underlying portfolio company investments at fair value as estimated by the Investment Manager. The vintage year diversification also includes an allocation of net cash flows and valuation adjustments made since financial statements were last received from the investment sponsor. Determinations regarding asset class, geography and industry also represent the Investment Manager s estimates. Accordingly, the actual diversification of our investment portfolio and the diversification of our investment portfolio on an ongoing basis may vary from the foregoing information. 2. Vintage year is the date of the first portfolio investment made by a private equity fund or the date of the co-investment. NB Private Equity Partners Limited 7

10 The graphs below depict the diversification of our private equity investment portfolio as of 31 March 2009 based on total private equity exposure, defined as the value of private equity investments plus related unfunded commitments. DIVERSIFICATION BASED ON PRIVATE EQUITY TOTAL EXPOSURE 1 Asset Class and Investment Type Vintage Year of Fund or Co-investment 2 Large-cap Buyout Funds 32% Secondary Purchases 1% Growth / Venture 9% Special Sit Coinvest 1% Mid-cap Buyout Funds 22% Large-cap Buyout Coinvest 5% Mid-cap Buyout Coinvest 9% Special Sit Funds 21% % 2000 & Earlier 1% % % % % % % % % North America 73% Geography Europe 23% Asia / Rest of World 4% Energy / Utilities 24% Diversified / Undisclosed / Other 17% Transport. 2% Comm. / Media 5% Industry Financial Services 11% Business Services 6% Consumer / Retail 10% Industrials 9% Technology / IT 8% Healthcare 8% 1. The diversification analysis by asset class and investment type is based on the net asset value of underlying fund investments and co-investments plus related unfunded commitments. The diversification analysis by vintage year, geography and industry is based on the diversification of underlying portfolio company investments at fair value as estimated by the Investment Manager. The vintage year diversification also includes an allocation of net cash flows and valuation adjustments made since financial statements were last received from the investment sponsor. Determinations regarding asset class, geography and industry, as well as the allocation of unfunded commitments, also represent the Investment Manager s estimates. Accordingly, the actual diversification of our investment portfolio and the diversification of our investment portfolio on an ongoing basis may vary from the foregoing information. 2. Vintage year is the date of the first portfolio investment made by a private equity fund or the date of the co-investment. NB Private Equity Partners Limited 8

11 DIVERSIFICATION OF UNFUNDED COMMITMENTS The graphs below depict the diversification of our $170.8 million of unfunded private equity commitments as of 31 March DIVERSIFICATION BASED ON UNFUNDED EXPOSURE 1 Asset Class and Investment Type Vintage Year of Fund or Co-investment 2 Large-cap Buyout Funds 34% Secondary Purchases 1% Growth / Venture 16% Mid-cap Buyout Funds 26% Special Sit Funds 19% Mid-cap Buyout Coinvest 4% % 2000 & Earlier 1% % % % % % % % % 1. Determinations regarding asset class represent the Investment Manager s estimates. 2. Vintage year is the date of the first portfolio investment made by a private equity fund or the date of the co-investment. NB Private Equity Partners Limited 9

12 VINTAGE YEAR DIVERSIFICATION In addition to the overall diversification of our private equity portfolio, we continue to be mindful of potential changes in the market in order to capitalize on the most attractive opportunities at a given point in time. In the second half of 2007 and throughout 2008, we tactically allocated a larger amount of capital to special situations funds and co-investments in order to take advantage of distressed investment opportunities. As a result, based on private equity net asset value at the end of the first quarter, 31% of our 2007 vintage year investments and 90% of our 2008 vintage year investments were invested in special situations / distressed. The table below illustrates the diversification of our private equity net asset value by vintage year and investment type as of 31 March For the purposes of this analysis, and throughout this Interim Financial Report, vintage year is defined as the date of the first portfolio investment made by a private equity fund or the date of a co-investment. DIVERSIFICATION BY VINTAGE YEAR AND INVESTMENT TYPE ($ in millions) Vintage Year <= Total Large-cap Buyout Funds $38.8 $34.0 $57.4 $5.6 - $135.8 Large-cap Buyout Co-investme Mid-cap Buyout Funds Mid-cap Buyout Co-investment Special Situations Funds Special Sit. Co-investments Growth / Venture Secondary Purchases Total $52.5 $53.5 $139.5 $141.7 $44.1 $431.4 Vintage Year <= Total Large-cap Buyout Funds 74% 64% 41% 4% 0% 31% Large-cap Buyout Co-investme 0% 0% 1% 11% 0% 4% Mid-cap Buyout Funds 17% 14% 31% 20% 1% 20% Mid-cap Buyout Co-investment 0% 1% 11% 27% 5% 13% Special Situations Funds 0% 3% 11% 31% 78% 22% Special Sit. Co-investments 0% 0% 0% 0% 12% 1% Growth / Venture 6% 8% 4% 8% 4% 6% Secondary Purchases 3% 10% 0% 0% 0% 2% Total 100% 100% 100% 100% 100% 100% NB Private Equity Partners Limited 10

13 PRIVATE EQUITY INVESTMENT PORTFOLIO The following is a list of our private equity investments as of 31 March 2009: ($ in millions) Principal Geography Vintage Year Estimated Fair Value Unfunded Commitments Total Exposure Asset Class Fund Investments AIG Highstar Capital II Mid-cap Buyout U.S $3.3 $0.3 $3.5 American Capital Equity II Mid-cap Buyout U.S Apollo Investment Fund V Large-cap Buyout U.S Aquiline Financial Services Fund Mid-cap Buyout U.S ArcLight Energy Partners Fund IV Mid-cap Buyout U.S Avista Capital Partners Mid-cap Buyout U.S Bertram Growth Capital I Growth Equity U.S Carlyle Europe Partners II Large-cap Buyout Europe Centerbridge Credit Partners Special Situations U.S Clayton, Dubilier & Rice Fund VII Large-cap Buyout U.S Clessidra Capital Partners Mid-cap Buyout Europe Corsair III Financial Services Capital Partners Mid-cap Buyout Global CVI Global Value Fund Special Situations Global Doughty Hanson & Co IV Large-cap Buyout Europe First Reserve Fund XI Large-cap Buyout U.S Investitori Associati III Mid-cap Buyout Europe J.C. Flowers II Large-cap Buyout Global KKR 2006 Fund Large-cap Buyout Global KKR Millennium Fund Large-cap Buyout Global NB Crossroads Fund XVII Diversified U.S NB Crossroads Fund XVIII Large-cap Buyout Large-cap Buyout Global NB Crossroads Fund XVIII Mid-cap Buyout Mid-cap Buyout Global NB Crossroads Fund XVIII Special Situations Special Situations Global NB Crossroads Fund XVIII Venture Capital Venture / Growth U.S Lightyear Fund II Mid-cap Buyout U.S Madison Dearborn Capital Partners V Large-cap Buyout U.S OCM Opportunities Fund VIIb Special Situations U.S OCM Principal Opportunities Fund IV Mid-cap Buyout U.S Platinum Equity Capital Partners II Special Situations U.S Prospect Harbor Credit Partners Special Situations U.S Sankaty Credit Opportunities III Special Situations U.S Summit Partners Europe Private Equity Fund Growth Equity Europe Sun Capital Partners V Special Situations U.S Terra Firma Capital Partners III Large-cap Buyout Europe Thomas H. Lee Equity Fund VI Large-cap Buyout U.S Trident IV Mid-cap Buyout U.S Warburg Pincus Private Equity VIII Large-cap Buyout Global Wayzata Opportunities Fund II Special Situations U.S Welsh, Carson, Anderson & Stowe X Large-cap Buyout U.S Total Fund Investments $355.6 $164.4 $519.9 Direct Co-investments (1) Avaya, Inc. Large-cap Buyout U.S Dresser Holdings, Inc. Mid-cap Buyout U.S Edgen Murray Corporation Mid-cap Buyout U.S Energy Future Holdings Corp. (TXU Corp.) Large-cap Buyout U.S First Data Corporation Large-cap Buyout U.S Firth Rixson, plc (Equity) Mid-cap Buyout Europe 2007 / 2008 Firth Rixson, plc (Mezzanine) Special Situations Europe 2008 Freescale Semiconductor, Inc. Large-cap Buyout U.S GazTransport & Technigaz S.A.S. Mid-cap Buyout Europe 2008 Group Ark Insurance Holdings Limited Mid-cap Buyout Global 2007 Kyobo Life Insurance Co., Ltd. Mid-cap Buyout Asia 2007 Linn Energy, LLC Mid-cap Buyout U.S MaRI Holdings Limited Mid-cap Buyout Global 2007 Press Ganey Associates, Inc. Mid-cap Buyout U.S Sabre Holdings Corporation Large-cap Buyout U.S Seventh Generation, Inc. Growth Equity U.S TPF Genco Holdings, LLC Mid-cap Buyout U.S Unión Radio Mid-cap Buyout Global 2008 Total Direct Co-investments $75.8 $6.4 $82.2 Total Private Equity Investment Portfolio $431.4 $170.8 $ Co-investment values are given on an aggregate-only basis. No single co-investment comprised more than 5.0% of total net asset value. NB Private Equity Partners Limited 11

14 VALUATION METHODOLOGY We carry our private equity investments on our books at fair value using the best information we have reasonably available to determine or estimate fair value. Publicly traded securities are valued based on quoted prices as of the last day of the relevant period less discounts to reflect legal restrictions associated with the securities, if any, that affect marketability. We determine such values for publicly traded securities held directly as well as known public positions held in the underlying private equity investments on a look-through basis. We estimate fair value for private interests based on a methodology that begins with the most recent information available from the general partner of the underlying fund or the lead investor of a direct co-investment, and considers subsequent transactions, such as drawdowns or distributions, as well as other information judged to be reliable that reports or indicates valuation changes, including realizations and other portfolio company events. We proactively re-value our investments before we have received updated information from the fund manager or lead sponsor if we become aware of material events that justify a change in valuation. Our net asset value of $7.79 per share as of 31 March 2009 was $0.38 lower than previously reported in our March 2009 Monthly Report principally due to the receipt of additional portfolio valuation information. Between the release date of our March 2009 Monthly Report and the date of this Interim Financial Report, our Investment Manager received first quarter 2009 financial statements and other valuation estimates that resulted in write-downs within our private equity portfolio, particularly related to our buyout coinvestments. Furthermore, our Investment Manager utilized this valuation information to proactively revalue certain portfolio companies that are in multiple private equity funds using the most conservative valuation multiple across the portfolio. The graphs below illustrate the diversification of our private equity investments by valuation type and the date of most recent available information as of 31 March NBPE Private Equity NAV by Valuation Type VALUATION METHODOLOGY NBPE Private Equity NAV by Date of Most Recent Available Information Private - Held Above Cost 34% Mark-to- Market Credit Related 15% Private - Held At Cost 12% Public Valuation 7% Private - Held Below Cost 32% Private Fund Investments (31-Mar-09) 56% Private Coinvestments (31-Mar-09) 18% Private Fund Investments (31-Dec-08) 4% Credit Related (31-Mar-09) 15% Public Investments (31-Mar-09) 7% NB Private Equity Partners Limited 12

15 PERFORMANCE BY ASSET CLASS Based on the multiple of total value to paid-in capital ( TVPI ), our private equity portfolio decreased in value from 0.84x at 31 December 2008 to 0.80x at 31 March The largest decline in performance was related to mid-cap buyout investments, which fell from 1.05x to 0.98x. The mid-cap buyout portfolio was primarily affected by lower public market comparables, weakening operating performance and a softer outlook for estimated future earnings. This confluence of events led to lower valuations at quarter end, especially for certain mid-cap buyout co-investments. For many of the same reasons, large-cap buyout valuations also declined across much of the portfolio. During the first quarter, the TVPI multiple of our large-cap buyout portfolio decreased from 0.75x to 0.73x. Our special situations / distressed portfolio declined from 0.70x to 0.66x in the first quarter of 2009, largely due to unrealized losses related to mark-tomarket adjustments on debt securities purchased by trading and restructuring funds. Overall, the special situations portfolio is in the early stages of the J-curve with a majority of the capital deployed in It is not unusual for distressed portfolios to have initial negative returns as managers build their investment positions. If our underlying managers are making appropriate credit selections, we would expect the distressed portfolios to appreciate much more quickly as credit markets begin to stabilize. In addition, by investing primarily in debt securities, the distressed portfolio should provide downside protection by investing in a more senior portion of the capital structure. The TVPI multiple of our growth equity and venture capital portfolio decreased from 1.16x to 1.13x during the quarter and our investment in NB Crossroads Fund XVII, which is diversified across all four asset classes, declined in value from 0.94x to 0.91x during the first three months of the year. The graph below illustrates a summary of our portfolio performance by asset class during the first quarter of Q PORTFOLIO PERFORMANCE BY ASSET CLASS TVPI 1.25x 1.16x 1.13x 1.05x 1.00x 0.98x 0.94x 0.91x 0.75x 0.75x 0.73x 0.70x 0.66x 0.50x 0.25x 0.00x Large-cap Buyout Mid-cap Buyout Special Situations Growth / Venture Crossroads Fund XVII 31 December 2008 Audited 31 March 2009 Interim NB Private Equity Partners Limited 13

16 CO-INVESTMENT PERFORMANCE During the first quarter of 2009, the TVPI multiple of our co-investment portfolio decreased from 0.98x to 0.87x. The write-downs in the co-investment portfolio were principally related to mid-cap buyout and other co-investments due to lower public market comparables, weakening operating performance and a softer outlook for estimated future earnings. The table below outlines the performance of our co-investment portfolio from inception through 31 March 2009 by asset class and valuation range. CO-INVESTMENT PERFORMANCE BY ASSET CLASS AND VALUATION RANGE Asset Class # Co-investments 31-March-2009 Fair Value ($mm) Total Value to Paid-in Capital % of Fair Value Large-cap Buyout 5 $ x 21.7% Mid-cap Buyout x 69.3% Other Co-investments x 9.0% Total Co-investments 20 $ x 100.0% Multiple Range # Co-investments 31-March-2009 Fair Value ($mm) Total Value to Paid-in Capital % of Fair Value < 0.5x 5 $ x 5.9% 0.5x - 1.0x x 32.7% Held at Cost x 1.3% 1.0x - 2.0x x 45.3% 2.0x x 14.8% Total Co-investments 20 $ x 100.0% NB Private Equity Partners Limited 14

17 LARGEST UNDERLYING INVESTMENTS At 31 March 2009, our private equity investment portfolio included exposure to over 2,350 separate companies, with our allocable portion of approximately 850 companies valued at greater than $20,000. Our 10 largest portfolio company investments totaled approximately $85 million in fair value, or 20% of our private equity investments and 21% of our total net asset value. Our 20 largest portfolio company investments totaled approximately $123 million in fair value, or 28% of our private equity investments and 31% of our total net asset value. No individual company accounted for more than 5.0% of total net asset value at quarter end. Listed below are the 20 largest portfolio company investments in alphabetical order. Company Name Status Business Description Partnership Affinion Group Holdings Inc. Privately Held Marketing solutions Apollo V Avaya, Inc. Privately Held Communication systems, applications and Direct, Fund XVIII services for enterprises California Highwind Power Privately Held Wind generated power plants Arclight IV, Fund XVIII Dresser Holdings, Inc. Privately Held Energy infrastructure and oilfield equipment and services Edgen Murray Corporation Privately Held Distributor and marketer of steel and alloy products Energy Future Holdings Corp. (f/k/a TXU Corp.) ** Privately Held Power generation, transmission and distribution, and retail electricity services Direct, First Reserve XI, Fund XVII, Fund XVIII Direct, Fund XVII, Fund XVIII Direct, KKR 2006, Fund XVIII First Data Corporation ** Privately Held Global payment processing services Direct, KKR 2006, Fund XVIII Firth Rixson, plc ** Privately Held Supplier of specialist metal products primarily Direct, Fund XVIII for the aerospace industry Group Ark Insurance Holdings Privately Held Lloyd s based specialty P&C insurer Direct, Aquiline, Fund XVIII Limited HD Supply Company ** Privately Held Diversified wholesale distributor CD&R VII, OCM Principal Opps IV, OCM Opps VIIb, Fund XVIII Lantheus Medical Imaging Privately Held Cardiovascular medical imaging Avista, Fund XVIII Linn Energy, LLC Publicly-Traded Independent oil and gas company Direct Nielsen Company Privately Held Global information and media products and services Carlyle Europe II, KKR Millennium, THL Fund VI, Fund XVII, Fund XVIII Nycomed Holdings A/S Privately Held Specialty pharmaceutical company Avista, Fund XVII, Fund XVIII Power Holdings Inc. Privately Held Manufacturer of full spectrum power Bertram Growth Capital, Fund XVIII distribution and monitoring equipment Sabre Holdings Corporation Privately Held Travel services Direct, Fund XVII, Fund XVIII ServiceMaster Company ** Privately Held Maintenance services, including lawn care, Clayton, Dubilier & Rice VII, Fund XVIII house cleaning and pest control Terra-Gen Power, LLC Privately Held Geothermal, wind and solar power generation Arclight IV, Fund XVIII TPF Genco Holdings, LLC Privately Held Natural gas fired power plants Direct, Fund XVII, Fund XVIII U.S. Foodservice Inc ** Privately Held Foodservice distributor Clayton, Dubilier & Rice VII, KKR 2006, Fund XVIII At 31 March 2009, approximately $28 million of our private equity investment portfolio was comprised of investments directly or indirectly in publicly-traded securities. This amount represented 7% of our private equity investments and 7% of our total net asset value. ** Indicates exposure to both equity and debt securities. NB Private Equity Partners Limited 15

18 NB CROSSROADS FUND OF FUNDS INVESTMENTS NB Crossroads Fund XVII ( Fund XVII ) and NB Crossroads Fund XVIII ( Fund XVIII ) are diversified private equity funds of funds comprised of private equity fund investments, secondary investments and co-investments. Our exposure to Fund XVII is through a single commitment to Fund XVII s asset allocation fund while our exposure to Fund XVIII is through separate commitments to each of the asset class funds within Fund XVIII: Large-cap Buyout; Mid-cap Buyout; Special Situations / Distressed; and Growth Equity / Venture Capital. As of 31 March 2009, the fair value of our investment in Fund XVII was $28.6 million, representing 7% of our total private equity investments and 7% of our total net asset value. The asset class diversification of our investment in Fund XVII based on private equity net asset value at quarter end was as follows 1 : Large-cap Buyout 25%; Mid-cap Buyout 29%; Growth / Venture 41%; and Special Situations 5%. As of 31 March 2009, Fund XVII consisted of 62 primary fund investments, nine co-investments and five secondary purchases and included exposure to over 1,400 separate companies, with the ten largest companies totaling approximately $2.7 million in fair value to NBPE, or less than 1% of our total net asset value. At the end of the first quarter 2009, we had unfunded commitments of $10.0 million to Fund XVII. As of 31 March 2009, the aggregate fair value of our investments in Fund XVIII was $36.5 million, representing 8% of our total private equity investments and 9% of our total net asset value. The asset class diversification of our investments in Fund XVIII based on private equity net asset value at quarter end was as follows 1 : Large-cap Buyout 18%; Mid-cap Buyout 52%; Special Situations 16%; and Growth / Venture 14%. As of 31 March 2009, Fund XVIII consisted of 71 primary fund investments, 28 co-investments and seven secondary purchases and included exposure to over 1,200 separate companies, with the ten largest companies totaling approximately $5.4 million in fair value to NBPE, or approximately 1% of our total net asset value. At the end of the first quarter 2009, we had unfunded commitments of $28.7 million to Fund XVIII. The table below lists our ten largest investments in Fund XVII and Fund XVIII in alphabetical order as of 31 March At 31 March 2009, the ten largest investments in Fund XVII had a fair value of approximately $7.3 million to NBPE, or 2% of our total private equity investments and 2% of our total net asset value. The ten largest investments in Fund XVIII had a fair value of approximately $9.9 million, or 2% of our total private equity investments and 2% of our total net asset value. Ten Largest Investments in Fund XVII Ten Largest Investments in Fund XVIII Partnership Asset Class Partnership Asset Class Apollo Investment Fund VI Large-cap Buyout 3i Eurofund V Mid-cap Buyout Battery Ventures VII Growth / Venture Aquiline Financial Services Fund Mid-cap Buyout Carlyle/Riverstone Global E&P Fund III Large-cap Buyout Doughty Hanson & Co V Mid-cap Buyout CVC European Equity Partners IV Large-cap Buyout Edgen Murray Corporation Mid-cap Co-invest New Enterprise Associates 11 Growth / Venture Madison Dearborn Capital Partners V Large-cap Buyout Oak Investment Partners XI Growth / Venture TowerBrook Investors II Mid-cap Buyout ONSET V Growth / Venture TPF Genco Holdings Mid-cap Co-invest Thoma Cressey Fund VIII Mid-cap Buyout Tenaska Power Fund II Mid-cap Buyout Trinity Ventures IX Growth / Venture Veritas Capital Fund III Mid-cap Buyout Warburg Pincus Private Equity IX Special Situations Wayzata Opportunities Fund Special Situations 1. The asset class diversification analysis is based on our allocable portion of the net asset value of the underlying fund investments and direct co-investments held by Fund XVII and Fund XVIII, respectively. NB Private Equity Partners Limited 16

19 LIQUIDITY AND CAPITAL RESOURCES The principal sources of our liquidity consist of the net proceeds of cash distributions from prior investments, cash distributions from existing investments, sales of investments, interest and dividends earned on invested cash and existing investments and borrowings under our credit facility (further detail provided below and in Note 5 of the Consolidated Financial Statements). As of 31 March 2009, we had borrowed $136.7 million from our $250.0 million credit facility in order to fund ongoing investment activities. As a result, we had cash and cash equivalents of $108.0 million and $113.3 million of undrawn capacity on our credit facility, resulting in total capital resources of $221.4 million. Given that our unfunded private equity commitments were $170.8 million at quarter end, we continued to maintain a conservative capital structure as over 100% of our unfunded commitments were backstopped by our cash and undrawn credit facility. The table below outlines our liquidity and capital position as of 31 March CAPITAL POSITION AT 31 MARCH 2009 ($ in millions) 31 March 2009 Net Asset Value $398.7 Total Private Equity Investments $431.4 Private Equity Investment Level 108% Unfunded Private Equity Commitments $170.8 Total Private Equity Exposure $602.1 Over-commitment Level 51% Cash and Cash Equivalents $108.0 Undrawn Credit Facility $113.3 Total Capital Resources $221.4 Excess of Capital Resources Over Unfunded Commitments $50.6 In August 2007, we entered into an agreement with The Bank of Scotland regarding a senior secured revolving credit facility of up to $250.0 million. Under the terms of the agreement, we may borrow, repay and re-borrow to fund private equity contributions and working capital requirements throughout the seven year term expiring in August All borrowings under the credit facility bear interest at a floating rate, calculated as LIBOR or Euribor, as appropriate, plus 1.35% per annum. At 31 March 2009, the interest rate on outstanding borrowings ranged from % to %. We are also required to pay a nonutilization fee calculated as 40 basis points per annum on the daily balance of the unused amount of the credit facility. Although we do not presently pay dividends, we have the ability to pay dividends subject to compliance with the terms of the agreement. The key financial covenant for our credit facility is a maximum debt to value ratio of 50.0%. The debt to value ratio is calculated as total debt and current liabilities divided by Restricted NAV, with Restricted NAV defined as the fair value of all private equity investments (less any restricted value) plus cash and cash equivalents. At 31 March 2009, the debt to value ratio was 26.4%. The two other covenants are a secured asset ratio and a commitment ratio. The secured asset ratio is not to exceed 80.0% and is defined as total debt and current liabilities divided by Secured Assets, with Secured Assets defined as the value of secured private equity investments plus cash and cash equivalents. At 31 March 2009, the secured asset ratio was 36.4%. NB Private Equity Partners Limited 17

20 The commitment ratio is defined as Restricted Total Exposure divided by the aggregate of shareholder s equity and the total amount of the credit facility, with Restricted Total Exposure defined as the value of private equity investments (less any restricted value) plus unfunded private equity commitments. If the debt to value ratio is greater than 25.0% and the commitment ratio is greater than 130.0%, then we become restricted from making new private equity investments. At 31 March 2009, the commitment ratio was 92.8%. NB Private Equity Partners Limited 18

21 MARKET COMMENTARY Although the financial markets have begun to stabilize and public market valuations have increased considerably from mid-march through early June 2009, the broader economy has yet to see a large-scale recovery. Businesses across the industry spectrum, hopeful that small signs of recovery hint at a more promising near-term outlook, continue to seek capital to de-lever balance sheets and improve cost-cutting initiatives. However, lingering credit scarcity combined with flat or negative revenue growth continues to challenge many companies. Relatively speaking, buyout activity during the first quarter of 2009 came to a standstill. Leveraged buyout volume is generally unavailable for the first quarter, with only one deal reported by Standard & Poor s. Leveraged buyout loan volume fell to a record low of $0.13 billion in the first quarter of 2009, versus $16.3 billion in the first quarter of 2008 and $0.8 billion in the fourth quarter of These figures are not surprising given the relative lack of financing and an uncertain M&A environment. Leveraged buyout transaction volume during the final months of 2008 was also effectively non-existent. Given the weak credit environment, only six small leveraged buyouts totaling $3.2 billion were announced in the fourth quarter. 2 This represented a 97% decline year-over-year from $125 billion during the fourth quarter of While the ongoing economic recession has created significant challenges, we believe it also created numerous and highly attractive opportunities, especially for experienced distressed investors with the right skill set, fresh capital and an intermediate to longer-term outlook. The prices of leveraged loans and high yield bonds declined sharply in the latter half of 2008 and first two months of 2009 and while they have recovered modestly since mid- March 2009, they remain at historically low levels on a relative basis. A rising number of defaults have created attractive risk-adjusted return potential for special situations / distressed investors. Given the substantial size of the global credit markets, even small increases in default rates tend to generate a significant supply of distressed investment opportunities. Although the economic environment continues to be challenging for existing investments, it has provided an increasingly favorable pricing environment for new investments. As of 31 March 2009, our portfolio had unfunded private equity commitments of $170.8 million, which we expect to be called over the next two to four years. We believe that attractive investment opportunities will persist for several years as our remaining unfunded capital is deployed. With 22% of our total exposure dedicated to special situations / distressed investments and a significant amount of capital remaining to be deployed across multiple asset classes, we continue to believe that our portfolio is well-positioned to generate attractive returns over the long term. 1. Standard & Poor s 1Q09 Leveraged Buyout Review 2. Standard & Poor s LCD Quarterly Review Fourth Quarter 2008 NB Private Equity Partners Limited 19

22 FORWARD-LOOKING STATEMENTS This report contains certain forward-looking statements. Forward-looking statements speak only as of the date of the document in which they are made and relate to expectations, beliefs, projections (including anticipated economic performance and financial condition), future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts and are subject to risks and uncertainties including, but not limited to, statements as to: our future operating results; our business prospects and the prospects of our investments; the impact of investments that we expect to make; the dependence of our future success on the general economy and its impact on the industries in which we invest; the ability of our investments to achieve their objectives; differences between our investment objective and the investment objectives of the private equity funds in which we invest; the rate at which we deploy our capital in private equity investments, co-investments and opportunistic investments; our expected financings and investments; the continuation of the Investment Manager as our service provider and the continued affiliation with the Investment Manager of its key investment professionals; the adequacy of our cash resources and working capital; and the timing of cash flows, if any, from the operations of our underlying private equity funds and our underlying portfolio companies. In some cases, you can identify forward-looking statements by terms such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "potential," "should," "will," and "would," or the negative of those terms or other comparable terminology. The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations are subject to risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us or are within our control. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forwardlooking statements. Factors and events that could cause our business, financial condition, liquidity and results of operations to vary materially include, among other things, general economic conditions, securities market conditions, private equity market conditions, the level and volatility of interest rates and equity prices, competitive conditions, liquidity of global markets, international and regional political conditions, regulatory and legislative developments, monetary and fiscal policy, investor sentiment, availability and cost of capital, technological changes and events, outcome of legal proceedings, changes in currency values, inflation, credit ratings and the size, volume and timing of transactions, as well as other risks described elsewhere in this report and our prospectus relating to our IPO. The foregoing is not a comprehensive list of the risks and uncertainties to which we are subject. Except as required by applicable law, we undertake no obligation to update or revise any forwardlooking statements to reflect any change in our expectations, or any changes in events, conditions or circumstances on which the forward-looking statement is based. In light of these risks, uncertainties and assumptions, the events described by our forward-looking statements might not occur. We qualify any and all of our forwardlooking statements by these cautionary factors. NB Private Equity Partners Limited 20

23 RISK FACTORS An investment in our company involves substantial risk and investors in our company s shares should carefully consider such risks, including the following. Additional risks and uncertainties that we do not presently know about or that we currently believe are immaterial may also adversely impact our business, financial condition, results of operations or the value of your investment. If any of the following risks actually occur, our business, financial condition, results of operations and the value of your investment would likely suffer. Our company may experience fluctuations in its monthly net asset value. Our company may experience fluctuations in our net asset value from month to month due to a number of factors, including changes in the values of investments, which in turn could be due to changes in values of portfolio companies, changes in the amount of distributions, dividends or interest paid in respect of investments, changes in operating expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition and general economic and market conditions. Such variability may lead to volatility in the trading price of the shares and cause our company s results for a particular period not to be indicative of our company s performance in a future period. The shares could continue to trade at a discount to net asset value. The shares could continue to trade at a discount to net asset value for a variety of reasons, including due to market conditions or to the extent investors undervalue the Investment Manager s investment management activities. Also, since there is generally a period of years before a new private equity fund has completed making its investments, return on our investments in such funds is not likely to be realized for a substantial time period, if at all, which could negatively impact the value of the shares. Additionally, unlike traditional private equity funds, we intend to continuously reinvest the cash we receive, except in limited circumstances. Therefore, the only way for investors to realize upon their investment is to sell their shares for cash. Accordingly, in the event that a holder of shares requires immediate liquidity, or otherwise seeks to realize the value of its investment in our company, through a sale of shares, the amount received by the holder upon such sale may be less than the underlying net asset value of the shares sold. The Euronext Amsterdam trading market is less liquid than certain other major exchanges, which could affect the price of our shares. The principal trading market for the shares is the Euronext Amsterdam, which is less liquid than certain other major exchanges in the United States and certain other parts of Europe. Because Euronext Amsterdam is less liquid than major exchanges in the United States and certain other parts of Europe, our shareholders may face difficulty when disposing of their shares, especially in large blocks. To date the company s shares have actively traded, but with generally low daily volumes. Our company cannot predict the effects on the price of the shares if a more liquid trading market for them does not develop. In addition, if such a market does not develop, relatively small sales may have a significant negative impact on the price of the shares. For example, sales of a significant number of shares may be difficult to execute at a stable price. Failure to continue to meet the financial covenants in our credit facility could have an adverse impact on our liquidity. We are currently in compliance with all of the covenants of our credit facility; however, certain events, including further reductions in the net asset value of our investments, could result in an event of default under the credit facility agreement. Under the terms of the credit facility, if an event of default occurs the lender may cancel the undrawn portion of the credit facility and declare the entire outstanding principal and interest immediately due. As a result, the company may not have access to sufficient capital to meet its obligations and could be forced to sell assets in order to cure the event of default or to repay the credit facility. NB Private Equity Partners Limited 21

24 STATEMENT OF RESPONSIBILITY AND CERTAIN INFORMATION Statement of Responsibility The directors are responsible for preparing financial statements for each financial year which give a true and fair view, in accordance with applicable Guernsey law, of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing those financial statements, the directors are required to: Select suitable accounting policies and then apply them consistently; Make judgments and estimates that are reasonable and prudent; State whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The directors confirm that they have complied with the above requirements in preparing these financial statements. The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with The Companies (Guernsey) Law, They are also responsible for the fairness of the management review included in the annual report and for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Regarding independent auditors and disclosure of information to auditors, there is no relevant audit information of which the directors are unaware. The directors have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the company s auditors are aware of that information. Certain Information We prepare consolidated financial statements for our Company on an annual and quarterly basis in accordance with generally accepted accounting principles in the United States of America ( U.S. GAAP ). Our fiscal year ends on 31 December. We are subject to the Netherlands Financial Supervision Act (Wet op het financieel toezicht, Wft ), and we are registered with the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten, AFM ) as a collective investment scheme as meant in section 1:107 of the Wft. We are subject to certain ongoing requirements under the Netherlands Financial Supervision Act, the Decree on Supervision of Conduct by Financial Enterprises (Besluit Gedragstoezicht financiële ondernemingen Wft) and the Decree on the Implementation Directive Transparency Issuing Entities (Besluit uitvoeringsrichtlijn transparantie uitgevende instellingen Wft) relating to the disclosure of certain information to investors, including the publication of our financial statements. NB Private Equity Partners Limited 22

25 DIRECTORS, ADVISORS AND CONTACT INFORMATION Key Information Trading Symbol: NBPE Exchange: Euronext Amsterdam Listing Date: 25 July 2007 Base Currency: USD Bloomberg: NBPE NA Reuters: NBPE.AS ISIN: GG00B1ZBD492 COMMON: Amsterdam Security Code: Board of Directors Talmai Morgan (Chairman) John Buser John Hallam Christopher Sherwell Peter Von Lehe Registered Office NB Private Equity Partners Limited P.O. Box 225 Heritage Hall, Le Marchant Street St. Peter Port, Guernsey GY1 4HY Channel Islands Tel: +44-(0) Fax: +44-(0) Investment Manager NB Alternatives Advisers LLC 325 North St. Paul Street, Suite 4900 Dallas, TX United States of America Tel: Fax: Guernsey Administrator Heritage International Fund Managers Limited Heritage Hall, Le Marchant Street St. Peter Port, Guernsey GY1 4HY Channel Islands Tel: +44-(0) Fax: +44-(0) Fund Service and Recordkeeping Agent Capital Analytics II, LP 325 North St. Paul Street, Suite 4700 Dallas, TX United States of America Independent Auditors and Accountants PricewaterhouseCoopers CI LLP P.O. Box 321 National Westminster House Le Truchot St. Peter Port, Guernsey GY1 4ND Channel Islands Tel: +44-(0) Fax: +44-(0) Depositary Bank The Bank of New York 101 Barclay Street, 22nd Floor New York, NY United States of America Tel: Fax: Paying Agent ABN AMRO Bank N.V Gustav Mahlerlaan PP Amsterdam The Netherlands ATTN: Astrid de Vries-Paeper Tel: Fax: For general questions about NB Private Equity Partners Limited, please contact us at or at The website address for NB Private Equity Partners Limited is NB Private Equity Partners Limited 23

26 NB PRIVATE EQUITY PARTNERS LIMITED CONSOLIDATED FINANCIAL STATEMENTS For the Three Month Period Ended 31 March 2009 NB Private Equity Partners Limited 24

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